KINSUS — Annual Report 2016

Aug 8, 2017

Stock Code: 3189

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KINSUS INTERCONNECT TECHNOLOGY CORP. 2016 Annual Report

Notice to readers

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

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

English Translation of The Annual Report Originally Issued in Chinese

The inside cover of annual report

1. The name, title, telephone number, and e-mail address of the spokesman or acting spokesman

• (1) The Spokesman

Name: Mu, Xian Jue Title: Senior Project Director of Planning Office Telephone number: 886-(03) 487-1919 EXT 26660 E-mail: jackmu@kinsus.com.tw

(2) The Acting Spokesperson Name: Liu, Su Zhen Title: Senior Director of Finance Department Telephone number: 886-(03) 487-1919 EXT 25005 E-mail: suejaneliu@kinsus.com.tw

2. The address and telephone number of the Company's headquarters, branch offices, and factories

Headquarter (Shilei Factory): No.1245, Zhonghua Rd., Xinwu Dist., Taoyuan City 327, Taiwan, R.O.C.

Telephone number: 886-(03) 487-1919 Qinghua Factory: No.810, Zhonghua Rd., Xinwu Dist., Taoyuan City 327, Taiwan, R.O.C. Telephone number: 886 (03) 487-1988 Xinfeng Factory: No.526, Sec. 2, Jianxing Rd., Xinfeng Township, Hsinchu County 304, Taiwan, R.O.C.

Telephone number: 886-(03) 557-1799

3. The name, address, e-mail address, and telephone number of the agency handling shares transfer

Name: Shareholder Services Department, KGI Securities Address: 5th Fl., No. 2, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City 100, Taiwan, R.O.C.

Website: https://www.kgieworld.com.tw Telephone number: 886-2-2389-2999

4. The name of the certified public accountant who duly audited the annual financial report for the most recent fiscal year, and the name, address and telephone number of said person's accounting firm

Names of certified public accountant: Huang, Yi Hui and Zhang, Zhi Ming Name of accounting firm: Ernst & Young

Address: 9th Fl., No. 333, Sec. 1, Keelung Rd., Songshan Dist., Taipei City 105, Taiwan, R.O.C. Website: http://www.ey.com.tw

Telephone number: 886-2-2757-8888

1. The name of any exchanges where the company's securities are traded offshore, and the method by which to access information on said offshore securities NA

2. The address of the Company's website http://www.kinsus.com.tw

The contents of annual report

1. A report to the shareholders ··············································· 2. A Company profile (1) Date of Incorporation ·············································································· (2) A brief history of the Company ··································································· 3. A corporate governance report (1) Organizational system ············································································· (2) Information on the company's directors, supervisors, general manager, assistant general managers, deputy assistant general managers, and the supervisors of all the company's divisions and branch units ········································································ (3) The state of the Company's implementation of corporate governance ······················· (4) Information on CPA professional fees ··························································· (5) Information on replacement of certified public accountant ·································· (6) Where the Company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held (7) Any transfer of equity interests and/or pledge of or change in equity interests (during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report) by a director, supervisor, managerial officer, or shareholder with a stake of more than 10 percent during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report ····················································· (8) Relationship information, if among the Company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another ·················· (9) The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the Company ·························································· 4. Information on capital raising activities (1) Capital and shares ················································································· (2) Issuance of corporate bonds ······································································· (3) Issuance of preferred shares ······································································· (4) Issuance of global depository receipts ··························································· (5) Issuance of employee share subscription warrants ············································· (6) New restricted employee Shares ·································································· (7) Mergers, acquisitions, and issuance of new shares due to acquisition of shares of other companies ·························································································· (8) Implementation of the Company's capital allocation plans ····································

Page

1 4 4 6 8 21 40 41 41 41 43 44 47 53 53 53 53 53 53 54

5. An overview of operations

An overview of operations
(1) A description of the business ····································································	55
(2) An analysis of the market as well as the production and marketing situation ···············	65
(3) The number of employees employed for the 2 most recent fiscal years, and during the
current fiscal year up to the date of printing of the annual report, their average years of
service, average age, and education levels (including the percentage of employees at each
level) ································································································	71
(4) Disbursements for environmental protection ····················································	71
(5) Labor relations ······················································································	72
(6) Important contracts ·················································································	73

6. An overview of the Company's financial status

6.	An overview of the Company's financial status
	(1) Condensed balance sheets and statements of comprehensive income for the past 5 fiscal
	years ································································································	74
	(2) Financial analyses for the past 5 fiscal years ····················································	80
	(3) Supervisors' or audit committee's report for the most recent year's financial statement ···	86
	(4) Financial statement for the most recent fiscal year ·············································	86
	(5) A parent company only financial statement for the most recent fiscal year, certified by a
	CPA ·································································································	86
	(6) If the Company or its affiliates have experienced financial difficulties in the most recent
	fiscal year or during the current fiscal year up to the date of printing of the annual report,
	the annual report shall explain how said difficulties will affect the company's financial
	situation ····························································································	86
**7. **	A review and analysis of the Company's financial position and financial
	performance, and a listing of risks
	(1) Financial position ··················································································	87
	(2) Financial performance ·············································································	88
	(3) Cash flow ····························································································	89
	(4) The effect upon financial operations of any major capital expenditures during the most
	recent fiscal year ·················································································	89
	(5) The Company's reinvestment policy for the most recent fiscal year, the main reasons for the
	profits/losses generated thereby, the plan for improving re-investment profitability, and
	investment plans for the coming year ···························································	89
	(6) The matters that the risks section shall analyze and assess during the most recent fiscal year
	and as they stood on the date of printing of the annual report································	89
	(7) Other important matters ···········································································	93
8.	Other items deserving special mention
	(1) Information related to the Company's affiliates ·················································	94

(2)	The status of the Company carrying out a private placement of securities during the most
	recent fiscal year or during the current fiscal year up to the date of printing of the annual
	report ································································································	98
(3)	Holding or disposal of shares in the Company by the company's subsidiaries during the
	most recent fiscal year or during the current fiscal year up to the date of printing of the
	annual report ·······················································································	98
(4)	Other matters that require additional description ···············································	99
(5)	Any of the situations listed in Article 36, paragraph 3, subparagraph 2 of the Securities and
	Exchange Act, which might materially affect shareholders' equity or the price of the
	Company's securities, occurring during the most recent fiscal year or during the current
	fiscal year up to the date of printing of the annual report ·····································	99

English Translation of The Annual Report Originally Issued in Chinese

1. A report to the shareholders

Dear Shareholders,

(1)2016 Business Report

The Company’s business performance was not good as prior year for the first half of 2016 due to the overall atmosphere of semi-conductor industry mainly focusing merely on disposing the existing inventory. While the level of stock has been reduced and needed to be replenished, the sale revenue of semi-conductor industry was enhanced for the second half of 2016 because of the improvement in products demand and sale price. Overall, worldwide 2016 semi-conductor revenue totaled to US$339.684 billion, which was about flat compared to US$334.768 billion, according to a result of research conducted by Gartner.

The growth from telecommunication market in 2016 has been offset by the recession from PC market. Revenue of wireless telecommunication grew 9.6%, mainly driven by the growth of smartphones and memory products. However, the semi-conductor market related to PC and Tablet was suffering a recession at a rate of 8.3%. Many countries have been taking actions to maintain economy development by adopting the “easy money policy” to build up an easy financial environment and conducting finance restructures. However, these actions seem to come to an end when FED decides to raise the interest rates starting the end of 2016 and expects to raise them 3 times during 2017. Moreover, although the remaining problems from global financial crisis have been resolved, certain structure problems, including aging population, long-term insufficient investment in capital, low-speedy technology innovation, and decline in ambition and enthusiasm, still exist and reduce the potential of global economy growth by influencing consumption and investment.

The Company’s revenue in parent-company-only basis totaled to NT$17,931,850 thousand in 2016, increased by 0.59% compared to NT$17,827,251 thousand in 2015. Net income in parentcompany-only basis was NT$2,233,705 thousand in 2016, decreased by 23.08% compared to NT$2,903,952 thousand in 2015. The Company’s consolidated revenue totaled to NT$23,165,066 thousand in 2016, increased by 0.45% compared to NT$23,061,311 thousand in 2015. The consolidated net income was NT$2,073,028 thousand in 2016, decreased by 24.05% compared to NT$2,729,526 thousand in 2015. The Company expects to re-catch the growth in light of increasing significant investments in Shin-Fon Factory for capital expenditures and initial investment after organizational adjustments.

(2)Summary of the business plan for FY2017

• (A)Business Policy

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English Translation of The Annual Report Originally Issued in Chinese

Since our establishment, we have been upholding the principle of "Satisfying Customers, Pursuing of Excellence" as our business policy, developing leadership in technique to meet market demand, mastering new generation product demands, investing engineering resources to stay ahead, and striving for better profit under competition for the purpose of greater profit.

(B) 2017 Expected Sales and Its Sources

For 2017, Deutsche Bank expects that there will be 10% growth in the Data Center market, 9% in automotive, 7% in communications, and 4% in consumer and industrial markets. WSTS highlights that memory and sensor products would be the major chip products to bring semiconductor industry for growing. While, International Business Strategies expect that Data Center and automotive will be the major strengths for growth in 2017.

New developments in electronics/semiconductor industry include the applications of autonomous driving services, virtual reality, cloud IOT, etc. Although the related technology is not yet mature, the market size is huge and prospective. According to Gartner, a market survey institution, the compound annual growth rate of IOT appliance will be up to 30%. The future business opportunity is infinitive. Kinsus’ fastest-growing products such as SiP substrates, FCCSP substrates, embedded high-density substrates are exactly the wellpreparation for the industrial trend.

However, we have to be cautious that the variety of handheld devices. The market of semiconductor remains stable due to speedy shift to smartphone and 4G LTE. However, the yearly sale growth probably slows down due to the trend of high-end but low-price of products.

• (C) Significant Production and Marketing Policy

• A. We will continuously invest research and development resources to support the diversified needs of consuming products and expand micro fine circuit manufacturing process production line. Also we will invest to meet the need of Fab 10 nm product process in order to obtain the market opportunities.

• B. As the expanding scale in operation, we will continuously recruit the professional talent, import high quality systems and technology, and invest in automated production equipment to improve production yields in order to achieve the Company’s high-profit target.

• C. We will maintain the partnerships with the advanced wafer design companies, timely grasp the most updated market information, and complete process technology and product capacity preparation as early as possible in order to maintain the long-term competitiveness of the Company.

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English Translation of The Annual Report Originally Issued in Chinese

(3)Company development strategy

The components of portable and wearable devices miniature trend will continue. The demand on related SiP substrate, FCCSP substrates and embedded high-density substrates will remain strong. These are the substrate products applied on current products and for the transition to the future of virtual reality and cloud IOT terminal devices. Kinsus will do whatever we can to seize key opportunities in market and continue to adjust the layout for market changes. We hope to win in market and to share the growing performance results with our shareholders.

Sincerely Yours,

The Chairman and CEO Guo, Ming-Dong

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English Translation of The Annual Report Originally Issued in Chinese

2. A Company Profile

(1) Date of Incorporation: 9/11/ 2000

(2) A brief history of the Company

Year	Milestones
2000/09	Founded with NT$2.5 billion capital and NT$12 billion paid-up capital. Manufacturing mainly in BGA relatedproducts.
2000/12	Cash capital increased by issuing new shares of NT$100 million with NT$1.3 billion paid-up capital after increase in total.
2001/04	Cash capital increased by issuing new shares of NT$600 million with NT$1.9 billion paid-up capital after increase in total.
2001/05	Started operations.
2001/07	Be certified toQS 9000.
2001/12	Be certified to ISO 14000 - Environmental management.
2002/06	Corporation wentpublic.
2002/11	Cash capital increased by issuing new shares of NT$100 million with NT$2 billion paid-up capital after increase in total.
2003/03	Plant expansion to the 3rdfloor and the 4thfloor.
2003/09	Listed for tradingin emergingmarkets.
2003/12	Acquired the review by Industrial Science and Technology Committee on the submissions of “Science and technology product or technologysuccessful development and marketing”.
2004/06	Surplus capital increased by issuing new shares of NT$220 million with NT$2.22 billion paid-up capital after increase in total.
2004/11	Listed on Taiwan Stock Exchange.
2004/11	Plant built inQinghua: No.810,Zhonghua Rd.,Xinwu Dist.,Taoyuan City.
2005/05	Operating performance ranked the 2nd, return on assets ranked 15th, return on equity ratio ranked 31st, growth drive ranked 33rd, profitability ranked 38th, and business revenue ranked 355th among top 1000 manufacturingcompanies byCommonwealth Magazine.
2005/07	Surplus capital increased by issuing new shares of NT$378 million with NT$2.598 billion paid-up capital after increase in total.
2005/08	Cash capital increased by issuing new shares of NT$300 million with NT$2.898 billion paid-up capital after increase in total.
2005/10	Plant bought at No.8, Qingnian Rd.,Yangmei Dist.,Taoyuan City32661,Taiwan(R.O.C.).
2006/05	Cash capital increased by issuing new shares of NT$500 million with NT$3.398 billion paid-up capital after increase in total.
2006/05	Ranked 19th as Taiwan's mostprofitable companies byCommonwealth Magazine.
2006/07	Ranked 89th as Taiwan's most profitable companies by Digital Time Business among top 100 Taiwan Technology.
2006/08	Surplus capital increased by issuing new shares of NT$492 million with NT$3.89 billion paid-up capital after increase in total.

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English Translation of The Annual Report Originally Issued in Chinese

2006/11	Ranked 131stamongAsia’s top150 with 14 Taiwan Enterprises listed byBusiness Week Asia.
2007/03	Be certified to ISO 14001 - Environmental management and OHSAS 18001.
2007/05	Ranked No. 212 on business revenue byCommonwealth Magazine.
2007/08	Surplus capital increased by issuing new shares of NT$464 million with NT$4.354 billion paid-up capital after increase in total.
2008/05	Ranked 52ndon return on assets, 146thon equity ratio, 22ndon profitability, and 595thon business revenue amongtop1000 manufacturingcompanies byCommonwealth Magazine.
2008/08	Surplus capital increased by issuing new shares of NT$106 million with NT$4.46 billion paid-up capital after increase in total.
2009/05	Ranked 35thon profitability and 229thon business revenue among top 1000 manufacturing companies byCommonwealth Magazine.
2010/05	Ranked 48thon profitability and 234thon business revenue among top 1000 manufacturing companies byCommonwealth Magazine.
2010/08	InvestedPIOTEK COMPUTER(SUZHOU)CO.,LTD.
2011/05	Ranked 115thon profitability and 192ndon business revenue among top 1000 manufacturing companies byCommonwealth Magazine.
2012/05	Ranked 108thon profitability and 162ndon business revenue among top 1000 manufacturing companies byCommonwealth Magazine.
2013/03	Bought plant at Xinfeng: No.526, Sec. 2, Jianxing Rd., Xinfeng Township, Hsinchu County 304, Taiwan.
2013/04	Beingselected as 2012 Deloitte Asia Pacific top500 high tech,highgrowth enterprises.
2013/05	Ranked 116thon profitability and 158thon business revenue among top 1000 manufacturing companies byCommonwealth Magazine.
2014/04	Kick-off for buildingXinfengFactory.
2014/05	Ranked 720thon market capitalization among top 1000 enterprise in China, Taiwan, Hong Kong, and Macau byBusiness Today.
2015/05	Ranked 139thonprofitabilityand 56th on netprofit byCommonwealth Magazine.
2016/05	Invest in FuYangTechnologyCorp.

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English Translation of The Annual Report Originally Issued in Chinese

3. A Corporate Governance Report

• (1) Organizational system

• (A)The Company's structure

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Shareholders’
Meeting
Audit Committee
Board of
Directors
Compensation
Internal Audit
Committee
Office
Chairman
Chairman Office
CEO
Administration
General Manager R&D Center
Center
Operations Center
Sales & Quality
R&D Engineering Material Manufacturing
Marketing Control
Division Division Center Division
Dept. Dept.
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English Translation of The Annual Report Originally Issued in Chinese

(B)The tasks of its principal divisions

Dept.	Job Description
Chief Executive Officer (CEO)	1. Business planning and strategic planning. 2. Company long-term development policy planning. 3. Business monitoring, promoting and implementation.
Audit Office	Identify deficiencies in internal control system, assess the effectiveness and efficiencyof operations,andprovide appropriate improvement suggestions.
General Manager	Responsible for business plan development, business performance management and analysis, Investment analysis and benefit assessment, cost reduction and control, business process automation and improvement, annual budgeting, overseas business management, promotion and performance evaluation in other important projects, manufacturing capacity and standard work hours,rationalization ofpersonnel standards.
R&D Center	Advanced product and technology research and development, equipment automation, and building new plants.
Administration Center	Responsible for finance and investment, annual budgeting, credit control, and stocks services. Responsible for the planning and execution of human resource, general affairs, environmental and purchasing. Responsible for the planning and execution of web information.
Operations Center	Responsible for the integration of manufacturing quality and operational resources of the overallplanningand management.
Manufacturing Division	Responsible for substrates related products manufacturing and work objectives and effectiveness management, manufacturing cost control analysis and improvement andproductionplanning.
Quality Control Dept.	Responsible for the quality policy, objectives and systems developed and implemented in order to meet customers’ needs.
Material Center	Responsible for production scheduling, shipping schedule, the material management, transportation, warehousing and import/export and customs bonded business.
Engineering Division	Responsible for assessing process operations, and developing the most appropriate manufacturing process, and improving production technology and yield analysis, and new product process import stability and optimization testing.
Sales & Marketing Dept.	Responsible for the Company's product sales and marketing.
R&D Dept.	Responsible for coordinating the product, design, development, and facility services.

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English Translation of The Annual Report Originally Issued in Chinese

• (2) Information on the Company's directors, general manager, assistant general managers, deputy assistant general managers, and the supervisors of all the Company's divisions and branch units.

(a) Directors as of March 28, 2017

Title	Nationality/Cou ntry of Origin	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding When Elected	Shareholding When Elected	Current Shareholding	Current Shareholding	Spouse&Minor Shareholding	Spouse&Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience(Education)	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
							Shares	%	Shares	%	Shares	%	Shares	%			Title	Name	Relation
Chairman	R.O.C	Guo, Ming-Dong	Male	2015.6.11	3	2000.9.1	1,179,795	0.26%	1,069,795	0.24%	－	－	－	－	National Taipei Institute of Technology President/UNICAP ELECTRONICS	Note 1	－	－	－
Director	R.O.C	Tong,Zi-Xian	Male	2015.6.11	3	2000.9.1	200,000	0.04%	200,000	0.04%	－	－	－	－	Computer and Communication Engineering /Taipei Tech Chairman/PEGATRON Corp.	Note 2	－	－	－
Director	R.O.C	Lu, Jing	Female	2015.6.11	3	2003.9.1	1,151,607	0.26%	Resignation at 2016.10.31
Director	R.O.C	Hua Xu Investment Corp. Rep. : Su, Yan-Xue		2015.6.11	3	2000.9.1	58,233,091	13.06%	58,233,091	13.06%	－	－	－	－	Master of Industrial Engineering/Carnegie MellonUniv. Chief Investment Officer/ASUSTEK ComputerIncorp. Chief Investment Officer/PEGATRON Corp.	Note 3	－	－	－
Director	R.O.C	Su,Yan-Xue	Female	2015.6.11	3	2009.6.16	－	－	－	－	－	－	－	－	as above	as above	－	－	－
Director	R.O.C	Hua Xu Investment Rep : Wu, Xiang-Xiang		2015.6.11	3	2000.9.1	55,556,221	12.46%	55,556,221	12.46%	－	－	－	－	International Trade/Providence Univ. M.B.A./Univ. of St.Thomas Vice President/kun jian Consulting Co., Chief Investment Officer/PEGATRON Corp.	Note 4	－	－	－
Director	R.O.C	Wu,Xiang-Xiang	Female	2015.6.11	3	2003.9.1	－	－	－	－	－	－	－	－	as above	as above	－	－	－
Director	R.O.C	Zbeng,Zhong-Ren	Male	2015.6.11	3	2003.9.1	－	－	－	－	－	－	－	－	School of Law/Soochow Univ. PhD./Stanford University Dean&Professor/Law School of Shih Hsin Univ.	Note 5	－	－	－
Independent Director	R.O.C	Chen, Jin-Cai	Male	2015.6.11	3	2003.9.1	－	－	－	－	－	－	－	－	Graduate School/Tamkang Univ. M.P.A/Univ. of San Francisco President/Namchow Group	Note 6	－	－	－
Independent Director	R.O.C	Huang, Chun-Bao	Male	2015.6.11	3	2003.9.1	－	－	－	－	－	－	－	－	Electrical Engineering/National Taipei Institute of President& GM/HAVIX ELECTRONICS CO.,LTD.	Note 7	－	－	－
Independent Director	R.O.C	Wu, Hui-Huang	Male	2015.6.11	3	2010.6.18	－	－	－	－	－	－	－	－	Board Director& President/UNIVERSAL SCIENTIFIC INDUSTRIAL CO., LTD Director/Taiwan Electrical and Electronic Director/Taiwan Federation of Industry Director/Taiwan Province IndustryAsso.	Note 8	－	－	－

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English Translation of The Annual Report Originally Issued in Chinese

Note 1	CEO	Kinsus Interconnect TechnologyCorp.
	Chairman	Kinsus Corp.(USA).
	Director	Kinsus Investment, Pegavision Corp, Kinsus Holding (Samoa) Limited, Kinsus Holding (Cayman) Limited, Piotek Holding Ltd., Piotek Holdings Ltd.(Cayman),Piotek(HK)TradingLimited.
	Independent Director	TAIFLEX Scientific Corp.,SilergyCorp.
Note 2	Chairman	Pegatron Corp.(also the Executive CEO), Lumens Digital Optics Inc., Hua Wei Investment, Hua Yu Investment, Hua Xu Investment, Kinsus Investment,Pegavision Corp., Eslite Foundation for Culture and Arts,and Ri-Kuan Metal Corporation.
	Director	Asrock Inc., Hua Yuan Investment, Hua Wei Investment, Hua Wei International, The Eslite Spectrum Corporation, Ezhi Technologies, Inc., AS Fly Travel Service, Azurewave Technologies, Inc., FuYang Technology Corp, Pegatron Holding Ltd., Unihan Holding Ltd., Protek Global Holdings Ltd., Magnificent Brightness Ltd., Casetek Holdings Ltd., Casetek Holdings Limited(CAYMAN), Pegatron Holland Holding B.V.I., Digitek Global Holdings Ltd., AMA Holdings Ltd., Kinsus Corp.(USA), Powtek Holdings Limited, Cotek Holdings Limited, Grand Upright Technology Limited, Alliance Culture Foundation, Hanguang Education Foundation, Public Television Service, Ministry of Culture National Performing Arts Center, Koo Medical Foundation, Lung Yingtai Cultural Foundation, ASLINK PRECISION CO., LTD., Huang Da-fu Medical Education Promotion Foundation, Fair Winds Foundation, Relations Across the Taiwan Straits Development Research Foundation.
	Chairman	Taipei Computer Association
Note 3	Chairman	WYSE Research Inc.
	Director	GuangDian Cinema,KHL IV Venture Capital Corporation,Eslite Foundation for Culture and Arts.
	Independent Director	TXC Corporation.
Note 4	Director	OFCO Industrial Corp.,Kinsus Investment.,TongHsingElectronics Industries,Ltd.
Note 5	Director	LOTES Co. Ltd.
	Independent Director	Wistron Corporation,ThroughTek Co.,Ltd.
	Supervisor	Apex Material TechnologyCorp, Apacer TechnologyInc.,OTO Photonics Inc.
Note 6	Chairman	Win Semiconductors Corp.,Inventec EnergyCorp.,Win-Win Venture Capital Co.,Ltd.
	Assistant Chairman	Hiwin Technologies Corp.
	Director	Inventec Solar Energy Corp., Namchow (BVI), Nan Xin International, Brotzeit German restaurant and bar (ShangHai), . Tingyi (Cayman Islands), Namchow Oil, Namchow (Thailnad), WIN Semi USA Inc., Win Semiconductors, Cayman Island Co., Ltd., WinMEMS Technologies Holdings Co., Ltd., Chowhao Trading (ShangHai), Tianjin Yoshi Yoshi Food Co., Ltd., Yong Ju (Thailand), Namchow Oil (Guang Zhou), Xin Sheng SanVenture Capital, Lucky Royal Co., Ltd., Namchow Management Co., Tian Bo Co., ITEQ Corp., Inventec EnergyCorp.
	Independent Director	TongHsingElectronics Industries,Ltd.,PlexBio Co.,Ltd.

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English Translation of The Annual Report Originally Issued in Chinese

	Supervisor	Inventec Solar EnergyCorp.,TAIPEI 101
Note 7	Chairman & G/M	HAVIX Electronics Co.,Ltd.
	Independent Director	Pegatron Corp.
Note 8	Director	Taiwan Read Foundation
	Member of compensation committee	Merry Corp.
	Independent Director	Universal Microelectronics Co.,Ltd.

Major shareholders of the institutional shareholders

Name of the Company’s institutional shareholder	Major Shareholders of the Company’s institutional shareholder
Hua Wei Investment	Pegatron Corp.(100.00%)
Hua Yu Investment	Pegatron Corp.(100.00%)
HuaXuInvestment	PegatronCorp. (100.00%)

Major shareholders of the Company’s institutional shareholders

Name of major institutional shareholders of the Company’s institutional shareholder	Major Shareholders, if institutional, of major institutional shareholders of the Company’s institutional shareholder
Pegatron Corp.	Asustek Computer Incorporation (17.42%)

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English Translation of The Annual Report Originally Issued in Chinese

Professional qualifications and independence analysis of directors

Qualification Name	Meet One of the Following Professional Qualification Requirements, Together with at Least 5 Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least 5 Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least 5 Years Work Experience			Independence Criteria(Remark 2)	Independence Criteria(Remark 2)	Independence Criteria(Remark 2)	Independence Criteria(Remark 2)	Independence Criteria(Remark 2)	Independence Criteria(Remark 2)			Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
Guo, Ming-Dong	-	-	YES				V	V	V	V	V	V	V	2
Tong, Zi-Xian	-	-	YES			V	V		V	V	V	V	V	-
Lu, Jing (Remark 1)	-	-	YES				V	V	V	V	V	V	V	-
Su, Yan-Xue	-	-	YES	V	V	V	V	V	V	V	V	V		1
Wu, Xiang-Xiang	-	-	YES			V	V		V	V	V	V		-
Zheng, Zhong-Ren	YES	-	YES	V	V	V	V	V	V	V	V	V	V	1
Chen, Jin-Cai	YES	-	YES	V	V	V	V	V	V	V	V	V	V	2
Huang, Chun-Bao	-	-	YES	V	V	V	V	V	V	V	V	V	V	1
Wu, Hui-Huang	-	-	YES	V	V	V	V	V	V	V	V	V	V	1

Remark 1：She resigned from directorship on 2016.10.31. Her independency was reviewed based on the information provided before resignation.

• Remark 2：Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

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

• Not a director or supervisor of the Company’s affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary elected based on Security Act or local regulations.

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

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

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

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

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

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

• Not been a person of any conditions defined in Article 30 of the Company Law.

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

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English Translation of The Annual Report Originally Issued in Chinese

(b) The general manager, assistant general managers, deputy assistant general managers and the chief of all the Company's divisions and branch units

					As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017	As of March 28, 2017
Title	Nationality/ Country of Origin	Name	Gender	Date Effective	Shareholding		Spouse & Minor Shareholding		Shareholding by Title Nominee		Experience(Education)	Other Position	Managers who are Spouses or Within Two Degrees
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
CSO	R.O.C	Tong, Zi-Xian	Male	2014.11.01	200,000	0.04%	－	－	－	－	Computer and Communication Engineering /Taipei Tech Chairman/PEGTRON Corp.	Page 9/Note 2	－	－	－
CEO	R.O.C	Guo, Ming-Dong	Male	2000.09.11	1,069,795	0.24%	－	－	－	－	National Taipei Institute of Technology President/UNICAP ELECTRONICS	Page 9/Note 1	－	－	－
Assistant CEO	R.O.C	Lu, Jing	Female	2000.09.11	Resignation at 2016.10.31.
CTO	R.O.C	Zhang, Qian-Wei	Male	2000.09.11	391,614	0.09%	－	－	－	－	Mechanics/National Central Univ. PCB Manager/MANZ Electronics	Director of FuYang Technology Corp.	－	－	－
General Manager	R.O.C	Chen, He-Xu	Male	2000.09.11	361,002	0.08%	－	－	－	－	Physics/Qinghua Univ. Production Manger/Motorola	Director of Pegavision Corporation and FuYang Technology Corp.	－	－	－
COO	R.O.C	Hu, Gui-Qin	Female	2016.09.01	－	－	－	－	－	－	Chemical Engineering/Chung Yuan Christian General Manager/Tripod Technology Corporation	N/A	－	－	－
Senior Assistant GM	R.O.C	Huang, Geng-Fang	Male	2005.08.01	314,875	0.07%	－	－	－	－	Ta Hwa Univ. of Science&Technology Senior Manager/MITAC Int'l Corp.	N/A	－	－	－
Senior Assistant GM	R.O.C	Yang, De-Sheng	Male	2006.07.27	Resignation at 2016.12.31.
Assistant GM	R.O.C	Lin, Zhi-Wei	Male	2001.03.01	41,909	0.01%	－	－	－	－	Material Science & Enginnering/Qinghua Univ. QC Manager/AU Optronics Corp	N/A	－	－	－
Assistant GM	R.O.C	Huang, Sheng-Chuan	Male	2015.02.01	－	－	－	－	－	－	Mechanical Engineering/Univ. of Cambridge Senior Manager/UNICAP Electronics	N/A	－	－	－
Assistant GM	R.O.C	Wu, Wei-Wen	Male	2016.09.01	－	－	－	－	－	－	Master of Management/Wichita State Univ. Assistant GM/Tripod Technology Corporation	N/A	－	－	－
Finance Supervisor	R.O.C	Liu, Su-Zhen	Female	2010.08.01	19,400	0.00%	－	－	－	－	M.B.A/National Central Univ. Junior Manager/EY Accounting Firm	N/A	－	－	－

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English Translation of The Annual Report Originally Issued in Chinese

(c) Remuneration paid during 2016 to directors, the general manager, and assistant general manager

Unit: NT$’000

Title	Name	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)(Rmk10)	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)(Rmk10)	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Ratio of Total Compensation (A+B+C+D+E+F+G) to Net Income (%)(Rmk10)	Ratio of Total Compensation (A+B+C+D+E+F+G) to Net Income (%)(Rmk10)	Compensation Paid to Directors from an Invested Company Other than the Company’s Subsidiar (Rmk11)
		Base Compensation (A) (Rmk.2)		Severance Pay (B)		Bonus to Directors (C)(Rmk.3)		Allowances(D)(Rmk.4)				Salary, Bonuses, and Allowances (E) (Rmk5)		Severance Pay Profit (F)		Profit Sharing- Employee Bonus (G) (Rmk6)
		The Company	Companies in the consolidated financial statements (Rmk7)	The Company	Companies in the consolidated financial statements (Rmk7)	The Company	Companies in the consolidated financial statements (Rmk7)	The Company	Companies in the consolidated financial statements (Rmk7)	The Company	Companies in the consolidated financial statements (Rmk7)	The Company	Companies in the consolidated financial statements (Rmk7)	The Company	Companies in the consolidated financial statements (Rmk7)	The Company		Companies in the consolidated financial statements (Rmk8)		The Company	Companies in the consolidated financial statements (Rmk7)
																Cash	Stock	Cash	Stock
Chairman	Guo,Ming-Dong	-	-	-	-	20,911	20,911	240	240	0.95%	0.95%	12,667	12,667	90	90	19,314	-	19,314	-	2.38%	2.38%	N/A
Director	Tong,Zi-Xian
Director	Lu, Jing (Resignation at 2016.10.31.)
Director	Hua Xu Investment Rep.: Su, Yan-Xue
Director	Hua Yu Investment Rep.:Wu, Xiang-Xiang
Director	Zheng,Zhong-Ren
Independent Director	Chen, Jin-Cai
Independent Director	Huang, Chun-Bao
Independent Director	Wu, Hui-Huang

Note:

1. Compensation to directors and employee for 2016 has been approved by a board meeting held on 2017/02/08 and will be reported in the coming shareholders’ meeting. As of now, details of the proportion can’t be decided yet while it is estimated by the actual distribution rate in prior year.

2. The Severance pay listed above is an accrual while the actual payment is zero.

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English Translation of The Annual Report Originally Issued in Chinese

Range of Remuneration

Range of Remuneration	Name of Directors	Name of Directors	Name of Directors	Name of Directors
	Total of(A+B+C+D)		Total of(A+B+C+D+E+F+G)
	The company (Remark 8)	Companies in the consolidated financial statements(Remark 9)H	The company (Remark 8)	Companies in the consolidated financial statements(Remark 9)I
Under NT$ 2,000,000	Hua Xu Investment Representative: Su, Yan-Xue Hua Yu Investment Representative: Wu, Xiang-Xiang Zheng, Zhong-Ren Chen, Jin-Cai Huang, Chun-Bao Wu,Hui-Huang	Hua Xu Investment Representative: Su, Yan-Xue Hua Yu Investment Representative: Wu, Xiang-Xiang Zheng, Zhong-Ren Chen, Jin-Cai Huang, Chun-Bao Wu,Hui-Huang	Hua Xu Investment Representative: Su, Yan-Xue Hua Yu Investment Representative: Wu, Xiang-Xiang Zheng, Zhong-Ren Chen, Jin-Cai Huang, Chun-Bao Wu,Hui-Huang	Hua Xu Investment Representative: Su, Yan-Xue Hua Yu Investment Representative: Wu, Xiang-Xiang Zheng, Zhong-Ren Chen, Jin-Cai Huang, Chun-Bao Wu,Hui-Huang
NT$2,000,000 ~ NT$5,000,000	Lu,Jing	Lu,Jing	－	－
NT$5,000,000 ~ NT$10,000,000	Guo, Ming-Dong Tong,Zi-Xian	Guo, Ming-Dong Tong,Zi-Xian	－	－
NT$10,000,000 ~ NT$15,000,000	－	－	Guo, Ming-Dong Tong, Zi-Xian Lu,Jing	Guo, Ming-Dong Tong, Zi-Xian Lu,Jing
NT$15,000,000 ~ NT$30,000,000	－	－	－	－
NT$30,000,000 ~ NT$50,000,000	－	－	－	－
NT$50,000,000 ~ NT$100,000,000	－	－	－	－
Over NT$100,000,000	－	－	－	－
Total	9	9	9	9

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English Translation of The Annual Report Originally Issued in Chinese

Remark:

1. Board directors should be disclosed separately (Corporation-stockholder and Representative should be marked), and the payment should be displayed in a consolidated amount. The board directors who also act as Chairman or GM should fill in the following Form (3-1) or (3-2).

2. Refers to the latest pay which includes basic base compensation, professional allowance, severance pay, and the other bonuses.

3. Bonus to Directors had approved in board meeting before shareholder meeting.

4. Refers to the consolidated allowances which include honorarium, special disbursement, and the other allowances. The allowances which include housing, cars, and the other vehicles should be listed the nature and the cost of asset on actual or market value. If accompanied with drivers, plese remarktheir payment excluded from personal payment.

5. Refers to the consolidated remuneration received by directors who are also employees which include honorarium, special disbursement, and the other allowances. The allowances which include housing, cars, and the other vehicles should be listed the nature and the cost of asset on actual or market value. If accompanied with drivers, the drivers’ salary shall be remarked but excluded from the persons’ compensation. In addition, acquiring employee stock options, employee’s restricted stocks right and the right to subscribe in cash offerings shall be taken into consideration in recognizing the compensation cost based on IFRS#2, Share-based Compensation.

6. Refers to the consolidated remuneration received by directors who are also employees (GM, assistant GM, and the other managers) which include stock bonus and cash bonus should be listed the approved number in board meeting before shareholder meeting. If unable to forecast, take reference to the last year, and fill in the Form 1-3.

7. Disposed the consolidated payment of our company and all the other companies in this report.

8. The payment to all the board directors by our company would be disclosed.in the form of range of remuneration.

9. The consolidated payment to all the board directors by our company and the other companies would be listed in the form of range of remuneration.

10. 10.The after-tax net profit refers to the one happened in personal or individual financial statement in the latest year.

11. 11.a. This column should dispose the remuneration to the board directors from our affiliates and the other investments.

12. b. The remuneration to the board directors from our affiliates and the other investments should be including the column J and defined as other investment.

13. c. The remuneration received by directors refers to the one paid by other investment other than the Company’s Subsidiary in the positions of the board director, supervisor, or manager which include honorarium、special disbursement、and the other allowances.

14. *The forms here are for the purpose of information disposal, not applicable for taxation if conflicts aroused with law.

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English Translation of The Annual Report Originally Issued in Chinese

Remuneration of the general manager and assistant general managers

Unit: NT$’000

												Unit:	Unit:	NT$’000
		Base Compensation (A) (Rk 2)		Sever	ance Pay (B)	Bonus and Special All (Rk 3)		Disposition of Net Earnings (D) (Rk 4)				Ratio of Total Remuneration (A+B+C+D) t Nt		Compensation Paid to
Title	Name		emar			owance emar				emar		Income	o e (%)(Remark 8)	Supervisors from an Invested Company Other than the Company’s Subsidiary (Remark 9)
		The Company	Companies in the consolidated financial statements (Remark 5)	The Company	Companies in the consolidated financial statements (Remark 5)	The Company	Companies in the consolidated financial statements (Remark 5)	The Company		Companies in the consolidated financial statements (Remark 5)		The Company	Companies in the consolidated financial statements (Remark 5)
								Cash	Stock	Cash	Stock
CSO	Tong, Zi-Xian	31,363	31,363	810	810	9,293	9,293	52,544	-	52,544	-	4.21%	4.21%	N/A
CEO	Guo, Ming-Dong
Assistant CEO	Lu, Jing (Resignation at 2016.10.31)
CTO	Zhang, Qian-Wei
General Manager	Chen, He-Xu
COO	Hu, Gui-Qin (Inauguration at 2016.09.01)
Senior Assistant GM	Huang, Geng-Fang
Senior Assistant GM	Yang, De-Sheng (Resignation at 2016.12.31)
Assistant GM	Lin, Zhi-Wei
Assistant GM	Huang, Sheng-Chuan
Assistant GM	Wu, Wei-Wen (Inauguration at 2016.09.01)

• *It is required to be disclosed for a position equivalent to the General Manager, Assistant General Manager (example: President, CEO, Executive supervisor, etc.)

Note:

1. Compensation to directors and employee for 2016 has been approved by a board meeting held on 2017/02/08 and will be reported in the coming shareholders’ meeting. As of now, details of the proportion can’t be decided yet while it is estimated by the actual distribution rate in prior year.

2. The retirement pay listed above is based on an accrual only while the actual payment was zero.

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English Translation of The Annual Report Originally Issued in Chinese

Range of Remuneration

Range of Remuneration	Name of the general manager and assistant general managers	Name of the general manager and assistant general managers
	The company (Remark 6)	Companies in the consolidated financial statements(Remark 7)
Under NT$2,000,000	-	-
NT$2,000,000 ~ NT$5,000,000	Hu, Gui-Qin Wu, Wei-Wen	Hu, Gui-Qin Wu, Wei-Wen
NT$5,000,000 ~ NT$10,000,000	Tong, Zi-Xian Huang, Geng-Fang Yang, De-Sheng Lin, Zhi-Wei Huang, Sheng-Chuan	Tong, Zi-Xian Huang, Geng-Fang Yang, De-Sheng Lin, Zhi-Wei Huang, Sheng-Chuan
NT$10,000,000 ~ NT$15,000,000	Guo, Ming-Dong Lu, Jing Zhang, Qian-Wei Chen, He-Xu	Guo, Ming-Dong Lu, Jing Zhang, Qian-Wei Chen, He-Xu
NT$15,000,000 ~ NT$30,000,000	-	-
NT$30,000,000 ~ NT$50,000,000	-	-
NT$50,000,000 ~ NT$100,000,000	-	-
Over NT$100,000,000	-	-
Total	11	11

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English Translation of The Annual Report Originally Issued in Chinese

Remark:

1. GM, assistant GM should be disclosed separately, and the payment should be displayed in a consolidation. The board directors who also act as Chairman or GM should fill in this form and the following Form (1-1) or (1-2).

2. Refers to the latest pay of the GM, assistant GM which include basic base compensation, professional allowance, and severance pay.

3. Refers to the consolidated allowances of the GM, assistant GM which include honorarium, special disbursement, and the other allowances. The allowances which include housing, cars, and the other vehicles should be listed the nature and the cost of asset on actual or market value. If accompanied with drivers, the drivers’ salary shall be remarked but excluded from the persons’ compensation. In addition, acquiring employee stock options, employee’s restricted stocks right and the right to subscribe in cash offerings shall be taken into consideration in recognizing the compensation cost based on IFRS#2, Share-based Compensation.

4. Refers to the consolidated remuneration received by the GM, assistant GM who are which include stock bonus and cash bonus should be disposed the approved number in board meeting before shareholder meeting. If unable to forecast, take reference to the last year, and fill in the Form 1-3. The after-tax net profit refers to the one happened in personal or individual financial statement in the latest year.

5. Disposed the consolidated payment of our company and all the other companies in this report.

6. The payment to all the GM, assistant GM by our company would be disclosed.in the form of range of remuneration.

7. The payment to all the GM, assistant GM by our company and the other companies should be disclosed.in the form of range of remuneration.

8. The after-tax net profit refers to the one happened in personal or individual financial statement in the latest year.

9. a. This column should dispose the remuneration to the GM, assistant GM from our affiliates and the other investments.

10. b. The remuneration to the GM, assistant GM from our affiliates and the other investments should be included in column and defined as other investment.

11. c. The remuneration received by GM, assistant GM from our subsidiaries and the other investments other than the Company’s in the positions of the board director, supervisor, or manager which include honorarium, special disbursement, and the other allowances.

12. *The forms here are for the purpose of information disposal, not applicable for taxation if conflicts aroused with law.

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English Translation of The Annual Report Originally Issued in Chinese

The name of each individual and the corresponding remuneration amount

Unit: NT$’000

						Unit: NT$’000
	Title	Name	Stock Bonus	Cash Bonus	Total	% of Net income (%)
Managers	CSO	Tong, Zi-Xian	-	52,544	52,544	2.35%
	CEO	Guo, Ming-Dong
	Assistant CEO	Lu, Jing (Resignation at 2016.10.31)
	CTO	Zhang, Qian-Wei
	General Manager	Chen, He-Xu
	COO	Hu, Gui-Qin (Inauguration at 2016.09.01)
	Senior Assistant GM	Huang, Geng-Fang
	Senior Assistant GM	Yang, De-Sheng (Resignation at 2016.12.31)
	Assistant GM	Lin, Zhi-Wei
	Assistant GM	Huang, Sheng-Chuan
	Assistant GM	Wu, Wei-Wen (Inauguration at 2016.09.01)

Note: Compensation to employees for 2016 had been approved in Board meeting on 2017/02/08 and will be reported in shareholders’ meeting. As of now, details of the proportion as proposed above hadn’t been decided yet while it is estimated by the actual distribution rate in prior year.

Remark:

1. Names and titles should be disclosed individually and the earning distribution may be disclosed in consolidation.

2. The earnings distribution for the managers approved in board meeting which include stock bonus and cash bonus will be estimated by the numbers given last year. The after-tax net profit refers to the one happened in personal or individual financial statement in the latest year.

3. Scope of application of the Manager is regulated by TWSE file No.0920001301 on March 27, 2003 and defined as：(1) President and equivalent rank (2) Vice President and equivalent rank (3) Junior President and equivalent rank (4) Financial Supervisor(5)Accounting Supervisor(6) Other signed for management services and the rights of man.

4. Board directors, GM and assistant GM who receive employee bonuses (including stock dividends and cash bonus) should fill in this form and Form1-2.

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English Translation of The Annual Report Originally Issued in Chinese

• (d) Separately compare and describe total remuneration, as a percentage of net income stated in the parent company only financial reports or individual financial reports, as paid by this company and by each other company included in the consolidated financial statements during the past 2 fiscal years to directors, supervisors, general managers, and assistant general managers, and analyze and describe remuneration policies, standards, and packages, the procedure for determining remuneration, and its linkage to operating performance and future risk exposure

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

Unit: NT$’000

				Unit: NT$’000
Year Title	2016			2015
	Total remuneration	Total remuneration to net income(%)	Total remuneration	Total remuneration to net income(%)
Director	21,151	0.95%	26,266	0.90%
GM and Assistant GM	94,010	4.21%	100,886	3.47%

Note: Compensation to employees for 2016 had been approved in Board meeting on 2017/02/08 and will be reported in the annual shareholders’ meeting. As of now, details of the proportion as proposed above hadn’t been decided yet while it is estimated by the actual distribution rate in prior year.

• b.The ratios of remuneration paid to directors, presidents and vice presidents of the Company in the last two years, and the percentage to net income, in 2016 and 2015. The policy, standards, and portfolios for the payment of remuneration have been complied with the Company’s Article of Incorporation. The compensation to management employees is measured based on the employees’ personal achievements, contribution made to the business operation, and the market averages. The compensations to directors and management employees have been reviewed by the Company’s Compensation Committee, proposed to the Board of Directors and to be reported in annual stockholders’ meeting.

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English Translation of The Annual Report Originally Issued in Chinese

• (3) The state of the Company's implementation of corporate governance

• (A) The state of operations of the board of directors

A total of 6 (A) meetings of the Board of Directors were held in 2016. The attendance of directors was as follows:

Title	Name (Remark 1)	Attendance in Person(B)	By Proxy	Attendance Rate (%) 【Ｂ/Ａ】(Remark 2)	Note
Chairman	Guo, Ming-Dong	6	0	100%	Lu, Jing resigned at 2016.10.31and the number of her attending in board meetings was 5.
Director	Tong, Zi-Xian	5	0	83%
Director	Lu, Jing (Note)	5	0	100%
Director	Hua Xu Investment Representative: Su, Yan-Xue	4	2	67%
Director	Hua Yu Investment Representative: Wu, Xiang-Xiang	6	0	100%
Director	Cheng, Zhong-Ren	6	0	100%
Independent director	Chen, Jin-Cai	6	0	100%
Independent director	Huang, Chun-Bao	6	0	100%
Independent director	Wu, Hui-Huang	6	0	100%
Other mentionable items: 1.The date of board meeting, the term, the content of proposal in board meeting, the opinions of all independent directors, and the Company’s response or action to the independent directors’ opinions shall be specified in the meeting minutes if one of the following situations is met: (1) The items listed in article #14-3 of Security Act. (None) (2) In addition to Item # (1) above, those resolutions accompanying with independent directors’ written objection or qualification. (None) 2. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None 3. Measures taken to strengthen the functionalityof the board: None

Remark:

1. Director or supervisor, who is an institutional shareholder and its representative, should be revealed of the names.

2. (1) Supervisors resigning prior to the end of the year should be indicated in the notes column the date of resign. The actual attendance rate (%) is calculated based on the accumulation of attendance in Board meeting divided by the times of board meeting before his/her resigning.

3. (2) For any re-election of director/supervisor, the old and the new one should be revealed with remarks and the actual attendance rate (%) based on the accumulation of attendance in board meeting divided by the times of board meeting after his/her election.

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English Translation of The Annual Report Originally Issued in Chinese

(B)The state of operations of the audit committee

A total of 6 (A) Audit Committee meetings were held in the previous period. The attendance of the independent directors was as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance Rate (%)【Ｂ/Ａ】 (Remark)	Note
Independent director	Chen, Jin-Cai	6	0	100%
Independent director	Huang, Chun-Bao	6	0	100%
Independent director	Wu, Hui-Huang	6	0	100%
Other mentionable items: 1. The date of board meeting, the term, the content of proposal in board meeting, the opinions of all independent directors, and the Company’s response or action to the independent directors’ opinions shall be specified in the meeting minutes if one of the following situations is met: (1) The items listed in article #14-3 of Security Act. (None) (2) In addition to Item # (1) above, those resolutions accompanying with independent directors’ written objection or qualification. (None) 2. If there are independent directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: NA 3. Communications between the independent directors, the Company's chief internal auditor and CPAs (e.g. the items, methods and results of audits of corporate finance or operations, etc.) The independent directors periodically obtained reports from the chief internal auditors and CPAs.

Remark:

1. Independent Director resigning before the end of the year should be indicated in the notes column date of release. The actual attendance rate (%) is calculated based on the accumulation of attendance in board meeting divided by the times of board meeting before his/her resigning.

2. For any re-election of independent director, the old and the new one should be revealed with remarks and the actual attendance rate (%) based on the accumulation of attendance in board meeting divided by the times of board meeting after his/her election.

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(C) The state of the company's implementation of corporate governance, any departure of such implementation from the Corporate Governance BestPractice Principles for TWSE/TPEx Listed Companies, and the reason for any such departure

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?	Yes		“Code of practice for corporate governance” has been exposed on the company Web site and public observatories.	No obvious deviation
2. Shareholding structure & shareholders’ rights (1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure? (2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares? (3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosed information?	Yes Yes Yes Yes		(1)Spokesman system has been established according to regulations and the will handle related issues. (2)The board directors and the shareholders who hold more than 10%-owned holdings will be declared in accordance with the provisions of Declaration of Directors. (3)According to the company “internal control system”, “internal audit system” and other related laws and regulations. (4)According to the company “for possible insider trading, operating procedures”, “code of conduct” and other related laws and regulations.	No obvious deviation No obvious deviation No obvious deviation No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
3. Composition and Responsibilities of the Board of Directors (1) Does the Board develop and implement a diversified policy for the composition of its members? (2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee? (3) Does the company establish a standard to measure the performance of the Board, and implement it annually? (4) Does the company regularly evaluate the independence of CPAs?	Yes Yes	No No	(1)Member diversification is considered by the Board members. (2)Functional commissions will be created in order to meet the need of operating situation of the company and other various. (3)Will actively assessing relevant stipulations. (4)Board in assessing the independence of accountants and by appointment on 2016.12.26.	(1)No obvious deviation (2)Will actively assessing the need of Functional commissions. (3)Will actively assessing relevant stipulations. (4)No obvious deviation
4. Has a listed company assigned a specific or other department to take in-charge of detailed matters of implementing corporate governance? (including, but not limited to, furnishing directors or supervisors with information needed, preparing the data for board meeting and shareholders’ meeting, executing business registration, preparing the minutes of board and shareholders’ meeting.)	Yes		The Company has assigned the HR department and the finance department for taking responsibility of detailed matters of implementing corporate governance.	No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
5. Does the company establish a communication channel and build a designated section on its website for stakeholders (Including, but not limited to, shareholders, employees, customers and suppliers, etc.), as well as handle all the issues they care for in terms of corporate social responsibilities?	Yes		Spokesman system has been established according to regulations and the will handle related issues. Aggressively assess to establish zones of the interested on website.	No obvious deviation
6. Does the company appoint a professional shareholder service agencyto deal with shareholder affairs?	Yes		Companies entrust KGI stock agency to handle the relevant Affairs of the Department.	No obvious deviation
7. Information Disclosure (1) Does the company have a corporate website to disclose both financial standings and the status of corporate governance? (2) Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)?	Yes Yes		(1)The Company has set up a Chinese/English website to disclose information regarding the Company’s financials, business and corporate governance status. (2)Spokesman system has been established.	(1)No obvious deviation (2)No obvious deviation
8. Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations,rights of stakeholders,directors’ and	Yes		(1)The company in accordance with the relevant statutes provide personnel regulations to protect employees’ rights. (2)Spokesman system and company website have been established to keep good	No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)?			relationship with the interests. (3)Directors decree training are held as regulated. (4)Company crisis management policy、crisis measurement standard and relevant customer policy have been stipulated and put into practice. (5)Company directors have been appropriated liabilityinsurance.
9.The improvement status for the result of Corporate Governance Evaluation announced by Taiwan Stock Exchange. Achievements: The Company has disclosed in its web-side Information regarding corporate governance, including the Article of Incorporation and the comprehensive corporate governance framework. Complete English version of all financial statements, annual reports, notification of shareholders’ meeting, Handbooks for shareholders’ meeting as well as the meeting minutes have been well-disclosed and announced to the public prior to the required timing. In addition, the Company’s material information in both Chinese and English versions have always announced at the same time. To be enhanced in priority: To establish a specific whistleblower system forpublic use in the Company’s web-side.

