TXC - Annual Report 2016 | FinancialReports.eu

Annual Report 2016 Table of Contents

I.	Business Report ………………………………………………………………3
II.	Company Overview
	A.Company Introduction……………………………………………………….6
	B. Company Structure and the Subsidiaries ……………………………………….9
III.	Corporate governance
	A. Directors…………………….………………………………………………...…11
	B. Personnel data of the general manager, vice general manager, assistant vice
	general manager, chief of divisions ………………………………12
	C. Remuneration and Compensation Paid to Directors, and General and Vice
	General Managers………………………………………………………………13
	D.Corporate governance and variations with management principles of
	publicly-listed companies and reasons ………………………………………21
IV.	Fund Raising Overview
	A. Capital and shares ……………………………………………………………58
	B. Data on share price, net value, profit, and dividend of the past two years……61
	C. Company’s dividend policy and its current implementation status ………62
	D. Employee bonus and rewards for directors and auditors …………………63
	E. Buying back company stocks ………………………………………………64
	F. Convertible Corporate Bond …………………………………………..……65
V.	Fund Utilization Plans:
	A. Fund Utilization Plan and Utilization Status of this Corporate Bond Issue…….67
	B. Previous capital increase by cash and execution status…………………………69
VI.	Business Information
	A. Business Contents …………………………………………………………...69
	B. Marketing & Sales Situation …………………………………….………82
	C. Employees’ average years in service, age, and educational background
	distribution of the past two years……………………………………………... 94
	D. Data on our environmental protection expense ……………………………94
	E. Labor Relations ……………….………………………………………………98
VII.	An Overview of the Company’s Financial Status
	A. Abbreviated Balance Sheets and P/L Statements for the Past 5 Years………103
	B. Financial Analysis for the past 5 Years …………………………………..111
	C. Consolidated Financial Statement for the Parent Company and its
	Subsidiaries for the most recent year, Certified by a CPA ………………….119
	D. Financial Statements for the most recent years, including an auditor’s
	Report Prepared by a CPA ………….…………………………………….201

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Enterprise Vision

The core value of an enterprise lies with its published management philosophy and its attendant mission and the continuous development of an enterprise is ofen built on a long-term architecture, as well as its core value. In view of the imperativeness and importance of the enterprise’s core value for long-term development following gradual development of the company.

Vision Statement

To provide the frequency controlled application products for the computer, communication, optical, and automotive industry so as to become, the most outstanding company in FCP industry judged by performance matrix and managerial capability.

Mission Statement

Through the continuous improvement and the urge for discipline and execution to enhance the productivity to interact with tier one vendors' requests by promoting company's professionalism and globalization framework.

Corporate Culture

To strive for the declared goals in management philosophy and mission, the company shall further develops its founding spirit of Integrity, Practicality, Innovation and Services and convert the guildlines of Unity, Harmony and High Efficiency into a precise corporate culature.

I. Business Report

Dear Shareholders,

Major shifts in the international political situation occurred in the blink of an eye in 2016. The UK voted to leave the EU and America has adopted protectionist policies. As for Taiwan, the most important development is the freeze in cross-strait relations. With regard to the economy, the global outlook still looks turbulent. Exchange rate fluctuation risks have increased. The prices of raw materials and crude oil appear to have bottomed out. In society, a new age of individualism is arising. Changes in labor laws are placing additional pressure on companies. Other factors including technology, resources, policy and population are rapidly shifting about along with overall environment, all of which have the potential to threaten the existence and development capabilities of a company. Fortunately, with the continued dedication of our employees and support from upstream and downstream companies, we have been able overcome these challenges and can say without compunction to our shareholders that we are ready to meet the next challenge arising from the business environment

With regard to 2016 operating performation, TXC’s consolidated revenue totaled NT$9.637 billion, an increase of 4.0% over the NT$9.266 billion recorded in the previous year which reached 99.8% of our forecast target. Net income in 2016 was NT$1.016 billion, an increase of 8.3% over the previous year’s NT$938 million which exceeded our forecast target. Basic EPS was NT$3.28, an increase of 8.3% over the previous year’s basic EPS of NT$3.03. Looking towards 2017, spreading our corporate spirit of ‘compete or perish, work hard or drop out’ will inject the company with the willpower to accomplish our goals. As TXC rolls out the new products which were developed to meet the forecast growth in network communications and automotive markets, we will take a prudent and cautious approach towards the future, moving forward one step at a time. Our 2016 operation results and 2017 business plan summary are as follows:

I. 2016 Operation Results

Consolidated revenue and net profit Unit: NT$1,000

Items Year	2016	2015	Growth Amount	Growth Rate
Net Revenue	9,637,101	9,265,656	371,445	4.01
Gross Profit	2,554,069	2,235,175	318,894	14.27
Net Profit	1,016,164	938,203	77, 961	8.31

Consolidated statement of income and Profitability

	Year	2016	2015
Financial Structure (%)	Debt/Assets Ratio	32.83%	31.07%
	Long-term Capital/Fixed Assets Ratio	273.17%	265.53%
Debt-Paying Ability (%)	Current Ratio	279.40%	248.91%
	Quick Ratio	227.49%	201.84%
Profitability (%)	Return on Assets	6.82%	6.67%
	Return on Equity	9.79%	9.56%
	Earnings per Share`（`NT$`）`	3.28	3.03

1 、 Budget Execution ： In 2016, we set up internal budgeted target only without make public of the financial estimates. The overall turnover and profit were affected by changes in industries and product mix, and

then resulted to achieving the operation target of more than 99%.

2 、 Research and development ：

In R & D, the company lauched Vehicle Mounted Temperature Compensating Control Quartz 、 Oscillator (ACAP TCXO) Vehicle Mounted Temperature Sensing Quartz Crystal (ACAP 、、 TSX) New Generation Micro 3-in-1 Light Sensor (Sensor) Miniature Constant Temperature Control Quartz Crystal Oscillator (OCXO), Miniature Vehicle Mounted Quartz Crystal (ACAP CXO) 、 Miniature Mobile Device Crystal(Crystal) …etc. In addition, we follow the RD schedule continuously to lauch variety of products to meet different customer’s demand.

3 、 Results from execution of other projects ：
(1) Green enterprise ：
In addition to ongoing promotion of green enterprise certification and other activities including the Greenhouse Gas Inventory (ISO14064-1) and routine Carbon Footprint (PAS2050) checks, TXC was given the EPA’s Product Carbon Footprint Emission Factor Database Establishment Award and earned six low carbon marks. TXC has also been promoting kitchen waste and plastic bag use reduction activities. The company hands out environmentally-friendly bags to further reduce the use of environmentally hazardous plastic bags. The chairman also led company employees in joining the Zhuwei Fishing Harbor beach cleaning activity held by the Taoyuan City Government in order to do our part in keeping the environment clean.
(2) Occupational safety and health ：

TXC has continued to promote OHSAS18001 Occupational Health and Safety Assessment Series certification and passed CNS15506 Occupational Safety and Health Management System certification to uphold labor safety under the guidance of the Occupational Safety & Health Committee and Labor-Management Conference. A number of health promotion activities such as Getting to Know Metabolic Syndrome health lecture, pap smear testing, HPV virus awareness lecture, CPR and Heimlick maneuver instruction, workplace quit smoking activity, oral cancer screening activity, individual weight reduction activity, stress relief activity, blood pressure monitoring activity and flu vaccine inoculation activity were held by TXC to help employees take positive steps towards a healthy lifestyle. The company has also received the Healthy Workplace - Health Promotion Badge from the Health Promotion Administration, Ministry of Health and Welfare. In order to create a communication-friendly environment and reduce miscommunication and conflict, a lifeline instructor was invited to teach a soft communication course to improve observation and interpersonal skills. Timely assistance and care is also provided for persons involved in traffic accidents which occur outside the company. TXC will continue on working to create of a safe work environment to provide maximum safety to our employees.

(3) System certification ： With regard to the maintenance of various operating systems, TXC has received the following certifications in 2016: Quality Management System (ISO9001), Automotive Industry Quality Management System (ISO/TS16949), Environmental Management System (ISO14001), Taiwan Occupational Safety and Health Management System (CNS15506), Information Safety Management System (ISO/IEC27001), Hazardous Substance Process Management System (IECQ QC 080000:2012), Occupational Safety and Health Management System (OHSAS 18001:2007) as well as ISO 14064-1:2006 Greenhouse Gas Inventory, Product Carbon Footprint Verification (PAS 2050:2011) and Material Flow Cost Accounting Verification (ISO 14051:2011) and renewed SONY GP partner certication. TXC will continue to update its management systems to satisfy and surpass customer requirements
(4) Corporate governance and responsibility ：

TXC’s 2[nd] corporate governance rating ranked among the top 5% of publicly listed companies and the company will continue to strive forward by embracing the spirit of open mindedness,

dedication, honesty and happiness. Due to the long-term services provided by our company to neighboring disadvantaged families and orphanages, TXC was given the Bureau of Industrial Development’s Corporate Volunteering Award. In addition, the company participation in a number of volunteer activities to show concern for local neighborhoods was included the CSR report for AA1000/GRI G4 verification to demonstrate our results in the field of CSR.

一、 2017 Business Plan Summary ：
1 、 Business direction and major policy ：
(1) Continued upgrading to industry 4.0 ：
- In response to the low birth rate and rising pressing from stricter labor conditions, upgrading to industry 4.0 automation and informatization is definitely a major business strategy of TXC. Therefore, while continuing to invest in automated production equipment, our company will also continue to enter into cooperation with various companies. By upgrading to industry 4.0, TXC will further increase productivity and reduce the difficulties caused by manpower supply shortage
(2) Boosting R&D results ：
- Simultaneously upgrading R&D capacity and product competitiveness is the key to ensuring sustainable operations. Therefore, our R&D department will focus on new product development in 2017 to swiftly enter the market, earn customer trust and opportunities for cooperation. Product R&D is focusing on the following:
- UHF Low Jitter PLL XO, HF Automotive XO, communication base station ultra high stability TCXO, SMT miniaturized OCXO, miniaturized TF crystal, high stability SC-cut crystal, ultra-miniaturized 1210 crystal, 5G communication terminal thermistor crystal, integrated proximity sensing miniaturized multifunction sensor, PM2.5 sensing element.
(3) Continued capacity expansion ：
- As market demand increases, TXC will continue to expand capacity at our three plants. Total production capacity is forecast to be increased by 20% or more to satisfy customer demand for 。
- TXC products. As a result, company sales will see a certain level of growth
(4) Corporate governance
- In order to allow further execution of board functions, each of the company’s newly appointed independent directors have their own dedicated area of expertise which will strengthem board operations in the future and maintain our excellent corporate governance rating. A 。
- philothranpic foundation has also been established to help fulfill our CSR commitments.
2 、 Expected sales and basis ：
- TXC will be taking a cautious and conservative approach in 2017. In addition to the support provided by the existing customer orders, TXC is planning to expand production capacity for new products and raise product process optimization. As our company steadily wins customer certification and approval for automotive industry products and high-end precision products, TXC expects that these new automotive and high-end precision products will make up an increasingly higher percentage of sales. Our efforts to develop miniaturization, high frequency, low power consumption precision products are steadily bearing fruit and our product quality is widely trusted by domestic and international customers. By effectively managing customer relations and offering a diverse range of products, total consolidated sales in 2017 are forecast to exceed 3 billion units. Our global market share should also remain above 10% ranking within the top 5 manufacturers in the global quartz element industry.

In the Tale of Two Cities, Dickens wrote “it was the best of times; it was the worst of times. Looking forward, we have everything but nothing at all.’’ In this time of government chaos and economic turmoil, there are certainly excellent opportunities out there but it is the worst of times for companies who are unable to adapt. Faced with the explosion of information from the Internet of Things, we have nothing to cling to as we go forward. Directionless companies will receive nothing when trying

to navigate through these shadowy times. The dazzling year of 2016 has passed and the tough times of 2017 lie ahead. TXC needs to face the future with an attitude of ‘good can be even better’ and ‘facing challenges, welcoming challenges’ and our managers need to embrace a leadership spirit of ‘digging down deep to burn bright, lead and sacrifice’ and must-win determination when faced with this uncertain future. Only those who can compete will not be eliminated. Constant striving will bring victory in this race! Going forward to face our customers is our common path. Looking back to review ourselves is a indispensable way of thinking for self-criticism. Let’s work together to create a common future for all of our stakeholders.

II.Company Overview

A.Company Introduction

1. Date of the company´s incorporation

In addition, TXC has extended our core technology competence to related LED substrate processes and crossed over into the sapphire LED field to support future group expansion and development. Over the years, we have upgraded customer value objectives and offered customers a variety of frequency control components for module design-in requirements to provide a total solution to satisfy the overall requirements of customers. TXC performance with regard to price, quality, delivery time and service continues to exceed customer expectations time and time again.

2. Company History

1983 Founded in Taiwan with US$95,000 capital. 1984 Began production on DIP type crystals and oscillators in Peitou factory. 1993 ISO9002 certified. 1995 Winner of the 4[th] National Award of Small and Medium Enterprises. 1997 Began production of SMD type crystals and oscillators in Taoyuan factory. 1998 Began production os SAW devices.
Implemented Oracle ERP system.
1999 Established US sales office.
2000 Increased capital to US$25.3 million. 2001 IPO’ed with capital increased to US$37 million.
2002 Listed in the Taiwan Stock Exchange(Code-3042)
Ranked among the top 10 worldwide frequency control product manufacturers. 2003 Began to offer value-added products(HF CXO/VCXO,OCXO,FX,etc.) for the telecom market. Began production in new factory in NIngbo, China.
2004 Implemented QoS and 6-Sigma management systems. QS9000 certified.
Established US Technology Center. 2005 ISO/TS16949 certified.

Ranked number 6 among the worldwide frequency control product manufacturers.

2006 Expanding Tauouan factory. Adding production lines in Taiwan and China. The capacity reached to 70 million units per month. Authorized Capital: US$57.9 million.

2007 New factory in Pingzhen inaugurated, factory expansion project in Ningbo factory launched, Intel presented the Preferred Quality Supplier, promotion of the Six Sigma project to Ningbo plant green belt training, procurement of the Shenzhen office, implementation of employee stock option, CB conversion, and recapitalization of surplus to NT$2,415,530,000.

2008 Simultaneously expanded factories in Pingzhen, Taiwan and Ningbo, China; won Intel’s Supplier Continuous Quality Improvement (SCQI) Award; won A+ evaluation for information disclosure and top 10 potential golden torch award; continued to promote the 6-Sigma black belt training program at Ningbo and Pingzhen plants. Set up sales operations in Osaka, Japan and Singapore to promote sales. Issued employee options and implement the treasury stock system. Set up subsidiary TXC Hongkong; execute employee option, CB conversion, surplus conversion to increase capitalization to NT$2,716,980,000.

2009 Second phase of Taiwan Pingchen and China Ningbo plant expansion initiated, received A+ ranking and top 10 award at sixth annual Information Disclosure and Transparency Ranking, on-the-job training plan launched for personnel at Ningbo and Pingchen plants, received Preferred Quality Supplier Award recognition again from Intel, strengthen company internal controls to ensure corporate governance effectiveness, promoted transparency of corporate governance information, exercised employee stock warrants, convertible bonds, capital increase by retained earnings to NT$2,887.27 million.
2010 Issued third convertible bond, received corporate governance system evaluation certification from the Taiwan Corporate Governance Associations, received industry model award for the Technology Industry B group from Commonwealth Magazine, awarded National Quality Award from Executive Yuan, continued to implement 6-Sigma black belt training plan for Ningpo and Pingchen plants, set up sales office in Europe to expand business, purchased offices in Shanghai and Suzhou, started third phase of plant expansion for Taiwan PCF, purchased 5,733 level ground of land, built the factories for new energy business unit, execute employee stock option and increase capital out of earning to 2.971 billion NT dollars.
2011 Completion and launch of Taiwan Pingzhen Third-Stage plant expansion and New Energy Division plant, establishment if TXC (Chongqing) Electronics Co., Ltd. production site, established TXC (Chongqing) Corporation and Ningbo Jingyu Company Limited, expansion of European subsidiary, receives A+ grade and top 10 award at Eighth Annual Information Disclosure and Evaluation, passed CGR report review, received Energy Conservation Elite, Outstanding Innovation Award and Commonwealth Corporate Citizen Award, received Taoyuan County Corporate Innovation Award, received ISO50001 Energy Management System, ISO28000 Supplier Chain Management System, ISO27001 Information Security Management System certification, Oracle ERP system upgraded to R12 version, valid assessment of remuneration fairness combined with performance evaluation, establishment of remuneration committee, exercise of employee stock warrants, NT$3,022,420,000 capital increase by capital surplus.
2012 TXC (Chongqing) Corporation plant construction, awarded Authorized Economic Operator (AEO) by the MOF Customs Administration, passed BSI greenhouse gas (ISO 14064-1), product carbon footprint (PAS 2050) inventory, product carbon neutralization (PAS 2060) inventory, given Corporate Citizenship Award by Commonwealth Magazine, received green sustainable enterprise award from BSI, external certification of CSR Report conformed to GRI G3.1 A+ and AA 1000 standards, passed CNS 15506 TOSHMS, awarded ninth annual Information Disclosure and Transparency A++ and top ten ranking, exercised employee stock options, convertible bond and NT$3,097,579,000 capital increase.
2013 Issued fourth convertible bond, TXC (Chongqing) Corporation begin formal mass production, received Taiwan Mittlestadt Award from the Ministry of Economic Affairs, passed review for R&D subsidy for a leading new product development project from the Industrial Development Bureau, was awarded CG6008 Advanced Corporate Governance certification, 10[th] annual A++ information disclosure assessment rating, passed greenhouse gas inventory (ISO14064-1), product carbon footprint inventory (PAS2050) and product carbon neutrality (PAS2060) verification, named as one of the top 50 Excellence in CSR

Award winners by Commonwealth Magazine and a three star 3[rd] annual Happiest Company Award from the Taipei City Government Department of Labor
2014 TXC’s Pingzhen Plant, Ningbo Plant and Chongqing Plant expanded in 2014, new offices in Shenzhen and Beijing were bought, won the A++ award for the Eleventh Information Disclosure Assessment, the Fourth Place in the 8th Global Corporate Citizens Award for Pillar Enterprises of Commonwealth Magazine, the 2nd Excellent Enterprise in Hiring Foreign Workers of Taoyuan County Government, the silver award of Taiwan Top50 Enterprises Sustainability Report Award for large high-tech electronics manufacturing industry of Taiwan’s Sustainable Energy Research Foundation, and passed certification of Greenhouse Gas Inspection (ISO14064-1), Corporation Sustainability Report, Product Carbon Footprint (PAS2050), Product Carbon Neutralization (PAS 2060), Information Security Management System (ISO 27001), Supply Chain Security Management System (ISO 28000) and Water Footprint for Information Security Launching Award and the GRC Management Paradigm Award by the British Standards Institute.
2015 Taiwan Pingzhen factory and TXC (Chongqing) continued production line expansion; successfully renewed “Authorized Economic Operator (AEO)” certification; received 12th “Information Disclosure Evaluation” A++ award; ranked within the top 20% of well-administered companies for the first time; passed “Greenhouse Gas Inspection (ISO14064-1); recognized by Huawei as “2015 Core Supplier”; praised by the British Standards Institution with an “Outstanding Management Model Award”; recognized by CommonWealth Magazine as a “Commonwealth CSR Corporation”; promoted Industry 4.0 intelligent factory transformations; the company’s LED department officially established itself as a separate entity under the name TXC OPTECH Corporation.; the joint venture, Guangdong Failong Crystal Technology Co. Ltd., was officially listed on the Shenzhen Stock Exchange.
2016 Taiwan Pingzhen factory, Ningbo factory, and Chongqing factories continue expanding production lines; receives subsidies through the Department of Commerce Department of Industry Manufacturing Upgrade and Innovation Optimization Plan (particulate matter sensor development); ranked within the top 5% of well-administered companies; Awarded Authorized Economic Operator (AEO) certification by the Ministry of Finance, received EPA’s Product Carbon Footprint Emission Factor Database Establishment Award, received BSI’s Environment Governance Practice Award, BSI occupational safety and health certificcations and BSI CSR report verification.
2017 Continued expansion of the production lines at Taiwan’s Pingzhen Plant, Ningbo Plant and Chongqing plant. Third corporate governance rating ranked within the top 5% of rated companies, received Bureau of Industrial Development’s Corporate Volunteering Award, passed Material Flow Cost Accounting Verification (ISO14051 MFCA), established the TXC Philantrophy Foundation, purchased office in Suzhou.

B `、` Company Structure and the Subsidiaries

The chart of TXC corporation and the subsidiaries

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2. The basic data of the subsidiaries

				December 31,2016
Name	Incorporated	Address	Capital	Business Nature
Taiwan Crystal Technology International Limited	1998.12.23	WESTERN SAMOA	USD 42,835,294	Investment holding
Growing Profits Trading Ltd	1999.03.09	BRITISH VIRGIN ISLANDS	USD 50,000	National trading
TXC (NGB) Electronic Co., Ltd. corporation	1999.03.12	No.189, Huangshan Xi Rd., Economic & Technical Development Zone,Ningbo Zhejiang,China	USD 45,835,294	Manufacture and sales of electronics products
TXC Technology Inc	2000.12.01	431 Lambert Road,Suite 306 Brea,California92812,U.S.A.	USD 300,000	Marketing activities
TXC Japan Corporation	2005.09.13	Davinici-shin-yokohama Bldg.,1-3-1, Shin-yokohama, Kohoku-ku,Yokohama,222-00 33 Japan	YEN 21,000,000	Marketing activities
TAIWAN CRYSTAL TECHNOLOGY(HK)LIMITED	2010.07.06	Rm.804, Sino Centre, 582-592 Nathan Rd.,Kln.H.K	USD 10,080,000	Investment holding
TXC (Chongqing) Electronic Co., Ltd. corporation	2010.10.11	JinFeng Industrial Region, Jiulongpo District, Chongqing City,China	RMB 187,876,609	Manufacture and sales of electronics products
Chongqing All Suns Company Limited	2011.02.14	Jiulongpo District, Chongqing, China JinfengRoad 108,	RMB 66,000,000	Marketing activities

Ningbo Jingyu Company Limited	2011.09.07	No.189, Huangshan Xi Rd., Economic & Technical Development Zone,Ningbo Zhejiang,China	RMB 1,000,000	Purchasing and selling electronic component
TXC OPTECH Corporation	2015.04.22	No.4, Gongye 6thRd., Pingzhen Dist,Taoyuan City	NTD 215,000,000	Manufacturers of electronic components
Ningbo free trade zone jingyue trading company	2016.06.29	Ningbo FTZ International DevelopmentBuilding 303-5 room	RMB 200,000	Purchasing and selling electronic component

III. Corporate Governance

A. Directors

April 10, 2017

. Directors			April 10,2017
Title	Name	Major academic (professional) experience	Current position in our company or other company

Chairman of Board of Directors	Lin, Jin-Bao	MBA, West Texas A&M University, USA	Chairman of the Board of Director of Tai Shin Electronics Corporation Chairman of the Board of Director of TXC Ninpo Corp Director of Protech Systems Co.Ltd
Vice-Chairman of Board of Directors	Hsu, Der-Jun	Kei-Nan Institute of Technology and Business	Chairman of the Board of Director of Chan-Yu Corporation Chairman of the Board of Director of Kuan-Ya Int’l Corporation Chairman of the Board of Director,TCTI Corporation
Director of Board	Go, Tien-Chong	Electronics Dept, Taipei Institute	Vice president of ESS Technology International Inc.
Corporate Director of Board	TLC Capital Co.,LTD	Director of TXC Corporation	Director of TXC Corporation Director of Simplo Technology
Director of Board	Lin, Wan-Shing	Master in Management, Taipei Science and Technological University	Chairman of the Board of Director of Tai Shin Electronics Corporation Chairman of the Board of Director of TXC Ninpo Corp Director of Protech Systems Co.Ltd.
Director of Board	Chen Chueh, Shang-Hsin	Master of management, Zhejiang University	Director ofTai Shing Electronics Components Corporation
Director of Board	Golden Talent Investment Holding co., Limited	Director of TXC Corporation	Director of TXC Corporation
Independent Director of Board	Yu, Shang-Wu	Ph.D., Birmingham University	Professor, Ming Chi University of Technology college of management and design
Independent Director of Board	Cai, Song-Qi	Finance and Accounting Department of Shanghai University Business Administration, National Chengchi University	Chairman of the Board of Director of EMCC Human Capital Solutions Inc
Independent Director of Board	Su Yan-Syue	Master in Industrial Management of Carnegie Mellon University, USA	Director ofKinsus Interconnect Technology Corp.
Independent Director of Board	Wang Chuan -Fen	Master in Law of Columbia University, USA	Partner of Chen & Lin Law Firm

B. Personnel data of the general manager, vice general manager, assistant vice general manager, chief of divisions

general manager, chief of	general manager, chief of	divisions
			April 10,2017
Title	Name	Date of	Major academic (professional)	Other part time position with
		employment		other companies
General Manager	Lin, Wan-Hsing	1989.11.11	Master in Management, Taipei Science and Technological University	Chairman of the Board of Director of Tai Shin Electronics Corporation Chairman of the Board of Director of TXC Ninpo Corp. Independent Director of Protech Systems Co.Ltd.
Vice General Manager	Chen Chueh, Shan-hsing	2002.04.01	Master of management, Zhejiang University	President of TXC Ninpo Corp. Chairman of the Board of Director, Shin Mau Electronics Corporation
Vice General Manager	Chang, Qi-Zhong	2006.04.01	Executive Master of Business Administration, EMBA National Chiao Tung University College of Management	-
Vice General Manager	Kuo, Ya-Ping	2009.08.01	BOSTON UNIVERSITY, MBA	General Manager of TXC Optec Corporation
Vice General Manager	LI,WAN-CHIN	2011.01.31	Ph.D., National Taiwan University of Science & Technology, Department of Business Administration Vice President, Sequel Technology, Inc.	-
Vice General Manager	CHANG, CHIEN-TSUNG	2012.01.01	City University of Macau, MBA Plant Manager, Taitien Electronics Co., Ltd.	Vice General Manager ofTXC Ninpo Corp
Vice General Manager	CHAO, MIN-CHIANG	2012.01.01	Ph.D., Naval Architecture & Ocean Engineering, National Taiwan University Engineer, Biomedical Engineering Center, ITRI	Vice General Manager ofTXC Ninpo Corp
Vice General Manager	Hsu, Wan-Thai	2015.08.17	PhD. of Graduate Institute of Electrical Engineering,Universityof Michigan	-
Vice General Manager	YU, FANG-MING	2012.01.01	Department of Electronic Engineering, Oriental Insitute of Technology	Vice General Manager of TXC(Chongqing)Corp
Group Marketing Director	WANG, TANG-HSING	2016.03.01	MBA of San Jose State University, USA	-
Vice General Manager	CHOU, CHIEN-FU	2017.04.01	Master of National Taiwan of Science and Technology	General Manager of TXC (Chongqing) Corp Chairman of the Board of Director of Chongqing All Sun CompanyLimited
Assistant Vice General Manager	Kuo,Ya Han	2009.08.01	West Coast University, MBA	-
Assistant Vice General Manager	Lin,Sufen	2010.07.01	Electrical Department of Kaohsiung Institute	-
Assistant Vice General Manager	Lin,Shi Bo	2011.01.31	Master of Physics, UC, Riverside, USA	-
Assistant Vice General Manager	Su, Zheming	2011.01.31	Department of Electrical Engineering, National Taiwan Ocean University	-
Assistant Vice General Manager	Liu, Hsu-Er	2015.06.01	Master of Department of Materials Science and Engineering, National Taiwan University	Assistant Vice General Manager ofTXC Ninpo Corp
Assistant Vice General Manager	Su, Jing-Sheng	2105.12.05	Master of Department of Electrical Engineering,National TsingHua University	-
Chief Financial Officer	Hong,Gon-Wen	2003.03.11	MBA, National Taipei University	Supervisor of Win win precision technology

Wang, Tang-Hsing , Vice General Manager ,named group marketing director, on March 1, 2016.

C. Remuneration and Compensation Paid to Directors, and General and Vice General Managers

(1) Remuneration Paid to Directors (including Independent Directors)

																December 31,2016 Unit: Shares,NT$1,000	December 31,2016 Unit: Shares,NT$1,000	December 31,2016 Unit: Shares,NT$1,000	December 31,2016 Unit: Shares,NT$1,000	December 31,2016 Unit: Shares,NT$1,000	December 31,2016 Unit: Shares,NT$1,000	December 31,2016 Unit: Shares,NT$1,000
Title	Name	Director’s Remuneration								~~T~~otal Remuneration (A+B+C+D) as a % of Net Income (Note 10)		Compensation E				arned bya Director Who is an Employee				Total Compensation A+B+C+D+E+F+G)as a % of Net Income (Note 10)		Compensation Paid to Directors from Non-Consolidated Affiliates (Note 11)
		Base Compensation(A) (Note 2)		Severance Pay and Pensions (B)		Compensation to Directors (C) (Note 3)		Allowances (D) (Note 4)				Base Compensation, Bonuses and Allowances (E) (Note 5)		Severance Pay and Pensions (F)		Compensation to Employees (G) (Note 6)
		From TXC	From All Consolidated Entities (Note 7)	From TXC	From All Consolidated Entities (Note 7)	From TXC	From All Consolidated Entities (Note 7)	From TXC	From All Consolidated Entities (Note 7)	From TXC	From All Consolidated Entities (Note 7)	From TXC	From All Consolidated Entities (Note 7)	From TXC	From All Consolidated Entities (Note 7)	From TXC		From All Consolidated Entities (Note 7)		From TXC	From All Consolidated Entities (Note 7)
																Cash	Stock	Cash	Stock
Chairman of Board of Directors	Lin, Jin-Bao	0	0	0	0	18,970	18,970	1,170	1,170	1.9820	1.9820	7,937	14,077	728	728	2,500	0	2,500	0	3.0807	3.6849	3,015
Vice-Chairman of Board of Directors	Hsu, Der-Jun
Director of Board and General Manager	Lin, Wan-Shing
Director of Board	Chen Chueh Shang-Hsin
Director of Board	Go Tien-Chong
Director of Board	TLC Capital Co.,LTD
Director of Board	Golden Talent Investment Holding co., Limited
Independent Director of Board	Yu, Shang-Wu
Independent Director of Board	Cai, Song-Qi
Independent Director of Board	Su Yan-Syue
Independent Director of Board	Wang Chuan -Fen

Remuneration Scale

	Remuneration Scale	Remuneration Scale	Remuneration Scale
Remuneration Paid to Directors	Director Names
	Total Remuneration (A+B+C+D)		Total Compensation	(A+B+C+D+E+F+G)
	From TXC (Note 8)	From All Consolidated Entities (Note 9) H	From TXC (Note 8)	From All Consolidated Entities (Note 9) I
Less than NT$2,000,000	Hsu, Der-Jun, Chen Chueh Shang-Hsin, Go Tien-Chong, Yu, Shang-Wu, Cai, Song-Qi, Su Yan-Syue,Wang Chuan –Fen,Golden Talent Investment Holding co., Limited (Chou, Ming-chih) `、`TLC Capital Co., LTD (Chang Wen-Chin)	Hsu, Der-Jun, Chen Chueh Shang-Hsin, Go Tien-Chong, Yu, Shang-Wu, Cai, Song-Qi, Su Yan-Syue,Wang Chuan –Fen, Golden Talent Investment Holding co., Limited (Chou, Ming-chih) ,TLC Capital Co., LTD (Chang Wen-Chin)	Go Tien-Chong, Yu, Shang-Wu, Cai, Song-Qi, Su Yan-Syue ,Wang Chuan –Fen, Golden Talent Investment Holding co., Limited (Chou, Ming-chih) ,TLC Capital Co., LTD (Chang Wen-Chin)	Go Tien-Chong, Yu, Shang-Wu, Cai, Song-Qi, Su Yan-Syue ,Wang Chuan -Fen, Golden Talent Investment Holding co., Limited (Chou, Ming-chih) ,TLC Capital Co., LTD (Chang Wen-Chin)
NT$2,000,000 –NT$4,999,999	Lin, Jin-Bao, Lin, Wan-Shing	Lin, Jin-Bao, Lin, Wan-Shing	Hsu, Der-Jun, Chen Chueh Shang-Hsin	Hsu, Der-Jun
NT$5,000,000 - NT$9,999,999			Lin, Jin-Bao, Lin, Wan-Shing	Lin, Jin-Bao, Lin, Wan-Shing, Chen Chueh Shang-Hsin
NT$10,000,000 - NT$14,999,999
NT$15,000,000 - NT$29,999,999
NT$30,000,000 - NT$49,999,999
NT$50,000,000 - NT$99,999,999
NT$100,000,000 and above
Total	11persons	11persons	11persons	11persons

Note 1: Director names shall be listed separately (the shareholder name and representative shall be listed separately for corporate directors) and each payment amount shall be disclosed as a summary. If directors concurrently serve as general and vice general managers, list in this Table and Tables (3-1) or (3-2) below.
Note 2: 2016 director remuneration (includes director salary, allowances, severance pay, various bonuses and incentives). Note 3: 2016 compensation to directors passed by the Board of Directors in 2017.
Note 4: Related 2016 director allowances (including travel expenses, special expenses, all kinds of allowances, accomodations, substantive objects offered in the form of vehicles and etc.). If real estate, cars and other transportation or exclusive personal expenses are offered, the asset category and cost, actual rent or rent calculated at fair market value, fuel expenses and other payments shall be disclosed. If a driver is assigned, attach an explanation of the driver’s related compensation but do not include the compensation into the remuneration.
Note 5: 2016 directors who concurrently hold positions in the company (including the general manager, vice general managers, other managers and employees) receive remunerations including salary, duty differential pay, severance pay, all kinds of bonuses, incentive pays, accomodations, and substantive objects offered in the form of vehicles. If real estate, cars and other transportation or exclusive personal expenses are offered, the asset category and cost, actual rent or rent calculated at fair market value, fuel expenses and other payments shall be disclosed. If a driver is assigned, attach an explanation of the driver’s related compensation but do not include the compensation into the remuneration.
Note 6: 2016 directors concurrently hold positions in the Company (including the general manager, vice general managers, other managers and employees) who receive employee bonuses (including stock and cash) shall disclose the 2016 employee compensation amounts passed and distributed by the 2017 Board of Directors meeting. If estimation is not possible, calculate this year’s proposed distribution amounts based on the actual percentages distributed for the previous year and list in Table 1-3.

Note 7: The total of all compensation items from all consolidated entities (including the Company) paid to Company directors shall be disclosed.

Note 8: The total of each of the remuneration items paid by the Company to each director are disclosed under the corresponding director name in the scale.

Note 9: The total of each of the remunderation items paid by all consolidated entities to Company directors shall be disclosed under the corresponding director name in the scale.
Note 10: Net Income refers to 2016 net income: Those who have adopted IFRS, net income refers to the net income in individual or separate financial reports for the most recent year.
Note 11: a. This column shall clearly list the related remuneration amounts from reinvested companies other than subsidiaries.
b. If Company directors receive remuneration from reinvested companies other than subsidiaries, the remuneration received by Company directors from reinvested companies other than subsidiaries is included in the Remuneration Scale column and the column is renamed All Reinvested Entities.
c. Compensation and remuneration refers to the compensation and remuneration (employee, director and supervisor remuneration), business execution expenses and other related remuneration received by Company directors as directors, supervisors and managers of reinvested entities other than subsidiaries.

(2) Compensation Paid to Executive Officers

								December 31,2016 Unit: Thousand Shares,NT$1,000 Employee Compensation (D) (Note 4) Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）` Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9) From TXC From All Consolidated Entities (Note 5) From TXC From All Consolidated Entities (Note 5) Cash Stock Cash Stock 8,600 0 8,600 0 3.8019 5.1227 3,015	December 31,2016 Unit: Thousand Shares,NT$1,000 Employee Compensation (D) (Note 4) Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）` Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9) From TXC From All Consolidated Entities (Note 5) From TXC From All Consolidated Entities (Note 5) Cash Stock Cash Stock 8,600 0 8,600 0 3.8019 5.1227 3,015	December 31,2016 Unit: Thousand Shares,NT$1,000 Employee Compensation (D) (Note 4) Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）` Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9) From TXC From All Consolidated Entities (Note 5) From TXC From All Consolidated Entities (Note 5) Cash Stock Cash Stock 8,600 0 8,600 0 3.8019 5.1227 3,015	December 31,2016 Unit: Thousand Shares,NT$1,000 Employee Compensation (D) (Note 4) Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）` Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9) From TXC From All Consolidated Entities (Note 5) From TXC From All Consolidated Entities (Note 5) Cash Stock Cash Stock 8,600 0 8,600 0 3.8019 5.1227 3,015	December 31,2016 Unit: Thousand Shares,NT$1,000 Employee Compensation (D) (Note 4) Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）` Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9) From TXC From All Consolidated Entities (Note 5) From TXC From All Consolidated Entities (Note 5) Cash Stock Cash Stock 8,600 0 8,600 0 3.8019 5.1227 3,015	December 31,2016 Unit: Thousand Shares,NT$1,000 Employee Compensation (D) (Note 4) Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）` Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9) From TXC From All Consolidated Entities (Note 5) From TXC From All Consolidated Entities (Note 5) Cash Stock Cash Stock 8,600 0 8,600 0 3.8019 5.1227 3,015	December 31,2016 Unit: Thousand Shares,NT$1,000 Employee Compensation (D) (Note 4) Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）` Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9) From TXC From All Consolidated Entities (Note 5) From TXC From All Consolidated Entities (Note 5) Cash Stock Cash Stock 8,600 0 8,600 0 3.8019 5.1227 3,015
Title	Name	Base Compensation(A) (Note 2)		Severance Pay and Pensions (B)		Bonuses and Allowances (C) (Note 3)		Employee Compensation (D) (Note 4)				Total Compensation as a % of Net Income (A+B+C+D) (Note 8`）`		Compensation Paid to Directors from Non-Consolidated Affiliates (Note 9)
		From TXC	From All Consolidated Entities (Note 5)	From TXC	From All Consolidated Entities (Note 5)	From TXC	From All Consolidated Entities (Note 5)	From TXC		From All Consolidated Entities (Note 5)		From TXC	From All Consolidated Entities (Note 5)
								Cash	Stock	Cash	Stock
Chairman of the Board of Directors	Lin, Jin-Bao	20,495	26,407	1,983	1,983	7,555	15,065	8,600	0	8,600	0	3.8019	5.1227	3,015
Vice-Chairman of the Board of Directors	Hsu, Der-Jun
General Manager	Lin, Wan-Shing
Vice General Manager	Chen Chueh Shang-Hsin
Vice General Manager	Kuo, Ya-Ping
Vice General Manager	Chang Qi-Zhong
Vice General Manager	Adam Lee
Vice General Manager	Colin Chang
Vice General Manager	M.K. Chao
Vice General Manager	Stephen You
Vice General Manager	Hsu, Wan-Thai
Group Marketing Director	WANG,TA NG-HSIN G

Note: Wang,Tang-Hsing ,Vice General Manager named group marketing director, on March 1, 2016.

＊ Regardless of the position, those positions equivalent to President and Vice-President (i.e.: President, CEO and Director) have all been disclosed.

Compensation Scale

CompensationScale
Compensation Paid to Senior Executives	Names of Senior Executives
	The Company (Note 6)	The Company in the financial report`（`Note 7`）`
Less than NT$2,000,000
NT$2,000,000 –NT$4,999,999	Lin, Jin-Bao, Hsu, Der-Jun, Lin, Wan-Shin,Chen Chueh Shang-Hsin, Kuo, Ya-Ping, Chang Qi-Zhong, Li,Wan-Chin, Chang,Chien-Tsung, Chao,Min-Chiang, Yu,Fang-Ming, Wang,Tang-Hsing	Lin, Jin-Bao, Hsu, Der-Jun, Kuo, Ya-Ping, Chang Qi-Zhong Li,Wan-Chi, Chang,Chien-Tsung, Chao,Min-Chiang, Yu,Fang-Ming
NT$5,000,000 - NT$9,999,999	Hsu Wan-Thai	Lin, Wan-Shin,Chen Chueh Shang-Hsin,Hsu Wan-Thai, Wang,Tang-Hsing
NT$10,000,000 - NT$14,999,999
NT$15,000,000 - NT$29,999,999
NT$30,000,000 - NT$49,999,999
NT$50,000,000 - NT$99,999,999
NT$100,000,000 and above
Total	12 persons	12 persons

Note 1: The names of general and vice general managers shall be listed separately (the shareholder name and representative shall be listed separately for corporate directors) and each payment amount shall be disclosed as a summary. If there are directors that concurrently serve as a general and vice general managers, list in this Table and Tables (1-1) or (1-2) below.
Note 2: Lists 2016 salary, allowances and severance pay for the general and vice general managers.
Note 3: Lists 2016 general and vice general manager bonuses, incentives, travel expenses, special expenses, all kinds of allowances, accomodations, substantive objects offered in the form of vehicles and other remuneration). If real estate, cars and other transportation or exclusive personal expenses are offered, the asset category and cost, actual rent or rent calculated at fair market value, fuel expenses and other payments shall be disclosed. If a driver is assigned, attach an explanation of the driver’s related compensation but do not include the compensation into the remuneration
Note 4: 2016 directors concurrently hold positions in the Company (including the general manager, vice general managers, other managers and employees) who receive employee bonuses (including stock and cash) shall disclose the 2016 general manager and vice general manager employee compensation amounts passed and distributed by the 2017 Board of Directors meeting. If estimation is not possible, calculate this year’s proposed distribution amounts based on the actual percentages distributed for the previous year and list in Table 1-3. Net Income refers to the most recent year’s net income: Those who have adopted IFRS, net income refers to the net income in individual or separate financial reports for the most recent year.
Note 5: The total of all compensation items from all consolidated entities (including the Company) paid to Company general managers and vice general managers shall be disclosed.
Note 6: The total of each of the remuneration items paid by the Company to each general and vice general manager shall be disclosed under the corresponding general manager and vice general manager names in the scale.
Note 7: The total of each of the remuneration items paid by all consolidated entities (including the Company) to each general and vice general manager shall be disclosed under the corresponding general and vice general manager name is the scale.
Note 8: Net Income refers to 2016 net income: Those who have adopted IFRS, net income refer to the net income in individual or separate financial reports for the most recent year.

Note 9: a. This column shall clearly list the related remuneration amounts from reinvested companies other than subsidiaries.
b. If Company general and vice general managers receive remuneration from reinvested companies other than subsidiaries, the remuneration received by Company directors from reinvested companies other than subsidiaries is included in Remuneration Scale Column E and the column is renamed All Reinvested Entities.
c. Remuneration refers to the compensation and remuneration (employee, director and supervisor remuneration), business execution expenses and other related remuneration received by Company general and vice general managers serving as directors, supervisors and managers of reinvested entities other than subsidiaries.
＊ There are differences in the income concept in the remuneration information disclosed in this Table and income tax laws so this Table is used for information disclosure and not taxation purposes.

(3) Profit Sharing Distributed to Managers (Proposed 2016 Employee Profit Sharing Amounts)

December 31, 2016 Unit: Thousand Shares, NT$ 1,000

	Title	Name	Stock	Cash	Total	Total as a % of Net Income
Managers	Chairman of Board of Director	Lin, Jin-Bao	0	14,800	14,800	1.4565
	Vice-Chairman of Board of Director	Hsu, Der-Jun
	General Manager	Lin, Wan-Shing
	Vice General Manager	Chen Chueh Shang-Hsin
	Vice General Manager	Kuo, Ya-Ping
	Vice General Manager	Chang Qi-Zhong
	Vice General Manager	Li,Wan-Chi
	Vice General Manager	Chang,Chien-Tsung
	Vice General Manager	Chao,Min-Chiang
	Vice General Manager	Yu,Fang-Ming
	Vice General Manager	Hsu, Wan-Thai
	Group Marketing Director	Wang,Tang-Hsing
	Assistant Vice General Manager	Kuo, Ya Han
	Assistant Vice General Manager	Lin,Su-Fen
	Assistant Vice General Manager	Su,Che-Ming
	Assistant Vice General Manager	Lin, Shi-Bo
	Assistant Vice General Manager	Liu, Hsu-Er
	Assistant Vice General Manager	Su, Jing-Sheng
	Chief Financial Officer	Hong, Gon-Wen

Note 1: Name and title of individuals shall be disclosed but earning distribution shall be disclosed in 18

summarized form.

Note 2: Employee remuneration amounts (including stocks and cash) for managers passed by the 2017 Board of Directors meeting. If estimation is not possible, calculate this year’s proposed distribution amounts based on the actual percentages distributed for the previous year. Net Income refers to 2016 net income: Those who have adopted IFRS, net income refers to the net income in individual or separate financial reports for the most recent year.
Note 3: The scope of application for managers is determined according to the rules set down in the March 27, 2003 Tai-tsai-cheng-san no. 0920001301 letter. The scope is as follows:
(1) President and equivalent level personnel
(2) Vice president and equivalent level personnel
(3) Assistant vice general manager and equivalent level personnel
(4) Financial department supervisor
(5) Accounting department supervisor
(6) Other persons handling company management affairs and with signature authority.
Note 4: If directors, presidents and vice presidents receive employee compensation (including stocks and cash), the compensation shall be listed in Table 1-2 and additionally in this Table.
Note 5: Wang,Tang-Hsing, Vice General Manager named group marketing director, on March 1, 2016.

(4) Top 10 Recipients of Employee Profit sharing (employee profit sharing from 2016 earnings received in 2017)

Unit: Thousand Shares, NT$ 1,000

Title	Name	Stock	Cash
Vice General Manager	Chen Chueh Shang-Hsin	0	9,468
Vice General Manager	Chang, Qi-Zhong
Vice General Manager	Chao,Min-Chiang
Vice General Manager	Yu,Fang-Ming
Assistant Vice General Manager	Kuo, Ya Han
Assistant Vice General Manager	Lin,Su-Fen
Assistant Vice General Manager	Su,Che-Ming
Assistant Vice General Manager	Lin, Shi-Bo
Assistant Vice General Manager	Su, Jing-Sheng
Chief Financial Officer	Hong, Gon-Wen

(5) Remuneration by the Company to individual directors shall be disclosed under the following circumstances:
Remuneration to individual directors shall be disclosed if there have been consecutive after-tax losses for the previous two year: Not applicable.
Remuneration to individual directors shall be disclosed in the event of insufficient director shareholdings for three consecutive months in the most recent year: Not applicable
If there are directors with an average pledged share ratio of over 50% for any three months in the most recent years, the individual director(s) with the average pledged share ratio exceeeding 50% for each of these months shall be disclosed: Not applicable.
(6) Individually compare and explain the analysis of the remuneration paid to Company directors,

general and vice general managers as a percentage of net income by the Company and all consolidated entities over the past two years and explain the remuneration payment policy, standard and mix, procedure for setting remuneration and operation performance and future risk correlation.

Remuneration Paid to Company Directors, General and Vice General Managers as a Percentage of Net Income by the Company over the Past Two Years

				Unit: %
Title		Remuneration as Percentage of Net		Income
		2016		2015
	From TXC	From All Consolidated Entities	From TXC	From All Consolidated Entities
Director	3.08	3.68	3.17	3.91
General Manager and Vice General Manager	3.80	5.12	3.41	4.83

Note 1 2016 director and general and vice general manager remuneration amounts are passed and distributed by the 2017 Board of Directors meeeting so the remuneration at percentage of net income calculations in this column are temporary estimates.

Note 2 Actual numbers were used for the 2015 calculations.

Company director remuneration is determined based on the Company’s Articles of Incorporation. Fair remuneration is provided by considering Company operation results and contributions towards company performance. General and vice general manager remuneration payment policy is based on the Company’s Salary Management Rules and salary levels for that job position in the industry market, the scope of authority of that job position inside the Company and degree of contribution toward operation targets. The procedure for setting remuneration follows evaluation and review procedures in the Company’s Director and Manager Performance Evaluation Rules. In addition to referring to the Company’s overall operational performance, future industry risks and development trends, individual performance achievement rates and contribution towards company performance is considered in order to provide fair compensation. The fairness of related performance evaluations and remuneration are reviewed by the salary and compensation committee and Board of Directors. The remuneration system is discussed at appropriate times based on actual operating conditions and with respect to related laws to achieve a balance between sustainable company operation and risk control.

