NTC - Annual Report 2015 | FinancialReports.eu

Security Code：2408

Website Inquiry ： www.nanya.com mops.twse.com.tw

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2015

Annual Report

Printed on May 10[th] , 2016

(This English translation is prepared in accordance with the Chinese version and is for reference purposes only. If there are any inconsistency between the Chinese original and this translation, the Chinese version shall prevail.)

I. Name, title, contact number and e-mail address of the Company’s Spokesperson and deputy spokesperson:

pokesperson:
	Spokesperson	Deputy Spokesperson
Name	Pei Ing Lee	Joseph Wu
Title	President	AVP
Contact number	(03) 328-1688	(03) 328-1688
E-mail address	[email protected]	[email protected]

II. Address and telephone of the headquarters, branches, and factory

Company: No.669, Fusing 3rd Rd., Gueishan Dist., Taoyuan City 333, Taiwan (R.O.C.) Tel. :(03)328-1688

FAB-1:No.336, Sec. 1, Nankan Rd., Luzhu Dist., Taoyuan City 336, Taiwan (R.O.C.) Tel.: (03)352-8225

FAB-3A:No. 98, Nanlin Rd., Taishan Dist, New Taipei City 243-08, Taiwan(R.O.C.) Tel.: (02)2904-5858

III. The name, address, website, and telephone number of the agency handling shares transfer Name: Stock Affairs Dept., Nanya Technology Corp.

Address:1F, 201, Tunhwa North Road, Taipei

Website: N/A

Tel: (02)2718-9898

IV. Name of the certified public accountant (“CPA”) who duly audited the annual financial report for the most recent fiscal year, and the name, address and telephone number of said person's accounting firm:

Name of accounting firm: KPMG Certified Public Accountants

Name of CPAs: Delphi Chen, Isabel Lee

Address: 68F, Taipei 101 Tower, No. 7, Section 5, Xinyi Road, Taipei,

11049, Taiwan. Tel: (02)8101-6666

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

V. Name of any exchanges where the company's securities are traded offshore, and the method by which to access information on said offshore securities: Luxembourg Stock Exchange
VI. Inquiry web-site: http://www.bourse.lu
VII. Company website:www.nanya.com

	*Contents*
I.	Letter to Shareholders ................................................................................................ 1
II.	Company Profile ......................................................................................................... 3
	1. Date of Incorporation ............................................................................................... 3
	2. Milestones ................................................................................................................ 3
III.	Corporate Governance ............................................................................................... 5
	1. Organization ............................................................................................................. 5
	2. Directors and Management Team ............................................................................ 7
	3. Remuneration to Board of Directors, Supervisors, President, and Vice
	Presidents ............................................................................................................... 12
	4. Implementation of Corporate Governance ............................................................. 17
	5. Information Regarding NTC’s Audit Fees............................................................. 37
	6. Replacement of Independent Auditors in the Last Two Years and Thereafter ....... 37
	7. The Company’s Chairman, President or Managers in charge of Finance or
	Accounting has been Under Current Audit Firm or its Affiliates’ Employment
	in 2015 .................................................................................................................... 37
	8. Changes in Shareholding ....................................................................................... 38
	9. Top 10 Shareholders Who are Related Parties to Each Other ................................ 40
	10. The total number of Shares and total Equity Stake Held in any Single
	Enterprise by the Company, the Company’s Directors and Supervisors,
	Managers, and any Companies Controlled either Directly or Indirectly by the
	Company ................................................................................................................ 41
IV.	Capital and Shares .................................................................................................... 42
	1. Capitalization ......................................................................................................... 42
	2. Composition of Shareholders ................................................................................. 43
	3. Distribution of Shareholding .................................................................................. 43
	4. Major Shareholders ................................................................................................ 44
	5. Market Price, Net Worth, Earnings, and Dividends per Common Share ............... 44
	6. Dividend Policy and Implementation Status .......................................................... 45
	7. Impact to NTC’s Business Performance and EPS Resulting from the
	Proposed Stock Dividends Distribution ................................................................. 45
	8. Employee Profit Sharing and Remuneration to Directors and Supervisors ........... 45
	9. Repurchase of Common Stock ............................................................................... 46
	10. Satus of Corporate Bonds .................................................................................... 46
	11. Satus of Preffered Stock ....................................................................................... 46
	12. Issuance of Global Depositary Receipts .............................................................. 47
	13. Satus of Employee Stock Options Plan ............................................................... 48
	14. Status of New Share Issuance in Connection with Mergers and Acquisitions .... 51
	15. Financing Plans and Implementation ................................................................... 51
V.	Operational Highlights ............................................................................................. 53
	1. Business Activities ................................................................................................. 53
	2. Market Status ......................................................................................................... 58
	3. Employees .............................................................................................................. 62
	4. Information on Environmental Protection Costs ................................................... 62

Labor Relations ...................................................................................................... 63 6. Material Contracts .................................................................................................. 64 VI. Financial Information ............................................................................................... 65 1. Five-Year Financial Summary .............................................................................. 65 2. Five-Year Financial Analysis ............................................................................... 69 3. Supervisors’ Review Report of Financial Report for 2015 ................................... 76 4. Consolidated Financial Statements Report ............................................................ 77 5. Stand-alone Financial Statements Report .............................................................. 77 6. The Financial Impact to the Company if the Company and its Affiliated Companies have Incurred any Financial or Cash Flow Difficulties ...................... 77 VII. Financial Status, Operating Results and Risk Management ................................ 78 1. Financial Status ...................................................................................................... 78 2. Operating Results ................................................................................................... 79 3. Cash Flow .............................................................................................................. 80 4. Major Capital Expenditures ................................................................................... 81 5. Reinvestment Policy, Cause of Gain or Loss, Corrective Action, and Future Investment Plan ...................................................................................................... 82 6. Risk Management .................................................................................................. 82 7. Other Important Matters......................................................................................... 85 VIII. Other Special Notes .................................................................................................. 86 1. Summary of NTC’s Subsidiary .............................................................................. 86 2. Private Placement Securities .................................................................................. 91 3. NTC’s Shares Acquired, Disposed of, and Held by its Subsidiary........................ 91 4. Other Necessary Supplement ................................................................................. 91 5. Any Events that Had Significant Impacts on Shareholders’ Right or Share Prices as Stated in Item 3 Paragraph 2 of Article 36 of Securities and Exchange Law of Taiwan ....................................................................................... 91

I. Letter to Shareholders

1. Year 2015 Financial Performance

Due to global economy weakness, DRAM market was slowing down and ASP (average selling price) continued to decline from Q2’15. We optimized product portfolio for premium DRAM in specialty market to maintain stable profitability. NTC reported consolidated revenue of NT$43.87 billion in 2015. Net income was NT$17.13 billion, EPS NT$7.07.

In 2015, NTC further enhanced production efficiency to reduce manufacturing cost for improving competitiveness. Monthly wafer output increased from 56 thousand in January to 60 thousand in December. 30nm design shrink also exceeded 50% output in Q4’15.

As a key supplier in specialty DRAM market, NTC established strategic alliance relationships with customers and controller suppliers by offering excellent customer service for the launch of next-generation consumer electronic products collaboratively. In product development area, we strengthened low power product design and related engineering capabilities. To fulfill the needs from mobile customers, we developed multi-chip–package solutions. By seamless cross-department cooperation, we demonstrated successful penetrations in premium market segments including automotive, industrial, networking, SiP (System-in-Package) and customized products.

2. Year 2016 Business Outlook

The focus areas of operation for 2016 are to deeply-root in specialty market and customized product to increase wafer value, improve production efficiency to reinforce cost effectiveness and 20nm technology conversion. Major tasks include:

(1) Continuously concentrate on consumer & low power markets, develop customized products for diversification and increase market share in specialty DRAM field. Greater than 85% of total revenue from consumer & low power markets is our target.
(2) Continuously drive manufacturing cost reduction through improving the production efficiency of front- end and back-end processes. 30nm design shrink product will surpass 70% of total output in 2016. Annual bit output growth is expected to reach 10%.
(3) To enable 20nm technology conversion, the new facility will be equipped with advanced tools in Q4’16. The development of next-generation DRAM products including DDR4/LPDDR4 is at full pace to provide full product lineup for fulfilling the requirements from new-generation consumer electronic products.

3. Future Development Strategy

NTC has entered into agreements with Micron Technology in December 2015 to support Micron Semiconductor Taiwan Co. Ltd. to acquire Inotera memories Inc. as a solely owned subsidiary of Micron Taiwan for NT$ 30 per share through Share Swap Transaction, invest up to NT$ 31.5 billion to acquire Micron’s private placement shares and have option rights to license its 1x and 1y DRAM technology nodes. The acquisition deal has been approved by Inotera’s shareholders and is still subject to certain conditions, including governmental approvals. NTC and Micron have entered into a new era of strategic alliance relationships. By becoming one of its major share ownerships in Micron, and entering cooperation in future technology nodes, will create Win-Win situation for both NTC and Micron. The deployment will further strengthen NTC’s position as a key supplier in specialty DRAM market.

DRAM market will still encounter headwind in 2016. In supply side, top 3 suppliers continue to ramp the production of advanced 20nm and 1xnm technology nodes and new capacity will come online. According to the forecast by market intelligence, 2016 worldwide bit growth rate will be higher than 2015. DRAM industry consolidation resulted in more disciplined supply growth. In consideration of profitability, the total supply growth is expected to be rational.

The demand side growth rate is projected at the same level as 2015 due to the uncertainty of global economy outlook and the stalled momentum of smart phone and tablet markets. Positively, 2016 Summer Olympics will energize DRAM demand from consumer electronic devices like high-resolution DTV, set-top-box.

We appreciate the continuous support by all of our shareholders. We will make the best effort to deliver great operation performance and increase the company’s value to maximize returns to our shareholders.

II. Company Profile

1. Date of Incorporation: Mar 4, 1995

Milestones

1995 Mar Nanya Technology Corp. was established and incorporated
Apr MOU signed by OKI, NTC and Nanya Plastics, in which NTC succeed all rights and obligations of 64Mb DRAM technology form Nanya Plastics Corp.
1996 Nov Signed 0.36μm and 0.32μm 64Mb DRAM technology licensing agreement with OKI
1997 Jul Set up NTC-USA, the branch office in charge of sales and marketing activities in USA
1998 Apr Awarded ISO-9001 Certification by Lloyd's Register Quality Assurance (LRQA)
Nov Signed a technology transfer agreement of 0.2/0.175μm process technology with IBM
Dec Awarded ISO-14001Certification by Lloyd's Register Quality Assurance (LRQA)
Dec Set up a product design center in Houston, Texas
1999 Oct 0.20μm 64Mb SDRAM mass production started
2000 Aug NTC was listed on Taiwan Stock Exchange
Oct Signed the co-development agreement of 0.14/0.11μm process technology with IBM
2001 Jun Mass production of 0.175μm 128Mb/256Mb DRAM
Oct DDR Products leads the market in production.
2002 Apr Set up Nanya Technology (HK) Corporation Limited
Jun Signing a strategic alliance agreement with Dell .As Dell’s main supplier of DRAM products.
Sep Set up the branch office in Tokyo, Japan
Nov Signed a Joint Development Program with Infineon Technologies AG to codevelop 0.07and 0.09μm process technology
Dec Awarded ISO-14001 Certification by Sweden Det Norske Veritas Awarded ISO-18001 Certification by Lloyd's Register Quality Assurance (LRQA)

2003 Jan Signed a Joint Development Program with Infineon Technologies AG to develop Inotera Memories Ltd.

Mar According to Gartner iSuppli, our company's market share rise to No.5 of the world
Jul Offering of Global Depositary Shares (GDS) on Luxembourg Stock Exchange
2004 May DDR2 products obtained worldwide system makers' validation
Dec 90nm pilot-run started
2005 Apr 512Mb DDR2 SDRAM (667 MHz) validated by Intel
Jun Successful qualification of 90nm technology
Sep Signed 60nm technology co-development agreement with Infineon
2006 Mar Nanya Fab-3 (300mm) groundbreaking ceremony
Oct Set up Nanya Technology (Shanghai) Corp.
2007 May FAB-3A equipment move-in Nov Pilot run successful in FAB-3A, 70nm wafer starts in Q3
2008 Apr Signed JV agreement with Micron
Nov FAB-3A 1st phase full capacity with 70nm
2009 Aug 68nm stack technology has been demonstrated successfully Sep 50nm stack technology has been demonstrated successfully
2010 Jan Invest IC design company─PieceMakers Tech Inc.
Jul 42nm stack technology has been demonstrated successfully
Oct Started 42nm stack technology volume production
2011 Jul 30nm stack technology has been demonstrated successfully
2012 Mar Set up Sumpro Electronics Corporation Limited
2013 Jan Amends Inotera Memories Joint Venture With Micron and Micron acquires rights to 100% of Inotera’s output Achieved the certification ISO 10002– Complaints Management Systems
2014 Jul Disposal Sumpro's 8-inch Fab and equipment.
Oct Started 30nm process Technology design shrink version volume production
Oct DDR4 products obtained worldwide system makers' validation
2015 Jul Fab 3A-N ground breaking Oct 30nm Design Shrink conversion exceed over 50%
Dec LPDDR3 4Gb volume production

III.Corporate Governance

Organization
1.1Organization Chart

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Shareholders
Meeting
Supervisors
Board of
Directors
Auditors Compensation
Committee
Chairman
General
Manager
NTC-USA
President Office
NTC-Delaware
NTC-Europe
NTC-Japan
NTC-HK
NTC-Shenzhen
Pei-Jen Co., Ltd.
Piece Makers Tech Inc.
Sumpro Electronic Inc.
Human Resource Legal& IP Accounting Safety & Hygiene QRA Product Development Design Verification Global Sales Marketing & Customization Operation Supporting Product Engineering Wafer Prodction
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1.2 Major Corporate Functions:

Department	Functions
Corp. Audit	Responsible for internal control system and evaluates the integrity and comprehensiveness of regulations; examines whether internal control is conducted effectively and continuously, measures the performance of each department and recommends corrective actions on a timely manner for an overall effective operation.
Accounting President Office	1. Responsible for financial policy management, capital movement, budget compilation, review, and control, accounting process. 2. Responsible for market trends analysis, assessment of the investment plan, set product strategy and operational marketing plans, programs and promote the cross-functional projects, sales performance management, outsourcing policy management.
Human Resource	Establishing human resource policy and execute personnel project, including personnel, salary& compensation, employee relationship, training and talent development)effectivelyand efficientlyto increase company’s human capital.
Legal & IP	Responsible for company legal affairs and other intellectual property management.
Safety & Hygiene	Supervises and audits the working environment with professional knowledge and continuous improvement; Planning and maintaining the safety and hygiene management system (ISO 14001, OHSAS 18001, TOSHMS management system)
Quality & Reliability Assurance	1. Responsible for the planning and establishment of the company's quality assurance system, and promote the quality of education and training, verification audit, quality control and quality improvement for quality theory of Business. 2. Responsible for establish FAB quality control system and incoming quality control, in-process quality control, failure analysis to ensure the stability of productqualityand meet customer needs.
Marketing /Global Sales	Responsible for the promotion and development of global business, set business strategy, promotion of new products, elaboration and implementation of marketing plans andpublic relations matters.
Products Development	Responsible for design, develop and control new product; Develop and design verification of mass production engineering technology and set up testing program.
Operation Supporting	1. Responsible for the planning and management of automation, the computer network and office automation in order to help improve business operation. 2. Plan for expansion program, capacity planning and management, materials management,to helpimprove the operational efficiency.
Fab Operation Group	1. Manufacturing: Responsible for the planning and operation of the manufacturing, process, equipment, and facility, to meet our customer requirements in Quality and Delivery. 2. Production Engineering and Testing`：`Responsible for validating new products , product engineering and testing technology development, abnormal product electrical / physical property analysis, development and management outsourcing of IC packaging and testing technology. 3. Facility System: Institutionalization and utility equipment operation and maintenance of the systematic establishment, strengthening operational efficiency.

2. Directors and Management Team

2.1 Directors and Supervisors:

																As of 2016/4/24	As of 2016/4/24	As of 2016/4/24
Title	Nationality	Name	Date elected	Term (Years)	Date first elected	Shareholding when elected		Current shareholding		Director’s Spouse & minor shareholding		Shareholding by Nominee Arrangement		Director’s experience （education）	Director’s current position at NTC and other companies	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
						shares	(%)	shares	(%)	shares	(%)	shares	(%)			Title	Name	Relation
Chairman	R.O.C.	Nan Ya Plastics Corp. Rep.: Chia-Chau Wu	2013.06.21	3	1995.02.17 2004.05.12	9,064,846,933 8,654	37.83 0.00	907,303,769 957	33.01 0.00	0 0	0.00 0.00	0 0	0.00 0.00	Chairman of Nan Ya Plastics Corp. Education B.S. in Business Administration, NCCU	Chairman of Nan Ya Plastics Corp. Chairman of NAN Ya PCB Corp. Direct of Inotera Memories, Inc.	NONE	NONE	NONE
Director	R.O.C.	Nan Ya Plastics Corp. Rep.: Wen-Yao Wang	2013.06.21	3	1995.02.17 2010.06.24	9,064,846,933 24,690,250	37.83 0.10	907,303,769 2,471,097	33.01 0.09	0 13,381	0.00 0.00	0 0	0.00 0.00	EVP of Nan Ya Plastics Corp. Pitzer College Department of business administration	EVP of Nan Ya Plastics Corp.	Director Director	Wen-Yuan Wang Otto Chang	Brother affinity
Director	R.O.C.	Nan Ya Plastics Corp. Rep.: Ming-Jen Tzou	2013.06.21	3	1995.02.17 2010.06.24	9,064,846,933 0	37.83 0.00	907,303,769 0	33. 01 0.00	0 0	0.00 0.00	0 0	0.00 0.00	President of Nan Ya Plastics Corp. Department of Chemical Engineering, NTUT	Director and President of Nan Ya Plastics Corp. Director of NAN Ya PCB Corp.	NONE	NONE	NONE
Director	R.O.C.	Nan Ya Plastics Corp. Rep.: Lin-Chin Su	2013.06.21 2014.01.07	3	1995.02.17 `－`	9,064,846,933 `－`	37.83 `－`	907,303,769 1,601	33. 01 0.00	0 0	0.00 0.00	0 0	0.00 0.00	SVP of Nanya technology Corp. Ph.D. in Materials Science and Engineering from University of Utah	SVP of Nanya technology Corp. Dirctor of Sumpor Electronic Inc.	NONE	NONE	NONE
Director	R.O.C.	Wen-Yuan Wang	2013.06.21	3	2007.05.25	39,969	0.00	4,000	0.00	127,648	0.00	0	0.00	Chairman of Formosa Chemicals & Fibre Corp. Education M.S. in Industrial Engineering, University of Houston, USA	Chairman of Formosa Chemicals & Fibre Corp Chairman of Formosa Taffeta Co., Ltd. Chairman of Formosa Advanced Technologies Co., Ltd. ED of Nan Ya Plastics Corp.	Director Director	Wen-Yao Wang Otto Chang	Brother affinity
Director	R.O.C.	Ruei-Hua Wang	2013.06.21	3	2010.06.24	0	0.00	0	0.00	0	0.00	0	0.00	ED of Formosa Plastics Corp. Department of Economics , Barnard College	ED of Formosa Plastics Corp. ED of Formosa Petrochemical Corp. Direct of Inotera Memories, Inc.	NONE	NONE	NONE
Director	R.O.C.	Pei-Ing Lee	2013.06.21	3	2004.05.12	775,714	0.00	263,098	0.01	1,571	0.00	0	0.00	President of Nanya technology Corp. Ph.D. degree of CHE from Syracuse University, New York, USA	President of Nanya technology Corp. Chairman of Inotera Memories, Inc. Chairman of PieceMakers Tech. Inc. Chairman of Sumpor Electronic Inc.	NONE	NONE	NONE
Director	R.O.C.	Otto Chang	2013.06.21	3	2004.05.12	597,896	0.00	59,839	0.00	0	0.00	0	0.00	President of NAN Ya PCB Corp. Department of Automatic Control Engineering, Feng Chia University	Director and President of NAN Ya PCB Corp. Direct of Inotera Memories, Inc. Director of PieceMakers Tech. Inc. Director of Sumpor Electronic Inc.	Director Director	Wen-Yuan Wang Wen-Yao Wang	affinity affinity
Director	R.O.C.	Charles Kau	2013.06.21	3	1998.05.29	52	0.00	5	0.00	515	0.00	0	0.00	ID of Aopen Bright Ideas Connected Corp. Master’s degree in Chemistry Engineering from North Carolina State University,U.S.A.	ID of Aopen Bright Ideas Connected Corp. ID of Hauman Tech. Corp. ID of AN-SHIN Food Services Co., LTD.	NONE	NONE	NONE

Title	Nationality	Name	Date elected	Term (Years)	Date first elected	Shareholding when elected	Shareholding when elected	Current shareholding	Current shareholding	Director’s Spouse & minor shareholding	Director’s Spouse & minor shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Director’s experience （education）	Director’s current position at NTC and other companies	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
						shares	(%)	shares	(%)	shares	(%)	shares	(%)			Title	Name	Relation
Independent Director	R.O.C	Yi-Fu Lin	2013.06.21	3	2013.06.21	0	0.00	0	0.00	0	0.00	0	0.00	Ministry of Economic Affairs Minister without Portfolio of Executive Yuan Ambassador of WTO Department of Statistic, NCCU.	Supervisor of CHO Pharma, Inc. ID of Swissray Global Healthcare Holding Ltd. ID of Taishin Financial Holding Co., Ltd. ID of Taishin International Bank.	NONE	NONE	NONE
Independent Director	R.O.C	Tsai-Feng Hou	2013.06.21	3	2013.06.21	0	0.00	0	0.00	0	0.00	0	0.00	Legislator President of TCSC Inc. The Executive master of Public Policy,NSYSU.	ID of King's Town Bank Lecturer Cheng Shiu University	NONE	NONE	NONE
Independent Director	R.O.C	Shu-Po Hsu	2013.06.21	3	2013.06.21	0	0.00	0	0.00	0	0.00	0	0.00	Director The Life Insurance Association of R.O.C Deputy Director General Chamber of Commerce of R.O.C. Master’s degree of Department And Graduate Institute Of Criminology, National Chung ChengUniversity	Chairman TLG Insurance Co., Ltd. Deputy Director of Taiwan Life Insurance Co., Ltd. Director of Taiwan Insurance Institute Director of Taiwan Insurance Guaranty Fund.	NONE	NONE	NONE
Supervisor	R.O.C	Formosa Taffeta Co., Ltd. Rep.: Shih-Ming Hsieh	2013.06.21	3	1995.02.17 2001.03.30	139,387,646 0	0.58 0.00	15,421,010 0	0.56 0.00	0 0	0.00 0.00	0 0	0.00 0.00	President of Formosa Advanced Technologies Co., Ltd. President of Formosa Taffeta Co., Ltd. National Taipei University of Technology	Deputy Chairman and President of Formosa Advanced Technologies Co., Ltd. ED and President of Formosa Taffeta Co., Ltd.	NONE	NONE	NONE
Supervisor	R.O.C	Pei-Jen Co., Ltd. Rep.: Ming-Chung Yeh	2013.06.21	3	2007.05.25 2013.06.21	6,869,820 0	0.03 0.00	687,558 0	0.03 0.00	0 0	0.00 0.00	0 0	0.00 0.00	AVP of Nan Ya Plastics Corp. Department of Accounting, SooChow University	Supervisor of NAN Ya PCB Corp. Supervisor of Wen Fung Industrial Co., Ltd. Supervisor of Wellink Technology Co., Ltd Supervisor of PieceMakers Tech. Inc.	NONE	NONE	NONE
Supervisor	R.O.C	Ming-Long Huang	2013.06.21	3	2001.03.30	1,450	0.00	145	0.00	39	0.00	0	0.00	CEO of Administration Chang Gung Memorial Hospital Master’s Degree of Department of Business Management , Chang GungUniversity	CEO of Administration Chang Gung Memorial Hospital Director of Formosa Petrochemical Corp.	NONE	NONE	NONE

Note ： NTC had capital reduction in2014 (capital reduction ratio was 89.991606%) 。

Major shareholders of the institutional shareholders April 28, 2016

Name of Institutional Shareholders	Major Shareholders
Nan Ya Plastics Corp.	Chang Gung Medical Foundation (11.05%), Formosa Plastics Corp. (9.88%), Yung-tsai Wang (5.41%), Formosa Chemicals & Fibre Corp. (5.21%), Chang Gung University (4.00%), Vanson International Investment Co.,LTD. (2.39%), Formosa Petrochemical Corp.(2.26%) Chindwell International Investment Corp. (1.86%), Citibank Taiwan in custody for Yuanda systerm Corp.(1.25%), HSBC Bank (Taiwan) Limited in custody for UBS in Singapore Pte Ltd-Singapore Branch (1.24%)
Formosa Taffeta Co., Ltd.	Formosa Chemicals & Fibre Corp. (37.40%), Chang Gung Medical Foundation (5.14%), Cathy Life Insurance Co., Ltd. (5.33%), Yu Yuang Textile Co., Ltd. (2.55%), Min- Xiong Lai(2.47%), Chang Gung University (2.20%), Nan Shan Life Insurance Co., Ltd. (2.16%), Chang Gung University of Science and Technology.(2.13%), Ming Chi University of Technology (1.87%), Min-Zhi Lai(1.54%)
Pei-Jen Co.,Ltd.	NTC 100% subsidiary

Major shareholders of the Company’s major institutional shareholders April 28, 2016

Name of Institutional Shareholders	Major Shareholders
Formosa Plastics Corp.	Chang Gung Medical Foundation (9.44%), Formosa Chemicals & Fibre Corp.(7.65%), HSBC Bank (Taiwan) Investment Account(6.26%), Nan Ya Plastics Corp.(4.63%), Yung-tsai Wang (4.43%), Chindwell International Investment Corp.(4.16%), Vanson International Investment Co.,LTD.(3.05%) Formosa Petrochemical Corp.(2.07%), Nan Shan Life Insurance Co., Ltd.(1.71%), Citibank Taiwan in custody Government of Singapore Investment Corporation Pte Ltd (1.66%)
Formosa Chemicals & Fibre Corp.	Chang Gung Medical Foundation (18.58%), Yung-tsai Wang (7.37%), Chindwell International Investment Corp. (6.35%), Vanson International Investment Co., Ltd. (3.80%), Formosa Plastics Corp.(3.39%), Nan Ya Plastics Corp.(2.40%), Union Power Development Co., Ltd.(1.63%), Standard Chartered Bank in custody for Genesis Capital Investment Group Corporation(1.40%), HSBC Bank (Taiwan) in custody for Kendall electricity Corp. Investment Account (1.29%), Nan Shan Life Insurance Co., Ltd.(1.25%)
Formosa Petrochemical Corp.	Formosa Plastics Corp.(28.56%), Formosa Chemicals & Fibre Corp.(24.15%), Nan Ya Plastics Corp.(23.11%), Chang Gung Medical Foundation (5.65%)`、`Formosa Taffeta Co., Ltd.(3.83%), Standard Chartered Bank in custody for Genesis Capital Investment Group Corporation (0.60%), HSBC Bank (Taiwan) in custody for bauer energy Corp. investment Account (0.51%), Standard Chartered Bank in custody for Central Capital management Corp. investment Account(0.49%), HSBC Bank (Taiwan) in custody for Asia Optical Co. Inc. Investment Account(0.48%), Taiwan bank in custody for Charitable Trust-Wang Chang Gung social welfare fund (0.44%)
Nan Shan Life Insurance Co., Ltd.	First bank in custody for Ruen Chen Investment Holding Co., Ltd trust account (76.46%), Ruen Chen Investment Holding Co., Ltd (14.16%), Ying-Zong DU (3.25%) Wen-De Guo (0.11%), Taishin bank in custody for Nan Shan Life Insurance stock trust account (0.06%), Ruen-hua dyeing & weaving co., Ltd(0.28%), Ruentex leasing Corp. (0.15%), Chiping investment Corp. (0.11%), Pao-Chih Investment Co., Ltd. (0.05%), Pao-yi Investment Co., Ltd..(0.05%), Pao-hui Investment Co., Ltd.(0.05%), Pao-huang Investment Co., Ltd.(0.05%)
CathyLife Insurance Co., Ltd.	CathayFinancial Holdings Corp. (100.00%)
HSBC Bank (Taiwan) Limited in custody for UBS in Singapore Pte Ltd-Singapore Branch	Investment Account
Citibank Taiwan in custody for Yuanda systerm Corp.	Investment Account
Chindwell International Investment Corp.	Everred Coporate, Inc. (100.00%)
Vanson International Investment Co.,LTD.	Landmark Capital Holdings Inc.(100.00%)
Yu YuangTextile Co., Ltd.	nonpublic company
Chang Gung Medical Foundation	A foundation approved by Department of Health and doesn't issue shares.
ChangGungUniversity	A foundation approved byMinistryof Education and doesn't issue shares.
Ming Chi University of Technology	A foundation approved by Ministry of Education and doesn't issue shares.
Chang Gung University of Science and Technology	A foundation approved by Ministry of Education and doesn't issue shares.

Directors’ Professional Qualifications and Independent Analysis

Criteria Name	Meet one of the following professional qualification requirements, together with at least fiveyears work experience	Meet one of the following professional qualification requirements, together with at least fiveyears work experience	Meet one of the following professional qualification requirements, together with at least fiveyears work experience	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	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
Nan Ya Plastics Corp. Rep.:Chia-Chau Wu	—	—												None
Nan Ya Plastics Corp. Rep.:Wen-Yao Wang	—	—												None
Nan Ya Plastics Corp. Rep.:Ming-Jen Tzou	—	—												None
Nan Ya Plastics Corp. Rep.:Lin-Chin Su	—	—												None
Wen-Yuan Wang	—	—												None
Ruei-Hua Wang	—	—												None
Pei-IngLee	—	—												None
Otto Chang	—	—												None
Charles Kau	—	—												3
Yi-Fu Lin	—	—												3
Tsai-FengHou	—	—												1
Shu-Po Hsu	—	—												None
Formosa Taffeta Co., Ltd. Rep.: Shih-MingHsieh	—	—												None
Pei-Jen Co., Ltd. Rep.Ming-ChungYeh	—	—												None
Ming-LongHuang	—	—												None

Note:

Not an employee of the Company or any of its affiliates;
Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its parent Company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares;
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 issued shares of the Company or ranks as one of its top ten shareholders;
Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;
Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds 5% or more of the total number of issued shares of the Company or ranks as of its top five shareholders;
Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified Company or institution that has a financial or business relationship with the Company;
Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, provided that this restriction does not apply to any member of the compensation committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Compensation Committees of Companies whose Stock is Listed on the TWSE or Traded on the GTSM“;
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
Not been a person of any conditions defined in Article 30 of the Company Law.
Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

2.2 Management Team

												2016/04/24 Management Teams who are spouses or within two degrees of kinship Title NameRelation None None None None None None None None None None None None None None None None None None None None None None None None None None None	2016/04/24 Management Teams who are spouses or within two degrees of kinship Title NameRelation None None None None None None None None None None None None None None None None None None None None None None None None None None None	2016/04/24 Management Teams who are spouses or within two degrees of kinship Title NameRelation None None None None None None None None None None None None None None None None None None None None None None None None None None None
Title	Nationality	Name	On board date	Shareholding		Director’s Spouse & minor shareholding		Shareholding by Nominee Arrangement		Experience（education）	current positions at other companies	Management Teams who are spouses or within two degrees of kinship
				Shares	%	Shares	%	Shares	%			Title	Name	Relation
President	R.O.C	Pei-Ing Lee (Note1)	2003.03.01	263,098	0.01	1,571	0.00	0	0.00	President of Nanya technology Corp. Ph.D. degree of CHE from Syracuse University, New York, USA	Chairman of Inotera Memories, Inc. Chairman of PieceMakers Tech. Inc. Chairman of Sumpor Electronic Inc.	None	None	None
Vice President	R.O.C	Otto Chang	1997.02.04	59,839	0.00	0	0.00	0	0.00	President of NAN Ya PCB Corp. Department of Automatic Control Engineering, Feng Chia University	Director and President of NAN Ya PCB Corp. Direct of Inotera Memories, Inc. Director of PieceMakers Tech. Inc. Director of Sumpor Electronic Inc.	None	None	None
Vice President	R.O.C	Lin-Chin Su (Note2)	2007.04.16	1,601	0.00	0	0.00	0	0.00	SVP of Nanya technology Corp. Ph.D. in Materials Science and Engineering from University of Utah	Director of Sumpor Electronic Inc.	None	None	None
AVP	R.O.C	Yau-Ming Chen	2007.04.16	0	0.00	0	0.00	0	0.00	AVP of Nanya technology Corp. Department of Electrical Engineering, NTU	None	None	None	None
AVP	R.O.C	Wesley Chang	2013.04.01	42	0.00	0	0.00	0	0.00	AVP of Nanya technology Corp. Master’s Degree of Department of Business Management, Chang Gung University	Supervisor of Pei-Jen Co., Ltd.	None	None	None
AVP	R.O.C	Chi-Meng Su	2013.02.20	0	0.00	0	0.00	0	0.00	AVP of Nanya technology Corp. Master’s Degree of Department of Electronics Engineering, NCTU	None	None	None	None
AVP	R.O.C	Rex Chuang	2013.04.08	140,000	0.01	0	0.00	0	0.00	AVP of Nanya technology Corp. Master’s Degree of Materials Engineering, San José State University	None	None	None	None
AVP/ Finance Supervisor	R.O.C	Joseph Wu (Note3)	2014.11.10	0	0.00	0	0.00	0	0.00	AVP of Nanya technology Corp. Master’s Degree of Materials Engineering, NTU	Director and President of Sumpor Electronic Inc.	None	None	None
Accounting Supervisor	R.O.C	Hung-Chi Kuo	2010.12.01	40,000	0.00	0	0.00	0	0.00	Director of Nanya technology Corp. Department of Accounting, NCHU	Director of Pei-Jen Co., Ltd.	None	None	None

Note1: Charles Kao, the former president, was retired on Oct.6, 2015, the Board approved to appoint Pei-Ing Lee as president at the same date. Note2: Li-Chin Su, the vice president, was promoted as senior vice president on Oct.6, 2015. Note3: Joseph Wu, chief finance officer, was promoted as assistant vice president on Oct.6, 2015.

3. Remuneration to Board of Directors, Supervisors, President, and Vice Presidents

3.1 Remuneration to Board of Directors (Include Independent Directors) Unit: 1,000 shares; NT$ thousands; 2015/12/31

Title	Name		Remuneration t	Remuneration t	Remuneration t	o Directors	o Directors			Total remuneration of A + B + C + D as a % of 2015 net income	Total remuneration of A + B + C + D as a % of 2015 net income	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Compensation earned by a Director who is an employee of NTC or of NTC’s consolidated subsidiaries	Total compensation of A+B+C+D+E+F+ G as a % of 2015 net income	Total compensation of A+B+C+D+E+F+ G as a % of 2015 net income	Compensation received from investments other than NTC’s subsidiary
		n (A)	Base Compensatio	Severance pay and pensions (B)		Compensatio n to Directors (C)		(D)	Allowances			Salaries, bonuses and allowances (E)		Severance pay and pensions (F)		Employee (G)		profit sharing (Note)		Cumulative ESOP exercisable shares (H)		New restricted employee shares (I)
		NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC	NTC		Consolid subsidiar Of NT	ated ies C	NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC	NTC	Consolidated subsidiaries Of NTC
																Cash	Stock market value	Cash	Stock market value
chairman	Nan Ya Plastics Corp. Rep.: Chia-Chau Wu	3,600	3,600	0	0	0	0	750	750	0.0254	0.0254	24,407	24,407	17,126	17,126	8,603	0	8,603	0	0	0	0	0	0.3179	0.3179	None
Director	Nan Ya Plastics Corp. Rep. Wen-Yao Wang
Director	Nan Ya Plastics Corp. Rep.: Ming-Jen Tzou
Director	Nan Ya Plastics Corp. Rep. Lin-Chin Su
Director	Pei-IngLee
Director	Wen-Yuan Wang
Director	Ruei-Hua Wang
Director	Otto Chang
Director	Charles Kau
Independent Director	Yi-Fu Lin
Independent Director	Tsai-Feng Hou
Independent Director	Shu-Po Hsu

Note:

Net income is from Financial Statements.
Remuneration was approved by the board of directors.

Table 3.1.1 Range of Compensation Paid to Directos

Range of compensation	Name of Directors	Name of Directors	Name of Directors
	Total of Remuneration (A+B+C+D)		Total of Remuneration	(A+B+C+D+E+F+G)
	NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC
Under NT$ 2,000,000	Wen-Yuan Wang, Ruei-Hua Wang, Chia-Chau Wu, Wen-Yao Wang, Ming-Jen Tzou, Pei-Ing Lee, Lin-Chin Su, Otto Chang, Charles Kau, Yi-Fu Lin, Tsai-Feng Hou, Shu-Po Hsu, Nan Ya Plastics Corp.	Wen-Yuan Wang, Ruei-Hua Wang, Chia-Chau Wu, Wen-Yao Wang, Ming-Jen Tzou, Pei-Ing Lee, Lin-Chin Su, Otto Chang, Charles Kau, Yi-Fu Lin, Tsai-Feng Hou, Shu-Po Hsu, Nan Ya Plastics Corp.	Wen-Yuan Wang, Ruei-Hua Wang, Chia-Chau Wu, Wen-Yao Wang, Ming-Jen Tzou, Otto Chang, Yi-Fu Lin、Tsai-Feng Hou, Shu-Po Hsu, Nan Ya Plastics Corp.	Wen-Yuan Wang, Ruei-Hua Wang, Chia-Chau Wu, Wen-Yao Wang, Ming-Jen Tzou, Otto Chang, Yi-Fu Lin, Tsai-Feng Hou, Shu-Po Hsu, Nan Ya Plastics Corp.
NT$2,000,000`～`NT$5,000,000
NT$5,000,000`～`NT$10,000,000			Pei-Ing Lee, Lin-Chin Su	Pei-Ing Lee, Lin-Chin Su
NT$10,000,000`～`NT$15,000,000			Charles Kau	Charles Kau
NT$15,000,000`～`NT$30,000,000
NT$30,000,000`～`NT$50,000,000
NT$50,000,000`～`NT$100,000,000
above NT$100,000,000
Total	13	13	13	13

3.2 Remuneration Paid to Supervisors Unit: 1,000 shares; NT$ thousands; 2015/12/31

Title	Name			Remuneration to Supervisors	Remuneration to Supervisors			Total remuneration of A + B + C as a % of 2015 net income	Total remuneration of A + B + C as a % of 2015 net income	Compensation received from investments other than NTC’s subsidiary
		Base compensation(A)		Compensation to Supervisors(B)(Note)		Allowances(C)
		NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC
Supervisor	Formosa Taffeta Co., Ltd. Rep.: Shih-MingHsieh	0	0	0	0	190	190	0.00	0.00	None
Supervisor	Pei-Jen Co., Ltd. Rep. : Ming-ChungYeh
Supervisor	Ming-Long Huang

Note: Supervisors’s Remuneration was approved by the board of directors.

Table 3.2.1 Range of Compensation Paid to Supervisors

Range of compensation	Name of Supervisors	Name of Supervisors
	Total of Remuneration (A+B+C)
	NTC	Consolidated Subsidiaries of NTC
UnderNT$2,000,000	Shih-Ming Hsieh, Ming-Chung Yeh, Ming-Long Huang, Pei-Jen Co.,Ltd.,Formosa Taffeta Co.,Ltd.	Shih-Ming Hsieh, Ming-Chung Yeh, Ming-Long Huang,Pei-Jen Co.,Ltd.,Formosa Taffeta Co.,Ltd.
NT$2,000,000`～`NT$5,000,000
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
aboveNT$100,000,000
Total	5	5

Table 3.3 Compensation Paid to President and Vice Presidents Unit: 1,000 shares; NT$ thousands; 2015/12/31

Title	Name	Salary (A)	Salary (A)	Severance pay and pensions (B)	Severance pay and pensions (B)	Bonuses and allowances (C)	Bonuses and allowances (C)	Employee profit sharing (D)	Employee profit sharing (D)	Employee profit sharing (D)	Employee profit sharing (D)	Total compensation (A+B+C+D) as a % of 2015 net income (%)	Total compensation (A+B+C+D) as a % of 2015 net income (%)	Cumulative ESOP exercisable shares	Cumulative ESOP exercisable shares	New restricted employee shares	New restricted employee shares	Compensation received from investments other than NTC’s subsidiary
		NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC	NTC		Consolidated Subsidiaries of NTC		NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC	NTC	Consolidated Subsidiaries of NTC
								Cash	Stock market value	Cash	Stock market value
President	Pei-Ing Lee (Note1)	24,407	24,407	17,126	17,126	0	0	8,603	0	8,603	0	0.2925	0.2925	0	0	0	0	0
former president	Charles Kau (Note1)
VP	Otto Chang
SVP	Lin-Chin Su (Note2)

Table 3.3.1 Range of Compensation Paid to President and Vice Presidents

Range of compensation	Name of President a	ndVice Presidents
	NTC	Consolidated Subsidiaries of NTC
Under NT$2,000,000	Otto Chang	Otto Chang
NT$2,000,000`～`NT$5,000,000
NT$5,000,000`～`NT$10,000,000	Pei-IngLee,Lin-Chin Su	Pei-IngLee,Lin-Chin Su
NT$10,000,000`～`NT$15,000,000	Charles Kau	Charles Kau
NT$15,000,000`～`NT$30,000,000
NT$30,000,000`～`NT$50,000,000
NT$50,000,000`～`NT$100,000,000
above NT$100,000,000
Total	4	4

3.4Employees' Compensation Granted to President and Vice Presidents

Unit: NT$ thousands; 2015/12/31

Title	Name	Stock (Fair Market Value)	Cash	Total employee compensati on	Total employee profit sharing as a % of 2015 net income(Note1)
President	Pei-Ing Lee (Note2)	0	22,240	22,240	0.1297
EVP	Otto Chang
SVP	Lin-Chin Su (Note3)
AVP	Yau-Ming Chen
AVP	Wesley Chang
AVP	C.M. Su
AVP	Rex Chuang
AVP and CFO	Joseph Wu (Note4)
Accounting Supervisor	Hung-Chi Kuo

Note1: Net income is from Financial Statements.

Note2: Charles Kao, the former president, was retired on Oct.6, 2015, the Board approved to appoint Pei-Ing Lee as president at the same date.

Note3: Li-Chin Su, the vice president, was promoted as senior vice president on Oct.6, 2015. Note4: Joseph Wu, chief finance officer, was promoted as assistant vice president on Oct.6, 2015.

4. Implementation of Corporate Governance

4.1 Board of Directors’ Meeting Status

A total of 7 meetings 【 A 】 of the board of directors were held in 2015. Director attendance status is shown as follows:

Tilte	Name	Attendance in person 【B】	By Proxy	Attendance rate in person (%) 【B/A】	Remark
Chairman	Chia-Chau Wu	7	0	100.00	Nan Ya Plastics Corp. Representative
Director	Wen-Yuan Wang	6	0	85.71
Director	Ruei-Hua Wang	5	0	71.43
Director	Ming-Jen Tzou	7	0	100.00	Nan Ya Plastics Corp. Representative
Director	Pei-IngLee	7	0	100.00
Director	Otto Chang	5	2	71.43
Director	Wen-Yao Wang	4	2	57.14	Nan Ya Plastics Corp. Representative
Director	Lin-Chin Su	7	0	100.00	Nan Ya Plastics Corp. Representative
Director	Charles Kau	4	0	57.14
Independent Director	Yi-Fu Lin	6	1	85.71
Independent Director	Tsai-Feng Hou	7	0	100.00
Independent Director	Shu-Po Hsu	4	3	57.14
Other annotations: 1. If there are the circumstances referred to in Article 14-3 of 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 meetings, sessions, contents of motions, all independents’ opinion and the Company’s response to independent directors’ opinion should be specified: None 2.Implementation of Directors Avoiding Conflict of Interests towards Resolution (1)Name: Chia-Chau Wu, Wen-Yuan Wang Resolutions adopted：The first time of board meeting on 3/12,2015. To Approve donating NT$896 Thousands to Ming Chi University of Technology. Causes of interest conflict Avoidance andVoting status`：`Directors above were the ED of Ming Chi University of Technology, so they did not discuss or Participate in the voting. (2)Name: Charles Kau, Pei-Ing Lee and Lin-Chin Su Resolutions adopted: The first time of board meeting on 3/12, 2015. To approve 2014 Special Bonus to NTC manager’s. Causes of interest conflict Avoidance and Voting status: Directors above were the captioned interested party, so they did not Participate in the voting. (3)Name: Pei-Ing Lee Resolutions adopted: The fifth time of board meeting (temporary) on 10/6, 2015.To approve appointing Pei-Ing Lee as president. Causes of interest conflict Avoidance and Voting status: Directors above were the captioned interested party, so they did not Participate in the voting. (4) Name: Chia-Chau Wu, Ruei-Hua Wang,Pei-Ing Lee, Otto Changa and Ming-Jen Tzou Resolutions adopted: The seventh time of board meeting on 12/14, 2015.To approve Micron Technology, Inc. to sign contact of Micron Memory Taiwan, MMT (100% shareholding of subsidiary of Micron Semiconductor B.V.) to merge and acquire Inotera Memories, Inc. Causes of interest conflict Avoidance and Voting status: Directors above were chairman or ED of Inotera, so they did not discuss or Participate in the voting. 3. Measures taken to strengthen the functionality of the Board: (1) The functions of the Board of Directors of the Company are sound and sufficient, meeting the current requirements of the Company’s corporate governance. (2) The Company will establish its Audit Committee after the reelection of directors in 2016 to improve its supervision function and strengthen its management function for the implementation of corporate governance.

4.2Audit Committee Meeting Status or Supervisors’ Participation in Board Meetings
NTC has not established Audit Committee yet.
Supervisors’ Participation in the Board of Directors’ Meetings:

There were 7 meetings 【 A 】 of the Board of Directors’ meeting in 2015 should be participated by Supervisors.The attendance status is shown as follows:

Title	Name	Attend in person【B】	Attendance rate in person (%)【B/A】	Remark
Supervisor	Shih-Ming Hsieh	5	71.43	Formosa Taffeta Co., Ltd. Representative
Supervisor	Ming-Chung Yeh	7	100.00	Pei-Jen Co., Ltd. Representative
Supervisor	Ming-Long Huang	7	100.00
Other annotations: 1. Composition and Duties of Supervisors (1)Communication among supervisors, employees and shareholders: the Company’s spokesman and deputy spokesman have represented Supervisors to communicate with employees and shareholders. (2)Communication among supervisors, the internal audit officer and CPA: Supervisors communicated with the internal audit officer and CPA via written internal audit reports or financial reports on regular basis on the Company’s business and financial status. 2. Supervisors’ Opinions Expressed in Board Meetings: None.

