Eastern Technologies Holding Limited Annual Report

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Stock code 5225

Eastern Technologies Holding Limited

2013 Annual Report

THIS TRANSLATED VERSION IS FOR REFERENCE ONLY; ALL CONTENTS SHOWN IN CHINESE VERSION SHALL PREVAIL.

Annual Report is available at Taiwan Stock Exchange Market Observation Post System http://newmops.twse.com.tw

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Address and telephone number of the headquarter, principal place of business, subsidiaries and branch offices:

Headquarter:

Name: Eastern Technologies Holding Limited

Address: The Grand Pavilion Commercial Centre, Oleander Way, 802 West bay Road, P.O. Box 32052, Grand Cayman KY1-1208, Cayman Islands

Tel: (852) 2343-1711

Website: http://www.kyetek.com Subsidiaries:

Name: Eastern Asia Technology (HK) Limited

Address: Room 1703-7 Hewlett Centre, 54 Hoi Yuen Road, Kwun Tong, Kowloon, HK Tel: (852) 2343-1711

Name: Hui Yang Eastern Asia Electronics Co., Ltd.

Address: Dongfeng Administrative Region, Xin Xu Town, Hui Yang District, Huizhou City, Guangdong Province, China

Tel: (86) 752-333-9166

Name: Huiyang Dongmei Audio Products Co., Ltd.

Tel: (86) 752-333-9166

Name: Hymnario-EAW (Huiyang) Co., Ltd.

Tel: (86) 752-333-9166

Name: Shenzhen MaliMaliBox Trading Corporation Limited

Address: Shop L502, Level 5, 1234space, 3018 Jianshe Road, Luohu District, Shenzhen Tel: (86) 755-6181-1816

Litigation and Non-Litigation Agent within ROC Name: Chang Po Chao

Title: Vice General Manager-Public Relations Tel: (886) 2-8911-3535

Email: [email protected] Spokesman

Name: Chang Po Chao

Title: Vice General Manager-Public Relations Tel: (886) 2-8911-3535

Email: [email protected]

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Acting Spokesman Name: Chang Tung I Title: Director

Tel: (886) 2-8911-3535 Email: [email protected]

Common Shares Transfer Agent and Registrar Name: Sinopac Securities Corporation

Address: 3^rd Floor, 17 Bo'ai Road, Taipei Tel: (886)2-2381-6288

Website: http://www.sinotrade.com.tw Auditors

Names: Shih, Chin-Chuan, Lai, Kwan-Chung Name of Audit Firm: Deloitte Touche Tohmatsu Tel: (866) 2-2545-9988

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

Overseas stock exchange on which securities are traded: Not applicable Company Website: http://www.kyetek.com

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List of Directors

Title Name Nationality Major Qualifications

Chairman Liou Jenq Lin Taiwan Master of Electronic Engineering and MBA from University of Southern California, U.S.

IBM Senior Engineer Advisor, U.S.

Xerox Senior Engineer Advisor, U.S.

Director Pai Chin Chang Taiwan Executive Master of Business Administration from Hong Long International Business College President of Eastern Technologies Holding Limited

Director Kwok King Lam Keenan Ken Hong Kong Master of Finance and Management from University of Michigan, U.S.

General Manager of Hifi Orient Thai Public Company Limited Director Representative of DJR

International Ltd.: Chang Tung I

Taiwan MBA from California State University, U.S.

Vice Executive Director of Kuo-Bin Ceramic Ind. Co., Ltd.

Independent Director

Chang Shan Juh Taiwan Master of Electronic Engineering from University of Southern California, U.S.

Head of Human Resources Department of Tatung Company

Lecturer of Faculty of Electronic Engineering and Human Resources Officer of Tatung University Independent

Director

Chen Ko Hung Taiwan Graduated from Faculty of Accounting from National Chengchi University Senior Manager of Finance Department of Para Light Electronics Co., Ltd.

Senior Manager of Finance Department of UniLite Corporation

Senior Manager of Finance Department of Princeton Technology Corporation Independent

Director

Shiau Fung Shyung Taiwan PHD of Economics from Chinese Culture University Master of Economics from Yale University, U.S.

