DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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.

Declaration of Consolidated Financial Statements of Affiliated Enterprises

For the year ended December 31, 2017, pursuant to "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises," the Company that is required to be included in the consolidated financial statements of affiliates, is the same as the Company required to be included in the consolidated financial statements of parent and subsidiary companies under International Financial Reporting Standard 10. Also, if relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies, it shall not be required to prepare separate consolidated financial statements of affiliates.

Hereby declare,

Company name: DAVICOM SEMICONDUCTOR, INC. Representative: HAO, TING February 22, 2018

			December 31, 2017				December 31, 2016
	Assets	Notes		AMOUNT	%		AMOUNT	%
	Current assets
1100	Cash and cash equivalents	6(1)	\$	881,406	70	\$	914,769	70
1125	Available-for-sale financial assets - current	6(2)		-	-		5,730	1
1150	Accounts receivable, net - related parties			62	-		65	-
1170	Accounts receivable, net	6(3)		35,407	3		42,363	3
1200	Other receivables			290	-		535	-
130X	Inventories, net	6(4)		37,060	3		27,888	2
1410	Prepayments			2,963	-		2,601	-
1470	Other current assets			88	-		18	-
11XX	Total Current Assets			957,276	76		993,969	76
	Non-current assets
1523	Available-for-sale financial assets - noncurrent	6(2)		56,348	4		47,879	4
1600	Property, plant and equipment, net	6(5)		126,720	10		130,087	10
1760	Investment property, net	6(6)		108,780	9		111,700	9
1780	Intangible assets			124	-		68	-
1840	Deferred income tax assets			9,603	1		9,954	1
1900	Other non-current assets	6(7)		6,888	-		5,788	-
15XX	Total Non-current assets			308,463	24		305,476	24
1XXX	Total assets		\$	1,265,739	100	\$	1,299,445	100

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

(Continued)

	Liabilities and Equity		December 31, 2017			December 31, 2016
		Notes		AMOUNT	%	AMOUNT	%
	Current liabilities
2150	Accounts payable - related parties		\$	7,306	1	\$ 5,939	-
2170	Accrued expenses			8,461	1	6,490	-
2200	Other payables	6(8)		28,590	2	35,218	3
2230	Current income tax liabilities	6(18)		674	-	7,624	1
2300	Other current liabilities			2,439	-	472	-
21XX	Current Liabilities			47,470	4	55,743	4
	Non-current liabilities
2570	Deferred income tax liabilities			663	-	3,636	-
2600	Other non-current liabilities	6(9)		17,508	1	19,444	2
25XX	Non-current liabilities			18,171	1	23,080	2
2XXX	Total Liabilities			65,641	5	78,823	6
	Equity attributable to owners of parent
	Share capital	6(12)
3110	Common stock			846,551	67	832,551	64
	Capital surplus	6(13)
3200	Capital surplus			250,252	20	259,876	20
	Retained earnings	6(14)
3310	Legal reserve			65,446	5	58,312	5
3350	Undistributed earnings	6(18)		51,033	4	71,340	5
	Other equity interest
3400	Other equity interest		(	13,367) (	1) (	2,087)	-
31XX	Equity attributable to owners of the
	parent			1,199,915	95	1,219,992	94
36XX	Non-controlling interest			183	-	630	-
3XXX	Total equity			1,200,098	95	1,220,622	94
	Significant contingent liabilities and	9
	unrecognised contract commitments
3X2X	Total liabilities and equity		\$	1,265,739	100	\$ 1,299,445	100

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Expressed in thousands of New Taiwan dollars, except earning per share)

			Years ended December 31
				2017		2016
	Items	Notes		AMOUNT	%	AMOUNT	%
4000	Sales revenue		\$	307,342	100 \$	312,545	100
5000	Operating costs	6(4)(16)(17)	(	97,270)(	32) (	95,171)(	30)
5900	Net operating margin			210,072	68	217,374	70
	Operating expenses	6(16)(17) and 7
6100	Selling expenses		(	34,657)(	11) (	33,594)(	11)
6200	General & administrative
	expenses		(	45,847)(	15) (	47,636)(	15)
6300	Research and development
	expenses		(	76,230)(	25) (	77,804)(	25)
6000	Total Operating Expenses		(	156,734)(	51) (	159,034)(	51)
6900	Operating income			53,338	17	58,340	19
	Non-operating income and
	expenses
7010	Other income	6(6)		25,928	9	26,085	8
7020	Other gains and losses	6(15)	(	20,658)(	7) (	2,657)(	1)
7050	Finance costs		(	31)	- (	35)	-
7000	Total non-operating
	income and expenses			5,239	2	23,393	7
7900	Income from continuing
	operations before income tax			58,577	19	81,733	26
7950	Income tax expense	6(18)	(	6,697)(	2) (	10,847)(	3)
8000	Profit for the year from
	continuing operations			51,880	17	70,886	23
8200	Profit for the year		\$	51,880	17 \$	70,886	23

(Continued)

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Expressed in thousands of New Taiwan dollars, except earning per share)

					Years ended December 31
				2017		2016
	Items	Notes		AMOUNT	%	AMOUNT	%
8311	Other comprehensive income, before tax, actuarial gains (losses) on defined benefit plans		(\$	1,680)	- (\$	349)	-
8349	Income tax related to components of other comprehensive income that will not be reclassified to
8310	profit or loss Components of other comprehensive income that will not be reclassified to profit or			286	-	59	-
	loss Components of other comprehensive income that will be reclassified to profit or		(	1,394)	- (	290)	-
8361 8362	loss Financial statement translation differences of foreign operations Unrealized gain on valuation	6(2)	(	5,487)(	2) (	4,655)(	2)
8399	of available-for-sale financial assets Income tax relating to the components of other	6(18)		11,377	4	1,965	1
8360	comprehensive income Components of other comprehensive income that will be reclassified to profit or		(	1,626)(	1)	8	-
8500	loss Total comprehensive income for the year Profit (loss), attributable to:		\$	4,264 54,750	1 ( 18 \$	2,682)( 67,914	1) 22
8610 8620	Owners of parent Non-controlling interest		\$ ( \$	52,327 447) 51,880	17 \$ - ( 17 \$	71,272 386) 70,886	23 - 23
8710 8720	Comprehensive income attributable to: Owners of parent Non-controlling interests		\$ (	55,197 447)	18 \$ - (	68,300 386)	22 -
9750	Basic earnings per share Net income	6(19)	\$ \$	54,750	18 \$ 0.63 \$	67,914	22 0.86
9850	Diluted earnings per share Net income	6(19)	\$		0.62 \$		0.85

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars)