4.3 Corporate Governance Implementation as Required by the Taiwan Financial Supervisory Commission

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(1)Does Company follow “Taiwan Corporate Governance Implementation” to establish and disclose its corporate governancepractices?			The Board of the Company approved the establishment of the “Nanya Corporate Governance Principles” of the Company in the Board meeting dated November 10, 2014, which are available in NTC external website.	None
(2) Ownership structure and shareholders’ equity A. Does the Company adopt internal procedures for appropriate handling shareholders' suggestions, doubts, disputes and litigation matters, and implementation in accordance with procedures? B.Does the Company monitoring the status of major shareholders with control over the Company and their ultimate control persons? C.Does the Company set up and execute the risk management and firewall between the Company and its affiliates? D. Does the Company establish internal rules prohibiting Company insiders from trading securities using information not disclosed to the market?	   		a. The Company has designated a spokesman and deputy spokesman, and established the investor relationship department to handle shareholders’ suggestions and complaints. b. The Company has kept monitoring the changes in shareholdings of Directors, Supervisors, Managerial Officers and shareholders with more than 5% of total outstanding shares. The required information has been disclosed monthly on MOPS as per SFB’s regulation about more than 10% of total outstanding shares. c. The personnel and property of the Company has been separated definitely from other affiliates without any abnormal transactions. All transactions with affiliated enterprises are conducted on a legitimate basis and at arm’s length. For banks, customers, and suppliers, we make a comprehensive risk arrangement through checking from computer and stop paying if any problems from same supplier. d. The Company’s insiders have signed respective declarations, indicating their knowledge and willingness to follow the relevant laws and regulations on insider trading. The Company has the internal prohibition with the Company's property, confidential information, or unable to obtain non-public information in the market to acquire its own illegitimate profits in the “Guidelines and Regulations Rule” of the Company.	None

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(3)Composition and duties of the Board of Directors A. Does the Company set up the various policies for the composition of Board of Directors, and to implement the policies? B. Does the Company establish other functional committee voluntarily, besides the remuneration committee and audit committee? C. Does the Company set up its evaluation standard for Board of Director performance, and to perform its evaluation regularly? D. Does the Company evaluate the independence and suitability of the CPA regularly?	 	 	a.The Directors of the Company possess various professional specialties and substantial experiences, please refer to page 7 of NTC Annual Report for their experience and education. Board of Director includes three independent directors and two female directors, and all are qualified. b. The Company has not established other functional committee. c. The Company has not set its evaluation standard on its BoD performance. d. The Company regularly evaluates the independence and qualification of external auditors annually, and asks the auditing CPA to provide the related information based on the evaluated index. Then will report the evaluation result to the BoD.	None
E.Does the Company build channels of communication with its stakeholders and establish a designated section for stakeholders on the Company website to respond stakeholders’ CSR concerns? F. Does the Company appoint a professional stock agency to deal the shareholders affairs?			The Company will comply with relevant regulations to establish a designated section for stakeholders on the company website to maintain good communication with our stakeholders. Stakeholders can communicate with the company by telephone, letters, facsimile, and e-mails at any time if needed. The Company has its own in-house stock affair department to handle shareholding affairs.	None

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(6) Information disclosure A. Does the Company establish a corporate website to disclose information regarding the Company's financials, operation and corporate governance B. Does the Company adopt other disclosure methods(i.e. setting of English website, appointed personnel responsible for information gathering and disclosing, implement of spokesperson system, and uploading the materials of investor conferences on website)	 		a.The Company has disclosed information regarding the Company's financials, operation and corporate governance on its corporate website at www.nanya.com b. The Company has designated dedicated responsible personnel to gather and disclose the Company’s information and implemented a spokesperson system. The Company has also disclosed information in English and uploaded the materials of investor conference and relating CSR report and business magazine on its corporate website.	None
(7) Does the Company have any other helpful information regarding corporate governance (i.e. the interest and care of employees, investor relations,relationship with vendors,stakeholders’ rights, attendance of training courses by Directors and Supervisors, the implementation status for a risk management policy and risk measurement, the implementation status of protection for consumers or customers and liability insurance for Directors and Supervisors with respect to their liabilities resulting from exercising their duties) ?			a. The Company keeps good relationships with employees and pay attention for rights of expressing opinions and suggestions. We set boxes for employees to provide their opinions at the entry of working place and through computer system as well. All are replied by designated person and we make policy of abnormal event arrangement to the protection. In the same time, Unions hold supervisory board and labour conference regularly and department head should attend the meeting and communicate with others. b. The company make budget plan to take care of employees’ health inspection and relating examination to enhance own body. On the part of diet, we make health regulations to exam the source, people, storage, usage and clearance to protect employee’s health and safety. c. The company has stock affairs department as a channel with stockholders and also provide investor section on website`。`We take part in investment forum held by foreign broker and hold seminars with domestic and foreign periodically. d. The spirit of Purchasing activities of the company is creating a fair and competitive environment and seeking for qualified vendors to coordinate with each department by reasonable price, material, equipment and engineering. e. The company keeps going on own business and performance and achieve mission of caring employees, customer service, and reward shareholder. We also improve competitiveness internationally, create shareholder equity, supply stable product line, and attribute to social responsibilities.	None

		Implementation status	Implementation status	Implementation status	Implementation status	Implementation status		Non-implementation and its reasons
Yes	No			Explanation
		f. Advanced studies of		Directors and supervisors`：`				None
		Name	Course time	program	organizer		hours
		Wen-Yuan Wang	2015.11.20	Corporate Governance Roadmap corporate social responsibility	Securities and future institute Dharma Drum Mountain Humanities and Social Improvement Foundation		6
		Chia-Chau Wu
		Ruei-Hua Wang
		Ming-Jen Tzou
		Otto Chang
		Lin-Chin Su
		Yi-Fu Lin
		Tsai-Feng Hou
		Shu-Po Hsu
		Shih-Ming Hsieh
		Ming-Long Huang
		Ming-Chung Yeh

		Name	Course time	program		organizer	hours
		Pei-Ing Lee	2015.11.10 2015.11.20	Corporate Merger and Acquisitions under Taiwan Laws corporate social responsibility		Securities and future institute Dharma Drum Mountain Humanities and Social Improvement Foundation	6
		Charles Kau	2015.05.27	Corporate ethics leader’ forum	s	Securities and future institute	3

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
			(b)Transaction strategy The Company simulates short-term and long–term strategy to choose optimum financial products by market trend, exchange demand and cash flow at head office. It has to be held every month and reported to financial director and audit sector. (c) Operation strategy The Company made arrangement of CCS contract with international banks to reduce risk for long liabilities. In order to avoid risk of the floating rate long-term debt, The Company made an arrangement of IRS contract through careful assessment. Risk management at head office has to evaluate any types of foreign loans by market price.
(8)Does the Company has self-assessment report for corporate governance or entrust other professional institution to evaluate corporate governance? (If yes, the Company shall disclose the self-assessment (or entrusted evaluation) results, major defect (or suggested)items and the corrections of anydefects			The Company has no self-assessment reports for its corporate governance or the evaluation reports from other third-party professional institutions.	None

4.4 Composition, Responsibilities and Operations of NTC’s Remuneration Committee

Table 4.4.1 Professional Qualifications and Independence Analysis of Remuneration Committee

Title	Criteria Name	Meet the following professional qualification requirements, together with at least fiveyears work experience	Meet the following professional qualification requirements, together with at least fiveyears work experience	Meet the following professional qualification requirements, together with at least fiveyears work experience			Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)		Number of other public companies concurrently serving as a member of remuneration committee
		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 specialists 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 area of commerce, law, finance, accounting, or otherwise necessary for the business needs of the Company	A	B	C	D	E	F	G	H
Independent Director	Yi-Fu Lin												2
Independent Director	Tsai-Feng Hou												1
Independent Director	Shu-Po Hsu												None

Note ： Tick “  ” in the appropriate corresponding boxes if Board Directors and Supervisors qualify the following conditions during the two years before being elected or during the term of office:

A. Not an employee of the Company or an affiliated Company.
B. Not a director and supervisor of the Company or an affiliated Company (The same does not apply, however, in cases where the person is an independent director of the Company, its parent Company, or any subsidiary in which the Company holds, directly or indirectly, more than 50 percent of the voting shares.)
C. Not an individual shareholder holding 1% or more than 1% of the total issued shares of the Company, including his or her spouse, minor children or a person holding such shares on behalf of him or her, or not one of the top 10 individual shareholders of the Company.
D. Not a spouse, a relative within second-degree of kinship or a relative within third-degree of consanguinity of the persons referred to in the previous three paragraphs;
E. Not a director, supervisor or employee of the institutional shareholder directly holding 5% or more than 5% of the total stocks issued by the Company; or not a director, supervisor or employee of one of the top five institutional shareholders of the Company.
F. Not a director, supervisor, manager of, or a shareholder holding 5% or more of the total stocks issued by any specified Company or institution engaging in financial or business dealings with the Company.
G. Not a professional, the owner, partner, director, supervisor, manager or the spouse of the aforesaid persons of a solely-owned business, partnership, Company or institution that has provided financial, business, legal or other services and consultation to the Company or its affiliated companies.
H. No circumstances set forth in the subparagraphs of Article 30 of the Company Law.

Table 4.4.2 Remuneration Committee Meeting Status

(1)There were 3 members of NTC’s Remuneration Committee.

(2)There were 2 meetings 【 A 】 of the remuneration committee convened in 2015. The attendance status is shown as follows:

Title	Name	Attend in person	Attendance rate in person (%)	Remark
Convener	Yi-Fu Lin	2	100%	-
Committee Member	Tsai-Feng Hou	2	100%	-
Committee Member	Shu-Po Hsu	2	100%	-

4.5 Implementation Status of Corporate Social Responsibility

For the Company’s corporate social responsibility implementation status, please refer to “NANYA Corporate Social Responsibility Report” on the company’s website: http://www.nanya.com

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(1)Exercising Corporate Governance A. Does the Company declare its CSR policy, system or relevant management guidelines and review the results of the implementation? B. Does the Company organize education and training on the implementation of CSR initiatives on a regular basis? C. Does the Company establish an exclusively (or concurrently) dedicated unit to be in charge of CSR and appoint executive-level positions by the board of directors with responsibility for CSR issues, and to report the status of the handling to the board of directors? D. Does the Company adopt reasonable remuneration policies and combine the employee performance evaluation system with CSR policies, and that a clear and effective incentive and discipline system be established?	   		Please refer to “Regarding this report and Communication with Stakeholders” of NANYA CSR Report. The company organizes training and promotion in respect of social responsibility on a regular basis, such as employee code of conduct, information security guideline, sexual harassment prevention, and encourages employees to participate in the related activities. The Company has formed the “Corporate Social Responsibility (CSR) Committee”. Its CSR Committee is led by President. The committee is responsible for determining the CSR strategies and evaluating the performance then report to board of directors in the middle of a year on annual basis. Please refer to “Image of Workplace” of NANYA CSR Report	None

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(2) Fostering a Sustainable Environment A. Does the Company endeavor to utilize all resources more efficiently and use renewable materials which have a low impact on the environment? B. Does the Company establish proper environment management systems based on the characteristics of their industries? C. Does the Company monitor the impact of climate change on their operations and establish Company strategies for energy conservation, carbon and greenhouse gas reduction?	  		Please refer to “Environmental Sustainability and Safety Hygiene” of NTC CSR Report. Please refer to “Environmental Sustainability and Safety Hygiene” of NTC CSR Report. Please refer to “Greenhouse Gas Emission and Management” of NTC CSR Report.	None

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(3) Preserving Public Welfare A. Does the Company comply with relevant laws and regulations, and the International Bill of Human Rights and adopt relevant management policies and procedure? B. Does the Company provide an employee grievance mechanism and respond to any employee’s grievance in an appropriate manner? C. Does the Company provide safe and healthful work environments for their employees and organize training on safety and health for their employees on a regular basis? D. Does the Company establish a platform to facilitate regular communication between the management and the employees and inform employees of operation changes that might have material impacts?	   		Please refer to “Protection of Employee Rights and Interests” of NTC CSR Report. Please refer to “Employee Interaction and Career Development” of NTC CSR Report. Please refer to “Healthy Workplace” of NTC CSR Report. Please refer to “Employee Interaction and Career Development” of NTC CSR Report.	None

Assessment item			Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
E. Does the Company establish effective training programs to foster career skills? F. Does the Company establish policies on consumer rights and interests and accept consumer complaints in the process of research and development, procurement, production, operations and services? G. Does the Company follow relevant laws, regulations and international guidelines when marketing or labeling their products and service? H. Does the Company assess whether there is any record of a supplier’s impact on the environment and society prior to engaging in commercial dealings? I.Does the Company enter into a contract with any of its major suppliers including terms that the contract may be terminated or rescinded any time if the supplier has violated such policy and has caused significant negative impact on the environment and society?	    		Please refer to “Employee Interaction and Career Development” of NTC CSR Report. Please refer to “Customer Relations” of NTC CSR Report. Please refer to “Customer Relationship” and “Green Product” of NTC CSR Report. Please refer to “Supplier and Contractor Management” of NTC CSR Report. Please refer to “Supplier and Contractor Management” of NTC CSR Report.	None

Assessment item	Implementation status	Implementation status	Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(4)Enhancing Disclosure of CSR Information Does the Company fully disclose relevant and reliable information relating to their CSR initiatives on Company’s website and MOPS website?			The Company has established a designated section of “Corporate Social Responsibility Report” for stakeholders to download and refer to NTC CSR Report, as well as disclosing its CSR implementation status and related information on MOPS website.	None
(5)If the Company has established its corporate social responsibility code of practice according to “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies”, please describe the operational status and differences: The Company has established its corporate social responsibility policies and code of practice which comply with “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies”. For the implementation status, please refer to NTC CSR Report and our corporate social responsibility related information on our website: http://www.nanya.com
(6)Other important information to facilitate better understanding of the Company’s implementation of corporate social responsibility: Please refer to NTC CSR Report and our corporate social responsibility related information on our website: http://www.nanya.com (7)If the Company’s “Corporate Social Responsibility Report” has been verified against assurance standards of the relevant certification bodies, the Company shall describe: BSI (British Standards Institution) reviewed this report against AA1000 Assurance Standard and the GRI G4guideline. It also verified that this report is in accordance with the core option of the G4guidelines.

4.6 Implementation Status of Operational Integrity

Assessment item	Implementation status	Implementation status	Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(1) Establishing the policies and external rams of ethical corporate management A. Does the Company clearly specify ethical corporate management policies, guidelines and the commitments of the board of directors and management team to implement the policies in its rules and external documents? B. Does the Company establish relevant policies, including operational procedures, guidelines, disciplinary rules for violations and complaint channel, for preventing any unethical conduct? Does the Company implement the policies? C. Does the Company adopt any prevention program for the items of the Article 7.2 of “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” or higher potential unethical conduct within other business activities?	  		a. At NTC we comply with laws and pursue our business objectives with integrity.“Integrity” is a major core value of the Company’s operational philosophies. NTC has established the Ethical Corporate Management Principles, the Code of Ethical Conduct and the Employee Code of Conduct to require those Directors, managers and each employee bears a heavy personal responsibility to uphold NTC’s ethics value. All details of the ethics policies and the measures that the Board and the management team take to ensure compliance are reported in our annual report and the Corporate Social Responsibility Report. b. NTC has established the Employee Code of Conduct available on our internet for all employees understanding of the Company's resolve to implement ethical corporate management, the related policies, complaint channel, and the consequences of committing unethical conduct. In order to promote a culture of awareness, we require all employees to be trained periodically on our core values and passed the qualification. c. NTC has established the Employee Code of Conduct. All employees shall follow this Employee Code of Conduct and act with integrity to ensure the relationships with our customers, shareholders, colleagues, suppliers and the communities, in which we live and work, are built on trust. The Company prohibits the employee to accept any improper gifts and entertainment. d. We also require our vendors to accept and abide by the same ethical standard that not to engage in any fraud or provide unethical conduct when dealing with us or our officers and employees.	None
(2) Corporate conduct and ethics compliance practice A.Does the Company assess ethical records of business counterparties? Does the Company include business conduct and ethics related clauses in the business contracts?			NTC requires our stakeholders such as our suppliers, vendors and other partners to accept and abide by the same ethical standard when dealing with NTC.	None

Assessment item	Implementation status	Implementation status	Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
B.Does the Company set up dedicated unit under the board of directors in charge of promotion of the ethical corporate management and report the execution to the board of directors periodically? C. Does the Company establish policies to prevent conflicts of interest, provides appropriate communication channels and implement the policies? D. Does the Company establish effective accounting systems and internal control systems for the implementation of policies? Does the Company audit such execution and compliance by internal audit unit or entrusted CPA? E. Does the Company periodically provide internal or external training courses of ethics corporate management?	   		At NTC, under the General Manager's Office, is in charge of	None
			carrying out the ethical corporate management policies and
			reporting to the board of directors on a regular basis.
			The Company promulgates policies of preventing conflicts of interests in the Employee Code of Conduct to protect the Company’s interests. We also require our vendors to accept and abide by the same ethical standard that not to engage in any fraud or provide unethical conduct when dealing with us or our officers and employees. We have established internal and external “Hotline“that employees or any relevant person may use to report any ethical irregularities. The Company promulgates policies of preventing conflicts of interests in the Employee Code of Conduct to protect the Company’s interests. We also require our vendors to accept and abide by the same ethical standard that not to engage in any fraud or provide unethical conduct when dealing with us or our officers and employees. We have established internal and external “Hotline“that employees or any relevant person may use to report any ethical irregularities. The Company sets up the effective accounting and internal control system. Connecting each operational function via comprehensive computerization to implement cross audit and abnormal management. The Company also forms the professional and independent framework of internal audit. Three levels of internal audit are implemented: Corp. Audit Department under the Board of Directors is responsible for level one internal audit; head Office is responsible for regular and special level two internal audit; Besides, on the basis of internal audit is the duty of whole employees, each departments are requested to perform regular self-inspection of business activities to carry out level three internal audit. The Company provides new hire orientation and annual refreshed training to all employees for their understanding of the Company's resolve to implement ethical corporate management, the related policies, prevention program and the consequences of committing unethical conduct.

Assessment item	Implementation status	Implementation status	Implementation status	Non-implementation and its reasons
	Yes	No	Explanation
(3)The channels for reporting any ethical Irregularities A.Does the Company set up specific reporting and reward system, convenient reporting channel and assign appropriate and dedicated sponsor to handle the case? B. Does the Company establish standard operation procedures for the investigation and security mechanism? C. Does the Company adopt protection measures of non-retaliation?	  		a.The Company has established internal and external “Hotline“ to accept any accusation of unlawful or unethical conduct. An independent and dedicated unit is in charge of any investigation from Hotline, and keeps the reporter’s identity and content of the report confidential. b.The Company has established internal and external “Hotline“ to accept any accusation of unlawful or unethical conduct. An independent and dedicated unit is in charge of any investigation from Hotline, and keeps the reporter’s identity and content of the report confidential. c.NTC will not tolerate threats or acts of retaliation against the informer. If the informer wishes, his/her report can be made anonymously: his/her name on the report will be replaced by one given trackingnumber.	None
(4) Enhancing disclosure of ethical corporate Does the Company disclose the content and the implement status of the Ethical Corporate Management Policies on the Company’s website and MOPS?			NTC discloses the Ethical Corporate Management Policies and the relevant information in its’ Annual Report which is available in NTC external website.	None
(5)For The Company which has established the policies of ethical corporate management based on “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”, the Company shall elaborate on any departure from the principles: The Company has established the “Ethical Corporate Management Principles”. We abide by to build up the operational philosophies of honesty, transparency and responsibility, base policies on the principle of good faith and establish good corporate governance and risk control and management mechanism so as to create an operational environment for sustainable development.
(6)Other helpful information regarding ethical corporate management: The Company arrange directors and managers to take part in corporate governance course to enhance supervise and governance ability.

(5)For The Company which has established the policies of ethical corporate management based on “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”, the Company shall elaborate on any departure from the principles: The Company has established the “Ethical Corporate Management Principles”. We abide by to build up the operational philosophies of honesty, transparency and responsibility, base policies on the principle of good faith and establish good corporate governance and risk control and management mechanism so as to create an operational environment for sustainable development. (6)Other helpful information regarding ethical corporate management:

4.7 NTC’s Corporate Governance Guidelines and Regulations:

Please refer to Inotera website at http://www.nanya.com and the MOPS website at http://mops.twse.com.tw.

4.8 Other Important Corporate Governance Information

NTC published the “Corporate Social Responsibility Report” to unroll its strategies and related activities in terms of economic, governance, environmental and social aspects. With that, the Company strengthens the communication with employees, shareholders and all stakeholders, as well as demonstrates its efforts in continuous improvement. And the Company has established "Code of Ethical Conduct”, please refer to the MOPS website at http://www.mops.twse.com.tw

4.9Implementation Status of the Internal Control System

(1) Internal Control System Statement

Nanya Technology Corp. Internal Control System Statement Date: 2016.3.15 The Company states the following with regard to its internal control system in 2015, based on the findings of a self-assessment: 1. The Company is fully aware that establishing, operating, and maintaining an internal control system are the responsibility of its Board of Directors and management. The Company has established such a system aimed at providing reasonable assurance of the achievement of objectives in the effectiveness and efficiency of operations (including profits, performance, and safeguard of asset security), reli ability, timeliness, transparency, and regulatory compliance of reporting, and compliance with applicable laws, regulations, and bylaws. 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 goals mentioned above. Furthermore, the effectiveness of an internal control system may change along with changes in environment or circumstances. The internal control system of the Company contains self-monitoring mechanisms, however, and the Company takes corrective actions as soon as a deficiency is identified. 3. The Company judges 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 internal control system judgment criteria adopted by the Regulations divide internal control into five elements based on the process of management control: 1. Control environment 2. Risk assessment 3. Control activities 4. Information and communications 5. Monitoring activities. Each element further contains several items. Please refer to the Regulations for details. 4. The Company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid criteria. 5. Based on the findings of the assessment mentioned in the preceding paragraph, the Company believes that on 2015.12.31 its internal control system (including its supervision and management of subsidiaries), encompassing internal controls for understanding of the degree of achievement of operational effectiveness and efficiency objectives, reliability, timeliness, transparency, and regulatory compliance of reporting, and compliance of reporting, and compliance with applicable laws, regulations, and bylaws, was effectively designed and operating, and reasonably assured the achievement of the above -stated objectives. 6. This Statement will become a major part of the content of the Company's Annual Report 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 Meeting of the Company held on 2016.3.15, where 0 of the 11 attending directors expressed dissenting opinions, and the remainder all affirmed the content of this Statement. Nanya Technology Corp. Chairman: Chia-Chau Wu President: Pei-Ing Lee

(2)Audit report of internal control system reviewed by independent auditors: None

4.10 Reprimands on the Company and its Employees in Violation of Laws, or Reprimand on its Employees in Violation of Internal Control System and Other Internal Regulations, Major Shortcomings and Status of Correction: None
4.11 Major Resolutions of Shareholders’ Meetings and Board Meetings:

Annual Shareholders’ Meeting of June 10, 2015:

(1)Ratify the Business Report and Financial Statements for 2014
(2)Ratify the Proposal for Distribution of 2014 Profits
(3)Amendment of the Company’s Articles of Incorporation
(4)Amendment of the Company’s “Convention Rules and Procedures for Shareholders’ Meeting”
(5)Amendment of the Company’s “Rules for Election of Directors and Supervisors”

Implementation Status:

(1)The 2015 Annual Shareholders’ Meeting resolved to distribute cash dividends of NT$2.0 per share. The Board Meeting of June 10, 2015 approved cash dividends adjustment of NT$1.9985 per share by the Company’s employees exercise their stock options, approved ex-dividend record date on July 17, 2015 and payment date on July 31, 2015. Authorize chairman to adjust the ultimate cash dividends of NT$1.9984 per share on June 23, 2015 by the Company’s employees exercise their stock options before book closure date of “Rules of Employee Stock Option Issuance and Subscription”.
(2)The resolutions in 2015 Annual Shareholders’ Meeting included the amendment of the Company’s Articles of Incorporation, the amendment of the Company’s “Convention Rules and Procedures for Shareholders’ Meeting” and the amendment of the Company’s “Rules for Election of Directors and Supervisors”. All the resolutions of the 2015 Annual Shareholders' Meeting have been fully implemented in accordance with the resolutions.

Major Resolutions of Board Meetings in 2015:

(1)2015.3.12 Convened the 2015 Annual Shareholders’ Meeting and Approved the Proposal for Distribution of 2014 Profits
(2)2015.3.12 Approved to Apply Supplemental Public Issuance of Private Placement in 2009 and 2011
(3)2015.5.11 Approved Capital Expenditure Budget of NT$14 billion for the First Phase of 20nm Technology Conversion
(4)2015.6.10 Approved to Issue Less than 400 million New Shares for Cash Capital Increase
(5)2015.8.10 Approved to Issue Employee Stock Options
(6)2015.10.6 Approved to Appoint Pei-Ing Lee as General Manager
(7)2015.12.14 Approved to Support Micron Semiconductors Taiwan Co. Ltd. (”Micron Taiwan”) to Acquire Inotera memories Inc. (”Inotera”) as a Solely Owned Subsidiary of Micron Taiwan through Share Swap Transaction
(8) 2015.12.14 Approved to Invest up to NT$31.5billion in Micron Technology, Inc. to Acquire Micron's Equity

(9)2015.12.14 Approved to Sign 1x and 1y Technology Transfer & License Option MOU with Micron Technology, Inc.

Major Resolutions of Board Meetings in 2016:

(1)2016.3.15 Convened the 2016 Annual Shareholders’ Meeting and Approved the Proposal for Distribution of 2015 Profits
(2)2016.3.15 Approved to Apply Supplemental Public Issuance of the first and second Private Placement in 2012
(3)2016.3.15 Approved Capital Expenditure Budget of NT$21.9 billion for the Second Phase of 20nm Technology Conversion
(4)2016.3.15 Approved to Authorize Chairman to Sign Relevant Documents of NT$12 billion Syndicated Loan
(5)2016.3.15 Approved Transfer Inotera Memories, Inc. Common Stocks to Micron Semiconductors Taiwan Co. Ltd.
(6)2016.5.10 Examined the Qualification of Directors (including independent directors) Candidates
(7)2016.5.10 Approved a Resolution to Offer One Additional Investment Alternative to Micron
4.12Major issues of record or written statements made by any directors or supervisors which specified his/her dissent to important resolutions passed by the Board of Directors in 2015, and as of the publication date of the Annual Report: None
4.13 Resignation or Dismissal of Personnel Involved in Preparation of Financial Reports

				As of 2016.5.10
Title	Name	Date of appointed	Date of termination	Reasons for resignation or dismissal
President	Charles Kau	2012.9.1	2015.10.6	Retirement

5. Information Regarding NTC’s Audit Fees

5.1 Table of Audit Fees

5.1 Table of Audit Fees	5.1 Table of Audit Fees
Name of audit firm		CPA	name		Auditperiod			Note
KPMG Certified Public Accountants Firm		Delphi Chen	Isabel Lee		2015.1.1~2015.12.31
						Unit: NT$thousands
Scale		Item		Audit fee		Non-audit fee	Total
1	Less than NT$2,000,000					445(Note)	445
2	NT$2,000,000～NT$4,000,000			3,120			3,120
3	NT$4,000,000～NT$6,000,000
4	NT$6,000,000～NT$8,000,000
5	NT$8,000,000～NT$10,000,000
6	NT$10,000,000 Above

Note: Non-audit fee includes capital registration of NT$142 thousand, business financial statement and annual report review of NT$70, traveling expences of NT$100, Form Printing of NT$133.

5.2 Non-audit fee paid to auditors, the audit firm and its affiliates accounted for more than one-fourth of total audit fee: None
5.3 Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of previous year: None
5.3 Audit fee reduced more than 15% year over year: None
Replacement of Independent Auditors in the Last Two Years and Thereafter: Due to position adjustment of KPMG, CPA of NTC’s change to Delphi Chen and Isabel Lee.
The Company’s Chairman, President or Managers in charge of Finance or Accounting has been under Current Audit Firm or its Affiliates’ Employment in 2015: None

8. Changes in Shareholding

8.1 Change in Shares Pledged by Directors, Supervisors, Managers and Major Shareholders with 10% Shareholding or More:

Unit: shares

				Unit: shares	Unit: shares
Title	Name	2015		As of April 24,2016
		Holding increase (decrease)	Pledged holding increase (decrease)	Holding increase (decrease)	Pledged holding increase (decrease)
Director	Nan Ya Plastics Corporation	0	0	0	0
Chairman	Chia-Chau Wu	0	0	91	0
Representative of Nan Ya Plastics Corp.	Wen-Yao Wang	0	0	0	0
Representative of Nan Ya Plastics Corp	Ming-Jen Tzou	0	0	0	0
Representative of Nan Ya Plastics Corp. SVP	Lin-Chin Su (Note1)	0	0	152	0
Director	Wen-Yuan Wang	0	0	0	0
Director	Ruei-Hua Wang	0	0	0	0
Director, President	Pei-Ing Lee (Note2)	50,000	0	137,264	82,000
Director, EVP	Otto Chang	0	0	0	0
Director, Former President	Charles Kau (Note2)	0	0	0	0
Independent Director	Yi-Fu Lin	0	0	0	0
Independent Director	Tsai-Feng Hou	0	0	0	0
Independent Director	Shu-Po Hsu	0	0	0	0
Supervisor	Pei Jen Co., Ltd.	0	0	0	0
Representative of Pei Jen Co., Ltd.	Ming-Chung Yeh	0	0	0	0
Supervisor	Formosa Taffeta Co., Ltd.	0	0	1,470,546	0
Representative of Formosa Taffeta Co., Ltd.	Shih-Ming Hsieh	0	0	0	0
Supervisor	Ming-Long Huang	0	0	0	0

Title	Name	2015	2015	As of April 24,2016	As of April 24,2016
		Holding increase (decrease)	Pledged holding increase (decrease)	Holding increase (decrease)	Pledged holding increase (decrease)
AVP	Yau-Ming Chen	0	0	0	0
AVP	Wesley Chang	0	0	0	0
AVP	Chi-Meng Su	0	0	0	0
AVP	Rex Chuang	(35,000)	0	140,000	0
AVP, Finance Supervisor	Chih-Hsiang Wu (Note3)	0	0	0	0
Accounting Supervisor	Hung-Chi Kuo	0	0	40,000	0
Major Shareholder	Formosa Plastics Corporation	(3,821,000)	0	0	0
Major Shareholder	Formosa Chemical & Fibre Corporation	(1,068,968)	0	0	0
Major Shareholder	Formosa Petrochemical Corporation	0	0	0	0

Note1 ： VP Lin-Chin Su was promoted to SVP on October 6, 2015. Note2 ： The former President Charles Kau retired and President Pei-Ing Lee boarded on October 6, 2015. Note3 ： Finance Supervisor, Chih-Hsiang Wu, was promoted to AVP.

8.2 Stock Trade/Pledge with Related Party by Directors, Supervisors, Managers and Major Shareholders with 10% Shareholding or More: None

As of 2016/4/24

Name	Shareholding	Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	The relationship between any of the Company’s Top Ten Shareholders	The relationship between any of the Company’s Top Ten Shareholders
	Shares	%	Shares	%	Shares	%	Name	Relation
Nan Ya Plastics Corporation (NPC) Chairman`：` Chia-Chau Wu	907,303,769	33.01%	-	-	-	-	FPC	FPC is the supervisor of NPC. NPC is the board director of FPC.
							FCFC	The Chairman of FCFC, Wen-Yuan Wang, is the managing director of NPC NPC and FCFC are the board directors of each other.
							FPCC	NPC and FPCC are the board directors of each other.
							MLPC	NPC is the board director of MLPC.
Representative of NPC: Chia-Chau Wu	957	0.00%	-	-	-	-	None	None
Representative of NPC: Ming-Jen Tzou	-	-	-	-	-	-	None	None
Representative of NPC: Wen-Yao Wang	2,471,097	0.09%	13,381	0.00%	-	-	FCFC	The relationship between Wen-Yao Wang and Wen-Yuan Wang, the Chairman of FCFC, is within two degrees of kinship.
Representative of NPC: Lin-Chin Su	1,601	0.00%	-	-	-	-	None	None
Formosa Plastics Corporation (FPC) Chairman`：` Chien-Nan Lin	367,537,854	13.37%	-	-	-	-	NPC	NPC is the board director of FPC. FPC is supervisor of NPC.
							FCFC	FCFC is the board director of FPC.
							FPCC	FPC and FPCC are the board directors of each other.
							MLPC	FPC is the board director of MLPC
							CGMF	CGMF is the board director of FPC.
Formosa Chemical & Fibre Corporation(FCFC) Chairman`：` Wen-Yuan Wang	364,815,409	13.27%	-	-	-	-	FPC	FCFC is the board director of FPC.
							NPC	The Chairman of FCFC, Wen-Yuan Wang, is the managing director of NPC. FCFC and NPC are the board directors of each other.
							FPCC	FCFC and FPCC are the board directors of each other.
							MLPC	The Chairman of FCFC, Wen-Yuan Wang, is the board director of MLPC. FCFC is supervisor of MLPC.
							CGMF	The Chairman of FCFC, Wen-Yuan Wang, is the board director of CGMF CGMF is the board director of FCFC.
Formosa Petrochemical Corporation (FPCC) Chairman`：` Pao-Lang Chen	364,815,409	13.27%	-	-	-	-	FPC	FPCC and FPC are the board directors of each other.
							NPC	FPCC and NPC are the board directors of each other.
							FCFC	FPCC and FCFC are the board directors of each other.
							MLPC	Chairman is the same person. FPCC is the board director of MLPC.
							CGMF	CGMF is the board director of FPCC.
HSBC Bank (Taiwan) Limited in custody for UBS in Singapore Pte Ltd- Singapore Branch Investment Account	111,858,521	4.07%	-	-	-	-	None	None

Name	Shareholding	Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement		The relationship between any of the Company’s Top Ten Shareholders
	Shares	%	Shares	%	Shares	%	Name	Relation
China CITIC Bank in custody for Investment Account of Kingston Technology Company	61,242,000	2.23%	-	-	-	-	None	None
Cathay Life Insurance Co.,Ltd. Chairman`：` Hung-Tu Tsai	31,956,000	1.16%	-	-	-	-	None	None
Mai-Liao Power Corporation (MLPC) Chairman`：` Pao-Lang Chen	26,261,393	0.96%	-	-	-	-	FPC	FPC is the board director of MLPC.
							NPC	NPC is the board director of MLPC.
							FCFC	The Chairman of FCFC, Wen-Yuan Wang, is the board director of MLPC FCFC is supervisor of MLPC.
							FPCC	Chairman is the same person. FPCC is the board director of MLPC.
ADATA Technology Co., Ltd. Chairman`：` Li-Pai Chen	24,893,021	0.91%	-	-	-	-	None	None
Chang Gung Medical Foundation(CGMF) Chairman`：` Pao-Chu Lee	19,627,765	0.71%	-	-	-	-	FPC	CGMF is the board director of FPC.
							FCFC	The Chairman of FCFC, Wen-Yuan Wang, is the board director of CGMF. CGMF is the board director of FCFC.
							FPC	CGMF is the board director of FPCC.

10.The total number of shares and total equity stake held in any single enterprise by the Company, the Company’s directors and supervisors, managers, and any companies controlled either directly or indirectly by the Company:

					As of 2016/4/4	As of 2016/4/4
Name of Enterprise	Ownership by	the Company	Direct or Indirect Ownership by Directors, Supervisors, Managers		Total Ownership
	Shares (Thousand)	%	Shares (Thousand)	%	Shares (Thousand)	%
Inotera Memories, Inc.	1,587,484	24.10%	438,681	6.66%	2,026,165	30.77%

IV. Capital and Shares

Capitalization As of 2016/4/24

Year / Month	Issue price (NT$ per share)	Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Remark	Remark
		Shares	Amount	Shares	Amount	Sources of capital	Capital increased by assets other than cash	notes
2011/01	13.2~16	6,000,000,000	60,000,000,000	4,034,341,549	40,343,415,490	Exercised ESOP	None	Note1
2011/04	13.2	6,000,000,000	60,000,000,000	4,034,575,549	40,345,755,490	Exercised ESOP	None	Note1
2011/11	2.77	19,100,000,000	191,000,000,000	14,864,900,455	148,649,004,550	Private Placement	None
2012/09	1.7	19,100,000,000	191,000,000,000	18,664,900,455	186,649,004,550	Private Placement	None
2012/12	1.7	30,000,000,000	300,000,000,000	23,959,018,099	239,590,180,990	Private Placement	None
2013/07	5.5~6.9	30,000,000,000	300,000,000,000	23,960,473,099	239,604,730,990	Exercised ESOP	None	Note2
2013/08	5.5	30,000,000,000	300,000,000,000	23,960,851,099	239,608,510,990	Exercised ESOP	None	Note2
2014/03	5.5	30,000,000,000	300,000,000,000	23,961,008,099	239,610,080,990	Exercised ESOP	None	Note2
2014/07	--	30,000,000,000	300,000,000,000	2,396,100,810	23,961,008,100	Cash capital dicrease	None	Note3
2014/08	5.5	30,000,000,000	300,000,000,000	2,398,335,810	23,983,358,100	Exercised ESOP	None	Note2
2014/12	55	30,000,000,000	300,000,000,000	2,409,527,810	24,095,278,100	Exercised ESOP	None	Note2
2015/03	55~81.9	30,000,000,000	300,000,000,000	2,426,697,810	24,266,978,100	Exercised ESOP	None	Note2
2015/05	55	30,000,000,000	300,000,000,000	2,428,400,810	24,284,008,100	Exercised ESOP	None	Note2
2015/08	55	30,000,000,000	300,000,000,000	2,428,565,810	24,285,658,100	Exercised ESOP	None	Note2
2016/01	36.5	30,000,000,000	300,000,000,000	2,748,565,810	27,485,658,100	Cash capital increase	None	Note4

Note1: Approval document No. and approval date: SFB. jin guen jen yi tzi No. 0910158515 approval on2002/11/05, SFB. jin guen jen yi tzi No. 0920162597 approval on2004/01/09 .

Note2: Approval document No. and approval date: SFB. jin guen jen yi tzi No. 0940124580 approval on 2005/06/20, 、 FB. jin guen jen yi tzi No. 0950125067 approval on 2006/06/20, SFB. jin guen jen yi tzi No. 0970038705 approval on 2008/07/31.

Note3: Approval document No. and approval date: SFB. jin guen jen yi tzi No. 1030022998 approval on 2014/06/24. Note4: Approval document No. and approval date: SFB. jin guen jen yi tzi No. 1040026195 approval on 2015/07/20.

Unit: share; 2016/04/24

				Unit: share;2016/04/24
Type of stock		Authorized capital		Remark
	Outstanding	Outstanding Un-issued shares	Total shares
Common Stock	2,748,565,810	27,251,434,190	30,000,000,000	-

2. Composition of Shareholders

2016/04/24

						2016/04/24
Type of shareholders	Government agencies	Financial institutions	Other juridical person	Domestic natural person	Foreign institutions & natural person	Total
Number of shareholders	1	17	244	120,180	221	120,663
Shareholding (shares)	1,335,377	69,437,477	2,151,868,713	316,953,330	208,970,913	2,748,565,810
Holding (percentage)	0.049	2.526	78.29	11.532	7.603	100.00

3. Distribution of Shareholding

Par value: NT$10per share As of 2016/04/24

Par value: NT$10per share			As of 2016/04/2
Common shares ownership (Unit: share)	Number of shareholders	Ownership (shares)	Ownership (percentage)
1`～`999	91,760	12,810,180	0.466
1,000`～`5,000	21,803	41,882,102	1.524
5,001`～`10,000	3,314	25,315,922	0.921
10,001`～`15,000	1,234	15,107,369	0.550
15,001`～`20,000	677	12,411,461	0.452
20,001`～`30,000	643	16,070,959	0.585
30,001`～`40,000	306	10,822,636	0.394
40,001`～`50,000	193	8,944,490	0.325
50,001`～`100,000	364	25,848,665	0.940
100,001`～`200,000	177	25,071,878	0.912
200,001`～`400,000	81	23,162,626	0.843
400,001`～`600,000	19	9,442,545	0.344
600,001`～`800,000	14	9,651,005	0.351
800,001`～`1,000,000	14	12,807,461	0.466
1,000,001and over	64	2,499,216,511	90.928
Total	120,663	2,748,565,810	100

4. Major Shareholders

		As of 2016/4/24
Top10 shareholder	OwnershipShares	OwnershipPercentage
Nan Ya Plastics Corporation	907,303,769	33.01
Formosa Plastics Corp.	367,537,854	13.37
Formosa Chemicals & Fibre Corp.	364,815,409	13.27
Formosa Petrochemical Corp.	364,815,409	13.27
HSBC Bank (Taiwan) Limited in custody for UBS in Singapore Pte Ltd-Singapore Branch Investment Account	111,858,521	4.07
CTBC in custody for Kingston Technology Corporation Investment Account	61,242,000	2.23
CathyLife Insurance Co.,Ltd.	31,956,000	1.16
Mai-Liao Power Corp.	26,261,393	0.96
ADATA TechnologyCo.,Ltd.	24,893,021	0.91
ChangGungMedical Foundation	19,627,765	0.71

5. Market Price, Net Worth, Earnings, and Dividends per Common Share

Item	Year	2014	2015	2016Q1
Market price per share	Highest marketprice	83.00	89.30	46.20
	Lowest marketprice	3.50	31.15	37.60
	Average marketprice	26.70	55.13	40.75
Book value per share	Before distribution	17.17	22.55	24.84
	After distribution	15.16	Undistributed	`－`
Earnings per share	Weighted average shares	2,399,138	2,423,879	2,702,164
	Not-adjusted earningsper share	11.77	7.07	0.68
	Adjusted earningsper share	`－`	`－`	`－`
Dividends per share	Cash dividends`（`Note 1`）`	1.9984	2.8	`－`
	Stock dividends from retained	`－`	`－`	`－`
	Stock dividends from capital	`－`	`－`	`－`
	Accumulated undistributed	`－`	`－`	`－`
Return on Investment	Price / earnings ratio`（`Note 2`）`	2.27	7.80	`－`
	Price / dividend ratio`（`Note 3`）`	13.36	19.69	`－`
	Cash dividendyield rate`（`Note 4`）`	7.48	5.08	`－`

Note1: Its expected number from earning distribution in 2015 and not approval by Regular Shareholders’ Meeting’s yet Note2: Price / earnings ratio = average market price / adjusted earnings per share

Note3: Price / dividend ratio = average market price / cash dividends per shar Note4: Cash dividend yield rate = cash dividends per share / average market price

6. Dividend Policy and Implementation Status

6.1 Dividend Policy

(1)In accordance with the Company’s Articles of Incorporation approved by the Board Meeting on December 14, 2015, which will be resolved at Annual Shareholders’ Meeting on June 22, 2016:

Whenever there are profits of the Company, it shall be used to pay all outstanding taxes, recover the Company’s accumulated losses, and set aside 10% thereof in a legal reserve. Thereafter, the remaining profit, if any, after set aside a special reserve or reserves for certain undistributed earnings for business purposes, shall collectively with any undistributed surplus earnings from previous fiscal years, be included in a surplus earning distribution plan submitted by the Board of Directors for approval at a Annual Shareholders’ Meeting.

The Company belongs to a high-technology and capital intensive industry and its operations are still experiencing significant growth. To accommodate the long-term financial projection of the Company, the Company adopts the policy that dividends shall be distributed appropriately in accordance with the Company's budget of capital expenditures. In principle, the stock dividends distributed by the Company shall not exceed 50% of the total distributable dividends of that year.

The Company will strive to maintain a stable dividend policy, and mainly dividends will be distributed by cash when free cash flow is sufficient to cover capital expenditure and debt repayment.It distributed cash dividends of NT$ 1.9984 per share in 2015.

(2) Proposal to Distribute Year 2015 Profits:

The Board Meeting of March 15, 2016 approved to distribute cash dividends of NT$2.8 per share. The dividends distribution proposal will be resolved at Annual Shareholders’ Meeting on June 22, 2016.

(3)Expect material change in dividend policy: None

7. Effect upon Business Performance and EPS of the Proposed Stock Dividends

Distribution: None

8. Compensation of Employees, Directors and Supervisors

8.1 The percentages or ranges of employees, directors and supervisors’ compensation as stated in the Company's Articles of Incorporation:

In accordance with Article 19 of the Company’s Articles of Incorporation approved by the Board Meeting on December 14, 2015, which will be resolved at Annual Shareholders’ Meeting on June 22, 2016:

The Company shall appropriate 1% to 12% for employees’ compensation from its profit, if any, before tax. However, the Company’s accumulated losses shall have been covered.

The Company may have the profit distributable as employees’ compensation distributed in the form of shares or in cash, and the qualification requirements of employees, including the employees of subsidiaries of the Company meeting certain specific requirements, entitled to receive compensation shall be determined by the Board of Directors.

8.2 The accounting treatment of the discrepancy between the actual distributed amount and the estimated figure for the current period:

The bases for estimating the amount of employee and director remuneration are based on relevant laws, the Company’s Article of Incorporation, and past experience. The difference, if any, between actual distribution and estimated amount will be included in the profit or loss in the following fiscal year based on relevant accounting principles.

8.3 Distribution of 2015 Compensation Approved by the Board of Directors:

The Board Meeting of March 15, 2016 approved:

(1) The amounts of employees’ cash compensation is NT$671,028,000, directors and supervisors’ cash compensation is NT$0. The difference between actual distribution and estimated amount will be in the loss of NT$36,619,479 in 2016 based on relevant accounting principles.
(2) Share amount of employees’ stock compensation is 0, percentage of the share amount to that of all stock dividends are 0%.

8.4 Distribution of 2014 Compensation of Employees, Directors and Supervisors:

The Annual Shareholders’ Meeting of June 10, 2015 resolved the amounts of employees’ cash compensation NT$671,028,000, directors and supervisors’ cash compensation NT$0. The amount of employees’ compensation is consistent with the estimated amount.

9. Repurchase of Common Stock: None

10. Status of Corporate Bonds: None

11. Status of Preferred Stock: None

12.Issuance of Global Depositary Receipts `：`

Issuance Items	Issuance Items	Issuance Items	July 11, 2003
Date of issuance(approval)			July11,2003
Place of offeringand trading			LuxembourgStock Exchange
Offeringamount			US$232,176,000
Offering price			US$6.91
Units to be offered			33,600,000 Units
Sources of underlyingshares of the GDRs			Cash capital increase issuance of new shares
Number of common shares represented by each GDR			10 common shares per GDR
Rights and obligations of GDR holders			Same as those of common share holders
The trustee			None
The depository			Citi Bank
The custodian			Citi Bank(Taipei)
Un-redemptoryunits of the GDRs			0 Units
The sharing manner of the expenses incurred from the GDR offering and other on-goingexpenses			Unless agreed upon otherwise among the Issuer, Lead Managers and Depositary, the expenses incurred from the GDR offering and other on-goingexpenses are to be borne bythe company.
Material matters in the depository agreement and the custodian agreement			See deposits agreement and custody agreement for details.
Market price per share(US$)	2015	Highest	$27.08
		Lowest	$9.88
		Average	$17.68
	2016/1/1 ~	Highest	$13.57
		Lowest	$11.35
	2016/3/31	Average	$12.14

13. Status of Employee Stock Options Plan

13.1 Issuance of Employee Stock Options

2016.5.10

			2016.5.10
ESOPgranted	97-1	100-1	104-1
Approval date by the securities & futures bureau	2008.7.31	2011.1.7	2015.8.24
Issue (grant) date	2008.12.18	2011.3.21	2016.5.10
Number of options granted	50,000 Unit	70,000 Unit	97,500 Unit
Percentage of shares exercisable to outstanding common shares	1.82%	2.55%	3.55%
Option duration	8 Years	8 Years	8 Years
Source of option shares	Issuing new common shares
Vesting schedule	 Upon 2 years from the issue date, available subscription ratio for exercising: 50% (accumulated).  Upon 3 years from the issue date, available subscription ration for exercising: 75% (accumulated).  Upon 4 years from the issue date, available subscription ration for exercising: 100%(accumulated).
Shares exercised	33,917 Unit	0 Unit	0 Unit
Value of shares exercised	NT$1,682,731K	NT$0	NT$0
Shares unexercised	16,083 Unit	70,000 Unit	97,500Unit
Exercise price per share	NT$51.2	NT$40.9	NT$38.0
Percentage of shares unexercised to outstanding common shares	0.59%	2.55%	3.55%
Impact to shareholders' equity	Dilution to shareholders’ equity is limited.

As of May.10, 2016

										As of May.10, 2016	As of May.10, 2016	As of May.10, 2016
	Title	Name	Number of Options Granted	% of shares exercisable to outstanding common shares		Shares	exercised			Shares unexercised (Note4)
					S hares Exerc is ed	Exerc is e P ric e Pe r S hare	Va lue o f S hares Exerc is ed	% o f s ha res e xe rc is ed to o utsta nd in g co mmo n s ha res	S hares Exerc is ed	Exerc is e P rice Pe r S hare	Va lue o f S hares Exerc is ed	% o f s ha res e xe rc ised to o utsta nd in g co mmo n s ha res
managers	Pesident Former President EVP SVP AVP AVP AVP AVP AVP/CFO Accounting Supervisor	Pei-Ing Lee(Note1) Charles Kau (Note1) Otto Chang Lin-Chin Su(Note2) Yau-Ming Chen Wesley Chang Chi-Meng Su Rex Chuang Joseph Wu(Note3) Hung-Chi Kuo	6,332 Thousand shares	0.2304%	50 Thousand shares	NT 55	2,750 KNT	0.0018%	6,282 Thousand shares	NT38 ~ NT51.2	243,404.8 KNT	0.2286%

As of May.10, 2016

									As of May.10, 2016	As of May.10, 2016	As of May.10, 2016	As of May.10, 2016
	Title	Name	Number of Options Granted	% of shares exercisable to outstanding common shares		Shares exercised			Shares unexercised (note2)
					S hares Exerc is ed	Exerc is e P rice Pe r S ha re	Va lue o f S hares Exerc is ed	% o f s ha res e xe rc ised to o utsta nd in g co mmo n s ha res	S hares Exerc is ed	Exerc is e P ric e Pe r S hare	Va lue o f S hares Exerc is ed	% o f s ha res e xe rc ised to o utsta nd in g co mmo n s ha res
Employees	Senior Director Senior Director Executive Administrator Director Director Director Director Deputy Director Deputy Director Department Manage	Mark Mao Jeff J.P. Lin Yao-Hsiung Kung Peter Chen Dong-Liung Yang Wen-Hao Chang Hsu-Cheng Fan John Tsai Benjamin Huang Min I Hsu	2,470 Thousand shares	0.0899%	644 Thousand shares	NT55	35,420 KNT	0.0234%	1,826 Thousand shares	NT38 ~ NT51.2	69,546.4 KNT	0.0664%

Note1: NTC issues the104-1 ESOP.

Note2: The data of unexercised shares and values were collected on the date of May.10, 2016.

