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HTC 2015 Annual Report
TWSE 2498
Mops.twse.com.tw / htc.com / printed on April 30, 2016
Annual Report

Table of contents

  • Page 1
    TWSE 2498 HTC 2015 Annual Report Annual Report Mops.twse.com.tw / htc.com / printed on April 30, 2016

  • Page 2
    HTC spokesman Name Chialin Chang Title President of Global Sales & Chief Financial Officer, Smartphone & Connected Devices Business Acting spokesman Not Available Tel +886 3 3753252 Email [email protected] corporate headquarters Address No. 23, Xinghua Road, Taoyuan District, Taoyuan City, Taiwan, ...

  • Page 3
    ...Letter to HTC Shareholders p. 4 5 6 7 8 Capital and shares Financial status, operating results and risk management Affiliate information and other special notes p. 116 Company profile p. 12 p. 134 Business operations p. 36 p. 148 Corporate governance p. 60 Financial information p. 170...

  • Page 4
    LETTER TO HTC SHAREHOLDERS

  • Page 5
    ... has positioned the Company well to seize new opportunities and extend into new markets. Smartphones HTC remains firmly committed to its smartphone business. The smartphone is the most personal of all consumer devices, and has become our digital hub, our link to a world of smart connected devices...

  • Page 6
    ...design with a high-end camera with OIS, high resolution audio and the best of Google's platform for a truly customizable experience. The HTC One A9 was well received among customers and the media, and the Q4 launch provided sales impetus into the holiday season. Over 2015, HTC's smartphone business...

  • Page 7
    ... and performance, in line with our Brand In 2015, we redefined our brand promise as the Pursuit of Brilliance, not only as our corporate ethos to pursue brilliance in everything we do, but in the creation of beautiful, intuitive and highly functional products that enable our customers to share...

  • Page 8
    COMPANY PROFILE

  • Page 9
    ... Company profile COMPANY PROFILE About HTC HTC brings brilliance to life through leading innovation in smart mobile device and experience design. Beginning with a vision to put a personal computer in the palm of our customers' hands, we have led the way in the evolution from palm PC to smartphone...

  • Page 10
    ... in the history of the mobile phone. It was at this point that HTC began to develop products in partnership with customers and to tailor products based on telecommunications services provided by its customers. This marks the beginning of HTC's efforts in building a global sales and service network...

  • Page 11
    ... talent in product design, user interface, brand and sales and marketing. This talent has enabled HTC to receive global recognition, with awards including "Device Manufacturer of the Year" at Mobile World Congress in 2011, and HTC was listed in the top 100 international brands by Interbrand...

  • Page 12
    ... and corrects vibrations to give a crystal-clear picture every time. Meanwhile, the front UltraPixel camera delivers the best self-portraits in any lighting condition, capturing 300% more light than conventional smartphone cameras. Over the past year, HTC has carried many of the features of its...

  • Page 13
    ...â„¢ camera, delivering brilliantly sharp, low light and high-resolution photos. Its DxOMark score of 88, one of the highest camera quality scores of any smartphone, is the result of tens of thousands of hours spent fine-tuning each element to deliver world-class photos and videos. Company profile...

  • Page 14
    ... is regarded by users as the most innovative cover accessories for smartphones. Apart from its primary function of protecting the phone, its display allows users to see notifications and alerts, as well as answer calls, without opening the front cover. In 2015, we released HTC Dot Viewâ„¢ II, the...

  • Page 15
    ... product bundle. UA HealthBox is designed to work with iOS and Android. Through an app available on the Apple App Store and Google Play, all the information that is monitored, such as daily activities, workouts, nutrition, and wellness, is recorded in real-time into UA Record, a cloud-based sports...

  • Page 16
    ..., and been bowled over by the total immersion in virtual reality with Vive. This outstanding product performance has set HTC a new standard to achieve over 2016, through our pursuit of brilliance in all aspects of our approach to product design, functionality and engineering. Company profile 29

  • Page 17
    ... behalf of Way-Chih Investment Co., Ltd. Management Team Cher Wang Chairwoman & Chief Executive Officer Chialin Chang President of Global Sales & Chief Financial Officer, Smartphone & Connected Devices Business David Chen Chief Operating Officer WH Liu Chief Technology Officer Jack Tong President...

  • Page 18
    ... the global Smartphone & Connected Devices Business product sales, responsible for production promotion, new customer development, customer relations, customer service and communication. Operations Center David Chen Chief Operating Officer Responsible for the execution of products research and...

  • Page 19
    ... (UAE) and Brazil. Human Resources Employees represent one of HTC's most valuable assets. The company has, in recent years, actively recruited outstanding talent into its ranks -particularly in the areas of product design, user interface, brand promotion, and sales and marketing. While bringing on...