		Equity attributable to owners of the parent
				Capital Reserves			Retained Earnings		Other equity interest
	Notes	Common stock	Additional paid-in capital	Employees' stock options	Others	Legal reserve		Undistributed earnings	Exchange differences from translation of foreign operations		Unrealized gain or loss on available for-sale financial assets		Unearned compensation for restricted employee share of stock	Total		Non controlling interest		Total equity
Year 2016
Balance at January 1, 2016		\$ 832,551	\$ 244,473	\$ 36,646	\$ 2,068	\$ 50,132	\$	81,802	\$ 7,197	(\$	6,602 )	\$	-	\$ 1,248,267	\$	4		\$ 1,248,271
Appropriation and distribution of 2015 earnings	6(14)
Legal reserve		-	-	-	-	8,180	(	8,180 )	-		-		-	-		-		-
Cash dividends		-	-	-	-	-	(	73,264 )	-		-		-	( 73,264 )		-	(	73,264 )
Employees' stock options expired	6(11)	-	-	( 36,646 )	36,646	-		-	-		-		-	-		-		-
Cash dividends distributed from capital surplus	6(14)	-	( 23,311 )	-	-	-		-	-		-		-	( 23,311 )		-	(	23,311 )
Profit (loss) for the year		-	-	-	-	-		71,272	-		-		-	71,272	(	386 )		70,886
Other comprehensive income (loss) for the year		-	-	-	-	-	(	290 ) (	4,655 )		1,973		-	( 2,972 )		-	(	2,972 )
Non-controlling interests		-	-	-	-	-		-	-		-		-	-		1,012		1,012
Balance at December 31, 2016		\$ 832,551	\$ 221,162	\$ -	\$38,714	\$ 58,312	\$	71,340	\$ 2,542	(\$	4,629 )	\$	-	\$ 1,219,992	\$	630		\$ 1,220,622
Year 2017
Balance at January 1, 2017		\$ 832,551	\$ 221,162	\$ -	\$38,714	\$ 58,312	\$	71,340	\$ 2,542	(\$	4,629 )	\$	-	\$ 1,219,992	\$	630		\$ 1,220,622
Appropriation and distribution of 2016 earnings	6(14)
Legal reserve		-	-	-	-	7,134	(	7,134 )	-		-		-	-		-		-
Cash dividends		-	-	-	-	-	(	64,106 )	-		-		-	( 64,106 )		-	(	64,106 )
Cash dividends distributed from capital surplus	6(14)	-	( 27,474 )	-	-	-		-	-		-		-	( 27,474 )		-	(	27,474 )
Issuance of restricted stocks to employees	6(11)(12)	14,000	-	-	17,850	-		-	-		-	(	15,544 )	16,306		-		16,306
Profit (loss) for the year		-	-	-	-	-		52,327	-		-		-	52,327	(	447 )		51,880
Other comprehensive income (loss) for the year		-	-	-	-	-	(	1,394 ) (	5,487 )		9,751		-	2,870		-		2,870
Balance at December 31, 2017		\$ 846,551	\$ 193,688	\$ -	\$56,564	\$ 65,446	\$	51,033	(\$ 2,945 )	\$	5,122	(\$	15,544 )	\$ 1,199,915	\$	183		\$ 1,200,098

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

			Years ended December 31
	Notes		2017	2016

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax		\$	58,577	\$	81,733
Adjustments
Adjustments to reconcile profit (loss)
Depreciation (including investment property)	6(5)(6)(16)		7,194		7,011
Amortisation	6(16)		3,592		4,470
Cost of restricted stocks to employees	6(11)		2,306		-
Deferred charges transferred to research and experimental
expenses			108		527
Interest income		(	2,509 )	(	1,736 )
Gain on disposal of available-for-sale financial assets	6(15)	(	2,041 )	(	2,342 )
Gain on disposal of property, plant and equipment	6(15)		-	(	48 )
Impairment loss	6(15)		-		500
Changes in operating assets and liabilities
Changes in operating assets
Notes receivable			3	(	65 )
Accounts receivable			6,956		10,390
Other receivables		(	251 )	(	346 )
Inventories		(	9,172 )		2,247
Prepayments		(	362 )		1,778
Other current assets		(	70 )		5
Changes in operating liabilities
Accounts payable - related parties			1,367	(	2,499 )
Accrued expenses			1,971		2,042
Other payables		(	6,628 )	(	4,161 )
Net defined benefit liabilities		(	3,616 )	(	7,211 )
Other current liabilities			1,967	(	674 )
Cash inflow generated from operations			59,392		91,621
Interest received			3,005		1,761
Income tax paid		(	17,609 )	(	9,157 )
Net cash flows from operating activities			44,788		84,225
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of available-for-sale financial assets			10,672		38,004
Acquisition of property, plant and equipment	6(5)	(	907 )	(	2,642 )
Proceeds from disposal of property, plant and equipment			-		48
Cash received through merger Increase in intangible assets		(	- 232 )	(	950 65 )
Decrease in refundable deposits			23	(	4 )
Increase in other assets		(	4,647 )	(	1,054 )
Net cash flows from investing activities			4,909		35,237
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of cash dividends	6(14)	(	91,580 )	(	96,575 )
Advance receipts for capital stock	6(12)		14,000		-
Net cash flows used in financing activities		(	77,580 )	(	96,575 )
Effect of foreign exchange rate changes on cash and cash
equivalents		(	5,480 )	(	4,653 )
Net (decrease) increase in cash and cash equivalents		(	33,363 )		18,234
Cash and cash equivalents at beginning of year			914,769		896,535
Cash and cash equivalents at end of year		\$	881,406	\$	914,769

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

1. HISTORY AND ORGANISATION

Davicom Semiconductor, Inc. (the "Company") was incorporated as a corporation under provisions of the Company Act of the Republic of China (R.O.C.). The Company and its subsidiaries (collectively referred herein as the "Group") are primarily engaged in the research, development, production, manufacturing and sales of communications network ICs.

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 February 22, 2018.

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

Effective Date by International

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

Effective Date by International

New Standards, Interpretations and Amendments Accounting Standards Board

Improvements to IFRSs 2012-2014 January 1, 2016

The above standards and interpretations have no significant impact to the Group's financial condition and operating result based on the Group's assessment.

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

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC effective from 2018 are as follows:

	Effective Date by International
New Standards, Interpretations and Amendments	Accounting Standards Board
Classification and measurement of share-based payment transactions (amendments to IFRS 2)	January 1, 2018
Applying IFRS 9, 'Financial instruments' with IFRS 4, 'Insurance contracts' (amendments to IFRS 4)	January 1, 2018
IFRS 9, 'Financial instruments'	January 1, 2018
IFRS 15, 'Revenue from contracts with customers'	January 1, 2018
Clarifications to IFRS 15, 'Revenue from contracts with customers' (amendments to IFRS 15)	January 1, 2018
Disclosure initiative (amendments to IAS 7)	January 1, 2017
Recognition of deferred tax assets for unrealised losses (amendments to IAS 12)	January 1, 2017
Transfers of investment property (amendments to IAS 40)	January 1, 2018
IFRIC 22, 'Foreign currency transactions and advance consideration'	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1, 'First-time adoption of International Financial Reporting Standards'	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, 'Disclosure of interests in other entities'	January 1, 2017
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 28, 'Investments in associates and joint ventures'	January 1, 2018
The above standards and interpretations have no significant impact to the Group's financial condition
and operating result based on the Group's assessment.