D. Corporate governance and variations with management principles of publicly-listed companies and reasons

Assessment Items			Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
1. Comply with General Guideline of publicly-listed companies and disclose company’s practical guideline in corporate governance?	Yes		TXC has formulated the Practical Guideline for Corporate Governance, and set up effective regulations governing corporate governance framework, protection of the rights and benefits of shareholders, strengthening the function of the board of directors, bringing up the function of the Auditing Committee, showing respect for the rights and benefits of the stakeholder, and enhancing the transparency of information. For details refer to the website: http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=6	Conforms with best-practice principles, no discrepancy
2. Company shareholding Structure and shareholders’ rights
`（`1）Has the Company formulated internal operating procedures for handling proposals, doubts, disputes and litigation of shareholders and follow procedures for implementation.	Yes		TXC has formulated procedures for handling proposals, doubts, disputes and litigation for protection of communication between the stakeholders and the company management, and timely find out and handle the various problems, as well as having dedicated persons for handling relevant matters. TXC also handles proposals and rights and benefits of relevant shareholders for subsidiaries. For details refer to the website: http://www.txccorp.com/index.php?action=e_company_1-1&cid=6	Conforms with best-practice principles, no discrepancy
`（`2`）`Has the Company the list of the major shareholders with de fact control of the Company and the final controllers of the major shareholders?	Yes		In accordance with Article 25 of the Securities Trading Act, requires monthly posting of changes in shareholding of the internal staff including directors, managers and shareholders with over 10% equities, on the open information observation website specified by the Securities and Futures Bureau.	Conforms with best-practice principles, no discrepancy
`（`3`）`Has the Company set up a firewall mechanism for executing risk control of affiliated enterprises?	Yes		Aside from formulation of various risk control mechanisms, the Company also has formulated relevant operation methods for the operation, business and finance with the affiliated enterprises. For instance, in the subsidiary operation method TXC has formulated decision making and approval for the subsidiaries, the management of trading by the associates, specific companies, associates and group trading operation procedures, aside from counseling internal control for the subsidiaries in writing. Moreover, similar to that of the parent company, the acquisition or disposal of assets handling procedures, endorsement method, operation method for loaning to other persons, handling procedures for trading of derivative financial commodities so as to implement the risk control mechanism for subsidiaries. Subsidiaries have already formulated respective risk control mechanisms, and set up risk control mechanisms and firewalls with the affiliated enterprises according to the relevant operatingmethods of the Company.	Conforms with best-practice principles, no discrepancy

Assessment items			Operation status (Note1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
`（`4`）`Has the Company formulated internal regulations prohibiting internal staff utilizing information not yet open to the market for trading of securities?	Yes		In 2012 the Company formulated the Operating Procedure for Prevention of Insider Trading and`「`Regulations on whistle-blowing of illegal and unethical or dishonest conduct`」`to prohibit the internal staff utilizing information not yet open to the market for trading securities.	Conforms with best-practice principles, no discrepancy
3. Members and duties of board of directors
`（`1）Has the Board of Directors drafted policies for a diversified board framework?	Yes		The Company board members have different professional backgrounds and work fields for implementing the board framework. Two women were elected as independent directors at the June 7, 2016 shareholders’ meeting. The members of board of directors possess a diverse range of expertise in the fields of industry, law, finance, accounting, investment management and operations management. The relevant fields of expertise are stated in Note 2.	Conforms with best-practice principles, no discrepancy
`（`2`）`Aside from setting up the Remuneration Committee and the Auding Committee according to the law, is it willing to set up other function committees?	Yes		Aside from setting up the Remuneration Committee and the Auditing Committee according to the law, the Company also has set up the Environmental and Social Committee and the Economic Committee, and formulated operating methods for the economic, environmental and social committees. For details refer to the website: http://www.txccorp.com/index.php?action=f_social_1&cid=2	Conforms with best-practice principles, no discrepancy

`（`3`）`Has the Company formulated board performance assessment method and regularly carry out performance assessment every year?	Yes		The Company has formulated the Directors and General Manager Performance Assessment Method. The performance of the board of directors is regularly evaluated (at least once per year), and regularly carry out performance assessment of the board every year and forward to the Remuneration Committee and the Board of Directors for discussion. Director performance evaluations are performed externally at least once every three years. The evaluation procedure divides the assessment into three sections: (1) Assessment of company overall operation performance and actual operation conditions of the board of directions. The boards of directors’ performance assessment items are divided into five financial indicators including consolidated revenue and net profit achievement rate, competitor performance comparison and 15 non-financial indicators including director independence, director average attendance and education & training. (2) Board members must conduct a 25-item self-assessment each year including understanding of company targets and mission, awareness of director duties and internal relationship operation and communication. (3) The assessment items of the chairman and the administration department of the board of directors include 10 items including observance of related laws and regulations and participation in company operations in accordance to the board member assessment form. The chairman is authorized to approve the weight of each assessment item. The company’s 2016 board of director performance evaluation has been completed and it passed review by the remuneration committee on April 24, 2017 and board of directors on April 24, 2017. Refer to the website for the related evaluation items and results. For details refer to the website:http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=6	Conforms with best-practice principles, no discrepancy

Assessment items	Operation status (Note1)	Operation status (Note1)	Operation status (Note1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
(4) Has the Company regularly assessed the independence of the certified accountant?	Yes		In order to strengthen the independence of the CPA and his /her familiarity with company business, an evaluation of CPA independence, competency and performance is performed by the company each year and an assessment is done based on the CPA Evaluation and Performance Assessment Procedure. The results are submitted to the Audit Committee and board of directors for discussion. The evaluation items include 10 independence indicators including no direct or significant indirect financial interest between the CPA and client, financial statements of the institution serviced may not have been audited within two years, CPA and all audit service team members may not have client shareholdings and 12 performance indicator items including financial statement completion date, interaction between CPA and the company, did the CPA actively submit recommendations regarding company systems and internal auditing. The company’s 2016 CPA performance evaluation has been completed and it passed review by the audit committee on April 24, 2017 and board of directors on April 24, 2017. The results will be used to implement corporate governance and improve the function of the board of directors. The CPA performance evaluation results have been posted on the company website. Refer to the company website. If a situation occurs in which the CPA needs to be replaced, the chairman and general manager shall understand the reason for replacement and hold an interview for the replacement CPA. A profile of the CPA and other related information is submitted to the Review Committee for review and then it is passed to the Board of Directors for discussion. Afterward, the CPA may be invited to board of director meetings if necessary. Due to internal rotation requirements at the CPA firm, the company’s CPA was replaced in the third quarter of 2016. An independence evaluation was performed and the new CPA was invited to attend meetings. The resolution was passed at meetings of the audit committee and board of directors on November 3,2016.	Conforms with best-practice principles, no discrepancy

Assessment items	Yes	No	Summary	Discrepancy with best-practice principles of TWSE/GTSM listed companies
4. Have public listed companies established dedicated (ad-hoc) corporate governance units or personnel responsible for corporate governance matters (including but not limitd to providing information needed by directors and supervisors to perform their duties, handle matters related to the board of directors meeting and shareholders’ meeting, handle company registration and registration of related changes, preparation of the board of directors and shareholders meeting minutes)?	Yes		The company has set up a corporate governance work team. The General Manager was appointed to serve as convenor. The administration center is responsible for company governance matters, protecting shareholder rights, strengthening board functions. Their major duties are: 1. Draft board of directors meeting agenda seven day prior to director notification, convene meeting and submit meeting information, agenda such as advance reminder of recusal due to conflict of interests and complete the meeting minutes of the board of directors meeting within 20 days after the meeting. 2. Advance registration of the shareholders’ meeting date each year in accordance with the law, prepare meeting commencement notifications within the legal time limits, meeting agenda, meeting minutes and register article of incorporation and director election changes. 3. In order to implement corporate governance, performance assessments of the board of directors and individual directors are performed at a regular time each year (Q2) in accordance with the Director and Officer Performance Evaluation Procedure. An external assessment must be peformed at least once every three years. 4. In order to ensure that the board of directors is promptly informed of major company information, board of director members are immediately notified after major company information announcements. Arrangements are made for directors to attend financial, business and other professional knowledge refresher courses. 5. Communication meetings of CPA, independent director and audit / financial supervisors are convened on an irregular basis to implement internal audit control systems. Refer to the company website for the communication meeting minutes. 6. At least one institutional investor conference is held each year.Participate in investment forums on an irregular basis. Set up an investment service team and a diverse range of communication channels for investors. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=8&id=11	Conforms with best-practice principles, no discrepancy

Assessment items	Yes	No	Summary	Discrepancy with best-practice principles of TWSE/GTSM listed companies
5. Any communication channel between the Company and the stakeholders? Any special zone on the website for the stakeholders for properly responding to the topic of corporate social responsibility where the stakeholders are concerned?	Yes		A dedicated CSR area, a dedicated stakeholder area, spokesman system and website has been established to provide communication channels and provide the latest news of the company and its subsidiaries. A dedicated shareholder mailbox and investor relations mailbox have also been established. Corresponding windows have been set up for business management and operation items. If company stakeholders have any relevant recommendations, questions or complaints, the mailbox in the dedicated stakeholder area or the dedicated stakeholder contact window may be used to contact the chairman, general manager, independent director or audit office of the company forming an effective and free-flowing communication channel. Website:. Website: http://www.txccorp.com/index.php?action=e_company_1-1&cid=6 http://www.txccorp.com/index.php?action=f_social_1&cid=2	Conforms with best-practice principles, no discrepancy

Assessment items	Operation status (Note1)	Operation status (Note1)	Operation status (Note1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
6. Any assigned professional stock affairs handling agency for shareholders’ affairs?	Yes		The company has appointed Yuanta Securities to serve as the company’s stock affairs agent and assist the company in handling matters related to the shareholders’ meeting.	Conforms with best-practice principles, no discrepancy
7. Information Disclosure
（1） Has the company set up website for disclosing finance, business and corporate governance?	Yes		The company and its subsidiaries have set up a website to provide financial and business information. A dedicated person has been assigned to be responsible for the updating of this information. Website: http://www.txccorp.com.	Conforms with best-practice principles, no discrepancy
（2） Are there other ways of information disclosure (such as English website, assign dedicated person for collection and disclosure of company information? Any spokesman system for implementation? Full process of briefing by the legal person posted on the company website)?	Yes		In addition to its Chinese language website, the company also provides English and Japanese languages websites. A dedicated person is responsible for collecting information and disclosure of major company information. External communication is handled by a spokesperson. Audio and video files of the company’s institutional investor conferences are posted on the company’s information disclosure website for general reference. Relevant information is posted on the Market Observation Post System designated by the competent authorities.	Conforms with best-practice principles, no discrepancy
8. Are there other important information for helping understand the operation of corporate governance (including but not limited to employee rights and benefits, employee care, investor relations, supplier relations, the rights and benefits of the stakeholders, further studies for directors and supervisors, risk control policy, and execution of risk assessment standard, client policy implementation, purchase of liability risk for directors and supervisors, others)?	Yes		27 1. Employee rights: Employee rights are handled by the company in accordance with the Labor Standards Act. See p.110 in the company’s annual report for information regarding other employee welfare measures, the pension system, continuing education and other related employee rights. The employee rights at our subsidiaries are handled in accordance with their respective national laws and regulations 2. Employee concern: In addition to setting up medical offices at the company and its subsidiaries that are staffed with professional medical care providers, a labor safety & health committee has been established for safety and health procedures for specialist personnel and personnel assistance projects including psychology, medical and health. A wide range of channels have been provided for personnel to express their opinions to create excellent two-way communicationchannels	Conforms with best-practice principles, no discrepancy

Assessment items			Operation status (Note1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
	Yes		28 3. Supplier relations and stakeholder rights are handled in accordance with the company and subsidiary work procedures and the contracts with cooperating companies to maintain the legal rights of both parties. No related lawsuits have been brought as of today. 4. Investor relations: The company and its subsidiaries are very concerned about investor rights. In addition to posting related information in a timely fashion on the Market Observation Post System and the company website, the company has been awarded an A+ information disclosure assessment rating for the fourth straight year, named a transparent voluntary information disclosure company for eight straight years and received an A++ rating for four straight years, ranked within the top 20% of public listed companies in the 1stcorporate governance assessment and within the top 5% of public listed companies in the 2ndand 3rd assessments. 5. Stakeholder rights: In holding the beliefs of integrity and honesty, the company is committed to building long-term relationships with stakeholders based on transparency and sincerity. See p.39 of the company’s annual report and the company website for information regarding stakeholder communication. 6. The company’s directors attend financial, business and professional knowledge continuing education courses on an irregular basis. Refer to the director and supervisor education and training table on p.17 of the company’s annual report. 7. Implemention of the company’s risk management policy and risk measurement standard: Refer to p. 141 of the company’s annual report for information regarding the risk management policy, organization structure and related risk control work of the company and its subsidiaries. In addition, the company and its subsidiaries analyze, track and respond to possible high risk events caused by operation targets to establish a sound risk management system. 8. Protecting consumers or customer policy implementation: Our ‘customer first, mission focused’ philosophy demonstrates our determination and commitment to our customers, our dedication to quality and hard work to earn customer approval over the years. The company has been given best supplier awards from a number of companies as a form of encouragement. 9. Liability insurance is purchased for the company’s directors and executive officers each year. The present policy coverage is US$5 million. The director and supervisor liability insurance policy is scheduled to be renewed when it expires in August 2017. The insurance premium, coverage and insurance premium rate will be submitted to the board of directors. Refer to the company website for the board of director meeting minutes	Conforms with best-practice principles, no discrepancy

Assessment items	Operation status (Note1)	Operation status (Note1)	Operation status (Note1)
	Yes	No	Discrepancy with best-practice principles of TWSE/GTSM listed companies
9. Any self-assessment report on corporate governance or any assessment report by a professional institution? (If yes, please provide opinions by the board of directors, self-assessment or assessment report by a third party and list the major defects or recommendations and status of improvement.)	Yes		Conforms with best-practice principles, no discrepancy
The company ranking within the top 20% of public listed companies in the 1stcorporate governance assessment and within the top 5% of public listed companies in the 2ndand 3rdassessments is acknowledgement of the hard work that TXC has put into corporate governance. Related explanations are as follows: (1) Improved items: One director performance evaluation is performed each year and an external evaluation is performed once every three years. (2) Items requiring improvement: 1. Convene general shareholders’ meeting before the end of May: The Company is actively evaluating holding the shareholders’ meeting at any earlier date to make it more convenient for shareholders to attend. 2. Set up non-statutory functional committees: The Company is planned to establish a nomination committee to ensure that the nomination process is fair and transparent. 3. The company’s board of directors’ election was held on June 7, 2016. Out of the 11 directors, two female independent directors were elected (one of them is a practicing attorney) to conform to our sexual equality policy and create an environment of diverse backgrounds and competencies. However, women still do not make up one-third of the board seats. Further evaluation and planning is needed for the next term. 4. Post financial statements within two months of the end of the accounting year: Currently discussing this matter with the CPA. The company will put forth more effort to achieve this goal. 5. The company is not required to provide annual financial forecast information in accordance with the law. 6. Voluntary disclosure of individual director and supervisor remunerion in the annual report: Not disclosed at this time due to personal information protection concerns. The company will consider disclosure in the future. 7. Collective agreements signed between the company and employees: No craft union has been established at the company. Collective agreements still do not need to be signed in accordance with the Collective Agreement Law. If a union is established, relevant laws and regulations will be followed.`。`

Collective agreements signed between the company and employees: No craft union has been established at the company. Collective agreements still 。

do not need to be signed in accordance with the Collective Agreement Law. If a union is established, relevant laws and regulations will be followed.

Note 1: Explanations should be provided in the summary column regardless of whether ‘yes’ or ‘no’ is checked under operating conditions. Note 2: Descriptions of directors’ fields of expertise

Diversity items Name of director	Gender	Operational Decision Making	Finance Accounting	Operation Management	Crisis Management	Industry Knowledge	International Market Outlook	Leadership Decision Making	Legal
Lin, Jin-Bao	Male							
Hsu, Der-Jun	Male							
Lin, Wan-Shing	Male							
Chen Chueh, Shang-Hsin	Male							
Go, Tien-Chong	Male							
TLC Capital Co., LTD (ChangWen-Chin)	Male							
Golden Talent Investment Holding co., Limited (Chou,Ming-chih)	Male							
Yu, Shang-Wu	Male							
Cai, Song-Qi	Male							
Su, Yan-Syue	Female							
Wang, Chuan -Fen	Female								

(4) Remuneration committee organization, duties and operation
The company established the remuneration committee on December 28, 2011. The third term of the remuneration committee was composed of four independent directors by July 18, 2016 board resolution. Independent director Yu Shang-Wu was reelected as convenor. The qualification review of this term’s members includes member academic background, member qualification review sheet, statement and related confidentiality agreements. Refer to the company website for more detailed information. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=8&id=10

The committee organization is as follows:

Board of directors Remuneration committee

Remuneration committee team: Human resources department Finance section

Remuneration Committee Member Information

Position (Note 1)	Criteria Name	Meets the Following Professional Qualification Requirements and Has at Least Five Years of Work Experience	Meets the Following Professional Qualification Requirements and Has at Least Five Years of Work Experience	Meets the Following Professional Qualification Requirements and Has at Least Five Years of Work Experience	Meets Indepence Criteria (Note 2)	Meets Indepence Criteria (Note 2)	Meets Indepence Criteria (Note 2)	Meets Indepence Criteria (Note 2)	Meets Indepence Criteria (Note 2)	Meets Indepence Criteria (Note 2)	Meets Indepence Criteria (Note 2)	Meets Indepence Criteria (Note 2)	Number of Other Public Companies Concurrent ly Serving as Member of Compensat ion Committee
		An Instructor of 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 of Private Junior College, College or University	A Judge, Public Proscutor, Attorney, CPA or Other Professional or Technical Specialists 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 Area of Commerce, Law, Finance, Accounting or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8
Independent director	Yu, Shang-Wu												0
Independent director	Cai, Song-Qi												0
Independent director	Su Yan-Syue												0
Independent director	Wang Chuan -Fen												0

Note 1: Write director, independent director or other for position.

Note 2: Please check “  ” the corresponding box if the following circumstances apply to the director in the two-year period before being elected and during the term of office.
(1) Not an employee of the company or its affiatiates.
(2) Not a director or supervisor of the company or its affiliates. However, this shall not apply in cases where an independent director has been established for the company, its parent company, or a

subsidiary in accordance with this law or the local national law.

(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 in other names in an aggregate amount of one percent or more of the total number of issued shares or ranks as one of its top shareholders.
(4) Not a spouse, relative within the second degree of kinship or linear relative within the third degree of kinship of any of the persons listed in the above three subparagraphs.
(5) Not a director, supervisor or employee of a corporate shareholder that directly holds five percent or more of the total number of shares issued by the company or ranks as one of its top five corporate shareholders.
(6) Not a director, supervisor, officer or shareholder holding five percent of more of a specified company or institution that has a financial or business relationship with the company.
(7) Not a professional individual who as an owner, partner, director, supervisor or officer of a sole proprietorship, partnership, company or institution that provides commercial, legal, financial or accounting services or consultation to the company or an affiliate of the company or a spouse thereof.
(8) None of the circumstances under Article 30 of the Company Law apply.
Remuneration Committee Operation Status
(1) The company’s remuneration committee has four members.

(2) The current term of remuneration committee members is: July 18, 2016 to June 6, 2019. The Committee met five times (A) in 2016 (three times during the previous term and two times during this term). The member qualifications and attendance status is as

follows:

Position	Name	Attendence in Person (B)	Attendence Rate in Person (%) (B/A) (Note)	Note
Independent director (convenor)	Yu, Shang-Wu	5	100%	Appointment renewed
Member	Huang,Tzu-Tsang	3	100%	Term expired
Member	Teng,Chih-Ping	3	100%	Term expired
Independent director	Cai, Song-Qi	2	100%	Newly appointed
Independent director	Su Yan-Syue	2	100%	Newly appointed
Independent director	Wang Chuan -Fen	2	100%	Newly appointed

Other mentionable items:

If the Board of Directors declines to adopt or modifies a recommendation of the remuneration committee, the date of the board of directors meeting, term, content of motions, board resolution results and company handling of remuneration committee opinions (if the resolution passed by the board of directors exceeds the recommendations of the remuneration committee, the circumstances and cause of the difference shall be specifically stated): No such circumstances.
If any committee member has an objection or qualified opinion together with a record or written

statement regarding a remuneration committee resolution, the remuneration committee date, term, content of motions, all member opinions and how member opinions were handled: No such circumstances.

Refer to the company website for more detailed information regarding the company’s remuneration committee operation conditions and meeting minutes.

http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=8&id=10.

Remuneration committee duties
In accordance with the charter of the company’s remuneration committee, the remuneration committee has the following duties and its recommendations are submitted to the board of directors for discussion:
Regular review on the charter and submission of amendment recommendations.
Determine and regular review the policies, system, standards and structure for company director and officer performance evaluations and remuneration.
Regularly evaluate the remuneration of company directors and officers.
The following principles must be followed before performance of the above remuneration committee duties:
Ensure the company’s remuneration arrangements conform to related laws and are sufficient to attract talent.
Performance assessments and compensation levels of directors, supervisors and executive officers shall take into account the general pay levels in the industy, the time spent by the individual and their responsibilities, the extent of goal achiecement, their performance in other positions and the compensation paid to employees holding equivalent positions in recent years. The evaluation should also cover the reasonableness of the correlation between the individual’s performance and the company’s operational performance and future risk exposure, with respect to the achievement of short and long-term business goals and the financial position of the company.
There shall be no incentive for directors or executive officers to pursue compensation by engaging in activities that exceed the tolerable risk level of the company.
The percentage of the bonus to be distributed based on short-term performance and the time for payment of any variable compensation for directors and executive officers shall be determined based on industry characteristics and company business attributes.
A committee member may not enter into discussions or voting when the committee is deciding on that member’s individual remuneration.
The decision making and handling of director and officer remuneration matters for subsidiaries is delegated to the subsidiary but requires the ratification of the company’s board of directors. The company’s remuneration committee is aksed to submit recommendation before the matter is submitted to the board of directors for discussion.

Refer to the company website for more detailed information on the company’s remuneration committee charter.

http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=8&id=10

(5) Fulfillment of Social Responsibility

Assessment items			Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
I. Exercising corporate governance
(1) Does the company declare its corporate social responsibility (CSR) policy or system and examine the results of its implementation?	Yes		See company webpage for the CSR policy planning and drafting in accordance with Article 6-1 of Corporate Social Responsibility Best Practice Principles, policies and results. http://www.txccorp.com/index.php?action=f_social_1&cid=5	Conforms with best-practice principles, no discrepancy
(2) Does the company hold regular CSR instruction and training?	Yes		The 2~~nd~~edition of the Code of Conduct issued by the company in 2010 includes the major scope of corporate social responsibility (CSR) covering business ethics guidelines and environmental protection. Related procedures were provided directed at company operation governance, employees, customers, community groups, suppliers, government and legal institutions, shareholdings and competitors. TXC employees and directors all keep this code of conduct manual. Employees must sign and return the responsibility declaration attached to the manual to ensure that the employee has received, read, understands, accepts and agrees to uphold the content of the manual. The manual provides guidelines for all employees to follow when performing their work. When a new employee joins the company, instruction and training is provided to remind employees to make sure to follow the code of conduct. In order to ensure that employees follow the code of conduct and do not forget its contents over time, the company and its subsidiaries hold CSR instruction and training seminars on an irregular basis to remind employees to follow the code of conduct.	Conforms with best-practice principles, no discrepancy

Assessment items			Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(3) Does the company have a dedicated (ad-hoc) CSR organization with board of directors’ authorization for its executive officers, which reports to the board of directors?	Yes		The company has set up a Corporate Social Responsibility Management Committee and the company’s Management Center is responsible for the overall coordination of the proficiencies of each department to jointly promote various CSR matters. Refer to the company website for the organization structure. http://www.txccorp.com/index.php?action=f_social_1&cid=5 In addition, Economy and Enviroment & Society Committees were established by the company in 2013 to effectively implement the decisions to the above issues and determine relevant authority and responsibility. The appointment of the various management representatives is approved by the board of directors and authorized by the General Manager’s representative. The economic management representative is appointed by the board of directors serves as the highest level financial supervisor. The environmental and social management representative appointed by the board of directors serves as the current environmental safety and health system management representative. The operation and implementation status of related promotional activities, except for those reported to the board of directirs at the end of each year, were reported at the December 17, 2016 board of directors’ meeting. Refer to the board of directors’ meeting minutes posted on the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=7 Implementation status and resource requirements at ordinary times are reported on an ad-hoc basis to the chairman and general manager so they can stay informed about the status and received the required information. Since overseas subsidiaries are subject to different local laws, the operation of social responsibility systems is the responsibility of the Administration Center. The Labor and Ethics Team, Safety and Health Team, Environment and Energy Team, System Management Team has been set up under the center. The above teams and the company’s safety committee include the issues of stakeholders into routine work, annual plan and annual management evaluation and review report to continue to promote and implement corporate responsibility-related activities and verification. The board of directors has authorized the company’s general manager as the chief officer of the system and shall report the system’s operatingstatus to board of directors eachyear.	Conforms with best-practice principles, no discrepancy

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(4) Has the company set up a reasonable remuneration policy which includes an employee performance evaluation system and CSR policy and established a clear and effective incentive and disciplinary system?	Yes		A salary grade table has been set up for the company and its subsidiaries to provide reasonable remuneration based on respective contribution of their position. Salary adjustment and bonus issuance is determined according to the company’s development strategy, the individual performance of the employee, future development potential and company operation status to inspire exceptional performance and achieve the salary issuance goals of internal and individual fairness. In order to encourage personnel to work hard to produce operation results, a certain percentage of profits is allocated for employee bonuses so that employees can share in company success. Industry benchmark companies and various salary and welfare systems are considered to offer externally competitive salaries which can attract and retain talented persons. The remuneration committee regularly reviews the reasonableness of the remuneration system. In addition, the performance evaluation guidelines state that supervisors may give positive ratings for the employee’s participation and level of cooperation with CSR-related activities in the performance evaluation for encouragement. The company has also set up incentive and disciplinary guidelines, a proposal improvement mechanism, workplace harassment and abuse prevention measures, complaint and disciplinary regulations to promptly reward achievements, guard against illegal activity and provide a basis for code of conducts and a standard for incentives and disciplinary actions.	Conforms with best-practice principles, no discrepancy
II. Environmentally Sustainable Development

Assessment items			Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(1) Is the company committed to utilizing all resources more efficiently and using renewable materials which have low environmental impact?	Yes		The company and its subsidiaries continue to promote energy conservation and carbon reduction projects such as solar power generation system installations, plant-wide use of energy saving lighting, adjustment of public lighting times at dawn and dusk, adjust air conditioning start / stop times based on weather conditions and domestic area hot water supply times, recycling process concentrated water for toilet water use in bathrooms, waste scrap is recycled by a certified scrap metal company to recover the gold and silver for reuse. Continue to provide employee with environmental protection knowledge and concepts so they can fulfill their responsibility to protect the Earth. Refer to company webpage. http://www.txccorp.com/index.php?action=g_ESH_1&cid=4	Conforms with best-practice principles, no discrepancy

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(2) Has the company set up a suitable environmental management systems based on industry characteristics?	Yes		The environment and safety & health policy of the company and its subsidiaries are as follows: R&D, manufacturing, testing and sales processes must conform to laws, regulations and other related requirements to prevent occupational haards and continue to improve management system operation to meet international standards. In order to protect our employees and fulfill our corporate responsibility to love the Earth, we are committed to: • Guaranteeing worker safety and health which is the primary responsibility and obligation of every level of supervisors at the company. • Preventing work related injury, health issues, disease and accidents to protect all plant personnel. • Following laws and regulations, reducing environmental pollution impact and developing standard operating procedures and methods. • Conveying policy to employees, suppliers, customers, contractors and stakeholders and holding required instruction and training to ensure that they possess the environmental, safety and health knowledge and perform the correct actions. • Continuing to improve management system operation and performance. • Encouraging employees to submit recommendations. Establishing and maintaining good communication channels for company supervisors and personnel. • Producing green products launch waste reduction activities and continually organize to create a safe and healthy environment. • The company is committed to adopting the latest international and domestic environment, safety and health standards to provide a basis for self-improvement. Refer to the information on the company website. http://www.txccorp.com/index.php?action=g_ESH_1&cid=1	Conforms with best-practice principles, no discrepancy

Assessment items			Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(3) Does the company monitor the effect of climate change on its operations, conduct greenhouse gas inventories and has the company set up energy conservation, carbon reduction and greenhouse gas reduction strategies?	Yes		The company and its subsidiaries have been promoting carbon management work for some time. The various items of work are regularly performed for Greenhouse Gas Inventory (ISO 14064-1) and Product Carbon Footprint Verification (PAS 2050) each year. By means of the inventory, the company’s actual carbon and greenhouse gas production amounts can be understood which can be used to devise corrective actions for achieving carbon dioxide emission reduction targets and demonstrate the company’s commitment to environmental protection. Refer to the information on the company website. http://www.txccorp.com/index.php?action=f_social_1&cid=1	Conforms with best-practice principles, no discrepancy
III. Promotion of social welfare
(1) Does the company comply with relevant laws and international human rights conventions? Have related management policies and procedures been set up?	Yes		In order to guarantee the worker rights, the company and its subsidiaries has drafted a worker’s rights and ethics policy, follow local labor regulations, SA8000 and EICC recognized human rights principles. The corporate social responsibility system operation guidelines, prohibition of forced labor control procedure, child labor remedies and minor worker protection control procedure, anti-discrimation control procedure, prohibition of corporal punishment and abuse control procedure, worker free assembly guidelines were drafted in accordance with policy requirements. The drafted policy is reviewed at the labor-management meeting each quarter to determine if any amendments or adjustments are needed to uphold business ethics and fulfill our corporate social responsibility. Refer to the company website. http://www.txccorp.com/index.php?action=f_social_1&cid=1	Conforms with best-practice principles, no discrepancy
(2) Has the company set up employee complaint system and channels and does the company reasonably handle such matters?	Yes		In order to maintain the legal rights of the company and its employees, the company and its subsidiaries have set a wide range of communication channels including employee opinion box, personnel satisfaction survey, supervisor mailbox / hotline, labor – management meeting, welfare committee meeting and other various meetings / conferences to allow free exchange of employee opinions and opinions regarding the company direction.	Conforms with best-practice principles, no discrepancy

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(3) Does the company provide employees with a safe and healthy work environment and organize regular training on safety and health for employees?	Yes		The company and its subsidiaries have set up occupational safety and health committees. A work progress discussion meeting is held every quarter. Environmental protection, safety and health matters are also reviewed to ensure the safety and health of the work environment. Company employees who perform labor safety and health-related work obtain the relevant licenses in accordance with the law. Personnel are also sent to attend seminars and conferences held by government agencies and academic institutes as needed. In addition, a medical office has been established which is staffed with a resident physician and full-time nurse providing professional medical consultation services. Health information (including disease prevention) lectures are held on an irregular basis. Refer to the company website for information regarding 2016 health management activities. http://www.txccorp.com/index.php?action=g_ESH_1&cid=5&sid=12 An environment, health and safety committee and safe production management committee has been set up respectively at the company’s Ningbo and Chongqing plants. A work progress discussion meeting is held each month to review environmental protection, safety and health matters. Many health instruction and promotion courses were held for new workers in 2016. Healthy lifestyle promotion materials are sent by mail to all personnel each month. Health information is provided from time to time on the company’s internal website and by email to satisfythe health requirements of employees and their dependents.	Conforms with best-practice principles, no discrepancy
(4) Has the company established a regular communication system and a reasonable way of notifying employees of changes which could have a significant effect on operations?	Yes		The company and its subsidiaries conduct employee satisfaction surveys at a regular time each year. For example, when existing employee relations must be changed due to the occurrence of a certain accident such as basic wage adjustment, changes to working times, salary structure changes, access control measures, parking space adjustment, foreign and domestic legal procedures are followed (Labor Standards Act and its enforcement rules are followed domestically). Through the coordination of the Welfare Committee, active measures are taken to explain and report matters to relevant personnel. A certain period of advance notice is given to personnel to achieve thegoal of full and seamless communication wheneverpossible.	Conforms with best-practice principles, no discrepancy

Assessment items			Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(5) Has the company established an effective career development training program?	Yes		The company and its subsidiaries plan employee training courses based on the job grade/level system and actual requirements in order to strengthen the professional knowledge, skill and expertise of personnel and improve work performance. The training courses include new employee training, professional training, management skill training, general training, self-inspired growth, project training and online learning platform courses.	Conforms with best-practice principles, no discrepancy
(6) Has the company established related policies and complaint procedures to protect consumer rights with regard to R&D, purchasing, production, work and service processes?	Yes		The company and its subsidiaries has taken out full product liability insurance for all company products. Since the company’s products are mainly active and passive frequency components, they will not cause physical injury to the sales channel distributor or final consumer if the product malfunctions (frequency defect or unable to start oscillation). The company has set up a dedicated customer service section to handle consumer complaint-relatedproblems.	Conforms with best-practice principles, no discrepancy
(7) Does the company follow related laws, regulations and international standards regarding the marketing and labelling of products and services?	Yes		The company and its subsidiaries keep track of changes in relevant international environmental protection laws and regulations (such as WEEE, ROHS, REACH) on a monthly basis to ensure that all materials, processes and supplied products meet international environmental protection requirements. When there is a new environmental protection requirement, the company immediately conducts an inventory and implements the required action plan. The new requirements are included in the EMS011 Environmental Controlled Substances Management Standard so relatedpersonnel and cooperatingsuppliers can follow this requirement.	Conforms with best-practice principles, no discrepancy
(8) Does the company evaluate the past environmental and social impact records of suppliers before conducting business with them?	Yes		In order to ensure that upstream and downstream companies have the ability to fulfill their corporate social responsibility, suppliers must submit and sign the supplier’s company basic information survey, quality and environmental system self-evaluation form, industry code of conduct, SA8000 commitment, environment, occupation, safety & health status survey form, declaration of conflict-free metals when the company and its subsidiaries select suppliers or introduce new suppliers to serve as a basis for evaluation and review.	Conforms with best-practice principles, no discrepancy

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
(9) Do contracts between the company and its major supplies include contract termination or cancellation clauses if the supplier violates the company’s CSR policy or has a significant environmental or social impact?	Yes		The ultimate goal of the supply and management business concepts of the company and its subsidiaries are close cooperation with suppliers to achieve customer satisfaction. In order to fulfill our CSR commitment as a member of the global supply chain, the company endaevors to spread its CSR commitment to its supplier group. The key points are as follows: 1. Approval of clean purchasing. 2. Quality and product safety assurance. 3. Environmental considerations (green purchasing). 4. Follow legal and social norms. 5. Ensure information security. 6. Consideration of human rights and labor safety & health. 7. Fulfillment of corporate social responsibilities If there is an actual or foreseeable major negative environmental, labor, human rights or social impact from the company’s existing suppliers, the company shall immediately downgrade or remove the supplier from the certified supplier list in accordance with supplier management procedures. If the materials provided by the supplier are not highly replaceable, the company shall assist the supplier eliminate above actual or foreseeable major negative environmental, labor, human rights or social impact to maintain effective operation of the supplychain.	Conforms with best-practice principles, no discrepancy
IV. Enhanced information disclosure (1) Is relevant and reliable-CSR related information disclosed by the company on its website or Market Information Post System?	Yes		For CSR-related information including corporate governance, environmental safety & health and social philanthropy of the company and its subsidiaries, refer to the company’s website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=1&sid=1`、` http://www.txccorp.com/index.php?action=g_ESH_1&cid=1`、` http://www.txccorp.com/index.php?action=f_social_1&cid=1	Conforms with best-practice principles, no discrepancy

Assessment items		Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary (Note 2)
V. If the company has established CSR best practice principles in accordance with Corporate Social Responsibilities Best Practice Principles for TWSE and TPEx-Listed Companies please explain any discrepancies between the principles and their implementation.	Yes		With regard to the annual CSR report prepared by the company, the content of the report and related operations shall conform to and have no major deviation from the Corporate Social Responsibilities Best Practice Principles for TWSE and TPEx-Listed Companies. Annual CSR reports are disclosed on the Market Information Post System and the company website. Refer to the company website. http://www.txccorp.com/index.php?action=f_social_1&cid=6	Conforms with best-practice principles, no discrepancy
VI. Other important information to facilitate better understanding of CSR implementation conditions.	Yes		For CSR-related information including corporate governance, environmental safety & health and social philanthropy of the company and its subsidiaries, refer to the company’s website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=1&sid=1`、` http://www.txccorp.com/index.php?action=g_ESH_1&cid=1`、` http://www.txccorp.com/index.php?action=f_social_1&cid=1	Conforms with best-practice principles, no discrepancy
VII. If the company’s CSR reports have passed the verification standards of certification institutions, an explanation should be provided.	Yes		A third-party verification agency, the British Standards Institution (BSI), has been appointed to verify the company’s 2010~2013 CSR reports. In 2014, the company had sufficient verification and verification requirement checking experience to adopt self-administration methods for the CSR report. In 2015, BSI was appointed again to verifythe company’s CSR report.	Conforms with best-practice principles, no discrepancy

Note 1: Explanations should be provided in the summary column regardless of whether ‘yes’ or ‘no’ is checked under operating conditions. Note: 2: For companies that have prepared a CSR report, the explanations in the summary may be replaced by referencing to the CSR report and indexing to pages of the reports.

(6) Company ethical corporate management and adopted practices

The company’s Ethical Corporate Management Best Practice Principles was approved the board of director’s meeting and was then presented the shareholders’ meeting on June 19, 2013. Ethical Corporate Management Procedures and Guide of Good Conduct was approved by the board of directors on April 24, 2017. At the same time, the Ethical Corporate Management Best Practice Principle Internal Control System and Internal Audit Implementation

Rules were included as actual audit items. In the future, the company will follow Ethical Corporate Management Best Practice Principles, operate the company with pragmatism, establish a sound corporate culture of ethical management and keep pace with domestic and international developments in ethical management rules. The company also encourages directors, independent directors, officers and employees to submit recommendations for discussion of how to improve ethical management principles in order to improve company ethical management results and put ethical management principles into practice. The company’s CSR implementation results are reported to the board of directors at the end of each year.

1. Implementing Ethical Corporate Management

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
1. Ethical corporate management policy and programs
(1) Does the company clearly state its integrity management policy, methods in its procedures and external documents? Are the board of directors and management committed to actively implementing the management policy?	Yes		The company has set up a code for integrity management and Chinese and English language versions of the code of conduct manual have been created. All of the employees and board members at the company and its subsidiaries understand its contents and must sign and hand in the responsibility declaration attached to the manual to ensure that the employee has received, read, understood and accepts the manual and agrees to uphold the entire content of the manual. The manual provides the principles for all employees to follow when performing their work. The integrity management implementation status is reported to the board of directors at least once eachyear.	Conforms with best-practice principles, no discrepancy
(2) Has the company set up programs to prevent to unethical conduct? Are work procedures, guides for conduct, disciplinary and complaint system for violations set up and implemented?	Yes		The company has set up procedures for handling reported cases of unethical or dishonest conduct. The company and its subsidiaries holds instruction and training for every new employee to remind employees that the code of conduct must be followed. Yes, the company performs total and complete announcement regarding integrity risks and reminds employees to make sure to follow the content of the code of conduct. When employees engage in dishonest conduct,the employee	Conforms with best-practice principles, no discrepancy

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
			disciplinary guidelines are followed to take a level of disciplinary action based on the severity of the case. Refer to the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=6
(3) Has the company taken actions to prevent unethical conduct in business activities where there is a higher risk of such conduct within the scope of Article 2 of Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies or other scopes of business?	Yes		Code of conducts have been set up the company and the subsidiaries to encourage employees to report suspected or discovered cases of violation of laws, regulations and the code of conduct to the board of directors, management, internal audit supervisor or other suitable personnel. In order to encourage employees to report violations, the company has set up related procedures and systems as well as let employees know that the company will do its utmost to protect the person reporting the case from retaliation. In addition, if a director or a manager violates the code of conduct, the company shall handle the case using the disciplinary measures set up for code of conduct violations. The name, position, date of violation, reason for violation, rule violation and handling status shall be promptly disclosed on the Market Observation Post System. Refer to the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=6	Conforms with best-practice principles, no discrepancy
2. Ethical Corporate Management Implementation
(1) Has the company evaluated to ethical management records of its business counterparts? Are ethical conduct provisions included in the contracts signed with business counterparts?	Yes		The credit ratings of cooperating suppliers and customers are checked by the company and its subsidiaries. Suppliers are asked to sign an Ethical Conduct Commitment promising that business activities shall be performed in a fair and ethical manner, and follow related laws and regulations and contract provisions. If the supplier is involved in dishonest conduct, the contract may be cancelled or terminated at anytime.	Conforms with best-practice principles, no discrepancy
(2) Has the company set up a dedicated (ad-hoc) ethical corporate management unit subordinate to the board of directors. Is the implementation status reported regularly to the board of	Yes		In order to implement its ethical corporate management policy and conduct sound ethical corporate management, the company and its subsidiaries has commissioned the administration center to serve as the dedicated ethical corporate management unit. The highest-level supervisor of the administration center is responsible for draftingthe ethical corporate managementpolicyand subsequent creation and	Conforms with best-practice principles, no discrepancy

Assessment items			Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
directors?			promotion of prevention programs. The status of the ethical corporate management implementation is reported to the board of directors at the end of each year. The implementation status was reported to the board of directors on December 17 in 2016. Refer to the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=8 The company has set up the following procedures for ethical corporate management implementation: 1. Corporate Governance Best Practice Principles, Ethical Corporate Management Best Practice Principles, Ethical Corporate Management Procedures and Guide of Good Conduct, Ethical Code of Conduct have been set up and anti-fraud measures established to incorporate ethical corporate management into TXC corporate culture. 2. Internal Major Information Handling Procedure, Insider Trading Prevention Management Procedure. Risk Control Procedure and Procedure Governing Financial and Business Matters with Affiliated Enterprises were set up to define the standards of ethical conduct and provide a guide for conduct for all stakeholders of the company. 3. Define the work duties of every department in the company. Clearly define the code of conduct for employees in the Code of Conduct and Employee Manual. Sign employment agreements with employees to implement ethical corporate management. To implement ethical corporate management, related company procedures and honesty & ethics requirements are explained in detail to new employees. Ethical requirements are clearly stated in the employment contract. Ethical corporate management policies are continually announced in routine department meetings, business meetings and various speeches to stress the importance of ethical corporate management. A total of 130 related courses have been held with 3,160 persons attending.

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
			Refer to the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=6
(3) Has the company drafted policies to prevent conflict of influence? Does the company provide appropriate channels? Have they been implemented?	Yes		The company and its subsidiaries have set up clear procedures in the Corporate Governance Best Practice Principles, Ethical Corporate Management Best Practice Principles, Article 14 of the Rules and Procedures of Board of Directors Meetings, Code of Conduct and Ethical Corporate Management Procedures and Guide of Good Conduct. If recusal is required due to a conflict of interest, the individual shall voluntarily recuse himself/herself. If a director, a supervisor or officer violates the ethical code of conduct, the company shall take disciplinary action in accordance with employee disciplinary guidelines and the ethical violation date, reason, rule and handling measures are disclosed promptly on the Market Observation Post System. The company has set up dedicated stakeholder area and established procedures for handling stakeholder recommendations, questions, disputes and litigation matters. Refer to the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=6 If a company employee engages in illegal activities during the course of a transaction, the incident may be reported using the fair and honest transaction mailbox. The company is fully responsible for maintaining confidentiality and conduct an investigation in accordance with the law.	Conforms with best-practice principles, no discrepancy
(4) Has the company established an effective accounting system and internal control system to implement ethical corporate management? Does the internal audit section conduct regular audits or appoint CPAs to conduct audits?	Yes		The company and its subsidiaries has set up an audit office and external CPA audit system. Its duties are to investigate and evaluate internal control system deficiencies and operation measurement efficiency and submit timely improvement recommendations to ensure the ongoing effective operation of internal control system and help the board of directors and management fulfill their responsibilities. Over the years, no cases of corruption have occurred at the company.	Conforms with best-practice principles, no discrepancy

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
(5) Does the company hold regular internal and external education and training on ethical management?	Yes		The company and its subsidiaries hold instruction and training for every new employee to remind them to follow the code of conduct and instruction and training on ethical conduct is provided to company employees on an irregular basis to ensure that they do not forget its content over the passage of time.	Conforms with best-practice principles, no discrepancy
III. Operation of the companyincident reportingsystem
(1) Has the company set up a incident reporting and incentive system and convenient incident reporting channels? Is an appropriate dedicated person appointed to handle the respective reported cases?	Yes		Honesty and integrity are a part of our core corporate culture. When related enterprises of the company and its subsidiaries conduct transactions with cooperating suppliers, a spirit of integrity, honesty, fairness and transparency is embraced with the hope of building long-term partnerships with our suppliers. Therefore, the company has set up a dedicated stakeholder area and established guidelines for the reporting of illegal, unethical or dishonest conduct. Refer to the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=6 If a company employee engages in illegal activities during the course of a transaction, the incident may be reported using the fair and honest transaction mailbox. The company is fully responsible for maintaining confidentiality and conduct an investigation in accordance with the law. In addition, an obstruction-free email communication channel has been established in the company website. Any stakeholder may communicate or make a complaint by email to the company’s independent directors, chairman and general manager at any time to maintain smooth communication and complaint channels with all stakeholders.http://www.txccorp.com/index.php?action=e_company_1-1&cid=6	Conforms with best-practice principles, no discrepancy
(2) Has reported incident investigation standards, work procedures and related confidentiality systems been set up by the company?	Yes		The company and its subsidiaries has established a Social Responsibility Manual, Employee Manual, Employee Complaint (Filing/Reporting) Control Procedure and Employee Participation in Industrial Saferty and Health Consulting and Communication Procedure for reporting, investigation and confidential systems.	Conforms with best-practice principles, no discrepancy
(3) Does the companytake actions to	Yes		It is clearlystated in the Employee Handbook,Employee Complaint	Conforms with

Assessment items	Operation Status (Note 1)	Operation Status (Note 1)	Operation Status (Note 1)	Discrepancy with best-practice principles of TWSE/GTSM listed companies
	Yes	No	Summary
protect whistleblowers from improper treatment due to the reporting of the incident?			(Filing/Reporting) Control Procedure set up the company and its subsidiaries: Strict confidentiality shall be maintained for related persons during the entire complaint filing / reporting process. If there is any disclosure, disciplinary action will be taken in accordance with related procedures. If the person who made the complaint / reported the incident is subjected to retaliation, serious disciplinary action will be taken in accordance with related procedures.	best-practice principles, no discrepancy
IV. Enhance information disclosure (1) Is ethical corporate management content and promotional results posted on the company website or the Market Observation Post System?	Yes		The company and its subsidiaries provide explanations in the Chinese, English and Japanese language versions of the website. Financial information, share price and dividend information, organization structure and company operation results are fully disclosed in quarterly reports, annual reports and the company website which quickly and authentically reports various business information in the hope that stakeholders are kept updated on the company’s operation status. Refer to the company website for further information on company governance. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=10	Conforms with best-practice principles, no discrepancy
V. If the company has established ethical corporate management best practice principles in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, state the deviations in its operation and the best practive principles: The company and its subsidiaries have established ethical corporate management best practice principles and promotion and announcments are handled in accordance with the best practice principles to strengthen employee awareness at each level of the organization. Thre is no major deviation in its operation or with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies.
V. Other major information useful in understanding ethical corporate management operation at the company: (such as review and revisions to the established ethical corporate management best practice principles) The company and its subsidiaries negotiate with customers and fulfill contract provisions with a spirit of honesty and integrity and also compete, negotiate and fulfill all contracts in a fair and ethical manner.

Systems and practices adopted for social responsibility

The CSR policies launched by the company are as follows:

Combine internal and external resources to launch various corporate social philanthropy activities.
Uphold shareholder rights, implement each corporate governance requirement.
Maintain the Earth’s sustainability; implement environment safety & health procedures.
Form promotional organizations and give them the respective resources to reach CSR goals.
Continue to strengthen promotional functions in accordance with domestic and international CSR-related laws and regulations.

Besides investment of company resources, the implementation of the above policies also depends on the care and effort invested by all employees to ensure the effective promotion of the above policies. A Corporate Social Responsibility Management Committee has been established internally by the company to promote various CSR matters, adhere to laws and regulations, uphold shareholder rights and organize upstream and downstream companies to jointly provide resources to create a harmonious and content society.

The company’s volunteer club has been established for three years now. Adopting the motto of ‘everyone join in for charity and philanthropy, do your part to show that you care’, the club is involved in community concern and year-end loving care donation activities such as nursing home pit barbecue family recreation activities and the Taoyuan spring beach cleaning activity, Refer to company website for more information about these activities. http://www.txccorp.com/index.php?action=f_social_1&cid=4&sid=12

Corporate social responsibility organization structure

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Board of Directors
Economic committee Environmental & Social
committee
(CFO)
Social responsibility
management committee
(President)
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Corporate Green Supplier chain Energy Risk Labor Labor safety Promoting
governance product management conservation manageme employers & Healthy social
(CFO) design team team team nt group committee office welfare
(CTO) (Supplier chain (Manufacturi (CFO) (Administr (Administrat team
center AVP) ion center (Administrat
ng center ation
VP) ion center
manager) center VP)
VP)
ICTT CEO
(Committee Chairman)
QA verification unit
(QA Staff)
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March 31, 2017

4. Fulfillment of social responsibility

Major activities sponsored by the com

Ma	jor activities sponsored bythe com		March 31,2017
Item	Activitytheme	Date held	Donee / Cooperatingorganization
A	Environmentalprotection
1	Zhuwei Fishing Port beach cleaning activityin Taoyuan city	04/30/2016	Department of Environmental Protection, TaoyuanCity Government
2	Plastic bagreductionpromotional activity	12/22/2016	Companyemployees
B	Community participation, social contribution, service and charity
1	Learning advancement scholarship	03/25/2016 03/28/2016	Taipei Hushan Elementary School, Delong Elementary School and eight other schools
2	Sporting facility sponsorship	04/11/2016	Taoyuan Hong Hua Children’s Orphanage
3	Love in Taiwan charity flea market and Transmitting Love and Happiness activity	05/20/2016 05/25/2016	Hong Hua, Long Tan Nursing Homes
4	Blood donation drive	05/24/2016 12/13/2016	Hsinchu Blood Donation Center
5	Packaged rice and food donation and concern for disadvantaged families activity	08/17/2016 08/23/2016 09/06/2016	Ankang Nursing School, three social welfare groups and Yongfeng and two othervillages
6	Sporting activity sponsorship	Feb.-Dec.,2016	Taoyuan Nanshi Elementary School and 15other schools
7	Concern for dependents	06/08/2016 09/14/2016	General affairs employee dependents
8	Root learningawakeningactivity	07/18/2016	Chinese Legal HistorySociety
9	Old shoes rescue project activity	08/11/2016	Step30 International Christian Care Association
10	Let love bring fulfillment life celebration activity	03/28/2016 06/26/2016 11/20/2016	Hong Hua, Sheng Ai, Long Chi Nursing Homes
11	Mid-Autumn Festival Evening Party	09/14/2016	Pingzhen Le Huo Orphanage
12	Management concept observation activity	09/21/2016 11/20/2016 2/7/2017 3/1/2017	National Central University, National Chengchi University, Yuan Ze University, Taiwan Seiwajyuku
13	Sporting activity sponsorship	01/12/2017	Taipei Yixian Elementary School
14	Concern for dependents	01/12/2017	General affairs employee dependents
15	Care for the elderly	01/13/2017	Huashan Foundation
16	End of year concern for disadvantaged families activity	01/19/2017 01/22/2017	Disadvantages families in Yongan, Yongfeng and Yongguang villages in Pingzhen,Taoyuan
17	Education institution charitydonation	01/12/2017	Fangdan NursingHome
18	Aesthetic education activity promotion	02/24/2017	Taipei Yifang and Quanyuan Elementary Schools
C	51 Consumer rights: TXC operation model is B2B-oriented. In order to uphold the rights of our corporate customers, TXC conducts a customer satisfaction survey each year and reviews each opinion submitted by the customer so an appropriate and effective response is provided. The information received from the satisfaction survey is included in the company’s operation performance indicators. In addition, the company’s products are electronic components so their failure will not cause injury to the user. However, in order to allow consumers to use our company’s products without worry, the company has still taken full product liability insurance to show that we take responsibility for our products. When a product failure occurs, we not only perform a failure analysis and root cause determination to find a solution to the failure but also bear warranty or compensation liability based on the requirements set forth in the contract signed with the customer.
D	Uphold employee human rights, implement safety and health measures: Refer to p. 106 - 109 in the annual report.