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

15. Financing plans and implementation-cash capital increase shares offering in 2016.

15.1 Content of investment plan:
(1) The fund was used to procure 20nm technology transition equipment. The company plan to transform the technology mix to monthly capacity of 30,000 WSPM in 20nm technology and 30,000 WSPM in 30nm technology instead of all 60,000 WSPM in 30nm technology before conversion.
(2) Funding Sources:
A.Total amount required for the plan: NT$42,988,285 thousand for the procurement of equipment and machinery.
B. Cash capital increase by issuing common shares of 320,000 thousand shares, the total funding amount is NT$11,680,000 thousand. The case has been approval by the Financial Supervisory Commission dated July 20, 2015 and the letter Jin-Guan-Zheng-Fa-Zi-Di No. 1040026195. The funding collection period is prolonged to the date of January 19, 2016 with the approval by the Financial Supervisory Commission dated October 7, 2015 and the letter Jin-Guan-Zheng-Fa-Zi-Di No. 1040041154. The new shares have been issued on January 19, 2016.
C. The remaining of NT$31,308,285 thousand will be financed by operating cash inflows, bank borrowings or other sources.
(3) Project items and fund implementation schedule:

Unit: NT$ thousands

			Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Project Item	Expected Completion Date	Total Funds Required	Expected funds implementation schedule
			2015				2016
			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
20nm Technology Transition	Dec.31, 2018	42,988,285	–	3,229	63,134	621,228	2,321,748	3,049,034	10,820,140	14,959,772
			2017				2018
			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
			820,000	1,330,000	–	–	5,670,000	2,430,000	630,000	270,000

Note ： The fund of cash capital increase is collected in Q1’16. Before that, the company used operating inflows, bank borrowings and other sources to sustain the capital expenditure.

15.2 Execution

(1) Expected benefits

Unit: 4G K equiv.; NT$thousands

Year	Item	Production Amount	Sales Amount	Sales Value	Operating Margin	Operating Income
2017	DRAM	51,008	51,008	4,008,387	1,022,070	815,010
2018	DRAM	200,891	200,891	14,128,207	6,059,070	5,689,364
2019	DRAM	264,388	264,388	17,521,445	7,860,562	7,511,069
2020	DRAM	264,388	264,388	17,986,353	8,297,791	7,972,491
2021	DRAM	264,388	264,388	17,631,359	7,948,021	7,632,584
Total		1,045,063	1,045,063	71,275,751	31,187,514	29,620,518

Note:The items above are calculated by the difference of the technology migration.

A.To increase production volume

The fund is planned to procure equipment and machinery mainly used in the technology migration from 30nm to 20nm. The company will keep the total WSPM of 60,000, and convert 30,000 WSPM to 20 nm technology with the rest in 30nm technology. The equipment and machinery will start to move-in in Q4’15 and pilot run in Q1’17. The projected technology migration will be completed in 2H’18.

According to the ramping up schedule, with the assumption of product yield of 65%~80%, the yearly production volume will be increased by 51,008 thousand dies, 200,891 thousand dies, 264,388 thousand dies, 264,388 thousand dies, 264,388 thousand dies from 2017 to 2021 after the manufacturing technology fully migrated to 20nm.

B.To increase production volume

The sales quantity assumption is based on the for-mentioned expected production volume. Thus, the yearly sales quantity will be increased by 51,008 thousand dies, 200,891 thousand dies, 264,388 thousand dies, 264,388 thousand dies, 264,388 thousand dies from 2017 to 2021 accordingly. Based on our current average selling price, with the consideration of future market trend, the ASP will drop gradually during 2017 to 2018 when using 30nm technology for manufacturing. However, with the assumption of new product applied 20nm technology DRAM has higher value, the company expect the product ASP manufactured in 20nm technology is higher than the original 30nm technology. Base on the presumptions mentioned above, the yearly sales value will be increased by NT$4,008,387 thousand dollars, NT$ 14,128,207 thousand dollars, NT$ 17,521,445 thousand dollars, NT$ 17,986,353 thousand dollars, NT$ 17,631,359 thousand dollars from 2017 to 2021.

C.To increase gross margin and net profit

Due to technology covert from 42nm to 30nm and 30nm design shrink output reached 20%, the manufacturing cost in Q1’15 decreased by 7~9% compared with previous quarter. Take depreciation and amortization expenses, output dies and yield into consideration, after 20nm technology migration, the company assume that the unit cost decrease by 9% as well.

Base on the gross margin rate in Q1’15 and take the benefit of 20nm technology migration into consideration, the company assume that the yearly gross margin will increase by NT$1,022,070 thousand, NT$6,059,070 thousand, NT$7,860,562 thousand, NT$8,297,791 thousand and NT$7,948,021 thousand from 2017 to 2021. In operation expenses aspect, based on Q1’15 operating expenses, the company assumes that the operation expenses to revenue ratio will rise at the beginning and drop after mass production. The predicted operating expenses to revenue ratio for this project are ranging from 2%~5% in 2017 to 2021. So the company assume that the operating profit will increase by NT$815,010 thousand, NT$5,689,364 thousand, NT$7,511,069 thousand, NT$7,972,491 thousand and NT$7,632,584 thousand from 2017 to 2021.

(2) Actual funds implementation progress of the plan

Unit: NT$ thousands

				Unit: NT$thousands
Items of the Plan	Implementation Progress		As of the end of Q1’16	Reasons or improvement plans of implementation progress surpass or fall behind theplan
20nm Technology Migration	Amount	Projection	3,009,339	The actual completion progress of implementation is slightly behind the schedule due to delay construction payment. The project will keep going to abide bytheplan.
		Actual	1,543,334
	Progress (%)	Projection	7.00
		Actual	3.59

IV. Operations overview

1. Business content

1.1 Business scope

NTC strives for being one of global major manufacturers specializing in memory production and wafer services with outstanding product research and development capabilities and low production cost advantage. We have been committed to providing high quality and advanced memory products and services.

Our company’s main product: (1)DRAM chips: A. DDR DRAM

-Density: 128Mb, 256Mb, 512 Mb

-Speed: 333 Mb/s, 400 Mb/s B. DDR2 DRAM

-Density: 128Mb, 256Mb, 512 Mb, 1Gb -Speed: 800 Mb/s, 1066 Mb/s C. DDR4 DRAM

-Density: 4Gb

-Speed: 2133 Mb/s, 2400 Mb/s, 2667 Mb/s

D. LPDDR

-Density: 512 Mb,1Gb

-Speed: 333 Mb/s, 400 Mb/s

E. LPDDR2

-Density: 1Gb, 2Gb, 4Gb

-Speed: 1066 Mb/s

F. LPDDR3

-Density: 4Gb

-Speed: 1600 Mb/s, 1866 Mb/s

(2)Wafer production services

In response to market demand in the future, NTC continue to develop products toward higher speed and more low power consumption. Under the cooperation of our R&D teams, we continue to produce new generation of memory components; meanwhile we became OEM who produces high value-added semiconductor products.

(3)Plans of developing new products and services

The short-term business objective under the existing production capacity is to make full use of the technical advantage, and to develop the target market of the high-value added products.

1.2Industry Overview

(1)Present Situation and Development of Industry

A. the situation of the industry

DRAM is mainly used in the personal computer industry. With rising in 3C integration trend of digital home appliances system such as the LED digital TV, digital camera, digital video converter (STB), DVD player, DVD-ROM, car navigation systems, video game consoles, etc. A status of family information and network centering on PC has formed. In addition to the constantly rising personal computer performance and pushing up demand for personal computers from emerging markets, the popularity of personal mobile devices such as smart phones and tablet PCs cause a demand for memory efficient and low power consumption. All drove demand growth of DRAM.

B. Development of industry

The DRAM industry is a very important part of the IC industry. DRAM is mainly used in personal computers and laptops. Due to cloud computing rise in recent years, a demand for server continues grows and mobile devices such as smart phones, tablet PCs also provide a strong growth momentum, DRAM demand continued to grow year after year. Total DRAM demands from smart phone and server two application markets have surpassed the DRAM demand from personal computers.

DRAM industry has deferred effect of capital investment, the high capital-intensive feature also caused the high threshold of entry barriers, coupled with the characteristics of technology progress rapidly, making supply fluctuation sharp and showed obvious economic cycles. A little imbalance between supply and demand may cause price shocks and lead to sharp fluctuations in the output value. For persistent in DRAM industry competition, each manufacturer positively turn their technology into the next generation. However, not every one of the vendors can burden the huge cost; a few manufacturers who can afford it caused an oligopoly market formation.

(2)Relevance of upstream, midstream, and downstream industry

IC production is circuit designing through computer-aided system by IC integrated circuit engineers, making photo-masks by electron beam exposure, and exposure with these photo-masks by a wafer manufacturer to change the circuit onto a wafer and send to assembly and packaging factories for cutting, and assembly and packaging with the configuration of the lead frame (lead frame). After forming complete ICs and then testing them, ICs are produced. IC industry has characterized by capital-intensive, technology-intensive. It needs billions of dollars-cost plant and equipment. This is not a domestic small and medium enterprise or any IC manufacturing companies can afford independently. Therefore, division of labor in this industry naturally formed. Every action will directly and significantly influence the upstream, midstream, downstream companies in many related industries including from the wafer material, design industry, the photo-mask industry to package, lead frame, the chemical material industry, equipment industry, testing industry. All of these are closely related to IC manufacturing industry.

NTC technology DRAM manufacturer is located in midstream of the IC industry. Explain the Taiwan IC industry system as follows:

A. IC Design:

Due to IC design industry relative to IC manufacturing industry is smaller scale, less capital, higher investment reward rate and the high level of education in Taiwan, abundant and excellent IC design human resources, as well as domestic perfect semiconductor industry architecture support, the entry barriers in IC design industry is low. Each design company will be targeted to the specific application of the market to do in-depth work and focused on product design and marketing.

B. IC manufacture:

The current domestic IC manufacturing companies mainly design the IC circuit or are commissioned by the foundry IC design and they produce ICs with very sophisticated equipment and strict production processes. IC manufacturing industry is a capital-intensive and technology-intensive industry. The proportion of capital expenditure value is about 70%. High capitals become a barrier to enter the industry. And the follow-up cost of maintenance and investment in research and development are still ongoing in order to maintain operating efficiency in IC FAB. IC manufacturing is basically divided into foundry, DRAM and IDM, mainly engaged in the investment, process technology R & D and manufacturing efficiency.

C. IC assembly and testing:

Packaging and testing of semiconductor are also the same as the capital and technology-intensive IC manufacturing industries. It is the backend of the IC manufacturing process. The packaging and testing belongs to foundry services. Its profits are from the fixed processing costs.

The main key affecting its profits is equipment utilization. It must maintain a close relationship with the upstream IC fabs. In order to improve equipment utilization and increase competitiveness, IC packaging and testing companies have been toward strategic alliances of upstream and downstream integration trend.

When faced with an increasingly competitive environment of the industry, in order to enhance the competitiveness and profitability and reduce dependence on other manufacturers, there are horizontal alliances and vertical integration phenomenon of manufacturers. Taking Nanya Technology for example, in addition to upstream FORMOSA SUMCO Technology Corporation supply silicon wafers and downstream Formosa Advanced Technologies Co. Ltd. also provide packaging and testing services. NTC has a unique advantage compared to other competitors.

(3)Product Development Trend

DRAM development can be summarized into the following several trends:

A. The main application trends:

Smart phones and tablets are required for low power mobile DRAM. Two applications have emerged as the two largest DRAM product applications. Due to the rise of cloud application server, the use of high-speed DRAM products in proportion of the total demand is also fast growing. In addition, digital TVs, set-top boxes, and automotive Networking and other niche applications of DRAM will continue to grow.

B. Performance requirements
(A) High Density:

Currently 4Gb is mainstream product density. Main applications are from smart phones, tablet PCs, servers, and personal computers. With 20 nm and 1x nanometer process generation comes, 8Gb will gradually replace 4Gb and become mainstream products density in 2016.

(B)High speed:

In response to fast computing of cloud data centers and the demand of high image quality for mobile devices, DRAM specifications continued evolution towards higher speeds to provide large amounts of data required for transmission. The operating speed of DDR4 products up to DDR4-3200, the operating speed of LPDDR4 product can be up to LPDDR4-4266.

(C)Low Power:

In response to a mobile device demand and the threat of global warming, the low voltage and low power DRAM products have become the mainstream specification of smart phones, servers, personal computers and consumer electronics products.

(D) Functional Requirements:
a. high data rate and broadband:
New Generation DDR4 was adopted by the server to meet the high data rate requirements in the second half of 2014. Personal computers also use DDR4 in the second half of 2015. Also high bandwidth and low power LPDDR4 is first adopted in 2015 by the high-end smart phones.
b. Diverse package specifications:
In response to diversity of application demand, DRAM package specifications turn into diverse package types, such as smart phone with PoP / eMCP, digital TV system in package with SiP, etc. from the previous mainstream product module (Module).

(4)Competitive situation

The current global DRAM oligopoly market is mastered by some leading manufacturers who have advanced manufacturing process. The main DRAM suppliers are Samsung and SK Hynix of South Korea and Micron of United States. A total market share is more than 90%. Due to a variety of market applications, the main target market of the top three suppliers are servers, personal computers and smart phones.

1.3Technology and R&D Status

(1)Development Strategy

Due to the change of market trends, Nanya conducts business strategy adjustment and focuses on the development in consumer memory, low power memory and other high value-added product lines. Nanya has successfully completed 30nm process transition and developed the niche products. The 20nm technology, licensed from Micron, will be implemented in 2017. Beyond 20nm technology, Nanya will have option right to license Micron's 1X and 1Y technology. Nanya will continue to develop next-generation DRAM products with advanced technologies and provide the broadest portfolio of memory solutions to meet the customer needs.

(2) Annual R&D Expenses over the past 5 years (Based on Consolidated Financial Statements Report)

				Unit`：`NTD, Thousand	Unit`：`NTD, Thousand
Year	2011	2012	2013	2014	2015
R&D Expenses	8,587,790	6,192,264	1,404,013	1,377,524	1,953,662

(3)Technology or products successfully developed

Nanya has developed 16Mb, 64Mb, 128Mb, 256Mb, 512Mb, 1Gb, 2Gb and 4Gb DRAM products successfully. DDR4 4Gb DRAM has also been launched to the market. Below are the summaries:

A. Successfully transfer 0.45μm, 0.36μm, and 0.32μm 16Mb DRAM design, manufacturing process and element analysis from OKI within 2 years from setting up the 1[st] factory. Quickly achieve high yields in both wafer and finished goods, and immediately adopt computer automated production management.
B. Successfully self-development 0.32μm 5V 16Mb EDO DRAM.
C. Successfully finished design of 4 products, 0.32μm 16Mb SDRAM, 0.28μm 16Mb(2M×8),0.28μm 64Mb SDRAM and 0.28μm 16Mb SDRAM (1Mb×16), within 2 years. 0.32μm SDRAM and 0.28μm 16Mb SDRAM (1Mb×16) was the main products at that time.
D. Successfully transfer 0.2μm 64Mb and 0.175μm 256Mb DRAM from IBM. Self-develop 128Mb DRAM based on IBM technology platform, quickly introduce to production line and achieve the desired yield.
E. Successfully convert FAB-1 from stack technology process to trench technology process. Successfully convert FAB-2 from 0.20μm technology to 0.175μm technology within 8 months from start-up and achieve the desired yield.
F. Successfully shrink 64Mb and 128Mb DRAM to 0.175μm technology. As to the gross dies of 64Mb DRAM can exceed 1,100 ea per 8 inch wafer, it’s very cost-competitive.
G. Successfully create the combo design of 0.175μm 128Mb and 256Mb SDR/DDR.
H. Successfully co-develop 0.14μm technology and products with IBM and quickly implement into production line.
I. Successfully design 0.175μm PC333 DDR product. Successfully develop DDR400 with 0.14μm technology product to ensure the leading position in DDR products.
J. Successfully design 0.14μm DDR1 128Mb specialty product and implement into mass production.
K. Successfully design 0.11μm DDR1 256Mb and 512Mb products and implement into mass production.
L. Successfully design 0.11μm DDR2 400, 533, 667 and 800 products and implement into mass production to ensure the leading position in DDR2 products.

M. Successfully design 0.90μm DDR1 512Mb and DDR2 400, 533, 667 and 800 products and implement into mass production to ensure the leading position in DDR2 products.
N. Successfully develop 0.70μm DDR2 512Mb, DDR2 1Gb and DDR3 1Gb products.
O. From Q4’2010, started convert to 42nm technology. Successfully develop 50nm DDR2 1Gb, 50nm DDR3 2Gb, 42nm DDR3 2Gb and 42nm DDR3 4Gb product.
P. Successfully develop low power LPDDR memory products in 2011, and 30nm DDR3 2Gb has implemented into mass production successfully.
Q. In 2013, finish low power product, LPDDR2 4Gb internal and customer qualification and implement into mass product in Q2’13.
R. In the 2nd half year of 2013, finish the internal qualification of 30nm DDR4 4Gb product. Start up the product qualification of DDR4, LPDDR3 4Gb and LPDDR2 1Gb.
S. In the 1st half year of 2014, finish the internal and customer qualification of LPDDR3 4Gb. In 3Q’14, start LPDDR3 4Gb mass production and trigger 30nm shrink products design to improve the product competitiveness.
T. In 2nd half year of 2014, finish 30nm shrink product development and implement to mass production, including 4Gb DDR3 and 1Gb LPDDR2.
U. In 1st half of 2015, finish 30nm shrink product development and implement to mass production, including 1/2/4Gb DDR3 consumer products. In 2nd half of 2015, finish 30nm 4Gb DDR4 product development and start to mass production. Finish internal qualification for 30nm shrink mobile products, including 2Gb LPDDR2 and 4Gb LPDDR3.
1.4Long-Term and Short-Term Sales Development Plan

(1)Short-Term Sales Development Plan

Continually increase the output percentage of 30nm shrink products. The output percentage of 30nm shrink was over 50% in Q4’15 and it will be over 70% in 2016. Focus on the niche market such as consumer and mobile applications, and develop customized products to diversify the product lines and increase the market share in niche memory market. The sales in consumer and low power applications will be above 85% of total revenue.

(2)Long-Term Sales Development Plan

Start 20nm process technology transition and production line setup. Nanya plans to move in new equipments in Q4’15 and speed up the new product design of DDR4/LPDDR4. Continually increase the market share in auto, industrial, networking, SiP, customized products and other high-margin applications.

2. Market Status and the Overview of Sales and Production

2.1 Market Status

(1)Sales Regions

Nanya has worldwide customers. To provide the fast and real time service, we set up a global sales network, includes the U.S., Europe, Japan, China and Taiwan. The sales in China and Asia pacific are over 80% of total sales. In the future, the market application is more diversified and demand of customized product is increasing, it’s estimated the sales percentage in the U.S., Europe and Japan will increase in the future.

(2)Market Share

The major DRAM suppliers are Samsung, Hynix, Micron and Nanya. In 2015, Nanya is the fourth DRAM provider and its market share is about 3%.

==> picture [260 x 194] intentionally omitted <==

----- Start of picture text -----

The Market share of
South Korea
Factories are over
70% in global
DRAM market.
----- End of picture text -----

Data from: IDC Feb., 2016.

(3)Future Situation in Demand and Supply and the Growth

A. Supply and the Growth

In terms of supply, three major suppliers continue increase output percentage of 20nm and 1Xnm and capacity. From the forecast of research companies, the bit growth rate of 2016 will be higher than 2015. To keep the profit margin be stable, the competitors are more conservative in capacity expansion. Therefore, the growth of overall supply will be rational.
B. Demand and the Growth
In terms of demand, the prospect of global economic is still not clear and the market growth in mobile applications such as smart phone and pad is become slow. The DRAM growth rate in 2016 will keep same as 2015. However, the DRAM demand in consumer applications such High-definition digital TV and set top box has chance to grow because of the Olympics which is taken every four years.

(4)Competitive Niche

The characteristics of DRAM niche market are product diversification and having a large number of customers. To provide excellent customized products and service, Nanya not only provides the quick service and high-quality products, but builds the close strategic alliance relationships with customers and chip providers. Nanya plays critical suppliers role by fulfilling customer’s diverse need.

(5)The Advantages and Disadvantages of Future Developments and the Coping Strategy

A. The Advantages
(A) DRAM market is oligopoly market which is leading by the suppliers with advanced technology so the market won’t fluctuate wildly.
(B)Focus on the consumer and low power niche markets, and continues making efforts in auto, networking, customized and the niche markets requiring long-term and stable supply
(C)Having 20nm advanced process technology and the right to license Micron's 1X and 1Y technology, NTC can provide complete product lines to meet customers’ demand.
(D)Having support from Formosa Groups. Formosa group has the strict production management system and excellent bargaining power in purchase, Nanya has better abilities in cost control than other competitors.

B. The Disadvantages and the Coping Strategy
It takes huge amount to develop DRAM advanced process technology. DRAM has wide range of market applications and product specification. The coping strategies are as below:
(A)Provide quick service and high quality products and focus in auto, networking, customized and the niche markets requiring long-term and stable supply.
(B)Develop and expand consumer and low power niche markets to increase the profit margin.
(C) Keep upgrading the technology to reduce the product cost.

(D)Real-time collect market information and grasp the customer information. Nanya can have the flexibility in adjusting product mix and increasing the sales weights of niche products to keep operation steady.

2.2 Important Applications of Primary Products and the Production Process
(1) Important Applications of Primary Products

NTC’s primary products are DRAM（Dynamic Random Access Memory） and other memory products. DRAM products are used to store the data while data processing and have a wide range of applications, such as computers, consumer electronics and communication applications.

(2) Production Process

The production of integrated circuits can divide into three stages: making the silicon wafers, making the integrated circuits, and packing the integrated circuits. Nanya focuses making of integrated circuits. The process, which takes approximately one to two months from start to finish, is very complicated and basically comprised several hundreds of different steps. The circuits are printed on the wafer using layers of masks by repeating processes including lithography, etching, oxidation, ion implantation, and thin film several timers. Then, the wafers are sent to the testing area to verify the functions of each IC. Finally, the wafers are forwarded to packaging house for assembling and final testing.

2.3 Supply of Raw Materials

Raw materials include silicon wafers and chemicals such as photoresist, special gases, and abrasives, and they are provided by the world’s leading semiconductor material suppliers from Japan, the U.S. and Taiwan who guarantee quality and stable supply. NTC also ensures availability of alternative sources of supply to prevent production interruption due to unexpected supply chain issues.

2.4 Suppliers/Customers Accounted for at Least 10% of Annual Procurement/Sales

(1) Major Customers for the Last Two Years:

Unit: NT$ thousands

									Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2014				2015				2016Q1
Item	Company Name	Sales Amount	Percent `〔`%`〕`	Relation to NTC	Company Name	Sales Amount	Percent `〔`%`〕`	Relation to NTC	Company Name	Sales Amount	Percent`〔`%`〕`	Relation to NTC
1	KINGSTON	6,381,074	12.99	None	KINGSTON	7,745,598	17.65	None	KINGSTON	1,350,352	12.99	None
	Others	42,726,548	87.01		Others	36,130,307	82.35		Others	9,047,203	87.01
	Total Sales	49,107,622	100.00		Total Sales	43,875,905	100.00		Total Sales	10,397,555	100
Analysis of Variation for 2015 vs 2014`：`Nanya continued enlarging the customer base and increasing the sales in consumer applications in 2015.

(2) Major Suppliers for the Last Two Years:

Unit: NT$ thousands

									Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2014				2015				2016Q1
Item	Company Name	Procurement Amount	Percent `〔`%`〕`	Relation to NTC	Company Name	Procurement Amount	Percent`〔`%`〕`	Relation to NTC	Company Name	Procurement Amount	Percent`〔`%`〕`	Relation to NTC
1	FORMOSA SUMCO Technology Corp.	763,221	11.09	Interested party	FORMOSA SUMCO Technology Corp.	924,815	11.96	Interested party	FORMOSA SUMCO Technology Corp.	255,341	13.25	Interested party
	Others	6,118,950	88.91		Others	6,808,419	88.04		Others	1,672,161	86.75
	Total Procurement	6,882,171	100		Total Procurement	7,733,234	100		Total Procurement	1,927,502	100
Analysis of Variation for 2015 vs 2014`：`FORMOSA SUMCO Technology Corp. is still the major supplier for NTC.

2.5 Production over the Last Two Years

Unit: NT$ thousands/ Kpcs

Year Output Products		2014			2015
	Capacity	Quantity	Amount	Capacity	Quantity	Amount
Memory	610K wafer/year	965,811	54,507,584	710K wafer/year	986,874	47,470,192
Total	-	-	54,507,584	-	-	47,470,192

2.6 Shipments over the Last Two Years. `：`

					Unit: NT$thousands/Kpcs	Unit: NT$thousands/Kpcs	Unit: NT$thousands/Kpcs	Unit: NT$thousands/Kpcs
Year Sales Products	2014				2015
	Local		Export		Local		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
Memory	322,660	16,120,846	544,931	32,843,573	328,775	14,110,967	580,395	29,616,680
Others	-	141,927	-	1,276	-	145,958	-	2,299
Total	-	16,262,773	-	32,844,849	-	14,256,925	-	29,618,979

3. Employees

	Year	Year	2014	2015	The year before 30 April,2016
Number of Employees	Indirector labor		1,546	1,587	1,614
	R&D staff		455	459	463
	Direct labor		513	473	486
	total		2,514	2,519	2,563
average age			36.29	36.93	36.98
average seniority			9.04	9.77	9.85
educational background		PhD	0.80	0.83	0.74
		Master	28.96	29.97	30.55
		Bachelor	59.98	59.59	59.23
		higherSchool	10.18	9.53	9.44
		Under high school	0.08	0.08	0.04

4. Environmental expenses Information

Nanya Technology Corporation (NTC) considerable importance to the pollution control work, has invested a lot of money to environmental protection facilities and pollution control management. Furthermore, according to the law, we had send personnel, who will operate and maintain pollution prevention equitments, to obtain qualified certificate for manage air pollution prevention, waste water treatment, waste clean up, and handling toxic substances, to ensure the facilities are under normal operation. NTC is to make efforts in promoting the management of environmental protection, all facilities operation are in accordance with environmental laws and regulations. In 2015, the main environmental expenses includes environmental permit application and certificate, waste clean-up costs, environmental monitoring costs, improve facilities protection improvement, etc.

On February 19, 2016, NTC Fab-1 violated Article 33 of “Soil and Groundwater Pollution Remediation Law”, thus fine NT$150,000 by Taoyuan City Government. However, in this case the interpretation of regulations still needs to clarify, so we have offered an appeal, and now it on reviewing by Taiwan EPA.

5. Labor Relations

5.1 Employee Welfare Benefits:

(1) Employee Welfare measure:

We have convenience stores, coffee shops, health care center and plan to set gym, Basketball and Badminton court.In additional, we provide employee dormitory for single personnel; Shuttle bus services are available in several routes. The Employee Welfare Committee plans several activities and provides gives employees with a gift coupon on the Dragon Boat Festival, Moon Festival, and Birthday.

(2) Training and Development:

In order to maintain NTC’s development strategy and employee’s demand of self-development, we provide a series of complete training courses and advanced studies ways. Its inculding New Employee training, helping they could adapt to company’s environment and culture quickly. NTC also plans on-the-job training, professional training, leading and management training. Besides, We also cooperate with well-known Univesities to set up further study programs, satisfing employee’s self-development demand.NTC will keep going to offer multiple resources and emhance our demand of employee’s competitive in global.

(3) Retirement Plan and Its Practices:

To keep employee’s mind on his work and make his retirement life with good quality, NTC has established a Retirement Plan according to Regulations Governing the Retirement of the Factory Workers of Taiwan Province, Labor Standards Act, and Labor Retirement Pension. For those choosing the old pension fund system, the Company has deposit 2% monthly salary to a special retirement Account of Taiwanese bank. It has been supervised by NTC Worker Retirement Fund Supervisory Committee. For the others choosing the new pension fund system, the Company contributes 6% monthly salary to employee’s individual retirement account in accordance with Monthly Contribution Wages Classification of Labor Pension. Employees are eligible to contribute more amounts voluntarily, and the amount will be deposit into his retirement account also. The execution of Pension Plan is under a good condition.

(4)In order to enhance the interaction and relationship between Labor and Management, We provide a variety of communication channels to realize employee satisfaction of Company’s system.
(5)NTC has good relationship between Labor and Management until now.
5.2 Case of Labor Management Conflict which results in any losses at the moment or in the future and disclosure of estimated amount and applicable solutions as of the most recent fiscal years, and during the current fiscal year up to the date of printing of the Annual Report: None.

6. Material Contracts

Agreement	Interest Parties	Term	Summary	Restriction Clause
Syndicate Term Loan Agreement	Bank of Taiwan	2014.01.28- 2019.01.28	Syndicate Term Loan	Financial ratios shall meet the requirements stipulated in the agreement
Service Agreement	Inotera Memory Inc.	From 15~~th~~ July, 2003 till certain termination terms	Service provision	N/A
Amended And Restated Technology Transfer And License Agreement	Micron Technology Inc.	From 26thNov., 2008 till certain termination terms or mutual termination	Technology Transfer And License	N/A
Technology Transfer and License Option Agreement for 20nm Process Node	Micron Technology Inc.	From 1st Jan., 2013 till certain termination terms or mutual termination	Technology Transfer And License	N/A
Joint Venture Agreement	Micron Technology Inc.	From 17thJan., 2013 till certain termination terms	Joint venture	N/A
Share Purchase Agreement	Micron Technology Inc.	From 14~~th~~Dec., 2015 till certain termination terms or mutual termination	Share acquisition	N/A
Syndicate Term Loan Agreement	Taiwan Cooperative Bank	2016.03.30- 2021.03.30	Syndicate Term Loan	Financial ratios shall meet the requirements stipulated in the agreement

VI. Financial Information

1. Five-Year Financial Summary

1.1 Condensed Statements of Financial Position and Comprehensive Income by – by IFRSs

(1) Condensed Statements of Financial Position – Consolidated by IFRSs

Unit: NT$ thousands

Year Item	Year Item	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`		2016Q1
		2015	2014	2013	2012	2011
Current assets		17,822,621	21,262,018	22,045,965	34,938,180	(Note2)	32,433,499
Property,plant and equipment		49,763,526	51,175,927	52,798,680	53,604,724		49,205,350
intangible assets		406,193	537,136	137,532	821,049		373,121
Other assets		36,013,697	31,577,231	18,344,642	11,631,876		35,538,977
Total assets		104,006,037	104,552,312	93,326,819	100,995,829		117,550,947
Current liabilities	Before Dist.	35,229,599	49,179,746	77,692,393	87,132,222		30,435,988
	After Dist.	35,229,599	49,179,746	77,692,393	87,132,222		30,435,988
Non-current liabilities		13,922,063	13,695,508	5,629,289	12,058,781		18,758,318
Total liabilities	Before Dist.	49,151,662	62,875,254	83,321,682	99,191,003		49,194,306
	After Dist.	49,151,662	62,875,254	83,321,682	99,191,003		49,194,306
Equity attributable to owners of the parent		54,737,689	41,601,453	9,873,778	1,753,881		68,244,096
Common stock		24,285,658	24,748,843	239,608,511	239,590,181		27,485,658
Capital surplus		7,812,701	6,377,936	3,696,784	3,728,063		16,263,491
Retained earnings	Before Dist.	22,991,433	10,816,268	(233,081,650)	(241,213,918)		24,840,375
	After Dist.	22,991,433	10,816,268	(233,081,650)	(241,213,918)		24,840,375
Other equity		(4,570)	5,939	(2,334)	(2,912)		2,105
Treasurystock		(347,533)	(347,533)	(347,533)	(347,533)		(347,533)
Non-controllinginterest		116,686	75,605	131,359	50,945		112,545
Total equity	Before Dist.	54,854,375	41,677,058	10,005,137	1,804,826		68,356,641
	After Dist.	54,854,375	41,677,058	10,005,137	1,804,826		68,356,641

Note1 ： The Financial Statements from 2011 to 2015 have been audited by KPMG.

Note2 ： The Financial Statements from 2013 refer to IFRSs. The Financial Statements from 2011 refer to following page audited by ROC GAAP.

(2) Condensed Statements of Comprehensive Income – Consolidated by IFRSs

Unit: NT$ thousands

Year Item	Year Item	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	2016 Q1~Q3
		2015	2014	2013	2012	2011
Operatingrevenue		43,875,905	49,107,622	45,224,061	33,882,225	(Note2)	10,397,555
Grossprofit		17,307,996	22,169,028	8,121,974	(22,286,927)		3,398,826
Operatingincome		13,487,386	18,804,572	4,960,734	(30,555,301)		2,632,815
Non-operatingincome and expenses		4,190,042	12,928,124	4,099,100	(5,411,038)		(787,798)
Income before income tax		17,677,428	31,732,696	9,059,834	(35,966,339)		1,845,017
Profit from ContinuingOperation		17,171,400	29,251,497	9,020,501	(36,019,569)		1,844,798
Income (Loss) from Discontinued Operation		`－`	(1,056,131)	(910,038)	`－`		`－`
Net income(Loss)		17,171,400	28,195,366	8,110,463	(36,019,569)		1,844,798
Other comprehensive income (net after tax)		(123,115)	65,870	578	(87,349)		6,675
Total comprehensive income		17,048,285	28,261,236	8,111,041	(36,106,918)		1,851,473
Net Income attributable to owners of the parent		17,141,167	28,242,317	8,137,820	(36,032,942)		1,848,942
Net income attributable to non-controllinginterests		30,233	(46,951)	(27,357)	13,373		(4,144)
Total comprehensive income attributable to owners of theparent		17,018,052	28,308,187	8,138,398	(36,120,291)		1,855,617
Total comprehensive income attributable to noncontrollinginterests		30,233	(46,951)	(27,357)	13,373		(4,144)
Earnings per share (NT$)	Beforeadjustment	7.07	11.77	0.34	(2.24)		0.68
	After adjustment	`－`	`－`	3.40	(22.36)		`－`

Note1: The Financial Statements from 2011 to 2015 have been audited by KPMG.

Note2: The Financial Statements from 2013 refer to IFRSs. The Financial Statements from 2011 refer to following page audited by ROC GAAP.

(3) Condensed Statements of Financial Position – Stand-alone by IFRSs

Unit: NT$ thousands

		Unit:	Unit:	Unit:	Unit:	NT$thousands
Year Item		Five-Year Financial Summary`（`Note1`）`
		2015	2014	2013	2012	2011
Current assets		17,105,847	20,560,689	20,313,948	33,730,379	Note2
Property, plant and equipment		49,722,671	51,157,114	51,238,671	51,806,261
intangible assets		406,193	537,136	137,532	821,049
Other assets		36,279,328	31,769,303	19,358,591	13,349,591
Total assets		103,514,039	104,021,970	91,048,742	99,707,280
Current liabilities	Before Dist.	34,640,036	48,510,026	75,260,075	85,563,764
	After Dist.	34,640,036	48,510,026	75,260,075	85,563,764
Non-current liabilities		14,136,314	13,910,491	5,914,889	12,389,635
Total liabilities	Before Dist.	48,776,350	62,420,517	81,174,964	97,953,399
	After Dist.	48,776,350	62,420,517	81,174,964	97,953,399
Equity attributable to owners of theparent		`－`	`－`	`－`	`－`
Common stock		24,285,658	24,748,843	239,608,511	239,590,181
Capital surplus		7,812,701	6,377,936	3,696,784	3,728,063
Retained earnings	Before Dist.	22,991,433	10,816,268	(233,081,650)	(241,213,918)
	After Dist.	22,991,433	10,816,268	(233,081,650)	(241,213,918)
Other equity		(4,570)	5,939	(2,334)	(2,912)
Treasurystock		(347,533)	(347,533)	(347,533)	(347,533)
Non-controllinginterest		`－`	`－`	`－`	`－`
Total equity	Before Dist.	54,737,689	41,601,453	9,873,778	1,753,881
	After Dist.	54,737,689	41,601,453	9,873,778	1,753,881

Note1: The Financial Statements from 2011 to 2015 have been audited by KPMG.

Note2 ： The Financial Statements from 2013 refer to IFRSs. The Financial Statements from 2011 refer to following page audited by ROC GAAP.

(4) Condensed Statements of Comprehensive Income– Stand-alone by IFRSs

Unit: NT$ thousands

Year Item	Year Item	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`
		2015	2014	2013	2012	2011
Operatingrevenue		43,129,599	48,589,951	44,686,542	32,478,098	(Note2)
Grossprofit		16,914,128	21,727,434	7,657,748	(22,288,829)
Operatingincome		13,390,105	18,611,318	4,713,686	(30,190,318)
Non-operatingincome and expenses		4,235,753	12,036,503	3,424,134	(5,842,624)
Income before income tax		17,625,858	30,647,821	8,137,820	(36,032,942)
Profit from ContinuingOperation		17,625,858	30,647,821	8,137,820	(36,032,942)
Income(Loss)from Discontinued Operation		`－`	`－`	`－`	`－`
Net income(Loss)		17,141,167	28,242,317	8,137,820	(36,032,942)
Other comprehensive income (net after tax)		(123,115)	65,870	578	(87,349)
Total comprehensive income		17,018,052	28,308,187	8,138,398	(36,120,291)
Net Income attributable to owners of theparent		`－`	`－`	`－`	`－`
Net income attributable to non-controllinginterests		`－`	`－`	`－`	`－`
Total comprehensive income attributable to owners of theparent		17,018,052	28,308,187	8,138,398	`－`
Total comprehensive income attributable to non-controllinginterests		`－`	`－`	`－`	`－`
Earnings per share (NT$)	Before adjustment	7.07	11.77	0.34	(2.24)
	After adjustment	`－`	`－`	3.40	(22.36)

Note1: The Financial Statements from 2011 to 2015 have been audited by KPMG.

Note2: The Financial Statements from 2013 refer to IFRSs. The Financial Statements from 2011 refer to following page audited by ROC GAAP.

1.2 Condensed Balance Sheets and Statements of Operations– by ROC GAAP

(1)Condensed Balance Sheets – by ROC GAAP

Unit: NT$ thousands

		Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year Item		Five-Year Financial Summary`（`Note1`）`
		2015	2014	2013	2012	2011
Current assets		(Note2)			33,730,379	30,055,648
Funds and Investment					8,261,355	10,962,295
Property, plant and equipment					51,806,261	70,308,218
Intangible assets					821,049	1,361,056
Other assets					5,569,690	5,767,004
Total assets					100,188,734	118,454,221
~~C~~urrent liabilities	Before Dist.				85,563,764	64,757,670
	After Dist.				85,563,764	64,757,670
Long-term liabilities					11,143,651	30,137,680
Other liabilities					1,211,353	775,922
~~T~~otal liabilities	Before Dist.				97,918,768	95,671,272
	After Dist.				97,918,768	95,671,272
Common stock					239,590,181	148,649,004
Capital surplus					3,728,063	3,570,987
~~R~~etained earnings	Before Dist.				(240,693,714)	(129,169,827)
	After Dist.				(240,693,714)	(129,169,827)
Unrealized gain or loss on financial instrument					13,527	84,437
Cumulative translation adjustment					(20,558)	(4,119)
Net loss not recognized aspension cost					`－`	`－`
Total stockholders’ equity	Before Dist.				2,269,966	22,782,949
	After Dist.				2,269,966	22,782,949

Note1: The Financial Statements from 2011 to 2015 have been audited by KPMG. Note2: The Financial Statements from 2013 refer to IFRSs.

(2)Condensed Statements of Operations – by ROC GAAP

Unit: NT$ thousands

		Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Year Item		Five-Year Financial Summary`（`Note1`）`
		2015	2014	2013	2012	2011
Net Operating revenues		(Note2)			32,478,098	36,741,280
Gross loss					(22,328,116)	(22,878,631)
Operations Income(Loss)					(30,200,175)	(33,176,106)
Non-operating income					889,576	800,102
Non-operating expense					6,732,111	7,509,689
Income before tax from continuing operation					(36,042,710)	(39,885,693)
Income from continuing operation					(36,042,710)	(39,885,693)
Income (Loss) on discontinued Operation					`－`	`－`
Extraordinary items					`－`	`－`
Cumulative effect of change in accounting principle					`－`	`－`
Net Income(Loss)					(36,042,710)	(39,885,693)
Earnings Per Share (NT$)	Before adjustment				(2.24)	(8.06)
	After adjustment				(22.36)	(80.62)

Note1: The Financial Statements from 2011 to 2015 have been audited by KPMG. Note2: The Financial Statements from 2013 refer to IFRSs.

1.3 Auditors’ Opinions from 2011 to 2015

Year	CPA Firm	CPA's Name	Auditing Opinion
2011	KPMG Taiwan	Eric Wu CPA Astor Kou,CPA	An Unqualified Opinion Subsequent to Revision
2012	KPMG Taiwan	Eric Wu CPA Astor Kou,CPA	An Unqualified Opinion Subsequent to Revision
2013	KPMG Taiwan	Eric Wu CPA Isabel Lee CPA	An Unqualified Opinion Subsequent to Revision
2014	KPMG Taiwan	Eric Wu CPA Isabel Lee CPA	An Unqualified Opinion Subsequent to Revision
2015	KPMG Taiwan	Delphi Chen CP AIsabel Lee CPA	An Unqualified Opinion Subsequent to Revision

2. Five-Year Financial Analysis

2.1 Financial Analysis – Consolidated by IFRSs

Item	Year	Year	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	2016 Q1
			2015	2014	2013	2012	2011
Capital structure	Debt ratio (%)		47.25	60.13	89.27	98.21	(Note2)	41.84
	Long-term fund to property, plant and equipment ratio (%)		138.20	108.2	29.61	25.86		177.04
Liquidity	Current ratio (%)		50.58	43.23	28.37	40.10		106.56
	Quick ratio (%)		29.22	30.95	16.67	21.83		82.31
	Times interest earned (times)		21.54	27.44	7.17	(20.76)		11.60
Operating performance	Accounts receivable turnover (times)		7.63	7.73	7.9	6.93		7.89
	Days sales outstanding		47.83	47.21	46.2	53		46.26
	Inventoryturnover (times)		4.78	4.18	3.30	3.90		4.71
	Accounts payable turnover (times)		19.18	17.12	16.49	11.81		19.22
	Inventoryturnover days		76.35	87.32	110.6	94		77.49
	Property, plant and equipment turnover (times)		0.86	0.94	0.85	0.55		0.84
	Total assets turnover(times)		0.42	0.49	0.46	0.31		0.37
Profitability	Return on total assets (%)		17.15	29.50	9.60	(31.60)		7.18
	Return on total equity (%)		35.57	109.1	137.3	(298.91		11.97
	Pre-tax income to paid-in capital ratio (%)		72.78	128.2	3.78	(15.03)		26.85
	Net margin (%)		39.13	57.41	17.93	(106.31		17.74
	Earnings per share(NT$)	Before adjustment	7.07	11.77	0.34	(2.24)		0.68
		After adjustment	`－`	`－`	3.40	(22.36)		`－`
Cash flow	Cash flow ratio (%)		52.57	54.92	17.16	(20.08)		58.47
	Cash flow adequacy ratio (%)		45.87	15.83	(32.12)	(56.10)		232.21
	Cash flow reinvestment ratio (%)		9.20	20.88	15.30	(19.93)		10.58
Leverage	Operatingleverage		1.42	1.29	2.36	0.40		1.57
	Financial leverage		1.06	1.06	1.41	0.95		1.07
1. Debt ratio falling and current ratio rising due to repay more debt loan and reduce current liabilities in 2015. 2. Profitability decreased mainly due to Dram industrial depression and average selling price falling in 2015. 3. Cash flow adequacy ratio increased by rising operating activity cash flow compared with 2014. Cash flow reinvestment ratio decreased due to reduce operatingactivitycash flow andpaycash dividends.

Note1 ： The Financial Statements from 2011 to 2015 have been audited by KPMG.

Note2 ： The Financial Statements from 2013 refer to IFRSs. The Financial Statements from 2011 refer to following page audited by ROC GAAP.

2.2 Financial Analysis – Stand-alone by IFRSs

Year Item(Note2)	Year Item(Note2)	Year Item(Note2)	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`	Five-Year Financial Summary`（`Note1`）`
			2015	2014	2013	2012	2011
Capital structure	Debt ratio(%)		47.12	60.00	89.15	98.24
	Long-term fund to property, plant and equipment ratio (%)		138.51	108.5	30.81	27.30
Liquidity	Current ratio (%)		49.38	42.38	26.99	39.42
	Quick ratio(%)		28.07	30.59	16.20	21.64
	Times interest earned(times)		21.69	26.72	6.57	(20.96)
Operating performance	Account receivable turnover (times)		7.01	7.35	7.79	6.41
	Days sales outstanding		52.06	49.65	46.85	57
	Inventoryturnover(times)		4.92	4.50	3.46	3.90
	Account payable turnover (times)		19.18	18.39	17.64	11.66
	Inventoryturnover days		74.18	81.11	105.4	94
	Property,plant and equipment turnover(times)		0.85	0.94	0.86	0.53
	Total assets turnover (times)		0.41	0.49	0.46	0.30
Profitability	Return on total assets(%)		17.20	29.96	9.80	(31.80)
	Return on total equity(%)		35.58	109.7	139.9	(300.14)
	Pre-tax income to paid-in capital ratio (%)		72.57	123.8	3.39	(15.04)
	Net margin (%)		39.74	58.12	18.21	(110.95)
	Earnings per share(NT$)	Before adjustment	7.07	11.77	0.34	(2.24)
		After adjustment	`－`	`－`	3.40	(22.36)
Cash flow	Cash flow ratio(%)		53.03	55.52	18.55	(19.58)
	Cash flow adequacy ratio (%)		68.65	23.60	(38.19	(67.02)
	Cash flow reinvestment ratio(%)		9.09	20.79	15.89	(19.93)
Leverage	Operatingleverage		1.43	1.30	2.40	0.39
	Financial leverage		1.06	1.06	1.44	0.95
1. Debt ratio falling and current ratio rising due to repay more debt loan and reduce current liabilities in 2015. 2. Profitability decreased mainly due to Dram industrial depression and average selling price falling in 2015. 3. Cash flow adequacy ratio increased by rising operating activity cash flow compared with 2014. 4. Cash flow reinvestment ratio decreased due to reduce operating activity cash flow and pay cash dividends.

Note1: The Financial Statements from 2011 to 2015 have been audited by KPMG.

Note 2 ： The above ratios of financial analysis are calculated based on the following equations:

1. Capital structure

(1) Debt ratio ＝ Total liabilities / Total assets

(2) Long-term fund to property, plant and equipment ratio ＝（ Total equity + non-current liabilities) / Net property, plant and equipment

2. Liquidity

(1) Current ratio ＝ Current assets / Current liabilities

(2) Quick ratio ＝ (Current assets – inventory – prepaid expenses) / Current liabilities

(3) Times interest earned ＝ Net Income before tax and interest expenses / Interest expenses

3. Operating performance

(1) Account receivable turnover (including accounts receivable and notes receivable) ＝ Net sales / Average account receivable (including account receivable and notes receivable) balance

(2) Days sales outstanding ＝ 365 / Receivable turnover

(3) Inventory turnover ＝ Cost of goods sold / Average inventory

(4) Account payable turnover (including accounts payable and notes payable) ＝ Cost of goods sold /Average account payable (including account payable and notes payable) balance

(5) Inventory turnover days ＝ 365 / Inventory turnover

(6) Property, plant and equipment turnover ＝ Net sales / Average net property, plant and equipment

(7) Total assets turnover ＝ Net sales / Average total assets

4. Profitability

(1) Return on total assets ＝ [Net income after tax + interest expense x (1-interest rate)] / Average total assets]

(2) Return on total equity ＝ Net income after tax / Average shareholders’ equity

(3) Pre-tax income to paid-in capital ratio = Income before tax / paid-in capital

(4) Net margin = Net income / Net sales

(5) Earnings per share = (Net income - preferred stock dividend) / Weighted average number of shares outstanding

5. Cash flow

(1) Cash flow ratio ＝ Net cash flow provided by operating activities / Current liabilities

(2) Cash flow adequacy ratio ＝ Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory additions, and cash dividend

(3) Cash flow reinvestment ratio = (Cash provided by operating activities - cash dividends) / (Gross property, plant and equipment + long-term investments + other noncurrent assets + working capital)

6. Leverage

(1) Operating leverage ＝ (Operating revenues – variable cost and expense) / Operating Income

(2) Financial leverage ＝ Operating income / (Operating income – interest expenses)

2.3 Financial Analysis – by ROC GAAP

2.3 Financial Analysis – by ROC GAAP	2.3 Financial Analysis – by ROC GAAP	2.3 Financial Analysis – by ROC GAAP
Year Item(Note3)			Five-Year Financial Summary`（`Note1`）`
			2015	2014	2013	2012	2011
Capital structure	Debt ratio (%)		Note2			97.73	80.77
	Long-term fund to fixed assets (%)					25.89	75.27
Liquidity	Current ratio(%)					39.42	46.41
	Quick ratio(%)					21.64	23.02
	Times interest earned(times)					(20.96)	(24.54)
Operating performance	Account receivable turnover(times)					6.41	4.88
	Days sales outstanding					57	75
	Inventory turnover(times)					3.9	5.31
	Account payable turnover(times)					11.66	8.45
	Inventory turnover days					94	69
	Fixed assets turnover(times)					0.63	0.52
	Total assets turnover(times)					0.32	0.31
Profitability	Return on total assets(%)					(31.47)	(30.84)
	Return on stockholders’ equity(%)					(287.73)	(143.91)
	Income to paid-in capital ratio(%)	Operating income				(12.60)	(22.32)
		Income before income tax				(15.04)	(26.83)
	Net margin(%)					(110.98)	(108.56)
	Earnings per share (NT$)	Before adjustment				(2.24)	(8.06)
		After adjustment				(22.36)	(80.62)
Cash flow	Cash flow ratio(%)					(19.52)	(23.90)
	Cash flow adequacy ratio(%)					(60.33)	(16.86)
	Cash flow reinvestment ratio(%)					(19.93)	(11.11)
Leverage	Operating leverage					0.39	0.43
	Financial leverage					0.95	0.96

Note1: The Financial Statements from 2011 to 2015 have been audited by KPMG. Note2: The Financial Statements from 2013 refer to IFRSs.

