ZERO ONE - Annual Report 2017 | FinancialReports.eu

CODE ： 3029

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2018 Annual Shareholders’ Meeting

Meeting Agenda

Date for the shareholders' meeting:2018/06/11 Location for the shareholders' meeting: 6F., No.35, Ln. 513, Ruiguang Rd., Neihu Dist., Taipei City.

1. Meeting Agenda ………………………………………………………………………1 2. Report Items …………….……………………………………………………………2 3. Matters for Ratification ……………………………………………………………5 4. Matters for Discussion ………………………………………………………………8 5. Extraordinary Motions ………………………………………………………11 6. Adjournment ……………………………………………………………………11 7. Attachment I. 2017 Business Report ………………………………………………………12 II. 2017 Independent Auditors’ Report and Financial Statements ………….…13 III. The Issuance of 2018 Restricted Employee New Shares ………………….…31 [IV.][Comparison Table for Regulations Governing the Acquisition and Disposal ] of Assets Before and After Revision …………..……………………………..34 8. Appendix I. Explanation for Dealing Shareholders’ Proposal ……………………35 II. Rules of Procedure for Shareholders Meetings ………………………36 [III.][Regulations Governing the Acquisition and Disposal of Assets Before ] Revision …………………………………………………………….………..…40 IV. Shareholding of Directors and Supervisors ……………………………….…54 V. Articles of Incorporation ……………………………………………………55

1. Meeting Agenda

Time ： 9:00 a.m., June 11, 2018

Place ： 6F., No.35, Ln. 513, Ruiguang Rd., Neihu Dist., Taipei City.

I. Call the Meeting to Order (to report the number of shares represented by
shareholders present at the meeting)

II. Chairperson Remarks

III.Report Items

(1) To report the business of the company in 2017.
(2) Report by supervisors on auditing of 2017 financial statements.
(3) To report distribution of 2017 compensation to employees, directors, and supervisors.
IV. Matters for Ratification
(1) To accept 2017 Business Report and Financial Statements.
(2) To approve the proposal for distribution of 2017 earnings.

V. Matters for Discussion

(1) Discussion on the issuance of new restricted employee shares.
(2) Discussion on the amendments to the Regulations Governing the
Acquisition and Disposal of Assets.
VI. Adjournment
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2.Report Items

Report No. 1

To report the business of the company in 2017.

Explanation:

The 2017 Business Report refers to Attachment I.

Report No. 2

Report by supervisors on auditing of 2017 financial statements.

Explanation:

The 2017 Supervisor’s Review Report is audited by supervisors, and attached as pp. 3.

ZERO ONE TECHONOLOGY COMPANY LIMITED

Supervisors’ Review Report

The board of directors has prepared the company’s 2017 Consolidated , and Parent Company Only Financial Statements. The CPAs of Wen-Chin Lin and Hsin Wei Tai of Deloitte & Touche was retained to audit ZOTC’s Financial Statements. The Business Report, Financial Statements, and profit allocation proposal have been reviewed and determined to be correct and accurate by the supervisors of ZERO ONE Technology Company Limited. According to Article 219 of the Company Act, we hereby submit this report.

Sincerely,

2018 Annual Shareholders’ Meeting

The Supervisor : ;KWAY INFORMATION

CORPORATION

The Representative ：

Cheng Che Tseng

The Supervisor : ;Yu Chi Lin

The Supervisor : ;Chih Cheng Lo

April 25, 2018

Report No. 3

To report distribution of 2017 compensation to employees, directors, and supervisors.

Explanation:

According to Article 19 and 19-1 of Article of Incorporation.
The board of directors, on February 26, 2018, approved directors’ and supervisors’ compensation totaled NT$ 5,219,369, and employees’ compensation totaled NT$

10,438,738, distributed in cash, taking up 2% and 4% of 2017 profit NT$ 260,968,441.

3.Matters for Ratification

Report No. 1 (Proposed by the board of directors) To accept 2017 Business Report and Financial Statements.

Explanation:

The company’s 2017 financial statements have been reviewed and determined to be correct and accurate by the CPAs of Deloitte & Touche, and supervisors, and then a written audit report shall be issued.

(1)The 2017 Business Report refers to Attachment I.
(2)Independent Auditors’ Report and 2017 Financial Statements refer to Attachment II.

Resolution:

Report No. 2 (Proposed by the board of directors)

To approve the proposal for distribution of 2017 earnings.

Explanation:

The 2017 Earnings Distribution Proposal, approved by the board of directors in April 25, 2018, audited by supervisors for reporting a commitment by the shareholders’ meeting, is attached hereto as follows.
The number of stocks was calculated at NT$16.39 per share, using the closing price on March 31, 2018.
Cash dividends are distributed pro rata and are rounded down to the nearest whole number. The fractional balance of dividends less than NT$ 1 will be summed up and recognized as other income of the company. After earnings distribution proposal is approved, the board of directors is authorized to set the record date, distribution of cash dividends, and other related matters, etc.
If the outstanding shares are impacted due to the record date, it is proposed the board of directors be authorized by the Shareholders’ Meeting to adjust the dividend payout ratio, and authorized the chairman to deal with all the related matters.
The 2017 earnings distribution table is attached as pp. 7.
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ZERO ONE TECHONOLOGY COMPANY LIMITED

EARNINGS DISTRIBUTION TABLE

Year 2017

(Unit ： NTD$)

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Items Total Notes
Beginning retained earnings 88,600,335
Less ： other comprehensive income 612,771 [Remeasurement of defined ]
benefit obligation in 2017
Add ： net profit after tax 195,983,590
Total ： 283,971,154
Allocation Items ：
Less ： 10% legal reserve 19,598,359
Add ： Reversal for allocated special surplus reserve 1,222,206
Distributable net profit $265,595,001
Distributable items ：
Less ： Dividend to shareholders—Cash Dividends 159,484,487 Caculated by outstanding
stock-122,680,375
(Estimating distribution of
a NT$1.3 cash dividend per
share).
Unappropriated retained earnings $106,110,514
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The chairman: Chia Hsin Lin Manager: Nancy Huang Chief Accountant: Michelle Chin

Resolution:

4.Matters for Discussion

Report No. 1 (Proposed by the board of directors) Discussion on the issuance of new restricted employee shares.

Explanation:

The Issuance of 2018 Restricted Employee New Shares is enacted by the company, according to relevant regulations of Article 267 of the Company Act, and “Regulations Governing the Offering and Issuance of Securities by Securities Issuers”.
Explanation of Article 60-2 of “ Regulations Governing the Offering and Issuance of Securities by Securities Issuers” goes as follows:
(1) Total amounts(shares) of issuance ：

The shares’ number of the issuance of restricted employee new shares is 700,000 by par value NT$ 10, a total of NT$ 7,000,000.

(2) Vesting conditions ：
A.Issue price ： The current issue is gratuitous.
B. Employees’ achievement of personal performance meets conditions of the issuance of 2018 restricted employee new shares.
C. The types of issued shares ： Besides the regulations based on Article 6, rights
- and obligation of restricted employee new shares is the same as those of ordinary shares.
D.Measures to be taken when employees fail to meet the vesting conditions ： Restricted employee new shares as redeemed by the company without charge will be Cancelled, as for not meeting the vesting conditions.
(3)Qualification requirements for acquiring or purchasing the vested shares ：
A. For all full-time employees who have serve starting from the Issue Date.
B. The actual number of qualified employees shall be determined by the year of working experience, position, performance, contribution and any other factors regarding with conditions for management, decided by the chairman, and resolved by the board of directors.
C. Based on Article 56-1, paragraph 1 of “Regulations Governing the Offering and Issuance of Securities by Foreign Issuers”, the total number of employee stock warrants, also including the total number of restricted employee new shares, to be exercised by any employee within each fiscal year shall not exceed 0.3 percent of the year-end total outstanding common shares of the company, and the number of options granted to a single employee shall not exceed one percent of the total number of options granted, according to Article 56, paragraph 1 of “Regulations Governing the Offering and Issuance of Securities by Foreign Issuers”.
(4)The reason why it is necessary to issue restricted stocks for employees ： The Company tends to attract and retain outstanding professionals, encourage excellent talents, and strengthen coherence of the company, for creating long-term Company growth and benefits for employees and shareholders.
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(5)Calculated expense amount, dilution of EPS, and other factors affecting shareholder’s equity ：
- A.;Calculated expense amount ： Expected total amounts(shares) of gratuitous issuance is 700,000 shares, calculated based on the closing price of NT$19.15 on April 24, 2018. The amortized expense is estimated by vesting period and conditions to be in the amount of NT$3,351,250 for 2018, 2019, 2020 and 2021, respectively, under the assumption of the total issuance.
- B. ;Dilution of EPS, and other factors affecting shareholder’s equity ： The diluted EPS for year 2018, 2019, 2020 and 2021 shall be NT$0.03, respectively, estimated by the total outstanding shares of 122,680,375. The dilution for future EPS is limited and therefore has no major impact on shareholder’s equity.
The Issuance of 2018 Restricted Employee New Shares is attached as pp. 31-33.
The issuer is allowed to register multiple issues over a period or by several times of 1 year from the date of the shareholders resolution, and issue new shares over a period or by several times of 1 year from the date next following the arrival of the notification of effective registration by the competent authority. The chairman shall declare the actual date of issuance.
5.;If each condition of the issue of restricted employee new shares has been edited by the assignment of competent authority, the applicable laws and regulations, or depending on the financial markets’ conditions or objective environment, full authority from the board of directors authorized by the shareholders’ meeting shall be obtained.
Relevant restrictions, important stipulations, or any other matters not set forth shall be executed for the issue of restricted employee new shares, according to the applicable laws, and the issuance of 2018 restricted employee new shares.

Resolution:

Report No. 2 (Proposed by the board of directors)

Discussion on the amendments to the Regulations Governing the Acquisition and Disposal of Assets.

Explanation:

For requirement of utilizing funds for company operation procedures, the company decided to edit the Regulations Governing the Acquisition and Disposal of Assets.
Comparison table before and after revision refers to Attachment IV.

Resolution:

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5. Extraordinary Motions

6. Adjournment

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7. Attachment

`【` Attachment I `】`

ZERO ONE TECHONOLOGY COMPANY LIMITED 2017 Business Report

(I) 2017 Business Objectives

The scope of the business sets on the storage, information security, internet, and cloud service, concentrates on the plot for services platform, pays a close attention to the trend of manufacturers. As for organization development, the company’s gross profits continue to maintain a rise by enhancing the internal passion and cohesion in the company, increasing abilities and experiences of our sales groups, and training professional skills of technical engineers.

(II) Implementation Results of Business Plans

In FY 2017, the company’s total revenue stood at NT$5,967,589 thousand, on the increase of NT$35,230 compared to the preceding year, 0.59% in year-over-year growth. The net profit was NT$194,906 thousand, on the decrease of NT$30,438 compared to the preceding year, a 13.51% year-over-year reduction. Basic earnings per share were NT$1.61.

(III)Financial Status and Profitability Analysis

1. Financial Status `：`

In FY 2017, the company’s net profit was NT$194,906 thousand, cash flows from operating, investing, and financing activities were NT$388,368, NT$9,383, and NT$143,969 thousand. Cash and cash equivalents at the beginning and the end period were NT$230,596 and NT$741,119 thousand.

2. Profitability Analysis `：`

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Items 2017(%) 2016(%)
Ratio of return on total assets 5.52 6.77
Ratio of return on shareholders’ equity 9.48 11.49
Ratio of operating income to capital stock 19.16 21.29
Ratio of profit before income tax to capital stock 19.96 21.94
Profit ratio 3.27 3.80
Earnings per share (NT$) 1.61 1.85
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The chairman: Chia Hsin Lin Manager: Nancy Huang Chief Accountant: Michelle Chin

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`【` Attachment II `】`

INDEPENDENT AUDITORS' REPORT

The board of directors and Shareholders Zero One Technology Company Limited

Opinion

We have audited the accompanying consolidated financial statements of Zero One Technology Company Limited and subsidiaries (the "Group"), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, 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, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (1AS), 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, 2017. 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.