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English Translation of The Annual Report Originally Issued in Chinese

(D)If the company has a compensation committee in place, the composition, duties, and operation of the compensation committee shall be disclosed

a. Professional Qualifications and Independence Analysis of Remuneration Committee Members

Title (Remark 1)	Criteria Name	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience			Independence Criteria (Remark 2)	Independence Criteria (Remark 2)	Independence Criteria (Remark 2)	Independence Criteria (Remark 2)			Number of Other Public Companies in Which the Individual is Concurrently Serving as an Remuneration Committee Member	Note
		An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university	A judge, public prosecutor, attorney, Certified Public Accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the Company	Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company	1	2	3	4	5	6	7	8
Independent Director	Chen, Jin-Cai	Yes	-	Yes	V	V	V	V	V	V	V	V	2
Independent Director	Huang, Chun-Bao	-	-	Yes	V	V	V	V	V	V	V	V	1
Independent Director	Wu, Hui-Huang	-	-	Yes	V	V	V	V	V	V	V	V	2

Remark: 1. Please fill columns for directors, independent directors, respectively, or others.

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

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

3. (2)Not a director or supervisor of affiliated companies. Not applicable in cases where the person is set up as an independent director of the parent company, the Company, or any subsidiary in accordance with this Act or local regulations.

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

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

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

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

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

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

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b.Attendance of Members at Remuneration Committee Meetings

• (a)There are 3 members in the Remuneration Committee.

• (b)Current member tenure: 2015/06/11-2018/06/10. A total of 4 (A) Remuneration Committee meetings were held in the previous period. The attendance record of the Remuneration Committee members was as follows:

Title	Name	Attendance in Person(B)	By Proxy	Attendance Rate (%) 【Ｂ/Ａ】	Note
Convener	Chen,Jin-Cai	4	0	100%
Committee Member	Huang, Chun-Bao	4	0	100%
Committee Member	Wu,Hui-Huang	4	0	100%
Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (e.g. the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): N/A 2. Resolutions of the remuneration committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting,session,content of the motion,all members’ opinions and the response to members’ opinion should be specified: N/A

Remark:

1. Remuneration committee member resign before the end of the year should be indicated in the notes column date of release, the actual attendance rate (%) based on the accumulation of attendance in board meeting.

2. If any Remuneration committee member re-election, the old and the new one should be revealed with remarks and the actual attendance rate (%) based on the accumulation of attendance in board meeting in the column.

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English Translation of The Annual Report Originally Issued in Chinese

(E)The state of the Company's performance of corporate social responsibilities

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best- Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
1. Corporate Governance Implementation (1)Does the company declare its corporate social responsibility policy and examine the results of the implementation? (2)Does the company provide educational training on corporate social responsibility on a regular basis? (3)Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board? (4)Does the company declare a reasonable salary remuneration policy, and integrate the employee performance appraisal system with its corporate social responsibility policy, as well as establish an effective reward and disciplinarysystem?	Yes Yes Yes	No	(1)We have established the Corporate Social and Environmental Responsibility Regulation and examine regularly. (2)Holding on-the-job training and Environmental Safety training regularly. (3)The charity activity is exercised by administration department, which include donation to the metropolitan Association of Police Friends, Firefighter Volunteer and other minority groups. (4)Company regularly conducts employee education and training for enhancing corporate ethics. According to the assessment results, reward or punishment will be given along with for inspire growth altogether.	(1)No obvious deviation (2)No obvious deviation (3)Not submitting to the Board yet (4)No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best- Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
2.Sustainable Environment Development (1)Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment? (2)Does the company establish proper environmental management systems based on the characteristics of their industries? (3)Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction?	Yes Yes Yes		(1)Companies are implementing garbage classification and recycling to reducing environmental impact. (2)Establishing industrial characteristics of waste water and air pollution prevention and control regulations and exercise by environmental safety management Department. (3)Implementing Paperless offices, advocating for energy saving in air conditioning in summer and turning off the lights. Checking greenhouse gas emissions on a regular basis, and obtaining the ISO 14064 certification. Expanding the water resource recycle system to enhance recycle rate to 30%.	(1)No obvious deviation (2)No obvious deviation (3)No obvious deviation
3.Preserving Public Welfare (1)Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2)Has the company set up an employee hotline or grievance mechanism to handle complaints with appropriate solutions?	Yes Yes		(1)The company shall submit work rules to the Labor Bureau for approval, and hold Labor Conference based on 「Measures for the implementation of the」 quarterly and submit the report to Labor Bureau for approval. (2)HR suggestion boxes are available for suggestions to the company.	(1)No obvious deviation (2)No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best- Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(3)Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis? (4)Does the company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them? (5)Does the company provide its employees with career development and training sessions? (6)Does the company establish any consumer protection mechanisms and appealing procedures regarding research development, purchasing, producing, operating and service? (7)Does the company advertise and label its goods and services according to relevant regulations and international standards? (8)Does the company evaluate the records of suppliers’ impact on the environment and society before taking on business partnerships?	Yes Yes Yes Yes Yes Yes		(3)In compliance with ISO14001 and OHSAS18001 international standards. Safety management plan is developed yearly, and carried out through meetings for self-inspection and occupational safety and health education training. (4)HR suggestion boxes are available for suggestions to the company. Significant impacts on the company's operation will be issued in public timely. (5)Company regularly conducts employee education and training to enhance staff career development. (6)Company does not supply products or service directly to consumers. The operational staff will be responsible for follow-up services. Company products are clearly labeled. (7)Yes. (8)Adopting EICC Enterprise Social Responsibility System and implementing Green thinking through purchase capacity. Prohibiting polluted materials expanding purchase environment toprotectproducts, prohibiting	(3)No obvious deviation (4)No obvious deviation (5)No obvious deviation (6)No obvious deviation (7)No obvious deviation (8)No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best- Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(9)Do the contracts between the company and its major suppliers include termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause appreciable impact on the environment and society?		NO	use of materials from conflicting regions. Requesting the suppliers to furnishing RoHS testing reports and the guaranty for products not to contain REACH SVHC. The Company includes conflict-free-minerals in supplier management system to exclude the materials production nations and respects EICC ethic standards and accepting the audit from its delegated parties. Complete evaluations are completely appropriated before collaborating with suppliers. (9)Contracts are not stipulated to terminate or cancel at any time	(9)It’s not stipulated that the contract can be suspended or terminated at any time.
4. Enhancing Information Disclosure (1)Does the company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System(MOPS)?	Yes		(1)The corporate social responsibilities(CSR) are revealed on its website and the Market Observation Post System (MOPS)	(1)No obvious deviation
5. If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe anydiscrepancybetween the Principles and their implementation: No obvious deviation
6. Other important information to facilitate better understandingof the company’s corporate social responsibility practices: None
7. A clear statement shall be made below if the corporate social responsibilityreports were verified byexternal certification institutions: None

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English Translation of The Annual Report Originally Issued in Chinese

(F)The state of the Company’s performance in the area of good faith management and the adoption of related measures

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1.Establishment of ethical corporate management policies and programs (1)Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement the policies? (2)Does the company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies? (3)Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies?	Yes Yes Yes		(1)The “Code of conduct for Integrity” approved at board meeting are revealed on its website and the Market Observation Post System (MOPS) (2)The “Code of conduct for Integrity” prohibits any dishonest behavior and prevention programs. (3)The “Code of conduct for Integrity” stipulates the scope in the prohibition of any dishonest behavior and prevention programs.	(1)No obvious deviation (2)No obvious deviation (3)No obvious deviation
2.Fulfill operations integrity policy (1)Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts? (2)Does the companyestablish an exclusively (or	Yes Yes		(1)The company evaluates business partners’ ethical records and include ethics-related clauses in business contracts (2)HR should implement credit management,and	(1)No obvious deviation (2)No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity? (3)Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? (4)Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, and are they audited by either internal auditors or CPAs on a regular basis? (5)Does the company regularly hold internal and external educational trainings on operational integrity?	Yes Yes Yes		exercises investigation when receiving any of the acts referred to questioned, prosecutors to the company. And the result will be published, if necessary, through legal channels to seek solutions. (3)The ”Code of Conduct for Integrity” is made as the business standard for the employees, contractors, suppliers, and business partners (4)Sound corporate accounting and internal control system, and audit plan is made and exercised by, internal auditors every year. (5)Company regularly conducts employee education and training, including for business ethical business courses.	(3)No obvious deviation (4)No obvious deviation (5)No obvious deviation
3.Operation of the integrity channel (1)Does the company establish both a reward or punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up? (2)Does the company establish standard operating procedures for confidential reportingon	Yes Yes		(1)“Employee reporting and complaint handling procedures” is made for the protection of supplier and employee reporting and complaint rights. (2)“Employee reporting and complaint handling procedures” is clearlystipulated the relevant	(1)No obvious deviation (2)No obvious deviation

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English Translation of The Annual Report Originally Issued in Chinese

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
investigating accusation cases? (3)Does the company provide proper whistleblower protection?	Yes		procedure and confidentiality. (3)“Employee reporting and complaint handling procedures” render protection to the petitioner from any possible revenge.	(3)No obvious deviation
4.Strengthening information disclosure (1)Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?	Yes		(1)The ”Code of Conduct for Integrity” has been revealed on corporate website. (http://www.kinsus.com.tw)	(1)No obvious deviation
5.If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe anydiscrepancybetween thepolicies and their implementation: None
6.Other important information to facilitate a better understandingof the company’s ethical corporate managementpolicies: None

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English Translation of The Annual Report Originally Issued in Chinese

• (G)If the Company has adopted corporate governance best-practice principles or related bylaws, disclose how these are to be searched.

• Please refer to the Company’s website at http://www.kinsus.com.tw/zh-TW/Download/otherinformation.

• (H)Other significant information that will provide a better understanding of the state of the company's implementation of corporate governance: None

• (I)The state of implementation of the company's internal control system

• a. For a Statement on Internal Control: Please refer to page 45 of the Statement of internal control.

• b. A CPA has been hired to carry out a special audit of the internal control system: None

• (J)For the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, disclose any sanctions imposed in accordance with the law upon the company or its internal personnel, any sanctions imposed by the company upon its internal personnel for violations of internal control system provisions, principal deficiencies, and the state of any efforts to make improvements: None

• (K)Material resolutions of a shareholders meeting or a board of directors meeting during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.

a. Material resolutions of 2016 shareholders meeting (at May 27, 2016)

Item	Date	Major resolutions
Shareholders’ meeting	May 27, 2016	A. Approval of the 2015 business report, financial statements and consolidated financial statements: Attending votes: 319,529,844(Of which the exercise of the voting rights by electronic means: 142,678,028) Favorable votes: 267,974,951(Of which the exercise of the voting rights by electronic means: 91,430,945) Unfavorable votes: 5,056(Of which the exercise of the voting rights by electronic means: 5,056) Invalid votes: 0 Abstention and Not votes: 51,549,837(Of which the exercise of the voting rights by electronic means: 51,242,027) Implementation of the situation:The resolution was adopted.

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English Translation of The Annual Report Originally Issued in Chinese

B. Approval of the distribution of 2015 retained earnings: (see Table 1 below) Attending votes: 319,529,844 (Of which the exercise of the voting rights by electronic means: 142,678,028) Favorable votes: 268,351,951 (Of which the exercise of the voting rights by electronic means: 91,807,945) Unfavorable votes: 31,056 (Of which the exercise of the voting rights by electronic means: 31,056) Invalid votes: 0 Abstention and Not votes: 51,146,837 (Of which the exercise of the voting rights by electronic means: 50,839,027) Implementation of the situation: The resolution was adopted and the dividends have been distributed on August 31, 2016 accordingly. C. Amend the Article of Incorporation Attending votes: 319,529,844 (Of which the exercise of the voting rights by electronic means: 142,678,028) Favorable votes: 268,390,951 (Of which the exercise of the voting rights by electronic means: 91,846,945) Unfavorable votes: 5,056 (Of which the exercise of the voting rights by electronic means: 5,056) Invalid votes: 0 Abstention and Not votes: 51,133,837 (Of which the exercise of the voting rights by electronic means: 50,826,027) Implementation of the situation: The resolution was adopted and has been implemented in accordance with the revised charter.

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Table 1

Kinsus Interconnect Technology Corporation

2015 Earnings Distribution Table

Item Beginning retained earnings Add: Other comprehensive income and loss - the impact of the actuarial gains and losses of benefits Add: Net profit after tax Distributable earnings Less: 10% Legal reserve Shareholder cash dividend (NT$3.5/share) Subtotal: Ending unappropriated retained earnings	Total (in NT$)
	$11,884,863,961 (8,721,698) 2,903,952,243
	14,780,094,506 (290,395,224) (1,559,075,000)
	(1,849,470,224)
	$12,930,624,282

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English Translation of The Annual Report Originally Issued in Chinese

b. Material resolutions from the meetings of board of directors

Date of board meeting	Major resolutions
2016/02/01	1. Approve 2015 compensation to employee and directors 2. 2015 Business report, parent-company-only financial statements, and consolidated financial statements 3. 2015 earnings distribution 4. 2015 representation letter for effectiveness on internal control structure 5. The 2016 annual shareholders’ meeting convened and related matters
2016/04/25	1. Participate in cash offering of the subsidiary, KINSUS INVESTMENT CO., LTD. 2. Resolve the addition and continuance of bank facility 3. Approve the endorsement for KINSUS INTERCONNECT TECHNOLOGY (SUZHOU) CORP.
2016/05/27	1. Dispose part of the operating equipment to related party
2016/07/25	1. Determine the measurement date for 2015 distribution of dividend 2. Distribution of 2015 compensation to directors 3. Propose the 2016 adjustment on managers’ compensations 4. Propose the amounts of employee compensation for managers 5. Approve the endorsement for PIOTEK COMPUTER (SUZHOU) CO., LTD. 6. Revise the budget of 2016 capital expenditures
2016/10/24	1. Approve the 2017 internal audit plan 2. Manager rotation 3. Resolve the addition and continuance of bank facility 4. Revise the budget of 2016 capital expenditures
2016/12/26	1. Approve the 2017 business plan and budget 2. Assess auditors’ independency, approve the engagement of auditors and the audit fee 3. Resolve the addition of bank facility 4. Determine the distribution of 2016 managers’ year-end bonus
2017/02/08	1. 2016 Business report, parent-company-only financial statements, and consolidated financial statements 2. 2016 earnings distribution 3. Approve 2016 compensation to employee and directors 4. 2016 representation letter for effectiveness on internal control structure

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English Translation of The Annual Report Originally Issued in Chinese

     5. Amend the Article of Incorporation

     6. Amend “Practice Guidance for Loaning to Others”

     7. Amend “Practice Guidance for Providing Endorsement/Guarantee”

     8. Amend “Procedures for Halt and Resumption Applications”

     9. Amend “Practical Guidance for Corporate Governance” 10. By-electing a director

     11. List of candidates for nomination of directors

     12. To release the newly by-elected director from prohibition of non-compete. 13. The 2017 annual shareholders’ meeting convened and related matters

  - 2017/03/30 1. To review the qualifications of the nominee for director to be by-elected

     2. Amend “Procedures for Acquisition and Disposal of Assets”

     3. Approve the revision of 2017 annual shareholders’ meeting convened and related matters

     4. Amend “The Rule for Establishing Audit Committee ”

• (L)Where, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, a director or supervisor has expressed a dissenting opinion with respect to a material resolution passed by the board of directors, and said dissenting opinion has been recorded or prepared as a written declaration, disclose the principal content thereof: None

• (M)A summary of resignations and dismissals, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, of the company's chairman, general manager, principal accounting officer, principal financial officer, chief internal auditor, and principal research and development officer: None

• (4) Information on CPA professional fees

Name of AccountingFirm	Name ofCPA	Audit Period	Note
Ernst & Young	Huang,Yi-Hui	2016
	Zhang,Zhi-Ming

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English Translation of The Annual Report Originally Issued in Chinese

Category Range	Category Range	Audit Fee	Non- Audit Fee	Total
1	Less than $2,000 thousand		V
2	$2,000 thousand (inclusive) - $4,000 thousand
3	$4,000 thousand (inclusive) - $6,000 thousand	V		V
4	$6,000 thousand (inclusive) - $8,000 thousand
5	$8,000 thousand (inclusive) - $10,000 thousand
6	$10,000 thousand and more

• (A)The amount of non-audit fees paid to the CPAs, their firm, and its affiliated enterprises accounting for at least one-fourth of the amount of audit fees: None

• (B) Change of the accounting firm with a decrease in the audit fees paid in the year of change compared to the year before the change: None

• (C) The audit fees reduced by 15% or more compared to the previous year: None

• (5) Information on replacement of certified public accountant: None

• (6) Where the Company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held: None

• (7) Any transfer of equity interests and/or pledge of or change in equity interests (during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report) by a director, supervisor, managerial officer, or shareholder with a stake of more than 10 percent during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.

• (A)Changes in equity due to transfer and pledge by directors, supervisors, officers, and greaterthan-10-percent shareholders

  • a. Changes in shareholdings of Directors, Officers, and Major Shareholders

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				Unit:Shares	Unit:Shares
Title	Name	2016		As of March 28,2017
		Increase (Decrease) in # of Shares Held	Increase (Decrease) in # of Shares Pledged	Increase (Decrease) in # of Shares Held	Increase (Decrease) in # of Shares Pledged
Chairman & CEO	Guo,Ming-Dong	─	─	(100,000)	─
Director & CSO	Tung,Tzu-Hsien	─	─	─	─
Director & Assistant CEO	Lu, Jing	Resignation at 2016.10.31		Resignation at 2016.10.31
Director (major shareholder)	Hua Xu Investment Co., Ltd. Corporate, rep: Su,Yan-Xue	─	─	─	─
	Su,Yan-Xue	─	─	─	─
Director (major shareholder)	Hua Yu Investment Co., Ltd. Corporate, rep.: Wu,Xiang-Xiang	─	─	─	─
	Wu,Xiang-Xiang	─	─	─	─
Director	Cheng,Zhong-Ren	─	─	─	─
Independent Director	Huang,Chun-Bao	─	─	─	─
Independent Director	Chen,Jin-Cai	─	─	─	─
Independent Director	Wu,Hui-Huang	─	─	─	─
Major Shareholder	Hua Wei Investment Co.,Ltd.	─	─	─	─
Technical Director	Chang,Chien-Wei	─	─	─	─
General manager	Chen,He-Xu	─	─	─	─
COO	Hu,Gui-Qin	Inauguration at 2016.09.01		─	─
Senior assistant GM	Huang,Geng-Fang	─	─	─	─
Senior assistant GM	Yang,De-Sheng	Resignation at 2016.12.31		Resignation at 2016.12.31
Assistant GM	Lin,Zhi-Wei	─	─	(14,000)	─
Assistant GM	Huang,Sheng-Chuan	─	─	─	─
Assistant GM	Wu,Wei-Wen	Inauguration at 2016.09.01		─	─
Chief FIN/ACC manager	Liu, Su-Zhen	─	─	─	─

(B)Where the counterparty in any transfer or pledge of equity is a related party, disclose the counterparty's name, its relationship with the Company as well as the Company's directors, supervisors, and greater-than-10-percent shareholders, and the number of shares acquired or pledged: None

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• (8) Relationship information, if among the Company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another:

							Title or Name of Its Related	Title or Name of Its Related
Name	Shares Held		Shares Held by Spouse or Minor Children		Total Shares Held in the Name of Others		Party, Spouse, or Relative Within the Second Degree of Kinship That Is Among Ten Largest Shareholders and Their Relationship		Note
	# of Shares	Shareholding Percentage	# of Shares	Shareholding Percentage	# of Shares	Shareholding Percentage	Title (or Name)	Relationship
Hua Wei Investment Co., Ltd.	60,128,417	13.48%	-	-	-	-	Hua Xu Investment Co., Ltd., Hua Yu Investment Co.,Ltd.	All are 100% owned by Pegatron Corp.	-
							Hua Wei	All are 100%
Hua Xu Investment Co., Ltd. (Representative: Su, Yan-Xue)	58,233,091	13.06%	-	-	-	-	Investment Co., Ltd., Hua Yu Investment Co.,Ltd.	owned by Pegatron Corp.	-
Su,Yan-Xue	-	-	-	-	-	-	-	-	-
							Hua Wei	All are 100%
Hua Yu Investment Co., Ltd. (Representative: Wu, Xiang-Xiang)	55,556,221	12.46%	-	-	-	-	Investment Co., Ltd., Hua Xu Investment Co.,Ltd.	owned by Pegatron Corp.	-
Wu,Xiang-Xiang	-	-	-	-	-	-	-	-	-
Fubon Life Assurance Co., Ltd.	17,800,000	3.99%
Nan Shan Life Insurance CompanyLtd.	15,670,000	3.51%	-	-	-	-	-	-	-
HSBC Westbury Large Enterprise Strategic Trust Fund	7,857,000	1.76%
Chunghwa Post	7,573,000	1.70%	-	-	-	-	-	-	-
Labor Pension Fund (New Scheme)	5,628,500	1.26%
Cathay Life Insurance Co., Ltd.	5,436,000	1.22%	-	-	-	-	-	-	-
CITI Norway Central Bank Investment Trust Account	4,600,571	1.03%	-	-	-	-	-	-	-

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• (9) The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the Company

Consolidated Shareholding Percentage

			Measurement date: Dec. 31,2016;Unit: Shares;%	Measurement date: Dec. 31,2016;Unit: Shares;%	Measurement date: Dec. 31,2016;Unit: Shares;%	Measurement date: Dec. 31,2016;Unit: Shares;%
Invested Enterprise	Investment by the Company		Investment by Directors, Supervisors, Officers, and Directly or Indirectly Controlled Companies		Consolidated Investment
	# of Shares	Shareholding Percentage	# of Shares	Shareholding Percentage	# of Shares	Shareholding Percentage
KINSUS CORP.(USA)	500,000	100%	－	－	500,000	100%
KINSUS HOLDING (SAMOA) LIMITED	166,308,720	100%	－	－	166,308,720	100%
KINSUS HOLDING (CAYMAN) LIMITED	－	－	72,000,000	100%	72,000,000	100%
KINSUS INTERCONNECT TECHNOLOGY (SUZHOU) CORP.	－	－	－	100%	－	100%
KINSUS INVESTMENT CO., LTD.	100,000,000	100%	－	－	100,000,000	100%
PEGAVISION CORP.	－	－	37,219,339	62.03%	37,219,339	62.03%
PIOTEK HOLDINGS LTD.(CAYMAN)	－	－	187,755,000	100%	187,755,000	100%
PIOTEK HOLDING LTD.	－	－	139,840,790	100%	139,840,790	100%
PIOTEK (H.K.) TRADING LIMITED.	－	－	200,000	100%	200,000	100%
PIOTEK COMPUTER (SUZHOU) CO. LTD.	－	－	－	100%	－	100%
PEGAVISION HOLDINGS CORPORATION	－	－	2,130,000	100%	2,130,000	100%
PEGAVISION CONTACT LENSES (SHANGHAI) CORPORATION	－	－	－	100%	－	100%
XIANG SHUO (SUZHOU) TRADING LIMITED	－	－	－	100%	－	100%
PEGAVISION JAPAN INC.		－	198	100%	198	100%

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Kinsus Interconnect Technology Corp. Statement on Internal Control Systems

Date: February 8[th] , 2017

Based on the results of self-inspection of the Company’s internal control system in 2016, the Company hereby states the following:

• (1)The Company is fully aware that establishing, implementing, and maintaining an internal control system are the responsibilities of its board of directors and officers. The Company has established such a system to provide reasonable assurance regarding the achievement of such objectives as effectiveness and efficiency of operations (including profits, performance, and safeguarding of assets), reliability of financial reporting, and compliance with applicable laws and regulations.

• (2)There are inherent limitations to every internal control system. An effective internal control system can only provide reasonable assurance regarding the achievement of the aforesaid three objectives in spite of how well-designed it is. Moreover, the effectiveness of an internal control system may vary with changes in environments or circumstances. Nevertheless, the internal control system of the Company comes with a self-supervision mechanism. The Company will take corrective actions immediately after a deficiency is identified.

• (3)The Company determines whether the design and implementation of its internal control system are effective according to the criteria for effectiveness of internal control systems as prescribed in the Regulations Governing Establishment of Internal Control Systems by Public Companies (hereinafter referred to as “the Regulations”). The internal control system criteria adopted in the Regulations divide an internal control system into five constituent elements based on the management and control processes: a. control environment; b. risk assessment; c. control activities; d. information and communications; and e. monitoring. Each constituent element also comprises several items. See the Regulations for the above-mentioned items.

• (4)The Company has adopted the aforesaid internal control system criteria to inspect the effectiveness of the design and implementation of its internal control system.

• (5)According to the results of the inspection mentioned above, the Company believes that its internal control system (the supervision and management of its subsidiaries are included) as of December 31, 2016, including the design and implementation of the internal control system regarding the perceived level of achievement of the objectives of operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable laws and regulations, is effective, and that it can reasonably assure the achievement of the aforesaid objectives.

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• (6)This statement will become an essential part of the Company’s annual report and prospectus and be disclosed to the public. If the Company is found to make a false statement, conceal information, or violate regulations regarding the disclosed content, it will be subject to the legal liabilities of Articles 20, 32, 171, and 174 of the Securities and Exchange Act.

• (7)This statement was adopted by the board of directors of the Company on February 8, 2017. None of the seven attending directors objected to this statement as all of them approved the content of this statement. Thus, a pronouncement is made herein.

Kinsus Interconnect Technology Corp.

The Chairman: Guo, Ming-Dong

The General Manager: Chen, He-Xu

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4. Information on Capital Raising Activities

(1) Capital and Shares

(A)Sources of Capital Stock

a. Types of Shares

a. Types of Shares
	As		of March 28,2017;Unit: Shares
Type of Shares	Authorized Capital Stock			Remark
	OutstandingShares (Note)	Unissued Shares	Total
Registered common stock	446,000,000	104,000,000	550,000,000	Note

Note: The Company has gone public since Nov. 1, 2004. The shares outstanding are all listed.

b. Formation of Capital Stock

As of March 28, 2017

Month & Year	Issue Price ($)	Authorized	Capital Stock	Paid-UpCapital Stock	Paid-UpCapital Stock		Note	Note
		# of Shares (Thousand Shares)	Amount (Thousand Dollars)	# of Shares (Thousand Shares)	Amount (Thousand Dollars)	Source of Capital Stock	Offsetting Payment of Shares with Properties Other Than Cash	Others
Sep. 2000	10	250,000	2,500,000	120,000	1,200,000	Startup capital 1,200,000	None	－
Dec. 2000	10	250,000	2,500,000	130,000	1,300,000	Cash addition 100,000	None	Note 1
April 2001	10	250,000	2,500,000	190,000	1,900,000	Cash addition 600,000	None	Note 2
Nov. 2002	10	250,000	2,500,000	200,000	2,000,000	Cash addition 100,000	None	Note 3
July 2004	10	288,000	2,880,000	222,000	2,220,000	Capitalization of earnings 220,000	None	Note 4
Aug. 2005	10	370,000	3,700,000	259,800	2,598,000	Capitalization of earnings 378,000	None	Note 5
Sep. 2005	10	370,000	3,700,000	289,800	2,898,000	Cash addition 300,000	None	Note 6
June 2006	10	550,000	3,700,000	339,800	3,398,000	Cash addition 500,000	None	Note 7
Sep. 2006	10	550,000	5,500,000	389,000	3,890,000	Capitalization of earnings 492,000	None	Note 8
Sep. 2007	10	550,000	5,500,000	435,400	4,354,000	Capitalization of earnings 464,000	None	Note 9
Sep. 2008	10	550,000	5,500,000	446,000	4,460,000	Capitalization of earnings 106,000	None	Note 10

Note 1: Approved by the Ministry of Economic Affairs with the Letter of Jing-(090)-Shang No. 09001013780 dated January 15, 2001

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• Note 2: Approved by the Ministry of Economic Affairs with the Letter of Jing-(090)-Shang No. 09001129300 dated April 17, 2001

• Note 3: Letter of (91)-Tai-Cai-Zheng-(Yi)-Zi No. 0910149830 issued by the Securities and Futures Commission, Ministry of Finance on September 11, 2002

• Note 4: Letter of (93)-Tai-Cai-Zheng-(Yi)-Zi No. 0930124569 issued by the Securities and Futures Commission, Ministry of Finance on June 2, 2004

• Note 5: Letter of Jin-Guan-Zheng-Yi-Zi No. 0940126584 issued by the Financial Supervisory Commission, Executive Yuan on July 1, 2005

• Note 6: Letter of Jin-Guan-Zheng-Yi-Zi No. 0940130374 issued by the Financial Supervisory Commission, Executive Yuan on August 2, 2005

• Note 7: Letter of Jin-Guan-Zheng-Yi-Zi No. 0950108623 issued by the Financial Supervisory Commission, Executive Yuan on March 24, 2006

• Note 8: Letter of Jin-Guan-Zheng-Yi-Zi No. 0950128559 issued by the Financial Supervisory Commission, Executive Yuan on July 5, 2006

• Note 9: Letter of Jin-Guan-Zheng-Yi-Zi No. 0960031093 issued by the Financial Supervisory Commission, Executive Yuan on June 21, 2007

• Note 10: Letter of Jin-Guan-Zheng-Yi-Zi No. 0970030373 issued by the Financial Supervisory Commission, Executive Yuan on June 18, 2008

(B)Shareholder Structure

As of March 28, 2017; Unit: Shares

Shareholder Structure Quantity	Government Agencies	Financial Institutions	Other Corporations	Individuals	Foreign Institutions & Foreigners	Total
# of Persons	0	25	165	22,737	255	23,182
# of Shares Held	0	53,694,000	208,350,823	93,902,297	90,052,880	446,000,000
Shareholding Percentage	0.00%	12.04%	46.72%	21.05%	20.19%	100%
Note: No shares are held by investors in Mainland China.

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(C)Diffusion of Ownership

Par at NT$10 per share; As of March 28, 2017

Scale of Shareholding	# of Shareholders	# of Shares Held	Shareholding Percentage
1 to 999	3,855	456,215	0.10%
1,000 to 5,000	15,648	30,423,661	6.82%
5,001 to 10,000	1,932	15,381,520	3.45%
10,001 to 15,000	503	6,445,276	1.44%
15,001 to 20,000	344	6,432,898	1.44%
20,001 to 30,000	269	6,991,289	1.57%
30,001 to 50,000	213	8,753,254	1.96%
50,001 to 100,000	182	12,913,547	2.89%
100,001 to 200,000	84	12,358,273	2.77%
200,001 to 400,000	62	18,095,307	4.06%
400,001 to 600,000	31	14,972,681	3.36%
600,001 to 800,000	12	8,233,879	1.85%
800,001 to 1,000,000	9	8,144,578	1.83%
1,000,001 to 1,000,000,000	38	296,397,622	66.46%
Total	23,182	446,000,000	100.00%

(D)List of principal shareholders

The names, numbers of owned shares, and shareholding percentages of those who own 5% or more of the total issued shares or whose shareholding percentage is among the top ten.

As of March 28, 2017; Unit: Shares	As of March 28, 2017; Unit: Shares	As of March 28, 2017; Unit: Shares
Shares Name of Major Shareholders	# of Shares Held	Shareholding Percentage
Hua Wei Investment Co., Ltd.	60,128,417	13.48%
Hua Xu Investment Co., Ltd.	58,233,091	13.06%
Hua Yu Investment Co., Ltd.	55,556,221	12.46%
Fubon Life Assurance Co., Ltd.	17,800,000	3.99%
Nan Shan Life Insurance Company, Ltd.	15,670,000	3.51%
HSBC Westbury Large Enterprise Strategic Trust Fund	7,857,000	1.76%
Chunghwa Post	7,573,000	1.70%
Labor Pension Fund (New Scheme)	5,628,500	1.26%
Cathay Life Insurance Co., Ltd.	5,436,000	1.22%
CITI Norway Central Bank Investment Trust Account	4,600,571	1.03%

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• (E)Share prices for the past 2 fiscal years, together with the company's net worth per share, earnings per share, dividends per share, and related information.

Unit: NT$

					Unit: NT$
Item	Year			2015	2016
Market Price per Share	Highest			106.50	80.8
	Lowest			49.90	58.9
	Average			76.63	70.26
Net Worth per Share	Before Distribution			63.66	64.73
	After Distribution			60.16	(Note)
Earnings per Share	Weighted Average # of Shares			446,000,000	446,000,000
	Earnings per Share	Before Adjustment		6.51	5.01
		After Adjustment		6.51	(Note)
Dividends per Share		Cash Dividends		3.5	(Note)
	Stock Dividends		Stock Dividends from Retained Earnings	－	( Note )
			Stock Dividends from Capital Reserves	－	( Note )
	Accumulated Unpaid Dividends			－	－
Analysis of Return on Investment	Price/Earnings Ratio			11.77	14.02
	Price/Dividend Ratio			21.89	(Note)
	Cash Dividend Yield			4.57%	( Note )

Note: The distribution of earnings in 2016 has been approved by the board of directors, but has not been resolved at the shareholders’ meeting.

• (F)The Company's dividend policy and implementation

a. The Company's Dividend Policy

The Company, if making profits in current year, shall distribute the earnings in the following order:

1. Payment of all taxes and dues;

2. Offset prior years’ operation losses;

3. Set aside 10% of the remaining amount after deducting items (a) and (b) as legal reserve;

4. Set aside or reverse special reserve in accordance with law and regulations;

5. The distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders’ meeting.

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The Company is in an industry with versatile environment. For long-term finance planning requirements and to meet the shareholders’ demand for cash, dividend policy aims for a steady balance. Cash dividends distributed each year cannot be less than 10% of the total dividends paid.

b. Dividend Distributions to Be Proposed at the Shareholders' Meeting

In 2016, the Company had a distributable earning of NT$15,163,370,576 after taxes, and set aside 10% of the amount, that is NT$223,370,459, as legal reserve, and special reserve of NT$613,915. The following distribution is proposed in accordance with the Articles of Incorporation:

(a)Shareholder dividends: NT$1,336,350,000, all distributed in the form of cash

(b)Unappropriated retained earnings at the end of the period: NT$13,603,036,922.

Kinsus Interconnect Technology Corp. Earnings Distribution Schedule

2016

Kinsus Interconnect Technology Corp. Earnings Distribution Schedule 2016
Item	Unit: NTD Amount
Unappropriated retained earnings (at beginning of period) Less:Other comprehensive income in 2016 - actuarial gains of defined benefit plans Add: Net income in 2016 Distributable earnings Less: 10% legal reserve Special reserve Shareholder bonuses ($3 per share in cash) Subtotal Unappropriated retained earnings (at end of period) Note: the number of shares allocated	$12,930,624,282 (958,296) 2,233,704,590
	15,163,370,576 (223,370,459) (613,195) (1,336,350,000)
	(1,560,333,654)
	$13,603,036,922
	445,450,000

Calculation Description:

The current paid-up capital of NT$ 4,460,000,000 (including 550,000 shares of treasury shares)

• c. Explanation of Expected Material Changes in the Dividend Policy: None

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• (G)Effect upon business performance and earnings per share of any stock dividend distribution proposed or adopted at the most recent shareholders' meeting

Regarding the distribution of earnings of the Company for 2016, the board of directors approved the proposal on February 8, 2017 to distribute shareholder bonuses totaling $1,336,350 thousand in the form of cash only. Thus, it is not applicable.

• (H)Compensation of employees, directors, and supervisors

• a. The percentages or ranges with respect to employee, director, and supervisor compensation, as set forth in the company's articles of incorporation:

The Company, if making profits in current year, shall provide the ratio of employee compensation to “income before tax and the employee and directors’ compensation to be provided” at less than 10% and the ratio of directors’ compensation to “income before tax and the employee and directors’ compensation to be provided” at be more than 1%, provided that all accumulated deficits, if any, are fully offset.

The employees’ compensation can be distributed in cash or stocks. The employees receiving the stock dividends may include employees in affiliated companies who met certain conditions stipulated by the Board of Directors.

Employee and directors’ compensation is to report in the shareholders’ meeting.

• b. The basis for estimating the amount of employee, director, and supervisor compensation, for calculating the number of shares to be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period: None

• c. Information on any approval by the board of directors of distribution of compensation:

• (a) Regarding the compensation to employee and directors of the Company for 2016 the board of directors approved the proposal on February 8, 2017 to distribute NT$343,533 thousand and NT$20,911 thousand for employee and director compensation respectively.

• (b) The proposed amount of employee stock bonuses to be distributed, and the size of such an amount as a percentage of the sum of the after-tax net income stated in the separate or individual financial reports for the current period and total employee bonuses: N/A

• d. The actual distribution of employee, director, and supervisor compensation for the previous fiscal year (with an indication of the number of shares, monetary amount, and stock price,

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of the shares distributed), and, if there is any discrepancy between the actual distribution and the recognized employee, director, or supervisor compensation, additionally the discrepancy, cause, and how it is treated.

The actual distribution of employee bonuses and director/supervisor compensation by the Company for 2015 is as follows:

Item	Earnings Distribution for 2015	Earnings Distribution for 2015	Discrepancy	Cause and Explanation of Discrepancy
	Adopted at Shareholders’ Meeting on May27, 2016	Actual Distribution
Director/Supervisor Compensation Employee Cash Bonuses	$26,026 thousand $442,444 thousand	$26,026 thousand $442,444 thousand	- -	- -

• (I)Share repurchases: The Company repurchased its own shares as below.

Repurchase term	Second time
Purpose	Transfer to employee
Duration	7/28/2015~9/27/2015
Price interval	NT$50~100
Shares andquantitybrought back	Common share
Amount	NT$32,884,993
Shares eliminated or transferred	0
Sharequantityaccumulated	550,000 shares
Sharequantityaccumulated to total shares outstanding	0.12%

(2)Issuance of corporate bonds: None

(3)Issuance of preferred shares: None

(4)Issuance of global depository receipts: None

(5)Issuance of employee share subscription warrants: None

(6)New restricted employee Shares: None

(7)Mergers, acquisitions, and issuance of new shares due to acquisition of shares of other companies

• (A)Where the Company completed a merger, acquisition, or issuance of new shares due to acquisition of shares of other companies in the most recent year and during the current period up to the date of printing of the annual report, the following matters shall be disclosed: None

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• (B)Where, in the most recent year and during the current period up to the date of printing of the annual report, the board of directors adopted a resolution approving a merger, acquisition, or issuance of new shares due to acquisition of shares of other companies, the state of the plan's implementation together with the basic information of the company (or companies) to be merged, acquired, or purchased through acquisition of shares shall be disclosed. Where a merger, acquisition, or issuance of new shares due to acquisition of shares of other companies is currently in progress, the state of the plan's implementation and its effect on shareholders' equity shall be disclosed: None

• (8)Implementation of the Company's capital allocation plans

• (A)Description of the plans: Each uncompleted public issue or private placement of securities, and issues or placements that were completed in the most recent three years but have not yet fully yielded the planned benefits: N/A

• (B)Status of implementation: N/A

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5. An Overview of Operations

(1)A description of the business

(A)Scope of Business

• a. Primary Business Areas

• (a)CC01080 Manufacturing of electronic components.

• (b)CC01990 Manufacturing of other electrical and electronic mechanical equipment.

• (c)CB01990 Manufacturing of other machinery.

• (d)CQ01010 Manufacturing of dies.

• (e)F401010 International trade.

• b. Sale Percentages of Primary Products

Sale Percentages of Primary Products	Sale Percentages of Primary Products	Sale Percentages of Primary Products
Unit: NT$’000
Percentage Primary product	2016
	Sales	Percentage
Division of substrates	17,922,696	77.37%
Division of PCBs	5,242,370	22.63%
Total	23,165,066	100.00%

• c. Current Products

• (a) Manufacturing & sales of PBGA (Plastic Ball Grid Array) substrates.

• (b) Manufacturing & sales of MCM (Multi-Chip-Module) BGA substrates.

• (c) Manufacturing & sales of CSP (Chip Scale Package) mini-BGA substrates.

• (d) Manufacturing & sales of High Dissipation Cavity Down substrates and TEBGA (Thermal Enhanced-BGA) substrates.

• (e) Manufacturing & sales of Flip Chip substrates and Flip Chip CSP substrates.

• (f) Manufacturing & sales of Flip Chip Film COF (Chip on Flex).

• (g) Manufacturing & sales of Core-less substrates.

• (h) Manufacturing & sales of All Layer Build Up substrates.

• (i) Manufacturing & sales of Embedded Pattern substrates.

• (j) Manufacturing & sales of Embedded Passive substrates.

• (k) Manufacturing & sales of High Density Copper Bump substrates.

• (l) Manufacturing & sales of High Band Width Package-On-Package substrates.

• (m) Manufacturing & sales of Core-less Embedded Passive substrates.

• d. New Products to Be Developed

Since the founding of the company, we have always maintained the principle of "Satisfy customers; pursue excellence.” Furthermore, we also positioned our R&D to achieve technology leadership and satisfy market demands. We always strive to increase the

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profitability of our products by entering the market early, as well as plan future investments of engineering resources by fully grasping the requirements of new generation products. Listed below are new products that we plan to develop in the future:

• (a) Introduction of Ultra-low Expansion/Shrinkage, High Tg, High Young's Modulus base materials

• (b) Development of Fine Pitch Copper Pillar and Solder Bump substrate technology.

• (c) Development of High Layer Count Core-less substrate manufacturing technology.

• (d) Development of Embedded Passive substrate technology.

• (e) Cooperative project of 20~14 nanometer chip packaging.

• (f) Development of automatic production technology for ultra-thin boards.

• (g) Development of integration technology of Embedded Active and Embedded Passive components.

• (h) Development of ultra-fine circuit (<8um), and high contact density products (<30um pitch)

• (i) Development of ultra-micropore (diameter<=30um) technology.

• (j) Development of low-cost fine circuit (<=20um) technology.

• (k) Development of Via Filling technology.

(B)Overview of the Industry

• a. Overview and Development of the Industry

In the whole electronic products market, the most prospective trends during the recent two years include personal computer significantly replaced by portable devices, personal mobile platform expanded from cellphone to automobile, and speedy increases in the content of telecommunication leading to huge increase on demand of bandwidth. These trends result in a rapid growth on the demand of server/information center and telecom infrastructure. Memory and the memory capacity also are significantly expanded.

Among computer related products, the applications on server and information center are the most prospective with the compounded growth rate of 5.3%. The related products include CPU, GPU, Data reroute device and all kind of memory. There are slight growth in other computer-related products, mainly including applications on IPC and Robot, whose longterm growth will be enhanced year by year due to the broader applications in Robot in spite of the short-term growth being not blooming yet.

Telecommunication products, whose production value represents 30% of the whole electronic products, have been the most rapid. However, the annual compounded growth rate of cellphone has reduced to 2.3% from a double-digit growth in prior years because the development of smartphone is reaching the maturity stage, innovated functions became less than before, and the consumers tend to purchase more in lack of new stimulation. The most

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rapid growth among telecommunication products has turned to wireless infrastructure because the fact of the content of telecommunication becoming the multi-media data is driving the enhancement of telecom agreement, providing the higher bandwidth and resulting in higher demand on all kind of electronic products related to information center.

Video & Sound equipment is the most prospective among consumer products. For example, the rapid expansion of AR/VR results in an annual compounded growth rate of 5.6%. The business opportunities related include family/personal video & sound equipment and related automobile electronic products.

Automobile electronic product is one of rapid developing applications in the future. Its applications include all kind of devices for assisting autopilot and related RADAR, LIDAR and sensors. Its annual compounded growth rate has been reached 5.6%.

The probable rapid-developing area is the applications on industrial and automotive ROBOT. With the mature development of Industry 4.0, this is a good business opportunity deserving our attention and pursue.

During the period from 2015 to 2020, the growth rate for whole electronic products reaches 2.7% as the different products have been acting as a major role in term and the good business opportunities are abundant. A good growth in 2017 and 2018 is expecting as the global economy recovery is getting stable.

Forecast for electronic system market

		2015	2016(F)	2020(F)	CAAGR 15 ~ 20
Computer	Personal computer	240	221	200	-3.6
	Server / Data storage	118	125	153	5.3
	Other computer	104	102	113	1.7
	Mobilephone	377	359	423	2.3
Communication	Wired infrastructure	118	121	134	2.6
	Wireless infrastructure	70	70	83	3.5
Consumer	TV	103	107	112	1.7
	Home audio /personal equipment	70	72	92	5.6
	Other consumerproducts	48	49	58	3.9
Car		177	184	232	5.6
Industry	Automation / control	48	50	58	3.9
	Other industrialproducts	116	115	144	4.4
	Solar energy	35	37	49	7.0
Medical		102	104	118	3.0
Military/ aerospace		139	142	166	3.6
Total(billions of dollars)		$1,865	$1,858	$2,135	2.7%

Source: Prismark 2017

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• b. Interrelationships between the Upstream, Midstream and Downstream of the Industry

The relative relationships between the upstream and downstream sectors of the industrial chain of PCB and IC substrate are shown in the figure below. Our company is positioned in the sector of "Circuit board." Upstream suppliers include Epoxy CCL (Copper Clad Laminate), copper foil, and various specialty chemicals suppliers. Downstream clients include IC packaging industry, and electronic product assembly EMS companies. Taiwan's companies control a significant portion of this supply chain while facing the challenge of competitors from Korea and China. Through upstream-downstream integration and cooperation, Taiwan's companies have always had strong a competitive advantage.

==> picture [442 x 119] intentionally omitted <==

==> picture [442 x 119] intentionally omitted <==

原物料: Raw materials	酚醛樹脂: Phenolic resin；溴化環氧樹脂: Brominated epoxy resin；銅箔: Copper foil; 玻纖紗: Fiberglass yarn；PI (Polymide)；玻纖布: Fiberglass cloth 南亞: Nan Ya Plastics Corporation；長春: Chang Chun Group; 長興: Eternal Materials Co., Ltd.；聯 仲: UPC Group；台灣銅箔: Taiwan Copper Foil Corporation, Ltd.；台日古河；FCFT (Furukawa Circuit Foil Taiwan) Corporation；金居: Co-Tech Development Corporation；李長榮: LCY Chemical Corporation；台玻: Taiwan Glass Group；必成: PFG Fiber Glass Corporation；富喬: Fulltech Fiber Glass Corporation；建榮: Baotek Inc.；德宏: Glotech Industrial Corp.；橡樹: Asahi-Schwebel Taiwan；達邁: Taimide Technology, Ltd.
銅箔基板: Copper clad laminate	紙質基板: Paper-based substrate；複合基板: Composite substrate；玻纖環氧基板: Fiberglass epoxy substrate；軟質基板: Flexible substrate；樹脂基板: Resin substrate 台光: Elite Material Co., Ltd.；台燿: Taiwan Union Technology Corporation；松電工: Song Dian Gong/Taiwan Song Electrical Multi-layer Materials Co., Ltd.；聯茂: ITEQ Corporation；合正: Uniplus Electronics Co., Ltd.；台光電: Elite Material Co., Ltd.；華韡: Hwa Woei Laminate Corporation；宏泰: Hong Tai Electric Industrial Co., Ltd.；台虹: Taiflex Scientific Co., Ltd.；律勝: Microcosm Technology Co., Ltd.；新揚科: ThinFlex
	蝕刻液: Etching solution；電鍍化學品: Electroplating chemicals；綠漆: Green paint；乾膜: Dryfilm；生產設備: Production equipment；製程代工: Process OEM
電路板: Circuit boards	單面板: Single sided boards；雙面板: Double sided boards；多層板: Multi-layer boards；軟板: Flexible boards；軟硬板: Rigid-flex boards；IC載板: IC substrates 敬鵬: Chin Poon Industrial Co., Ltd.；競國: APCB Group；華通: Compeq Manufacturing Co., Ltd.； 欣興: Unimicron Technology Corporation；金像: Gold Circuit Electronics Co., Ltd.；南電: Nan Ya Printed Circuit Board Corporation；燿華: Uniteh Printed Circuit Board Corporation；健鼎: Tripod TechnologyCorporation；先豐: BoardTek Chemical EngineeringCorporation；旗勝: Mektek Industrial

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Corporation, Ltd.；台郡: Flexium Interconnect, Inc.；嘉聯益: Career Technology Co., Ltd.；同泰: Uniflex Technology Inc.；楠梓電: WUS Printed Circuit Co., Ltd.；景碩: Kinsus Interconnect Technology Corporation 應用產品: 資訊: Information；通訊: Communication；光電: Photoelectric；民生: Daily necessities；消費性: Application products Consumer products；精密儀器: Precision instruments；汽車: Automobiles；航太: Aerospace

c. Various Product Development Trends

The growth rates of PCB-related products, including IC substrates, are shown in table below. The 2016 recession from 2015 is attributed to the slowing sales trend in smartphone markets, including USA, Korea, and China. The performance in 2016 was reduced because of slowing innovation in cellphone function and being lack of product differentiation resulting reduction in price for competition. The smartphone related products reduced significantly, such as HDI, IC Substrate and FPI reducing by 5.9%, 6.3% and 6.6% respectively. While, in 2017, market demands for these products will be enhanced as we expect that smartphones in USA brand will grow significantly, Korean products will rally from bottom, and Chinese cellphone will recover into growing trend. Those computer or consumer related products, such as single, double or multi-layer boards, will maintain a slight, stable annual compounded growth rate at 1.3% to 2.3%. Conclusively, the production value of all PCB products will keep at an annual compounded growth rate at 2.0%.

PCB production forecast by product type

Unit: Millions of US dollars

Product type	2015	16E/15	2016(E)	2020(F)	CAAGR 15 ~ 20
Single-Layer PCB	7,905	-2.0%	7,745	8,432	1.30%
Multi-Layer PCB	20,689	-2.3%	20,204	23,180	2.30%
HDI	8,011	-5.9%	7,539	8,885	2.10%
IC substrate	6,922	-6.3%	6,487	6,946	0.10%
FPC	11,798	-6.6%	11,017	13,545	2.80%
Total	55,325	-4.2%	52,992	60,988	2.00%

Source: Prismark 2017

There are several strategic concerns regarding the development of PCB industry.

• (a)In order to meet the reduction in size and distance of IC PIN, the specification of IC substrate also is reformed for SLP (Substrate-like PCB) from HDI. The demand is the most urgent for smartphone design and will, in some aspects, change the relation of supply chain to make the substrate manufacturers have the advantages of winning the clients’ order in comparing to HDI manufacturers.

• (b)As the shrinkage in semiconductor process technology continuously develops, the wiring density of IC substrate also is enhanced. The demand for fine-wiring and low-layer & low-unit price also continuously grows. The demand for for SiP substrate is growing too.

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• (c)The development for cellphone, portable device and personal video-sound equipment is toward miniaturization and low power consumption. Also more AR/VR functions are designed into devices. FPC module will grow rapidly to meet these mechanic designing demand and related products growth.

Regarding competitive technology, there were concerns about the development of InFO wafer level packaging process technique threatening the growth of IC substrate. Now it comes out that the yield rate improvement and the speed of cost down was not as good as the improvement in IC substrate competitiveness. However, on the other hand the packaging technique of Leadless-Leadframe used in low-pin IC, including the development of QFN/DFN, FO-WLP and MIS, is faster than expected. The substrate-manufacturing companies therefore shall continuously watch its development and speed up the efforts on process capacity for FC-CSP and Core-less in order to maintain their competitive advantages.

As to the sub-area of IC substrate, the future development trend for substrate products is shown as table 3. Generally, module, particularly the SiP product, will be the most growing and its annual compounded growth rate would reach 7.9% because of the driver from the growth of portable products and personal video & sound equipment as well as the trend of miniaturization of electronics.

The FCCSP substrate products have declined in 2016 though grew very fast during past 2 or 3 years. Its expected annual compounded growth rate for future is also a negative number. This is attributed to the price dropped down by intensive price-competition in cellphone core application processor. The demand of substrate for FCBOC did not increase although memory capacity grew year by year. The content of growth came from the increase of single memory chip capacity, chip stacked, and multi-layer memory semiconductor process technology, which did not increase the demand for memory substrates. Therefore the production value was reduced. However, the Flip-chip packaging substrate used in Hispeed/Hi-bandwidth memory will still have the potential for huge growth, which is different from the general traditional memory packaging substrate market situation.