  • Page 20
    BUSINESS OPERATIONS

  • Page 21
    ... Smartphone Low Productivity 10"~12" Notebook 4,000 7"~8" Tablet 3,000 High Source: Display Research, Gartner, BNP, Macquarie Research While Gartner predicts worldwide device (phone, Ultramobile and PC combined) shipments will reach 2.4 billion units in 2016, just a 1.9% year-over-year increase...

  • Page 22
    ... for Smartphones The year-over-year growth of smartphone market has been slowing in the last couple of years. Given the smartphone market is already saturated in developed markets, research firm Gartner expects mobile phone sales will increase only by 2.5% and reach 2 billion units in 2016, mainly...

  • Page 23
    ...eStores in Taiwan, India, the US and EMEA. Aside from the aforementioned core smartphone business, we are also actively exploring and expanding our product portfolios into areas where HTC can deliver premium, quality products and services to our customers as well as users. Though this takes time, we...

  • Page 24
    ... all connected with UA Record™, that arms users with the information they need to create the lives they desire. HTC's connected device product strategy was reimagined in 2015 with the partnership with leading sports brand Under Armour®. Working closely, HTC teamed up our world-class design and...

  • Page 25
    ... goals by developing relatable customer lifestyle moments into our sharing, at times that are relevant to our targets, and by recognizing that the social interactions our customers have with HTC are a never-ending opportunity to demonstrate our brand values in action. We believe our brand stands for...

  • Page 26
    ... the user a real-time dynamic homepage to access global and personal social networks news. Zoeâ„¢ shooting mode used HTC UltraPixelâ„¢-powered camera to bring image galleries to life, and redefined how people take pictures, play and share precious moments. In addition, HTC BoomSoundâ„¢ provides...

  • Page 27
    ...-directional fingerprint scanner located at the bottom of the screen, Android Pay makes purchasing items as secure and as easy as "tap, pay, done." Game changing audio has always been central to the HTC One family, and the HTC One A9 delivers amazing sound quality, with HTC BoomSound integrated...

  • Page 28
    .... Included in the box is the quick charge 3.0 Rapid Charger with improved thermal management that can charge the battery up to 50% in just 30 minutes - ideal for people who find their phone running low on juice before the end of the working day. Virtual Reality In March 2015, HTC and Valve...

  • Page 29
    ... Business operations Corporate Governance HTC is committed to implementing good governance, effective risk management and information transparency. HTC policies related to these corporate governance are explained further below: Disclosure of Information & Financial Forecasts HTC has been working...

  • Page 30
    ... the Most Recent Two-Year Period (1) Major suppliers representing at least 10% of gross purchase Unit: NT$ millions 2015 Supplier Code a b c Others Total Amount 14,039 13,831 10,970 37,953 76,793 % 18 18 14 50 100 Relation to HTC Customer Code None None None Major customers representing at least 10...

  • Page 31
    ... equipment after making adjustments for necessary production stoppages, non-work holidays, etc. Nokia Corporation January 1, 2003 ~ December 31, 2016 (2) Sales Unit: 1,000 units / NT$ millions 2015 Domestic Sales Quantity Smartphones and other items (accessories) Total 2,084 2,084 Value...

  • Page 32
    CORPORATE GOVERNANCE

  • Page 33
    ...When Elected Shares % Principal work experience and academic qualifications Positions held concurrently in the company and/ or and other company • CEO and President, HTC Corporation • Chairwoman (Representative), H.T.C. (B.V.I) Corp. • Chairwoman (Representative), HTC Investment One (BVI...

  • Page 34
    ... Relation Title Nationality/ place of Registration Name Date Elected Term Expires Date First Elected Shareholding When Elected Shares % Principal work experience and academic qualifications Positions held concurrently in the company and/ or and other company • Director, HTC VIVE TECH...

  • Page 35
    ...the business of the company Conditions Conforms to criteria for independence (note) Name Have work experience in commerce, law, finance, accounting, or other areas relevant to the business of the company V V V V V V 1 2 3 4 5 6 7 V 8 9 V 10 V V V V V V Number of other public companies...

  • Page 36
    ... of California, Berkeley. • General Manager of the PC Division, First International Computer, Inc. (FIC) Director Wen-Chi Chen Spouse President of Global Sales & Chief Financial Officer, Smartphone & Connected Devices Business Republic of China Chialin Chang 2012.04.16 0 0.00...

  • Page 37
    70 Corporate governance 2016.04.30 Unit: Share; % Other persons holding shares in their name (note) Shares % Principal work experience and academic qualifications • MBA, Oklahoma City University. • HR Director, DuPont • APAC Business Group HR Manager, Intel Microelectronics Asia Ltd. ...