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

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

Effective Date by International
Accounting Standards Board
January 1, 2019
To be determined by International Accounting Standards Board
January 1, 2019
January 1, 2021
January 1, 2019
January 1, 2019
January 1, 2019
Sale or contribution of assets between an investor and its associate

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

IFRS 16, 'Leases'

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

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

(2) Basis of preparation

A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:
(a) Available-for-sale financial assets measured at fair value.
(b) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
(3) Basis of consolidation
A. Basis for preparation of consolidated financial statements:
- (a) All subsidiaries are included in the Group's consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls 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 unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
- (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.
- (d) Changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.
- (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

B.				Subsidiaries included in the consolidated financial statements:
----	--	--	--	-----------------------------------------------------------------	--	--

				Ownership (%)
			December 31,	December 31,
Name of investor	Name of subsidiary	Main business activities	2017	2016	Description
Davicom Semiconductor, Inc.	Medicom Corp.	Manufacturing and designing of IC	99.36	99.36	-
Davicom Semiconductor, Inc.	Davicom Investment Inc.	General investment	100.00	100.00	-
Davicom Semiconductor, Inc.	TSCC Inc.	Reinvestment business	100.00	100.00	-
Davicom Semiconductor, Inc.	Aidialink Corp.	Wireless communication machinery and equipment manufacturing industry	51.06	51.06	Note 2
TSCC Inc.	JUBILINK LIMITED	Reinvestment business	100.00	100.00	-
TSCC Inc.	DAVICOM IC (SuZHou) Co.LTD	Manufacturing and designing of IC	100.00	100.00	Note 1

Note 1: The principal operations have not commenced. The subsidiary is engaged in sales and agent services.

Note 2: On October 12, 2016, Davicom Semiconductor, Inc subscribed for 51.06% of the shares of Aidialink Corp.
C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions on fund remittance from subsidiaries to the parent company: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.
(4) Foreign currency translation

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

A. Foreign currency transactions and balances

(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and

liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

(d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within 'other gains and losses'.
B. Translation of foreign operations
(a) The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
- iii. All resulting exchange differences are recognised in other comprehensive income.
(b) When the foreign operation partially disposed of or sold is 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, even when the Group still 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.
(5) Classification of current and non-current items
A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
- (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;
- (b) Assets held mainly for trading purposes;
- (c) Assets that are expected to be realised within twelve months from the balance sheet date;
- (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
- (a) Liabilities that are expected to be settled within the normal operating cycle;
- (b) Liabilities arising mainly from trading activities;
- (c) Liabilities that are to be settled within twelve months from the balance sheet date;
- (d) Liabilities for which the repayment date cannot be extended unconditionally to more than

twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

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

(7) Available-for-sale financial assets
A. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.
B. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.
C. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are presented in 'financial assets measured at cost'.
(8) Receivables

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

(9) Impairment of financial assets
A. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
B. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:
- (a) Significant financial difficulty of the issuer or debtor;
- (b) 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) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;
(d) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
C. When the Group assess that there has been objective evidence of impairment and an impairment loss has occurred, accounting treatment for impairment is as follows:
(a) Financial assets measured at amortised cost

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

(b) Financial assets carried at cost

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

The amount of the impairment loss is measured as the difference between the asset's acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from 'other comprehensive income' to 'profit or loss'. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(10) Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to receive the cash flows from financial asset expire.

(11) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(12) Investments accounted for using equity method / associates
A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.
B. The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
C. When changes in an associate's equity that are not recognised in profit or loss or other comprehensive income of the associate and such changes not affecting the Group's ownership percentage of the associate, the Group recognises change in ownership interests in the associate in 'capital surplus' in proportion to its ownership.
D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group's ownership percentage of the associate but maintains significant influence on the associate, then 'capital surplus' and 'investments accounted for under the equity method' shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group's ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss.
G. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it still retains significant influence over this associate,

then the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

H. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss. If it still retains significant influence over this associate, then the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss proportionately.
(13) Property, plant and equipment
A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
B. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. 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:

Buildings	50 years
Computer communications equipment	2 ~ 6 years
Transportation equipment	5 years
Other equipment	3 ~ 4 years

(14) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Investment property is depreciated on a straight-line basis over its estimated useful life of 50 years.

(15) Operating leases (lessee/lessor)

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

(16) Intangible assets

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 3 to 5 years.

(17) Impairment of non-financial assets

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

(18) 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 recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(19) Employee benefit

A. Short-term employee benefits

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

B. Pensions

(a) Defined contribution plans

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

(b) Defined benefit plans
i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.
ii. Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.
C. Employees' compensation and directors' and supervisors' remuneration
Employees' compensation and directors' and supervisors' remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal obligation 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 employees' compensation is paid by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.
(20) Employee share-based-payment
A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.
B. Restricted stocks:
- (a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period.
- (b) For restricted stocks where those stocks do not restrict distribution of dividends to employees and employees are not required to return the dividends received if they resign during the vesting period, the Group recognises the fair value of the dividends received by the employees who are expected to resign during the vesting period as compensation cost at the date of dividends declared.
- (c) For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Group and the Group must refund their payments on the stocks, the Group recognises the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognises the payments from the employees who are expected to be eventually vested with the stocks in 'capital surplus – others'.

(21) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
B. The current income tax 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 recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated 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 realised or the deferred tax liability is settled.
D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.
E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

(22) Share capital

A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.
B. Where the Company repurchases the Company's equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, and 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 approved 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

The Group manufactures and sells communications network ICs. Revenue is measured at the fair value of the consideration received or receivable taking into account of value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group's activities. Revenue arising from the sales of goods should be recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains 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.

(25) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Group's Chief Operating Decision-Maker is responsible for allocating resources and assessing performance of the operating segments.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

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

(1) Critical judgements in applying the Group's accounting policies

None.

(2) Critical accounting estimates and assumptions

A. Evaluation of accounts receivable

When there is objective evidence showing signs of impairment, the Group considers future cash flow estimates. The amount of the impairment loss is measured by the difference between the carrying amount of the asset and the estimated future cash flow at the original effective interest rate of the financial asset. If the actual cash flow is less than expected, there may be significant impairment losses.

B. Evaluation of inventories

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

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

	December 31, 2017	December 31, 2016
Cash on hand	\$ 150	\$	76
Checking accounts and demand deposits	466,487		345,193
Time deposits	414,769		569,500
	\$ 881,406	\$	914,769

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

B. The Group has no cash and cash equivalents pledged to others.
(2) Available-for-sale financial assets

Items		December 31, 2017		December 31, 2016
Current items:
Listed stocks	\$	-	\$	6,171
Valuation adjustment		-	(	441)
Total	\$	-	\$	5,730
Non-current items:
Unlisted stocks	\$	39,761	\$	39,761
Emerging stocks		16,440		18,908
Subtotal		56,201		58,669
Valuation adjustment		5,147	(	5,790)
Accumulated impairment	(	5,000)	(	5,000)
Total	\$	56,348	\$	47,879

A. The Group recognised \$11,377 and \$1,965 in other comprehensive income for fair value change and reclassified \$1,094 and \$2,342 from equity to profit or loss for the years ended December 31, 2017 and 2016, respectively.

B. The Group assessed and recognised impairment loss of \$500 on equity investment, MTECH Corporation, for the year ended December 31, 2016.
C. As of December 31, 2017, and 2016, the Group has no available-for-sale financial assets pledged to others.

(3) Accounts receivable

	December 31, 2017	December 31, 2016
Accounts receivable	\$ 35,407	\$ 42,363

A. As of December 31, 2017 and 2016, the Group has no impairment loss on accounts receivable.

B. For the information of the credit quality of financial assets that are neither past due nor impaired and the ageing analysis of accounts receivable that were past due but not impaired, please refer to Note 12(2) C.

