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TatungAnnual Report2020202020202020202020202020202020202020202020202020202020202020202020202020202020202020202020202020202020202020201717171717171717171717171717171717171717171717171717171717

S t o c k C o d e 2 3 7 1

SPOKESPERSONMr. Wen-chieh PengChief Financial Offi cer(02)25925252 ext. [email protected]

DEPUTY SPOKESPERSONMr. Lung-chieh WangSenior General Manager of Stock Affairs Division(02)25925252 ext. [email protected]

SHARE REGISTRARStock Affairs Division Tatung CompanyNo. 22, Sec. 3, Chungshan N. Road, Taipei(02)25925252 ext. 3258 / 3259http://www.tatung.com

INDEPENDENT AUDITORSu-wen, LinSyuan-Syuan, WangErnst & Young Taiwan9F, No. 333, Sec. 1, Keelung Road, Taipei(02)27578888http://www.ey.com/tw/zh_tw

OVERSEAS SECURITIES EXCHANGELuxembourg stock exchangeDisclosed information can be found at BLOOMBERG.

WEBSITE FOR REFERENCEMarket Observation Post Systemhttp://mops.twse.com.tw/mops/web/index

CORPORATE WEBSITEhttp://www.tatung.com

• Notice to readers T h i s d o c u m e n t i s a n E n g l i s h

translation of a report originally written in Chinese.

If there is any difference between the two versions, the Chinese one shall prevail.

Published on March 31, 2018

MANUFACTURING PLANTSHEADQUARTERSNo. 22, Sec. 3, Chungshan N. Road, TaipeiTel: (02) 25925252 (100 lines)Fax: (02) 25915185 / 25921813www.tatung.com

POWER BUSINESS GROUP • Power Equipment Business Unit * Industrial Appliance Plant No. 102, Min Sheng Road, Neihai Village, Tayuan District, Taoyuan City Tel : (03) 3863123 / Email: [email protected] * Cable Plant No. 106, Min Sheng Road, Neihai Village, Tayuan District, Taoyuan City Tel : (03) 3863111 / Email: [email protected] • Motor Business Unit No. 352, His Tung Road, Sanhsia, New Taipei City Tel: (02) 86766888 / Email: [email protected] • Electrical Engineering Division No. 22, Sec. 3, Chungshan N. Road, Taipei Tel: (02) 25925252 / Email: [email protected]

CONSUMER BUSINESS GROUP • Advanced Electronics Business Unit No. 22, Sec. 3, Chungshan N. Road, Taipei Tel: (02) 25925252 / Email: [email protected] • Appliance Business Unit No. 38, Lane 1119, Takuan Road, Tayuan District, Taoyuan City Tel: (03) 3861111 / Email: [email protected]

SYSTEM BUSINESS GROUP • Smart Meter Business Unit No. 22, Sec. 3, Chungshan N. Road, Taipei Tel: (02)25925252 / Email: [email protected] * Meter Factory No. 102, Min Sheng Road, Neihai Village, Tayuan District, Taoyuan City Tel: (03) 3863123 / Email: [email protected] • Solar Energy Business Units No. 22, Sec. 3, Chungshan N. Road, Taipei Tel: (02)25925252 / Email: [email protected] • System Integration Business Units No. 22, Sec. 3, Chungshan N. Road, Taipei Tel: (02) 25984299 / Email: [email protected]

EXPORT DEPARTMENT No. 22, Sec. 3, Chungshan N. Road, Taipei Tel: (02) 25925252 • Export Department of Industrial Appliance Plant Email: [email protected] • Export Department of Cable Plant Email: [email protected] • Export Department of Motor Email: [email protected] • Export Department of Advanced Electronics Email: [email protected] • Export Department of Appliance Email: [email protected] • Export Department of Smart Meter Email: [email protected] • Export Department of Solar System Email: [email protected]

TATUNG 2017 Annual Report

CONTENTS

■ Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . 01■ Business Report of 2017 . . . . . . . . . . . . . . . . . . . . . 02■ Corporate Chronicle . . . . . . . . . . . . . . . . . . . . . . 04 Corporate Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04 Company Milestones. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 05 Global Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09

■ Corporate Governance . . . . . . . . . . . . . . . . . . . . 11 Organization Chart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Profile of board of directors and management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Status of corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Information on independent auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Information on change of independent auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Change of shareholding by directors, management, and major shareholders . . . . . . . . . . . 44 Information on the top 10 shareholders who are related parties to each other . . . . . . . . . . . 45 Long-term investments ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

■ Financial Information . . . . . . . . . . . . . . . . . . . . . . 47 Source of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Shareholder structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Distribution profile of shareholder ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Major shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Market price, net worth, earnings and dividends per common share . . . . . . . . . . . . . . . . . 49 Dividend policy and implementation status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Employee and remuneration to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Issuance of corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Issuance of preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Issuance of global depository receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Status of employee stock option plan (ESOP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Status of new restricted employee shares plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Status of new share issuance in connection with mergers and acquisitions . . . . . . . . . . . . . 51 Financial plans and implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

■ Operation Overview . . . . . . . . . . . . . . . . . . . . . . 52 Power business group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Consumer business group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 System business group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Operation summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Workforce structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Expenditure on environmental protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Labor relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Important contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

■ Financial Overview . . . . . . . . . . . . . . . . . . . . . . . 75 Condensed balance sheet and income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Financial analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Audit Committee's review report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Consolidated statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Parent company only statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

■ Analysis on Financia Status and Financial Performanceand Risk as Sessment . . . . . . . . . . . . . . . . . . . . . . . 82

Financial status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Long-term investment policy, main reasons for profits or losses, improvement

plans and the investment plan for the coming year . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Risk assessment and analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

■ Special Disclosures . . . . . . . . . . . . . . . . . . . . . . . 88 Information on Investees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Holdings and sale of shares by subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

■ Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Consolidated statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Parent company only statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273

Letter to Shareholders


1

Dear Fellow Shareholders,Our company has obtained preliminary success in business transformations and reinvestments with the efforts of our management teamwork on business transformations in 2017. Our overall operating results have marked a turnaround from loss to profi t with the profi t from our reinvestments despite a small loss in the business of our primary sector. Accordingly, our management team will stick to the strategies we have employed, building up our growth dynamics and enhancing our corporate governance in the hope of maximizing the company’s profi t in return for the support of our shareholders.

I. Operating Results in 2017Tatung Company had a revenue of NT$17.48 billion with a loss of NT$170 million from its primary sector. Plus non-operating earnings in 2017, this term saw a net profit of NT$ 74 million after tax and earnings of NT$ 0.03 per share. Tatung Company had a consolidated income of NT$75.55 bil l ion and a consolidated operating profit of NT$ 1.09 billion in 2017.

II. Tatung Company’s Development in 2017 and in the FutureClimate change has been identified as the top 1 risk in “The Global Risk Report 2018” released at World Economic Forum, WEF, in January, 2018. The impact of climate change upon nations, corporations, or even individuals will come as an unavoidable challenge for all. Ta t u n g C o m p a n y h a s a l w a y s s h o u l d e r e d environmental protection, including energy saving, carbon emission reduction, and water conservation, as pa r t of ou r co r porate respons ib i l i t ies by manufacturing eco-friendly products and providing solutions to environmental issues. As a matter of fact, we have been working on the solar power manufacturing for more than five years, completing over 70 mega Watts in meter ing solar power. Meanwhile, as the pioneering manufacturer of smart grid in Taiwan, we have developed the first AMI system in the country. From this year on, Tatung Company will go further to become a large-scale solar power manufacturing company where we design and construct micro-grid systems, smart surveillance systems, energy saving systems, etc. All these developments display our company’s vision for the challenges as well as opportunities that come with climate change because we have been tapping talents for developing technology, systems,

and products in relation to environmental protection as we tu rn these chal lenges into p rof i tab le opportunities. Tatung Company will have its centennial anniversary in November, 2018. In retrospect, our company has been playing a significant role in every stage of Taiwan’s development to the benefits of the country’s economic development. The founder of the company Lin Shan Chih started his career in civil engineering, accomplishing more than six hundred public constructions in his life. Our late President Lin Ting Sheng successfully expanded the business scope to home appliances, industrial appliances, electronics, and other business investments to serve the needs of consumers and the country as a whole. Moreover, our former president Lin Wei Shan went further to incorporate information technology, mechanical and electr ical engineer ing, and photoelectric engineering (for example, face plates and solar cells) into the business. The centenary of Tatung Company marks the company’s historical significance in the past and for the future as well, for the company’s value of environmental sustainability for the sake of society and investors will mold the company into a leading business group in the fields of green energy and smart energy systems. Therefore, Tatung Company will be devoted to amalgamating environmental sus ta i nab i l i t y and co r po rate management apart from manufacturing best quality products and ser vices in the hope that we wi l l obtain “EPS” (Earnings Per Share) for shareholders and manage “ESG” (Environmental, Social, Corporate Governance) well for the eco-friendly environment, the company’s sustainability, and the corporate responsibilities. We have witnessed a good page in the company’s development and we will continue to recruit staff and partners who share the same values with us to work together in order to strengthen our operating results so as to arrive at more profit for our shareholders and to maintain the company’s sustainable development and growth.

Finally, with my gratitude for your continual support and encouragement, I wish you joy, happiness and good health.

Sincerely,

Chairman

Business Report of 2017


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Tatung Business Report I n 2017, ow ing to the s tab le recover y of majo r economies in the wor ld, whi le Tatung Company (“the Company”) continues to engage in corporate t ransformations and operat ional advancement, the operation of the subsidiar ies have improved significantly, overall business operating results have turned profitable. Below is a report on the operation performance of core businesses and investments for year 2017 and the future plans of the Company.

I. 2017 Business ReviewTatung 2017 consolidated revenue was NT$75.55 billion, the operating profit was NT$ 1.09 billion. 2017 Tatung standalone revenue was NT$17.48 billion, operating loss was NT$0.17 billion, together with non-operating income from investments, the net profit after tax was NT$74 million which resulted in a capital gain of NT$0.03 per share.1. The Company's operating profit had risen by 1.29%

in 2017 than in 2016. Regardless of the declination in Consumer BG as its home appliance business in mature markets, the System BG and the Power BG gained revenue growth with smart meter, solar power and cable projects, thus, the individual revenue had risen than that of the last year.

2. With respect to the investment businesses, CPT had turned loss into profit compared to year 2016, GET's reduction of losses had recognized, ECS had also turned losses caused by bad debt into profit, and the reduction of loss or the rise of profit of several other investment businesses have also recognized. Therefore the profits increased compared to year 2016 which led to NT$1 billion net profit in investments in 2017.

II. Core Business:The Company is dedicated to providing fine products to improve criteria for energy efficiency, sustainability and health; combining business operations and social responsibil ity is our philosophy. For this reason, all products of the Company are aimed to be designed and manufactured as green energy, energy-saving, and highly efficient under the concept of smart energy management. The system solutions business will continue to develop its smart grid, IoT business, mechatronics system, and solar power system. The company, in overall business, had turn loss into profit in 2017, we continue to engage in corporate and operational transformations, and the business is dedicated to continual improvement. We believe persistence and effort bring success to our business. Below is a brief report on the business groups of the Company.• Consumer BG:

In order to improve customer exper ience and enhance appliance product value, we autonomously succeeded in integrating the R&D of Smart Home Devices and Smart Home Cloud services, such as AI rice cooker and various kinds of home appliances, all the smart products services are provided through Smart Home Cloud services, customers can easily control the operation of equipment remotely by the functions of scheduling, situation, and power management; these products of innovative user experience and visual perception have received approval in 2017 from Taiwan Excellence Award, Good

Design Award (Japan), iF Design Award (Germany), and Red Dot Design Award (Germany). Therefore the Company and the foreign affiliates have strived to pursue the overseas markets including America, Japan, and Southeast Asia. We're looking forward to watching Consumer BG continue to grow in revenue from global sales.

• System BG: By the end of 2017, we had built more than 70 MW of grid, Tatung will advance its development of solar energy generating systems from small sized rooftop panel into large ground-based or water-based power plants. We have continuously obtained the land needed for the power plant in Yu-guang special district, Qigu, Tainan, and we expect to obtain the related licenses and can start construction on the development by the end of 2018; in early 2019, the construction will be completed and start to generate electricity. To conform to the expansion of large scale solar and wind power constructions in Taiwan, we will provide the construction plans for full range of large transformer stations to meet business needs, and in the future, we will make good use of our equipment and electromechanical integration capabilities to gain access to power plant business opportunities in operational and maintenance products. In 2017, Tatung Smart Meter had obtained the government contracts while it continues to expand in foreign markets such as Japan and Thailand. With respect to Smart Microgrid, by integrating solar photovoltaic power generation systems, energy storage, smart meters, and distributed grids, we provide the most complete smart energy solutions and services, and the Smart Grid Demonstration System and Verification Platform we completed in Qimei, Penghu which have won awards in 2018 Smart City Summit and Expo is a successful case. We are confident that we will become the leading company in smart energy management in Taiwan, and we expect that AI and system businesses to be an important measure of the profitability of the company.

• Power BG: In 2017, the Power BG continued its adjusted strategy to develop smart, energy-saving and highly efficient products. Based on the IE3 technology and incorporated with various special application needs, we developed ultra-high efficiency motors such as explosion-proof motors, TSMS, and TiMS, which can be applied in either cable or wireless IoT data transmission. In addition, after a long-term verification, our transformer products were accredited with KEMA certification in April 2018, which will promote the sales in the international market. Meanwhile, we adjusted the configuration of production line and appropriately replaced old equipment to enhance the cost competitiveness of transformers.

II. Major investments: ◆ Major investments are described as

below:1. Chunghwa Pictures Tubes Co., Ltd. (CPT)

In the year of 2017, CPT kept its focus on the business of car, industrial LCD display panels and other better margin products. The business has finally turned a profit owing to the relatively stable market price, the improvement of CPT cost expenditures and

Business Report of 2016


3

the acquisition of local government subsidies of Fuzhou new plant. The 6th generation production line in Fuzhou was also put into operation in July of 2017. In 2018, we expect to increase the revenue of the business of car and industrial LDC display panels, accelerate customer certification and product introduction of the Fuzhou 6th generation production l ine, and integrate the module plants in China to enhance management and production efficiency. Continuous transformation and maintenance of management results are considered to be important tasks to accomplish in the coming year.

2. Green Energy Technologies (GET)In the first half of year 2017, the solar industry is subject to policy uncertainty of the major demand countries, so the overall market price slides. In the second half of the year, driven by market demand, higher-end multichip unit price rises steadily; the financial report of GET therefore is obviously better than the first half of the year. GET is highly competitive in high-end multichip, but because of the imbalance between supply and demand, it cannot avoid losses along with industrial changes. In 2018, although the industry is expected to continue to fluctuate, GET, based on its competitive high-end multichip integration technology, will develop lightweight modules and incorporate Tatung Business Group to expand the scale of the system and improve its operation.

3. San Chih Assets Development Co., Ltd. (SCAD)The phase one construction of the construction project, “Tatung Palace mansion”, located in Tu Cheng Distr ict, New Taipei City, has been completed in October, 2017 as scheduled and we shall recognize the income by the end of 2018. At present, the housing market is not clear. SCAD will examine the best timing to launch project phase two or adjust the scale of project phase two to cope with the need of housing market. Chun-ho plant will initiate its cooperation project with the MRT company and continue to evaluate the possible investment in the commercial construction for the purpose of achieving the best value for the company assets.

III. Enforcement of Corporate GovernanceAfter the re-election of directors in 2017, the Company has five directors made up from three independent directors and two external directors, forming a board of directors organized by a majority of independent directors and external directors. The Company also approved the establishment of Corporate Governance Committee in March 2018. With the assistance of the audit committee, the independent directors strive to strengthen internal control systems, including promotion of the ability to compiling financial statements, reviews of investment strategies and executions of various investment projects, and implementation of decree, etc. The Compensation Committee has continuously established better linkage between performance KPI and the compensation system for directors and management teams. The Company also takes an active role in the evaluation of corporate governance promoted by the competent authorities and continues to enforce corporate governance.

IV. Refocus to create greater shareholders’ value1. Continuously reduce non-core investment

portfolio: We completed the transformation process for Tatung

Mexico in 2017 and the sale of the remaining shares of Taiwan NISSEI Instruments Co., Ltd., at the first season of 2018. We will stop the operation of Tatung Czech. For the investments that suffer continuous losses, we will continuously assess the optimal operation strategy or transformation opportunities, while for those investments that cannot be improved or do not meet the Company’s mid- and long-term strategies, we will continue to look for the opportunities to merge, to bring to market, or to put into liquidation.

2. Future vision and strategy: 1. Strengthening the brand image and sales channel 2. Focusing on the overall solution of green energy,

energy creation and energy conservation(1) The solar energy as the main green energy;(2) Smart grid based on energy storage, smart meters

and micro grids.(3) Renewable energy development equipped

with high voltage transformer station and power distribution system.

The solar power generation system has been completed with a built capacity of 70MW, and the cumulative target this year is estimated to exceed 100MW. In the future, we will take advantage of resources of the Company to strengthen the smart energy management plan of energy creation, energy storage, and energy saving.

3. Activating assets4. Adjusting the investment portfolio

Looking into the future, we will invest more resources to expand solar power plants that generate stable returns. With our achievements and experience of smart energy management in Taiwan, we expect to expand the international market and to promote the corporate value of the Company. We have presented initial results of the corporate transformation in 2017 and we sincerely appreciate all shareholders’ continued support. We will expedite the Company’s and Group’s transformation to pass on the company spirit, to implement corporate social responsibility initiatives, and to enhance shareholders’ value. Again, we appreciate all shareholders’ continued support.

President

Corporate Chronicle - Corporate Value


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Corporate ValueEstablished in 1918, Tatung Company (formerly known as Xie Chih Business Enterprise) has evolved and grown over the decades into one of Taiwan’s leading conglomerates.The foundation of the Company is built on four fundamental values—Integrity, Honesty, Industry, and Frugality. Developed by Tatung’s founder and former chairman, Mr. Shan-chih Lin, they represent the essence of the Company’s commitments to our customers, shareholders, and employees.

Mr. T. S. Lin, Chairman Emeritus of Tatung, further extended the precepts behind these core values to serve as the guidel ines for the Company’s continued success and prosperity.

∆ Industry - education cooperationTo cultivate young engineering talent and to lend efforts to research and development through cooperation between the Company and Tatung High School as well as Tatung University. Realizing the importance of education in a society with a knowledge-based economy, Tatung sponsors the schools’ major projects while also contributing industrial experience to the teaching. As a responsible corporate citizen, Tatung regards its dedication to education as a manifestation of long-term commitment to social well being.

∆ Shareholder responsibilityTo pursue maximum returns for our shareholders and to maintain a stable dividend policy.

∆ Employee harmonyTo encourage se l f -mot ivat ion and cooperat ion amongst employees through the organization of profit centers to ensure fair compensation, incentives, welfare benefits, as well as to provide on-the-job training.

∆ Customer satisfactionTo re-invest profits in pursuit of better product quality so as to create value for our customers.

Company Milestones


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Company Milestones 1918• Establishment of Xie Chih Business Enterprise, the forerunner of

Tatung Company, by Founder and Chairman, Mr. Shan-chih Lin Completed over 600 constructions, including the Sindian River embankment project and the Executive Yuan building

1942• Mr. T. S. Lin succeeded as chairman of Tatung and also acted

as principal of both Tatung High School and Tatung University• Establishment of Tatung High School

1949• Pioneered production of electric fans under the name Tatung• Mass production of electric fans & motors (Pioneering in Home Appliance & Motor industries)

1956• Establishment of Tatung University

1960• Mass production of Tatung rice cookers, a revolutionary step

for housewives in Taiwan

1962• The Company became publicly listed on the Taiwan Stock

Exchange

1963• Mass production of transformers & switchgears (Pioneering in

Industrial Appliance industry)

1964• Mass production of black-and-white TVs

1966• Establishment of Wire & Cable Plant in Taoyuan County

1968• The Company renamed from Tatung Steel and Machinery

Company to Tatung Company and officially registered as so

1969• Company mascot (Tatung Boy) and song were launched• Mass production of coloured TVs

1970• Revenues exceeded NT$2.2 billion, making Tatung Taiwan’s foremost private company• Establishment of Forward Electronics Company

1972• Mr. W. S. Lin appointed as president of Tatung

1977• Participated in the Ten Major Infrastructure Projects with the

construction of a slag treatment facility for China Steel Corp. and provision of the turnkey solution for the CKS International Airport’s power control station

1980• Ranked as Taiwan’s No.1 exporter of electric and electronics

products • Recipient of the "Premier’s Award for Outstanding Export

Performance"• CRT plant by Chunghwa Picture Tubes ramped up

1990• Constructed Communication Cable Plant and Power Cable

Plant

1994• Establishing computerized system of household registration &

conscription for the Ministry of the Interior

1998• Tatung (Shanghai) Co., Ltd. was established to manufacture

motors, generators, transformers, and switchgears

1999• Tatung Institute of Technology renamed as Tatung University

2001• Chunghwa Picture Tubes was listed on the Taiwan Stock

Exchange

2005• Consol idated Tatung’s Desktop PC Business Unit with

Elitegroup Computer Systems (ECS), making Tatung the largest shareholder of ECS

• The second housing project by Shan Chih Asset Development for urban renewal was approved by Taipei City Government, which contributed significantly to the urbanization of Datong district

2006• Mr. T. S. Lin, Chairman Emeritus, passed away on 10 May and

aged 88• Mr. W. S. Lin was elected as chairman and president of Tatung• The Urban Renewal Project by Shan Chih Asset Development

Corporate Chronicle


6

was approved by Taipei City Government for its contribution towards Datong District, in which a community activity center would be built for the locals

2007• The Industrial Appliance Business Unit was rewarded the

"Corporate Sustainability and Excellence Award" by Taoyuan County Government

2008• Tatung Company celebrated its 90 th anniversar y of

establishment in November• Green Energy Technology was listed on the Taiwan Stock

Exchange on 25th January• Ranked No.1 in Taiwan by the Environmental Protection

Administration as the most proactive corporation for the promotion of green consumption

• Shan Chih Asset Development Co. introduced its luxury condominium, "Tatung Tomorrow World", a masterpiece of green architecture, to commemorate Tatung’s 90th anniversary

2009• Tatung Fine Chemicals started trading on the emerging stock

market in September• Shan Chih Semiconductor Co. was listed on the Taiwan Stock

Exchange on 23th December

2010• Tatung electric fan, a classic of its kind nationwide, is enjoying

its 60th anniversary • Tatung Boy, the mascot of Tatung Co., is celebrating its 40th

birthday• Luxury condominium, "Tatung Noble Residences", the 2nd

project in Nangang by Shan Chih Asset Development, was under construction

• Tatung 21.5" LED backlight display was awarded 2011 iF design award in audio and video category

2011• Ms. W.Y. Lin was appointed President of Tatung• 999 sets of designer limited edition rice cookers, winner of

IDEA "Gold" for packaging and graphics, were introduced to commemorate its 50th anniversary. A series of rice cookers in colours of indigenous Taiwanese fruits, watermelon red (Siluo), banana yellow (Cishan), and guava green (Yenchao), were also introduced to celebrate the centenary foundation of the R.O.C. and as the Company’s attempt to relate the touch of Taiwan’s local specialities into CE product line

• Winner of "Top Green Brand 2011" and "Quality award" in the category of home appliance by Business Next magazine

• Winner of "Yahoo! Emotive Brand Awards"• Winner of "Top 100 Taiwan Brand" by the Ministry of Economic

Affairs

2012• Winner of "Top Green Brand 2012" by Business Next magazine

awarded "Advanced Award" in the category of home appliance

• Winner of Taiwan Excellence Award 2012 (Silver Award) & Good Design Award 2012 for the rice cooker of 50th anniversary limited edition. Both the product and its packaging were selected as 2012 Good Design Best 100.

• New Energy BU won Taiwan Power Company’s first bid of Low Voltage AMI Pilot Project, a revolutionary milestone for the intelligent management system of electricity usage for households in Taiwan

• Won the bid of Hualien-Taitung Railway Electrification Project by the Ministry of Transportation and Communications taking part in the national momentous infrastructure project for the green transportation of the East

• Tatung 3C obtained Gold Award in the category of 3C retail channel in the contest of the Best Service in Taiwan 2012

2013• Awarded Best Corporate Governance, Taiwan, 2013 by World

Finance, a financial magazine by World News Media based in the UK

• Winner of the 13th "Golden Qual ity Award for Publ ic Construction" in design and construction

• Tatung and Chunghwa Picture Tubes (CPT) were both awarded Honorable Mention in the 2013 Taiwan Top 50 CSR Awards in the category of manufacturing industry

• Winner of "Top Green Brand 2013" by Business Next Magazine awarded "Advanced Award" in the category of home appliance

• Won the bid for New Taipei City’s Green Campus Project, in which solar panel system and intelligent energy management system are to be installed in 16 selected schools in New Taipei City

• To celebrate its 95th anniversary of establishment, the Company held an open-air charity concert in Pinxi district where Tatung Boy Flying Lanterns made their debut

• Tatung Consumer Products Co. (TCPC), Tatung’s brand channel, set up an official account on LINE along with the release of Tatung Boy character stickers and emoticons which, within 24 hours of online introduction, attracted more than one million active users and the download volume it created broke the record to become No.1 in the official account category of LINE

• Chunghwa Picture Tubes(CPT) launched a public tender offer of Giantplus Technology’s common shares to enhance its competitive edge in small and medium-size mobile modules expending its business scale to total solution service

2014• Winner of 2014 Taiwan Corporate Sustainability Award, bronze

medal, for large enterprises in technology and electronics manufacturing industry

• Winner of "Top Green Brand 2014" by Business Next Magazine

Company Milestones


7

awarded "Advanced Award" in the category of home appliance

• As the only local brand winning Power Brands 2014 award in the category of home appliances, Tatung was awarded Bronze Medal Award by the magazine of MANAGER today

• Unveiling "Tatung Boy Halley Rider" Lantern in the 2014 Taiwan Lantern Festival

• Co-organizing "Smart City Summit and Expo" to promote Tatung’s unique total solution for smart energy saving system

• Won the bid for New Taipei City’s Green Market and Campus Project, in which smart meters and energy saving monitoring system are installed to the energy management system setting the project the best example to PV-ESCO rooftop solar system alike in Northern Taiwan

• Accomplished microgrid system on Taiping Island, the southernmost territory of Taiwan, to set the benchmark for the application of microgrid system in offshore islands of Taiwan

• Further to the winning of solar system roofing bids for government-owned buildings in New Taipei City, Nantou, Taichung, Pingtung, Tainan, and Kaohsiung, the Company again won the bid for Penghu County Government’s solar system roofing project making Tatung the most experienced PV energy service company (PV-ESCO) in Taiwan

• The Company, as an important supplier of high efficiency motors and cables, was invited by Steel Asia Manufacturing Corporation, the largest steel company in the Philippines, to its new plant’s inauguration ceremony in Davao

• Accomplishing Railway Electrification Project for Hualian–Taitung Line with the introduction of Tatung Boy EasyCard as a way of celebration

• All new brand —"in fresh"— introduces hydroponic vegetables that are fresh, healthy, and pollution free to provide customers a new healthy choice by utilizing optoelectronic technology in agriculture

• Tatung Group donated 12 million dollars to Kaohsiung City Government to help the victims in the disaster of explosion

• Acquired the certificate of registration of ISO / IEC 27001:2013 by British Standards Institution for the information security management system of both Tatung and eTungGo, Tatung’s online shop

2015• The result of the Top 100 Influential Brand in Taiwan 2014

survey, carried out by Business Weekly and Ipsos, Taiwan, ranked Tatung No.4 in the category of electronics industry, No.24 in the main chart of mixed categories, and No.8 in the category of Taiwan native influential brand. The survey is the first of its kind to be conducted from the viewpoint of general consumers in respect of the most influential brand in their daily life

• Tatung Boy lantern, Greeting Dragon with Good Luck, made its debut in the 2015 Taiwan Lantern Festival

• Establishing eTungGo, Tatung’s online shop, to involve in e-commerce business

• Tatung Healthy Life Store began its official operation

• Applying cloud computing and Internet of Things technology to come up with solutions for smart life, smart grid, and smart factory & building to showcase in 2015 Smart City Summit & Expo

• Establishing Taiwan's first smart microgrid demonstration Park in Linbian for Pingtung County Government. The work won "Smart Energy Conservation" award in the 2015 Smart City Innovative Application Competition organized by the Board of Science and Technology (BOST), the Executive Yuan, and also was awarded a silver medal in the microgrid category of APEC's 2015 Energy and Smart Community Application Competition

• Shan-Chih Asset Development launched its flagship smart green community, "Tatung Smart Manor", which was awarded a gold medal in design of the 2015 Taiwan's Excellent Smart Green Building and System

• Tatung won the Bronze Medal in the category of electronics industry of Taiwan Corporate Sustainability Awards for 3 consecutive years

• Tatung utilized the technology of Internet of Things on smart appliances and cooperated with SIGMU to create all-rounded smart living

• Tatung won the bidding of solar PV roofing plan for the public buildings in Kinmen County. The project enables Kinmen County Government to get the trends in electricity consumption and gauge reportable events on real-time power generation via Tatung’s smart meters and energy saving monitoring system so that electricity losses can be reduced and efficiency on power generation can be enhanced

• Tatung rice cooker, an important cultural asset representing Taiwan's everyday life, was exhibited and demonstrated as a cultural & creative artifact in Tsutaya Books (Japan), one of the twenty most beautiful bookstores in the world

• Tatung won the bidding of solar PV power generation system for Pratas Island. The project includes 40kWp of solar energy and fuel control system to monitor the operation of generator and load status so that output of solar PV can be controlled and uninterrupted power supply in Pratas Island can be expected

• Tatung cooperated with ITRI and Toshiba to promote microgrid within smart grid in Penghu. The project not only implements regional application of microgrid in Taiwan but also raises the proportion of renewable energy hoping to maintain stable power supply and optimize the regulation for demand and supply

2016• Tatung won the bidding of solar PV roofing system for the

public buildings in New Taipei City. System of microgrid is introduced to the project to enable the emergency supply of electricity when without power supply from state grid in an event of natural disasters

• The Company engaged in a multiple academia-industrial cooperation project with the Soochow University marking a

Corporate Chronicle


8

new milestone for the Company’s cross-campus cooperation• Tatung Boy lantern, The Transformer and Earth Keeper, made

its debut in the 2016 Taiwan Lantern Festival.• Tatung Fusion Skillet (waterless cooker) won 2016 iF Award• Introducing 6 smart solutions including Smart Community,

Smart Energy, Smart Home, Smart Surveil lance, Smart Healthcare and Smart Factory in the 2016 Smart City Summit & Expo

• Tatung rice cooker TAC-03DW and Tatung Microcomputer Controlled Rice Cooker won Silver Awards in the competition of Taiwan Excellence Award 2016

• Tatung Smart PV Atmospheric Water Generator won the System Integration Award co-held by the Taiwan Smart City Solution Alliance and Taipei Computer Association

• In response to the policy by the Council of Agriculture, Executive Yuan, transforming barren farmlands into Solar Photovoltaic Green Zone for the subsiding areas in Yunlin County, Tatung cooperated with local farmers to run ground–mounted solar power plants for the first time

• The power system in the Railway Electrification Project for Hualian–Taitung Line won the 2016 Excellence in Engineering Project Award by the Chinese Institute of Engineers

• Tatung won the bidding of the Fudekeng Restoration Park Solar PV System which will transform the ex-landfill into the Hill of Energy for Taipei city

• Tatung was awarded a silver medal of the TTQS Training Quality System by the Workforce Development Agency, the Ministry of Labor, Executive Yuan

• Tatung was acknowledged by the Ministry of Economical Affairs for its effort in energy saving practice and thus being granted the prize of Energy Saving Model

• Tatung won the Excellence Award for Leadership in Energy Conservation by Taipei City Government

• The Taiwan Corporate Sustainability Awards were bestowed to Tatung Company, Chunghwa Picture Tubes Ltd, and Green Energy Technology Inc.

• Tatung won the bidding of 2016 Taipei City Public Premises Solar Photovoltaic Roofing Project, in which two innovative systems including particulate matter 2.5(PM2.5) measurement system and light-weighted solar modules would be installed

2017• Won the bidding of Taoyuan Public Landfill Solar PV System,

the biggest of its kind in Taiwan. The project will be included into smart management system, via smart cloud platform, together with Taoyuan Public House Solar PV Roofing System and Ponds Floating Solar PV System.

• Tatung Boy “Grab Your Bat” creative lantern made its debut in the 2017 Taiwan Lantern Festival in Yunlin.

• Tatung Fusion Skillet (waterless cooker) won the Silver Quality award in the 2017 Taiwan Excellence Award.

• Tatung attended the 2017 Smart City Summit & Expo showcasing the solutions for smart energy, smart community, smart industry and cloud service.

• Taoyuan’s Ponds Floating Solar PV System came into operation, a project built by Tatung with concern to maintain the balance of nature and environmental sustainability.

• Cooperating with ITRI to develop IE4 industrial induction motor with super high-efficiency.

• Created by Tatung’s energy innovation technologies, three applications namely pond floating solar PV system, tree of life, and fountain pavilion were showcased in Taoyuan Agriculture Expo 2018 .

• Allying with National Pingtung University of Science and Technology to develop smart greenhouse agricultural technology.

• Won the bid of solar PV roofing system for Banqiao Fruit and Vegetable Wholesale Market in New Taipei City.

• Tatung rice cookers were certified with EPA Carbon Emission Label.

• To help with tourism in townships of Taiwan, the Company invited Jiji Township Administration to launch a joint event turning Jiji into a town of games in the hope of promoting local prosperity. Tatung boy stamps and first-day covers were also issued for the first time.

• Integrating the “Tatung Cloud” with Microsoft Azure International Cloud service to develop all-rounded smart life on Tatung IOT.

• Won the bid of solar PV roofing system for sewage treatment plant in Benjhou, Kaohsiung.

• Tatung Thailand signed contract with Thailand Eastern Technological College for industry-academic cooperation.

• Tatung, Chunghwa Picture Tubes, and Green Energy Technology won the Taiwan Corporate Sustainability Award.

2018• Creative Lantern, "Tatung Boy Returns with Gifts", made its

debut in the 2018 Taiwan Lantern Festival in Chiayi.• Tatung smart home cloud service, Tatung fusion skil let

(waterless cooker TRC-M61A), and stainless steel rice cooker won the “2018 Taiwan Excellence Award”.

• Tatung won the 2018 Smart City Innovation Application Award for its achievement in smart microgrid system in Qimei island.

Global Network


9

U.S.A Tatung Co. of America, Inc.

Tatung Electric Co. of America, Inc.

Mexico Tatung Mexico S.A. de C.V.Czech

Tatung Czech s.r.o.

China Tatung Information Technology (Jiangsu) Co., Ltd.

Tatung (Shanghai) Co., Ltd.

Tatung Compressors (Zhongshan) Co., Ltd.

Japan Tatung Company of Japan, Inc.

Thailand Tatung (Thailand) Co., Ltd.

Myanmar Myanmar Tatung Co., Ltd.

Dubai Tatung Middle East Purification of Potable Water L.L.C.

Singapore Tatung Electronics (Singapore) Pte. Ltd.

Tatung Information (Singapore) Pte. Ltd.

Tatung Electric (Singapore) Pte. Ltd.

Corporate Chronicle


10

Taiwan Tatung Co. Power Business Group

Consumer Business Group

System Business Group

Investments Chunghwa Picture Tubes, Ltd.

Forward Electronics Co., Ltd.

Shan Chih Semiconductor Co., Ltd. (Reinvest GET)

Shan Chih Asset Development Co., Ltd.

Tatung Consumer Products (Taiwan) Co., Ltd.

Chunghwa Electronics Development Co., Ltd.

Tatung System Technologies Inc.

Tatung Fine Chemicals Co., Ltd.

Toes Opto-Mechatronics Co., Ltd.

Tatung Medical & Healthcare Technologies Co., Ltd.

Shan Chih Investment Co., Ltd.

Chih Sheng Investment Co., Ltd.

Tatung Forever Energy Co., Ltd.

Tung Yang Energy Co., Ltd.

Others

U.S.A Tatung Co. of America, Inc.


Mexico Tatung Mexico S.A. de C.V.Czech

Tatung Czech s.r.o.

China Tatung Information Technology (Jiangsu) Co., Ltd.



Japan Tatung Company of Japan, Inc.

Thailand Tatung (Thailand) Co., Ltd.

Myanmar Myanmar Tatung Co., Ltd.

Dubai Tatung Middle East Purification of Potable Water L.L.C.

Singapore Tatung Electronics (Singapore) Pte. Ltd.



Corporate Governance - Organization Chart


11

Organization ChartT a t u n g C o m p a n y i s d e d i c a t e d t o manufactur ing energy-saving products, systems and services with three business g roups work ing on smar t g r ids, smar t communit ies and smar t households to p roduce a number of energy- sav ing and highly efficient electronic products, household appl iances, high-eff iciency smar t moto r s , power supply faci l i t ies and automatic control products. They are fully integrated with information and communication systems as well as well -rounded and instant services in relation to their products and solutions. Our smart grids rely upon our system solutions and power business groups for the supply of smart electricity meters, communication modules, concentrators, FTU/FRTU, high-efficiency and energy-saving motors and transformers and switch/control gears, etc. We also provide such fully integrated system solutions and technological services as AMI communication and system control stations, advanced power distribution automation, smart transformer stations and power plants. I n s o f a r a s o u r s m a r t c o m m u n i t y i s concerned, our business groups of system solut ions have integrated solar power systems, energy-saving systems, other recyclable micro-grid systems, the SHMS system (fo r household energy saving, security, and health care), and the SBMS system (for corporate smart buildings to manage energy saving) into our wel l -rounded so lut ions and technolog ica l services. For smart homes, we have integrated the Company’s manufactured appliances and system solutions into an advanced solution for smart home applications which can be used on cellphones or tablets, together with our cloud services, in order to provide a energy-saving, convenient, safe and healthy smart life as we offer smart, energy-saving and environment-friendly household appl iances, IP cameras, su r ve i l lance systems, smart gateways, energy-saving sensors, environmental sensors, etc. Tatung Company is equipped with core technologies to manufacture important products in the system solut ions whi le working with strategic business partners to target the world market.

Shareholders' Meeting

Board of Directors

Internal Audit Committee

Chairman

President

Audit Committee

Remuneration Committee

Corporate Governauce Committee

Corporate Governance


12

Administration Human Resources & General Administration Division, Finance & Accounting Division, Stock Affairs Division, Procurement Division, Management Information System Division, Legal Division, Environmental & Safety Division, Quality and Customs Department

POWER BUSINESS GROUP

Power Equipment BU

Industrial Appliance: Researching, developing and manufacturing all kinds of transformers rated 345kV 1000MVA and under, all kinds of reactors rated 345kV 100MVAR and under, gas insulated switchgears and outdoor gas circuit breakers up to 161kV class, 36kV series of switchgear, power distribution equipment, and other industrial equipment.Cable: With more than fifty years of technical experience, this business unit is responsible for manufacturing and sale of various wires, cables, optical fiber cables and busway which are widely used in telecommunication, power transmission and distribution system, industrial equipment, home appliance and IT network & electronic device.

Motor BUTatung motor business has been in the industry for more than 70 years. Tatung’s motors business has been operating for over six decades with sales worldwide. With "Tatung Motors Drive the World" as its theme. Integrating of all aspects of electric machine which covered for designing, manufacturing, and selling of 1/8~30,000HP, single and three phase induction motors, high temperature resistant motor, and explosion- proof motor, immersible pump motors, PM motors, EV motors, drives, water jacket motors, generator sets, and total solutions of power systems.

Electrical Engineering Division

To comply with Government Renewal Energy policy, Tatung Company has integrated the resources of three Heavy Power Plants within Tatung Group and the advantage of our electrical power products for the expanding of the business scope of electrical power system integration and providing total solution services.Business scope: 1. PV power substation system. 2. Small scale Hydro Power Plant system. 3. Wind Mill Power substation system. 4. Electrical Power Engineering System.

CONSUMER BUSINESS GROUP

Advanced Electronics BU

The Advanced Electronics Business Unit (AEBU) focuses on providing global ODM customers with design and manufacturing products & solutions. The product lines include 2 main lines: digital entertainment and Internet-of-Things (IoT) products. The digital entertainment line includes gaming headsets, smart noise cancelation headsets, streaming microphone, and entertainment accessories.The IoT products include IP camera, smart energy management and sensing-&-control products. Tatung’s customers can benefit from Tatung’s fast reaction to accommodate market needs and flexibility in design customization. The on-going research and development will further enhance the customers’ competitiveness in their products.

Appliance BU

To boost sales in both domestic and overseas markets, apart from improving brand operations, we enhance brand value with innovative design, quality products, and technology integration. Our wide variety of products includes eco-friendly air-conditioning systems for business and home; 4K smart LCD displays; slim fashionable refrigerators; and top-loading high-level inverter washers. In addition, we have won awards worldwide for a great number of products awards due to our persistence in technology innovation and esthetic design. We have also launched health kitchen appliances including Enjoy Fresh juicer & Fast cooking pot and Fusion Cooker. As a title sponsor of the Taipei Golden Horse Film Festival, we have successfully promoted Tatung multifunctional cookers to the world and enhance the brand value. To make farm-to-table a reality, we persistently promote our health food brand "In Fresh" through careful selection of smallholding farmers.With the rise of the Internet of Things (IoT), we integrate resources to develop a wide variety of smart and energy-efficient appliances equipped with touch/sensing and internet technologies to provide consumers with total smart life solutions. With the smart appliance system and smart appliance app, consumers can control various Tatung smart appliances wirelessly to achieve electricity management, remote control, schedule management, and scenario personalization to save energy and protect the Earth smartly.

SYSTEM BUSINESS GROUP

Smart Meter BU

Smart Meter BU provides various types of smart meters and AMI systems. Tatung has the ability of integrating the systems of smart meter infrastructure and integrating different communication technologies such as RF, PLC, and 4G communications to develop smart meter application functions to meet customer needs and improve system performance. Furthermore, cooperating with the design and development of solar energy systems to become the development of microgrid system integrators, and serve the global power companies, governments and households.

Solar Energy BU

In the Solar Energy BU, from north to south in Taiwan, there are hundreds of public buildings and cases, integrated with Tatung’s high-performance solar energy products, to provide professional energy creation management and establishment services. The main services are electricity grid systems, stand-alone solar energy systems and related applications. With rich experiences in Taiwan, the establishment of various types of solar power plants has been extended from public housing roofs to ground-based landfill sites and water-based photoelectric ponds.With electromechanical integration capabilities and monitoring technology, to promote renewable energy. Tatung develop power plants maintenance business.

System Integration BU

System Integration BU is committed to specializing in the fields of information and communication systems as well as electromechanical systems.Information and Communication Systems: For more than 30 years, we have been helping customers deal with the computerization and automation of their systems and have endeavored to meet the needs of the information market in the era of technology. We expect ourselves to be a representative manufacturer of high-quality system integration in the country. We specialize in information system integration, network security planning & construction, and application software development. We have rich large-scale system integration capabilities and experience. The service team has owned a wide range of IT professional skills, certificates and services network throughout the Taiwan by 13 direct branch offices to provide customers fast services. In the future, we will continue to devote ourselves to deepening the fields of information and communication integration, cloud applications, information security, outsourcing services, business intelligence and system development, and then will become the leading manufacturer in those fields.Electromechanical Systems: As various infrastructure projects at Taiwan started between the 1950s and 1970s, Tatung Company made an important contribution to the infrastructure construction such as power generation, power transmission as well as power supply. Electrical and mechanical systems related businesses are:

1. Provide power plants, large substations, transmission & distribution systems, solar power generation and motor related electromechanical integration services.

2. Residential and factory-built electromechanical engineering, including planning as well as construction for smart building.

3. Sewage (waste water) treatment, which has reached the industrial waste water Zero Discharge standard.4. Traffic mechanical and electrical engineering for Rails and roads as well as sign control systems.

We has owned cross-disciplinary professionals, which covers various functionalities such as power, electronics, mechanics, smart control, information, communications, transportation and project management. They are responsible for integrating cross-disciplinary professionals, coordinating cross-organizational interfaces, providing integrated design, project management and maintenance services.



13

Profile of board of directors and management(I) Board of directors

As of March 31, 2018

TitleNationality

or corporate

seatName Male /

Female

Date of appointment

(assumption of post)

Term of office

Date of initial appointment

Shares held upon appointment Shares held currentlyShares held by

spouse and underage children currently

Shares held in another person’s name

Work / educational experience Job title assumed in the Company and any other company

Other head, director, or supervisor who is his/her spouse or is within 2nd degree of kinship

Number of shares

Shareholding percentage

(%)Number of

sharesShareholding percentage

(%)Number of


(%)Number of


(%)Job title Name Relationship

Chairman Republic of China (Taiwan)

Wen-Yen K. Lin(Note 1)

Female 2018.02.01 3 years 1996.06.06 16,004,173 0.68 16,004,173 0.68 17,655,173 0.76 - - Master of Economics, Maryland UniversityAssistant Professor of Maryland UniversityLecturer of National Taiwan UniversityLecturer of Tatung UniversitySenior General Manager of Tatung Company's International SalesExecutive Vice President of Tatung Company

President of Tatung Company, Chairman of Tatung Information (Singapore) Pte. Ltd.Chairman of Tatung Mexico S.A. de C.V., Chairman of Tatung Czech s.r.o.Chairman of Elitegroup Computer Systems Co., Ltd.

None None None

Director Republic of China (Taiwan)

Tatung Unviersity(Note 2)

- 2017.05.11 3 years 1987.05.24 144,798,047 6.19 144,798,047 6.19 - - - - - - - - -


Representative of Tatung UnviersityI-Hua Chang

Male 2017.05.11 3 years 1997.07.17 227,615 0.01 227,615 0.01 6,353 - - - Bachelor of Mechanical Engineering, Tatung UniversityPresident of Tatung Consumer Products (Taiwan) CompanySecretary general of Tatung company’s Secretariat

Chairman & President of Shan Chih Asset Development Co., Ltd.Director of Tatung Industry CompanyDirector of Cheng Sheng Broadcasting Corp.Director of Chunghwa Electronics Development Co., Ltd.Chairman & President of Chih Sheng Realty Co., Ltd.Director of Tatung Consumer Products (Taiwan) Co., Ltd.Director of Kuender Co., Ltd.

None None None


Shou-Huang Chen

Male 2017.05.11 3 years 2017.05.11 - - - - - - - - Master of Law, Chinese Culture UniversityDoctor of Philosophy, LLD Institute of the Law of the Sea National Taiwan Ocean UniversityPolitical Deputy Minister Ministry of JusticeChief Prosecutor Taiwan High Prosecutors OfficeDirector of Taiwan After-CareJudge of Taiwan Chiayi District CourtChief Prosecutor, Taiwan High Court Kaohsiung, and Hualien Branch CourtChief Prosecutor, Taiwan Taichung, Taoyuan, Yilan District Court

Managing Director & Attorney at-law, Peace & Grace International Attorneys at Law

None None None


Sheng-Wen Tsai

Male 2017.05.11 3 years 2017.05.11 - - - - - - - - Bachelor of Accounting Fu-Jen UniversityExecutive Director, Ernst & Young

Practicing Accountant Fortune & Co., CPAs None None None


Lung-Ta Lee Male 2017.05.11 3 years 2011.06.24 367 - 367 - - - - - Ph.D. of Chemical Engineering, Tatung UniversityR&D Section Manager of Tatung Fine Chemicals Co., Ltd.President of Shang Chih Chemical Industry Co., Ltd.

Director & President of Shan Chih Semiconductor Co., Ltd.Director of Tatung Fine Chemicals Co., Ltd.,Director of Green Energy Technology Inc.,Director of Greater Power Ltd.Chairman & President of Chih De Investment Co., Ltd.Chairman of Ultra Energy Holdings Ltd.Chairman of Ultra Energy (Weifang) Technology Co. Ltd.Chairman of Shang Chih International ChemicalIndustry Co., Ltd. Chairman of Huaian Tatung Advanced Technology Materials Co., Ltd.Chairman of Wujiang Shanghua Material Technology Co., Ltd.Chairman of Wujiang Shang Huah Plastic Co., Ltd.Chairman of Dongguan Tongli Trading Co., Ltd.Director of Chih Sheng Investment Co., Ltd.Director of Chunghwa Electronics Development Co., Ltd.Director of Gintung Energy Co., Ltd.

None None None



14

Profile of board of directors and management(I) Board of directors


TitleNationality

or corporate

seatName Male /

Female

Date of appointment


Term of office







Number of shares


(%)Number of


(%)Number of


(%)Number of



Chairman Republic of China (Taiwan)


Female 2018.02.01 3 years 1996.06.06 16,004,173 0.68 16,004,173 0.68 17,655,173 0.76 - - Master of Economics, Maryland UniversityAssistant Professor of Maryland UniversityLecturer of National Taiwan UniversityLecturer of Tatung UniversitySenior General Manager of Tatung Company's International SalesExecutive Vice President of Tatung Company

President of Tatung Company, Chairman of Tatung Information (Singapore) Pte. Ltd.Chairman of Tatung Mexico S.A. de C.V., Chairman of Tatung Czech s.r.o.Chairman of Elitegroup Computer Systems Co., Ltd.

None None None


Tatung Unviersity(Note 2)

- 2017.05.11 3 years 1987.05.24 144,798,047 6.19 144,798,047 6.19 - - - - - - - - -


Representative of Tatung UnviersityI-Hua Chang

Male 2017.05.11 3 years 1997.07.17 227,615 0.01 227,615 0.01 6,353 - - - Bachelor of Mechanical Engineering, Tatung UniversityPresident of Tatung Consumer Products (Taiwan) CompanySecretary general of Tatung company’s Secretariat

Chairman & President of Shan Chih Asset Development Co., Ltd.Director of Tatung Industry CompanyDirector of Cheng Sheng Broadcasting Corp.Director of Chunghwa Electronics Development Co., Ltd.Chairman & President of Chih Sheng Realty Co., Ltd.Director of Tatung Consumer Products (Taiwan) Co., Ltd.Director of Kuender Co., Ltd.

None None None


Shou-Huang Chen

Male 2017.05.11 3 years 2017.05.11 - - - - - - - - Master of Law, Chinese Culture UniversityDoctor of Philosophy, LLD Institute of the Law of the Sea National Taiwan Ocean UniversityPolitical Deputy Minister Ministry of JusticeChief Prosecutor Taiwan High Prosecutors OfficeDirector of Taiwan After-CareJudge of Taiwan Chiayi District CourtChief Prosecutor, Taiwan High Court Kaohsiung, and Hualien Branch CourtChief Prosecutor, Taiwan Taichung, Taoyuan, Yilan District Court

Managing Director & Attorney at-law, Peace & Grace International Attorneys at Law

None None None


Sheng-Wen Tsai

Male 2017.05.11 3 years 2017.05.11 - - - - - - - - Bachelor of Accounting Fu-Jen UniversityExecutive Director, Ernst & Young

Practicing Accountant Fortune & Co., CPAs None None None


Lung-Ta Lee Male 2017.05.11 3 years 2011.06.24 367 - 367 - - - - - Ph.D. of Chemical Engineering, Tatung UniversityR&D Section Manager of Tatung Fine Chemicals Co., Ltd.President of Shang Chih Chemical Industry Co., Ltd.

Director & President of Shan Chih Semiconductor Co., Ltd.Director of Tatung Fine Chemicals Co., Ltd.,Director of Green Energy Technology Inc.,Director of Greater Power Ltd.Chairman & President of Chih De Investment Co., Ltd.Chairman of Ultra Energy Holdings Ltd.Chairman of Ultra Energy (Weifang) Technology Co. Ltd.Chairman of Shang Chih International ChemicalIndustry Co., Ltd. Chairman of Huaian Tatung Advanced Technology Materials Co., Ltd.Chairman of Wujiang Shanghua Material Technology Co., Ltd.Chairman of Wujiang Shang Huah Plastic Co., Ltd.Chairman of Dongguan Tongli Trading Co., Ltd.Director of Chih Sheng Investment Co., Ltd.Director of Chunghwa Electronics Development Co., Ltd.Director of Gintung Energy Co., Ltd.

None None None



15


TitleNationality

or corporate

seatName Male /

Female

Date of appointment


Term of office







Number of shares


(%)Number of


(%)Number of


(%)Number of



Independent Director

Republic of China (Taiwan)

Peng-Fei Su Male 2017.05.11 3 years 2011.06.24 - - - - - - - - B.S. in Department of Electrical and Control Engineering, National Chiao-Tung UniversityM.S. in Graduate Institute of Business Administration, National Chengchi UniversityDepartment of Enterprises and FinanceDirector of SUNNET Co., Ltd.AVP of Investment Department, Development Technology Consultant Co., Ltd.

Senior Vice General Manager in Investment Department, Cheng Ye Assets Management Co., Ltd.Independent Director, San Chih Semiconductor Co., Ltd.

None None None



Tzong-Der Liou Male 2017.05.11 3 years 2012.06.12 - - - - - - - - Ph. D. of Law Nagoya University, JapanChair Professor, Nagoya University, JapanChairperson, Department of Law, National Chengchi UniversityDean, College of Law, National Chengchi UniversityDean of Academic Affairs, National Chengchi UniversityIndependent Director, Taiwan Sugar CorporationDirector, Taiwan Administrative Law AssociationVice Chairperson, National Communications CommissionArbitrator, Chinese Arbitration Association, Taipei

Distinguished Professor, College of Law, National Chengchi UniversityDirector, JinWen University of Science & TechnologyChairman, Teacher Grievances Committee of Ministry of Education

None None None



Chi-Ming Wu Male 2017.05.11 3 years 2013.06.13 - - - - - - - - BBA, Department of Business Administration, National Chengchi UniversityMBA, Graduate Institute of Business Administration, National Taiwan UniversityPh.D. in Finance, University of Mississippi, U.S.A.Public Director, Securities Investment Trust & Consulting Association of the R.O.C.Member of Management Board, Public Service Pension FundChartered Financial Analyst, CFAChief of Training Section, Center of Public & Business Administration Education, National Chengchi UniversityIndependent Director, Ennoconn Corporation Co., Ltd.Member of Ombudsman Committee, Financial Ombudsman Institution

Associate Professor, Department of Finance, National Chengchi UniversityIndependent Director, TSC Auto ID Technology Co., Ltd.

None None None

Note 1: Chairman Wei-Shan Lin resigned and the board elected director Wen-Yen K. Lin to take up chairmanship on February 1, 2018. Note 2: Major institutional shareholders

Institutional shareholder Major shareholders

Tatung University Not Availavle (The school has no shareholders)

Note 3: Director of Wei-Tung Lin had resigned on March 10, 2017.Note 4: The Company had elected directors on May 11, 2017. Director of Huo-Yen Chen had terminated. Director of Shou-Huang Chen and

Director of Sheng-Wen Tsai had elected.Note 5: Please refer to pages 95-101 for the job assumed by the directors and supervisors in other investees concurrently.



16


TitleNationality

or corporate

seatName Male /

Female

Date of appointment


Term of office







Number of shares


(%)Number of


(%)Number of


(%)Number of





Peng-Fei Su Male 2017.05.11 3 years 2011.06.24 - - - - - - - - B.S. in Department of Electrical and Control Engineering, National Chiao-Tung UniversityM.S. in Graduate Institute of Business Administration, National Chengchi UniversityDepartment of Enterprises and FinanceDirector of SUNNET Co., Ltd.AVP of Investment Department, Development Technology Consultant Co., Ltd.

Senior Vice General Manager in Investment Department, Cheng Ye Assets Management Co., Ltd.Independent Director, San Chih Semiconductor Co., Ltd.

None None None



Tzong-Der Liou Male 2017.05.11 3 years 2012.06.12 - - - - - - - - Ph. D. of Law Nagoya University, JapanChair Professor, Nagoya University, JapanChairperson, Department of Law, National Chengchi UniversityDean, College of Law, National Chengchi UniversityDean of Academic Affairs, National Chengchi UniversityIndependent Director, Taiwan Sugar CorporationDirector, Taiwan Administrative Law AssociationVice Chairperson, National Communications CommissionArbitrator, Chinese Arbitration Association, Taipei

Distinguished Professor, College of Law, National Chengchi UniversityDirector, JinWen University of Science & TechnologyChairman, Teacher Grievances Committee of Ministry of Education

None None None



Chi-Ming Wu Male 2017.05.11 3 years 2013.06.13 - - - - - - - - BBA, Department of Business Administration, National Chengchi UniversityMBA, Graduate Institute of Business Administration, National Taiwan UniversityPh.D. in Finance, University of Mississippi, U.S.A.Public Director, Securities Investment Trust & Consulting Association of the R.O.C.Member of Management Board, Public Service Pension FundChartered Financial Analyst, CFAChief of Training Section, Center of Public & Business Administration Education, National Chengchi UniversityIndependent Director, Ennoconn Corporation Co., Ltd.Member of Ombudsman Committee, Financial Ombudsman Institution

Associate Professor, Department of Finance, National Chengchi UniversityIndependent Director, TSC Auto ID Technology Co., Ltd.

None None None

Note 1: Chairman Wei-Shan Lin resigned and the board elected director Wen-Yen K. Lin to take up chairmanship on February 1, 2018. Note 2: Major institutional shareholders

Institutional shareholder Major shareholders

Tatung University Not Availavle (The school has no shareholders)

Note 3: Director of Wei-Tung Lin had resigned on March 10, 2017.Note 4: The Company had elected directors on May 11, 2017. Director of Huo-Yen Chen had terminated. Director of Shou-Huang Chen and

Director of Sheng-Wen Tsai had elected.Note 5: Please refer to pages 95-101 for the job assumed by the directors and supervisors in other investees concurrently.



17

(II) Professional qualifications and independence analysis of directors As of March 31, 2018

Qualification

Name

Whether they possess work experience of more than five years and the following professional qualifications Independence criteria (Note 4)

Number of other public companies in which he/she serves

concurrentlyas

independent director

An instructor orhigher position in a department of commerce, law,

finance, accounting,or other academic

department related to company business

in a public or private junior college, college,

or university

A judge, public prosecutor, attorney,

certified public accountant, or

other professional or technical

specialist who has passed a national examination and

has been awarded a certificate in a

professionalcapacity necessary for

company business

Having workexperience in the

area of commerce,law, finance or accounting, or

otherwise necessary forcompany business 1 2 3 4 5 6 7 8 9 10


√ √ √ √ √ √ √ 0

I-Hua Chang √ √ √ √ √ √ √ 0

Shou-Huang Chen √ √ √ √ √ √ √ √ √ √ √ √ 0

Sheng-Wen Tsai √ √ √ √ √ √ √ √ √ √ √ √ 0

Lung-Ta Lee √ √ √ √ √ √ √ 0

Peng-Fei Su √ √ √ √ √ √ √ √ √ √ √ 1

Tzong-Der Liou √ √ √ √ √ √ √ √ √ √ √ √ 0

Chi-Ming Wu √ √ √ √ √ √ √ √ √ √ √ √ 1

Note 1: Chairman Wei-Shan Lin resigned and the board elected director Wen-Yen K. Lin to take up chairmanship on February 1, 2018.Note 2: Director of Wei-Tung Lin had resigned on March 10, 2017.Note 3: The Company had elected directors on May 11, 2017. Director of Huo-Yen Chen had terminated. Director of Shou-Huang Chen and

Director of Sheng-Wen Tsai had elected.Note 4: Please tick the corresponding boxes if directors have been any of the following during the two years prior to being elected or during the

term of office: (1) Not an employee of the Company or any of its affiliates; (2) Not a director or supervisor of the Company or its affiliates (The same does not apply, however, in cases where the person is an

independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Securities and Exchange Act or with the laws of the country of the parent or subsidiary);

(3) Neither a shareholder who holds shares, together with those held by the person’s spouse or underage children, or held by the person under others’ name in an aggregate amount of 1% or more than the total number of issued shares of the Company, nor one of the Company’s top 10 individual shareholders;

(4) Not a spouse, relative within the 2nd degree of kinship, or lineal relative within the 5th degree of kinship of any of the people specified in the preceding three subparagraphs;

(5) Neither a director, supervisor or an employee of the institutional shareholders directly holding 5% or more of the Company’s total issued shares, nor a director, supervisor or an employee of the Company’s top five institutional shareholders;

(6) Not a director, supervisor, manager or shareholder holding 5% or more of the shares of any specific companies or organizations which have financial or business relationship with the Company;

(7) Not personally or married to an owner, a partner, professional individual, director, supervisor, or manager of a sole proprietorship, partnership, company or an organization which provides commercial, legal, financial, or accounting services or consultation to the Company or any of its affiliates;

(8) Not a spouse or relative within the 2nd degree of kinship to any other directors of the Company;(9) Not in contravention of Article 30 of the Company Law; (10) Not any governments, institutional shareholders or their representatives pursuant to Article 27 of the Company Law.



18

(III) The managementAs of March 31, 2018

Title Nationality NameMale /Female

Date of appointment (assumption

of post)

Shareholding

Shares held by his/her

spouse and minor children

currently


Work / educational experience

(Note 1)

Job title assumed in any other company

Manager who is his/her spouse or is within 2nd

degree of kinship

Num

ber o

f sh

ares

Shar

ehol

ding

pe

rcen

tage

(%)

Num

ber o

f sh

ares

Shar

ehol

ding

pe

rcen

tage

(%)

Num

ber o

f sh

ares

Shar

ehol

ding

pe

rcen

tage

(%)

Job

title

Nam

e

Rela

tions

hip

President Republic of China (Taiwan)

Wen-Yen K. Lin Female 2011.07.05 16,004,173 0.68 17,655,173 0.76 - - Master of Economics, Maryland UniversityAssistant Professor of Maryland UniversityLecturer of National Taiwan UniversityLecturer of Tatung UniversitySenior General Manager of Tatung Company's International SalesExecutive Vice President of Tatung Company

Chairman of Tatung CompanyChairman of Tatung System Technologies Inc.Chairman of Elitegroup Computer Systems Co., Ltd.Chairman of Tatung Mexico S.A. de C.V.Chairman of Tatung Czech s.r.o.Chairman of Tatung Information (Singapore) Pte. Ltd.

None None None

Chief Financial Officer


Wen-Chieh Peng

Male 2013.06.24 10,000 - - - - - Master of insurance, Feng Chia UniversityGeneral Manager of TatungCompany’s Investment Division & President’s Special AssistanSenior General Manager of Tatung Company's Finance & Accounting Division

Director of Chunghwa Picture Tubes, Ltd.Chairman of Chih Sheng Investment Co., Ltd.Director of Absolute Alpha LimitedDirector of Chih Sheng Realty Co., Ltd.Director of Wu-jiang Tatung Electronics Trading Co., Ltd.Director of Shan Chih Asset Development Co., Ltd.

None None None

Financial Officer


Ruei-Kai Jhang Male 2013.06.24 - - - - - - EMBA, Tamkang UniversityAssistant Manager of Chinfon BankManager of JihSun Bank SeniorManager of Tatung Company’s Accounting Division

Director & President of Chih Sheng Investment Co., Ltd.Director & President of Chunghwa Electronics Development Co., Ltd.

None None None

Accounting Officer


Shu-Fen Chen Female 2011.01.27 23,330 - - - - - Bachelor of Management, Tatung UniversitySenior Manager of Tatung Company’s Accounting Division

Director of Tatung Electronics (Singapore) Pte. Ltd.

None None None

Note 1: Please refer to pages 95-101 itemed (IV) Information about directors, supervisors and presidents of affiliates for the job assumed by the managers in other investees concurrent.

Other information of important management

Name Unit Educational background Work experience

Hur-Lon Lin System Business Group, Tatung Company

Master of Materials Science and Engineering, National Tsing Hua University

Associate Professor of Materials Engineering, Tatung UniversityPresident of San Chih Semiconductor Co., Ltd.President & CEO of Green Energy Technology Inc., Ltd.

Tzu-Te Chen System Integration Business Unit, System Business Group, Tatung Company

Bachelor of Information Management, Chienkuo Technology University

Senior General Manager of ICT & Energy Solution Business Unit, Tatung Company

Shueei-Tian Shiue

Power Business Group, Tatung Company

Bachelor of Electrical Engineering, Tatung University

Senior Plant Manager of Motor Business Unit, Tatung Company

An Chao Legal Division, Tatung Company Bachelor of Law, National Taiwan University Senior Counsel of Liu &Partners Attorneys-At-LawGeneral Manager of Legal Division, Tatung Company



19

(IV) Remuneration paid to directors, president and vice presidents in 20171. Remuneration to directors

Unit: NT$ Thousand

Job title Name

Remuneration to directors Percentage of the total of

A, B, C and D to income

after tax (%)

Relevant remuneration received by directors who are also employeesPercentage of total of A, B, C, D, E, F and G to

income after tax (%)Whether

remuneration from any

reinvested companies other than

subsidiaries is received?

Remuneration (A) Retirement pension (B) Remuneration allocated from earnings (C)

Business execution expenses (D)

Salary, bonus and special allowance (E) Retirement pension (F) Employees’ bonus allocated from earnings (G)

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts The Company All companies included in Financial statements

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

Cas

h di

vide

nd

Stoc

k di

vide

nd

Cas

h di

vide

nd

Stoc

k di

vide

nd

ChairmanWei-Shan Lin 12,080 13,320 – – – 245 – 2,042 – – – 15,200 – – – – – – – – –

DirectorWen-Yen K. Lin – 7,140 – – – 2,245 120 1,380 – – 9,867 9,867 154 154 – – – – – – –

DirectorWei-Tung Lin – – – – – 45 30 30 – – – – – – – – – – – – –

DirectorI-Hua Chang – – – – – 45 120 120 – – – 9,592 – 108 – – 6,600 – – – –

DirectorLung-Ta Lee – 100 – – – – 120 600 – – – 2,778 – 249 – – – – – – –

DirectorHuo-Yen Chen – – – – – – 50 50 – – – – – – – – – – – – –

DirectorShou-Huang Chen 383 383 – – – – 80 80 – – – – – – – – – – – – –

DirectorSheng-Wen Tsai 383 383 – – – – 80 80 – – – – – – – – – – – – –

Independent-DirectorPeng-Fei Su 3,700 4,132 – – – – – – – – – – – – – – – – – – –

Independent-DirectorTzong-Der Liou 3,120 3,120 – – – – – – – – – – – – – – – – – – –

Independent-Director Chi-Ming Wu 2,900 2,900 – – – – – – – – – – – – – – – – – – –

Note 1: Provision for expensed retirement pension: NT$154,000 by the Company (NT$511,000 by all companies under the consolidated financial statements).Note 2: Remuneration allocated from earnings and Employees' bonus allocated from earnings are a proposed figure.Note 3: Apart from what is listed in the table above, the company’s directors did not receive any pay for the services they provided in the

previous year’s financial report (e.g., providing consultations as non-staff).Note 4: Director of Wei-Tung Lin had resigned on March 10, 2017. Director of Huo-Yen Chen had terminated by re-election on May 11, 2017.

Director of Shou-Huang Chen and Sheng-Wen Tsai had elected on May 11, 2017. Chairman of Wei-Shan Lin had resigned on February 1, 2018.



20

(IV) Remuneration paid to directors, president and vice presidents in 20171. Remuneration to directors

Unit: NT$ Thousand

Job title Name

Remuneration to directors Percentage of the total of

A, B, C and D to income

after tax (%)

Relevant remuneration received by directors who are also employeesPercentage of total of A, B, C, D, E, F and G to


remuneration from any

reinvested companies other than

subsidiaries is received?

Remuneration (A) Retirement pension (B) Remuneration allocated from earnings (C)

Business execution expenses (D)

Salary, bonus and special allowance (E) Retirement pension (F) Employees’ bonus allocated from earnings (G)

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts The Company All companies included in Financial statements

The

Com

pany

All c

ompa

nies

in

clud

ed in

Fin

anci

al

state

men

ts

Cas

h di

vide

nd

Stoc

k di

vide

nd

Cas

h di

vide

nd

Stoc

k di

vide

nd

ChairmanWei-Shan Lin 12,080 13,320 – – – 245 – 2,042 – – – 15,200 – – – – – – – – –

DirectorWen-Yen K. Lin – 7,140 – – – 2,245 120 1,380 – – 9,867 9,867 154 154 – – – – – – –

DirectorWei-Tung Lin – – – – – 45 30 30 – – – – – – – – – – – – –

DirectorI-Hua Chang – – – – – 45 120 120 – – – 9,592 – 108 – – 6,600 – – – –

DirectorLung-Ta Lee – 100 – – – – 120 600 – – – 2,778 – 249 – – – – – – –

DirectorHuo-Yen Chen – – – – – – 50 50 – – – – – – – – – – – – –

DirectorShou-Huang Chen 383 383 – – – – 80 80 – – – – – – – – – – – – –

DirectorSheng-Wen Tsai 383 383 – – – – 80 80 – – – – – – – – – – – – –

Independent-DirectorPeng-Fei Su 3,700 4,132 – – – – – – – – – – – – – – – – – – –

Independent-DirectorTzong-Der Liou 3,120 3,120 – – – – – – – – – – – – – – – – – – –

Independent-Director Chi-Ming Wu 2,900 2,900 – – – – – – – – – – – – – – – – – – –

Note 1: Provision for expensed retirement pension: NT$154,000 by the Company (NT$511,000 by all companies under the consolidated financial statements).Note 2: Remuneration allocated from earnings and Employees' bonus allocated from earnings are a proposed figure.Note 3: Apart from what is listed in the table above, the company’s directors did not receive any pay for the services they provided in the

previous year’s financial report (e.g., providing consultations as non-staff).Note 4: Director of Wei-Tung Lin had resigned on March 10, 2017. Director of Huo-Yen Chen had terminated by re-election on May 11, 2017.

Director of Shou-Huang Chen and Sheng-Wen Tsai had elected on May 11, 2017. Chairman of Wei-Shan Lin had resigned on February 1, 2018.



21

2. Remuneration to the management teamUnit: NT$ Thousand

Job title Name

Salary (A) Retirement pension (B)

Bonus and special allowance (C)

Employees’ bonus allocatedfrom earnings (D)

Percentage of total of A, B, C and D to


remuneration from any reinvested

companies other than subsidiaries is

received?Th

e Com

pany

All c

ompa

nies in

clude

d in

Finan

cial st

atem

ents

The C

ompa

ny

All c

ompa

nies in

clude

d in

Finan

cial st

atem

ents

The C

ompa

ny

All c

ompa

nies in

clude

d in

Finan

cial st

atem

ents

The CompanyAll companies

included in Financial statements

The C

ompa

ny

All c

ompa

nies in

clude

d in

Finan

cial st

atem

ents

Cash

div

idend

Stock

div

idend

Cash

div

idend

Stock

div

idend

President Wen-Yen K. Lin 9,867 9,867 154 154 – – – – – – – – –

Note 1: Provision for expensed retirement pension: NT$154,000 by the Company (NT$154,000 by all companies under the consolidated financial statements).

3. Employee bonus granted to the management team: None.

4. The percentage of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the most recent two fiscal years to directors, presidents and vice presidents of the Company, to the income after tax, and the policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance.

Job title

Percentage of total remuneration, which is paid by the Company and by all companies included in the consolidated financial statements to directors, presidents

and vice presidents of the Company, to the income after tax

2016 2017

Directors(2.7%) 112%

President / Vice President

The Board of Directors is authorized to determine the transportation allowance and remuneration to directors of the Company based on their contribution to the Company’s operation and by taking into consideration the local and foreign standards as applied in the same industry. Presidents and vice presidents manage the Company’s business on the order of the Board of Directors. The appointment, dismissal and remuneration of presidents and vice presidents shall be subject to the Company Law. Furthermore, remuneration will also be allocated from the Company’s earnings, if any, in accordance with Article 24 of the Company Regulations.



22

Status of corporate governance(I) Status of Board of Directors’meeting

The Board of Directors has held 9 meetings in 2017. The status for the attendance of directors is as follows:

Title Name Attendance in person

Attendance by proxy

Attendance rate (%) Notes

Chairman Wei-Shan Lin 9 0 100 Resigned on February 1, 2018(Chairman & Director)

Director Wen-Yen K. Lin 9 0 100

Director Tatung University / I-Hua Chang 9 0 100

Director Shou-Huang Chen 4 0 80 Elected on May 11, 2017

Director Sheng-Wen Tsai 5 0 100 Elected on May 11, 2017

Director Lung-Ta Lee 9 0 100

Director Wei-Tung Lin 2 0 100 Resigned on March 10, 2017

Director Tatung University / Huo-Yen Chen 4 0 100 Terminated on May 11, 2017

Independent Director Peng-Fei Su 9 0 100

Independent Director Tzong-Der Liou 9 0 100

Independent Director Chi-Ming Wu 9 0 100

Other notes to be specified: I. The Board of Directors’ meetings of independent directors shall specify the dates, terms, agendas, opinions of all

independent directors and how their opinions are responded by the Company if one of the subsequent conditions occurs. 1. What is indicated in Article 14-3 of the Securities and Exchange Act:

Board Meeting Content and the execution of the resolutions

Items listed under

14-3 of the Securities Exchange

Act

Objections raised or

reservation opinions of

independent director(s)

The Second Meeting of 201703/09/2017

1. The Company's Plan to Raise Long-Term Capital. √ None

2. Amendment of the Company’s "Procedures for Acquisition or Disposal of Assets."

√ None

3. Amendment of the Company’s compensation/remuneration mechanism for directors (exclusion of independent directors) and professional managers.

√ None

4. Amendment of the Company’s compensation/remuneration mechanism for independent directors.

√ None

Independent directors’ comments: None.

The Company’s execution of the independent directors resolutions: None.

Resolution: approved by all attending Directors without objection.

The Fourth Meeting of 201705/03/2017

1. The plan to sell part of the land and building of Tatung Building owned by our subsidiary - Shan Chih Asset Development Co., Ltd..

√ None






23


Items listed under


Act

Objections raised or

reservation opinions of

independent director(s)

The Fifth Meeting of 201708/08/2017

1. The proposal for subscription of the common shares of Green Energy Technology Inc. through private placement.

√ None

2. The cost of the Company’s 2017 audited financial statements by CPA. √ None




The Sixth Meeting of 201709/19/2017

1. The company’s subsidiary - Shan Chih Asset Development Co., Ltd. proposed disposal of security investment in China.

√ None

2. The proposal for investment of newly established Tung Yang Energy Co., Ltd. and the participation in the capital increase of Tatung Forever Energy Co., Ltd. through the capital increase of Sheng Yaug EnergyCo., Ltd..

√ None




The Seventh Meeting of 201711/14/2017

1. Amendments to the articles of internal control and internal audit implementation rules.

√ None

2. The proposal for the Company to provide endorsements and guarantees to Chunghwa Picture Tubes, Ltd..

√ None




The Eighth Meeting of 201712/21/2017

1. The Company proceeds cash capital raising activities of common shares.

√ None

2. The Company invests to build the solar power plant in Yuguang District, Qigu, Tainan.

√ None

3. The Company adjusts the subscription price of the common shares of Green Energy Technology Inc. through private placement.

√ None

4. The proposal for the Capital Improvement Financing Plan of Tatung Vietnam Co., Ltd. (100% owned subsidiary of the Company).

√ None

5. The proposal for the Capital Improvement Financing Plan of TGSI (100% owned subsidiary of the Company).

√ None

6. The proposal for the Capital Improvement Financing Plan of Tatung InfoComm Co., Ltd..

√ None




2. Apart from the above-mentioned matter, any resolutions that were passed by the board of directors but independent directors had objection or reservations about in documented minutes or statements: None

II. With reference to directors’ withdrawing from any motion due to conflict of interest, the directors’ names, contents of motions, causes for the withdrawal, and participation in voting shall be specified: the Board of Directors did not encounter any motions with conflicting interests against the Company in the year.



24

1. Board Meeting 3/9/2017 Meeting Agenda: Amendment of the company’s compensation / remuneration mechanism for independent directors. Directors withdrawn from discussion and vote due to personal interest: Peng-Fei Su, Tzong-Der Liou and Chi-Ming Wu. Reasons for avoidance of conflict of interest and vote results: In accordance with Article 206 of the Company Act,

except withdrawing from discussion and vote due to personal interest by Directors Peng-Fei Su, Tzong-Der Liou and Chi-Ming Wu, the proposal was approved by all other attending Directors without objection.

III. Objectives to strengthen the functions of the Board of Directors in the current year and most recent year (e.g., establishment of Audit Committee and upgrading information transparency) and evaluation of the execution thereof:1. In compliance with the competent authority's promotion of robust corporate governance policies, the Company had

established independent directors, Audit Committee, and Remuneration Committee.2. Upgrading information transparency, internet-based reporting system, and disclosure of information on corporate

governance:(1) The Company performs its obligations faithfully in accordance with the relevant laws and the related TWSE rules.

Establishing an internet-based reporting system for public information that appoint personnel responsible for gathering and disclosing the information, and establishing a spokesperson system so as to ensure the proper and timely disclosure of information about policies that might affect the decisions of shareholders and stakeholders.

(2) In order to keep shareholders and stakeholders fully informed, the Company utilizes the convenience of the internet and set up a website containing the information regarding its finances, operations, and corporate governance. If necessary, furnish the financial, corporate governance, and other relevant information in English. To avoid misleading information, the aforesaid website shall be maintained by specified personnel, and the recorded information shall be accurate, detailed and updated on a timely basis.

(3) The Company shall attend an investor conference in compliance with the regulations of the TWSE. The financial and business information disclosed in the investor conference shall be disclosed on the designated internet information posting system by TWSE and provided for inquiry through the Company’s website.

(4) The Company shall disclose the information regarding corporate governance in the fiscal year in accordance with laws and regulations and TWSE rules. According to the actual performance of the corporate governance system, disclose the plans and measures to improve its corporate governance system through appropriate mechanisms.

(II) Participation by Audit CommitteeA total of 10 Audit Committee meetings were held in the previous period (2017). Committee member of Audit Committee attendance was as follows:

Title Name Attendance in person

Attendance by proxy

Attendance rate (%) Notes

Convenor (Chairman) Peng-Fei Su 10 0 100Re-elected at the shareholders meeting onMay 11, 2017

Committee Tzong-Der Liou 10 0 100Re-elected at the shareholders meeting onMay 11, 2017

Committee Chi-Ming Wu 10 0 100Re-elected at the shareholders meeting onMay 11, 2017

Other mentionable items: 1. The Audit Committee meetings of independent directors shall specify the dates, terms, agendas, opinions of Audit Committee

and how their opinions are responded by the Company if one of the subsequent conditions occurs. (1) What is indicated in Article 14-5 of the Securities and Exchange Act:


Items listed under


Act

Resolutions objected by audit

committee while

approved with the

consent of two thirds or more of the entire board of directors

The Second Meeting of 201703/09/2017

1. The Company's Plan to Raise Long-Term Capital. √ None

2. Amendment of the Company’s "Procedures for Acquisition or Disposal of Assets".

√ None

Resolutions at the Committee meeting (03/09/2017): approved by the entire membership of the Committee.

The Company’s execution of the audit committee’s resolutions: approved by all attending Directors without objection.



25


Items listed under


Act


committee while

approved with the


The Third Meeting of 201703/29/2017

1. The Company’s 2016 Internal Control System Statements. √ None

2. The Company’s 2016 Financial Statements. √ None



The Fourth Meeting of 201705/03/2017

1. The plan to sell part of the land and building of Tatung Building owned by our subsidiary - Shan Chih Asset Development Co., Ltd..

√ None



The Fifth Meeting of 201708/08/2017

1. The Company’s consolidated financial statements and review report of independent accountants June 30, 2017.

√ None

2. The Company’s 2017 certified public accountants’ fees on auditing and certification of financial statements.

√ None

3. The proposal for subscription of the common shares of Green Energy Technology Inc. through private placement.

√ None



The Sixth Meeting of 201709/19/2017

1. The company’s subsidiary - Shan Chih Asset Development Co., Ltd. proposed disposal of security investment in China.

√ None

2. The proposal for investment of newly established Tung Yang Energy Co., Ltd. and the participation in the capital increase of Tatung Forever Energy Co., Ltd. through the capital increase of Sheng Yaug EnergyCo., Ltd..

√ None



The Seventh Meeting of 201711/14/2017

1. Amendments to the articles of internal control and internal audit implementation rules.

√ None

2. The proposal for the Company to provide endorsements and guarantees to Chunghwa Picture Tubes, Ltd..

√ None





26


Items listed under


Act


committee while

approved with the


The Eighth Meeting of 201712/21/2017

1. The Company proceeds cash capital raising activities of common shares.

√ None

2. The Company invests to build the solar power plant in Yuguang District, Qigu, Tainan.

√ None

3. The Company adjusts the subscription price of the common shares of Green Energy Technology Inc. through private placement.

√ None

4. The proposal for the Capital Improvement Financing Plan of Tatung Vietnam Co., Ltd. (100% owned subsidiary of the Company).

√ None

5. The proposal for the Capital Improvement Financing Plan of TGSI (100% owned subsidiary of the Company).

√ None

6. The proposal for the Capital Improvement Financing Plan of Tatung InfoComm Co., Ltd..

√ None



(2) In addition to the above-mentioned matter, any other resolutions agreed by the two-thirds of all the directors without having been agreed by the audit committee: None.

2. If there is Independent Directors’ avoidance of motions in conflict of interest, the Independent Directors’ names, contents of motions, causes for avoidance and voting should be specified: None

3. Communications between the independent directors, the Company's Chief Internal Auditor and CPAs (including the material items, methods and results of audits of corporate finance or operations, etc.):

For the CAE (Chief Audit Executive): In addition to submitting the audit report to the Chairman, it is also needed to hand over the audit report to the individual directors who can discuss and communicate with the CAE directly with regard to the contents of the audit report while needed. If the individual directors have any comments on the audit report, the internal audit unit has to follow up and reply to the individual directors with the countermeasures, moreover, if the individual directors have any instructions, the CAE has to report to the individual directors accordingly after the audit project is finalized.

For the CPA: After the quarter, half-year and annual financial statements are finalized, the individual directors call a Meeting of Communication with Management and Governing body of Audit Clients to invite the CPA only to the meeting for fully discussions and for interchanging opinions with regard to the issues which the CPA has discovered from the internal control systems or from the financial statements during the auditing period.



27

(III) Corporate Governance Implementation Status and Deviations from "the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies"

Evaluation Item

Implementation StatusDeviations from "the Corporate Governance Best-Practice Principles for

TWSE/TPEx Listed Companies" and

ReasonsYes No Abstract Illustration

(I) Does the Company establish and disclose the Corporate Governance Best- Pract ice Pr incip les based on "Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies"?

√ In accordance with "Corporate Governance Best Prac-tices Principles for TWSE/GTSM Listed Companies", the Company has adopted and made public its corporate governance best practices principles at its official website and at the Market Observation Post.

None

(II) Shareholding structure & shareholders’ rights1. Does the Company establish an

internal operating procedure to d e a l w i t h s h a re h o l d e r s ’ suggestions, doubts, disputes and litigations, and implement based on the procedure?

√ 1. Shareholders’ suggestions and questions are directly addressed to the departments held accountable as well as taken care of by the Company’s spokesman or deputy spokesman.

1. None

2. Does the Company possess the list of its major shareholders as well as the ultimate owners of those shares?

√ 2. Monthly applications of changes in the shareholdings of directors, supervisors, and shareholders with a greater than 10 percent share of the company’s total issued equity are submitted to keep track of and stay in contact with major shareholders who have controlling power so as to get hold of the persons with ultimate control over the company.

2. None

3. Does the Company establish and execute the r isk management and f i rewal l system with in its conglomerate structure?

√ 3. The Company has set up rules for supervising its subsidiaries and periodic reviews of their operations.

3. None

4. Does the Company establ i sh internal rules against ins iders t r a d i n g w i t h u n d i s c l o s e d information?

√ 4. The Company has established the Management Procedures for the Prevention of Insider Trading in Tatung Co., Ltd. to prohibit company insiders from trading securities using information not disclosed to the market.

4. None

(III) Composition and Responsibilities of the Board of Directors

1. Does the Board develop and implement a diversified policy for the composition of its members?

√ 1. The Company has stipulated diversity in the compo-sition of the board of directors in Article 20 of its Corporate Governance Best Practices Principles, and has included directors with diverse expertise like law and finance and from various industries.

The policy to diversify the membershif of the Board. Please refer to note.

1. None

2. Does the Company voluntarily e s ta b l i s h o t h e r f u n c t i o n a l committees in addition to the Remuneration Committee and the Audit Committee?

√ 2. In order to have a sound corporate governance, the Company has established a corporate governance commit tee w ith i t s o rgan i zat iona l char te r in accordance with the resolutions made by the board of directors on March 15th, 2018. The board of directors elected the following to be members of the Company’s corporate governance committee: Peng-fei Su (Independent director), Tzong-der Liou (Independent director), Chi-Ming Wu (Independent director), Shou-huang Chen (Director), Sheng-wen TSAI (Director).