Key audit matters for the Group's consolidated financial statements for the year ended December 31, 2017 are stated as follows:

Valuation of allowance for uncollectible accounts

Description

As indicated in Note 5 for critical accounting estimates and judgements, the Group assesses the collectability of accounts receivable and valuation of allowance for uncollectible accounts, based on considering future valuation of cash flows, and referencing credit limits, historical experience, and present financial conditions of customers. As the estimation of allowance for uncollectible accounts is subject to judgement of the management, and assumption of credit risks from customers, we consider the valuation of allowance for uncollectible accounts a key audit matter.

Our procedure includes understanding and testing controls of allowance for uncollectible accounts by the management in line with periodic review, predicting and managing differences as tracked for losses, design and execution of relevant controls.

Allowance for Inventory Valuation Loss

Description

The valuation of the inventory of the Group includes the estimate of net realizable value and the allowance

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for inventory valuation loss regarding with the outdated and obsolete inventory. Net realizable valuation, based on the historical data of market situation and similar products, of the inventory is the carrying amounts calculated by the estimate sales price deducts the estimate of input costs, and cost of goods sold, during the ordinary course of business. The material influence of market condition will affect the amount of net realizable valuation. Besides, the ratio of the allowance for inventory valuation loss is valued by inventory aging and the allowance for the actual loss We consider the estimate of net realizable valuation, and the ratio of the allowance for inventory impairment loss of the outdated and obsolete inventories a key audit matter, based on management's professional estimation.

Our procedure includes understanding the accounting policies, valuation methods, and citation information originality for the inventory of the Group, obtaining information of the year-end allowance for inventory valuation loss and inventory aging reports, drawing samples to ensure the reasonableness of the inventory as valued by net realizable value method and the inventory aging, and the carrying amount of the year-end allowance for inventory valuation loss fitting the Group’s accounting policy for allowance.

Other Matter

We have also audited the parent company only financial statements of Zero One Technology Company Limited as of and for the years ended December 31, 2017 and 2016 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 the IFRS, IAS, IFRIC, and 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 members of the supervisors) are responsible for overseeing the Group's financial reporting process.

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

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

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

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, 2017 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.

The engagement partners on the audit resulting in this independent auditors' report are Wen Chin Lin and Hsin Wei Tai.

Deloitte & Touche

Taipei, Taiwan Republic of China

February 26, 2018

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 dfference in the interpretation of the two versions, the Chinese-language independent auditors' report and consolidated financial statements shall prevail.

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ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale financial assets - current Debt investments with no active market - current Notes receivable Trade receivables Inventories Current tax assets Other current assets Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Debt investments with no active market - non-current Investments accounted for using equity method Property, plant and equipment Other intangible assets Deferred tax assets Refundable deposits Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Trade payables Other payables Current tax liabilities Current portion of bonds payable Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities Net defined benefits liabilities - non-current Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		2017 Amount % $ 741,119 20 51,338 1 21,724 1 212,366 6 185,925 5 1,466,240 41 490,564 14 804 - 10,151 - 3,180,231 88 68,565 2 21,654 1 11,539 - 4,446 - 310,083 9 970 - 19,436 - 1,786 - 438,479 12 $ 3,618,710 100 $ 1,252,876 34 134,882 4 32,423 1 9,733 - 74,226 2 1,504,140 41 481 - 20,922 1 21,403 1 1,525,543 42 1,224,804 34 434,135 12 139,840 4 16,723 - 283,971 8 440,534 12 (15,501) - 2,083,972 58 9,195 - 2,093,167 58 $ 3,618,710 100		2016
				Amount % $ 510,523 15 83,896 2 3,480 - 282,673 8 108,933 3 1,545,647 45 444,687 13 - - 87,678 3 3,067,517 89 48,861 1 510 - 11,367 - 2,502 - 303,812 9 1,427 - 16,948 1 1,451 - 386,878 11 $ 3,454,395 100 $ 1,142,666 33 152,830 4 22,356 1 28,563 1 70,067 2 1,416,482 41 - - 20,835 1 20,835 1 1,437,317 42 1,212,655 35 421,421 12 117,432 3 22,876 1 251,545 7 391,853 11 (16,723) - 2,009,206 58 7,872 - 2,017,078 58 $ 3,454,395 100

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ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE Net sales OPERATING COSTS Cost of goods sold GROSS PROFIT OPERATING EXPENSES 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 Other gains and losses Finance costs Share of loss of associated and joint ventures Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE NET PROFIT OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Income tax relating to items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss: Unrealized gain/(loss) on available-for-sale financial assets		2017 Amount % $ 5,967,589 100 5,379,298 90 588,291 10 224,640 4 118,464 2 10,493 - 353,597 6 234,694 4 16,810 - 882 - (374) - (7,506) - 9,812 - 244,506 4 49,600 1 194,906 3 (737) - 125 - (612) - 1,222 -		2016
				Amount % $ 5,932,359 100 5,353,091 90 579,268 10 228,449 4 81,387 1 11,310 - 321,146 5 258,122 5 11,829 - (210) - (1,198) - (2,498) - 7,923 - 266,045 5 40,701 1 225,344 4 (2,966) - 504 - (2,462) - 6,153 - (Continued)

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ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Other comprehensive income for the year, net of income tax TOTAL COMPREHENSIVE 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 From continuing operations Basic Diluted		2017 Amount % 610 - $ 195,516 3 $ 195,983 3 (1,077) - $ 194,906 3 $ 196,593 3 (1,077) - $ 195,516 3 $1.61 $1.58		2016
				Amount % 3,691 - $ 229,035 4 $ 224,077 4 1,267 - $ 225,344 4 $ 227,768 4 1,267 - $ 229,035 4 $1.85 $1.82

(Concluded)

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ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2016 Appropriation of the 2015 earnings Legal reserve Special Reserve Cash dividends - NT$1.0 per share Cash dividends distributed by the subsidiaries Disposal of subsidiaries Changes in percentage of ownership interest in subsidiaries Recognition of employee share options by the Company Net profit for the year ended December 31, 2016 Other comprehensive income (loss) for the year, net of income tax Total comprehensive income (loss) for the year ended December 31, 2016 BALANCE, DECEMBER 31, 2016 Appropriation of 2016 earnings Legal reserve Special Reserve Cash dividends - NT$1.2 per share Cash dividends distributed by subsidiaries Convertible bonds converted to capital stock Recognition of employee share options by the Company Issuance of ordinary shares under employee share options Non-controlling interests increase Net profit for the year ended December 31, 2017 Other comprehensive income (loss) for the year, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017		Equity Attributable to Owners of the Company			Non-controlling Total Interests $ 1,900,034 $ 4,177 - - - - (121,266) - - (300) - (766) (494) 3,494 3,164 - 224,077 1,267 3,691 - 227,768 1,267 2,009,206 7,872 - - - - (146,690) - - (600) 19,146 - 5,342 - 375 - - 3,000 195,983 (1,077) 610 - 196,593 (1,077) $ 2,083,972 $ 9,195	Total Equity $ 1,904,211 - - (121,266) (300) (766) 3,000 3,164 225,344 3,691 229,035 2,017,078 - - (146,690) (600) 19,146 5,342 375 3,000 194,906 610 195,516 $ 2,093,167
	Share Capital Shares (In Thousand) Issued Capital Capital Surplus 121,265 $ 1,212,655 $ 418,751 - - - - - - - - - - - - - - - - - (494) - - 3,164 - - - - - - - - - 121,265 1,212,655 421,421 - - - - - - - - - - - - 1,188 11,879 7,267 - - 5,342 27 270 105 - - - - - - - - - - - - 122,480 $ 1,224,804 $ 434,135	Retained Earnings	Total $ 291,504 - - (121,266) - - - - 224,077 (2,462) 221,615 391,853 - - (146,690) - - - - - 195,983 (612) 195,371 $ 440,534	Other Equity Unrealized Gain/ (Loss) on Available-for- sale Financial Assets $ (22,876) - - - - - - - - 6,153 6,153 (16,723) - - - - - - - - - 1,222 1,222 $ (15,501)
		Unappropriated Legal Reserve Special Reserve Earnings $ 99,152 $ - $ 192,352 18,280 - (18,280) - 22,876 (22,876) - - (121,266) - - - - - - - - - - - - - - 224,077 - - (2,462) - - 221,615 117,432 22,876 251,545 22,408 - (22,408) - (6,153) 6,153 - - (146,690) - - - - - - - - - - - - - - - - - 195,983 - - (612) - - 195,371 $ 139,840 $ 16,723 $ 283,971

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ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Impairment loss recognized on trade receivables Net loss on foreign currency exchange Interest income Depreciation expenses Share of loss of associates Net gain on fair value change of financial assets/liabilities at fair value through profit or loss Compensation costs of employee share options Reversal of write-down of inventories Amortization expenses Dividend income Net loss (gain) on disposal of available-for-sale financial assets Finance costs Gain on disposal of property, plant and equipment Impairment loss recognized on financial assets Changes in operating assets and liabilities Financial assets held for trading Notes receivable Trade receivables Inventories Other current assets Notes payable Trade payables Other payables Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of debt investments with no active market Purchase of available-for-sale financial assets Purchase of financial assets measured at cost Payments for property, plant and equipment Interest received Acquisition of associates Dividend received Payment for intangible assets Proceeds from sale of available-for-sale financial assets (Increase) decrease in refundable deposits	2017 $ 244,506 26,727 25,928 (9,872) 7,720 7,506 (5,498) 5,342 (2,839) 1,219 (710) 434 374 (2) - 38,012 (76,992) 55,230 (44,740) 68,347 - 104,803 (18,417) 4,159 (650) 430,587 (42,219) 388,368 70,135 (27,798) (21,144) (12,337) 9,587 (9,450) 710 (633) 598 (335)	2016 $ 266,045 234 685 (7,051) 7,725 2,498 (4,549) 3,164 (8,135) 1,681 (2,300) (12,540) 1,198 - 8,556 156,812 (40,525) (222,917) (38,908) (75,679) (62) 165,619 40,092 (3,117) (793) 237,733 (38,920) 198,813 - (303) - (2,312) 8,125 (5,000) 2,300 - 34,085 465 (Continued)

20 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

Proceeds from disposal of property, plant and equipment Purchase of debt investments with no active market Proceeds from sale of held-to-maturity financial assets Net cash outflow on disposal of subsidiaries Proceeds from sale of financial assets measured at cost Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid Proceeds from long-term borrowings Repayment of long-term borrowings Changes in non-controlling interest Cash dividends paid to non-controlling interests Exercise of employee share options Interest paid Repayment of short-term borrowings Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET 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	2017 50 - - - - 9,383 (146,690) 4,000 (4,000) 3,000 (600) 375 (54) - (143,969) (23,186) 230,596 510,523 $ 741,119	2016 - (125,870) 50,388 (24,406) 2,000 (60,528) (121,266) - - 3,000 (300) - (631) (1,800) (120,997) (6,170) 11,118 499,405 $ 510,523

(Concluded)

21 -

INDEPENDENT AUDITORS' REPORT

The board of directors and Shareholders Zero One Technology Company Limited

Opinion

We have audited the accompanying parent company only financial statements of Zero One Technology Company Limited (the "Company"), which comprise the parent company only balance sheets as of December 31, 2017 and 2016, and the parent company only statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2017 and 2016, and its parent company only financial performance and its parent company only 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 Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, 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 parent company only financial statements for the year ended December 31, 2017. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Company's parent company only financial statements for the year ended December 31, 2017 are stated as follows:

Valuation of allowance for uncollectible accounts

Description

As indicated in Note 5 for critical accounting estimates and judgements, the Company assesses the collectability of accounts receivable and valuation of allowance for uncollectible accounts, based on considering future valuation of cash flows, and referencing credit limits, historical experience, and present financial conditions of customers. As the estimation of allowance for uncollectible accounts is subject to judgement of the management, and assumption of credit risks from customers, we consider the valuation of allowance for uncollectible accounts a key audit matter.