(4) Inventories

				December 31, 2017
	Allowance for Cost valuation loss				Book value
Work in process	\$	27,395	(\$	12,069)	\$	15,326
Finished goods		31,687	(	9,953)		21,734
	\$	59,082	(\$	22,022)	\$	37,060
		December 31, 2016
				Allowance for
		Cost		valuation loss		Book value
Work in process	\$	26,447	(\$	13,037)	\$	13,410
Finished goods		23,963	(	9,485)		14,478
	\$	50,410	(\$	22,522)	\$	27,888

The cost of inventories recognised as expenses for the period:

		Years ended December 31,
		2017	2016
Cost of goods sold	\$	97,816 \$	95,186
Gain on decline in market value	(	500)	-
Others	(	46) (	15)
	\$	97,270 \$	95,171

(5) Property, plant and equipment

			Computer
			communications		Transportation
		Buildings	equipment	equipment		Others	Total
At January 1, 2017
Cost	\$	169,884	\$ 1,016	\$	2,325	\$ 909	\$ 174,134
Accumulated depreciation	(	42,448) (	790) (		323) (	486) (	44,047)
	\$	127,436	\$ 226	\$	2,002	\$ 423	\$ 130,087
2017
Opening net book amount as at January 1	\$	127,436	\$ 226	\$	2,002	\$ 423	\$ 130,087
Additions		150	581		-	176	907
Depreciation charge	(	3,394) (	288) (		387) (	205) (	4,274)
Closing net book amount as at December 31	\$	124,192	\$ 519	\$	1,615	\$ 394	\$ 126,720
At December 31, 2017
Cost	\$	170,034	\$ 931	\$	2,325	\$ 811	\$ 174,101
Accumulated depreciation	(	45,842) (	412) (		710) (	417) (	47,381)
	\$	124,192	\$ 519	\$	1,615	\$ 394	\$ 126,720

				Computer
				communications		Transportation
	Buildings			equipment	equipment		Others	Total
At January 1, 2016
Cost	\$	169,883	\$	1,486	\$	1,090	\$ 850	\$ 173,309
Accumulated depreciation	(	39,116) (		1,139) (		1,090) (	429) (	41,774)
	\$	130,767	\$	347	\$	-	\$ 421	\$ 131,535
2016
Opening net book amount as at January 1	\$	130,767	\$	347	\$	-	\$ 421	\$ 131,535
Additions		-		100		2,325	217	2,642
Depreciation charge	(	3,331) (		221) (		323) (	215) (	4,090)
Closing net book amount as at December 31	\$	127,436	\$	226	\$	2,002	\$ 423	\$ 130,087
At December 31, 2016
Cost	\$	169,883	\$	1,586	\$	3,415	\$ 1,067	\$ 175,951
Accumulated depreciation	(	42,447) (		1,360) (		1,413) (	644) (	45,864)
	\$	127,436	\$	226	\$	2,002	\$ 423	\$ 130,087

(6) Investment property

Buildings

		Years ended December 31,
		2017		2016
At January 1
Cost	\$	148,907	\$	148,907
Accumulated depreciation	(	37,207)	(	34,286)
	\$	111,700	\$	114,621
Opening net book amount as at January 1	\$	111,700	\$	114,621
Depreciation charge	(	2,920)	(	2,921)
Closing net book amount as at December 31	\$	108,780	\$	111,700
At December 31
Cost	\$	148,907	\$	148,907
Accumulated depreciation	(	40,127)	(	37,207)
	\$	108,780	\$	111,700

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

		Years ended December 31,
		2017		2016
Rental income from investment property	\$	21,522	\$	20,712
Direct operating expenses arising from the investment property that generated rental income
during the period	(\$	4,779)	(\$	4,868)

B. The fair value of the investment property held by the Group as at December 31, 2017 and 2016 was \$151,401 and \$179,714, respectively, which was valued by independent valuers on December 31, 2017 and 2016. Valuations were made using the cost approach and income approach in a weight ratio of 50% for each approach which is categorised within Level 3 in the fair value hierarchy. Key assumptions are as follows:

	Overall capital	Ratio of
	interest rate	salvage value
Cost approach	1.835%	5.00%
		Capitalisation rate
Income approach		8.20%

(7) Other non-current assets

		December 31, 2017	December 31, 2016
Overdue receivables	\$	9,702	\$	9,702
Deferred charges		6,808		5,685
Guarantee deposits paid		80		103
Less: Allowance for uncollectible accounts	(	9,702)	(	9,702)
	\$	6,888	\$	5,788
(8) Other payables
		December 31, 2017		December 31, 2016
Wages and bonus payable	\$	20,634	\$	25,060
Processing fees payable		2,484		4,117
Others		5,472		6,041
	\$	28,590	\$	35,218
(9) Other non-current liabilities
		December 31, 2017		December 31, 2016
Net defined benefit liability	\$	14,578	\$	16,514
Guarantee deposits received		2,930		2,930
	\$	17,508	\$	19,444

(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 the end of December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method, to the employees expected to be qualified for retirement next year, the Company will make contributions to cover the deficit by next March.

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

		December 31, 2017		December 31, 2016
Present value of defined benefit obligations	(\$	37,994)	(\$	36,704)
Fair value of plan assets		23,416		20,190
Net defined benefit liability	\$	(14,578)	\$	(16,514)

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

					Net defined
				benefit liability

(\$	36,704)	\$	20,190	(\$	16,514)
(	99)		-	(	99)
(	404)		222	(	182)
(	132)		-	(	132)
(	37,339)		20,412	(	16,927)


	-		9)	(	9)
(	945)		-	(	945)
(	726)		-	(	726)
(	1,671)		9)	(	1,680)
	-		4,029		4,029
	1,016		1,016)		-
(\$	37,994)	\$	23,416	(\$	14,578)
		Present value of defined benefit obligations	( ( (	Fair value of plan assets

		Present value of
		defined benefit	Fair value of		Net defined
		obligations	plan assets		benefit liability
Year ended December 31, 2016
Balance at January 1	(\$	39,434)	\$ 16,057	(\$	23,377)
Current service cost	(	99)	-	(	99)
Interest (expense) income	(	316)	128	(	188)
	(	39,849)	16,185	(	23,664)
Remeasurements:
Return on plan asset (excluding amounts
included in interest income or expense)		-	9		9
Change in financial assumptions		537	-		537
Experience adjustments	(	895)	-	(	895)
	(	358)	9	(	349)
Pension fund contribution		-	4,697		4,697
Paid pension		3,503	( 701)		2,802
Balance at December 31	(\$	36,704)	\$ 20,190	(\$	16,514)

(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 utilisation plan and the "Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund" (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorised by the Regulator. The composition of fair value of plan assets as of December 31, 2017 and 2016 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.
(e) The principal actuarial assumptions used were as follows:

	Years ended December 31,
	2017	2016
Discount rate	0.60%	1.10%
Future salary increases	2.00%	2.00%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory.

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

	Discount rate				Future salary increases
	Increase 0.5%		Decrease 0.5%		Increase 0.5%		Decrease 0.5%
December 31, 2017
Effect on present value of defined
benefit obligation	(\$	945)	\$	989	\$	875	(\$	846)
December 31, 2016
Effect on present value of defined
benefit obligation	(\$	866)	\$	904	\$	800	(\$	774)

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

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

(f)Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2017 amounts to \$188.
(g) As of December 31, 2017, the weighted average duration of that retirement plan is 3.7 years. The analysis of timing of the future pension payment was as follows:

Within 1 year	(	24,004)
1-5 year(s)	(	9,127)
Over 5 years	(	4,863)
	(\$	37,994)

B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the "New Plan") under the Labor Pension Act (the "Act"), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company 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.
(b) The Company's sub-subsidiary, DAVICOM IC (SuZhou) Co. LTD, has a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People's Republic of China (PRC) are based on certain percentage of employees' monthly salaries and wages. Other than the monthly contributions, the Group has no further obligations.
(c) The pension costs under defined contribution pension plans of the group for the years ended December 31, 2017 and 2016, were \$4,811 and \$5,055, respectively.