  • Page 38
    ..., or managerial officer of a non-subsidiary affiliate. Note 9: Since the Company did not issue restricted employee shares to directors up to the date of printing of this annual report, the number in this column is not applicable. * Compensation information disclosed in this statement differs from...

  • Page 39
    ...Note 6) Cash Stock Exercisable Employee Stock Options (Note 5) Restricted employee shares (Note 8) Title Former HTC CEO (Note a) President of Global Sales & Chief Financial Officer, Smartphone & Connected Devices Business Chief Operation Officer Chief Technology Officer Vice President President...

  • Page 40
    ...Note: Since there's a net loss in fiscal 2015, the percentage in this column is not applicable. 4. Employee profit sharing granted to Management Team None. 2. HTC's reward programs and policies are designed to support HTC's business strategy and the focus of performance differentiation. Our reward...

  • Page 41
    ... business information on the Market Observation Post System, HTC also convenes online investor conferences on a quarterly basis to allow investors timely access to information on the company's operations and performance. In December 2008, the HTC Investor Relations Website was revised. A special...

  • Page 42
    ... audit officers, who report to the Supervisors on issues such as risk management, major litigations, and internal audit reports. Based on the principle of sound, conservative accounting, HTC's Supervisors and CPAs regularly undertake joint reviews of major account items in the financial statements...

  • Page 43
    ...the"Operational Procedures for Handling Material Inside Information and Preventing Insider Tranding" . It governs purchase and sale of priced stocks by internal staffs. None (1) Establishment of a corporate website to disclose information regarding the Company's financials, business and corporate...

  • Page 44
    ...28 To 2015.12.28 Organization Taiwan Corporate Governance Association Training Mergers and Insider Trading Professional Development Class for Principal Accounting Officers of Issuers, Securities Firms, and Securities Exchanges Hours 3 Notes Associate Vice President Hsiu Lai 2016.03.14 2016.03...

  • Page 45
    ...'s commitment to the development of corporate social responsibility is outlined on our global website (www.csr.htc.com). HTC has set out an employee code of conduct and supplier code of conduct, and policies relating to environmental safety and health, carbon reduction, energy management, etc. It is...

  • Page 46
    ...the limited warranty sheet included in the HTC phone package ‧Customer service contact numbers in all countries ‧Customer service center contact info card in Taiwan ‧Include the telephone numbers and methods of connecting to its dedicated customer service lines on its official Website ‧Live...

  • Page 47
    ... a dedicated (or part-time) unit with responsibility for the enforcement of ethical corporate management. Currently, HTC has adopted an employee code of conduct that sets rules for compliance by all division supervisors and employees in their execution of company operations, to prevent violations...

  • Page 48
    ... guide its internal operations, such as the"Specific Companies, Enterprise Groups and Related Parties","Budget Management Procedures","Corporate Bylaws for Subsidiaries"and"Operational Procedures None for Handling Material Inside Information, and Prevention of Insider Trading". None (2) Whether...

  • Page 49
    ... a change of share status to write-off 408,700 shares of the Company's restricted employee shares and setting the record date for the reduction of paid-up capital. 1. Adopted resolution for the sale of TY5 building in Taoyuan headquarters. 2015.12.29 2016.02.29 HTC Corporation. Chairwoman...

  • Page 50
    ... the current fiscal year up to the date of printing of the annual report, of the company's chairman, general manager, principal accounting officer, principal financial officer, chief internal auditor, and principal research and development officer Title President & CEO Vice President Name Peter Chou...

  • Page 51
    ... Governing Information to be Published in Annual Reports of Public Companies" : None. President of Global Sales & Chief Financial Officer, Smartphone & Connected Devices Business Chief Operation Officer Chialin Chang 0 0 0 0 David Chen 560,727 ( 395,000 ) 0 0 (Continued) Corporate...

  • Page 52
    100 Corporate governance 7. Related Party Relationship Among the Company's 10 Largest Shareholders. Unit: Shares 2015 Change in quantity of shareholding 18,000 0 ( 8,858 ) 0 0 3,000 18,500 Change in quantity of pledged shares 0 0 0 0 0 0 2016.01.01 - 2016.04.26 Change in quantity of shareholding 0...

  • Page 53
    ... Limited) HTC VIVE Holding (BVI) Corp. HTC VIVE TECH (BVI) Corp. HTC VIVE TECH Corp. Note: Investments accounted for using the equity method. 0 0 0 0 0 0 0 0 0 0 0 0 0 Total investments Long-term investments (Note) H.T.C. (B.V.I.) Corp. Communication Global Certification Inc. High Tech Computer...

  • Page 54
    ... to encourage employees to expand their life experience through exercise and engaging in recreational pursuits in their spare time. Many kinds of activities, family days, sporting competitions, art and cultural competitions are hosted to encourage a normal social life outside of work. To offer...