Major sponsorships and activities of subsidiaries (Ningbo and Chongqing plants)

	March 31,2017	March 31,2017	March 31,2017
Item	Activitytheme	Date held	Donee / cooperatingorganization
A	Environmentalprotection
1	P2P4 building auto cleaning machine DI water recovery of the hot water used in P2 building processes	Aug.2016	Ningbo Beilun Maoheng Engineering Equipment Co., Ltd.
2	P3P4 building concentrated water recovery sand carbon backwashproject	Jun.2016	Wuxi Lianhui Construction Engineering Co.,Ltd.
3	P4 building east side hot water recovery supply for hotwater in the fixture cleaningroom	Aug.2016	Wuxi Lianhui Construction Engineering Co.,Ltd.
4	Central water supplied to general water tank after temperature reduction to replenish coolingtower	Aug.2016	Wuxi Lianhui Construction Engineering Co.,Ltd.
5	P4 building north side hot water supply chip	Aug.2016	Wuxi Lianhui Construction Engineering Co.,Ltd.
6	P3P4 concentrated recovery fixture cleaning room use	Dec.2016	Ningbo Beilun Maoheng Engineering EquipmentCo.,Ltd.
7	Wastewater station sludge sedimentation tank filler replacement(CKG)	08/25/2016	Chongching Longyao Environmental Protection Engineering Co.,Ltd.
8	F1 building backwash water, ROR water optimization upgrade(CKG)	09/13/2016	Shangpin Electromechanical Installation Engineering Co.,Ltd.
9	P1 building production area T5 lighting replaced with LED lighting (CKG)	09/20/2016	Yangyi Electronics Technology (Ningbo) Co.,Ltd.
B	Community participation, social contribution, service and charity
1	2016 Outstanding Taiwan Businesses in China Innovative Operation Award	Nov. 2016	Management Institute in Taiwan
2	4thAnnual Chongqing Internship Demonstration Site for Taiwan University Students	Aug. 2016	Chongqing City People’s Government Taiwan Affairs Office / Chongqing CityYouth League
3	Received Technology Enterprise with Highest Growth Potential Award from Gaoxin District, ChongqingCity	Apr. 2016	Gaoxin District Management Committee, Chongqing City
4	Jinfeng Park Yuan Xiao Party	Feb. 2016	Chongqing Jinfeng Park Federation of Trade Unions
5	Jinfeng Park Marathon	Apr. 2016	Chongqing Jinfeng Park Federation of Trade Unions
6	Jinfeng Park TXC Cup Ball Sport Competition	Jul.-Oct. ,2016	Chongqing Jinfeng Park Federation of Trade Unions
7	Jinfeng Park Singles Dating Party	07/09/2016	Chongqing Jinfeng Park Federation of Trade Unions
8	Advanced Trades Homes	01/06/2016	Chongqing Jinfeng Park Federation of Trade Unions
9	Employee Hands-On Experience	Mar.-Nov.,2016	Chongqing Jinfeng Park Federation of Trade Unions
10	Sponsor economically disadvantaged junior high and elementarystudents from JinfengTownship	Mar. 2016	Chongqing Jinfeng Park Federation of Trade Unions
11	Create a medical green corridor for staff and workers	Mar. 2016	Jiulongpo District Health and Family Planning Commission / Jiulongp District People’s Hospital JinfengTownshipHealthCenter
12	Provide commuter bus for employees returning home for theNewYear Festival	Feb. 2016	Jinfeng Electronic Information Park Company
13	Standard plant two-time fire prevention acceptance	Mar. 2016	Jinfeng Electronic Information Park Company Jiulongpo District Fire Brigade
C	Consumer rights: None

D	Safetyand health	Safetyand health
1	Annual cafeteria eating utensil hygiene test	08/15/2016	Ningbo Yuanda Testing Technology Co.,Ltd.
2	Annual cafeteria drinking water quality test	08/15/2016	Ningbo Yuanda Testing Technology Co.,Ltd.
3	Annual cafeteria LP gas detector check	10/26/2016	Ningbo Institute of Measurement and Testing
4	Workplace occupational health and safety evaluation and report(includingX-ray portion)	11/14/2016	Zhejiang Duopu Testing Technology Co.,Ltd.
5	Plant drinking water quality testing (testing done once every 2 months, all drinking water sources covered and tested onceperyear)	11/10/2016	Shanghai Pune Testing Technology Co., Ltd.
6	Cafeteria cooking fume concentration testing	08/15/2016	Ningbo Yuanda Testing Technology Co.,Ltd.
7	Worksite occupational health and safety evaluation and report(conducted inNovember of eachyear)	12/01/2016	Chongqing City Banan Disease Control Center
8	Plant drinking water quality testing	06/25/2016	Chongqing City Qingze Water Quality Testing Co.,Ltd.
E	Uphold employee rights
1	Labor-management meeting	Dec. 2016	TXC (Ningbo) Union
2	Workers’ Congress	Jan. 2016	TXC (Chongqing) Union

(7) Disclose the inquiry methods if the company has established a Corporate Governance Code of Conduct and other relevant regulations
In order to establish sound corporate governance, the company’s board of directors have approved the drafting of the Code of Ethical Conduct and Corporate Governance Best Practice Principles and continue to draft more concrete and detailed regulations and procedures such as Related Party Transaction Management, Specific Company, Related Party and Group Company Transaction Procedure, Scope of Independent Director Duties and Responsibilities, Subsidiary Supervision Procedure, Procedure Governing Financial and Business Matters with Affiliated Enterprises, Risk Control Procedure, Important Internal Information Handling Procedure, Procedure for Handling Stakeholder Recommendations, Questions, Disputes and Litigation Matters, Procedure for Handling the Reporting Cases of Illegal, Unethical or Dishonest Conduct as well as the TXC Code of Conduct, Ethical Corporate Governance Best Practice Principles and Ethical Corporate Management Procedures and Guide of Good Conduct. In addition to their regular announcement, the company also posts this information for public access on the company website to regulate the conduct and ethics of company directors and all subordinate personnel. An ethical management section has been set up on the company website to provide full disclosure and complete explanations of ethical management policy implementation and the drafting and promotion of subsequent preventative programs. The company website also has a dedication section on social responsibility. Refer to the information provided on the company website. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=6 http://www.txccorp.com/index.php?action=e_company_1-1&cid=8 The company’s Ningbo and Chongqing plants have established ethical corporate management code best practice principles and continue to draft more concrete and detailed regulations and procedures such as Related Party, Specific Company and Group Company Transaction Procedure, Board of Directors Agenda Procedure, Business Ethics Control Procedure, Subsidiary Operation Management Procedure, Debt Commitment and Contingency Management Procedure, Financial and

Non-Financial Information Management Procedure, Derivative Financial Product Transaction Handling Procedure and regular announce this information to regulate the conduct and ethics of company directors and all subordinate personnel.

With regard to the announcement of related insider stock transactions, regular education courses are organized for directors and the announcements of competent authorities are posted on the company website for reference by insiders.

Refer to the information on the company website.

http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=6

The Corporate Social Responsibility Best Practice Principles drafted by the company has been approved by the board of directors. The principles are directed at the overall operation activities of the company and group companies including the active fulfillment of corporate social responsibility while performing company operations to conform to the international trends of balancing environmental, social and corporate governance developments and use corporate civic commitment to raise national economic contribution, improve the living quality of employees, communities and society to create competitive advantage based on corporate responsibility.
Refer to the company website for information on CSR policy, organization, promotion and results.

http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=6 http://www.txccorp.com/index.php?action=f_social_1&cid=5

The subsidiary Ningbo and Chongqing plants have drafted Social Responsibility Manuals. The manual is directed at the overall operation activities of the company including the active fulfillment of corporate social responsibility while performing company operations to conform to the international trends of balancing environmental, social and corporate governance developments and use corporate civic commitment to raise national economic contribution, and improve the living quality of employees, communities and society to create competitive advantage based on corporate responsibility.

(8) Other important information which is sufficient to understand corporate governance operation status must also be disclosed
Refer to the information in the company website for company director candidate nomination system, director and independent director nomination and selection method, nomination process, candidate information (conformance with qualification criteria), election process and election results. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=8 http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=7
In order to improve corporate governance, the company communicates with its CPA, independent directors, audit supervisor and accounting supervisors on an ad hoc basis. Refer to the information in the company website for status of communication. http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=7&id=8
In order to strengthen corporate governance, the company pays special attention to open disclosure of information and posts related financial information on the company website. Important information is concurrently disclosed on the company website and to company directors so related persons can clearly understand the operation status of the company and investors and stakeholders promptly receive important information from the company. Refer to the relevant information on the =

company website. http://www.txccorp.com/index.php?action e_company_news

The effort invested and results obtained by the company in corporate governance and information disclosure has been widely recognized. The company has been awarded an A++ information disclosure assessment rating for four straight years, named a transparent voluntary information disclosure company for eight straight years, ranked within the top 20% of public listed companies in the 1st corporate governance assessment and ranked within the top 5% of public listed companies in the 2nd and 3rd assessments.

http://www.txccorp.com/index.php?action=e_company_1-1&cid=3&sid=9&id=16

(11) Important resolutions of the shareholders’ meeting and board of directors in recent years up to the publishing date of the annual report

1. Important resolutions of the board of directors

Date	Board meeting	Important resolution	Resolution result
02/01/2016	Board meeting	1. Company production line expansion plan. 2. 2015performance bonus issuance.	1. Passed by all attending directors without objection. 2. Passed byall attendingdirectors without objection.
03/14/2016	Board meeting	1. 2015 allocation of director remuneration and employee compensation 2. 2015 operation report and financial statements 3. Matters related to the convening of the 2016 shareholders’ meeting. 4. Matters related to the shareholders’ general meeting acceptance of shareholder proposals. 5. Matters related to the shareholders’ general meeting acceptance of directors (independent director) candidates nominated by shareholders. 6. Election of directors. 7. Removal of the non-compete agreement restrictions 8. Company capability to self-prepare financial reports evaluation report. 9. Company first level supervisor appointment. 10. Annual internal control self-check report, internal control statement and audit report.	1 Passed by all attending directors without objection 2 Passed by all attending directors without objection 3 Passed by all attending directors without objection 4 Passed by all attending directors without objection 5 Passed by all attending directors without objection 6 Passed by all attending directors without objection 7 Passed by all attending directors without objection 8 Passed by all attending directors without objection 9 Passed by all attending directors without objection 10 Passed by all attending directors without objection
06/07/2016	Board meeting	1. Distribution of 2015 profits. 2. Review and approval directors (independent director) candidates nominated by shareholders. 3. Review and approval of 2015 CPA independence and performance evaluations. 4. Bank credit line extension and financial product undertaking. 5. Company production line expansion plan. 6. Amendments to the company’s management procedures. 7. 2016 performance bonus issuance 8. Subsidiary TXC OPTECH Corporation new share issuance by capital increase by cash. 9. 2016 first quarter financial statement.	1 Passed by all attending directors without objection 2 Passed by all attending directors without objection 3 Passed by all attending directors without objection 4 Passed by all attending directors without objection 5 Passed by all attending directors without objection 6 Passed by all attending directors without objection 7 Passed by all attending directors without objection 8 Passed by all attending directors without objection 9 Passed by all attending directors without objection
07/18/2016	Board meeting	1. Election of new chairman and vice chairman.	1 Passed by all attending directors without objection
07/18/2016	Board meeting	1. Matters related to the distribution of 2015 profits. 2. Appointment of 2ndterm remuneration committee members. 3. Subsidiarydirector and supervisor appointment.	1 Passed by all attending directors without objection 2 Passed by all attending directors without objection 3 Passed byall attendingdirectors without objection

Date	Board meeting	Important resolution	Resolution result
08/08/2016	Board meeting	1. 2016 second quarter financial statements. 2. Bank credit line extension and financial product undertaking. 3. Company production line expansion plan. 4. Subsidiary establishment. 5. Deliberate on 2015 director remuneration and officer / employee compensation allocation. 6. Deliberate on annual salaryadjustment for officers.`。`	1. Passed by all attending directors without objection 2. Passed by all attending directors without objection 3. Passed by all attending directors without objection 4. Passed by all attending directors without objection 5. Passed by all attending directors without objection 6. Passed byall attendingdirectors without objection
11/09/2016	Board meeting	1. Company CPA replacement and CPS independence evaluation. 2. 2016 third quarter financial statements. 3. Profit repatriation of offshore companies. 4. Bank credit line approval.	1. Passed by all attending directors without objection 2. Passed by all attending directors without objection 3. Passed by all attending directors without objection 4. Passed byall attendingdirectors without objection
12/19/2016	Board meeting	1. 2017 audit plan. 2. 2016 performance bonus issuance. 3. 2017 employee compensation and director remuneration allocation percentages. 4. 2017 operation plan and annual budget. 5. Derivative product undertaking. 6. Company production line expansion. 7. Amendments to the company’s management procedures. 8. Review and approval of 2017 CPA fees. 9. Companyestablishment of foundation.	1 Passed by all attending directors without objection 2 Passed by all attending directors without objection 3 Passed by all attending directors without objection 4 Passed by all attending directors without objection 5 Passed by all attending directors without objection 6 Passed by all attending directors without objection 7 Passed by all attending directors without objection 8 Passed by all attending directors without objection 9 Passed byall attendingdirectors without objection
03/14/2017	Board meeting	1. 2016 operation report and financial statements. 2. Matters related to the convening of the 2017 shareholders’ general meeting. 3. Matters related to the shareholders’ general meeting acceptance of shareholder proposal rights. 4. Amendments to the Procedure for Handling Acquisition and Disposal of Assets. 5. Matters related to the handling of stock affairs for the company’s reinvestment companies. 6. Purchase of subsidiary office. 7. Appointment of first level supervisors. 8. Annual internal control self-check report, internal control statement and audit report.	1 Passed by all attending directors without objection 2 Passed by all attending directors without objection 3 Passed by all attending directors without objection 4 Passed by all attending directors without objection 5 Passed by all attending directors without objection 6 Passed by all attending directors without objection 7 Passed by all attending directors without objection 8 Passed by all attending directors without objection
04/24/2017	Board meeting	1. 2016 director remuneration and employee compensation allocation.`。` 2. 2016 profit distribution. 3. 2016 CPA independence and performance evaluation review and approval. 4. 2016 director and officer performance evaluation approval. 5. 2017 first quarter financial statements. 6. Bank credit line extension and derivative financial product undertaking. 7. Appointment of first level supervisors. 8. Newly drafter company management procedures. 9. Proposed subsidiary reinvestment. 10. 2017 second quarter performance bonus issuance.	1 Passed by all attending directors without objection 2 Passed by all attending directors without objection 3 Passed by all attending directors without objection 4 Passed by all attending directors without objection 5 Passed by all attending directors without objection 6 Passed by all attending directors without objection 7 Passed by all attending directors without objection 8 Passed by all attending directors without objection 9 Passed by all attending directors without objection 10 Passed by all attending directors without objection

2. Important Resolutions of the 2016 Shareholders’ General Meeting

Time: 9:30 am, June 7, 2016 (Tuesday)

Place: No. 4 Pingzhen Industrial Park 6[th] Rd., Pingzhen City, Taoyuan County

Implementation of major resolutions:

(1). Amendments to the company’s article of incorporation; resolution approved by the 2016 shareholders’ meeting. The articles of incorporation were implemented following its amendment and the amended article of incorporation was posted on the company website.
(1) Recognize 2015 business report and financial statement; resolution approved by the 2016

shareholders’ meeting.

  - (2)  Recognize distribution of 2015 profits; 2016 shareholders’ general meeting, cash dividend of NT$2.5 per share, full amount issued on September 13, 2016 in accordance with the shareholders’ meeting resolution.

  - (3)  Election of directors: Candidate nomination system in the articles of incorporation used. 11 directors elected (including 4 independent directors.

  - Directors Paul Lin, William Hsu, Peter Lin, Chen Chueh Shang-Hsin, Ge Tianzhong, TLC Capital Co., Ltd., Zhixin Investment Corporation and independent directors Yu Shangwu, Tsai Songchi, Su Yan Syue, Wang Chuan Fan were elected. Directors Paul Lin and William Hsu were elected chairman and vice chairman by June 7, 2016 board of direction resolution. Director Peter Lin was reelected general manager. The election results are posted on the company website and Market Observation Post System.

  - (4)  Removal of non-compete agreement restrictions for newly elected directors: Non-compete agreement restriction removal approved for Directors Paul Lin, William Hsu and Peter Lin, Chen Chueh Shang-Hsin, Ge Tianzhong, TLC Capital Co., Ltd., Tsai Songchi, Su Yan Syue, Wang Chuan Fan.

  - (5)  The above articles of incorporation amendments and director and chairman elections were approved by June 28, 2016 MOEA letter Jing-shou-shang no. 10501135710.

(12) Main content of recorded or written statements of dissenting opinions filed by directors or supervisors in connection with important resolutions passed by the board of directors in recent years up to the publication date of the annual reports: No such circumstances.
(13) Summary of company chairman, general manager, accounting supervisor, finance supervisor, internal audit supervisor and R&D supervisor resignations and dismissals in recent years up to the publication date of the annual report: No such circumstances.

7. Where the company’s chairman, general manager or any officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of is CPA or at an affiliated enterprise of the accounting, the name and position of the person and the period during which the position was held, shall be disclosed: No such circumstances.

IV. Fund Raising Overview A. Capital and Shares

(1) Source of Capital

1. Capitalization

						April 10, 2017	April 10, 2017	Unit: Shares, NT$
Year/ Month	Issue Price	Authorized Share Capital		Paid-In	Capital		Remark
		Shares	Amount	Shares	Amount	Source of Capital	Capital Increase by Assets Other Than Cash	Other (Approval document no.)
72.12	10	310,000	3,100,000	310,000	3,100,000	Registered capital	Nil	-
73.03	10	3,315,200	33,152,000	3,315,200	33,152,000	Capital increase by cash	Nil	-
78.03	10	8,500,000	85,000,000	8,500,000	85,000,000	Capital increase by cash	Nil	-
78.10	10	18,000,000	180,000,000	18,000,000	180,000,000	Capital increase by cash	Nil	-
79.07	10	21,060,000	210,600,000	21,060,000	210,600,000	Capital increase by cash, by capital surplus	Nil	07/10/1990 (79) Tai-Tsai-Cheng(1) no. 01530
80.08	10	60,000,000	600,000,000	31,590,000	315,900,000	Capital increase by cash, by earnings, by capital surplus	Nil	08/01/1991 (80) Tai-Tsai-Cheng(1) no. 02111
81.07	10	60,000,000	600,000,000	41,067,000	410,670,000	Capital increase by earnings, by capital surplus	Nil	07/07/1992 (81) Tai-Tsai-Cheng(1) no. 01518
82.07	10	60,000,000	600,000,000	47,300,000	473,000,000	Capital increase by earnings	Nil	07/14/1993 (82) Tai-Tsai-Cheng(1) no. 30047
83.07	10	60,000,000	600,000,000	51,557,000	515,570,000	Capital increase by earnings, by capital surplus	Nil	07/07/1994 (83) Tai-Tsai-Cheng(1) no. 31774
84.06	10	60,000,000	600,000,000	55,681,560	556,815,600	Capital increase by earnings	Nil	06/22/1995 (84) Tai-Tsai-Cheng(1) no. 36958
85.09	10	100,000,000	1,000,000,000	75,681,560	756,815,600	Capital increase by cash	Nil	09/05/1996 (85) Tai-Tsai-Cheng(1) no. 53631
89.09	10	100,000,000	1,000,000,000	82,201,820	822,018,200	Capital increase by earnings	Nil	09/06/2000 (89) Tai-Tsai-Cheng(1) no.5237
90.07	10	260,000,000	2,600,000,000	110,348,515	1,103,485,150	Capital increase by earnings	Nil	05/14/2001 (90) Tai-Tsai-Cheng(1) no. 129296
90.08	10	260,000,000	2,600,000,000	120,348,515	1,203,485,150	Capital increase by cash	Nil	06/12/2001 (90) Tai-Tsai-Cheng(1) no.135132
91.09	10	260,000,000	2,600,000,000	137,673,100	1,376,731,000	Capital increase by earnings, by capital increase	Nil	08/21/2002 (91) Tai-Tsai-Cheng(1) no. 0910146351
92.08	10	260,000,000	2,600,000,000	144,140,534	1,441,405,340	Capital increase by earnings	Nil	08/12/2003 Tai-Tsai-Cheng(1) no. 0920136359
93.08	10	260,000,000	2,600,000,000	151,810,534	1,518,105,340	Convertible bonds, exercise of employee stock options	Nil	08/18/2004 Ching-Shou-Shang-Zi no. 09301157450
93.10	10	260,000,000	2,600,000,000	160,779,678	1,607,796,780	Capital increase by earnings	Nil	10/13/2004 Ching-Shou-Shang-Zi no.09301188710
93.10	10	260,000,000	2,600,000,000	160,784,678	1,607,846,780	Convertible bonds	Nil	10/19/2004 Ching-Shou-Shang-Zi no. 09301199790
94.05	10	260,000,000	2,600,000,000	163,133,882	1,631,338,820	Convertible bonds	Nil	05/03/2005 Ching-Shou-Shang-Zi no. 09401077580
94.07	10	260,000,000	2,600,000,000	168,068,138	1,680,681,380	Convertible bonds. exercise of	Nil	07/25/2005 Ching-Shou-Shang-Zi

Year/ Month	Issue Price	Authorized Share Capital	Authorized Share Capital	Paid-In	Capital		Remark
		Shares	Amount	Shares	Amount	Source of Capital	Capital Increase by Assets Other Than Cash	Other (Approval document no.)
						employee stock options		no. 09401135020
94.09	10	260,000,000	2,600,000,000	178,181,410	1,781,814,100	Capital increase by earnings	Nil	09/23/2005 Ching-Shou-Shang-Zi no. 09401185020
94.10	10	260,000,000	2,600,000,000	181,557,883	1,815,578,830	Convertible bonds, exercise of employee stock options	Nil	10/20/2005 Ching-Shou-Shang-Zi no. 09401207340
95.01	10	260,000,000	2,600,000,000	186,198,661	1,861,986,610	Convertible bonds, exercise of employee stock options	Nil	01/23/2006 Ching-Shou-Shang-Zi no. 09501010180
95.03	10	260,000,000	2,600,000,000	188,908,827	1,889,088,270	Convertible bonds, exercise of employee stock options	Nil	04/17/2006 Ching-Shou-Shang-Zi no. 09501068450
95.07	10	260,000,000	2,600,000,000	188,942,532	1,889,425,320	Convertible bonds	Nil	07/20/2006 Ching-Shou-Shang-Zi no. 09501152420
95.09	10	300,000,000	3,000,000,000	203,711,768	2,037,117,680	Capital increase by earnings	Nil	09/04/2006 Ching-Shou-Shang-Zi no. 09501198120
95.10	10	300,000,000	3,000,000,000	204,815,282	2,048,152,820	Convertible bonds, exercise of employee stock options	Nil	10/16/2006 Ching-Shou-Shang-Zi no.09501232600
96.01	10	300,000,000	3,000,000,000	205,698,282	2,056,982,820	Exercise of employee stock options	Nil	01/16/2007 Ching-Shou-Shang-Zi no. 09601010470
96.04	10	300,000,000	3,000,000,000	206,032,282	2,060,322,280	Exercise of employee stock options	Nil	04/14/2007 Ching-Shou-Shang-Zi no. 09601078450
96.07	10	300,000,000	3,000,000,000	206,624,577	2,066,245,770	Convertible bonds	Nil	07/27/2007 Ching-Shou-Shang-Zi no. 09601180970
96.08	10	300,000,000	3,000,000,000	230,7397,19	2,307,397,190	Capital increase by earnings	Nil	08/28/2007 Ching-Shou-Shang-Zi no.09601210120
96.10	10	300,000,000	3,000,000,000	240,243,456	2,402,434,560	Convertible bonds	Nil	10/22/2007 Ching-Shou-Shang-Zi no. 09601258520
97.01	10	300,000,000	3,000,000,000	241,552,590	2,415,525,900	Convertible bonds	Nil	01/29/2008 Ching-Shou-Shang-Zi no. 09701022010
97.01	10	300,000,000	3,000,000,000	241,552,590	2,415,525,900	Convertible bonds	Nil	01/29/2008 Ching-Shou-Shang-Zi no. 09701022010
97.04	10	300,000,000	3,000,000,000	241,627,148	2,416,271,480	Convertible bonds	Nil	04/11/2008 Ching-Shou-Shang-Zi no. 09701087040
97.08	10	300,000,000	3,000,000,000	242,464,833	2,424,648,330	Convertible bonds	Nil	08/05/2008 Ching-Shou-Shang-Zi no.09701191720
97.08	10	350,000,000	3,500,000,000	270,395,056	2,703,950,560	Capital increase by earnings	Nil	08/28/2008 Ching-Shou-Shang-Zi no. 09701819210
97.11	10	350,000,000	3,500,000,000	271,698,090	2,716,980,900	convertible bonds	Nil	11/17/2008 Ching-Shou-Shang-Zi no. 09701293960
98.09	10	400,000,000	4,000,000,000	287,312,523	2,873,125,230	Capital increase by earnings	Nil	09/11/2009 Ching-Shou-Shang-Zi no. 0980120690
98.11	10	400,000,000	4,000,000,000	287,340,930	2,873,409,300	Convertible bonds	Nil	11/11/2009 Ching-Shou-Shang-Zi no. 09801260380
99.01	10	400,000,000	4,000,000,000	288,727,249	2,887,272,490	Convertible bonds	Nil	01/26/2010 Ching-Shou-Shang-Zi

Year/ Month	Issue Price	Authorized Share Capital	Authorized Share Capital	Paid-In	Capital		Remark
		Shares	Amount	Shares	Amount	Source of Capital	Capital Increase by Assets Other Than Cash	Other (Approval document no.)
								no. 09901016750
99.04	10	400,000,000	4,000,000,000	290,907,037	2,909,070,370	Employee stock options and convertible bonds	Nil	04/21/2010 Ching-Shou-Shang-Zi no. 09901078530
99.09	10	400,000,000	4,000,000,000	296,665,178	2,966,651,780	Capital increase by earnings	Nil	09/02/2010 Ching-Shou-Shang-Zi no.09901199850
99.11	10	400,000,000	4,000,000,000	297,183,178	2,971,831,780	Employee stock options	Nil	11/18/2010 Ching-Shou-Shang-Zi no. 099001257750
100.04	10	400,000,000	4,000,000,000	296,305,178	2,963,051,780	Employee stock options treasury stock retired	Nil	4/15/2011 Ching-Shou-Shang-Zi no. 100001075170
100.07	10	400,000,000	4,000,000,000	296,316,207	2,963,162,070	Convertible bonds	Nil	7/26/2011 Ching-Shou-Shang-Zi no. 100001171400
100.08	10	400,000,000	4,000,000,000	302,242,310	3,022,423,100	Capital increase by earnings	Nil	8/25/2011 Ching-Shou-Shang-Zi no.100001197910
102.01	10	500,000,000	5,000,000,000	309,757,040	3,097,570,400	Employee stock options and convertible bonds	Nil	1/17/2013 Ching-Shou-Shang-Zi no.10201011600

2. Types of Stock

	April 10,2017 Unit: Share	April 10,2017 Unit: Share	April 10,2017 Unit: Share	April 10,2017 Unit: Share
Type of Stock	Authorized Share Capital			Remarks
	Listed (Note)	Unlisted	Total
Common Stock	309,757,040	190,242,960	500,000,000

Note ︰ The above stocks are listed company stocks. Statistics from the April 10, 2017 book closure date.

3. Shelf Registration Related Information: Not applicable.

(2) Composition of Shareholders

April 10, 2017, Unit: Person/Share/%

Composition No.	Government Agencise	Financial Institutions	Other Judicial Persons	Individuals	Foreign Institutions and Individuals	Total (Note)
No. of Shareholders	6	11	91	27,660	226	27,994
Shareholding	10,518,197	67,518,457	19,769,318	106,452,402	105,498,666	309,757,040
Shareholding Percentage	3.40%	21.80%	6.38%	34.36%	34.06%	100.00%

Note 1: The above share amount statistics are from the April 10, 2017 book closure date. Note 2: TSWE primary listed, GTSM primary listed and emerging stock companies shall disclose Chinese capital shareholding percentages: Not applicable.

B. Data on share price, net value, profit, and dividend of the past two years

Item	Year	Year	2015	2016	2017.03.31 end
Marketprice / share (Note 1)	Highest		44.30	47.40	46.50
	Lowest		28.15	32.50	40.60
	Average		37.36	41.69	43.63
Net value per share (Note 2)	Before distribution		34.67	31.38	30.71
	After distribution			`註`9	`註`9
Earnings Per Share	Weight average number of shares (1000’s share)		309,757	309,757	309,757
	Earnings Per Share (Note3)	Before adjustment	3.03	3.28	1.04
		After adjustment	3.03	`註`9	-
Dividend Per share	Cash dividend		2.50	`註`9	-
	Stock dividend without compensation	Earningsper share	-	`註`9	-
		Stock dividend	-	`註`9	-
	Accrued undistributed dividend (Note 4)		-	-	-
Analysis of rate of return	P/E (Note 5)		12.33	12.71	-
	P/C (Note 6)		14.94	`註`9	-
	C/P (Note 7)		6.69%	`註`9	-
`＊` If use profits or capital reserve for raising capital shares appropriate, then it should announce the information of the number of appropriate shares and retroactivlye adjust market price and cash dividend`。`

Note1 ： list the hightest and lowest price of the common stocks in that year, and the average market price for that year is calculated based on the transaction values and transaction amounts 。
Note2 ： Use the number of circulated shares at the end of the year as the base, then the 。
dividend distributed determined in the coming year’s stockholders’ meeting
Note3 ： If there is any retroactive adjustment from the stock dividend without compensation, 。
then it should list earning per share on before and after adjustment
Note4 ： If the equity investment has constraint that limits the undistributed dividend for that year and it is cumulated until to later profitable year. Then it should disclose the 。
cumulative undistributed dividend up to that year
Note5 ： P/E ＝ current year average share price at closing ／ earning per share 。
Note6 ： P/C ＝ current year average share price at closing ／ cash dividend per share 。
Note7 ： C/P ＝ cash dividend per share ／ current year average share price 。
Note8 ︰ The financial statements of TXC Corporation were audited or view or certified by CPA.
Note9 ︰ Up to 2017.03.31 ， The retained earnings of 2016 has not yet admitted by the stockholders’ meeting.

C. Company’s dividend policy and its current implementation status

1.Dividend policy as defined in the articles of incorporation `：`

(1) If there is a profit at the final settling of accounts after paying all taxes and offsetting of losses from previous years, the Company shall first set aside ten percent of the profits as legal reserve. This shall not apply when the legal reserve amounts to the total authorized capital. Director remuneration shall be no more than 2% and employee bonus shall be no lower than 3% of the special reserve allocated from the profits in accordance with the law or after reversal. The remainder together with undistributed earnings from previous periods after an appropriate amount is reserved depending on operating conditions is distributed as shareholder dividends as resolved by the shareholders' meeting. The board of directors is authorized to determine the counterparts for employee stock dividend distribution which include those company employees that conform to certain conditions. The Company's dividend distribution policy is made in consideration of factors such as industry development being in a growth phase, long-term financial planning and shareholder cashflow requirements. Therefore, the earnings available for distribution for that year, after allocation of the legal reserve and special reserve in accordance with the law, shall be distributed as provided in the previous paragraph. Of this, the cash dividend portion of shareholder dividends shall not be lower than 20% of total dividends.

If the company generates annual profit, no less than 3% of that profit will be provided to employees as a bonus in the form of cash or company shares, as determined by the board of directors. Receipients of this bonus will include company employees who fulfill certain conditions. The company must apportion a directors’ bonus of no greater than 2% of posted profit figures, following the board of directors’ decision. Employee and director bonuses are announced at the general meeting of shareholders. However, the company shall retain a portion of funds prior to incurring losses, the amount beyond which will be distributed as bonuses according to the aforementioned proportion.

2.Suggested dividend appropriate in this shareholders’ meeting `：`

Profit distribution for 2016

Unit ： NT$

	Unit`：`NT$	Unit`：`NT$
Item	Amount
	Sub-total	Sum
Beginning period undistributed profits	(867,319,712)	1,791,721,469 (99,646) (18,680,232) __ 1,772,941,591 1,016,164,758 (101,616,476) __ 2,687,489,873 (867,319,712) __ 1,820,170,161
Adjusted retained earnings from investments
accounted for using equity method
Remeasurement of defined employee benefit plans to
retained earnings

Adjusted undistributed profits Net profit after tax for this year Appropriate legal reserve (10%) Profits available for distribution Distribution Item: Cash Dividends (NT$2.8 per share) End period of undistributed profits

Note: (1) Allocation of 2016 undistributed profit shall be given priority for the above profit distribution.

D. Employee bonus and rewards for directors and auditors

The principle of surplus distribution in accordance with company regulations:
Surplus in this year’s final account should first be used to pay tax and to make up for past deficits, then followed by allocation of 10% as legal reserve or appropriate or divert the special surplus reserve in accordance with applicable laws and regulations, but if where such legal reserve amounts to the total authorized capital, this provision shall not apply and after retaining an appropriate amount in view of the operation status, the balance unallocated surplus should be allocated by percentages as follows:
（ 1 ） Employee bonus must not be less than 3%.
（ 2 ） Reward for directors and auditors must not be over 2%.

Moreover, the objects of employee bonus should comprise employees of affiliated companies under specific conditions and authorize the board of directors to formulate the stipulations.

Accountant procedures if a current period’s estimated employee dividend, the basis of director/supervisor bonus amounts and calculations for stock dividend figures differ from the amounts that are actually apportioned:
(1) The basis of estimating the current period’s estimated employee dividend and

director/supervisor bonus figures: please see the aforementioned (VI).1. Stock dividend policy.

(2) The basis for calculating stock dividends apportions: if the company has not apportioned stock dividends during this period, please disregard.
(3) Accounting procedures if the current period’s actual apportioned value differs from the estimated figures:When a significant change occurs to the dividend value approved by the board of directors, that adjustment is due to annual expenses. If the figure remains changed by the day of the general meeting of shareholders, the matter will be processed according to the updated accounting estimate, and amounts transferred onto accounts according to general meeting of shareholder decision.
Proposal by the Board of Directors for surplus distribution in 2016:
As proposed by the Board of Directors on April 24, 2017 surplus distribution for employee bonus and reward for directors and auditors are as follows:
(1) Propose to allocate employee cash bonus amounting to NT$ 113,821,697 and cash reward for directors and auditors amonting to NT$18,970,283. There is no difference between the planned allocation amount from expense for employee bonus and surplus in the 2016 financial statement. So, no adjustment for income and loss is required.
(2) Propose to allocate employee bonus and reward for directors and auditors in accordance with par value setting earnings per share at: NT$3.28
The Company Board of Directors on surplus allocation in 2015:
The actual surplus allocation of employee bonus and reward for directors and auditors is according to resolution adopted by the shareholders meeting on June 7, 2016.
(1) Actual reward for employee and directors in cash respectively: NT$104,094,029 and NT$17,349,005.
(2) No difference between the proposed allocation adopted by the Board of Directors and the resolution by shareholders meeting.

E. The company’s repurchasing of company shares: Not applicable.

F. Convertible Corporate Bond:

Convertible Corporate bond data

January 26, 2016

		January26,2016
Type of corporate bond(Note 2)		Domestic 4th unsecured convertible corporate bond(Note 5`）`
Date of issuance		January25,2013
Face value		NT$100,000.00
Location of issuance and trade(Note 3)		N/A
Issuanceprice		Issued at face value
Total amount		NT$800,000,000.00
Interest rate		Coupon rate 0%
Term		Three-year term Due date: January25,2016
Guarantee institute		N/A
Trustee		Chinatrust Commercial Bank
Underwriter		Yuanta Securities Co.,Ltd.
Attorney		Chiu Ya-wen
CPA		Deloitte & Touche CPAs GongShuang-hsiung,WongBo-ren
Solvency
Outstanding principal		NT$800,000,000.00
Redemption or liquidated before maturity
Restrictive clauses(Note 4)		None
Ratinginstitute,ratingdate,corporate bond rating		N/A
Other rights	Converted (exchanged or subscribed) common stock, GDR or marketable security up to the reportpublishingdate	was expired and terminated on January 26,2016
Other rights	Issuance and conversion (exchange or subscription) measures	N/A
Issuance and conversion, exchange or subscription measures, dilution effect of issuance conditions on equityand shareholder equity		N/A
Custodian		N/A

Note 1: Publicly offered and private placement company bonds are including in the company bond procedure. Publicly offered corporate bonds in the procedures refer to board validated (approved) issues. Private placement corporate bonds in the procedures refer to issues that have passed board resolution.

Note 2: The number of columns may be adjusted based on the number of issues. Note 3: List for overseas corporate bond.

Note 4: If issuance of cash dividend, outward investment is restricted or certain capital ratio is maintained. Note 5: Indicate in a conspicuous manner if it is a private placement.

Note 6: Convertible bonds that are convertible corporate bonds, exchangeable bonds, shelf registration bonds or warrant bonds shall be listed in a table format according to their attributes for disclosure of convertible corporate bond, exchangeable bond, shelf registration bond or warrant bond information.

Type of corporate bond	Type of corporate bond	Domestic 4thunsecured convertible corporate bond
Item	Year	As of 2016/01/26
Convertible corporate bond market price	Highest	99.9
	Lowest	99.8
	Average	99.85
Conversion price		NT$40.9
Issuance (handling) date & conversion price at issuance		2013/01/25`，`NT$49.2
Fulfillthe conversionobligation		Issue new shares

（三） Exchangeable Bond: None.
（四） Shelf Registration: None.
( 五） Bond with Warrants: None.
三、 Preferred Shares ： None.
四、 Issuance of Oversea Depositary Shares ： None.
五、 Status of Employee Stock Option Plan ： None.
六、 Status of Employee Restricted Stock ： None.
七、 Status of New Share Issuance in Connection with Mergers and Acquisitions:None.

V. Fund Utilization Plans:

A. Fund Utilization Plan and Utilization Status of this Corporate Bond Issue

(1) Corporate Bond Issue Plan

Financial Supervisory Commission, Executive Yuan approval date and document no: 12/17/2012 Chin-Guan-Cheng-Fa-Zi no. 1010056347.
Taipei Exchange approval date and document number: 1/24/2013 Cheng-Tai-Tsai-Zi no. 10200014731.
Total capital required for plan: NT$800,000 thousand.
Source of capital: Issue of 2013 fourth domestic unsecured convertible bonds
Denomination: NT$100,000

Period: Three years

Coupon rate: 0 %

Total amount: NT$800,000 thousand

Fund utilization plan, scheduled progress and expected benefits:
(a) Fund utilization plan items and scheduled progress

(Unit: NT$1,000)

			(Unit: NT$1,000)	(Unit: NT$1,000)	(Unit: NT$1,000)	(Unit: NT$1,000)	(Unit: NT$1,000)
Plan Item	Scheduled Completion Date	Total Capital Required	Scheduled Fund Utilization Progress
			2013			2014
			2Q	3Q	4Q	1Q	2Q
Purchase of Machinery and Equipment	Q2 2014	439,500	100,000	100,000	50,000	50,000	139,500
Repayment of Bank Loans	Q2 2013	400,000	400,000	`－`	`－`	`－`	`－`
Total		839,500	500,000	100,000	50,000	50,000	139,500

The total amount for the Company’s application for the fourth domestic unsecured convertible bond issue was NT$800,000 thousand. The application was submitted to the FSC in November 2012. It was planned for the bond to be put up for public sale by book building. After the fund raising was completed according to the schedule in the first quarter of 2013, the funds will be used to purchase machinery and equipment and make the payments needed to repay bank loans. The fund utilization and scheduled progress has been reasonable.

(2) Expected Benefits:

The Company’s total planned fund utilization amount is NT$839,500 thousand. It shall be mainly used to purchase machinery and equipment and for the repayment of bank loans. The expected benefits are described as follows:

 Purchase of Machinery and Equipment

In order to meet market demand and expand our scale of operations, NT$439,500 thousand from this plan is to be used to purchase machinery and equipment for SMD

quartz crystal unit production. The estimated increase in production amount, sales amount, sales income, gross profit and net operating income are shown in the Table below. The estimated return on investment period is 3.82 years.

		(Unit: 1,000pcs./NT$1,000)	(Unit: 1,000pcs./NT$1,000)	(Unit: 1,000pcs./NT$1,000)	(Unit: 1,000pcs./NT$1,000)	(Unit: 1,000pcs./NT$1,000)
Year	Item	Production Amount	Sales Amount	Sales Value	Gross Profit	Net Operating Income
2013	SMD quartz crystal unit product	30,000	30,000	390,000	101,790	62,790
2014		84,000	84,000	1,008,000	247,262	146,462
2015		96,000	96,000	1,056,000	243,514	137,914
2016		96,000	96,000	960,000	208,128	112,128

 Repayment of Bank Loans

One of the Company’s fund raising plan items was to repay NT$400,000 thousand in bank loans. After fund raising was completed through the application for fourth domestic unsecured convertible bond issue, related loans were repayed in accordance with the bank loan contract. In addition to saving approximately NT$2,530 thousand in interest expenditures in 2013, another NT$5,060 in interest expenditures will be saved annually starting from 2014 which will further improve our financial structure.

(3) Implementation Status: Implementation of all plan items were completed in the first quarter of 2015.

(NT$: 1,000)

of 2015.					(NT$: 1,000)
Plan Item	Implementation Status		Q1 2015 Current	Until Q1 2015	Reasons Why Plan is Ahead or Behind Schedule and Improvement Plan
Purchase of Machinery and Equipment	Amount Expended	Scheduled	`－`	439,500	Equipment purchase progress adjusted mainly due to customer orders which caused implementation progress to fall behind original scheduledplan.
		Actual	36,206	439,500
	Implementation Progress (%)	Scheduled	`－`	100.00%
		Actual	8.24%	100.00%
Repayment of Bank Loans	Amount Expended	Scheduled	`－`	400,000	No major differences with original scheduled implementation progress.
		Actual	`－`	400,000
	Implementation Progress (%)	Scheduled	`－`	100.00%
		Actual	`－`	100.00%
Total	Amount Expended	Scheduled	`－`	839,500	Equipment purchase progress adjusted mainly due to customer orders which caused implementation progress to fall behind original scheduledplan.
		Actual	36,206	839,500
	Implementation Progress (%)	Scheduled	`－`	100.00%
		Actual	4.31%	100.00%

2. Previous capital increase by cash and execution status: Not appliable

`、` VI Business Information

A `、` Business Contents

1 、 Business Scope
(1). Major Business Contents

TXC is a professional frequency control component and sensory component manufacturer. Since the company’s founding in December, 1983, it has been devoted to research and development, design, production, and sale of quartz component product series. Products include high precision, high quality quartz crystal, automotive crystal, crystal oscillators, and timing modules. Market demand has led TXC to develop multiple kinds of sensors using independent core technology, products that are widely used in mobile communication, wearable devices, IoT, and automotive electronics markets. In addition, TXC has extended our core technology competence to related LED substrate processes and crossed over into the sapphire LED field to support future group expansion and development. Over the years, we have upgraded customer value objectives and offered customers a variety of frequency control components for module design-in requirements to provide a total solution to satisfy the overall requirements of customers. TXC performance with regard to price, quality, delivery time and service continues to exceed customer expectations time and time again.

(2). Business Proportions

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(unit NT$ 1000’s)
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2016 Consolidated Revenue NTD 9,637,101 thousand dollars

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2015 Consolidated Revenue
NTD 9,265,656 thousand dollars
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(3). Company’s current products

Product Type	Type	Product Size
Crystals	Metal Can Type Crystals	HC-49S / HC-49S SMD
	SMD Glass Sealing Crystals	5.0 x 3.2mm`，`3.2 x 2.5mm 2.5 x 2.0mm`，`2.0 x 1.6mm
	SMD Seam Sealing Crystals	5.0 x 3.2mm`，`3.2 x 2.5mm 2.5 x 2.0mm`，`2.0 x 1.6mm 1.6 x 1.2mm`，`1.2 x 1.0mm
	SMD AuSn Sealing Crystals	2.0 x 1.6mm`，`1.6 x 1.2mm`，` 1.2 x 1.0mm
	SMD Seam Temperature Sensing Crystals(TSX)	2.5 x 2.0mm`，`2.0 x 1.6mm 1.6 x 1.2mm
	SMD kHz Crystals(TuningFork)	3.2 x 1.5mm`，`2.0 x 1.2mm 1.6 x 1.0mm
Oscillators	SMD Crystal Oscillators (CMOS)	14.0 x 9.0mm`，`7.0 x 5.0mm 5.0 x 3.2mm`，`3.2 x 2.5mm 2.5 x 2.0mm`，`2.0 x 1.6mm
	SMD Crystal Oscillators (Differential)	14.0 x 9.0mm`，`7.0 x 5.0mm 5.0 x 3.2mm`，`3.2 x 2.5mm
	SMD kHz Crystal Oscillators	7.0 x 5.0mm`，`5.0 x 3.2mm 3.2 x 2.5mm`，`2.5x 2.0mm
	SMD Voltage Controlled Crystal Oscillators (VCXO)	14.0 x 9.0mm`，`7.0 x 5.0mm 5.0 x 3.2mm`，`3.2 x 2.5mm
	Oven Controlled Crystal Oscillators (OCXO)	36 x 27 x 14 mm(Dip type) 25 x 25 x 11mm(Dip type) 9 x 14 x 7.7mm(SMD type)
	SMD Temperature Compensated Crystal Oscillators (TCXO)	3.2 x 2.5mm`，`2.5 x 2.0mm 2.0 x 1.6mm`，`1.6 x 1.2mm
	Precise SMD Temperature Compensated Crystal Oscillators (TCXO Stratum-3)	7.0 x 5.0mm`，`5.0 x 3.2mm
Real-Time Clock (RTC)	Real Time Clock Module	SOP 14PINS 10.1 x 7.4mm

Product Type	Type	Product Size
Sensors	Light Sensors/ e-Compass Sensors	2.5 x 2.0mm/4.5 x 0.9mm 1.6x1.6mm/
Automotive	DIP / Glass Sealed Crystal / Seam Sealed Crystal /XO/TCXO /kHz Crystal Oscillators/ kHz Crystals(TuningFork)	HC49S/HC-49S SMD/ 8.04.5mm/53.2mm/ 3.22.5mm 3.21.5mm / 2.52 mm/2.01.6 mm
Sapphire	4”/6”Single-side/ Double-side Polished Sapphire Wafer 4”/6” PSS wafer	4”660 um / 800 um 6”1000 um / 1300 um PSS,D26/D27/D28/D29

(4). Scheduled new products development

TXC will pool more resources in research and development of new products so as to expand the market share of advance applied and high added-value products. Concomitantly, we’ll actively engage in technology research and development of optics, micro-mechanical and electrical devices, sensors and medical electronics. In face of challenge from competitors at home and abroad, our focus on technology development as below:

i. Elevation of SMD miniaturized product development:
Over the years, TXC successful did mass production in 1.2x1.0x0.35mm quartz components and started to get in extra mini 1.0 x 0.8 x 0.35mm quartz components development for the next generation. To meet future miniaturized products and self-developed engineering technology, we’ll further focus on production and research and development of still higher precision process technology requirement, as well as engage in low cost, low energy consumption, high anti-vibration and enlarged broadband.
ii. Automotive electronics development TXC has won certification of the TS-16949 initial period product development quality operation system. We have completed version conversion of ISO/TS16949-2009 and the automotive electronics have ushered in the growth period. Continuoursly upgrading product technology, safety and quality toward grade 0, the highest quality reliability in technology upgrade. Currently we are developing crystal and TCXO for Grade 0.
iii. Advanced oscillator and modular product development
Continue to engage in development of advanced products including TSX for 5G Networking, PLL XO, Low jittter XO, optical fiber telecommunications module VCSO, HFF VCXO, and VCXO high frequency telecommunication and high precision frequency temperature controllers (OCXO) for base station use, etc. Such products can accommodate booming growth of telecommunications systems in Asia and the newly emerged nations.
iv. Sensor application product development
Proactively invest in the sensor component market, and develop proximity sensor ,

ambient light sensor and ToF sensor for use in smart handheld devices by using microminiaturized special ceramic seal technology; successively develop diamagnetic sensor components such as e-compasses, gyroscopes, and accelerometers, and actively develop PM2.5 sensors that correspond to product use trends and market demand.

v. Product Roadmap

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2 `、` The Industry

(1). Current industry status and development

The current domestic quartz industries are mainly for producing components such as crystals, crystal oscillators, and crystal filters. The basic manufacturing process of making crystals starts from cutting the quartz, and then after grinding and polish to the desired sizes; followed by depositing thin metal film electrodes on its surface under the vaccum, and subsequently, it is connected with condut wires; afterward it is packaged. In addition, by assembling and packaging the crystal components with IC oscillators then it will result the crystal oscillators. Assembling and packaging the crystal components and capacitors, wires, and resistors then it will be the crystal filters.

When you comparing the three crystal technologies: frequency, precision, and size dimension you can see that the European and U.S manufacturers are strong in the frequencies development. It was because of their development of the wireless technology that it gives them an advantage in the design and development; but production efficiency is lower. Japan manufacturers are the technology leaders and they are excellent in the precision and the scale size of the products. They have the advantages of products improvement, and can further to make it in mass production and automatic production. To the Taiwanese manufacturers, most of them are buying the material & know-how, machinery equipments, or purchasing the manufacturing process of which usually lead to

a faster time in marketing the product. But recently, the manufacturers have improved their manufacturing process, and the manufacturing equipments; also the learning of the manufacturing process further improves it. Presently, the mainland manufacturers mainly produce low-end products wherein 80% of them are for export and their products still have not effectively satisfied the demand of their massive domestic market. In recent years Chinese manufacturers are aggressively to promote their technology abilities and to advance to the middle and high end. Below table is a comparison of advantages/disadvantages of competitions from the major producers.

Key	European, USA	Japanese	Taiwanese	China
element	manufactures	manufactures	manufactures	manufactures
Frequency	High	High	High-middle	Middle-low
Precision	High	Veryhigh	High-middle	Middle-low
Size	High-middle	High	High-middle	Middle-low

Currently, in Taiwan the major crystal manufacturers are TXC Corp, Siward Crystal Technology, Harmony Electronics, Taitien Electronics, Tai-Saw Technology, and EChina Technology. TXC Corp has the highest market share and Harmony Electronics is next.

(2). Market relationship of up, middle, and down stream companies
Crystal components are our major product and it is also the basic electronics parts. Our upstream industries include crystal growth, material manufacturing, and precision machinery. The downstream applications include information technology, wire and wireless communications, consumer electronics, and network products etc. The relationship between the up, middle, and downstream manufacturers is given in the below diagram:
- Potential entrants
- ‧ Electronics components channels ‧ Other non frequency electronics components manufacturers

Upstream suppliers

‧ Crystal growth－ Manufacturing man-made crystals

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‧ －
Manufacturing man-made
crystals Downstream clients
‧ Materials manufacturing－．Wire, wireless communication
Manufacturers of Crystal
Crystal bar, wafer/crystal ． industry
disk、metal and cermic ．crystal gridding ．Consumer electronics industry
package materials(top circuit design ．Mobile communication
．
cover、base cover)、plastic、 crystal/oscillator package industry
IC… crystal/oscillator testing ．Basestation and equipments
‧ precision machinary－－ industry
cleaning/plating、fine 、fine fine ．Automotives electronics
、
tuning/package、 industry
．
examing/testing Mobile computing
(photo-mask
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‧ precision machinary－－ cleaning/plating、fine 、fine fine tuning/package、 examing/testing (photo-mask manufacturing、vaccum plating machine、yellowish light plating equipments、 testing instruments、jug & fixture…)

Substitutes

． Silicon Timing Devices
．self-stimulatedLCVariable frequency filter,、 oscillator
． Dielectric Resonance (DR Oscillator)
． FilmBody Accoustic (FBAR)
． 73 MEMS technooogy
．Green Clock

(3). Development Trend of Crystal Industry

Crystal products are important components in the electronics products. To sponsor the future 3C growth and trend, the future product style, its size, and the precision will have the following trend ：

(i). Production trend `：`

(a). Slim down and usage of SMD

In terms of the technology aspect, we have achieved the slim down level for use the single crystal IC, crystal design & manufacturing, and packaging & testing etc. For example take the case of SMD quartz crystal, its dimension has downsized from 11.8×5.5mm 、 8×4.5mm 、 7×5mm to 6×3.5mm 、 5×3.2mm 、 4×2.5mm 、 3×2.5mm 、 2.5×2.0mm 、 2.0×1.6mm and further to the dimension of 1.6×1.2mm 、 1.2×1.0 ； its height has also improved from 2mm 、 1.8mm 、 1.5mm 、 1.2mm to 1mm 、 0.9mm 、 0.8mm 、 0.7mm 、 0.5mm 、 0.35mm 、 0.30mm. By the effective SMD scale down improvement, we are also toning with the development trend of Chipset, design trend of brand clients and the SMT production from our downstream clients.

