Altek — Annual Report 2016

Jul 26, 2017

Stock Code: 3059

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Altek Corporation

2016

Annual Report

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English and Chinese versions, the Chinese version shall prevail.

Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw 2016 Annual Report is available at: http://www.altek.com.tw Printed on May 5, 2017

Spokesperson Name: Belle Liang Title: Vice President & CFO. Tel: 886-3-578-4567 E-mail: spokesman@altek.com.tw

Deputy Spokesperson Name: Eva Liang Title: Manager Tel: 886-3-578-4567 E-mail: spokesman@altek.com.tw

Headquarters Address: No.12, Li-Hsin Rd., Hsinchu, Taiwan, R.O.C. Tel: 886-3-578-4567

Stock Transfer Agent Sino Pac Securities Corporation, Stock Transfer Agent Dept. Tel: 886-2-2381-6288 Website: http://www.sinotrade.com.tw

Auditors PricewaterhouseCoopers Accounting Firm Auditors: Mr. Dian-Yi Li and Mrs. Yu-Kuan Lin Address: 5F, No.2, Gong-Ye E. 3rd Rd., Hsinchu, Taiwan, R.O.C. Tel.: 886-3-578-0205 Website: http://www.pwc.com.tw

Overseas Securities Exchange: N.A.

Corporate Website http://www. altek.com.tw

Contents

I. Letter to Shareholders ............................................................................... 1 II. Company Profile ....................................................................................... 3 2.1 Date of Incorporation ................................................................................................................. 3 2.2 Company History ........................................................................................................................ 3 III. Corporate Governance Report ................................................................. 4 3.1 Organization ............................................................................................................................... 4 3.2 Directors, Supervisors and Management Team ......................................................................... 5 3.3 Implementation of Corporate Governance .............................................................................. 19 3.4 Audit Fee ................................................................................................................................... 45 3.5 Replacement of CPA. ................................................................................................................ 45 3.6 Audit Independence ................................................................................................................. 45 3.7 Equity Transfer and Changes in Equity Pledge of Directors, Supervisors, Managers and Shareholders Holding More than 10% of the Shares ................................................................ 46 3.8 Relationship among the Top Ten Shareholders........................................................................ 47 3.9 Ownership of Shares in Affiliated Enterprises .......................................................................... 48 IV. Capital Overview .................................................................................... 49 4.1 Capital and Shares .................................................................................................................... 49 4.2 Bonds. ....................................................................................................................................... 53 4.3 Preferred Stock ......................................................................................................................... 53 4.4 Global Depository Receipts. ..................................................................................................... 53 4.5 Employee Stock Options ........................................................................................................... 54 4.6 Issuance of New Restricted Employee Shares .......................................................................... 56 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions ........................ 57 4.8 Financing Plans and Implementation ....................................................................................... 57 V. Operational Highlights ............................................................................ 58 5.1 Business Activities ..................................................................................................................... 58 5.2 Market and Sales Overview ...................................................................................................... 63 5.3 Human Resources ..................................................................................................................... 69 5.4 Environmental Protection Expenditure .................................................................................... 69 5.5 Labor Relations ......................................................................................................................... 70 5.6 Important Contracts ................................................................................................................. 75

VI. Financial Information ............................................................................. 76 6.1 Five-Year Financial Summary .................................................................................................... 76 6.2 Five-Year Financial Analysis ...................................................................................................... 83 6.3 Supervisors’ Report for the Most Recent Year ......................................................................... 89 6.4 Consolidated Financial Statements for the Years Ended December 31, 2016 and 2015 ......... 90 6.5 Separate Financial Statements for the Years Ended December 31, 2016 and 2015 .............. 164 6.6 Difficulty in Financial Turnover of the Company and its Affiliated Companies ...................... 165 VII. Review of Financial Conditions, Financial Performance, and Risk Management ....................................................................................... 166 7.1 Analysis of Financial Status ..................................................................................................... 166 7.2 Analysis of Financial Performance .......................................................................................... 167 7.3 Analysis of Cash Flow .............................................................................................................. 168 7.4 Major Capital Expenditure Items and Impact on Finance and Business. ............................... 168 7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year ............................................................................. 169 7.6 Analysis of Risk Management ................................................................................................. 169 7.7 Other Important Items. .......................................................................................................... 174 VIII. Special Disclosure ............................................................................... 175 8.1 Profile of Affiliated Companies ............................................................................................... 175 8.2 Private Placement of Securities in the Most Recent Years ..................................................... 182 8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years. ....... 182 8.4 Other Mentionable Items ....................................................................................................... 182 8.5 Any Event Having a Material Impact on Shareholders' Rights and Interests or Securities Prices stipulated in Subparagraph 2, Paragraph 3, Article 36 of the Securities and Exchange Act ............................................................................................................................................ 182

I. Letter to Shareholders

The 2016 Business Report and the summary of the 2017 Business Plan are reported below:

1. 2016 Business Report

With the support of all shareholders and colleagues, the Company has been actively transformed into a digital imaging solution provider. In the year of 2016, the solutions including digital image processing chip, dual lens camera module, and image processing technology licensing continued penetrating several international smart phone supply chain successfully; also, new wearable image products continued to appear in market. However, due to the shortage of key components as a result of the earthquake in Japan and the delay of launching new products by the customers, the Company’s consolidated revenue amounted to NT$11.58 billion in 2016, representing a decrease of approximately 7.3% from the previous year; furthermore, the consolidated gross profit rate was 13%, the net income was NT$53.8 million, and the earnings per share was NT$0.2.

1. Summary of 2017 Business Plan, Effects of External Competition, Laws, and Overall

2. Business Environment, and Business Objectives

3. (1)Summary of 2017 Business Plan, Business, Operating Strategy, and Major Production/ Sales Plicy

4. Business: Due to the broad application of the digital image, the Company has applied the digital image technology that was developed through years of efforts to provide customers with image chips, camera modules, image processing technology licensing, wearable image products, and other digital imaging solutions. Since the mobile phone with dual camera design has become one of the trends, more mid- and high-end mobile phones are expected to be adopted that is expected to help increase the market penetration rate of the dual-camera mobile phone. If there is no significant change in the market, the growth of the wearable image product can also be expected.

5. R&D: The use of image technology in the fields of 3D sensing, virtual reality, depth learning, artificial intelligence, and driverless car…etc., will become more vigorous and play the key roles. To grasp the opportunities of Industry 4.0 and IoT, the Company will continue to adjust operating strategies and resources, recruit outstanding talents in research and development, and improve the capacity for technological innovation, so as to strengthen the efficacy of digital imaging solutions and chips and accelerate the product launches.

6. Management: The Company will continue to strengthen the production/sales, supply chain management, and manufacturing quality and efficiency, in the hope of reducing costs and maintaining a flexible customized production model, while improving systems and procedures for better operational efficiency.

7. (2)Effects of External Competition, Laws, and Overall Business Environment, and Business Objectives

In the prospect of this year, while facing the rapid changes in new technologies, new materials, and new technologies, all Altek colleagues still need to overcome the possible challenges in the business environments, continue to deepen the core

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technology of digital image, enhance product added value, provide customers with total solutions and services, and continuously improve the market share and influence in the field of digital image, as well as continuing to strengthen the aspects of system, procedure, and production in order to enhance the overall competitiveness, growth, and profitability. The Company’s management team and employees will continue to dedicate to pursuing the best interests of all shareholders with the business philosophy of precision, promptness, innovation, quality, cost, flexibility and efficiency. We would like to thank our shareholders for your continuing supports and encouragement to the Company.

Sincerely yours,

Chairman & CEO Alex Hsia

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II. Company Profile

2.1 Date of Incorporation

December 24, 1996.

2.2 Company History

1996	Founded as “Asia Imagination corporation” to engage in the design, production and sales of digital cameras.
1997	Renamed as “Altek Corporation” and established its first corporate headquarters located in 3F, No. 10 Li-Hsin Road, Science-Based Industrial Park, Hsinchu City, Taiwan.
1998	Introduced Taiwan’s first 1.0 million pixels autofocus digital still camera.
2002	Listed on the Taiwan Stock Exchange.
2003	Issued convertible bonds of US$60,000 thousand and listed on Luxembourg Stock Exchange.
2006	Published domestic convertible bonds of NT$1,500,000 thousand and listed on Taiwan Stock Exchange.
2007	Monthly DSC shipment achieved two million units, ranked No.1 in the digital camera ODM market with the market share of 10%.
2008	Introduced the world's first GPS digital camera.
2010	The first smartphone/camera featuring communication, triple zooming lens and 12.2 million pixels received CommunicAsia’s Award of Ten Best Products in Singapore Telecom Show. Established the new headquarters at No.12, Li-Hsin Road, Science-Based Industrial Park, Hsinchu City, Taiwan.
2013	Transformating itself to an image solution provider with focuses on smartphone camera and consumer imageproducts.
2014	Image signal processor and dual-camera solutions were applied to flagship smartphones of global manufacturers. Copmleted the capital decrease of NT$1,182,475 thousand.
2015	More customers in China and India launched more smart phones with Altek imagingsolutions.
2016	Altek in-depth computing chips were applied to dual-camera smartphones and tablets of global manufacturers.

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III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

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Shareholders’ Meeting
Supervisor
Board of Directors
Audit office
Chairman
Chief Executive Officer
CEO office
Business Division Development Research & Management Project Product Planning Division Finance Division Human Resources Division
Division Division
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3.1.2 Major Corporate Functions

Department	Functions
Audit Office	Carry out the audit operation for the implementation of the internal control system and also for the performance evaluation and decision makingof management.
CEO Office	1. Assist CEO in planning, integrating, and coordinating medium and long-term business and operational strategies. 2. Engage in legal affairs related to contracts and intellectural property rights. 3. Handle corporate relationships andpublic relations.
Business Division	Engage in sales of products and services, business development, and formulation and execution of sales strategies.
Research & Development Division	Design and develop competitive technologies and products.
Product Management Division	1. Engage in quality enhancement, safety regulations and product testing. 2. Engage inproject management andproductprocurement.
Product Planning Division	Analyze market trends and plan product strategies.
Finance Division	Plan, organize, and apply financial resources and management information system in line with business and operationalgoals.
Human Resources Division	Handle human resources planning.

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3.2 Directors, Supervisors and Management Team

3.2.1 Directors and Supervisors

Profile of Directors and Supervisors

																	April 18,2017	April 18,2017	April 18,2017
Title	Nationality/ Country of Origin	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected		Current Shareholding		Current Shareholding of Spouse or Minor Children		Shareholding by Nominee Arrangement		Experience (Education)	Other Position	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship
							Shares	% (Note 1)	Shares	% (Note 1)	Shares	% (Note 1)	Shares	% (Note 1)			Title	Name	Relation
Chairman	R.O.C	Alex Hsia	Male	2014.06.19	3 years	1996.12.20	1,782,764	0.45	757,934	0.28	943,051	0.34	0	0.00	(Note 2)	Executive Director of Altek System (Kunshan) Co., Ltd.	Supervisor	Amy Chien	Spouse
Director	R.O.C	Yitsang International Co., Ltd.		2014.06.19	3 years	2014. 06.19	19,923,000	5.06	13,946,100	5.09	-	-	-	-	-	-	-	-	-
	R.O.C	Representative: David Lin	Male	2016. 03.19	3 years	2016. 03.19	520,790	0.13	520,790	0.19	0	0.00	0	0.00	(Note 3)	Director, Altek Autotronics	None	None	None
Director	R.O.C	Yitsang International Co., Ltd.		2014.06.19	3 years	2014. 06.19	19,923,000	5.06	13,946,100	5.09	-	-	-	-	-	-	-	-	-
	Macau	Representative: Simon Law	Male	2014. 06.19	3 years	2014. 06.19	200,000	0.05	140,000	0.05	0	0.00	0	0.00	(Note 4)	None	None	None	None
Director	R.O.C	Stan Hung	Male	2014. 06.19	3 years	2014. 06.19	0	0.00	0	0.00	0	0.00	0	0.00	(Note 5)	(Note 5)	None	None	None
Director	R.O.C	Jason Lin	Male	2014. 06.19	3 years	2014. 06.19	862,055	0.22	552,438	0.20	0	0.00	0	0.00	(Note 6)	Director, Altek Semicondu-ctor	None	None	None
Independent Director	R.O.C	Wen-Hsieh Lai	Male	2016. 06.17	3 years	2016. 06.17	0	0.00	-	-	-	-	-	-	(Note 7)	(Note 7)	None	None	None
Independent Director	R.O.C	Jaime Tang	Female	2014. 06.19	3 years	2002.05.27	0	0.00	0	0.00	0	0.00	0	0.00	(Note 8)	(Note 8)	None	None	None

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Title	Nationality/ Country of Origin	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Current Shareholding of Spouse or Minor Children	Current Shareholding of Spouse or Minor Children	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Other Position	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship
							Shares	% (Note 1)	Shares	% (Note 1)	Shares	% (Note 1)	Shares	% (Note 1)			Title	Name	Relation
Supervisor	R.O.C	Tim Liou	Male	2014. 06.19	3 years	2000.06.01	0	0.00	0	0.00	0	0.00	0	0.00	(Note 9)	(Note 9)	None	None	None
Supervisor	R.O.C	Amy Chien	Female	2014. 06.19	3 years	2014. 06.19	547,532	0.14	873,272	0.32	827,713	0.30	0	0.00	(Note 10)	None	Chairman	Alex Hsia	Spouse
Supervisor	R.O.C	Alex Liou	Male	2014. 06.19	3 years	2014. 06.19	1,203	0.00	350,142	0.13	7,000	0.00	0	0.00	(Note 11)	None	None	None	None

• Note 1: Shareholding when elected is calculated based on 394,158,321 shares issued on June 19, 2014. Due to the capital decrease of 30% by cash on October 7, 2014, current shareholding is calculated based on 273,908,825 shares issued after capital decrease.

Note 2: Alex Hsia: M.A. of Electronics Engineering, UCS; Vice Presiednt of Microtek Co.

Note 3: David Lin: Bachelor of Business Administration, Tam Kang University; Vice Presiednt of Microtek.

Note 4: Simon Law: M.S. of UC Berkeley; Design Manager of Xerox.

• Note 5: Stan Hung: B.A. of TamKang University; Chairman of UMC. Other postion: Chairman and Chief Strategy Officer of UMC; Direcotr of EPISTAR Corporation, UMC Capital, and Top Taiwna Venture Capital; Chairman of UMC Investment.

• Note 6: Jason Lin: M.A. of U. of California - Santa Barbara; President of IC Media Technology Corp.; General Manager of Philips Semiconductor.

• Note 7: Wen-Hsieh Lai took up a post of an independent director on June 17, 2016. Experience (Education): China University of Technology; Chairman of Chieh-Cheng Engineering Co., Ltd. Other postion: Member of Remuneration Committee, Chairman of Chieh-Cheng Engineering Co., Ltd.

• Note 8: Jaime Tang: M.A. of Indiana University; General Auditor, CFO, and Human Resources Director of Walsin Lihwa. Other position: Special Assistant of Chairman's Office, Walsin Lihwa Corp.; Convener of Remuneration Committee.

• Note 9: Tim Liou: M.S. of UCS; Senior Engineer of IBM; Senior Engineering Advisor of Xerox. Other position: Chairman of Eastern Technologies Holding Limited, Co. and Eastech Electronics.

Note 10: Amy Chien: B.A. of TamKang Unversity; Research Assistant of University of Texas Health Science Center.

Note 11: Alex Liou: Chairman of Anchihsin Technology; Superintendent of Rongai Hospital.

• Note 12: Sharehodling when elected includes shares in trust with the right to use.

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Major shareholders of the institutional shareholders

	April 18, 2017
Name of Institutional Shareholders	Major Shareholders
Yitsang International Co., Ltd.	Jingcai International Investment Co., Ltd. (64.1%) and Baiying Co., Ltd. (35.6%)

Major shareholders of the Company’s Major Institutional Shareholders

Major shareholders of the Company’s Major Institutional Shareholders	Major shareholders of the Company’s Major Institutional Shareholders
April 18,2017
Name of Institutional Shareholders	Major Shareholders
Jingcai International Investment Co., Ltd.	Yun-Hsing Lin and other shareholders (100%)
Baiying Co., Ltd.	Jade Star Investment Co., Ltd (100%)

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Professional Qualifications and Independence Analysis of Directors and Supervisors

	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017
Criteria Name	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience			Independence Criteria (Note 1)										Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
Chairman Alex Hsia														0
Director David Lin														0
Director Simon Law														0
Director Stan Hung														0
Director Jason Lin														0
Independent Director Wen- Hsieh Lai														0
Independent Director Jaime Tang														0
Supervisor Tim Liou														0
Supervisor Amy Chien														0
Supervisor Alex Liou														0

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

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1. Not an employee of the Company or any of its affiliates.

2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.

3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.

5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings.

6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.

7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the Remuneration Committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx”.

8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

9. Not been a person of any conditions defined in Article 30 of the Company Act.

10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Act.

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3.2.2 Management Team

3.2.2 Management Team	3.2.2 Management Team	3.2.2 Management Team	3.2.2 Management Team	3.2.2 Management Team
													April 18,2017
Title	Nationality/C ountry of Origin	Name	Gender	Date Effective	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Education/Experience	Other Position	Managers who are Spouses or within Two Degrees of Kinship
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
CEO	R.O.C.	Alex Hsia	Male	1996.12.28	757,934	0.28	943,051	0.34	0	0.00	M.A. of Electronics Engineering, UCLA; V.P. of Microtek Co.	Executive Director of Altek System (Kunshan) Co., Ltd.	None	None	None
VP	R.O.C.	Rick Han	Male	2010.04.13	234,747	0.09	0	0.00	0	0.00	B.S. of National Taiwan University of Science and Technology; V.P. of Ulead Co.	None	None	None	None
VP	R.O.C.	Vincent Kao	Male	2014.11.10	1,747	0.00	707	0.00	0	0.00	B.A. of National Taiwan University; Deputy of A.V.P., of Teco Image System	Director of Altek Japan	None	None	None
VP	R.O.C.	Kenny Li	Male	2014.11.10	0	0.00	0	0.00	0	0.00	M.S. of National Chiao Tung University; Special Assistant of Quanta Computer	None	None	None	None
VP	R.O.C.	Morgan Chiu	Male	2014.11.10	133,017	0.05	0	0.00	0	0.00	M.B.A. of National Central University; A.V.P. of Lite-on IT Corporation	None	None	None	None
VP	R.O.C.	Belle Liang	Female	2017.01.25	20,000	0.00	0	0.00	0	0.00	Finance, National Taiwan University; Special Assistant for Chairman of THSR Corporation	Independent Director of eGalax_eMPIA Technology Inc.	None	None	None
Accounting Manager	R.O.C.	Seiko Chen	Female	2017.03.27	0	0.00	0	0.00	0	0.00	B.A. of TamKang University; Senior Manager of Coretronic Corp.	None	None	None	None

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3.2.3 Remuneration of Directors, Supervisors, President, and Vice President

Remuneration of Directors

Unit: NT$ thousand; Dec. 31, 2016

		Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	(%)	(%)
		Base Compensation (A)		Severance Pay (B)		Bonus to Directors (C) (Note 3)		Allowances (D)
Title	Name		All Comanies		All Comanies in		All Comanies in		All Comanies in		All Companies in
		The Company	p in the Consolidated Financial Statements	The Company	p the Consolidated Financial Statements	The Company	p the Consolidated Financial Statements	The Company	p the Consolidated Financial Statements	The Company	the Consolidated Financial Statements
Chairman	Alex Hsia	0	0	0	0	1,190	1,190	410	410	2.97	2.97
Director	Yitsang International Co.,Ltd.
Representative Director	Steve Shyr (Note 1)
Representative Director	David Lin (Note1)
Representative Director	Simon Law
Director	Stan Hung
Director	Jason Lin
Independent Director	Jaime Tang
Independent Director	Wen-Hsieh Lai (Note 2)

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Title	Name	Relevant Remuneration Received by Directors Who are	Relevant Remuneration Received by Directors Who are	Relevant Remuneration Received by Directors Who are	Relevant Remuneration Received by Directors Who are	Also Employees	Also Employees	Also Employees	Also Employees	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)
		Salary, Bonuses and Allowances (E) (Note 4)		Severance Pay (F)		Profit Sharing-Employee Bonus (G) (Note 3)
		The Company	All Companies in the Consolidated Financial Statements	The Company	All Companies in the Consolidated Financial Statements	The Company		All Companies in the Consolidated Financial Statements		The Company	All Companies in the Consolidated Financial Statements
						Cash	Stock	Cash	Stock
Chairman	Alex Hsia	10,504	21,356	131	323	0	0	0	0	22.74	43.27
Director	Yitsang International Co.,Ltd.
Representative Director	Steve Shyr (Note 1)
Representative Director	David Lin (Note1)
Representative Director	Simon Law
Director	Stan Hung
Director	Jason Lin
Independent Director	Jaime Tang
Independent Director	Wen-Hsieh Lai (Note 2)

Note 1: Yitsang International Co., Ltd. reappointed David Lin as Director on March 19, 2016.

Note 2: Took up the post of an independent director on June 17, 2016.

Note 3: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Note 4: Salary, bonuses and allowances include employee stock option certificates and restricted stock award shares recognized by share-based payment in accordance with IFRS2.

Note 5: No Remuneration is from invested companies except for those companies in the consolidated financial statements.

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Range of Remuneration

Range of Remuneration	Name of Directors	Name of Directors	Name of Directors	Name of Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements
Under NT$ 2,000,000	Alex Hsia, Steve Shyr, Yitsang International Co., Ltd., David Lin, Simon Law, Stan Hung, Jason Lin, Jaime Tang, and Wen-Hsieh Lai	Alex Hsia, Steve Shyr, Yitsang International Co., Ltd., David Lin, Simon Law, Stan Hung, Jason Lin, Jaime Tang, and Wen-Hsieh Lai	Steve Shyr, Yitsang International Co., Ltd., David Lin, Simon Law, Stan Hung, Jason Lin, Jaime Tang, and Wen-Hsieh Lai	Steve Shyr, Yitsang International Co., Ltd., Simon Law, Stan Hung, Jaime Tang, and Wen-Hsieh Lai
NT$2,000,001 ~ NT$5,000,000	－	－	－	David Lin
NT$5,000,001 ~ NT$10,000,000	－	－	Alex Hsia	Alex Hsia and Jason Lin
Over NT$10,000,000	－	－	－	－
Total	9	9	9	9

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Remuneration of Supervisors

Unit: NT$ thousand; Dec. 31, 2016

Title	Name	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Ratio of Total Remuneration (A+B+C) to Net Income (%)	Ratio of Total Remuneration (A+B+C) to Net Income (%)
		Base Compensation (A)		Bonus to Supervisors (B) (Note 1)		Allowances (C)
		The Company	Companies in the Consolidated FinancialStatements	The Company	Companies in the Consolidated FinancialStatements	The Company	Companies in the Consolidated FinancialStatements	The Company	Companies in the Consolidated FinancialStatements
Supervisor	Tim Liou	0	0	595	595	120	120	1.33	1.33
Supervisor	Amy Chien
Supervisor	Alex Liou

Note 1: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Note 2: No Remuneration is from invested companies except for those companies in the consolidated financial statements.

	Range of Remuneration	Range of Remuneration
Range of Remuneration	Name of Supervisors
	Total of(A+B+C)
	The Company	Companies in the Consolidated Financial Statements
Under NT$2,000,000	Tim Liou,AmyChien,and Alex Liou	Tim Liou,AmyChien,and Alex Liou
NT$2,000,001 ~ NT$5,000,000
NT$5,000,001 ~ NT$10,000,000
Over NT$10,000,000
Total	3	3

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Remuneration of the President and Vice President

								Unit: NT$thousand;Dec. 31,2016	Unit: NT$thousand;Dec. 31,2016	Unit: NT$thousand;Dec. 31,2016	Unit: NT$thousand;Dec. 31,2016	Unit: NT$thousand;Dec. 31,2016	Unit: NT$thousand;Dec. 31,2016
Title	Name	Salary (A) (Note 1)		Severance Pay (B)		Bonuses and Allowances (C)		Profit Sharing-Employee Bonus (D) (Note 2)				Ratio of Total Compensation (A+B+C+D) to Net Income(%)
		The Company	Companies in the Consolidate d Financial Statements	The Company	Companies in the Consolidated Financial Statements	The Company	Compani es in the Consolid ated Financial Stateme nts	The Company		Companies in the Consolidated Financial Statements		The Company	Compani es in the Consolid ated Financial Stateme nts
								Cash	Stock	Cash	Stock
CEO	Alex Hsia	23,765	31,685	566	749	2,587	4,715	0	0	0	0	50.03	69.05
SVP	Jason Lin
SVP	Steve Shyr(Note 3)
SVP	David Lin(Note 4)
SVP	DougFranz(Note 5)
VP	Jack Lee(Note 6)
VP	Rick Han
VP	Vincent Kao
VP	Morgan Chiu
VP	KennyLi
VP	AmyYang

Note 1: Salary includes employee stock option certificates and restricted stock award shares recognized by share-based payment in accordance with IFRS2.

Note 2: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017. Note 3: Steve Shyr discharged on March 19, 2016. The information disclosed above is as of his last day as SVP Note 4: David Li discharged on February 20, 2016. The information disclosed above is as of his last day as SVP. Note 5: Doug Franz discharged on April 15, 2016. The information disclosed above is as of his last day as SVP. Note 6: Jack Lee discharged on April 15, 2016. The information disclosed above is as of his last day as VP. Note 7: No Remuneration is from invested companies except for those companies in the consolidated financial statements.

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Range of Remuneration

Range of Remuneration	Name of President and Vice President	Name of President and Vice President
	The Company	Companies in the Consolidated Financial Statements
Under NT$ 2,000,000	David Lin, Steve Shyr, Jack Lee, Doug Franz, Shu-Chen Yang, and Jason Lin	David Lin, Steve Shyr, Jack Lee, Doug Franz, and Shu-Chen Yang
NT$2,000,001 ~ NT$5,000,000	Rick Han,Vincent Kao,Morgan Chiu,and KennyLi	Rick Han,Vincent Kao,Morgan Chiu,and KennyLi
NT$5,000,001 ~ NT$10,000,000	Alex Hsia	Alex Hsia and Jason Lin
Over NT$10,000,001 ~ NT$15,000,000
Total	11	11

Profit Sharing-Employee Bonus

Profit Sharing-Employee Bonus	Profit Sharing-Employee Bonus	Profit Sharing-Employee Bonus
			Unit: NT$thousand;Dec. 31,2016
Title	Name	Employee Bonus in Stock	Employee Bonus in Cash	Total	Ratio of Total Amount to Net Income(%)
CEO	Alex Hsia	0	0	0	0
VP	Rick Han
VP	Vincent Kao
VP	Morgan Chiu
VP	Kenny Li

Note: The earning distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

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3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents

A.The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to directors, supervisors, presidents and vice presidents of the Company, to the net income

Title	2015	2015	2016 (Note 1)	2016 (Note 1)
	The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements
Directors	13.94%	22.06%	55.60%	80.41%
Supervisors
Presidents and Vice Presidents

Note 1: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Explanation: The ratio of total remuneration paid to directors, supervisors, presidents and vice presidents of the Company, to the net income in 2016 is higher than that in 2015 due to a lower profit in 2016.

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B. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance

business performance	business performance	business performance
Directors and Supervisors			Payment Policy for Presidents and Vice Presidents
Compensation Policy for Directors and Supervisors	Remuneration Policy for Directors and Supervisors	Allowance Policy for Directors and Supervisors
According to the Articles of Incorporation, if the Company has earnings after the annual final accounts, after paying profit-seeking income tax as well as making up losses of the previous years, the Company shall first set aside ten percent (10%) of said earnings as legal reserve. Thereafter, the Company shall set aside or reverse a special reserve in accordance with the Securities and Exchange Act. 2% of balance of the earnings shall be distributed as compensation to the Directors and Supervisors.	The remuneration is paid for the services Directors and Supervisors provided to the Company subject to Article 21 of the Articles of Incorporation. The remuneration is measured based on the personal achievements, contribution and participation made to the business operation with reference to the normal standard of the industry.	The Company may pay the allowance with reference to the normal standard of the industry and subject to the attendance rate.	(1) The Company has set up the Remuneration Committee in 2011 to evaluate the individual performance and enact the policies, standards and portfolios for the payments. (2) The payment portfolios include salary, bonus and compensation. The payment will be distributed according to the individual experience, contribution and performance as well as the liability burdened with reference to the normal standard of the industry.

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3.3 Implementation of Corporate Governance

3.3.1 Board of Directors

A total of 5 meetings of the Board of Directors were held in 2016.

The attendance of director and supervisor were as follows:

Title	Name	Attendance in Person	By Proxy	Attendance Rate (%)
Chairman	Alex Hsia	5	0	100%
Director	Yitsang International Co., Ltd. Representative: Steve Shyr(Note 1)	1	0	100%
Director	Yitsang International Co., Ltd. Representative: David Lin(Note 1)	4	0	100%
Director	Yitsang International Co., Ltd. Representative: Simon Law	5	0	100%
Director	Jason Lin	4	0	80%
Director	Stan Hung	0	5	0%
Independent Director	Wen-Hsieh Lai (Note 2)	2	0	67%
Independent Director	Jaime Tang	3	0	60%
Other mentionable items: 1. If there are circumstances referred to in Article 14-3 of the Securities and Exchange Act and resolutions of the directors’ meetings objected to by independent directors or subject to qualified opinion and recorded or declared in writing, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions and the company’s response should be specified: None. 2. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None. 3. Measures taken to strengthen the functionality of the board: The Board of Directors has established a Remuneration Committee to assist the board in carryingout its various duties.

Note 1:Yitsang International Limited Company reappointed David Lin as Director on March 19, 2016. Note 2: Wen-Hsieh Lai took up a post of the independent director on June 17, 2016.

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• 3.3.2 Audit Committee: The Audit Committee will be established according to regulations after the shareholders’ meeting to be held in 2017.

• 3.3.3 Attendance of Supervisors at Board Meetings

A total of 5 meetings of the Board of Directors were held in 2016. The attendance of supervisors was as follows:

Title	Name	Attendance in Person	Attendance Rate (%)
Supervisor	Tim Liou	4	80%
Supervisor	Amy Chien	4	80%
Supervisor	Alex Liou	4	80%
Other mentionable items: 1. Composition and responsibilities of supervisors: (1) Communications between supervisors and the Company's employees and shareholders (e.g. communication channels and methods, etc.): The supervisors may directly communicate with employees and shareholders if needed. (2) Communications between supervisors and the Company's chief internal auditor and CPA (e.g. items, methods and results of the audits of corporate finance or operations, etc.): A. Communications with the chief internal auditor: The company chief internal auditor summits the audit reports to supervisors every month. The supervisors have no opposite opinions on the reports. B. The chief internal auditor attends the board meeting to brief the audit findings. The supervisors have no opposite opinions on the reports. C. Communications with the CPA: CPAs communicate with Directors and Supervisors before submission of financial statements. 2. If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of the meetings, sessions, contents of motion, resolutions of the directors’ meetings and the company’s response to the supervisor’s opinion should be specified: None.

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3.3.4 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Assessment Item			Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
1. Does Company follow “Taiwan Corporate Governance Implementation” to establish and disclose its corporate governance practices?	V		1. The Board of Directors has established theCode of Best Practice. All operations are performance in accordance with the Code. Up to now, there is no significant difference.	None.
2. Shareholding Structure & Shareholders’ Rights (1) Does Company have Internal Operation Procedures for handling shareholders’ suggestions, concerns, disputes and litigation matters. If yes, has these procedures been implemented accordingly? (2) Does Company possess a list of major shareholders and beneficial owners of these major shareholders? (3) Has the Company built and executed a risk management system and “firewall” between the Company and its affiliates?	V V V		(1) The Company has set up the spokesperson and deputy spokesperson to handle shareholders’ suggestions or concerns. The Company has entrusted the Stock Transfer Agent and has set up the website to handle shareholders’ suggestions or disputes. (2) The Company reported the changes in the data in accordance with related laws. (3) The Company and its affiliates perform the operations and financial affairs independently. The Company has set up the written regulations to control financial and operational information.	None. None. None.