Note 3 ： The above ratios of financial analysis are calculated based on the following equations:

1. Financial structure

(1) Debt ratio ＝ Total liabilities/Total assets

(2) Long-term fund to fixed asset ratio ＝（ Net shareholder’s equity + long-term liabilities ） / Net fixed assets

2. Liquidity

(1) Current ratio ＝ Current assets / Current liabilities

(2) Quick ratio ＝ (Current assets – inventory – prepaid expenses) / Current liabilities

(3) Times interest earned (times) ＝ Net income before tax and interest expenses / Interest expenses

3. Operating Performance

(1) Account receivable turnover (including accounts receivable and notes receivable) ＝ Net sales / Average receivable (including accounts receivable and notes receivable) balance

(2) Days sales outstanding ＝ 365 / Receivable turnover

(3) Inventory turnover ＝ Cost of goods sold / Average inventory

(4) Accounts payable turnover (including accounts payable and notes payable) ＝ Cost of goods sold / Average payable (including accounts payable and notes payable) balance

(5) Inventory turnover days ＝ 365 / Inventory turnover
(6) Fixed assets turnover ＝ Net sales / Average net fixed assets

(7) Total assets turnover ＝ Net sales / Total assets

4. Profitability

(1) Return on total assets ＝ [Net income after tax + interest expense x (1-interest rate)] / Average total assets]

(2) Return on stockholders’ equity ＝ Net income after tax / Average shareholders’ equity

(3) Operating income to paid-in capital ratio = Operating income / Paid-in capital

(4) Pre-tax income to paid-in capital ratio = Income before tax / Paid-in capital

(5) Net margin = Net income / Net sales

(6) Earnings per share = (Net income - preferred stock dividend) / Weighted average number of shares outstanding

5. Cash Flow

(1) Cash flow ratio ＝ Net cash provided by operating activities / Current liabilities

(2) Cash flow adequacy ratio = Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory additions, and cash dividend

(3) Cash flow reinvestment ratio = (Cash provided by operating activities - cash dividends) / (Gross fixed assets + long-term investments + other assets + working capital)

6. Leverage

(1) Operating leverage ＝ (Operating revenues – variable cost and expense) / Operating income

(2) Financial leverage ＝ Operating income / (Operating income – interest expenses)

3. Supervisors’ Review Report:

NANYA TECHNOLOGY CORP.

Supervisors’ Review Report

The Board of Directors has prepared the Company’s 2015 Business Report, Proposal for Profits Distribution, and Financial Statements audited by the CPA. We as the Supervisors of the Company have examined the aforementioned documents and found no unconformities. According to Article 219 of Company Act, we hereby submit this report. Please be advised accordingly.

Submitted to:

The Company’s 2016 Annual Annual Shareholders’ Meeting

Supervisors: Shih-Ming Hsie

Ming-Jong Yeh

Ming-Long Huang

March 15, 2016

Consolidated Financial Statements for the Years Ended December 31, 2014 and 2013, and Independent Auditors’ Report:

Please refer to page 92-167 of the Annual Report.

Stand-alone Financial Statements for the Years Ended December 31, 2014 and 2013, and Independent Auditors’ Report:

Please refer to page 168-235 of the Annual Report.

The Company should disclose the financial impact to the Company if the Company and its affiliated companies have incurred any financial or cash flow difficulties in 2014 and as of the date of this Annual Report: None

VII. Financial Status, Operating Results and Risk Management

1 Financial Status: Consolidated Report – IFRSs:

Unit: NT$ thousands

			Unit: NT$ thousands	Unit: NT$ thousands
Year			Difference
	2015	2014
Item			Amount	%

Current assets	17,822,621	21,262,018	(3,439,397)	(16.18)
Investment usingthe equitymethod	32,833,967	28,345,200	4,488,767	15.84
Property, plant and equipment	49,763,526	51,175,927	(1,412,401)	(2.76)
Deferred income tax assets	876,064	846,648	29,416	3.47
Total Assets	104,006,037	104,552,312	(546,275)	(0.52)
Current liabilities	35,229,599	49,179,746	(13,950,147)	(28.37)
Long-term liabilities	13,922,063	13,695,508	226,555	1.65
Total Liabilities	49,151,662	62,875,254	(13,723,592)	(21.83)
Common stock	24,285,658	24,095,278	190,380	0.79
Capital received in advance	-	653,565	(653,565)	100
Capital surplus	7,812,701	6,377,936	1,434,765	22.50
Retained earnings	22,991,433	10,816,268	12,175,165	112.56
Total Equity	54,854,375	41,677,058	13,177,317	31.62
Explanation for Significant Changes`：` (1)Current liabilities decreased mainly due to Long-term loans due within one year and loans from relationships. (2)Capital Surplus increased mainly due to the recognition of employee stock options amounted to NT$ 2,924 thousands, new employee stock option execution amounted to NT$ 856,818 thousands and issuance of common stock for cash amounted to NT$ 489,599 thousands. (3)Retained earnings increased from gaining profit.

2. Operating Results

2.1 Consolidated Report – IFRSs

Unit: NT$ thousands

2.1 Consolidated Report – IFRSs			Unit: NT$ thousands	Unit: NT$ thousands
Year Item	2015	2014	Difference
			Amount	%
Operating revenues	43,875,905	49,107,622	(5,231,717)	(10.65)
Cost of goods sold	26,567,909	26,938,594	(370,685)	(1.38)
Gross profit	17,307,996	22,169,028	(4,861,032)	(21.93)
Operating expenses	3,820,610	3,364,456	456,154	13.56
Operating income	13,487,386	18,804,572	(5,317,186)	(28.28)
Non-operating income and expenses	4,190,042	12,928,124	(8,738,082)	(67.59)
Income before income tax	17,677,428	31,732,696	(14,055,268)	(44.29)
Income tax Benefit	506,028	2,481,199	(1,975,171)	(79.61)
Net income	17,171,400	28,195,366	(11,023,966)	(39.10)
Analysis for Significant Changes: (1)Gross profit decreased mainly due to average selling price falling. (2)Operating income, Income tax Benefit, and Net income decreased mainly due to revenue and profit falling. (3)Non-operating income and expenses decreased mainly due to less recognition of investment using the equity method of Inotera. (4)Income tax Benefit of Y2014 was higher due to company recognize deferred income tax assets for the unused loss carry forward benefit that future taxable profit will be available against in 2014.

2.2Gross Profit Variance Analysis – Consolidated Report by IFRSs:

Unit: NT$ thousands

	Variances		Effect of variances	Effect of variances
Item	between	Sales	Cost	Product	Quantity variances
	2014 and 2015	variances	variances	mix
Grossprofit	-4,861,032	-14,312,018	5,253,931	2,699,569	1,497,486

The variance analysis of gross profit ：

(1)Sales variances: The decrease on Industrial depression and average selling price had negative impact on sales variances.

(2)Cost variances: The rising portion of 30nm design shrink product and yield improvement had positive impact on cost variances.

(3)Product mix: The rising sales portion of higher margin product had positive impact.

(4)Quantity variances: The rising portion of 30nm design shrink process and wafer output had positive impact on quantity variances.

3. Cash Flow

3.1 Cash Flow Analysis for 2015

Unit: NT$thousands

		Net cash used		Remedy for	Remedy for
Cash balance-	Net cash provided		Cash balance
				insufficient cash
beginning	by operating	in investing	(deficit)
		d fii		Investment	Financing
(1)	activities (2)	an nancng	(1)+(2)-(3)
		activities(3)		plan	plan

7,267,855	18,522,241	27,181,490	(1,391,394)	-	4,106,000

(1)Operating activities: The net profit is NT$17.1 billion, plus depreciation expenses, deduct share of profit of associates using equity method and others, net cash inflow from operating activities was NT$18.5 billion.

(2) Cash outflow from investing activities：To improve 30nm efficiency, the company invests in

30nm product design shrink process and back-end equipment. The total procurement of machinery resulted in cash outflow of NT$3.8 billion.

(3)Cash outflow from financing activities：The company’s short-term loan, long-term loan, borrowing from related parties repayments and cash dividends distribution resulted in a cash outflow of NT$23.3 billion.

(4)Remedies for insufficient cash：The company withdrew short-term and long-term bank loans of NT$4.1 billion to fulfill capital requirements.

A. Liquidity:

Year
	2015	2014
Item

Current Ratio (%)	52.57	54.92
Quick Ratio (%)	45.87	15.83
Times Interest Earned	9.2	20.88
~~(Ti~~ ~~)~~ Explanation for significant changes:

(A)Quick Ratio: The sum of operating cash inflow in recent 5 years increased resulted in the quick ratio rise compared with 2014.

(B)Time’s interest earned: The operating cash inflow decreased and cash dividend distribution in 2014 resulted in times interest earned decreased in 2015.

3.2Cash flow projection for next year:

Unit: NT$ thousands

				Unit: NT$ thousands	Unit: NT$ thousands
	Net cash	Net cash used in		Remedy for
Cash balance-	provided by	investing and	Cash balance	insufficient cash
beginning	operating	financing	(deficit)	Investment	Investment
	activities	activities		plan	plan
3,103,705	10,969,393	72,169,377	(58,096,279)	47,481,638	23,680,000

The expected cash inflow from operating activities for next year is around NT$11 billion. The net cash used in investing and financing activities is around NT$72 billion which mainly spent in projected bank loan and related parties borrowings repayment, 20nm machinery procurement and to acquire of Micron’s private placement or convertible corporate bond. The yearly cash deficit is around NT$58 billion. The company plan to raise NT$71 billion in 2016 by cash capital increase, syndicated loan and disposal of Inotera shares.

4. Major Capital Expenditures

4.1 Major Capital Expenditures and Sources of Funding: None

5. Reinvestment Policy, Cause of Gain or Loss, Corrective Action, and Future Investment Plan:

2015/12/31 Unit ： NT$ thousands

Company	Investment	Policy	Cause of Gain or Loss	improvement plan	Other investment plan
NTC-USA	20,392	Selling of semiconductor products.	Gain $ 1,787 from investment	`－`	`－`
NTC-Delaware	36,005	Designing of semiconductor products.	Gain $ 9,376 from investment	─	`－`
Pei-Jen Co., Ltd.	175,348	Import/Export Business	Gain $ 20,424 from investment	`－`	`－`
NTC-HK	66,271	Selling of semiconductor products.	Gain $ 9,836 from investment	`－`	`－`
NTC-Japan	20,161	Selling of semiconductor products.	Gain $ 22,235 from investment	`－`	`－`
Inotera Memories, Inc.	24,631,379	Engaged in manufacturing and sellingelectronicparts.	Gain $ 4,380,050 from investment	`－`	`－`
PieceMakers Tech Inc.	21,246	Designing of semiconductor products.	Gain $ 38,297 from investment	─	`－`
Sumpro Co., Ltd.	2,591,000	Engaged in manufacturing and selling electronic parts.	Loss $6,762 from investment	Loss improvement because there is no main cost after deposal all equipment	`－`
NTC-Germany	30,056	Import/Export Business	Gain $ 4,672 from investment	`－`	`－`
NTC-Shenzhen	32,570	Selling of semiconductor products.	Gain $ 5,667 from investment	`－`	`－`

6. Risk Management

6.1 Risk Associated with Interest Rates, Foreign Exchange and Inflation:

(1)Interest rate

The Company has floating interest rates for its long-term loans. Avoidance of interest rate risk, our company carefully estimates the situation on financial markets, and exchanges contracts with well-known international banks during relatively low interest rate. Our interest rate is lower than financial investment plan.

(2) Foreign exchange: Our company underfunded usages of foreign exchange on daily operation are coping with foreign exchange spot transaction and forward exchange agreement during favorable market rate. We sign a relatively low long-term exchanger rate policy with national well-known banks, which lower the impact of exchange rate on our continuing debt on foreign currency.

(3) Inflation:According to the announcement by Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C. (Taiwan), the annual growth rate of Consumer Price and Core Consumer Price in 2015 is -0.31% and 0.79% respectively, the impact on the Company’s 2015 profitability was insignificant.

6.2Risks Associated with High-risk/high-leveraged Investment; Lending, Endorsements, and Guarantees for Other Parties; and Financial Derivative Transactions:

The Company did not engage in any high-risk or high-leveraged investments. The transactions and procedures related to lending and endorsement are based on the Company’s “Procedures of Lending” and “Procedures of Endorsement Guarantee.”. Furthermore, derivative transactions follow the “Procedures for Acquisition and Disposal of Assets”.

The principle of leading target is our affiliate companies with unified funds. The amount of loans is base on Article 15 of the Companies Act, and is implemented by the Board of Directors. The purposes of loan are mostly short-tem fund dispatching, and object are usually parent company and affiliates.

6.3Future Research & Development Plans and Expected R&D Spending:

NTC will continuously focus on consumer and low power product markets. In product development area, we strengthened low power product design and related engineering capabilities. To fulfill the needs from mobile customers, we also developed multi-chip –package solutions. For enhancing product performance including higher speed grade and lower power consumption, we will achieve that goal by deploying advanced 20nm technology to develop new generation products in order to meet specialty market requirements. The R&D expense in 2015 was NT$ 2,078,667 thousand, 6% increase from 2014.

6.4Risks Associated with Changes in the Government Policies and Regulatory Environment: NTC pays close attention to changes in domestic and international politics and economic situations, major policy formation, and regulation amendments. Professional training is provided to NTC employees as needed. The following summarizes major regulation changes related to Nanya’s finances and operations from 2015 to February 28, 2016.

According to amendment to Article 235 and Article 240 and addition of Article 235-1 of the Company Act announced by Presidential Order Hua-Tsung-Yi-Yi-Tzu No. 10400058161 on May 20, 2015, the percentage of surplus profit distributable as employees' bonus shall be definitely specified in the Articles of Incorporation. NTC has approved the amendment to the Articles of Incorporation of the Company in its 2016 Special Shareholders’ Meeting. It has no impact on the Company’s operating costs.

According to Greenhouse Gas Reduction and Management Act promulgated by Presidential Order Hua-Tsung-Yi-Yi-Tzu No. 10400077011 on July 1, 2015, long-term national GHG emission reduction goal shall be to reduce GHG emissions to no more than 50% of 2005 GHG emission by 2050. Environmental Protection Administration announced Enforcement Rules of Greenhouse Gas Reduction and Management on Jan. 6, 2016. As the related promotion plans have yet to finalize, the impact on NTC will remain uncertain before they are implemented. However, it is likely that operating costs will increase as a result.

6.5Risks Associated with Changes in Technology and Industry: None
6.6Changes in Corporate Image and Impact On Company’s Crisis Management:
NTC “keep inquiring to the very root” and “rest only when perfection is achieved” and insist on such determination to face problems openly and solve problems with practical methods. Also, we constantly keep the idea of “work hard, rest only when perfection is achieved, devote ourselves to society, and sustainable management.”
6.7 Risks Associated with Mergers and Acquisitions: Not applicable
6.8 Risks Associated with Capacity Expansion: None
6.9Risks Associated with Sales Concentration and Purchase Concentration:
(1) Concentration of sales
Nanya Technology company focus on consumer and low power niche markets and concentrate on competitive and diversified products, so we keep enhancing customer groups in 2015, which was non-concentration of sales risk.
(2) Concentration of purchase
NTC’S main production material is silicon wafers, which are mostly supplied by Formosa Sumco Technology Corporation. Formosa Sumco’s silicon wafers account for 12% of NTC’s yearly spending on purchasing materials. Although the material supply is somewhat concentrated, NTC still has multiple sources and qualified suppliers to ensure stability and quality of production materials. Therefore, the risk from the concentration of material supply is acceptable to the NTC management team.
6.10 Potential Impact and Risks Associated with Sales of Significant Numbers of Shares by Nanya’s Directors, Supervisors, and/or Major Shareholders Who Own 10% or More of Nanya’s Total Outstanding Shares: Not applicable
6.11 Risks Associated with Change in Management: Not applicable

6.12 Risks Associated with Litigation：
(1)In 2002, Nanya Technology Corporation and its subsidiary, Nanya Technology Corporation, U.S.A., with other major DRAM manufacture corporations as codefendants, were alleged to conspire and manipulate DRAM prices on the market.
(2) Qimonda AG filed a complaint with Düsseldorf Regional Court asserting Nanya Technology Europe GmbH, a subsidiary of Nanya Technology Corporation, patent infringements in November 2011. Nanya Technology Corporation and Nanya Technology Europe GmbH (collectively “Nanya”) later filed a declaratory judgment against Qimonda AG for patent utilization rights with Munich Regional Court in June, 2012. Munich Regional Court declared the rights granted to Nanya continue to exist and are enforceable in August, 2014. Qimonda AG appealed in September, 2014. However, Qimonda AG has revoked its complaint and appeal in July, 2015, and then the case is closed.
(3) In mid of 2010, Nanya Technology Corporation (“Nanya”) , other manufacturers and individuals were alleged to international cartel in the industry for DRAM, which may have effected the Brazilian market. Nanya has engaged counsels to deal with the case to protect Nanya’s interests.
6.13 Other Material Risks: None

7. Other Important Matters: None

VIII. Other Special Notes

1. Summary of NTC’s Subsidiary

(1) Subsidiary Chart:

==> picture [431 x 302] intentionally omitted <==

----- Start of picture text -----

NTC-USA
100 ％
NTC-Delaware
100 ％
NTC-Europe
100 ％
NTC-HK
100 ％
NTC-Shenzhen
NTC-Japan 100 ％
NTC
100 ％
Pei-Jen Co., Ltd
100 ％
Piece Makers Tech Inc.
55.26 ％
Sumpor Electronic Inc.
100 ％
----- End of picture text -----

(2)Subsidiary Information:

2015/12/31 Unit: Thousands

Subsidiaries	Date of Incorporation	Address	Capital Stock	Business Activities
NTC-USA	1997.04	1735 Technology Drive, Suite 400, San Jose, CA 95110	USD 720	Selling of semiconductor products.
NTC-Delaware	2008.10	108 West 13thStreet, Wilmington, Delaware 19801, U.S.A.	USD 1,100	Designing of semiconductor products.
NTC-HK	2002.04	7thFloor, Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong	HKD 15,366	Selling of semiconductor products.
NTC-Japan	2002.09	8F Moriden Building, 3-9-9 Mita, Minato-ku,Tokyo, 108-0073, Japan	JPY 70,000	Selling of semiconductor products.
Pei-Jen Co., Ltd.	1978.11	1F., No.201, Dunhua N. Rd., Songshan Dist., Taipei City 10508, Taiwan (R.O.C.)	NTD 48,000	Import/Export Business
Piece Makers Tech Inc.	2006.01	8F.-1, No.89, Dongmei Rd., East Dist., Hsinchu City 30070, Taiwan (R.O.C.)	NTD 143,293	Designing of semiconductor products.
NTC-Germany	2002.09	Pempelforter Strasse 50, 40211 Duesseldorf, Germany	EUR 800	Import/Export Business
NTC-Shenzhen	2006.08	Area N,3rd Floor, Block B, Junxiangda Building , Zhongshanyuan Road,Nanshan District,Shenzhen	USD 985	Selling of semiconductor products.
Sumpro Co., Ltd.	2012.03	No.168, Changrong Rd., Lujhu Dist., Taoyuan City 33859, Taiwan (R.O.C.)	NTD 2,591,000	Engaged in manufacturing and selling electronicparts.

(3)Shareholders in Common of NTC and Its Subsidiary with Deemed Control and Subordination: None

(4) Business Scope of NTC’s Subsidiary:

The subsidiary overall is engaged in research, development, design, manufacturing and sale of semiconductor products. NTC-USA, NTC-Japan, NTC-HK, NTC-Germany and NTC-Shenzhen those are selling semiconductor products on behalf of NTC.

(5) Directors, Supervisors and Presidents of NTC’s Subsidiaries

As of 2015/12/31 Unit: shares ； %

		As of	2015/12/31 Unit: shares`；`%	2015/12/31 Unit: shares`；`%
Name of Subsidiary	Title	Name or Representative	Shareholding
			Shares	%
Nanya Technology Corporation, USA.	Chairman	Nanya Technology Corporation Representative: Pei-Ing Lee	2,400	100.00
	Director	Nanya Technology Corporation Representative: Rex Chuang	Same as above	Same as above
	Director	Brian Donahue	`－`	`－`
	President	Brian Donahue	`－`	`－`
Nanya Technology Delaware	Chairman	Nanya Technology Corporation Representative: Pei-IngLee	1	100.00
	Director	Nanya Technology Corporation Representative: Chi-MengSu	Same as above	Same as above
	Director	Nanya Technology Corporation Representative: Chih-HsiangWu	Same as above	Same as above
	Director	Douglas Lewellen	`－`	`－`
	President	Douglas Lewellen	`－`	`－`
Nanya Technology (HK) Corporation	Director	Nanya Technology Corporation Representative: Pei-IngLee	19,700	100.00
	Director	Otto Chang	`－`	`－`
	President	Pei-Ing Lee	`－`	`－`
Nanya Technology Japan	Chairman	Nanya Technology Corporation Representative: Pei-IngLee	1,000	100.00
	Chairman	Nanya Technology Corporation Representative: Chin-Lu Pan	Same as above	Same as above
	Director	Otto Chang	`－`	`－`
	Director	Chih-Hsiang Wu	`－`	`－`
	Supervisor	Hung-Chi Kuo	`－`	`－`
	President	Chin-Lu Pan	`－`	`－`
Nanya Technology (Shenzhen) Co., Ltd.	Chairman	Nanya Technology (HK) Corporation Representative: Pei-IngLee	`－`	100.00
	Director	Otto Chang	`－`	`－`
	Director	Michael Pai	`－`	`－`
	President	Michael Pai	`－`	`－`

Name of Subsidiary	Title	Name or Representative	Shareholding	Shareholding
			Shares	Shares
Nanya Technology Germany	Managing Director	Jean-Louis Freart	`－`	`－`
Pei. Jen Co., Ltd.	Chairman	Nanya Technology Corporation Representative: Pei-Ing Lee	480,000	100.00
	Director	Nanya Technology Corporation Representative: Nelson Chien	Same as above	Same as above
	Director	Nanya Technology Corporation Representative: Hung-Chi Kuo	Same as above	Same as above
	Supervisor	Nanya Technology Corporation Representative: Wesley Chang	Same as above	Same as above
	President	Nelson Chien	`－`	`－`
Piecemakers Tech. Inc.	Chairman	Nanya Technology Corporation Representative: Pei-Ing Lee	7,918,297	55.26
	Director	Nanya Technology Corporation Representative: Otto Chang	Same as above	Same as above
	Director	Nanya Technology Corporation Representative: Chung-Jung Hou	Same as above	Same as above
	Director	Hsiao-Wen Lee	573,399	4.00
	Director	Joe Ting	471,387	3.29
	Supervisor	Ming-Chung Yeh	`－`	`－`
	President	Hsiao-Wen Lee	573,399	4.00
Sumpro Electronics Corporation	Chairman	Nanya Technology Corporation Representative: Pei-Ing Lee	259,100,000	100.00
	Director	Nanya Technology Corporation Representative: Otto Chang	Same as above	Same as above
	Director	Nanya Technology Corporation Representative: Lin-Chin Su	Same as above	Same as above
	Director	Nanya Technology Corporation Representative: Chih-Hsiang Wu	Same as above	Same as above
	Director	Nanya Technology Corporation Representative: Ming-Chung Yeh	Same as above	Same as above
	Supervisor	Nanya Technology Corporation Representative: Nelson Chien	Same as above	Same as above
	President	Chih-Hsiang Wu	`－`	`－`

(6)Operational Highlights of NTC's Subsidiaries:

	2015/12/31 Unit: NT$thousands	2015/12/31 Unit: NT$thousands	2015/12/31 Unit: NT$thousands	2015/12/31 Unit: NT$thousands	2015/12/31 Unit: NT$thousands	2015/12/31 Unit: NT$thousands	2015/12/31 Unit: NT$thousands	2015/12/31 Unit: NT$thousands
Company	Capital	Total assets	Total liabilities	Net worth	Operating revenue	Operating income	Net income	Earnings per share (NT$)
NTC-USA	20,392	273,336	143,332	130,004	1,866,768	4,000	1,787	745
NTC-Delaware	36,005	139,231	15,632	123,599	304,526	14,501	9,376	9,376,326
NTC-HK	66,271	430,318	395,871	34,447	2,355,011	2,181	9,836	499
NTC-Japan	20,161	882,900	701,548	181,352	3,166,034	33,398	22,235	22,235
Pei-Jen Co., Ltd.	48,000	310,457	500,372	(189,915)	-	(58)	21,798	45.41
PieceMakers Tech Inc.	143,293	466,919	206,133	260,786	1,114,208	54,220	70,735	4.94
NTC-Germany	28,816	385,937	333,868	52,069	2,175,239	42,351	4,672	-
NTC-Shenzhen	32,683	41,960	26,539	15,421	84,177	19,354	5,667	-
Sumpro Co., Ltd.	2,591,000	36,609	736	35,873	(7,722)	(9,956)	(6,762)	(0.03)
Capital, Total assets, Total liabilities (1)1USD= NT$33.066 (2)1JPY= NT$0.2736 (3)1EUR= NT$36.038 (4)1HKD= NT$4.254 (5)1CNY=NT$5.0777				; ; ; ; ; ;	Operating revenue, Operating income, Net income 1USD= NT$31.9238 1JPY= NT$0.2623 1EUR= NT$35.2181 1HKD= NT$4.0968 1CNY= NT$5.0993

1.2 Consolidated Financial Statements of Affiliated Enterprises

(1)Representation Letter

Representation Letter

The entities to be included in the consolidated financial statements of affiliates which is required of Nanya Technology Corporation as of and for the year ended December 31, 2015, in accordance with the “Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” are all the same entities included in the consolidated financial statements for the same period of Nanya Technology Corporation and its subsidiaries prepared in conformity with the International Accounting Standards No.10 as endorsed by the ROC Financial Supervisory Commission (FSC). In addition, the information required to be disclosed in the above-mentioned consolidated financial statements of affiliates is also included in the said consolidated financial statements of parent company and its subsidiary. Therefore, Nanya Technology Corporation and its subsidiaries did not prepare a separate set of consolidated financial statements of affiliates.

NANYA TECHNOLOGY CORPORATION

Chairman: Jia-Zhao, Wu March 15, 2016

(2) Affiliated company’s Consolidated Financial Statements: same as NTC’s Financial Statements.
(3) Consolidated Business Reports of Affiliated Enterprises: None

2. Private Placement Securities in 2014 and as of the Date of this Annual Report: None

NTC’s Shares Acquired, Disposed of, and Held by its Subsidiary in 2014 and as of the Date of this Annual Report:

Name of subsidiary	Capital	Souce of capital	NTC Shareholding Ratio (%)	Acquired, Disposed of Date	Acquired amount	Disposed amoun	Investmetn Gain Or Loss	Shareholding number and amount(As of 2016/3/31)	creation of pledge	Money of Endorsement and Guarantee	amount of Lending money
Pei-Jen Co., Ltd.	NT$48,000K	The creation of capital And Earning of Capital Injuction	100.00%	2015	—	—	—	687,558units NT$27,468K	none	none	none
				As of 2016/3/31	—	—

4. Other Necessary Supplement: None

Any Events in 2015 and as of the Date of this Annual Report that Had Significant Impacts on Shareholders’ Right or Share Prices as Stated in Item 3 Paragraph 2 of Article36 of Securities and Exchange Law of Taiwan: None

NANYA TECHNOLOGY CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2015 (With Independent Auditors’ Report Thereon)

Representation Letter

NANYA TECHNOLOGY CORPORATION

_____ Jia-Zhao, Wu

Chairman

March 15, 2016

NANYA TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, 2014 AND 2015 (Expressed in thousands of New Taiwan Dollars)

DECEMBER 31, 2014 (Adjusted) Assets Current assets: 1100 Cash and cash equivalents (Note 6(1)) $ 7,267,855 7 1170 Notes and accounts receivable, net (Note 6(4)) 6,025,292 6 1180 Accounts receivable due from related parties, net (Notes 6(4) and 7) 19,825 - 1200 Other receivables (Note 6(4)) 1,660,987 2 1210 Other receivable－related parties (Notes 6(4) (10) and 7) 248,012 - 130x Inventories (Note 6(5)) 5,148,407 5 1470 Other current assets 891,640 - Total current assets 21,262,018 20 Non-current assets: 1523 Available-for-sale financial assets－non-current (Note 6(2)) 115,366 - 1543 Financial assets carried at cost－non-current (Note 6(3)) - - 1546 Debt investments without active market –non-current (Note 6(3)) - - 1550 Investments accounted for using equity method, net (Notes 6(7)and 7) 28,345,200 27 1600 Property, plant and equipment (Notes 6(9), 7 and 8) 51,175,927 49 1780 Intangible assets 537,136 1 1840 Deferred income tax assets (Note 6(15)) 846,648 1 1935 Lease receivable－long-term (Note 6(10)) 1,883,806 2 1990 Other non-current assets (Notes 6(1) and 8) 386,211 - Total non-current assets 83,290,294 80 Total assets 104,552,312 100	DECEMBER 31, 2014 (Adjusted)		DECEMBER 2015	31, 3 5 - 1 - 6 2 17 - - - 32 48 - 1 2 - 83 100 DECEMBER 31, 2014 (Adjusted) Liabilities and Equity Current liabilities： 2100 Short-term loans (Note 6(11)) $ - - 2170 Notes and accounts payable 1,075,345 1 2180 Accounts payable－related parties (Note 7) 133,595 - 2220 Other payables－related parties (Notes 6(13) and 7) 41,099,884 39 2322 Current portion of long-term loans (Note 6(12)) 3,900,000 4 2399 Other current liabilities 2,970,922 3 Total current liabilities 49,179,746 47 Non-current liabilities: 2540 Long-term loans (Note 6(12)) 12,480,000 12 2570 Deferred income tax liabilities (Note 6(15)) 276 - 2613 Lease payables－long-term (Note 6(13)) 282,250 - 2640 Accrued pension liabilities (Note 6(14)) 634,563 1 2670 Other non-current liabilities 298,419 - Total non-current liabilities 13,695,508 13 Total liabilities 62,875,254 60 Equity (Notes 6(7)(8)(15)(16)): 3110 Common stock 24,095,278 23 3140 Capital received in advance 653,565 1 3200 Additional paid-in capital 6,377,936 6 3310 Legal reserve - - 3300 Accumulated profit 10,816,268 10 3400 Other equity 5,939 - 3500 Treasury stock (347,533 ) - Equity attributable to owners of the Company 41,601,453 40 36xx Non-controlling interest 75,605 - Total equity 41,677,058 40 Total Liabilities and Equity $ 104,552,312 100	DECEMBER 31, 2014 (Adjusted)	DECEMBER 31, 2014 (Adjusted)		DECEMBER 2015	31,
		$	3,103,705 5,442,511 - 1,486,388 263,588 5,949,340 1,577,089 17,822,621 92,930 9,340 181,280 32,833,967 49,763,526 406,193 876,064 1,632,343 387,773 86,183,416 104,006,037			- 1 - 39 4 3 47 12 - - 1 - 13 60 23 1 6 - 10 - - 40 - 40 100		3,306,000 1,384,780 175,430 26,646,915 500,000 3,216,474 35,229,599 12,685,000 7,558 273,923 755,860 199,722 13,922,063 49,151,662 24,285,658 - 7,812,701 1,077,812 21,913,621 (4,570) (347,533 ) 54,737,689 116,686 54,854,735 104,006,037	3 2 - 26 - 3 34 12 - - 1 - 13 47 23 - 8 1 21 - - 53 - 53 100

Total assets 104,552,312 100 $ 104,006,037 100

NANYA TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2015 (Expressed in thousands of New Taiwan Dollars, except for per share amounts)

4000Operating revenues (Notes 6(19) and 7) 5000Cost of goods sold (Notes 6(5)(14)(17)(20) and 7) Gross profit Operating expenses (Notes 6(14)(17)(20) and7)： 6100 Selling and distribution expenses 6200 Administrative and general expenses 6300 Research and development expenses Total operating expenses Operating income Non-operating income and expenses： 7010 Other income 7020 Other gains and losses (Notes 6(21) and 7) 7050 Finance expenses (Note 6(21)) 7060 Share of profit of associate accounted for using equity method (Note 6(7)) Net non-operating activities 7900Income before income tax 7950Income tax expense (Note 6(15)) 8000Profit from continuing operations 8100Loss from discontinued operations (Note 12(3)) Net income 8300Other comprehensive income (loss) 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Remeasurement of the net defined benefit assets 8320 Recognized shares of other comprehensive income of associates accounted for using equity methods – may not be reclassified subsequently to profit or loss 8349 Income tax expense related to items that may not be reclassified to profit or loss (Note 6(15)) Total amount of items that may be reclassified subsequently to income or loss 8360 Items that may be reclassified subsequently to profit or loss: 8361 8362 Exchange differences arising on translation foreign operations Unrealized gain on available-for-sale financial assets 8399 Income tax expense related to items that may be reclassified to profit or loss (Note 6(15)) 8300Other comprehensive loss 8500Total comprehensive income Profit attributable to: Owners of the Company Profit from continuing operations Loss from discontinued operations 8610 Profit attributable to owners of the Company Non-controlling interests Profit from continuing operations Loss from discontinued operations 8620 Income (loss) attributable to non-controlling interests Total comprehensive (loss) income attributable to: Owners of the Company Comprehensive income from continuing operations Comprehensive loss from discontinued operations 8710 Total comprehensive income attributable to owners of the Company Non-controlling interests Comprehensive income from continuing operations Comprehensive loss from discontinued operations 8720 Total comprehensive income (loss) attributable to non-controlling interests 9750 Basic earnings per share (Unit: TWD) (Note 6(18)) 9710 Basic earnings per share from continuing operations 9720 Basic loss per share from discontinued operations Basic earnings per share 9810 Diluted earnings per share(Unit: TWD) (Note 6(18)) Diluted earnings per share from continuing operations Diluted loss per share from discontinued operations Diluted earnings per share		2014 (Adjusted) Amounts % 49,107,622 100 26,938,594 55 22,169,028 45 588,584 1 1,398,348 3 1,377,524 3 3,364,456 7 18,804,572 38 261,829 1 571,459 1 (1,199,818) (2) 13,294,654 27 12,928,124 27 31,732,696 65 2,481,199 5 29,251,497 60 (1,056,131 ) (2) 28,195,366 58 (59,408) - (1,811) - - - 57,597 - (3,777) 12,050 - - - - 65,870 - 28,261,236 58 29,238,438 59 (996,121 ) (2 ) 28,242,317 57 13,059 - (60,010 ) - (46,951 ) - 29,304,308 60 (996,121 ) (2 ) 28,308,187 58 13,059 - (60,010 ) - (46,951 ) - 12.19 (0.42 ) 11.77 12.18 (0.42 ) 11.76		2015	% 100 61 39 2 3 4 9 30 1 1 (2) 10 10 40 1 39 - 39 - - - - - - - - 39 - - - - - - 39 - 39 - - -
		Amounts 49,107,622 26,938,594 22,169,028 588,584 1,398,348 1,377,524 3,364,456 18,804,572 261,829 571,459 (1,199,818) 13,294,654 12,928,124 31,732,696 2,481,199 29,251,497 (1,056,131 ) 28,195,366 (59,408) (1,811) - 57,597 (3,777) 12,050 - 65,870 28,261,236 29,238,438 (996,121 ) 28,242,317 13,059 (60,010 ) (46,951 ) 29,304,308 (996,121 ) 28,308,187 13,059 (60,010 ) (46,951 ) 12.19 (0.42 ) 11.77 12.18 (0.42 ) 11.76		Amounts 43,875,905 26,567,909 17,307,996 660,729 1,206,219 1,953,662 3,820,610 13,487,386 226,050 419,496 (860,427) 4,404,923 4,190,042 17,677,428 506,028 17,171,400 - 17,171,400 (132,255) (2,835) 22,484 (112,606 ) 11,928 (22,437) - (123,115 ) 17,048,285 17,141,167 - 17,141,167 30,233 - 30,233 17,018,052 - 17,018,052 30,233 - 30,233 7.07 - 7.07 7.02 - 7.02
	$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

NANYA TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

Attributable to owners of the Company

Balance at January 1, 2014 $ Effect of the retrospective application of accounting principle or adjustment Adjusted balance as of January 1, 2014 Net income Other comprehensive income (loss) Total comprehensive income Change in other capital surplus: Change in recognized shares of associates accounted for using equity methods Difference between the actual disposal of subsidiary shares price and book value Acquisition of ownership interests in subsidiaries from non-controlling interests Recognized compensation costs on employee stock options Due to recognition of equity component of employee stock options issued Cash dividend distributed to non-controlling interest by subsidiaries Capital reduction to offset accumulated deficits Balance as of December 31, 2014 Net income Other comprehensive income (loss) Total comprehensive income Legal capital reserve Common stock dividends Change in other capital surplus: Change in equity of associates accounted for using equity method Adjustments of capital surplus for the Company's cash dividends received by subsidiaries Change in equity of subsidiaries accounted for using equity method Increase in non-controlling interests Recognized compensation costs on employee stock options by the Company Recognized compensation costs on employee stock options by subsidiaries Due to recognition of equity component of employee stock options issued Capital received in advance – exercise of employee stock options Balance as of December 31, 2015 $		Common stock 239,608,511 - 239,608,511 - - - - - - - 135,840 - (215,649,073 ) 24,095,278 - - - - - - - - - - - 190,380 - 24,285,658		Capital received in advance - - - - - - - - - - 653,565 - - 653,565 - - - - - - - - - - - (653,565) - -	Capital surplus 3,696,784 - 3,696,784 - - - 2,200,117 (835) (36,311) 18,129 500,052 - - 6,377,936 - - - - - 86,316 1,374 (3,159) - 2,924 893 856,818 489,599 7,812,701		Retained earnings Legal reserve Unappropriated retained earnings (accumulated deficit) - (233,081,650) - (20,241 ) - (233,101,891 ) - 28,242,317 - 57,597 - 28,299,914 - - - - - (23,652) - - - (7,176) - - - 215,649,073 - 10,816,268 - 17,141,167 - (112,606 ) - 17,028,561 1,077,812 (1,077,812) - (4,853,396) - - - - - - - - - - - - - - - - 1,077,812 21,913,621	Other equity items Exchange difference on translation of foreign financial statements Unrealized (losses) gains on available-for-sale financial assets (19,739) 17,405 - - (19,739 ) 17,405 - - (3,777 ) 12,050 (3,777 ) 12,050 - - - - - - - - - - - - - - (23,516) 29,455 - - 11,928 (22,437 ) 11,928 (22,437 ) - - - - - - - - - - - - - - - - - - - - (11,588 ) 7,018		Treasury stock (347,533) - (347,533 ) - - - - - - - - - (347,533) - - - - - - - - - - - - - (347,533 )	Total equity attributable to owners of parent 9,873,778 (20,241 ) 9,853,537 28,242,317 65,870 28,308,187 2,200,117 (835) (59,963) 18,129 1,282,281 - - 41,601,453 17,141,167 (123,115 ) 17,018,052 - (4,853,396) 86,316 1,374 (3,159) - 2,924 893 393,633 489,599 54,737,689	Non- controlling interest 131,359 - 131,359 (46,951) - (46,951 ) - 22,939 (9,787) 149 - (22,104) - 75,605 30,233 - 30,233 - - - - 3,159 7,300 - 389 - - 116,686	Total Equity 10,005,137 (20,241 ) 9,984,896 28,195,366 65,870 28,261,236 2,200,117 22,104 (69,750) 18,278 1,282,281 (22,104) - 41,677,058 17,171,400 (123,115 ) 17,048,285 - (4,853,396) 86,316 1,374 - 7,300 2,924 1,282 393,633 489,599 54,854,375
							Legal reserve - - - - - - - - - - - - - - - - - 1,077,812 - - - - - - - - - 1,077,812	Exchange difference on translation of foreign financial statements (19,739) - (19,739 ) - (3,777 ) (3,777 ) - - - - - - - (23,516) - 11,928 11,928 - - - - - - - - - - (11,588 )

NANYA TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

Cash flows from operating activities:
Net income from continuing operations before tax
Net loss from discontinued operations before tax
Net income before tax
Adjustments for:
Income and expenses not affecting cash flows
Depreciation expense
Amortization of deferred charges
Interest expenses
Interest income
Dividend revenue
Compensation costs arising from share-based payments
Share of profit of associate accounted for using equity method
Loss (gain) on disposal of property, plant and equipment
Property, plant and equipment reclassified to expense
Impairment loss on non-financial assets
Unrealized foreign currency exchange gain, net
Discount amortization of financial liabilities
Income and expenses not affecting cash flows
Change in operating assets and liabilities:
Decrease(increase) in accounts receivable
Decrease(increase) in other receivables
Decrease (increase) in inventories
Decrease (increase) in other current assets
Decrease in accounts payable
Increase (decrease) in other current liabilities
Decrease in accrued pension liabilities
Decrease in other non-current liabilities
Total change in operating assets and liabilities
Cash generated from operating activities
Interest received
Dividend received
Interest paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of debt investments without active market
Purchases of financial assets carried at cost
Proceeds from disposal of non-current assets classified as held for sale
Purchases of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Purchase of intangible asset
Decrease in lease receivables
Increase in other non-current assets
Acquisition of ownership interests in subsidiaries from non-controlling interests
Net cash used in investing activities
Cash flows from financing activities:
Increase in short-term loans
Repayments of short-term loans
Increase in long-term loans
Repayments of long-term loan
Decrease in other payable-related parties
Decrease in lease payables－related parties
Cash dividends paid by subsidiaries
Exercise of employee stock options
Proceeds from sale of subsidiary shares of stock (without losing control)
Increase in non-controlling interests
Cash dividends paid
Net cash used in financing activities
Effect of foreign currency exchange translation
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

For the years ended December 31,
2014 (Adjusted)
2015
$ 31,732,696
17,677,428
(1,056,131
)
-
30,676,565
17,677,428
5,416,077
5,669,957
191,434
129,408
1,207,899
860,427
(262,270)
(226,050)
-
(3,601)
18,278
493,805
(13,294,654)
(4,404,923)
(53,604)
1,745
13,005
-
395,254
4,204
(173,335)
(40,223)
14,000
5,000
(6,527,916
)
2,489,749
759,103
682,725
239,897
12,548
2,568,251
(800,933)
234,812
(707,583)
(692,932)
(90,925)
939,046
(29,897)
(145,482)
(10,958)
(23,798
)
(15,773
)
3,878,897
(960,796
)
28,027,546
19,206,381
261,069
227,576
-
3,601
(1,242,110)
(882,399)
(35,602
)
(32,918
)
27,010,903
18,522,241
-
(181,280)
-
(9,340)
1,700,000
-
(5,795,646)
(3,841,842)
77,976
2,928
(291,163)
(111,196)
429,330
429,330
(361,681)
(1,563)
(69,750
)
-
(4,310,934
)
(3,712,963
)
90,600
3,600,600
(180,600)
(300,000)
11,975,000
500,000
(7,300,000)
(3,700,000)
(25,373,682)
(14,487,626)
(7,404)
(7,853)
(22,104)
-
1,282,281
393,633
22,104
-
-
7,300
-
(4,852,022
)
(19,513,805
)
(18,840,568
)
86,189
(132,860
)
3,272,353
(4,164,150)
3,995,502
7,267,855
$
7,267,855
3,103,705

2014 (Adjusted)
$ 31,732,696
(1,056,131
)
30,676,565
5,416,077
191,434
1,207,899
(262,270)
-
18,278
(13,294,654)
(53,604)
13,005
395,254
(173,335)
14,000
(6,527,916
)
759,103
239,897
2,568,251
234,812
(692,932)
939,046
(145,482)
(23,798
)
3,878,897
28,027,546
261,069
-
(1,242,110)
(35,602
)
27,010,903
-
-
1,700,000
(5,795,646)
77,976
(291,163)
429,330
(361,681)
(69,750
)
(4,310,934
)
90,600
(180,600)
11,975,000
(7,300,000)
(25,373,682)
(7,404)
(22,104)
1,282,281
22,104
-
-
(19,513,805
)
86,189
3,272,353
3,995,502
$
7,267,855

$ $

NANYA TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2015 (All amounts are expressed in thousands of New Taiwan Dollars, except for per share information or unless otherwise specified)

1. Organization and Principal Activities

Nanya Technology Corporation (the “Company”) was legally established with the approval of the Ministry of Economic Affairs on March 4, 1995, with registered address at 669, Fuhsing 3rd Road, Hwa-Ya Technology Park, Kueishan District, Taoyuan City, Taiwan. The main operating activities of the Company and its subsidiary (the “Group”) are researching, developing, manufacturing and selling semiconductor products, and the import and export of its machinery, equipment and raw materials.

2. Financial Statements Issuance Procedures

The accompanying consolidated financial statements were approved and authorized for issue by the Board of Directors on March 15, 2016.

3. Application of New and Revised Standards and Interpretations

(1) Impact of adoption of new and amended standards and interpretations endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”)

The Group adopted the 2013 version of the IFRSs endorsed by the FSC (excluding IFRS 9 Financial Instruments) in preparing the stand-alone financial statements commencing from 2015. Related new, revised and amended standards and interpretations are listed below:

New, Revised or Amended Standards and Interpretations
Amendments to IFRS 1 “Limited Exemption from Comparative IFRS 7 Disclosures
for First time Adopters”
Amendments to IFRS 7 “Disclosures–Transfers of Financial Assets”
Amendments to IFRS 7 “Disclosures–Offsetting Financial Assets and Financial
Liabilities”
IFRS 10 “Consolidated Financial Statements”
IFRS 12 “Disclosure of Interests in Other Entities”
IFRS 13 “Fair Value Measurement”
Amendment to IAS 1 “Presentation of Items of Other Comprehensive Income”
Amendment to IAS 12 “Deferred Tax: Recovery of Underlying Assets”
Amendment to IAS 19 “Employee Benefits”

Effective Date
Prescribed by
**IASB **

July 1, 2010
July 1, 2011
January 1, 2013
January 1, 2013
(Investment entit~~y~~
took effect on
effective January
1, 2014)
January 1, 2013
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013

100

New, Revised or Amended Standards and Interpretations Amendment to IAS 27 “Separate Financial Statements” Amendment to IAS 32 “Offsetting Financial Assets and Financial Liabilities”	Effective Date Prescribed by IASB
	January 1, 2013 January 1, 2014

Except for the following items, the Group believes that the adoption of the aforementioned 2013 version of the IFRSs endorsed by the FSC did not have any significant effect on the Company’s stand-alone financial statements.

(a) Amendments to IAS 1 “Presentation of Financial Statements”

The amendments to IAS 1 require the Group to classify other comprehensive income as items presented, should be shown separated for each of the two categories: (a) items that could not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. The amendments also require the tax associated with items of other comprehensive income which presented before tax to be shown separately. Accordingly, the Group has amended the presentation of the statements of comprehensive income, and restated the comparative-period amounts.

(b) IFRS 12 “Disclosure of Interests in Other Entities”

The Group has increased its disclosures on information related to associates and joint ventures according to this standard. (Please refer to Note 6(7) for details.)

This ~~e s~~ tandard has changed the definition of fair value, provided a framework for fair value measurement, and prescribed specific guidance for fair value measurement disclosures. Accordingly, the Group has increased related disclosures on fair value measurements. In accordance with the transitional provision of this standard, the required additional disclosure for comparative information is no longer required. Although this standard has been postponed for adoption commencing 2015, management is not expecting that the adoption thereof will have significant influences on the fair value of the Group’s assets and liabilities.

(d) Amendments to IAS 19 “Employee Benefits”

The amendments to IAS 19 require the Group to calculate a “net interest” amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on plan assets used in current IAS 19. In addition, the amendments eliminate the accounting treatment of either the corridor approach or the immediate recognition of actuarial gains and losses to profit or loss when incurred, and instead require companies to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the other hand, is expensed immediately when incurred and is no longer amortized over the average period before meeting vesting conditions on a straight-line basis. In

101

addition, instead of recognizing liability and expense only when a demonstrable benefit commitment is made, the amendments require the Group to recognize liability and expense for termination benefits on (1) the date when the Group can no longer withdraw the offer of the benefit; or (2) the date when the Group recognizes related restructuring expense, whichever date is earlier. Moreover, the amendments also require a broader disclosure for defined benefit plans.