2. None



28

Evaluation Item




3. Does the Company establ ish a s tanda rd to measu re the performance of the Board, and implement it annually?

√ 3. In accordance with the resolutions made by the board of directors on March 15th, 2018, the Company has established the regulations for assessing the performance by the board of directors and the other functional committees of the Company. Accordingly, the company’s board of directors and other functional committees shall each conduct, at least once a year, an internal performance evaluation. Meanwhile, at least once every two years, the Company’s board performance evaluation shall be conducted by an external, independent, professional institution or a panel of external experts and scholars. Internal and external board performance evaluations shall be submitted to the board of directors three months before the first board meeting in the following year.

The Company will establish the procedures for the compensation of directors in accordance with the following: the articles and operating rules of the incorporation, the above-mentioned regulations and the related regulations set up by functional committees of the Company. Their performance evaluation and reasonable compensation need to be supervised by related functional committees and the board of directors. Meanwhile, the adopted compensation system for directors is, at any time, subject to change as a result from the Company’s operational performance and changes made in related regulations.

3. None

4. Does the Company regular ly evaluate the independence of CPAs?

√ 4. To ensure the reliability of financial statements and to implement corporate governance, the Company reviews the independence of the CPA in the annual BOD meeting. The Company verifies the CPA’s experience and confirms that there is no additional financial or business relation other than the audit and tax fees. The family members of the CPA should also abide by the independence requirements. The Company evaluates the independence of the CPA according to the Certified Public Accountant Act and the 10th section of the Code of Conduct. The Company obtains the independence declaration and ensures the information stated is correct.

4. None

(IV) Has the TWSE/GTSM Listed Company set up a full-(or part-)time corporate governance unit or personnel to be in charge of corporate governance affairs (which are inclusive of but not rest r icted to the fo l lowing: offer ing the information needed for a director to perform his/her duties, handling matters relating to board meetings and shareholders m e et i n g s a cco rd i n g to l a w s , handling corporate registration and amendment registration, producing minutes of board meetings and shareholders meetings, etc.)?

√ The Company has established a corporate governance committee in charge of corporate governance related matters. In accordance with the organizational charter of the corporate governance committee, the responsibilities of the committee involve:

1. Establishing the criteria for electing independent directors and members of functional committees by taking candidates’ experiences, specialties and independence into consideration before submitting them to the board of directors for approval.

2. Proposing and assessing potential candidates for independent directors and members of functional committees.

3. Recommending to the board of directors candidates for the Company’s directors (including independent di rectors), members of functional committees, directors and independent directors of the Company’s subsidiaries.

4. Managing and assessing the execution of duties by the Company’s president, directors, independent directors, and members of functional committees.



29

Evaluation Item




5. Managing the corporate governance’s system insofar as its analysis, execution, planning and operating rules are concerned; reviewing and revising the rules of procedure for board meetings as well as the guidelines, regulations, organizational rules in relation to the corporate governance before submitting to the board of directors for approval.

6. Discussing the plan by the board of directors for the next fiscal year and assessing the execution of the plan for the current year before submitting to the board of directors for approval and reports.

7. Appraising the mechanism for interaction with shareholders.

8. Appraising the Company’s governance relations with its subsidiaries and affiliated enterprises.

9. Appraising the efficacy of the corporate governance system.

10. Taking up any resolutions made by the board of director in accordance with the Company’s regulations.

None

(V) Does the Company establ i sh a communication channel (This is inclusive of but not restr icted to shareholders, employees, clients and suppliers, etc) and build a designated section on its website for stakeholders, as well as handle all the issues they care for in terms of corporate social responsibilities?

√ The Company has established a communication channelwith shareholders, set up an area for shareholders at theofficial website, and properly responded to the issues ofcorporate social responsibilities about which sharehold-ers are concerned.

None

(VI) Does the Company appoint a professional shareholder service agency to deal with shareholder affairs?

√ The Company handles shareholders meeting matters by itself.

The Company handles shareholders meeting mat-ters by itself.

(VII) Information Disclosure

1. Does the Company have a corporate website to disclose both financial standings and the status of corporate governance?

√ 1. The Company and its subsidiaries have set up their websites for releasing their financial, business and corporate governance information.

1. None

2. Does the Company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and d i sc losu re, c reat ing a spokesman system, webcasting investor conferences)?

√ 2. Apart from the official English Website, the Company has also designated the personnel gathering, disclosing and updating the Company’s information while implementing the spokesman system. The information concerning the Company’s investor conference has been made available on its official website as well.

2. None



30

Evaluation Item




(VIII) I s t h e r e a ny o t h e r i m p o r ta nt information to facil itate a better understanding of the Company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing i n s u r a n c e f o r d i r e c t o r s a n d supervisors)?

√ 1. Rights and treatment of employees: All Tatung Company’s employees, applicants, and

contract workers are equally treated with dignity regardless of their races, religions, colors, genders, and nationalities. The Company has set up working regulations, welfare, salary, and subsidies according to the labor and gender equality related regulations promulgated by the government. The Company also reviews employees’ performance annually to ensure reasonable alignment between employees’ salary and labor, so that they will be contended with their jobs.

1. None

2. Investor relations: The Company has appointed Investor Relations department

to collect and disclose information and to communicate with stakeholders, investors and the public.

The Company also attends domestic and oversea investor forums sporadically to deliver information regarding corporate financials, business strategies and operation directions. Moreover, the Company has set up the investor service on the corporate website for stakeholders, investors and the public to download material information of monthly sales revenues, financial statements, annual reports and conference booklets, financial ratios and investor conference presentations, etc. Financial and business information of the Company would be released on Taiwan Stock Exchange Market Observation Post System.

2. None

3. Supplier management: Tatung is an environmentally friendly company with a

calling to uphold the global environmentalism, so that we request suppliers to sign contracts in which they would abide by the government’s environmental protection laws and regulations in reducing waste, preventing pollution, and disposing wastes. The suppliers will be audited upon Tatung’s request and Tatung has the right to suspend or terminate the partnership, should any matters violating the law be found. Besides, in order to comply with customers’ green procurement demand and international legal requirements such as RoHS directive, Tatung has been actively promoting the green supply chain. Through building up the green supply chain, we can review our suppliers’ performance and to strengthen the existing supply chain. As for the safety of suppliers’ working environment, Tatung has also implemented evaluation in-dicators in the supplier reviews/evaluations.

In addition, "Tatung health and safety management method for construction suppliers" has been established to reduce the probability of an accident.

3. None

4. Rights of investors: The Company has set up communication channels with investors and set aside an area at the official website specifically for investors.

4. None

5. The progress of training of directors and managerial officers: (1) The Company’s directors (including independent

directors) fulfilled of training in 2017. (2) The training of the Company’s managerial officers:

A. Chief Financial Officer – Wen-Chieh Peng: 6 hours.B. Accounting Officer – Shu-Fen Chen: 12 hours.

5. None

6. Enforcement of consumers’ protection policies: The Company always strictly observes the contracts with our clients so as to sustain a steady and harmonious relationship, arriving at better profits as a result.

6. None



31

Evaluation Item




7. Coverage of liability insurance for directors and supervisors: The Company has purchased liability insurance for directors and supervisors.

7. None

(IX) Specify the Company’s improvements in accordance with the recently released evaluations of corporate governance by the Corporate Governance Center of the Taiwan Stock Exchange Corporation (TWSE). As for those yet to be improved, account for the Company’s list of priorities and their implementation.

The Company has conducted an internal assessment of its corporate governance practices in order to gradually improve its governance and upgrade its corporate image.

Note: The policy to diversify the membership of the Board has been carried out as follow:

Name / Title

Basic requirements and values Professional background Professional knowledge and skills

Gender Nationality Educational backgroundAbility

to make operational judgments

Ability to perform

accounting and

financial analysis.

Ability to conduct

management administration

Ability to conduct crisis management

Knowledge of the

industry

An international

market perspective.

Ability to lead

Ability to make policy

decisions

Wen-Yen K. LinChairman

Female R.O.C. Master of Economics, Maryland University

√ √ √ √ √ √ √ √

Representative of Tatung UniversityI-Hua Chang Director

Male R.O.C. Bachelor of MechanicalEngineering, Tatung University

√ √ √ √ √ √ √ √

Shou-Huang ChenDirector

Male R.O.C. Doctor of Philosophy, LLD Institute of the Law of the Sea National Taiwan Ocean University

√ √ √ √ √ √ √ √

Sheng-Wen Tsai Director

Male R.O.C. Bachelor of Accounting Fu-Jen University

√ √ √ √ √ √ √ √

Lung-Ta Lee Director

Male R.O.C. Ph.D. of Chemical Engineering, Tatung University

√ √ √ √ √ √ √ √

Peng-Fei SuIndependent Director

Male R.O.C. Administration, National Chengchi University

√ √ √ √ √ √ √ √

Tzong-Der Liou Independent Director

Male R.O.C. Ph. D. of Law Nagoya University, Japan

√ √ √ √ √ √ √ √

Chi-Ming Wu Independent Director

Male R.O.C. Ph.D. in Finance, University of Mississippi, U.S.A.

√ √ √ √ √ √ √ √



32

(IV) The composition, duties, and operation of the Compensation Committee:(1) Members of the Remuneration Committee


Title

Qualification

Name

Whether they possess work experience of more than five years and the following professional

qualificationsIndependence criteria (Note 1)

Number ofother publiccompaniesin which he/she serves

concurrentlyas

Compensation Committee

Notes

An instructor orhigher position

in a departmentof commerce,law, finance,

accounting, orother academic

departmentrelated tocompany business

in a public orprivate junior

college, college,or university

A judge, publicprosecutor,attorney,

certified publicaccountant, or

other professionalor technical

specialist who has

passed a national

examination and

has been awarded

a certificate ina professional

capacitynecessary for

company business

Having workexperience in

thearea of

commerce,law, finance or

accounting,or otherwisenecessary for

company business

1 2 3 4 5 6 7 8

Independent Director Tzong-Der Liou √ √ √ √ √ √ √ √ √ √ 0 (Note2)

Independent Director Peng-Fei Su √ √ √ √ √ √ √ √ √ 1 (Note2)

Independent Director Chi-Ming Wu √ √ √ √ √ √ √ √ √ √ 3 (Note2)

Note 1: Please tick the corresponding boxes if Compensation Committee have been any of the following during the two years prior to being elected or during the term of office:(1) Not an employee of the Company or any of its affiliates;(2) Directors and supervisors should not be affiliated with the Company or its affiliated enterprises. But this restriction does not apply to

those for their companies or parent compaines or subsidiaries as dictated in the Securities and Exchange Act nor does it apply to independent directors established by the domestic laws and regulations;

(3) Neither a shareholder who holds shares, together with those held by the person’s spouse or underage children, or held by the person under others’ name in an aggregate amount of 1% or more than the total number of issued shares of the Company, nor one of the Company’s top 10 individual shareholders;

(4) Not a spouse, relative within the 2nd degree of kinship, or lineal relative within the 3rd degree of kinship of any of the people specified in the preceding three subparagraphs;

(5) Neither a director, supervisor or an employee of the institutional shareholders directly holding 5% or more of the Company’s total issued shares, nor a director, supervisor or an employee of the Company’s top five institutional shareholders;

(6) Not a director, supervisor, manager or shareholder holding 5% or more of the shares of any specific companies or organizations which have financial or business relationship with the Company;

(7) Not personally or married to an owner, a partner, professional individual, director, supervisor, or manager of a sole proprietorship, partnership, company or an organization which provides commercial, legal, financial, or accounting services or consultation to the Company or any of its affiliates;

(8) Not in contravention of Article 30 of the Company Law;Note 2: The term of office of the 2nd session of Compensation Committee has expired. The 3rd session of Compensation is reappointed by

the board of directors on August 8, 2017. New member of the 3rd Compensation Committee is Tzong-Der Liou , Peng-Fei Su and Chi-Ming Wu.



33

(2) Operation of Compensation Committee1. The compensation committee composed of three members.2. The term of office of the second committee began from June 17, 2014 to May 10, 2017. The term of office of the third committee began from August 8, 2017 to May 10, 2020. The committee has convened the meetings two times last year (A); the qualifications and attendances of the members

are shown as follows:

Title Name Attendance in person (B)

Attendance by proxy

Attendance rate(%) (B/A) Notes

Convenor (Chairman) Tzong-Der Liou 2 0 100 (Note1)

Committee Peng-Fei Su 2 0 100 (Note1)

Committee Chi-Ming Wu 2 0 100 (Note1)

Other notable items:1. If the board of directors decline to adopt or modify a recommendation of the compensation committee, it is

imperative to note down the board meeting’s date, session, motion, resolution as well as Tatung Company’s disposition of the compensation committee’s recommendation. (If the remuneration passed by the board exceeds the recommendation of the compensation committee, the circumstances and causes for the difference shall be specified): None.

2. As to a resolution of the compensation committee, if a committee member expresses any objection or reservation recorded or in a written statement, it is imperative to specify the committee’s date, session, disposition of the comments: None.

Note 1: The term of office of the 2nd session of Compensation Committee has expired. The 3rd session of Compensation is reappointed by the board of directors on August 8, 2017. New member of the 3rd Compensation Committee is Tzong-Der Liou, Peng-Fei Su and Chi-Ming Wu.

(V) Corporate Social Responsibility

Evaluation Item

Implementation StatusDeviations from "the

Corporate Social Responsibility Best-Practice Principles for


Reasons

Yes No Abstract Explanation

1. Corporate Governance Implementation(1) Does the Company declare its

corporate social responsibility policy and examine the results of the implementation?

√ (1) The Company establishes the social responsibility policies and the social responsibility practice principles and also publishes "Tatung Corporate Social Responsibility Report" every year, disclosing its efforts at and contributions to management, quality services, social responsibility, and the environment. Meanwhile, Tatung has also formulated policies beneficial to society, laborers, quality control, research and development, the environment, safety and health, and dividend, as the highest principle.

(1) None

(2) Does the Company provide educat iona l t ra i n i ng on corporate social responsibility on a regular basis?

√ (2) The Company actively promotes and carries out social responsibility. In addition to linkage to internal and external training resources, Tatung Co. also regularly cooperates with the social welfare institutions in the Children's Day, summer vacation, Christmas, company celebration activities, etc., to promote the progress of economic, environment and society achieving the goals of sustainable management and development.

(2) None



34

Evaluation Item




Reasons


(3) Does the Company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?

√ (3) The Company has set the Legal Division and Environment & Safety Division as the responsible unit for the corporate social responsibility. The Company has reported to the board of directors the implementation of corporate social responsibility on March 15, 2018.

(3) None

(4) Does the Company declare a r e a s o n a b l e s a l a r y remuneration pol icy, and i nteg rate the em p l oyee performance appraisal system w ith i t s co rporate socia l responsibility policy, as well as establish an effective reward and disciplinary system?

√ (4) The Company protects the compensation and benefits for her employees and enacts its salary rules in compliance with regulations through the implementation of the internal control policies and the relevant salaries regulations. And Tatung Co. establishes performance management method and reward and punishment regulations. Every employee’s performance is reviewed regularly based on performance management method. Employees’ behavior with the inclusion of the performance appraisal standards, and according to their performance to give reward and punishment.

(4) None

2. Sustainable Environment Development(1) Does the Company endeavor

to utilize all resources more efficiently and use renewable mater ials which have low impact on the environment?

√ (1) Tatung Co. has implemented the corporate -wide "Pol lut ion Prevention Pays, 3P " program since 1993. 3P program helps the factories and subsidiar ies with manufacturing function achieving the goals of cleaner production and green products by developing the innovated technologies, improving the manufacturing processes, introducing concepts of green materials and product design, and reusing the wastes. Many products of the Company have acquired "Green Mark", "Energy Label", "Water Label" or "Product Carbon Footprint".

(1) None

(2) Does the Company establish p r o p e r e n v i r o n m e n t a l management systems based on the characteristics of their industries?

√ (2) Tatung Co. has implemented ISO14001 environmental management system in the factories and subsidiaries since 1996 to continually improve their environmental performances. So far, all the factories have established the management system and certified by the third parties. Subsidiaries such as CPT, GET, Forward Electronics and others also established the management system and certified by the third parties. In 2005 "Tatung Electrical and Electronic Equipment Restriction of Hazardous Substance (RoHS) Test Laboratory" (testing and analyzing the hazardous substances in materials, parts and products) is established to assist in building "Green Supply Chain" which contributes in exporting the products to EU, USA, Japan and other countries.

(2) None

(3) Does the Company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company s t r a t e g i e s f o r e n e r g y conservation and carbon reduction?

√ (3) Every BU continues to enhance energy management and raise energy efficiency in order to reduce GHG emissions. Tatung Co. carries out corporate-wide GHG management education since 2009 and conducts GHG emission inventory based on the requirements of ISO14064-1 and receive third party verification. So far, three out of four factories and CPT, GET carry GHG inventory annually.

(3) None



35

Evaluation Item




Reasons


3. Preserving Public Welfare

(1) D o e s t h e C o m p a n y f o r m u l a t e a p p r o p r i a t e management policies and procedures according to relevant regulations and the International Bil l of Human Rights?

√ (1) All Tatung Company’s employees, applicants, and contract workers are equally treated with dignity regardless of their races, religions, colors, genders, and nationalities. The Company has set up working regulations, welfare, salary, and subsidies according to the labor and gender equality related regulations promulgated by the government. The Company also reviews employees’ performance annually to ensure reasonable alignment between employees’ salary and labor, so that they will be contended with their jobs.

(1) None

(2) Has the Company set up a n em p l oyee h ot l i n e o r gr ievance mechanism to h a n d l e co m p l a i nt s w i th appropriate solutions?

√ (2) The Company establishes the Regulation of Processing Employees’ Complaints in place for the employees to complain about any dispute and provides a channel to deal with.

(2) None

(3) Does the Company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?

√ (3) 1. Tatung Co. established the government and TAF certified "Tatung Environment Research Center" and government certified "Tatung Sampling Center" to carry out the sampling and testing from the operation sites regularly to evaluate the conditions of exposure and provide the recommendations to resolve the hazards to the employees.

2. Enhancing the management on the hazardous machines and equipments, as well as organizing training among the employees.

3. Carrying out the training of Job Safety Analysis in the factories and subsidiaries in order to enhance each operation to comply with S.O.P.

4. Establishing Occupational health and safety management systems (OHSAS 18001 and CNS 15506) to continually improve the health and safety performances.

5. Enforcing the employees’ abi l ity and awareness on the prevention of f i re accident and electr icity safety by providing f i re accident prevention and e lect r ic i t y safet y cou r ses and regu la r check s .

(3) None

(4) Does the Company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them?

√ (4) 1. The Company set up a tangible "Board Chairman Mail Box" and electronic "Human Resource Services Mail Box" for employees to bilaterally communicate with supervisors directly and get swift feedbacks.

2. According to the "Regulations for Implementing Labor-Management Meeting," the Company holds a labor-management meeting regularly, hoping to have a better communication and resolve differences with one another.

3. The Company has regulations for handling employee complaints. Moreover, the Company publishs e-paper twice a month.

(4) None

(5) Does the Company provide its employees with career development and training sessions?

√ (5) The Company’s employees w ith p rofess ional and development advantages, to take the dual career development path of management and professional positions through various training and human resource measures to allow employees to choose a different career planning according to their interests and abilities thereby assisting the Company and colleagues to pursue progress.

(5) None



36

Evaluation Item




Reasons


(6) Does the Company establish any consumer protection mechanisms and appealing p r o c e d u r e s r e g a r d i n g re s e a rc h d eve l o p m e nt, p u rch a s i n g , p ro d u c i n g , operating and service?

√ (6)~(9)The Tatung’s qualified supplier should sign both "Master Contract " and " Suppl ier Commitment Let ter ", the Undersigned undertakes that the products or services provided by it shall comply with the laws & regulations and international standards related to safety and environmental protection and its labor services shall comply with domestic and international laws, policies or regulations related to human rights and labor services. Where it is proven as a fact that the products or services provided by the Undersigned are l ikely to endanger the safety and health of consumers or other interested parties, Tatung could terminate the Agreement and Purchase Order immediately.According to Consumer Rights Policy, (1) The info. of Products and Services have showed on the

website http://www.tatung.com.tw/content/service.asp(2) The complaint mailbox for Supplier is [email protected]

(6)~(9)None

(7) Does the Company advertise and labe l i t s goods and services according to relevant regulations and international standards?

√

(8) Does the Company evaluate the records of suppl ie r s’ impact on the environment and society before taking on business partnerships?

√

(9) Do the contracts between the Company and its major suppliers include termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause appreciable impact on the environment and society?

√

4. Enhancing Information Disclosure(1) Does the Company disclose

r e l e v a n t a n d r e l i a b l e information regarding i t s corporate social responsibility on its website and the Market Obser vat ion Post Sys tem (MOPS)?

√ (1) Tatung Co. issues Tatung Corporate Social Responsibility Report annually. The report is used as a tool not only to present the performances on the business operation, environmental protection, health and safety, and social responsibility but also to communicate with stakeholders. The latest version, "2017 Tatung Corporate Social Responsibility Report", was published in June, 2017 (http://www.tatung.com/Content-EN/csr-report.asp), and disclosed in the MOPS (Market Observation Post System). Subsidiaries such as CPT and GET publish their CSR Reports annually, too. The reports are available to the public and downloadable from the companies’ websites.

(1) None

5. If the Company has established the corporate social responsibil ity principles based on "the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies", please describe any discrepancy between the Principles and their implementation:

The Company has promulgated the principles in accordance with the "Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies." There is no major difference between the two.



37

Evaluation Item




Reasons


6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices:(1) The corporate social responsibility best practice is developed by the board of directors of the Company on November 12,

2014, and it was amended in accordance with organization adjusting on May 15, 2018.(2) The Company, through commercial activities, non - cash property endowments, volunteer service or other free professional

services, participates in community development and charities events.a. In support of preserving and innovation of traditional arts, the Company invited Taiwan indigenous paper carving

master to design Tatung Boy small lanterns of 12 Chinese zodiac. As a token of celebrating the Year of Chicken in 2017, the small lanterns served as a promotion gift for Tatung 3C to its customers.

b. In support of traditional folk arts, the Company invited Taiwan indigenous lantern master to make Tatung Boy creative lanterns to display in the 2017 Taiwan Lantern Festival in Yunlin and Nantou Lantern Festival.

c. Tatung Boy as an Ambassador of Love participated in the activities organized by the Taiwan MPS Society to support rare disease groups in action and called for more support from others.

d. To help the recovery of Taiwan's local tourism industry, the Company invited Jiji Township Administration of Nantou County to jointly launch the activity of “Tatung Boy Adventure” in the summer vacation of 2017. The activity unprecedentedly set the first instance of making a corporate mascot as an endorser for local tourism working together with Nantou County Government to boost township prosperity.

e. In an effort of bringing warmth and hope to the underprivileged children, the Company invited 300 children from 8 social welfare groups and orphanages to participate in the 8th Tatung Charity Soccer Summer Camp. The Company hopes children can experience and learn the spirit of teamwork and sportsmanship through this one-day field training course.

f. Corporate charitable blood donation during winter and summer vacations in response to the shortage of blood supply. A total of 212 units of blood were donated in 2017.

g. Supporting wheelchair project for Nicaraguan children contributing to public diplomacy with love spreading from a Taiwanese corporation to international allies.

h. Supporting native performing arts groups by cooperating with children’s theatre to jointly compose a brand-new play “Tatung Boy Loves the Earth”, a children’s drama performed to over 6,000 students in 7 primary schools nationwide. The play is infused with the concepts of energy-saving, healthy living, and environmental protection giving rise to a significant habit change amongst students.

i. Tatung Boy participated in the 2017 New Taipei City International Environmental Arts Festival to promote New Taipei City raising public awareness for community characteristics development.

j. Supporting Taipei commercial district development and community characteristics development, Tatung Boy participated in the 2017 Happy Halloween in Tianmu organized by the Tianmu Marketplace Development Association.

(3) For other important information to facilitate better understanding of the Company’s implementation of corporate social responsibility, please refer to the Company’s website (http://www.tatung.com).

7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions:

"2017 Tatung Corporate Social Responsibility Report" follows the requirements of AA1000 AS:2008 and GRI G4 guidelines with Core in accordance. The report was verified with condition of AA1000 Type 2, High level assurance by TUV NORD.

(VI) Ethical Corporate Management

Evaluation Item

Implementation StatusDeviations from

"the Ethical Corporate

Management Best-Practice Principles for


Reasons

Yes No Abstract Illustration

1. Establishment of ethical corporate management policies and programs

(1) Does the Company declare its ethical corporate management pol icies and procedures in i t s guidelines and external documents, as well as the commitment from its board to implement the policies?

√ (1) The Company continues to enhance core corporate philosophy – "Integrity, Honesty, Industry, and Frugality," and states that the employees are prohibited to perform malpractices or accept gifts of others in regarding to their jobs on Company Rules, Ethical Corporate Management Best Practice Principles and Business Ethics Statement for Group Employees.

(1) None



38

Evaluation Item





Reasons


(2) Does the Company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies?

√ (2) To implement ethical corporate management policies and actively prevent unethical conducts, the Company establishes Procedures for Ethical Management and Guidelines for Conduct and promulgate to all employees.

(2) None

(3) Does the Company es tab l i sh appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Eth ica l Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies?

√ (3) The Company establishes r igorous and effective accounting system and internal control system to prevent bribery and acceptance of bribes, illegal campaign contributions.

(3) None

2. Fulfill operations integrity policy

(1) Does the Company eva luate business partners’ ethical records and include ethics-related clauses in business contracts?

√ (1) The Tatung’s qualified supplier should sign both "Master Contract" and "Supplier Commitment Letter", the Undersigned undertakes that the products or services provided by it shall comply with the laws & regulations and international standards related to safety and environmental protection and its labor services shall comply with domestic and international laws, policies or regulations related to human rights and labor services. Where it is proven as a fact that the products or services provided by the Undersigned are likely to endanger the safety and health of consumers or other interested parties, Tatung could terminate the Agreement and Purchase Order immediately.

(1) None

(2) Does the Company es tab l i sh an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity?

√ (2) The Company has set the Legal Division and Human Resources & General Administration Division as the dedicated unit for the ethical corporate management. The Company has reported to the board of directors the implementation of ethical management on December 21, 2017.

(2) None

(3) Does the Company es tab l i sh pol icies to prevent confl icts of interest and provide appropriate communication channels, and implement it?

√ (3) The Company establishes the "Conflicts of Interests Prevention Clause" on Company Rules and the Rules Governing Procedure for Board of Directors Meetings, and has stipulated and promulgated the "Internal Signif icant Information Processing Operational Procedures" for directors, managers and employees in order to avoid insider trading.

(3) None

(4) Has the Company establ ished e f f e c t i v e s y s t e m s f o r b o t h accounting and internal control to faci l i tate ethical corporate management, and are theyaudited by either internal auditors or CPAs on a regular basis?

√ (4) The Company has established effective accounting and internal control systems for ensuring the implementation of policies, and the internal auditors formulate annual audit plans based on the results of the risk assessment and report to the Board its audit report.

(4) None

(5) Does the Company regularly hold internal and external educational trainings on operational integrity?

√ (5) The Company's training derived from core corporate phi losophy – " Integr ity, Honesty, Indust r y, and Frugality," and develops "Honesty and Integrity" core competencies as the design basis of orientation training, management training and professional training. The Company expects the ethical corporate management policies to achieve sustainable management and emphasize the importance of " Integrity, Honesty, Industry, and Frugality," in the internal and external website.

(5) None



39

Evaluation Item





Reasons


3. Operation of the integrity channel

(1) Does the Company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up?

√ (1) The Company has a mechanism of process ing employees’ complaints for employees’ feedback, found violations of lawlessness (including corruption), and reported unethical conducts.

(1) None

(2) Does the Company es tab l i sh standard operating procedures fo r conf ident ia l repor t ing on investigating accusation cases?

√ (2) The Company maintains secrecy and inspects the reported contents as well as protects informants’ rights and interests.

(2) None

(3) Does the Company provide proper whistleblower protection?

√ (3) The Company has obligation to maintain secrecy of informants and properly protects informants.

(3) None

4. Strengthening information disclosure

(1) Does the Company disclose its ethical corporate management po l ic ies and the resu l t s of i t s implementation on the Company’s website and MOPS?

√ (1) The Company has disclosed on its website and the Market Observation Post System the ethical corporate management best practice principles and results of its implementation.

(1) None

5. If the Company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation:

The Company has promulgated the principles in accordance with the "Ethical Corporate Management Best Practice principles for TWSE/GTSM Listed Companies. " There is no major difference between the two.

6. Other important information to facilitate a better understanding of the Company’s ethical corporate management policies (e.g., review and amend its policies).(1) The corporate ethical management best practice principles were developed by the board of directors of the Company on

November 12, 2014, and it was amended in accordance with organization adjusting on November 14, 2017.(2) The Company at all times takes notice of the development of relevant local and international regulations concerning

ethical corporate management so as to review and improve its ethical corporate management best practice principles and achieves better results from im-plementing the principles.

(3) The Company complies with the Company Act, Securities and Exchange Act, Business Entity Accounting Act, Political Donations Act, An-ti-Corruption Act, Government Procurement Act, Act on Recusal of Public Servants Due to Conflicts of Interest, TWSE/GTSM-listening rules, or other laws or regulations regarding commercial activities, as the underlying basic premise to facilitate ethical corporate manage-ment.

(VII) Corporate Governance Guidelines and Regulations: 1. Approved by the Board of Directors in 2014, the Company has adopted Corporate Governance Best Practice Principles,

Corporate Social Responsibility Best Practice Principles, Ethical Corporate Management Best Practice Principles, Procedures for Ethical Management and Guidelines for Conduct, and Ethical Conduct Principles. The Company has disclosed the aforesaid relevant corporate governance regulations on the Market Observation Post System and its internal and external websites for stakeholders’ reference.

2. Please refer to the websites of the investment companies for their Corporate Governance Best Practice Principles and relevant regulations.

(VIII) Other Important Information Regarding Corporate Governance: 1. For information on TATUNG's corporate governance, please refer to the TATUNG website at http:// www.tatung.com.2. The Subsidiary Company's facilitate understanding of corporate governance, please refer to the Subsidiary Company

website.



40

(IX) Execution of internal control system1. Internal control statement

Tatung Company Limited by SharesInternal Control System Statement

Date: March 15, 2018The Company states the following with regard to its internal control system during fiscal year 2017, based on the findings of a self-assessment:I. The Company is ful ly aware that establishing, operating and maintaining an internal control system are the

responsibilities of its Board of Directors and management. The Company has established such a system to provide reasonable assurance of the effectiveness and efficiency of its operations (including profitability, performance and safeguarding of assets security), reliabilities, timeliness, transparency of reporting, and compliance with applicable laws and regulations.

II. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing the three goals mentioned above. Furthermore, the effectiveness of an internal control system may vary along with changes in the operating environment or circumstances. The Company’s internal control system features a self-monitoring mechanism, however, and the Company takes corrective actions as soon as a deficiency is identified.

III. The Company judges the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (hereinbelow, "the Regulations"). The internal control system judgment criteria adopted by the Regulations divide internal control into five key elements based on the process of management control: 1) control environment, 2) risk assessment, 3) control activities, 4) information and communications, and 5) monitoring activities, each of these elements in turn contains certain audit items. Please refer to the Regulations for details.

IV. The Company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid criteria.

V. Based on the aforementioned audit findings, the Company believes that on December 31, 2017, its internal control system (including supervision of subsidiaries), as well as internal controls to monitor the attainment of its objectives concerning operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable laws and regulations were effective in design and operation and reasonably assured the achievement of the above-stated objectives.

VI. This Statement will become a major part of the content of the Company’s Annual Report and Prospectus, and will be publicized. Any falsehood, concealment, or other illegality in the publicized content will entail legal liability under Articles 20, 32, 171 and 174 of the Securities and Exchange Act.

VII. This Statement has been unanimously approved by the 8 attending directors in the Board of Directors Meeting of the Company on March 15, 2018.

Tatung Co., Ltd.

Wen-yen K. Lin Chairman

Wen-Yen K. Lin President

2. This statement is issued in accordance with the criteria for "Regulations Governing the Establishment of Internal Control Systems of Public Companies" promulgated by the Financial Supervisory Commission ("FSC"), Executive Yuan.

3. Where CPAs are retained to audit the internal control systems as required by the FSC, please disclose the CPAs' audit report: N/A.



41

(X) Any penalties imposed upon the Company or its in-house personnel in accordance with the law, or punishment imposed by the Company on its in-house personnel for violation of the Company’s internal control system regulations, and the major defects and corrective action thereof: None.

(XI) Major resolutions of the Shareholders’ Meeting

Summary of major motions Resolution Subsequent development

1. Resolution on ratification of the 2016 business report and financial statement.

1,140,135,054 (56.71%) shares in favor.Motion passed as proposed.

Completed.

2. Resolution on ratification of the appropriation of profit and loss for 2016.


Completed.

3. D iscuss ion on the Long-term fund-raising plans.

1,134,016,114 (56.41%) shares in favor.Domestic cash increment passed as proposed.Cash increment in the form of private placement of common stocks failed as proposed.

The Board resolved to issue new common shares for cash in public offering on 21 December, 2017.

4. Procedures for Acquisition and Disposal of Assets— Cur rent Procedures and Proposed Amendments.


Completed in accordance with the resolution.

5. Election of new directors. Result of election:Title Name

Director Wei-Shan Lin

Director Wen-Yen K. Lin

Director Representative Of Tatung University:I-Hua Chang


Peng-Fei Su


Tzong-Der Liou


Chi-Ming Wu

Director Shou-Huang Chen

Director Sheng-Wen Tsai

Director Lung-Ta Lee

Completed the election of Directors, and registration to the Department of Commerce, Ministry of Economic Affairs.

6. To release the directors (including independent Directors) from the non-competition restrictions.


Completed.



42

(XII) Major resolutions of the Board of Directors

Date Major resolutions

2017/02/17 The Board of Directors resolved to convene the 2017 Regular Shareholder’s Meeting.

2017/03/09 The Board resolved to issue new common shares for cash in private placement (or issue new shares in public)…the shares) issued no more than 600,000,000 shares.

2017/03/29The Board of Directors' resolved no dividend distribution in year 2017.

The Reviews of 2017 "Director / Independent Director" nominees by Tatung Board of Directors.

2017/05/11 Election of new Chairman.

2017/08/08 Tatung Co. releases its Board resolution that resolved the acquisition of shares of Green Energy Technology Inc. through a Private Placement.

2017/09/19Report the Board resolution of setting up a new company to operate solar system projects.

Report the Board resolution of capital increase to Tatung Forever Energy Co., Ltd.

2017/11/14 Tatung Co. on behalf of Chunghwa Picture Tubes Ltd. for endorsements / Guarantees.

2017/12/21

The Board resolved to issue new common shares for cash in public offering.

The Board approved to invest and install Tainan Chi-Gu solar plant project.

Supplementary information on the Board resolution of Tatung Co. that resolved the acquisition of shares of Green Energy Technology Inc. via a Private Placement.

The Board resolved to acquisition of shares of Tatung Vientnam Co., Ltd.

The Board resolved to acquisition of private placement common stock of CPT from Tatung Global Strategy Investment and Trading (BVI) Inc.

Tatung Co. waive receivables of Tatung Global Strategy Investment and Trading (BVI) Inc.

The Company’s assignment of creditor's rights of Tatung Infocomm Co., Ltd.

2018/02/01

Chairman Wei-Shan Lin resigned and the board elected director Wen-Yen K. Lin to take up chairmanship.

The Board resolution of the investment into a Joint-Venture Company for holding solar power plant.

The Board approved to invest and install the second stage of Tainan Chi-Gu solar plant project.

2018/03/15

The Board of Directors resolved to convene the 2018 Regular Shareholder’s Meeting.

The Board of Directors' resolved no dividend distribution in year 2018.

Tatung Co. set up the Corporate Governance Committee and appointed members of Committee.



43

(XIII) Major issues of record or written statements made by any director dissenting to important resolutions passed by the Board of Directors: None.

(XIV) Resigned or discharged officers relating to company: As of March 31, 2018

Job title Name Date of election Date of termination Cause

Chairman Wei-Shan Lin March 17, 2006 February 01, 2018 Resignation

Note: Parties relating to company, namely chairman, president, financial and accounting managers, and internal auditing managers, etc.

Information on independent auditors Accounting firm CPA’s name CPA’s audit period Remark (Note)

Ernst & Young Taiwan Su-Wen Lin

2017Hsuan-Hsuan, Wang

Unit NT$ Thousand

TitleRange Audit fees Non-audit fees Total amount

1 Under NT$2,000 – – –

2 From NT$2,000 to NT$4,000 – 3,450 3,450

3 From NT$4,000 to NT$6,000 – – –

4 From NT$6,000 to NT$8,000 – – –

5 From NT$8,000 to NT$10,000 – – –

6 Over NT$10,000 13,130 – 13,130

1. The non-audit professional fees paid to CPAs, CPAs’ offices and affiliates accounting for more than one-quarter of total audit professional fees should be disclosed. The disclosure items should include the amounts of audit and non-audit professional fees as well as non-audit service content.

Unit NT$ Thousand

Accounting firm CPA’s name Audit fees

Non-audit fees CPA’s audit

periodRemarkManagement

system designCompany registration HR Others

(Note) Subtotal

Ernst & Young Taiwan

Su-Wen Lin

13,130 0 0 0 3,450 3,450 2017

Note: The item "non-audit fee-other" consists of consulting and service fee totaling NT$ 3,450 thousand dollars.Hsuan-Hsuan,

Wang

2. The audit professional fees of replacing CPAs’ firm within the current fiscal year less than that of the previous fiscal year should be disclosed. The disclosure items should include the reduction amount, percentage and reason for the replacement: None.

3. The audit professional fee within the current fiscal year that is 15% less than that of the previous fiscal year should be disclosed. The disclosure items should include the reduction amount, percentage and reason: None.



44

Information on change of independent auditors1. Regarding the former CPA: None.2. Regarding the successor CPA: None.3. The previous auditor’s reply to issues regarding Articles 10, Subsection 6, Item 1 and

Paragraph 3 of Item 2 of the Regulation: Not applicable.

Information on the Company’s chairman, president, financial or accounting managers holding positions in the auditor’s firm or its affiliates within the previous year: None.

Change of shareholding by directors, management, and major shareholders

Title Name

2017 As of 31 March 2018

Increase (decrease) in shares held

Increase (decrease) in

pledged sharesIncrease

(decrease) in shares held

Increase (decrease) in

pledged shares

Chairman & President Wen-Yen K. Lin -- -- -- --

Director Representative Of Tatung University: I-Hua Chang -- -- -- --

Director Shou-Huang Chen -- -- -- --

Director Sheng-Wen Tsai -- -- -- --

Director Lung-Ta Lee -- -- -- --

Independent Director Tzong-Der Liou -- -- -- --

Independent Director Peng-Fei Su -- -- -- --

Independent Director Chi-Ming Wu -- -- -- --

Chief Financial Officer Wen-Chieh Peng -- -- -- --

Financial Officer Ruei-Kai Jhang -- -- -- --

Accounting Officer Shu-Fen Chen -- -- -- --

Note 1: Chairman Wei-Shan Lin resigned and the board elected director Wen-Yen K. Lin to take up chairmanship on February 1, 2018.Note 2: Director of Wei-Tung Lin had resigned on March 10, 2017.Note 3: The Company had elected directors on May 11, 2017. Director of Huo-Yen Chen had terminated. Director of Shou-Huang Chen and

Director of Sheng-Wen Tsai had elected.Note 4: The Company has no major shareholders owning more than 10% of its total shares.Note 5: The counterparts of transfer or pledge of the Company’s equity: None.



45

Information on the top 10 shareholders who are related parties to each other

NameShares held personally Shares held by spouse

and minor childrenTotal shares held in another

person’s name

Information on top 10 shareholders in proportion of shareholding and who are

related to one another under their names and Relationship. Remark

Share(s) Shareholding(%) Share(s) Shareholding

(%) Share(s) Shareholding(%) Name Relationship

Pamirs Capital (H.K.)Limited-Client A/C 174,079,000 7.44 N/A N/A Not Available -

Kim Eng Securities(Hong Kong) Limited

156,148,000 6.67 N/A N/A32,100,000 1.37 AZUMA MAKOTO

-124,048,000 5.30 DING DAVID

Tatung UniversityRepresentative:Liang-De Li

144,798,047 6.19 N/A N/A - - None None -

5,342 - 1,338 - - - None None -

Luo De Investment Co., Ltd.Representative:Ya-Lin Wang

104,028,000 4.45 N/A N/A Not Available -

Not Available -

China Trust Commercial Bank’s trust division in custody for Tatung Company’s employee stockholding trust account Representative: Jessica Wang

100,618,817 4.30 N/A N/A - - None None -

- - - - - - None None -

UOB Kay Hian(Hong Kong) Limited--A/C Client 93,576,654 4.00 N/A N/A Not Available -

Bank SinoPac is entrusted thecustody of invest-ment account by SinoPac (Asia)


Yuanta Securities (Hong Kong) Company Limited-PSHK Clients 72,141,000 3.08 N/A N/A Not Available -

San Ya Investment Co., Ltd. Representative:Ya-Fong Wang


Not Available -

Wen-Yi Zheng 66,572,000 2.85 Not Available -



46

Long-term investments ownershipUnit: share; %

Reinvested companies Invested by the Company

Direct / indirect investments by the Company’s directors,

supervisors, and management Total ownership

Shares (%) Shares (%) Shares (%)

Chunghwa Picture Tubes, Ltd. 1,850,745,168 28.56 822,367,532 12.69 2,673,112,700 41.25

Shan Chih Semiconductor Co., Ltd. 49,913,576 43.18 17,518,581 15.15 67,432,157 58.33

Green Energy Technology Inc. 19,723,865 4.54 149,786,564 34.51 169,510,429 39.05

Shan Chih Asset Development Co., Ltd. 5,220,064 100.00 - - 5,220,064 100.00

Note 1: The listed companies are important subsidiaries from equity-accounted investees of Tatung Company.Note 2: The book closure date of these company: Chunghwa Picture Tubes, Ltd. -2018/4/24, Shan Chih Semiconductor Co., Ltd. -2018/4/10, Green

Energy Technology Inc. -2018/4/28.

Financial Information


47TATUNG 2017 Annual Report

47TATUNG 2017 Annual Report

47

Source of capital (I) Capitalization


Month / year

Par alue

Authorized capital Paid-in capital Remark

Share(s) Amount (NT$) Share(s) Amount (NT$) Sources of capital

Capital increase by assets

other than cash

Others

February 2011

NT$10 10,000,000,000 100,000,000,000 2,339,536,685 23,395,366,850 Conversion of shares by stock option NT$8,545,000capital reductionNT$32,134,271,970

No Official letter under Ching-Shou-Sheng-Tze No. 10001035060 dated February 22, 2011 of Ministry of Economic Affairs

(II) Type of stockAs of March 31, 2018

Type of stockAuthorized capital

RemarkOutstanding shares Un-issued shares Total

Common stock 2,339,536,685 shares 7,660,463,315 shares 10,000,000,000 shares Listed company’s stock

(III) Shelf registration: None.

Shareholder structureAs of April 28, 2018 (Note)

Type of shareholders

QuantityGovernment

agenciesDomestic financial

institutionsOther domestic

institutions Individuals Foreign

institutions and individuals

Total

Number of shareholders 3 10 316 185,106 260 185,695

Shareholding 15,685 101,738,777 502,926,612 829,927,886 904,927,725 2,339,536,685

Holding percentage (%) 0.00 4.35 21.50 35.47 38.68 100.00

Note : The information on the last day of the transfer period of 2018.


48

Distribution profi le of shareholder ownershipAs of April 28, 2018 (Note 1)

Range of shareholding(unit: share) Number of shareholders Ownership Holding percentage (%)

1 ~ 999 132,976 30,691,994 1.31

1,000 ~ 5,000 39,711 87,069,179 3.72

5,001 ~ 10,000 6,548 48,409,887 2.07

10,001 ~ 15,000 2,225 27,271,254 1.17

15,001 ~ 20,000 1,065 18,865,930 0.81

20,001 ~ 30,000 1,140 27,938,089 1.19

30,001 ~ 50,000 929 36,582,066 1.57

50,001 ~ 100,000 577 39,977,078 1.71

100,001 ~ 200,000 228 31,959,690 1.37

200,001 ~ 400,000 99 27,690,096 1.18

400,001 ~ 600,000 41 20,263,073 0.87

600,001 ~ 800,000 31 21,832,839 0.93

800,001 ~ 1,000,000 16 14,255,775 0.61

1,000,001 above 109 1,906,729,735 81.49

Total 185,695 2,339,536,685 100.00

Note 1: The information on the last day of the transfer period of 2018.Note 2: The Company does not issue preferred stock.

Major shareholdersAs of April 28, 2018 (Note)

SharesName Total shares owned Ownership (%)

Pamirs Capital (H.k.) Limited--Client A/C 174,079,000 7.44

Kim Eng Securities (Hong Kong) Limited 156,148,000 6.67

Tatung University 144,798,047 6.19

Luo De Investment Co., Ltd. 104,028,000 4.45

China Trust Commercial Bank’s trust division in custody for Tatung Company’s employee stockholding trust account 100,618,817 4.30

UOB Kay Hian (Hong Kong) Limited--A/C Client 93,576,654 4.00

Bank SinoPac is entrusted the custody of in-vestment account by SinoPac (Asia) 83,650,000 3.58

Yuanta Securities (Hong Kong) Company Limited-PSHK Clients 72,141,000 3.08

San Ya Investment Co., Ltd. 68,999,000 2.95

Wen-Yi Zheng 66,572,000 2.85

Note : The information on the last day of the transfer period of 2018.



49

Market price, net worth, earnings and dividends per common shareFiscal year

Item 2016 2017

Market price (Note 1)

High 9.89 20.65

Low 4.49 9.51

Average 6.24 13.47

Net worth per share (Note 2)

Before distribution 13.28 12.99

After distribution 13.28 12.99

Earnings per shareWeighted average of shares 2,259,390,651 2,233,869,779

Earnings per share (Note 3) (1.03) 0.03

Dividends per share

Cash dividends No No

Stock dividendsRetained earnings No No

Additional paid-in capital No No

Accumulated undistributed dividends (Note 4) No No

Return on investment

Price to earnings (P/E) ratio (Note 5) (6.06) 449.00

Price to dividend (P/D) ratio (Note 6) No No

Cash dividend yield (Note 7) No No

* Information on retroactive adjustments in market price and cash dividends shall be disclosed if any dividends were distributed due to an increase in retained earnings or capital surplus.

Note 1: Pertains to the highest and lowest market prices of each common share in the fiscal year specified. The average market price for each fiscal year is calculated based on the transaction value and volume for the year.

Note 2: Figures based on the number of shares issued at the end of the previous fiscal year and the resolution passed at the shareholders’ meeting in the following fiscal year.

Note 3: Earnings per share before and after adjustment shall be disclosed if stock dividends were distributed.Note 4: Regulations governing the issuance of securities provide that un-appropriated dividends in the current year may be accumulated and

distributed when the Company posts a profit, and only the accumulated amount of dividends needs to be disclosed.Note 5: P/E ratio = Average closing price per share/Earnings per share.Note 6: P/D ratio = Average closing price per share/Cash dividend per share. Note 7: Cash dividend yield = Cash dividend per share/Average closing price per share in the current year.Note 8: The financial statements for Q1 of 2018 were under review by independent auditors when this annual report is printed.

Dividend policy and implementation status(I) Dividend policy

1. If Tatung Company’sannual financial report shows any earnings, the company must, first, in accordance with the laws, pay the tax, and balance former losses before setting aside 10 percent of such earnings as a legally required reserve. Nevertheless, this requirement shall no longer apply once the legally reserve equals or exceeds the authorized capital amount.

2. The company must, according to the regulations, set aside or reverse special capital reserve together with initial undistributed earnings as the distributable accumulated earnings for the shareholders except legal reserve provision. The board of directors meeting shall draft a proposal for the shareholders meeting to make a final decision on the distribution of the earnings.

(II) Implementation1. The Company suffered net loss and thus no dividends were distributed in 2016.2. The Company had net income in 2017. However, there is still accumulated deficits that need to be covered, hence, the

Company did not dividends were distributed in 2017. A breakdown on Earning Allocation in 2017 follows:



50

(III) Earning Allocation:Unit: NT$ Thousand

Fiscal yearItem 2017

Accumulated deficits brought forward 0

1. Net profit in 2017 74,070

2. Reversal of special reserve 18,685

3. Other comprehensive income 7,503

4. Acquisition or disposal on subsidiary share (381,273)

The total amount of the deficit yet to be compensated (281,015)

Item for compensating the deficit:Special reserve to compensate the accumulated deficits 281,015

Accumulated deficits carried forward 0

Dividend distribution 0

Explanation: Following the adoption of T-IFRS, the FSC on April 6, 2012 issued Order No. Jin-Guan-Zheng-Fa-Zi-No. 1010012865, the Company set aside the special reserve related to first-time adoption of T-IFRS. By approval of shareholder’s meeting, the deficits is compensated by these special reserve. Accordingly, there is no other deficits to be compensated. However, the balance of special reserve to be recovered is NTD11,351,814 thousand if there is earnings in the future.

Impact of stock dividend distribution on business performance and EPS: Not applicable.

Employee and remuneration to directors(I) The percentage and scope of employee

and remuneration to directors as contained in the Company’s Articles of Incorporation.Tatung Company has surplus earnings each year, the company shall set aside no less than 1 percent of them as remuneration for the employees and no more than 2 percent of them as remuneration for directors. However, if the company still has accumulated losses, such earnings shall be reserved for balancing the books.As remuneration for the employees is distributed by stock dividend or cash, it 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. Employees that receive remuneration by stock dividend or cash must meet specified criteria regulated by the company.

(II) The basis for estimating the amount of employee and director compensation, the basis for calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period.The Company had net income in 2017. However, there is still accumulated deficits that need to be covered, hence, the Company did not estimate employees’ compensation and remuneration to directors and supervisors and distribute stock bonuses.

(III) Employee and remuneration to directors distributed from earnings of the previous year: 1. T h e a m ou nt of a ny em p l oyee co m pen sat i o n

distributed in cash or stocks and compensation for directors and supervisors. If there is any discrepancy between that amount and the estimated figure for the fiscal year these expenses are recognized, the discrepancy, its cause, and the status of treatment shall be disclosed: None

2. T h e a m ou nt of a ny em p l oyee co m pen sat i o n distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial reports or individual financial reports for the current period and total employee compensation: None

(IV) The actual distribution of employee and director compensation for the previous fiscal year (with an indication of the number, dollar amount, and stock price, of the shares distributed), and, the cause and treatment of discrepancy, if any, between the actual distribution and the recognized employee and director compensation:The Company suffered net loss in 2016 and thus did not estimate employee compensation and remuneration for the directors and supervisors.

Share buyback: None.



51

Issuance of corporate bonds: None.Issuance of preferred shares: None.Issuance of global depository receipt:

Issuing Date 10/2/2009

Issuance & Listing Luxembourg Stock Exchange

Total Amount US$197,500,000

Offering Price Per GDR US$3.95

Units Issued 50,000,000

Underlying Securities Capital increase for cash by isssuing new common shares

Common Shares Represented 1,000,000,000

Rights & Obligation of GDR Holders Same as those of common Share Holders

Trustee Not Applicable

Depositary Bank The bank of New York Mellon

Custodian Bank Mega International Commercial Bank

GDRs Outstanding 210,360

Apportionment of Expenses for Issuance & Maintenance Tatung

Terms and Conditions in the Deposit Agreement & Custody Agreement -

Closing Price Per GDR

2017

Highest USD$13.125

Lowest USD$5.934

Average USD$8.791

1/1/2018-3/31/2018

Highest USD$18.500

Lowest USD$13.000

Average USD$16.178

Status of employee stock option plan (ESOP): None.ESOP granted to management team and to the top 10 employees: None.Status of new restricted employee shares plan: None.New restricted employee shares plan granted to management team and to the top 10 employees: None.Status of new share issuance in connection with mergers and acquisitions: None.

Financial plans and implementation: None.

Operation Overview


52

Revenue breakdownFor management purposes, the Group is organized into business units basedon their products and services and has three reportable operating segments asfollows:(1) Optical department: This department is responsible for CRT, TFT-LCD backlight module manufacturing and production,

development of liquid crystal display modules, electronic switches and sensors and solar modules virus, manufacturing and sales. (2) Machinery and energy department: The department is responsible for the research, manufacture and sales of intelligent grid,

smart-grid portal, photovoltaics, LED lighting, motor and machinery and energy control system. (3) Consumer products department: This department is responsible for digital television, flat panel display manufacturing, digital media

devices, digital audio-visual and home appliances, etc.. No operating segments have been aggregated to form the above reportable operating segments.

For the year ended December 31, 2017

Optical sector Machinery and energy sector

Consumerproducts sector Others Total

Revenue $34,724,488 $26,284,194 $10,451,792 $4,092,535 $75,553,009

Revenue distribution of TatungCategory %

POWER BUSINESS GROUP 46.53%

CONSUMER BUSINESS GROUP 29.83%

SYSTEM BUSINESS GROUP 23.58%

OTHER 0.06%

Operation Overview


53

POWER BUSINESS GROUP

Power Equipment Business Unit - Industrial appliance

(Transformers and switchgears)Business ActivitiesI. Business scope

(I) Main lines of business and sales breakdown

Category %

Transformers 70%

Switchgears 30%

(II) Current products1. Transformers

All kinds of power transformers, distribution transformers, shunt reactors, transformer par t ial discharge diagnosis device and testing & certification services of transformers.

2. SwitchgearsSwitchgears, Control panel, PV Box, mobile substation, gas insulated switchgears (GIS), underground 2-way and 4-way switches, s w i tch g ea r co m po n ent s , ca pa c i to r s , p o t e n t i a l t r a n s f o r m e r s a n d c u r r e n t transformers.

II. Technology and R&D(I) Product development

Product SpecificationExpected time to hit the market

(Year)

Transformers

Pole-type Transformer with improved design 2018

Pad-mounted Transformer with improved Design 2018

Distributed Photovoltaic grid transformer 2018

Switchgears

Underground 4-way Automatic switches 2018

High voltage switchgear (Confirming to CNS 15156-200 Standard)

2018

(II) Research & development As for transformer products, the Company is

developing short-circuit certif icated power transformer, main power transformers with 500kV & ultrahigh-capacity, high efficiency transformers for Solar system, smart distribution cubicle and smart cast-resin transformers.

III. Industry overview(I) Current status and development

1. In year 2017, the demand of indust r ia l appl iance was improved, Taiwan Power Company and private companies increased their investments.

According to the study of T IER (Taiwan Institute of Economic Research), the output value of industr ial appl iance increased slightly in 2017.

2. Look into 2018, according to the analysis of DGBAS of Executive Yuan, the economic growth rate is about 2.42% in 2018, lower than that at 2.86% in 2017. The demand o f i n d u s t r i a l a p p l i a n ce p ro d u ct s fo r Taiwan Power Company is expected to be prosperous owing to the executions of "Seventh Transmission Project", "Power Grid Reinforcement Project" and "Reginal Grid Project ". In addit ion, the new edit ion of "Electr icity Act " al lows the pr ivate green energy firms to sell and transmit electricity directly to users. It will encourage the private green energy firms to increase investments to stimulate the sales of relating industrial appliance products.

(II) Relationship between the upstream, midstream, and downstream sectors of the industry

Upstream

Important components / parts, insulating material, switchgear components and raw material of metal.

Midstream Design & manufacturing of the industrial appliance.

Downstream Government and private enterprises.

(III) Product development trend and competition status

D u e to t h e i m p rove m e nt o f Ta i p owe r ’s financial status, the replacing projects of old power plants wil l be released. And Ministry of Economic Affairs promotes the export of Turnkey. Both will help the manufacturers to get more opportunities.

Operation Overview


54

(IV) Important certifications

2306

China Compulsory Certification

CED TAFCertification

Environmental Protection Label

from the Environmental

Protection Department

ISO9001 ISO14001 OHSAS 18001 CNS Mark

IV. Long-term and short-term business development plans(I) Short-term plan To utilize the newly built electric plant to upgrade

the manufacturing ability and the production capability of power transformers to win over the orders of extra-high voltage and capacity of power transformers.

(II) Long-term plan By taking Taiwan as an R&D base, Tatung will build

its global marketing networks of the industrial appliance products by enhancing the innovation and upgrading the quality.

Market and product statusI. Market analysis

(I) Domestic market share, future supply & demand and potential growth in year 20171. Market share: Transformers accounted for 35%;

Switchgears accounted for 10%.2. Future supply & demand condit ions and

potential growth: Tatung’s industrial appliance products have been sold domestically and internationally and won an excellent reputation for the quality, performance and service. Since the demand of local market is slowing down, Tatung will be directly promoting overseas potential markets such as Japan and Middle East continuously to increase the product sales.

(II) Favorable and unfavorable factors and countermeasures 1. Vision plan of Industrial Appliance SBU In response to the trend of global environmental

protection, we will continue to develop new products with high-efficiency, energy-saving, low noise level and meet RoHS-conscious to enhance its green product image.

2. Favorable factors(1) Tatung has an enti re ser ies of power

products including the power equipment of generations, transmission and distribution, power cables, electric motors, solar power plant, etc.

(2) Due to Taiwan Nuclear power plants will retire soon, Government will accelerate to replace the power plants. These will bring

business opportunities of power equipment for local vendors in Taiwan.

(3) As Ministry of Economic Affairs promotes the export of Turnkey, we will expand the overseas market with government.

3. Unfavorable factors(1) Limited to Taiwan not join the International

tariffs union, the export sales is affected by custom duties. It is not conducive to expanding export business.

(2) Investment of Taiwan Power Company is still conservative. It limits the domestic sales.

4. Countermeasures(1) Technology Cooperates with overseas

companies and expands the market with the partners together.

(2) Co o rd i n at i n g w i t h t h e s t ra te g y o f MOE’s Industry 4.0, Tatung will promote customization and IoT products.

II. Purpose and manufacturing processes of main products(I) Purpose Transformers and switchgears are mainly used for

the government’s major infrastructure projects such as power plants, transmission and distribution systems and for private enterprises projects such as factory constructions, building constructions, traditional mechanical & electrical manufacturing industries, etc.

(II) Manufacturing processes Through the procurement system, raw materials

and parts / components are purchased from well reputed local and overseas suppliers. Cost reduction and standardization of products have been developing continuously. Tatung industrial appliance products are widely and trustfully used by customers at home and abroad.

III. Procurement of major materials(I) Items of major materials Silicon Steel, Copper wires, Insulating oil, Bushing,

Insulating material, Mild steel, Tap Changers, Radiators, Circuit breakers and Protection relays.

(II) Major suppliers (1) Overseas supplies: ABB, NGK, MR, JFE, Siemens,

Kitashiba, Toshiba, Hitachi Metal, Mitsubishi, etc.(2) Domestic Suppliers: China Steel Corporation, Yi

Chiu Chemical & Technical Co., Ltd., Minchali Metal Industry Co., Ltd., Tatung Wire and Cable, etc.

(III) The suppl ie rs p rov ide the mater ia ls wi th reasonable prices, good quality and appropriate delivery time. Through B2B procurement, it improves the ability of both strains.

Operation Overview


55

Power Equipment Business Unit - Cable (Wire and Cable) Business ActivitiesI. Business scope


CategoryPercentage of product sales

%

Enameled wire, tinned wire & bare copper wire, tailor-made copper wire 58%

Power cable 26%

Communication cable, electronic cable, optical fiber cable 16%

(II) Current products 1. Enameled wire, tinned wire, bare copper wire

Enameled wire: Enameled copper wire, inverter duty motor wire (PEIV), compressor wi re, enameled copper wi re for 30 0 °C & 400°C grade smoke and heat exhaust ventilators motor. Enameled rectangular wire. Fine enameled rectangular wire.Tinned copper wire: Highly solderable evenly-thick lead-free tinned copper wire, Highly solderable evenly-thick lead-free tinned copper clad steel wire. Bare copper wire: Bare copper wire, oxygen-free copper wire, copper-alloy wire of all varieties, tailor made copper wire.

2. Power cablePower cable: 600V~161kV high & low-voltage XLPE cable, PVC wire and cable, Rubber cable (EPR, Hypalon, Neoprene), Fire-resistant cable, Heat- resistant cable, Low smoke halogen-free cable and Photo-Voltaic cable for solar energy.Busway distribution system: Insulation type (IP66), fire-resistant type busway distribution system.

3. Communication cable, electronic wire, optical fiber cableCommunication cable, electronic wire products: Communication cable, PV wire, LAN cable, RG type, and high frequency coaxial cable according to standards of CNS, JIS etc.Optical fiber cable: Ribbon slot optical cable (4-600 cores), single mode optical loose-tube BJF SM optical cable (6-216 cores), optical fiber patch cord/pigtail, single loose tube optical fiber cable, jelly-

filled optical drop cable, Bend-Insensitive optical fiber cable., micro bundle optical cable, flat optical cable, corrugated steel tape armoured optical Cable.


1. Enameled wire & tinned wireHighly solderable evenly-thick lead-free tinned copper clad steel wire, 200°C high temperature enameled wire, fine enameled rectangular wire.

2. Power cableBKS bus duct, F i re - retardant low smoke halogen-free cable.

3. Communication cable & electronic wirePV solar Wire, fire retardant PVC cable.


1. Enameled wire : The p rospect s fo r enameled w i re a re increasing with upgrades in the industry and the requirement for high frequency transmission, improvements in heat resistance, developments of inver ter surge resistant magnet wire used in eco-fr iendly power efficient inverter-driven home appliances, and the diversification of enameled coils such as large & fine sized enameled rectangular wires. Market demand for enameled wire stays stable.

2. Power cable: Demand r i ses s teadi ly in majo r pub l ic infrastructure projects, such as the requirement of 25kV,69kV and 161kV power cable from Taipower, electromechanical project of public construction, the tunnel construction, China Petroleum Corporation, China Steel, Mass Rapid Transit and airport expansion project. Tatung also cooperated with famous foreign company to complete the No.7 emergency 161kV power generation project of Datan Power Plant, and plan to proceed the following project: solar energy generation project, No.8 and No.9 power generation project of Datan Power Plant. Demand of Electrical busway grows with the requirement of new extention and construction project such as equipment rooms of Chunghwa Telecom Co., new buildings (Danhai New Town development) and some plant extension projects of private companies., hotels, etc.

3. Communication cable: To meet the demand of Chunghwa Telecom Co. and other Telecom Co. in constructing next generation network (NGN) and 4G, procurement of communication cable and optical cable is gradually increased.

Operation Overview


56


UpstreamSuppliers of raw materials such as plastic pellets, copper, aluminum, tin, optic fiber, steel wire etc.

Midstream Wire & Cable manufacturers

Downstream Power, electrical engineering, and communication electronics providers

(III) Product development trend and competition status1. Enameled wire:

Enameled wire is becoming, self-bonding, high heat resistant, Rectangular wire, fine rectangular wire and surge resistant.

2. Power cable: The plant increases investment in equipment to achieve automation and intel l igence which significantly enhances the production ef f iciency, and continue to technical ly improve the manufacturing process to elevate product quality.For the trends of environmental protection, cables that are environmentally fr iendly, fire resistant cable and LSHF cable have all acquired certif ications. Regarding green energy, TATUNG develops the PV so la r cable and gets the third party certification successively.

3. Communication cables: Broadband optic fiber and indoor optic fiber have been adopted by Chunghwa Telecom to fulfill the policy of FTTH (Fiber To The Home). Micro bundle optical cable and flat optical cable cer t i f ied by Chunghwa Telecom. and now continue to supply to Chunghwa Telecom. We hope to enlarge the scale so that sales and profits will be increased.



EU network system verification

ETL verification Japan PSE Certification

2306

UL Certification TAF Certification Product Safety of Electrical Appliance &

Materials

TÜV SÜD Certification

IV. Long-term and short-term business development plans(I) Short-term plan Chunghwa Te lecom and Ta ipower have

successively opened bids and we will try our best to compete for the orders and cooperate with other distributors in order to win OEM orders for bus way and LAN cable. In addition, thanks to the warming of the government’s green energy

policy, solar PV CABLE that complies with the EN 50618 specification has been developed, and TÜV SÜD certification has been obtained. It will also fully expand the market share.

Taoyuan plant supply copper wire to Tatung overseas plants. After fabrication, the overseas plants deliver the products back to Taoyuan p lant fo r sa les . Taoyuan p lant w i l l make ful l use of the advantages of the overseas manufacturing plants through jointly marketing to establish a win-win strategy. On the other hand, for the unfavorable products, Taoyuan plant wi l l manipulate the OEM strategy to utilize the subcontractor resources to enhance the competitiveness of their products and to increase performance and profits. At the same time, Tatung’s wire and cable plants will expand markets in Japan, India, Southeast Asia, and Middle-East.

(II) Long-term plan In cooperation with factories to purchase new

equipment, eliminate old equipment, strengthen product competitiveness, and increase market share, and we will strive for domestic orders for rail vehicles, pay attention to solar cable business opportunities in the future, and actively promote Tatung PV CABLE and wire for PV RIBBON.

We will Strengthen product quality and flexible fabrication to enhance marketing networks for the Taoyuan plant and Thai plant, and expanding markets in Japan, Southeast Asia, the United States, India, and Europe as well as constructing deeper and wider product l ines. The integrated operation of "2 sites, 2 plants" makes the most profitable investment. We wi l l also develop special product and create the product differentiation to get the competitiveness advantage.


1. Demand from updated works of Linkou, Dalin, Tunghs iao, Dah-Tam power plant units of Taipower, mass rapid transit railway projects and the country's various civil construction work.

2. Demand for bare copper wi re, enameled wire and tinned wire is stable in Asia. These products are operated and managed by Tatung Taoyuan plant, which also makes the most of competitiveness of the Tatung (Thailand) Co., Ltd. to reduce production costs of LAN cable, and market around the world.

II. Purpose and manufacturing processes of main productsEnameled wire, tinned wire and bare copper wire1. Purpose of enameled wire: transformers, vehicle

electric products, motors, compressors, wireless charging coil, voice coils, smart card and choke coli etc.

Operation Overview


57

Purpose of oxygen-free copper wire: solar ribbon wire, electronic flexible flat cable, rectangular copper wire, High-speed LAN cable, quality stereo wire, extreme fine-drawn wire copper materials., diode pins.

Purpose of tinned wire: resistor and capacitor wire.

2. Production process: copper rod → drawing → anneal ing →

varnish (or tin coating) → finished product test → packaging → delivery

Power cable 1. Various types of power cables, from 600V to

161KV, supplied to TPC, military, the public, and private sectors and exported to other countries around the world.

2. Production process: copper rod drawing → stranding → insulated

extrusion → wrapping → sheath extrusion → finished product test → packaging → delivery

Communication cable 1. Purpose: 3C products for indoor voice and data

c o m m u n i c a t i o n , e l e c t r o n i c d e v i c e connection, s ignal t ransmiss ion, power supply, (LAN) cables, broadband for high frequency data transmission, and cable for long distance high-capacity transmission.

2. Production process: Drawing → insulation → stranding → sheath

extrusion → inspection → packaging → delivery

III. Procurement of major materials1. Main mater ials: copper plates, copper

wire, varnish, tin, copper clad steel wire, cross- l inked PE, rubber, PVC pellets, LSHF compound, PE pellets, petroleum jelly and optical fiber etc.

2. Sources: Contractors at home and abroad.

IV. Development strategy 1. Environmental protection is a responsibility

for all. Tatung is making an all-out effort to develop its products in the direction of being low-lead, cadmium-free, low-smoke, and halogen-free.

2. Continuing to develop various LAN cables, notebook wires, cell phone cables, satellite communication cables, and f iber-optic image transmission modules.

3. Enameled wi re, bare copper wi re and tinned wire are being developed to be heat-resistant, rectangular, self-bonding, surge-resistant, high frequency transmission, suitable for heat- resistant and humidity- resistant surroundings.

Motor Business UnitDescription of BusinessI. Business scope


Category %

MV and LV motors 53.1%

HV motors 28.4%

Generators 17.7%

Other products 0.8%

(II) Current products 1. Motors

With 70 years of techniques and experience in R&D and producing for all kinds of energy saving high-efficiency, single-phase, and three phase high-low-voltage motor from 1/8―30,000HP, full specification included a variety of special motor and application of the system such as premium high-efficiency motors, high temperature resistant motors, electric vehicle motors, explosion proof motor, new automatic brush lifting device equipped wound rotor motor, vertical high thrust pump motor, gear reducer, inverter motor, aluminum frame motor, brake motor, oil well motor, water pump motor, immersible pump motor, built-in type spindle motor, rolling motor, elevator motors, crane motors, permanent magnet motors, rail traction motors, inverters, control panel, each type of ventilators, etc; as well as providing full solutions to serve for whole plant power equipment and systems engineering industries.

2. GeneratorsDiesel generator set for land and marine uses, hydroelectric power group, motor generator sets for special purposes.

3. Other productsA variety of castings, etc.


To cope with the increasing awareness of green energy and the development of industrial 4.0. For medium- high voltage motors, the focus will be on reducing frame size, increase rating and the introduction of new series of fin type

Operation Overview


58

castings series, fin type explosion proof series and new top hat steel fabricated frame series. For low voltage motor, the focus will be on the development of high-efficiency motors series and PM motors etc. Motors :For medium- high voltage motors, the focus will be on reducing frame size, increase rating and the introduction of new series of fin type castings series, fin type explosion proof series and new top hat steel fabricated frame series. For low voltage motor, the focus will be on the development of high-efficiency motors series and PM motors etc.1. IE4 Motors (1HP―200HP 2P, 4P, 6P)2. VHS/VSS WPI Premium Efficiency High thrust

motors 3. High Voltage Exd IIC explosion proof motor

(#315―#560)4. Low Voltage Exe Exn explosion proof IEC/ATEX

certification 5. PM server and EV motor (include control

system)6. Smart motor surveillance component and

system7. Small hydro generator8. Offshore wind generator


Taiwan's economic growth at 2017 is 2.58%. Motor industry is continuously affected by the global economic cycle. Demand of motor industry remains constant, unchanged. Looking toward 2018, global economic recovery is expected to continually, Taiwan's economic growth is expected to be at least 2.3%. However due to America tax reform, uncertainty of its policy, geopolitical inferences etc. The pace of the recovery is expected to be slowed.

(II) Relationship between the upstream, midstream and downstream sectors of the industry

UpstreamImportant parts, insulation materials, and metal raw materials, castings and power distribution equipment.

MidstreamMotor product design and manufacturing. B2B system, SAP system , PDM system and IoT Application.

Downstream

Government, private enterprises. (Power plant, Steel plant, Petrochemical, Mining, Water treatment, ship, Cement, Paper, Transportation, Recycling, Printing, Freezing, Rubber, Machinery, Gas, Wood, Food Processing, Generators, Systems, etc.)

(III) Product development trend and competition statusEnergy saving and environmental protection, high- end manufactur ing equipment, new energy, new material, new energy vehicle; products that pursuit energy saving has been the major business values nowadays. Energy saving products and increasing the popularity will be the trend (such as injection molding industry, electric vehicle)Competitors are focusing on the development and the potential market of green product. Motor division will strengthen the development of IE4.Motor division wil l enhance the investment in technical development, seeking parties to cooperate in technical advancement, material global sourcing of materials. Develop the p roduct ea r ly to access the mar ket before potent ial competitors to enhance competitiveness.


Canadian Standards Association (CSA)


Europe CE Certificate America UL Certificate

IV. Long-term and short-term business development plans(I) Short-term plan

New research in IE4 motor, Servo-motor and upgrade Explosion-poof, the development on the new series of motor, high-efficiency motors wi l l be the core requirement which amounted 60% of the development that enable Tatung Shanghai capable of fully utilizing its resources and the production capacity. By re-configuration of favorable product combination for sales strategy adjustment to achieve the sales target.

(II) Long-term planTo integrate global production, enhancing p roduct ion capab i l i t y and a l ign i t w i th advanced global service network.1. Energy saving technologies advanced

continuously. High voltage motors wil l be targeted on large- scale, customized, more efficient, energy saving, low noise and low vibration features of high value added motor series to keep abreast of competitiveness.

2. Act ively invest ing in renewable energy deve lopment, inc lud ing I E4 u l t ra - h igh ef f ic iency motor s , tu rb ine generato r s , small hydro generators and related motor ser ies contr ibuting to clean energy and environmental protection.

Operation Overview


59


(I) 2018 domestic market analysis:The global economy is in recession. Demand and price declined, competition is becoming fiercer. Base on the data collected from the Energy Bureau of the Ministry of Economic Affairs, eight major domestic manufacturers and the market, the estimated domestic market share: Motor 30% & Generator 25%.1. Motor division planning

I n r e s p o n s e t o t h e t r e n d o f g l o b a l environmental protection, motor division wi l l continue to develop ultra-eff iciency product- motor series that comply with RoHS to enhance product's green image.

2. Favorable factorsDemand for energy saving, high efficiency motor increased. Customized products is still promising.

3. Unfavorable factors 2018 domestic investment environment is still pessimistic. Large-scale manufacturing may continue to shrink. High-voltage motor demand will be less. The rising prices of raw mater ials and the str icter environmental protection in the Mainland have brought t ight supply sources. The overal l market situation will not be much different, business opportunity is still limited.

4. Countermeasure ■ Domestic Market

To cope with the energy saving opportunity and fulf i l the civi l responsibi l it ies, motor division should focus on enhancement of high voltage motors market, maintenances and services demands, customize product to increase the profit amount.Medium- small voltage motor: the focus wi l l be on standardization of the motor module, reduce cost and improve delivery to hence competitiveness. Through enhance competitiveness to improve profit margin. Sales will be targeted on high profit margin product.High voltage motor: the focus wil l be on subs t i tu te and ma i ntenance bus i nes s opportunities.Generator: Due to request of power rationing from Taiwan Electricity. The target wil l be on demand fo r h igh - end and specia l customized generator.

■ Foreign MarketSearch for new customers, consolidate old customer relationship to expand business opportunities in the fol lowing area such as North America, Southeast Asia, Japan, Australia, Europe (Include Middle East).Target on OEM cases, establish sales and distribution

base. Increase the sales ratio of medium-sized motors to increase profit margin.Competitive Advantage:Tatung has solid and experienced technical manpower w i th s t rong cus tomi ze and maintenance capabil ity. Tatung also has rich and stable sourcing supply for example Tatung Shanghai with sales office around the globe. "Human Resource" has always been the core competitive advantage of the company, Tatung will keep provide training to ensure the most competitive workforce.

II. Purpose and manufacturing processes of main productsMotor products are mainly used in power plants, t ransm i s s ions , d i s t r ibut ion sy s tems, p r i vate construction projects.Small and medium sized motor is mainly used in the mechanical industries, water pumps, liquid pumps, fans, air compressors, refr igerant compressors, elevators, forklifts, cranes, lifts, lift ladders. Large motor is mainly used for power plants, cement, chemical, and industrial equipment, etc.

III. Procurement of major materials(I) Main material for motor:

1. Magnetic material and conductive material: silicon steel, copper, wire, insulating material, iron material.

2. Cast iron motor parts3. Motor peripheral: the control electronics,

each kind of accessories for temperature control and peripherals.

(II) In response to the rise of raw material prices and stricter environmental protection on Mainland. TSA will strengthen the search and development of potential sources in other regions to stabilize sources supply.

Operation Overview


60

Electrical Engineering Division

Description of BusinessI. Business scope

Category

Pv Power Substation System

Small Scale Hydro Power Plant System

Wind Mill Power Substation System

Lectrical Power Engineering System

II. Technology and R&D

There is a growing trend for PV power plants toward large scale capacity. Accordingly, it is a necessary development for voltage to step up grid connection. Apart from device of the traditional stationary power conversion stations, it is essential to have the device of mobile power conversion stations with multi-spot grid connection. This is the product that Tatung Company has developed.

III. Industry OverviewAlternative energy is becoming the Taiwanese government’s adopted policy, which will give its domestic suppliers priority consideration when it comes to the supply of alternative energy. Tatung Company is capable of meeting the demand of such alternative energy policy, for the company is the only one in the industry who can produce the complete set of equipment for the whole system on its own in addition to its extensive and comprehensive experience in the production and integration of heavy power equipment.


Aggressively bidding for Power Engineering System projects to augment the company’s credibility and experience

(II) Long-term plan1. To es tab l i sh a s tandard i zed operat ion

system which dictates pre-bid preparations, tho rough b id p roposa l s , and ef f ic ient execution plans since it takes a lot of time to construct and install PV and Small Scale Hydro Power plants.

2. For the Wind Mill Power Plants, the development and manufacturing of power generators will be executed through technology collaboration.

V. Sales and Marketing: (I) Market Analysis:

Considering the government’s energy policy, specific guidelines for producing renewable alternative energy must act with the market. However, since power generators for Wind Mi l l Power plants are h igh-end products, sys tem vendors must be encouraged by the government to mandate a widespread use of domestic products as a better way to implement the energy policy.

(II) The Use of Main products and Their ManufacturingTatung Company manufactures all equipment for producing renewable alternative energy to nuclear and coal-fired power.

(III) Procurement of major materialsCopper, i ron and other raw mater ials are commodities. The lead time of production equipment needs to be tied in with engineering schedule control.

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CONSUMER BUSINESS GROUP

Advanced Electronics Business Unit

Business ActivitiesI. Business scope


Category %

Digital entertainment products 93.72%

Smart & IoT products 6.28%

(II) Current products1. Digital entertainment product lines

W i re d & w i re l e s s h e a d s et s fo r g a m i n g & entertainment, streaming microphone & camera, smart & active noise cancelation headsets, head mounted devices, and entertainment accessories.

2. Smart & IoT product linesAI enabled audio products, IP camera, baby camera & parent unit, USB camera, IoT service gateway, IoT smart controller & module, electronic vehicle smart charging controller, and sensing-and-control products.


1. Digital entertainment productsDevelop wired and wireless headset, mounted devices, and accessories for entertainments. The digital entertainment product lines are with smart features, stylish designs, active noise cancellation, clear voice reception, and high definition audio & video quality.

2. IP camerasIP cameras can support high compression rate for high definition video quality, and furtherly integrate temperature, light, sound, and motion sensors for environmental monitoring. Camera product lines are certified by global leading cloud service providers to provide best audio and video performance.

3. Smart & IoT devices and sensing-&-control productsEmbedded leading AI eco-systems & technologies, series of Tatung IoT smart devices include Smart Headset & speaker, IoT services gateway, IoT smart controller and module, electronic vehicle smart charging control ler and sensing-and-control products which innovate user experiences and are the core devices supporting smart home, office, factory, building, campus and city applications.

(II) Research & development 1. Head set product lines are designed with smart

features, ergonomic and modish form factors, and active noise cancellation, and equipped with wide band audio and ultimate sound quality.

2. Develop high definition built- in and add- on cameras for smart TV. Products are certified by global leading service providers. Support leading features including high definition video shooting, high compressed video format, noise suppression, ease-of-use, and interoperability.

3. Develop IP cameras with advanced features including night vision, environment monitoring, event detection, and easy installation.

4. Incorporated with leading AI & cloud services, IoT smart devices focus on energy-saving & efficiency management, security & safety, and wellness monitoring applications. Products are environmental friendly, low power consuming, and compliant to international standards.

(III) Important certifications

Compliance with the European

Directives

Compliance with American

safety standards


Compliance with U.S. Federal

Communications Commission

for telecommunications

WEEE

Compliance with German

& European safety requirements

Compliance with Japanese emissions

control standards by VCCI

RoHS Energy Conservation

Label

Energy Star


As the penetration rate of connected devices going high, broad band Internet accesses becoming ubiquitous, cloud services and big data analytics and applications getting mature, these factors pull high the demands of connected products and IoT applications. New business models and application are innovated by alliances among branders, channels and operators for new applications. Foreseen emerging products & solutions include accessories for entertainments, IoT devices, sensors, energy saving & eff iciency management, environment monitor ing, security surveillance system and etc.


UpstreamSystem-on-a-chip, memory, communication IC/module, digital signal processor, sensor component, power IC/module, mechanical parts, and software venders.

Midstream Headset, IP camera, IoT device designers and manufacturers.

DownstreamODM/OEM customers include branders, channels and operators. End users are home, office, corporate, and government users.

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62

(III) Product development trend and competition status1. Digital entertainment products

To echo the trend of environmental protection, the on-going product development will enable wideband audio, HD video, RF technologies, fashion designs, noise cancelation, power saving and smart features for digital entertainment product lines to provide customers best price/performance products in line with the most updated and standardized model required by the core cloud service clients.

2. Smart & IoT devices & solutionsProducts are designed with easy installation, bundled with AI & cloud services or private cloud projects, and incorporated with smart handheld devices, TV & PC for easy use. Their smart relevant applications can be extended from homes, offices, buildings, factories, campus, communities to cities.

(IV) Plans for developments1. Al l ied with global leading platform and

solution providers, Tatung engages its efforts on advanced technology research and development to provide new products with cutt ing edged features and enhanced competiveness.

2. To adapt the most updated technology and application, Tatung has long-term partnerships with key component venders for co-developing time-to-market products to boost profits and sales performance.

3. Advanced technologies are developed and applied to provide users smart, convenient, energy saving, safe, and environment friendly lifestyles.


(I) Future supply & demand conditions and growth potential1. According to an international forecasting

report, the global sales of IoT products & solutions is about US$98.9 billion in 2016, and will grow enormously to US$362 billion in 2020. Ministry of Economic Affairs also engages its effor ts to support Taiwanese venders for developing IoT core technologies and products. It is estimated that the sales of IoT products & solutions by Taiwanese venders will be over US$14 billion in 2020.

2. The market research company estimates that there will be over 15 billion connected devices wor ldwide in 2020. Demands of cloud based devices with energy-saving features for IoT applications keep tremendous growth.

(II) Favorable & unfavorable factors and countermeasures1. Favorable factors

With in - house experienced R&D teams, Tatung leverages global leading platforms for advanced solutions to deliver products with competitiveness and fulfill market needs.

2. Unfavorable factorsProducts suffer from the short lifecycle and intense price competition.

3. CountermeasuresEfforts & investments are continuously to be made to enhance product planning capability, development expertise, product quality, manufacturing efficiency, and global operating.

(III) Competitive niches and strategies for growthWith effective and flexible designs, customizations, and manufacturing services on digital entertainment and smart application products, Tatung provides customers fast reactions to accommodate market needs. Customers and Tatung benefit from this strategy and have tightly partnerships for continuous growth on business.

(IV) Mission, core values, and vision1. Mission: To facilitate work and enrich life with

advanced technologies.2. Core values: Innovation, teamwork, quality, and

humanity.3. Vis ion: To be customers’ best choice by

integrating products and solutions with value – added applications and services.

II. Purpose and manufacturing processes of main products(I) Purpose

Product lines mainly focus on digital entertainment and smart living applications including video & audio entertainment, networking, automation, energy management, assisted living and security surveillance.

(II) Manufacturing processesTatung offers global customers competitive products and complete services through product research, design, validation, manufacturing, testing, packaging, warehousing, delivery, logistics and service.

III. Supply of main raw materialsTo assure product quality and delivery, Tatung has long-term partnership with raw material venders for timely supplies. Tatung mainly manufactures in-house, and also out-sources some components/parts from qualified venders.

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Appliance Business UnitBusiness ActivitiesI. Business scope


Category %

Air conditioners 37.57%

Small home appliances 14.80%

Large home appliances 35.85%

LED TVs 10.84%

Compressors 0.93%

(II) Current products1. Air conditioners: Window-type air conditioners,

Spl it type ai r condit ioners, Commercial air conditioners, Air conditioning facilities, Constant temperature and humidity package air conditioners, Water cooled suspension air conditioners, Chillers for central air conditioning, Heat pump (Air source heat pump, Water source heat pump, Multi Source Heat Pump, High temperature heat pump,) Atmospheric water generator, Dehumidifier, Commercial dehumidifier, Fan coil unit, Air handling unit, Hot air dryer, Air purifier.

2. Home appliances: Refrigerators, washers, coolers / freezers, electric fans, electric thermal kettles, hair dryers and electric kettles.

3. Kitchen appliances: Multi-functional cookers, fusion cooker, induction cookers, ovens, microwave ovens, blenders.

4. LED TVs: Digital TV with embedded Hi-HD tuner, LED backlight LCD TV, 4K UHD TV and smart TV.

5. Compressors: Compressors for various appliances such as refrigerators and dehumidifiers.


1. Air conditioners: R&D of inverter- controlled air conditioning driver modules, APP smart kit, remote monitor system.

2. Home appliances: R&D of inverter – controller technologies, development of environmental friendly coolant systems, plasma sterilization and deodorization systems.

3. Kitchen appliances: Develop a wide range of unique and multi-functional products based on energy- saving, environmental -friendly and healthy concepts.

4. LED TVs: Increase the ratio of energy-saving LED backlight product lines with innovative Ultra, HD, 4K, 2K, curved Display and smartTV technology, while adding superior crystal image technology to enhance the per formance of display products. Featuring HDR technology (High Dynamic Range Imaging) for image quality enhancement.


1. Strengthen the function of brand operation; use innovative product designs and quality products to enhance brand value.