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Assessment Item			Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(4) Has the Company established internal rules prohibiting insider trading on undisclosed information?	V		(4) The Company has set up the procedures for handling material Inside Information to avoid the improper leakage of information and to establish proper information handling and disclosure mechanisms, so as to ensure the consistence and correctness of publication. The regulations are disclosed on the Company’s website.	None.
3. Composition and Responsibilities of the Board of Directors (1) Has the Company established a diversification policy for the composition of its Board of Directors and has it been implemented accordingly?	V		(1) The Company’s Board of Directors consists of experts that are well-experienced, equipped with knowledge, skills, and literacy in diverse fields, and able to provide professional opinions from different perspectives. The Company has established the Corporate Social Responsibility (CSR) Code of Practice and considered the Company’s operations, operating model, and development in respect of the composition of the	None.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			Board of Directors. Currently, among 7 directors, one is female. Directors have diverse backgrounds, from marketing, R&D, management in the electronics industry, to accounting, internal audit, and business administration in other industries, fully reflecting the diversification policy for the composition of the Board of Directors.
(2) Other than the Compensation Committee and the Audit Committee which are required by law, does the Company plan to set up other Board committees? (3) Has the Company established methodology for evaluating the performance of its Board of Directors, on an annual basis? (4) Does the Company regularly evaluate its external auditors’ independence?	V	V V	(2) The Company has established the Compensation Committee and will establish the Audit Committee in 2017. Other board committees will be set up based on the scale of operations and business needs. (3) The Board of Directors performs its duties in accordance with related laws and regulations. In the future, the Company will set up the regulations governing the evaluation of the board performance based on the actual needs. (4) The Company evaluates the independence of its CPAs annually and reports to the Board of Directors	Same as explanation. Same as explanation. None.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			based on the Integrity, Objectivity, and Independence of the Code of Ethics Professional Accountants Bulletin No.10 promulgated by Taiwan CPA.
4. Does the Company established a full- (or part-) time corporate governance unit or personnel to be in charge of corporate governance affairs (including but not limited to furnish information required for business execution by directors, handle matters relating to board meetings and shareholders’ meetings according to laws, handle corporate registration and amendment registration, produce (or record?) minutes of board meetings and shareholders meetings, etc.	V		The Company has appointed Finance Division as the full-time corporate governance unit to be in charge of corporate governance affairs.	None.
5. Has the Company established a means of communicating with its Stakeholders (including but not limited to shareholders, employees, customers, suppliers, etc.) or created a Stakeholders Section on its Company website? Does the Company respond to stakeholders’ questions on corporate responsibilities?	V		Depending on different situations, the Company appoints the spokesperson, deputy spokesperson, or stock transfer unit to communicate with stakeholders. The contact information of the spokesperson, deputy spokesperson, and related business units is disclosed on the Company’s website.	None.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
6. Has the Company appointed a professional registrar for its Shareholders’ Meetings?	V		The Company has appointed a Stock Transfer Agent to handle related affairs based on actual needs.	None.
7. Information Disclosure (1) Has the Company established a corporate website to disclose information regarding its financials, business and corporate governance status? (2) Does the Company use other information disclosure channels (e.g. maintaining an English-language website, designating staff to handle information collection and disclosure, appointing spokespersons, webcasting investor conference etc.)?	V V		(1) The Company has established a corporate website (http://www.altek.com.tw) to disclose information regarding its financials, business and corporate governance status. (2) The Company maintains a multi-language website (Traditional Chinese, Simplified Chinese and English), designates the staff to handle information collection and disclosure, and appoints the spokesperson. The Company also sets up its news contact and IC contact information on the website to provide the latest news and channels of communication. After the investor conference is held, the audio/video information will be disclosed on the website.	None. None.
8. Has the Company disclosed other information to facilitate a better understandingof its	V		For more information on employee rights, employee wellness, investor relations, supplier relations,rights of	None.

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Assessment Item			Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
corporate governance practices (e.g. including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors)?			stakeholders, directors’ training records, and purchasing insurance for directors, please refer to Page 42.
9.The improvement status for the result of Corporate Governance Evaluation announced by Taiwan Stock Exchange	V		1.The Company has reinforced the contents of the corporate website to increase information transparency. 2.Improvements have been made based on the requirements of the competent authority.	None.

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3.3.5 Composition, Responsibilities and Operations of the Remuneration

Committee

A. Professional Qualifications and Independence Analysis of Remuneration Committee Members

Title	Criteria Name	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work Experience	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Number of Other Public Companies in Which the Individual is Concurrently Serving as a Remuneration Committee Member
		An Instructor or Higher Position in a Department of Commerce, Law, Finance,Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8
Independent Director	Jaime Tang												0
Independent Director	Wen-Hsieh Lai												0
Committee Member	Sophia Chen												0

Note 1: Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during the term(s) of office.

• (1) Not an employee of the Company or any of its affiliates.

• (2) Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent director of the parent company, or any subsidiary set up in accordance with the act or local laws.

• (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company, or ranking in the top 10 in holdings.

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three sub-paragraphs.

• (5) Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company, or who

27

holds shares ranking in the top five holdings.

• (6) Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which has a financial or business relationship with the Company.

• (7) Not a professional individual, who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof.

• (8) Not a person of any conditions defined in Article 30 of the Company Act.

B. Attendance of Members at Remuneration Committee Meetings

There are 3 members in the Remuneration Committee with term from June 19[th] , 2014 to June 18[th] , 2017. A total of 2 meetings of the Remuneration Committee were held in 2016. The attendance record of the Remuneration Committee members was as follows:

Title	Name	Attendance in Person	By Proxy	Attendance Rate (%)
Convener	Jaime Tang	2	0	100%
Committee Member	Sophia Chen	2	0	100%
Committee Member	James Huang (Note 1)	1	0	100%
Committee Member	Wen-Hsieh Lai(Note 1)	1	0	100%
Other mentionable items: 1. If the Board of Directors declines to adopt or modifies a recommendation of the Remuneration Committee, it should specify the date of the meeting, session, content of the motion, resolution by the Board of Directors, and the Company’s response to the Remuneration Committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the Remuneration Committee, the circumstances and cause for the difference shall be specified): None. 2. Resolutions of the Remuneration Committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting, session,content of the motion,all members’ opinions and the response to members’ opinion should be specified: None.

Note 1: James Huang resigned on June 17, 2016 and Independent Director Wen-Hsieh Lai was appointed by the Board of Directors to be a member of the Remuneration Committee on the same day.

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3.3.6 Social Responsibility Implementation Status as Required by the Taiwan Financial Supervisory Commission

Supervisory Commission
Assessment Item			Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
1. Implementation of Corporate Governance (1) Does the Company have a corporate social responsibility policy and evaluate its implementation? (2) Does the Company hold regular CSR training? (3) Does the Company have a dedicated (or ad-hoc) CSR organization with Board of Directors authorization for senior management, which reports to the Board of Directors? (4) Does the Company set a reasonable compensation policy, integrate employee appraisal with CSR policy, and set clear and effective incentive and disciplinary policies?	V V V V		(1) The Company has established the Corporate Social Responsibility (CSR) Code of Practice and pays close attention to the development and changes of international CSR systems. (2) The Company holds CSR training from time to time. (3) The CEO Office is the dedicated CSR unit responsible to propose and execute the CSR policies or systems. (4) The Company refers to the professional salary surveys, integrates employee appraisal with CSR policy, and implements the performance evaluation systems and incentive and disciplinary policies on a regular basis.	None. None. None. None.
2. Environmentally Sustainable Development (1) Is the Company committed to improving resource efficiency and to the use of renewable materials with low environmental impact? (2) Has the Company set an Environmental management system designed from its industry	V V		(1) The Group adopts the ERP system and electronic approval system to reduce printed mails and official letters. The messages and policies are announced via E-mail to reduce paper consumption. (2) The Company mainly provides customers with imagingsolutions,which	None. None.

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Assessment Item			Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
characteristics?			cause no waste or pollution. All products are manufactured and sold in accordance with environmental laws and regulations. In addition to obtaining ISO certification, the Company is the green partner of its customers.
(3) Does the Company track the impact of climate change on operations, carry out greenhouse gas inventories, and set energy conservation and greenhouse gas reduction strategy	V		(3) The Company implements energy-saving policies and green procurement voluntarily and continuously pays close attention to its impact on environmental changes and sets up strategies for environmental protection.	None.
3. Promotion of Social Welfare (1) Does the Company set policies and procedures in compliance with regulations and internationally recognized human rights principles? (2) Has the Company established appropriately managed employee appeal procedures? (3) Does the Company provide employees with a safe and healthy working environment, with regular safety and health training?	V V V		(1) The Company promotes policies, communicates with employees openly, and abides by labor-related laws and regulations to protect employees’ rights and interests. (2)The employee mailbox is set up as a channel of communication (HRM@altek.com.tw) between the Company and employees. (3)The Company holds the employee health check, occupational safety and health seminars, and fire management training annually to improve the safety and health performance. The Company also organizes various training programs to improve employees’	None. None. None.

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Assessment Item			Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			response to emergency and awareness of occupational safety.
(4) Has the Company established a mechanism for regular communication with employees and use reasonable measures to notify employees of operational changes which may cause significant impact to employees? (5) Has the Company established effective career development training plans? (6) Has the Company set polices and consumer appeal procedures in its R&D, purchasing, production, operations, and service processes? (7) Does the Company follow regulations and international standards in the marketing and labelling of its products and services?	V V V V		(4)The Company has established the Working Rules based on the Labor Standards Act and reported to the Science Park Bureau. The Company also holds employee communication meetings from time to time to facilitate communication. Subsidiaries in mainland China have established mechanisms for communication with employees based on local laws and labor contracts. (5)The Company has set up the complete career development training system, such as the annual training plan that contains the development priorities and the organization’s focuses, to maximize the effect of training for individuals, business operations, and the organization. (6)The Customer Service Department has been established to provide immediate services for customers. (7)As the Company’s customers are international manufacturers, the Company provides products and services in accordance with related international regulations and standards.	None. None. None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(8) Does the company evaluate environmental and social track records before engaging with potential suppliers? (9) Does the Company’s contracts with major suppliers include termination clauses if they violate CSR policy and cause significant environmental and social impact?	V V		(8)Under the same conditions of the transactions, the Company selects suppliers fulfilling environmental protection and social responsibilities. (9)According to the Supplier Management Procedures and the Regulations Governing Management of Environmental Substances, the Company requests its partners to abide by related international laws and regulations, the requirements of the world’s top manufacturers (RoHS, REACH, and GP), and the commitment to corporate social responsibility, so as to facilitate environmental protection, labor rights and ethics, health and safety, risk management, and the code of ethics.	None. None.
4. Enhanced Information Disclosure Does the Company disclose relevant and reliable CSR information on its website and the Taiwan Stock Exchange website?	V		The Company has disclosed information on business and financial affairs and corporate activities on its website from time to time.	None.
5. If the company has established its corporate social responsibility code of practice according to “Listed Companies Corporate Social Responsibility Code of Practice,” please describe the operational status and differences. The Company has established the Corporate Social Responsibility (CSR) Code of Practice and has disclosed the Code on the website. We will implement the corporate social responsibility gradually to promote economic, social, and environmental balance and development.
6. Other important information to facilitate better understanding of the company’s implementation of corporate social responsibility: Corporate social responsibility (CSR) is the combination of economic, legal, and ethical responsibilities. Upholding the business philosophy of integrity, the Company values human rights and employees’ rights, improves financial disclosure and transparency, enhances communication with stakeholders, protects consumers’ rights, maintains fair competition, and strengthen anti-bribery and anti-corruption practice. The Company also establishes the Altek Charity Fund to care for the socially disadvantaged.

1. Other important information to facilitate better understanding of the company’s implementation of corporate social responsibility:

2. Corporate social responsibility (CSR) is the combination of economic, legal, and ethical responsibilities. Upholding the business philosophy of integrity, the Company values human rights and employees’ rights, improves financial disclosure and transparency, enhances communication with stakeholders, protects consumers’ rights, maintains fair competition, and strengthen anti-bribery and anti-corruption practice. The Company also establishes the Altek Charity Fund to care for the socially disadvantaged.

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Deviations from “the Corporate Social Implementation Status Responsibility Assessment Item Best-Practice Principles for TWSE/TPEx Listed Yes No Summary Companies” and Reasons

1. Other information regarding “Corporate Responsibility Report ” which is verified by certifying bodies: The Company has obtained the following certification:  ISO9001  ISO14001  ISO13485  OHSAS1800  ISO/TS16949  Sony Green Partner Certification

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• A. Developing the Sustainable Environment

• (1) The environmental safety and health unit is responsible to promote the Company’s environmental protection and the safety and health management.

• (2) Taking measures for environmental and health management, the Company aims to maintain a comfortable, healthy, and safe workplace in accordance with related safety and health policies.

• (3) The Company reviews the legal compliance regularly in accordance with waste management regulations.

• (4) The Company implements energy-saving and carbon reduction measures to reduce GHG emissions.

• (5) The Company, grows plants, takes utility-saving measures throughout the office, and implements waste recycling and environmentally-friendly tableware to fulfill its social responsibility.

responsibility.
Item	Number of Dedicated Employees	Content of Work
Environment, safety and health management	2	1. Maintain the office environment (cleaning, disinfection, and pest control). 2. Carry out the inspection of the office environment to maintain a healthy and safe workplace; report the workplace monitoring plan and result based on the requirements of the central competent authorities.
Waste management	2	1. Entrust qualified waste handling companies to handle general waste through incineration. 2. Entrust qualified waste handling institutions to remove and handle hazardous business waste. 3. Periodically report general and hazardous business waste online (output, removal, disposal, and temporary storage)based on the regulations.
Energy-saving and carbon reduction management		1. Promote utility saving, waste reduction, and recycling to fulfill environmental protection and energy-saving and carbon reduction policies. 2. Promote electronic documents and LED lighting to meet the functional needs and the energy-saving policy. 3. Encourage employees to take public transportation to save energy. 4. Adopt green land and grow plants to respond to environmentalprotection.

• (6) Request suppliers to set up the environment, safety and health management systems and audit their implementation and effectiveness from time to time.

• (7) As a member of the R&D industry, the Company produces products without air pollution or wastewater emissions. Electronic components, plastic chassis, and waste circuit boards generated in few assembling tests are handled in accordance with waste handling principles and related environmental regulations.

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CO2 or GHG Emission over the Past Two Years

Carbon Emission Unit: KG(K) 1,154 1,171 2015 2016

• (8) To reduce carbon emissions and to provide a comfortable workplace, the Company grows plants in the office building, takes energy-saving and carbon reduction measures, saves water resources, implements waste recycling, and promotes environmentally-friendly tableware.

• (9) Workplace and occupational safety and health promotion

• a. The employee health check is carried out every year.

• b. Physicians hold health seminars and provide consultancy every month.

• c. The Company maintains a safe workplace in accordance with related fire regulations and holds fire training and fire drills on a regular basis.

• d. The Company has set up the emergency response team and the first-aid team, which are responsible to facilitate administrative support and obtain first-aid resources of the science park, to respond to major disasters and reduce losses.

• e. The Company carries out the inspection on a regular basis to maintain office and workplace safety.

• f. The Company has set up the Environment, and Safety and Health Code of Practice to prevent occupational disasters, safeguard employees’ safety and health, and maintain the normal operation of the workplace, and further achieve corporate sustainability.

• g. The Company carries out the facility check periodically based on the Occupational Safety and Health Act and the Safety and Health Code of Practice, such as electrical equipment, passenger and cargo lifts, air conditioning, drinking fountains, official vehicles, and fire systems.

• h. The security, access control and monitoring system are available at the factory for 24 hours.

• i. The Company has set up the fire protection plan and the emergency response plan, specifying the responsibilities of employees and units at all levels, to carry out the fire protection training at least twice every year as well as the CPR training.

• j. The Company implements cleaning, disinfection, and garbage classification to avoid the growth of mosquitos and bacteria.

• k. The Company carries out the disinfection once every quarter at the garbage storage, pantry, and kitchen; filters of drinking fountains are replaced once every month and the quality test is performed quarterly.

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• l. The Company has set up the contractor management regulations, which specify that contractors are required to participate in related training programs or seminars, receive the notification of any hazardous factors at workplaces before construction, and sign the Construction Safety and Health Declaration and Commitment.

B. Altek Charity Fund

Upholding the spirit of contributing to the society, the Company has established the Altek Charity Fund to promote children and youth welfare, elderly welfare, welfare for the disabled, women’s welfare, social relief, community development, social work, volunteers, and club development.

Since its establishment, the Altek Charity Fund has donated NT$3 million and hundreds of cameras to 80 institutions and thousands of beneficiaries.

• (1) Art and Social Education

• a. Art activities

In the Little Photographers event, Altek employees volunteered to teach children how to use the camera and keep the memory through digital imaging technology. The Altek Charity Fund sponsored Old Five Old Foundation to hold the smartphone photographer contest, “Silver Lining”, and the one-day imaging camp, which facilitated the interaction between the elderly and families.

• b. Social education activities

Striving for the information education in rural schools, the Altek Charity Fund donated cameras to Belize Information Education Volunteer Club and Tanzania Volunteer Club of National Tsing Hua University.

• (2) Human Care (Charity Donation)

• a. The Altek Charity Fund donated cameras and smartphones to Child Welfare League Foundation, Taiwan Fund for Children and Families, and Chinese Chidrenhome & Shelter Association.

• b. The Altek Charity Fund has sponsored the year-end charity activity held by cnYes for a long time. cnYes collects materials and donations and visits beneficiary institutions to deliver love.

• c. The Altek Charity Fund made donations to the Mustard Seed Mission and St. Anne’s Home to care for the disadvantaged groups.

• d. Emergency relief: The Altek Charity Fund made a donation to Social Affairs Bureau, Tainan City Government in response to 2016 Tainan Earthquake.

• (3) Sports activities

The Altek Charity Fund donated camera-embedded smartphones to the ACE National Tennis Tournament-Youth Class A.

• (4) Environmental protection

The Altek Charity Fund implemented recycling and adopted green land in Hsinchu Science Park.

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3.3.7 Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission

Supervisory Commission
Assessment Item		Implementation Status		Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
1. Establishment of Corporate Conduct and Ethics Policy and Implementation Measures (1) Does the company have bylaws and publicly available documents addressing its corporate conduct and ethics policy and measures, and the commitment regarding implementation of such policy from the Board of Directors and the management team? (2) Does the company establish relevant policies which are duly enforced to prevent unethical conduct and provide implementation procedures, guidelines, consequence of violation and complaint procedures in such policies?	V V		(1) The Board of Directors and management perform their duties in good faith based on integrity and honesty. The related policy or system will be established depending on business needs or laws or regulations. (2) Upholding integrity, transparency, and accountability, the Company has established good mechanisms for corporate governance and risk management for the purpose of creating a sustainable business environment. Departments and employees perform business activities in an ethical, fair and transparent way and in accordance with the Company Act, Securities and Exchange Act, Business Entity Accounting Act, and related internal control regulations or other laws related to business activities, reflecting their awareness of ethical corporate management.	None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(3) Does the company establish appropriate compliance measures for the business activities prescribed in paragraph 2, article 7 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and any other such activities associated with high risk of unethical conduct?	V		(3)The Company has established the Procedures for Acquisition or Disposal of Assets and the Procedures for Lending Funds to Other Parties and Endorsement & Guarantee against activities associated with high risks of unethical conduct. The accounting and internal control systems have also been established for internal auditors to check the compliance and prevent unethical conduct.	None.
2. Ethic Management Practice (1) Does the company assess the ethics records of whom it has business relationship with and include business conduct and ethics related clauses in the business contracts? (2) Does the company set up a unit which is dedicated to or tasked with promoting the company’s ethical standards and reports directly to the Board of Directors with periodical updates on relevant matters? (3) Does the company establish policies to prevent conflict of interests, provide appropriate communication and complaint channels and implement such policies properly?	V V V		(1) The Company performs such operations in accordance with related laws and regulations. (2) The CEO Office is the unit which is dedicated to or tasked with promoting the company’s ethical standards and reports directly to the Board of Directors with periodical updates on relevant matters. (3) The Company’s departments perform such operations based on their responsibilities and report to the head of the department through e-mail.	None. None. None.

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Assessment Item		Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(4) To implement relevant policies on ethical conducts, does the company establish effective accounting and internal control systems that are audited by internal auditors or CPA periodically? (5) Does the company provide internal and external ethical conduct training programs on a regular basis?	V V		(4) The Company has established effective accounting and internal control systems that are audited by internal auditors or CPA periodically. The internal audit results will be reported to the Board of Directors. (5) The Company provides training programs on its operating principles from time to time.	None. None.
3. Implementation of Complaint Procedures (1) Does the company establish specific complaint and reward procedures, set up conveniently accessible complaint channels, and designate responsible individuals to handle the complaint received? (2)Does the company establish standard operation procedures for investigating the complaints received and ensuring such complaints are handled in a confidential manner? (3)Does the company adopt proper measures to prevent a complainant from retaliation for his/her filinga	V V V		(1) Employees may report to the head of unit or CEO directly via e-mail. (2)The Company has set up a reporting mailbox and holds related documents and data confidential. If employees find any violation of ethical corporate management, they may report to supervisors and Audit Office. If the violation is verified to be true, violators will be punished in accordance with related internal polices or laws. (3)The Company holds the entire reporting procedures confidential to	None. None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
complaint?			prevent a complainant from retaliation for his/her filinga complaint.
4. Information Disclosure Does the company disclose its guidelines on business ethics as well as information about implementation of such guidelines on its website and Market Observation Post System (“MOPS”)?		V	The Company will disclose its guidelines on business ethics as well as information about implementation of such guidelines based on the business needs.	Disclose based on business needs.
5. If the company has established corporate governance policies based on TSE Corporate Conduct and Ethics Best Practice Principles, please describe any discrepancy between the policies and their implementation: The Company operates in good faith at all times. The Company will establish the code of best practice based on business needs.
6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices: As disclosed above.

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3.3.8 Corporate Governance Guidelines and Regulations

Major Internal Policies

Disclosed at

Article of Incorporation Rules and Procedures of Shareholders’ Meeting Rules for Election of Directors Rules and Procedures of Board of Director Meetings Procedures for Acquisition or Disposal of Assets Procedures for Lending Funds to Other Parties and Endorsement & Guarantee Procedures for Handling Material Inside Information Compensation Committee Charter Code of Best Practice Corporate Social Responsibility (CSR) Code of Practice Regulation of the Scope and Responsibilities of Independent Directors

Market Observation Post System/Corporate Governance: http://mops.twse.com.tw/mops/web/index The Company’s Website/Investors: http://www.altek.com.tw/zh-tw/home

3.3.9 Other Important Information Regarding Corporate Governance

The major stakeholders are listed based on the operational attributes: Employees, customers, suppliers, investors, and the media.

• A. Employees’ rights and care

• Based on the people-oriented management, the Company fully respects and cares for employees through providing employees’ benefits, training programs, and a better working environment; the pension system is implemented based on the Labor Pension Act and the Labor Standards Act to protect employees’ rights. The group insurance policies for employees and their family members are also planned. The employee health check is held on a regular basis.

• B. Investor relation

The investor relation unit is set up and its contact information is disclosed on the Company’s website. The investor relation unit is responsible to handle shareholders’ suggestions and respond to investors’ questions.

• C. Supplier relation

The Company maintains a good relationship with suppliers and take measures to reduce carbon emissions. According to the Supplier Management Procedures and the Regulations Governing Management of Environmental Substances, the Company requests its partners to abide by related international laws and regulations, the requirements of the world’s top manufacturers (RoHS, REACH, and GP), and the commitment to corporate social responsibility, so as to facilitate environmental protection, labor rights and ethics, health and safety, risk management, and the code of ethics.

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D. Stakeholders’ rights

The Company seeks to maintain a good relationship with stakeholders as well as protects their rights through a sound communication channel. The internal major information is managed by the responsible unit and person in charge. Stakeholders may express their opinions through the spokesperson mailbox set up by the Company to safeguard their rights.

• E. Training record of directors and supervisors in 2016: None.

• F. Liability Insurance for directors and supervisors

Insured	Insurance Company	Insured Amount	Period
All directors and supervisors	Insurance Company of North America	US$8 million	April 30, 2017~April 30, 2018

G. Managers’ participation in training courses on corporate governance in 2016: None.

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3.3.10 Internal Control Systems

A. Internal Control Declaration

Altek Corporation Internal Control Declaration

Date: March 27, 2017

The declaration of the internal control system from January 1, 2016 to December 31, 2016 is made below based on the result of self-inspection.

1. The Company acknowledges that establishing, implementing, and maintain the internal control system is the responsibility of the Company’s Board of Directors and management. The Company has established the internal control system for the purpose of properly assuring the achievements of operational efficacy and efficiency (including profits, performance, and guarantee of asset safety) and reporting that reflect reliability, timeliness, and transparency as well as compliance.

2. The internal control system has its congenital limitations; the effective internal control system, regardless how perfectly it is designed, may only provide proper assurance for the achievements of the above three goals; in addition, due to changes in the environment and the situation, the effectiveness of the internal control system may change as well. The Company’s internal control system is designed with a self-monitoring mechanism. Once a flaw is identified, the Company will take corrective actions immediately.

3. The Company determines whether the design and implementation of the internal control system are effective based on the items stipulated in the Regulations Governing Establishment of Internal Control Systems by Public Companies (the Regulations). Items adopted by the Regulations are five components of the internal control system based on the control process: 1. Control environment; 2. Risk assessment; 3. Control operation; 4. Information and communication; and 5. Monitoring operation. Each component contains several items. For more information on the foregoing items, please refer to the Regulations.

4. The Company has adopted the abovementioned items that determine the effectiveness of the design and implementation of the internal control system.

5. Based on the result of evaluation mentioned above, the design and implementation of the internal control system (including supervision and management of the Company’s subsidiaries) as of December 31, 2016, such as the level of achievement of operational efficacy and efficiency and reporting that reflect reliability, timeliness, and transparency as well as compliance, are considered effective and properly assure the achievement of the above goals.

6. The Declaration will constitute the major content of the Company’s annual report and prospectus and be disclosed. Any falseness or concealment of the abovementioned content will involve legal responsibilities stipulated in Articles 20, 32, 171, and 174 of the Securities and Exchange Act.

7. The Declaration has been approved by the Board of Directors on March 27, 2017. All attended directors agreed on the contents of the Declaration.

Altek Corporation

Chairman & CEO: Alex Hsia

B. CPA’s Audit Report on the Company’s Internal Contorl System to be disclosed: N/A.

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3.3.11 Punishments, Major Defects, and Improvements of Violation of the Company’s Internal Control System: None.

3.3.12 Major Resolutions of Shareholders’ Meeting and Board Meetings

A.Resolutions of 2016 general shareholders’ meeting:

Item	Major Resolutions	Implementation
1	Approval of the 2015 business report and financial statements.	Performed in accordance with relevant laws and regulations.
2	Approval of the distribution of retained earnings and capital reserve bycash.	Completed on October 21, 2016.
3	Approval of amendments to the Procedures for the Acquisition and Disposal of Assets.	Performed in accordance with the amended regulations.
4	Approval of private placement of common stock and domestic or foreign convertible bonds.	The Company did not perform the private placement, which will expire on June 16, 2017; the Board of Director resolved on May 5, 2017 that no private placement of securities will be performed in the remaining period.
5	Approval of Altek Semiconductor (Cayman) Co., Ltd.’s capital increase by cash.	Performed in accordance with relevant laws and regulations.
6	Ajustment in Altek Biotechnology’s investment structure and capital increase by cash.	Performed in accordance with relevant laws and regulations.
7	Election of the 7~~th~~term of independent directors.	Wen-Hsieh Lai was elected as an independent director.

B.Resolutions of 2016 board meeting:

Date	Major Resolutions
2016.06.17	1. Approval of appointment of Independent Director Wen-Hsieh Lai as a member of the 2nd Remuneration Committee. 2. Approval of appointment of VP Amy Yang as the head of accounting and finance.
2016.08.12	Approval of appointment of Manager Eva Liang as the head of internal audit.
2016.11.08	Approval of Altek Semiconductor (Cayman) Co., Ltd.’s capital increase by cash.
2017.03.27	1.Approval of appointment of VP Belle Liang as the head of finance and Senior Manager Seiko Chen as the head of accounting. 2.Approval of amendments to the Article of Incorporation. 3.Approval of amendments to the Procedures for Acquisition or Disposal of Assets. 4.Approval of amendments to the Procedures for Lending Funds to Other Parties and Endorsement & Guarantee. 5.Approval of amendments to the Rules for Election of Directors. 6.Approval of the election of directors for the the 8thterm. 7.Approval of amendments to the Rules and Procedures of Board of Director Meetings. 8.Approval of amendments to the Audit Committee Charter. 9.Approval of the 2016 business report and financial statements. 10.Approval of 2016 distribution of retained earnings. 11.11. Approval of assemblyof the 2017general shareholders’ meeting.
2017.05.05	1. Approval of Ying-Chih Hsieh, Ching-Chien Hu, and MORI SHOREI as candidates for independent directors of the 8thterm. 2. Approval of the short-form merger between the Company and its 100% owned Altek Autotronics. 3. Approval of termination of the private placement of common stock and domestic or foreign convertible bonds resolved in the 2016general shareholders’ meeting.

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• 3.3.13 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None.

• 3.3.14 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D

Title	Name	Date Effective	Date of Resignation/Dismissal	Reason for Resignation/Dismissal
Head of Accounting and Finance	Steve Shyr	2002.10.02	2016.06.17	Job adjustment
Head of Accounting and Finance	Amy Yang	2016.06.17	2017.1.25	Resignation
Head of Internal Audit	Steven Su	2006.03.14	2016.8.12	Job adjustment

3.4 Audit Fee

Unit: NT$ thousand

Accounting Firm	Name of CPA	Audit Fee	Non-audit Fee	Non-audit Fee	Non-audit Fee	Non-audit Fee	Non-audit Fee	Period Covered by CPA’s Audit
			System of Design	Company Registration	Human Resources	Others (Note)	Subtotal
Pricewaterhous eCoopers	Dian-Yi Lin	5,880	0	250	0	3,614	3,864	2016.01. 01~ 2016.12. 31
	Yun-Kuan Lin

Note: Consulting fee.

3.5 Replacement of CPA: N/A.

3.6 Audit Independence

The Company’s Chairman, President, Chief Financial Officer, or managers in charge of its finance and accounting operations did not hold any position in the Company’s independent auditing firm or its affiliates in 2016.

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• 3.7 Equity Transfer and Changes in Equity Pledge of Directors, Supervisors, Managers and Shareholders Holding More than 10% of the Shares

3.7.1 Changes in shareholdings of directors, supervisors, managers and major shareholders

Title	Name	2016	2016	2016.01.01~2017.04.18	2016.01.01~2017.04.18
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (D e c r e a s e)
Chairman & CEO	Alex Hsia	0	0	0	0
Director & SVP (Note1)	Yitsang International Co.,Ltd.	0	13,000,000	0	(6,500,000)
	Representative: SteveShyr	0	0	0	0
	Representative: David Lin	0	0	0	0
Director	Yitsang International Co.,Ltd.	0	13,000,000	0	(6,500,000)
	Representative: Simon Law	0	0	0	0
Director	Stan Hung	0	0	0	0
Director & SVP	Jason Lin	0	0	0	0
Independent Director	Jaime Tang	0	0	0	0
Independent Director	Wen-Hsieh Lai	0	0	0	0
Supervisor	Tin Liou	0	0	0	0
Supervisor	Amy Chien	0	0	0	0
Supervisor	Alex Liou	0	0	0	0
SVP (Note 2)	Doug Franz	0	0	0	0
VP	Rick Han	0	0	0	0
VP (Note 3)	Jack Lee	0	0	0	0
VP	Vincent Kao	0	0	0	0
VP	Morgan Chiua	(10,000)	0	0	0
VP	Kenny Li	0	0	0	0

Note 1: Yitsang International Co., Ltd. reappointed David Lin as Director on March 19, 2016. Note 2: Discharged on April 15, 2016.

Note 3: Discharged on April 15, 2016.

