AHOKU — AGM Information 2018

Jun 19, 2018

Stock Code: 3002

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AHOKU ELECTRONIC COMPANY

2018 Annual General Shareholders’ Meeting Meeting Handbook

Time: 9:00 a.m., Tuesday, June 5, 2018 Venue: 5F-1, No.92, Sec.1, Nei-Hu Rd., Nei-Hu Dist., Taipei City, Taiwan

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

Table of Contents

Page No. I. Meeting Procedures ......................................................................................... 1 II. Meeting Agenda ............................................................................................. 2 Report Items..................................................................................................... 3 Ratification Items ............................................................................................ 4 Election Items .................................................................................................. 5 Discussion Items .............................................................................................. 5 Extemporary Motions. ..................................................................................... 6 Adjournment. ................................................................................................... 6 III. Attachments 1. 2017 Business Report .................................................................................. 7 2. Supervisors’ Review Report ........................................................................ 9 3. Independent Auditors’ Report and 2017 Financial Statements ................. 10 4. The Proposal for Distribution of 2017 Earnings ....................................... 26 5. List of Independent Director Candidates ................................................... 27 IV. Appendices 1. Articles of Incorporation ............................................................................ 28 2. Rules and Procedures of Shareholders’ Meeting ....................................... 35 3. Rules for Directors and Supervisors Elections ........................................ 40 4. Shareholding of Directors and Supervisors ............................................... 44 5. Other Explanation. ..................................................................................... 45

AHOKU ELECTRONIC COMPANY

2018 Annual General Shareholders’ Meeting Procedures

• I. Call the Meeting to Order

II. Chairman Remarks

III. Report Items

IV. Ratification Items

V. Election Items

VI. Discussion Items

VII. Extemporary Motions

VIII. Adjournment

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AHOKU ELECTRONIC COMPANY 2018 Annual General Shareholders’ Meeting Agenda

Time: 9:00 a.m., Tuesday, June 5, 2018

Venue: 5F-1, No.92, Sec.1, Nei-Hu Rd., Nei-Hu Dist., Taipei City, Taiwan

I. Call the Meeting to Order (Report the attendance)

II. Chairman Remarks

III. Report Items

1. 2017 Business Report

2. Supervisors’ Review Report on the 2017 Financial Statements

3. Report of Distribution on the 2017 Employees’ Compensation and Directors’ and Supervisors’ Remuneration

IV. Ratification Items

1. Adoption of the 2017 Business Report and Financial Statements

2. Adoption of the Proposal for Distribution of 2017 Earnings

V. Election Items

1. To Elect the Company’s 11[th] Term of the Directors and Supervisors

VI. Discussion Items

1. To Release the Newly Elected Directors from the Non-Competition Restrictions

VII. Extemporary Motions

VIII. Adjournment

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Report Items

Item No.1: 2017 Business Report.

Explanation: please refer to Attachment 1 (page 7 to page 8) of this Handbook for the 2017 Business Report.

Item No.2: Supervisors’ Review Report on the 2017 Financial Statements. Explanation: please refer to Attachment 2 (page 9) of this Handbook for the Supervisors’ Review Report.

Item No.3: Report of Distribution on the 2017 Employees’ Compensation and Directors’ and Supervisors’ Remuneration.

Explanation:

1. According to Article 25 of the “Articles of Incorporation” : 「 The Company shall set aside 4%~8% of profit as employees’ compensation and not more than 5% of profit as directors’ and supervisors’ remuneration for the profitable fiscal year. 」

2. The Company’s profit for the year ended December 31, 2017 was NT$ 92,987,189 (that is, pretax profit before deducting employees’ compensation and directors’ and supervisors’ remuneration). It’s proposed to set aside 6% of profit, equivalent to NT$ 5,579,231, as compensation to employees and 3.5% of profit, equivalent to NT$ 3,254,552, as remuneration to directors and supervisors. The aforementioned amounts are the same as the expenses estimated in 2017, and they will all be paid in cash.

3. This proposal was approved by the Remuneration Committee and the Board of Directors, and submitted to this year’s Annual General Shareholders’ Meeting according to the related laws and regulations.

4. 3 -

Ratification Items

Item No.1: (Proposed by the Board of Directors) Proposal: Adoption of the 2017 Business Report and Financial Statements. Explanation:

1. The Company’s 2017 Financial Statements were approved by the Board of Directors, and audited by Certified Public Accountant He, Rui-Xuan and Certified Public Accountant Chen, Zhao-Mei of Deloitte & Touche. The aforementioned Financial Statements together with the Business Report have been reviewed by the supervisors. Supervisors’ Review Report is provided herein.

2. Please refer to Attachment 1 (page 7 to page 8) of this Handbook for the 2017 Business Report.

3. Please refer to Attachment 3 (page 10 to page 25) of this Handbook for Independent Auditors’ Report and 2017 Financial Statements.

Resolution:

Item No.2: (Proposed by the Board of Directors) Proposal: Adoption of the Proposal for Distribution of 2017 Earnings. Explanation:

1. The Proposal for Distribution of 2017 Earnings was approved by the Board of Directors. Each Shareholder will be entitled to receive a cash dividend of NT$ 0.25 per share. Upon the approval of this year’s Annual General Shareholders’ Meeting, it is proposed that the Board of Directors will be authorized to resolve the ex-dividend record date, payment date and other relevant matters.

2. The calculation of the cash dividend is based on the proportion of shareholdings up to the round unit of one NT dollar. Any amount less than one NT dollar will be rounded down. The sum of any such rounded-down will be recognized as the other non-operating income of the Company.

3. Should any change in the number of outstanding shares resulting from the buyback of share, transfer or cancellation of the treasury shares, or other reasons, the ratio of the cash dividend may need to be adjusted accordingly. It is proposed to fully authorize the Board of Directors to adjust the dividend to be distributed to each share and to proceed on the relevant matters.

4. Please refer to Attachment 4 (page 26) of this Handbook for the Proposal for Distribution of 2017 Earnings.

Resolution:

Election Items

Item No.1: (Proposed by the Board of Directors) Proposal: To Elect the Company’s 11[th] Term of the Directors and Supervisors. Explanation:

1. The term of the office of directors and supervisors will be expired on June 30, 2018. Accordingly, the Company proposes to duly elect new directors and supervisors at this year’s Annual General Shareholders’ Meeting. The newly elected directors and supervisors will take office and their term of office will be effective after the term of the office of current directors and supervisors is expired.

2. According to the “Articles of Incorporation”, the Board of Directors resolved that seven directors (including two independent directors) and four supervisors will be elected. The term of the office of new directors and supervisors is three years, starting from July 1, 2018 to June 30, 2021.

3. The candidate nomination system has been adopted by the Company for election of independent directors. Shareholders shall select independent directors from the List of Independent Director Candidates, which was reviewed and approved by the Board of Directors on April 25, 2018. Please refer to Attachment 5 (page 27) of this Handbook for the List of Independent Director Candidates.

Election Results:

Discussion Items

Item No.1: (Proposed by the Board of Directors) Proposal: To Release the Newly Elected Directors from the Non-Competition Restrictions.

Explanation:

1. According to Article 209 of the “Company Act”, a director, who does anything for himself or on behalf of others that falls within the scope of the Company’s business, shall explain at the shareholders’ meeting the essential contents of such act and secure the approval from the shareholders’ meeting.

2. The Company’s director has invested, managed or has been a director for companies of which business scope is similar to the Company’s. It will be proposed to release such directors from non-competition restrictions.

Resolution:

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Extemporary Motions

Adjournment

• 6 -

Attachment 1

2017 Business Report

1. Results of Implementation of Business Plan

The consolidated operating revenue of the Company in 2017 was NT$ 665,555 thousand. The consolidated net profit was NT$ 72,814 thousand, and the earnings per share was NT$ 0.73. The operating performance is described as follows:

Unit: NT$ thousand

Item	2016	2017	Increase /Decrease	Increase /Decrease %
Operatingrevenue	404,612	665,555	260,943	64.49%
Grossprofit	142,665	201,085	58,420	40.95%
Operatingexpenses	106,230	168,303	62,073	58.43%
Operatingincome	36,435	32,782	(3,653)	(10.03%)
Non-operatingincome and expenses	35,020	53,155	18,135	51.78%
Profit before income tax	71,455	85,937	14,482	20.27%
Netprofit	60,265	72,814	12,549	20.82%

2. Execution of the Budget

The Company didn’t release any financial forecast in 2017, so it is not applicable.