Master of Agricultural Economics from National Chung Hsing University Degree of Agricultural Economics from National Chung Hsing University Deputy Minister of Council for Economic Planning and Development

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Eastern Technologies Holding Limited Contents

A. Statement to Shareholders 1

B. Overview of the Company 3

1. Date of Incorporation 3

2. Description of the Company and the Group 3

3. History of the Company and the Group 3

C. Report of Corporate Governance 4

1. Organization 4

2. Directors, Supervisors, General Managers, Vice General Managers, Senior Managers and Heads of Departments and Branch Offices

5

3. Details of Fee payable to Auditors 15

4. Details of Change of Auditors 15

5. Chairman, General Managers, or Managers responsible for Finance or Accounting Affairs of the Company who have served in the firm of the Certified Public Accountants or its Associates for the latest year

15

6. Movements of Shareholdings and Pledge thereof Held by Directors, Managers and

Shareholders (whose shareholdings representing over 10% of total Share) for the year as at the date of issue of annual report

16

7. Details of Shareholdings of Top Ten Substantial Shareholders, their relationship as related parties under the Statement of Financial Accounting Standards No.6 (“FAS 6”) or as spouse or second degree relatives

16

D. Funding 17

1. Capital and Shares 17

(1) Sources of Funds 17

(2) Structure of Shareholdings 17

(3) Shareholding Dispersal 18

(4) List of Substantial Shareholders 18

(5) Market price, Equity, Earnings, Dividends per share and the relevant information 18

(6) Dividend Policies and its Implementation 19

(7) Impact to Business Performance and EPS resulting from Stock Dividend Distribution 19 (8) Staff Bonus and Remunerations of Directors and Supervisors 19

(9) Repurchase of the Company’s own Shares 20

2. Corporate Bonds (including bonds of foreign companies) 20

3. Preferred Shares 20

4. Global Depositary Receipts 20

5. Employees’ Stock Options 20

6. Employees’ Restricted Shares 20

7. Mergers and Acquisitions 20

8. Issue of New Shares in Exchange of Shareholdings of Other Entities 20

9. Financing Plans and Implementation 20

E. Review of Operations 21

1. Business 21

(1) Scope 21

(2) Industry Overview 22

(3) Technology, Research and Development 25

(4) Long and Short Term Development Strategies and Plans 32

2. Markets and Sales Overview 34

(1) Market Analysis 34

(2) Usage and Production Process of Major Products 39

(3) Supply of Major Raw Resources 40

(4) Names, Transaction Amounts and Proportion of Customers who account for more than 10% of total purchase (sales) for either of the latest two years

40

(5) Production Volume for the Latest two years 42

(6) Sales Volume for the Latest two years 42

3. Number of Employees for the Latest two years and as at Date of Issue of Annual Report 42

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F. Financial Overview 45 1. Condensed Financial Information for the Latest Five Years 45

2. Financial Analysis for the Latest Five Years 47

3. Consolidated Financial Report audited and certified by Accountants for the Latest Year 49 G. Review and Analysis of Financial Status and Operating Results and Risk Assessment 122

1. Financial Status 122

2. Operating Results 123

3. Cash Flow 124

4. Effect of Material Capital Expenditures for the Latest year to Financial Positions 124 5. Investments Policies, Main Reasons for Profit or Loss therefrom, Improvement Plans for the

Latest year and Investment Plans for the Coming Year

125 6. Risk Assessment For the Latest Year and As at the Date of Issue of Annual Report 128

7. Other Important Matters 141

H. Special Notes 142

1. Information Related to the Group for the Latest Year 142

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A. STATEMENT TO SHAREHOLDERS

Dear Shareholders,

In 2013, with the concerted efforts of the operations team and all staff of the Company, we successfully entered the supply chain of speaker systems of Korean world-class audio-visual leading brand customer one year earlier than we expected. With such breakthrough enhancement, the Company being a strategic partner supplier is secured with major orders for key audio-visual components of speakers from the world’s top five consumer electronic audio-visual brands. With outstanding core technologies and highly effective professional services, the Company continues to strengthen the cooperation relationship and technical support with customers in an attempt to create more benefits for our shareholders.

Information of the industry

Capitalized on the increasing demand for portable devices such as smart phones, high-resolution (4K2K/U HD) plasma television and tablet computer, we have experienced top-notch visual enjoyment.

Compared to our audio perception, consumers begin to have greater demand for sounds with texture and no physical boundaries (wireless transmission). No matter portable devices or audio equipment for home use, there is a vast market demand, resulting in a growth in the products for home theatre/ Mini Hifi/ Sound Bars/ TV Speakers/ Bluetooth^® Speaker/Earphones. With the 2014 World Cup and 2016 Olympics scheduled to be held in Brazil, South America, it is expected that demand for high-power speaker products in that region and Europe will grow by leaps and bounds. In addition, with wider application of portable devices in the future coupled with the introduction of new products to our existing customers, KYET believes all these favorable factors will continue to drive its future revenue with a 2 digits growth.

Financial Performance

With the growing demand for consumer electronics products and portable devices, the introduction of a Korean world-class audio-visual leading brand customer since the second quarter of 2013, and by virtue of the increasing sales of outdoor high power speakers in South American region, the sales in April 2013 and the third quarter of 2013 hit a historical high in a single month and quarter respectively.