(b). High frequency `、` high modularized `、` high precision `：`

High frequency, high frequency element modularization, high precision: Fiber channel, Gigabit Ethernet, synchronous optical networking (SONET), synchronous digital hierarchy (SDH), Small Cell base station or access point base station, 4G/5G base station and other various high speed transmission system advances has raised high frequency, modularization, high precision requirements for quartz elements. Through the Company's self developed high frequency, high precision and low phase noise crystal oscillators (XO), voltage control crystal oscillators (VCXO), temperature compensating crystal oscillators (TCXO) and constant temperature crystal oscillators (OCXO) will assist simplification of customer circuit design and satisfy performance requirements for the high speed networks and the next generation of wireless telecommunication systems.

The products are as the below list:

		PKG
No	Projects		Type	Features
		(mm)

		7.0x5.0	LVPECL	High Frequency
	High Frequency XO
1		5.0x3.2	LVDS
	(above 100MHz)			Low Noise
		3.2*2.5	HCSL

		7.0x5.0	CMOS	High Frequency
	High Frequency VCXO
2		5.0x3.2	LVPECL	Low Noise
	b 50MH
	(aove z)	3.2*2.5	LVDS	High Pull

	High Frequency SO	7.0x5.0	LVPECL	High Frequency

3	(above 150MHz)	5.0x3.2	LVDS	Low Noise

		3.2x2.5
		2.5x2.0
4	TCXO		Clipped Sine	High Stability
		2.0x1.6

		1.6*1.2
		7.0x5.0
		5.0x3.2
5	32.768KHz CXO (TF)		CMOS	High Stability
		3.2x2.5

		2.5x2.0
		7.0x5.0
		5.0x3.2
6	Precise XO/MO	3.2x2.5	CMOS	High Stability
		2.5x2.0
		2.0x1.6
		7.0x5.0	Clipped Sine
7	Stratum 3 TCXO			Ultra High Stability
		5.0x3.2	CMOS

		36*27	LVCMOS
				High Stability
8	OCXO	25*25	HCMOS
				Ultra Low Noise
		14*9.0	Sinewave

(ii). Optical sensor industry development trends:

Optical sensors are a major component in smart phones. Product attributes such as type, dimension and size will be developed in accordance with the following market application development trends and directions:

(1) Miniaturization

Using our exclusive patented ceramic 3D stacked packages and strategic partner’s chip optimization design, the proximity sensor + ambient light sensor + IR emitter have a market leading single structure and dimensions. Following the development of the world smallest integrated proximity sensor with dimensions of 2.5 x 2.0mm, 2.0 x 1.6mm and 4.5 x 0.9mm dimension sensors were introduced to satisfy different types of smart phone design requirements.

(2) Integration

Utilizing the design foundation created for the 3-in-1 proximity sensor + ambient light sensor + IR emitter single integrated structure, a 4-in-1 single integrated structure was

developed combining together a color sensor, a proximity sensor, an ambient light sensor and a IR emitter providing next generation AMOLED panel technology customers with more time responsive and appropriate color imaging features.

(3) Characteristic optimization
a. Dim light sensitivity: Aesthetics is a major consideration in the design of today’s mobile devices. As a result, the light sensor is placed under dark glass on most products. Generally speaking, the dark glass has a transmissiveness of about 10% so the light strength decreases significantly as the light passes through the dark glass. If there is not enough resolving power, the changes in ambient light strength cannot be detected.
b. Sensing distance: The sensing distance of proximity sensors usually depends on IR light strength and level of interference from IR light in the ambient environment. Since the IR light source is placed under a dark glass, a larger amount of current must be consumed to increase the light intensity if one wants to increase the sensing distance. In addition, the calculation method used for handling the source of interference also may affect the sensing distance.

c. Sensing distance: The sensing distance of proximity sensors usually depends on IR light strength and level of interference from IR light in the ambient environment. Since the IR light source is placed under a dark glass, a larger amount of current must be consumed to increase the light intensity if one wants to increase the sensing distance. In addition, the calculation method used for handling the source of interference also may affect the sensing distance.

(4). Competitions

For quite some time Taiwan electronics industry usually take the OEM fashion to function as a supplier to world’s largest electronics and information technology companies. Applying Taiwan’s capital, technical skills, labor or other market unique advantages that 、 takes the advantages of ”global labor division” ”regional labor division” to achieve the vertical integration purpose 。 With the advance of Taiwanese electronics manufacturer’s technical level, their business operatios have transformed from the parts assembled in the early days, to the OEM, and even promoted to the ODM and OBM scale. In order to gain a more added value, many Taiwan electronics companies, reposition their value chain locations, and have gradually extended themselves from manufacturing to product R&D, design and even further to sales and marketing, post-sale and brand management; and amid the global work divisions, have stance in a unique place . The major global companies with their procurement arranging, are team with Taiwan electronics companies in value creations; and they would be able to intend more on their brand and sales management. This ends up in a win-win situation for both parties.

With Taiwanese electronics industry forms in the nature cluster groups, and it thus has a demand of 30% of the global crystal component product. But Taiwanese manufactures can only produce no more than the 20% of total global production, and this China domestic market would provide growing space for Taiwanese companies. But the crystal component industries are in the border of oligopoly competition since the ten largest manufacturers in the world have a total combination of production of 65% and more. This illustrates the great differences of the manufacturers in this industry, and this can be said it is an oligopoly competition market. Because of the wide applications of the products,

each manufacturer emphasizes its own product and the market. The lower-end and mature market has a stronger tendency in cutting price to competition. This results a very strong competition market.

In the global crystal component industry, Japan is still the largest producer and it has about 40% of the worldwide productions. Our domestic competitors are SiWard Crystal Corporation, EChina Technology, Harmony Electronics, Taitien Electronics, and Tai-Saw Technology and Hosonic Electronics. Each corporation differentiates by specializing in different products and market. Our company has the highest market share which demonstrates our leading role in the crystal component industry.

Technology and Recent Research and Development
(1) Ratio of R&D expense in Total Operating Cost during recent years up to 2017.03.31

units ： NT$ 1,000’s ， %

		units`：`NT$	1,000’s`，`%
Year	2015	2016	2017.03.31
Net Revenue	9,265,656	9,637,101	2,132,930
Research and Development Expense	455,535	538,506	135,882
R&D Expense/Net Revenue (%)	4.9%	5.6%	6.4%

(2) Research and Development Results

1 、 SMD 4.0 x 2.4mm Ambient Light Sensor and Proximity Sensor with Integrated IR LED for Mobile Phone. 2 、 SMD 2.5 x 2.0mm Ambient Light Sensor and Proximity Sensor with Integrated IR LED for Mobile Phone. 3 、 SMD 3 in 1 Light Sensor 2.5 x 2.0 mm for Smartphone, Tablet, DSLR, Smart wearable , Fitness devices. 4 、 SMD 3 in 1 Light Sensor 4.5 x 0.9 mm for Smartphone, Tablet, Smart wearable , Fitness devices. 5 、 SMD Crystal 2.5 x 2.0 mm for Automotive. 6 、 SMD Crystal 2.0 x 1.6 mm for Automotive. 7 、 SMD Crystal 1.6 × 1.2 mm for SIP. Products 8 、 SMD 5.0 × 3.2 mm TF CXO for variable. development 9 、 SAW-based Oscillator for SAN. 10 、 SMD Seam CXO 2.0 × 1 .6 mm 2~54 MHz for digital camera, Portable TV. 11 、 SMD 3.2 x 2.5 mm TCXO for GPS and WiMAX. 12 、 SMD 2.5 x 2.0 mm TCXO for GPS and WiMAX SMD 2.0 x 1.6 mm TCXO for GPS and WiMAX. 13 、 SMD 1.6 x 1.2 mm TCXO for GPS and WiMAX. 14 、 SMD 5.0 x 3.2 mm Stratum-3 VC-TCXO for Base Station, Small-cell, Networking Infrastructure. 15 、 SMD 7.0 x 5.0 mm Stratum-3 TCXO for Base Station, Small-cell, Networking Infrastructure. 16 、 SMD Crystal 1.2×1.0mm for future.

17、 SMD 5.0 × 3.2 mm TF CXO for variable.
18、 Inverted MESA BLK 1.3 × 1.03mm
19、 Inverted MESA BLK 1.6 × 1.14mm
20、 Inverted MESA BLK 2.49 × 1.83mm
21、 SMD 2.0 x 1.6 mm TSX for GPS
22、 SMD 2.5 x 2.0 mm TSX for GPS
23、 SMD 3.2 x 1.5 mm Tuning Fork
24、 SMD 3.2 x 1.5 mm Tuning Fork for Automotive.
25、 SMD 2.0 x 1.2 mm Tuning Fork
26、 SMD 1.6 x 1.0 mm Tuning Fork
27、 SMD 7.0 x 5.0 mm Oscillator for HCSL
28、 SMD 5.0 x 3.2 mm Oscillator for HCSL
29、 DIP 25 x 25 mm OCXO for stratum-level and base-station.
30、 DIP 20 x 20 mm OCXO for telecommunication.
31、 RTC 10.1 x 7.4 mm for smart utilities devices, electric meters, gas meters.
32、 4” Single-side Polished Sapphire Wafer for LED application
33、 4” Double-side Polished Sapphire Wafer for LED application
34、 6” Single-side Polished Sapphire Wafer for LED application
35、 6” Double-side Polished Sapphire Wafer for LED application
36、 1.6 x 1.6 mm 3-axis electronic compass for Sensor application
37、 SMD 3.2 x 2.5 mm TCXO for Automotive.
38、 SMD 2.5 x 2.0 mm TSX for Automotive.
39、 SMD 7.0mm X 5.0mm High Frequency CXO (2.1GHz) for Base Station,
Networking, Infrastructure
40、 SMD 7.0mm X 5.0mm High Frequency VCXO (2.1GHz) for Base Station,
Networking,Infrastructure

Patents and
Academic
publications Patent︰
1. Electrode of the piezoelectric crystal oscillator components
2. Vacuum gas-tight system integration package structure
3. Structure and production method of the piezoelectric quartz oscillator chip
4. The production of piezoelectric quartz oscillator chip
5. Quartz crystal oscillator
6. Crystal oscillator with layout structure for the miniaturization of size
7. Piezoelectric material thinning device
8. Wafered composite material thinning device
9. Grooved resonator unit packaging structure
10. Light sensor chip packaging structure
11. Stacked light sensor chip packaging structure
12. Thru-hole resonator device wafer level packaging structure
13. Thru-hole resonator device wafer level packaging structure manufacturing method
14. Improved resonator wafer grade packaging structure
15. Strengthen hermetic sealing of oscillator wafer grade packaging structure
16. Partition and serial-type light sensor chip packaging structure
For the patents or possible patents of TXC, please refer to relative patent database
http://www.tipo.gov.tw/ch/
Paper︰

1 、 Development of High-Stability Miniaturized Oven Controlled Crystal Oscillator (English), 2016. 2 、 Anchor loss reduction of quartz resonators utilizing phononic crystals. (English), 2015. 3 、 A Perspective for the Quartz Crystal Devices Industry and Technologies in Taiwan and China. (English), 2014. 4 、 A Study for the Relationship between Drive Level and the Activity Energy in Arrhenius Accelerated Aging Model for the Small Quartz Resonators. (English), 2014. 5 、 A Study on Raising the Fundamental TS-mode Resistance by Energy Trapping for 3[rd] Overtone. (English), 2014. 6 、 Laser Measurement and Identification of Vibration Modes of AT-cut Quartz Crystal Resonators. (English), 2013. 7 、 The Study of Aging Frequency Drift Mechanism for Quartz Crystal Resonators. (English), 2013. 8 、 Advanced TSV-Based Crystal Resonator Devices Using 3-D Integration Scheme With Hermetic Sealing. (English), 2013. 9 、 TSV-based quartz crystal resonator using 3D integration and Si Packaging technologies. (English), 2013. 10 、 A Brief View of the Current State of the Development and Aging Performance of Fixed Frequency Surface Acoustic Wave (SAW) Oscillator (English), 2012. 11 、 Properties of Miniature X- and Z’-Elongated Rectangular AT-CUT Quartz Resonators of Different Sizes (English), 2012. 12 、 Vibration Mode Identification and Coupling Assessment with the Mindlin Plate Equations and Measurements is a Quartz Crystal Plate (English), 2012. 13 、 Aging Performance of Small Size MHz Quartz Crystal Under High Drive (English),2011 14 、 Inharmonic Overtones in Partially Plated AT-cut Quartz Crystal Plates (English),2011 15 、 The Study of Activation Energy (Ea) by Aging and High Temperature Storage for Quartz Resonators' Life Evaluation (English), 2011. 16 、 Efficient AT-cut quartz Crystal Resonator Design Tool for Activity Dip in Working Temperature Range (English), 2011. 17 、 Quartz Crystal Industry of China at Crossroads (English), 2011 For relative paper, please refer to the website of TXC: http://txccorp.com/

Long and short term sales and marketing plan
(1). Short term Development Plan
- (a). Marketing Strategy ：
- If profit structure has been optimized, solidify current market share among target customers of mobile computing, mobile telecommunications, internet and consumptive electronic products; maintain service and flexibility advantages, and deepen relationships with core customers.
- Develop new applications, new customer bases, and new businesss opportunities for high-end products, including AOM (acoustic optic modulator – high frequency), ACAP (automotive crystal application products), and sensors, and continue to maintain high growth levels.

In accordance with customer management patterns, seize a space within market opportunity and competitive value by grasping and introducing Design in and CM syncing.
Comprehensively strengthen the depth and breadth of relationships with IDH (IC Design House), understand the development trends of customer technology, and immediately release products that meet customer demands to ensure a front-end reference design win.
Continue to strengthen the European, US, and Japanese markets, and develop markets in developing countries; establish TXC as the largest brand in China.
Establish a special leading organization to enhance the atmosphere of team work and organization efficiency.
Continually optimize marketing abilities, to help improve the depth and breadth of the marketing strategy layout.
Build a complete global logistics network to satisfy customer demands for prompt product delivery, and provide customers with prompt technology integration services.
Establish dynamic marketing channels and a global layout.
Implement Industry 4.0 big data analysis on information systems, to assist staff in formulating and evaluating marketing strategies.
Improve employee abilities and comprehensively strengthen the sales team’s competitiveness by establishing a marketing training system.
(b). Manufacturing Strategy ：
To respond to the coming of IOT, miniaturization, urgent high-mix, low volume production, the only way to quickly respond and achieve time to volume, time by market is through an ongoing focus on key process technology.
Responding the challenges of a changing industry, strengthening the “sensitivity” of
engineering and production personnel, building up a spirit of “team striving” and embracing a “customer first” business philosophy, instilling core spirit and thinking into the production units and continually optimization of “adaptability + control capability + integration capability = core competence”.
Integrate the cross-strait manufacturing resources at three sites, use KM platform to
share and exchange engineering resources and use the group’s smart integration portal to establish optimal production capacity and efficiency allocation under a big data analysis framework.
Employee-wide discussion of COPQ and Total Cost. Use systems thinking to seek out
further quality and efficiency improvement.
Fully introduce the iFactory 4.0 concept to build a production management system that grasps production information in real time.
Product quality is introduced into production control through a big data analysis PAT/SYA management concept, inspecting and controlling production quality deviation and conforming to the objective of “99.99” defect-free rate within each workstation, to improve overall production quality and guide workers in engineering to strengthen production efficiency and product quality.
Optimized operations management and promoting the efficacy of each case’s management makes production more competitive.

(c). Quality Assurance Strategy ：
With the international manufacturing giants as a benchmark,, optimize TXC Group’s quality control system, pursuing “Zero Risks” as the ultimate goal.
Improve TXC Group’s green product and process services, ensuring that the company’s products, production processes and work environment conform to international environmental standards and customer demands.
Promote product quality risk management, strengthen customer trust through automotive application risk recognition, stable product and production process design, and Zero Defect product management.
Continue to improve Cost of Poor Quality (COPQ).
Promote on the job training in basic and progressive advanced quality tools as a foundation for continual improvement.
Strengthen reliability testing equipment and improve analytical capability to achieve the objectives, verification, and inspection and control tasks of product miniaturization, high precision, and high stability.
Create a quality control platform that corresponds with suppliers, to avert quality risks in materials or products, ensuring reliable, continuous supply.
Carry out a business continuity supply plan (BCP), simulating and planning production operations in the event of a large scale crisis, ensuring the ability to maintain business operations for customers.
Integrate the knowledge bases of the Pingzhen, Ningbo, and Chongqing factory locations, building an industrial 4.0 intelligent quality control platform.
Continue promoting quality education, quality activities, and encouragement programs, implementing quality responsibility among all personnel, and achieving the objective of “Zero Risk”.
(d). Product R&D Strategy ：
Plan company development strategy and product development direction based on market requirements and marketing deployment.
Create technical map based on company development strategy for the development of products that meet market requirements with leading technology.
Implement project management, reduce R&D times, flexibly address customer requirements and take advantage of every business opportunity.
Continue to strengthen R&D team, refine professional training and technology database systemization to make further progress toward become a world class R&D team.
Connect incentive system and R&D management mechanism to further raise team morale and development efficiency.
Make good use of school, R&D institute and government resources, utilize academic-industrial cooperation projects to accelerate product development. Reciprocate by introducing successful results back to related industries in Taiwan.
Consider worker-friendly environment, energy saving, carbon reduction factors in product R&D to do our part for the Earth and the next generation.
(2). Long term Development Plan
(a) Focus on development of high-end products used for fiber channel, gigabit Ethernet, SDH-SONET (synchronous optical network), small cells, terminal communications applications and high precision frequency control products used for medical electronic product applications. Also, develop miniaturized products used for wearable and smart home applications.

(b) Actively develop frequency control devices for automotive peripheral control module applications to achieve our foremost goal of meeting stringent quality requirements.
(c) Continue to expand sales service network. Besides strengthening sales deployment in Europe and America, broaden and deepen the sales network in southern China (Shenzhen, Wuhan and Chongqing), eastern China (Suzhou, Beijing and Shanghai), Japan (Shin-Yokohama, Osaka) and also aggressively expand in the Korea market, strengthen Singapore, India and Vietnam sales marketing channel deployment to supply services and meet market demand in each region, increase market scale and build a foundation for China and emerging market development in order to reach the goal of becoming one of the top two manufacturers in the quartz crystal industry.
(d) Continue to develop high-end timing products and also focus on sensor product development. Develop diverse product applications and diversified operation strategy to find new blue water business opportunities.

B `、` Marketing & Sales Situation

1 、 Market Analysis
(1).Market for our major products

The product trend is toward to small and light. The products that use the SMD crystal will have a higher percentage than others. In the future, Asia still is the major OEM center, and the products from Asia are still very high. TXC would still need to work hard on the market expansion in America, Europe and Japan.

Regional sales distribution of our major products in the past two years ：

Unit: NT$ 1,000

			Unit: NT$1,000	Unit: NT$1,000
Year Region	2015 (consolidated)		2016 (consolidated)
	Amount	%	Amount	%
America	239,122	2.58	267,915	2.78
Europe	35,478	0.38	39,638	0.41
Asia	7,603,437	82.06	7,527,750	78.11
Domestic	1,387,619	14.98	1,801,798	18.70
Total	9,265,656	100.00	9,637,101	100.00

(2). Market share
Quartz elements manufactured using the natural properties of crystals are an irreplaceable basic component for many electronic products. The quartz element market which is currently dominated by Japanese manufactured products, TXC Corporation is a Taiwan-based manufacturer of this critical component that has enjoyed consistent rapid growth and expanded its market share due to its energy and ambition, provision of quality and reliable products and flexible production services. In 2016, TXC maintained its 10% global market share (according to information from external market analysts) making it no. 1 in Taiwan and one of the top 3 dedicated frequency control element manufacturing service companies in the world.

Total Xtal & Oscillator Market Shares (Millions of Dollars)

Unit: USD Million

2016 Rank	Company Name	2016 Revenue(M)	Market Share (%)
1	Seiko Epson	$409	12.9%
2	NDK	$357	11.3%
3 4	TXC KCD	$310 $287	9.8% 9.1%
5	KDS	$212	6.7%
6	Vectron	$160	5.1%
7	SIWARD	$103	3.3%
8	Hosonic	$94	3.0%
9	MegaChips	$73	2.3%
10	Murata	$72	2.3%
	Others	$1,088	34.4%
	Total Revenue	$3,165	100%

Source ： TXC, CS&A, 2017

(3). Market future demand and supply condition, and its growth potential

(i) Industry side

Global frequency element production value was US$3.1 to 3.3 billion. Compound annual growth rate is 0.5%

Unit: Million pcs

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Source ： CS&A, 2016

Annual global sales of frequency elements are estimated at 18.0-20.0 billion units. Compound annual growth rate is 2.5%.

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Source ： CS&A, 2016

4. Product applications

TXC offers a complete product line covering a diverse range of applications which meet the electronic product technology development requirements of each application field and industry cross-linking opportunities made possible by IOT which should form a driving force 。 for future growth.

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(ii) Market side

Development of IOT-related applications including smart home, smart industry, smart vehicle, smart connection, smart medical and various end-user products such as wearable products, mobile devices, virtual reality and UAV has expanded rapidly as shown in the Fig below. The IDC has forecast that the global IOT will have 50 billion IOT devices in 2020 which will usher in the huge business opportunities of the IoE.

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Source: IDC, 2016

A. Automotive Electronics

With the rise of IoT, many ICT companies have released auxiliary products suitable for automotive use and telematics products to allow access to a diverse range of applications while driving any type of vehicle. In response to national laws mandating the inclusion automatic emergency breaking and lane departure warning functions into new car assessment items, Advanced Driver Assistant Systems (ADAS) key equipment and components will be introduced to the new generation of automobiles to improve driving safety. The ADAS market will explode in size which will drive demand for automotive electronics, sensors and related components. DIGITIMES Research estimates the market will grow in size to US$12.54 billion in 2020.

As the world enters the age of the smart automobile, automotive electronics will make up an increasing percentage of a vehicle’s cost. By 2020, the percentage of automotive electronics is forecast to grow to 35%. Global automotive sales are expected to break through the 100 million mark in 2017 and reach 111 million in 2020. New energy and electric vehicles have become a primary R&D objective for automotive firms. Electric vehicle sales are expected to reach 5.6 million units in 2035 (390,000 units in 2015). There are now an average of 60 – 100 quartz elements on every vehicle with applications ranging from non-safety to safety. The reliability requirements for frequency element products are correspondingly higher than other consumer electronic products. Our existing customers have been expanding into the field because they see good future prospects in the automotive electronic markets. This will help TXC to take advantage business opportunities which emerge in the automotive electronics field.

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B. Infrastructure and Small Cell

With the flourishing development of IoT and the gradual maturing of 4G/LTE technology, overall mobile network data speeds and the number of users have significantly increased. To satisfy future industry growth, service providers must continue to expand the number of base stations. To reduce investment costs and rapidly increase network coverage rates, service providers must utilize Small Cell as a mobile communications amplifier and extender. As shown in the figure below, MIC surveys forecasting global Small Cell output values by 2020, the annual production value will reach USD$2,077 M, a CAGR of 14%.

TXC advanced products that fill these requirements include OCXO, VCXO, S3-TCXO and high frequency XO, which can help also in improving overall product ASP and maintaining gross margins.

C. Sensors

In the coming generations, IoT technology will be present in all aspects of life. Sensors of all kinds will play essential roles, assisting individuals or enterprises in gathering all varieties of environmental data, and analyze that data to deliver valuable information. With the development of IoT, a diverse environment of service applications, such as mobile communications, wearable devices, automotive electronics, medical treatment, and M2M applications, along with PM2.5 sensor modules can connect with application side air filters/purifiers, and become elements of the IoT, by using a “smart air circle” operating concept. Each of these technologies will create growth potential for sensors of all types.

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Source ： DIGITIMES ， 2015/11

D. Other Mobile Device Development

a. Smart Phone

Smart phone demand slowed in 2017 but maintained an annual 1.5 to 1.6 billion rate. The industry survey and research institute IDC estimates that global smartphone shipments will reach 1.53 billion in 2017, increasing by 4.2% compared to the 1.47

billion in shipments last year. Provided these growth trends are maintained, shipments are forecast to reach 1.77 billion in 2021 growing at a 3.8% CAGR. Though the growth of the two companies with the largest market shares, Samsung and Apple will slow, the market share of Chinese smart phone manufacturers will continue to rise. Different chipset solutions will drive market supply and demand for crystal miniaturization, high precision and high temperature TCXO/TSX. Total production output of Chinese smartphones in 2017 is estimated to remain at 634 million units which is the same level as 2016 and represents a market share of 45.6%.

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Worldwide Mobile Phone Market by Device Type ， 2014-2020

(Source ： DIGITIMES)

b. Wearable devices As consumer awareness and demand grows significantly and global wearable device companies expand, the industry survey and research institute IDC forecasts than annual shipments of global wearable devices will maintain double-digit growth until 2020. Shipments will reach 205 million units in 2019 representing an annual increase of 20.58% and 237 million units in 2020 representing an annual increase of 15.60%.

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Source ： DIGITIMES
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c. Virtual Reality (VR)
Major virtual reality companies continued to introduce virtual reality (VR) and augmented reality (AR) devices in 2016. This was a major step forward for the VR and AR markets. Market demand for VR and AR devices is now gradually crossing over into the technology product enthusiast phase. Demand from various commercial applications and other consumer fields should be immense. VR and AR will also provide a future development direction for equipment manufacturers, content and platform providers and developers. The industry survey and research institute IDC expects global VR headset and AR device shipments to reach 99.40 million units in 2021, which is 10 times the output in 2016.

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Global VR and AR handset shipment forecast(Unit:M) Source ： IDC ， 2017/3

(4). Niches competition, the advantages/disadvantages of the future development, and the response strategies.

SWOT Analysis

Strengths Weaknesses
1. TXC is well established in the market, has solid customer 1. Must further strengthen channel base of brand manufacturers, high market share, deployment in emerging markets. trustworthy reputation, can provide concurrent on-site 2. Lack ability to lead development of service at customer design and manufacture bases. equipment for critical materials, long
1. Global logistics management, high level of delivery delivery times for orders. flexibility, meets customer delivery requirements on 3. Limited ability to automate front-end schedule. processes.
1. Profession automated manufacturing team, stable quality 4. China market is entering a slower and volume manufacture cost advantage. period of growth, more serious
1. Continued development and volume production of high business risk with small to medium precision and miniaturized products, continually narrows customers the technology gap with Japanese companies.
1. Products satisfy diverse customer design and technology development requirements.

Professional marketing and application engineering teams satisfy the various requirements of customer and provide product technology support during each stage of the design and volume production process.

Opportunities Threatness 1. China continues to nourish and develop technology giants 1. Japanese manufacturers have advantages in in each industry; some brand customers are quickly brand status, control over raw material developing into global players in their fields. production and technical capabilities and a

The design centers for automotive electronic supply comparative advantage in cost structure. chains and chipset manufacturers are being moved 2. Customers in mature industries are switching offshore to China. Competitive advantage of having the designs over to lower ASP or integrated-use same cultural background. materials due to cost considerations.
The IoT industry will continue to drive development of 3. Competitive MEMS, green clock and HCR peripheral products and related applications including replacement products are threating low-end sensors, M2M, wearable and medical, all of which will applications and putting pressure on current boost future growth. product price quotations.
High-end, high precision and high stability product and 4. Rise of Chinese red supply chain can easily market deployments are steadily being completed, affect mature products. seeking out niche markets and products to provide steady 5. Fluctuating exchange rates are affecting sales sources of products. and profits.
Continue to receive honors and awards including the 6. Changes in government labor laws have Taiwan Mittlestadt Award, CSR, Taiwan Excellence resulted in higher labor costs and

Award as well as Greenhouse Gas Inventory manufacturing cost increases.

(ISO14064-1), Carbon Footprint Inventory (PAS2050), and Carbon Neutrality (PAS2060) certifications which will further raise our brand exposure and build up our company image.

Respond Strategies

Enhance abroad sales teams ， actively seeking Europe, USA,Japan and Korea etc Tier 1 clients 。
Develop the market agreesively and expect to be the largest brand in China
Enhance the engineering technlolist of NGB factory, train material handling/ manufacture process automatic 。

professionals in China

Continuously to hire domestic trained as well as from abroad the research scientists and professionals in the communication and automobile parts industries.
Create more advantageous products ， may take strategic alliance and partnership in some of the products for cost reduction 。
Enhance product R&D ability ， develop smaller size and high end products that to improve the overall 。

profitability

Enhance the development of quartz crystal modularized products 。
Exercise stringent control over receivables and timely and closely verify demand on the customer side to facilitate flexible allocation.
Lean management, further optimization of each stage of management, raise operation efficiency.

2 `、` Major products’ important applications and their manufacturing process

(1). Major products’ important applications

Crystal componentsproduct	Crystal componentsproduct	Major Applications
Crystals		Mobile phone`、`wireless equipment`、`W-LAN`、`wireless telephone`、` WiFi Module `、`Sip Module `、`bluetooth `、`telephone terminal equipment`、`intelligent transport(ITS)`、`car accessories`、`LCD projector`、` coping machine`、`computer`、`printer`、`scanner`、`audio-visual equipments`、` camera`、`games`、`beeper
Crystal Oscillators	CXO`、`SO	base`、`wireless equipments`、`W-LAN`、`coxial cable communication`、` fiber optics communication `、`telphony terminal equipments `、` counter/sythesizers`、`intelligent transport(ITS)`、`computer`、`storage device`、`printer`、`audio-isual device`、`camera`、`games
	VC-TCXO`、` TCXO	Mobile phone `、` basestation `、` wireless equipment `、` satellitecommunication`、`W-LAN`、`bluetooth`、`global positioning systems`、`coaxial cable communication`、`fiber optics communication
	VCXO`、` VCSO	base`、`wireless equipments`、`satellite communication`、`W-LAN`、`coaxial cable communication`、`fiber optics communication`、`phony terminal equipment`、`counter/synthesizer
	OCXO	base`、`wireless equipments`、`satellite communication`、`global positioning systems`、`coaxial cable communication`、`fiber optics communication`、` counter/synthesizer
Sensor		mobile device
Tuning Fork		mobile phone`、`digital home`、`wireless networking`、`computers`、` automotives
Real Time Clock Module		Smart Grid`、`consumer`、`networking`、`Factory Automation control`、`monitor system`、`Server`、`satellite communication`、`automotives
		With the technology of GaN by MOCVD (metal organic vapor phase epitaxy), produce high-brightness blue LED. Applied to the LED backlight and lightingsystems.
Sapphire

(2). Manufacturing Process

Steps for crystal components manufacturing are: first we need to manufacture the quartz crysal needed for the electrical material. It involves the cutting, polish, cleaning of the wafer form. Then with the mechanical arms to place the wafer on the base and fixed with the silver based glue. Then package it under vaccum. For oscillators it is necessary to add one more unit of oscillating circuit IC with golden line conduction via amplified output of crystal chip oscillation. It requires more IC placement and wire bonding process compared to the quartz crystal.

－ (a). Pre-manufacturing process quartz crystal.

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Crystal grinding grinding
Crystal cut (machines to bar or (crude、medium、fine)
bar round shape)
Store Clean Differentiate frequency
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－ (b). Post-manufacturing process quartz crystal (use silver, gold, nickel for electroplating, and the process would reduce crystal frequency. Fine tuning the electroplating that would reduce frequency error to 3~10ppm)

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Crystal Electroplating Crude freq Base fixed
cleaning adjustment
Aging/electrical Base, outside Fine tuning Glue and bake
/temperature prebaking/weld frequency, to fix the
testing ing, seal plating with crystal
silver
Final check and
storage
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－ (c). Post manufacturing process crystal oscillator (use silver, gold, nickel for electroplating, and the process would reduce crystal frequency.)

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IC placement Crystal placement
Crystal Electroplating (assembly electronic (assembly crystal)
cleaning component)
Aging/electric Base, shell
Add barcode al/temperature Check for gas prebake/weldi
test barcode testing leaking ng, seal
Final check
and storage
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`、` (3) Light Sensor manufacturing process

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Stud Bump IC Wafer Mount Dicing UV Ray
Irradiating
Marking IR-LED IR-LED Plasma
Die Bond Wire Bond
Breaking Encapsulant Underfill Flip Chip
Dispansing Bond
Final Test Tape & Reel
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(d) Sapphire substrate process

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

Boule Cutting Grinding Polishing Cleaning and
inspection
Exposure and Photoressisting
Etchengraving development Storage
Cleaning and
inspection
Storage
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`、` (3) State of the major materials suppliers

The major materials for crystal and crystal oscillators include the base, wire bond, IC 。 package, crystal slice and crystal bars The main raw material of the sapphire substrate such as alumina. Major materials in light sensors are ceramic substrate, IC, IR LED and packaging tape.

(a). All the materials come from the at least three suppliers, and this would minimize the risk of all materials coming from a single supplier. Our company’s procurement depends on the buying terms, state of supply, and specifications; before the materials to be ordered. And, it also depends on some special conditions that we would adjust the ratio of buying materials and this approach would help us not too concentrated the ordering from a single supplier, or 。
running the risks of the orders being interrupted
(b). All the suppliers have long term relationship with us. And, our friendship is good. With our company is growing strongly, these suppliers would also take highest 。
priority to satisfy our company needs Annually, we also meet with our suppliers on regular or irregular base to review our purchasing terms and any room for the improvement. This also helps a stable and continuous relationship in the 。
materials supply

(c). In considering the steady material supply, our company will provide the Rolling Forecast ， to the suppliers and the production preparations. This can shorten the delivery time and an assurance of on time delivery. If there is any unusual situation, these suppliers will accommodate our needs to assure a stable supply.
、
(4) The suppliers and customers over than 10% of the past two years:
(a). Main Suppliers

unit ： NT$1,000

							unit`：`NT$1,000	unit`：`NT$1,000
	2015			2016			2017 Q1
Company	Amount	The Percentage of annual procurement (%)	Company	Amount	The Percentage of annual procurement (%)	Company	Amount	The Percentage of annual procurement (%)
S Company	1,082,521	22.27%	S Company	707,007	15.14%	K Company	152,776	13.00%
Others	3,778,994	77.73%	K Company	475,527	10.18%	S Company	124,423	10.59%
			Others	3,486,369	74.68%	Others	898,239	76.41%
Total	4,861,515	100.00%	Total	4,668,903	100.00%	Total	1,175,438	100.00%

(b). Main Clients

unit ： NT$ 1,000

							unit`：`NT$ 1,000	unit`：`NT$ 1,000
	2015			2016			2017 Q1
Client	Amount	Percentage of annual sale (%)	Client	Amount	Percentage of annual sale (%)	Client	Amount	Percentage of annual sale (%)
F Group	1,345,687	14.52%	F Group	1,205,525	12.51%	F Group	268,533	15.82%
Others	7,919,969	85.48%	Others	8,431,576	87.49%	H Group	203,053	11.96%
						Others	1,661,344	72.22%
Total	9,265,656	100.00%	Total	9,637,101	100.00%	Total	2,132,930	100.00%

`、` (5) Production and monetary values for the past two years

Year Majorproducts	2015	2015	2015	2016	2016	2016
	Capacity	Production	Value	Capacity	Production	Value
DIP Crystal Product	250,000	209,031	298,476	200,000	188,862	258,802
SMD Crystal Product	2,800,000	2,517,292	5,939,631	2,900,000	2,578,069	5,292,220
Others	0	1,564,456	1,917,631	0	2,402,077	2,380,855
Total	3,050,000	4,290,779	8,155,738	3,100,000	5,169,008	7,931,877

、 (6) Volumes of sales and monetary values of the past two years

Unit: 1000 PCS/NT$1000

					Unit: 1000 PCS/NT$1000	Unit: 1000 PCS/NT$1000	Unit: 1000 PCS/NT$1000	Unit: 1000 PCS/NT$1000
year Major products	2015				2016
	Domestic sales		Export		Domestic sales		Export
	Quantity	Value	Quantity	Value	Quantity	Value	Quantity	Value
DIP Crystal Product	10,434	18,486	199,353	365,002	11,877	20,209	179,115	318,605
SMD Crystal Product	66,749	284,241	2,314,675	7,285,402	72,019	284,074	2,470,611	7,256,970
Others	385	430,355	1,149,532	882,170	679	424,177	1,174,049	1,333,066
Total	77,568	733,082	3,663,560	8,532,574	84,575	728,460	3,823,775	8,908,641

`、` C Employees’ average years in service, age, and educational background distribution of the past two years

ution of the past two years	ution of the past two years
Year		2015	2016	2017/03/31
Total number employees	Engineer	444	508	535
	Administrative	578	594	572
	Sale	94	99	120
	Technicians/Operators	1,417	1,594	1,582
	Total	2,533	2,795	2,809
Average Age		30.90	31.27	31.35
Average Years in Service		4.71	4.73	4.76
Distribution of Educational Background	Ph.D.	0.53%	0.39%	0.39%
	M.S.	5.62%	5.40%	5.28%
	B.S.	28.39%	38.58%	38.16%
	HighSchool	26.37%	31.24%	31.98%
	BelowHighSchool	24.50%	24.39%	24.19%

D `、` Data on our environmental protection expense

1． Briefing on environmental protection fines

No fines related to environmental protection at Pingzhen Plant, Ningbo Plant and Chongqing Plant.

Legal regulations require permits for the installation of polluting facilities, pollution emission, paying of pollution prevention fees, or require the establishment of a special staff unit responsible for environmental protection. The following is a descripition of TXC permit applications, fees, and unit establishment:
A. Pingzhen factory manufactures chips and quartz components. Local authorities have approved applications for permits relevant to waste products, wastewater and regular

pollution sources that result from the production process, and a special staff environmental protection unit required in the permits has been established and is implementing operations and safeguards to maintain effective use of treatment measures. In addition, to adjust to new production line expansion, TXC has invested in adding wastewater treatment units and completed reconstruction of existing wastewater treatment plants; newly installed water scrubbing tower and adsorption equipment effectively treats different pollutants. Pingzhen factory is also actively discussing the feasibility of reusing wastewater, in the hopes of reducing environmental impact. NT$ 12.6 million paid in 2016 was spent primarily on cleaning the environment, environmental inspections, pollution prevention equipment operation and safeguarding, and protective equipment.

B. Ningbo factory has continued to sustain its status as the single entity with the largest quartz crystal production capability in the world. During the production process, the factory especially emphasized environmental administration and social contributions, actively complying with requirements outlined in the new “Environmental Law”, effective January 1[st] , 2015, closely observing bottom lines, meeting and exceeding requirements by local environmental protection law enforcement. Site operation controls are in place concerning wastewater, waste gases, factory noise, and dangerous solid waste. If wastewater COD and fluoride indicators are lower than the national standard, 50% or less of water levels are released, and optimizing water recycling is used. Concerning waste gas, the waste gas emission treatment process is monitored online through PH values; the “abnormal propanol waste liquid recycling and reuse case” promotes waste resourcing treatment. Chemical products are fully controlled using a modified electronification process, to achieve a clean production concept and mobile shift environmental management that shifts from end treatment to source treatment. In guaranteeing payment for environmental protection measures and the management process, hardware demands are met: in 2016, around RMB168,000 was devoted to environmental treatment.
C. Chongqing factory environmental protection measures are being smoothly implemented, product quality is stable, and all equipment has maintained good operating conditions. In 2016, expanded production lines were fitted, and investments were completed that upgraded and reconstructed the wastewater stations within the water pollution treatment prevention equipment, adding water coagulation, neutralization, and pressure filtration equipment. A series of acid alkaline exhaust treatment equipment was added, and has passed inspections by the Jiulongpo Environmental Protection Bureau of Chongqing, receiving an emissions permit. In accordance with new regulations from the Environmental Protection Bureau which require pollution emitting enterprises to purchase pollution credits from the Chongqing United Assets and Equity Exchange, a request to purchase these credits has been submitted. A total of RMB900,000 was expended on environmental management in 2016.

Briefing on implementation of safety and health
A. In 2009, Pingzhen factory established a work safety and sanitation committee. The committee currently has 12 members, 5 of whom were voted into office. A professional safety and sanitation meeting that addresses each environmental, health, and safety issue is held seasonally. To improve workplace safety, the company first promoted “occupational health and safety achievement recognition” through the “occupational health and safety committee”, in accordance with relevant operating directions. After undergoing risk identification, correction, and preventative measures, the factory was awarded with the CLA’s three year recognition. In March, 2013, the factory received its second achievement recognition, earning another two year recognition from the CLA. In February, 2015, the factory applied for its third achievement recognition and once again earned the CLA’s three year recognition. In August, 2015, the factory renewed its ISO 14001 environmental management system, OHSAS 18001 occupational health and safety management system, and CNS 15506 Taiwan occupational safety and health management system verifications. A total of 15 health promotional activities were held in 2016. For further information, see the following web page: http://www.txccorp.com/index.php?action=g_ESH_1&cid=5&sid=12#tab0. This repeatedly underscores the factory’s persistent dedication to creating a safe and healthy work environment, bringing the greatest guarantee of safety to our coworkers.
B. Since 2012, the Ningbo factory has formed the company’s social responsibility system through the Electronic Industry Code of Conduct’s (EICC) integration of labor, environment, health, safety, and business morality. Through the guidance of the “Safe Production Committee” and a goal of zero work accidents, each department’s safety staff holds at least one safety inspection each month, which aim for 100% elimination of potential safety hazards by continuing to use a Plan Do Check Act (PDCA) cycle that makes daily improvements to health, safety, and health management. The factory successfully renewed its “Safe Production Standardization (Level III)”, awarded by Ningbo City, without a single major accident throughout the entire year. The company takes full concern of employees’ physical health management; 12 health management special topic training sessions have been held, and 23 monthly emails and posters issued, with around 1650 participants. Concerning occupational health management, the company has passed work environment occupational hazard inspections and appraisals, and occupational hazard control results appraisals. Concerning risk sources, elimination, replacement, work process control, executive management, and PPE protection improvement measures have been taken to continue improving occupational illness risks that may be caused due to noise, dust, or poisonous chemical materials in the environment. Currently, there have been no reported incents of occupational illnesses.
C. In March, 2013, the Chongqing factory established a “Safe Production Management Committee”, which fully complies with the Chongqing Jiulongpo Bureau of Work Safety’s requirements, holding safe production management events, and also conforms to “Chongqing City Safe Production Supervisor Management Regulations”. To achieve the goal of zero work safety accidents, monthly safety inspections are held within each department of the organization, and a meeting is held to pursue improvements on

deficiencies, and ensure latent safety risks are promptly eliminated. Moreover, the safe production room also has perfect work safety investigation, declaration, and management systems which have thus far prevented major safety mishaps within the factory.

Hazardous Materials Management System
Protecting the Earth’s environment is a topic of great importance for people living in the 21[st] century. Founded on the concepts of perfecting our protection of the Earth and benefiting the next generation of grandchildren, and the corporate responsibility of common protection of the overall ecological environment, TXC can shoulder its mission of contributing to society, fully and actively promoting environmental management with an attitude of caution.

TXC’s non harmful materials policy is as follows:

To fully respect the goal of being a citizen of the Earth, we pledge to:

Become customers’ greatest companion for green products, according to the most stringent legal or customer requirements.
Confirm organization operations and provide resources, promote environmental education, strengthen the environmental consciousness and objectives of all staff and suppliers.
Design green products, emphasizing products and production processes with no harmful materials.
Using company events, implement continual improvements to achieve the company’s goal of sustainable operations.

TXC abides by the European Union’s RoHS 2.0 (Restriction of Hazardous Substances in Electrical and Electronic Equipment) 2011/65/EU, WEEE (Waste Electrical and Electronic Equipment) 2012/19/EU, PFOS (The Perfluorooctane Sulfonates Directive) 2006/122/EC, and chemical products are Registered, Evaluated, Authorized, and Restricted (REACH) according to (EC) No 1907/2006 requirements. Since July 1[st] , 2006, TXC has cooperated with international standards restricting the use of lead (Pb), cadmium (Cd), mercury (Hg), hexavalent chromium (Cr[6+] ), polybrominated biphenyl (PBB), and Polybrominated diphenyl ethers (PBDE), and accommodated customers’ non halogen requests. In addition to obtaining an ISO 14001 environmental management system and IECQ/QC 080000 harmful materials management system certifications, our employees’ dedication has allowed us to continually qualify as a Green Partner for international manufacturing giant, Sony, and earn an electronic communications products voluntary pollution control certificate from the China RoHS electronic communications products pollution control management method in 2012. Founded on the principles of mutual understanding and common promotion of environmental improvement, green shopping activities continue to provide users with a green product foundation. To ensure product quality conforms to relevant environmental regulations, TXC strictly prohibits the use of controlled substances during the manufacturing process, and requires suppliers to refrain from using or having prohibited materials within the products or during the production process, in the hopes that

from a product’s design to its manufacturing and shipment, TXC products will not use, come into contact with, or receive pollutants, to reduce the environmental impact of our products and services.In addition to complying with EICC and GeSI behavioral standards and relevant requirements, TXC has also inspected our supply chain, and written a policy which promises not to use any conflict metals originating from Congo or other neighboring countries. To strengthen the supply chain’s green product requirements, suppliers are encouraged to have a basic ISO 9001 quality management system, and introduce a QC 080000 system to implement environmentally safe material controls. TXC’s supplier management regulations require suppliers of important raw materials to sign a green product and environmental declaration, and especially provides upstream and downstream suppliers with Chinese and English explanations of the required SDS forms for the entire factory, to ensure reader comprehension and so that necessary disposal is properly handled.

5. Supplementary briefing

To strengthen corporate responsibility implementation, Pingzhen factory completed its “Greenhouse Gases Examination Report” and “Product Carbon Footprint Examination Report” in 2016, and passed BSI inspections, receiving ISO 14064-1 and PAS 2050 certifications. TXC continues to cooperate with the department of environmental protection in promoting low carbon activities, and received six low carbon activities certifications from the Environmental Protection Administration in 2016. Activities included Taoyuan 2016 Spring Beach Cleaning Event (4/30) and so on. The factory will continue to promote environmental, health, and safety activities, to ensure the workplace environment remains safe and clean, delivering employees the greatest guarantee of safety. For further information, see the following web page: http://www.txccorp.com/index.php?action=g_ESH_1&cid=1

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E `、` Labor Relations

The Company has maintained harmonious labor relations since its establishment. In recent years and since the closing date for publication of the annual report, there are no losses due to employer/employee disputes and there have never been any major employer/employee disputes since its establishment. Aside from holding employor/employee meetings and discussion meetings for new employees and for foreign nationals, and conducting employee satisfaction investigation, we have also set up an

employee opinions mailbox and other channels for reflecting their opinions. We have spared no efforts toward employee benefits. We have often stressed the importance of employees and have provided employee bonus in stock allotment, stock options, and cash for wedding ／ funeral ／ other festive occasions, emergency relief fund, group insurance ／ medical checkup, subsidies for tour at home or abroad, as well as discounts for books, magazines and special convenience stores; and sponsor birthday celebrations, sports competition, year-end party and luck draw, various recreational activities and commendation of senior and outstanding employees; also provide canteen, hostel and parking lots, table tennis table, pool table and other facilities. It is hoped that through coordination of the employee welfare committee with the Company to promote employer/employee harmony and guarantee employee benefits and health in a bid for win-win for both the employer and the employees.

Insurance and retirement	Labor, health, group insurance, housing accumulation fund (china subsidiaries), social insurance(china subsidiaries)
Profit sharing	Employee’sremuneration,stock dividends, stock options, convertible corporate bonds,treasurystock,Cashgifts for three major holidays
Gifts	Cash gifts for three major holidays, birthdays, weddings, births, hospitalization and white card consolationgifts(blasket of flower)
Medical insurance	1. Group insurance: Life insurance, major disease insurance, accident injury insurance, emergency medical treatment, hospitalization treatment and occupational injury insurance. 2.Regular health exams: Physical exam, complete blood count (CBC), vision exam, hearing exam, liver function exam, blood fat exam, urine examination, chest X-rays, seasonal flu vaccine inoculation subsidy. 3.Manager insurance 4. Aging business insurance`、`Critical illness medical insurance`、`medical insurance(China subsidiaries)
Activities	Domestic and international travel activities, birthday parties, employee athletic meets, year-end banquet and employee drawing, ball sport competitions, painting contests, photography contests, contracted merchant discounts, book reading club, a variety of employee social club activities and group purchase of movie ticket, art activies, course or activity for employee’s anti-pressure, and course for anti-smokingand anti-weight
Emergency relief	Grants allocated based on real-life conditions experienced by employees
Book reading	Regularly purchase book, magazine, newspapers for the reading enjoyment of employees,and VCD/DVD multimedia for employees’ use
Other welfare	Solid promotion channels, overseas assignment development opportunities , performance bonuses issued based on operation status, recognition of veteran and exceptional personnel, top ten outstanding project commendations, incentives for employee project proposals, bonuses for emplyees’ child, bonsus forpatents andproposal

Employee cafeteria, employee dormitory, car and motorcycle parking spaces, table tennis room, billiards room, badminton court, fitness room, breast-feeding Facilities room, medical service office, convenience store, leisure room, shooting machines, libery, KTV and Chess room(china subsidiaries)

2. Employee education and training:

The Company provides employees a multiple learning environment. Colleagues can continually challenge their growth limit through internal ／ external training, OJT, KM （ knowledge management system ） , reading clubs, online ／ physical library, and supervisor ／ peer instruction. At the same time, through the new employees ／ professional technology ／ supervisor coaching ／ general knowledge course ／ self-development education and training system to bring maximun satisfaction for employees! On the other hand, through planning of job category ／ job level, work rotation, project allocation and overseas assignments to integrate their lives with their careers and enable them enjoy the happiness of growth in knowledge and skills and develop a bright future.

The Company has established Education and Training Guidelines and Mandatory Occupational Course Guidelines and our subsidiaries have established Employee Promotion and Reassignment Guidelines to plan related training courses in accordance with occupational and professional requirements in order to improve employee knowledge and skills, overall quality of employees and operation performance. Related education and training performance in 2016 is listed in the table below:

a. PCF Factory

a. PCF Factory
Item	No. of Class	No. of Sessions	No of Trainees	No. of Hours	Expense(NTD)
1. Management Level Training	14	14	797	1,648	198,820
2. Self Heuristic Growth Training	13	17	541	286	7,200
3. Job Function Training	96	214	10,648	24,170	324,278
4. General Knowledge Training	9	42	2,898	4,829	13,740
5. New employees Training	26	12	218	3,510	0
Total	158	299	15,102	34,443	544,038

b. NGB Factory

b. NGB Factory
Item	No. of Class	No. of Sessions	No of Trainees	No. of Hours	Expense(RMB)
1. Management Training	14	18	615	3394	126,320
2. Job Training	40	83	3,992	8,782	20,626
3. General Training	18	30	6,198	22,594	2,254
4. Project Training	3	8	253	1,779	90,841
5. Other Training	7	7	1,422	15,330	0
Total	82	146	12,480	51,879	240,041

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c. CKG Factory

c. CKGFactory
Item	No. of Class	No. of Sessions	No of Trainees	No. of Hours	Expense(RMB)
1. Management Training	3	3	113	33	0
2. Job Training	39	66	1,811	194	104,118
3. General Training	5	15	1,218	14	0
4. Other Training	7	7	426	23.5	0
Total	54	91	3,568	263.5	104,118

(1)The Company’s finance supervisor qualified for Professional Certification of Finance and Accounting Supervisor of Publicly-listed Companies sponsored by the R.O.C. Accounting Research Development Fund.
(2)Two financial staffs of the Company acquired the Internal Auditor Certificate issued by the Internal Auditing Association.
(3) One financial staff of the Company acquired the Stock Professional Services certification test issued by the Securities and Futures Bureau, Financial Supervisory Commission.
(4) One financial staff of the Company acquired the Certified Public Accountant issued by the Ministry of Examination.
(5)Two financial staff of the Company acquired the Certified Accountant issued by the Ministry of Examination.
(6)Two financial staffs of the Company acquired the Certificate of Securities Salespeerson issued by the Ministry of Examination.
(7)Two financial staffs of the Company acquired the Certificate of PMP (Project Management Professional).