Change in Component of substrate from 2015 to 2020

Unit: Millions of US dollars

	2015	2016(E)	2020(F)	CAAGR 15 ~ 20
FC PGA/LGA/BGA	2,467	2,272	2,313	-1.3%
FCCSP/FCBOC	1,750	1,560	1,543	-2.5%
WB PBGA/CSP	1,897	1,845	1,909	0.1%
Module	809	810	1,182	7.9%
Total	6,922	6,487	6,947	0.1%

Source: Prismark 2017

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Conclusively, there are several area in electronic products market, including PCB, IC substrate and FPC, that deserve more investments.

1. Server/Information Center/Data storage

2. Personal Video-Sound system/AR/VR

3. Automobile electronics

4. Industrial/Automation/Robot

5. SLP Substrate

6. SiP Packaging Substrate

The Company will continuously invests in the growth area and watches out the impacts from competitive technology in order to innovate and manufacture the new products that can meet with the demand of market and clients.

d. Product Competitions

As shown in the table below, PCB products, especially IC substrates, have significantly different trends of growth and declines. As the IC wafer technology moves towards 20 nanometers, or even 16/14 nanometers, FC CSP products commonly used for smart phone chips also grow rapidly and could reach a compound growth rate of 11.6% in 2012-2017. Not only does it show a brilliant growth, but it also suppresses conventional WB PBGA/CSP products. The growth and declines of products subsequently cause the rise and fall of suppliers with different technical proficiency levels. Since FC PGA/LGA/BGA products are used primarily in PC products, it also causes the decline of this type of products.

Products in the category of Module will have more connectivity, wireless access functions after 2014, including 2015 and 2016, such as WiFi, Bluetooth, and other basic features necessary for hand-held devices. These functions are already being integrated into a smaller, in both surface area and volume, common module by the chip or module designers, in order to compete for the opportunity of wearable product application. Its annual growth rate has already risen to 12%. There will be many opportunities for the development of this type of products. We should be able to find another drive for growth in the future, with the new development of diversified wearable devices.

Product Category	2014	2018F	2013-2018 Compound Growth Rate
FC PGA/LGA/BGA	$3,113	$3,615	-0.5%
FC CSP/FC BOC	$1,824	$2,852	11.6%
WB PBGA/CSP	$2,091	$2,046	-2.2%
Module	$914	$1,850	12.0%
Total	$7,945	$9,231	2.1%

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==> picture [371 x 145] intentionally omitted <==

Source: Prismark 2015

• (C)Overview of Technology and R&D

a.R&D expenses during recent years and up to the publication date of this annual report

		Unit: NT$’000;%
Item Year	2016	As of March 31, 2017
R&D expenses	1,438,082	323,775
Net income	23,165,066	4,970,344
Percentage of R&D expenses(%)	6.21%	6.51%

• b. Successfully developed technology or products

• (a) Manufacturing technology and products of PBGA (Plastic Ball Grid Array) substrates.

• (b) Manufacturing technology and products of MCM (Multi-chip-Module) BGA substrates.

• (c) Manufacturing technology and products of CSP (Chip Scale Package) substrates.

• (d) Manufacturing technology and products of High Dissipation Cavity Down substrates, and TEBGA (TEBGA-Thermal Enhanced BGA) substrates.

• (e) Manufacturing technology and products of Flip Chip substrates, and Flip Chip CSP substrates.

• (f) Manufacturing technology and products of Flip Chip film COF (Chip on Flex).

• (g) Manufacturing technology and products of Core-less substrates.

• (h) Peripheral and array wire type Copper Bump Packaging substrates.

• (i) Miniature Heatsink Packaging substrates.

• (j) Manufacturing technology and products of Embedded Pattern substrates.

• (k) Technology and design specifications of Embedded Thin capacitors.

• (l) Technology of No-wiring Bump Ni/Au electroplating.

• (m) Manufacturing technology of Copper Bump.

• (n) Anisotropic Etching technology.

• (o) Asymmetric structural board technology and odd-numbered-layer board technology.

• (p) High Band Width Package-On-Package substrates technology.

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     - (q) Electroless Nickel/Electroless Palladium/Immersion Gold (EPIG) surface treatment technology.

     - (r) Embedded Thermal Bar technology.

• (D)Long & Short Term Business Development Plans

• a. Short Term Plan

  • (a)Marketing Strategies

    • Maintain close cooperation with key clients; stay up-to-date with the new products updates and customer needs.

    • Multi-directional product development strategy; be attentive to the development of small and mid-sized clients, as well as product changes.

    • Develop business opportunities in new application fields; introduce different product design concepts and achieve technology-preparedness early.

    • Establish rapid prototyping unit, and enhance new product development services.

    • Increase R&D capacity and shorten design time; provide timely introduction of new products in order to satisfy customer demands.

    • Continue to promote the TS16949 quality assurance certification system; ensure product quality; establish worldwide quality reputation by receiving certifications from major international manufacturers.

(b)Production Strategy

In response to the continuously expanding business scale, we will strive to simplify the technologies, improve manufacturing processes, implement automation & unattended operations, and conduct enhancements & maintenance, in order to increase productivity, reduce defective ratio, and lower costs.

• (c)Directions of Product Development

• Increase R&D capabilities; actively invest in product R&D, design, and improvements; shorten product development time and try to lower costs; continue to simplify and accelerate processes, as well as improve quality.

• Reinforce product development and communication with potential customers, in order to fully grasp the market trends and maintain technical leadership.

(d)Operation Scale and Finance

• Continue to expand facility, invest in technologies, and increase utilization rate in order to expand the scale of operation.

• Establish sound, complete fundraising channels; establish close cooperative and mutually beneficial relationships with financial institutions; identify long-term lowinterest loans, in order to supply the capitals needed for expanding the operation of the company.

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b. Long Term Plan

(a)Marketing Strategies

• Train marketing professionals on a long-term basis; gather information about other companies in the same industry as well as future development trends; stay informed about the status of current and new competitors; gain insights into market opportunities and establish operational bases widely; adjust individual product strategies immediately following changes in the market; increase market share.

• Maintain partnership relations with advanced chip develop and design companies; always be in possession of first-hand information; achieve process technology and production capacity preparedness, in order to maintain the company's long-term competitiveness.

(b)Production Strategies

• Continue to increase production quality, technical strength, product yield, and lower production cost.

• Actively invest in automatic production equipment; bring in professional talents and advanced production technology; and improve process efficiency, in order to achieve the goal of increase the company's profitability.

• Increase flexibility in production, in order to be able to respond to rapid market changes and unexpected urgent demands.

(c)Directions of Product Development

• Bring together related manufacturers in the nation to form R&D alliance, in order to actively and collaboratively develop and integrate advanced products, to create high added-value and head-start opportunities.

• In fields of high technical difficulties, adopt the strategies of technology transfer and authorization, as well as international cooperation; or commission domestic or foreign research institutes to conduct R&D projects, in order to lower the risks, shorten development time, exert the combined results of R&D, and increase R&D strength.

(d)Operation Scale and Finance

• Cultivate operational strength; expand quickly the operational scale; move towards the goal of diversified product development.

• As the company continues to expand its business, in the future, we will establish marketing and production bases around the world, and actively build worldwide operation management and R&D centers.

• Raise long/mid-term funds and build up long-term development strength, in order to expand the operation scale of the company.

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(2)An analysis of the market as well as the production and marketing situation

(A)Analysis of the Market

a. Sales (available) areas of primary products (services)

		Unit: NT$’000
Sales area	2016 Sales Value	Percentage
Taiwan	9,092,912	39.25%
Mainland China	9,077,967	39.19%
United States	4,388,426	18.94%
Europe	197,030	0.85%
Others	408,731	1.77%
Total	23,165,066	100.00%

Our company's primary product is the spherical array (BGA) substrates for IC. It is used as the chip carrier for semi-conductor packaging and acts as the connecting channel to external circuit. It is categorized as a raw material for the packaging industry or a carrier component. Its main sales targets are domestic and foreign IC packaging, design and system businesses.

b. Market Share

Currently, Japan remains to be the leading country of IC substrates production. It is the priority choice of the majority of packaging companies. This is mainly because of the overall strength of Japan's electronics industry, its certification numbers, excellent process capabilities, peripheral materials, and the support capability of its equipment industry. These factors enable Japan's substrates manufacturers to outperform others.

Our nation ranks as the second largest producing country. We have complete industrial chain and world's largest IC OEM manufacturing scale, which successfully drives the demands for substrates and packaging. Through technology authorization, along with their own process control technology, integrated industry environment & peripheral resources, etc., our IC substrates industry made our nation to become the second largest producer; second only to Japan, Currently, the industry has moved the production of substrates products with lower technical levels to mainland China. In the future, the local production scale will grow significantly, as the electronics industrial chain expands.

In recent years, Japan, Korea, and Taiwan's IC substrates manufacturers have been engaged in fierce competition. Looking at the numbers from 2014 and 2015, Taiwan's IC substrate manufacturers grabbed a significant market share of 30%.

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c. Future Demand and Supply Condition, and Growth Potential of the Market

Currently, IC substrates are used 100% in the packaging market. They are categorized as one of the high-end electronic packaging materials. In addition to the drive from the global electronics market, as the complexity of the products and the speed of signals increase, IC substrate industry has become an important factor in elevating the level of packaging. According to data published by Prismark, the production value of IC substrate was about $6.922 billion dollars in 2015, which was about 11.76% of the overall PCB production value. It is estimated that by 2017, as the global market continues to grow moderately, the global PCB production value could reach $61.6 billion. The annual production value of IC substrates is estimated to reach $6.947 billion in 2020; which is slightly above the industrial level. Among them, Module products grew strongly by a compound rate of 7.9% for the period from 2015 to 2020 driven by the speed growth of portable products, personal video & sound systems and the trend of electronic products to be miniaturized. As the functions of electronic products continuously become more complicated and the types of corresponding packaging also are made progressively, the portion of high-end packaging will continuously grows.

d. Competitive Niche

Our technical team is primarily consisted of research institutes, well-known professionals, related industries, and foreign and domestic experts. Both the quality of our products and the production capacity meet the international standards. Systems manufacturers from various countries are also gradually affirming our production technology and price competitiveness, and are starting to use substrates produced by our domestic manufacturers.

Our company is a Full Process Workshop. We are capable of providing our customers with the full manufacturing process service from circuit design, photomask manufacturing, substrates production, to automatic electric testing. Customers can access our computer system through the Internet and query relevant real-time information. This can help to maintain good and stable cooperative relations with our customers.

• e. Favorable and Unfavorable Factors for Development Perspectives, and the Responding Measures

(a) Favorable factors

• IDM factory releases production capacity to system chipset manufacturers, which gives domestic system chipset manufacturers and packaging factories more space to grow as well as more business opportunities. Furthermore, packaging technology is moving towards the direction of high pin count and small pin pitch to achieve the goals of light, thin, short, and small; BGA substrates are certainly the right

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technology that is in line with such a product trend.

Since the founding of our company thirteen years ago, our R&D and manufacturing technology teams have already accumulated rich experiences and acquired excellent skills. Their capabilities in continued innovation and rapid development have also grown to a level that allow them to compete with other nations. The packaging factories are adopting broader and diversified certification systems to allow them to work closely with domestic substrate manufacturers in order to lower costs and shorten delivery times. Such practice of local procurement has become a trend and can facilitate the continuous development of the industry in the future.

Professional Full Process Workshop can provide customers with technical services and consultation in areas of circuit design, photomask manufacturing, substrate production, automatic inspection, and others. Customers can receive all the services they need at the same time, thus saving them time, effort, and money.

(b)Unfavorable factors

• Because BGA substrate and packaging technologies change as the chip design companies' products change, therefore, the life cycles of these technologies often are shorter. When the chip design companies change the specifications of their products, the substrate design of BGA and packaging technologies will have to be modified in sync with the market.

Responding measures:

In order to keep up with the market trends, our company actively strives to increase R&D capacity, as well as strengthen our design and manufacturing abilities in multilayer boards and thin boards. In the future, the company will continue to develop various types of Flip Chip substrates, ultra-thin boards, and high-density substrates needed, and at the same time extend patented technologies that we currently own in order to compete for market opportunities.

• Since BT base material are Mitsubishi's proprietary material, therefore, if Mitsubishi's production capacity tightens, it will definitely affect our product delivery and consequently cause us to lose customers.

Responding measures:

In addition to maintain good relations with current BT base material manufacturer, we will conduct development testing of related substitute materials at the same time, in order to prevent the risk of material shortage; thus allowing us to have multiple sources of suppliers and maintain a stable supply of the primary raw material. (For instance, material from Hitachi and others.)

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• (B) Major Applications and Manufacturing Processes of the Primary Products

a. Major applications of the primary products

PrimaryProduct	Major Application
PBGA Substrates	BGApackaging;applicationproducts include chipsets andgraphics chips.
MCM（Multi chip Module）Substrates	MCM packaging; application products include IC that combines analog, digital, power control circuit,as well as memoryand logical IC control.
CSP Substrates	CSP packaging; application products include Flash, high-speed DRAM, and logical chips.
Flip chip	Application products include chipsets, graphics chips, Flash memory, and logical IC.
FC CSP	High-end hand-held devices' system chips, communication chips, and chipsets.
Embedded Substrates	Embedded substrates can shorten spacing between components, in order to improveproducts' electricalproperties.

b. Manufacturing Process of the Primary Products

==> picture [411 x 367] intentionally omitted <==

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

Multi-layer
START Double layer
Drilling
Solder Mask
Circuit Formation Drilling
Inner AOI DP+Cu Plating Ni/Au
Plating
Layer Brown
Plug Hole AEI
Oxide
Circuit
Lamination AVI
Formation
X-ray Drilling AOI
Packing
----- End of picture text -----

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(C)Supply Condition of the Primary Raw Materials

The Company’s primary materials include BT substrates, gold potassium cyanide, films, copper sheets, etc. Among them, BT substrates and films are purchased from major foreign manufacturers. In order to ensure a stable supply of the materials and their quality, the Company does not easily change suppliers once they have been rated and gone through the trial production. In addition, we actively seek to maintain good long-term relationships with our suppliers. Through the long-term cooperative relationships, lowered costs, fast and flexible delivery schedules, we strive to increase the competitive power of our products and create the maximum profits.

Supply Areas (Manufacturers) of the Primary Raw Materials

PrimaryRaw aterial	SupplyArea	Supplier
Substrates	Japan	Mitsubishi、Hitachi、Ajinomoto fine
Goldpotassium	Taiwan	Hon Hai
Copper sheets	Japan	OFUNA
Films	Japan	Mitsubishi、Hitachi

(D)Major Suppliers in the Last Two Calendar Years

a. Major Clients in the Last Two Calendar Years

Unit: NT$’000

						Unit:	Unit:	NT$’000
		2015				2016
Item	Client name	Amount	% to annual net sale〔%〕	Relation with issuer	Client name	Amount	% to annual net sale〔%〕	Relation with issuer
1	C	1,449,489	6.29	Parent company	A	1,722,711	7.44	None
2	B	1,435,632	6.22	None	B	1,513,503	6.53	None
3	D	1,417,507	6.15	None	C	1,391,182	6.01	Parent company
	Others	18,758,683	81.34		Others	18,537,670	80.02
	N l	23061311	100		N l	23165066	100
	et sae	,,			et sae	,,

Due to continued upgrading product packaging from Lead Frame to BGA, even flip chip, IC substrate market demand continues. The main customers of the sales amount do not change much.

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b. Major Suppliers in the Last Two Calendar Years

Unit: NT$’000

		2015	2015			2016	2016
Item	Supplier	Amount	% to annual purchase 〔%〕	Relation with issuer	Supplier	Amount	% to annual purchase 〔%〕	Relation with issuer
1	A	941,428	11.50	None	A	1,081,825	12.44	None
2	C	919,129	11.23	None	B	946,425	10.88	None
3	B	861,591	10.52	None	C	923,174	10.62	None
	Others	5,465,589	66.75		Others	5,743,601	66.06
	N h	8187737	100		N h	8695025	100
	et purcase	,,			et purcase	,,

The Company’s principal raw materials including gold potassium cyanide, base material, film, copper sheets, drills, milling cutters, dry film and chemicals. Since established, our exposure in the market goes higher, and sales continues to grow under market demand. The cost of raw materials such as copper and gold prices go up which caused the purchasing value continues to rise too.

As to the major raw material supplier, customers require high quality control in Substrate base. Due to long attestation and short life cycles, the major material would not be easily replaced. Therefore, we only use 1 to 2 suppliers as the main supplier. The major suppliers don’t change much respectively in 2015 and 2016.

(E)Production in the Last Two Years

Unit: NT$’000

Year Output Major Products (or bydepartment)		2016			2015
	Capacity	Quantity	Amount	Capacity	Quantity	Amount
Support plate	6,873,834	6,310,940	18,766,676	5,890,357	5,407,999	19,808,056

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(F)Sales in the Last Two Years

Unit: NT$’000

					Unit: NT$’000	Unit: NT$’000	Unit: NT$’000	Unit: NT$’000
Year Shipments & Sales Major Products (or bydepartments)	2016				2015
	Local		Export		Local		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
Support plate	1,588,088	5,506,489	4,671,473	12,425,371	1,119,524	4,712,384	4,309,806	13,114,867
Others	-	3,586,423	-	1,646,783	-	4,472,230	-	761,830
Total	-	9,092,912	-	14,072,154	-	9,184,614	-	13,876,697

(3)The number of employees employed for the 2 most recent fiscal years, and during the current fiscal year up to the date of printing of the annual report, their average years of service, average age, and education levels (including the percentage of employees at each level)

	Year	2015	2016	Data as of in 2017/03/31
Number of Employees	Management	250	251	267
	R&D/Technician	603	572	593
	operating personnel	2,964	2,861	3,022
	Total	3,817	3,684	3,882
Average Age		32.5	33	33
Average Years of Service		4.7	5.02	4.82
Education	Ph.D.	0.11%	0.11%	0.10%
	Masters	9.51%	9.42%	8.89%
	Bachelor’s Degree	50.14%	56.19%	59.61%
	Senior High School	37.28%	31.43%	28.75%
	Below Senior High School	2.96%		2.65%
			2.85%

(4)Disbursements for environmental protection

The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report:

Lately, due to high awareness of environmental protection, requirements of environmental quality are growing continuously. Concurrently with the discharge standard of pollutants are gradually

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improving, we spent hundreds of millions of dollars investment in pollution prevention equipment in order to make every effort to prevent pollution even though we are only a 16 years old company. As of the date of annual report published, there is no pollution disputes found.

(5)Labor relations

• (A)Companies of various welfare measures, further education, training, retirement systems and their implementation status, as well as the agreement between labor and employee rights protection measures.

• (a)Benefits and their implementation

  • a.Employee Bonus

  • b.Group Insurance

  • c.Festival Prizes: the Dragon Boat Festival, Mid-Autumn Festival bonus

  • d.Year-End Bonus

e.SSA benefits: marriages, births, deaths, serious injuries, disasters, major accidents

f. On-the-JobTraining

• g.Employee benefits Committee provides:

  • i) Travelling

  • ii) Club

  • iii) Birthday Voucher

• (b)Continuing education and training and its implementation status

For the purpose of enhancing staff quality and job skills, we stipulate "Administrative Measures on Education and Training" in orientation training, and for all employees to implement general training and professional training on schedule to become outstanding professionals, and improve the operating performance and effective utilization of human resources.

(c)Situation of Retirement System and Its Implementation

The Company established Retirement Oversight Committee in 2001 under the approval of House of labor of Taoyuan County Government letter of No 126197. Total monthly salaries to be made 2% of the labor pension fund to the Central Trust Bureau Accounts in the same year. Exercising Labor Pension Act on 2005/07/01. After practice, employees can either adopt in "Labor Standards Law" provisions relating to pension, or adopt new Act to the pension system and retain the application of the regulations before the length. To those who apply the Act, the employee pension contribution will be made monthly, which shall not be less than 6% of monthly salary.

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(d)Agreement between labor and employee rights protection measures

We have always been treasured the spirit of labor integration, coexistence and common prosperity dealing with the labor relations. We take preciously of employee comments and employees’ comments are welcomed at any time through the Company’s formal and informal channels of communication to reflect their problems of life and work. Through the opportunities for two-way communication between the company and employees, we are able to have greater mutual understanding and awareness to build consensus and success in the long run.

a.Labor Coordination Meeting

Labor coordination meetings held on a regular basis, pushed by the employers represented, promoted mainly focus on the Company’s system of communication with employees on the Company’s orders, work environment, safety and health issues for two-way communication. The communication through this consultation between employers and business owner enhances not only the mutual trust but also the mutual understanding.

b.Employee benefit Committee

Members of the Employee benefit Committee are elected by employees directly and openly who are good at communication. At the Welfare Committee meeting, both employers and employees are able to reach adequate communication to the Company’s various welfare measures.

• (B)Losses due to labor disputes, and current and future estimated amount of responses may occur as of the date of annual report published:

The Company’s labor agreements are entered into based on the Labor Standards Law. Humanization is applied in operational management. There was no loss caused by labor disputes.

• (6)Important contracts: None

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6. An Overview of the Company's Financial Status

(1)Condensed balance sheets and statements of comprehensive income for the past 5 fiscal years

• (A)Brief Balance Sheet and Statements of Comprehensive Income

a. Brief Consolidated Balance Sheets - under IFRSs

					Unit: NT$’000	Unit: NT$’000
Year Item		2012	2013	2014	2015	2016
Current Assets		21,018,448	21,812,172	23,471,268	23,471,368	21,615,555
Property, Plant & Equipment		14,136,096	14,756,743	15,429,778	16,150,904	16,578,663
Intangible Assets		8,098	14,159	19,982	30,280	18,820
Other Assets		1,027,392	1,529,268	2,130,646	2,986,180	3,040,677
Total Assets		36,190,034	38,112,342	41,051,674	42,638,732	41,253,715
Current liabilities	Before Appropriation	8,167,617	9,003,298	10,103,181	10,318,448	8,639,797
	After Appropriation	9,505,617	10,341,298	11,887,181	11,877,523	(Note2)
Non-Current Liabilities		2,689,899	1,579,904	895,719	1,492,483	1,599,149
Total liabilities	Before Appropriation	10,857,516	10,583,202	10,998,900	11,810,931	10,238,946
	After Appropriation	12,195,516	11,921,202	12,782,900	13,370,006	(Note2)
Equity Attributable to Shareholders of the Parent
Capital		4,460,000	4,460,000	4,460,000	4,460,000	4,460,000
Capital Surplus		5,853,673	5,863,612	5,939,819	5,939,819	5,939,819
Retained earnings	Before Appropriation	12,746,962	14,646,450	16,718,487	17,829,718	18,503,389
	After Appropriation	11,408,962	13,308,450	14,934,487	16,270,643	(Note2)
Other Components of Equity		(74,424)	108,879	279,703	194,484	(613)
TreasuryStock		-	-	-	(32,885)	(32,885)
Non-controllingInterests		2,346,307	2,450,199	2,654,765	2,436,665	2,145,059
Total Equity	Before Appropriation	25,332,518	27,529,140	30,052,774	30,827,801	31,014,769
	After appropriation	23,994,518	26,191,140	28,268,774	29,268,726	(Note2)

Note 1: As IFRSs have been adopted since 2013, these statements were prepared under IFRS and audited.

Note 2: Earning appropriation of 2016 has not been approved by the shareholders.

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b. Brief Parent-Company-Only Balance Sheet –under IFRSs

Unit: NT$’000

						Unit: NT$’000
Year Item		2012	2013	2014	2015	2016
Current Assets		16,954,391	17,879,353	19,880,887	19,685,035	17,625,515
Property, Plant & Equipment		7,370,315	7,970,375	8,914,836	10,309,220	11,947,782
Intangible Assets		2,298	7,408	11,927	9,869	5,208
Other Assets		4,253,720	5,114,118	5,453,133	6,075,014	5,924,904
Total Assets		28,580,724	30,971,254	34,260,783	36,079,138	35,503,409
Current Assets	Before Appropriation	4,999,895	5,391,312	6,311,775	7,325,160	5,811,639
	After Appropriation	6,337,895	6,729,312	8,095,775	8,884,235	(Note 2)
Non-Current Liabilities		594,618	501,001	550,999	362,842	822,060
Total Liabilities	Before Appropriation	5,594,513	5,892,313	6,862,774	7,688,002	6,633,699
	After Appropriation	6,932,513	7,230,313	8,646,774	9,247,077	(Note 2)
Equity Attributable to Shareholders of the Parent
Capital		4,460,000	4,460,000	4,460,000	4,460,000	4,460,000
Capital Surplus		5,853,673	5,863,612	5,939,819	5,939,819	5,939,819
Retained Earning	Before Appropriation	12,746,962	14,646,450	16,718,487	17,829,718	18,503,389
	After Appropriation	11,408,962	13,308,450	14,934,487	16,270,643	(Note 2)
Other Components of Equity		(74,424)	108,879	279,703	194,484	(613)
Treasury Stock		-	-	-	(32,885)	(32,885)
Non-controlling Interests		-	-	-	-	-
Total Equity	Before Appropriation	22,986,211	25,078,941	27,398,009	28,391,136	28,869,710
	After Appropriation	21,648,211	23,740,941	25,614,009	26,832,061	(Note 2)

Note 1: As IFRSs have been adopted since 2013, these statements were prepared under IFRS and audited.

Note 2: Earning appropriation of 2016 has not been approved by the shareholders.

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c. Brief Consolidated Statements of Comprehensive Income -under IFRSs

					Unit: NT$’000
Year Item	2012	2013	2014	2015	2016
Operating Revenues	22,034,283	23,102,827	24,943,834	23,061,311	23,165,066
Gross Profit	5,224,055	6,204,434	6,946,880	5,961,602	5,750,545
Operating Income	2,801,424	3,435,401	4,009,159	3,063,724	2,589,772
Non-Operating Income & Expense	70,552	227,947	141,913	141,524	(20,314)
Income Before Income Tax	2,871,976	3,663,348	4,151,072	3,205,248	2,569,458
Net Income of Continuing Operation	2,375,672	3,116,254	3,490,233	2,729,526	2,073,028
Income (Loss) from Discontinued Operation	-	-	-	-	-
Net income	2,375,672	3,116,254	3,490,233	2,729,526	2,073,028
Other Comprehensive Income	(266,968)	317,234	301,864	(137,614)	(326,985)
Total Comprehensive Income	2,108,704	3,433,488	3,792,097	2,591,912	1,746,043
Net income (loss) Attributable to Shareholders of the Parent	2,790,562	3,224,093	3,617,327	2,903,952	2,233,705
Net income (loss) Attributable to Non-Controlling Interests	(414,890)	(107,839)	(127,094)	(174,426)	(160,677)
Comprehensive Income Attributable to Shareholders of the Parent	2,619,178	3,420,791	3,803,861	2,810,012	2,037,649
Comprehensive Income Attributable to Non-Controlling Interests	(510,474)	12,697	(11,764)	(218,100)	(291,606)
Earnings Per Share (in NT$)	6.26	7.23	8.11	6.51	5.01

Note: As IFRSs have been adopted since 2013, these statements were prepared under IFRS and audited.

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d. Brief Parent-Company-Only Statements of Comprehensive Income -under IFRSs

Unit: NT$’000

					Unit: NT$’000
Year Item	2012	2013	2014	2015	2016
Operating Revenues	17,651,784	18,026,999	19,290,237	17,827,251	17,931,850
Gross profit	5,767,213	6,038,599	6,273,087	5,313,503	4,709,722
Operating Income	4,029,648	4,100,235	4,300,134	3,509,636	2,691,712
Non-Operating Income & Expense	(744,794)	(331,174)	(150,430)	(162,134)	(63,780)
Profit (loss) from continuing operations before tax	3,284,854	3,769,061	4,149,704	3,347,502	2,627,932
Net Income of Continuing Operation	2,790,562	3,224,093	3,617,327	2,903,952	2,233,705
Income (Loss) from Discontinued Operation	-	-	-	-	-
Net income	2,790,562	3,224,093	3,617,327	2,903,952	2,233,705
Other Comprehensive Income	(171,384)	196,698	186,534	(93,940)	(196,056)
Total Comprehensive Income	2,619,178	3,420,791	3,803,861	2,810,012	2,037,649
Earnings per share(in NT$)	6.26	7.23	8.11	6.51	5.01

Note: As IFRSs have been adopted since 2013, these statements were prepared under IFRS and audited.

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(B) Brief Balance Sheet and Income Statement-adopting ROC GAAP

a. Brief Balance Sheet –under ROC GAAP

Unit: NT$’000

		Unit: NT$’000
Year Item		Partial financial data from last fiveyears(Note)
		2012
Current Assets		16,978,716
Mutual Fund and Investment		3,671,070
Fixed Assets		7,906,248
Intangible Assets		2,298
Other Assets		35,349
Total Assets		28,593,681
Current Liabilities	Before Appropriation	4,962,645
	After Appropriation	6,300,645
LongTerm Liabilities		514,292
Other Liabilities		－
Total Liabilities	Before Appropriation	5,476,937
	After Appropriation	6,814,937
Capital		4,460,000
Capital Surplus		5,853,673
Retained Earnings	Before Appropriation	12,877,495
	After Appropriation	11,539,495
Unrealized Gain or Loss on Financial Instrument		15,646
Cumulative Translation Adjustment		(90,070)
Net Loss Not Recognized as Pension Cost		－
Shareholder’s Equity	Before Appropriation	23,116,744
Total Amount	After Appropriation	21,778,744

Note: The statement for 2012 were audited and also presented under IFRSs since 2013.

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a. Brief Income Statement- under ROC GAAP

Unit: NT$’000

	Unit: NT$’000
Year Item	Partial financial data from last fiveyear(Note1)
	2012
OperatingGross	17,651,784
Grossprofit	5,772,776
OperatingIncome	4,037,328
Non-operatingIncome	114,600
Non-operatingExpense.	(859,942)
Continuing Operating Income Before Tax	3,291,986
ContinuingOperatingIncome	2,797,694
Discontinued Operation Income(Loss)	－
ExtraordinaryGain(Loss)	－
Cumulative Effect of Changes in AccountingPrinciples	－
Net Income(Loss)	2,797,694
Earnings Per Share(in NT$) (Note 2)	6.27

Note1: The statement for 2012 were audited and also presented under IFRSs since 2013.

Note 2: Earning per share would have been retroactively adjusted if deemed necessary.

(C) Certified Accountants’ Names in Past Five Years

Year	Name of Accountant	Firm	Opinion	Reason for Changing
2012	Guo, Shao Bin Xu,Xin Min	Ernst & Young	Unmodified	Internal rotation
2013	Huang, Yi Hui Zhang,Zhi Ming	Ernst & Young	Unmodified	Internal rotation
2014	Huang, Yi Hui Zhang,Zhi Ming	Ernst & Young	Unmodified	None
2015	Huang, Yi Hui Zhang,Zhi Ming	Ernst & Young	Unmodified	None
2016	Huang, Yi Hui Zhang, Zhi Ming	Ernst & Young	Unmodified with on explanatory paragrapl	None

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(2) Financial analyses for the past 5 fiscal years

(A)Adopting IFRSs-Consolidated

	In NT$’000	In NT$’000	In NT$’000	In NT$’000	In NT$’000	In NT$’000	In NT$’000
Analysis Items	Year( Note 1) (Note 2)		2012	2013	2014	2015	2016
Capital Structure Analysis(%)	Debt Ratio		30.00	27.77	26.79	27.70	24.82
	Long Term Funds to Fixed Assets		189.14	182.31	180.16	172.30	173.19
Liquidity Analysis (%)	Current Ratio		257.34	242.27	232.32	227.47	250.19
	Quick Ratio		232.08	218.74	209.93	203.78	222.49
	Interest Coverage		41.10	66.90	74.49	57.26	37.03
Operation Performance Analysis	Average Collection Turnover (times)		5.81	6.19	6.89	6.20	6.14
	Average Collection Days		63	59	53	59	59
	InventoryTurnover(times)		6.86	7.46	7.26	6.38	6.45
	Average Payable Turnover(times)		8.77	8.71	9.10	8.38	8.21
	Average InventoryTurnover Days		53	49	50	57	57
	Fixed Assets Turnover(times)		1.45	1.50	1.56	1.28	1.23
	Total Assets Turnover(times)		0.62	0.62	0.63	0.55	0.55
Return On Investment Analysis	Return on Total Assets(%)		6.82	8.51	8.92	6.63	5.08
	Return on equity (%)		9.55	11.79	12.12	8.97	6.70
	Income to Capital (%)	OperatingIncome	62.81	77.03	89.89	68.69	58.07
		Pre-Tax Income	64.39	82.14	93.07	71.87	57.61
	Net Income to Sales		10.78	13.49	13.99	11.84	8.95
	Earnings Per Share(NT$)		6.26	7.23	8.11	6.51	5.01
Cash Flow	Cash Flow Ratio(%)		66.59	67.50	68.17	67.24	66.58
	Cash Flow AdequacyRatio(%)		95.09	94.87	107.97	108.92	113.68
	Cash Flow Re-investment Ratio		10.61	11.80	11.81	11.03	8.73
Leverage	Operation Leverage		2.47	2.29	2.17	2.84	3.02
	Financial Leverage		1.03	1.02	1.01	1.02	1.03
Please explain why financial ratio has changed up to 20 % for the most recent two years. The over 20% changes in Interest coverage, Return on assets, Return on equity, the ratio of operating profits to paid- in capital, the ratio of IBIT to paid-in capital and operation leverage are mainly attributed to decreases in gross profit and increases in operatingexpenses.

Note 1: IFRSs have been adopted since 2013 and the above ratios are calculated based on the audited FS.

Note 2: Calculation formula will be stated below.

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(B)Adopting IFRSs-Parent-Company-Only

Item (Note 2)	Year (Note1)	Year (Note1)	2012	2013	2014	2015	2016
Capital Structure Analysis(%)	Debt Ratio		19.57	19.03	20.03	21.31	18.68
	Long Term Funds to Fixed Assets		297.10	283.55	269.96	225.32	210.68
Liquidity Analysis (%)	Current Ratio		339.09	331.63	314.98	268.73	303.28
	Quick Ratio		311.75	308.32	292.83	249.17	279.32
	Interest Coverage		164.11	222.16	211.52	157.72	95.61
Operation Performance Analysis	Average Collection Turnover (times)		6.72	6.75	7.60	6.52	6.41
	Average Collection Days		54	54	48	56	57
	Inventory Turnover (times)		7.22	8.48	8.56	7.73	8.60
	Average Payable Turnover (times)		12.17	12.58	11.79	9.13	9.26
	Average Inventory Turnover Days		51	43	43	47	42
	Fixed Assets Turnover (times)		2.19	2.13	1.99	1.54	1.34
	Total Assets Turnover (times)		0.63	0.61	0.59	0.51	0.50
Return On Investment Analysis	Return on Total Assets (%)		10.04	10.88	11.14	8.31	6.31
	Return on Equity (%)		12.49	13.42	13.79	10.41	7.80
	Income to Capital (%)	Operating Income	90.35	91.93	96.42	78.69	60.35
		Pre-Tax Income	73.65	84.51	93.04	75.06	58.92
	Net Income to Sales (%)		15.81	17.88	18.75	16.29	12.46
	Earnings Per Share (NT$)		6.26	7.23	8.11	6.51	5.01
Cash Flow	Cash Flow Ratio (%)		100.45	110.42	96.28	83.58	87.42
	Cash Flow Adequacy Ratio (%)		138.54	139.63	146.63	126.83	119.52
	Cash Flow Re-investment Ratio		12.03	14.47	12.52	11.84	9.26
Leverage	Operation Leverage		1.50	1.49	1.50	1.64	1.96
	Financial Leverage		1.01	1.00	1.00	1.01	1.01
Please explain why financial ratio has changed up to 20 % for the most recent two years. The over 20% changes in Interest coverage, Turnover of AP, turnover of property, plants and equipment, return on assets,return on equityare mainlyattributed to decreases ingrossprofit and increases in operatingexpenses.

Note 1: IFRSs have been adopted since 2013 and the above ratios are calculated based on the audited FS. Note 2: Calculation formula will be stated below.

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• a. Capital Structure Analysis

• (a)Debt Ratio= Total Liabilities/ Total Assets

• (b) Long Term Funds to Fixed Assets= (Total Equity + non-current liabilities)/ Net value of fixed capital

b.Liquidity

• (a) Current Ratio= Current Assets/ Current Liabilities

• (b) Quick Ratio= (Current Assets-Inventory-Prepaid Expense)/ Current Liabilities

• (c) Interest Coverage=Net Profit before Income Tax and Interest Expense/ Interest Expense

c.Operation Performance Analysis

• (a) Account Receivable (including account receivable and note receivable that derived from operation activities) Turnover Rate= Next Sales/ Average Account Receivable (including account receivable and note receivable that derived from operation activities) remaining amount.

• (b) Average Collection Days= 365/ Account Receivable Turnover Ratio

• (c) Inventory Turnover= Cost of Sales/ Average Inventory

• (d) Account Payable (including account payable and note payable result from business operation) Turnover rate= Cost of Sales/ Average Account Payable (including account payable and note payable that derived from operation activities) remaining amount.

• (e) Average Inventory Turnover Days= 365/ Inventory Turnover

• (f) Fixed Assets (Land, Equipment Turnover) = Net Sales/ Average Fixed Assets.

• (g) Total Assets Turnover= Net Sales/ Average Total Assets

d.Return on Investment

• (a) Return on Total Assets=〔Profit(Loss) after tax + Interest Expense×（１－Interest Rate）〕/Average Total Assets.

• (b) Return on Equity= Profit (Loss) after tax/Average Total Equity

• (c) Net Income to Sales= Profit (Loss) after tax/ Net Sales

• (d) Earning per Share= (attributed to parents profit (loss)-Preferred dividend)/weight average stock share issue. (Note 4)

e.Cash Flow

• (a) Cash Flow Ratio=Operation Activities Cash Flow/Current Liabilities

• (b) Cash Flow Adequacy Ratio (%) =Last five years Operation Activities Cash Flow/last five annual years (Cash Expenditure + Increase in Inventory+ Cash Dividends)

• (c) Cash Flow Re-investment Ratio= (Operation Activities Cash Flow-Cash Dividends)/ (Gross Fixed Assets + Long Term Investment + Other Non-Current Assets + Operation Capital) (Note 5)

f.Leverage

• (a) Operation Leverage = (Net Operating Income-Variable Cost and Expense)/ Operating Income (Note 6)

• (b) Financial Leverage = Operating Income / (Operating Income- Interest Expense)

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(C)Adopting ROC GAAP-Consolidated

Year (Note 1) Analysis Items (Note 2)	Year (Note 1) Analysis Items (Note 2)	Year (Note 1) Analysis Items (Note 2)	Last Five Years Financial Analysis
			2012
Capital Structure Analysis (%)	Debt Ratio		29.66
	Long Term Funds to Fixed Assets		189.21
Liquidity Analysis (%)	Current Ratio		258.75
	Quick Ratio		232.98
	Interest Coverage		41.2
Operation Performance Analysis	Average Collection Turnover (times)		5.81
	Average Collection Days		63
	Inventory Turnover (times)		7.75
	Average Payable Turnover (times)		8.76
	Average Inventory Turnover Days		47
	Fixed Assets Turnover (times)		1.45
	Total Assets Turnover (times)		0.62
Return On Investment Analysis	Return on Total Assets		6.82
	Return on equity		9.54
	Income to Capital (%)	Operating Income	62.97
		Pre-Tax Income	64.55
	Net Income to Sales (%)		10.81
	Earnings Per Share (NT$)		6.27
Cash Flow	Cash Flow Ratio (%)		66.79
	Cash Flow Adequacy Ratio (%)		97.06
	Cash Flow Re-investment Ratio (%)		10.64
Leverage	Operation Leverage		2.46
	Financial Leverage		1.03

Note 1: The statement for 2012 were audited and also presented under IFRSs since 2013.

Note 2: Calculation formula will be stated below.

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(D)Adopting ROC GAAP- Parent-Company-Only

Year (Note1) Item (Note 2)	Year (Note1) Item (Note 2)	Year (Note1) Item (Note 2)	Last Five Years Financial Analysis
			2012
Capital Structure Analysis (%)	Debt Ratio		19.16
	Long Term Funds to Fixed Assets		298.89
Liquidity Analysis (%)	Current Ratio		342.13
	Quick Ratio		314.09
	Interest Coverage		164.46
Operation Performance Analysis	Average Collection Turnover (times)		6.72
	Average Collection Days		54
	Inventory Turnover (times)		8.21
	Average Payable Turnover (times)		12.17
	Average Inventory Turnover Days		44
	Fixed Assets Turnover (times)		2.2
	Total Assets Turnover (times)		0.63
Return On Investment Analysis	Return on Total Assets		10.06
	Return on Equity		12.46
	Income to Capital (%)	Operating Income	90.52
		Pre-Tax Income	73.81
	Net Income to Sales (%)		15.85
	Net Income to Sales (%)		6.27
Cash Flow	Earnings Per Share (NT$)		101.21
	Cash Flow Ratio (%)		141.38
	Cash Flow Adequacy Ratio (%)		12
Leverage (%)	Cash Flow Re-investment Ratio (%)		1.5
	Operation Leverage		1.01

Note 1: The statement for 2012 were audited and also presented under IFRSs since 2013.

Note 2: Calculation formula will be stated below.

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• a.Capital Structure Analysis

• (a)Debt Ratio= Total Liabilities/ Total Assets

• (b) Long Term Funds to Fixed Assets= (Total Equity + non-current liabilities)/ Net value of fixed capital

b.Liquidity

• (a) Current Ratio= Current Assets/ Current Liabilities

• (b) Quick Ratio= (Current Assets-Inventory-Prepaid Expense)/ Current Liabilities

• (c) Interest Coverage=Net Profit before Income Tax and Interest Expense/ Interest Expense

• c.Operation Performance Analysis

• (a) Account Receivable (including account receivable and note receivable that derived from operation activities) Turnover Rate= Next Sales/ Average Account Receivable (including account receivable and note receivable that derived from operation activities) remaining amount.

• (b) Average Collection Days= 365/ Account Receivable Turnover Ratio

• (c) Inventory Turnover= Cost of Sales/ Average Inventory

• (d) Account Payable (including account payable and note payable result from business operation) Turnover rate= Cost of Sales/ Average Account Payable (including account payable and note payable that derived from operation activities) remaining amount.

• (e) Average Inventory Turnover Days= 365/ Inventory Turnover

• (f) Fixed Assets (Land, Equipment Turnover) = Net Sales/ Average Fixed Assets.

• (g) Total Assets Turnover= Net Sales/ Average Total Assets

• d.Return on Investment

• (a) Return on Total Assets=〔Profit(Loss) after tax + Interest Expense×（1－Interest Rate）〕/Average Total Assets.

• (b) Return on Equity= Profit (Loss) after tax/Average Total Equity

• (c) Net Income to Sales= Profit (Loss) after tax/ Net Sales

• (d) Earning per Share= (attributed to parents profit (loss)-Preferred dividend)/weight average stock share issue. (Note 4)

e.Cash Flow

• (a) Cash Flow Ratio=Operation Activities Cash Flow/Current Liabilities

• (b) Cash Flow Adequacy Ratio (%) =Last five years Operation Activities Cash Flow/last five annual years (Cash Expenditure + Increase in Inventory+ Cash Dividends)

• (c) Cash Flow Re-investment Ratio= (Operation Activities Cash Flow-Cash Dividends)/ (Gross Fixed Assets + Long Term Investment + Other Non-Current Assets + Operation Capital) (Note 5)

f.Leverage

• (a) Operation Leverage = (Net Operating Income-Variable Cost and Expense)/ Operating Income (Note 6)

• (b) Financial Leverage = Operating Income / (Operating Income- Interest Expense)

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• (3) Audit committee's report on the financial statements for the most recent year.

KINSUS INTERCONNECT TECHNOLOGY CORP. EXAMINATION REPORT APPROVED BY THE AUDIT COMMITTEE

The Board of Directors has prepared and submitted the Company’s Business Operation Report, Parent-Company-Only Financial Statements, Consolidated Financial Statements and Profit Appropriation Proposal for the period from January 1[st] to December 31[st] , 2016. The ParentCompany-Only Financial Statements and Consolidated Financial Statements have been audited by Ernst & Young and accompanied with the auditors’ reports. These reports mentioned above have been examined by the audit committee and hereby reported in accordance with the requirements of Securities and Exchange Act Article 14- 4 and Company Act Article 219.

Please kindly review and approve it.

KINSUS INTERCONNECT TECHNOLOGY CORP.

Audit Committee Convener: Chen, Jin-Cai

• (4) For financial statement for the most recent fiscal year please refers to page 196 to 303.

• (5) For a parent-company-only financial statement for the most recent fiscal year, certified by a CPA please refer to page 100 to 195.

• (6) If the Company or its affiliates have experienced financial difficulties in the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, the annual report shall explain how said difficulties will affect the company's financial situation: None.

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7. A Review and Analysis of the Company's Financial Position and Financial Performance and a Listing of Risks

(1) Financial position

Financial Status Review and Analysis Chart

			Unit: NT$’000	Unit: NT$’000	Unit: NT$’000
Year Item	2016	2015	Differences		Note
			Amount	%
Current Assets Property, Plant and Equipment Prepayment for Equip. Other Assets Total Assets Current Liabilities Non-Current Liabilities Total Liabilities Capital Capital Surplus Retained Earning Other Shareholder Equity Total Shareholder Equity	21,615,555 16,578,663 2,252,721 806,776 41,253,715 8,639,797 1,599,149 10,238,946 4,460,000 5,939,819 18,503,389 2,111,561 31,014,769	23,471,368 16,150,904 2,607,515 408,945 42,638,732 10,318,448 1,492,483 11,810,931 4,460,000 5,939,819 17,829,718 2,598,264 30,827,801	(1,855,813) 427,759 (354,794) 397,831 (1,385,017) (1,678,651) 106,666 (1,571,985) 0 0 673,671 (486,703) 186,968	(7.91) 2.65 (13.61) 97.28 (3.25) (16.27) 7.15 (13.31) 0.00 0.00 3.78 (18.73) 0.61	Note
Analysis on ratio changes: Note: Due to increases in investment accounted for under equity method.

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(2) Financial performance

Financial Performance Comparison Analysis

Unit: NT$’000

Year Item	2016	2015	plus(minus) Amount	plus (minus) Variation ratio (%)	Note
Operating Revenues Cost Of Goods Sold Gross Profit Operating Expenses Operating Income Other Non-Operate Inc. and exp. Pre-Tax Income Income Tax Expense Net Income Other comprehensive income (loss) Total comprehensive income	23,165,066 17,414,521 5,750,545 3,160,773 2,589,772 (20,314) 2,569,458 496,430 2,073,028 (326,985) 1,746,043	23,061,311 17,099,709 5,961,602 2,897,878 3,063,724 141,524 3,205,248 475,722 2,729,526 (137,614) 2,591,912	103,755 314,812 (211,057) 262,895 (473,952) (161,838) (635,790) 20,708 (656,498) (189,371) (845,869)	0.45 1.84 (3.54) 9.07 (15.47) (114.35) (19.84) 4.35 (24.05) 137.61 (32.63)	Note 1 Note 2 Note 3 Note 4
Analysis on ratio changes: Note 1: Due to decrease in other income. Note 2: Due to increase in cost of goods sold and operating expenses. Note 3: Due to the translation adjustments from currency exchange differences of foreign operational institutes/investees. Note 4: Please refer to Note 2 and Note 3. The reason for changes in the Company’s core business: None.

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• (3) Cash flow: Cash Flow Analysis for the Coming Year

				Unit: NT$’000	Unit: NT$’000
Beginning cash balance	Cash flow expecting from whole year operation activities	Estimate whole year cash outflow amount	Estimate available cash balance (insufficient) amount +-	Remedies for Insufficient cash
				Investment Plan	Financial Management Plan
$12,672,783	$18,921,240	$(23,421,454)	$8,172,569	-	-
a. Cash flows variation analysis: The expected cash balance will be NT$8,172,569 thousand because of the continuing operational cash flows and the expected significant cash flows from investing and financing activities. b. Estimate cash insufficient remedies and liquidity analysis: no cash liquidity concerns.

• (4)The effect upon financial operations of any major capital expenditures during the most recent fiscal year:

Our company has established a new production facility in Shin-Feng for the purpose of business operation expansion. This facility will be the production base for high end products in the coming years.

• (5)The Company’s reinvestment policy for the most recent fiscal year, the main reasons for the profits/losses generated thereby, the plan for improving re-investment profitability, and investment plans for the coming year:

The Company’s main investments are all of long-term strategic investments. In year 2016, the parent company annual investment loss was NT$199,580 thousand, decreased from NT$325,786 thousand in 2015. For certain investee companies, the scale economy of investments was not yet reached and their short-term profitability needs to be improved. The Company’s board has authority to refine the investment organization, if deemed necessary, in order to sustain the longterm investment strategy and to continuously generate the value for the Company to a maximum extent.

• (6)The matters that the risks section shall analyze and assess during the most recent fiscal year and as they stood on the date of printing of the annual report

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• (A) Impacts on Company’s Income and Future Counter Measures for Interest rate, Exchange rate Fluctuation and Inflation. Our company’s 2016 interest rate and exchange gain or loss is list as below:

Unit: NT$1,000	Unit: NT$1,000
Year Item	2016
Net Exchange Gain(loss)	(48,989)
Net Sales	23,165,066
Income before Tax	2,569,458
Net Exchange Gain(loss)	(0.21%)
Net Exhange Gain(Loss)to Net Pre-Tax Profit Ratio	(1.91%)
Interest Revenue	72,471
Interest Revenue to Net Sales Income	0.31%
Interest Income to Pre-Tax Net Profit Ratio	2.82%
Interest Expense	71,306
Interest Expense to Net Sales Interest Ratio	0.31%
Interest Expense to Net Pre-Tax Profit Ratio	2.78%
Interest Income(Expense)to Net Pre-Tax Profit Ratio	0.05%

Sources: financial reports certified by CPA.

• a. Impacts on Interest Rate Fluctuation

Our company always has been in a financial health status. We have assigned financial specialty personnel to cooperate with banks closely and obtain preferred mid to long term fund for our automatic equipment. Recently, annual interests gain (loss) only was accounted for 0.05% of our company’s pre-tax profit. Thus, interest fluctuation doesn’t impose serious effects on our company.

b. Impacts of Exchange Rate Fluctuation

• (a)We use US dollars as main quotation currency for exporting business. Our long term borrowing and major importing items are also denominated in US dollars currency. For these reasons, impact of exchange rate change between the New Taiwan Dollar (NTD) vs. US. Dollars (USD) is minimal to our company. In 2016, annual foreign exchange gain (loss) was only accounted for (0.21%) of net sales.

(b)Counter-Measures for Exchange Rate Fluctuation

• i. The Company opens foreign currency accounts in banks for collecting the money from sales. To exchange USD into NTD will be depending on the actual capital needs or the

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fluctuation of exchange rate. Payment for importing raw materials depends on the exchange rate. We can choose to use foreign currency acquired from exporting or to buy foreign currency in advance to reduce the effect of exchange rate fluctuation.

• ii. We try to use USD as major currency when importing raw materials or machinery. Also we borrow loan in USD to balance th e ratio of USD assets vs. liabilities for reducing the impact resulted from exchange rate fluctuation.

(c)Impacts of Inflation

We keep close look on market price fluctuation and maintain good interaction with suppliers and clients. Thus, in 2016, there is no serious incident caused by inflation.

• (B) Reasons for company policy, gain or loss and future counter measures for engaging in high risk, highly leveraged investments, loans to others, endorsement and financial derivatives.

Latest years our company has not engaged in high risk, highly leveraged investments, loans to others and endorsement. Please refer to this report page 185 and 292. Moreover, our company established rules to regulate financial derivatives transaction and loan with others, endorsement risk management. For these reasons, those activities will not induce serious impacts on our company.

• (C) Future R&D plans and Fund Estimated to Invest

Our company benefit from expertise in R&D and production experiences that accumulated for many years which allows us to meet product safety and diversity by launching “Modularized Product Design” production method to promote R&D capabilities, speed up new product development in order to satisfy variety product specifications that requested by different customers.

In the latest years, we have purchased new machines and equipment in order to reach the best production practice and to rejuvenate current products. We expect to invest about NT$851,583 thousand in R&D related field in 2017.

• (D) Changes in domestic and foreign policy and legal impact on the company's financial operations and counter measures

Lately, our company’s financial operations haven’t affected by critical policy or legal changes in domestic and oversea because our main target market is in domestic, legal and critical policies are relatively stable also there is no military or political risks in the short term in the domestic. Conclude above reasons, we estimate our company will not suffer from negative effects due to major policy and legal changes in domestic and oversea.