  • Page 55
    ... companies. Moreover, the standby power of the power suppliers used for models promoted from 2013 may further achieve 0.03 W, the minimum energy consumption criterion. HTC's R&D team has developed excellent power management models that allow phones to enter power saving standby mode in accordance...

  • Page 56
    ... 2016 flagship smartphone, the HTC 10, which has been engineered from the inside out to last longer. The HTC 10 features HTC's new Boost+ technology, which optimizes phone memory and manages apps to improve battery life by 30%, enabling up to two days' use per recharge. b) Recyclability Complete...

  • Page 57
    ...The HTC One (M7) became the first smartphone to comply with international standards, including ISO/TS 14067:2013, PAS 2050:2011, ISO 14040:2006 and ISO 14044:2006, with respect to carbon footprint and life cycle evaluations of products. In 2015, we completed product carbon footprint and life cycle...

  • Page 58
    ... in the society, HTC piloted the "HTC Power To Give" project for public welfare in 2013. By partnering with Dr. David Anderson from University of California, Berkeley, HTC developed a cellphone app that enabled users of smartphones to share idle computing resources while charging their cellphones...

  • Page 59
    ... practical and easy operation/setting for phone functions, including "zoom in", "voice input", "Taipei Bus Inquiring APP" and "weather forecast", in great detail, while all other staff were responsible for 1-on-2 close operation assistance. 5.2.7 Let love migrate - surprise shoe box Another...

  • Page 60
    CAPITAL AND SHARES

  • Page 61
    ... Capital and Shares (1) Capitalization: 2016.04.26 Unit: Share; NT$ Authorized Paid-in Remark Capital increase by assets other than cash None None None None None Authorized Paid-in Remark Capital increase by assets other than cash $ Month/ Year 03/1998 10/1998 08/2000 04/2001 06/2002 Price 10 10...

  • Page 62
    ...Treasury stock (Note) 0 0 0.00% Total 127,231 827,641,465 100.00% Number of shareholders Shareholding Holding percentage Note: The treasury stocks were the restricted employee shares withdrawn by HTC without compensation. (3) Distribution of ownership: 2016.04.26 Each share has a par value of...

  • Page 63
    ... of the stock dividend proposal on operational performance and earnings per share: HTC will not distribute stock dividends at the 2016 Annual Shareholders' Meeting; therefore it is not applicable. Accumulated undistributed dividend Price/Earnings ration Return on investment Price/Dividend ratio...

  • Page 64
    ... 0 share Buy-back period Buy-back price range Number of shares bought back Total amount for buy-back shares Cancellation of buy-back shares Cumulative number of own shares held 2. Employee Compensation proposal adopted by the Board: HTC will not distribute Employee Compensation at the 2016 Annual...

  • Page 65
    ... may be used to purchase one share of common stock of HTC. The share purchase price shall be the closing price of HTC common stock on the date of issuance of the employee stock warrants. (1) Issuance of employee share warrants and impact to shareholders' equity 2016.04.30 / Unit: share and NT...

  • Page 66
    ... 10 employees 2016.04.30 / Unit: share and NT$ Exercised Number of Option /Number of Option Issued (Note1) Unexercised Number of Option /Number of Option Issued (Note 1) Title Former HTC CEO (Note 4) President of Global Sales & Chief Financial Officer, Smartphone & Connected Devices Business...

  • Page 67
    ... Number of Restricted Employee Shares Issued Issued Price per Share Percentage of Shares Exercisable to Outstanding Common Shares 3rd Restricted employee shares 2015.08.19 2015.12.23 4,006,000 shares NTD 0 0.48% 1. An employee who remains employed at HTC after 1 year has elapsed from the time of...

  • Page 68
    ...Note 3) President of Global Sales & Chief Financial Officer, Smartphone & Connected Devices Business Chief Operating Officer Chief Technology Officer Name Number of Restricted Employee Shares Acquired Number of Shares Restricted Issued Price Restricted Employee Shares Issued amount Amount...

  • Page 69
    FINANCIAL STATUS, OPERATING RESULTS AND RISK MANAGEMENT

  • Page 70
    ... in global smartphone market and product mix change. Despite a lowered operating expense, operating income for 2015 came in lower compared to 2014 as our business went through transition. Non-operation income and expenses for 2015 decreased from 2014 due to impairment loss for some assets. Change in...

  • Page 71
    ... developments. Evaluation analysis is based on industry dynamics, market competition, founding team experience, business model and risk analysis. The final goal is to make key strategic investments (via minority or control) in companies and industries that strengthen HTC's product and service...