The total sales for 2013 was NT$5,219 million, representing a growth of 18.2% from 2012. It also marked a new historical high of sales revenue in a year.

However, with the influence of product mix, the gross profit margin was 15.2%, a slight decrease from 2012’s 15.6%. Meanwhile, owing to the relevant costs of a listed company, increase of workforce for the expansion of business as well as the increase of research & development costs, there was an increase in operating expenses from 2012. However, thanks to the savings of enterprise income tax as a result of application for a new and high technology enterprise for subsidiaries in the mainland China, the net profit after tax amounted to NT$329 million in 2013, representing an increase of 6.5% from 2012’s, with earnings per share after tax of NT$5.41.

Research & Development (R&D)

The R&D of the Company focuses on providing the quality sound systems for the key worldwide customers on their future products. Our goal is to provide solution and speaker systems of high quality

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products and wireless information streaming technology such as Bluetooth^®, AirPlay^® and NFC. Our product lines are towards diversification and apart from maintaining the business fundamental with existing customers, we endeavour to R&D in order to enhance the added value of the products, and strengthen our leading position in terms of technology and patents.

The Prospect

Leveraging on the acoustic experience accumulated over the years, the Company integrates continuously its advantages in large-scale production to enhance various production technologies, high-end development capability and leading technologies in speaker drivers. We continue to provide high quality and competitive speaker products for worldwide audio-visual brand customers. Other than this core business, we endeavour to enhance our image and technology, entering the OEM/ODM business of high-end audio brands to provide product development and supply of its popular product lines.

To stick to the Company’s operating philosophy; we endeavour to enhance the acoustic experience by offering the best acoustic and cost-effective products. From which, people understand that the enjoyment from hearing is not inferior to “seeing”, and in turn appreciate and enjoy their beautiful life brought from “hearing”. We aim to build up a team of elites and expect to continue to bring benefits to the Company’s investors, by its stable foundation for the past decades, coupled with its innovative mentality to achieve the corporate vision of bringing the excellent sounds for the mankind.

We would like to express our gratitude for the continuous support from all shareholders, customers and staff. Let us join hands to match into the future success.

Chairman Liou Jenq Lin

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B. OVERVIEW OF THE COMPANY

1. Date of Incorporation: 1 February 2011

2. Description of the Company and the Group (1) Description of the Company and the Group

Eastern Technologies Holding Limited (KYET) is a holding company incorporated on 1 February 2011 in Cayman Islands. The purpose of its establishment is to facilitate listing of Eastern Asia Technology (HK) Limited and its subsidiaries Hui Yang Eastern Asia Electronics Co., Ltd. (HYEA), Huiyang Dongmei Audio Products Co., Ltd. (HYDM) and Hymnario-EAW (Huiyang) Co., Ltd. (HYHY) on Taiwan Stock Exchange. The principal activities of the Company and its subsidiaries (“the Group”) are research, development, production and sales of speaker systems and earphones.

(2) Group Structure: please refer to page 142 of this annual report.

(3) Risk Assessment: please refer to pages 128~141 of this annual report.

3. History of the Company and the Group

Date Important Events

1971 Establishment of Eastern Asia Woods Industrial Corp., the former of KYET

1972 Cooperated with Japanese to obtain their technology and support for the production of speaker boxes for sales to Japan.

1977 Became OEM of speakers who produced products for internationally renowned brands, and the product portfolio transformed from speaker boxes to speaker systems.

1983 Became a leader in speaker products. A design and R&D centre was set up to focus on improvement in product quality and R&D capability.

1986 Commenced direct export sales and taking up of orders from international brands.

1988 Eastern Asia Technology (HK) Limited (EAH) was set up to engage in the trading, manufacturing and investment of speaker systems.

1989 Production plant was relocated to Malaysia and Huizhou and Shenzhen, China 1990 Vertical integration was carried out to extend its production to speaker units.

1991 Resources were integrated and EAH was acting as operating hub. Group Engineering Centre (GEC) was set up to provide technical support to production and sales department

1995 HYEA was set up to principally engage in the production of speakers and parts.

HYHY was established to specialize in the manufacturing of speaker units.

1996 First phase of Huiyang plant completed, in which speaker unit assembly department was set up and part of the production capacity in Malaysia was transferred thereto.

1997 Plastic department was set up and successfully developed stereo system and Dolby virtual surround sound system for home theater.

1998 Production of speaker systems in Shenzhen was transferred to Huiyang plant, enabling Huiyang plant to become one of the few plants in the world which can conduct one-stop production of speaker systems.