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• (E) Influence and Counter-Measures for Technology and Industry Shift Company’s Financial Operation

We pay attention on technology shifting in the industry and assigned specialist to evaluate and research certain changes might influence company’s financial operation and found its countermeasures. In recent years, there is no critical technology shifting that will impose threat on company’s financial operation.

• (F) Crisis Management and Counter Measures Result from Company’s Image Change Impact.

Our company’s image is always being good; in the recent years there is no significant incidents that would require corporation crisis management.

• (G) Expected income from merger and potential risk counter-measures: Not Applicable.

• (H) Expected income from production facilities expansion and potential risk counter-measures: please refer to this report section “7” point (4).

• (I) Potential risk and counter-measures derived from buying and selling products:

The major raw materials that our company purchased are potassium gold, substrate, transparent film, and copper sheet, drill bit, milling cutter, dry film and chemical substances. Once those materials were approved, changing materials is less likely. Thus, we only maintain 1~2 suppliers. Meanwhile, we keep good cooperation with other supplies in order to spread risk. Besides, for one of our key product- IC BGA substrate, mostly we sell it to leading IC design companies in domestic and oversea. Their applications rages are broad and therefore we are free from centralized sales risk.

• (J) Risk counter-measures for directors, supervisors, shareholders owns more ten percent of company’s shares, bulk share transfer or redemption: Our company’s directors and shareholders owning more than 10% of company’s share do not engage bulk share transfer.

• (K) The impact of the change on the company's right to operate, risks and counter-measures: None

• (L) Litigation or non-litigation case, should list the company and its directors, supervisors, general manager, the sustainable person in charge of, shareholders own more than ten percent of company’s shares and the company has the judgment or the slave system is still in the case of significant litigation non-litigation or administrative contentious event, the results could affect shareholders' equity or securities, should disclose its disputed fact, the subject of money, lawsuits start date, the major parties and deal with the case of the suit before the published this annual report: None.

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• (M) Other Risk and Counter-Measure: None.

• (7) Other important matters: None

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8. Other Items Deserving Special Mention

• (1) Information related to the Company's affiliates

• (A)Associates Consolidated Business Operation Report:

a.As of December 31, 2016, our company organization chart as shown below:

==> picture [547 x 598] intentionally omitted <==

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

PIOTEK COMPUTER PIOTEK (H.K.)
(SUZHOU) CO., LTD. TRADING LIMITED
Share Holding Share Holding
Share Holding 100% 100%
100%
PIOTEK HOLDING LIMITED
KINSUS CORP. (USA)
Share Holding Share Holding 100%
51%
PIOTEK HOLDINGS LTD.
(CAYMAN)
KINSUS KINSUS KINSUS
KINSUS HOLDING
INTERCONNECT HOLDING INTERCONNECT
TECHNOLOGY Share (SAMOA) LIMITED (CAYMAN) TECHNOLOGY
Share
Holding Share Holding100% LIMITED SUZHOU CORP.
Holding
100%
100%
KINSUS INVESTMENT
CO., LTD.
Share Holding 100%
Share
Share Holding
Holding XIANG-SHOU (SUZHOU)
36.81%
100%
TRADING LIMITED
PEGAVISION PEGAVISION
JAPAN INC. CORPORATION
Share
Share Holding
Holding
100%
100%
PEGAVISION HOLDINGS
CORPORATION
Share Holding
100%
PEGAVISION CONTACT LENSES
(SHANGHAI) CORPORATION
----- End of picture text -----

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b.The name, incorporation date, address, paid-in capital, and main business items of each affiliate:

Company Name	Date of establishment	address	Paid-up capital (NT$ thousand)	Main businesses
KINSUS INTERCONNECT TECHNOLOGY CORP.	2000.09.11	Taoyuan City	4,460,000	Electronic Parts and Components Manufacturing, Electronic materials wholesale and retail
KINSUS CORP. (USA)	2000.10.11	CA U.S.A.	16,125	Designing substrates, formulating marketing strategy analysis, developing new customers, researching and development new product technology
KINSUS HOLDING (SAMOA) LIMITED	2006.12.04	Samoa	5,363,465	Investing activities
KINSUS INVESTMENT CO., LTD.	2009.08.12	Taoyuan City	1,000,000	Investingactivities
PEGAVISION CORPORATION	2009.08.26	Taoyuan City	600,000	Manufacturingmedical equipment
KINSUS HOLDING (CAYMAN) LIMITED	2006.12.06	Cayman Islands	2,322,000	Investing activities
PIOTEK HOLDING LTD.(CAYMAN)	2009.12.16	Cayman Islands	6,055,099	Investingactivities
PIOTEK HOLDING LIMITED	1999.08.13	Cayman Islands	4,509,872	Investingactivities
PIOTEK(HK)TRADING LIMITED	2009.12.12	HongKong	839	Tradingactivities
PEGAVISION HOLDINGS CORPORATION	2011.11.28	Samoa	68,693	Investing activities
PEGAVISION JAPAN INC.	2015.05.15	Japan	2,728	Manufacturingmedical equipment
KINSUS INTERCONNECT TECHNOLOGY SUZHOU CORP.	2007.04.09	China, Suzhou	2,257,500	Manufacturing and selling printed circuit board (PCB) (not high-densityfine-line)
PIOTEK COMPUTER (SUZHOU) CO., LTD.	2000.02.17	China, Suzhou	5,376,075	Researching, developing, producing and selling electronic components, PCBs and related products andprovidingafter-sale services
PEGAVISION CONTACT LENSES (SHANGHAI)CORPORATION	2012.11.27	China, Shanghai	65,062	Manufacturing medical equipment
XIANG-SHOU (SUZHOU) TRADING LIMITED	2013.05.02	China, Suzhou	64,500	Manufacturing and selling printed circuit board (PCB) (not high-density fine-line)

c.For companies presumed to have a relationship of control and subordination under Article 369-3 of the Company Act: None.

d.The industries covered by the business operated by the affiliates overall: Please refer to the table on above.

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e.The names of the directors, supervisors, and general manager of each affiliate and the details of their shareholding or capital contribution in such affiliate:

Company Name	Title	Name or Representative person	Shares Held	Shares Held
			# of Shares	Shareholding Percentage
KINSUS INTERCONNECT TECHNOLOGY CORP.	Director (Honorary Chairman)	Tong, Zi-Xian	200,000	0.04%
	Director	Hua Yu Investment Co., Ltd. (Representative:Wu, Xiang-Xiang)	55,556,221	12.46%
	Director	Hua Xu Investment Co., Ltd. (Representative:Su, Yan-Xue)	58,233,091	13.06%
	Chairman	Guo, Ming-Dong	1,069,795	0.24%
	Director	Lu, Jing (Resignation at 2016.10.31.)	Stop declare
	Director	Cheng, Chung-Jen	－	－
	Independent Director	Chen, Jin-Cai	－	－
	Independent Director	Wu, Hui-Huang	－	－
	Independent Director	Huang, Chun-Bao	－	－
PIOTEK HOLDING LTD.(CAYMAN)	Director	Kinsus Holding (SAMOA) Limited (Representative: Guo, Ming-Dong)	95,755,000	51%
PIOTEK HOLDING LIMITED	Director	Piotek Holdings Ltd (Cayman) (Representative: Guo, Ming-Dong)	139,840,790	100%
PIOTEK (HK) TRADING LIMITED	Director	Piotek Holdings Ltd. (Representative: Guo, Ming-Dong)	200,000	100%
PIOTEK COMPUTER (SUZHOU) CO., LTD.	Director	Piotek Holding Limited (Representative: Cheng, Ching-Feng )	－	100%
	Supervisors	Piotek Holding Limited (Representative: Chen, Ji-Liang)
KINSUS CORPORATION (USA)	Chairman	KINSUS INTERCONNECT TECHNOLOGY CORP. (Representative: Guo, Ming-Dong)	500,000	100%
	Director	Tong, Zi-Xian	－	－
	Director	He, Ming-Sen	－	－
KINSUS HOLDING (SAMOA) LIMITED	Chairman	KINSUS INTERCONNECT TECHNOLOGY CORP. (Representative: Guo, Ming-Dong)	166,308,720	100﹪
KINSUS HOLDING (CAYMAN) LIMITED	Chairman	KINSUS HOLDING(SAMOA) LIMITED (Representative: Guo, Ming-Dong)	72,000,000	100﹪
KINSUS INTERCONNECT TECHNOLOGY SUZHOU CORP.	General manager	KINSUS HOLDING(CAYMAN) LIMITED (Representative: Cheng, Ching-Feng )	－	100%

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	Supervisor	KINSUS HOLDING (CAYMAN) LIMITED (Representative: Liu, Su-Zhen )
XIANG-SHOU (SUZHOU) TRADING LIMITED	legal representative and executive director	KINSUS HOLDING (CAYMAN) LIMITED (Representative: Cheng, Ching-Feng )	－	100%
	Supervisor	KINSUS HOLDING (CAYMAN) LIMITED (Representative: Liu, Su-Zhen )
KINSUS INVESTMENT CO., LTD.	Chairman	KINSUS INTERCONNECT TECHNOLOGY CORP. (Representative: Tong, Zi-Xian)	100,000,000	100%
	Director	KINSUS INTERCONNECT TECHNOLOGY CORP. (Representative: Guo, Ming-Dong)
	Director	KINSUS INTERCONNECT TECHNOLOGY CORP. (Representative: Wu, Xiang-Xiang)
	Supervisor	KINSUS INTERCONNECT TECHNOLOGY CORP. (Representative: Shen, Yi-Zhong)
PEGAVISION CORPORATION	Chairman	Tong, Zi-Xian	645,729	1.08%
	Director	KINSUS INVESTMENT CO., LTD. (Representative: Guo, Ming-Dong)	22,088,736	36.81%
	Director	KINSUS INVESTMENT CO., LTD. (Representative: Wen, Mu-Rong)
	Director	Hua Yu Investment Co., Ltd. (Representative: Chen, He-Xu)	5,701,121	9.50%
	Director	Hua Yu Investment Co., Ltd. (Representative: Hou, Wen-Yong)
	Director	Xu, Liang-Rong	1,798,409	3.00%
	Independent Director	Yao, Ren-Lu
	Independent Director	Huang, Da-Fu
PEGAVISION HOLDINGS CORPORATION	Director	PEGAVISION CORPORATION (Representative: Chen, Ji-Liang)	2,130,000	100%
PEGAVISION CONTACT LENSES (SHANGHAI) CORPORATION	Director	Pegavision Holdings Corporation (Representative: Cheng, Ching-Feng )	－	100%
	Supervisor	Pegavision Holdings Corporation (Representative: Chen, Ji-Liang)
PEGAVISION JAPAN INC.	President	PEGAVISION CORPORATION (Representative: Lin, Yan-Ren)	198	100%

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f. The overview of the operations of affiliates:

Unit: NT$’000

Company Name	Capital	Total assets	Total liabilities	Net Value	Revenue	Operating income	Net income	Earnings per share
KINSUS INTERCONNECT TECHNOLOGY CORP.	4,460,000	35,503,409	6,633,699	28,869,710	17,931,850	2,691,712	2,233,705	5.01
KINSUS CORP. (USA)	16,125	39,361	2,699	36,662	41,889	8,287	4,769	9.54
KINSUS HOLDING (SAMOA) LIMITED	5,363,465	2,526,740	0	2,526,740	5,605,257	(364,193)	(256,869)	(1.54)
KINSUS INVESTMENT CO., LTD.	1,000,000	1,218,869	3,986	1,214,883	0	(409)	52,520	0.53
PEGAVISION CORPORATION	600,000	1,922,844	697,393	1,225,451	1,644,396	231,230	186,891	3.11
PEGAVISION HOLDINGS CORPORATION	68,693	46,640	0	46,640	0	(25)	5,769	2.71
PEGAVISION CONTACT LENSES (SHANGHAI) CORPORATION	65,062	51,477	5,464	46,013	57,255	5,132	5,832	Note 1
KINSUS HOLDING (CAYMAN) LIMITED	2,322,000	1,100,038	0	1,100,038	2,217,394	91,282	33,282	0.46
PIOTEK HOLDING LTD. (CAYMAN)	6,055,099	2,797,455	0	2,797,455	3,597,142	(464,816)	(568,922)	(5.94)
KINSUS INTERCONNECT TECHNOLOGY SUZHOU CORP.	2,257,500	2,300,143	1,265,250	1,034,893	2,008,697	92,360	31,763	Note 1
XIANG-SHOU (SUZHOU) TRADING LIMITED	64,500	146,301	81,152	65,149	231,388	(1,021)	1,511	Note 1
PIOTEK HOLDING LIMITED	4,509,872	2,797,455	0	2,797,455	3,597,142	(464,816)	(568,922)	(4.07)
PIOTEK (HK) TRADING LIMITED	839	152,709	79,791	72,918	631,276	9,975	15,351	76.76
PIOTEK COMPUTER (SUZHOU) CO., LTD.	5,376,075	4,525,682	1,802,025	2,723,657	3,561,481	(481,489)	(584,054)	Note 1
PEGAVISION JAPAN INC.	2,728	4,617	1,515	3,102	11,267	526	354	1,787.13

Note 1：The companies have no shares available for EPS calculation.

• Note 2：If the related-party is a foreign company, the relevant figures are converted to NT dollar at the exchange rate at the reporting date.

(B)Associates Consolidated Financial Report: please refer to page 196 to 303.

• (C)Associates Report: Not applicable.

• (2)The status of the Company carrying out a private placement of securities during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report. None.

• (3)Holding or disposal of shares in the Company by the company's subsidiaries during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report: None.

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• (4)Other matters that require additional description: None.

• (5)Any of the situations listed in Article 36, paragraph 3, subparagraph 2 of the Securities and Exchange Act, which might materially affect shareholders' equity or the price of the Company's securities, occurring during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report: None.

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English Translation of an Audit Report Originally Issued in Chinese REPORT OF INDEPENDENT AUDITORS

To: the Board of Directors and Shareholders of Kinsus Interconnect Technology Corp.

Opinion

We have audited the accompanying parent-company-only balance sheets of Kinsus Interconnect Technology Corp. (the “Company”) as of December 31, 2016 and 2015, and the related parentcompany-only statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the parent-company-only financial statements, including the summary of significant accounting policies (together “the parent-company-only financial statements”).

In our opinion, based on the results of our audits and the report of other auditors (please refer to the － Other Matter Making Reference to the Audit of a Component Auditor section of our report), the parent-company-only financial statements referred to above present fairly, in all material respects, the parent-company-only financial position of the Company as of December 31, 2016 and 2015, and their parent-company-only financial performance and cash flows for the years then ended, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Parent-Company-Only Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in accordance with the Norm. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of the most significance in our audit of parent-company-only financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the parent-company-only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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Revenue Recognition

We determine that revenue recognition is one of the key audit matters. The Company’s revenue amounting to NT$17,931,850 thousand for the year ended December 31, 2016 is a significant account to the Company’s financial statements. The Company has conducted these sale activities in multimarketplace, including Taiwan, China, USA, etc. Among these locations, it has established hubwarehouse for certain foreign customers’ convenience. Furthermore, variety of sale terms and conditions enacted in its main sale contracts or sale orders contributed to the complexity for the Company to decide the appropriate timing of transfer the risk of ownership and return of goods to the buyers. We therefore conclude that there are significant risks with respect to the topic of revenue recognition.

Our audit procedures therefore include, but not limit to, evaluating the properness of accounting policy for revenue recognition, assessing and testing the effectiveness of relevant internal controls related to revenue recognition, particularly those controls for sipment to or from foreign warehouses, obtaining major sale orders or agreements to inspect the terms and conditions, checking the consistency of the accounting for revenue recognition with sale agreement or orders, performing analytical review procedures on monthly sale revenues, and executing sale cut-off tests, etc.

We have also evaluated the appropriateness of the related disclosure in Note 6 to the financial statements.

Related Party Transactions

The Company, to implement a plan of group operation, sold part of its operating equipment and machinery to FuYang Technology Corp., an associate investee accounted for under equity method indirectly, in amount of NT$241,776 thousand. This transaction was accunted for as a significant, non-routine related party transaction during the year ended December 31, 2016. We therefore conclude that the transaction is one of the key audit matters.

Our audit procedures therefore include, but not limit to, obtaining the related mutual agreements in order to clarify the purpose, pricing and collection term of the transaction, evaluating and testing the effectiveness of the internal controls related to related party transactions established by the Company’s management, including the approval flow authorized by board of directors or proper management and examination on the Company’s compliance with the “Process Guidance for Acquiring or Disposing Assets”.

We have also evaluated the appropriateness of the related disclosure in Note 7 to the financial statements.

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Other Matter – Making Reference to the Audit of a Component Auditor

We did not audit the financial statements of FuYang Technology Corp., an indirectly invested associate accounted for under the equity method by the Company. The financial statements of FuYang Technology Corp. as of December 31, 2016 and for the year then ended were audited by other auditors, whose report thereon has been furnished to us. Our audit, insofar as it related to the investment in the associate accounted for under the equity method amounting to NT$432,689 thousand as of December 31, 2016 representing 1.22% of the Company’s total assets, the related shares of income before tax from the associate under the equity method for the year then ended amounting to NT$(12,783) thousand representing (0.49)% of the Company’s income before tax, and the related shares of other comprehensive income from the associate under the equity method for the year then ended amounting to NT$(4,528) thousand representing 2.31% of the other comprehensive income, are based solely on the audit reports of other auditors.

Responsibilities of Management and Those Charged with Governance for the Parent-CompanyOnly Financial Statements

Management is responsible for the preparation and fair presentation of the parent-company-only financial statements in accordance with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of parent-company-only financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including audit committee, are responsible for overseeing the financial reporting process of the Company.

Auditor’s Responsibilities for the Audit of the Parent-Company-Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent-company-only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could

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reasonably be expected to influence the economic decisions of users taken on the basis of these parentcompany-only financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

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

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

5. Evaluate the overall presentation, structure and content of the parent-company-only financial statements, including the accompanying notes, and whether the parent-company-only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent-company-only financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of 2016 parent-company-only financial statements and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Ernst & Young February 8, 2017 Taipei, Taiwan, Republic of China

Notice to Readers

The accompanying parent-company-only financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China on Taiwan and not those of any other jurisdictions. The standards, procedures and practice to audit such financial statements are those generally accepted and applied in the Republic of China on Taiwan.

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- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Parent-Company-Only Balance Sheets

As of December 31, 2016 and 2015

(Amounts Expressed in Thousands of New Taiwan Dollars)

Assets	Assets	Assets		2016	2016			2015	2015
Code	Accounts	Notes		Amount		%		Amount		%
1100 1110 1147 1150 1170 1180 1200 1210 1310 1410 1470 11XX 1550 1600 1780 1840 1915 1995 15XX 1XXX	Current assets Cash and cash equivalents Financial assets at fair value through profit or loss Bond investments with no active market Notes receivable, net Accounts receivable, net Accounts receivable - related parties, net Other receivables Other receivables - related parties Inventories, net Prepayments Other current assets Total current assets Non-current assets Investment accounted for under equity method Property, plant and equipment, net Intangible assets, net Deferred tax assets Prepayment for equipment Other non-current assets Total non-current assets Total Assets	4, 6(1) 4, 6(2) 4, 6(3) 4, 6(4) 4, 6(5) 4, 6(5), 7 7 4, 6(6) 4, 6(7) 4, 6(8), 8, 9 4, 6(9) 4, 6(22) 4, 6(8), 9 6(10)		$9,833,450 2,839,333 423,057 3,030 2,513,446 33,730 243,431 314,027 1,318,258 73,942 29,811 17,625,515 3,778,285 11,947,782 5,208 9,593 2,133,188 3,838 17,877,894 $35,503,409		28 8 1 - 7 - 1 1 4 - - 50 10 34 - - 6 - 50 100		$10,998,903 3,524,742 423,057 1,835 2,920,639 21,759 281,480 7,489 1,317,749 115,144 72,238 19,685,035 3,610,796 10,309,220 9,869 9,593 2,452,423 2,202 16,394,103 $36,079,138		30 10 1 - 8 - 1 - 4 - - 54 10 29 - - 7 - 46 100

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

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- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Parent-Company-Only Balance Sheets (Continued) As of December 31, 2016 and 2015

(Amounts Expressed in Thousands of New Taiwan Dollars)

Liabilities and Equity	Liabilities and Equity	Liabilities and Equity		2016	2016			2015	2015
Code	Accounts	Notes		Amount		%		Amount		%
2100 2150 2170 2180 2200 2230 2300 21XX 2540 2570 2600 25XX 2XXX 3100 3110 3200 3300 3310 3350 3400 3500 3XXX	Current liabilities Short-term loans Notes payable Accounts payable Accounts payable - related parties Other payables Current income tax liabilities Other current liabilities Total current liabilities Non-current liabilities Long-term loans Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Capital Common stock Capital surplus Retained earnings Legal capital reserve Unappropriated earnings Other components of equity Treasury Stock Total equity Total liabilities and equity	6(11) 7 6(12), 7 4, 6(22) 6(13) 6(14), 8 4, 6(22) 4, 6(15), 6(16) 6(17) 6(17) 6(17) 6(17)		$1,277,100 43,498 1,074,861 207,877 2,414,819 469,126 324,358 5,811,639 788,700 351 33,009 822,060 6,633,699 4,460,000 5,939,819 3,340,018 15,163,371 (613) (32,885) 28,869,710 $35,503,409		4 - 3 1 7 1 1 17 2 - - 2 19 12 17 9 43 - - 81 100		$1,831,266 49,834 1,049,302 428,877 3,094,451 541,841 329,589 7,325,160 288,860 39,834 34,148 362,842 7,688,002 4,460,000 5,939,819 3,049,623 14,780,095 194,484 (32,885) 28,391,136 $36,079,138		5 - 3 1 9 2 1 21 1 - - 1 22 12 16 8 41 1 - 78 100

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

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- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Parent-Company-Only Statements of Comprehenstve Income

For the Years Ended December 31, 2016 and 2015

(Amounts Expressed in Thousands of New Taiwan Dollars, Except Earnings Per Share)

Code	Accounts	Notes	2016		2015
			Amount	%	Amount	%
4000 5000 5900 6000 6100 6200 6300 6900 7000 7010 7020 7050	Operating revenues Operating costs Gross profit Operating expenses Selling General and administrative Research and development Operating expenses total Operating income Non-operating income and expenses Other income Other gains and losses Finance costs Share of profit or loss of subsidiaries, associates and joint ventures Non-operating income and expense total Income from continuing operations before income tax Income tax Net income Other comprehensive income (loss) Item that may not be reclassified subsequently to profit or loss Actuarial gain (loss) on defined benefit plains Items that may be reclassified subsequently to profit or loss Unrealized gain (loss) on available-for-sale security Share of other comprehensive income (loss) of subsidiaries, associates and joint ventures Income tax related to items that may be reclassified subsequently to profit or loss Total other comprehensive income, net of tax Total comprehensive income Earnings per share - basic (in NT$) Earnings per share - diluted (in NT$)	4, 6(18), 7 7 7 6(20), 7 6(20), 7 6(20) 4, 6(22) 6(21) 6(23) 6(23)	$17,931,850 (13,222,128) 4,709,722 (204,559) (859,383) (954,068) (2,018,010) 2,691,712 155,185 8,391 (27,776) (199,580) (63,780) 2,627,932 (394,227) 2,233,705 (959) - (234,931) 39,834 (196,056) $2,037,649 $5.01 $4.95	100 (74) 26 (1) (5) (5) (11) 15 1 - - (1) - 15 (3) 12 - - (1) - (1) 11	$17,827,251 (12,513,748) 5,313,503 (170,374) (620,887) (1,012,606) (1,803,867) 3,509,636 118,580 66,432 (21,360) (325,786) (162,134) 3,347,502 (443,550) 2,903,952 (8,721) (24,694) (72,922) 12,397 (93,940) $2,810,012 $6.51 $6.38	100 (70) 30 (1) (3) (6) (10) 20 1 - - (2) (1) 19 (3) 16 - - - - - 16
7070
7900 7950 8200 8300 8310 8311 8360 8362 8370 8399 8500 9750 9850

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

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- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Parent-Company-Only Statements of Changes in Equity

For the Years Ended December 31, 2016 and 2015

(Amounts Expressed in Thousands of New Taiwan Dollars)

	Items	Capital	Capital Surplus	Retained Earnings	Retained Earnings	Other Components of equity	Other Components of equity	Treasury Stock
				Legal Reserve	Unappropriated Earnings	Exchange differences arising on translation of foreign operations	Unrealized valuation gain (loss) on available-for-sale financial assets
Code		3100	3200	3310	3350	3410	3425	3500	3XXX
A1 B1 B5 D1 D3 D5 L1 A1 B1 B5 D1 D3 D5 Z1	Balance as of January 1, 2015 Appropriation and distribution of 2014 earnings: Legal reserve Cash dividends - common shares Net income (loss) for 2015 Other comprehensive income (loss) for 2015 Total comprehensive income Treasury stock repurchased Balance as of December 31, 2015 Appropriation and distribution of 2015 earnings: Legal reserve Cash dividends - common shares Net income (loss) for 2016 Other comprehensive income (loss) for 2016 Total comprehensive income Balance as of December 31, 2016	$4,460,000 - 4,460,000 - $4,460,000	$5,939,819 - 5,939,819 - $5,939,819	$2,687,890 361,733 - 3,049,623 290,395 - $3,340,018	$14,030,597 (361,733) (1,784,000) 2,903,952 (8,721) 2,895,231 14,780,095 (290,395) (1,559,075) 2,233,705 (959) 2,232,746 $15,163,371	$255,009 (60,525) (60,525) 194,484 (195,097) (195,097) $(613)	$24,694 (24,694) (24,694) - - - $-	$- - (32,885) (32,885) - $(32,885)	$27,398,009 - (1,784,000) 2,903,952 (93,940) 2,810,012 (32,885) 28,391,136 - (1,559,075) 2,233,705 (196,056) 2,037,649 $28,869,710

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

NOTE: The employees' bonuses of NT$343,533 and the directors' and supervisors' remuneration of NT$20,911 thousand for the year ended December 31, 2016 had been deducted from comprehensive income for the year ended December 31, 2016.

The employees' bonuses of NT$442,444 and the directors' and supervisors' remuneration of NT$26,026 thousand for the year ended December 31, 2015 had been deducted from comprehensive income for the year ended December 31, 2015.

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

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English Translation of Parent-Company-Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Parent-Company-Only Statements of Cash Flows For the Years Ended December 31, 2016 and 2015

(Amounts Expressed in Thousands of New Taiwan Dollars)

Code	Items		2016		2015	Code	Items	2016	2015
AAAA A10000 A20000 A20010 A20100 A20200 A20300 A20400 A20900 A21200 A22300 A22500 A22500 A23100 A23700 A30000 A31110 A31130 A31150 A31160 A31180 A31190 A31200 A31230 A31240 A32130 A32150 A32160 A32180 A32210 A32230 A32240 A33000 A33100 A33300 A33500 AAAA	Cash flows from operating activities: Net income before tax Adjustments: Profit or loss not effecting cash flows: Depreciation Amortization Bad debt expense (gain on recovery) Net loss (gain) of financial assets (liabilities) at fair value through profit or loss Interest expense Interest income Share of profit or loss of subsidiaries, associates and joint ventures Gain on disposal of property, plant and equipment Loss on disposal of property, plant and equipment Gain on disposal of investment Impairment loss of non-financial asset Changes in operating assets and liabilities: Financial Assets at fair value through profit or loss Notes receivable Accounts receivable Accounts receivable - related parties Other receivable Other receivable - related parties Inventories Prepayment Other current assets Notes payable Accounts payable Accounts payable - related parties Other payable Advance receipts Other current liabilities Net pension liability under defined benefit plan Cash generated from operations Interest received Interest paid Income tax paid Net cash provided by (used in) operating activities		$2,627,932 2,259,944 19,197 4,289 (10,159) 27,776 (62,885) 199,580 451 - - 17,100 695,568 (1,195) 402,904 (11,971) 37,350 (306,538) (509) 41,202 42,427 (6,336) 25,559 (221,000) (262,715) 760 (3,040) (4,098)		$3,347,502 1,953,230 26,086 (17,179) (24,447) 21,360 (76,970) 325,786 (5) 725 (30,845) - 1,581,283 2,523 (499,791) (20,751) 110,843 1,708 4,075 (38,824) (24,680) 9,970 122,233 181,562 (77,360) (1,126) 254 (4,241)	BBBB B00400 B00600	Cash flows from investing activities: Disposal of available-for-sale financial assets Acquisition of bond investments for which no active market exists Acquisition of investment accounted for under equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Acquisition of intangible assets Net cash provided by (used in) investing activities Cash flows from financing activities: Increase in (repayment of) short-term loans Increase in long-term loans Repayment of long-term loans Increase in guarantee deposits received Payment of cash dividends Treasury stock purchased Net cash provided by (used in) financing activities Net Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	- - (602,000) (4,255,307) 241,776 (1,636) (14,536)	46,520 (3,057) - (4,172,476) 5 3,145 (24,028) (4,149,891) 1,100,468 - (339,432) - (1,784,000) (32,885) (1,055,849) 916,599 10,082,304 $10,998,903
						B01800
						B02700 B02800 B03800 B04500 BBBB CCCC C00100 C01600 C01700 C03000 C04500 C04900 CCCC EEEE E00100 E00200
								(4,631,703)
								(554,166) 800,000 (303,111) 2,000 (1,559,075) -
								(1,614,352)
								(1,165,453) 10,998,903
								$9,833,450
			5,511,593		6,872,921
			63,584 (27,984) (466,591)		77,349 (21,073) (806,858)
			5,080,602		6,122,339

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

109

• • English Translation of Parent ~~-~~ Company ~~-~~ Only Financial Statements and Footnotes Originally Issued in Chinese ~~English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese~~ Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Notes to the Parent-Company-Only Financial StatementsNotes to Parent-Company-Only Financial Statements (Continued)

(Amounts Expressed in Thousands of New Taiwan Dollars unless Otherwise Specified)

1. HISTORY AND ORGANIZATION

Kinsus Interconnect Technology Corp. (referred to “the Company”) was established on September 11, 2000. Its main business activities include the manufacture of electronic products, the whole-sale and retail-sale of electronic materials, and the consultation services of business operation and management. The Company’s stocks have been governmentally approved on May 20, 2004 to be listed and traded in Taiwan Stock Exchange starting November 1, 2004.The registered business premise and main operation address is at No. 1245, Chung Hua Rd., Hsinwu District, Taoyuan City, Taiwan 32747.

2. DATE AND PROCEDURE OF AUTHORIZATION FOR FINANCIAL STATEMENTS ISSUANCE

The financial statements of the Company were authorized to be issued in accordance with a resolution of the Board of Directors’meeting held on February 8, 2017.

3. NEWLY ISSUED OR REVISED STANDARDS AND INTERPRETATIONS

• (1)Standards or interpretations issued, revised or amended, which are recognized by Financial Supervisory Commission (“FSC”), but not yet adopted by the Group at the date of issuance of the Group’s financial statements are listed below:

• (a) IAS 36 “Impairment of Assets” (Amendment)

These amendments relate to those issued in May 2011 and require entities to disclose the recoverable amount of an asset (including goodwill) or a cash-generating unit when an impairment loss has been recognized or reversed during the period. The amendments also require detailed disclosure of how the fair value less costs of disposal has been measured when an impairment loss has been recognized or reversed, including valuation techniques used, level of fair value hierarchy of assets and key assumptions used in measurement. The amendments are effective for annual periods beginning on or after January 1, 2014.

• (b) IFRIC 21 “Levies”

This interpretation provides guidance on when to recognize a liability for a levy imposed by a government (both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain). The interpretation is effective for annual periods beginning on or after January 1, 2014.

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• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

• (c) IAS 39 “Financial Instruments: Recognition and Measurement” (Amendment)

Under the amendments, there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain criteria are met. The interpretation is effective for annual periods beginning on or after January 1, 2014.

• (d) IAS 19 “Employee Benefits” (Defined benefit plans: employee contributions)

The amendments apply to contributions from employees or third parties to define benefit plans. The objective of the amendments is to provide a policy choice for a simplified accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendments are effective for annual periods beginning on or after July 1, 2014.

• (e) Improvements to International Financial Reporting Standards (2010-2012 cycle):

IFRS 2 “Share-based Payment”

The annual improvements amend the definitions of 'vesting condition' and 'market condition' and add definitions for 'performance condition' and 'service condition' (which were previously part of the definition of 'vesting condition'). The amendments prospectively apply to share-based payment transactions for which the grant date is on or after July 1, 2014.

IFRS 3 “Business Combinations”

The amendments include: (1) deleting the reference to "other applicable IFRSs" in the classification requirements; (2) deleting the reference to "IAS 37 Provisions, Contingent Liabilities and Contingent Assets or other IFRSs as appropriate", other contingent consideration that is not within the scope of IFRS 9 shall be measured at fair value at each reporting date and changes in fair value shall be recognized in profit or loss; (3) amending the classification requirements of IFRS 9 Financial Instruments to clarify that contingent consideration that is a financial asset or financial liability can only be measured at fair value, with changes in fair value being presented in profit or loss depending on the requirements of IFRS 9. The amendments apply prospectively to business combinations for which the acquisition date is on or after July 1, 2014.

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• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

IFRS 8 “Operating Segments”

The amendments require an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments. The amendments also clarify that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly. The amendments are effective for annual periods beginning on or after July 1, 2014.

IFRS 13 “Fair Value Measurement”

The amendments to the Basis for Conclusions of IFRS 13 clarify that when deleting paragraph B5.4.12 of IFRS 9 Financial Instruments and paragraph AG79 of IAS 39 Financial Instruments: Recognition and Measurement as consequential amendments from IFRS 13 Fair Value Measurement, the IASB did not intend to change the measurement requirements for short-term receivables and payables.

IAS 16 “Property, Plant and Equipment”

The amendments clarify that when an item of property, plant and equipment is revalued, the accumulated depreciation at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset. The amendments are effective for annual periods beginning on or after July 1, 2014.

IAS 24 “Related Party Disclosures”

The amendments clarify that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity. The amendments are effective for annual periods beginning on or after July 1, 2014.

IAS 38 “Intangible Assets”

The amendments clarify that when an intangible asset is revalued, the accumulated amortization at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset. The amendments are effective for annual periods beginning on or after July 1, 2014.

• (f) Improvements to International Financial Reporting Standards (2011-2013 cycle):

IFRS 1 “First-time Adoption of International Financial Reporting Standards”

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• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

The amendments clarify that an entity, in its first IFRS financial statements, has the choice between applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS permits early application.

IFRS 3 “Business Combinations”

These amendments clarify that paragraph 2(a) of IFRS 3 Business Combinations excludes the formation of all types of joint arrangements as defined in IFRS 11 Joint Arrangements from the scope of IFRS 3; and the scope exception only applies to the financial statements of the joint venture or the joint operation itself. The amendments are effective for annual periods beginning on or after July 1, 2014.

IFRS 13 “Fair Value Measurement”

The amendments clarify that paragraph 52 of IFRS 13 includes a scope exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis. The objective of the amendments is to clarify that this portfolio exception applies to all contracts within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation. The amendments are effective for annual periods beginning on or after July 1, 2014.

IAS 40 “Investment Property”

The amendments clarify the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property; in determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 Business Combinations and investment property as defined in IAS 40 Investment Property, separate application of both standards independently of each other is required. The amendments are effective for annual periods beginning on or after July 1, 2014.

(g) IFRS 14 “Regulatory Deferral Accounts”

IFRS 14 permits first-time adopters to continue to recognize amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognize such amounts, the Standard requires that the effect of rate regulation must be presented separately from other items. IFRS 14 is effective for annual periods beginning on or after January 1, 2016.

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• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

• (h) IFRS 11 “Joint Arrangements” (Accounting for Acquisitions of Interests in Joint Operations)

The amendments provide new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments require the entity to apply all of the principles on business combinations accounting in IFRS 3 “Business Combinations”, and other IFRS (that do not conflict with the guidance in IFRS 11), to the extent of its share in a joint operation acquired. The amendments also require certain disclosure. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (i) IAS 16 “Property, Plant and Equipment and IAS 38 “Intangible Assets” — Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify that the use of revenue-based methods to calculate depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset, such as selling activities and change in sales volumes or prices. The amendments also clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (j) IAS 16 “Property, Plant and Equipment and IAS 41 “Agriculture” — Agriculture: Bearer Plants

The IASB decided that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 Property, Plant and Equipment, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, and the produce growing on bearer plants will remain within the scope of IAS 41. The amendments are effective for annual period beginning on or after January 1, 2016.

• (k) IAS 27 “Separate Financial Statements” — Equity Method in Separate Financial Statements

The IASB restored the option to use the equity method under IAS 28 for an entity to account for investments in subsidiaries and associates in the entity’s separate financial statements. In 2003, the equity method was removed from the options. These amendments remove the only difference between the separate financial statements prepared in

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accordance with IFRS and those prepared in accordance with the local regulations in certain jurisdictions. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (l) Improvements to International Financial Reporting Standards (2012-2014 cycle):

IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”

The amendments clarify that a change of disposal method of assets (or disposal groups) from disposal through sale or through distribution to owners (or vice versa) should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. The amendments also require identical accounting treatment for an asset (or disposal group) that ceases to be classified as held for sale or as held for distribution to owners. The amendments are effective for annual periods beginning on or after January 1, 2016.

IFRS 7 “Financial Instruments: Disclosures”

The amendments clarify that a servicing contract that includes a fee can constitute continuing involvement in a financial asset and therefore the disclosures for any continuing involvement in a transferred asset that is derecognized in its entirety under IFRS 7 Financial Instruments: Disclosures is required. The amendments also clarify that whether the IFRS 7 disclosure related to the offsetting of financial assets and financial liabilities are required to be included in the condensed interim financial report would depend on the requirements under IAS 34 Interim Financial Reporting. The amendments are effective for annual periods beginning on or after January 1, 2016.

IAS 19 “Employee Benefits”

The amendments clarify the requirement under IAS 19.83, that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. The amendments are effective for annual periods beginning on or after January 1, 2016.

IAS 34 “Interim Financial Reporting”

The amendments clarify what is meant by “elsewhere in the interim financial report” under IAS 34; the amendments state that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report. The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. The amendments are effective for annual periods beginning on or after January 1, 2016.

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• (m) Disclosure Initiative — Amendment to IAS 1 “Presentation of Financial Statements”:

The amendments contain (1) clarifying that an entity must not reduce the understandability of its financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures or functions. The amendments reemphasize that, when a standard requires a specific disclosure, the information must be assessed to determine whether it is material and, consequently, whether presentation or disclosure of that information is warranted, (2) clarifying that specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated, and how an entity shall present additional subtotals, (3) clarifying that entities have flexibility as to the order in which they present the notes to financial statements, but also emphasize that understandability and comparability should be considered by an entity when deciding on that order, (4) removing the examples of the income taxes accounting policy and the foreign currency accounting policy, as these were considered unhelpful in illustrating what significant accounting policies could be, and (5) clarifying that the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, classified between those items that will or will not be subsequently reclassified to profit or loss. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (n) IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities”, and IAS 28“Investments in Associates and Joint Ventures” — Investment Entities: Applying the Consolidation Exception

The amendments contain (1) clarifying that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity when the investment entity measures all of its subsidiary at fair value, (2) clarifying that only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated when all other subsidiaries of an investment entity are measured at fair value, and (3) allowing the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. The amendments are effective for annual periods beginning on or after January 1, 2016.

The abovementioned standards and interpretations issued by IASB and recognized by FSC are applicable for annual periods beginning on or after January 1, 2017. The Company assesses that there will be no significant impact on the Campany’s financial statements then.

• (2)Standards or interpretations issued, revised or amended, by IASB but not yet recognized by FSC at the date of issuance of the Company’s financial statements are listed below:

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• (a) IFRS 15 “Revenue from Contracts with Customers”

The core principle of the new Standard is for companies to recognize revenue to depict the transfer of promised goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

The new Standard includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts with customers. The Standard is effective for annual periods beginning on or after January 1, 2018.

(b) IFRS 9 “Financial Instruments”

The IASB has issued the final version of IFRS 9, which combines classification and measurement, the expected credit loss impairment model and hedge accounting. The standard will replace IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9 Financial Instruments (which include standards issued on classification and measurement of financial assets and liabilities and hedge accounting).

Classification and measurement: Financial assets are measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial asset’s contractual cash flow characteristics. Financial liabilities are measured at amortized cost or fair value through profit or loss. Furthermore there is requirement that ‘own credit risk’ adjustments are not recognized in profit or loss.

Impairment: Expected credit loss model is used to evaluate impairment. Entities are required to recognize either 12-month or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition.

Hedge accounting: Hedge accounting is more closely aligned with risk management activities and hedge effectiveness is measured based on the hedge ratio.

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The new standard is effective for annual periods beginning on or after January 1, 2018.

• (c) IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full.

IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

The effective date of the amendments has been postponed indefinitely, but early adoption is allowed.

(d) IFRS 16“Leases”

The new standard requires lessees to account for all leases under a single on-balance sheet model (subject to certain exemptions). Lessor accounting still uses the dual classification approach: operating lease and finance lease. The Standard is effective for annual periods beginning on or after January 1, 2019.

• (e) IAS 12“Income Taxes” — Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify how to account for deferred tax assets for unrealized losses. The amendments are effective for annual periods beginning on or after January 1, 2017.

• (f) Disclosure Initiative — Amendment to IAS 7 “Statement of Cash Flows”

The amendments relate to changes in liabilities arising from financing activities and to require a reconciliation of the carrying amount of liabilities at the beginning and end of

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the period. The amendments are effective for annual periods beginning on or after January 1, 2017.

• (g) IFRS 15 “Revenue from Contracts with Customers” — Clarifications to IFRS 15

The amendments clarify how to identify a performance obligation in a contract, determine whether an entity is a principal or an agent, and determine whether the revenue from granting a licence should be recognized at a point in time or over time. The amendments are effective for annual periods beginning on or after January 1, 2018.

• (h) IFRS 2 “Shared-Based Payment” — Amendments to IFRS 2

The amendments contain (1) clarifying that vesting conditions (service and non-market performance conditions), upon which satisfaction of a cash-settled share-based payment transaction is conditional, are not taken into account when estimating the fair value of the cash-settled share-based payment at the measurement date. Instead, these are taken into account by adjusting the number of awards included in the measurement of the liability arising from the transaction, (2) clarifying if tax laws or regulations require the employer to withhold a certain amount in order to meet the employee’s tax obligation associated with the share-based payment, such transactions will be classified in their entirety as equity-settled share-based payment transactions if they would have been so classified in the absence of the net share settlement feature, and (3) clarifying that if the terms and conditions of a cash-settled share-based payment transaction are modified, with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as an equity-settled transaction from the date of the modification. The equity-settled share-based payment transaction is measured by reference to the fair value of the equity instruments granted at the modification date and is recognised in equity, on the modification date, to the extent to which goods or services have been received. The liability for the cash-settled share-based payment transaction as at the modification date is derecognised on that date. Any difference between the carrying amount of the liability derecognised and the amount recognised in equity on the modification date is recognised immediately in profit or loss. The amendments are effective for annual periods beginning on or after January 1, 2018.

• (i) Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts — Amendments to IFRS 4

The amendments help to resolve issues arising from the different effective dates for IFRS 9 “Financial Instruments” (January 1, 2018) and the new insurance contracts standard about to be issued by the IASB (still to be decided, but not before January 1, 2020). The amendments allow entity issuing insurance contracts within the scope of IFRS 4 to

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mitigate certain effects of applying IFRS 9 “Financial Instruments” before the IASB’s new insurance contracts standard becomes effective. The amendments introduce two approaches: an overlay approach and a temporary exemption. The overlay approach allows an entity applying IFRS 9 to remove from profit or loss the effects of some of the accounting mismatches that may occur from applying IFRS 9 before the new insurance contracts standard is applied. The temporary exemption enables eligible entities to defer the implementation date of IFRS 9 until 2021 (these entities that defer the application of IFRS 9 will continue to apply IAS 39).

• (j) Transfers of Investment Property — Amendments to IAS 40

The amendments relate to the transfers of investment property. The amendments clarify that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use, the entity should transfer property into and out of investment property accordingly. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. The amendments are effective for annual periods beginning on or after January 1, 2018.

• (k) Improvements to International Financial Reporting Standards (2014-2016 cycle):

IFRS 1 “First-time Adoption of International Financial Reporting Standards”

The amendments revise and amend transition requirements relating to certain standards and delete short-term exemptions under Appendix E for first-time adopter. The amendments are effective for annual periods beginning on or after January 1, 2018.

IFRS 12 “Disclosure of Interests in Other Entities”

The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10–B16, apply to an entity’s interests that are classified as held for sale or discontinued operations. The amendments are effective for annual periods beginning on or after January 1, 2017.

IAS 28 “Investments in Associates and Joint Ventures”

The amendments clarify that when an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and other qualifying entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9 “Financial Instruments” on an investment-by-investment basis. Besides, if an entity that is not itself an investment entity has an interest in an associate

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or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate's or joint venture's interests in subsidiaries on an investment-by-investment basis. The amendments are effective for annual periods beginning on or after January 1, 2018.

(l) IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

The interpretation clarifies that when applying paragraphs 21 and 22 of IAS 21 “The Effects of Changes in Foreign Exchange Rates”, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. The interpretation is effective for annual periods beginning on or after January 1, 2018.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Company’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. As the Company is still currently determining the potential impact of the standards and interpretations listed under (1) to (2), it is not practicable to estimate their impact on the Company at this point in time. All other standards and interpretations have no material impact on the Company.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1)Statement of compliance

The parent-company-only financial statements of the Company for the years ended December 31, 2016 and 2015 were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”).

(2) Basis of preparation

The Company prepared parent-company-only financial statements in accordance with Article 21 of the Regulations, which provided that the profit or loss and other comprehensive income for the period presented in the parent-company-only financial statements shall be the same as the profit or loss and other comprehensive income attributable to stockholders of the parent presented in the consolidated financial statements for the period, and the total equity presented in the parent-company-only financial statements shall be the same as the equity attributable to the parent company presented in the consolidated financial statements. Therefore, the Company accounted for its investments in subsidiaries using equity method and, accordingly, made necessary adjustments.

The parent-company-only financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The parent-companyonly financial statements are expressed in thousands of New Taiwan Dollars (“NT$”) unless otherwise stated.

(3)Foreign currency transactions

The Company’s parent-company-only financial statements are presented in its functional currency, New Taiwan Dollars (NTD). Items included in the parent-company-only financial statements are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Company at functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

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All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

• (a) Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

• (b)Foreign currency items within the scope of IAS 39 Financial Instruments: Recognition and Measurement are accounted for based on the accounting policy for financial instruments.

• (c) Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

(4)Translation of financial statements in foreign currency

The assets and liabilities of foreign operations are translated into NTD at the closing rate of exchange prevailing at the reporting date and the income and expenses are translated at an average exchange rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. The following are accounted for as disposals even if an interest in the foreign operation is retained by the Company: the loss of control over a foreign operation, the loss of significant influence over a foreign operation, or the loss of joint control over a foreign operation.

On partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or jointly controlled entity that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

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Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

(5)Current and non-current distinction

An asset is classified as current when:

• (a) The Company expects to realize the asset, or intends to sell or consume it, in its normal operating cycle.

• (b) The Company holds the asset primarily for the purpose of trading.

• (c) The Company expects to realize the asset within twelve months after the reporting period.

• (d) The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

• (a) The Company expects to settle the liability in its normal operating cycle.

• (b) The Company holds the liability primarily for the purpose of trading.

• (c) The liability is due to be settled within twelve months after the reporting period.

• (d) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. 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.

All other liabilities are classified as non-current.

(6)Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and 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 (include fixed-term deposits that have matures of 3 months from the date of acquisition).

(7)Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.

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Financial assets and financial liabilities within the scope of IAS 39 Financial Instruments: Recognition and Measurement are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

A.Financial assets

The Company accounts for regular way purchase or sales of financial assets on the trade date.

Financial assets of the Company are classified as financial assets at fair value through profit or loss, available-for-sale financial assets and loans and receivables. The Company determines the classification of its financial assets at initial recognition.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.

A financial asset is classified as held for trading if:

• i. it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

• ii. on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or

• iii. it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial asset at fair value through profit or loss; or a financial asset may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

• i. it eliminates or significantly reduces a measurement or recognition inconsistency; or

• ii. a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

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Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on financial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment).

If financial assets don’t have quoted prices in an active market and their far value cannot be reliably measured, they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, at the reporting date.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or those not classified as financial assets at fair value through profit or loss, held-to-maturity investments, or loans and receivables.

Foreign exchange gains and losses and interest calculated using the effective interest method relating to monetary available-for-sale financial assets, or dividends on an available-for-sale equity instrument, are recognized in profit or loss. Subsequent measurement of available-forsale financial assets at fair value is recognized in equity until the investment is derecognized, at which time the cumulative gain or loss is reclassified to profit or loss.

If equity instrument investments do not have quoted prices in an active market and their fair value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at the reporting date.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Company upon initial recognition designates as available-for-sale, classified as at fair value through profit or loss, or those for which the holder may not recover substantially all of its initial investment.

Loans and receivables are separately presented on the balance sheet as receivables or bond investments for which no active market exists. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or transaction costs. The effective interest method amortization is recognized in profit or loss.

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Impairment of financial assets

The Company assesses at each reporting date whether there is any objective evidence that a financial asset other than the financial assets at fair value through profit or loss is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset. The carrying amount of the financial asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss.

A significant or prolonged decline in the fair value of an available-for-sale equity instrument below its cost is considered a loss event.

Other loss events include:

(a)significant financial difficulty of the issuer or obligor; or

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

• (c)it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or

• (d)the disappearance of an active market for that financial asset due to financial difficulties of the issuer.

For held-to-maturity financial assets and loans and receivables measured at amortized cost, the Company first assesses individually whether objective evidence of impairment exists individually for financial asset that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exits for an individually assessed financial asset, whether significant or not, it includes the asset in a Company of financial assets with similar credit risk characteristics and collectively assesses them for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. Interest income is accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to profit or loss.

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In the case of equity investments classified as available-for-sale, where there is evidence of impairment, the amount recorded for impairment is the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss. The impairment amount is reclassified from equity to profit or loss. Impairment losses on equity investments are not reversed through profit or loss. Increases in their fair value after impairment are recognized directly in equity.

In the case of debt instruments classified as available-for-sale, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss. Future interest income is based on the reduced carrying amount of assets and calculated using the effective interest rate which is the discount rate for measuring impairment loss. Interest income is recognized in profit or loss. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss.

Derecognition of financial assets

A financial asset is derecognized when:

• (a)The ights to receive cash flows from the asset have expired

• (b)The Company has transferred the asset and substantially all the risks and rewards of the asset have been transferred

• (c)The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

• B.Financial liabilities and equity instruments

Classification between liabilities or equity

The Company classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument.

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Equity instruments

An equity instrument is any contract of the Company that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

A financial liability is classified as held for trading if:

• (a)it is acquired principally for the purpose of selling it in short term;

• (b)on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or

• (c)it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated upon initial recognition as at fair value through profit or loss when doing so results in more relevant information, because either:

• (a)it eliminates or significantly reduces measurement or recognition inconsistency; or

• (b)a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

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Gains or losses on the subsequent measurement of liabilities at fair value through profit or loss, including interests, are recognized in profit or loss.

If financial liabilities at fair value through profit or loss do not have quoted prices in an active market and their far value cannot be reliably measured, they are classified as financial liabilities measured at cost on balance sheet and carried at cost as of the reporting date.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include payables and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Relevant gains or losses and amortization amounts are recognized in profit or loss when the liabilities are derecognized and amortized through the effective interest rate method.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

(8)Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

(a) In the principal market for the asset or liability, or

• (b) In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Company.

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The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

(9)Inventories

Inventories are valued at lower of cost or net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

Raw materials - At actual purchase cost, using weighted average method Finished goods and work in progress - Including cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity, using weighted average method.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(10)Investments accounted for using the equity method

The Company accounted for its investments in subsidiaries using equity method and made necessary adjustments in accordance with Article 21 of the Regulations. Such adjustments were made after the Company considered the different accounting treatments to account for its investments in subsidiaries in the consolidated financial statements under IFRS 10 “Consolidated Financial Statements” and the different IFRSs adopted from different reporting entity’s perspectives, and the Company recorded such adjustments by crediting or debiting to investments accounted for under the equity method, share of profit or loss of subsidiaries, associates and joint ventures and share of other comprehensive income of subsidiaries, associates and joint ventures.