Allowance for Inventory Valuation Loss

Description

The valuation of the inventory of the Company includes the estimate of net realizable value and the

22 -

allowance for inventory valuation loss regarding with the outdated and obsolete inventory. Net realizable valuation, based on the historical data of market situation and similar products, of the inventory is the carrying amounts calculated by the estimate sales price deducts the estimate of input costs, and cost of goods sold, during the ordinary course of business. The material influence of market condition will affect the amount of net realizable valuation. Besides, the ratio of the allowance for inventory valuation loss is valued by inventory aging and the allowance for the actual loss We consider the estimate of net realizable valuation, and the ratio of the allowance for inventory impairment loss of the outdated and obsolete inventories a key audit matter, based on management's professional estimation.

Our procedure includes understanding the accounting policies, valuation methods, and citation information originality for the inventory of the Company, obtaining information of the year-end allowance for inventory valuation loss and inventory aging reports, drawing samples to ensure the reasonableness of the inventory as valued by net realizable value method and the inventory aging, and the carrying amount of the year-end allowance for inventory valuation loss fitting the Company’s accounting policy for allowance.

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

Management is responsible for the preparation and fair presentation of the parent company only 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 parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the 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 members of the supervisors) are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Parent Company Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 parent company only financial statements.

Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
23 -

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 parent company only 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 parent company only financial statements, including the disclosures, and whether the parent company only 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 parent company only financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion.

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 parent company only financial statements for the year ended December 31, 2017 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.

The engagement partners on the audit resulting in this independent auditors' report are Wen Chin Lin and Hsin Wei Tai.

Deloitte & Touche

Taipei, Taiwan Republic of China

February 26,2018

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.

24 -

ZERO ONE TECHNOLOGY CO., LTD.

BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale financial assets - current Debt investments with no active market - current Notes receivable Trade receivables Inventories Other current assets Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Debt investments with no active market - non-current Investments accounted for using the equity method Property, plant and equipment Other intangible assets Deferred tax assets Refundable deposits Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Trade payables Other payables Current tax liabilities Current portion of bonds payable Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities Net defined benefit liabilities - non-current Other noncurrent liabilities Total non-current liabilities Total liabilities EQUITY Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL		2017 Amount % $ 624,337 18 51,338 2 13,709 - 205,866 6 185,228 5 1,457,385 41 465,673 13 6,068 - 3,009,604 85 68,565 2 510 - 9,016 - 139,432 4 308,819 9 893 - 18,529 - 1,484 - 547,248 15 $ 3,556,852 100 $ 1,204,547 34 130,998 4 32,423 1 9,733 - 73,733 2 1,451,434 41 434 - 20,922 - 90 - 21,446 - 1,472,880 41 1,224,804 35 434,135 12 139,840 4 16,723 - 283,971 8 440,534 12 (15,501) - 2,083,972 59 $ 3,556,852 100		2016
				Amount % $ 449,929 13 83,896 3 3,480 - 273,160 8 106,354 3 1,515,562 45 437,154 13 80,677 2 2,950,212 87 48,861 2 510 - 8,867 - 48,421 1 302,077 9 952 - 16,325 1 1,152 - 427,165 13 $ 3,377,377 100 $ 1,083,960 32 144,392 4 20,353 1 28,563 1 69,978 2 1,347,246 40 - - 20,835 1 90 - 20,925 1 1,368,171 41 1,212,655 36 421,421 12 117,432 4 22,876 1 251,545 7 391,853 12 (16,723) (1) 2,009,206 59 $ 3,377,377 100

25 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE Net sales OPERATING COSTS Cost of goods sold GROSS PROFIT OPERATING EXPENSES Selling and marketing expenses General and administrative expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income Other gains and losses Share of profit or loss of subsidiaries associates and joint ventures Finance costs Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE NET PROFIT OTHER COMPREHENSIVE (LOSS) INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Income tax relating to items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss:		2017 Amount % $ 5,836,451 100 5,263,781 90 572,670 10 218,141 4 112,207 2 330,348 6 242,322 4 16,717 - 610 - (13,978) - (361) - 2,988 - 245,310 4 49,327 1 195,983 3 (737) - 125 - (612) -		2016
				Amount % $ 5,629,077 100 5,106,939 91 522,138 9 208,992 4 71,433 1 280,425 5 241,713 4 11,412 1 2,544 - 7,028 - (618) - 20,366 1 262,079 5 38,002 1 224,077 4 (2,966) - 504 - (2,462) -

(Continued)

26 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Unrealized gain (loss) on available-for-sale financial assets Share of other comprehensive income (loss) of subsidiaries, associates and joint ventures accounted for using the equity method Other comprehensive (loss) income for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 23) From continuing operations Basic Diluted		2017 Amount % 2,183 - (961) - 1,222 - 610 - $ 196,593 3 $ 1.61 $ 1.58		2016
				Amount % 6,153 - - - 6,153 - 3,691 - $ 227,768 4 $ 1.85 $ 1.82


		$		$

(Concluded)

27 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2016 Appropriation of the 2015 earnings Legal reserve Special reserve Cash dividends - NT$1.0 per share Changes in percentage of ownership interest in subsidiaries Recognition of employee share options by the Company Net profit for the year ended December 31, 2016 Other comprehensive income for the year, net of income tax Total comprehensive income for the year ended December 31, 2016 BALANCE, DECEMBER 31, 2016 Appropriation of 2016 earnings Legal reserve Special reserve Cash dividends - NT$1.2 per share Convertible bonds converted to capital stock Recognition of employee share options by the Company Issuance of ordinary shares under employee share options Net profit for the year ended December 31, 2017 Other comprehensive loss for the year, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017	Share Capital Shares (In Thousand) Issued Capital Capital Surplus 121,265 $ 1,212,655 $ 418,751 - - - - - - - - - - - (494) - - 3,164 - - - - - - - - - 121,265 1,212,655 421,421 - - - - - - - - - 1,188 11,879 7,267 - - 5,342 27 270 105 - - - - - - - - - 122,480 $ 1,224,804 $ 434,135	Retained Earnings	Total $ 291,504 - - (121,266) - - 224,077 (2,462) 221,615 391,853 - - (146,690) - - - 195,983 (612) 195,371 $ 440,534	Other Equity Unrealized Gain/(Loss) on Available-for- sale Financial Assets $ (22,876) - - - - - - 6,153 6,153 (16,723) - - - - - - - 1,222 1,222 $ (15,501)	Total Equity $ 1,900,034 - - (121,266) (494) 3,164 224,077 3,691 227,768 2,009,206 - - (146,690) 19,146 5,342 375 195,983 610 196,593 $ 2,083,972
		Unappropriated Legal Reserve Special Reserve Earnings $ 99,152 $ - $ 192,352 18,280 - (18,280) - 22,876 (22,876) - - (121,266) - - - - - - - - 224,077 - - (2,462) - - 221,615 117,432 22,876 251,545 22,408 - (22,408) - (6,153) 6,153 - - (146,690) - - - - - - - - - - - 195,983 - - (612) - - 195,371 $ 139,840 $ 16,723 $ 283,971

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ZERO ONE TECHNOLOGY CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax
Adjustments for:
Impairment loss recognized on trade receivable
Net loss on foreign currency exchange
Share of loss (profit) of subsidiaries, associates and joint ventures
Interest income
Depreciation expenses
Net gain on fair value change of financial assets/liabilities at fair
value through profit or loss
Compensation costs of employee share options
Reversal of write-down of inventories
Amortization expenses
Dividend income
Net loss (gain) on disposal of available-for-sale financial assets
Finance costs
Gain on disposal of property, plant and equipment
Impairment loss recognized on financial assets
Changes in operating assets and liabilities
Financial assets held for trading
Notes receivable
Trade receivables
Inventories
Other current assets
Trade payable
Other payable
Other current liabilities
Net defined benefit liabilities
Cash generated from operations
Income tax paid
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investments accounted for using equity method
Proceeds from sale of debt investments with no active market
Purchase of available-for-sale financial assets
Payments for property, plant and equipment
Interest received
Dividend received
Other dividends received
Payments for intangible assets
Proceeds from sale of available-for-sale financial assets
Increase in refundable deposits
Proceeds from disposal of property, plant and equipment

2017
2016
$ 245,310
$ 262,079
26,696
1,046
22,486
10,057
13,978
(7,028)
(9,592)
(6,828)
6,144
4,656
(5,498)
(4,549)
5,342
3,164
(4,943)
(8,112)
821
1,071
(710)
(2,300)
434
(12,540)
361
618
(2)
-
-
6,056
38,012
156,812
(78,874)
(37,891)
34,031
(218,201)
(25,278)
(38,522)
83,271
(60,665)
115,180
130,369
(13,863)
37,847
3,755
(13,211)
(650)
(793)
456,411
203,135
(38,902)
(36,992)
417,509
166,143
(109,450)
(7,100)
67,145
-
(18,822)
(303)
(11,232)
(2,108)
(8,535)
7,890
3,500
3,500
710
2,300
(633)
-
598
34,085
(332)
(480)
50
-
(Continued)

29 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

Purchase of debt investments with no active market Proceeds from sale of held-to-maturity financial assets Increase in prepayments Proceeds on financial assets measured at cost Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid Proceeds from long-term borrowings Repayment of long-term borrowings Exercise of employee share options Interest paid Increase in guarantee deposits Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) 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	2017 - - - - (77,001) (146,690) 4,000 (4,000) 375 (41) - (146,356) (19,744) 174,408 449,929 $ 624,337	2016 (127,853) 50,388 (10,920) 2,000 (48,601) (121,266) - - - (36) 90 (121,212) (5,910) (9,580) 459,509 $ 449,929

(Concluded)

30 -

`【` Attachment III `】`

Zero One Technology Company Limited The Issuance of 2018 Restricted Employee New Shares

Article 1 Issue purpose `：`

The company tends to attract and retain outstanding professionals, encourage excellent talents, and strengthen coherence of the company, for creating long-term company growth and benefits for employees and shareholders. The Issuance of Restricted Employee New Shares is enacted by the company, according to relevant regulations of Article 267 of the Company Act, and “Regulations Governing the Offering and Issuance of Securities by Securities Issuers”.

Article 2 Issue period ：
The issuer is allowed to register multiple issues over a period or by several times of 1 year from the date of the shareholders resolution, and issue new shares over a period or by several times of 1 year from the date next following the arrival of the notification of effective registration by the competent authority. The chairman shall declare the actual date of issuance.
Article 3 Qualification requirements ：
1.For all full-time employees who have serve starting from the Issue Date. The actual number of qualified employees shall be determined by the year of working experience, position, performance, contribution and any other factors regarding with conditions for management, decided by the chairman, and resolved by the board of directors.
2.Based on Article 56-1, paragraph 1 of “Regulations Governing the Offering and Issuance of Securities by Foreign Issuers”, the total number of employee stock warrants, also including the total number of restricted employee new shares, to be exercised by any employee within each fiscal year shall not exceed 0.3 percent of the year-end total outstanding common shares of the company, and the number of options granted to a single employee shall not exceed one percent of the total number of options granted, according to Article 56, paragraph 1 of “Regulations Governing the Offering and Issuance of Securities by Foreign Issuers”.