3. Financial Revenue and Expenses and Profitability Analysis

	Item	2016	2017
Financial structure	Debt ratio(%)	20.34	23.96
	Ratio of long-term capital to property, plant and equipment(%)	658.17	396.06
Solvency	Current ratio(%)	1,533.47	823.06
	Quick ratio(%)	1,420.64	747.55
Profitability	Return on assets(%)	3.65	4.29
	Return on equity (%)	4.58	5.83
	Netprofit ratio(%)	14.89	11.25
	Earningsper share(NT$)	0.59	0.73

• 7 -

• Status of Research and Development

• The Company believes that only continuing to invest in new product development can create the company’s future growth momentum. Therefore, the Company devotes a lot of effort to developing new products or technologies. In 2017, R&D expenses were NT$ 37,600 thousand which accounted for 5.65% of the consolidated operating revenue. In the future R&D project, in addition to making effort in the advancement of core technologies, the Company also will actively grasp the development trends and business opportunities of new products and technologies, and continues to invest in the development of product’s technology, which meets the market demand and development potential, to drive the continued growth of company operations.

Chairman: Li, Guang-Hao Manager: Li, Guang-Hao Accounting Supervisor: Zheng, Yi-Shan

• 8 -

Attachment 2

AHOKU ELECTRONIC COMPANY Supervisors’ Review Report

2017 Financial Statements of AHOKU ELECTRONIC COMPANY are prepared by the Board of Directors and audited by Certified Public Accountant He, Rui-Xuan and Certified Public Accountant Chen, Zhao-Mei of Deloitte & Touche. These Financial Statements, along with 2017 Business Report and the Proposal for Distribution of 2017 Earnings, have been reviewed by supervisors ourselves and these reports and statements are indeed compliance with the related laws and regulations. According to Article 219 of the “Company Act”, we supervisors submit this review report for your consideration.

Submit to

2018 Annual General Shareholders’ Meeting, AHOKU ELECTRONIC COMPANY

Supervisors: Chen, Hui-Fen Han, Dong-Lian Li, Shu-Ying Huang, Zhang-Qing

April 30, 2018

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Attachment 3

Independent Auditors’ Report

(This is a summary translation of the Independent Auditors’ Report. Please refer to the Chinese version for full details.)

The Board of Directors and Shareholders

AHOKU ELECTRONIC COMPANY

Opinion

We have audited the accompanying consolidated financial statements of AHOKU ELECTRONIC COMPANY and its subsidiaries (the “Group”), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit

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evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2017. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the consolidated financial statements for the year ended December 31, 2017 and stated as follows:

1. Revenue Recognition

2. Business Combination

3. 11 -

AHOKU ELECTRONIC COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2017 and 2016

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Available-for-sale financial assets (Notes 4 and 7) Notes receivable (Notes 5 and 8) Accounts receivable (Notes 5 and 8) Accounts receivable - related parties (Notes 5 and 32) Other receivables (Notes 5 and 8) Other receivables - related parties (Notes 5 and 32) Current tax assets (Notes 4 and 25) Inventories (Notes 4, 5 and 9) Prepayments Other current assets (Notes 6 and 10) Total current assets NON-CURRENT ASSETS Investments accounted for using equity method (Notes 4 and 12) Property, plant and equipment (Notes 4 and 13) Investment properties (Notes 4 and 14) Goodwill (Notes 4 and 15) Intangible assets (Notes 4 and 16) Deferred tax assets (Notes 4 and 25) Long-term prepayments for lease (Note 17) Other non-current assets (Note 18) Total non-current assets TOTAL LIABILITIESAND EQUITY CURRENT LIABILITIES Short-term loans (Note 9) Notes payable (Note 20) Accounts payable (Note 20) Accounts payable - related parties (Note 32) Other payables (Note 21) Other payables - related parties (Note 32) Current tax liabilities (Notes 4 and 25) Receipts in advance Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 25) Net defined benefit liabilities (Notes 4 and 22) Guarantee deposits received (Note 29) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT Capital stock – common stock Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Equity attributable to shareholders of the parent NON-CONTROLLING INTERESTS Total equity TOTAL		December31,	2017 ％ 14 31 - 10 - 1 - - 7 1 17 81 - 17 - - 1 - 1 - 19 100 1 - 4 - 4 - - 1 - 10 13 1 - 14 24 54 1 11 - 4 15 ( 2 ) 68 8 76 100		December31,	2016	2016
		Amount $ 256,700 581,619 2,360 194,288 - 7,137 119 2,442 121,618 16,749 325,103 1,508,135 - 321,678 3,510 3,550 9,256 4,681 18,316 3,369 364,360 $ 1,872,495 $ 24,564 3,632 69,669 - 63,996 2,638 2,461 13,393 2,883 183,236 243,275 21,920 260 265,455 448,691 1,020,000 14,762 205,682 689 77,869 284,240 44,982 ) 1,274,020 149,784 1,423,804 $ 1,872,495			Amount $ 382,728 502,760 290 68,586 10,098 7,076 40,213 2,329 86,913 9,985 205,902 1,316,880 95,219 196,800 3,595 - 162 3,897 8,658 793 309,124 $ 1,626,004 $ - 1,755 26,658 575 40,551 1,327 127 12,274 2,610 85,877 221,506 23,082 255 244,843 330,720 1,020,000 14,767 199,655 - 61,551 261,206 689 ) 1,295,284 - 1,295,284 $ 1,626,004		％
	(		(	(			24 31 - 4 1 - 2 - 5 1 13 81 6 12 - - - - 1 - 19 100 - - 2 - 2 - - 1 - 5 14 1 - 15 20 63 1 12 - 4 16 - 80 - 80 100

The accompanying notes are an integral part of the consolidated financial statements.

• 12 -

AHOKU ELECTRONIC COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2017 and 2016 (In Thousands of New Taiwan Dollars, except Earnings Per Share)

OPERATING REVENUE (Notes 4 and 32) Sales revenue Less: Sales returns Sales allowance Net sales revenue Service revenue Total operating revenue OPERATING COSTS (Notes 9 and 32) GROSS PROFIT OPERATING EXPENSES (Notes 24 and 32) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES Share of profit (loss) of associates accounted for using equity method (Note 4) Interest income (Note 32) Rental income Dividend income Other income Gain on disposal of investments (Note 24) Net gain on foreign currency exchange (Note 24) Other losses Interest expenses Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 25) NET PROFIT (Note 24)			2017		％ 100 - - 100 - 100 70 30 8 11 6 25 5 - 3 - - 1 4 - - - 8 13 2 11			2016
										％
										100 - - 100 - 100 65 35 9 11 6 26 9 1 6 - 1 1 - - - - 9 18 3 15

(Continued)

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AHOKU ELECTRONIC COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2017 and 2016 (In Thousands of New Taiwan Dollars, except Earnings Per Share)

OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Share of the other comprehensive loss of associates accounted for using equity method Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Unrealized gain(loss) on available-for-sale financial assets Share of the other comprehensive loss of associates accounted for using equity method Total other comprehensive income (loss) TOTAL COMPREHENSIVE INCOME (LOSS) NET PROFIT ATTRIBUTABLE TO: Shareholders of the parent Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the parent company Non-controlling interests EARNINGS PER SHARE (Note 26) Basic Diluted	2017	％ - - ( 14 ) 7 - ( 7 ) 4 11 - 11 4 - 4		2016
	Amount ( $ 681 ) - ( 90,864 ) 44,038 2,331 ( 45,176 ) $ 27,638 $ 74,685 ( 1,871 ) $ 72,814 $ 29,741 ( 2,103 ) $ 27,638 $ 0.73 $ 0.73			Amount ( $ 791 ) ( 160 ) ( 45,633 ) ( 13,628 ) ( 6,130 ) ( 66,342 ) ($ 6,077 ) $ 60,265 - $ 60,265 ( $ 6,077 ) - ( $ 6,077 ) $ 0.59 $ 0.59	％
					( 1 ) - ( 11 ) ( 3 ) ( 2 ) (17 ) ( 2 ) 15 - 15 ( 2 ) - ( 2 )
				(

