Altek - Annual Report 2017 | FinancialReports.eu

Stock Code: 3059

==> picture [85 x 40] intentionally omitted <==

Altek Corporation

2017

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 2017 Annual Report is available at: http://www.altek.com.tw Printed on May 5, 2018

Spokesperson Name: Belle Liang Title: Vice President & CFO. Tel: 886-3-578-4567 E-mail: [email protected]

Deputy Spokesperson Name: Eva Liang Title: Manager Tel: 886-3-578-4567 E-mail: [email protected]

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

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 and Management Team ................................................................................. 6 3.3 Remuneration of Directors, Supervisors, President, and Vice President .................... 12 3.4 Implementation of Corporate Governance.................................................................. 20 3.5 Information of Audit Fee ............................................................................................. 46 3.6 Information of replacement of CPA ............................................................................. 47 3.7 Altek’s Chairman, President, Chief Financial Officer, or managers in charge of its finance and accounting operations hold any position in the Company’s independent auditing firm or its affiliates in 2017 ...................................................... 48 3.8 Equity Transfer and Changes in Equity Pledge of Directors, Supervisors, Managers and Shareholders Holding More than 10% of the Shares ........................................... 49 3.9 Relationship among the Top Ten Shareholders ........................................................... 50 3.10 Ownership of Shares in Affiliated Enterprises ........................................................... 51 IV. Capital Overview ............................................................................................................... 52 4.1 Capital and Shares ........................................................................................................ 52 4.2 Bonds ............................................................................................................................ 56 4.3 Preferred Stock. ............................................................................................................ 56 4.4 Global Depository Receipts. ......................................................................................... 56 4.5 Employee Stock Options .............................................................................................. 57 4.6 Restricted Employee Shares ......................................................................................... 59 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions. .......... 60 4.8 Financing Plans and Implementation ........................................................................... 60 V. Operational Highlights ....................................................................................................... 61 5.1 Business Activities ........................................................................................................ 61 5.2 Market and Sales Overview .......................................................................................... 65 5.3 Human Resources ......................................................................................................... 71

5.4 Environmental Protection Expenditure ....................................................................... 71 5.5 Labor Relations ............................................................................................................. 72 5.6 Important Contracts ..................................................................................................... 75 VI. Financial Information ........................................................................................................ 76 6.1 Five-Year Financial Summary ....................................................................................... 76 6.2 Five-Year Financial Analysis .......................................................................................... 80 6.3 Audit Committee’s Review Report for the Most Recent Year ..................................... 83 6.4 Consolidated Financial Statements for the Years Ended December 31, 2017 and 2016 ............................................................................................................................. 84 6.5 Separate Financial Statements for the Years Ended December 31, 2017 and 2016 . 157 6.6 Difficulty in Financial Turnover of the Company and its Affiliated Companies ......... 158 VII. Review of Financial Conditions, Financial Performance, and Risk Management ......... 159 7.1 Analysis of Financial Status ........................................................................................ 159 7.2 Analysis of Financial Performance ............................................................................. 160 7.3 Analysis of Cash Flow ................................................................................................. 161 7.4 Major Capital Expenditure Items and Impact on Finance and Business. ................... 161 7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year .............................. 161 7.6 Analysis of Risk Management .................................................................................... 161 7.7 Other Important Items ............................................................................................... 164 VIII. Special Disclosure ......................................................................................................... 165 8.1 Profile of Affiliated Companies .................................................................................. 165 8.2 Private Placement of Securities in the Most Recent Years ........................................ 172 8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years........................................................................................................................... 172 8.4 Other Mentionable Items. .......................................................................................... 172 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 ...................................................................................... 172

I. Letter to Shareholders

The 2017 Business Report and the summary of the 2018 Business Plan are reported below:

1. 2017 Business Report

With the support of all shareholders and colleagues, Altek has been actively transformed into an intelligent vision solution provider to service customers with 3D-Depth Sensing Chip, dual camera module and image processing technology licensing. We have been recognized by world-class mobile phone companies and semiconductor manufacturers. Nonetheless, due to the fast change in wearable image product market and the effects of alternation of new and old products on chips and dual-lens camera modules, the consolidated revenue amounted to NT$10.6 billion in 2017, representing a decrease of approximately 9% from the previous year while the consolidated gross profit rate was 14%, the net income was NT$13.402 million, and the earnings per share was NT$0.05.

Summary of 2018 Business Plan, Effects of External Competition, Laws, and Overall Business Environment, and Business Objectives
(1)Summary of 2018 Business Plan, Operating Strategy, and Major Production/ Sales Policy
- Business: Altek has been dedicated in depth computing and algorithm technology for years and has held plenty of patents in Taiwan, China and the United States. Altek’s 3D-Depth Sensing Chip, together with active IR (infrared) light will further enhance the real-time depth quality and computing to support a wide range of applications. In 2018, most mainstream models of smart phones will be equipped with dual camera functions that will substantially boost the penetration rate of dual-camera mobile phone. In addition, surveillance, self-driving vehicles, smart home assistant, drone, sweeping robot.., etc, will all feature 3D sensing and plus AI function soon. The application of imaging technology in relevant fields will become increasingly thriving and play key roles.
- R&D: We’ve invested in research and development so many years for the innovative artificial pancreas that will be delivered in this year. The use of imagetechnology in the fields of 3D sensing, depth computing, artificial intelligence, virtual reality, IoT and self-driving car…etc., will become more vigorous and play the key roles. Altek will continue to adjust operating strategies and resources, recruit outstanding talents in research and development, and improve the capacity for technology innovation, so as to strengthen applications pertaining to 3D sensing, deep learning chips, IoT fields and medical related optical product applications and the acceleration of the product launches.
- Management: Altek 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.

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

We’re still facing the rapid changes in new technologies, new materials and business environments. Therefore, Altek’s telants need to overcome those challenges, deepen the core technology of intelligent vision, enhance product added value, and strengthen system, procedure so that we can expand the market share and strengthen Altek’s competitiveness, growth and profitability. Altek management team and employees will continue to pursue the best interests of all shareholders with the business philosophy of precision, promptness, innovation, quality, cost-saving, flexibility and efficiency.

We would like to thank our shareholders for your continuing supports and encouragement for Altek.

Sincerely yours,

Chairman & CEO Alex Hsia

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 fixed lens digital camera.
2002 Listed on the Taiwan Stock Exchange. 2003 Issued convertible bonds of US$60,000 thousands 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 10% market share
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 Transforming itself to an image solution provider with focuses on smartphone camera and consumer image products.
2014 Image signal processor and dual-camera solutions were applied to flagship smartphones of global manufacturers. Completed the capital decrease of NT$1,182,475 thousands.
2015 More customers in China and India launched more smart phones with Altek imaging solutions.
2016 Altek in-depth computing chips were applied to dual-camera smartphones and tablets of global manufacturers.
2017 State-of-the-art 3D-Depth Sensing Chip AL6100 debuted at CES 2018. Altek became the first ODM to deliver reference designs based on the Qualcomm Vision Intelligence Platform.

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

==> picture [440 x 557] intentionally omitted <==

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

Shareholders ’
Meeting
Audit Committee
Board of Directors
Compensation
Committee
Audit office
Chairman
Chief Executive
Officer
Product Planning
CEO office
Dividion
Research & Engineering Human
Business Purchasing Finance
Development Supporting Resources
Division Division Division
Division Division Division
3.1.2 Major Corporate Functions
Department Functions
Carry out the audit operation for the implementation of the internal
Audit Office control system and also for the performance evaluation and decision
making of management.
Product Planning Division Analyze market trends and plan product strategies.
1. Assist CEO in planning, integrating, and coordinating medium and
long-term business and operational strategies.
CEO Office 2. Engage in legal affairs related to contracts and intellectual property
rights.
3. Handle corporate and public relationhips.
Engage in sales of products and services, business development, and
Business Division
formulation and execution of sales strategies.
Research & Development
Design and develop competitive technologies and products.
Division
Purchasing Division Engage in group procurement
----- End of picture text -----

3.1.2 Major Corporate Functions

Department	Functions
Engineering Supporting Division	Engage in quality improvement, document management, product safety and product testing engineering.
Product Management Division	1. Engage in quality enhancement, safety regulations and product testing. 2. Engage inproject management andproductprocurement.
Finance Division	Plan, organize, and apply financial resources and management information system in line with business and operational goals.
Human Resources Division	Handle human resources planning.

3.2 Directors and Management Team

3.2.1 Directors

A.Profile of Directors

																	April 17,2018	April 17,2018	April 17,2018
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	2017.06.16	3 years	1996.12.20	757,934	0.28	1,007,934	0.37	943,051	0.34	0	0.00	(Note 2)	Executive Director of Altek (Kunshan) Co.,Ltd.	None	None	None
Director	R.O.C	Yitsang International Co., Ltd.		2017.06.16	3 years	2014. 06.19	13,946,100	5.09	13,946,100	5.09	-	-	-	-	-	-	-	-	-
	R.O.C	Representative: David Lin	Male	2017.06.16	3 years	2016. 03.19	520,790	0.19	559,790	0.20	0	0.00	0	0.00	(Note 3)	Director of Altek Biotechnology Corp.	None	None	None
Director	R.O.C	Yitsang International Co., Ltd.		2017.06.16	3 years	2014. 06.19	13,946,100	5.09	13,946,100	5.09	-	-	-	-	-	-	-	-	-
	R.O.C	Representative: Belle Liang	Female	2017.06.16	3 years	2017.06.16	20,000	0.01	20,000	0.01	0	0.00	0	0.00	(Note 4)	Independent Director of eGalax_EMPIA TechnologyInc.	None	None	None
Director	R.O.C	Sophia Chen	Female	2017.06.16	3 years	2017.06.16	0	0.00	0	0.00	0	0.00	0	0.00	(Note 5)	President, Gold Jasper Management Co.,Ltd	None	None	None
Independent Director	R.O.C	Ching Jen Hu	Male	2017.06.16	3 years	2017.06.16	0	0.00	0	0.00	0	0.00	0	0.00	(Note 6)	-	None	None	None

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
Independent Director	R.O.C	Ying Chih Hsieh	Female	2017.06.16	3 years	2017.06.16	0	0.00	0	0.00	0	0.00	0	0.00	(Note 7)	Executive Director of First Wealth Management Limited, Hong KongBranch	None	None	None
Independent Director	Japan	Mori Shorei	Male	2017.06.16	3 years	2017.06.16	0	0.00	0	0.00	0	0.00	0	0.00	(Note 8)	-	None	None	None

Note 1: Shareholding when elected is calculated based on 273,908,825 shares issued on June 16, 2017.Current shareholding is calculated based on 273,788,825 shares issued on April 17, 2018. Note 2: Alex Hsia: M.A. of Electronics Engineering, UCS; Vice President of Microtek Co.

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

Note 4: Belle Liang: MBA of Finance, National Taiwan University; Special Assistant to Chairman of THSR Corporation.

Note 5: Sophia Chen: Bachelor of Rutgers University, State University of New Jersey; President of Gold Jasper Management Co., Ltd.

Note 6: Ching Jen Hu: M.A. of Mechanical Engineering, University of California; Senior Vice President of Etron Technology Inc, President of LED BU of Walsin Lihwa Corp. Note 7: Ying Chih Hsieh: MBA of The University of Dallas; President of Taiwan Securities Co., Ltd. Hong Kong Branch, Vice President of Securities, SinoPac Holdings Note 8: Mori Shorei: Researcher of Faculty of Engineering, University of Tokyo; Director of Fuji Film Corp. Japan

B. Director that is an institutional shareholder, its main shareholders

(1)Major shareholders of the institutional shareholders

April 17, 2018

	April 17, 2018
Name of Institutional Shareholders	Major Shareholders
Yitsang International Co., Ltd.	Jingcai International Investment Co., Ltd. (74.74%) and BaiyingCo.,Ltd.(24.97%)

(2)Major shareholders of Altek’s Major Institutional Shareholders

2)Major shareholders of Altek’s Major Institutional Shareholders	2)Major shareholders of Altek’s Major Institutional Shareholders
April 17,2018
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%)

C.Professional Qualifications and Independence Analysis of Directors

April 18, 2017

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)	Independence Criteria (Note 1)	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 Belle Liang														1
Director Sophia Chen														0
Independent Director Ching Jen Hu														0
Independent Director Ying Chih Hsieh														0
Independent Director Mori Shorei														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.

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

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.
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.
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”.
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
Not been a person of any conditions defined in Article 30 of the Company Act.
Not a governmental, juridical person or its representative as defined in Article 27 of the Company Act.

3.2.2 Management Team

April 17, 2018

													April 17,2018	April 17,2018	April 17,2018
Title	Nationality/ Country 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	% (Note 1)	Shares	% (Note 1)	Shares	% (Note 1)			Title	Name	Relation
CEO	R.O.C.	Alex Hsia	Male	1996.12.28	1,007,934	0.37	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
SVP	USA	Simon Law	Male	2018.02.01	0	0.00	0	0.00	0	0.00	M.S. of UC Berkeley; Design Manager of Xerox.	Director of Altek Semiconductor Corp.	None	None	None
VP	R.O.C.	Vincent Kao	Male	2014.11.10	61,747	0.02	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	0.01	0	0.00	0	0.00	MBA of Finance, National Taiwan University; Special Assistant to Chairman of THSR Corporation	Independent Director of eGalax_eMPIA Technology Inc.	None	None	None
Accounting Manager	R.O.C.	Peggy Hsu	Female	2018.02.14	0	0.00	0	0.00	0	0.00	B.A. of Accounting, National Chung Hsing University; Finance Director and Spokesperson of Tera Xtal TechnologyCo.,Ltd.	None	None	None	None

Note 1: Shareholding percentage is calculated based on 273,788,825 shares issued on April 17, 2018.

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

3.3.1Remuneration of Directors

Unit: NT$ thousand; Dec. 31, 2017

		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	1,625	1,625	0	0	329	329	280	280	16.67	16.67
Director	Yitsang International Co.,Ltd.
Representative Director	Simon Law (Note 1)
Representative Director	David Lin
Representative Director	Belle Liang (Note 2)
Director	Stan Hung (Note 1)
Director	Jason Lin (Note 1)
Independent Director	Jaime Tang (Note 1)
Independent Director	Wen-Hsieh Lai (Note 1)
Director	Sophia Chen (Note 2)
Independent Director	Ching Jen Hu (Note 2)
Independent Director	Ying Chih Hsieh (Note 2)
Independent Director	Mori Shorei (Note 2)

Title	Name	Relevant Remuneration Received by Directors Who ar	Relevant Remuneration Received by Directors Who ar	Relevant Remuneration Received by Directors Who ar	Relevant Remuneration Received by Directors Who ar	e Also Employees	e Also Employees	e Also Employees	e Also Employees	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)	Remuneration from invested companies except for those companies in the consolidated statement
		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	9,774	18,387	167	324	0	0	0	0	90.84	156.28	0
Director	Yitsang International Co., Ltd.
Representative Director	Simon Law (Note 1)
Representative Director	David Lin
Representative Director	Belle Liang (Note 2)
Director	Stan Hung (Note 1)
Director	Jason Lin (Note 1)
Independent Director	Jaime Tang (Note 1)
Independent Director	Wen-Hsieh Lai (Note 1)
Director	Sophia Chen (Note 2)
Independent Director	Ching Jen Hu (Note 2)
Independent Director	Ying Chih Hsieh (Note 2)
Independent Director	Mori Shorei (Note 2)

Note 1: Simon Law 、 Stan Hung 、 Jason Lin 、 Wen-Hsieh Lai and Jaime Tang discharged on June 16, 2017. The information disclosed above is as of discharged date. Note 2: Belle Liang 、 Sophia Chen 、 Ching Jen Hu 、 Ying Chih Hsieh and Mori Shorei were in charge on June 16,2018.

Note 3: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15, 2018.

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.

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, Yitsang International Co., Ltd., Simon Law, David Lin, Belle Liang, Stan Hung, Jason Lin, Jaime Tang, Wen-Hsieh Lai, Sophia Chen, Ching Jen Hu, Ying Chih Hsieh,Mori Shorei	Alex Hsia, Yitsang International Co., Ltd., Simon Law, David Lin, Belle Liang, Stan Hung, Jason Lin, Jaime Tang, Wen-Hsieh Lai, Sophia Chen, Ching Jen Hu, Ying Chih Hsieh,Mori Shorei	Yitsang International Co., Ltd., Simon Law, David Lin, Belle Liang, Stan Hung, Jason Lin, Jaime Tang, Wen-Hsieh Lai, Sophia Chen, Ching Jen Hu, Ying Chih Hsieh, Mori Shorei	Yitsang International Co., Ltd., Simon Law, Belle Liang, Stan Hung, Jaime Tang, Wen-Hsieh Lai, Sophia Chen, Ching Jen Hu, Ying Chih Hsieh, Mori Shorei
NT$2,000,001 ~ NT$5,000,000	`－`	`－`	`－`	David Lin`、`Jason Lin
NT$5,000,001 ~ NT$10,000,000	`－`	`－`	Alex Hsia	Alex Hsia
Over NT$10,000,000	`－`	`－`	`－`	`－`
Total	13	13	13	13

3.3.2 Remuneration of Supervisors

Unit: NT$ thousand; Dec. 31, 2017

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 (%)	Remuneration from invested companies except for those companies in the consolidated statement
		Base Compensation (A)		Bonus to Supervisors (B) (Note 1)		Allowances (C)
		The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements
Supervisor	Tim Liou	0	0	92	92	50	50	1.06	1.06	0
Supervisor	Amy Chien
Supervisor	Alex Liou

Note 1: Tim Liou 、 Amy Chien and Alex Liou were discharged on June 16,2017. The information disclosed above is as of discharged date. Note 2: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15, 2018. Note 3: Altek set up Audit Committee from June 2017 to replace Supervisors.

Range of Remuneration

Range of Remuneration	Name of Supervisors	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

3.3.3 Remuneration of the President and Vice President

Unit: NT$ thousand; Dec. 31, 2017

Title	Name	Salary (A) (Note 5)	Salary (A) (Note 5)	Severance Pay (B)	Severance Pay (B)	Bonuses and Allowances (C)	Bonuses and Allowances (C)	Profit Sharing-Employee Bonus (D) (Note 6)	Profit Sharing-Employee Bonus (D) (Note 6)	Profit Sharing-Employee Bonus (D) (Note 6)	Profit Sharing-Employee Bonus (D) (Note 6)	Ratio of Total Compensation (A+B+C+D) to Net Income (%)	Ratio of Total Compensation (A+B+C+D) to Net Income (%)	Remuneration from invested companies except for those companies in the consolidated statement
		The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements	The Company		Companies in the Consolidated Financial Statements		The Company	Companies in the Consolidated Financial Statements
								Cash	Stock	Cash	Stock
CEO	Alex Hsia	15,214	18,571	614	621	8,522	8,522	0	0	0	0	181.68	206.78	0
SVP	Jason Lin (Note 1)
VP	VincentKao
VP	Kenny Li
VP	Morgan Chiu
VP	Belle Liang (Note 2)
VP	Rick Han (Note 3)
VP	Amy Yang (Note 4)

Note 1: Jason Lin discharged on Jan. 25, 2017. The information disclosed above is as of his last day as SVP. Note 2: Belle Liang was in charge on Jan.25, 2017.

Note 3: Rick Han discharged on Sep. 06, 2017. The information disclosed above is as of his last day as VP. Note 4: Amy Yang discharged on Jan. 25, 2017. The information disclosed above is as of her last day as VP.

Note 5: Salary includes employee stock option certificates and restricted stock award shares recognized by share-based payment in accordance with IFRS2. Note 6: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15, 2018.

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	Jason Lin`、`AmyYang	Jason Lin`、`AmyYang
NT$2,000,001 ~ NT$5,000,000	Vincent Kao`、`Kenny Li`、`Morgan Chiu`、`Belle Liang and Rick Han	Vincent Kao`、`Kenny Li`、`Morgan Chiu`、`Belle Liang and Rick Han
NT$5,000,001 ~ NT$10,000,000	Alex Hsia	Alex Hsia
Over NT$10,000,001 ~	`－`	`－`
Total	8	8

3.3.4Profit Sharing-Employee Bonus

Unit: NT$ thousand; Dec. 31, 2017

					Unit: NT$thousand;Dec. 31,2017
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	Vincent Kao
VP	Kenny Li
VP	Morgan Chiu
VP	Belle Liang

Note: The earning distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15 2018

3.3.5 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	2016	2016	2017(Note 1)	2017(Note 1)
	The Company	Companies in the Consolidated Financial Statements	The Company	Companies in the Consolidated Financial Statements
Directors	55.60%	80.41%	209.74%	276.07%
Supervisors
President and Vice Presidents

Note 1: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15 2018

Explanation:

(1).The directors and supervisors remunerated according to the Company Articles and profits.
(2).The remunerations of the directors and supervisors, President and Vice Presidents were reviewed and passed by the remuneration committee and the board of directors.
(3).The remunerations received by the Director's concurrent employee and President and Vice Presidents includes the salary costs recognized by IFRS2 "Share-based payment".

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 President 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 making up losses of the previous years, no more than 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) Altek has set up the Remuneration Committee 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.

3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

A total of 5 meetings of the Board of Directors were held in 2017.

The attendances of director were as follows:

Title	Name	Attendance in Person	By Proxy	Attendance Rate(%)	Note
Chairman	Alex Hsia	5	0	100%	2017/06/16 re-elected
Director	Yitsang International Co., Ltd. Representative: David Lin	5	0	100%	2017/06/16 re-elected
Director	Yitsang International Co., Ltd. Representative: Belle Liang	3	0	100%	2017/06/16 newlyappointed
Director	Sophia Chen	2	1	67%	2017/06/16 newlyappointed
Independent Director	Ching Jen Hu	3	0	100%	2017/06/16 newlyappointed
Independent Director	Ying Chih Hsieh	3	0	100%	2017/06/16 newlyappointed
Independent Director	Mori Shorei	2	1	67%	2017/06/16 newlyappointed
Director	Yitsang International Co., Ltd. Representative: Simon Law	2	0	100%	2017/06/16 discharged
Independent Director	Jaime Tang	1	0	50%	2017/06/16 discharged
Independent Director	Wen-Hsieh Lai	2	0	100%	2017/06/16 discharged
Director	Jason Lin	1	0	50%	2017/06/16 discharged
Director	Stan Hung	0	2	0%	2017/06/16 discharged

Note: The 7[th] term of the Board of Directors expired on June 16[th] 2017, and reelects the 8[th] term of Board of Directors on the same day.

