2357 ASUSTeK Computer Inc. 2015 ANNUAL REPORT yTaiwan Stock Exchange Market Observation Post SystemǺhttp://mops.twse.com.tw yASUS annual report is available at http://www.asus.com Printed on April 11, 2016 321 WorldReginfo - 1e6161ae-a8c3-41e7-9120-30c6cd860a2f I. SPOKESPERSON & DEPUTY SPOKESPERSON Spokesperson: Nick Wu Title: Chief Financial Officer Tel.: (886) 2 2894-3447 EXT: 2343 E-mail: [email protected] Deputy Spokesperson: Nick Wu (temporary) Title: Chief Financial Officer Tel.: (886) 2 2894-3447 EXT: 2343 E-mail: [email protected] II. HEADQUARTERS AND PLANTS Taipei Headquarters: No.15, Li-Te Rd., Beitou Dist., Taipei 112, Taiwan Tel.: (886) 2 2894-3447 Address: 4F, No.150, Li-Te Rd., Beitou Dist., Taipei 112, Taiwan III.SECURITIES DEALING INSTITUTE Name : KGI Securities Corporation, Registrar and Transfer Services Address : 5F, 2, Sec. 1, Chung-Chin S. Rd., Zhongzheng Dist., Taipei City Tel. : (886) 2 2389-2999 Website : http://www.kgiworld.com.tw IV. AUDITORS Name : CPA: CHOU TSENG HUI-CHIN & CHANG, MING-HUI CPA Firm : PricewaterhouseCoopers, Taiwan Address : 27F., No.333, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City 110 Tel. : (886) 2 2729-6666 E-mail : http://www.pwc.com V. EXCHANGEABLE BOND EXCHANGE MARKETPLACE Marketable security: GDR Luxemburg Stock Exchange: http://www.bourse.lu VI. COMPANY WEBSITE http://www.asus.com.tw ! 322 WorldReginfo - 1e6161ae-a8c3-41e7-9120-30c6cd860a2f ɡɡ CONTENTS ɡɡ Page I. Letter to shareholders ……………………………………………………………………… 1 II. Introduction of the company ……………………………………………………………… 3 1. Date of Incorporation ………………..…...………………………..……………………….. 3 2. Company History …………...……………………………………………………………… 3 III. Corporate governance report ……………………………………………………………... 22 1. Organization of company ………………………………………………………………… 22 2. Directors, Supervisors, President, Vice President, Assistant V.P., and department heads.... 24 3. Corporate governance …………………………………………………………………….. 34 4. CPAs fees …………...…..………………………………………………………………….. 67 5. CPA’s information …………………………………………………………………………. 67 6. The chairman, president, and financial or accounting manager of the company who had worked for the independent auditor or the related party in the most recent years ………… 67 7. Information on Net Change in Shareholding and Net Change in Shares Pledged by Directors, Supervisors, Department Heads, and Shareholders of 10% shareholding or more ……………………………………………………………………………………….. 68 8. The relation of the top ten shareholders as the definition of Finance Standard Article 6 …. 69 9. Investment from Directors, Supervisors, Managers, and directly or indirectly controlled businesses ………………………………………………………………………………… 70 IV. Stock subscription …………………………………………………………………………. 75 1. Capital and shares …………………………………………………………………………. 75 2. Corporate bonds …………………………………………………………………………… 81 3. Preferred stock ……………………………………………………………………………. 81 4. Issuance of global depository receipts …………………………………………………….. 81 5. Employees stock option certificates ………………………………………………………. 83 6. Limit on Employee New Bonus Share ……………………………………………... 83 7. Merger and acquisitions or stock shares transferred with new stock shares issued……….. 83 8. Fund implementation plan ………………………………………………………………… 84 V. Overview of business operation………………………………..…………………………… 85 1. Principal activities ………………………………………………………………………… 85 2. Market analysis and the condition of sale and production ………………………………… 89 3. Status of employees ……………………………………………………………………….. 95 4. Expenditure on environmental protection ………………………………………………… 95 5. Employee / employer relation …………………………………………………………….. 95 6. Important agreements ……………………………………………………………………… 100 ! 323 WorldReginfo - 1e6161ae-a8c3-41e7-9120-30c6cd860a2f VI. Financial information ………………………………………………………………. 101 1. Five-year Financial Summary ……………………………………………..………………. 101 2. Five-year Financial analysis ……………..………………………………………………… 109 3. Supervisor’s report in the most recent years ………………………………………………. 118 4. Financial statements in the most recent years …………………………………………….. 118 5. Consolidated financial statements in the most recent years ………………………………. 118 6. Impact of financial difficulties of the Company and related party on the Company’s financial position ………………………………………………………………………….. 118 VII. Review of financial position, financial performance and risk management ……………. 119 1. Financial position ………………………………………………………………………….. 119 2. Financial performance ……………...………………………………………………………. 121 3. Analysis of cash flows ……………………………………………………………………... 124 4. Impact of major capital expenditure on finance and business …………………………….. 125 5. Policies, reasons for gain or loss and action plan in regard to investment plans in current year and the next year…………………………………………………………………….. 125 6. Risk management …………………………………………………………………………. 