2002 ERP (SAP) system was introduced to enhance management efficiency.

HYDM was established to principally produce various speaker products

2003 HYEA and HYHY were awarded “Best Financial Report of Foreign-Invested Company” by the Ministry of Finance of Huiyang City, Guangdong Province.

Participated in an exhibition of consumer electronic appliance in Las Vegas in January and was honored “Innovative Design and Engineering” award for its speaker systems for flat panel home theater, flat speaker systems for Notebook and plat speaker systems.

2008 Earphones department was set up and HYDM commenced production of earphones products 2011 The Company was incorporated in Cayman Islands.

Reorganization of the structure of the Group completed.

Audit Committee and Remuneration Committee were set up.

2012 The Company was formally listed on Taiwan Stock Exchange on 5 November 2012.

The Company conducted capital increase by cash through issue of 6,750,000 ordinary shares with carrying amount of NTD10 per share, totaling NTD67,500,000. The paid-in share capital after the capital increase was NTD607,500,000.

2013 Hui Yang Eastern Asia Electronics Co., Ltd. and Huiyang Dongmei Audio Products Co., Ltd were approved and

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C. REPORT OF CORPORATE GOVERNANCE

1. Organization (1) Organization chart

(2) Responsibilities of Each Department

Department Main Responsibilities

Board Accountable to the shareholders; execute resolutions; determine operation plans and investment proposals based on the scope of authorization granted by the shareholders

Chairman Formulate strategic operation instructions and objectives and appoint managers for the execution of the instructions and objectives.

Audit Committee Monitor preparation of financial report and internal control on behalf of the Board to ensure the reliability of the financial report and the legal compliance of all activities.

Remuneration Committee

Monitor payroll of all operating teams and the appropriateness of staff bonus on behalf of the Board to enable independence between ownership and operating concession.

Audit Department Perform auditing tasks on a regular or irregular basis pursuant to the internal control system, prepare audit report and provide ways of improvement.

General Manager Execute resolutions of the Board and manage all company affairs.

Speaker Systems Department

Propose and execute sales, production, procurement and development plans of speaker systems products.

Earphones Systems Department

Propose and execute sales, production, procurement and development plans of earphones systems products.

Finance Department Manage fund allocation, financial control and accounting, stock affairs, investment and public relations.

Human Resources Department

Manage human resources, legal affairs and computer information.

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2. Directors, Supervisors, General Managers, Vice General Managers, Senior Managers and Heads of Departments and Branch Offices (1) Details of Directors and Supervisors

1. Directors (There is no supervisors in the Company)

2 March 2014

Title Name Date of

Appointment

Term Date of

first appointment

Shareholdings at appointment

Current Shareholdings

Current shareholdings

Of Spouse, minor children

Shares held in other’s name

Major Qualification

Current positions in the Company and other companies

Other officers, directors or supervisors who are spouse or second-degree

relatives No. of

Shares

Ratio No. of Shares

Ratio Title Name Relationship

24 March 2011

3 years 24 March 2011 - - 1,949,400 3.21 - - - - Master of Electronic

Engineering and MBA from University of Southern California, U.S.

IBM Senior Engineer Advisor, U.S.

Xerox Senior Engineer Advisor, U.S.

Other companies:

(Note1)

- - -

Director Pai Chin Chang

24 March 2011

3 years 24 March 2011 - - 385,000 0.63 - - - - Executive Master of Business Administration from Hong Long International Business College

President of the Company;

Director of Hui Yang Eastern Asia Electronics Co., Ltd.;

Director of Huiyang Dongmei Audio Products Co., Ltd.;

Director of Eastern Asia Industries Sdn.

Bhd.

- - -

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6

Director Kwok King Lam

Keenan Ken

24 March 2011

3 years 24 March 2011 - - 1,512,000 2.49 - - - - Master of Finance and Management from University of Michigan, U.S.

The Company: Nil Other companies:

(Note 2)

- - -

Director DJR International Ltd. (Chang Tung I is appointed to perform director’s duties) (Note 4)

15 December 2011

2 years and 4 months

15 December 2011

31,411,000 51.17 26,437,600 43.52 - - 453,000 0.75 MBA from California State University, U.S.

Vice Executive Director of Kuo-Bin Ceramic Ind. Co., Ltd.

Acting Spokesman of the Company;

Chairman of Eastwin Investment Inc.；

Director of Eastech Electronics (Hui Yang) Co., Ltd.

- - -

Chang Tung I - - - 100,000 0.16 100,000 0.16 - - - - - - -

Chang Shan Juh 24 March 2011

3 years 24 March 2011 - - - - - - - - Master of Electronic

Engineering from University of Southern California, U.S.