3.7.2 Shares Trading with Related Parties: None

3.7.3 Shares Pledge with Related Parties: None

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3.8 Relationship among the Top Ten Shareholders

			April 18, 2017	April 18, 2017	April 18, 2017	April 18, 2017	April 18, 2017	April 18, 2017	April 18, 2017
Name	Current Shareholding		Spouse’s/Minor’s Shareholding		Shareholding by Nominee Arrangement		Name and Relationship between the Company’s Top Ten Shareholders, or Spouses or Relatives within Two Degrees		Remark
	Shares	%	Shares	%	Shares	%	Name	Relationship
Tung-Hsin Investment Corp. Representative: Tong-Yi Chang	14,107,000	5.15	0	0.00	0	0.0 0	None	None
Yitsang International Co., Ltd. Representative: Yun-HsingLin	13,946,100	5.09	0	0.00	0	0.0 0	None	None
Hsiang-Wei Investment Corp. Representative: Kai-Tai Yen	11,966,090	4.37	0	0.00	0	0.0 0	None	None
Taiwan Life Insurance Co., Ltd. Representative: Ssu-Kuo Huang	5,840,000	2.13	0	0.00	0	0.0 0	None	None
KGI	3,836,758	1.40	0	0.00	0	0.0 0	None	None
Altek Employees’ RSA Trust Account	3,655,000	1.33	0	0.00	0	0.0 0	None	None
Unique Technology Co.Ltd. Representative： Yu LongChang	3,097,304	1.13	0	0.00	0	0.0 0	None	None
CTBC Bank Representative: Chao-Chin Tong	2,560,000	0.93	0	0.00	0	0.0 0	None	None
Vanguard Total International Stock Index Fund a series of Vanguard Star Funds	2,489,353	0.91	0	0.00	0	0.0 0	None	None
Jin Joen International Investment Corporation Representative: Hsu-Chih Huang	1,800,000	0.66	0	0.00	0	0.0 0	None	None

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3.9 Ownership of Shares in Affiliated Enterprises

	December 31,2016	December 31,2016	December 31,2016	December 31,2016	December 31,2016	December 31,2016
Affiliated Enterprises	Ownership by the Company		Direct or Indirect Ownership by Directors, Supervisors, Managers		Total Ownership
	Shares	%	Shares	%	Shares	%
Altek International Investment Co., Ltd.	92,726,249	100.00	0	0.00	92,726,249	100.00
Altek Lab Inc.	0	0.00	(Note 1)	100.00	(Note 1)	100.00
Altek Imaging Technology (Cayman) Co., Ltd.	0	0.00	15,092,410	100.00	15,092,410	100.00
Altek (Kunshan) Precision Co., Ltd.	0	0.00	(Note 2)	100.00	(Note 2)	100.00
Leading Tech. Co., Ltd.	0	0.00	45,000,000	100.00	45,000,000	100.00
Altek (Kunshan) Co., Ltd.	0	0.00	(Note 2)	100.00	(Note 2)	100.00
Toptek Investment Cayman Co., Ltd.	0	0.00	1,400,000	100.00	1,400,000	100.00
Toptek Electronics (Kunshan) Co., Ltd.	0	0.00	(Note 2)	100.00	(Note 2)	100.00
Altek Trading (Cayman) Co., Ltd.	0	0.00	8,500,000	100.00	8,500,000	100.00
Altek Trading(Shanghai) Co., Ltd.	0	0.00	(Note 2)	100.00	(Note 2)	100.00
Altek Semiconductor (Cayman) Co., Ltd.	0	0.00	20,000,000	71.43	20,000,000	71.43
Altek Semiconductor Corp.	0	0.00	20,000,000	71.43	20,000,000	71.43
Altek Optical (Cayman) Co., Ltd.	0	0.00	8,864,432	100.00	8,864,432	100.00
Altek Optical Technology (Cayman) Co., Ltd.	0	0.00	15,000,000	100.00	15,000,000	100.00
Altek (Kunshan) Optical Co., Ltd.	0	0.00	(Note 2)	100.00	(Note 2)	100.00
Altek Japan Corporation	1,000	100.00	0	0.00	1,000	100.00
Altek Investment Co., Ltd.	5,000,000	100.00	0	0.00	5,000,000	100.00
Altek Autotronics Corp.	21,775,200	90.73	2,224,800	9.27	24,000,000	100.00
Altek International Holding Co., Ltd.	12,865,921	100.00	0	0.00	12,865,921	100.00
Altek Biotechnology (Cayman) Co., Ltd.	0	0.00	12,865,921	100.00	12,865,921	100.00
Altek Biotechnology Corp.	0	0.00	40,100,000	100.00	40,100,000	100.00

Note 1: 9,311,875 common shares and 2,000,000 preferred stocks.

Note 2: No share was issued.

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IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

Unit: Share; NT$ thousand

						Unit: Share;NT$thousand	Unit: Share;NT$thousand	Unit: Share;NT$thousand
Month/ Year	Par Value	Authorized Capital		Paid-in Capital		Remark
		Shares	Amount	Shares	Amount	Source of Capital	Capital Increased by Assets Other than Cash	Other
2014.02	10	500,000,000	5,000,000	385,265,321	3,852,653	Cancellation of TreasuryStock	None	-
2014.08	10	500,000,000	5,000,000	394,158,321	3,941,583	Execution of ESOP	None	-
2014.10	10	500,000,000	5,000,000	275,910,825	2,759,108	Cash Capital Reduction	None	-
2014.10	10	500,000,000	5,000,000	270,135,825	2,701,358	Cancellation of Treasury Stock	None	-
2015.05	10	500,000,000	5,000,000	270,253,825	2,702,538	Execution of ESOP	None	-
2015.12	10	500,000,000	5,000,000	272,693,825	2,726,938	Issuance of RSA	None	-
2016.03	10	500,000,000	5,000,000	273,883,825	2,738,838	Issuance of RSA	None	-
2016.05	10	500,000,000	5,000,000	274,253,825	2,742,538	Issuance of RSA	None
2016.08	10	500,000,000	5,000,000	274,063,825	2,740,638	Cancellation of Issued RSA	None
106.04 2017.04	10	500,000,000	5,000,000	273,908,825	2,739,088	Cancellation of Issued RSA	None

April 18, 2017; unit: Share

				April 18, 2017; unit: Share
Type of Share	Authorized Capital			Remark
	Issued Shares	Un-issued Shares	Total Shares
Common shares	273,908,825	226,091,175	500,000,000	Listed stock

Information for Shelf Registration: N/A.

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4.1.2 Status of Shareholders

		April 18,2017	April 18,2017	April 18,2017	April 18,2017	April 18,2017
Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign nstitutions & Natural Persons	Total
Number of Shareholders	1	6	88	41,477	115	41,687
Shareholding (shares)	34	8,505,700	55,901,829	181,708,540	27,792,722	273,908,825
Percentage	0.00	3.10	20.41	66.34	10.15	100.00

4.1.3 Shareholding Distribution Status

A. Common Shares

April 18, 2017

A. Common Shares			April 18,2017
Class of Shareholding	Number of Shareholders	Shareholding (Shares)	Percentage
1～ 999	18,928	4,104,508	1.50%
1,000～ 5,000	16,257	37,059,670	13.53%
5,001～ 10,000	3,370	26,443,766	9.65%
10,001～ 15,000	1028	13,085,846	4.78%
15,001～ 20,000	614	11,377,082	4.15%
20,001～ 30,000	520	13,212,197	4.82%
30,001～ 50,000	431	17,281,900	6.31%
50,001～100,000	301	21,755,806	7.94%
100,001～200,000	143	20,068,050	7.33%
200,001～400,000	49	13,916,918	5.08%
400,001～600,000	19	9,242,665	3.37%
600,001～800,000	4	2,725,522	1.00%
800,001～1,000,000	2	1,845,272	0.67%
1,000,001 or above	21	81,789,623	29.86%
Total	41,687	273,908,825	100.00

B. Preferred Shares: None.

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4.1.4 List of Major Shareholders

April 18,2017	April 18,2017	April 18,2017
Shareholder's Name	Shareholding (Shares)	Percentage
Tung-Hsin Investment Corp.	14,107,000	5.15
Yitsang International Co., Ltd.	13,946,100	5.09
Hsiang-Wei Investment Corp.	11,966,090	4.37
Taiwan Life Insurance Co., Ltd.	5,840,000	2.13
KGI	3,836,758	1.4
Altek Employees’ RSA Trust Account	3,655,000	1.33
Unique Technology Co.Ltd.	3,097,304	1.13
CTBC Bank	2,560,000	0.93
Vanguard Total International Stock Index Fund a series of Vanguard Star Funds	2,489,353	0.91
Jin Joen International Investment Corporation	1,800,000	0.66

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

Unit: NT$

					Unit: NT$
Item	Year		2015	2016	2017 (as of March 31)
Market Price per Share	Highest Market Price		40.60	31.1	27.3
	Lowest Market Price		17.75	19.05	22.1
	Average Market Price		30.20	23.41	24.49
Net Worth per Share	Before Distribution		34.93	32.52	31.16
	After Distribution		33.94	(Note 1)	(Note 1)
Earnings per Share	Weighted Average Shares (thousand shares)		269,237	265,840	265,840
	Earnings Per Share		1.02	0.20	0.12
Dividends per Share	Cash Dividends		0.9952	(Note 1)	－
	Stock Dividends	Earnings	－	－	－
		Capital Reserve	－	－	－
	Accumulated Undistributed Dividends		－	－	－
Return on Investment	Price/Earnings Ratio (Note 2)		30.27	29.26	－
	Price/Dividend Ratio (Note 3)		30.35	(Note 1)	－
	Cash Dividend Yield Rate (Note 4)		3.30	(Note 1)	－

Note 1: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Note 2: Price / Earnings Ratio = Average Market Price / Earnings per Share.

Note 3: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share.

Note 4: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price.

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• 4.1.6 Dividend Policy and Implementation Status

• A. Dividend Policy

Based on the Article of Incorporation, the Company shall have ten percent (10%) to twenty percent (20%) of profit of the current year distributable as employees' compensation and not more than two (2%) of profit of the current year distributable as directors’ remuneration. However, the company's accumulated losses shall have been covered. The Company may have the profit distributable as employees' compensation in the form of shares or in cash. The employees to distribute the compensation include the staffs in the affiliate companies which the Company owns more than fifty percent (50%) of the shares.

Profit of the current year mentioned in the first paragraph shall be profit before tax and employees’ compensation and directors’ remuneration. The Company may, by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, have the profit distributable as employees' compensation and directors’ remuneration; and in addition thereto a report of such distribution shall be submitted to the shareholders' meeting.

The amount of dividend distributed shall consider the surplus earnings of the year, the accumulated surplus earnings of the previous years and the capital structure as well as the future operation demand. The policy of dividend distribution will take funding demand and dilution of surplus earnings per share into account, and both the stock dividend as well as the cash dividend will be distributed together. The ratio of cash dividend distributed will not be lower than twenty percent (20%) of the total dividend distributed of the year. However, the actual amount of distribution will be determined by shareholders in the shareholders’’ meeting.

B. Proposed Distribution of Dividend

		Unit: NT$	Unit: NT$	Unit: NT$
Year	Date for Board of Directors to Approve Distribution of Dividend	Shareholders’ Meeting
		Cash Dividend	Capital Surplus (in Cash)	Share Dividend
2016	2017.03.27	NT$215,595,882 (NT$0.8 per share)	(NT$0 per share)	(NT$0 per share)

Note: The ratio of distribution per share is calculated based on the outstanding stock on March 27[th] , 2017. It is 269,494,852 shares in total, and the 4,413,973 treasury stock has already been deducted. The distribution will be implemented subject to relevant rules after the resolution of the general shareholders’ meeting on June 16th, 2017.

• C. Major Change in the Dividend Policy: None.

• 4.1.7 Impact of Stock Dividend on Business Performance and Earnings per Share: N/A.

4.1.8 Employee Bonus and Directors' and Supervisors' Remuneration

• A. Information Relating to Employee Bonus and Directors’ and Supervisors’ Remuneration in the Articles of Incorporation

• (1) 10 %~20% as a bonus for employees.

• (2) Not exceeding 2 % as compensation for directors and supervisors.

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B. The Estimated Basis for Calculating the Employee Bonus and Directors’ and Supervisors’ Remuneration: None.

C. Profit Distribution for Employee Bonus and Directors’ and Supervisors’

Remuneration for 2016 Approved in Board of Directors Meeting

(1) The proposal of retained earnings distribution has been approved by the Board of Directors on March 27th, 2017, and the compensation for the employees is NT$13,383,318 and the compensation for the directors and supervisors is NT$1,784,442. It’s proposed to distribute the compensation by cash after the approval of the general shareholders’ meeting. The proposed amount of the compensation for the employees, directors and supervisors is the same as the estimated amount of recognition fees of the year.

(2) The Ratio of Employees’ Remuneration by Stock to Net Income after Tax and Employees’ Remuneration in Individual Financial Statements: N/A.

D. Information of 2015 Earnings Set Aside for Employee Bonus and Directors’ and Supervisors’ Remuneration: None.

4.1.9 Buyback of Treasury Stock

There are no buying back treasury shares in 2016. Until the date of the Company annual report, the Company bought back total treasury shares 4,413,973 shares, and also it accumulates 1.61% of the Company outstanding shares.

4.2 Bonds: None.

4.3 Preferred Stock: None.

4.4 Global Depository Receipts: None.

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4.5 Employee Stock Options

4.5.1 Issuance of Employee Stock Options

April 18, 2017; unit: NT$	April 18, 2017; unit: NT$	April 18, 2017; unit: NT$	April 18, 2017; unit: NT$	April 18, 2017; unit: NT$	April 18, 2017; unit: NT$
Type of Stock Option	2ndTranche			3rdTranche
Approval Date	2008.04.28			2011.06.08
Issue Date	2008.06.13	2008.10.31	2009.03.23	2011.10.28	2012.03.21
Units Issued (Thousand Shares)	8,000	1,000	3,000	3,000	3,000
Shares of Stock Options to Be Issued as a Percentage of OutstandingShares(Note 1)	2.06%	0.26%	0.77%	0.77%	0.76%
Duration	2008.06.13~ 2017.12.31	2008.10.31~ 2017.12.31	2009.03.23~ 2017.12.31	2011.10.28~ 2020.12.31	2012.03.21~ 2020.12.31
Conversion Measures	Issuing new shares	Issuing new shares	Issuing new shares	Issuing new shares	Issuing new shares
Conditional Conversion Periods and Percentages	2 years after issued: could exercise 40% of total outstanding shares; 3 years after issued: could exercise 70% of total outstanding shares; 4years after issued: could exercise 100% of total outstandingshares;
Converted Shares (Thousand Shares)	5,933	684	2,272	280	1,054
Exercised Amount (NT$Thousand)	139,099	15,288	43,360	6,748	26,441
Number of Shares Yet to Be Converted(Thousand Shares)	1,400	30	0	2,320	1,405
Adjusted Exercise Price for Those who Have Yet to Exercise Their Rights(NT$)	30.6	25.6	24.2	31.7	31.5
Unexercised Shares as a Percentage of Total Issued Shares (Note 2)	0.51%	0.01%	0.00%	0.85%	0.51%
Impact on Shareholders’ Equity	Attract and retain professionals, improve employees’ coherence and sense of belonging, and create the interests of the Company and shareholders.

Note 1: Calculated according to issued shares on date of issuing the ESOP.

Note 2: Calculated according to issued shares on April 18, 2017 (273,908,825 shares).

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4.5.2 List of Executives Receiving Employee Stock Options and the Top Ten Employees with Stock Options

April 18, 2017; unit: thousand shares; NT$ thousand

Title	Title	Name	Number of Stock Options	Stock Options as a Percentage of Shares Issued (Note 1)	Exercised	Exercised	Exercised	Exercised	Unexercised	Unexercised	Unexercised	Unexercised
					Number of Shares Converte d	Strike Price (NT$) (Note 3)	Amount (NT$ Thousand)	Converted Shares as a Percentage of Shares Issued (Note 1)	Number of Shares Converted	Strike Price (NT$) (Note 4)	Amount (NT$Thousand)	Converted Shares as a Percentage of Shares Issued (Note 1)
Management	CEO	Alex Hsia	3,749	1.37	785	21.2~29.5	19,170	0.29	2,964	24.2~31.7	92,598	1.08
	SVP	Jason Lin
	SVP	Steve Shyr
	SVP	David Lin
	SVP	Doug Franz (resigned)
	VP	Rick Han
	VP	Jack Lee (resigned)
	VP	Vincent Kao
	VP	Morgan Chiu
	VP	Kenny Li
Other	Employee	(Note 2)	1,952	0.71	1,277	21.2~26.9	30,511	0.47	596	24.2~31.5	18,602	0.22

Note 1: Calculated according to issued shares on April 18, 2017 (273,908,825 shares). (Issued shares are based on those listed in the registration change.)

Note 2: Top ten employees with stock options are: Yong-Fei Chien, Hung-Long Chou, Kuo-Chang Chen, Shui-Lin Chen, Chun-Yen Chen, Chin-Cheng Chang, Yo-Pang Fu (resigned), Chia-Ming Hsueh , Chin-Kuo Lee, and Cheng-Tao Yang, (Arrange in last name’s alphabetical order)

Note 3: The subscription price upon execution shall be disclosed.

Note 4: The subscription price adjusted based on the issue regulations shall be disclosed.

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4.6 Issuance of New Restricted Employee Shares

April 18, 2017; unit: NT$

	April 18, 2017; unit: NT$	April 18, 2017; unit: NT$	April 18, 2017; unit: NT$	April 18, 2017; unit: NT$
Type of New Restricted Employee Shares	The first Tranche of 2015
Date of Effective Registration	2015.06.22
Issue Date	2015.12.08	2016.03.21	2016.05.05
Number of New Restricted Employee Shares Issued(Thousand Shares)	2,440	1,190	370
Issued Price (NT$)	0	0	0
New Restricted Employee Shares as a Percentage of Shares Issued(Note 1)	0.89%	0.43%	0.14%
Vesting Conditions of New Restricted Employee Shares	If the employees are still on duty and the personal performance of the year are at least B plus or more than B plus as well as the employee has followed the relevant working rules of the Company, the ratio for the employees to acquire new restricted employee shares is as follows: One year after issuance: 0% of acquired shares; Two years after issuance: 50% of acquired shares; Threeyears after issuance: 100% of acquired shares.
Restricted Rights of New Restricted Employee Shares	1. If the employees have acquired new restricted employee shares before the fulfillment of the conditions, new restricted employee shares are not able to sell, pledge, transfer, offer as a gift, set the mortgage or dispose in some other ways. 2. The attendance of shareholders’ meeting, voting rights and some other rights of shareholders will be managed bythe trust custodian institution.
Custody Status of New Restricted Employee Shares	Trust custodian institution will take care of the shares before the fulfillment of duration mentioned above.
Measures to be TakenWhen Vesting Conditions Are Not Met	Except the trust custodian limitation mentioned above, the rights of the new restricted employee shares are all the same as the issued common shares of the Company.
Number of New Restricted Employee Shares that Have Been Redeemed or Bought Back(Thousand Shares)	345	0		0
Number of Released New Restricted Employee Shares(Thousand Shares)	0	0		0
Number of Unreleased New Restricted Shares(Thousand Shares)	2,095	1,190		370
Ratio of Unreleased New Restricted Shares to Total Issued Shares (%) (Note 1)	0.76%	0.43%		0.14%
Impact on Possible Dilution of Shareholdings	If new restricted employee shares have been fully issued, it’s estimated to enhance 0.89% of the capital stock base on the current outstanding stock. Since the conditions are fulfilled separately, the effect of dilution is verylimited.	If new restricted employee shares have been fully issued, it’s estimated to enhance 0.43% of the capital stock base on the current outstanding stock. Since the conditions are fulfilled separately, the effect of dilution is very limited.		If new restricted employee shares have been fully issued, it’s estimated to enhance 0.14% of the capital stock base on the current outstanding stock. Since the conditions are fulfilled separately, the effect of dilution is very limited.

Note 1: Calculated according to issued shares on April 18, 2017 (273,908,825 shares).

56

List of Executives Receiving New Restricted Employee Shares and the Top Ten Employees with New Restricted Employee Shares

					April 18,2017;unit: Thousand shares;NT$thousand	April 18,2017;unit: Thousand shares;NT$thousand	April 18,2017;unit: Thousand shares;NT$thousand	April 18,2017;unit: Thousand shares;NT$thousand	April 18,2017;unit: Thousand shares;NT$thousand	April 18,2017;unit: Thousand shares;NT$thousand	April 18,2017;unit: Thousand shares;NT$thousand	April 18,2017;unit: Thousand shares;NT$thousand
	Title	Name	Number of New Restricted Shares	New Restricted Shares as a Percentage of Shares Issued (Note 1)	Released				Unreleased
					Number of Shares	Issed Price (NT$)	Amount (NT$ Thousands)	Released Restricted Shares as a Percentage of Shares Issued (Note 1)	Number of Shares	Issed Price (NT$)	Amount (NT$ Thousan ds)	Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1)
Management (Note 2)	CEO	Alex Hsia	1,130	0.41%	0	0	0	0	1,130	0	0	0.41%
	SVP	Jason Lin
	SVP	David Lin
	VP	Rick Han
	VP	Vincent Kao
	VP	Morgan Chiu
	VP	Kenny Li
Other	Employee	(Note 3)	770	0.28%	0	0	0	0	770	0	0	0.28%

Note 1: Calculated according to issued shares on April 18, 2017 (273,908,825 shares). (Issued shares are based on those listed in the registration change.) Note 2: The management with new restricted employee shares are listed above.

Note 3: Top ten employees with new restricted employee shares are:, Hung-Long Chou, Kuo-Chang Chen, Shui-Lin Chen, Shih-Chang Chia, Yong-Fei Chien, Kuo-Chun Hung, Chia-Ming Hsueh, Chin-Kuo Lee, Cheng-Tao Yang, and Yung-Neng Yu.(Arrange in last name’s alphabetical order)

4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions: None.

4.8 Financing Plans and Implementation: None

57

V. Operational Highlights

5.1 Business Activities

5.1.1 Business Scope

A. Main Areas of Business Operations

The Company’s main businesses are research, development, manufacturing and sale of digital imaging-related applications, as well as import and export associated with above-mentioned businesses.

Due to the significant decrease in the overall market demand for digital cameras caused by the emergence of smartphones, the Company has actively transformed itself into a digital imaging solution provider. With advanced technology in digital image processing, optical and image chip design, the Company provides customers with products and services including ISP (Image Signal Processor), software, IP licensing, camera modules, and so on. In addition to being a supply chain of global smartphone manufacturers, the Company has applied digital imaging technologies to medical and automotive markets.

B. Revenue Distribution

. Revenue Distribution	. Revenue Distribution	. Revenue Distribution
Unit: NT$ thousand
Major Divisions	Total Sales in Year 2016	(%) of Sales
Digital Imaging-related Applications	11,577,046	100.00%

Note: Consolidated base with IFRS.

C. New Product Development

• (1) Dual-camera module and computing software (fusion, zooming…)

• (2) ISP (in-depth computing, 3D-sensing chips…)

• (3) Digital imaging products (360-degree camera, AR/VR camera, surveillance camera…)

• (4) Diabetes care products (glucose meter, insulin delivery system..)

• (5) Advanced driving assistance system (dual-camera module and computing software)

5.1.2 Industry Overview

The Company’s main products are the smartphone imaging solution (including digital image processing chip, dual-camera module and software) and the digital imaging system products. The industry overview is described below.

• A. Current Status and Development

• (1) Smartphone

Since Apple Inc. launched the first-generation iPhone in 2007, the development of smartphones has prospered and became the indispensable consumer electronics products for most of consumers. In addition to communication, a variety of other applications and functions are also promoted. More types of imaging requirements are needed by consumers, such as audio/video streaming, social networks, dual-camera photography, and augmented reality (AR). According to the statistics conducted by Strategy Analytics, the number of smartphones delivered worldwide in

58

2015 was 1.4 billion and is expected to reach 1.9 billion in 2020.

• (2) Digital imaging system

Due to the growth of smartphones, the sales of traditional digital cameras continued to decline. Benefiting from its higher telephoto rate and larger photosensitive components, the traditional digital camera still attracts some users in need of high imaging quality. It is estimated that the demands in the next few years may still maintain the bottom line. On the other hand, other models of camera, such as sports camera and driving recorder, are expected to grow. With the ongoing development of IoT, Big Data, or human-machine interface, the demand for visual aids and machine vision will increase; with the popularity of the social media, consumers share photos and videos via social media, leading to the new demand for camera applications, such as 360-degree panoramic view and webcast. This new type of application will continue to create a new demand in the camera market.

• B. Relevance of Upstream, Midstream, and Downstream

The Company has transformed itself from the digital camera ODM to a digital imaging solution provider. The following statement will explain that relevance of upstream, midstream, and downstream in the field of digital camera with smartphone, digital imaging chips.

(1) Smartphone

phone
Upstream		Midstream		Downstream
Sensor, lens, and flex board IC：ISP、Memory、USB LCD, chassis, passive components, connectors, electroacoustic products,		Camera module factory and computing software developer		Smartphone system manufacturer
batteries, antennas

The Company’s products cover digital imaging chips (upstream) and camera modules and computing software (midstream). Digital imaging chips are within the scope of the IC industry, which can be divided into IC designer (upstream), IC foundry (midstream), and IC packaging and testing provider (downstream). The IC industry mainly adopts the business model of division of work. After IC designers complete the design, IC foundry will produce IC. The drawing designed by IC designers will be converted into a mask and then etched in a wafer. After the wafer is produced, it will be transported to the IC packaging provider to be cut into chips and packaged. Each wafer may produce hundreds or thousands of chips and each chip will be tested to ensure its completeness. After the chips are tested and verified to be complete, then they are sold in the market.

==> picture [394 x 74] intentionally omitted <==

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

Upstream Midstream Downstream
I P design/IC IC
IC/wafer IC IC
design IC design Packaging
Foundry IP manufacturing & testing Module channel
----- End of picture text -----

59

(2) Digital imaging system

Digital imaging system
Upstream Optical lens Image sensor Digital imaging processing chip LED screen Memory	Midstream Digital imaging system setup	Downstream
		Brand operator Channel operator Consumer

C. Product Development Trend

• (1) Smartphone

To meet customers’ needs, the specifications and functions of smartphones continue to advance, such as CPU computing capacity, and a variety of multi-media functions are promoted, such as enlarged screen, increased screen resolution and camera pixel, and fast focus. In addition to Wi-Fi, GPS, and Bluetooth, wireless communication functions also contain NFC and wireless charge. Apple Inc. launched a dual-camera smartphone, featuring image quality comparable to the single-lens reflex camera, for the first time in 2016, driving the growth of dual-camera smartphones. It is expected that Apple Inc. will continue to promote the dual-lens and 3D sensing functions that can be applied to face recognition and augmented reality (AR) in 2017, and will attract other manufacturers to follow. Except for the photo and social network sharing in the future, smartphones will become very close to our life.

• (2) Digital imaging system

As most cameras of smartphones have fixed focuses, the basic need of digital cameras featuring high optical zooms and anti-shake will be maintained in the next few years. The waterproof and anti-shake digital camera has special functions that cannot be replaced by smartphones, so the demands will last for a while. In addition to traditional digital cameras, various derived products become more popular among consumers, such as smartphone-linked camera, sports camera, and camera featuring 360-degree panorama or webcast. Such type of new products may expand the applications of digital imaging and create another potential market for digital camera suppliers.

D. Industrial Competition

• (1) Smartphone

The Company provides smartphone consumers with the comprehensive digital imaging solution, including image processor, imaging software, IP authorization, and camera module, and the flexible imaging technology, with considerable uniqueness and an entry barrier in the market position.

In terms of digital processors, the major competitors are American and Japanese manufacturers. However, featuring the best price–performance ratio and perfect customized services, the Company’s digital processors are still competitive. In terms of camera modules, despite competition in Taiwan and mainland China, the imaging software technology and IP authorization, in addition to module hardware, offer better quality and differentiated functions (such as dual-camera module).

60

• (2) Digital camera

• According to the TSR’s report, the world’s top three consumer digital camera brands are Canon, Nikon, and Sony, followed by Samsung and Fujifilm. Domestic manufacturers operate based on the business model of ODM/OEM and major suppliers are Altek Corporation and Canon.

• E. Overall Economy and Countermeasures

As the life cycle of consumer electronics products becomes shorter with more intense industrial competition, only with excellent R&D technologies, product strategies responding to mainstream, and effectively executive management are the way to deal with those challenges.

5.1.3 Research and Development

• A. Research and Development Expenses

Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Item	2016	2017 (as of March 31)
Total Expense	1,033,082	244,044
% to Revenue	9%	9%

Note: Consolidated base with IFRS.

• B. Technologies or Products Developed

• (1) Dual-camera module and computing software (fast focus, refocus, bokeh, fusion…)

• (2) ISP (in-depth computing)

• (3) Glucose meter

• (4) Advanced driving assistance system and camera lens

• (5) Wearable camera (10-times autofocus applied to smartphones)

• C. Ongoing Research and Development Projects and Expenses

In addition to developing extended products, the Company will continue to pay attention to the industrial trend and invest in technologies and applications with potential for development. The research and development expense is expected to grow steadily, and if there is no significant change, the annual consolidated R&D expense accounts for 8% of the consolidated revenue. In terms of the smartphone imaging solution, the Company mainly develops cost-effective digital imaging processing chips, dual-camera modules featuring high pixel and special functions, and computing software.

In terms of the autotronic imaging solution, the Company mainly develops driver aids and safety monitoring systems, such as automotive dual-camera module.

In terms of the medical imaging solution, the Company develops blood glucose diagnosis and care and diagnostic imaging equipment.

In terms of cameras, the Company develops 360-degree cameras, AR/VR cameras, and safety control cameras. The future R&D plan and progress are described below:

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Unit: NT$ thousand

Ongoing Projects	Completed %	Expense to be Invested	Mass Production Date	Key Success Factors
Smartphone Image Solution	30%~100%	400,000～ 600,000	2017 Q2~ 2017 Q4	Customers’ product launch date
Advanced Driving Assistance System	70%	20,000～ 50,000	2017 Q4	Image identification, automotive supply chain, and customer verification
Insulin Delivery System	80%	120,000～ 200,000	2017 Q4	Software, Mechanism, and WIFI
Digital Camera, 360-degree Camera, AR/VR Camera, SafetyContro Camera	60%	100,000~ 200,000	2017 Q3	Customers’ product launch date

5.1.4 Long-term and Short-term Development

A. Short-term Business Development Plan

Transforming itself from a digital camera provider into a digital imaging solution provider, the Company provides customers with chips, software, IP, and module integration by taking advantage of existing digital imaging processors, optical and digital processors, and customized products. The focus of the short-term business development plan is to increase the market share of the following fields:

(1) Dual-camera module and computing for smartphones.

(2) Imaging processors of smartphones and digital imaging products.

(3) Digital cameras and extended products, such as 360-degree cameras, AR/VR cameras, and safety control cameras.

(4) Other applications, including medical imaging solutions (such as glucose meter and insulin delivery system) and autotronic imaging solutions.

B. Mid and Long-term Business Development Plan

The Company will continue to strengthen digital imaging core technologies, control key components, increase customers, and develop related digital imaging markets; in addition, the Company will expand its scope of business and exert the synergy to improve the overall competitiveness, growth, and profitability.

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5.2 Market and Sales Overview

5.2.1 Market Analysis

• A. Major Sales Region

The Company’s products are mainly shipped to customers in Asia, the US and Europe and sold by these customers in the global market.

B. Market Share

The Company is Taiwan’s second largest ODM provider for global digital camera manufacturers. The Company provides comprehensive digital imaging solutions, so no related data can be used to estimate the market share. As consumers have higher demand for imaging, the market share of the Company’s imaging solutions is expected to growth year by year. The Company is also the world’s first dual-camera module supplier that goes into mass production with comprehensive software and hardware solutions.

• C. Market Supply/Demand and Growth in the Future

The competition in the smartphone market becomes more and more intense. Smartphone manufacturers invest many resources in imaging enhancement and differentiation. In mainland China, local manufacturers specializing in key components such as chips, software, and camera modules compete intensely. In the future, in addition to strengthening product specifications and technologies, the Company has to be more competitive in terms of technological services and cost control. Benefiting by its existing digital imaging processors and optical and imaging processors, the Company provides customers with chips, software, IP, and modules that are quality and competitive. Dual-camera modules and imaging processors still have considerable potential for growth in the future.