Other mentionable items:

A. Items listed in Article 14-3 in Securities and Exchange Act or Board resolutions independent directors have dissenting opinions or qualified opinions with notes in minutes of the directors meetings:

a. Item listed in Article 14-3

Date	Resolutions	Any Independent Director had Dissenting opinion or qualified opinions
2017.03.27 16thmeeting of 7thBoard	1.Approval of appointment of Chief Finance officer and Chief Accounting officer. 2.Approval of amendments to the Procedures for Acquisition or Disposal of Assets. 3.Approval of amendments to the Procedures for Lending Funds to Other Parties and Endorsement & Guarantee. 4.Approval of capital reduction through cancellation of RSA.	None
2017.05.05 17thmeeting of 7thBoard	1. Approval of the short-form merger between Altek and its 100% owned Altek Autotronics.	None
2017.08.13 2ndmeeting	2. Approval of capital reduction through cancellation of RSA.	None

Date	Resolutions	Any Independent Director had Dissenting opinion or qualified opinions
of 8thBoard
2017.11.13 3rdmeeting of 8thBoard	1. Approval of the record date of capital increase through execution of Employee Stock Option Plan 2. Approval of capital reduction through cancellation of RSA.	None

b. Other written or otherwise recorded resolutions on which independent directors had dissenting opinion of qualified opinion: none.
B. If there is directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None.
C. Goals to enhance the Board’s operations:
a. This year, Altek set up an audit committee to assist the Board of Directors in fulfilling its supervisory duties.
b. Altek's Directors perform self-assessment of the overall board operation with respect to participation in company operations, enhancement of the quality of board decisions, composition and structure of the board of directors, appointment/election of directors and continuing education, and internal controls in accordance with the rule of Performance Assessment of Board of Directors. Members of the board also conduct self-assessment of their familiarity with Company goals and missions, knowledge of director's responsibilities, personal participation in company operations, internal relationship management and communications, professional knowhow and continuing education, and internal controls. The staff in charge of board meeting affairs compiled the self-assessment results and submits the results to the Board of Directors. According to the results of the overall assessment in the year of 2017, the overall operation of the board of directors of Altek is still considered to be sound and in line with corporate governance.

D. The attendance of the independent directors were as follows:

(V: Attend in Person `；` © : By Proxy; #: Absence)

Year 2017	1st	2nd	3rd	4th	5th
	16thof the 7thBoard	17thof the 7thBoard	1stof the 8thBoard	2ndof the 8thBoard	3rdof the 8thBoard
Jaime Tang (Note1)	V	#
Wen-Hsieh Lai (Note 1)	V	V
Ching Jen Hu (Note 2)			V	V	V
Ying Chih Hsieh (Note 2)			V	V	V
Mori Shorei (Note 2)			©	V	V

Note 1: Jaime Tang and Wen-Hsieh Lai were the independent Directors of 7[th] Board, discharged on 2017/06/16.

Note 2: Ching Jen Hu 、 Ying Chih Hsieh and Mori Shorei were the independent Directors of 8[th] Board, ， were in charge on 2017/06/16.

3.4.2 Audit Committee:

A total of 2 meetings of the Audit Committee were held in 2017.

The attendances of Independent director were as follows:

Title	Name	Attendance in Person	Attendance Rate(%)	Note
Independent Director	Ching Jen Hu	2	100%	2017/06/16 newlyappointed
Independent Director	Ying Chih Hsieh	2	100%	2017/06/16 newlyappointed
Independent Director	Mori Shorei	2	100%	2017/06/16 newlyappointed

Note: Altek set up Audit Committee from June 2017

Other mentionable items:

A. Any action regulated by Securities and Exchange Act 14-5, or any resolution not approved by the Audit Committee but approved by two thirds or more of all directors instead:
a. Item listed in Article 14-5

BOD Date	BOD Resolutions	The processing when Independent directors hold the dissenting opinion or the reservation, and the corporate handling the Independent director’s opinion
2017.08.11 1stof 1st Board	1. Approval of 2017Q2 financial statements 2. Approval of capital reduction through cancellation of RSA.	None
2017.11.13 2ndof 1st Board	1. Approval of the record date of capital increase through execution of Employee Stock Option Plan 2. Approval of capital reduction through cancellation of RSA. 3. Approval of the internal control system and internal audit operations of the “Audit Committee's Operational Management Operations”.	None

b. If there are resolutions not approved by the Audit Committee but approved by two thirds or more of all directors instead: None.
B. If there is independent directors’ avoidance of motions in conflict of interest, the independent directors’ names, contents of motion, causes for avoidance and voting should be specified: None.
C. Communications of Independent Directors with Internal Audit Supervisor and CPAs:
a. Other than submitting the audit reports to the independent directors every month, the Chief internal Auditor also reports to the Audit Committee in each quarter’s meeting according to the annual audit plan and actual implementation.
b. An accountant attends Audit Committee and communicates and interacts with independent directors on issues relating to the review or check of financial reports or on issues related to finance, taxation or internal control.
c. The independent directors can contact with internal audit and CPAs directly, and the communication is in good condition.

3.4.3 Attendance of Supervisors at Board Meetings

A total of 5 meetings of the Board of Directors were held in 2017. The attendance of supervisors was as follows:

Title	Name	Attendance in Person	Attendance Rate (%)	Note
Supervisor	Tim Liou	1	50%	2017/06/16 discharged
Supervisor	Amy Chien	1	50%	2017/06/16 discharged
Supervisor	Alex Liou	2	100%	2017/06/16 discharged

Note ： 1. The 7[th] Board of Directors was expired on 2017/06/16.

Since Altek set up an audit committee in June 2017 to exercise supervisory powers, there is no longer elected supervisors.

Other mentionable items:

A. Composition and responsibilities of supervisors:
a. Communications between supervisors and the Company's employees and shareholders:

The 3 supervisors had professional competence in the industry.

  - Through consulting the spokesperson, supervisors of finance department…, the supervisors communicated with employees and shareholders well, and that helps supervisors to exercise their supervisory function.

b. Communications between supervisors and the Company's chief internal auditor and CPA:
- (i).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.
- (ii).The chief internal auditor attends the board meeting to brief the audit findings. The supervisors have no opposite opinions on the reports.
- (iii).Communications with the CPA: CPAs communicate with Directors and Supervisors before submission of financial statements.
B. 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.

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

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
1. Does Company follow “Taiwan Corporate Governance Implementation” to establish and disclose its corporate governance practices?	V		1. The Board of Directors has established the Code 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) Altek has set up the spokesperson and deputy spokesperson to handle shareholders’ suggestions or concerns. Altek has entrusted the Stock Transfer Agent and has set up the website to handle shareholders’ suggestions or disputes. (2) In addition analysis the shareholder status base on shareholder list after book clousure stating date, Altek handle a list of major shareholders and ultimate controllers. Altek reported the changes in the data in accordance with related laws. (3) Altek and its affiliates perform the operations and financial affairs independently. Altek has set up the written regulations to control financial and operational information.	None. None. None.

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) Altek 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) A.Altek has specified in the “Code of Best Practice for Corporate Governance” that the composition of the board of directors should be considered diversified. B. The implementation of the board diversity policy of Altek is as follows: a.There are three females of 7 directors. b.There is one Japanese Of the seven directors c.Among the directors, Alex Hsia and Mori shorei are good at Business management, leadership decision-making and industry knowledge; Sophia Chen is good at Business management, leadership decision-making and Financial Accounting`；`Ying Chih Hsieh and Belle Liang are good at Financial Accounting. David Lin and Ching Jen Hu are good at Industrial knowledge.	None.

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
			C. Altek has fully implemented the board diversity policy.
(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) Altek has established the Compensation Committee and the Audit Committee. Other functional committees will be set up based on the scale of operations and business needs. (3) Altek has published the Rule of Performance Assessment of Board of Directors, Altek's directors perform self-assessment every year and report to the Board, please refer to 3.3.1 Board of Directors for the assessment. (4) Altek regularly assesses the CPA’s independence each year in accordance with the principles of “Integrity, Objectivity and Independence” in the Bulletin No.10 of “The Norm of Professional Ethics for Certified Public Accountant of the Republic of China” issued by the National Federation of Certified Public Accountant Associations of the Republic of China (NFCPAAROC) to verify whether the CPA is a Company’s director, shareholder or employee and confirm whether the CPA is a non-stakeholder, and then reports the assessment results to the Board of Directors. The results of the last two years were submitted on March 27, 2017 and March 23, 2018 respectively.	Same as explanation. None. None.

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
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		4. Altek has appointed Finance Division as the full-time corporate governance unit to be in charge of corporate governance affairs and protect shareholders' rights and strengthening the functions of the Board of Directors. Its duties mainly include providing the information necessary for the directors to execute their business, handling matters related to board meetings and shareholders’ meetings, producing minutes of board meetings and shareholders’ meetings, and conducting corporate registration and registration amendment. In 2017, Altek's corporate governance-related affairs are handled and executed in accordance with law. The main implementations are as follows: (1) 5 board meetings and 1 shareholders’ meeting were organized. (2) The amendments related to the Company were made in accordance with the latest laws and regulations related to the Company's operation and corporate governance and submitted it the Board for discussion. (3). According to the resolution of each meeting, the change of company registration was completed.	None.

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
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		5. Depending on different situations, Altek 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.
6. Has the Company appointed a professional registrar for its Shareholders’ Meetings?	V		6. Altek has appointed Sinopac Securities to handle related affairs.	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) Altek has established a corporate website(http://www.altek.com.tw) to disclose information regarding its financials, business and corporate governance status. (1) Altek maintains a multi-language website (Traditional Chinese, Simplified Chinese and English), designates the staff to handle information collection and disclosure, and appoints the spokesperson. Altek also sets up its news contact and IC contact information on the website to provide the latest news and channels of communication.	None. None.

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
8. Has the Company disclosed other information to facilitate a better understanding of its 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)?	V		For more information on employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ training records, and purchasing insurance for directors, please refer to Page 40~42.	None.
9.The improvement status for the result of Corporate Governance Evaluation announced by Taiwan Stock Exchange	V		(1) Altek 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.

3.4.5 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	Ying Chih Hsieh												0
Independent Director	Ching Jen Hu												0
Independent Director	Mori Shorei												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 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.There are 3 members in the Remuneration Committee.

C.Term of the Remuneration Committee is from Aug 11[th] , 2017 to June 15[th] , 2020.

D.A total of 2 meetings of the Remuneration Committee were held in 2017. The attendance record of the Remuneration Committee members was as follows:

follows:
Title	Name	Attendance in Person	By Proxy	Attendance Rate (%)	Note
Convener	Ying Chih Hsieh	1	0	100%	2017/08/11 newlyappointed
Committee Member	Ching Jen Hu	1	0	100%	2017/08/11 newlyappointed
Committee Member	Mori Shorei	1	0	100%	2017/08/11 newlyappointed
Convener	Jaime Tang	1	0	100%	2017/06/16 discharged
Committee Member	Sophia Chen	1	0	100%	2017/06/16 discharged
Committee Member	Wen-Hsieh Lai	1	0	100%	2017/06/16 discharged
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 (e.g., 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.

3.4.6 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) Altek has established the Corporate Social Responsibility (CSR) Code of Practice and pays close attention to the development and changes of international CSR systems. (2) Altek 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) Altek 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?	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.	None.

Assessment Item			Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(2) Has the Company set an Environmental management system designed from its industry characteristics? (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 V		(2) Altek mainly provides customers with imaging solutions, which cause no waste or pollution. All products are manufactured and sold in accordance with environmental laws and regulations. In addition to obtaining ISO certification, Altek is the green partner of its customers. (3) A. Altek 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. B. Altek's carbon emissions in 2017 were 1,080KG (K), which was lower than 1,171KG (K) in 2016. Altek continued to save energy and reduce carbon, in order to do its best to protect the environment's social responsibility.	None. None.
3. Promotion of Social Welfare (1) Does the Company set policies and procedures in compliance with regulations and internationally recognized human rights principles?	V		(1)Altek follows the regulations of Labor Standards Act and adheres to international human rights conventions to execute related operations, attaching importance to labor and human rights and implementing human resources management policies without discrimination of gender, ethnicity,age,marital status,	None.

Assessment Item			Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			family status, etc., installing the employee mailbox, and providing generous employee benefits.
(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? (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?	V V V V		(2)The employee mailbox is set up as a channel of communication ([email protected]) between the Company and employees. (3) Altek holds the employee health check, occupational safety and health seminars, and fire management training annually to improve the safety and health performance. Altek also organizes various training programs to improve employees’ response to emergency and awareness of occupational safety. (4) Altek has established the Working Rules based on the Labor Standards Act and reported to the Science Park Bureau. Altek 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) Altek 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 trainingfor individuals,	None. None. None. None.

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
			business operations, and the organization.
(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? (8) Does the company evaluate environmental and social track records before engaging with potential suppliers? (9) Do the Company’s contracts with major suppliers include termination clauses if they violate CSR policy and cause significant environmental and social impact?	V V V V		(6)The Customer Service Department has been established to provide immediate services for customers. (7)As Altek’s customers are international manufacturers, Altek provides products and services in accordance with related international regulations and standards. (8)Under the same conditions of the transactions, Altek selects suppliers fulfilling environmental protection and social responsibilities. (9) Altek establishes long-term partnerships with suppliers in the supply chain. According to the Supplier Management Procedures and the Regulations Governing Management of Environmental Substances, Altek 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. None. None.

				Deviations from “the
Assessment Item			Implementation Status	Corporate Social Responsibility Best-Practice Principles for
	Yes	No	Summary	TWSE/TPEx Listed Companies” and Reasons
4. Enhanced Information Disclosure			Altek has disclosed information	None.
Does the Company disclose relevant			on business and financial
and reliable CSR information on its	V		affairs and corporate activities
website and the Taiwan Stock			on its website from time to
Exchange website?			time.
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.
Altek 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.

Other important information to facilitate better understanding of the company’s implementation of corporate social responsibility:
Altek is dedicated to corporate social responsibility, has won a number of environmental certifications and participated in various charitable activities in humanistic care:
Environmental certification: Altek 's quality system has passed environmental certifications such as ISO9001, ISO13485, ISO/TS16949, ISO14001, OHSAS1800, and SONY Green Partner Certification. Altek is committed to environmental protection.
Humanistic care and charitable activities: Altek upholds the purpose of giving back to the community and establishes the “Altek Charity Fund.” Since its establishment, through donations or in-kind donations and activities, Altek has accumulatively contributed over NTD 3 million and in hundreds cameras. There are more than 80 institutions and thousands people benefited.
Other information regarding “Corporate Responsibility Report” which is verified by certifying bodies: None.

3.4.7 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) Altek has established “Procedures for Ethical Management and Guidelines for Conduct” to prevent infidelity. Established the appeal method and if there is any violation, will be punished in accordance with the rule of rewards andpenalties.	None. None.
(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) Altek 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 andprevent	None.

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
			unethical conduct.
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? (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 V V V		(1) Altek 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 Altek’s ethical standards and reports directly to the Board of Directors with periodical updates on relevant matters. (3) Altek’s departments perform such operations based on their responsibilities and report to the head of the department through e-mail. (4) Altek 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 Audit Committee and the Board of Directors. (5) Altek provides training programs on its operating principles from time to time.	None. None. None. None. None.

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. 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 filing a complaint?	V V V		(1) Employees may report to the head of unit or CEO directly via e-mail. (2) Altek 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) Altek holds the entire reporting procedures confidential to prevent a complainant from retaliation for his/her filing a complaint.	None. None. None.
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 rules had been disclosed on company’s website and Market Observation Post System.	None.
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: None.

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
6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices: As disclosed above.

3.4.8 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 for Corporate Governance Corporate Social Responsibility (CSR) Code of Practice Regulation of the Scope and Responsibilities of Independent Directors Rule of Performance Assessment of Board of Directors Ethical Corporate Management Best Practice Principles Procedures for Ethical Management and Guidelines for Conduct	Market Observation Post System/Corporate Governance: http://mops.twse.com.tw/mops/web/index Altek’s Website/Investors: http://www.altek.com.tw/zh-tw/finance/detail/8

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 for Corporate Governance
Corporate Social Responsibility (CSR) Code of
Practice
Regulation of the Scope and Responsibilities of
Independent Directors
Rule of Performance Assessment of Board of
Directors
Ethical Corporate Management Best Practice
Principles
Procedures for Ethical Management and
Guidelines for Conduct

Market Observation Post System/Corporate Governance:
http://mops.twse.com.tw/mops/web/index
Altek’s Website/Investors:
http://www.altek.com.tw/zh-tw/finance/detail/8

3.4.9 Other Important Information Regarding Corporate Governance

A. Employees’ rights and cares

Based on the people-oriented management, Altek 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 relations

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

C. Supplier relation

Altek maintains a good relationship with suppliers and takes measures to reduce carbon dioxide emissions. According to the Supplier Management Procedures and the Regulations Governing Management of Environmental Substances, Altek requests its partners to abide by related international laws and regulations, the requirements of the world’s top manufacturers (RoHS, REACH, and GP) 、 RoHS and REACH annex 17 for environmental protection and hygiene 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.

D. Training record of directors and supervisors in 2017:

Title	Name	Date	Institute	course	hours
Chairman	Alex Hsia	2017.08.11	Securities and Futures Institute	International and national anti-avoidance tax development and corporate response	3 hours
				Non-accounting background Directors and supervisors how to review financial reports	3 hours
Director	Sophia Chen	2017.08.11	Securities and Futures Institute	International and national anti-avoidance tax development and corporate response	3 hours
				Non-accounting background Directors and supervisors how to review financial reports	3 hours
Director	David Lin	2017.08.11	Securities and Futures Institute	International and national anti-avoidance tax development and corporate response	3 hours
				Non-accounting background Directors and supervisors how to review financial reports	3 hours
Director	Belle Liang	2017.08.11	Securities and Futures Institute	International and national anti-avoidance tax development and corporate response	3 hours
				Non-accounting background Directors and supervisors how to review financial reports	3 hours
Independent Director	Ching Jen Hu	2017.08.11	Securities and Futures Institute	International and national anti-avoidance tax development and corporate response	3 hours
				Non-accounting background Directors and supervisors how to review financial reports	3 hours
Independent Director	Ying Chih Hsieh	2017.08.11	Securities and Futures Institute	International and national anti-avoidance tax development and corporate response	3 hours
				Non-accounting background Directors and supervisors how to review financial reports	3 hours
Independent Director	Mori Shorei	2017.08.11	Securities and Futures Institute	International and national anti-avoidance tax development and corporate response	3 hours
				Non-accounting background Directors and supervisors how to review financial reports	3 hours
		2017.11.14	Securities and Futures Institute	Rule and practice of Audit Committee	3 hours
				Discussion on Related Legal Problems of Inside Deal Cases	3 hours

E. 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, 2018~April 30, 2019

F. Managers’ participation in training courses on corporate governance in 2017: None.

3.4.10 Internal Control Systems

A. Internal Control Declaration

Altek Corporation Internal Control Declaration

Date: March 23, 2018

The declaration of the internal control system from January 1, 2017 to December 31, 2017 is made below based on the result of self-inspection.

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.
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.
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.
The Company has adopted the abovementioned items that determine the effectiveness of the design and implementation of the internal control system.
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, 2017, 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.
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.
The Declaration has been approved by the Board of Directors on March 23, 2018. 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 Control System to be disclosed: N/A.

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

3.4.12 Major Resolutions of Shareholders’ Meeting and Board Meetings

A. Resolutions of 2017 general shareholders’ meeting:

Item	Major Resolutions	Implementation
1	Approval of the 2016 business report and financial statements.	Performed in accordance with relevant laws and regulations.
2	Approval of the distribution of earnings by cash.	Completed on Sep. 08, 2017.
3	Approval of revising the Articles of Incorporation	(1) Completed registration on June 30, 2017 (2) It was announced on the website of Altek on June 16, 2017 and was executed according with the amended regulations.
4	Approval of revising the Procedures for Acquisition or Disposal of Assets.	It was announced on the website of Altek on June 16, 2017 and was executed according with the amended regulations.
5	Approval of revising the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees.	It was announced on the website of Altek on June 16, 2017 and was executed according with the amended regulations.
6	Approval of revising the Procedures for Election of Directors and Supervisors.	It was announced on the website of Altek on June 16, 2017 and was executed according with the amended regulations.
7	To elect the board members for the 8th term.	(1)Alex Hsia`、`Yitsang International Co., Ltd Representative: David Lin`、`Belle Liang`、`Sophia Chen`、`. Ching Jen Hu`、`Ying Chih Hsieh and Mori Shorei were elected. (2)Completed registration on June 30, 2017
8	To release the newly elected Directors from the non-competition restrictions.	Performed in accordance with relevant laws and regulations.