Head of Human Resources Department of Tatung Company

Lecturer of Faculty of Electronic Engineering and Human Resources Officer of Tatung University

The Company: Nil;

Lecturer of Faculty of Electronic Engineering and Human Resources Officer of Tatung University

- - -

Chen Ko Hung 24 March 2011

3 years 24 March 2011 - - - - - - - - Graduated from Faculty of

Accounting from National Chengchi University Senior Manager of Finance Department of Para Light Electronics Co., Ltd.

Senior Manager of Finance Department of UniLite Corporation

Senior Manager of Finance Department of Princeton Technology Corporation

The Company: Nil;

CFO of Ampire Co., Ltd

Director of Chiplus Semiconductor Corp.;

Supervisor of Integrated Digital Technologies, Inc.

- - -

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Shiau Fung Shyung

（Note 3）

12 August 2011

2 years and 7 months

12 August 2011 - - - - - - - - PHD of Economics from Chinese Culture University Master of Economics from Yale University, U.S.

Master of Agricultural Economics from National Chung Hsing University

Degree of Agricultural Economics from National Chung Hsing University

Deputy Minister of Council for Economic Planning and Development

The Company: Nil;

Professor of Tamkang University;

Other companies (Note 3)

- - -

Note 1: Director of DJR International Ltd., Eastern Asia Technology Limited, Eastech Electronics (Taiwan) Inc., Eastwin Investment Inc., East Synergy Limited, Eastech Electronics Technology (Hui Yang) Co., Ltd., Eastech Electronics (HK) Limited, Eastwin Electronics Technology (Hui Yang) Co., Ltd., Eastern Asia Technology (HK) Limited, Hymnario-EAW (Huiyang) Co., Ltd., Hui Yang Eastern Asia Electronics Co., Ltd., Huiyang Dongmei Audio Products Co., Ltd., Shenzhen MaliMaliBox Trading Corporation Limited, Sound Cheers Limited, Eastern Asia Industries Sdn. Bhd., KWF (Thailand) Limited, Hifi Orient Thai Public Company Limited, etc.; and supervisor of Altek Corporation and Jean Co., Ltd.

Note 2: Director of KWF (Thailand) Limited, Life Orient Co., Ltd, AE Technology Co., Ltd., Praise & Grace (HK) Ltd, Tyon Industrial International Ltd, Everstrong Properties Limited, Angkor Capital Limited, Loopin Company Limited, Popup Solution Company Limited, Bole Media Company Limited, Bookers Group Limited, etc.; Deputy Managing Director of Hifi Orient Thai Pacific Company Limited

Note 3: He was appointed through by-election on 12 August 2011. Independent director of Wayi International Digital Entertainment Co., Compass Systems Corp. and CMC Magnetics Corporation; and supervisor of Sus Recycling Technology Inc. and Zhong Hua Cheng Co., Ltd..

Note 4: He was appointed through by-election on 15 December 2011.

Note 5: The Company does not have non-director staff, but has personnel who actually perform directors’ duties or substantially control the human resources, finance or business of the company and thus directing the act of the directors. Besides, pursuant to the Common Law of Cayman Islands, substantial directors or shadow directors shall have the same responsibilities.

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8

(2) Details of General Manager, Vice General Manager, Senior Manager and Head of departments and branch offices

Title Name Date of

Appointment

Shareholdings at appointment

Shareholdings held by spouse and minor children

Shares held in other’s name

Major Qualification

Current positions in the Company and other companies

Other officers, directors or supervisors who are

spouse or second-degree relatives

Grant of Share Options

No. of Shares

Ratio No. of

Shares

Ratio No. of Shares

Ratio Title Name Relationship

General Manager

Pai Chin Chang

24 March 2011

（Note 1）

385,000 0.63% - - - - Executive Master of Business

Administration from Hong Long International Business College

President of KYET

Director of Hui Yang Eastern Asia Electronics Co., Ltd;

Director of Huiyang Dongmei Audio Products Co., Ltd;

Director of Eastern Asia Industries Sdn.Bhd.

- - - -

Vice General Manager

Chu Ming Chung

1 December 1999

（Note 2）

80,000 0.13% - - - - Master of Management from

Komazawa University, Japan Vice General Manager of Eastern Asia Technology (HK) Limited

Director of Hymnario-EAW (Huiyang) Co., Ltd.

