cpc — Audit Report / Information 2016

Dec 27, 2016

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2016 AND 2015

-----------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of CHIEFTEK PRECISION CO., LTD.

Opinion

We have audited the accompanying consolidated balance sheets of CHIEFTEK PRECISION CO., LTD. and its subsidiaries (collectively referred herein as the “Group”) as at December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, International Financial Reporting Interpretations Committee Interpretations, and Standing Interpretations Committee 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 (R.O.C 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.

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the 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.

Adequacy of allowance for inventory market price decline of individually identified obsolete or damaged inventories

Description

Please refer to Note 4(10), “Inventories” for accounting policies on inventory, Note 5, “Critical accounting judgements, estimates and key sources of assumption uncertainty” for the uncertainty of significant accounting estimates and assumptions applied on inventory valuation, and Note 6(3), “Inventories” for details of allowance for inventory market price decline. As of December 31, 2016, inventory and allowance for inventory market price decline amounted to NT$391,878 thousand and NT$73,313 thousand, respectively.

The Group is primarily engaged in the manufacture and sale of linear motion guide and slide. Due to the demand for high quality products, there is a risk of market price decline and obsolescence of inventories. The Group recognizes inventories at the lower of cost and net realizable value, and the net realizable value is determined based on historical data of closeout inventory and range of discount. Given the uncertainty in the estimation of net realizable value and the significance of the balance of inventory and allowance for inventory market price decline to the financial statements, we consider the allowance for inventory market price decline a key audit matter.

How our audit addressed the matter

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

• A. Understanding the operations and industry of the Group to assess the reasonableness of policies and procedures on allowance for inventory market price decline, including the consistency of inventory classification used in determining net realizable value.

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• B. Obtaining the inventory list which management used in calculating the lower of cost and net realizable value, checking randomly for the accuracy in calculating net realizable value of inventory, and discussing with management and checking relevant evidence to check the reasonableness of the amount of allowance for inventory market price decline.

Cut-off of export sales revenue

Description

Please refer to Note 4(24), “Revenue recognition” for accounting policies on revenue recognition.

The Group is primarily engaged in domestic and export sales. Based on the Group’s accounting policy, revenue is recognized when the significant risks and rewards of ownership have been transferred to the customer. The terms and conditions of the transaction vary with export customers, and the manual process of obtaining evidence of ownership transfer after delivery and judging the timing of revenue recognition are essential. As export sales involve manual process, the daily transaction amounts are voluminous, the timing of revenue recognition may not be in the proper period, and the transaction amounts around balance sheet date are material, we consider the cut-off of export sales revenue a key audit matter.

How our audit addressed the matter

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

• A. Checking revenue recognition process, and examining revenue recognition basis and approval procedure to assess the accuracy of timing of export sales revenue recognition.

• B. Randomly checking export sales transactions around the balance sheet date, including ascertaining the trading conditions in contract, verifying the evidence of ownership transfer, checking and analysing subsequent export sales returns to ascertain whether the export sales revenue has been recorded in proper period.

Other matter – Parent company only financial report

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

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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 Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, International Financial Reporting Interpretations Committee Interpretations, and Standing Interpretations Committee 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.

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

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

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

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with R.O.C 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 R.O.C GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• A. 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

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error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• B. 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.

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

• D. 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.

• E. 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.

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

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

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

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

Lin, Tzu-Shu

Independent Accountants

Liu, Tzu-Meng

PricewaterhouseCoopers, Taiwan

Republic of china March 23, 2017

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

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(19) 5(1) and 6(3) 6(4)(5) and 8 6(4)(5) and 8 5(2), 6(6)(7) 6(19) 6(4) 8	December 31, 2016 AMOUNT % $ 506,430 23 32,195 1 323,860 15 1,925 - - - 318,565 15 16,508 1 1,199,483 55 892,019 41 - - 68,707 3 21,286 1 5,837 - 3,997 - 1,430 - 3,614 - 996,890 45 $ 2,196,373 100	December 31, 2015	December 31, 2015
		AMOUNT $ 506,430 32,195 323,860 1,925 - 318,565 16,508 1,199,483 892,019 - 68,707 21,286 5,837 3,997 1,430 3,614 996,890 $ 2,196,373	AMOUNT $ 449,849 24,696 324,429 1,504 13,837 365,499 15,464 1,195,278 661,307 316,864 53,104 23,545 20,101 2,258 1,432 2,367 1,080,978 $ 2,276,256	%
Current assets 1100 Cash and cash equivalents 1150 Notes receivable, net 1170 Accounts receivable, net 1200 Other receivables 1220 Current income tax assets 130X Inventory 1410 Prepayments 11XX Total current assets Non-current assets 1600 Property, plant and equipment 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1915 Prepayments for equipment 1920 Guarantee deposits paid 1980 Other financial assets - non- current 1990 Other non-current assets 15XX Total non-current assets 1XXX Total assets				20 1 14 - 1 16 1
				53
				29 14 2 1 1 - - -
				47
				100

(Continued)

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

December 31, 2016 December 31, 2015 Notes AMOUNT % AMOUNT % 6(8) $ 187,715 8 $ 204,803 9 65,774 3 48,048 2 42,694 2 23,482 1 78,446 4 62,800 3 6(19) 5,951 - 7,350 - 972 - 797 - 6(9), 8 and 9 58,533 3 99,160 5 440,085 20 446,440 20 6(9), 8 and 9 390,633 18 503,418 22 6(19) 2,614 - 2,917 - 6(10) 4,625 - 3,950 - 397,872 18 510,285 22 837,957 38 956,725 42 6(11)(13) 620,455 28 592,338 26 6(12) 463,051 21 463,051 20 6(11)(13)(19) 64,905 3 57,827 3 334,354 15 312,835 14 ( 5,928) - 12,024 - 6(11) ( 118,544)( 5)( 118,544)( 5) 1,358,293 62 1,319,531 58 123 - - - 1,358,416 62 1,319,531 58 6(21) and 9 $ 2,196,373 100 $ 2,276,256 100

Current liabilities 2100 Short-term borrowings 2150 Notes payable 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2310 Advance receipts 2320 Long-term liabilities, current portion 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2640 Net defined benefit liabilities 25XX Total non-current liabilities 2XXX Total liabilities Share capital 3110 Share capital - common stock Capital reserves 3200 Capital surplus Retained earnings 3310 Legal reserve 3350 Unappropriated retained earnings 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 Unrecognized Contract Commitments 3X2X Total liabilities and equity

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

Items

Forthe years endedDecember31 2016 2015 Notes AMOUNT % AMOUNT % $ 982,536 100 $ 1,021,983 100 6(3)(6)(10)(17)(18)(2 1) ( 627,819) ( 64) ( 715,579) ( 70) 354,717 36 306,404 30 6(5)(6)(10)(17)(18) and 7 ( 79,262) ( 8) ( 79,483) ( 8) ( 107,347) ( 11) ( 93,780) ( 9) ( 43,775) ( 4) ( 36,985) ( 4) ( 230,384) ( 23) ( 210,248) ( 21) 124,333 13 96,156 9 6(14) 8,169 1 8,279 1 6(7)(15) and 12 ( 14,449) ( 2) ( 5,023) - 6(4)(16) ( 12,645) ( 1) ( 17,997) ( 2) ( 18,925) ( 2) ( 14,741) ( 1) 105,408 11 81,415 8 6(19) ( 19,874) ( 2) ( 10,633) ( 1) $ 85,534 9 $ 70,782 7 6(10) ($ 906) - ($ 3,798) ( 1) 6(19) 154 - 646 - ( 17,962) ( 2) ( 3,144) - ($ 18,714) ( 2) ($ 6,296) ( 1) $ 66,820 7 $ 64,486 6 $ 85,583 9 $ 70,782 7 ( 49) - - - $ 85,534 9 $ 70,782 7 $ 66,879 7 $ 64,486 6 ( 59) - - - $ 66,820 7 $ 64,486 6 6(20) $ 1.45 $ 1.20 6(20) $ 1.44 $ 1.19

4000 Sales revenue 5000 Operating costs 5900 Net operating margin Operating expenses 6100 Selling expenses 6200 General and 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 Other comprehensive income (loss) (Net) Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8311 Other comprehensive loss, before tax, actuarial loss on defined benefit plans 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations 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 Comprehensive income (loss) attributable to: 8710 Owners of the parent 8720 Non-controlling interest Earnings per share (in dollars) 9750 Basic 9850 Diluted

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars)