Regardless of the gradual decline in the digital camera market, the basic demand remains unchanged. Due to high technological requirements, other digital imaging products, such as safety control cameras, 360-degree cameras, and webcast cameras, continue to account for a certain degree of market share. The market share is expected to grow if there is no significant change.

• D. Competitive Niche

• (1) Digital imaging processing

• a. Computing and deduction.

• b. Imaging color development.

• c. Chips and digital imaging integration that optimize quality and performance.

• (2) Imaging chips

• a. Respond to customers’ needs instantly and directly.

• b. Grasp the opportunity for product launch.

• c. Develop new functions and applications instantly.

• d. Budget leverage.

• e. Customized products.

• (3) Optical processing

• a. Alignment and calibration.

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• E. Advantages, Disadvantages and Countermeasures for Prospects

• (1) Advantages

• a. With years of experience and technological strength in the digital camera market, the Company has been widely recognized and supported by the world’s top manufacturers. As consumers have higher requirements for photography, quality, and functions, the Company has competitive advantages in the digital imaging market.

• b. Solid technological development and integration

• As a digital imaging company that develops its own system integration chips, the Company leads the industry in terms of technological strength. Its innovative R&D resources and capacity for digital imaging technologies and product development have been highly recognized by the world’s top manufacturers.

• (2) Disadvantages

• a. Short life cycle and decline in price

• The price of consumer electronic products continues to decline and the requirements for specifications and functions increase gradually, making the product’s life cycle shorter and shorter. Countermeasures:

More than 50% of the Company’s employees engage in research and development of new technologies and products to improve the Company’s competitiveness. In addition, the Company has strived for the development of key components and imaging applications. With independent technological capacities and better vertical integration, the Company aims to improve its competitiveness by mass production.

• b. Dependent key components

The Company relies on its key component suppliers heavily, especially imaging sensors and high-end optical zooms. It is crucial to maintain the stable supply of key components.

Countermeasures:

Key components of digital imaging solutions include imaging sensors, high-end lens, and IC foundries. In addition to maintaining a good relationship with suppliers, the Company has actively developed other suppliers to decentralize the procurement risk. Key components are also designed by the Company or companies invested by the Company to control the sources of key components and reduce the cost of purchase and development schedule.

• 5.2.2 Purpose and Production Process of Major Products

Currently, the Company’s major products are digital imaging chips, camera modules and digital cameras. The purposes and production processes of these products are described as follows:

A. Digital Imaging Chip

• (1) Major purpose

Featuring face detection/tracking, face recognition, anti-shack, and lens compensation, digital imaging chips are applied to general consumer products, smartphone images, autotronic products, and medical imaging products and suitable for basic and high-end portfolios.

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(2) Production process

The production process of each chip, from design to finish, is described below:

==> picture [423 x 123] intentionally omitted <==

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

Lead frame
Wafer
or substrate
CAD Wafer Wafer Packaging
Design Mask Packaging
CAE manufac testing & testing
turing
----- End of picture text -----

a. Design procedure

Based on the product specifications, the design engineers convert the circuits into drawings for mass production using CAD and deliver drawings to wafer foundries.

==> picture [348 x 40] intentionally omitted <==

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

Computer
Circuit Circuit Layout CAD
data/tape
design simulation
----- End of picture text -----

b. Mask procedure

Circuits completed by IC designers are saved in tapes through database and delivered to the mask manufacturers. The production process includes four stages: Glass Process, Cr Film Coating, Resist Coating and Shipping. Completed masks will be delivered to wafer foundries for production.

c. Wafer production procedure

Wafers are manufactured by foundries. Wafers are processed through etching, photo, thin film, and diffusion in the module with masks. Completed wafers will be tested and qualified wafers will then be delivered.

• d. Wafer testing procedure

Completed wafers should be tested to examine their functions. Wafers of good quality or of poor quality will be marked respectively.

• e. Packaging procedure

Wafers of good quality will be sent for IC packaging. The packaging procedure is as follows:

==> picture [377 x 80] intentionally omitted <==

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

Label Cut Mount Wire Plastic
closures
Stamp
Electroplating Dam-bar/desmear Packaging Deliver
/tin
----- End of picture text -----

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B. Dual-camera Module

(1) Major purpose

Dual-camera modules are applied to smartphones and tablets.

• (2) Production process

==> picture [457 x 98] intentionally omitted <==

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

Software /
Camera module Dispense integration firmware Focusing Calibration Quality testing Packaging/Deliver
----- End of picture text -----

C. Digital Imaging Solution

• (1) Major purpose

Digital imaging solutions include imaging database, photo shooting, image recording, image duplication, transmission, and storage.

(2) Production process

==> picture [377 x 271] intentionally omitted <==

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

Specification and functional testing Deliver
Packaging
Production tool integration
Module integration Environmental reliability test
Assembly Digital imaging processing
Software/firmware integration Institutional & electronic reliability
integration
----- End of picture text -----

5.2.3 Major Suppliers

The Company has maintained a good relationship with major suppliers to control sources of materials, shorten deliver, improve material quality, and reduce risks. By doing this, the Company can control production schedule, logistics, and costs independently. The Company also reaches an agreement with major suppliers to establish safe inventory for the optimization of quality, delivery, and costs.

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5.2.4 Major Customers

A. Major Suppliers in the Last Two Calendar Years

Unit: NT$ thousand

									Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
	2015				2016				2017 (as of March 31)
Name	Amount	Percentage (%)	Relation with Issuer	Name	Amount	Percentage (%)	Relation with Issuer	Name	Amount	Percentage (%)	Relation with Issuer
－	－	－	－	a	1,406,584	14.66	None	－	－	－	－
Other	9,566,118	100.00	None	Other	8,189,981	85.34	None	Other	1,932,888	100.00	None
Total	9,566,118	100.00	－	Total	9,596,564	100.00	－	Total	1,932,888	100.00	－

B. Major Customers in the Last Two Calendar Years

Unit: NT$ thousand

								Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
2015				2016				2017 (as of March 31)
Name	Amount	Percentage (%)	Relation with Issuer	Name	Amount	Percentage (%)	Relation with Issuer	Name	Amount	Percentage (%)	Relation with Issuer
E	3,571,054	28.59	None	E	2,326,399	20.09	None	E	663,545	24.93	None
F	1,305,799	10.45	None	F	1,989,676	17.19	None	F	480,462	18.05	None
－	－	－	－	O	1,671,863	14.44	None	－	－	－	－
－	－	－	－				－				None
Other	7,615,176	60.96	None	Other	5,589,108	48.28	None	Other	1,517,100	57.02	None
Total	12,492,029	100.00	－	Total	11,577,046	100.00	－	Total	2,661,107	100.00	－

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5.2.5 Production in the Last Two Years

Unit: Thousand; NT$ thousand

				Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand
Year	2015			2016
Output Major Products	Capacity	Quantity	Value	Capacity	Quantity	Value
Digital Imaging-related Applications	Note			Note

Note: Such information is the Company’s business secret. To protect shareholder’s benefits, it’s not able to disclose herein.

5.2.6 Shipments and Sales in the Last Two Years

	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand
Year	2015(Note 1)				2016(Note 1)
Shipments & Sales Major Products	Local		Export		Local		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
Digital Imaging-related Applications	Note 2	2,035,606	Note 2	10,456,423	Note 2	439,930	Note 2	11,137,116

Note 1: Consolidated base with IFRS.

Note 2: Such information is the Company’s business secret. To protect shareholder’s benefits, it’s not able to disclose herein.

5.2.7 Operating Department

The Company is approved by the Industrial Development Bureau, Ministry of Economic Affairs as the headquarters of the Group to have internal management reports made consistently by decision makers in the Company and its subsidiaries. The major decision makers are responsible to allocate resources to business departments and evaluate their performance.

A. General information

The decision makers are responsible to allocate resources and evaluate the overall performance of the Group.

B. Measurement of department information

The decision makers evaluate the performance of business departments based on the consolidated financial statements compiled in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC), as endorsed by the FSC.

• C. Department information and information on assets and liabilities The Company and subsidiaries are single reporting departments, with revenue from external customers, profit and loss, and assets consistent with consolidated operating revenue, consolidated profit and loss, and consolidated assets.

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D. Types of products and services

The revenue from external customers is mainly generated by digital imaging products sold and related import/export business.

E. Types of regions

The types of regions in 2015 and 2016 are as follows:

	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Region	2015		2016
	Revenue	Non-current Liability	Revenue	Non-current Liability
Asia	9,235,699	3,085,704	9,950,667	2,577,653
Europe	1,191,005	－	1,118,838	－
America	29,719	－	67,611	－
Taiwan	2,035,606	2,219,152	439,930	2,173,112
Total	12,492,029	5,304,856	11,577,046	4,750,765

5.3 Human Resources

an Resources	an Resources
Year		2014	2016	March 31, 2017
Number of Employees	Direct and Indirect	493	245	241
	Management	16	8	7
	Total	509	253	248
Average Age		38.98	41.59	41.64
Average Years of Service		5.09	7.4	8.05
Education (%)	Ph.D.	2.36	0.7	0.8
	Master	49.71	48.8	43.2
	Bachelor’s Degree	44.20	45.8	50.4
	Senior High School	2.55	4.0	4.0
	Below Senior High School	1.18	0.7	1.6

Note: Such information is the Company’s business secret. To protect shareholder’s benefits, it’s not able to disclose herein.

5.4 Environmental Protection Expenditure

5.4.1 Total Losses and Penalties

The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report: None.

5.4.2 Countermeasures and Possible Expenditure

The Company is a high-tech company located in Hsinchu Science Park, consuming very limited pollution. The Company strictly obeys environmental protection regulations. No environmental protection and safety penalty occurred from the Company and its subsidiaries.

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5.5 Labor Relations

• 5.5.1 Implementation and Maintenance of Employee Benefits, Training, and Pension System and Labor Agreements

A. Employee benefits

Since its establishment, the Company has implemented the people-oriented management by valuing and caring for employees and continuously providing comprehensive benefits based on the Labor Pension Act and the Labor Standards Act.

Altek employees enjoy a comprehensive benefits package and annual, sick and maternity leave terms and flexible vacation rights that are significantly above the standard set in the Labor Law. Employees enjoy coverage under national Labor and Health Insurance schemes as well as group insurance coverage – well above Labor Law requirements.

Employees work flexible hours that fit in with their priorities and needs. Altek schedules regular employee health check and provides special monetary disbursements for weddings, births, hospitalization and funerals. Altek employees are also entitled to join in annually organized company outings, sports events and athletic competitions.

Special gifts or ‘red envelopes’ find their way to every employee to help celebrate his or her birthday. Special birthday discounts and awards are also provided by specially designated retailers.

B. Employee Training

Talent is the most important asset of the Company. Thus, developing employees’ knowledge and skills through properly planned resources and improving their productivity is the crucial task for the Company. Altek arranges annual training plans to address the professional needs of its employees, the professional skills training targets of management and the overall strategic objectives of the organization. Training for individuals, jobs and the organization strikes an optimal balance that gives every employee a tailored training schedule that is solid, well-rounded and targeted on enhancing and expanding skill sets. To provide better training quality, a feedback survey is conducted for the reference to subsequent training planning. Meanwhile, the Company also encourages employees to participate in external training programs, such as seminars, professional courses, and advanced study, by providing subsidies, so as to expand employees’ self-development and work potential.

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The number of training programs held in 2016 totaled 3,006 hours, with 1,067 trainees and at the cost of NT$447,000. The results of training programs are shown below:

Unit: NT$

			Unit: NT$
Item	Number of Trainees	Hours	Expense
Professional Training	851	2,222	447,000
Employee Safety and Health Training	47	141
QualityTraining	84	166
Generic Training	25	75
New Employee Orientation	44	264
External Training	16	138
Total	1,067	3,006

Training programs are divided into:

• (1) Professional Training

Professional training courses are held to improve employee’s’ professional skills, productivity, and performance.

• (2) Employee Safety and Health Training

Employee safety and health training courses are held in accordance with national industrial safety and health regulations to safeguard employees’ health and safety at workplaces.

(3) Quality Training

The quality training courses are held to improve all employees’ awareness of quality and promote the provision of products of the best quality that meets customers’ needs.

(4) Generic Training

The generic training courses are held to improve employees’ language and computer skills and develop their potential for the purpose of achieving the Company’s overall business objectives.

• (5) New Employee Orientation

The new employee orientation is held by Human Resource Division to help new recruits adapt to the Company’s systems, environment, and information security.

C. Pension System

The pension system is implemented in accordance with the Labor Pension Act and the Labor Standards Act. The labor retirement reserve is appropriated monthly. The pension systems of subsidiaries are implemented according to related local laws and regulations.

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Pension System	Old System	New System
Applicable Law	Labor Standards Act	Labor Pension Act
Method of Appropriation	2% of the monthly salary is appropriated and deposited in the Bank of Taiwan in the name of the Supervisory Committee of Business Entities’ Labor Retirement Reserve.	At least 6% of the monthly salary is appropriated to the employee’s personal account in Bureau of Labor Insurance, Ministry of Labor.
Amount of Appropriation	The balance of the labor retirement reserve is NT$48,985 thousand.	The pension recognized in 2016 was NT$15,510 thousand.

D. Labor Agreement

The Company and its subsidiaries have established mechanisms and channels of regular communication with employees and hold employee communication meetings from time to time to ensure smooth communication. No labor-related dispute occurs.

The Company has established the Working Rules based on the Labor Standards Act and the Working Rules have been approved by the Hsinchu Science Park Bureau.

E. Code of Conduct or Code of Ethics

(1)Employees shall work in accordance with the Company’s policies and regulations, abide by supervisors’ proper guidance, and have strong willingness to work and deliver good quality; supervisors shall provide guidance for employees in a cordial manner. Employees shall report their duties to their superiors.

(2)Employees shall hold an active, gregarious, and enterprising attitude toward work with a proactive point of view. Employees shall perform their duties reliably without any delay or procrastination. During working hours, employees are not allowed to leave their posts without permission.

(3)Employees shall take self-esteem, self-respect, and self-discipline seriously, act honestly, thriftily, and politely, and show respect to others.

(4)Employees are not allowed to browse documents, letters, technologies, and business that are not under their management without permission.

(5)Employees shall not disclose, tell, deliver, or transfer, or publish or release trade secrets known or held by themselves at their posts; without the Company’s written consent, employees are not allowed to operate or participate in business of their own or any third party that is related or similar to the Company’s business. Rights and liabilities of employment and confidentiality are governed by the Company’s Employment Contract and Confidentiality Contract separately.

(6)Employees shall not accept rebate or other illegal benefits due to convenience of duties or take advantage of their duties to make profit for themselves or others.

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(7)Employees shall not disclose confidential information on personal salaries on purpose or inquire about salaries of others.

(8)Employees shall not bring ammunition, swords, and guns, dangerous goods, contraband or objects irrelevant to the public goods of production to the workplaces or carry away any public goods from the Company without permission.

(9)Employees shall keep the workplace and the surroundings safe and clean in accordance with the occupational safety and health laws and regulations and the Company’s policies and prevent burglary, fire, or other natural disasters from happening.

F. Procedures for Handling Material Inside Information

The Company has established the Procedures for Handling Material Inside Information and includes the Procedures in the internal control system. To reduce the risk of insider trading, the responsible units notify related employees and supervisors from time to time to report any material information to be disclosed. Employees or supervisors may refer to related internal regulations from the responsible units or the corporate website.

All directors, supervisors, managers and employees or other parties receiving material information due to their position, profession, or relationship of control shall exercise the due care of a good administrator, perform their duties based on a self-discipline and prudent attitude and a principle of good faith, and strictly abide by the following regulations in respect of handling, disclosure, and confidentiality of material information set up by related competent authority.

• Article 1 These Procedures are specially adopted to establish sound mechanisms for the handling and disclosure of material inside information by the Company, in order to prevent improper information disclosures and to ensure the consistency and accuracy of information released by the Company to the public.

• Article 2 The Company shall implement its handling and disclosure of material inside information in accordance with applicable laws and regulations, the rules and regulations of the Taiwan Stock Exchange Corporation or the GreTai Securities Market, and these Procedures.

• Article 3 These Procedures shall apply to all directors, supervisors, managerial officers, and employees of the Company.

• The Company shall ensure that any other person who acquires knowledge

• Article 4 of the Company's material inside information due to their position, profession, or relationship of control shall comply with the applicable provisions of these Procedures.

• Article 5 For the purposes of these Procedures, the term "material inside information" refers to the news that involves the Company’s finance, business or the supply/demand and public acquisition of securities and have a major impact on the Company’s stock price or the legitimate investors’ decision making; the “news” mentioned above refers to Article 2 and Article 3 of the Regulations Governing the Scope of Material Information and the Means of its Public Disclosure Under Article 157-1,

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Paragraph 4 of the Securities and Exchange Act.

Article 6 The method to announce the news mentioned in Article 4 shall be governed by the Securities and Exchange Act.

Article 7 The time of establishment of the news mentioned in Article 5 shall be governed by the Securities and Exchange Act.

• Article 8 The spokesperson or the person appointed by him/her is responsible for handling material inside information with the following functions and authorities:

• Responsibility for formulating the drafts of these Procedures and any amendments to them.

• Responsibility for announcing material inside information according to laws and regulations.

• Responsibility for receiving reports on unauthorized disclosures of material inside information and formulation of corresponding measures.

• Other activities related to these Procedures.

• Article 9 The Company's directors, supervisors, managerial officers, and employees shall exercise the due care and fiduciary duty of a good administrator and act in good faith when performing their duties, and shall sign confidentiality agreements.

No director, supervisor, managerial officer, or employee with knowledge of material inside information of the Company may divulge the information to others.

No director, supervisor, managerial officer, or employee of the Company may inquire about or collect any non-public material inside information of the Company not related to their individual duties from a person with knowledge of such information, nor may they disclose to others any non-public material inside information of the Company of which they become aware for reasons other than the performance of their duties.

Any organization or person outside of the Company that is involved in any corporate action of the Company relating to a merger or acquisition, major memorandum of understanding, strategic alliance, other business partnership plans, or the signing of a major contract shall be required to sign a confidentiality agreement, and may not disclose to another party any material inside information of the Company's thus acquired.

• Article 10 The Company shall keep records in respect of any disclosure of information to outside parties.

Article 11 These Procedures, and any amendments to them, shall be implemented upon approval by the board of directors.

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• G. Safeguard for the Workplace and Employees’ Safety

• (1) Environmental improvement and maintenance of environmental conditions

The maintenance of the facilities and equipment at the workplace will be designed from time to time to create a comfortable and safe working environment.

(2) Safety training

The training course on fire and emergency drills will be carried out annually to minimize the loss of property in case of emergency.

(3) Health management

Cleaning, disinfection, and garbage recycling are carried out at the workplace to avoid the growth of mosquitos and bacteria.

5.5.2 Loss Caused by Labor-related Disputes, Estimations and Countermeasures: None.

5.6 Important Contracts

Agreement	Counterparty	Period	Major Contents	Restrictions
ODM	Note	Note	Design and manufacturing of medical products	Non-disclosure
ODM	Note	Note	Design and manufacturing of DSC	Non-disclosure
Technology Authorization	Note	Note	Authorization of digital imaging technologies	Non-disclosure

Note: Such information is business secret. To protect shareholder’s benefit, it’s unable to disclose herein.

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VI. Financial Information

6.1 Five-Year Financial Summary

6.1.1 Condensed Balance Sheet

A. Consolidated Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousand

Year Item	Year Item	2012	2013	2014	2015	2016	March 31, 2017 (Note 2)
Current Assets		10,012,033	9,078,856	9,643,055	9,649,516	10,051,522	9,007,681
Property, Plant and Equipment		5,297,892	5,656,784	5,603,692	5,211,143	4,657,848	4,493,134
Intangible Assets		73,079	110,413	103,447	93,713	92,917	86,296
Other Assets		1,034,715	872,407	502,017	445,806	424,845	473,350
Total Assets		16,417,719	15,718,460	15,852,211	15,400,178	15,227,132	14,060,461
Current Liabilities	Before Distribution	5,311,445	4,923,728	5,447,625	5,117,961	5,613,869	4,891,368
	After Distribution	5,684,446	4,923,728	5,717,879	5,386,241	Note 3	Note 3
Non-current Liabilities		953,879	894,824	724,458	653,365	580,270	518,458
Total Liabilities	Before Distribution	6,265,324	5,818,552	6,172,083	5,771,326	6,194,139	5,409,826
	After Distribution	6,638,325	5,818,552	6,442,337	6,039,606	Note 3	Note 3
Share Capital(Note 4)		3,961,013	3,902,653	2,701,358	2,726,938	2,739,788	2,739,088
Capital Reserve	Before Distribution	2,377,444	2,028,690	2,063,551	1,975,772	1,862,914	1,861,738
	After Distribution	2,041,743	2,028,690	1,928,424	1,841,632	Note 3	Note 3
Retained ~~E~~arnings	Before Distribution	4,912,768	4,374,704	4,426,902	4,536,749	4,462,922	4,494,059
	Distribution	4,875,468	4,374,704	4,291,775	4,402,609	Note 3	Note 3
Other EquityInterest		(340,799)	27,904	481,868	414,647	(25,521)	(430,312)
TreasuryStock		(768,094)	(440,573)	－	(129,393)	(129,393)	(129,393)
Equity Attributable to Owners of the Parent	Before Distribution	10,142,332	9,893,378	9,673,679	9,524,713	8,910,710	8,535,180
	After Distribution	9,769,331	9,893,378	9,403,425	9,256,433	Note 3	Note 3
Non-controllingInterests		10,063	6,530	6,449	104,139	122,283	115,455
~~T~~otal Equity	Before Distribution	10,152,395	9,899,908	9,680,128	9,628,852	9,032,993	8,650,635
	After Distribution	9,779,394	9,899,908	9,409,874	9,360,572	Note 3	Note 3

Note 1: IFRSs have been adopted since 2013 (the disclosure of the 2012 financial data is required in the 2013 financial statements).

Note 2: The annual financial statements have been audited by CPAs; financial statements as of March 31, 2017 have been reviewed by CPAs.

Note 3: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Note 4: Mainly the capital decrease by cash at the amount of NT$1,182,475 thousand in 2014.

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B. Consolidated Condensed Balance Sheet – Based on ROC GAAP

Unit: NT$ thousand

		Unit: NT$thousand
Item	Year	2012
Current Assets		10,289,931
Funds & Investments		587,372
Fixed Assets		3,826,492
Intangible Assets		111,536
Other Assets		1,558,127
Total Assets		16,373,458
Current Liabilities	Before Distribution	5,453,899
	After Distribution	5,826,900
Long-term Liabilities		－
Other Liabilities		749,962
Total Liabilities	Before Distribution	6,203,861
	After Distribution	6,576,862
Share Capital		3,961,013
Capital Reserve	Before Distribution	2,387,988
	After Distribution	2,052,287
Retained Earnings	Before Distribution	4,775,439
	After Distribution	4,738,139
Unrealized Gain or Loss on Financial Instruments		－
Cumulative Translation Adjustments		(196,812)
Net Loss Unrecognized as Pension Cost		－
Treasury Stock		(768,094)
Minority Interests		10,063
Total Shareholders’ Equity	Before Distribution	10,169,597
	After Distribution	9,796,596

Note: The above financial data have been audited by CPAs.

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C. Individual Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousand

Year Item	Year Item	2012	2013	2014	2015	2016
Current Assets		4,527,075	2,773,391	3,560,652	3,342,969	2,172,741
Property, Plant and Equipment		2,306,706	2,252,204	2,195,459	2,151,402	2,132,812
Intangible Assets		4,434	7,135	3,892	3,866	2,172
Other Assets		11,019,966	11,083,223	10,308,292	10,217,278	10,022,195
Total Assets		17,858,181	16,115,953	16,068,295	15,715,515	14,329,920
Current Liabilities	Before Distribution	6,788,749	5,327,751	5,670,171	5,544,812	4,871,861
	After Distribution	7,161,750	5,327,751	5,940,425	5,813,092	Note 3
Non-current Liabilities		927,100	894,824	724,445	645,990	547,349
~~T~~otal Liabilities	Before Distribution	7,715,849	6,222,575	6,394,616	6,190,802	5,419,210
	After Distribution	8,088,850	6,222,575	6,664,870	6,459,082	Note 3
Share Capital (Note 4)		3,961,013	3,902,653	2,701,358	2,726,938	2,739,788
~~C~~apital Reserve	Before Distribution	2,377,444	2,028,690	2,063,551	1,975,772	1,862,914
	After Distribution	2,041,743	2,028,690	1,928,424	1,841,632	Note 3
Retained Earnings	Before Distribution	4,912,768	4,374,704	4,426,902	4,536,749	4,462,922
	After Distribution	4,875,468	4,374,704	4,291,775	4,402,609	Note 3
Other Equity Interest		(340,799)	27,904	481,868	414,647	(25,521)
Treasury Stock		(768,094)	(440,573)	－	(129,393)	(129,393)
Total shareholders’ Equity	Before Distribution	10,142,332	9,893,378	9,673,679	9,524,713	8,910,710
	After Distribution	9,769,331	9,893,378	9,403,425	9,256,433	Note 3

Note 1: IFRSs have been adopted since 2013 (the disclosure of the 2012 financial data is required in the 2013 financial statements).

Note 2: The financial data have been audited by CPAs.

Note 3: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Note 4: Mainly the capital decrease by cash at the amount of NT$1,182,475 thousand in 2014.

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D. Individual Condensed Balance Sheet – Based on ROC GAAP

Unit: NT$ thousand

		Unit: NT$ thousand
Item	Year	2012
Current Assets		4,801,680
Funds & Investments		10,672,229
Fixed Assets		835,306
Intangible Assets		4,434
Other Assets		1,500,296
Total Assets		17,813,945
~~C~~urrent Liabilities	Before Distribution	6,904,449
	After Distribution	7,277,450
Long-term Liabilities		－
Other Liabilities		749,962
~~T~~otal Liabilities	Before Distribution	7,654,411
	After Distribution	8,027,412
Share Capital		3,961,013
~~C~~apital Reserve	Before Distribution	2,387,988
	After Distribution	2,052,287
~~R~~etained Earnings	Before Distribution	4,775,439
	After Distribution	4,738,139
Unrealized Gain or Loss on Financial Instruments		－
Cumulative Translation Adjustments		(196,812)
Net Loss Unrecognized as Pension Cost		－
Treasury Stock		(768,094)
~~T~~otal Shareholders’ Equity	Before Distribution	10,159,534
	After Distribution	9,786,533

Note: The above financial data have been audited by CPAs.

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6.1.2 Condensed Statement of Comprehensive Income/Condensed Statement of Income

A. Consolidated Condensed Statement of Comprehensive Income–Based on IFRS

		Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Year Item	2012	2013	2014	2015	2016	March 31, 2017
Operating Revenue	24,575,459	19,165,825	15,431,081	12,492,029	11,577,046	2,661,107
Gross Profit from Operations	1,766,651	1,158,836	1,560,966	1,568,786	1,555,744	401,266
Net Operating Income (Loss)	183,551	(63,840)	301,251	226,351	45,759	47,326
Non-operating Income and Expense	145,809	(303,661)	9,631	56,160	144,816	(15,830)
Income (Loss) before Tax	329,360	(367,501)	310,882	282,511	190,575	31,496
Income (Loss) for Continued Operations	280,103	(330,515)	276,175	274,380	100,108	25,130
Income (Loss) from Discontinued Operations	－	－	－	－	－	－
Net Income (Loss)	280,103	(330,515)	276,175	274,380	100,108	25,130
Other Comprehensive Income(Income after Tax)	(343,283)	368,703	458,362	(11,764)	(438,440)	(416,793)
Total Comprehensive Income	(63,180)	38,188	734,537	262,616	(338,332)	(391,663)
Net Income Attributable to Owners of the Parent	280,103	(332,012)	275,335	273,643	53,800	31,137
Net Income Attributable to Non-controllingInterests	－	1,497	840	737	46,308	(6,007)
Comprehensive Income Attributable to Owners of the Parent	(63,180)	36,691	733,697	265,898	(382,446)	(384,835)
Comprehensive Income Attributable to Non-controllingInterests	－	1,497	840	(3,282)	44,114	(6,828)
Earnings (Loss) per Share (NT$)	0.75	(0.88)	0.80	1.02	0.20	0.12

Note 1: IFRSs have been adopted since 2013 (the disclosure of the 2012 financial data is required in the 2013 financial statements).

• Note 2: The annual financial statements have been audited by CPAs; financial statements as of March 31, 2017 have been reviewed by CPAs.

• Note 3: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

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B. Consolidated Condensed Statement of Income – Based on ROC GAAP

Unit: NT$ thousand

	Unit: NT$thousand
Year Item	2012
Operating Revenue	24,575,459
Gross Profit from Operations	1,766,651
Income from Operations	183,551
Non-operating Income	183,463
Non-operating Expenses	(37,654)
Income from Operations of Continued Segments-before Tax	329,360
Income from Operations of Continued Segments-after Tax	280,103
Income from Discontinued Operations	－
Extraordinary Gain or Loss	－
Cumulative Effect of Accounting Principle Changes	－
Net Income	280,103
Earnings per Share (NT$)	0.75

Note: The above financial data have been audited by CPAs.

C. Individual Condensed Statement of Comprehensive Income–Based on IFRS

Unit: NT$ thousand

Year Item	2012	2013	2014	2015	2016
Operating Revenue	22,154,630	10,164,641	11,710,474	9,153,080	3,860,298
Gross Profit from Operations	1,451,506	1,079,436	1,249,827	1,011,509	650,252
Net Operating Income (Loss)	131,815	148,278	354,250	177,508	22,497
Non-operating Income and Expense	106,587	(532,313)	(106,917)	72,180	51,557
Income (Loss) before Tax	238,402	(384,035)	247,333	249,688	74,054
Income (Loss) for Continued Operations	280,103	(332,012)	275,335	273,643	53,800
Income (Loss) from Discontinued Operations	－	－	－	－	－
Net Income (Loss)	280,103	(332,012)	275,335	273,643	53,800
Other Comprehensive Income (Income after Tax)	(343,283)	368,703	458,362	(7,745)	(436,246)
Total Comprehensive Income	(63,180)	36,691	733,697	265,898	(382,446)
Earnings (Loss) per Share (NT$)	0.75	(0.88)	0.80	1.02	0.20

Note 1: IFRSs have been adopted since 2013 (the disclosure of the 2012 financial data is required in the 2013 financial statements).

Note 2: The financial data have been audited by CPAs.

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D. Individual Condensed Statement of Income – Based on ROC GAAP

Unit: NT$ thousand

	Unit: NT$thousand
Year Item	2012
Operating Revenue	22,154,630
Gross Profit from Operations (Note 2)	1,451,506
Income from Operations	131,815
Non-operating Income	108,349
Non-operating Expenses	(1,762)
Income from Operations of Continued Segments-before Tax	238,402
Income from Operations of Continued Segments-after Tax	280,103
Income from Discontinued Operations	－
Extraordinary Gain or Loss	－
Cumulative Effect of Accounting Principle Changes	－
Net Income	280,103
Earnings per Share (NT$)	0.75

Note 1: The above financial data have been audited by CPAs. Note 2: Include realized (unrealized) interests among affiliated companies.

6.1.3 Auditors’ Opinions from 2012 to 2016

Year	CPA	Accounting Firm	Audit Opinion
2012	Guo-Hua Zeng and Wei-Chen Wang	PricewaterhouseCoopers	Unqualified opinion
2013	Guo-Hua Zeng and Wei-Chen Wang	PricewaterhouseCoopers	Unqualified opinion
2014	Yu-Kuan Lin and Fang-Yu Wun (Note)	PricewaterhouseCoopers	Unqualified opinion
2015	Yu-Kuan Lin and Dian-Yi Li (Note)	PricewaterhouseCoopers	Unqualified opinion
2016	Dian-Yi Li and Yu-Kuan Lin (Note)	PricewaterhouseCoopers	Unqualified opinion

Note: Since 2014 Q1, CPAs have been changed based on the job rotation of PricewaterhouseCoopers.