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

• 14 -

AHOKU ELECTRONIC COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended December 31, 2017 and 2016

(In Thousands of New Taiwan Dollars, except Dividends Per Share)

Balance, January 1, 2016 Appropriation and distribution of earnings for 2015 Legal reserve Cash dividends to shareholders – NT$ 0.35 per share Net profit in 2016 Other comprehensive income (loss) in 2016 Total comprehensive income (loss) in 2016 Balance, December 31, 2016 Appropriation and distribution of earnings for 2016 Legal reserve special reserve Cash dividends to shareholders – NT$ 0.5 per share Disposal ofinvestments accounted for using equity method Net profit in 2017 Other comprehensive income (loss) in 2017 Total comprehensive income (loss) in 2017 Increase innon-controlling interests Balance, December 31, 2017				Equityattributable to shareholders of theparent	Equityattributable to shareholders of theparent	Equityattributable to shareholders of theparent	Equityattributable to shareholders of theparent	Equityattributable to shareholders of theparent		Total $ 1,337,061 - 35,700 ) 60,265 66,342 ) 6,077 ) 1,295,284 - - 51,000 ) 5 ) 74,685 44,944 ) 29,741 - $ 1,274,020	Non-controlling interests (Notes 11and27) $ - - - - - - - - - - - ( 1,871 ) ( 232 ) ( 2,103 ) 151,887 $ 149,784		Totalequity
	Capital - common stock (Note23) $ 1,020,000 - - - - - 1,020,000 - - - - - - - - $ 1,020,000	Capital surplus (Note23) $ 14,767 - - - - - 14,767 - - - ( 5 ) - - - - $ 14,762		RetainedEarnings (Note23) Legal reserve Special reserve Unappropriated earnings $ 195,475 $ - $ 42,117 4,180 - ( 4,180 ) - - ( 35,700 ) - - 60,265 - - ( 951 ) - - 59,314 199,655 - 61,551 6,027 - ( 6,027 ) - 689 ( 689 ) - - ( 51,000 ) - - - - - 74,685 - - ( 651 ) - - 74,034 - - - $ 205,682 $ 689 $ 77,869			Otherequity (Note23) Exchange differences on translating foreign operations Unrealized gain (loss) on available-for-sal e financial assets $ 102,672 ($ 37,970 ) - - - - - - ( 51,763 ) ( 13,628 ) ( 51,763 ) ( 13,628 ) 50,909 ( 51,598 ) - - - - - - - - - - ( 88,331 ) 44,038 ( 88,331 ) 44,038 - - ($ 37,422 ) ($ 7,560 )
							Exchange differences on translating foreign operations $ 102,672 - - - ( 51,763 ) ( 51,763 ) 50,909 - - - - - ( 88,331 ) ( 88,331 ) - ($ 37,422 )
				Legal reserve $ 195,475 4,180 - - - - 199,655 6,027 - - - - - - - $ 205,682	Special reserve $ - - - - - - - - 689 - - - - - - $ 689
		(				( ( ( ( ( ( (	( ( ( ( (	( ( ( ( (	( ( ( ( ( (		( ( (	( ( ( ( ( (	$ 1,337,061 - 35,700 ) 60,265 66,342 ) 6,077 ) 1,295,284 - - 51,000 ) 5 ) 72,814 45,176 ) 27,638 151,887 $ 1,423,804

The accompanying notes are an integral part of the consolidated financial statements.

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AHOKU ELECTRONIC COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2017 and 2016 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax Adjustments for: Depreciation expenses Amortization expenses Provision for bad debt expenses Interest expenses Interest Income Dividend Income Share of profit of associates accounted for using equity method Gain on disposal of investment Unrealized (gain) / loss on foreign currency exchange Changes in operating assets and liabilities Notes receivable Accounts receivable Accounts receivable - related parties Other receivables Other receivables - related parties Inventories Prepayments Other current assets Notes payable Accounts payable Accounts payable - related parties Other payables Other payables - related parties Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of available-for-sale financial assets Disposal of available-for-sale financial assets Net cash inflow from acquisition of subsidiary (Note 27)	2017 $ 85,937 24,689 2,152 1,935 256 ( 19,991 ) ( 950 ) 689 ( 26,001 ) 5,600 992 ( 9,694 ) 10,098 ( 230 ) 24 24,207 9,332 ( 367 ) ( 1,932 ) ( 3,110 ) ( 40 ) 2,167 1,311 784 ( 3,133 ) 104,725 ( 4,897 ) 99,828 ( 458,412 ) 424,164 9,762	2016
		$ 71,455 10,018 396 1,009 - ( 25,083 ) ( 2,787 ) ( 2,340 ) ( 1,246 ) ( 885 ) ( 290 ) 10,126 ( 25,204 ) ( 95 ) 37 1,155 ( 316 ) 7 512 ( 8,436 ) 233 5,266 ( 122 ) 1,074 ( 9,193 ) 25,291 ( 5,158 ) 20,133 ( 156,797 ) 194,324 -

(Continued)

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AHOKU ELECTRONIC COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2017 and 2016 (In Thousands of New Taiwan Dollars)

Acquisition of property, plant and equipment (Note 28) Acquisition of intangible assets Acquisition of investment properties Increase in other financial assets Decrease (increase) in other non-current assets Interest received Other dividends received Net cash generated from (Used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Cash dividends Interest paid Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2017 ( $ 17,178 ) ( 1,305 ) - ( 135,187 ) ( 8 ) 20,515 950 (156,699 ) 10,000 ( 51,000 ) ( 256 ) ( 41,256 ) ( 27,901 ) ( 126,028 ) 382,728 $ 256,700	2016
		( $ 3,146 ) - ( 88 ) ( 17,252 ) 843 24,234 2,787 44,905 - ( 35,700 ) - ( 35,700 ) ( 354 ) 28,984 353,744 $ 382,728

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

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Independent Auditors’ Report (Parent Company Only Financial Statements)

(This is a summary translation of the Independent Auditors’ Report. Please refer to the Chinese version for full details.)

The Board of Directors and Shareholders

AHOKU ELECTRONIC COMPANY

Opinion

We have audited the accompanying parent company only financial statements of AHOKU ELECTRONIC COMPANY (the “Company”), which comprise the parent company only balance sheets as of December 31, 2017 and 2016, and the parent company only statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2017 and 2016, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance

• 18 -

with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements for the year ended December 31, 2017. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Company’s parent company only financial statements for the year ended December 31, 2017 are stated as follows:

1. Revenue Recognition

2. Acquisition of ACPA Technology Co., Ltd.

3. 19 -

AHOKU ELECTRONIC COMPANY

PARENT COMPANY ONLY BALANCE SHEETS

December 31, 2017 and 2016

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash (Notes 4 and 6) Available-for-sale financial assets (Notes 4 and 7) Notes receivable (Notes 5 and 8) Accounts receivable (Notes 5 and 8) Accounts receivable - related parties (Notes 5 and 25) Other receivables (Notes 5 and 8) Other receivables - related parties (Notes 5 and 25) Current tax assets (Notes 4 and 20) Inventories (Notes 4 and 9) Prepayments Other current assets (Notes 6 and 10) Total current assets NON-CURRENT ASSETS Investments accounted for using equity method (Notes 4 and 11) Property, plant and equipment (Notes 4 and 12) Investment properties (Notes 4 and 13) Intangible assets (Notes 4 and 14) Deferred tax assets (Notes 4 and 20) Other non-current assets Total non-current assets TOTAL LIABILITIESAND EQUITY CURRENT LIABILITIES Notes payable (Note 15) Accounts payable (Note 15) Accounts payable - related parties (Note 25) Other payables (Note 16) Other payables - related parties (Note 25) Current tax liabilities (Notes 4 and 20) Receipts in advance Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 20) Net defined benefit liabilities (Notes 4 and 17) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY Capital stock – common stock Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL		December 31,2017 Amount ％ $ 15,310 1 48,473 3 268 - 75,937 5 406 - 350 - 2,057 - 2,442 - 807 - 2,798 - 484 - 149,332 9 1,493,836 86 93,931 5 3,510 - 54 - 3,007 - 10 - 1,594,348 91 $ 1,743,680 100 $ 1,595 - 938 - 171,919 10 29,694 2 1,296 - 2,443 - 13,426 1 221,311 13 227,410 13 20,684 1 255 - 248,349 14 469,660 27 1,020,000 59 14,762 1 205,682 12 689 - 77,869 4 284,240 16 44,982 ) ( 3 ) 1,274,020 73 $ 1,743,680 100	December 31,2017 Amount ％ $ 15,310 1 48,473 3 268 - 75,937 5 406 - 350 - 2,057 - 2,442 - 807 - 2,798 - 484 - 149,332 9 1,493,836 86 93,931 5 3,510 - 54 - 3,007 - 10 - 1,594,348 91 $ 1,743,680 100 $ 1,595 - 938 - 171,919 10 29,694 2 1,296 - 2,443 - 13,426 1 221,311 13 227,410 13 20,684 1 255 - 248,349 14 469,660 27 1,020,000 59 14,762 1 205,682 12 689 - 77,869 4 284,240 16 44,982 ) ( 3 ) 1,274,020 73 $ 1,743,680 100		December 31,2016	December 31,2016	December 31,2016
		Amount $ 15,310 48,473 268 75,937 406 350 2,057 2,442 807 2,798 484 149,332 1,493,836 93,931 3,510 54 3,007 10 1,594,348 $ 1,743,680 $ 1,595 938 171,919 29,694 1,296 2,443 13,426 221,311 227,410 20,684 255 248,349 469,660 1,020,000 14,762 205,682 689 77,869 284,240 44,982 ) 1,274,020 $ 1,743,680			Amount $ 87,029 113,839 290 68,586 11,086 375 43,094 2,329 93 2,869 26,426 356,016 1,458,387 94,192 3,595 141 3,897 10 1,560,222 $ 1,916,238 $ 1,755 911 331,365 27,004 305 - 14,771 376,111 221,506 23,082 255 244,843 620,954 1,020,000 14,767 199,655 - 61,551 261,206 689 ) 1,295,284 $ 1,916,238		％
	(		(	(			5 6 - 4 1 - 2 - - - 1 19 76 5 - - - - 81 100 - - 17 1 - - 1 19 12 1 - 13 32 53 1 11 - 3 14 - 68 100

The accompanying notes are an integral part of the parent company only financial statements.

• 20 -

AHOKU ELECTRONIC COMPANY

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2017 and 2016

(In Thousands of New Taiwan Dollars, except Earnings Per Share)

OPERATING REVENUE (Notes 4 and 25) Sales revenue Less: Sales returns Sales allowance Net sales revenue Service revenue Total operating revenue OPERATING COSTS (Notes 9 and 25) GROSS PROFIT OPERATING EXPENSES (Notes 19 and 25) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES Share of profit (loss) of subsidiaries and associates accounted for using equity method (Note 4) Interest income (Note 25) Rental income Dividend income Other income (Note 25) Gain on disposal of investments (Note 19) Net gain(loss) on foreign currency exchange (Note 19) Other losses Total non-operating income and expenses		2017	％ 100 - - 100 - 100 78 22 8 7 4 19 3 8 - - - - 7 4 - 19		2016
		Amount $ 380,787 885 237 379,665 869 380,534 296,590 83,944 32,168 27,952 14,004 74,124 9,820 32,161 582 971 950 1,183 24,789 14,305 608 ) 74,333				％
	(					100 - - 100 - 100 79 21 7 7 4 18 3 13 1 - 1 - - - - 15

(Continued)

• 21 -

AHOKU ELECTRONIC COMPANY

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2017 and 2016 (In Thousands of New Taiwan Dollars, except Earnings Per Share)

PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 20) NET PROFIT (Note 19) OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Share of the other comprehensive gain(loss) of subsidiaries and associates accounted for using equity method Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Unrealized gain (loss) on available-for-sale financial assets Share of the other comprehensive gain (loss) of subsidiaries and associates accounted for using equity method Total other comprehensive income (loss) TOTAL COMPREHENSIVE INCOME (LOSS) EARNINGS PER SHARE (Note 21) Basic Diluted		2017	％ 22 2 20 - - ( 24 ) 3 9 (12 ) 8		2016
						％
						18 3 15 ( 1 ) - ( 11 ) ( 3 ) ( 2 ) (17 ) ( 2 )

The accompanying notes are an integral part of the parent company only financial statements. (Concluded)

• 22 -

AHOKU ELECTRONIC COMPANY

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

For the years ended December 31, 2017 and 2016

(In Thousands of New Taiwan Dollars, except Dividends Per Share)

Balance, January 1, 2016 Appropriation and distribution of earnings for 2015 Legal reserve Cash dividends to shareholders – NT$ 0.35 per share Net profit in 2016 Other comprehensive income (loss) in 2016 Total comprehensive income (loss) in 2016 Balance, December 31, 2016 Appropriation and distribution of earnings for 2016 Legal reserve Special reserve Cash dividends to shareholders – NT$ 0.5 per share Disposal ofinvestments accounted for using equity method Net profit in 2017 Other comprehensive income (loss) in 2017 Total comprehensive income (loss) in 2017 Balance, December 31, 2017	Capital – Common Stock(Note 18) $ 1,020,000 - - - - - 1,020,000 - - - - - - - $ 1,020,000	Capital Surplus (Notes 18) $ 14,767 - - - - - 14,767 - - - ( 5 ) - - - $ 14,762	Retained Earnings(Note 18) Legal Reserve Special Reserve Unappropriated Earnings $ 195,475 $ - $ 42,117 4,180 - ( 4,180 ) - - ( 35,700 ) - - 60,265 - - ( 951 ) - - 59,314 199,655 - 61,551 6,027 - ( 6,027 ) - 689 ( 689 ) - - ( 51,000 ) - - - - - 74,685 - - ( 651 ) - - 74,034 $ 205,682 $ 689 $ 77,869	Retained Earnings(Note 18) Legal Reserve Special Reserve Unappropriated Earnings $ 195,475 $ - $ 42,117 4,180 - ( 4,180 ) - - ( 35,700 ) - - 60,265 - - ( 951 ) - - 59,314 199,655 - 61,551 6,027 - ( 6,027 ) - 689 ( 689 ) - - ( 51,000 ) - - - - - 74,685 - - ( 651 ) - - 74,034 $ 205,682 $ 689 $ 77,869	Other Equity (Note 18) Exchange differences on translating foreign operations Unrealized Gain (Loss) on Available-for-sale Financial Assets $ 102,672 ($ 37,970 ) - - - - - - ( 51,763 ) ( 13,628 ) ( 51,763 ) ( 13,628 ) 50,909 ( 51,598 ) - - - - - - - - - - ( 88,331 ) 44,038 ( 88,331 ) 44,038 ($ 37,422 ) ($ 7,560 )	Other Equity (Note 18) Exchange differences on translating foreign operations Unrealized Gain (Loss) on Available-for-sale Financial Assets $ 102,672 ($ 37,970 ) - - - - - - ( 51,763 ) ( 13,628 ) ( 51,763 ) ( 13,628 ) 50,909 ( 51,598 ) - - - - - - - - - - ( 88,331 ) 44,038 ( 88,331 ) 44,038 ($ 37,422 ) ($ 7,560 )		Total Equity
					Exchange differences on translating foreign operations $ 102,672 - - - ( 51,763 ) ( 51,763 ) 50,909 - - - - - ( 88,331 ) ( 88,331 ) ($ 37,422 )
			Legal Reserve $ 195,475 4,180 - - - - 199,655 6,027 - - - - - - $ 205,682	Special Reserve $ - - - - - - - - 689 - - - - - $ 689
					( ( ( ( (	( ( ( ( (	$ 1,337,061 - ( 35,700 ) 60,265 ( 66,342 ) ( 6,077 ) 1,295,284 - - ( 51,000 ) ( 5 ) 74,685 ( 44,944 ) 29,741 $ 1,274,020

The accompanying notes are an integral part of the parent company only financial statements.