For the year ended December 31, 2015 Balance at January 1, 2015 Distribition of earnings for 2014 net income: Legal reserve Cash dividends Reversal of special reserve Profit for 2015 Other comprehensive loss for 2015 Buy-back of treasury shares Balance at December 31, 2015 For the year ended December 31, 2016 Balance at January 1, 2016 Distribition of earnings for 2015 net income: Legal reserve Cash dividends Stock dividends Profit for 2016 Other comprehensive loss for 2016 Non-controlling interest Balance at December 31, 2016	Notes						Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent				Non - controlling interest	Totalequity
			Share capital - common stock		Capital reserve			RetainedEarnings		Financial statements translation differences of foreign operations	Treasury stocks	Total
							Legal reserve	Special reserve	Unappropriated retained earnings
	6(13) 6(11) 6(13) 6(11)(13)		$ 592,338 - - - - - - $ 592,338 $ 592,338 - - 28,117 - - - $ 620,455		$ 463,051 - - - - - - $ 463,051 $ 463,051 - - - - - - $ 463,051		$ 55,753 2,074 - - - - - $ 57,827 $ 57,827 7,078 - - - - - $ 64,905	$ 133 - - ( 133 ) - - - $ - $ - - - - - - - $ -	$ 275,263 ( 2,074 ) ( 28,117 ) 133 70,782 ( 3,152 ) - $ 312,835 $ 312,835 ( 7,078 ) ( 28,117 ) ( 28,117 ) 85,583 ( 752 ) - $ 334,354	$ 15,168 - - - - ( 3,144 ) - $ 12,024 $ 12,024 - - - - ( 17,952 ) - ($ 5,928)	($ 113,367 ) - - - - - ( 5,177) ($ 118,544) ($ 118,544 ) - - - - - - ($ 118,544)	$1,288,339 - ( 28,117 ) - 70,782 ( 6,296 ) ( 5,177) $1,319,531 $1,319,531 - ( 28,117 ) - 85,583 ( 18,704 ) - $1,358,293	$ - - - - - - - $ - $ - - - - ( 49 ) ( 10 ) 182 $ 123		$1,288,339 - ( 28,117 ) - 70,782 ( 6,296 ) ( 5,177) $1,319,531 $1,319,531 - ( 28,117 ) - 85,534 ( 18,714 ) 182 $1,358,416

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Reversal of allowance doubtful accounts Loss on inventory market price decline Depreciation Depreciation reclassified to intangible assets Loss on disposal of property, plant and equipment Amortization Amortization reclassified to intangible assets Loss on disposal of intangible assets Impairment loss Interest income Interest expense Changes in operating assets and liabilities Changes in operating assets Notes receivable Accounts receivable Other receivables Inventories Prepayments Changes in operating liabilities Notes payable Accounts payable Other payables Advance receipts Net defined benefit liabilities Cash inflow generated from operations Interest received Interest paid Income tax received Income tax paid Net cash flows from operating activities

Forthe years endedDecember31, Notes 2016 2015 $ 105,408 $ 81,415 6(2)(14) ( 3,480 ) ( 5,254 ) 6(3) 327 17,095 6(4)(17) 118,296 129,746 6(6) ( 331 ) - 6(15) 92 1,404 6(6)(17) 1,442 937 6(6) ( 106 ) - 6(15) 18 - 6(6)(7)(15) 4,298 - 6(14) ( 1,242 ) ( 1,528 ) 6(16) 12,645 17,997 ( 7,499 ) 11,257 4,878 ( 19,930 ) ( 421 ) 146 49,927 91,786 ( 1,044 ) 4,190 19,432 ( 2,307 ) 19,212 8,154 13,700 335 175 ( 557 ) ( 231) ( 289) 335,496 334,597 1,242 1,528 ( 13,012 ) ( 18,091 ) 13,803 - ( 19,129) ( 14,892) 318,400 303,142

(Continued)

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisition of property, plant and equipment Interest paid for acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Cash paid for acquisition of intangible assets Increase in prepayment for equipment Increase in guarantee deposits paid Decrease (increase) in other financial assets - non-current (Increase) decrease in other non-current assets Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term borrowings Increase in long-term borrowings Decrease in long-term borrowings Payments of cash dividends Buy-back of treasury shares Change in non-controlling interest Net cash flows used in financing activities Effect of foreign exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Forthe years endedDecember31, Notes 2016 2015 6(22) ($ 15,620 ) ($ 13,810 ) 6(4)(16)(22) ( 370 ) ( 309 ) - 110 6(6) ( 21,837 ) ( 2,763 ) ( 2,593 ) ( 3,206 ) ( 1,739 ) ( 232 ) 2 ( 1,432 ) ( 1,247 ) 691 ( 43,404 ) ( 20,951 ) ( 17,088 ) ( 224,432 ) 100,000 45,799 ( 253,170 ) ( 80,854 ) 6(13) ( 28,117 ) ( 28,117 ) 6(11) - ( 5,177 ) 172 - ( 198,203 ) ( 292,781 ) ( 20,212 ) ( 4,127 ) 56,581 ( 14,717 ) 6(1) 449,849 464,566 6(1) $ 506,430 $ 449,849

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANIZATION

• (1) CHIEFTEK PRECISION CO., LTD. (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.) on October 19, 1998. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in research, development, manufacture and sale of miniature linear guide, miniature ball screw, miniature linear modules, electro-optics equipment and semiconductor process equipment.

• (2) The common shares of the Company have been listed on the Taipei Exchange since December 28, 2012.

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, 2017.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

• (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 as endorsed by FSC effective from 2017 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board(“IASB”)
Recoverable amount disclosures for non-financial assets (amendments to International Accounting Standards (“IAS”) 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) International Financial Reporting Interpretations Committee (“IFRIC”) 21, ‘Levies’ Defined benefit plans: employee contributions (amendments to IAS 19R) Improvements to IFRSs 2010-2012 Improvements to IFRSs 2011-2013 Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28)	January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016

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New Standards,Interpretations and Amendments

Effective date by International Accounting Standards Board(“IASB”)

Accounting for acquisition of interests in joint operations (amendments to IFRS 11) IFRS 14, ‘Regulatory deferral accounts’ Disclosure initiative (amendments to IAS 1) Clarification of acceptable methods of depreciation and amortization (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Equity method in separate financial statements (amendments to IAS 27) Improvements to IFRSs 2012-2014

January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating results based on the Group’s assessment.

• A. Amendments to IAS 36, ‘Recoverable amount disclosures for non-financial assets ’

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

Based on the Group’s assessment, the amendments will result in an increase of disclosure information for asset impairment.

• B. Amendments to IAS 1, ‘Disclosure initiative ’

This amendment clarifies the presentation of materiality, aggregation and subtotals, the framework of financial report, and the guide for accounting disclosure.

(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 effective from 2017 are as follows:

endorsed by the FSC effective from 2017 are as follows:
c	Effective date byIASB
Disclosure initiative (amendments to IAS 7) Recognition of deferred tax assets for unrealized losses (amendments to IAS 12) Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Classification and measurement of share-based payment transactions (amendments to IFRS 2)	January 1, 2017 January 1, 2017 January 1, 2017 January 1, 2018

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c

Effective date byIASB

Applying IFRS 9, ‘Financial instruments’ with IFRS 4, ‘Insurance contracts’ (amendments to IFRS 4) IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15) Transfers of investment property (amendments to IAS 40) IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS 28, ‘Investments in associates and joint ventures’ IFRS 16, ‘Leases’ Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28)

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2019 To be determined by International Accounting Standards Board

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating results based on the Group’s assessment.

• A. Amendments to IAS 7, ‘Disclosure initiative ’

This amendment requires that an entity shall provide more disclosures related to changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

• B. Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealized losses ’ These amendments clarify the recognition of deferred tax assets for unrealized losses related to debt instruments measured at fair value, and they clarify several of the general principles underlying the accounting for deferred tax assets. The amendments clarify that a deductible temporary difference exists whenever an asset is measured at fair value and that fair value is below the asset’s tax base. When an entity assesses whether taxable profits will be available against which it can utilise a deductible temporary difference, it considers a deductible temporary difference in combination with all of its other deductible temporary differences unless there are tax law restrictions, and the tax deduction resulting from temporary differences is excluded from estimated future taxable profits.

• C. 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 recognized 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.

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The core principle of IFRS 15 is that an entity recognizes 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 recognizes 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: Recognize 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.

• D. IFRS 16, ‘Leases ’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognize 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) Statement of compliance

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 item, these consolidated financial statements have been prepared under the historical cost convention:

• Defined benefit liabilities recognized 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 judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5, ‘Critical accounting judegments, estimates and key sources of

~16~

assumption uncertainty’.

(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 an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

• (b) Inter-company transactions, balances and unrealized 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 recognized 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 recognized in profit or loss. All amounts previously recognized 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 recognized 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.

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B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name of Subsidiary	Business December 31, December 31, activities 2016 2015 Professional investment 100 100 Sale of high precision linear motion components and rendering after-sales service 100 100 Research, manufacture and sale of machineries 80 - Professional investment 100 100 Sale of high precision linear motion components and rendering after-sales service 100 100 Production, processing and sale of high precision linear motion components and after-sales service 100 100 Percentage owned by the Company	Note
CHIEFTEK PRECISION CO., LTD. (“CHIEFTEK PRECISION”) CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION HOLDING CO., LTD. CHIEFTEK PRECISION HOLDING CO., LTD. Chieftek Precision (Hong Kong) Co., Limited	CHIEFTEK PRECISION HOLDING CO., LTD. cpc Europa GmbH (“cpc Europa”) CSM Maschinen GmbH Chieftek Precision (Hong Kong) Co., Limited CHIEFTEK PRECISION USA CO., LTD. (“cpc USA”) Chieftek Machinery (Kunshan) Co., Ltd. (“Chieftek (Kunshan)”)		- - Note - -

Note: Newly established company in March, 2016.

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 interest that are material to the Group: None.

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(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 recognized 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 recognized 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 recognized in profit 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 recognized 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 recognized in other comprehensive income.