3. Pension System Implementation

TXC’s employee retirement measures are fixed according to labor standard laws; in accordance with period legal reminders, reseave 9% of monthly salary for retirement preparatory funds are paid into the Bank of Taiwan, and an Occupational Retirement Preparatory Fund Supervisory Committee is then responsible for managing and using the retirement fund. Starting July 1[st] , 2005, in accordance with labor retirement fund regulations, reseave 6% of monthly salary for monthly retirement payments are transferred into special individual retirement accounts established by the department of labor; A separate appointed agent retirement fund was established in January 2007, reseave 8% of monthly salary for employee pension to ensure that retirement plans are managed professionally.

4. Labor and Management Negotiations and Employee Rights

In addition to legally managing negotiations between labor and management, TXC conducts employee satisfaction research, employee discussions, and international employee discussions, and has installed employee suggestion boxes. TXC is devoted to providing accessible communication channels, in the hopes to facilitate abundant communication between employee suggestions and company direction, and seeks to improve and provide an excellent work environment and conditions.

To ensure the physical safety of employees and work environment safety, in addition to establishing an “occupational health and safety committee” which holds periodical committee

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meetings that discuss occupational implementation achievements and matters of occupational health and safety, additional management measures have been established, and all employees are required to implement them; TXC not only purchases group insurance annually and holds periodic occupational health and safety lectures, but also sends employees to attend occupational health and safety courses, and has published the “TXC Emergency Response Plan” and “Environmental Health and Safety Management Handbook” to guarantee employee safety and a calm reaction to emergency situations. For further information, please consult the following webpage: http://www.txccorp.com/index.php?action=g_ESH_1&cid=5&sid=14. To achieve the goal of zero disasters, TXC irregularly revises the annual emergency response plan and environmental health and safety management handbooks, and formulates detailed implementation according to the revised contents; an institution then acts according to the plan’s timetable and contents, which then undergoes an auditing organization’s exploration of execution deficiencies, and the following year’s emergency response plan and environmental health and safety handbook are then formulated, and are discussed and revised at any time according to the implementation process and auditing, thereby reducing the institution’s risks, finally achieving the goal of zero hazards.

( `四` ) `、` Fulfillment of social responsibility

There company’s corporate social responsibility has always including three aspects: corporate philanthropy, corporate governance and environmental safety & health. In the future, related resources from external units that have been cooperating over a long period with our company will be fully integrated. This combined with the high level of enthusiasm and caring shown by our volunteer employees and the newly established charity and compassion foundation will show our commitment to displaying a spirit of ‘giving back to society’, making maximum use of limited resources and encouraging the joint participation of neighboring communities and companies. By making a greater impact with our philanthropic activities, TXC will set out a path for sustainable operations and expand the reach of our philanthropy.

Please refer to the website: http://www.txccorp.com/index.php?action=f_social_1&cid=6

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VII. An Overview of the Company’s Financial Status

A. Abbreviated Balance Sheets and P/L Statements for the Past 5 Years

、 (1) Abbreviated Consolidated Balance Sheets (IFRS)

Unit ： NT$ 1,000

(1)`、`Abbreviated	(1)`、`Abbreviated	Consolidated Balance Sheets (IFRS)	Consolidated Balance Sheets (IFRS)	Consolidated Balance Sheets (IFRS)	Unit`：`NT$ 1,000	Unit`：`NT$ 1,000	Unit`：`NT$ 1,000
Year Item		Financial information			for the post 5 years (Note1)
		2012	2013	2014	2015	2016	Up to 2017.03.31 (Note 3)
Current assets			6,858,639	7,806,568	8,573,807	8,818,130	8,337,901
Property, plant and equipment(Note 2)			5,508,064	5,153,830	4,570,352	4,277,905	4,266,155
Intangible assets			0	0	11,921	10,798	9,469
Other assets (Note 2)			616,827	661,849	2,424,335	1,735,135	1,413,273
Total assets			12,983,530	13,622,247	15,580,415	14,841,968	14,026,798
Current liabilities	Before distribution		2,811,689	2,791,774	3,444,554	3,156,105	3,411,428
	After distribution		2,811,689	2,791,774	3,444,554	`註`6	`註`6
Long-term liabilities			1,846,958	1,935,897	1,396,615	1,912,681	1,053,723
Total liabilities	Before distribution		4,658,647	4,727,671	4,841,169	5,068,786	4,465,151
	After distribution		4,658,647	4,727,671	4,841,169	`註`6	`註`6
Interests attributable to parent company			8,324,883	8,894,576	10,739,246	9,719,652	9,511,467
Common stock			3,097,570	3,097,570	3,097,570	3,097,570	3,097,570
Capital surplus			1,662,181	1,662,181	1,662,181	1,665,224	1,665,224
Retained earnings	Before distribution		3,489,796	3,792,029	3,940,109	4,163,101	4,484,047
	After distribution		3,489,796	3,792,029	3,940,109	`註`6	`註`6
Other interests			75,336	342,796	2,039,386	793,757	264,626
Treasury Stock			0	0	0	0	0
Non-controlling interests			0	0	0	53,530	50,180
Total stockholders’ equity	Before distribution		8,324,883	8,894,576	10,739,246	9,773,182	9,561,647
	After distribution		8,324,883	8,894,576	10,739,246	`註`6	`註`6

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.

＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards. Note 1: The years which have not yet been audited and certified by a CPA should be noted.

Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year.

Note 3: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.

Note 4: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.

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Note 5: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

Note 6: Earnings in 2016 have not yet passed shareholders’ meeting resolution as of March 31, 2017.

、 (2) Abbreviated Balance Sheets (IFRS)

Unit ： NT$ 1,000

Year Item	Year Item		Financial information for the post 5 years(Note 1)	Financial information for the post 5 years(Note 1)	Financial information for the post 5 years(Note 1)	Financial information for the post 5 years(Note 1)	Up to 2017.03.31 (Note 3)
		2012	2013	2014	2015	2016	Not Applied
Current assets		Not Applied	4,931,108	5,042,763	4,812,193	4,650,756
Property, plant and equipment(Note 2)			3,013,892	2,739,181	1,968,448	2,055,749
Intangible assets			0	0	3,832	2,638
Other assets (Note 2)			4,598,770	5,216,153	7,975,571	7,195,572
Total assets			12,543,770	12,998,097	14,760,044	13,904,715
Current liabilities	Before distribution		2,373,019	2,437,562	2,649,503	2,561,647
	After distribution		2,373,019	2,437,562	2,649,503	`註`6
Long-term liabilities			1,845,868	1,665,959	1,371,295	1,623,416
Total liabilities	Before distribution		4,218,887	4,103,521	4,020,798	4,185,063
	After distribution		4,218,887	4,103,521	4,020,798	`註`6
Interests attributable to parent company			8,324,883	8,894,576	10,739,246	9,719,652
Common stock			3,097,570	3,097,570	3,097,570	3,097,570
Capital surplus			1,662,181	1,662,181	1,662,181	1,665,224
Retained earnings	Before distribution		3,489,796	3,792,029	3,940,109	4,163,101
	After distribution		3,489,796	3,792,029	3,940,109	`註`6
Other interests			75,336	342,796	2,039,386	793,757
Treasury Stock			0	0	0	0
Non-controlling interests			0	0	0	0
Total stockholders’ equity	Before distribution		8,324,883	8,894,576	10,739,246	9,719,652
	After distribution		8,324,883	8,894,576	10,739,246	`註`6

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.

＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards. Note 1: The years which have not yet been audited and certified by a CPA should be noted.

Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year.

Note 3: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.
Note 4: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.

Note 5: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected

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or revised amounts should be listed and the circumstances and reasons should be noted. Note 6: Earnings in 2016 have not yet passed shareholders’ meeting resolution as of March 31, 2017.

`、` (3) Abbreviated Conslodiated Balance Sheets (GAAP)

Unit ： NT$ 1,000

Year Item	Year Item	Financial information for the post 5 years (Note1)	Financial information for the post 5 years (Note1)	Financial information for the post 5 years (Note1)	Financial information for the post 5 years (Note1)
		2012	2012	2013	2014	2015
Current assets		6,737,268	Not Applied	Not Applied	Not Applied	Not Applied
Long-term equity investments		299,192
Property, plant and equipment(Note 2)		5,734,497
Intangible assets		115,024
Other assets		110,221
Total assets		12,996,202
Current liabilities	Before distribution	3,445,764
	After distribution	3,445,764
Long-term liabilities		1,525,637
Other liabilities		144,305
Total liabilities	Before distribution	5,115,706
	After distribution	5,115,706
Common stock		3,097,570
Capital surplus		1,616,549
Retained earnings	Before distribution	3,029,417
	After distribution	2,347,952
Unrealized gains on financial instruments		(13,105)
Cumulative translation adjustments		167,431
Asset revaluation increment(note 3)		(22,808)
Total stockholders’ equity	Before distribution	7,880,496
	After distribution	7,199,031

Note 1: The years which have not yet been audited and certified by a CPA should be noted.

Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year.

Note 3: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.

Note 4: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

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`、` (4) Abbreviated Balance Sheets (GAAP)

Unit ： NT$ 1,000

Year Item	Year Item	Financial information for the post 5 years (Note1)	Financial information for the post 5 years (Note1)	Financial information for the post 5 years (Note1)	Financial information for the post 5 years (Note1)
		2012	2013	2014	2015	2016
Current assets		5,188,324	Not Applied	Not Applied	Not Applied	Not Applied
Long-term equity investments		4,033,572
Property, plant and equipment(Note 2)		3,394,698
Intangible assets		0
Other assets		18,424
Total assets		12,635,018
Current liabilities	Before distribution	3,173,779
	After distribution	3,173,779
Long-term liabilities		1,437,500
Other liabilities		143,243
Total liabilities	Before distribution	4,754,522
	After distribution	4,754,522
Common stock		3,097,570
Capital surplus		1,616,549
Retained earnings	Before distribution	3,029,417
	After distribution	2,347,952
Unrealized gains on financial instruments		(13,105)
Cumulative translation adjustments		167,431
Asset revaluation increment		(22,808)
Total stockholder s’ equity	Before distribution	7,880,496
	After distribution	7,199,031

Note 1: The years which have not yet been audited and certified by a CPA should be noted.

Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year.

Note 3: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.

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`、` (5) Abbreviated Consolidated P/L Statements (IFRS)

Unit ： NT$ 1,000

						Unit`：`NT$ 1,000
Year Item	Financial information for the post 5 years (Note 1)					Up to 2017.03.31 (Note 2)
	2012	2013	2014	2015	2016
Net operatingrevenue	Not Applied	9,503,583	9,526,243	9,265,656	9,637,101	2,132,930
Grossprofit		2,194,030	2,331,149	2,235,175	2,554,069	603,099
Operatingincome		951,154	1,004,022	908,335	1,114,394	263,674
Nonoperating gains and losses		110,611	141,733	179,275	77,878	104,205
Income before income tax		1,061,765	1,145,755	1,087,610	1,192,272	367,879
Continuing operations net Income		935,161	995,174	938,203	1,013,692	317,783
Discontinuing operations net Loss		0	0	0	0	0
Net income(loss)		935,161	995,174	938,203	1,013,692	317,783
Other comprehensive income `（`net amount`）`		179,040	255,984	1,680,945	(1,264,408)	(529,318)
Total comprehensive income		1,114,201	1,251,158	2,619,148	(250,716)	(211,535)
Net income attributable to parent company		935,161	995,174	938,203	1,016,164	321,133
Net income attributable to non-controllinginterests		0	0	0	(2,472)	(3,350)
Comprehensive income attributable toparent company		1,114,201	1,251,158	2,619,148	(248,244)	(208,185)
Comprehensive income attributable to non-controlling interests		0	0	0	(2,472)	(3,350)
Earningsper share		3.02	3.21	3.03	3.28	1.04

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.
＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards.

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.
3: Gains (losses) from discontinued operations are listed as net amounts after income tax deduction.
4: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.
5: Earnings in 2016 have not yet passed shareholders’ meeting resolution as of March 31, 2017.

107

Unit ： NT$ 1,000

`、` (6) Abbreviated P/L Statements (IFRS)

Year Item	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Up to 2017.03.31 (Note 2)
	2012	2013	2014	2015	2016
Net operatingrevenue	Not Applied	8,336,979	8,178,579	7,898,695	7,887,769	Not Applied
Grossprofit		1,508,429	1,476,609	1,367,717	1,633,015
Operatingincome		678,460	638,958	559,524	767,750
Nonoperating gains and losses		345,119	444,759	475,633	364,143
Income before income tax		1,023,579	1,083,717	1,035,157	1,131,893
Continuingoperations net Income		935,161	995,174	938,203	1,016,164
Discontinuing operations net Loss		0	0	0	0
Net income(loss)		935,161	995,174	938,203	1,016,164
Other comprehensive income `（`net amount`）`		179,040	255,984	1,680,945	(1,264,408)
Total comprehensive income		1,114,201	1,251,158	2,619,148	(248,244)
Net income attributable to parent company		935,161	995,174	938,203	1,016,164
Net income attributable to non-controllinginterests		0	0	0	0
Comprehensive income attributable toparent company		1,114,201	1,251,158	2,619,148	(248,244)
Comprehensive income attributable to non-controlling interests		0	0	0	0
Earningsper share		3.02	3.21	3.03	3.28

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.
＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards.

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.
3: Gains (losses) from discontinued operations are listed as net amounts after income tax deduction.
4: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.
5: Earnings in 2016 have not yet passed shareholders’ meeting resolution as of March 31, 2017.

108

、 (7) Abbreviated Consolidated P/L Statements (GAAP)

Unit ： NT$ 1,000

Year Item	Financial information for the post 5 years (Note	Financial information for the post 5 years (Note	Financial information for the post 5 years (Note	Financial information for the post 5 years (Note	1)
	2012	2013	2014	2015	2016
Net operatingrevenue	10,928,495	Not Applied	Not Applied	Not Applied	Not Applied
Grossprofit	2,508,295
Operatingincome	1,257,655
Nonoperating income and gains	159,188
Nonoperating expenses and losses	(114,224)
Income before income tax	1,302,619
Net income before cumulative effect of change in accounting principles	1,148,886
Income(loss) from operations of discontinued segment	0
Extraordinary gain or loss	0
Cumulative effect of change in accounting principles	0
Net income	1,148,886
Earningsper share	3.79

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Gains (losses) from discontinued operations, extraordinary gains or losses and cumulative effects resulting from changes in accounting principles are listed as net amounts after income tax deduction.
3: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

109

、 (8) Abbreviated P/L Statements (GAAP)

Unit ： NT$ 1,000

Year Item	Financial information for the post 5 years (Note	Financial information for the post 5 years (Note	Financial information for the post 5 years (Note	Financial information for the post 5 years (Note	1)
	2012	2013	2014	2015	2016
Net operatingrevenue	9,477,481	Not Applied	Not Applied	Not Applied	Not Applied
Grossprofit	1,708,304
Operatingincome	866,519
Nonoperating income and gains	449,511
Nonoperating expenses and losses	57,327
Income before income tax	1,258,703
Net income before cumulative effect of change in accounting principles	1,148,886
Income(loss) from operations of discontinued segment	0
Extraordinary gain or loss	0
Cumulative effect of change in accounting principles	0
Net income	1,148,886
Earningsper share	3.79

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Gains (losses) from discontinued operations, extraordinary gains or losses and cumulative effects resulting from changes in accounting principles are listed as net amounts after income tax deduction.
3: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

110

B `、` Financial Analysis for the past 5 Years

`（` 1 `）` Consolidated Financial Analysis (IFRS)

Yesr Item	Yesr Item	Yesr Item	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Up to 2017.03.31
			2012	2013	2014	2015	2016
Capital Structure Analysis (%)	Debt ratio (%)		Not Applied	35.88%	34.71%	31.07%	32.83%	31.83%
	Long-term fund to fixed asstes ratio (%)			184.67%	210.14%	265.53%	273.17%	248.83%
Liquidity Analysis (%)	Current Ratio (%)			243.93%	279.63%	248.91%	279.40%	244.41%
	Quick Ration (%)			180.81%	215.62%	201.84%	227.49%	191.20%
	Times interest earned (%)			2,406%	2,538%	2,610%	4,349%	6,426%
Operating performace Analysis (%)	Average collection turnover(times)			3.07	3.36	3.12	3.18	3.06
	Days sales outstanding			118.79	108.63	116.94	114.77	119.28
	Average inventoryturnover(times)			4.67	4.35	4.41	4.64	3.85
	Averagepayment turnover(times)			6.34	7.36	6.45	5.64	4.61
	Average inventoryturnover(days)			78.13	83.97	82.85	78.66	94.80
	Fixed assets turnover(times)			1.73	1.85	1.91	2.18	2.00
	Total assets turnover(times)			0.73	0.70	0.63	0.63	0.59
Profitability Analysis (%)	Turn on total assets (%)			7.48%	7.77%	6.67%	6.82%	2.24%
	Turn on total equity (%)			11.57%	11.56%	9.56%	9.79%	3.29%
	Paid-in capital ratio (%)			34.28%	36.99%	35.11%	38.49%	11.88%
	Net margin (%)			9.84%	10.45%	10.13%	10.52%	14.90%
	Earnings per share(Basic) Note I			3.02	3.21	3.03	3.28	1.04
Cash Flow	Cash flow ratio (%)			70.80%	54.96%	65.35%	78.70%	17.78%
	Cash flow adequacy ratio (%)			86.44%	81.61%	104.28%	123.42%	150.37%
	Cash flow reinvestment ration (%)			6.45%	5.76%	9.83%	10.87%	11.01%
Leverage	Operating leverage			1.9799	1.9446	2.0967	1.8211	1.7971
	Financial Leverage			1.0506	1.0491	1.0501	1.0258	1.0226
		Please explain the reasons of changes in financial ratio for the post two years (No needs for analysis if change of financial ratio is less than 20%) 1. Times interest earned increased due to CB expired, less interests expenses and increased profits. 2. Cash flow ratio increased due to net operating cash inflow this year was increased compared to lastyear.

111

NoteII `：` Glossary `：`

  1. Capital StructureAnalysis

        - Debt ratio `＝` Total liabilities `／` Total assets

(2) Long-term fund to fixed asstes ratio ＝（ Total stockholders’ equity ＋ Long-term liabilities ）／ Net Fixed Assets
Liquidity Analysis
(1) Current Ratio ＝ current assets ／ current liabilities
－－
(2) Quick Ration ＝（ current assets Inventories Prepaid expenses ）／ current liabilities
＝
(3) Times interest earned Earnings before interest and taxs ／ Interest expenses
Operating performace Analysis
＝

(1) Average collection turnover

    - Net sales `／` Average trade Receivables

(2) Days sales outstanding ＝ 365 ／ Average collection turnover
＝。
(3) Average inventory turnover Cost of good sold ／ Average inventory
＝
(4) Average payment turnover Cost of good sold ／ Average trade Payables
(5) Average inventory turnover(Days) ＝ 365 ／ Average inventory turnover
(6) Fixed assets turnover ＝ Net sales ／ Net Fixed Assets
(7) Total assets turnover ＝ Net sales ／ Total assets

Profitability Analysis

 - `－`

 - (1) Turn on total assets `＝〔` Net income `＋` Interest expenses× `（` 1 Effective tax rate `）〕／ 。`

 - Average total assets

(2) Turn on total equit ＝ Net income ／ Average stockholders’ equit 。
(3) Net margin ＝ Net income ／ net sales 。
－
(4) Earnings per share ＝（ Net income Perferred stock dividend ）／ Weighted average number of shares outstanding
Cash Flow
(1) Cash flow ratio ＝ Net cash provided by operating activities ／ current liabilities
＝
(2) Cash flow adequacy ratio Five-year sum of cash from operations ／ Five-year sum of capital expenditures, inventory additions, and cash dividend.
＝
(3) Cash flow reinvestment ration (Cash provided from operating activities – Cash dividend) ／（ Grosss fixed assets + investment + Other assets + Working capital ）
Leverage
(1) Operating leverage ＝（ Net sales – Variable cost ）／ Income from operations
(2) Financial Leverage ＝ Income from operations ／（ Income from operations － Interest expenses ）

112

`（` 2 `）` Financial Analysis (IFRS)

Yesr Item	Yesr Item	Yesr Item	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Up to 2017.03.31
			2012	2013	2014	2015	2016
Capital Structure Analysis (%)	Debt ratio (%)		Not Applied	33.63%	31.57%	27.24%	28.69%	Not Applied
	Long-term fund to fixed asstes ratio (%)			337.46%	385.54%	615.23%	551.77%
Liquidity Analysis (%)	Current Ratio (%)			207.80%	206.88%	181.63%	181.55%
	Quick Ration (%)			156.54%	161.39%	145.87%	143.09%
	Times interest earned (%)			2,932	3,230	3,377%	6,630%
Operating performace Analysis (%)	Average collection turnover(times)			3.03	3.18	3.07	3.16
	Days sales outstanding			120.55	114.80	118.73	115.50
	Average inventory turnover(times)			6.19	5.89	6.52	6.80
	Average payment turnover(times)			5.03	5.31	5.51	5.18
	Average inventory turnover(days)			58.95	61.95	56.00	53.67
	Fixed assets turnover(times)			2.77	2.99	3.36	3.92
	Total assets turnover(times)			0.66	0.63	0.57	0.55
Profitability Analysis (%)	Turn on total assets (%)			7.66%	7.99%	6.95%	7.19%
	Turn on total equity (%)			11.57%	11.56%	9.56%	9.84%
	Paid-in capital ratio (%)			33.04%	34.99%	33.42%	36.54%
	Net margin (%)			11.22%	12.17%	11.88%	12.88%
	Earnings per share(Basic)			3.02	3.21	3.03	3.28
Cash Flow	Cash flow ratio (%)			55.74%	43.94%	40.27%	52.59%
	Cash flow adequacy ratio (%)			83.80%	90.99%	96.22%	109.74%
	Cash flow reinvestment ratio(%)			5.60%	3.16%	2.44%	4.66%
Leverage	Operating leverage			1.7327	1.7827	1.8940	1.5353
	Financial Leverage			1.0563	1.0505	1.0598	1.0231
		Please explain the reasons of changes in financial ratio for the post two years (No needs for analysis if change of financial ratio is less than 20%) 1. Times interest earned increased due to CB expired, less interests expenses and increased profits. 2. Cash flow ratio increased due to net operating cash inflow this year was increased compared to last year. 3. Cash flow reinvestment ration increaseddue to net operating cash inflow thisyear was increased compared to lastyear.

113

NoteII `：` Glossary `：`

  1. Capital StructureAnalysis

        - Debt ratio `＝` Total liabilities `／` Total assets

(2) Long-term fund to fixed asstes ratio ＝（ Total stockholders’ equity ＋ Long-term liabilities ）／ Net Fixed Assets
Liquidity Analysis
(1) Current Ratio ＝ current assets ／ current liabilities
－－
(2) Quick Ration ＝（ current assets Inventories Prepaid expenses ）／ current liabilities
＝
(3) Times interest earned Earnings before interest and taxs ／ Interest expenses
Operating performace Analysis
＝

(1) Average collection turnover

    - Net sales `／` Average trade Receivables

(2) Days sales outstanding ＝ 365 ／ Average collection turnover
＝。
(3) Average inventory turnover Cost of good sold ／ Average inventory
＝
(4) Average payment turnover Cost of good sold ／ Average trade Payables
(5) Average inventory turnover(Days) ＝ 365 ／ Average inventory turnover
(6) Fixed assets turnover ＝ Net sales ／ Net Fixed Assets
(7) Total assets turnover ＝ Net sales ／ Total assets

Profitability Analysis

 - `－`

 - (1) Turn on total assets `＝〔` Net income `＋` Interest expenses× `（` 1 Effective tax rate `）〕／ 。`

 - Average total assets

(2) Turn on total equit ＝ Net income ／ Average stockholders’ equit 。
(3) Net margin ＝ Net income ／ net sales 。
－
(4) Earnings per share ＝（ Net income Perferred stock dividend ）／ Weighted average number of shares outstanding
Cash Flow
(1) Cash flow ratio ＝ Net cash provided by operating activities ／ current liabilities
＝
(2) Cash flow adequacy ratio Five-year sum of cash from operations ／ Five-year sum of capital expenditures, inventory additions, and cash dividend.
＝
(3) Cash flow reinvestment ration (Cash provided from operating activities – Cash dividend) ／（ Grosss fixed assets + investment + Other assets + Working capital ）
Leverage
(1) Operating leverage ＝（ Net sales – Variable cost ）／ Income from operations
(2) Financial Leverage ＝ Income from operations ／（ Income from operations － Interest expenses ）

114

`（` 3 `）` Consolidated Financial Analysis (GAAP)

Item	Year	Year	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years
			2012	2013	2014	2015	2016
Capital StructureAnalysis	Debt ratio (%)		39.36%	Not Applied	Not Applied	Not Applied	Not Applied
	Long-term fund to fixed asstes ratio (%)		164.03%
Liquidity Analysis	Current Ratio (%)		195.52%
	Quick Ration (%)		150.24%
	Times interest earned (%)		3,764%
Operating performace Analysis	Average collection turnover(times)		3.28
	Days sales outstanding		111.24
	Average inventory turnover(times)		6.19
	Average payment turnover(times)		6.44
	Average inventory turnover(days)		58.97
	Fixed assets turnover(times)		1.91
	Total assets turnover(times)		0.84
Profitability Analysis	Turn on total assets (%)		9.45%
	Turn on total equity (%)		15.28%
	Paid-in capital ratio (%)	Operating income	41.61%
		Pre-tax income	43.10%
	Net margin (%)		10.51%
	Earnings per share(Basic) Note I		3.79
Cash Flow	Cash flow ratio (%)		48.53%
	Cash flow adequacy ratio (%)		77.61%
	Cash flow reinvestment ration (%)		8.56%
Leverage	Operating leverage		1.6875
	Financial Leverage		1.0291

115

Note I ： The financial statements of TXC Corporation were audited and certified by CPA. EPS is before retroactively adjust.

NoteII `：` Glossary `：`

  1. Capital StructureAnalysis

        - Debt ratio `＝` Total liabilities `／` Total assets

(2) Long-term fund to fixed asstes ratio ＝（ Total stockholders’ equity ＋ Long-term liabilities ）／ Net Fixed Assets
Liquidity Analysis
(1) Current Ratio ＝ current assets ／ current liabilities
－－
(2) Quick Ration ＝（ current assets Inventories Prepaid expenses ）／ current liabilities
＝
(3) Times interest earned Earnings before interest and taxs ／ Interest expenses
Operating performace Analysis
＝

(1) Average collection turnover

    - Net sales `／` Average trade Receivables

(2) Days sales outstanding ＝ 365 ／ Average collection turnover
＝。
(3) Average inventory turnover Cost of good sold ／ Average inventory
＝
(4) Average payment turnover Cost of good sold ／ Average trade Payables
(5) Average inventory turnover(Days) ＝ 365 ／ Average inventory turnover
(6) Fixed assets turnover ＝ Net sales ／ Net Fixed Assets
(7) Total assets turnover ＝ Net sales ／ Total assets

Profitability Analysis

 - `－`

 - (1) Turn on total assets `＝〔` Net income `＋` Interest expenses× `（` 1 Effective tax rate `）〕／ 。`

 - Average total assets

(2) Turn on total equit ＝ Net income ／ Average stockholders’ equit 。
(3) Net margin ＝ Net income ／ net sales 。
－
(4) Earnings per share ＝（ Net income Perferred stock dividend ）／ Weighted average number of shares outstanding
Cash Flow
(1) Cash flow ratio ＝ Net cash provided by operating activities ／ current liabilities
＝
(2) Cash flow adequacy ratio Five-year sum of cash from operations ／ Five-year sum of capital expenditures, inventory additions, and cash dividend.
＝
(3) Cash flow reinvestment ration (Cash provided from operating activities – Cash dividend) ／（ Grosss fixed assets + investment + Other assets + Working capital ）
Leverage
(1) Operating leverage ＝（ Net sales – Variable cost ）／ Income from operations
(2) Financial Leverage ＝ Income from operations ／（ Income from operations － Interest expense

116

`（` 4 `）` Financial Analysis (GAAP)

Item	Year	Year	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years	Financial Analysis for thepast 5 Years
			2012	2013	2014	2015	2016
Capital StructureAnalysis	Debt ratio (%)		37.63%	Not Applied	Not Applied	Not Applied	Not Applied
	Long-term fund to fixed asstes ratio (%)		274.49%
Liquidity Analysis	Current Ratio (%)		163.47%
	Quick Ration (%)		130.78%
	Times interest earned (%)		4,409%
Operating performace Analysis	Average collection turnover(times)		3.23
	Days sales outstanding		113.14
	Average inventory turnover(times)		7.73
	Average payment turnover(times)		5.57
	Average inventory turnover(days)		47.24
	Fixed assets turnover(times)		2.79
	Total assets turnover(times)		0.75
Profitability Analysis	Turn on total assets (%)		9.71%
	Turn on total equity (%)		15.28%
	Paid-in capital ratio (%)	Operating income	28.67%
		Pre-tax income	41.65%
	Net margin (%)		12.12%
	Earnings per share(Basic) Note I		3.79
Cash Flow	Cash flow ratio (%)		39.80%
	Cash flow adequacy ratio (%)		74.99%
	Cash flow reinvestment ration (%)		5.77%
Leverage	Operating leverage		1.5786
	Financial Leverage		1.0349

117

Note I ： The financial statements of TXC Corporation were audited and certified by CPA. EPS is before retroactively adjust.

NoteII `：` Glossary `：`

  1. Capital StructureAnalysis

        - Debt ratio `＝` Total liabilities `／` Total assets

(2) Long-term fund to fixed asstes ratio ＝（ Total stockholders’ equity ＋ Long-term liabilities ）／ Net Fixed Assets
Liquidity Analysis
(1) Current Ratio ＝ current assets ／ current liabilities
－－
(2) Quick Ration ＝（ current assets Inventories Prepaid expenses ）／ current liabilities
＝
(3) Times interest earned Earnings before interest and taxs ／ Interest expenses
Operating performace Analysis
＝

(1) Average collection turnover

    - Net sales `／` Average trade Receivables

(2) Days sales outstanding ＝ 365 ／ Average collection turnover
＝。
(3) Average inventory turnover Cost of good sold ／ Average inventory
＝
(4) Average payment turnover Cost of good sold ／ Average trade Payables
(5) Average inventory turnover(Days) ＝ 365 ／ Average inventory turnover
(6) Fixed assets turnover ＝ Net sales ／ Net Fixed Assets
(7) Total assets turnover ＝ Net sales ／ Total assets

Profitability Analysis

 - `－`

 - (1) Turn on total assets `＝〔` Net income `＋` Interest expenses× `（` 1 Effective tax rate `）〕／ 。`

 - Average total assets

(2) Turn on total equit ＝ Net income ／ Average stockholders’ equit 。
(3) Net margin ＝ Net income ／ net sales 。
－
(4) Earnings per share ＝（ Net income Perferred stock dividend ）／ Weighted average number of shares outstanding
Cash Flow
(1) Cash flow ratio ＝ Net cash provided by operating activities ／ current liabilities
＝
(2) Cash flow adequacy ratio Five-year sum of cash from operations ／ Five-year sum of capital expenditures, inventory additions, and cash dividend.
＝
(3) Cash flow reinvestment ration (Cash provided from operating activities – Cash dividend) ／（ Grosss fixed assets + investment + Other assets + Working capital ）
Leverage
(1) Operating leverage ＝（ Net sales – Variable cost ）／ Income from operations
(2) Financial Leverage ＝ Income from operations ／（ Income from operations － Interest expense

118

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2016 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standards 10 “Consolidated and Separate Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

TXC CORPORATION

PAUL LIN Chairman March 9, 2017

119 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders TXC Corporation

Opinion

We have audited the accompanying consolidated financial statements of TXC Corporation and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the 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 Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2016. 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.

120 -

Key audit matters for the Company’s consolidated financial statements for the year ended December 31, 2016 are stated as follows:

Key Audit Matter

Inventory of the Group as of December 31, 2016 was NT$1,520,049 thousands, accounted for 10% of the total assets in the consolidated financial statements. The valuation of inventory is subjected to fluctuation of market demand and technology changing rapidly. It may result in the impairment of inventory. The management determines the inventory book value and the allowance for inventories at lower of cost or net realize value in accordance with IAS 2 “Inventory”. Since the value of inventory is subject to management’s judgement and significant in the consolidated financial statements, the inventory valuation is identified as a key audit matter.

Refer to Note 4 for a summary of the significant accounting policies and refer to Note 13 for the amount of the allowance for inventories.

Our key audit procedures performed in respects of the above area included the following:

Tested the net realized value of inventories on the balance sheet date. Sampled testing the price on the latest purchase order and sales order to verify whether the net realized value of inventories is reasonable.
Implemented computer audit in order to verify the accuracy and correctness of the net realized value by recalculation on the balance sheet date.
Verified the accuracy of the inventory aging report by testing the inventory’s aging details. Obtained the list of inferior goods and spoilage to understand the slow moving inventory and evaluate whether the impairment for inventories is appropriate.

Other Matter

We have audited the accompanying financial statements of TXC Corporation as of December 31, 2016 and 2015 on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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

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Auditors’ 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 auditors’ 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 the 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 the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

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

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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 the consolidated financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors’ 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.

Deloitte & Touche Taipei, Taiwan Republic of China

March 30, 2017

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance 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 audit such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail. Also, as stated in Note X to the financial statements, the additional footnote disclosures that are not required under generally accepted accounting principles were not translated into English.

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Note 7) Available-for-sale financial assets - current (Note 8) Held-to-maturity financial assets - current (Note 9) Notes receivable (Note 12) Trade receivables (Note 12) Trade receivables from related parties (Notes 12 and 30) Other receivables Other receivables from related parties (Note 30) Inventories (Note 13) Prepayment for lease (Note 18) Other financial assets - current (Note 11) Other current assets Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Note 8) Held-to-maturity financial assets - non-current (Note 9) Financial assets measured at cost - non-current (Note 10) Investments accounted for using equity method (Note 15) Property, plant and equipment (Note 16) Investment properties (Note 17) Other intangible assets Deferred tax assets (Note 25) Prepayment for equipment Long-term prepayment for lease (Note 18) Other noncurrent assets Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans (Note 19) Financial liabilities at fair value through profit or loss - current (Note 7) Notes payable Trade payables Trade payables to related parties (Note 30) Other payables (Note 21) Other payables to related parties (Note 30) Current tax liabilities (Note 25) Current portion of long-term borrowings and bonds payable (Notes 19 and 20) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Note 19) Deferred income tax liabilities (Note 25) Net defined benefit liabilities - non-current (Note 22) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (Note 23) Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Total other equity Total equity attributable to owners of the company NON-CONTROLLING INTERESTS Total equity TOTAL		2016 Amount % $ 2,092,897 14 1,890,100 13 62,853 1 - - 51,236 - 3,023,659 20 9,612 - 48,761 - 709 - 1,520,049 10 2,416 - - - 115,838 1 8,818,130 59 1,215,050 8 46,532 - 85,520 1 65,228 1 4,277,905 29 61,723 - 10,798 - 31,136 - 107,596 1 102,431 1 19,919 - 6,023,838 41 $ 14,841,968 100 $ 20,280 - 25,525 - 756 - 1,395,657 9 1,602 - 875,356 6 972 - 67,061 1 723,896 5 45,000 - 3,156,105 21 1,483,749 10 331,428 2 56,311 1 41,193 - 1,912,681 13 5,068,786 34 3,097,570 21 1,665,224 11 1,151,202 8 222,793 1 2,789,106 19 4,163,101 28 (161,346) (1) 955,103 7 793,757 6 9,719,652 66 53,530 - 9,773,182 66 $ 14,841,968 100		2015
				Amount % $ 2,727,944 18 1,122,680 7 - - 47,840 - 46,422 - 2,873,093 18 4,910 - 96,159 1 646 - 1,534,026 10 2,637 - 32,825 - 84,625 1 8,573,807 55 1,870,976 12 50,280 - 115,520 1 65,032 - 4,570,352 29 67,412 1 11,921 - 25,718 - 83,859 1 113,887 1 31,651 - 7,006,608 45 $ 15,580,415 100 $ 252,283 2 4,978 - - - 1,110,954 7 1,503 - 635,512 4 1,364 - 57,983 - 1,349,855 9 30,122 - 3,444,554 22 1,165,625 8 129,115 1 46,607 - 55,268 - 1,396,615 9 4,841,169 31 3,097,570 20 1,662,181 11 1,057,381 7 222,793 1 2,659,935 17 3,940,109 25 249,121 2 1,790,265 11 2,039,386 13 10,739,246 69 - - 10,739,246 69 $ 15,580,415 100

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

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SALES COST OF GOODS SOLD (Note 24) GROSS PROFIT OPERATING EXPENSES (Note 24) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Note 24) Other gains and losses (Note 24) Finance costs (Note 24) Share of profits of associates and joint venture (Note 15) Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 25) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Item that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Share of the other comprehensive income of associates accounted for using the equity method		2016 Amount % $ 9,637,101 100 (7,083,032) (74) 2,554,069 26 509,182 5 391,987 4 538,506 6 1,439,675 15 1,114,394 11 99,083 1 252 - (28,062) - 6,605 - 77,878 1 1,192,272 12 (178,580) (2) 1,013,692 10 (18,680) - (99) - (18,779) -		2015
				Amount % $ 9,265,656 100 (7,030,481) (76) 2,235,175 24 497,711 5 373,594 4 455,535 5 1,326,840 14 908,335 10 79,237 1 133,547 1 (43,324) - 9,815 - 179,275 2 1,087,610 12 (149,407) (2) 938,203 10 (15,645) - - - (15,645) - (Continued)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Item that maybe reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Unrealized (loss) gain on available-for-sale financial assets Share of the other comprehensive income of associates accounted for using the equity method Other comprehensive (loss) income for the year, net of income tax TOTAL COMPREHENSIVE (LOSS) INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 26) From continuing and discounted operations Basic Diluted		2016 Amount % $ (407,529) (4) (835,208) (9) (2,892) - (1,245,629) (13) (1,264,408) (13) $ (250,716) (3) $ 1,016,164 11 (2,472) - $ 1,013,692 11 $ (248,244) (3) (2,472) - $ (250,716) (3) $3.28 $3.23		2015
				Amount % $ (93,862) (1) 1,789,392 19 1,060 - 1,696,590 18 1,680,945 18 $ 2,619,148 28 $ 938,203 10 - - $ 938,203 10 $ 2,619,148 28 - - $ 2,619,148 28 $3.03 $2.86

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

(Concluded)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

BALANCE AT JANUARY 1, 2015 Appropriation of 2014 earnings Legal reserve Cash dividends distributed by the company Net profit for the year ended December 31, 2015 Other comprehensive income (loss) for the year ended December 31, 2015, net of income tax Total comprehensive income (loss) for the year ended December 31, 2015 Reissuance of treasury stock BALANCE AT DECEMBER 31, 2015 Appropriation of 2015 earnings Legal reserve Cash dividends distributed by the company Net profit for the for the year ended December 31, 2016 Other comprehensive loss for the for the year ended December 31, 2016, net of income tax Total comprehensive income (loss) for the for the year ended December 31, 2016 Other changes in capital surplus Actual disposal or acquisition of interest in subsidiaries Change in capital surplus from investments in associates and joint ventures accounted for by using equity method Additional non-controlling interest recognized on equity BALANCE AT DECEMBER 31, 2016				Equity Attributable to Owners of the Parent		Total Non-controlling Interests $ 8,894,576 $ - - - (774,393) - 938,203 - 1,680,945 - 2,619,148 - (85) - 10,739,246 - - - (774,393) - 1,016,164 (2,472) (1,264,408) - (248,244) (2,472) - - 331 (331) 2,712 - - 56,333 $ 9,719,652 $ 53,530	Total Equity $ 8,894,576 - (774,393) 938,203 1,680,945 2,619,148 (85) 10,739,246 - (774,393) 1,013,692 (1,264,408) (250,716) - - 2,712 56,333 $ 9,773,182
	Shares (In Thousands) 309,757 - - - - - - 309,757 - - - - - - - - - 309,757	Share Capital Capital Surplus $ 3,097,570 $ 1,662,181 - - - - - - - - - - - - 3,097,570 1,662,181 - - - - - - - - - - - - - 331 - 2,712 - - $ 3,097,570 $ 1,665,224		Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $ 957,864 $ 222,793 $ 2,611,372 99,517 - (99,517) - - (774,393) - - 938,203 - - (15,645) - - 922,558 - - (85) 1,057,381 222,793 2,659,935 93,821 - (93,821) - - (774,393) - - 1,016,164 - - (18,779) - - 997,385 - - - - - - - - - - - - $ 1,151,202 $ 222,793 $ 2,789,106	Others Exchange Differences on Translation Unrealized Gain (Loss) on Available-for- Foreign Operations sale Financial Assets $ 341,996 $ 800 - - - - - - (92,875) 1,789,465 (92,875) 1,789,465 - - 249,121 1,790,265 - - - - - - (410,467) (835,162) (410,467) (835,162) - - - - - - - - $ (161,346) $ 955,103

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

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Depreciation expenses of investment properties Amortization expenses Amortization of prepayments for lease Recognition (reversal) of provisions Finance costs Interest income Dividend income Share of profit of associates and joint ventures Loss on disposal of property, plant and equipment Gain on disposal of investment Gain on disposal of investments accounted for using equity method Impairment loss recognized on financial assets Net gain on fair value change of financial assets and liabilities at fair value through profit or loss Write-down of inventories Impairment loss recognized on property, plant and equipment Changes in operating assets and liabilities Financial asset held for trading Notes receivable Trade receivables Trade receivables from related parties Other receivables Other receivables from related parties Inventories Other current assets Financial liabilities held or trading Notes payable Trade payables Trade payables to related parties Other payables Other payables to related parties Other current liabilities Net defined benefit liabilities Cash generated from operations Interest paid Income tax paid Net cash generated from operating activities	2016 $ 1,192,272 911,332 4,403 3,686 2,523 (320) 28,062 (14,411) (4,132) (6,605) 9,080 (13,010) (1,350) 47,152 (33,609) 28,658 1,414 158,048 (4,811) (149,954) (4,750) 44,379 (63) (14,006) (30,958) (4,821) 756 284,703 99 239,887 (392) 14,878 (12,802) 2,675,338 (27,046) (164,523) 2,483,769	2015 $ 1,087,610 974,009 3,467 3,163 2,637 8,723 43,324 (33,527) (1,118) (9,815) 12,245 (3,286) (1,628) 10,210 (52,314) 12,125 440 213,877 (3,357) 36,461 1,971 (35,323) (18) 111,567 44,911 (15,300) - 42,823 1,182 28,354 225 (32,327) (12,133) 2,439,178 (26,285) (172,192) 2,240,701 (Continued)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at fair value through profit or loss Proceeds from sale of financial assets at fair value through profit or loss Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets Purchase of held-to-maturity financial assets Proceeds from sale of held-to-maturity financial assets Purchase of financial assets measured at cost Proceeds from sale of financial assets measured at cost Purchase of investment accounted for using equity method Proceeds from sale of investment accounted for using equity method Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Payments for intangible assets Decrease in other financial assets Decrease in other noncurrent assets Increase in prepayment for equipment Interest received Dividend received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayments of short-term borrowings Repayments of bond payables Proceeds from long-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Refund of guarantee deposits received Dividends paid to owners of the Company Payments for transaction costs attributable to buy-back of ordinary shares Proceeds from reissue of treasury shares Increase in non-controlling Net cash used in financing activities	2016 $ (2,905,352) 1,913,560 (63,545) - - 50,300 - 13,010 (2,364) 5,185 (825,686) 24,312 (3,104) 32,825 11,732 (23,737) 17,430 8,792 (1,746,642) (129,596) (800,000) 950,000 (550,000) - (14,075) (774,393) - - 56,333 (1,261,731)	2015 $ (1,272,720) 1,116,410 (130,819) 154,104 (50,280) - (50,000) - - 6,101 (388,953) 3,462 (7,561) 20,419 4,410 (33,224) 31,813 6,618 (590,220) (173,302) - 1,150,000 (928,125) 24,402 - (774,393) (806) 721 - (701,503) (Continued)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

2016 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS $ (110,443) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (635,047) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 2,727,944 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 2,092,897 The accompanying notes are an integral part of the consolidated financial statements.	2015 $ 10,562 959,540 1,768,404 $ 2,727,944 (Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TXC CORPORATION AND SUBSIDIARIES

1. GENERAL INFORMATION

TXC Corporation (the “Company”) was incorporated in the Republic of China (“ROC”) on December 28, 1983.

TXC specializes in producing high quality Quartz Unite Crystal, Automotive Crystal, Crystal Oscillator (CXO), and Timing Module (TM) as well as develops a variety of sensors by core technology to satisfy the market demand. Sensors are applied to various applications including mobile communication, wearable device, Internet of Things and vehicle electronics, etc. Besides, in order to expand the Group’s future development, TXC introduced extension process related to sapphire substrate and accesses the field of LED sapphire.

On August 26, 2002, TXC’s shares began to be traded on the Taiwan Stock Exchange.

The functional currency of the Company is New Taiwan dollars. The consolidated financial statements are presented in New Taiwan dollars.

In order to ensure investors’ rights and interests, the Company had applied to Taiwan Corporate Governance Association for corporate governance assessment certification. The Company has acquired (CG6005 general version of corporate governance assessment and authentication) and (CG6008 advanced version of corporate governance assessment and authentication), on March 23, 2011 and June 27, 2013, respectively. The Company will continue to strengthen corporate governance functions in order to work with international standards and to protect public interests.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the company’s board of directors on March 9, 2017.

3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS

a. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from 2017.

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, the Group should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the IASB and endorsed by the FSC for application starting from 2017.

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New, Amended or Revised Standards and Interpretations
(the“New IFRSs”)
Annual Improvements to IFRSs 2010-2012 Cycle

Annual Improvements to IFRSs 2011-2013 Cycle

Annual Improvements to IFRSs 2012-2014 Cycle

Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities:
Applying the Consolidation Exception”

Amendment to IFRS 11 “Accounting for Acquisitions of Interests in
Joint Operations”

IFRS 14 “Regulatory Deferral Accounts”

Amendment to IAS 1 “Disclosure Initiative”

Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”

Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants”

Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”

Amendment to IAS 36 “Impairment of Assets: Recoverable Amount
Disclosures for Non-financial Assets”

Amendment to IAS 39 “Novation of Derivatives and Continuation of
Hedge Accounting”

IFRIC 21 “Levies”

Effective Date
Announced by IASB (Note 1)

July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014

Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application in 2017 of the above IFRSs and related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Group’s accounting policies, except for the following:

1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Group is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 3 the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment will be applied retrospectively.

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2) IFRIC 21 “Levies”

IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government. It addresses the accounting for a liability whose timing and amount is certain and the accounting for a provision whose timing or amount is not certain. The Group accrues related liability when the transaction or activity that triggers the payment of the levy occurs. Therefore, if the obligating event occurs over a period of time (such as generation of revenue over a period of time), the liability is recognized progressively. If an obligation to pay a levy is triggered upon reaching a minimum threshold (such as a minimum amount of revenue or sales generated), the liability is recognized when that minimum threshold is reached.

3) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards, including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments”, were amended in this annual improvement.

The amended IFRS 2 changes the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Group or another entity in the same group or the market price of the equity instruments of the Group or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Group as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Group, but also of other entities outside the Group. The share-based payment arrangements with market conditions, non-market conditions or non-vesting conditions will be accounted for differently, and the aforementioned amendment will be applied prospectively to those share-based payments granted on or after January 1, 2017.

IFRS 3 was amended to clarify that contingent consideration should be measured at fair value, irrespective of whether the contingent consideration is a financial instrument within the scope of IFRS 9 or IAS 39. Changes in fair value should be recognized in profit or loss. The amendment will be applied prospectively to business combination with acquisition date after January 1, 2017.

The amended IFRS 8 requires the Group to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker. The judgements made in applying aggregation criteria should be disclosed retrospectively upon initial application of the amendment in 2017.

When the amended IFRS 13 becomes effective in 2017, the short-term receivables and payables with no stated interest rate will be measured at their invoice amounts without discounting, if the effect of not discounting is immaterial.

IAS 24 was amended to clarify that a management entity providing key management personnel services to the Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

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4) Annual Improvements to IFRSs: 2011-2013 Cycle

Several standards, including IFRS 3, IFRS 13 and IAS 40 “Investment Property”, were amended in this annual improvement.

The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32. The Group entered into [crude oil] purchase contracts that could be settled net in cash. When the amended IFRS 13 becomes effective in 2017, the Group will elect to measure the fair value of those contracts on a net basis retrospectively.

IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required to determine whether the investment property acquired is acquisition of an asset or a business combination.

5) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed by the FSC for application starting from 2017. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Group has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Group’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Group continues assessing other possible impacts that application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Group’s financial position and financial performance, and will disclose these other impacts when the assessment is completed.

b. New IFRSs in issue but not yet endorsed by the FSC

The Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

The FSC announced that amendments to IFRS 9 and IFRS 15 will take effect starting January 1, 2018. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs.

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New IFRSs
Annual Improvements to IFRSs 2014-2016 Cycle

Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”

IFRS 9 “Financial Instruments”

Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”

IFRS 15 “Revenue from Contracts with Customers”

Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue from
Contracts with Customers”

IFRS 16 “Leases”

Amendment to IAS 7 “Disclosure Initiative”

Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”

Amendments to IAS 40 “Transfers of investment property”

IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”

Effective Date
Announced by IASB (Note 1)

Note 2
January 1, 2018
January 1, 2018
January 1, 2018
To be determined by IASB
January 1, 2018
January 1, 2018
January 1, 2019
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following:

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
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b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

Impairment of financial assets

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

Transition

Financial instruments that have been derecognized prior to the effective date of IFRS 9 cannot be reversed to apply IFRS 9 when it becomes effective. Under IFRS 9, the requirements for classification, measurement and impairment of financial assets are applied retrospectively with the difference between the previous carrying amount and the carrying amount at the date of initial application recognized in the current period and restatement of prior periods is not required. The requirements for general hedge accounting shall be applied prospectively and the accounting for hedging options shall be applied retrospectively.

2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulated that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

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Conversely, when an entity sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence or joint control in an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated.

3) IFRS 15 “Revenue from Contracts with Customers” and related amendment

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations from January 1, 2018.

When applying IFRS 15, an entity shall recognize revenue by applying the following steps:

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when the entity satisfies a performance obligation.

In identifying performance obligations, IFRS 15 and related amendment require that a good or service is distinct if it is capable of being distinct (for example, the Group regularly sells it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each of those goods or services individually rather than to transfer combined items).

4) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor.

When IFRS 15 and related amendment are effective, an entity may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.

When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

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5) Amendment to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

In addition, in determining whether to recognize a deferred tax asset, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses as deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve the higher amount, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
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3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 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.