B. Resolutions of 2017 board meeting:

Date	Major Resolutions
2017.06.16 1stmeeting of 8thBoard	Altek Board of Directors unanimously re-elected Mr.Alex Hsia as Chairman
2017.08.12 2ndmeeting of 8thBoard	Altek appointed the members of the 3rd Board's Remuneration Committee
2017.11.13 3rdmeeting of 8thBoard	1. Approval of the amendment of “Rule of the Remuneration of Directors and Supervisors”. 2. Approval of the amendment of “Rule of the Remuneration and Performance evaluation of Managers”. 3.Approve of the amendment of “Rules and Procedures of Board of Director Meetings”. 4. Approval of the amendment of “Audit Committee Charter”. 5.Approval of the amendment of “Rules Governing the Scope of Powers of Independent Directors”. 6. Approval of the amendment of “Rule of Performance Assessment of Board of Directors”. 7. Approval of the establishment of “Ethical Corporate Management Best Practice

Date	Major Resolutions
	Principles” and “Procedures for Ethical Management and Guidelines for Conduct”.
2018.03.23 4thmeeting of 8thBoard	1. Approval of appointment chief accounting officer. 2. Approval of the distribution of employees’ compensation as well as the remuneration for the Directors and Supervisors. 3. Approval of the 2017 business report and financial statements. 5.Approval of 2017 distribution of retained earnings. 6.Approve of issuance of Restricted Stock Awards ("RSA"). 7.Approval of assembly of the 2018 general shareholders’ meeting. 8.Approval of the appointment of CPAs and CPAs’ remuneration. 9.Approval of investing in AI Science and Technology Innovation Fund (tentative name)through the wholly-owned subsidiaryAltek EMS Kunshan Co.,Ltd.
2018.04.23 5thmeeting of 8thBoard	Approval of the issuance of new common shares for cash and domestic or overseas convertible bonds in private placement.

3.4.13 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None.
3.4.14 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	Seiko Chen	2017.03.27	2018.02.14	Job adjustment

3.5 Information of Audit Fee

3.5.1 Payment to the Audit:

Accounting Firm	Name of CPA	Name of CPA	Period Covered by CPA’s Audit	Note
PricewaterhouseCoopers	Dian-Yi Li	Yun-Kuan Lin	2017.01.01`～` 2017.12.31	none

Unit: NT$ thousand

Range	Range
		Audit Fee	Non-audit Fee	Total
	item
1	Under NT$ 2,000,000
2	NT$2,000,00 ~ NT$3,999,999		V
3	NT$4,000,00 ~ NT$5,999,999	V
4	NT$6,000,00 ~ NT$7,999,999			V
5	NT$8,000,00 ~ NT$9,999,999
6	NT$10,000,000 ~

3.5.2Non-audit fee paid to auditors, the audit firm and its affiliates accounted for more than one-fourth of total audit fee, should disclose the details:

Unit: NT$ thousand

			Unit:	Unit:	Unit:	Unit:	Unit:	NT$ thousand
Accounting Firm	Name of CPA	Audit Fee	Non-audit Fee					Period Covered by CPA’s Audit
			System of Design	Company Registration	Human Resources	Others (Note)	Subtotal
Pricewater- houseCoopers	Dian-Yi Li	5,210	0	415	0	1,810	2,225	2017.01.01~ 2017.12.31
	Yun-Kuan Lin

Note: Consulting fee and Transfer Pricing Research Report.

3.5.3 Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of previous year: Not applicable.
3.5.4 Audit fee reduced more than 15% year over year: None.

3.6 Information of replacement of CPA:

3.6.1 Regarding the former CPA

Replacement Date	2018.03.23	2018.03.23	2018.03.23	2018.03.23
Reasons of replacement	Due to the job rotation of PricewaterhouseCoopers, the CPAs were replaced to Kwok-wah Tsang and Dian-Yi Li. since 2018Q1.
Describe whether the Company terminated or the CPA did not accept the appointment	Parties Status		CPA	The Company
	Termination of appointment
	No longer accepted (continued) appointment		V
Other issues (except for unqualified issues) in the audit reports within the last twoyears	NA
Differences with the company	Yes		Accounting principles or practices
			Disclosure of Financial Statements
			Audit scope or steps
			Others
	None	V
Other Revealed Matters	None

Note: There is no disclosure matters disclosures required by Article 10 Section 6Paragraph 1 Point 4&7 of the Standards.

3.6.2 Regarding the successor CPA

3.6.2 Regarding the successor CPA
Name of accounting firm	Pricewater houseCoopers
Name of CPA	Kwok-wah Tsangand Dian-Yi Li.
Date of appointment	2018.03.23
Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issueprior to the engagement.	None
Succeeding CPA’s written opinion of disagreement toward the former CPA	None

3.6.3 The former CPA’s reply about the Article 10 Section 6 Paragraph 1 & Paragraph2-3 of the Standards: N/A.
3.7 Altek’s Chairman, President, Chief Financial Officer, or managers in charge of its finance and accounting operations hold any position in the Company’s independent auditing firm or its affiliates in 2017. ： None.

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

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

Title	Name	2017.01.01~2017.12.31	2017.01.01~2017.12.31	2018.01.01~2018.04.17	2018.01.01~2018.04.17
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman & CEO	Alex Hsia	0	0	250,000	0
Director	Yitsang International Co.,Ltd.	0	(6,500,000)	0	0
Director	Yitsang International Co., Ltd. Representative: David Lin	0	0	39,000	0
Director &VP (Note 1)	Yitsang International Co., Ltd. Representative: Belle Liang	0	0	0	0
Director (Note 2)	Sophia Chen	0	0	0	0
Independent Director (Note 2)	Ching Jen Hu	0	0	0	0
Independent Director (Note 2)	Ying Chih Hsieh	0	0	0	0
Independent Director (Note 2)	Mori Shorei	0	0	0	0
SVP (Note 3)	Simon Law	NA	NA	0	0
VP	Vincent Kao	0	0	60,000	0
VP	Morgan Chiu	(20,000)	0	20,000	0
VP	Kenny Li	0	0	0	0
Head of Accounting (Note 4)	Peggy Hsu	NA	NA

Note 1: Belle Liang was on board as VP on Jan.25, 2017; as Director on June 16, 2017, the information disclosed above is from on duty date.

Note 2: New appointed Directors, The information disclosed above is from on duty date.

Note 3: Simon Law was on board as SVP on Feb.1, 2018, the information disclosed above is from on board date.

Note 4: Peggy Hsu was on board as Head of Accounting on Feb.14, 2018, the information disclosed above is from on board date.

3.8.2 Shares Trading with Related Parties: None.

3.8.3 Shares Pledge with Related Parties: None.

3.9 Relationship among the Top Ten Shareholders

April 17, 2018

Name	Current Shareholding	Current Shareholding	Spouse’s/Minor’s Shareholding	Spouse’s/Minor’s Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship between the Company’s Top Ten Shareholders, or Spouses or Relatives within Two Degrees	Name and Relationship between the Company’s Top Ten Shareholders, or Spouses or Relatives within Two Degrees
	Shares	%	Shares	%	Shares	%	Name	Relationship
Tung-Hsin Investment Corp. Representative: Tong-Yi Chang	14,711,000	5.37	0	0.00	0	0.00	None	None
	0	0.00	0	0.00	0	0.00	None	None
Yitsang International Co., Ltd. Representative: Yun-Hsing Lin	13,946,100	5.09	0	0.00	0	0.00	None	None
	634	0.00	0	0.00	0	0.00	None	None
Standard Chartered Bank in custody fo KGI	3,718,058	1.36	0	0.00	0	0.00	None	None
Unique Technology Co., Ltd. Representative`：` Yu Lung Chang	3,097,304	1.13	0	0.00	0	0.00	None	None
	15,723	0.01	0	0.00	0	0.00	None	None
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	2,908,353	1.06	0	0.00	0	0.00	None	None
Vanguard Emerging Markets Stock Index Fund, a series of Vanguard International Equity Index Funds	2,882,000	1.05	0	0.00	0	0.00	None	None
Citibank in custody for DFA	2,162,159	0.79	0	0.00	0	0.00	None	None
Altek Employees’ RSA Trust Account	1,837,500	0.67	0	0.00	0	0.00	None	None
Citibank in custody for SPC	1,606,000	0.59	0	0.00	0	0.00	None	None
Altek Charity Fund	1,537,890	0.56	0	0	0	0	None	None

3.10 Ownership of Shares in Affiliated Enterprises

	December 31,2017	December 31,2017	December 31,2017	December 31,2017	December 31,2017	December 31,2017
Affiliated Enterprises	Ownership by the Company		Direct or Indirect Ownership by Directors, Supervisors, Managers		Total Ownership
	Shares	%	Shares	%	Shares	%
Altek Japan Corporation	1,000	100.00	0	0.00	1,000	100.00
Altek International Investment Co., Ltd.	88,662,059	100.00	0	0.00	88,662,059	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
Altek EMS (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 Optical Technology (Cayman) Co., Ltd.	0	0.00	11,200,000	100.00	11,200,000	100.00
Altek (Kunshan) Optical Co., Ltd.	0	0.00	(Note 2)	100.00	(Note 2)	100.00
Altek Semiconductor (Cayman) Co., Ltd.	0	0.00	20,000,000	50.00	20,000,000	50.00
Altek Semiconductor Corp.	0	0.00	20,000,000	50.00	20,000,000	50.00
Altek Semiconductor (Shanghai) Co., Ltd.	0	0.00	(Note 2)	50.00	(Note 2)	50.00
Altek Optical (Cayman) Co., Ltd.	0	0.00	4,800,241	100.00	4,800,241	100.00
Altek Investment Co., Ltd.	5,000,000	100.00	0	0.00	5,000,000	100.00
Altek International Holding (BVI) Co., Ltd.	12,865,921	100.00	0	0.00	12,865,921	100.00
Altek Biotechnology Holding (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.

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

Unit: Share; NT$ thousand

Month/ Year	Par Value	Authorized Capital	Authorized Capital	Paid-in Capital	Paid-in Capital	Remark	Remark	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	-
2017.04	10	500,000,000	5,000,000	273,908,825	2,739,088	Cancellation of Issued RSA	None	-
2017.08	10	500,000,000	5,000,000	273,738,825	2,737,388	Cancellation of Issued RSA	None	-
2017.11	10	500,000,000	5,000,000	273,818,825	2,738,188	Cancellation of Issued RSA & Execution of ESOP	None	-
2018.04	10	500,000,000	5,000,000	273,788,825	2,737,888	Cancellation of Issued RSA	None	-

April 17, 2018; unit: Share

				April 17, 2018; unit: Share
Type of Share	Authorized Capital			Remark
	Issued Shares	Un-issued Shares	Total Shares
Common shares	273,788,825	226,211,175	500,000,000	Listed stock

B.Information for Shelf Registration: N/A.

4.1.2 Status of Shareholders

		April 17,2018 Financial Institutions Other Juridical Persons Domestic Natural Persons Foreign Institutions & Natural Persons Total 8 78 45,927 122 46,136 2,156,098 39,033,222 202,495,940 30,103,531 273,788,825 0.79 14.26 73.96 10.99 100.00	April 17,2018 Financial Institutions Other Juridical Persons Domestic Natural Persons Foreign Institutions & Natural Persons Total 8 78 45,927 122 46,136 2,156,098 39,033,222 202,495,940 30,103,531 273,788,825 0.79 14.26 73.96 10.99 100.00	April 17,2018 Financial Institutions Other Juridical Persons Domestic Natural Persons Foreign Institutions & Natural Persons Total 8 78 45,927 122 46,136 2,156,098 39,033,222 202,495,940 30,103,531 273,788,825 0.79 14.26 73.96 10.99 100.00	April 17,2018 Financial Institutions Other Juridical Persons Domestic Natural Persons Foreign Institutions & Natural Persons Total 8 78 45,927 122 46,136 2,156,098 39,033,222 202,495,940 30,103,531 273,788,825 0.79 14.26 73.96 10.99 100.00
Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons
Number of Shareholders	1	8	78	45,927	122
Shareholding (shares)	34	2,156,098	39,033,222	202,495,940	30,103,531
Percentage	0.00	0.79	14.26	73.96	10.99

4.1.3 Shareholding Distribution Status

A. Common Shares

April 17, 2018

			April 17,2018
Class of Shareholding	Number of Shareholders	Shareholding (Shares)	Percentage (%)
1`～` 999	18,881	3,624,946	1.32
1,000`～` 5,000	20,228	44,465,342	16.24
5,001`～` 10,000	3,701	29,451,881	10.76
10,001`～` 15,000	1,052	13,454,375	4.91
15,001`～` 20,000	712	13,384,795	4.89
20,001`～` 30,000	577	14,943,409	5.46
30,001`～` 50,000	452	18,456,576	6.74
50,001`～`100,000	302	21,362,393	7.80
100,001`～`200,000	127	18,318,790	6.69
200,001`～`400,000	54	14,872,419	5.43
400,001`～`600,000	14	6,840,059	2.50
600,001`～`800,000	14	9,657,332	3.53
800,001`～`1,000,000	3	2,738,217	1.00
1,000,001 or above	19	62,218,291	22.72
Total	46,136	273,788,825	100.00

B. Preferred Shares: None.

4.1.4 List of Major Shareholders

April 17, 2018

		April 17,2018
Shares Shareholder's Name	Shareholding (Shares)	Percentage
Tung-Hsin Investment Corp.	14,711,000	5.37
Yitsang International Co., Ltd.	13,946,100	5.09
Standard Chartered Bank in custody fo KGI	3,718,058	1.36
Unique Technology Co., Ltd.	3,097,304	1.13
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	2,908,353	1.06
Vanguard Emerging Markets Stock Index Fund, a series of Vanguard International EquityIndex Funds	2,882,000	1.05
Citibank in custody for DFA	2,162,159	0.79
Altek Employees’ RSA Trust Account	1,837,500	0.67
Citibank in custody for SPC	1,606,000	0.59
Altek Charity Fund	1,537,890	0.56

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

Unit: NT$

					Unit: NT$
Item	Year		2016	2017	2018 (as of March 31)
Market Price per Share	Highest Market Price		31.1	37.9	36.3
	Lowest Market Price		19.05	22.10	27.35
	Average Market Price		23.41	27.06	31.05
Net Worth per Share	Before Distribution		33.06	32.75	32.76
	After Distribution		32.26	(Note 1)	(Note 1)
Earnings per Share	Weighted Average Shares (thousand shares)		265,840	265,928	267,996
	Earnings Per Share		0.20	0.05	(0.10)
Dividends per Share	Cash Dividends		0.8	(Note 1)	`－`
	Stock Dividends	`－`	`－`	`－`	`－`
		`－`	`－`	`－`	`－`
	Accumulated Undistributed Dividends		`－`	`－`	`－`
Return on Investment	Price/Earnings Ratio (Note 2)		117.05	541.2	`－`
	Price/Dividend Ratio (Note 3)		29.26	(Note 1)	`－`
	Cash Dividend Yield Rate (Note 4)		3.42	(Note 1)	`－`

Note 1: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15, 2018.

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.

4.1.6 Dividend Policy and Implementation Status
A. Dividend Policy

Based on the Article of Incorporation, 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

B. Proposed Distribution of Dividend	B. Proposed Distribution of Dividend
		Unit: NT$
Year	Date for BoDs to Approve Distribution of Dividend	Shareholders’ Meeting
		Cash Dividend	Capital Surplus (in Cash)	Share Dividend
2017	2018.03.23	NT$135,177,913 (NT$0.5 per share)	0 (NT$0 per share)	0 (NT$0 per share)

Note: The ratio of distribution per share is calculated based on the outstanding stock on March 14[th] , 2018. It is 270,355,825 shares in total, and the 3,433,000 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 15th, 2018.
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.
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 2017 Approved in Board of Directors Meeting
(1) The proposal of retained earnings distribution has been approved by the Board of Directors on March 23th, 2018, and the compensation for the employees is NT$3,159,426 and the compensation for the directors and supervisors is NT$421,256. 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 2017. Until the date of the annual report, Altek bought back total treasury shares 3,433,973 shares, and also it accumulates 1.25% of the Company outstanding shares.

4.2 Bonds: None.
4.3 Preferred Stock: None.
4.4 Global Depository Receipts: None.

4.5 Employee Stock Options

4.5.1 Issuance of Employee Stock Options

April 18, 2017; unit: NT$

Type of Stock Option	3rdTranche	3rdTranche
Approval Date	2011.06.08
Issue Date	2011.10.28	2012.03.21
Units Issued (Thousand Shares)	3,000	3,000
Shares of Stock Options to Be Issued as a Percentage of Outstanding Shares (Note 1)	0.77%	0.76%
Duration	2011.10.28~2020.12.31	2012.03.21~2020.12.31
Conversion Measures	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; 4 years after issued: could exercise 100% of total outstanding shares;
Converted Shares (Thousand Shares)	280	1,054
Exercised Amount (NT$Thousand)	6,748	26,441
Number of Shares Yet to Be Converted (Thousand Shares)	1,420	1,033
Adjusted Exercise Price for Those who Have Yet to Exercise Their Rights(NT$)	30.7	30.5
Unexercised Shares as a Percentage of Total Issued Shares (Note 2)	0.52%	0.38%
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 17, 2018 (273,788,825 shares).

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

April 17, 2018; unit: thousand shares; NT$ thousand

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 Converted	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	840	0.31	136	23.9	3,250	0.05%	704	30.5~30.7	21,572	0.26%
	SVP	Simon Law
	VP	Vincent Kao
	VP	Morgan Chiu
	VP	Kenny Li
Top 10 Employees		(Note 2)	1,860	0.68%	589	23.9~34.5	14,610	0.22%	1,271	30.5~30.7	38,950	0.46%

Note 1: Calculated according to issued shares on April 17, 2018 (273,788,825 shares).

Note 2: Top ten employees with stock options are: Kuo-Chang Chen, Shui-Lin Chen, Hung-Long Chou, Shi-Chang Han, Qin-Guo Li, Jie-Sheng Lin, Zong-Han Lin, Sheng-De Shih, Bo-Zheng Wu 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.

4.6 Restricted Employee Shares

4.6.1 Issuance of New Restricted Employee Shares

April 17, 2018; unit: NT$

	April 17, 2018; unit: NT$	April 17, 2018; unit: NT$	April 17, 2018; unit: NT$	April 17, 2018; 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 by the 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 Taken When 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)	525	0		70
Number of Released New Restricted Employee Shares(Thousand Shares)	972.5	595		0
Number of Unreleased New Restricted Shares(Thousand Shares)	942.5	595		300
Ratio of Unreleased New Restricted Shares to Total Issued Shares (%) (Note 1)	0.34%	0.22%		0.11%
Impact on Possible Dilution of Shareholdings	The influence on the Company’s EPS is limited, hence there’s no material impact on the shareholder’s equity.

Note 1: Calculated according to issued shares on April 17, 2018 (273,788,825 shares).

4.6.2 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$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%	April 18,2017;unit: Thousand shares;NT$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%	April 18,2017;unit: Thousand shares;NT$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%	April 18,2017;unit: Thousand shares;NT$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%	April 18,2017;unit: Thousand shares;NT$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%	April 18,2017;unit: Thousand shares;NT$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%	April 18,2017;unit: Thousand shares;NT$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%	April 18,2017;unit: Thousand shares;NT$thousand Released Unreleased Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Released Restricted Shares as a Percentage of Shares Issued (Note 1) Number of Shares Issued Price (NT$) Amount (NT$ Thousands) Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1) 365 0 0 0.13% 365 0 0 0.13% 480 0 0 0.18% 630 0 0 0.23%
	Title	Name	Number of New Restricted Shares	New Restricted Shares as a Percentage of Shares Issued (Note 1)	Released				Unreleased
					Number of Shares	Issued Price (NT$)	Amount (NT$ Thousands)	Released Restricted Shares as a Percentage of Shares Issued (Note 1)	Number of Shares	Issued Price (NT$)	Amount (NT$ Thousands)	Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1)
Management	CEO	Alex Hsia	730	0.27%	365	0	0	0.13%	365	0	0	0.13%
	VP	Vincent Kao
	VP	Morgan Chiu
	VP	Kenny Li
Top 10 Employees		(Note 2)	1,110	0.41%	480	0	0	0.18%	630	0	0	0.23%

Note 1: Calculated according to issued shares on April 17, 2018 (273,788,825 shares).

Note 2: Top ten employees with new restricted employee shares are: Kuo-Chang Chen, Shui-Lin Chen, Shih-Chang Chia, Yong-Fei Chien, Hung-Long Chou, Shi-Chang Han, Kuo-Chun Hung, Qin-Guo Li, Jie-Sheng Lin, Zong-Han Lin, Sheng-De Shih, Bo-Zheng Wu and Cheng-Tao Yang, 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

V. Operational Highlights

5.1 Business Activities

5.1.1 Business Scope
A. Main Areas of Business Operations

As a digital imaging solution provider, Altek mainly delivers the research, development, manufacturing and sale of digital imaging-related applications and offers customers IP licensing, computing software, application-specific integrated circuits (ASIC), dual (multi-) lens camera module, and ODM for system products.

B. Revenue Distribution

Revenue Distribution	Revenue Distribution	Revenue Distribution
Unit: NT$ thousand
Major Divisions	Total Sales in Year 2017	(%) of Sales
Digital Imaging-related Applications	10,552,773	100.00%

Note1: Digital imaging-related applications include imaging chips, dual lens camera modules, wearable cameras, automotive cameras, and medical electronics.

Note2: Consolidated base with IFRS.

C. New Product Development
(1) AI deep learning chips
(2) Automotive imaging chips
(3) Dual lens camera module and algorism software
(4) Home and industrial surveillance camera
(5) Wide-angle automotive camera (megapixels or more)
(6) Artificial pancreas
(7) New generation of glucose meter
(8) Disposable wide-angle endoscope

5.1.2 Industry Overview

A. Current Status, Development and Competition

As a digital imaging solution provider, Altek is aware that digital imaging has become a necessity with changes in consumers’ habits. In addition to the focus on the image quality of cameras and camcorders, Altek now approaches greater importance to home intelligence, personal safety, driving safety, and medical precision in response to IoT, Big Data, and vision intelligence.

The 2018 CES mainly focuses on AI, IoT, self-driving, home intelligence (smart assistants, sweeping robots, and housekeeping robots), and AR/VR. Machine vision is the common technology for different products, which further allows machines to read, learn, and increase intelligence.

In the market, Altek is one of the few solution providers that offer a full range of solutions from IP licensing, computing software, dual (multi-) lens camera modules, to ODM for

total solution providers. With the increasing importance of digital imaging, a diversity of competitors, including algorism software companies, fabless and camera module manufacturers, and top brands have started to develop their own technologies, leading to intense the competitions.