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6.2 Five-Year Financial Analysis

A. Consolidated Financial Analysis – Based on IFRS

Item	Year	Year	2012	2013	2014	2015	2016	March 31, 2017
Financial Structure (%)	Debt Ratio		38.16	37.02	38.94	37.48	40.68	38.48
	Ratio of Long-term Capital to Property,Plant and Equipment		209.64	190.83	185.67	197.19	206.39	204.07
Solvency (%)	Current Ratio (%)		188.50	184.39	177.01	188.30	179.05	184.15
	Quick Ratio (%)		151.89	153.51	151.85	165.33	149.10	153.89
	Interest Earned Ratio (Times)		187.92	－	19.00	14.88	8.39	5.54
Operating Performance	Accounts Receivable Turnover (Times)		7.07	5.80	5.60	5.30	4.57	4.56
	Average Collection Period		51.62	62.93	65.17	68.86	79.86	80.04
	Inventory Turnover (Times)		10.62	10.55	9.98	8.36	6.88	6.12
	Accounts Payable Turnover (Times)		5.46	6.37	5.10	4.08	4.14	4.44
	Average Days in Sales		34.36	34.59	36.57	43.66	53.05	59.64
	Property, Plant and Equipment Turnover(Times)		4.64	3.50	2.74	2.31	2.35	0.58
	Total Assets Turnover (Times)		1.38	1.19	0.98	0.80	0.76	0.18
Profitability	Return on Total Assets (%)		1.59	(2.00)	1.84	1.86	0.80	0.21
	Return on Stockholders' Equity(%)		2.67	(3.30)	2.82	2.84	1.07	0.28
	Pre-tax Income to Paid-in Capital(%)		8.32	(9.42)	11.51	10.36	6.96	1.15
	Profit Ratio (%)		1.14	(1.72)	1.79	2.20	0.86	0.94
	Earnings per Share (NT$)	Before Adjustment	0.75	(0.88)	0.80	1.02	0.20	0.12
		After Adjustment	0.75	(0.88)	0.80	1.02	Note 3	Note 3
Cash Flow	Cash Flow Ratio (%)		－	－	21.2	6.16	－	9.08
	Cash Flow Adequacy Ratio(%)		108.16	95.69	42.36	62.43	－	25.18
	Cash Reinvestment Ratio (%)		－	－	9.33	0.36	－	3.95
Leverage	Operating Leverage		16.72	－	8.39	10.88	44.05	10.24
	Financial Leverage		1.01	0.85	1.06	1.10	2.33	1.17

Note 1: IFRSs have been adopted since 2013 (the disclosure of the 2012 financial data is required in the 2013 financial statements). Note 2: Calculated based on the weighted average number of shares after adjustment. The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Reason for Changes in Financial Ratios in the Last Two Years:

Due to the lower revenue and profitability of digital imaging-related applications, the financial structure, solvency, operating performance and profitability in 2016 were lower than those in 2015.

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B. Consolidated Financial Analysis – Based on ROC GAAP

Item	Year	Year	2012
Financial Structure (%)	Debt Ratio		37.89
	Ratio of Long-term Capital to Fixed Assets		191.96
Solvency (%)	Current Ratio (%)		188.67
	Quick Ratio (%)		147.34
	Interest Earned Ratio (Times)		187.92
Operating Performance	nover (Times)		6.48
	Average Collection Period		56.34
	Inventory Turnover (Times)		10.62
	Accounts Payable Turnover (Times)		5.46
	Average Days in Sales		34.36
	Fixed Assets Turnover (Times)		4.64
	Total Assets Turnover (Times)		1.39
Profitability	Return on Total Assets (%)		1.59
	Return on Stockholders' Equity (%)		2.67
	Ratio of Operating Income to Issued Capital (%)		4.63
	Ratio of Pre-tax Income to Issued Capital (%)		8.32
	Profit Ratio (%)		1.14
	Earnings per Share (NT$)	Before Adjustment	0.75
		After Adjustment	0.75
Cash Flow	Cash Flow Ratio (%)		－
	Cash Flow Adequacy Ratio (%)		103.11
	Cash Reinvestment Ratio (%)		－
Leverage	Operating Leverage		16.72
	Financial Leverage		1.01

Note: Calculated based on the weighted average number of shares after adjustment.

Reason for Changes in Financial Ratios in the Last Two Years: N/A.

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C. Individual Financial Analysis – Based on IFRS

Item	Year	Year	2012	2013	2014	2015	2016
Financial Structure (%)	Debt Ratio		43.21	38.61	39.80	39.39	37.82
	Ratio of Long-term Capital to Property, Plant and Equipment		479.88	479.01	473.62	472.75	443.45
Solvency (%)	Current Ratio(%)		66.68	52.06	62.80	60.29	44.60
	Quick Ratio(%)		64.43	51.44	61.98	60.12	44.42
	Interest Earned Ratio (Times)		136.30	－	18.44	13.27	3.88
Operating Performance	Accounts Receivable Turnover (Times)		6.87	3.84	5.80	5.30	3.39
	Average Collection Period		53.10	95.02	62.93	68.86	107.67
	InventoryTurnover(Times)		119.29	125.22	566.87	413.87	459.62
	Accounts Payable Turnover(Times)		3.54	2.10	2.99	2.36	1.20
	Average Days in Sales		3.06	2.91	0.64	0.88	0.79
	Property, Plant and Equipment Turnover (Times)		9.50	4.46	5.27	4.21	1.80
	Total Assets Turnover (Times)		1.18	0.60	0.73	0.58	0.26
Profitability	Return on Total Assets(%)		1.50	(1.90)	1.78	1.83	0.50
	Return on Stockholders' Equity (%)		2.67	(3.31)	2.81	2.85	0.58
	Pre-tax Income to Paid-in Capital(%)		6.02	(9.84)	9.16	9.16	2.70
	Profit Ratio(%)		1.26	(3.27)	2.35	2.99	1.39
	Earnings per Share (NT$)	Before Adjustment	0.75	(0.88)	0.80	1.02	0.20
		After Adjustment	0.75	(0.88)	0.80	1.02	Note 3
Cash Flow	Cash Flow Ratio (%)		－	－	12.24	7.04	－
	Cash Flow AdequacyRatio(%)		－	－	－	－	－
	Cash Reinvestment Ratio(%)		－	－	6.55	1.15	－
Leverage	OperatingLeverage		9.02	5.95	3.20	5.23	21.11
	Financial Leverage		1.01	1.08	1.04	1.13	－

Note 1: IFRSs have been adopted since 2013 (the disclosure of the 2012 financial data is required in the 2013 financial statements).

Note 2: Calculated based on the weighted average number of shares after adjustment.

Note 3: The earnings distribution of Year 2016 is subject to approval of the shareholders’ meeting to be held on June 16, 2017.

Reason for Changes in Financial Ratios in the Last Two Years:

Due to the lower revenue and profitability of digital imaging-related applications, the financial structure, solvency, operating performance and profitability in 2016 were lower than those in 2015.

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D. Individual Financial Analysis – Based on ROC GAAP

Item	Year	Year	2012
Financial Structure (%)	Debt Ratio		42.97
	Ratio of Long-term Capital to Fixed Assets		1,216.26
Solvency (%)	Current Ratio (%)		69.54
	Quick Ratio (%)		63.30
	Interest Earned Ratio (Times)		136.30
Operating Performance	Accounts Receivable Turnover (Times)		6.72
	Average Collection Period		54.33
	Inventory Turnover (Times)		145.88
	nover (Times)		3.54
	Average Days in Sales		2.50
	Fixed Assets Turnover (Times)		25.88
	Total Assets Turnover (Times)		1.19
Profitability	Return on Total Assets (%)		1.51
	Return on Stockholders' Equity (%)		2.67
	Ratio of Operating Income to Issued Capital(%)		3.33
	Ratio of Pre-tax Income to (%)	Issued Capital	6.02
	Profit Ratio (%)		1.26
	Earnings per Share (NT$)	Before Adjustment	0.75
		After Adjustment	0.75
Cash Flow	Cash Flow Ratio (%)		－
	Cash Flow Adequacy Ratio (%)		112.14
	Cash Reinvestment Ratio (%)		－
Leverage	Operating Leverage		9.02
	Financial Leverage		1.01

Note: Calculated based on the weighted average number of shares after adjustment.

Reason for Changes in Financial Ratios in the Last Two Years: N/A.

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International Financial Reporting Standards (IFRS)

Formula for Financial Ratios:

1. Financial Structure

2. (1) Debt Ratio ＝ Total Liabilities ／ Total Assets.

3. (2) Ratio of Long-term Capital to Property, Plant and Equipment ＝ (Total Shareholders’ Equity ＋ Non-current Liabilities) ／ Net Property, Plant and Equipment.

4. Solvency

5. (1) Current Ratio ＝ Current Assets ／ Current Liabilities.

6. (2) Quick Ratio ＝ (Current Assets － Inventory － Prepaid Expenses) ／ Current Liabilities.

7. (3) Interest Earned Ratio ＝ Net Profit before Income Tax and Interest Expenses ／ Current Interest Expenses.

8. Operating Performance

9. (1) Accounts Receivable Turnover (including Accounts Receivable and Notes Receivable arising from Business) ＝ Net Sales ／ Average Accounts Receivable Balance (including Accounts Receivable and Notes Receivable arising from Business) in Each Period.

10. (2) Average Collection Period ＝ 365 ／ Accounts Receivable Turnover.

11. (3) Inventory Turnover ＝ Cost of Sales ／ Average Inventory.

12. (4) Accounts Payable Turnover (including Accounts Payable and Notes Payable arising from Business) ＝ Cost of Sales ／ Average Accounts Payable Balance (including Accounts Payable and Notes Payable arising from Business) in Each Period.

13. (5) Average Days in Sales ＝ 365 ／ Inventory Turnover.

14. (6) Property, Plant and Equipment Turnover ＝ Net Sales ／ Net Average Property, Plant and Equipment.

15. (7) Total Assets Turnover ＝ Net Sales ／ Average Total Assets.

16. Profitability

17. (1) Return on Total Assets ＝〔 Net Income ＋ Interest Expenses×(1 － Tax Rate) 〕／ Average Total Assets.

18. (2) Return on Stockholders' Equity ＝ Net Income ／ Average Total Shareholders’ Equity.

19. (3) Profit Ratio ＝ Net Income ／ Net Sales.

20. (4) Earnings per Share ＝ (Profits and Losses Attributable to the Owners of the Parent Company － Preferred Dividend) ／ Weighted Average Number of Shares Issued.

21. Cash Flow

22. (1) Cash Flow Ratio ＝ Net Cash Flow from Operating Activities ／ Current Liabilities.

23. ＝

24. (2) Cash Flow Adequacy Ratio Net Cash Flow from Operating Activities over the Last Five Years ／ (Capital Expenditures ＋ Increase in Inventory ＋ Cash Dividend) over the Last Five Years.

25. (3) Cash Reinvestment Ratio ＝ (Net Cash Flow from Operating Activities － Cash Dividends) ／ (Gross Property, Plant and Equipment ＋ Long-term Investment ＋ Other Non-current Assets ＋ Working Capital).

26. Leverage

27. ＝ －

28. (1) Operating Leverage (Net Operating Income Variable Operating Costs and Expenses) ／ Operating Income.

29. ＝ －

30. (2) Financial Leverage Operating Income ／ (Operating Income Interest Expenses).

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ROC Generally Accepted Accounting Principles (GAAP)

Formula for Financial Ratios:

1. Financial Structure

2. (1) Debt Ratio ＝ Total Liabilities ／ Total Assets. (2) Ratio of Long-term Capital to Fixed Assets ＝ (Net Shareholders’ Equity ＋ Long-term Liabilities) ／ Net Fixed Assets. 2. Solvency (1) Current Ratio ＝ Current Assets ／ Current Liabilities.

3. (2) Quick Ratio ＝ (Current Assets － Inventory － Prepaid Expenses) ／ Current Liabilities.

4. (3) Interest Earned Ratio ＝ Net Profit before Income Tax and Interest Expenses ／ Current Interest Expenses. 3. Operating Performance (1) Accounts Receivable Turnover (including Accounts Receivable and Notes Receivable arising from Business) ＝ Net Sales ／ Average Accounts Receivable Balance (including Accounts Receivable and Notes Receivable arising from Business) in Each Period.

(2) Average Collection Period ＝ 365 ／ Accounts Receivable Turnover.

• (3) Inventory Turnover ＝ Cost of Sales ／ Average Inventory. (4) Accounts Payable Turnover (including Accounts Payable and Notes Payable arising from Business) ＝ Cost of Sales ／ Average Accounts Payable Balance (including Accounts Payable and Notes Payable arising from Business) in Each Period.

• (5) Average Days in Sales ＝ 365 ／ Inventory Turnover.

• (6) Fixed Assets Turnover ＝ Net Sales ／ Average Net Fixed Assets. (7) Total Assets Turnover ＝ Net Sales ／ Average Total Assets.

• Profitability

• (1) Return on Total Assets ＝〔 Net Income ＋ Interest Expenses×(1 － Tax Rate) 〕／ Average Total Assets. (2) Return on Stockholders' Equity ＝ Net Income ／ AverageNet shareholders' Equity.

• (3) Profit Ratio ＝ Net Income ／ Net Sales.

• ＝ －

• (4) Earnings per Share (Net Income Preferred Dividend) ／ Weighted Average Number of Shares Issued. 5. Cash Flow

• (1) Cash Flow Ratio ＝ Net Cash Flow from Operating Activities ／ Current Liabilities.

• ＝

• (2) Cash Flow Adequacy Ratio Net Cash Flow from Operating Activities over the Last Five Years ／ (Capital Expenditures ＋ Increase in Inventory ＋ Cash Dividend) over the Last Five Years.

• (3) Cash Reinvestment Ratio ＝ (Net Cash Flow from Operating Activities － Cash Dividends) ／ (Gross Fixed Assets ＋ Long-term Investment ＋ Other Assets ＋ Working Capital).

• Leverage

＝ － (1) Operating Leverage (Net Operating Income Variable Operating Costs and Expenses) ／ Operating Income.

＝ － (2) Financial Leverage Operating Income ／ (Operating Income Interest Expenses).

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6.3 Supervisors’ Report for the Most Recent Year

Supervisor’s Report

The Company’s 2016 financial statements (including the consolidated financial statements) were audited by CPA Dian-Yi Lee and CPA Yu-Kuan Lin of PricewaterhouseCoopers Taiwan that were presented fairly, in all material respects, regarding the Company’s financial position, and the results of

operations and cash flows. We have reviewed the said business report, financial statements, and proposal for surplus earnings distribution that were prepared by the Board of Directors without finding any nonconformity. We submit this

Supervisors’ report in accordance with Article 219 of the Company Law.

To: The 2017 General Shareholders’ Meeting of Altek Corporation

Supervisor: Tim Liou

Supervisor: Amy Chien

Supervisor: Alex Liou

March 27, 2017

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6.4 Consolidated Financial Statements for the Years Ended December 31, 2016 and 2015

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2016 AND 2015

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 16000168

(In Thousands of New Taiwan Dollars) To the Board of Directors and Shareholders of Altek Corporation

Opinion

We have audited the accompanying consolidated balance sheets of Altek Corporation and its subsidiaries (the “Group”) as at December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and 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 at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. 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 consolidated financial statements of the current period. These matters were addressed in the

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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.

Allowance for inventory valuation losses

Description

Please refer to Note 4(11) for description of accounting policy on inventory valuation. Please refer to Note 5(2) for accounting estimates and assumption uncertainty in relation to inventory valuation. Please refer to Note 6(4) for description of allowance for inventory valuation losses.

The Group is primarily engaged in manufacturing and sales of digital image application products. As the Group is in a rapidly changing industry and the short life cycle of electronic products and the highly competitive nature of the market, there is a higher risk of incurring inventory valuation losses or having obsolete inventory. The Group measuring inventories sold at the lower of cost and net realisable value. For inventory that is over certain age and individually identified obsolete or ruined inventory, recognising losses at net realisable value. Aforementioned allowance for inventory valuation losses mainly arising from individually identified obsolete or ruined inventory, since the value of inventories is significant, inventory kinds is various, and the individual identification of inventory usually involves human judgment which belongs to the area that needs to be judged in the audit process. Thus, we identified valuation of allowance for inventory losses as one of key audit matters.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• A. Understanding and assessing the provision policy on inventory valuation losses.

• B. Obtaining the statement of individually identified obsolete inventory prepared by management and checking the accuracy of stock age analysis report and relevant information.

• C. Checking the reasonableness of net realisable value of inventory to assess the consistency between valuation of market value decline and its provision policy, and assessing the reasonableness of allowance for valuation losses determined by the Group.

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Timing of sales revenue recognition

Description

Please refer to Note 4(25) for accounting policies of revenue recognition. The Company and its subsidiaries’ revenue mainly arises from export and the cash amounts are material. As the sales terms vary from customers who located around Mainland China, Europe and America, the terms in customer orders and contracts are essential to be judged. As it involves judgement and identification of ownership transfer timing of risk and compensation, we consider the timing of revenue recognition a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• A. Assessing the appropriation of policies on sales revenue recognition.

• B. Assessing and testing the design of internal controls that are relevant to sales revenue recognition and the effectiveness of execution.

• C. Performing cutoff test on sales revenue in specific period around balance sheet date.

• D. Performing confirmation and substantive test on the balance of accounts receivable at the end of period to confirm accounts receivable and relevant sales revenue have been recorded in accurate period.

Other matter – Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of Altek Corporation as at and for the years ended December 31, 2016 and 2015.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the supervisors, are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

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1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

2. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

3. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

4. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

PricewaterhouseCoopers, Taiwan Hsinchu, Taiwan Republic of China March 27, 2017

---

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(3) 6(4) 6(5) 6(6) 6(7) 6(8) 6(24) 6(9)	2016	% 32 5 - 18 - - 10 1 - 66 1 1 31 1 - - 34 100	2015
		AMOUNT $ 4,849,989 693,709 349 2,783,145 19,943 3,628 1,470,971 210,016 19,772 10,051,522 147,834 126,757 4,657,848 92,917 69,782 80,472 5,175,610 $ 15,227,132		AMOUNT $ 5,741,973 427,531 17,264 2,251,748 21,199 2,061 1,061,419 115,452 10,869 9,649,516 143,995 138,206 5,211,143 93,713 71,834 91,771 5,750,662 $ 15,400,178	%
Current assets 1100 Cash and cash equivalents 1110 Current financial assets at fair value through profit or loss 1150 Notes receivable, net 1170 Accounts receivable, net 1200 Other receivables 1220 Current income tax assets 130X Inventories, net 1410 Prepayments 1470 Other current assets 11XX Current Assets Non-current assets 1543 Non-current financial assets at cost 1550 Investments accounted for using equity method 1600 Property, plant and equipment, net 1780 Intangible assets, net 1840 Deferred income tax assets 1900 Other non-current assets 15XX Non-current assets 1XXX Total assets					37 3 - 15 - - 7 1 -
					63
					1 1 34 1 - -
					37
					100

(Continued)

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

2016 2015 Notes AMOUNT % AMOUNT % 6(10) $ 2,415,000 16 $ 1,730,000 11 2,417,239 16 2,422,069 16 445,206 3 510,923 3 79,253 1 62,273 1 6(13) 52,247 - 36,998 - 204,924 1 355,698 2 5,613,869 37 5,117,961 33 6(13) 121,819 1 98,880 1 6(24) 442,112 3 528,141 3 6(11) 16,339 - 26,344 - 580,270 4 653,365 4 6,194,139 41 5,771,326 37 6(14) 2,739,788 18 2,726,938 18 6(15) 1,862,914 12 1,975,772 13 6(16) 1,374,374 9 1,347,010 9 142,456 1 142,456 1 2,946,092 19 3,047,283 20 6(17) ( 25,521 ) - 414,647 2 6(14) ( 129,393 ) ( 1 ) ( 129,393) ( 1) 8,910,710 58 9,524,713 62 122,283 1 104,139 1 9,032,993 59 9,628,852 63 9 $ 15,227,132 100 $ 15,400,178 100

Current liabilities 2100 Short-term borrowings 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2250 Provisions for liabilities - current 2300 Other current liabilities 21XX Current Liabilities Non-current liabilities 2550 Provisions for liabilities - noncurrent 2570 Deferred income tax liabilities 2600 Other non-current liabilities 25XX Non-current liabilities 2XXX Total Liabilities Equity attributable to owners of parent Share capital 3110 Common stock Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Other equity interest 3400 Other equity interest 3500 Treasury stocks 31XX Equity attributable to owners of the parent 36XX Non-controlling interest 3XXX Total equity Significant contingent liabilities and unrecognised contract commitments 3X2X Total liabilities and equity

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

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items

2016 2015 Notes AMOUNT % AMOUNT % 6(18) and 7 $ 11,577,046 100 $ 12,492,029 100 6(22)(23) ( 10,021,302)( 87)( 10,923,243)( 87) 1,555,744 13 1,568,786 13 6(22)(23) ( 93,892)( 1)( 65,012)( 1) ( 383,011)( 3)( 230,592)( 2) ( 1,033,082)( 9)( 1,046,831)( 8) ( 1,509,985)( 13)( 1,342,435)( 11) 45,759 - 226,351 2 6(19) 98,970 1 90,192 - 6(20) 71,965 1 1,602 - 6(21) ( 26,119) - ( 20,459) - 6(6) - - ( 15,175) - 144,816 2 56,160 - 190,575 2 282,511 2 6(24) ( 90,467)( 1)( 8,131) - $ 100,108 1 $ 274,380 2

4000 Sales revenue 5000 Operating costs 5900 Net operating margin Operating expenses 6100 Selling expenses 6200 General & administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of loss of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the year

(Continued)

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items	2016 2015 Notes AMOUNT % AMOUNT $ 7,847 - ($ 4,392) ( 1,334 ) - 747 6(11) 6,513 - ( 3,645) ( 524,091 ) ( 5) ( 846) ( 11,547 ) - ( 8,112) 6(24) 90,685 1 839 ( 444,953 ) ( 4) ( 8,119) ($ 438,440 ) ( 4) ($ 11,764) ($ 338,332 ) ( 3) $ 262,616 $ 53,800 1 $ 273,643 46,308 - 737 $ 100,108 1 $ 274,380 ($ 382,446 ) ( 3) $ 265,898 44,114 - ( 3,282) ($ 338,332 ) ( 3) $ 262,616 6(25) $ 0.20 $ 6(25) $ 0.20 $	2015
			%
Other comprehensive income 8311 Other comprehensive income, before tax, actuarial gains (losses) on defined benefit plans 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8310 Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8361 Currency translation differences of foreign operations 8370 Share of other comprehensive loss of associates and joint ventures accounted for under equity method 8399 Income tax relating to the components of other comprehensive income 8360 Components of other comprehensive loss that will be reclassified to profit or loss 8300 Total other comprehensive loss for the year 8500 Total comprehensive (loss) income for the year Profit,attributable to: 8610 Owners of the parent 8620 Non-controlling interest Profit (loss) for the year Comprehensive (loss) income attributable to: 8710 Owners of the parent 8720 Non-controlling interest Total comprehensive income (loss) for the year 9750 Basic earnings per share 9850 Diluted earnings per share			- -
			-
			- - -
			-
			-
			2
			2 -
			2
			2 -
			2
			1.02
		$	1.01

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

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

2015 Balance at January 1, 2015 Appropriation of 2014 earnings Legal reserve Cash dividends and capital surplus used to issue cash to shareholders Share-based payment transactions Restricted stock Purchase of treasury shares Changes in ownership interests in subsidiaries Difference between consideration and carrying amount of subsidiaries acquired Profit for the year Other comprehensive loss for the year Non-controlling interests Balance at December 31, 2015	Notes							Equity att	ributable to owners of	the parent	the parent			Non-controlling interest	Total equity
			Common stock	Capital surplus				RetainedEarnings		Otherequityinterest		Treasurystocks	Total
						Legal reserve		Special reserve	Unappropriated retained earnings	Currency translation differences of foreign operations	Other equity - others
	6(16) 6(15)(16) 6(12)(15)(17) 6(12)(15)(17) 6(28) 6(17)		$ 2,701,358 - - 1,180 24,400 - - - - - - $ 2,726,938	$ 2,063,551 - ( 135,127 ) 5,733 40,992 - - 623 - - - $ 1,975,772		$ 1,319,477 27,533 - - - - - - - - - $ 1,347,010		$ 142,456 - - - - - - - - - - $ 142,456	$ 2,964,969 ( 27,533 ) ( 135,127 ) - - - ( 25,024 ) - 273,643 ( 3,645 ) - $ 3,047,283	$ 481,868 - - - - - - - - ( 4,100 ) - $ 477,768	$ - - - 2,271 ( 65,392 ) - - - - - - ($ 63,121 )	$ - - - - - ( 129,393 ) - - - - - ($ 129,393 )	$ 9,673,679 - ( 270,254 ) 9,184 - ( 129,393 ) ( 25,024 ) 623 273,643 ( 7,745 ) - $ 9,524,713	$ 6,449 - - - - - 25,024 ( 623 ) 737 ( 4,019 ) 76,571 $ 104,139	$ 9,680,128 - ( 270,254 ) 9,184 - ( 129,393 ) - - 274,380 ( 11,764 ) 76,571 $ 9,628,852

(Continued)

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

2016 Balance at January 1, 2016 Appropriation of 2015 earnings Legal reserve Cash dividends and capital surplus used to issue cash to shareholders Share-based payment transactions Restricted stock Retirement of employee restricted shares Difference between consideration and carrying amount of subsidiaries acquired Profit for the year Other comprehensive loss for the year Non-controlling interest Balance at December 31,2016	Notes						Equity att	ributable to owners of	the parent	the parent			Non-controlling interest	Total equity
		Common stock	Capital surplus				RetainedEarnings		Otherequityinterest		Treasurystocks	Total
					Legal reserve		Special reserve	Unappropriated retained earnings	Currency translation differences of foreign operations	Other equity - others
	6(16) 6(15)(16) 6(12)(15)(17) 6(12)(15)(17) 6(28) 6(17)	$ 2,726,938 - - - 15,600 ( 2,750 ) - - - - $ 2,739,788	$ 1,975,772 - ( 134,140 ) 236 25,713 ( 4,620 ) ( 47 ) - - - $ 1,862,914		$ 1,347,010 27,364 - - - - - - - - $ 1,374,374		$ 142,456 - - - - - - - - - $ 142,456	$ 3,047,283 ( 27,364 ) ( 134,140 ) - - - - 53,800 6,513 - $ 2,946,092	$ 477,768 - - - - - - - ( 442,759 ) - $ 35,009	($ 63,121 ) - - 36,534 ( 41,313 ) 7,370 - - - - ($ 60,530 )	($ 129,393 ) - - - - - - - - - ($ 129,393 )	$ 9,524,713 - ( 268,280 ) 36,770 - - ( 47 ) 53,800 ( 436,246 ) - $ 8,910,710	$ 104,139 - - - - - 47 46,308 ( 2,194 ) ( 26,017 ) $ 122,283	$ 9,628,852 - ( 268,280 ) 36,770 - - - 100,108 ( 438,440 ) ( 26,017 ) $ 9,032,993

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

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Depreciation Amortisation Provision for doubtful accounts Net gain on financial assets at fair value through profit or loss Impairment loss on financial assets for using equity method Proceeds from disposal of financial assets at cost Interest expense Interest income Cash dividends income Share-based payment compensation cost Share of loss of associates and joint ventures accounted for under equity method Gain on disposal of property, plant and equipment Changes in operating assets and liabilities Changes in operating assets Financial assets at fair value through profit or loss - current Notes receivable Accounts receivable Other receivables Inventories Prepayments Other current assets Changes in operating liabilities Accounts payable Other payables Provisions for liabilities Other current liabilities Other non-current liabilities Cash (outflow) inflow generated from operations Interest received Cash dividends received Interest paid Income tax paid Net cash flows (used in) from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at cost Proceeds from liquidation of financial assets at cost Proceeds from capital reduction of financial assets at cost Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in intangible assets Decrease (increase) in deposits received Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Increase (decrease) in deposits-in Employee stock options exercised Payment to acquire treasury stocks Cash dividends from capital surplus Changes in non-controlling interest Net cash flows from (used in) financing activities Effect of exchange rate Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes 2016 2015 $ 190,575 $ 282,511 6(7)(22) 340,366 426,624 6(8)(22) 14,911 15,529 6(3) 9,093 502 6(2)(20) ( 761 ) ( 2,005 ) 6(20) - 20,442 6(5)(20) - ( 10,833 ) 6(21) 26,119 20,459 6(19) ( 52,135 ) ( 50,299 ) 6(19) ( 7,509 ) ( 267 ) 6(12) 36,770 5,113 - 15,175 6(20) ( 2,405 ) ( 1,974 ) ( 265,417 ) ( 63,124 ) 16,962 55,710 ( 614,037 ) 106,201 ( 4,800 ) 814 ( 509,643 ) 93,137 ( 102,393 ) 76,547 ( 189 ) ( 6,875 ) 175,121 ( 452,745 ) ( 8,234 ) ( 61,409 ) 38,188 ( 48,626 ) ( 149,947 ) ( 76,208 ) ( 5,676 ) 422 ( 875,041 ) 344,821 57,071 48,383 7,509 267 ( 25,839 ) ( 20,364 ) ( 69,180 ) ( 57,103 ) ( 905,480 ) 316,004 ( 14,583 ) ( 20,389 ) - 32,480 7,998 5,806 6(27) ( 99,656 ) ( 53,096 ) 22,248 1,974 6(27) ( 6,348 ) ( 8,839 ) 7,376 ( 7,274 ) ( 82,965 ) ( 49,338 ) 685,000 320,000 4,230 ( 6,103 ) - 4,071 6(14) - ( 129,393 ) ( 268,280 ) ( 270,254 ) 6(28) ( 26,017 ) 76,571 394,933 ( 5,108 ) ( 298,472 ) 38,565 ( 891,984 ) 300,123 6(1) 5,741,973 5,441,850 6(1) $ 4,849,989 $ 5,741,973

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

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ALTEK CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars, unless stated otherwise)

1. HISTORY AND ORGANIZATION

Altek Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.). The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the development, manufacturing and sale of digital image technology application, and related export and import trade.

The Company was listed in the Taiwan Stock Exchange on December 24, 2002, as approved by the TaiTz (91) Letter No. 024976 of the former Securities and Futures Commission, Ministry of Finance, R.O.C., dated September 27, 2002.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 27, 2017.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”) None.

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(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2017 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28) Accounting for acquisition of interests in joint operations (amendments to IFRS 11) IFRS 14, ‘Regulatory deferral accounts’ Disclosure initiative (amendments to IAS 1) Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Defined benefit plans: employee contributions (amendments to IAS 19) Equity method in separate financial statements (amendments to IAS 27) Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, ‘Levies’ Improvements to IFRSs 2010-2012 Improvements to IFRSs 2011-2013 Improvements to IFRSs 2012-2014	January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2016 January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating result based on the Group’s assessment. Amendments to IAS 36, ‘Recoverable amount disclosures for non-financial assets’

The amendments remove the requirement to disclose recoverable amount when a cash generating unit (CGU) contains goodwill but there has been no impairment. When a material impairment loss has been recognised or reversed for an individual asset, including goodwill, or a CGU, it is required to disclose the recoverable amount of the asset or CGU. If the recoverable amount is fair value less costs of disposal, it is required to disclose the level of the fair value hierarchy, the valuation techniques(s) used and key assumptions.

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(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC effective from 2017 are as follows:

endorsed by the FSC effective from 2017 are as follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Classification and measurement of share-based payment transactions (amendments to IFRS 2) Applying IFRS 9 ‘Financial instruments’ with IFRS 4 ‘Insurance contracts’ (amendments to IFRS 4) IFRS 9, ‘Financial instruments’ Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) IFRS 15, ‘Revenue from contracts with customers’ Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15) IFRS 16, ‘Leases’ Disclosure initiative (amendments to IAS 7) Recognition of deferred tax assets for unrealised losses (amendments to IAS 12) Transfers of investment property (amendments to IAS 40) IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First-time adoption of international financial reporting standards’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investments in associates and joint ventures’	January 1, 2018 January 1, 2018 January 1, 2018 To be determined by International Accounting Standards Board January 1, 2018 January 1, 2018 January 1, 2019 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating result based on the Group’s assessment. The quantitative impact will be discloed when the assessment is complete.

• A. Amendments to IFRS 2, ‘Classification and measurement of share-based payment transactions’

The amendment clarifies that the fair value of a cash-settled award is determined on a basis consistent with that used for equity-settled awards. The amendment also clarifies the accounting for modifications that change an award from cash-settled to equity-settled. Besides, the amendment introduces an exception that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax obligation associated with a share-based payment and pay that amount to the tax authority.