Article 4 Total amounts(shares) of issuance ：

The shares’ number of the issuance of restricted employee new shares is 700,000 by par value NT$ 10, a total of NT$ 7,000,000.

Article 5 Conditions of issuance ：

1.Issue price ： The current issue is gratuitous. The issue price is NT$ 0(per share).
2.The types of issued shares ： Besides the regulations based on Article 6, rights and obligation of restricted employee new shares is the same of these of ordinary shares.
3.Vesting conditions ：
(1)After employees received the vested shares, employees’ continuous employment with the company through the vesting period and achievement of personal performance are required to receive the vested shares by the portion of ：
Employees, continuous employment with the company for 1 year, will receive 25% of the vested shares.
Employees, continuous employment with the company for 2 year, will receive 25% of the vested shares.
Employees, continuous employment with the company for 3 year, will receive 25% of the vested shares.
Employees, continuous employment with the company for 4 year, will receive 25% of the vested shares.
31 -
(2)After employees received the vested shares from the company, it will redeem and cancel the issued restricted employee shares as employees breach the labor contract and working regulations, for the restricted employee new shares that don't meet the vesting conditions.

Article 6 Restricted rights before employees meet the vesting conditions ：

1.After receiving the vested shares, employees shall not sell, transfer, bestow, pledge, ask the company to redeem, or dispose in other way the unvested restricted shares, unless employees meet the vesting conditions.
2.For the restricted employee new shares that don't meet the vesting conditions, the rights of attending, proposal, speaking and voting in shareholders’ meeting of the restricted employee new shares are executed by the custodian according to the trust agreement.
3.Before the vested shares meet the conditions in line with the regulations, restricted stock awards are not entitled to acquire any benefits from cash dividends, stock dividends, Reduction of Capital, capital surplus of cash(stock), and any equity as distributed by merger, demerger, share transfer, etc., in line with relevant laws and regulations being legally prescribed.
4.After issuance, the restricted employee new shares must immediately be deposited in trust or custody. During the vesting period, there is no reason or way to request the trustee or custodian banks for return of the shares.
Article 7 Measures to be taken when employees fail to meet the vesting conditions ： Restricted employee new shares as redeemed by the company without charge will be cancelled.
Article 8 The handling process in case of employee resignation, temporarily on leave without pay, death, occupational casualty, or transfer ：
1.Ordinary resignation(voluntary resignation/retirement/laid off/dismissed) ：
When restricted employee new shares fail to meet the vesting conditions, they shall be redeemed without charge, and cancelled, as for not meeting the vesting conditions at the date of resignation.
2.Temporarily on leave without pay ：
The condition regarding with starting to temporarily no-paid leave for or over 3 months shall be deemed as failing to meet the vesting conditions at the starting date of temporarily no-paid leave. Restricted employee new shares shall be redeemed without charge, and cancelled, as for not meeting the vesting conditions.
3.Death ：

When restricted employee new shares fail to meet the vesting conditions, they shall be redeemed without charge, and cancelled, as for not meeting the vesting conditions at the date of death.

4.Occupational casualty ：

If employees can't work because of the occupational casualty, the vested shares shall be calculated by the portion of shares based on the vesting conditions, according to the proportion of days employed, as for not meeting the vesting conditions. 5.Transfer ：

For operational needs, the company may assign employees to transfer into related parties, hence the chairman shall decide their proportion of vested shares, according to stipulation of which proportion of shares being decided by continuous employment years. If employees volunteer to transfer, their restricted employee new shares shall be redeemed without charge, and cancelled.

32 -
In case of termination or changes of employment under circumstances other than those described above, as restricted employee new shares fail to meet the vesting conditions, it shall be redeemed without charge, and cancelled, as for not meeting the vesting conditions.

Article 9 Other important stipulations `：`

1.Tax ：
Employees will process the tax generated by exercising the vested shares, unless otherwise provided, according to the tax policy by the R.O.C government.
2.Confidentiality ：
Employees, who receive the vested shares, shall keep all the contract details confidential and shall not probe or release the content and shares granted details upon the day he/she receives the contract. Incumbents will face punishment upon breaching the labor contract and working regulations, based on Article 5, paragraph 3, subparagraph 2, and the company will redeem and cancel the issued restricted employee shares, for the new restricted employee shares that don't meet the vesting conditions.
3.Regulation ：
Based on the application and operational time for employees lists, signature, other matters, etc., regarding with the vested shares, the company shall notify employees, who receive the vested shares, to handle the matters, according to the regulations.
4.This plan has been approved by over 1/2 of the board members, as over 2/3 of the board members present in the board of director’s meeting, and is effective after the approval of the related authority. Any revisions or rectifications of the plan before issuance needs to obtain the approval as stated above. The chairman is authorized to make any revisions required by the governing authority during the auditing process and will obtain the approval from the board members prior to issuance.
5.The vested shares should be deposited in trust of stock, assigned the company or appointed proxy to sign and edit the relevant trust agreement with the trust organization, and deal with related matters for trust for employees who received the vested shares.
6.Any other matters not set forth in the plan shall be edited or executed by the Board of directors or an authorized person, unless otherwise provided, according to the applicable laws and regulations.
33 -

`【` Attachment IV `】`

Zero One Technology Company Limited

Comparison Table for Regulations Governing the Acquisition and Disposal of Assets Before and After Revision

==> picture [498 x 594] intentionally omitted <==

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

After the Revision Before the Revision Explanation
for edition
Article 7 ： Procedures for acquisition Article 7 ： Procedures for acquisition To edit the
or disposal of securities investment or disposal of securities investment regulations
1. (Omitted). 1. (Omitted). based on
2. Determination procedures of 2. Determination procedures of the fact as
conditions of the transaction and conditions of the transaction and required.
level of authorization level of authorization
(1)(Omitted). (1)(Omitted).
(2)When acquiring or disposing (2)When acquiring or disposing
securities that are not traded at securities that are not traded at
stock exchanges or securities stock exchanges or securities
dealers, the company shall dealers, the company shall
factor in the net value per share, factor in the net value per share,
technical analysis, profitability, technical analysis, profitability,
and future potential of such and future potential of such
securities as well as the market securities as well as the market
interest rate, coupon rate, debt interest rate, coupon rate, debt
credit rating, and recent credit rating, and recent
transaction price upon transaction price upon
acquisition or disposal. acquisition or disposal.
A.-B. ： (Omitted). A.-B. ： (Omitted).
C. As issuing the preferred
shares by purchasing and
initial subscription from the
financial holding company,
an approval of the chairman
shall be obtained, as the
preferred shares’ value of the
underlying equals to or under
NT$50 million; however, if
their value of the underlying
exceeds NT$50 million, a
resolution of the board of
directors shall be obtained.
D. Except for the transaction C.Except for the transaction
types for securities types for securities
investment mentioned investment mentioned
above, it shall be approved above, it shall be approved
by the chairman, as its by the chairman, as its
amount is under NT$ 10 amount is under NT$ 10
million. However. If its million. However. If its
amount exceeds the limit, a amount exceeds the limit, a
resolution of the board of resolution of the board of
directors shall be obtained. directors shall be obtained.
3.-4. ： (Omitted). 3.-4. ： (Omitted).
Article 16 ： Implementation and Article 16 ： Implementation and To edit the
Revision Revision regulations
1.(Omitted). 1.(Omitted). based on the
2.The Procedures has been 2.The Procedures has been fact.
approved to the shareholders’ approved to the shareholders’
meeting on June 11, 2018. meeting on June 14, 2017.
----- End of picture text -----

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8. Appendix

`【` Appendix I `】` Explanation for Dealing Shareholders’ Proposal

The shareholders’ meeting processes the application of the Shareholders’ Proposal, giving a public notice announcing on the Market Observation System, from April 3, 2018 to April 13, 2018. During the given period, the application for dealing shareholders’ proposal was not received.

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`【` Appendix II `】`

Zero One Technology Company Limited Rules of Procedure for Shareholders Meetings

Article 1 The rules of procedures for this Corporation's shareholders’ meetings, except as otherwise provided by law, regulation, or Articles of incorporation, shall be as provided in these Rules.

Article 2 ;The company shall furnish the attending shareholders with an attendance book to sign, or attending shareholders may hand in a sign-in card in lieu of signing in. Shareholders attending at shareholders’ meetings shall wear attendance cards.

The number of shares in attendance shall be calculated according to the shares indicated by the attendance book and sign-in cards handed in plus the number of shares whose voting rights are exercised by correspondence or electronically.

Article 3 Attendance and voting at shareholders’ meetings shall be calculated based on numbers of shares. A shareholder shall be entitled to one vote for each share held, except when the shares are restricted shares or are deemed non-voting shares under Article 179 of the Company Act.

When the company holds a shareholders’ meeting, it may allow the shareholders to exercise voting rights by electronic and correspondence means. When voting rights are exercised by correspondence or electronic means, the method of exercise shall be specified in the shareholders’ meeting notice. A shareholder exercising voting rights by correspondence or electronic means will be deemed to have attended the Meeting in person, but to have waived his/her rights with respect to the extraordinary motions and amendments to original proposals of that Meeting.

Article 4 ;The venue for a shareholders’ meeting shall be the premises of this Corporation, or a place easily accessible to shareholders and suitable for a shareholders’ meeting. The Meeting may begin no earlier than 9 a.m. and no later than 3 p.m. Full consideration shall be given to the opinions of the independent directors with respect to the place and time of the Meeting.
Article 5 ;If a shareholders’ meeting is convened by the board of directors, the Meeting shall be chaired by the chairperson of the board. When the chairperson of the board is on leave or for any reason unable to exercise the powers of the chairperson, the chairperson shall
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appoint one of the directors to act as chair. Where the chairperson does not make such a designation, the directors shall select from among themselves one person to serve as chair.

If a shareholders’ meeting is convened by a party with power to convene but other than the Board of directors, the convening party shall chair the Meeting.

Article 6 The company appoints its attorneys, certified public accountants, or related persons retained by it to attend a shareholders’ meeting. Persons handling affairs of the Meeting shall wear identification cards or badges.

Article 7 The process of the Meeting shall be audio and video recording as preserved for at least 1 year.

Article 8 The chairman shall call the Meeting to order at the time scheduled for the Meeting. If the number of shares represented by the shareholders present at the Meeting has not yet constituted the quorum at the time scheduled for the Meeting, the chairman may postpone the time for the Meeting. The postponements shall be limited to two times at the most and Meeting shall not be postponed for longer than one hour in the aggregate. If after two postponements no quorum can yet be constituted but the shareholders present at the Meeting represent more than one - third of the total outstanding shares, tentative resolutions may be made in accordance with paragraph 1 of Article 175 of the company Law of the Republic of China.

If, prior to conclusion of the Meeting, during the process of the Meeting the number of outstanding shares represented by the shareholders present becomes sufficient to constitute the quorum, the chairman may submit the tentative resolutions to the Meeting for approval in accordance with Article 174 of the company Law of the Republic of China.

Article 9 ; If a shareholders’ meeting is convened by the board of directors, the Meeting agenda shall be set by the board of directors. The Meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders’ meeting. The provisions of the preceding paragraph apply mutatis mutandis to a shareholders’ meeting convened by a party with the power to convene that is not the board of directors.

The chair may not declare the Meeting adjourned prior to completion of deliberation on the Meeting agenda of the preceding two paragraphs (including extraordinary motions),

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except by a resolution of the shareholders’ meeting.

The shareholders cannot designate any other person as the chairman and continue the Meeting in the same or other place after the Meeting is adjourned. If the chair declares the Meeting adjourned in violation of the rules of procedure, the other members of the board of directors shall promptly assist the attending shareholders in electing a new chair in accordance with statutory procedures, by agreement of a majority of the votes represented by the attending shareholders, and then continue the Meeting.