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The Company’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Company has significant influence.

Under the equity method, the investment in the associate or joint venture is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the associate. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealized gains and losses resulting from transactions between the Company and the associate or joint venture are eliminated to the extent of the Company’s related interest in the associate.

When changes in the net assets of an associate or joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Company’s percentage of ownership interests in the associate or joint venture, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate on a prorate basis.

When the associate or joint venture issues new stocks, and the Company’s interest in an associate is reduced or increased as the Company fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate is recognized in Additional Paid in Capital and Investment in associate. When the interest in the associate is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

The Company determines at each reporting date whether there is any objective evidence that the investment in the associate or joint venture is impaired in accordance with IAS 39 Financial Instruments: Recognition and Measurement . If this is the case the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate or joint venture’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets. In determining the value in use of the investment, the Company estimates:

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• (a) Its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows form the operations of the associate or joint venture and the proceeds on the ultimate disposal of the investment; or

• (b) The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate or joint venture is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets .

Upon loss of significant influence over the associate or jointly controlled entity of joint venture, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or jointly controlled entity and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss.

(11)Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. 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 is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 “Property, plant and equipment”. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings	10 to 25 years
Machinery	4 to 5 years
Transportation	5 years
Office equipment	3 to 5 years
Other equipment	3 to 25 years

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An item of property, plant and equipment or any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The property, plant and equipment’s residual values, useful lives and methods of depreciation are reviewed at each financial year. If the expected values differ from the estimates, the differences are recorded as a change in accounting estimate.

(12)Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, not meeting the recognition criteria, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit (CGU) level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are recognized in profit or loss.

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The Company’s accounting policies for intangible assets are as follows:

Cost of Computer Software Useful economic life 1 year Amortization method Straight-line method during the contract term Internally generated or acquired externally Acquired externally

(13)Impairment of non-financial assets

The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 “Impairment of Assets” may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company would conduct impairment tests at individual or CGU level. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired. An asset’s recoverable amount is the higher of an asset’s net fair value or its value in use.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the recoverable amount of the asset or CGU. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years.

Impairment loss or reversals of continuing operations are recognized in profit or loss.

(14)Treasury Stock

The Company’s own equity instruments repurchased (treasury shares) are recognized at repurchase cost and deducted from equity. Any difference between the carrying amount and the consideration is recognized in equity.

(15)Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Conditions and methods for the recognition of various types of revenue are listed below:

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Sale of goods

Revenue from the sale of goods is recognized when all the following conditions have been satisfied: significant risks and rewards of ownership of the goods have passed to the buyer; neither continuing managerial involvement nor effective control over the goods sold have been retained; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the entity; and the costs incurred in respect of the transaction can be measured reliably.

Interest income

Interest incomes from financial assets at amortized costs (including loans and receivables and held-to-maturity financial assets) and available-for-sale financial assets are estimated using the effective interest method and recognized in profit or loss.

Dividend income

Dividend incomes are recognized only when the Company has the right to receive the dividends.

(16)Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(17)Post-employment benefits

All regular employees of the Company are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with the Company. Therefore, fund assets are not included in the Company’s parent-company-only financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations.

For the defined contribution plan, the Company will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due.

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Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions.Remeasurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of:

• (a) the date of the plan amendment or curtailment, and

• (b) the date that the Company recognizes restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted and disclosed for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events.

(18)Income tax

Income tax expense (benefit) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The 10% income tax for undistributed earnings of the Company is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders’ meeting.

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Deferred income tax

Deferred income tax is a temporary difference between the tax bases of assets and liabilities and their carrying amounts in balance sheet at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

• (a) Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit (loss);

• (b) In respect of taxable temporary differences associated with investments in subsidiaries, and associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, any unused tax losses and carry forward of unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:

• (a) Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• (b) In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will be reversed in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed and recognized at each reporting date.

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Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

5. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that would have a significant risk for a material adjustment to the carrying amounts of assets and liabilities within the next fiscal year are discussed below.

(1)Post-employment benefits

The cost of post-employment benefit pension plan and the present value of the defined benefit obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions, including the change in the discount rate and expected salary level. The assumptions used for measuring pension cost and defined benefit obligation are disclosed in Note 6.

(2)Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax benefit and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provision is based on various factors, such as past experience in tax audit and different interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company’s domicile.

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Deferred tax assets are recognized for all carryforward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies. As of December 31, 2016, the un-recognized portion of the Company’s defferred tax assets was disclosed in Note 6.

6. CONTENTS OF SIGNIFICANT ACCOUNTS

(1)Cash and cash equivalents

Cash and petty cash Checkings and savings Time deposit Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	200 2,153,840 7,679,410	200 2,373,292 8,625,411
	9,833,450	10,998,903

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

Held for trading: Money market fund Valuation adjustments Total	As of December 31,	As of December 31,
	2016 (NT$’000) 2,769,911 69,422 2,839,333	2015 (NT$’000)
		3,442,558 82,184
		3,524,742

No financial asset at fair value through profit or loss was pledged as collateral.

(3)Bond investments with no active market

Time deposits Current	As of December 31,	As of December 31,
	2016 (NT$’000) 423,057 423,057	2015 (NT$’000)
		423,057
		423,057

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There was no bond investments with no active market pledged as collateral.

(4)Notes receivable

Notes receivable – from operations Less: allowance for doubtful accounts Net	As of December 31,	As of December 31,
	2016 (NT$’000) 3,030 - 3,030	2015 (NT$’000)
		1,835 -
		1,835

No notes receivable was pledged by the Company as collateral.

(5)Accounts receivable and accounts receivable - related parties, net

A. Accounts receivable, net

Accounts receivable, gross Less: allowance for doubtful accounts allowance for sales returns and discounts Net of allowances Accounts receivable - related parties, gross Less: allowance for doubtful accounts Net of allowances Total accounts receivable, net	As of December 31,	As of December 31,
	2016 (NT$’000) 2,589,202 (51,680) (24,076) 2,513,446 33,730 - 33,730 2,547,176	2015 (NT$’000)
		2,968,030 (47,391) -
		2,920,639
		21,759 -
		21,759
		2,942,398

• B. The Company estimates the sales returns and discounts based on historical experience and other known reasons, as a reduction of operating income at sale of goods.

• C. The Company entered into factoring agreements with banks. Accounts receivables from selected customers are transferred to banks without recourse. Details of the agreed credit limits and accounts receivables transferred as of December 31, 2016 and 2015 were as follows:

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12/31/2016 12/31/2015	Financial Institution Mega International Commercial Bank - LanYa Branch Mega International Commercial Bank - LanYa Branch	Accounts receivable de-recognized (NT$’000)	Advance received (NT$’000)	Collateral	Credit Limit
		249,402 251,600	49,298 -	None None	Note Note

Note: The credit limits were US$30,000 thousand as of December 31, 2016 and 2015.

• D.The collection term of accounts receivables are generally on 60 to 120 day after monthly closing. The movement schedule of the impairment provision for accounts receivable, including related parties, was presented as below. (Please also refer to Note 12 for credit risk disclosure)

As of January 1, 2016 Provision (reversal) Effect of exchange rate changes As of December 31, 2016 As of January 1, 2015 Provision (reversal) Effect of exchange rate changes As of December 31, 2015	Impaired Individually (NT$’000) - - - - - - - -	Impaired Collectively (NT$’000) 47,391 4,289 - 51,680 64,570 (17,179) - 47,391	Total (NT$’000)
			47,391 4,289 -
			51,680
			64,570 (17,179) -
			47,391

Aging analysis for the net accounts receivable, including related parties, were as follows.

12/31/2016 12/31/2015	Neither past due nor impaired (NT$’000)	Accounts receivable	Accounts receivable	–past due, but not impaired	–past due, but not impaired	Total (NT$’000)
		Less than 61 days (NT$’000)	61 to 90 days (NT$’000)	91 to 120 days (NT$’000)	Longer than 120 days (NT$’000)
	2,369,493 2,776,357	177,683 166,041	- -	- -	- -	2,547,176 2,942,398

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(6)Inventory

• A. Details of inventory:

Raw material Supplies Work in process Finished goods Merchandises Total	As of December 31,	As of December 31,
	2016 (NT$’000) 368,051 40,165 523,069 332,253 54,720 1,318,258	2015 (NT$’000)
		349,620 40,460 563,882 336,273 27,514
		1,317,749

• B. For the years ended December 31, 2016 and 2015, the Company recognized NT$13,222,128 thousand and NT$12,513,748 thousand under the caption of costs of sale, respectively. The following items were also included in cost.

Item	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
Loss from (Gains on recovery of) inventory market decline Loss (gain) from physical Loss in inventory written-off and obselencense Total	(20,268) 29,935 1,366,931	(136,990) (1,853) 1,191,343
	1,376,598	1,052,500

The Company recognized gains on recovery of inventory market decline because some of the inventories previously provided with market loss or obsolescence were disposed.

C. The inventories were not pledged.

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• (7)Investments Accounted For Under the Equity Method

	As of December 31,	As of December 31,	As of December 31,	As of December 31,
	2016		2015
Investee companies		Percentage		Percentage
	Amount	of	Amount	of
	(NT$’000)	Ownership	(NT$’000)	Ownership
Investments in subsidiaries:
KINSUS CORP. (USA)	36,663	100.00%	32,462	100.00%
KINSUS HOLDING (SAMOA) LIMITED	2,526,740	100.00%	3,011,949	100.00%
KINSUS INVESTMENT CO.,LTD.	1,214,882	100.00%	566,385	100.00%
Total	3,778,285		3,610,796

A. Investments in subsidiaries

Investments in subsidiaries were present in the parent-company-only financial statements under the caption of investments accounted for under equity method. Valuation adjustment is made if deemed necessary.

B. The Company’s investments accounted for under the equity method were not pledged.

(8)Property, plant and equipment

Cost: As of 1/1/2016 Addition Disposals Effect of EXrate Reclassification As of 2/31/2016	Land (NT$’000)	Buildings (NT$’000)	Machinery (NT$’000)	Office Equipment (NT$’000)	Transportation (NT$’000)	Other Equipment (NT$’000)	Construction in progress and equipment awaiting inspection (including prepaid equipment) (NT$’000)	Total (NT$’000)
	1,557,800 2,546,735 - 1,940 - (10,510) - - 4,642 1,030,743		9,147,835 8,905 (1,653,554) - 2,879,980	37,056 5,590 (7,231) - 850	4,090 1,805 (1,355) - -	2,304,567 161,701 (393,889) - 562,702	5,061,609 3,658,657 - - (4,478,917)	20,659,692 3,838,598 (2,066,539) - -
	1,562,442 3,568,908		10,383,166	36,265	4,540	2,635,081	4,241,349	22,431,751

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As of 1/1/2015 1,366,426 Addition - Disposals - Effect of EXrate - Reclassification 191,374 As of 2/31/2015 1,557,800 Depreciation and impairment: As of 1/1/2016 - Depreciation - Impairment loss - Disposal - Effect of EXrate - Reclassification - As of 12/31/2016 - As of 1/1/2015 - Depreciation - Impairme loss - Disposal - Effect of EXrate - Reclassification - As of 12/31/2015 - Net carrying amount: As of 12/31/2016 1,562,442 As of 12/31/2015 1,557,800	1,366,426 - - - 191,374	1,366,426 - - - 191,374	2,472,080 - - - 74,655		9,676,936 441 (2,049,861) - 1,520,319		23,626 6,121 - - 7,309		2,735 1,355 - - -		2,194,275 58,051 (150,529) - 202,770 2,304,567 1,545,212 376,538 - (388,957) - -	2,761,524 4,296,512 - - (1,996,427)	18,497,602 4,362,480 (2,200,390) - -
	1,557,800		2,546,735		9,147,835		37,056		4,090			5,061,609	20,659,692
			891,996 152,661 - (10,510) - -		5,442,776 1,718,269 17,100 (1,417,196) - -		16,603 11,473 - (7,231) - -		1,462 1,003 - (418) - -			- - - - - -	7,898,049 2,259,944 17,100 (1,824,312) - -
As of 1/1/2016 Depreciation Impairment loss Disposal Effect of EXrate Reclassification As of 12/31/2016 As of 1/1/2015 Depreciation Impairme loss Disposal Effect of EXrate Reclassification As of 12/31/2015 Net carrying amou
	-		1,034,147		5,760,949		20,845		2,047		1,532,793	-	8,350,781
	- - - - - -		766,015 125,981 - - - -		5,925,647 1,557,893 - (2,049,501) - 8,737		7,992 8,611 - - - -		723 739 - - - -		1,444,107 260,006 - (150,164) - (8,737)	- - - - - -	8,144,484 1,953,230 - (2,199,665) - -
	-		891,996		5,442,776		16,603		1,462		1,545,212	-	7,898,049
	nt: 1,562,442		2,534,761		4,622,217		15,420		2,493		1,102,288	4,241,349	14,080,970
As of 12/31/2016 As of 12/31/2015
	1,557,800		1,654,739		3,705,059		20,453		2,628		759,355	5,061,609	12,761,643

A. “ Significant components ” of buildings primarily comprised the main buildings and the facilities, which are depreciated based on their respective useful economic life of 20 to 25 years and 10 to 20 years.

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B. Details of property, plant & equipment and prepayment for machinery is as follows:

Property, plant and equipment Prepaid equipment Total	As of December 31,	As of December 31,
	2016 (NT$’000) 11,947,782 2,133,188 14,080,970	2015 (NT$’000)
		10,309,220 2,452,423
		12,761,643

• C. Please refer to Note 8 for details on property, plant and equipment pledged as collaterals.

• D. The Company purchased 40 parcels of land with a total area of 36,287.15 square meters. Lands are located at the addresses of No. 1113, 1114, 1438 to 1443,1479,1486 to 1487 at ShiLeiZi Sub-section, ShiLeiZi Section, No. 1044, 1047 to 1049 at QingHua Section, and No. 0001, 697 to 700 and 712 to 726 at RongHua Section, XinFeng Village. Due to regulatory restrictions, land cannot be registered under the Company’s name while it has been temporarily registered under the general manager’s name and, to secure the Company’s right to the land, mortgage registration has been set aside with the Company being the obligee.

(9)Intangible assets

Cost: As of January 1, 2016 Additions – acquired separately Derecognized upon retirement Effect of exchange rate changes As of December 31, 2016 As of January 1, 2015 Additions – acquired separately Derecognized upon retirement Effect of exchange rate changes As of December 31, 2015	Computer software (NT$’000)
	24,028 14,536 (26,478) -
	12,086
	23,080 24,028 (23,080) -
	24,028

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Amortization and Impairment: As of January 1, 2016 Amortization Derecognized upon retirement Effect of exchange rate changes As of December 31, 2016 As of January 1, 2015 Amortization Derecognized upon retirement Effect of exchange rate changes As of December 31, 2015 Carrying amount, net: As of December 31, 2016 As of December 31, 2015	14,159 19,197 (26,478) -
	6,878
	11,153 26,086 (23,080) -
	14,159
	5,208
	9,869

Amounts of amortization recognized for intangible assets are as follows:

Operating expense	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	19,197	26,086

(10)Other non-current assets

Refundable deposits	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	3,838	2,202

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(11)Short-term loans

	As of December 31,	As of December 31,
Interest interval (%)	2016 (NT$’000)	2015 (NT$’000)
Unsecured bank loans 0.88~1.33	1,277,100	1,831,266

As of December 31, 2016 and 2015, the line of unused short-term loan credit for the Company amounted to NT$5,360,400 thousand and NT$2,907,734 thousand, respectively.

(12)Other payable

Accrued expense Equipment payable Accrued interest Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	1,744,694 669,227 898	2,007,409 1,085,936 1,106
	2,414,819	3,094,451

• (13)Other current liabilities

Other current liabilities Unearned sales revenue Current portion of long-term loans Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	25,365 3,893 295,100	28,405 3,133 298,051
	324,358	329,589

(14)Long-term loans

Debtor	Type of Loan	Maturity	Loan Balance	Repayment
			As of 12/31/2016 (NT$’000)
Mega International Commercial Bank - LanYa Branch	Credit loan	2018.08.12- 2021.09.05	890,300	Note 2、4

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Taipei Fubon Commercial Bank - BeiTou Branch Total Less: current portion Non-current portion Debtor	Credit loan Type of Loan	2017.12.15 Maturity	193,500	Note 3 Repayment
			1,083,800 (295,100)
			788,700
			Loan Balance
			As of 12/31/2015 (NT$’000)
Mega International Commercial Bank - LanYa Branch Mega International Commercial Bank - LanYa Branch Taipei Fubon Commercial Bank - BeiTou Branch Total Less: current portion Non-current portion	Secured bank loan Credit loan Credit loan	2015.10.27- 2016.12.15 2015.10.27- 2018.08.12 2017.12.15	48,581 144,430 393,900	Note 1 Note 2 Note 3
			586,911 (298,051)
			288,860

• Note 1: A term is defined as every 3 months starting from the initial draw-down date. Grace period is 2 years (8 terms). The interest is repayable in installments of equal amount for 20 terms.

• Note 2: Interest shall be paid for the first 12 months from the initial draw-down date. Starting from the 13th month, interest shall be paid monthly with principal repaid every 3 months.

• Note 3: One year after the initial draw-down date is considered term one and the following terms are defined as every 6 months since then. The principal and interest are repayable in installments of equal amount for 5 terms.

• Note 4: A term is defined as every 3 months starting from the initial draw-down date. Loan period is 5 years. Grace period is 1 year (4 terms). Interest shall be paid monthly with principal repaid every 3months. The rest is repayable in installments of equal amount for 16 terms.

A portion of property, plant and equipment were pledged to Mega International Commercial Bank and Shanghai Commercial & Savings Bank (the first-priority mortgagors) as collaterals for secured bank loans. Please refer to Note 8 for more details.

As of December 31, 2016 and 2015, the interest rate intervals for long-term loans were 1.076% ~1.98% and 1.02%~1.3214%, respectively.

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(15)Other non-current liabilities

Accrued pension costs Guarantee deposits received Total	As of December 31,	As of December 31,
	2016 (NT$’000) 31,009 2,000 33,009	2015 (NT$’000)
		34,148 -
		34,148

(16)Post-employment benefits

Defined contribution plan

The Company adopted a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Company has made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts.

Expenses under the defined contribution plan for the years ended December 31, 2016 and 2015 are NT$95,057 thousand and NT$93,793 thousand, respectively.

Defined benefits plan

The Company adopts a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee.

The fund is operated in a potofolio basis by Goernance Committee on Labor Retirement Fund in accordance with the Rule for Custody and Operating the Labor Retirement Fund. The investment of the Fund may be executed either by the Committee itself or by outsourced other profession institutions with its investment stategy, including both active and passive management, targeting in a medium or longer term. In considering the risks of market, credit and liquidity, the Committee establishes the ceiling of fund investment and control plan, in one hand, to reduce investment risk to an affordable extent and, in the other hand, to achieve the targeted return flexibly. As of December 31, 2016, the Company plans to contribute

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NT$4,969 thousand to the funds under its defined benefit scheme during the following fiscal year.

As of December 31, 2016 and 2015, the maturities of the Company’s defined benefit plan were expected in 2035 and 2036 and the detail information is listed as below.

Matured in Less than one year More than one year but less than five years More than five years Total	As of December 31,	As of December 31,
	2016 (NT$’000) 13,014 17,313 113,555 143,882	2015 (NT$’000)
		14,162 3,038 22,213
		39,413

Pension costs recognized in profit or loss are as follows:

Current service costs Net interest of defined benefit liability (asset) Past service cost Settlement Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	189 683 - -	152 668 - -
	872	820

Reconciliation of liability (asset) of the defined benefit plan is as follows:

Defined benefit obligation Plan assets at fair value Other non-current liabilities – net defined benefit liability		As of
	Dec. 31, 2016 (NT$’000) 130,404 (99,395) 31,009	Dec. 31,2015 (NT$’000)	Jan. 1, 2015 (NT$’000)
		127,707 (93,559)	116,697 (87,029)
		34,148	29,668

Reconciliation of liability (asset) of the defined benefit liability is as follows:

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1/1/2015 Current service cost Interest cost Past service cost and settlement Total Re-measurment on defined benefit liability/assets: Actuarial gain/loss due to change in population statistic assumptions Actuarial gian/loss due to change in financial assumptions Experience gian/loss Re-measurement on defined benefit assets Total Benefits paid Contributions by employer Effect of exchange rate 12/31/2015 Current service cost Interest cost Pasts service cost and settlement Total Re-measurment on defined benefit liability/assets: Actuarial gain/loss due to change in population statistic assumptions Actuarial gian/loss due to change in financial assumptions Experience gian/loss Re-measurement on defined benefit assets Total Benefits paid Contributions by employer Effect of exchange rate 12/31/2016	Present value of defined benefit obligation (NT$’000)	Fair value of plan assets (NT$’000)	Net defined benefit liability(asset) (NT$’000)
	116,697 152 2,626 -	(87,029) - (1,958) -	29,668 152 668 -
	2,778 2,453 6,154 474 -	(1,958) - - (360) -	820 2,453 6,154 114 -
	9,081	(360)	8,721
	(849) - -	849 (5,061) -	- (5,061) -
	127,707 189 2,554 -	(93,559) - (1,871) -	34,148 189 683 -
	2,743 (726) 5,073 (4,393) -	(1,871) - - 1,005 -	872 (726) 5,073 (3,388) -
	(46)	1,005	959
	- - -	- (4,970) -	- (4,970) -
	130,404	(99,395)	31,009

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The % of major categories of total plan assets at fair value was as follows:

Cash	Pension plan (%) as of December 31,	Pension plan (%) as of December 31,
	2016 100.00%	2015
		100.00%

The actuarial assumptions used for the Company’s defined benefit plan are shown below:

Discount rate Expected rate of salary increases	As of December 31,	As of December 31,
	2016 1.80% 3.00%	2015
		2.00% 3.00%

Sensitivity analysis :

Discount rate increased by 0.5% Discount rate decreased by 0.5% Expected salary level increased by 0.5% Expected salary level decreased by 0.5%	For theyear ended December 31,	For theyear ended December 31,	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)		2015 (NT$’000) Increase in defined benefit obligation Decrease in defined benefit obligation - (12,150) 13,746 - 13,534 - - (12,095)
	Increase in defined benefit obligation	Decrease in defined benefit obligation		Decrease in defined benefit obligation
	- 13,692 13,454 -	(12,157) - - (12,080)		(12,150) - - (12,095)

For the purpose of sensitivity analysis above, the Company calculated the impact on defined benefit obligation due to a reasonable and feasible change of one singal assumption (i.e. discount rate or expected salary level) with other assumptions remaining equal. Please note that the sensitivity analysis has its limitation due to the co-relation between different actuarial assumptions and the rarity that only one assumption changes at a time. The method used in the analysis is consistent for both current and prior years.

(17)Equity

A. Common shares

As of December 31, 2016 and 2015, the Company’s authorized capital and paid-in capital were NT$5,500,000 thousand and NT$4,460,000 thousand, respectively, each share at par

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value of NT$10, divided into 446,000 thousand shares. Each share represents a voting right and a right to receive dividends.

Treasury stocks brought back by the Company for the purpose of transfer to employee during the period from August 18, 2015 to September 25, 2015 totaled to 550 thousand shares. Please refer to Note 6(17)-C to the financial statements for more details.

B. Capital surplus

Additional paid-in capital Differences betweenequity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries All changes in interests in subsidiaries Total	As of December 31,	As of December 31,
	2016 (NT$’000) 5,850,000 50,925 38,894 5,939,819	2015 (NT$’000)
		5,850,000 50,925 38,894
		5,939,819

According to Taiwan Company Act, the capital surplus shall not be used except for making good the deficit of the Company. When a company incurs no loss, it may distribute the capital surplus related to the income derived from the issuance of new shares at a premium or income from endowments received by the company up to a certain percentage of paidin capital. The said capital surplus could be distributed in cash to its shareholders in proportion to the number of shares being held by each of them. Capital surplus related to long-term equity investments cannot be used for any purpose.

C. Treasury stock

Treasury stock amounting to NT$32,885 thousand, divided into 550 thousand shares, was held by the Company as of December 31, 2016 and 2015.

For the year ended December 31, 2016, there was no change in shares of treasury stock. The movement schedule of treasury stock for the year ended December 31, 2015 was as below (in thousand shares).

Purpose of repurchase Beginningbalance For the years ended December 31, 2015 To be transfered to employees -	Addition 550	Decrease -	Endingbalance
			550

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According to the Securities and Exchange Law of the R.O.C., the total shares of treasury stock shall not exceed 10% of the Company’s issued stock, and the total purchase amount shall not exceed the sum of the retained earnings, additional paid-in capital-premiums and realized additional paid-in capital. As such, the ceiling number of shares of treasury stock that the Company could hold as of December 31, 2016 were 44,600 thousand shares, with the maximum payments of NT$24,353,389 thousand.

In compliance with Securities and Exchange Law of the R.O.C., treasury stock should not be pledged, nor should it be entitled to voting rights or receiving dividends.

• D. Appropriation of earnings and dividend policies

(a)Earning distribution

The Company’s earnings in current year, if any, shall firstly be made to pay all taxes and dues and then to offset prior year’s operation losses. 10% of the remaining amount shall be set aside as legal reserve and special reserve shall be provided pursuant to Article 41 of the Securities and Exchange Act. Any remaining earnings after the said deductions shall be appropriated as follows:

• a. 1% as remuneration to directors

• b. Bonues to employees cannot be less than 1% of the total bonus to employees and shareholders. Bonus to employees can be distributed in cash or stocks. The parties receiving the stock dividends shall include employees in affiliated companies who met certain conditions stipulated by the Board of Directors.

• c. The Board of Directors would propose an earning distribution plan based on the remaining balance combined with the undistributed earnings accumulated during previous years to be resolved at the shareholders’ meeting.

However, according to the addition of Article 235-1 of the Company Act announced on May 20, 2015, the Company shall provide a fixed amount or percentage of the actual profit for a year to be distributed as “employees’ compensation”. The Company’s shareholders’ meeting held on May 27, 2016 passed the resolution of amending the Articles of Incorporation, according to the revised Articles of Incorporations, current year’s earnings, if any, shall be distributed in the following order:

• a. Payment of all taxes and dues;

• b. Offset prior years’ operation losses;

• c. Set aside 10% of the remaining amount after deducting items (a) and (b) as legal reserve;

• d. Set aside or reverse special reserve in accordance with law and regulations; and

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• e. The distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders’ meeting.

(b)Dividend policies

The Company is in an industry with versatile environment. For long-term finance planning requirements and to meet the shareholders’ demand for cash, dividend policy aims for a steady balance. Cash dividends distributed each year cannot be less than 10% of the total dividends paid.

(c)Legal reserve

According to the Company Act, legal reserve shall be set aside until such amount equal total authorized capital. Legal reserve can be used to offset deficits. If the Company does not incur any loss, the portion of legal reserve exceeding 25% of the paid-in capital may be distributed to shareholders by issuing new shares or by cash in proportion to the number of shares held by each shareholder.

(d)Special reserve

Following the adoption of Taiwan IFRS, the Company complies with Order No. JinGuan-Zheng-Fa 1010012865 issued by FSC on April 6, 2012. On the Company’s firsttime adoption of the Taiwan IFRS, for any unrealized revaluation gains and cumulative translation adjustments recorded under shareholders’ equity that the Company elects to transfer to retained earnings by application of the exemption under IFRS 1, an equal amount of special capital reserve shall be set aside. After the adoption of Taiwan IFRS for the preparation of financial statements, the Company shall set aside supplemental special reserve based on the difference between the amount already set aside according to the requirements in the preceding point and other net deductions from shareholders’ equity when appropriating distributable earnings. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reserved may be distributed as earnings.

The Company did not incur any special reserve upon the first-time adoption of Taiwan IFRS.

• (e)The appropriations of earnings for the Year 2016 and 2015 were approved through the Board of Directors’ meetings and shareholders’ meetings held on February 8, 2017 and May 27, 2016, respectively. The details of the distributions are as follows:

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Legal reserve Cash dividend Total	Appropriation of earnings	Appropriation of earnings	Dividend per share (in NT$)	Dividend per share (in NT$)
	2016 (NT$’000) 223,370 1,336,350 1,559,720	2015 (NT$’000)	2016	2015
		290,395 1,559,075	3.00	3.50
		1,849,470

Please refer to Note 6(19) for details on employees’ compensation and remuneration to directors and supervisors.

(18)Sale

Sale of goods Less: sales returns and allowances Services revenue Other operating revenue Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	17,849,275 (318,624) 157,707 243,492	17,812,750 (344,226) 190,589 168,138
	17,931,850	17,827,251

• (19)Summary statement of employee benefits, depreciation and amortization by function is as follows:

Function Nature	2016 (NT$’000)	2016 (NT$’000)	2016 (NT$’000)	2015 (NT$’000)	2015 (NT$’000)	2015 (NT$’000)
	Cost of goods sold	Operating expense	Total	Cost of goods sold	Operating expense	Total
Employee benefit
Salaries & wages	2,054,934	548,028	2,602,962	2,173,729	589,420	2,763,149
Labor and health insurance	168,255	47,653	215,908	171,635	44,402	216,037
Pension	72,220	23,709	95,929	73,253	21,360	94,613
Other employee benefit	104,705	29,542	134,247	93,204	22,096	115,300
Depreciation	2,029,919	230,025	2,259,944	1,851,526	101,704	1,953,230
Amortization	-	19,197	19,197	-	26,086	26,086

Note: The headcounts of the Company amounted to 3,684 and 3,801 respectively on December 31, 2016 and 2015.

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A resolution was passed at the shareholders’ meeting of the Company held on May 27, 2016 to amend the Articles of Incorporation of the Company. According to the resolution, not lower than 10% of profit of the current year is distributable as employees’ compensation and no higher than 1% of profit of the current year is distributable as remuneration to directors and supervisors. However, the company's accumulated losses shall have been covered. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the form of shares or in cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors and supervisors can be obtained from the “Market Observation Post System” on the website of the TWSE.

Based on profit of the year ended December 31, 2016, the Company estimated the amounts of the employees’ compensation and remuneration to directors and supervisors for the year ended December 31, 2016 to be not lower than 10% and not higher than 1% of profit of the current year, respectively, recognized as employee benefits expense. As such, employees’ compensation and remuneration to directors and supervisors for the year ended December 31, 2016 amount to NT$343,533 thousand and NT$20,911 thousand, respectively. The Company estimated the amounts of the employees’ compensation and remuneration to directors and supervisors for the year ended December 31, 2015 to be NT$442,444 thousand and NT$26,026 thousand, respectively. The aforementioned employees’ compensation and remuneration to directors and supervisors for the years ended December 31, 2016 and 2015 were estimated based on post-tax net income of the period and recognized as salaries expense. The number of stocks distributed as employees’ compensation was calculated based on the closing price one day earlier than the date of shareholders’ meeting. For example, if there was different between the estimated amount and the actual distribution of the employee bonuses and remuneration to directors and supervisors, it will recognize in profit or loss to next year.

The Company’s Board has determined the employees’ compensation and directors’ renumeration, all in cash, to be NT$343,533 thousand and NT$20,911 thousand, respectively, in a meeting held on February 8, 2017.

No material differences exist between the estimated amount and the actual distribution of the employee bonuses and remuneration to directors and supervisors for the year ended December 31, 2016.

The Company’s Board has determined the employees’ compensation and directors’ renumeration, all in cash, to be NT$442,444 thousand and NT$26,026 thousand, respectively, in a meeting held on February 1, 2016.

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No material differences exist between the estimated amount and the actual distribution of the employee bonuses and remuneration to directors and supervisors for the year ended December 31, 2015.

(20)Non-operating incomes and expenses

A. Other incomes

Interest income Gain on reversal of bad debts Other income－others Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000) 62,885 - 92,300 155,185	2015 (NT$’000)
		76,970 17,179 24,431
		118,580

B. Other gains and losses

Gain (loss) from disposal of property, plant and equipment Foreign exchange gains, net Financial assets at fair value through profit Gain from disposal of investment Impairment loss on property, plant and equipment Other expenses Total C. Finance costs	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	(451) 18,374 (12,762) 22,921 (17,100) (2,591)	(720) 14,237 24,447 30,845 - (2,377)
	8,391	66,432

Interests due to bank loans	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	27,776	21,360

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(21)Components of other comprehensive income (OCI)

For the year ended December 31, 2016

Arising during the period (NT$’000) Not reclassified to profit or loss: Actuarial gains or losses on defined benefits plan To be reclassified to profit or loss in subsequent period: (959) Exchange differences arising on translation of foreign operations (234,931) Total OCI (235,890) For the year ended December 31, 2015 Arising during the period (NT$’000) Not reclassified to profit or loss: Actuarial gains or losses on defined benefits plan To be reclassified to profit or loss in subsequent period: (8,721) Exchange differences arising on translation of foreign operations (72,922) Unrealized valuation gain (loss) on available-for- sale financial assets 6,151 Total OCI (75,492)	Arising during the period (NT$’000)	Reclassification during the period (NT$’000) - - - Reclassification during the period (NT$’000) - - (30,845) (30,845)	Subtotal (NT$’000)	Income tax benefit (expense) (NT$’000) - 39,834 39,834 Income tax benefit (expense) (NT$’000) - 12,397 - 12,397	OCI, Net of tax (NT$’000)
	(959) (234,931)		(959) (234,931)		(959) (195,097)
	(235,890)		(235,890)		(196,056)
			Subtotal (NT$’000)		OCI, Net of tax (NT$’000)
	(8,721) (72,922) 6,151		(8,721) (72,922) (24,694)		(8,721) (60,525) (24,694)
	(75,492)		(106,337)		(93,940)

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• (22)Income tax

• A. The major components of income tax expense (income) are as follows:

Income tax expense (benefit) recognized in profit or loss

Current income tax expense (benefit): Current income tax expense Reversal of uncertain tax position upon finalization Deferred tax expense (benefit): Deferred tax expense (benefit) relating to origination and reversal of temporary differences Total income tax expense B. Income tax recognized in other comprehensive Deferred tax expense (benefit): Exchange differences arising on translation of foreign operations C. A reconciliation between tax expense and the applicable tax rates is as follows: Accounting profit (loss) before tax from continuing operations Tax payable at the enacted tax rates 10% surtax on undistributed earnings Tax effect of income tax-exempted	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	564,778 (170,902) 351	658,713 (213,398) (1,765)
	394,227	443,550

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Tax effect of expenses not deductible for tax purposes Tax effect of deferred tax assets/liabilities Reversal of uncertain tax position upon finalization Total income tax recognized in profit or loss	- 43,218 (170,902)	404 40,632 (213,398)
	394,227	443,550

D. Deferred tax assets (liabilities) relate to the following:

For the year ended December 31, 2016

Temporary differences Prepaid appreciation tax on agricultural land Unrealized exchange loss (gain) Cumulative translation adjustment Deferred tax income/ (expense) Net deferred tax assets/(liabilities) Reflected in balance sheet as follows: Deferred tax assets Deferred tax liabilities	Beginning balance as of January 1, 2016 (NT$’000)	Deferred tax income (expense) recognized in profit or loss (NT$’000)	Deferred tax income (expense) recognized in other comprehen sive income (NT$’000)	Deferred tax income (expense) recognized in equity (NT$’000)	Increase from business acquisition (NT$’000)	Exchange adjustments (NT$’000)	Ending balance as of December 31, 2016 (NT$’000)
	9,593 - (39,834)	- (351) -	- - 39,834	- - -	- - -	- - -	9,593 (351) -
	(30,241)	(351)	39,834	-	-	-	9,242
	9,593						9,593
	(39,834)						(351)

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For the year ended December 31, 2015

Temporary differences Prepaid appreciation tax on agricultural land Unrealized exchange loss (gain) Cumulative translation adjustment Deferred tax income/ (expense) Net deferred tax assets/(liabilities) Reflected in balance sheet as follows: Deferred tax assets Deferred tax liabilities	Beginning balance as of January 1, 2015 (NT$’000)	Deferred tax income (expense) recognized in profit or loss (NT$’000)	Deferred tax income (expense) recognized in other comprehensiv e income (NT$’000)	Deferred tax income (expense) recognized in equity (NT$’000)	Increase from business acquisition (NT$’000)	Exchange adjustments (NT$’000)	Ending balance as of December 31, 2015 (NT$’000)
	- (1,765) (52,231)	9,593 1,765 -	- - 12,397	- - -	- - -	- - -	9,593 - (39,834)
	(53,996)	11,358	12,397	-	-	-	(30,241)
	-						9,593
	(53,996)						(39,834)

• E. Unrecognized deferred tax assets

As of December 31, 2016 and 2015, deferred tax assets that have not been recognized as they may not be used to offset future taxable income amounted to NT$520,599 thousand and NT$447,381 thousand, respectively.

• F. The Company’s investments and capital additions are qualified as the investment on manufacture or technology service industry during the period from July 1, 2008 to December 31, 2009 and, therefore, entitled to a 5-year tax-exmpted holiday. The details of tax holiday enjoyed by the Company are listed as below.

Item 1	Approval authority Ministry of Economic Affairs	Approval document No. 10005112010 issued at Aug. 25, 2011	Exemptionperiod 2013.01.01~2017.12.31

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G. Imputation credit information

Balances of imputation credit	As of December 31,	As of December 31,
	2016 (NT$’000) 2,140,790	2015 (NT$’000)
		1,942,384

The Company’s expected/actual creditable ratio for 2016 and 2015 were 16.09% and 14.50%. However, effective January 1, 2015, the creditable ratio for the individual shareholders residing in the Republic of China will be half of the original creditable ratio according to the revised Article 66-6 of the Income Tax Law.

As of December 31, 2016, the Company did not have unappropriated earnings resulted in the years of 1997 and before.

H. The status of assessment of income tax return

The assessment of income tax returns The Company Assessed and approved up to 2013

• (23)Earnings per share

Basic earnings per share is calculated by dividing net profit for the year attributable to the common shareholders of the parent entity by the weighted average number of common shares outstanding during the year.

Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent entity (after adjusting any influences) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

A. Basic earnings per share

Net income available to common shareholders of the parent (NT$’000) Weighted average number of common shares outstanding (in thousand shares) Basic earnings per share (in NT$)	For theyear ended December 31,	For theyear ended December 31,
	2016	2015
	2,233,705	2,903,952
	445,450	445,822
	5.01	6.51

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B. Diluted earnings per share

Net income available to common shareholders of the parent (NT$’000) Net income available to common shareholders of the parent after dilution (NT$’000) Weighted average number of common shares outstanding (in thousand shares) Effect of dilution: Employee bonus (compensation) – stock (in thousand shares) Weighted average number of common shares outstanding after dilution (in thousand shares) Diluted earnings per share (in NT$)	For theyear ended December 31	For theyear ended December 31
	2016	2015
	2,233,705	2,903,952
	2,233,705	2,903,952
	445,450 5,383	445,822 9,611
	450,833	455,433
	4.95	6.38

No other transactions that would significantly change the outstanding common shares or potential common shares incurred during the period subsequent to reporting date and up to the approval date of financial statements.

7. RELATED PARTY TRANSACTIONS

(1)Significant transactions with related parties

A. Sales to

Subsidiaries Other related parties Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	9,323 53,438	6,822 62,426
	62,761	69,248

Selling prices and collection terms to related parties are similar to those to third party customers for the years ended December 31, 2016 and 2015. The collection terms are 30 to 60 days from the end of delivery month by telegraphic transfer.

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B. Purchases

Subsidiaries Other related parties Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	2,021,720 15,870	1,845,144 -
	2,037,590	1,845,144

The product specification of goods purchased from related parties in the year ended December 31, 2016 and 2015, differed from those purchased from other vendors. Thus, transaction prices are not comparable. The payment terms for related parties and nonrelated parties are 30 to 120 days from the end of delivery month by telegraphic transfer.

C. Accounts receivable - related parties

Other related parties Less: allowance for doubtful accounts Net	As of December 31,	As of December 31,
	2016 (NT$’000) 33,730 - 33,730	2015 (NT$’000)
		21,759 -
		21,759

D. Account payable- related parties

Subsidiaries Other related parties Total	As of December 31,	As of December 31,
	2016 (NT$’000) 191,819 16,058 207,877	2015 (NT$’000)
		428,877 -
		428,877

• E. The Company recognized commission expenses amounting to NT$40,806 thousand and NT$40,798 thousand, respectively, for the years ended December 31, 2016 and 2015 due to delegating its subsidiaries for marketing.

• F. For the years ended December 31, 2016 and 2015, the Company recognized travelling of NT$134 thousand and NT$64 thousand, respectively, for commissioning subsidiaries to handle travelling logistics.

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For the years ended December 31, 2016 and 2015, the Company recognized travelling of NT$34 thousand and NT$185 thousand, respectively, for commissioning other related parties to handle travelling logistics.

• G. The Company’s subcontracting fees to its subsidiaries amounted to NT$6,470 thousand and NT$15,350 thousand, respectively, for the years ended December 31, 2016 and 2015.

• H. The Company charged its subsidiaries for providing technology support in amount of NT$6,930 thousand and NT$3,253 thousand, recorded under the caption of other nonoperating incomes, for the years ended December 31, 2016 and 2015, respectively.

• I. For the years ended December 31, 2016 and 2015, the Company recognized operating expenses of NT$1,877 thousand and NT$2,968 thousand, respectively, for services provided by other related parties.

Moreover, the years ended December 31, 2015, the Company recognized operating expenses of NT$188 thousand, respectively, for services provided by the Parent.

• J. The Company recognized other incomes in amount of NT$15,831 thousand and NT$16,096 thousand for the years ended December 31, 2016 and 2015, respectively, due to selling tools and spare parts to its subsidiaries.

The Company recognized other incomes in amount of NT$41,930 thousand for the years ended December 31, 2016, respectively, due to selling tools and spare parts to its related parties.

• K. The Company provided bank loan garranty in total of NT$2,921,850 thousand for its subsidiaries as of December 31, 2016. The garranty amount is of contingency and not recognized at the balance sheets and the statements of comprehensive incomes yet.

• L. Salaries and rewards to key management of the Company

Short-term employee benefits Post-employee benefits Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	96,019 810	86,728 819
	96,829	87,547

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M.Other receivables

Subsidiaries Other related parties Total	As of December 31,	As of December 31,
	2016 (NT$’000) 8,136 305,891 314,027	2015 (NT$’000)
		7,489 -
		7,489

• N. Accrued expenses

Parent company Subsidiaries Other related parties Total	As of December 31,	As of December 31,
	2016 (NT$’000) - 4,605 - 4,605	2015 (NT$’000)
		69 4,431 42
		4,542

O. Transaction of asset

The Company did not conduct any transactions related to property, plant and equipment with related parties during the year ended December 31, 2015. For 2016, it is shown at the following table.

	Type of Assets Related Parties For the year ended December 31, 2016 Machinery Other related parties	Book Value (NT$’000) 241,776	Selling price (NT$’000) 241,776	Gain (NT$’000) -	Price reference
					Negotiated

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8. PLEDGED ASSETS

The following assets of the Company are pledged as collaterals:

Item	Carrying Amount As of December 31,	Purpose
	2016 (NT$’000) 2015 (NT$’000)
Property, plant and equipment - machinery (carrying amount)	Note -	Long-term secured loans

• Note l: The Company has sent an application for cancellation of secured transaction for movable properties on December 30, 2016 and received a letter of approval for cancellation of registration on January 4, 2017.

9. SIGNIFICANT CONTINGENCIES AND UNRECOGNIZED CONTRACT COMMITMENTS

• (1) The Company’s unused letters of credit (LC) as of December 31, 2016 were as follows:

Currency JPY USD EURO	LC Amount(in thousand) JPY 1,449,732 USD 7,893 EUR 53	Security (in thousand)
		- - -

• (2) Detail of significant constructions in progress and outstanding contracts of property, plant and equipment as of December 31, 2016 was as follow:

Nature of Contract Machinery and contruction contracts	Contract Amount (NT$’000) 3,585,623	Amount Paid (NT$’000) 2,940,999	Outstanding Balance (NT$’000)
			644,624

• (3) The Company provided bank loan garranty in total of NT$2,921,850 thousand for its subsidiariesas as of December 31, 2016. The garranty amount is of contingency and not recognized at the balance sheets and the statements of comprehensive incomes yet.

10. SIGNIFICANT DISASTER LOSS

None.

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11. SIGNIFICANT SUBSEQUENT EVENT

None.

12. OTHERS

• (1) Categories of financial instruments

Financial assets

Financial assets at fair value through profit or loss: Held for trading Loans and receivable Cash and cash equivalents (excluding cash on hand) Bond investments with no active market Notes receivable Accounts receivable Accounts receivable - related parties Other receivable Other receivable - related parties Total Financial liabilities Financial liabilities measured at amortized cost: Short-term loans Payables	As of December 31,	As of December 31,
	2016 (NT$’000) 2015 (NT$’000) 2,839,333 3,524,742 9,833,250 10,998,703 423,057 423,057 3,030 1,835 2,513,446 2,920,639 33,730 21,759 243,431 281,480 314,027 7,489 16,203,304 18,179,704 As of December 31, 2016 (NT$’000) 2015 (NT$’000) 1,277,100 1,831,266 3,741,055 4,622,464	2015 (NT$’000)
		3,524,742 10,998,703 423,057 1,835 2,920,639 21,759 281,480 7,489
		18,179,704
		2015 (NT$’000) 1,831,266 4,622,464

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Long-term loans (including current portion) Total	1,083,800 6,101,955	586,911
		7,040,641

• (2) Objectives and policies of financial risk management

The Company’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activates. The Company identifies, measures, and manages the aforementioned risks based on its policy and risk preferences.

The Company has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant transactions, due approval process by the Board of Directors and Audit Committee must be carried out based on related protocols and internal control procedures. The Company complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market risk comprises currency risk, interest rate risk and other price risk (e.g. equity instruments).

In practice, it is rarely the case that a single risk variable will change independently from other risk variables. There are usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

Foreign currency risk

The Company’s exposure to foreign currency risk relates primarily to the Company’s operating activities (when revenue or expense are denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign operations.

The Company has certain foreign currency receivables denominated in the same foreign currency as certain foreign currency payables, therefore natural hedge is achieved. Thus, hedge accounting is not adopted.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Company’s profit (loss) and equity is performed on significant monetary items denominated in foreign currencies as of the end of the reporting period. The Company’s

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foreign currency risk is mainly related to the volatility in the exchange rates of US dollars. The sensitivity analysis is as follows:

If NT dollars appreciates/depreciates against US dollars by 1%, the net income (loss) for the years ended December 31, 2016 and 2015would increase/decrease by NT$80 thousand and NT$37 thousand, respectively.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to interest rate risk relates primarily to the Company’s investments with variable interest rates and loans with fixed and variable interest rates, which are all categorized as loans and receivables.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as of the end of the reporting period and presumed to be held for one accounting year, including investments and loans with variable interest rates. If interest rate increases/decreases by 0.1%, the net income (loss) for the years ended December 31, 2016 and 2015 would decrease/increase by NT$207 thousand and decrease/increase by NT$45 thousand, respectively.

(4) Credit risk management

Credit risk is the risk that counterparty will not meet its obligations under a contract and result in a financial loss. The Company is exposed to credit risk from operating activities (primarily for accounts and notes receivable) and financing activities (primarily for bank deposits and other financial instruments).

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit risk of all customers are assessed based on a comprehensive review of the customers’ financial status, credit ratings from credit institutions, past transactions, current economic conditions and the Company’s internal credit ratings. The Company also employs some credit enhancement instruments (e.g. prepayment or insurance) to reduce certain customers’ credit risk.

As of December 31, 2016 and 2015, receivables from the top ten customers were accounted for 53.32% and 52.06% of the Company’s total accounts receivable, respectively. The concentration of credit risk is relatively not significant for the remaining receivables.

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Credit risk from balances with banks, fixed-income securities and other financial instruments is managed by the Company’s finance division in accordance with the Company’s policy. The counterparties that the Company transacts with are determined by internal control procedures. They are banks with fine credit ratings and financial institutions, corporate and government agencies with investment-grade credit ratings. Thus, there is no significant default risk. Conclusively, no significant credit risk is expected by the Company.

(5) Liquidity risk management

The Company maintains financial flexibility through the use of cash and cash equivalents, highly-liquid marketable securities, bank loans, etc. The table below summarizes the maturity profile of the Company’s financial liabilities based on the contractual undiscounted payments and contractual maturity. The payment amount includes the contractual interest. The undiscounted interest payment relating to borrowings with variable interest rates is extrapolated based on the estimated yield curve as of the end of the reporting period.

Non-derivative financial instruments

Less than 1 year (NT$’000) 1 to 2 years (NT$’000) As of December 31, 2016 Loans 1,597,373 247,536 Payables 3,741,055 - As of December 31, 2015 Loans 2,152,079 253,258 Payables 4,622,464 -	Less than 1 year (NT$’000) 1 to 2 years (NT$’000)	2 to 3 years (NT$’000)	3 to 4 years (NT$’000)	4 to 5 years (NT$’000)	Total (NT$’000)
		205,918 - 39,898 -	203,766 - - -	151,614 - - -	2,406,207 3,741,055 2,445,235 4,622,464

(6) Fair values of financial instruments

• A. The evaluation methods and assumptions applied in determining the fair value

Fair value is the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between willing market participants (not under coercion or liquidation). The following methods and assumptions are used by the Company in estimating the fair values of financial assets and liabilities:

• (a) The carrying amount of cash and cash equivalents, receivables, payables and other current liabilities approximate their fair value due to their short maturity terms.

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• (b) For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (e.g. listed stocks and bonds).

• (c) Fair value of equity instruments without active markets (including listed companies’ shares from private placement, stocks of public companies not traded in an active market and unlisted stocks) are estimated using the market approach. Under the approach, factors, such as the trading prices of comparable equity instruments in an active market, and other relevant informations (i.e. discount due to lack of liquidity, stock price-to-earning ratio (PER) and price-to-book ratio (PBR) of similar companies) are input into the pricing model for its fair value.

• B. Fair value of financial instruments measured at amortized cost

The carrying amount of the Company’s financial assets and liabilities measure at amortized cost approximates their fair value.

• C. Fair value measurement hierarchy for financial instruments

Please refer to Note 12(7) for fair value measurement hierarchy for financial instruments of the Company.

• (7) Fair value measurement hierarchy

• A. Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date

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

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

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B. Fair value measurement hierarchy of the Company’s assets and liabilities

The Company does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Company’s assets and liabilities measured at fair value on a recurring basis is as follows:

As of December 31, 2016

Financial assets: Financial assets at fair value through profit or loss Funds Financial liabilities: None As of December 31, 2015 Financial assets: Financial assets at fair value through profit or loss Funds Financial liabilities: None	Level 1 (NT$’000)	Level 2 (NT$’000)	Level 3 (NT$’000)	Total (NT$’000)
	2,839,333 Level 1 (NT$’000)	- Level 2 (NT$’000)	- Level 3 (NT$’000)	2,839,333 Total (NT$’000)
	3,524,742	-	-	3,524,742

As of December 31, 2015

Transfers between Level 1 and Level 2 during the period

For December 31, 2016 and 2015, there were no transfers between Level 1 and Level 2 fair value hierarchy.

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(8) Significant financial assets and liabilities denominated in foreign currencies

Information regarding the Company’s significant financial assets and liabilities denominated in foreign currencies was listed below: (In Thousands)

Foreign Currencies ($’000) Financial assets Monetary items: USD 72,124 Non-monetary item: USD 79,485 Financial liabilities Monetary items: USD 72,376			As of December 31,	As of December 31,
		2016			2015
		Exchange Rate 32.25 32.25 32.25	NTD (NT$’000)	Foreign Currencies ($’000)	Exchange Rate 32.825 32.825 32.825	NTD (NT$’000)
			2,326,014 2,563,403 2,334,096	85,167 92,747 85,281		2,795,604 3,044,411 2,799,338

The above information is disclosed based on the carrying amount of foreign currency (after being converted to functional currency).

Foreign exchange gains or losses on monetary financial assets and financial liabilities are shown as below.

Foreign currency resultingin exchangegain or loss USD Other	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000) 15,758 2,616	2015 (NT$’000)
		9,393 4,845

(9) Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company manages and adjusts its capital structure in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

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13. ADDITIONAL DISCLOSURES

• (1) Information on significant transactions

• A. Financing provided to others: None.