2. Expand overseas sales and China marketing activities.

3. Improve the manufacturing process capability, quality capability and product competitiveness.


UpstreamLCD, panels, software / hardware development, plastic resin, copper, aluminum, iron, packing materials, electronic substrates, motor, compressors.

Midstream Home appliance product manufacturers.

Downstream

Retailers, franchise stores, service stations, wholesalers, clients, businesses, public places, government agencies, medical, educational, financial and insurance institutions.

(III) Product development trend and competition statusAs home appliance field is a mature market, facing the severe competition from overseas and local vendors, Tatung needs to focus its product development on designing smart, innovative, multifunctional, refined, and energy saving products.Tatung Smart HEMS App creates a more efficient and effective way of managing the electrical appliances and devices without sacrificing current living comforts. Tatung Smart HEMS is useful for anyone who wants to reduce home energy consumption and save money; it offers users total management of home energy consumption with appliance control, energy consumption monitoring, and self-monitoring functions anytime, anywhere, through any internet enabled personal device.As a way of rejuvenating the brand, we offer our new home appliances in ivory color, expressing a life philosophy through positive energy. Each product has been renamed and features uncompromised build quality and aesthetic design, recognized by national as well as international awards, including the Taiwan Excellence Awards, iF Design Award (Germany), and Good Design Award (Japan), among others. As a leader in the home appliance industry, our goal is to deliver a brand-new Tatung to consumers as we continue to create classic, enduring products.

Operation Overview


64


Compliance with the European

Directives

Compliance with American & Canadian Safety

Standards

China Compulsory Product

Certification

ISO 9001 ISO 14001

R31001RoHS

Taiwan Green Mark represents for "recyclable,

low-polluting, and resource-saving"

Taiwan Recognizable

Label for Energy Efficient Products

Compliance with U.S. Federal Communications

Commission

Compliance with Bureau

of Standards, Metrology &

Inspection in Taiwan

WEEE

Taiwan Excellence Award from Ministry of

Economic Affairs


Economic Affairs


Economic Affairs

Taiwan Excellence Silver Award from

Ministry of Economic Affairs

Taiwan Excellence Silver Award from

Ministry of Economic Affairs

iF product design award

iF product design award

GOOD DESIGN AWARD

Taiwan Saving Water label

(For General Level)

Taiwan Saving Water label

(For Glden Level)

RoHS Japan PSE Certification

AS/NZS Regulatory Compliance Mark

MIT(Made in Taiwan)

Reddot design award winner

2017

Taiwan Premium MIT Gold Mark

Taiwan CNS Mark

IV. Long-term and short-term business development plans(I) Tatung’s Innovation R&D Center recruits overseas

and local experts to provide technical assistance and guidance, and devotes itself to the in-depth development of forward looking technologies to distinguish features of forthcoming new products.

(II) Tatung will continue einforceits collaboration with major suppliers of key parts and components for raising the profits.

(III) LED TV and home appliance industry both are saturated and mature. Tatung will improve the manufacturing process, reduce manufacturing cost, and develop innovative products to enhance its overall competitiveness.


(I) Domestic market LED TVs and home appliances market in Taiwan in 2017: 921K units of LED TVs; 832K units of air conditioners; 551K units of washers; 500K units of refrigerators; 934K of multifunctional cookers.

(II) Overseas market The overseas sales of home appliances in 2017; 23K units of multi-functional cookers and Fusion Cooker sold to America, Japan, China, Hong Kong, Philippines, Australia and New Zealand; 33K units of compressors for fridges and water coolers; sales amount US$2.84M of air conditioners including residential type and commercial type.

(III) Future demand and growth potentialThe expected growth rate will be more than about 3%~5% in 2018.

(IV) Competitive niches1. Good brand reputation, superb logistic system,

fast and excellent service network.2. Automated production, products with high

stability and reliability.3. Outstanding R&D capability.4. Tatung owns distribution channels and global

supply chain system.(V) Favorable / unfavorable factors and

countermeasures1. Favorable factors: With the sign of improving

economy, Tatung aggressively works on both domestic and overseas projects to seize business opportunities. Meanwhile, we keep improving the services of all distribution channel s to further enhance brand reputation.

2. Unfavorable factors: The short life cycle and intense pr ice competit ion of consumer electronic products; traditional stores face fierce competition from IT shops, chain stores, discount stores, on-line shopping and television shopping channels.

3. Countermeasures: Efficient human resource planning, strengthening R&D and production capabi l i t ies , p rov id ing innovat ive and differentiated products to boost sales. Strategic alliances with major wholesalers to increase sales.

(VI) Mission, core values, and vision1. Mission: To enrich people’s work and life with

cutting edge technologies.2. Core values: Innovation, teamwork, quality, and

humanity.3. Vision: To become consumer’s best choice by

delivering quality products with value-added application and customer service.

II. Purpose and manufacturing processes of main products(I) Purpose

Tatung offers convenient, healthy, comfortable, energy saving and environmental -friendly household electric appliances to customers. The products are used by businesses, public locations, government agencies, educational institutions for displaying, information transmitting, enhancing efficient working, and providing entertainment.

(II) Production processes From R&D, design, molding, manufacturing, testing, packaging, warehousing to transportation, Tatung provides customers complete product line and after-sales service through its nationwide sales / service network and logistics systems.

III. Supply of main raw materialsMain raw materials are purchased from and supplied by reputable overseas or domestic vendors. Tatung established steady supply-demand relationship with them to ensure product stability and, through the B2B system, to further lower its inventories and material costs.

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65

SYSTEM BUSINESS GROUP Smart Meter BU, Solar System BU, Smart System Division

Business ActivitiesI. Business scope


CategoryOperating Revenue

%

Major scope of SSBG are Energy Infrastructure, Green Energy and Smart Systems, such as Smart Meters, Micro-Grid System, Solar System, Smart Building Management System, Smart Campus Management System, Smart Home Management System, IoTization of Products/Devices and Data Analysis.

100%

(II) Current products■ Energy Infrastructure

1. Smart Meter The Advanced Mete r i ng I n f ra s t r uctu re

(AMI) consists mainly of the smart meter, communication network and the Meter Data Management System (MDMS). It equipped with communication capabilities and also provide real-time monitoring of various incidents, such as power outages and thefts of electricity.

2. Micro-grid System Micro-grid system is a regional small supply

system, combined with the distributed energy such as solar energy, wind power, emergency generator and energy storage, separate or parallel to the traditional power grid. The system can immediately enter islanding operation when power outage occurs, and it can keep functioning using renewable energy and energy storage system to achieve an emergency power supply.

■ Green Energy1. Solar System Design and construction of the PV solar system,

and the energy monitoring system.2. PV Power Analysis Visualization of the data of power generation

from each PV site, control of the health of PV solar system with the forecast of the power through the PV modules.

■ Smart System1. Smart Building Made building and its infrastructure providing

the owner, operator and occupant with an envi ronment that is f lexible, effective, comfortable and secure through the use of integrated technological building systems, communications and controls.

2. Smart Campus Provide information on energy consumption,

manage on-campus electricity needs and dormitory energy costs.

■ IoTization of Products/Devices1. IoTization of Products IoTization enables predictive maintenance by

actively notifying users to perform advance maintenance to reduce losses due to paused production lines.

2. Energy Management System Use Smart Electricity Meters for remote power

management and demand control to achieve energy conservation.

■ Data Analysis Platform1. IoT data analysis The a rch i tectu re of IoT, i nc lud ing data

transmission from devices to cloud, data analysis and data visualization, is provided.


■ Smart Meter BU: Research and development electronic meters with technical specifications such as CNS/ANSI/IEC/MID/JIS, smar t meter, communication module, management software, meter reading software and focus on power monitor ing, measurement technology, and communication module.

■ Solar System BU: The services of PV solar system construction of the rooftops of public facility, industry lands, landfills, farm ponds, enterprise’s projects, ESCO, power plant engineering management, operation and maintenance.

■ Smart System Division: Smart building system, micro-grid system, smart home management system, IoT-based smart control and management system, and data analysis service to provide smart system total solution.


■ Energy Infrastructure1. Smart Meter AMI market has gradually spread to emerging

countries such as Eastern Europe, Southeast Asia, and the Middle East. In Japan, due to the gradual liberalization of the Japanese electricity market, the government plans to fully import AMI construction in 2020. In Southeast Asia, the peak period of AMI deployment is 2016-2021, Tatung cooperated with local companies to enter Thailand, Malaysia and other countries to develop smart meter market. In the Middle East, the demands of AMI was increased in recent years, and will completely constructed in 2021.

2. Micro-grid System Ta t u n g h a ve ex te n s i ve ex p e r i e n ce i n

electromechanical design and manufacturing, integrated renewable energy, energy storage, distribution network construction and energy management systems, provided total solutions to users in different types, such as household, island and village.

■ Green EnergyTo cooperate with the BOE policy “Million Solar Roof plan”, Tatung has provided the “PV solar system plan and professional technology of installation” to promote renewable energy all out. Up to now, Tatung has successfully finished PV solar systems in kinds of place, such as residential area, community, factory, dormitory, and commercial building. We’re

Operation Overview


66

offering the solutions of rooftop, ground-mounted and floating types. Since 2018, Tatung has stepped into the new territory of large-scale ground-mounted PV power plant.

■ IoTization of Products/Devices, Data Analysis Platform1. IoT is the world development trend. Taiwan

should gradually move towards the era of providing value added solutions from that of manufacturing, therefore, how to integrate the various vertical market resources inside Tatung Group and to provide a complete program are our Business Unit’s priorities.

2. Smart bui lding market mostly adopts BMS (Building Management System) as the main control system currently. The future trend will be the input of IoT technology, so that construction becomes not only building automation, but smart buildings.

3. IoT is value-added by data analysis. Artificial intelligence models are widely adopted by industries. We will focus on it to develop our core techniques.

(II) Product development trend and competition status■ Energy Infrastructure

1. Tatung has the ability of integrating the systems of smart meter infrastructure and integrating different communication technologies such as RF, PLC, and 4G communications to develop smart meter application functions to meet customer needs and improve system performance.

2. In response to the needs of international markets, Tatung developed smart meters that comply with international standards, such as ANSI, IEC, JIS and other international standards to enhance market competitiveness.

3. In response to market demand at home and abroad, we develop various types of competitive fundamental-form electronic meters, high-end model with a communication module, and were globally recognized.

■ Green Energy Tatung has integrated the internal technology and

resources to match up country’s development policy and actively cooperate with local governments to provide the most professional consulting consulting advises.

(III) Important certifications and awards■ Tatungweatherproofmetershavebeencertifiedby

JIS and Japanese power companies, and it is the only one be certified company in Taiwan.

■ ECSIntelligentBuildingwon“2017TIBAAWARDS”Gold Award in renovation, and was recommended to participate "2018 APIGBA AWARDS".

■ Chimei,SmartLow-carbonIslewon“2018SmartCityInnovative Application Award”.


■ Research and development various types of meters with international standards certification.

■ Strengthen the relationship with main customers, build effective retail channel for domestic market, and develop overseas markets.

■ Continuous development of the public facilities, private enterprise’s projects, industry zones, factory rooftops of logistics, ground-mounted landfills and floating PV systems.

(II) Long-term plan■ Maintain the relationship between the international

strategic partners and cooperate with each other to expand overseas markets.

■ Strengthen and enhance the R & D capabilities of smart meter, meet customer needs, strategic all iances with foreign well-known companies, participate in domestic and international smart meter system project.

■ Exploitation and focus on mid-large scale ground-mounted power plants, large floating systems and other new PV markets.


(I) Domestic market■ Tatung already won the bid of low voltage smart

meter in three-phase type, and make an effort to get 800 thousand households in 2019, 2 millions households in 2020.

■ To solve the problem and to further increase the penetration of renewable energies, Tatung Company has work closely with Taiwan Power Company and the NEPII project to build up the demonstration system and verification platform for the smart grid in Chimei. The project integrates 400kW solar photovoltaic system and energy storage system (250kW, 300kWh); renewable energy accounted more than 50% of the system load.

■ Major achievements of Green Energy in 2017 are Fudekeng restoration park PV solar system 1996.8kWp, Houzhuang landfill rehabilitation sites PV solar system 2407.2kWp, Taoyuan City farm ponds floating PV solar system 481.44kWp, Tainan City Water Resources Bureau, Tainan City 494kWp, Solar Tree in Taoyuan Agriculture Expo, New Taipei City fruit and vegetable market 430.08kWp, Benzhou sewage treatment plant 1444.32 kWp, Hsinchu County Stadium 934.56 kWp.

(II) Overseas market■ In 2017, won a Smart Meter bid from Japan Electric

Power Company.

II. Purpose and manufacturing processes of main products1. Purpose

Power Company’s billing meters, factory and home energy-saving monitoring and loading and unloading device control system.

2. Manufacturing processes Currently, design, mold making, assembly, testing and packaging, all are performed in Taiwan locally.

III. Supply of main raw materialsMaterials are manufactured either in-house or from qualified domestic or international suppliers to ensure product stability and reliability.

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67

System Integration Business UnitBusiness ActivitiesI. Business scope


Category %

ICT Applications 61.22%

Electro-Mechanical Systems 38.78%

(II) Current productsMain Product Categories■ ICT applications

Distribute major brands of IT products, NEC IP/ PBX system and telecommunication equipment. Develop smart energy management system, official document management system, attendance system and a variety of government projects.

■ Electro-Mechanical SystemsThe scope is from the power generation, distribution, transmission, to the electricity, including the five major electromechanical pipelines and smart communities with smart grids, smart buildings, smart homes, smart security monitoring, and health care systems. Applying big data with the smart building management system enables buildings to operate in the most efficient situation, so that residential and commercial offices can provide a safe, convenient, energy-saving and sustainable environment.


■ ICT applicationsV i r t u a l i za t i o n , c l o u d co m p u t i n g , WA N/ L A N implementation, heterogeneous integrated systems, official document management system, social welfare management system, the BLI information management system, accounting system, logistic management system, and questionnaire survey system.

■ Electro-Mechanical Systems1. Residence, factory management, energy, water

treatment, and other mechanical and electrical engineering planning, design, and construction.

2. Planning, setting up and application services for Smart Building Certification.

(II) Research & Development■ ICT applications

The official document system that has been in operation for more than a decade has been transformed into a streamlined, enterprise-oriented system. It provides contractual procurement to the public sector for procurement. On the other hand, an asset management system was developed to assist leasing businesses, maintenance systems, and integrated accounting systems.

■ Electro-Mechanical SystemsTaking electromechanical integration as the main direction, electromechanical systems specialize in planning, construction and system integration of residence, plants and water resources, and cultivate the ability to plan and to integrate smart building systems.Grasp the design of each project and use it as a blueprint to conduct construction in order to avoid engineering disputes. Promote applying BIM (Build Information Modeling) to electromechanical systems to enhance design capabilities.


■ ICT applicationsKnockout competition among industries is constantly moving fast. Faced with the new era of competition, it is necessary to find patterns to integrate resources quickly in order to create new business opportunities.

■ Electro-Mechanical SystemsThe technology of intelligent building system is changing rapidly, and every year there are new application technologies listed. Therefore, in the integration of electromechanical system planning, it is necessary to consider the latest systems and technical applications so that the subsequent maintenance of the property management can allow the building to be maintained, operated and managed continuously for extending the life of the building.

(II) Relationship among the upstream, midstream, and downstream sectors of the industry■ ICT applications

Upstream suppliers for PCs, mainframes, network facilities, and developing tools

Midstreamagents / providers for network infrastructure, systems integration, application software

Downstream end users for government institutions, schools, public / private sectors ,etc.

■ Electro-Mechanical Systems

Upstream manufacturers for electro-mechanics, communications and IoT

Midstream five pipelines and system integrators

Downstream manufacturers, builders and owners

(III) Product development trend and competition status■ ICT applications

Market Intelligence & Consulting Institute (MIC) observes the top ten trends of ICT industries in 2018. It is expected that the ICT sector will develop in the four directions of "intelligence, openness, service, and integration". "Intelligence" is a boom which is driven by artificial intelligence and will stimulate intelligent applications and technologies."Openness" i s an open sof t ware and net work computing architecture. "Service" is to meet the future of emerging technologies in the 5G era. "Integration" is a trend of cross-domain application and system integration solution, which is brought by the rise of multiple intelligences.According to these four directions, MIC has summarized 10 important development trends of the ICT industry in 2018, including " precise recognition ", " intelligent retail", "security AI", "software openness", " calculated marginalization ", " service-oriented technology," "miniaturization of network services," "data-based telecommunications operations," "interoperability across applications," and "industrial concentration."

■ Electro-Mechanical SystemsThe building planning of Intelligent City is the integration of architectural aesthetics, public art, intelligent green building and universal design accessibility. In terms of maintenance and management, smart property management is introduced for community safety and life services to create safe, healthy and comfortable smart communities.

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68

By integrating the industrial development advantages of Tatung’s ICT, electromechanical systems and IoT intelligent systems, realize the intelligent green vision of both human and technology.

IV. Development strategy■ ICT applications

1. Differentiate goods and services2. Strengthen the existing customer relationships, and gain

new clients / new business opportunities3. Provide a broader product line to meet customers'

requirements4. Increase the high gross-profit portfolios5. Replicate solutions, and stimulate customers' demand6. Develop cloud services and information security

solutions7. Build good relationships with suppliers to extend the

product services■ Electro-Mechanical Systems

Integrate all products and systems, utilize IoT technology, and provide complete system integration services from power generation, transmission, distribution, electricity to home appliances.Continuously pay attentions to the case that has already obtained, such like the public housing case at Taipei and the cases that are regard as locked targets. And simultaneously strive for the electromechanical projects on the construction of private houses


(I) Domestic market■ ICT applications IDC (International Data Corporation) announces top

ten ICT predictions for Taiwan in 2018. With the rapid changes of market and high competitive pressure, digital transformation has become the focus of enterprise development, and the promotion of Digital Native Enterprise will be an important direction of enterprise development in the future.

■ Electro-Mechanical Systems C r e a t e d i f f e r e n t i a t i o n b e t w e e n T a t u n g ’ s

electromechanical systems and those of other companies. Par t icipate in impor tant T3 ai rpor t construction projects and strive for related orders. Due to the forward-looking market, water resources will be key projects in the follow-up direction.

(II) Factors for Development Visions and Response Strategies■ ICT applications IDC expects that by 2021, 50% of global GDP, 60% of

Asia Pacific's contribution will come from "digitalization", including digital products, services, technologies, operations, and relations, etc. It is expected that more than 55% of GDP will be contributed by digital service products and technologies by 2012 in Taiwan.

IDC has announced that the cyber threat will enter an "automated attack" in 2018, and many proactive and automated attacks will continue to occur; and it is expected that future cyber warfare will become the offensive and defensive battlefield of "Analysis Automation." It is expected that 43% of large enterprises in 2018 will take the lead in adopting security services and products centered on machine-learning and forecasting.

■ Electro-Mechanical Systems1. Advantages: The government facilitates the Taoyuan Aviation

city as well as forward-looking programs for roads

and the drainage stations, which increases the demand for electromechanical integration.

2. Disadvantages: Competition in the market is fierce. Manufacturers

often compete at low prices.3. Response Strategies: Strengthen the project by risk assessment, and

establish a complete design team with estimating capabilities to choose the case carefully.

(III) Competitive niche and Growth Strategy■ ICT applications

1. Competitive niche˙ Be a well-known brand, Be trusted by customers,

and provide nationwide services˙ Own r ich large-scale system integration

experiences in the public sector2. Growth Strategy˙ Grow profit revenues˙ Lean customer services˙ Reinforce professional project technologies˙ St rengthen the b rand image and take

corporate responsibilities■ Electro-Mechanical Systems

1. Accumulate customer trust reputation by long-term electromechanical equipment manufacturing experience.

2. Own experience in professional electromechanical system integration.

(IV) Mission, Core Values and VisionMission: Provide comprehensive system integration solutions. Core Values: Suit the action to the word with cautious commitment. Vision: Be the most professional and largest system integration strategic partner for the public sector in the domestic market.

II. Development Direction and Processes Control(I) Development Direction

1. Official Documents System — Improve the efficiency of official documents management and meet the requirements of file verification.

2. Leasing Asset Management System - The system is developed based on the requirement of leasing business. The rent, amortization, and gross profits generated by the business leasing assets can be automatically calculated by the system and provide complete reporting functions.

3. Maintenance System - It is an on-line maintenance inquiry system, which provides inquiries for customer service contracts, renewal and expiration date, etc. And it can track maintenance status, analyze maintenance manpower information, and provide service records analysis, which offers detailed service records and analysis report by customer's name.

4. Integrated Accounting System- It is used to assist enterprise overall operation management, control costs and capital flows, construct sound audit system, and provide a total solution that meets the processes as well as operational management, etc.

(II) Processes ControlThrough the processes of requirement collection, system analysis, design, development, implementation and migration, deliver high-valued products and services to customers via national service network.

III. Supply OverviewIntegrate Tatung group’s complete product chain with high-quality products at home and abroad in order to ensure that the quality of products as well as production processes is in strict control. All products are provided with complete warranty and good after-sales services.

Operation Overview


69

Operation summary(I) Suppliers / customers accounting for 10% or more of the Company’s total purchase / sales

amount in 2016 and 20171. Key Supplies

Unit: NT$ Thousand2016 2017

Name Procurement amount

Percentage of total net procurement

Relationship with the Company Name Procurement

amountPercentage of total

net procurementRelationship with the

Company

Others 64,915,990 100% Inapplicable Others 62,801,930 100% Inapplicable

Net purchases 64,915,990 100% Inapplicable Net purchases 62,801,930 100% Inapplicable

Note 1: These customers purchase less than the current year as a result of its net purchase more than 10% of company, it will not be disclosed.Note 2: The financial statements for Q1 of 2018 were under review by independent auditors when this annual report is printed.

2. Key BuyersUnit: NT$ Thousand

2016 2017

Name Sales amount Percentage of total net sales

Relationship with the Company Name Sales amount Percentage of total

net salesRelationship with the

Company

Others 77,677,625 100% Inapplicable Others 75,553,009 100% Inapplicable

Net sales 77,677,625 100% Inapplicable Net sales 75,553,009 100% Inapplicable

Note 1: Net income for the year on these customers as a result of its net operating income less than 10% of the Company, it will not be disclosed.Note 2: The financial statements for Q1 of 2018 were under review by independent auditors when this annual report is printed.

(II) Production in 2016 and 2017Output: Set

[Unit]Amount: NT$ThousandFiscal year

OutputMajor products(or by departments)

2016 2017

Capacity Output Amount Capacity Output Amount

Optical sector 287,508 281,509 26,999,522 247,952 239,096 27,827,274

Machinery and energy sector 314,523 922,243 12,677,808 276,070 1,342,337 13,850,160

Consumer products sector 0 4,393,202 5,475,033 0 5,433,563 12,041,919

Others 8,760 3,693 390,640 6,633 3,287 350,216

Total 610,791 5,600,647 45,543,003 530,655 7,018,283 54,069,569

(III) Shipments and sales amount in 2016 and 2017[Unit]Amount: NT$Thousand

Fiscal year 2016 2017 Shipments & sales Domestic Export Domestic Export

Major products (or by departments) Quantity Amount Quantity Amount Quantity Amount Quantity Amount

Optical sector 1,039 414,068 371,731 32,655,577 1,620 1,172,276 294,507 33,567,544

Machinery and energy sector 1,029,712 17,995,465 277,510 13,660,197 818,867 19,084,084 276,511 9,057,769

Consumer products sector 1,434,297 14,543,661 3,228,820 3,115,095 1,513,732 13,432,551 3,631,643 3,577,037

Others 2,184 3,582,593 3,024 406,978 659 3,821,659 2,796 326,537

Total 2,467,232 36,535,787 3,881,085 49,837,847 2,334,878 37,510,570 4,205,457 46,528,887

Note: The above data are subject before consolidation.

(IV) Tatung and Subsidiaries, R&D expenses totaled NT$4,813,584 thousand dollars in 2017 up to the publishing date of the annual report

Operation Overview


70

Workforce structureFiscal year 2016 2017 March 31, 2018

The Company

Number of employees

Management & staff 1515 1431 1412

Technicians 1786 1639 1659

Total 3301 3070 3071

Average age 41.06 42.04 42.04

Average years of service 13.08 14.02 14.05

Education level

Ph.D. 12 13 12

Master 379 353 357

Bachelor & other higher education 1699 1626 1619

Senior high school 761 709 697

Below senior high school 450 369 386

All companies included in Financial statements 26668 20019 19781

Expenditure on environmental protectionTo cope with the trend of international environmental protection and government laws and regulat ions, the Company i s dedicated to the prevention of pollution and environmental protection for the better working environment of employees, better living environment for the public and better fulfillment of social responsibilities.

(I) Environmental protection measures1. Actions:

ISO 14001

ISO 14064 Green Products

Green Mark/Energy Label/Water Label

EnvironmentalTest

Energy Auditing

Product CarbonFootprint

RoHS Test

GreenSupply Chain

Eco-Efficiency

Disposal ofWaste

Design forthe Environment

(DfE)

CorporateSocial Responsibility

Report

EnvironmentalPerformance

Evaluation

Life CycleAssessment

Energy Saving

ImplementPollution

Prevention

ISO 50001

Promotion ofEducation and

Training

PollutionPreventionPays (3P)

2. Results:(1) All manufacturing factories have implemented

ISO 14001 and received certifications.(2) Promotes energy saving projects in the factories,

as well as implementing ISO 50001. So far San-Hsia Factory, Tayuan Plant, and Taoyuan Wires & Cables Plant have implemented ISO 50001 and received certifications.

(3) Devotes in envi ronmental f r iendly products, Tatung Co. has the following product categories being certified with:■ Green Mark: Household ai r condit ioners,

refrigerators, and amorphous cast-resin dry type transformer.

■ Energy Label: Air conditioners, dehumidifiers, washing machines, electric fans, refrigerators, monitors, warm-hot water dispensers, and

electric ovens.■ Water Label: Washing machines.■ Product carbon footprint: One model of A.C.

motors (3hp), one model of liquid immersed amorphous metal core transformer (2,000kVA), one model of r ice cooker ( TAC-10A-SR). Besides, the company has also issued "Product Category Rule, PCR" for A.C. motors, Rice Cookers, and Electric Cookers thus the industry can fol lows the PCRs to calculate carbon footprint for such products.

(II) Losses incurred from environmental pollution in the recent year and up to the publishing date of the annual reportFrom 2017 and up to the publishing date of the annual report, Taoyuan Wires & Cables Plant was fined NTD$30,000 due to violation of "Water Pollution Control Act". The violation was immediately corrected.

(III) Information about RoHSIn order to comply with the customers’ green procurement and EU’s RoHS requirements to ensure successful domestic and export markets, the Company’s factories, starting from the year 2004, have been dedicated to promoting a green supply chain which covers product design, procurement and production, and has also avoided using hazardous substances for making the Company a well-established green supply enterprise. In 2005, the Company established "Tatung Electrical and Electronic Equipment Restriction of Hazardous Substance (RoHS) Test Laboratory" to assist in the test and analysis of hazardous substances by various factories and related industry as well as to provide related professional technologies. The RoHS Test Laboratory successfully completed certification for both the Authenticated Chemical test Laboratory of the TAF and the Electrical and Electronic Equipment Test Laboratory of the Bureau of Standards, Metrology and Inspection of Ministry of Economic Affairs in 2007. On 28th November 2017, the Laboratory passed the annual audit conducted by the TAF.

Operation Overview


71

Labor relations(I) Tatung pioneered the "labor and management united as one" concept to promote

operational autonomyThe Company set up the Tatung Employees’ Welfare Committee in 1947 and the "Tatung United Welfare Committee" in 1969 as part of the Company’s efforts to promote the delegation of responsibility to lower hierarchies in the organizations and to develop new management talent.

Employees’ welfare Implementation

1. Stock ownership The Company subsidized employees to buy corporate stocks since 1992 as part of their savings.

2. Subsidies Education subsidies for employees’ children in senior high school and college/university; funeral subsidies for colleagues or their spouses and immediate relatives; financial gifts for death of colleagues; subsidies for employees’ birthday, travel, and retirement; cash gifts for weddings of employees or their children as well as for birth of employees’ children.

3. Benefits Employees can purchase Company products via zero-interest installments and price discounts on groceries in corporate stores. Free movie shows and special trains in Spring Festival.

4. Club activities Education, recreation, physical education, languages, hiking/mountain climbing and photography

5. Health and safety plan Labor insurance, health insurance, group insurance, retirement pension, free annual health check-up

Education and training Implementation

Employee training Encouraging employees to study and to become a talent of "intelligence, integrity and ability". Offering employee diverse training courses including general, professional, management, environmental, health and safety, information security courses and online e-learning. Constructing organizational and lifelong learning culture. Efficiently strengthening talent development by systematic management.A total of 6,424 employees attended 24,755.5 hours of training, and 1,677 employees attended 1,677 hours of online e-learning in 2017.

Retirement system Implementation

Retirement plans In accordance with the requirements by laws and ordinances concerned, appropriate 6% of their monthly pays into the individual account for newly employees newly hired starting from July 1, 2005 and employees who have chosen new system Labor Pension Act. For the existent employees who continually choose the old pension system regulations and for the service seniority retained under the old system of employees who choose new pension regulations, we appropriate the pension reserve funds at the right amounts into the specially designated account in Bank of Taiwan based on the retirement regulations.

Management / labor relations Measures

Channel for employees to voice dissent or communicate with management

"Employees’ Suggestion Mail Box" is set up at company website, along with "Regulations of Processing Employees’ Complaints." Employees can voice out their opinions during training courses, or present their proposals during QC activities. Regular and special meetings between management and the labor unions are also held to facilitate communications.

Protection of employees’ interests and rights Measures

Safe and happy working environment

Implemented in accordance with the Labor Law, Gender Equality in Employment Act and in some cases better than regulations for workers.

Operation Overview


72

(II) Strategy and objective: Developing the Company’s most valuable asset - peopleLabor and management are committed to work ing together for the good of the Company and its workers. Both sides operate on the principle of promoting a harmonious, safe and happy working environment. Serious losses due to labor and management disputes from 2017 up to the publication of the annual report: None. Estimate of current and potential losses due to labor and management serious disputes and preventive policies: Losses due to labor and management major disputes not foreseen in the near future.

(III) Employees’ code of ethicsThe Company’s employees abide by Company rules which are designed to uphold the principles of "honesty, integrity and diligence." All employees follow a code of ethics and are dedicated to contributing to the stability, continuity and prosper ity of the Company and workers a l ike. Management leads under the principle "Do not do unto others what you do not want others do unto you," treating workers like their own family and guiding them by personal example. (Please refer to Page 4 for detailed information.)

(IV) The protection measures on the working environment and the health and safety of the employees1. Targets and Measures

Visitor Safety Guideline

Contractor management

Education and promotion on regulations

Tatung Health and Safety Guidebook

Disaster Prevention Pays

Working Condition Monitoring,Health Management and Promotion

Occupational Health andSafety Management System

Health andSafety Policy

DisasterFree

2. Action(1) Announces "Health and Safety Policy" and promotes

"Disaster Prevention Pays" program in the factories and subsidiaries, and looks forward to the target of "Disaster Free" by reviewing its performances and conducting the continual improvements.

(2) Occupational Health and Safety Management System

Tatung Co. has established the procedures to improve the issues of health and safety, as well as set objectives and reform projects. These are accomplished through the execution of reform projects and periodical assessments, as well as reviewed by the management, and aided in the continued improvement of health and safety performances. All the factories have implemented OHSAS 18001 and received certifications. Tayuan Plant and San-Hsia Factory also implemented Ta i wa n O ccu p at i o n a l Sa fet y a n d H e a l t h Management System (CNS15506). Since ISO 45001

has been published in 2018, Tatung Co. will set schedule to switch OHSAS 18001 to ISO 45001 in the next few years.

(3) Education and promotion on regulations ESD opens "Health and Safety Training Class" for new

recruits. The factories and subsidiaries also organize training courses for the needs of the business operations such as VOCs & Designated Chemicals class, Job Safety Analysis class, Forklifters, and Stationary Cranes training classes, etc.

Regarding to regulation promotion, ESD organizes "Tatung Co. Health and Safety Seminar" every year to promote newly updated regulations and other concerned topics. In 2017, ESD continued to assist the factories and subsidiaries to implement Chemical Control Banding and labor physical and mental health protection measures, as well as carrying out audits on the issues with highly potential health and safety hazards and electric fire.

(4) Working Condition Monitoring, Health Management and Promotion

Tatung Co. sets working environment monitoring plan and conducts monitor ing on work sites. The results from monitoring are available to the employees.

Tatung Co. believes that the health of the employees and their families is a kind of assets to the company. Tatung Co. organizes numerous health speeches, seminars, health checks to let the employees understand the importance of their health and promote to their families.

(5) Contractor management Tatung Co. promotes "Contractor health and safety

management method" and conducts irregular site inspection during the operation period. Tatung Co. also promotes "Visitor Safety Guideline" to ensure the safety among visitors. All visitors must read this guideline and wear proper safety gears according to the requirements of the factory or subsidiary.

Operation Overview


73

Important contractsImportant contracts up to the publishing date of the annual report

Nature Counterpart Duration Description Restriction clause

Investment cooperation Japan Sumitomo Heavy

Industries, Ltd. October 13, 1995Incorporation of Tatung SM-Cyclo Co., Ltd. under joint venture Production of gear-reducers

NO

Investment cooperation Japan Okuma December 12, 1996

Incorporation of Tatung Okuma Co., Ltd. under joint venture Production of working machines

NO

Investment cooperation Japan Mitsui Mining &

Smelting Co., Ltd. October 13, 1975Incorporation of Tatung Die Casting Co. under joint venture Production of die casting products

NO

Technology cooperation Japan Toshiba Corporation March 26, 2013~

March 25, 2023

Design and production technology of 161kv (contain)~345kv (contain) Oil -type transformers, and manufacture above 66kv (contain) Gas Transformer

1. Authorize to manufacture in Taiwan

2. Activities of sales except Japan

Technology cooperation Korea Chardon Korea

CorporationJune 1, 2015~ May 31, 2021

Technology transfer of four ways underground switches automatic line

NO

Technology cooperation Japan Nissin Electric CO.,

Ltd.May 28, 2013~ May 28, 2018

Technology transfer of 25.8kV GIS

Activities of sales are limited to the Taiwan Power Company

Patent License U.S.A.Rovi International Solutions SarlCorporation

December 07, 2008~September 24, 2023

Patent license of copy protection process NO

Patent License U.S.A.Rovi International Solutions SarlCorporation

December 07, 2008~September 24, 2023

Patent license of RTLA Products(1) Non-video O/P(2) analog video O/P without

copy protection processNO

Patent License Japan Sony Corporation January 01, 2014~ December 31, 2018

Patent license of TV( on- screen display/4K TV) NO

Patent License U.S.A. Thomson Licensing L.L.C.

January 01, 2015~ December 31, 2019 Patent license of LCD Monitor NO

Patent License U.S.A. MPEG LA, L.L.C. January 01, 2016~ December 31, 2020

Patent license of MPEG-2 Systems NO

Operation Overview


74

Nature Counterpart Duration Description Restriction clause

Patent License U.S.A. MPEG LA, L.L.C. January 01, 2016~ December 31, 2020

Patent license of AVC/H.264 (MPEG-4 Part 10) NO

Patent License U.S.A. MPEG LA, L.L.C. May 01, 2013~ December 31, 2020 Patent license of HEVC NO

Mid-term loan contract Cooperative Bank December 29, 2017~

December 29, 2019Revolving limit (2 years) Limit of NT$1,100,000,000 NO

Mid-term loan contract

Far Eastern International Bank

December 22, 2017~ December 22, 2020

Revolving limit (3 years) Limit of NT$1,000,000,000 NO


Bank of Taiwan(to sponsor)

December 23, 2016~December 23, 2021

Syndicated credit extension(5 years) Limit of NT$25,200,000,000

Non-consolidated financial statement of the issuing company:a. Current ratio shall be no

less than 100%.b. Percentage of liability 2015~2018 shall be no

more than 160%. 2019~ shall be no more

than 140%c. Tangible Net worth 2015~2018 shall be no

less than 26 billion NTD. 2019~ shall be no less

than 30 billion NTD.

Long-term loan contract Bank Sinopac July 09, 2014~

July 09, 2023Non-revolving limit (9 years) Limit of NT$115,000,000 NO

Long-term loan contract Bank Sinopac April 27, 2015~

April 27, 2027Non-revolving limit (12 years) Limit of NT$350,000,000 NO

Long-term loan contract Bank Sinopac June 27, 2017~

June 27, 2029Non-revolving limit (12 years) Limit of NT$166,000,000 NO

Mid-term loan contract King's Town Bank September 28, 2017~

September 28, 2019Non-revolving limit (2 years) Limit of NT$1,500,000,000 NO

Mid-term loan contract O Bank December 29, 2017~

December 29, 2020Non-revolving limit (3 years) Limit of NT$220,000,000 NO


Taishin International Bank

January 31, 2018~ January 31, 2023

Non-revolving limit (5 years) Limit of NT$330,000,000 NO

Financial Overview


75

Condensed balance sheet and income statement(I) Condensed balance sheet - IFRSs - Tatung And Subsidiaries

Unit: NT$ ThousandYear

ItemMost Recent 5-year Financial Information

2013 2014 2015 2016 2017

Current assets 78,618,067 86,006,738 86,960,951 130,165,281 89,234,024

Property, plant and equipment (Note 2) 94,621,225 86,205,789 77,800,166 71,518,020 96,086,434

Intangible assets 2,207,785 2,113,480 1,792,921 1,091,100 907,082

Other assets (Note 2) 28,207,914 39,501,311 35,364,580 35,624,952 42,353,818

Total assets 203,654,991 213,827,318 201,918,618 238,399,353 228,581,358

Current liabilitiesBefore distribution 104,943,233 93,801,791 104,017,444 103,081,497 88,860,214

After distribution 104,943,233 93,801,791 104,017,444 103,081,497 (Note 5)

Liabilities 36,462,038 58,155,003 48,989,315 49,434,531 54,949,285

Total liabilitiesBefore distribution 141,405,271 151,956,794 153,006,759 152,516,028 143,809,499


Equity attributable to shareholders of the parent 33,301,195 34,366,587 30,599,156 29,640,304 29,045,273

Capital stock 23,395,367 23,395,367 23,395,367 23,395,367 23,395,367

Capital surplus 767,970 750,641 785,376 2,864,841 3,273,505

Retained earningsBefore distribution 9,975,000 10,135,587 6,983,139 4,808,065 4,508,365


Unrealized gain or loss on financial instruments (30,272) 891,862 242,144 (371,104) (502,065)

Treasury stock (806,870) (806,870) (806,870) (1,056,865) (1,629,899)

Non-controlling interests 28,948,525 27,503,937 18,312,703 56,243,021 55,726,586

Total equityBefore distribution 62,249,720 61,870,524 48,911,859 85,883,325 84,771,859


Note 1: The Company's financial statements for the two years have been duly audited by independent auditors. Since 2013 use IFRSs.Note 2: The Company did not carry out land vale re-appraisal in 2017.Note 3: The financial statements for Q1 of 2018 were under review by independent auditors when this annual report is printed.Note 4: The appropriation proposals are subject to a resolution of the shareholders' meeting in the following year.Note 5: Not yet distributed.

Financial Overview


76

(II) Condensed balance sheet - IFRSs - TatungUnit: NT$ Thousand

YearItem

Most Recent 5-year Financial Information2013 2014 2015 2016 2017

Current assets 20,790,760 17,105,841 17,089,003 16,930,430 16,302,241

Property, plant and equipment (Note 2) 2,156,405 2,701,758 3,060,707 3,626,622 4,388,024

Intangible assets 83,100 101,370 72,033 59,083 23,529

Other assets (Note 2) 49,907,133 51,524,778 48,909,888 50,348,260 50,301,390

Total assets 72,937,398 71,433,747 69,131,631 70,964,395 71,015,184

Current liabilitiesBefore distribution 21,719,482 15,452,202 14,344,527 11,741,654 10,135,178


Liabilities 17,916,721 21,614,958 24,187,948 29,582,437 31,834,733

Total liabilitiesBefore distribution 39,636,203 37,067,160 38,532,475 41,324,091 41,969,911


Owners' equity 33,301,195 34,366,587 30,599,156 29,640,304 29,045,273

Capital stock 23,395,367 23,395,367 23,395,367 23,395,367 23,395,367

Capital surplus 767,970 750,641 785,376 2,864,841 3,273,505

Retained earningsBefore distribution 9,975,000 10,135,587 6,983,139 4,808,065 4,508,365


Unrealized gain or loss on financial instruments (30,272) 891,862 242,144 (371,104) (502,065)

Treasury stock (806,870) (806,870) (806,870) (1,056,865) (1,629,899)

Non-controlling interests - - - - -

Total equityBefore distribution 33,301,195 34,366,587 30,599,156 29,640,304 29,045,273


Note 1: The Company's financial statements for the two years have been duly audited by independent auditors. Since 2013 use IFRSs.Note 2: The Company did not carry out land vale re-appraisal in 2017.Note 3: The appropriation proposals are subject to a resolution of the shareholders' meeting in the following year.Note 4: Not yet distributed.

Financial Overview


77

(III) Condensed income statement - IFRSs - Tatung And SubsidiariesUnit: NT$ Thousand

YearItemMost Recent 5-year Financial Information

2013 2014 2015 2016 2017

Operating revenue 112,926,870 112,609,278 84,719,184 77,677,625 75,553,009

Realized Gross profit 12,278,166 15,884,074 4,939,189 10,586,566 11,817,697

Income from operations (3,766,105) (733,880) (9,558,471) (2,871,649) 1,087,062

Non-operating income and expenses (1,178,070) (1,671,284) (524,399) 665,162 1,622,968

Loss before income tax (4,944,175) (2,405,164) (10,082,870) (2,206,487) 2,710,030

Net loss from operations of continued segments (5,319,552) (2,987,049) (11,211,037) (3,506,254) 2,049,756

Income from discontinued departments - - 416,518 (33,648) 69,498

Net loss (5,319,552) (2,987,049) (10,794,519) (3,539,902) 2,119,254

Other comprehensive income (net of tax) 830,492 2,363,644 (1,333,044) (4,101,612) (1,242,123)

Total comprehensive income (4,489,060) (623,405) (12,127,563) (7,641,514) 877,131

Net loss attribute to equity attributable to owners of parent (1,611,408) 363,539 (3,075,015) (2,343,945) 74,070

Net loss attribute to non controlling interest (3,708,144) (3,350,588) (7,719,504) (1,195,957) 2,045,184

Total comprehensive income attribute to equity attributable to owners of parent (1,364,192) 1,288,947 (3,750,958) (2,765,124) (49,388)

Total comprehensive income attribute to non controlling interest (3,124,868) (1,912,352) (8,376,605) (4,876,390) 926,519

Loss per share (Note 2) (0.70) 0.16 (1.35) (1.03) 0.03

Note 1: The Company's financial statements for the two years have been duly audited by independent auditors. Since 2013 use IFRSs.Note 2: All information of the earnings per share for the previous years is calculated on a fully diluted basis. Note 3: The financial statements for Q1 of 2018 were under review by independent auditors when this annual report is printed.Note 4: The Income (loss) from discontinued departments is shown by the net amount after deducting the income tax.

Financial Overview


78

(IV) Condensed income statement - IFRSs - TatungUnit: NT$ Thousand

YearItemMost Recent 5-year Financial Information

2013 2014 2015 2016 2017

Operating revenue 24,087,818 21,295,466 18,151,104 17,259,632 17,482,835

Realized Gross profit 2,394,002 1,846,739 1,581,503 2,404,376 2,164,903

Income from operations (257,408) (874,725) (966,334) (51,462) (177,326)

Non-operating income and expenses (1,490,473) 1,209,308 (2,107,282) (2,363,313) 214,721

Loss before income tax (1,747,881) 334,583 (3,073,616) (2,414,775) 37,395

Net loss from operations of continued segments (1,611,408) 363,539 (3,075,015) (2,343,945) 74,070

Income from discontinued departments - - - - -

Net loss (1,611,408) 363,539 (3,075,015) (2,343,945) 74,070

Other comprehensive income (net of tax) 247,216 925,408 (675,943) (421,179) (123,458)

Total comprehensive income (1,364,192) 1,288,947 (3,750,958) (2,765,124) (49,388)

Net loss attribute to equity attributable to owners of parent (1,611,408) 363,539 (3,075,015) (2,343,945) 74,070

Net loss attribute to non controlling interest - - - - -

Total comprehensive income attribute to equity attributable to owners of parent (1,364,192) 1,288,947 (3,750,958) (2,765,124) (49,388)

Total comprehensive income attribute to non controlling interest - - - - -

Loss per share(Note 2) (0.70) 0.16 (1.35) (1.03) 0.03

Note 1: The Company's financial statements for the two years have been duly audited by independent auditors. Since 2013 use IFRSs.Note 2: All information of the earnings per share for the previous years is calculated on a fully diluted basis.

(V) Auditors’ opinions from 2013 to 2017:

Year Firm CPA Opinion

2013 Ernst & Young Su-Wen Lin An unqualified opinion with

explanatoryLan-Ching Chang





2016 Ernst & Young Su-Wen Lin Unmodified opinion and

other matters paragraphHsuan-Hsuan, Wang

2017 Ernst & Young Su-Wen Lin Unmodified opinion and

other matters paragraphHsuan-Hsuan, Wang

Financial Overview


79

Financial analysisFinancial analysis - IFRSs - Tatung And Subsidiaries

YearItem (Note 2)

Most Recent 5-year Financial Information2013 2014 2015 2016 2017

Financial structure (%)

Debt ratio 69.43 71.07 75.78 63.98 62.91

Long-term funds to Property, plant and equipment ratio 104.32 139.23 125.84 189.21 145.41

Liquidity Analysis (%)

Current ratio 74.91 91.69 83.6 126.27 100.42

Quick ratio 49.9 63.51 62.16 107.93 78.03

Times interest earned - 0.33 - 0.48 1.77

Operating performance

Average collection turnover (times) 6.61 6.04 5.3 6.63 7.73

Days sales outstanding 55 60 69 55 47

Average inventory turnover (times) 4.44 4.41 3.91 3.72 3.87

Average payment turnover (times) 4.72 4.38 4.04 4.28 4.55

Average inventory turnover days 82 82 93 98 94

Property, plant and equipment turnover (times) 1.15 1.25 1.03 1.04 0.9

Total assets turnover (times) 0.55 0.54 0.41 0.35 0.32

Profitability

Return on total assets (%) (1.31) 0.00 (3.49) 0.01 2.20

Return on equity (%) (8.50) (4.81) (19.49) (5.25) 2.48

Incom before tax Percentage to paid-in capital (%) (21.13) (10.28) (43.10) (9.43) 11.58

Net margin (%) (4.71) (2.65) (12.74) (4.56) 2.71

Earnings per share (NT$) (0.70) 0.16 (1.35) (1.03) 0.03

Cash flow

Cash flow ratio (%) 5.53 6.19 1.00 4.07 10.30

Cash flow adequacy ratio (%) 42.78 59.49 43.74 61.46 38.36

Cash flow reinvestment ratio (%) 2.03 1.93 0.36 1.30 2.32

LeverageOperating leverage (25.15) (130.80) (7.72) (23.82) 61.64

Financial leverage 0.54 0.17 0.69 0.40 (0.43)Note 1: Other financial reports have been audited by certified public accountants. Due to the use of IFRS in 2013.Note 2: Formulas for the above table are specified as follows:

1. Capital structure analysis(1) Debts ratio = Total liabilities / Total assets(2) Long-term funds to Property, plant and equipment,

net = (Shareholders’ equity + long-term liabilities) / Net Property, plant and equipment

2. Liquidity analysis (1) Current ratio = Current assets / Current liabilities(2) Q u i c k ra t i o = (Cu r re nt a s s et s - i nve nto r i e s -

prepayment) / Current liabilities (3) Times interest earned = Earnings before interest and

taxes / Interest expenses 3. Operating performance analysis

(1) Average col lection turnover (including account receivables and notes receivables from operation) = Net sales / Average trade receivables (including accounts receivables and notes receivables from operation)

(2) Days sales outstanding = 365 / Average collection turnover

(3) Average inventory turnover = Cost of sales / Average inventory

(4) Average payment turnover ( including account payables and notes payables from operation) = Cost of sales / Average trade payables (including account payables and notes payables from operation)

(5) Average inventory turnover days = 365 / Average inventory turnover

(6) Property, plant and equipment turnover = Net sales / Property, plant and equipment net.

(7) Total assets turnover = Net sales / Total assets

4. Profitability analysis(1) Return on total assets = [Net income + interest

expenses * (1 – effective tax rate)] / Average total assets

(2) R e t u r n o n e q u i t y = N e t i n c o m e / Av e r a g e shareholders’ equity

(3) Percentage to paid-in capital ~ operating income = Operating income / Paid-in capital

(4) Percentage to paid-in capital ~ income before tax = Income before tax / Paid-in capital

(5) Net margin = Net income / Net sales(6) Earnings per share = (Net income - preferred stock

dividends) / Weighted average number of shares outstanding

5. Cash flow(1) Cash flow ratio = Net cash from operating activities /

Current liabilities(2) Cash f low adequacy rat io = F ive -year sum of

cash f rom operat ion / F ive-year sum of capital expenditures, inventory additions, and cash dividends

(3) Cash flow reinvestment ratio = (Cash from operating activities - cash dividends) / (Gross fixed assets + long-term investment + other assets + working capital)

6. Leverage(1) Operating leverage = (Net sales – variable costs +

expenses) / Operating income (2) Financial leverage = Operating income / (Operating

income - interest expenses)

Financial Overview


80

Financial analysis - IFRSs - TatungYear

Item (Note 2)Most Recent 5-year Financial Information

2013 2014 2015 2016 2017

Financial structure (%)

Debt ratio 54.34 51.89 55.74 58.23 59.10

Long-term funds to Property, plant and equipment ratio 2,375.15 2,072.04 1,790.01 1,633.00 1,387.41

Liquidity Analysis (%)

Current ratio 95.72 110.70 119.13 144.19 160.85

Quick ratio 74.87 78.89 88.51 109.40 120.33

Times interest earned - 1.46 - - 1.05

Operatingperformance

Average collection turnover (times) 3.13 2.81 2.76 3.30 3.56

Days sales outstanding 117 129 132 111 103

Average inventory turnover (times) 4.69 4.57 3.95 3.76 3.94

Average payment turnover (times) 4.73 4.22 4.17 4.97 5.37

Average inventory turnover days 78 80 92 97 93

Property, plant and equipment turnover (times) 10.97 8.77 6.30 5.16 4.36

Total assets turnover (times) 0.33 0.30 0.26 0.25 0.25

Profitability

Return on total assets (%) (1.11) 1.34 (3.67) (2.52) 0.95

Return on equity (%) (4.80) 1.07 (9.47) (7.78) 0.25

Incom before tax Percentage to paid-in capital (%) (7.47) 1.43 (13.14) (10.32) 0.16

Net margin (%) (6.69) 1.71 (16.94) (13.58) 0.42

Earnings per share (NT$) (0.70) 0.16 (1.35) (1.03) 0.03

Cash flow

Cash flow ratio (%) 14.20 7.02 9.42 7.77 (0.98)

Cash flow adequacy ratio (%) 298.62 230.49 209.30 164.24 64.62

Cash flow reinvestment ratio (%) 5.52 1.83 2.33 1.46 (0.15)

LeverageOperating leverage (74.50) (18.94) (17.28) (309.53) (91.76)

Financial leverage 0.21 0.55 0.62 0.07 0.20

Note 1: Other financial reports have been audited by certified public accountants. Since 2013 use IFRSs.Note 2: Formulas for the above table are specified as follows:

1. Capital structure analysis(1) Debts ratio = Total liabilities / Total assets(2) Long-term funds to Property, plant and equipment,

net = (Shareholders’ equity + long-term liabilities) / Net Property, plant and equipment

2. Liquidity analysis (1) Current ratio = Current assets / Current liabilities(2) Q u i c k ra t i o = (Cu r re nt a s s et s - i nve nto r i e s -

prepayment) / Current liabilities (3) Times interest earned = Earnings before interest and

taxes / Interest expenses 3. Operating performance analysis

(1) Average col lection turnover (including account receivables and notes receivables from operation) = Net sales / Average trade receivables (including accounts receivables and notes receivables from operation)

(2) Days sales outstanding = 365 / Average collection turnover

(3) Average inventory turnover = Cost of sales / Average inventory

(4) Average payment turnover ( including account payables and notes payables from operation) = Cost of sales / Average trade payables (including account payables and notes payables from operation)

(5) Average inventory turnover days = 365 / Average inventory turnover

(6) Property, plant and equipment turnover = Net sales / Property, plant and equipment net.

(7) Total assets turnover = Net sales / Total assets4. Profitability analysis

(1) Return on total assets = [Net income + interest expenses * (1 – effective tax rate)] / Average total assets

(2) R e t u r n o n e q u i t y = N e t i n c o m e / Av e r a g e shareholders’ equity

(3) Percentage to paid-in capital ~ operating income = Operating income / Paid-in capital

(4) Percentage to paid-in capital ~ income before tax = Income before tax / Paid-in capital

(5) Net margin = Net income / Net sales(6) Earnings per share = (Net income - preferred stock

dividends) / Weighted average number of shares outstanding

5. Cash flow(1) Cash flow ratio = Net cash from operating activities /

Current liabilities(2) Cash f low adequacy rat io = F ive -year sum of

cash f rom operat ion / F ive-year sum of capital expenditures, inventory additions, and cash dividends

(3) Cash flow reinvestment ratio = (Cash from operating activities - cash dividends) / (Gross fixed assets + long-term investment + other assets + working capital)

6. Leverage(1) Operating leverage = (Net sales – variable costs +

expenses) / Operating income (2) Financial leverage = Operating income / (Operating

income - interest expenses)

Financial Overview


81

Audit Committee's review reportThe Board of Directors has prepared and submitted the Company’s 2017 Business Report, Financial Statements (including Consolidated Financial Statements), and loss make-up proposal. The CPA firm, Ernst & Young, has audited the Financial Statements and issued an audit opinion report. We, the Audit Committee, has agreed upon the CPA’s audit opinion, and duly reviewed the Business Report and loss make-up proposal. We hereby submit this report according to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

Sincerely,To Tatung Co. 2018 Annual General Shareholders’ Meeting

The convener of the Audit Committee15th March, 2018

Consolidated statements and report of Independent Auditor : Please refer to Page 103~272. Parent company only statements and report of Independent Auditor: Please refer to Page 273~376.

Occurrence of financial difficulties: None.

Analysis on Financia Status and Financial Performance and Risk as Sessment


82

Financial statusUnit: NT$ Thousand

YearItem 2017 2016 Difference

Amount %

Current assets 89,234,024 130,165,281 (40,931,257) (31.45)

Non-current assets 139,347,334 108,234,072 31,113,262 28.75

Total assets 228,581,358 238,399,353 (9,817,995) (4.12)

Current liabilities 88,860,214 103,081,497 (14,221,283) (13.80)

Non-current liabilities 54,949,285 49,434,531 5,514,754 11.16

Total liabilities 143,809,499 152,516,028 (8,706,529) (5.71)

Capital stock 23,395,367 23,395,367 0 0.00

Capital surplus 3,273,505 2,864,841 408,664 14.26

Retained earnings 4,508,365 4,808,065 (299,700) (6.23)

Other equities (502,065) (371,104) (130,961) 35.29

Treasury stock (1,629,899) (1,056,865) (573,034) (54.22)

Non-controlling interests 55,726,586 56,243,021 (516,435) (0.92)

Total shareholders’ equity 84,771,859 85,883,325 (1,111,466) (1.29)

Analysis of deviation over 20% and exceeding NT$10 million:1. Current assets: The change from current assets were resulted from the following points: The company’s consolidated party:

Chunghwa Picture Tubes,Group has a newly-built plant and acquisition of additional equipment this year. The company also dispose its financial products, previously booked in the current asset, and Giantplus Technology Co., Ltd. The points above resulted in a decrease in current asset for the year ended 2017 compare to the year ended 2016.

2. Non-current assets: The change in non-current assets were mainly due to the increase in the acquisition of equipment of its subsidiaries. Also the ending balance for tax credits in this fiscal year has increased compares to 2016.

3. Other Equity: The main reason for the decrease in the ending balance for other equity in 2017, comparing to 2016, was due to the fluctuations in the exchange rate and the fair value of the securities held by the company in the year of 2017.

4. Treasury stocks: The treasury stocks increased in 2017 which was mainly caused by the increase in the stocks, of the parent company, held by subsidiaries.

Analysis on Financia Status and Financial Performanceand Risk as Sessment


83

Financial performanceUnit: NT$ Thousand

YearItem

2017 2016Difference Percentage

(%)Subtotal Total Subtotal Total

Sales revenue 76,681,558 78,886,924 (2,205,366) (2.80)

Less: sales returns 576,762 813,288 (236,526) (29.08)

Sale allowances 551,787 396,011 155,776 39.34

Net sales revenues 75,553,009 77,677,625 (2,124,616) (2.74)

Cost of goods sold 63,735,312 67,091,059 (3,355,747) (5.00)

Gross profits 11,817,697 10,586,566 1,231,131 11.63

Operating expenses 12,895,065 13,458,215 (563,150) (4.18)

Net other Income 2,164,430 0 2,164,430 100.00

Operating profits (losses) 1,087,062 (2,871,649) 3,958,711 137.85

Non-operating income and expense 1,622,968 665,162 957,806 (144.00)

Loss from continuing operating units before income tax 2,710,030 (2,206,487) 4,916,517 222.82

Income tax 660,274 1,299,767 (639,493) 49.20

Net loss from continuing operations 2,049,756 (3,506,254) 5,556,010 158.46

Income(Loss) from discontinued departments 69,498 (33,648) 103,146 306.54

Net loss 2,119,254 (3,539,902) 5,659,156 159.87

Other comprehensive income (loss), net of income tax (1,242,123) (4,101,612) 2,859,489 (69.72)

Total comprehensive loss 877,131 (7,641,514) 8,518,645 111.48

Footnote:1. Net operating income: The net operating income increased in 2017. Because the subsidiaries improved their operations and

successfully cut cost and expense.2. Net other income: The net other income increased in 2017.Because the government grants were mainly from the Putian City

People’s Government’s high-end, new technology panel project grant acquired by the subsidiary of CPT.3. Non-operating income and expenditures: The increase in non-operating income and expenditure was caused by the

disposal of subsidiaries’ property, plant and equipment.4. Continuing operations’ pre-tax net profit (loss): The main reason is that the company's subsidiary, consolidated in the

consolidated financial statements for the year of 2017, resulted a profit from reduced their costs and expenses, and disposal of the land, buildings and equipment.

5. Income tax expense: During 2017, the temporary differences in income tax and the reversal of the deferred income tax expenses in the subsidiaries, had caused the decrease in the income tax expense.

6. Continuing operations’ net profit (loss) after tax, and net profit (loss): The change was caused by the pretax income for the fiscal year 2017 and the decrease in income tax expense.

7. Profit (loss) from the discontinued operations: The change was caused by a consolidated subsidiary which transferred its investment into discontinued unit and therefore reduced its loss.

8. Other comprehensive (loss) income (net of tax): The change was mainly caused by the fluctuations in the exchange rate and the fair value of securities held by the company during2017. The other comprehensive losses in the current period decreased compared to 2016.

9. Comprehensive (loss) income: For the year ended 2017, the company turns the net loss in 2016 into a net profit. In addition, the other comprehensive loss (net of tax) in 2017 decreased comparing to 2016 which results in a significant increase in the total comprehensive benefit.

Note: If the difference does not exceed 20%, the analysis is not required.



84

Cash flowUnit: NT$ Thousand

Balance of cash-beginning(1)

Net cash flow from operating activities in

the year(2)

Net cash flow from investing and

financing activities in the year (3)

Remaining (Shortfall) of cash (1)+(2)+(3)

Measures for covering the shortfall of cash

Investment plan Financing plan

46,521,400 9,152,671 (23,693,795) 31,980,276 - -

1. Analysis of change in cash flow in the current year:(1) Operating activities: Net cash inflow from operating activities in 2016 was NT$4,200,411 thousand. Net cash inflow from operating

activities in 2017 was NT$9,152,671 thousand. The net inflow from operating activities in 2017 was the result of better net income than that of 2016 .

(2) Investing activities: Net cash outflow from investing activities in 2016 was NT$34,538,143 thousand. Net cash outflow from investing activities in 2017 was NT$19,496,356 thousand. The net cash outflow from investing activities in 2017 was more than that of 2016 in disposal of financial assets at fair value through profit or loss, and acquisitions of the bond investment within the inactive market.

(3) Financing activities: Net cash inflow from financing activities in 2016 was NT$50,257,136 thousand. Net cash outflow from financing activities in 2017 was NT$3,081,805 thousand. The net cash outflow from financing activities in 2017 was the result of decreasing in non-controlling interest than that of 2016.

2. Measures for covering the shortfall of cash: Not applicable3. Analysis of cash flow for the coming year:

Unit: NT$ Thousand

Balance of cash-beginning(1)

Net cash flow from operating activities in

the year(2)

Net cash flow from investing and

financing activities in the year (3)

Remaining (Shortfall) of cash (1)+(2)+(3)

Measures for covering the shortfall of cash

Investment plan Financing plan

31,980,276 4,836,530 (9,512,278) 27,304,528 - -

Impacts of major capital expenditures on financial position and operations: None.

Long-term investment policy, main reasons for profits or losses, improvement plans and the investment plan for the coming year: The main investment strategy at company is energy conservation and service industry oriented. In addition, the Company focus on energy saving, healthcare, and green energy fields. The Company positively coordinates with overseas sales in expanding and developing the brand to main objective. In the future, the effect of investment proposal will be evaluated seriously by investment review committee. After that, it will be preceded. Finally, it will create the core value of the Company and all shareholders.



85

Risk assessment and analysis(I) Structure of risk management:

Risk management Bodies in charge Responsibilities

Strategy & operation risk

1. Board of Directors2. H igh - leve l management (Cha i r man,

president)3. Management of each plant and division

(General manager, director, and center manager)

1. Stipulation & implementation of management policies

2. Assessment & analysis of operation performance

Market risk Sales unit of each plant and division Business & sales promotion as well as market research and evaluation

Financial & Liquidity risk Finance & Accounting Division Final accounting of cost, funds allocation and control, and hedging of interest and exchange rates

Legal risk Legal Division Process of litigation and non-litigation cases

(II) Impact of interest rate and exchange rate fluctuations and inflation on the Company’s earnings and countermeasures:1. Interest rate:

(1) Derivatives can been used as a hedge against interest rate fluctuations for the Company’s long-term debts.(2) When considering mid to long-term bond issues, the Company carefully sets its target interest rate to lower its interest

rate risks as much as possible. For example, the Company’s offshore exchangeable corporate bond issue offers a fixed interest rate, while its domestic secured convertible bond offers a zero coupon rate.

2. Exchange rate:The Company has a natural hedge against currency fluctuation as its business involves imports and exports. It also utilizes derivatives to hedge the remainder of its foreign exchange position that is exposed to currency exchange risks. The management of risks involving such derivatives are set forth in the Company’s "Operational Procedures for Derivatives Treading." The Company also has an internal control system to supervise the loss limit of foreign currency transactions.

3. Inflation:Inflation in the past year had no adverse impact on the Company’s operations and profitability.

(III) Investment policy and reasons for gains and losses on high-risk and high - leverage investments, loans to a third party, derivative trades, and countermeasures:The Company engages in derivative trades, such as operational hedging of foreign exchange, for the sole purpose of lowering its financial risk and conducts all transactions in accordance with the Company’s internal control procedure.

(IV) R&D plans, development, expenditure, commercialization, and factors to success:The Company sets aside 3% of annual sales for investment in R&D to develop new products, technologies and markets to better serve customers around the world. The Company will continue to closely follow the progress, development and results of its various development projects.

(V) Major changes in domestic and foreign government policies and laws which may impact on the financial position and operation of the Company, and countermeasures:The Company carefully monitors any changes in local and foreign policies and makes appropriate adjustments in the Company’s internal control system and operations when necessary.The Company’s R&D units and financial department continues to avail of and seek various investment incentives, such as tax credit, granted by the Ministry of Economic Affairs and other government agencies.



86

(VI) Impact of changes in technologies on the financial position and operation of the Company, and countermeasures:1. With the mass demand for energy efficiency & carbon reduction technique to cope with global warming, Power Equipment

Business Unit and Smart Solution Business Unit of the Company have developed deep technical foundation, kept putting efforts on research & development, and expanded the business of key products as well as system aggressively in smart grid to ensure its technology and market leading position in domestic electricity generation, power transmission & distribution and energy management. The Company marches into oversea market and aims at the energy technology industry leader.

2. With the trend of energy efficiency and carbon reduction, Home Appliance Business Unit has strived to carry on fine tradition, and reinforced to develop high-quality green home appliances with health, environment protection, energy-saving and high efficiency concepts to increase the sales performance and profit.

3. With the advent of the digital era, the Company is aggressively pursuing R&D, production and marketing of products that integrate information, communications and home appliance functions to cater to the demand of the digital-age family.

4. The Company’s focus is on developing visual products, such as LCD TVs and LCD monitors, which offer bright market prospects.

5. With the coming of age of personal high-frequency radio communication, the Company is actively exploring opportunities in 4th generation wireless communications business.

(VII) Impact by changes of corporate image on the Company’s risk management policies, and countermeasures:The Company was founded on philosophy that emphasizes "integrity, honesty, industry and frugality." These four core values are strictly followed by each and every individual in the Company and have won public recognition. The Company will strive to carry on this tradition, while, actively pursue new ideas to ensure better corporate governance.The Company has also appointed a special task force to respond to unforeseen situations in order to reduce uncertainties and ensure smooth business operations.

(VIII) Expected benefits and potential risks from mergers and acquisitions and countermeasures:The Company has no ongoing merger and acquisition activities. In considering future M&As, the Company will evaluate their efficiency, risks, vertical integration and other factors in accordance with its internal control system.

(IX) Expected benefits and risks related to plant expansion and countermeasures:Any expansion of the Company’s facilities shall be subject to careful evaluation by a special task force in accordance with the Company’s internal control system.

(X) Risk from concentration of purchase or sales, and countermeasures:The Company will arrange for alternative sources for purchase, and will diversify its customer base in order to reduce the concentration of sales.

(XI) Risk from major transfer or swap of stocks by Tatung’s directors or major shareholders with over 10% of Tatung’s total outstanding shares, and countermeasures:The shareholdings of the Company’s directors have been stable during the past years, and there was no major transfer or swap of stocks.

(XII) Risk from the change in management of the Company, and countermeasures:The Company has a strong and stable management team, and there is no risk from the change in the management of the Company.

(XIII) Major litigations, non-contentious matters or administrative actions, concluded or pending, involving any of the directors, presidents, responsible persons in fact , shareholders holdings more than 10% of the outstanding shares and subsidiaries, the result of which may significantly affect shareholders’ equity or the stock price of the Company. Disclosure shall be made with the facts in dispute, course of action, commencing date of the legal proceeding, principal litigants and the status up to the publication date of the annual report:As for Tong-Da Case with respect to the Former Chairman Lin (Lin hereafter), The Supreme Court revoked Taiwan High Court’s decision on Dec. 7, 2015, and the case was remanded to Taiwan High Court. Taiwan High Court has sentenced Lin to



87

imprisonment and fine, Lin has filed an appeal to the Supreme Court, the High Court has affirmed the referral of the case.The Securities and Futures Investors Protection Center (SFIPC hereafter) filed suit against Lin seeking compensation for the loss in Taiwan High Court. According to the court decision, Lin has to pay back the company 1.9 billion NT dollars plus interest. Lin authorized his lawyer to appeal to the Supreme Court, the Supreme Court reversed the original judgement and remanded the case to the original court for retrial.As for SFIPC filing suit to remove Lin from the board, the original district court and high court ruled that the SFIPC's lawsuit was groundless, and decided against the SFIPC. Whereas, on Jul. 10, 2017, the Supreme Court rescinded the original judgement and remanded the case to the original court for retrial. On Feb. 21, 2018, SFIPC filed for permission of Taiwan High Court to withdraw the suit. The litigation procedure of this case ended, for Lin had resigned from the board of the Company on Feb. 1, 2018.The Company remains in normal operation, and is not affected by the litigation.

(XIV) Other major risks, and countermeasures: None.

Other significant matters: None.

Special Disclosures


88

Information on Investees(I) List of investees

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Special Disclosures


89

(II) Shareholdings, profile and operating highlights of investeesAs of 31 December 2017 Unit: NT$ Thousand

Name of investees Long-term investment Indirect investment Total consolidated shareholdings Date of

incorporation Address Main business or products Capital Total assets Total liabilities Net worth Sales

revenueOperating

income Net income EPS

Share(s) % Share(s) % Share(s) % (Note 1) (Note 2)

Chunghwa PictureTubes, Ltd.

1,850,745,168 28.56 822,277,654 12.69 2,673,022,822 41.25 May, 1971 No.1, HuayingRoad, Longtan Dist., Taoyuan City

Manufacturing and selling CRT tubes and TFT-LCD

64,794,542 47,942,868 33,763,805 14,179,063 28,913,545 877,659 2,985,583 0.46

Tatung SystemTechnologies Inc.

36,018,121 53.60 540,621 0.80 36,558,742 54.40 May, 2000 22, Chungshan North Road, Sec.3, Taipei

Providing computer software/hardware services, voice/networking equipment and system integration

672,000 1,785,225 772,550 1,012,675 3,005,967 121,106 117,289 1.75


18,955,623 12.05 45,122,880 28.70 64,078,503 40.75 August, 1970

22, Chungshan North Road, Sec.3, Taipei

Manufacturing and selling of backlight modules, switches, potentiometers, encoders, wireless devices and LED lightings.

1,572,572 3,513,955 1,919,121 1,594,834 615,924 -100,099 6,595 0.04

Shan Chih Semiconductor Co., Ltd.

49,913,576 43.18 17,362,651 15.02 67,276,227 58.20 July, 1995 22, Chungshan North Road, Sec.3, Taipei

Manufacturing and selling of the materials of semiconductors

1,155,973 2,659,605 472,073 2,187,532 338,025 -19,037 -309,289 -2.68

Green Energy Technology Inc., Ltd.

19,723,865 4.55 149,741,993 34.50 169,465,858 39.05 June, 2004 22, Chungshan North Road, Sec.3, Taipei

Manufacturing and selling of solar photovoltaic multicrystalline silicon wafers

4,339,853 15,001,778 10,129,345 4,872,433 9,320,571 -535,832 -619,139 -1.43

Central Research Technology Co., Ltd.

6,612,155 100.00 - - 6,612,155 100.00 August, 1997


Offering EMC/RF testing and certification services

66,122 69,648 14,927 54,721 57,895 265 221 0.03


49,650,000 99.10 - - 49,650,000 99.10 October, 2000


Sales, installation, and service of home appliances and digital consumer products

501,000 1,597,822 2,611,211 -1,013,389 5,864,936 -222,445 -217,431 -4.34

Tatung SM-CYCLO Co., Ltd.

6,400,000 85.33 - - 6,400,000 85.33 April, 1996 22, Chungshan North Road, Sec.3, Taipei

Designing, manufacturing and selling of speed reducers and speed variators

75,000 291,568 97,356 194,212 318,790 56,866 47,504 6.33


37,458,319 48.27 4,935,497 6.36 42,393,816 54.63 March, 1980 22, Chungshan North Road, Sec.3, Taipei

Industrial coatings, electroposition coatings, resistor coatings, photocatalyst, ink, Jet ink ABS plastic, color dyes

775,960 665,934 286,345 379,589 280,160 -41,643 15,758 0.20


5,220,064 100.00 - - 5,220,064 100.00 June, 1966 22, Chungshan North Road, Sec.3, Taipei

Development of real estate 5,220,064 42,860,849 9,575,203 33,285,646 862,480 100,491 1,019,744 195.35


262,626,267 93.27 18,946,832 6.73 281,573,099 100.00 February, 1970


Business investment 2,815,737 2,745,790 1,437,439 1,308,351 - -5,302 46,321 0.16

Tatung Die Casting Co., Ltd.

153,000 51.00 - - 153,000 51.00 November, 1971


Die casting mould and parts 30,000 218,960 117,397 101,563 360,754 26,571 18,253 60.84


32,174,366 95.33 - - 32,174,366 95.33 July , 2004 4F, No.136, Sec. 3, Ren’ai Road, Da’an Dist., Taipei

Medical healthcare information system integration development services. Design and trade of medical treatment facilities

337,513 327,763 131,081 196,682 181,466 -30,171 -31,760 -0.94

Toes Opto- Mechatronics Co., Ltd.

17,000,000 85.00 - - 17,000,000 85.00 May, 2004 22, Chungshan North Road, Sec.3, Taipei

Designing and manufacturing of various automatic equipment

200,000 245,848 165,125 80,723 221,710 7,874 5,384 0.27


77,627,119 95.83 3,376,213 4.17 81,003,332 100.00 November,1990


Business Investment 810,033 583,085 22,556 560,529 - -12,314 78,667 0.97


150,000,000 100.00 - - 150,000,000 100.00 June, 2008 No.160, Sec. 1, Fuxing South Road, Taipei

Business Investment 1,500,000 798,406 150,395 648,011 - -3,315 -80,222 -0.53


25,623,000 98.55 - - 25,623,000 98.55 February,2015

No.160, Sec. 1, FuxingSouth Road, Taipei

Solar power business 260,000 277,133 15,623 261,510 148,167 1,940 3,214 0.12


15,000,000 100.00 - - 15,000,000 100.00 November,2017


Solar power business 150,000 149,741 63 149,678 - -348 -322 -0.02

Special Disclosures


90

(II) Shareholdings, profile and operating highlights of investeesAs of 31 December 2017 Unit: NT$ Thousand



revenueOperating



Chunghwa PictureTubes, Ltd.

1,850,745,168 28.56 822,277,654 12.69 2,673,022,822 41.25 May, 1971 No.1, HuayingRoad, Longtan Dist., Taoyuan City

Manufacturing and selling CRT tubes and TFT-LCD

64,794,542 47,942,868 33,763,805 14,179,063 28,913,545 877,659 2,985,583 0.46

Tatung SystemTechnologies Inc.

36,018,121 53.60 540,621 0.80 36,558,742 54.40 May, 2000 22, Chungshan North Road, Sec.3, Taipei

Providing computer software/hardware services, voice/networking equipment and system integration

672,000 1,785,225 772,550 1,012,675 3,005,967 121,106 117,289 1.75


18,955,623 12.05 45,122,880 28.70 64,078,503 40.75 August, 1970


Manufacturing and selling of backlight modules, switches, potentiometers, encoders, wireless devices and LED lightings.

1,572,572 3,513,955 1,919,121 1,594,834 615,924 -100,099 6,595 0.04


49,913,576 43.18 17,362,651 15.02 67,276,227 58.20 July, 1995 22, Chungshan North Road, Sec.3, Taipei

Manufacturing and selling of the materials of semiconductors

1,155,973 2,659,605 472,073 2,187,532 338,025 -19,037 -309,289 -2.68

Green Energy Technology Inc., Ltd.

19,723,865 4.55 149,741,993 34.50 169,465,858 39.05 June, 2004 22, Chungshan North Road, Sec.3, Taipei

Manufacturing and selling of solar photovoltaic multicrystalline silicon wafers

4,339,853 15,001,778 10,129,345 4,872,433 9,320,571 -535,832 -619,139 -1.43


6,612,155 100.00 - - 6,612,155 100.00 August, 1997


Offering EMC/RF testing and certification services

66,122 69,648 14,927 54,721 57,895 265 221 0.03


49,650,000 99.10 - - 49,650,000 99.10 October, 2000


Sales, installation, and service of home appliances and digital consumer products

501,000 1,597,822 2,611,211 -1,013,389 5,864,936 -222,445 -217,431 -4.34

Tatung SM-CYCLO Co., Ltd.

6,400,000 85.33 - - 6,400,000 85.33 April, 1996 22, Chungshan North Road, Sec.3, Taipei

Designing, manufacturing and selling of speed reducers and speed variators

75,000 291,568 97,356 194,212 318,790 56,866 47,504 6.33


37,458,319 48.27 4,935,497 6.36 42,393,816 54.63 March, 1980 22, Chungshan North Road, Sec.3, Taipei

Industrial coatings, electroposition coatings, resistor coatings, photocatalyst, ink, Jet ink ABS plastic, color dyes

775,960 665,934 286,345 379,589 280,160 -41,643 15,758 0.20


5,220,064 100.00 - - 5,220,064 100.00 June, 1966 22, Chungshan North Road, Sec.3, Taipei

Development of real estate 5,220,064 42,860,849 9,575,203 33,285,646 862,480 100,491 1,019,744 195.35


262,626,267 93.27 18,946,832 6.73 281,573,099 100.00 February, 1970


Business investment 2,815,737 2,745,790 1,437,439 1,308,351 - -5,302 46,321 0.16

Tatung Die Casting Co., Ltd.

153,000 51.00 - - 153,000 51.00 November, 1971


Die casting mould and parts 30,000 218,960 117,397 101,563 360,754 26,571 18,253 60.84


32,174,366 95.33 - - 32,174,366 95.33 July , 2004 4F, No.136, Sec. 3, Ren’ai Road, Da’an Dist., Taipei

Medical healthcare information system integration development services. Design and trade of medical treatment facilities

337,513 327,763 131,081 196,682 181,466 -30,171 -31,760 -0.94

Toes Opto- Mechatronics Co., Ltd.

17,000,000 85.00 - - 17,000,000 85.00 May, 2004 22, Chungshan North Road, Sec.3, Taipei

Designing and manufacturing of various automatic equipment

200,000 245,848 165,125 80,723 221,710 7,874 5,384 0.27


77,627,119 95.83 3,376,213 4.17 81,003,332 100.00 November,1990


Business Investment 810,033 583,085 22,556 560,529 - -12,314 78,667 0.97


150,000,000 100.00 - - 150,000,000 100.00 June, 2008 No.160, Sec. 1, Fuxing South Road, Taipei

Business Investment 1,500,000 798,406 150,395 648,011 - -3,315 -80,222 -0.53


25,623,000 98.55 - - 25,623,000 98.55 February,2015


Solar power business 260,000 277,133 15,623 261,510 148,167 1,940 3,214 0.12


15,000,000 100.00 - - 15,000,000 100.00 November,2017


Solar power business 150,000 149,741 63 149,678 - -348 -322 -0.02

Special Disclosures


91

As of 31 December 2017 Unit: NT$ Thousand



revenueOperating



Tatung (Thailand) Co., Ltd.

97,400,000 92.23 8,200,000 7.77 105,600,000 100.00 October, 1989

Amata Nakorn, Industrial Estate. Bangna-Trad Road, KM.57, 700/50,52,54, Moo 6, T. Nongmaidang, A.Muang, Chonburi 20000, Thailand

EMS, Industrial Appliances, Wire and Cable, Electronics and Home Appliances, Air Conditioning product, Smart Meter, Solar Module, LED TV, LED lighting product assembly

940,289 543,300 90,584 452,716 177,318 -51,144 18,431 0.17

Tatung Company of Japan, Inc.

15,000 100.00 - - 15,000 100.00 August, 1975 4F, VORT Suehirocho, 6-14-7, Soto-Kanda, Chiyoda-Ku, Tokyo, 101-0021, Japan

Sale and service of equipment and instruments, materials, electronics, home appliances and IT products

1,903 2,280,600 1,640,795 639,805 3,149,029 103,068 55,202 3,680.11

Tatung Electronics (Singapore) Pte. Ltd.

3,600,000 90.00 - - 3,600,000 90.00 September, 1972

8 Boon Lay Way #02-14, TradeHub21, Singapore 609964

Sale and service of materials and parts

63,846 133,115 26,657 106,458 68,436 -8,468 -11,224 -2.81


86,049,842 100.00 - - 86,049,842 100.00 December, 1999

50, Raffles Place #32-01 Singapore Land Tower, Singapore 048623

Business Investment 1,499,755 364,837 260 364,577 - -384 -608 -0.01


33,098,675 100.00 - - 33,098,675 100.00 April, 1998 50, Raffles Place #32-01 Singapore Land Tower, Singapore 048623

Business Investment 610,080 611,490 409 611,081 - -272 -70,884 -2.14

Tatung Co. of America, Inc.

1,750,000 50.00 - - 1,750,000 50.00 September, 1972

2850 El Presidio Street, Long Beach, CA 90810, U.S.A.

Sale and service of electronic products and home appliances

135,225 596,177 380,584 215,593 1,385,320 8,941 -24,717 -7.06

Tatung Mexico S.A. de C.V.

1,597,248 100.00 - - 1,597,248 100.00 November, 1997

Calle Miguel Catalan No. 420 Parque Industrial Rio Bravo Ciudad Juarez, Chih. C.P. 322557 Mexico

Manufacturing of Electronic products

376,246 305,762 62,476 243,286 126,631 7,299 -71,684 -44.88


1,000,000 100.00 - - 1,000,000 100.00 July, 1988 14381 Chambers Road, Tustin, CA 92780, U.S.A.

Sale and service of heavy-industry products

121,184 212,598 35,281 177,317 307,204 -2,788 -2,102 -2.10

Tatung Czech s.r.o. - 100.00 - - - 100.00 December, 2003

Na Radosti 184/59, 155 21 Prague 5, Czech Republic

EU Sales office for Smart meter, IoT and energy saving products

342,448 43,472 34,681 8,791 697 -9,755 -14,281 -

Myanmar Tatung Co., Ltd.

- - 425,100 100.00 425,100 100.00 March, 2016 No.68 (A), Htan Ta Pin Street, Aung Myay Thar Si Housing, No.(1) Quarter, Kamayut Township, Yangon, Myanmar

Promote Tatung solar system, heavy-industry products, home appliances products and Air Conditioning products and provide customer services.

13,133 5,634 2,334 3,300 - -5,474 -5,525 -13.00

Absolute Alpha Limited 50,000 100.00 - - 50,000 100.00 December, 2009

Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands

Business Investment 3,190 20,240 - 20,240 - -34 152 3.03

Leap High Ltd. 195,000 65.00 - - 195,000 65.00 May, 2016 Offshore Chambers, P.O. Box 217, Apia, Samoa

Business Investment 9,438 724 - 724 - -31 -4,462 -14.87

Tatung Myanmar Joint Venture Holding Co., Ltd.

- - 150,000 100.00 150,000 100.00 January, 2016 Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands

Business Investment 4,841 3,951 - 3,951 - - -740 -4.93

Tatung Information Technology (Jiangsu) Co., Ltd.

- - - 100.00 - 100.00 December, 1999

No.555, Jiangxing E. Road, Song-Ling Town, Wu-jiang City, Jiangsu, P.R.C.

Manufacturing and selling of electronics and home appliances

820,660 85,437 489,766 -404,329 104,017 1,524 37,176 -

Special Disclosures


92




revenueOperating



Tatung (Thailand) Co., Ltd.

97,400,000 92.23 8,200,000 7.77 105,600,000 100.00 October, 1989

Amata Nakorn, Industrial Estate. Bangna-Trad Road, KM.57, 700/50,52,54, Moo 6, T. Nongmaidang, A.Muang, Chonburi 20000, Thailand

EMS, Industrial Appliances, Wire and Cable, Electronics and Home Appliances, Air Conditioning product, Smart Meter, Solar Module, LED TV, LED lighting product assembly

940,289 543,300 90,584 452,716 177,318 -51,144 18,431 0.17


15,000 100.00 - - 15,000 100.00 August, 1975 4F, VORT Suehirocho, 6-14-7, Soto-Kanda, Chiyoda-Ku, Tokyo, 101-0021, Japan

Sale and service of equipment and instruments, materials, electronics, home appliances and IT products

1,903 2,280,600 1,640,795 639,805 3,149,029 103,068 55,202 3,680.11


3,600,000 90.00 - - 3,600,000 90.00 September, 1972

8 Boon Lay Way #02-14, TradeHub21, Singapore 609964

Sale and service of materials and parts

63,846 133,115 26,657 106,458 68,436 -8,468 -11,224 -2.81


86,049,842 100.00 - - 86,049,842 100.00 December, 1999

50, Raffles Place #32-01 Singapore Land Tower, Singapore 048623

Business Investment 1,499,755 364,837 260 364,577 - -384 -608 -0.01


33,098,675 100.00 - - 33,098,675 100.00 April, 1998 50, Raffles Place #32-01 Singapore Land Tower, Singapore 048623

Business Investment 610,080 611,490 409 611,081 - -272 -70,884 -2.14

Tatung Co. of America, Inc.

1,750,000 50.00 - - 1,750,000 50.00 September, 1972

2850 El Presidio Street, Long Beach, CA 90810, U.S.A.

Sale and service of electronic products and home appliances

135,225 596,177 380,584 215,593 1,385,320 8,941 -24,717 -7.06

Tatung Mexico S.A. de C.V.