• (b)When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Group retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

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(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 realized, 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 realized within twelve months from the balance sheet date;

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

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

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

• (b) Liabilities arising mainly from trading activities;

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

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

(6) Cash equivalents

• A. Cash equivalents refer to short-term highly liquid investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value.

• B. Time deposits that meet the above criteria and are held for the purpose of meeting short-term cash commitment in operations are classified as cash equivalents.

(7) Receivables

• Accounts receivable are 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 recognized at fair value and subsequently measured at amortized 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.

(8) 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.

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• 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) 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;

• (c) It becomes probable that the borrower will enter bankruptcy or other financial reorganization;

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

• C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made according of financial assets. 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 recognized 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 recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortized cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(9) Derecognition of financial assets

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

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

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

• C. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has not retained control of the financial asset.

• (10) Inventories

• Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in process comprises raw materials, direct labor, other direct costs and related production overheads (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 realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses. When the cost of inventory is lower than net realizable value, a write-down is provided and recognized in operating costs. If the circumstances that caused the write-down cease to exist,

~21~

such that all or part of the write-down is no longer needed, it should be reversed to that extent and recognized as deduction of operating costs.

(11) Property, plant and equipment

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

• B. Subsequent costs are included in the asset’s carrying amount or recognized 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 derecognized. 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. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. 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:

are as follows:
Assets Buildings and structures Machinery and equipment Transportation equipment Office equipment Leasehold improvements Other equipment	Useful lives
	3 ～ 50 years 2 ～ 15 years 3 ～ 10 years 1 ～ 10 years 2 ～ 15 years 2 ～ 10 years

• (12) Leases (lessee)

Payments made under an operating lease (net of any incentives received from the lessor) are recognized in profit or loss on a straight-line basis over the lease term.

(13) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model.

(14) Intangible assets

• A. Trademarks and patents

Separately acquired trademarks of corporate identity system and patents are stated initially at cost. Trademarks and patents have a finite useful life and are amortized on a straight-line basis over their estimated useful lives of 10 to 20 years.

~22~

B. Computer software

Computer software is stated initially at cost and amortized on a straight-line basis over its estimated useful life of 3 years.

• －

• C. Internally generated intangible assets research and development expenditures

• (a) Research expenditures are recognized as an expense as incurred.

• (b) Development expenditures that do not meet the following criteria are recognized as expenses

  • as incurred, but are recognized as intangible assets when the following criteria are met:

  • i. It is technically feasible to complete the intangible asset so that it will be available for use or sale;

  • ii. An entity intends to complete the intangible asset and use or sell it;

  • iii. An entity has the ability to use or sell the intangible asset;

  • iv. It can be demonstrated how the intangible asset will generate probable future economic benefits;

  • v. Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and

  • vi. The expenditure attributable to the intangible asset during its development can be reliably measured.

• (c) Upon being available for use, internally generated intangible assets are amortized on a straight-line basis over their estimated useful life.

• D. Other intangible assets

Technology contribution is stated initially at cost, and regarded as having an indefinite useful life as it was assessed to generate continuous net cash inflow in the foreseeable future. Technology contribution is not amortized, but is tested annually for impairment.

• (15) 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 recognized 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. 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 amortized historical cost would have been if the impairment had not been recognized.

• (16) Borrowings

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

~23~

• B. Fees paid on the establishment of loan facilities are recognized 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 drawdown 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 capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

• (17) Notes and accounts payable

• Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at amortized 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 insignificant.

• (18) Derecognition of financial liabilities

• A financial liability is derecognized when the obligation under the liability specified in the contract is discharged or cancelled or expires.

• (19) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

(20) Employee benefits

• A. Short-term employee benefits

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

• B. Pensions

• (a) Defined contribution plans

  • For defined contribution plans, the contributions are recognized as pension expenses when they are due on an accrual basis. Prepaid contributions are recognized 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 recognized 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 government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.

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

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

  • Employees’ compensation and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, 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 distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

• (21) Income tax

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

• B. The current income tax expense 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 tax is recognized, 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 balance sheet. However, the deferred 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 or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, 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 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 tax asset is realized or the deferred tax liability is settled.

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

~25~

• 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 recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred 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 realize the asset and settle the liability simultaneously.

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

(22) Share capital

• A. Ordinary shares are classified as equity.

• 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 resolved from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(23) 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; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(24) Revenue recognition

• Revenue is measured at the fair value of the consideration received or receivable taking into account sales 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 is recognized 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 neither 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.

~26~

(25) Government grants

Government grants are recognized at their fair value only when there is reasonable assurance that the Company will comply with any conditions attached to the grants and the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes expenses for the related costs for which the grants are intended to compensate.

(26) Operating segments

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

5. CRITICALACCOUNTING 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) Evaluation of inventories

• A.As inventories are stated at the lower of cost and net realizable value, the Group must determine the net realizable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable 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.

• B. As of December 31, 2016, the carrying amount of inventories was $318,565.

(2) Impairment assessment of tangible and intangible assets (excluding goodwill)

• A. The Group assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilized and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.

• B. As of December 31, 2016, the Group recognized intangible assets, net of impairment loss, amounting to $68,707.

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6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash: Cash on hand Checking accounts and demand deposits Cash Equivalents: Time deposits	December31,2016 852 $ 504,120 504,972 1,458 506,430 $	December31,2015
		1,104 $ 432,217
		433,321
		16,528
		449,849 $

• A. The Group associates 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. Details of the Group’s cash and cash equivalents pledged to others as collateral as of December 31, 2016 and 2015 are provided in Note 8, ‘Pledged assets’.

• (2) Accounts receivable, net

Accounts receivable, net
		December	31,2016		December	31,2015
Accounts receivable	$		337,065	$		341,943
Less: Allowance for doubtful accounts	(		13,205)	(		17,514)
		$	323,860		$	324,429

• A. The ageing analysis of the Group’s accounts receivable that were past due but not impaired is as follows:

follows:
Up to 30 days 31 to 90 days 91 to 180 days 181 to 365 days Over 365 days	December31,2016 30,547 $ 38,511 15,301 14,718 - 99,077 $	December31,2015
		32,826 $ 31,293 21,063 3,697 1,421
		90,300 $

The above ageing analysis was based on invoice past due date.

• B. Movement analysis of the Group’s financial assets that were impaired is as follows:

For the years ended December 31,

			2016		2015
			Group provision		Group provision
At January 1		$	17,514	$	23,140
Reversal of allowance for doubtful accounts	(		3,480)	(	5,254)
Effect of foreign exchange rate changes	(		829)	(	372)
At December 31	$		13,205	$	17,514

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• C. The Group’s accounts receivable that were neither past due nor impaired were from the customers who have good credit quality.

• D. As of December 31, 2016 and 2015, the Group does not hold any collateral as security for accounts receivable.

(3) Inventories

receivable. Inventories
Raw materials Supplies Work in process Finished goods Raw materials Supplies Work in process Finished goods		December31,2016
	Allowance for Cost marketprice decline 27,365 $ 498) ($ 30,742 3,402) ( 148,618 13,498) ( 185,153 55,915) ( 391,878 $ 73,313) ($ December31,2015		Bookvalue
			26,867 $ 27,340 135,120 129,238
			318,565 $
	Allowance for Cost marketprice decline 26,426 $ 441) ($ 32,156 2,541) ( 147,064 11,551) ( 236,159 61,773) ( 441,805 $ 76,306) ($		Bookvalue
			25,985 $ 29,615 135,513 174,386
			365,499 $

The cost of inventories recognized as expense for the year:

For the years ended December 31,

			2016			2015
Cost of goods sold		$	628,439	$		695,059
Provision for inventory market price decline			327			17,095
(Gain) Loss on physical inventory	(		843)			3,622
Revenue from sale of scraps	(		104)	(		197)
		$	627,819		$	715,579

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(4) Property, plant and equipment

January1,2016 Cost Accumulated depreciation For theyear ended December 31,2016 At January 1 Additions Transferred from investment property Transferred from prepayments for equipment Transferred after acceptance inspection Depreciation charge Disposals－Cost ' －Accumulated depreciation Net currency exchange differences At December 31 December 31,2016 Cost Accumulated depreciation

Construction Leasehold in progress Buildings improvements and equipment and Machinery and Transportation Office and other before acceptance Land structures equipment equipment equipment equipment inspection Total - $ 447,810 $ 795,195 $ 5,385 $ 17,282 $ 116,728 $ 18,541 $ 1,400,941 $ - 78,604) ( 544,552) ( 4,068) ( 15,605) ( 96,805) ( - 739,634) ( - $ 369,206 $ 250,643 $ 1,317 $ 1,677 $ 19,923 $ 18,541 $ 661,307 $ - $ 369,206 $ 250,643 $ 1,317 $ 1,677 $ 19,923 $ 18,541 $ 661,307 $ - 1,862 8,737 149 552 4,467 830 16,597 316,864 - - - - - - 316,864 - - - - - - 16,857 16,857 - 12,681 17,584 - - 3,126 33,391) ( - - 13,191) ( 94,070) ( 455) ( 1,147) ( 9,433) ( - 118,296) ( - - 1,059) ( - 160) ( 353) ( - 1,572) ( - - 967 - 160 353 - 1,480 - - 968) ( 76) ( 33) ( 141) ( - 1,218) ( 316,864 $ 370,558 $ 181,834 $ 935 $ 1,049 $ 17,942 $ 2,837 $ 892,019 $ 316,864 $ 462,353 $ 818,978 $ 5,384 $ 17,470 $ 123,646 $ 2,837 $ 1,747,532 $ - 91,795) ( 637,144) ( 4,449) ( 16,421) ( 105,704) ( - 855,513) ( 316,864 $ 370,558 $ 181,834 $ 935 $ 1,049 $ 17,942 $ 2,837 $ 892,019 $