• B. Endorsement/Guarantee provided to others: Please refer to attachment 1.

• C. Marketable securities held as of December 31, 2016 (excluding investments in subsidiaries, associates and joint ventures): Please refer to attachment 2.

• D. Individual securities acquired or disposed of with accumulated amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 3.

• E. Acquisition of individual real estate with amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 4.

• F. Disposal of individual real estate with amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: None.

• G. Related party transactions with purchase or sales amount of at least NT$100 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 5.

• H. Receivables from related parties of at least NT$100 million or 20 percent of the paid-in capital as of Decemer 31, 2016: Please refer to attachment 6.

• I. Derivative instrument transactions: None.

• (2) Information on investees

• A. Investees over whom the Company exercises significant influence or control (excluding investees in Mainland China): Please refer to attachment 7.

• B. Investees over which the Company exercises control shall be disclosed of information under Note 13(1):

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• (a) Financing provided to others: None.

• (b) Endorsement/Guarantee provided to others: None.

• (c) Marketable securities held as of December 31, 2016 (excluding investments in subsidiaries, associates and joint ventures): Please refer to attachment 8.

• (d) Individual securities acquired or disposed of with accumulated amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 9.

• (e) Acquisition of individual real estate with amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: None.

• (f) Disposal of individual real estate with amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: None.

• (g) Related party transactions with purchase or sales amount of at least NT$100 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 10.

• (h) Receivables from related parties of at least NT$100 million or 20 percent of the paidin capital as of December 31, 2016: Please refer to attachment 11.

• (i) Derivative instrument transactions: None.

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(3) Information on investments in Mainland China:

• A. Name of investee in China, main business, paid-in capital, method of investment, investment flows, percentage of ownership, investment gain or loss, carrying amount at the end of reporting period, inward remittance of earning or loss and the upper limit on investment in China:

(In Thousands of New Taiwan Dollars)

Name of Investee in China	Main Business (NT$’000)	Paid-in Capital (NT$’000)	Method of Investment (NT$’000)	Accumulated Outflow of Investment from Taiwan as of January 1, 2016 (NT$’000)	Investment Flows	Investment Flows	Accumulate d Outflow of Investment from Taiwan as of December 31, 2016 (NT$’000)	Profit/ Loss of Investee (NT$’000)	Percentage of Ownership (Direct or Indirect Investment) (NT$’000)	Share of Profit/Loss (NT$’000)	Carrying Amount as of December 31, 2016 (NT$’000)	Accumulated Inward Remittance of Earnings as of December 31, 2016 (NT$’000)	Accumulated Outflow of Investment from Taiwan to Mainland China as of December 31, 2016 (NT$’000)	Investment Amounts Authorized by Investment Commission, MOEA (NT$’000)	Upper Limit on Investment in China by Investment Commission, MOEA (NT$’000)
					Outflow (NT$’000)	Inflow (NT$’000)
Kinsus Interconnect Technology Suzhou Corp.	Manufacturing and selling PCB (not high- density fine- line)	2,257,500 (Note 2)	(Note 1)	2,257,500 (Note 2)	-	-	2,257,500 (Note 2)	31,763 (Note 2 and Note 4)	100%	31,763 (Note 2 and Note 4)	1,034,889 (Note 2 and Note 4)	-	2,257,500 (Note 2)	2,257,500 (Note 2)	No upper limit (Note 5)

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Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

Piotek Computer (Suzhou) Co., Ltd.	Researching, developing, producing and selling electronic components, PCBs and related products and providing after- sale services	5,376,075 (Note 2)	(Note 1)	3,039,683 (Note 2)	-	-	3,039,683 (Note 2)	(584,054) (Note 2 and Note 4)	51%	(297,868) (Note 2 and Note 4)	2,723,648 (Note 2 and Note 4)	-	3,039,683 (Note 2)	3,039,683 (Note 2)	No upper limit (Note 5)
Xiang-Shuo (Suzhou) Trading Limited	Trading of PCB (not high- density fine- line) and material for related products	64,500 (Note 2)	(Note 1)	64,500 (Note 2)	-	-	64,500 (Note 2)	1,511 (Note 2 and Note 4)	100%	1,511 (Note 2 and Note 4)	65,149 (Note 2 and Note 4)	-	64,500 (Note 2)	64,500 (Note 2)	No upper limit (Note 5)
Pegavision Contact Lenses (Shanghai) Corporation	Selling medical equipment	65,062 (Note 3)	(Note 1)	65,062	-	-	65,062	5,832 (Note 2 and Note 4)	100%	5,832 (Note 2 and Note 4)	46,013 (Note 2 and Note 4)	-	65,062	65,062	735,270 (Note 6)

180

• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

• Note 1: Investment in Mainland China through companies in the third area.

• Note 2: Amounts in foreign currencies are translated into New Taiwan dollars using the exchange rates on the balance sheet date.

• Note 3: The paid-in capital is USD2,100 thousand, equivalent to NT$65,062 thousand.

• Note 4: Gain/loss on investment is recognized based on the audited financial statements of the parent company in Taiwan.

• Note 5: The Company meets the conditions of corporate operation headquarter in the Principle of Evaluation for Investment and Technical Cooperation in Mainland China. Thus, there is no upper limit on investment amount.

• Note 6: The upper limit on investment for Pegavision Contact Lenses (Shanghai) Corporation is calculated as 60% of the net value of the financial statements audited by recent accountants of Pegavision Corporation.

181

• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

B. Significant transactions with investees in China:

(a) Purchase and balances of related accounts payable as of December 31, 2016:

The Company’s purchase from Kinsus Interconnect Technology Suzhou The Company’s purchase from Piotek Computer (Suzhou) Co., Ltd.	Purchases Amount (NT$’000) % to Net Purchase 2,006,751 27.33% 14,969 0.20%	Accounts	Payable
	Amount (NT$’000)	Amount (NT$’000) 191,819 -	% to Account Balance
	2,006,751		14.95%
	14,969		-%

The product specification of goods purchased by the Company from Kinsus Interconnect Technology Suzhou Corp. and Piotek Computer (Suzhou) Co., Ltd. in the year ended December 31, 2016 differed from goods purchased from other vendors. Thus, transaction prices are not comparable. Payment term for related parties is 30 to 60 days from the end of delivery month. The payment terms for non-related parties are 30 to 120 days from the end of delivery month by telegraphic transfer.

(b) Sales, the ending balance of related accounts receivable and their weightings:

Sale of Piotek Computer (Suzhou) to Piotek (H.K.) Trading ($’000) Sale of Piotek Computer (Suzhou) to Xiang-Shuo (Suzhou) Trading ($’000) Sale of Xiang-Shuo (Suzhou) Trading to Piotek Computer (Suzhou) Trading ($’000)	Sales Amount % to Net Sales USD18,401 16.67% USD2,597 2.35% RMB25,825 54.29%	Accounts receivable	Accounts receivable
	Amount	Amount USD2,431 USD825 RMB4,649	% to Account Balance
	USD18,401		8.70%
	USD2,597		2.95%
	RMB25,825		44.73%

182

• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

Sale of Xiang-Shuo (Suzhou) Trading to Kinsus Interconnect Technology Suzhou ($’000) Sale of the Company to Xiang- Shuo (Suzhou) Trading(NT$’000) Sale of the Company to Kinsus Interconnect Technology Suzhou(NT$’000)	RMB4,380	9.21% -% 0.05%	RMB866 - -	8.33%
	56			-%
	9,267			-%

The product specification of goods sold between subsidiaries in the year ended December 31, 2016 differed from goods sold to other customers. Thus, transaction prices cannot be reasonably compared. Sales of the Company to Kinsus Interconnect Technology Suzhou Corp. and Xiang-Shuo (Suzhou) Trading Limited have the same product prices as sales to non-related parties. Collection terms are also equivalent to the ones for non-related parties, which is 30 to 60 days from delivery by telegraphic transfer.

• (c) Ending balance of endorsements/guarantees or collateral provided and the purposes: Please refer to attachment 1.

• (d) Maximum balance, ending balance, interest rate range and total interest for current period from financing provided to others: None.

• (e) Transactions that have significant impact on profit or loss of current period or the financial position, such as services provided or rendered:

• a. The Company commissioned Kinsus Interconnect Technology (Suzhou) Corp. for processing of NT$6,470 thousand for the year ended December 31, 2016. Payable amounted to NT1,209 thousand as of December 31, 2016.

• b. The Company sold fixtures and spare parts to Piotek Computer (Suzhou) Co., Ltd., Kinsus Interconnect Technology Suzhou Corp. Trading Limited and Xiang-Shuo (Suzhou) Trading and recognized other income of NT$15,831 thousand for the year ended December 31, 2016.

• c. As of December 31, 2016, the balance of other receivables amounted to NT$1,104 thousand, NT$6,069 thousand and NT$963 thousand, respectively.The other receivable were resulted from the Company’s sale of fixtures to Piotek Computer (Suzhou) Co., Ltd., Kinsus Interconnect Technology Suzhou Corp and Xiang-Shuo (Suzhou) Trading Limited.

183

• • English Translation of Parent Company Only Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Parent-Company-Only Financial Statements (Continued)

d. As of December 31, 2016, other receivables of Xiang-Shuo (Suzhou) Trading Limited due to payment and collection on behalf of Piotek Computer (Suzhou) Co., Ltd. amounted to RMB31 thousand.

14. OPERATING SEGMENT INFORMATION

The Company has provided the operating segment disclosure in the consolidated financial statements.

184

English Translation of Parent-Company-Only Financial Statements Originally Issued in Chinese Kinsus Interconnect Technology Corp.

Endorsement/Guarantee Provided to Others

For the Year Ended December 31, 2016

Attachment 1

(In Thousands of Foreign Currency / New Taiwan Dollars)

Endorsement/ Guarantee Provider	Endorsement/ Guarantee Provider	Guaranteed Party	Guaranteed Party	Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party	Maximum Balance for the Period	EndingBalance	Amount ActuallyDrawn	Amount of Endorsement/ Guarantee secured by Properties	Ratio of Accumulated Endorsement/ Guarantee to Net Worth per Latest Financial Statements	Maximum Endorsement/ Guarantee Amount Allowed	Endorsement provided by parent company to subsidiaries	Endorsement provided by subsidiaries to parent company	Endorsement provided to entities in China
No. (Note 1)	Name	Name	Nature of Relationship
0 0	Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp.	Kinsus Interconnect Technology Suzhou Corp. Piotek Computer (Suzhou) Co., Ltd.	Investee accounted for using equity method indirectly Investee accounted for using equity method indirectly	The overall amount of guarantees/ endorsements provided to a subsidiary in which the Company holds directly over 50% (inclusive) of common equity interest shall not exceed 20% of the net worth in the current financial statements. $5,773,942 The overall amount of guarantees/ endorsements provided to a subsidiary in which the Company holds directly over 50% (inclusive) of common equity interest shall not exceed 20% of the net worth in the current financial statements. $5,773,942	$3,708,750 (USD 115,000) (Note 2) $986,850 (USD 30,600) (Note 2)	$1,935,000 (USD 60,000) (Note 2) $986,850 (USD 30,600) (Note 2)	$951,375 $400,908	$- $-	6.70% 3.42%	$14,434,855 $14,434,855 Shall not exceed 50% of the net worth in the current financial statements. Shall not exceed 50% of the net worth in the current financial statements.	Y Y	N N	Y Y

Note 1: Kinsus Interconnect Technology Corp. is coded "0".

Note 2: Amounts in foreign currencies are converted to New Taiwan Dollars using the exchange rates as of the balance sheet date.

185

- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Marketable Securities

As of December 31, 2016

As of December 31, 2016	As of December 31, 2016	As of December 31, 2016	As of December 31, 2016
					Attachment 2 (In Thousands of New Taiwan Dollars)
Name of Held Company	Type and Name of Marketable Securities	Relationship with the Issuer	Financial Statement Account		As of December 31,2016			Note
				Shares / Units	Carrying Amount	Shareholding %	Fair Value (Note)
Kinsus Interconnect Technology Corp.	Money market funds: Capital Money Market Fund Taishin Ta Chong Money Market Fund Taishin 1699 Money Market Fund FSITC Money Market Fund Mega Diamond Money Market Fund Jih Sun Money Market Union Money Market Fund UPAMC James Bond Fund Subtotal Add: Valuation adjustments of financial assets held for trading Total	- - - - - - - -	Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss	32,783,435 18,812,748 30,522,218 1,168,258 41,465,474 31,315,952 15,838,553 15,322,946	$510,667 255,796 400,000 200,000 500,000 450,000 203,448 250,000 2,769,911 69,422 $2,839,333	-% -% -% -% -% -% -% -%	$523,951 264,712 408,961 206,443 514,931 459,396 207,214 253,725 $2,839,333

Note: Companies without quotes in the open markets are valued at net equities.

186

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp

Marketable Securities Acquired and Disposed of At Costs or Prices of At Least NT$300 Million or 20% of The Paid-In Capital

For the Year Ended December 31, 2016

												Attachment 3 (In Thousands of New Taiwan Dollars)	Attachment 3 (In Thousands of New Taiwan Dollars)	Attachment 3 (In Thousands of New Taiwan Dollars)
CompanyName	Type and Name of Marketable Securities	Financial Statement Account	Counter-party	Nature of Relationship	BeginningBalance		Acquisition			Disposal			EndingBalance
					Shares/Units	Amount	Shares/Units	Amount	Shares/Units	Amount	CarryingValue	Gain/Loss on Disposal	Shares/Units	Amount
Kinsus Interconnect Technology Corp.	Stock: Kinsus Investment Co., Ltd.	Investments accounted for using the equity method	-	-	39,800,000	$398,000	60,200,000	$602,000	-	$-	$-	$-	100,000,000	$1,000,000

187

- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Acquisition of Individual Real Estate with Amount of at Least NT$300 million or 20% of the Paid-in Capital

For the Year Ended December 31, 2016

Attachment 4

(In Thousands of New Taiwan Dollars)

Acquiring Company	Name of Property	Transaction Date	Transaction Amount	Payment Status	Counter- party	Relationship	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Price Reference	Purpose and Use of Acquisition	Other Terms
							Owner	Relationship with the Company	Transfer Date	Amount
Kinsus Interconnect Technology Corp.	Houses and buildings Construction of XinFeng Plant	2014.02.13 2015.03.24	$2,268,036	NT$ 2,146,042 thousand was paid as of December 31, 2016	Guo-Gong Construction Co., Ltd.	None	None	None	None	None	Bidding	Production expansion and operation planning	None

188

• • English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Related Party Transactions with Purchase or Sales Amount of At least NT$100 Million or 20% of the Paid-in Capital

For the Year Ended December 31, 2016

Attachment 5

(In Thousands of New Taiwan Dollars)

CompanyName	Related Party	Nature of Relationship	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/ Accounts Payable or Receivable	Notes/ Accounts Payable or Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment/ Collection Term	Unit Price	Payment/ Collection Term	EndingBalance	% to Total
Kinsus Interconnect Technology Corp.	Kinsus Interconnect Technology Suzhou Corp.	Investee accounted for using equity method indirectly	Purchase	$2,006,751	27.33%	Payment within 30 days from the end of delivery month	Specs of goods purchased are different from others. Cannot be reasonablely compared.	Other vendors also enjoy payment within 30~120 days from the end of delivery month	Accounts payable $(191,819)	(14.95)%

189

• • English Translation of Parent Company Only Financial Statements Originally Issued in Chinese Kinsus Interconnect Technology Corp.

Receivables from Related Parties of at Least NT$ 100 Million or 20% of the Paid-in Capital

As of December 31, 2016

Attachment 6

(In Thousands of New Taiwan Dollars)

CompanyName	Related Party	Nature of Relationship	EndingBalance	Turnover Ratio	Overdue	Overdue	Amount Received in	Allowance for Doubtful
					Amount	Action Taken
Kinsus Interconnect Technology Corp.	FuYang Technology Corp.	Other related parties	$305,891	-	$-	-	$-	$-
			(Note)

Note: Other receivable

190

English Translation of Parent-Company-Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Investees over Which the Company Exercise Significant Influence or Control Directly or Indirectly (Excluding Investees in Mainland China)

As of December 31, 2016

Attachment 7

(In Thousands of Foreign Currency / New Taiwan Dollars)

Investor	Investee	Business Location	Main Business and Product	Original Investment Amount	Original Investment Amount	Balance as of Decembe	Balance as of Decembe	r 31,2016	Net Income (Loss) of the Investee	Share of Income (Loss) of the Investee	Note
				As of December 31,2015	As of December 31,2016	Shares	%	CarryingValue
Kinsus Investment Co., Ltd. Kinsus Investment Co., Ltd. KINSUS HOLDING (SAMOA) LIMITED KINSUS HOLDING (SAMOA) LIMITED PIOTEK HOLDINGS LTD. (CAYMAN) PIOTEK HOLDING LIMITED Pegavision Corporation Pegavision Corporation Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp.	KINSUS CORP. (USA) KINSUS HOLDING (SAMOA) LIMITED Kinsus Investment Co., Ltd. Pegavision Corporation FuYang Technology Corp. KINSUS HOLDING (CAYMAN) LIMITED PIOTEK HOLDINGS LTD. (CAYMAN) PIOTEK HOLDING LIMITED PIOTEK (H.K.) TRADING LIMITED PEGAVISION HOLDINGS CORPORATION PEGAVISION JAPAN INC.	CA. U.S.A. Samoa Taoyuan City Taoyuan City Hsinchu County Cayman Islands Cayman Islands British Virgin Islands Hong Kong Samoa JAPAN	Investing activities Investing activities Manufacturing medical equipment Electronic Parts and Components Manufacturing Investing activities Investing activities Investing activities Trading activities Investing activities Selling medical equipment Designing substrates, formulating marketing strategy analysis, developing new customers, researching and development new product technology	USD500 USD166,309 $398,000 (Note1) $286,418 $- USD72,000 USD94,309 USD139,841 USD26 USD2130 JPY9,900	USD500 USD166,309 $1,000,000 (Note1) $286,418 $450,000 USD72,000 USD94,309 USD139,841 USD26 USD2,130 JPY 9,900	500,000 shares 166,308,720 shares 100,000,000 shares 22,088,736 shares 45,000,000 shares 72,000,000 shares 95,755,000 shares 139,840,790 shares 200,000 shares 2,130,000 shares 198 shares	100.00% 100.00% 100.00% 36.81% 36.00% 100.00% 51.00% 100.00% 100.00% 100.00% 100.00%	$36,663 $2,526,740 $1,214,882 $451,144 $432,689 USD 34,110 USD 44,239 USD 86,743 USD 2,261 $35,419 $3,102	$4,769	$4,769 $(256,869) $52,520 $68,803 $(12,783) USD 1,032 USD(8,997) USD(17,641) USD 476 $5,769 $354
									$(256,869)
									$52,520
									$186,891
									$(35,509)
									USD 1,032
									USD(17,641)
									USD(17,641)
									USD 476
									$5,769
									$354

Note1 : The Company's original investment in Kinsus Investment Co., Ltd. was NT$500,000 thousand. Kinsus Investment Co., Ltd. reduced capital by NT$102,000 thousand to offset deficits in 2013. And increased capital by NT$602,000 thousand in 2016. After the increase, investment amount increased to NT$1,000,000 thousand.

191

- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Marketable Securities (Excluding Investments in Subsidiaries, Associates and Jointly Controlled Entities)

As of December 31, 2016

						Attachment 8 (In Thousands of New Taiwan Dollars)	Attachment 8 (In Thousands of New Taiwan Dollars)	Attachment 8 (In Thousands of New Taiwan Dollars)	Attachment 8 (In Thousands of New Taiwan Dollars)	Attachment 8 (In Thousands of New Taiwan Dollars)	Attachment 8 (In Thousands of New Taiwan Dollars)
Name of Held Company	Type and Name of Marketable Securities	Relationship with the Issuer	Financial Statement Account			As of December 31,2016			Guarantee, Pledge or Other Restricted Conditions
				Shares(Unit)		Carrying Amount	%	Fair Value (Net Equity)	Shares	Carrying Amount	Note
Kinsus Investment Co., Ltd. Kinsus Investment Co., Ltd. Pegavision Corporation	Money market funds: Taishin Ta Chong Money Market Fund Valuation adjustments of financial assets held for trading Total Stocks: Yi-Shuo Creative Co., Ltd. Money market funds: Yuanta Wan Tai Money Market Fund Yuanta De-Li Money Market Fund Valuation adjustments of financial assets held for trading Total	- - -	Financial assets carried at cost Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss	829,070 5,000,000 17,879,293 9,229,182		$11,315 351 $11,666 $50,000 $268,108 149,000 328 $417,436	-% 7.49% -%	$11,666 $- (Note) $268,381 149,055 $417,436	- - -	$-
										$-
										$-

Note: No quotes in active markets and fair values cannot be measured reliably.

192

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Marketable Securities Acquired and Disposed of At Costs or Prices of At Least NT$300 Million or 20% of The Paid-In Capital

For the Year Ended December 31, 2016

Attachment 9

												(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
CompanyName	Type and Name of Marketable Securities	Financial Statement Account	Counter-party	Nature of Relationship	BeginningBalance		Acquisition			Disposal			EndingBalance
					Shares/Units	Amount	Shares/Units	Amount	Shares/Units	Amount	CarryingValue	Gain/Loss on Disposal	Shares/Units	Amount
Kinsus Investment Co., Ltd.	Stock: FuYang Technology Corp.	Investments accounted for using the equity method	-	-	-	$-	45,000,000	$450,000	-	$-	$-	$-	45,000,000	$450,000

193

- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Related Party Transactions with Purchase or Sales Amount of At least NT$100 Million or 20% of the Paid-in Capital

For the Year Ended December 31, 2016

Attachment 10

			(In Thousands of US Dollars)	(In Thousands of US Dollars)	(In Thousands of US Dollars)	(In Thousands of US Dollars)	(In Thousands of US Dollars)	(In Thousands of US Dollars)	(In Thousands of US Dollars)	(In Thousands of US Dollars)	(In Thousands of US Dollars)
CompanyName	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes/Accounts Payable or Receivable		Note
			Purchase/ Sale	Amount	% to Total	Payment/ Collection Term	Unit Price	Payment/ Collection Term	EndingBalance	% to Total
Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek (H.K.) Trading Limited Kinsus Interconnect Technology Suzhou Corp. Piotek Computer (Suzhou) Co., Ltd. Xiang-Shuo (Suzhou) Trading Limited	Pegatron Corporation Piotek (H.K.) Trading Limited Piotek Computer (Suzhou) Co., Ltd. Kinsus Interconnect Technology Corp. Xiang-Shuo (Suzhou) Trading Limited Piotek Computer (Suzhou) Co., Ltd.	Parent company Parent company Also a subsidiary under the Company's control Also a subsidiary under the Company's control Also a subsidiary under the Company's control Also a subsidiary under the Company's control	Sales Sales Purchase Sales Purchase Sales	USD 43,213 USD 18,401 USD 18,401 USD 62,404 USD 3,428 USD 3,428	39.15% 16.67% 100.00% 100.00% 4.90% 47.81%	Payment within 60 days from the end of delivery month Payment within 30 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month	Specs of goods sold are different from others. Cannot be reasonably compared. Specs of goods sold are different from others. Cannot be reasonably compared. Specs of goods sold are different from others. Cannot be reasonably d Specs of goods sold are different from others. Cannot be reasonably compared. Specs of goods sold are different from others. Cannot be reasonably Specs of goods sold are different from others. Cannot be reasonably compared.	No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with.	Accounts receivable USD 11,071 Accounts receivable USD 2,431 Accounts payable USD (2,431) Accounts receivable USD 6,015 Accounts payable USD 567 Accounts receivable USD 670	39.62% 8.70% (100.00)% 100.00% 2.41% 44.73%

194

- - English Translation of Parent Company Only Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp.

Receivables from Related Parties of at Least NT$ 100 Million or 20% of the Paid-in Capital

As of December 31, 2016

Attachment 11

(In Thousands of US Dollars)

CompanyName	Related Party	Nature of Relationship	EndingBalance	Turnover Ratio	Overdue	Overdue	Amount Received in Subsequent Periods	Allowance for Doubtful Debts
					Amount	Action Taken
Piotek Computer (Suzhou) Co., Ltd. Kinsus Interconnect Technology Suzhou Corp.	Pegatron Corporation Kinsus Interconnect Technology Corp.	Parent company Parent company	USD 11,071 (Note) USD 6,015 (Note)	4.80 6.67	$- $-	- -	$- $-	$- $-

Note: Accounts receivable

195

English Translation of Financial Statements and a Report Originally Issued in Chinese

MANAGEMENT REPRESENTATION LETTER

The entities that are required to be included in the combined financial statements of Kinsus Interconnect Technology Corp. as of December 31, 2016 and for the year then ended under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the International Accounting Standard No. 10, “Consolidated and Separate Financial Statements.” In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Kinsus Interconnect Technology Corp. and Subsidiaries do not prepare a separate set of combined financial statements.

Very truly yours,

Kinsus Interconnect Technology Corp.

By

Guo, Ming-Dong Chairman February 8, 2017

196

English Translation of Financial Statements and a Report Originally Issued in Chinese REVIEW REPORT OF INDEPENDENT AUDITORS

To: the Board of Directors and Shareholders of Kinsus Interconnect Technology Corp.

Opinion

We have audited the accompanying consolidated balance sheets of Kinsus Interconnect Technology Corp. (the “Company”) and its subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including the summary of significant accounting policies (together “the consolidated financial statements”).

In our opinion, based on our audits and the reports of other auditor (please refer to the Other Matter – Making Reference to the Audit of a Component Auditor section of our report), the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2016 and 2015, and their consolidated financial performance and cash flows for the years then ended, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in accordance with the Norm. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 2016 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

197

Revenue Recognition

We determine that revenue recognition is one of the key audit matters. The Company’s consolidated revenue amounting to NT$23,165,066 thousand for the year ended December 31, 2016 is a significant account to the Company’s consolidated financial statements. The Company and its subsidiaries have conducted these sale activities in multi-marketplace, including Taiwan, China, USA, etc. Among these locations, the Company and its subsidiaries have established hub-warehouse for certain foreign customers’ convenience. Furthermore, variety of sale terms and conditions enacted in the main sale contracts or sale orders contributed to the complexity for the Company and its subsidiaries to decide the appropriate timing of transfer the risk of ownership and return of goods to the buyers. We therefore conclude that there are significant risks with respect to the topic of revenue recognition.

Our audit procedures therefore include, but not limit to, evaluating the properness of accounting policy for revenue recognition, assessing and testing the effectiveness of relevant internal controls related to revenue recognition, particularly those controls for shipment to or from foreign warehouses, obtaining major sale orders or agreements to inspect the terms and conditions, checking the consistency of the accounting for revenue recognition with sale agreement or orders, performing analytical review procedures on monthly sale revenues, and executing sale cut-off tests, etc.

We have also evaluated the appropriateness of the related disclosure in Note 6 to the consolidated financial statements.

Related Party Transactions

The Company and its subsidiaries, to implement a plan of group operation, sold part of its operating equipment and machinery to FuYang Technology Corp., an associate investee accounted for under equity method, in amount of NT$241,776 thousand. This transaction was accunted for as a significant, non-routine related party transaction during the year ended December 31, 2016. We therefore conclude that the transaction is one of the key audit matters.

Our audit procedures therefore include, but not limit to, obtaining the related mutual agreements in order to clarify the purpose, pricing and collection term of the transaction, evaluating and testing the effectiveness of the internal controls related to related party transactions established by the Company’s management, including the approval flow authorized by board of directors or proper management and examination on the Company and its subsidiaries’ compliance with the “Process Guidance for Acquiring or Disposing Assets”.

We have also evaluated the appropriateness of the related disclosure in Note 7 to the consolidated financial statements.

198

Other Matter – Making Reference to the Audit of a Component Auditor

We did not audit the financial statements of FuYang Technology Corp., an invested associate accounted for under the equity method. The financial statements of FuYang Technology Corp. as of December 31, 2016 and for the year then ended were audited by other auditors, whose report thereon has been furnished to us. Our audit, insofar as it related to the investment in the associate accounted for under the equity method amounting to NT$432,689 thousand as of December 31, 2016 representing 1.05% of the Company’s consolidated total assets, the related shares of income before tax from the associate under the equity method for the year then ended amounting to NT$(12,783) thousand representing (0.50)% of the Company’s consolidated income before tax, and the related shares of other comprehensive income from the associate under the equity method for the year then ended amounting to NT$(4,528) thousand representing 1.38% of the consolidated other comprehensive income, are based solely on the audit reports of other auditors.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

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

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

Those charged with governance, including audit committee or supervisors, are responsible for overseeing the financial reporting process of the Company and its subsidiaries.

199

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

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

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

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

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

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

200

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of 2016 consolidated financial statements and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Ernst & Young February 8, 2017 Taipei, Taiwan, Republic of China

Notices to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China

201

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2016 and 2015

(Amounts Expressed In Thousands of New Taiwan Dollars)

Assets	Assets	Assets		2016	2016			2015	2015
Code	Accounts	Notes		Amount		%		Amount		%
1100 1110 1147 1150 1170 1180 1200 1210 1310 1410 1470 11XX 1543 1550 1600 1780 1840 1900 1915 15XX 1XXX	Current assets Cash and cash equivalents Financial assets at fair value through profit or loss Bond investments with no active market Notes receivable, net Accounts receivable, net Accounts receivable - related parties Other receivables Other receivables - related parties Inventories, net Prepayments Other current assets Total current assets Non-current assets Financial assets carried at cost Investment accounted for under equity method Property, plant and equipment, net Intangible assets Deferred income tax assets Other non-current assets Prepayment for equipment Total non-current assets Total Assets	4, 6(1) 4, 6(2) 4, 6(3), 8 4, 6(5) 4, 6(6) 4, 6(6), 7 7 4, 6(7) 4, 6(4) 4, 6(8) 4, 6(9), 8 4, 6(10) 4, 6(25) 6(11), 7 4, 6(9), 9		$11,212,646 3,268,435 423,057 3,030 3,197,829 399,736 289,514 307,646 2,258,244 134,676 120,742 21,615,555 50,000 432,689 16,578,663 18,820 9,882 295,385 2,252,721 19,638,160 $41,253,715		27 8 1 - 8 1 1 1 5 - - 52 - 1 40 - - 1 6 48 100		$12,746,307 3,536,370 428,112 1,835 3,590,193 248,909 336,543 2,081 2,285,436 159,205 136,377 23,471,368 50,000 - 16,150,904 30,280 9,880 318,785 2,607,515 19,167,364 $42,638,732		30 8 1 - 8 1 1 - 5 1 - 55 - - 38 - - 1 6 45 100

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

202

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Consolidated Balance Sheets-(Continued) As of December 31, 2016 and 2015

(Amounts Expressed In Thousands of New Taiwan Dollars)

Liabilities and Equity	Liabilities and Equity	Liabilities and Equity		2016	2016			2015	2015
Code	Accounts	Notes		Amount		%		Amount		%
2100 2150 2170 2180 2200 2230 2250 2300 21XX 2540 2570 2600 25XX 2XXX 31XX 3100 3110 3200 3300 3310 3350 3400 3500 36XX 3XXX	Current liabilities Short-term loans Notes payable Accounts payable Accounts payable - related parties Other payables Current income tax liabilities Provisions Other current liabilities Total current liabilities Non-current liabilities Long-term loans Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Equity attributable to shareholders of the parent Capital Common stock Capital surplus Retained earnings Legal reserve Unappropriated earnings Other components of equity Treasury Stock Non-controlling interests Total equity Total liabilities and equity	6(12) 7 6(13), 7 4, 6(25) 4, 6(14) 6(15) 6(16), 8 4, 6(25) 4, 6(17), 6(18) 6(19) 6(19) 6(19) 6(19) 6(19)		$2,228,478 48,092 2,126,485 16,059 3,021,801 510,591 - 688,291 8,639,797 1,508,390 631 90,128 1,599,149 10,238,946 4,460,000 5,939,819 3,340,018 15,163,371 (613) (32,885) 2,145,059 31,014,769 $41,253,715		6 - 5 - 7 1 - 2 21 4 - - 4 25 11 14 8 37 - - 5 75 100		$3,095,030 55,484 1,996,799 - 3,932,762 569,378 294 668,701 10,318,448 1,366,299 40,190 85,994 1,492,483 11,810,931 4,460,000 5,939,819 3,049,623 14,780,095 194,484 (32,885) 2,436,665 30,827,801 $42,638,732		7 - 5 - 9 1 - 2 24 4 - - 4 28 10 14 7 35 - - 6 72 100

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

203

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2016 and 2015

(Amounts Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Code	Accounts	Notes	2016		2015
			Amount	%	Amount	%
4000 5000 5900 6000 6100 6200 6300 6900 1310 7000 7010 7020 7050 7060 7900 7950 8200 8300 8310 8311 8360 8361 8362 8370 8399 8500 8600 8610 8620 8700 8710 8720 9750 9850	Net revenue Cost of sale Gross profit Operating expenses Sales and marketing General and administrative Research and development Total operating expenses Operating income Non-operating incomes and expenses Other incomes Other gains and losses Finance costs Share of profit or loss of associates and joint ventures Total non-operating incomes and expenses Income before income tax Income tax expense Net income Other comprehensive income (loss) Item that may not be reclassified to profit or loss Actuarial gain (loss) from defined benefit plans Items that may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations Unrealized valuation gain (loss) on available-for-sale financial assets Share of profit or loss of associates and joint ventures Income tax related to items that may be reclassified subsequently to P/L Total other comprehensive income, net of tax Total comprehensive income Net income (loss) attributable to: Shareholders of the parent Non-controlling interests Total comprehensive income (loss) attributable to: Shareholders of the parent Non-controlling interests Earnings per share - basic (In NT$) Earnings per share - diluted (In NT$)	4, 6(20), 7 7 7 6(23), 7 6(23) 6(23) 4, 6(8) 4, 6(25) 6(24) 6(26) 6(26)	$23,165,066 (17,414,521) 5,750,545 (509,185) (1,213,506) (1,438,082) (3,160,773) 2,589,772 195,672 (131,897) (71,306) (12,783) (20,314) 2,569,458 (496,430) 2,073,028 (959) (361,332) - (4,528) 39,834 (326,985) $1,746,043 $2,233,705 (160,677) $2,073,028 $2,037,649 (291,606) $1,746,043 $5.01 $4.95	100 (75) 25 (2) (5) (7) (14) 11 1 (1) - - - 11 (2) 9 - (1) - - - (1) 8 10 (1) 9 9 (1) 8	$23,061,311 (17,099,709) 5,961,602 (437,849) (975,409) (1,484,620) (2,897,878) 3,063,724 309,476 (110,984) (56,968) - 141,524 3,205,248 (475,722) 2,729,526 (8,721) (116,596) (24,694) - 12,397 (137,614) $2,591,912 $2,903,952 (174,426) $2,729,526 $2,810,012 (218,100) $2,591,912 $6.51 $6.38	100 (74) 26 (2) (4) (7) (13) 13 1 - - - 1 14 (2) 12 - (1) - - - (1) 11 13 (1) 12 12 (1) 11

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

204

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2016 and 2015

(Amounts Expressed In Thousands of New Taiwan Dollars)

Code	Items			Equity Attributable to Shareholders of the Parent	Equity Attributable to Shareholders of the Parent	Equity Attributable to Shareholders of the Parent	Equity Attributable to Shareholders of the Parent			Non- controlling Interests	Total Equity
		Capital	Capital Surplus	Retained Earnings		Others		Treasury Stock	Total
				Legal Reserve	Unappropriated Earnings	Exchange differences arising on translation of foreign operations	Unrealized valuation gain (loss) on available-for-sale financial assets
		3100	3200	3310	3350	3410	3425	3500	31XX	36XX	3XXX
A1 B1 B5 D1 D3 D5 L1 A1 B1 B5 D1 D3 D5 Z1	Balance as of January 1, 2015 Appropriation and distribution of 2014 earnings: Legal reserve Cash dividends - common shares Net income (loss) for 2015 Other comprehensive income (loss) for 2015 Total comprehensive income Treasury stock repurchased Balance as of December 31, 2015 Appropriation and distribution of 2015 earnings: Legal reserve Cash dividends - common shares Net income (loss) for 2016 Other comprehensive income (loss) for 2016 Total comprehensive income Balance as of December 31, 2016	$4,460,000 - 4,460,000 - $4,460,000	$5,939,819 - 5,939,819 - $5,939,819	$2,687,890 361,733 - 3,049,623 290,395 - $3,340,018	$14,030,597 (361,733) (1,784,000) 2,903,952 (8,721) 2,895,231 14,780,095 (290,395) (1,559,075) 2,233,705 (959) 2,232,746 $15,163,371	$255,009 (60,525) (60,525) 194,484 (195,097) (195,097) $(613)	$24,694 (24,694) (24,694) - - $-	$- - (32,885) (32,885) - $(32,885)	$27,398,009 - (1,784,000) 2,903,952 (93,940) 2,810,012 ($32,885) 28,391,136 - (1,559,075) 2,233,705 (196,056) 2,037,649 $28,869,710	$2,654,765 (174,426) (43,674) (218,100) 2,436,665 (160,677) (130,929) (291,606) $2,145,059	$30,052,774 - (1,784,000) 2,729,526 (137,614) 2,591,912 (32,885) 30,827,801 - (1,559,075) 2,073,028 (326,985) 1,746,043 $31,014,769

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

205

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2016 and 2015

(Amounts Expressed In Thousands of New Taiwan Dollars)

Code	Items		2016		2015	Code	Items	2016	2015
AAAA A10000 A20000 A20010 A20100 A20200 A20300 A20400 A20900 A21200 A22300 A22500 A23700 A30000 A31110 A31130 A31150 A31160 A31180 A31190 A31200 A31230 A31240 A31990 A32130 A32150 A32160 A32180 A32200 A32210 A32230 A32240 A33000 A33100 A33300 A33500 AAAA	Cash flows from operating activities: Income before income tax Adjustments: Income and expense adjustments: Depreciation Amortization Bad debt expense (gain on recovery) Net loss (gain) of financial assets (liabilities) at fair value through profit or loss Interest expense Interest income Share of profit or loss of associates and joint ventures Loss (gain) on disposal of property, plant and equipment Impairment loss on non-financial assets Changes in operating assets and liabilities: Financial assets at fair value through profit or loss Notes receivable Accounts receivable Accounts receivable - related parties Other receivables Other receivables - related parties Inventories Prepayments Other current assets Long-term prepaid rents Notes payable Accounts payable Accounts payable - related parties Other payables Provisions Unearned sales revenue Other current liabilities Accrued pension liabilities Cash generated from (used in) operations Interest received Interest paid Income tax paid Net cash provided by (used in) operating activities		$2,569,458 3,464,017 31,215 6,531 (10,653) 71,306 (72,471) 12,783 43,555 21,126 278,588 (1,195) 386,860 (150,827) 47,292 (305,565) 27,192 24,529 15,635 28,213 (7,392) 129,686 16,059 (369,201) (294) 59,442 (3,469) (4,098)		$3,205,248 3,196,903 34,432 (19,603) (55,431) 56,968 (86,116) - 108,807 14,211 1,623,650 4,417 (529,703) 187,497 111,215 (774) (122,467) (60,704) (44,397) 13,291 14,473 10,050 - 73,374 (8) (11,246) (2,035) (4,241)	BBBB B00400 B00700 B01800 B02700 B02800 B03800 B04500 BBBB CCCC C00100 C01600 C01700 C03000 C04500 C04900 CCCC DDDD EEEE E00100 E00200	Cash flows from investing activities: Disposal of available-for-sale financial assets Disposal of bond investments with no active market Acquisition of Investment accounted for under equity method Acquisition of property, plant and equipment Disposal of property, plant and equipment Decrease (increase) in refundable deposits Acquisition of intangible assets Net cash provided by (used in) investing activities Cash flows from financing activities: Increase in (repayment of) short-term loans Increase in long-term loans Repayment of long-term loans Increase (decrease) in deposits received Payment of cash dividends Treasury stock purchased Net cash provided by (used in) financing activities Effect of exchange rate changes Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	- 5,055 (450,000) (4,761,567) 260,601 (4,813) (20,457)	46,520 35,715 - (5,000,206) 1,680 (363) (44,806) (4,961,460) 1,288,134 1,084,751 (1,310,123) (29,106) (1,784,000) (32,885) (783,229) 10,806 1,204,692 11,541,615 $12,746,307
								(4,971,181)
								(866,552) 800,000 (694,292) 7,273 (1,559,075) -
								(2,312,646)
								(2,510)
								(1,533,661) 12,746,307
								$11,212,646
			6,308,322		7,717,811
			72,140 (72,842) (554,944)		90,561 (55,519) (814,278)
			5,752,676		6,938,575

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

Chairman: Ming-Dong Guo

CEO: Ho-Shu Chen

Head of Accounting: Su-Zhen Liu

206

English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese ~~English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese~~ Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Notes to the Consolidated Financial StatementsNotes to Consolidated Financial Statements (Continued)

(Amounts Expressed in Thousands of New Taiwan Dollars unless Otherwise Specified)

1. HISTORY AND ORGANIZATION

Kinsus Interconnect Technology Corp. (referred to “the Company”) was established on September 11, 2000. Its main business activities include the manufacture of electronic products, the whole-sale and retail-sale of electronic materials, and the consultation services of business operation and management. The Company’s stocks have been governmentally approved on May 20, 2004 to be listed and traded in Taiwan Stock Exchange starting November 1, 2004. The registered business premise and main operation address is at No. 1245, Chung Hua Rd., Hsinwu District, Taoyuan City, Taiwan 32747.

2. DATE AND PROCEDURE OF AUTHORIZATION FOR FINANCIAL STATEMENTS ISSUANCE

The consolidated financial statements of the Company and its subsidiaries (“the Group”) were authorized to be issued in accordance with a resolution of the Board of Directors’meeting held on February 8, 2017.

1. NEWLY ISSUED OR REVISED STANDARDS AND INTERPRETATIONS

2. (1) Standards or interpretations issued, revised or amended, which are recognized by Financial Supervisory Commission (“FSC”), but not yet adopted by the Group at the date of issuance of the Group’s financial statements are listed below.

   • (a) IAS 36 “Impairment of Assets” (Amendment)

This amendments relate to the amendment issued in May 2011 and requires entities to disclose the recoverable amount of an asset (including goodwill) or a cash-generating unit when an impairment loss has been recognized or reversed during the period. The amendment also requires detailed disclosure of how the fair value less costs of disposal has been measured when an impairment loss has been recognized or reversed, including valuation techniques used, level of fair value hierarchy of assets and key assumptions used in measurement. The amendments are effective for annual periods beginning on or after January 1, 2014.

• (b) IFRIC 21 “Levies”

This interpretation provides guidance on when to recognize a liability for a levy imposed by a government (both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain). The interpretation is effective for annual periods beginning on or after January 1, 2014.

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

• (c) IAS 39 “Financial Instruments: Recognition and Measurement” (Amendment)

Under the amendments, there would be no need to discontinue hedge accounting if a hedging derivative was notated, provided certain criteria are met. The interpretation is effective for annual periods beginning on or after January 1, 2014.

• (d) LAS 19 “Employee Benefits” (Defined benefit plans: employee contributions)

The amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to provide a policy choice for a simplified accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendments are effective for annual periods beginning on or after July 1, 2014.

• (e) Improvements to International Financial Reporting Standards (2010-2012 cycle):

IFRS 2 “Share-based Payment”

The annual improvements amend the definitions of 'vesting condition' and 'market condition' and add definitions for 'performance condition' and 'service condition' (which were previously part of the definition of 'vesting condition'). The amendments prospectively apply to share-based payment transactions for which the grant date is on or after July 1, 2014.

IFRS 3 “Business Combinations”

The amendments include: (1) deleting the reference to "other applicable IFRSs" in the classification requirements; (2) deleting the reference to "IAS 37 Provisions, Contingent Liabilities and Contingent Assets or other IFRSs as appropriate", other contingent consideration that is not within the scope of IFRS 9 shall be measured at fair value at each reporting date and changes in fair value shall be recognized in profit or loss; (3) amending the classification requirements of IFRS 9 Financial Instruments to clarify that contingent consideration that is a financial asset or financial liability can only be measured at fair value, with changes in fair value being presented in profit or loss depending on the requirements of IFRS 9. The amendments apply prospectively to business combinations for which the acquisition date is on or after July 1, 2014.

208

English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

IFRS 8 “Operating Segments”

The amendments require an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments. The amendments also clarify that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly. The amendments are effective for annual periods beginning on or after July 1, 2014.

IFRS 13 “Fair Value Measurement”

The amendments to the Basis for Conclusions of IFRS 13 clarify that when deleting paragraph B5.4.12 of IFRS 9 Financial Instruments and paragraph AG79 of IAS 39 Financial Instruments: Recognition and Measurement as consequential amendments from IFRS 13 Fair Value Measurement, the IASB did not intend to change the measurement requirements for short-term receivables and payables.

IAS 16 “Property, Plant and Equipment”

The amendments clarify that when an item of property, plant and equipment is revalued, the accumulated depreciation at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset. The amendments are effective for annual periods beginning on or after July 1, 2014.

IAS 24 “Related Party Disclosures”

The amendments clarify that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity. The amendments are effective for annual periods beginning on or after July 1, 2014.

IAS 38 “Intangible Assets”

The amendments clarify that when an intangible asset is revalued, the accumulated amortization at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset. The amendments are effective for annual periods beginning on or after July 1, 2014.

209

English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

(f) Improvements to International Financial Reporting Standards (2011-2013 cycle):

IFRS 1 “First-time Adoption of International Financial Reporting Standards”

The amendments clarify that an entity, in its first IFRS financial statements, has the choice between applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS permits early application.

IFRS 3 “Business Combinations”

This amendments clarify that paragraph 2(a) of IFRS 3 Business Combinations excludes the formation of all types of joint arrangements as defined in IFRS 11 Joint Arrangements from the scope of IFRS 3; and the scope exception only applies to the financial statements of the joint venture or the joint operation itself. The amendments are effective for annual periods beginning on or after July 1, 2014.

IFRS 13 “Fair Value Measurement”

The amendments clarify that paragraph 52 of IFRS 13 includes a scope exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis. The objective of the amendments is to clarify that this portfolio exception applies to all contracts within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation. The amendments are effective for annual periods beginning on or after July 1, 2014.

IAS 40 “Investment Property”

The amendments clarify the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property; in determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 Business Combinations and investment property as defined in IAS 40 Investment Property, separate application of both standards independently of each other is required. The amendments are effective for annual periods beginning on or after July 1, 2014.

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

• (g) IFRS 14 “Regulatory Deferral Accounts”

IFRS 14 permits first-time adopters to continue to recognize amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognize such amounts, the Standard requires that the effect of rate regulation must be presented separately from other items. IFRS 14 is effective for annual periods beginning on or after January 1, 2016.

• (h) IFRS 11 “Joint Arrangements” (Accounting for Acquisitions of Interests in Joint Operations)

The amendments provide new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments require the entity to apply all of the principles on business combinations accounting in IFRS 3 “Business Combinations”, and other IFRS (that do not conflict with the guidance in IFRS 11), to the extent of its share in a joint operation acquired. The amendments also requires certain disclosure. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (i) IAS 16“Property, Plant and Equipment and IAS 38 “Intangible Assets” — Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify that the use of revenue-based methods to calculate depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset, such as selling activities and change in sales volumes or prices. The amendments also clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (j) IAS 16“Property, Plant and Equipment and IAS 41 “Agriculture” — Agriculture: Bearer Plants

The IASB decided that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 Property, Plant and Equipment , because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, and the produce growing on bearer plants will remain within the scope of IAS 41. The amendments are effective for annual periods beginning on or after January 1, 2016.

211

English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

• (k) IAS 27“Separate Financial Statements” — Equity Method in Separate Financial Statements

The IASB restored the option to use the equity method under IAS 28 for an entity to account for investments in subsidiaries and associates in the entity’s separate financial statements. In 2003, the equity method was removed from the options. This amendments removes the only difference between the separate financial statements prepared in accordance with IFRS and those prepared in accordance with the local regulations in certain jurisdictions. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (l) Improvements to International Financial Reporting Standards (2012-2014 cycle):

IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”

The amendments clarify that a change of disposal method of assets (or disposal groups) from disposal through sale or through distribution to owners (or vice versa) should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. The amendments also requires identical accounting treatment for an asset (or disposal group) that ceases to be classified as held for sale or as held for distribution to owners. The amendments are effective for annual periods beginning on or after January 1, 2016.

IFRS 7 “Financial Instruments: Disclosures”

The amendments clarify that a servicing contract that includes a fee can constitute continuing involvement in a financial asset and therefore the disclosures for any continuing involvement in a transferred asset that is derecognized in its entirety under IFRS 7 Financial Instruments: Disclosures is required. The amendments also clarify that whether the IFRS 7 disclosure related to the offsetting of financial assets and financial liabilities are required to be included in the condensed interim financial report would depend on the requirements under IAS 34 Interim Financial Reporting. The amendments are effective for annual periods beginning on or after January 1, 2016.

IAS 19 “Employee Benefits”

The amendments clarify the requirement under IAS 19.83, that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. The amendments are effective for annual periods beginning on or after January 1, 2016.

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IAS 34 “Interim Financial Reporting”

The amendments clarify what is meant by “elsewhere in the interim financial report” under IAS 34; the amendments states that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report. The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (m) Disclosure Initiative — Amendment to IAS 1 “Presentation of Financial Statements”:

The amendments contain (1) clarifying that an entity must not reduce the understandability of its financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures or functions. The amendments reemphasize that, when a standard requires a specific disclosure, the information must be assessed to determine whether it is material and, consequently, whether presentation or disclosure of that information is warranted, (2) clarifying that specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated, and how an entity shall present additional subtotals, (3) clarifying that entities have flexibility as to the order in which they present the notes to financial statements, but also emphasize that understandability and comparability should be considered by an entity when deciding on that order, (4) removing the examples of the income taxes accounting policy and the foreign currency accounting policy, as these were considered unhelpful in illustrating what significant accounting policies could be, and (5) clarifying that the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, classified between those items that will or will not be subsequently reclassified to profit or loss. The amendments are effective for annual periods beginning on or after January 1, 2016.

• (n) IFRS 10“Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities”, and IAS 28“Investments in Associates and Joint Ventures” — Investment Entities: Applying the Consolidation Exception

The amendments contain (1) clarifying that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity when the investment entity measures all of its subsidiary at fair value, (2) clarifying that only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated when all other subsidiaries of an investment entity

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are measured at fair value, and (3) allowing the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. The amendments are effective for annual periods beginning on or after January 1, 2016.

The abovementioned standards and interpretations issued by IASB and recognized by FSC are applicable for annual periods beginning on or after January 1, 2017. The Group assesses that there will be no significant impact on the Group’s financial statements then.

• (2) Standards or interpretations issued, revised or amended, by IASB but not yet recognized by FSC at the date of issuance of the Group’s financial statements are listed below.

• (a) IFRS 15 “Revenue from Contracts with Customers”

The core principle of the new Standard is for companies to recognize revenue to depict the transfer of promised goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

The new Standard includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts with customers. The Standard is effective for annual periods beginning on or after January 1, 2018.

(b) IFRS 9“Financial Instruments”

The IASB has issued the final version of IFRS 9, which combines classification and measurement, the expected credit loss impairment model and hedge accounting. The standard will replace IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9 Financial Instruments (which include standards issued on classification and measurement of financial assets and liabilities and hedge accounting).

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Classification and measurement: Financial assets are measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial asset’s contractual cash flow characteristics. Financial liabilities are measured at amortized cost or fair value through profit or loss. Furthermore there is requirement that ‘own credit risk’ adjustments are not recognized in profit or loss.

Impairment: Expected credit loss model is used to evaluate impairment. Entities are required to recognize either 12-month or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition.

Hedge accounting: Hedge accounting is more closely aligned with risk management activities and hedge effectiveness is measured based on the hedge ratio.

The new standard is effective for annual periods beginning on or after January 1, 2018.

• (c) IFRS 10“Consolidated Financial Statements” and IAS 28“Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full.

IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

The effective date of the amendments has been postponed indefinitely, but early adoption is allowed.

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• (d) IFRS 16“Leases”

The new standard requires lessees to account for all leases under a single on-balance sheet model (subject to certain exemptions). Lessor accounting still uses the dual classification approach: operating lease and finance lease. The Standard is effective for annual periods beginning on or after January 1, 2019.