1,597,248 100.00 - - 1,597,248 100.00 November, 1997

Calle Miguel Catalan No. 420 Parque Industrial Rio Bravo Ciudad Juarez, Chih. C.P. 322557 Mexico

Manufacturing of Electronic products

376,246 305,762 62,476 243,286 126,631 7,299 -71,684 -44.88


1,000,000 100.00 - - 1,000,000 100.00 July, 1988 14381 Chambers Road, Tustin, CA 92780, U.S.A.

Sale and service of heavy-industry products

121,184 212,598 35,281 177,317 307,204 -2,788 -2,102 -2.10

Tatung Czech s.r.o. - 100.00 - - - 100.00 December, 2003

Na Radosti 184/59, 155 21 Prague 5, Czech Republic

EU Sales office for Smart meter, IoT and energy saving products

342,448 43,472 34,681 8,791 697 -9,755 -14,281 -

Myanmar Tatung Co., Ltd.

- - 425,100 100.00 425,100 100.00 March, 2016 No.68 (A), Htan Ta Pin Street, Aung Myay Thar Si Housing, No.(1) Quarter, Kamayut Township, Yangon, Myanmar

Promote Tatung solar system, heavy-industry products, home appliances products and Air Conditioning products and provide customer services.

13,133 5,634 2,334 3,300 - -5,474 -5,525 -13.00

Absolute Alpha Limited 50,000 100.00 - - 50,000 100.00 December, 2009

Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands

Business Investment 3,190 20,240 - 20,240 - -34 152 3.03

Leap High Ltd. 195,000 65.00 - - 195,000 65.00 May, 2016 Offshore Chambers, P.O. Box 217, Apia, Samoa

Business Investment 9,438 724 - 724 - -31 -4,462 -14.87


- - 150,000 100.00 150,000 100.00 January, 2016 Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands

Business Investment 4,841 3,951 - 3,951 - - -740 -4.93


- - - 100.00 - 100.00 December, 1999


Manufacturing and selling of electronics and home appliances

820,660 85,437 489,766 -404,329 104,017 1,524 37,176 -

Special Disclosures


93




revenueOperating




- - - 100.00 - 100.00 September, 2004

No.38, Sheng Hui N. Road, Nantou Town, Zhongshan City, Guangdong, P.R.C.

Manufacturing and selling of reciprocating compressors for freezing and refrigeration

364,186 524,567 147,124 377,443 486,344 7,238 -1,188 -


- - - 100.00 - 100.00 December, 1995

No. 5299, Beisong Road, Chedun Town, Songjiang District, Shanghai , P.R.C.

Motors, generators, transformers 768,259 2,043,144 1,152,666 890,478 1,234,480 -58,699 -70,884 -

Wu-Jiang Tatung Electronics Trading Co., Ltd.

- - - 100.00 - 100.00 November,2009


Wholesale and import/export business of electronic products, instrumentation, home appliances and oxygen concentrators

161,907 26,470 55,928 -29,458 36,206 -3,324 -3,557 -

Chunghwa Picture Tubes (Labuan) Ltd.

8,000,000 41.03 11,500,000 58.97 19,500,000 100.00 October, 1992

Lot2&3, Level 3, Wisma Lazenda Jalam Kemajuan, 8700 Labuan, Malaysia

Business Investment 599,580 -213,397 - -213,397 - -157 45,599 2.34

Chunghwa P.T. (Wujiang) Ltd.

- - - 100.00 - 100.00 March, 2001 No.555, Jiang Xing East Road, Wujiang Economic Technology Development Zone, Jiangsu Province, China.

Research, development, production and sales of LCD panel

3,438,721 4,941,966 151,017 4,790,949 196,896 -246,073 -311,167 -

CPT TPV Optical (Fujian) Co., Ltd.

- - - 80.00 - 80.00 September, 2005

Shangzheng, Yuanhong Road, Fuqing City, Fujian Province, China

Development, design, production and sales of new flat panel display components, LCD products, modules and components

644,760 800,251 63,692 736,559 283,177 -32,234 -27,704 -

CPTF Optronics Co., Ltd. - - 2,325,526,100 100.00 2,325,526,100 100.00 January, 1994 No.1, Xing Ye Road, Mawei Hi-tech Development Zone, FuZhou, Fujian Province, China

Development, design and production of flat panel display products; flat panel display products and related parts wholesale.

8,137,913 28,143,186 15,345,153 12,798,033 12,822,549 2,525,655 1,648,902 0.71

CPTF Visual Display (Fuzhou) Ltd.

- - - 100.00 - 100.00 November, 2003

No1.Xin Ye Road, Mawei Hi-tech Development Zone, Fuzhou , Fujian Province, China

Assembly, development, design, and sales of display products.

149,011 1,566,704 1,126,044 440,660 1,964,112 63,183 34,587 -

CPT Technology (Group) Co., Ltd.

- - 729,289,715 26.37 729,289,715 26.37 November, 1993

No.6, Rujiang West Road, Mawei District, Fuzhou, Fujian Province, China


12,326,688 66,760,468 15,039,335 51,721,133 6,534,837 599,142 654,988 0.24

Mantix Display Technology Co., Ltd.

- - - 100.00 - 100.00 June, 2015 No.1, Hanzhong West Road, Hanjiang District, Putian, Fujian Province, China


38,726,529 50,326,890 12,243,524 38,083,366 226,901 -25,024 107,701 -

Note 1: Exchange rate for balance sheet items (current rate): USD (29.76000) SGD(22.26000) THB(0.91760) JPY(0.26420) MXN(1.51062) CZK(1.39078) VND(0.00131) RMB(4.55450) MMK(0.02175)

Note 2: Exchange rate for income statement items (average rate): USD(30.43392) SGD(22.03832) THB(0.90177) JPY(0.27133) MXN(1.61035) CZK(1.30561) VND(0.00134) RMB(4.50765)MMK (0.02414)

(III) Business scope of Tatung and its investees and the correlation of their business activitiesThe Company and its affiliates are primarily engaged in electronic information, home appliances, and industrial appliance businesses. In general, the correlation of our business activities is formed by mutual support in production, sales, marketing and service to maximize the synergy of Tatung Group ensuring a successful delivery of the best and most efficient service to our customers.

Special Disclosures


94




revenueOperating




- - - 100.00 - 100.00 September, 2004

No.38, Sheng Hui N. Road, Nantou Town, Zhongshan City, Guangdong, P.R.C.

Manufacturing and selling of reciprocating compressors for freezing and refrigeration

364,186 524,567 147,124 377,443 486,344 7,238 -1,188 -


- - - 100.00 - 100.00 December, 1995

No. 5299, Beisong Road, Chedun Town, Songjiang District, Shanghai , P.R.C.

Motors, generators, transformers 768,259 2,043,144 1,152,666 890,478 1,234,480 -58,699 -70,884 -


- - - 100.00 - 100.00 November,2009


Wholesale and import/export business of electronic products, instrumentation, home appliances and oxygen concentrators

161,907 26,470 55,928 -29,458 36,206 -3,324 -3,557 -


8,000,000 41.03 11,500,000 58.97 19,500,000 100.00 October, 1992

Lot2&3, Level 3, Wisma Lazenda Jalam Kemajuan, 8700 Labuan, Malaysia

Business Investment 599,580 -213,397 - -213,397 - -157 45,599 2.34


- - - 100.00 - 100.00 March, 2001 No.555, Jiang Xing East Road, Wujiang Economic Technology Development Zone, Jiangsu Province, China.


3,438,721 4,941,966 151,017 4,790,949 196,896 -246,073 -311,167 -


- - - 80.00 - 80.00 September, 2005

Shangzheng, Yuanhong Road, Fuqing City, Fujian Province, China


644,760 800,251 63,692 736,559 283,177 -32,234 -27,704 -

CPTF Optronics Co., Ltd. - - 2,325,526,100 100.00 2,325,526,100 100.00 January, 1994 No.1, Xing Ye Road, Mawei Hi-tech Development Zone, FuZhou, Fujian Province, China

Development, design and production of flat panel display products; flat panel display products and related parts wholesale.

8,137,913 28,143,186 15,345,153 12,798,033 12,822,549 2,525,655 1,648,902 0.71


- - - 100.00 - 100.00 November, 2003

No1.Xin Ye Road, Mawei Hi-tech Development Zone, Fuzhou , Fujian Province, China

Assembly, development, design, and sales of display products.

149,011 1,566,704 1,126,044 440,660 1,964,112 63,183 34,587 -


- - 729,289,715 26.37 729,289,715 26.37 November, 1993

No.6, Rujiang West Road, Mawei District, Fuzhou, Fujian Province, China


12,326,688 66,760,468 15,039,335 51,721,133 6,534,837 599,142 654,988 0.24


- - - 100.00 - 100.00 June, 2015 No.1, Hanzhong West Road, Hanjiang District, Putian, Fujian Province, China


38,726,529 50,326,890 12,243,524 38,083,366 226,901 -25,024 107,701 -

Note 1: Exchange rate for balance sheet items (current rate): USD (29.76000) SGD(22.26000) THB(0.91760) JPY(0.26420) MXN(1.51062) CZK(1.39078) VND(0.00131) RMB(4.55450) MMK(0.02175)

Note 2: Exchange rate for income statement items (average rate): USD(30.43392) SGD(22.03832) THB(0.90177) JPY(0.27133) MXN(1.61035) CZK(1.30561) VND(0.00134) RMB(4.50765)MMK (0.02414)

(III) Business scope of Tatung and its investees and the correlation of their business activitiesThe Company and its affiliates are primarily engaged in electronic information, home appliances, and industrial appliance businesses. In general, the correlation of our business activities is formed by mutual support in production, sales, marketing and service to maximize the synergy of Tatung Group ensuring a successful delivery of the best and most efficient service to our customers.

Special Disclosures


95

(IV) Directors, supervisors and presidents of investeesAs of 28 February 2018

Name of investees Title Name or representative ShareholdingShares %

Chunghwa Picture Tubes, Ltd.

Representatives of Chunghwa Electronics Development Co., Ltd.:

585,825,932 9.04%

Chairman Wei-Shan Lin 79,172 -

Director Wen-Yen K. Lin 79,124 -

Director Ho-Long Lin - -

Representatives of Tatung Company: 1,850,745,168 28.56%

Director Wen-Chieh Peng - -

Independent Director Chien-Ho Chao - -

Independent Director Chien-Chung Yuan - -

Independent Director Yuh-Yuan Tsai - -

President Sheng-Chang Lin 20,732 -


Director Wen-Yen K. Lin 2,904 -

Director Wei-Shan Lin 4,357 0.01%

Representatives of Tatung Company: 36,018,121 53.60%

Chairman Bo-Yen Shen 331,346 0.49%

Director Tzu-Te Chen - -

Director Shih-Kuang Tsai - -

Director Chi-Wei Chen - -

Independent Director Ho-Ping Yen - -

Independent Director Po-Sheng Lin - -

Independent Director Chao-Tung Wen - -

President Yin-Hsiu, Liu 97,918 0.15%

Forward Electronics Co., Ltd. Representatives of Tatung Company: 18,955,623 12.05%

Chairman Wei-Shan Lin - -

Director Wen-Yen K. Lin - -

Director and President Meng-Chi Hsu - -

Director Yi-Tsai Hsu - -Director Jian-Pyng Hsu - -

Director Ju-Ping Yuan - -

Independent Director Yang-Ping Shen - -

Independent Director Chia-Nan Wang - -

Independent Director Danny-J Lay - -


Chairman Wei-Shan Lin 162,584 0.14%

Director Wen-Yen K. Lin 40,645 0.04%


Director Yu-Jen Lee - -

Director Chang-ping Lin 10,838 0.01%

Director and President Lung-Ta Lee 105,578 0.09%

Director Chia-Ying Ma - -

Independent Director Ching -Chuan Lo - -

Independent Director Han-Qing Lin - -

Independent Director Peng-Fei Su - -

Special Disclosures


96

As of 28 February 2018


Green Energy Technology Inc.

Representatives of Shan Chih Semiconductor Co., Ltd. 101,249,274 23.33%


Director Wei-Feng Yeh - -

Director Hung-Jui Chen - -

Director Lung-Ta Lee - -


Director Fan-Hsiung Chen 10,477 -

Independent Director Chu-Ching Wang - -

Independent Director Po-Sung Chiu 4,577 -

Independent Director Teng-Tsai Tu - -

President Shin-Yuan Lin 124,028 0.03%



Chairman and President Ke-Chi Chan - -

Director Wei-Shan Lin - -

Director Fu-Lai Chu - -

Director Chi-Fang Huang - -

Director Tzu-Shiann Chen - -

Supervisor Jui-Kai Chang - -





Director and President Chung-Chi Chang - -

Director Shu-Li Chen - -

Director I-Hua Chang - -

Supervisor Po-Han Lee - -

Tatung SM-Cyclo Co., Ltd. Representatives of Tatung Company: 6,400,000 85.33%


Director and President Tzyy-Perng Wu - -

Representative of SM-Cyclo: 1,100,000 14.67%

Director Nakamura Atsushi - -

Supervisor Jung-Chang Hsieh - -





Director and President Yung-Chi Chang 57,493 0.07%



Director Chia-Ying Ma - -

Independent Director Kuen-Chang Lee - -

Independent Director Jia-Heng Lin - -

Special Disclosures


97




Representatives of Tatung Company: 5,220,064 100.00%Chairman Wei-Shan Lin - -Director Wen-Yen K. Lin - -Director Lung-Chieh Wang - -Director and President I-Hua Chang - -Director Wen-Chieh Peng - -Supervisor Wen-Kang Hsu - -





Director I-Hua Chang - -

Director and President Jui-Kai Chang - -


Representatives of Shan Chih Asset Development Co., Ltd.:

562,355 0.20%

Supervisor Yu-Sheng Su - -

Supervisor Yi-Chun Chen - -

Tatung Die Casting Co., Ltd. Representatives of Tatung Company: 153,000 51.00%


Director and President Jung-Chang Hsieh - -

Director Chia-Tien Lin - -

Representatives of Mitsui Mining & Smelting Co., Ltd.: 147,000 49.00%

Director Kenji Okubo - -

Director Hiroyuki Nakazawa - -

Supervisor Chien-Cheng Yu - -

Supervisor Shoichi Komamura - -





Director and President Li-Min Chen - -

Director Po-Han Lee - -

Director Bo-Yen Shen - -

Supervisor Pei-Chun Hsieh - -

Toes Opto-Mechatronics Co., Ltd.




Director Wen-Jui Chen - -


Director Yung-Yu Chen - -

Supervisor Shu-Li Chen - -

President Yuan-Sun Tang - -




Director Cheng-Chieh Yang - -

Director Lung-Chieh Wang - -

Representatives of Chunghwa Electronics Development Co., Ltd.

3,376,213 4.17%


President Shu-Li Chen - -

Special Disclosures


98





Chairman Wen-Chieh Peng - -



Director and President Jui-Kai Chang - -


Supervisor Chih-Hsin Cheng - -



Chairman Ho-Long Lin - -



Director Jui-Kai Chang - -


Supervisor Shu-Hua Liao - -

President Yun-Wei Huang - -

Tung Yang Energy Co., Ltd. Representatives of Tatung Company: 15,000,000 100.00%

Chairman Ho-Long Lin - -

Director Jui-Kai Chang - -


Supervisor Shu-Hua Liao - -

President Yun-Wei Huang - -

Tatung (Thailand)Co., Ltd. Representatives of Tatung Company: 97,400,000 92.23%

Chairman Ming-Yuan Hsieh - -


Director Shueei-Tian Shiue - -



Director Chung-Chi Chang - -

President Chun-Rong Lu - -


Representatives of Tatung Company: 15,000 100.00%


Director and Vice Chairman Ying-Che Huang - -


Director Chieh-Ming Tseng - -

Director Kwo-Shun Chen - -

Director Ming-Tse Hsu - -


Supervisor Cheng-Chieh Yang - -

Supervisor Shu-Li Chen - -

President Hsieh-Jang Chang - -




Director Chee-Cherng Yang - -

Director Shu-Fen Chen - -

Special Disclosures


99





Chairman Wen-Yen K. Lin - -






Tatung Co. of America, Inc. Director Andrew L. Sun 875,000 25.00%

Director Christina Sun 875,000 25.00%

Director Ta-Kuan Huang Lin - -

Director Ching-Kuan Chan Lin - -



Director and President Huei-Jihn Jih - -

Tatung Mexico S.A de C.V. Representatives of Tatung Company: 1,597,248 100.00%




Director Chang-Ping Lin - -

Director Chi-Hua Lan - -

Supervisor Shu-Wen Lin - -

Tatung Electric Co., of America, Inc.


Chairman Shueei-Tian Shiue - -

Director Ming-Tse Hsu - -

Director Yung-Feng Wang - -

Director Kwo-Shun Chen - -


President Chi-Hua Lan - -

Tatung Czech s.r.o. Representatives of Tatung Company: - 100.00%



Myanmar Tatung Ltd. Representatives of Tatung Information (Singapore) Pte. Ltd.: 425,099 100.00%

Chairman His-Sheng Wang - -




Absolute Alpha Limited Representatives of Tatung Company: 50,000 100.00%



Director Cheng-Chieh Yang - -

Director Yi-Chun Chen - -

Leap High Ltd. Representatives of Tatung Company: 195,000 65.00%




Representatives of Tatung Information (Singapore) Pte. Ltd.: 150,000 100.00%



Representatives of Tatung Information (Singapore) Pte. Ltd.: - 100.00%

Chairman Chung-Chi Chang - -



Director Kao-Chung Chang - -

Director Tang-Ping Tu - -

Special Disclosures


100




Representatives of Tatung Information (Singapore) Pte. Ltd.: - 79.89%

Shan Chih Investment Co., Ltd.: - 20.11%

Chairman Kuo-Hua Chung - -

Director and President Hong-Shiun Pan - -

Director Chao-Ching Chen - -

Director Tsan-Chuan Wu - -


Supervisor Yu-Sheng Su - -

Tatung (Shanghai) Co., Ltd. Representatives of Tatung Electric (Singapore) Pte. Ltd.: - 87.23%

Shan Chih Investment Co. Ltd.: - 12.77%

Chairman Shueei-Tian Shiue - -


Director and President Kwo-Shun Chen - -


Director An Chao - -



Representatives of Chih Sheng Holding HK Ltd.: - 100.00%

Chairman and President Chung-Chi Chang - -



Director Ssu-Kai Lin - -

Director Chun-Shih Ho - -

Supervisor Shing-Jye Tsai - -


Representatives of Chunghwa Picture Tubes (Bermuda) Ltd.: 11,500,000 58.97%

Chairman Sheng-Chang Lin - -

Director Jui-Lin Yang - -




Representatives of CPT Technology (Group) Co., Ltd.: - 75.00%

Chairman Wei Chen - -

Director Wei-Jung Chang - -

Representatives of Chunghwa P.T. (Labuan) Ltd.: - 25.00%

President Kuo-Ling Chi - -

Representatives of CPT Technology (Group) Co., Ltd.: - -

Supervisor Chia-Shan Wu - -


Representatives of CPT Technology (Group) Co., Ltd.: - 75.00%


President Kuo-Tsai Kang - -

Director Wei-Jung Chang

Director Chin-Hui Yang - -

Representatives of Chunghwa P.T. (Bermuda) Ltd.: - 5.00%

Director Jui-Lin Yang - -

Representative of TPV Technology Limited - 20.00%

Director You-Zhu Chen - -

Representatives of CPT Technology (Group) Co., Ltd.:


Representatives of CPT Technology (Group) Co., Ltd.:

Supervisor Shane Tyau - -

Special Disclosures


101



CPTF Optronics Co., Ltd. Representatives of CPT Technology (Group) Co., Ltd.: 1,976,697,185 85.00%

Representatives of Chunghwa P.T. (Wujiang) Ltd.: 348,828,915 15.00%


Director and President Wei-Jung Chang - -

Director Sheng-Chang Lin - -

Director Shui-Yuan Lin - -

Director Chin-Hui Yang - -

Supervisor Yi-Yu Lin - -

Supervisor Li Lin - -



Representatives of CPTF Optronics Co., Ltd.: - 100.00%

Chairman and President Wei-Jung Chang - -

Director Wei Chen - -

Director Sheng-Chang Lin - -



Representatives of Chunghwa P.T. (Labuan) Ltd.: 729,289,715 26.37%


Director and President Wei Chen - -

Director Wen-Sheng Lu - -

Director Jun-Qin Wu - -

Director Miao-Cheng Luo - -

Director Fu-Suo Bao - -

Director Guo-Wei Chen - -

Director Xin-Zhi Zheng - -

Director Yi Wu - -

Director Xue-Jun Zheng - -


Supervisor Chun-Ming Liu - -

Supervisor Zuo Wang - -


Representatives of CPT Technology (Group) Co., Ltd: - 100.00%


Vice Chairman Wen-Sheng Lu - -

Director and President Hsiang-Kuei Chung - -


Director Wei Chen - -

Supervisor Li Lin - -

Special Disclosures


102

Securities issuance through private placement: None.

Holdings and sale of shares by subsidiariesAs of March 31, 2018 Unit: NT$ Thousand; shares; %

Name Paid-in capital

Source of funding


by the Company

Date of acquisition or disposal

Shares and amount of acquisition

Shares and amount of

disposalInvestment

income

Shares and amount held

up to the publishing

date of the annual

report

Balance of

pledged shares

Amount of endorsement/

guarantee made by the

Company

Amount of financing provided

by the Company


2,815,737 Own capital

93.27% - - - - 333,586 shares7,422 thousand NTD

- - -



28.56% - - - - 10,944,773 shares243,521 thousand NTD

- 2,000,000 -

Chunghwa P.T. (Bermuda) Ltd.


- - (Note 1) - - 59,652,985 shares1,327,279 thousand NTD

- - -



12.05% May.~ Sep.,2017

- 3,070,000 shares38,414 thousand NTD

- 33,166,000 shares737,944 thousand NTD

- - -

Note 1: The total shares of subsidiaries that held Tatung Company’s shares were 59,652,985 shares. There were including Chunghwa P.T. (Bermuda) Ltd. (11,046,994 shares) and Dalemont (12,105,265 shares), Daliant (12,161,208 shares) , Banglor (12,227,364 shares), Bensaline (12,112,154 shares) which subsidiaries were Chunghwa P.T. (Bermuda) Ltd. 100% hold. Since 2017Q2, Chunghwa P.T. (Bermuda) Ltd. and its subsidiaries-Dalemont, Daliant, Banglor and Bensaline have been merged into a company, and the surviving company is Chunghwa P.T. (Bermuda) Ltd.. And there has no change in holding shares of Tatung Company

Other necessary supplementary information: None.

Any Events in 2017 and as of the Date of this Annual Report that Had Significant Impacts on Shareholders’ Right or Security Prices as Stated in Item 3 Paragraph 2 of Article 36 of Securities and Exchange Law of Taiwan: None.

Appendix - Consolidated statements


1031

TATUNG CO., LTD. AND SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSWITH INDEPENDENT AUDITORS’ REPORT

December 31, 2017 AND 2016

Address: 22, Sec. 3, Chung-shan N. Rd., Taipei city, Taiwan R.O.C.Telephone: 886-2-2592-5252

The reader is advised that these consolidated financial statements have been prepared originally in Chinese. In the eventof a conflict between these financial statements and the original Chinese version or difference in interpretation betweenthe two versions, the Chinese language financial statements shall prevail.



104

2

REPRESENTATION LETTER

The subsidiaries included in the consolidated financial statements as of December 31, 2017 and for

the year then ended prepared under the International Financial Reporting Interpretation No. 10

(referred to as “Consolidated Financial Statements”) are the same as the affiliated entities to be

included in the combined financial statements of the Company, if any to be prepared, pursuant to the

Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and

Consolidated Financial Statements of Affiliated Enterprises (referred to as “Combined Financial

Statements”). Also, the footnotes disclosed in the Consolidated Financial Statements have fully

covered the required information in such Combined Financial Statements. Accordingly, the Company

did not prepare any other set of Combined Financial Statements than the Consolidated Financial

Statements.

Very truly yours,

Tatung Co., Ltd.

Chairman: Wen-Yen K. Lin

March 15, 2018h 15, 2018



1053

Independent Auditors’ Report

English Translation of a Report Originally Issued in Chinese

The Board of Directors and ShareholdersTatung Co., Ltd. (“the Company”)

Opinion

We have audited the accompanying consolidated balance sheets of the Company and its subsidiaries(“the Group”) as of December 31, 2017 and 2016, the related consolidated statements ofcomprehensive income, and the related consolidated statements of changes in equity and cash flowsfor the years ended December 31, 2017 and 2016, and notes to the consolidated financial statementsincluding a summary of significant accounting policies (together “the consolidated financialstatements”).

In our opinion, based on our audits and the reports of other auditors (please refer to the Other Matterssection), the consolidated financial statements referred to above present fairly, in all material respects,the consolidated financial position of the Company and its subsidiaries as of December 31, 2017 and2016, and their consolidated financial performance and cash flows for the years ended December 31,2017 and 2016, in conformity with the requirements of the Regulations Governing the Preparation ofFinancial Reports by Securities Issuers and International Financial Reporting Standards, InternationalAccounting Standards, interpretations developed by the International Financial ReportingInterpretations Committee or the former Standing Interpretations Committee as endorsed by FinancialSupervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation ofFinancial Statements by Certified Public Accountants and auditing standards generally accepted inthe 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 areindependent of the Company and its subsidiaries in accordance with the Norm of Professional Ethicsfor Certified Public Accountant of the Republic of China (the “Norm”), and we have fulfilled ourother ethical responsibilities in accordance with the Norm. Based on our audits and the reports ofother auditors, we believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance inour audit of 2017 consolidated financial statements. These matters were addressed in the context ofour audit of the consolidated financial statements as a whole, and in forming our opinion thereon, andwe do not provide a separate opinion on these matters.



106

4

1. Revenue Recognition

The Group recognized net sales in the amount of NT$ 75,553,009 thousand in 2017. The Companyand its subsidiaries operated in various industries and their various products were sold to local aswell as foreign markets. The sales terms varied, the sales amount was relatively large and thetransactions were highly complicated. Therefore, we considered this a key audit matter.

Our audit procedures included, but not limited to, assessing the appropriateness of the accountingpolicy of revenue recognition; evaluating and testing the design and operating effectiveness ofinternal controls in the sales cycle; selecting samples to perform tests of details and vouching themto transaction records, examining contracts, sales orders or supporting documents; reviewingsignificant terms and condition of contracts; performing cut-off testing by selecting a set ofsamples of transactions from either side of year-end and vouching them to supporting evidencesto ensure the reasonableness of revenue cut-off; performing analytical procedures on gross marginand sales from major customers; reviewing significant subsequent sales returns and discounts toverify the occurrence of sales transactions and reasonableness of the timing of revenue recognition.

We also assessed the adequacy of disclosures of operating revenues. Please refer to Notes 4, 5,and 6 to the Group’s consolidated financial statements.

2. The Judgement of Consolidated Entities

According to IFRS 10, an investor is the parent company of the investee when the investor hascontrol over the investee regardless of how the investor participates in the investment. Since theGroup holds less than 50% of the shares of some consolidated entities, and the judgment of whetherthe Company has control over the consolidated entities would directly affect the consolidatedfinancial statements, we considered this a key audit matter.

Our audit procedures included, but not limited to, obtaining the group structure chart; investigatingchanges in group structure; inspecting the comprehensive holding percentage of each consolidatedentity; analyzing the composition of the board of directors and management, the changes of boardmembers over the years, holding percentage of the top ten shareholders, attendance rate inshareholders meetings, and related investment contracts to confirm whether the Company hasidentified all the consolidated entities and the appropriateness of the Company’s evaluation of thecontrol over its consolidated entities.

Please refer to Note 4 to the consolidated financial statements for the consolidation status of theGroup as of December 31, 2017.

3. Non-financial Assets Impairment

As of December 31, 2017, the net value of property, plant and equipment accounted for 42% ofthe total consolidated asset of the Group, which is deemed material to the consolidated financialstatements of the Group. The Company and its subsidiaries operated diversification businessmodel, therefore some of the products experienced larger market fluctuation and adverse changes,which indicated a possibility of impairment of property, plant and equipment as of December 31,2017. In addition, the assessment process of impairment of aforementioned non-financial assetshighly relies on highly subjective judgment and involves uncertainty in estimation. Therefore, weconsidered this a key audit matter.



1075

Our audit procedures included, but not limited to, inspecting the impairment possibility and thecash-generating unit of the property, plant and equipment of the Group; obtaining the data andassumption regarding the evaluation of recoverable amount from the Company. In addition toconsidering the historical and external financial information to evaluate the appropriateness of therelated assumption, we adopted the evaluation report provided by the internal expert for assessingthe appropriateness of the impairment testing data or the fair value report of the cash-generatingunit, the method of evaluation and the key evaluation parameters, such as discount rate.

Please refer to Notes 4, 5 and 6 to the consolidated financial statements for the disclosure ofproperty, plant and equipment.

Other Matters-Referring to Other Auditors

We did not audit the financial statements of certain consolidated subsidiaries, which statementsreflected total assets of NT$2,399,875 thousand and NT$2,484,005 thousand, constituting 1% and1% of consolidated total assets as of December 31, 2017 and 2016, respectively, and total operatingrevenues of NT$2,703,719 thousand and NT$2,700,829 thousand, constituting 4% and 3% ofconsolidated operating revenues for the years ended December 31 2017 and 2016, respectively. Thosefinancial statements were audited by other auditors, whose reports thereon have been furnished to us,and our opinions expressed herein are based solely on the audit reports of the other auditors. We didnot audit the financial statements of certain associates and joint ventures accounted for under theequity method whose statements are based solely on the reports of other auditors. These associatesand joint ventures under equity method amounted to NT$3,789,505 thousand and NT$3,846,228thousand, accounting for 2% and 2% of consolidated total assets as of December 31, 2017 and 2016,respectively. The related shares of profits (losses) from the associates and joint ventures under theequity method amounted to NT$58,065 thousand and NT$(258,571) thousand, accounting for 2%and 12% of the consolidated net income (loss) before tax for the years ended December 31 2017 and2016, respectively, and the related shares of other comprehensive income from the associates andjoint ventures under the equity method amounted to NT$(114,788) thousand and NT$(133,419)thousand, accounting for 9% and 3% of the consolidated other comprehensive income, net, for theyears ended December 31, 2017 and 2016, respectively.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

Management is responsible for the preparation and fair presentation of the consolidated financialstatements in accordance with Regulations Governing the Preparation of Financial Reports bySecurities Issuers and International Financial Reporting Standards, International AccountingStandards, interpretation as well as related guidance endorsed by the Financial SupervisoryCommission of the Republic of China, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.

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

Those charged with governance (inclusive of the Audit Committee) are responsible for overseeingthe Group’s financial reporting process.



108

6

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statementsas a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with the auditing standards generally accepted in theRepublic of China will always detect a material misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of theseconsolidated financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China,we exercised professional judgment and maintained professional skepticism throughout the audit. Wealso:

1. Identified and assessed 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, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

2. Obtained an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control.

3. Evaluated the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

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

5. Evaluated the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

6. Obtained sufficient appropriate audit evidence regarding the financial information of the entitiesor business activities within the Company to express an opinion on the consolidated financialstatements. We are responsible for the direction, supervision and performance of the group audit,and forming the group audit opinion.

We communicated with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identified during our audit.



1097

We also provided those charged with governance with a statement that we have complied withrelevant ethical requirements regarding independence, and communicated with them all relationshipsand 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 determined those mattersthat were of most significance in the audit of the consolidated financial statements of the currentperiod and are therefore the key audit matters. We describe these matters in our auditor’s report unlesslaw or regulation precludes public disclosure about the matter or when, in extremely rarecircumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Other

We have audited and expressed an unqualified opinion on the parent company only financialstatements of the Company as of and for the years ended December 31, 2017 and 2016.

Ernst & Young, TaiwanMarch 15, 2018

Notice to ReadersThe accompanying financial statements are intended only to present the financial position and results of operations and cash flows inaccordance with accounting principles and practices generally accepted in the Republic of China on Taiwan and not those of any otherjurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally acceptedand applied in the Republic of China on Taiwan.



110

Notes Amount % Amount %Current assets

Cash and cash equivalents 4,6 $31,980,276 14 $42,687,252 18Financial assets at fair value through profit or loss, current 4,6,8 646,743 - 17,262,633 7Available-for-sale financial assets, current 4,6 381,437 - 390,711 -Financial assets in held-to-maturity, current 4,6 - - 20,000 -Financial assets carried at cost, current 4,6 29,238 - 29,238 -Debt instrument investments for which no active market exists, current 4,6,8 25,407,275 11 24,057,035 10Notes receivable, net 4,6 542,911 - 547,939 -Accounts receivable, net 4,5,6,8 7,452,456 3 8,268,682 4Accounts receivable - related parties, net 4,6,7 74,538 - 22,655 -Construction receivable 4,6 180,903 - 173,874 -Other receivables 4 1,694,887 1 3,496,854 2Other receivables - related parties 4,7 1,610 - 2,070 -Current tax assets 19,129 - 40,806 -Inventories 4,5,6,8 16,000,338 7 16,933,720 7Prepayments 8 3,892,812 2 1,972,180 1Non-current assets held for sale (net) 4,6,8 74,614 - 13,224,395 6Other current assets 854,857 1 1,035,237 -

Total current assets 89,234,024 39 130,165,281 55Non-current assets

Available-for-sale financial assets, non-current 4,6,8 1,283,254 1 1,025,321 -Financial assets carried at cost, non-current 4,6 518,124 - 408,283 -Debt instrument investments for which no active market exists, non-current 4,6,8 4,164,924 2 2,928,817 1Investments accounted for under the equity method 4,6,8 5,136,165 2 5,668,214 2Property, plant and equipment 4,5,6,7,8 96,086,434 42 71,518,020 30Investment property, net 4,5,6 14,127,842 6 14,106,097 6Intangible assets 4,6 907,082 1 1,091,100 1Deferred tax assets 4,5,6 2,993,125 1 2,620,497 1Other non-current assets 6,8 13,997,594 6 8,611,524 4Long-term receivable 4,6,7 132,790 - 256,199 -

Total non-current assets 139,347,334 61 108,234,072 45

Total assets $228,581,358 100 $238,399,353 100

English Translations of Consolidated Financial Statements Originally Issued in Chinese

ContentsAssets

December 31, 2017 and December 31, 2016

TATUNG CO., LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

December 31, 2017 December 31, 2016

(Expressed in Thousands of New Taiwan Dollars)

8



111

Liabilities and EquityNotes Amount % Amount %

Current liabilitiesShort-term loans 6,8 $41,552,640 18 $54,412,093 23Short-term notes and bills payable 6 3,487,053 2 2,057,903 1Financial liabilities at fair value through profit or loss, current 4,6 1,358 - 841 -Notes payable 7 2,151,786 1 462,161 -Accounts payable 12,264,730 5 13,107,690 5Accounts payable - related parties 7 37,897 - 12,243 -Other payables 7 12,579,366 6 10,783,750 5Current tax liabilities 192,696 - 288,162 -Provision, current 4,5,6 131,570 - 116,817 -Liabilities related to non-current assets classified as held for sale 4 - - 4,339,032 2Advanced receipts 3,201,459 1 2,720,349 1Current portion of long-term loans 6,8 11,533,039 5 13,087,564 5Other current liabilities - others 1,726,620 1 1,692,892 1

Total current liabilities 88,860,214 39 103,081,497 43Non-current liabilities

Long-term loans 6,8 45,826,939 20 38,223,531 16Provision, non-current 4,5,6 321,504 - 306,406 -Deferred tax liabilities 4,5,6 5,938,762 3 6,533,997 3Long-term payables 88,693 - 140,646 -Long-term deferred revenues 4,6 154,518 - 240,620 -Net defined benefit liability 4,5,6 2,449,004 1 3,635,590 2Deposits in 134,268 - 148,028 -Deferred credit for investments accounted for under the equity method 4,6 19,970 - 19,970 -Other non-current liabilities, others 15,627 - 185,743 -

Total non-current libilities 54,949,285 24 49,434,531 21Total liabilities 143,809,499 63 152,516,028 64Equity attributable to shareholders of the parent

Capital stockCommon stock 6 23,395,367 10 23,395,367 10

Capital reserve 6 3,273,505 1 2,864,841 1Retained earnings 6

Legal reserve 36,354 - 36,354 -Special reserve 4,753,026 2 6,946,785 3Accumulated deficits (281,015) - (2,175,074) (1)

Total retained earnings 4,508,365 2 4,808,065 2Other equities

Exchange differences on translation of foreign operation 4 (1,098,677) - (709,739) -Unrealized gain or loss on available-for-sale financial assets 4 596,612 - 365,333 -Equity related to non-current assets classified as held for sale 4,6 - - (26,698) -

Total other equities (502,065) - (371,104) -Treasury stock 4,6 (1,629,899) - (1,056,865) (1)

Equity attributable to shareholders of the parent 29,045,273 13 29,640,304 12Non-controlling interests 4,6 55,726,586 24 56,243,021 24Total equity 84,771,859 37 85,883,325 36Total liabilities and equity $228,581,358 100 $238,399,353 100

Contents

TATUNG CO., LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

December 31, 2017 and December 31, 2016(Expressed in Thousands of New Taiwan Dollars)



9



112

Contents Notes Amount % Amount %Operating revenues 4,6,7 $76,681,558 102 $78,886,924 102Less: Sales returns 5,6 (576,762) (1) (813,288) (1)Less: Sales allowances 5,6 (551,787) (1) (396,011) (1)Net operating revenues 75,553,009 100 77,677,625 100Operating costs 5,6,7 (63,735,312) (84) (67,091,059) (86)Net gross profit 11,817,697 16 10,586,566 14

Operating expenses 6Sales and marketing (3,983,652) (5) (4,142,185) (6)General and administrative (4,956,973) (7) (5,444,722) (7)Research and development (3,954,440) (5) (3,871,308) (5)

Total operating expense (12,895,065) (17) (13,458,215) (18)Net other income 6 2,164,430 3 - -Operating income (loss) 1,087,062 2 (2,871,649) (4)

Non-operating income and expenseOther income 4,6,7 2,098,284 3 2,986,620 4Other gains and (losses) 6 3,021,348 4 2,160,468 3Finance costs 4,6 (3,626,052) (5) (4,293,969) (6)Share of profit (loss) of associates and joint ventures 6 129,388 - (187,957) -

Total Non-operating income and expense 1,622,968 2 665,162 1

Income (loss) before income tax 2,710,030 4 (2,206,487) (3)Income tax expense 4,5,6 (660,274) (1) (1,299,767) (2)Income (loss) from continuing operations 2,049,756 3 (3,506,254) (5)Income (loss) from discontinued operations 4,6 69,498 - (33,648) -Net Income (loss) 2,119,254 3 (3,539,902) (5)

Other comprehensive (loss) income 4,6Not to be reclassified to profit or loss in subsequent periods:

Gains (losses) on remeasurements of defined benefit plans 39,151 - 338,426 -Equity related to non-current assets classified as held for sale - - (4,110) -Share of other comprehensive (loss) income of associates and joint ventures accounted (1,042) - 466 -

for using the equity method, not to be reclassified to profit or lossIncome tax related to components of other comprehensive income not to be reclassified 687 - (10,341) -

to profit or lossTo be reclassified to profit or loss in subsequent periods:

Exchange differences resulting from translating the financial statements of a foreign operation (1,526,042) (2) (3,559,383) (5)Unrealized gain (loss) from available-for-sale financial assets 340,121 - (912,523) (1)Equity related to non-current assets classified as held for sale 56,078 - (215,067) -Share of other comprehensive (loss) income of associates and joint ventures accounted for (123,742) - (125,581) - using the equity method, to be reclassified to profit or lossIncome tax related to components of other comprehensive income to be reclassified (27,334) - 386,501 1

to profit or lossTotal of other comprehensive (loss) income, net of income tax (1,242,123) (2) (4,101,612) (5)Total comprehensive (loss) income $877,131 1 $(7,641,514) (10)

Net income (loss) attributable to:Shareholders of the parent $74,070 $(2,343,945)Non-controlling interests 2,045,184 (1,195,957)

$2,119,254 $(3,539,902)Total comprehensive (loss) income attributable to:

Shareholders of the parent $(49,388) $(2,765,124)Non-controlling interests 926,519 (4,876,390)

$877,131 $(7,641,514)Earnings (loss) per share 6

Basic earnings (loss) per share (NT$)Basic earnings (loss) per share from continuing operations $0.02 $(1.03)Basic earnings (loss) per share from discontinued operations 0.01 -Basic earnings (loss) per share $0.03 $(1.03)

Diluted earnings (loss) per share (NT$) $0.03 $(1.03)

2017 2016


TATUNG CO., LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2017 and 2016(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

10



113

Cont

ents

Capi

talSt

ock

Capi

tal R

eser

veLe

gal R

eser

veSp

ecial

Res

erve

Unap

prop

riated

Earn

ings

(Acc

umul

ated

defic

its)

Exch

ange

Diffe

renc

eson

Tran

slatio

nof

Fore

ign

Oper

ation

Unre

alize

dGa

inor

Loss

onVa

luati

onof

Avail

able-

for-

sale

Fina

ncial

Asse

ts

Equi

ty R

elated

to N

on-c

urre

ntAs

sets

Clas

sified

asHe

ldfo

rSale

Trea

sury

Stoc

kTo

tal$2

3,39

5,36

7$7

85,3

76$3

6,35

4$1

0,04

7,05

3$(

3,10

0,26

8)$8

,114

$235

,469

$(1,

439)

$(80

6,87

0)$3

0,59

9,15

6$1

8,31

2,70

3$4

8,91

1,85

9

Spec

ialre

serv

euse

dto

offse

tacc

umul

ated

defic

its-

--

(3,1

00,2

68)

3,10

0,26

8-

--

--

--

Netl

ossi

n201

6-

--

-(2

,343

,945

)-

--

-(2

,343

,945

)(1

,195

,957

)(3

,539

,902

)

Othe

rcom

preh

ensiv

e(lo

ss)i

ncom

ein2

016

--

--

192,

069

(717

,853

)12

9,86

4(2

5,25

9)-

(421

,179

)(3

,680

,433

)(4

,101

,612

)

--

--

(2,1

51,8

76)

(717

,853

)12

9,86

4(2

5,25

9)-

(2,7

65,1

24)

(4,8

76,3

90)

(7,6

41,5

14)

Acqu

isitio

noft

reas

urys

tock

sheld

bysu

bsid

iaries

--

--

--

--

(249

,995

)(2

49,9

95)

249,

995

-

Acqu

isitio

nord

ispos

alof

subs

idiar

ies's

hare

s-

(258

,816

)-

-(2

1,56

5)-

--

-(2

80,3

81)

(1,9

25,8

72)

(2,2

06,2

53)

Chan

gein

subs

idiar

ies'o

wner

sihp

-2,

338,

281

--

(1,6

33)

--

--

2,33

6,64

844

,662

,948

46,9

99,5

96

Chan

gesi

nnon

-con

trolli

ngin

teres

ts-

--

--

--

--

-(1

80,3

63)

(180

,363

)Ba

lance

asof

Dec

embe

r31,

2016

$23,

395,

367

$2,8

64,8

41$3

6,35

4$6

,946

,785

$(2,

175,

074)

$(70

9,73

9)$3

65,3

33$(

26,6

98)

$(1,

056,

865)

$29,

640,

304

$56,

243,

021

$85,

883,

325

$23,

395,

367

$2,8

64,8

41$3

6,35

4$6

,946

,785

$(2,

175,

074)

$(70

9,73

9)$3

65,3

33$(

26,6

98)

$(1,

056,

865)

$29,

640,

304

$56,

243,

021

$85,

883,

325

Spec

ialre

serv

euse

dto

offse

tacc

umul

ated

defic

its-

--

(2,1

75,0

74)

2,17

5,07

4-

--

--

--

Reve

rsalo

fspe

cialr

eser

ve-

--

(18,

685)

18,6

85-

--

--

--

Neti

ncom

ein2

017

--

--

74,0

70-

--

-74

,070

2,04

5,18

42,

119,

254

Othe

rcom

preh

ensiv

e(lo

ss)i

ncom

ein2

017

--

--

7,50

3(3

88,9

38)

231,

279

26,6

98-

(123

,458

)(1

,118

,665

)(1

,242

,123

)

--

--

81,5

73(3

88,9

38)

231,

279

26,6

98-

(49,

388)

926,

519

877,

131

Disp

osal

oftre

asur

ysto

cksh

eldby

subs

idiar

ies-

--

--

--

-21

,183

21,1

83(2

1,18

3)-

Disp

osal

ofsu

bsid

iary

--

--

--

--

--

(3,7

37,3

82)

(3,7

37,3

82)

Acqu

isitio

nord

ispos

alof

subs

idiar

ies's

hare

s-

488,

558

--

(381

,273

)-

--

(594

,217

)(4

86,9

32)

3,72

5,37

63,

238,

444

Chan

gein

subs

idiar

ies'o

wner

ship

-(7

9,89

4)-

--

--

--

(79,

894)

62,3

68(1

7,52

6)

Chan

gesi

nnon

-con

trolli

ngin

teres

ts-

--

--

--

--

-(1

,472

,133

)(1

,472

,133

)Ba

lance

asof

Dec

embe

r31,

2017

$23,

395,

367

$3,2

73,5

05$3

6,35

4$4

,753

,026

$(28

1,01

5)$(

1,09

8,67

7)$5

96,6

12$-

$(1,

629,

899)

$29,

045,

273

$55,

726,

586

$84,

771,

859

Engl

ishTr

ansla

tions

ofFi

nanc

ialSt

atem

ents

Orig

inall

yIss

ued

in C

hine

se

TATU

NG C

O., L

TD.A

NDSU

BSID

IARI

ES

CON

SOLI

DATE

DST

ATEM

ENTS

OF

CHAN

GES

IN E

QUIT

Y

Fort

he Y

ears

Ende

d De

cem

ber3

1,20

17an

d20

16

Total

com

preh

ensiv

e(lo

ss)i

ncom

e

Balan

ceas

ofJa

nuar

y1,2

016

Total

com

preh

ensiv

e(lo

ss)i

ncom

e

( Exp

ress

edin

Thou

sand

sof N

ewTa

iwan

Dol

lars)

Balan

ceas

ofJa

nuar

y1,2

017

Attri

buted

to E

quity

Hol

ders

ofth

ePar

ent

Non-

cont

rolli

ngIn

teres

tsTo

tal E

quity

Retai

ned

Earn

ings

Othe

r Com

pone

ntso

f Equ

ity

11



114

Cash

flows

from

ope

ratin

g ac

tiviti

es:

Cash

flows

from

inve

sting

activ

ities：

Neti

ncom

e(lo

ss)f

rom

cont

inui

ng o

pera

tions

bef

orei

ncom

etax

$2,7

10,0

30$(

2,20

6,48

7)Ac

quisi

tion

offin

ancia

l ass

ets at

fair

valu

ethr

ough

pro

fit o

rlos

s-

(16,

271,

430)

Neti

ncom

efro

m d

iscon

tinue

d op

erati

ons b

efor

einc

omet

ax10

9,36

413

,252

Disp

osal

offin

ancia

l ass

ets at

fair

valu

ethr

ough

pro

fit o

rlos

s15

,875

,554

580,

499

Neti

ncom

e(lo

ss) b

efor

einc

omet

ax$2

,819

,394

$(2,

193,

235)

Acqu

isitio

n of

avail

able-

for-s

alefin

ancia

l ass

ets-

(52,

161)

Adju

stmen

tsto

reco

ncile

cons

olid

ated

neti

ncom

e(lo

ss)t

o ne

t cas

h pr

ovid

ed b

y ope

ratin

g ac

tiviti

es:

Disp

osal

of av

ailab

le-fo

r-sale

finan

cial a

ssets

72,4

973,

785,

523

Depr

eciat

ion

expe

nse

8,13

5,65

79,

614,

995

Acqu

isitio

n o

finv

estm

enti

n de

btin

strum

entw

ithou

t acti

vem

arke

t(3

8,28

9,80

1)(2

0,56

5,18

8)Am

ortiz

ation

expe

nse

299,

773

420,

498

Disp

osal

ofin

vestm

enti

n de

btin

strum

entw

ithou

t acti

vem

arke

t35

,168

,154

14,0

65,1

37Al

lowa

ncef

orlo

ng-te

rmre

ceiv

ables

134,

747

11,8

27Pr

ocee

dsfro

mre

paym

ents

of h

eld-to

-matu

rityf

inan

cial a

ssets

20,0

00-

Inco

mef

rom

finan

cial a

sset

orfin

ancia

lliab

ility

atfa

irva

luet

hrou

gh p

rofit

orl

oss

(26,

616)

(151

,313

)Ac

quisi

tion

offin

ancia

l ass

ets ca

rried

at co

st(1

35,2

30)

(147

,531

)In

teres

t exp

ense

s3,

631,

700

4,29

3,96

9Di

spos

al of

finan

cial a

ssets

carri

ed at

cost

20,1

8054

0In

teres

tinc

ome

(1,0

49,7

91)

(977

,370

)Ac

quisi

tion

ofin

vestm

ents

acco

unted

for u

sing

equi

tym

ethed

(4,8

17)

(4,8

41)

Divi

dend

sinc

ome

(83,

931)

(52,

487)

Disp

osal

ofsu

bsid

iaries

(251

,317

)-

Shar

e of(

prof

it)lo

ss o

f ass

ociat

es an

d jo

intv

entu

res

(129

,388

)18

7,95

7Ca

shre

turn

sfro

m ca

pital

redu

ction

ofi

nves

tmen

ts ac

coun

tedfo

r und

erth

e equ

itym

ethod

481,

181

781

Gain

on

disp

osal

of p

rope

rty, p

lant a

nd eq

uipm

ent

(1,8

05,2

64)

(420

,690

)Di

spos

al of

non

-cur

ren t

asse

ts he

ldfo

rsale

3,49

8,57

224

8,20

3(G

ain)L

oss o

n di

spos

al of

non

-cur

rent

asse

ts cla

ssifi

ed as

held

fors

ale(2

,323

,058

)4,

082

Acqu

isitio

n of

pro

perty

, plan

t and

equi

pmen

t(3

4,04

5,15

1)(1

2,52

7,61

5)Lo

ss(g

ain) o

n di

spos

al of

inve

stmen

ts19

,963

(2,4

82,1

91)

Disp

osal

of p

rope

rty, p

lant a

nd eq

uipm

ent

2,26

6,73

71,

242,

547

Impa

irmen

tlos

s on

finan

cial a

ssets

14,7

0868

,398

Acqu

isitio

n of

intan

gibl

e ass

ets(2

78,7

14)

(308

,661

)Im

pairm

entl

oss o

n no

n-fin

ancia

l ass

ets1,

080,

657

742,

690

Acqu

isitio

n of

inve

stmen

t pro

perty

(2,0

94)

(102

,300

)Ch

ange

sin

asse

ts an

d lia

bilit

iesfro

m o

pera

ting

activ

ities

:In

crea

sein

long

-term

rece

ivab

les(1

2,41

8)(2

3,29

3)No

tesre

ceiv

able

5,02

896

,986

Incr

ease

in o

ther

non

-cur

rent

asse

t(3

,256

,559

)(4

,458

,353

)Ac

coun

tsre

ceiv

able

650,

810

1,23

6,43

8In

com

etax

es p

aid o

n lan

dva

luei

ncre

men

t(6

23,1

30)

-Ac

coun

tsre

ceiv

able

-rela

ted p

artie

s44

0,55

157

,648

Net c

ash

used

inin

vesti

ng ac

tiviti

es(1

9,49

6,35

6)( 3

4,53

8,14

3)Co

nstru

ction

rece

ivab

le(7

,029

)10

3,68

4Ot

herr

eceiv

ables

(inclu

dere

lated

par

ties)

150,

653

(968

,630

)Ca

shflo

wsfro

mfin

ancin

g as

tiviti

es：

Inve

ntor

ies95

3,77

81,

494,

264

Incr

ease

insh

ort-t

erm

loan

s55

,331

,048

131,

277,

307

Prep

aym

ents

(3,4

22,7

50)

561,

856

Decr

ease

insh

ort-t

erm

loan

s(6

5,51

6,76

9)(1

22,3

34,1

20)

Othe

r cur

rent

asse

ts18

0,97

945

8,84

3In

crea

sein

shor

t-ter

m n

otes

and

bills

pay

able

3,44

6,37

22,

132,

818

Fina

ncial

asse

ts at

fair

valu

ethr

ough

pro

fit o

rlos

s21

9,81

6(4

50,9

61)

Decr

ease

insh

ort-t

erm

not

es an

d bi

lls p

ayab

le(1

,993

,504

)(1

,560

,635

)Ot

her n

on-c

urre

nt as

sets

62,4

8546

9,27

1Re

paym

ent o

f bon

ds-

(600

,000

)No

tes p

ayab

le1,

689,

625

(227

,524

)Pr

ocee

dsfro

mlo

ng-te

rmlo

ans

24,7

82,1

5838

,315

,732

Acco

unts

paya

ble

(815

,565

)(2

,365

,304

)Re

paym

ent o

flon

g-ter

mlo

ans

(19,

276,

324)

(43,

775,

290)

Acco

unts

paya

ble-

relat

ed p

artie

s(6

37,4

15)

(5,6

10)

(Dec

reas

e)In

crea

sein

dep

osits

-in(1

3,87

4)17

,834

Othe

r pay

ables

3,15

3,01

1(2

0,71

1)(D

ecre

ase)

Incr

ease

inlo

ng-te

rm p

ayab

le(5

1,95

3)11

3,41

8Pr

ovisi

on29

,851

(192

,751

)Pu

rcha

se o

ftre

asur

ysto

cks

-(2

49,9

95)

Adva

nced

rece

ipts

481,

110

422,

739

Disp

osal

oftre

asur

ysto

cks

38,4

14-

Fina

ncial

li abi

lities

atfa

irva

luet

hrou

gh p

rofit

orl

oss

(581

)(1

40)

Acqu

isitio

n of

shar

es o

fsub

sidiar

ies' e

quity

(2,2

85,5

22)

-Ot

her c

urre

ntlia

bilit

ies- o

ther

s13

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12



115 13

TATUNG CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED December 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars unless otherwise specified)

1. Organization Operations

Established in 1918, Tatung Company (the “Company”) was incorporated under the Company Actof the Republic of China (“R.O.C.”) and underwent reorganization in 1939. The total capital atthat time was Taiwan Yuan $180,000, later increased to Taiwan Yuan $20,000,000 after severalcapital injections. After the reformation of monetary system in 1949, the total capital wasconverted to the equivalent of New Taiwan dollars (“NTD”) 200,000. As of December 31, 2017,the issued and registered capital was NTD23,395,367 thousand. The main activities of theCompany are as follows:

(1) The design, manufacture, sale, installation, network system, automation system, lease, servicemaintenance, import and export as agency of the following products:

○1 Steel manufacturing machinery ○2 Industrial appliances○3 Household appliances ○4 Refrigerators○5 Air conditioners ○6 Metal processing machinery○7 Electronic products ○8 Wire and cable○9 Chemical industry ○10 Cookware○11 Wood-made products ○12 Plastic products○13 Office equipment ○14 Audio products○15 Precision meters ○16 Transmission equipment○17 Transportation facilities ○18 Healthcare products○19 Microbe fermentation ○20 Construction○21 Furniture ○22 Solar wafers○23 Water treatment engineering ○24 Telecommunication equipment○25 Parking facilities ○26 Automation machinery○27 Semiconductors ○28 Real estate development and leasing

(2) Magazine publishing

(3) Customs brokerage

(4) General import/export (excluding permitted business)

(5) Development and leasing (excluding construction industry) of industrial parks on behalf ofthe competent authority.

The investment plans should be approved by the Board of Directors; however, the total investmentamount is not limited to the amount provided by Article 13 of Company Act, which states that thetotal investment amount shall not exceed 40% of the amount of its own paid-in capital.

The Company’s common shares were publicly listed on the Taiwan Stock Exchange (TWSE) onFebruary 9, 1962. The Company’s registered office and the main business location locate at No.22, Zhongshan North Road, Section 3, Taipei, Republic of China (R.O.C.).



116


(Expressed in Thousands of New Taiwan Dollars unless otherwise Specified)

14

2. Date and procedures of authorization of financial statements for issue

The consolidated financial statements of the Company and its subsidiaries (“the Group”) for theyear ended December 31, 2017 and 2016 were authorized for issue in accordance with a resolutionof the Board of Directors’ meeting on March 15, 2018.

3. Newly issued or revised standards and interpretations

(1) Changes in accounting policies resulting from applying for the first time certain standards andamendments

The Group applied for the first time International Financial Reporting Standards, InternationalAccounting Standards, and Interpretations issued, revised or amended which are endorsed byFinancial Supervisory Commission (“FSC”) and become effective for annual periodsbeginning on or after 1 January 2017. The nature and the impact of each new standard andamendment has no material effect on the Group.

(2) Standards or interpretations issued, revised or amended, which are endorsed by FSC, but notyet adopted by the Group as at the end of the reporting period are listed below.

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

The core principle of the new Standard is for companies to recognize revenue to depictthe transfer of promised goods or services to customers in amounts that reflect theconsideration to which the Group expects to be entitled in exchange for those goods orservices. An entity recognizes revenue in accordance with that core principle by applyingthe following steps:

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

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



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15

(b) IFRS 9“Financial Instruments”

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

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

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

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

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

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

The amendments address the inconsistency between the requirements in IFRS 10Consolidated Financial Statements and IAS 28 Investments in Associates and JointVentures, in dealing with the loss of control of a subsidiary that is contributed to anassociate or a joint venture. IAS 28 restricts gains and losses arising from contributionsof non-monetary assets to an associate or a joint venture to the extent of the interestattributable to the other equity holders in the associate or joint ventures. IFRS 10 requiresfull profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amendedso that the gain or loss resulting from the sale or contribution of assets that constitute abusiness as defined in IFRS 3 between an investor and its associate or joint venture isrecognized in full. IFRS 10 was also amended so that the gains or loss resulting from thesale or contribution of a subsidiary that does not constitute a business as defined in IFRS3 between an investor and its associate or joint venture is recognized only to the extent ofthe unrelated investors’ interests in the associate or joint venture. The effective date ofthe amendments has been postponed indefinitely, but early adoption is allowed.



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16

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

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

(e) Disclosure Initiative — Amendment to IAS 7 “Statement of Cash Flows”:

The amendments relate to changes in liabilities arising from financing activities and torequire a reconciliation of the carrying amount of liabilities at the beginning and end ofthe period. The amendments are effective for annual periods beginning on or after 1January 2017.

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

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

(g) IFRS 2 “Shared-Based Payment” - Amendments to IFRS 2

The amendments contain (1) clarifying that vesting conditions (service and non-marketperformance conditions), upon which satisfaction of a cash-settled share-based paymenttransaction is conditional, are not taken into account when estimating the fair value of thecash-settled share-based payment at the measurement date. Instead, these are taken intoaccount by adjusting the number of awards included in the measurement of the liabilityarising from the transaction, (2) clarifying if tax laws or regulations require the employerto withhold a certain amount in order to meet the employee’s tax obligation associatedwith the share-based payment, such transactions will be classified in their entirety asequity-settled share-based payment transactions if they would have been so classified inthe absence of the net share settlement feature, and (3) clarifying that if the terms andconditions of a cash-settled share-based payment transaction are modified, with the resultthat it becomes an equity-settled share-based payment transaction, the transaction isaccounted for as an equity-settled transaction from the date of the modification. Theequity-settled share-based payment transaction is measured by reference to the fair valueof the equity instruments granted at the modification date and is recognised in equity, onthe modification date, to the extent to which goods or services have been received. Theliability for the cash-settled share-based payment transaction as at the modification dateis derecognised on that date. Any difference between the carrying amount of the liabilityderecognised and the amount recognised in equity on the modification date is recognisedimmediately in profit or loss. The amendments are effective for annual periods beginningon or after 1 January 2018.



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17

(h) Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts— Amendmentsto IFRS 4

The amendments help to resolve issues arising from the different effective dates for IFRS9 “Financial Instruments” (1 January 2018) and the new insurance contracts standardabout to be issued by the IASB (still to be decided, but not before 1 January 2020). Theamendments allow entities issuing insurance contracts within the scope of IFRS 4 tomitigate certain effects of applying IFRS 9 “Financial Instruments” before the IASB’snew insurance contracts standard becomes effective. The amendments introduce twoapproaches: an overlay approach and a temporary exemption. The overlay approachallows an entity applying IFRS 9 to remove from profit or loss the effects of some of theaccounting mismatches that may occur from applying IFRS 9 before the new insurancecontracts standard is applied. The temporary exemption enables eligible entities to deferthe implementation date of IFRS 9 until 2021 (these entities that defer the application ofIFRS 9 will continue to apply IAS 39).

(i) Transfers of Investment Property — Amendments to IAS 40

The amendments relate to the transfers of investment property. The amendments clarifythat a change in use occurs when the property meets, or ceases to meet, the definition ofinvestment property and there is evidence of the change in use, the entity should transferproperty into and out of investment property accordingly. A change in management’sintentions for the use of a property is not evidence of a change in use. The amendmentsare effective for annual periods beginning on or after 1 January 2018.

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

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

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

IFRS 12 “Disclosure of Interests in Other Entities”

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



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IAS 28“Investments in Associates and Joint Ventures”

The amendments clarify that when an investment in an associate or a joint venture is heldby, or is held indirectly through, an entity that is a venture capital organization, or amutual fund, unit trust and other qualifying entities including investment-linked insurancefunds, the entity may elect to measure that investment at fair value through profit or lossin accordance with IFRS 9 “Financial Instruments” on an investment-by-investmentbasis. Besides, if an entity that is not itself an investment entity has an interest in anassociate or joint venture that is an investment entity, the entity may, when applying theequity method, elect to retain the fair value measurement applied by that investment entityassociate or joint venture to the investment entity associate's or joint venture's interests insubsidiaries on an investment-by-investment basis. The amendments are effective forannual periods beginning on or after 1 January 2018.

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

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

The abovementioned standards and interpretations issued by IASB and endorsed by FSC sothat they are applicable for annual periods beginning on or after 1 January 2018. Apart fromthe potential impact of the standards and interpretations listed under (a), (b), (e), and (f) whichis described below, all other standards and interpretations have no material impact on theGroup:

(a) IFRS 15“Revenue from Contracts with Customers” (including Amendments to IFRS 15“Clarifications to IFRS 15 Revenue from Contracts with Customers”)

The Group elected to recognize the cumulative effect of initially applying IFRS 15 at thedate of initial application (1 January 2018). The Group also elected to apply this standardretrospectively only to contracts that are not completed contracts at the date of initialapplication.



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The Group’s principal activities consist of the sale of goods, consturction contracts, andrendering of services. The impacts arising from the adoption of IFRS 15 on the Group aresummarized as follows:

A. Revenue from sale of goods and rendring of services are currently recognized whengoods and services have been delivered to the buyer. Starting from the date of initialapplication, in accordance with the requirements of IFRS 15, the Group shallrecognize revenue when (or as) the Group satisfies a performance obligation bytransferring a promised good or services to a customer. IFRS 15 has no materialimpact on the Group’s revenue recognition from sale of goods and rendering ofservices. However, for some contracts, part of the consideration was received fromcustomers upon signing the contract, then the Group has the obligation to provide theservices subsequently. The Group recognized the consideration received in advancefrom customers as payment received in advance under other current liabilities.Starting from the date of initial application, in accordance with IFRS 15, it should berecognized as contract liabilities. The Group will reclassify prepayments to contractliabilities amounting to NTD3,056,768 thousand on initial application date.

B. Revenue from construction contracts is currently recognized by reference to the stageof completion. Starting from the date of initial application, in accordance with IFRS15, the Group shall recognize revenue when (or as) the Group satisfies a performanceobligation by transferring a promised service to a customer and also by reference tothe stage of completion. IFRS 15 has no impact on the Group’s revenue recognitionfrom construction contracts. Starting from the date of initial application, for somecontracts, the obligations are fulfilled while the Group still doesn’t have the right toreceive the consideration unconditionally. the Group should recognize them undercontract assets, instead of construction contracts receivable. As for contracts that theobligations aren’t fulfilled but the Group receives consideration first, the Groupshould recognize them under contract liabilities, instead of advanced receipts. TheGroup will reclassify construction receivables to contract assets and advanceconstruction receipts to contract liabilities amounting to NTD180,903 andNTD144,691 thousand, respectively.

C. In accordance with the requirements of IFRS 15, more extensive disclosure wouldhave to be made.

(b) IFRS 9 “Financial Instruments”

The Group elects not to restate prior periods in accordance with the requirements of IFRS9 at the date of initial application (1 January 2018). The adoption of IFRS 9 has thefollowing impacts on the Group:



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20

A. Classification and measurement of financial assets

a. Available-for-sale financial assets – equity instrument investments

The assessment of the cash flow characteristics will be based on the facts andcircumstances that exited as at the date of initial application. As these equityinstrument investments are not held-for-trading, the Group elected to designatethem as financial assets measured at fair value through other comprehensiveincome. On the date of initial application, the Group will reclassify available-for-sale (including carried at cost) financial assets to financial assets measured at fairvalue through other comprehensive income and to financial assets measured at fairvalue through profit or loss of NTD1,874,164 thousand, and NTD337,889thousand, respectively. Other related adjustments are described as follow:

1. The stocks of unlisted companies currently measured at cost in accordance withIAS 39 had an original cost of NTD566,590 thousand and was partially impairedfor NTD19,228 thousand. However, in accordance with the requirement of IFRS9, stocks of unlisted companies must be measured at fair value but are notrequired to be assessed for impairment. The estimated fair value of the stocks ofunlisted companies was NTD620,399 thousand as at the date of initialapplication. The Group will adjust the carrying amount of financial assetsmeasured at fair value through other comprehensive income and will alsoincrease retained earnings, other equity, non-controlling interest, and decreasedeferred tax asset by NTD19,228 thousand, NTD40,846 thousand, NTD12,219thousand and NTD744 thousand, respectively.

2. The stocks of listed companies are currently measured at fair value. As at thedate of initial application, except for the reclassification to financial assetsmeasured at fair value through other comprehensive income and other equityaccounts, no other difference will incur.

b. Available-for-sale financial assets –domestic listed and unlisted stocks

The subsidiaries of the Company held domestic listed and unlisted stocks. Assessedbased on the fact and situation of the characteristic of the financial assets’ cash flowas at the date of initial application, the stocks were not fully used to repay theprincipal and the interest associated with the oustanding principal. Therefore, thestocks should be classified as mandatory financial assets at fair value through profitor loss. As at the date of initial application, the stocks should be reclassified tofinancial assets at fair value through profit or loss from available-for-sale financialassets. In addition, the change of fair value accumulated under other equity shouldbe reclassified to retained earnings. Therefore, the Company reclassified change offair value amounting to NTD57,009 thousand recognized in porportion to theholding percentage before to retained earnings.



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21

c. Available-for-sale financial assets – de-recognition of equity investments measuredat fair value

Upon de-recognition of equity investments currently classified as available-for-salemeasured at fair value, the accumulated gains or losses previously recognized inother comprehensive income was recycled to profit or loss from equity. However,under IFRS 9, subsequent fair value changes of the aforementioned equityinvestments are recognized in other comprehensive income and cannot be recycledto profit or loss. Upon de-recognition, the accumulated amounts in othercomponent of equity is reclassified to retained earnings (reclassification to profit orloss is not allowed). The above de-recognition accounting treatment has no materialimpact on the Group as at the date of initial application.

d. Impairment of financial assets

This is applicable to financial assets not measured at fair value through profit orloss. In accordance with IFRS 9, a loss allowance for debt instruments ismeasured using the expected credit loss model, whereas trade receivables orcontract assets that result from transactions that are within the scope of IFRS 15 aremeasured using the simplified approach (provision matrix). The aforementionedrequirements on impairment is different from the current incurred loss model andhave no material impact on the Group.

B. Others

Consequential amendments on the related disclosures in IFRS 7 were also made as aresult of the application of IFRS 9, which include the disclosure requirements relatedto the initial application of IFRS 9. Therefore more extensive disclosure would haveto be made.

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

Additional disclosure of a reconciliation of the carrying amount of liabilities arising fromfinancing activities at the beginning and end of the period would be required.

(3) Standards or interpretations issued, revised or amended, by IASB but not yet endorsed by FSCat the date of issuance of the Group’s financial statements are listed below.



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22

(a) IFRS 16“Leases”

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

(b) IFRIC 23 “Uncertainty Over Income Tax Treatments”

The Interpretation clarifies application of recognition and measurement requirements inIAS 12 “Income Taxes” when there is uncertainty over income tax treatments. TheInterpretation is effective for annual periods beginning on or after 1 January 2019.

(c) IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevantaccounting aspects (including recognition, measurement, presentation and disclosurerequirements). The core of IFRS 17 is the General (building block) Model, under thismodel, on initial recognition, an entity shall measure a group of insurance contracts at thetotal of the fulfilment cash flows and the contractual service margin. The fulfilmentcash flows comprise of the following:

(1) estimates of future cash flows;(2) Discount rate: an adjustment to reflect the time value of money and the financial risks

related to the future cash flows, to the extent that the financial risks are not includedin the estimates of the future cash flows; and

(3) a risk adjustment for non-financial risk.

The carrying amount of a group of insurance contracts at the end of each reporting periodshall be the sum of the liability for remaining coverage and the liability for incurredclaims. Other than the General Model, the standard also provides a specific adaptationfor contracts with direct participation features (the Variable Fee Approach) and asimplified approach (Premium Allocation Approach) mainly for short-duration contracts.IFRS 17 is effective for annual periods beginning on or after 1 January 2021.

(d) IAS 28“Investment in Associates and Joint Ventures” — Amendments to IAS 28

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associateor joint venture that form part of the net investment in the associate or joint venture beforeit applies IAS 28, and in applying IFRS 9, does not take account of any adjustments thatarise from applying IAS 28. The amendment is effective for annual reporting periodsbeginning on or after 1 January 2019.



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23

(e) Prepayment Features with Negative Compensation (Amendments to IFRS 9)

The amendment allows financial assets with prepayment features that permit or require aparty to a contract either to pay or receive reasonable compensation for the earlytermination of the contract, to be measured at amortized cost or at fair value through othercomprehensive income. The amendment is effective for annual reporting periodsbeginning on or after 1 January 2019.

(f) Improvements to International Financial Reporting Standards (2015-2017 cycle):

IFRS 3 “Business Combinations”

The amendments clarify that an entity that has joint control of a joint operation shallremeasure its previously held interest in a joint operation when it obtains control of thebusiness. The amendments are effective for annual periods beginning on or after 1January 2019.

IFRS 11 “Joint Arrangements”

The amendments clarify that an entity that participates in, but does not have joint controlof, a joint operation does not remeasure its previously held interest in a joint operationwhen it obtains joint control of the business. The amendments are effective for annualperiods beginning on or after 1 January 2019.

IAS 12 “Income Taxes”

The amendments clarify that an entity shall recognize the income tax consequences ofdividends in profit or loss, other comprehensive income or equity according to where theentity originally recognized those past transactions or events. The amendments areeffective for annual periods beginning on or after 1 January 2019.

IAS 23 “Borrowing Costs”

The amendments clarify that an entity should treats as part of general borrowings anyborrowing made specifically to obtain an asset when the asset is ready for its intended useor sale. The amendments are effective for annual periods beginning on or after 1 January2019.



126



24

(g) Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)

The amendments clarify that when a change in a defined benefit plan is made (such asamendment, curtailment or settlement, etc.), the entity should use the updatedassumptions to remeasure its net defined benefit liability or asset. The amendments areeffective for annual periods beginning on or after 1 January 2019.

The abovementioned standards and interpretations issued by IASB have not yet endorsed byFSC at the date when the Group’s financial statements were authorized for issue, the localeffective dates are to be determined by FSC. As the Group is still currently determining thepotential impact of the standards and interpretations listed under (a)~(b), (d), and (f)~(g), it isnot practicable to estimate their impact on the Group at this point in time. All other standardsand interpretations have no material impact on the Group.

4. Summary of significant accounting policies

(1) Statement of compliance

The consolidated financial statements of the Group for the years ended December 31, 2017and 2016 have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers (“the Regulations”) and International FinancialReporting Standards, International Accounting Standards, and interpretations developed bythe International Financial Reporting Interpretations Committee or the former StandingInterpretations Committee as endorsed by the FSC.

(2) Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except forfinancial instruments that have been measured at fair value. The consolidated financialstatements are expressed in thousands of New Taiwan Dollars (“NTD”) unless otherwisestated.

(3) Basis of consolidation

Preparation principle of consolidated financial statement

Control is achieved when the Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power overthe investee. Specifically, the Group controls an investee if and only if the Group has:



127



25

(a) power over the investee (i.e. existing rights that give it the current ability to direct therelevant activities of the investee)

(b) exposure, or rights, to variable returns from its involvement with the investee, and(c) the ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, theGroup considers all relevant facts and circumstances in assessing whether it has power overan investee, including:

(a) the contractual arrangement with the other vote holders of the investee(b) rights arising from other contractual arrangements(c) the Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstancesindicate that there are changes to one or more of the three elements of control.

Subsidiaries are fully consolidated from the acquisition date, being the date on which theCompany obtains control, and continue to be consolidated until the date that such controlceases. The financial statements of the subsidiaries are prepared for the same reportingperiod as the parent company, using uniform accounting policies. All intra-group balances,income and expenses, unrealized gains and losses and dividends resulting from intra-grouptransactions are eliminated in full.

A change in the ownership interest of a subsidiary, without a change of control, is accountedfor as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent andto the non-controlling interests even if this results in the non-controlling interests having adeficit balance.

If the Company loses control of a subsidiary, it:

(a) derecognizes the assets (including goodwill) and liabilities of the subsidiary;(b) derecognizes the carrying amount of any non-controlling interest;(c) recognizes the fair value of the consideration received;(d) recognizes the fair value of any investment retained;(e) recognizes any surplus or deficit in profit or loss; and(f) reclassifies the parent’s share of components previously recognized in other

comprehensive income to profit or loss.



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26

a. The consolidated entities are listed as follows:

Investor Subsidiary Main businesses

December 31,

2017

December 31,

2016

The Company, Chunghwa Electronics

Investment Co., Ltd., Green Energy

Technology Inc., Chih Sheng Realty Co.,

Ltd. and Tatung Global Strategy Investment

and Trading (BVI) Inc.


(“CPT”)

Manufacture, research and sale of

picture tubs and TFT-LCD products

41.25% 41.25%

The Company, Shan-Chih Investment Co.,

Ltd. and Shan-Chih Asset Development Co.


(“TSTI”)

Software and hardware service and

system integration

54.40% 54.40%

The Company, CPT, SCSC and Chunghwa

Electronics Investment Co., Ltd

Forward Electronics Co., Ltd. (“FD”) Manufacture and sale of electronics 40.75% 40.75%

The Company Taiwan Telecommunication Industry

Company Ltd.

Telecommunication devices. 100.00% 100.00%

The Company and Chunghwa Electronics

Investment Co., Ltd.

San-Chih Semiconductor Co.,

Ltd.(“SCSC”)

Manufacture and sales of

semiconductors and chips

58.20% 58.20%

The Company, SCSC, SCAD, Shan Chih

Investment Co., Ltd., and Chih Sheng


Green Energy Technology Inc.

(“GET”)

Manufacture of electrical parts and

retail sales and wholesale of

electrical materials

39.04% 36.22%

The Company Central Research Technology Co. EMCIRF testing and certification

services

100.00% 100.00%

The Company Tatung Consumer Products (Taiwan)

Co., Ltd.

Sales of home appliances and digital

computer products

99.10% 99.10%

The Company Tatung SM-Cycle Co. Manufacture of speed reducers,

speed aviators

85.33% 85.33%

The Company, Chunghwa Electronics

Investment Co., Ltd. and Chih-Sheng



(“TFC”)

Industrial coatings, electrocution

coatings resistor coatings, photo-

catalyst, inkjet ink

54.63% 54.63%

The Company Shan-Chih Asset Development Co.

(“SCAD”)

Development and leasing of real

estate

100.00% 100.00%

The Company, SCAD and Chih Sheng


Chunghwa Electronics


Professional investment holding 100.00% 99.86%

The Company Tatung DIE Casting Co. Manufacturing and sales of casting

mold

51.00% 51.00%

The Company and Tatung Wire & Cable

(Thailand) Co., Ltd.

Tatung (Thailand) Co., Ltd. Manufacturing and sales of IT

products, home appliances and AI

meter

100.00% 100.00%

The Company Tatung Co. of Japan, Inc. Sales and purchase of electronic

parts, home appliances and IT

products

100.00% 100.00%

The Company Tatung Electronics(S) Pte. Ltd. Purchases, sales and services of raw

material

90.00% 90.00%

The Company Tatung Wire & Cable (Thailand) Co.,

Ltd.

Manufacture and sales of wire and

cable

100.00% 100.00%

The Company Tatung Information (Singapore) Pte.

Ltd.




129



27


December 31,

2017

December 31,

2016

The Company Tatung Electric (Singapore) Pte. Ltd. Professional investment holding 100.00% 100.00%

The Company Tatung Co. of America Inc. Sales and service of IT and household

electronics products in the US

50.00% 50.00%

The Company Tatung Mexico S.A de C.V.

(“TMX”)

Manufacture of electronic products 100.00% 100.00%

The Company Tatung Science and Technology, Inc. Sale and purchase of IT products 100.00% 100.00%

The Company Tatung Electric Company of

America, Inc.

Manufacture and sales of motor

products in the U.S.

100.00% 100.00%

The Company Tatung Netherlands B.V. Sales of electronic products 100.00% 100.00%

The Company TATUNG CZECH s.r.o Manufacture of IT products 100.00% 100.00%

The Company Tatung Medical Healthcare

Technologies Co., Ltd.

Design and sales of medical

instruments.

95.33% 95.08%

The Company Toes Opto-Mechatronics Co. Manufacture of data storage and

process equipment

85.00% 85.00%

The Company Tatung Vietnam Co., Ltd. Manufacture and sales of home

appliances

100.00% 100.00%

The Company Tatung Electric Technology (VN)

Co., Ltd.


cable

100.00% 100.00%

The Company Chih Sheng Investment Co., Ltd. Professional investment holding 100.00% 100.00%

The Company and Chunghwa Electronics


Shan Chih Investment Co., Ltd. Professional investment holding 100.00% 100.00%

The Company Tatung Global Strategy Investment

and trading (BVI) Inc.

Professional investment holding - 100.00%

The Company Absolute Alpha Limited Professional investment holding 100.00% 100.00%

The Company Tatung Forever Energy Co., Ltd. Solar energy related business 98.55% 98.12%

The Company Leap High Limited Professional investment holding 65.00% 65.00%

The Company Tungyang Energy Co., Ltd. Solar energy related business 100.00% -

The Company and CPTB Chunghwa Picture Tubes (Labuan)

Ltd. (“CPTL”)

Investment holding and sales of

TFT-LCD

100.00% 100.00%

CPT Giantplus Technology Co., Ltd.

(“Giantplus”)

Research, development, production

and sales of LCD.

- 53.67%

CPT Chunghwa Picture Tubes (Bermuda)

Ltd. (“CPTB”)


TFT-LCD

100.00% 100.00%

CPTB and CPTL Chunghwa Picture Tubes

Technology (Group) Co., Ltd.

(“CPTTG”)

Research, design, manufacturing,

sales and service of flat-panel display

device, monitor display model and

components

26.37% 30.42%

CPTB Dalemont Investment Ltd. Professional investment holding - 100.00%

CPTB Daliant Investment Ltd. Professional investment holding - 100.00%

CPTB Bangalor Investment Ltd. Professional investment holding - 100.00%

CPTB Bensaline Investment Ltd. Professional investment holding - 100.00%

CPTB New Kingston Enterprises Limited

(“NKEL”)


CPTTG(L) and CPTTG Chunghwa Picture Tubes (Wujiang)

Ltd. (“CPTW”)

Assembly final module of TFT-LCD 100.00% 100.00%



130



28


December 31,

2017

December 31,

2016

CPTTG Chunghwa Pictures Display

Technology (Fujian) Ltd.(“FDT”)

Assembly final module of TFT-LCD - 100.00%

CPTW, FDT and CPTTG CPTF Optronics Co., Ltd. Assembly final module of TFT-LCD 100.00% 100.00%

CPTB Chunghwa Picture Tubes (Malaysia)

Sdn. Bhd. (“CPTM”)

Manufacture and sale of CRT 100.00% 100.00%

CPTF Optronics Co., Ltd., NKEL, and

Forward Development Co., Ltd.

CPTF Visual Display (Fuzhou)

Ltd.(“FVD”)

Manufacture components of TFT-

LCD

100.00% 100.00%

CPTF Optronics Co., Ltd. Hwallar Optronics (Fuzhou) Co. Ltd. Manufacture components of TFT-

LCD

51.00% 51.00%

CPTTG Chunghwa PictureTubes Technology

(Labuan) Ltd


TFT-LCD

100.00% 100.00%

CPTTG Fuzhou YingYuan Equity Investment

Management Co., Ltd.


CPTTG Vibrant Display Technology CO.,

Ltd.

R&D, design and manufacture

components of TFT-LCD

100.00% 100.00%

CPTB and CPTTG CPT TPV Optical (Fujian) Co., Ltd. Manufacture components of TFT-

LCD

80.00% 80.00%

CPTB CPTF Optronics (Shen-Zhen) Co.,

Ltd.

Investigation of market information 100.00% 100.00%

CPTTG, CPTF Optronics Co., Ltd., and

Goldmax Asia Pacific Ltd

Kornerstone Materials Technology

Co. Ltd.

R&D, design and manufacture and

sale of panel components

100.00% 100.00%

Kornerstone Materials Technology Co. Ltd. DDD3Empire Manufacture, research and sales of

optical glass

55.00% 55.00%

CPTF Optronics Co., Ltd CPTF Optronics (HK) Co., Ltd. Sales of TFT-LCD 100.00% 100.00%

Vibrant Display Technology CO., Ltd. Huajiayuan Co., Ltd. Development, investment, sale,

leasing of real estate; estate

management and lodging

100.00% -

Giantplus Technology Co., Ltd. Giantplus (Samoa) Holding Co., Ltd. Investment - 100.00%

Giantplus Technology Co., Ltd. Hsh Heng Investment Co., Ltd. Investment - 100.00%

Giantplus (Samoa) Holding Co., Ltd. Giantplus Holding L.L.C Investment - 100.00%

Giantplus Holding L.L.C Kunshan Giantplus Optoelectronics

Technology Co., Ltd.

Manufacture components of LCD

display

- 100.00%

Giantplus Holding L.L.C Shenzhen Giantplus Optoelectronics

Display Co., Ltd.

Manufacture components of LCD

display

- 100.00%

Giantplus Holding L.L.C Kunshan Giantplus Optronics

Display Technology Co., Ltd

Sales of touch panel - 100.00%

Forward Electronics Co., Ltd. Forward Development Co., Ltd. Investment holding 100.00% 100.00%

Forward Electronics Co., Ltd., Green Energy

Technology Inc. and Toes Opto-

Mechatronics Co.

Gintung Energy Co., Ltd. Manufacture and sale of solar

module and related component

45.82% 45.82%

Forward Development Co., Ltd. Forward Electronics Equipment

(Dong Guan) Co., Ltd

Manufacture and sale of tuner,

keyboard, mouse, remote controller,

switch, socket and potentiometer.

100.00% 100.00%



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29


December 31,

2017

December 31,

2016

Forward Development Co., Ltd. Suzhou Forward Electronics


Manufacture and sale of backlight

unit for TFT-LCD, driving board,

tuner, keyboard, mouse, switch,

socket and connector.

100.00% 100.00%

SCSC Greater Power Limited Investment holding 100.00% 100.00%

SCSC Chih De Investment Co., Ltd. Investment holding 100.00% 100.00%

GET Energy Well International Limited Investment holding 100.00% 100.00%

GET Green Energy Global Investment Investment holding 100.00% 100.00%

Greater Power Limited and Energy Well

International Limited

Ultra Energy Holdings Limited Investment holding 100.00% 100.00%

Energy Well International Limited Golden Sunny Limited Investment holding 100.00% 100.00%

Ultra Energy Holdings Limited Ultra Energy (WEIFANG)

Technology Co. Ltd

Solar silicon wafer slicing. 100.00% 100.00%

TFC Tatung Coatings (Kunshan) Co., Ltd. Manufacture and sale of industry

coating and electro-deposition

coating.

100.00% 100.00%

TFC Huaian Tatung Advanced

Technology Materials Co., Ltd.

Manufacture and sale of positive

material of lithium battery, printer

ink, electro-deposition high

performance coating.

100.00% 100.00%

TFC Shang Chih International Chemical

Industry Co., Ltd.

Investment holding 100.00% 100.00%

TFC Wujiang Shang Huah Plastic Co., Ltd. Manufacture and sale of ABS plastic. 100.00% 100.00%

Shang Chih International Chemical Industry

Co., Ltd.

Wujiang Shanghua Material

Technology Co., Ltd

ABS plastic, color dyes 100.00% 100.00%

Shang Chih International Chemical Industry

Co., Ltd.

Dongguan Tongli Trading Co., Ltd. Wholesale of painting, coating and

chemical products.