  • Page 72
    ... a leading competitive edge. Product differentiation and innovations in user experience allow us to develop a wide range of products tailored to meet diverse consumer needs. HTC SenseR is designed with customer at the center to make mobile phones more intuitive and easy to use. (3) We upgrade our...

  • Page 73
    ... fiscal year primarily focus on research and development of applications related to the user experience and mobile data services, and on providing product-related technical support and after-sales service. In addition to further developing its existing smartphone product line, the Company will...

  • Page 74
    ...ensure HTC's leadership position in 4G market and technology. HTC will continue to use its resources to develop new technologies and enhance the holistic user experience in order to deliver products and services that fit all high-end, mid-end, and low-end segment market demands. Sales: HTC products...

  • Page 75
    ...Product Design and Quality Risks Production Quality Risk Product Quality Risk 7. Other Important Matters (1) Certification details of employees whose jobs are related to the release of the company's financial information Number of Employees Certification Certified Public Accountants (CPA) Internal...

  • Page 76
    AFFILIATE INFORMATION AND OTHER SPECIAL NOTES

  • Page 77
    .... PT. High Tech Computer Indonesia HTC India Private Limited HTC (Thailand) Limited 100.00% 100.00% 100.00% 99.33% 100.00% HTC Corporation 99.00% 100.00% 100.00% H.T.C. (B.V.I.) Corp. 99.00% 100.00% HTC Nordic ApS 100.00% 1.00% 100.00% 100.00% 100.00% Communication Global Certification...

  • Page 78
    ... Stock NTD 1,925 (MYR 250) Business Activities Marketing, repair and aftersales services Sale of smart handheld devices and electronic components Global investing activities, marketing, repair and aftersales service International holdings Design, research and development of application software...

  • Page 79
    ... engage in online and download media services. 11. Dashwire, Inc. engages in design and management of cloud synchronization technology. 12. Inquisitive Minds, Inc. is mainly engaged in development and sale of digital education platform. 13. HTC Investment One (BVI) Corporation is mainly engaged...

  • Page 80
    ... Director Supervisor HTC Investment One Director (BVI) Corporation HTC VIVE Holding (BVI) Corp. Director HTC Myanmar Company Limited HTC Corporation Representative: Cher Wang Director 1,000 shares HTC Corporation Representative: Cher Wang Affiliate information and other special notes 157

  • Page 81
    ...00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Company HTC Vietnam Services One Member Limited Liability Company S3 Graphics Co, Ltd. Title Name or Representative High Tech Computer Asia Pacific Pte. Ltd. Representative: Jack Tong HTC Investment One (BVI) Corporation...

  • Page 82
    ...( 65.55 ) Company Investor: HTC Corporation Investee: H.T.C. (B.V.I.) Corp. Communication Global Certification Inc. High Tech Computer Asia Pacific Pte. Ltd. HTC Investment Corporation HTC 1 Investment Corporation HTC Investment One (BVI) Corporation HTC Investment (BVI) Corp. HTC VIVE Holding...

  • Page 83
    ... designed on Android Phone operating systems (OS), with connected devices and virtual reality systems. HTC products support voice communication, mobile Internet, multimedia, global positioning service (GPS), personal data assistant (PDA), e-mail, instant data search, financial transaction services...

  • Page 84
    ... issued); c. Voluntarily release annual greenhouse gas emissions data to the public through international nonprofit organizations, CDP. Employee health and safety (H&S): In accordance with contents of the plan for management of occupational health and safety (H&S), the company will comply with...

  • Page 85
    ... for Taiwan's three main annual festivals, cash for weddings / funerals, subsidies for club activities, access to employee exercise facilities and various exercise classes, massage service, library, and book store coupons. Open and responsive lines of communication HTC operates an internal system...

  • Page 86
    ... be delivered via a telephone hotline, e-mail address or physical mail as well as made known through HTC's regular employee opinion surveys. During the most recent fiscal year and as of the printing date of this annual report, labor relations management have been harmonious with no losses resulting...

  • Page 87
    FINANCIAL INFORMATION

  • Page 88
    ...836 1,717,150 55,213,207 196,979,839 116,556,611 2011 178,751,062 15,318,600 2,241,541 50,810,264 247,121,467 145,631,489 Item Current Assets Long-term Investments Properties Intangible Assets Other Assets Total Assets Before Appropriation 2015 2014 Year 2013 2012 127,271,142 42,652,154 19,935,586...

  • Page 89
    ...,715,633 22,767,479 20,946,323 256,111,830 153,434,018 As of 2016.03.31 77,459,785 (4) Abbreviated Consolidated Balance Sheets - ROC GAAP Unit: NT$ thousands Year Item Current Assets Long-term Investments 2015 2014 2013 2012 139,658,980 10,197,272 25,651,292 11,520,674 19...