• B. Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts’ To address the concerns about the different effective dates of IFRS 9, ‘Financial instruments’, and the forthcoming new standard IFRS 4, ‘Insurance contract’, which may result in different bases

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for measuring assets and liabilities, this amendment allows insurers who meet specific requirements as set out in IFRS 4, ‘Insurance contract’ to adopt temporary exemption from IFRS 9, ‘Financial instruments’, or to use overlay approach under IFRS 9, ‘Financial instruments’ alternatively.

• C. IFRS 9, ‘Financial instruments’

• (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

• (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losse or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

• D. IFRS 15, ‘Revenue from contracts with customers’

• IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11 ‘Construction contracts’, IAS 18 ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

• The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

• Step 1: Identify contracts with customer.

• Step 2: Identify separate performance obligations in the contract(s).

• Step 3: Determine the transaction price.

• Step 4: Allocate the transaction price.

• Step 5: Recognise revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity

to disclose sufficient information to enable users of financial statements to understand the nature,

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amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Under IFRS 15, depending on the nature of licences, they are either (1) a promise to provide a right to access to an entity’s intellectual property as it exists throughout the licence period, or (2) a promise to provide a right to use an entity’s intellectual property as it exists at the point in time when the licence is granted.

Licences that meet all of the following criteria provide access to an entity’s intellectual property, and revenue is recognised based on the performance obligation's progress towards completion:

1. the contract requires, or the customer reasonably expects, that the entity will undertake activities that significantly affect the intellectual property to which the customer has rights;

2. the rights granted by the licence directly expose the customer to any positive or negative effects of the entity’s activities identified above; and

3. those activities do not result in the transfer of a good or service to the customer as those activities occur.

If licences cannot meet all criteria listed above, the entity provides a right to use the entity's intellectual property. Revenue shall be recognised at the point in time at which the licence is granted to the customer.

• E. Amendments to IFRS 15, ‘ Clarifications to IFRS 15 Revenue from Contracts with Customers’ The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract; determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and determine whether the revenue from granting a licence should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard.

• F. IFRS 16, ‘Leases’

• IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

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

(2) Basis of preparation

• A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:

• a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

• b) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

• a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls and entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

• b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

• d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as

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equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.

• e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

(Blank below)

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B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name ofSubsidiaries	Main Business Activities	Ownership (%)	Ownership (%)	Note
			December31,2016	December31,2015
Altek Corporation " " " " " Altek International Investment Co., Ltd. " " Note 2 Note 2 Note 3 Note 2 Note 2 Note 3 Altek Semiconductor (Cayman) Co., Ltd. Note 2	Altek International Investment Co., Ltd. Altek Japan Corporation Altek Investment Co., Ltd. Altek Autotronics Corporation Altek Biotechnology Corporation Altek International Holding (BVI) Co.,Ltd. Altek Lab Inc. Altek Optical (Cayman) Co., Ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek (Kunshan) Co., Ltd. Altek EMS (Kunshan) Co., Ltd. Altek Imaging Technology (Shanghai) Limited Altek Precision (Kunshan) Co., Ltd. Altek Trading (Shanghai) Limited Altek Biotechnology Corporation Altek Semiconductor Corporation Altek Optical Technology (Kunshan) Co., Ltd.	Investments and general business operations Sales and design of optical instruments Investments Research design, manufacture and sales of car electronic components Research and development, manufacture and sales of biotechnology Investments and general business operations Design service Investments and general business operations Investments and general business operations Manufacture and sales of digital still camera and its accessories Manufacture and sales of related engineering services Manufacture and sales of optical components Manufacture and sales of digital camera parts Wholesale, import and export of related electronic and their associated accessories Research and development, manufacture and sales of biotechnology Research design and sales of ASIC Manufacture and sales of related electronic services and its accessories and optical components	100% 100% 100% 100% - 100% 100% 100% 71.43% 100% 100% - 100% 100% 100% 100% 100%	100% 100% 100% 99.59% 100% - 100% 100% 71.43% 100% 100% - 100% 100% - 100% 100%	Note 1 Note 4 Note 4 Note 4

Note 1: Ownership increased due to subsidiary’s continuing repurchase of shares of Altek Autotronics Corporation. Note 2: Invested by Leading Tech. Co., Ltd., Toptek Investment Cayman Co., Ltd., Altek Imaging Technology (Cayman) Co., Ltd., Altek Trading (Cayman) Co., Ltd., Altek Optical Technology (Cayman) Co., Ltd. , which are wholly owned by Altek International Investment Co., Ltd. Note 3: Invested by Altek Biotechnology Holding (Cayman) Co., Ltd., which is wholly owned by Altek International Holding (BVI) Co., Ltd. Note 5: Altek Imaging Technology (Shanghai) Limited and Beijing Altek Image Communication Technology Co., Ltd. have completed the liquidation in the fourth quarter of 2015. Note 4: In June 2016, the Group’s investment structure transfer the share holding of Altek Biotechnology Corporation to be owned by Altek Biotechnology Holding (Cayman) Co., Ltd. , which is a subsidiary of Altek International Holding (BVI) Co., Ltd.

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• C. Subsidiaries not included in the consolidated financial statements: None.

• D. Adjustments for subsidiaries with different balance sheet dates: None.

• E. Significant restrictions: None.

• F. Subsidiaries that have non-controlling interests that are material to the Group: None.

• (4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions and balances

• a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

• b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

• c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss as part of the fair value gain or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘other gains and losses’.

• B. Translation of foreign operations

• a) The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

• ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

iii. All resulting exchange differences are recognised in other comprehensive income.

• b) When the foreign operation partially disposed of or sold is an associate or joint arrangements,

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exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even the Group still retains partial interest in the former foreign associate or joint arrangements after losing significant influence over the former foreign associate, or losing joint control of the former joint arrangements, such transactions should be accounted for as disposal of all interest in these foreign operations.

• c) When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale.

• d) Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rates at the balance sheet date.

(5) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

• a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

• b) Assets held mainly for trading purposes;

• c) Assets that are expected to be realised within twelve months from the balance sheet date;

• d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

• a) Liabilities that are expected to be paid off within the normal operating cycle;

• b) Liabilities arising mainly from trading activities;

• c) Liabilities that are to be paid off within twelve months from the balance sheet date;

• d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

• Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss

• A. Financial assets at fair value through profit or loss are financial assets held for trading or financial

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assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

• a) Hybrid contracts; or

• b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

• c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

• B. On a regular way purchase or sale basis, financial assets held for trading are recognised and derecognised using trade date accounting.

• C. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in profit or loss.

(8) Accounts receivable

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(9) Impairment of financial assets

• A. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

• B. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:

• a) Significant financial difficulty of the issuer or debtor;

• b) A breach of contract, such as a default or delinquency in interest or principal payments;

• c) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;

• d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

• e) The disappearance of an active market for that financial asset because of financial difficulties;

• f) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including

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adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;

• g) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;

• h) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

• C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

• a) Financial assets measured at amortised cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• b) Financial assets measured at cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(10) Derecognition of financial assets

The Group derecognises a financial asset when one of the following conditions is met:

• A.The contractual rights to receive cash flows from the financial asset expire.

• B.The contractual rights to receive cash flows from the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

• C.The Group neither retains nor transfers substantially all risks and rewards of ownership of the financial asset; however, it has not retained control of the financial asset.

(11) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises raw materials,

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direct labor, other direct costs and related production overheads which are allocated based on normal operating capacity. It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(12) Investments accounted for under the equity method / associates

• A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost. The Group’s investments in associates include goodwill identified on acquisition, net of any accumulated impairment loss arising through subsequent assessments.

• B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.

• C. When changes in an associate’s equity that are not recognised in profit or loss or other comprehensive income of the associate and such changes not affecting the Group’s ownership percentage of the associate, the Group recognises the Group’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

• D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.

• F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss.

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• G. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it still retains significant influence over this associate, then the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

• H. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss. If it still retains significant influence over this associate, then the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss proportionately.

• (13) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change.

The estimated useful lives of property, plant and equipment are as follows:

Buildings and structures	3 years ~ 40 years
Machinery	3 years ~ 10 years
Test equipment	3 years ~06 years
Other equipment	1 year0~ 11 years

(14) Operating leases (lessee)

Lease income from an operation lease (net of any incentives given to the lessor) is recognised in profit or loss on straight-line basis over the lease term.

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(15) Intangible assets

• Intangible assets consist of software costs and are amortized on a straight-line basis over its estimated useful life of 1 to 5 years.

(16) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(17) Borrowings

• A. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

• B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

(18) Accounts payable

Accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(19) Provisions for other liabilities

• Provisions (including warranties) are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

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(20) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

• (b) Defined benefit plans

  • i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.

  • ii. Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

  • iii. Past-service costs are recognised immediately in profit or loss.

• C. Termination benefits

• Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognises expense as it can no longer withdraw an offer of termination benefits or it recognized relating restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

• D. Employees’ compensation and directors’ and supervisors’ remuneration

• Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. The Company calculates the number of shares of employees’ stock bonus based on the fair value per share at the previous day of the

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stockholders’ meeting held in the year following the financial reporting year, and after taking into account the effects of ex-rights and ex-dividends.

- (21) Employee share based payment

• A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

• B. Restricted stocks:

• (a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period.

• (b) For restricted stocks where those stocks do not restrict distribution of dividends to employees and employees are not required to return the dividends received if they resign during the vesting period, the Group recognized the fair value of the dividends received by the employees who are expected to resign during the vesting period as compensation cost at the date of dividends declared.

• (c) For restricted stocks where employees do not need to pay to acquire those stocks, if the Group will pay the employees who resign during the vesting period to repurchase the stocks, the Group estimates such payment that will be made and recognizes such amounts as compensation cost and liability at the grant date in accordance with the terms of restricted stocks.

(22) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred income tax is recognised, using the balance sheet liability method, on temporary

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differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit (loss). Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

• D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

• F. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

(23) Share capital

• A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

• B. Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(24) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities.

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(25) Revenue recognition

• A. Sales of goods

The Group manufactures and sells digital image technology application products. Revenue is measured at the fair value of the consideration received or receivable taking into account of value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods should be recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains either continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

• B. Technical service revenue and royalty income

The Group provides and charges for technical service and royalty income. Revenue is recognised in accordance with the stage of completion of the transaction, and cost is recognised when incurred in the current period.The Group recognised losses immediately if any loss is expected to be incurred in the transaction. Revenue is recognised when the following conditions are met: (a)The amount of revenue can be measured reliably;

• (b) It is probable that the economic benefits associated with the transaction will flow to the entity;

• (c)The costs incurred or to be incurred in respect of the transaction can be measured reliably; and

• (d) The stage of completion of the transaction at the end of the reporting period can be measured reliably.

(26) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

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(1) Critical judgements in applying the Group’s accounting policies: None.

(2) Critical accounting estimates and assumptions:

• Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of obsolete inventories on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2016, the carrying amount of inventories was $1,470,971.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand Checking accounts and demand deposits Time deposits Total	December 31,2016 1,319 $ 123,931 4,724,739 4,849,989 $	December 31,2015
		1,139 $ 282,049 5,458,785
		5,741,973 $

• A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The Group has no cash and cash equivalents pledged to others.

(2) Financial assets at fair value through profit or loss

Items Current items: Financial assets held for trading Valuation adjustment Total	December 31,2016 690,449 $ 3,260 693,709 $	December 31,2015
		425,032 $ 2,499
		427,531 $

The Group recognized net gain (loss) of $2,325 and ($11,190) for the years ended December 31, 2016 and 2015, respectively.

(3) Accounts receivable

and 2015, respectively. Accounts receivable
		December 31,2016		December 31,2015
Accounts receivable	$	2,792,622	$	2,252,282
Less: allowance for bad debts	(	9,477)	(	534)
	$	2,783,145	$	2,251,748

• A. The credit quality of accounts receivable that were neither past due nor impaired was in the following categories based on the Group’s Credit Quality Control Policy:

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Group 1 Group 2	December 31,2016 2,734,047 $ 36,239 2,770,286 $	December 31,2015
		2,156,195 $ 91,433
		2,247,628 $

Note:

Group 1: Including domestic and foreign listed companies and their affiliated companies. Group 2: Others.

B.The ageing analysis of accounts receivable that were past due but not impaired is as follows:

Up to 30 days 31 to 90 days 91 to 180 days Over 181 days	December 31,2016 1,647 $ 6,291 - 4,921 12,859 $	December 31,2015
		565 $ 3,312 243 -
		4,120 $

The above ageing analysis was based on past due date.

C.Movements in the provision for impairment of accounts receivable are as follows:

Individualprovision Group provision Total At January 1 - $ 534 $ 534 $ Provision for impairment 9,627 534) ( 9,093 Effects of foreign exchange 150) ( - 150) ( At December 31 9,477 $ - $ 9,477 $ 2016 Individualprovision Group provision Total At January 1 - $ 37 $ 37 $ Provision for impairment - 502 502 Effects of foreign exchange - 5) ( 5) ( At December 31 - $ 534 $ 534 $ 2015		2016
			Total
			9,477 $
	Individualprovision Group provision Total - $ 37 $ 37 $ - 502 502 - 5) ( 5) ( - $ 534 $ 534 $		Total
			534 $

D.The Group does not hold any collateral as security.

(4) Inventories

nventories
Raw materials Work-in-process Finished goods Total		December 31,2016
	Allowance for Cost valuation loss 828,083 $ 59,076) ($ 203,734 24,153) ( 559,346 36,963) ( 1,591,163 $ 120,192) ($		Book value
			769,007 $ 179,581 522,383
			1,470,971 $

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December 31, 2015

	December 31,2015
Raw materials Work-in-process Finished goods Total	Allowance for Cost valuation loss 586,514 $ 125,289) ($ 145,078 25,569) ( 591,776 111,091) ( 1,323,368 $ 261,949) ($	Book value
		461,225 $ 119,509 480,685
		1,061,419 $

The cost of inventories recognised as expense for the periods:

Cost of goods sold Loss on decline in market value Total		For th year ended December 31,2016		For th year ended December 31,2015
		9,957,845 $ 63,457 10,021,302 $		10,819,363 $ 103,880 10,923,243 $

(5) Financial assets measured at cost

Financial assets measured at cost
Items		December 31,2016		December 31,2015
Non-current items:
Unlisted stocks	$	160,430	$	156,591
Less: Accumulated impairment	(	12,596)	(	12,596)
Total	$	147,834	$	143,995

• A. As the Group’s investment in unlisted stocks are not traded in an active market, and no sufficient industry information of companies similar to these stocks financial information can be obtained, the fair value of the investment in unlisted stocks cannot be measured reliably. The Group classified those stocks as ‘financial assets measured at cost’.

• B. Financial assets measured at cost – Pac-line Opportunity Fund has completed the liquidation on December 23, 2015. The Company recognised disposal of financial assets at Pac-line Opportunity Fund’s carrying amount of $21,647. The actual amount recovered was $32,480 and gain on disposal of investments of $10,833 was recognised.

• C. No impairment loss was recognized for the financial assets measured at cost for the years ended December 31, 2016 and 2015.

• D. As of December 31, 2016 and 2015, no financial assets measured at cost held by the Group were pledged to others.

(6) Investments accounted for under the equity method

		December 31,2016		December 31,2015
JinJing Optical Technology Co., Ltd.	$	44,028	$	44,028
Phoenix Optical (Shanghai) Co., Ltd.		139,971		151,420
		183,999		195,448
Less: accumulated impairment loss	(	57,242)	(	57,242)
	$	126,757	$	138,206

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The carrying amount of the Group’s interests in all individually immaterial associates and the Group’s

share of the operating results are summarized below:

As of December 31, 2016 and 2015, the carrying amount of the Group’s individually immaterial associates amounted to $126,757 and $138,206, respectively.

		For the year ended		For the year ended
		December 31,2016		December 31,2015
Loss for the period from continuing operations	($	118,000)	($	79,237)
Other comprehensive loss-net of tax	(	5,056)	(	12,930)
Total comprehensive loss	($	123,056)	($	92,167)

(Blank below)

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(7) Property, plant and equipment

At January 1, 2016 Cost Accumulated depreciation 2016	Land 1,042,216 $ - 1,042,216 $ 1,042,216 $ - - - - - 1,042,216 $ 1,042,216 $ - 1,042,216 $	Buildings and structures Machinery Test equipment 3,717,659 $ 1,868,136 $ 201,217 $ 584,318) ( 1,063,689) ( 177,229) ( 3,133,341 $ 804,447 $ 23,988 $ 3,133,341 $ 804,447 $ 23,988 $ 131 375 12,173 - 15,929) ( 2,142) ( - - 3,006 92,360) ( 127,213) ( 14,833) ( 162,015) ( 58,378) ( 1,243) ( 2,879,097 $ 603,302 $ 20,949 $ 3,522,603 $ 1,443,305 $ 199,899 $ 643,506) ( 840,003) ( 178,950) ( 2,879,097 $ 603,302 $ 20,949 $
Opening net book amount Additions Disposals Reclassifications Depreciation charge Net exchange differences Closing net book amount At December 31, 2016 Cost Accumulated depreciation

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At January 1, 2015 Cost Accumulated depreciation 2015	Land 1,042,216 $ - 1,042,216 $ 1,042,216 $ - - - - - 1,042,216 $ 1,042,216 $ - 1,042,216 $	Buildings and structures Machinery Test equipment 3,774,021 $ 1,914,467 $ 221,421 $ 496,859) ( 920,394) ( 178,466) ( 3,277,162 $ 994,073 $ 42,955 $ 3,277,162 $ 994,073 $ 42,955 $ 98 1,334 3,512 - - - - 240 - 95,578) ( 172,772) ( 21,861) ( 48,341) ( 18,428) ( 618) ( 3,133,341 $ 804,447 $ 23,988 $ 3,717,659 $ 1,868,136 $ 201,217 $ 584,318) ( 1,063,689) ( 177,229) ( 3,133,341 $ 804,447 $ 23,988 $
Opening net book amount Additions Disposals Reclassifications Depreciation charge Net exchange differences Closing net book amount At December 31, 2015 Cost Accumulated depreciation

For the years ended December 31, 2016 and 2015, there was no capitalisation of borrowing interests attributable to the property, plant and equipment and the Group did not pledge any fixed asset as collateral.

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(8) Intangible assets

		2016			2015
At January 1
Cost	$		130,369	$	138,662
Accumulated amortisation	(		36,656)	(	35,215)
	$		93,713	$	103,447
For the years ended December 31
Opening net book amount	$		93,713	$	103,447
Additions			15,415		2,676
Amortisation charge	(		13,926)	(	14,497)
Net exchange differences	(		2,285)		2,087
Closing net book amount	$		92,917	$	93,713
At December 31
Cost	$		129,020	$	130,369
Accumulated amortisation	(		36,103)	(	36,656)
	$		92,917	$	93,713
A. Details of amortisation on intangible assets are as follows:
	For the year ended		For the year ended
	December 31,2016		December 31,2015
Operating costs	$	5,861	$		7,685
Operating expense		8,065			6,812
	$	13,926	$		14,497

B.The Group has no intangible assets pledged to others.

(9) Long-term prepaid rents ( shown as ‘Other non-current assets’)

Land-use right	December31,2016 34,929 $	December31,2015
		39,003 $

The Group recognized amortisation expenses for the years ended December 31, 2016 and 2015 amounting to $985 and $1,032, respectively.

(10) Short-term borrowings

Short-term borrowings
Type of borrowings Bank borrowings Unsecured borrowings Type of borrowings Bank borrowings Unsecured borrowings	December31,2016 2,415,000 $ December31,2015 1,730,000 $	Interest rate range 1.1%~1.2% Interest rate range 1.14%~1.3%	Collateral
			None Collateral
			None

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(11) Pensions

• A. (a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.

(b) The amounts recognised in the balance sheet are as follows:

		December 31,2016		December 31,2015
Present value of defined benefit	($	54,809)	($	68,753)
obligations
Fair value of plan assets		48,564		48,985
Net defined benefit liability	($	6,245)	($	19,768)

• (c) Movements in net defined benefit liabilities are as follows:

Year ended December 31, 2016 Balance at January 1 Current service cost Previous service cost Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Pension payments Balance at December 31	Present value of defined benefit obligations		Fair value of plan assets	Net defined benefit liability
	68,753) ($ 56) ( 6,056 1,169) ( 63,922) ( - 1,866) ( 10,084 8,218 - 895 54,809) ($	48,985 $ - - 833 49,818 371) ( - - 371) ( 12 895) ( 48,564 $		19,768) ($ 56) ( 6,056 336) ( 14,104) ( 371) ( 1,866) ( 10,084 7,847 12 - 6,245) ($

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Year ended December 31, 2015 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Balance at December 31	Present value of defined benefit obligations		Fair value of plan assets	Net defined benefit liability
	62,721) ($ 52) ( 1,255) ( 64,028) ( - 2,284) ( 2,441) ( 4,725) ( - 68,753) ($		47,686 $ - 954 48,640 333 - - 333 12 48,985 $	15,035) ($ 52) ( 301) ( 15,388) ( 333 2,284) ( 2,441) ( 4,392) ( 12 19,768) ($

• (d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earning is less than aforementioned rates, government shall make payment for the deficit after authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2016 and 2015 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

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(e) The principal actuarial assumptions used were as follows:

The principal actuarial assumptions used	were as follows:
Discount rate Future salary increases	For the year ended December31,2016 1.40% 3.00%	For the year ended December31,2015
		1.70%
		3.00%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory. Note: Using the age range as an assessment of classification.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

		Discount rate	Discount rate			Future salaryincreases	Future salaryincreases	Future salaryincreases
.	Increase	0.25%	Decrease	0.25%	Increase 0.25%		Decrease	0.25%
December 31, 2016
Effect on present value of
defined benefit obligations	($	1,561)	$	1,624	$	1,458	($	1,411)
		Discount rate				Future salaryincreases
.	Increase	0.25%	Decrease	0.25%	Increase 0.25%		Decrease	0.25%
December 31, 2015
Effect on present value of
defined benefit obligations	($	1,804)	$	2,112	$	1,876	($	1,648)

The sensitivity analysis above is based on other conditions that are unchanged but only one assumption is changed. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

The method and assumptions of analysing sensitivity are the same with the previous for the period.

• (f) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2017 amounts to $12.

• B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly and amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. For the years ended December 31, 2016 and 2015, the Group had recognized pension costs of $36,056 and $35,926, respectively, under the above pension scheme.

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• (b) The subsidiaries provided defined contribution plans for its employees. Pursuant to local regulations, such employees and the subsidiaries each make contributions based on a certain percentage based of the salaries and wages to the pension funds. The subsidiaries had recognized pension costs of $33,303 and $49,915 for the years ended December 31, 2016 and 2015, respectively.

(12) Share-based payment

• A.As of December 31, 2016 and 2015, the Company’s share-based payment arrangements were as follows:

follows:
Type of arrangement	Grant date	Quantity granted	Contract period	Vesting conditions
Employee stock options " " " First time issuance of restricted shares to employees " "	June 13, 2008 October 31, 2008 October 28, 2011 March 21, 2012 November 13, 2015 March 18, 2016 May 5, 2016	8,000 1,000 3,000 3,000 2,440 1,190 370	9.6 years 9.2 years 9.2 years 8.9 yesrs 3 years 3 years 3 years	Note 1 Note 1 Note 1 Note 1 Note 2、Note 3 Note 2、Note 3 Note 2、Note 3

• Note 1: 2 years’ service vest 40%, 3 years’ service vest 70%, 4 years’ service vest 100%.

• Note 2: The restricted shares were issued at no consideration to the Company’s existing employees whose service years have reached 2 years and 3 years and who achieved the performance requirement. The vested ratio is 50% and 50%, respectively. If employees who are entitled to receive restricted stocks do not meet the vesting conditions, the Company will redeem at no consideration and retire those shares.

• Note 3: The stocks and dividends distributed to employees during the vesting period shall be given by the Company at no consideration. Employees are not required to return the stocks and dividends if they resign during the vesting period.

• B.Details of the share-based payment arrangements are as follows:

• a) For the years ended December 31, 2016 and 2015, the information on the share options and the weighted number of average exercise price of compensation plan employee stock options are as follows:

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Options outstanding at beginning of the year Optical expired Options exercised Options outstanding at end of the year Options exercisable at end of the year Approved and not yet issued options at the end of the year		For the year ended December 31,2016	For the year ended December 31,2016	For the year ended December 31,2015	For the year ended December 31,2015
		No. of options	Weighted-average exercise price (in dollars)(Note)	No. of options	Weighted-average exercise price (in dollars)(Note)
		5,155 - - 5,155 5,155 -	32.80 $ - - 31.30 31.30	6,561 1,288) ( 118) ( 5,155 4,417 -	33.60 $ - 34.50 32.80 32.70

• Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.

• b) No stock options were exercised during the year ended December 31, 2016. The weightedaverage stock price of stock options at exercise dates for the year ended December 31, 2015 amounted to $37.48 (in dollars).

• c) The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:

follows:
Issue date approved	Expirydate	December	31,2016	December	31,2015
		No. of shares (in thousands) 1,400 30 2,320 1,405	Exercise price (in dollars) (Note) $ 30.60 25.60 31.70 31.50	No. of shares (in thousands) 1,400 30 2,320 1,405	Exercise price (in dollars) (Note)
June 13, 2008 October 31, 2008 October 28, 2011 March 21, 2012	December 31, 2017 December 31, 2017 December 31, 2020 December 31, 2020				$ 32.00 26.80 33.20 33.00

• Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.

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• d) The fair value of stock options granted is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Type of arrangement	Grant date	Stock price (in dollars)	Exercise price (Note) (in dollars)	Expected price volatility	Expected option life	Expected dividends	Risk- free interest rate	Fair value per unit (in dollars)
Employee stock options " " "	June 13, 2008 October 31, 2008 October 28, 2011 March 21, 2012	$ 45.50 32.60 30.65 27.85	$ 30.60 25.60 31.70 31.50	24.45% 22.11% 30.27% 33.54%	6 years 6 years 5 years 4.9 years	1.5% 1.5% 1.4% 1.4%	2.40% 1.88% 1.18% 1.08%	10.56 6.54 7.42 7.35

Note : The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.

C.Restricted shares to employees:

• (1)The information on restricted shares to employees is as follows:

ote : The exercise price of stock options was adjusted based on the dividends and cash capital reduction per share distributed. stricted shares to employees: The information on restricted shares to employees is as follows:	cash dividends, stock
For the year ended December 31, 2016 (share in thousands) Outstanding beginning balance 2,440 Shares granted 1,560 Restricted shares forfeited-retired 190) ( Restricted shares forfeited-not retired 85) ( Outstanding ending balance 3,725	For the year ended December 31, 2015 (share in thousands)
	- 2,440 - -
	2,440

(2) As of December 31, 2016, the Company collected 275 thousand shares of restricted shares because certain employees did not meet the vesting condition. Among those collected back shares, 190 thousand shares were used for capital reduction. The capital reduction effective

date was on August 12, 2016 as resolved by the Board of Directors, and the change of registration has been completed.

D.Expenses incurred on share-based payment transactions are shown below:

(13)	Provisions Equity-settled At January 1, 2016 Additional provisions Used (reversed) during the period At December 31, 2016	For the year ended For the year ended December 31,2016 December 31,2015 36,770 $ 5,113 $ Warranty 135,878 $ 63,302 25,114) ( 174,066 $

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Current Non-current	December 31,2016 52,247 $ 121,819 $	December 31,2015
		36,998 $
		98,880 $

The Group gives warranties on digital image technology application products sold. Provision for warranty is estimated based on historical warranty data of digital image technology application products.

(14) Share capital

As of December 31, 2016, the Company’s authorized capital was $5,000,000, consisting of 500,000 thousand shares of ordinary stock, and the paid-in capital was $2,740,638 (Including redeemed but not yet retired amounted to $850) with a par value of $10 (in dollars) per share.

• A. Movements in the number of the Company’s ordinary shares outstanding are as follows:

(Expressed in thousands of shares)

		2016			2015
At January 1			268,280			270,136
Employee stock options exercised			-			118
Issuance of restricted stocks			1,560			2,440
Retired restricted shares to employees that
did not meet the vesting conditions	(		190)			-
Redeemed restricted shares to employees that
did not meet the vesting conditions	(		85)			-
Purchase of treasury shares			-	(		4,414)
At December 31			269,565			268,280

• B. Treasury shares

a) Reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

are as follows:
Shares held by	Reason for reacquisition Repurchase shares under the R.O.C. Company Law section 186 and the Enterprises Mergers and Acquisitions Act section 12 To be reissued to employees	(in thousands of shares) December 31, 2016
		Number of shares 981 3,433 4,414	Book value
Altek Corporation Altek Corporation			33,255 $ 96,138
			129,393 $

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December 31, 2015

		December 31, 2015	December 31, 2015
Shares held by	Reason for reacquisition Repurchase shares under the R.O.C. Company Law section 186 and the Enterprises Mergers and Acquisitions Act section 12 To be reissued to employees	(in thousands of shares)
		Number of shares 981 3,433 4,414	Book value
Altek Corporation Altek Corporation			33,255 $ 96,138
			129,393 $

• b) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.

• c) Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

• d) Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

• C. For the year ended December 31, 2015, the Company issued 118 thousand shares for employee stock options exercised and the registration for issuance had been completed.

• D. Under the Enterprise Merger and Acquisition Act, in consideration of business strategies and division of services to increase competitiveness and operational performance, the Company decided to spin-off its medical electronics segment amounting to $400,000 to swap for common shares of Altek Biotechnology Corporation at $10 per share and obtained 40 million shares. The split was resolved by the shareholders on June 2, 2015. On September 8, 2015, the Board of Directors resolved to set the spin-off date as January 4, 2016. Below are assets of the segment spun off.

spun off.
Asset Cash Other prepaid expenses Property, plant and equipment	January4,2016
	399,272 $ 501 227
	400,000 $

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• E. The Board of Directors’ meeting on April 20, 2015 and the stockholders’ meeting on June 2, 2015 adopted a resolution to issue employee restricted ordinary shares amounting to 4,000 thousands shares to be issued once or by installments within one year from the receiving date of the effectiveness notification from the authorities. The shares are subscribed at no cost to employees. The employee restricted ordinary shares issued are subject to certain transfer restrictions before their vesting conditions are met. Other than these restrictions, the rights and obligations of these shares issued are the same as other issued ordinary shares.

• (15) Capital surplus

Pursuant to the R.O.C. Company Law, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

legal reserve is insufficient.
At January 1, 2016 Employee stock options expense Cash dividends from capital surplus Issuance of restricted shares to employees Retirement of employee restricted shares Acquisition of ownership interests in subsidiaries At December 31, 2016	Share premium		Employee stock options	Difference between proceeds from disposal of subsidiary and book value	Restricted shares to employees Total 40,992 $ 1,975,772 $ - 236 - 134,140) ( 25,713 25,713 4,620) ( 4,620) ( - 47) ( 62,085 $ 1,862,914 $
	1,880,706 $ - 134,140) ( - - - 1,746,566 $		52,493 $ 236 - - - - 52,729 $	1,581 $ - - - - 47) ( 1,534 $

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At January 1, 2015 Employee stock options expense Employee stock options exercised Cash dividends from capital surplus Issuance of restricted shares to employees Acquisition of ownership interests in subsidiaries At December 31, 2015	Share premium	Employee stock options		Difference between proceeds from disposal of subsidiary and book value		Restricted shares to employees Total - $ 2,063,551 $ - 2,842 - 2,891 - 135,127) ( 40,992 40,992 - 623 40,992 $ 1,975,772 $	Total
	2,012,075 $ - 3,758 135,127) ( - - 1,880,706 $	50,518 $ 2,842 867) ( - - - 52,493 $		958 $ - - - - 623 1,581 $
							1,975,772 $

(16) Retained earnings

• A. According to the Company’s Articles of Incorporation, the annual earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. Special reserve shall be set aside in accordance with the rules set forth in the Securities and Exchange Law, and distributing the remaining amount as common stockholders’ dividends in accordance with the resolution adopted by the Board of Directors and approved at the stockholders’ meeting.