The Group has changed the accounting policy related to the measurement and expression of net defined benefit assets, pension cost, and actuarial gains or losses. With the elimination of the corridor approach, the Group has fully recognized the unrecognized actuarial gains or losses, and retrospectively adjusted the accumulated deficit as follows:

Consolidated statement of financial position:

December 31, 2014: Investments accounted for using equity method Current defined benefit liabilities Accumulated earnings	Reporting balances under 2010 version of IFRSs $ 28,347,485 674,994 10,778,122		Effect of IFRSs upgrade	Reporting balances under 2013 version of IFRSs	Reporting balances under 2013 version of IFRSs
	$		(2,285 ) (40,431 ) 38,146		28,345,200 634,563 10,816,268

Consolidated statement of comprehensive income:

For the year ended December 31, 2014: Operating costs Advertising expense Management expense R&D expense Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method Net income	Reporting balances under 2010 Effect of version of IFRSs IFRSs upgrade $ (26,939,061) 467 (588,624) 40 (1,398,471) 123 (1,377,610) 86 13,294,580 74 28,194,576 790	Reporting balances under 2013 version of IFRSs
		(26,938,594) (588,584) (1,398,348) (1,377,524) 13,294,654 28,195,366

102

(2) The IFRSs issued by IASB but not yet endorsed by FSC

New, revised and amended standards and interpretations for IFRSs issued by the IASB but not yet endorsed by the FSC are as follows:

New, Revised or Amended Standards and Interpretations
IFRS 9 “Financial Instruments”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of
Assets between an Investor and Its Associate or Joint Venture”
Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment
Entities: Applying the Consolidation Exception”
Amendments to IFRS 11 “Accounting for Acquisitions of Interests
in Joint Operations”
IFRS 14 “Regulatory Deferral Account”
IFRS 15 “Revenue from Contracts with Customers”
IFRS 16 “Leasehold”
Amendment to IAS 1 “Disclosure Initiative”
Amendment to IAS 7 “Disclosure Initiative”
Amendment to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”
Amendments to IAS16 and IAS 41 “Bearer Plants”
Amendments to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 27 “Equity Method in Separate Financial
Statements”
Amendments to IAS 36 “Recoverable Amount Disclosures for
Non-Financial Assets”
Amendments to IAS 39 “Novation of Derivatives and
Continuation of Hedge Accounting”
Annual Improvements Cycle 2010-2012 and 2011-2013
Annual Improvements to IFRSs 2012-2014 Cycle
Amendments to IFRIC Interpretation 21 “Levies”

Effective Date
Prescribed by IASB

January 1, 2018
Not yet announced by
IASB
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2018
January 1, 2019
January 1, 2016
January 1, 2017
January 1, 2017
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
July 1, 2014
January 1, 2016
January 1, 2014

The Group is evaluating the impact on its financial position and financial performance of the initial adoption of above mentioned standards or interpretations. The results thereof will be disclosed when the Group completes its evaluation.

103

4. Summary of Significant Accounting Policies

The following significant accounting policies are adopted in the accompanying consolidated financial statements. Except for the changes in accounting policies described in Note 3, the significant accounting policies have been applied consistently to all the reporting periods presented in these financial statements.

(1) Statement of compliance

The accompanying consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the “Regulations”) and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations (hereinafter referred to IFRS as endorsed by the FSC).

(2) Basis of preparation

Basis of measurement

The consolidated financial statements have been prepared on historical cost basis, except for the following material items in the statement of financial position.

(i) Available-for-sale financial assets measured at fair value.
(ii) The net defined benefit liabilities are measured as the fair value of the plan assets, less the present value of the defined benefit obligation.

Functional and presentation currency

The functional currency of the Group is determined based on the primary economic environment in which the entities operate. The consolidated financial statements are presented in New Taiwan Dollar, which is the Group’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(3) Basis of consolidation
1) The consolidated financial statements comprise the Company and its subsidiaries.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Total profit or loss of subsidiary applicable to the non-controlling interests is allocated to the non-controlling interests even if it results in the non-controlling interests to having a deficit balance.

104

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

Changes in the ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

2) List of subsidiaries included in the consolidated financial statements:

Investor The name of subsidiaries The Company NANYA TECHNOLOGY CORP. U.S.A The Company NANYA TECHNOLOGY CORP. Delaware The Company NANYA TECHNOLOGY CORP. H.K. The Company NANYA TECHNOLOGY CORP. Japan The Company PEI JEN Co., Ltd. The Company PIECEMAKERS TECHNOLOGY CORP. The Company SUMPRO ELECTRONICS CORP. NANYA TECHNOLOGY CORP. H.K. NANYA TECHNOLOGY CORP., Germany NANYA TECHNOLOGY CORP. H.K. NANYA TECHNOLOGY CORP. Shenzen	Business activity Sales of semiconductor products Design of semiconductor products Sales of semiconductor products Sales of semiconductor products Investment in enterprise Product design and sells Manufacture and sale of electronic components Sales of semiconductor products Sales of semiconductor products	Shareholdings	Shareholdings
		December 31, 2014 100.00% 100.00% 100.00% 100.00% 100.00% 58.34% 100.00% 100.00% 100.00%	December 31, 2015
			100.00% 100.00% 100.00% 100.00% 100.00% 55.26% 100.00% 100.00% 100.00%

3) Subsidiaries not included in the consolidated financial statements: None.

(4) Foreign currency

1. Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary assets and liabilities is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for the effective interest and payments during the period, and such assets and liabilities reported in foreign currency translated at the exchange rate at the end of the reporting period.

Foreign currency-denominated non-monetary assets and liabilities measured at fair value are retranslated to the functional currency at the exchange rate on the date when fair value was determined. Foreign currency-denominated non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on translation are recognized in profit or loss.

105

2. Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Group’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planed nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income.

(5) Classification of current and non-current assets and liabilities

An asset is classified as current under any one of the following conditions. All other assets are classified as non-current.

The asset is expected to be realized, or sold or consumed, during the Group’s normal operating cycle;
The asset is held primarily for the purpose of trading;
The asset is expected to be realized within twelve months after the balance sheet date; or
The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date.

A liability is classified as current under any one of the following conditions. All other liabilities are classified as non-current.

The liability is expected to be settled during the Group’s normal operating cycle;
The liability is held primarily for the purpose of trading;

106

The liability is due to be settled within twelve months after the balance sheet date; or
The Group does not have any unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.
(6) Cash and cash equivalents

Cash comprises cash on hand and cash in bank. Cash equivalents are 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 with maturities that go beyond 3 months and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes are classified under cash equivalents.

(7) Financial instruments

Financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instruments.

Financial assets

Financial assets are categorized into held-to-sold financial assets, loans and receivables.

(a) Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, interest income calculated using the effective interest method, dividend income, and foreign currency differences on available-for-sale debt instruments, are recognized in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in other income. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade-date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at cost after minus impairment loss, and are included in financial assets measured at cost.

107

Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Such dividend income is recognized in other comprehensive income.

(b) Loans and Receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market, which comprise accounts receivable and other receivables. Such assets are recognized initially at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, receivables other than are measured at amortized cost using the effective interest method, less any impairment losses other than except for short-term receivables for which the effect of discounting is immaterial. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade-date accounting.

Interest income from receivables is recognized in other income...

(c) Impairment of financial assets

Except for financial assets at fair value through profit or loss, a financial asset is assessed for impairment at the reporting date. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a ‘loss event’) that occurred subsequent to the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial assets that can be estimated reliably.

Objective evidence that financial assets are impaired includes delinquency or default (such as unpaid or delayed payment of interest or principal) by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an available-for-sale investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Objective evidence that receivables are impaired includes historical trends of collection and increasing level of overdue receivables which are collected beyond the credit term.

An impairment loss in respect of a financial asset measured at amortized cost is determined based on the excess of its carrying amount over the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

108

An impairment loss in respect of a financial asset is written off directly against its carrying amount, except for accounts receivable, in which an impairment loss is credited to an allowance account against the receivables. When a receivable is determined to be uncollectible, it is written off from the allowance account. Any subsequent recovery of a receivable written off is charged to the allowance account. Changes in the amount of the allowance accounts are recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss on a financial assets measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date.

Impairment losses and recoveries resulting from accounts receivable are recognized under general administrative and expenses in profit or loss. Impairment losses and recoveries resulting from financial assets other than accounts receivable are recognized in profit or loss, under other gain or loss of results from non-operating activities.

(d) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash inflow from the asset are terminated or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts.

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Financial liabilities and equity instrument
(a) Classification of liabilities or equity instruments

Debt or equity instruments issued by the Group are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized based on the proceeds received, net of direct issue costs.

Interest related to the financial liability is recognized in profit or loss under non-operating income and expenses.

(b) Other financial liabilities

Financial liabilities not classified as held for trading or designated as at fair value through profit or loss, which comprise short-term and long-term loans, and accounts and other payables, are measured at fair value, plus any directly attributable transaction costs at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss as finance costs.

A financial liability is derecognized when the contractual obligation thereon has been discharged or cancelled or has expired. The difference between the carrying amount of a financial liability derecognized and the consideration paid (including any non-cash assets transferred or liabilities assumed) is charged to profit or loss.

(d) Offsetting of financial assets and liabilities

Financial assets and liabilities are presented on a net basis when the Group has legally enforceable rights to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(8) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in acquiring the inventories, production costs and other costs incurred in bringing them to their existing location and condition. The cost of inventories is calculated using the weighted-average method. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

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Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(9) Non- current assets held for sale and discontinued operations

1. Non-current assets held for sale

Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale or distribution rather than through continuing use are reclassified as held for sale or held for distribution to owners. Immediately before classification as held for sale or held for distribution to owners, the assets, or components of a disposal Group are re-measured in accordance with the Group’s accounting policies. Thereafter, generally the assets or disposal groups are measured at the lower of their carrying amount and fair value less costs to sell.

Any impairment loss on a disposal group is initially allocated to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that impairment loss is not allocated to assets which are within the scope of IAS 36 – Impairments. Those assets of the disposal group will continue to be measured in accordance with the Group’s measurement accounting policies. Impairment losses on assets initially classified as held for sale or held for distribution to owners and any subsequent gains or losses on re-measurement are recognized in profit or loss. Gains are not recognized in excess of any cumulative impairment loss.

When the assets classified as held for sale or held for distribution to owners are intangible assets or property, plant and equipment, they are no longer amortized or depreciated, and any equity-accounted investee discontinues the use of the equity method.

2. Discontinued operations

An operation is classified as a discontinued operation if the operation is disposed or, reclassified as non- current assets held for sale. Such operation includes a separate major line of business, geographic area of operations, or a subsidiary acquired exclusively by the Group with a view of re-sale. Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale or held for distribution to owners, whichever comes first. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is restated as if the operation had been discontinued from the start of the comparative year

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(10)Investment in associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments to align their accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

Unrealized profits resulting from the transactions between the Group and an associate are eliminated to the extent of the Group’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

When the Group’s share of losses exceeds its interest in an associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

(11)Property, plant and equipment

(a) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of a self-constructed asset comprises material, direct labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that is eligible for capitalization. In additions, cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

Gain or loss arising from the disposal of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and is charged to profit or loss.

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(b) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure can be reasonably assessed, and will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(c) Depreciation

Depreciation of property, plant and equipment is provided over their estimated useful lives by using the straight-line method. The depreciation charge for each period is recognized in profit or loss.

If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

(i) Buildings: 25 years.
(ii) Machinery and equipment: 5 to 16 years.
(iii) Miscellaneous equipment: 3 to 15years.

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in accounting estimate.

(12)Leases

(a) Lesser

Asset under financing lease is recognized on a net basis as lease receivable. Initial direct costs incurred in negotiating and arranging an operating lease is added to the net investment in the leased asset. Finance income is allocated to each period during the lease term in order to produce a constant periodic rate of interest on the remaining balance of the receivable.

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Lease income from an operating lease is recognized as income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease is added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are confirmed.

(b) Lessee

Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the lease asset.

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized as expense on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the reduction of the lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term in order to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent rent is recognized as expense in the period in which it is incurred.

(13)Intangible Assets

Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates.

Other development expenditure is recognized as an expense when incurred.

The depreciable amount of capitalized development expenditure is determined after deducting its residual value. Amortization is recognized as an expense on a straight-line basis over the estimated useful lives of intangible assets from the date that they are made available for use.

The residual value, amortization period, and amortization method for an intangible asset with a finite useful life are reviewed at least at each fiscal year-end. Changes therein are accounted for as changes in accounting estimates.

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(14)Impairment of non-derivative financial assets

At each balance sheet date, an assessment is made whether there is any indication that an asset (including inventories, deferred tax assets, and other non-financial assets) may have been impaired. If any such indication exists, the recoverable amount of the asset is estimated. If it is not possible to determine the recoverable amount for the individual asset, then the Group will have to determine the recoverable amount for the asset's cash-generating unit (CGU).

The recoverable amount for individual asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Such reduction is treated as an impairment loss, which is charged to profit or loss.

The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amount of that asset is estimated. An impairment loss recognized in prior periods for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The increase in the carrying amount shall not exceed the carrying amount (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years.

(15)Treasury stock

Repurchased shares are recognized under treasury shares (a contra-equity account) based on their repurchase price (including all directly accountable costs), net of tax. Gain ~~o~~ n disposal of treasury shares is recognized under “Capital Reserve – Treasury Share Transactions”; Loss on disposal of treasury shares is offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such los ~~s i~~ s accounted for under retained earnings. The carrying amount of treasury shares is calculated using the weighted average of different types of repurchase.

If treasury shares are cancelled, “Capital Reserve – Share Premiums” and “Share Capital” are debited proportionately. Gain on cancellation of treasury shares is recognized under existing capital reserves arising from similar types of treasury shares; Loss on cancellation of treasury shares is offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such loss is accounted for under retained earnings.

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(16)Revenue recognition

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. For international shipments, transfer usually occurs upon loading the goods onto the relevant carrier at the port. Generally for such products, the customer has no right of return. For domestic sales, transfer occurs upon receipt by the customer.

(17)Employee benefits

(a) Defined contribution plan

Obligations for contributions to a defined contribution pension plan are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(b) Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of a defined benefit pension plan is calculated by estimating the discounted present value of future benefit that employees have earned in return for their service in the current and prior periods. Any unrecognized past service costs and the fair value of any plan assets are deducted from the aforementioned net obligation. The discount rate is the yield on the reporting date of government bonds that have maturity dates approximating the terms of the Group’s obligations and are denominated in the same currency in which the benefits are expected to be paid.

An actuarial calculation of pension costs and related liabilities is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, an asset is recognized, but the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to the plan. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.

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When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized immediately in profit or loss.

Remeasurement of the net defined benefit liabilities (assets), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest), and (3) the effect of the asset ceiling (if any, excluding interest), is recognized immediately in other comprehensive income. The amounts recognized in other comprehensive income can be reclassified to retained earnings or other equity. If the amounts recognized in other comprehensive income are transferred to other equity, they shall not be reclassified to profit or loss or recognized in retained earrings in a subsequent period.

Gains or losses on the curtailment or settlement of a defined benefit plan are also recognized as pension expenses when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, any change in the present value of the defined benefit obligation, and any related actuarial gains or losses and past service cost that were not previously recognized.

(c) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

(18)Share-based payment

The grant-date fair value of share-based payment awards granted to employee is recognized as employee expenses, with a corresponding increase in equity, over the period when employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions, and there is no true-up for the differences between expected and actual outcomes.

(19)Income taxes

Tax expense comprises current tax expense and deferred tax expense. Current and deferred taxes are included in profit or loss for the period, except to the extent that the tax arises from a business combination or a transaction or event which is recognized directly in equity or other comprehensive income.

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Current tax comprises the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date, and any adjustments for current tax of prior periods.

Deferred tax is recognized for the temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is recognized for all temporary differences, except to the extent that the deferred tax arises from:

(a) The initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit (loss).
(b) The investments in subsidiaries, branches and associates, and interests in joint ventures where it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates, based on tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to the period when the asset is realized or the liability is settled.

Deferred tax assets are offset against deferred tax liabilities only if:

(a) the Group has a legal enforceable right to set off current tax assets against current tax liabilities; and
(b) the deferred tax assets and the deferred liabilities relate to income taxes levied by the same taxation authority on either:
(i) The same taxable entity; or
(ii) Different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously; in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

A deferred tax asset is recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that the benefit of part or the deferred tax asset will be utilized.

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(20)Earnings per share

The basic earnings per share are calculated as the profit attributable to the ordinary shareholder of the Group divided by weighted-average number of ordinary shares outstanding. The diluted earnings per share is calculated based on the profit attributable to ordinary shareholders of the Group divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee stock options.

(21)Operating segments

An operating segment is a component of the Group that engages in business activities from which it may incur revenues and incur expenses. Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

5. Critical Accounting Judgments and Key Sources of Estimation Uncertainly

The consolidated financial statements are prepared in conformity with the IFRSs as endorsed by the FSC, under which, management make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in future periods.

Information about judgments made in applying the accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is discussed below. Please refer to the Note 6(10)(13) about the classification of lease.

Significant judgment, assumptions and estimation uncertainties were applied to the following:

(1) Reliability of deferred tax assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those deferred tax assets can be utilized. Management has applied subjective judgment and estimates in assessing the realization of deferred tax assets, including estimates of future revenue growth and profitability, Income Tax Holidays, the amount of tax credits that can be utilized and feasible tax planning strategies. Any changes in the global economic environment, the industry trends and relevant laws and regulations could result in significant adjustments to the deferred tax assets. Deferred tax assets of $846,648 and $876,064 have been recognized as of December 31, 2014 and 2015, respectively.

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6. Significant Accounts

(1) Cash and Cash Equivalents

Cash on hand－pretty cash Cash in bank－demand deposit account Cash equivalents: Cash in bank－time deposits Repurchase agreements collateralized by corporate bonds	December 31, 2014 $ 163 3,091,133 3,808,616 367,943 $ 7,267,855	December 31, 2015	December 31, 2015
			171 2,952,040 - 151,494 3,103,705

Refer to Note 6(22) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Group.

The Group’s certificate of time deposit and restricted bank deposit amounting to $375,900 and 376,883 which were pledged for the Group’s importation of cargo materials, research and development's plan being undertaken with the Ministry of Economic Affairs and loans payable, were reclassified to non-current assets as of December 31, 2014 and 2015, respectively.

(2) Non-current assets held for sale
(a) The non-current assets held for sale were as follows:

a) The non-current assets held for sale were as follows:
Listed securities: Listed shares of stock	December 31, 2014 $ 115,366	December 31, 2015 92,930
	$

－
(b) Sensitivity analysis equity price risk

The impact to other comprehensive income of hypothetical changes in prices of the equity securities on the reporting date were as follows:

securities on the reporting date were as follows:
Security price on reporting date Increase1% Decrease1%	For theyears ended December 31 2014 2015 Other comprehensive income (after tax) Other comprehensive income (after tax) $ 1,154 1,154 $ (1,154 ) (1,154 )
	2014 Other comprehensive income (after tax) $ 1,154 $ (1,154 )
	$ $
		(1,154 )

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(3) Investment in debt securities with no active market / Financial assets carried at cost－non-current

The Group purchased a two-year interest-free convertible bond of USD6,000 thousand issued by Memoright in August, 2015. The conversion rights embedded in the corporate bond are accounted for separately as the economic characteristics and risks are not specifically associated. The conversion rights of the corporate bond which are linked to unlisted preference shares of $9,340 － and the corporate bonds of $181,280 were accounted for as financial assets carried at cost － non-current and investment in debt securities with no active market non-current, respectively, as of December 31, 2015.

(4) Accounts Receivable and Other Receivables

Accounts receivable－non-related parties Accounts receivable－related parties Other receivables (including related parties) Less : allowance for doubtful receivables	December 31, 2014 $ 21,301 6,032,705 1,908,999 (8,889 ) $ 7,954,116		December 31, 2015
			- 5,451,688 1,749,976 (9,177 ) 7,192,487

Aging analysis of notes receivable, accounts receivable and other receivables:

December 31, 2014 December 31, 2015	Neither past due nor impaired $ 7,806,317 7,154,949	Past due but not impaired Within 30 days 31-60 days over 61 days 146,542 1,257 - 37,538 - -	Past due but not impaired Within 30 days 31-60 days over 61 days 146,542 1,257 - 37,538 - -	total
		Within 30 days 146,542 37,538	31-60 days 1,257 -
				7,954,116 7,192,487

Movements of the allowance for doubtful receivables were as follows:

Balance, beginning of year Reversal of impairment Balance, end of year	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
		2014 9,546 (657 ) 8,889	2015
	$ $		8,889 288 9,177

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(5) Inventories

Raw materials Work in progress In-transit inventory Merchandise Total	December 31, 2014 $ 145,517 2,719,794 2,140,021 143,072 $ 5,148,407	December 31, 2015
		214,271 2,723,567 2,998,347 13,155 5,949,340

Inventory cost charged to cost of goods sold amounted to $26,969,188 and $26,564,595 for the years ended December 31, 2014 and 2015, respectively. The loss from measuring inventories at net realizable value of $3,314 was also charged to cost of goods sold because the carrying value exceeded the net realizable value of inventories. As the net realizable value of inventories has increased because the circumstance that caused the inventory devaluation in prior period has improved, the Group recognized a gain from recovery in the value of inventories of $30,594 for the year ended December 31, 2014, which was debited to cost of goods sold as the net realizable value exceeded the carrying value of inventories.

(6) Available-for-sale assets

On March 14, 2014, the Board of Directors of the Company and the Provisional Shareholders' Meeting of the subsidiary, named “Sumpro Electronics Corporation”, decided to sell portion of the buildings, and all of the machines and element of Sumpro, and settled them on July 1,2014.

The impairment loss of $1,980 and $405,306, resulting from measuring at lower of other carrying amounts and fair values less costs to sell, respectively, was recognized in the 2014 consolidated statements of comprehensive income under other loss and discontinued operations loss.

(7) Investments Accounted for Using Equity Method

The components of the investments accounted for using equity method were as follows:

Associates	December 31, 2014 $ 28,345,200		December 31, 2015
	$		32,833,967

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(a) Associates

The information of the investments in a significant associate accounted for using equity method was as follows：

method was as follows：
Registration Country Associates Relationship	Percentage of ownership
	2014.12.31	2015.12.31
Inotera Memories, Inc The main supplier for raw material of the Company. Its primary operating activity is producing and selling of semiconductor products. Taiwan	24.42%	24.34%

The Group's capital surplus—equity of associates accounted for using equity method increased by $62,756 due to the recognition of compensation costs arising from employee stock options of Inotera Memories, Inc. for the year ended December 31, 2015.

On February 10, May 12, August 11 and November 11, 2015, the Company recognized capital surplus—equity of associates accounted for under the equity method amounting to $23,560 due to the increase of capital of Inotera Memories, Inc.by 22,595 thousand shares, for which the Group did not purchase additional shares in proportion to its original shareholding percentage.

The Group's capital surplus—equity of associates accounted for under the equity method increased by $62,979 due to the recognition of compensation costs arising from the employee stock options of Inotera Memories, Inc. for the year ended December 31, 2014.

－ The Group's capital surplus equity of associates accounted for under the equity method increased by $2,137,138 due to the increase in capital of 71,714 thousand shares on February 13, May 8 , August 6, 2014 and November 11. Additionally, the depositary receipts of 40,000 units issued by Inotera Memories, Inc. on May 15, 2014, for which the Company did not purchase the depositary receipts in proportion to its original shareholding percentage.

The following is the aggregated financial information of the major associate that has already been modified to the associates' consolidated financial statements based on the IFRS as endorsed by FSC to reflect the fair value adjustments made at the time of acquisition and adjustment for accounting policy variations.

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The financial information of Inotera Memories Inc. was summarized as follows:

Current assets Non-current assets Current liabilities Non-current liabilities Net assets Operating income Net income Other comprehensive income Total comprehensive income Share of the equity of the associate at January 1, Total comprehensive income allocated to the Group of investment in associate at December 31, Share of the equity of the associate at December 31, Add: Realized gain fromdisposal of fixed assets Recognition of compensation costs arising from employee stock options Capital surplus due to acquisition of shares not proportionate t~~o~~ original holding ratio Less: Others Carrying amount of equity of the major associate	December 31, 2014 December 31, 2015 $ 56,814,358 41,012,811 80,987,748 116,871,496 (17,272,884) (12,325,004) (4,050,738 ) (10,237,028 ) $ 116,478,484 135,322,275 December 31, 2014 December 31, 2015 $ 82,570,966 60,762,323 52,913,068 18,077,421 (7,316 ) (11,365 ) $ 52,905,752 18,066,056 For the year ended December 31, 2014 2015 $ 12,851,698 28,345,200 13,294,654 4,404,923 26,146,352 32,750,123 540 270 62,979 62,756 2,137,138 23,560 (1,809 ) (2,742 ) $ 28,345,200 32,833,967	December 31, 2014 December 31, 2015 $ 56,814,358 41,012,811 80,987,748 116,871,496 (17,272,884) (12,325,004) (4,050,738 ) (10,237,028 ) $ 116,478,484 135,322,275 December 31, 2014 December 31, 2015 $ 82,570,966 60,762,323 52,913,068 18,077,421 (7,316 ) (11,365 ) $ 52,905,752 18,066,056 For the year ended December 31, 2014 2015 $ 12,851,698 28,345,200 13,294,654 4,404,923 26,146,352 32,750,123 540 270 62,979 62,756 2,137,138 23,560 (1,809 ) (2,742 ) $ 28,345,200 32,833,967	December 31, 2015
	$ $
		2014 12,851,698 13,294,654 26,146,352 540 62,979 2,137,138 (1,809 ) 28,345,200
	$ $

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(8) Subsidiary and acquisition of non-controlling interests

(a) Acquisition of non-controlling interests

On March 27, 2014, a subsidiary of the Company, Sumpro Electronics Corporation (Sumpro), redeemed its common shares by paying $69,750 in cash, which increased the Group’s shareholding percentage in its subsidiary from 94% to 100%. On September 26, 2014, the treasury shares of stock of 15,000 thousand shares repurchased by the subsidiary were cancelled due to a resolution approved by the board of directors of Sumpro. The record date for all of these capital decrease transactions were set on September 26, 2014. These transactions resulted in the following changes to the Group’s ownership interest in its subsidiaries and associates:

Acquisition of non-controlling interests (carrying amount) Consideration paid for the non-controlling interests Differences between purchase consideration and book value of the shares Decrease in capital surplus Decrease in retained earnings	For the year ended December 31, 2014	For the year ended December 31, 2014
	$ $ $ $	9,787 (69,750 ) (59,963 ) (36,311) (23,652 ) (59,963 )

(b) Disposal of certain subsidiaries’ shares without losing control

On March 18, 2014, the Group sold for $22,104 its ownership of 12.76 percent shares of a subsidiary, PieceMakers Technology, Inc. This resulted in the following:

Book value of non-controlling interests disposed of. Proceeds from disposal of non-controlling interests Decrease in capital surplus- the difference between the actual selling price and book value of the equity shares sold	For the year ended December 31, 2014 Piecemakers Corporation	For the year ended December 31, 2014 Piecemakers Corporation
	$ $	22,939 (22,104 ) 835

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(9) Property, Plant and Equipment

The cost and depreciation of the property, plant and equipment of the Group as of and for the years ended December 31, 2014 and 2015 were as follows:

Cost: Balance as of January 1, 2014 Additions Disposals Reclassification Reclassification to non-current assets held for sale Reclassification to prepaid expense Effect of exchange rate change Balance as of December 31, 2014 Balance as of January 1, 2015 Additions Disposals Reclassification Effect of exchange rate change Balance as of December 31, 2015 Accumulated depreciation / impairment: Balance as of January 1, 2014 Depreciation for the period Reversal of impairment loss Impairment loss Disposals Reclassification Reclassification to non-current assets held for sale Reclassification to prepaid expense Transferred to expense Effect of exchange rate change Balance as of December 31, 2014 Balance as of January 1, 2015 Depreciation for the period Reversal of impairment loss Disposals Reclassification Effect of exchange rate change Balance as of December 31, 2015 Carrying amounts: Balance as of December 31, 2014 Balance as of December 31, 2015		Land		Building 5,241,798 - (781) - (1,042,934) - (118 ) 4,197,965 4,197,965 83 (572) - 64 4,197,540 1,602,429 180,570 - - (780) - (640,954) - - (10,188 ) 1,131,007 1,131,007 160,182 - (572) - 32 1,290,719 3,066,888 2,906,821	Machinery and equipment 121,096,948 1,201,197 (3,494,331) 1,168,672 (2,220,593) (83,564) 950 117,669,279 117,669,279 3,977,383 (195,366) 3,090,899 1,965 124,544,160 73,947,602 5,120,870 (12,986) - (3,485,597) 205,935 (765,287) (17,720) 12,985 333 75,006,135 75,006,135 5,447,674 - (194,076) 14,843 (246) 80,274,330 42,663,144 44,269,830	Other equipment 1,992,068 28,328 (268,541) (191,902) - (11,580) 185 1,548,558 1,548,558 17,063 (121,651) (15,469) (499 ) 1,428,002 1,525,667 114,637 (19) 973 (252,364) (205,935) - 2,374 20 10,587 1,195,940 1,195,940 62,101 4,204 (117,998) (14,893) 850 1,115,400 352,618 297,748	Under construction 529,640 4,526,483 - (976,770) - - - 4,079,353 4,079,353 271,280 - (3,075,430) - 1,275,203 - - - - - - - - - - - - - - - - - - 4,079,353 1,275,203	Total 129,874,378 5,756,008 (3,763,653) - (3,263,527) (95,144) 1,017 128,509,079 128,509,079 4,265,809 (317,589) - 1,530 132,458,829 77,075,698 5,416,077 (13,005) 973 (3,738,741) - (1,406,241) (15,346) 13,005 732 77,333,152 77,333,152 5,669,957 4,204 (312,646) - 636 82,635,303 51,175,927 49,763,526
	$ $ $ $ $ $ $ $ $ $	1,013,924 - - - - - - 1,013,924 1,013,924 - - - - 1,013,924 - - - - - - - - - - - - - - - - - - 1,013,924 1,013,924

(a) Collaterals

Please refer to Note 8 for details of the Group's property, plant and equipment pledged or collateralized as security for long-term loans or lines of credit.

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(b) Leased Assets

Please refer to Note 6(13) for the further description of finance lease liabilities.

Property, plant and equipment under construction
Capitalized interest (charged to construction in progress) Capitalized interest rates	For theyears ended December 31,
		2014 - -	2015
	$		33,587 2.10%~2.32%

(10) Lease receivables
(a) On June 18, 2009, the Group signed an amended long-term lease agreement with Inotera Memories, Inc. and MeiYa Technology Corp. on the lease of building, facilities and land located on 348, 348-1 and 348-3, Hwa-Ya Section, Kueishan District, Taoyuan City. This amended lease agreement, which took effect retroactively from January 1, 2009, includes the renewal term. Initial lease term is from January 1, 2009 to December 31, 2018. However Inotera Memories, Inc. is entitled to renew this amended lease agreement for an unlimited number of consecutive additional terms of five years each, by providing a written notice with the intention to renew the lease term commencing from January 1, 2019. In addition, Inotera Memories, Inc. has an exclusive option to purchase the leased assets for a total purchase price of US$50,000 thousand on and after January 1, 2024. Also, the rental receivable for the entire year of 2009 has been waived. Initial yearly rentals for the leased building (including facilities and land) were US$13,010 thousand and US$1,990 thousand, respectively from January 1, 2010 to December 31, 2018; the first yearly renewal rentals for the leased building (including facilities and land) will be US$8,010 thousand and US$1,990 thousand, respectively, from January 1, 2019 to December 31, 2023; the subsequent yearly renewal rentals for the leased building (including facilities and land) will be US$10 thousand and US$1,990 thousand commencing from January 1, 2024. The amended lease agreement for the building (including facilities) is treated as a capital lease because (a) the present value of the periodic rental payments made since the inception date is at least 90% of the market value of the leased assets and (b) the lease term is equal to 75% or more of the total estimated economic life of the leased assets. The land is treated as an operating lease.
(b) The total lease receivable from the capital lease of the building (including facilities) was $5,185,620; the implicit interest rate was 10.56%. The cost of the leased assets at the beginning of the lease period was $2,656,223. The difference was recognized as unrealized interest revenue of $2,529,397. For the years ended December 31, 2014 and 2015, the Group recognized the interest revenue of $225,187 and $202,759, respectively, from the amortization of unrealized interest revenue.

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The details of lease receivables were as follows:

	December 31, 2014 Gross investment in the lease Unearned finance income Present value of minimum lease payments receivable 429,330 202,759 226,571 1,552,320 544,414 1,007,906 1,057,320 181,420 875,900 3,038,970 928,593 2,110,377 226,571 1,883,806 $ 2,110,377	December 31, 2014 Gross investment in the lease Unearned finance income Present value of minimum lease payments receivable 429,330 202,759 226,571 1,552,320 544,414 1,007,906 1,057,320 181,420 875,900 3,038,970 928,593 2,110,377 226,571 1,883,806 $ 2,110,377	December 31, 2015	December 31, 2015	December 31, 2015
	Gross investment in the lease 429,330 1,552,320 1,057,320 3,038,970	Unearned finance income 202,759 544,414 181,420 928,593 $	Gross investment in the lease 429,330 1,387,320 792,990 2,609,640	Unearned finance income 177,867 444,864 103,103 725,834 $	Present value of minimum lease payments receivable
$ $					251,463 942,456 689,887
					1,883,806
					251,463 1,632,343
					1,883,806

(11) Short-term Loans

Short-term borrowings consisted of the following:

Unsecured bank loans Interest rate Maturity date		December 31, 2015
		$ 3,306,000
		1.15%~1.6%
		February 5, 2016 to 12, 2016

(12) Long-term Loans

Long-term loans consisted of the following:

	December 31, 2014	December 31, 2014		Amount
Currency NTD NTD	Interest rate range Expiration 1.987%~2.092% 104~105 2.093%~2.439% 104~108 December 31, 2015
			$ $ $	800,000 15,580,000 (3,900,000 ) 12,480,000 10,435,000
Currency NTD NTD	Interest rate range 1.271%~2.014% 2.3270%	Expiration 105~106 108		Amount
			$ $ $	1,200,000 11,985,000 (500,000 ) 12,685,000 8,106,000

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(a) Issuance and redemption of loans

(i) The Group signed a syndicated loan agreement with Bank of Taiwan, the managing bank, and 13 other banks (here in after referred to as ‘‘the Company of banks”) for a syndicated loan with a credit line of $12,000,000 on January 2, 2014, and applied for appropriation of loans of $6,400,000 on January 28, 2014, $3,650,000 on July 28, 2014, and $1,950,000 on October 27, 2014, respectively. This loan bears interest of 90-day commercial paper rate, plus, an annual interest rate of 1.1% in monthly payments. Additionally, the first installment payment of the principal is payable on due date, with the rest payable in 5 semi-annual installments. According to the agreement, the borrower should maintain a balance of no less than 3% of the original credit limit in the specified bank account two months from the first credit approval ~~d~~ ate.

Also, the Group is required to maintain certain financial ratios which should be based on its semi-annual and annual consolidated financial statements and calculated by the managing bank every 6 months starting from the end of year 2013 or when the managing bank deems necessary. In the event that any of the financial covenants below is breached, the Group is required to submit a formal letter to the managing bank at least three months after submitting the semi-annual and annual consolidated financial statements to syndicated banks, so that the managing bank can convene a meeting of the Banks to discuss the aforesaid breach and to resolve whether a waiver of the breach will be granted. The required financial ratios are as follows:

I. Financing payables to related parties: not less than $35,000,000.

In July 2015, the Company signed a supplementary contract with a group of banks, agreeing to delete this financial covenant.

II. Liability Ratio (total liabilities to total net equity and tangibles assets, plus, financing payables to related parties): not more than 200%.
III. Tangible net equity, plus, other financing payables to related parties: not less than $45,000,000 in the semi-annual and annual financial statements of 2013, and $50,000,000 for each year beginning 2014.

The Group was in compliance with all of the aforementioned covenants as of and for the years ended December 31, 2014 and 2015.

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(ii) The Group signed a syndicated loan agreement with Bank of Taiwan, the managing bank, and 7 other banks for a credit line of $18,000,000 in the form of credit loan on November 9, 2009. According to the above syndicated loan agreement, the Group was required to comply with certain financial covenants by maintaining certain financial ratios. In the event that any of the financial covenants below is breached, the Group is required to cure the breach, no later than the end of November in the relevant calendar year, for a breach in respect of any semi-annual consolidated financial statements, and for a breach in respect of any annual consolidated financial statements, no later than the end of June of the following calendar year, or to submit a formal letter to the managing bank at least two months prior to the expiration of the Remedial Period, so that the managing bank can convene a meeting of the Banks to discuss the aforesaid breach and to resolve before the expiration of the Remedial Period on whether a waiver of the breach will be granted. These financial covenants are as follows:
I. Current Ratio (total current assets to total current liabilities): not less than one (1) to one (1).
II. Interest Coverage Ratio (EBITDA to interest expenses): shall not be less than three (3) to one (1).
III. Leverage Ratio (total liabilities, plus, contingent liabilities to tangible net worth): not higher than one and a half (1.5) to one (1).

On November 28, 2014, the syndicated banks formally agreed to further waive the Group’s obligation to comply with its financial loan covenants under the syndicate loan relating to the financial statements for the six-month period ended June 30, 2014. This syndicated loan was repaid on January 28, 2015.

(b) Collaterals for bank loans

Please refer to Note 8 for information on assets pledged as loan collateral by the Group.

(13) Finance lease liabilities

(a) The Group signed a long-term lease agreement with Inotera Memories, Inc. to lease out a portion of the building and land (including supplemental equipment) located at No. 667, Fuhsing 3rd Road, Hwa-Ya Technology Park, Kueishan Dist., Taoyuan City. The lease term covers a total lease period of 354 months commencing from July 1, 2005, and will expire on December 31, 2034 (including the period when the lease is automatically extended). The monthly rentals for the lease of building and land (including supplemental equipment) were $2,058 and $310, respectively. The lease of the building is treated as a finance lease. However, the lease of the land is treated as an operating lease.

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(b) The lease of the building is treated as a finance lease with implicit interest rate of 5.88%. The net carrying value of leased assets and the initial total amount of lease payable for the finance lease of the building was $345,637.
(c) The rental expenses from the lease of land which was treated as an operating lease amounted to $3,719 and $3,719 for the years ended December 31, 2015 and 2014, respectively. These expenses were fully paid as of December 31, 2015 and 2014.

	December 31, 2014	December 31, 2014	December 31, 2014	December 31, 2014	December 31, 2015	December 31, 2015	December 31, 2015
	Future minimum lease payments	Interest		Present value of minimum lease payments	Future minimum lease payments 24,698 98,792 345,770 469,260	Interest 16,371 60,142 110,497 187,010	Present value of minimum lease payments
$ $	24,698 98,792 370,468 493,958	16,845 62,343 124,667 203,855	7,853 36,449 245,801 290,103 $ 7,853 282,250 $ 290,103				8,327 38,650 235,273
							282,250
							8,327 273,923
							282,250

(14) Employee Benefits
(a) Defined benefit plan

The movements in the present value of the defined benefit obligations and fair value of plan assets were as follows:

assets were as follows:
Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2014 $ 1,052,002 (417,439 ) $ 634,563	December 31, 2015
	$ $		1,189,853 (433,993 ) 755,860

The Group has established an employee defined benefit retirement plan covering full-time employees. Under this plan, contributions are made to an independent fund that is deposited with Bank of Taiwan. Employees are eligible for retirement and payments of retirement benefits are based on years of service and the average salary for the last six months before the employee’s retirement according to the R.O.C. Labor Standards Law.

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(i) Composition of plan assets

The Labor Pension Fund Supervisory Committee manages the Group’s pension fund which is being funded according to the Labor Standards Law. Under the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, this fund is required to distribute minimum income but such minimum income shall not be less than the interest income derived from two-year time deposit with the local banks.

As of December 31, 2015, the Group’s pension fund with Bank of Taiwan amounted to $433,993. Please refer to the related information published on the website of the Labor Pension Supervisory Committee concerning the utilization of the labor pension fund, related yield rate and its allocation.

(ii) Movements in present value of the defined benefit obligations

Movements in present value of the defined benefit obligations were as follows:

Defined benefit obligation at January 1, Current service and interest costs Remeasurement of net defined benefit liabilities－ actuarial losses arising from change in financial assumptions Benefits paid Defined benefit obligation at December 31,	For the years ended December 31, 2014 2015 $ 1,232,558 1,052,002 2,897 26,559 (54,969) 134,821 (154,494 ) (23,529 ) $ 1,052,002 1,189,853	For the years ended December 31, 2014 2015 $ 1,232,558 1,052,002 2,897 26,559 (54,969) 134,821 (154,494 ) (23,529 ) $ 1,052,002 1,189,853	For the years ended December 31, 2014 2015 $ 1,232,558 1,052,002 2,897 26,559 (54,969) 134,821 (154,494 ) (23,529 ) $ 1,052,002 1,189,853	For the years ended December 31, 2014 2015 $ 1,232,558 1,052,002 2,897 26,559 (54,969) 134,821 (154,494 ) (23,529 ) $ 1,052,002 1,189,853
		2014 1,232,558 2,897 (54,969) (154,494 ) 1,052,002
	$ $			1,052,002 26,559 134,821 (23,529 ) 1,189,853

(iii) Movements in fair value of defined benefit plan assets

Fair value of plan assets at January 1, Interest income Remeasurement of net defined liabilities－return on plan assets (excluding interest income) Contributions from employer Benefits already paid by the plan Fair value of plan assets at December 31,	For the years ended December 31, 2014 2015 $ 393,104 417,439 7,593 8,417 4,439 2,566 13,484 13,565 (1,181 ) (7,994 ) $ 417,439 433,993	For the years ended December 31, 2014 2015 $ 393,104 417,439 7,593 8,417 4,439 2,566 13,484 13,565 (1,181 ) (7,994 ) $ 417,439 433,993	For the years ended December 31, 2014 2015 $ 393,104 417,439 7,593 8,417 4,439 2,566 13,484 13,565 (1,181 ) (7,994 ) $ 417,439 433,993	For the years ended December 31, 2014 2015 $ 393,104 417,439 7,593 8,417 4,439 2,566 13,484 13,565 (1,181 ) (7,994 ) $ 417,439 433,993
		2014 393,104 7,593 4,439 13,484 (1,181 ) 417,439		2015
	$ $			417,439 8,417 2,566 13,565 (7,994 ) 433,993

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(iv) Expenses recognized in profit or loss

Current service costs Net interest income of net defined benefitliabilities Expected rate of return for the plan asset Operating costs Expenses costs	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
	$ $ $ $	2014 5,488 23,419 (7,593 ) 21,314 13,914 7,400 21,314		2015
				5,587 20,972 (8,417 ) 18,142 12,672 5,470 18,142

(v) Remeasurement of net defined benefit liabilities (assets) recognized in other comprehensive income

Balance of January 1 Recognized during the period Balance of December 31	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
	$ $	2014 - (59,408 ) (59,408 )		2015
				(59,408) 109,771 50,363

(vi) Actuarial assumptions

Discount rate Future salary increases	For the years ended December 31,	For the years ended December 31,
	2014 2.00 % 2.50 %	2015 1.50 % 2.50 %

Based on the actuarial report, the Group is expected to make contributions of $13,563 to the defined benefit plans in 2016.

The weighted average duration of the defined benefit plan is 22 years.

(vii)Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Group’s management use judgments and estimates in determining the related actuarial assumptions at balance sheet date, including discount rate, expected return on plan assets and future salary increases. Any changes in actuarial assumptions may significantly impact the present value of the defined benefit obligation.

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As of December 31, 2015, the effects of the present value of the defined benefit obligation arising from changes in principal actuarial assumptions were as follows:

December 31, 2015 Discount rate (change 0.25%) Future salary increases (change 1%)	Effect of defined benefit obligations	Effect of defined benefit obligations
	Increase Amount $ 58,570 250,793	Decrease Amount
		(55,386) (204,793)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The sensitivity analysis adopts the same methods for determining the defined benefit assets at balance sheet date.

The same methods and assumptions are adopted in the two-year sensitivity analysis.

(b) Defined contribution plan

The Group contributes an amount equal to 6% of the employee’s monthly wages to the Labor Pension personal account of the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act, under which, the Group is not required to bear the regulated or putative obligation subsequent to the payment of fixed-rate contribution.

The Group’s pension costs under the contribution pension plan amounted to $121,332 and $112,567 for the years 2014 and 2015, respectively.

(15) Income Tax

(a) The Group’s income tax expense recognized for the years ended December 31, 2014 and 2015 were as follows:

were as follows:
Current income tax expense Deferred income tax expense Income tax expense		For the years ended December 31, 2014 2015 76,651 505,678 2,404,548 - 350 2,481,199 506,028
		2014 76,651 2,404,548 2,481,199
	$ $
			506,028

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The Group’s income tax expense recognized in other comprehensive income for the years ended December 31, 2014 and 2015 were as follows:

ended December 31, 2014 and 2015 were as follows:
Items that could not be reclassified subsequently to profit or loss: Remeasurement of net defined benefit plan		For the years ended December 31, 2014 2015 - 22,484
		2014 -
	$

The Group’s income tax (benefit) expense calculated at the statutory income tax rate on the financial reporting income before income taxes was reconciled to the income tax (benefit) expense as follows:

Income tax calculated based on local tax rate Effect of foreign tax rate change Tax effect o~~f~~ ~~f~~ive -year tax holiday Tax effect of expired loss carryforward benefit Tax effect of permanent differences Tax effect of unrecognized changes of temporary difference Tax effect of unrecognized current-year loss carryforward Expired tax holiday Tax effect of unrecognizedcurrent-year tax holiday Overstatement in prior year’s income tax 10% surtax on undistributed earnings Other Total	For theyears ended December 31, 2014 2015 $ 5,033,870 3,021,954 39,428 3,428 (1,025,917) (685,630) 153,292 - (2,072,666) (764,006) (71,508) (2,333) 423,102 (1,563,741) 837,620 - (847,181) - 13,951 14,248 - 484,766 (2,792 ) (2,658 ) $ 2,405,504 484,691	For theyears ended December 31, 2014 2015 $ 5,033,870 3,021,954 39,428 3,428 (1,025,917) (685,630) 153,292 - (2,072,666) (764,006) (71,508) (2,333) 423,102 (1,563,741) 837,620 - (847,181) - 13,951 14,248 - 484,766 (2,792 ) (2,658 ) $ 2,405,504 484,691
		2014 5,033,870 39,428 (1,025,917) 153,292 (2,072,666) (71,508) 423,102 837,620 (847,181) 13,951 - (2,792 ) 2,405,504
	$ $

(b) Deferred income tax assets and liabilities
(i) Unrecognized deferred income tax assets

The components of unrecognized deferred income tax assets of the Group were as follows:

follows:
Deductible temporary differences Net operating loss carry forwards	December 31, 2014 $ 61,046 19,390,856 $ 19,451,902	December 31, 2015
		500 17,885,328
		17,885,828

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The ROC Income Tax Act allows tax losses, as assessed by the tax authorities, to offset taxable income over a period of ten years for local tax reporting purposes. The aforementioned tax losses are not recognized as deferred tax assets as the Group estimates that the taxable income in the future will not be sufficient for covering temporary differences.

As of December 31, 2015, under ROC Income Tax, the unused loss carry forward benefits available to the Group were as follows:

Year 2008 2009 2010 2011 2012 2013 2014 2015 Total	Unused loss carry forward $ 6,607,978 19,737,350 12,439,512 30,344,487 30,123,062 4,422,499 1,526,508 6,417 $ 105,207,813	Expiry year
	$ $	2018 2019 2020 2021 2022 2023 2024 2025 2026

(ii) Recognized deferred tax liabilities and assets

The changes in recognized deferred tax assets and liabilities in 2014 and 2015 were as follows:

Deferred tax liabilities ：

Balance as of January 1, 2014 Debit income statement Balance as of December 31, 2014 Balance as of January 1, 2015 Debit income statement Balance as of December 31, 2015	Unrealized foreign exchange gain $ - 59 $ 59 $ 59 6,838 $ 6,897	Others 183 34 217 217 444 661		Total 183 93 276 276 7,282 7,558
	$ $ $ $

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Deferred tax assets：

Balance as of January 1, 2014 Credit income statement Balance as of December 31, 2014 Balance as of January 1, 2015 Credit debit income statement Debit equity Balance as of December 31, 2015	Operating loss carryforwards $ 3,163,111 (2,316,349 ) $ 846,762 $ 846,762 (68,859) - $ 777,903	Others 87,992 (88,106 ) (144 ) (144) 75,791 22,484 98,161		Total 3,251,103 (2,404,455 ) 846,648 846,648 6,932 22,484 876,064
	$ $ $ $

The unutilized loss carry forward benefits as of December 31, 2015 and their expiry year for which deferred tax assets were recognized were as follows:

Year 2008		Unused loss carry forward 4,575,902	Expiry year
	$		2018

(iii) The Group's income tax returns have been examined by the ROC tax authority through 2013.

(iv) Information related to the integrated income tax were as follows:

December 31, 2014 Undistributed earnings in 1997 and prior year $ - Undistributed earnings in 1998 and thereafter 10,816,268 10,816,268 Imputation credit account balance $ 73,483 2014(actual) Tax deduction ratio for earnings distribution to ROC residents 0.68 %	December 31, 2014 Undistributed earnings in 1997 and prior year $ - Undistributed earnings in 1998 and thereafter 10,816,268 10,816,268 Imputation credit account balance $ 73,483 2014(actual) Tax deduction ratio for earnings distribution to ROC residents 0.68 %	December 31, 2014 Undistributed earnings in 1997 and prior year $ - Undistributed earnings in 1998 and thereafter 10,816,268 10,816,268 Imputation credit account balance $ 73,483 2014(actual) Tax deduction ratio for earnings distribution to ROC residents 0.68 %	December 31, 2014 Undistributed earnings in 1997 and prior year $ - Undistributed earnings in 1998 and thereafter 10,816,268 10,816,268 Imputation credit account balance $ 73,483 2014(actual) Tax deduction ratio for earnings distribution to ROC residents 0.68 %		December 31, 2015
					- 21,913,621 21,913,621 37,556 2015 (estimated)



			0.68 %		0.17 %

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Under the integrated income tax system, the above imputation credit account and creditable ratio were calculated according to the formal interpretation No.10204562810 issued by Taxation Administration, Ministry of Finance, R.O.C. on October 17, 2013.