100.00% 100.00%

Tatung Information (Singapore) Pte. Ltd. Tatung Information Technology

(Jiangsu) Co., Ltd.

Manufacture and sales of various

electrical products

100.00% 100.00%

Tatung Information (Singapore) Pte. Ltd. Tatung Wire And Cable Technology

(Wujiang) Co., Ltd.


cable

100.00% 100.00%


and Shan-Chih International Holding

Corporation

Tatung Compressors

(ZHONGSHAN) Co., Ltd.

Manufacture and sales of

reciprocating compressors.

100.00% 100.00%

Tatung Electric (Singapore) Pte. Ltd. and

Shan-Chih International Holding

Corporation

Tatung (Shanghai) Co., Ltd Manufacture and sales of motors,

generators and transformers

100.00% 100.00%

TMX TMX Logistics, Inc. Hub service 100.00% 100.00%

TMX TMX Technologies Inc. Technologies & business

development

100.00% 100.00%

Shan Chin Investment Co. Ltd Shan-Chih International Holding

Corporation


Shan-Chih International Holding

Corporation

Shan-Chih Wire&Cable Technology

(Wujiang) Co. , Ltd.


cable

- 100.00%



132



30


December 31,

2017

December 31,

2016

TSTI Chyun Huei Business Technology

Inc.

Information software

Service

100.00% 100.00%

TSTI Tatung System Technologies

Holding Ltd.


TSTI Tisnet Technology Inc. Software design and development 100.00% 100.00%

Tatung System Technologies Holding Ltd. TSTI Technologies (Shanghai) Co.,

Ltd.

Information software

Service

94.00% 94.00%

Chih Sheng Investment Co., Ltd. Chih Sheng Investment (BVI) Investment holding 100.00% 100.00%

Chih Sheng Investment Co., Ltd. HEDA Biotechnology Co., Ltd. Produce, food retail and wholesale

industry

52.17% 52.17%

Chih Sheng Investment (BVI) Co., Ltd Chih Sheng Holding Co., Ltd. Investment holding 100.00% 100.00%

Chih Sheng Holding Co., Ltd. and CPTB Goldmax Asia Pacific Ltd Investment holding 51.26% 51.26%

Chih Sheng Holding Co., Ltd. Chih Sheng Holding HK Limited Investment holding 100.00% 100.00%

Absolute Alpha Limited Tatung Information Technologies

Corp.

Sales of electronic products 100.00% 100.00%

Chih Sheng Holding HK Limited Wu-jiang Tatung Electronics Trading

Co. LTD

Sales of information products 100.00% 100.00%

Shan-Chih Asset Development Co. and

Taipei Industry Corporation

Tatung Forestry and Construction

Co.

Design and construction of structural

engineering.

99.87% 99.87%

Shan-Chih Asset Development Co. Taipei Industry Corporation Production and sales of mixing

concrete.

50.61% 50.61%

Shan-Chih Asset Development Co. Chih Sheng Realty Co., Ltd. Realty management 100.00% 100.00%

Shan-Chih Asset Development Co. Shan-Chih Asset International

Holding Corporation

Investment Holding 100.00% 100.00%

Shan-Chih Asset International Holding

Corporation

Tatung Management Consultant

(Shanghai) Co., Ltd.

Realty and Leasing Service 100.00% 100.00%

Shan-Chih Asset International Holding

Corporation

Shan-Chih Asset International (Hong

Kong) Holding Limited

Investment Holding 100.00% 100.00%

Shan-Chih Asset International (Hong Kong)

Holding Limited

Suqian Zhiwei Real Estate Co., Ltd. Realty management - 100.00%

Tatung Forever Energy Co., Ltd. Sheng Yang Energy Co., Ltd. Battery Material Retail 100.00% 100.00%

Tatung Information (Singapore) Pte. Ltd.,

and Tatung (Thailand) Co., Ltd.

Myanmar Tatung Co., Ltd. Sales and customer service of solar

energy, industrial motor, home

appliances, industrial air

conditioner

100.00% 100.00%

Tatung Information (Singapore) Pte. Ltd. Tatung Myanmar JV Holding Co., Ltd. Investment Holding 100.00% 100.00%

Tatung Medical Healthcare Technologies

Co., Ltd.

Tatung Medical & Healthcare

Technologies Inc.

Investment Holding 100.00% -

Tatung Medical & Healthcare Technologies

Inc.

Elite Oxygen And Healthcare Co., Ltd. Sale of Oxygen generator 100.00% -

Tatung Medical Healthcare Technologies

Co., Ltd.

Insured Pharmaceuticals Co., Ltd. Pharmaceuticals and warehousing and

transportation service

100.00% -

Tatung (Shanghai) Co., Ltd Tatung Xinji (Guangdong)


Electrical engineering system

installation service

100.00% -



133



31

Green Energy Technology Inc. issued 19,724 thousand shares in December 2017through private placement and the Company subscribed all the shares. Also, ChihSheng Investment Co., Ltd, a subsidiary of the Company, sold part of its shares ofGreen Energy Technology Inc. during the third quarter. Hence, the Group’s holdingpercentage of Green Energy Technology Inc. increased from 36.22% to 39.04%.

Tatung (Shanghai) Co., Ltd, a subsidiary of the Company, invested to establish DatongXinji (Guangdong) Technology Co., Ltd. in December 2017. Its main activity iselectrical engineering system installation service.

Tatung Global Strategy Investment and Trading (BVI) Inc. had completed theliquidation procedure in December 2017, and thus the Group’s holding percentagedecreased from 100% to 0%

The Company held a capital injection for Tatung Forever Energy Co., Ltd. inDecember 2017, and thus the Group’s holding percentage increased from 98.12% to98.55%.

San-Chih Asset International (Hong Kong) Holding Limited, a subsidiary of theCompany, sold all shares of Suqian Zhiwei Real Estate Co., Ltd to Jiangsu speedingProperties Limited in the amount of RMB131,640 thousand. Therefore, the Group’sholding percentage decreased from 100% to 0%. Upon the disposal, Suqian ZhiweiReal Estate Co., Ltd will no longer be consolidated.

The Company established Tungyang Energy Co., Ltd. in November 2017 to expandthe solar energy business of the Group.

Vibrant Display Technology CO., Ltd, a subsidiary of the Company, establishedHuajiayuan Co., Ltd. in November 2017 with its own funding in the amount ofRMB181,000 thousand.

Chih-Sheng Investment Co., Ltd, a subsidiary of the Company, bought shares ofChunghwa Electronics Investment Co., Ltd during the third quarter in 2017. Hence,the Group’s holding percentage increased from 99.86% to 100%.

Tatung Medical Healthcare Technologies Co., Ltd, a subsidiary of the Company,established Insured Pharmaceuticals Co., Ltd in the third quarter of 2017 in order tooperate the pharmaceuticals warehousing and transportation services.



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32

Tatung Medical Healthcare Technologies Co., Ltd. held a capital injection in August2017. The Group subscribed to the shares and thus the Group’s holding percentageincreased to 95.33%.

Shan-Chih Wire & Cable Technology (Wujiang) Co., Ltd, a subsidiary of theCompany, had completed the liquidation procedure in August 2017, and thus theGroup’s direct and indirect holding percentage decreased from 100% to 0%.

Chunghwa Picture Tubes Technology (Group) Co., Ltd, a subsidiary of ChunghwaPicture Tubes, Ltd, merged its fully-owned subsidiary, Chunghwa Pictures DisplayTechnology (Fujian) Ltd in July 2017 to integrate the company’s resource, improveoperating efficiency, and lower administration costs. Hence, Chunghwa Picture Tubes,Ltd’s direct and indirect holding percentage of Chunghwa Pictures DisplayTechnology (Fujian) Ltd decreased from 100% to 0%.

Dalemont Investment Ltd, Daliant Investment Ltd, Bangalor Investment Ltd andBensaline Investment Ltd. had completed the liquidation procedures in June 2017,and thus Chunghwa Picture Tubes, Ltd’s direct and indirect holding percentagedecreased from 100% to 0%.

Chunghwa Picture Tubes, Ltd sold all of its shares of Giantplus Technology Co., Ltd.to a Japanese company, Ortus Technology Co., Ltd. The 236,981,757 shares were soldin the amount of NTD3,926,787 thousand (each share sold at NTD16.57). Therefore,the Group’s direct and indirect holding percentage of Giantplus Technology Co., Ltddecreased from 53.67% to 0%. Upon the disposal, Giantplus Technology Co., Ltd andits subsidiaries will no longer be consolidated.

CPTB and CPTL sold 69,999,922 shares, a 4.05% of the total shares of CPTTG inFebruary and March, 2017. After deducting the related transaction fees, the netproceeds were RMB719,438 thousand. Upon the disposal, the Group’s direct andindirect holding percentage of CPTTG decreased from 30.42% to 26.37%.

The Group established Tatung Medical & Healthcare Technologies Inc. in March 2017with USD50 thousand and reinvested in Foshan City Yile oxygen medical and tradeCo., Ltd. The Group’s holding percentages of these companies are 100%.

The Company increased its shareholding in CPT by 17.03% as a result of the legalaction against Compal Electronics, Inc. Refer to Note 9(5) for further details.



135



33

b. Although the percentages of ownership interests in some companies, such as CPT,CPTTG, FD, GET, Gintung Energy Co., Ltd., are less than 50%, the Group determinedthat it has control over these companies. This is due to a combination of factorsincluding the fact that the Group has been the single largest shareholder of thesecompanies since the inception of the investment; the remaining shareholding of othershareholders is dispersed; in the absence of contractual arrangement, the Group couldobtain proxies to achieve relative majority and the Group is able to appoint or approvethe key management personnel of these companies who have the ability to direct therelevant activities.

c. Subsidiaries that are not included in the consolidated financial statement are asfollows:

Percentage of ownership

Investor Subsidiary Business nature

December 31,

2017

December 31,

2016

The Company, Shan-Chih Asset

Development Co., Tatung Forestry

and Construction Co. and Tatung

Fine Chemicals Co., Ltd.

Hsieh Chih Industrial Library

Publishing Co.

The publishing and sales of

Hsieh Chih Industrial Library

98.80% 98.80%

The Company Lansong International Co., Ltd Forestry 98.33% 98.33%

All the above subsidiaries were of insignificant percentage to the Company’s totalassets and operating revenue and therefore not consolidated by the Company.

Please refer to Note 8 for stocks of subsidiaries of the Gorup that were pledged ascollaterals.

(4) Foreign currency transactions

The Group’s consolidated financial statements are presented in NTD, which is also theCompany’s functional currency. Each entity in the Group determines its own functionalcurrency and items included in the financial statements of each entity are measured by thefunctional currency.

Transactions in foreign currencies are initially recorded by the Group entities at theirrespective functional currency rates prevailing at the date of the transaction. Monetary assetsand liabilities denominated in foreign currencies are translated at the functional currencyclosing rate of exchange ruling at the reporting date. Non-monetary items measured at fairvalue in a foreign currency are translated by the exchange rates at the date when the fair valueis determined. Non-monetary items that are measured at historical cost in a foreign currencyare translated by the exchange rates at the dates of its initial transactions.



136



34

All exchange differences arising from the settlement or translation of monetary items are takeninto profit or loss in the period which they arise except for the following:

(a) Exchange differences arising from foreign currency borrowings for an acquisition of aqualifying asset. If the differences are regarded as an adjustment to interest costs, whichwill be capitalize and take as part of the cost of the borrowing.

(b) Foreign currency items within the scope of IAS 39 Financial Instruments: Recognitionand Measurement are accounted for based on the accounting policy for financialinstruments.

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

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

(5) Translation of financial statements in foreign currency

The assets and liabilities of foreign entities are translated into NTD at the closing exchangerate at the balance sheet date. Income and expenses are translated at an average rate within theperiod. The exchange differences arising on the translation are recognized in othercomprehensive income. On the disposal of a foreign operation, the cumulative amount of theexchange differences relating to that foreign operation, recognized in other comprehensiveincome and accumulated in the separate component of equity, is reclassified from equity toprofit or loss when the gain or loss on disposal is recognized. The following are accounted foras disposals even if an interest in the foreign operation is retained by the Group: the loss ofcontrol over a foreign operation, the loss of significant influence over a foreign operation, orthe loss of joint control over a foreign operation.

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



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35

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

(6) Current and non-current distinction for assets and liabilities

An asset is classified as current when:

(a) The Group expects to realize the asset, or intends to sell or consume it, in its normaloperating cycle

(b) The Group holds the asset primarily for the purpose of trading(c) The Group expects to realize the asset within twelve months after the reporting period(d) The asset is cash or cash equivalent unless the asset is restricted from being exchanged or

used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

(a) The Group expects to settle the liability in its normal operating cycle(b) The Group holds the liability primarily for the purpose of trading(c) The liability is due to be settled within twelve months after the reporting period(d) The Group does not have an unconditional right to defer settlement of the liability for at

least twelve months after the reporting period. Terms of a liability that could, at theoption of the counterparty, result in its settlement by the issue of equity instruments donot affect its classification.

All other liabilities are classified as non-current.

(7) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highlyliquid time deposits (including ones that have maturity within twelve months) or investmentsthat are readily convertible to known amounts of cash and which are subject to an insignificantrisk of changes in value.

(8) Financial instruments

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



138



36

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

(a) Financial assets

The Group accounts for regular may purchase or sales of financial assets on the tradedate.

Financial assets of the Group are classified as financial assets at fair value through profitor loss, held-to-maturity investments, available-for-sale financial assets and loans andreceivables. The Group determines the classification of its financial assets at the initialrecognition.

Financial assets at fair value through profit or loss

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

A financial asset is classified as held for trading if:

it is acquired or incurred principally for the purpose of selling or repurchasing it in thenear term;

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

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

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

it eliminates or significantly reduces a measurement or recognition inconsistency; or a group of financial assets, financial liabilities or both is managed and its performance

is evaluated on a fair value basis, in accordance with a documented risk managementor investment strategy, and information about the group is provided internally on thatbasis to the key management personnel



139



37

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

If financial assets do not have quoted prices in an active market and their fair value cannotbe reliably measured, then they are classified as financial assets measured at cost onbalance sheet and carried at cost net of accumulated impairment losses, if any, as at thereporting date.

Available-for-sale financial assets

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

Foreign exchange gains and losses and interest calculated using the effective interestmethod relating to monetary available-for-sale financial assets, or dividends on anavailable-for-sale equity instrument, are recognized in profit or loss. Subsequentmeasurement of available-for-sale financial assets at fair value is recognized in equityuntil the investment is derecognized, at which time the cumulative gain or loss isrecognized in profit or loss.

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

Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixed maturitiesare classified as held-to-maturity when the Group has the positive intention and ability tohold it to maturity, other than those that are designated as available-for-sale, classified asfinancial assets at fair value through profit or loss, or meet the definition of loans andreceivables.

After initial measurement held-to-maturity financial assets are measured at amortized costusing the effective interest method, less impairment. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fee or transaction costs.The effective interest method amortization is recognized in profit or loss.



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38

Loans and receivables

Loans and receivables are non-derivative financial assets that quoted without activemarket and with fixed or determinable amounts. Moreover, the following conditions mustbe met: the initial recognition not designates as available for sale, classified as at fairvalue through profit or loss, or those for which the holder may not recover substantiallyall of its initial investment.

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

Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that afinancial asset other than the financial assets at fair value through profit or loss isimpaired. A financial asset is deemed to be impaired if there is objective evidence ofimpairment as a result of one or more loss events that has occurred after the initialrecognition of the asset and that loss event has an impact on the estimated future cashflows of the financial asset. The carrying amount of the financial asset impaired, otherthan receivables impaired which are reduced through the use of an allowance account, isreduced directly and the amount of the loss is recognized in profit or loss.

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

Other loss events include:

significant financial difficulty of the issuer or obligor; or a breach of contract, such as a default or delinquency in interest or principal payments;

or it becoming probable that the borrower will enter bankruptcy or other financial

reorganization; or the disappearance of an active market for that financial asset because of financial

difficulties.



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For held-to-maturity financial assets and loans and receivables measured at amortizedcost, the Group first assesses individually whether objective evidence of impairmentexists individually for financial asset that are individually significant, or collectively forfinancial assets that are not individually significant. If the Group determines that noobjective evidence of impairment exits for an individually assessed financial asset,whether significant or not, it includes the asset in a group of financial assets with similarcredit risk characteristics and collectively assesses them for impairment. If there isobjective evidence that an impairment loss has been incurred, the amount of the loss ismeasured as the difference between the assets carrying amount and the present value ofestimated future cash flows. The present value of the estimated future cash flows isdiscounted at the financial assets original effective interest rate. If a loan has a variableinterest rate, the discount rate for measuring any impairment loss is the current effectiveinterest rate. Interest income is accrued based on the reduced carrying amount of theasset, using the rate of interest used to discount the future cash flows for the purpose ofmeasuring the impairment loss.

Receivables together with the associated allowance are written off when there is norealistic prospect of future recovery. If, in a subsequent year, the amount of theestimated impairment loss increases or decreases because of an event occurring after theimpairment was recognized, the previously recognized impairment loss is increased orreduced by adjusting the allowance account. If a future write-off is later recovered, therecovery is credited to profit or loss.

In the case of equity investments classified as available-for-sale, where there is evidenceof impairment, the cumulative loss - measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss - is removed from other comprehensive income andrecognized in profit or loss. Impairment losses on equity investments are not reversedthrough profit or loss; increases in their fair value after impairment are recognized directlyin other comprehensive income.

In the case of debt instruments classified as available-for-sale, the amount recorded forimpairment is the cumulative loss measured as the difference between the amortized costand the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss. Future interest income continues to be accrued based on thereduced carrying amount of the asset, using the rate of interest used to discount the futurecash flows for the purpose of measuring the impairment loss. The interest income isrecognized in profit or loss. If, in a subsequent year, the fair value of a debt instrumentincreases and the increase can be objectively related to an event occurring after theimpairment loss was recognized in profit or loss, the impairment loss is reversed throughprofit or loss.



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Derecognition of financial assets

A financial asset is derecognized when:

The rights to receive cash flows from the asset have expired; The Group has transferred the asset and substantially all the risks and rewards of the

asset have been transferred; The Group has neither transferred nor retained substantially all the risks and rewards

of the asset, but has transferred control of the asset.

Once the financial asset are derecognized entirety, the difference between the carryingamount and the consideration received or receivable including any cumulative gain orloss that had been recognized in other comprehensive income is recognized in profit orloss.

(b) Financial liabilities and equity

Classification between liabilities and equity

The Group classifies the instrument issued as a financial liability or an equity instrumentin accordance with the substance of the contractual arrangement and the definitions of afinancial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of anentity after deducting all of its liabilities. The transaction costs of an equity transactionare accounted for as a deduction from equity (net of any related income tax benefit) to theextent they are incremental costs directly attributable to the equity transaction thatotherwise would have been avoided.

Compound instruments

The Group evaluates the terms of the convertible bonds issued to determine whether itcontains both a liability and an equity component. Furthermore, the Group assesses ifthe economic characteristics and risks of the put and call options contained in theconvertible bonds are closely related to the economic characteristics and risk of the hostcontract before separating the equity element.

For the liability component excluding the derivatives, its fair value is determined basedon the rate of interest applied at that time by the market to instruments of comparablecredit status. The liability component is classified as a financial liability measured atamortized cost before the instrument is converted or settled.



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For the embedded derivative that is not closely related to the host contract (for example,if the exercise price of the embedded call or put option is not approximately equal on eachexercise date to the amortized cost of the host debt instrument), it is classified as a liabilitycomponent and subsequently measured at fair value through profit or loss unless itqualifies for an equity component. The equity component is assigned the residualamount after deducting from the fair value of the instrument as a whole the amountseparately determined for the liability component. Its carrying amount is notremeasured in the subsequent accounting periods. If the convertible bond issued doesnot have an equity component, it is accounted for as a hybrid instrument in accordancewith the requirements under IAS 39 Financial Instruments: Recognition andMeasurement.

Transaction costs are apportioned between the liability and equity components of theconvertible bond based on the allocation of proceeds to the liability and equitycomponents when the instruments are initially recognized.

On conversion of a convertible bond before maturity, the carrying amount of the liabilitycomponent being the amortized cost at the date of conversion is transferred to equity.

Financial liabilities

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

Financial liabilities at fair value through profit or loss

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

A financial liability is classified as held for trading if:

it is acquired or incurred principally for the purpose of selling or repurchasing it in thenear term;

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

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



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

it eliminates or significantly reduces a measurement or recognition inconsistency; or a group of financial assets, financial liabilities or both is managed and its performance

is evaluated on a fair value basis, in accordance with a documented risk managementor investment strategy, and information about the group is provided internally on thatbasis to the key management personnel.

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

If the financial liabilities at fair value through profit or loss do not have quoted prices inan active market and their fair value cannot be reliably measured, then they are classifiedas financial liabilities measured at cost on balance sheet and carried at cost as at thereporting date.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans andborrowings that are subsequently measured using the effective interest rate method afterinitial recognition. Gains and losses are recognized in profit or loss when the liabilitiesare derecognized as well as through the effective interest rate method amortizationprocess.

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

Derecognition of financial liabilities

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

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



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(c) Offsetting of financial instruments

Financial assets and financial liabilities offset and the net amount will be reported in thebalance sheet if, and only if, there is a currently enforceable legal right to offset therecognized amounts and there is an intention to settle on a net basis, or to realize the assetsand settle the liabilities simultaneously.

(9) Derivative financial instrument

The Group uses derivative financial instruments to hedge its foreign currency risks and interestrate risks. A derivative is classified in the balance sheet as financial assets or liabilities atfair value through profit or loss (held for trading) except for derivatives that are designatedeffective hedging instruments which are classified as derivative financial assets or liabilitiesfor hedging.

Derivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently remeasured at fair value. Derivativesare carried as financial assets when the fair value is positive and as financial liabilities whenthe fair value is negative. Any gains or losses arising from changes in the fair value ofderivatives are taken directly to profit or loss, except for the effective portion of cash flowhedges, which is recognized in equity.

Derivatives embedded in host contracts are accounted for as separate derivatives and recordedat fair value if their economic characteristics and risks are not closely related to those of thehost contracts and the host contracts are not held for trading or designated at fair value thoughprofit or loss. These embedded derivatives are measured at fair value with changes in fairvalue recognized in profit or loss.

(10)Fair value measurement

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

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

liability



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

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

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

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

(11)Inventories

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

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

Raw materials – purchase cost on weighted average cost formula.

Work in progress and finished goods – cost of direct materials and labor and a proportion ofmanufacturing overheads based on normal operatingcapacity on weighted average cost formula.

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

(12)Construction contract

When the outcome of a construction contract can be estimated reliably, contract revenue andcontract costs associated with the construction contract shall be recognized as revenue andexpenses respectively by reference to the stage of completion of the contract activity at theend of the reporting period. The recognition of revenue and expenses by reference to the stageof completion of a contract is often referred to as the percentage of completion method. Underthis method, contract revenue is matched with the contract costs incurred in reaching the stageof completion, resulting in the reporting of revenue, expenses and profit which can beattributed to the proportion of work completed.



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When the outcome of a construction contract cannot be estimated reliably, revenue shall berecognized only to the extent of contract costs.

When it is probable that total contract costs will exceed total contract revenue, the expectedloss shall be recognized as an expense immediately.

(13)Non-current assets held for sale and discontinued operations

Non-current assets and disposal groups are classified as held for sale if their carrying amountswill be recovered through a sale transaction that is highly probable within one year from thedate of classification and the asset or disposal group is available for immediate sale in itspresent condition. Non-current assets and disposal groups classified as held for sale aremeasured at the lower of their carrying amount and fair value less costs to sell.

In the consolidated statement of comprehensive income of the reporting period, and of thecomparable period of the previous year, income and expenses from discontinued operationsare reported separately from income and expenses from continuing operations, down to thelevel of profit after taxes, even when the Group retains a non-controlling interest in thesubsidiary after the sale. The resulting profit or loss (after taxes) is reported separately inthe statement of comprehensive income.

Property, plant and equipment and intangible assets once classified as held for sale are notdepreciated or amortized.

(14)Investments under equity method

The Group’s investment in its associate is accounted for using the equity method other thanthose that meet the criteria to be classified as held for sale. An associate is an entity overwhich the Group has significant influence. A joint venture is a type of joint arrangementwhereby the parties that have joint control of the arrangement have rights to the net assets ofthe joint venture.

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



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When changes in the net assets of an associate or a joint venture occur and not those that arerecognized in profit or loss or other comprehensive income and do not affects the Group’spercentage of ownership interests in the associate or joint venture, the Group recognizes suchchanges in equity based on its percentage of ownership interests. The resulting capitalsurplus recognized will be reclassified to profit or loss at the time of disposing the associateor joint venture on a pro-rata basis.

When the associate or joint venture issues new stock, and the Group’s interest in an associateor joint venture is reduced or increased as the Group fails to acquire shares newly issued inthe associate or joint venture proportionately to its original ownership interest, the increase ordecrease in the interest in the associate or joint venture is recognized in additional paid incapital and investment accounted for using the equity method. When the interest in theassociate or joint venture is reduced, the cumulative amounts previously recognized in othercomprehensive income are reclassified to profit or loss or other appropriate items. Theaforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basiswhen the Group disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reportingperiod as the Group. Where necessary, adjustments are made to bring the accountingpolicies in line with those of the Group.

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

(a) Its share of the present value of the estimated future cash flows expected to be generatedby the associate, including the cash flows from the operations of the associate or joinventure and the proceeds on the ultimate disposal of the investment; or

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

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



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Upon loss of significant influence over the associate or joint venture, the Group measures andrecognizes any retaining investment at its fair value. Any difference between the carryingamount of the associate or joint venture upon loss of significant influence and the fair valueof the retaining investment and proceeds from disposal is recognized in profit or loss.Furthermore, if an investment in an associate becomes an investment in a joint venture or aninvestment in a joint venture becomes an investment in an associate, the entity continues toapply the equity method and does not remeasure the retained interest.

(15)Property, plant and equipment

Property, plant and equipment are stated at acquisition cost, net of accumulated depreciationand accumulated impairment losses, if any. Such cost includes the cost of dismantling andremoving the item and restoring the site on which it is located and borrowing costs forconstruction in progress if the recognition criteria are met. Each part of an item of property,plant and equipment with a cost that is significant in relation to the total cost of the item isdepreciated separately. When significant parts of property, plant and equipment are requiredto be replaced in intervals, the Group recognized such parts as individual assets with specificuseful lives and depreciation, respectively. The carrying amount of those parts that arereplaced is derecognized in accordance with the derecognition provisions of IAS 16 Property,plant and equipment. When a major inspection is performed, its cost is recognized in thecarrying amount of the plant and equipment as a replacement if the recognition criteria aresatisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

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

Buildings 3～50 yearMachinery and equipment 1～35 yearTransportation equipment 2～10 yearOffice equipment 2～10 yearLeased assets 3～50 yearLeasehold improvements The shorter of lease terms or economic useful livesOther equipment 2～10 year

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

The assets’ residual values, useful lives and methods of depreciation are reviewed at eachfinancial year-end and adjusted prospectively, if appropriate.



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(16)Investment property

Investment properties are measured initially at cost, including transaction costs. The carryingamount includes the cost of replacing part of an existing investment property at the time thatcost is incurred if the recognition criteria are met and excludes the costs of day-to-dayservicing of an investment property. Subsequent to initial recognition, investment propertiesare measured using the cost model in accordance with the requirements of IAS 16 for thatmodel, other than those that meet the criteria to be classified as held for sale (or are includedin a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-currentAssets Held for Sale and Discontinued Operations.


Buildings 30～50 years

Investment properties are derecognized when either they have been disposed of or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal. The difference between the net disposal proceeds and thecarrying amount of the asset is recognized in profit or loss in the period of derecognition.

Assets are transferred to or from investment properties when there is a change in use.

(17)Leases

Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidentalto ownership of the leased item, are capitalized at the commencement of the lease at the fairvalue of the leased property or, if lower, at the present value of the minimum lease payments.Lease payments are apportioned between finance charges and reduction of the lease liabilityso as to achieve a constant rate of interest on the remaining balance of the liability. Financecharges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is noreasonable certainty that the Group will obtain ownership by the end of the lease term, theasset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

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



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Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits ofownership of the asset are classified as operating leases. Initial direct costs incurred innegotiating an operating lease are added to the carrying amount of the leased asset andrecognized over the lease term on the same basis as rental income. Rental revenue generatedfrom operating lease is recognized over the lease term using the straight line method.Contingent rents are recognized as revenue in the period in which they are earned.

(18)Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost ofintangible assets acquired in a business combination is its fair value as at the date ofacquisition. Following initial recognition, intangible assets are carried at cost less anyaccumulated amortization and accumulated impairment losses, if any. Internally generatedintangible assets, excluding capitalized development costs, are not capitalized and expenditureis reflected in profit or loss for the year in which the expenditure is incurred.

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

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

Intangible assets with indefinite useful lives are not amortized, but are tested for impairmentannually, either individually or at the cash-generating unit level. The assessment ofindefinite life is reviewed annually to determine whether the indefinite life continues to besupportable. If not, the change in useful life from indefinite to finite is made on a prospectivebasis.

Gains or losses arising from derecognition of an intangible asset are measured as thedifference between the net disposal proceeds and the carrying amount of the asset and arerecognized in profit or loss when the asset is disposed.



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Research and development costs

Research costs are expensed as incurred. Development expenditures, on an individualproject, are recognized as an intangible asset when the Group can demonstrate:

(a) The technical feasibility of completing the intangible asset so that it will be available foruse or sale

(b) Its intention to complete and its ability to use or sell the asset(c) How the asset will generate future economic benefits(d) The availability of resources to complete the asset(e) The ability to measure reliably the expenditure during development

Following initial recognition of the development expenditure as an asset, the cost model isapplied requiring the asset to be carried at cost less any accumulated amortization andaccumulated impairment losses. During the period of development, the asset is tested forimpairment annually. Amortization of the asset begins when development is complete andthe asset is available for use. It is amortized over the period of expected future benefit.

Patents

The patent is amortized over the period of useful life.

Technology cooperation costs

Technical cooperation costs have been granted the use of right 3 to 10 years depending ondifferent project.

Computer software

The cost of computer software is amortized on a straight-line basis over the estimated usefullife (3 years).

A summary of the policies applied to the Group’s intangible assets is as follows:

PatentsTechnology

Cooperation Costs Computer softwareUseful lives Finite Finite FiniteAmortization method used Amortized on a straight-

line basis over theperiod of the patent

Amortized on a straight-line basis over theperiod of the technologycooperation terms

Amortized on a straight-line basis over theestimated useful life

Internally generated or acquired Acquired Acquired Acquired



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(19)Impairment of non-financial assets

The Group assesses at the end of each reporting period whether there is any indication that anasset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indicationexists, or when annual impairment testing for an asset is required, the Group estimates the asset’srecoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined foran individual asset, unless the asset does not generate cash inflows that are largely independentof those from other assets or groups of assets. Where the carrying amount of an asset or CGUexceeds its recoverable amount, the asset is considered impaired and is written down to itsrecoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whetherthere is any indication that previously recognized impairment losses may no longer exist ormay have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversedonly if there has been an increase in the estimated service potential of an asset which in turnincreases the recoverable amount. However, the reversal is limited so that the carryingamount of the asset does not exceed its recoverable amount, nor exceed the carrying amountthat would have been determined, net of depreciation, had no impairment loss been recognizedfor the asset in prior years.

A cash generating unit, or groups of cash-generating units, to which goodwill has beenallocated is tested for impairment annually at the same time, irrespective of whether there isany indication of impairment. If an impairment loss is to be recognized, it is first allocatedto reduce the carrying amount of any goodwill allocated to the cash generating unit (group ofunits), then to the other assets of the unit (group of units) pro rata on the basis of the carryingamount of each asset in the unit (group of units). Impairment losses relating to goodwillcannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss isrecognized in profit or loss.

(20)Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as aresult of a past event, it is probably that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate can be made of the amount of theobligation. Where the Group expects some or all of a provision to be reimbursed, thereimbursement is recognized as a separate asset but only when the reimbursement is virtuallycertain. If the effect of the time value of money is material, provisions are discounted using acurrent pre-tax rate that reflects the risks specific to the liability. Where discounting is used,the increase in the provision due to the passage of time is recognized as a finance cost.



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Provision for decommissioning, restoration and rehabilitation costs

The provision for decommissioning, restoration and rehabilitation costs arose on constructionof a property, plant and equipment. Decommissioning costs are provided at the present valueof expected costs to settle the obligation using estimated cash flows and are recognized as partof the cost of that particular asset. The cash flows are discounted at a current pre-tax ratethat reflects the risks specific to the decommissioning liability. The unwinding of thediscount is expensed as incurred and recognized as a finance cost. The estimated future costsof decommissioning are reviewed annually and adjusted as appropriate. Changes in theestimated future costs or in the discount rate applied are added to or deducted from the cost ofthe asset.

Maintenance warranties

A provision is recognized for expected warranty claims on products sold, based on pastexperience, management’s judgment and other known factors.

Sales returns and allowances

A provision has been recognized for sales returns and allowances based on past experienceand other known factors.

(21)Treasury shares

Own equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. Any difference between the carrying amount and the consideration isrecognized in equity.

(22)Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow tothe Group and the revenue can be reliably measured. Revenue is measured at the fair value ofthe consideration received or receivable. The following specific recognition criteria must alsobe met before revenue is recognized:

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions have beensatisfied:

(a) the significant risks and rewards of ownership of the goods have passed to the buyer;(b) neither continuing managerial involvement nor effective control over the goods sold have

been retained;(c) the amount of revenue can be measured reliably;(d) it is probable that the economic benefits associated with the transaction will flow to the

entity; and(e) the costs incurred in respect of the transaction can be measured reliably.



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Rendering of Services

Revenue from Information systems integration services is recognized by reference to the stageof completion. Stage of completion is measured by reference to the proportion that contractcost incurred for work performed to date bear to the estimated total contract costs. Wherethe contract outcome cannot be measured reliably, revenue is recognized only to the extentthat the expenses incurred are eligible to be recovered.

Interest income

For all financial assets measured at amortized cost (including loans and receivables and held-to-maturity financial assets) and available-for-sale financial assets, interest income is recordedusing the effective interest rate method and recognized in profit or loss.

Dividends

Revenue is recognized when the Group has the right to receive the payment established.

Rent Income

Rental income from operating lease is accounted by straight-line basis on the period of lease.

(23)Borrowing costs

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

(24)Government grants

Government grants are recognized where there is reasonable assurance that the grant will bereceived and all attached conditions will be complied with. Where the grant relates to anasset, it is recognized as deferred income and released to income in equal amounts over theexpected useful life of the related asset. When the grant relates to an expense item, it isrecognized as income over the period necessary to match the grant on a systematic basis tothe costs that it is intended to compensate.



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Where the Group receives non-monetary grants, the asset and the grant are recorded gross atnominal amounts and released to the statement of comprehensive income over the expecteduseful life and pattern of consumption of the benefit of the underlying asset by equal annualinstallments. Where loans or similar assistance are provided by governments or relatedinstitutions with an interest rate below the current applicable market rate, the effect of thisfavorable interest is regarded as additional government grant.

(25)Post-employment benefits

All regular employees of the Company and its domestic subsidiaries are entitled to a pensionplan that is managed by an independently administered pension fund committee. Fund assetsare deposited under the committee’s name in the specific bank account and hence, notassociated with the Company and its domestic subsidiaries. Therefore fund assets are notincluded in the Group’s consolidated financial statements. Pension benefits for employeesof the overseas subsidiaries and the branches are provided in accordance with the respectivelocal regulations.

For the defined contribution plan, the Company and its domestic subsidiaries will make amonthly contribution of no less than 6% of the monthly wages of the employees subject to theplan. The Company recognizes expenses for the defined contribution plan in the period inwhich the contribution becomes due. Overseas subsidiaries and branches make contributionto the plan based on the requirements of local regulations.

Post-employment benefit plan that is classified as a defined benefit plan uses the ProjectedUnit Credit Method to measure its obligations and costs based on actuarial assumptions. Re-measurements, comprising of the effect of the actuarial gains and losses, the effect of the assetceiling (excluding net interest) and the return on plan assets, excluding net interest, arerecognized as other comprehensive income with a corresponding debit or credit to retainedearnings in the period in which they occur. Past service costs are recognized in profit or losson the earlier of:

(a) the date of the plan amendment or curtailment, and(b) the date that the Group recognizes restructuring-related costs

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



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(26)Share-based payment transactions

The cost of equity-settled transactions between the Group and its employees is recognizedbased on the fair value of the equity instruments granted. The fair value of the equityinstruments is determined by using an appropriate pricing model.

The cost of equity-settled transactions is recognized, together with a corresponding increasein other capital reserves in equity, over the period in which the performance and/or serviceconditions are fulfilled. The cumulative expense recognized for equity-settled transactionsat each reporting date until the vesting date reflects the extent to which the vesting period hasexpired and the Group’s best estimate of the number of equity instruments that will ultimatelyvest. The income statement expense or credit for a period represents the movement incumulative expense recognized as at the beginning and end of that period.

No expense is recognized for awards that do not ultimately vest, except for equity-settledtransactions where vesting is conditional upon a market or non-vesting condition, which aretreated as vesting irrespective of whether or not the market or non-vesting condition issatisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expenserecognized is the expense as if the terms had not been modified, if the original terms of theaward are met. An additional expense is recognized for any modification that increases thetotal fair value of the share-based payment transaction, or is otherwise beneficial to theemployee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date ofcancellation, and any expense not yet recognized for the award is recognized immediately.This includes any award where non-vesting conditions within the control of either the entityor the employee are not met. However, if a new award is substituted for the cancelled award,and designated as a replacement award on the date that it is granted, the cancelled and newawards are treated as if they were a modification of the original award, as described in theprevious paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in thecomputation of diluted earnings per share.

The cost of restricted stocks issued is recognized as salary expense based on the fair value ofthe equity instruments on the grant date, together with a corresponding increase in other capitalreserves in equity, over the vesting period. The Group recognized unearned employee salarywhich is a transitional contra equity account; the balance in the account will be recognized assalary expense over the passage of vesting period.



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(27)Income taxes

Income tax expense (benefit) is the aggregate amount of current and deferred taxes whichincluded in the determination of current profit or loss.

Current income tax

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

The 10% surtax on undistributed retained earnings is recognized as income tax expense in thesubsequent year when the distribution proposal is approved by the Shareholders’ meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax basesof assets and liabilities and their carrying amounts for financial reporting purposes.

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

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

(b) In respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will notreverse in the foreseeable future.

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

(a) Where the deferred tax asset relating to the deductible temporary difference arises fromthe initial recognition of an asset or liability in a transaction that is not a businesscombination and, at the time of the transaction, affects neither the accounting profit nortaxable profit or loss

(b) In respect of deductible temporary differences associated with investments insubsidiaries, associates and interests in joint ventures, deferred tax assets are recognizedonly to the extent that it is probable that the temporary differences will reverse in theforeseeable future and taxable profit will be available against which the temporarydifferences can be utilized.



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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply inthe year when the asset is realized or the liability is settled, based on tax rates and tax lawsthat have been enacted or substantively enacted at the reporting date. The measurement ofdeferred tax assets and deferred tax liabilities reflects the tax consequences that would followfrom the manner in which the Group expects, at the end of the reporting period, to recover orsettle the carrying amount of its assets and liabilities.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit orloss. Deferred tax items are recognized in correlation to the underlying transaction either inother comprehensive income or directly in equity. Deferred tax assets are reassessed at eachreporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities offset, only if a legally enforceable right existsto offset current income tax assets against current income tax liabilities and the deferred taxesrelate to the same taxable entity and the same taxation authority.

(28)Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The considerationtransferred, the identifiable assets acquired and liabilities assumed are measured at acquisitiondate fair value. For each business combination, the acquirer measures any non-controllinginterest in the acquiree either at fair value or at the non-controlling interest’s proportionateshare of the acquiree’s identifiable net assets. Acquisition-related costs are accounted for asexpenses in the periods in which the costs are incurred and are classified under administrativeexpenses.

When the Group acquires a business, it assesses the assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at the acquisition date. This includes theseparation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of theacquirer’s previously held equity interest in the acquiree is remeasured to fair value at theacquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at theacquisition-date fair value. Subsequent changes to the fair value of the contingentconsideration which is deemed to be an asset or liability, will be recognized in accordancewith IAS 39 Financial Instruments: Recognition and Measurement either in profit or loss oras a change to other comprehensive income. However, if the contingent consideration isclassified as equity, it should not be remeasured until it is finally settled within equity.



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Goodwill is initially measured as the amount of the excess of the aggregate of theconsideration transferred and the non-controlling interest over the net fair value of theidentifiable assets acquired and the liabilities assumed. If this aggregate is lower than thefair value of the net assets acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.Goodwill acquired in a business combination is, from the acquisition date, allocated to eachof the Group’s cash-generating units that are expected to benefit from the combination,irrespective of whether other assets or liabilities of the acquiree are assigned to those units.Each unit or group of units to which the goodwill is so allocated represents the lowest levelwithin the Group at which the goodwill is monitored for internal management purpose and isnot larger than an operating segment before aggregation.

Where goodwill forms part of a cash-generating unit and part of the operation within that unitis disposed of, the goodwill associated with the operation disposed of is included in thecarrying amount of the operation. Goodwill disposed of in this circumstance is measuredbased on the relative recoverable amounts of the operation disposed of and the portion of thecash-generating unit retained.

5. Significant accounting judgments, estimates and assumptions

The preparation of the Group’s consolidated financial statements require management to makejudgments, estimates and assumptions that affect the reporting amounts of revenues, expenses,assets and liabilities, and the disclosure of contingent liabilities, at the balance sheet date.However, uncertainty about these assumption and estimate could result in outcomes that require amaterial adjustment to the carrying amount of the asset or liability affected in future periods.

(1) Judgment

In the process of applying the Group’s accounting policies, management has made thefollowing judgments, which have the most significant effect on the amounts recognized in theconsolidated financial statements:

(a) Investment properties

Certain properties of the Group comprise a portion that is held to earn rentals or for capitalappreciation and another portion that is owner-occupied. If these portions could be soldseparately, the Group accounts for the portions separately as investment properties andproperty, plant and equipment. If the portions could not be sold separately, the propertyis classified as investment property in its entirety only if the portion that is owner-occupied is under 10% of the total property.



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(b) Operating lease commitment-Group as the lessor

The Group has entered into commercial property leases on its investment propertyportfolio. The Group has determined, based on an evaluation of the terms and conditionsof the arrangements, that it retains all the significant risks and rewards of ownership ofthese properties and accounts for the contracts as operating leases.

(c) De facto control without a majority of the voting rights in subsidiaries

The Company does not have majority of the voting rights in certain subsidiaries.However, after taking into consideration factors such as absolute size of the Company’sholding, relative size of the other shareholdings, how widely spread is the remainingshareholding, contractual arrangements between shareholders, potential voting rights,etc., the Company reached the conclusion that it has de facto control over thesesubsidiaries. Please refer to Note 4 for further details.

(2) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty atthe reporting date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below.

(a) Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the balancesheet cannot be derived from active markets, they are determined using valuationtechniques including the income approach (for example the discounted cash flows model)or market approach. Changes in assumptions about these factors could affect thereported fair value of the financial instruments. Please refer to Note 12 for more details.

(b) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds itsrecoverable amount, which is the higher of its fair value less costs to sell and its value inuse. The fair value less costs to sell calculation is based on available data from bindingsales transactions in an arm’s length transaction of similar assets or observable marketprices less incremental costs that would be directly attributable to the disposal of the asset.The value in use calculation is based on a discounted cash flow model. The cash flowsprojections are derived from the budget for the next five years and do not includerestructuring activities that the Group is not yet committed to or significant futureinvestments that will enhance the asset’s performance of the cash generating unit beingtested. The recoverable amount is most sensitive to the discount rate used for thediscounted cash flow model as well as the expected future cash-inflows and the growthrate used for extrapolation purposes. Please refer to Note 6 for more details.



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(c) Pension benefits

The cost of post-employment benefit and the present value of the pension obligation underdefined benefit pension plans are determined using actuarial valuations. An actuarialvaluation involves making various assumptions. These include the determination of thediscount rate and future salary increases. Please refer to Note 6 for more details.

(d) Provisions

Legal Provisions

The Group regularly estimates the legal costs according to historical experience. If theobligation is highly likely to occur and the amount can be reasonably estimated, the Grouprecognizes related provisions for the legal matters. Please refer to Note 6.

(e) Revenue recognition - sales returns and allowance

The Group estimates sales returns and allowance based on historical experience and otherknown factors at the time of sale, which reduces the operating revenue. Please refer toNote 6.

(f) Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and theamount and timing of future taxable income. Given the wide range of internationalbusiness relationships and the long-term nature and complexity of existing contractualagreements, differences arising between the actual results and the assumptions made, orfuture changes to such assumptions, could necessitate future adjustments to tax incomeand expense already recorded. The Group establishes provisions, based on reasonableestimates, for possible consequences of audits by the tax authorities of the respectivecounties in which it operates. The amount of such provisions is based on various factors,such as experience of previous tax audits and differing interpretations of tax regulationsby the taxable entity and the responsible tax authority. Such differences of interpretationmay arise on a wide variety of issues depending on the conditions prevailing in therespective Group's domicile.



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Deferred tax assets are recognized for all carryforward of unused tax losses, unused taxcredits and deductible temporary differences to the extent that it is probable that futuretaxable profit will be available or there are sufficient taxable temporary differencesagainst which the unused tax losses, unused tax credits or deductible temporarydifferences can be utilized. The amount of deferred tax assets determined to be recognizedis based upon the likely timing and the level of future taxable profits and taxabletemporary differences together with future tax planning strategies. Please refer to Note 6 for more details on unrecognized deferred tax assets as of December 31, 2017.

(g) Accounts receivables–estimation of impairment loss

The Group considers the estimation of future cash flows when there is objective evidenceshowed indications of impairment. The amount of the loss is measured as the differencebetween the asset's carrying amount and the present value of estimated future cash flows(excluding future credit losses that have not been incurred) discounted at the financialasset's original effective interest rate. However, as the impact from the discounting of short-term receivables is not material, the impairment of short-term receivables is measured asthe difference between the asset's carrying amount and the estimated undiscounted futurecash flows. Where the actual future cash flows are lower than expected, a materialimpairment loss may arise. Please refer to Note 6 for more details.

(h) Inventories

Estimates of net realisable value of inventories take into consideration that inventories maybe damaged, become wholly or partially obsolete, or their selling prices have declined.The estimates are based on the most reliable evidence available at the time the estimatesare made. Please refer to Note 6 for more details.

6. Contents of significant accounts


As of December 31,2017 2016

Cash on hand & petty cash $174,639 $188,405Cash in banks 23,999,355 33,812,830Time deposits 7,802,540 8,668,128Cash in transit 3,742 17,889Total $31,980,276 $42,687,252



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(2) Financial assets at fair value through profit or loss


Held for trading:Derivatives not designated as hedging instruments

Forward foreign exchange contracts $- $13,006

Non-derivative financial assetsCapital-guaranteed financial products 633,076 17,230,231Open-end funds 13,003 18,859Stocks 664 537Subtotal 646,743 17,249,627

Total $646,743 $17,262,633

Current $646,743 $17,262,633Non-current - -Total $646,743 $17,262,633

CPTTG and Vibrant Display Technology CO., Ltd., subsidiaries of the Group, purchasedQianYuan--ZhouZhouLi" Open-ended and principal guaranteed wealth management productamounting to RMB2,200,000 thousand, QIANYUAN principal-guaranteed investmentproduct amounting to RMB800,000 thousand and QianYuan--ZhouZhouLi" Open-ended andprincipal guaranteed wealth management product amounting to RMB500,000 thousand fromChina Construction Bank for short-term investment during the forth quarter in 2016. In 2017,the aforementioned wealth management products were sold in the amount of RMB2,214,688thousand, RMB804,932 thousand, and RMB502,294 thousand, respectively

Please refer to Note 8 for more details on financial assets at fair value through profit or lossunder pledge.

(3) Available-for-sale financial assets


Stocks $1,664,691 $1,416,032

Current $381,437 $390,711Non-current 1,283,254 1,025,321Total $1,664,691 $1,416,032

Please refer to Note 8 and Attachment 3 of Note 13 for more details on available-for-salefinancial assets under pledge and for the breakdown.



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(4) Held-to-maturity financial assets

As of December 31,

2017 2016

Bonds $- $20,000

Current $- $20,000Non-current - -

Total $- $20,000

Bonds were matured in January 2017.

Held-to-maturity financial assets were not pledged.

(5) Financial assets measured at cost

As of December 31,

2017 2016

Available-for-sale financial assetsStocks $547,362 $437,521

Current $29,238 $29,238Non-current 518,124 408,283

Total $547,362 $437,521

Financial assets measured at cost were not pledged. Please refer to Attachment 3 of Note 13 for the breakdown.

The above investments in the equity instruments of unlisted entities are measured at cost asthe fair value of these investments are not reliably measurable due to the fact that thevariability in the range of reasonable fair value measurements is significant for that investmentand that the probabilities of the various estimates within the range cannot be reasonablyassessed and used when measuring fair value.



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(6) Debt instrument investments for which no active market exists

As of December 31,

2017 2016

Cash in banks-reserve accounts $5,273,546 $3,873,131

Time deposits (Note) 24,298,653 23,112,721

Total $29,572,199 $26,985,852

Current $25,407,275 $24,057,035

Non-current 4,164,924 2,928,817

Total $29,572,199 $26,985,852

Please refer to Note 8 for more details on debt instrument investments for which no activemarket exists that were pledged as collateral.

Note: Chunghwa Electronics Investment Co., Ltd. transferred its shares of CPT to CreditSuisse in January 2010 and acquired proceeds of NTD1,047,800 thousand, which wasrecognized in other current liabilities – other. The Group then pledged the aboveamount to Credit Suisse, which was recognized in bonds investments for which noactive market exists – current. The Group guaranteed to buy-back the above shares ina certain period. The above transactions had remained unchanged as of December 31,2017 and 2016.

(7) Notes receivables

As of December 31,

2017 2016

Notes receivables arising from operating activities $542,968 $547,991

Less: allowance for doubtful debts (57) (52)

Subtotal $542,911 $547,939

Notes receivables were not pledged.



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(8) Accounts receivable and Accounts receivable-related parties


Accounts receivable $8,130,331 $8,835,249Less: allowance for doubtful debts (1,104,820) (1,075,804)Allowance for sales returns and discounts (18,951) (16,394)Net 7,006,560 7,743,051Installment accounts receivable 450,982 528,107Less: allowance for doubtful debts - -Unrealized interest revenue - trade receivables from

installment sales (5,086) (2,476)Net 445,896 525,631Subtotal 7,452,456 8,268,682Accounts receivable-related parties 75,452 23,568Less: allowance for doubtful debts (914) (913)Net 74,538 22,655Total $7,526,994 $8,291,337

The expected recovery of the accounts receivables from installment sales is as follows:


Not later than one year $238,696 $283,417Later than one year and not later than two years 96,333 181,161Later than two years 115,953 63,529Total $450,982 $528,107

Due to the contracts of accounts receivable factoring with recourse, account receivablesamounting to NTD0 thousand and NTD5,661 thousand were pledged as collateral as ofDecember 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, the Grouphad signed non-recourse accounts receivable purchase agreement with the bank and hadoffered USD0 thousand and USD1,000 thousand as secured promissory notes (Note).

(Note: Guarantee for future business disputes)

Please refer to Note 8 for pledged trade receivables.



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The Group’s credit terms are generally 30-180 day. The movements in the provision forimpairment of accounts receivable and accounts receivable-related parties are as follows:(Please refer to Note 12 for disclosure of credit risks)

Individuallyimpaired

Collectivelyimpaired Total

As of January 1, 2017 $772,340 $304,377 $1,076,717Charge (reversal) for the current period (19,047) 128,229 109,182Write off (10,823) (65,197) (76,020)Effect of exchange rate changes (1,958) (2,187) (4,145)As of December 31, 2017 $740,512 $365,222 $1,105,734



As of January 1, 2016 $706,954 $153,436 $860,390Charge (reversal) for the current period 79,060 160,245 239,305Write off (7,840) (1,272) (9,112)Effect of exchange rate changes (4,754) (8,032) (12,786)Reclassify to non-current assets held for sale (1,080) - (1,080)As of December 31, 2016 $772,340 $304,377 $1,076,717

Impairment loss, that was individually determined for the years ended December 31, 2017 and2016, arose due to the fact that the counterparty was in financial difficulties. The amount ofimpairment loss recognized was the difference between the carrying amount of the tradereceivable and the present value of its expected recoverable amount. The Group did not holdany collateral for such trade receivables.

Aging analysis of account receivables and account receivables-related parties that were pastdue as at the balance sheet date but not impaired is as follows:

Neither pastdue nor

impaired

Past due but not impaired

As of1 to 6

months6 months to

1 yearMore than 1

year TotalDecember 31, 2017 $7,049,562 $442,586 $21,717 $13,129 $7,526,994December 31, 2016 6,916,933 1,252,370 87,729 34,305 8,291,337

(9) Construction receivables


Accumulated cost incurred $4,979,867 $4,203,781Accumulated recognized project profit (loss) 175,885 226,754Accumulated billed amounts based on construction progress (4,896,728) (4,149,636)Reclassification (Note 1) (78,121) (107,025)Construction receivables $180,903 $173,874



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As of December 31, 2017

Items (Note 2)

Contract

proceeds

Contract costs

incurred

Accumulated

recognized total

project

profit(loss)

Percentage of

completion

(Note 3)

Amounts billed

based on

Construction

progress

Construction

contracts

receivable

Percentage of

completion method

Category A $140,272 $124,633 $10,519 0%~100% $117,413 $17,739

Category B 5,544,122 4,588,026 151,790 9%~100% 4,501,739 238,077

Category C 1,026,698 267,208 13,576 5%~73% 277,576 3,208

Reclassification

(Note 1) - - - - (78,121)

Total $6,711,092 $4,979,867 $175,885 $4,896,728 $180,903


Items (Note 2)

Contract

proceeds

Contract costs

incurred

Accumulated

recognized total

project

profit(loss)

Percentage of

completion

(Note 3)

Amounts billed

based on

construction

progress

Construction

contracts

receivable

Percentage of

completion method

Category A $141,298 $115,796 $14,353 0%~100% $83,115 $47,034

Category B 5,364,911 4,055,538 210,706 1%~100% 4,032,379 233,865

Category C 986,738 32,447 1,695 0%~15% 34,142 -

Reclassification

(Note 1) - - - - (107,025)

Total $6,492,947 $4,203,781 $226,754 $4,149,636 $173,874

(Note 1: Aging of part of construction receivables has reached an operating cycle, hence,they are reclassified to long-term receivables.)

(Note 2: Projects involving similar products have been combined as a single item.)(Note 3: The percentage of completion varied in each project, it is therefore presented as a

range.)

As of December 31, 2017 and 2016, the above construction projects had not generatedconstruction retainage of construction contracts.



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(10)Inventory

(a) The details of inventories are as follows:


Raw materials $2,166,861 $1,981,846Work in progress 4,663,162 4,093,120Finished good 5,197,569 6,300,774Inventories in transit 87,462 217,404Buildings and land held for sale 473,682 491,302Property under construction 2,876,224 3,371,569Property used for construction 535,378 477,705Total $16,000,338 $16,933,720

(b) Property under construction:

As of December 31,Name of developing projects 2017 2016

Project D $2,876,224 $1,978,654Project F1 - 1,392,915Total $2,876,224 $3,371,569

December 31, 2017

ProjectsTotal valueof contract

Totalestimated

costsCompletedpercentage

Scheduledyear of

completionAdvancedreceipts

Project D $7,990,540 $4,721,816 45.01% 107 $1,707,198

According to domestic regulations, the installments of advance receipts from buyersshould be deposited in the trust accounts and be used following construction progress. Asof December 31, 2017, the above advance receipts were deposited in the trust accountsand recognized as other current assets – other financial assets.

The Group had sold all the shares of the subsidiary that held Project F1. Therefore, therelated properties under construction were derecognized as of December 31, 2017.



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(c) The costs of inventories recognized in expenses are as follows:

For the years endedDecember 31,

2017 2016Cost of inventories recognized in expenses $61,214,032 $63,517,071Loss on allowance for inventory valuation(gain from price recovery of inventory) 308,164 (909,219)

The gain from price recovery of inventory was resulted from continuously selling theinferior inventories and fair value of partial inventories was recovered, therefore thecause of the net realizable value of inventory to be lower than the cost has not existed.

(d) Please refer to Note 8 for pledged inventories.

(11)Non-current assets held for sale or Disposal groups held for sale, net


Property, Plant and Equipment $46,179 $1,490,765Assets of Discontinued Operations - 11,733,630Shares 28,435 -

$74,614 $13,224,395

(a) Details of Property, Plant and Equipment are as follows:


Land $- $1,186,922Buildings, net - 188,581Other equipment, net - 36,740Machinery and equipment 46,179 78,522Total $46,179 $1,490,765



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Major property, plant and equipment mentioned above were lands, buildings andequipment of CPT, a subsidiary of the Group. The lands, buildings and equipment werelocated in Bade Taoyuan. CPT decided to dispose of the aforementioned property, plantsand equipment to its subsidiary Giantplus in accordance with the resolution of the boardof directors on November 25, 2016. The related assets had been classified as non-currentassets held for sale and were reported separately in the consolidated balance sheet.Because the selling price is expected to be higher than the carrying value of the relatednet assets, those assets were recognized as non-current assets held for sale under carryingvalue. The lands, buildings and equipment were sold in the amount of NTD3,831,059thousand. The transfer was completed during the second quarter in 2017.

(b) On November 24, 2016, the board of directors of CPT, a subsidiary of the Group, hasresolved to sell all of its shares held in Giantplus to Ortus Technology Co., Ltd, a Japanesecorporation. Giantplus and its subsidiary were reclassified as disposal group held for salein 2016, and were reported separately in the consolidated balance sheets in the amount ofNTD11,733,630 thousand. The transfer was completed during the first quarter in 2017.In addition, since the disposal group held for sale met the criteria of discontinuedoperations, the profit or loss from discontinued operations was reported separately as oneline item in the statements of consolidated comprehensive income. Also, information ofprofit and loss of discontinued operations in 2016 was restated, and the analysis of theamounts and the cash flow information was disclosed.

The assets, liabilities and equity related to the discontinued operations mentioned aboveare listed as follows:

December 31, 2016

Cash and cash equivalents $3,834,148Debt instrument investments for which no active market exists, current 40,740Accounts receivable, net 1,840,543Other receivables 140,379Inventory 680,804Prepayments 140,687Property, plant and equipment 4,834,315Intangible assets 162,864Deferred tax asset 25,476Other non-current assets 182,315Non-current assets held for sale 11,882,271Accumulated impairment-non-current held for sale assets (148,641)Non-current assets classified as held for sale $11,733,630



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December 31, 2016

Accounts payable $1,587,936Other payables 1,294,906Other payables-related party 2,035Current income tax liabilities 84,538Advance receipts 144,900Current portion of long-term loans 516,151Other current liabilities-other 6,367Long-term loans 650,884Defined benefit obligation-non-current 44,030Deposit-in 7,285Liabilities related to non-current assets classified as held for sale $4,339,032

Equity related to non-current assets classified as held for saleAttributable to parent company $(26,698)Attributable to NCI (88,728)Total $(115,426)

Profit or loss and cash flow related to said discontinued operations:


2017 2016Profit or loss of discontinued operationsSales revenue $2,997,437 $11,683,609Cost of sales (2,403,370) (9,951,502)Gross margin 594,067 1,732,107Operating expenses (264,570) (1,147,798)Operating income 329,497 584,309Non-operating income and expense (179,009) 94,854Income before income tax 150,488 679,163Income tax expense (39,866) (46,900)Subtotal 110,622 632,263Intercompany eliminations (41,124) (665,911)Profit or loss from discontinuing operations $69,498 $(33,648)

Cash flow from discontinued operationsNet cash provided by operating activities $89,543 $2,014,229Net cash used in investing activities (938,668) (967,028)Net cash (used in) generated from financing activities 1,221,119 (1,260,866)Effects of exchange rate changes on cash and cashequivalents (41,472) (89,049)

Net increase (decrease) of cash and cash equivalents $330,522 $(302,714)



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(12)Investments under equity method

(a) The following table lists the investments under equity method of the Group:


InvesteesCarryingamount

Percentage ofownership (%)

Carryingamount

Percentage ofownership (%)

Investments in associates:Listed companiesElitegroup Computer Systems Co., Ltd. $3,789,505 27.35 $3,846,228 27.35Unlisted companiesTatung Okuma Co., Ltd. 1,184,201 49.00 1,074,358 49.00Kuender Co., Ltd. 80,458 50.00 142,461 50.00Hsieh-Chih Industrial Library Publishing Co. 13,503 98.80 13,138 98.80Chung-Tai Technology Development Engineering Co. 13,165 22.00 14,162 22.00Lansong International Co., Ltd. - 98.33 - 98.33Tatung Cranes (Shanghai) Co., Ltd 24,699 45.00 27,657 45.00Taiwan Nissei Display System Co., Ltd (Note 1) - - 37,748 20.00Ufeco (Wujiang) Technology Inc. 23,846 40.00 20,932 40.00Nature Worldwide Technology Corp. (Note 2) (19,970) 85.36 (19,970) 85.36Yunbao Co., Ltd 2,115 40.00 1,810 40.00Subtotal 1,322,017 1,312,296Jointly Controlled Entity:Panshiyiyuant Mgmt. Investment (Fuzhou) Co. (Note 3) - - 485,029 50.00Lin Htet Lin Company Limited 3,951 49.00 4,691 49.00Tatung Middle East Purification of Potable Water

L.L.C (Note 4) 722 49.00 - -Net of long-term investments accounted for underequity method 5,116,195 5,648,244Add: Long-term equity investments, credit balance 19,970 19,970Total $5,136,165 $5,668,214

Note 1: Chih-Sheng Investment Co., Ltd., a subsidiary of the Company, signed a sharedisposal contract in March 2018 to sell shares of its investment under equitymethod, Taiwan Nissei Display System Co., Ltd. Hence, it was reclassified asnon-current assets held for sale as of December 31, 2017

Note 2: San Chih Investment Co., Ltd., the subsidiary of the Company, did not intend tosupport Nature Worldwide Technology Corp. from April 2010. NatureWorldwide Technology Corp. was still under liquidation process as of December31, 2017.

Note 3: Panshiyiyuant Mgmt. Investment (Fuzhou) Co. is a limited partnership co-founded by CPT’s subsidiaries, Fuzhou YingYuan Equity InvestmentManagement Co., Ltd., CPTF Optronics Co., Ltd. and ZhongHengYiYuan Co.Its business scope includes consulting services of non-securities investments andsecurities related investments. Because Panshiyiyuant Mgmt. Investment(Fuzhou) Co. could not find appropriate investment targets, its establishmentregistration was cancelled on August 11, 2017.

Note 4: The Company started a joint venture with peers through Leap High Limited inDubai to establish Tatung Middle East Purification of Potable Water L.L.C. inApril 2017 to expand and win business related with solar energy and watergenerators in the Middle East’s market.



175



73

(b) Investments in associates:

Information on the material associate of the Group:

Company name: Elitegroup Computer Systems Co., Ltd.

Nature of the relationship with the associate: Elitegroup Computer Systems Co., Ltd.is engaged in manufacturing and selling related products in the Group’s industry chain.The Group invested in Elitegroup Computer Systems Co., Ltd. for the purpose ofupstream/downstream integration.

Principal place of business (country of incorporation): Taiwan

Fair value of the investment in the associate when there is a quoted market price forthe investment: Elitegroup Computer Systems Co., Ltd. is a listed entity on the TaiwanStock Exchange (TWSE). The fair value of the investment in Elitegroup ComputerSystems Co., Ltd. was NTD3,026,637 thousand and NTD2,378,616 thousand, as ofDecember 31, 2017 and 2016, respectively.

Reconciliation of the associate’s summarized financial information presented to thecarrying amount of the Group’s interest in the associate:

The summarized financial information of the associate is as follows:


Current assets $15,582,748 $16,383,504Non-current assets 6,337,971 7,001,020Current liabilities (9,631,841) (10,710,784)Non-current liabilities (528,556) (698,150)Equity 11,760,322 11,975,590

Proportion of the Group’s ownership 27.35% 27.35%Subtotal 3,216,448 3,275,324Goodwill 614,638 614,638

Other adjustments (41,581) (43,734)Carrying amount of the investment $3,789,505 $3,846,228


2017 2016Operating revenue $29,947,340 $29,945,931Profit (loss) from continuing operations 224,119 (878,808)Other comprehensive income (loss), net of income

tax (429,894) (484,597)Total comprehensive income (loss) (205,775) (1,363,405)



176



74

Except the associate mentioned above, the other associates were not individuallymaterial. As of December 31, 2017 and 2016, the aggregate carrying amount of theGroup’s interests in the other associates was NTD1,322,017 thousand andNTD1,312,296 thousand, respectively. The aggregate financial information based onGroup’s share of the other associates is as follows:


2017 2016Profit from continuing operations $96,054 $47,221Other comprehensive income (loss) (post-tax) 711 2,173Total comprehensive income (loss) 96,765 49,394

The other associates had no contingent liabilities or capital commitments as ofDecember 31, 2017 and 2016, nor did the associates provide collaterals.

Please refer to Note 8 for more details on the investment in material associate pledgedas collateral of the Group.

(c) Investments in jointly controlled entities

Investments in jointly controlled entities were not individually material. The aggregatefinancial information of the Group’s investments in jointly controlled entities is asfollows:


2017 2016Profit (loss) from continuing operations $(4,292) $24,889Other comprehensive income (loss), net of income tax - -Total comprehensive income (loss) $(4,292) $24,889

The investments in jointly controlled entities were not pledged as collateral.

(d) The balances of certain investments accounted for under the equity method that wereaudited by other independent accountants were NTD3,789,505 thousand andNTD3,846,228 thousand as of December 31, 2017 and 2016, respectively. The balancesof share of profit of associates accounted for using equity method that were audited byother independent accountants were NTD58,065 thousand and NTD(258,571) thousandfor the years ended December 31, 2017 and 2016, respectively. The balances of share ofother comprehensive income (loss) of associates and joint ventures that were audited byother independent accountants were NTD(114,788) thousand and NTD(133,419)thousand as of December 31, 2017 and 2016, respectively.



177



178



76

Capitalized borrowing costs of property, plant and equipment are as follows:

ItemFor the years ended December 31,

2017 2016Construction in progress $1,988 $83,939Machinery and equipment - 880Capitalization rate of borrowing costs 5.50% 2.63%~5.50%

Components of buildings, including main building structure, electronic engineering,electrical engineering, fire engineering, air conditioning units and elevators weredepreciated by useful lives.

Leased assets under finance leases were pledged solely as security for the bank loans.

Please refer to Note 8 for more details on property, plant and equipment under pledge.

Assets related to Tatung University are described as follows:The carrying amount of Hsin-She-Gong Building (“the Building”) was NTD125,402thousand. The Company provided the fund fully for the building. The ownershipregistration was completed and the Company has acquired building use permit andrelated licenses.

On May 6, 2016, Shan-Chih Asset Development purchased the land of Hsin-She-GongBuilding and completed the transfer of title. The development plans will go with theoverall plans of the Company in the future. The related development plans involvedissues such as land usage modifications and urban planning. The long term plans stillneed continuing communication between Tatung University and the Educationministry and integrated planning.

Due to other reasons, some land and prepayments for land of the Company and itssubsidiaries have been held by other people and asset protection measures have beentaken.

The Group decided to sell part of the land and building of Tatung Building to YuantaFinancial Holding Co., Ltd in the amount of NTD1,650,000 thousand. The transactionwas completed in June 2017 and the gain of disposal was NTD1,461,745 thousand.

⑧The book values of certain property, plant and equipment of the Group have beendeducted to recoverable amount. Impairment loss of NTD657,505 thousand ( includingNTD23,880 thousand which was deducted from other non-current asset) and ofNTD329,161 thousand were recognized to the comprehensive income statement for theyears ended December 31, 2017 and 2016, respectively. The recoverable amount wasmeasured by net fair value. The fair value was estimated by the amount to which boththe seller and buyer agreed and under the condition that both parties agreed to all thetransaction terms. The impairment loss was recognized as the difference between theestimated net fair value and book values.



179



77

(14)Investment property

Land Buildings TotalCost:January 1, 2017 $12,341,995 $2,382,239 $14,724,234Additions - 2,094 2,094Other changes (Note) 95,075 (1,386) 93,689December 31, 2017 $12,437,070 $2,382,947 $14,820,017January 1, 2016 $12,325,442 $2,290,331 $14,615,773Additions 6,036 96,264 102,300Other changes (Note) 10,517 (4,356) 6,161December 31, 2016 $12,341,995 $2,382,239 $14,724,234

Depreciation and impairment:January 1, 2017 $- $(618,137) $(618,137)Depreciation - (74,909) (74,909)Other changes (Note) - 871 871December 31, 2017 $- $(692,175) $(692,175)

January 1, 2016 $- $(545,747) $(545,747)Depreciation - (74,692) (74,692)Other changes (Note) - 2,302 2,302December 31, 2016 $- $(618,137) $(618,137)

Net carrying amount as at:December 31, 2017 $12,437,070 $1,690,772 $14,127,842December 31, 2016 $12,341,995 $1,764,102 $14,106,097

Note: Other changes including transfer in (out) and reclassifications from prepayments forland, inventory, property, plant and equipment, and changes in exchange rates.


2017 2016Rental income from investment property $396,955 $374,690Less: Direct operating expenses from investment property

generating rental income (not including depreciation) (103,058) (86,087)

Direct operating expenses from investment propertynot generating rental income (not including depreciation) - -

Total $293,897 $288,603

No investment property was pledged.



180



78

The investment properties of the Group were not measured at fair value. Instead, the Grouponly disclosed information about fair value. The fair value measurement was categorizedunder Level 3. The fair value of part of the investment properties was determined based onvaluations performed by an independent appraiser. As of December 31, 2017 and 2016, thefair values of investment properties were NTD28,090,861 thousand and NTD22,659,871thousand, respectively. The fair values were supported by market evidences. The valuationmethod used is income approach－discounted cash analysis and land development analysis,and the parameters mainly used are as follows:


Discount rate 1.845%~8.500% 1.985%~8.500%Growth rate 0.8%~3% 1%~5%


GoodwillPatents and

licensesComputersoftware

OthersIntangible

asset TotalCost:January 1, 2017 $314,781 $4,572,515 $759,298 $225,721 $5,872,315Addition-acquired separately - 110,433 166,325 961 277,719Disposals - (502,874) (86,263) - (589,137)Other (Note) - (869) 13,178 (19,102) (6,793)December 31, 2017 $314,781 $4,179,205 $852,538 $207,580 $5,554,104Cost:January 1, 2016 $314,781 $4,568,060 $722,064 $329,004 $5,933,909Addition-acquired separately - 5,110 286,081 17,470 308,661Disposals - - (130,298) - (130,298)Other (Note) - (655) (118,549) (120,753) (239,957)December 31, 2016 $314,781 $4,572,515 $759,298 $225,721 $5,872,315

Amortization and impairment:January 1, 2017 $145,690 $3,877,424 $635,246 $122,855 $4,781,215Amortization - 133,422 151,126 1,661 286,209Disposals - (502,874) (86,263) - (589,137)Other (Note) 169,091 - (356) - 168,735December 31, 2017 $314,781 $3,507,972 $699,753 $124,516 $4,647,022Amortization and impairment:January 1, 2016 $- $3,538,932 $505,525 $96,531 $4,140,988Amortization - 206,723 180,925 26,407 414,055Disposals - - (130,298) - (130,298)Other (Note) 145,690 131,769 79,094 (83) 356,470December 31, 2016 $145,690 $3,877,424 $635,246 $122,855 $4,781,215

Net carrying amount as at:December 31, 2017 $- $671,233 $152,785 $83,064 $907,082December 31, 2016 $169,091 $695,091 $124,052 $102,866 $1,091,100

Note: Other including changes in exchange rates, reclassification, impairment losses andconsolidated entities reclassified to non-current assets held for sale.



181



79


2017 2016Operating costs $8,329 $33,427Operating expense (including research and development costs) $277,880 $380,628

(16)Other non-current assets


Long-term prepaid rent $2,261,437 $1,587,225Advance payments in equipment 5,500,058 3,490,198Advance payments in materials 1,813,932 2,093,326Refundable deposits 838,331 750,948Net Input VAT 3,195,330 21,737Other non-current assets - other 388,506 668,090Total $13,997,594 $8,611,524

As of December 31, 2017 and 2016, long-term prepaid rents were for land use rights.

Please refer to Note 9 (7) for prepayment from purchases reclassification to long-termprepayment of materials.With respect to the above mentioned other non-current assets – other, part of the lands andland prepayment were held temporarily under third parties’ names because of regulatoryrequirements or other reasons. As of December 31, 2017 and 2016, land under third partiesthat had pledged to the Group were both NTD227,979, and land unsecured were bothNTD4,669 thousand. In order to secure the Group’s right over the lands, the Group hasadopted relevant security measures, including having the lands pledged to the Group. Yet,there are still some pieces of land that the Group has not secured its right over them. TheGroup continues handling the issue eagerly.

Please refer to Note 8 for more details on other non-current assets that were pledged ascollateral.

(17)Long-term receivables-net


Long-term receivables $798,084 $776,998Loss: Allowance for bad debts (665,294) (520,799)Total $132,790 $256,199

(18)Short-term loans

As of December 31,Interest Rates (%) 2017 2016

Unsecured bank loans 0.66%~5.20% $21,814,171 $29,017,645Secured bank loans 0.89%~7.00% 19,722,315 25,377,994Subtotal 41,536,486 54,395,639Due to employees 0.17%~0.17% 16,154 16,454Total $41,552,640 $54,412,093



182



80

The Group’s unused short-term lines of credits amounted to NTD12,242,991 thousand andNTD17,569,187 thousand, as of December 31, 2017 and 2016, respectively.

Secured bank loans were pledged under part of the subsidiaries, available-for-sale financialassets, debt instrument investments for which no active market existed, stock investments ofsubsidiaries, investment under the equity method, account receivables, prepaid rents (right ofuse of land) and property, plant and equipment. Please refer to Note 8 for more details.

(19)Short-term notes and bills payable

As of December 31,Guarantors Interest Rates (%) 2017 2016

Unsecured domestic bills payable 0.45%~7.00% $3,490,150 $2,059,592Less: Unamortized discount (3,097) (1,689)Net $3,487,053 $2,057,903

(20)Financial liabilities at fair value through profit or loss


Held for trading:Derivatives not designated as hedging Instruments

Foreign currency option $767 $260Foreign exchange forward contracts 591 581

Total $1,358 $841

Current $1,358 $841

(21)Long-term deferred revenue

Long-term deferred revenue were government grants for the years ended December 31, 2017and 2016.

Government grantsAs of December 31,2017 2016

Beginning balance $240,620 $271,902Received during the period 65,147 115,446Released to the statement of comprehensive income (145,734) (126,077)Exchange differences (5,515) (20,651)Ending balance $154,518 $240,620

Government grants had been received for the purchase of particular items of property, plantand equipment which were amortized during the useful life of the acquired assets.



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16,2

00,0

001.

93Ef

fect

ive

Dec

embe

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toD

ecem

ber2

3,20

21.T

he1s

trep

aym

ento

fprin

cipa

lisi

n3

year

safte

rfirs

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aw.T

here

mai

ning

prin

cipa

lisr

epai

din

5se

mi-a

nnua

llyre

paym

ents

.The

1st

to 4

thpa

ymen

tsw

illbe

5%an

dth

ere

mai

ning

80%

will

bere

paid

inth

e 5th

repa

ymen

t.Se

cure

d Sy

ndic

ated

loan

sfro

mB

ank

ofTa

iwan

8,64

0,00

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840,

000

1.93

Effe

ctiv

eD

ecem

ber2

3,20

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embe

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2021

.The

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epay

men

tofp

rinci

pali

sin

3ye

arsa

fterf

irst

draw

.The

rem

aini

ngpr

inci

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srep

aid

in5

sem

i-ann

ually

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ymen

ts.T

he 1

stto

4th

repa

ymen

tsw

illde

crea

seth

ecr

edit

limit

by5%

each

,and

the

rem

aini

ng80

%w

illbe

repa

idin

the

5thre

paym

ent.



185

TATU

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CO

.,LT

D.A

ND

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SID

IAR

IES

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ssed

in T

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ess o

ther

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ecifi

ed)

83

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fDec

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Inte

rest

rate

(%)(

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e)M

atur

ityda

tean

dte

rmso

frep

aym

ent

2017

2016

Hua

Nan

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kL/

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ans(

USD

)$-

$19,

259

1.90

~3.3

8Pr

inci

pali

srep

aid

in18

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ysaf

terf

irstd

raw

.The

dura

tion

ofth

elo

anis

two

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s.H

uaN

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ank

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loan

s(R

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)-

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.The

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ans(

USD

)-

27,9

132.

28~3

.38

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cipa

lisr

epai

din

180

days

afte

rfirs

tdra

w.T

hedu

ratio

nof

the

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ars.

Two-

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loan

sdue

tost

ockh

olde

rsan

dem

ploy

ees

17,3

5317

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otal

28,4

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2525

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mor

tized

issu

ing

cost

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)(2

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40)

28,2

38,3

7025

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rent

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on(3

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34)

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20)

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7,83

9,83

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4,40

5,83

8

Shan

-Chi

hA

sset

Dev

elop

men

tCo.

guar

ante

edth

eC

ompa

ny’s

long

-term

loan

s.A

sofD

ecem

ber3

1,20

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d20

16,t

heba

lanc

eof

guar

ante

esw

ere

NTD

27,2

00,0

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ousa

ndan

dN

TD28

,200

,000

thou

sand

,res

pect

ivel

y;th

eC

ompa

ny’s

form

erC

hairm

an,W

.S. L

in, g

uara

ntee

dpa

rtof

the

Com

pany

’sba

nklo

ans.

How

ever

,the

resp

onsi

ble

pers

onof

the

Com

pany

has

chan

ged

from

W.S

.Lin

toW

en-Y

enLi

nK

uoac

cord

ing

tore

solu

tions

ofth

eB

oard

ofD

irect

orso

nFe

brua

ry1,

2018

,and

the

alte

rnat

ion

regi

stra

tion

with

the

Min

istry

ofEc

onom

icA

ffai

rsw

asco

mpl

eted

onFe

brua

ry8,

2018

.Unt

ilth

eda

yth

efin

anci

alst

atem

ents

auth

oriz

edfo

riss

uein

acco

rdan

cew

itha

reso

lutio

nof

the

Boa

rdof

Dire

ctor

s,th

eba

nklo

ansg

uara

ntee

dby

the

form

erC

hairm

an,W

.S.L

in h

ave

been

grad

ually

trans

ferr

edto

the

curr

entC

hairm

anW

en-Y

enLi

nK

uo.

Fort

heye

arse

nded

Dec

embe

r31,

2017

and

2016

,cer

tain

long

term

loan

sof

the

Com

pany

incl

uded

debt

cove

nant

sreq

uirin

gm

inim

umle

vels

ofliq

uidi

tyra

tio,l

iabi

lity

toeq

uity

ratio

,and

neta

sset

sva

lue.

Fort

heye

ars

ende

dD

ecem

ber3

1,20

17an

d20

16,t

heC

ompa

nydi

dno

tbre

ach

any

such

cove

nant

s,th

eref

ore

ther

ew

as n

o im

med

iate

repa

ymen

t oft

helo

anst

rigge

red

bybr

each

ofco

vena

nts.

Part

ofth

epr

oper

ty,p

lant

and

equi

pmen

t,de

btin

stru

men

tinv

estm

ents

with

noac

tive

mar

kete

xist

s,an

din

vest

men

tsac

coun

ted

foru

sing

the

equi

tym

etho

dw

ere

pled

ged

asco

llate

ralf

orse

cure

dlo

ans.

Plea

sere

fert

oN

ote

8 fo

rmor

e de

tails

.

(Not

e:In

tere

stra

tesa

rero

unde

d of

fto

the

seco

ndde

cim

al p

lace

.)



186

TATU

NG

CO

.,LT

D.A

ND

SUB

SID

IAR

IES

NO

TES

TOC

ON

SOLI

DA

TED

FIN

AN

CIA

LST

ATE

MEN

TS(E

xpre

ssed

in T

hous

ands

ofN

ewTa

iwan

Dol

lars

unl

ess o

ther

wis

eSp

ecifi

ed)

84

(b)

CPT

and

its su

bsid

iarie

s

Lend

ers

Aso

fDec

embe

r31,

Inte

rest

rate

(%)(

Not

e)M

atur

ityda

tean

dte

rmso

frep

aym

ent

2017

2016

Adm

inis

tere

dby

Ban

kof

Taiw

an(s

yndi

cate

dlo

ans)

$2,2

78,1

25$3

,543

,750

2.77

~3.2

5Th

efir

stre

paym

entd

ate

issi

xm

onth

safte

rthe

date

ofth

isag

reem

ent,

and

each

ofth

eei

ghte

ensu

cces

sive

sem

i-ann

uald

ates

ther

eafte

r.Th

erep

aym

entp

erce

ntag

esar

e5%

fort

hefir

stre

paym

ent,

7.5%

fort

hese

cond

and

third

repa

ymen

ts,1

0%fo

rthe

four

than

dth

efift

hre

paym

ents

,12%

fort

hesi

xth

and

seve

nth

repa

ymen

ts,

3.6%

fort

heei

ghth

and

nint

hre

paym

ents

,6.3

%fo

rthe

tent

hre

paym

ent,

2.25

%fo

rthe

elev

enth

tofo

urte

enth

repa

ymen

ts,a

nd3.

375%

fort

hefif

teen

thto

eigh

teen

thre

paym

ents

.Se

cure

dlo

ng-te

rmlo

anfro

m M

ega

Bill

s Fin

ance

Co.

Ltd.

-47

,200

2.69

Exte

ndan

nual

lybe

ginn

ing

oney

eara

ftert

hefir

stus

eday

.Cre

ditl

imit

isgr

adua

llyre

duce

don

asem

i-an

nual

basi

sbe

ginn

ing

six

mon

ths

afte

rthe

first

use

day.

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ditl

imit

isre

duce

dby

5%fir

stsi

xm

onth

saf

tert

hefir

stus

eda

y,th

en7.

5%fo

rthe

seco

ndan

dth

irdsi

xm

onth

sper

iods

,10%

,for

the

four

than

dfif

thsi

xm

onth

spe

riods

,12%

fort

hesi

xth

and

seve

nth

six

mon

thsp

erio

ds,3

.6%

fort

heei

ghth

and

nint

hsi

xm

onth

sper

iods

,6.

3%fo

rthe

tent

hsi

xm

onth

sper

iods

,2.2

5%fo

rthe

elev

enth

tofo

urte

enth

six

mon

thsp

erio

ds,a

nd3.

375%

fort

hefif

teen

thto

eigh

teen

thsi

xm

onth

sper

iod.

Secu

red

long

-term

loan

from

Kin

g’sT

own

bank

-1,

700,

000

3.30

The

first

repa

ymen

tdat

eis

six

mon

thsa

ftert

hedr

awdo

wn

date

,and

the

rest

ofth

ere

paym

ents

will

bem

ade

onea

chof

the

nine

teen

succ

essi

vequ

arte

rlyda

tes

ther

eafte

r.Fr

omSe

ptem

ber3

0,20

15to

June

30,2

016,

the

repa

ymen

tis

NTD

50,0

00th

ousa

ndev

ery

quar

ter.

From

Sept

embe

r30

,201

6to

June

30,2

019,

the

repa

ymen

tis

NTD

100,

000

thou

sand

ever

yqu

arte

r.Fr

omSe

ptem

ber

30,

2019

toJu

ne30

,20

20,

the

repa

ymen

tisN

TD15

0,00

0th

ousa

ndev

ery

quar

ter.

Secu

red

long

-term

loan

from

Kin

g’sT

own

bank

-1,

180,

000

2.61

Agr

ace

perio

dof

6m

onth

safte

rthe

draw

dow

nda

te, t

hefir

stre

paym

entd

ate

isth

ree

mon

thsa

ftert

hegr

ace

date

,and

the

rest

ofth

ere

paym

ents

will

bem

ade

onea

chof

the

sixt

hsu

cces

sive

quar

terly

date

sthe

reaf

ter.

From

Nov

embe

r1,

2016

toN

ovem

ber

1,20

17,

the

repa

ymen

tis

NTD

20,0

00th

ousa

ndev

ery

quar

ter.

NTD

1,10

0,00

0th

ousa

ndw

illbe

repa

idon

Feb

ruar

y1,

2018

.Se

cure

dlo

ng-te

rmlo

anfro

mK

ing’

sTow

nba

nk1,

000,

000

-2.