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																		Construction
															Leasehold			in progress
			Buildings											improvements				and equipment
			and	Machinery and			Transportation					Office			and other		before acceptance
	January1,2015		structures			equipment			equipment			equipment			equipment			inspection			Total
Cost		$	446,668	$		793,127	$		4,091	$		17,139	$		109,457	$		14,830	$		1,385,312
Accumulated	depreciation	(	65,587)	(		444,517)	(		3,877)	(		14,557)	(		86,677)			-	(		615,215)
		$	381,081		$	348,610		$	214		$	2,582		$	22,780		$	14,830	$		770,097
For theyear ended December 31,2015
At January 1		$	381,081		$	348,610	$		214	$		2,582	$		22,780	$		14,830		$	770,097
Additions			1,142			8,380			1,321			419			5,855			1,110			18,227
Transferred from prepayments for
equipment			-			-			-			-			-			5,139			5,139
Transferred after acceptance inspection			-			634			-			-			1,904	(		2,538)			-
Depreciation	charge	(	13,017)	(		104,787)	(		204)	(		1,313)	(		10,425)			-	(		129,746)
Disposals－Cost			-	(		6,191)			-	(		202)	(		172)			-	(		6,565)
' －Accumulated depreciation			-			4,677			-			202			172			-			5,051
Net currency	exchange differences		-	(		680)	(		14)	(		11)	(		191)			-	(		896)
At December	31	$	369,206		$	250,643		$	1,317		$	1,677		$	19,923		$	18,541	$		661,307
December 31,2015
Cost		$	447,810	$		795,195	$		5,385	$		17,282	$		116,728	$		18,541	$		1,400,941
Accumulated	depreciation	(	78,604)	(		544,552)	(		4,068)	(		15,605)	(		96,805)			-	(		739,634)
		$	369,206		$	250,643		$	1,317		$	1,677		$	19,923		$	18,541	$		661,307

~31~

• A. Amount of borrowing costs capitalized as part of property, plant and equipment and the range of the interest rates for such capitalization are as follows:

Amount capitalized Interest rate	For theyears ended December31,	For theyears ended December31,
	2016 370 $ 1.65%	2015
		309 $
		1.76%

• B. Information about the property, plant and equipment that were pledged to others as collateral as of December 31, 2016 and 2015 is provided in Note 8, ‘Pledged assets’.

• C. Information about transferred from investment property for the years ended December 31, 2016 is provided in Note 6(5), B.

(5) Investment property, net

For the years ended December 31, 2016 and 2015, details of movements in investment property are as follows:

as follows:
	2016			Land
Cost at January 1		$		316,864
Transferred to property, plant and equipment		(		316,864)
Cost at December 31			$	-
	2015			Land
Cost at January 1 and	December 31		$	316,864

Cost at January 1 and December 31

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

property are shown below:
Rental income from investment property Direct operating expenses arising from the investment property that did not generate rental income during the year	For theyears ended December31,
	2016 - $ 989 $	2015
		- $
		879 $

• B. Due to future operational development, the Board of Directors on August 10, 2016, authorized the transfer of the investment property to property, plant and equipment for construction of new factory.

• C. The fair value of the investment property held by the Group as at December 31, 2015 was $320,270, which was valued using the actual price registration, and is categorized within Level 3 in the fair value hierarchy.

• D. Information about the investment property that was pledged to others as collateral as of December 31, 2015 is provided in Note 8, ‘Pledged assets’.

~32~

(6) Intangible assets

For the years ended December 31, 2016 and 2015, reconciliation chart of the initial cost, accumulated amortization amount and carrying amount at beginning and end of year of intangible assets is as follows:

For the year ended December 31, 2016

Trademarks Patents Software At January 1 Cost 578 $ 6,497 $ 4,613 $ Accumulated amortization 578) ( 871) ( 3,635) ( Net value - $ 5,626 $ 978 $ 2016 Net value at January 1, 2016 - $ 5,626 $ 978 $ Additions－acquired separately - 2,673 1,732 Additions－depreciation reclassified - - - Additions－amortization reclassified - - - Disposals－cost - 24) ( 146) ( Disposals－accumulated amortization - 6 146 Amortization - 498) ( 944) ( Impairment loss - - - Net currency exchange differences - - 31) ( Net value at December 31, 2016 - $ 7,783 $ 1,735 $ At December 31, 2016 Cost 578 $ 9,146 $ 6,156 $ Accumulated amortization 578) ( 1,363) ( 4,421) ( Accumulated impairment - - - Net value - $ 7,783 $ 1,735 $

~33~

					For theyear ended December	For theyear ended December	For theyear ended December	For theyear ended December	31,	2015
			Trademarks		Patents		Software			Others		Total
At January 1
Cost		$	578	$	3,799	$	4,563	$		60,000	$	68,940
Accumulated amortization	(		540)	(	593)	(	3,023)	(		13,500)	(	17,656)
Net value		$	38	$	3,206	$	1,540		$	46,500	$	51,284
2015
Net value at January 1, 2015		$	38	$	3,206	$	1,540	$		46,500	$	51,284
Additions－acquired separately			-		2,698		65			-		2,763
Amortization	(		38)	(	278)	(	621)			-	(	937)
Net currency exchange differences			-		-	(	6)			-	(	6)
Net value at December 31, 2015	$		-	$	5,626	$	978		$	46,500	$	53,104
At December 31, 2015
Cost		$	578	$	6,497	$	4,613	$		60,000	$	71,688
Accumulated amortization	(		578)	(	871)	(	3,635)	(		13,500)	(	18,584)
Net value		$	-	$	5,626	$	978		$	46,500	$	53,104

~34~

• A. For the years ended December 31, 2016 and 2015, no borrowing costs were capitalized as part of intangible assets.

• B. Details of amortization on intangible assets are as follows:

For the years ended December 31,

Manufacturing overhead General and administrative expenses Research and development expenses	2016 167 $ 127 1,148 1,442 $	2015
		167 $ 189 581
		937 $

• C. For impairment information about the intangible assets, please refer to Note 6(7), ‘Impairment of non-financial assets’.

(7) Impairment of non-financial assets

• A. The Group recognized impairment loss for the years ended December 31, 2016 and 2015 was －

• $4,298 and $ , respectively (Listed as ‘Other gains and losses’). Details of such loss are as follows:

For the years ended December 31,

－ Impairment loss intangible assets

Recognized in other Recognized comprehensive inprofit or loss income 4,298 $ - $ 2016	2015	2015
	Recognized in other Recognized comprehensive inprofit or loss income - $ - $
		- $

• B. The impairment loss reported by operating segments is as follows:

For the years ended December 31,

The Company

Recognized in other Recognized comprehensive inprofit or loss income 4,298 $ - $ 2016	2015	2015
	Recognized in other Recognized comprehensive inprofit or loss income - $ - $
		- $

~35~

(8) Short-term borrowings

Nature	December31,2016	December31,2016	Interest	rate range	Collateral
Unsecured borrowings	$	125,000	1.05%～1.18%		None
Secured borrowings		62,715	1.20%～1.51%		Endorsements and
					guaruantees by parent
					company
	$	187,715
Nature	December31,2015		Interest	rate range	Collateral
Unsecured borrowings	$	204,803	0.79%～1.58%		None
Long-term borrowings
				Interest rate
Nature	Expirydate	December	31,2016	range	Collateral
Long-term bank borrowings
Secured borrowings	February 17,	$	426,250	1.37%～	Time deposits, land, buildings
	2018～			2.01%	and structures, machinery
	September 23,				and equipment
	2021
Unsecured borrowings	September 23,
	2019		22,916	1.37%	None
			449,166
Less: current portion		(	58,533)
		$	390,633
				Interest rate
Nature	Expirydate	December	31,2015	range	Collateral
Long-term bank borrowings
Secured borrowings	February 10,	$	602,578	1.65%～	Demand deposits, buildings
	2017～			2.14%	and structures, machinery
	December 9,				and equipment, investment
	2019				property-land and
					endorsements and guarantees
					by parent company
Less: current portion		(	99,160)
		$	503,418

- (9) Long term borrowings

As of March 25, 2016, the Company has extended the credit contract with Chang Hwa Commercial Bank, Ltd. to February 17, 2018.

~36~

(10) Pensions

• A.(a) The Company has 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. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next March.