B. Relevance of Upstream, Midstream, and Downstream

There are a variety of digital imaging applications, especially the launch of multi-lens camera modules. Some end products, such as smart phones, with complicated supply chains also rely on camera modules developing trends. The following figure shows how the digital imaging industry operates in overall:

==> picture [441 x 178] intentionally omitted <==

C. Product Development Trend

With a change in consumers’ lifestyle, digital imaging has become the necessary for the daily life. From smart phones, automobiles, home and business surveillance to medical diagnosis, digital imaging is everywhere, and a variety of applications have sprung up.

For example, Apple took the lead to launch a dual-lens camera smart phone in 2016 and the image quality (such as blur background) is comparable to that of monocular cameras. In 2017, Apple added 3D sensing to offer face recognition, leading another trend in the market. With increasingly stricter requirements for driving safety, along with the trend of self-driving, the automotive imaging application has turned from viewing into sensing with a focus on intelligent judgments on the shape, volume, color, moving speed, and distance.

With the rapid development of the chip computing speed, AI has become a big trend. In 2018 CES, 3D sensing features the addition of cameras to different types of electronic products, including self-driving, drones, IoT products, and robots. Different from Apple Siri or Amazon Echo that features hearing, the introduction of vision will accelerate the development of AI.

5.1.3 Research and Development

A. Research and Development Expenses

Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Item	2017	2018 (as of March 31)
Total R&D Expense	874,826	195,691
% to Revenue	9%	8%

Note: Consolidated base with IFRS.

B. Technologies or Products Developed
(1) 3D sensing computer chips.
(2) Dual-camera module and computing software (featuring fast focus, refocus and bokeh).
(3) New-generation 360 degree VR camera.
(4) New-generation glucose meter.
(5) Insulin injection system (artificial pancreas).
(6) Disposable endoscope.
C. Ongoing Research and Development Projects and Expenses

In addition to developing extended products, Altek 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 2018, R&D plan and progress are described below:

below:
OngoingR&D Project	Expected Completion time
AI Deep Learning Chips	Before 2018 end
Active Dual-lens Module and algorism Software	Before 2018 end
VR Camera	Before 2018Q3
Safety Surveillance Camera	Before 2018 end
Automotive Camera (Megapixels)	Before 2018 end
Artificial Pancreas	2018Q1
New-generation Glucose Meter	Before 2018 end
New-generation Wide-range Disposable Endoscope	Before 2020 end

The expenses of the above R&D projects accounted for more than 80% of the total R&D expenses.

5.1.4 Long-term and Short-term Development
A. Short-term Business Development Plan
- (1) Strengthen partnership with existing customers, ensure quality and delivery, and further expand product lines.
- (2) Form strategic alliances with international manufactures to develop new customers worldwide.
- (3) Build visibility and reputation by participating in major exhibitions.
- (4) Strengthen cooperation with the supply chains to develop cost-effective solutions.
B. Mid and Long-term Business Development Plan
- (1) Continue to develop more competitive products for the next generation.
- (2) Strengthen strategic alliances with top manufacturers worldwide to develop new business opportunities.
- (3) Develop advanced products and technologies to increase differentials and barriers to entry.
- (4) Strengthen strategies for international development, visibility and market share.
- (5) Recruit and retain outstanding talents to reserve the capacity for product research and business development.

5.2 Market and Sales Overview

5.2.1 Market Analysis

A. Major Sales Region

In 2017, Altek’s major sales region is Asia, accounting for 89% of the consolidated sales, followed by Europe, accounting for 10% of the consolidated revenue, and North America accounted for 1% of the consolidated sales.

B. Market Share

Altek offers a full range of digital imaging solutions (including IP licensing, algorism software, chip design, dual (multi-) lens camera modules, and ODM for system products). Altek has no estimation for its market share.

C. Market Supply/Demand and Growth in the Future

With the increasing importance of digital imaging, other algorism software companies, fabless companies, camera module manufacturers and top brands have started to develop their own technologies. Competition among key component suppliers in China is also intense. Altek has to advance in terms of specifications and technologies and deliver more competitive services and costs.

According to the research institution’s estimation, the penetration rate of the dual-lens camera modules for smart phones will increase from 20% in 2017 to 42% in 2021, and the sales volume will increase from 320 million sets to 730 million sets. The global scale of 3D sensing software and hardware is estimated to increase from US$4.5 billion in 2017 to US$24.9 billion in 2024. Looking to the future, digital imaging products will maintain strong growth overall.

2014-2024 Global 3D Sensing Market Scale

Unit: USD million

==> picture [366 x 209] intentionally omitted <==

D. Competitive Niche

(1) In-depth algorism software

Altek has invested in in-depth algorism software for many years and obtained various patents in Taiwan, China, and the U.S. Our in-depth imaging technology has been highly recognized by smart phone manufacturers in China and semiconductor manufacturers in U.S.

(2) Imaging chips

Altek’s chip design team has developed more than 10 generation imaging chips successfully, including the latest 3D indepth sensing chips commissioned by semiconductor manufacturers in the U.S. More than 200 million end products have been equipped with our imaging chips.

(3) Optical processing technology and system integration

Altek has developed and produced cameras for international customers for over 20 years. Once the world’s largest DSC ODM, Altek has an optical team that delivers custom design with the strong capacity for technology development, system integration, and mass production.

(4) Complete digital imaging solution

Altek offers one-stop shopping service to customers and quickly responds to customers’ needs, from product development to mass production, in the shortest time to help customers lead in the market.

E. Advantages, Disadvantages and Countermeasures for Prospects
(1) Advantages
- a. With the rapid development of digital imaging, Altek plays an important role with promising prospects.
- b. With the development of 3D sensing and intelligent vision, Altek’s in-depth computing technology leads ahead of the industry.
- c. Altek offers a full range of digital imaging solutions to customers, from product development to mass production, in the shortest time to help customers lead in the market.
(2) Disadvantages and Countermeasures
- a. With the ever-changing development of technology, there are higher requirements for specifications and functions, leading to price reductions and shorter life cycles.

Countermeasure:

Altek will recruit and retain outstanding talents to strengthen its capacity for product research and resilience; Altek will also develop more technologies and products with a longer life time and higher barriers to entry.

b. Intense competition

With the increasing importance of digital imaging, other competitors have

started to develop their own technologies, and China also supports its local manufacturers, leading to intenser competition.

Countermeasure:

Altek will develop advanced products and technologies to increase differentials and barriers to entry.

5.2.2 Purpose and Production Process of Major Products

A. Digital Imaging Chip
(1) Major purpose

Digital imaging chips are applied to general consumer products, smartphone images, autotronic products, and medical imaging products ~~.~~

(2) Production process

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

==> picture [423 x 122] 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 81] intentionally omitted <==

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

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

B. Dual-camera Module

(1) Major purpose

Dual-camera modules are applied to smartphones, tablets and cars.

(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

Images recording, community sharing, webcast, virtual reality, and face recognition.

(2) Production process

==> picture [377 x 260] intentionally omitted <==

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

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

5.2.3 Major Suppliers

Altek has maintained a good relationship with major suppliers to control sources of materials, shorten delivery, improve material quality, and reduce risks. Altek also reaches an agreement with major suppliers and according the market supply and demand to review price in order to establish safe inventory for the optimization of quality, delivery, and costs.

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$thousand	Unit: NT$thousand
2016				2017				2018 (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	o	832,751	10.13	None	p	220,443	11.08	None
Other	8,189,981	85.34	None	Other	7,385,744	89.87	None	Other	1,769,861	88.92	None
Total	9,596,564	100.00	`－`	Total	8,218,495	100.00	`－`	Total	1,990,305	100.00	`－`

The reason for the change: Altek has been actively transitioning to develop new products and cooperate with the new suppliers.

B. Major Customers in the Last Two Calendar Years

Unit: NT$ thousand

								Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
2016				2017				2018 (as of March 31)
Name	Amount	Percentage (%)	Relation with Issuer	Name	Amount	Percentage (%)	Relation with Issuer	Name	Amount	Percentage (%)	Relation with Issuer
E	2,326,399	20.09	None	F	2,064,733	19.57	None	F	456,555	19.54	None
F	1,989,676	17.19	None	E	1,877,714	17.79	None	T	420,701	18.01	None
O	1,671,863	14.44	None	S	1,156,451	10.96	None	`－`	`－`	`－`	`－`
Other	5,589,108	48.28	None	Other	5,453,875	51.68	None	Other	1,459,057	62.45	None
Total	11,577,046	100.00	`－`	Total	10,552,773	100.00	`－`	Total	2,336,313	100.00	`－`

The reason for the change: Altek has been actively transitioning; due to different sales of products, the customer's ranking has changed slightly.

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	2016			2017
Output Major Products	Capacity	Quantity	Value	Capacity	Quantity	Value
Digital Imaging-related Applications	See Note			See 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
Year	2016(Note 1)				2017(Note 1)
Shipments & Sales Major Products	Local		Export		Local		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
Digital Imaging-related Applications	Note 2	439,930	Note 2	11,137,116	Note 2	11,431	Note 2	10,441,342

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.

5.3 Human Resources

Human Resources	Human Resources
Year		2016	2017	March 31, 2018
Number of Employees	Direct and Indirect	245	192	206
	Management	8	5	5
	Total	253	197	211
Average Age		41.59	42.0	42.0
Average Years of Service		7.4	8.6	8.6
Education (%)	Ph.D.	0.7	0.5	0.5
	Master	48.8	46.7	49.2
	Bachelor’s Degree	45.8	48.2	46.0
	Senior High School	4.0	3.6	3.3
	Below Senior High School	0.7	1.0	1.0

Note: Exposing only the number of employees in individual entity. 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

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

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, Altek 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 annualsick 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

Talents are the most important assets 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, Altek 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.

The number of training programs held in 2017 totaled 4,361 hours, with 1,234 trainees and at the cost of NT$542,936. The results of training programs are shown below:

Unit: NT$

			Unit: NT$
Item	Number of Trainees	Hours	Expense
Professional Training	715	2,484	542,936
Employee Safety and Health Training	98	294
QualityTraining	130	390
Generic Training	204	582
New Employee Orientation	54	162
External Training	33	449
Total	1,234	4,361

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 potentials 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.

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$40,555 thousand.	The pension recognized in 2017 was NT$13,156 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.
(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. 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.

(4) Environment and safety management:

The visitor needs the ID card issued by the company in order to access the control door. The security guard will check the ID card then the visitor is able to enter the Company.

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

5.6 Important Contracts

Agreement	Counterparty	Period	Major Contents	Restrictions
Land Lease	Hsinchu Science Park Bureau, Ministry of Science and Technology	2018.09.19~ 2027.12.31	Renting Scientific Park Land	Need to comply with related management Regulations

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	Unit: NT$ thousand	Unit: NT$ thousand	Unit: NT$ thousand	Unit: NT$ thousand
Year Item		2013	2014	2015	2016	2017	March 31, 2018 (Note 2)
Current Assets		9,078,856	9,643,055	9,649,516	10,051,522	10,213,502	10,221,306
Property, Plant and Equipment		5,656,784	5,603,692	5,211,143	4,657,848	4,426,156	4,408,104
Intangible Assets		110,413	103,447	93,713	92,917	121,538	113,574
Other Assets		872,407	502,017	445,806	424,845	287,775	322,219
Total Assets		15,718,460	15,852,211	15,400,178	15,227,132	15,048,971	15,065,203
Current Liabilities	Before Distribution	4,923,728	5,447,625	5,117,961	5,613,869	5,042,892	5,022,544
	After Distribution	4,923,728	5,717,879	5,386,241	5,829,465	(Note 2)	(Note 2)
Non-current Liabilities		894,824	724,458	653,365	580,270	520,854	538,742
Total Liabilities	Before Distribution	5,818,552	6,172,083	5,771,326	6,194,139	5,563,746	5,561,286
	After Distribution	5,818,552	6,442,337	6,039,606	6,409,735	(Note 2)	(Note 2)
Share Capital(Note 3)		3,902,653	2,701,358	2,726,938	2,739,788	2,738,188	2,737,888
Capital Reserve	Before Distribution	2,028,690	2,063,551	1,975,772	1,862,914	2,256,692	2,256,188
	After Distribution	2,028,690	1,928,424	1,841,632	1,862,914	(Note 2)	(Note 2)
Retained ~~E~~arnings	Before Distribution	4,374,704	4,426,902	4,536,749	4,462,922	4,259,236	4,255,564
	Distribution	4,374,704	4,291,775	4,402,609	4,274,326	(Note 2)	(Note 2)
Other EquityInterest		27,904	481,868	414,647	(25,521)	(302,339)	(299,786)
TreasuryStock		(440,573)	`－`	(129,393)	(129,393)	(96,138)	(96,138)
Equity Attributable to Owners of the Parent	Before Distribution	9,893,378	9,673,679	9,524,713	8,910,710	8,855,639	8,853,716
	After Distribution	9,893,378	9,403,425	9,256,433	8,695,114	(Note 2)	(Note 2)
Non-controllingInterests		6,530	6,449	104,139	122,283	629,586	650,201
~~T~~otal Equity	Before Distribution	9,899,908	9,680,128	9,628,852	9,032,993	9,485,225	9,507,917
	After Distribution	9,899,908	9,409,874	9,360,572	8,817,397	(Note 2)	(Note 2)

Note 1: The annual financial statements have been audited by CPAs; financial statements as of March 31, 2018 have been reviewed by CPAs.

Note 2: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15, 2018.

Note 3: Mainly the capital decrease by cash at the amount of NT$1,182,475 thousand in 2014.

B. Individual Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousand

Year Item	Year Item	2013	2014	2015	2016	2017
Current Assets		2,773,391	3,560,652	3,342,969	2,545,463	1,710,815
Property, Plant and Equipment		2,252,204	2,195,459	2,151,402	2,132,812	2,179,758
Intangible Assets		7,135	3,892	3,866	2,505	1,754
Other Assets		11,083,223	10,308,292	10,217,278	9,766,424	9,630,848
Total Assets		16,115,953	16,068,295	15,715,515	14,447,487	13,523,175
Current Liabilities	Before Distribution	5,327,751	5,670,171	5,544,812	4,989,428	4,195,351
	After Distribution	5,327,751	5,940,425	5,813,092	5,205,024	(Note 2)
Non-current Liabilities		894,824	724,445	645,990	547,349	472,185
~~T~~otal Liabilities	Before Distribution	6,222,575	6,394,616	6,190,802	5,536,777	4,667,536
	After Distribution	6,222,575	6,664,870	6,459,082	5,752,373	(Note 2)
Share Capital (Note 3)		3,902,653	2,701,358	2,726,938	2,739,788	2,738,188
~~C~~apital Reserve	Before Distribution	2,028,690	2,063,551	1,975,772	1,862,914	2,256,692
	After Distribution	2,028,690	1,928,424	1,841,632	1,862,914	(Note 2)
Retained Earnings	Before Distribution	4,374,704	4,426,902	4,536,749	4,462,922	4,259,236
	After Distribution	4,374,704	4,291,775	4,402,609	4,247,326	(Note 2)
Other Equity Interest		27,904	481,868	414,647	(25,521)	(302,339)
Treasury Stock		(440,573)	`－`	(129,393)	(129,393)	(96,138)
Total shareholders’ Equity	Before Distribution	9,893,378	9,673,679	9,524,713	8,910,710	8,855,639
	After Distribution	9,893,378	9,403,425	9,256,433	8,695,114	(Note 2)

Note 1: The financial data have been audited by CPAs.

Note 2: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 15, 2018.

Note 3: Mainly the capital decrease by cash at the amount of NT$1,182,475 thousand in 2014.

Note4: Altek made a simple merger with its subsidiary, Altek Autotronics, on June 30, 2017. The foregoing transaction belongs to the structural reorganization within the Group, where Altek Autotronics should be considered to be possessed by Altek from the very beginning and was consolidated. The 2016 individual financial statements were retrospectively renumbered when Altek prepared the 2017 individual financial statements. The 2016 financial ratio was calculated based on the reconstructed one.

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$thousand
Year Item	2013	2014	2015	2016	2017	March 31, 2018
Operating Revenue	19,165,825	15,431,081	12,492,029	11,577,046	10,552,773	2,336,313
Gross Profit from Operations	1,158,836	1,560,966	1,568,786	1,555,744	1,435,042	298,843
Net Operating Income (Loss)	(63,840)	301,251	226,351	45,759	159,446	16,078
Non-operating Income and Expense	(303,661)	9,631	56,160	144,816	(21,884)	(3,172)
Income (Loss) before Tax	(367,501)	310,882	282,511	190,575	137,562	12,906
Income (Loss) for Continued Operations	(330,515)	276,175	274,380	100,108	49,587	3,582
Income (Loss) from Discontinued Operations	`－`	`－`	`－`	`－`	`－`	`－`
Net Income (Loss)	(330,515)	276,175	274,380	100,108	49,587	3,582
Other Comprehensive Income(Income after Tax)	368,703	458,362	(11,764)	(438,440)	(326,910)	9,258
Total Comprehensive Income	38,188	734,537	262,616	(338,332)	(277,323)	12,840
Net Income Attributable to Owners of the Parent	(332,012)	275,335	273,643	53,800	13,402	(27,153)
Net Income Attributable to Non-controllingInterests	1,497	840	737	46,308	36,185	30,735
Comprehensive Income Attributable to Owners of the Parent	36,691	733,697	265,898	(382,446)	(306,223)	(7,775)
Comprehensive Income Attributable to Non-controllingInterests	1,497	840	(3,282)	44,114	28,900	20,615
Earnings (Loss) per Share (NT$)	(0.88)	0.80	1.02	0.20	0.05	(0.10)

Note: The annual financial statements have been audited by CPAs; financial statements as of March 31, 2018 have been reviewed by CPAs.

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

Unit: NT$ thousand

Year Item	2013	2014	2015	2016	2017
Operating Revenue	10,164,641	11,710,474	9,153,080	3,860,298	4,459,078
Gross Profit from Operations	1,079,436	1,249,827	1,011,509	650,252	438,319
Net Operating Income (Loss)	148,278	354,250	177,508	22,497	(193,822)
Non-operating Income and Expense	(532,313)	(106,917)	72,180	51,557	211,304
Income (Loss) before Tax	(384,035)	247,333	249,688	74,054	17,482
Income (Loss) for Continued Operations	(332,012)	275,335	273,643	53,800	13,402
Income (Loss) from Discontinued Operations	`－`	`－`	`－`	`－`	`－`
Net Income (Loss)	(332,012)	275,335	273,643	53,800	13,402
Other Comprehensive Income (Income after Tax)	368,703	458,362	(7,745)	(436,246)	(319,625)
Total Comprehensive Income	36,691	733,697	265,898	(382,446)	(306,223)
Earnings (Loss) per Share (NT$)	(0.88)	0.80	1.02	0.20	0.05

Note 1: The financial data have been audited by CPAs.

Note 2: Altek made a simple merger with its subsidiary, Altek Autotronics, on June 30, 2017. The foregoing transaction belongs to the structural reorganization within the Group, where Altek Autotronics should be considered to be possessed by Altek from the very beginning and was consolidated. The 2016 individual financial statements were retrospectively renumbered when Altek prepared the 2017 individual financial statements. The 2016 financial ratio was calculated based on the reconstructed one.

6.1.3 Auditors’ Opinions from 2013 to 2017

Year	CPA	Accounting Firm	Audit 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	PricewaterhouseCoopers	Unqualified opinion
2017	Dian-Yi Li and Yu-Kuan Lin	PricewaterhouseCoopers	Unqualified opinion

Note: CPAs have been changed based on the job rotation of PricewaterhouseCoopers.

6.2 Five-Year Financial Analysis

A. Consolidated Financial Analysis – Based on IFRS

Item	Year	2013	2014	2015	2016	2017	March 31, 2018
Financial Structure (%)	Debt Ratio	37.02	38.94	37.48	40.68	36.97	36.91
	Ratio of Long-term Capital to Property,Plant and Equipment	190.83	185.67	197.19	206.39	226.07	277.82
Solvency (%)	Current Ratio (%)	184.39	177.01	188.30	179.05	202.53	203.51
	Quick Ratio (%)	153.51	151.85	165.33	149.10	175.91	175.71
	Interest Earned Ratio (Times)	`－`	19.00	14.88	8.39	6.12	3.35
Operating Performance	Accounts Receivable Turnover (Times)	5.80	5.60	5.30	4.57	4.08	4.08
	Average Collection Period	62.93	65.17	68.86	79.86	89.46	89.46
	Inventory Turnover (Times)	10.55	9.98	8.36	6.88	6.46	6.46
	Accounts Payable Turnover (Times)	6.37	5.10	4.08	4.14	4.01	3.88
	Average Days in Sales	34.59	36.57	43.66	53.05	56.50	56.50
	Property, Plant and Equipment Turnover(Times)	3.50	2.74	2.31	2.35	2.32	0.53
	Total Assets Turnover (Times)	1.19	0.98	0.80	0.76	0.70	0.16
Profitability	Return on Total Assets (%)	(2.00)	1.84	1.86	0.80	0.47	0.06
	Return on Stockholders' Equity (%)	(3.30)	2.82	2.84	1.07	0.54	0.04
	Pre-tax Income to Paid-in Capital(%)	(9.42)	11.51	10.36	6.96	5.02	0.47
	Profit Ratio (%)	(1.72)	1.79	2.20	0.86	0.47	0.15
	Earnings per Share (NT$)	(0.88)	0.80	1.02	0.20	(Note 2)	(Note 2)
Cash Flow	Cash Flow Ratio (%)	`－`	21.2	6.16	`－`	16.29	`－`
	Cash Flow Adequacy Ratio (%)	95.69	42.36	62.43	`－`	36.79	73.01
	Cash Reinvestment Ratio (%)	`－`	9.33	0.36	`－`	4.96	`－`
Leverage	Operating Leverage	`－`	8.39	10.88	44.05	11.65	26.68
	Financial Leverage	0.85	1.06	1.10	2.33	1.20	1.60
The 20% changes in various financial ratios in recent two years: 1. Reduction in the interest protection ratio: Mainly due to the decrease in pre-tax net income in 2017. 2. Profitability ratios and the reduction in earnings per share: Mainly due to the decrease in pre-tax and after-tax net income in 2017. 3. The increase in relative cash flow ratios: Mainly due to the operating positive net cash flows in 2017. 4. Reduced operating and financial leverage: Manly due to the increase of operating income in 2017.