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AHOKU ELECTRONIC COMPANY

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

For the years ended December 31, 2017 and 2016 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax Adjustments for: Depreciation expenses Amortization expenses Provision for bad debt expenses Interest Income Dividend Income Gain on disposal of investment Share of profit of subsidiaries and associates accounted for using equity method Unrealized (gain) loss on foreign currency exchange Changes in operating assets and liabilities Notes receivable Accounts receivable Accounts receivable - related parties Other receivables Other receivables - related parties Inventories Prepayments Notes payable Accounts payable Accounts payable - related parties Other payables Other payables - related parties Other current liabilities Net defined benefit liabilities Cash generated from (used in) operations Income tax paid Net cash generated from (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of available-for-sale financial assets Disposal of available-for-sale financial assets	2017 $ 84,153 1,190 87 1,849 ( 582 ) ( 950 ) ( 24,789 ) ( 32,161 ) ( 1,589 ) 22 ( 9,724 ) 10,678 26 955 ( 714 ) 21 ( 160 ) 28 ( 157,258 ) 2,693 991 ( 1,486 ) ( 3,019 ) ( 129,739 ) ( 344 ) ( 130,083 ) ( 155,404 ) 231,995	2016
		$ 71,148 1,153 87 1,009 ( 1,854 ) ( 2,787 ) ( 679 ) ( 53,258 ) ( 866 ) ( 290 ) 10,126 ( 10,549 ) ( 119 ) ( 2,389 ) 134 ( 591 ) 512 ( 35 ) 73,542 5,045 260 1,032 ( 9,193 ) 81,438 ( 4,820 ) 76,618 ( 91,704 ) 60,808

(Continued)

• 24 -

AHOKU ELECTRONIC COMPANY

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

For the years ended December 31, 2017 and 2016 (In Thousands of New Taiwan Dollars)

Acquisition of long-term stock right investment evaluated with equity method Acquisition of property, plant and equipment Decrease in other receivables - related parties Acquisition of investment properties Decrease in financial assets Interest received Other dividends received Net cash generated from (used in) investing activities NET CASH USED IN FINANCING ACTIVITIES Cash dividends NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2017 ( $ 33,911 ) ( 844 ) 40,000 - 25,942 636 950 109,364 ( 51,000 ) ( 71,719 ) 87,029 $ 15,310	2016
		$ - ( 191 ) - ( 88 ) 1,533 1,889 2,787 ( 24,966 ) ( 35,700 ) 15,952 71,077 $ 87,029

The accompanying notes are an integral part of the parent company only financial statements. (Concluded)

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Attachment 4

AHOKU ELECTRONIC COMPANY The Proposal for Distribution of 2017 Earnings

	Unit: NT$
Item	Amount
Unappropriated retained earnings of previous years Less: actuarial losses on defined benefit plans Adjustment of unappropriated retained earnings Plus: Net profit in 2017 Less: 10% legal reserve Less: special reserve Earnings available for distribution for this year Distribution item: Cash dividends to shareholders (NT$ 0.25 per share) Unappropriated retained earnings at the end of theyear	3,835,900 (651,109)
	3,184,791 74,685,331 (7,468,533) (44,293,997)
	26,107,592 (25,500,000)
	607,592

Note: Net profit in 2017 is prioritized for earnings distribution this year.

Chairman: Li, Guang-Hao Manager: Li, Guang-Hao Accounting Supervisor: Zheng, Yi-Shan

• 26 -

Attachment 5

AHOKU ELECTRONIC COMPANY List of Independent Director Candidates

	List of Independent Director	Candidates
Name	Zhang,Jia-Xian	Huang,Rong-Wen
Education	Executive Master of Business Administration, College of Commerce, National Chengchi University	National Taipei University of Technology
Current Position	General Manager, Xian Yun Management Consulting Company Guest Lecturer, College of Adult and Overseas Education, Shanghai Jiao Tong University Independent Director / Chief Strategy Officer, Suzhou Honmingyi Environmental Co., Ltd. Consultant on Organizational Change Management, Huai’an Branch of Sutong Construction Group HR Consultant, Hotai Motor Group and Taian Insurance Co., Ltd.	Consultant, Wingot Textile Corporation
Work Experience	Vice President, Wowprime Corporation Special Assistant to General Manager / Chief Human Resource Officer, SHUI-MU International Co., Ltd. Director of General Management Division / Chief Human Resource Officer, Holiday Entertainment Co., Ltd. Training Director, Sinyi Realty Inc.	Chairman, Yourong Trading Limited Manager, Taipei Branch of Toray Industries, Inc.
Shareholding (Unit: Shares)	0	0

• 27 -

Appendix 1

AHOKU ELECTRONIC COMPANY Articles of Incorporation

Chapter 1 General Provisions

Article 1

The Company is organized as a company limited by shares and permanently existing in accordance with the Company Act of the Republic of China (the “Company Act”) and the Company’s English name is AHOKU ELECTRONIC COMPANY.

Article 2

The scope of business of the Company shall be as follows:

1. CC01010 Electric power supply, electric transmission and power distribution machinery manufacturing

2. CC01030 Electrical appliance and audiovisual electronic products manufacturing

3. CC01040 Lighting facilities manufacturing

4. CC01060 Wire communications machinery and equipment manufacturing

5. CC01080 Electronic parts and components manufacturing

6. F113020 Electrical appliance wholesale

7. F119010 Electronic material wholesale

8. F113070 Telecommunication equipment wholesale

9. F213060 Telecommunication equipment retail

10. F401010 International trade

11. F401021 Restrained telecom radio frequency equipment and materials import

12. ZZ99999 Except for permitted business, the Company may engage in other businesses not prohibited or restricted by laws or regulations

Article 3

The Company may invest outward with the total amount of investment free of restrictions as set forth in Article 13 of the Company Act, and may act as a guarantor externally.

Article 4

The head office of the Company is located in Taipei City, Taiwan, The Republic of China. Subject to the approval of the board of directors and, the Company may, if necessary, set up subsidiaries or branches within or outside the territory of the Republic of China.

Article 5

Public announcements of the Company shall be made in accordance with the

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provisions of Article 28 of the Company Act.

Chapter 2 Shares

Article 6

The total capital amount of the Company shall be 1,500,000,000 New Taiwan Dollars, divided into 150,000,000 shares, at par value of 10 New Taiwan Dollars each. The board of directors is authorized to issue the unissued shares in installments.

A total amount of 80,000,000 New Taiwan Dollars among the above total capital amount shall be reserved for issuing employee stock options, which is 8,000,000 shares at par value of 10 New Taiwan Dollars each. The board of directors is authorized to issue the unissued shares in installments according to the Company Act and other relevant laws and regulations.

Article 7

The share certificates of the Company shall be all in registered form. The share certificates, after due registration with the competent authority, shall be signed or sealed by at least three directors and shall be legally authenticated prior to issue. The Company may, pursuant to the applicable laws and regulations, deliver shares or other securities in book-entry form, instead of delivering physical certificates evidencing shares or other securities. The Company shall arrange for such shares to be recorded by a centralized securities custodian institution.

Article 8

Registration for transfer of shares shall be suspended sixty days immediately before the date of general shareholders’ meeting, and thirty days immediately before the date of extraordinary shareholders’ meeting, or within five days before the day on which dividend, bonus, or any other benefit is scheduled to be paid by the Company.

Article 9

All matters concerning shares shall be conducted in accordance with “Regulations Governing the Administration of Shareholder Services of Public Companies” and the relevant laws and regulations.

Chapter 3 Shareholders’ Meetings

Article 10

Shareholders’ meetings shall be of two types, general meetings and extraordinary meetings. General meetings shall be convened annually by the board of directors within six months of the end of each fiscal year. Extraordinary meetings shall be convened in accordance with the relevant laws, whenever necessary.