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

	December	31,2016	December	31,2015
Present value of defined benefit obligations	($	8,437)	($	7,433)
Fair value of plan assets		3,812		3,483
Net defined benefit liability	$	4,625	($	3,950)

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

For theyear ended December31,2016	Present value of defined benefit obligations		Fair value of plan assets	Net defined benefit liability
Balance at January 1 Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Balance at December 31	7,433) ($ 126) ( 7,559) ( - 253) ( 625) ( 878) ( - 8,437) ($	3,483 $ 59 3,542 28) ( - - 28) ( 298 3,812 $		3,950) ($ 67) ( 4,017) ( 28) ( 253) ( 625) ( 906) ( 298 4,625) ($

~37~

For theyear ended December31,2015 Balance at January 1 Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Balance at December 31	Present value of defined benefit obligations		Fair value of plan assets	Net defined benefit liability
	3,547) ($ 71) ( 3,618) ( - 206) ( 3,609) ( 3,815) ( - 7,433) ($		3,106 $ 62 3,168 17 - - 17 298 3,483 $	441) ($ 9) ( 450) ( 17 206) ( 3,609) ( 3,798) ( 298 3,950) ($

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund” (Article 6: The scope of utilization 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 utilization 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 earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2016 and 2015 is given in the Annual Labor Retirement Fund Utilization Report announced by the government.

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

For the years ended December 31,

Discount rate Future salary increases	2016 1.40% 3.25%	2015
		1.70%
		3.25%

~38~

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with Taiwan Life Insurance Industry 5th Mortality Table.

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

Increase 0.25% Decrease 0.25% December 31,2016 Effect on present value of defined benefit obligation 211) ($ 222 $ Discount rate Increase 0.25% Decrease 0.25% December 31,2015 Effect on present value of defined benefit obligation 161) ($ 194 $ Discount rate	Increase 0.25% Decrease 0.25% 197 $ 188) ($ Future salaryincreases Increase 0.25% Decrease 0.25% 170 $ 144) ($ Future salaryincreases

The sensitivity analysis above was based on one assumption which changed while the other conditions remain unchanged. 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.

• (f) Expected contributions to the defined benefit pension plan of the Company for the year ended December 31, 2017 are $297.

• (g) As of December 31, 2016, the weighted average duration of that retirement plan is 12 years. The analysis of timing of the future pension payment was as follows:

The analysis of timing of the future pension payment was as follows:
Within 1 year 2-5 years Over 5 years	1,928 $ 2,164 5,749
	9,841 $

• B. Effective July 1, 2005, the Company has 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 contributes monthly an 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. The other subsidiaries are subject to local government sponsored defined contribution plan. In accordance with the related laws of the respective local government, the independent pension fund of employees is administered by the government. Other than the monthly contributions, these subsidiaries do not have further obligations. The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2016 and 2015 were $10,332 and $9,376, respectively.

~39~

(11) Share capital-common stock

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

thousands of shares):
Balance at beginning of year Stock dividends Buy-back of treasury shares Balance at end of year	For theyears ended December31,
	2016 2015 56,234 56,355 2,812 - - 121) ( 59,046 56,234	2015
		56,234

• B. On June 25, 2015, the Company’s stockholders adopted a resolution to increase the authorized capital by $400,000. The authorized capital is $1,200,000 under the amended Articles of Incorporation of the Company.

• C. On June 16, 2016, the Company’s stockholders adopted a resolution to issue shares of common stock due to capitalization of retained earnings of $28,117 and obtained approval from the SFC. The effective date of capitalization was set on August 31, 2016.

• D. Treasury shares

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

For the year ended December 31, 2016

	For theyear ended	For theyear ended	December31,2016
Reason for reacquisition To be reissued to employees Reason for reacquisition To be reissued to employees	Shares at beginning ofyear Increase 3,000 - For theyear ended		Shares at Decrease end ofyear - 3,000 Shares at Decrease end ofyear - 3,000 December31,2015
	Shares at beginning ofyear 2,879	Increase 121	Decrease -

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

• as treasury shares for the years ended December 31, 2016 and 2015 was $ and $5,177 (121 thousand shares), respectively. As of December 31, 2016 and 2015, the treasury shares amounted to $118,544.

~40~

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

• (d) Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired.

• E. As of December 31, 2016, the Company’s authorized capital was $1,200,000 (including $30,000 reserved for employee stock options), and the paid-in capital was $620,455 (62,046 thousand shares) with par value of $10 (in dollars) per share.

(12) Capital reserve

2016 Balances at beginning and end of year 2015 Balances at beginning and end of year	Sharepremium 462,937 $ Sharepremium 462,937 $	Others Total 114 $ 463,051 $ Others Total 114 $ 463,051 $

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 Law requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

(13) Retained earnings

• A. The legal reserve shall be exclusively used to cover accumulated deficit, to issue new stocks, or to distribute cash to shareholders in proportion to their share ownership. The use of legal reserve for the issuance of stocks or cash dividends to shareholders in proportion to their share ownership is permitted provided that the balance of such reserve exceeds 25% of the Company’s paid-in capital.

• B. According to the Company’s Articles of Incorporation, the Company’s dividend policy is to distribute the current year’s earnings, if any, in the following order:

• (1) pay all taxes and dues;

• (2) offset any loss of prior years;

• (3) set aside 10% as legal reserve;

• (4) set aside or reverse special reserve as required by regulations or the Competent Authority;

• (5) The appropriation of the remaining amount after deducting items (1) to (4), along with the unappropriated retained earnings of prior years can be distributed in accordance with a resolution passed during a meeting of the Board of Directors and approved at the shareholders’ meeting. However, the distribution of dividends shall not be lower than 20% of the current year’s profit after deducting items (1) to (4). In order to continually expand the scale of

~41~

operation, increase competitiveness as well as cooperate with the Company’s long-term development, future capital requirements and long-term financial plan, the dividend policy is to distribute stock dividends and partially as cash dividends. Cash dividends shall not be less than 10% of the total dividends distributed to shareholders.

• C. 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. No amount was 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.

• D. The Company recognized cash dividends amounting to $28,117 ($0.5 (in dollars) per share) and $28,117 ($0.5 (in dollars) per share) and stock dividends amounting to $28,117 ($0.5 (in dollars) －

• per share) and $ distributed to owners for the years ended December 31, 2016 and 2015, respectively. On March 23, 2017, the Board of Directors during its meeting proposed cash dividends for 2016 of $59,045 ($1.0 (in dollars) per share).

(14) Other income

For the years ended December 31,

Government grants income Interest income: Interest income from bank deposits Other income: Reversal of allowance for doubtful accounts Others	2016 1,150 $ 1,242 3,480 2,297 8,169 $	2015
		- $ 1,528 5,254 1,497
		8,279 $

(15) Other gains and losses

For the years ended December 31,

		2016			2015
Net currency exchange loss	($		10,041)	($		3,427)
Loss on disposal of property, plant,
and equipment	(		92)	(		1,404)
Loss on disposal of intangible asset	(		18)			-
Impairment loss	(		4,298)			-
Other losses			-	(		192)
	($		14,449)	($		5,023)

~42~

(16) Finance costs

For the years ended December 31,

			2016			2015
Interest expense on bank borrowings		$		13,015	$		18,306
Less: capitalization of qualifying assets	(			370)	(		309)
		$		12,645	$		17,997

(17) Expenses by nature

For the year ended December 31, 2016

Expenses by nature	12,645 $ 17,997 $ For theyear ended December31,2016	12,645 $ 17,997 $ For theyear ended December31,2016	17,997 1,2016
Employee benefit expense Employee benefit expense Depreciation Amortization Employee benefit expense Depreciation Amortization Wages and salaries Labor and health insurance expense Pension costs Other personnel expenses Wages and salaries Labor and health insurance expense Pension costs Other personnel expenses	Operatingcost Operatingexpense Total 145,150 $ 121,818 $ 266,968 $ 105,108 13,188 118,296 167 1,275 1,442 250,425 $ 136,281 $ 386,706 $ For theyear ended December31,2015		Total
			266,968 $ 118,296 1,442
			386,706 $
	Operatingcost Operatingexpense Total 142,036 $ 106,028 $ 248,064 $ 117,819 11,927 129,746 167 770 937 260,022 $ 118,725 $ 378,747 $ For theyear ended December31,2016		Total
			248,064 $ 129,746 937
			378,747 $
	Operatingcost Operatingexpense Total 122,414 $ 105,912 $ 228,326 $ 12,224 8,060 20,284 5,938 4,461 10,399 4,574 3,385 7,959 145,150 $ 121,818 $ 266,968 $ Forthe yearendedDecember31,2015		Total
			228,326 $ 20,284 10,399 7,959
			266,968 $
	Operatingcost 119,878 $ 11,666 5,698 4,794 142,036 $	Operatingexpense 92,081 $ 7,053 3,687 3,207 106,028 $	Total
			211,959 $ 18,719 9,385 8,001
			248,064 $

(18) Employee benefit expense

~43~

• A. According to the Articles of Incorporation of the Company, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees’ compensation and directors’ and supervisors’ remuneration. The ratio shall be 3% to 8% for employees’ compensation and shall not be higher than 3% for directors’ and supervisors’ remuneration.

• B. For the years ended December 31, 2016 and 2015, the Company’s employees’ compensation was accrued at $9,006 and $6,850, respectively; while directors’ and supervisors’ remuneration was accrued at $3,377 and $2,569, respectively. The aforementioned amounts were recognized in salary expenses.

• The expenses recognized for 2016 were accrued based on the earnings of current year and the percentage specified in the Articles of Incorporation of the Company. The employees’ compensation and directors’ and supervisors’ remuneration for 2016 as resolved by the Board of Directors was $8,975 and $3,366, respectively. The employees’ compensation will be distributed in the form of cash.