Director of Shenzhen MaliMaliBox Trading Corporation Limited

- - - -

Vice General Manager

Chang Po Chao

1 December 2011

50,000 0.08% - - - - Degree of International

Trading from National Chengchi University Vice President, Public Relations and Spokesman of KYET

Director of Eastwin Technology (Samoa) Incorporated

- - - -

Chief Financial Officer

Lam Pui Man

24 March 2011

（Note 1）

- - - - Master of Finance from

Chinese University of Hong Kong

BBA from The Hong Kong University of Science and Technology

Fellow member of Association of Chartered Certified Accountants and Hong Kong Institute of Certified Public Accountants

Senior Manager of Finance Department of EATL Group CPA Audit Accountants of Arthur Andersen CFO of KYET

- - - - -

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Head of Audit

Tang Kai Tak

24 March 2011

（Note 1）

- - - - Master of Applied Finance

from Macquarie University, Australia

Fellow member of Association of Chartered Certified Accountants and Hong Kong Institute of Certified Public Accountants

Certified Internal Auditor, Certified Information System Auditor, Certified Fraud Examiner

Head of Audit of KYET Head of Internal Audit of Schick International Ltd and Wing Lung Bank

Head of Audit of KYET

- - - - -

Note 1: KYET was incorporated on 1 February 2011. The above staff originally worked in EATL Group, and was redesignated to serve KYET on 24 March 2011.

Note 2: Joined Eastern Asia Technology (HK) Limited on 1 December 1999.

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10 (3) Remunerations of Directors, Supervisors, General Managers and Vice General Managers

1. Remunerations paid to Directors, Supervisors, General Managers and Vice General Managers for the latest year (1) Remunerations of Directors (including independent executive directors)

Unit: NTD’000

Title Name Remuneration of Directors Percentage of aggregate of

A, B, C and D to net profit after tax

Remunerations of Concurrent Employments Percentage of aggregate of

A, B, C, D, E, F and G to net profit after tax

Any Remunerations from companies other than subsidiaries for investment business Salary (A) Post-employment

Pension (B)

Share of Profits (C)

Fee incurred for duty performance

(D)

Salary, Bonus and Special bonus

(E)

Post-employment Pension

(F)

Bonus payable to employees as profit distribution (G)

Share Options (H) Restricted Awards (I) Company All

companies contained in the financial statements

The Company

All companies contained in the financial statements

The Company

The Company All companies contained in the financial statements

The Company

Cash bonus

Share Bonus

Cash bonus

Share Bonus

- - - -

6,580 (Note 1)

135 135 2.04% 2.04% - 9,530 - 58 - - 4,144

(Note 2)

- - - - - 2.04% 6.22% Nil

Director Pai Chin Chang

Director Chang Tung I

Director Kwok King Lam Keenan Ken

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Chang Shan Juh

Chen Ko Hung

Shiau Fung Shyung

Note 1: Remuneration payable to Directors as profit distribution for 2013 has been approved by the Remuneration Committee and the Board on 11 February 2014, but is pending approval by the shareholders at the regular meeting held on 30 April 2014.

Note 2: Bonus payable to employees as profit distribution for 2013 totaled HKD2,217,180 (approximately NTD8,506,000) has been approved by the Remuneration Committee and the Board on 11 February 2014, but is pending approval by the shareholders at the regular meeting held on 30 April 2014.

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Remuneration Ranking Ranking of Remunerations

payable to each directors

Name of Directors Aggregate of above 4 kinds of

remunerations (A+B+C+D)

Aggregate of above 7 kinds of remunerations (A+B+C+D+E+F+G) The Company All companies

contained in the financial statements

The Company All companies contained in the financial statements Below 2,000,000 Liou Jenq Lin

Pai Chin Chang Chang Tung I Kwok King Lam Keenan Ken

Chang Shan Juh Chen Ko Hung Shiau Fung Shyung

Liou Jenq Lin Pai Chin Chang Chang Tung I Kwok King Lam Keenan Ken

Chang Tung I Kwok King Lam Keenan Ken

2,000,000 (inclusive) – 5,000,000 (not inclusive)

- - - -

- - - Liou Jenq Lin

Pai Chin Chang 10,000,000 (inclusive) –

15,000,000 (not inclusive)

- - - -

Above 100,000,000

Total 7 directors 7 directors 7 directors 7 directors

(2) Remuneration of Supervisors: the Company does not have any supervisors, thus it is not applicable.

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(3) Remunerations of General Managers and Vice General Managers

Title Name Salary (A) Post-employment

pensions (B)

Bonus and Special Bonus (C)

Bonus payable to employees as profit distribution (D)

Percentage of aggregate of A, B, C and D to net profit after tax (%)

Share Options Restricted Awards Any

Remunerations from companies other than subsidiaries for investment business The

Company All companies contained in the financial statements

The Company

The Company All companies

contained in the financial statements

The Company

the Company

All companies contained in the financial statements Cash

Bonus Share Bonus

Cash Bonus

Share Bonus

Chairman (Management)

Liou Jenq Lin

878 13,420 - 116 148 1,948 148

(Note 1)

- 4,292 (Note 1)

- 0.36% 6.01% - - - - Nil

General Manager

Pai Chin Chang Vice General Manager

Chu Ming Chung Vice General Manager

Chang Po Chao

Note 1: Bonus payable to employees as profit distribution for 2013 totaled HKD2,217,180 (approximately NTD8,506,000) has been approved by the Remuneration Committee and the Board on 11 February 2014, but is pending approval by the shareholders at the regular meeting held on 30 April 2014.