(11) Share-based payment

A. For the years ended December 31, 2017 and 2016, the Group's share-based payment arrangements were as follows:

Type of arrangement	Grant date	Quantity granted	Contract period	Vesting conditions
Employee stock options	2008.06.26	5,108	8 years	2~4 years' service
		(share in thousands)
Treasury stock		27		Vested
transferred to employees	2014.10.08	(share in thousands)	-	immediately
Restricted stock to		1400
employee	2017.09.29	(share in thousands)	3 years	1~3 years' service

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

		Nine months ended September 30,
	2017				2016
	No. of options (share in thousands)	Weighted-average exercise price (in dollars)		No. of options (share in thousands)	Weighted-average exercise price (in dollars)
Options outstanding at January 1	-	\$	-	2,162	\$	23.60
Options forfeited	-		-	( 2,162)		-
Options outstanding at September 30	-		-	-		-
Options exercisable at September 30	-		-	-		-

C. The weighted-average stock price of stock options at exercise dates for the years ended December 31, 2017 and 2016 was \$23.82 and \$23.26, respectively.

D. As of December 31, 2017 and 2016, there were no stock options outstanding.
E. The fair value of stock options granted after January 1, 2008, is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

				Expected
Type of	Grant	Stock	Exercise	price	Expected	Expected	Risk-free	Fair value
arrangement	date	price	price		volatility option life	dividends	interest rate	per unit
Employee stock options	June 26, 2008	\$36.50	\$ 36.5	54.63	4.37 years	-	2.61%	\$ 16.95

F. The Board of Directors at their meeting on May 26, 2017 adopted a resolution to issue employee restricted ordinary shares for 2,000 thousand shares and granted 1,400 thousand shares on September 29, 2017. The record date for capital increasing of employee restricted ordinary shares was set on October 2, 2017 and the subscription price is \$10 (in dollars) per share. From the day of grant, percent of vesting are 20%, 30%, and 50%, respectively, in sequence from 1 to 3 years.
G. For the year ended December 31, 2017, the compensation fees arising from restricted stocks to employees is \$2,306.

(12) Share capital

A. As of December 31, 2017, the Company's authorized capital was \$1,200,000, consisting of 120,000 thousand shares of ordinary stock (including 18,000 thousand shares reserved for employee stock options and 400 thousand shares reserved for convertible bonds issued by the Company), and the paid-in capital was \$846,551 with a par value of \$10 (in dollars) per share. All proceeds from shares issued have been collected.

Movements in the number of the Group's ordinary shares outstanding are as follows:

	2017	2016
	(share in thousands)	(share in thousands)
At January 1	83,255	83,255
Issuance of restricted stocks to employees	1,400	-
At December 31	84,655	83,255

B. The Board of Directors at their meeting on May 26, 2017 adopted a resolution to issue employee restricted ordinary shares for 2,000 thousand shares with the effective date set on August 8, 2017, granted 1,400 thousand shares on September 29, 2017 and the subscription price is \$10 (in dollars) per share. The record date for capital increase of employee restricted ordinary shares was set on October 2, 2017. As at December 31, 2017, the receipts for share capital was \$14,000 and the capital surplus and others was \$17,850 and \$15,544, respectively.
(13) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange 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. On May 26, 2017 and June 6, 2016, the distribution of cash dividends from capital surplus was approved by the shareholders and amounted to \$27,474 and \$23,311, respectively. On February 22, 2018, the Board of Directors proposed the distribution of cash of \$30,476 from capital surplus.

Terms of the distribution of cash from capital surplus as approved by the Board of Directors but has not been resolved by the shareholders will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.

(14) Retained earnings
A. Under the Company's Articles of Incorporation, the current year's earnings shall first be used to pay all taxes and offset prior years' operating losses and 10% of the remaining amount shall be set aside as legal reserve, then set aside or reverse special reserve in accordance with related regulations. The appropriation of the remainder along with the earnings in prior years shall be proposed by the Board of Directors and resolved at the stockholders' meeting. The Company

shall appropriate all the current distributable earnings, taking into consideration the Company's financials, business and operations. Dividends to shareholders can be distributed in the form of cash or shares and cash dividends to shareholders shall account for at least 30% of the total dividends to shareholders.

B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company's paid-in capital.
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.
D. The appropriation of 2016 and 2015 earnings was resolved by the shareholders on May 26, 2017 and June 6, 2016, respectively. Details are as follows:

	'	Year ended December 31, 2016 '		Year ended December 31, 2015
			Dividends			Dividends
			per share			per share
		Amount	(in dollars)	Amount	(in dollars)
Legal reserve	\$	7,134		\$ 8,180
Cash dividends		64,106	\$ 0.77	73,264	\$	0.88

On May 26, 2017 and June 6, 2016, the distribution of cash dividends from capital surplus was approved by the shareholders and amounted to \$27,474 and \$23,311, respectively. The abovementioned appropriation of earnings of 2016 and 2015 was in agreement with those amounts proposed by the Board of Directors on February 24, 2017 and March 7, 2016, respectively.

E. The details of the appropriation of 2017 earnings was proposed by the Board of Directors on February 22, 2018. Details are as follows:

	Year ended December 31, 2017
		Dividends per share
	Amount	(in dollars)
Legal reserve	\$ 5,103
Cash dividends	45,714	\$ 0.54

On February 22, 2018, the Board of Directors proposed the distribution of cash of \$30,476 from capital surplus, please refer to Note 6(13). Abovementioned appropriation of earnings and distribution of cash from capital surplus has not been resolved by the shareholders.

F. For the information relating to employees' compensation (bonuses) and directors' and supervisors' remuneration, please refer to Note 6(17).

(15) Other income and expenses – net

		Years ended December 31,
		2017	2016
Net currency exchange losses	(\$	17,920) (\$	2,168)
Other losses	(	4,779) (	5,189)
Gains on disposal of investment		2,041	5,152
Impairment loss		- (	500)
Gains on disposal of property, plant and equipment		-	48
	(\$	20,658) (\$	2,657)

(16) Expenses by nature

	Years ended December 31,
	2017	2016
Changes in finished goods, work-in-process and raw materials inventory	\$ 43,617	\$	47,957
Employee benefit expense	122,489		125,707
Depreciation charges on property, plant and equipment	4,274		4,090
Amortisation charges	3,592		4,470
Product testing fees	33,285		29,609
Other costs and expenses	46,747		42,372
Operating costs and expenses	\$ 254,004	\$	254,205

(17) Employee benefit expense

	Years ended December 31,
	2017		2016
Wages and salaries	\$ 106,054	\$	108,704
Labour and health insurance fees	7,870		8,021
Pension costs	5,224		5,341
Other personnel expenses	3,341		3,641
	\$ 122,489	\$	125,707

A. According to the Articles of Incorporation of the Company, a ratio of gain on current pre-tax profit before deduction of employees' compensation and directors' remuneration, after covering accumulated losses, shall be distributed as employees' compensation and directors' remuneration. The ratio shall not be lower than 8.5% for employees' compensation and shall not be higher than 2% for directors' remuneration.