• The employees’ compensation and directors’ and supervisors’ remuneration for 2015 as resolved by the Board of Directors was $9,419, which was the same amount recognized in the 2015 financial statements. The employees’ compensation will be distributed in the form of cash. Information about the appropriation of employees’ compensation and directors’ and supervisors’ remuneration by the Company as proposed by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(19) Income tax

• A. Income tax expense

• (a) Components of income tax expense:

For the years ended December 31,

			2016			2015
Current income tax:
Income tax incurred in current year		$		17,342	$		13,821
10% tax on unappropriated earnings				432			-
Prior year’s income tax over estimate	(			10)	(		2,187)
Total current income tax				17,764			11,634
Deferred income tax:
Origination and reversal of temporary
differences				2,110	(		1,001)
Income tax expense		$		19,874	$		10,633

~44~

(b) The income tax relating to components of other comprehensive income is as follows:

For the years ended December 31,

								2016	2016				2015	2015
	Remeasurement of defined benefit	obligations					($		154)		($			646)
B.	Reconciliation between income tax expense and accounting profit
								For theyears ended December						31,
								2016					2015
	Tax calculated based on profit before	tax and					$		22,607		$			16,961
	statutory tax rate
	Effect of iterns disallowed by tax regulation								682					63
	Effect from investment tax credits				(				3,837)	(				2,514)
	Effect from five year tax exempt project								-	(				1,690)
	10% tax on unappropriated earnings								432					-
	Prior year income tax over estimate				(				10)	(				2,187)
	Income tax expense						$		19,874		$			10,633
C.	Amounts of deferred tax assets or liabilities as a result							of temporary differences are as follows:
				For			theyear ended December					31,2016
									Recognized
					Recognized				in other
								in profit	comprehensive
			January1					or loss	income				December 31
	Temporary differences:
	Deferred tax assets:
	Allowance for doubtful accounts	$		535	($			535)	$			-	$	-
	Loss on invetory market value
	decline			1,843				430				-		2,273
	Investment loss			6,117	(			208)				-		5,909
	Unused compensated absences			1,077				468				-		1,545
	Unrealized gain on inter affiliates			12,969	(			2,568)				-		10,401
	Pensions			1,004				-			154			1,158
			$	23,545	($			2,413)	$		154		$	21,286
	Deferred tax liabilities:
	Depreciation	($		1,791)		$		44	$			-	($	1,747)
	Unrealized gain on foreign
	currency exchange	(		1,126)				259				-	(	867)
		($		2,917)			$	303	$			-	($	2,614)
			$	20,628	($			2,110)	$		154		$	18,672

~45~

For the year ended December 31, 2015

Recognized in profit January1 or loss Temporary differences: Deferred tax assets: Allowance for doubtful accounts 638 $ 103) ($ Loss on invetory market value decline 1,541 302 Investment loss 4,561 1,556 Unused compensated absences 932 145 Unrealized gain on inter affiliates 12,525 444 Unrealized loss on foreign currency exchange 261 261) ( Pensions 358 - 20,816 $ 2,083 $ Deferred tax liabilities: Depreciation 1,835) ($ 44 $ Unrealized gain on foreign currency exchange - 1,126) ( 1,835) ($ 1,082) ($ 18,981 $ 1,001 $

Recognized in other comprehensive income December31 - $ 535 $ - 1,843 - 6,117 - 1,077 - 12,969 - - 646 1,004 646 $ 23,545 $ - $ 1,791) ($ - 1,126) ( - $ 2,917) ($ 646 $ 20,628 $

• D. The Company’s income tax returns through 2015 have been assessed and approved by the Tax Authority, except for the 2014 income tax return which is currently under examination. There were no disputes existing between the Company and the Authority as of March 23, 2017.

• E. Unappropriated retained earnings:

December 31, 2016 December 31, 2015 Earnings generated in and after 1998 $ 334,354 $ 312,835 F. As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $59,918 and $60,819, respectively. As dividends were approved at the stockholders’ meeting on June 16, 2016 and June 25, 2015 with the dividend distribution date set by the Board of Directors on August 31, 2016 and July 20, 2015, the creditable tax rate for the unappropriated retained earnings for 2015 and 2014 is 21.53% and 23.45%, respectively, and the creditable tax rate for 2016 is expected to be 19.70%. As the imputation tax credit is to be calculated based on the balance of the imputation tax credit account as of the dividend distribution date, the applicable creditable tax rate for 2016 is expected to be adjusted based on all possible imputation tax credit generated before the dividend distribution date.

~46~

(20) Earnings per share (“EPS”)

For the year ended December 31, 2016

	For theyear ended December31,2016
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Weighted average number of shares outstanding EPS Amount after tax (shares in thousands) (in dollars) 85,583 $ 59,046 1.45 $ 85,583 $ 59,046 - 315 85,583 $ 59,361 1.44 $ For theyear ended December31,2015
	Weighted average number of shares outstanding EPS Amount after tax (shares in thousands) (in dollars) 70,782 $ 59,056 1.20 $ 70,782 $ 59,056 - 311 70,782 $ 59,367 1.19 $

The abovementioned weighted average number of ordinary shares outstanding to conversion has been adjusted to unappropriated retained earnings as proportional increase in capital for the year ended December 31, 2015

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(21) Operating leases

The Group entered into a non-cancellable operating lease agreement for the periods from January 1, 2003 to December 31, 2022 and from August 28, 2014 to August 27, 2034 for the land in Tainan Science Park. The lease agreement is renewable at the end of the lease term. The Company pays monthly rent. If the announced land values, state-owned land rent rate, or other factors change, the monthly rent paid by the Group will be adjusted accordingly on the following month. The Group may have to pay additional rent or get a refund on its last rental payment because of such adjustment. The rent expense of $6,833 and $6,531 was recognized in profit or loss for the years ended December 31, 2016 and 2015, respectively. The future aggregate minimum lease payments under noncancellable operating leases are as follows:

cancellable operating leases are as follows:
Supplemental cash flow information A. Investing activities with partial cash payments December31,2016 December31,2015 Within one year 7,175 $ 6,531 $ Later than one year but not exceeding five years 28,700 26,124 Exceeding five years 7,798 13,629 43,673 $ 46,284 $ 2016 2015 Purchase of property, plant and equipment 16,597 $ 18,227 $ Add: Opening balance of notes payable 3,281 - Opening balance of payable for equipment 1,343 516 Less: Ending balance of notes payable 1,575) ( 3,281) ( Ending balance of payable for equipment 3,656) ( 1,343) ( Capitalization for interest 370) ( 309) ( Cash paid during the year 15,620 $ 13,810 $ For theyears ended December31,	December31,2016 7,175 $ 28,700 7,798 43,673 $ For theyears ended		December31,2015
			6,531 $ 26,124 13,629
			46,284 $

(22) Supplemental cash flow information

A. Investing activities with partial cash payments

• B. Investing activities with no cash flow effects

Investing activities with no cash flow effects
a. Investment property reclassified to property, plant and equipment b. Prepayments for equipment reclassified to property, plant and equipment	For theyears ended December31,
	2016 316,864 $ 16,857 $	2015
		- $
		5,139 $

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7. RELATED PARTY TRANSACTIONS

(1) Significant transactions and balances with related parties

None.

(2) Key management compensation

None. Key management compensation
Salaries and other short-term employee benefits	For theyears ended December31,
	2016 20,814 $	2015
		18,469 $

8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

Assetpledged Land (Note 1) Buildings and structures-net (Note 2) Machinery and equipment-net (Note 2) Pledged demand and time deposits (Note 3)	December31,2016 December31,2015 316,864 $ 316,864 $ 325,831 332,434 24,984 165,858 1,430 1,432 669,109 $ 816,588 $ Bookvalue	Purpose of collateral
	December31,2016 316,864 $ 325,831 24,984 1,430 669,109 $
		Guarantee for long－ term borrowings Guarantee for long－ term borrowings Guarantee for long－ term borrowings Guarantee for long－ term borrowings

(Note 1) Listed as ‘Property, plant and equipment’ as of December 31, 2016, listed as ‘Investment property, net’ as of December 31, 2015.

• (Note 2) Listed as ‘Property, plant and equipment’.

(Note 3) Listed as ‘Other financial assets - non-current’.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

• (1) As of December 31, 2016 and 2015, the endorsements and guarantees provided by the Company to the subsidiary, cpc Europa GmbH, amounted to $128,820 and $46,644, respectively, and the actual amount drawn down was $62,715 and $39,468, respectively.

• (2) As of December 31, 2016 and 2015, the Group’s remaining balance due for construction in progress and prepayments for equipment were $12,682 and $37,066, respectively.

• (3) On November 14, 2014, the Company entered into a mid-term secured syndicated loan contract for a credit line of $560,000 with 6 financial institutions including Mega International Commercial Bank. The credit term is 5 years. Under the terms of the syndicated loan, the Company agreed that:

• A.Under the terms of the syndicated loan, the financial ratios stated in the Company’s semi-annual reviewed financial statements and annual audited financial statements shall comply with the following financial ratios and will be assessed semi-annually:

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• (a) Current ratio (current assets/current liabilities): At least 100%.