  • Page 90
    ... Operations Income (Loss) from Extraordinary Items Cumulative Effect of Changes in Accounting Principle Net Income Basic Earnings Per Share Abbreviated income statement was based on IFRS 2015 2014 2013 2012 270,701,687 56,989,072 14,762,895 2,317,531 155,323 16,925,103 16,780,968 2011...

  • Page 91
    ... ) 2.37 Financial analysis was based on ROC GAAP 2011 3. Profitability Analysis Profitability declined compared to the previous year due to product transition and intensified competition in smartphone market. 4. Cash Flow Analysis As we recorded a loss in 2015, our net cash outflow from operating...

  • Page 92
    ...10.66 ) 2.37 ( ( Financial analysis was based on ROC GAAP 2011 As of 2016. 03.31 48 413 138 97 ( 588 ) 3.29 111 2.44 1.94 150 0.98 4. Cash Flow Analysis As we recorded a loss in 2015, our net cash outflow from operating activities saw an increase from the previous year, resulting in negative cash...

  • Page 93
    ...prepared the Company's 2015 Business Report, Financial Statements and Earnings Distribution Proposal. HTC Corporation's Financial Statements have been audited and certified by Hsu, Wen-Ya, CPA, and Lai Guan-Jhong, CPA, of Deloitte & Touche and an audit report relating to the Financial Statements has...

  • Page 94
    ...HTC CORPORATION BALANCE SHEETS DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars) 2015 ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Notes 7 and 28) Trade receivables, net (Note 10) Trade receivables - related...

  • Page 95
    ...Financial information HTC CORPORATION STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share) 2015 Amount OPERATING REVENUES (Notes 8, 22 and 29) OPERATING COSTS (Notes 11, 20, 23 and 29) GROSS PROFIT...

  • Page 96
    ...Financial information HTC CORPORATION STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Share Capital Retained Earnings Exchange Differences on Translating Foreign Operations Other Equity Unrealized Losses...

  • Page 97
    190 Financial information HTC CORPORATION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars) 2015 CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before income tax Adjustments for: Depreciation expense Amortization expense Finance ...

  • Page 98
    ...AND OPERATIONS HTC Corporation (the "Company") was incorporated on May 15, 1997 under the Company Law of the Republic of China to design, manufacture, assemble, process, and sell smart mobile devices and provide after-sales service. In March 2002, the Company had its stock listed on the Taiwan Stock...

  • Page 99
    ... 9 requires that impairment loss on financial assets is recognized by using the "Expected Credit When preparing its parent company only financial statements, the Company used equity method to account for its investment in subsidiaries, associates and jointly controlled Financial information 195

  • Page 100
    .... For the purposes of presenting the parent company only financial statements, the assets and liabilities of the Company's foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated...

  • Page 101
    ... loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of an intangible asset...

  • Page 102
    ... risk management or investment strategy, and information about the grouping is provided internally on that basis; or • The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss. Financial assets at...

  • Page 103
    ... management or investment strategy, and information about the grouping is provided internally on that basis; or • The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be designated as at fair value through profit or loss. Financial...

  • Page 104
    ... any related restructuring costs. b. Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the Company' parent company only financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred...

  • Page 105
    ... INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 9. FINANCIAL ASSETS MEASURED AT COST December 31 2015 Financial assets held for trading Derivatives financial assets (not under hedge accounting) Foreign exchange contracts Financial liabilities held for trading Derivatives financial liabilities (not...

  • Page 106
    .... 2015 Unlisted equity investments H.T.C. (B.V.I.) Corp. Communication Global Certification Inc. High Tech Computer Asia Pacific Pte. Ltd. HTC Investment Corporation PT. High Tech Computer Indonesia HTC I Investment Corporation HTC Holding Cooperatief U.A. HTC Investment One (BVI) Corporation HTC...

  • Page 107
    210 Financial information At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Company were as follows: December 31 2015 H.T.C. (B.V.I.) Corp. Communication Global Certification Inc. High Tech Computer Asia Pacific Pte. Ltd. HTC Investment ...

  • Page 108
    212 Financial information 16. INTANGIBLE ASSETS December 31 2015 Carrying amounts Patents Other intangible assets 2014 17. NOTE AND TRADE PAYABLES December 31 2015 Note payables Trade payables Trade payables - related parties $ 555 29,653,990 384,914 $30,039,459 2014 $ 1,073 40,814,737 6,508,521 ...

  • Page 109
    ..., 2014 Current service cost Net interest (expense) income Recognized in profit or loss Fair Value of Plan Assets Net Defined Benefit Asset Warranty Provision Balance, beginning of the year Provisions recognized (reversed) Amount utilized during the year Translation adjustment Balance, end of the...