Article 10 Before speaking, an attending shareholder must specify on a speaker's slip the subject of the speech, his/her shareholder account number (or attendance card number), and account name. The order in which shareholders speak will be set by the chair. A shareholder in attendance who has submitted a speaker's slip but does not actually speak shall be deemed to have not spoken. When the content of the speech does not correspond to the subject given on the speaker's slip, the spoken content shall prevail. When an attending shareholder is speaking, other shareholders may not speak or interrupt unless they have sought and obtained the consent of the chair and the shareholder that has the floor; the chair shall stop any violation.

Article 11 Except with the consent of the chair, a shareholder may not speak more than twice on the same proposal, and a single speech may not exceed 5 minutes. If the shareholder's speech violates the rules or exceeds the scope of the agenda item, the chair may terminate the speech.

Article 12 When a juristic person is appointed to attend as proxy, it may designate only one person to represent it in the Meeting.

When a juristic person shareholder appoints two or more representatives to attend a shareholders’ meeting, only one of the representatives so appointed may speak on the same proposal.

Article 13 After an attending shareholder has spoken, the chair may respond in person or direct relevant personnel to respond.

Article 14 The chairman may announce to end the discussion of any resolution and go into voting if the chairman deems it appropriate.

Article 15 Vote monitoring and counting personnel for the voting on a proposal shall be appointed

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by the chair, provided that all monitoring personnel shall be shareholders of the company.

At the time of a vote, for each proposal, the chair or a person designated by the chair shall first announce the total number of voting rights represented by the attending shareholders, followed by a poll of the shareholders. The results of the voting shall be announced on-site at the Meeting, and a record made of the vote.

Article 16 When a Meeting is in progress, the chair may announce a break based on time considerations.
Article 17 ;;Except otherwise specified in the company Law of the Republic of China or Articles of Incorporation of the company, a resolution shall be adopted by a majority of the votes represented by the shareholders present at the Meeting. The resolution shall be deemed adopted and shall have the same effect as if it was voted by casting ballots if no objection is voiced after solicitation by the chairman.
Article 18 ; When there is an amendment or an alternative to a proposal, the chair shall present the amended or alternative proposal together with the original proposal and decide the order in which they will be put to a vote. When any one among them is passed, the other proposals will then be deemed rejected, and no further voting shall be required.

Article 19 ; The chair may direct the proctors (or security personnel) to help maintain order at the Meeting place. When proctors (or security personnel) help maintain order at the Meeting place, they shall wear an identification card or armband bearing the word "Proctor."

Article 20 In regard to all matters not provided for in the company Law of the Republic of China, and Articles of Incorporation shall govern.

Article 21 ; These Rules, and any amendments hereto, shall be implemented after adoption by shareholders’ meetings.

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`【` Appendix III `】`

Zero One Technology Company Limited

Regulations Governing the Acquisition and Disposal of Assets Before Revision

Article 1 Purpose

Disposal procedures hereto are stipulated for the purpose of asset guarantee and complete information publication.

Article 2 Legal Basis
The procedures are set forth in accordance with provisions of Article 36-1 of the Securities and Exchange Act, “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”, as released by Financial Supervisory Commission(“FSC”).
Article 3 “Assets” as used herein should mean：
Securities investments in stocks, government bonds, corporate bonds, financial bonds, securities representing interest in a fund, depositary receipts, call (put) warrants, beneficial interest securities, and asset-backed securities, etc.
Real property (including land, houses and buildings, investment property, rights to use land, and construction enterprise inventory) and equipment.
Memberships.
Intangible assets：Patents, copyrights, trademarks, franchise rights, and other
intangible assets.
Derivatives.
Assets acquired or disposed of in connection with mergers, demergers, acquisitions, or transfer of shares in accordance with law.
Other major assets.
Article 4 Limits of amounts in acquisition of non-operating related real estate and securities investment The above assets’ limitation of amounts of the company thereof are as follows：
1.;The acquisition of real estate for non-operating purpose should not exceed 10% of the company’s net worth.
2.;The total amount of security investments by the company shall not exceed 40% of the company’s paid-in capital (not including assets that belongs to the bond fund of profit stability and 100% principal guaranteed fund).
3.;The amount of investment in each respective security should not exceed 20% of the company’s net worth.
Article 5 Professional appraisers and their officers, CPA, attorneys, and securities underwriters that provide the company with appraisal reports, CPA's opinions, attorney's opinions, or underwriter's opinions shall not be a related party of any party to the transaction.
Article 6[Procedures for acquisition or disposal of real estate or equipment are as follows][：]
Evaluation and operating procedures
Acquisition or disposal of real estate and other fixed assets shall follow the company’s internal control procedures of fixed assets.
Determination procedures of conditions of the transaction and level of authorization
(1)The transaction price of acquisition or disposal of real estate shall reference the publicly announced value, appraised price, and actual transaction price in neighboring area to determine conditions and price, and an analytical repot shall be made and submitted to the chairman. Where each transaction prices are under NT$ 20 million, approval from the chairman and the matter for discussion of the next board of directors shall be reported. and as it exceeds NT$ 20 million, a resolution of the board of directors shall be obtained.
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- (2)The transaction price of acquisition or disposal of other fix assets shall be determined either by price quotation, price comparison, price negotiation or tender, and final transaction price under NT$ 10 million shall be approved in accordance with the level of authorization. Where each transaction price exceeds NT$ 10 million, approval from the chairman and a resolution of the board of directors shall be obtained.
Execution department
Where the company acquires or disposes real estate or other fixed assets, appropriate approval shall be obtained in accordance with the level of authorization, as well as responsible and management department shall execute accordingly.
Appraisal report of real estate and other fixed assets In acquiring or disposing real estate or other fixed assets where the transaction price reaches 20% of the company's paid-in capital or NT$300 million or more, the company shall obtain an appraisal report prior to the date of occurrence from a professional appraiser and shall further comply with the following provisions, except trading with a government agency, contracting third parties to build on the land owned or rented by the company, or acquiring or disposing of machinery and equipment for operating purposes：
- (1)Where due to special circumstances and it is necessary to give a restricted price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval from the board of directors in advance, and the same procedure shall be followed for any future changes to the terms and conditions of the transaction.
- (2)Where the transaction price equals to or exceeds NT$1 billion, appraisals from two or more professional appraisers shall be obtained.
- (3)Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, except the actual acquisition price is lower than the appraised price or the actual disposal price is higher than the appraised price, a CPA shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ARDF and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price ：
  - A. The difference between the appraised price and the actual transaction price equals to or exceeds 20% of the transaction price.
  - B.The difference between the appraised prices of two or more professional
appraisers equal to or exceeds 10 % of the transaction price.
- (4)Where a professional appraisal is conducted prior to the contract date, the appraisal report should have been issued within 3 months of the contract date. However, if the object’s publicly announced value is still the same and the appraisal report, and the report was issued no longer than 6 months, then the original professional appraiser may provide opinions. Where the company acquires or disposes assets through court auction, the certificate issued by the court can be used to replace appraisal report or CPA opinions.
- (5)Where the company acquires or disposes assets through court auction, the certificate issued by the court can be used to replace appraisal report or CPA opinions.
- (6) The transaction prices as mentioned in this Article Shall follow the regulations of Article 13, paragraph 1.
Article 7[Procedures for acquisition or disposal of securities investment are as follows][：]
Evaluation and operating procedures
Acquisition or disposal of securities investment shall follow the company’s internal control procedures of investment.
Determination procedures of conditions of the transaction and level of authorization
(1)When acquiring the negotiable securities that are traded at stock exchanges or securities dealers：
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- A. The transaction amounts for merger arbitrage is under NT$ 50 million；
- B. The single target amounts regarding with the sales and purchase of the convertible bonds, under the put price, equal to or under NT$ 50 million；
- C.Except for the transaction types for securities investment mentioned above, it shall be approved by the chairman, as its amount is under NT$ 10 million. However. If its amount exceeds the limit, a resolution of the board of directors shall be obtained.
(2)When acquiring or disposing securities that are not traded at stock exchanges or securities dealers, the company shall factor in the net value per share, technical analysis, profitability, and future potential of such securities as well as the market interest rate, coupon rate, debt credit rating, and recent transaction price upon acquisition or disposal.
- A. An approval of the sales and purchase of initial issued and subscription of the convertible bond, as its amount is under NT$ 50 million, of the chairman shall be obtained. If its amount exceeds NT$ 50 million, a resolution of the board of directors shall be obtained.
- B. An approval of the sales and purchase of financial commodities of fixed income(such as, the fund bond, repurchase agreement, etc.) of the chairman shall be obtained;
- C. Except for the transaction types for securities investment mentioned above, it shall be approved by the chairman, as its amount is under NT$ 10 million. However. If its amount exceeds the limit, a resolution of the board of directors shall be obtained.
Execution department
Where the company acquires or disposes securities investment, appropriate approval shall be obtained in accordance with the level of authorization and financial department shall execute accordingly.
4.:Obtaining an expert opinion
(1)In acquiring or disposing securities where the transaction price, as referred to audited or reviewed financial statements by CPA, reaches 20% of the company’s paid-in capital or exceeds NT$300 million, opinions regarding the transaction price from CPA shall be obtained prior to the date of occurrence. Where CPA’s opinion is based on the professional opinions, it shall be prepared in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ARDF. Where the transaction price is available in the open market or otherwise regulated by the Financial Supervisory Commission (“SFC”), the limitation shall not apply.
(2)Where the company acquires or disposes assets through court auction, the certificate issued by the court can be used to replace appraisal report or CPA’s opinions.
(3)The transaction prices as mentioned in this Article Shall follow the regulations of Article 13, paragraph 1.
Article 8 The related party transactions for acquisition and disposal of real estate
1.When the company engages in any acquisition or disposal of assets from or to a related party, in addition to the procedures set forth in Article 6 and 7, if the transaction amount reaches 10 percent or more of the company's total assets, the company shall also obtain an appraisal report from a professional appraiser or a CPA's opinion in compliance with Article 6 and 7.
2.Evaluation and operating procedures
When the company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises, the company’s following matters shall be
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approved by the board of directors and recognized by the supervisors, and then the company is allowed to sign the transaction contract and pay ：

(1)The purpose, necessity and anticipated benefit of the acquisition or disposal of assets.
(2)The reason for choosing the related party as a trading counterparty.
(3)With respect to the acquisition of real property from a related party, information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with paragraph 13, subparagraph 1 and 4.
(4)The date and price at which the related party originally acquired the real property, the original trading counterparty, and that trading counterparty's relationship to the company and the related party.
(5)Monthly cash flow forecasts for the year commencing from the anticipated month of signing of the contract, and evaluation of the necessity of the transaction, and reasonableness of the funds utilization.
(6)An appraisal report from a professional appraiser or a CPA's opinion obtained in compliance with the preceding Article.
(7)Restrictive covenants and other important stipulations associated with the transaction.

The calculation of the transaction amounts referred to in the preceding paragraph shall be approved by the board of directors and recognized by the supervisors need not be counted toward the transaction amount.

With respect to the acquisition or disposal of business-use equipment between the company and its parent or subsidiaries, the company's board of directors may pursuant to Article 6, paragraph 2, subparagraph 2 delegate the chairman to decide such matters when the transaction is within a certain amount and have the decisions subsequently submitted to and ratified by the next board of directors.

If the position of the independent director has been created, when a matter is submitted for discussion by the board of directors pursuant to paragraph 1, the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting.