The stockholders approved a resolution during their meetings on August 30, 2007, and June 25, 2008, allowing the Group to avail of the Income Tax Holiday for qualifying investment projects relating to capital increase for semiconductor manufacturing under Article 9 of the Statute for Upgrading Industries. On July 7, 2010, the Group was approved by the Ministry of Finance, R.O.C. to avail of the tax holiday for five years commencing from January 1, 2011.

Capital increase for expansion Duration of Income Tax Holiday

Capital increase for Semiconductor Manufacturing January 2011 to December 2015

(16) Capital and other equity

As of December 31, 2014 and 2015, the Group’s government registered total authorized capital both amounted to $300,000,000 with $10 par value per share, and total paid-up common stock amounted to $24,095,278, and 24,285,658 respectively. All issued shares were paid up upon issuance.

(a) Common stock

In 2015, the board of directors approved to increase the Group’s common shares arising from the exercise of stock options under the Employee Stock Option Plan (ESOP). Accordingly, the Group issued 4 thousand and 19,034 thousand common shares of stock, at an issuance premium price of $81.9 and $55 per share, respectively, with total values amounting to $328 and $1,046,870, respectively. All issued shares were paid up upon issuance. Also, the process for the registration thereof was completed.

In 2014, the board of directors approved to increase the Group’s common shares arising from the exercise of stock options under the Employee Stock Option Plan (ESOP). Accordingly, the Group issued 2,392 thousand and 11,192 thousand common shares of stock, at discounted issuance price of $5.5 per share and issuance premium price of $55 per share, with a total value amounting to $13,156 and 615,560. All issued shares were paid up upon issuance. Also, the process for the registration thereof was completed.

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On March 22, 2012 and October 24, 2012, the board of directors approved to carry out a private placement of common shares through the issuance of 3,800,000 thousand common shares and 5,294,118 thousand common shares after reducing the Company’s capital to 380,319 thousand common shares and 529,856 thousand common shares, respectively, at a discounted issuance price of $1.7 per share. This capital increase was approved by the Securities and Futures Bureau (SFB). The effective date for the capital increase was March 7, 2012 and May 28, 2013. Also, the process for the registration thereof was completed. According to the Securities and Exchange Act, the transfer of such privately placed common shares within three years from the delivery date is forbidden, except when the transferees conform to Article 43-8 of the Securities and Exchange Act.

The movements of shares outstanding for the years ended December 31, 2014 and 2015 were as follows:

	Common Shares 2014 2015 23,960,851 2,409,528 13,584 19,038 (21,564,907 ) - 2,409,528 2,428,566	Common Shares 2014 2015 23,960,851 2,409,528 13,584 19,038 (21,564,907 ) - 2,409,528 2,428,566
	2014 23,960,851 13,584 (21,564,907 ) 2,409,528
$ $
		2,428,566

(b) Capital reduction

On March 14, 2014, the board of directors approved to carry out a capital reduction to cover the deficit. The Company has covered its accumulated deficits amounting to $233,081,650 for the year ended December 31, 2013. In accordance with the relevant provisions of the company law, the Company reduced its capital amounting to $215,649,073 by cancelling its shares of stock of 21,564,907 thousand shares, to cover its accumulated losses. This capital reduction was approved by the letter No. 1030022998 issued by SFB on June 24, 2014, under which, the date of this capital reduction was set on June 27, 2014. On August 8, 2014, the board of directors of the Company adopted to set September 1, 2014, as the base date for the amendment of shareholding of each shareholder after this capital reduction. Also, the process for the registration thereof was completed.

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(c) Capital surplus

The components of capital surplus were as follows:

Change in recognized shares of subsidiaries and associates accounted for using equity method Employee stock option plans Premium from exercise of employee stock options Other	December 31, 2014 $ 4,977,555 879,953 520,428 - $ 6,377,936	December 31, 2015
	$ $	5,061,605 1,372,476 1,377,246 1,374 7,812,701

In accordance with the Companies Act, realized capital reserves can only be reclassified as share capital or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the capitalization of capital reserves every year shall not exceed 10 percent of the paid-up capital.

(d) Retain earning

(i) Legal reserve

In accordance with the Companies Act, 10% of net income should be set aside as legal reserve, until it is equal to share capital. When the Group incurs no loss, it may, in pursuant to a resolution to be adopted by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by cash. Only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed.

(ii) Earnings appropriation and distribution

According to the rules of the Group’s articles and Company Act in the Republic of China, the annual net income, after providing for income tax and covering the losses of previous years, is first set aside for legal reserve at the rate of 10% thereof. In addition, a special reserve shall also be set aside in accordance with applicable laws and regulations based on business need. The remainder plus the undistributed earnings of the previous years are distributed or left undistributed for business purposes according to the resolution of the stockholders ‘dividend distribution plan, which are initially proposed by the Board of Directors and adopted by the shareholders in the annual stockholders’ meeting..

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The Group appropriates 0.1% to 15% of the distributable earnings after dividends as employees’ bonuses, which are recognized as the Group’s expenses in the year earnings are incurred. The people who are entitled to receive employee bonus include the employees of subsidiaries who meet certain condition set by the board of directors.

As it belongs to a highly capital-intensive industry with strong growth potential, the Group adopts a dividend distribution policy which is in line with its plans for product line expansion and the demand for funds. This policy requires that the distribution of cash dividends shall be equal to at least fifty percent (50%) of the Group’s total dividend distribution every year.

In accordance with the amended Company Act of May, 2015, employee bonus is no longer subject to appropriation and distribution of retained earnings commencing from 2015. The Company is yet to effect the amendments to the Company’s Articles of Incorporation within the deadline that Authorities specify.

The estimated employee bonus amounted to $97,004 in 2014, which was consistent with the actual amount distributed. There was no difference between the actual amount distributed and the estimated amount of employee bonus in the consolidated financial statements in 2014.

During their meeting on June 10, 2015, the stockholders approved the appropriations of 2014 earnings as follows:

Dividends attributable to ordinary shareholders: Cash dividends	For the year ended December 31, 2014	For the year ended December 31, 2014	For the year ended December 31, 2014
	Dividends per share $ 2.00		Amount
			4,853,396

Based on the resolution approved by the stockholders during their meeting on June 6, 2014, no appropriations were made of earnings in 2013 as the Company had no earnings available for appropriations but an accumulated deficit as of December 31, 2013.

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(e) Treasury Shares

The Group's shares of stock held by subsidiaries were as follows:

Numbers of shares at January 1, Capital reduction Numbers of shares at December 31, Amount of dollars at December 31, Book value per share Price per share (dollars)	December 31, 2014 6,870 (6,183 ) 687 $ 347,533 $ 505.46 $ 81	December 31, 2015
	$ $ $	687 -
		687
		347,533
		505.46 45.7

As of December 31, 2015, none of the Group's common shares of stock held by its subsidiary, Pei Jen Co., Ltd. has been sold.

According to the Securities and Exchange Act, treasury shares of stock cannot be pledged and the shareholders’ right is limited until such shares are transferred.

(f) Other Equity

Balance at January 1, 2014 Exchange differences on translation of foreign operations, net of tax: -the Group Unrealized gains (losses) on available-for-sale financial assets: -the Group Balance at December 31, 2014 Balance at January 1, 2015 Exchange differences on translation of foreign operations, net of tax -the Group Unrealized gains (losses) on available-for-sale financial assets: -the Group Balance at December 31, 2015	Exchange differences on translation of foreign operations $ (19,739) (3,777) - $ (23,516 ) $ (23,516) 11,928 - $ (11,588 )	Unrealized gains on available-for- sale financial assets	Unrealized gains on available-for- sale financial assets
	$ $ $ $		17,405 - 12,050 29,455 29,455 - (22,437 ) 7,018

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(17) Share-based Payment Transactions

The Group has issued stock options under the employee stock option plan (ESOP) as follows:

Grant date Grant unit Deal period Vested Conditions	The6ndbatch of Employee Stock Option Plan 2008.12.18 500,000 8 years Period of two years duration and a certain proportion	The7ndbatch of Employee Stock Option Plan 2011.03.21 70,000 8 years Period of two years duration and a certain proportion	The Subsidiaries’ Employee Stock Option Plan 2012.04.05 600 8 years Period of two years duration and a certain proportion	Capital increase hold Employee Stock Option Plan
				2015.12.22 32,000 Immediately vested

(a) Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Dividend yield Expected volatility Risk-free rate Fair value of unit stock option(dollar) Compensation cost using equity method	The6ndbatch of Employee Stock Option Plan -% 42.15% 2.01% 1.5 48,547	The7ndbatch of Employee Stock Option Plan The Subsidiaries’ Employee Stock Option Plan -% -% 53.79% 62,18% 0.9307% 1.0300% 5.91 5.375 262,499 505,199	Capital increase hold Employee Stock Option Plan
			-% 64.00% 0.74% 15.30 489,599

Expected volatility is based on weighted average of historical volatility, and it is adjusted accordingly when there is additional market information about the volatility. The expected term of stock option is based on each of the Group’s issued stock option plans. Expected dividend and risk-free rate is determined based on government bonds.

(b) Relevant information of employee stock option plans

The details of these employee stock option plans for the years ended December 31, 2014 and 2015 were as follows:

The details of these employee 2015 were as follows:	stock option plans for the years ended December 31, 2014 and	stock option plans for the years ended December 31, 2014 and	stock option plans for the years ended December 31, 2014 and
Outstanding at January 1, Options exercised Options forfeited Outstanding at December 31, Options exercisable, end of period	For theyears ended December 31,
	2014 Number of options (Units) Weighted-average exercise price(NTD) 114,321 $ 4.95 (25,467) 55.00 (4,889 ) 16.16 83,965 46.98 67,756 47.94	2015
	Number of options (Units) 114,321 (25,467) (4,889 ) 83,965 67,756	Number of options (Units) 83,965 (7,155) (4,964 ) 71,846 71,846	Weighted-average exercise price(NTD)
			46.98 53.12 73.44 42.79 42.79

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Further details of the stock options of the Group were as follows:

Range of exercise price (dollar) Weighted average of remaining contractual year	December 31, 2014 43~81.9 0.29~4.23	December 31, 2015
		41.5~81.9 1.46~3.73

(c) Compensation cost

Expenses were incurred from share options granted to employees for the years ended December 31, 2014 and 2015. These expenses were as follows:

For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
	2014 18,278 - 18,278	2015
$ $		4,206 489,599
		493,805

(18) Earnings Per Share

For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
	2014 29,238,438 (996,121 ) 2,824,231 2,399,138 12.19 (0.42 ) 11.77	2015
$ $ $		17,141,167 -
		17,141,167
		2,423,879
		7.07 -
		7.07

144

For theyears ended December 31, 2014 2015 $ 29,238,438 17,141,167 (996,121 ) - $ 2,824,231 17,141,167 2,399,138 2,423,879 1,710 16,251 2,400,848 2,440,130 12.18 7.02 (0.42 ) - $ 11.76 7.02	For theyears ended December 31, 2014 2015 $ 29,238,438 17,141,167 (996,121 ) - $ 2,824,231 17,141,167 2,399,138 2,423,879 1,710 16,251 2,400,848 2,440,130 12.18 7.02 (0.42 ) - $ 11.76 7.02	For theyears ended December 31, 2014 2015 $ 29,238,438 17,141,167 (996,121 ) - $ 2,824,231 17,141,167 2,399,138 2,423,879 1,710 16,251 2,400,848 2,440,130 12.18 7.02 (0.42 ) - $ 11.76 7.02
	2014 29,238,438 (996,121 ) 2,824,231 2,399,138 1,710 2,400,848 12.18 (0.42 ) 11.76	2015
$ $ $		17,141,167 -
		17,141,167
		2,423,879 16,251
		2,440,130
		7.02 -
		7.02

(19) Revenue

For the years ended December 31, 2014 and 2015, the components of revenue were as follows:

Sales revenues		2014 49,107,622	2015
	$		43,875,905

(20) Employee Compensation

The Company’s articles of incorporation were approved by the board of directors and has yet to be approved at shareholders’ meeting. Under this articles of incorporation, if the Company makes a profit, it should appropriate for employee compensation which is calculated based on 1% to 12% of the Company’s net profit before tax before deduction of employee compensation. If the Company incurs accumulated deficit, the Company should first cover the said accumulated deficit.

The estimated employee compensation which was charged to profit or loss under operating costs or expense amounted to $634,408 for the year ended December 31, 2015. This employee compensation was estimated based on the Company's net income before tax before deducting employee compensation, according to the earnings allocation method as stated under the Company's articles of association. If there is any difference between the actual amount and the estimated amount of employee compensation after the financial reports are issued, management is expecting that the difference will be treated as a change in accounting estimate and recognized through profit or loss in the period of the change.

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(21) Results from Non-operating Activities

(a) Other gains and losses

Foreign exchange gains, net Provision for or reversal of allowance for impairment Gain (Loss) on disposal of property, plant and equipment Dividend revenue Others Finance expenses Bank borrowings Less: Capitalized of interest Financing from entities with significant influence over the Group Financing interest from other related parties Lease payments Others	For the years ended	For the years ended	December 31, 2015 228,514 (4,204) (1,745) 3,601 193,330 419,496 December 31, 2015 357,608 (33,587) 168,093 350,955 16,845 513 860,427

		2014 333,733 - 373,753 474,462 17,293 577 1,199,818
	$ $

(b) Finance expenses

(22) Financial Instruments

(a) Credit risk
(i) Exposure to credit risk

The carrying amount of accounts receivable represents the maximum exposure to credit risk. As of December 31, 2014 and 2015, the estimated Group’s maximum exposures to credit risk from accounts receivable were $6,045,117 and $5,442,511, respectively.

(ii) Concentration of credit risk

The majority of the Group's customers are mostly those in the high-tech industry. In order to reduce accounts receivable credit risk, the Group continuously assesses the financial condition of its customers. If it is necessary, the Group will ask for guarantees or warranties. The Group still regularly assesses the likelihood of collectability of accounts receivable and sets aside allowance for bad debts, based on the result of management’s evaluation of the overall amounts of bad debts.

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As of December 31, 2014 and 2015, the Group’s largest customers both consisted of four customers which accounted for 39.37% and 39.04%, respectively, of notes and accounts receivable so that management believes the concentration of credit risk.

(b) Liquidity risk

The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments but excluding the impact of netting agreements:

December 31, 2014 Non-derivative financial liabilities Secured bank loans Unsecured bank loans Entities with significant influence over the Group Financing from other related parties Finance lease liabilities Notes and accounts payable (including to related parties) December 31, 2015 Non-derivative financial liabilities Secured bank loans Unsecured bank loans Entities with significant influence over the Group Financing from other related parties Finance lease liabilities Notes and accounts payable (including to related parties)		Carrying amount	Contractual cash flow		Within 6 months 3,750,108 251,342 - - 12,349 1,208,940 5,222,739 137,707 3,823,486 - - 12,349 1,560,210 5,539,752	6-12months 144,329 50,676 13,615,271 27,043,146 12,349 - 40,865,771 137,707 9,178 8,939,150 16,992,737 12,349 - 26,091,121	1-2years 288,659 102,900 - - 24,698 - 416,257 5,001,359 712,156 - - 24,698 - 57,894,610	2-5years 12,311,110 321,080 - - 74,094 - 12,706,284 7,295,478 8,375 - - 74,094 - 59,692,157	Over 5years
	$ $ $ $	15,580,000 800,000 13,400,000 26,615,567 290,103 1,208,940 57,894,610 11,985,000 4,506,000 8,800,000 16,727,941 282,250 1,560,210 43,861,401	16,494,206 836,636 13,615,271 27,043,146 493,958 1,208,940 59,692,157 12,572,251 4,559,195 8,939,150 16,992,737 469,260 1,560,210 45,092,803						- 110,638 - - 370,648 - 481,286 - - - - 345,770 - 345,770

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

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(c) Currency risk

(i) Exposure to currency risk

The Group’s significant exposure to foreign currency risk was as follows:

Financial assets: Monetary items USD JPY EUR Financial liabilities: Monetary items USD JPY EUR	December 31, 2014	December 31, 2014	December 31, 2014	December 31, 2015	December 31, 2015	December 31, 2015
	Foreign currency (inthousands)	Foreign rate	New Taiwan Dollars	Foreign currency (inthousands)	Exchange rate	New Taiwan Dollars
	$ 267,934 1,629,358 628 $ 94,532 725,529 -	31.718 0.2650 38.531 31.718 0.2650 -	8,498,331 431,780 24,197 2,998,366 192,265 -	214,956 2,575,126 451 92,178 156,072 1,098	33.066 0.2736 36.0384 33.066 0.2736 36.0384	7,107,735 704,554 16,253 3,047,958 42,701 39,570

(ii) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the foreign currency exchange fluctuations on cash and cash equivalents, accounts receivable, and accounts payable which are denominated in different foreign currencies. A 1% depreciation of the NTD against the USD, EUR, and JPY as of December 31, 2014 and 2015 would have increased the net income before tax by $57,637 and $46,983 for the years ended December 31, 2014 and 2015, respectively. This analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis as prior year.

(d) Interest risk

The Group’s exposure to interest rate risk arising from financial assets and liabilities is discussed further in the management of liquidity risk as disclosed in Note 23(a)(ii).

The following sensitivity analysis is based on the risk exposure to interest rates of the derivative and non-derivative financial instruments on the reporting date. For variable rate instruments, the sensitivity analysis assumes the liabilities bearing variable interest rates are outstanding for the whole year. A 1% increase in interest rate is assessed by management to be a reasonably possible change in interest rate.

An increase of 1% in interest rates mainly from loans with floating interest rates at the reporting date would have decreased net income before tax by $563,956 and $420,189 for the years ended December 31, 2014 and 2015, respectively.

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(e) Fair value of financial instruments
(i) Types and fair value of financial instruments

The book value and fair value of the Group’s financial assets and liabilities were as follows:

	December 31, 2014	December 31, 2014	December 31, 2014
BookValue 115,366 7,267,855 6,045,117 1,908,999 1,883,806 17,105,777 1,208,940 41,099,884 15,580,000 282,250 58,171,074		FairValue
	Level 1 Level 2 115,366 - - - - - - - - - - - - - - - - - - - - - December 31, 2015		Level 3 - - - - - - - - - - -	Total
				115,366 - - - - - - - - - -
Book Value 92,930 9,340 102,270 3,103,705 5,442,511 1,749,976 181,280 1,632,343 12,212,085		FairValue
	Level 1 92,930 - 92,930 - - - - - 92,930	Level 2 - - - - - - - - -	Level 3 - 12,320 12,320 - - - 190,123 - 202,443	Total
				92,930 12,320
				105,250
				- - - 190,123 -
				295,373

149

	December 31, 2015	December 31, 2015	December 31, 2015
BookValue $ 3,300,000 1,560,210 26,646,915 11,985,000 273,923 $ 43,772,048		FairValue
	Level 1 - - - - - -	Level 2 - - - - - -	Level 3 - - - - - -	Total
				- - - - -
				-

(ii) Valuation techniques not used in fair value determination of financial instruments

Investment in debt securities with no active market and financial liabilities measured at amortized cost:

The fair value of financial liabilities traded in active markets or market maker is based on quoted market prices. When quoted prices are unavailable, the fair value is determined by discounted cash flows, using estimation and assumptions under existing market conditions which are obtainable by the Group.

(iii) Valuation techniques used in fair value determination of financial instruments

If the quoted price is available on an active market, the market price is used as the fair value.

Fair value of the Group's financial instruments with no active market is determined as follows:

The fair value of investment in debt securities with no active market and financial assets carried at cost was estimated by Cox-Ross-Rubinstein of convertible bond and Binomial model of European call option. The key assumption for stock volatility was estimated by evaluating the stock volatility of same industry.

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(23) Financial Risk Management

(a) Nature and extent

The Group has the following exposure risks for holding certain financial instruments:

(i) Credit risk

(ii) Liquidity risk

(iii) Market risk

Detailed discussions about the risks involved on financial instruments are disclosed in the related notes to the consolidated financial statements.

(b) Framework of risk management

The board of directors has overall responsibility for the establishment and oversight of the risk management framework. The board has established the Risk Management Committee, which is responsible for developing and monitoring Group’s risk management policies.

The Group’s risk management policies are established to identify and analyze the risks being faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The board of directors oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The board of directors is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the board of directors.

151

(c) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

(i) Accounts receivable

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The Group has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, when available, and in some cases, bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from the Group; these limits are reviewed quarterly. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

The Group established an impairment allowance that represents its estimate of incurred losses in respect of accounts receivable and other receivables. Major components of this impairment allowance are specific loss component that is related to individually significant exposure and collective loss component where the loss is incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

(ii) Investment

The credit risk exposure in the bank deposits, fixed income investments and other financial instruments are measured and monitored by the Group’s finance department. Considering that the Company deals only with banks and other external parties with good credit standing and with above investment grade financial institutions, corporate organization and government agencies, management is not expecting non- compliance issues and significant credit risk.

(d) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Also, the Group’s approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient current funds to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

152

The Group uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimizing its cash return on investments. The Group aims to maintain the level of its cash and cash equivalents and other highly marketable debt investmencopts at an amount in excess of expected cash flows on financial liabilities (other than trade payables) over the succeeding 60 days. The Group also monitors the level of expected cash outflows on trade and other payables. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Group has unused short term bank facilities for $8,106,000.

(e) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Group buys and sells derivatives in order to reduce market risks. All these transactions are made in accordance with the risk management policy.

(i) Currency risk

The Group’s exposure to currency risk is on sales and purchases that are denominated in a currency other than the respective functional currencies of the Group, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in EUR, USD, and JPY.

The interest is denominated in the currency used in the borrowings. Generally, borrowings are primarily the NTD. Also, the Group may apply for loans in other currency for operating purpose.

(ii) Interest rate risk

The Group adopts a policy of entering into financial instrument transaction that fixes interest rate, such as interest rate swaps, in order to manage its interest rate exposure risks arising from the Group’s long-term loans bearing floating interest rates. However, as the range of fluctuation of the interest rates during the term of agreements is acceptable, the Group believes that their interest rate risk need not be hedged.

(iii) Other market value risk

The Group is only expecting to meet the consumption and sales demand so that the Group did not sign commodity contracts without net settled.

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(24) Capital Management

The Group’s policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares, non-redeemable preference shares, retained earnings and non-controlling interests.

The Group may adjust the payment of dividend to shareholders, return cash to shareholders through capital reduction, issue new shares or sell held for sale assets in order to pay off its liabilities. Likewise, the Group monitors its debt-to-capital ratio which serves as the basis to control capital, the same practice as the other companies in the industry. The debt-to-capital ratio on reporting date was as follows:

Total Liabilities subtract: cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	For the years ended	For the years ended	December 31, 2015 49,151,662 (3,103,705 ) 46,047,957 54,854,375 83.95%
		2014 62,875,254 (7,267,855 ) 55,607,399 41,677,058 133.42%
	$ $ $

The Group has no plan of buying treasury shares.

The Group has not changed its capital management strategy as of December 31, 2015.

7. Related-party Transactions

(1) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the Group.

(2) Key management personnel compensation

Key management personnel compensation
Short-term employee benefits	For the years ended December 31,
		2014 53,999	2015
	$		55,603

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(3) Significant related-party transactions

(a) Sales to related parties

The Group’s significant sales to related parties and the balance of accounts receivable were as follows:

Sales	Sales	Accounts receivable relatedparties	Accounts receivable relatedparties
For theyears ended
	2014 1,264 232,453 233,717	December 31, 2014 - 19,825 19,825	December 31, 2015
$			- - -

Note: The sales and sales discount of $57 and $3,177, respectively, to other related parties were recognized for the year ended December 31, 2015.

The selling prices and collection terms for the sales to related parties and other related parties are not significantly different from those third-party customers, and the normal credit term with the related parties above is the account is due for collection on the 15[th] day of the month following the month of delivery of goods sold. There is no collateral obtained for related party accounts receivable. However, no bad debt provision thereon is necessary based on the result of management’s evaluation.

(b) Purchase from related parties

The Group’s significant purchases from related parties and the balance of accounts payable were as follows:

Purchases For theyears ended December 31, 2014 2015 75,944 (1,504) 123,488 103,560 827,708 946,623 $ 1,027,140 1,048,679	Purchases For theyears ended December 31, 2014 2015 75,944 (1,504) 123,488 103,560 827,708 946,623 $ 1,027,140 1,048,679	Accountspayable－relatedparties	Accountspayable－relatedparties
For theyears ended
	2014 75,944 123,488 827,708 1,027,140	December 31, 2014	December 31, 2015
$		- 10,411 123,184 133,595	- 9,314 166,116 175,430

Note: The purchase discounts and allowances were recognized as a result of the change in the transfer price of the Group’s purchases.

155

The purchase price and payment terms for the purchase from related parties are not significantly different from those with third-party vendors, and the average payment period for notes and accounts payable pertaining to such purchase transactions ranged from one to two months, which was similar to that of other normal vendors. Purchase price with associates is calculated using the transfer pricing formula in accordance with the agreement.

Amount For the years ended December 31, 2014 2015 28,707 200 5,463,106 6,149,891 $ 5,491,813 6,150,091	Amount For the years ended December 31, 2014 2015 28,707 200 5,463,106 6,149,891 $ 5,491,813 6,150,091	Otherpayables－relatedparties	Otherpayables－relatedparties
For the years ended
	2014 28,707 5,463,106 5,491,813	December 31, 2014	December 31, 2015
$		38 1,006,493 1,006,531	21 1,012,250 1,012,271

The term of transactions with the related parties above is 60 days after the end of each month when processed consigned goods are received.

(d) The Group's income received from related parties, such as utility income and receivables from payment on behalf of related parties were as follows:

Associates		Other receivables－relatedparties	Other receivables－relatedparties
		December 31, 2014 14,091	December 31, 2015
	$		12,125

(e) Financing to related parties

The details of the Group's lending to related parties were as follows:

Entities with significant influence over the Group Other related parties	Other receivables－relatedparties	Other receivables－relatedparties
	December 31, 2014 $ 13,400,000 26,615,567 $ 40,015,567	December 31, 2015
		8,800,000 16,727,941
		25,527,941

Interest payables under other payables—related parties as of December 31, 2014 and 2015 amounted to $57,333, and $34,347, respectively. Please refer to Note 6(21) for details on related interest expenses.

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(f) Property transactions

(i) The Group sold land and machinery equipment to its affiliates. The downstream unrealized sales profit is realized based on the depreciation of machinery equipment over its useful life. The realized profit on disposal of assets amounted to$540 and $270 as of the years ended December 31, 2014 and 2015, respectively; and the unrealized profit on disposal of assets, which is a deduction of investment under equity method, amounted to $101,949 and $101,138 as of December 31, 2014, and 2015, respectively.
(ii) The Group purchased machinery equipment from other related parties of $85,473 for the year ended December 31, 2015, and the unpaid payables of $64,029 were accounted for －
under other payables related parties as of December 31, 2015.
(iii) The Group sold its equipment to its affiliates for $695 and the profit on disposal thereof amounted to $695 for the year ended December 31, 2015. All amounts were received as of December 31, 2015.
(iv) The Group purchased machinery equipment from other related parties and its affiliates amounting to $188,305 for the year ended December 2014, and the unpaid payables of －
$12,600 were accounted for under payables related parties as of December 31, 2014.
(v) The Group sold its equipment to its affiliates for $7,000 and the profit on disposal thereof amounted to $1,171 for the year ended December 31, 2014, and the unpaid payables of －
$7,350 were accounted for under other payables related parties as of December 31, 2014.
(g) Lease contracts
(i) Please refer to Note 6(9) and 6(12) for the details of the Group’s long-term lease contracts with associates.
(ii) The Group's rental expenses paid to related parties were as follows:

Entities with significant influence over the Group Other related parties Total	Amount	Amount	Amount
	For the year ended December 31, 2014 $ 91,082 - $ 91,082	For the year ended December 31, 2015
	$ $		164,114 79,348 243,462

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(h) Contracts with related parties
(i) The Group signed a Service Agreement with IMI; its services include the management of facility, human resources, finance, purchasing, engineering, and so on. The service fee is calculated based on the actual time spent and the hourly rates. This Service Agreement took effect on July 15, 2003, and will remain effective until it has been mutually agreed to be terminated by both parties.
(ii) The Group signed a Probe Tester Consignment and Service Agreement with IMI on August 6, 2013. Under this Agreement, IMI provides the services of probe test and related maintenance of testing equipment. This Prober Tester Consignment and Service Agreement took effect from the signing date to December 31, 2014, or whenever a party has notified the other party to terminate this Prober Tester Consignment and Service Agreement in accordance with the conditions stipulated in the aforementioned Agreement.

8. Pledged Properties

The Group’s assets pledged to secure loans are as follows:

Pledged assets	Object Guarantee for bank loans $ Guarantee for bank loans and import $	December 31, 2014 30,628,371 375,900		December 31, 2015
Property, plant and equipment Other non-current assets				17,092,977 376,883

9. Commitments and Contingencies

(1) Significant Commitments
(a) The Group's has provided guarantees of $585,000 both as of December 31, 2014 and 2015 in connection with the hiring of foreign workers and importation of goods.
(b) As of December 31, 2014 and 2015, the Group's unused letters of credit amounted to $518,610 and $22,829, respectively.

(2) Contingent Liabilities

(a) In 2002, Nanya Technology Corporation and its subsidiary, Nanya Technology Corporation, U.S.A. (collectively “Nanya”), and other major Dynamic Random Access Memory (“DRAM”) manufacturers, were alleged to collusively manipulate DRAM’s market prices in the U.S.A. which violates the Antitrust Law. Currently, the aforementioned antitrust litigation is still pending in the U.S.A. Federal Court and State Court, and Nanya has engaged counsels to properly handle it to ensure Nanya’s rights.

158

In November 2014, Qimonda AG accused Nanya Technology GmbH of patent infringement in Landgericht Dusseldorf Court. In June 2012, Nanya Technology Corporation and Nanya Technology GmbH (collectively “Nanya”) filed a request to the Landgericht Munich Court for a declaratory relief, and the said request had been approved in August 2014. However, QimondaAG was not satisfied by the decision made by the court, and therefore, has decided to file an appeal to the Landgericht Munich Court in September 2014. In July 2015, Qimonda AG has withdrawn the prosecution and appeal so that this case has ended.

(b) In 2000, the Company was charged by Brazil's Ministry of Justice as being involved in the International Monopolies, which influences Brazil’s DRAM market. Consequently, the Company, other large international companies and individuals are investigated at the same time. The Company has engaged counsels to properly handle it to ensure Nanya’s rights.

10. Significant Disaster Loss: None.

11. Subsequent Event:

On January 14, 2016, the Company issued new shares of stock for cash in connection with its plan to increase its capital. This capital increase is intended to raise funds to finance the conversion of its capacities for design shrink product to 20nm. The actual number of shares of stock issued was 320,000 thousand shares of common stock at subscription price of $36.5 per share with total value amounting to $11,680,000. All payments for this capital increase were fully received.

12. Others

(1) The nature of expenses classified under cost of goods sold and operating expense were as follows:

	For theyear ended December	For theyear ended December	31, 2014
	Cost of goods sold	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension expenses Other personnel expenses Depreciation expenses Amortization expenses	2,357,837 161,926 86,568 52,807 5,283,171 191,434	1,515,811 91,346 56,078 14,845 132,906 -	3,873,648 253,272 142,646 67,652 5,416,077 191,434

159

	For theyear ended December	For theyear ended December	31, 2015
	Cost of goods sold	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension expenses Other personnel expenses Depreciation expenses Amortization expenses	2,497,646 136,765 80,186 46,693 5,597,498 129,408	1,543,897 95,252 50,523 16,034 72,459 -	4,041,543 232,017 130,709 62,727 5,669,957 129,408

As of December 31, 2014 and 2015, the Company had 2,414 and 2,406 employees, respectively.

(2) Future financing plans of the Group
(a) Financing plan: As of December 31, 2015, the Group has an unused credit facility of $8,106,000 thousand for long and short-term loans.
(b) To increase the rate of design shrink product production, the Company is still keeping its effort on converting the capacities of design shrink product to 30nm. When such conversion is completed, management is expecting that production output will exceed 70% of the total capacities by the end of Q2, 2016. The actual output is around 50% at the end of 2015. With more design shrink product output, die cost will be reduced; hence, the Group will become more cost-efficient.
(c) To raise the sales of value-added product：Nanya Technology will remain concentrated on the business of Low-Power and Consumer DRAM products. These two genres generated over 75% of its revenues for now and are likewise expected to exceed 80% of revenues at the end of 2016. It will focus on niche market and related application in order to raise the selling price of its products. In the future, it is aiming to create more value to its products to enhance the Company’s profitability.
(d) The Company's profitability and the operations had improved since the year 2013. The repayment of debt and decrease in current liabilities are expected to continue due to continuous cash inflow in the future.
(e) On January, 2016, the Company has completed the process for its cash capital increase in cash of $11,680,000. The proceeds from this capital increase of $11,680,000 are intended to finance the conversion of the capacities of design shrink product to 20nm.

160

(3) Discontinued operations

On July 1, 2014, the subsidiary of the Company, Sumpro Electronics Corporation, sold all of its machines, elements and main inventory because the foundry technology and equipment are limited and product lines are incomplete.

The operating result and cash flow of the discontinued operations were as follows:

Discontinued operations income Operating income Operating cost Gross profit Operating expense Non-operating income and expense The loss before income tax Income tax expense Discontinued operating loss Cash flow of the discontinued operation Cash flow from operating activities Cash flow from investment activities Cash flow from financing activities Increase in cash	December 31, 2014 $ 1,360,198 (1,820,679 ) (460,481) (266,490) (329,160 ) (1,056,131) - $ (1,056,131 ) $ 115,240 1,233,481 (1,280,573 ) $ 68,148

13. Other Disclosure Items

(1) Related information on material transaction items:

The following are the Company’s significant transactions required to be disclosed in accordance with the Regulation:

(a) Financing provided: None
(b) Guarantees and endorsements for other parties: None.
(c) Information regarding securities held:

Name of company which holds securities	Category and name of securities	Relationship between issuer of security and the company which holds securities	Account name		Decemb	er 31, 2015		The highest shares owned or the contributio n of capital	Note
				Shares / Units (in thousands)	Carrying value	Percentage of ownership	Market value or net asset value
Pei Jen Co., Ltd Pei Jen Co., Ltd	Nanya Printed Circuit Board Co. Memoright(CAYMAN)Co.,LTD	Other related parties -	held-for-sale financial assets Investment in debt securities with no active market and Financial assets carried at cost	2,770 -	92,930 190,620	0.43% -%	92,930 202,443	0.43% -	- -

161

(d) Information regarding purchase or sales of securities for the period exceeding $300 million or 20% of the Company’s paid-in capital: None
(e) Information on acquisition of real estate for which the purchase amount exceeded $300 million or 20% of the Company’s paid-in capital: None.
(f) Information regarding receivables from disposal of real estate exceeding $300 million or 20% of the Company’s paid-in capital: None.
(g) Information regarding related-party purchases and/or sales for which the amount exceeded $100 million or 20% of the Company’s paid-in capital:

Purchasing (selling) company	Related party	Nature of relationship		Tra	nsaction	details	Abn tran	ormal saction	Accounts/notes receivable (payable)	Accounts/notes receivable (payable)	Note
			Purchas e (sale)	Amount	% to total	Payment terms	Amount	Payment terms	Ending balance	Notes/accounts receivable or (payable)
The Company The Company The Company The Company The Company The Company	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Japan Nanya Technology Corp., Germany Piece Makers Technology, Inc. Formosa Sumco Technology Corp. Nanya Plastic Corp.	Parent company Parent company Parent company Parent company Other related parties Entities with significant influence over the Group	(Sale) (Sale) (Sale) (Sale) Purchase Purchase	1,775,485 3,034,454 2,145,768 587,577 924,815 103,560	4.12% 7.04% 4.98% 1.36% 12.03% 1.35%	O/A,60~90Days O/A,180ays O/A,60~90Days O/A,60~100Days O/A60Days On the 15thof the month following the mouth of purchase	- - - - - -	- - - - - -	136,600 689,298 321,322 116,940 (166,116) (9,314)	2.37% 11.98% 5.58% 2.03% 10.83% 0.61%	(Note) (Note) (Note) (Note) - -

Note: the transactions were written off in the consolidated financial statements

(h) Information regarding accounts receivable from related parties for which the amount exceeded $100 million or 20% of the Company’s paid-in capital:

Accounts receivable company	Related party	Nature of relationship	Amount	Turnover	Due date accounts receivable	Due date accounts receivable	Amounts received in subsequent periods	Allowance for bad debt
					Amount	Method
The Company The Company The Company The Company	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Japan Nanya Technology Corp., Germany Piece Makers Technology, Inc.	Parent company Parent company Parent company Parent company	Account receivable 136,600 Account receivable 689,298 Account receivable 321,322 Account receivable 116,940	9.42 5.43 5.10 2.92	- - - -	- - - -	101,118 471,323 292,450 63,915	- - - -

(i) Information regarding trading in derivative financial instruments: None.

162

(j) Intercompany relationships and significant intercompany transactions:

No.	Company name	Counter party	Relationship	Intercompany t	Intercompany t	ransactions
				Financial Statement Item	Amount	Terms	Percentage of consolidated total gross sales or total assets
0 0 0 0 0 0 0 0 0	Nanya Technology Corp. 〃〃〃〃〃〃〃〃	Nanya Technology Corp., U.S.A Nanya Technology Corp., Germany Nanya Technology Corp., Japan Piece Makers Technology, Inc. Ltd. Nanya Technology Corp., Delaware Nanya Technology Corp., U.S.A Nanya Technology Corp., Germany Nanya Technology Corp., Japan Piece Makers Technology, Inc. Ltd.	1 1 1 1 1 1 1 1 1	Sales Sales Sales Sales Management expense Accounts receivable Accounts receivable Accounts receivable Accounts receivable	1,775,485 2,145,768 3,034,454 587,577 315,442 136,600 321,322 689,298 116,940	On the basis of general conditions On the basis of general conditions On the basis of general conditions On the basis of general conditions On the basis of general conditions On the basis of general conditions On the basis of general conditions On the basis of general conditions On the basis of general conditions	4.05% 4.89% 6.92% 1.34% 0.72% 0.13% 0.31% 0.66% 0.11%

Note 1: Assigned numbers represent the following:

0 represents the parent company.
The subsidiaries are represented numerically starting from 1.

Note 2: The terms of transactions are defined as follows:

Represents the parent company having transaction with a subsidiary.
Represents a subsidiary having transaction with the parent company.
Represents a subsidiary having transaction with a subsidiary.

Note 3: The business relationship and significant transactions between the parent company and the subsidiary only disclose the importations of

sales and account receivable, didn’t repeat about the purchase and account payable.

163

(2) Information on the Company’s long-term equity investments: None.

Information regarding investments in Mainland China: None.

Investor	Investee	Location	Main Businesses and Products	Investme	nt Amount	Balance	as of Decemb	er 31,2015	The maximum holding or investment	Net Income (Loss) of the Investee	Equity in Net Income (Net Loss)	Note
				December 31, 2015	December 31,2014	Shares	Percentage of Ownership	Carrying Value
The Company The Company The Company The Company The Company The Company The Company The Company Nanya Technology Corp., HK Pei Jen Co., Ltd.	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Delaware Pei Jen Co., Ltd. Nanya Technology Corp., HK Nanya Technology Corp., Japan Inotera Memories, Inc. Piece Makers Technology, Inc. Sumpro Electronics Corporation Nanya Technology Corp., Germany Inotera Memories, Inc.	U.S.A U.S.A Taipei Hong Kong Japan Taoyuan Hsinchu Taoyuan Germany Taoyuan	Sales of semiconductor products Design of semiconductor products Import/export business Sales of semiconductor products Sales of semiconductor products Business of electronic products Design of semiconductor products Business of electronic products Import/export business Business of electronic products	20,392 36,005 175,348 66,271 20,161 24,631,379 21,246 2,591,000 30,056 143,966	20,392 36,005 175,348 66,271 20,161 24,631,379 21,246 2,591,000 30,056 143,966	2 - 480 20 1 1,587,484 7,918 259,100 - 9,018	100.00% 100.00% 100.00% 100.00% 100.00% 24.20% 55.26% 100.00% 100.00% 0.14%	122,569 123,599 - 34,448 179,194 32,647,944 75,773 35,873 52,070 186,023	100.00% - % 100.00% 100.00% 100.00% 24.30% 58.34% 100.00% 100.00% 0.15%	1,787 9,376 21,798 9,836 22,235 18,077,421 70,735 (6,762) 4,672 18,077,421	1,787 9,376 20,424 9,836 22,235 4,380,050 38,297 (6,762) 4,672 24,873	(Note) (Note) -(Note) (Note) (Note) (Note) (Note) (Note)

Note: The transactions were written off in the consolidated financial statement.

(3) Investment in Mainland China

(a) Relevant information about the name of investees and the main business activities was as follows:

Investee Company Name	Main Businesses and Products	Actual amount of Paid-in Capital	Method of Investment	Accumulated Outflow of Investment from Taiwan as of Jan 1, 2014	Outflow amo curren	/ Inflow unt of tperiod I Inflow	Accumulated Outflow of nvestment from Taiwan as of December 31, 2014	Current income of investees	Direct and Indirect Shareholdin g Ratio by the Company	The maximum holding or investment	The highest shares owned or the contribution of capital	Investment income or loss	Accumulated Inward Remittance of Earnings as of December 31, 2014
					Outflow
Nanya Technology Corp.,Shenzhen	Sales of semiconductor products	32,570	(Note 1)	32,570	-	-	32,570	5,667	100.00%	100.00%	5,667	15,420	-

(b) Quota for investment in Mainland China

Accumulated Outflow of Investment from Taiwan to China	Investment Amounts Authorized by the Investment Commission, MOEA	Maximum Allowable Investment Authorized by the Investment Commission, MOEA
32,570 (USD985)	32,570 (USD985)	32,842,613

Note 1：Indirect investment in Nanya Technology Corp., Shenzhen through Nanya Technology Corp., HK. Note 2：The exchange rate of New Taiwan dollars to US dollars on September 30, 2015 was USD1：TWD 33.066. Note 3：Amount was recognized based on the self-prepared financial statements. Note 4：60% of net equity.

164

Please refer to the related disclosures above captioned as “Related information on material transaction items” and “Intercompany relationships and significant intercompany transactions” for direct or indirect significant transactions between the Group and its investees in Mainland China for the year ended December 31, 2015. (The transactions were eliminated in the consolidated financial statements.)

14. Segment information

(1) General information:

The Group’s main operating activities are manufacturing and selling semiconductor products. The operating decision maker uses the geographic area information as the management framework to manage the segments. It is divided into two reporting segments: manufacturing department and Japan department. The manufacturing department manufactures semiconductor products and sells them to domestic and foreign system operators, distributors, agents and Japan department. Japan department sell the semiconductor products.

(2) The income of the reporting segment, segment assets, segment liabilities and the information of the measure basis and reconciliation.

The Group’s reportable segments are responsible for the Company's geographic area business units. The operating decision maker uses the geographic area information as the management framework to manage the segments. Most of the business units are piecemeal obtain so that the management team is kept in the each time.

No tax expenses are allocated to the reporting segment. The reportable amount is similar to that of the report used by the chief operating decision maker.

The accounting policies of the operating segments are the same as those described in Note 4. The operating segment’s profit of the Group uses the operating income before tax as the measurement and basis of performance evaluation. The Group treats intersegment sales and transfers as third-party transactions. They are measured at market price.

165

Operating segments are combined and reconciled as follows:

			December 31, 2014	December 31, 2014
Japanese division $ 3,603,604 - $ 3,603,604 $ 170 378 - - $ 136,737 $ - 1,268 $ 636,993 $ 615,903		Manufacturing division 39,116,940 9,473,010 48,589,950 1,191,244 5,552,428 12,170,194 10,051 30,647,821 28,679,484 51,157,114 104,021,970 62,288,417	Discontinuing divisions Others divisions 1,360,198 6,387,078 69,923 315,978 1,430,121 6,703,056 14,637 8,403 60,168 5,372 - 75,109 690,000 - (1,056,131 ) 145,305 - 161,083 - 17,545 82,212 2,010,235 39,577 1,732,694 December 31, 2015		Adjustments and eliminated (1,360,198) (9,858,911 ) (11,219,109 ) (14,636) (17,003) 1,049,351 (690,000) 1,858,964 (495,367) - (2,199,098 ) (1,801,337 )	Total
						49,107,622 - 49,107,622 1,199,818 5,547,343 13,294,654 10,051 31,732,696 28,345,200 51,175,927 104,552,312 62,875,254 Total 43,875,905 - 43,875,905 860,427 5,799,365 4,404,921 (4,204) 17,677,428 32,833,967 49,763,526 104,006,037 49,151,662
	Japanese division 3,166,034 - 3,166,034 - 1,454 - - 26,157 - 6,050 882,900 701,548	Manufacturing division 35,439,802 7,682,075 43,121,877 851,732 5,789,618 4,475,243 (4,204) 17,619,097 33,219,278 49,722,671 103,550,296 48,776,856	Discontinuing divisions - - - - - - - - - - - -	Others divisions 5,270,069 370,443 5,640,512 8,696 8,293 24,873 - 130,948 186,023 34,805 1,620,261 1,261,340	Adjustments and eliminated - (8,052,518 ) (8,052,518 ) (1) - (95,195) - (98,774 ) (571,334) - (2,047,420 ) (1,588,082 )
$ $ $ $ $ $ $

166

(3) Types of products and service:

Types of products and service:
Products and service DRAM Others Total		2014 48,964,419 143,203 49,107,622	2015 43,727,648 148,257 43,875,905
	$ $

(4) Geographic area information

The Group’s revenue from continuing operations from external customers by location of operations and information concerning the location of its non-current assets were as follows:

District From external clients: Taiwan USA Japan Mainland China Other countries Non-current assets: Taiwan Other countries Total		2014 20,605,485 771,987 1,715,857 21,266,018 4,748,275 49,107,622 51,700,746 12,317 51,713,063	2015 18,834,167 644,466 1,183,890 18,777,614 4,435,768 43,875,905 50,139,084 30,635 50,169,719
	$ $ $ $

Non-current assets included property, plant and equipment, investing properties, intangible asset and other assets, excluding financial instruments, defer tax assets, retirement benefit assets and equity non-current assets generated from insurance contracts.