25Th

efir

stre

paym

entd

ate

issi

xm

onth

safte

rthe

draw

dow

nda

te,a

ndth

ere

stof

the

repa

ymen

tsw

illbe

mad

eon

each

ofth

ese

vent

een

succ

essi

vequ

arte

rlyda

test

here

afte

r.Fr

omJa

nuar

y31

,201

8to

Apr

il30

,201

9, th

ere

paym

enti

sN

TD25

,000

thou

sand

ever

yqu

arte

r.Fr

omJu

ly31

,201

9to

Oct

ober

31,2

020,

the

repa

ymen

tis

NTD

50,0

00th

ousa

ndev

ery

quar

ter.

From

Janu

ary

31,

2021

toJa

nuar

y31

,20

22th

ere

paym

ent

isN

TD90

,000

thou

sand

ever

yqu

arte

r.Th

ere

mai

ning

will

bedu

eon

Apr

il18

,202

2.



187

TATU

NG

CO

.,LT

D.A

ND

SUBS

IDIA

RIE

SN

OTE

S TO

CO

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IAL

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ENTS

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ds o

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ise

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ified

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85

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ers

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fDec

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Inte

rest

rate

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e)M

atur

ityda

tean

dte

rmso

frep

aym

ent

2017

2016

Secu

red

long

-term

loan

from

Kin

g’sT

own

bank

$600

,000

$-2.

25Th

efir

stre

paym

entd

ate

issi

xm

onth

safte

rthe

draw

dow

nda

te,a

ndth

ere

stof

the

repa

ymen

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illbe

mad

eon

each

ofth

ese

vent

een

succ

essi

vequ

arte

rlyda

tes

ther

eafte

r.Fr

omA

pril

30,2

018

toJu

ly31

,201

9,th

ere

paym

enti

sNTD

15,0

00th

ousa

ndev

ery

quar

ter.

From

Oct

ober

31,2

019

toJa

nuar

y1,

2021

,the

repa

ymen

tis

NTD

30,0

00th

ousa

ndev

ery

quar

ter.

From

Apr

il30

,202

1to

Apr

il30

,202

2th

ere

paym

enti

sNTD

54,0

00th

ousa

ndev

ery

quar

ter.

The

rem

aini

ngw

illbe

due

onJu

ly10

,202

2.Se

cure

dlo

ng-te

rmlo

anfro

mC

hina

Dev

elop

men

tB

ank

(USD

15,0

00th

ousa

nd)

-19

8,66

06.

32Th

ere

paym

enti

sdiv

ided

into

nine

succ

essi

veda

tes.

USD

0.6

mill

ion

will

bere

paid

onN

ovem

ber9

,201

3.U

SD0.

21m

illio

nw

illbe

repa

idon

Apr

il30

,201

4.U

SD0.

31m

illio

nw

illbe

repa

idon

Oct

ober

30,2

014.

USD

1.49

mill

ion

will

bere

paid

onA

pril

30,a

ndO

ctob

er30

,201

5.U

SD2.

37m

illio

nw

illbe

repa

idon

Apr

il30

,and

Oct

ober

30,2

016.

USD

3.08

mill

ion

will

bere

paid

onA

pril

30,a

ndN

ovem

ber8

,201

7.Se

cure

dlo

ng-te

rmlo

anfro

mA

gric

ultu

ralB

ank

ofC

hina

(RM

B200

,000

thou

sand

)-

185,

959

5.94

The

repa

ymen

tisd

ivid

edin

tosi

xsu

cces

sive

date

s.R

MB

30m

illio

nw

illbe

repa

idpe

rsix

mon

thsf

rom

Dec

embe

r31,

2014

toJu

ne30

,201

6.R

MB4

0m

illio

nw

illbe

repa

idon

Dec

embe

r31,

2016

toJa

nuar

y16

,20

17,r

espe

ctiv

ely.

Secu

red

Long

-term

loan

from

Chi

na M

erch

antB

ank

(RM

B10

0,00

0th

ousa

nd)

-22

2,39

95.

94Th

ere

paym

enti

sdi

vide

din

tote

nsu

cces

sive

date

s.5%

will

bere

paid

fort

he 1

stto

4th

six

mon

ths

perio

ds,

10%

will

bere

paid

for t

he 5

thto

8th

six

mon

thsp

erio

ds,a

nd20

%w

illbe

repa

idfo

r the

9th

to10

thsi

xm

onth

spe

riods

.The

mat

urity

date

isJu

ly31

,201

7.Se

cure

dlo

ng-te

rmlo

anfro

m E

xpor

t-Im

port

Ban

k(R

MB

96,2

80th

ousa

nd)

-14

5,42

04.

99Th

ere

paym

ent

isdi

vide

din

toei

ght

succ

essi

veda

tes.

RM

B5

mill

ion

will

bere

paid

onJu

ne21

,an

dD

ecem

ber2

1,20

14.R

MB

12.5

mill

ion

will

bere

paid

onJu

ne21

,and

Dec

embe

r21,

2015

.RM

B15

mill

ion

will

bere

paid

onJu

ne21

,and

Dec

embe

r21,

2016

.RM

B17

.5m

illio

nw

illbe

repa

idon

June

21,2

017.

RM

13.7

8m

illio

nw

illbe

repa

idon

Dec

embe

r17,

2017

.Se

cure

dlo

ng-te

rmlo

anfro

mB

ank

ofC

omm

unic

atio

ns F

inan

cial

Leas

ing

Co.

,Ltd

(RM

B60

,000

thou

sand

)

-74

,057

5.00

The

repa

ymen

tis

divi

ded

into

twel

vein

stal

lmen

ts.T

hefir

stpa

ymen

tRM

B4,

591

thou

sand

was

mad

eon

Dec

embe

r15,

2014

.The

repa

ymen

tofR

MB

4,66

2th

ousa

ndw

asm

ade

onM

arch

15,2

015.

The

repa

ymen

tof

RM

B4,

733

thou

sand

was

mad

eon

June

15,2

015.

The

repa

ymen

tofR

M4,

806

thou

sand

was

mad

eon

Sept

embe

r15

,20

15.

The

repa

ymen

tof

RM

B4,

930

thou

sand

was

mad

eon

Dec

embe

r15

,20

15.

The

repa

ymen

tofR

MB

4,99

1th

ousa

ndw

asm

ade

onM

arch

15,2

016.

The

repa

ymen

tofR

MB

5,05

4th

ousa

ndw

asm

ade

onJu

ne15

,201

6. T

here

paym

ento

fRM

B5,

117

thou

sand

was

mad

eon

Sept

embe

r15,

2016

. The

repa

ymen

tofR

MB

5,18

6th

ousa

ndw

asm

adeo

nD

ecem

ber1

5,20

16.T

here

paym

ento

fRM

B5,

247

thou

sand

was

mad

eon

Mar

ch15

,201

7.Th

ere

paym

ento

fR

MB

5,31

0th

ousa

ndw

asm

ade

onJu

ne15

,201

7.Th

ere

paym

ento

fRM

B5,

373

thou

sand

was

mad

eon

Sep

tem

ber1

5,20

17.



188

TATU

NG

CO

.,LT

D.A

ND

SUBS

IDIA

RIE

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OTE

S TO

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2017

2016

Secu

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long

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onstr

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ank

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e-tim

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long

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loan

from

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onstr

uctio

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ank

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736,

113

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long

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loan

from

Chi

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onstr

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ank

(USD

60,0

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ousa

nd)

1,78

5,60

0-

2.63

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one-

time

repa

ymen

twill

bedu

eon

Janu

ary

10,2

019.

Secu

red

long

-term

loan

from

Chi

naC

onstr

uctio

nB

ank

(USD

49,4

70th

ousa

nd)

1,47

2,22

7-

2.65

The

one-

time

repa

ymen

twill

bedu

eon

Feb

ruar

y1,

2019

.

Adm

inis

tere

dby

Chi

naC

onstr

uctio

nB

ank

(syn

dica

ted

loan

s)(R

MB

211,

214

thou

sand

)96

1,97

5-

4.75

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ting

from

May

8,20

19,

the

repa

ymen

tis

divi

ded

into

eigh

tse

mi-a

nnua

llysu

cces

sive

repa

ymen

ts.

RM

B24

,178

thou

sand

will

bere

paid

on 1

stan

d 2nd

repa

ymen

ts.R

MB

31,5

39th

ousa

ndw

illbe

repa

idon

3rd

and

4thre

paym

ents

.RM

B35

,923

thou

sand

will

bere

paid

on 5

than

d 6nd

repa

ymen

ts.R

MB

13,9

67th

ousa

ndw

illbe

repa

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and

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paym

ents

.A

dmin

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red

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hina

Con

struc

tion

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k(s

yndi

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dlo

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329

thou

sand

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432,

188

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ting

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19,

the

repa

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eigh

tse

mi- a

nnua

llysu

cces

sive

repa

ymen

ts.

RM

B13

,202

thou

sand

will

bere

paid

on 1

stan

d 2nd

repa

ymen

ts.R

MB

17,2

21th

ousa

ndw

illbe

repa

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3rd

and

4thre

paym

ents

.R

MB

19,6

15th

ousa

ndw

illbe

repa

idon

5th

and

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paym

ents

.R

MB

7,62

7an

dR

MB

7,62

6th

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ndw

illbe

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idon

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and

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paym

ents

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cure

dlo

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rmlo

anfro

mC

hina

For

tune

Secu

ritie

s(R

MB

200,

000

thou

sand

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929,

796

7.50

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one-

time

repa

ymen

twill

bedu

eon

Feb

ruar

y28

,201

7.

Secu

red

long

-term

loan

from

Chi

na M

insh

eng

Ban

k(R

MB

300,

000

thou

sand

)-

1,39

4,69

49.

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eon

e-tim

ere

paym

entw

illbe

due

onJa

nuar

y13

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red

long

-term

loan

from

Chi

na M

insh

eng

Ban

k(R

MB

53,0

00th

ousa

nd)

1,57

7,28

0-

2.91

The

one-

time

repa

ymen

twill

bedu

eon

Dec

embe

r18,

2018

.

Secu

red

Long

-term

loan

from

Chi

na M

erch

antB

ank

(USD

42,5

00t h

ousa

nd)

-1,

370,

625

2.65

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one-

time

repa

ymen

twill

bedu

eon

Janu

ary

6,20

17.

Secu

red

Long

-term

loan

from

Chi

na M

erch

antB

ank

(USD

45,0

00th

ousa

nd)

-1,

451,

250

2.82

The

one-

time

repa

ymen

twill

bedu

eon

Janu

ary

20,2

017.

Secu

red

Long

-term

loan

from

Boh

aiIn

tern

atio

nal

Trus

t(R

MB

466,

950

thou

sand

)1,

953,

653

2,17

0,84

16.

40Th

eon

e-tim

ere

paym

entw

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due

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ecem

ber2

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TATU

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6.60

The

one-

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repa

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bedu

eon

Mar

ch24

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9.

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Long

-term

loan

from

Chin

aRa

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Trus

t(R

MB3

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nd)

-1,

394,

694

8.90

The

one-

time

repa

ymen

twill

bedu

eon

Janu

ary

27,2

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red

Long

-term

loan

from

Chin

aRa

ilway

Trus

t(R

MB1

77,5

00th

ousa

nd)

808,

424

825,

194

6.35

The

one-

time

repa

ymen

twill

bedu

eon

Oct

ober

13,2

018.

Secu

red

Long

-term

loan

from

Chin

aRa

ilway

Trus

t(R

MB3

88,0

00th

ousa

nd)

1,76

7,14

6-

5.65

The

one-

time

repa

ymen

twill

bedu

eon

Feb

ruar

y13

,201

9.

Secu

red

long

-term

loan

from

Chin

a M

insh

eng

Bank

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B420

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thou

sand

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912,

890

1,95

2,57

25.

95Th

eon

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ere

paym

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illbe

due

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ecem

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ecur

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ng-te

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mIn

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ank

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repa

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tisd

ivid

edin

totw

osu

cces

sive

repa

ymen

ts.RM

B25

,000

thou

sand

will

bere

paid

onA

ugus

t1,

2017

and

Aug

ust1

,201

8,re

spec

tivel

y.U

nsec

ured

Long

-term

loan

from

Hua

Fu

Secu

ritie

sCo

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MB5

0,00

0th

ousa

nd)

170,

794

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ere

paym

ent

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din

tofo

ursu

cces

sive

repa

ymen

ts.RM

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thou

sand

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paid

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ovem

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8,20

17,N

ovem

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18,N

ovem

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0,92

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tain

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ded

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oN

ote

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ets

pled

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ans.

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190

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men

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16U

nsec

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long

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loan

from

Kin

g’sT

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m M

arch

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cipa

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din

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15,0

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ndpe

rpay

men

t.U

nsec

ured

long

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from

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g’sT

own

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163,

394

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2.55

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nuar

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ount

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aym

ent.

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red

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mK

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ted

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the

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dLo

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239,

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516

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men

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men

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beN

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sand

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nsec

ured

long

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from

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485,

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m M

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nanc

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nanc

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ank

whi

char

eor

igin

ally

due

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ecem

ber

2015

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June

2016

hasb

een

exte

nded

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wo

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hile

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paid

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ela

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cure

dsy

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m F

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273,

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kw

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inal

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Dec

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dJu

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sbee

nex

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prin

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ated

loan

sfro

m F

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ncia

lBan

kw

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2018

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men

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95


Defined contribution plan

The Company and its domestic subsidiaries adopt a defined contribution plan in accordancewith the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company and itsdomestic subsidiaries will make monthly contributions of no less than 6% of the employees’monthly wages to the employees’ individual pension accounts. The Company and itsdomestic subsidiaries have made monthly contributions of 6% of each individual employee’ssalaries or wages to employees’ pension accounts.

Subsidiaries located in the People’s Republic of China will contribute social welfare benefitsbased on a certain percentage of employees’ salaries or wages to the employees’ individualpension accounts.

Pension benefits for employees of overseas subsidiaries and branches are provided inaccordance with the local regulations.

Expenses under the defined contribution plan for the years ended December 31, 2017 and2016 were NTD454,745 thousand and NTD477,239 thousand, respectively.

Defined benefits plan

The Company and its domestic subsidiaries adopt a defined benefit plan in accordance withthe Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the unitsof service years and the average salaries in the last month of the service year. Two units peryear are awarded for the first 15 years of services while one unit per year is awarded after thecompletion of the 15th year. The total units shall not exceed 45 units. Under the LaborStandards Act, the Company and its domestic subsidiaries contribute an amount equivalent to4% of the employees’ total salaries and wages on a monthly basis to the pension funddeposited at the Bank of Taiwan in the name of the administered pension fund committee.Before the end of each year, the Company and its domestic subsidiaries assess the balance inthe designated labor pension fund. If the amount is inadequate to pay pensions calculated forworkers retiring in the same year, the Company and its domestic subsidiaries will make up thedifference in one appropriation before the end of March the following year.



198



96

The Ministry of Labor is in charge of establishing and implementing the fund utilization planin accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization ofthe Labor Retirement Fund. The pension fund is invested in-house or under mandates, basedon a passive-aggressive investment strategy for long-term profitability. The Ministry ofLabor establishes checks and risk management mechanism based on the assessment of riskfactors including market risk, credit risk and liquidity risk, in order to maintain adequatemanager flexibility to achieve targeted return without over-exposure of risk. With regard toutilization of the pension fund, the minimum earnings in the annual distributions on the finalfinancial statement shall not be less than the earnings attainable from the amounts accruedfrom two-year time deposits with the interest rates offered by local banks. Treasury Fundscan be used to cover the deficits after the approval of the competent authority. As theCompany does not participate in the operation and management of the pension fund, nodisclosure on the fair value of the plan assets categorized in different classes could be madein accordance with paragraph 142 of IAS 19. The Group expects to contribute NTD373,168thousand to its defined benefit plan during the 12 months beginning after December 31, 2017.

As of December 31, 2017 and 2016, the durations of the defined benefits plan obligation ofthe subsidiaries under the Group were different. The latest years of maturity are 2025 and2033, respectively.

Pension costs recognized in profit or loss for the years ended December 31, 2017 and 2016:


2017 2016Current period service costs $74,112 $65,457Interest income or expense 59,555 40,071Past service cost 90 90Expected return on plan assets (8,639) (278)Total $125,118 $105,340

Changes in present value of defined benefit obligation and fair value of plan assets are asfollows:

As of2017.12.31 2016.12.31 2016.1.1

Present value of the defined benefitobligation $4,469,098 $4,934,645 $5,770,021

Plan assets at fair value (2,022,716) (1,301,968) (620,131)Liabilities reclassified as held-for-sale non-

current asset - (44,030) -Subtotal 2,446,382 3,588,647 5,149,890Other 2,622 46,943 36,212Other non-current liabilities - net defined

benefit liabilities(assets) $2,449,004 $3,635,590 $5,186,102



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97

Reconciliation of net defined benefit liability (asset) is as follows:

Present value ofDefined benefit

obligationFair value ofplan assets

Net definedbenefit liability

(asset)As of January 1, 2016 $5,770,021 $(620,131) $5,149,890Current period service costs 65,457 - 65,457Net interest expense (income) 46,159 (6,276) 39,883Past service cost and gains and losses

arising from settlements - - -Subtotal 5,881,637 (626,407) 5,255,230Remeasurements of the net defined benefit

liability (asset):Actuarial gains and losses arising from

changes in demographic assumptions 52,687 - 52,687Actuarial gains and losses arising from

changes in financial assumptions 274,675 - 274,675Experience adjustments (661,090) - (661,090)Return on plan assets - 5,256 5,256Subtotal (333,728) 5,256 (328,472)

Payments from the plan (368,764) 368,764 -Benefits paid (181,742) - (181,742)Reclassification to liabilities directly

related to held-for-sale non-currentassets (106,788) 62,758 (44,030)

Contributions by employer - (1,112,339) (1,112,339)As of December 31, 2016 4,890,615 (1,301,968) 3,588,647Current period service costs 74,112 - 74,112Net interest expense (income) 57,679 (20,596) 37,083Past service cost and gains and losses

arising from settlements 13,923 - 13,923Subtotal 5,036,329 (1,322,564) 3,713,765Remeasurements of the net defined benefit

liability (asset):Actuarial gains and losses arising from

changes in demographic assumptions 10,108 - 10,108Actuarial gains and losses arising from

changes in financial assumptions (23,204) - (23,204)Experience adjustments (34,028) - (34,028)Return on plan assets - 6,843 6,843Subtotal (47,124) 6,843 (40,281)

Payments from the plan (360,836) 360,836 -Benefits paid (159,271) - (159,271)Contributions by employer - (1,067,831) (1,067,831)As of December 31, 2017 $4,469,098 $(2,022,716) $2,446,382



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98

The following significant actuarial assumptions are used to determine the present value of thedefined benefit obligation:


Discount rate 1.07%~1.39% 1.13%~1.25%Expected rate of salary increases 1.00%~2.25% 1.00%~2.25%

A sensitivity analysis for significant assumption as at December 31, 2017 and 2016 is, asshown below:

Effect on the defined benefit obligation2017 2016

Increasedefinedbenefit

obligation

Decreasedefinedbenefit

obligation


obligation


obligationDiscount rate increase by 0.5% $- $150,098 $- $149,068Discount rate decrease by 0.5% 156,654 - 154,819 -

The sensitivity analyses above are based on a change in the actuarial assumption (for example:change in discount rate or future salary), keeping all other assumptions constant. Thesensitivity analyses may not be representative of an actual change in the defined benefitobligation as it is unlikely that changes in assumptions would occur in isolation of one another.

There was no change in the methods and assumptions used in preparing the sensitivityanalyses compared to the previous period.

(24)Provisions

Maintenancewarranties

Reserve forlawsuit

Decommissioningreserve Total

As of January 1, 2017 $116,817 $228,865 $77,541 $423,223Arising during the period 53,059 534,218 1,419 588,696Utilized during the period (30,899) (159,756) - (190,655)Unused provision reversed (7,381) (342,403) - (349,784)Effect of exchange rate changes (26) (18,380) - (18,406)As of December 31, 2017 $131,570 $242,544 $78,960 $453,074

Current-December 31, 2017 $131,570 $- $- $131,570Non-current-December 31, 2017 - 242,544 78,960 321,504As of December 31, 2017 $131,570 $242,544 $78,960 $453,074

Current-December 31, 2016 $116,817 $- $- $116,817Non-current-December 31, 2016 - 228,865 77,541 306,406As of December 31, 2016 $116,817 $228,865 $77,541 $423,223



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99



Reserve for lawsuit

Provisions have been recognized for estimated legal obligations and relevant cost based onpast experience. If the existing obligation is mostly likely to incur and the amount may bereasonably estimated, the provisions for legal matters is to be recognized.

Decommissioning, restoration and rehabilitation reserve

A provision has been recognized for decommissioning costs associated with a factory ownedby GET. The Group is committed to decommissioning the site as a result of the constructionof the factory.

(25)Equities

(a) Common stock

As of December 31, 2017 and 2016, the Company’s authorized capital and issued capitalwere NTD100,000,000 thousand and NTD23,395,367 thousand, with a par value ofNTD10 dollar, totaling 10,000,000 thousand shares and 2,339,537 thousand shares,respectively. Each share is entitled to one voting right and the right to receive dividends.

As of December 31, 2017 and 2016, 1,000,000 thousand shares of the Company wereissued as 50,000 thousand units of global depositary receipts(“GDR”), each GDRequaling to 20 shares. The GDR were listed on Luxembourg Stock Exchange.

(b) Capital reserve


Actual addition or disposal of shares of subsidiaries $488,558 $-Share of changes in net assets of subsidiaries,associates and joint ventures accounted for using theequity method 2,679,812 2,759,706

Other 105,135 105,135Total $3,273,505 $2,864,841



202



100

According to the Company Act, the capital reserve shall not be used except for makinggood the deficit of the company. When a company incurs no loss, it may distribute thecapital reserves related to the income derived from the issuance of new shares at apremium or income from endowments received by the Company. The distribution couldbe made in cash or in the form of dividend shares to its shareholders in proportion to thenumber of shares being held by each of them.

(c) Treasury stock

As of December 31, 2017 and 2016 the Company’s subsidiaries, CPT and its subsidiaries,and Chunghwa Electronics Investment Co., held 70,598 thousand shares and 334thousand shares of the Company’s stock. The stocks mentioned above were held forfinancing purpose before the amendments of the Company Act on November 12, 2001.In addition, FD, a subsidiary of the Company, purchased shares of the Company in 2016 and sold portion of them in 2017. FD held 33,166 thousand shares and 36,236 thousandshares of the Company’s stock as of December 31, 2017 and 2016. Because the holdingpercentage of Chunghwa Picture Tubes, Ltd. increased, the recognized treasury stockincreased to NTD1,629,899 thousand as of December 31, 2017.

(d) Retained earnings and dividend policies:

According to the Company’s Articles of Incorporation, current year’s earnings, if any,shall be distributed in the following order:

(a) Payment of all taxes and dues(b) Offset prior years’ operation losses(c) Appropriate 10% of the remaining amount after deducting items (a) and (b) as a legal

reserve(d) Appropriate or reverse special reserve in accordance with relevant laws or regulations(e) After deducting items (a), (b), (c) and (d) above from the current year’s earnings, the

distribution of the remaining portion, if any, will be recommended by the board ofdirectors and resolved in the stockholders’ meeting.

According to the Company Act, the Company needs to set aside amount to legal reserveunless where such legal reserve amounts to the total authorized capital. The legal reservecan be used to offset the deficit of the Company. When the Company incurs no loss, itmay distribute the portion of legal reserve which exceeds 25% of the paid-in capital byissuing new shares or by cash in proportion to the number of shares being held by eachof the shareholders.



203



101

Following the adoption of T-IFRS, the FSC on April 6, 2012 issued Order No. Jin-Guan-Zheng-Fa-Zi No. 1010012865, which sets out the following provisions for compliance:

On a public company's first-time adoption of the T-IFRS, for any unrealized revaluationgains and cumulative translation adjustments (gains) recorded to shareholders’ equity thatthe company elects to transfer to retained earnings by application of the exemption underIFRS 1, the company shall set aside an equal amount of special reserve. Following acompany’s adoption of the T-IFRS for the preparation of its financial reports, whendistributing distributable earnings, it shall set aside special reserve, from the profit/lossof the current period and the undistributed earnings from the previous period, an amountequal to “other net deductions from shareholders’ equity for the current fiscal year,provided that the company has already set aside special reserve according to therequirements in the preceding point, it shall set aside supplemental special reserve basedon the difference between the amount already set aside and other net deductions fromshareholders’ equity. For any subsequent reversal of other net deductions fromshareholders’ equity, the amount reversed may be distributed.

As of January 1, 2014, special reserve set aside for the first-time adoption of T-IFRSamounted to NTD15,894,690 thousand. In the shareholders’ meeting last year, theCompany resolved to make up for its losses by special reserve of NTD11,195,032thousand and to recover the special reserve amounted to NTD124,233 thousand.Unrecovered special reserve amounted to NTD11,070,799 thousand. Also, after theCompany disposed of related assets and reversed special reserves of NTD70,865thousand to retained earnings, special reserve set aside for the first-time adoption of T-IFRS amounted to NTD4,753,026 thousand as of December 31, 2017.

Details of the 2017 deficits compensation as approved by the boards’ meeting on March15, 2018, and details of the 2016 deficits compensation as approved by the shareholders’meeting on May 11, 2017 are as follows:

Deficits compensation2017 2016

Special reserve $281,015 $2,175,074

Please refer to Note 6(29) for more details about provision for employees’ bonuses andcompensation for directors and supervisors.



204



102

(e) Non-controlling interests:


2017 2016Balance as of January 1 $56,243,021 $18,312,703Income (loss) attributable to non-controlling interests 2,045,184 (1,195,957)Other comprehensive income, attributable to non-

controlling interests, net of tax:Actuarial gain (loss) from defined benefit plans 31,293 132,710Exchange differences resulting from translating the

financial statements of a foreign operation (1,144,877) (2,930,230)Unrealized gains (losses) from available-for-sale

financial assets (34,461) (913,392)Other comprehensive income from investment of

associates and joint ventures under equity method - 30,479Other comprehensive income directly related to non-

current assets held for sale 29,380 -That subsidiaries purchased (disposed) shares of parent

company deemed as treasury stock transaction (21,183) 249,995Disposal of subsidiaries (losing control) (3,737,382) -Actual acquisition or disposal of the shares of the

subsidiaries 3,725,376 (1,925,872)Subsidiaries equity change 62,368 44,662,948Cash dividends distributed by the subsidiaries (1,472,133) (180,363)Balance as of December 31 $55,726,586 $56,243,021

(26)Operating revenue


2017 2016Sale of goods $72,232,108 $73,947,703Less: sales returns, discounts and allowances (1,128,549) (1,209,299)Subtotal 71,103,559 72,738,404Revenue from sale of properties (included lands and buildings) 50,688 23,127Revenue arising from rendering of services andconstruction contract 1,970,273 3,068,862Other operating revenues 2,428,489 1,847,232Total $75,553,009 $77,677,625



205



103

(27)Net other income (expenses)


2017 2016Government grants $2,164,430 $-

The government grants were mainly from the Putian City People’s Government’s high-end,new technology panel project grant acquired by Vibrant Display Technology CO., Ltd., thesubsidiary of CPT, amounting to RMB440,000 thousand.

(28)Operating leases

Operating lease commitments – the Group as lessee

The Group entered into commercial property leases. These leases have an average life of oneto fifty years with no renewal option included in the contracts. There are no restrictions placedupon the Group by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as of December 31,2017 and December 31, 2016 are as follows:


Not later than one year $526,774 $642,114Later than one year and not later than five years 853,520 1,323,968Later than five years 221,291 157,983Total $1,601,585 $2,124,065

Operating lease expenses recognized are as follows:


2017 2016Minimum lease payments $489,803 $514,264

Operating lease commitments – the Group as lessor

The Group entered into commercial property leases with remaining terms of between one andtwenty years. All leases include a clause to enable upward revision of the rental charge on anannual basis according to prevailing market conditions.



206



104

Future minimum rentals receivable under non-cancellable operating leases as of December31, 2017 and December 31, 2016 are as follows:


Not later than one year $459,008 $343,721Later than one year and not later than five years 1,025,507 769,424Later than five years 481,548 382,218Total $1,966,063 $1,495,363

There was no contingent rent recognized as income for the years ended December 31, 2017and December 31, 2016, respectively.

(29)Summary statement of employee benefits, depreciation and amortization expenses by functionduring the years ended December 31, 2017 and 2016:

By Function

By Nature

For the years ended December 31,2017 2016

Operatingcosts

Operatingexpenses Total amount

Operatingcosts

Operatingexpenses Total amount

Employee benefits expenseSalaries $5,957,577 $4,951,463 $10,909,040 $6,004,455 $4,989,645 $10,994,100Labor and health insurance 474,196 406,215 880,411 500,226 409,308 909,534Pension 311,171 268,692 579,863 298,691 283,888 582,579Other employee benefits expense 251,154 212,018 463,172 239,605 273,576 513,181

Depreciation 6,640,542 1,300,769 7,941,311 7,243,536 1,115,740 8,359,276Amortization 9,364 282,103 291,467 38,139 382,359 420,498

The Company’s Article of Incorporation states that if there is a profit, the Company shouldset aside employee compensation no less than 1% of the profit and board membercompensation no more than 2%. When the Company suffers an accumulated deficit, the profitshould be retained to recover the deficit. The employee compensation should be paid out byshares or cash, and should be resolved in the board of directors’ meeting, with two thirds ofthe board members present and over half of the present members’ approval. Information ofthe board of directors’ resolution regarding the employees’ compensation and remunerationto directors and supervisors can be obtained from the “Market Observation Post System” onthe website of the TWSE.

The Company had net income in 2017. However, there is still accumulated deficits that needto be covered, hence, the Company did not estimate employees’ compensation andremuneration to directors and supervisors.

The Company suffered net loss in 2016 and thus did not estimate employees’ compensationand remuneration to directors and supervisors.



207



105

(30)Non-operating income and expenses

(a) Other income


2017 2016Dividend income $83,931 $52,487Interest income 1,044,507 955,510Others 969,846 1,978,623Total $2,098,284 $2,986,620

(b) Other gains and losses


2017 2016Gains on disposal of property, plant and equipment $1,805,264 $420,498Gains (losses) from disposal of held-for-sale non-current assets 2,323,058 (4,082)Gains (losses) on disposal of investments (19,963) 2,482,191Foreign exchange gains, net 1,522,843 946,326Gains (losses) on financial assets / financial liabilitiesat fair value through profit or loss 26,616 151,313Impairment losses from financial assets (14,708) (50,362)Impairment losses from non-financial assets－held-for-sale non-current assets (254,061) -Impairment losses from non-financial assets－others (826,596) (742,690)Others (1,541,105) (1,042,726)Total $3,021,348 $2,160,468

(c) Finance costs


2017 2016Interest on borrowings from bank $3,543,798 $4,203,495Interest on bonds payable - 9,215Others 82,254 81,259Total finance costs $3,626,052 $4,293,969



208



106

(31)Components of other comprehensive income

For the year ended December 31, 2017:

Arising during theperiod

Reclassificationadjustments

during the period

Othercomprehensive

incomeIncome tax benefit

(expense)

Othercomprehensive

income, net of taxNot to be reclassified to profit or loss

in subsequent periods:Remeasurements of defined benefit

plans $39,151 $- $39,151 $687 $39,838Equity related to non-current assets

held-for-sale - - - - -Share of other comprehensive

income of associates and jointventures accounted for using theequity method (1,042) - (1,042) - (1,042)

To be reclassified to profit or loss insubsequent periods:Exchange differences resulting

from translating the financialstatements of a foreign operation (1,422,254) (103,788) (1,526,042) 70,620 (1,455,422)

Unrealized gains (losses) fromavailable-for-sale financialassets 338,700 1,421 340,121 (97,954) 242,167

Equity related to non-current assetsheld-for-sale (128,098) 184,176 56,078 - 56,078

Share of other comprehensiveincome of associates and jointventures accounted for using theequity method (162,590) 38,848 (123,742) - (123,742)

Total of other comprehensive income$(1,336,133) $120,657 $(1,215,476) $(26,647) $(1,242,123)


Arising during theperiod

Reclassificationadjustments

during the period

Othercomprehensive

incomeIncome tax benefit

(expense)

Othercomprehensive

income, net of taxNot to be reclassified to profit or loss

in subsequent periods:Remeasurements of defined benefit

plans $338,426 $- $338,426 $(10,341) $328,085Equity related to non-current assets

held-for-sale (4,110) - (4,110) - (4,110)Share of other comprehensive

income of associates and jointventures accounted for using theequity method 466 - 466 - 466

To be reclassified to profit or loss insubsequent periods:Exchange differences resulting from

translating the financial statementsof a foreign operation (3,559,383) - (3,559,383) 257,739 (3,301,644)

Unrealized gains (losses) fromavailable-for-sale financial assets 1,643,408 (2,555,931) (912,523) 128,762 (783,761)

Equity related to non-current assetsheld-for-sale (215,067) - (215,067) - (215,067)

Share of other comprehensiveincome of associates and jointventures accounted for using theequity method (125,581) - (125,581) - (125,581)

Total of other comprehensive income $(1,921,841) $(2,555,931) $(4,477,772) $376,160 $(4,101,612)



209



107

(32)Income tax

The major components of income tax expense (income) are as follows:

Income tax expense (income) recognized in profit or lossFor the years ended

December 31,2017 2016

Current income tax expense :Current income tax charge $1,623,696 $1,470,686Adjustments in respect of current income tax of prior periods 44,202 (22,719)

Deferred tax expense (income):Deferred tax expense (income) relating to origination

and reversal of temporary differences (404,793) 176,912Deferred tax expense (income) relating to origination

and reversal of tax loss and tax credit (304,316) (221,858)Deferred tax liability write-off (298,515) (103,254)

Total income tax expense $660,274 $1,299,767

Income tax relating to components of other comprehensive incomeFor the years ended

December 31,2017 2016

Deferred tax expense (income):Exchange differences resulting from translating the

financial statements of a foreign operation $(70,620) $(257,739)Unrealized gains (losses) from available-for-sale

financial assets 97,954 (128,762)Actuarial (gains) losses on defined benefits plan (687) 10,341Income tax relating to components of other

comprehensive income $26,647 $(376,160)

Reconciliation between tax expense and the product of accounting profit multiplied byapplicable tax rates is as follows:


2017 2016Accounting income (loss) before tax from continuing

operations $2,710,030 $(2,206,487)Tax at the domestic rates applicable to profits in the

country concerned $746,213 $(532,449)Tax effect of losses (revenues) exempt from taxation (434,457) 124,941Tax effect of expenses not deductible for tax purposes (177,185) 231,323Tax effect of deferred tax assets/liabilities 194,672 1,346,646Adjustments in respect of current income tax of prior periods 44,202 (22,719)Others 286,829 152,025Total income tax expense recognized in profit or loss $660,274 $1,299,767



210



108

Deferred tax assets (liabilities) relate to the following:


Beginning

balance

Deferred tax

income (expense)

recognized in

profit or loss

Deferred tax

income (expense)

recognized in

other

comprehensive

income

Exchange

differences Ending balance

Temporary differences

Deferred tax assets

Revaluations of available-for-sale investments to fair value $442,300 $- $(97,954) $- $344,346

Impairment on property, plant and equipment - 61,108 - 635 61,743

Loss from investments accounted for using the equity method 424,462 37,991 - - 462,453

Unrealized intragroup profits and losses 13,123 (2,873) - - 10,250

Provisions 43,631 (40,857) - - 2,774

Accrued pension liabilities 34,722 (2,482) - - 32,240

Allowance for doubtful accounts 176,414 (16,451) - (50) 159,913

Unrealized loss on market decline of inventories 116,667 97,343 - (517) 213,493

Employee benefits 4,081 (428) - - 3,653

Impairment on prepayments 14,034 - - - 14,034

Other 37,482 7,157 - (1,023) 43,616

Unused tax losses 1,313,581 343,188 - (12,159) 1,644,610

Subtotal 2,620,497 483,696 (97,954) (13,114) 2,993,125

Deferred tax liabilities

Profit from investments accounted for using the equity method (622,091) 142,741 - - (479,350)

Unrealized gain on foreign exchange (227,489) (38,945) - - (266,434)

Exchange differences resulting from translating the financial

statements of a foreign operation (308,893) 1,956 70,620 - (236,317)

Reserve for land revaluation (5,317,655) 432,799 - - (4,884,856)

Other (57,869) (14,623) 687 - (71,805)

Subtotal (6,533,997) 523,928 71,307 - (5,938,762)

Deferred tax (expense)/income $1,007,624 $(26,647) $(13,114)

Net deferred tax assets/(liabilities) $(3,913,500) $(2,945,637)

Reflected in balance sheet as follows:

Deferred tax assets $2,620,497 $2,993,125

Deferred tax liabilities $(6,533,997) $(5,938,762)



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Beginning

balance

Deferred tax

income (expense)

recognized in

profit or loss

Deferred tax

income (expense)

recognized in

other

comprehensive

income

Exchange

differences

Reclassified to

held-for-sale Ending balance

Temporary differences

Deferred tax assets

Revaluations of available-for-sale

investments to fair value $313,538 $- $128,762 $- $- $442,300

Impairment on property, plant and equipment 31,065 (31,065) - - - -

Gain on disposal of property, plant and equipment 57,774 (57,774) - - - -

Loss from investment accounted for using the

equity method 431,431 (6,969) - - - 424,462

Unrealized intragroup profits and losses 11,844 1,883 - - (604) 13,123

Provisions 76,074 (32,443) - - - 43,631

Accrued pension liabilities 38,905 (5,919) 1,736 - - 34,722

Allowance for doubtful accounts 165,678 14,854 - (4,118) - 176,414

Unrealized loss on market decline of inventories 83,503 64,876 - (5,915) (25,797) 116,667

Employee benefits 4,374 (293) - - - 4,081

Impairment on prepayments 14,034 - - - - 14,034

Impairment on non-current assets held for sale 1,861 (1,861) - - - -

Other 364,005 (306,916) - (15,986) (3,621) 37,482

Unused tax losses 1,147,511 221,858 - (55,788) - 1,313,581

Subtotal 2,741,597 (139,769) 130,498 (81,807) (30,022) 2,620,497

Deferred tax liabilities

Profit from investments accounted for using

the equity method (869,290) 247,199 - - - (622,091)

Unrealized gain (loss) on foreign exchange (32,243) (199,793) - - 4,547 (227,489)

Exchange differences resulting from translating

the financial statements of a foreign operation (565,254) (1,377) 257,738 - - (308,893)

Reserve for land revaluation (5,420,909) 103,254 - - - (5,317,655)

Other (184,479) 138,686 (12,076) - - (57,869)

Subtotal (7,072,175) 287,969 245,662 - 4,547 (6,533,997)

Deferred tax (expense)/income $148,200 $376,160 $(81,807) $(25,475)

Net deferred tax assets/(liabilities) $(4,330,578) $(3,913,500)

Reflected in balance sheet as follows:

Deferred tax assets $2,741,597 $2,620,497

Deferred tax liabilities $(7,072,175) $(6,533,997)



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The following table contains information of the unused tax losses of the Group:

YearTax losses for the

periodUnused tax losses as of December 31,

Expiration year2017 20162017 $3,137,700 $2,785,651 $- 20272016 5,917,409 5,285,940 4,173,436 20262015 12,355,379 11,928,579 12,904,939 20252014 7,714,504 7,396,070 7,152,419 20242013 5,411,529 5,282,382 4,971,561 20232012 15,113,657 14,864,689 14,474,170 20222011 12,325,961 12,321,405 12,240,074 20212010 18,462,158 18,202,239 18,202,239 20202009 33,440,354 33,162,461 33,078,275 20192008 4,388,320 2,406,352 4,446,296 2018

$118,266,971 $113,635,768 $111,643,409

Details of the Group’s unused tax credit are as follows:

Unused balance as ofDecember 31, Expiration

Laws and regulations Items 2017 2016 yearAbolishment of the Act forUpgrading Industries

Emerging, important andstrategic industries

$- $9,449 2016

Unrecognized deferred tax assets

As of December 31, 2017 and December 31, 2016, the Group’s unrecognized deferred taxassets amounted to NTD21,153,786 thousand and NTD22,607,173 thousand, respectively.

Imputation credit information


Balances of imputation credit amounts$-

(Note 1)$1,457,642

(Note 2)

The actual creditable ratio for 2017 and 2016 both were 0%.



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The Company’s earnings generated in the year ended December 31, 1997 and prior years havebeen fully appropriated.

(Note 1): The amendments to the Income Tax Act with retrospective effect from January 1,2018 were passed by the Legislative Yuan on January 18, 2018, and announced by thePresident on February 7, 2018, respectively. According to the amendments, the imputation taxscheme under the integrated income tax system is repealed.

(Note 2): According to the Article 66-6 of Income Tax Act, the imputation credit ratio for theearnings of 2016 distributed to individual stockholders residing in R.O.C. would be half ofthe original ratio.

The assessment of income tax returns

As of December 31, 2017, the assessment of the income tax returns of the Company and itssubsidiaries is as follows:

The assessment of income taxreturns by tax authorities

The Company Assessed and approved up to 2014 Subsidiary-SCAD Assessed and approved up to 2014 Subsidiary-CPT Assessed and approved up to 2015 Subsidiary-SCSC Assessed and approved up to 2015 Subsidiary-FD Assessed and approved up to 2015 Subsidiary-TSTI Assessed and approved up to 2015 Subsidiary-TFC Assessed and approved up to 2015

(33)Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributableto ordinary equity holders of the parent entity by the weighted average number of ordinaryshares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable toordinary equity holders of the parent entity (after adjusting for interest on the convertiblepreference shares) by the weighted average number of ordinary shares outstanding during theyear plus the weighted average number of ordinary shares that would be issued on conversionof all the dilutive potential ordinary shares into ordinary shares.



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For the years endedDecember 31

2017 2016Basic and diluted earnings (loss) per share:Income (loss) attributable to ordinary equity holders of the

Company (in thousands of NTD) $74,070 $(2,343,945)

Weighted average number of ordinary shares outstandingfor basic and diluted earnings per share (in thousands) 2,233,870 2,259,391

Basic and diluted income (loss) per share (in dollars of NTD) $0.03 $(1.03)

There were no other transactions involving ordinary shares or potential ordinary sharesbetween the balance sheet date and the issuance date of the financial statements. The Companydid not estimate employee compensation and remuneration for the directors and supervisorsand hence there is no dilution effect on earnings per share.

(34)Changes in parent’s interest in subsidiaries

Acquisition of new shares in a subsidiary not in proportion to ownership interest

Kornerstone Materials, a subsidiary of CPT, held a capital injection amounting toRMB1,400,000 thousand in the first quarter to the third quarter in 2016. However, CPTFOptronics Co., Ltd, a subsidiary of CPT, failed to acquire new shares proportionately to theirownership interests, which resulted in changes in ownership interest of CPTF Optronics Co.,Ltd and CPTTG in its subsidiaries amounting to NTD(60,614) thousand. The change wasrecognized as a deduction of capital reserve and retained earnings amounting to NTD18,936thousand and NTD41,678 thousand, respectively, in each company.

CPTTG, a subsidiary of CPT, held a capital injection in the third quarter of 2016 in the amountof RMB10,000,000 thousand. The CPT group did not acquire new shares proportionately toits ownership interests, which resulted in changes in ownership interest of subsidiariesamounting to NTD9,052,994 thousand, and was recognized as an addition of capital reserveunder CPT.

CPTTG, a subsidiary of CPT, held a capital injection in the first quarter to the third quarter of2016 in the amount of RMB80,000 thousand for Kornerstone Materials, subsidiary of CPT.However, CPTF Optronics Co., Ltd, a subsidiary of CPT did not acquire new sharesproportionately to its ownership interests, which resulted in changes in ownership interest ofsubsidiaries amounting to NTD(1,172) thousand, and was recognized as an decrease of capitalreserve.



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Disposal of shares issued by subsidiaries

CPTL, a subsidiary of CPT, sold shares of CPTTG in March 2017 in a total of 30,040,422shares, which represents a 1.74% of total shares. After deduction of related transaction fee,the net proceeds were NTD1,337,047 thousand. The carrying value of the shares of CPTTGsold was NTD979,795 thousand. The difference between the actual disposal proceeds and thecarrying value, amounting to NTD357,252 thousand, had been recognized under equity inproportion to the holding percentage.

CPTB, a subsidiary of CPT, sold shares of CPTTG in February 2017 in a total of 39,959,500shares, which represents a 2.31% of total shares. After deduction of related transaction fee,the net proceeds were NTD1,857,424 thousand. The carrying value of the shares of CPTTGsold was NTD1,354,897 thousand. The difference between the actual disposal proceeds andthe carrying value, amounting to NTD502,527 thousand, had been recognized under equity inproportion to the holding percentage.

Acquisition of shares issued by subsidiaries

CPTB and CPTL, subsidiaries of CPT, transferred their shares of CPTW to CPTTG(L) in thefirst quarter of 2016. CPTB and CPTL recognized changes in ownership in subsidiariesamounting to NTD73,999 thousand in their related equity accounts.

CPT transferred its 41.03% shares in CPTL to the Company in the second quarter of 2016.The shareholding percentage of CPT towards CPTL decreased from 100% to 58.97%. Thepayment CPT received amounted to NTD968,560 thousand. The book value of net asset ofinvestment in CPTL under the equity method amounted to NTD500,711 thousand. Theaccumulated other comprehensive income adjustment was NTD141,747 thousand. Therefore,the difference between the actual acquisition or disposal price and the book value, amountingto NTD609,596 thousand, was recognized under the equity accounts in CPT’s book.

The above equity charges recognized by subsidiaries were then recognized by the Companyaccording to it’s combined proportion of ownership interest over these subsidiaries.

(35)Disposal of subsidiaries

On November 24, 2016, the board of directors of CPT, a subsidiary of the Group, has resolvedto sell all of its shares held in Giantplus to Ortus Technology Co., Ltd, a Japanese corporation.Giantplus and its subsidiary were reclassified as disposal group held for sale in 2016, and werereported separately in the consolidated balance sheets. The transfer was completed on March30, 2017. The Group lost control of Giantplus and no longer included it in the consolidatedfinancial statements.



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114

(a) Consideration of disposal

The consideration collected was cash and cash equivalents. The Gorup disposed ofGiantplus in the amount of NTD3,926,787 thousand. After deduction of relatedtransactoin fee, the net proceeds were NTD3,913,353 thousand.

(b) Analysis of assets and liabilities of Giantplus as of the date losing control

As ofMarch 31,

2017Current assets (including cash and cash equivalents NTD4,164,670thousand) $7,301,594Non-current asset 6,106,436Total assets 13,408,030

Current liabilities (4,529,038)Non-current liabilities (812,120)Total liabilities (5,341,158)Net assets of Giantplus 8,066,872Carrying value of non-controlling interest (3,737,382)Net disposal assets $4,329,490

(c) Loss on disposal of subsidiary

Consideration collected $3,913,353Net disposal assets (4,329,490)Accumulated exchange difference of the subsidiary’s net assets arisen

from reclassification from equity to profits and loss because oflosing control of the subsidiary (80,388)

Loss on disposal of subsidiary $(496,525)

(d) Cash outflow of disposal of subsidiary

Consideration collected $3,913,353Balance of cash and cash equivalents of disposal (4,164,670)

$(251,317)



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(36)Subsidiaries that have material non-controlling interests

Financial information of subsidiaries that have material non-controlling interests is providedbelow:

Proportion of equity interest held by non-controlling interests:


Name Country of Incorporation and operation 2017 2016CPT Group Taiwan 59.78% 59.84% (Note)SCSC Group Taiwan 41.80% 41.82%

The holding percentage mentioned above is disclosed as the comprehensive holdingpercentage. Both of the companies mentioned above own subsidiaries, and thus the financialinformation mentioned below is consolidated financial information.

(Note: Please refer to Note 9 (5) for more details about the change of non-controlling equityinterest in connection with Compal Electronics, Inc. arbitration appeal)

Accumulated balances of material non-controlling interest:


CPT Group $50,951,213 $51,500,482SCSC Group 4,758,265 4,961,450

Profit/(loss) allocated to material non-controlling interest:


2017 2016CPT Group $2,365,806 $(162,370)SCSC Group (586,872) (1,002,697)

The summarized financial information of these subsidiaries is provided below. Thisinformation is based on amounts before inter-company eliminations.



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Summarized information of profit or loss for the year ended December 31, 2017:

CPT Group SCSC GroupOperating revenue $34,739,820 $12,144,456Profit of (loss) for the period from continuing operations 3,498,628 (766,878)Total comprehensive income for the period $3,017,016 $(605,528)

Summarized information of profit or loss for the year ended December 31, 2016:

CPT Group SCSC GroupOperating revenue $33,069,645 $15,637,691Profit or (loss) for the period from continuing operations (861,520) (1,400,665)Total comprehensive income for the period $(4,106,299) $(1,528,086)

Summarized information of financial position as of December 31, 2017:

CPT Group SCSC GroupCurrent assets $52,507,127 $4,693,732Non-current assets 81,777,539 11,452,248Current liabilities 59,600,465 9,321,629Non-current liabilities 17,753,803 792,942

Summarized information of financial position as of December 31, 2016:

CPT Group SCSC GroupCurrent assets $92,655,354 $4,796,509Non-current assets 48,786,306 12,897,266Current liabilities 72,197,190 9,642,466Non-current liabilities 13,093,841 1,715,387

Summarized cash flow information for the year ended December 31, 2017:

CPT Group SCSC GroupOperating activities $9,185,655 $1,591,088Investing activities (18,340,283) (387,502)Financing activities (4,344,120) (1,037,168)Net increase/(decrease) in cash and cash equivalents (14,942,447) 181,579

Summarized cash flow information for the year ended December 31, 2016:

CPT Group SCSC GroupOperating activities $2,050,874 $1,689,759Investing activities (31,384,645) (234,393)Financing activities 50,894,600 (2,688,026)Net increase/(decrease) in cash and cash equivalents 20,860,581 (1,311,127)



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(37)Significant purchase agreements of technology and materials

Contracting partyThe term ofthe contract The content of repayment

Technology agreementSamsung Display Co.,

Ltd. (SDC)January 2014

｜December 2023

1. CPT is authorized to use patent.2. The Company is required to pay royalty fees

on installment basis during the effective periodof the contract.

Mitsubishi ElectricCorporation (MELCO)

July 2015｜

June 2020



Sharp Corporation January 2016｜

June 2019



Japan Display Inc. January 2017｜

December 2021



LG. Display Co., Ltd. March 2015｜

March 2022



Semiconductor EnergyLaboratory Co., Ltd(SEL)

January 2009|

December 2018



Hydis Technology Co.,Ltd.

November 2012|

October 2022

1. CPT is authorized to use the patent.2. The Company is required to pay royalty fees


Industrial TechnologyResearch Institute

August 5, 2015|

August 4, 2030

1. CPT is authorized to use the patent.2. The Company is required to pay royalty fees


Purchase agreement ofmaterials

Corning DisplayTechnologies TaiwanCo., Ltd (CorningTaiwan)

January 2017｜

December 2021

1. Corning Taiwan will guarantee to supplymaterials of TFT-LCD to CPT.

2. CPT is required to make prepayments oninstallment basis to Corning Taiwan to bededucted from subsequent purchase.

Please refer to Note 9 for other purchase agreements.



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118

7. Related party transactions

Related parties that have transactions with the Group during the financial reporting period:

Related parties and relationship

Name of related parties Relationship with the CompanyTatung University Significant influence over the CompanyTatung Senior High School Significant influence over the CompanyTatung Okuma Co., Ltd. AssociatesElitegroup Computer Systems Co., Ltd. AssociatesTaiwan Nissei Display System Co., Ltd AssociatesTatung Cranes (Shanghai) Co., Ltd AssociatesKunde (wujiang) Plastic Technology Co., Ltd. AssociatesKuender Co., Ltd. AssociatesKuender (Wujiang) Eelectronic parts Co., Ltd. AssociatesUfeco (Wujiang) Technology Inc AssociatesNature Worldwide Technology Corp. AssociatesHsieh-Chih Industrial Library Publishing Co. AssociatesHuai-Jie (Wujiang) Plastic Processing Technology Co., Ltd. AssociatesThe Employee Welfare Committee of Tatung SystemTechnologies Inc. (“TSTI”)

Other related party

Association of GET (Taoyuan) Other related partyAffiliate Union of Tatung Company Other related partyThe Employee Welfare Committee of ForwardElectronics Co., Ltd. (“FD”)

Other related party

Gintech Energy Corporation Other related partyThe Employee Welfare Committee of Tatung Company Other related partyThe United Employees’ Welfare Committee of Tatung Other related partyThe Employee Welfare Committee of GET Other related party

(Note: If the transaction amount of single related party doesn’t reach 10% of the transaction totalamount, it will be combined to present with others.)

Significant related party transactions

(1) Sales (including leasing revenue)


2017 2016Entity with joint control or significant influence over the

CompanyTatung University $35,795 $48,009Other 5,805 4,131

Associates 80,009 78,623Other related parties

Gintech Energy Corporation 402,212 322,837Other 18,209 2,256

Total $542,030 $455,856



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(a) The Company

The sales price to related parties was determined through mutual agreement based onmarket conditions. The collection terms for domestic related parties were 90 days,equivalent to those for domestic third parties; the collection terms for foreign relatedparties were 30-180 days, equivalent to these for foreign third parties.

(b) Significant subsidiaries

There were no significant differences between selling prices to related parties and pricesto arm’s length customers. The comparison of collection terms between related partiesand arm’s length customers is summarized as follows:

For the years ended December 31,

2017 2016

Company Region Related parties General supplier Related parties General supplier

CPT and itssubsidiaries

Overseas O/A 30-180 days T/T in advanceL/C 30-45 days at sightO/A 95 days

O/A 30-90 days T/T in advanceO/A 95 days

Domestic O/A 30-33 days T/T in advanceO/A 30-45 days

O/A 30-90 days T/T in advanceO/A 45 daysL/C 30-60 days at sight

SCSC and itssub-subsidiaries

Overseas O/A 60-150 daysT/T 30 days

T/T 7~30 daysO/A 30-90 daysT/T in advance, L/C atsight

O/A 30-120 daysT/T 30 days

T/T in advanceT/T 3~30 daysL/C 60 daysO/A 45-120 days

Domestic O/A 60 daysT/T 90 daysL/C 180 days

O/A 30-90 daysPeriod closing date30~90 daysL/C at sightT/T 15 days afterreceiptT/T 3~90 daysL/C 30~180 daysT/T in advance

T/T 15~90 daysL/C 180 daysO/A 60-90 days

T/T in advanceT/T 30~90 daysL/C at sightL/C 30~90 daysAMS 30-90 days

FD and itssubsidiaries

Overseas O/A 30-150 days O/A 60-150 daysOr L/C SIGHT

O/A 30-150 days O/A 60-150 daysOr L/C SIGHT

Domestic Cash collection atperiod closing dateO/A or TT 30-150 days

O/A 30-120 days Cash collection atperiod closing dateO/A or TT 30-150 days

O/A 30-120 days

Tatung SystemTechnologiesInc. and itssubsidiaries

Overseas O/A 30-120 days O/A 30-120 days O/A 30-120 days O/A 30-120 days

Domestic O/A 30-120 days O/A 30-120 days O/A 30-120 days O/A 30-120 days



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120

(2) Purchase


2017 2016Associates

Elitegroup Computer Systems Co., Ltd. $48,849 $5,620Kunde (wujiang) Plastic Technology Co., Ltd. - 3,502Kuender Co., Ltd. 6 3,318Other 258 1,090

Other related partiesGintech Energy Corporation - 3,011

Total $49,113 $16,541

(a) The Company

The purchase price from related parties was determined through mutual agreement basedon market conditions. The payment terms to related parties and third parties for domesticpurchases were both net 30-150 days, while the terms for overseas purchases were bothnet 30-120 days.

(b) Significant subsidiaries

There are no significant differences between purchasing prices from related parties andprices to arm’s length suppliers. The comparison of payment terms between relatedparties and arm’s length suppliers is summarized as follows:


2017 2016

Company Region Related parties General supplier Related parties General supplier

CPT and itssubsidiaries

Overseas T/T 30-360 days L/C 30-180 daysT/T 30-360 days

T/T 30-360 days L/C 30-180 daysT/T 30-360 days

Domestic 30-90 days after QC 30-210 days after QC 30-90 days after QC 30-210 days after QC

FD and itssubsidiaries

Overseas T/T 30-150 days afterQC or DA 120 days

T/T or L/C 30-150 daysafter QC

T/T 30-150 days afterQC or DA 120 days

T/T or L/C 30-150 daysafter QC

Domestic 30-120 days after QC 30-120 days after QC 30-120 days after QC 30-120 days after QCOverseas

Tatung SystemTechnologiesInc. and itssubsidiaries

Domestic 30-60 days after QC 30-60 days after QC 30-60 days after QC 30-60 days after QC

Overseas O/A 60-90 days O/A 30-120 days O/A 60-90 days O/A 30-120 days



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(3) Accounts receivable – related parties


Entity with joint control or significant influence over theCompany $925 $3,086

AssociatesTatung Okuma Co., Ltd. 19,084 2,448Elitegroup Computer Systems Co., Ltd. 9,088 1,421Taiwan Nissei Display System Co., Ltd 3,377 3,186Other 1,322 1,356

Other related partiesGintech Energy Corporation 41,654 12,071Other 2 1

Total 75,452 23,569Less: allowance for doubtful accounts (914) (914)Net $74,538 $22,655

(4) Others receivable – related parties (current and non-current)


Entity with joint control or significant influence over theCompany $332 $137

AssociatesNature Worldwide Technology Corp. 4,175 4,175Tatung Okuma Co., Ltd. 909 1,518Other 369 415

Total 5,785 6,245Less: allowance for doubtful accounts (3,758) (3,758)Net 2,027 2,487Non-current portion (417) (417)Current portion $1,610 $2,070

(5) Notes payable


Other related partyGintech Energy Corporation $- $4,098



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122

(6) Accounts payable – related parties



AssociatesKuender (Wujiang) Eelectronic parts Co., Ltd. 5,387 5,615Kunde (wujiang) Plastic Technology Co., Ltd. 2,819 5,126Elitegroup Computer Systems Co., Ltd. 28,783 111Other (including impact of change of exchange rate) 875 1,350

Other related party 32 35Total $37,897 $12,243

(7) Other payable


Financing payable (detail list as below)PanShiYiYuan Mgmt. Investment (Fuzhou) Co. $- $464,433

Entity with joint control or significant influence over theCompany 102 527

AssociatesHsieh-Chih Industrial Library Publishing Co. 1,446 1,079Kunde (wujiang) Plastic Technology Co., Ltd. 921 950Other 393 988

Other related partiesThe Employee Welfare Committee of Tatung Company 517 531Other 512 4,414

Total $3,891 $472,922

Related Party2017.1.1~12.31

Maximum Balance

MaximumBalance

Date 2017.12.31Interest

RateInterestExpense

Related party of the Group $440,274 2017.2.13 $- 5.5% $3,027

Related Party2016.1.1~12.31

Maximum Balance

MaximumBalance

Date 2016.12.31Interest

RateInterestExpense

Related party of the Group $464,433 2016.12.31 $464,433 5.5% $27,024



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123

(8) Plants and Office leased – related parties


2017 2016Entity with joint control or significant influence over the

CompanyTatung university $29,541 $42,669Other 3,555 2,488

AssociatesTatung Okuma Co., Ltd. 10,371 10,373Other 1,160 1,161

Other relatedGintech Energy Corporation 6 9,030Other 444 445

Total $45,077 $66,166

(9) Transaction of propertyFor the years ended

December 31,2017 2016

Purchase of assetsAssociates

Tatung Okuma Co., Ltd. $661 $-Elitegroup Computer Systems Co., Ltd. 940 1,689Kuender Co., Ltd. - 1,650

Total $1,601 $3,339

(10)Compensation of key management personnel


2017 2016Short-term employee benefits $213,194 $155,887Post-employment benefits 2,018 2,177Total $215,212 $158,064

(11)The former Chairman of Tatung Company, Wei-Shan Lin, guaranteed part of the bank loansfor the Company and its subsidiaries.



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8. Assets pledged as collateral

The following table lists assets of the Group pledged as collateral:

Carrying amounts as ofDecember 31,

2017 2016 Purpose of the pledgeLand $10,657,996 $12,145,839 LoansBuildings 17,097,473 15,870,147 LoansLease improvement 957,685 1,065,865 LoansMachines and other Equipment 4,304,146 5,557,296 LoansDebt instrument investments for which no

active market exists27,790,802 26,699,028 Various guarantees

Financial assets at fair value through profitor loss shares-capital-guaranteedfinancial products

318,815 325,429 Performance guarantee

Investments accounted for under theequity method

1,389,500 2,262,000 Loans

Other non-current assets – deposit-out 48,421 48,641 Lawsuit depositsRent prepaid (current and non-current) 1,137,497 372,598 LoansAvailable-for-sale financial assets - shares 84,166 77,880 Loans, performance guaranteeAccounts receivable - 5,661 LoansInventory 988,553 1,931,799 Loans, lawsuits of constructionsNon-current assets held for sale

Debt instrument investments for whichno active market exists, current

- 33,450 All Margins

Property, plant and equipment-building - 1,781,296 LoansProperty, plant and equipment-land - 1,606,878 LoansTotal $64,775,054 $69,783,807

In addition to the pledged assets mentioned above, the Company pledged certain stocks of subsidiariesfor bank loans and financing loans.

9. Commitments and contingencies

(1) Promissory notes issued by the Group and subsidiaries to secure bank loans, constructionperformance bond and tariff guarantee amounted to USD20,560 thousand andNTD26,216,699 thousand.

(2) The Company and its subsidiaries’ unused letters of credit for importing raw materials andmachinery amounted to USD29,070 thousand, JPY8,912 thousand, RMB675 thousand,EUR1,669 thousand, SEK42 thousand, CHF59 thousand, and NTD87,449 thousand.



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125

(3) Performance bond issued by financial institutions amounted to USD131 thousand andNTD976,056 thousand.

(4) Collaterals for purchasing materials amounted to NTD120,000 thousand, and collaterals forpurchasing property, plant, equipment amounted to NTD76,210 thousand.

(5) As of December 31, 2017, the significant contingencies and unrecognized contractcommitments of the Company are as follows:

(a) The Company applied to Mega International Commercial Bank and Bank of Taiwan forcredit lines to be issued for Tatung Co., of Japan, Inc. The promissory notes amounted toNTD972,400 thousand and NTD800,000 thousand. The Company applied to IndustrialBank of Taiwan, Fubon Bank and Far Eastern Commercial Bank for credit lines to beissued for CPT. The promissory notes of credit amounted to NTD1,000,000 thousand,NTD500,000 thousand and NTD1,500,000 thousand.

(b) King Pro Group (“King Pro”) and Ka Hung Exhibition Co., Ltd. (“Ka Hung”) contractedwith the Company as subcontractors to construct part of the Talin Power Plant, for whichtender the Company contracted with Kai Yuan Construction Co., Ltd. However, KingPro and Ka Hung failed to complete the construction upon deadline and both partiesclaimed to terminate the contract. King Pro and Ka Hung claimed that the Company hadnot paid construction examination fees, prepayments and advances and filed an actionagainst the Company to claim payment of NTD23,610 thousand. The next trial date wasset on May 8, 2018. In addition, the Company filed for provisional seizure against KingPro and Ka Hung on March 21, 2016 and claimed indemnities resulted from advancesand contract termination. The next trial date is April 11, 2018.

(c) The Company engaged in a construction project with Taiwan Railways Administration,MOTC (“Taiwan Railways”). There is still a dispute regarding the overdue fine chargedby Taiwan Railways as the Company didn’t complete the project on time. The Companyhad engaged an attorney to file a mediation to the Public Construction Commission.

(d) Yung Loong Engineering Corp. (Yung Loong) was engaged in a construction project,“BI-HAI machinery installing project”, with the Company, however, Yung Loongclaimed that the Company’s power generation set was defective and caused delay in theconstruction. Therefore, Yung Loong claimed payment of NTD56,997 thousand from theCompany. After failing a mediation on July 22, 2014, the action is pending at the courtof first instance. Yung Loong requested for an appraisal for the items in dispute on court.The appraisal report was filed on February 21, 2017 and the counterparty filed anapplication to the court for re-appraisal.



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(e) Compal Electronics, Inc. (“Compal”) made a public announcement on March 29, 2013 torequest the Company to purchase shares of Chunghwa Picture Tubes Ltd. held by Compaland it filed for arbitration to the Arbitration Association of the Republic of China. TheCompany received the arbitration appeal submitted by Compal from the Association onApril 3, 2013. The Company received on May 19, 2014 the arbitration award 102-Chung-Sheng-He-Zi No. 25 Arbitration Judgment, which was issued on May 16, 2014, from theArbitration Association of the Republic of China. The main context is as follows:

a. The respondent (referring to the Company) shall make a payment to the claimant(“Compal”) for NTD2,118,607 thousand. The first payment of NTD718,607thousand shall be paid within a month after the arbitration award is delivered to therespondent. The second payment of NTD700,000 thousand shall be paid within fourmonths after the arbitration award is delivered to the respondent. The third paymentof NTD700,000 thousand shall be paid within seven months after the arbitrationaward is delivered to the respondent. In addition, the Company shallpay the interest at an annual rate of 5% from April 3, 2013 to full repayment day.

b. The claimant shall deliver the private placement shares in question for thecorresponding payments in 374,274,704 shares, 364,583,334 shares and364,583,333 shares.

c. Other claims from Compal are dismissed.

d. Two thirds of the arbitration fees shall be borne by the claimant while the rest isborne by the respondent.

Compal was dissatisfied with the outcome of the arbitration award and filed an action torevoke the unfavorable part of the arbitration award. On January 11, 2017, the SupremeCourt of the ROC ruled to revoke the appeal of Compal. After this ruling, Compal cannotcontinue to argue against the arbitration. Both parties settled the shares on February 9,2017. The representatives of both parties were present to confirm accuracy of the stocktransferred and payments and then signed a memorandum.

(f) The Company and Toshiba Electronics Components Taiwan Corporation (“Toshiba”)signed a contract regarding “the purchase and the assembly of motor and fan of theTaiwan Railways TILTING train and EMU800 train”. The Company completelyfollowed the blueprint of Toshiba, but Toshiba claimed that the products were faulty andclaimed damages amounting to NTD58,125 thousand, requiring the Company to pay. TheChinese Arbitration Association, Taipei made a judgement that it wouldn’t handle thiscase because of the jurisdiction. Toshiba also filed an arbitration in Tokyo. The next trialdate will be decided after the evidence establishment plan is confirmed on May 21, 2018.



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(g) The Company engaged in a smart electrical meter project with Taiwan Power Company,(“Taiwan Power”). The Company delivered the products according to the purchasecontracts signed and finished the inspection and acceptance, and payment collection.However, there is still a dispute regarding the warranty coverage of “Meter InterfaceUnit” of the smart electrical meter.

(h) Hwang Chang General Contractor Co., LTD (“Hwang Chang”) engaged in a constructionproject led by the East District Project Office of the Department of Rapid Transit Systems,Taipei City Government: “Taipei Urban Metro System Circular Line Sections CF640 toCF641A Electricity, Plumbing and Environmental Control Construction.” Such projectwas outsourced to the Company on August 3, 2014. However, the Company deemed thatHwang Chang delayed in delivering the construction site for about a year during thecontract period. The Company couldn’t start the construction and collect payments duringthe delay period. Hence, the construction cost was a lot higher than expected. TheCompany terminated the contract after giving notice to Hwang Chang. Afterwards,Hwang Chang claimed against the Company for damages of price differences betweencontract prices with other subcontractors. This legal action is under Taiwan Shilin DistrictCourt’s jurisdiction and the trial date would be decided when both parties provide relatedinformation.

(i) The Company outsourced “Office relocation and expansion of Taiwan Taoyuan DistrictCourt and new construction project of Dang Cheng Building” to Da Hong ChungTechnical Engineering Co., Ltd (“Da Hong Chung”). The Company deemed that Da HongChung did not assign sufficient workers as contracted and hence delayed the constructionprogress. The Company notified Da Hong Chung to increase manpower for the project.However, Da Hong Chung refused to do so because it claimed that the Company had notpaid the additional construction fee. The Company terminated the contract on October19, 2017 and would claim damages against Da Hong Chung for the delay when theconstruction is completed. Da Hong Chung filed a legal action to the Taiwan TaipeiDistrict Court to claim its construction receivable in February 2018. As of now, Da HongChung has not paid the judgement fee, and the trial date hasn’t been decided. Therefore,there is no actual legal action at the moment.

(j) United Aerotech System Corporation filed a legal action against the Company on January6, 2010, claiming payments of consultant fees amounting to NTD1,490 thousand. Bothparties reached a settlement in 2017. However, on March 12, 2018, the Company receivedthe indictment from United Aerotech System Corporation claiming consulting feeamounting to NTD32,643 thousand. The Company had appointed attorneys to handle theissue.



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(6) As of December 31, 2017, CPT and its subsidiaries had commitments and contingencies asfollows:

Material litigation

Lawsuits related to patent

Eidos Display, LLC and Eidoes III, LLC filed a patent infringement action in the United StatesDistrict Court of Texas against CPT and three other Taiwanese LCD companies in April 2011.CPT and the plaintiff reached a settlement in July 2017. The United States District Court ofTexas closed the legal action in mid-August.

Other litigations

Regarding violation of antitrust laws, CPT paid fines with respect to the verdicts of the USDepartment of Justice (DOJ), European Commission (EC) and the Korean Fair TradeCommission (KFTC) from 2008 to 2012. Japan Fair Trade Commission (JFTC), CanadianCompetition Bureau (CCB), and the Taiwan Fair Trade Commission terminated investigationsafter 2009. CPT settled with the Brazilian government in late September 2017. Regarding thecivil actions, CPT settled with HP, Best Buy, Costco, Home Depot, Target, TracFone. Inaddition, CPT also settled the civil class actions filed by state prosecutors in Oklahoma andSouth Carolina. The Company has engaged professional attorneys to handle other litigationsprudently.

In July 2016, ASUS Corporation and AmTran Corporation filed civil actions against CPT andseveral other panel manufacturers to the Taipei District Court. Afterwards, ASUS Corporationwithdrew the action and stated that it would not file any other actions against the same fact inthe future to the Taipei District Court. AmTran Corporation also withdrew the action. CPTagreed with the withdrawal and the case was closed in January 2017.

Regarding the antitrust cases under the official investigations in various countries, includingthose made by the Japanese Fair Trade Commission, Korean Fair Trade Commission(“KFTC”) and European Commission, CPT had been cooperative with the investigations. TheCompany was not subject to any fines. The Czech Republic had reached a final judgment andthe fines were paid in 2010. The government of Hungary had finished its investigation inAugust 2014 and concluded that CPT did not engaged in any illegal activities. CPT hadreached a settlement with the Brazilian government for CRT-CDT and CRT-CPTinvestigation in late September and early October of 2017. Regarding the civil actions, CPTsettled with the plaintiffs in the class actions in the U.S. and Canada. CPT has also settled withthe plaintiffs, including Target, Sears and K-mart, Best Buy and ViewSonic. The Companyhad retained professional attorneys to handle other litigations prudently.



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CPT had received legal action related forwarded by the Taiwan Taoyuan District Court inMarch 2017. Israel citizens filed a class action against CPT and many other CRTmanufacturers to the Israeli District Court. CPT had retained professional attorneys to handleother litigations prudently.

(7) As of December 31, 2017, SCSC and its subsidiaries had commitments and contingencies asfollows:

(a) To secure an ample supply of silicon raw material to produce diodes, SCSC entered intoa silicon raw material supply contract with Cargill in December 2007, which wasamended in December 2013 with the contract term starting from April 1, 2013 to March31, 2020. Under the contract, Cargill has made commitment to providing certain quantityof silicon raw material to SCSC. during the contract period and at the total contract priceof JPY4,268,592 thousand. In addition, SCSC is required to pay a minimum purchaseamount of JPY275,724 thousand. As of December 31, 2017, the amount of prepaymentwas JPY63,396 thousand (or the equivalent of approx. NTD18,290 thousand), which wasclassified under the prepayments and long-term prepayments.

(b) As of December 31, 2017, the significant unfinished or undelivered contracts of SCSCwere related to crystal growth furnace equipment. The total amount of purchasing pricewas NTD791,091 thousand, of which NTD479,131 thousand has been paid. Since thequality and the function of the equipment did not meet the standard of SCSC, SCSC didnot accept and use the products. SCSC contemplates not to pay any contract price.

(c) Hemlock Semiconductor Corporation, a supplier of silicon raw material, filed an actionagainst GET and Tatung Co. of America Inc. (“TUS”). The plaintiff claimed that inaddition to other issues, GET and TUS were liable of breaching the contract. GET andTUS have denied all causes of actions. As of the balance sheet date, the discovery processhad been completed. In order for the Group to secure the position in terms of litigation,this disclosure does not completely comply with IAS 37 “Provisions, ContingentLiabilities and Contingent Assets Issued”. GET and TUS have engaged legal counsel forthe legal matter.

(d) In March 2016, GET amended the long-term purchase contract for materials with supplierA. The amendment was to extend the original contract term from 2011 to 2017, to the endof 2018. With respect to the insufficient purchase as of January 31, 2016, both partiesmodified the minimum amount and purchase price each year according to the extendedterm. GET recognized advance payments that would be deducted in one year asprepayments under current assets, while the remaining amount was recognized as long-term prepaid materials. GET did not meet the minimum purchase amount for the yearended 2017 and as of August 2016. Thus, GET recognized a loss of NTD50,105 thousandand NTD3,681 thousand (recognized under other gain or loss) for the prepaid amount tosupplier A.



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(e) On June 26, 2015, GET amended the long-term purchase contract for materials withsupplier B. The amendment was to extend the contract term from 2009 to 2016 to a termfrom July 2015 to 2025. With respect to the insufficient purchase as of June 30, 2015,both parties modified the minimum amount and purchase price each year according to theextended term. In addition, both parties increased the total purchase amount and setamounts that could be deducted from advance payments each year. Thus, GET recognizedadvance payments that would be deducted in one year as prepayments under currentassets, while the remaining amount was recognized as long-term prepaid materials.

As of the balance sheet date, the interest payable notice sent out by supplier B stated anamount of USD9,800 thousand (NTD296,641 thousand). Since GET actively maintainsbusiness relations with supplier B, the possibility of paying the interest mentioned aboveis relatively low, and thus GET did not estimate this particular contingent liability.

(f) As of December 31, 2017, GET and its subsidiaries signed a purchase contract formaterials and paid NTD2,273,724 thousand, which were classified under prepaymentsand long-term prepayments according to the expected time table of payment deduction.

(g) GET, in a move to expand their long-term business, have cooperated with downstreamclients in Taiwan through long-term strategic alliance by entering into contracts with themto supply multi-crystalline wafer. A total of USD489 thousand (or the equivalent ofNTD16,171 thousand) was accounted for under the advance receipts (current and non-current) resulting from the cooperation as of December 31, 2017.

(h) In order to fund the plant construction in Luzhu, Southern Taiwan Science Park, purchasethe equipment in Luzhu plant and improve working capital, GET resolved at its boardmeeting held on January 25, 2011 to borrow syndicated loans from Bank of Taiwan,Cathay United Bank, Land Bank, Agriculture Bank, Entie Commercial Bank, IndustrialBank of Taiwan and Yuanta Bank. The amount of the 5-year loan was NTD3.2 billionand the loan agreement was signed on February 1, 2011. The line of credit and the purposeof use of every item are listed as follows:

Item Line of Credit PurposeItem A NTD0.8 billion to construct the Luzhu plantItem B NTD1.7 billion to construct the Luzhu plantItem C-1(Note) USD22 million to develop foreign creditItem C -2 (Note) USD22 million to improve working capital

Note: The total balance of the credit line drawn from Item C-1 and Item C-2 cannot exceedthe principal, NTD0.7 billion or USD22 million (lower of the two).



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As of December 31, 2017, each line of credit had been fully drawn. GET signed anextension contract with the consortium bank on December 28, 2017 to extend the loan fortwo years starting April 29, 2018. Please refer to Note 6(22) for the payback dates andamounts.

(i) In order to provide financing to purchase equipment and improve working capital, GETresolved at its board meeting on May 19, 2011 to borrow syndicated loans from FubonBank, Mega Bank, First Bank, Far Eastern International Bank, Chang Hwa Bank andTaiwan Business Bank. The amount of the 5-year loan was USD70 million and the loanagreement was signed on May 30, 2011. The line of credit and the purpose of use of everyitem are listed as follows:

Item Line of Credit PurposeItem A USD56 million to purchase equipment or improve working capital.Item B USD14 million to purchase equipment or improve working capital.

As of December 31, 2017, each line of credit had been fully drawn. GET signed anextension contract with the consortium bank on December 17, 2017 to extend the loan fortwo years starting June 17, 2018. Please refer to Note 6(22) for the payback dates andamount.

(j) Securities and Futures Investors Protection Center and some investors filed a damagesclaim to the Taipei District Court against GET and the management, claiming that the2011 simplified GET financial forecast was not updated to align with the full forecast.Their claim was based on the first ruling of another Securities Exchange Act criminalcase, ruled by the Taipei District Court. GET has appointed attorneys to cooperate withthe court and hopes that justice will be served. GET is operating at its normal pace and isnot influenced by the suit.

(k) Eversol Corporation filed a damages claim to the Taipei District Court against GET,claiming that GET breached the OEM contract. GET has appointed attorneys to cooperatewith the court and hopes that justice will be served. GET is operating at its normal paceand is not influenced by the suit.

10. Significant disaster loss

None.



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11. Significant subsequent events

(1) The amendments to the Income Tax Act were passed by the Legislative Yuan on January 18,2018, and announced by the President in February 2018. According to the amendments, thecorporate income tax rate was raised from 17% to 20%. If recalculated with the new tax rates,there might be impact of NTD231,108 thousand and NTD30,383 thousand on the deferred taxassets and deferred tax liabilities as of December 31, 2017, respectively.

(2) The responsible person of the Company has changed from W. S. Lin to Wen-Yen Lin Kuoaccording to the resolutions of the board of directors on February 1, 2018 and the alternationregistration with the Ministry of Economic Affairs was completed on February 8, 2018.

(3) According to the resolutions of the board of directors on February 1, 2018, the Companystarted a joint venture with financial investors to establish a solar power project developmentcompany. The capital was set at NTD4,000,000 thousand.

(4) According to the resolutions of the board of directors on February 1, 2018, the Companyagreed to invest in Tainan Qigu Yuguang District Phase 2 solar power plant. The plant willbe built by the Company’s fully-owned subsidiary, Tungyang Energy Co., Ltd.

(5) SCAD, a subsidiary of the Company, signed with the Taipei City Government “Taipei UrbanMetro Rapid System needed land for development negotiation agreement” and “Transfer oftitle to land contract” in accordance with the resolutions of the board of directors on March 8,2018 to apply for the development plan of Wanda Line Phase 1 LG07 station developmentzone 3. If SCAD does not sign the agreement or obtain the qualification of the best investor,the Taipei City Government will only requisite the land for the metro system and change theuse of the remaining land back to industrial usage and return it to SCAD.

(6) CPT signed a syndicated loan contract with a credit line of NTD7,500,000 thousand withsyndicated loan banks managed by Bank of Taiwan on January 4, 2018. All the credit line hasbeen drawn on January 15, 2018.

(7) Tatung (Shanghai) Co., Ltd, a subsidiary of the Company, decided to dispose of the plants andunderlying land to the local government to cooperate with the local government’s planning toactivate assets in accordance with the resolutions of the board meeting d held on January 25,2018. The negotiated compensation for the relocation was RMB202,599 thousand. Afterdeducting the compensation for the lessee, the net proceeds for Tatung (Shanghai) Co., Ltdwas RMB199,964 thousand.

(8) Hongding Resources Technology had filed a legal action in connection with damages againstGET to the Intellectual Property Court for patent infringement of Sino-American SiliconProducts Inc. GET has appointed attorneys to cooperate with the court and hopes that justicewill be served. GET is operating at its normal pace and is not influenced by the action.



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12. Other

(1) Categories of financial instruments

Financial assetsAs of December 31,2017 2016

Financial assets at fair value through profit or loss:Held for trading (including the non-current) $646,743 $17,262,633

Available-for-sale financial assets (including Financialassets measured at cost) ($547,362, $437,521) (includingnon-current) 2,212,053 1,853,553

Held-to-maturity financial assets - 20,000Loans and receivables:

Cash and cash equivalents(without cash on hand) 31,805,637 42,498,847Debt instrument investments for which no active market

exists (including non-current) 29,572,199 26,985,852Notes receivable (including related parties) 542,911 547,939Accounts receivable (including related parties) (including

the construction receivable)7,707,897 8,465,211

Other receivables (including related parties) (includingnon-current)

1,829,287 3,755,123

Other non-current assets－deposits-out 838,331 750,948Subtotal 72,296,262 83,003,920Total $75,155,058 $102,140,106

Financial liabilitiesAs of December 31,2017 2016

Financial liabilities at amortized cost:Short-term loan $41,552,640 $54,412,093Short-term notes and bills payable 3,487,053 2,057,903Payables (including related parties)(including non-current) 27,122,472 24,506,490Loan (including current portions) 57,359,978 51,311,095Deposits in 134,268 148,028Subtotal 129,656,411 132,435,609

Financial liabilities at fair value through profit or loss:Designated at fair value through profit or loss at initial

recognition1,358 841

Total $129,657,769 $132,436,450



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(2) Financial risk management objectives and policies

The Group’s risk management objectives are to manage market risk, credit risk and liquidityrisk related to its operating activities. The Group identifies measures and manages theaforementioned risks based on policy and risk preference. The Group has establishedappropriate policies, procedures and internal controls for financial risk management. Beforeentering into significant financial activities, due approval process by the board of directorsand audit committee must be carried out based on related protocols and internal controlprocedures. The Group complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market prices. Market risks comprise of currency risk, interestrate risk, and other price risk (such as equity price risk).

In practice, it is rarely the case that a single risk variable will change independently from otherrisk variables. There are usually connections between risk variables. However the sensitivityanalysis disclosed below does not take into account the interdependencies between riskvariables.

Foreign currency risk

The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to theGroup’s operating activities (when revenue or expense are denominated in a different currencyfrom the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.

The Group’s certain foreign currency receivables are denominated in the same foreigncurrency with foreign currency payables, therefore natural hedge is received. The Group alsouses forward contracts to hedge the foreign currency risk on items denominated in foreigncurrencies. Hedge accounting is not applied as they did not qualify for hedge accountingcriteria. Furthermore, as net investments in foreign subsidiaries are for strategic purposes, theyare not hedged by the Group.

The foreign currency sensitivity analysis is performed on significant monetary itemsdenominated in foreign currencies at the end of the reporting period. The analysis mainlyfocuses on foreign currency’s appreciation and depreciation, which will affect the Group’sprofit. The Group’s foreign currency risk is mainly related to the volatility in the exchangerates for USD, JPY and RMB.



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The information of the sensitivity analysis is as follows:

(a) When NTD appreciates or depreciates against USD by 1%, the profit for the years endedDecember 31, 2017 and 2016 will increase (decrease) by NTD269,187 thousand andNTD156,750 thousand, respectively.

(b) When NTD appreciates or depreciates against JPY by 1%, the profit for the years endedDecember 31, 2017 and 2016 will increase (decrease) by NTD21,510 thousand andNTD24,172 thousand, respectively.

(c) When NTD appreciates or depreciates against RMB by 1%, the profit for the years endedDecember 31, 2017 and 2016 will increase (decrease) by NTD147,734 thousand andNTD172,250 thousand, respectively.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrumentwill fluctuate because of changes in market interest rates. The Group’s exposure to the risk ofchanges in market interest rates relates primarily comes from the Group’s loans andreceivables at variable interest rates, bank borrowings with fixed interest rates and variableinterest rates.

The Group manages its interest rate risk by having a balanced portfolio of fixed and variableloans and borrowings and entering into interest rate swaps. Hedge accounting does not applyto these swaps as they do not qualify for it.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as atthe end of the reporting period, including investments and borrowings with variable interestrates and interest rate swaps. At the balance sheet date, an increase/decrease of 10 basis pointsof interest rate could cause the profit for the years ended December 31, 2017 and 2016 todecrease/increase by NTD71,989 thousand and NTD80,044 thousand, respectively.

Equity price risk

The Group’s listed and unlisted equity securities are susceptible to market price risk arisingfrom uncertainties about future values of the investment securities. The Group’s listed equitysecurities are classified under held for trading financial assets or available-for-sale financialassets, while unlisted equity securities are classified as available-for-sale. The Group managesthe equity price risk through diversification and placing limits on individual and total equityinstruments. Reports on the equity portfolio are submitted to the Group’s senior managementon a regular basis. The Group’s board of directors reviews and approves all equity investmentdecisions.



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At the balance sheet date, a change of 1% in the price of the listed equity securities held fortrading would have no impact on the Group’s profit for the years ended December 31, 2017and 2016, respectively.

At the balance sheet date, a decrease of 1% in the price of the listed equity securities classifiedunder available-for-sale could have an impact of NTD14,281 thousand and NTD12,310thousand on the Company’s equity for the years ended December 31, 2017 and 2016,respectively.

Please refer to Note 12(8) for sensitivity analysis information of other equity instruments orderivatives that are linked to such equity instruments whose fair value measurement iscategorized under Level 3.