Evaluation of the reasonableness of the transaction costs
(1)The company that acquires real property from a related party shall evaluate the reasonableness of the transaction costs by the following means ：
- A. Based upon the related party's transaction price plus necessary interest on funding and the costs to be duly borne by the buyer. "Necessary interest on funding" is imputed as the weighted average interest rate on borrowing in the year the company purchases the property; provided, it may not be higher than the maximum non-financial industry lending rate announced by the Ministry of Finance.
- B. Total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided, the actual cumulative amount loaned by the financial institution shall have been 70 percent or more of the financial institution's appraised loan value of the property and the period of the loan shall have been 1 year or more. However, this shall not apply where the financial institution is a related party of one of the trading counterparties.
(2)Where land and structures thereupon are combined as a single property purchased in one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in the preceding paragraph.
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(3)The company that acquires real property from a related party and appraises the cost of the real property in accordance with paragraph 3, subparagraph 1 and 2 of this Article shall also engage a CPA to check the appraisal and render a specific opinion.
(4)When the related Party Transactions for acquisition of real estate conducted in accordance with paragraph 3, subparagraph 1 and 2 of this Article are uniformly lower than the transaction price, the matter shall be handled in compliance with paragraph 3, subparagraph 5 of this Article. However, where the following circumstances exist, objective evidence has been submitted and specific opinions on reasonableness from a professional real property appraiser and a CPA have been obtained, this restriction shall not apply ：
A. Where the related party acquired undeveloped land or leased land for development, it may submit proof of compliance with one of the following conditions ：
- (a)Where undeveloped land is appraised in accordance with the means in the preceding Article, and structures according to the related party's construction cost plus reasonable construction profit are valued in excess of the actual transaction price. The "Reasonable construction profit" shall be deemed the average gross operating profit margin of the related party's construction division over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower.
- (b)Completed transactions by unrelated parties within the preceding year involving other floors of the same property or neighboring or closely valued parcels of land, where the land area and transaction terms are similar after calculation of reasonable price discrepancies in floor or area land prices in accordance with standard property market practices.
- (c)Completed leasing transactions by unrelated parties for other floors of the same property from within the preceding year, where the transaction terms are similar after calculation of reasonable price discrepancies among floors in accordance with standard property leasing market practices.
B. Where the company acquiring real estate from a related party and the terms of the transaction are similar to the terms of the recent transactions for acquisition of neighboring or closely valued parcels of land of a similar size by unrelated parties within the preceding year. Where the recent transactions for neighboring or closely valued parcels of land mentioned in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transaction for similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within one year refers to one year from the actual date of acquisition of the real estate.
(5)When the appraised values of real estate acquired by the company from related parties according to paragraph 3, subparagraph 1 and 2 of this Article is lower than the transaction price, the situation shall be handled in the following manner. Moreover, if the company uses the equity method to account for its investment in another company and sets aside a special reserve according to the above provision, it may not utilize the special reserve until it has recognized a loss on decline in market value of the assets it purchased at a premium, or they have been disposed of, or adequate compensation has been made, or the status quo ante has been restored, or there is other evidence to confirm there was nothing unreasonable in the transaction, and the Financial Supervisory Commission has given its consent.
A. A special reserve shall be set aside in accordance with Article 41, paragraph 1 of
- “Securities and Exchange Act” against the difference between the real property
44 -

transaction price and the appraised cost, and may not be distributed or used for capital increase or issuance of bonus shares. Where the company uses the equity method to account for its investment in another public company, then the special reserve called for under Article 41, paragraph 1 of “Securities and Exchange Act” shall be set aside pro rata in a proportion consistent with the share of the company's equity stake in the other company.

B. Supervisors shall comply with Article 218 of the Company Act.
C. Actions taken pursuant to paragraph 3, subparagraph 5, A. and B., of this Article shall be reported to the shareholders’ meeting, and the details of the transaction shall be disclosed in the annual report and any investment prospectus.
(6)Where the company acquires real estate from a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with the provisions about accessing and operating procedures of paragraph 1 and 2 of this Article, while subparagraph 1, 2 and 3 of paragraph 3 of this Article shall not apply ：
A. The related party acquired the real estate through inheritance or as a gift.
B. More than five years had elapsed from the time the related party signed the contract to obtain the real estate to the signing date for the current transaction.
C. The real property is acquired through signing of a joint development contract, building on the land owned or rented by the company with the related party.
(7)Where the company obtains real estate from a related party, it shall also comply with the provisions set forth in the subparagraph 5 of paragraph 3 of this Article, if there is other evidence indicating that the acquisition was not an arm’s length transaction.

Article 9 Procedures for acquisition or disposal of membership or intangible assets are as follows ： 1. Evaluation and operating procedures

Acquisition or disposal of membership or intangible assets regarding with evaluation and operating procedures shall follow the company’s internal control procedures of asset management.
Determination procedures of conditions of the transaction and level of authorization
(1)The transaction price of acquisition or disposal of membership shall refer to the market value, terms and conditions and transaction price and a report shall be prepared for submission to the chairman. Where the transaction price exceeds NT$1 million, approval from the chairman shall be obtained, and the matter for discussion of the board of directors shall be reported. If the transaction price exceeds NT$1 million, a resolution of the board of directors shall be obtained.
(2)The transaction price of acquisition or disposal of intangible assets shall refer to professional opinion or the market value, terms and conditions and transaction price and a report shall be prepared for submission to the chairman. Where the transaction price exceeds 3% of the company’s paid-in capital or under NT$20 million, approval from the chairman shall be obtained, and the matter for discussion of the board of directors shall be reported. If the transaction price exceeds NT$20 million, a resolution of the board of directors shall be obtained.
(3)With respect to the company's acquisition or disposal of assets that is subject to the approval of the board of directors under the company's procedures or other laws or regulations, if a director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the director's dissenting opinion to each supervisor. Where the position of the independent director has been created, when a transaction involving the acquisition or disposal of assets is submitted for discussion by the board of directors pursuant to the preceding paragraph, the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors’ meeting.
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Execution Where the company acquires or disposes membership or intangible assets, appropriate approval shall be obtained in accordance with the level of authorization and responsible, as well as financial and management departments shall execute accordingly.
Professionals’ opinions about membership and intangible assets shall be reported under the following circumstances:
- (1)The transaction price of acquiring or disposal of membership reaches 1% of the company’s paid-in capital or above NT$3 million.
- (2)The transaction price of acquiring or disposal of intangible assets reaches 5% of the company’s paid-in capital or above NT$20 million.
- (3)Where the transaction price of acquiring or disposing membership or intangible assets reaches 20% of the company’s paid-in capital or exceeds NT$300 million, CPA’s opinion, in compliance with the Provisions of Statement of Auditing Standards No. 20 published by the ARDF, shall be obtained prior to the date of Occurrence, except for transactions with the governmental sector.
Article 10 Procedures for acquisition or disposal of Claims of financial institutions.

In principle, the company does not conduct any trading regarding acquisition or disposal of claims of financial institutions. Where the trading is intended in the future, relevant operating procedures shall be approved and resolved these procedures by the board of directors.

Article 11 Procedures for acquisition or disposal of financial derivatives are as follows

Trading principles and strategies
(1)Types of instrument
- A. Financial derivatives referred herein are broadly defined as instruments that derive their value from the performance of underlying assets, interest or currency exchange rates, indexes, or other instrument such as forwards, options, futures, interests or currency exchange rates, swaps, and various combinations thereof.
- B. Claims of financial institutions shall be conducted in accordance with the procedures set forth, but transactions for the repurchase agreement shall not apply.
(2)Strategies
- Financial derivatives are mainly used for hedging purpose and the selection of instruments shall correlate or associate with the business operation. In order to reduce the overall currency exposures and hedging cost, the currency of the position held shall be the same as the one used for business activities, and the position of the currency (account receivable and payable in foreign currency) shall be balanced. The transaction of specific purpose shall be evaluated carefully, as well as prior approval and a resolution of the board of directors shall be obtained.
(3)Authorization and delegation
- A. Trader
  - (a)To establish financial derivative strategies for the company.
  - (b)To evaluate holding of the positions every two week periodically, establish trading strategies based on the judgment of the market intelligence and submit for approval.
  - (c)To execute the trading in accordance with the level of authorization.
  - (d)Shall material incident occur in the financial market and existing strategies is no longer applicable, new trading strategies shall be proposed and used as the basis for trading upon approval from the chairman.
- B. Accountant
  - (a)Confirmation of transactions executed.
  - (b)To verify if transactions respond to level of authority and strategies.
(c)To valuate financial derivatives every month, and submit a report to the
chairman.
```
 - (d)Bookkeeping handling.
```
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- (e)To conduct a report and declaration in accordance to FSC.
C. Settlement ： To execute the settlement.
D. Level of approval
- (a)Level of each transaction of hedging purpose shall be approved by the chairman.
- (b)Transaction of other purposes shall only be preceded upon approval from the board of directors.
- (c)With respect to the company’s acquisition or disposal of assets that is subject to the approval of the board of directors under the company's procedures or other laws or regulations, if a director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the director's dissenting opinion to each supervisor. Where the position of the independent director has been created in accordance with the provisions of the Act, when a transaction involving the acquisition or disposal of assets is submitted for discussion by the board of directors pursuant to the preceding paragraph, the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting.
E. Internal Audit
- Internal audit shall be aware of the adequacy of the derivative transaction on a periodic basis and should issue monthly audit report based on the compliance of the derivative transaction. Shall there be any material violation; a written notice shall be sent to the board of directors.
(4)Performance Evaluation
A. Trading with hedging purpose
- (a)The evaluation basis is the profit/loss between cost of the currency on the book and derivative transaction.
- (b)To fully comprehend the risks of evaluation, the company shall conduct evaluation based on the monthly closing.
- (c)The Finance department shall provide evaluation of the foreign currency based position, the market trend and analysis of foreign currency to the president for their review.
B. Trading with specific purpose

The evaluation shall be conducted based on the actual profit/loss and the Finance personnel shall prepare financial statements based on the position held for management’s review on a periodic basis.

(5)Total transaction amount, and the maximum limit of loss
A. The Contract Amount
- (a)Transaction amount for hedging purpose

The Finance Department shall be in control of the currency based position to avoid any transaction risks. The transaction amount for hedging purpose shall not exceed the internal currency based position within the company (the difference between foreign currency based current asset and foreign currency based liabilities). The chairman’s approval is required if the transaction amount exceeded the aforementioned limit.

(b)Transaction for specific purpose

Based on the observation of the market, the Finance Department shall prepare responsive strategies for review and approval from the president and chairman. When the net accumulative contract amount of the transaction for specific purpose exceeds US$ 10 Million, an instruction for the transaction of board of directors shall be approved.

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- B. Maximum Limit of Loss
  - (a)The purpose of hedging is to avoid risks and the total aggregated loss amount of transactions based on hedging purpose shall not exceed US$500,000.
  - (b)The loss of transactions based on specific purpose shall not exceed US$100,000, or 5% of amounts of transactions. If the loss amount exceeds the limit, the responsible persons shall be notified and responsive actions shall be discussed in the meeting.
  - (c)Loss amount per individual contract shall not exceed US$20,000, or 5% of amounts of transactions.
  - (d)Total annual aggregated loss amount of transaction based on specific purpose shall not exceed US$300,000.
Measures of Risk management
(1)Credit risk control

As every factor varied in the markets will induce risks of derivatives, measures of risk management shall be conducted as follows ：

A. Counterparty ： Well-known domestic and overseas financial institutions.
B. Trading Instruments ： Financial instruments offered by the above mentioned

financial institutions.

C. Transaction amounts ： The transaction amounts without written-off of the same
- parties shall not exceed 10% of the total authorized amounts, except having the approval by the chairman.
(2)Market risk control
Primarily the open currency market provided by the banks, excluding the option market.
(3)Liquidity risk control

To ensure liquidity, financial instruments with high liquidity shall be chosen(as the position of financial instruments shall be balanced over any time zone in the markets) and financial institutions responsible for trading shall provide sufficient information and have the capability to trade in any markets over any time zone.