• B. The amount of dividends appropriated is based on the Company’s current year’s net income and prior years’ retained earnings, taking into account the Company’s financial structure and future operating plans. The distribution ratio of cash dividends to stock dividends is based on the Company’s funding status, diluted earnings per share and other factors. According to the dividend policy adopted by the Board of Directors, cash dividends shall account for at least 20% of the total dividends distributed. Dividends appropriation shall be resolved by the stockholders at the stockholders’ meeting.

• C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

• D. a) In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

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• b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.

• E. The appropriation of 2015 and 2014 earnings had been resolved at the stockholders’ meeting on June 17, 2016 and June 2, 2015, respectively. Details are summarized below:

Legal reserve Cash dividends	Dividends per share Amount (in NT dollars) 27,364 $ 134,140 0.5 $ 161,504 $ 2015	2014	2014
	Amount 27,364 $ 134,140 161,504 $	Amount 27,533 $ 135,127 162,660 $	Dividends per share (in NT dollars)
			0.5 $

The additional paid-in capital was returned to stockholders as resolved at the stockholders’ meeting on June 17, 2016 and on June 2, 2015, the shareholders resolved to return capital surplus amounting to $134,140 (approximately $0.5 per share) and $135,127 (approximately $0.5 per share) to shareholders in the nature of a capital contribution. The appropriation of 2015 and 2014 earnings were the same as that approved by the Board of Directors on March 18, 2016 and April 20, 2015 respectively.

• F. The appropriation of 2016 earnings had been resolved at the Board of Directors meeting on March 27, 2017. Details are summarized below:

27, 2017. Details are summarized below:
Legal reserve Cash dividends	2016
	Amount 5,380 $ 215,596 220,976 $	Dividends per share (in NT dollars) 0.8 $

Above-mentioned appropriation of 2016 earnings is yet to be resolved by the shareholders.

• G. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(23).

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(17) Other equity items

Other equity items
			Foreign currency		Unearned
		translation adjustment			compensation		Total
At January 1, 2016	$		477,768	($	63,121)	$	414,647
Currency translation differences:
Group	(		433,174)		-	(	433,174)
Associates	(		9,585)		-	(	9,585)
Issuance of restricted shares			-	(	41,313)	(	41,313)
to employees
Retirement of restricted shares			-		7,370		7,370
to employees
Share-based payment transactions			-		36,534		36,534
At December 31, 2016	$		35,009	($	60,530)	($	25,521)
			Foreign currency		Unearned
		translation adjustment			compensation		Total
At January 1, 2015	$		481,868	$	-	$	481,868
Currency translation differences:
Group			2,633		-		2,633
Associates	(		6,733)		-	(	6,733)
Issuance of restricted shares			-	(	65,392)	(	65,392)
to employees
Share-based payment transactions			-		2,271		2,271
At December 31, 2015	$		477,768	($	63,121)	$	414,647

(18) Operating Revenue

Operating Revenue
Sales Revenue Service Revenue Other Revenue Total	For the year ended December 31,2016 10,995,263 $ 451,148 130,635 11,577,046 $	For the year ended December 31,2015
		12,334,184 $ 47,415 110,430
		12,492,029 $

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(19) Other income

(19)	Other income
(20)	Other gains and losses Rental revenue Dividend income Interest income: Interest income from bank deposits Others Other income - others Total	For the year ended December 31,2016 - $ 7,509 52,076 59 39,326 98,970 $	For the year ended December 31,2015
			5,822 $ 267 50,233 66 33,804
			90,192 $

(20)	Other gains and losses
(21) (22)	Finance costs Expenses by nature For the year ended For the year ended December 31,2016 December 31,2015 Net gain (losses) on financial assets at fair value through profit or loss 2,325 $ 11,190) ($ Net currency exchange gains 67,791 21,297 Gain on disposal of property, plant and equipment 2,405 1,974 Gain on disposal of financial assets at amortised cost - 10,833 Impairment loss - 20,442) ( Other expenses 556) ( 870) ( Total 71,965 $ 1,602 $ For the year ended For the year ended December 31,2016 December 31,2015 Interest expense: Bank borrowings 26,119 $ 20,459 $ For the year ended For the year ended December 31,2016 December 31,2015 Employee benefit expenses 1,470,077 $ 1,634,084 $ Depreciation charges on property, plant and equipment 340,366 426,624 Amortisation charges on intangible assets 13,926 14,497 Total 1,824,369 $ 2,075,205 $	For the year ended December 31,2015
		1,602 $
		For the year ended December 31,2015
		20,459 $
		For the year ended December 31,2015
		1,634,084 $ 426,624 14,497
		2,075,205 $

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(23) Employee benefit expenses

Employee benefit expenses
Wages and salaries Employee stock options Labor and health insurance fees Pension costs Other personnel expenses Total	For the year ended December 31,2016 1,245,514 $ 36,770 72,001 63,695 52,097 1,470,077 $	For the year ended December 31,2015
		1,404,206 $ 5,113 80,852 86,194 57,719
		1,634,084 $

• A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute compensation to the employees and pay remuneration to the directors and supervisors that account for 10% to 20% and no higher than 2%, respectively, of distributable profit of the current period. If a company has accumulated deficit, earnings should be channeled to cover losses. Employees’ compensation can be distributed in the form of shares or in cash. Employees of subsidiaries that the Company holds more than 50% shareholding are entitled to receive aforementioned stock or cash.

• Abovementioned distributable profit of the current period refers to the pre-tax profit before deduction of employees’ compensation and directors’ and supervisors’ remuneration. A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributed as employees’ compensation and directors’ and supervisors’ remuneration; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

• B. For the years ended December 31, 2016 and 2015, employees’ compensation was accrued at $13,383 and $45,124, respectively; directors’ and supervisors’ remuneration was accrued at $1,784 and $6,017, respectively. The aforementioned amounts were recognized in salary expenses.

Employees’ compensation and directors’ and supervisors’ remuneration of 2015 as resolved by the meeting of Board of Directors were in agreement with those amounts recognised in the 2015 financial statements.

Information about the appropriation of employees’ bonus and directors’ and supervisors’ remuneration by the Company as proposed by the Board of Directors and resolved by the stockholders will be posted in the “ Market Observation Post System ” at the website of the Taiwan Stock Exchange.

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(24) Income tax

A. Income tax expense

a) Components of income tax expense:

			For the year ended		For the year ended
			December 31,2016		December 31,2015
Current tax:
Current tax on profits for the year	$		101,118	$	55,823
Adjustments in respect of prior
years	(		16,025)	(	7,338)
Total current tax			85,093		48,485
Deferred tax:
Origination and reversal of
temporary differences			5,374	(	40,354)
Total deferred tax			5,374	(	40,354)
Income tax expense	$		90,467	$	8,131
The income tax charged to equity during			the period is as follows:
			For the year ended		For the year ended
			December 31,2016		December 31,2015
Remeasurement of defined benefit
obligations		$	1,334	($	747)
Translation differences of foreign
operations	(		90,685)	(	839)
	($		89,351)	($	1,586)

b) The income tax charged to equity during the period is as follows:

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B. Reconciliation between income tax expense and accounting profit:

		For the year ended		For the year ended
		December 31,2016		December 31,2015
Tax calculated based on profit before
tax and statutory tax rate	$	57,996	$	74,552
Expense disallowed by tax regulation		11,400	(	2,447)
Estimated 10% corporate income tax
on unappropriated earnings		10,849		15,451
Changes in reassessment of deferred
tax assets		21,277	(	54,841)
Effect from tax credit of investment	(	7,955)	(	17,246)
Adjustment of income tax expense in
prior years	(	16,025)	(	7,338)
Tax paid outside of the territory of the Republic of China		22,975		-
Tax exempted income by tax regulation	(	17,723)		-
Effect from alternative minimum tax		7,673		-
Income tax expense	$	90,467	$	8,131

C. Amounts of deferred tax assets or liabilities as a result of temporary difference, tax losses and investment tax credit are as follows:

nvestment tax credit are as follows:
Recognised in other Recognised in comprehensive January1 profit or loss income December 31 Temporary differences: -Deferred tax assets: Cost of after-sales service and other estimated expenses 62,442 $ 8,771) ($ 354) ($ 53,317 $ Tax losses - 280 - 280 Tax credit of investment 9,392 6,793 - 16,185 Subtotal 71,834 $ 1,698) ($ 354) ($ 69,782 $ -Deferred tax liabilities: Gain on foreign investment under the equity method 399,995) ($ 4,474) ($ - $ 404,469) ($ Estimated warranty costs - - 980) ( 980) ( Currency translation differences 127,347) ( - 90,685 36,662) ( Others 799) ( 798 - 1) ( Subtotal 528,141) ($ 3,676) ($ 89,705 $ 442,112) ($ Total 456,307) ($ 5,374) ($ 89,351 $ 372,330) ($ For theyear ended December 31,2016	For theyear ended December 31,	2016
		December 31
		53,317 $ 280 16,185
		69,782 $

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			For theyear ended December 31,2015	For theyear ended December 31,2015	For theyear ended December 31,2015	For theyear ended December 31,2015	For theyear ended December 31,2015	For theyear ended December 31,2015	For theyear ended December 31,2015
						Recognised
							in other
				Recognised in		comprehensive
		January1		profit or loss			income		December 31
Temporary differences:
-Deferred tax assets:
Cost of after-sales service and
other estimated expenses	$		67,911	($	6,216)	$	747	$		62,442
Tax losses			17,007	(	17,007)		-			-
Tax credit of investment			-		9,392		-			9,392
Subtotal	$		84,918	($	13,831)	$	747	$		71,834
-Deferred tax liabilities:
Gain on foreign investment under
the equity method	($		454,966)	$	54,971	$	-	($		399,995)
Currency translation differences	(		128,186)		-		839	(		127,347)
Others	(		13)	(	786)		-	(		799)
Subtotal	($		583,165)	$	54,185	$	839	($		528,141)
Total	($		498,247)	$	40,354	$	1,586	($		456,307)

• D. According to the Act for Industrial Innovation, details of the amount the Group is entitled as investment tax credit and unrecognised deferred tax assets amount are as follows:

Qualifyingitems				December 31,2016
		Unused tax credits		Unrecognised deferred tax assets	Investment usable until
Research and development Research and development Qualifyingitems		8,230 $ 7,955 16,185 $		- $ - - $ December 31,2015	2017 2018
		Unused tax credits		Unrecognised deferred tax assets	Investment usable until
Research and development		9,392 $		- $	2017

• E. Expiration dates of unused tax losses and amounts of unrecognised deferred tax assets are as follows:

follows:	ollows:
December 31, 2015: None. Amount Year incurred filed / assessed 2016 1,650 $			December 31,2016
			Unused amount 1,650 $	Unrecognised deferred tax assets Usable untilyear - $ 2026
					2026

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• F. The amounts of deductible temporary difference that are not recognized as deferred tax assets ： None.

• G. As of December 31, 2016, the Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority.

• H. Unappropriated retained earnings:

December 31, 2016 December 31, 2015 Earnings generated in and after 1998 $ 2,946,092 $ 3,047,283

• I. As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $279,388 and $260,906, respectively. The creditable tax rate is estimated to be 9.48% for the year ended December 31, 2016 and was 9.04% for the year ended December 31, 2015.

• (25) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Restricted shares to employees Employees' bonus Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	For	theyear ended December 31,2016
	Amount after tax 53,800 $ 53,800 $ 53,800 $	Weighted average number of ordinary shares outstanding (share in thousands) 265,840 1,019 958 267,817	Earnings per share (in dollars)
			0.20 $
			0.20 $

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Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Restricted shares to employees Assumed conversion of all dilutive potential ordinary shares Employees’ bonus Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	For	theyear ended December 31,2015	theyear ended December 31,2015
	Amount after tax 273,643 $ 273,643 $ 273,643 $	Weighted average number of ordinary shares outstanding (share in thousands) 269,237 7 3 795 270,042	Earnings per share (in dollars)
			1.02 $
			1.01 $

(26) Operating leases

The Group leases office buildings for operational needs under non-cancellable operating lease agreements. These lease terms are between 2016 and 2027. Most of the lease agreements are renewable at the market price at the end of the lease period. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

Not more than 1 year More than 1 year but not more than 5 years Over 5 years	December 31,2016 7,289 $ 14,785 22,178 44,252 $	December 31,2015
		16,963 $ 22,285 25,874
		65,122 $

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(27) Supplemental cash flow information

Investing activities with partial cash payments

		For the year ended		For the year ended
		December 31,2016		December 31,2015
Acquisitions of property, plant, and
equipment	$	45,477	$	105,791
Add:property and equipment and
construction billings payable at
beginning of year		61,027		8,332
Less: property and equipment and
construction billings payable at end
of year	(	6,848)	(	61,027)
Cash paid	$	99,656	$	53,096
		For the year ended		For the year ended
		December 31,2016		December 31,2015
Acquisitions of intangible assets	$	15,415	$	2,676
Add: Payable at beginning of year		-		6,163
Less: Payable at end of year	(	9,067)		-
Cash paid	$	6,348	$	8,839

(28) Transactions with non-controlling interest

• A. Acquisition of additional equity interest in a subsidiary

For the years ended December 31, 2016 and 2015, the Group acquired an additional 0.41% and 1.57%, respectively, of shares of its subsidiary –Altek Autotronics Corporation for a total cash consideration of $1,483 and $5,097, respectively. This transaction resulted in a decrease in the non-controlling interest by $1,436 and $5,720 and a decrease in the equity attributable to owners of the parent by $47 and increase by $623, respectively. The effect of the change in ownership interests in Altek Autotronics Corporation on the equity attributable to owners of the parent for the years ended December 31, 2016 and 2015 is shown below:

		For the year ended		For the year ended
	December 31,2016		December 31,2015
Carrying amount of non-controlling
interest acquired	$	1,436	$	5,720
Consideration paid to non-controlling interest	(	1,483)	(	5,097)
Capital surplus
-Difference between proceeds on
acquisition of or disposal of equity
interest in a subsidiary and its carrying
amount	($	47)	$	623

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• B. The Group did not acquire share increase raised by a subsidiary proportionally to its interest to the second-tier subsidiary.

Grandson Altek Semiconductor (Cayman) Co., Ltd., a second-tier subsidiary of the Group, increased capital by issuing new shares on December 30, 2015. The Group did not acquire shares proportionally to its interest. As a result, the Group decreased its share interest to 28.57%. The transaction increased non-controlling interest by $89,367 and decreased the equity attributable to owners of parent by $11,261. The effect of changes in interests in Altek Semiconductor (Cayman) Co., Ltd. on the equity attributable to owners of the parent for the year ended December 31, 2015 is shown below:

year ended December 31, 2015 is shown below:
Cash Decrease in the carrying amount of non-controlling interst Exchange differences on translation of foreign financial statements Retained earnings -recognition of changes in ownership interest in subsidiaries	2015
	81,668 $ 102,673) ( 4,019) ( 25,024) ($

• -recognition of changes in ownership interest in subsidiaries

7. RELATED PARTY TRANSACTIONS

(1) Significant transactions and balances with related parties:

No significant related party transactions.

(2) Key management compensation

No significant related party transactions. Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Share-based payments Total	For the year ended December 31,2016 32,845 $ 647 9,067 42,559 $	For the year ended December 31,2015
		60,609 $ 864 -
		61,473 $

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

Contingencies

a) The GUC (General Unsecured Creditor Trustee) of Eastman Kodak Company (hereunder ‘Kodak’) filed a lawsuit against the Company in the United States Bankruptcy Court for the Southern District of New York, asserting certain payments in 49.2 million transactions prior to Kodak’s bankruptcy were out of ordinary course of business. After discussion, the GUC agreed to withdraw its claim on August 24, 2016, so the suit was dismissed. The Company neither needs to refund nor to make any

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payment to the GUC.

• b) On December 22, 2015, the Company filed a civil complaint against HTC Corporation with the Taiwan Taipei District Court, alleging HTC Corporation’s default in relation to the agreed upon Manufacturing and Supply Agreement and claiming damage of USD 11,126 thousand against HTC Corporation. As of March 27, 2017, the case is still under trial.

10. SIGNIFICANT DISASTER LOSS

• None.

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

• None.

12. OTHERS

(1) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends, return capital or issue new shares to achieve the optimal capital structure.

(2) Financial instruments

• A. Fair value information of financial instruments

• The carrying amounts of financial instruments (including cash and cash equivalents, notes receivable, accounts receivable, other receivables, refundable deposits (shown as non-current assets), short-term borrowings, accounts payable, other payables, and guarantee deposits received (shown as non-current liabilities)) are approximate to their fair value. The fair value information of financial instruments measured at fair value is provided in Note 12(3).

• B. Financial risk management policies

• a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial performance.

• b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units, as well as provides written principles for overall risk management and policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

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• C. Significant financial risks and degrees of financial risks

• a) Market risk

Foreign exchange risk

• i. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

• ii. Management has set up a policy to require that group companies hedge their entire foreign exchange risk exposure with Group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

• iii. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through transactions denominated in the relevant foreign currencies.

• iv. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

December 31, 2016

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD USD:RMB Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD USD:RMB	Foreign Currency Amount (In thousands)	Exchange Rate	Book Value (NTD)	SensitivityAnalysis	SensitivityAnalysis	SensitivityAnalysis
				Extent of Variation	Effect on Profit or (Loss)	Effect on Other Comprehensive Income(Loss)
	USD 102,320 USD 75,336 USD 3,930 USD 94,101 USD 61,696	32.25 6.937 32.25 32.25 6.937	3,299,820 $ 2,429,586 126,757 $ 3,034,757 $ 1,989,696	1% 1% 1% 1% 1%	32,998 $ 24,296 - $ 30,348) ($ 19,897) (	- $ - 1,268 $ - $ -

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December 31, 2015

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD USD:RMB Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD USD:RMB	Foreign Currency Amount (In thousands)	Exchange Rate	Book Value (NTD)	SensitivityAnalysis	SensitivityAnalysis	SensitivityAnalysis
				Extent of Variation	Effect on Profit or (Loss)	Effect on Other Comprehensive Income(Loss)
	USD 100,781 USD 80,924 USD 4,210 USD 92,778 USD 67,843	32.825 6.4936 32.825 32.825 6.4936	3,308,136 $ 2,656,330 138,206 $ 3,045,438 $ 2,226,946	1% 1% 1% 1% 1%	33,081 $ 26,563 - $ 30,454) ($ 22,269) (	- $ - 1,382 $ - $ -

• v.Total exchange gain, including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2016 and 2015 amounted to $67,791 and $21,297, respectively.

Interest rate risk

Interest risk arises from the changes of market interest rate causing fluctuation in financial instruments’ fair value or cash received and paid in the future.

The Group raised short-term borrowings at fixed rates during the years ended December 31, 2016 and 2015, and thus had no significant cash flow interest rate risk.

Price risk

The Group is exposed to price risk because of investments held by the Group. The Group sets limits to control the transaction volume and stop-loss amount to reduce it’s market risk.

b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings, the utilization of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers,

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including outstanding receivables and committed transactions.

• ii. No credit limits were exceeded during the reporting periods, and management does not expect any significant losses from non-performance by these counterparties for the years ended December 31, 2016 and 2015.

• iii. The individual analysis of financial assets that had been impaired is provided in the statement for each type of financial asset in Note 6.

• iv. The credit quality information of financial assets that are neither past due nor impaired or past due and not impaired is provided in the statement in Note 6(3).

• c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, and compliance with internal balance sheet ratio targets.

• ii. Surplus cash held by the operating entities over and above the balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

• iii. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:

Non-derivative financial liabilities:
December 31, 2016 Short-term borrowings Accounts payable Other payables Guarantee deposits recevied	Less than 1year 2,415,000 $ 2,417,239 445,206 -	Over 1year
		- $ - - 10,094

Non-derivative financial liabilities:

Non-derivative financial liabilities:
December 31, 2015 Short-term borrowings Accounts payable Other payables Guarantee deposits received	Less than 1year 1,730,000 $ 2,422,069 510,923 -	Over 1year
		- $ - - 6,576

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(3) Fair value estimation

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed beneficiary certificates, on-the-run derivative instruments with quoted market prices is included in Level 1.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in equity investment without active market is included in Level 3.

• B. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2016 and 2015 is as follows:

016 and 2015 is as follows:
December 31, 2016 Assets Recurring fair value measurements Financial assets at fair value though profit or loss Beneficiary certificate December 31, 2015 Assets Recurring fair value measurements Financial assets at fair value though profit or loss Beneficiary certificate	Level 1 693,709 $ Level 1 427,531 $	Level 2 - $ Level 2 - $	Level 3 - $ Level 3 - $	Total
				693,709 $
				Total
				427,531 $

• C. The methods and assumptions the Group used to measure fair value are as follows:

The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Open-end fund Market quoted price Net asset value

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13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: None.

• B. Provision of endorsements and guarantees to others: None.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) : Please refer to table 1.

• D. Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or 20% of the Company’s paid-in capital: None.

• E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 2.

• H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 3.

• I. Trading in derivative financial instruments undertaken during the reporting periods: None.

• J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China ): Please refer to table 5.

(3) Information on investments in Mainland China

• A. The related information of investments in Mainland China: Please refer to table 6.

• B. Significant transactions, either directly or indirectly throught a third area, with investee companies in the Mainland Area:

For the significant purchases, sales, accounts payable and accounts receivable transactions between the Company and the investee companies in Mainland China through its subsidiaries, please refer to tables 2 and 4.

14. SEGMENT INFORMATION

(1) General information

The Group mainly operates in one segment. The chief operating decision-maker reviews the Group’s reporting to assess performance and allocate resources. The Group mainly has a single reportable segment.

(2) Measurement of segment information

The chief operating decision-maker assesses the segment performance through the consolidated financial statements which are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by

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the FSC.

(3) Information about segment profit or loss, assets and liabilities

The Group has a single reportable segment. The revenue from external customers, the related gain

or loss, and the assets correspond with the consolidated revenue, consolidated operating income, and consolidated assets.

(4) Reconciliation for segment income (loss), assets and liabilities ： None.

(5) Information on product and service

Revenues from external customers are derived from the sale of digital image technology application and related export and import trade.

(6) Geographical information

Geographical information for the years ended December 31, 2016 and 2015 is as follows:

For the years ended December 31,

Asia Europe America Taiwan Total	Revenue Non-current assets 9,950,667 $ 2,577,653 $ 1,118,838 - 67,611 - 439,930 2,173,112 11,577,046 $ 4,750,765 $ 2016	2015	2015
	Revenue 9,950,667 $ 1,118,838 67,611 439,930 11,577,046 $	Revenue 9,235,699 $ 1,191,005 29,719 2,035,606 12,492,029 $	Non-current assets
			3,085,704 $ - - 2,219,152
			5,304,856 $

(7) For the years ended December 31, 2016 and 2015, $5,987,938 and $4,876,853 out of the Group's total revenue was from sales of digital image technology application and others to certain customers, respectively.

(Blank below)

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Altek Corporation and subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

December 31, 2016

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account		As of December31,2016	As of December31,2016
				Number of shares	Bookvalue	Ownership (%)	Fairvalue
Altek Corporation " " Altek (Kunshan) Co., Ltd. " Altek Investment Co., Ltd. Altek Autotronics Corporation Altek Semiconductor Corporation Altek Biotechnology Corporation	Gianta Co., Ltd. - Common stock Yung Li Investments Inc. - Common stock Hua-chuang Automobile Information Technical Center Co., Ltd. - Common stock Guangdong Kingding Optical Technology Co., Ltd. CPEC Huachuang Private Equity (Kunshan) Enterprise (Limited Partnership) Money Market Fund Money Market Fund Money Market Fund Money Market Fund	Director None None None None None None None None	Financial assets carried at cost -non-current " " " " Financial assets at fair value through profit or loss-current " " "	762,876 1,999,613 10,000,000 1,200,000 N/A 987,466 15,440,615 2,401,418 20,580,254	10,312 $ 5,950 93,450 5,579 32,543 15,782 202,008 44,317 431,602	14.55% 4.84% 2.00% 6.45% (Note) N/A N/A N/A N/A	10,312 $ 5,950 93,450 5,579 32,543 15,782 202,008 44,317 431,602

Note : 1% of CPEC Huachuang Private Equity (Kunshan) Enterprise (Limited Partnership)’s capital contribution.

Table 1, Page 1

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Altek Corporation and subsidiaries

Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more

For the year ended December 31, 2016

			For	the year ended December 31, 2016	the year ended December 31, 2016
Table 2 Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction			Differences in transaction terms compared to third party transactions Notes/accounts receivable (payable) Expressed in thousands of NTD (Except as otherwise indicated)
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unit price	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
Altek Corporation " Altek International Investment Co., Ltd. Altek Autotronics Corporation Altek Semiconductor Corporation Altek Biotechnology Corporation Altek (Kunshan) Co., Ltd. Altek Trading (Shanghai) Limited "	Altek International Investment Co., Ltd. Altek Semiconductor Corporation Altek (Kunshan) Co., Ltd. Altek International Investment Co., Ltd. " " " Altek (Kunshan) Co., Ltd. Altek Autotronics Corporation	Parent and affiliated company " " The same ultimate parent company Parent and affiliated company The same ultimate parent company Parent and affiliated company The same ultimate parent company "	Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases	2,949,019 $ 251,758 4,428,756 333,318 393,380 685,573 217,766 1,037,567 131,908	92% 8% 100% 98% 21% 94% 3% 89% 11%	Net 120 days Net 75 days " " " " " " "	Approximately the same price with third parties " " " " " " " "	Note " " " " " " " "	1,990,972) ($ 78,824) ( 1,354,238) ( 90,870) ( 245,329) ( 177,066) ( - 151,175) ( 64,017) (	96% 4% 96% 100% 41% 79% 0% 70% 30%

Note: The payment term with third parties was net 60~120 days.

Table 2, Page 1

159

Altek Corporation and subsidiaries

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

December 31, 2016

Table 3 Creditor	Counterparty	Relationship withthe counterparty	Balance as atDecember31,2016	Turnover rate	Overduereceivables	Overduereceivables	Amount collected subsequent to the balance sheet date Allowance for doubtfulaccounts Expressed in thousands of NTD (Except as otherwise indicated)	Amount collected subsequent to the balance sheet date Allowance for doubtfulaccounts Expressed in thousands of NTD (Except as otherwise indicated)
					Amount	Actiontaken
Altek International Investment Co., Ltd. " " Altek (Kunshan) Co., Ltd. "	Altek Corporation Altek Semiconductor Corporation Altek Biotechnology Corporation Alteck International Investment Co., Ltd. Altek Trading (Shanghai) Limited	Parent company Parent company The same ultimate parent company Parent company The same ultimate parent company	1,990,972 $ 245,329 177,066 1,354,238 151,175	1.33 3.26 3.25 5.10 8.88	- $ - - - -	N/A N/A N/A N/A N/A	836,221 $ 188,010 58,736 1,073,911 151,175	- $ - - - -

Table 3, Page 1

160

Altek Corporation and subsidiaries

Significant inter-company transactions during the reporting periods

For the year ended December 31, 2016

Table 4

Expressed in thousands of NTD

(Except as otherwise indicated)

Companyname	Counterparty	Relationship (Note 1)			Transaction
			General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets(Note 2)
Altek Corporation " " " Altek International Investment Co., Ltd. " Altek Autotronics Corporation " Altek Semiconductor Corporation " Altek Biotechnology Corporation " Altek (Kunshan) Co., Ltd. " Altek Trading (Shanghai) Limited " " "	Altek International Investment Co., Ltd. " Altek Semiconductor Corporation " Altek (Kunshan) Co., Ltd. " Altek International Investment Co., Ltd. " " " " " " " Altek (Kunshan) Co., Ltd. " Altek Autotronics Corporation "	(1) (1) (1) (1) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3)	Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable	2,949,019 $ 1,990,972 251,758 78,824 4,428,756 1,354,238 333,318 90,870 393,380 245,329 685,573 177,066 217,766 - 1,037,567 151,175 131,908 64,017	Net 120 days " Net 75 days " " " " " " " " " " " " " " "	25% 13% 2% 1% 38% 9% 3% 1% 3% 2% 6% 1% 2% 0% 9% 1% 1% 0%

Note 1: Relationship between transaction and counterparty is classified into the following categories:

(1) Parent company to subsidiary.

• (2) Subsidiary to parent company.

• (3) Subsidiary to subsidiary.

Note 2: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 3: The Company may decide to disclose or not to disclose transaction details in this table based on the Materiality Principle.

Table 4, Page 1

161

Altek Corporation and subsidiaries

Information on investees

Table 5

For the year ended December 31, 2016

Expressed in thousands of NTD (Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shares he	ld as at December	31,2016	Net profit (loss) of the investee for the year ended December 31,2016	Investment income(loss) recognised by the Company for the year ended December 31,2016	Footnote
				Balance as at December 31, 2016	Balance as at December 31, 2015	Number of shares	Ownership (%)	Book value
Altek Corporation " " " " " Altek International Investment Co., Ltd. " Altek Semiconductor (Cayman) Co., Ltd. Altek Biotechnology Holding (Cayman) Co., Ltd.	Altek International Investment Co., Ltd. Altek Japan Corporation Altek Investment Co., Ltd. Altek Autotronics Corporation Altek Biotechnology Corporation Altek International Holding (BVI) Co, Ltd. Altek Lab Inc. JinJing Optical Technology Co., ltd. Altek Semiconductor Corporation Altek Biotechnology Corporation	British Virgin Islands Japan Republic of China Republic of China Republic of China British Virgin Islands U.S.A. Samoa Republic of China Republic of China	Investment and general business operations Sale and design of optical instruments Investment Research design, manufacture and sales of car electronic components Research and development, manufacture and sales of biotechnology Investment and general business operations Design service Investment and general business operations Research design and sales of ASIC Research and development, manufacture and sales of biotechnology	3,033,618 $ 2,869 50,000 184,080 - 415,376 118,671 112,875 200,000 415,376	3,033,618 $ 2,869 50,000 182,597 1,000 - 118,671 112,875 200,000 -	92,726,249 1,000 5,000,000 21,775,200 - 12,865,921 11,311,875 3,500,000 20,000,000 40,100,000	100% 100% 100% 100% - 100% 100% 23.33% 100% 100%	9,124,874 $ 11,820 35,143 241,318 - 433,348 63,035 - 377,737 433,348	10,903 $ 17) ( 8,868 306) ( 32,393 2,657 1,112 116,809) ( 169,369 32,393	10,903 $ 17) ( 75) ( 276) ( 29,736 2,657 1,908 - 120,980 2,657	Note 1 Note 3 Note 3 Note 2 Note 3

Note 1: Ownership (%) on Altek Autotronics Corporation held by Altek Corporation and Altek Investment Co., Ltd. are 90.73% and 9.27%, respectively.

Note 2: Common stock of 9,311,875 shares and preferred stock of 2,000,000 shares.

Note 3: In June 2016, The share holding of Altek Biotechnology Corporation was changed to be owned by Altek Biotechnology Holding (Cayman) Co., Ltd. , which is a subsidiary of Altek International Holding (BVI) Co., Ltd.

Table 5, Page 1

162

Information on investments in Mainland China For the year ended December 31, 2016

Table 6

Altek Corporation and subsidiaries

Expressed in thousands of NTD

(Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-incapital	Investment method （Note1）	Accumulated amount of remittance from Taiwan to Mainland China as of January1,2016	Amount remitted Mainland Ch remitted back the yearendedD	from Taiwan to ina/Amount to Taiwan for ecember31,2016	Accumulated amount of remittance from Taiwan toMainland China as of December31,2016	Net profit (loss) of investee for the year ended December 31, 2016	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December31,2016	Book value of investments in Mainland China as of December 31, 2016	Accumulated amount of investment income remitted back to Taiwan as of December31,2016
					Remitted to Mainland China	Remitted back to Taiwan
Altek (Kunshan) Co., Ltd. (Note 2) Altek EMS (Kunshan) Co., Ltd. (Note 3) Altek Trading (Shanghai) Limited Kinko Optical (Suzhou) Co., Ltd. Phoenix Optical (Shanghai) Co., Ltd. Altek Precision (Kunshan) Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd.	Manufacture and sale of digital still cameras and its accessories Manufacture and sale of related engineering services Wholesale, import and export of digital cameras, digital video cameras and their associated accessories Manufacture and sale of optical components Manufacturing and marketing of digital cameras and its key components, photo sensor and optoelectronic equipment Design, manufacture and sales of digital camera parts Manufacture and sales of digital camera and its accessories and optical components	1,599,600 $ 161,250 274,125 483,750 510,292 445,050 483,750	2 2 2 2 2 2 2	1,451,250 $ 292,927 274,125 112,875 285,878 445,050 483,750	- $ - - - - - -	- $ - - - - - -	1,451,250 $ 292,927 274,125 112,875 285,878 445,050 483,750	3,403) ($ 22,792 ( 14,828) ( 113,246) ( 1,191) ( 95) 993	100% 100% 100% 23.33% 40% 100% 100%	3,403) ($ 22,792 ( 14,828) - - ( 95) 993	3,861,055 $ 776,216 279,889 - 126,757 156,659 140,762	- $ - - - - - -

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1)Directly invest in a company in Mainland China.