Note: The annual financial information has been audited by the accountants, and the financial information for the first quarter of 2018 was reviewed by the accountants.

B. Individual Financial Analysis – Based on IFRS

B. Individual	Financial Analysis – Based on IFRS
Item	Year	2013	2014	2015	2016	2017
Financial Structure (%)	Debt Ratio	38.61	39.80	39.39	38.32	34.52
	Ratio of Long-term Capital to Property, Plant and Equipment	479.01	473.62	472.75	443.40	427.93
Solvency (%)	Current Ratio(%)	52.06	62.80	60.29	51.02	40.78
	Quick Ratio(%)	51.44	61.98	60.12	49.91	40.30
	Interest Earned Ratio (Times)	`－`	18.44	13.27	3.80	1.64
Operating Performance	Accounts Receivable Turnover (Times)	3.84	5.80	5.30	3.48	5.31
	Average Collection Period	95.02	62.93	68.86	104.89	68.74
	InventoryTurnover(Times)	125.22	566.87	413.87	57.29	87.23
	Accounts Payable Turnover(Times)	2.10	2.99	2.36	1.30	2.07
	Average Days in Sales	2.91	0.64	0.88	6.37	4.18
	Property, Plant and Equipment Turnover (Times)	4.46	5.27	4.21	1.98	2.07
	Total Assets Turnover (Times)	0.60	0.73	0.58	0.28	0.32
Profitability	Return on Total Assets(%)	(1.90)	1.78	1.83	0.50	0.25
	Return on Stockholders' Equity (%)	(3.31)	2.81	2.85	0.58	0.15
	Pre-tax Income to Paid-in Capital(%)	(9.84)	9.16	9.16	2.63	0.64
	Profit Ratio(%)	(3.27)	2.35	2.99	1.27	0.30
	Earnings per Share (NT$)	(0.88)	0.80	1.02	0.20	0.05
Cash Flow	Cash Flow Ratio (%)	`－`	12.24	7.04	`－`	`－`
	Cash Flow AdequacyRatio(%)	`－`	`－`	`－`	`－`	`－`
	Cash Reinvestment Ratio(%)	`－`	6.55	1.15	`－`	`－`
Leverage	OperatingLeverage	5.95	3.20	5.23	`－`	`－`
	Financial Leverage	1.08	1.04	1.13	0.01	0.88
The 20% change in various financial ratios in the recent two years:
1. Decrease in current ratio: Mainly due to the reduction of cash and equivalent cash.
2. Reduction of the interest protection multiple: Mainly due to the decrease in pre-tax income in 2017.
3. The increase for the turnover rate of AR and AP: The difference caused by changes of product mix.
4. Profitability ratios and reduction in earnings per share: Mainly due to the reduction of pre-tax and after-tax
income.
5. Increased financial leverage: Mainly due to the decrease in operating income in 2017.

Note 1: Annual financial information is certified by accountants

International Financial Reporting Standards (IFRS)

Formula for Financial Ratios:

Financial Structure
(1) Debt Ratio ＝ Total Liabilities ／ Total Assets.
(2) Ratio of Long-term Capital to Property, Plant and Equipment ＝ (Total Shareholders’ Equity ＋ Non-current Liabilities) ／ Net Property, Plant and Equipment.
Solvency
(1) Current Ratio ＝ Current Assets ／ Current Liabilities.
(2) Quick Ratio ＝ (Current Assets － Inventory － Prepaid Expenses) ／ Current Liabilities.
(3) Interest Earned Ratio ＝ Net Profit before Income Tax and Interest Expenses ／ Current Interest Expenses.
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) Property, Plant and Equipment Turnover ＝ Net Sales ／ Net Average Property, Plant and Equipment.
(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 ／ Average Total Shareholders’ Equity.
(3) Profit Ratio ＝ Net Income ／ Net Sales.
(4) Earnings per Share ＝ (Profits and Losses Attributable to the Owners of the Parent Company － 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 Property, Plant and Equipment ＋ Long-term Investment ＋ Other Non-current 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).

6.3 Audit Committee’s Review Report for the Most Recent Year

Audit Committee’s Review Report

To: The 2018 Annual General Shareholders’ Meeting

The Board of Directors has prepared the Company’s 2017 Business Report, Financial Statements and proposal for allocation of earnings. The CPA firm of PricewaterhouseCoopers was retained to audit Altek’s Financial Statements and has issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, and earnings allocation proposal have been reviewed and determined to be correct and accurate by the Audit Committee members of Altek Corporation. According to relevant requirements of the Securities Exchange Act and the Company Law, we hereby submit this report.

Altek Corporation

Chairman of the Audit Committee Ching Jen Hu

March 23, 2018

6.4 Consolidated Financial Statements for the Years Ended December 31, 2017 and 2016

==> picture [166 x 122] intentionally omitted <==

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 17000244

(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, 2017 and 2016, 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, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the 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 judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the

~1~

==> picture [166 x 122] intentionally omitted <==

context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements of the current period are stated as follows:

Allowance for inventory valuation losses

Description

Please refer to Note 4(12) 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 measures inventories sold at the lower of cost and net realisable value. For inventory that is over a certain age and individually identified obsolete or damaged inventory, the company recognises losses at net realisable value. Aforementioned allowance for inventory valuation losses mainly arises from individually identified obsolete or damaged inventory. Since the value of inventories is significant, involves various types of inventory, and the individual identification of inventory usually involves management judgement which is an area that also needs to be assessed using our judgement during the audit process. Thus, we identified valuation of allowance for inventory losses as one of the key audit matters.

How our audit addressed the matter

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

A. Obtained an understanding and assessed the provision policy on inventory valuation losses.
B. Obtained the statement of individually identified obsolete inventory prepared by management and checked the accuracy of stock age analysis report and relevant information.
C. Checked the accuracy of net realisable value of inventory, assessed the consistency between valuation of market value decline and its provision policy, and assessed the reasonableness of allowance for valuation losses determined by the Group.

~2~

==> picture [165 x 122] intentionally omitted <==

Timing of sales revenue recognition

Description

Please refer to Note 4(27) for accounting policies of revenue recognition. The Company and its subsidiaries’ revenue mainly arises from export sales and the cash amounts are material. As the sales terms vary from customers who are located in Mainland China, Europe and America, the terms in customer orders and contracts needs to be properly assessed. Since this involves judgement in the determination of timing of ownership transfer, we consider the timing of revenue recognition as a key audit matter.

How our audit addressed the matter

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

A. Assessed the appropriation of policies on sales revenue recognition.
B. Assessed and tested the design of internal controls that are relevant to sales revenue recognition and the effectiveness of execution.
C. Performed cutoff test on sales revenue in specific period around balance sheet date.
D. Performed confirmation and substantive test on the balance of accounts receivable at the end of period to confirm accounts receivable and that relevant sales revenue have been recorded in the proper 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, 2017 and 2016.

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.

~3~

==> picture [166 x 122] intentionally omitted <==

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 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 judgement and maintain professional skepticism throughout the audit. We also:

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.
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.

~4~

==> picture [166 x 122] intentionally omitted <==

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

~5~

==> picture [165 x 122] intentionally omitted <==

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.

Li, Tien-Yi

[Lin, Yu-Kuan ]

For and on behalf of PricewaterhouseCoopers, Taiwan

March 23, 2018

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.

~6~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

Assets	December 31, 2017 AMOUNT % `$` `5,874,982` `39` `584,799` `4` `30,335` `-` `2,342,369` `16` `18,976` `-` `3,339` `-` `1,165,926` `8` `176,696` `1` `16,080` `-` `10,213,502` `68` `138,011` `1` `-` `-` `3,648,788` `24` `777,368` `5` `121,538` `1` `82,415` `1` `67,349` `-` `4,835,469` `32` `$` `15,048,971` `100`	December 31, 2016	December 31, 2016
	AMOUNT `$` `5,874,982` `584,799` `30,335` `2,342,369` `18,976` `3,339` `1,165,926` `176,696` `16,080` `10,213,502` `138,011` `-` `3,648,788` `777,368` `121,538` `82,415` `67,349` `4,835,469` `$` `15,048,971`	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`	%
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 1760 Investment property, net 1780 Intangible assets, net 1840 Deferred income tax assets 1900 Other non-current assets 15XX Non-current assets 1XXX Total assets			`32` `5` `-` `18` `-` `-` `10` `1` `-`
			`66`
			`1` `1` `31` `-` `1` `-` `-`
			`34`
			`100`

(Continued)

~7~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity December 31, 2017
December 31, 2016
Notes
AMOUNT
%
AMOUNT
%
6(11)
$
2,021,000
14
$
2,415,000
16
6(12)
199,797
2
-
-
30,335
-
-
-
2,097,254
14
2,417,239
16
420,452
3
445,206
3
62,053
-
79,253
1
6(15)
30,177
-
52,247
-
181,824
1
204,924
1
5,042,892
34
5,613,869
37
6(15)
93,818
-
121,819
1
6(26)
394,939
3
442,112
3
32,097
-
16,339
-
520,854
3
580,270
4
5,563,746
37
6,194,139
41
6(16)
2,738,188
18
2,739,788
18
6(17)
2,256,692
15
1,862,914
12
6(18)
1,379,754
9
1,374,374
9
142,456
1
142,456
1
2,737,026
18
2,946,092
19
6(19)
(
302,339) (
2) (
25,521)
-
6(16)
(
96,138)
- (
129,393) (
1)
8,855,639
59
8,910,710
58
6(28)
629,586
4
122,283
1
9,485,225
63
9,032,993
59
9
11
$
15,048,971
100
$
15,227,132
100

Current liabilities
2100
Short-term borrowings
2110
Short-term notes and bills payable
2150
Notes payable
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
Significant subsequent event
3X2X
Total liabilities and equity

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

~8~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

Items Year ended December 31
2017
2016
Notes
AMOUNT
%
AMOUNT
%
6(20)
$
10,552,773
100
$
11,577,046
100
6(4)(24)(25)
(
9,117,731 ) (
86) (
10,021,302) (
87)
1,435,042
14
1,555,744
13
6(24)(25)
(
69,687 ) (
1) (
93,892) (
1)
(
331,083 ) (
3) (
383,011) (
3)
(
874,826 ) (
9) (
1,033,082) (
9)
(
1,275,596 ) (
13) (
1,509,985) (
13)
159,446
1
45,759
-
6(21)
110,676
1
98,970
1
6(22)
(
105,995 ) (
1)
71,965
1
6(23)
(
26,565 )
- (
26,119)
-
(
21,884 )
-
144,816
2
137,562
1
190,575
2
6(26)
(
87,975 ) (
1) (
90,467) (
1)
$
49,587
-
$
100,108
1

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
7000
Total non-operating
income and expenses
7900
Profit before income tax
7950
Income tax expense
8200
Profit for the year

(Continued)

~9~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

Items Year ended December 31
2017
2016
Notes
AMOUNT
%
AMOUNT
%
($
1,798 )
-
$
7,847
-
6(26)
306
- (
1,334)
-
(
1,492 )
-
6,513
-
(
392,098 ) (
4) (
524,091) (
5)
1,520
- (
11,547)
-
6(26)
65,160
1
90,685
1
(
325,418 ) (
3) (
444,953) (
4)
($
326,910 ) (
3) ($
438,440) (
4)
($
277,323 ) (
3) ($
338,332) (
3)
$
13,402
-
$
53,800
1
36,185
-
46,308
-
$
49,587
-
$
100,108
1
($
306,223 ) (
3) ($
382,446) (
3)
28,900
-
44,114
-
($
277,323 ) (
3) ($
338,332) (
3)
6(27)
$
0.05
$
0.20
6(27)
$
0.05
$
0.20

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
that will not be
reclassified to profit or
loss
8361
Currency translation
differences of foreign
operations
8370
Share of other
comprehensive income (loss)
of associates and joint
ventures accounted for uner
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 income
for the year
Profit (loss), attributable to:
8610
Owners of the parent
8620
Non-controlling interest
Profit for the year
Comprehensive (loss)
income attributable to:
8710
Owners of the parent
8720
Non-controlling interest
Total comprehensive loss for
the year
9750
Basic earnings per share
9850
Diluted earnings per share

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

~10~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

Notes				Equity att	ributable to owners of	the parent	the parent			Non-controlling interest	Total equity
	Common stock	Capital surplus		Retained Earnings		Other equityinterest		Treasury stocks	Total
			Legal reserve	Special reserve	Unappropriated retained earnings	Currency translation differences of foreign operations	Other equity - others
6(18) 6(17)(18) 6(14)(17) 6(14)(16)(17) 6(14)(16)(17) 6(28) 6(19) 6(18) 6(14)(17)(19) 6(14)(17)(19) 6(16)(17) 6(17)(28) 6(19)	`$ 2,726,938` `-` `-` `-` `15,600` `(` `2,750 )` `-` `-` `-` `-` `$ 2,739,788` `$ 2,739,788` `-` `-` `1,300` `(` `2,900 )` `-` `-` `-` `-` `-` `$ 2,738,188`	`$ 1,975,772` `-` `(` `134,140 )` `236` `25,713` `(` `4,620 )` `(` `47 )` `-` `-` `-` `$ 1,862,914` `$ 1,862,914` `-` `-` `2,404` `(` `4,609 )` `209` `395,774` `-` `-` `-` `$ 2,256,692`	`$ 1,347,010` `27,364` `-` `-` `-` `-` `-` `-` `-` `-` `$ 1,374,374` `$ 1,374,374` `5,380` `-` `-` `-` `-` `-` `-` `-` `-` `$ 1,379,754`	`$` `142,456` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$` `142,456` `$` `142,456` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$` `142,456`	`$` `3,047,283` `(` `27,364` `)` `(` `134,140` `)` `-` `-` `-` `-` `53,800` `6,513` `-` `$` `2,946,092` `$` `2,946,092` `(` `5,380` `)` `(` `215,596` `)` `-` `-` `-` `-` `13,402` `(` `1,492` `)` `-` `$` `2,737,026`	`$` `477,768` `-` `-` `-` `-` `-` `-` `-` `(` `442,759 )` `-` `$` `35,009` `$` `35,009` `-` `-` `-` `-` `-` `-` `-` `(` `318,133 )` `-` `($` `283,124 )`	`($` `63,121 )` `-` `-` `36,534` `(` `41,313 )` `7,370` `-` `-` `-` `-` `($` `60,530 )` `($` `60,530 )` `-` `-` `33,806` `7,509` `-` `-` `-` `-` `-` `($` `19,215 )`	`($` `129,393 )` `-` `-` `-` `-` `-` `-` `-` `-` `-` `($` `129,393 )` `($` `129,393 )` `-` `-` `-` `-` `33,255` `-` `-` `-` `-` `($` `96,138 )`	`$ 9,524,713` `-` `(` `268,280 )` `36,770` `-` `-` `(` `47 )` `53,800` `(` `436,246 )` `-` `$ 8,910,710` `$ 8,910,710` `-` `(` `215,596 )` `37,510` `-` `33,464` `395,774` `13,402` `(` `319,625 )` `-` `$ 8,855,639`	`$` `104,139` `-` `-` `-` `-` `-` `47` `46,308` `(` `2,194 )` `(` `26,017 )` `$` `122,283` `$` `122,283` `-` `-` `-` `-` `-` `(` `395,774 )` `36,185` `(` `7,285 )` `874,177` `$` `629,586`	`$` `9,628,852` `-` `(` `268,280 )` `36,770` `-` `-` `-` `100,108` `(` `438,440 )` `(` `26,017 )` `$` `9,032,993` `$` `9,032,993` `-` `(` `215,596 )` `37,510` `-` `33,464` `-` `49,587` `(` `326,910 )` `874,177` `$` `9,485,225`

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

~11~

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation

Amortisation

Provision (reversal of) for doubtful accounts

Net loss (gain) on financial assets at fair value through profit or loss

Interest expense

Interest income

Cash dividends income

Share-based payment compensation cost

Gain on disposal of property, plant and equipment

Impairment loss on financial assets

Loss on disposal of investment

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
Notes payable
Accounts payable
Other payables
Provisions for liabilities
Other current liabilities
Other non-current liabilities
Cash inflow (outflow) generated from operations
Interest received
Cash dividends received
Interest paid
Income tax paid
Net cash flows from (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at cost
Loss on disposal of investments accounted for under the equity method
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 in deposits received
Net cash flows from (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings
Proceeds from issuance of short-term notes and bills payable
Increase in deposits-in
Proceeds from sales of treasury shares
Cash dividends for capital surplus

Employee stock options exercised
Changes in non-controlling interest

Net cash flows from financing activities
Effect of exchange rate
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year Notes
2017
2016
$
137,562 $
190,575
6(7)(8)(24)
264,329
340,366
6(9)(10)(24)
15,232
14,911
6(3)
(
672 )
9,093
6(2)(21)
206 (
761 )
6(23)
26,565
26,119
6(21)
(
76,647 ) (
52,135 )
6(21)
(
3,113 ) (
7,509 )
6(14)(25)
33,806
36,770
6(22)
(
470 ) (
2,405 )
6(5)(22)
17,050
-
6(22)
4,191
-
108,704 (
265,417 )
(
29,667 )
16,962
414,902 (
614,037 )
3,252 (
4,800 )
272,099 (
509,643 )
31,027 (
102,393 )
3,414 (
189 )
30,011
-
(
278,214 )
175,121
(
30,977 ) (
8,234 )
(
50,081 )
38,188
(
22,568 ) (
149,947 )
130 (
5,676 )
870,071 (
875,041 )
73,946
57,071
3,113
7,509
(
26,802 ) (
25,839 )
(
99,059 ) (
69,180 )
821,269 (
905,480 )
(
13,517 ) (
14,583 )
123,571
-
5,661
7,998
6(30)
(
92,123 ) (
99,656 )
21,339
22,248
6(30)
(
52,941 ) (
6,348 )
11,352
7,376
3,342 (
82,965 )
(
394,000 )
685,000
199,724
-
13,954
4,230
33,464
-
6(18)
(
215,596 ) (
268,280 )
3,704
-
6(28)
874,177 (
26,017 )
515,427
394,933
(
315,045 ) (
298,472 )
1,024,993 (
891,984 )
6(1)
4,849,989
5,741,973
6(1)
$
5,874,982 $
4,849,989

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

~12~ 95

ALTEK CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016

(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 Tai-

Tz (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 23, 2018.

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”)

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

follows:

New Standards,Interpretations andAmendments

Effective date by
International Accounting
StandardsBoard

Amendments to IFRS 10, IFRS 12 and IAS 28, ‘Investment entities:
applying the consolidation exception’
Amendments to IFRS 11, ‘Accounting for acquisition of interests in
joint operations’
IFRS 14, ‘Regulatory deferral accounts’
Amendments to IAS 1, ‘Disclosure initiative’
Amendments to IAS 16 and IAS 38, ‘Clarification of acceptable
methods of depreciation and amortisation’
Amendments to IAS 16 and IAS 41, ‘Agriculture: bearer plants’
Amendments to IAS 19, ‘Defined benefit plans: employee contributions’
Amendments to IAS 27, ‘Equity method in separate financial statements’
Amendments to IAS 36, ‘Recoverable amount disclosures for non-
financial assets’

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

~13~

New Standards,Interpretations andAmendments	Effective date by International Accounting StandardsBoard
Amendments to IAS 39, ‘Novation of derivatives and continuation of hedge accounting’ IFRIC 21, ‘Levies’ Annual improvements to IFRSs 2010-2012 cycle Annual improvements to IFRSs 2011-2013 cycle Annual improvements to IFRSs 2012-2014 cycle	January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. (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 2018 are as follows:

follows:

New Standards,Interpretations andAmendments
Amendments to IFRS 2, ‘Classification and measurement of share-based
payment transactions’
Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with
IFRS 4 Insurance contracts’
IFRS 9, ‘Financial instruments’
IFRS 15, ‘Revenue fromcontracts with customers’
Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from
contracts with customers’
Amendments to IAS 7, ‘Disclosure initiative’
Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised
losses’
Amendments to IAS 40, ‘Transfers of investment property’
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’

Effective date by
International Accounting
StandardsBoard

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
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 financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete.

~14~

A. 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 losses 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 Group 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.
B. 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, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

~15~

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:

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

C. 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.

When adopting the new standards endorsed by the FSC effective from 2018, the Group will apply the new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. Further, the Group expects to adopt IFRS 15 using the modified retrospective approach. The significant effects of applying the new standards as of January 1, 2018 are summarized below:

~16~

						Effect of
Consolidated balance sheet		2017 version				adoption of		2018 version
Affected items		IFRSs amount			new standards			IFRSs amount
January 1, 2018
Non-current financial assets at fair value through profit or loss		$	-	$		10,601	$		10,601
Non-current financial assets at fair value through other comprehensive income						127,410			127,410
Non-current financial assets at cost			138,011	(		138,011)			-
Total affected assets		$	138,011	$		-	$		138,011
Retained earnings		$	4,259,236	$		23,600	$		4,282,836
Other equity interest	(		302,339)	(		23,600)	(		325,939)
Total affected equity		$	3,956,897	$		-	$		3,956,897

Explanation:

In accordance with IFRS 9, the Group expects to reclassify non-current financial assets at cost in the amount of $138,011, by increasing non-current financial assets at fair value through profit or loss and non-current financial assets at fair value through other comprehensive income in the amount of $10,601 and $127,410, respectively; increasing retained earnings and decreasing other equity interest in the amount of $23,600 and $23,600, respectively.

(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 as endorsed by the FSC are as follows:

New Standards,Interpretations andAmendments

Effective date by
International Accounting
StandardsBoard
January 1, 2019
To be determined by International
Accounting Standards Board
January 1, 2019
January 1, 2021
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

Amendments to IFRS 9, ‘Prepayment features with
negative compensation’
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution
of assets between an investor and its associate or joint
venture’
IFRS 16, ‘Leases’
IFRS 17, ‘Insurance contracts’
Amendments to IAS 19, ‘Plan amendment, curtailment
or settlement’
Amendments to IAS 28, ‘Long-term interests in
associates and joint ventures’
IFRIC 23, ‘Uncertainty over income tax treatments’
Annual improvements to IFRSs 2015-2017 cycle

~17~

100

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.