(4)Cash-Flow risk control

To maintain stable turnover of the working capital of the company, the source of the capital for derivative transaction shall be self funded, and the transaction shall take future capital needs for 3 months into consideration.

(5)Operating risk control
A. To comply with the authorized amount, procedures and internal audit processes.
B. Different personnel shall be assigned for trading, confirmation and settlement.
C. Personnel who is in charge of risk evaluation, monitoring and controlling shall not be in same department as those described in the preceding paragraph, and reporting shall be made to the board of directors or the management who is not responsible for trading or determination of position.
D. The position held under the derivative trading shall be evaluated once a week, while transaction associated with hedging purpose shall be evaluated twice per month, and the evaluation reports shall be submitted to the management authorized by the board of directors.
(6)Financial instrument risk control
Personnel, who is in charge of the trading, shall have sufficient knowledge and professional skills of the financial instrument and shall request the banks to fully disclose associated risks, lest financial instrument risk is misled.
(7)Legal risk control
Any documents with financial institutions can only be signed after reviewing by the legal department or legal counsels.
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Internal audit system
- The company's internal audit personnel shall periodically make a determination of the suitability of internal controls on derivatives and conduct a monthly audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, and prepare an audit report. If any material violation is discovered, all supervisors shall be notified in writing.
Auditing principle by the board of directors
- (1)The board of directors shall assign the management to constantly monitor and control the risks of derivative transaction with the following principles:
  - A. To conduct periodic review and check if the risk management measures are adequate and in compliance with the internal procedures.
  - B. To monitor the trading and its performance. Shall there be any material event, the board of directors shall be informed and necessary actions shall be taken. If the company has had independent directors, they shall submit opinions and attend the board of directors.
- (2)To check if the performance meets the business strategy and to determine if the risks are within the corporate tolerance level periodically.
- (3)Derivative transaction shall be conducted in accordance with the relevant procedures and reported to the board of directors afterwards.
- (4)To establish a reference book for derivative transaction with detailed information, including its type, amount, approval date from the board of Directors and evaluation items listed in the subparagraph 1 and 2 of paragraph 4 of this Article.
Article 12 Procedures for mergers, spin-off, acquisition and share transfer are as follows
1.Evaluation and operating procedures
- (1)CPA, attorney, and securities underwriter shall be engaged to schedule project timetable and a task force shall be formed to execute the project according to statutory rules and regulations. Prior to convening the board of directors to resolve on the matter, a CPA, attorney, or securities underwriter shall give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and submit it to the board of directors for deliberation and passage. However, the requirement of obtaining an aforesaid opinion on reasonableness issued by an expert may be exempted in the case of a merger by the company of a subsidiary in which it directly or indirectly holds 100 percent of the issued shares or authorized capital, and in the case of a merger between subsidiaries in which the company directly or indirectly holds 100 percent of the respective subsidiaries’ issued shares or authorized capital.
- (2)The company participating in a merger, demerger, or acquisition shall prepare a public report to shareholders detailing important contractual content and matters relevant to the merger, demerger, or acquisition prior to the shareholders’ meeting and include it along with the expert opinion referred to in the subparagraph 1 of ;paragraph 1 of this Article when sending shareholders notification of the shareholders’ meeting for reference in deciding whether to approve the merger, demerger, or acquisition. Provided, where a provision of another act exempts a company from convening the shareholders’ meeting to approve the merger, demerger, or acquisition, this restriction shall not apply. Where the shareholders’ meeting of any one of the companies participating in a merger, demerger, or acquisition fails to convene or pass a resolution due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is rejected by the shareholders’ meeting, the companies participating in the merger, demerger or acquisition shall immediately publicly explain the reason, the follow-up measures, and the preliminary date of the next shareholders’ meeting.
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2.Others

(1)The board of Directors meeting date and reporting ： The company participating in a merger, demerger, or acquisition shall convene a board of directors meeting and shareholders’ meeting on the day of the transaction to resolve matters relevant to the merger, demerger, or acquisition, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent. The company participating in a transfer of shares shall call a board of directors meeting on the day of the transaction, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent. When participating in a merger, demerger, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall prepare a full written record of the following information and retain it for 5 years for reference.
A. Basic identification data for personnel: Including the occupational titles, names, and national ID numbers of all persons involved in the planning or implementation of any merger, demerger, acquisition, or transfer of another company's shares prior to disclosure of the information.
B. Dates of material events: Including the signing of any letter of intent or memorandum of understanding, the hiring of a financial or legal advisor, the execution of a contract, and the convening of a board of directors.
C. Important documents and minutes: Including merger, demerger, acquisition, and share transfer plans, any letter of intent or memorandum of understanding, material contracts, and minutes of the board of directors’ meetings.

The company that is listed on an exchange or has its shares traded on an OTC market shall, within 2 days counting inclusively from the date of passage of a resolution by the board of directors, report the information set out in subparagraphs 1 and 2 of the preceding paragraph in the prescribed format and via the Internet-based information system.

(2)Non-disclosure commitment ： Every person participating in or privy to the plan for
merger, spin-off, acquisition, or share transfer shall issue a written undertaking of confidentiality and may not disclose the content of the plan prior to public disclosure of the information and may not trade, in their own name or under the name of another person, in any stock or other equity security of any company related to the plan for merger, spin-off, acquisition, or transfer of shares.
(3)Pricing principles for transfer or acquisition of shares ： Companies participating in a share transfer shall engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and submit it to the shareholders’ meeting. Acquisition or share transfer may not arbitrarily alter the share exchange ratio or acquisition price unless under the below-listed circumstances, and shall stipulate the circumstances permitting alteration in the contract for the merger, spin-off, acquisition, or transfer of shares ：
A. Cash capital increase, issuance of convertible corporate bonds, or the issuance of bonus shares, issuance of corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity based securities.
B. An action, such as a disposal of major assets, that affects the company's financial operations.
C. An event, such as a major disaster or major change in technology, that affects shareholder equity or share price.
D. An adjustment where any of the companies participating in the merger, demerger, acquisition, or transfer of shares from another company, buys back treasury stock.
E. An increase or decrease in the number of entities or companies participating in the merger, demerger, acquisition, or transfer of shares.
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F. Other terms/conditions that the contract stipulates may be altered and that have been publicly disclosed.
(4) Content of contract ： The contract of the companies participating in the merger,
- spin-off, acquisition, or share transfer, under Article 317-1 of “the Company Act” and Article 22 of Business Mergers and Acquisitions Act, shall also record the followings.
A. Handling of breach of contract.
B. Principles for the handling of equity-type securities previously issued or treasury stock previously bought back by any company that is extinguished in a merger or that is demerged.
C. The amount of treasury stock participating companies are permitted under law to buy back after the record date of calculation of the share exchange ratio, and the principles for handling thereof.
D. The manner of handling changes in the number of participating entities or companies.
E. Preliminary progress schedule for plan execution, and anticipated completion date.
F. Scheduled date for convening the legally mandated shareholders’ meeting if the plan exceeds the deadline without completion, and relevant procedures.
(5)Changes of companies participating in mergers, spin-off, acquisition and share transfer ： after public disclosure of the information, if any company participating in the merger, demerger, acquisition, or share transfer intends further to carry out a merger, demerger, acquisition, or share transfer with another company, all of the participating companies shall carry out anew the procedures or legal actions that had originally been completed toward the merger, demerger, acquisition, or share transfer; except that where the number of participating companies is decreased and a participating company's shareholders’ meeting has adopted a resolution authorizing the board of directors to alter the limits of authority, such participating company may be exempted from calling another shareholders’ meeting to resolve on the matter anew.
(6)Where any of the companies participating in a merger, spin-off, acquisition, or share transfer is not the company, the company shall sign an agreement with the counterparty whereby the latter is required to abide by the provisions of paragraph 2, subparagraphs 1 “the board of Director’s meeting date”, subparagraphs 2 “on-disclosure commitment”, and subparagraph 5” changes of companies participating in mergers, spin-off, acquisition and share transfer”.

Article 13 Procedures for public disclosure of information are as follows

Disclosure items and standards
(1)Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises.
(2)Merger, demerger, acquisition, or transfer of shares.
(3)Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contracts set out in the procedures adopted by the company.
(4)Where the type of asset acquired or disposed is equipment for business use, the trading counterparty is not a related party, and the transaction amount reaches NT$500 million or more.
(5)Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages,
51 -

or joint construction and separate sale, and the amount the company expects to invest in the transaction reaches NT$500 million.

(6)Where an asset transaction other than any of those referred to in the preceding subparagraph 5, assets trading and a disposal of receivables by a financial institution, or an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances ：
- A. Trading of government bonds.
- B. Trading of bonds under repurchase/resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises.
Timeline and standards for public disclosure of information Should acquisition or disposal of assets meet the standards for public disclosure of information, the company needs to file and make public announcement within two days from the date of the event.
Disclosure procedures
(1)The company shall disclose information into the reporting website designated by the FSC in accordance with the statutory regulations.
(2)The company and on behalf of its non-public subsidiaries shall compile monthly reports on the status of derivatives trading up to the end of the preceding month and enter the information in the prescribed format into the reporting website designated by the FSC by the tenth day of each month.
(3)Where an error or omission occurs at the time of public announcement, it is required to correct the error, and all the items shall be publicly announced again, within 2 days form the occurrence.
(4)The company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, reference books, appraisal reports and CPA, attorney, and securities underwriter’s opinions at the company headquarters, where they shall be retained for five years except where another Act provides otherwise.
(5)Where any of the following circumstances occurs with respect to a transaction that the company has already publicly announced and reported in accordance with the following paragraph, a public report of relevant information shall be made on the reporting website designated by the FSC within two days from the date of occurrence ：
- A. Change, termination, or rescission of a contract signed in regard to the original transaction.
- B. The merger, spin-off, acquisition, or share transfer is not completed by the scheduled date set forth in the contract.
- C. Change of the publicly disclosed information.

Article 14 The subsidiaries of the company shall comply with the followings ：

The subsidiaries shall establish the Procedures in accordance with the “Regulation Governing the Acquisition and Disposal of Assets by Public Companies” and obtain approval from the subsidiaries’ board of Directors and its shareholders’ meetings. Where there are amendments to the Procedures, the same approvals shall also be applied.
The subsidiaries shall comply with the provisions set forth in the Procedures, in addition to their own procedures, when acquiring or disposing assets.
The company shall disclose information on behalf of subsidiaries that are not publicly listed in the domestic market, in accordance with “Regulation Governing the Acquisition and Disposal of Assets by Public Companies”.
The paid-in capital or total asset of the company shall be the standard for determining whether or not the company shall disclose information on behalf of a subsidiary in the event of the type of transaction specified therein reaches 20 % of the paid-in capital or 10% of the total asset.
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Article 15 Penalties are as follows

Where the employees of the company violate the provisions set forth, appropriate penalties shall be carried out in accordance with the periodic performance evaluation of regulations of the company.
Article 16 Implementation and Revision
With respect to the company’s acquisition or disposal of assets that is subject to the approval of the board of directors under the company's procedures or other laws or regulations, if a director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the director's dissenting opinion to each supervisor. Where the position of the independent director has been created, when a transaction involving the acquisition or disposal of assets is submitted for discussion by the board of directors pursuant to the preceding paragraph, the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors.
The Procedures has been approved to the shareholders’ meeting on June 14, 2017.
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`【` Appendix IV `】`

Shareholding of Directors and Supervisors

(1) The paid-up capital of the Company stands at NT$ 1,226,803,750 with 122,680,375 shares.
(2) In compliance with Article 26 of the Securities and Exchange Act, and Article 2 of Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies ：
1.Total minimum number of shares required to be held by the directors ： 8,000,000 shares.
2.Total minimum number of shares required to be held by the supervisors ： 800,000 shares.
(3) As of the book closure date, shareholding information of directors and supervisors was as follows ：

Date for the shareholders' meeting:2018/06/11

==> picture [470 x 465] intentionally omitted <==

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

Current
Current
Title Name Shareholding
Shareholding(%)
(Shares)
The
Chia Hsin Lin 9,723,292 7.93%
chairman
Director You Mou Chiang 2,642,735 2.15%
Director Jui Hsu Chen 110,884 0.09%
The representative of Prisma
Director Commerce & Networks, Inc. ： 1,042,759 0.85%
Chih Chi Chou
Independent
Ming Hsiung Wu 0 0.00%
Director
Independent
0 0.00%
Director [Chien Cheng Lin ]
Independent
Ming Yuan Lin 0 0.00%
Director
Holdings of all Directors 13,519,670 11.02%
The representative of Kway
Supervisor Information Corporation ： 2,522,264 2.05%
Cheng Che Tseng
Supervisor Yu Chi Lin 512,101 0.42%
Supervisor Chih Cheng Lo 10,406 0.01%
Holdings of all Supervisors 3,044,771 2.48%
Holdings of all Directors and Supervisors 16,564,441 13.50%
----- End of picture text -----

54 -

`【` Appendix V `】`

Zero One Technology Company Limited

Articles of Incorporation

Chapter I General Provisions

Article 1 ： The company shall be incorporated under the Company Law of the Republic

of China, and its name shall be Zero One Technology Co., Ltd.