(4) Credit risk management

Credit risk is the risk that counterparty will not meet its obligations under a contract, leadingto a financial loss. The Group is exposed to credit risk from operating activities (primarily foraccounts receivables and notes receivables) and financing activities, including bank depositsand other financial instruments.

Customer credit risk is managed by each business unit subject to the Group’s establishedpolicy, procedures and control relating to customer credit risk management. Credit limits areestablished for all customers based on their financial position, rating from credit ratingagencies, historical experience, prevailing economic condition and the Group’s internal ratingcriteria etc. Certain customer’s credit risk will also be managed by taking credit enhancingprocedures, such as requesting for prepayment or insurance.

As of December 31, 2017 and 2016, top ten customers’ receivables represented 24.07% and26.58% of the total accounts receivables of the Group, respectively. The credit concentrationrisk of other accounts receivables is insignificant.

Credit risk from balances with banks, fixed income securities and other financial instrumentsis managed by the Group’s treasury in accordance with the Group’s policy. The Group onlytransacts with counterparties approved by the internal control procedures, which are banksand financial institutions, companies and government entities with good credit rating and withno significant default risk. Consequently, there is no significant credit risk for these counterparties.



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(5) Liquidity risk management

The Group’s objective is to maintain a balance between continuity of funding and flexibilitythrough the use of cash and cash equivalents, highly liquid equity investments, bankborrowings, convertible bonds and finance leases. The table below summarizes the maturityprofile of the Group’s financial liabilities based on the contractual undiscounted payments andcontractual maturity. The payment amount includes the contractual interest. The undiscountedpayment relating to borrowings with variable interest rates is extrapolated based on theestimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial instrumentsLess Than

1 Year 2-3 Years 4-5 YearsMore than

5 Years Total

December 31, 2017Loans (including non-current) $56,038,508 $20,907,118 $5,343,167 $22,386,919 $104,675,712Short-term notes and bills payable 3,490,150 - - - 3,490,150Payables (including relates

parties) (including non-current) 27,067,909 49,797 4,766 - 27,122,472Deposit-in 128,579 4,709 - 980 134,268

December 31, 2016Loans (including non-current) $70,695,108 $16,762,424 $23,893,299 $765,000 $112,115,831Short-term notes and bills payable 2,059,592 - - - 2,059,592Payables (including relates

parties) (including non-current) 24,347,568 158,232 690 - 24,506,490Deposit-in 142,580 4,468 - 980 148,028Liabilities directly related to non-current assets held for sale 3,417,321 598,218 63,677 - 4,079,216

Derivative financial instrumentsLess Than

1 Year 2-3 Years 4-5 YearsMore than

5 Years Total

December 31, 2017Flow-in $- $- $- $- $-Flow-out (1,358) - - - (1,358)

Net $(1,358) $- $- $- $(1,358)

December 31, 2016Flow-in $23,930 $- $- $- $23,930Flow-out (19,700) - - - (19,700)

Net $4,230 $- $- $- $4,230

Tables above about the disclosures of derivative financial instruments were disclosed by theundiscounted net cash flow.



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(6) Fair value of financial instruments

(a) The methods and assumptions applied in determining the fair value of financialinstruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date. Thefollowing methods and assumptions were used by the Group to measure or disclose thefair values of financial assets and financial liabilities:

The carrying amount of cash and cash equivalents, receivables, other non-currentassets, payables and other current liabilities approximate their fair value due to theirshort maturities.

For financial assets and liabilities traded in an active market with standard terms andconditions, their fair value is determined based on market quotation price (includinglisted equity securities, beneficiary certificates, bonds and futures, etc.) at the reportingdate.

Fair value of equity instruments without market quotations (including privateplacement of listed equity securities, unquoted public company and private companyequity securities) are estimated using the market method valuation techniques basedon parameters such as prices based on market transactions of equity instruments ofidentical or comparable entities and other relevant information (for example, inputssuch as discount for lack of marketability, P/E ratio of similar entities and Price-Bookratio of similar entities).

Fair value of debt instruments without market quotations, bank loans, bonds payableand other non-current liabilities are determined based on the counterparty prices orvaluation method. The valuation method uses DCF method as a basis, and theassumptions such as the interest rate and discount rate are primarily based on relevantinformation of similar instrument (such as yield curves published by the TaipeiExchange, average prices for Fixed Rate Commercial Paper published by Reuters andcredit risk, etc.)

The fair value of derivatives which are not options and without market quotations, isdetermined based on the counterparty prices or discounted cash flow analysis usinginterest rate yield curve for the contract period. Fair value of option-based derivativefinancial instruments is obtained using on the counterparty prices or appropriate optionpricing model (for example, Black-Scholes model) or other valuation method (forexample, Monte Carlo Simulation).



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(b) The carrying amount of the Company’s financial instruments measured at amortized costsuch as cash and cash equivalents, receivables, held-to-maturity financial assets, debtinstrument investments for which no active market exists, payables, long-term and short-term loans, short-term notes and bills payable and bonds payable approximate their fairvalue.

(c) Fair value measurement hierarchy for financial instruments

Please refer to Note 12(8) for fair value measurement hierarchy for financial instrumentsof the Group.

(7) Derivative financial instruments

The Group’s derivative financial instruments include forward currency contracts andembedded derivatives. The related information for derivative financial instruments notqualified for hedge accounting and not yet settled as at December 31, 2017 and 2016 is asfollows:

Forward exchange contracts

Forward foreign exchange contracts to manage exposure part partial transactions, but notdesignated as hedging instruments:

December 31, 2017Currency Period

Buying currency exchange forward Buy USD2,600 thousand September 2017-March 2018Buying currency exchange forward Buy RMB6,621 thousand December 2017-January 2018Buying currency exchange forward Buy JPY167,430 thousand November 2017-February 2018

December 31, 2016Currency Period

Buying currency exchange forward Buy USD10,000 thousand October 2016-March 2017Buying currency exchange forward Buy RMB16,974 thousand December 2016-January 2017

Exchange options

December 31, 2017

The following table refers to the related conditions with regard to the Company’s unamortizedexchange options on December 31, 2017.

Counterpartybank

Foreignexchange

rate

Foreign exchangerate on the date of

settlement FXTerm of settlement (USD in thousands)

A USD/CNH FX > 6.68 Executing price at 6.68 to sell USD1,000B USD/JPY FX < 110.60 Executing price at 110.60 to buy USD1,000



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As of December 31, 2017, foreign exchange options contracts that had been settled amountedto USD77,200 thousand, EUR 3,000 thousand, and the remaining unsettled contractsamounted to USD2,000 thousand, with a fair value of NTD(36) thousand (including royaltiesamounted to NTD175 thousand and unrealized loss amounted to NTD139 thousand),recognized as financial liabilities carried at fair value through profit or loss - current.

December 31, 2016

Counterpartybank

Foreignexchange

rate

Foreign exchangerate on the date of

settlement FXTerm of settlement (USD in thousands)

A USD/TWD FX > 32.90 Executing price at 32.90 to sell USD1,000B USD/TWD FX < 31.36 Executing price at 31.36 to buy USD1,000

As of December 31, 2016, foreign exchange options contracts that had been settled amountedto USD150,000 thousand, EUR 500 thousand, and the remaining unsettled contracts amountedto USD2,000 thousand, with a fair value of NTD260 thousand (including royalties amountedto NTD390 thousand and unrealized loss amounted to NTD130 thousand), recognized asfinancial liabilities carried at fair value through profit or loss - current.

CPT and its subsidiaries

As at December 31, 2017 and 2016, CPT and its subsidiaries did not hold any derivativefinancial instruments not qualified for hedge accounting and not yet settled.

SCSC and its subsidiaries

Forward foreign exchange contracts

Forward foreign exchange contracts aimed at managing exposures of certain transactions, butnot designated as hedging instruments. Forward foreign exchange contracts entered into bySCSC and its subsidiaries are listed as follows:

Item Contract amount PeriodDecember 31, 2017

Forward foreign exchange contracts USD2,122 thousand October 2017-January 2018Forward foreign exchange contracts USD363 thousand November 2017-March 2018

December 31, 2016Forward foreign exchange contracts USD12,900 thousand November 2016-April 2017



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141


Forward foreign exchange contracts

Forward foreign exchange contracts aim at managing exposures of certain transactions, butnot designated as hedging instruments. Forward foreign exchange contracts entered into byTatung Compressors (Zhongshan) Co., Ltd. are listed as follows:

December 31, 2017Item Contract amount Period

Forward foreign exchange contracts Sell USD200 thousand December 2017-March 2018

December 31, 2016None.

The counterparties of the aforementioned derivative transactions are reputable financialinstitutions with satisfactory credit ratings; hence, credit risk is relatively low.

The forward foreign exchange contracts aim at hedging exchange rate risk of net assets or netliabilities with cash inflows or outflows upon maturity. The Company also has sufficientworking capital, and therefore there’s no significant cash flow risk.

(8) Fair value measurement hierarchy

(a) Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financialstatements are categorized within the fair value hierarchy, based on the lowest level inputthat is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs aredescribed as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets orliabilities that the entity can access at the measurement date

Level 2 – Inputs other than quoted prices included within Level 1 that are observable forthe asset or liability, either directly or indirectly

Level 3 – Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurringbasis, the Group determines whether transfers have occurred between levels in thehierarchy by re-assessing categorization at the end of each reporting period.



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142

(b) Fair value measurement hierarchy of the Group’s assets and liabilities

The Group does not have assets that are measured at fair value on a non-recurring basis.Fair value measurement hierarchy of the Group’s assets and liabilities measured at fairvalue on a recurring basis is as follows:

December 31, 2017Level 1 Level 2 Level 3 Total

Financial assetsFinancial assets at fair value

through profit or loss:Stocks $664 $- $- $664Forward exchange contracts - - - -Capital-guaranteed financialproducts - - 633,076 633,076Open-end funds 13,003 - - 13,003

Available-for-sale financial assets:Stocks 1,428,110 - 236,581 1,664,691

Financial liabilitiesFinancial liabilities at fair value

through profit or loss:Forward exchange contracts - 591 - 591Exchange options - 767 - 767

December 31, 2016Level 1 Level 2 Level 3 Total

Financial assetsFinancial assets at fair value

through profit or loss:Stocks $537 $- $- $537Forward exchange contracts - 13,006 - 13,006Capital-guaranteed financialproducts - - 17,230,231 17,230,231Open-end funds 18,859 - - 18,859

Available-for-sale financial assets:Stocks 1,230,981 - 185,051 1,416,032

Financial liabilitiesFinancial liabilities at fair value

through profit or loss:Forward exchange contracts - 581 - 581Exchange options - 260 - 260



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143

Transfers between Level 1 and Level 2 during the period

There were no transfers between Levels 1 and 2 for the years ended December 31, 2017and 2016.

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy formovements during the period is as follows:

Measurement at fairvalue throughincome/loss Available- for-sale

Capital-guaranteedfinancial products Share Total

January 1, 2017 $17,230,231 $185,051 $17,415,282Recognized in profit and loss, 2017

(recognized under other gains and losses) 25,551 (4,000) 21,551

Recognized in other comprehensiveincome, 2017 (recognized underunrealized gain or loss on valuation of Available-for-salefinancial assets) - 55,530 55,530

Acquisition/Issuance, 2017 1,997,926 - 1,997,926Disposal/Liquidation, 2017 (18,103,340) - (18,103,340)Exchange differences (517,292) - (517,292)December 31, 2017 $633,076 $236,581 $869,657

Measurement at fairvalue throughincome/loss Available- for-sale

Capital-guaranteedfinancial products Share Total

January 1, 2016 $404,398 $213,023 $617,421Recognized in other comprehensive

income, 2016 (recognized underunrealized gain or loss on valuation of Available-for-salefinancial assets) 78,807 (27,972) 50,835

Acquisition/Issuance, 2016 18,849,277 - 18,849,277Disposal/Liquidation, 2016 (2,044,264) - (2,044,264)Exchange differences (57,987) - (57,987)December 31, 2016 $17,230,231 $185,051 $17,415,282



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144

Information on significant unobservable inputs to valuation in Level 3

Description of significant unobservable inputs to valuation of recurring fair valuemeasurements categorized within Level 3 of the fair value hierarchy is as follows:

As at December 31, 2017:

Valuation

techniques

Significant

unobservable inputs

Quantitative

information

Relationship

between inputs and

fair value

Sensitivity of the input to

fair value

Available-for-sale

Stocks Market approach discount for lack of

marketability

0%~30% The higher the

discount for lack of

marketability, the

lower the fair value

of the stocks

1% increase (decrease) in

the discount for lack of

marketability would result

in increase (decrease) in

the Group’s equity by

NTD2,366 thousand

Capital-guaranteed

financial products

Market approach

or revenue approach

Price of the financial

products

- - Transactions involving

financial products are

currency transactions, and

hence their value are

equal to the fair value.

As at December 31, 2016:

Valuation

techniques

Significant

unobservable inputs

Quantitative

information

Relationship

between inputs and

fair value

Sensitivity of the input to

fair value

Available-for-sale


marketability


discount for lack of

marketability, the

lower the fair value

of the stocks

1% increase (decrease) in

the discount for lack of

marketability would result

in increase (decrease) in

the Group’s equity by

NTD1,872 thousand

Capital-guaranteed

financial products

Market approach

or revenue approach

Annualized expected

return

2.3%~2.5% The higher the

expected annualized

return, the higher

the estimated fair

value

0.25% increase (decrease)

in the annualized expected

return would result in

increase (decrease) in the

Group’s equity by

NTD8,171 thousand



247



145

Valuation process used for fair value measurements categorized within Level 3 of the fairvalue hierarchy

The Group’s Accounting Department is responsible for validating the fair valuemeasurements and ensuring that the results of the valuation are in line with marketconditions, based on independent and reliable inputs which are consistent with otherinformation, and represent exercisable prices. The Department analyses the movementsin the values of assets and liabilities which are required to be re-measured or re-assessedas per the Group’s accounting policies at each reporting date.

(c) Fair value measurement hierarchy of the Group’s assets and liabilities not measured atfair value but for which the fair value is disclosed

As at December 31, 2017:Level 1 Level 2 Level 3 Total

Investment properties(please refer to Note 6(14)) $- $- $31,397,928 $31,397,928

Investments under the equity method(please refer to Note 6(12)) 3,026,637 - - 3,026,637

As at December 31, 2016:Level 1 Level 2 Level 3 Total

Investment properties(please refer to Note 6(14)) $- $- $22,659,871 $22,659,871

Investments under the equity method(please refer to Note 6(12)) 2,378,616 - - 2,378,616

(9) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currenciesis listed below:

As of December 31, 2017Foreign currency Exchange rate NTD

Financial Assets -Monetary items

USD $701,858,171 29.7600 $20,887,299JPY 712,097,800 0.2642 188,136RMB 7,319,373,664 4.5545 33,336,087

Investments under equitymethod

RMB 41,213,399 4.5545 187,706Financial Liabilities -Monetary items

USD 1,333,304,872 29.7600 39,679,153JPY 14,713,038,126 0.2642 3,887,185RMB 5,824,387,238 4.5545 26,527,172EUR 8,392,924 35.5700 298,536



248



146



USD $702,551,760 32.2500 $22,657,294JPY 1,109,549,614 0.2756 305,792RMB 10,167,516,984 4.6490 47,268,786

Investments under equitymethod

RMB 28,346,782 4.6490 131,784Financial Liabilities -Monetary items

USD 1,188,599,685 32.2500 38,332,340JPY 9,867,471,330 0.2756 2,719,475RMB 6,462,427,364 4.6490 30,043,825EUR 11,783,899 33.9000 399,474

Because the subsidiaries used a wide range of functional currencies, the Group could notdisclose the foreign exchange gain or loss of financial asset and liability by each foreigncurrency with significant effect. The net gain (loss) from foreign exchange currencies of theGroup were NTD1,552,843 thousand and NTD946,326 thousand for the years endedDecember 31, 2017 and 2016, respectively.

The information above was presented in book value of foreign currency which has beentranslated to functional currency.

(10)Capital management

The primary purpose of the Group’s capital management is to ensure the Group can maintaina strong credit rating and healthy capital ratios in order to support its business and maximizeequity value. The Group manages and adjusts its capital structure in accordance with changesin economic conditions. To maintain or adjust the capital structure, the Group may adjustdividend payment, return capital or issue new shares.

(11)On December 7, 2015, the Supreme Court of the ROC revoked the judgment made by theTaiwan High Court on the Nature Worldwide Technology Co., case and remanded the case tothe Taiwan High Court. On August 23, 2017, former Chairman Lin was sentenced to fixed-term imprisonment and penalties by Taiwan High Court. Former Chairman Lin appealed tothe Supreme Court of the ROC and the Taiwan High Court of the ROC confirmed that alldocuments were successfully transferred.



249



147

According to the amended regulations regarding confiscation, the items to be confiscated shallbe possessions owned by the ultimate beneficiary. However, former Chairman Lin did nothave any actual gains and was not the ultimate beneficiary. The judgement seemed to bemistaken. Shang Chih Investment Co., Ltd. (“Shang Chih”) discovered the fraudulent financialreporting after investing in Nature Worldwide Technology Co. The financial statements weremodified and the fund from the fraudulent loan was nowhere to be found. Because of the loanfraud, Nature Worldwide Technology Co., was unable to pay back their bank loans. Inconsideration of the Group’s credibility, the Company increased the capital of NatureWorldwide Technology Co., to pay back their bank loans. Former Chairman Lin never handledany of the payment and was not the final beneficiary.

As for guarantee responsibilities, the confiscation of guarantee expected gains is actuallyagainst the purpose of the legislation and related regulations of confiscation. Also, thecalculation of illegal income did not follow the rule of logic and empirical rule. The originaljudgement was wrong in both acknowledgement of the facts and legal citations. FormerChairman Lin had appointed an attorney to appeal to the Supreme Court of the ROC.

The Securities and Futures Investors Protection Center filed a legal action in connection withdamages against former Chairman Lin to the Taiwan High Court. According to the syllabusof the Taiwan High Court’s judgment, former Chairman Lin shall pay the CompanyNTD1,900,000 thousand and related interests. The judgement was incorrect in both factdetermination and legal citation. Former Chairman Lin had appointed an attorney to appeal tothe Supreme Court of the ROC. The Supreme Court of the ROC revoked the judgment onDecember 11, 2017, and remanded the case to the Taiwan High Court. It is currently pendingin the Taiwan High Court.

The Securities and Futures Investors Protection Center filed a chairman dismissal legal actionagainst former Chairman Lin. The District Court and High Court have ruled that the basis ofthe legal action was invalid, and hence ruled in favor of the Company. However, the SupremeCourt of the ROC revoked the judgment on July 10, 2017 and remanded the case to the TaiwanHigh Court. The Securities and Futures Investors Protection Center had withdrawn the civilaction from the Taiwan High Court on February 21, 2018.

The Company's operations, finance and business were not affected by the above personal casesand will continue as usual.



250



148

(12)Liquidity risk of subsidiaries

Some of the subsidiaries of the Group were exposed to liquidity risk that the current liabilitieswere more than the current assets. The liquidity risk was mainly due to the consolidatedfinancial conditions of the CPT group and SCSC group. The details are as follows:

1. As of December 31, 2017, the accumulated loss attributed to CPT amounted toNTD57,940,896 thousand. The current liabilities were NTD7,093,338 thousand more thancurrent assets. To improve the financial conditions and to ensure sufficient operatingcapital, the CPT group plans to adopt measures mentioned below:

(a) The CPT group would continue to focus on its niche products, strictly control itsexpenses, lower the purchase costs, and increase the utilization rate of productioncapacity to improve profitability.

(b) Extend the short-term loans: CPT planned to extend the short-term loans upon maturityto meet the short-term operation funding needs. As of March 15, 2018, CPT hascompleted all the extension procedures.

(c) CPT signed a syndicated loan contract with a credit line of NTD7,500,000 thousandwith syndicated loan banks managed by Bank of Taiwan on January 4, 2018 to meet itsmid- to long-term capital needs. As of January 15, 2018, CPT had drawn NTD7,500,000thousand from the credit line. Also, Vibrant Display Technology CO., Ltd, a subsidiaryof CPT, signed a syndicated loan contract with a credit line of RMB4,700,000 thousandwith banks in China. As of December 31, 2017, the unused credit line wasRMB3,700,000 thousand.

2. As of December 31, 2017, the accumulated loss attributed to SCSC amounted toNTD309,895 thousand. The current liabilities were NTD4,627,897 thousand more thancurrent assets. The liquidity risk was mainly due to the consolidated financial conditionsof GET. To improve the financial conditions and to ensure sufficient operating capital,GET planned to extend its short-term loans and other related procedures. The managementof GET considered that the abovementioned strategies would reduce the liquidity risk ofthe consolidated financial conditions substantially on December 31, 2017.

The consolidated financial statements of the Group for the year ended December 31, 2017was not adjusted for the uncertainty of whether the strategies mentioned above can beachieved.



251



149

13. Other disclosure

(1) Information at significant transactions:

(a) Financing provided to others: refer to Attachment 1.

(b) Endorsement/Guarantee provided to others: refer to Attachment 2.

(c) Securities held: refer to Attachment 3.

(d) Individual securities acquired or disposed of with accumulated amount exceeding thelower of NTD300 million or 20% of the capital stock: refer to Attachment 4.

(e) Acquisition of real estate in the amount exceeding the lower of NTD300 million or 20%of capital stock: refer to Attachment 5.

(f) Disposal of real estate up to the amount exceeding the lower of NTD300 million or 20%of capital stock: refer to Attachment 6.

(g) Related party transactions for purchases and sales amounts exceeding the lower ofNTD100 million or 20% of capital stock: refer to Attachment 7.

(h) Receivables from related parties with amounts exceeding the lower of NTD100 millionor 20% of capital stock: refer to Attachment 8.

(i) Engaging in derivative transactions: refer to Note 6 and Note 12 in the consolidatedfinancial statements.

(j) Intercompany Relationships and Significant Intercompany Transactions: refer toAttachment 11.

(2) Information on investees:

Of the investee company directly or indirectly has significant influence or control over, theirinvestee companies’ information: refer to Attachment 9.

(3) Information on investments in China:

(a) The investee company name, main business, paid-in capital, type of the investment,capital inflow and outflow, ownership, investment gains and losses, ending balance ofinvestment, repatriation of investment income and the mainland investment limitscenario: refer to Attachment 10.



252



150

(b) Transactions with the investee companies directly or indirectly through a third countryfollowing the occurrence of significant transactions, prices, payment terms and unrealizedgains and losses were as below:

Ending balance and percentage of purchase and related payables: refer to Attachment7.

Ending balance and percentage of sales and related receivables: refer to Attachment 7.

Gains and loss on the transaction of property: None.

Ending balance and purpose of endorsement guarantees or collateral: refer toAttachment 2.

Ending balance, maximum limit, interest rates range and current interest amount offinancing: refer to Attachment 1.

Other investments that have significant impact on current profit or financial condition,such as the services provided or received: None.

14. Segment information

For management purposes, the Group organized its business units based on their products andservices and has three reportable operating segments as follows:

(1) Optical department: This department is responsible for CRT, TFT-LCD backlight modulemanufacturing and production, development of liquid crystal display modules, electronicswitches and sensors and solar modules virus, manufacturing and sales.

(2) Machinery and energy department: The department is responsible for the research,manufacture and sales of intelligent grid, smart-grid portal, photovoltaics, LED lighting,motor and machinery and energy control system.

(3) Consumer products department: This department is responsible for digital television, flatpanel display manufacturing, digital media devices, digital audio-visual and home appliances,etc.

No operating segments have been aggregated to form the above reportable operating segments.Other business activities that are not reported and the related information of the operating segmentsare disclosed under the “Other Operating Segments” section.



253



151

Management monitors the operating results of its business units separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment performance isevaluated based on operating profit or loss and is measured based on accounting policies consistentwith those in the consolidated financial statements.

The entity should disclose measurement of assets of reportable operating segments in accordancewith IFRS 8 “Operating Segments.” However, the Group did not disclose such informationbecause the measurement of the Company and the subsidiaries’ assets and liabilities were notprovided to the operation decision maker.

Transfer prices between operating segment are on an arm’s length basis in a manner similar totransactions with third parties.

(1) Information on profit or loss, assets and liabilities of the reportable segment:


Optical

Machinery

and energy

Consumer

products

Other

operating

segments

Adjustment

and

elimination Consolidated

Revenue

External customer $34,724,488 $26,284,194 $10,451,792 $4,092,535 $- $75,553,009

Inter-segment 15,332 1,857,659 6,557,796 55,661 (8,486,448) -

Total revenue $34,739,820 $28,141,853 $17,009,588 $4,148,196 $(8,486,448) $75,553,009

Segment profit (loss) $2,411,184 $(376,493) $(160,239) $(1,246,378) $1,421,682 $2,049,756


Optical

Machinery

and energy

Consumer

products

Other

operating

segments

Adjustment

and

elimination Consolidated

Revenue

External customer $33,066,654 $29,873,836 $11,031,258 $3,705,877 $- $77,677,625

Inter-segment 2,991 1,781,826 6,627,498 283,694 (8,696,009) -

Total revenue $33,069,645 $31,655,662 $17,658,756 $3,989,571 $(8,696,009) $77,677,625

Segment profit (loss) $(861,520) $(1,172,632) $(177,945) $(5,111,753) $3,817,596 $(3,506,254)

1 Revenue was from information software and real estate development that are operatingsegments that did not meet the quantitative thresholds for reportable segments.

2 Inter-segment revenue are eliminated on consolidation and recorded under the “adjustmentand elimination” column, all other adjustments and eliminations are disclosed below.



254



152

(2) Geographical information

Revenue from external customersFor the years ended

2017 2016Taiwan $30,849,820 $34,581,582China 32,113,236 25,691,257Asia 5,576,771 3,315,275Europe 4,367 917America 2,689,648 2,706,669Southeast Asia 1,418,616 10,333,306Other countries 2,900,551 1,048,619Total $75,553,009 $77,677,625

The revenue information above is based on the locations of the customers.

Non-current assetsAs of December 31,2017 2016

Taiwan $70,684,500 $78,393,223China 53,657,992 16,177,520Asia 22,479 33,954Europe - 2,673America 183,954 220,385Southeast Asia 702,817 755,185Total $125,251,742 $95,582,940

Non-current assets included property, plant and equipment, investment property, intangibleassets, other non-current assets and long-term receivable.

(3) Information about major customers

The Company’s sales to any single customer did not account for more than 10% of its netconsolidated sales of 2017 and 2016. Accordingly, no disclosure is required.



255

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,213

5,119

,213

9Ch

ungh

wa Pi

cture

Tube

s (W

ujian

g) Lt

d.Ch

ungh

wa Pi

cture

Tube

s Tec

hnolo

gyOt

her r

eceiv

ables

- rel

ated p

arties

Yes

1,828

,814

1,821

,799

1,821

,799

4.35%

2-

Busin

ess tu

rnove

r-

None

-1,9

16,38

01,9

16,38

0(G

roup)

Co., L

td.

Note

1: Th

e Com

pany

and i

ts su

bsidi

aries

are co

ded a

s foll

ows:

(i

) The

Com

pany

is co

ded "

0".

(ii

) The

subs

idiari

es are

code

d con

secuti

vely

begin

ning f

rom "1

" in t

he or

der p

resen

ted in

the t

able

abov

e.No

te 2:

If the

econ

omic

subs

tance

of tr

ansac

tions

are f

inanc

ing to

othe

rs, re

gardl

ess of

whic

h com

pone

nt the

y are

recog

nized

as in

the f

inanc

ial st

ateme

nts, c

ertain

tran

sactio

ns su

ch as

the a

ccou

nt rec

eivab

les –r

elated

parti

es an

d adv

ance

s are

includ

ed he

rein.

Note

3: M

axim

um ba

lance

of fin

ancin

g prov

ided t

o othe

rs for

the c

urren

t yea

r.No

te 4:

Natur

e of f

inanc

ing is

code

d as f

ollow

s: op

eratio

nal f

undin

g is c

oded

"1";

short

-term

finan

cing i

s cod

ed "2

".No

te 5:

Tota

l amo

unt o

f the f

inanc

ing is

disc

losed

herei

n if th

e fina

ncing

is re

lated

to bu

siness

tran

sactio

ns. T

otal a

moun

t of f

inanc

ing sh

all re

fer to

the a

moun

t the l

ende

r prov

ides t

o the

borro

wer w

ithin

the pa

st ye

ar.No

te 6:

The r

easo

ns an

d cou

nterpa

rties

of the

finan

cing a

re ad

dresse

d here

in as

the fin

ancin

g was

asso

ciated

with

short

-term

capit

al ne

eds.

Note

7: Fin

ancin

g to i

ndivi

dual

coun

ter-pa

rty sh

all no

t exc

eed 25

%~40

% of

the ne

t asse

ts va

lues

from

the la

test f

inanc

ial st

ateme

nts. T

otal f

inanc

ing am

ount

shall

not e

xceed

40%

of the

audit

ed/re

viewe

d net

asset

s valu

e of th

e mos

t curr

ent p

eriod

.No

te 8:

If a p

ublic

comp

any b

rings

the f

inanc

ing pr

opos

al to

the bo

ard of

direc

tors a

ccord

ing to

Arti

cle 14

-1, th

e Reg

ulatio

ns G

overn

ing L

oanin

g of F

unds

and M

aking

of En

dorse

ments

/Gua

rantee

s by P

ublic

Com

panie

s,the

comp

any s

till ne

eds t

o disc

lose

the

amou

nt res

olved

by th

e boa

rd in

the ba

lance

to di

sclos

e the

risk

, eve

n if t

he fu

nds a

re no

t app

ropria

ted ye

t. Whe

n the

fund

s are

repaid

after

wards

, the c

ompa

ny sh

ould

disclo

se the

amou

nt ret

urned

to re

flect

the ri

sk ad

justm

ent.

If

a pub

lic co

mpan

y auth

orize

s the

chair

man o

f the

board

of di

rector

s to a

pprop

riate

or us

e cert

ain lim

its of

the f

unds

seve

ral tim

es in

the pe

riod o

f a ye

ar ac

cordi

ng to

Arti

cle 14

-2, R

egula

tions

Gov

erning

Loa

ning o

f Fun

ds an

d Mak

ing of

En

dorse

ments

/Gua

rantee

s by P

ublic

Com

panie

s, the

comp

any s

till n

eeds t

o disc

lose t

he am

ount

resolv

ed by

the b

oard

in th

e bala

nce.

Note

9: Sh

an-C

hih A

sset D

evelo

pmen

t Co.,

Ltd.

's rec

eivab

les fr

om N

ature

Worl

dwide

Tec

hnolo

gy C

orp. w

ere co

llecte

d in t

he am

ount

of $1

20,00

0 tho

usan

d on J

une 1

0, 20

13. T

he re

maini

ng cl

aim is

still

pend

ing in

the c

ourt.

Note

10: T

he C

ompa

ny ha

s fina

nced

to its

subs

idiary

－Ta

tung G

lobal

Strate

gy In

vestm

ent a

nd T

rading

(BVI

) Inc

.. Part

of th

e loa

ns ha

ve be

en ov

erdue

.On A

ugus

t 29,

2012

, The

Boa

rd of

Direc

tors o

f the C

ompa

ny ha

s reso

lved t

o proc

eed w

ith liq

uidati

on to

solve

the i

ssue.

In the

proc

ess of

liquid

ation

, part

of th

e loa

n has

been

rece

ived.

Whil

e TGS

I is u

nable

to pa

y bac

k the

who

le am

ount.

The B

oard

of Di

rector

s of th

e Com

pany

has d

eterm

ined t

o give

up th

e amo

unt u

npaid

by TG

SI. T

he liq

uidati

on of

TGSI

is fi

nishe

d on D

ecem

ber 2

8, 20

17.

Note

11:T

he B

oard

of Di

rector

s of th

e Com

pany

deter

mine

d to t

ransfe

r the

recei

vable

s due

from

Tatun

g Viet

nam

Co., L

td. to

capit

al inc

rease

on D

ecem

ber 2

1,201

7.Ho

weve

r, as o

f Dec

embe

r 31,

2017

, Tatu

ng V

ietna

m Co

., Ltd.

hasn

’t fin

ished

the a

lterna

tion r

egist

ration

proc

edure

. Hen

ce, th

e Com

pany

reco

gnize

d suc

h amo

unt u

nder

prepa

ymen

ts for

inve

stmen

t, non

-curre

nt.No

te 12

: On M

arch,

2012

, The

Boa

rd of

Direc

tors o

f the

Com

pany

has r

esolve

d to s

ell al

l of i

ts sh

ares o

f its

subs

idiary

, Tatu

ng In

foCom

m Co

., Ltd.

, to V

ee T

eleco

m M

ultim

edia

Co., L

td.. R

egard

ing th

e Com

pany

finan

cing t

o Tatu

ng In

foCom

m Co

., Ltd.

,the

Com

pany

has s

igned

a rep

ayme

nt ag

reeme

nt wi

th Ta

tung I

nfoCo

mm C

o., L

td. an

d non

-curre

nt po

rtion

was

reclas

sified

from

othe

rs rec

eivab

le–rel

ated p

arties

to lo

ng-te

rm re

ceiva

ble.

Howe

ver,T

atung

InfoC

omm

Co., L

td ha

s not

repaid

princ

ipal a

nd in

terest

due u

nder

the ag

reeme

nt to

the C

ompa

ny si

nce J

uly,20

14. T

he C

ompa

ny ha

s deli

vered

paym

ent o

rder a

pplic

ation

form

to th

e cou

rt on

Octo

ber,2

014

and a

pplie

d for

enfor

ceme

nt ac

tion t

o Tatu

ng In

foCom

m Co

., Ltd'

s tax

refun

d on D

ecem

ber,2

014.

This

case

is cu

rrentl

y und

er leg

al pr

oced

ures.

Rega

rding

the C

ompa

ny fin

ancin

g to T

atung

InfoC

omm

Co., L

td., th

e Com

pany

has r

ecog

nized

allow

ance

for b

ad de

bts am

ounti

ng to

NTD

611,3

67 th

ousa

nd.

The B

oard

of Di

rector

s of th

e Com

pany

deter

mine

d to s

old th

e rec

eivab

les du

e from

Tatun

g Info

Comm

Co.,

Ltd.

to its

subs

idiary

,Shan

-Chih

Asse

t Dev

elopm

ent C

o. in

the am

ount

of NT

D 53

,000 t

hous

and o

n De

cembe

r 21,2

017.

Note

13: T

ransla

ted at

Dece

mber

31,20

17 ex

chan

ge ra

te

As K

unsh

an's l

oan

intere

st rat

e+0.2

5%

As W

ujian

g's lo

anint

erest

rate+

0.25%

Limi

t of to

talfin

ancin

g amo

unt

Colla

teral

Relat

edPa

rtyInt

erest

rate

Limi

t of f

inanc

ing am

ount

for in

dividu

al co

unter

-party

153



256

ATTA

CHM

ENT

2

Endo

rsem

ent/G

uara

ntee

prov

ided

toot

hers

fort

heye

aren

ded

Dece

mbe

r31,

2017

(Am

ount

sin

Thou

sand

sofN

ewTa

iwan

Dolla

rs,Un

less s

pecif

iedOt

herw

ise)

Com

pany

nam

eRe

latio

nshi

p(N

ote2

)0

Tatu

ng C

o.,L

tdTa

tung

Co.

of Ja

pan,

Inc.

2$7

,261

,318

$1,7

72,4

00$1

,772

,400

$1,2

94,5

80$-

6.03

%$1

4,52

2,63

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NN

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ghwa

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reTu

bes,

Ltd.

27,

261,

318

3,00

0,00

03,

000,

000

3,00

0,00

03,

000,

000

10.2

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YN

N

1Sh

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hih

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o.Ch

ihSh

eng

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y Co.

,Ltd

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7,09

3,01

880

,000

80,0

0080

,000

-0.

28%

14,1

86,0

36N

NN

Tatu

ng C

o.,L

td4

85,1

16,2

1628

,200

,000

27,2

00,0

0026

,994

,551

27,2

00,0

0095

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85,1

16,2

16N

YN

2W

ujian

gSh

angh

uaM

ateria

lTa

tung

Fine

Che

mica

ls Co

.,Lt

d.4

37,5

8222

,860

22,7

7322

,773

22,7

7355

.43%

37,5

82N

NN

Tech

nolo

gy C

o.,L

td

3Hu

aian

Tatu

ngAd

vanc

edTe

chno

logy

Mate

rials

Co.,

Ltd.

Tatu

ngFi

ne C

hem

icals

Co.,

Ltd.

475

,815

54,8

6454

,654

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65.6

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NN

N

4Gr

een

Ener

gyTe

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logy

Inc.

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eifan

g)Te

chno

logy

Co.

Ltd

31,

948,

973

320,

531

223,

782

160,

518

44,6

404.

59%

2,43

6,21

6N

NY

Gint

ung

Ener

gy C

orpo

ratio

n1

1,94

8,97

348

,000

48,0

002,

087

-0.

99%

2,43

6,21

6N

NN

5Ne

ngNa

iInt

erna

tiona

l Co.

,Ltd

Gree

nEn

ergy

Tech

nolo

gyIn

c.4

1,94

9,65

21,

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000

1,25

0,00

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4,00

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000

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N

6Ul

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Hold

ing

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ited

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nEn

ergy

Tech

nolo

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0,30

71,

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000

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0,00

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4 ,00

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250,

000

51.4

3%2,

430,

307

NN

N

7Fo

rwar

dEl

ectro

nics

Co.

,Ltd

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rwar

dDe

velo

pmen

t Co.

,Ltd

.2

478,

450

156,

725

89,2

80-

-5.

60%

797,

417

NN

N

8Su

zhou

Forw

ard

Elec

troni

csFo

rwar

dEl

ectro

nics

Co.

,Ltd

.4

357,

702

360,

000

360,

000

290,

823

-30

.19%

596,

170

NN

NTe

chno

logy

Co.

,Ltd

.9

Tatu

ngSy

stem

Tech

nolo

gies

Inc.

Chyu

nHu

ei Co

mm

ercia

lTec

hnol

ogies

Inc.

220

2,53

515

0,00

090

,000

20,0

98-

8.89

%50

6,33

8N

NN

Tatu

ngSy

stem

Tech

nolo

gies

Inc.

Tisn

etTe

chno

logy

Inc.

220

2,53

570

,000

70,0

003,

000

-6.

91%

506,

338

NN

N

10Ch

yun

Huei

Com

mer

cialT

echn

olog

iesIn

c.Ta

tung

Syste

mTe

chno

logi

esIn

c.4

19,3

238,

000

8,00

06,

285

-8.

28%

48,3

06N

NN

11Ch

ungh

waPi

cture

Tube

s,Lt

d.Ch

ungh

waPi

cture

Tube

s(Be

rmud

a)Lt

d.2

7,08

9,53

280

0,00

0-

--

-7,

089,

532

NN

N

12CP

TFOp

troni

cs C

o.,L

td.

Korn

ersto

neM

ateria

lsTe

chno

logy

Co.

Ltd.

31,

417,

906

286,

933

286,

933

273,

270

-2.

24%

6,39

9,01

7N

NY

13Ch

ungh

waPi

cture

Tube

sTec

hnol

ogy(

Grou

p) C

o.,L

td.

Korn

ersto

neM

ateria

lsTe

chno

logy

Co.

Ltd.

215

,516

,340

1,43

4,66

71,

434,

667

--

2.77

%25

,860

,567

NN

Y

14Ch

ungh

waPi

cture

Tube

s(La

buan

)Ltd

.Ch

ungh

waPi

cture

Tube

s(Be

rmud

a)Lt

d.4

433,

091

476,

863

136,

635

115,

229

-9.

46%

721,

819

NN

NNo

te1:

The C

ompa

nyan

dits

subs

idiar

iesar

ecod

edas

follo

ws:

1.Th

e Com

pany

isco

ded

"0".

2.Th

e sub

sidiar

iesar

ecod

edco

nsec

utiv

elybe

ginn

ing

from

"1"i

nth

eord

erpr

esen

tedin

thet

able

abov

e.No

te2:

Acco

rdin

gto

the"

Guid

eline

sGov

erni

ngth

ePre

para

tion

ofFi

nanc

ial R

epor

tsby

Secu

rities

Issue

rs"iss

ued

byth

e R.O

.C.S

ecur

ities

and

Futu

res B

urea

u,re

ceiv

ing

parti

es sh

ould

bedi

sclo

sed

ason

eoft

hefo

llowi

ng:

1.An

inve

steec

ompa

nyth

atha

sabu

sines

srela

tions

hip

with

Tatu

ng C

o.,L

td2.

A su

bsid

iaryi

nwh

ichTa

tung

hold

sdire

ctlyo

ver5

0%of

equi

tyin

teres

t.3.

Anin

veste

ein

which

Tatu

ngan

dits

subs

idiar

iesho

ldov

er50

%of

equi

tyin

teres

t.4.

Anin

veste

ein

which

Tatu

ngho

ldsd

irectl

yand

indi

rectl

yove

r50%

ofeq

uity

inter

est.

5.An

inve

steet

hath

aspr

ovid

edgu

aran

teest

oTa

tung

Co.

,Ltd

,and

vice

versa

,due

toco

ntra

ctual

requ

irem

ents.

6.An

inve

steei

nwh

ichTa

tung

conj

unctl

yinv

ests

with

othe

r sha

reho

lder

s,an

dfo

rwhi

chTa

tung

hasp

rovi

ded

endo

rsem

ent/g

uara

ntee

inpr

opor

tion

toits

shar

ehol

ding

perc

entag

e.No

te3:

Indi

vidu

alen

dorse

men

torg

uara

ntee

shall

note

xcee

d30

%to

50%

ofth

epro

vide

r'sne

tass

etsva

lue,

howe

ver,

nolim

itsfo

rthe

coun

ter-p

arty

who

isac

ompa

ny10

0%di

rectl

yori

ndire

ctlyo

wned

by C

PT.

Total

endo

rsem

ento

rgua

rant

eefo

roth

ers s

hall

note

xcee

d50

%of

thep

rovi

der's

neta

ssets

valu

e.Th

eGro

upto

talen

dorse

men

torg

uara

ntee

foro

ther

s sha

llno

texc

eed

50%

ofth

epro

vide

r'sne

tass

etsva

lue.

Note

4:Th

emax

imum

amou

ntof

endo

rsem

ento

rgua

rant

eepr

ovid

edto

othe

rsfo

rcur

rent

Note

5:En

dorse

men

t/gua

rant

eere

spon

sibili

tiesa

reas

sum

edwh

enth

ecom

pany

hase

nter

edin

toan

endo

rsem

ent/g

uara

ntee

cont

ract

orwh

enlin

esof

cred

itsof

notes

hasb

een

appr

oved

asof

year

end

;and

othe

riss

uesr

elated

togu

aran

teeor

endo

rsem

ent s

houl

dbe

calcu

lated

ingu

aran

tee/en

dorse

men

tam

ount

.No

te6:

Shou

lden

terac

tual

amou

ntre

ceiv

ing

party

prov

ided

with

inth

elim

itam

ount

ofgu

aran

tee/en

dorse

men

t.No

te7:

Aco

mpa

nyis

code

d"Y

"whe

na s

ubsid

iaryi

send

orse

dby

thel

isted

pare

ntco

mpa

ny,o

ralis

tedpa

rent

com

pany

isen

dorse

dby

a sub

sidiar

y,or

acom

pany

with

anen

dorse

men

tin

Main

land

Chin

a.

Note

8:Li

mit

ofgu

aran

tee/en

dorse

men

tam

ount

forr

eceiv

ing

party

isles

stha

nth

atof

endi

ngba

lance

,whi

chis

duet

oex

chan

gera

tedi

ffere

nces

.No

te9:

Tran

slated

atDe

cem

ber3

1,20

17ex

chan

gera

teNo

te10

:The

Boa

rdof

Dire

ctors

ofHu

aian

Tatu

ngAd

vanc

edTe

chno

logy

Mate

rials

Co.,

Ltd.

hasr

esol

ved

toap

ply s

tandb

yLett

erso

f Cre

dit,

SBLC

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Stock－

Toyo

taM

otor C

o.-

Avail

able-

for-sa

lefin

ancia

lasse

ts,no

ncurr

ent

5,500

10,48

1 -

10,48

1

Stock－

SONY

Co.

-Av

ailab

le-for

-sale

finan

ciala

ssets,

nonc

urren

t8,4

0011

,281

-11

,281

Stock－

Total

48 lis

tedco

mpan

ies-

Avail

able-

for-sa

lef in

ancia

lasse

ts,no

ncurr

ent

-12

1,210

-12

1,210

Chun

ghwa

Pictur

eTub

es,Lt

d.Sto

ck－

Tatun

g Co.,

Ltd

Paren

t-sub

sidiar

yAv

ailab

le-for

-sale

finan

ciala

ssets,

nonc

urren

t10

,944,7

7321

0,140

0.47

210,1

40(N

ote 1)

Chun

ghwa

Pictur

eTub

es (B

ermud

a)Lt

d.Sto

ck－

Tatun

g Co.,

Ltd

Paren

t-sub

sidiar

yAv

ailab

le-for

-sale

finan

ciala

ssets,

nonc

urren

t59

,652,9

851,1

45,33

72.5

51,1

45,33

7(N

ote 1)

Chun

ghwa

Pictur

eTub

es (M

alays

ia)Sd

n.Bhd

.M

inesG

olf R

esort

Berha

d-

Finan

ciala

ssets

measu

redat

cost,

nonc

urren

t5,0

00,00

0-

5.26

-(N

ote 2)

Chun

ghwa

Pictur

eTub

esTe

chno

logy (

Labu

an)L

td.Sto

ck－

Foca

Tech

syste

ms C

o.,Lt

d-

Avail

able-

for-sa

lefin

ancia

lasse

ts,no

ncurr

ent

787,5

2124

,492

0.26

24,49

2

Chun

ghwa

Pictur

eTub

esTe

chno

logy (

Grou

p) Co

.,Ltd.

Equit

y－Hu

achu

ang(F

ujian

)equ

ityinv

estme

nten

terpri

se (L

imite

dPart

nersh

ip)-

Finan

ciala

ssets

measu

redat

cost,

nonc

urren

t-

455,4

5010

.0047

2,045

(Note

2)

Tatun

gFine

Che

mica

ls Co

.,Ltd.

Stock－

Hsieh

Chih

Indus

trial

Libra

ryPu

blish

ing C

o.Af

filiate

dcom

pany

Finan

ciala

ssets

measu

redat

cost,

nonc

urren

t1

-0.0

3-

Stock－

Taiw

anSm

ithInd

ustri

al Co

.,Ltd.

-Av

ailab

le-for

-sale

finan

ciala

ssets,

nonc

urren

t40

0,000

-4.4

3-

(Note

3)

Tatun

gWire

& Ca

ble (T

haila

nd) C

o.,Lt

d.Eq

uity－

Tatun

g (Th

ailan

d) Co

.,Ltd.

Affili

atedc

ompa

nyFin

ancia

lasse

tsme

asured

atco

st,no

ncurr

ent

8,200

,000

75,24

37.7

7-

(Note

1)No

te 1:

Alltr

ansac

tions

areeli

mina

tedin

theco

nsoli

dated

finan

cials

tatem

ents.

Note

2:No

activ

emark

et,ab

leto

measu

refai

rvalu

e

Note

3:Th

eGrou

passe

ssedt

hatth

einv

estee

comp

anyh

assu

spen

dedo

perat

ionsa

ndthe

rewe

reno

signo

f resu

meop

eratio

ns.H

ence

,theG

roup r

ecog

nized

impa

irmen

tloss

ofNT

D 4,0

00 th

ousan

donJ

une 3

0,201

7.

Relat

ionsh

ipFin

ancia

lstat

emen

tacc

ount

Endin

g bala

nce

Units

(intho

usan

ds)/

bond

s/sha

res(in

thous

ands

)No

teBo

okva

luePe

rcenta

geof

owne

rship

(%)

Mark

etva

lue/

neta

ssets

value

Holde

rTy

pean

dnam

eofs

ecuri

ties

157



260

ATTA

CHME

NT 4

Indivi

dual

securi

ties a

cquir

edor

dispo

sedof

with

accu

mulat

ed am

ount

excee

dingt

helow

erof

NT$3

00mi

lliono

r20p

ercen

tofth

ecap

itals

tock.

Note

Share

s/unit

sAm

ount

Share

s/unit

sAm

ount

Share

s/unit

sAm

ount

Cost

Gain

(Loss

)fro

mdis

posal

Share

s/unit

sAm

ount

Tatun

gCo.,

LtdCh

ungh

waPic

ture T

ubes,

Ltd.

Invest

ments

acco

unted

forun

dert

heeq

uitym

ethod

Comp

al El

ectron

ics,In

c.-

548,3

85,63

0($1

69,50

4)1,1

03,44

1,371

$2,28

5,522

-$-

$-$-

1,850

,745,1

68$2

,314,3

10

(Note

5)(N

ote2)

(976,0

81)

(Note

6)

Invest

ments

acco

unted

forun

dert

heeq

uitym

ethod

Tatun

gGlob

alStr

ategy

Invest

ment

and

Paren

t-sub

sidiar

y-

-19

8,918

,167

308,5

83-

--

--

-

Trad

ing(B

VI)I

nc.

Green

Ene

rgy T

echno

logyI

nc.

Invest

ments

acco

unted

forun

dert

heeq

uitym

ethod

-Pa

rent-s

ubsid

iary

--

19,72

3,865

300,0

00-

--

-19

,723,8

6523

8,783

(Note

2&4)

San-C

hihAs

setInt

ernati

onal

(H.K

)Hol d

ing.,L

tdSu

qianZ

hiwei

Real

Estat

eCo.,

Ltd.

Invest

ments

acco

unted

forun

dert

heeq

uitym

ethod

Jiang

suspe

eding

Prop

erties

Limite

d-

-1,0

45,61

5-

--

599,5

5456

9,521

30,03

3-

-

(Note

8)

Tatun

gGlob

alStr

ategy

Invest

ment

and

Chun

ghwa

Pictur

e Tub

es,Ltd

.Inv

estme

nts ac

coun

tedfor

unde

rthe

equit

ymeth

odTa

tungC

o.,Ltd

Paren

t-sub

sidiar

y19

8,918

,167

308,5

83-

-19

8,918

,167

414,2

2741

4,227

--

-

Trad

ing(B

VI)I

nc.

Chun

ghwa

Pictur

e Tub

es(B

ermud

a)Ltd

.Ch

ungh

waPic

ture T

ubes

Tech

nolog

y(Gr

oup)

Co.,

Ltd.

Invest

ments

acco

unted

forun

dert

heeq

uitym

ethod

--

495,7

65,57

215

,347,7

34-

-39

,959,5

001,8

57,42

41,3

54,89

7-

729,2

89,71

513

,354,2

48

(Note

3)(N

ote7)

(Note

2)

Chun

ghwa

Pictur

e Tub

es(L

abua

n)Ltd

.Ch

ungh

waPic

ture T

ubes

Tech

nolog

y(Gr

oup)

Co.,

Ltd.

Invest

ments

acco

unted

forun

dert

heeq

uitym

ethod

--

30,04

0,422

931,1

39-

-30

,040,4

221,3

37,04

797

9,795

--

-

(Note

3)

Chun

ghwa

Pictur

e Tub

es,Ltd

.Gi

antpl

us Te

chno

logyC

o.,Ltd

.No

n-curr

ent a

ssets

held

forsal

eOr

tus T

echno

logyC

o.,Ltd

.-

236,9

81,75

73,9

26,78

7-

-23

6,981

,757

3,913

,353

4,180

,849

(267,4

96)

--

Chun

ghwa

Pictur

e Tub

es Te

chno

logy

Capit

al-gu

arante

edfin

ancia

lprod

uct

Finan

cial a

ssets

atfai

rvalu

ethro

ughp

rofito

rloss

China

Cons

tructi

onBa

nk-

-10

,035,2

85-

--

10,03

5,285

10,03

5,285

--

-

(Grou

p)Co

.,Ltd.

－CC

BQi

anYu

an-Z

houZ

houL

i

Capit

al-gu

arante

edfin

ancia

lprod

uct

Finan

cial a

ssets

atfai

rvalu

ethro

ughp

rofito

rloss

China

Cons

tructi

onBa

nk-

-3,6

47,33

8-

--

3,647

,338

3,647

,338

--

-

－CC

BQI

ANYU

AN

Vibra

ntDi

splay

Tech

nolog

yCO.

,Ltd.

Capit

al-gu

arante

edfin

ancia

lprod

uct

Finan

cial a

ssets

atfai

rvalu

ethro

ughp

rofito

rloss

China

Cons

tructi

onBa

nk-

-2,2

76,01

3-

--

2,276

,013

2,276

,013

--

-

－CC

BQi

anYu

an－

Zhou

Zhou

Li

Note

1:Be

ginnin

gbala

nceo

fwhic

hisr

ecogn

izedi

n ava

ilable

-for-s

alefin

ancia

l asse

ts an

dfina

ncial

asset

s atfa

irva

luethr

ough

profit

orlos

sisc

urren

tmark

etpri

ce

Begin

ningb

alanc

eofw

hichi

sreco

gnize

dini

nvest

ments

acco

unted

forun

dert

heeq

uitym

ethod

inclue

dthe

adjus

tmen

tsun

dert

heeq

uitym

ethod

Note

2:Ba

lance

wase

limina

tedin

theco

nsoli

dated

finan

cials

tatem

ents.

Note

3:As

theGr

oupd

idno

tlose

theco

ntrol

ofCh

ungh

waPic

ture T

ubes

Tech

nolog

y(Gr

oup)

Co.,L

td. ,th

ediff

erenc

ebetw

eenthe

actua

l acq

uisitio

nord

isposa

lpric

e and

thebo

okva

lueha

dbeen

recog

nized

unde

requ

ity .

Note

4:As

theGr

oupo

rigina

llyha

scon

trolo

verG

reen E

nergy

Tech

nolog

yInc

. ,the

differ

ence

betw

eenthe

actua

l acq

uisitio

npric

e and

thebo

okva

lueha

dbeen

recog

nized

unde

requ

ity .

Note

5: Tr

ading

prices

Note

6:Cha

nges

in ad

dition

alpa

id an

dthe

differ

ence

betw

eenthe

actua

l acq

uisitio

npric

e and

thebo

okva

luein

capita

lNo

te7:T

henu

mber

ofsh

ares2

73,48

3,643

iscap

italin

crease

byCh

ungh

waPic

ture T

ubes

Tech

nolog

y(Gr

oup)

Co.,L

td.'ss

hare

divide

nds

Note

8:San

-Chih

Asset

Intern

ation

al(H

ongK

ong)

Holdi

ngLim

ited,

subsid

iaryo

ftheC

ompa

ny,s

old al

lsha

resof

Suqia

nZhiw

eiRe

al Es

tateC

o.,Ltd

inDe

cembe

r,201

7. Th

erefor

e,the

Grou

p'sho

lding

perce

ntage

decre

asedf

rom10

0%to

0%.

Begin

ningb

alanc

eAd

dition

Dispo

salEn

dingb

alanc

eBu

yer/se

ller

Type

andn

ameo

fsecu

rities

Finan

cials

tatem

ent a

ccoun

t(N

ot e3)

Coun

ter-pa

rtyRe

lation

ship

158



261

ATTA

CHM

ENT

5

Real

estat

e acq

uired

with

amou

ntex

ceed

ingNT

D300

milli

onor

20%

of th

e cap

itals

tockf

or th

eyea

rend

edDe

cemb

er31

,201

7

Owne

rRe

lation

ship

with

issue

rTr

ansfe

rDate

Amou

nt

Huaji

ayua

n Co.,

Ltd.

Land

Usag

e Righ

t20

17.11

.15RM

B16

4,929

thou

sand

Paid

Putia

nmini

stryo

flan

dan

dres

ource

sHa

njian

gbran

chof

fice

Non-

relate

dNo

neNo

neNo

neNo

nePu

blish

edpr

iceRe

siden

tial a

ndSe

rvice

facili

ties

None

Note

1:Ap

prais

alres

ultsh

allbe

disclo

sed i

n the

Price

Refe

rence

colum

n ifp

rope

rty ap

prais

al is

requir

edby

law.

Note

2: Ca

pital

stock

refers

to th

epare

nt co

mpan

y's ca

pital

stock

.If th

estoc

kswe

re iss

uedw

ith no

parv

alueo

rpar

value

isno

tNTD

10, th

e thr

esho

uldsh

allbe

10%

of th

eequ

ity at

tribu

table

tosh

areho

lders

of th

epare

nt.

Note

3:Tr

ansa

ction

date

re fers

to co

ntrac

tdate

,pay

ment

date,

clos

ingda

te, tr

ansfe

rdate

, thed

ateof

Res

olutio

nof t

he B

oard

ofDi

rector

s,or

other

dates

onwh

ich co

unter

-part

y and

amou

ntwe

rese

ttled

,whic

heve

r cam

efirs

t.

Price

Refe

rence

Purp

oseo

f tran

sacti

onOt

her t

erms

Selle

rNa

meof

prop

erty

Tran

sacti

onDa

teFi

rstAc

qusit

ionDa

teTr

ansa

ction

amou

ntCo

unter

-part

yRe

lation

ship

Relat

edpa

rty tr

ansa

ction

:prev

ious t

ransfe

rdata

159



262

ATTA

CHME

NT 6

Real

estate

dispo

sedof

with

amou

ntex

ceedin

g NTD

300m

illion

or20

%of

thecap

italst

ockf

orthe

yeare

nded

Dece

mber

31,2

017

Selle

rNa

meof

prope

rtyTr

ansac

tion

Date

FirstA

cqusi

tion

Date

Book

value

Tran

sactio

nam

ount

Amou

ntrec

eived

Gain

ondis

posal

Coun

ter-pa

rtyRe

lation

ship

Purpo

seof

transa

ction

Price

Refer

ence

Othe

rterm

s

Shan-

Chih

Asset

Deve

lopme

ntCo

. Lan

dand

plant

2017

.0520

03.10

$161

,979

$1,65

0,000

Colle

cted

$1,46

1,745

Yuan

taFu

tures

Co.Lt

d.Yu

anta

Comm

ercial

Bank

Yuan

taSe

curiti

es Co

.,Ltd

.

Non-r

elated

Asset

activa

tion

Thep

ricei

sbase

dont

heap

praisa

lpric

eof

China

Real

Estat

eApp

raiser

Firm

andS

avills

Real

Estat

eApp

raiser

Firm

and w

asde

ciede

after

both

thesel

leran

dbuy

erne

gotia

ted.

None

Chun

ghwa

Pictu

reTu

besL

td.La

nd,p

lanta

ndeq

uipme

nt20

16.11

(Note

4)19

77.10

1,508

,001

3,831

,059

After

thetra

nsacti

onam

ount

ofNT

D3,8

31,05

9tho

usand

dedu

cting

therel

atedt

ransac

tion

feeof

NTD

95,23

8tho

usand

and

thead

vance

receip

ts NTD

237,2

49tho

usand

Chun

ghwa

Pictur

eTub

es Ltd

.again

stGi

antpl

usTe

chno

logy C

o., Lt

d.(w

hich w

ascla

ssifie

dund

erpre

paym

entsa

ndlon

g-term

defer

redrev

enue

),the

remain

ingam

ount

of NT

D3,4

98,57

2tho

usand

hasb

eentot

alco

llecte

d.

2,323

,058

Gian

tplus

Tech

nolog

yCo

., Ltd.

Paren

t-sub

sidiar

yAs

setact

ivatio

n,res

ource

integr

ation

,eff

icien

cyinc

rease

Thep

ricea

t whic

h CPT

soldt

heTa

oyua

nlan

d,pla

ntan

dequ

ipmen

tto G

iantpl

usTe

chno

logy

Co., L

td. w

asap

praise

dbya

pprai

sersf

romBa

uUe

n Real

Estat

eApp

raiser

Firm

andJ

ones

Lang

LaSa

lleTa

iwan

Ltd.

Thep

rices

arelist

edas

follow

s:

Thea

pprai

salpri

ceof

Bau U

en Re

al Es

tate

Appra

iserF

irmis N

TD3,8

14,82

9tho

usand

.

Thea

pprai

salpri

ceof

Jones

Lang

LaSa

lleTa

iwan

Ltd.

is NTD

3,815

,741t

housa

nd.

None

Note

1:Ap

praisa

lresul

tshall

bedis

closed

inthe

Price

Refer

ence

colum

nifp

ropert

yapp

raisal

isreq

uired

bylaw

.No

te2:

Tran

sactio

ndate

refers

toco

ntract

date.

Note

3: Ca

pital

stock

refers

tothe

paren

tcom

pany

'scap

italst

ock.

Ifthe

stocks

were

issue

d with

nopa

rvalu

eorp

arval

ueisn

ot NT

D10

,thet

hresho

uldsha

llbe1

0%of

theeq

uitya

ttribu

table

tosha

rehold

ersof

thepa

rent.

Note

4: Ch

ungh

waPic

tureT

ubes

Ltd. w

asco

mplet

edthe

transf

erof

land,

plant

ande

quipm

entin

thesec

ondq

uarte

r201

7.

160



263

Rela

ted

party

trans

actio

nsfo

rpur

chas

esan

dsa

lesa

mou

ntse

xcee

ding

NT$

100

mill

ion

or20

%of

capi

tals

tock

Tatu

ngCo

.,Lt

dTa

tung

Cons

umer

Pro

duct

s (Ta

iwan

)Co.

,Ltd

.Pa

rent

-sub

sidia

rySa

les

($3,

362,

693)

(19.

23)

-N

osig

nific

antd

iffer

ence

Not

e 7$1

,740

,419

36.5

3G

reen

Ener

gyTe

chno

logy

Inc.

Pare

nt-s

ubsid

iary

Sale

s(1

69,7

16)

(0.9

7)-

〃〃

110,

025

2.31

Tatu

ngCo

.ofJ

apan

,Inc

.Pa

rent

-sub

sidia

rySa

les

(571

,290

)(3

.27)

-〃

〃99

,482

2.09

Tatu

ngCo

.ofJ

apan

,Inc

.Pa

rent

-sub

sidia

ryPu

rcha

ses

451,

670

3.56

-〃

〃(2

00,2

04)

(6.6

7)Ta

tung

Co.o

fAm

eric

aInc

.Pa

rent

-sub

sidia

ryPu

rcha

ses

124,

898

0.98

-〃

〃(1

2,50

8)(0

.42)

Tatu

ngEl

ectri

cCom

pany

ofAm

eric

a,In

c.Pa

rent

-sub

sidia

rySa

les

(152

,368

)(0

.87)

-〃

〃23

,638

0.50

Tatu

ng (S

hang

hai)

Co.,

Ltd

Pare

nt-s

ubsid

iary

Sale

s(1

16,2

10)

(0.6

6)-

〃〃

74,8

561.

57Ta

tung

(Sha

ngha

i)Co

.,Lt

dPa

rent

-sub

sidia

ryPu

rcha

ses

141,

664

1.12

-〃

〃(1

2,93

3)(0

.43)

Chun

ghw

a Pic

ture

Tube

s,Lt

d.Pa

rent

-sub

sidia

rySa

les

(115

,389

)(0

.66)

-〃

〃26

,731

0.56

Tatu

ngCo

.ofJ

apan

,Inc

.Ch

ungh

wa P

ictu

reTu

bes,

Ltd.

Com

pany

inas

soci

ates

Sale

s(1

,681

,454

)(5

3.17

)15

0

-

-93

3,68

671

.15

Tatu

ngCo

.,Lt

dPa

rent

-sub

sidia

rySa

les

(423

,593

)(1

3.40

)60

-

-

202,

628

15.4

4Ta

tung

Co.,

Ltd

Pare

nt-s

ubsid

iary

Purc

hase

s48

6,23

216

.83

60

-

-(2

9,44

6)(1

5.15

)

Tatu

ng (S

hang

hai)

Co.,

Ltd

Vib

rant

Disp

lay

Tech

nolo

gyCO

.,Lt

d.Co

mpa

nyin

asso

ciat

esSa

les

(225

,460

)(1

8.67

)Ac

cord

ing

toco

ntra

ct

-

-49

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12.5

5Ta

tung

Co.,

Ltd

Pare

nt-s

ubsid

iary

Sale

s(1

46,4

01)

(12.

12)

60

-

-19

,103

4.81

Tatu

ngCo

.,Lt

dPa

rent

-sub

sidia

ryPu

rcha

ses

203,

027

22.1

012

0

-

-(1

46,0

78)

(30.

73)

Gre

enEn

ergy

Tech

nolo

gyIn

c.U

ltraE

nerg

y (W

EIFA

NG

)Tec

hnol

ogy

Co.L

tdPa

rent

-sub

sidia

rySa

les

(1,5

78,1

19)

(16.

93)

T/T

90

-

-1,

325,

570

73.8

9U

ltraE

nerg

y (W

EIFA

NG

)Tec

hnol

ogy

Co.L

tdPa

rent

-sub

sidia

ryPu

rcha

ses

323,

267

4.17

T/T

45

-

-(1

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1.24

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inte

chEn

ergy

Corp

orat

ion

Oth

er re

late

dpa

rties

Sale

s(3

88,1

39)

(4.1

6)T/

T30

-

-

41,6

542.

32

Ultr

aEne

rgy

(WEI

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G)T

echn

olog

yCo

.Ltd

Gre

enEn

ergy

Tech

nolo

gyIn

c.Pa

rent

-sub

sidia

ryPu

rcha

ses

1,57

8,11

940

.28

T/T

90

-

-(1

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)(7

1.65

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reen

Ener

gyTe

chno

logy

Inc.

Pare

nt-s

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iary

Sale

s(3

23,2

67)

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-

-

1,66

2,61

688

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Gin

tung

Ener

gyCo

.,Lt

d.Ta

tung

Co.,

Ltd

Pare

nt-s

ubsid

iary

Sale

s(3

93,3

11)

(23.

00)

60

-

-9,

316

2.36

CPTF

Opt

roni

csCo

.,Lt

d.Ch

ungh

wa P

ictu

reTu

bes,

Ltd.

Pare

nt-s

ubsid

iary

Sale

s(7

82,3

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(11.

00)

-

-

-5,

282,

824

83.0

0Ch

ungh

wa P

ictu

reTu

besT

echn

olog

y (G

roup

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,Ltd

.Co

mpa

nyin

asso

ciat

esSa

les

(1,7

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38)

(24.

00)

-

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1,62

412

.00

CPTF

Visu

al D

ispla

y (F

uzho

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d.Co

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1,22

1,59

212

.00

-

-

-(3

94,3

83)

(22.

01)

Chun

ghw

a Pic

ture

Tube

sTec

hnol

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(Gro

up)C

o.,L

td.

Chun

ghw

a Pic

ture

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s,Lt

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rent

-sub

sidia

rySa

les

(5,4

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00)

-

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495,

669

97.0

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TF O

ptro

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Co.,

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pany

inas

soci

ates

Purc

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s1,

700,

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30.0

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-

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(741

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2.55

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isual

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lay

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pany

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soci

ates

Purc

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s73

7,49

113

.00

-

-

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81,1

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12)

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al D

ispla

y (F

uzho

u)Lt

d.CP

TF O

ptro

nics

Co.,

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Com

pany

inas

soci

ates

Sale

s(1

,221

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)(6

2.00

)-

-

-

394,

383

45.0

0Ch

ungh

wa P

ictu

reTu

besT

echn

olog

y (G

roup

)Co.

,Ltd

.Co

mpa

nyin

asso

ciat

esSa

les

(737

,491

)(3

8.00

)-

-

-

481,

104

55.0

0

Gia

ntpl

usTe

chno

logy

Co.,

Ltd.

Chun

ghw

a Pic

ture

Tube

s,Lt

d.Pa

rent

-sub

sidia

rySa

les

(335

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)(1

1.00

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-

-

-

-(N

ote2

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ungh

wa P

ictu

reTu

bes,

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Pare

nt-s

ubsid

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Purc

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s15

9,84

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-

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- -

Shen

zhen

Gia

ntpl

us O

ptoe

lect

roni

cs D

ispla

yCo

.,Lt

d.Pa

rent

-sub

sidia

ryPu

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219,

609

18.0

0-

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- K

unsh

an G

iant

plus

Opt

roni

cs D

isplay

Tech

nolo

gyCo

.,Lt

dPa

rent

-sub

sidia

ryPu

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226,

857

19.0

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-

-

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-

Shen

zhen

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ntpl

us O

ptoe

lect

roni

cs D

ispla

yCo

.,Lt

d.G

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plus

Tech

nolo

gyCo

.,Lt

d.Pa

rent

-sub

sidia

rySa

les

(219

,609

)(7

.00)

-

-

-

- -

(Not

e2)

Kun

shan

Gia

ntpl

us O

ptro

nics

Disp

lay

Tech

nolo

gyCo

.,Lt

dG

iant

plus

Tech

nolo

gyCo

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-sub

sidia

rySa

les

(226

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)(8

.00)

-

-

-

- -

(Not

e2)

Chun

ghw

a Pic

ture

Tube

s,Lt

d.G

iant

plus

Tech

nolo

gyCo

.,Lt

d.Pa

rent

-sub

sidia

rySa

les

(278

,996

)(1

.00)

- -

- -

-(N

ote2

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iant

plus

Tech

nolo

gyCo

.,Lt

d.Pa

rent

-sub

sidia

ryPu

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476,

121

2.00

- -

- -

- CP

TF O

ptro

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Co.,

Ltd.

Pare

nt-s

ubsid

iary

Purc

hase

s78

2,33

03.

00 -

- -

(5,2

82,8

24)

(45.

96)

Chun

ghw

a Pic

ture

Tube

sTec

hnol

ogy

(Gro

up)C

o.,L

td.

Pare

nt-s

ubsid

iary

Purc

hase

s5,

463,

078

24.0

0 -

- -

(3,4

95,6

69)

(30.

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Not

e1:A

lltra

nsac

tions

aree

limin

ated

inth

econ

solid

ated

finan

cial

state

men

ts.N

ote2

: Gia

ntpl

usTe

chno

logy

Co.,

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&Co

nsol

idat

edsu

bsid

iary

have

notb

een

thes

ubsid

iarie

soft

heCo

mpa

nyan

d re

late

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rties

ofth

e Gro

upfro

mM

arch

30,2

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ce,th

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nar

eonl

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sclo

sed

whe

nth

ey w

eres

till r

elat

edpa

rties

ofth

e Gro

up.

ATTA

CHM

ENT

7

Purc

hase

r (se

ller)

Rela

ted

party

Rela

tions

hip

Tran

sact

ions

Det

ails

ofno

n-ar

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leng

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tion

Not

esan

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coun

ts re

ceiv

able

(pay

able

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ote

Purc

hase

s(S

ales

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rcen

tage

ofto

tal

rece

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les (

paya

ble)

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nce

(Not

e1)

Amou

nt(N

ote1

)Pe

rcen

tage

ofto

tal

purc

hase

s (sa

les)

Cred

itTe

rmU

nitp

rice

Cred

itTe

rm

161



264

Relat

edpa

rtytra

nsacti

onsf

orpu

rchase

sand

sales

amou

ntsex

ceedin

g NT$

100m

illion

or20

%of

capita

lstoc

k

Shan

-Chih

Asset

Dev

elopm

entC

o.Ta

tungC

o.,Ltd

Paren

t-sub

sidiar

ySa

les(23

9,048

)(27

.72)

- -

- 14

0.12

Tatun

gElec

tricCo

mpan

yofA

meric

a,Inc

.Ta

tungC

o.,Ltd

Paren

t-sub

sidiar

yPu

rchase

s15

2,433

61.90

120

- -

(25,47

2)(78

.38)

Forw

ard D

evelo

pmen

tCo.,

Ltd.

CPTF

Visu

al Di

splay

(Fuzh

ou)L

td.Co

mpan

yina

ssocia

tesSa

les(42

0,046

)(87

.47)

60No

signif

icant

differ

ence

Nosig

nifica

ntdif

feren

ce12

0,362

81.44

Suzh

ou Fo

rward

Electr

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Tech

nolog

yCo.,

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Paren

t-sub

sidiar

yPu

rchase

s48

2,186

100.0

090

〃〃

(149,5

97)

(100.0

0)

Suzh

ou Fo

rward

Electr

onics

Tech

nolog

yCo.,

Ltd.

Forw

ard D

evelo

pmen

tCo.,

Ltd.

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t-sub

sidiar

ySa

les(48

2,186

)(60

.99)

120

Nosig

nifica

ntdif

feren

ceNo

signif

icant

differ

ence

149,5

9761

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TSTI

Tech

nolog

ies (S

hang

hai)C

o.,Ltd

.Vi

brant

Displ

ayTe

chno

logyC

O.,L

td.Co

mpan

yina

ssocia

tesSa

les(11

9,639

)(3.

32)

30No

signif

icant

differ

ence

O/A

30-12

0days

18,26

92.1

9

Tatun

g Fine

Chem

icalsC

o.,Ltd

.Ta

tungC

oatin

gs (K

unsha

n)Co

.,Ltd.

Paren

t-sub

sidiar

ySa

les(14

7,784

)(52

.75)

120

- -

6,086

17.59

Tatun

g Fore

verE

nergy

Co.,L

td.Ta

tungC

o.,Ltd

Paren

t-sub

sidiar

ySa

les(14

7,743

)(10

0.00)

60 -

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100.0

0

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Opto-

Mech

atron

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brant

Displ

ayTe

chno

logyC

O.,L

td.Co

mpan

yina

ssocia

tesSa

les(15

0,829

)(84

.39)

- -

- 10

,164

100.0

0

Note

1:Th

etran

sactio

nsam

ong t

heco

nsoldi

atede

ntitie

s were

elimi

nated

inthe

conso

lidate

dfina

ncial

statem

ents.

Note

2: Gi

antpl

usTe

chno

logyC

o.,Ltd

.&Co

nsolid

ateds

ubsid

iaryh

aveno

tbeen

thesub

sidiar

iesof

theCo

mpan

yand

relat

edpa

rtieso

fthe G

roupf

romMa

rch30

,2017

. Hen

ce,the

inform

ation

areon

lydis

closed

whe

nthe

y were

still r

elated

partie

softh

e Grou

p.

ATTA

CHME

NT7-1

Note

Purch

ases

(Sales

)Am

ount

(Note

1)Pe

rcenta

geof

total

purch

ases (

sales)

Cred

itTerm

Unitp

rice

Cred

itTerm

Balan

ce(N

ote1)

Perce

ntage

oftot

alrec

eivab

les (p

ayable

)

Notes

anda

ccoun

ts rec

eivab

le(pa

yable)

Purch

aser (s

eller)

Relat

edpa

rtyRe

lation

ship

Tran

sactio

nsDe

tailso

fnon

-arm'

slen

gthtra

nsacti

on

162



265

ATTA

CHM

ENT

8

Rece

ivab

les fr

om re

lated

par

tiesw

itham

ount

sexc

eedi

ngNT

$100

mill

ion

or 2

0% o

f cap

itals

tock

Amou

ntCo

llecti

onsta

tus

Tatu

ng C

o., L

td1.

Acco

unts

rece

ivab

le-Re

lated

par

ty

Tatu

ng C

onsu

mer

Prod

ucts

(Taiw

an) C

o.,L

td.

Pare

nt-su

bsid

iary

$1,7

40,4

192.

06$-

-$-

$-

Gree

nEn

ergy

Tech

nolo

gyIn

c.Pa

rent

-subs

idiar

y11

0,02

50.

74-

--

-

2.Ot

hera

ccou

nts r

eceiv

able-

Relat

ed p

arty

(inc

ludi

nglo

ng-te

rm)

Gree

nEn

ergy

Tech

nolo

gyIn

c.Pa

rent

-subs

idiar

y98

9,53

7-

--

--

Shan

-Chi

hAs

setD

evelo

pmen

t Co.

Pare

nt-su

bsid

iary

453,

453

--

--

-

Tatu

ngIn

form

ation

Tech

nolo

gy (J

iangs

u) C

o., L

td.

Pare

nt-su

bsid

iary

559,

330

--

--

-

Tatu

ng C

o. o

f Jap

an,I

nc.

Chun

ghwa

Pictu

reTu

bes,

Ltd.

Com

pany

inas

socia

tes93

3,68

60.

6765

6,29

6-

-

Tatu

ng C

o., L

tdPa

rent

-subs

idiar

y20

2,62

85.

4213

2,68

6-

-

CPT F

Optro

nics

Co.

, Ltd

.Ch

ungh

waPi

cture

Tube

s,Lt

d.Pa

rent

-subs

idiar

y5,

282,

824

--

--

-

Chun

ghwa

Pictu

reTu

besT

echn

olog

y (Gr

oup)

Co.

, Ltd

.Co

mpa

nyin

asso

ciates

741,

624

--

--

-

Chun

ghwa

Pictu

reTu

besT

echn

olog

y (Gr

oup)

Co.

, Ltd

.Ch

ungh

waPi

cture

Tube

s,Lt

d.Pa

rent

-subs

idiar

y3,

495,

669

--

--

-

CPTF

Visu

alDi

splay

(Fuz

hou)

Ltd.

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Optro

nics

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, Ltd

.Co

mpa

nyin

asso

ciates

394,

383

--

--

-

Chun

ghwa

Pictu

reTu

besT

echn

olog

y (Gr

oup)

Co.

, Ltd

.Co

mpa

nyin

asso

ciates

481,

104

--

--

-

Forw

ard

Deve

lopm

ent C

o., L

td.

CPTF

Visu

alDi

splay

(Fuz

hou)

Ltd.

Pare

nt-su

bsid

iary

120,

362

3.99

17,2

32-

31,3

75-

Suzh

ouFo

rwar

dEl

ectro

nics

Tech

nolo

gy C

o., L

td.

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ard

Deve

lopm

ent C

o., L

td.

Pare

nt-su

bsid

iary

149,

597

3.31

--

33,6

16-

Gree

nEn

ergy

Tech

nolo

gyIn

c.Ul

traEn

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(WEI

FANG

)Tec

hnol

ogy C

o. L

tdPa

rent

-subs

idiar

y1,

325,

570

2.28

920,

303

--

Ultra

Ener

gy (W

EIFA

NG)T

echn

olog

y Co.

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Gree

nEn

ergy

Tech

nolo

gyIn

c.Pa

rent

-subs

idiar

y1,

662,

616

2.06

--

--

Note

1:Al

ltra

nsac

tions

aree

limin

ated

inth

econ

solid

ated

finan

cials

tatem

ents.

Com

pany

reco

rded

as re

ceiv

able

Relat

ed p

arty

Relat

ions

hip

Endi

ng b

alanc

e(N

ote 1

)Tu

rnov

er ra

te

Tatu

ngas

ked

for o

verd

ue re

ceiv

ables

form

Chu

nghw

aPict

ureT

ubes

,Ltd

.m

onth

ly,a

nd b

oth

sides

activ

elyco

mm

unica

tedwi

th re

paym

ent,

and

the

amou

nt o

f acc

ount

s rec

eivab

le du

e fro

mCh

ungh

waPi

cture

Tube

s,Lt

d. d

ecre

ased

year

byy

ear.

With

thec

ash

flow

from

bot

hsid

es,

colle

ction

and

paym

ents

till o

ngoi

ng

Over

due r

eceiv

ables

Amou

nt re

ceiv

edin

subs

eque

nt p

erio

dAl

lowa

nce f

ordo

ubtfu

lacc

ount

s

163



266

ATTA

CHM

ENT

9

Nam

es, l

ocati

onsa

ndre

lated

info

rmati

onof

inve

steec

ompa

nies

(exc

ludi

ng in

vestm

ent i

n M

ainlan

dCh

ina)

Endi

ng b

alanc

eBe

ginn

ing

balan

ceNu

mbe

rof

shar

es(in

thou

sand

s)

Perc

entag

eof

owne

rship

(%)

Book

valu

e

Tatu

ngCo

.,Lt

dCh

ungh

waPi

cture

Tube

s,Lt

d.Ta

oyua

nCi

ty,Ta

iwan

Man

ufac

ture

,res

earc

han

dsa

leof

pict

ure t

ubsa

ndTF

T-LC

D pr

oduc

ts$6

,992

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$4,2

93,0

251,

850,

745,

168

28.5

6$2

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e 2)

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e 2)

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e 2)

San

Chih

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icond

ucto

rCo.,

Ltd.

Taip

eiCi

ty,Ta

iwan

Man

ufac

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and

sales

ofse

mico

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tors

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chip

s92

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149

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Tech

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gies

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e man

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Tatu

ng V

ietna

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etnam

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omea

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iwan

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omea

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echa

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Co.

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iwan

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old

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and

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of m

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l ins

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ents

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c.U.

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pany

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Elite

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stem

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ty,Ta

iwan

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anuf

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and

sales

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ducts

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ng O

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Taip

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ty,Ta

iwan

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and

prod

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wor

king

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hine

49,0

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der &

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Ltd.

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ty,Ta

iwan

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ersio

nof

plas

tic m

odul

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aryP

ublis

hing

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ty,Ta

iwan

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and

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ihIn

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ialLi

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iwan

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tructi

onof

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256,

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orati

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tion

and

sales

of m

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1969

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1

Chun

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bes(

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Tung

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ipei

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relat

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150,

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g th

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sold

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eree

limin

ated

in th

econ

solid

ated

finan

cials

tatem

ents.

Note2

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Com

pany

incr

ease

d its

shar

ehol

ding

in C

PT b

y 17.

03%

asar

esul

tof t

he le

gala

ction

again

stCo

mpa

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troni

cs,I

nc.R

efer t

o Not

e 9(5

)for

furth

er d

etails

.

Inad

dito

n,Ta

tung

Glob

alSt

rateg

yInv

estm

ent A

nd T

radi

ng(B

VI)s

old

all th

esha

reso

fChu

nghw

aPict

ureT

ubes

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. it h

eld to

theC

ompa

ny in

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embe

r 201

7. H

ence

, the

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pany

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ldin

g pe

rcen

tageo

fChu

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aPict

ureT

ubes

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reas

ed to

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6%.

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obal

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nves

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ding

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com

plete

d th

e liq

uida

tion

proc

edur

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mbe

r 201

7, an

d th

us th

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up’s

hold

ing

perc

entag

e dec

reas

edfro

m 1

00%

to 0

%.

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:The

Com

pany

tran

sferre

d th

erec

eivab

les d

uefro

mTa

tung

Viet

nam

Co.,

Ltd.

in th

eam

ount

of N

TD 5

26,2

85 th

ousa

nd to

capi

tal in

crea

se in

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embe

r 201

7.

Howe

ver,

asof

Dec

embe

r 31,

201

7, T

atung

Viet

nam

Co.,

Ltd.

has

n’tf

inish

ed th

ealte

rnati

onre

gistr

ation

pro

cedu

re.H

ence

, the

Com

pany

reco

gnize

dsu

cham

ount

und

er p

repa

ymen

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r inv

estm

ent,

non-

curre

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storc

ompa

nyIn

veste

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pany

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tion

Main

bus

ines

sesa

nd p

rodu

cts

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alIn

vestm

ent

Endi

ng b

alanc

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t inc

ome(

loss

)of

inve

steec

ompa

ny

Inve

stmen

t inc

ome

(loss

)rec

ogni

zed

(not

e 1)

Note

164



267

ATTA

CHM

ENT

9-1

Nam

es, l

ocati

onsa

ndre

lated

info

rmati

onof

inve

steec

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nies

(exc

ludi

ng in

vestm

ent i

n M

ainlan

dCh

ina)

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ng b

alanc

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ginn

ing

balan

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mbe

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shar

es(in

thou

sand

s)

Perc

entag

eof

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rship

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Book

valu

e

Forw

ard

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troni

csCo

.,Lt

d.Fo

rwar

d De

velo

pmen

tCo.,

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Briti

sh V

irgin

Islan

dsIn

vestm

ent h

oldi

ng$6

80,7

52$6

80,7

52-

100.

00$1

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598

$53,

598

Gint

ung

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gyCo

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d.Ta

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nCi

ty,Ta

iwan

The m

anuf

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ring

and

sale

ofso

lar m

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355,

296

355,

296

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914

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3

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icond

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rCo.,

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ergy

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nolo

gyIn

c.Ta

oyua

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ty,Ta

iwan

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ufac

ture

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l par

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holes

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gan

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terPo

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nves

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ty,Ta

iwan

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stmen

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ding

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gyCo

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ty,Ta

iwan

The m

anuf

actu

ring

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sale

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lar m

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edco

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193

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ty,Ta

iwan

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Tech

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Lim

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Inve

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e 1)

Note

165



268

ATTA

CHME

NT 9-

2

Name

s, loca

tions

andrela

ted inf

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Chung

hwaE

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nicsIn

vestm

entCo

.,Ltd.