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Article 11

A notice for convening a general shareholders’ meeting shall be given thirty (30) days prior to the meeting. A notice for convening a extraordinary shareholders’ meeting shall be given fifteen (15) days prior to the meeting. The notice shall specify the date, place and agenda of the meeting. The notice may be given by means of electronic transmission, after obtaining a prior consent from the shareholders.

The aforementioned notice may be publicly announced, provided that for the shareholders who hold less than 1,000 shares.

Article 12

Where a shareholder is unable to attend a shareholders’ meeting, such shareholder may appoint a proxy by using the proxy form provided by the Company, which shall specify the scope of proxy and be signed and sealed by the shareholder. The attendance of shareholder’s proxies shall be in accordance with the Article 177 of the Company Act and “Regulations Governing the Use of Proxies for Attendance at Shareholders’ Meeting of Public Companies” issued by the competent authority.

Article 13

The chairman of the board of directors shall preside at each meeting of shareholders. In the event the chairman of the board of directors is absent, he shall designate one director to act on his behalf. In the absence of such a designation, the directors shall elect a director from among themselves to preside at the meeting. If the shareholders’ meeting is called by any convener other than the board of directors, the chairperson shall be assumed by the convener. If there are more than two conveners, the chairperson shall be elected out of the conveners.

Article 14

The Company’s shareholders are entitled to one voting right per share, provided that shareholders have no voting right for shares held under Article 179 of the Company Act.

Article 15

Except as otherwise provided in the relevant laws or the Company Act, any resolution of a shareholders’ meeting shall be adopted at a meeting which at least general majority of the shareholders attend and at which meeting a general majority of the shareholders present vote in favor of such resolution.

To transfer shares to employees at less than the average actual repurchase price, the Company must has obtained the consent of at least two-thirds of the voting rights present at the latest shareholders meeting attended by shareholders representing a majority of total issued shares.

To issue employee stock options that the exercise price may be lower than the closing

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price of the Company stocks as of the issue date, the Company must has obtained the consent of at least two-thirds of the voting rights represented at a shareholders meeting attended by shareholders representing a majority of the total issued shares. Resolutions adopted at a shareholders’ meeting shall be recorded in the minutes of the meeting, which shall be signed or bear the seal of the chairman of the meeting and shall be distributed to all shareholders within 20 days after the close of the meeting. The distribution of the minutes of shareholders’ meeting as required in the preceding paragraph may be made by means of public announcements.

Chapter 4 Directors and Supervisors

Article 16

The Company shall have five to seven (5~7) directors and two to four (2~4) supervisors to be elected from among persons with capacity to make judicial acts by the shareholders’ meeting. The term of their office shall be three (3) years and they are eligible for re-election.

The Company shall have, among the aforementioned directors, at least two independent directors, and the number of independent directors shall be no less than one-fifth of the total number of directors. Independent directors shall be elected by adopting the candidate nomination system, and shareholders elect from the slate of independent director candidates.

The professional qualification, shareholding, restriction on the concurrent posts, the means of nomination and election of independent directors and other matters to be complied with, shall all be in accordance with the relevant rules of the competent authority of securities.

Article 17

The board of directors shall consist of the directors of the Company. The chairman of the board of directors shall be elected by and among the directors by a majority of directors present at a meeting attended by more than two-thirds of directors. The chairman of the board of directors shall externally represent the Company.

The reasons for convening a board of directors’ meeting shall be notified to each director and supervisor at least seven days in advance. If the board of directors’ meeting needs to be convened due to emergency, it may be convened at any time. In order to convene the board of directors’ meeting, notice may be made by written notice, fax or e-mail.

Article 18

Where the chairman of the board of directors is on leave or can’t exercise his powers or perform his duties for any reason, an acting chairman shall be designated in accordance with Article 208 of the Company Act. Where a director is unable to attend

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the meeting of the board of directors, he may appoint another director as his proxy to attend the meeting by issuing a letter of proxy. Each director can act as a proxy for only one other director.

Article 19

Unless otherwise provided for in the Company Act, resolutions of the board of directors shall be adopted by a majority of the directors at the meeting attended by a majority of the directors.

Article 20

In case no election of new directors and supervisors is effected after expiration of the term of office of existing directors and supervisors, the term of office of out-going directors and supervisors shall be extended until the time new directors and supervisors have been elected and assumed their office.

Article 21

The supervisors shall perform their duties of supervision in accordance with laws and regulations, and may attend the board of directors’ meeting, but may not have voting rights.

Article 22

No matter the Company’s profits or losses, the Company shall pay remuneration for the directors and supervisors conducting the business of the Company. The remuneration to the directors and supervisors shall be determined by the board of directors in consideration of the directors’ and supervisors’ participation in and devotion to the operation of the Company as well as reference to the common practical standards.

The Company may purchase liability insurance policies for directors and supervisors during the tenure of their offices and within the scope of damages results from the performances of their official duties.

Chapter 5 Managers

Article 23

The Company may have one general manager, several vice general managers and managers, whose appointment, removal and remuneration shall be handled in accordance with Article 29 of the Company Act.

Chapter 6 Accounting

Article 24

The fiscal year of the Company is annually from 1 January until 31 December. Upon

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closing of each fiscal year, the board of directors shall prepare the following statements and reports and shall submit the same to the supervisors for inspection no later than thirty (30) days prior to the meeting date of the general shareholders’ meeting for ratification:

1. The business report.

2. The financial statements.

3. The proposal for distributing earnings or covering losses.

Article 25

If the Company has profit at the end of each fiscal year, the Company shall allocate 4% to 8% of profit as employees’ compensation. The board of directors can determine to issue stock or distribute cash to employees, including employees of the Company’s subsidiaries who meet certain qualifications. The Company may allocate no more than 5% of profit as directors’ and supervisors’ remuneration. Employees’ compensation and directors’ and supervisors’ remuneration shall be reported to the shareholders’ meeting.

When the Company has retained losses, profit shall be retained to offset previous years’ losses before distribution of profit as indicated above shall apply.

If the Company has earnings at the end of the fiscal year, the Company shall first allocate the earnings to pay taxes and cover accumulated losses, and then 10% of the remaining net earnings shall be allocated as the Company’s legal reserve unless and until the accumulated legal reserve reaches the paid in capital. Certain amount shall be further allocated as special reserve or the special reserve shall be reversed in accordance with applicable laws and regulations or as requested by the competent authority. The balance (if any) together with accumulated unappropriated retained earnings can be distributed after the distribution plan proposed by the Board of Directors and approved by the shareholders’ meeting.

The Company’s dividend policy is to take into consideration the Company’s industrial environment and growth phases, future demands of funds, long-term financial planning, and the cash flows that the shareholders desire. With respect to distribution of dividends, no less than 30% of the retained earnings available for distribution of the current year shall be distributed to shareholders as dividends, which may be distributed in stock dividend or cash dividend, and the distribution of cash dividend shall not be less than 10% of total dividends. If the retained earnings available for distribution of the current year do not reach 1% of the paid in capital of the Company, the Company may distribute no dividend.

Chapter 7 Supplementary Articles

Article 26

With respect to the matters not provided herein, the Company Act and other relevant

• 33 -

laws and regulations shall govern.

Article 27

These Articles of Incorporation were enacted on July 12, 1983. The first amendment was made on August 12, 1985. The second amendment was made on April 15, 1986. The third amendment was made on June 9, 1994. The fourth amendment was made on November 29, 1997. The fifth amendment was made on November 21, 1998. The sixth amendment was made on May 30, 1999. The seventh amendment was made on December 28, 1999. The eighth amendment was made on June 9, 2000. The ninth amendment was made on May 8, 2001. The tenth amendment was made on May 31, 2002. The eleventh amendment was made on June 3, 2005. The twelfth amendment was made on June 14, 2006. The thirteenth amendment was made on June 13, 2008. The fourteenth amendment was made on June 16, 2009. The fifteenth amendment was made on June 18, 2010. The sixteenth amendment was made on June 6, 2012. The seventeenth amendment was made on June 6, 2014. The eighteenth amendment was made on June 24, 2015. The nineteenth amendment was made on June 17, 2016.