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Remuneration Ranking

Ranking of Remunerations payable to each directors Name of General Manager and Vice General Manager The Company All companies contained in

the financial statements

Below 2,000,000 Chang Po Chao -

2,000,000(inclusive) – 5,000,000(not inclusive) - Liou Jenq Lin, Chu Ming Chung 5,000,000(inclusive) – 10,000,000(not inclusive) - Pai Chin Chang

10,000,000(inclusive) – 15,000,000(not inclusive) - -

Above 100,000,000 - -

Total 1 Manager 3 Managers

(4) Name of Managers who have been awarded employees’ bonus and the distribution of bonus

Unit: NTD’000 Title (Note 1) Name (Note 1) Share Bonus Cash Bonus Total

Percentage of total amount to net profit

after tax (%) Managers General Manager Pai Chin Chang - 5,223

Note 1

5,223 Note 1

1.59%

Note 1 Vice General Manager Chu Ming Chung

Vice General Manager Chang Po Chao Chief Financial Officer Lam Pui Man Head of Auditing Tang Kai Tak

Note 1: Bonus payable to employees as profit distribution totaled HKD2,217,180 (approximately NTD8,506,000) has been approved by the Remuneration Committee and the Board on 11 February 2014, but is pending approval by the shareholders at the regular meeting.

2. Analysis on the percentage of total or individual remunerations of directors, supervisors, chairman, general managers and vice general managers of the Company and all companies contained in the financial statements for the latest two years to net profit after tax, and descriptions on the remuneration policies, standards and packages and the way of determination of remunerations and its relationship with operating results.

(1) Percentage of total remunerations of directors, supervisors, president, general managers and vice general managers of the Company and all companies contained in the financial statements for the latest two years to net profit after tax

Unit: NTD’000

Item 2012 2013

Amount % Amount %

Directors 5,300 1.72% 6,715 2.04%

Chairman, General Managers and Vice General Managers

15,342 4.97% 19,776 6.01%

Consolidated total net profit

308,877 100.00 328,876 100.00

(2) Descriptions on the remuneration policies, standards and packages and the way of determination of remunerations and its relationship with operating results

A. According to Article 117 of the Articles of Association of the Company, the remuneration of Directors shall not be higher than 2% of the profit of the year.

B. Remunerations of Chairman, General Managers and Vice General Manager shall be determined based on his/her position, contribution to the Company pursuant to internal practices of the Company. Bonus payable to employees shall be determined according to the Articles of Association of the Company.

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3. Details of Fee Payable to Auditors (1) Fee Payable to Auditors

Ranking of Fees Payable to Auditors

Name of the Accounting Firm

Name of Auditors Audit Period Remark

Deloitte & Touche Shih, Chin-Chuan Lai, Kwan-Chung Year 2013 -

Ranking/ Item of fees Audit Fee Non-Audit Fee Total

1. Less than 2,000,000 

2. 2,000,000 (inclusive) – 4,000,000  

3. 4,000,000 (inclusive) – 6,000,0000 4. 6,000,000 (inclusive) – 8,000,0000 5. 8,000,000 (inclusive) – 10,000,0000 6. Over 10,000,000

(2) For non-audit fees payable to certified public accountants, their firms and their associates amounting to more than 1/4 of the audit fee, disclosures shall be made on the amount of audit and non-audit fees and the content of the audit services.

Unit: NTD’000

Name of the Accounting Firm

Name of CPA Audit Fees

Non-Audit Fees Term of

Audit

Remark System

Design

Registration Human Resources

Others Sub-total

Deloitte &

Touche

Shih, Chin-Chuan Lai, Kwan-Chung

3,200 530 530 Year 2013

(3) In case of change of auditor, and the resulting audit fee is lower than the previous year, disclosures shall be made on the decreased amount, ratio and reason thereof: Not Applicable.

(4) If audit fee is lower than 15% compared to the previous year, disclosures shall be made on the decreased amount, ratio and reason thereof: Nil.