• (b) Liability ratio (total liabilities/net equity): Less than 150%.

• (c) Tangible net value (shareholders’ equity less intangible assets): At least $1,000,000.

• B. If the Company violates the above financial covenants, its financing rate shall be increased by an additional 0.25% per annum from the following June 1, after the earlier of the date of notification by the management bank or the latest financial year end, to the date prior to the completion of improvement.

As of December 31, 2016, the Company has not violated any of the above covenants.

• (4) For the details of operating lease agreements, please refer to Note 6(21), ‘Operating leases’.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

• None.

12. OTHERS

(1) Capital 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 paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

• A. Fair value information of financial instruments

• The Group’s financial instruments not measured at fair value (including cash and cash equivalents, notes receivable, accounts receivable, other receivables, guarantee deposits paid, other financial assets - non-current, short-term borrowings, notes payable, accounts payable, other payables and long-term borrowings (including current portion)) are based on their book value as book value approximates fair value.

• 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.

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• (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 closely with the Group’s operating units. The Board provides written principles for overall risk management, as well as written 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

  • I.Foreign exchange risk

  • (i) The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to USD, EUR and JPY. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

  • (ii) Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure with the Group treasury. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.

  • (iii)The Group treasury’s risk management policy is to hedge anticipated cash flows (mainly export sales and purchase of inventory) in the major foreign currency in the future so as to decrease the risk exposure in the major foreign currency.

  • (iv)The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. However, as the objective of the net investments in foreign operations is for strategic purposes, the Group does not hedged the investments.

  • (v)The Group’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD, the subsidiaries’ functional currency: USD, EUR and CYN). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

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Exchange rate (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 6,928 $ 32.25 JPY:NTD 7,721 0.2756 EUR:NTD 268 33.90 Financial liabilities Monetary items USD:NTD 59 32.25 JPY:NTD 12,161 0.2756 EUR:NTD 729 33.90 Exchange rate (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 9,949 $ 32.83 JPY:NTD 14,024 0.2727 EUR:NTD 869 35.88 Financial liabilities Monetary items USD:NTD 166 32.83 JPY:NTD 10,812 0.2727 EUR:NTD 434 35.88 December31,2016 Foreign currency amount(in thousands) December31,2015 Foreign currency amount(in thousands)		December31,2016	December31,2016	Book value (NTD)
				223,441 $ 2,128 9,089 1,888 3,352 24,707 Book value (NTD)
			Exchange rate 32.83 0.2727 35.88 32.83 0.2727 35.88
				326,576 $ 3,824 31,194 5,438 2,948 15,565

Sensitivity analysis of foreign exchange risk is primarily for foreign currency monetary items at financial reporting date. If the exchange rate of NTD to other currencies had appreciated/depreciated by 1% with all other factors remaining constant, the Group’s net profit (loss) after tax for the years ended December 31, 2016 and 2015 would increase/decrease by $1,684 and $2,776, respectively.

(vi)The total exchange loss, including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2016 and 2015 amounted to $10,041 and $3,427, respectively.

II.Price risk

The Group is not engaged in any financial instruments with price variations, thus, the Group does not expect market risk arising from variations in the market prices.

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III.Interest rate risk

  - (i)The Group analyses its interest rate exposure on a dynamic basis. Thus, the interest rate of the Group’s liabilities fluctuates accordingly with the market interest rate, creating divergence in the Group’s future cash flow. However, partial interest rate risk is offset by cash and cash equivalents at variable rates.

  - (ii)If interest rates on borrowings had been 10% higher/lower with all other variables held constant, net profit (loss) after tax for the years ended December 31, 2016 and 2015 would decrease/increase by $1,049 and $1,519, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.

• (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, the Group is responsible for managing and analysing the credit risk for each of their new clients. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. The utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents and credit exposures to customers, including outstanding receivables and committed transactions. For financial institutions, the Group also transacts with many different financial institutions to diversify credit risk.

• II.For the credit ratings of the Group’s financial assets, please refer to Note 6, ‘Financial assets’.

• III.For the ageing analysis of financial assets that were past due but not impaired, please refer to Note 6(2), ‘Accounts receivable, net’.

• (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 at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.

• II.Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts. The Group is expected to readily generate cash inflows for managing liquidity risk.

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• III.The table below analyses the Group’s non-derivative financial liabilities and relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

undiscounted cash flows.
December31,2016	Less than 1year	Between 1 and 2years	Between 2 and5 years	More than 5 years
Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) December31,2015 Non-derivative financial liabilities:	188,230 $ 65,774 42,694 78,446 65,869 Less than 1year	- $ - - - 230,501 Between 1 and 2years	- $ - - - 166,930 Between 2 and5 years	- $ - - - - More than 5 years
Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) Non-derivative financial liabilities:	205,893 $ 48,048 23,482 62,800 108,813	- $ - - - 331,729	- $ - - - 180,771	- $ - - - -

• IV.The Group does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

(3) Fair value information

• A. Details of the fair value of the Group’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2), ‘Financial instruments’. Details of the fair value of the Group’s investment property measured at cost are provided in Note 6(5), ‘Investment property, net’.

• B. As of December 31, 2016 and 2015, the Group had no fair value financial instruments.

~54~

13. SUPPLEMENTARY DISCLOSURES

Information related to the year ended December 31, 2016 will be disclosed.

(1) Significant transactions information

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: Please refer to table 2.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): None.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Group’s paid-in capital: None.

• E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 3.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: None.

• I. Trading in derivative instruments undertaken during the reporting period: None.

• J. Significant inter-company transactions during the reporting period: Please refer to table 4.

(2) Information on investees

• Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 5.

(3) Information on investments in Mainland China

• A. Basic information: Please refer to table 6.

• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 7.

14. SEGMENT INFORMATION

(1) General information

The management of the Group has identified the operating segments based on how the Group’s chief operating decision maker regularly reviews information in order to make decisions.

(2) Measurement of segment information

The chief operating decision-maker evaluates the performance of operating segments based on pretax income excluding non-recurring income. For details of operating aegments’ accounting policies, please refer to Note 4.

(3) Segment information

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

~55~

For the year ended December 31, 2016

			For theyear ended December31,2016	For theyear ended December31,2016	For theyear ended December31,2016
Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortization Interest expense Income from segment pre-tax income Segment assets Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortization Interest expense Income from segment pre-tax income Segment assets		CHIEFTEK PRECISION	Chieftek (Kunshan) cpc Europa cpcUSA Others 267,845 $ 156,151 $ 126,077 $ - $ - 335 - - 267,845 155,816 126,077 - 903 - 4 - 971 2,392 1,222 447 - 1,043 - - 6,051 5,845) ( 6,864 246) ( 282,884 79,373 64,704 39,365 For theyear ended December31,2015			Total 1,334,727 $ 352,191 982,536 1,242 119,738 12,645 106,632 2,196,373
		784,654 $ 351,856 432,798 335 114,706 11,602 99,808 1,730,047
		CHIEFTEK PRECISION	Chieftek (Kunshan) cpc Europa 274,133 $ 145,473 $ - 88 274,133 145,385 1,100 - 1,560 2,102 - 603 2,943 10,878) ( 247,945 110,241	cpcUSA 133,124 $ - 133,124 4 - - 3,193 69,667	Others - $ - - - - 45 85 13		Total
		826,513 $ 357,172 469,341 424 127,021 17,349 76,921 1,848,390					1,379,243 $ 357,260 1,021,983 1,528 130,683 17,997 72,264 2,276,256

(4) Reconciliation for segment income (loss)

The sales between segments were under the arms’ length principle. The external revenues reported to the chief operating decision maker adopt the same measurement for revenues in statement of comprehensive income. The reconciliations of pre-tax income between reportable segments and continuing operations were as follows :

~56~

For the years ended December 31,

2016 Reportable segments profit before income tax 106,878 $ Other segments (loss) profit before income tax 246) ( Inter segments (loss) profit 1,224) ( Profit before income tax 105,408 $	2015
	72,179 $ 85 9,151
	81,415 $

(5) Information on product and service

The Group is engaged solely in research and development, manufacture and sale of miniature linear guide, miniature ball screw, and miniature linear modules; therefore, disclosure is not required.

(6) Geographical information

Geographical information
Geographical information for the years ended December 31, Non-current Revenue(Note) assets China 269,212 $ 3,715 $ Taiwan 223,654 933,527 Germany 155,816 32,860 USA 126,077 75 Others 207,777 - 982,536 $ 970,177 $ For the year ended and as at December31,2016	2016 and 2015 is as follows: For the year ended and as at December31,2015
	Revenue(Note) 274,179 $ 192,476 145,386 133,123 276,819 1,021,983 $	Non-current assets
		4,940 $ 1,032,502 16,031 270 -
		1,053,743 $

(Note) The revenue is classified based on the location of the customer’s country.