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.

~18~

101

(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 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)

~19~

102

B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name of Subsidiaries	Main Business Activities	Ownership (%)	Ownership (%)	Note
			December 31,2017	December 31,2016
Altek Corporation Altek International Investment Co., Ltd. Investments and general business operations 100 " Altek Japan Corporation Sales and design of optical instruments 100 " Altek Investment Co., Ltd. Investments 100 " Altek Autotronics Corporation Research design, manufacture and sales of car electronic components - " Altek International Holding (BVI) Co., Ltd. Investments and general business operations 100 Altek International Investment Co., Ltd. Altek Lab Inc. Design service 100 " Altek Optical (Cayman) Co., Ltd. Investments and general business operations 100 " Altek Semiconductor (Cayman) Co., Ltd. Investments and general business operations 50 Note 2 Altek (Kunshan) Co., Ltd. Manufacture and sales of digital still camera and its accessories 100 Note 2 Altek EMS (Kunshan) Co., Ltd. Manufacture and sales of related engineering services 100 Note 2 Altek Precision (Kunshan) Co., Ltd. Manufacture and sales of digital camera parts 100 Note 2 Altek Trading (Shanghai) Limited Wholesale, import and export of related electronic and their associated accessories 100 Note 3 Altek Biotechnology Corporation Research and development, manufacture and sales of biotechnology 100 Altek Semiconductor (Cayman) Co., Ltd. Altek Semiconductor Corporation Research design and sales of ASIC 100 " Altek Semiconductor (Shanghai) Co., Ltd. Imaging technologies, electronic software and hardware development, IC design and development, technology service, and wholesale, import and export of related products. 100 Note 2 Altek Optical Technology (Kunshan) Co., Ltd. Manufacture and sales of related electronic services and its accessories and optical components 100 Note 1: The Group did not participate in the subsidiary’s capital increase, thus, the share ownership was decreased. 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: It was invested by Altek Semiconductor (Cayman) Co., Ltd. and was incorporated in January 2017. Note 6: On June 30, 2017, Altek Corporation consummated a short-form merger with Altek Autotronics Corporation and the former is the surviving company. Note 4: In June 2016, the Group’s investment restructuring transferred the share holding of Altek Biotechnology Corporation to Altek Biotechnology Holding (Cayman) Co., Ltd. , which is a subsidiary of Altek International Holding (BVI) Co., Ltd.				100 100 100 100 100 100 100 71.43 100 100 100 100 100 100 - 100	- - - Note 6 Note 4 - - Note 1 - - - - Note 4 - Note 5 -

~20~

103

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.

~21~

104

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

The Group classifies all assets that do not meet the above criteria as non-current assets.

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.

The Group classifies all liabilities that do not meet the above criteria as non-current liabilities.

(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.

~22~

105

(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 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

~23~

106

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 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.

~24~

107

(11) Operating leases (lessor)

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

(12) 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, 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.

(13) 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.

~25~

108

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.
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.
(14) 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 ~ 6 years Other equipment 2 years ~ 11 years

(15) 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.

~26~

109

(16) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 10 to 35 years.

(17) Intangible assets

Intangible assets consist of software and mask costs and they are amortized on a straight-line basis over theirs estimated useful life of 3 to 5 years.

(18) 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.

(19) 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.

(20) 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.

(21) 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.

~27~

110

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.

(22) 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.

~28~

111

D. Employees’ compensation and directors’ and supervisors’ remuneration
Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

- (23) 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.

(24) 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.

~29~

112

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 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.
(25) 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

~30~

113

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.

(26) 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.

(27) 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.

(28) 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.

~31~

114

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:

(1) Critical judgements in applying the Group’s accounting policies: None.
(2) Critical accounting estimates and assumptions:
A. 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, 2017, the carrying amount of inventories was $1,165,926.

B. Impairment assessment of financial assets without active markets

When there is an impairment indication that a financial instrument is impaired so that carrying amount of such investment may not be recoverable, the Group would assess the impairment loss of the investment accordingly. For a financial asset without an active market, the Group assesses its impairment based on the present value of estimated future cash flows from the expected cash dividends and disposal value discounted using the market rate of return at the balance sheet date for a similar financial instrument to determine its recoverable amount as well as by analysing the reasonableness of the related assumptions used.

As of December 31, 2017, the carrying amount of financial assets measured at cost, after the impairment loss, was $138,011.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

impairment loss, was $138,011. TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand Checking accounts and demand deposits Time deposits Total	December31,2017 840 $ 411,191 5,462,951 5,874,982 $	December31,2016
		1,319 $ 123,931 4,724,739
		4,849,989 $

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.

~32~

115

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

Financial assets at fair value through profit or loss
Items Current items: Financial assets held for trading Valuation adjustment Total	December31,2017 581,745 $ 3,054 584,799 $	December31,2016
		690,449 $ 3,260
		693,709 $

The Group recognized net gain of $2,736 and $2,325 for the years ended December 31, 2017 and 2016, respectively.

(3) Accounts receivable

2016, respectively. Accounts receivable
		December	31,2017		December	31,2016
Accounts receivable		$	2,351,116		$	2,792,622
Less: Allowance for bad debts	(		8,747)	(		9,477)
		$	2,342,369		$	2,783,145

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:

Group 1 Group 2	December31,2017 2,070,650 $ 264,105 2,334,755 $	December31,2016
		2,734,047 $ 36,239
		2,770,286 $

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	December31,2017 334 $ - 218 7,062 7,614 $	December31,2016
		1,647 $ 6,291 - 4,921
		12,859 $

The above ageing analysis was based on past due date.

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

2017

	2017
Individualprovision At January 1 9,477 $ Reversal of impairment 672) ( Effects of foreign exchange 58) ( At December 31 8,747 $	Group provision Total - $ 9,477 $ - 672) ( - 58) ( - $ 8,747 $	Total
		8,747 $

~33~

116

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		2016
			Total
			9,477 $

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

(4) Inventories

Inventories
Raw materials Work-in-process Finished goods Total Raw materials Work-in-process Finished goods Total		December31,2017
	Allowance for Cost valuation loss 737,657 $ 48,162) ($ 136,416 5,601) ( 355,434 9,818) ( 1,229,507 $ 63,581) ($ December31,2016		Bookvalue
			689,495 $ 130,815 345,616
			1,165,926 $

	Allowance for Cost valuation loss 828,083 $ 59,076) ($ 203,734 24,153) ( 559,346 36,963) ( 1,591,163 $ 120,192) ($		Bookvalue
			769,007 $ 179,581 522,383
			1,470,971 $

The cost of inventories recognised as expense for the periods:

(5)

Financial assets measured at cost
For the year ended
For the year ended
December31,2017
December31,2016
Cost of goods sold
9,278,614
$ 9,957,845
$ (Reversal of) loss on decline in market value
160,883)
(
63,457
Total
9,117,731
$ 10,021,302
$ Items
December31,2017
December31,2016
Non-current items:
Unlisted stocks
167,657
$ 160,430
$ Less: Accumulated impairment
29,646)
(
12,596)
(
Total
138,011
$ 147,834
$

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’.

~34~

117

B. Due to the impairment of the financial assets at cost, the Group assessed the recoverable value of the financial assets at cost was lower than its carrying amount, and recognised impairment loss by $17,050 for the year ended December 31, 2017.
C. As of December 31, 2017 and 2016, no financial assets measured at cost held by the Group were pledged to others.

(6) Investments accounted for under the equity method

pledged to others. Investments accounted for under the equity	method
		December 31,2017		December 31,2016
JinJing Optical Technology Co., Ltd.	$	44,028	$	44,028
Phoenix Optical (Shanghai) Co., Ltd.		-		139,971
		44,028		183,999
Less: Accumulated impairment loss	(	44,028)	(	57,242)
	$	-	$	126,757

A. On May 8, 2017, Phoenix Optical (Shanghai) Co., Ltd. has completed its liquidation.
B. 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, 2017 and 2016, the carrying amount of the Group’s individually immaterial associates amounted to $0 and $126,757, respectively.

		For the year ended		For the year ended
	December31,2017		December31,2016
Loss for the year from continuing operations	($	31,537)	($	118,000)
Other comprehensive income (loss) - net of tax		3,847	(	5,056)
Total comprehensive loss	($	27,690)	($	123,056)

(Blank below)

~35~

118

(7) Property, plant and equipment

														Construction in	Construction in
															progress and
						Buildings and								prepayment for
			Land			structures			Machinery		Test	equipment			equipment			Others			Total
At January 1, 2017
Cost		$	1,042,216		$	3,522,603		$	1,443,305		$	199,899		$	29,043		$	678,217		$	6,915,283
Accumulated depreciation			-	(		643,506)	(		840,003)	(		178,950)			-	(		594,976)	(		2,257,435)
		$	1,042,216		$	2,879,097		$	603,302		$	20,949		$	29,043		$	83,241		$	4,657,848
2017
Opening net book amount		$	1,042,216		$	2,879,097		$	603,302		$	20,949		$	29,043		$	83,241		$	4,657,848
Additions			-			83,646			547			819			-			12,603			97,615
Disposals			-			-	(		20,048)	(		186)			-	(		635)	(		20,869)
Reclassifications	(		573,532)	(		170,018)			-			-	(		29,043)			-	(		772,593)
Depreciation charge			-	(		87,469)	(		107,743)	(		9,760)			-	(		55,132)	(		260,104)
Net exchange differences			-	(		37,744)	(		13,636)	(		255)			-	(		1,474)	(		53,109)
Closing net book amount		$	468,684		$	2,667,512		$	462,422		$	11,567		$	-		$	38,603		$	3,648,788
At December 31, 2017
Cost		$	468,684		$	3,353,156		$	1,366,032		$	170,311		$	-		$	533,260		$	5,891,443
Accumulated depreciation			-	(		685,644)	(		903,610)	(		158,744)			-	(		494,657)	(		2,242,655)
		$	468,684		$	2,667,512		$	462,422		$	11,567		$	-		$	38,603		$	3,648,788

~36~

119

At January 1, 2016
Cost
Accumulated depreciation
2016
Opening net book amount
Additions
Disposals
Reclassifications
Depreciation charge
Net exchange differences
Closing net book amount
At December 31, 2016
Cost
Accumulated depreciation

Construction in
progress and
Buildings and
prepayment for
Land
structures
Machinery
Test equipment
equipment
Others
Total
1,042,216
$ 3,717,659
$ 1,868,136
$ 201,217
$ 15,343
$ 740,695
$ 7,585,266
$ -
584,318)
(
1,063,689)
(
177,229)
(
-
548,887)
(
2,374,123)
(
1,042,216
$ 3,133,341
$ 804,447
$ 23,988
$ 15,343
$ 191,808
$ 5,211,143
$ 1,042,216
$ 3,133,341
$ 804,447
$ 23,988
$ 15,343
$ 191,808
$ 5,211,143
$ -
131
375
12,173
26,592
6,206
45,477
-
-
15,929)
(
2,142)
(
-
1,772)
(
19,843)
(
-
-
-
3,006
12,513)
(
-
9,507)
(
-
92,360)
(
127,213)
(
14,833)
(
-
105,960)
(
340,366)
(
-
162,015)
(
58,378)
(
1,243)
(
379)
(
7,041)
(
229,056)
(
1,042,216
$ 2,879,097
$ 603,302
$ 20,949
$ 29,043
$ 83,241
$ 4,657,848
$ 1,042,216
$ 3,522,603
$ 1,443,305
$ 199,899
$ 29,043
$ 678,217
$ 6,915,283
$ -
643,506)
(
840,003)
(
178,950)
(
-
594,976)
(
2,257,435)
(
1,042,216
$ 2,879,097
$ 603,302
$ 20,949
$ 29,043
$ 83,241
$ 4,657,848
$

For the years ended December 31, 2017 and 2016, 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.

~37~

120

- (8) Investment acquisition Buildings and structures

At January 1, 2017 Cost Accumulated depreciation 2017 Opening net book amount Additions - from acquisitions Reclassifications Depreciation charge Closing net book amount At December 31, 2017 Cost Accumulated depreciation	Land Buildings and structures Total - $ - $ - $ - - - - $ - $ - $ - $ - $ - $ - 9,000 9,000 573,532 199,061 772,593 - 4,225) ( 4,225) ( 573,532 $ 203,836 $ 777,368 $ 573,532 $ 245,710 $ 819,242 $ - 41,874) ( 41,874) ( 573,532 $ 203,836 $ 777,368 $

At December 31, 2016 : None.

A. Rental income from investment property and direct operating expenses arising from investment property are shown below:

roperty are shown below:
Rental income from investment property Direct operating expenses arising from the investment property that generated rental income during the year Direct operating expenses arising from the investment property that did not generate rental income during the year	For the year ended December31,2017 17,298 $ 4,752 $ - $	For the year ended December31,2016
		- $
		- $
		- $

B. As at December 31, 2017, the fair value of investment property held by the Group amounted to $886,343. The fair value was valuated with the technique that is widely adopted by market participants by referring to substantiating evidence such as transaction price of similar property.
C. There was no capitalisation of borrowing interests attributable to investment property.
D. The Group did not pledge any investment property as collateral.

~38~

121

(9) Intangible assets

Intangible assets
			2017			2016
At January 1
Cost		$	129,020		$	130,369
Accumulated amortisation	(		36,103)	(		36,656)
		$	92,917		$	93,713
For the year ended December 31
Opening net book amount		$	92,917		$	93,713
Additions			48,637			15,415
Amortisation charge	(		14,319)	(		13,926)
Net exchange differences	(		5,697)	(		2,285)
Closing net book amount		$	121,538		$	92,917
At December 31
Cost		$	165,921		$	129,020
Accumulated amortisation	(		44,383)	(		36,103)
		$	121,538		$	92,917
A. Details of amortisation on intangible assets are as		follows:
			For the year ended			For the year ended
		December31,2017			December31,2016
Operating costs		$	5,296	$		5,861
Operating expense			9,023			8,065
		$	14,319	$		13,926

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

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

	December31,2017	December31,2016
Land-use right	33,296 $	34,929 $
The Group recognized amortisation expenses for the years ended December 31, 2017 and 2016
amounting to $913 and $985, respectively.

(11) Short-term borrowings

Short-term borrowings
Type ofborrowings Bank borrowings Unsecured borrowings Type ofborrowings Bank borrowings Unsecured borrowings	December31,2017 2,021,000 $ December31,2016 2,415,000 $	Interestraterange 1% ~1.19% Interestraterange 1.1%~1.2%	Collateral
			None Collateral
			None

~39~

122

(12) Short-term notes and bills payable

Short-term notes and bills payable
Commercial paper payable Less: Discount on short-term notes and bills payable Interest rate ranges	December31,2017		December31,2016
	200,000 $ 203) ( 199,797 $ 0.84%		- $ - - $ -

(13) 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	31,2017	December	31,2016
Present value of defined benefit obligations	($	48,728)	($	54,809)
Fair value of plan assets		40,554		48,564
Net defined benefit liability	($	8,174)	($	6,245)

~40~

123

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

	Present value of	Present value of	Present value of		Fair value	Fair value	of
		defined benefit				plan		Net defined
			obligations			assets		benefit liability
2017
Balance at January 1	($		54,809)		$	48,564		($	6,245)
Current service cost	(		58)				-	(	58)
Interest (expense) income	(		767)				679	(	88)
	(		55,634)			49,243		(	6,391)
Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense)			-	(			163)	(	163)
Change in financial assumptions	(		1,605)				-	(	1,605)
Experience adjustments	(		30)				-	(	30)
	(		1,635)	(			163)	(	1,798)
Pension fund contribution			-				15		15
Pension payments			8,541	(		8,541)			-
Balance at December 31	($		48,728)		$	40,554		($	8,174)
	Present value of				Fair value		of
		defined benefit				plan		Net defined
			obligations			assets		benefitliability
2016
Balance at January 1	($		68,753)		$	48,985		($	19,768)
Current service cost	(		56)				-	(	56)
Previous service cost			6,056				-		6,056
Interest (expense) income	(		1,169)				833	(	336)
	(		63,922)			49,818		(	14,104)
Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense)			-	(			371)	(	371)
Change in financial assumptions	(		1,866)				-	(	1,866)
Experience adjustments			10,084				-		10,084
			8,218	(			371)		7,847
Pension fund contribution			-				12		12
Pension payments			895	(			895)		-
Balance at December 31	($		54,809)		$	48,564		($	6,245)

~41~

124

(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, 2017 and 2016 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.
(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	For the year ended December31,2017 1.10% 3.00%	For the year ended December31,2016
		1.40%
		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, 2017
Effect on present value of
defined benefit obligations	($	1,342)	$	1,396	$	1,245	($	1,206)
		Discount rate				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)

~42~

125

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, 2018 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, 2017 and 2016, the Group had recognized pension costs of $31,847 and $36,056, respectively, under the above pension scheme.
(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 $26,924 and $33,303 for the years ended December 31, 2017 and 2016, respectively.

(14) Share-based payment

A. As of December 31, 2017 and 2016, the Company’s share-based payment arrangements were as follows:

follows:
Type ofarrangement	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

~43~

126

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, 2017 and 2016, the information on the share options and the weighted number of average exercise price of compensation plan employee stock options are as follows:

are as follows:
Weighted-average exercise price No. of options (in dollars)(Note) Options outstanding at beginning of the year 5,155 31.30 $ Options expired 2,572) ( 27.74 Options exercised 130) ( 28.49 Options outstanding at end of the year 2,453 30.62 Options exercisable at end of the year 2,453 30.62 Approved and not yet issued options at the end of the year - 2017	2016
	No. of options 5,155 - - 5,155 5,155 -	Weighted-average exercise price (in dollars)(Note)
		32.80 $ - - 31.30 31.30

Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.
(b) The weighted-average stock price of stock options at exercise dates for the year ended December 31, 2017 was $27.74 (in dollars). No stock options were exercised during the year ended December 31, 2016.
(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, 2017 December 31, 2017 December 31, 2020 December 31, 2020	December	Exercise price (in dollars) (Note) $ - - 30.7 30.5 31,2017	December	31,2016
		No. of shares (in thousands) - - 1,420 1,033		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					$ 30.6 25.6 31.7 31.5

~44~

127

Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.
(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	29.6 $ 24.8 30.7 30.5	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:
(a) The information on restricted shares to employees is as follows:

		2017		2016
		(shareinthousands)		(shareinthousands)
Outstanding beginning balance		3,725		2,440
Shares granted		-		1,560
Restricted shares forfeited - retired	(	290)	(	190)
Restricted shares forfeited - not retired		-	(	85)
Outstanding ending balance		3,435		3,725

(b) For the year ended December 31, 2017, the Company collected 290 thousand shares of restricted shares because certain employees did not meet the vesting condition, and the change of registration has been completed.
D. Expenses incurred on share-based payment transactions are shown below:

Equity-settled

For the year ended December31,2017 33,806 $	For the year ended December31,2016
	36,770 $

~45~

128

(15) Provisions

At January 1, 2017 Additional provisions Rreversed during the year Exchange differences At December 31, 2017 Current Non-current	Warranty 174,066 $ 43,448 93,529) ( 10 123,995 $ December31,2017 December31,2016 30,177 $ 52,247 $ 93,818 $ 121,819 $

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.

(16) Share capital

As of December 31, 2017, the Company’s authorized capital was $5,000,000, consisting of 500,000 thousand shares of ordinary stock, and the paid-in capital was $2,738,188 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)
		2017		2016
At January 1		269,565		268,280
Employee stock options exercised		130		-
Issuance of restricted stocks		-		1,560
Retired restricted shares to employees that
did not meet the vesting conditions	(	290)	(	190)
Redeemed restricted shares to employees that
did not meet the vesting conditions		-	(	85)
Sales of treasury shares		981		-
At December 31		270,386		269,565

B. Treasury shares

(a) As of December 31, 2017 and 2016, the reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

~46~

129

Sharesheld by	December 31, 2017 (in thousands of shares)	December 31, 2017 (in thousands of shares)
	(Expressedinthousands ofshares)
	Number ofshares 3,433	Bookvalue
Altek Corporation		96,138 $

Sharesheld by	(inthousands ofshares) December 31, 2016	(inthousands ofshares) December 31, 2016
	(Expressed in thousands of shares)
	Number ofshares 981 3,433 4,414	Bookvalue
Altek Corporation Altek Corporation		33,255 $ 96,138
		129,393 $

(b) Pursuant to the R.O.C. Securities and Exchange Act, 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 Act, 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 Act, 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. 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 the assets of the segment spun off.

~47~

130

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

D. For the year ended December 31, 2017, the Company issued 130 thousands shares for employee stock options exercised and the registration for issuance will be completed pursuant to the regulation.

(17) Capital surplus

Pursuant to the R.O.C. Company Act, 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 Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paidin capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

At January 1, 2017 Employee stock options exercised Retirement of employee restricted shares Proceeds from sale of treasury shares Subsidiaries’ capital increase not participated proportionately to the original shareholding ratio At December 31, 2017	Share Employee stock premium options 1,746,566 $ 52,729 $ 3,657 1,253) ( - - - - - - 1,750,223 $ 51,476 $	Difference between consideration and carrying amount of subsidiaries acquired or disposed 1,534 $ - - - - 1,534 $	Changes in ownership interests in subsidiaries - $ - - - 395,774 395,774 $	Proceeds from sales of treasury Restricted shares to shares employees Total - $ 62,085 $ 1,862,914 $ - - 2,404 - 4,609) ( 4,609) ( 209 - 209 - - 395,774 209 $ 57,476 $ 2,256,692 $

~48~

131

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

(18) 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 Act, 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.

~49~

132

(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 2016 and 2015 earnings had been resolved at the stockholders’ meeting on June 16, 2017 and June 17, 2016, respectively. Details are summarized below:

For the year ended December 31, 2016 For the year ended December 31, 2015

Legal reserve Cash dividends	Amount 5,380 $ 215,596 220,976 $	Dividends per share (in NT dollars) 0.8 $	Amount 27,364 $ 134,140 161,504 $	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, the shareholders resolved to return capital surplus amounting to $134,140 (approximately $0.5 per share) to shareholders in the nature of a capital contribution. The appropriation of 2016 and 2015 earnings were the same as that approved by the Board of Directors on March 27, 2017 and March 18, 2016, respectively.