(2)Through investing in an existing company in the third area,which then investeed in the investee in Mainland China.

(3)Others.

Note 2: Including retained earnings capitalized of US$4,600 (In thousand of US dollars).

Note 3: Including retained earnings capitalized of US$3,600 (In thousand of US dollars).

Companyname	Accumulated amount of remittance from Taiwan to Mainland China as of December31,2016	Investment amount approved by the Investment CommissionoftheMinistry of EconomicAffairs (MOEA)	Ceiling on investments in Mainland China imposed by theInvestment Commissionof MOEA
Altek Corporation	3,387,535 $	4,610,267 $	- $

Note:According to “REGULATIONS COVERNING THE APPROVAL OF INVESTMENT OR TECHNICAL IN MAINLAND CHINA”on August 29, 2008, Altek Corporation obtained the approval from the Industrial Development Bureau of Ministry of Economics Affairs issued to Headquarters, so there is no need to compute the ceiling amount of the Company.

Table 6, Page 1

163

• 6.5 Separate Financial Statements for the Years Ended December 31, 2016 and 2015

Please refer to page 133~189 of the 2016 Chinese Annual Report.

164

6.6 Difficulty in Financial Turnover of the Company and its Affiliated Companies: None

165

VII. Review of Financial Conditions, Financial Performance, and Risk Management

7.1 Analysis of Financial Status IFRS & Consolidated Base

Unit: NT$ thousand

			Unit: NT$ thousand	Unit: NT$ thousand
Year Item	December 31, 2015	December 31, 2016	Difference
			Amount	%
Current Assets	9,649,516	10,051,522	402,006	4.17
Property, Plant and Equipment	5,211,143	4,657,848	(553,295)	(10.62)
Intangible Assets	93,713	92,917	(796)	(0.85)
Other Assets	445,806	424,845	(20,961)	(4.70)
Total Assets	15,400,178	15,227,132	(173,046)	(1.12)
Current Liabilities	5,117,961	5,613,869	495,908	9.69
Non-current Liabilities	653,365	580,270	(73,095)	(11.19)
Total Liabilities	5,771,326	6,194,139	422,813	7.33
Share Capital	2,726,938	2,739,788	12,850	0.47
Capital Reserve	1,975,772	1,862,914	(112,858)	(5.71)
Retained Earnings	4,536,749	4,462,922	(73,827)	(1.63)
Other Equity Interest	414,647	(25,521)	(440,168)	(106.15)
Treasury Stock	(129,393)	(129,393)	-	-
Non-controlling Interests	104,139	122,283	18,144	17.42
Total Shareholders’ Equity	9,628,852	9,032,993	(595,859)	(6.19)

7.1.1 Analysis of the percentage of change exceeding 20%

Other Interests: The change in other interests was due to the exchange rate of translation of financial statements of foreign operations.

7.1.2 Effect of changes on the Company’s financial condition: No significant effect.

7.1.3 Future response actions: N/A.

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7.2 Analysis of Financial Performance IFRS & Consolidated Base

Analysis of Financial Performance IFRS & Consolidated Base	Analysis of Financial Performance IFRS & Consolidated Base	Analysis of Financial Performance IFRS & Consolidated Base	Analysis of Financial Performance IFRS & Consolidated Base	Analysis of Financial Performance IFRS & Consolidated Base
Unit: NT$thousand
Year Item	2015	2016	Amount of Increase (Decrease)	Percentage of Change (%)
OperatingRevenue	12,492,029	11,577,046	(914,983)	(7.32)
Cost of Sales	10,923,243	10,021,302	(901,941)	(8.26)
Gross Profit from Operations	1,568,786	1,555,744	(13,042)	(0.83)
OperatingExpenses	1,342,435	1,509,985	167,550	12.48
Net OperatingIncome(Loss)	226,351	45,759	(180,592)	(79.78)
Non-operatingIncome and Expenses	56,160	144,816	88,656	157.86
Income before Tax	282,511	190,575	(91,936)	(32.54)
Income Tax Expense	8,131	90,467	82,336	1,012.62
Income after Tax	274,380	100,108	(174,272)	(63.51)

• 7.2.1 Analysis of the percentage of change exceeding 20%

• A. Net operating income, net income before tax, and net income after tax decreased The revenue and profits of digital imaging products decreased in 2016; manufacturers in mainland China transformed themselves from OEM to operation and reclassified management/sales expenses under the overall production cost as operating expenses, leading to the decrease in net operating income, net income before tax, and net income after tax.

• B. Non-operating income and expenses increased

Non-operating income and expenses increased due to the decrease in investment loss recognized via the equity method and the increase in net foreign exchange gains.

• C. Income tax expenses increased

Income tax expenses increased due to the recognition of temporary difference income tax and deferred tax.

7.2.2 Effect of changes on the company’s future business

• Due to maturity of the digital camera industry with a M-shaped trend, the Company will strengthen its production of key components and reduce costs, in addition to integrating resources, improving expense control and improving procedures and production/sales management. The Company will also strengthen the digital imaging core technologies, develop other digital imaging products, and enter the supply chain of the mobile communication industry.

The smartphone imaging solutions include design, chips, software, and camera lens and modules. Benefiting by its strength in the field of imaging processors, the Company has actively negotiated with customers specializing in smartphones and driving recorders. The smartphone solutions, including chips, software, IP, and modules, can be customized and thus are highly recognized by global smartphone customers. Currently, the Company has transformed itself into a digital imaging solution provider to improve its mid and long-term competitiveness, growth and profitability.

167

• 7.2.3 Analysis of changes in gross profit from operations IFRS & Consolidated Base

Unit: NT$ thousand

		Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Item	Change	Reasons for Change- Favorable (Unfavorable)
		Difference in Price	Difference between Cost and Price	Difference in Sales Portfolio	Difference in Quality
Gross Profit from Operations	(13,042)	742,088	(680,309)	132,757	(207,578)

Explanation for reasons for change:

• A. Price difference: Mainly caused by changes in the unit price of digital cameras and other product portfolios.

• B. Cost price difference: Mainly caused by changes in the cost of digital cameras and other product portfolios.

• C. Sales portfolio difference: Mainly caused by changes in other product portfolios.

• D. Quantity difference: Mainly caused by the decrease in sales of digital cameras and changes in the quantity of other product portfolios.

7.3 Analysis of Cash Flow

IFRS & Consolidated Base

Analysis of Cash Flow IFRS & Consolidated Base	Analysis of Cash Flow IFRS & Consolidated Base	Analysis of Cash Flow IFRS & Consolidated Base	Analysis of Cash Flow IFRS & Consolidated Base
				Unit: NT$thousand
Cash and Cash Equivalents, Beginning of Year (a)	Net Cash Flow from Operating Activities (b)	Cash Inflows (c)	Cash Surplus (Deficit) (a)+(b)+(c)	Leverage of Cash Deficit
				Investment Plan	Financing Plan
5,741,973	(905,480)	13,496	4,849,989	－	－

7.3.1 Analysis of changes in cash flow

• A. Operating activities: Net cash outflows from the business cycle.

• B. Investment activities: Net cash outflows from the purchase of equipment.

• C. Financing activities: Net cash inflows from the increase in short-term loans and payment of cash dividends.

7.3.2 Remedy for cash deficit and liquidity analysis

• No cash deficit occurs. The financing activities will be organized based on the business needs.

• 7.3.3 Analysis of cash flow for the coming year: N/A.

7.4 Major Capital Expenditure Items and Impact on Finance and Business: None.

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• 7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year

The Company’s main investment policy is to enhance vertical integration of imaging processing, optical technologies and key components. The main investment companies are Altek International Investment Co., Ltd., Altek (Kunshan) Co., Ltd. In 2016, the Company recognized investment gain of NT$42,928 thousand, mainly from Altek Semiconductor Corp. and Altek Biotechnology Corp.

Benefiting by its existing digital imaging processors and optical and imaging processors and customized products, the Company provides customers with chips, software, IP, and module integration and has transformed itself into a digital imaging solution provider. Currently, the Company enters the supply chain of several smartphone customers and actively applies digital imaging technologies to other fields. In the future, the Company will continue to invest in related technologies and products to improve its mid and long-term competitiveness, growth, and profitability.

• 7.6 Analysis of Risk Management

• 7.6.1 Organizational Structure and Policy of Risk Management

For possible operational risks, the Company clearly sets up each department’s responsibility for risk management. The Company controls and ensures customers’ needs through weekly management meetings and maintains a good relationship with customers to make profit and achieve a win-win satiation.

• A. Organizational Structure of Risk Management

To respond to possible risks that the Company may face in the future, the Company clearly sets up each department’s responsibility for risk management.

(1) Audit Office

Audit Office is responsible to carry out audit operations for the better implementation of the internal control system and as the reference to the management’s performance evaluation and decision making, so as to control possible risks.

• (2) CEO Office

CEO Office is responsible to respond to possible legal actions, disputes over patent rights, contractual risks, and mid and long-term business and operational strategies.

• (3)Business Division

The division is focusing on the risk of products when the Company faces the product’s trends changes and the competition of the product’s price and will make the strategy in order to control the risks.

• (4)Project Management Division

a. The division is focusing on the risks of the Product’s safety, the protection of environment, and Mass- Production Management so as to make the responding strategy.

b. The division is focusing on the risks of material’s price and the stability of the supply chain so as to make the strategy.

169

• (5) Finance Division

Facing possible risks with regard to interest rates and exchange rates, Finance Division is responsible to engage in hedging transactions based on the related laws and regulations and the Procedures for Acquisition or Disposal of Assets. Finance Division is also responsible to control risks arising from transmission of information.

(6) Human Resource Division

Human Resource Division is responsible to draft the mid and long-term strategies for possible risks and control such risks.

B. Risk Management Policy

Risk Management is performed by Finance Division based on the policies approved by the Board of Directors. Finance Division works closely with business units and is responsible to identify, assess, and hedge financial risks. Finance Division sets up written policies for the specific scope and matters, such as foreign exchange risk, interest risk, credit risk, use of derivative and non-derivative financial instruments, and investment of remaining liquidity.

(1) Market Risk

a. Foreign Exchange Risk

The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. The fair value changes with the fluctuations in foreign exchange rates. Management has set up a policy to require that the companies hedge their entire foreign exchange risk exposure with group treasury. As such, no significant market risk is anticipated.

b. Interest Rate Risk

Interest rate risk arises from the changes of market interest rate causing fluctuation in financial instruments’ fair value or cash received and paid in the future. The Company raised short-term borrowings at fixed rates during the years ended December 31, 2016 and 2015, and thus had no significant cash flow interest rate risk.

c. Price Risk

The Company is exposed to price risk because of investments in beneficiary certificates made by the Company. The Company has set limits to control the transaction volume and stop-loss amount to reduce its market risk. As such, no significant price risk is anticipated.

• (2) Credit Risk

According to the Company’s credit policy, each local entity in the Company is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. The counterparties’ credit has been evaluated and no default is expected. As a result, the possibility of credit risk is relatively low. The largest credit risk is the book value. As the Group’s accounts receivable debtors have good credit records, no material losses resulting from counter-party defaults

170

are anticipated.

(3) Liquidity Risk

Cash flow forecasting is performed in the operating entities of the Company to ensure they have sufficient cash to meet operational needs.

Surplus cash held by the operating entities over and above the balance required for working capital management are transferred to the Company treasury. Company treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. Financial assets invested by the Company have active markets, which allow quick sales of financial assets at a price close to the fair value. As such, no significant demand for additional cash is anticipated.

7.6.2 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures

Unit: NT$ thousand

				Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Item	2015			2016
	Amount	Percentage to Revenue (%)	Percentage to Profit (Loss) before Tax(%)	Amount	Percentage to Revenue (%)	Percentage to Profit (Loss) before Tax(%)
Interest Expense	20,459	0.16	7.24	26,119	0.23	13.71
Exchange Gains	21,297	0.17	7.54	67,791	0.59	35.57

Note: Consolidated base with IFRS.

Based on the conservatism principle, the short-term investments of the Company are mainly Money Market Fund.

Interest expenses of Year 2016 increased NT$5,660 thousand compared with Year 2015, with an interest rate between 1.1% and 1.2%. Finance Division evaluates the bank loan rate and obtains the average market rate and works closely with the bank to obtain the best lending rate.

Exchange gains of Year 2016 increased NT$46,494 thousand compared with Year 2015 mainly due to the fluctuation of foreign exchange rate. The purchase/sales is performed at US dollars. The fair market price changes with the fluctuation of foreign exchange rate, resulting in dynamic natural hedging. In addition, the Company has properly controlled the net position of foreign currencies to reduce the risk of changes in the foreign exchange rate. Thus, no significant market risk is anticipated.

According to the procedures for acquisition or disposal of derivatives stipulated in the Procedures for Acquisition or Disposal of Assets, the Company collects information on interest rates and foreign exchange rates on a daily basis and refers to the opinions of experts in foreign exchange to reduce the effect of changes in foreign exchange rates on profit.

The Company pays close attention to inflation at any time and properly adjusts the product quotations and purchase contracts to reduce the effect of inflation on the Group.

171

• 7.6.3 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions

The Company did not engage in any high-risk or high-leveraged investments or any lending or endorsement to others. The Company has established the Procedures for Lending Funds to Other Parties and Endorsement & Guarantee and the Procedures for Acquisition or Disposal of Assets (including regulations for derivative transactions).

• 7.6.4 Future Research & Development Projects and Corresponding Budget

Please refer to page 62 “Ongoing Research and Development Projects and Expenses”

• 7.6.5 Effects of and Response to Changes in Major Policies and Laws Relating to Corporate Finance and Sales

The Company consistently pays close attention to any changes in local and foreign policies and makes appropriate amendments to our systems when necessary. Changes in related laws have not had a significant impact on our operations.

• 7.6.6 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales

The digital image applications have been widely used nowadays including mobile devices, medical devices and autotronic devices, regardless of the correction of DSC market. As the digital image applications and needs continue to grow, the Company will enhance the market share and influence in the digital image area to improve the overall competitiveness, growth and profitability.

• 7.6.7 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures

The Company has consistently maintained a professional and ethical business philosophy, emphasized the corporate image and risk management, and fulfilled its social responsibilities. With years of experience and transforming itself into a digital camera solution provider, the Company has also organized numerous public welfare activities, including establishing Altek Charity Fund, to fulfill the social responsibilities.

• 7.6.8 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans

According to the resolution passed in the 17th meeting of the 7th Board of Directors on May 5, 2017, the short-form merger between the Company and its subsidiary Altek Autotronics Corp., with June 30, 2017 as the base date, will benefit the resource integration across the Group. As this merger is within the scope of the Group, which is considered reorganization, it has no impact on shareholders’ equity and generates no risk.

• 7.6.9 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans

• As of the date of this Annual Report, the Company has no ongoing factory expansion activities.

• 7.6.10 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration

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• A. Purchase

• In addition to maintaining a good relationship with major suppliers, the Company has consistently worked to diversify its supplier base in order to reduce the concentration of purchase.

B. Sales

In addition to traditional digital cameras, the Company also sells sports cameras and wearable cameras. The smartphone imaging solutions, including chips, software, IP, and modules, can be customized and thus are highly recognized by global smartphone customers without excessive customer concentration. In the future, the Company will continue to strengthen the digital imaging core technologies and develop other related fields, in addition to reinforcing the relationship with existing customers, in order to increase both customers and the market share.

• 7.6.11 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%

As of the date of this Annual Report, there have been no major transfers of shares.

• 7.6.12 Effects of, Risks Relating to and Response to the Changes in Management Rights There was no change in management rights.

173

7.6.13 Litigation or Non-litigation Matters

Case	Fact in Dispute	Amount of Subject	Start of Litigation	Major Litigant	Current Progress
Dispute over the transactions prior to Eastman Kodak Company’s(“Kodak”) bankruptcy being out of ordinary course of business	Dispute over the transactions prior to Eastman Kodak Company’s(“Kodak”) bankruptcy being out of ordinary course of business	The GUC of Kodak filed a lawsuit against the Company in the United States Bankruptcy Court for the Southern District of New York, asserting certain payments in US$49.2 million transactions prior to Kodak’s bankruptcy were out of ordinary course of business.	June 17, 2014	General Unsecured Creditor Trustee (entrusted by the creditor)	The GUC has agreed to drop the lawsuit, which took effect when served on the court at 3am on August 24, 2016, the Eastern Time Zone.
Civil complaint against HTC Corporation	HTC Corporation’s default in the agreed upon Manufacturing and Supply Agreement	US$11,126 thousand against HTC Corporation	December 22, 2015	HTC Corporation	The case is still under trial at the Taiwan Taipei District Court.

7.6.14 Other Major Risks: None.

7.7 Other Important Items: None.

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VIII. Special Disclosure

8.1 Profile of Affiliated Companies

8.1.1 Organizational Structure of Affiliated Companies

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December 31, 2016
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Altek Corporation
100% 100% 100% 90.73% 100%
Altek
Altek International Altek Investment
Altek Japan Corp. Investment Co. Ltd. Co., Ltd. 9.27% Altek Autotronics Corp. International Holding Co., Ltd.
100% 100% 100% 100% 100% 100% 71.43% 100% 100%
Altek Lab Inc. Altek Imaging Technology Leading Tech Toptek Investment Altek Trading Technology (Cayman) Altek Optical Altek Semiconductor Altek Optical Altek Biotechnology
Co., Ltd. Cayman Co., Ltd. (Cayman) Co. Ltd. (Cayman) Co., Ltd. (Cayman) Co., Ltd. (Cayman) Co., Ltd.
(Cayman) Co., Ltd. Co., Ltd.
100% 100% 100% 100% 100% 100% 100%
Altek (Kunshan) Altek (Kunshan) Co., Toptek Electronics Altek Trading Altek (Kunshan) Altek Semiconductor Altek Biotechnology
Precision Co., Ltd. Ltd. (Kunshan) Co., Ltd. (Shanghai) Co., Ltd. Optical Co., Ltd. Corp. Corp.
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8.1.2 Scope of Business Engaged by Affiliated Companies

The scope of business engaged by affiliated companies is research, development, manufacturing and sale of digital imaging-related applications. With over 20 years of experience in digital imaging technologies including digital imaging processing, optical and imaging chip design, the Company and its affiliated companies provides customers with chips, software, IP, and module integration and has transformed itself into a digital imaging solution provider. In addition to successfully entering the supply chain of smartphone customers, the Company also applies digital imaging technologies to the medical and automotive fields.

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8.1.3 Profile of Affiliated Companies

Unit: NT$ (foreign currency) thousand; December 31, 2016

Name of Company	Date of Establishment	Address	Paid-in Capital	Paid-in Capital	Main Business or Production	Division of Work
Altek Japan Corporation	July 5, 2005	Japan	JPY	10,000	Design of optical components	Development and design of camera optics components
Altek International Investment Co., Ltd.	February 2, 2000	British Virgin Islands	USD	92,726	Business operation and investment	Business operation and investment
Altek Lab Inc.	July 15, 2000	U.S.A.	USD	1,005	Design services	R&D and sales of key components of digital cameras
Altek Imaging Technology (Cayman) Co., Ltd.	April 19, 2005	Cayman Islands	USD	15,092	Business operation and investment	Holding company indirectly investing in mainland China
Altek (Kunshan) Precision Co., Ltd.	October 27, 2010	Kunshan, China	USD	13,800	Production/sales of plastic and metal parts	Component supplier
Leading Tech. Co., Ltd.	May 15, 2002	Cayman Islands	USD	45,000	Business operation and investment	Holding company indirectly investing in mainland China
Altek (Kunshan) Co., Ltd.	July 23, 2001	Kunshan, China	USD	49,600	Manufacturing and sales of digital cameras and related components	Manufacturing and sales of digital cameras
Toptek Investment Cayman Co., Ltd.	March 3, 2004	Cayman Islands	USD	1,400	Business operation and investment	Holding company indirectly investing in mainland China
Toptek Electronics (Kunshan) Co., Ltd.	March 3, 2004	Kunshan, China	USD	5,000	Production/sales of electronic product components	Component supplier
Altek Trading (Cayman) Co., Ltd.	June 7, 2005	Cayman Islands	USD	8,500	Business operation and investment	Holding company indirectly investing in mainland China
Altek Trading(Shanghai) Co., Ltd.	December 7, 2005	Shanghai, China	USD	8,500	Wholesale and import/export of electronic products and accessories andpackageproducts	Import/export of electronic products
Altek Semiconductor (Cayman) Co., Ltd.	November 26, 2009	Cayman Islands	USD	70	Business operation and investment	Holding company indirectly investing in subsidiaries in Taiwan

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Name of Company	Date of Establishment	Address	Paid-in Capital	Paid-in Capital	Main Business or Production	Division of Work
Altek Semiconductor Corp.	November 26, 2009	Hsinchu City, Taiwan	NTD	200,000	R&D and sales of integrated circuits with special applications	Development and design of integrated circuits with special applications
Altek Optical (Cayman) Co., Ltd.	May 19, 2006	Cayman Islands	USD	8,864	Business operation and investment	Holding company indirectly investing in mainland China
Altek Optical Technology (Cayman) Co., Ltd.	November 21, 2011	Cayman Islands	USD	15,000	Business operation and investment	Holding company indirectly investing in mainland China
Altek (Kunshan) Optical Co., Ltd.	November 21, 2011	Kunshan, China	USD	15,000	Production/sales of electronic product components	Production/sales of electronic product components
Altek Investment Co., Ltd.	July 20, 2004	Taipei City, Taiwan	NTD	50,000	General investment	Investment company
Altek Autotronics Corp.	December 3, 2009	Hsinchu City, Taiwan	NTD	240,000	R&D, manufacturing, and sales of automotive electronics components	R&D and sales of automotive electronics components
Altek International Holding Co., Ltd.	May 17, 2016	British Virgin Islands	USD	12,866	Business operation and investment	Holding company indirectly investing in subsidiaries in Taiwan
Altek Biotechnology (Cayman) Co., Ltd.	May 23, 2016	Cayman Islands	USD	12,866	Business operation and investment	Holding company indirectly investing in subsidiaries in Taiwan
Altek Biotechnology Corp. (Note)	December 11, 2014	Hsinchu City, Taiwan	NTD	401,000	R&D, manufacturing, and sales of biotechnological and medical electronic equipment	R&D of biotechnological and medical electronic equipment

Note: The 2016 shareholders’ meeting (held on June 17, 2016) resolved to pass the adjustment of Altek Biotechnology Corp.’s investment structure; instead of direct holding, Altek Biotechnology Corp. is 100% owned by Altek Biotechnology Holding (Cayman) Co., Ltd., which is invested by 100%-owned Altek International Holding (BVI) Co., Ltd.

8.1.4 The Same Shareholders of Companies Controlled by or Subordinate to the Company: None.

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8.1.5 Directors, Supervisors and Presidents of Affiliated Companies

December 31, 2016

				December 31,	December 31,
Name of Company	Title	Name or Representative		Shareholding
		Name	Corporate Representative	Number of Shares	Shareholding Ratio
Altek Japan Corporation	Chairman Director Director Supervisor	Altek Corporation	Alex Hsia David Lin Vincent Kao Steve Shyr	1,000	100.00%
Altek International Investment Co., Ltd.	Director	Altek Corporation	Alex Hsia	92,726,249	100.00%
Altek Lab Inc.	Director	Altek International Investment Co., Ltd.	Alex Hsia	(Common stock) 9,311,875 (Preferred stock) 2,000,000	100.00%
Altek Imaging Technology (Cayman) Co., Ltd.	Director	Altek International Investment Co., Ltd.	Alex Hsia	15,092,410	100.00%
Altek (Kunshan) Precision Co., Ltd.	Executive Director Director	Altek Imaging Technology (Cayman) Co., Ltd.	Alex Hsia Steven Su	N/A	100.00%
Leading Tech. Co., Ltd.	Director	Altek International Investment Co., Ltd.	Alex Hsia	45,000,000	100.00%
Altek (Kunshan) Co., Ltd.	Executive Director Director	Leading Tech. Co., Ltd.	Alex Hsia Steve Chou	N/A	100.00%
Toptek Investment Cayman Co., Ltd.	Director	Altek International Investment Co., Ltd.	Alex Hsia	1,400,000	100.00%
Toptek Electronics (Kunshan) Co., Ltd.	Executive Director Director	Toptek Investment Cayman Co., Ltd.	Alex Hsia Steve Shyr	N/A	100.00%
Altek Trading (Cayman) Co., Ltd.	Director	Altek International Investment Co., Ltd.	Alex Hsia	8,500,000	100.00%
Altek Trading(Shanghai) Co., Ltd.	Executive Director Supervisor	Altek Trading (Cayman) Co., Ltd.	Alex Hsia Steven Su	N/A	100.00%
Altek Semiconductor (Cayman) Co., Ltd.	Chairman Director Director	Altek International Investment Co., Ltd.	Alex Hsia Jye-Sheng Lin Tat On Lo	20,000,000	71.43%

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Name of Company	Title	Name or Representative	Name or Representative	Shareholding	Shareholding
		Name	Corporate Representative	Number of Shares	Shareholding Ratio
Altek Semiconductor Corp.	Chairman Director Director Supervisor	Altek Semiconductor (Cayman) Co., Ltd.	Alex Hsia Jason Lin Simon Law Steven Su	20,000,000	100.00%
Altek Optical (Cayman) Co., Ltd.	Director	Altek International Investment Co.,Ltd.	Alex Hsia	8,864,432	100.00%
Altek Optical Technology (Cayman) Co., Ltd.	Director	Altek International Investment Co.,Ltd.	Alex Hsia	15,000,000	100.00%
Altek (Kunshan) Optical Co., Ltd.	Executive Director Director	Altek Optical Technology (Cayman)Co.,Ltd.	Alex Hsia Steve Shyr	N/A	100.00%
Altek Investment Co., Ltd.	Chairman Director Director Supervisor	Altek Corporation	Alex Hsia Jason Lin David Lin Steve Shyr	5,000,000	100.00%
Altek Autotronics Corp.	Chairman Director Director Supervisor	Altek Corporation	Alex Hsia Jason Lin David Lin Steven Su	21,775,200	90.73% (Note 1)
Altek International Holding Co., Ltd.	Director	Altek Corporation	Alex Hsia	12,865,921	100.00%
Altek Biotechnology (Cayman) Co., Ltd.	Director	Altek International Holding Co.,Ltd.	Alex Hsia	12,865,921	100.00%
Altek Biotechnology Corp. (Note 2)	Chairman Director Director Supervisor	Altek Biotechnology (Cayman) Co., Ltd.	Alex Hsia Steve Shyr Jason Lin Steven Su	40,100,000	100.00%

Note 1: Altek Investment Co., Ltd. holds 9.27% of Altek Autotronics Corp.’ shares.

Note 2: The 2016 shareholders’ meeting (held on June 17, 2016) resolved to pass the adjustment of Altek Biotechnology Corp.’s investment structure; instead of direct holding, Altek Biotechnology Corp. is 100% owned by Altek Biotechnology Holding (Cayman) Co., Ltd., which is invested by 100%-owned Altek International Holding (BVI) Co., Ltd.

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8.1.6 Operation of Affiliated Companies

Unit: NT$ (foreign currency) thousand; December 31, 2016

Name of Company	Capital	Capital	Total Assets	Total Assets	Total Liabilities	Total Liabilities	Net Value	Net Value
Altek International Investment Co., Ltd.	USD	92,726	USD	329,406	USD	46,312	USD	283,094
Altek Lab Inc.	USD	1,005	USD	1,986	USD	31	USD	1,955
Altek Imaging Technology (Cayman) Co., Ltd.	USD	15,092	USD	4,858	USD	0	USD	4,858
Altek(Kunshan)Precision Co.,Ltd.	USD	13,800	USD	4,858	USD	0	USD	4,858
Leading Tech. Co., Ltd.	USD	45,000	USD	119,723	USD	0	USD	119,723
Altek (Kunshan) Co., Ltd.	USD	49,600	USD	193,173	USD	73,450	USD	119,723
Toptek Investment Cayman Co., Ltd.	USD	1,400	USD	24,070	USD	0	USD	24,070
Toptek Electronics (Kunshan) Co., Ltd.	USD	5,000	USD	24,074	USD	5	USD	24,069
Altek Trading (Cayman) Co., Ltd.	USD	8,500	USD	8,679	USD	0	USD	8,679
Altek Trading(Shanghai) Co., Ltd.	USD	8,500	USD	15,408	USD	6,729	USD	8,679
Altek Semiconductor (Cayman) Co., Ltd.	USD	70	USD	13,274	USD	2	USD	13,272
Altek Semiconductor Corp.	NTD	200,000	NTD	1,130,838	NTD	753,101	NTD	377,737
Altek Optical (Cayman) Co., Ltd.	USD	8,864	USD	3,930	USD	0	USD	3,930
Altek Japan Corporation	JPY	10,000	JPY	94,362	JPY	51,474	JPY	42,888
Altek Investment Co., Ltd.	NTD	50,000	NTD	35,143	NTD	0	NTD	35,143
Altek Autotronics Corp.	NTD	240,000	NTD	389,194	NTD	128,516	NTD	260,678
Altek Optical Technology (Cayman)Co.,Ltd.	USD	15,000	USD	4,365	USD	0	USD	4,365
Altek (Kunshan) Optical Co., Ltd.	USD	15,000	USD	4,401	USD	36	USD	4,365
Altek International Holding (BVI) Co., Ltd.	USD	12,866	USD	13,437	USD	0	USD	13,437
Altek Biotechnology Holding (Cayman) Co., Ltd.	USD	12,866	USD	13,437	USD	0	USD	13,437
Altek Biotechnology Corp.	NTD	401,000	NTD	791,216	NTD	357,867	NTD	433,349

Note 1: The Company is the headquarters of the Group. Operating revenue and operating income of subsidiaries are trade secrets. To protect shareholders’ equity, such information will not be disclosed. The current investment gain and loss has been disclosed in the notes of the financial statements.

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8.1.7 Declaration of Consolidated Financial Statements of Affiliated Companies

Altek Corporation

Declaration of Consolidated Financial Statements of Affiliated Companies

In 2016 (January 1, 2016 to December 31, 2016), companies that shall be included in the consolidated financial statements of affiliated companies in accordance with the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same companies that shall be included in the consolidated financial statements of the parent company and subsidiaries in accordance with IFRS 10. In addition, the related information that shall be disclosed in the consolidated financial statements of affiliated companies has been disclosed in the abovementioned consolidated financial statements of the parent company and subsidiaries. Accordingly, the consolidated financial statements of affiliated companies are not compiled separately.

Sincerely,

Altek Corporation

Chairman: Alex Hsia March 27, 2017

8.1.8 Affiliation Report

The Company is not the affiliated company of other companies as stipulated in “Chapter VI-I Affiliated Enterprises” of the Company Act, so no affiliation report is compiled.

• 8.1.9 Endorsement/Guarantee, Lending Funds to Others, and Derivatives Transactions of Affiliated Companies: None.

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• 8.2 Private Placement of Securities in the Most Recent Years

• 8.2.1 The general shareholders’ meeting held on June 17, 2016 resolved to pass the private placement of common stock and domestic or overseas convertible corporate bonds within 70 million shares. The private placement may be carried out at a time or in installments within one year of the date of the resolution. The Board of Directors is authorized to adjust, set up and carry out the private placement.

• 8.2.2 The abovementioned private placement will expire on June 16, 2017. Due to its oncoming expiration, the Board of Director resolved on May 5, 2017 that no private placement of securities will be performed in the remaining period.

• 8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years: None.

• 8.4 Other Mentionable Items: None.

• 8.5 Any Event Having a Material Impact on Shareholders' Rights and Interests or Securities Prices stipulated in Subparagraph 2, Paragraph 3, Article 36 of the Securities and Exchange Act: None

182