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2016 and 2015 is as follows:

Client A B C D E	Revenue Segment 59,187 $ Chieftek (Kunshan) 57,411 CHIEFTEK PRECISION 49,681 Chieftek (Kunshan) 47,079 CHIEFTEK PRECISION 17,660 CHIEFTEK PRECISION For theyear ended December31,2016	For theyear ended December31,2015	For theyear ended December31,2015
		Revenue Segment 73,348 $ Chieftek (Kunshan) 72,950 CHIEFTEK PRECISION 34,324 Chieftek (Kunshan) 50,454 CHIEFTEK PRECISION 72,433 CHIEFTEK PRECISION	Segment

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Loans to others

For the year ended December 31, 2016

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

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Table 1
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No. (Note 1)	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2016	Balance at December 31, 2016	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Coll	ateral	Limit on loans granted to a single party (Note 2)	Ceiling on total loans granted (Note 2)	Footnote
													Item	Value
0	CHIEFTEK PRECISION CO., LTD.	cpc Europa GmbH	Other receivables	Y	53,331 $	- $	- $	1.5%	Short-term financing	- $	Operational use	- $	－	- $	543,317 $	543,317 $	－

(Note 1) The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

• (1)Parent company is ‘0’.

• (2)The subsidiaries are numbered in order starting from ‘1’.

(Note 2) Calculation of limit on loans granted to a single party and ceiling on total loans granted are as follows:

Short-term financing: The maximum loan amount is 40% of the Companyʼs net assets and the maximum amount for short-term financing is 40% of its net assets.

Table 1, Page 1

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Provision of endorsements and guarantees to others

For the year ended December 31, 2016

Table 2

No. (Note 1)	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party (Note 3)	Maximum outstanding endorsement/ guarantee amount as of December 31, 2016	Outstanding endorsement/ guarantee amount at December 31, 2016	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided (Note 3)	Provision of endorsements/ guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
		Companyname	Relationship with the endorser/ guarantor （Note 2）
0	CHIEFTEK PRECISION CO., LTD.	cpc Europa GmbH	1	679,147 $	150,570 $	128,820 $	62,715 $	- $	9%	679,147 $	Y	N	N	－

• (Note 1) The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

• (1) Parent company is ‘0’.

• (2) The subsidiaries are numbered in order starting from ‘1’.

• (Note 2) The following code respresents the relationship with the Company:

• (1) The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary.

• (Note 3) (1) The total endorsements/guarantees provided shall not exceed 50% of the Companyʼs net assets, and the amount provided for each counterparty shall not exceed 20% of the Companyʼs paid-in capital. However, the limitation is not applied to subsidiaries that the Company directly or indirectly holds more than 50% of the voting shares.

• (2) For trading partner, except for the abovementioned limit, the maximum amount for individual trading partner shall not exceed the higher of total purchase and sale transations during the most recent year.

Table 2, Page 1

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

• Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid in capital or more For the year ended December 31, 2016

Table 3

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Description and reasons for difference in transaction terms compared to third party transactions	Description and reasons for difference in transaction terms compared to third party transactions	Notes/accountsreceivable (payable)	Notes/accountsreceivable (payable)	Footnote
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unit price	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
CHIEFTEK PRECISION CO., LTD. Chieftek Machinery (Kunshan) Co., Ltd	Chieftek Machinery (Kunshan) Co., Ltd CHIEFTEK PRECISION CO., LTD.	Subsidiary The Company	(Sales) Purchases	($ 229,741) 229,741	(29%) 100%	（Note 1） （Note 1）	- $ - $	（Note 2） （Note 3）	89,940 $ ( 89,940)	26% (100%)	－ －

(Note 1) 180 days after monthly-closing, T/T.

(Note 2) The collection periods for third parties are from 15 days after monthly-closing to 150 days after next monthly-closing.

(Note 3) The company had no purchases from other suppliers.

Table 3, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

• Significant inter company transactions during the reporting period For the year ended December 31, 2016

Table 4

Expressed in thousands of NTD

Number (Note 1)	Companyname	Counterparty	Relationship (Note 2)		Transaction	Transaction
				General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets(Note3)
0 1	CHIEFTEK PRECISION CO., LTD. cpc Europa GmbH	cpc Europa GmbH CSM Maschinen GmbH CHIEFTEK PRECISION USA CO., LTD. Chieftek Machinery (Kunshan) Co., Ltd. CSM Maschinen GmbH	1 1 1 1 3	Sales revenue Interest income Accounts receivable Endorsements and guarantees Long-term prepayment Sales revenue Other income Accounts receivable Sales revenue Accounts receivable Sales revenue Accounts receivable	($ 60,763) ( 176) 40,111 128,820 35,675 ( 61,352) ( 4,560) 21,215 ( 229,741) 89,940 ( 261) 296	180 days after monthly- closing, T/T － － － － 180 days after monthly- closing, T/T － － 180 days after monthly- closing, T/T － 60 days, T/T －	(6%) － 2% 6% 2% (6%) － 1% (23%) 4% － －

(Note 1) The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1) Parent company is ‘0’.

(2) The subsidiaries are numbered in order starting from ‘1’.

(Note 2) Relationship between transaction company and counterparty is classified into the following three categories:

(1) Parent company to subsidiary.

(2) Subsidiary to parent company.

(3) Subsidiary to subsidiary.

(Note 3) 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.

Table 4, Page 1

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Information on investees

For the year ended December 31, 2016

Table 5

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December 31,2016	Shares held as at December 31,2016	Shares held as at December 31,2016	Net profit (loss) of the investee for the year ended December 31,2016	Investment income (loss) recognized by the Company for the year ended December 31,2016	Footnote
				Balance as at December 31,2016	Balance as at December 31,2015	Number of shares	Ownership (%)	Book value
CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION HOLDING CO., LTD. CHIEFTEK PRECISION HOLDING CO., LTD.	CHIEFTEK PRECISION HOLDING CO., LTD. cpc Europa GmbH CSM Maschinen GmbH Chieftek Precision (Hong Kong) Co., Limited CHIEFTEK PRECISION USA CO., LTD.	Samoa Germany Germany Hong Kong America	Professional investment Sale of high precision linear motion components and rendering after -sale services Research, manufacture and sale of machineries Professional investment Sale of high precision linear motion components and rendering after -sale services	202,290 $ 98,695 726 164,475 53,535	202,290 $ 98,695 - 164,475 53,535	6,760,000 - - 5,100,000 1,660,000	100 100 80 100 100	233,774 $ 31,605) ( 492 215,054 58,599	7,264 $ 5,845) ( 244) ( 3,787 3,480	7,264 $ 5,845) ( 195) ( - -	Subsidiary Subsidiary Subsidiary Subsidiary (Note 1) Subsidiary (Note 1)

(Note 1) Not required to disclose income (loss) recognized by the Company.

• (Note 2) Foreign currencies were translated into New Taiwan Dollars using the exchange rate (USD:NTD 1:32.25) as at December 31, 2016.

Table 5, Page 1

Information on investments in Mainland China

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

For the year ended December 31, 2016

Table 6

Expressed in thousands of NTD

Amount remitted from Taiwan to Investment Accumulated Mainland China/ Accumulated Accumulated income amount Amount remitted back amount of amount Ownership (loss) recognized of investment to Taiwan for the year ended remittance from of remittance from Net income of held by by the Company Book value of income Taiwan to December 31, 2016 Taiwan to investee for the the for the year investments in remitted back to Mainland China Remitted to Mainland China as year ended Company ended December Mainland China Taiwan as of Investee in Mainland Main business Investment as of January 1, Mainland Remitted back to of December 31, December 31, (direct or 31, 2016 as of December December 31, China activities Paid-in capital method 2016 China Taiwan 2016 2016 indirect) （ Note 2 ） 31, 2016 2016 Footnote Chieftek Machinery Production, $ 164,475 Note 1 $ 164,475 $ - $ - $ 164,475 $ 3,788 100% $ 3,788 $ 215,169 $ - － (Kunshan) Co., Ltd processing and sale of high precision linear motion components and rendering after-sale services

Investment amount approved by

		Investment amount approved by
Companyname	Accumulated amount of remittance from Taiwan to Mainland China as of December31,2016	the Investment Commission of the Ministry of Economic Affairs (MOEA)	Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA(Note3)
CHIEFTEK PRECISION CO., LTD.	$ 164,475	$ 164,475	$ 815,050

(Note 1) Through investing in an existing company in the third area (Chieftek Precision (Hong Kong) Co., Ltd.) which then invested in the investee in Mainland China.

(Note 2) The investment income (loss) is recognized based on the investeesʼ financial statements that were audited and attested by R.O.C. parent company’s CPA for the year ended December 31, 2016. (Note 3) The ceiling amount is 60% of the higher of net worth or consolidated net worth.

(Note 4) Foreign currencies were translated into New Taiwan Dollars using the exchange rate (USD:NTD 1:32.25) as at December 31, 2016.

Table 6, Page 1

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas For the year ended December 31, 2016

Table 7

Investee in Mainland China	Sale(purchase)	Sale(purchase)	Propertytransaction	Propertytransaction	Accounts receivable(payable)	Accounts receivable(payable)	Provision of endorsements/guarantees or collaterals	Provision of endorsements/guarantees or collaterals		Financing	Financing		Others
	Amount	%	Amount	%	Balance at December 31, 2016	%	Balance at December 31, 2016	Purpose	Maximum balance during the year ended December 31,2016	Balance at December 31, 2016	Interest rate	Interest during the year ended December 31, 2016
Chieftek Machinery (Kunshan) Co., Ltd	$ 229,741	29%	$ -	-	$ 89,040	26%	$ -	-	$ -	- $	-	- $	- $

Table 7, Page 1