F. The appropriation of 2017 earnings had been resolved at the Board of Directors meeting on March 23, 2018. Details are summarized below:

	For	the yearendedDecember31,2017	the yearendedDecember31,2017	the yearendedDecember31,2017
			Dividends per share
		Amount		(inNTdollars)
Legal reserve	$	1,340
Special reserve		283,124		-
Cash dividends		135,178	$	0.5
	$	419,642

Above-mentioned appropriation of 2017 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(25).

~50~

133

(19) Other equity items

Other equity items
			Foreign currency			Unearned
		translationadjustment				compensation			Total
At January 1, 2017		$	35,009	($		60,530)	($		25,521)
Currency translation differences:
Group	(		319,395)			-	(		319,395)
Associates			1,262			-			1,262
Retirement of restricted shares			-			7,509			7,509
to employees
Share-based payment transactions			-			33,806			33,806
At December 31, 2017	($		283,124)	($		19,215)	($		302,339)
			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)
Operating revenue
			For the	year ended For				the	year ended
			December			31,2017 December31,2016
Sales revenue			$		10,167,892 $				11,013,353
Service revenue						186,854			450,916
Other revenue						198,027			112,777
Total			$		10,552,773 $				11,577,046

(20) Operating revenue

~51~

134

(21) Other income

Other income
Rental revenue Interest income: Interest income from bank deposits Others Dividend income Other income - others Total	For the year ended December31,2017 12,546 $ 76,612 35 3,113 18,370 110,676 $	For the year ended December31,2016
		- $ 52,076 59 7,509 39,326
		98,970 $

(22) Other gains and losses

Other gains and losses
			For the year ended			For the year ended
		December31,2017			December31,2016
Net gains on financial assets at
fair value through profit		$	2,736		$	2,325
Net currency exchange (losses) gains	(		82,483)			67,791
Gains on disposal of property, plant and equipment			470			2,405
Losses on disposal of investment	(		4,191)			-
Impairment loss	(		17,050)			-
Other expenses	(		5,477)	(		556)
Total	($		105,995)		$	71,965
Finance costs
			For the year ended			For the year ended
		December31,2017			December31,2016
Interest expense:
Bank borrowings		$	26,565		$	26,119
Expenses by nature
			For the year ended			For the year ended
		December31,2017			December31,2016
Employee benefit expenses		$	1,307,891		$	1,470,077
Depreciation charges on property, plant
and equipment			264,329			340,366
Amortisation charges on intangible assets			14,319			13,926
Total		$	1,586,539		$	1,824,369

(23) Finance costs

(24) Expenses by nature

~52~

135

(25) Employee benefit expenses

Wages and salaries Employee stock options Labour and health insurance fees Pension costs Other personnel expenses Total	For the year ended December31,2017 1,109,349 $ 33,806 62,549 58,917 43,270 1,307,891 $	For the year ended December31,2016
		1,245,514 $ 36,770 72,001 63,695 52,097
		1,470,077 $

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 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’ 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’ remuneration; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

Before the establishment of the Audit Committee of the Company, the remuneration of the supervisors and the directors shall be pay no higher than 2% of distributable profit of the current period.

B. For the years ended December 31, 2017 and 2016, employees’ compensation was accrued at $3,159 and $13,383, respectively; directors’ and supervisors’ remuneration was accrued at $421 and $1,784, respectively. The aforementioned amounts were recognized in salary expenses.
C. Employees’ compensation and directors’ and supervisors’ remuneration for 2016 as resolved by the stockholders were in agreement with those amounts recognized in the 2016 financial statements.

Information about the appropriation of employees’ compensation 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.

~53~

136

(26) Income tax

A. Income tax expense

(a) Components of income tax expense:

me tax ncome tax expense a) Components of income tax expense:
		For the year ended			For the year ended
		December31,2017			December31,2016
Current tax:
Current tax on profits for the year		$	85,553		$	101,118
Adjustments in respect of prior years	(		3,238)	(		16,025)
Total current tax			82,315			85,093
Deferred tax:
Origination and reversal of
temporary differences			5,660			5,374
Total deferred tax			5,660			5,374
Income tax expense		$	87,975		$	90,467
b) The income tax charged to other comprehensive income			as follows:
		For the year ended			For the year ended
		December31,2017			December31,2016
Remeasurement of defined benefit
obligations	($		306)		$	1,334
Translation differences of foreign
operations	(		65,160)	(		90,685)
	($		65,466)	($		89,351)
econciliation between income tax expense and accounting profit:
		For the year ended			For the year ended
		December	31,2017		December31,2016
Tax calculated based on profit before
tax and statutory tax rate	$		84,250	$		57,996
Expense disallowed by tax regulation	(		23,228)			11,400
Estimated 10% corporate income tax
on unappropriated earnings			2,915			10,849
Changes in reassessment of deferred
tax assets	(		3,743)			21,277
Effect from tax credit of investment			425	(		7,955)
Adjustment of income tax expense in
prior years	(		3,238)	(		16,025)
Tax paid outside of the territory of the Republic of China			32,129			22,975
Tax exempted income by tax regulation	(		1,535)	(		17,723)
Effect from alternative minimum tax			-			7,673
Income tax expense	$		87,975	$		90,467

(b) The income tax charged to other comprehensive income as follows:

B. Reconciliation between income tax expense and accounting profit:

~54~

137

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

investment tax credit are as follows:
							2017
							Recognised
								in other
				Recognised in comprehensive
		January1		profit or loss				income		December31
Temporary differences:
-Deferred tax assets:
Cost of after-sales service and
other estimated expenses		$	53,317	($		14,150)	$	-		$	39,167
Currency translation differences			-			-		28,498			28,498
Tax losses			280	(		280)		-			-
Tax credit of investment			16,185	(		1,435)		-			14,750
Subtotal		$	69,782	($		15,865)	$	28,498		$	82,415
-Deferred tax liabilities:
Gain on foreign investment under
the equity method	($		404,469)		$	13,597	$	-	($		390,872)
Pension expense	(		980)	(		439)		306	(		1,113)
Currency translation differences	(		36,662)			-		36,662			-
Others	(		1)	(		2,953)		-	(		2,954)
Subtotal	($		442,112)		$	10,205	$	36,968	($		394,939)
Total	($		372,330)	($		5,660)	$	65,466	($		312,524)

~55~

138

						2016	2016	2016
							Recognised
								in other
				Recognised in comprehensive
		January1		profit	or loss			income		December31
Temporary differences:
-Deferred tax assets:
Cost of after-sales service and
other estimated expenses		$	61,584	($	8,267)		$	-		$	53,317
Pension expense			858	(	504)	(		354)			-
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)
Pension expense			-		-	(		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)

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:

	December31,2017
Unused taxcredits 6,944 $ 7,806 14,750 $	Unrecognised deferred taxassets - $ - - $ December31,2016	Expiry year
		2018 2019
Unused taxcredits 8,230 $ 7,955 16,185 $	Unrecognised deferred taxassets - $ - - $	Expiry year
		2017 2018

~56~

139

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

December 31, 2017: None.

		December31,2016	December31,2016
Year incurred 2016	Amount filed / assessed 1,650 $	Unused amount 1,650 $	Unrecognised deferred taxassets - $	Expiry year
				2026

F. The amounts of deductible temporary difference that are not recognized as deferred tax assets ： None.
G. As of December 31, 2017, the Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority.
H. With the abolishment of the imputation tax system under the amendments to the Income Tax Act promulgated by the President of the Republic of China in February, 2018, the information on unappropriated retained earnings and the balance of the imputation credit account as of December 31, 2017, as well as the estimated creditable tax rate for the year ended December 31, 2017 is no longer disclosed.

Unappropriated retained earnings on December 31, 2016:

Earnings generated in and after 1998

		December	31,2016
	$		2,946,092

As of December 31 2016, the balance of the imputation tax credit account was $279,476 and the creditable tax rate was 9.86% .

(27) Earnings per share

creditable tax rate was 9.86% . 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 December31,2017
	Amount after tax 13,402 $ 13,402 $ 13,402 $	Weighted average number of ordinary shares outstanding (share in thousands) 265,928 2,712 228 268,868	Earnings per share (in dollars)
			0.05 $
			0.05 $

~57~

140

For theyear ended December31,2016	For theyear ended December31,2016	For theyear ended December31,2016
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 $

(28) Transactions with non-controlling interest

A. Acquisition of additional equity interest in a subsidiary

During the year ended December 31, 2016, the Group acquired an additional 0.41% shares of its subsidiary - Altek Autotronics Corporation at the amount of $1,483. This transaction resulted in a decrease of $1,436 in the non-controlling interest and a decrease of $47 in the equity attributable to owners of the parent. The effect of the change in ownership interests on the equity attributable to owners of the parent for the year ended December 31, 2016 is shown below:

	For the year ended	For the year ended
	December31,2016
Carrying amount of non-controlling interest acquired	$	1,436
Consideration paid to non-controlling interest	(	1,483)
Capital surplus
-Difference between proceeds on acquisition of or disposal of equity
interest in a subsidiary and its carrying amount	($	47)

B. The Group did not acquire share increase 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 June 9 and July 11, 2017. The Group did not acquire shares proportionally to its interest. As a result, the Group decreased its share interest by 21.43%. The transaction increased non-controlling interest by $513,046 and increased the equity attributable to owners of parent by $395,774. The effect of changes in interests in Altek Semiconductor (Cayman) Co., Ltd. on the equity attributable to owners of the parent as of 2017 is shown below:

~58~

141

			For the year ended
		December31,2017
Cash		$	908,820
Carrying amount of non-controlling interest	(		513,046)
Capital surplus - Changes in ownership interests in subsidiaries		$	395,774

(29) Operating leases

The Group leased part of the Taipei office building with operating leases. Contingent rents of $17,298 were recognized for these leases in profit or loss for the year ended December 31, 2017. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

are as follows:
Not more than 1 year More than 1 year but not more than 5 years	December31,2017 28,921 $ 38,561 67,482 $	December31,2016
		- $ -
		- $

The Group leases office buildings for operational needs under non-cancellable operating lease agreements. These lease terms are between 2017 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	December31,2017 3,448 $ 13,794 17,243 34,485 $	December31,2016
		7,289 $ 14,785 22,178
		44,252 $

(30) Supplemental cash flow information

A. Investing activities with partial cash payments

			For the year ended			For the year ended
		December31,2017			December31,2016
Acquisitions of property, plant, and
equipment		$	97,615		$	45,477
Add: Property and equipment and
construction billings payable at
beginning of year			6,848			61,027
Less: Property and equipment and
construction billings payable at end
of year	(		12,340)	(		6,848)
Cash paid		$	92,123		$	99,656

~59~

142

			For the year ended			For the year ended
		December31,2017			December31,2016
Acquisitions of intangible assets		$	48,637		$	15,415
Add: Payable at beginning of year			9,067			-
Less: Payable at end of year	(		4,763)	(		9,067)
Cash paid		$	52,941		$	6,348

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship: None.

(2) Significant transactions and balances with related parties:

No significant related party transactions.

(3) 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 December31,2017 24,649 $ 567 9,490 34,706 $	For the year ended December31,2016
		32,845 $ 647 9,067
		42,559 $

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

Contingencies

(1) 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 payment to the GUC.
(2) 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 23, 2018, the case is still under trial.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate will be raised from 17% to 20% effective from January 1, 2018. This will increase the Company’s deferred tax assets and deferred tax

~60~

143

liabilities by $11,941 and $69,695, respectively.

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.
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

~61~

144

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, 2017

		December31,2017	December31,2017	December31,2017	December31,2017	December31,2017
Foreign Currency Amount (In thousands) (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 82,628 USD USD:RMB 58,286 USD Financial liabilities Monetary items USD:NTD 79,594 USD USD:RMB 48,656 USD Foreign Currency Amount (In thousands) (Foreign currency: functional currency) Financial assets Monetary items USD:NTD USD 102,320 USD:RMB USD 75,336 Non-monetary items USD:NTD USD 3,930 Financial liabilities Monetary items USD:NTD USD 94,101 USD:RMB USD 61,696		Effect on Effect on Other Exchange Book Value Extent of Profit or Comprehensive Rate (NTD) Variation (Loss) Income(Loss) 29.760 2,459,009 $ 1% 24,590 $ - $ 6.5342 1,734,591 1% 17,346 - 29.760 2,368,717 $ 1% 23,687) ($ - $ 6.5342 1,448,003 1% 14,480) ( - SensitivityAnalysis Effect on Effect on Other Exchange Book Value Extent of Profit or Comprehensive Rate (NTD) Variation (Loss) Income(Loss) 32.25 3,299,820 $ 1% 32,998 $ - $ 6.937 2,429,586 1% 24,296 - 32.25 126,757 $ 1% - $ 1,268 $ 32.25 3,034,757 $ 1% 30,348) ($ - $ 6.937 1,989,696 1% 19,897) ( - December31,2016 SensitivityAnalysis

	Foreign Currency Amount (In thousands)		Exchange Rate 32.25 6.937 32.25 32.25 6.937	Book Value (NTD) 3,299,820 $ 2,429,586 126,757 $ 3,034,757 $ 1,989,696
					Effect on Effect on Other Extent of Profit or Comprehensive Variation (Loss) Income(Loss) 1% 32,998 $ - $ 1% 24,296 - 1% - $ 1,268 $ 1% 30,348) ($ - $ 1% 19,897) ( -
						- $ - 1,268 $ - $ -

~62~

145

v. Total exchange (loss) 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, 2017 and 2016 amounted to ($82,483) and $67,791, 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, 2017 and 2016, 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 its 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, 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, 2017 and 2016.
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

~63~

146

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: December 31, 2017 Short-term borrowings Short-term notes and bills payable Notes payable Accounts payable Other payables Guarantee deposits recevied Non-derivative financial liabilities: December 31, 2016 Short-term borrowings Accounts payable Other payables Guarantee deposits recevied	Less than 1year 2,021,000 $ 199,797 30,335 2,097,254 420,452 - Less than 1year 2,415,000 $ 2,417,239 445,206 -	Over 1year
		- $ - - - - 23,923 Over 1year
		- $ - - 10,094

(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, 2017 and 2016 is as follows:

~64~

147

December 31, 2017 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Beneficiary certificate December 31,2016 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Beneficiary certificate	Level 1 584,799 $ Level 1 693,709 $	Level 2 - $ Level 2 - $	Level3 - $ Level3 - $	Total
				584,799 $
				Total
				693,709 $

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

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.

~65~

148

(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 through 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 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.

~66~

149

(6) Geographical information

Geographical information for the years ended December 31, 2017 and 2016 is as follows:

Revenue Non-current assets 9,332,973 $ 2,307,520 $ 1,047,980 - 60,389 - 111,431 2,240,174 10,552,773 $ 4,547,694 $ Forthe yearendedDecember31,2017	Forthe yearendedDecember31,2016	Forthe yearendedDecember31,2016
Revenue 9,332,973 $ 1,047,980 60,389 111,431 10,552,773 $	Revenue 9,950,667 $ 1,118,838 67,611 439,930 11,577,046 $	Non-current assets
		2,577,653 $ - - 2,173,112
		4,750,765 $

(7) For the years ended December 31, 2017 and 2016, $5,098,898 and $5,987,938 of the Group’s total revenue was from sales of digital image technology application, respectively.

(Blank below)

~67~

150

Altek Corporation and subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

December 31, 2017

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 December31,2017	As of December31,2017
				Number of shares	Bookvalue	Ownership (%)	Fairvalue
Altek Corporation " " Altek (Kunshan) Co., Ltd. " Altek Investment Co., Ltd. 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	Director None None None None None None	Financial assets carried at cost -non-current " " " " Financial assets at fair value through profit or loss-current "	762,876 633,483 10,000,000 1,200,000 N/A 2,487,654 28,530,618	10,312 $ 289 76,400 5,465 45,545 39,902 544,897	14.55% 4.84% 2.00% 6.45% (Note) N/A N/A	10,312 $ 289 76,400 5,465 45,545 39,902 544,897

Note : 1% of CPEC Huachuang Private Equity (Kunshan) Enterprise (Limited Partnership)’s capital contribution.

Table 1, Page 1

151

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, 2017

Table 2 Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Differences in transaction terms compared to third party transactions Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Differences in transaction terms compared to third party transactions Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	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	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Altek Corporation Altek International Investment Co., Ltd. Altek Semiconductor Corporation Altek Biotechnology Corporation Altek (Kunshan) Co., Ltd. Altek Trading (Shanghai) Limited " Altek Semiconductor (Shanghai) CO., Ltd.	Altek International Investment Co., Ltd. Altek (Kunshan) Co., Ltd. Altek International Investment Co., Ltd. " " " Altek (Kunshan) Co., Ltd. "	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	3,903,935 $ 6,884,317 989,153 743,448 196,847 589,483 419,580 169,427	97% 100% 78% 100% 2% 54% 38% 100%	Net 120 days Net 75 days " " " " " "	Approximately the same price with third parties " " " " " " "	Note " " " " " " "	1,648,946) ($ 1,307,430) ( 400,901) ( 296,970) ( - 68,704) ( 186,963) ( 163,266) (	96% 98% 92% 100% 0% 27% 73% 100%

Note: The payment term with third parties was net 60~120 days.

Table 2, Page 1

152

Altek Corporation and subsidiaries

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

December 31, 2017

Table 3 Creditor	Counterparty	Relationship with the counterparty	Balance as at December31,2017	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)
					Amount	Action taken
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 Altek Semiconductor (Shanghai) Co., Ltd.	Parent company Parent company The same ultimate parent company Parent company The same ultimate parent company The same ultimate parent company	1,648,946 $ 400,901 296,970 1,307,430 186,963 163,266	2.39 3.50 4.70 5.05 5.50 4.58	- $ - - - - -	N/A N/A N/A N/A N/A N/A	850,152 $ 210,308 252,602 1,232,398 169,766 146,083	- $ - - - - -

Table 3, Page 1

153

Altek Corporation and subsidiaries

Table 4

Expressed in thousands of NTD

Significant inter-company transactions during the reporting periods

For the year ended December 31, 2017

(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 Semiconductor Corporation " Altek Biotechnology Corporation " Altek (Kunshan) Co., Ltd. " Altek Trading (Shanghai) Limited " " " Altek Semiconductor (Shanghai) Co., Ltd. "	Altek International Investment Co., Ltd. " Altek (Kunshan) Co., Ltd. " Altek International Investment Co., Ltd. " " " " " " " Altek (Kunshan) Co., Ltd. " " "	(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	3,903,935 $ 1,648,946 6,884,317 1,307,430 989,153 400,901 743,448 296,970 196,847 - 589,483 68,704 419,580 186,963 169,427 163,266	Net 120 days " Net 75 days " " " " " " " " " " " " "	37% 11% 65% 9% 9% 3% 7% 2% 2% 0% 6% 0% 4% 1% 2% 1%

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

154

Altek Corporation and subsidiaries

Information on investees

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

For the year ended December 31, 2017

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shares he	ld as at December	31,2017	Net profit (loss) of the investee for the year ended December 31, 2017	Investment income(loss) recognised by the Company for the year ended December 31,2017	Footnote
				Balance as at December 31, 2017	Balance as at December 31, 2016	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 International Holding (BVI) Co, Ltd. Altek Lab Inc. JinJing Optical Technology Co., ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek Semiconductor Corporation Altek Biotechnology Corporation	British Virgin Islands Japan Republic of China Republic of China British Virgin Islands U.S.A. Samoa Cayman Islands 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 Investment and general business operations Design service Investment and general business operations Investment and general business operations Research design and sales of ASIC Research and development, manufacture and sales of biotechnology	2,910,046 $ 2,869 50,000 - 415,376 109,509 104,160 182,941 200,000 415,376	3,033,618 $ 2,869 50,000 184,080 415,376 109,509 104,160 182,941 200,000 415,376	88,662,059 1,000 5,000,000 - 12,865,921 11,311,875 3,500,000 20,000,000 20,000,000 40,100,000	100% 100% 100% - 100% 100% 23.33% 50% 100% 100%	8,912,258 $ 10,923 39,894 - 496,717 58,637 - 627,237 317,938 496,717	165,669 $ 419) ( 4,750 92) ( 63,369 1,399 31,537) ( 62,978 92,634 63,369	165,669 $ 419) ( 54) ( - 63,369 480 - 26,793 41,528 63,369	Note 1 Note 3 Note 2 Note 3

Note 1: On June 30, 2017, Altek Corporation consummated a short-form merger with Altek Autotronics Corporation and the former is the surviving company. 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

155

Altek Corporation and subsidiaries Information on investments in Mainland China For the year ended December 31, 2017

Table 6

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method `（`Note 1`）`	Accumulated amount of remittance from Taiwan to Mainland China as of January1,2017	Amount remitte Mainland C remitted back theyear ended D	d from Taiwan to hina/Amount to Taiwan for ecember 31,2017	Accumulated amount of remittance from Taiwan toMainland China as of December 31,2017	Net profit (loss) of investee for the year ended December 31, 2017	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31,2017	Book value of investments in Mainland China as of December 31,2017	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2017
					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. (Note 4) Altek Precision (Kunshan) Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd. Altek Semiconductor (Shanghai) 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 Imaging technologies, electronic software and hardware development, IC design and development, technology service, and wholesale, import and export of related products.	1,476,096 $ 148,800 252,960 446,400 470,892 410,688 333,312 14,880	2 2 2 2 2 2 2 2	1,339,200 $ 270,310 252,960 104,160 263,805 410,688 446,400 -	- $ - - - - - - -	- $ - - - ( 123,572) - ( 113,088) -	1,339,200 $ 270,310 252,960 104,160 140,233 410,688 333,312 -	175,716 $ 1,311 26,546 ( 27,354) - ( 3,270) ( 10,643) 4,866) (	100% 100% 100% 23.33% 40% 100% 100% 50%	175,716 $ 1,311 26,546 - - ( 3,270) ( 10,643) 2,502) (	3,960,196 $ 761,765 301,033 - - 150,170 12,579 10,848	- $ - - - - - - -

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). Note 4: On May 8, 2017, Phoenix Optical (Shanghai) Co., Ltd. has completed liquidation.