Assets and liabilities that are not classified as current are classified as non-current.

d. Basis of consolidation

Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

e. Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss.

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Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the Group entities (including subsidiaries, associates, joint ventures and branches in other countries that use currency different from the currency of the Company) are translated into the presentation currency - the New Taiwan dollar as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving the loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to the non-controlling interests of the subsidiary but is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

f. Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the specific identification of cost on the balance sheet date.

g. Investments in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The Group uses the equity method to account for its investments in associates and joint ventures.

Under the equity method, investments in an associate and a joint venture are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate and joint venture. The Group also recognizes the changes in the Group’s share of the equity of associates attributable to the Group.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

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When the Company subscribes for additional new shares of the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in the Group’s share of the equity of associates. If the Group’s ownership interest is reduced due to the additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. 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 Group continues to apply the equity method and does not remeasure the retained interest.

When a group entity transacts with its associate profits and losses resulting from the transactions with the associate are recognized in the Group’ consolidated financial statements only to the extent that interests in the associate are not related to the Group.

h. Property, plant and equipment

Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

Freehold land is not depreciated.

Depreciation on property, plant and equipment (including assets held under finance leases) is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

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On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

i. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

j. Intangible assets
1) Intangible assets acquired separately

2) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

k. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

l. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

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Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a settlement date basis.

a) Measurement category

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets, and loans and receivables.

i. Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

A financial asset may be designated as at fair value through profit or loss upon initial recognition if:

i) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
ii) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
iii) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.

Fair value is determined in the manner described in Note 29.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset.

Investments in equity instruments under financial assets at fair value through profit or loss that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in profit or loss.

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ii. Held-to-maturity investments

Commercial paper, corporate bonds, and foreign government bonds, which are above specific credit ratings and the Group has positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

iii. Available-for-sale financial assets

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

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

iv. Loans and receivables

Loans and receivables (including trade receivables and cash and cash equivalent) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalent includes time deposits with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

b) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial asset, that the estimated future cash flows of the investment have been affected.

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For financial assets carried at amortized cost, such as trade receivables and held-to-maturity financial assets, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with a default on receivables.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

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c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

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

2) Equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

3) Financial liabilities
a) Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest or dividend paid on the financial liability. Fair value is determined in the manner described in Note 29.

Financial liabilities at fair value through profit or loss that are obligations to deliver unquoted equity instruments borrowed by a short seller whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial liabilities carried at cost. If, in a subsequent period, the fair value of the financial liabilities can be reliably measured, the financial liabilities are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in profit or loss.

b) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

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4) Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or the instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to capital surplus - share premium. When the conversion option remains unexercised at maturity, the balance recognized in equity will be transferred to capital surplus - share premium.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component.

5) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss.

m. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowance for sales returns and liability for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
147 -
b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
d) It is probable that the economic benefits associated with the transaction will flow to the Group; and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Revenue from the sale of property in the course of ordinary activities is recognized when the construction is completed and the property is transferred to the buyer. Until such revenue is recognized, deposits and installment payments received from sales of properties are carried in the consolidated balance sheets under current liabilities.

2) Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate.

n. Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

1) The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

2) The Group as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

o. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

148 -

p. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as a deduction from the carrying amount of the relevant asset and recognized in profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

q. Employee benefits

1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and net interest on the net defined benefit liability (asset)) are recognized as employee benefit expenses in the period they occur, when the plan amendment or curtailment occurs. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

r. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

149 -

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

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a. Income taxes

As of December 31, 2016 and 2015, the carrying amount of deferred tax assets in relation to unused tax losses was $31,136 thousand and $25,718 thousand, respectively. The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.

b. Estimated impairment of trade receivables

When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between an asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

c. Fair value measurements and valuation processes

If some of the Group’s assets and liabilities measured at fair value have no quoted prices in active markets, the board of directors of the Company has set up a valuation committee, to determine whether to engage third party qualified valuers and to determine the appropriate valuation techniques for fair value measurements.

Where Level 1 inputs are not available, the Group or engaged valuers would determine appropriate inputs by referring to the analyses of the financial position and the operation results of investees, recent transaction prices, prices of same equity instruments not quoted in active markets, quoted prices of similar instruments in active markets, valuation multiples of comparable entities, market prices or rates and specific features of derivatives. If the actual changes of inputs in the future differ from expectation, fair value might vary accordingly.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities is disclosed in Note 29.

d. Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

e. Recognition and measurement of defined benefit plans

The net defined benefit liabilities (assets) and the resulting defined benefit costs under the defined benefit pension plans are calculated using the projected unit credit method. Actuarial assumptions comprise the discount rates, rates of employee turnover, future salary increases, etc. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of expenses and liabilities.

f. Significant influence over associates

Note 15 describes that several companies are associates of the Group although the Group only holds less than 20% of the voting power in each of these companies. The Group has significant influence over these companies by virtue of the right to appoint and remove directors from the board of directors of these companies.

151 -

6. CASH AND CASH EQUIVALENTS

Cash on hand Demand deposits Checking accounts Cash equivalents (investments with original maturities less than three months) Time deposits Repurchase agreements collateralized by bonds		December 31	December 31
		2016 $ 673 1,752,164 3,381 116,679 220,000 $ 2,092,897	2015 $ 758 2,290,647 5,035 231,504 200,000 $ 2,727,944

The market rate intervals of cash in bank repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

Bank balance Repurchase agreements collateralized by bonds	December 31
	2016 2015 0.6%-8.44% 0.48%-3.83% 0.32%-0.43% 0.48%-0.54%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Financial assets designated as at FVTPL Structured deposit (a) Financial assets held for trading Derivative financial instruments (not under hedge accounting) Foreign exchange forward contracts (b) Non-derivative financial assets Mutual funds Financial liabilities at FVTPL-current Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts (b)		December 31	December 31
		2016 $ 1,440,932 - 449,168 $ 1,890,100 $ 25,525	2015 $ 489,017 249 633,414 $ 1,122,680 $ 4,978

a. The Group entered into short-term structured time deposit contracts with a bank from 2016.1.1 to 2016.12.31. The structured time deposit contract includes an embedded derivative instrument which is not closely related to the host contract. The Group designated the entire contract as financial asset at FVTPL on initial recognition.
152 -
b. At the end of the reporting period, outstanding foreign exchange contracts not under hedge accounting were as follows:

				Contract Amount
		Currency	Maturity Date	(In Thousands)
December	31, 2016
Sell		USD/NTD	2017.01.03-2017.03.01	USD13,000/NTD414,850
Buy		JPY/USD	2017.01.04-2017.02.03	JPY340,421/USD3,150
Sell		USD/JPY	2017.01.04-2017.02.15	USD4,500/JPY501,965
Sell		USD/RMB	2017.01.04-2017.04.05	USD4,000/RMB26,852
Knock-out	forward	USD/NTD	2017.01.17-2017.01.23	USD2,000/NTD64,120
Knock-out	forward	USD/JPY	2017.01.10-2017.02.22	USD1,500/JPY167,950
December	31, 2015
Sell		USD/NTD	2016.01.25-2016.03.01	USD6,000/NTD196,728
Knock-out	forward	USD/JPY	2016.01.29-2016.03.04	USD4,500/JPY557,000
Sell		USD/JPY	2016.01.21-2016.01.22	USD1,000/JPY122,440
Knock-out	forward	USD/NTD	2016.02.22	USD1,000/NTD33,030
Sell		USD/RMB	2016.01.04-2016.04.01	USD10,100/RMB64,877
Knock-out	forward	USD/JPY	2016.01.29-2016.03.22	USD1,500/JPY179,850

The Group entered into foreign exchange forward contracts during the years ended December 31, 2016 and 2015 to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting.

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Current Domestic investments Mutual funds Non-current Domestic investments Listed shares and emerging market shares (a) Foreign investments Listed shares (b)		December 31	December 31
		2016 $ 62,853 $ 17,148 1,197,902 $ 1,215,050	2015 $ - $ 34,300 1,836,676 $ 1,870,976

a. The market value of available-for-sale financial assets has been lower than the book value. As a result, the Group evaluated and recognized an impairment loss of $17,152 thousand, $10,210 thousand during years ended December 31, 2016 and 2015, respectively.
153 -
b. The shares of Guangdong Failong Crystal Technology Co., Ltd, which is held by the Group, is classified as financial assets measured at cost. Since the Company has been listed on ShenZhen Stock Exchange on May 15, 2015, and already has the public quoted market price in active market, the shares of Guangdong Failong Crystal Technology Co., Ltd, has been reclassified to available-for-sale financial assets (see Note 29).

9. HELD-TO-MATURITY FINANCIAL ASSETS

Current Domestic investments Corporate bonds - Chinatrust (a) Noncurrent Domestic investments Corporate bonds - Cayman Ton Yi (b)		December	31
		2016 $ - $ 46,532	2015 $ 47,840 $ 50,280

a. In 2013, the Group bought the denomination of CNY$10,000 thousand and 3-year corporate bonds issued by Chinatrust with a coupon rate and an effective interest rate of 2.9% both.
b. In 2015, the Group bought the denomination of CNY$10,000 thousand and 3-year corporate bonds issued by Cayman Ton Yi Industrial Holdings Limited with a coupon rate and an effective interest rate of 4.2% both.

10. FINANCIAL ASSETS MEASURED AT COST

Non-current Domestic unlisted ordinary shares Classified according to financial asset measurement categories Available-for-sale financial assets		December 31	December 31
		2016 $ 85,520 $ 85,520	2015 $ 115,520 $ 115,520

The Group has assessed the recoverable amount of the financial assets measured at cost and recognized impairment loss of $30,000 thousand during the period of year ended December 31, 2016.

The shares of Guangdong Failong Crystal Technology Co., Ltd., has been reclassified to available-for-sale financial assets (see Notes 8 and 29).

Management believed that the above unlisted equity investments held by the Group, whose fair value cannot be reliably measured, because the range of reasonable fair value estimates was so significant. Therefore they were measured at cost less impairment at the end of reporting period.

154 -

11. OTHER FINANCIAL ASSETS

Current Time deposits with original maturity more than 3 months		December	31
		2016 $ -	2015 $ 32,825

The market interest rates of the time deposits with original maturity more than 3 months were 1.83%-4% and 0.61% per annum as of December 31, 2016 and 2015.

12. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable Notes receivable - operating Notes receivable - non-operating Less: Allowance for impairment loss Trade receivables Trade receivables Trade receivables - related parties Less: Allowance for impairment loss Less: Allowance for impairment loss - related parties		December 31	December 31
		2016 $ 51,248 - (12) $ 51,236 $ 3,040,176 9,690 3,049,866 (16,517) (78) $ 3,033,271	2015 $ 46,437 - (15) $ 46,422 $ 2,899,508 4,940 2,904,448 (26,415) (30) $ 2,878,003

The average credit period of sales of goods was 2 to 4 months. No interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Historical experience shows that the Group recognized an allowance in accordance with the proportion of trade receivables of each customers, not the aging schedule.

The aging of receivables was as follows:

31- 60 days 61-90 days 91-365 days		December 31	December 31
		2016 $ - - - $ -	2015 $ 167,658 41,995 73,450 $ 283,103

The above aging schedule was based on the past due days from end of credit term.

155 -

The movements of the allowance for doubtful trade receivables were as follows:

Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2015
$ -
$ 17,688

Add: Impairment losses recognized on
receivables
7,493
1,333
Less: Amounts written off during the year as
uncollectible
-
-
Foreign exchange translation gains and losses

-

(69)

Balance at December 31, 2015
$ 7,493
$ 18,952

Balance at January 1, 2016
$ 7,493
$ 18,952

Add: Impairment losses recognized on
receivables
-
(317)
Less: Amounts written off during the year as
uncollectible
(7,493)
(1,793)
Foreign exchange translation gains and losses

-

(247)

Balance at December 31, 2016
$ -
$ 16,595

The movements of the allowance for doubtful notes receivable were as follows:
Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2015
$ -
$ 118

Less: Impairment losses reversed
-
(103)
Less: Amounts written off during the year as
uncollectible

-

-

Balance at December 31, 2015
$ -
$ 15

Balance at January 1, 2016
$ -
$ 15

Less: Impairment losses reversed
-
(3)
Less: Amounts written off during the year as
uncollectible

-

-

Balance at December 31, 2016
$ -
$ 12

13. INVENTORIES

Total
$ 17,688
8,826
-

(69)
$ 26,445
$ 26,445
(317)
(9,286)

(247)
$ 16,595
Total
$ 118
(103)

-
$ 15
$ 15
(3)

-
$ 12

Finished goods Work in process Raw materials Supplies and spare parts	December 31
	2016 2015 $ 253,470 $ 304,265 429,107 355,487 273,731 185,802 72,287 43,429 (Continued)

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Merchandise Land to be development		December 31	December 31
		2016 $ 283,346 208,108 $ 1,520,049	2015 $ 419,067 225,976 $ 1,534,026 (Concluded)

Prepayment for land purchases is the payment made by Chongqing All Sum to acquire the land use right in Chongqing Gao-Shing District to develop and sell real estate. Chongqing All Sum has acquired real estate certificate issued by Chongqing Association of land and real estate resources during 2013. The land has not been constructed yet as of December 31, 2016.

As of December 31, 2016 and 2015, the allowance for inventories were $48,384 thousand and $42,993 thousand, respectively.

The cost of inventories recognized as cost of goods sold in the years ended December 31, 2016 and 2015 included $7,083,032 thousand and $7,030,481 thousand, respectively, which include $28,658 thousand and $12,125 thousand, respectively, due to write-downs of inventories.

14. SUBSIDIARIES

Subsidiary Included in Consolidated Financial Statements

The detail information of the subsidiaries at the end of reporting period was as follows:

Investor
Investee
Business Nature
TXC Corporation
Taiwan Crystal Technology
International Limited (TCTI)
Investment holding
TXC Technology, Inc.
Marketing activities
TXC Japan Corporation
Marketing activities
Taiwan Crystal Technology (HK)
Limited (TCT-HK)
Investment holding
TXC Optec Corporation
Manufacture and sales of
electronic products
Taiwan Crystal
Technology
Growing Profits Trading Ltd.
(GPT)
International trading
International
Limited
TXC (Ningbo) Corporation
(NGB)
Manufacture and sales of
electronic products
TXC (Ningbo)
Corporation
TXC (Chongqing) Corporation
(Chongqing)
Manufacture and sales of
electronic products
Chongqing All Sun Company
Limited (Chongqing All sun)
Marketing activities
Ningbo Jingyu Company Limited
(Ningbo Jingyu)
Purchasing and selling
electronic component
Taiwan Crystal
Technology (HK)
Limited
TXC (Chongqing) Corporation
(Chongqing)
Manufacture and sales of
electronic products
Ningbo Jingyu Trade
Company Limited
(Ningbo Jingyu)
Ningbo Free Trade Zone Jingyue
Trading Company
Trading

Percentage of
Ownership at
December 31
2016
2015
Note
100.00
100.00
a
100.00
100.00
b
100.00
100.00
c
100.00
100.00
f
88.90
100.00
j
100.00
100.00
d
100.00
100.00
e
66.40
66.40
g
100.00
100.00
h
100.00
100.00
i
33.60
33.60
g
100.00
-
k

a. Taiwan Crystal Technology International Limited was incorporated on December 23, 1998 in Samoa.

b. TXC Technology, Inc. was incorporated on December 1, 2000 in California, U.S.A.

157 -
c. TXC Japan Corporation was incorporated on September 13, 2005 in Yokohama, Japan.
d. Growing Profits Limited was incorporated on March 9, 1999 in the British Virgin Islands.
e. TXC (Ningbo) Corporation was incorporated on March 12, 1999 in Ningbo, China.
f. Taiwan Crystal Technology (HK) Limited was incorporated on July 6, 2010 in Hong Kong Special Administrative Region, China.
g. TXC (Chongqing) Corporation was incorporated on October 11, 2010 in Chongqing, China.
h. Chongqing All Sun Corporation was incorporated on February 14, 2011 in Chongqing, China.
i. Ningbo Jingyu Company Limited was incorporated on September 7, 2011 in Ningbo, China.
j. TXC Optec Corporation was established on April 22, 2015 in Taiwan. The contributed capital was $100 thousand in 10 shares. According to decisions made in 2015 annual general meeting, in order to ensure professional services, which enhance competency and performance, TXC Corporation will divide the assets and liabilities of photovoltaics industry to TXC Optec Corporation following “R.O.C. Business Mergers and Acquisitions Act” and related acts. TXC Optec Corporation will issue 21,490 thousand shares in exchange of the assets and liabilities mentioned above.
k. Ningbo Free Trade Zone Jingyue Trading Company was incorporated on June 29, 2016 in free trade zone in Ningbo, China.

15. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

	December	31
	2016 $ 65,228 December	2015 $ 65,032 31
2016 2015 $ 65,228 $ 65,032 For the Year Ended December 31
	2016 $ 6,605 (3,111) $ 3,494	2015 $ 9,815 1,060 $ 10,875

Refer to the Table “name, locations, and related information of investees on which the company exercises significant influence” for the nature of activities, principal place of business and country of incorporation of the associates.

The TXC has power to govern the financial and operating policies of Tai-Shing due to part of directors of TXC are the same as Tai-Shing. As a result, Tai-Shing is accounted for using the equity method.

158 -

16. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2015 Additions Disposals Effect of foreign currency exchange differences Transfer from investment property Prepayments, buildings, land operating purpose Reclassifications Balance at December 31, 2015 Accumulated depreciation and impairment Balance at January 1, 2015 Disposals Depreciation expense Transfer from investment property Impairment losses Effect of foreign currency exchange differences Balance at December 31, 2015 Carrying amounts at December 31, 2015 Cost Balance at January 1, 2016 Additions Disposals Effect of foreign currency exchange differences Transfer to investment property Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Disposals Depreciation expense Transfer to investment property Impairment losses Effect of foreign currency exchange differences Balance at December 31, 2016 Carrying amounts at December 31, 2016	Freehold Land Land Improvements $ 598,145 $ 151 - 920 - - - - - - - - - - $ 598,145 $ 1,071 $ - $ 151 - - - 22 - - - - - - $ - $ 173 $ 598,145 $ 898 $ 598,145 $ 1,071 - - - (151 ) - - - - $ 598,145 $ 920 $ - $ 173 - (151 ) - 131 - - - - - - $ - $ 153 $ 598,145 $ 767	Buildings Machinery and Equipment Transportation Equipment $ 2,439,616 $ 6,284,679 $ 15,911 20,592 341,848 4,156 (3,110 ) (97,782 ) (1,501 ) (21,916 ) (83,893 ) (369 ) (26,429 ) - - 89,648 - - - 23,309 - $ 2,498,401 $ 6,468,161 $ 18,197 $ 691,467 $ 3,552,254 $ 9,358 (3,110 ) (83,229 ) (1,350 ) 134,711 811,355 2,666 (9,555 ) - - - 440 - (5,661) (46,398) (219) $ 807,852 $ 4,234,422 $ 10,455 $ 1,690,549 $ 2,233,739 $ 7,742 $ 2,498,401 $ 6,468,161 $ 18,197 49,247 735,332 3,711 (41,414 ) (199,058 ) (1,056 ) (79,255 ) (300,076 ) (1,435 ) (5,400) - - $ 2,421,579 $ 6,704,359 $ 19,417 $ 807,852 $ 4,234,422 $ 10,455 (41,414 ) (166,285 ) (990 ) 135,540 750,399 3,258 (1,863 ) - - - 1,414 - (23,557) (190,703) (913) $ 876,558 $ 4,629,247 $ 11,810 $ 1,545,021 $ 2,075,112 $ 7,607	Office Equipment $ 249,959 20,405 (35,252 ) (2,595 ) - - (23,309) $ 209,208 $ 181,401 (34,249 ) 25,255 - - (1,451) $ 170,956 $ 38,252 $ 209,208 37,294 (8,833 ) (10,212 ) - $ 227,457 $ 170,956 (8,280 ) 22,004 - - (7,432) $ 177,248 $ 50,209	Property in Construction $ - 1,032 - (5 ) - - - $ 1,027 $ - - - - - - $ - $ 1,027 $ 1,027 102 - (85 ) - $ 1,044 $ - - - - - - $ - $ 1,044	Total $ 9,588,461 388,953 (137,645 ) (108,778 ) (26,429 ) 89,648 - $ 9,794,210 $ 4,434,631 (121,938 ) 974,009 (9,555 ) 440 (53,729) $ 5,223,858 $ 4,570,352 $ 9,794,210 825,686 (250,512 ) (391,063 ) (5,400) $ 9,972,921 $ 5,223,858 (217,120 ) 911,332 (1,863 ) 1,414 (222,605) $ 5,695,016 $ 4,277,905

For the years ended December 31, 2016 and 2015, the Group recognized impairment loss of $1,414 thousand and $440 thousand related to property, plant and equipment of the foundry reportable segment respectively since this loss was attributable to greater than anticipated wear and tear (Refer to Note 36). The impairment had been recognized in other gains and losses in the consolidated statements of comprehensive income.

The above items of property, plant and equipment were depreciated on a straight-line basis over the estimated useful lives as follows:

Land improvements 6 years Buildings Industrial building 35-61 years Electrical power systems 4-10 years Engineering systems 1-17 years Equipment Major production equipment 1-5 years Temperature control systems 4-7 years Transportation equipment 4-7 years Transportation equipment 3-8 years Office equipment 2-6 years

159 -

The major component parts of the buildings held by the Group included plants, electro-powering machinery and engineering systems, etc., which were depreciated over their estimated useful lives.

Property, plant and equipment pledged as collateral for bank borrowings were set out on Note 31.

17. INVESTMENT PROPERTIES

Completed investment property Cost Balance at January 1, 2015 Transferred from property, plant and equipment Effect of foreign currency exchange differences Balance at December 31, 2015 Accumulated depreciation and impairment Balance at January 1, 2015 Transferred from property, plant and equipment Depreciation expense Effect of foreign currency exchange differences Balance at December 31, 2015 Cost Balance at January 1, 2016 Transferred from property, plant and equipment Effect of foreign currency exchange differences Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Transferred from property, plant and equipment Depreciation expense Effect of foreign currency exchange differences Balance at December 31, 2016		December	31
		2016 2015 $ 61,723 $ 67,412 Completed Investment Property $ 81,242 26,429 (1,736) $ 105,935 $ (26,069) (9,555) (3,467) 568 $ (38,523) $ 105,935 5,400 (7,843) $ 103,492 $ (38,523) (1,863) (4,403) 3,020 $ (41,769)

The investment properties held by the Group were depreciated using the straight-line method over their useful lives of 5-61 years.

160 -

The fair value of the Group’s investment properties as of December 31, 2016 and 2015 was $110,152 thousand and $124,116 thousand, respectively. The fair value valuation had not been performed by independent qualified professional valuers; however, management of the Group used the valuation model that market participants would use in determining the fair value the valuation was arrived at by reference to market evidence of transaction prices for similar properties.

All of the Group’s investment property was held under freehold interests. The investment properties pledged as collateral for bank borrowing were set out in Note 31.

18. PREPAYMENTS FOR LEASE

Current asset (included in prepaid rent line item) Non-current asset		December 31	December 31
		2016 $ 2,416 102,431 $ 104,847	2015 $ 2,637 113,887 $ 116,524

As of December 31, 2016 and 2015, prepaid lease payments include land use right, which are located in Mainland China.

The prepayment for lease pledged as collateral for bank borrowing were set out in Note 31.

19. BORROWINGS

a. Short-term borrowings

Secured borrowings (Note 31) Bank loans (1) Unsecured borrowings Line of credit borrowings (2) Letters of credit (3)		December 31	December 31
		2016 $ - - 20,280 20,280 $ 20,280	2015 $ 101,867 98,475 51,941 150,416 $ 252,283

1) The weighted average effective interest rate on short-term secured bank loans was 1.36% per annum as of December 31, 2015.
2) The range of weighted average effective interest rate on line of credit borrowings was 1.35%-2.56% per annum as of December 31, 2015.
3) The interest rate on the letters of credit was 0.85%-1.89% and 0.9% per annum as of December 31, 2016 and 2015, respectively.
161 -

b. Long-term borrowings

Secured borrowings (Note 31) Bank loans (1) Unsecured borrowings Bank loans Less: Current portions Long-term borrowings		December 31	December 31
		2016 $ 421,875 1,785,770 (723,896) $ 1,483,749	2015 $ 921,875 794,664 (550,914) $ 1,165,625

The borrowings of the Group were as follows:

Maturity Date
Floating rate borrowings
Secured bank borrowing denominated in
NT$ 2019.08.01

Secured bank borrowing denominated in
NT$ 2019.09.01

Secured bank borrowing denominated in
NT$ 2020.04.20

Unsecured bank borrowing denominated in
NT$ 2017.09.09

Unsecured bank borrowing denominated in
NT$ 2017.09.10

Unsecured bank borrowing denominated in
NT$ 2018.01.25

Unsecured bank borrowing denominated in
NT$ 2018.01.25

Unsecured bank borrowing denominated in
NT$ 2018.01.25

Unsecured bank borrowing denominated in
NT$ 2018.01.25

Unsecured bank borrowing denominated in
NT$ 2019.09.05

Unsecured bank borrowing denominated in
NT$ 2018.09.05

Unsecured bank borrowing denominated in
NT$ 2018.09.05

Unsecured bank borrowing denominated in
NT$ 2017.12.15

Unsecured bank borrowing denominated in
US$ 2018.02.26

Unsecured bank borrowing denominated in
US$ 2018.02.26

Unsecured bank borrowing denominated in
US$ 2018.05.28

**December 31 **

2016
2015
$ -
$ 187,500

171,875
234,375

250,000
500,000

200,000
200,000

200,000
200,000

250,000
-

100,000
-

100,000
-

100,000
-

200,000
-

100,000
-

100,000
-

-
50,000

32,279
32,825

64,559
65,650

80,698
82,064
(Continued)

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December 31	December 31	December 31
2016 2015 $ 64,558 $ 65,650 96,838 - 96,838 98,475 (723,896) (550,914) $ 1,483,749 $ 1,165,625 (Concluded) 1.00%-1.782% per annum as of December 31

	2016 $ - - $ -	2015 $ 798,941 (798,941) $ -

20. BONDS PAYABLE

On January 25, 2013, the Corporation issued forth unsecured domestic convertible bonds with an aggregate value of $800,000 thousand to pay off borrowings and purchase equipment.

Other details of the bond issuance are summarized as follows:

a. Issue date: January 25, 2013.
b. Total issue amount: $800,000 thousand.
c. Issue price: 100%.
d. Par value: $100 thousand.
e. Coupon rate: 0%.
f. Repayment term: The bonds are repayable on January 25, 2016 upon the maturity of the bonds.
g. Conversion right: Holder can request for conversion of the bonds to the Corporation’s ordinary shares.
h. Conversion period: From February 26, 2013 to January 15, 2016.
i. Conversion price: The original conversion price per share is $40.9. The conversion price is subject to adjustment based on a certain formula if there are changes in outstanding shares or execution of conversion below market price.
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j. Redemption of bonds
1) Redemption on the maturity date: On the maturity date, the Corporation will redeem the bonds of the principal amounts.
2) Early redemption on the maturity date:
- a) During the period of time between one month after issuance and the 40th day before maturity, if the closing price of the Corporation’s shares reaches 30% of the conversion price for 30 consecutive trading days, the Corporation may redeem the remaining bonds at a price of their book value.
- b) During the period of time between one month after issuance and the 40th day before maturity, when over 90% of the bonds had been redeemed, bought back or converted, the Corporation may redeem the remaining bonds at a price of their book value.
k. Converted bond: As of December 31, 2016, all bonds had been redeemed.

21. OTHER LIABILITIES

Current Other payables Payable for bonus to employees and directors Payable for commission Payable for salaries Payable for bonus Payable for annual leave Payable for purchase of equipment Others		December 31	December 31
		2016 $ 134,666 49,502 104,233 244,588 28,119 184,444 129,804 $ 875,356	2015 $ 121,443 67,001 82,217 212,224 25,803 11,460 115,364 $ 635,512

22. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company and TXC Optec Corporation of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiaries in NGB and CKG are members of a state-managed retirement benefit plan operated by the government of China. The subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

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b. Defined benefit plans

The defined benefit plan adopted by the Company of the Group in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company contribute amounts equal to 4% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability		December 31	December 31
		2016 $ 141,977 (85,666) $ 56,311	2015 $ 120,520 (73,913) $ 46,607

Movements in net defined benefit liability (asset) were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liability (Asset)
Balance at January 1, 2015	$ 106,029	$ (66,138)	$	39,891
Service cost
Current service cost	1,875	-		1,875
Past service cost and loss (gain) on
settlements	790	-		790
Net interest expense (income)	1,722	(1,200)		522
Recognized in profit or loss	4,387	(1,200)		3,187
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(548)		(548)
Actuarial (gain) loss - changes in
demographic assumptions	5,735	-		5,735
Actuarial (gain) loss - changes in financial
assumptions	2,572	-		2,572
Actuarial (gain) loss - experience
adjustments	11,090	-		11,090
Recognized in other comprehensive income	19,397	(548)		18,849
Contributions from the employer	-	(15,320)		(15,320)
Benefits paid	(9,293)	9,293		-
Balance at December 31, 2015	120,520	(73,913)		46,607
				(Continued)

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	Present Value	Present Value
	of the Defined				Net Defined
		Benefit	Fair Value of			Benefit
	Obligation		the Plan Assets		Liability (Asset)
Service cost
Current service cost	$	1,802	$	-	$	1,802
Past service cost and loss (gain) on
settlements		231		-		231
Net interest expense (income)		1,262		(725)		537
Recognized in profit or loss		3,295		(725)		2,570
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-		171		171
Actuarial (gain) loss - changes in
demographic assumptions		7,457		-		7,457
Actuarial (gain) loss - changes in financial
assumptions		3,144		-		3,144
Actuarial (gain) loss - experience
adjustments		11,734		-		11,734
Recognized in other comprehensive income		22,335		171		22,506
Contributions from the employer		-		(15,372)		(15,372)
Benefits paid		(4,173)		4,173		-
Balance at December 31, 2016	$	141,977	$	(85,666)	$	56,311
						(Concluded)

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Cost of goods sold Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 1,258 332 500 480 $ 2,570	2015 $ 1,564 401 576 646 $ 3,187

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the (government/corporate) bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.
166 -

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate(s) Expected rate(s) of salary increase	December 31
	2016 2015 1.125% 1.375% 2.00% 2.00%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would decrease/increase) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2016 $ (3,443) $ 3,571 $ 3,446 $ (3,340)	2015 $ (2,786) $ 2,888 $ 2,782 $ (2,699)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		December	31
		2016 $ 15,372 5 years	2015 $ 15,320 5 years

23. EQUITY

a. Share capital

Ordinary shares

Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2016 500,000 $ 5,000,000 309,757 $ 3,097,570	2015 500,000 $ 5,000,000 309,757 $ 3,097,570

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

30,000 thousand shares of the Company’s shares authorized were reserved for the issuance of convertible bonds and employee share options.

167 -

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital* Issuance of common shares Conversion of bonds Overdue options The difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition Share of changes in capital surplus of associates or joint venture May not be used for any purpose Share warrants		December 31	December 31
		2016 $ 611,776 977,028 73,377 331 2,712 - $ 1,665,224	2015 $ 611,776 977,028 27,745 - - 45,632 $ 1,662,181

Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

c. Retained earnings and dividend policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The shareholders held their regular meeting on June 7, 2016 and, in that meeting, had resolved amendments to the Company’s Articles of Incorporation (the “Articles”), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees’ compensation.

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration of directors and supervisors before and after amendment, please refer to f. employee benefits expense in Note 24(f).

Dividends are recommended by the board of directors in accordance with the Corporation’s dividend policy. Under this policy, industry trend and growth should be evaluated, investment opportunities should be fully understood, and proper capital adequacy ratios should be considered in determining the dividend to be distributed. In addition, cash dividends should not be less than 20% of the total dividends to be appropriated.

Appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

168 -

Items referred to under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

The appropriations of earnings for 2015 and 2014 had been approved in the shareholders’ meetings on June 7, 2016, and June 16, 2015 respectively. The appropriations and dividends per share were as follows:

Legal reserve Cash dividends	Appropriation of Earnings	Dividends Per Share (NT$)
	For Fiscal For Fiscal Year 2015 Year 2014 $ 93,821 $ 99,517 774,393 774,393	For Fiscal For Fiscal Year 2015 Year 2014 $ - $ - 2.5 2.5

The appropriations of earnings for 2016 are subject to the resolution of the shareholders’ meeting to be held on June 2017.

d. Treasury stock

	According to	According to
Purpose of Buy-Back	the	Raw
Number of shares at January 1, 2015	$	-
Addition 20 thousand shares		20
Sold 20 thousand shares		(20)
Number of shares at December 31, 2015	$	-

The Company decided to pass through the split case of TXC Optec Corporation on June 16, 2015 at shareholders meeting (Note 14). According to Business Mergers and Acquisition Act Article 12, shareholders can request the Company buyback treasury stock in accordance with the fair value. The Company bought back treasury stock totaling 20 thousand shares, and the total value of shares bought back was $806 thousand. Also the Company sold full treasury stock, and the sale price was $721 thousand. Therefore, retained earnings are deducted by 85 thousand dollars.

24. NET PROFIT AND OTHER COMPREHENSIVE INCOME (LOSS) FROM CONTINUING OPERATIONS

Net profit from continuing operations was attributable to:

a. Other income

Other income
Interest income Income from government grants Dividends income Others	For the Year Ended December 31
		2016 $ 14,411 42,210 4,132 38,330 $ 99,083	2015 $ 33,527 6,566 1,118 38,026 $ 79,237

169 -

b. Other gains and losses

For the Year Ended	For the Year Ended	December 31
2016 $ (9,080) 13,010 33,609 45,447 1,350 (47,152) (1,414) (35,518) $ 252 For the Year Ended		2015 $ (12,245) 3,286 52,314 119,403 1,628 (10,210) (440) (20,189) $ 133,547 December 31
2016 $ (17,152) (30,000) $ (47,152) For the Year Ended		2015 $ (10,210) - $ (10,210) December 31
2016 $ (27,003) (1,059) $ (28,062) For the Year Ended		2015 $ (26,522) (16,802) $ (43,324) December 31
	2016 $ 911,332 3,686 $ 915,018 $ 776,258 135,074 $ 911,332 $ 3,686	2015 $ 974,009 3,163 $ 977,172 $ 841,208 132,801 $ 974,009 $ 3,163

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f. Employee benefits expense

Post-employment benefits (see Note 22) Defined contribution plans Defined benefit plans Other employee benefits Payroll expense Labor and health insurance Others An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 63,103 2,570 65,673 1,493,887 85,902 28,315 1,608,104 $ 1,673,777 $ 970,821 702,956 $ 1,673,777	2015 $ 68,469 3,187 71,656 1,357,648 85,348 26,693 1,469,689 $ 1,541,345 $ 906,275 635,070 $ 1,541,345

1) Employees’ compensation and remuneration of directors for 2016 and 2015

In compliance with the Company Act as amended in May 2015 and the amended Articles of Incorporation of the Company approved by the shareholders in their meeting on June 2016, the Company accrued employees’ compensation and remuneration of directors at the rates no less than 3% and no higher than 2%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2016 and 2015 which have been approved by the Company’s board of directors on March 9, 2017 and March 14, 2016, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors Amount	For the Year Ended December 31
	2016 2015 9% 9% 1.5% 1.5%

Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2016 Cash Share $ 113,822 $ - 18,970 -	2015
		Cash Share $ 104,094 $ - 17,349 -

If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

171 -

There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the year ended December 31, 2015.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2017 and 2016 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

2) Bonus to employees and remuneration of directors for 2014:

The bonus to employees and remuneration of directors for 2014 which have been approved in the shareholders’ meeting on June 16, 2015 were as follows:

Bonus to employees Remuneration of directors	For the Year Ended December 31, 2014
	Cash Share $ 107,478 $ - 17,913 -

There was no difference between the amounts of the bonus to employees and the remuneration of directors approved in the shareholders’ meeting on June 16, 2015 and the amounts recognized in the consolidated financial statements for the year ended December 31, 2014.

Information on the bonus to employees and remuneration of directors and supervisors resolved by the shareholders in their meeting in 2015 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

25. INCOME TAXES RELATING TO CONTINUING

a. The major components of tax expense (income) were as follows:

Current tax In respect of the current period Income tax of unappropriated earnings Adjustments for prior year Deferred tax In respect of the current period Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2016 $ 158,723 5,435 9,926 174,084 4,496 $ 178,580	2015 $ 136,707 10,979 8,913 156,599 (7,192) $ 149,407

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A reconciliation of accounting profit and current income tax expenses is as follows:

Profit before tax from continuing operations Income tax expense at the 17% statutory rate Tax effect of adjusting items: Nondeductible expenses in determining taxable income Tax-exempt income Tax-exempt income for five years Additional income tax on unappropriated earnings Unrecognized temporary differences Unrecognized loss carryforwards Investment tax credit Additional income tax under the Alternative Minimum Tax Act Deferred tax effect of earnings of subsidiaries Effect of different tax rate of group entities operating in other jurisdictions Adjustment for prior years’ tax Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 1,192,272 $ 202,686 9,028 (2,272) (21,081) 5,435 179 5,303 (35,513) - 10,812 (5,923) 9,926 $ 178,580	2015 $ 1,087,610 $ 184,894 2,690 (2,540) (16,478) 10,979 508 - (31,159) 5,287 - (13,687) 8,913 $ 149,407

The applicable tax rate used above is the corporate tax rate of 17% payable by the Group in ROC, while the applicable tax rate used by subsidiaries in China is 15%-25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of 2017 appropriations of earnings is uncertain, the potential income tax consequences of 2016 unappropriated earnings are not reliably determinable.

b. Income tax expense recognized in other comprehensive income

Deferred tax In respect of the current year Remeasurement on defined benefit plan	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ (3,826)	2015 $ (3,204)

c. Current tax assets and liabilities

Current tax liabilities Income tax payable		December	31
		2016 $ 67,061	2015 $ 57,983

173 -
d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

Opening Balance Recognize in Profit or Loss Recognize in Other Comprehen- sive Income Deferred tax assets Unrealized loss on inventories $ 7,493 $ 1,432 $ - Financial assets at fair value through profit or loss 155 2,131 - Payable for annual leave 4,028 203 - Determine benefit obligation 9,932 (2,176) 3,826 Property, plant and equipment 2,097 212 - Allowance for impaired receivables 537 (134) - Others 1,476 408 - $ 25,718 $ 2,076 $ 3,826 Deferred tax liabilities Unrealized exchange gain $ 4,679 $ 6,572 $ - Associates 124,436 - - AFS financial assets - - 195,742 $ 129,115 $ 6,572 $ 195,742 For the year ended December 31, 2015 Opening Balance Recognize in Profit or Loss Recognize in Other Comprehen- sive Income Deferred tax assets Unrealized loss on inventories $ 8,600 $ (929) $ - Financial assets at fair value through profit or loss 2,123 (1,968) - Payable for annual leave 3,828 414 - Determine benefit obligation 8,790 (2,062) 3,204 Property, plant and equipment 2,079 66 - Allowance for impaired receivables 432 116 - Others 3,637 1,694 - $ 29,489 $ (2,669) $ 3,204 Deferred tax liabilities Unrealized exchange gain $ 14,540 $ (9,861) $ - Associates 124,436 - - $ 138,976 $ (9,861) $ -	Exchange Differences $ (91) - (90) - (176) (37) (90) $ (484) $ (1) - - $ (1) Exchange Differences $ (178) - (214) - (48) (11) (3,855) $ (4,306) $ - - $ -	Closing Balance $ 8,834 2,286 4,141 11,582 2,133 366 1,794 $ 31,136 $ 11,250 124,436 195,742 $ 331,428 Closing Balance $ 7,493 155 4,028 9,932 2,097 537 1,476 $ 25,718 $ 4,679 124,436 $ 129,115
Deferred tax assets Unrealized loss on inventories Financial assets at fair value through profit or loss Payable for annual leave Determine benefit obligation Property, plant and equipment Allowance for impaired receivables Others Deferred tax liabilities Unrealized exchange gain Associates

174 -
e. Unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expire in 2027 Information about unused loss carry-forward and tax-exemption Loss carryforwards as of December 31, 2016 comprised of: Unused Amount $22,195,724		December 31
		2016 2015 $ 22,195,724 $ - Expiry Year Project 2027

f. Information about unused loss carry-forward and tax-exemption

Loss carryforwards as of December 31, 2016 comprised of:

g. As of December 31, 2016, profits attributable to the following expansion projects were exempted from income tax for 5 year period:

Expansion of Construction Project 2009 Integrated income tax Unappropriated earnings Unappropriated earnings generated before January 1, 1998 Unappropriated earnings generated on and after January 1, 1998 Shareholder-imputation credit account		Tax-exemption Period 2014-2018 December 31	Tax-exemption Period 2014-2018 December 31
		2016 $ - 2,789,106 $ 2,789,106 $ 201,555	2015 $ - 2,659,935 $ 2,659,935 $ 187,979

h. Integrated income tax

The creditable ratio for distribution of earnings of 2016 and 2015 was 9.05% (expected) and 8.23%, respectively.

i. Income tax assessments

The tax returns had been assessed by the tax authorities before in 2011, respectively.

175 -

26. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share from continuing operations were as follows:

Net Profit for the Year

Profit for the period attributable to owners of the Company Effect of dilutive potential ordinary shares: Convertible bonds Earnings used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 1,016,164 879 $ 1,017,043	2015 $ 938,203 13,946 $ 952,149

Weighted average number of ordinary shares outstanding (in thousand shares):

Weighted average number of ordinary shares in computation of basic earnings per share Effect of dilutive potential ordinary shares: Convertible bonds Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 309,757 1,340 3,593 314,690	2015 309,748 19,560 4,111 333,419

If the Group was able to settle the compensation paid to employees by cash or shares, the Group presumed that the entire amount of the compensation would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the shares had a dilutive effect. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

27. OPERATING LEASE ARRANGEMENTS

a. The Group as lessee

Operating leases relate to leases of warehouse in trade zone with lease terms 3 years. All operating lease contracts contain clauses for 3-yearly market rental reviews. The Group does not have a bargain purchase option to acquire the leased land at the expiry of the lease periods.

The future minimum lease payments of non-cancellable operating lease commitments were as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December	31
		2016 $ 2,800 4,200 - $ 7,000	2015 $ 1,455 - - $ 1,455

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b. The Group as lessor

Operating leases relate to the investment property owned by the Group with lease terms between 1 to 2 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

The future minimum lease payments of non-cancellable operating lease were as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December	31
		2016 $ 2,781 888 - $ 3,669	2015 $ 8,462 3,149 - $ 11,611

28. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity).

The Group is not subject to any externally imposed capital requirements.

29. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments
1) Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values.

2) Fair value of financial instruments that are measured at fair value on a recurring basis
a) Fair value hierarchy

December 31, 2016

Financial assets at FVTPL Mutual funds Structured deposits	Level 1 $ 449,168 - $ 449,168	Level 2 $ - 1,440,932 $ 1,440,932	Level 3 $ - - $ -	Total $ 449,168 1,40,932 $ 1,890,100 (Continued)

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Available-for-sale financial assets Unlisted securities - ROC Equity securities Securities listed in other countries Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts December 31, 2015 Financial assets at FVTPL Mutual funds Structured deposits Forward exchange contracts Available-for-sale financial assets Unlisted securities - ROC Equity securities Securities listed in other countries Equity securities Financial liabilities at FVTPL Forward exchange contracts	Level 1 $ - 1,197,902 62,853 $ 1,260,755 $ - Level 1 $ 633,414 - - $ 633,414 $ - 1,836,676 $ 1,836,676 $ -	Level 2 $ - - - $ - $ 25,525 Level 2 $ - 489,017 249 $ 489,266 $ - - $ - $ 4,978	Level 3 $ 17,148 - - $ 17,148 $ - Level 3 $ - - - $ - $ 34,300 - $ 34,300 $ -	Total $ 17,148 1,197,902 62,853 $ 1,277,903 $ 25,525 (Concluded) Total $ 633,414 489,017 249 $ 1,122,680 $ 34,300 1,836,676 $ 1,870,976 $ 4,978

There were no transfers between Levels 1 and 2 in the current and prior periods.

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b) Reconciliation of Level 3 fair value measurements of financial assets

For the year ended December 31, 2016

Financial assets Balance at January 1, 2016 Recognized in profit or loss (included in other gains and losses) Balance at December 31, 2016 For the year ended December 31, 2015 Financial assets Balance at January 1, 2015 Recognized in profit or loss (included in other gains and losses) Balance at December 31, 2015	Available-for- sale Financial Assets
	Equity Instruments $ 34,300 (17,152) $ 17,148 Available-for- sale Financial Assets
	Unlisted Shares $ 44,510 (10,210) $ 34,300

c) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement

Financial Instruments Derivatives - foreign currency forward contracts Structured deposits	Valuation Techniques and Inputs
	Discounted cash flow. Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties. Discounted cash flow.

The products had short matured period, therefore the fair value is reasonable to be estimated based on the book value.

179 -
d) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement

The fair values of unlisted equity securities - ROC were determined using income approach. In this approach, the discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees. The significant unobservable inputs used are listed on the table below. An increase in long-term revenue growth rates or long-term pre-tax operating margin or a decrease in WACC or discount for lack of marketability used in isolation would result in increase in fair value.

Long-term revenue growth rates Long-term pre-tax operating margin WACC Discount for lack of marketability	December 31
	2016 2015 13.08% 11.73% -% 7.10% 12.10% 13.12% 31.88% 30.58%

b. Categories of financial instruments

Financial assets Fair value through profit or loss (FVTPL) (1) Loans and receivables (2) Held-to-maturity investments (3) Available-for-sale financial assets (4) Financial liabilities Fair value through profit or loss (FVTPL) (5) Amortized cost (6)	December 31
	2016 2015 $ 1,890,100 $ 1,122,680 5,226,874 5,781,999 46,532 98,120 1,363,423 1,986,496 25,525 4,978 4,502,268 4,517,096

1) The balances included the carrying amount of structured deposits and forward exchange contracts.
2) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade and other receivables, and other financial assets.
3) The balances included the carrying amount of financial bond investment.
4) The balances included the carrying amount of available-for-sale financial assets measured at cost.
5) The balances included the carrying amount of forward foreign exchange contract.
6) The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, note payable, trade and other payables, and bonds issued.
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c. Financial risk management objectives and policies

The Group’s major financial instruments included equity and debt investments, bonds payable, borrowings. The Group’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Group sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Group’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The corporate treasury function reported quarterly to the Group’s risk management committee, an independent body that monitors risks and policies implemented to mitigate risk exposures.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below). The Group entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including:

a) Foreign currency risk

Several subsidiaries of the Company had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period (see Note 34).

Sensitivity analysis

The Group was mainly exposed to the USD and JPY.

The following table details the Group’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. The sensitivity analysis included external loans/borrowings as well as loans/borrowings to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in pre-tax/post-tax profit and other equity associated with New Taiwan dollars strengthen 1% against the relevant currency. For a 1% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on post-tax profit and other equity and the balances below would be negative.

181 -

Profit or loss	USD Impact For the Year Ended December 31 2016 2015 $ 34,335 $ 18,906	JPY Impact
		For the Year Ended December 31
		2016 2015 $ (4,689) $ (2,813)

i. This was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.
ii. This was mainly attributable to the exposure to outstanding JPY payables, which were not hedged, at the end of the reporting period.

b) Interest rate risk

The Group was exposed to interest rate risk because the Group’s bank deposits and the Group borrowed funds at floating interest rates.

The carrying amount of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2016 2015 $ 336,679 $ 464,329 - 798,941 1,752,164 2,290,647 2,227,925 1,968,822

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 0.25% basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 0.25% basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2016 and 2015 would decrease/increase by $1,189 thousand and $805 thousand, which was mainly attributable to the Group’s exposure to interest rates on its floating rate bank deposits and bank borrowings.

c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments. The Group’s equity price risk was mainly concentrated on equity instruments operating in Shenzhen stock exchange, growth enterprise.

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Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 1% higher/lower, other comprehensive income for the years ended December 31, 2016 and 2015 would increase/decrease by $11,979 thousand and $18,367 thousand, respectively.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group is arising from:

The carrying amount of the respective recognized financial assets as stated in the balance sheets.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liability. As of December 31, 2016 and 2015, the Group had available unutilized overdraft and short-term bank loan facilities of approximately $4,591,399 thousand and $5,420,615 thousand, respectively.

Liquidity and interest risk rate tables

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows.

To extend that interest flows are floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

December 31, 2016

	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)	1 Year		2-3 Years		4-5 Years			5+ Years		Total
Non-derivative financial
liabilities
Trade payables	-	$ 1,398,015	$	-	$		-	$		-	$ 1,398,015
Other payables	-	876,328		-			-			-	876,328
Other current liabilities	-	45,000		-			-			-	45,000
Variable interest rate
(liabilities)	0.86-1.78	744,176		1,483,749			-			-	2,227,925
Guarantee deposits received	-	-		41,193			-			-	41,193

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December 31, 2015

	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)	1 Year		2-3 Years		4-5 Years		5+ Years		Total
Non-derivative financial
liabilities
Trade payables	-	$ 1,112,457	$	-	$	-	$		-	$ 1,112,457
Other payables	-	636,876		-		-			-	636,876
Other current liabilities	-	30,122		-		-			-	30,122
Bonds payable	-	798,941		-		-			-	798,941
Variable interest rate
(liabilities)	0.9-2.56	803,197		978,125		187,500			-	1,968,822
Guarantee deposits received	-	-		55,268		-			-	55,268

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities was subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

The following table detailed the Group’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

December 31, 2016

On Demand or Less Than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (16,516) $ (7,891) $ (1,118) December 31, 2015 On Demand or Less Than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (867) $ (3,825) $ (286)	1-5 Years $ - 1-5 Years $	5+ Years $ - 5+ Years $

d. Reclassifications

On May 15, 2015, the Group reclassified its financial assets and the fair values at the reclassification date were as follows:

	Before		After
	Reclassifications	Reclassifications
Financial assets at fair value through profit or loss - held for
trading	$ 458,729	$	-
Available-for-sale financial assets	-		458,729
	$ 458,729	$	458,729

184 -

Since the investment in Guandong Failong Crystal Technology Co., Ltd. has market price after it became listed in the Shenzhen Stock Exchange on May 15, 2015, it is most appropriate to reclassify if as available-for-sale investment.