A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees' compensation distributed in the form of shares or in cash; and in addition thereto a report of such

distribution shall be submitted to the shareholders' meeting. Directors' remuneration shall be distributed in cash. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive employees' compensation in the form of stock or cash are set by the Board of Directors.

B. For the years ended December 31,2017 and 2016, employees' compensation was accrued at \$5,621 and \$8,020, respectively; directors' and supervisors' remuneration was accrued at \$1,319 and \$1,640, respectively. The aforementioned amounts were recognised in salary expenses.

The employees' compensation and directors' and supervisors' remuneration were estimated and accrued based on 8.5% and 2% of distributable profit of current year as of the end of reporting period. The employees' compensation and directors' and supervisors' remuneration resolved by the Board of Directors were \$5,621 and \$1,319, respectively, and the employees' compensation will be distributed in the form of cash.

Employees' compensation and directors' and supervisors' remuneration of 2016 as resolved by the meeting of the Board of Directors were in agreement with those amounts recognised in the 2016 financial statements.

Information about employees' bonus and directors' and supervisors' remuneration of the Company as approved by the meeting of Board of Directors and resolved by the shareholders will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.

(18) Income tax

A. Income tax expense

(a) Components of income tax expense:

		Years ended December 31,
		2017		2016
Current tax:
Current tax on profits for the period	\$	10,633	\$	14,457
Additional 10% income tax imposed on
unappropriated earnings		10		36
Prior year income tax overestimation		16	(	3,223)
Total current tax		10,659		11,270
Deferred tax:
Origination and reversal of temporary differences	(	3,962)	(	423)
Income tax expense	\$	6,697	\$	10,847

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

		Years ended December 31,
		2017	2016
Fair value gains/losses on available-for-sale financial assets	(\$	1,626)	\$ 8
Remeasurement of defined benefit obligations		286	59
	\$	(1,340)	\$ 67

B. Reconciliation between income tax expense and accounting profit:

		Years ended December 31,
		2017		2016
Tax calculated based on profit before tax and
statutory tax rate	\$	9,715	\$	13,962
Effects from items disallowed by tax regulation		232		5,541
Effect from temporary difference		1,236		199
Effect from tax credit of investment	(	4,561)	(	6,143)
Additional 10% tax on undistributed earnings		10		36
Prior year income tax (over) underestimation		16	(	3,223)
Others		49		475
Income tax expense	\$	6,697	\$	10,847

C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

						Year ended December 31, 2017
						Recognised
				Recognised		in other
			in			comprehensive
		January 1		profit or loss		income		December 31
Temporary differences: - Deferred tax assets:
Loss on scrapped inventory	\$	692	\$	-	\$	-	\$	692
Loss for market value decline and obsolete and slow-moving inventories		3,829		-		-		3,829 - -
Unrealised exchange loss		-		1,681		-		1,681
Unused compensated absences Others		1,253 4,180	( (	225) 467)	(	- 1,340)		1,028 2,373
Subtotal		9,954		989	(	1,340)		9,603
- Deferred tax liabilities:								-
Currency translation differences	(	512)		-		-	(	512)
Unrealised exchange loss	(	3,124)		2,973		-	(	151)
Subtotal	(	3,636)		2,973		-	(	663)
Total	\$	6,318	\$	3,962	(\$	1,340)	\$	8,940

	Year ended December 31, 2016
						Recognised
				Recognised		in other
				in		comprehensive
		January 1		profit or loss		income		December 31
Temporary differences:
- Deferred tax assets:
Loss on scrapped inventory	\$	692	\$	-	\$	-	\$	692
Loss for market value decline and obsolete and slow-moving		3,829		-		-		3,829 -
inventories								-
Unrealised exchange loss		-				-		-
Unused compensated absences		1,455	(	202)		-		1,253
Others		3,389		724		67		4,180
Subtotal		9,365		522		67		9,954
- Deferred tax liabilities:								-
Currency translation differences	(	512)		-		-	(	512)
Unrealised exchange loss	(	3,025)	(	99)		-	(	3,124)
Subtotal	(	3,537)	(	99)		-	(	3,636)
Total	\$	5,828	\$	423	\$	67	\$	6,318

D. The Company's income tax returns through 2015 have been assessed and approved by the Tax Authority.

E. Unappropriated retained earnings:

	December 31, 2017	December 31, 2016
After 1998	\$ 51,033	\$	71,340

F. As of December 31, 2017 and 2016, the balance of the imputation tax credit account was \$10,077 and \$7,022, respectively. The creditable tax rate was 12.62% for the year ended December 31, 2016 and is estimated to be 19.75% for the year ended December 31, 2017.

(19) Earnings per share

		Year ended December 31, 2017
	Amount after tax	Weighted average number of ordinary shares outstanding (share in thousands)	Earnings per share (in dollars)
Basic earnings per share
Profit attributable to ordinary shareholders of the parent	\$ 52,327	83,605	\$ 0.63
Diluted earnings per share
Profit attributable to ordinary shareholders of the parent	\$ 52,327	83,605
Restricted stocks to employees		1,050
Employees' bonus Profit attributable to shareholders	-	370
of the parent plus assumed	\$ 52,327	85,025	\$ 0.62
conversion of all dilutive potential
ordinary shares
		Year ended December 31, 2016 Weighted average
		number of ordinary
		shares outstanding	Earnings per share
	Amount after tax	(share in thousands)	(in dollars)
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share	\$ 71,272	83,255	\$ 0.86
Profit attributable to ordinary	\$ 71,272	83,255
shareholders of the parent Employees' bonus	-	415
Profit attributable to shareholders
of the parent plus assumed conversion of all dilutive potential ordinary shares	\$ 71,272	83,670	\$ 0.85
(20) Operating leases
Please refer to Note 9(2)
7. RELATED PARTY TRANSACTIONS
Key management compensation
		Years ended December 31,
		2017	2016
Salaries and other short-term employee benefits		\$ 13,721	\$ 16,354

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS (1) Contingencies

None.

(2) Commitments

Operating lease agreement

The Group entered into a 20-year non-cancellable operating lease agreement with the Science Park Administration for land and office. The lease agreement is renewable at the end of the lease period at market price.

The future aggregate minimum lease payments are as follows:

	December 31, 2017	December 31, 2016
Not later than one year	\$ 2,152	\$ 2,154
Later than one year but not more than five years	6,457	8,614
Later than five years	-	-
	\$ 8,609	\$ 10,768

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

1. OTHERS
(1) Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends 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 carrying amounts of the Group's financial instruments not measured at fair value (including cash and cash equivalents, notes receivable, accounts receivable, other receivables, notes payable, accounts payable and other payables) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(3).