  • Page 110
    ... thousand ordinary shares, and the outstanding GDRs represented 2,471.1 thousand ordinary shares or 0.30% of the Company's outstanding ordinary shares. As part of a high-technology industry and as a growing enterprise, the Company considers its operating environment, industry developments, and long...

  • Page 111
    ... the Year Ended December 31 2014 2015 2014 $ - 22. REVENUE For the Year Ended December 31 Other Equity December 31 2015 Exchange differences on translating foreign operations Unrealized losses on available-forsale financial assets Unearned employee benefit $ 1,473,417 ( 13,633) 2015 Sale of goods...

  • Page 112
    ...) Equity-settled share-based payments Total employee benefits expense Classification - by function Operating costs Operating expenses 513,002 244,346 Gain or loss on financial assets and liabilities held for trading was derived from forward exchange transactions. The Company entered into forward...

  • Page 113
    ...Sales of wireless and smartphone which has 3.5G and GPS function Expiry Year 2015.01.01-2018.09.30 Opening Balance Deferred tax assets Temporary differences Allowance for loss on decline in value of inventory Unrealized profit Unrealized royalties Unrealized marketing expenses Unrealized warranty...

  • Page 114
    ... exercise price equals to the closing price of the Company's ordinary shares on the grant date. For any subsequent changes in the Company's ordinary shares, the exercise price is adjusted accordingly. Information on employee share options was as follows: For the Year Ended December 31 2015 Number of...

  • Page 115
    ..., trade payables and other payables. The Company's Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which...

  • Page 116
    ...301,302 $ 1,160 3 to 12 Months Over 1 Year 29. RELATED-PARTY TRANSACTIONS Operating Sales For the Year Ended December 31 2015 Subsidiaries Joint venture Main management Other related parties - Employees' Welfare Committee Other related parties - other related parties' chairperson or its significant...

  • Page 117
    ... parties assisted the Company to expand business overseas and render design, research and development support, consulting services and after-sales services. The Company recognized related expenses amounting to NT$8,975,963 thousand and NT$8,667,945 thousand for the years ended December 31, 2015...

  • Page 118
    ...1800/1900 patent license; royalty payment based on agreement. We have also audited the parent company only financial statements of HTC Corporation as of and for the years ended December 31, 2015 and 2014 on which we have issued an unqualified report. February 29, 2016 January 1, 2014 - December 31...

  • Page 119
    234 Financial information HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars) 2015 ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Notes 7 and 31) ...

  • Page 120
    236 Financial information HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)) 2015 Amount OPERATING REVENUES (Notes 8, 25 and 32) OPERATING COSTS (...

  • Page 121
    ...Losses on Available-forsale Financial Assets Ordinary Shares Capital Surplus Legal Reserve Special Reserve Unappropriated Earnings Unearned Employee Benefit Treasury Shares Total Equity BALANCE, JANUARY 1, 2014 The loss off-setting for 2013 Special reserve reversed Profit for the year ended...

  • Page 122
    240 Financial information HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars) 2015 CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before income tax Adjustments for: Depreciation expense ...

  • Page 123
    ... China. HTC and its subsidiaries (the "Company") are engaged in design, manufacture, assemble, process, and sell smart mobile devices and provide after-sales service. In March 2002, HTC had its stock listed on the Taiwan Stock Exchange. On November 19, 2003, HTC listed some of its shares of stock on...

  • Page 124
    ... in profit or loss by using the effective interest method; For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through...

  • Page 125
    ... share of the fair value of the acquiree's identifiable net assets. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company's foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting...

  • Page 126
    ... loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of an intangible asset...

  • Page 127
    ... risk management or investment strategy, and information about the grouping is provided internally on that basis; or • The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss. Financial assets at...

  • Page 128
    ... management or investment strategy, and information about the grouping is provided internally on that basis; or • The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be designated as at fair value through profit or loss. Financial...

  • Page 129
    ... value of treasury share is calculated using the weighted-average approach in accordance with the purpose of the acquisition. When the Company's treasury share is retired, the treasury share account should be credited, and the capital surplus premium on stock account and capital stock account...

  • Page 130
    ...Cash on hand Checking accounts and demand deposits Time deposits (with original maturities less than three months) $ 2,122 31,819,080 3,525,597 $ 35,346,799 $ 2014 2,295 7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 2015 Financial assets held for trading 2014 33,266,966...

  • Page 131
    ... Financial information For the Year Ended December 31 2015 Revenues Other gains and losses $22,604 1,258 $ 23,862 2014 $102,057 1,939 $103,996 10. OTHER CURRENT FINANCIAL ASSETS December 31 2015 Time deposits with original maturities more than three months 2014 $4,100,290 $334,954 9. FINANCIAL...