The carrying amounts and fair values of the reclassified financial assets (excluding those that had been derecognized) were as follows:

Available-for-sale financial assets		December 31	December 31	December 31	December 31
		2016 Carrying Amount Fair Value $ 1,197,902 $ 1,197,902		2015
		Carrying Amount $ 1,197,902		Carrying Amount $ 1,836,676	Fair Value $ 1,836,676

30. RELATED-PARTY TRANSACTIONS

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

a. Sales of goods

Associates b. Purchase of goods Associates Other associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2016 2015 $ 22,720 $ 21,587 For the Year Ended December 31
		2016 $ - 41 $ 41	2015 $ 840 58 $ 898

c. Operating expenses Other associates d. Commission revenue Associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2016 2015 $ 994 $ 632 For the Year Ended December 31
		2016 $ 2,201	2015 $ 1,524

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e. Rental revenue

Related Party Location Rent Collection Other associates 1F., No. 189, Huangshan W. Rd., Beilun Dist., Ningbo City Based on contract, and paid on a monthly basis		For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 Amount % to Total Account Balance $ 3,500 -		2015
				Amount % to Total Account Balance $ 3,657 -

Selling prices to related parties were similar to those for third parties.

f. Trade receivables from related parties

Associates Less: Allowance for impairment loss		December	31
		2016 $ 9,690 (78) $ 9,612	2015 $ 4,940 (30) $ 4,910

g. Trade payables to related parties

Associates Other associates		December	31
		2016 $ - 1,602 $ 1,602	2015 $ 959 544 $ 1,503

h. Other receivables from related parties

Associates Other associates Other payables to related parties Associates		December	31
		2016 $ 19 690 $ 709 December	2015 $ 646 - $ 646 31
		2016 $ 972	2015 $ 1,364

i. Other payables to related parties
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j. Acquisition of property, plant and equipment

Other associates	Acquisition Amounts	Acquisition Amounts	Acquisition Amounts
	For the Year Ended December 31
		2016 $ 3,926	2015 $ 1,486

k. Compensation of key management personnel

Short-term benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 88,534 3,239 $ 91,773	2015 $ 78,697 2,596 $ 81,293

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

31. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings:

Land Building equipment, net Investment property Prepaid rental		December 31	December 31
		2016 $ 573,770 1,109,553 26,100 13,662 $ 1,723,085	2015 $ 573,770 1,056,956 26,500 15,269 $ 1,672,495

32. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2016 and 2015 were as follows:

a. Unused letters of credit amounted to approximately JPY228,890 thousand and JPY144,551 thousand as of December 31, 2016 and 2015.
b. As of December 31, 2016, the Company unrecognized commitments are as follows:

Acquisition of equipment Acquisition of equipment Acquisition of equipment Acquisition of equipment	Contract Amount Paid Amount Unpaid Amount $ 9,616 $ 8,013 $ 1,603 US$ 217 US$ 5 US$ 212 RMB 5,111 RMB - RMB 5,111 JPY 777,141 JPY 105,890 JPY 671,251

187 -
c. For the year ended December 31, 2016, the Company sold overseas unlisted common shares of Sitime to unrelated party amounted to $20,551 thousand and had already received $7,917 thousand, while the remaining payment of $12,634 thousand have to fulfill specific conditions to be collected. The Company will recognize the remaining balance once the conditions be fulfilled and the value can be reliably measured. The Company has been received the remaining amount and recognized in other gains - Gain on disposal of investment.

33. SIGNIFICANT EVENTS AFTER REPORTING PERIOD: NONE

34. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2016

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	92,686	32.279 (USD:NTD)	$ 2,991,811
USD		58,683	6.8721(USD:RMB)	1,894,229
JPY		726,404	0.2757 (JPY:NTD)	200,270
JPY		8,917	0.0587 (JPY:RMB)	2,458
Financial liabilities
Monetary items
USD		28,331	32.279(USD:NTD)	914,496
USD		16,669	6.8721(USD:RMB)	538,059
JPY		1,779,453	0.2757 (JPY:NTD)	490,595
JPY		656,715	0.0587 (JPY:RMB)	181,056
December 31, 2015
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	103,850	32.825 (USD:NTD)	$ 3,408,876
USD		26,282	6.4936 (USD:RMB)	862,707
JPY		289,288	0.2727 (JPY:NTD)	78,889
Financial liabilities
Monetary items
USD		46,802	32.825 (USD:NTD)	1,536,276
USD		25,733	6.4936 (USD:RMB)	844,686
JPY		956,855	0.2727 (JPY:NTD)	260,934
JPY		363,866	0.0539 (JPY:RMB)	99,226

188 -

For the years ended December 31, 2016 and 2015, unrealized net foreign exchange gains were $45,447 thousand and $119,403 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

35. SEPARATELY DISCLOSED ITEMS

a. Information on significant transactions and information on investees:
1) Lending funds to others. (None)
2) Providing endorsements or guarantees for others. (None)
3) Holding of securities at the end of the period. (Table 1)
4) Aggregate purchases or sales of the same securities reaching NT$300 million or 20 percent of paid-in capital or more. (Table 2)
5) Acquisition of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
6) Disposal of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
7) Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 3)
8) Trade receivables from related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 4)
9) Trading in derivative instruments. (Note 7)
10) Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them. (Table 8)
11) Information on investees. (Table 5)
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland China area. (Table 6)
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses. (Table 7)
- a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
189 -
c) The amount of property transactions and the amount of the resultant gains or losses.
d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

36. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments under IFRS 8 “Operating Segments” were as follows:

Crystal Optec

a. Segment revenues and results

Crystal Optec Investment income share of profits of associates accounted for using the equity method Interest income Loss on disposal of property, plant and equipment Net exchange gain Valuation gain on financial instruments Financial costs Others Profit before tax (continuing operations)		Segment Revenue For the Year Ended December 31 2016 2015 $ 9,209,166 $ 8,804,022 427,935 461,634 $ 9,637,101 $ 9,265,656		Segment Profit	Segment Profit
				For the Year Ended December 31
		2016 $ 9,209,166 427,935 $ 9,637,101		2016 $ 1,132,936 (18,542) 1,114,394 6,605 14,411 (9,080) 45,447 33,609 (28,062) 14,948 $ 1,192,272	2015 $ 886,856 21,479 908,335 9,815 33,527 (12,245) 119,403 52,314 (43,324) 19,785 $ 1,087,610

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales for the years ended December 31, 2016 and 2015.

190 -

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and directors’ salaries, share of profits of associates, gain recognized on the disposal of interest in former associates, rental revenue, interest income, gain or loss on disposal of property, plant and equipment, gain or loss on disposal of financial instruments, exchange gain or loss, valuation gain or loss on financial instruments, finance costs and income tax expense. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

b. Revenue from major products and services

Crystal Optec	2016 $ 9,209,166 427,935 $ 9,637,101	2015 $ 8,804,022 461,634 $ 9,265,656

Assets and liabilities not used by the chief operating decision maker in the allocation of resources and assessment of performance of segments are not disclosed.

c. Geographical information

The Group’s operates in two principal geographical areas – Taiwan and China.

The Group’s revenue from continuing operations from external customers and information about its noncurrent assets by geographical location are detailed below:

Taiwan China Others		Revenue from External Customers December 31 2016 2015 $ 8,395,399 $ 8,161,904 1,202,971 1,081,490 38,731 22,262 $ 9,637,101 $ 9,265,656		Noncurrent Assets	Noncurrent Assets
				December 31
		2016 $ 8,395,399 1,202,971 38,731 $ 9,637,101		2016 $ 2,510,436 2,068,485 1,451 $ 4,580,372	2015 $ 2,455,954 2,419,894 3,234 $ 4,879,082

Noncurrent assets included property, plant and equipment, intangible assets and other assets but excluded deferred tax assets and financial instruments.

d. Major customer information

Major customer did not account for 10% or more of sales in 2016 and 2015.

191 -

TABLE 1

TXC CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December	31, 2016			Note
				Shares		Carrying Amount	Percentage of Ownership		Shares
TXC Corporation TXC (Ningbo) Corporation	Stock listed overseas Guandong Failong Crystal Technology Co., Ltd. Stock-emerging company Win Win Precision Technology Co., Ltd. Stock-unlisted company Marson Technology Co., Ltd. iSentek Inc. UPI Semiconductor Corp. Financial bonds Cayman Ton Yi Industrial Holdings Structured deposits Fubon 16WMSD0601 BNP Paribas Structured Offshore Deliverable CNY Option Investment Mutual fund Fidelity Funds - Global Property Fund A-USD Fubon China Money Market TWD Fubon Chi-Hsiang Money Market Mutual fund E Fund Money Market Fund Southern Cash Currency Fund China International Fund Management Co., Ltd. CIFM Plain Vanilla Bond Fund China Merchants Fund China Merchants Currency Fund E Fund Stable Income Bond Fund China GuangFa Money Market Fund	None None None None Chairman is a direct of the Company None None ″ None ″ ″ None ″ ″ ″ ″ ″ ″ ″	Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent ″ ″ Held-to-maturity financial assets - noncurrent Financial assets at fair value through profit or loss - current ″ Available-for-sale financial assets - noncurrent ″ ″ Financial assets at fair value through profit or loss - current ″ ″ ″ ″ ″ ″ ″	10,096 1,365 414 2,500 2,000 RMB 10,000 RMB 15,000 RMB 9,000 1,000 470 1,931 RMB 25,122 RMB 3,296 RMB 10,001 RMB 10,559 RMB 9,498 RMB 2,032 RMB 9,757 RMB 4,024		$ 1,197,902 $ 17,148 $ 3,000 40,000 42,520 $ 85,520 $ 46,532 $ 71,205 42,430 $ 113,635 $ 9,440 23,403 30,010 $ 62,853 $ 116,899 15,336 46,537 49,133 44,196 9,456 45,401 18,725 $ 345,683	6 3 5 15 2		$ 1,197,902 $ 17,148 None ″ ″ $ 46,532 $ 71,205 42,430 $ 113,635 $ 9,440 23,403 30,010 $ 62,853 $ 116,899 15,336 46,537 49,133 44,196 9,456 45,401 18,725 $ 345,683

(Continued)

192 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December	31, 2016			Note
				Shares		Carrying Amount	Percentage of Ownership		Shares
TXC (Chongqing) Limited Ningbo Jingyu Company Limited Chongqing All Sun Company Limited	Structured deposits Bank of Communication First Sino Bank China Merchants Bank China Everbright Bank China Construction Bank Orient Securities Company Limited Mutual fund E Fund Stable Income Bond Fund China International Fund Management Co., Ltd. Structured deposits First Sino Bank China Construction Bank Mutual fund Southern Cash Fund Structured deposits Chongqing Rural Commercial Bank Mutual fund Southern Cash Fund	None ″ ″ ″ ″ ″ None ″ None ″ None None None	Financial assets at fair value through profit or loss - current ″ ″ ″ ″ ″ Financial assets at fair value through profit or loss - current ″ Financial assets at fair value through profit or loss - current ″ Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current	RMB 20,053 RMB 41,371 RMB 30,902 RMB 45,010 RMB 30,057 RMB 30,111 RMB 6,185 RMB 5,214 RMB 39,542 RMB 38,131 RMB 451 RMB 10,068 RMB 10,378		$ 93,309 192,508 143,795 209,440 139,860 140,112 $ 919,024 $ 28,781 24,262 $ 53,043 $ 183,995 177,429 $ 361,424 $ 2,102 $ 46,849 $ 48,340			$ 93,309 192,508 143,795 209,440 139,860 140,112 $ 919,024 $ 28,781 24,262 $ 53,043 $ 183,995 177,429 $ 361,424 $ 2,102 $ 46,849 $ 48,340

(Concluded)

193 -

TABLE 2

TXC CORPORATION 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

(In Thousands of New Taiwan Dollars)

Company Name	Marketable Securities Type andName	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Equity in Net Gain (Loss)	Ending	Balance
					Shares	Amount	Shares	Amount	Shares	Amount	Carrying Amount	Gain (Loss) on Disposal		Shares	Amount
TXC (Ningbo) Corporation TXC (Chongqing) Limited	Structured deposits Mutual funds ″ Structured deposits	Financial instruments at FVTPL - current ″ Financial instruments at FVTPL - current ″ Financial instruments at FVTPL - current	China Everbright Bank Bank of Communication China Merchants Bank China Money Fund First Sino Bank	″ None None ″ None	- - - - -	$ 155,053 152,345 - 81,211 75,919	- - - - -	$ 461,695 437,396 398,516 417,956 480,017	- - - - -	$ (400,892) (493,077) (389,548) (497,217) (367,432)	$ (400,892) (493,077) (389,548) (497,217) (367,432)	$ - - - - -	$ (6,416) (3,355) 488 (1,950) (4,509)	- - - - -	$ 209,440 93,309 9,456 - 183,995

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TABLE 3

TXC CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Buyer	Related Party	Relationship		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 Terms	Unit Price	Payment Terms	Ending Balance	% to Total
TXC Corporation TXC (Ningbo) Corporation	TXC (Ningbo) Corporation TXC (Chongqing) Limited Growing Profit Trading Ltd. TXC (Chongqing) Limited	Subsidiary Subsidiary Subsidiary Subsidiary	Purchase Sale Purchase Purchase Purchase	$ 1,851,735 (248,431) 550,062 351,184 236,335	34 (3) 10 20 13	Note ″ ″ ″ ″	Its trading price depends on its function within the Group ″ ″ ″ ″	Note ″ ″ ″ ″	$ (547,358) 82,926 (107,183) (88,999) (131,142)	(38) 3 (8) (12) (18)

Note: The terms of purchases from related parties were not significantly different from those with third parties.

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TABLE 4

TXC CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
TXC (Ningbo) Corporation TXC (Chongqing) Corporation	TXC Corporation TXC (Ningbo) Corporation TXC Corporation	Parent entity Subsidiary Parent entity	$ 547,358 131,142 107,183	3.38 1.80 5.13	$ - - -	- - -	$ 506,003 27,263 94,641	$ - - -

196 -

TABLE 5

TXC CORPORATION AND SUBSIDIARIES

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of December 31, 2016	as of December 31, 2016	Net Income (Losses) of the Investee	Equity in the Earnings (Losses)	Note
				December 31, 2016	December 31, 2015	Shares (In Thousands)	Percentage of Ownership	Carrying Value
TXC Corporation Taiwan Crystal Technology International Ltd. TXC (Ningbo) Corporation Ningbo Jingyu Company Limited Taiwan Crystal Technology International (HK) Limited	Taiwan Crystal Technology International Ltd. TXC Technology Inc. TXC Japan Corporation Taiwan Crystal Technology International (HK) Limited Tai-Shing Electronics Components Corporation TXC Optec Corporation Growing Profit Trading Ltd. TXC (Ningbo) Corporation TXC (Chongqing) Corporation Chongqing All Sun Company Limited Ningbo Jingyu Company Limited Ningbo Free Trade Zone JingYue Tranding Company TXC (Chongqing) Limited	Western Samoa U.S.A. Japan Hong Kong Taiwan Taiwan B.V.I. Ningbo Chongqing Chongqing Ningbo Ningbo Chongqing	Investment Marketing activities Marketing activities Investment Manufacture and sales of electronics products Manufacture and sales of sapphire International trading Manufacture and sales of electronics products Manufacture and sales of electronics products Market activities International trading International trading Manufacture and sales of electronics products	$ 1,390,461 9,879 6,172 298,362 59,564 444,718 1,691 1,487,211 604,152 312,644 4,807 931 298,362	$ 1,390,461 9,879 6,172 298,362 60,580 430,000 1,691 1,487,211 604,152 312,644 4,807 - 298,362	42,835 300 2 10,080 2,250 22,225 50 45,835 123,745 66,000 1,000 200 10,080	100.00 100.00 100.00 100.00 10.23 88.90 100.00 100.00 66.40 100.00 100.00 100.00 33.60	$ 4,669,597 14,729 18,756 369,503 65,228 428,722 229,554 4,479,159 722,713 305,329 8,426 812 369,055	$ 354,800 (2,936) 3,010 37,342 83,653 (22,196) (9,338) 369,021 111,936 (1,572) (4,699) (124) 111,936	$ 359,419 (2,936) 3,010 37,342 6,605 (19,724) (9,338) 369,021 74,326 (1,572) (4,699) (124) 37,610	Difference from upstream transactions $4,619 thousand

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TABLE 6

TXC CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars or U.S. Dollars)

Name of the investees in Mainland China, main businesses and products, paid-in capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, dividends remitted by the investee, and the limit of investment in Mainland China:

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Method of Investment	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2016 (US$ in Thousand)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2016 (US$ in Thousand)	Investee Company Current Net Income	Percentage of Ownership	Investment Income (Loss) Recognized	Carrying Amount as of December 31, 2016	Accumulated Inward Remittance of Earnings as of December 31, 2016
							Outflow	Inflow
TXC (Ningbo) Corporation Guandong Failong Crystal Technology Co., Ltd. TXC (Chongqing) Corporation Chongqing All Suns Company Limited Ningbo Jingyu Company Limited Ningbo Free Trade Zone JingYue Tranding Company	Manufacturing and sales of crystal and crystal oscillator Manufacturing and sales of new electronic components Manufacturing and sales of electronic devices and hardware components Real estate intermediary service, real estate management and electronic product wholesale Purchasing and selling electronic component International trading		$ 1,487,211 580,947 902,514 312,644 4,807 931	Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Direct investment of the Corporation in Mainland China Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China		$ 1,427,630 46,478 298,362 - - -	$ - - - - - -	$ - - - - - -	$ 1,427,630 46,478 298,362 - - -	$ 369,021 - 111,936 (1,572) (4,699) (124)	100 6 100 100 100 100	$ 369,021 - 111,936 (1,572) (4,699) (124)	$ 4,479,159 1,197,902 1,091,768 305,329 8,426 812	$ 256,146 3,014 - - - -
Investment limits in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2016		Investment Amounts Authorized by Investment Commission, MOEA			Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$1,772,470		$1,832,878			$ -

Investment limits in Mainland China:

Note: The investment in Mainland China has no maximum limitation since TXC Corporation had acquire the approval by the Industrial Development Bureau of the Company’s establishment of operating head quarters in Taiwan.

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TABLE 7

TXC CORPORATION AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD AREA, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES

FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Significant direct or indirect transactions with the investees, prices and terms of payment, unrealized gain or loss:

Company Name	Related Party	Transaction Type			Transaction Details	Transaction Details		Accounts/Notes Receivable/Payable	Accounts/Notes Receivable/Payable	Unrealized Gain or Loss
			Amount	Percentage (%)	Price	Payment Term	Compared with Terms of Third Parties	Balance	%
TXC Corporation GPT	NGB NGB CKG NGB	Purchase Sale Purchase Sale	$ 1,851,735 248,431 550,062 351,184	34 (3) 10 (39)	Its trading price depends on its function within the Group ″ ″ ″	Similar with third parties ″ ″ ″	Its trading price depends on its function within the Group ″ ″ ″	$ (547,358) 82,926 (107,183) 88,999	(38) 3 (8) 44	$ 21,966 4,718 7,670 -

Endorsements guarantees or collateral directly or indirectly provided to the investees: None.
Financings directly or indirectly provided to the investees: None.
The maximum balance of funds, the ending balance, the interest rate range and the total amount of current interest: None.
Other transactions that significantly impacted current year’s profit or loss or financial position: None.
199 -

TABLE 8

TXC CORPORATION AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

For the year ended December 31, 2016

No.	Company Name	Counterparty	Natural of Relationship (Note 1)		Intercompany Transactions	Intercompany Transactions
				Accounts	Amount	Terms (Note 2)	Percentage of Consolidated Total Gross Sales or Total Assets (%)
0	TXC Corporation	TXC Technology, Inc. TXC Japan Corporation TXC (Ningbo) Corporation TXC (Chongqing) Corporation Growing profits Trading Ltd.	a a a a	Other expense - consulting expense Other expense - consulting expense Purchase Trade payables Sales Purchase Trade receivables Trade payables Purchase Trade payables Purchase Trade payables	$ 67,862 42,764 30,648 7,645 248,431 1,851,735 82,926 547,358 550,062 107,183 82,063 33,389	1 1 1 1 1 1 1 1 1 1 1 1	1 - - - 3 19 1 4 6 1 1 -
1	TXC (Ningbo) Corporation	Growing profits Trading Ltd. TXC (Chongqing) Corporation	c c	Purchase Trade payables Sales Purchase Trade payables	351,184 88,999 132,861 236,335 131,142	3 3 3 3 3	4 1 1 2 1
2	TXC (Chongqing) Corporation	Growing profits Trading Ltd.	c	Purchase	87,309	3	1

Note 1: a. Represent the transactions from parent company to subsidiary.
c. Represent the transactions between subsidiaries.

Note 2: In 2016, the selling price and purchasing price were not significantly different from those with third parties, except those for NGB, CKG, GPT, and TXC (HK) Limited which is depends on its function within the Group.

200 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders TXC Corporation

Opinion

We have audited the accompanying financial statements of TXC Corporation (the Company), which comprise the balance sheets as of December 31, 2016 and 2015, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with 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 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, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

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

Key Audit Matter

Inventory of the Company as of December 31, 2016 was NT$927,345 thousands, accounted for 7% of the total assets in the financial statements. The valuation of inventory is subjected to fluctuation of market demand and technology changing rapidly. It may result in the impairment of inventory. The management determines the inventory book value and the allowance for inventories at lower of cost or net realize value in accordance with IAS 2 “Inventory”. Since the value of inventory is subject to management’s judgement and significant in the financial statements, the inventory valuation is identified as a key audit matter.

Refer to Note 4 for a summary of the significant accounting policies and refer to Note 13 for the amount of the allowance for inventories.

201 -

Our key audit procedures performed in respects of the above area included the following:

Tested the net realized value of inventories on the balance sheet date. Sampled testing the price on the latest purchase order and sales order to verify whether the net realized value of inventories is reasonable.
Implemented computer audit in order to verify the accuracy and correctness of the net realized value by recalculation on the balance sheet date.
Verified the accuracy of the inventory aging report by testing the inventory’s aging details. Obtained the list of inferior goods and spoilage to understand the slow moving inventory and evaluate whether the impairment for inventories is appropriate.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with 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 financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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 the 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 financial statements.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
202 -
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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the 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 auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors’ 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.

Deloitte & Touche Taipei, Taiwan Republic of China

March 30, 2017

Notice to Readers

The accompanying financial statements are intended only to present the financial position, financial performance 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 audit such financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail. Also, as stated in Note X to the financial statements, the additional footnote disclosures that are not required under generally accepted accounting principles were not translated into English.

203 -

TXC CORPORATION

BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4 and 7) Available-for-sale financial assets - current (Notes 4 and 8) Held-to-maturity financial assets - current (Notes 4, 5 and 9) Notes receivable (Notes 4, 5 and 12) Trade receivables (Notes 4, 5 and 12) Trade receivables from related parties (Notes 4, 5, 12 and 29) Other receivables (Note 4) Other receivables from related parties (Notes 4 and 29) Inventories (Notes 4 and 13) Other financial assets - current (Note 11) Other current assets Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Notes 4 and 8) Held-to-maturity financial assets - non-current (Notes 4, 5 and 9) Financial assets measured at cost - non-current (Notes 4 and 10) Investments accounted for using equity method (Notes 4, 14 and 25) Property, plant and equipment (Notes 4 and 15) Investment properties (Notes 4 and 16) Other intangible assets (Note 4) Deferred tax assets (Notes 4, 5 and 23) Prepayment for equipment Refundable deposits (Note 4) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans (Note 17) Financial liabilities at fair value through profit or loss - current (Notes 4 and 7) Notes payable Trade payables Trade payables to related parties (Note 29) Other payables (Note 19) Other payables to related parties (Note 29) Current tax liabilities (Notes 4 and 23) Current portion of long-term borrowings and bonds payable (Notes 17 and 18) Other current liabilities (Note 19) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Note 17) Deferred tax liabilities (Notes 4 and 23) Net defined benefit liabilities - non-current (Notes 4 and 20) Guarantee deposits received (Notes 4, 19 and 26) Total non-current liabilities Total liabilities EQUITY (Note 21) Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unrealized gain or loss on available-for-sale financial assets Total other equity Total equity TOTAL		2016 Amount % $ 936,594 7 113,635 1 62,853 - - - 2,358 - 2,422,041 17 95,382 1 31,577 - 1,017 - 927,345 7 - - 57,954 - 4,650,756 33 1,215,050 9 46,532 - 85,520 1 5,566,535 40 2,055,749 15 163,757 1 2,638 - 25,056 - 90,383 1 2,739 - 9,253,959 67 $ 13,904,715 100 $ 20,280 - 13,445 - 756 - 605,175 4 697,253 5 580,206 4 263 - 56,378 1 562,500 4 25,391 - 2,561,647 18 1,209,375 9 331,423 2 56,311 1 26,307 - 1,623,416 12 4,185,063 30 3,097,570 22 1,665,224 12 1,151,202 8 222,793 2 2,789,106 20 4,163,101 30 (161,346) (1) 955,103 7 793,757 6 9,719,652 70 $ 13,904,715 100		2015
				Amount % $ 1,309,639 9 - - - - 47,840 1 2,919 - 2,335,359 16 97,431 1 37,655 - 1,122 - 912,022 6 32,825 - 35,381 - 4,812,193 33 1,870,976 13 50,280 - 115,520 1 5,648,430 38 1,968,448 13 186,156 1 3,832 - 19,795 - 81,647 1 2,767 - 9,947,851 67 $ 14,760,044 100 $ 51,940 1 909 - - - 477,056 3 631,533 4 414,006 3 1,325 - 50,994 - 1,005,191 7 16,549 - 2,649,503 18 1,165,625 8 129,110 1 46,607 - 29,953 - 1,371,295 9 4,020,798 27 3,097,570 21 1,662,181 11 1,057,381 7 222,793 2 2,659,935 18 3,940,109 27 249,121 2 1,790,265 12 2,039,386 14 10,739,246 73 $ 14,760,044 100

The accompanying notes are an integral part of the financial statements.

204 -

TXC CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 2 and 29) Sales Less: Sales returns Less: Sales allowances Net operating revenue COST OF GOODS SOLD (Notes 22 and 29) GROSS PROFIT UNREALIZED INTER-COMPANY GAIN REALIZED GAIN ON INTER AFFILIATE ACCOUNTS REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 4 and 29) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Notes 4 and 22) Other gains and losses (Note 22) Finance costs (Notes 4 and 22) Share of profit of associates and joint ventures Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 23) NET PROFIT FOR THE YEAR		2016 Amount % $ 7,984,017 101 21,886 - 74,362 1 7,887,769 100 6,251,634 79 1,636,135 21 (4,718) - 1,598 - 1,633,015 21 316,622 4 177,374 2 371,269 5 865,265 11 767,750 10 56,862 - (59,102) (1) (17,333) - 383,716 5 364,143 4 1,131,893 14 115,729 1 1,016,164 13		2015
				Amount % $ 7,973,106 101 18,691 - 55,720 1 7,898,695 100 6,531,490 83 1,367,205 17 (1,598) - 2,110 - 1,367,717 17 318,930 4 171,892 2 317,371 4 808,193 10 559,524 7 34,048 - 83,568 1 (31,587) - 389,604 5 475,633 6 1,035,157 13 96,954 1 938,203 12 (Continued)

205 -

TXC CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Share of the other comprehensive income of associates accounted for using the equity method Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Share of the other comprehensive income of associates accounted for using the equity method Unrealized (loss) gain on available-for-sale financial assets Other comprehensive (loss) income for the year, net of income tax TOTAL COMPREHENSIVE (LOSS) INCOME FOR THE YEAR EARNINGS PER SHARE (Note 24) From continuing and discontinued operations Basic Diluted		2016 Amount % $ (18,680) - (99) - (18,779) - (407,529) (5) (2,892) - (835,208) (11) (1,245,629) (16) (1,264,408) (16) $ (248,244) (3) $ 3.28 $ 3.23		2015
				Amount % $ (15,645) - - - (15,645) - (93,862) (1) 1,060 - 1,789,392 22 1,696,590 21 1,680,945 21 $ 2,619,148 33 $ 3.03 $ 2.86




		$		$

The accompanying notes are an integral part of the financial statements.

(Concluded)

206 -

TXC CORPORATION

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

Shares (In Thousands) Share Capital Capital Surplus BALANCE AT JANUARY 1, 2015 309,757 $ 3,097,570 $ 1,662,181 Appropriation of 2014 earnings Legal reserve - - - Cash dividends distributed by the Company - - - Net profit for the year ended December 31, 2015 - - - Other comprehensive income (loss) for the year ended December 31, 2015, net of income tax - - - Total comprehensive income (loss) for the year ended December 31, 2015 - - - Reissuance of treasury shares - - - BALANCE AT DECEMBER 31, 2015 309,757 3,097,570 1,662,181 Appropriation of 2015 earnings Legal reserve - - - Cash dividends distributed by the Company - - - Change in capital surplus from investments in associates and joint ventures accounted for by using equity method - - 2,712 Net profit for the for the year ended December 31, 2016 - - - Other comprehensive loss for the for the year ended December 31, 2016, net of income tax - - - Total comprehensive income (loss) for the year ended December 31, 2016 - - - Actual disposal or acquisition of interest in subsidiaries - - 331 BALANCE AT DECEMBER 31, 2016 309,757 $ 3,097,570 $ 1,665,224	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $ 957,864 $ 222,793 $ 2,611,372 99,517 - (99,517) - - (774,393) - - 938,203 - - (15,645) - - 922,558 - - (85) 1,057,381 222,793 2,659,935 93,821 - (93,821) - - (774,393) - - - - - 1,016,164 - - (18,779) - - 997,385 - - - $ 1,151,202 $ 222,793 $ 2,789,106	Others Exchange Differences on Translating Unrealized Gain (Loss) on Available-for- Foreign Operations sale Financial Assets $ 341,996 $ 800 - - - - - - (92,875) 1,789,465 (92,875) 1,789,465 - - 249,121 1,790,265 - - - - - - - - (410,467) (835,162) (410,467) (835,162) - - $ (161,346) $ 955,103	Total Equity $ 8,894,576 - (774,393) 938,203 1,680,945 2,619,148 (85) 10,739,246 - (774,393) 2,712 1,016,164 (1,264,408) (248,244) 331 $ 9,719,652

The accompanying notes are an integral part of the financial statements.

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TXC CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Depreciation expenses of investment properties Amortization expenses Impairment loss recognized on accounts receivables Net loss on fair value change of financial assets and liabilities designated as at fair value through profit or loss Finance costs Interest income Dividend income Share of profit of associates and joint ventures Gain on disposal of property, plant and equipment Gain on disposal of investment Gain on disposal of investments accounted for using equity method Impairment loss recognized on financial assets Write-down of inventories Unrealized gain on the transactions with subsidiaries, associates and joint ventures Realized gain on the transactions with subsidiaries, associates and joint ventures Changes in operating assets and liabilities: Notes receivable Trade receivables Trade receivables from related parties Other receivables Other receivables from related parties Inventories Other current assets Financial liabilities held or trading Notes payable Trade payables Trade payables to related parties Other payables Other payables to related parties Other current liabilities Accrued pension costs Cash generated from operations Interest paid Income taxes paid Net cash generated by operating activities	2016 $ 1,131,893 405,643 22,399 2,200 336 11,487 17,333 (5,849) (4,132) (383,716) (819) (13,010) (1,350) 47,152 23,693 4,718 (1,598) 564 (86,973) 2,001 3,059 105 (39,016) (22,319) (909) 756 128,119 65,720 166,241 (1,062) 8,842 (12,802) 1,468,706 (16,315) (105,209) 1,347,182	2015 $ 1,035,157 490,799 7,595 2,354 6,818 909 31,587 (13,222) (1,118) (389,604) - (3,286) (1,628) 10,210 9,192 1,598 (2,110) 13,523 26,937 27,886 (15,256) 32,009 85,775 (17,479) (12,488) - (21,014) (76,797) (28,524) 203 3,203 (12,133) 1,191,096 (14,732) (109,296) 1,067,068 (Continued)

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TXC CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sale of held -to-maturity financial assets Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets Purchase of held-to-maturity financial assets Proceeds from sale of held-to-maturity financial assets Purchase of financial assets measured at cost Proceeds from sale of financial assets measured at cost Acquisition of investment accounted for using equity method Net cash inflow on disposal of associates Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Payments for intangible assets Decrease in other financial assets Increase in other non-current assets Increase in prepayment for equipment Interest received Dividend received from associates Cash outflow due to corporate division Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term borrowings Repayments of bond payables Proceeds from long-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Dividends paid to owners of the Company Payments for transaction costs attributable to buy-back of ordinary shares Proceeds from reissue of treasury shares Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	2016 $ (115,449) (63,545) - - 50,300 - 13,010 (17,081) 5,185 (493,949) 1,824 - 28 (1,260) 32,825 - (8,736) 8,868 72,392 - (515,588) (31,660) (800,000) 950,000 (550,000) (3,646) (774,393) - - (1,209,699) 5,060	2015 $ - (130,819) 154,104 (50,280) - (50,000) - (100) 6,101 (152,859) 372 (1,706) - - 20,419 (3,764) (34,089) 11,508 6,618 (20,000) (244,495) (99,837) - 1,150,000 (928,125) - (774,393) (806) 721 (652,440) - (Continued)

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TXC CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR The accompanying notes are an integral part of the financial statements.	2016 $ (373,045) 1,309,639 $ 936,594	2015 $ 170,133 1,139,506 $ 1,309,639 (Concluded)

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NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TXC CORPORATION

1. ORGANIZATION AND OPERATIONS

TXC Corporation (TXC) was incorporated on December 28, 1983 under the Company Law and other related regulations of the Republic of China (ROC).

TXC specializes in producing high quality Quartz Unite Crystal, Automotive Crystal, Crystal Oscillator (CXO), and Timing Module (TM) as well as develops a variety of sensors by core technology to satisfy the market demand. Sensors are applied to various applications including mobile communication, wearable device, Internet of Things and vehicle electronics, etc. Besides, in order to expand the group’s future development, TXC introduced extension process related to sapphire substrate and accesses the field of LED sapphire.

On August 26, 2002, TXC’s shares began to be traded on the Taiwan Stock Exchange.

The functional currency of the Company is New Taiwan dollars. The financial statements are presented in New Taiwan dollars.

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The financial statements were reported to the Board of Directors and issued on March 9, 2017.

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

a. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from 2017

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, the Company should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the IASB and endorsed by the FSC for application starting from 2017.

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Effective Date
Announced by IASB (Note 1)

Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application in 2017 of the above IFRSs and related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Company’s accounting policies, except for the following:

1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Company is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment will be applied retrospectively. The aforementioned amendments will be retroactive in 2017.

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2) IFRIC 21 “Levies”

IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government. It addresses the accounting for a liability whose timing and amount is certain and the accounting for a provision whose timing or amount is not certain. The Company accrues related liability when the transaction or activity that triggers the payment of the levy occurs. Therefore, if the obligating event occurs over a period of time (such as generation of revenue over a period of time), the liability is recognized progressively. If an obligation to pay a levy is triggered upon reaching a minimum threshold (such as a minimum amount of revenue or sales generated), the liability is recognized when that minimum threshold is reached.

3) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards, including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments”, were amended in this annual improvement.

The amended IFRS 2 changes the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Company or another entity in the same group or the market price of the equity instruments of the Company or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Company as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Company, but also of other entities outside the Company. The share-based payment arrangements with market conditions, non-market conditions or non-vesting conditions will be accounted for differently, and the aforementioned amendment will be applied prospectively to those share-based payments granted on or after January 1, 2017.

The amended IFRS 8 requires the Company to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker. The judgements made in applying aggregation criteria should be disclosed retrospectively upon initial application of the amendment in 2017.

IAS 24 was amended to clarify that a management entity providing key management personnel services to the Company is a related party of the Company. Consequently, the Company is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required. When the amendment becomes effective in 2017, Company X which provides key management personnel services to the Company will be treated retrospectively as a related party and disclosed accordingly.

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4) Annual Improvements to IFRSs: 2011-2013 Cycle

Several standards, including IFRS 3, IFRS 13 and IAS 40 “Investment Property”, were amended in this annual improvement.

5) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Company are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Company has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Company’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

The disclosures of related party transactions and impairment of goodwill will be enhanced when the above amendments are retrospectively applied in 2017.

Except for the above impacts, as of the date the financial statements were authorized for issue, the Company continues assessing other possible impacts that application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Company’s financial position and financial performance, and will disclose these other impacts when the assessment is completed.

b. New IFRSs in issue but not yet endorsed by the FSC

The Company has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

The FSC announced that IFRS 9 and IFRS 15 will take effect starting January 1, 2018. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs.

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Effective Date
Announced by IASB (Note 1)

Note 2
January 1, 2018
January 1, 2018
January 1, 2018
To be determined by IASB
January 1, 2018
January 1, 2018
January 1, 2019
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.
1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

For the Company’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.
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Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Company may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

Impairment of financial assets

For purchased or originated credit-impaired financial assets, the Company takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

Transition

2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

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3) IFRS 15 “Revenue from Contracts with Customers” and related amendment

When applying IFRS 15, an entity shall recognize revenue by applying the following steps:

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when the entity satisfies a performance obligation.

In identifying performance obligations, IFRS 15 and related amendment require that a good or service is distinct if it is capable of being distinct (for example, the Company regularly sells it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each of those goods or services individually rather than to transfer combined items).

Under IFRS 15, the Company will allocate the transaction price to each performance obligation identified in the contract on a relative stand-alone selling price basis. Under current standard, the Company applies residual value method to allocate the amount of revenue to be recognized.

4) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Under IFRS 16, if the Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Company should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Company as lessor.

When IFRS 16 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

5) Amendment to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Company expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

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In addition, in determining whether to recognize a deferred tax asset, the Company should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses as deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Company’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Company will achieve the higher amount, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

Basis of Preparation

The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c. Level 3 inputs are unobservable inputs for the asset or liability.

When preparing its parent company only financial statements, the Company used equity method to account for its investment in subsidiaries, associates and jointly controlled entities. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owner of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatment between parent company only basis and consolidated basis were made to investments accounted for by equity method, share of profit or loss of subsidiaries, associates and joint ventures, share of other comprehensive income of subsidiaries, associates and joint ventures and related equity items, as appropriate, in the parent company only financial statements.

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Classification of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;
b. Assets expected to be realized within twelve months after the reporting period; and
c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

a. Liabilities held primarily for the purpose of trading;
b. Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue; and
c. Liabilities for which the Company does not have an unconditional right to defer settlement 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.

Assets and liabilities that are not classified as current are classified as non-current.

Foreign Currencies

In preparing the Company’s financial statements, transactions in currencies other than the Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purposes of presenting financial statements, the assets and liabilities of the Group’s foreign operations (including of the subsidiaries, associates, joint ventures or branches operations in other countries or currencies used different with the Company) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income.

On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

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In relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests of the subsidiary and are not recognized in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Company losing significant influence or joint control), the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at specific identification of cost on the balance sheet date.

Investments in Subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

Subsidiary is an entity that is controlled by the Company.

Under the equity method, investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. The Company also recognizes the changes in the Company’s share of equity of subsidiaries.

Changes in the Company’s ownership interest in a subsidiary that do not result in the Company losing control of the subsidiary are equity transactions. The Company recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Company’s share of losses of a subsidiary exceeds its interest in that subsidiary (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the entire financial statements of the invested company. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

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Profits or losses resulting from downstream transactions are eliminated in full in the parent company only financial statements. Profits and losses resulting from upstream transactions and transactions between subsidiaries are recognized in the parent company only financial statements only to the extent of interests in the subsidiaries that are not related to the Company.

Investments in Associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The Company uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of equity of associates.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Company subscribes for additional new shares of the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in the Company’s share of equity of associates. If the Company’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

When the Company’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. 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 Company continues to apply the equity method and does not remeasure the retained interest.

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When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’s financial statements only to the extent of interests in the associate that are not related to the Company.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss.

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. Assets are depreciated over the shorter of the lease term and their useful lives using the straight-line method.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period.

Intangible Assets

a. Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis which is in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before the end of its economic life. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

b. Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

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Impairment of Tangible and Intangible Assets Other Than Goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

Financial Instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a settlement date basis.

1) Measurement category

a) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

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A financial asset may be designated as at fair value through profit or loss upon initial recognition if:

i. Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
ii. The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
iii. The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.

Fair value is determined in the manner described in Note 7.

b) Held-to-maturity investments

Commercial paper, which is above specific credit ratings and the Company has positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

c) Available-for-sale financial assets

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

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Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

d) Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalent, debt investments with no active market, and other receivables are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalent includes time deposits and investments with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables and other receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables, and other situations.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

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The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables and other receivables that are written off against the allowance account.

3) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

b. Equity instruments

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

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c. Financial liabilities

1) Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 28.

Financial liabilities at fair value through profit or loss, which are obligations to deliver unquoted equity instruments borrowed by a short seller whose fair value cannot be reliably measured, and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial liabilities carried at cost. If, in a subsequent period, the fair value of the financial liabilities can be reliably measured, the financial liabilities are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in profit or loss.

2) Derecognition of financial liabilities

d. Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

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e. Derivative financial instruments

The Company enters into derivative financial instruments, including foreign exchange forward contracts, to manage its exposure to interest rate and foreign exchange rate risks, including.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

a. Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

1) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3) The amount of revenue can be measured reliably;
4) It is probable that the economic benefits associated with the transaction will flow to the Company; and
5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Income from properties developed for sale is recognized when construction is complete, rewards of ownership of the properties are transferred to buyers, and collectability of the related receivables is reasonably assured. Deposits received from sales of properties and installment payments are carried in the balance sheets under current liabilities.

b. Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

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Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Leasing

a. The Company as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

b. The Company as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

Borrowing Costs

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized as a deduction from the carrying amount of the relevant asset and recognized in profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which they become receivable.

Employee Benefits

a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

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b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost), past service cost and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets 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.

c. Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination and the acquisition of a subsidiary, the tax effect is included in the accounting for the business combination and investment in subsidiary.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

Income Taxes

As of December 31, 2016 and 2015, the carrying amount of deferred tax assets in relation to unused tax losses was $25,056 thousand and $19,795 thousand, respectively. The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.

Estimated Impairment of Trade Receivables

When there is objective evidence of impairment loss, the Company takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Fair Value Measurements and Valuation Processes

If some of the Company's assets and liabilities measured at fair value have no quoted prices in active markets, the board of directors of the Company has set up a valuation committee, to determine whether to engage third party qualified valuers and to determine the appropriate valuation techniques for fair value measurements.

231 -

Where Level 1 inputs are not available, the Group or engaged valuers would determine appropriate inputs by referring to (the analyses of the financial position and the operation results of investees, recent transaction prices, prices of same equity instruments not quoted in active markets, quoted prices of similar instruments in active markets, valuation multiples of comparable entities, market prices or rates and specific features of derivatives. If the actual changes of inputs in the future differ from expectation, fair value might vary accordingly.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities is disclosed in Note 28.

Write-down of Inventory

Recognition and Measurement of Defined Benefit Plans

Net defined benefit liabilities (assets) and the resulting defined benefit costs under defined benefit pension plans are calculated using the projected unit credit method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and future salary increase, etc. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

Significant Influence Over Associates

Note 14 describes that an associate of the Company although the Company only owns less than 20% of the voting power in this company. The Company has significant influence over this company by virtue of the right to appoint the directors to the board of directors of this company.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents (investments with original maturities less than 3 months) Time deposits Repurchase agreements collateralized by bonds		December 31	December 31
		2016 $ 374 638,769 77,451 220,000 $ 936,594	2015 $ 382 877,753 231,504 200,000 $ 1,309,639

The market rate intervals of cash in bank and repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

Bank balance Repurchase agreements collateralized by bonds	December 31
	2016 2015 0.6%-8.44% 0.48%-3.83% 0.32%-0.43% 0.48%-0.54%

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7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Financial assets designated as at FVTPL Structured deposits (a) Financial liabilities at FVTPL-current Financial liabilities held for trading Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts (b)		December 31	December 31
		2016 $ 113,635 $ 13,445	2015 $ - $ 909

a. The Company entered into short-term structured time deposit contracts with a bank from 2016.1.1 to 2016.12.31. The structured time deposit contract includes an embedded derivative instrument which is not closely related to the host contract. The Company designated the entire contract as financial asset at FVTPL on initial recognition.
b. At the end of the reporting period, outstanding forward exchange contracts not under hedge accounting were as follows:

				Contract Amount
		Currency	Maturity Date	(In Thousands)
December	31, 2016
Sell		USD/NTD	2017.01.03-2017.03.01	USD13,000/NTD414,850
Sell		USD/JPY	2017.01.04-2017.02.15	USD4,500/JPY501,965
Knock-out	forward	USD/NTD	2017.01.17-2017.01.23	USD2,000/NTD64,120
Knock-out	forward	USD/JPY	2017.01.10-2017.02.22	USD1,500/JPY167,650
December	31, 2015
Sell		USD/NTD	2016.01.25-2016.03.01	USD6,000/NTD196,728
Sell		USD/JPY	2016.01.21-2016.01.22	USD1,000/JPY122,440
Knock-out	forward	USD/JPY	2016.01.29-2016.03.04	USD4,500/JPY557,000
Knock-out	forward	USD/NTD	2016.02.22	USD1,000/NTD33,030

The Company entered into foreign exchange forward contracts during the years ended December 31, 2016 and 2015 to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities. Those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting.

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8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Current Domestic investments Mutual funds Non-current Domestic investments Listed shares (a) Foreign investments Listed shares (b)		December 31	December 31
		2016 $ 62,853 $ 17,148 1,197,902 $ 1,215,050	2015 $ - $ 34,300 1,836,676 $ 1,870,976

a. The market value of available-for-sale financial assets has been lower than the book value. As a result, the Company evaluated and recognized impairment loss of $17,152 thousand and $10,210 thousand during 2016 and 2015, respectively.
b. The shares of Guangdong Failong Crystal Technology Co., Ltd., which is held by the Company was classified as financial assets measured at cost. Since the shares of this company have been listed on ShenZhen Stock Exchange on May 15, 2015, and already have the public quoted market price in active market, the shares of Guangdong Failong Crystal Technology Co., Ltd., have been reclassified to available-for-sale financial assets (see Note 28).

9. HELD-TO-MATURITY FINANCIAL ASSETS

Current Domestic investments Corporate bonds - Chinatrust (a) Non-current Domestic investments Corporate bonds - Cayman Ton Yi (b)		December	31
		2016 $ - $ 46,532	2015 $ 47,840 $ 50,280

a. In 2013, the Company bought the denomination of CNY$10,000 thousand and 3-year corporate bonds issued by Chinatrust with a coupon rate and an effective interest rate of 2.9% both. The corporate bonds have expired in March 2016.
b. In 2015, the Company bought the denomination of CNY$10,000 thousand corporate bonds issued by Cayman Ton Yi Industrial Holdings Limited with a coupon rate of 4.2% and an effective interest rate of 4.2% both.
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10. FINANCIAL ASSETS MEASURED AT COST

Non-current Domestic unlisted ordinary shares Classified according to financial asset measurement categories Available-for-sale financial assets		December 31	December 31
		2016 $ 85,520 $ 85,520	2015 $ 115,520 $ 115,520

The Company has assessed the recoverable amount of the financial assets measured at cost and recognized impairment loss of $30,000 thousand during the period of year ended December 31, 2016.

The shares of Guangdong Failong Crystal Technology Co., Ltd., has been reclassified to available-for-sale financial assets (see Notes 8 and 28).

Management believed that the above unlisted equity investments held by the Company, whose fair value cannot be reliably measured, because the range of reasonable fair value estimates was so significant. Therefore, they were measured at cost less impairment at the end of reporting period.

11. OTHER FINANCIAL ASSETS

Current Time deposits with original maturity more than 3 months		December	31
		2016 $ -	2015 $ 32,825

The market interest rates of the time deposits with original maturity more than 3 months were 0.61% per annum as of December 31, 2015.

12. NOTES, ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

Notes receivable Notes receivable - operating Less: Allowance for impairment loss		December 31	December 31
		2016 $ 2,370 (12) $ 2,358	2015 $ 2,934 (15) $ 2,919 (Continued)

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Trade receivables Trade receivables Trade receivables - related parties Less: Allowance for impairment loss Less: Allowance for impairment loss - related parties Other receivables Income tax refund receivable Others		December 31	December 31
		2016 $ 2,434,746 95,460 2,530,206 (12,705) (78) $ 2,517,423 $ 28,910 2,667 $ 31,577	2015 $ 2,357,059 97,461 2,454,520 (21,700) (30) $ 2,432,790 $ 16,246 21,409 $ 37,655 (Concluded)

The average credit period of sales of goods was 2 to 4 months. No interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Company considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Historical experience shows that the Company recognized an allowance in accordance with the proportion of trade receivables of each customers, not the aging schedule.

The aging of receivables was as follows:

31- 60 days 61-90 days 91-365 days		December	31
		2016 $ - - - $ -	2015 $ 2,297 19,140 51,571 $ 73,008

The above aging schedule was based on the past due date from end of credit term.

The Movements of the Allowance for Doubtful Trade Receivables were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2015 $ - $ 14,809 Add: Impairment losses recognized on receivable 7,493 - Less: Impairment losses reversed - (572) Less: Amounts written off during the year as uncollectible - - Balance at December 31, 2015 $ 7,493 $ 14,237	Total $ 14,809 7,493 (572) - $ 21,730 (Continued)

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Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2016
$ 7,493
$ 14,237

Add: Impairment losses recognized on
receivable
-
339
Less: Impairment losses reversed
-
-
Less: Amounts written off during the year as
uncollectible

(7,493)

(1,793)

Balance at December 31, 2016
$ -
$ 12,783

The movements of the allowance for doubtful notes receivable:
Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2015
$ -
$ 118

Less: Impairment losses reversed

-

(103)

Balance at December 31, 2015
$ -
$ 15

Balance at January 1, 2016
$ -
$ 15

Less: Impairment losses reversed

-

(3)

Balance at December 31, 2016
$ -
$ 12

Total
$ 21,730
339
-

(9,286)
$ 12,783
(Concluded)
Total
$ 118

(103)
$ 15
$ 15

(3)
$ 12

13. INVENTORIES

Finished goods Work in process Raw materials Supplies and spare parts Merchandise Inventory in transit		December 31	December 31
		2016 $ 163,672 259,452 188,611 53,058 204,666 57,886 $ 927,345	2015 $ 178,651 211,802 85,226 24,380 408,085 3,878 $ 912,022

As of December 31, 2016 and 2015, the allowance for inventories were $37,766 thousand and $36,664 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2016 and 2015 was $6,251,634 thousand and $6,531,490 thousand, respectively. The costs of goods sold inventory write - downs of $23,693 thousand and $9,192 thousand, respectively.

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14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in subsidiaries Investments in associates		December 31	December 31
		2016 $ 5,501,307 65,228 $ 5,566,535	2015 $ 5,583,398 65,032 $ 5,648,430

Investments in Subsidiaries

Unlisted companies Taiwan Crystal Technology International Ltd. TXC Technology Inc. TXC Japan Corporation Taiwan Crystal Technology (HK) Limited TXC Optec Corporation		December 31	December 31
		2016 $ 4,669,597 14,729 18,756 369,503 428,722 $ 5,501,307	2015 $ 4,753,972 17,916 15,783 362,329 433,398 $ 5,583,398

The propotion of the Company’s ownership was as follows:

Taiwan Crystal Technology International Ltd. TXC Technology Inc. TXC Japan Corporation Taiwan Crystal Technology (HK) Limited TXC Optec Corporation	December 31
	2016 2015 100% 100% 100% 100% 100% 100% 100% 100% 88.9% 100%

TXC Optec Corporation was established on April 22, 2015 in Taiwan. The contributed capital was $100 thousand in 10 thousand shares. According to decisions made in 2015 annual general meeting, in order to ensure professional services, which enhance competency and performance, TXC Corporation will divide the assets and liabilities of photovoltaics industry to TXC Optec Corporation following “R.O.C. Business Mergers And Acquisitions Act” and related acts. TXC Optec Corporation will issue 21,490 thousand shares in exchange of the assets and liabilities mentioned above. The date fixed for the spin-off fell on September 1, 2015. The divided capitalized value is $429,900 thousand. The contributed capital for TXC Optec Corporation increase to $430,000 thousand (21,500 thousand shares) on the date fixed for the spin-off of December 31, 2015 (Note 25).