B. Financial risk management policies
(a) The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programmed focuses on the unpredictability of financial markets

and seeks to minimize potential adverse effects on the Group's financial position and financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

(b) Risk management is carried out by a treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group's operating units. The management 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

Foreign exchange risk

i. The Group's businesses involve some non-functional currency operations. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

					December 31, 2017
	Foreign					Sensitivity analysis
	currency amount (In thousands)		Exchange rate	Book value (NTD)	Degree of variation		Effect on profit or loss	Effect on other comprehensive income
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD	\$	8,155	29.76	\$ 242,693	1%	\$	2,427	\$	-
USD:RMB		1,231	6.52	8,026	1%		80		-
RMB:NTD		1,709	4.57	7,810	1%		78		-
Financial liabilities Monetary items
USD:NTD	\$	244	29.76	\$ 7,261	1%	\$	73	\$	-
				December 31, 2016
	Foreign					Sensitivity analysis

				December 31, 2016
					Sensitivity analysis
	currency amount			Book value	Degree of		Effect on	Effect on other comprehensive
	(In thousands)		Exchange rate	(NTD)	variation		profit or loss	income
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD	\$	4,734	32.25	\$ 152,672	1%	\$	1,527	\$ -
USD:RMB		1,325	6.99	9,255	1%		93	-
RMB:NTD		1,071	4.62	4,945	1%		49	-
Financial liabilities
Monetary items
USD:NTD	\$	188	32.25	\$ 6,063	1%	\$	61	\$ -

ii. The total exchange gain (loss), including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2017 and 2016, amounted to (\$17,920) and (\$2,168), respectively.

Price risk

i. The Group is exposed to equity securities price risk because of investments held by the Group and classified on the balance sheet as available-for-sale financial assets. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.
ii. The Group's investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 1% with all other variables held constant, for the years ended December 31, 2017 and 2016, other components of equity would have increased/decreased by \$563 and \$536, respectively, as a result of gains/losses on equity securities classified as available-for-sale.
(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group's credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by management. The utilization of credit limits is regularly monitored. Thus, the probability of credit risk is remote.
ii. For the years ended December 31, 2017 and 2016, no credit limits were exceeded during the reporting periods, and management does not expect any significant losses from nonperformance by these counterparties.
iii. The credit quality information of financial assets that are neither past due nor impaired is as follows:

	December 31, 2017
	Group 1	Group 2
Accounts receivable	\$ 2,493 \$	30,808
	December 31, 2016
	Group 1	Group 2
Accounts receivable	\$ 1,655 \$	32,944

Group 1:Credit limits granted to customers less than \$1,000 according to existing customers' selling limits for the first half year and receipts of accounts receivable during the latest three months.

Group 2:Credit limits granted to customers exceeding \$1,000 according to existing customers' selling limits for the first half year and receipts of accounts receivable during the latest three months.
iv. The ageing analysis of financial assets that were past due but not impaired is as follows:

	December 31, 2017	December 31, 2016
Accounts receivable
Up to 30 days	\$ 2,106	\$ 6,895
31 to 90 days	-	869
91 to 180 days	-	-
Over 181 days	-	-
	\$ 2,106	\$ 7,764

The above ageing analysis was based on past due date.

(c) Liquidity risk
i. Cash flow forecasting is performed by Group treasury. Group treasury monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements, for example, currency restrictions.
ii. Surplus cash held by the operating entities over and above balance required for working capital management will be invested in interest bearing current accounts and time deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
iii. The table below analyses the Group's non-derivative financial liabilities based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:	Less	Between	Between
December 31, 2017	than 1 year	1 and 2 years	2 and 5 years
Notes payable	\$ 7,306	\$ -	\$ -
Accounts payable	8,461	-	-
Other payables	28,590	-	-
Other financial liabilities (shown as other non-current liabilities)	18	2,092	820

Non-derivative financial liabilities:	Less	Between	Between
December 31, 2016	than 1 year	1 and 2 years	2 and 5 years
Notes payable	\$ 5,939	\$ -	\$ -
Accounts payable	6,490	-	-
Other payables	35,218	-	-
Other financial liabilities	1,648	18	1,264
(shown as other non-current
liabilities)

(3) Fair value information

A. Details of the fair value of the Company's financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Group's investment property measured at cost are provided in Note 6(7).
B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company's investment in listed stocks and emerging stocks is included in Level 1.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability. The fair value of the Group's investment in equity investment without active market is included in Level 3.
C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities as at December 31, 2017 and 2016 is as follows:

December 31, 2017	Level 1	Level 2	Level 3	Total
Assets
Recurring fair value measurements
Available-for-sale financial assets
Equity securities	\$ 21,443	\$ -	\$ 34,905	\$ 56,348
December 31, 2016	Level 1	Level 2	Level 3	Total
Assets
Recurring fair value measurements
Available-for-sale financial assets
Equity securities	\$ 28,266	\$ -	\$ 25,343	\$ 53,609

D. The methods and assumptions the Group used to measure fair value are as follows:
(a) The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

	Listed shares	Emerging stocks
Market quoted price	Closing price	Last transaction price

(b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date (i.e. yield curves on the Taipei Exchange, average commercial paper interest rates quoted from Reuters).
(c) The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group's financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Group's management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.
(d) The Group takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Group's credit quality.
E. For the years ended December 31, 2017 and 2016, there was no transfer between Level 1 and Level 2.
F. The following chart is the movement of Level 3 for the years ended December 31, 2017 and 2016:

		Years ended December 31,
		2017	2016
	Non-derivative equity instrument		Non-derivative equity instrument
At January 1	\$	25,343	\$	25,893
Losses recognised in profit or loss (Note 1)		-	(	500)
Gains and losses recognised in other comprehensive income (Note 2)		9,562	(	50)
At December 31	\$	34,905	\$	25,343

Note 1: Recorded as non-operating income and expense.

Note 2: Recorded as unrealised valuation gain or loss of available-for-sale financial assets.

G. For the years ended December 31, 2017 and 2016, there was no transfer into or out from Level 3.
H. Finance department is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently updating inputs and making any other necessary adjustments to the fair value.
I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

	Fair value at December 31, 2017	Valuation technique	Significant unobservable input	Range (weighted average)	Relationship of inputs to fair value
Non-derivative equity instrument:
Unlisted shares	\$ 34,905	Net asset value	Not applicable	-	Not applicable
	Fair value at December 31, 2016	Valuation technique	Significant unobservable input	Range (weighted average)	Relationship of inputs to fair value
Non-derivative equity instrument:
Unlisted shares	\$ 25,343	Net asset value	Not applicable	-	Not applicable

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information
A. Loans to others: None.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 1.
D. Acquisition or sale of the same security with the accumulated cost exceeding NT\$300 million or 20% of the Company's paid-in capital: None.
E. Acquisition of real estate reaching NT\$300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching NT\$300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching NT\$100 million or 20% of paidin capital or more: None.
H. Receivables from related parties reaching NT\$100 million or 20% of paid-in capital or more: None.
I. Trading in derivative instruments undertaken during the reporting periods: None.
J. Significant inter-company transactions during the reporting periods: None.
(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 2.

(3) Information on investments in Mainland China
A. Basic information: Please refer to table 3.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

14. SEGMENT INFORMATION

(1) General information

The Group operates business only in a single industry and is mainly engaged in distribution of communications Network ICs or related services. The Chief Operating Decision-Maker who allocates resources and assesses performance of the Group as a whole, has identified that the Group has only on reportable operating segment.

(2) Segment information

The segment information provided to the Chief Operating Decision-Maker for the reportable segments is as follows:

	Years ended December 31,
		2017		2016
Revenue from external customers	\$	307,342	\$	312,545
Depreciation and amortisation (including investment property)		10,786		11,481
Income tax expense		6,697		10,847
Reportable segments income		51,880		70,886
Assets of reportable segments		1,265,739		1,299,445
Capital expenditure in non-current assets of reportable segments		907		2,642
Liabilities of reportable segments		65,641		78,823

(1) Reconciliation for segment income (loss)

The revenue from external customers, profit or loss, assets and liabilities reported to the Chief Operating Decision-Maker is measured in a manner consistent with that in the financial statements. Thus, reconciliation is not required.