• (e) IAS 12“Income Taxes” — Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify how to account for deferred tax assets for unrealized losses. The amendments are effective for annual periods beginning on or after January 1, 2017.

• (f) Disclosure Initiative — Amendment to IAS 7 “Statement of Cash Flows”:

The amendments relate to changes in liabilities arising from financing activities and to require a reconciliation of the carrying amount of liabilities at the beginning and end of the period. The amendments are effective for annual periods beginning on or January 1, 2017.

• (g) IFRS 15 “Revenue from Contracts with Customers” — Clarifications to IFRS 15

The amendments clarify how to identify a performance obligation in a contract, determine whether an entity is a principal or an agent, and determine whether the revenue from granting a licence should be recognized at a point in time or over time. The amendment are effective for annual periods beginning on or after Jaunary 1, 2018.

• (h) IFRS 2 “Shared-Based Payment” — Amendments to IFRS 2

The amendments contains (1) clarifying that vesting conditions (service and non-market performance conditions), upon which satisfaction of a cash-settled share-based payment transaction is conditional, are not taken into account when estimating the fair value of the cash-settled share-based payment at the measurement date. Instead, these are taken into account by adjusting the number of awards included in the measurement of the liability arising from the transaction, (2) clarifying if tax laws or regulations require the employer to withhold a certain amount in order to meet the employee’s tax obligation associated with the share-based payment, such transacitons will be classified in their entirety as equity-settled share-based payment transacitons if they would have been so classified in the absence of the net share settlement feature, and (3) clarifying that if the terms and conditions of a cash-settled share-based payment transaction are modified, with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as an equity-settled transaction from the date of the

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modification. The equity-settled share-based payment transaction is measured by reference to the fair value of the equity instruments granted at the modification date and is recognised in equity, on the modification date, to the extent to which goods or services have been received. The liability for the cash-settled share-based payment transaction as at the modification date is derecognised on that date. Any difference between the carrying amount of the liability derecognised and the amount recognised in equity on the modification date is recognised immediately in profit or loss. The amendments are effective for annual periods beginning on or after Jaunary 1, 2018.

• (i) Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts — Amendments to IFRS 4

The amendments help to resolve issues arising from the different effective dates for IFRS 9 “Financial Instruments” (January 1, 2018) and the new insurance contracts standard about to be issued by the IASB (still to be decided, but not before 1 January 2020). The amendments allow entities issuing insurance contracts within the scope of IFRS 4 to mitigate certain effects of applying IFRS 9 “Financial Instruments” before the IASB’s new insurance contracts standard becomes effective. The amendments introduce two approaches: an overlay approach and a temporary exemption. The overlay approach allows an entity applying IFRS 9 to remove from profit or loss the effects of some of the accounting mismatches that may occur from applying IFRS 9 before the new insurance contracts standard is applied. The temporary exemption enables eligible entities to defer the implementation date of IFRS 9 until 2021 (these entities that defer the application of IFRS 9 will continue to apply IAS 39).

• (j) Transfers of Investment Property — Amendments to IAS 40

The amendments relate to the transfers of investment property. The amendments clarify that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use, the entity should transfer property into and out of investment property accordingly. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. The amendments are effective for annual periods beginning on or after January 1, 2018.

• (k) Improvements to International Financial Reporting Standards (2014-2016 cycle):

IFRS 1 “First-time Adoption of International Financial Reporting Standards”

The amendments revise and amend transition requirements relating to certain standards and delete short-term exemptions under Appendix E for first-time adopter. The amendments are effective for annual periods beginning on or after January 1, 2018.

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IFRS 12 “Disclosure of Interests in Other Entities”

The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10–B16, apply to an entity’s interests that are classified as held for sale or discontinued operations. The amendments are effective for annual periods beginning on or after January 1, 2017.

IAS 28“Investments in Associates and Joint Ventures”

The amendments clarify that when an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and other qualifying entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9 “Financial Instruments” on an investment-by-investment basis. Besides, if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate's or joint venture's interests in subsidiaries on an investment-by-investment basis. The amendments are effective for annual periods beginning on or after January 1, 2018.

(l) IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

The interpretation clarifies that when applying paragraphs 21 and 22 of IAS 21 “The Effects of Changes in Foreign Exchange Rates”, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. The interpretation is effective for annual periods beginning on or after January 1, 2018.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Group’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. As the Group is still currently determining the potential impact of the standards and interpretations listed under (a)~(b), it is not practicable to estimate their impact on the Group at this point in time. All other standards and interpretations have no material impact on the Group.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1)Statement of compliance

The consolidated financial statements of the Group for the years ended December 31, 2016 and 2015 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”) and International Financial Reporting Standards, International Accounting Standards, and Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by the FSC.

(2)Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The consolidated financial statements are presented in thousands of New Taiwan Dollars (“NT$”) unless otherwise specified.

• (3)Basis of consolidation

Preparation principle of consolidated financial statements

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• (a) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

• (b) exposure, or rights, to variable returns from its involvement with the investee, and

• (c) the ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• (a) the contractual arrangement with the other vote holders of the investee

• (b) rights arising from other contractual arrangements

• (c) the Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

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Subsidiaries are fully consolidated from the acquisition date, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using uniform accounting policies. All intra-group balances, income and expenses, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to the NCIs even if this results in a deficit balance of the NCIs.

If the Group loses control of a subsidiary, it:

• (a) derecognizes the assets (including goodwill) and liabilities of the subsidiary;

• (b) derecognizes the carrying amount of any non-controlling interest;

• (c) recognizes the fair value of the consideration received;

• (d) recognizes the fair value of any investment retained;

• (e) recognizes any surplus or deficit in profit or loss; and

• (f) reclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss.

The consolidated entities are listed as follows:

Investor Subsidiary Main businesses The Company KINSUS CORP. (USA) Designing substrates, formulating marketing strategy analysis, developing new customers, researching and development new product technology The Company KINSUS HOLDING (SAMOA) LIMITED Investing activities The Company KINSUS INVESTMENT CO., LTD. Investing activities	Percentage of Ownership (%) As of December 31,	Percentage of Ownership (%) As of December 31,
	2016 100.00% 100.00% 100.00%	2015
		100.00% 100.00% 100.00%

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KINSUS HOLDING	KINSUS HOLDING	Investing activities	100.00%	100.00%
(SAMOA)	(CAYMAN)
LIMITED	LIMITED
KINSUS HOLDING	PIOTEK	Investing activities	51.00%	51.00%
(SAMOA)	HOLDINGS LTD.
LIMITED	(CAYMAN)
KINSUS	PEGAVISION	Manufacture of medical	36.81%	36.81%
INVESTMENT	CORPORATION	equipment	(Note)	(Note)
CO., LTD.
KINSUS HOLDING	KINSUS	Manufacturing and selling	100.00%	100.00%
(CAYMAN)	INTERCONNECT	printed circuit board (PCB) (not
LIMITED	TECHNOLOGY	high-density fine-line)
	SUZHOU CORP.
KINSUS HOLDING	XIANG-SHOU	Trading of PCB related	100.00%	100.00%
(CAYMAN)	(SUZHOU)	products and materials (not
LIMITED	TRADING	high-density fine-line)
	LIMITED
PIOTEK	PIOTEK HOLDING	Investing activities	100.00%	100.00%
HOLDINGS LTD.	LIMITED
(CAYMAN)
PIOTEK HOLDING	PIOTEK	Researching, developing,	100.00%	100.00%
LIMITED	COMPUTER	producing and selling electronic
	(SUZHOU) CO.,	components, PCBs and related
	LTD.	products and providing after-
		sale services
PIOTEK HOLDING	PIOTEK (H.K.)	Trading activities	100.00%	100.00%
LIMITED	TRADING
	LIMITED
PEGAVISION	PEGAVISION	Investing activities	100.00%	100.00%
CORPORATION	HOLDINGS
	CORPORATION

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PEGAVISION	PEGAVISION	Selling medical	100.00%	100.00%
CORPORATION	JAPAN INC.	equipment
PEGAVISION	PEGAVISION	Selling medical	100.00%	100.00%
HOLDINGS	CONTACT	equipment
CORPORATION	LENSES
	(SHANGHAI)
	CORPORATION

Note：The Group owned 36.81% of ownership of Pegavision Corporation as of December 31, 2016 and 2015. The management decide to include Pegavision Corporation as a consolidated entity because the Group, in substance, possess the control over this entity.

(4)Foreign currency transactions

The Group’s consolidated financial statements are presented in New Taiwan Dollar, which is the parent company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. At the reporting date, monetary items denominated in foreign currencies are retranslated at the prevailing functional currency closing rate of exchange; non-monetary items measured at fair value in a foreign currency are retranslated using the exchange rates at the date when the fair value is determined; and non-monetary items measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising from the settlement or translation of monetary items are taken to profit or loss in the period in which they arise, except for the following:

• A. Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

• B. Foreign currency items within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are accounted for based on the accounting policy for financial instruments.

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• C. Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

• (5)Foreign currency transactions and translation of financial statements in foreign currency

The assets and liabilities of foreign operations are translated into New Taiwan dollar at the closing rate of exchange prevailing at the balance sheet date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income under exchange differences on translation of foreign operations. On disposal of the foreign operation, cumulative amount of the exchange differences recognized in other comprehensive income under separate component of equity is reclassified from equity to profit or loss when recognizing the disposal gain/loss.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the NCIs in that foreign operation, instead of recognized in profit or loss. In partial disposal of an associate or jointly controlled entity that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

• (6)Current and non-current distinction for assets and liabilities

An asset is classified as current when:

• (a) The Group expects to realize the asset, or intends to sell or consume it, in its normal operating cycle

• (b) The Group holds the asset primarily for the purpose of trading

• (c) The Group expects to realize the asset within twelve months after the reporting period

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• (d) The asset is cash or cash equivalent, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

• (a) The Group expects to settle the liability in its normal operating cycle

• (b) The Group holds the liability primarily for the purpose of trading

• (c) The liability is due to be settled within twelve months after the reporting period

• (d) The Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. 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.

All other liabilities are classified as non-current.

• (7)Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and 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 (including fixed-term deposits that have maturities equal to or less than three months from the date of acquisition).

• (8)Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are recognized initially at fair value plus or minus, in the case of financial assets and financial liabilities not at fair value through profit or loss, directly attributable transaction costs.

• A. Financial assets

The Group accounts for regular way purchase or sales of financial assets on the settlement date basis.

Financial assets of the Group are classified as financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables. The Group

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determines the classification of its financial assets at initial recognition based on their natures and purposes.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.

A financial asset is classified as held for trading if:

• (a) it is acquired principally for the purpose of selling in short term;

• (b) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or

• (c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial asset at fair value through profit or loss; or a financial asset may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

• (a) it eliminates or significantly reduces measurement or recognition inconsistency; or

• (b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on financial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment).

If financial assets do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at the reporting date.

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Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or those not classified as financial assets at fair value through profit or loss, held-to-maturity investments, or loans and receivables.

Foreign exchange gains and losses and interest calculated using the effective interest method relating to monetary available-for-sale financial assets, or dividends on an available-for-sale equity instrument, are recognized in profit or loss. Subsequent measurement of available-for-sale financial assets at fair value is recognized in equity until the investment is derecognized, at which time the cumulative gain or loss is reclassified to profit or loss.

If equity instrument investments do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at the reporting date.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those that the Group classifies as at fair value through profit or loss, upon initial recognition designates as available-forsale, or those for which the holder may not recover substantially all of its initial investment due to credit worsening.

Loans and receivables are separately presented on the balance sheet as receivables or bond investments with no active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or transaction costs. The effective interest method amortization is recognized in profit or loss.

Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset other than the financial assets at fair value through profit or loss is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset. The carrying amount of the financial asset is reduced

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through the use of an allowance account and the amount of the loss is recognized in profit or loss.

A significant or prolonged decline in the fair value of an available-for-sale equity instrument below its cost is considered a loss event.

Other loss events include:

• (a) significant financial difficulty of the issuer or obligor; or

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

• (c) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or

• (d) the disappearance of an active market for that financial asset due to financial difficulties of the issuer.

For held-to-maturity financial assets and loans and receivables measured at amortized cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial asset that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exits for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. Interest income is accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to profit or loss.

In the case of equity investments classified as available-for-sale, where there is evidence of impairment, the amount recorded for impairment is the cumulative loss measured as

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the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss. The impairment amount is reclassified from equity to profit or loss. Impairment losses on equity investments are not reversed through profit or loss. Increases in their fair value after impairment are recognized directly in equity.

In the case of debt instruments classified as available-for-sale, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss. Future interest income is based on the reduced carrying amount of assets and calculated using the effective interest rate which is the discount rate for measuring impairment loss. Interest income is recognized in profit or loss. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss.

Derecognition of financial assets

A financial asset is derecognized when:

• (a) The rights to receive cash flows from the asset have expired

• (b) The Group has transferred the asset and substantially all the risks and rewards of the asset have been transferred

• (c) The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

• B. Financial liabilities and equity instruments

Classification between liabilities or equity

The Group classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument.

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Equity instruments

An equity instrument is any contract of the Group that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

A financial liability is classified as held for trading if:

• (a) it is acquired principally for the purpose of selling it in short term;

• (b) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or

• (c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated upon initial recognition as at fair value through profit or loss when doing so results in more relevant information, because either:

• (a) it eliminates or significantly reduces measurement or recognition inconsistency; or

• (b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Gains or losses from subsequent measurement on liabilities at fair value through profit or loss, including interests, are recognized in profit or loss.

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If the financial liabilities at fair value through profit or loss do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial liabilities measured at cost on balance sheet and carried at cost as at the reporting date.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include payables and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Relevant gains or losses and amortization amounts are recognized in profit or loss when the liabilities are derecognized and amortized through the effective interest rate method.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

(9)Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

(a)In the principal market for the asset or liability, or

• (b)In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

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The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

• (10)Inventories

Inventories are valued at lower of cost or net realizable value item by item.

Costs incurred in bringing each inventory to its present location and conditions are accounted for as follows:

Raw materials - At actual purchase cost, using weighted average method Finished goods and work in progress - Including cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity, using weighted average method.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

• (11)Investments accounted for using the equity method

The Group’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Group has significant influence. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.

Under the equity method, the investment in the associate or an investment in a joint venture is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the associate or joint venture. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations

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or made payments on behalf of the associate or joint venture. Unrealized gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the Group’s related interest in the associate or joint venture.

When changes in the net assets of an associate or a joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Group’s percentage of ownership interests in the associate or joint venture, the Group recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate or joint venture on a prorata basis.

When the associate or joint venture issues new stock, and the Group’s interest in an associate or a joint venture is reduced or increased as the Group fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate or joint venture is recognized in Additional Paid in Capital and Investment accounted for using the equity method. When the interest in the associate or joint venture is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Group disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate or an investment in a joint venture is impaired in accordance with IAS 39 Financial Instruments: Recognition and Measurement . If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets . In determining the value in use of the investment, the Group estimates:

• (a)Its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or

• (b)The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

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Because goodwill that forms part of the carrying amount of an investment in an associate or an investment in a joint venture is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets .

Upon loss of significant influence over the associate or joint venture, the Group measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss. Furthermore, if an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the entity continues to apply the equity method and does not remeasure the retained interest.

(12)Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. 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 is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 “Property, plant and equipment”. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings	10 to 25 years
Machinery	5 to 10 years
Transportation	2 to 6 years
Office equipment	3 to 5 years
Other equipment	1 to 25 years

An item of property, plant and equipment or any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

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The property, plant and equipment’s residual values, useful lives and methods of depreciation are reviewed at each financial year. If the expected values differ from the estimates, the differences are recorded as a change in accounting estimate.

(13)Leasing

Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased item or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Rental incomes under operating lease are recognized on a straight-line basis over the lease term. Contingent rents are recognized as revenue in the period in which they are earned.

(14)Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, not meeting the recognition criteria, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

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Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit (CGU) level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are recognized in profit or loss.

The Group’s accounting policies for intangible assets are as follows:

Cost of Computer Software Useful economic life 1 to 5 years Amortization method Straight-line method during the contract term Internally generated or acquired externally Acquired externally

(15)Impairment of non-financial assets

The Group assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 “Impairment of Assets” may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group would conduct impairment tests at individual or CGU level. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired. An asset’s recoverable amount is the higher of an asset’s net fair value or its value in use.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the recoverable amount of the asset or CGU. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years.

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Impairment loss or reversals of continuing operations are recognized in profit or loss.

(16)Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Provisions for sales returns and allowances

The Group estimates provisions for sales returns and allowances based on past experience and other known factors.

(17)Treasury Stock

The Company’s own equity instruments repurchased (treasury shares) are recognized at repurchase cost and deducted from equity. Any difference between the carrying amountand the consideration is recognized in equity.

(18)Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Conditions and methods for the recognition of various types of revenue are listed below:

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions have been satisfied: significant risks and rewards of ownership of the goods have passed to the buyer; neither continuing managerial involvement nor effective control over the goods sold have been retained; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the entity; and the costs incurred in respect of the transaction can be measured reliably.

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Customer Loyalty Program

When the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme is to be taken into account.

Interest income

Interest incomes from financial assets at amortized costs (including loans and receivables and held-to-maturity financial assets) and available-for-sale financial assets are estimated using the effective interest method and recognized in profit or loss.

Dividend income

Dividend incomes are recognized only when the Group has the right to receive the dividends.

(19)Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(20)Post-employment benefits

All regular employees of the Company and its domestic subsidiaries are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with the Company and its domestic subsidiaries. Therefore, fund assets are not included in the Group’s consolidated financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations.

For the defined contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due. Overseas subsidiaries and branches make contribution to the plan based on the requirements of local regulations and the contribution is expensed as incurred.

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Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Remeasurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of:

• (a) the date of the plan amendment or curtailment, and

• (b) the date that the Group recognizes restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted and disclosed for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events

(21)Income tax

Income tax expense (benefit) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The 10% income tax for undistributed earnings of the Company and its subsidiaries is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders’ meeting.

Deferred income tax

Deferred income tax is a temporary difference between the tax bases of assets and liabilities and their carrying amounts in balance sheet at the reporting date.

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Deferred tax liabilities are recognized for all taxable temporary differences, except:

• (a) Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit (loss);

• (b) In respect of taxable temporary differences associated with investments in subsidiaries, and associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, any unused tax losses and carry forward of unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:

• (a) Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• (b) In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will be reversed in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed and recognized at each reporting date.

Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

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Interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period.

5. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that would have a significant risk for a material adjustment to the carrying amounts of assets and liabilities within the next fiscal year are discussed below.

(1)Fair value of financial instruments

Where the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including income approach (for example, the discounted cash flows model) or the market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

(2)Post-employment benefits

The cost of post-employment benefit pension plan and the present value of the defined benefit obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions, including the change in the discount rate and expected salary level. The assumptions used for measuring pension cost and defined benefit obligation are disclosed in Note 6.

(3)Revenue recognition - customer loyalty programmes

The Group uses statistical techniques to estimate the fair value of award credits under customer loyalty programmes. Parameters used in the estimation include: assumptions on the expected exchange rate, commodity portfolio available for future exchange and customer preference. Before the points issued under the programme expire, the estimates have material uncertainty. Please refer to Note 6 for more details.

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(4)Revenue recognition – sale returns and allowances

The Group estimates sales returns and allowances based on past experience and other known factors as reductions of sales revenue upon sales. Please refer to Note 6 for more details.

(5)Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax benefit and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provision is based on various factors, such as past experience in tax audit and different interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company’s domicile.

Deferred tax assets are recognized for all carryforward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies. As of December 31, 2016, the un-recognized portion of the Croup’s defferred tax assets was disclosed in Note 6.

6. CONTENTS OF SIGNIFICANT ACCOUNTS

(1)Cash and cash equivalents

As of December 31,

Cash and petty cash Checking and saving Time deposit Total	2016 (NT$’000)	2015 (NT$’000)
	5,693 2,948,555 8,258,398	6,234 3,379,804 9,360,269
	11,212,646	12,746,307

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

Held for trading: Money market fund Valuation adjustment Total	As of December 31,	As of December 31,
	2016 (NT$’000) 3,198,334 70,101 3,268,435	2015 (NT$’000)
		3,453,872 82,498
		3,536,370

No financial asset at fair value through profit or loss was pledged as collateral.

(3)Bond investments with no active market

Time deposits Current Non-current	As of December 31,	As of December 31,
	2016 (NT$’000) 423,057 423,057 -	2015 (NT$’000)
		428,112
		428,112
		-

There was no bond investments with no active market pledged as collateral.

(4)Financial assets carried at cost

Stocks Non-current	As of December 31, 2016 (NT$’000) 2015 (NT$’000) 50,000 50,000 50,000 50,000	As of December 31, 2016 (NT$’000) 2015 (NT$’000) 50,000 50,000 50,000 50,000
		2015 (NT$’000) 50,000 50,000

• A. Because the interval of reasonable estimates of the fair value of unlisted stocks held by the Group is significantly variable and the probabilities of each estimate cannot be reasonably evaluated, these stocks cannot be measured in fair value. Thus they are carried at cost.

B. No financial assets carried at cost were pledged as collateral.

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(5)Notes receivable

Notes receivable – from operations Less: allowance for doubtful accounts Net	As of December 31,	As of December 31,
	2016 (NT$’000) 3,030 - 3,030	2015 (NT$’000)
		1,835 -
		1,835

No notes receivable was pledged by the Group as collateral.

(6)Accounts receivable and accounts receivable - related parties, net

A. Accounts receivable, net

Accounts receivable, gross Less: allowance for doubtful accounts Less: allowance for return & discount Net of allowances Accounts receivable - related parties, gross Less: allowance for doubtful accounts Net of allowances Total accounts receivable, net	As of December 31,	As of December 31,
	2016 (NT$’000) 3,282,698 (53,303) (31,566) 3,197,829 399,736 - 399,736 3,597,565	2015 (NT$’000)
		3,642,703 (47,799) (4,711)
		3,590,193
		248,909 -
		248,909
		3,839,102

B. The Group evaluated sales return and discount based on experiences and other known factors and recorded it as a reduction against sales at the time of recognizing revenue.

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• C. The Group entered into factoring agreements with banks. Accounts receivables from selected customers are transferred to banks without recourse. Details of the agreed credit limits and accounts receivables transferred were as follows:

12/31/2016 12/31/2015	Financial Institution Mega International Commercial Bank - LanYa Branch Mega International Commercial Bank - LanYa Branch	Accounts receivable de-recognized (NT$’000)	Advance received (NT$’000)	Collateral	Credit Limit
		249,402 251,600	49,298 -	None None	Note Note

Note: The credit limits were US$30,000 thousand as of December 31, 2016 and 2015.

• D.The collection term of accounts receivables are generally on 60 to 120 day after monthly closing. The movement schedule of the impairment provision for accounts receivable, including related parties, was presented as below. (Please also refer to Note 12 for credit risk disclosure)

As of January 1, 2016 Provision (reversal) Effect of exchange rate changes As of December 31, 2016 As of January 1, 2015 Provision (reversal) Effect of exchange rate changes As of December 31, 2015	Impaired Individually (NT$’000) - - - - - - - -	Impaired Collectively (NT$’000) 47,799 6,531 (1,027) 53,303 67,946 (19,603) (544) 47,799	Total (NT$’000)
			47,799 6,531 (1,027)
			53,303
			67,946 (19,603) (544)
			47,799

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Aging analysis for the net accounts receivable, including related parties, were as follows.

12/31/2016 12/31/2015	Neither past due nor impaired (NT$’000)	Accounts receivable	Accounts receivable	–past due, but not impaired	–past due, but not impaired	Total (NT$’000)
		Less than 61 days (NT$’000)	61 to 90 days (NT$’000)	91 to 120 days (NT$’000)	Longer than 120 days (NT$’000)
	3,391,325 3,639,724	206,240 199,378	- -	- -	- -	3,597,565 3,839,102

(7)Inventory

• A. Details of inventory:

Raw material Supplies Work in process Finished goods Merchandises Total	As of December 31,	As of December 31,
	2016 (NT$’000) 682,338 41,619 769,623 711,312 53,352 2,258,244	2015 (NT$’000)
		638,897 41,027 815,704 759,271 30,537
		2,285,436

B. For the year ended December 31, 2016 and 2015, the Group recognized NT$17,414,521 thousand and NT$17,099,709 thousand under the caption of costs of sale, respectively. The following items were also included in cost.

Item	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
Loss from (Gains on recovery of) inventory market decline Loss (gain) from physical Loss in inventory write-off obselencense Total	21,905 39,428 1,785,503	(104,357) (2,118) 1,319,081
	1,846,836	1,212,606

The Group recognized gains on recovery of inventory market decline because some of the inventories previously provided with market loss or obsolescence were disposed.

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

• C. The inventories were not pledged.

• (8)Investments accounted for using the equity method

	As of December 31	As of December 31	As of December 31
	2016	2015
Investee	Carrying amount (NT$’000) Percentage of ownership (%)	Carrying amount (NT$’000) -	Percentage of ownership (%)
FuYang Technology Corp.	432,689 36.00%		-%

• A. The Group invested cash in FuYang Technology Corp. during May 2016 for interest ownership of 36%. The investment is accounted for as an investment in associates due to the Group’s ability to exercise its significant influence.

• B. Investments in associates

The aggregate carrying amount of the Group’s interests in FuYang Technology Corp. is NT$432,689 thousand. The aggregate financial information based on Group’s share of FuYang Technology Corp. is as follows:

Profit or loss from continuing operations Other comprehensive income (post-tax) Total comprehensive income	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	(12,783) (4,528)	- -
	(17,311)	-

There were no contingent liabilities or capital commitments with respect to the investment in the associate as of December 31, 2016. Nor any of the Group’s share interest on FuYang was pledged as collateral.

The Group’s investment accounted for under equity method as of December 31, 2016 amounted to NT$432,689 thousand while the related investment income/loss and other comprehensive income were NT$(17,311) for the year then ended. They were measured based on the audited financial statements of the investee for the same correspondent period.

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• C. No investment accounted for under equity method was pledged as collateral as of December 31, 2016.

• (9) Property, plant and equipment

Land (NT$’000) Cost: As of 1/1/2016 1,557,800 Addition - Disposals - Effect of EX rate - Reclassification 4,642 As of 12/31/2016 1,562,442 As of 1/1/2015 1,366,426 Addition - Disposals - Effect of EX rate - Reclassification 191,374 As of 12/31/2015 1,557,800 Depreciation and impairment: As of 1/1/2016 - Depreciation - Impairment loss - Disposal - Effect of EX rate - Reclassification - As of 12/31/2016 - As of 1/1/2015 - Depreciation - Impairment loss - Disposal - Effect of EX rate - Reclassification - As of 12/31/2015 -	Land (NT$’000)	Land (NT$’000)		Buildings (NT$’000)		Machinery (NT$’000)		Office Equipment (NT$’000)	Transportat ion (NT$’000)	Other Equipment (NT$’000)	Construction in progress and equipment awaiting inspection (including prepaid equipment) (NT$’000)	Construction in progress and equipment awaiting inspection (including prepaid equipment) (NT$’000)	Total (NT$’000)
	1,557,800 - - - 4,642			5,556,743 3,938 (10,510) (241,745) 1,030,743		16,781,076 10,253 (1,846,796) (521,279) 3,150,827		131,576 9,376 (10,971) (4,625) 18,835	15,809 1,805 (1,355) (672) -	3,992,908 198,196 (417,520) (108,420) 640,416	5,238,467 3,997,933 (2,575) (10,111) (4,846,840)		33,274,379 4,221,501 (2,289,727) (886,852) (1,377)
	1,562,442			6,339,169		17,574,081		144,191	15,587	4,305,580	4,376,874		34,317,924
	1,366,426 - - - 191,374			5,614,222 10,654 (71,944) (70,843) 74,654		17,202,285 58,908 (2,442,452) (154,054) 2,116,389		118,946 11,408 (17,968) (1,428) 20,618	14,700 1,355 - (246) -	3,958,417 86,105 (342,406) (33,606) 324,398	3,107,645 4,861,010 - (2,755) (2,727,433)		31,382,641 5,029,440 (2,874,770) (262,932) -
	1,557,800			5,556,743		16,781,076		131,576	15,809	3,992,908	5,238,467		33,274,379
				1,743,546 284,820 - (10,510) (74,154) -		10,148,920 2,520,866 17,100 (1,556,702) (372,329) 374		80,839 29,751 - (9,724) (3,866) (185)	11,552 2,586 - (418) (794) -	2,531,103 625,994 4,026 (408,217) (76,664) (1,374)	- - - - - -		14,515,960 3,464,017 21,126 (1,985,571) (527,807) (1,185)
As of 1/1/2016 Depreciation Impairment loss Disposal Effect of EX rate Reclassification As of 12/31/2016 As of 1/1/2015 Depreciation Impairment loss Disposal Effect of EX rate Reclassification As of 12/31/2015
		-		1,943,702		10,758,229		96,815	12,926	2,674,868	-		15,486,540
		- - - - - -		1,521,919 266,238 - (26,551) (18,060) -		10,235,466 2,390,247 13,425 (2,402,650) (96,305) 8,737		73,772 24,444 391 (16,642) (1,126) -	8,679 3,055 - - (182) -	2,364,370 512,919 395 (318,440) (19,404) (8,737)	- - - - - -		14,204,206 3,196,903 14,211 (2,764,283) (135,077) -
		-		1,743,546		10,148,920		80,839	11,552	2,531,103	-		14,515,960

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Net carrying amou	nt: 1,562,442	4,395,467	6,815,852	47,376	2,661	1,630,712	4,376,874	18,831,384

• A. “ Significant components ” of buildings primarily comprised the main buildings and the facilities, which are depreciated based on their respective useful economic life of 20 to 25 years and 3 to 20 years.

B. Details of property, plant & equipment and prepayment for machinery is as follows:

Property, plant and equipment Prepayment for equipment Total	As of December 31,	As of December 31,
	2016 (NT$’000) 16,578,663 2,252,721 18,831,384	2015 (NT$’000)
		16,150,904 2,607,515
		18,758,419

C. Please refer to Note 8 for details on property, plant and equipment pledged as collaterals.

• D. The Company purchased 40 parcels of land with a total area of 36,287.15 square meters. Lands are located at the addresses of No. 1113, 1114, 1438 to 1443,1479,1486 to 1487 at ShiLeiZi Sub-section, ShiLeiZi Section, No. 1044, 1047 to 1049 at QingHua Section, and No. 0001, 697 to 700 and 712 to 726 at RongHua Section, XinFeng Village. Due to regulatory restrictions, land cannot be registered under the Company’s name while it has been temporarily registered under the general manager’s name and, to secure the Company’s right to the land, mortgage registration has been set aside with the Company being the obligee.

(10)Intangible assets

Cost: As of January 1, 2016 Additions – acquired separately Derecognized upon retirement Reclassification Effect of exchange rate changes As of December 31, 2016	Computer software (NT$’000)
	55,622 20,457 (33,411) 1,377 (1,790)
	42,255

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

As of January 1, 2015 Additions – acquired separately Derecognized upon retirement Effect of exchange rate changes As of December 31, 2015 Amortization and Impairment: As of January 1, 2016 Amortization Derecognized upon retirement Reclassification Effect of exchange rate changes As of December 31, 2016 As of January 1, 2015 Amortization Derecognized upon retirement Effect of exchange rate changes As of December 31, 2015 Carrying amount, net: As of December 31, 2016 As of December 31, 2015	40,101 44,806 (29,007) (278)
	55,622
	25,342 31,215 (33,411) 1,185 (896)
	23,435
	20,119 34,432 (29,007) (202)
	25,342
	18,820
	30,280

Amounts of amortization recognized for intangible assets are as follows:

Operating expense Sales and marketing General and administrative Research and development Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	205 869 29,445 696	- 1,107 31,257 2,068
	31,215	34,432

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(11)Other non-current assets

Refundable deposits Long-term prepaid rent Total	As of December 31,	As of December 31,
	2016 (NT$’000) 49,919 245,466 295,385	2015 (NT$’000)
		45,106 273,679
		318,785

As of December 31, 2016 and 2015, among the long-term prepaid rent, the balances of right to use land amounted to NT$245,466 thousand and NT$273,679 thousand, respectively.

(12)Short-term loans

	As of December 31,	As of December 31,
Interest interval (%)	2016 (NT$’000)	2015 (NT$’000)
Unsecured bank loans 0.88~1.85	2,228,478	3,095,030

As of December 31, 2016 and 2015, the line of unused short-term loan credit for the Group amounted to NT$6,192,525 thousand and NT$3,156,970 thousand, respectively.

(13)Other payable

Accrued expense Equipment payable Accrued interest Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	2,293,765 725,692 2,344	2,662,966 1,265,758 4,038
	3,021,801	3,932,762

(14)Provisions

As of January 1, 2016 Additions Used	Sales Returns and Allowances (NT$’000)
	294 - -

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Reversal (294) Adjustment to present value due to discount rate change and passage of time - As of December 31, 2016 - As of December 31, 2016 (NT$’000) 2015 (NT$’000) Current - 294 Non-current - - Total - 294	Reversal (294) Adjustment to present value due to discount rate change and passage of time - As of December 31, 2016 - As of December 31, 2016 (NT$’000) 2015 (NT$’000) Current - 294 Non-current - - Total - 294	(294) -	(294) -
		-
	2016 (NT$’000)		2015 (NT$’000) 294 - 294
	- -
	-

Sales returns and allowances

The Group incurred sales returns and allowances based on past experiences and other known factors as reductions against sales revenue upon sale, recording it under the caption of provisions.

(15)Other current liabilities

A.

Other current liabilities Unearned sales revenue Deferred revenue - Customer Loyalty Programmes Current portion of long-term loans Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	69,362 81,049 1,623 536,257	73,152 21,607 1,302 572,640
	688,291	668,701

B. Customer loyalty programs

Balance, beginning Deferred during the period Recognized in profit or loss Balance, ending	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	1,302 11,561 (11,240)	781 637 (116)
	1,623	1,302

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Current Non-current Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	1,623 -	1,302 -
	1,623	1,302

(16)Long-term loans

Details of long-term loans were as follows:

Loan Balance

			Loan Balance
Debtor	Type of Loan Secured bank loan Credit loan Secured bank loan Credit loan Credit loan	Maturity	As of Dec. 31, 2016 (NT$’000)	Repayment
Mega International Commercial Bank - LanYa Branch Mega International Commercial Bank - LanYa Branch The Shanghai Commercial & Savings Bank - ZhongLi Branch The Shanghai Commercial & Savings Bank - ZhongLi Branch Taipei Fubon Commercial Bank – BeiTou Branch Total Less: current portion Non-current portion		2020.05.07 2018.08.12- 2021.09.05 2017.04.15- 2019.01.15 2017.01.15- 2017.04.15 2017.12.14	96,000 1,676,397 75,000 3,750 193,500	Note 9 Note 8 Note 6 and 8 Note 8 Note 10
			2,044,647 (536,257)
			1,508,390

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Debtor	Type of Loan	Maturity	Loan Balance	Repayment
			As of Dec. 31, 2015 (NT$’000)
Mega International Commercial Bank - LanYa Branch Mega International Commercial Bank - LanYa Branch The Shanghai Commercial & Savings Bank - ZhongLi Branch The Shanghai Commercial & Savings Bank - ZhongLi Branch Land Bank of Taiwan - ZhongLi Branch Taipei Fubon Commercial Bank – BeiTou Branch Total Less: current portion Non-current portion	Secured bank loan Credit loan Secured bank loan Credit loan Credit loan Credit loan	2016.05.07- 2016.12.15 2016.01.17- 2020.12.04 2016.07.15- 2019.01.15 2016.01.24- 2017.04.15 2016.04.27 2017.12.14	123,081 1,162,006 181,953 15,000 62,999 393,900	Note 1, 2 and 9 Note 2, 3 and 4 Note 6, 7 and 8 Note 6 and 8 Note 2 and 5 Note 10
			1,938,939 (572,640)
			1,366,299

• Note 1: A term is defined as every 3 months starting from the initial draw-down date. Grace period is 2 years (8 terms). The rest is repayable in installments of equal amount for 20 terms.

• Note 2: Interest shall be paid for the first 12 months from the initial draw-down date. Starting from the 13th month, interest shall be paid monthly with principal repaid every 3 months.

• Note 3: A term is defined as every 3 months starting from the initial draw-down date. The loan is repayable in installments of equal amount for 20 terms.

• Note 4: A term is defined as every 3 months starting from the initial draw-down date. The loan is repayable in installments of equal amount for 16 terms.

• Note 5: A term is defined as every 1 months starting from the initial draw-down date. The principal and interest are repayable in installments of equal amount.

• Note 6: A term is defined as every 3 months starting from the initial draw-down date. Grace period is 2 years (8 terms). The rest is repayable in installments of equal amount for 12 terms.

• Note 7: Starting from the 25[th] month, a term is defined as every 3 months. The loan is repayable in installments of equal amount for 11 terms.

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• Note 8: A term is defined as every 3 months starting from the initial draw-down date. Grace period is 1 years (4 terms). The rest is repayable in installments of equal amount for 16 terms.

• Note 9: The first year is the grace period while the loan principal is repaid in 16 installments 4% for each of the first 15 installments and 40% for the very last installment.

• Note 10: One year after the initial draw-down date is considered term one and the following terms are defined as every 6 months since then. The principal and interest are repayable in installments of equal amount for 5 terms.

• A. A portion of property, plant and equipment were pledged to Mega International Commercial Bank and Shanghai Commercial & Savings Bank (the first-priority mortgagors) as collaterals for secured bank loans. Please refer to Note 8 for more details.

• B. As of December 31, 2016 and 2015, the interest rate intervals for long-term loans were 1.076%~2.590% and 1.02%~2.01%, respectively.

(17)Other non-current liabilities

Accrued pension costs Deposits received Total	As of December 31,	As of December 31,
	2016 (NT$’000) 31,009 59,119 90,128	2015 (NT$’000)
		34,148 51,846
		85,994

(18)Post-employment benefits

Defined contribution plan

The Company and its domestic subsidiaries adopt a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company and its domestic subsidiaries will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Company and its domestic subsidiaries have made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts.

Subsidiaries located in the People’s Republic of China will contribute social welfare benefits based on a certain percentage of employees’ salaries or wages to the employees’ individual pension accounts.

Pension benefits for employees of overseas subsidiaries and branches are provided in accordance with the local regulations.

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Expenses under the defined contribution plan for the years ended December 31, 2016 and 2015 were NT$113,660 thousand and NT$112,096 thousand, respectively.

Defined benefits plan

The Company and its domestic subsidiaries adopt a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company and its domestic subsidiaries and its domestic subsidiaries contribute an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee.

The fund is operated in a potofolio basis by Governance Committee on Labor Retirement Fund in accordance with the Rule for Custody and Operating the Labor Retirement Fund. The investment of the Fund may be executed either by the Committee itself or by outsourced other profession institutions with its investment stategy, including both active and passive management, targeting in a medium or longer term. In considering the risks of market, credit and liquidity, the Committee establishes the ceiling of fund investment and control plan, in one hand, to reduce investment risk to an affordable extent and, in the other hand, to achieve the targeted return flexibly. As of December 31, 2016, the Company plans to contribute NT$4,969 thousand to the funds under its defined benefit scheme during the following fiscal year.

As of December 31, 2016 and 2015, the maturities of the Company’s defined benefit plan were expected in 2036 and 2037 and the detail information is listed as below.

Less than one year More than one year but less than five years More than five years Total	As of December 31,	As of December 31,
	2016 (NT$’000) 13,014 17,313 113,555 143,882	2015 (NT$’000)
		14,162 3,038 22,213
		39,413

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Pension costs recognized in profit or loss were as follows:

Current period service costs Net interest of defined benefit liability (asset) Previous period service costs Settlement Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	189 683 - -	152 668 - -
	872	820

Reconciliation of liability (asset) of the defined benefit plan is as follows:

Defined benefit obligation Plan assets at fair value Other non-current liabilities – net defined benefit liability		As of
	Dec. 31, 2016 (NT$’000) 130,404 (99,395) 31,009	Dec. 31, 2015 (NT$’000) 127,707 (93,559) 34,148		Jan. 1, 2015 (NT$’000)
				116,697 (87,029)
				29,668

Reconciliation of liability (asset) of the defined benefit liability is as follows:

1/1/2015 Current service cost Interest expense(revenue) Past service cost and settlement Total Re-measurment on defined benefit liability/assets: Actuarial gain/loss due to change in population statistic assumptions Actuarial gian/loss due to change in financial assumptions Experience adjustments	Present value of defined benefit obligation (NT$’000)	Fair value of plan assets (NT$’000)	Net defined benefit liability (asset) (NT$’000)
	116,697 152 2,626 -	(87,029) - (1,958) -	29,668 152 668 -
	2,778 2,453 6,154 474	(1,958) - - (360)	820 2,453 6,154 114

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Re-measurement on defined benefit assets Total Benefits paid Contributions by employer Effect of exchange rate 12/31/2015 Current service cost Interest expense(revenue) Past service cost and settlement Total Re-measurment on defined benefit liability/assets: Actuarial gain/loss due to change in population statistic assumptions Actuarial gian/loss due to change in financial assumptions Experience adjustments Re-measurement on defined benefit assets Total Benefits paid Contributions by employer Effect of exchange rate 12/31/2016	-	-	-
	9,081	(360)	8,721
	(849) - -	849 (5,061) -	- (5,061) -
	127,707 189 2,554 -	(93,559) - (1,871) -	34,148 189 683 -
	2,743 (726) 5,073 (4,393) -	(1,871) - - 1,005 -	872 (726) 5,073 (3,388) -
	(46)	1,005	959
	- - -	- (4,970) -	- (4,970) -
	130,404	(99,395)	31,009

The major categories as a percentage of the fair value of total plan assets are as follows:

Cash	Pensionplan(%)as of December 31,	Pensionplan(%)as of December 31,
	2016 100.00%	2015
		100.00%

The actuarial assumptions used for the Group’s defined benefit plan are shown below:

Discount rate Expected rate of salary increases	As of December 31,	As of December 31,
	2016 1.80% 3.00%	2015
		2.00% 3.00%

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Sensitivity analysis :

Discount rate increaseby0.5% Discount rate decrease by0.5% Expected salary level increased by 0.5% Expected salary level decreased by 0.5%	For theyear ended December 31,	For theyear ended December 31,	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)		2015 (NT$’000)
	Increase in defined benefit obligation	Decrease in defined benefit obligation	Increase in defined benefit obligation	Decrease in defined benefit obligation
	- 13,692 13,454 -	(12,157) - - (12,080)	- 13,746 13,534 -	(12,150) - - (12,095)

For the purpose of sensitivity analysis above, the Company calculated the impact on defined benefit obligation due to a reasonable and feasible change of one singal assumption (i.e. discount rate or expected salary level) with other assumptions remaining equal. Please note that the sensitivity analysis has its limitation due to the co-relation between different actuarial assumptions and the rarity that only one assumption changes at a time. The method used in the analysis is consistent for both current and prior years.

(19)Equity

A. Common shares

As of December 31, 2016 and 2015, the Company’s authorized capital and paid-in capital were NT$5,500,000 thousand and NT$4,460,000 thousand, respectively, each share at par value of NT$10, divided into 446,000 thousand shares. Each share represents a voting right and a right to receive dividends.

Treasury stocks brought back by the Company for the purpose of transfer to employee during the period from August 18, 2015 to September 25, 2015 totaled to 550 thousand shares. Please refer to Note 6(19)-C to the financial statements for more details.

B. Capital surplus

Additional paid-in capital Differences betweenequity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries	As of December 31,	As of December 31,
	2016 (NT$’000) 5,850,000 50,925	2015 (NT$’000)
		5,850,000 50,925

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

All changes in interests in subsidiaries Total	38,894 5,939,819	38,894
		5,939,819

According to the Taiwan Company Act, the capital surplus shall not be used except for making good the deficit of the Company. When a company incurs no loss, it may distribute the capital surplus related to the income derived from the issuance of new shares at a premium or income from endowments received by the company up to a certain percentage of paid-in capital. The said capital surplus could be distributed in cash to its shareholders in proportion to the number of shares being held by each of them. Capital surplus related to long-term equity investments cannot be used for any purpose.

C. Treasury stock

For the years ended December 31, 2016 and 2015,treasury stock was held by the Group while treasury stock amounted to NT$32,885 thousand, divided into 550 thousand shares.

For the year ended December 31, 2016, there was no change in share of treasury stock. The movement schedule of treasury stock for the year ended December 31, 2015 was as below (in thousand shares).

Purpose of repurchase To be transfered to employees	Beginning balance -	Addition	Decrease -	Ending balance 550
		550

According to the Securities and Exchange Law of the R.O.C., the total shares of treasury stock shall not exceed 10% of the Company’s issued stock, and the total purchase amount shall not exceed the sum of the retained earnings, additional paid-in capital-premiums and realized additional paid-in capital. As such, the ceiling number of shares of treasury stock that the Company could hold as of December 31, 2016 were 44,600 thousand shares, with the maximum payments of NT$24,353,389 thousand.

In compliance with Securities and Exchange Law of the R.O.C., treasury stock should not be pledged, nor should it be entitled to voting rights or receiving dividends.

D. Appropriation of earnings and dividend policies

(a)Earning distribution

The Company’s earnings in current year, if any, shall firstly be made to pay all taxes and dues and then to offset prior year’s operation losses. 10% of the remaining amount

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English Translation of Consolidated Financial Statements and Footnotes Originally Issued in Chinese Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

shall be set aside as legal reserve and special reserve shall be provided pursuant to Article 41 of the Securities and Exchange Act. Any remaining earnings after the said deductions shall be appropriated as follows:

• a. 1% as remuneration to directors

• b. Bonues to employees cannot be less than 1% of the total bonus to employees and shareholders. Bonus to employees can be distributed in cash or stocks. The parties receiving the stock dividends shall include employees in affiliated companies who met certain conditions stipulated by the Board of Directors.

• c. The Board of Directors would propose an earning distribution plan based on the remaining balance combined with the undistributed earnings accumulated during previous years to be resolved at the shareholders’ meeting.

However, according to the addition of Article 235-1 of the Company Act announced on May 20, 2015, the Company shall provide a fixed amount or percentage of the actual profit for a year to be distributed as “employees’ compensation”. The Company’s shareholders’ meeting held on May 27, 2016 passed the resolution of amending the Articles of Incorporation, according to the revised Articles of Incorporations, current year’s earnings, if any, shall be distributed in the following order:

• a. Payment of all taxes and dues;

• b. Offset prior years’ operation losses;

• c. Set aside 10% of the remaining amount after deducting items (a) and (b) as legal reserve;

• d. Set aside or reverse special reserve in accordance with law and regulations; and

• e. The distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders’ meeting.

(b)Dividend policies

The Company is in an industry with versatile environment. For long-term finance planning requirements and to meet the shareholders’ demand for cash, dividend policy aims for a steady balance. Cash dividends distributed each year cannot be less than 10% of the total dividends paid.

(c)Legal reserve

According to the Company Act, legal reserve shall be set aside until such amount equal total authorized capital. Legal reserve can be used to offset deficits. If the Company does not incur any loss, the portion of legal reserve exceeding 25% of the paid-in

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capital may be distributed to shareholders by issuing new shares or by cash in proportion to the number of shares held by each shareholder.

(d)Special reserve

Following the adoption of Taiwan IFRS, the Company complies with Order No. JinGuan-Zheng-Fa 1010012865 issued by FSC on April 6, 2012. On the Company’s firsttime adoption of the Taiwan IFRS, for any unrealized revaluation gains and cumulative translation adjustments recorded under shareholders’ equity that the Company elects to transfer to retained earnings by application of the exemption under IFRS 1, an equal amount of special capital reserve shall be set aside. After the adoption of Taiwan IFRS for the preparation of financial statements, the Company shall set aside supplemental special reserve based on the difference between the amount already set aside according to the requirements in the preceding point and other net deductions from shareholders’ equity when appropriating distributable earnings. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reserved may be distributed as earnings.

The Company did not incur any special reserve upon the first-time adoption of Taiwan IFRS.

• (e)The appropriations of earnings for the Year 2016 and 2015 were approved through the Board of Directors’ meetings and shareholders’ meetings held on February 8, 2017 and May 27, 2016, respectively. The details of the distributions are as follows:

Legal reserve Cash dividends - common stock Total	Appropriation of earnings	Appropriation of earnings	Dividend per share (in NT$)	Dividend per share (in NT$)
	2016 (NT$’000) 223,370 1,336,350 1,559,720	2015 (NT$’000)	2016 3.00	2015
		290,395 1,559,075		3.50
		1,849,470

For 2015 employee and directors’ compensation under the new Article to be amended, please refer to Note 6(22) for details.

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E. Non-controlling interests

Beginning balance Net loss attributable to NCIs Other comprehensive income attributable to NCIs: Exchange differences arising on translation of foreign operations Ending balance	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000) 2,654,765 (174,426) (43,674) 2,436,665
	24,367,665 (160,677) (130,929)
	2,145,059

(20)Sale

Sale of goods Less: sales returns and allowances Services rendered Other operating revenue Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	23,182,483 (485,401) 157,707 310,277	23,155,396 (491,745) 190,589 207,071
	23,165,066	23,061,311

• (21)Operating lease

A. Group as a lessee

The commercial leasing agreements that the Group entered into for buildings and plants have an average term of one to five years. There are no restrictive covenants for the Group in the contracts.

Total future minimum lease payments due to irrevocable leasing contracts were as follows:

Less than one year More than one year but less than five years Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	89,893 304,162	84,745 394,056
	394,055	478,801

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Expenses under operating lease were as follows:

Minimum lease payment	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	148,762	149,112

B. Group as a lessor

The leasing agreements that the Group entered into for plants have an average term of one year.

Total future minimum lease payments due to irrevocable leasing contracts were as follows:

Less than one year	As of December 31 2016 (NT$’000) 2015 (NT$’000) - -	As of December 31 2016 (NT$’000) 2015 (NT$’000) - -
		2015 (NT$’000) -

For the years ended December 31, 2016 and 2015, rent incomes of the Group amounted to NT$26,903 thousand and NT$22,716 thousand, respectively.

(22)Summary statement of employee benefits, depreciation and amortization by function is as follows:

Function Nature	2016 (NT$’000)	2016 (NT$’000)	2016 (NT$’000)	2015 (NT$’000)	2015 (NT$’000)	2015 (NT$’000)
	Cost of goods sold	Operating expense	Total	Cost of goods sold	Operating expense	Total
Employee benefit
Salaries & wages	2,972,538	923,223	3,895,761	3,182,359	921,541	4,103,900
Labor and health insurance	185,291	71,144	256,435	189,146	67,082	256,228
Pension	77,990	36,542	114,532	79,690	33,226	112,916
Other employee benefit	218,370	100,111	318,481	214,987	93,195	308,182
Depreciation	3,093,276	370,741	3,464,017	2,952,612	244,291	3,196,903
Amortization	205	31,010	31,215	-	34,432	34,432

A resolution was passed at the shareholders’ meeting of the Company held on May 27, 2016 to amend the Articles of Incorporation of the Company. According to the resolution, not lower than 10% of profit of the current year is distributable as employees’ compensation and no

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higher than 1% of profit of the current year is distributable as remuneration to directors and supervisors. However, the company's accumulated losses shall have been covered. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the form of shares or in cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors and supervisors can be obtained from the “Market Observation Post System” on the website of the TWSE.

Based on profit of the year ended December 31,2016, the Company estimated the amounts of the employees’ compensation and remuneration to directors and supervisors for the year ended December 31, 2016 to be not lower than 10% and not higher than 1% of profit of the current nine-month period, respectively, recognized as employee benefits expense. As such, employees’ compensation and remuneration to directors and supervisors for the year ended December 31, 2016 amount to NT$343,533 thousand and NT$20,911 thousand, respectively. Employees’ compensation and remuneration to directors and supervisors for the year ended December 31, 2015 amount to NT$442,444 thousand and NT$26,026 thousand. The aforementioned employees’ compensation and remuneration to directors and supervisors for the year ended December 31, 2016 were estimated based on post-tax net income of the period and recognized as salary expenses. The number of stocks distributed as employees’ compensation, if any, shall be calculated based on the closing price one day earlier than the date of shareholders’ meeting and considered the impacts of ex-right/ex-dividend.

The Company’s Board has determined the employees’ compensation and directors’ renumeration, all in cash, to be NT$343,533 thousand and NT$20,911 thousand, respectively, in a meeting held on February 8, 2017.