4. Details of Change of Auditors: Not applicable

5. Chairman, General Managers, or Managers responsible for Finance or Accounting Affairs of the Company who have served in the firm of the Certified Public Accountant or its Associates for the latest year: Nil

(22)

6. Movements of Shareholdings and Pledge thereof Held by Directors, Managers, and Shareholders (whose shareholdings representing over 10% of total Share) for the year as at the date of issue of annual report:

(1) Movement of transfer and pledge of shareholdings of directors, supervisors, managers and substantial shareholders

Unit: Share

2013 As at 2 March 2014

Title Name Increase (Decrease) in Number of shares held

Increase (Decrease) in Number of Shares Pledged

Increase (Decrease) in Number of shares held

Increase (Decrease) in Number of Shares Pledged

Chairman Liou Jenq Lin - - - -

Director DJR International Ltd. - - - -

Director and General Manager

Pai Chin Chang (8,000) - (7,000) -

Legal Director Representative of DJR International Ltd.

Chang Tung I - - - -

Director Kwok King Lam Keenan Ken - - - -

Independent Director Chang Shan Juh - - - -

Independent Director Shiau Fung Shyung - - - -

Independent Director Chen Ko Hung - - - -

Vice General Manager Chu Ming Chung - - - -

Vice General Manager Chang Po Chao - - - -

Chief Financial Officer Lam Pui Man - - - -

Head of Auditing Tang Kai Tak - - - -

(2) Details of Transfer of Shareholdings of Directors, Supervisors, Managers and Substantial Shareholders: Not applicable

7. Details of Shareholdings of Top Ten Substantial Shareholders, their relationship as related parties under FAS 6 or as spouse or second degree relatives

7 April 2013 : Unit : Share

Name Shares held Shares held by spouse, minor children

Aggregate Shares held in the name of other parties

Name and relationship of Top ten substantial shareholders who are related to each other or are spouse, second degree

relatives

Remark

No. of shares

Shareholding ratio

No. of shares

Shareholding ratio

No. of shares

Shareholding ratio

Name Relationship DJR International

Ltd.

26,437,600 43.52% - - 453,000 0.75% Liou Jenq Lin

Director Investment clients’

accounts for New Advantage Holdings Ltd.

6,000,000 9.88% - - - - - - -

Liou Jenq Lin 1,949,400 3.21% - - - - DJR

International Ltd.

Director -

Shin Kong Life Insurance Co., Ltd.

1,750,000 2.88% - - - - - - -

Chinatrust entrusted investment account of KYET opened for foreign employees

1,545,000 2.54% - - - - - - -

Kwok King Lam Keenan Ken

1,512,000 2.49% - - - - - -

Citibank entrusted clients’ account for Yuanta Asset Management (H.K.)

1,300,000 2.14% - - - - - - -

AVY Precision Technology Inc.

890.000 1.47% - - - - - - -

Diao Gao Zong 863,000 1.42% - - - - - - -

Shen Bei Bei 671,000 1.10% - - - - - - -

(23)

D. FUNDING

1. Capital and Shares (1) Sources of Funds of the Company 1. Sources of funds of the Company

28 February 2014; Unit: ‘000 shares; NTD’000

Month/Year Issue Price Authorised Share Capital Paid-in Share Capital Remark No. of

Shares

Amount No. of Shares

Amount Source of Funds

Paid by assets other

than cash

Others

February 2011 10 80,000 800,000 100 1,000 Set up of share capital

- - March 2011 10 80,000 800,000 53,900 539,000 Issue of new

shares

(Note) - November 2012 60 80,000 800,000 6,750 67,500 Increase of

funds by cash

- -

Note: To comply with the listing requirements of Taiwan, the Company was incorporated in Cayman Islands in February 2011.

Pursuant to the resolutions passed at the general meeting held on 30 March 2011, additional issue of 53,900,000 new shares to DJR, a substantial shareholder of the Company and an acquisition of 100% equity of EAH from EATL at a consideration of HKD293,887,883 was resolved and thus reorganization of the shareholding structure of the Group was completed. After the reorganization, the Company directly held 100% equity interests in EAH, and indirectly held 100% equity interests in HYEA, HYDM and HYHY.

28 February 2014; Unit: shares

Type of Shares Authorized Share Capital Remarks

Issued Shares Unissued Shares Total Ordinary Shares Listed Shares

60,750,000 19,250,000 80,000,000

2. Relevant details to be disclosed under the reporting system: Not Applicable.

(2) Structure of Shareholdings

2 March 2014

Amount Structure Government Authority

Financial Institute

Other Legal Entity

Individual Foreign Entity and Individual

Total

No. of person 1 3 19 1,066 30 1,119

No. of shares held 32,000 2,028,000 2,879,000 17,388,090 38,422,910 60,750,000

Shareholding ratio 0.05 3.34 4.73 28.62 63.25 100