AHOKU ELECTRONIC COMPANY Chairman: Li, Guang-Hao

• 34 -

Appendix 2

AHOKU ELECTRONIC COMPANY

Rules and Procedures of Shareholders’ Meeting

Article 1

Shareholders’ Meeting of the Company (the “Meeting”) shall be conducted in accordance with these Rules and Procedures. Any matter not provided in these Rules and Procedures shall be handled in accordance with relevant laws and regulations.

Article 2

The Meeting shall be held at the head office of the Company or at any other appropriate place that is convenient for the shareholders to attend. The time to start the Meeting shall not be earlier than 9:00 a.m. or later than 3:00 p.m.

The process of the Meeting shall be taperecorded or videotaped and these tapes shall be preserved for at least one year.

Article 3

If a shareholders’ meeting is convened by the board of directors, the meeting shall be chaired by the chairman of the board. When the chairman of the board is on leave or for any reason unable to exercise the powers of the chairman, the vice chairman shall act in place of the chairman; if there is no vice chairman or the vice chairman also is on leave or for any reason unable to exercise the powers of the vice chairman, the chairman shall appoint one of the managing directors to act as chair, or, if there are no managing directors, one of the directors shall be appointed to act as chair. Where the chairman does not make such a designation, the managing directors or the directors shall select from among themselves one person to serve as chair.

If a shareholders’ meeting is convened by a party with power to convene but other than the board of directors, the convening party shall chair the meeting. When there are two or more such convening parties, they shall mutually select a chair from among themselves.

Article 4

The Company shall prepare an attendance book for attending shareholders to sign in, or shareholder present may hand in an attendance card in lieu of signing on the attendance book. The number of shares in attendance shall be calculated according to the shares indicated by the attendance book or the attendance cards handed, plus the number of shares whose voting rights are exercised by correspondence or electronically.

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Any legal entity designated as proxy by a shareholder(s) to be present at the Meeting may appoint only one representative to attend the Meeting.

If a corporate shareholder designates two or more representatives to attend the Meeting, only one representative can speak for each discussion item.

Article 5

The Company may appoint designated counsel, certified public accountant or other related persons to attend the Meeting.

Persons handling affairs of the Meeting shall wear identification cards or badges.

Article 6

Attendance and voting at the Meeting shall be calculated based on the number of shares.

Chairman shall call the Meeting to order at the time scheduled for the Meeting. If the number of shares represented by the shareholders present at the Meeting has not yet constituted the quorum at the time scheduled for the Meeting, the chairman may postpone the time for the Meeting. The postponements shall be limited to two times at the most and the Meeting shall not be postponed for longer than one hour in the aggregate. If after two postponements no quorum can yet be constituted but the shareholders present at the Meeting represent more than one-third of the total outstanding shares, tentative resolutions may be made in accordance with Section 1 of Article 175 of the Company Act.

If during the process of the Meeting the number of outstanding shares represented by the shareholders present becomes sufficient to constitute the quorum, the chairman may submit the tentative resolutions to the Meeting for approval in accordance with Article 174 of the Company Act.

Article 7

The agenda of the Meeting shall be set by the Board of Directors if the Meeting is convened by the Board of Directors. Unless otherwise resolved at the Meeting, the Meeting shall proceed in accordance with the agenda.

The above provision applies mutatis mutandis to cases where the Meeting is convened by any person, other than the Board of Directors, entitled to convene such Meeting.

Unless otherwise resolved at the Meeting, the chairman can’t announce adjournment of the Meeting before all the discussion items (including special motions) listed in the agenda are resolved. In the event that the chairman adjourns the Meeting in violation of these Rules and Procedures, the shareholders may designate, by a majority of votes represented by shareholders attending the Meeting, one person as chairman to

• 36 -

continue the Meeting.

The shareholders can’t designate any other person as chairman and continue the Meeting in the same or other place after the Meeting is adjourned.

Article 8

When a shareholder present at the Meeting wishes to speak, a Speech Note should be filled out with summary of the speech, the shareholder’s number (or the number of Attendance Card) and the name of the shareholder. The sequence of speeches by shareholders should be decided by the chairman.

Unless otherwise permitted by the chairman, each shareholder shall not, for each discussion item, speak more than two times (each time not exceeding 5 minutes). In case the speech of any shareholder violates the above provision or exceeds the scope of the discussion item, the chairman may stop the speech of such shareholder.

If any shareholder present at the Meeting submits a Speech Note but does not speak, no speech should be deemed to have been made by such shareholder. In case the contents of the speech of a shareholder are inconsistent with the contents of the Speech Note, the contents of actual speech shall prevail.

Unless otherwise permitted by the chairman and the shareholder in speaking, no shareholder shall interrupt the speeches of the other shareholders, otherwise the chairman shall stop such interruption.

Article 9

After the speech of a shareholder, the chairman may respond himself/herself or appoint an appropriate person to respond.

Article 10

The chairman may announce to end the discussion of any resolution and go into voting if the chairman deems it appropriate.

Article 11

When the Company holds a shareholders’ meeting, it may allow the shareholders to exercise voting rights by correspondence or electronic means.

A shareholder exercising voting rights by correspondence or electronic means will be deemed to have attended the Meeting in person, but to have waived his/her rights with respect to the extraordinary motions and amendments to original proposals of that Meeting.

In regards to the resolution of proposals, unless otherwise provided for in the relevant laws and regulations of the Company Act and the Articles of Incorporation of the Company, resolution shall be passed by a majority of the voting rights represented by

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the shareholders attending the Meeting.

The proposal for a resolution shall be deemed approved if no objection or waiver expressed by the shareholders casting their votes via electronic means, and if the chairman inquires and receives no objection from the shareholders in attendance in person.

Article 12

The person(s) to check and the person(s) to record the ballots during a vote by casting ballots shall be appointed by the chairman. The person(s) checking the ballots shall be a shareholder(s).

Vote counting for shareholders’ meeting proposals or elections shall be conducted in public at the place of the shareholders’ meeting. Immediately after vote counting has been completed, the results of the voting, including the statistical tallies of the numbers of votes, shall be announced on-site at the Meeting, and a record made of the vote.

Article 13

If there is amendment to or substitute for a discussion item, the chairman shall decide the sequence of voting for such discussion item, the amendment or the substitute. If any one of them has been adopted, the others shall be deemed vetoed and no further voting is necessary.

Article 14

When a meeting is in progress, the chairman may announce a break based on time considerations. If a force majeure event occurs, the chairman may rule the Meeting temporarily suspended and announce a time when, in view of the circumstances, the Meeting will be resumed.

If a meeting fails to complete all of the items on the Meeting agenda, a resolution may be adopted at the Meeting to defer or resume the Meeting within 5 days without the need to make any further written notices or published announcements to the shareholders.

Article 15

The chairman may conduct the disciplinary officers or the security guard to assist in keeping order of the Meeting place. Such disciplinary officers or security guards shall wear badges marked “Disciplinary Officers” for identification purpose.

Article 16

Any matters not adequately provided for herein shall be subject to handling in accordance with the Company Act, Securities and Exchange Act, Articles of

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Incorporation of the Company and other relevant laws and regulations.

Article 17

These Rules and Procedures shall be effective from the date it is approved by the shareholders’ meeting. The same applies in case of revision.

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Appendix 3

AHOKU ELECTRONIC COMPANY Rules for Directors and Supervisors Elections

Article 1

The directors and supervisors of the Company shall be elected in accordance with the Rules specified herein.

Article 2

All persons with disposing capacity shall be elected as directors or supervisors of the Company.

The directors and supervisors of the Company shall be elected through cumulative voting. Attendance card numbers printed on the ballots may be used instead of recording the names of voting shareholders. Each share shall be entitled to one vote for each director or supervisor to be elected. The holder of the shares may cast all votes for one candidate, or may distribute the votes among several candidates.

Article 3

At the beginning of the election, the chairman shall appoint several persons to check and record the ballots. The persons to check the ballots may be appointed from among the shareholders present.