  • Page 132
    ... Limited Liability Company HTC Myanmar Company Limited HTC Investment Corporation HTC Investment One (BVI) Corporation Yoda Co., Ltd. 99.99 100.00 100.00 99.99 100.00 100.00 - 99.00 Operation of restaurant business, parking lot and building cleaning services Design, research and development...

  • Page 133
    ... software Sale of smart mobile devices Design, research and development of application software Online/download media services Marketing, repair and after-sales services Main Businesses Marketing, repair and after-sales services 2015 99.33 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100...

  • Page 134
    ...were depreciated on a straight-line basis over the estimated useful lives as follows: Total Building 5-50 years 3-6 years 3-5 years Effect of foreign currency exchange differences Balance, end of the year Net book value, end of the year Other equipment 2015 Completed Investment Property $( 730) 284...

  • Page 135
    ...for the years ended December 31, 2015 and 2014 were as follows: 2015 Other Intangible Assets 20. NOTE AND TRADE PAYABLES December 31 Total Note payables Trade payables $ 2015 555 29,597,830 $ 2014 1,541 43,801,802 22. PROVISIONS December 31 2015 Warranty provision Provisions for contingent loss on...

  • Page 136
    ... "LPA") is a defined contribution plan. Based on the LPA, HTC, Communication Global Certification Inc. ("CGC") and Yoda Co., Ltd. ("Yoda") make monthly contributions to employees' individual pension accounts at 6% of monthly salaries and wages. The Company has defined contribution retirement benefit...

  • Page 137
    ...14.81 years 24. EQUITY Share Capital a. Ordinary shares December 31 2015 Numbers of shares authorized (in thousands of shares) Shares authorized Number of shares issued and fully paid (in thousands of shares) Shares issued 2014 As part of a high-technology industry and as a growing enterprise, HTC...

  • Page 138
    ...Year Number of Shares, End of Year Dividends Per Share (NT$) For 2014 $ 0.38 For 2013 $ - Information on the earnings appropriation proposed by the Company's board of directors and approved by the Company's shareholders is available on the Market Observation Post System website of the Taiwan Stock...

  • Page 139
    ... employees for 2014 and 2013 have been approved in the shareholders' meetings on June 2, 2015 and June 19, 2014, respectively, were as follows: c. Impairment losses on financial assets For the Year Ended December 31 2015 Trade receivables (included in operating expenses) Financial assets measured...

  • Page 140
    ... tax assets and deferred tax liabilities for the years ended December 31, 2015 and 2014 were as follows: 2015 Recognized in Other Comprehensive Income Opening Balance Recognized in Profit or Loss Translation Adjustment Closing Balance 27. INCOME TAXES RELATING TO CONTINUING OPERATIONS a. Income...

  • Page 141
    .... For any subsequent changes in the HTC's ordinary shares, the exercise price is adjusted accordingly. Information on employee share options was as follows: For the Year Ended December 31 2015 (Expected) 34.37% 2014 (Actual) 21.92% (Loss) profit for the year attributable to owners of the parent...

  • Page 142
    ... Financial information Information about outstanding options as of the reporting date was as follows: December 31 2015 Range of exercise price (NT$) Weighted-average remaining contractual life (years) $54.5-$149 7.30 years 2014 $134.5-149 8.22 years 30. CAPITAL RISK MANAGEMENT The Company manages...

  • Page 143
    ..., trade payables and other payables. The Company's Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which...

  • Page 144
    ... $528,353 2,381 60,921 $ 591,655 Operating Sales For the Year Ended December 31 2015 Main management Joint venture Other related parties - Employees' Welfare Committee Other related parties - other related parties' chairperson or its significant stockholder, is HTC's chairperson $ 9,971 20,920 2014...

  • Page 145
    ... performance focuses on types of goods or services delivered or provided. Under IFRS 8 - "Operating Segments," the Company is organized and managed as a single reportable business segment. The Company's operations are mainly in the research, design, manufacture and sale of smart mobile devices...

  • Page 146
    ... and marketing plans, procurement plans, product roadmaps, product design records, product test plans and reports, product software and source codes, product pricing, product appearance, product specifications, tooling specifications, personnel information, financial information, customer lists...

  • Page 147
    ... not allowed for special offers. Purchasing agreements/sales contracts and related evaluation information should be documented clearly and confidentially. The contract information of customers and venders/suppliers, including but not limited to their names, price, delivery condition, payment terms...

  • Page 148
    ... the names of people with whom they have personal relationships, to engage in business ventures the same as or similar to HTC or to invest exceeding five percent of total market value in such a company. Employees are also prohibited from use so-called "Inside Information" to gain personal profit or...

  • Page 149
    HTC Corporation Chairwoman: Cher Wang