Companyname	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2017	Investment amount approved by the Investment Commission of the Ministryof Economic Affairs(MOEA)	Ceiling on investments in Mainland China imposed bythe Investment Commission of MOEA
Altek Corporation	2,850,863 $	3,027,901 $	- $

Note:According to “REGULATIONS GOVERNING 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

156

6.5 Separate Financial Statements for the Years Ended December 31, 2017 and 2016

Please refer to page 128~187 of the 2017 Chinese Annual Report.

157

6.6 Difficulty in Financial Turnover of the Company and its Affiliated Companies: None

158

VII. Review of Financial Conditions, Financial Performance, and Risk Management

7.1 Analysis of Financial Status IFRS & Consolidated Base

Analysis of Financial Status IFRS & Consolidated Base	Analysis of Financial Status IFRS & Consolidated Base	Analysis of Financial Status IFRS & Consolidated Base
			Unit: NT$ thousand Difference Amount % 161,980 1.61 (231,692) (4.97) 28,621 30.80 (137,070) (32,26) (178,161) (1.17) (570,977) (10.17) (59,416) (10.24) (630,393) (10.18) (1,600) (0.06) 393,778 21.14 (203,686) (4.56) (276,818) 1,084.67 33,255 (25.70) 507,303 414.86 452,232 5.01
Year Item	December 31, 2016	December 31, 2017	Difference
			Amount	%
Current Assets	10,051,522	10,213,502	161,980	1.61
Property, Plant and Equipment	4,657,848	4,426,156	(231,692)	(4.97)
Intangible Assets	92,917	121,538	28,621	30.80
Other Assets	424,845	287,775	(137,070)	(32,26)
Total Assets	15,227,132	15,048,971	(178,161)	(1.17)
Current Liabilities	5,613,869	5,042,892	(570,977)	(10.17)
Non-current Liabilities	580,270	520,854	(59,416)	(10.24)
Total Liabilities	6,194,139	5,563,746	(630,393)	(10.18)
Share Capital	2,739,788	2,738,188	(1,600)	(0.06)
Capital Reserve	1,862,914	2,256,692	393,778	21.14
Retained Earnings	4,462,922	4,259,236	(203,686)	(4.56)
Other Equity Interest	(25,521)	(302,339)	(276,818)	1,084.67
Treasury Stock	(129,393)	(96,138)	33,255	(25.70)
Non-controlling Interests	122,283	629,586	507,303	414.86
Total Shareholders’ Equity	9,032,993	9,485,225	452,232	5.01

7.1.1 Analysis of the percentage of change exceeding 20%

A. The increase in intangible assets was mainly due to the cost of mask increases.
B. The decrease in other assets was mainly because the equity method of the investee company that has returned back the capital reduction.
C. The change in other interests was due to the exchange rate of translation of financial tatements of foreign operations.
D. The decrease in Treasury shares was mainly due to the sale of Treasury shares.
E. The increase in capital reserves and non-controlling equity was mainly due to the fact that the subsidiary’s cash increase was not subscribed based on the proportion of shares held.
7.1.2 Effect of changes on the Company’s financial condition: No significant effect.
7.1.3 Future response actions: N/A.

159

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	2016	2017	Amount of Increase (Decrease)	Percentage of Change (%)
OperatingRevenue	11,577,046	10,552,773	(1,024,273)	(8.85)
Cost of Sales	10,021,302	9,117,731	(903,571)	(9.02)
Gross Profit from Operations	1,555,744	1,435,042	(120,702)	(7.76)
OperatingExpenses	1,509,985	1,275,596	(234,389)	(15.52)
Net OperatingIncome(Loss)	45,759	159,446	113,687	248.45
Non-operatingIncome and Expenses	144,816	(21,884)	(166,700)	(115.11)
Income before Tax	190,575	137,562	(53,013)	(27.82)
Income Tax Expense	90,467	87,975	(2,492)	(2.75)
Income after Tax	100,108	49,587	(50,521)	(50.47)

7.2.1 Analysis of the percentage of change exceeding 20%
A. The increase in net operating profit was mainly due to the decrease in the cost of employing personnel and depreciation expenses.
B. The decrease of Non-operating income and expenses, pre-tax and the after-tax net profit is mainly due to the exchange rate fluctuations in the years of 2016 and 2017.

7.2.2 Effect of changes on the company’s future business

Faced with the rapid changes in the market, Altek will continue to explore the core technologies of smart vision, enhance the added value of products, provide customers with complete solutions and services, and constantly improve our market share and influence in the field of smart vision, while strengthening various systems, processes, and production and sales management to improve overall competitiveness, growth and profitability.

In addition, with the dramatic growth in the penetration rate of the dual-camera phones market, Altek’s related businesses was also significantly improved this year. In the future, mobile phones, security controls, autopilots, smart home assistants, drones, and sweeping robots will all be fitted with 3D sensing and even AI, and the use of imaging and intelligent vision technologies in related fields will become increasingly popular and plays a key role.

160

7.3Analysis of Cash Flow
7.3.1 Analysis of changes in cash flow in 2017

Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017	Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017	Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017	Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017
				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
4,849,989	821,269	203,724	5,874,982	`－`	`－`

A. Operating activities: Net cash inflows from the business cycle.
B. Investment activities: Net cash inflows from receiving the refund from investee’s capital reduction.
C. Financing activities: Net cash inflows from the capital increasing of subsidiaries.
7.3.2 The Improvement Program of Liquidity Insufficiency
- Altek has no lack of liquidity. The financing activities will be organized based on the business needs.
7.3.3 Analysis of cash flow for the coming year:
- According to the balance of cash and the cash flows from operating activities, Altek has conducted prudent assessments, plans and controls related operating and investment cash expenses. The mandate is that Altek presupposes maintaining stable cash liquidity.
7.4 Major Capital Expenditure Items and Impact on Finance and Business: None.
7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year

The recent investment policy is consistent with the Altek group's operating principles and continues to focus on the growth of its core business. In recent years, Altek’s profit has been transformed into a digital imaging solution provider as a result of the cutting into a number of mobile phone supply chains, and extending the use of digital imaging technology to other areas. Altek will continue to supervise and assist its subsidiaries in order to achieve profitability goals. In the future, Altek will focus on the future market trend and our product strategies will be adjusted to enhance investment returns.

7.6 Analysis of Risk Management
7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures
- A.the change of interest rate:

Altek’s financial status is good, and it has close relationship with the banks for a long time. We will be able to obtain better interest rate conditions to meet the needs of its operations, regularly assess the status of the cost of funding and pay attention to the trend of market interest rates, so it is estimated that the fluctuations of interest rate will have no major impact to us.

B. Change of Exchange rate:

Altek's purchases and sales of goods major quoted by the currency in US dollars,

161

through the balance of assets and liabilities, will be able to significantly reduce exchange rate risk and achieve a neutral hedge effect.

According to the procedures for acquisition or disposal of derivatives stipulated in the Procedures for Acquisition or Disposal of Assets, Altek 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.

C. inflation effect:

Altek's quotations for customers and suppliers are adjusted by the market rates, and inflation has little effect for Altek. However, Altek will commit to the transformation of better production process and continue to save money to meet the uncertainty of inflation.

7.6.2 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

Altek did not engage in any high-risk or high-leveraged investments or any lending or endorsement to others. Altek 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).

7.6.3 Future Research & Development Projects and Corresponding Budget

Please refer to page 63 “Ongoing Research and Development Projects and Expenses”

7.6.4 Effects of and Response to Changes in Major Policies and Laws Relating to Corporate Finance and Sales

Altek 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.

7.6.5 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, Altek will enhance the market share and influence in the digital image area to improve the overall competitiveness, growth and profitability.

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures

Altek 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, Altek has also organized numerous public welfare activities, including establishing Altek Charity Fund, to fulfill the social responsibilities.

162

7.6.7 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 Altek 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.

7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans

As of the date of this Annual Report, Altek has no ongoing factory expansion activities.

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration
A. Purchase

In addition to maintaining a good relationship with major suppliers, Altek has consistently worked to diversify its supplier base in order to reduce the concentration of purchase.

B. Sales

In addition to traditional digital cameras, Altek also sells sports cameras and wearable cameras.auto camera. 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, Altek 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.

7.6.10 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.

7.6.11 Effects of, Risks Relating to and Response to the Changes in Management Rights There was no change in management rights.

163

7.6.12 Litigation or Non-litigation Matters

Case	Fact in Dispute	Amount of Subject	Start of Litigation	Major Litigant	Current Progress
Civil complaint against HTC Corporation	HTC Corporation’s default in the agreed upon Manufacturing and Supply Agreement	US$11,126 thousand against HTC Corporation	2015.12.22	HTC Corporation	The case is still under trial at the Taiwan Taipei District Court.
Action against Q Technology’s patent infringement	Patent infringement of Xiaomi (model: Hungmi PRO) using Q Technology’s dual-lens camera module	RMB1,000 thousand	2017.01.09	Q Technology Company Limited.	The case is still under trial at the Beijing Intellectual Property Court.
Action against O Film’s patent infringement	Patent infringement of Xiaomi (model: Hungmi PRO) using O Film’s dual-lens camera module	RMB1,000thousand	2017.03.13	Shenzhen O-Film Tech Co.,Ltd.	The case is still under trial at the Beijing Intellectual Property Court.

7.6.13Other Major Risks: None.

7.7 Other Important Items: None.

164

VIII. Special Disclosure

8.1 Profile of Affiliated Companies

8.1.1 Organizational Structure of Affiliated Companies

December 31, 2017

==> picture [704 x 201] intentionally omitted <==

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

Altek Corp.
100% 100% 100% 100%
Altek
Altek International Altek Investment
Altek Japan Corp. Investment Co. Ltd. Co., Ltd. International Holding
(BVI) Co., Ltd.
100% 100% 100% 100% 100% 100% 50% 100% 100%
Altek Lab Inc. Altek Imaging Technology Leading Tech Toptek Investment Altek Trading Technology (Cayman) Altek Optical Altek Semiconductor Altek Optical Altek Biotechnology Holding (Cayman)
Co., Ltd. Cayman Co., Ltd. (Cayman) Co. Ltd. (Cayman) Co., Ltd. (Cayman) Co., Ltd.
(Cayman) Co., Ltd. Co., Ltd. Co., Ltd.
100% 100% 100% 100% 100% 100% 100% 100%
Altek Precision Altek (Kunshan) Altek EMS Altek Trading Altek Optical Altek Semiconductor Altek Semiconductor Altek Biotechnology
(Kunshan) Co., Ltd. Co., Ltd. (Kunshan) Co., Ltd. (Shanghai) Co., Ltd (Kunshan) Co., Ltd. Corp. (Shanghai) Co., Ltd. Corporation
----- End of picture text -----

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, Altek and its affiliated companies provides customers with chips, software, IP, and module integration and has transformed itself into intelligent vision solutions provider. In addition to successfully entering the supply chain of smartphone, intelligent home,VR camera,robot and wearable camera customers, Altek also applies digital imaging technologies to the medical and automotive fields.

165

8.1.3 Profile of Affiliated Companies

8.1.3 Profile of Affiliated Companies	8.1.3 Profile of Affiliated Companies	8.1.3 Profile of Affiliated Companies	8.1.3 Profile of Affiliated Companies	8.1.3 Profile of Affiliated Companies	8.1.3 Profile of Affiliated Companies	8.1.3 Profile of Affiliated Companies
Unit: NT$ (foreign currency) thousand; December 31, 2017
Name of Company	Date of Establishment	Address	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	88,662	Business operation and investment	Business operation and investment
Altek Lab Inc.	July 15, 2000	U.S.A.	USD	1,005	Special application integrated circuit design	Special application integrated circuit design
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 investingin mainland China
Altek (Kunshan) Co., Ltd.	July 23, 2001	Kunshan, China	USD	49,600	Manufacturing and sales of digital cameras and phone cameras related components	Manufacturing and sales of digital cameras and phone 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
Altek EMS (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 Optical Technology (Cayman) Co., Ltd.	November 21, 2011	Cayman Islands	USD	11,200	Business operation and investment	Holding company indirectly investing in mainland China
Altek (Kunshan) Optical	November 21, 2011	Kunshan, China	USD	11,200	Production/sales of electronic	Production/sales of electronic

166

Name of Company	Date of Establishment	Address	Paid-in Capital	Paid-in Capital	Main Business or Production	Division of Work
Co., Ltd.					product components	product components
Altek Semiconductor (Cayman) Co., Ltd.	November 26, 2009	Cayman Islands	USD	100	Business operation and investment	Holding company indirectly investing in subsidiaries in Taiwan
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 Semiconductor(Shanghai) Co., Ltd.	2016.11.21	Shanghai, China	USD	500	Imaging technology and electronic hardware and software development, integrated circuit design and development and technical services	Imaging technology and electronic hardware and software development, integrated circuit design and development and technical services
Altek Optical (Cayman) Co., Ltd.	May 19, 2006	Cayman Islands	USD	4,800	Business operation and investment	Holding company indirectly investing in mainland China
Altek Investment Co., Ltd.	July 20, 2004	Taipei City, Taiwan	NTD	50,000	General investment	Investment company
Altek International Holding (BVI) 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 Holding (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

8.1.4 The Same Shareholders of Companies Controlled by or Subordinate to the Company: None.

167

8.1.5 Directors, Supervisors and Presidents of Affiliated Companies

.1.5 Directors, Supervisors and Presidents of Affiliated	.1.5 Directors, Supervisors and Presidents of Affiliated	Companies	Companies	Companies	Companies
		December 31, 2017 Name or Representative Shareholding Name Corporate Representative Number of Shares Shareholding Ratio Altek Corporation Alex Hsia David Lin Vincent Kao Steve Shyr 1,000 100.00% Altek Corporation Alex Hsia 88,662,059 100.00% Altek International Investment Co., Ltd. Alex Hsia (Common stock) 9,311,875 (Preferred stock) 2,000,000 100.00% Altek International Investment Co., Ltd. Alex Hsia 15,092,410 100.00% Altek Imaging Technology (Cayman)Co., Ltd. Alex Hsia Steven Su N/A 100.00% Altek International Investment Co., Ltd. Alex Hsia 45,000,000 100.00% Leading Tech. Co., Ltd. Alex Hsia Steve Chou N/A 100.00% Altek International Investment Co., Ltd. Alex Hsia 1,400,000 100.00% Toptek Investment Cayman Co., Ltd. Alex Hsia Steve Shyr N/A 100.00% Altek International Investment Co., Ltd. Alex Hsia 8,500,000 100.00% Altek Trading (Cayman) Co., Ltd. Alex Hsia Steven Su N/A 100.00% Altek International Investment Co., Ltd. Alex Hsia 11,200,000 100.00%
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	88,662,059	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%
Altek EMS (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 Optical Technology (Cayman) Co., Ltd.	Director	Altek International Investment Co., Ltd.	Alex Hsia	11,200,000	100.00%

168

Name of Company	Title	Name or Representative	Name or Representative	Shareholding	Shareholding
		Name	Corporate Representative	Number of Shares	Shareholding Ratio
Altek (Kunshan) Optical Co., Ltd.	Executive Director Director	Altek Optical Technology (Cayman)Co.,Ltd.	Alex Hsia Steve Shyr	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	50.00%
Altek Semiconductor Corp.	Chairman Director Director Supervisor	Altek Semiconductor (Cayman) Co., Ltd.	Alex Hsia Jason Lin Simon Law James Wu	20,000,000	100.00%
Altek Semiconductor(Shanghai) Co., Ltd.	Executive Director Director	Altek Semiconductor (Cayman)Co.,Ltd.	Alex Hsia Jonathan Shaw	N/A	100.00%
Altek Optical (Cayman) Co., Ltd.	Director	Altek International Investment Co.,Ltd.	Alex Hsia	4,800,241	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 International Holding BVI Co., Ltd.	Director	Altek Corporation	Alex Hsia	12,865,921	100.00%
Altek Biotechnology Holding(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 James Wu	40,100,000	100.00%

169

8.1.6 Operation of Affiliated Companies

Unit: NT$ (foreign currency) thousand; December 31, 2017

Name of Company	Capital	Capital	Total Assets	Total Assets	Total Liabilities	Total Liabilities	Net Value	Net Value
Altek Japan Corporation	JPY	10,000	JPY	41,397	JPY	52	JPY	41,345
Altek International Investment Co., Ltd.	USD	88,662	USD	345,237	USD	45,659	USD	299,578
Altek Lab Inc.	USD	1,005	USD	2,043	USD	73	USD	1,970
Altek Imaging Technology (Cayman) Co., Ltd.	USD	15,092	USD	5,046	USD	0	USD	5,046
Altek(Kunshan)Precision Co.,Ltd.	USD	13,800	USD	5,046	USD	0	USD	5,046
Leading Tech. Co., Ltd.	USD	45,000	USD	133,071	USD	0	USD	133,071
Altek (Kunshan) Co., Ltd.	USD	49,600	USD	208,868	USD	75,797	USD	133,071
Toptek Investment Cayman Co., Ltd.	USD	1,400	USD	25,598	USD	0	USD	25,598
Altek EMS (Kunshan) Co., Ltd.	USD	5,000	USD	25,601	USD	4	USD	25,597
Altek Trading (Cayman) Co., Ltd.	USD	8,500	USD	10,115	USD	0	USD	10,115
Altek Trading(Shanghai) Co., Ltd.	USD	8,500	USD	18,901	USD	8,786	USD	10,115
Altek Optical Technology (Cayman)Co.,Ltd.	USD	11,200	USD	423	USD	0	USD	423
Altek (Kunshan) Optical Co., Ltd.	USD	11,200	USD	453	USD	30	USD	423
Altek Semiconductor (Cayman) Co., Ltd.	USD	100	USD	42,311	USD	0	USD	42,311
Altek Semiconductor Corp.	NTD	200,000	NTD	878,161	NTD	560,223	NTD	317,938
Altek Semiconductor(Shanghai) Co., Ltd.	USD	500	USD	7,514	USD	7,150	USD	364
Altek Optical (Cayman) Co., Ltd.	USD	4,800	USD	0	USD	0	USD	0
Altek Investment Co., Ltd.	NTD	50,000	NTD	39,909	NTD	16	NTD	39,893
Altek International Holding (BVI) Co., Ltd.	USD	12,866	USD	16,691	USD	0	USD	16,691
Altek Biotechnology Holding (Cayman) Co., Ltd.	USD	12,866	USD	16,691	USD	0	USD	16,691
Altek Biotechnology Corp.	NTD	401,000	NTD	987,564	NTD	490,846	NTD	496,718

Note 1: Altek 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.

170

8.1.7 Declaration of Consolidated Financial Statements of Affiliated Companies

Altek Corporation

Declaration of Consolidated Financial Statements of Affiliated Companies

In 2017 (January 1, 2017 to December 31, 2017), 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 23, 2018

8.1.8 Affiliation Report

Altek 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.

171

8.2 Private Placement of Securities in the Most Recent Years

To enrich working capital, repay borrowings, reinforce financial structures and support the Company’s development funding needs, the 5[th] of 8[th] term BoD approved raising funds through private placement within the limit of 60,000,000 common shares, and will proposed to the 2018 shareholders meeting.

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

172

AI assistant

Altek — Annual Report 2017

52290_rns_2018-07-02_dd823bc1-f438-48f5-8f18-cb2e0f12a3f9.pdf

Stock Code: 3059

Altek Corporation

2017

Annual Report

Notice to readers

Contents

I. Letter to Shareholders

1. 2017 Business Report

II. Company Profile

2.1 Date of Incorporation

2.2 Company History

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

3.1.2 Major Corporate Functions

3.2 Directors and Management Team

3.2.1 Directors

A.Profile of Directors

(2)Major shareholders of Altek’s Major Institutional Shareholders

C.Professional Qualifications and Independence Analysis of Directors

3.2.2 Management Team

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

3.3.1Remuneration of Directors

Range of Remuneration

3.3.2 Remuneration of Supervisors

Range of Remuneration

Range of Remuneration

3.3.4Profit Sharing-Employee Bonus

3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

Other mentionable items:

D. The attendance of the independent directors were as follows:

(V: Attend in Person ； © : By Proxy; #: Absence)

3.4.2 Audit Committee:

3.4.3 Attendance of Supervisors at Board Meetings

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

3.4.5 Composition, Responsibilities and Operations of the Remuneration Committee

A. Professional Qualifications and Independence Analysis of Remuneration Committee Members

B.There are 3 members in the Remuneration Committee.

C.Term of the Remuneration Committee is from Aug 11[th] , 2017 to June 15[th] , 2020.

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

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

3.4.8 Corporate Governance Guidelines and Regulations

3.4.9 Other Important Information Regarding Corporate Governance

A. Employees’ rights and cares

B. Investor relations

C. Supplier relation

D. Training record of directors and supervisors in 2017:

E. Liability Insurance for directors and supervisors

F. Managers’ participation in training courses on corporate governance in 2017: None.

3.4.10 Internal Control Systems

A. Internal Control Declaration

Altek Corporation Internal Control Declaration

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

3.4.12 Major Resolutions of Shareholders’ Meeting and Board Meetings

A. Resolutions of 2017 general shareholders’ meeting:

B. Resolutions of 2017 board meeting:

3.5 Information of Audit Fee

3.5.1 Payment to the Audit:

3.6 Information of replacement of CPA:

3.6.1 Regarding the former CPA

3.6.2 Regarding the successor CPA

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

3.8.2 Shares Trading with Related Parties: None.

3.9 Relationship among the Top Ten Shareholders

3.10 Ownership of Shares in Affiliated Enterprises

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

4.1.2 Status of Shareholders

4.1.3 Shareholding Distribution Status

A. Common Shares

B. Preferred Shares: None.

4.1.4 List of Major Shareholders

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

B. Proposed Distribution of Dividend

Altek Annual Report 2017

(V: Attend in Person `；` © : By Proxy; #: Absence)