Article 4

1. According to the number of directors and supervisors as specified in the Company’s Articles of Incorporation, and the statistical outcome of electronic votes platform and ballots, candidates obtaining the most number of votes shall be elected and served as independent directors, non-independent directors or supervisors accordingly. In case two or more persons obtain the same number of votes and the number of such persons exceeds the specified seats available, they shall draw lots to determine who should win the seats available, and the chairman shall draw lots on behalf of the candidate not present.

2. If a candidate is elected at the same time as director and supervisor in accordance with the preceding paragraph, he/she may not concurrently serve as the director and supervisor of the Company, and shall decide which position to be assumed. The vacancy shall be filled in by the candidate with major voting in the same election. If he/she fails to make his/her own decision at the time of election on the site, the chairman shall decide in the order of the directors and supervisors.

3. The Company shall have more than half of elected directors, and at least one or

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more elected supervisors, or one or more elected supervisors and elected directors, among whom no following relationship exists:

• (1) A spousal relationship.

• (2) A familial relationship within the second degree of kinship.

• The elected directors or elected supervisors don’t meet the item 3 of the Article 4 of the Rules, determination of which directors or supervisors are elected shall be made according to the following provisions:

• (1) When there are some among the directors who don’t meet the conditions, the election of the director receiving the lowest number of votes among those not meeting the conditions shall be deemed invalid.

• (2) When there are some among the supervisors who don’t meet the conditions, the provisions of the preceding subparagraph shall apply mutatis mutandis.

• (3) When there are some among the directors and supervisors who don’t meet the conditions, the election of the supervisor receiving the lowest number of votes among those not meeting the conditions shall be deemed invalid.

• When the government or a juristic person is a shareholder of the Company, except with the approval of the Competent Authority, a representative of the government or juristic person may not concurrently be selected or serve as the director or supervisor of the Company.

• A supervisor shall not be concurrently a director, a managerial officer or other staff / employee of the Company. In order to exercise the prompt supervision power, supervisors of the Company should have a domicile within the territory of the Republic of China.

Article 5

The board of directors shall prepare separate ballots for directors and supervisors in numbers corresponding to the directors and supervisors to be elected. The number of voting rights associated with each ballot shall be specified on the ballots, which shall then be distributed to the attending shareholders at the shareholders’ meeting. The election held by electronic votes requires no ballots.

The ballots of directors shall be cast for independent directors and non-independent directors in consolidation and shall be elected respectively.

Article 6

If a candidate is a shareholder, a voter must enter the candidate’s account name and shareholder account number in the “candidate” column of the ballot; for a non-shareholder, a voter shall enter the candidate’s full name and identity card number. However, when the candidate is a governmental organization or juristic-person shareholder, the name of the governmental organization or

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juristic-person shareholder shall be entered in the column for the candidate’s account name in the ballot paper, or both the name of the governmental organization or juristic-person shareholder and the name of its representative may be entered. When there are multiple representatives, the name of each respective representative shall be entered.

Article 7

A ballot is invalid under any of the following circumstances:

1. The ballot isn’t in the form provided in accordance with the Article 5 of the Rules;

2. A blank ballot is placed in the ballot box;

3. The handwriting is unclear and indecipherable or has been altered;

4. The candidate whose name is filled in on the ballot is a shareholder, but the candidate’s account name and shareholder account number don’t conform with those given in the shareholder register, or the candidate whose name is filled in on the ballot is a non-shareholder, and a cross-check shows that the candidate’s name and identity card number don’t match;

5. Other words or marks are filled in on the ballot in addition to the candidate’s account name or shareholder account number (or identity card number) and the number of voting rights allotted.

6. The name of the candidate filled in on the ballot is identical to that of another shareholder, but no shareholder account number or identity card number is provided on the ballot to identify such individual.

7. There are two or more than two candidates filled in on the same ballot.

Article 8

In the election of directors and supervisors of the Company, the ballot box used for voting shall be prepared by Board of Directors and checked in public by the person to check the ballots before voting.

Article 9

The voting rights shall be calculated on site immediately after the end of the poll, and the results of the calculation, including the list of persons elected as directors and supervisors and the numbers of votes with which they were elected, shall be announced by the chairman on the site.

Article 10

The Company shall issue notifications to the directors and supervisors elected.

Article 11

If directors are removed with cause so that the Board of Directors has less than five

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directors, the Company shall handle directors by-election in the latest shareholders’ meeting. In case the director’s vacancy reaches one-third of the number of seats stipulated in the Articles of Incorporation of the Company, the Company shall convene the extraordinary shareholders’ meeting to handle directors by-election within 60 days from the date of occurrence.

If independent directors are removed with cause so that the number of independent directors doesn’t meet the Articles of Incorporation of the Company, the Company shall handle independent directors by-election in the latest shareholders’ meeting. In case all independent directors are resigned, the Company shall convene the extraordinary shareholders’ meeting to handle independent directors by-election within 60 days from the date of occurrence.

If supervisors are removed with cause so that the number of supervisors doesn’t meet the Articles of Incorporation of the Company, the Company shall handle supervisors by-election in the latest shareholders’ meeting. In case all supervisors are resigned, the Company shall convene the extraordinary shareholders’ meeting to handle supervisors by-election within 60 days from the date of occurrence.

Article 12

Any matters not adequately provided for herein shall be subject to handling in accordance with the Company Act, Articles of Incorporation of the Company and other relevant laws and regulations.

Article 13

These Rules and any revision thereof shall become effective after approval at the shareholders’ meeting.

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Appendix 4

Shareholding of Directors and Supervisors

1. As of the book closure date (April 7, 2018) of this year’s annual general shareholders’ meeting, the paid-in capital of the Company is NT$ 1,020,000,000, the issued and outstanding shares are 102,000,000 shares.

2. According to Article 26 of “Securities and Exchange Act” and “Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies”, the minimum shareholding held by all directors of the Company shall be 8,000,000 shares and that held by all supervisors of the Company shall be 800,000 shares. (Note 1)

3. As of the book closure date of this year’s annual general shareholders’ meeting, the shareholding held by individual and all directors and supervisors is listed in the table below, which has been in accordance with the aforementioned statutory standard.

Shareholding of Individual and All Directors

Unit: shares; %

			Unit: shares;%
Title	Name	Current Shareholding	Shareholding Ratio
Chairman	Li,Guang-Hao	8,332,359	8.17%
Director	Weng,Zhen-Xiang	3,606,532	3.54%
Director	Chen,Mei-Ling	6,177,651	6.06%
Director	Zhuang,Li-Yu	10,084	0.01%
Independent Director	Huang,Rong-Wen	0	0.00%
Independent Director	Zhang,Jia-Xian	0	0.00%
Total		18,126,626	17.78%

Shareholding of Individual and All Supervisors

Unit: shares; %

			Unit: shares;%
Title	Name	Current Shareholding	Shareholding Ratio
Supervisor	Chen,Hui-Fen	749,968	0.74%
Supervisor	Han,Dong-Lian	8,000	0.01%
Supervisor	Li,Shu-Ying	408,823	0.40%
Supervisor	Huang,Zhang-Qing	55,125	0.05%
Total		1,221,916	1.20%

• Note1: According to Article 2 of “Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies”, if a public company has elected two or more independent directors, the share ownership figures calculated at the rates for all directors and supervisors other than the independent directors shall be decreased to 80 percent.

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Appendix 5

Other Explanation

1. The impact of stock dividends issuance on business performance, earnings per share and shareholders’ return on investment:

2. The Company’s Board of Directors proposed cash dividends distribution for the year of 2017, so this item is not applicable.

3. The explanation for handling the proposals of the shareholders in this year’s Annual General Shareholders’ Meeting:

4. (1)According to Article 172-1 of the “Company Act”, any shareholder holding one percent or more of the total number of outstanding shares may propose to the Company a written proposal for discussion in the annual general shareholders’ meeting, provided that only one agenda shall be allowed, and such proposal shall be elaborated by 300 words or less.

5. (2)The acceptance period for the proposals to be resolved in this year’s annual general shareholders’ meeting is from April 3 to April 12, 2018. The aforementioned information has been lawfully published on the Market Observation Post System.

6. (3)There was not any proposal submitted by any shareholder during the said acceptance period.

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