125 7. Other important matters …………………………………………………………………… 128 VIII Special disclosures …………………………………………………………………………. 129 1. Related party ……………………………………………………………………………… 129 2. Subscription of marketable securities privately in the most recent years …………………. 129 3. The stock shares of the company held or disposed by the subsidiaries in the most recent years ……………………………………………………………………………………… 129 4. Supplementary disclosures ……………………………………………………………….. 129 5. Occurrence of events defined in Securities Transaction Law Article 36.2.2 that has great impact on shareholder’s equity or security price in the most recent years and up to the date of the report printed …………………………………………………………………. 129 ! 324 WorldReginfo - 1e6161ae-a8c3-41e7-9120-30c6cd860a2f I. Letter to Shareholders Dear Shareholders: Thank you for your long-term support. ASUS maintained relatively stable operating performance in 2015, despite challenging global economic conditions and the effects of fluctuating currency rates on revenue. Throughout the year, we continued to focus on innovation as we developed and enhanced core products and services. Through these efforts we were able to achieve above-average growth across key markets. The ASUS brand promise of In Search of Incredible continues to inspire everything we do. In 2016, we have been actively pursuing ambitious goals that will drive business. As we focus on product design and customer experience, we are executing channel marketing and cost management plans in order to expand operational scale across PC and mobile product lines. To gain a competitive edge, we are also adopting an open, diversified, and collaborative mindset as we consider strategic plans for developing new IoT technologies. Demand for traditional computing devices decreased last year, globally. The industry-wide decrease in market demand resulted in a 10 percent decline in annual shipments of personal computers. Despite this trend, ASUS global notebook market share increased to approximately 12 percent. Across the industry, smartphone shipments declined from 30 to 50 percent growth rates in previous years to just 10 percent growth in 2015. In this difficult environment, ASUS was able to achieve exponential growth in ZenFone shipments in target markets. Demand for the ZenFone was particularly strong in emerging markets, where consumers are investing in smartphones that offer premium features at affordable price points. In a global environment where consumers are setting higher expectations for product innovation and quality, ASUS sees opportunity. As a pioneer of 2-in-1 notebook technology, and as a leading designer of high-end notebooks and gaming computers and components, ASUS will continue to be a market leader as we deliver innovation, quality, and exceptional value. Looking ahead, ASUS will continue to invest in innovation while enhancing core product lines. We will continue to provide empowering luxury with our ZenFone series, which offers maximum value and the best user experience. ASUS has already invested in rapidly developing wearables, IoT, virtual reality, robotics, smart home and smart cities technologies. We will continue to develop these technologies, and we expect them to thrive over the next five to 10 years. Operating results for 2015, and the operational outlook for 2016, are summarized as follows: Financial Performance The 2015 ASUS Group consolidated revenue totaled NT$472.3 billion, a one percent decrease compared to 2014. The net income attributable to shareholders of the parent Company accounted for NT$17.1 billion, a reduction of 12 percent compared to 2014. Despite a substantial increase in ASUS smartphone shipments, due to currency fluctuations in emerging markets revenue growth appeared flat. Overall, consolidated operating income remained steady in 2015. Operating income for the ASUS brand reached NT$436.5 billion (unaudited), and operating profit for the ASUS brand reached NT$20.1 billion (unaudited). Operating income for brand in 2014 was NT$436.3 billion (unaudited), and operating profit for brand reached NT$20.3 billion (unaudited). Awards Building from a people-centric design philosophy inspired by our In Search of Incredible brand promise, ASUS products continue to gain global recognition through international awards. ASUS won a total of 4,368 international awards in 2015, consistently delivering record-high numbers of winning entries while receiving recognition for innovation, brand image, customer satisfaction, customer experience, social 11 WorldReginfo - 1e6161ae-a8c3-41e7-9120-30c6cd860a2f responsibility and environmentally sustainable practices. ASUS has been the most awarded company at the Taiwan Excellence Awards for 13 consecutive years. In 2016, for the second consecutive year, ASUS