Investments in Associates

Associate that is not individually material		December	31
		2016 $ 65,228	2015 $ 65,032

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The Company’s share of: Profit from continuing operations Other comprehensive income (loss) Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 6,605 (3,111) $ 3,494	2015 $ 9,815 1,060 $ 10,875

Refer to Table 6 “name, locations, and related information of investees on which the Company exercises significant influence” for the nature of activities, principal place of business and country of incorporation of the associates.

Since part of directors of TXC are the same as Tai-Shing, the TXC has power to govern the financial and operating policies of Tai-Shing. As a result, Tai-Shing is accounted for using the equity method.

15. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2015 Additions Disposals Enterprise Segmentation Transfer to investment property Balance at December 31, 2015 Accumulated depreciation and impairment Balance at January 1, 2015 Disposals Depreciation expense Enterprise Segmentation Transfer to investment property Balance at December 31, 2015 Carrying amount at December 31, 2015 Cost Balance at January 1, 2016 Additions Disposals Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Disposals Depreciation expense Balance at December 31, 2016 Carrying amount at December 31, 2016	Freehold Land Land Improvements $ 598,145 $ 151 - 920 - - - - - - $ 598,145 $ 1,071 $ - $ 151 - - - 22 - - - - $ - $ 173 $ 598,145 $ 898 $ 598,145 $ 1,071 - - - (151) $ 598,145 $ 920 $ - $ 173 - (151 ) - 131 $ - $ 153 $ 598,145 $ 767	Buildings $ 1,488,428 13,892 (1,388 ) - (258,189) $ 1,242,743 $ 449,537 (1,388 ) 80,960 - (70,910) $ 458,199 $ 784,544 $ 1,242,743 38,295 (41,414) $ 1,239,624 $ 458,199 (41,414 ) 66,985 $ 483,770 $ 755,854	Machinery and Equipment $ 2,605,845 132,875 (4,635 ) (464,870 ) - $ 2,269,215 $ 1,517,657 (4,263 ) 401,099 (220,188 ) - $ 1,694,305 $ 574,910 $ 2,269,215 441,634 (18,092) $ 2,692,757 $ 1,694,305 (17,087 ) 331,548 $ 2,008,766 $ 683,991	Transport- ation Equipment $ - 789 - - - $ 789 $ - - - - - $ - $ 789 $ 789 1,440 - $ 2,229 $ - - 350 $ 350 $ 1,879	Office Equipment $ 100,195 4,383 (25,246 ) (1,904 ) - $ 77,428 $ 86,238 (25,246 ) 8,718 (1,444 ) - $ 68,266 $ 9,162 $ 77,428 12,580 (656) $ 89,352 $ 68,266 (656 ) 6,629 $ 74,239 $ 15,113	Total $ 4,792,764 152,859 (31,269 ) (466,774 ) (258,189) $ 4,189,391 $ 2,053,583 (30,897 ) 490,799 (221,632 ) (70,910) $ 2,220,943 $ 1,968,448 $ 4,189,391 493,949 (60,313) $ 4,623,027 $ 2,220,943 (59,308 ) 405,643 $ 2,567,278 $ 2,055,749

No impairment assessment was performed for the year ended December 31, 2015 as there was no indication of impairment.

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The above items of property, plant and equipment were depreciated on a straight-line basis at follows:

Land improvements 7 years Buildings Industrial building 35-51 years Electrical power systems 3-11 years Engineering systems 3-51 years Equipment Major production equipments 1-5 years Temperature control systems 4-7 years Transportation equipments 4-7 years Transportation equipments 5 years Office equipment 2-6 years

The TXC divided parts of machinery and equipment to TXC Optec Corporation. Refer to Note 25 for segmentation information.

Property, plant and equipment pledged as collateral for bank borrowings were set out on Note 30.

16. INVESTMENT PROPERTIES

	Completed	Completed
	Investment
	Property
Cost
Balance at January 1, 2015	$	10,160
Transferred from property, plant and equipment		258,189
Disposals		(1,722)
Balance at December 31, 2015	$	266,627
Accumulated depreciation and impairment
Balance at January 1, 2015	$	(3,688)
Transferred from property, plant and equipment		(70,910)
Disposals		1,722
Depreciation expense		(7,595)
Balance at December 31, 2015	$	(80,471)
Carrying amount at December 31, 2015	$	186,156
Cost
Balance at January 1, 2016	$	266,627
Transferred from property, plant and equipment		-
Disposals		-
Balance at December 31, 2016	$	266,627
		(Continued)

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	Completed
	Investment
	Property
Accumulated depreciation and impairment
Balance at January 1, 2016	$ (80,471)
Depreciation expense	(22,399)
Balance at December 31, 2016	$ (102,870)
Carrying amount at December 31, 2016	$ 163,757
	(Concluded)

The Company leased parts of office buildings to TXC Optec Corporation, therefore reclassified these buildings from property, plant and equipment to investment properties.

The investment properties were depreciated using the straight-line method over their estimated useful lives of 5-61 years.

The fair value of the Company’s investment properties as of December 31, 2016 and 2015 was $382,728 thousand and $295,479 thousand, respectively. The fair value valuation had not been performed by independent qualified professional appraisers. The management of the Company had used the valuation model that market participants would use in determining the fair value. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

All of the Company’s investment property was held under freehold interests. The investment properties pledged as collateral for bank borrowing were set out in Note 30.

17. BORROWINGS

a. Short-term borrowings

Unsecured borrowings Letters of credit		December	31
		2016 $ 20,280	2015 $ 51,940

The interest rate on the letters of credit was 0.85%-1.89% and 0.9% annum as of December 31, 2016 and 2015, respectively.

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b. Long-term borrowings

Secured borrowings (Note 30) Bank loans (1) Unsecured borrowings Line of credit borrowings (2) Less: Current portions Long-term borrowings		December 31	December 31
		2016 $ 421,875 1,350,000 (562,500) $ 1,209,375	2015 $ 921,875 450,000 (206,250) $ 1,165,625

1) As of December 31, 2016 and 2015, the weighted average effective interest rate on the bank loan was both 1.15%-1.204% per annum. See Note 30 for collaterals on long-term loans.
2) The interest rate on the line of credit was 0.86%-1.11% and 1%-1.11% annum as of December 31, 2016 and 2015, respectively.

18. BONDS PAYABLE

Unsecured domestic convertible bonds Less: Current portions		December 31	December 31
		2016 $ - - $ -	2015 $ 798,941 (798,941) $ -

Unsecured domestic convertible bonds

As of January 25, 2013, the Company issued forth unsecured domestic convertible bonds with an aggregate principle amount of $800,000 thousand to pay off borrowings and purchase equipments.

Other details of the bond issuance are summarized as follows:

a. Issue date: January 25, 2013.
b. Total issue amount: $800,000 thousand.
c. Issue price: 100%.
d. Par value: $100 thousand.
e. Coupon rate: 0%.
f. Repayment term: The bonds are repayable on January 25, 2016 upon the maturity of the bonds.
g. Conversion right: Holder can request for conversion of the bonds to the Company’s ordinary shares.
h. Conversion period: From February 26, 2013 to January 15, 2016.
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i. Conversion price: The original conversion price per share is $40.9. The conversion price is subject to adjustment based on a certain formula if there are changes in outstanding shares or execution of conversion below market price.
j. Redemption of bonds
1) Redemption on the maturity date: On the maturity date, the Company will redeem the bonds of the principal amount.
2) Early redemption before the maturity date:
- a) During the period of time between one month after issuance and the 40th day before maturity, if the closing price of the Company’s shares reaches 30% of the conversion price for 30 consecutive trading days, the Company may redeem the remaining bonds at a price of their book value.
- b) During the period of time between one month after issuance and the 40th day before maturity, when over 90% of the bonds had been redeemed, bought back or converted, the Company may redeem the remaining bonds at a price of their book value.
k. Converted bond: As of December 31, 2016, all bonds had been redeemed.

19. OTHER LIABILITIES

Current Other payables Payables for bonus to employees and directors Payables for commission Payables for salaries Payables for bonus Payables for annual leave Payable for purchase of equipment Others Other liabilities Receipts under custody Others Non-current Guarantee deposits received		December 31	December 31
		2016 $ 134,447 49,502 37,400 130,226 17,779 122,217 88,635 $ 580,206 $ 3,286 22,105 $ 25,391 $ 26,307	2015 $ 121,443 64,372 32,286 113,790 16,283 - 65,832 $ 414,006 $ 4,273 12,276 $ 16,549 $ 29,953

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20. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, the Company makes monthly contributions to employees’ individual pension accounts equal at 6% of monthly salaries and wages.

The Company has set up appointed manager’s pension fund and contributes monthly an amount of not less than 8% of the appointed manager’s monthly salaries and wages to the Bank of Taiwan.

b. Defined benefit plans

The defined benefit plan adopted by the Company in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company contributes amounts equal to 4% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability		December 31	December 31
		2016 $ 141,977 (85,666) $ 56,311	2015 $ 120,520 (73,913) $ 46,607

Movements in net defined benefit liability (asset) were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liability (Asset)
Balance at January 1, 2015	$ 106,029	$ (66,138)	$	39,891
Service cost
Current service cost	1,875	-		1,875
Past service cost and loss (gain) on
settlements	790	-		790
Net interest expense (income)	1,722	(1,200)		522
Recognized in profit or loss	4,387	(1,200)		3,187
				(Continued)

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	Present Value	Present Value
	of the Defined				Net Defined
		Benefit	Fair Value of			Benefit
	Obligation		the Plan Assets		Liability (Asset)
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	$	-	$	(548)	$	(548)
Actuarial (gain) loss - changes in
demographic assumptions		5,735		-		5,735
Actuarial (gain) loss - changes in financial
assumptions		2,572		-		2,572
Actuarial (gain) loss - experience
adjustments		11,090		-		11,090
Recognized in other comprehensive income		19,397		(548)		18,849
Contributions from the employer		-		(15,320)		(15,320)
Benefits paid		(9,293)		9,293		-
Balance at December 31, 2015		120,520		(73,913)		46,607
Service cost
Current service cost		1,802		-		1,802
Past service cost and loss (gain) on
settlements		231		-		231
Net interest expense (income)		1,262		(725)		537
Recognized in profit or loss		3,295		(725)		2,570
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-		171		171
Actuarial (gain) loss - changes in
demographic assumptions		7,457		-		7,457
Actuarial (gain) loss - changes in financial
assumptions		3,144		-		3,144
Actuarial (gain) loss - experience
adjustments		11,734		-		11,734
Recognized in other comprehensive income		22,335		171		22,506
Contributions from the employer		-		(15,372)		(15,372)
Benefits paid		(4,173)		4,173		-
Balance at December 31, 2016	$	141,977	$	(85,666)	$	56,311
						(Concluded)

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Cost of goods sold Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 1,258 332 500 480 $ 2,570	2015 $ 1,564 401 576 646 $ 3,187

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Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government and corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

Discount rate(s) Expected rate(s) of salary increase	December 31
	2016 2015 1.125% 1.375% 2.00% 2.00%

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2016 $ (3,443) $ 3,571 $ 3,446 $ (3,340)	2015 $ (2,786) $ 2,888 $ 2,782 $ (2,699)

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		December	31
		2016 $ 15,372 5 years	2015 $ 15,320 5 years

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21. EQUITY

a. Share Capital

Ordinary shares

Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2016 500,000 $ 5,000,000 309,757 $ 3,097,570	2015 500,000 $ 5,000,000 309,757 $ 3,097,570

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

30,000 thousand shares of the Company’s shares authorized were reserved for the issuance of convertible bonds and employee share options.

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital* Issuance of ordinary shares Conversion of bonds Overdue options The difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition Share of changes in capital surplus of associates or joint venture May not be used for any purpose Share warrants		December 31	December 31
		2016 $ 611,776 977,028 73,377 331 2,712 - $ 1,665,224	2015 $ 611,776 977,028 27,745 - - 45,632 $ 1,662,181

Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

c. Retained earnings and dividend policy

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Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Company should appropriate or reverse to a special reserve.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

The appropriations of earnings for 2015 and 2014 had been approved in the shareholders’ meetings on June 7, 2016 and June 16, 2015, respectively. The appropriations and dividends per share were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal For Fiscal Year 2015 Year 2014 $ 93,821 $ 99,517 774,393 774,393	Dividends Per Share (NT$)
		For Fiscal For Fiscal Year 2015 Year 2014 $ - $ - 2.5 2.5

The appropriations of earnings for 2016 are subject to the resolution of the shareholders’ meeting to be held on June 2017.

d. Treasury share

	According to	According to
Purpose of Buy-Back	the	Raw
Number of shares at January 1, 2015	$	-
Addition 20 thousand shares		20
Sold 20 thousand shares		(20)
Number of shares at December 31, 2015	$	-

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22. NET PROFIT FROM CONTINUING OPERATIONS

Net profit from continuing operations had been arrived at after charging:

a. Other income

Interest income Rental income Dividends income Income from government grants Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 5,849 15,316 4,132 20,610 10,955 $ 56,862	2015 $ 13,222 6,961 1,118 - 12,747 $ 34,048

b. Other gains and losses

Gain on disposal of property, plant and equipment Gain on disposal of investment Gain on disposal of associates Net loss arising on financial assets designated as at FVTPL Net foreign exchange gains Impairment loss on financial assets Compensation Depreciation expenses of investment properties	For the Year Ended December 31	For the Year Ended December 31
		2016 2015 $ 819 $ - 13,010 3,286 1,350 1,628 (11,487) (909) 36,091 99,970 (47,152) (10,210) 29,334) (2,602) (22,399) (7,595) $ (59,102) $ 83,568

c. Impairment loss on financial assets

Available-for-sale financial assets Financial assets measured at cost	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ (17,152) (30,000) $ (47,152)	2015 $ (10,210) - $ (10,210)

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d. Finance costs

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2016 2015 $ (16,274) $ (14,785) (1,059) (16,802) $ (17,333) $ (31,587) For the Year Ended December 31
2016 $ 405,643 2,200 $ 407,843 $ 329,190 1,094 13,903 61,456 $ 405,643 $ 1,833 367 $ 2,200 For the Year Ended		2015 $ 490,799 2,354 $ 493,153 $ 415,658 563 17,374 57,204 $ 490,799 $ 1,260 1,094 $ 2,354 December 31
	2016 $ 23,317 2,570 25,887 786,527 $ 812,414 $ 443,323 369,091 $ 812,414	2015 $ 24,732 3,187 27,919 750,712 $ 778,631 $ 438,888 339,743 $ 778,631

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1) Employees’ compensation and remuneration of directors for 2016 and 2015

Accrual rate

Employees’ compensation Remuneration of directors Amount	For the Year Ended December 31
	2016 2015 9.0% 9.0% 1.5% 1.5%

Employees’ compensation Remuneration of directors	For Fiscal Year 2016 Cash Bonus Share Bonus $ 113,822 $ - 18,970 -	For Fiscal Year 2015
		Cash Bonus Share Bonus $ 104,094 $ - 17,349 -

If there is a change in the amounts after the actual financial statements were authorized for issue, the different are recorded as a change in the accounting estimate.

There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the financial statements for the years ended December 31, 2015.

2) Bonus to employees and remuneration of directors for 2014

The bonus to employees and remuneration of directors for 2014 which have been approved in the shareholders’ meeting on June 16, 2015 were as follows:

Bonus to employees Remuneration of directors	For the Year Ended December 31, 2014
	Cash Share $ 107,478 $ - 17,913 -

There was no difference between the amounts of the bonus to employees and the remuneration of directors approved in the shareholders’ meeting on June 16, 2015 and the amounts recognized in the financial statements for the year ended December 31, 2014.

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23. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Major components of tax expense recognized in profit or loss

For the Year Ended December 31 2016 2015 Current tax In respect of the current year $ 94,780 $ 82,499 Income tax of unappropriated earnings 5,435 10,979 Adjustments for prior year 10,378 9,252 110,593 102,730 Deferred tax In respect of the current period 5,136 (5,776) Income tax expense recognized in profit or loss $ 115,729 $ 96,954 A reconciliation of accounting profit and income tax expenses is as follows: For the Year Ended December 31 2016 2015 Profit before tax from continuing operations $ 1,131,893 $ 1,035,157 Income tax expense at the 17% statutory rate $ 192,422 $ 175,977 Nondeductible expenses in determining taxable income 8,016 1,735 Tax-exempt income (65,594) (67,258) Tax-exempt income for five years (21,081) (16,478) Income tax on unappropriated earnings 5,435 10,979 Unrecognized deductible temporary differences - (107) Subsidiaries to repatriate earnings withholding tax 10,812 - Investment tax credits (24,659) (22,433) Additional income tax under the Alternative Minimum Tax Act - 5,287 Adjustment for prior years’ tax 10,378 9,252 Income tax expense recognized in profit or loss $ 115,729 $ 96,954 The applicable tax rate is corporate tax of 17%.	For the Year Ended	For the Year Ended	For the Year Ended	December 31
				2015 $ 82,499 10,979 9,252 102,730 (5,776) $ 96,954 December 31
		2016 $ 1,131,893 $ 192,422 8,016 (65,594) (21,081) 5,435 - 10,812 (24,659) - 10,378 $ 115,729	2015 $ 1,035,157 $ 175,977 1,735 (67,258) (16,478) 10,979 (107) - (22,433) 5,287 9,252 $ 96,954

As the status of 2017 appropriations of earnings is uncertain, the potential income tax consequences of 2016 unappropriated earnings are not reliably determinable.

b. Income tax expense recognized in other comprehensive income

Deferred tax In respect of the current year Related to actuarial gain/loss from defined benefit plans	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ (3,826)	2015 $ (3,204)

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c. Current income tax assets and liabilities

Current tax liabilities Income tax payable		December	31
		2016 $ 56,378	2015 $ 50,994

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

Deferred tax assets Unrealized loss on inventories Financial assets at fair value through profit or loss Payable for annual leave Determine benefit obligation Others Deferred tax liabilities Unrealized exchange gain Associates Unrealized gain/loss on available-for-sale financial assets	Opening Balance Recognize in Profit or Loss Recognize in Other Comprehen- sive Income $ 6,668 $ 696 $ - 155 2,131 - 2,768 254 - 9,932 (2,176) 3,826 272 530 - $ 19,795 $ 1,435 $ 3,826 $ 4,674 $ 6,571 $ - 124,436 - - - - 195,742 $ 129,110 $ 6,571 $ 195,742	Closing Balance $ 7,364 2,286 3,022 11,582 802
		$ 25,056
		$ 11,245 124,436 195,742
		$ 331,423

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For the Year ended December 31, 2015

Deferred tax assets Unrealized loss on inventories Financial assets at fair value through profit or loss Payable for annual leave Determine benefit obligation Others Deferred tax liabilities Unrealized exchange gain Associates	Opening Balance Recognize in Profit or Loss Recognize in Other Comprehen- sive Income $ 6,925 $ (257) $ - 2,123 (1,968) - 2,746 22 - 8,790 (2,062) 3,204 97 175 - $ 20,681 $ (4,090) $ 3,204 $ 14,540 $ (9,866) $ - 124,436 - - $ 138,976 $ (9,866) $ -	Closing Balance $ 6,668 155 2,768 9,932 272
		$ 19,795
		$ 4,674 124,436
		$ 129,110

e. Unused investment tax credits, operating loss carryforward and tax-exemption information

As of December 31, 2016, profits attributable to the following expansion projects were exempted from income tax for a five-year period:

Expansion of Construction Project

Tax-exemption Period

2009 Integrated income tax Unappropriated earnings Unappropriated earnings generated before January 1, 1998 Unappropriated earnings generated on and after January 1, 1998 Imputation credits accounts		2014 to 2018 December 31	2014 to 2018 December 31
		2016 $ 2,789,106 $ 2,789,106 $ 201,555	2015 $ - 2,659,935 $ 2,659,935 $ 187,979

f. Integrated income tax

The creditable ratio for distribution of earnings of 2016 and 2015 was 9.05% (expected) and 8.46%, respectively.

g. Income tax assessments

The tax returns had been assessed by the tax authorities before 2011, respectively.

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24. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share from continuing operations were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Effect of dilutive potential ordinary shares: Interest on convertible bonds (after tax) Earnings used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 1,016,164 879 $ 1,017,043	2015 $ 938,203 13,946 $ 952,149

Weighted average number of ordinary shares outstanding (in thousand shares):

Weighted average number of ordinary shares in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Convertible bonds Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 309,757 1,340 3,593 314,690	2015 309,748 19,560 4,111 333,419

If the Company offered to settle compensation or bonuses paid to employees in cash or shares, the Company assumed the entire amount of the compensation or bonus will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

25. NON-CASH TRANSACTIONS

According to decisions made in 2015 annual general meeting, in order to ensure professional services, which enhance competency and performance, TXC Corporation will divide the assets and liabilities of photovoltaics industry to TXC Optec Corporation following “R.O.C. Business Mergers And Acquisitions Act” and related acts. TXC Optec Corporation will issue 21,490 thousand shares in exchange of the assets and liabilities below.

	September 1,	September 1,
		2015
Deposits in bank	$	20,000
Notes receivable		7,194
Trade receivables		148,446
Inventories		85,332
		(Continued)

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	September 1,	September 1,
		2015
Other current assets	$	1,178
Property, plant and equipment		245,142
Trade payable		(57,779)
Other payables		(19,596)
Other payables to related parties		(17)
	$	429,900
		(Concluded)

26. OPERATING LEASE ARRANGEMENTS

a. The Company as lessee

Operating leases relate to leases of warehouse in trade zone with lease terms 3 years. All operating lease contracts contain clauses for 3-yearly market rental reviews. The Company does not have a bargain purchase option to acquire the leased land at the expiry of the lease periods.

The future minimum lease payments of non-cancellable operating lease commitments were as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December 31
		2016 2015 $ 2,800 $ 1,455 4,200 - - - $ 7,000 $ 1,455

b. The Company as lessor

Operating leases relate to the investment property owned by the Company with lease terms between 1 to 2 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

The future minimum lease payments of non-cancellable operating lease were as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December	31
		2016 $ 8,210 - - $ 8,210	2015 $ 13,260 8,210 - $ 21,470

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27. CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.)

The capital structure of the Company consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity).

The Company is not subject to any externally imposed capital requirements.

28. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values.

b. Fair value of financial instruments that are measured at fair value on a recurring basis
1) Fair value hierarchy

December 31, 2016 Available-for-sale financial assets Unlisted securities - ROC Equity securities Securities listed in other countries Equity securities Mutual funds Financial assets at FVTPL Structured deposits Financial liabilities at FVTPL Forward exchange contracts	Level 1 $ - 1,197,902 62,853 $ 1,260,755 $ - $ -	Level 2 $ - - - $ - $ 113,635 $ 13,445	Level 3 $ 17,148 - - $ 17,148 $ - $ -	Total $ 17,148 1,197,902 62,853 $ 1,277,903 $ 113,635 $ 13,445

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December 31, 2015

Available-for-sale financial assets Unlisted securities - ROC Equity securities Securites listed in other countries Equity securities Financial liabilities at FVTPL Forward exchange contracts	Level 1 $ - 1,836,676 $ 1,836,676 $ -	Level 2 $ - - $ - $ 909	Level 3 $ 34,300 - $ 34,300 $ -	Total $ 34,300 1,836,676 $ 1,870,976 $ 909

There were no transfers between Levels 1 and 2 in the current and prior periods.

2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2016

Financial assets Balance at January 1, 2016 Recognized in profit or loss (included in other gains and losses) For the year ended December 31, 2015 Financial assets Balance at January 1, 2015 Recognized in profit or loss (included in other gains and losses)	Available-for- sale Financial Assets
	Equity Instruments $ 34,300 (17,152) $ 17,148 Available-for- sale Financial Assets
	Equity Instruments $ 44,510 (10,210) $ 34,300

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3) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement

Financial Instruments Derivatives - foreign currency forward contracts Structured deposits	Valuation Techniques and Inputs
	Discounted cash flow. Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties. Book value method. The products had short matured period, therefore the fair value is reasonable to be estimated based on the book value.

4) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement

	December 31,	December 31,
	2016	2015
Long-term revenue growth rates	13.08%	11.73%
Long-term pre-tax operating margin	-	7.10%
WACC	12.10%	13.12%
Discount for lack of marketability	31.88%	30.58%

5) The balances included the carrying amount of foreign currency forward contracts.
c. Categories of financial instruments

Financial assets Loans and receivables (1) Fair value through profit or loss (FVTPL)(2) Held-to-maturity investments (3) Available-for-sale financial assets (4) Financial liabilities Fair value through profit or loss (FVTPL) (5) Amortized cost (6)	December 31
	2016 2015 $ 3,491,708 $ 3,819,717 113,635 - 46,532 98,120 1,363,243 1,986,496 13,445 909 3,675,808 3,746,676

1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivables, trade and other receivables, other financial assets, and refundable deposits.
259 -
2) The balances included the carrying amount of structured deposits.
3) The balances included the carrying amount of financial bond investment.
4) The balances included the carrying amount of available-for-sale shares and mutual funds.
5) The balances included the carrying amount of foreign exchange forward contracts.
6) The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, notes payable, trade and other payables, and bonds issued.
d. Financial risk management objectives and policies

The Company’s major financial instruments included equity and debt investments, notes receivable, trade receivables, other receivables, notes payable, trade payables, other payables, bonds payable, borrowings. The Company’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Company’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis.The Company did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The financial department reported quarterly to the Board of directors, which monitors risks and policies implemented to mitigate risk exposures.

1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below). The Company entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including forward foreign exchange contracts to hedge the exchange rate risk arising on the Company’s foreign currency monetary.

a) Foreign currency risk

Several subsidiaries of the Company had foreign currency sales and purchases, which exposed the Company to foreign currency risk.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period (see Note 33).

260 -

Sensitivity analysis

The Company was mainly exposed to the USD and JPY.

The following table details the Company’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. The sensitivity analysis included external loans/borrowings as well as loans/borrowings to foreign operations within the Company where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in post-tax profit and other equity associated with New Taiwan dollars strengthen 1% against the relevant currency. For a 1% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on post-tax profit and other equity and the balances below would be negative.

Profit or loss	USD Impact For the Year Ended December 31 2016 2015 $ 19,493 $ 18,726	JPY Impact
		For the Year Ended December 31
		2016 2015 $ (2,893) $ (1,820)

i. This was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.
ii. This was mainly attributable to the exposure to outstanding JPY payables, which were not hedged, at the end of the reporting period.
b) Interest rate risk

The Company was exposed to interest rate risk because the Company’s bank deposits and the Company borrowed funds at floating interest rates.

The carrying amount of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2016 2015 $ 297,451 $ 464,329 - 798,841 638,769 877,753 1,792,155 1,423,815

261 -

Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 0.25% basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 0.25% basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the years ended December 31, 2016 and 2015 would decrease/increase by $2,883 thousand and $1,365 thousand, which was mainly attributable to the Company’s exposure to interest rates on its floating rate bank deposits and bank borrowings.

c) Other price risk

The Company was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Company does not actively trade these investments. The Company’s equity price risk was mainly concentrated on equity instruments operating in Shenzhen stock exchange, growth enterprise.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 1% higher/lower, other comprehensive income for the year ended December 31, 2016 and 2015 would increase/decrease by $11,979 thousand and 18,367 thousand, respectively.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure of discharge an obligation by the counterparties and financial guarantees provided by the Company arises from:

a) The carrying amount of the respective recognized financial assets as stated in the balance sheets;
b) The amount of contingent liabilities in relation to financial guarantee issued by the Company.
3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Company relies on bank borrowings as a significant source of liability. As of December 31, 2016 and 2015, the Company had available unutilized overdraft and short-term bank loan facilities of approximately $2,619,285 thousand and $3,573,588 thousand, respectively.

262 -
a) Liquidity and interest risk rate tables

The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay. The tables included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

To extend that interest flows are floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

December 31, 2016

	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)	1 Year		2-3 Years		4-5 Years		5+ Years		Total
Non-derivative financial
liabilities
Trade payable		$ 1,303,184	$	-	$	-	$		-	$ 1,303,184
Other payables		580,469		-		-			-	580,469
Other current liabilities		25,391		-		-			-	25,391
Variable interest rate
liabilities	0.86-1.204	582,780		1,209,375		-			-	1,792,155
Guarantee deposits received		-		26,307		-			-	26,307
December 31, 2015
	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)	1 Year		2-3 Years		4-5 Years		5+ Years		Total
Non-derivative financial
liabilities
Trade payable	-	$ 1,108,589	$	-	$	-	$		-	$ 1,108,589
Other payables	-	415,331		-		-			-	415,331
Other current liabilities	-	16,549		-		-			-	16,549
Bonds payable	-	798,941		-		-			-	798,941
Variable interest rate
liabilities	0.9-1.204	258,190		978,125		187,500			-	1,423,815
Guarantee deposits received	-	-		29,953		-			-	29,953

263 -
b) Liquidity and interest risk rate tables for derivative financial liabilities

The following table detailed the Company’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

December 31, 2016

On Demand or Less than 1 Month 1-3 Months 3 Net settled Foreign exchange forward contracts $ (9,155) $ (4,290) December 31, 2015 On Demand or Less than 1 Month 1-3 Months 3 Net settled Foreign exchange forward contracts $ 60 $ (969)	Months to 1 Year 1-5 Years $ - $ - Months to 1 Year 1-5 Years $ - $ -	5+ Years $ - 5+ Years $ -

e. Reclassifications

On May 15, 2015 the Company reclassified its financial assets and the fair values at the reclassification date were as follows:

	Before		After
	Reclassifications	Reclassifications
Financial assets carried at cost	$ 458,729	$	-
Available-for-sale financial assets	-		458,729
	$ 458,729	$	458,729

The carrying amounts and fair values of the reclassified financial assets (excluding those that had been derecognized) were as follows:

Available-for-sale financial assets		December 31	December 31	December 31	December 31
		2016 Carrying Amount Fair Value $ 1,197,902 $ 1,197,902		2015
		Carrying Amount $ 1,197,902		Carrying Amount $ 1,836,676	Fair Value $ 1,836,676

264 -

29. TRANSACTIONS WITH RELATED PARTY

Details of transactions between the Company and related parties are disclosed below.

a. Sales of goods

Subsidiaries Associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 264,757 22,720 $ 287,477	2015 $ 300,320 21,587 $ 321,907

b. Purchase of goods

Subsidiaries Associates Other associates Consulting fees Subsidiaries	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2016 2015 $ 2,514,579 $ 2,567,756 - 100 41 58 $ 2,514,620 $ 2,567,914 For the Year Ended December 31
		2016 $ 110,626	2015 $ 104,605

c. Consulting fees

The consulting fee above is due to the Company’s part of business activities committed to the related parties.

d. Operating expenses

Other associates e. Rental income Subsidiaries	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2016 2015 $ 994 $ 632 For the Year Ended December 31
		2016 $ 12,000	2015 $ 4,000

In 2016 and 2015, the selling price and purchasing price were not significantly different from those with third parties, except those for NGB, GPT, CKG, Ningbo Jingyu and TXC JP whose trading price depends on its function within the Group.

265 -

f. Trade receivables from related parties

Subsidiaries Associates Less: Allowance for impairment loss		December 31	December 31
		2016 $ 85,770 9,690 (78) $ 95,382	2015 $ 92,521 4,940 (30) $ 97,431

The outstanding accounts receivables from related parties are unsecured.

g. Trade payables to related parties

Subsidiaries Associates Other associates		December 31	December 31
		2016 $ 695,651 - 1,602 $ 697,253	2015 $ 630,888 101 544 $ 631,533

The outstanding trade payables from related parties are unsecured.

h. Other receivables from related parties

Subsidiaries Associates		December 31	December 31
		2016 $ 998 19 $ 1,017	2015 $ 1,122 - $ 1,122

i. Other payables from related parties

Subsidiaries Associates Other associates		December 31	December 31
		2016 $ 45 - 218 $ 263	2015 $ - 1,325 - $ 1,325

The credit period of the transaction above is similar to those for the third parties.

j. Payments for property, plant and equipment

Other associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 3,926	2015 $ 1,449

266 -
k. Disposal of property, plant and equipment

Subsidiaries		2016 The Price Gain/Loss $ - $ -		2015
				The Price Gain/Loss $ 372 $ -

l. Compensation of key management personnel

Short-term employee benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 88,534 3,239 $ 91,773	2015 $ 78,697 2,596 $ 81,293

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

30. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings:

Land Building equipment, net Investment properties, net		December 31	December 31
		2016 $ 573,770 720,489 157,533 $ 1,451,792	2015 $ 573,770 782,151 179,808 $ 1,535,729

31. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. In addition to those disclosed in other notes, significant commitments and contingencies of the Company as of December 31, 2016 and 2015 were as follows:
b. Unused letters of credit amounted to approximately JPY228,890 thousand and JPY144,551 thousand as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, the Company unrecognized commitments are as follows:

Acquisition of equipment	Contract Amount Paid Amount Unpaid Amount $ 29,426 $ 21,270 $ 8,156

32. SIGNIFICANT EVENTS AFTER REPORTING PERIOD: NONE

267 -

33. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Company’s significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2016

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	87,261	32.279 (USD:NTD)	$ 2,816,698
JPY		716,177	0.2757 (JPY:NTD)	197,450
RMB		14,314	4.6532 (RMB:NTD)	66,606
Non-monetary items
Investments accounted for using equity
method
USD		456	32.279 (USD:NTD)	14,729
JPY		68,032	0.2757 (JPY:NTD)	18,756
RMB		1,082,932	4.6532 (RMB:NTD)	5,039,100
Financial liabilities
Monetary items
USD		26,871	32.279 (USD:NTD)	867,369
JPY		1,765,485	0.2757 (JPY:NTD)	486,744
December 31, 2015
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	103,850	32.825 (USD:NTD)	$ 3,408,876
JPY		289,288	0.2727 (JPY:NTD)	78,889
RMB		9,414	5.055 (RMB:NTD)	47,588
Non-monetary items
Investments accounted for using equity
method
USD		546	32.825 (USD:NTD)	17,916
JPY		57,875	0.2727 (JPY:NTD)	15,783
RMB		1,012,127	5.055 (RMB:NTD)	5,116,301
Financial liabilities
Monetary items
USD		46,802	32.825 (USD:NTD)	1,536,276
JPY		956,855	0.2727 (JPY:NTD)	260,934

268 -

For the years ended December 31, 2016 and 2015, unrealized net foreign exchange gains were $36,091 thousand and $99,901 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

34. SEPARATELY DISCLOSED ITEMS

a. Information on significant transactions and information on investees:
1) Lending funds to others. (None)
2) Providing endorsements or guarantees for others. (None)
3) Holding of securities at the end of the period. (Table 1)
4) Aggregate purchases or sales of the same securities reaching NT$300 million or 20 percent of paid-in capital or more. (Table 2)
5) Acquisition of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
6) Disposal of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
7) Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 3)
8) Trade receivables from related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 4)
9) Trading in derivative instruments. (Table 5 and Note 7)
10) Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them. (Table 6)
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland China area. (Table 7)
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: (Table 8)
- a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
- c) The amount of property transactions and the amount of the resultant gains or losses.
269 -
d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.
270 -

TABLE 1

TXC CORPORATION

MARKETABLE SECURITIES HELD DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December	31, 2016			Note
				Shares		Carrying Amount	Percentage of Ownership		Shares
TXC Corporation TXC (Ningbo) Corporation	Stock listed overseas Guandong Failong Crystal Technology Co., Ltd. Stock-emerging company Win Win Precision Technology Co., Ltd. Stock-unlisted company Marson Technology Co., Ltd. iSentek Inc. UPI Semiconductor Corp. Financial bonds Cayman Ton Yi Industrial Holdings Structured deposits Fubon 16WMSD0601 BNP Paribas Structured Offshore Deliverable CNY Option Invesment Mutual fund Fidelity Funds - Global Property Fund A-USD Fubon China Money Market TWD Fubon Chi-Hsiang Money Market Mutual fund E Fund Money Market Fund Southern Cash Currency Fund China International Fund Management Co., Ltd. CIFM Plain Vanilla Bond Fund China Merchants Fund China Merchants Currency Fund E Fund Stable Income Bond Fund China GuangFa Money Market Fund	None None None None Chairman is a direct of the Company None None ″ None ″ ″ None ″ ″ ″ ″ ″ ″ ″	Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent ″ ″ Held-to-maturity financial assets - noncurrent Financial assets at fair value through profit or loss - current ″ Available-for-sale financial assets - noncurrent ″ ″ Financial assets at fair value through profit or loss - current ″ ″ ″ ″ ″ ″ ″	10,096 1,365 414 2,500 2,000 RMB 10,000 RMB 15,000 RMB 9,000 1,000 470 1,931 RMB 25,122 RMB 3,296 RMB 10,001 RMB 10,559 RMB 9,498 RMB 2,032 RMB 9,757 RMB 4,024		$ 1,197,902 $ 17,148 $ 3,000 40,000 42,520 $ 85,520 $ 46,532 $ 71,205 42,430 $ 113,635 $ 9,440 23,403 30,010 $ 62,853 $ 116,899 15,336 46,537 49,133 44,196 9,456 45,401 18,725 $ 345,683	6 3 5 15 2		$ 1,197,902 $ 17,148 None ″ ″ $ 46,532 $ 71,205 42,430 $ 113,635 $ 9,440 23,403 30,010 $ 62,853 $ 116,899 15,336 46,537 49,133 44,196 9,456 45,401 18,725 $ 345,683

(Continued)

271 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December	31, 2016			Note
				Shares		Carrying Amount	Percentage of Ownership		Shares
TXC (Chongqing) Limited Ningbo Jingyu Company Limited Chongqing All Sun Company Limited	Structured deposits Bank of Communication First Sino Bank China Merchants Bank China Everbright Bank China Construction Bank Orient Securities Company Limited Mutual fund E Fund Stable Income Bond Fund China International Fund Management Co., Ltd. Structured deposits First Sino Bank China Construction Bank Mutual fund Southern Cash Fund Structured deposits Chongqing Rural Commercial Bank Mutual fund Southern Cash Fund	None ″ ″ ″ ″ ″ None ″ None ″ None None None	Financial assets at fair value through profit or loss - current ″ ″ ″ ″ ″ Financial assets at fair value through profit or loss - current ″ Financial assets at fair value through profit or loss - current ″ Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current	RMB 20,053 RMB 41,371 RMB 30,902 RMB 45,010 RMB 30,057 RMB 30,111 RMB 6,185 RMB 5,214 RMB 39,542 RMB 38,131 RMB 451 RMB 10,068 RMB 10,378		$ 93,309 192,508 143,795 209,440 139,860 140,112 $ 919,024 $ 28,781 24,262 $ 53,043 $ 183,995 177,429 $ 361,424 $ 2,102 $ 46,849 $ 48,340			$ 93,309 192,508 143,795 209,440 139,860 140,112 $ 919,024 $ 28,781 24,262 $ 53,043 $ 183,995 177,429 $ 361,424 $ 2,102 $ 46,849 $ 48,340

(Concluded)

272 -

TABLE 2

TXC CORPORATION

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

(In Thousands of New Taiwan Dollars)

Company Name	Marketable Securities Type andName	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Equity in Net Gain (Loss)	Ending	Balance
					Shares	Amount	Shares	Amount	Shares	Amount	Carrying Amount	Gain (Loss) on Disposal		Shares	Amount
TXC (Ningbo) Corporation TXC (Chongqing) Limited	Structured deposits Mutual funds ″ Structured deposits	Financial instruments at FVTPL - current ″ Financial instruments at FVTPL - current ″ Financial instruments at FVTPL - current	China Everbright Bank Bank of Communication China Merchants Bank China Money Fund First Sino Bank	None None None ″ None	- - - - -	$ 155,053 152,345 - 81,211 75,919	- - - - -	$ 461,695 437,396 398,516 417,956 480,017	- - - - -	$ (400,892) (493,077) (389,548) (497,217) (367,432)	$ (400,892) (493,077) (389,548) (497,217) (367,432)	$ - - - - -	$ (6,416) (3,355) 488 (1,950) (4,509)	- - - - -	$ 209,440 93,309 9,456 - 183,995

273 -

TABLE 3

TXC CORPORATION

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Buyer	Related Party	Relationship		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 Terms	Unit Price	Payment Terms	Ending Balance	% to Total
TXC Corporation TXC (Ningbo) Corporation	TXC (Ningbo) Corporation TXC (Chongqing) Limited Growing Profit Trading Ltd. TXC (Chongqing) Limited	Subsidiary Subsidiary Subsidiary Subsidiary	Purchase Sale Purchase Purchase Purchase	$ 1,851,735 (248,431) 550,062 351,184 236,335	34 (3) 10 20 13	Note ″ ″ ″ ″	Its trading price depends on its function within the Group ″ ″ ″ ″	Note ″ ″ ″ ″	$ (547,358) 82,926 (107,183) (88,999) (131,142)	(38) 3 (8) (12) (18)

Note: The terms of purchases from related parties were not significantly different from those with third parties.

274 -

TABLE 4

TXC CORPORATION

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
TXC (Ningbo) Corporation TXC (Chongqing) Corporation	TXC Corporation TXC (Ningbo) Corporation TXC Corporation	Parent entity Subsidiary Parent entity	$ 547,358 131,142 107,183	3.38 1.8 5.13	$ - - -	- - -	$ 506,003 27,263 94,641	$ - - -

275 -

TABLE 5

TRADING IN DERIVATIVE INSTRUMENTS DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

TXC CORPORATION

TXC (Ningbo) entered into the trading derivative instruments to manage its exposure to interest rate risks of foreign bonds and borrowings.

As of December 31, 2016, unexpired forward contract was below:

	Company			Contract Amount
	Name	Currency	Expired Period	(In Thousand Dollar)
December 31, 2016
Sell the forward contract	NGB	USD/RMB	2017.01.04-2017.04.05	USD4,000/RMB26,852
Buy the forward contract	NGB	JPY/USD	2017.01.04-2017.02.03	JPY340,421/USD3,150

276 -

TABLE 6

TXC CORPORATION

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of December 31, 2016	as of December 31, 2016	Net Income (Losses) of the Investee	Equity in the Earnings (Losses)	Note
				December 31, 2016	December 31, 2015	Shares (In Thousands)	Percentage of Ownership	Carrying Value
TXC Corporation Taiwan Crystal Technology International Ltd. TXC (Ningbo) Corporation Ningbo Jingyu Company Limited Taiwan Crystal Technology International (HK) Limited	Taiwan Crystal Technology International Ltd. TXC Technology Inc. TXC Japan Corporation Taiwan Crystal Technology International (HK) Limited Tai-Shing Electronics Components Corporation TXC Optec Corporation Growing Profit Trading Ltd. TXC (Ningbo) Corporation TXC (Chongqing) Corporation Chongqing All Sun Company Limited Ningbo Jingyu Company Limited Ningbo Free Trade Zone JingYue Tranding Company TXC (Chongqing) Limited	Western Samoa U.S.A. Japan Hong Kong Taiwan Taiwan B.V.I. Ningbo Chongqing Chongqing Ningbo Ningbo Chongqing	Investment Marketing activities Marketing activities Investment Manufacture and sales of electronics products Manufacture and sales of sapphire International trading Manufacture and sales of electronics products Manufacture and sales of electronics products Market activities International trading International trading Manufacture and sales of electronics products	$ 1,390,461 9,879 6,172 298,362 59,564 444,718 1,691 1,487,211 604,152 312,644 4,807 931 298,362	$ 1,390,461 9,879 6,172 298,362 60,580 430,000 1,691 1,487,211 604,152 312,644 4,807 - 298,362	42,835 300 2 10,080 2,250 22,225 50 45,835 123,745 66,000 1,000 200 10,080	100.00 100.00 100.00 100.00 10.23 88.9 100.00 100.00 66.40 100.00 100.00 100.00 33.60	$ 4,669,597 14,729 18,756 369,503 65,228 428,722 229,554 4,479,159 722,713 305,329 8,426 812 369,055	$ 354,800 (2,936) 3,010 37,342 83,653 (22,196) (9,338) 369,021 111,936 (1,572) (4,699) (124) 111,936	$ 359,419 (2,936) 3,010 37,342 6,605 (19,724) (9,338) 369,021 74,326 (1,572) (4,699) (124) 37,610	Difference from upstream transactions $4,619 thousand

277 -

TABLE 7

TXC CORPORATION

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars or U.S. Dollars)

Name of the investees in Mainland China, main businesses and products, paid-in capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, dividends remitted by the investee, and the limit of investment in Mainland China:

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Method of Investment	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2016 (US$ in Thousand)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2016 (US$ in Thousand)	Investee Company Current Net Income	Percentage of Ownership	Investment Income (Loss) Recognized	Carrying Amount as of December 31, 2016	Accumulated Inward Remittance of Earnings as of December 31, 2016
							Outflow	Inflow
TXC (Ningbo) Corporation Guandong Failong Crystal Technology Co., Ltd. TXC (Chongqing) Corporation Chongqing All Suns Company Limited Ningbo Jingyu Company Limited Ningbo Free Trade Zone JingYue Tranding Company	Manufacturing and sales of crystal and crystal oscillator Manufacturing and sales of new electronic components Manufacturing and sales of electronic devices and hardware components Real estate intermediary service, real estate management and electronic product wholesale Purchasing and selling electronic component International trading		$ 1,487,211 580,947 902,514 312,644 4,807 931	Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Direct investment of the Corporation in Mainland China Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China		$ 1,427,630 46,478 298,362 - - -	$ - - - - - -	$ - - - - - -	$ 1,427,630 46,478 298,362 - - -	$ 369,021 - 111,936 (1,572) (4,699) (124)	100 6 100 100 100 100	$ 369,021 - 111,936 (1,572) (4,699) (124)	$ 4,479,159 1,197,902 1,091,768 305,329 8,426 812	$ 256,146 3,014 - - - -
The limited amounts of the investment in Mainland China
Accumulated Investment in Mainland China as of December 31, 2016		Investment Amounts Authorized by Investment Commission, MOEA			Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$1,772,470		$1,832,878			$ -

The limited amounts of the investment in Mainland China

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TABLE 8

FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

TXC CORPORATION

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD AREA, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES

Significant direct or indirect transactions with the investees, prices and terms of payment, unrealized gain or loss:

Company Name	Related Party	Transaction Type			Transaction Details	Transaction Details		Accounts/Notes Receivable/Payable	Accounts/Notes Receivable/Payable
			Amount	Percentage (%)	Price	Payment Term	Compared with Terms of Third Parties	Balance	%	Unrealized Gainor Loss
TXC Corporation GPT	NGB NGB CKG NGB	Purchase Sale Purchase Sale	$ 1,851,735 248,431 550,062 351,184	34 (3) 10 (39)	Its trading price depends on its function within the Group ″ ″ ″	Similar with third parties ″ ″ ″	Its trading price depends on its function within the Group ″ ″ ″	$ (547,358) 82,926 (107,183) 88,999	(38) 3 (8) 44	$ 21,966 4,718 7,670 -

The transactions of properties and the profit or loss: None.
Endorsements guarantees or collateral directly or indirectly provided to the investees: None
Financings directly or indirectly provided to the investees: None
Other transactions that significantly impacted current year’s profit or loss or financial position: None
279 -

AI assistant

TXC — Annual Report 2016

52274_rns_2017-06-16_49181dc3-184b-4fa4-b9ef-66d6ba99676c.pdf

Annual Report 2016 Table of Contents

Enterprise Vision

Vision Statement

Mission Statement

Corporate Culture

I. Business Report

Dear Shareholders,

I. 2016 Operation Results

Consolidated statement of income and Profitability

II.Company Overview

A.Company Introduction

1. Date of the company´s incorporation

2. Company History

B 、 Company Structure and the Subsidiaries

2. The basic data of the subsidiaries

III. Corporate Governance

A. Directors

B. Personnel data of the general manager, vice general manager, assistant vice general manager, chief of divisions

C. Remuneration and Compensation Paid to Directors, and General and Vice General Managers

(1) Remuneration Paid to Directors (including Independent Directors)

Remuneration Scale

(2) Compensation Paid to Executive Officers

Compensation Scale

D. Corporate governance and variations with management principles of publicly-listed companies and reasons

(5) Fulfillment of Social Responsibility

1. Implementing Ethical Corporate Management

4. Fulfillment of social responsibility

Major sponsorships and activities of subsidiaries (Ningbo and Chongqing plants)

1. Important resolutions of the board of directors

2. Important Resolutions of the 2016 Shareholders’ General Meeting

IV. Fund Raising Overview A. Capital and Shares

(1) Source of Capital

1. Capitalization

2. Types of Stock

3. Shelf Registration Related Information: Not applicable.

(2) Composition of Shareholders

B. Data on share price, net value, profit, and dividend of the past two years

C. Company’s dividend policy and its current implementation status

1.Dividend policy as defined in the articles of incorporation ：

2.Suggested dividend appropriate in this shareholders’ meeting ：

Profit distribution for 2016

D. Employee bonus and rewards for directors and auditors

E. The company’s repurchasing of company shares: Not applicable.

F. Convertible Corporate Bond:

Convertible Corporate bond data

V. Fund Utilization Plans:

A. Fund Utilization Plan and Utilization Status of this Corporate Bond Issue

(2) Expected Benefits:

 Purchase of Machinery and Equipment

 Repayment of Bank Loans

2. Previous capital increase by cash and execution status: Not appliable

、 VI Business Information

A 、 Business Contents

(2). Business Proportions

(4). Scheduled new products development

2 、 The Industry

(1). Current industry status and development

Upstream suppliers

Substitutes

(3). Development Trend of Crystal Industry

(i). Production trend ：

(b). High frequency 、 high modularized 、 high precision ：

(1) Miniaturization

(2) Integration

(4). Competitions

B 、 Marketing & Sales Situation

(3). Market future demand and supply condition, and its growth potential

(i) Industry side

4. Product applications

(ii) Market side

A. Automotive Electronics

B. Infrastructure and Small Cell

C. Sensors

D. Other Mobile Device Development

a. Smart Phone

2 、 Major products’ important applications and their manufacturing process

(2). Manufacturing Process

TXC Annual Report 2016

B `、` Company Structure and the Subsidiaries

1.Dividend policy as defined in the articles of incorporation `：`

2.Suggested dividend appropriate in this shareholders’ meeting `：`

`、` VI Business Information

A `、` Business Contents

2 `、` The Industry

(i). Production trend `：`

(b). High frequency `、` high modularized `、` high precision `：`

B `、` Marketing & Sales Situation

2 `、` Major products’ important applications and their manufacturing process

`、` (3) Light Sensor manufacturing process

`、` (3) State of the major materials suppliers

`、` (5) Production and monetary values for the past two years

`、` C Employees’ average years in service, age, and educational background distribution of the past two years

D `、` Data on our environmental protection expense

E `、` Labor Relations

( `四` ) `、` Fulfillment of social responsibility

`、` (3) Abbreviated Conslodiated Balance Sheets (GAAP)

`、` (4) Abbreviated Balance Sheets (GAAP)

`、` (5) Abbreviated Consolidated P/L Statements (IFRS)

`、` (6) Abbreviated P/L Statements (IFRS)

B `、` Financial Analysis for the past 5 Years

`（` 1 `）` Consolidated Financial Analysis (IFRS)

NoteII `：` Glossary `：`

`（` 2 `）` Financial Analysis (IFRS)

NoteII `：` Glossary `：`

`（` 3 `）` Consolidated Financial Analysis (GAAP)

NoteII `：` Glossary `：`

`（` 4 `）` Financial Analysis (GAAP)

NoteII `：` Glossary `：`