Article 2 ： The scope of business of the company shall be as follows ：

Design, manufacturing, packaging, selling, consulting and services of electronic information, computer software, hardware, accessories, components, Chinese data processing, and the sale of books of information technology, etc.
CC01101 Restrained Telecom Radio Frequency Equipments and Materials Manufacturing.
F401021 Restrained Telecom Radio Frequency Equipments and Materials Import.
G902011 Type II Telecommunications Enterprise
J201030 Technique and Performing Arts Training
ZZ99999 All business items that are not prohibited or restricted by laws and regulations, except for those subject to special approval.

Article 2-1 ： ;The company may act as a guarantor where necessary for the purpose of

carrying out its business, and investment.

Article 3 ： The company shall have its registered head office and manufacture

organization in Taipei City, where necessary and with a resolution to do so by the board of directors (“Board”), set up branch offices either within or outside the territory of the Republic of China.

Article 4 ： ;(deleted).

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Chapter II Shares

Article 5 ： ;The total registered capital stock of the company shall be NT$1.5 billion New Taiwan Dollars, divided into 150 million ordinary shares with a par value of Ten New Taiwan Dollars (NT$10) per share. Any unissued shares shall be issued, where necessary, upon the approval of the Board.
Article 6 ： ;Share affairs shall be handled pursuant to the Regulations Governing the Administration of Shareholder Services of Public Companies.
Article 7 ： ;The company's share certificates shall all be in non-bear form and shall be issued only after they have been signed and sealed by at least three directors, the company's seal, and duly certified by the competent authorities or its authorized registration institution. The company shall issue a physical share certificate for all the new shares, or exemption for issuing any physical share certificates for the shares issued, and the share certificate shall be placed in custody or for registration with a centralized depositary.

Article 8 ： ;(deleted).

Section III Shareholders’ Meeting

Article 9 ： ;Shareholders’ meetings of the company are of two kinds: regular
shareholders’ meetings and extraordinary shareholders’ meetings. The regular shareholders’ meeting is called once per year within six months of the close of the fiscal year. Extraordinary shareholders’ meetings may be called in accordance with applicable laws and regulations whenever necessary. Unless otherwise provided by the Company Act, the general meeting of the Members should be convened by the board of directors.

Article 10 ： ;(deleted).

Article 11 ： ;Except when the shares are restricted shares or are deemed non-voting shares under Article 179 of the Company Act., shareholders of the company shall be
56 -

entitled to one vote for each share held at the shareholders’ meetings. In case a shareholder is unable to attend a shareholders’ meeting, he/she may grant the appointment of proxy to attend a shareholders’ meeting, in line with Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies.

Article 12 ： ;Unless otherwise provided for in the laws and regulations, a meeting of
; ;shareholders shall proceed only if attended by shareholders representing more than one-half of the total outstanding capital stock of the company, passing resolutions of a shareholders’ meeting, with the concurrence of a majority of the votes held by the attending shareholders present at the meeting.

Chapter IV Directors and Supervisors

the shareholders’ meeting from among the individuals of legal capacity, and eligible for re-election, with the term of three years.
Article 13-1 ： ;The company shall appoint independent directors, not less than two in number and not less than one-fifth of the total number of directors. A candidates nomination system is adopted, and the shareholders shall elect independent directors from among the nominees listed in the roster of independent director candidates. The professional qualifications, restrictions on both shareholding and concurrent positions held, determination of independence, method of nomination and other requirements with regard to the independent directors shall be set forth in accordance with the Rules and Regulations of the Taiwan Stock Exchange.
Article 13-2 ： In line with business needs, the board of directors shall set up the Audit Committee, a Compensation Committee, and functional committees.
Article 14 ： The directors shall constitute the board of directors and shall elect one
57 -

chairman (and one vice chairman) of the Board from among themselves by a majority at a meeting attended by at least two-thirds of the attending Directors.

Article 15 ： ;The board of directors of the company could be convened in writing or via email or fax in line with the Company Act.
The directors shall participate in person at the meeting. If a director is unable to attend the meeting, he/she shall be entitled to authorize another director to represent him/her at the meeting by executing a power of attorney stating the reason for convening the meeting therein the scope of authorization.
Article 16 ： ;The board of directors is authorized to decide the compensation to all directors and supervisors with reference to suggestions of the Compensation Committee, or at a rate consistent with general practices in the industry. If the company reports a surplus, the company shall distribute the compensation in accordance with Article 19 of Articles of Incorporation.

The company may purchase liability insurance for directors and supervisors with respect to their liabilities on the business scope, resulting from exercising their duties during their terms of occupancy.

Chapter V Managerial Officials

Article 17 ： ;The company shall appoint several managers. The appointment, discharge, and compensation of managers shall be in accordance with decisions resolved by 50% of the directors attending meeting.

Chapter VI Accounting

Article 18 ： ;The fiscal year for the company shall be from January 1 of each year to December 31 of the same year. After the close of each fiscal year, the following reports shall be prepared by the board of directors, audited by supervisors, and submitted to the regular shareholders’ meeting for acceptance:
Business Report;
58 -
Financial Statements;
Proposal Concerning Appropriation of Earnings or Covering of Losses.

Article 19 ： ;According to surplus earnings each year, the company shall set aside no less than 1~15 % of them as compensation for the employees and no more than 3 % of them as compensation for directors and supervisors. If the company has accumulated losses, it shall offset losses.

Surplus earnings each year as mentioned above refer to profits calculated by the current year's pre-tax profit before deducting of annual compensation of the employees, directors, and supervisors.

As compensation for the employees shall need the concurrence of at least half of all the directors present at a board of directors meeting attended by at least two-thirds of the directors, and the decision must be announced in the shareholders’ meeting.

Employee compensation mentioned in preceding paragraph shall be distributed in stocks or in cash. The payment shall apply to employees in the subsidiaries.

Article 19-1 ： In the event that the company, according to the final settlement, earns profits in a fiscal year, such profits shall first be set aside to pay the applicable taxes, offset losses, set aside for 10 % of legal reserve, and the remaining profits shall be set aside for or reversal of special reserve in accordance with the laws, regulations, or the business requirements. Any further remaining profits plus unappropriated earnings shall be distributed in accordance with the proposal submitted by the Board, for approval at a shareholders’ meeting. The company adopts a dividend distribution policy whereby only surplus profits of the Company shall be distributed to shareholders, and considers the impact on the diluted of earning per share and return on equity, according to the company’s capital budget plan, and working capital requirement in the future. Shareholders of the company dividend distribution, of which cash dividends shall not be lower than 10% of the total shareholders’ dividends distributed for the same year.

59 -

Chapter VII Supplementary Provisions

Article 20 ： ;In regard to all matters not provided for in these Articles of Incorporation shall govern.

Article 21 ： ;Articles of Incorporation were enacted on June 9, 1980. The 1st amendment was made on March 10, 1982. The 2nd amendment was made on April 18, 1982. The 3rd amendment was made on Octobor 10, 1983. The 4th amendment was made on May 14, 1985. The 5th amendment was made on Octobor 30, 1986. The 6th amendment was made on December 15, 1989. The 7th amendment was made on August 21, 1990. The 8th amendment was made on June 29, 1995. The 9th amendment was made on February 1, 1996. The 10th amendment was made on June 26, 1997. The 11th amendment was made on November 7, 1997. The 12th amendment was made on June 18, 1998. The 13th amendment was made on June 15, 1999. The 14th amendment was made on May 22, 2000. The 15th amendment was made on May 10, 2001. The 16th amendment was made on May 14, 2002. The 17th amendment was made on June 25, 2003. The 18th amendment was made on June 15, 2004. The 19th amendment was made on June 14, 2005. The 20th amendment was made on June 14, 2006. The 21st amendment was made on June 13, 2007. The 22nd amendment was made on June 10, 2009. The 23rd amendment was made on June 14, 2010. The 24th amendment was made on June 15, 2012. The 25th amendment was made on June 8, 2016.

60 -

AI assistant

ZERO ONE — Annual Report 2017

52262_rns_2018-06-29_c2735112-4b27-4812-a193-9c70f520fca5.pdf

2018 Annual Shareholders’ Meeting

Meeting Agenda

Table of Contents

1. Meeting Agenda

II. Chairperson Remarks

III.Report Items

V. Matters for Discussion

2.Report Items

Report No. 1

Explanation:

Report No. 2

Explanation:

ZERO ONE TECHONOLOGY COMPANY LIMITED

Supervisors’ Review Report

CORPORATION

Report No. 3

Explanation:

3.Matters for Ratification

Explanation:

Explanation:

ZERO ONE TECHONOLOGY COMPANY LIMITED

EARNINGS DISTRIBUTION TABLE

Year 2017

4.Matters for Discussion

Explanation:

Explanation:

5. Extraordinary Motions

6. Adjournment

7. Attachment

【 Attachment I 】

ZERO ONE TECHONOLOGY COMPANY LIMITED 2017 Business Report

(I) 2017 Business Objectives

(II) Implementation Results of Business Plans

1. Financial Status ：

2. Profitability Analysis ：

【 Attachment II 】

INDEPENDENT AUDITORS' REPORT

Opinion

Basis for Opinion

Key Audit Matters

Description

Allowance for Inventory Valuation Loss

Description

Other Matter

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

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

INDEPENDENT AUDITORS' REPORT

Opinion

Basis for Opinion

Key Audit Matters

Valuation of allowance for uncollectible accounts

Description

Allowance for Inventory Valuation Loss

Description

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

Auditors' Responsibilities for the Audit of the Parent Company Only Financial Statements

Notice to Readers

ZERO ONE TECHNOLOGY CO., LTD.

BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ZERO ONE TECHNOLOGY CO., LTD.

ZERO ONE Annual Report 2017

`【` Attachment I `】`

1. Financial Status `：`

2. Profitability Analysis `：`

`【` Attachment II `】`

`【` Attachment III `】`

Article 1 Issue purpose `：`

Article 9 Other important stipulations `：`

`【` Attachment IV `】`

`【` Appendix I `】` Explanation for Dealing Shareholders’ Proposal

`【` Appendix II `】`

`【` Appendix III `】`

`【` Appendix IV `】`

`【` Appendix V `】`