(5) Major clients

Sales exceeding 10% of the Group's sales revenue were as follows：

KINGSTONE TECHNOLOGY CO,LTD ADATA TECHNOLOGY CORPORTION Total		2014 6,381,074 5,110,037 11,491,111	2015 7,745,598 3,094,531 10,840,129
	$ $

167

NANYA TECHNOLOGY CORPORATION

FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2015 (With Independent Auditors’ Report Thereon)

168

169

170

NANYA TECHNOLOGY CORPORATION

STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, 2014 AND 2015 (Expressed in thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (Note 6(1)) 1170 Notes and accounts receivable, net (Notes 6(3)(17)) 1180 Accounts receivable from related parties, net (Notes 6(3) and 7) 1200 Other receivables (Note 6(3)) 1210 Other receivable－related parties (Notes 6(3)(8) and 7) 130x Inventories (Note 6(4)) 1470 Other current assets Total current assets Non-current assets: 1543 Financial assets carried at cost－non-current (Note 6(2)) 1546 Debt investments without active market – non-current (Note 6(2)) 1550 Investments accounted for using equity method, net (Notes 6(5) and 7) 1600 Property, plant and equipment (Notes 6(7), 7 and 8) 1780 Intangible assets 1840 Deferred income tax assets (Note 6(13)) 1935 Lease receivable－long-term (Note 6(8)) 1990 Other non-current assets (Notes 6(1) and 8) Total non-current assets Total assets	DECEMBER 31, 2014 (Adjusted) $ 6,414,145 6 4,976,818 5 1,558,297 1 1,644,580 - 248,012 - 4,834,283 5 884,554 1 20,560,689 20 - - - - 28,677,212 27 51,157,114 49 537,136 1 840,000 1 1,883,806 2 366,013 - 83,461,281 80 $ 104,021,970 100		DECEMBER 31, 2015 2,242,753 2 4,443,733 4 1,309,646 1 1,466,021 2 263,588 - 5,815,290 6 1,564,816 2 17,105,847 17 9,340 - 181,280 - 33,219,400 32 49,722,671 48 406,193 - 869,322 1 1,632,343 2 367,643 - 86,408,192 83 103,514,039 100 DECEMBER 31, 2014 (Adjusted) Liabilities and Equity Current liabilities: 2100 Short-term loans (Note 6(9)) $ - - 2170 Notes and accounts payable 1,065,547 1 2180 Accounts payable－related parties (Note 7) 133,595 - 2220 Other payables－related parties (Notes 6(11) and 7) 40,626,472 39 2230 Income tax liabilities - - 2322 Current portion of long-term loans (Note 6(10)) 3,900,000 4 2399 Other current liabilities 2,784,412 3 Total current liabilities 48,510,026 47 Non-current liabilities: 2540 Long-term loans (Note 6(10)) 12,480,000 12 2570 Deferred income tax liabilities (Note 6(13)) - - 2613 Lease payables－long-term (Note 6(11)) 282,250 - 2640 Accrued pension liabilities (Note 6(12)) 634,563 1 2670 Other non-current liabilities 513,678 - Total non-current liabilities 13,910,491 13 Total liabilities 62,420,517 60 Equity (Notes 6(5)(6)(13)(14)(15)): 3110 Common stock 24,095,278 23 3140 Capital received in advance 653,565 1 3200 Additional paid-in capital 6,377,936 6 3310 Legal reserve - - 3300 Accumulated profit 10,816,268 10 3400 Other equity 5,939 - 3500 Treasury stock (347,533 ) - Total equity 41,601,453 40 Total Liabilities and Equity $ 104,021,970 100		DECEMBER 31, 2015	DECEMBER 31, 2015
			2,242,753 4,443,733 1,309,646 1,466,021 263,588 5,815,290 1,564,816 17,105,847 9,340 181,280 33,219,400 49,722,671 406,193 869,322 1,632,343 367,643 86,408,192 103,514,039		3,300,000 1,357,888 175,430 26,176,298 482,565 500,000 2,647,855 34,640,036 12,685,000 6,838 273,923 755,860 414,693 14,136,314 48,776,350 24,285,658 - 7,812,701 1,077,812 21,913,621 (4,570) (347,533 ) 54,737,689 103,514,039	3 1 - 25 1 1 3 34 12 - - 1 - 13 47 23 - 8 1 21 - - 53 100

171

NANYA TECHNOLOGY CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2015 (Expressed in thousands of New Taiwan Dollars, except for per share amounts)

4000Operating revenues (Notes 6(17) and 7) 5000Cost of goods sold (Notes 6(4)(12)(15)(18) and 7) Gross profit 5910 Add: Unrealized profit from sale 5920 Realized profit from sale Gross profit Operating expenses (Notes 6(12)(15)(18) and 7)： 6100 Selling and distribution expenses 6200 Administrative and general expenses 6300 Research and development expenses Total operating expenses Operating income Non-operating income and expenses： 7010 Other income 7020 Other gains and losses (Notes 6(19) and 7) 7050 Finance expenses (Note 6(19)) 7060 Share of profit of subsidiary and associate accounted for using equity method (Note 6(5)) Net non-operating activities 7900Income before income tax 7950Income tax expense (Note 6(13)) Net income 8300Other comprehensive income (loss) 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Remeasurement of net defined benefit assets 8330 Recognized share of other comprehensive income of associates accounted for using equity method –may not be reclassified subsequently to profit or loss 8349 Income tax expense related to items that may not be reclassified to profit or loss (note 6(13)) Total amount of items may be reclassified subsequently to income or loss 8360 Items that could be reclassified subsequently to profit or loss: 8361 8362 Exchange differences arising on translation of foreign operations Unrealized gain on available-for-sale financial assets 8399 Income tax expense related to items that may be reclassified to profit or loss Total amount of items that may be reclassified subsequently to profit or loss 8300Other comprehensive loss Total comprehensive income 8750Basic earnings per share (Note 6(16)) Diluted earnings per share (Note 6(16))		2014 (Adjusted) Amounts % 48,589,951 100 26,809,439 55 21,780,512 45 (72,643) - 19,565 - 21,727,434 45 415,327 1 1,365,718 3 1,335,071 3 3,116,116 7 18,611,318 38 266,992 - 790,561 2 (1,191,244) (2) 12,170,194 25 12,036,503 25 30,647,821 63 2,405,504 5 28,242,317 58 59,408 - (1,811) - - - 57,597 - (3,777) 12,050 - - - - 8,273 - 65,870 - 28,308,187 58 11.77 11.76		2015	% 100 61 39 - - 39 1 3 4 8 31 1 1 (2) 10 10 41 1 40 - - - - - - - - - 40
		Amounts 48,589,951 26,809,439 21,780,512 (72,643) 19,565 21,727,434 415,327 1,365,718 1,335,071 3,116,116 18,611,318 266,992 790,561 (1,191,244) 12,170,194 12,036,503 30,647,821 2,405,504 28,242,317 59,408 (1,811) - 57,597 (3,777) 12,050 - 8,273 65,870 28,308,187 11.77 11.76		Amounts 43,129,599 26,209,509 16,920,090 (78,605) 72,643 16,914,128 482,989 1,192,306 1,848,728 3,524,023 13,390,105 224,239 387,995 (851,724) 4,475,243 4,235,753 17,625,858 484,691 17,141,167 (132,255) (2,835) 22,484 (112,606 ) 11,928 (22,437) - (10,509 ) (123,115 ) 17,018,052 7.07 7.02
	$ $ $ $

172

NANYA TECHNOLOGY CORPORATION

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2015

(Expressed in thousands of New Taiwan Dollars)

Balance at January 1, 2014 Effect of the retrospective application of accounting principle or adjustment Adjusted balance as of January 1, 2014 Net income Other comprehensive income (loss) Total comprehensive income Change in recognized shares of subsidiaries and associates accounted for using equity method Capital reduction to offset accumulated deficits Difference between the actual disposal of subsidiary shares price and book value Acquisition of ownership interests in subsidiaries from non-controlling interests Recognized compensation costs on employee stock options Due to recognition of equity component of employee stock options issued Balance as of December 31, 2014 Net income Other comprehensive income (loss) Total comprehensive income Legal capital reserve Common stock dividends Change in other capital surplus: Change in equity of associates accounted for using equity method Change in equity of subsidiaries accounted for using equity method Adjustments of capital surplus for company's cash dividends received by subsidiaries Recognized compensation costs on employee stock options by the Company Recognized compensation costs on employee stock options by subsidiaries Due to recognition of equity component of employee stock options issued Capital received in advance – exercise of employee stock options Balance as of December 31, 2015		Common stock 239,608,511 - 239,608,511 - - - - (215,649,073) - - - 135,840 24,095,278 - - - - - - - - - - 190,380 - 24,285,658		Capital received in advance - - - - - - - - - - - 653,565 653,565 - - - - - - - - - - - (653,565) - -	Capital surplus 3,696,784 - 3,696,784 - - - 2,200,473 - (835) (36,311) 17,773 500,052 6,377,936 - - - - - - 86,316 (3,159) 1,374 2,924 893 856,818 489,599 7,812,701		Retained	earnings Unappropriated retained earnings (accumulated deficit) (233,081,650) (20,241 ) (233,101,891 ) 28,242,317 57,597 28,299,914 - 215,649,073 - (23,652) - (7,176 ) 10,816,268 17,141,167 (112,606 ) 17,028,561 (1,077,812) (4,853,396) - - - - - - - - 21,913,621	Other equity items Exchange difference on translation of foreign financial statements Unrealized (losses) gains on available-for-sale financial assets (19,739) 17,405 - - (19,739 ) 17,405 - - (3,777 ) 12,050 (3,777) 12,050 - - - - - - - - - - - - (23,516) 29,455 - - 11,928 (22,437 ) 11,928 (22,437 ) - - - - - - - - - - - - - - - - - - - - (11,588 ) 7,018	Treasury stock (347,533) - (347,533 ) - - - - - - - - (347,533) - - - - - - - - - - - - - (347,533)	Total Equity 9,873,778 (20,241 ) 9,853,537 28,242,317 65,870 28,308,187 2,200,473 - (835) (59,963) 17,773 1,282,281 41,601,453 17,141,167 (123,115 ) 17,018,052 - (4,853,396) - 86,316 (3,159) 1,374 2,924 893 393,633 489,599 54,737,689
							Legal reserve - - - - - - - - - - - - - - - - 1,077,812 - - - - - - - - - 1,077,812
	$ $

173

NANYA TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWS

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

Cash flows from operating activities: Net income before tax Adjustments for: Incomes and expenses not affecting cash flows Depreciation expense Amortization of deferred charges Interest expenses Interest income Dividend revenue Compensation costs arising from share-based payments Share of profit of subsidiary and associate accounted for using equity method Loss (or gain) on disposal of property, plant and equipment Property, plant and equipment reclassified to expense Reversal of gain on impairment of non-financial assets Unrealized sales profits Realized sales profits Unrealized foreign currency exchange gain, net Discount amortization of financial liabilities Incomes and expenses not affecting cash flows Change in operating assets and liabilities: Decrease (increase) in accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventories Decrease (increase) in other current assets Decrease in accounts payable Increase in other payables－related parties Increase (decrease) in other current liabilities Decrease in accrued pension liabilities Decrease in other non-current liabilities Total change in operating assets and liabilities Cash generated from operating activities Interest received Interest paid Income tax paid Net cash provided by operating activities Cash flows from investing activities: Purchases of debt investments without active market Purchases of financial assets carried at cost Acquisitions of investment accounted for using equity method Purchases of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Purchases of intangible asset Decrease in lease receivables Increase in other non-current assets Net cash used in investing activities Cash flows from financing activities: Increase in short-term loans Repayments of short-term loans Increase in long-term loans Repayments of long-term loan Decrease in other payable－related parties Decrease in lease payables－related parties Cash dividends paid Exercise of employee stock options Proceeds from sale of subsidiary shares of stock (without losing control) Net cash used in financing activities Effect of foreign currency exchange translation Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year	For the years ended December 31, 2014 (Adjusted) 2015 $ 30,647,821 17,625,858 5,360,994 5,659,997 191,434 129,408 1,191,244 851,724 (266,992) (224,239) 54,392 - 17,773 492,523 (12,170,194) (4,475,243) (329,570) 1,016 13,005 - (10,051) 4,204 72,643 78,605 (19,565) (72,643) (173,697) (40,223) 14,000 5,000 (6,054,584 ) 2,410,129 298,996 860,480 205,181 (15,368) 2,220,820 (981,007) 181,105 (680,262) (480,980) (108,019) 152,365 44,016 870,016 (109,114) (145,482) (10,958) (2,922 ) (16,620 ) 3,299,099 (1,016,852 ) 27,892,336 19,019,135 265,798 225,758 (1,221,827) (873,959) (285 ) (1,036 ) 26,936,022 18,369,898 - (181,280) - (9,340) (290,000) - (5,764,014) (3,810,003) 475,486 2,928 - (171) (291,163) (111,196) 429,330 429,330 (362,705 ) 77 (5,803,066 ) (3,679,655 ) - 3,600,000 - (300,000) 11,975,000 500,000 (7,300,000) (3,700,000) (24,000,000) (14,500,000) (7,404) (7,853) - (4,852,022) 1,282,281 393,633 22,104 - (18,028,019 ) (18,866,242 ) 90,253 4,607 3,195,190 (4,171,392) 3,218,955 6,414,145 $ 6,414,145 2,242,753	For the years ended December 31, 2014 (Adjusted) 2015 $ 30,647,821 17,625,858 5,360,994 5,659,997 191,434 129,408 1,191,244 851,724 (266,992) (224,239) 54,392 - 17,773 492,523 (12,170,194) (4,475,243) (329,570) 1,016 13,005 - (10,051) 4,204 72,643 78,605 (19,565) (72,643) (173,697) (40,223) 14,000 5,000 (6,054,584 ) 2,410,129 298,996 860,480 205,181 (15,368) 2,220,820 (981,007) 181,105 (680,262) (480,980) (108,019) 152,365 44,016 870,016 (109,114) (145,482) (10,958) (2,922 ) (16,620 ) 3,299,099 (1,016,852 ) 27,892,336 19,019,135 265,798 225,758 (1,221,827) (873,959) (285 ) (1,036 ) 26,936,022 18,369,898 - (181,280) - (9,340) (290,000) - (5,764,014) (3,810,003) 475,486 2,928 - (171) (291,163) (111,196) 429,330 429,330 (362,705 ) 77 (5,803,066 ) (3,679,655 ) - 3,600,000 - (300,000) 11,975,000 500,000 (7,300,000) (3,700,000) (24,000,000) (14,500,000) (7,404) (7,853) - (4,852,022) 1,282,281 393,633 22,104 - (18,028,019 ) (18,866,242 ) 90,253 4,607 3,195,190 (4,171,392) 3,218,955 6,414,145 $ 6,414,145 2,242,753
	2014 (Adjusted) $ 30,647,821 5,360,994 191,434 1,191,244 (266,992) 54,392 17,773 (12,170,194) (329,570) 13,005 (10,051) 72,643 (19,565) (173,697) 14,000 (6,054,584 ) 298,996 205,181 2,220,820 181,105 (480,980) 152,365 870,016 (145,482) (2,922 ) 3,299,099 27,892,336 265,798 (1,221,827) (285 ) 26,936,022 - - (290,000) (5,764,014) 475,486 - (291,163) 429,330 (362,705 ) (5,803,066 ) - - 11,975,000 (7,300,000) (24,000,000) (7,404) - 1,282,281 22,104 (18,028,019 ) 90,253 3,195,190 3,218,955 $ 6,414,145
	$ $

174

NANYA TECHNOLOGY CORPORATION

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2015 (All amounts are expressed in thousands of New Taiwan Dollars, Except for per share information or unless otherwise specified)

1. Organization and Principal Activities

Nanya Technology Corporation (the “Company”) was legally established with the approval of the Ministry of Economic Affairs on March 4, 1995, with registered address at 669, Fuhsing 3rd Road, Hwa-Ya Technology Park, Kueishan District, Taoyuan City, Taiwan. The main operating activities of the Company are researching, developing, manufacturing and selling semiconductor products, and the import and export of its machinery, equipment and raw materials.

2. Financial Statements Issuance Procedures

The accompanying financial statements were approved and authorized for issue by the Board of Directors on March 15, 2016.

3. Application of New and Revised Standards and Interpretations

(1) Impact of adoption of new and amended standards and interpretations endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”)

The Company adopted the 2013 version of the IFRSs endorsed by the FSC (excluding IFRS 9 Financial Instruments) in preparing the financial statements commencing from 2015. Related new, revised and amended standards and interpretations are listed below:

New, Revised or AmendedStandards and Interpretations
Amendments to IFRS 1 “Limited Exemption from Comparative IFRS 7 Disclosures
for First - time Adopters”
Amendments to IFRS 7 “Disclosures–Transfer of Financial Asset”
Amendments to IFRS 7 “Disclosures–Offsetting Financial Assets and Financial
Liabilities”
IFRS 10 “Consolidated financial statements”
IFRS 12 “Disclosure of Interests in Other Entities”
IFRS 13 “Fair Value Measurement”
Amendment to IAS 1 “Presentation of Items of Other Comprehensive Income”
Amendment to IAS 12 “Deferred Tax: Recovery of Underlying Assets”
Amendment to IAS 19 “Employee Benefits”
Amendment to IAS 27 “Separate Financial Statements”
Amendment to IAS 32 “Offsetting Financial Assets and Financial Liabilities”

Effective Date
Prescribed by
**IASB **

July 1, 2010
July 1, 2011
January 1, 2013
January 1, 2013
(Investment entity
took effect on
January 1, 2014)
January 1, 2013
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2014

175

Except for the following items, the Company believes that the adoption of the aforementioned 2013 version of the IFRSs endorsed by the FSC did not have any significant effect on the Company’s financial statements.

(a) Amendments to IAS 1 “Presentation of Financial Statements”

The amendments to IAS 1 require the Company to classify other comprehensive income as items presented, should be shown separated for each of the two categories: (a) items that could not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. The amendments also require the tax associated with items of other comprehensive income which presented before tax to be shown separately. Accordingly, the Company has amended the presentation of the statements of comprehensive income, and restated the comparative-period amounts.

(b) IFRS 12 “Disclosure of Interests in Other Entities”

The Company has increased its disclosures on information related to subsidiaries, associates, and joint ventures according to this standard. Please refer to Note 6(5) for details.

The standard has changed the definition of fair value, provided a framework for fair value measurement, and prescribed specific guidance for fair value measurement disclosures. Accordingly, the Company has increased related disclosures on fair value measurements. In accordance with the transitional provision of this standard, the required additional disclosure for comparative information is no longer required. Although this standard has been postponed for adoption commencing 2015, management is not expecting that the adoption thereof will have significant influences on the fair value of the Company’s assets and liabilities.

(d) Amendments to IAS 19 “Employee Benefits”

The amendments to IAS 19 require the Company to calculate a “net interest” amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on plan assets used in current IAS 19. In addition, the amendments eliminate the accounting treatment of either the corridor approach or the immediate recognition of actuarial gains and losses to profit or loss when incurred, and instead require company to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the other hand, is expensed immediately when incurred and is no longer amortized over the average period before meeting vesting conditions on a straight-line basis. In addition, instead of recognizing liability and expense only when a demonstrable benefit commitment is made, the amendments require the Company to recognize liability and expense for termination benefits on (1) the date when the Company can no longer withdraw the offer of the benefit; or (2) the date when the Company recognizes related restructuring expense, whichever date is earlier. Moreover, the amendments also require a broader disclosure for defined benefit plans.

176

The Company has changed the accounting policy related to the measurement and expression of net defined benefit assets, pension cost, and actuarial gains or losses. With the elimination of the corridor approach, the Company has fully recognized the unrecognized actuarial gains or losses, and retrospectively adjusted the accumulated deficit as follows:

Statement of financial position:

Reporting balances under 2010 Effect of version of IFRSs IFRSs upgrade December 31, 2014: Investments accounted for using equity method $ 28,679,484 (2,272 ) Current defined benefit liabilities 674,994 (40,431 ) Other non-current liabilities 513,665 13 Accumulated earnings 10,778,122 38,146 Statement of comprehensive income: Reporting balances under 2010 Effect of version of IFRSs IFRSs upgrade For the year ended December 31, 2014： Operating costs $ (26,809,906) 467 Advertising expense (415,367) 40 Management expense (1,365,841) 123 R&D expense (1,335,157) 86 Share of other comprehensive income of subsidiaries, associates, and joint ventures accounted for using equity method 12,170,120 74 Net income 28,241,527 790		Reporting balances under 2013 version of IFRSs
		28,677,212 634,563 513,678 10,816,268 Reporting balances under 2013 version of IFRSs
		(26,809,439) (415,327) (1,365,718) (1,335,071) 12,170,194 28,242,317

177

(2) IFRSs issued by IASB but not yet endorsed by FSC

New, revised and amended standards and interpretations for IFRSs issued by the IASB but not yet endorsed by the FSC are as follows:

New, Revised or Amended Standards and Interpretations
IFRS 9 “Financial Instruments”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture”
Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment
Entities: Applying the Consolidation Exception”
Amendments to IFRS 11 “Accounting for Acquisitions of Interests
in Joint Operations”
IFRS 14 “Regulatory Deferral Accounts”
IFRS 15 “Revenue from Contracts with Customers”
IFRS 16 “Leases”
Amendment to IAS 1 “Disclosure Initiative”
Amendment to IAS 7 “Disclosure Initiative”
Amendment to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”
Amendments to IAS16 and IAS 41 “Bearer Plants”
Amendments to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 27 “Equity Method in Separate Financial
Statements”
Amendments to IAS 36 “Recoverable Amount Disclosures for
Non-Financial Assets”
Amendments to IAS 39 “Novation of Derivatives and
Continuation of Hedge Accounting”
Annual Improvements Cycle 2010-2012 and 2011-2013
Annual Improvements to IFRSs 2012-2014 Cycle
Amendments to IFRIC Interpretation 21 “Levies”

Effective Date
Prescribed by IASB

January 1, 2018
Not yet
announced by IASB
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2018
January 1, 2019
January 1, 2016
January 1, 2017
January 1, 2017
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
July 1, 2014
January 1, 2016
January 1, 2014

The Company is evaluating the impact on its financial position and financial performance of the initial adoption of above mentioned standards or interpretations. The results thereof will be disclosed when the Company completes its evaluation.

178

4. Summary of Significant Accounting Policies

The following significant accounting policies are adopted in the accompanying financial statements. Except for the changes in accounting policies described in Note 3(1), these significant accounting policies have been applied consistently to all the reporting periods presented in these financial statements .

(1) Statement of compliance

The accompanying financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the “Regulations”).

(2) Basis of preparation

Basis of measurement

Except for the defined benefit plan assets that are recognized as plan assets, plus the unrecognized past service cost and the unrecognized actual loss, less the unrecognized actual gain and the present value of the defined benefit obligation, the financial statements have been prepared on a historical cost basis.

Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the Company operates. The financial statements are presented in New Taiwan Dollars, which is the Company’s functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.

(3) Foreign currency
Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary assets and liabilities is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for the effective interest and payments during the period, and such assets and liabilities reported in foreign currency translated at the exchange rate at the end of the reporting period.

179

Foreign currency-denominated non-monetary assets and liabilities measured at fair value are retranslated to the functional currency at the exchange rate on the date when fair value was determined. Foreign currency denominated non-monetary items measured at historical cost is translated using the exchange rate at the date of the transaction. Foreign currency differences arising on translation are recognized in profit or loss.

2. Foreign operations

The assets and liabilities of foreign operations including goodwill and fair value adjustments arising on acquisition are translated to the Company’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’s functional currency at the average rate. Foreign currency differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(4) Classification of current and non-current assets and liabilities

An asset is classified as current under any one of the following conditions. All other assets are classified as non-current.

The asset is expected to be realized, or sold or consumed, during the Company’s normal operating cycle;
The asset is held primarily for the purpose of trading;
The asset is expected to be realized within twelve months after the balance sheet date; or
The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date.

A liability is classified as current under any one of the following conditions. All other liabilities are classified as non-current.

180

The liability is expected to be settled during the Company’s normal operating cycle;
The liability is held primarily for the purpose of trading;
The liability is due to be settled within twelve months after the balance sheet date; or
The Company does not have any unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.
(5) Cash and cash equivalents

(6) Financial instruments

Financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instruments.

1. Financial assets

Financial assets are categorized into financial assets at fair value through profit or loss and receivables.

(a) Loans and Receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market, which comprise accounts receivable and other receivables. Such assets are recognized initially at fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, receivables other than are measured at amortized cost using the effective interest method, less any impairment losses other than short-term receivables in which the effect of discounting is immaterial. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Interest income from receivables is recognized in other income.

181

(b) Impairment of financial assets

Objective evidence that financial assets are impaired includes delinquency or default (such as unpaid or delayed payment of interest or principal) by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an available-for-sale investment in an equity security, a significant or prolonged decline in its fair value below its cost is considered objective evidence of impairment.

An impairment loss in respect of a financial asset is written off directly against its carrying amount, except for accounts receivable, for which an impairment loss is credited to an allowance account against the receivables. When a receivable is determined to be uncollectible, it is written off from the allowance account. Any subsequent recovery of a receivable written off is charged to the allowance account. Changes in the amount of the allowance accounts are recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss on a financial assets measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date.

Impairment losses and recoveries resulting from accounts receivable are recognized under administrative and general expenses. Impairment losses and recoveries resulting from financial assets other than accounts receivable are recognized in profit or loss, under other gain or loss of results from non-operating activities.

182

(c) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash inflow from the asset are terminated, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

2. Financial liabilities and equity instruments

(a) Classification of liabilities or equity instruments

Debt or equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized based on the proceeds received, net of direct issue costs.

Interest related to a financial liability is recognized in profit or loss under non-operating income and expenses.

(b) Other financial liabilities

Except for those held-for-trading, financial liabilities which comprise of short-term and long-term loans, and accounts and other payables, are measured at fair value, plus, any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, under finance expenses of the results from non-operating activities.

183

(c) Derecognition of financial liabilities

(d) Offsetting of financial assets and liabilities

Financial assets and liabilities are presented on a net basis when the Company has legally enforceable rights to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(7) Inventories

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(8) Investment in associates

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity.

The financial statements include the Company’s share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments to align their accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases.

Unrealized profits resulting from the transactions between the Company and an associate are eliminated to the extent of the Company’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

184

When the Company’s share of losses exceeds its interest in an associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.

(9) Subsidiaries

The Company accounts for investee companies in which it has a controlling interest using the equity method. The net income, other comprehensive income, and shareholder’s equity in the financial reports of the Company and the net income, other comprehensive income, and shareholder’s equity that belongs to the Company in the consolidated financial reports should be the same.

The Company accounts for changes in owners’ equity of subsidiaries as equity transactions between the two parties of the transaction, provided that control is still exists.

(10)Property, plant and equipment

(a) Recognition and measurement

Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses. The cost of a self-constructed asset comprises material, direct labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that is eligible for capitalization. In additions cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

(b) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure can be reasonably assessed, and will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

185

(c) Depreciation

Depreciation of property, plant and equipment is provided over their estimated useful lives by using the straight-line method. The depreciation charge for each period is recognized in profit or loss.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

(i) Buildings: 25 years.
(ii) Machinery and equipment: 5 to 16 years.
(iii) Miscellaneous equipment: 3 to 15years.

(11)Leases

1. Lessor

Lease income from an operating lease is recognized as income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are confirmed.

186

2. Lessee

Leases in which the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the lease asset.

Contingent rent is recognized as expense in the period in which it is incurred.

(12)Intangible Assets

Other development expenditure is recognized as an expense when incurred.

(13)Impairment of non-derivative financial assets

At each balance sheet date, an assessment is made whether there is any indication that an asset (including inventories, deferred tax assets, and other non-financial assets) may have been impaired. If any such indication exists, the recoverable amount of the asset is estimated. If it is not possible to determine the recoverable amount for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit (CGU).

187

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amount of that asset is estimated. An impairment loss recognized in prior periods for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset ’ s recoverable amount since the last impairment loss was recognized. The increase in the carrying amount shall not exceed the carrying amount (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years.

(14)Treasury stock

Repurchased shares are recognized under treasury shares (a contra-equity account) based on their repurchase price (including all directly accountable costs), net of tax. Gai ~~n o~~ n disposal of treasury shares is recognized under “Capital Reserve – Treasury Share Transactions”; Loss on disposal of treasury shares is offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such los ~~s i~~ s accounted for under retained earnings. The carrying amount of treasury shares is calculated using the weighted average of different types of repurchase.

(15)Revenue recognition

188

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement for international shipments, transfer usually occurs upon loading the goods onto the relevant carrier at the port. Generally for such products the customer has no right of return. For domestic sales, transfer occurs upon receipt by the customer.

(16)Employee benefits

1. Defined contribution plan

Obligations for contributions to a defined contribution pension plan are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

2. Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of a defined benefit pension plan is calculated by estimating the discounted present value of future benefit that employees have earned in return for their service in the current and prior periods. Any unrecognized past service costs and the fair value of any plan assets are deducted from aforementioned net obligation. The discount rate is the yield on the reporting date of government bonds that have maturity dates approximating the terms of the Company’s obligations and are denominated in the same currency in which the benefits are expected to be paid.

An actuarial calculation of pension costs and related liabilities is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, an asset is recognized, but the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to the plan. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized immediately in profit or loss.

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3. Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

(17)Share-based payment

For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for the differences between expected and actual outcomes.

(18)Income taxes

The initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

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The investments in subsidiaries, branches and associates, and interests in joint ventures, where it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is measured, at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets are offset against deferred tax liabilities only if:

(i) the Company has a legal enforceable right to set off current tax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred liabilities relate to income taxes levied by the same taxation authority on either:
(a) The same taxable entity; or
(b) Different taxable entities which intent either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously; in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

A deferred tax asset is recognized for the carry forward of unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that the benefit of part or the deferred tax asset will be utilized.

(19)Earnings per share

The basic earnings per share are calculated as the profit attributable to the ordinary shareholder of the Company divided by weighted-average number of ordinary shares outstanding. The diluted earnings per share are calculated as the profit attributable to ordinary shareholders of the Company divided by weighted-average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee stock options.

(20)Operating segments

The Company discloses its information on operating segments in its consolidated financial statements, so it need not disclose such information in its non-consolidated financial statements.

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5. Critical Accounting Judgments and Key Sources of Estimation Uncertainly

The financial statements are prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, under which, management make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in future periods.

Please refer to Note 6(7)(8)(11) for information concerning the recognized significant impact on the financial report due to the application of accounting policies involving significant judgments.

Significant judgment, assumptions and estimation uncertainties were applied to the following:

(1) Realizability of deferred tax assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those deferred tax assets can be utilized. Management has applied subjective judgment and estimates in assessing the realization of deferred tax assets, including estimates of future revenue growth and profitability, income tax holidays, the amount of tax credits that can be utilized and feasible tax planning strategies. Any changes in the global economic environment, industry trends, and relevant laws and regulations could result in significant adjustments to the deferred tax assets. Deferred tax assets of $840,000 and $869,332 had been recognized as of December 31, 2014 and 2015, respectively.

6. Significant Accounts

(1) Cash and Cash Equivalents

Cash in bank－checking and demand deposit account Cash equivalents: Cash in bank－time deposits Repurchase agreements collateralized by corporate bonds	December 31, 2014 $ 2,300,148 3,808,616 305,381 $ 6,414,145	December 31, 2015	December 31, 2015
			2,124,513 - 118,240 2,242,753

Refer to Note 6(20) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

The Company’s time deposits of $360,000, which were pledged as collateral for the Company’s loans payable, were reclassified to non-current assets both as of December 31, 2014 and 2015.

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(2) Investment in debt securities with no active market / Financial assets carried at cost－non-current

The Company purchased a two-year interest-free convertible bond of USD6, 000 thousand issued by Memoright in August, 2015. The conversion rights embedded in the corporate bond are accounted for separately as the economic characteristics and risks are not specifically associated. The conversion rights of the corporate bond which are linked to unlisted preference shares of $9,340 and the corporate bonds of $181,280 were accounted for as financial assets carried at cost －－ non-current and investment in debt securities with no active market non-current, respectively, as of December 31, 2015.

(3) Accounts Receivable and Other Receivables

Accounts receivable－non-related parties Accounts receivable－related parties Other receivables (including related parties)	December 31, 2014 $ 21,301 6,513,814 1,892,592 $ 8,427,707	December 31, 2015	December 31, 2015
			- 5,753,379 1,729,609 7,482,988

As of December 31, 2014 and 2015, no allowance for impairment was provided because all of the accounts comprising accounts receivable (including related parties) and other receivables (including related parties) were still within the normal credits terms and were evaluated to be collectable.

Aging analysis of notes receivable, accounts receivable and other receivables:

December 31, 2014 December 31, 2015	Neither past due nor impaired $ 8,290,017 7,482,988	Past due but not impaired Within 30 days 31-60 days over 61 days 137,690 - - - - -	Past due but not impaired Within 30 days 31-60 days over 61 days 137,690 - - - - -	total
		Within 30 days 137,690 -	31-60 days - -
				8,427,707 7,482,988

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(4) Inventories

Inventories
Raw materials Work in progress In-transit inventory Total	December 31, 2014 $ 145,517 2,559,678 2,129,088 $ 4,834,283	December 31, 2015
		214,271 2,606,799 2,994,220 5,815,290

The Company recognized cost of goods sold amounting to $26,839,034 and $26,209,513 for the years ended December 31, 2014 and 2015, respectively.

As the net realizable value of inventories has increased because the circumstance that caused the inventory devaluation in prior period to improve, the Company recognized a gain from recovery in the value of inventories of $4 and $29,595 for the years ended December 31, 2014 and 2015 respectively, which was debited to cost of goods sold as the carrying value of inventories exceeded the net realizable value thereof.

(5) Investments Accounted for Using Equity Method

The components of the investments accounted for using equity method were as follows:

Subsidiaries Associate	December 31, 2014 $ 493,082 28,184,130 $ 28,677,212		December 31, 2015
	$ $		571,456 32,647,944
			33,219,400

(a) Subsidiaries

Please refer to the consolidated financial statements as of and for the years ended December 31, 2015 for further information.

(b) Associate

The information of the investments in a significant associate accounted for using equity method was as follows:

method was	as follows:
Associates	Relationship	Registration Country	Percentage of ownership
			2014.12.31	2015.12.31
Inotera Memories, Inc	The main supplier for raw material of the Company. Its primary operating activity is producing and selling of semiconductor products.	Taiwan	24.28%	24.20%

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The Company's capital surplus—equity of associates accounted for using equity method increased by $62,756 due to the recognition of the costs of employee stock options of Inotera Memories, Inc. for the year ended December 31, 2015.

On February 10, May 12, August 11 and November 11, 2015, the Company recognized capital surplus—equity of associates accounted for under the equity method amounting to $23,560 due to the increase of capital of Inotera Memories, Inc. by 22,595 thousand shares, for which the Company did not purchase additional shares in proportion to its original shareholding percentage.

The Company's capital surplus—equity of associates accounted for using equity method increased by $62,979 due to the recognition of compensation costs arising from the employee stock options of Inotera Memories, Inc. for the year ended December 31, 2014.

－ The Company recognized capital surplus equity of associates accounted for under the equity method amounting to $2,124,829 due to the recognition of compensation costs arising from the employee stock options of 71,714 thousand shares of Inotera Memories, Inc. On February 13, May 8, August 6 and November 11, 2014, and the depositary receipts of 40,000 units issued by Inotera Memories, Inc. on May 15, 2014, for which the Company did not purchase the depositary receipts in proportion to its original shareholding percentage.

The fair value and book value of investments in publicly traded stocks of the major associate was as follows:

was as follows:
Book value Fair Value	December 31, 2014 $ 28,184,130 $ 79,691,682	December 31, 2015
	$ $	32,647,944 44,370,170

Summary of shares of profit or loss of associates attributable to the Company were as follows:

Share of profit of associate		For theyears ended December 31,	For theyears ended December 31,
		2014 13,219,545	2015 4,380,050
	$

The following is the aggregated financial information of a significant associate that has already been modified to the associate’s financial statements based on the IFRS as endorsed by FSC. Such financial information included the fair value adjustments at the time of acquisition of this associate and the adjustments made for differences in the applicable accounting policies as of and for the years ended December 31, 2014 and 2015.

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The financial information of Inotera Memories Inc. was summarized as follows:

Current assets Non-current assets Current liabilities Non-current liabilities Net assets Operating income Net income Other comprehensive income Total comprehensive income Share of the equity of the associate at January 1, Total comprehensive income allocated to the Company of investment in associate at December 31, Share of the equity of the associate at December 31, Add: Disposal of realized profit from fixed assets Recognization of compensation costs arising from employee stock options Capital surplus due to acquisition of shares not proportionate t~~o~~ original holding ratio Less: Others Carrying amount of equity of the major associate	December 31, 2014 December 31, 2015 $ 56,808,416 41,007,469 80,994,116 116,878,536 (17,273,310) (12,326,702) (4,050,738 ) (10,237,028 ) $ 116,478,484 135,322,275 December 31, 2014 December 31, 2015 $ 82,570,966 60,762,323 $ 52,913,068 18,077,421 (7,316 ) (11,365 ) $ 52,905,752 18,066,056 For theyears ended December 31,	December 31, 2014 December 31, 2015 $ 56,808,416 41,007,469 80,994,116 116,878,536 (17,273,310) (12,326,702) (4,050,738 ) (10,237,028 ) $ 116,478,484 135,322,275 December 31, 2014 December 31, 2015 $ 82,570,966 60,762,323 $ 52,913,068 18,077,421 (7,316 ) (11,365 ) $ 52,905,752 18,066,056 For theyears ended December 31,	December 31, 2014 December 31, 2015 $ 56,808,416 41,007,469 80,994,116 116,878,536 (17,273,310) (12,326,702) (4,050,738 ) (10,237,028 ) $ 116,478,484 135,322,275 December 31, 2014 December 31, 2015 $ 82,570,966 60,762,323 $ 52,913,068 18,077,421 (7,316 ) (11,365 ) $ 52,905,752 18,066,056 For theyears ended December 31,
		2014 13,996,332 13,219,545 27,215,877 540 62,979 2,124,829 (1,220,095 ) 28,184,130	2015 28,184,130 4,380,050 32,564,180 270 62,756 23,560 (2,822 ) 32,647,944
	$ $

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(6) Acquisition of non-controlling interests
(a) Acquisition of non-controlling interests

On March 27, 2014, a subsidiary of the Company, Sumpro Electronics Corporation (Sumpro), redeemed its common shares by paying $69,750 in cash, which increased the Group’s shareholding percentage in its subsidiary from 94% to 100%. On September 26, 2014, the treasury shares of stock of 15,000 thousand shares repurchased by the subsidiary were cancelled due to a resolution approved by the board of directors of Sumpro. The record date for all of these capital decrease transactions were set on September 26, 2014. These transactions resulted in the following changes to the Company’s ownership interest in its subsidiaries and associates:

Acquisition of non-controlling interests (carrying amount) Consideration paid for the non-controlling interests Differences between purchase consideration and book value of the shares Decrease in capital surplus Decrease in retained earnings	For the year ended December 31, 2014	For the year ended December 31, 2014
	$ $ $ $	9,787 (69,750 ) (59,963 ) (36,311) (23,652 ) (59,963 )

(b) Disposal of certain subsidiaries’ shares without losing control

On March 18, 2014, the Company sold for $22,104 its ownership of 12.76 percent shares of a subsidiary, PieceMakers Technology, Inc. This resulted in the following:

subsidiary, PieceMakers Technology, Inc. This resulted in the following:
Book value of non-controlling interests disposed of. Proceeds from disposal of non-controlling interests Decrease in capital surplus the difference between the actual selling price and book value of the equity shares sold	For the year ended December 31, 2014 PieceMakers
	$ $	22,939 (22,104 ) 835

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(7) Property, Plant and Equipment

(a) The cost and depreciation of the property, plant and equipment of the Company as of and for the years ended December 31, 2014 and 2015 were as follows:

Cost: Balance as of January 1, 2014 Additions Disposals Reclassification Balance as of December 31, 2014 Balance as of January 1, 2015 Additions Disposals Reclassification Balance as of December 31, 2015 Accumulated depreciation / impairment: Balance as of January 1, 2014 Depreciation for the period Reversal of impairment loss Impairment loss Disposals Reclassification Transferred to expense Balance as of December 31, 2014 Balance as of January 1, 2015 Depreciation for the period Reversal of impairment loss Disposals Reclassification Balance as of December 31, 2015 Carrying amounts: Balance as of December 31, 2014 Balance as of December 31, 2015		Land		Building 5,238,565 - (1,042,934) - 4,195,631 4,195,631 - - - 4,195,631 1,600,801 180,242 - - (651,110) - - 1,129,933 1,129,933 159,931 - - - 1,289,864 3,065,698 2,905,767	Machinery and equipment 119,046,612 1,179,889 (3,779,579) 1,168,671 117,615,593 117,615,593 3,953,441 (188,500) 3,091,399 124,471,933 73,448,689 5,070,113 (12,986) - (3,737,807) 180,828 12,986 74,961,823 74,961,823 5,442,163 - (187,939) 13,992 80,230,039 42,653,770 44,241,894	Other equipment 1,976,119 18,004 (272,570) (191,901 ) 1,529,652 1,529,652 9,251 (121,651) (15,969 ) 1,401,283 1,516,699 110,639 (19) 2,954 (264,181) (180,828) 19 1,185,283 1,185,283 57,903 4,204 (117,998) (13,992 ) 1,115,400 344,369 285,883	Under construction 529,640 4,526,483 - (976,770 ) 4,079,353 4,079,353 271,280 - (3,075,430 ) 1,275,203 - - - - - - - - - - - - - - 4,079,353 1,275,203	Total 127,804,860 5,724,376 (5,095,083) - 128,434,153 128,434,153 4,233,972 (310,151) - 132,357,974 76,566,189 5,360,994 (13,005) 2,954 (4,653,098) - 13,005 77,277,039 77,277,039 5,659,997 4,204 (305,937) - 82,635,303 51,157,114 49,722,671
	$ $ $ $ $ $ $ $ $ $	1,013,924 - - - 1,013,924 1,013,924 - - - 1,013,924 - - - - - - - - - - - - - - 1,013,924 1,013,924

(b) Collaterals

Please refer to Note 8 for the details of the Company's property, plant and equipment pledged or collateralized as security for long-term loans or lines of credit.

Please refer to Note 6(11) for the further description of finance lease liabilities.

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(d) Property, plant and equipment under construction

Property, plant and equipment under construction
Capitalized interest (charged to construction in progress) Capitalized interest rates	For theyears ended December 31, 2014 2015 $ - 33,587 - 2.10%~2.32%
		2014 - -
	$

(8) Lease receivables
(a) On June 18, 2009, the Company signed an amended long-term lease agreement with Inotera Memories, Inc. and MeiYa Technology Corp. on the lease of building, facilities and land located on 348, 348-1 and 348-3, Hwa-Ya Section, Kueishan District, Taoyuan City. This amended lease agreement, which took effect retroactively from January 1, 2009, includes the renewal term. Initial lease term is from January 1, 2009 to December 31, 2018. However Inotera Memories, Inc. is entitled to renew this amended lease agreement for an unlimited number of consecutive additional terms of five years each, by providing a written notice with the intention to renew the lease term commencing from January 1, 2019. In addition, Inotera Memories, Inc. has an exclusive option to purchase the leased assets for a total purchase price of US$50,000 thousand on and after January 1, 2024. Also, the rental receivable for the entire year of 2009 has been waived. Initial yearly rentals for the leased building (including facilities and land) were US$13,010 thousand and US$1,990 thousand, respectively from January 1, 2010 to December 31, 2018; the first yearly renewal rentals for the leased building (including facilities and land) will be US$8,010 thousand and US$1,990 thousand, respectively, from January 1, 2019 to December 31, 2023; the subsequent yearly renewal rentals for the leased building (including facilities and land) will be US$10 thousand and US$1,990 thousand commencing from January 1, 2024. The amended lease agreement for the building (including facilities) is treated as a capital lease because (a) the present value of the periodic rental payments made since the inception date is at least 90% of the market value of the leased assets and (b) the lease term is equal to 75% or more of the total estimated economic life of the leased assets. The land is treated as an operating lease.
(b) The total lease receivable from the capital lease of the building (including facilities) was $5,185,620; the implicit interest rate was 10.56%. The cost of the leased assets at the beginning of the lease period was $2,656,223. The difference was recognized as unrealized interest revenue of $2,529,397. For the years ended December 31, 2014 and 2015, the Company recognized the interest revenue of $225,187 and $202,759, respectively, from the amortization of unrealized interest revenue.

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The details of lease receivables were as follows:

Less than one year Between one and five years More than five years Subtotal Current Non-current Lease receivables－related parties		December 31, 2014 Gross investment in the lease Unearned finance income Present value of minimum lease payments receivable 429,330 202,759 226,571 1,552,320 544,414 1,007,906 1,057,320 181,420 875,900 3,038,970 928,593 2,110,377 226,571 1,883,806 $ 2,110,377	December 31, 2014 Gross investment in the lease Unearned finance income Present value of minimum lease payments receivable 429,330 202,759 226,571 1,552,320 544,414 1,007,906 1,057,320 181,420 875,900 3,038,970 928,593 2,110,377 226,571 1,883,806 $ 2,110,377	December 31, 2015	December 31, 2015	December 31, 2015
		Gross investment in the lease 429,330 1,552,320 1,057,320 3,038,970	Unearned finance income 202,759 544,414 181,420 928,593 $	Gross investment in the lease 429,330 1,387,320 792,990 2,609,640	Unearned finance income 177,867 444,864 103,103 725,834 $	Present value of minimum lease payments receivable
	$ $					251,463 942,456 689,887 1,883,806 251,463 1,632,343 1,883,806

(9) Short-term Loans

Short-term borrowings consisted of the following:

Unsecured bank loans Interest rate Maturity date	December 31, 2015
	$ 3,300,000
	1.362%~1.60%
	105.02.05~105.02.12

(10) Long-term Loans

Long-term loans consisted of the following:

	December 31, 2014	December 31, 2014		Amount 800,000 15,580,000 (3,900,000 ) 12,480,000 10,430,000
Currency NTD NTD	Interest rate range Expiration 1.987%~2.092% 104~105 2.093%~2.439% 104~108 December 31, 2015
			$ $ $
Currency NTD NTD	Interest rate range 1.271%~2.014% 2.3270%	Expiration 105~106 108		Amount
			$ $ $	1,200,000 11,985,000 (500,000 ) 12,685,000 80,670,000

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(a) Issuance and redemption of loans

(i) The Company signed a syndicated loan agreement with Bank of Taiwan, the managing bank, and 13 other banks (here in after referred to as ‘‘the Company of banks”) for a syndicated loan with a credit line of $12,000,000 on January 2, 2014. The Company’s actual drawings of the syndicated loan amounted to $6,400,000 on January 28, 2014, $3,650,000 on July 28, 2014, and $1,950,000 on October 27, 2014, respectively. This loan bears interest of 90-day commercial paper rate, plus, an annual interest rate of 1.1% in monthly payments. Additionally, the first installment payment of the principal is payable on due date, with the rest payable in 5 semi-annual equal installments. According to the agreement, the borrower should maintain a balance of no less than 3% of the original credit limit in the specified bank account two months from the first credit approval date.

Also, the Company is required to maintain certain financial ratios which should be based on its semi-annual and annual consolidated financial statements and calculated by the managing bank every 6 months starting from the end of year 2013 or when the managing bank deems necessary. In the event that any of the financial covenants below is breached, the Company is required to submit a formal letter to the managing bank at least three months after submitting the semi-annual and annual consolidated financial statements to syndicated banks, so that the managing bank can convene a meeting of the Banks to discuss the aforesaid breach and to resolve whether a waiver of the breach will be granted. The required financial ratios are as follows:

I. Financing payables to related parties: not less than $35,000,000.

In July 2015, the Company signed a supplementary contract with a group of banks, agreeing to delete this financial covenant.

II. Liability Ratio (total liabilities to total net equity and tangibles assets, plus, financing payables to related parties): not more than 200%.
III. Tangible net equity, plus, other financing payables to related parties: not less than $45,000,000 in the semi-annual and annual consolidated financial statements of 2013, and $50,000,000 for each year beginning 2014.

The Company was in compliance with all of the aforementioned financial covenants as of and for the years ended December 31, 2014 and 2015.

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(ii) The Company signed a syndicated loan agreement with Bank of Taiwan, the managing bank, and 7 other banks for a credit line of $18,000,000 in the form of credit loan on November 9, 2009. According to the above syndicated loan agreement, the Company was required to comply with certain financial covenants by maintaining certain financial ratios. In the event that any of the financial covenants below is breached, the Company is required to cure the breach, no later than the end of November in the relevant calendar year, for a breach in respect of any semi-annual consolidated financial statements, and for a breach in respect of any annual consolidated financial statements, no later than the end of June of the following calendar year, or to submit a formal letter to the managing bank at least two months prior to the expiration of the Remedial Period, so that the managing bank can convene a meeting of the Banks to discuss the aforesaid breach and to resolve before the expiration of the Remedial Period on whether a waiver of the breach will be granted. These financial covenants are as follows:
I. Current Ratio (total current assets to total current liabilities): not less than one (1) to one (1).
II. Interest Coverage Ratio (EBITDA to interest expenses): shall not be less than three (3) to one (1).
III. Leverage Ratio (total liabilities, plus, contingent liabilities to tangible net worth): not higher than one and a half (1.5) to one (1).

On November 28, 2014, the syndicated banks formally agreed to further waive the Company’s obligation to comply with its financial loan covenants under the syndicate loan relating to the consolidated financial statements for the six-month period ended June 30, 2014. This syndicated loan was repaid on January 28, 2015.

(b) Collaterals for bank loans

Please refer to Note 8 for information on assets pledged as loan collateral by the Company.

(11) Finance lease liabilities
(a) The Company signed a long-term lease agreement with Inotera Memories, Inc. to lease out a portion of the building and land (including supplemental equipment) located at No. 667, Fuhsing 3rd Road, Hwa-Ya Technology Park, Kueishan Dist., Taoyuan City. The lease term covers a total lease period of 354 months commencing from July 1, 2005, and will expire on December 31, 2034 (including the period when the lease is automatically extended). The monthly rentals for the lease of building and land (including supplemental equipment) were $2,058 and $310, respectively. The lease of the building is treated as a finance lease. However, the lease of the land is treated as an operating lease.

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(b) The lease of the building is treated as a finance lease with implicit interest rate of 5.88%. The net carrying value of leased assets and the initial total amount of lease payable for the finance lease of the building was $345,637.
(c) The rental expenses from the lease of land which was treated as an operating lease amounted to$3,719 and $3,719 for the years ended December 31, 2015 and 2014, respectively. These expenses were fully paid as of December 31, 2015 and 2014.

	December 31, 2014	December 31, 2014	December 31, 2014	December 31, 2014	December 31, 2015	December 31, 2015	December 31, 2015
	Future minimum lease payments	Interest		Present value of minimum lease payments	Future minimum lease payments 24,698 98,792 345,770 469,260	Interest 16,371 60,142 110,497 187,010	Present value of minimum lease payments
$ $	24,698 98,792 370,468 493,958	16,845 62,343 124,667 203,855	7,853 36,449 245,801 290,103 $ 7,853 282,250 $ 290,103				8,327 38,650 235,273
							282,250
							8,327 273,923
							282,250

(12) Employee Benefits
(a) Defined benefit plan

The movements in the present value of the defined benefit obligations and fair value of plan assets were as follows:

assets were as follows:
Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2014 $ 1,052,002 (417,439 ) $ 634,563	December 31, 2015
	$ $		1,189,853 (433,993 ) 755,860

The Company has established an employee defined benefit retirement plan covering full-time employees. Under this plan, contributions are made to an independent fund that is deposited with Bank of Taiwan. Employees are eligible for retirement and payments of retirement benefits are based on years of service and the average salary for the last six months before the employee’s retirement according to the R.O.C. Labor Standards Law.

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(i) Composition of plan assets

The Labor Pension Fund Supervisory Committee manages the Company’s pension fund which is being funded according to the Labor Standards Law. Under the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, this fund is required to distribute minimum income but such minimum income shall not be less than the interest income derived from two-year time deposit with the local banks.