No material differences exist between the estimated amount and the actual distribution of the employee bonuses and remuneration to directors and supervisors for the year ended December 31, 2016.

The Company’s Board has determined the employees’ compensation and directors’ renumeration, all in cash, to be NT$442,444 thousand and NT$26,026 thousand, respectively, in a meeting held on February 1, 2016.

No material differences exist between the estimated amount and the actual distribution of the employee bonuses and remuneration to directors and supervisors for the year ended December 31, 2015.

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(23)Non-operating incomes and expenses

• A. Other incomes

Interest income Other income－others Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000) 72,471 123,201 195,672	2015 (NT$’000)
		86,116 223,360
		309,476

B. Other gains and losses

Loss from disposal of property, plant and equipment Foreign exchange loss, net Financial assets at fair value through profit Impairment loss on non-financial assets Other expenses Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	(43,555) (48,989) 10,653 (21,126) (28,880)	(108,807) (14,925) 55,431 (14,211) (28,472)
	(131,897)	(110,984)

C. Finance costs

Interests on bank loans	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	71,306	56,968

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(24)Components of other comprehensive income (OCI)

For the year ended December 31, 2016

Not reclassified to profit or loss: Actuarial gains or losses on defined benefits plan To be reclassified to profit or loss in subsequent period: Exchange differences arising on translation of foreign operations Unrealized valuation gain (loss) on available-for-sale financial assets Total OCI or the year ended December Not reclassified to profit or loss: Actuarial gains or losses on defined benefits plan To be reclassified to profit or loss in subsequent period: Exchange differences arising on translation of foreign operations Unrealized valuation gain (loss) on available-for-sale financial assets Total OCI	Arising during the period (NT$’000)	Reclassification during the period (NT$’000) - - - - Reclassification during the period (NT$’000) - - (30,845) (30,845)	Subtotal (NT$’000)	Income tax benefit (expense) (NT$’000) - 39,834 - 39,834 Income tax benefit (expense) (NT$’000) - 12,397 - 12,397	OCI, Net of tax (NT$’000)
	(959) (361,332) (4,528)		(959) (361,332) (4,528)		(959) (321,498) (4,528)
	(366,819)		(366,819)		(326,985)
	31, 2015 Arising during the period (NT$’000)		Subtotal (NT$’000)		OCI, Net of tax (NT$’000)
	(8,721) (116,596) 6,151		(8,721) (116,596) (24,694)		(8,721) (104,199) (24,694)
	(119,166)		(150,011)		(137,614)

For the year ended December 31, 2015

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(25)Income tax

• A. The major components of income tax expense (income) are as follows:

Income tax expense (benefit) recognized in profit or loss

Current income tax expense (benefit): Current income tax expense Reversal of uncertain tax position upon finalization Deferred tax expense (benefit): Deferred tax expense (benefit) relating to origination and reversal of temporary differences Total income tax expense Income tax recognized in other comprehensive Deferred tax expense (benefit): Exchange differences arising on translation of foreign operations	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	618,253 (122,096) 273	687,692 (210,169) (1,801)
	496,430	475,722
	2016 (NT$’000)	2015 (NT$’000)
	(39,834)	(12,397)

B. Income tax recognized in other comprehensive income

A reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rates is as follows:

Accounting profit (loss) before tax from continuing operations Tax payable at the enacted tax rates 10% surtax on Undistributed earnings Tax effect of income tax-exempted	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	2,569,458	3,205,248
	508,837 120,013 (43,296)	501,265 157,191 (112,954)

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Tax effect of expenses not deductible for tax purposes Tax effect of deferred tax assets/liabilities Reversal of uncertain tax position upon finalization Total income tax expense (income) recognized in profit or loss	37 32,935 (122,096)	506 139,883 (210,169)
	496,430	475,722

C. Deferred tax assets (liabilities) relate to the following:

For the year ended December 31, 2016

Temporary differences Prepaid appreciation tax on agricultural land Unrealized loss on inventory valuation Unrealized exchange loss (gain) Other Cumulative translation adjustment Deferred tax income/ (expense) Net deferred tax assets/(liabilities) Reflected in balance sheet as follows: Deferred tax assets Deferred tax liabilities	Beginning balance as of Jan. 1, 2016 (NT$’000)	Deferred tax income (expense) recognized in P/L (NT$’000)	Deferred tax income (expense) recognized in OCI (NT$’000)	Deferred tax income (expense) recognized in equity (NT$’000)	Increase from business acquisition (NT$’000)	Exchange adjustment (NT$’000)	Ending balance as of Dec. 31, 2016 (NT$’000)
	9,593 287 (356) - (39,834)	- (6) (275) 8 -	- - - - 39,834	- - - - -	- - - - -	- - - - -	9,593 281 (631) 8 -
	(30,310)	(273)	39,834	-	-	-	9,251
	9,880						9,882
	(40,190)						(631)

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For the year ended December 31, 2015

Beginning balance as of Jan. 1, 2015 (NT$’000) Temporary differences Prepaid appreciation tax on agricultural land `- Unrealized loss on inventory valuation 276 Unrealized exchange loss (gain) (2,146) Cumulative translation adjustment (52,231) Deferred tax income/ (expense) Net deferred tax assets/(liabilities) (54,101) Reflected in balance sheet as follows: Deferred tax assets 276 Deferred tax liabilities (54,377)	Beginning balance as of Jan. 1, 2015 (NT$’000)	Deferred tax income (expense) recognized in P/L (NT$’000)	Deferred tax income (expense) recognized in OCI (NT$’000)	Deferred tax income (expense) recognized in equity (NT$’000)	Increase from business acquisition (NT$’000)	Exchange adjustment (NT$’000)	Ending balance as of Dec. 31, 2015 (NT$’000)
		9,593 11 1,790 -	- - - 12,397	- - - -	- - - -	- - - -	9,593 287 (356) (39,834)
	(54,101)	11,394	12,397	-	-	-	(30,310)
	276						9,880
	(54,377)						(40,190)

• D. Unrecognized deferred tax assets

As of December 31, 2016 and 2015, deferred tax assets that have not been recognized as they may not be used to offset future taxable income amounted to NT$1,056,371 thousand and NT$1,078,696 thousand, respectively.

• E. The investments and capital additions of the Company and its subsidiary, Pegavision, are qualified as the investment on manufacture or technology service industry during the period from July 1, 2008 to December 31, 2009 and, therefore, entitled to a 5-year tax holidays/exemption enjoyed by the Group are listed as below.

Item 1 2	Approval authority Ministry of Economic Affairs Ministry of Economic Affairs	Approval document No. 10005112010 issued at Aug. 25, 2011 No. 10005116950 issued at Dec. 27, 2011	Exemptionperiod Jan. 1, 2013~ Dec. 31, 2017 Jan. 1, 2014~ Dec. 31, 2018

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• F. Unused balance of deductible net operating loss within the Group was listed as following.

Occurrence year	Accumulated net operating loss (NT$’000)	Unused balance As of December 31, 2016 (NT$’000) 2015 (NT$’000) 98,291 98,751	Expiration Year
		2016 (NT$’000)
2012	135,158	98,291	2022

• G. Imputation credit information

Balances of imputation credit	As of December 31,	As of December 31,
	2016 (NT$’000) 2,140,790	2015 (NT$’000)
		1,942,384

The Company’s expected/actual creditable ratio for 2016 and 2015 were 16.09% and 14.50%. However, effective January 1, 2015, the creditable ratio for the individual shareholders residing in the Republic of China will be half of the original creditable ratio according to the revised Article 66-6 of the Income Tax Law.

As of December 31, 2016, the Company did not have unappropriated earnings resulted in the years of 1997 and before.

H. The assessment of income tax return

As of December 31, 2016, the assessment status of income tax returns of the Company and subsidiaries were as follows:

The Company Subsidiary - Pegavision Corporation Subsidiary - Kinsus Investment Co., Ltd.	The assessment of income tax returns Assessed and approved up to 2013 Assessed and approved up to 2014 Assessed and approved up to 2014

(26)Earnings per share

Basic earnings per share is calculated by dividing net profit for the year attributable to the common shareholders of the parent entity by the weighted average number of common shares outstanding during the year.

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Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

A. Basic earnings per share

Net income available to common shareholders of the parent (in NT$’000) Weighted average number of common shares outstanding (in thousand shares) Basic earnings per share (in NT$)	For theyear ended December 31,	For theyear ended December 31,
	2016	2015
	2,233,705	2,903,952
	445,450	445,822
	$5.01	$6.51

B. Diluted earnings per share

Net income available to common shareholders of the parent (in NT$’000) Net income available to common shareholders of the parent after dilution (in NT$’000) Weighted average number of common shares outstanding (in thousand shares) Effect of dilution: Employee bonus – stock (in thousand shares) Weighted average number of common shares outstanding after dilution (in thousand shares) Diluted earnings per share (in NT$)	For theyear ended December 31,	For theyear ended December 31,
	2016	2015
	2,233,705	2,903,952
	2,233,705	2,903,952
	445,450 5,383	445,822 9,611
	450,833	455,433
	$4.95	$6.38

No other transactions that would significantly change the outstanding common shares or potential common shares incurred during the period subsequent to reporting date and up to the approval date of financial statements.

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(27)Subsidiary that has material non-controlling interests

Proportion of equity interest held by non-controlling interests:

Name Country PIOTEK HOLDINGS LTD. and its subsidary China Accumulated balances of material non-controlling interest: PIOTEK HOLDINGS LTD. and its subsidary Profit/(loss) allocated to material non-controlling interest: PIOTEK HOLDINGS LTD. and its subsidary	Country	As of December 31,
		2016
		2016 (NT$’000) (278,764)

The summarized financial information of this subsidiary is provided below. This information is based on amounts before inter-company eliminations.

Summarized information of profit or loss is as follows:

Operating revenue Profit/loss from continuing operation Total comprehensive income for the period	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000) 4,190,571 (568,886) (830,882)	2015 (NT$’000)
		4,700,977 (520,173) (609,370)

Summarized information of financial position is as follows:

Current assets Non-current assets Current liabilities Non-current liabilities	As of December 31,	As of December 31,
	2016 (NT$’000) 2,098,636 2,585,677 1,044,255 842,596	2015 (NT$’000)
		2,516,463 3,336,563 1,188,561 1,036,121

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Summarized cash flow information is as follows:

Operating activities Investing activities Financing activities Net increase/(decrease) in cash and cash equivalents	For theyear ended Deceember 31,	For theyear ended Deceember 31,
	2016 (NT$’000) (198,386) (39,600) (193,459) (463,330)	2015 (NT$’000)
		123,821 (171,773) 404,416 349,218

7. RELATED PARTY TRANSACTIONS

• (1) Significant transactions with related parties

A. Sales to

Parent company Other related parties Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	1,393,606 69,913	1,452,652 62,426
	1,463,519	1,515,078

Selling prices and collection terms to related parties are similar to those to third party customers for the years ended December 31, 2016 and 2015. The collection terms are 30 to 60 days from the end of delivery month by telegraphic transfer.

B. Purchases

Other related parties	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	15,870	-

The product specification of goods purchased from related parties in the year ended December 31, 2016 and 2015, differed from those purchased from other vendors. Thus, transaction prices are not comparable. The payment terms for related parties and nonrelated parties are 30 to 120 days from the end of delivery month by telegraphic transfer.

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• C. For the years ended December 31, 2016 and 2015, the Group recognized travelling expenses of NT$152 thousand and NT$340 thousand, respectively, for commissioning other related parties to handle travelling logistics.

• D. For the years ended December 31, 2016 and 2015, the Group recognized rent expenses of NT$68,236 thousand and NT$50,460 thousand, respectively, for plants leased from the Parent.

Moreover, for the years ended December 31, 2016 and 2015, the Group recognized rent expenses of NT$923 thousand and NT$7,769 thousand, respectively, for plants leased from other related parties.

In addition, for the years ended December 31, 2016 and 2015, the Group recognized rent expenses of NT$265 thousand and NT$183 thousand (tax included), respectively, for various facilities leased from the Parent.

• E. For the years ended December 31, 2016 and 2015, the Group recognized operating expenses of NT$5,591 thousand and NT$7,554 thousand, respectively, for services provided by other related parties.

Moreover, for the years ended December 31, 2016 and 2015, the Group recognized operating expenses of NT$1,073 thousand and NT$1,261 thousand (tax included), respectively, for services provided by the Parent.

In addition, for the years ended December 31, 2016 and 2015, the Group incurred operating expenses of NT$70,504 thousand and NT$91,965 thousand (tax included), respectively, for utility bills paid by the Parent on behalf of the Group.

• F. For the years ended December 31, 2016 and 2015, the Group recognized rent income of NT$5,332 thousand and NT$7,243 thousand, for plants leased to other related parties.

• G. For the years ended December 31, 2016, the Group recognized other income of NT$1,877 thousand, for provided services to other related parties.

• H. For the year ended December 31, 2016, the Group recognized other income of NT$41,930 thousand, for selling equipment and spare parts to other related parties.

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I. Accounts receivable - related parties

Parent company Other related parties Total Less: allowance for doubtful accounts Net	As of December 31,	As of December 31,
	2016 (NT$’000) 357,057 42,679 399,736 - 399,736	2015 (NT$’000)
		227,150 21,759
		248,909 -
		248,909

J. Accounts payable - related parties

Other related parties	As of December 31,	As of December 31,
	2016 (NT$’000) 16,059	2015 (NT$’000)
		-

K. Salaries and rewards to key management of the Group

Short-term employee benefits Post-employee benefits Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	96,019 810	90,101 819
	96,829	90,920

L. Other receivables

Other related parties	As of December 31,	As of December 31,
	2016 (NT$’000) 307,646	2015 (NT$’000)
		2,081

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M.Refundable deposits

Parent company	As of December 31,	As of December 31,
	2016 (NT$’000) 10,000	2015 (NT$’000) 5,700

N. Accrued expenses

Ultimate parent company Other related parties Total	As of December 31,	As of December 31,
	2016 (NT$’000) 16,594 936 17,530	2015 (NT$’000)
		22,971 1,607
		24,578

O. Transfering asset

The Group did not conduct any transactions related to property, plant and equipment with related parties during the year ended December 31, 2015. While, for 2016, transfer of assets with related parties were shown as the following.

Type of Assets 2016 Machinery	Related Parties Other related parties	Book Value (NT$’000) 241,776	Selling price (NT$’000) 241,776	Gain (NT$’000) -	Price reference
					Negotiated

8. PLEDGED ASSETS

The following assets of the Group are pledged as collaterals:

Item	Carrying Amount As of December 31,	Carrying Amount As of December 31,	Purpose
	2016 (NT$’000)	2015 (NT$’000) 332,913 13,400 346,313
Property, plant and equipment - machinery (carrying amount) Property, plant and equipment - other equipment (carrying amount) Total	244,492 5,157		Long-term secured loans Long-term secured loans
	249,649

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9. SIGNIFICANT CONTINGENCIES AND UNRECOGNIZED CONTRACT COMMITMENTS

• (1) The Group’s unused letters of credit (LC) as of December 31, 2016 were as follows:

Currency JPY USD Euro	LC Amount(in thousand) JPY 1,454,932 USD 8,469 EUR 53	Security(in thousand)
		- - -

• (2) Details of significant constructions in progress and outstanding contracts of property, plant and equipment as of December 31, 2016 were as follows:

Nature of Contract Machinery and contruction contracts	Contract Amount (NT$’000) 3,807,972	Amount Paid (NT$’000) 3,049,055	Outstanding Balance (NT$’000)
			758,917

10. SIGNIFICANT DISASTER LOSS

None

11. SIGNIFICANT SUBSEQUENT EVENT

None

12. OTHERS

• (1) Categories of financial instruments

Financial assets

Financial assets at fair value through profit or loss: Held for trading Loans and receivable Cash and cash equivalents (excluding cash on hand)	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	3,268,435 11,206,953	3,536,370 12,740,073

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Bond investments with no active market Notes receivable Accounts receivable Accounts receivable - related parties Other receivable Other receivable - related parties Total	423,057 3,030 3,197,829 399,736 289,514 307,646	428,112 1,835 3,590,193 248,909 336,543 2,081
	19,096,200	20,884,116

Financial liabilities

Financial liabilities measured at amortized cost: Short-term loans Payables Long-term loans (including current portion) Total	As of December 31,	As of December 31,
	2016 (NT$’000) 2,228,478 5,212,437 2,044,647 9,485,562	2015 (NT$’000)
		3,095,030 5,985,045 1,938,939
		11,019,014

• (2) Objectives and policies of financial risk management

The Group’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activates. The Group identifies, measures, and manages the aforementioned risks based on its policy and risk preferences.

The Group has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant transactions, due approval process by the Board of Directors and Audit Committee must be carried out based on related protocols and internal control procedures. The Group complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market risk comprises currency risk, interest rate risk and other price risk (e.g. equity instruments).

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In practice, it is rarely the case that a single risk variable will change independently from other risk variables. There are usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

Foreign currency risk

The Group’s exposure to foreign currency risk relates primarily to the Group’s operating activities (when revenue or expense are denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign operations. The Group has certain foreign currency receivables denominated in the same foreign currency as certain foreign currency payables, therefore natural hedge is achieved. Thus, hedge accounting is not adopted.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Group’s profit (loss) and equity is performed on significant monetary items denominated in foreign currencies as of the end of the reporting period. The Group’s foreign currency risk is mainly related to the volatility in the exchange rates of US dollars. The sensitivity analysis is as follows:

If NT dollars appreciates/depreciates against US dollars by 1%, net income (loss) for the years ended December 31, 2016 and 2015 would increase/decrease by NT$9,223 thousand and NT$11,442 thousand, respectively.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk relates primarily to the Group’s investments with variable interest rates and loans with fixed and variable interest rates, which are all categorized as loans and receivables.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as of the end of the reporting period and presumed to be held for one accounting year, including investments and loans with variable interest rates. If interest rate increases/decreases by 0.1%, the net income (loss) for the years ended December 31, 2016 and 2015 would decrease/increase by NT$1,340 thousand and decrease/increase by NT$7,383 thousand, respectively.

(4) Credit risk management

Credit risk is the risk that counterparty will not meet its obligations under a contract and result in a financial loss. The Group is exposed to credit risk from operating activities

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(primarily for accounts and notes receivable) and financing activities (primarily for bank deposits and other financial instruments).

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit risk of all customers are assessed based on a comprehensive review of the customers’ financial status, credit ratings from credit institutions, past transactions, current economic conditions and the Group’s internal credit ratings. The Group also employs some credit enhancement instruments (e.g. prepayment or insurance) to reduce certain customers’ credit risk.

As of December 31, 2016 and 2015, receivables from the top ten customers were accounted for 47.67% and 51.71% of the Group’s total accounts receivable, respectively. The concentration of credit risk is relatively insignificant for the remaining receivables.

Credit risk from balances with banks, fixed-income securities and other financial instruments is managed by the Group’s finance division in accordance with the Group’s policy. The counterparties that the Group transacts with are determined by internal control procedures. They are banks with fine credit ratings and financial institutions, corporate and government agencies with investment-grade credit ratings. Thus, there is no significant default risk. Conclusively, no significant credit risk is expected by the Group.

(5) Liquidity risk management

The Group maintains financial flexibility through the use of cash and cash equivalents, highly-liquid marketable securities, bank loans, etc. The table below summarizes the maturity profile of the Group’s financial liabilities based on the contractual undiscounted payments and contractual maturity. The payment amount includes the contractual interest. The undiscounted interest payment relating to borrowings with variable interest rates is extrapolated based on the estimated yield curve as of the end of the reporting period.

Non-derivative financial instruments

As of December	Less than 1 year (NT$’000) 1 to 2 years (NT$’000) 2 to 3 years (NT$’000) 3 to 4 years (NT$’000) 4 to 5 years (NT$’000) Total (NT$’000) 31, 2016 2,825,676 552,030 477,777 376,274 151,614 4,383,371 5,212,437 - - - - 5,212,437
Loans Payables

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As of December	31, 2015
Loans	3,734,453	831,211	228,215	252,199	117,342	5,163,420
Payables	5,985,045	-	-	-	-	5,985,045

• (6) Fair values of financial instruments

• A. The evaluation methods and assumptions applied in determining the fair value

Fair value is the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between willing market participants (not under coercion or liquidation). The following methods and assumptions are used by the Group in estimating the fair values of financial assets and liabilities:

• (a) The carrying amount of cash and cash equivalents, receivables, payables and other current liabilities approximate their fair value due to their short maturity terms.

• (b) For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (e.g. listed stocks and bonds).

• (c) Fair value of equity instruments without active markets (including listed companies’ shares from private placement, stocks of public companies not traded in an active market and unlisted stocks) are estimated using the market approach. Under the approach, factors, such as the trading prices of comparable equity instruments in an active market, and other relevant informations (i.e. discount due to lack of liquidity, stock price-to-earning ratio (PER) and price-to-book ratio (PBR) of similar companies) are input into the pricing model for its fair value.

• B. Fair value of financial instruments measured at amortized cost

The carrying amount of the Group’s financial assets and liabilities measure at amortized cost approximates their fair value.

• C. Fair value measurement hierarchy for financial instruments

Please refer to Note 12(7) for fair value measurement hierarchy for financial instruments of the Group.

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• (7) Fair value measurement hierarchy

• A. Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date

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

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

B. Fair value measurement hierarchy of the Group’s assets and liabilities

The Group does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Group’s assets and liabilities measured at fair value on a recurring basis is as follows:

As of December 31, 2016

Financial assets: Financial assets at fair value through profit or loss Funds Financial liabilities: None	Level 1 (NT$’000)	Level 2 (NT$’000)	Level 3 (NT$’000)	Total (NT$’000)
	3,268,435	-	-	3,268,435

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As of December 31, 2015

Level 1 Level 2 Level 3 Total (NT$’000) (NT$’000) (NT$’000) (NT$’000) Financial assets: Financial assets at fair value through profit or loss Funds 3,536,370 - - 3,536,370 Financial liabilities: None

Transfers between Level 1 and Level 2 during the period

For the years ended December 31, 2016 and 2015, there were no transfers between Level 1 and Level 2 fair value hierarchy.

(8) Significant financial assets and liabilities denominated in foreign currencies

Information regarding the Group’s significant financial assets and liabilities denominated in foreign currencies was listed below:

As of December 31,

Foreign Currencies ($’000) Financial assets Monetary items: USD 119,476 CNY 115,027 Financial liabilities Monetary items: USD 142,824 CNY 104,865		2016			2015
		Exchange Rate 32.25 4.649 32.25 4.649	NTD (NT$’000)	Foreign Currencies ($’000)	Exchange Rate 32.83 5.05 32.83 5.05	NTD (NT$’000)
			3,853,096 534,759 4,606,070 487,514	139,277 93,723 166,990 118,755		4,571,767 473,750 5,482,634 600,304

The above information is disclosed based on the carrying amount of foreign currency (after being converted to functional currency).

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Foreign exchange gain/loss on monetary financial assets and liabilities is shown as below.

Foreign currency resultingin exchangegain or loss USD Other	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000) (48,995) 6	2015 (NT$’000)
		(17,421) 2,497

(9) Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Group manages and adjusts its capital structure in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

13. ADDITIONAL DISCLOSURES

• (1) Information on significant transactions

• A. Financing provided to others: None.

• B. Endorsement/Guarantee provided to others: Please refer to attachment 1.

• C. Marketable securities held as of December 31, 2016 (excluding investments in subsidiaries, associates and joint ventures): Please refer to attachment 2.

• D. Individual securities acquired or disposed of with accumulated amount of at least NT$ 300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 3

• E. Acquisition of individual real estate with amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 4.

• F. Disposal of individual real estate with amount of at least NT$100 million or 20 percent of the paid-in capital for the year ended December 31, 2016: None.

• G. Related party transactions with purchase or sales amount of at least NT$100 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 5.

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• H. Receivables from related parties of at least NT$100 million or 20 percent of the paid-in capital as of Decemer 31, 2016: attachment 6.

• I. Derivative instrument transactions: None.

• J. Intercompany relationships and significant intercompany transactions for the year ended December 31, 2016: Please refer to attachment 12.

• (2) Information on investees

• A. Investees over whom the Company exercises significant influence or control (excluding investees in Mainland China): Please refer to attachment 7.

• B. Investees over which the Company exercises control shall be disclosed of information under Note 13(1):

  • (a) Financing provided to others: None.

  • (b) Endorsement/Guarantee provided to others: None.

  • (c) Marketable securities held as of December 31, 2016 (excluding investments in subsidiaries, associates and joint ventures): Please refer to attachment 8

  • (d) Individual securities acquired or disposed of with accumulated amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 9.

  • (e) Acquisition of individual real estate with amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: None.

  • (f) Disposal of individual real estate with amount of at least NT$300 million or 20 percent of the paid-in capital for the year ended December 31, 2016: None.

  • (g) Related party transactions with purchase or sales amount of at least NT$100 million or 20 percent of the paid-in capital for the year ended December 31, 2016: Please refer to attachment 10.

  • (h) Receivables from related parties of at least NT$100 million or 20 percent of the paidin capital as of December 31, 2016: Please refer to attachment 11.

  • (i) Derivative instrument transactions: None.

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(3) Information on investments in Mainland China:

A. Name of investee in China, main business, paid-in capital, method of investment, investment flows, percentage of ownership, investment gain or loss, carrying amount at the end of reporting period, inward remittance of earning or loss and the upper limit on investment in China:

(In Thousands of New Taiwan Dollars)

Name of Investee in China	Main Business	Paid-in Capital (NT$’000)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of Jan. 1, 2016 (NT$’000)	Investment Flows	Investment Flows	Accumulate d Outflow of Investment from Taiwan as of December 31, 2016 (NT$’000)	Profit/ Loss of Investee (NT$’000)	Percentage of Ownership (Direct or Indirect Investment)	Share of Profit/Loss (NT$’000)	Carrying Amount as of December 31, 2016 (NT$’000)	Accumulat ed Inward Remittance of Earnings as of Dec. 31, 2016 (NT$’000)	Accumulated Outflow of Investment from Taiwan to Mainland China as of Dec. 31, 2016 (NT$’000)	Investment Amounts Authorized by Investment Commission, MOEA (NT$’000)	Upper Limit on Investment in China by Investment Commission, MOEA (NT$’000)
					Outflow (NT$’000)	Inflow (NT$’000)
Kinsus Interconnect Technology Suzhou Corp.	Manufacturing and selling PCB (not high- density fine- line)	2,257,500 (Note 2)	(Note 1)	2,257,500 (Note 2)	-	-	2,257,500 (Note 2)	31,763 (Note 2 and Note 4)	100%	31,763 (Note 2、 Note 4 and Note 7)	1,034,889 (Note 2、 Note 4 and Note 7)	-	2,257,500 (Note 2)	2,257,500 (Note 2)	No upper limit (Note 5)

286

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Kinsus Interconnect Technology Corp. Notes to Consolidated Financial Statements (Continued)

Piotek Computer (Suzhou) Co., Ltd.	Researching, developing, producing and selling electronic components, PCBs and related products and providing after- sale services	5,376,075 (Note 2)	(Note 1)	3,039,683 (Note 2)	-	-	3,039,683 (Note 2)	(584,054) (Note 2 and Note 4)	51%	(297,868) (Note 2、 Note 4 and Note 7)	2,723,648 (Note 2、 Note 4 and Note 7)	-	3,039,683 (Note 2)	3,039,683 (Note 2)	No upper limit (Note 5)
Xiang-Shuo (Suzhou) Trading Limited	Trading of PCB (not high- density fine- line) and material for related products	64,500 (Note 2)	(Note 1)	64,500 (Note 2)	-	-	64,500 (Note 2)	1,511 (Note 2 and Note 4)	100%	1,511 (Note 2、 Note 4 and Note 7)	65,149 (Note 2、 Note 4 and Note 7)	-	64,500 (Note 2)	64,500 (Note 2)	No upper limit (Note 5)
Pegavision Contact Lenses (Shanghai) Corporation	Selling medical equipment	65,062 (Note 3)	(Note 1)	65,062	-	-	65,062	5,832 (Note 2 and Note 4)	100%	5,832 (Note 2、 Note 4 and Note 7)	46,013 (Note 2、 Note 4 and Note 7)	-	65,062	65,062	735,270 (Note 6)

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Note 1: Investment in Mainland China through companies in the third area.

Note 2: Amounts in foreign currencies are translated into New Taiwan dollars using the exchange rates on the balance sheet date.

Note 3: The paid-in capital is USD2,100 thousand, equivalent to NT$65,062 thousand.

Note 4: Gain/loss on investment is recognized based on the audited financial statements of the parent company in Taiwan.

Note 5: The Company meets the conditions of corporate operation headquarter in the Principle of Evaluation for Investment and Technical Cooperation in Mainland China. Thus, there is no

upper limit on investment amount.

Note 6: The upper limit on investment for Pegavision Contact Lenses (Shanghai) Corporation is calculated as 60% of the net value of the financial statements audited by accounts of Pegavision Corporation’s net equity.

Note 7: Transactions are eliminated upon preparation of consolidated financial statements.

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• B. Significant transactions with investees in China:

• (a) Purchase and balances of related accounts payable as of December 31, 2016: Please refer to attachment 12 for details.

• (b) Sale and balance of related accounts receivable as of December 31, 2016: Please refer to attachment 12 for details.

• (c) Property transaction amounts and resulting gain or loss: None.

• (d) Ending balance of endorsements/guarantees or collateral provided and the purposes: Please refer to attachment 1.

• (e) Maximum balance, ending balance, interest rate range and total interest for current period from financing provided to others: None.

• (f) Transactions that have significant impact on profit or loss of current period or the financial position, such as services provided or rendered: Please refer to attachment 12 for details.

• (g) Above transactions are eliminated upon preparation of consolidated financial statements. Please refer to attachment 12 for details.

14. OPERATING SEGMENT

For management purposes, the Group is organized into operating segments based on different products and services and has two reportable operating segments as follows:

IC Substrate: This segment produces and manufactures BGA substrates and sells the products to manufacturers of electronic products.

Printed Circuit Board (PCB): This segment produces and manufactures PCBs and sells the products to manufacturers of electronic products.

No operating segments have been aggregated to form the above reportable operating segments.

The Group’s operating segments adopts the same accounting policies as the ones in Note 4. Management monitors the operating results of its business units separately for the purpose of decisionmaking on resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and measured consistently with methods applied to operating profit or loss in the consolidated financial statements.

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• (1)Segment income (loss), assets and liabilities

For the year ended December 31, 2016

IC Substrate (NT$’000) External customer 17,922,696 Inter-segment - Total revenue 17,922,696 Segment income (loss) 2,484,374 For the year ended December 31, 2015 IC Substrate (NT$’000) External customer 17,820,429 Inter-segment - Total revenue 17,820,429 Segment income (loss) 3,179,452	IC Substrate (NT$’000)	PCB (NT$’000)	Elimination (NT$’000)	Consolidated (NT$’000)
	17,922,696 -	5,242,370 -	- -	23,165,066 -
	17,922,696	5,242,370	-	23,165,066
	2,484,374	(411,346)	-	2,073,028
		PCB (NT$’000)	Elimination (NT$’000)	Consolidated (NT$’000)
External customer Inter-segment Total revenue Segment income (loss)
	17,820,429 -	5,240,882 -	- -	23,061,311 -
	17,820,429	5,240,882	-	23,061,311
	3,179,452	(449,926)	-	2,729,526

For the year ended December 31, 2015

Details of assets and liabilities under the Group’s operating segments are as follows:

Segment assets As of Dec. 31, 2016 As of Dec. 31, 2015 Segment liabilities As of Dec. 31, 2016 As of Dec. 31, 2015	IC Substrate (NT$’000)	PCB (NT$’000)	Elimination (NT$’000)	Consolidated (NT$’000)
	34,627,746	6,625,969	-	41,253,715
	35,118,866	7,519,866	-	42,638,732
	IC Substrate (NT$’000)	PCB (NT$’000)	Elimination (NT$’000)	Consolidated (NT$’000)
	7,697,825	2,541,121	-	10,238,946
	9,012,667	2,798,264	-	11,810,931

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(2)Geographical information

Revenues from external customers

Taiwan Other countries Total	For theyear ended December 31,	For theyear ended December 31,
	2016 (NT$’000)	2015 (NT$’000)
	9,092,912 14,072,154	9,184,614 13,876,697
	23,165,066	23,061,311

Note: The revenue information above is based on the location of the customers.

Non-current assets

Taiwan U.S.A China Japan Total	As of December 31,	As of December 31,
	2016 (NT$’000)	2015 (NT$’000)
	14,888,571 277 4,256,570 171	13,769,447 243 5,337,759 35
	19,145,589	19,107,484

(3)Information about major customers

No additional discourses for the years ended December 31, 2016 and 2015 due to no individual customer accounting for at least 10% of net sales.

291

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Endorsement/Guarantee Provided to Others

For the Year ended December 31, 2016

Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)	Table 1 (In Thousands of ForeignCurrency / NewTaiwan Dollars)
Endorsement/ Guarantee Provider		Guaranteed Party		Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party	Maximum Balance for the Period	EndingBalance	Amount Actually Drawn	Amount of Endorsement/ Guarantee secured by Properties	~~Ratio of~~ Accumulated Endorsement/ Guarantee to Net Worth per Latest Financial	Maximum Endorsement/ Guarantee Amount Allowed	Endorsement provided by parent company to subsidiaries	Endorsement provided by subsidiaries to parent company	Endorsement provided to entities in China
No. (Note 1)	Name	Name	Nature of Relationship
0 0	Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp.	Kinsus Interconnect Technology Suzhou Corp. Piotek Computer (Suzhou) Co., Ltd.	Investee accounted for using equity method indirectly Investee accounted for using equity method indirectly	The overall amount of guarantees/ endorsements provided to a subsidiary in which the Company holds directly over 50% (inclusive) of common equity interest shall not exceed 20% of the net worth in the current financial statements. $5,773.942 The overall amount of guarantees/ endorsements provided to a subsidiary in which the Company holds directly over 50% (inclusive) of common equity interest shall not exceed 20% of the net worth in the current financial statements. $5,773.,942	$3,708,750 (USD 115,000) (Note 2) $986,850 (USD 30,600) (Note 2)	$1,935,000 (USD 60,000) (Note 2) $986,850 (USD 30,600) (Note 2)	$951,375 $400,908	$- $-	6.70% 3.42%	$14,434,855 $14,434,855 Shall not exceed 50% of the net worth in the current financial statements. Shall not exceed 50% of the net worth in the current financial statements.	Y Y	N N	Y Y

Note 1: Kinsus Interconnect Technology Corp. is coded "0".

Note 2: Amounts in foreign currencies are converted to New Taiwan Dollars using the exchange rates as of the balance sheet date.

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Kinsus Interconnect Technology Corp. and Subsidiaries

Marketable Securities Held as of December 31, 2016

Table 2

(In Thousands of New Taiwan Dollars)

Name of Held Company	Type and Name of Marketable Securities	Relationship with the Issuer	Financial Statement Account	As of December 31,2016	As of December 31,2016	As of December 31,2016	Fair Value(Note)	Note
				Shares / Units	Carrying Amount	Shareholding %
Kinsus Interconnect Technology Corp.	Money market funds: Capital Money Market Fund Taishin Ta Chong Money Market Fund Taishin 1699 Money Market Fund FSITC Money Market Fund Mega Diamond Money Market Fund Jih Sun Money Market Union Money Market Fund UPAMC James Bond Fund Subtotal Add: Valuation adjustments of financial assets held for trading Total	- - - - - - - -	Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss	32,783,435 18,812,748 30,522,218 1,168,258 41,465,474 31,315,952 15,838,553 15,322,946	$510,667 255,796 400,000 200,000 500,000 450,000 203,448 250,000 2,769,911 69,422 $2,839,333	-% -% -% -% -% -% -% -%	$523,951 264,712 408,961 206,443 514,931 459,396 207,214 253,725 $2,839,333

Note: Companies without quotes in the open markets are valued at net equities.

293

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Kinsus Interconnect Technology Corp. and Subsidiaries

Marketable Securities Acquired and Disposed of At Costs or Prices of At Least NT$300 Million or 20% of The Paid-In Capital

For the Year ended December 31, 2016

Table 3

(In Thousands of New Taiwan Dollars)

CompanyName	Type and Name of Marketable Securities	Financial Statement Account	Counter-party	Nature of Relationship	BeginningBalance	BeginningBalance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Shares/Units	Amount	Shares/Units	Amount	Shares/Units	Amount	CarryingValue	Gain/Loss on	Shares/Units	Amount
Kinsus Interconnect Technology Corp.	Stock: Kinsus Investment Co., Ltd.	Investments accounted for under equity method	-	-	39,800,000	$398,000	60,200,000	$602,000	-	$-	$-	$-	100,000,000	$1,000,000

294

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Kinsus Interconnect Technology Corp. and Subsidiaries

Acquisition of Individual Real Estate with Amount of at Least NT$ 300 million or 20% of the Paid-in Capital

For the Year ended December 31, 2016

Table 4

(In Thousands of New Taiwan Dollars)

Acquiring Company	Name of Property	Transaction Date	Transaction Amount	Payment Status	Counter- party	Relationship	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Price Reference	Purpose and Use of Acquisition	Other Terms
							Owner	Relationship with the Company	Transfer Date	Amount
Kinsus Interconnect Technology Corp.	Houses and buildings	103.02.13, 104.03.24	$2,268,036	NT$2,146,042 thousand was paid as of December 31, 2016	Guo-Gong Construction Co., Ltd.	None	None	None	None	None	Bidding	Production expansion and operation planning	None
	Construction of XinFeng Plant

295

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Kinsus Interconnect Technology Corp. and Subsidiaries

Related Party Transactions with Purchase or Sales Amount of At least NT$ 100 Million or 20% of the Paid-in Capital

For the Year ended December 31, 2016

Table 5

(In Thousands of New Taiwan Dollars)

CompanyName	Related Party	Nature of Relationship	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/ Accounts Payable or Receivable	Notes/ Accounts Payable or Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment/ Collection Term	Unit Price	Payment/ Collection Term	EndingBalance	% to Total
Kinsus Interconnect Technology Corp.	Kinsus Interconnect Technology Suzhou Corp.	Investee accounted for using equity method indirectly	Purchase	$2,006,751	27.33%	Payment within 30 days from the end of delivery month	Specs of goods purchased are different from others. Cannot be reasonablely compared.	Other vendors also enjoy payment within 30~120 days from the end of delivery month	Accounts payable $(191,819)	(14.95)%	Note

Note: Transactions are eliminated when preparing the consolidated financial statements.

296

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Kinsus Interconnect Technology Corp. and Subsidiaries

Receivables from Related Parties of at Least NT$ 100 Million or 20% of the Paid-in Capital

As of December 31, 2016

Table 6

							Table 6	Table 6
							(In Thousands of New Taiwan Dollars)
CompanyName	Related Party	Nature of Relationship	EndingBalance	Turnover Ratio	Overdue		Amount Received in Subsequent Periods	Allowance for Doubtful Debts
					Amount	Action Taken
Kinsus Interconnect Technology Corp.	FuYang Technology Corp.	Other related parties	$305,891 (Note)	-	$-	-	$-	$-

Note: Other receivables

297

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Kinsus Interconnect Technology Corp. and Subsidiaries

Investees over Which the Company Exercise Significant Influence or Control Directly or Indirectly (Excluding Investees in Mainland China) As of December 31, 2016

Table 7

				Table 7	Table 7	Table 7	Table 7	Table 7	Table 7	Table 7	Table 7
				(In Thousands of Foreign Currency/ New Taiwan Dollars)
Investor	Investee	Business Location	Main Business and Product	Original Investment Amount		Endingbalance			Net Income (Loss) of the Investee	Share of Income (Loss) of the Investee	Note
				As of Dec. 31,2015	As of Dec. 31,2016	Shares	%	CarryingValue
Kinsus Investment Co., Ltd. Kinsus Investment Co., Ltd. KINSUS HOLDING (SAMOA) LIMITED KINSUS HOLDING (SAMOA) LIMITED PIOTEK HOLDINGS LTD. (CAYMAN) PIOTEK HOLDING LIMITED Pegavision Corporation Pegavision Corporation Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp.	KINSUS CORP. (USA) KINSUS HOLDING (SAMOA) LIMITED Kinsus Investment Co., Ltd. Pegavision Corporation FuYang Technology Corp. KINSUS HOLDING (CAYMAN) LIMITED PIOTEK HOLDINGS LTD. (CAYMAN) PIOTEK HOLDING LIMITED PIOTEK (H.K.) TRADING LIMITED PEGAVISION HOLDINGS CORPORATION PEGAVISION JAPAN INC.	CA U.S.A. Samoa Taoyuan City Taoyuan City Hsinchu County Cayman Islands Cayman Islands British Virgin Islands Hong Kong Samoa JAPAN	Investing activities Investing activities Manufacturing medical equipment Electronic Parts and Components Manufacturing Investing activities Investing activities Investing activities Trading activities Investing activities Selling Medical facility Designing substrates, formulating marketing strategy analysis, developing new customers, researching and development new product technology	USD500 USD166,309 $398,000 (Note 1) $286,418 $- USD72,000 USD94,309 USD139,841 USD26 USD2,130 JPY 9,900	USD500 USD166,309 $1,000,000 (Note 1) $286,418 $450,000 USD72,000 USD94,309 USD139,841 USD26 USD2,130 JPY 9,900	500,000 166,308,720 100,000,000 22,088,736 45,000,000 72,000,000 95,755,000 139,840,790 200,000 2,130,000 198	100.00% 100.00% 100.00% 36.81% 36.00% 100.00% 51.00% 100.00% 100.00% 100.00% 100.00%	$36,663 $2,526,740 $1,214,882 $451,144 $432,689 USD 34,110 USD 44,239 USD 86,743 USD 2,261 $35,419 $3,102	$4,769	$4,769 $(256,869) $52,520 $68,803 $(12,783) USD 1,032 USD(8,997) USD(17,641) USD 476 $5,769 $354	Note Note Note Note Note Note Note Note Note Note
									$(256,869)
									$52,520
									$186,891
									$(35,509)
									USD 1,032
									USD(17,641)
									USD(17,641)
									USD 476
									$5,769
									$354

Note: Transactions are eliminated when preparing the consolidated financial statements.

Note 1: The Company's original investment in Kinsus Investment Co., Ltd. was NT$500,000 thousand. Kinsus Investment Co., Ltd. reduced capital by NT$102,000 thousand to offset deficits in 2013, and increased capital by NT$602,000 thousand in 2016. After the increase, investment amount increased to NT$1,000,000 thousand.

298

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Marketable Securities Held as of December 31, 2016 (Excluding Investments in Subsidiaries, Associates and Jointly Controlled Entities)

As of December 31, 2016

Table 8

						Table 8	Table 8	Table 8	Table 8	Table 8	Table 8
						(In Thousands of New Taiwan Dollars)
Name of Held Company	Type and Name of Marketable Securities	Relationship with the Issuer	Financial Statement Account			As of December 31,2016			Guarantee, Pledge or Other Restricted Conditions
				Shares(Unit)		Carrying Amount	%	Fair Value (Net Equity)	Shares	Carrying Amount	Note
Kinsus Investment Co., Ltd. Kinsus Investment Co., Ltd. Pegavision Corporation	Money market funds: Taishin Ta Chong Money Market Fund Valuation adjustments of financial assets held for trading Total Stocks: Yi-Shuo Creative Co., Ltd. Money market funds: Yuanta Wan Tai Money Market Fund Yuanta DE-Li Money Market Fund Valuation adjustments of financial assets held for trading Total	- - -	Financial assets carried at cost Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss	829,070 5,000,000 17,879,293 9,229,182		$11,315 351	-% 7.49% -%	$11,666 $- (Note) $268,381 149,055 $417,436	- - -	$-
										$-
						$11,666
						$50,000
						$268,108 149,000 328				$-
						$417,436

Note: No quotes in active markets and fair values cannot be measured reliably.

299

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Marketable Securities Acquired and Disposed of At Costs or Prices of At Least NT$300 Million or 20% of The Paid-In Capital

For the Year ended December 31, 2016

												Table 9 (In Thousands of New Taiwan Dollars)	Table 9 (In Thousands of New Taiwan Dollars)	Table 9 (In Thousands of New Taiwan Dollars)
CompanyName	Type and Name of Marketable Securities	Financial Statement Account	Counter-party	Nature of Relationship	BeginningBalance		Acquisition			Disposal			EndingBalance
					Shares/Units	Amount	Shares/Units	Amount	Shares/Units	Amount	CarryingValue	Gain/Loss on	Shares/Units	Amount
Kinsus Investment Co., Ltd.	Stock: FuYang Technology Corp.	Investments accounted for using the equity method	-	-	-	$-	45,000,000	$450,000	-	$-	$-	$-	45,000,000	$450,000

300

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Related Party Transactions with Purchase or Sales Amount of At least NT$ 100 Million or 20% of the Paid-in Capital

As of December 31, 2016

			As of December 31, 2016	As of December 31, 2016	As of December 31, 2016	As of December 31, 2016	As of December 31, 2016	As of December 31, 2016	As of December 31, 2016	As of December 31, 2016	As of December 31, 2016
			Table 10 (In Thousands of US Dollars)
CompanyName	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes/Accounts Payable or Receivable		Note
			Purchase/ Sale	Amount	% to Total	Payment/ Collection Term	Unit Price	Payment/ Collection Term	EndingBalance	% to Total
Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek (H.K.) Trading Limited Technology Suzhou Corp. Piotek Computer (Suzhou) Co., Ltd. Xiang-Shuo (Suzhou) Trading Limited	Pegatron Corporation Piotek (H.K.) Trading Limited Piotek Computer (Suzhou) Co., Ltd. Kinsus Interconnect Technology Corp. Xiang-Shuo (Suzhou) Trading Limited Piotek Computer (Suzhou) Co., Ltd.	Parent company Parent company Also a subsidiary under the Company's control Also a subsidiary under the Company's control Also a subsidiary under the Company's control Also a subsidiary under the Company's control	Sales Sales Purchase Sales Purchase Sales	USD 43,213 USD 18,401 USD 18,401 USD 62,404 USD 3,428 USD 3,428	39.15% 16.67% 100.00% 100.00% 4.90% 47.81%	Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 30 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month	Specs of goods sold are different from others. Cannot be reasonably d Specs of goods sold are different from others. Cannot be reasonably d Specs of goods sold are different from others. Cannot be reasonably Specs of goods sold are different from others. Cannot be reasonably Specs of goods sold are different from others. Cannot be reasonably Specs of goods sold are different from others. Cannot be reasonably	No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with. No non-related parties to be compared with.	Accounts receivable USD 11,071 Accounts receivable USD 2,431 Accounts payable USD (2,431) Accounts receivable USD 6,015 Accounts payable USD 567 Accounts receivable USD 670	39.62% 8.70% (100.00)% 100.00% 2.41% 44.73%	Note Note Note Note Note

Note: Transactions are eliminated when preparing the consolidated financial statements.

301

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Receivables from Related Parties of at Least NT$ 100 Million or 20% of the Paid-in Capital

As of December 31, 2016

Table 11

							Table 11	Table 11
							(In Thousands of US Dollars)
CompanyName	Related Party	Nature of Relationship	EndingBalance	Turnover Ratio	Overdue		Amount Received in Subsequent Periods	Allowance for Doubtful Debts
					Amount	Action Taken
Kinsus Interconnect Technology Suzhou Corp. Piotek Computer (Suzhou) Co., Ltd.	Pegatron Corporation Kinsus Interconnect Technology Corp.	Parent company Parent company	USD 11,071 (Note) USD 6,015 (Note and Note 1)	4.80 6.67	$- $-	- -	$- $-	$- $-

Note: Accounts receivable

Note 1: Transactions are eliminated when preparing the consolidated financial statements.

302

English Translation of Consolidated Financial Statements Originally Issued in Chinese

Kinsus Interconnect Technology Corp. and Subsidiaries

Table 12

Intercompany Relationships and Significant Intercompany Transactions for the Year Ended December 31, 2016

				Table 12	Table 12	Table 12	Table 12
				(In Thousands of Foreign Currency/ New Taiwan Dollars)
No. (Note 1)	CompanyName	Counter-Party	Nature of Relationship (Note 2)	IntercompanyTransaction
				Financial Statement Account	Amount	Terms	Percentage to Consolidated Net Revenue or Total Assets(Note 3)
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 2 2 2 2 2 4	Year 2016 Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Kinsus Interconnect Technology Corp. Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Xiang-Shuo (Suzhou) Trading Limited Xiang-Shuo (Suzhou) Trading Limited Xiang-Shuo (Suzhou) Trading Limited Xiang-Shuo (Suzhou) Trading Limited Xiang-Shuo (Suzhou) Trading Limited PIOTEK (H.K.) TRADING LIMITED	Xiang-Shuo (Suzhou) Trading Limited Xiang-Shuo (Suzhou) Trading Limited KINSUS CORP. (USA) Kinsus Interconnect Technology Suzhou Cor Kinsus Interconnect Technology Suzhou Cor Piotek Computer (Suzhou) Co., Ltd. Kinsus Interconnect Technology Suzhou Cor Kinsus Interconnect Technology Suzhou Cor Piotek Computer (Suzhou) Co., Ltd. KINSUS CORP. (USA) KINSUS CORP. (USA) Kinsus Interconnect Technology Suzhou Cor Kinsus Interconnect Technology Suzhou Cor Xiang-Shuo (Suzhou) Trading Limited Kinsus Interconnect Technology Suzhou Cor Piotek Computer (Suzhou) Co., Ltd. PIOTEK (H.K.) TRADING LIMITED PIOTEK (H.K.) TRADING LIMITED PIOTEK (H.K.) TRADING LIMITED Xiang-Shuo (Suzhou) Trading Limited Xiang-Shuo (Suzhou) Trading Limited Kinsus Interconnect Technology Suzhou Cor Kinsus Interconnect Technology Suzhou Cor Kinsus Interconnect Technology Suzhou Cor Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Piotek Computer (Suzhou) Co., Ltd. Kinsus Interconnect Technology Suzhou Cor Kinsus Interconnect Technology Suzhou Cor KINSUS CORP. (USA)	1 1 1 p 1 p 1 1 p 1 p 1 1 1 1 p 1 p 1 1 p 1 1 1 3 3 3 3 p 3 p 3 p 3 3 3 3 p 3 p 3 3	Other receivables Other income Accrued expense Accrued expense Accounts payable Other receivables Other receivables Purchase Purchase Commission expense Travel expense Manufacturing - processing Sales revenue Sales revenue Other income Other income Other income Sales revenue Accounts receivable Accounts receivable Sales revenue Other income Other receivables Purchase Accounts receivable Other receivables Sales revenue Sales revenue Accounts receivable Commission expense	$963 $2,485 $3,396 $1,209 $191,819 $1,104 $6,069 $2,006,751 $14,969 $40,806 $134 $6,470 $9,267 $56 $8,714 $4,632 $6,930 USD 18,401 USD 2,431 USD 825 USD 2,597 USD 272 USD 32 USD 10 RMB 4,649 RMB 31 RMB 25,825 RMB 4,380 RMB 866 USD 33	- Payment within 60 days from the end of delivery month Payment within 30 days from the end of delivery month by TT Payment within 60 days from the end of delivery month Payment within 30 days from the end of delivery month - - Payment within 30 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month by TT - Payment within 60 days from the end of delivery month Payment within 30 days from the end of delivery month Payment within 60 days from the end of delivery month - - - Payment within 60~90 days from the end of delivery month Payment within 60~90 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60~90 days from the end of delivery month Payment within 60~90 days from the end of delivery month Payment within 60~90 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month Payment within 60 days from the end of delivery month	-% 0.01% 0.01% -% 0.46% -% 0.01% 8.66% 0.06% 0.18% -% 0.03% 0.04% -% 0.04% 0.02% 0.03% 2.56% 0.19% 0.06% 0.36% 0.04% -% -% 0.05% -% 0.52% 0.09% 0.01% -%

Note 1: Transaction information between Parent company and its subsidiaries should be disclosed by codes below:

• (1) Parent company is coded "0".

• (2) The subsidiaries are coded from "1" in the order presented in the table above.

• Note 2: Relationship are divided into the following three types and the types are required to be indicated:

• (1) From the parent company to a subsidiary.

• (2) From a subsidiary to the parent company.

• (3) Between subsidiaries.

• Note 3: Regarding the percentage of transaction amount to consolidated operating revenues or total assets, it is computed based on the ending balance to consolidated total assets for balance sheet items; and based on interim accumulated amount to consolidated net revenue for income statement items.

303