(2) Information on products and services

Details of revenue balance is as follows:

	Years ended December 31,
		2017		2016
Sales revenue	\$	306,847	\$	312,529
Service revenue		495		16
	\$	307,342	\$	312,545

(3) Geographical information

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

	Years ended December 31,
	2017				2016
	Revenue		Non-current assets		Revenue		Non-current assets
China	\$ 182,842	\$	-	\$	194,959	\$	-
Taiwan	50,380		242,512		49,481		247,643
USA	6,457		-		6,701		-
Others	67,663		-		61,404		-
Total	\$ 307,342	\$	242,512	\$	312,545	\$	247,643

(4) Major customer information

For the years ended December 31, 2017 and 2016, details of the Group's sale revenue from customers accounted for more than 10% of sales amounts in consolidated income statements are as follows:

	Years ended December 31,
	2017			2016
	Revenue	%			Revenue	%
A	\$ 61,535		21	\$	84,736		27
B	64,622		20		64,010		20
C	46,682		15		43,659		14
	\$ 172,839		56	\$	192,405		61

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

December 31, 2017

Table 1

Expressed in thousands of NTD

(Except as otherwise indicated)

					As of December 31, 2017
	Marketable securities	Relationship with the	General		Book value			Footnote
Securities held by	(Note 1)	securities issuer (Note 2)	ledger account	Number of shares	(Note 3)	Ownership (%)	Fair value	(Note 4)
The Company	Unitech Capital Inc.		Available-for-sale financial	1,000,000	\$ 34,905	2.00%	\$ 34,905
		-	assets - non-current
The Company	Auden Techno Corp.		Available-for-sale financial	1,210,000	15,996	2.96%	15,996
		-	assets - non-current
Davicom Investment Inc.	Global Mobile Corp.		Financial assets measured at	892,458	-	0.32%	-
		-	cost
Davicom Investment Inc.	MTECH Corporation		Available-for-sale financial	200,000	-	1.21%	-
		-	assets - non-current
Davicom Investment Inc.	Auden Techno Corp.		Available-for-sale financial	412,000	5,447	1.60%	5,447
		-	assets - non-current

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.

Note 2: Leave the column blank if the issuer of marketable securities is non-related party.

Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value.

Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions.

Information on investees

December 31, 2017

Table 2

Expressed in thousands of NTD

(Except as otherwise indicated)

									Net profit (loss)	Investment income(loss)
					Initial investment amount		Shares held as at December 31, 2017		of the investee for the year ended December 31,	recognised by the Company for the year ended
	Investee		Main business	Balance	Balance				2017	December 31, 2017
Investor	(Notes 1 and 2)	Location	activities	as at December 31, 2017	as at December 31, 2016	Number of shares	Ownership (%)	Book value	(Note 2(2))	(Note 2(3))	Footnote
The Company	TSCC Inc.	Samoa	General investment	\$ 143,224	\$ 143,224	4,400,000	100	\$ 96,993	(\$ 4,343)	(\$ 4,343)	-
The Company	Davicom Investment Inc.	Taiwan	General investment	222,000	222,000	21,200,000	100	209,522	( 1,877)	( 1,877)	-
The Company	Medicom Corp.	Taiwan	Designing and manufacturing of IC	17,004	17,004	496,811	99.36	363	( 20)	( 20)	-
The Company	Aidialink Corp.	Taiwan	Wireless communication machinery and equipment manufacturing industry	1,320	1,320	120,000	51.06	189	( 913)	( 466)	-
TSCC Inc.	Jubilink Ltd.	British Virgin Islands	General investment	82,725	82,725	22,775,207	100	-	-	-	-

Information on investments in Mainland China

December 31, 2017

Table 3

Expressed in thousands of NTD

(Except as otherwise indicated)

				Accumulated	Amount remitted from Taiwan							Accumulated
				amount of	to Mainland China/		Accumulated		Ownership	Investment income		amount
				remittance from	Amount remitted back		amount		held by	(loss) recognised		of investment
				Taiwan to	to Taiwan for the year		of remittance		the	by the Company	Book value of	income
				Investment Mainland China	ended December 31, 2017		from Taiwan to	Net income of	Company	for the year ended	investments in	remitted back to
Investee in	Main business		method	as of January 1,	Remitted to	Remitted back	Mainland China	investee as of	(direct or	31-Dec-17	Mainland China	Taiwan as of
Mainland China	activities		Paid-in capital (Note 1)	2017	Mainland China	to Taiwan	as of December 31, 2017	31-Dec-17	indirect)	(Note 2)	as of December 31, 2017	31-Dec-17	Footnote
		\$ 74,400	(2)	\$ 74,400	-		- \$ 74,400 (\$	4,974)	100	(\$ 4,974) \$	37,533	-	-
DAVICOM IC (SuZHou) Co.LTD

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1)Directly invest in a company in Mainland China..

(2)Through investing in TSCC Inc., an existing company in the third area, which then invested in the investee in Mainland China.

(3)Others.

Note 2: Investment income (loss) was recognised based on the financial statements that are audited and attested by R.O.C. parent company's CPA.

	Accumulated amount of	Investment amount approved by
	remittance from Taiwan to	the Investment Commission of the	Ceiling on investments in Mainland
	Mainland China as of	Ministry of Economic Affairs	China imposed by the Investment
Company name	September 30, 2017	(MOEA)	Commission of MOEA
DAVICOM IC (SuZHou) Co.LTD	\$ 74,400	\$ 93,744	\$ 720,059

AI assistant

DAVICOM — Annual Report 2017

52295_rns_2017-11-20_0c161293-6ac9-4363-bd7f-638f6aeff922.pdf

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

Declaration of Consolidated Financial Statements of Affiliated Enterprises

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Expressed in thousands of New Taiwan dollars, except earning per share)

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Expressed in thousands of New Taiwan dollars, except earning per share)

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES

DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

1. HISTORY AND ORGANISATION

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(2) Basis of preparation

(16) Intangible assets

(17) Impairment of non-financial assets

(18) Notes and accounts payable

(19) Employee benefit

B. Pensions

(21) Income tax

(22) Share capital

(23) Dividends

(24) Revenue recognition

(25) Operating segments

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

(1) Critical judgements in applying the Group's accounting policies

(2) Critical accounting estimates and assumptions

B. Evaluation of inventories

6. DETAILS OF SIGNIFICANT ACCOUNTS

(3) Accounts receivable

(5) Property, plant and equipment

(6) Investment property

(7) Other non-current assets

(10) Pensions

(11) Share-based payment

(12) Share capital

(15) Other income and expenses – net

(16) Expenses by nature

(17) Employee benefit expense

(18) Income tax

A. Income tax expense

(19) Earnings per share

8. PLEDGED ASSETS

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS (1) Contingencies

10. SIGNIFICANT DISASTER LOSS

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

(2) Financial instruments

(3) Fair value information

13. SUPPLEMENTARY DISCLOSURES

14. SEGMENT INFORMATION

(2) Information on products and services

(3) Geographical information

(4) Major customer information

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

December 31, 2017

Expressed in thousands of NTD

(Except as otherwise indicated)

Information on investees

December 31, 2017

Information on investments in Mainland China

December 31, 2017

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DAVICOM Annual Report 2017