As of December 31, 2015, the Company’s pension fund with Bank of Taiwan amounted to $433,993. Please refer to the related information published on the website of the Labor Pension Supervisory Committee concerning the utilization of the labor pension fund, related yield rate and its allocation.

(ii) Movements in present value of the defined benefit obligations

Movements in present value of the defined benefit obligations were as follows:

Defined benefit obligation at January 1, Current service and interest costs Remeasurement of net defined benefit liabilities－actuarial losses arising from change in financial assumptions Benefits paid Defined benefit obligation at December 31,	For the years ended	For the years ended	For the years ended	December 31, 2015
		2014 1,232,558 2,897 (54,969) (154,494 ) 1,052,002
	$ $			1,052,002 26,559 134,821 (23,529 ) 1,189,853

(iii) Movements in fair value of defined benefit plan assets

Fair value of plan assets at January 1, Interest income Remeasurement of net defined liabilities－return on plan assets (excluding interest income) Contributions from employer Benefits already paid by the plan Fair value of plan assets at December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
		2014 393,104 7,593 4,439 13,484 (1,181 ) 417,439		2015
	$ $			417,439 8,417 2,566 13,565 (7,994 ) 433,993

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(iv) Expenses recognized in profit or loss

Current service costs Net interest income of net defined benefitliabilities Expected rate of return for the plan asset Operating costs Expenses costs	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
	$ $ $ $	2014 5,488 23,419 (7,593 ) 21,314 13,914 7,400 21,314		2015
				5,587 20,972 (8,417 ) 18,142 12,672 5,470 18,142

(v) Remeasurement of net defined benefit liabilities (assets) recognized in other comprehensive income

Balance of January 1, Recognized during the period Balance of December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
	$ $	2014 - (59,408 ) (59,408)		2015
				(59,408) 109,771 50,363

(vi) Actuarial assumptions

Discount rate Future salary increases	For the years ended December 31,	For the years ended December 31,
	2014 2.00 % 2.50 %	2015 1.50 % 2.50 %

Based on the actuarial report, the Company is expected to make contributions of $13,563 to the defined benefit plans for the one year period after the reporting date.

The weighted average duration of the defined benefit plan is 22 years.

(vii)Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Company’s management use judgments and estimates in determining the related actuarial assumptions at balance sheet date, including discount rate, expected return on plan assets and future salary increases. Any changes in actuarial assumptions may significantly impact the present value of the defined benefit obligation.

205

As of December 31, 2015, the effects of the present value of the defined benefit obligation arising from changes in principal actuarial assumptions were as follows:

December 31, 2015 Discount rate (change 0.25%) Future salary increases (change 1%)	Effect of defined benefit obligations	Effect of defined benefit obligations
	Increase Amount $ 58,570 250,793	Decrease Amount
		(55,386) (204,793)

The same methods and assumptions are adopted in the two-year sensitivity analysis.

(b) Defined contribution plan

The Company contributes an amount equal to 6% of the employee’s monthly wages to the Labor Pension personal account of the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act, under which, the Company is not required to bear the regulated or putative obligation subsequent to the payment of fixed-rate contribution.

The Company’s pension costs under the contribution pension plan amounted to $92,293 and $96,658 for the years 2014 and 2015, respectively.

(13) Income Tax

(a) The Company’s income tax (benefit) expense recognized for the years ended December 31, 2014 and 2015 were as follows:

2014 and 2015 were as follows:
Current income tax expense Deferred income tax (benefit) expense Income tax (benefit) expense		For the years ended December 31, 2014 2015 - 484,691 2,405,504 - 2,405,504 484,691
		2014 - 2,405,504 2,405,504
	$ $
			484,691

206

The Company’s income tax expense recognized in other comprehensive income for the years ended December 31, 2014 and 2015 were as follows:

ended December 31, 2014 and 2015 were as follows:
Items that could do not be reclassified subsequently to profit or loss: Remeasurement of net defined benefit plan		For the years ended December 31, 2014 2015 - 22,484
		2014 -
	$

The Company’s income tax (benefit) expense calculated at the statutory income tax rate on the financial reporting income before income taxes was reconciled to the income tax (benefit) expense as follows:

Income tax calculated based on local tax rate Tax effect of five-year tax holiday Tax effect of expired loss carryforward benefit Tax effect of permanent differences Tax effect of unrecognized changes of temporary difference Tax effect of unrecognized current-year loss carryforward Tax effect of unrecognized current-year tax holiday Expired tax holiday Overestimated income tax expense of previous period 10% income surtax on undistributed earnings Total income tax expenses	For theyears ended December 31, 2014 2015 $ 5,210,130 2,996,396 (1,025,836) (685,630) 153,292 - (2,060,032) (759,778) (38,060) - 162,919 (1,566,094) (847,181) - 837,620 - 12,652 15,106 - 484,691 $ 2,405,504 484,691	For theyears ended December 31, 2014 2015 $ 5,210,130 2,996,396 (1,025,836) (685,630) 153,292 - (2,060,032) (759,778) (38,060) - 162,919 (1,566,094) (847,181) - 837,620 - 12,652 15,106 - 484,691 $ 2,405,504 484,691
		2014 5,210,130 (1,025,836) 153,292 (2,060,032) (38,060) 162,919 (847,181) 837,620 12,652 - 2,405,504
	$ $

(b) Deferred income tax assets and liabilities
(i) Unrecognized deferred income tax assets

The components of unrecognized deferred income tax assets of the Company were as follows:

follows:
Deductible temporary differences Net loss carryforward	December 31, 2014 $ 60,125 18,904,468 $ 18,964,593	December 31, 2015
		- 17,398,499
		17,398,499

207

As of December 31, 2015, under ROC Income Tax the unused loss carry forward benefits available to the Company were as follows:

Year 2008 2009 2010 2011 2012 2013 Total	Unused loss carry forward $ 6,607,978 19,525,230 12,439,512 30,344,487 29,717,148 3,709,757 $ 102,344,112	Expiry year
	$ $	2018 2019 2020 2021 2022 2023

(ii) Recognized deferred tax liabilities and assets

The changes in recognized deferred tax liabilities and assets in 2014 and 2015 were as follows:

Deferred tax assets ：

Balance as of January 1, 2014 Credit income statement Balance as of December 31, 2014 Balance as of January 1, 2015 (Credit) debit income statement Credit equity Balance as of December 31, 2015 Deferred tax liability：	Operating loss carryforward $ 3,163,111 (2,315,699 ) $ 847,412 $ 847,412 (69,509) - $ 777,903	Others 82,393 (89,805 ) (7,412 ) (7,412) 76,347 22,484 91,419	Total
	$ $ $ $		3,245,504 (2,405,504 ) 840,000 840,000 6,838 22,484 869,322

Balance as of January 1, 2015 Credit income statement Balance as of December 31, 2015	operating loss carryforward $ - - $ -	Others - 6,838 6,838	Total
			- 6,838
			6,838

208

The unutilized loss carry forward benefits as of December 31, 2015 and their expiry year for which deferred tax assets were recognized were as follows:

Year 2008		Amount of unused loss carryforward 4,575,902	Expiry year
	$		2018

(iii) The Company's income tax returns have been examined by the ROC tax authority through 2013.
(iv) Information related to the integrated income tax were as follows:

December 31, 2014 - 10,816,268 10,816,268 73,483 2014(actual) 0.68 %	December 31, 2015	December 31, 2015
	- 21,913,621
	21,913,621
	37,556
	2015 (estimated) 0.17 %
0.68 %		0.17 %

The stockholders approved a resolution during their meetings on August 30, 2007, and June 25, 2008, allowing the Company to avail of the Income Tax Holiday for qualifying investment projects under Article 9 of the Statute for Upgrading Industries. Capital increase for Semiconductor Manufacturing .On July 7, 2010, the Company was approved by Ministry of Finance, R.O.C. to avail of the tax holiday for five years commencing from January 1, 2011.

Capital increase for expansion Capital increase forSemiconductor Manufacturing	Duration of Income Tax Holiday
	January 2011 to December 2015

209

(14) Equity

As of December 31, 2014 and 2015, the Company’s government registered total authorized capital both amounted to $300,000,000 with $10 par value per share, and total paid-up common stock amounted to $24,095,278 and $24,285,658, respectively. All issued shares were paid up upon issuance.

(a) Common stock

In 2015, the board of directors approved to increase the Company’s common shares arising from the exercise of stock options under the Employee Stock Option Plan (ESOP). Accordingly, the Company issued 4 thousand and 19,034 thousand common shares of stock, at an issuance premium price of $81.9 and $55 per share, respectively, with total values amounting to $328 and $1,046,870, respectively. All issued shares were paid up upon issuance. Also, the process for the registration thereof was completed.

In 2014, the board of directors approved to increase the Company’s common shares arising from the exercise of stock options under the Employee Stock Option Plan (ESOP). Accordingly, the Company issued 2,392 thousand and 11,192 thousand common shares of stock, at discounted issuance price of $5.5 per share and an issuance premium price of $55 per share, respectively, with a total value amounting to $13,156 and $615,560. All issued shares were paid up upon issuance. Also, the process for the registration thereof was completed.

On March 22, 2012 and October 24, 2012, the board of directors approved to carry out a private placement of common shares through the issuance of 3,800,000 thousand common shares and 5,294,118 thousand common shares after reducin ~~g t~~ he Company’s capital to 380,319 thousand common shares and 529,856 thousand common shares, respectively, at a discounted issuance price of $1.7 per share. This capital increase was approved by the Securities and Futures Bureau (SFB). The effective date for the capital increase was March 7, 2012 and May 28, 2013. Also, the process for the registration thereof was completed. According to the Securities and Exchange Act, the transfer of such privately placed common shares within three years from the delivery date is forbidden, except when the transferees conform to Article 43-8 of the Securities and Exchange Act.

The movements of shares outstanding for the years ended December 31, 2014 and 2015 were as follows:

as follows:
Balance as of January 1, Exercise of employees stock options Capital reduction Balance as of December 31,		Common Shares 2014 2015 23,960,851 2,409,528 13,584 19,038 (21,564,907 ) - 2,409,528 2,428,566
		2014 23,960,851 13,584 (21,564,907 ) 2,409,528
	$ $
			2,428,566

210

(b) Capital reduction

On March 14, 2014, the board of directors approved to carry out a capital reduction to cover the deficit. The Company has covered its accumulated deficits amounting to $233,081,650 for the year ended December 31, 2013. In accordance with the relevant provisions of the companies law, the Company reduced its capital amounting to $215,649,073 by cancelling its shares of stock of 21,564,907 thousand shares, to cover its accumulated losses. This capital reduction was approved by the letter No. 1030022998 issued by SFB on June 24, 2014. The base date of this capital reduction was set on June 27, 2014. On August 8, 2014, the board of directors of the Company adopted to set September 1, 2014, as the base date of this capital reduction. Also, the process for the registration thereof was completed.

(c) Capital surplus

The components of capital surplus were as follows:

Change in equity interest of subsidiaries and associates accounted for using equity method Employee stock option plans Premium from exercise of employee stock options Other	December 31, 2014 $ 4,977,555 879,953 520,428 $ 6,377,936	December 31, 2015
	$ $	5,061,605 1,373,850 1,377,246 1,374 7,812,701

In accordance with the Companies Act, realized capital reserves can only be reclassified as share capital or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital within a year shall not exceed 10 percent of the paid-up capital.

(d) Retain earning

(i) Legal reserve

In accordance with the Companies Act, 10% of net income should be set aside as legal reserve, until it is equal to share capital. When a company incurs no loss, it may, in pursuant to a resolution to be adopted by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by cash. Only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed.

211

(ii) Earnings appropriation and distribution

According to the rules of the Company’s articles and Company Act, the Company’s annual net income, after providing for income tax and covering the losses of previous years, is first set aside for legal reserve at the rate of 10% thereof. In additions, a special reserve in accordance with applicable laws and regulations shall also be set aside. The remainder plus the undistributed earnings of the previous years are distributed or left undistributed for business purposes according to the resolution of the stockholders’ dividend distribution plan, which are initially proposed by the board of directors and adopted by the shareholders in the annual stockholders’ meeting.

The Company appropriates 0.1% to 15% of the distributable earnings after dividends as employees’ bonuses, which are recognized as the Company’s expenses in the year earnings are incurred. The people who can be distributed the employee bonus are including the subsidiaries’ employee who meet certain condition. The certain condition is settled by the board of directors.

As it belongs to a highly capital-intensive industry with strong growth potential, the Company adopts a dividend distribution policy which is in line with its plans for product line expansion and the demand for funds. This policy requires that the distribution of cash dividends shall be equal to at least fifty percent (50%) of the Company’s total dividend distribution every year.

In accordance with the Amended Company Act of May, 2015, employee bonus is no longer subject to appropriation and distribution of retained earnings commencing from 2015. The Company is yet to effect the amendments to the Company’s Articles of Incorporation within the deadline that Authorities specify.

The estimated employee bonus amounted to $97,004 in 2014, which was consistent with the actual amount distributed. There is no difference between the actual amount distributed and the estimated amount of the employee bonus from the financial statement in 2014.

The appropriations of earnings of 2014 were approved in the stockholders' meeting on June 10, 2015. The amounts of appropriation of dividends per share were as follows:

Dividends attributable to ordinary shareholders: Cash dividends	For the year ended December 31, 2014	For the year ended December 31, 2014	For the year ended December 31, 2014
	Dividends per share $ 2.00		Amount
			4,853,396

212

On June 6, 2014, the Company’s stockholders decided during their meeting that there were no earnings to be distributed for 2014 due to the accumulated deficit as of December 31, 2013.

(e) Treasury Shares

The Company's stocks held by subsidiaries were as follows:

Numbers of shares in the beginning Capital reduction Numbers of shares in the end Amount of dollars in the end Book value per share Price per share (dollars)	December 31, 2014 6,870 (6,183 ) 687 $ 347,533 $ 505.46 $ 81	December 31, 2015
	$ $ $	687 -
		687
		347,533
		505.46 45.7

As of December 31, 2015, none of the Company's common stock held by its subsidiary, Pei Jen Co., Ltd. has been sold.

According to the Securities and Exchange Act, the treasury shares of stock are not allowed to be pledged and the shareholders’ right is limited until such shares are transferred.

(f) Other Equity

Balance at January 1, 2014 Exchange differences on translation of foreign operations, net of tax: -the Company Unrealized gains (losses) on available-for-sale financial assets: -the Company Balance at December 31,2014 Balance at January 1, 2015 Exchange differences on translation of foreign operations, net of tax -the Company Unrealized gains (losses) on available-for-sale financial assets: -the Company Balance at December 31, 2015	Exchange differences on translation of foreign operations $ (19,739) (3,777) - $ (23,516 ) $ (23,516) 11,928 - $ (11,588 )	Unrealized gains on available-for- sale financial assets	Unrealized gains on available-for- sale financial assets
	$ $ $ $		17,405 - 12,050 29,455 29,455 - (22,437 ) 7,018

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(15) Share-based Payment Transactions

The Company has issued stock options under the employee stock option plan (ESOP) as follows:

Grant date Grant unit Expected term Vested Conditions	The6ndbatch of Employee Stock Option Plan 2008.12.18 500,000 8 years Period of two years duration and a certain proportion	The7ndbatch of Employee Stock Option Plan 2011.03.21 70,000 8 years Period of two years duration and a certain proportion	Capital increase hold Employee Stock Option Plan
			2015.12.22 32,000 Immediately vested

(a) Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Dividend yield Expected volatility Risk-free rate Fair value of unit stock option (dollar) Compensation cost using equity methods	The6ndbatch of Employee Stock Option Plan -% 42.15% 2.01% 1.5 48,547	The7ndbatch of Employee Stock Option Plan -% 53.79% 0.9307% 5.91 262,499	Capital increase hold Employee Stock Option Plan
			-% 64.00% 0.74% 15.30 489,599

Expected volatility is based on weighted average of historical volatility, and it is adjusted accordingly when there is additional market information about the volatility. The expected term of stock option is based on each of the Company’s issued stock option plans. Expected dividend and risk-free rate is determined based on government bonds.

(b) Relevant information of employee stock option plans

The details of these employee stock option plans for the years ended December 31, 2014 and 2015 were as follows:

2015 were as follows:
Outstanding at January 1, Options exercised Options forfeited Outstanding at December 31, Options exercisable, end of period	For theyears ended December 31,
	2014		2015
	Number of options (Units) 114,321 (25,467) (4,889 ) 83,965 67,756	Weighted-average exercise price(NTD)	Number of options (Units)		Weighted-average exercise price(NTD
		$ 4.95 55.00 16.16 46.98 47.94		83,965 (7,155) (4,964 ) 71,846 71,846	46.98 53.12 73.44 42.79 42.79

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Further details of the stock options of the Company were as follows:

Range of exercise price (dollar) Weighted average of remaining contractual year	December 31, 2014 $ 43~81.9 0.29~4.23	December 31, 2015
		41.5~81.9 1.46~3.73

(c) Compensation cost

Expenses were incurred from share options granted to employees for the years ended December 31, 2014 and 2015. These expenses were as follows:

Compensation cost arising from share options granted to employees Compensation cost arising from capital increase distributed to employees		2014 17,773 - 17,773	2015
	$ $		2,924 489,599 492,523

(16) Earnings Per Share

Basic earnings per share： Net income Weighted-average number of ordinary shares outstanding (basic) Basic earnings per share (dollars) Diluted earnings per share: Net income from continuing operations attributable to the Company Effect of potentially dilutive ordinary shares Weighted-average number of ordinary shares (basic) Effect of potentially dilutive ordinary shares Effect of employee stock option Weighted-average number of ordinary shares (diluted) Diluted earnings per share (dollars)	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
		2014 28,242,317 2,399,138 11.77 28,242,317 2,399,138 1,710 2,400,848 11.76	2015
	$ $ $ $		17,141,167 2,423,879 7.07 17,141,167 2,423,879 16,251 2,440,130 7.02

215

(17) Revenue

For the years ended December 31, 2014 and 2015, the components of revenue were as follows:

Sales revenues	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
		2014 48,589,951	2015
	$		43,129,599

(18) Employee Compensation

The Company’s articles of incorporation were approved by the board of directors and have yet to be approved at shareholders’ meeting. Under this articles of incorporation, if the Company makes a profit, it should appropriate for employee compensation which was calculated based on 1% to 12% of the Company’s net profit before tax before deduction of employee compensation. If the Company incurs accumulated deficit, the Company should first cover the accumulated deficit.

The estimated employee compensation of the Company amounted to $634,408 for the year ended December 31, 2015. The employee compensation was calculated based on the Company's net profit before tax, distributed according to the earnings allocation method as stated under the Company's articles of association, and expensed as operating costs or expenses for the year ended December 31, 2015. If there are any difference between the actual amounts and the estimated amount of employee compensation after the financial reports are issued, management is expecting that the difference will be treated as a change in accounting estimate and recognized through profit or loss in the period of the change.

(19) Results from Non-operating Activities

(a) Other gains and losses

Foreign exchange gains, net Gain (Loss) on disposal of property, plant and equipment Provision for or reversal of allowance for impairment (losses) gains on assets Others	For the years ended	For the years ended	December 31, 2015 228,430 (1,016) (4,204) 164,785 387,995
		2014 491,979 329,570 10,051 (41,039 ) 790,561
	$ $

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(b) Finance expenses

Finance expenses
Interest expenses: Bank borrowings Less: Capitalized of interest Financing from entities with significant influence over the Company Financing from related parties Lease payments Others	For the years ended		December 31,
		2014 333,733 - 373,753 466,050 17,293 415 1,191,244	2015
	$ $		357,573 (33,587) 168,093 342,521 16,845 279 851,724

(20) Financial Instruments

(a) Credit risk
(i) Exposure to credit risk

The carrying amount of accounts receivable represents the maximum exposure to credit risk. As of December 31, 2014 and 2015, the estimated Company’s maximum exposures to credit risk from accounts receivable were $6,535,115 and $5,753,379, respectively.

(ii) Concentration of credit risk

The Company's customers are concentrated in the high-tech industry. In order to reduce accounts receivable credit risk, the Company continuously assesses the financial condition of customers. If it is necessary, the Company will ask for guarantees or warranties. The Company still regularly assesses the likelihood of collectability of accounts receivable and sets aside allowance for bad debts, based on the result of management’s evaluation of the overall amounts of bad debts.

As of December 31, 2014 and 2015, the Company’s largest customers consisted of six customers and seven customers which accounted for 53.88% and 56.61%, respectively, of accounts receivable so that management believes the concentration of credit risk.

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(b) Liquidity risk

December 31, 2014 Non-derivative financial liabilities Secured bank loans Unsecured bank loans Entities with significant influence over the Company Financing from other related parties Finance lease liabilities Notes and accounts payable (including to related parties) December 31, 2015 Non-derivative financial liabilities Secured bank loans Unsecured bank loans Entities with significant influence over the Company Financing from other related parties Finance lease liabilities Notes and accounts payable (including to related parties)		Carrying amount	Contractual cash flow 16,494,206 836,636 13,615,271 26,519,297 493,958 1,199,142 59,158,510 12,572,251 4,553,190 8,939,150 16,456,162 469,260 1,533,318 44,523,331	Within 6 months 3,750,108 251,342 - - 12,349 1,199,142 5,212,941 137,707 3,823,480 - - 12,349 1,533,318 5,506,854	6-12months 144,329 50,676 13,615,271 26,519,297 12,349 - 40,341,922 137,707 9,178 8,939,150 16,456,162 12,349 - 25,554,546	1-2years 288,659 102,900 - - 24,698 - 416,257 5001,359 712,156 - - 24,698 - 5,738,213	2-5years 12,311,110 321,080 - - 74,094 - 12,706,284 7,295,477 8,376 - - 74,094 - 7,377,947	Over 5years
	$ $ $ $	15,580,000 800,000 13,400,000 26,100,000 290,103 1,199,142 57,369,245 11,985,000 4,500,000 8,800,000 16,200,000 282,250 1,533,318 43,300,568						- 110,638 - - 370,648 - 481,286 - - - - 345,770 - 345,770

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

(c) Currency risk

(i) Exposure to currency risk

The Company’s significant exposure to foreign currency risk was as follows:

Financial assets: Monetary items USD JPY EUR	December 31, 2014	December 31, 2014	December 31, 2014	December 31, 2015	December 31, 2015	December 31, 2015
	Foreign currency (in thousands)	Foreign rate	New Taiwan Dollars	Foreign currency (in thousands)	Exchange rate	New Taiwan Dollars
	$ 267,934 1,629,358 628	31.718 0.2650 38.531	8,498,331 431,780 24,197	214,956 2,575,126 451	33.066 0.2736 36.038	7,107,735 704,554 16,253

218

Financial liabilities: Monetary items USD JPY EUR	December 31, 2014	December 31, 2014	December 31, 2014	December 31, 2015	December 31, 2015	December 31, 2015
	Foreign currency (in thousands)	Foreign rate	New Taiwan Dollars	Foreign currency (in thousands)	Exchange rate	New Taiwan Dollars
	$ 67,846 725,529 -	31.718 0.2650 -	2,151,939 192,265 -	73,908 156,072 1,098	33.066 0.2736 36.038	2,443,842 42,701 39,570

(ii) Sensitivity analysis

The Company’s exposure to foreign currency risk arises from the foreign currency exchange fluctuations on cash and cash equivalents, accounts receivable, and accounts payable which are denominated in different foreign currencies. A 1% depreciation of the NTD against the USD, EUR, and JPY as of December 31, 2014 and 2015 would have increased the net income before tax by $66,101 and $53,024 for the years ended December 31, 2014 and 2015, respectively. This analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis.

(d) Interest risk

The Company’s exposure to interest rate risk arising from financial assets and liabilities is discussed further in the management of liquidity risk in Note 21(a)(ii).

An increase of 1% in interest rates mainly from loans with floating interest rates at the reporting date would have decreased net income before tax by $558,800 and $414,850 for the years ended December 31, 2014 and 2015, respectively.

219

(e) Fair value of financial instruments
(i) Types and fair value of financial instruments

The book value and fair value of the Company’s financial assets and liabilities are listed as follows:

	December 31, 2014	December 31, 2014	December 31, 2014
BookValue 6,414,145 6,535,115 1,892,592 1,883,806 16,725,658 1,199,142 40,626,472 15,580,000 282,250 57,687,864		FairValue
	Level 1 - - - - - - - - - -	Level 2 - - - - - - - - - -	Level 3 - - - - - - - - - -	Total
				- - -
				-
				-
				- -
				-
				-
				-

	December 31, 2015	December 31, 2015	December 31, 2015
Book Value 9,340 2,242,753 181,280 5,753,379 1,729,609 1,632,343 11,548,704		FairValue
	Level 1 - - - - - - -	Level 2 - - - - - - -	Level 3 12,320 - 190,123 - - - 202,443	Total
				12,320
				- 190,123 - -
				-
				202,443

220

	December 31, 2015	December 31, 2015	December 31, 2015
Book Value $ 3,300,000 1,538,318 26,176,298 $11,985,000 $ 273,923 $ 43,273,539		FairValue
	Level 1 - - - - - -	Level 2 - - - - - -	Level 3 - - - - - -	Total
				- - - - -
				-

(ii) Valuation techniques not used in fair value determination of financial instruments

Investment in debt securities with no active market and financial liabilities measured at amortized cost:

The fair value of financial liabilities traded in active markets is based on quoted market prices. When quoted prices are unavailable, the fair value is determined by discounted cash flows, using estimation and assumptions under existing market conditions which are obtainable by the Company.

(iii) Valuation techniques used in fair value determination of financial instruments

If the quoted price is available on an active market, the market price is used as the fair value.

Fair value of the Company's financial instruments with no active market is determined as follows:

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(21) Financial Risk Management

(a) Nature and extent

The Company has the following exposure risks for holding certain financial instruments:

(i) Credit risk
(ii) Liquidity risk
(iii) Market risk

Detailed discussions about the risks involved on financial instruments are disclosed in the related notes to the financial statements.

(b) Framework of risk management

The board of directors has overall responsibility for the establishment and oversight of the risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring Company’s risk management policies.

The Company’s risk management policies are established to identify and analyze the risks being faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.

222

(i) Accounts receivable

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from the Company; these limits are reviewed quarterly. Customers that fail to meet the Company’s benchmark creditworthiness may transact with the Company only on a prepayment basis.

The Company established an impairment allowance that represents its estimate of incurred losses in respect of accounts receivable and other receivables. Major components of this impairment allowance are specific loss component that is related to individually significant exposure and collective loss component where is the loss is incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

(ii) Investment

The credit risk exposure in the bank deposits, fixed income investments and other financial instruments are measured and monitored by the Company’s finance department. Considering that the Company deals only with banks and other external parties with good credit standing and with above investment grade above financial institutions, corporate organization and government agencies, management is not expecting non- compliance issues and significant credit risk.

(d) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Also, the Company’s approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient current funds to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

223

The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimizing its cash return on investments. The Company aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash flows on financial liabilities (other than trade payables) over the succeeding 60 days. The Company also monitors the level of expected cash outflows on trade and other payables. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Company has unused short-term bank facilities for $8,067,000.

(e) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company buys and sells derivatives in order to reduce market risks. All these transactions are made in accordance with the risk management policy.

(i) Currency risk

The Company’s exposure to currency risk is on sales and purchases that are denominated in a currency other than the respective functional currencies of the Company, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in EUR, USD, and JPY.

The interest is denominated in the currency used in the borrowings. Generally, borrowings are primarily the NTD. Also, the Company may apply for loans in other currency for operating purpose.

(ii) Interest rate risk

The Company adopts a policy of determining the percentage of entering into a fixed interest rate hedge, such as interest rate swaps, by predicting the trend of future interest rate. All of the Company’s long-term loans bear floating interest rates. However, as the range of fluctuation of the interest rates during the term of agreements is acceptable, the Company believes that their interest rate risk need not be hedged.

(iii) Other market price risk

The Company is only expecting to meet the consumption and sales demand. The Company did not sign commodity contracts which are not net settled.

224

(22) Capital Management

The Company’s policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares, non-redeemable preference shares, retained earnings and non-controlling interests.

The Company may adjust the payment of dividend to shareholders, return cash to shareholders through capital reduction, issue new shares or sell held for sale assets in order to pay off its liabilities. Likewise, the Company monitors its debt-to-capital ratio which serves as the basis to control capital, the same practice as the other companies in the industry. The debt-to-capital ratio on reporting date was as follows:

Total Liabilities Less: cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	For the years ended	For the years ended	December 31, 2015
		2014 62,420,517 (6,414,145 ) 56,006,372 41,601,453 134.63%
	$ $ $		48,776,350 (2,242,753 ) 46,533,597 54,737,689 85.01%

The Company has no plan of buying treasury shares.

The Company has not changed its capital management strategy as of December 31, 2015.

7. Related-party Transactions

(1) Relationship of the Company with its related parties

The detailed information of the Company’s subsidiaries was as follows:

Nanya Technology Corp., U.S.A. Nanya Technology Corp., Delaware Nanya Technology Corp., Hong Kong. Nanya Technology Corp., Japan Pei Jen Co., Ltd. Piece Makers Technology, Inc. Sumpro Electronics Corporation `Nanya Technology Corp., Germany.` Nanya Technology Corp., Shenzhen	Country of incorporation USA USA Hong Kong Japan Taiwan Taiwan Taiwan Europe China	Ownership interest (Holding: %)	Ownership interest (Holding: %)
		December 31, 2014 100.00 100.00 100.00 100.00 100.00 58.34 100.00 100.00 100.00	December 31, 2015
			100.00 100.00 100.00 100.00 100.00 55.26 100.00 100.00 100.00

225

(2) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the Group.

(3) Key management personnel compensation

Key management personnel compensation
Short-term employee benefits	For the years ended December 31,
		2014 20,328	2015 23,309
	$

Please refer to Note 6(15) for further discussion related to share-based payment.

(4) Significant related-party transactions
(a) Sales to related parties

The Company’s significant sales to related parties and the balance of accounts receivable were as follows:

as follows:
Subsidiary Associates Other related parties Total	Sales		December 31, 2015 7,682,075 3,476 (3,120 ) 7,682,431	Accounts receivable related parties
	For the years ended
		2014 9,473,010 1,264 232,453 9,706,727		December 31, 2014 1,538,472 - 19,825 1,558,297	December 31, 2015
	$ $				1,309,646 - -
					1,309,646

Note: The sales discount of $57 and $3,177 to other related parties were recognized for the year ended December 31, 2014 and 2015, respectively.

The selling prices and collection terms for the sales to related parties are not significantly different from those third-party customers, and the normal credit term with the related parties above is O/A 60 to 180 days and the 15[th] day of the monthhe 15[th] day of the month following the month of delivery of goods sold. There is no collateral received among related parties accounts receivable. However, not bad debt provision is necessary based on the result of management’s evaluation.

226

(b) Purchases from related parties

The Company’s significant purchases from related parties and the balance of accounts payable were as follows:

Purchases For the years ended December 31, 2014 2015 $ 75,944 (1,504) 118,697 103,560 783,983 946,623 $ 978,624 1,048,679	Purchases For the years ended December 31, 2014 2015 $ 75,944 (1,504) 118,697 103,560 783,983 946,623 $ 978,624 1,048,679	Accountspayable－relatedparties	Accountspayable－relatedparties
For the years ended
	2014 75,944 118,697 783,983 978,624	December 31, 2014	December 31, 2015
$ $		- 10,411 123,184 133,595	- 9,314 166,116 175,430

Note: The purchase discounts and allowances were recognized as a result of the change in the transfer price of the Company’s purchases.

Amount For theyears ended December 31, 2014 2015 $ 5,463,106 6,149,891 28,707 200 $ 5,491,813 6,150,091	Amount For theyears ended December 31, 2014 2015 $ 5,463,106 6,149,891 28,707 200 $ 5,491,813 6,150,091	Otherpayables－relatedparties	Otherpayables－relatedparties
For theyears ended
	2014 5,463,106 28,707 5,491,813	December 31, 2014	December 31, 2015
$ $		1,006,493 38 1,006,531	1,012,250 21 1,012,271

The term of transactions with the related parties above is 60 days after the end of the month when processed consigned goods are received.

(d) The Company's income received from related parties, such as utility income and receivables from payment on behalf of related parties were as follows:

Associates		Other receivables－relatedparties	Other receivables－relatedparties
		December 31, 2014 14,091	December 31, 2015
	$		12,125

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(e) The expenses for human resources support and services expenditures and other payables-related parties were as follows:

item The relationship Management expenses subsidiary	Amount For theyears ended December 31, 2014 2015 $ 337,242 381,568	Amount For theyears ended December 31, 2014 2015 $ 337,242 381,568	Amount For theyears ended December 31, 2014 2015 $ 337,242 381,568		Otherpayables－relatedparties	Otherpayables－relatedparties	Otherpayables－relatedparties
		2014 337,242			December 31, 2014		December 31, 2015
	$				42,878		58,302

(f) Financing from related parties

The details of the Company’s lending from related parties were as follows:

Entities with significant influence over the Company Other related parties	Other receivables－relatedparties	Other receivables－relatedparties
	December 31, 2014 $ 13,400,000 26,100,000 $ 39,500,000	December 31, 2015
		8,800,000 16,200,000 25,000,000

Interest payables on borrowings from related parties as of December 31, 2014and, 2015 amounted to $56,610, and $33,369, respectively. Please refer to Note 6(19) for details on related interest expenses.

(g) Property transactions
(i) The Company sold land and machinery equipment to its associates. The downstream unrealized sales profit is realized based on the depreciation of machinery equipment over its useful life. The realized profit on disposal of assets amounted to$540 and $270 as of the years ended December 31, 2014 and 2015, respectively; and the unrealized profit on disposal of assets, which is a deduction of investment under equity method, amounted to $101,409 and $101,138 as of December 31, 2014, and 2015, respectively.
(ii) The Company purchased machinery equipment from other related parties of $85,473 for the year ended December 31, 2015, and the unpaid payables of $64,029 were accounted －
for under other payables related parties as of December 31, 2015.
(iii) The Company sold its equipment to its affiliates for $695 and the profit on disposal thereof amounted to $695 for the year ended December 31, 2015. All payments were received as of December 31, 2015.

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(iv) The Company purchased machinery equipment from other related parties and its affiliates amounting to $188,305 for the year ended December 2014, and the unpaid payables of －
$12,600 were accounted for under payables related parties as of December 31, 2014.
(v) The Company sold its equipment to its affiliates for $7,000 and the profit on disposal thereof amounted to $1,171 for the year ended December 31, 2014, and the unpaid －
payables of $12,600 were accounted for under payables related parties as of December 31, 2014.
(h) Lease contracts
(i) Please refer to Note 6(8) and 6(11) for the details of the Company’s long-term lease contracts with associates.
(ii) The Company's rental expenses and the balance of lease payable to related parties were as follows:

Entities with significant influence over the Company $ Other related parties Total $		For the year ended December 31,	For the year ended December 31,	For the year ended December 31,
		2014 91,082 - 91,082		2015
				164,114 79,348 243,462

(i) Contracts with related parties
(i) The Company signed a Service Agreement with IMI; its services include the management of facility, human resources, finance, purchasing, engineering, and so on. The service fee is calculated based on the actual time spent and the hourly rates. This Service Agreement took effect on July 15, 2003, and will remain effective until it has been mutually agreed to be terminated by both parties.
(ii) The Company signed a Probe Tester Consignment and Service Agreement with IMI on August 6, 2013. Under this Agreement, IMI provides the services of probe test and related maintenance of testing equipment. This Prober Tester Consignment and Service Agreement took effect from the signing date to December 31, 2014, or whenever a party has notified the other party to terminate this Prober Tester Consignment and Service Agreement in accordance with the conditions stipulated in the aforementioned Agreement.

229

8. Pledged Properties

The Company’s assets pledged to secure loans are as follows:

Pledged assets	Object Guarantee for bank loans $ Guarantee for bank loans and import $	December 31, 2014 30,628,377 360,000		December 31, 2015
Property, plant and equipment Other non-current assets				17,092,977 360,000

9. Commitments and Contingencies

(1) Significant Commitments
(a) The Company's has provided guarantees of amounted to $585,000 both as of December 31, 2014 and 2015 in connection with the hiring of foreign workers and importation of goods.
(b) As of December 31, 2014 and 2015, the Company's unused letters of credit amounted to $518,610 and $22,829, respectively.
(2) Contingencies Liabilities
(a) In 2002, Nanya Technology Corporation and its subsidiary, Nanya Technology Corporation, U.S.A. (collectively “Nanya”), and other major Dynamic Random Access Memory (“DRAM”) manufacturers, were alleged to collusively manipulate DRAM’s market prices in the U.S.A. which violates the Antitrust Law. Currently, the aforementioned antitrust litigation is still pending in the U.S.A. Federal Court and State Court, and Nanya has engaged counsels to properly handle it to ensure Nanya’s rights.
(b) In November 2014, Qimonda AG accused Nanya Technology GmbH of patent infringement in Landgericht Dusseldorf Court. In June 2012, Nanya Technology Corporation and Nanya Technology GmbH (collectively “Nanya”) filed a request to the Landgericht Munich Court for a declaratory relief, and the said request had been approved in August 2014. However, QimondaAG was not satisfied by the decision made by the court, and therefore, has decided to file an appeal to the Landgericht Munich Court in September 2014. In July 2015, Qimonda AG has withdraw ~~ns~~ the prosecution and appeal so that this case has ended.
(c) In 2000, the Company was charged by Brazil's Ministry of Justice as being involved in the International Monopolies, which influences Brazil’s DRAM market. Consequently, the Company, other large international companies and individuals are investigated at the same time. The Company has engaged counsels to properly handle it to ensure Nanya’s rights

10. Significant Disaster Loss: None.

230

11. Subsequent Event:

12. Others

(1) The nature of expenses classified under cost of goods sold and operating expenses were as follows:

	For theyear ended December	For theyear ended December	31, 2014
	Cost of goods sold	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension expenses Other personnel expenses Depreciation expenses Amortization expenses	2,011,712 135,801 74,162 43,174 5,234,632 191,434	1,090,344 48,942 39,445 13,165 126,362 -	3,102,056 184,743 113,607 56,339 5,360,994 191,434

	For theyear ended December	For theyear ended December	31, 2015
	Cost of goods sold	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension expenses Other personnel expenses Depreciation expenses Amortization expenses	2,497,464 136,765 80,186 46,693 5,597,499 129,408	1,113,282 50,027 34,614 14,932 62,498 -	3,610,928 186,792 114,800 61,625 5,659,997 129,408

As of December 31, 2014 and 2015, the Company had 2,414 and 2,406 employees, respectively.

231

(2) Future finance plans of the Company
(a) Financing plan:

As of December 31, 2015, the Company has an unused credit facility of $8,067,000 for long-term and short-term loans.

(b) To increase the ratio of design shrink product production, the Company is still keeping its effort on converting the capacities of design shrink product to 30nm. When such conversion is completed, management is expecting that production output will exceed 70% of the total capacities by the end of Q2, 2016. The actual output is around 50% at the end of 2015. With more design shrink product output, die cost will be reduced; hence, the Company will become more cost-efficient.
(c) To raise the sales of value-added product

Nanya Technology will remain concentrated on the business of Low-Power and Consumer DRAM products. These two products generated over 75% of its revenues for now and are expected to exceed 85% at the end of 2016. It aims to focus on niche market and related application in order to raise the selling price of its products. In the future, it is eager to create more value to its products to enhance the Company’s profitability.

(d) The Company's profitability and the operations had improved since the year 2013. The repayment of debt and decrease in current liabilities are expected due to continuous cash inflow in the future.
(e) On January, 2016, the Company has completed the process for its cash capital increase in cash of $11,680,000. The proceeds from this capital increase of $11,680,000 are intended to finance the conversion of the capacities of design shrink product to 20nm.

13. Other Disclosure Items

(1) Related information on material transaction items:

The followings are the Company’s significant transactions required to be disclosed in accordance with the Regulation:

(a) Financing provided: None
(b) Guarantees and endorsements for other parties: None.

232

(c) Information regarding securities held:

Name of company which holds securities	Category and name of securities	Relationship between issuer of security and the company which holds securities	Account name	Decembe	Decembe	r 31, 2015		Note
				Shares / Units (in thousands)	Carrying value	Percentage of ownership	Market value or net asset value
The Company	Memoright (CAYMAN) Co., LTD	-	Investment in debt securities with no active market and Financial assets carried at cost	-	190,620	-%	202,443	-

(d) Information regarding purchase or sales of securities for the period exceeding $300 million or 20% of the Company’s paid-in capital: None
(e) Information on acquisition of real estate for which the purchase amount exceeded $300 million or 20% of the Company’s paid-in capital: None.
(f) Information regarding receivables from disposal of real estate exceeding $300 million or 20% of the Company’s paid-in capital: None.
(g) Information regarding related-party purchases and/or sales for which the amount exceeded $100 million or 20% of the Company’s paid-in capital:

Purchasing (selling) company	Related party	Nature of relationship		Tra	nsaction	details	Abn tran	ormal saction	Accounts/notes receivable (payable)	Accounts/notes receivable (payable)	Note
			Purchas e (sale)	Amount	% to total	Payment terms	Amount	Payment terms	Ending balance	Notes/accounts receivable or (payable)
The Company The Company The Company The Company The Company The Company	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Japan Nanya Technology Corp., Germany Piece Makers Technology, Inc. Formosa Sumco Technology Corp. Nanya Plastic Corp.	Parent company Parent company Parent company Parent company Other related parties Entities with significant influence over the Company	(Sale) (Sale) (Sale) (Sale) Purchase Purchase	1,775,485 3,034,454 2,145,768 587,577 924,815 103,560	4.12% 7.04% 4.98% 1.36% 12.03% 1.35%	O/A,60~90Days O/A,180ays O/A,60~90Days O/A,60~100Days O/A60Days On the 15thof the month following the mouth of purchase	- - - - - -	- - - - - -	136,600 689,298 321,322 116,940 (166,116) (9,314)	2.37% 11.98% 5.58% 2.03% 10.83% 0.61%	- - - - - -

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(h) Information regarding accounts receivable from related parties for which the amount exceeded $100 million or 20% of the Company’s paid-in capital:

Accounts receivable company	Related party	Nature of relationship	Amount	Turnover	Due date accounts receivable	Due date accounts receivable	Amounts received in subsequent periods	Allowance for bad debt
					Amount	Method
The Company The Company The Company The Company	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Japan Nanya Technology Corp., Germany Piece Makers Technology, Inc.	Parent company Parent company Parent company Parent company	Account receivable 136,600 Account receivable 689,298 Account receivable 321,322 Account receivable 116,940	9.42 5.43 5.10 2.92	- - - -	- - - -	101,118 471,323 292,450 63,915	- - - -

(i) Information regarding trading in derivative financial instruments: None.
(2) Information on the Company’s long-term equity investments: None.

Information regarding investments in Mainland China: None.

Investor	Investee	Location	Main Businesses and Products	Investme	nt Amount	Balance	as of Decemb	er 31,2015	Net Income (Loss) of the Investee	Equity in Net Income (Net Loss)	Note
				December 31, 2015	December 31,2014	Shares	Percentage of Ownership	Carrying Value
The Company The Company The Company The Company The Company The Company The Company The Company Nanya Technology Corp., HK Pei Jen Co., Ltd.	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Delaware Pei Jen Co., Ltd. Nanya Technology Corp., HK Nanya Technology Corp., Japan Inotera Memories, Inc. Piece Makers Technology, Inc. Sumpro Electronics Corporation Nanya Technology Corp., Germany Inotera Memories, Inc.	U.S.A U.S.A Taipei HK Japan Taoyuan Hsinchu Taoyuan Germany Taoyuan	Sales of semiconductor products Design of semiconductor products Import/export business Sales of semiconductor products Sales of semiconductor products Business of electronic products Design of semiconductor products Business of electronic products Import/export business Business of electronic products	20,392 36,005 175,348 66,271 20,161 24,631,379 21,246 2,591,000 30,056 143,966	20,392 36,005 175,348 66,271 20,161 24,631,379 21,246 2,591,000 30,056 143,966	2 - 480 20 1 1,587,484 7,918 259,100 - 9,018	100.00% 100.00% 100.00% 100.00% 100.00% 24.20% 55.26% 100.00% 100.00% 0.14%	122,569 123,599 - 34,448 179,194 32,647,944 75,773 35,873 52,070 186,023	1,787 9,376 21,798 9,836 22,235 18,077,421 70,735 (6,762) 4,672 18,077,421	1,787 9,376 20,424 9,836 22,235 4,380,050 38,297 (6,762) 4,672 24,873	- - -

(3) Investment in Mainland China
(a) Relevant information about the name of investees and the main business activities was as follows:

Investee Company Name	Main Businesses and Products	Actual amount of Paid-in Capital	Method of Investment	Accumulated Outflow of Investment from Taiwan a of Jan 1, 2014	s Outflow amo curren Outflow	/ Inflow unt of tperiod	Accumulated Outflow of Investment from Taiwan as of December 31, 2014	Current income of investees	Direct and Indirect Shareholdin g Ratio by the Company	The highest shares owned or the contribution of capital	Investment income or loss	Accumulated Inward Remittance of Earnings as of December 31, 2014
						Inflow
Nanya Technology Corp.,Shenzhen	Sales of semiconductor products	32,570	(Note 1)	32,570	-	-	32,570	5,667	100.00%	5,667	15,420	-

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(b) Quota for investment in Mainland China

Quota for investment in Mainland	China
Accumulated Outflow of Investment from Taiwan to China	Investment Amounts Authorized by the Investment Commission, MOEA	Maximum Allowable Investment Authorized by the Investment Commission, MOEA
32,570 (USD985)	32,570 (USD985)	32,842,613

Note 1：Indirect investment in Nanya Technology Corp., Shenzhen through Nanya Technology Corp., HK. Note 2：The exchange rate of New Taiwan dollars to US dollars on December 31, 2015 was USD1：TWD 33.066. Note 3：Amount was recognized based on the self-prepared financial statements. Note 4：60% of net equity.

(c) Significant transactions:

For the Company’s direct or indirect investment or other significant transactions in Mainland China, please refer to the related disclosures above captioned as “Related to significant transaction”.

14. Segment information

Please refer to the consolidated financial statements as of and for the year ended December 31, 2015.

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AI assistant

NTC — Annual Report 2015

52061_rns_2016-07-05_72feab75-b930-44f1-a508-097b614c1175.pdf

2015

Annual Report

Printed on May 10[th] , 2016

Contents

I. Letter to Shareholders

1. Year 2015 Financial Performance

2. Year 2016 Business Outlook

3. Future Development Strategy

II. Company Profile

1. Date of Incorporation: Mar 4, 1995

Milestones

III.Corporate Governance

1.2 Major Corporate Functions:

2. Directors and Management Team

2.1 Directors and Supervisors:

Directors’ Professional Qualifications and Independent Analysis

2.2 Management Team

3. Remuneration to Board of Directors, Supervisors, President, and Vice Presidents

Table 3.1.1 Range of Compensation Paid to Directos

3.4Employees' Compensation Granted to President and Vice Presidents

4. Implementation of Corporate Governance

4.1 Board of Directors’ Meeting Status

4.4 Composition, Responsibilities and Operations of NTC’s Remuneration Committee

Table 4.4.2 Remuneration Committee Meeting Status

4.5 Implementation Status of Corporate Social Responsibility

4.6 Implementation Status of Operational Integrity

4.7 NTC’s Corporate Governance Guidelines and Regulations:

4.8 Other Important Corporate Governance Information

4.9Implementation Status of the Internal Control System

(1) Internal Control System Statement

5. Information Regarding NTC’s Audit Fees

8. Changes in Shareholding

IV. Capital and Shares

2. Composition of Shareholders

3. Distribution of Shareholding

4. Major Shareholders

5. Market Price, Net Worth, Earnings, and Dividends per Common Share

6. Dividend Policy and Implementation Status

6.1 Dividend Policy

7. Effect upon Business Performance and EPS of the Proposed Stock Dividends

8. Compensation of Employees, Directors and Supervisors

8.4 Distribution of 2014 Compensation of Employees, Directors and Supervisors:

9. Repurchase of Common Stock: None

10. Status of Corporate Bonds: None

11. Status of Preferred Stock: None

12.Issuance of Global Depositary Receipts ：

13. Status of Employee Stock Options Plan

15. Financing plans and implementation-cash capital increase shares offering in 2016.

15.2 Execution

(1) Expected benefits

A.To increase production volume

B.To increase production volume

C.To increase gross margin and net profit

IV. Operations overview

1. Business content

1.1 Business scope

(2)Wafer production services

(1)Present Situation and Development of Industry

A. IC Design:

B. IC manufacture:

(3)Product Development Trend

(4)Competitive situation

1.3Technology and R&D Status

(1)Development Strategy

(3)Technology or products successfully developed

(1)Short-Term Sales Development Plan

(2)Long-Term Sales Development Plan

2. Market Status and the Overview of Sales and Production

2.1 Market Status

(2)Market Share

A. Supply and the Growth

(4)Competitive Niche

2.4 Suppliers/Customers Accounted for at Least 10% of Annual Procurement/Sales

(1) Major Customers for the Last Two Years:

(2) Major Suppliers for the Last Two Years:

2.5 Production over the Last Two Years

2.6 Shipments over the Last Two Years. ：

NTC Annual Report 2015

12.Issuance of Global Depositary Receipts `：`

2.6 Shipments over the Last Two Years. `：`