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ChihI

nvestm

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City,T

aiwan

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ng & I

nvestm

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$92,91

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sCo.,

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aipeiC

ity,Tai

wan

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ervice

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Taipei

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aiwan

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related

busin

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5)

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atung

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td.My

anmar

Sales

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in busi

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Invest

ment

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ment i

ncome

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recogn

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Endin

g bala

nce

Note

Net in

come(l

oss)o

finv

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compan

y

166



269

ATTA

CHM

ENT

10

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stmen

tin

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land

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flow

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ng E

lectri

c(Si

ngap

ore)

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ng(S

hang

hai)

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tdM

anuf

actu

re an

dsa

lesof

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otor

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nera

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(2)

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dies

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810,

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197,

976

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LIM

ITED

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69,6

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ote8

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538

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38,5

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170

Appendix - Parent company only statements


273

1

TATUNG CO., LTD.PARENT COMPANY ONLY FINANCIAL STATEMENTS

WITHINDEPENDENT AUDITORS’ REPORT

DECEMBER 31, 2017 AND 2016

Address: 22, Sec. 3, Chung-shan N. Rd., Taipei city, Taiwan R.O.C.

Telephone: 886-2-2592-5252

The reader is advised that these financial statements have been prepared originally in Chinese. In the event of a conflictbetween these financial statements and the original Chinese version or difference in interpretation between the two versions,the Chinese language financial statements shall prevail.



274

2

Independent Auditors’ Report

English Translation of a Report Originally Issued in Chinese

The Board of Directors and ShareholdersTatung Co., Ltd. (“the Company”)

Opinion

We have audited the accompanying parent company only balance sheets of the Company as of December31, 2017 and 2016, the related parent company only statements of comprehensive income, changes inequity and cash flows for the years ended December 31, 2017 and 2016, and notes to the financialstatements including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of the other auditors (please refer to the Other Matterssection), the parent company only financial statements referred to above present fairly, in all materialrespects, the financial position of the Company as of December 31, 2017 and 2016, and the financialperformance and its cash flows for the years ended December 31, 2017 and 2016, in conformity with theGuidelines 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 ofFinancial Statements by Certified Public Accountants and auditing standards generally accepted in theRepublic of China. Our responsibilities under those standards are further described in the Auditor’sResponsibilities for the Audit of the Financial Statements section of our report. We are independent ofthe Company in accordance with the Norm of Professional Ethics for Certified Public Accountant of theRepublic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in accordancewith the Norm. Based on our audits and the reports of other auditors, we believe that the audit evidencewe 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 ouraudit of 2017 financial statements. These matters were addressed in the context of our audit of thefinancial statements as a whole, and in forming our opinion thereon, and we do not provide a separateopinion on these matters.



275

3

1. Revenue Recognition

The Company recognized net sales in the amounted of NT$17,482,835 thousand in 2017. TheCompany operated in various industries and their various products were sold to local as well as foreignmarkets. The sales terms varied, the sales amount was relatively large and the transactions were highlycomplicated. Therefore, we considered this a key audit matter.

Our audit procedures included, but not limited to, assessing the appropriateness of the accountingpolicy of revenue recognition; evaluating and testing the design and operating effectiveness of internalcontrols in the sales cycle; selecting samples to perform tests of details and vouching them totransaction records, examining contracts, sales orders or supporting documents; reviewing significantterms and condition of contracts; performing cut-off testing by selecting a set of samples oftransactions from either side of year-end and vouching them to supporting evidences to ensure thereasonableness of revenue cut-off; performing analytical procedures on gross margin and sales frommajor customers; reviewing significant subsequent sales returns and discounts to verify the occurrenceof sales transactions and reasonableness of the timing of revenue recognition.

We also assessed the adequacy of disclosures of operating revenues. Please refer to Note 4, 5, and 6to the parent company only financial statements.

2. Investments accounted for under the equity method

As of December 31, 2017, the investment accounted for under the equity method amounted to NT$47,165,444 thousand, which accounted for 67% of the total assets, which is deemed significant to theparent company only financial statements. We reviewed whether the Company had substantive controlover its investees. For those investees that the Company had substantive control over, we thenreviewed if the investee had been deemed as a consolidated entity. For the long-term equityinvestments that the Company made significant impact on such investees, we reviewed if theinvestment was accounted for under the equity method. The appropriateness of the accountingtreatment mentioned above had significant impact to the parent company only financial statements,and thus we considered this a key audit matter.

Our audit procedures included, but not limited to, obtaining the most recent group investment structurechart of the Company; reviewing the changes in group structure and understanding the recognitionbasis and classification of investments accounted for under the equity method; analyzing thecomposition of the board of directors and management and the investment contracts to determinewhether the investments of the Company were accounted for according to IFRS; verifying whetherthe Company had obtained audited financial statements when recognizing investment income andother comprehensive income under the equity method. In addition to understanding the impact theinvestees’ significant events made on the Company’s individual financial statements, we furtherevaluated whether the measurement of the investment accounted for under the equity methodcomplied with IFRS and IAS. Meanwhile, we verified the existence and ownership of the investmentby confirmation or physical count procedures.

We also assessed the adequacy of disclosures of investments accounted for under the equity method.Please refer to Note 6 to the parent company only financial statements.



276

4

3. Non-financial Assets Impairment

As of December 31, 2017, the net value of property, plant and equipment accounted for 6% of thetotal asset of the Company, which is deemed material to the parent company only financial statements.The Company had operating loss in 2017, which indicated a possibility of impairment of property,plant and equipment as of December 31, 2017. In addition, the assessment process of impairment ofaforementioned non-financial assets highly relies on highly subjective judgment and involvesuncertainty in estimation. Therefore, we considered this a key audit matter.

Our audit procedures included, but not limited to, inspecting the impairment possibility and the cash-generating unit of the property, plant and equipment; obtaining the data and assumption regarding theevaluation of recoverable amount from the Company. In addition to considering the historical andexternal financial information to evaluate the appropriateness of the related assumption, we adoptedthe evaluation report provided by the internal expert for assessing the appropriateness of theimpairment testing data or the fair value report of the cash-generating unit, the method of evaluationand the key evaluation parameters, such as discount rate.

Please refer to Note 5 and 6 to the parent company only financial statements for the disclosure ofproperty, plant and equipment.

Other Matters-Referring to Other Auditors

We did not audit the financial statements of certain associates, which statements reflected investmentsaccounted for under the equity method of NT$5,086,768 thousand and NT$5,147,543 thousand,accounting for 7% and 7% of the total assets as of December 31, 2017 and 2016, respectively. The relatedshares of (losses) profits from the associates and joint ventures under the equity method amounted toNT$117,231 thousand and NT$(235,052) thousand, accounting for 313% and 10% of the netincome/(loss) before income tax for the years ended December 31, 2017 and 2016, respectively, and therelated shares of other comprehensive loss from the associates and joint ventures under the equity methodamounted to NT$(93,854) thousand and NT$(114,986) thousand, accounting for 76% and 27% of thecomprehensive loss for the years ended December 31, 2017 and 2016, respectively. Those financialstatements were audited by other auditors, whose reports thereon have been furnished to us, and ouropinions expressed herein are based solely on the audit reports of the other auditors.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

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



277

5

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

Those charged with governance (inclusive of the Audit Committee) are responsible for overseeing theCompany’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only financialstatements as a whole are free from material misstatement, whether due to fraud or error, and to issue anauditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with the auditing standards generally accepted in theRepublic of China will always detect a material misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if, individually or in the aggregate, they could reasonablybe expected to influence the economic decisions of users taken on the basis of these parent company onlyfinancial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China,we exercised professional judgment and maintained professional skepticism throughout the audit. Wealso:

1. Identified and assessed the risks of material misstatement of the parent company only financialstatements, whether due to fraud or error, design and perform audit procedures responsive to thoserisks, 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 resultingfrom error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

2. Obtained an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control.

3. Evaluated the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

4. Concluded 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 orconditions that may cast significant doubt on the Company’s ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor’s reportto the related disclosures in the parent company only financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor’s report. However, future events or conditions may cause the Company to cease tocontinue as a going concern.



278

6

5. Evaluated the overall presentation, structure and content of the parent company only financialstatements, including the disclosures, and whether the parent company only financial statementsrepresent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtained sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Company to express an opinion on the parent company only financialstatements. We are responsible for the direction, supervision and performance of the group audit.

We communicated with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identified during our audit.

We also provided those charged with governance with a statement that we have complied with relevantethical requirements regarding independence, and communicated with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.

From the matters communicated with those charged with governance, we determined those matters thatwere of most significance in the audit of the parent company only financial statements of the currentperiod and are therefore the key audit matters. We describe these matters in our auditor’s report unlesslaws or regulations preclude 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 consequencesof doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Ernst & Young, TaiwanMarch 15, 2018

Notice to ReadersThe accompanying financial statements are intended only to present the financial position and results of operations and cash flows inaccordance with accounting principles and practices generally accepted in the Republic of China on Taiwan and not those of any otherjurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted andapplied in the Republic of China on Taiwan.



279

Notes Amount % Amount %Current assets

Cash and cash equivalents 4,6 $1,795,653 3 $2,096,040 3Financial assets at fair value through profit or loss, current 4,6 2,994 - 23,930 -Available-for-sale financial assets, current 4,5,6 377,895 1 381,470 1Financial assets in held-to-maturity, current 4,6 - - 826,250 1Financial assets carried at cost, current 4,6 29,238 - 29,238 -Debt instrument investments for which no active market exists, current 4,6,8 3,866,140 6 3,655,814 5Notes receivable, net 4,6 262,273 - 256,817 -Accounts receivable, net 4,5,6 2,286,908 3 2,220,381 3Accounts receivable - related parties, net 4,6,7 2,215,224 3 1,955,661 3Construction receivables 4,6,7 205,315 - 238,944 -Other receivables 4 113,411 - 21,876 -Other receivables - related parties 4,7 1,028,419 1 1,124,516 2Current tax assets 4 12,513 - 14,320 -Inventories 4,5,6 3,911,457 6 3,854,691 6Prepayments 7 194,801 - 230,482 -

Total current assets 16,302,241 23 16,930,430 24Non-current assets

Available-for-sale financial assets, non-current 4,5,6 23,068 - 12,787 -Financial assets carried at cost, non-current 4,6 2,300 - 2,300 -Debt instrument investments for which no active market exists, non-current 4,6,8 194,966 - 126,554 -Investments accounted for under the equity method 4,6,8 47,165,444 67 46,190,327 65Property, plant and equipment 4,5,6,7,8 4,388,024 6 3,626,622 5Intangible assets 4,6,7 23,529 - 59,083 -Deferred tax assets 4,5,6 542,460 1 502,294 1Other non-current assets 6 312,834 - 295,865 1Deposit-out 287,757 - 259,107 -Long-term receivables 4,6 78,121 - 231,024 -Long-term receivables - related parties 4,6,7 1,168,155 2 2,728,002 4Prepayments for investments, non-current 4,6 526,285 1 - -

Total non-current assets 54,712,943 77 54,033,965 76Total assets $71,015,184 100 $70,964,395 100

ContentsAssets

December 31, 2017 and December 31, 2016

English Translations of Financial Statements Originally Issued in Chinese

TATUNG CO., LTD.PARENT COMPANY ONLY BALANCE SHEETS


(Expressed in Thousands of New Taiwan Dollars)

7



280

Liabilities and EquityNotes Amount % Amount %

Current liabilitiesShort-term loans 6,8 $4,875,438 7 $3,968,758 6Short-term notes and bills payable 6 301,848 - 199,923 -Financial liabilities at fair value through profit or loss, current 4,6 627 - 260 -Notes payable - - 52,000 -Accounts payable 2,635,932 4 2,470,625 3Accounts payable - related parties 7 364,242 - 234,580 -Other payables 1,154,216 2 3,469,227 5Other payables - related parties 7 81,111 - 44,942 -Provision, current 4,6 59,010 - 47,551 -Advanced receipts 230,357 - 117,036 -Current portion of long-term loans 6,8 398,534 1 1,109,420 2Other current liabilities - others 33,863 - 27,332 -

Total current liabilities 10,135,178 14 11,741,654 16Non-current liabilities

Long-term loans 6,8 27,839,836 39 24,405,838 34Deferred tax liabilities 4,5,6 361,143 1 300,977 1Long-term notes payables 47,663 - 79,970 -Net defined benefit liability 4,5,6 1,174,761 2 1,831,351 3Deposits in 1,755 - 4,390 -Deferred credit for investments accounted for under the equity method 4,6 2,409,575 3 2,795,395 4Other non-current liabilities, others - - 164,516 -

Total non-current libilities 31,834,733 45 29,582,437 42Total liabilities 41,969,911 59 41,324,091 58Equity

Capital stockCommon stock 6 23,395,367 33 23,395,367 33

Capital reserve 6 3,273,505 5 2,864,841 4Retained earnings 6

Legal reserve 36,354 - 36,354 -Special reserve 4,753,026 7 6,946,785 10Accumulated deficits (281,015) (1) (2,175,074) (3)

Total retained earnings 4,508,365 6 4,808,065 7Other equities 4

Exchange differences on translation of foreign operation (1,098,677) (2) (709,739) (1)Unrealized gain or loss on available-for-sale financial assets 596,612 1 365,333 -Equity related to non-current assets classified as held for sale - - (26,698) -

Total other equities (502,065) (1) (371,104) (1)Treasury stock 4,6 (1,629,899) (2) (1,056,865) (1)

Total equity 29,045,273 41 29,640,304 42

Total liabilities and equity $71,015,184 100 $70,964,395 100

Contents

TATUNG CO., LTD.PARENT COMPANY ONLY BALANCE SHEETS

December 31, 2017 and December 31, 2016(Expressed in Thousands of New Taiwan Dollars)



8



281

TATUNG CO., LTD.PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2017 and 2016(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

Contents Note Amount % Amount %

Operating revenues 4,6,7 $17,651,130 100 $17,391,781 100Less: Sales returns 5,6 (60,589) - (66,576) -Less: Sales allowances 5,6 (107,706) - (65,573) -Net operating revenues 17,482,835 100 17,259,632 100Operating costs 6,7 (15,317,932) (88) (14,855,256) (86)Gross profit 2,164,903 12 2,404,376 14Unrealized gross profit (74,468) - (73,561) -Realized gross profit 76,170 - 49,658 -Net gross profit 2,166,605 12 2,380,473 14

Operating expenses 6,7

Sales and marketing (1,063,242) (6) (1,286,126) (7)General and administrative (646,034) (4) (532,193) (3)Research and development (634,655) (3) (613,616) (4)

Total operating expense (2,343,931) (13) (2,431,935) (14)Operating loss (177,326) (1) (51,462) -

Non-operating income and expenses

Other income 4,6,7 469,427 2 467,406 3Other gains and (losses) 6, (534,874) (3) (460,283) (3)Finance costs 4,6 (721,336) (4) (696,028) (4)Share of profit (loss) of subsidiaries, associates and joint ventures 6 1,001,504 6 (1,674,408) (10)

214,721 1 (2,363,313) (14)

Income (loss) before income tax 37,395 - (2,414,775) (14)Income tax benefit 4,5,6 36,675 - 70,830 -Net income (loss) 74,070 - (2,343,945) (14)

Other comprehensive (loss) income 4,6

Not to be reclassified to profit or loss in subsequent periods:

Gains (losses) on remeasurements of defined benefit plans (7,776) - 95,823 1Share of other comprehensive income of subsidiaries, associates and joint ventures 15,279 - 96,246 1accounted for using the equity method, not to be reclassified to profit or loss

To be reclassified to profit or loss in subsequent periods:

Unrealized gain (loss) from available-for-sale financial assets 6,707 - (555) -Share of other comprehensive loss of subsidiaries, associates and joint ventures (137,668) - (612,693) (4)accounted for using the equity method, to be reclassified to profit or loss

Total of other comprehensive (loss) income, net of income tax (123,458) - (421,179) (2)Total comprehensive (loss) income $(49,388) - $(2,765,124) (16)

Earnings (loss) per share (NT$) 6

Basic earnings (loss) per share $0.03 $(1.03)

Diluted earnings (loss) per share $0.03 $(1.03)

2017 2016


9



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11



28412

TATUNG CO., LTD.NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars unless otherwise specified)

1. Organization operations

Established in 1918, Tatung Company (the “Company”) was incorporated under the Company Actof the Republic of China (“R.O.C.”) and underwent reorganization in 1939. The total capital atthat time was Taiwan Yuan $180,000, later increased to Taiwan Yuan $20,000,000 after severalcapital injections. After the reformation of monetary system in 1949, the total capital wasconverted to the equivalent of New Taiwan dollars (“NTD”) 200,000. As of December 31, 2017,the issued capital and registered was NTD23,395,367 thousand. The main activities of theCompany are as follows:

(1) The design, manufacture, sale, installation, network system, automation system, lease,maintenance service, import, export and agency of the following products:

○1 Steel manufacturing machinery ○2 Industrial appliances○3 Household appliances ○4 Refrigerator○5 Air conditioners ○6 Metal processing machinery○7 Electronic products ○8 Wire and cable○9 Chemical industry ○10 Cookware○11 Wood-made products ○12 Plastic products○13 Office equipment ○14 Audio products○15 Precision meter ○16 Transmission equipment○17 Transportation facilities ○18 Healthcare products○19 Microbe fermentation ○20 Construction○21 Furniture ○22 Solar wafers○23 Water treatment engineering ○24 Telecommunication equipment○25 Parking facilities ○26 Automation machinery○27 Semiconductor ○28 Real estate development and leasing

(2) Magazine publishing

(3) Customs brokerage

(4) General import/export (excluding permitted business)

(5) Development and leasing (excluding construction industry) of industrial parks on behalf ofthe competent authority.

The investment plans should be resolved by the board of directors, but the total amount ofinvestment is not limited to the amount provided by Article 13 of Company Act, which states thatthe total amount of investment shall not exceed 40% of the amount of its own paid-in capital.



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(Expressed in Thousands of New Taiwan Dollars unless otherwise specified)

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The Company’s common shares were publicly listed on the Taiwan Stock Exchange (TWSE) onFebruary 9, 1962. The Company’s registered office and the main business location is at No. 22,Zhongshan North Road, Section 3, Taipei, Republic of China (R.O.C.).

2. Date and procedures of authorization of financial statements for issue

The parent company only financial statements of the Company for the years ended December 31,2017 and 2016 were authorized for issue in accordance with a resolution of the board of directors’meeting on March 15, 2018.

3. Newly issued or revised standards and interpretations

(1) Changes in accounting policies resulting from applying for the first time certain standards andamendments

The Company applied for the first time International Financial Reporting Standards,International Accounting Standards, and Interpretations issued, revised or amended which areendorsed by Financial Supervisory Commission (“FSC”) and become effective for annualperiods beginning on or after 1 January 2017. The nature and the impact of each new standardand amendment has no material effect on the Company.

(2) Standards or interpretations issued, revised or amended, which are endorsed by FSC, but notyet adopted by the Company as at the end of the reporting period are listed below.

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

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

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

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



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(b) IFRS 9“Financial Instruments”

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

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

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

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

The new standard is effective for annual periods beginning on or after 1 January 2018.Consequential amendments on the related disclosures also become effective for annualperiods beginning on or after 1 January 2018.

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

The amendments address the inconsistency between the requirements in IFRS 10Consolidated Financial Statements and IAS 28 Investments in Associates and JointVentures, in dealing with the loss of control of a subsidiary that is contributed to anassociate or a joint venture. IAS 28 restricts gains and losses arising from contributionsof non-monetary assets to an associate or a joint venture to the extent of the interestattributable to the other equity holders in the associate or joint ventures. IFRS 10 requiresfull profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amendedso that the gain or loss resulting from the sale or contribution of assets that constitute abusiness as defined in IFRS 3 between an investor and its associate or joint venture isrecognized in full. IFRS 10 was also amended so that the gains or loss resulting from thesale or contribution of a subsidiary that does not constitute a business as defined in IFRS3 between an investor and its associate or joint venture is recognized only to the extent ofthe unrelated investors’ interests in the associate or joint venture. The effective date ofthe amendments has been postponed indefinitely, but early adoption is allowed.



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

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

(e) Disclosure Initiative — Amendment to IAS 7 “Statement of Cash Flows”:

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

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

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

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

The amendments contain (1) clarifying that vesting conditions (service and non-marketperformance conditions), upon which satisfaction of a cash-settled share-based paymenttransaction is conditional, are not taken into account when estimating the fair value of thecash-settled share-based payment at the measurement date. Instead, these are taken intoaccount by adjusting the number of awards included in the measurement of the liabilityarising from the transaction, (2) clarifying if tax laws or regulations require the employerto withhold a certain amount in order to meet the employee’s tax obligation associatedwith the share-based payment, such transactions will be classified in their entirety asequity-settled share-based payment transactions if they would have been so classified inthe absence of the net share settlement feature, and (3) clarifying that if the terms andconditions of a cash-settled share-based payment transaction are modified, with the resultthat it becomes an equity-settled share-based payment transaction, the transaction isaccounted for as an equity-settled transaction from the date of the modification. Theequity-settled share-based payment transaction is measured by reference to the fair valueof the equity instruments granted at the modification date and is recognized in equity, onthe modification date, to the extent to which goods or services have been received. Theliability for the cash-settled share-based payment transaction as at the modification dateis derecognized on that date. Any difference between the carrying amount of the liabilityderecognized and the amount recognized in equity on the modification date is recognizedimmediately in profit or loss. The amendments are effective for annual periods beginningon or after 1 January 2018.



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(h) Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts— Amendmentsto IFRS 4

The amendments help to resolve issues arising from the different effective dates for IFRS9 “Financial Instruments” (1 January 2018) and the new insurance contracts standardabout to be issued by the IASB (still to be decided, but not before 1 January 2020). Theamendments allow entities issuing insurance contracts within the scope of IFRS 4 tomitigate certain effects of applying IFRS 9 “Financial Instruments” before the IASB’snew insurance contracts standard becomes effective. The amendments introduce twoapproaches: an overlay approach and a temporary exemption. The overlay approachallows an entity applying IFRS 9 to remove from profit or loss the effects of some of theaccounting mismatches that may occur from applying IFRS 9 before the new insurancecontracts standard is applied. The temporary exemption enables eligible entities to deferthe implementation date of IFRS 9 until 2021 (these entities that defer the application ofIFRS 9 will continue to apply IAS 39).

(i) Transfers of Investment Property — Amendments to IAS 40

The amendments relate to the transfers of investment property. The amendments clarifythat a change in use occurs when the property meets, or ceases to meet, the definition ofinvestment property and there is evidence of the change in use, the entity should transferproperty into and out of investment property accordingly. A mere change inmanagement’s intentions for the use of a property does not provide evidence of a changein use. The amendments are effective for annual periods beginning on or after 1 January2018.

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

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

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

IFRS 12 “Disclosure of Interests in Other Entities”

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



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IAS 28“Investments in Associates and Joint Ventures”

The amendments clarify that when an investment in an associate or a joint venture is heldby, or is held indirectly through, an entity that is a venture capital organization, or amutual fund, unit trust and other qualifying entities including investment-linked insurancefunds, the entity may elect to measure that investment at fair value through profit or lossin accordance with IFRS 9 “Financial Instruments” on an investment-by-investmentbasis. Besides, if an entity that is not itself an investment entity has an interest in anassociate or joint venture that is an investment entity, the entity may, when applying theequity method, elect to retain the fair value measurement applied by that investment entityassociate or joint venture to the investment entity associate's or joint venture's interests insubsidiaries on an investment-by-investment basis. The amendments are effective forannual periods beginning on or after 1 January 2018.

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

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

The abovementioned standards and interpretations issued by IASB and endorsed by FSC sothat they are applicable for annual periods beginning on or after 1 January 2018. Apart fromthe potential impact of the standards and interpretations listed under (a), (b), (e), and (f) whichis described below, all other standards and interpretations have no material impact on theCompany:

(a) IFRS 15“Revenue from Contracts with Customers” (including Amendments to IFRS 15“Clarifications to IFRS 15 Revenue from Contracts with Customers”)

The Company elected to recognize the cumulative effect of initially applying IFRS 15 atthe date of initial application (1 January 2018). The Company also elected to apply thisstandard retrospectively only to contracts that are not completed contracts at the date ofinitial application.



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The Company’s principal activities consist of the sale of goods, construction contracts,and rendering of services. The impacts arising from the adoption of IFRS 15 on theCompany are summarized as follows:

A. Revenue from sale of goods and rendering of services are currently recognized whengoods and services have been delivered to the buyer. Starting from the date of initialapplication, in accordance with the requirements of IFRS 15, the Company shallrecognize revenue when (or as) the Company satisfies a performance obligation bytransferring a promised good or services to a customer. IFRS 15 has no impact on theCompany’s revenue recognition from sale of goods and rendering of services.However, for some contracts, part of the consideration was received from customersupon signing the contract, then the Company has the obligation to provide the servicessubsequently. The Company recognized the consideration received in advance fromcustomers as payment received in advance under other current liabilities. Startingfrom the date of initial application, in accordance with IFRS 15, it should berecognized as contract liabilities. The Company will reclassify prepayments tocontract liabilities amounting to NTD85,666 thousand on initial application date.

B. Revenue from construction contracts is currently recognized by reference to the stageof completion. Starting from the date of initial application, in accordance with IFRS15, the Company shall recognize revenue when (or as) the Company satisfies aperformance obligation by transferring a promised service to a customer and also byreference to the stage of completion. IFRS 15 has no impact on the Company’s revenuerecognition from construction contracts. Starting from the date of initial application,for some contracts, the obligations are fulfilled while the Company still doesn’t havethe right to receive the consideration unconditionally. The Company should recognizethem under contract assets, instead of construction contracts receivable. As forcontracts that the obligations aren’t fulfilled but the Company receives considerationfirst, the Company should recognize them under contract liabilities, instead ofadvanced receipts. The Company will reclassify construction receivables to contractassets and advance construction receipts to contract liabilities amounting to NTD205,315 and NTD144,691 thousand, respectively.

C. In accordance with the requirements of IFRS 15, more extensive disclosure wouldhave to be made.

(b) IFRS 9 “Financial Instruments”

The Company elects not to restate prior periods in accordance with the requirements ofIFRS 9 at the date of initial application (1 January 2018). The adoption of IFRS 9 hasthe following impacts on the Company:



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A. Classification and measurement of financial assets

Available-for-sale financial assets – equity instrument investments

The assessment of the cash flow characteristics will be based on the facts andcircumstances that exited as at the date of initial application. As these equityinstrument investments are not held-for-trading, the Company elected to designatethem as financial assets measured at fair value through other comprehensive income.On the date of initial application, the Company will reclassify available-for-sale(including carried at cost amounting to NTD31,538 thousand) financial assets tofinancial assets measured at fair value through other comprehensive income ofNTD432,501 thousand. Other related adjustments are described as follow:

(a) The stocks of unlisted companies currently measured at cost in accordance withIAS 39 had an original cost of NTD50,766 thousand and was partially impairedfor NTD19,228 thousand. However, in accordance with the requirement of IFRS9, stocks of unlisted companies must be measured at fair value but are not requiredto be assessed for impairment. The estimated fair value of the stocks of unlistedcompanies was NTD93,584 as at the date of initial application. The Company willadjust the carrying amount of financial assets measured at fair value through othercomprehensive income and will also adjust retained earnings and other equity byNTD19,228 and NTD42,818, respectively.

(b) The stocks of listed companies are currently measured at fair value. As at the dateof initial application, except for the reclassification to financial assets measured atfair value through other comprehensive income and other equity accounts, noother difference will incur.

Available-for-sale financial assets – de-recognition of equity investments measured atfair value

Upon de-recognition of equity investments currently classified as available-for-salemeasured at fair value, the accumulated gains or losses previously recognized in othercomprehensive income was recycled to profit or loss from equity. However, underIFRS 9, subsequent fair value changes of the aforementioned equity investments arerecognized in other comprehensive income and cannot be recycled to profit or loss.Upon de-recognition, the accumulated amounts in other component of equity isreclassified to retained earnings (reclassification to profit or loss is not allowed). Theabove de-recognition accounting treatment has no material impact on the Company asat the date of initial application.



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This is applicable to financial assets not measured at fair value through profit or loss.In accordance with IFRS 9, a loss allowance for debt instruments is measured usingthe expected credit loss model, whereas trade receivables or contract assets that resultfrom transactions that are within the scope of IFRS 15 is measured using the simplifiedapproach (provision matrix). The aforementioned requirements on impairment isdifferent from the current incurred loss model and have no material impact on theCompany.

B. Others

Consequential amendments on the related disclosures in IFRS 7 were also made as aresult of the application of IFRS 9, which include the disclosure requirements relatedto the initial application of IFRS 9. Therefore more extensive disclosure would haveto be made.

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

Additional disclosure of a reconciliation of the carrying amount of liabilities arising fromfinancing activities at the beginning and end of the period would be required.

(3) Standards or interpretations issued, revised or amended, by IASB but not yet endorsed by FSCat the date of issuance of the Company’s financial statements are listed below.

(a) IFRS 16“Leases”

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

(b) IFRIC 23 “Uncertainty Over Income Tax Treatments”

The Interpretation clarifies application of recognition and measurement requirements inIAS 12 “Income Taxes” when there is uncertainty over income tax treatments. TheInterpretation is effective for annual periods beginning on or after 1 January 2019.



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(c) IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevantaccounting aspects (including recognition, measurement, presentation and disclosurerequirements). The core of IFRS 17 is the General (building block) Model, under thismodel, on initial recognition, an entity shall measure a group of insurance contracts at thetotal of the fulfilment cash flows and the contractual service margin. The fulfilmentcash flows comprise of the following:

(1) estimates of future cash flows;(2) Discount rate: an adjustment to reflect the time value of money and the financial risks

related to the future cash flows, to the extent that the financial risks are not includedin the estimates of the future cash flows; and

(3) a risk adjustment for non-financial risk.

The carrying amount of a group of insurance contracts at the end of each reporting periodshall be the sum of the liability for remaining coverage and the liability for incurredclaims. Other than the General Model, the standard also provides a specific adaptationfor contracts with direct participation features (the Variable Fee Approach) and asimplified approach (Premium Allocation Approach) mainly for short-duration contracts.IFRS 17 is effective for annual periods beginning on or after 1 January 2021.

(d) IAS 28“Investment in Associates and Joint Ventures” — Amendments to IAS 28

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associateor joint venture that form part of the net investment in the associate or joint venture beforeit applies IAS 28, and in applying IFRS 9, does not take account of any adjustments thatarise from applying IAS 28. The amendment is effective for annual reporting periodsbeginning on or after 1 January 2019.

(e) Prepayment Features with Negative Compensation (Amendments to IFRS 9)

The amendment allows financial assets with prepayment features that permit or require aparty to a contract either to pay or receive reasonable compensation for the earlytermination of the contract, to be measured at amortized cost or at fair value through othercomprehensive income. The amendment is effective for annual reporting periodsbeginning on or after 1 January 2019.



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(f) Improvements to International Financial Reporting Standards (2015-2017 cycle):

IFRS 3 “Business Combinations”

The amendments clarify that an entity that has joint control of a joint operation shallremeasure its previously held interest in a joint operation when it obtains control of thebusiness. The amendments are effective for annual periods beginning on or after 1January 2019.

IFRS 11 “Joint Arrangements”

The amendments clarify that an entity that participates in, but does not have joint controlof, a joint operation does not remeasure its previously held interest in a joint operationwhen it obtains joint control of the business. The amendments are effective for annualperiods beginning on or after 1 January 2019.

IAS 12 “Income Taxes”

The amendments clarify that an entity shall recognize the income tax consequences ofdividends in profit or loss, other comprehensive income or equity according to where theentity originally recognized those past transactions or events. The amendments areeffective for annual periods beginning on or after 1 January 2019.

IAS 23 “Borrowing Costs”

The amendments clarify that an entity should treats as part of general borrowings anyborrowing made specifically to obtain an asset when the asset is ready for its intended useor sale. The amendments are effective for annual periods beginning on or after 1 January2019.

(g) Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)

The amendments clarify that when a change in a defined benefit plan is made (such asamendment, curtailment or settlement, etc.), the entity should use the updatedassumptions to remeasure its net defined benefit liability or asset. The amendments areeffective for annual periods beginning on or after 1 January 2019.

The abovementioned standards and interpretations issued by IASB have not yet endorsed byFSC at the date when the Company’s financial statements were authorized for issue, the localeffective dates are to be determined by FSC. As the Company is still currently determiningthe potential impact of the standards and interpretations listed under (a)~(b), (d), and (f)~(g),it is not practicable to estimate their impact on the Company at this point in time. All otherstandards and interpretations have no material impact on the Company.



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4. Summary of significant accounting policies

(1) Statement of compliance

The parent company only financial statements of the Company for the years ended December31, 2017 and 2016 have been prepared in accordance with the Regulations Governing thePreparation of Financial Reports by Securities Issuers (“the Regulations”).

(2) Basis of preparation

The Company prepared parent company only financial statements in accordance with Article21 of the Regulations, which provided that the profit or loss and other comprehensive incomefor the period presented in the parent company only financial statements shall be the same asthe profit or loss and other comprehensive income attributable to stockholders of the parentpresented in the consolidated financial statements for the period, and the total equity presentedin the parent company only financial statements shall be the same as the equity attributable tothe parent company presented in the consolidated financial statements. Therefore, theCompany accounted for its investments in subsidiaries using equity method and, accordingly,made necessary adjustments.

The parent company only financial statements have been prepared on a historical cost basis,except for financial instruments measured at fair value. The parent company only financialstatements are expressed in thousands of New Taiwan Dollars (“NTD”) unless otherwisestated.

(3) Foreign currency transactions

The Company’s parent company only financial statements are presented in its functionalcurrency, New Taiwan Dollars (NTD).

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



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

(a)Exchange differences arising from foreign currency borrowings for an acquisition of aqualifying asset. If the differences are regarded as an adjustment to interest costs, whichwill be capitalized and take as part of the cost of the borrowing.

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

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

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

(4) Translation of financial statements in foreign currency

The assets and liabilities of foreign operations are translated into NTD at the closing exchangerate at the balance sheet date. Income and expenses are translated at an average rate withinthe period. The exchange differences arising on the translation are recognized in othercomprehensive income. On the disposal of a foreign operation, the cumulative amount of theexchange differences relating to that foreign operation, recognized in other comprehensiveincome and accumulated in the separate component of equity, is reclassified from equity toprofit or loss when the gain or loss on disposal is recognized.

The following are accounted for as disposals even if an interest in the foreign operation isretained by the Company: the loss of control over a foreign operation, the loss of significantinfluence over a foreign operation, or the loss of joint control over a foreign operation.

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



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

(5) Current and non-current distinction for assets and liabilities

An asset is classified as current when:

A. The Company expects to realize the asset, or intends to sell or consume it, in its normaloperating cycle;

B. The Company holds the asset primarily for the purpose of trading;C. The Company expects to realize the asset within twelve months after the reporting period;D. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or

used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

A. The Company expects to settle the liability in its normal operating cycleB. The Company holds the liability primarily for the purpose of tradingC. The liability is due to be settled within twelve months after the reporting periodD. The Company does not have an unconditional right to defer settlement of the liability for

at least twelve months after the reporting period. Terms of a liability that could, at theoption of the counterparty, result in its settlement by the issue of equity instruments do notaffect its classification.

All other liabilities are classified as non-current.


Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highlyliquid time deposits (including ones that have maturity within 12 months) or investments thatare readily convertible to known amounts of cash and which are subject to an insignificantrisk of changes in value.

(7) Financial instruments

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



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

A. Financial assets

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

Financial assets of the Company are classified as financial assets at fair value through profitor loss, held-to-maturity investments, available-for-sale financial assets and loans andreceivables. The Company determines the classification of its financial assets at initialrecognition.

Financial assets at fair value through profit or loss

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

A financial asset is classified as held for trading if:

(a) it is acquired or incurred principally for the purpose of selling or repurchasing it in thenear term;

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

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

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

(a) it eliminates or significantly reduces a measurement or recognition inconsistency; or(b) a group of financial assets, financial liabilities or both is managed and its performance

is evaluated on a fair value basis, in accordance with a documented risk managementor investment strategy, and information about the group is provided internally on thatbasis to the key management personnel.



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Financial assets at fair value through profit or loss are measured at fair value with changesin fair value recognized in profit or loss. Dividends or interests on financial assets at fairvalue through profit or loss are recognized in profit or loss (including those received duringthe period of initial investment). If financial assets do not have quoted prices in an activemarket and their far value cannot be reliably measured, then they are classified as financialassets measured at cost on balance sheet and carried at cost net of accumulated impairmentlosses, if any, as of the reporting date.

Available-for-sale financial assets

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

Foreign exchange gains and losses and interest calculated using the effective interestmethod relating to monetary available-for-sale financial assets, or dividends on anavailable-for-sale equity instrument, are recognized in profit or loss. Subsequentmeasurement of available-for-sale financial assets at fair value is recognized in equity untilthe investment is derecognized, at which time the cumulative gain or loss is recognized inprofit or loss.

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

Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixed maturitiesare classified as held-to-maturity when the Company has the positive intention and abilityto hold it to maturity, other than those that are designated as available-for-sale, classifiedas financial assets at fair value through profit or loss, or meet the definition of loans andreceivables.

After initial measurement held-to-maturity financial assets are measured at amortized costusing the effective interest method, less impairment. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fee or transaction costs.The effective interest method amortization is recognized in profit or loss.



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Loans and receivables

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

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


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

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

Other loss events include:

(a) significant financial difficulty of the issuer or obligor; or(b) a breach of contract, such as a default or delinquency in interest or principal payments;

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

reorganization; or(d) the disappearance of an active market for that financial asset because of financial

difficulties.



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

Receivables together with the associated allowance are written off when there is no realisticprospect of future recovery. If, in a subsequent year, the amount of the estimatedimpairment loss increases or decreases because of an event occurring after the impairmentwas recognized, the previously recognized impairment loss is increased or reduced byadjusting the allowance account. If a future write-off is later recovered, the recovery iscredited to profit or loss.

In the case of equity investments classified as available-for-sale, where there is evidenceof impairment, the cumulative loss - measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss - is removed from other comprehensive income and recognizedin profit or loss. Impairment losses on equity investments are not reversed through profitor loss; increases in their fair value after impairment are recognized directly in othercomprehensive income.

In the case of debt instruments classified as available-for-sale, the amount recorded forimpairment is the cumulative loss measured as the difference between the amortized costand the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss. Future interest income continues to be accrued based on thereduced carrying amount of the asset, using the rate of interest used to discount the futurecash flows for the purpose of measuring the impairment loss. The interest income isrecognized in profit or loss. If, in a subsequent year, the fair value of a debt instrumentincreases and the increase can be objectively related to an event occurring after theimpairment loss was recognized in profit or loss, the impairment loss is reversed throughprofit or loss.



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Derecognition of financial assets

A financial asset is derecognized when:

(a) The rights to receive cash flows from the asset have expired;(b) The Company has transferred the asset and substantially all the risks and rewards of

the asset have been transferred;(c) The Company has neither transferred nor retained substantially all the risks and

rewards of the asset, but has transferred control of the asset.

Once the financial asset, are derecognized entirety, the difference between the carryingamount and the consideration received or receivable including any cumulative gain or lossthat had been recognized in other comprehensive income, is recognized in profit or loss.

B. Financial liabilities and equity

Classification between liabilities or equity

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

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of anentity after deducting all of its liabilities. The transaction costs of an equity transactionare accounted for as a deduction from equity (net of any related income tax benefit) to theextent they are incremental costs directly attributable to the equity transaction thatotherwise would have been avoided.

Compound instruments

The Company evaluates the terms of the convertible bonds issued to determine whether itcontains both a liability and an equity component. Furthermore, the Company assesses ifthe economic characteristics and risks of the put and call options contained in theconvertible bonds are closely related to the economic characteristics and risk of the hostcontract before separating the equity element.

For the liability component excluding the derivatives, its fair value is determined based onthe rate of interest applied at that time by the market to instruments of comparable creditstatus. The liability component is classified as a financial liability measured at amortizedcost before the instrument is converted or settled.



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For the embedded derivative that is not closely related to the host contract (for example, ifthe exercise price of the embedded call or put option is not approximately equal on eachexercise date to the amortized cost of the host debt instrument), it is classified as a liabilitycomponent and subsequently measured at fair value through profit or loss unless it qualifiesfor an equity component. The equity component is assigned the residual amount afterdeducting from the fair value of the instrument as a whole the amount separatelydetermined for the liability component. Its carrying amount is not remeasured in thesubsequent accounting periods. If the convertible bond issued does not have an equitycomponent, it is accounted for as a hybrid instrument in accordance with the requirementsunder IAS 39 Financial Instruments: Recognition and Measurement.

Transaction costs are apportioned between the liability and equity components of theconvertible bond based on the allocation of proceeds to the liability and equity componentswhen the instruments are initially recognized.

On conversion of a convertible bond before maturity, the carrying amount of the liabilitycomponent being the amortized cost at the date of conversion is transferred to equity.


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

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held fortrading and financial liabilities designated upon initial recognition as of fair value throughprofit or loss.

A financial liability is classified as held for trading if:

(a) it is acquired or incurred principally for the purpose of selling or repurchasing it in thenear term

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

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



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

(a) it eliminates or significantly reduces a measurement or recognition inconsistency or(b) a group of financial assets, financial liabilities or both is managed and its performance

is evaluated on a fair value basis, in accordance with a documented risk managementor investment strategy, and information about the group is provided internally on thatbasis to the key management personnel

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

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

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans andborrowings that are subsequently measured using the effective interest rate method afterinitial recognition. Gains and losses are recognized in profit or loss when the liabilitiesare derecognized as well as through the effective interest rate method amortization process.

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

Derecognition of financial liabilities

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

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



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C. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in thebalance sheet if, and only if, there is a currently enforceable legal right to offset therecognized amounts and there is an intention to settle on a net basis, or to realize the assetsand settle the liabilities simultaneously.

(8) Derivative financial instrument

The Company uses derivative financial instruments to hedge its foreign currency risks andinterest rate risks. A derivative is classified in the balance sheet as financial assets orliabilities at fair value through profit or loss (held for trading) except for derivatives that aredesignated effective hedging instruments which are classified as derivative financial assets orliabilities for hedging.

Derivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently remeasured at fair value. Derivativesare carried as financial assets when the fair value is positive and as financial liabilities whenthe fair value is negative. Any gains or losses arising from changes in the fair value ofderivatives are taken directly to profit or loss, except for the effective portion of cash flowhedges, which is recognized in equity.

Derivatives embedded in host contracts are accounted for as separate derivatives and recordedat fair value if their economic characteristics and risks are not closely related to those of thehost contracts and the host contracts are not held for trading or designated at fair value thoughprofit or loss. These embedded derivatives are measured at fair value with changes in fairvalue recognized in profit or loss.

(9) Fair value measurement

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

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

liability



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

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

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

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

(10)Inventories

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

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

Raw materials - purchase cost on weighted average cost formula

Work in progress and finished goods - cost of direct materials and labor and a proportion ofmanufacturing overheads based on normal operating capacity but excluding borrowing costs.

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

(11)Construction contract

When the outcome of a construction contract can be estimated reliably, contract revenue andcontract costs associated with the construction contract shall be recognized as revenue andexpenses respectively by reference to the stage of completion of the contract activity at theend of the reporting period. The recognition of revenue and expenses by reference to thestage of completion of a contract is often referred to as the percentage of completion method.Under this method, contract revenue is matched with the contract costs incurred in reachingthe stage of completion, resulting in the reporting of revenue, expenses and profit which canbe attributed to the proportion of work completed.



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When the outcome of a construction contract cannot be estimated reliably, revenue shall berecognized only to the extent of contract costs.

When it is probable that total contract costs will exceed total contract revenue, the expectedloss shall be recognized as an expense immediately.

(12)Investments accounted for using the equity method

The Company’s investment in its subsidiaries is presented as investments accounted for usingthe equity method and adjusted by necessary measurements in accordance with Article 21 ofthe Regulations, which provided that the profit or loss and other comprehensive income forthe period presented in the parent company only financial statements shall be the same as theprofit or loss and other comprehensive income attributable to stockholders of the parentpresented in the consolidated financial statements for the period, and the total equity presentedin the parent company only financial statements shall be the same as the equity attributable tothe parent company presented in the consolidated financial statements.

These adjustments resulted from considering the different treatments of investments insubsidiaries under IFRS 10 Consolidated Financial Statements and under IFRS applied todifferent entity level. These investments may be debited or credited using the equity method,as share of profits (losses) of subsidiaries, associates and joint ventures, or share of othercomprehensive income (loss) of subsidiaries, associates and joint ventures.

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

Under the equity method, the investment in the associate is carried in the balance sheet at costand adjusted thereafter for the post-acquisition change in the Company’s share of net assetsof the associate. After the interest in the associate is reduced to zero, additional losses areprovided for, and a liability is recognized, only to the extent that the Company has incurredlegal or constructive obligations or made payments on behalf of the associate. Unrealizedgains and losses resulting from transactions between the Company and the associate areeliminated to the extent of the Company’s related interest in the associate.

When changes in the net assets of an associate occur and not those that are recognized in profitor loss or other comprehensive income and do not affects the Company’s percentage ofownership interests in the associate, the Company recognizes such changes in equity based onits percentage of ownership interests. The resulting capital surplus recognized will bereclassified to profit or loss at the time of disposing the associate on a pro-rata basis.



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When the associate issues new stock, and the Company’s interest in an associate is reducedor increased as the Company fails to acquire shares newly issued in the associateproportionately to its original ownership interest, the increase or decrease in the interest in theassociate is recognized in additional paid in capital and investment in associate. When theinterest in the associate is reduced, the cumulative amounts previously recognized in othercomprehensive income are reclassified to profit or loss or other appropriate items. Theaforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basiswhen the Company disposes the associate.

The financial statements of the associate are prepared for the same reporting period as theCompany. Where necessary, adjustments are made to bring the accounting policies in linewith those of the Company.

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

A. Its share of the present value of the estimated future cash flows expected to be generatedby the associate, including the cash flows from the operations of the associate and theproceeds on the ultimate disposal of the investment

B. The present value of the estimated future cash flows expected to arise from dividends to bereceived from the investment and from its ultimate disposal

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

Upon loss of significant influence over the associate, the Company measures and recognizesany retaining investment at its fair value. Any difference between the carrying amount ofthe associate upon loss of significant influence and the fair value of the retaining investmentand proceeds from disposal is recognized in profit or loss.



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Property, plant and equipment is stated at cost, net of accumulated depreciation andaccumulated impairment losses, if any. Such cost includes the cost of dismantling andremoving the item and restoring the site on which it is located and borrowing costs forconstruction in progress if the recognition criteria are met. Each part of an item of property,plant and equipment with a cost that is significant in relation to the total cost of the item isdepreciated separately. When significant parts of property, plant and equipment are requiredto be replaced in intervals, the Company recognized such parts as individual assets withspecific useful lives and depreciation, respectively. The carrying amount of those parts thatare replaced is derecognized in accordance with the derecognition provisions of IAS 16Property, plant and equipment. When a major inspection is performed, its cost is recognizedin the carrying amount of the plant and equipment as a replacement if the recognition criteriaare satisfied. All other repair and maintenance costs are recognized in profit or loss asincurred.


Buildings 3～50 yearMachinery and equipment 3～20 yearTransportation equipment 3～10 yearOffice equipment 3～10 yearLeased assets 3～50 yearLeasehold improvements The shorter of lease terms or economic useful livesOther equipment 2～10 year

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

The assets’ residual values, useful lives and methods of depreciation are reviewed at eachfinancial year end and adjusted prospectively, if appropriate.



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(14)Leases

Company as a lessee

Finance leases which transfer to the Company substantially all the risks and benefits incidentalto ownership of the leased item, are capitalized at the commencement of the lease at the fairvalue of the leased property or, if lower, at the present value of the minimum lease payments.Lease payments are apportioned between finance charges and reduction of the lease liabilityso as to achieve a constant rate of interest on the remaining balance of the liability. Financecharges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is noreasonable certainty that the Company will obtain ownership by the end of the lease term, theasset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

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

Company as a lessor

Leases in which the Company does not transfer substantially all the risks and benefits ofownership of the asset are classified as operating leases. Initial direct costs incurred innegotiating an operating lease are added to the carrying amount of the leased asset andrecognized over the lease term on the same basis as rental income. Rental revenue generatedfrom operating lease is recognized over the lease term using the straight line method.Contingent rents are recognized as revenue in the period in which they are earned.


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

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



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

Intangible assets with indefinite useful lives are not amortized, but are tested for impairmentannually, either individually or at the cash-generating unit level. The assessment ofindefinite life is reviewed annually to determine whether the indefinite life continues to besupportable. If not, the change in useful life from indefinite to finite is made on a prospectivebasis.

Gains or losses arising from derecognition of an intangible asset are measured as thedifference between the net disposal proceeds and the carrying amount of the asset and arerecognized in profit or loss when the asset is derecognized.

Research and development costs

Research costs are expensed as incurred. Development expenditures, on an individualproject, are recognized as an intangible asset when the Company can demonstrate:

A. The technical feasibility of completing the intangible asset so that it will be available foruse or sale

B. Its intention to complete and its ability to use or sell the assetC. How the asset will generate future economic benefitsD. The availability of resources to complete the assetE. The ability to measure reliably the expenditure during development

Following initial recognition of the development expenditure as an asset, the cost model isapplied requiring the asset to be carried at cost less any accumulated amortization andaccumulated impairment losses. During the period of development, the asset is tested forimpairment annually. Amortization of the asset begins when development is complete andthe asset is available for use. It is amortized over the period of expected future benefit.

Computer software

The cost of computer software is amortized on a straight-line basis over the estimated usefullife (2~5 years).



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A summary of the policies applied to the Company’s intangible assets is as follows:

Computer softwareUseful lives FiniteAmortization method used Amortized on a straight- line basis over the estimated

useful lifeInternally generated or acquired Acquired

(16)Impairment of non-financial assets

The Company assesses at the end of each reporting period whether there is any indication thatan asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indicationexists, or when annual impairment testing for an asset is required, the Company estimates theasset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined foran individual asset, unless the asset does not generate cash inflows that are largely independentof those from other assets or groups of assets. Where the carrying amount of an asset or CGUexceeds its recoverable amount, the asset is considered impaired and is written down to itsrecoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whetherthere is any indication that previously recognized impairment losses may no longer exist ormay have decreased. If such indication exists, the Company estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversedonly if there has been an increase in the estimated service potential of an asset which in turnincreases the recoverable amount. However, the reversal is limited so that the carryingamount of the asset does not exceed its recoverable amount, nor exceed the carrying amountthat would have been determined, net of depreciation, had no impairment loss been recognizedfor the asset in prior years.

A cash generating unit, or groups of cash-generating units, to which goodwill has beenallocated is tested for impairment annually at the same time, irrespective of whether there isany indication of impairment. If an impairment loss is to be recognized, it is first allocatedto reduce the carrying amount of any goodwill allocated to the cash generating unit (group ofunits), then to the other assets of the unit (group of units) pro rata on the basis of the carryingamount of each asset in the unit (group of units). Impairment losses relating to goodwillcannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss isrecognized in profit or loss.



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(17)Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) asa result of a past event, it is probably that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate can be made of the amount of theobligation. Where the Company expects some or all of a provision to be reimbursed, thereimbursement is recognized as a separate asset but only when the reimbursement is virtuallycertain. If the effect of the time value of money is material, provisions are discounted using acurrent pre-tax rate that reflects the risks specific to the liability. Where discounting is used,the increase in the provision due to the passage of time is recognized as a finance cost.



(18)Treasury shares

Own equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. Any difference between the carrying amount and the consideration isrecognized in equity.

(19)Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow tothe Company and the revenue can be reliably measured. Revenue is measured at the fairvalue of the consideration received or receivable. The following specific recognition criteriamust also be met before revenue is recognized:

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions have beensatisfied:

A. the significant risks and rewards of ownership of the goods have passed to the buyer;B. neither continuing managerial involvement nor effective control over the goods sold have

been retained;C. the amount of revenue can be measured reliably;D. it is probable that the economic benefits associated with the transaction will flow to the

entity;E. the costs incurred in respect of the transaction can be measured reliably.



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Rendering of Services

Revenue from Information systems integration services is recognized by reference to the stageof completion. Stage of completion is measured by reference to the proportion that contractcost incurred for work performed to date bear to the estimated total contract costs. Wherethe contract outcome cannot be measured reliably, revenue is recognized only to the extentthat the expenses incurred are eligible to be recovered.

Interest income

For all financial assets measured at amortized cost (including loans and receivables and held-to-maturity financial assets) and available-for-sale financial assets, interest income is recordedusing the effective interest rate method and recognized in profit or loss.

Dividends

Revenue is recognized when the Company’s right to receive the payment is established.

Rent Income

Rental income from operating lease is accounted by straight-line basis on the period of lease.

(20)Borrowing costs

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

(21)Government grants

Government grants are recognized where there is reasonable assurance that the grant will bereceived and all attached conditions will be complied with. Where the grant relates to anasset, it is recognized as deferred income and released to income in equal amounts over theexpected useful life of the related asset. When the grant relates to an expense item, it isrecognized as income over the period necessary to match the grant on a systematic basis tothe costs that it is intended to compensate.



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Where the Company receives non-monetary grants, the asset and the grant are recorded grossat nominal amounts and released to the statement of comprehensive income over the expecteduseful life and pattern of consumption of the benefit of the underlying asset by equal annualinstallments. Where loans or similar assistance are provided by governments or relatedinstitutions with an interest rate below the current applicable market rate, the effect of thisfavorable interest is regarded as additional government grant.


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

For the defined contribution plan, the Company will make a monthly contribution of no lessthan 6% of the monthly wages of the employees subject to the plan. The Companyrecognized expenses for the defined contribution plan in the period in which the contributionbecomes due.

Post-employment benefit plan that is classified as a defined benefit plan uses the ProjectedUnit Credit Method to measure its obligations and costs based on actuarial assumptions. Re-measurements, comprising of the effect of the actuarial gains and losses, the effect of the assetceiling (excluding net interest) and the return on plan assets, excluding net interest, arerecognized as other comprehensive income with a corresponding debit or credit to retainedearnings in the period in which they occur. Past service costs are recognized in profit or losson the earlier of:

(a) the date of the plan amendment or curtailment, and(b) the date that the Company recognizes restructuring-related costs

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



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(23)Income taxes

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

Current income tax

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

The 10% income tax for undistributed earnings is recognized as income tax expense in thesubsequent year when the distribution proposal is approved by the shareholders’ meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax basesof assets and liabilities and their carrying amounts for financial reporting purposes.

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

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

B. In respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will notreverse in the foreseeable future.

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



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A. Where the deferred tax asset relating to the deductible temporary difference arises from theinitial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting profit nor taxable profitor loss

B. In respect of deductible temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, deferred tax assets are recognized only to theextent that it is probable that the temporary differences will reverse in the foreseeable futureand taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply inthe year when the asset is realized or the liability is settled, based on tax rates and tax lawsthat have been enacted or substantively enacted at the reporting date. The measurement ofdeferred tax assets and deferred tax liabilities reflects the tax consequences that would followfrom the manner in which the Company expects, at the end of the reporting period, to recoveror settle the carrying amount of its assets and liabilities.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit orloss. Deferred tax items are recognized in correlation to the underlying transaction either inother comprehensive income or directly in equity. Deferred tax assets are reassessed at eachreporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities offset, only if a legally enforceable right existsto offset current income tax assets against current income tax liabilities and the deferred taxesrelate to the same taxable entity and the same taxation authority.

5. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s parent only financial statements require management to makejudgements, estimates and assumptions that affect the reported amounts of revenues, expenses,assets and liabilities, and the disclosure of contingent liabilities, at balance sheet date. However,uncertainty about these assumption and estimate could result in outcomes that require a materialadjustment to the carrying amount of the asset or liability affected in future periods.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year are discussed below.



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Where the fair value of financial assets and financial liabilities recorded in the balance sheetcannot be derived from active markets, they are determined using valuation techniquesincluding the income approach (for example the discounted cash flows model) or marketapproach. Changes in assumptions about these factors could affect the reported fair value ofthe financial instruments. Please refer to Note 12 for more details.

(2) Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds itsrecoverable amount, which is the higher of its fair value less costs to sell and its value in use.The fair value less costs to sell calculation is based on available data from binding salestransactions in an arm’s length transaction of similar assets or observable market prices lessincremental costs that would be directly attributable to the disposal of the asset. The valuein use calculation is based on a discounted cash flow model. The cash flows projections arederived from the budget for the next five years and do not include restructuring activities thatthe Company is not yet committed to or significant future investments that will enhance theasset’s performance of the cash generating unit being tested. The recoverable amount is mostsensitive to the discount rate used for the discounted cash flow model as well as the expectedfuture cash-inflows and the growth rate used for extrapolation purposes.

(3) Pension benefits

The cost of post-employment benefit and the present value of the pension obligation underdefined benefit pension plans are determined using actuarial valuations. An actuarial valuationinvolves making various assumptions. These include the determination of the discount rate,future salary increases, mortality rates and future pension increases. Please refer to Note 6 formore details.

(4) Revenue recognition - sales returns and allowance

The Company estimates sales returns and allowance based on historical experience and otherknown factors at the time of sale, which reduces the operating revenue. Please refer to Note 6.

(5) Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount



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and timing of future taxable income. Given the wide range of international businessrelationships and the long-term nature and complexity of existing contractual agreements,differences arising between the actual results and the assumptions made, or future changes tosuch assumptions, could necessitate future adjustments to tax income and expense alreadyrecorded. The Company establishes provisions, based on reasonable estimates, for possibleconsequences of audits by the tax authorities of the respective counties in which it operates.The amount of such provisions is based on various factors, such as experience of previous taxaudits and differing interpretations of tax regulations by the taxable entity and the responsibletax authority. Such differences of interpretation may arise on a wide variety of issuesdepending on the conditions prevailing in the respective Company’s domicile.

Deferred tax assets are recognized for all carryforward of unused tax losses, unused tax creditsand deductible temporary differences to the extent that it is probable that future taxable profitwill be available or there are sufficient taxable temporary differences against which the unusedtax losses, unused tax credits or deductible temporary differences can be utilized. The amountof deferred tax assets determined to be recognized is based upon the likely timing and the levelof future taxable profits and taxable temporary differences together with future tax planningstrategies. Please refer to Note 6 for more details on unrecognized deferred tax assets as ofDecember 31, 2017.

(6) Accounts receivables–estimation of impairment loss

The Company considers the estimation of future cash flows when there is objective evidenceshowed indications of impairment. The amount of the loss is measured as the difference betweenthe asset's carrying amount and the present value of estimated future cash flows (excludingfuture credit losses that have not been incurred) discounted at the financial asset's originaleffective interest rate. However, as the impact from the discounting of short-term receivables isnot material, the impairment of short-term receivables is measured as the difference betweenthe asset's carrying amount and the estimated undiscounted future cash flows. Where the actualfuture cash flows are lower than expected, a material impairment loss may arise. Please refer toNote 6 for more details.

(7) Inventories

Estimates of net realizable value of inventories take into consideration that inventories may bedamaged, become wholly or partially obsolete, or their selling prices have declined. Theestimates are based on the most reliable evidence available at the time the estimates are made.Please refer to Note 6 for more details.



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6. Contents of significant accounts



Cash on hand & demand deposits $51,375 $51,691Cash in banks 1,740,536 2,003,192Time deposits - 23,268Cash in transit 3,742 17,889Total $1,795,653 $2,096,040

(2) Financial assets at fair value through profit or loss, current


Held for trading:Derivatives not designated as hedging instruments

Forward foreign exchange contracts $- $5,071

Non-derivative financial assetsOpen-end funds 2,994 18,859

Total $2,994 $23,930

Held for trading financial assets were not pledged.

(3) Available-for-sale financial assets


Stocks $400,963 $394,257

Current $377,895 $381,470Non-current 23,068 12,787Total $400,963 $394,257

Available-for-sale financial assets were not pledged.



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(4) Held-to-maturity financial assets


Bonds $- $20,000Corporate bonds - 806,250Total $- $826,250

Current $- $826,250Non-current - -Total $- $826,250

Bonds and corporate bonds were matured in January 2017 and March 2017, respectively.

Held-to-maturity financial assets were not pledged.

(5) Financial assets measured at cost


Stocks $31,538 $31,538

Current $29,238 $29,238Non-current 2,300 2,300Total $31,538 $31,538

The above investments in the equity instruments of unlisted entities are measured at cost asthe fair value of these investments are not reliably measurable due to the fact that thevariability in the range of reasonable fair value measurements is significant for that investmentand that the probabilities of the various estimates within the range cannot be reasonablyassessed and used when measuring fair value.

Financial assets measured at cost were not pledged.

(6) Debt instrument investments for which no active market exists


Cash in banks $194,966 $114,046Time deposits 3,866,140 3,668,322Total $4,061,106 $3,782,368



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50


Current $3,866,140 $3,655,814Non-current 194,966 126,554Total $4,061,106 $3,782,368

Please refer to Note 8 for more details on debt instrument investments for which no activemarket exists that were pledged as collateral.

(7) Notes receivable


Notes receivables arising from operating activities $262,273 $256,817Less: allowance for doubtful debts - -Total $262,273 $256,817

Notes receivables were not pledged.

(8) Accounts receivable and accounts receivable-related parties


Accounts receivable $1,897,049 $1,815,867Less: allowance for doubtful debts (21,728) (92,132)Net 1,875,321 1,723,735Installment accounts receivable 413,630 497,239Less: unrealized interest revenue – trade receivables from

installment sales(2,043) (593)

Less：allowance for doubtful debts - -Net 411,587 496,646Subtotal 2,286,908 2,220,381Accounts receivable-related parties 2,218,511 1,956,831Less: allowance for doubtful debts (1,119) (315)Less: unrealized interest revenue – trade receivables from

installment sales(2,168) (855)

Net 2,215,224 1,955,661Total $4,502,132 $4,176,042



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The expected recovery of the accounts receivables from installment sales is as follows:


Not later than one year $201,345 $252,549Later than one year and not later than two years 96,333 181,161Later than two years 115,952 63,529Total $413,630 $497,239

Accounts receivables were not pledged.

The Company’s credit term are generally 30-180 day terms. The movements in the provisionfor impairment of accounts receivable and accounts receivable-related parties are as follows:



As of January 1, 2017 $20,135 $72,312 $92,447Charge (reversal) for the current period (10,246) (59,354) (69,600)As of December 31, 2017 $9,889 $12,958 $22,847

As of January 1, 2016 $20,135 $65,571 $85,706Charge (reversal) for the current period - 6,741 6,741As of December 31, 2016 $20,135 $72,312 $92,447

Impairment loss that was individually determined for the years ended December 31, 2017 and2016 arose due to the fact that the counterparty was in financial difficulties. The amount ofimpairment loss recognized was the difference between the carrying amount of the tradereceivable and the present value of its expected recoverable amount. The Company did nothold any collateral for such trade receivables.

Aging analysis of account receivables and account receivables-related parties that were pastdue as of the balance sheet date but not impaired is as follows:

Neither pastdue nor

impaired

Past due but not impaired

As of1 to 6

months6 months to

1 yearMore than

1 year TotalDecember 31, 2017 $3,846,080 $643,436 $10,630 $1,986 $4,502,132December 31, 2016 3,687,794 456,883 21,230 10,135 4,176,042



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(9) Construction receivables (including from related parties)


Accumulated cost incurred $6,135,802 $5,299,128Accumulated recognized project profit (loss) 276,392 321,652Accumulated amount billed based on construction progress (6,128,758) (5,274,811)Reclassification (Note 1) (78,121) (107,025)Construction receivables $205,315 $238,944


Items (Note 2)Contractproceeds

Contract costsincurred

Accumulatedrecognizedtotal projectprofit(loss)

Percentageof

completion(Note 3)

Amountsbilled based on

constructionprogress

Constructioncontracts

receivablePercentage ofcompletion

methodCategory A $140,272 $124,633 $10,519 91%~100% $117,413 $17,739Category B 6,780,947 5,719,208 250,732 9%~100% 5,714,564 255,376Category C 1,076,798 291,961 15,141 5%~73% 296,781 10,321

Reclassifications(Note 1) - - - - (78,121)

Total $7,998,017 $6,135,802 $276,392 $6,128,758 $205,315


Items (Note 2)Contractproceeds

Contract costsincurred

Accumulatedrecognizedtotal projectprofit(loss)

Percentageof

completion(Note 3)

Amountsbilled based on

constructionprogress

Constructioncontracts

receivablePercentage ofcompletion

methodCategory A $141,298 $115,796 $14,353 91%~100% $83,115 $47,034Category B 6,601,737 5,137,544 305,347 1%~100% 5,149,204 293,687Category C 1,036,738 45,788 1,952 1%~28% 42,492 5,248

Reclassifications(Note 1) - - - - (107,025)

Total $7,779,773 $5,299,128 $321,652 $5,274,811 $238,944

(Note 1: Aging of part of construction receivables has reached an operating cycle, hence, theyare reclassified to long-term receivables.)

(Note 2: Projects involving similar products have been combined as a single item.)(Note 3: The percentage of completion varied in each project, it is therefore presented as a

range)

As of December 31, 2017 and 2016, the above construction projects had not generatedconstruction retainage of construction contracts.



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(10)Inventory

A. The details of inventories are as follows:


Raw materials $648,467 $632,237Work in progress 1,640,208 1,507,533Finished good 1,328,762 1,300,761Inventories in transit 54,334 51,772Construction in progress 239,686 362,388Total $3,911,457 $3,854,691

B. The cost of inventories recognized in expenses are as follows:For the years ended

December 31,2017 2016

Cost of inventories recognized in expenses (includinggain and loss from inventory valuation) $14,534,143 $14,230,562Loss on allowance for inventory valuation (gain fromprice recovery of inventory) 69,469 (107,749)

The gain from price recovery of inventory is resulted from selling inferior inventories,therefore the cause for the net realizable value of inventory to be lower than the cost no longerexisted.

C. Inventories were not pledged.

(11)Investments accounted for using the equity method

A. The following table lists the investments accounted for using the equity method of theCompany:

As of December 31, 2017 2016

Name of investee companyCarryingamount

Percentage ofownership

Carryingamount


Investment in subsidiaries:Listed companiesChunghwa Picture Tubes, Ltd. (Note 1) $2,314,310 28.56 $2,116,018 25.49Tatung System Technologies Inc. 522,352 53.60 499,791 53.60Forward Electronics Co., Ltd. (90,014) 12.05 (107,307) 12.05San Chih Semiconductor Co., Ltd. 850,234 43.18 932,455 43.18Tatung Fine Chemicals Co. 174,081 48.27 167,816 48.27Green Energy Technology Inc.(Note 2) 238,783 4.54 - -Subtotal 4,009,746 3,608,773



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Name of investee companyCarryingamount


Carryingamount


Non-public companiesTaiwan Telecommunication Industry Co., Ltd. $(854,363) 100.00 $(774,672) 100.00Central Research Technology Co. 54,721 100.00 54,938 100.00Tatung Consumer Products (Taiwan) Co., Ltd. (1,068,739) 99.10 (843,320) 99.10Tatung Sm-Cyclo Co., Ltd. 165,730 85.33 165,688 85.33Shang-Chih Asset Development Co. 31,573,715 100.00 30,986,043 100.00Chunghwa Electronic Investment Co., Ltd. 1,086,881 93.27 994,288 93.27Tatung Die Casting Co. 51,797 51.00 47,752 51.00Tatung (Thailand) Co., Ltd. 377,428 92.23 353,723 92.23Tatung Company of Japan, Inc. 639,805 100.00 626,519 100.00Tatung Electronics(S) Pte. Ltd. 95,813 90.00 106,158 90.00Tatung Wire & Cable (Thailand) Co., Ltd. 74,462 100.00 73,439 100.00Tatung Singapore Information Co., Ltd. (23,095) 100.00 (22,959) 100.00Tatung Electric (Singapore) Pte. Ltd. 776,864 100.00 859,137 100.00Tatung Co. of America Inc. 107,333 50.00 136,528 50.00Tatung Mexico S.A de C.V. 152,619 100.00 236,785 100.00Tatung Science and Technology Inc. 7,435 100.00 8,130 100.00Tatung Electric Company of America, Inc. 172,698 100.00 184,545 100.00Tatung Netherlands B.V. (125,852) 100.00 (125,852) 100.00TATUNG CZECH s.r.o 8,791 100.00 21,593 100.00Tatung Medical Healthcare Technologies Co.,

Ltd. (Note 3) 188,902 95.33 205,761 95.08Toes Opto-Mechatronics Co. 68,615 85.00 63,481 85.00Tatung Vietnam Co. Ltd. (Note 4) (247,512) 100.00 (243,822) 100.00Tatung Electric Technology (Vietnam) Co., Ltd. 22,665 100.00 40,257 100.00Shang Chih Investment Co., Ltd. 652,346 95.83 499,474 95.83Chih Sheng Investment Co., Ltd. 703,272 100.00 704,151 100.00Taipei Industry Corporation 15 0.0026 14 0.0026Tatung Forever Energy Co., Ltd. (Note 5) 257,710 98.55 194,564 98.12Chunghwa Picture Tubes (Labuan) Ltd. 587,394 41.03 806,760 41.03Tatung Global Strategy Investment And

Trading (BVI) Inc. (Note 6) - - (677,463) 100.00Absolute Alpha Limited 20,240 100.00 20,090 100.00Leap High Limited 471 65.00 6,289 65.00Tungyang Energy Co., Ltd. (Note 7) 149,678 100.00 - -Hsieh-Chih Industrial Library Publishing Co. 955 6.91 931 6.91Lansong International Co., Ltd. - 98.33 - 98.33Subtotal 35,678,794 34,708,950

Investment in associates:Listed companiesElitegroup Computer System Co., Ltd. 3,789,505 27.35 3,846,228 27.35Non-public companiesTatung-Okuma Co., Ltd. 1,184,201 49.00 1,074,358 49.00Kuender & Co., Ltd. 80,458 50.00 142,461 50.00Chung-Tai Technology Development EngineeringCo.

13,165 22.00 14,162 22.00

Subtotal 5,067,329 5,077,209The balance of the investment accounted for

using equity method44,755,869 43,394,932

Add: the credit balance of the investmentaccounted for using equity method

2,409,575 2,795,395

Total $47,165,444 $46,190,327



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55

B. Investments in subsidiaries:

Investments in subsidiaries were presented as investments accounted for using the equitymethod and adjusted by necessary measurements.

Note 1: Tatung Global Strategy Investment and Trading (BVI) sold all the shares ofChunghwa Picture Tubes, Ltd. to the Company in December 2017. Hence, theCompany’s holding percentage of Chunghwa Picture Tubes, Ltd. increased to28.56%. Also, the Company bought shares of Chunghwa Picture Tubes, Ltd. inthe amount of NTD2,285,524 thousand from Compal Electronics, Inc.(“Compal”) according to the arbitration outcome with Compal (Such amount wasrecognized under other payables as of December 31, 2016.) The related settlementand payment procedures of the shares were completed in the 1st quarter of 2017.

Note 2: Green Energy Technology Inc. issued 19,724 thousand shares in December 2017through private placement. The Company subscribed all the shares, and thus theCompany’s holding percentage increased to 4.54%.

Note 3: Tatung Medical Healthcare Technologies Co., Ltd. held a capital injection inAugust 2017. The Company subscribed to the shares proportionately and thus theCompany’s holding percentage increased to 95.33%.

Note 4: The Company transferred the receivables due from Tatung Vietnam Co., Ltd. inthe amount of NTD526,285 thousand to increase capital in December 2017.However, as of December 31, 2017, Tatung Vietnam Co., Ltd. hasn’t finished thealternation registration procedure. Hence, the Company recognized such amountunder prepayments for investment, non-current.

Note 5: Tatung Forever Energy Co., Ltd. held a capital injection in November 2017. TheCompany subscribed all the shares, and thus the Company’s holding percentageincreased to 98.55%.

Note 6: Tatung Global Strategy Investment and Trading (BVI) Inc. had completed theliquidation procedure in December 2017, and thus the Company’s holdingpercentage decreased from 100% to 0%.

Note 7: The Company invested NTD150,000 thousand in November 2017 to establishTungyang Energy Co., Ltd. to expand the solar energy business.

For the years ended December 31, 2017 and 2016, the Company received dividends frominvesting in subsidiaries and associates using the equity method amounting to NTD879,087 thousand and NTD1,164,044 thousand, respectively.

Please refer to Note 8 for investment in subsidiaries that were pledged as collateral.



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56

C. Investments in associates:

a. Information on the material associate of the Company:

Company name: Elitegroup Computer Systems Co., Ltd.

Nature of the relationship with the associate: Elitegroup Computer Systems Co., Ltd. isin the business of manufacturing and selling related products in the Company’s industrychain. The Company invested in Elitegroup Computer Systems Co., Ltd. for thepurpose of upstream/downstream integration.

Principal place of business (country of incorporation): Taiwan

Fair value of the investment in the associate when there is a quoted market price for theinvestment: Elitegroup Computer Systems Co., Ltd. is a listed entity on the TaiwanStock Exchange (TWSE). The fair value of the investment in Elitegroup ComputerSystems Co., Ltd. was NTD3,026,637 thousand and NTD2,378,616 thousand, as ofDecember 31, 2017 and 2016, respectively.

Reconciliation of the associate’s summarized financial information presented to thecarrying amount of the Company’s interest in the associate:

The summarized financial information of the associate is as follows:


Current assets $15,582,748 $16,383,504Non-current assets 6,337,971 7,001,020Current liabilities (9,631,841) (10,710,784)Non-current liabilities (528,556) (698,150)Equity 11,760,322 11,975,590

Proportion of the Company’s ownership 27.35% 27.35%Subtotal 3,216,448 3,275,324Goodwill 614,638 614,638Other adjustments (41,581) (43,734)

Carrying amount of the investment $3,789,505 $3,846,228



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2017 2016

Operating revenue $29,947,340 $29,945,931Profit (loss) from continuing operations 224,119 (878,808)Other comprehensive income, net of income tax (429,894) (484,597)Total comprehensive income (205,775) (1,363,405)

b. Except the associate mentioned above, other associates were not individually material.The aggregate financial information based on Company’s share of other associates wasas follows:


2017 2016Profit from continuing operations $103,809 $51,568Other comprehensive income, net of income tax 711 2,173Total comprehensive income 104,520 53,741

c. The associates had no contingent liabilities or capital commitments as of December 31,2017 and 2016.

d. Please refer to Note 8 for the investments in associates pledged as collateral of theCompany.

D. The balances of certain investments accounted for under the equity method that wereaudited by other auditors were NTD5,086,768 thousand and NTD5,147,543 thousand as ofDecember 31, 2017 and 2016, respectively. The shares of profit (loss) of associatesaccounted for using equity method and joint ventures that were audited by other auditorswere NTD117,231 thousand and NTD(235,052) thousand for the years ended December31, 2017 and 2016, respectively. The shares of other comprehensive income (loss) ofassociates accounted for using equity method and joint ventures that were audited by otherauditors were NTD(93,854) thousand and NTD(114,986) thousand as of December 31,2017 and 2016, respectively.



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A. The details of property, plant and equipment are as follows:

BuildingsMachinery and

equipmentOffice

equipmentTransportation

equipmentLeasehold

improvementsOther

equipment

Construction inprogress andequipmentawaiting

examination TotalCost:As of January 1, 2017 $541,513 $7,096,421 $385,168 $59,112 $447,678 $1,513,344 $644,573 $10,687,809Additions 1,406 63,198 17,584 1,791 42,802 41,935 1,131,683 1,300,399Disposals - (282,996) (6,808) (3,031) (11,231) (98,648) (775) (403,489)Other changes (Note) 7,080 1,233,578 384 - 7,080 10,382 (1,227,284) 31,220As of December 31, 2017 $549,999 $8,110,201 $396,328 $57,872 $486,329 $1,467,013 $548,197 $11,615,939

As of January 1, 2016 $632,484 $6,731,400 $400,863 $61,508 $413,495 $1,513,665 $571,105 $10,324,520Additions 3,745 29,226 12,476 510 35,544 50,544 643,609 775,654Disposals (95,800) (557,664) (30,477) (2,906) (7,556) (82,018) (6,526) (782,947)Other changes (Note) 1,084 893,459 2,306 - 6,195 31,153 (563,615) 370,582As of December 31, 2016 $541,513 $7,096,421 $385,168 $59,112 $447,678 $1,513,344 $644,573 $10,687,809

Depreciation and impairment:As of January 1, 2017 $(391,397) $(4,677,236) $(336,377) $(53,247) $(277,756) $(1,325,174) $- $(7,061,187)Depreciation (14,992) (353,116) (33,605) (1,918) (73,496) (88,699) - (565,826)Impairment - (46) (364) - (130) (1,558) - (2,098)Disposals - 282,222 6,807 3,008 10,749 98,410 - 401,196Other changes (Note) - (520) 520 - - - - -As of December 31, 2017 $(406,389) $(4,748,696) $(363,019) $(52,157) $(340,633) $(1,317,021) $- $(7,227,915)

As of January 1, 2016 $(467,089) $(4,887,917) $(325,241) $(54,088) $(210,180) $(1,319,298) $- $(7,263,813)Depreciation (15,527) (342,153) (41,581) (2,032) (73,051) (85,636) - (559,980)Disposals 90,805 552,834 30,445 2,873 5,889 79,760 - 762,606Other changes (Note) 414 - - - (414) - - -As of December 31, 2016 $(391,397) $(4,677,236) $(336,377) $(53,247) $(277,756) $(1,325,174) $- $(7,061,187)

Net carrying amount as of:December 31, 2017 $143,610 $3,361,505 $33,309 $5,715 $145,696 $149,992 $548,197 $4,388,024

December 31, 2016 $150,116 $2,419,185 $48,791 $5,865 $169,922 $188,170 $644,573 $3,626,622

(Note: Including transfer from advance payments of equipment and reclassification.)

No borrowing costs were capitalized as property, plant and equipment for the years endedDecember 31, 2017 and 2016.

Components of buildings, including main building structure, electronic engineering,electrical engineering, fire engineering, air conditioning units and elevators, aredepreciated by their own respective useful lives.

Please refer to Note 8 for more details on property, plant and equipment that were pledgedas collateral.



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59

B. Assets related to Tatung University are described as follows:

The carrying amount of Hsin-She-Gong Building (“the Building”) was NTD125,402thousand. The Company provided the fund fully for the building. The ownershipregistration was completed and the Company has acquired building use permit and relatedlicenses.

On May 6, 2016, Shan-Chih Asset Development purchased the land of Hsin-She-GongBuilding and completed the transfer of title. The development plans will go with the overallplans of the Company in the future. The related development plans involved issues such asland usage modifications and urban planning. The long term plans still need continuingcommunication between Tatung University and the Education ministry and integratedplanning.


Computer software cost

Cost

Amortizationand

impairmentNet book

valueAs of January 1, 2017 $275,578 $(216,495) $59,083Addition 305 - 305Amortization - (35,859) (35,859)As of December 31, 2017 $275,883 $(252,354) $23,529

As of January 1, 2016 $235,483 $(163,450) $72,033Addition 40,095 - 40,095Amortization - (53,045) (53,045)As of December 31, 2016 $275,578 $(216,495) $59,083

Amortization expense of intangible assets under the statement of comprehensive income:


2017 2016Operating costs $2,210 $2,210Operating expense $33,649 $50,835



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60

(14)Other non-current assets


Advance payments in equipment $153,719 $12,601Other non-current assets - other 159,115 283,264Total $312,834 $295,865

With respect to the above other non-current assets – other, part of the lands and landprepayment in the amount of NTD70,073 thousand and NTD4,669 thousand were heldtemporarily under third parties’ name because of regulatory requirements or other reasons asof December 31, 2017 and 2016. In order to secure the Company’s right over the lands, theCompany has adopted relevant security measures, including having the lands pledged to theCompany.

(15)Long-term receivables-net


Tatung InfoComm Co., Ltd. $- $644,799Other 78,121 107,024Less: allowance for doubtful debts - (520,799)Net $78,121 $231,024

On March 30, 2012, the Company entered into a share purchase contract with Vee TelecomMultimedia Co., Ltd. Under the contract, the Company would sell all of its shares of its fully-owned subsidiary, Tatung InfoComm Co., Ltd., to Vee Telecom Multimedia Co., Ltd. TheCompany’s financing to Tatung InfoComm Co., Ltd amounting to NTD557,980 thousandwould be repaid by Tatung InfoComm Co., Ltd in 5 years. However, Tatung InfoComm co.,Ltd. was not able to repay the Company as agreed in the contract. Hence, in addition to takingmeasures to secure creditor rights, the Company evaluated the financial condition of TatungInfoComm co., Ltd. and the likelihood of collection. Also, the Company recognized allowancefor bad debts in full amount. In December 2017, the Company sold all of its creditor rights toits fully-owned subsidiary, Shang-Chih Asset Development Co. in the amount of NTD53,000thousand.



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(16)Short-term loans

Interest RatesAs of December 31,2017 2016

Unsecured bank loans 1.77%~2.54% $750,000 $1,140,000Secured bank loans 1.73%~2.40% 2,700,000 887,000L/C loans 1.00%~5.20% 938,082 1,084,412Short-term loans in foreign currency 1.06%~3.47% 471,202 840,892Subtotal 4,859,284 3,952,304Due to employees 0.17% 16,154 16,454Total $4,875,438 $3,968,758

The Company’s unused short-term lines of credits amounted to NTD1,074,547 thousand andNTD2,775,357 thousand, as of December 31, 2017 and 2016, respectively.

Part of investments accounted for using the equity method and property, plant and equipmentwere pledged as collaterals for secured bank loans. Please refer to Note 8 for more details.

(17)Short-term notes and bills payable

Guarantors Interest RatesAs of December 31,2017 2016

Unsecured domestic bills payable 0.45%-1.17% $302,000 $200,000Less: Unamortized discount (152) (77)Net $301,848 $199,923

(18)Financial liabilities at fair value through profit or loss - current


Held for trading:Derivatives not designated as hedging Instruments

Forward foreign exchange contracts $591 $-Foreign currency option 36 260

Total $627 $260



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loan

sfro

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ctive

from

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tembe

r28,

2017

to S

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19.(

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loan

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eres

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of12

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ansf

rom

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g’sT

own

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150,

000

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fecti

vefro

m S

eptem

ber2

8,20

17 to

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tembe

r28,

2019

.(no

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ing

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used

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tches

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h lo

anus

e

up to

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ceed

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e

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of12

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g th

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bein

gre

duce

d if

nopr

incip

al,pr

incip

al

bein

gre

paid

upon

matu

rity)

.



335

TATU

NG

CO.,

LTD

.N

OTE

S TO

PARE

NT

COM

PAN

YO

NLY

FIN

AN

CIA

LST

ATE

MEN

TS(E

xpre

ssed

in T

hous

ands

ofN

ewTa

iwan

Dol

lars

unl

ess o

ther

wise

Spec

ified

)

63

Lend

ers

Asof

Dec

embe

r31,

Inte

rest

rate

(%)(N

ote)

Mat

urity

date

and

term

sofr

epay

men

t20

1720

16U

nsec

ured

long

-term

loan

sfro

mK

ing’

sTow

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nk$3

50,0

00$-

2.07

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ctive

from

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mbe

r27,

2017

toSe

ptem

ber2

8,20

19.(

non-

revo

lvin

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loan

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ceed

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amou

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loan

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duce

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aturit

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ansf

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g’sT

own

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ber2

9,20

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embe

r28,

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.(no

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hlo

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eup

to2

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s,ca

nnot

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piry

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duem

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.Se

cure

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ng-te

rmlo

ansf

rom

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Sin

oPac

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8184

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2.57

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toJu

ly9,

2023

. Sin

ceth

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date

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in36

quar

terly

paym

ents.

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inoP

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7,20

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ank

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000

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9,20

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embe

r29,

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.The

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paid

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.

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aste

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tern

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001.

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ecem

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iwan

8,64

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embe

r23,

2016

toD

ecem

ber2

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ento

fprin

cipa

lisi

n3

year

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ther

emai

ning

80%

will

bere

paid

inth

e 5th

repa

ymen

t.



336

TATU

NG

CO.,

LTD

.N

OTE

S TO

PARE

NT

COM

PAN

YO

NLY

FIN

AN

CIA

LST

ATE

MEN

TS(E

xpre

ssed

in T

hous

ands

ofN

ewTa

iwan

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lars

unl

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ther

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ified

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64

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fDec

embe

r31,

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rest

rate

(%)(N

ote)

Mat

urity

date

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term

sofr

epay

men

t20

1720

16

Hua

Nan

Bank

L/C

loan

s(U

SD)

$-$1

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91.

90~3

.38

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cipa

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epai

din

180

days

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rfirs

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thel

oan

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loan

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ryof

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ank

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in, h

ave b

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uo.

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arse

nded

Dec

embe

r31,

2017

and

2016

,cer

tain

long

term

loan

soft

heCo

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clud

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equi

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the

year

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ach

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was

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edia

tere

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loan

strig

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s.

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epr

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and

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strum

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ithno

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vestm

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Plea

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fert

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ote 8

form

ore d

etai

ls.



337



65


Defined contribution plan

The Company adopts a defined contribution plan in accordance with the Labor Pension Actof the R.O.C. Under the Labor Pension Act, the Company will make monthly contributionsof no less than 6% of the employees’ monthly wages to the employees’ individual pensionaccounts. The Company has made monthly contributions of 6% of each individual employee’ssalaries or wages to employees’ pension accounts.

Expenses under the defined contribution plan for the years ended December 31, 2017 and2016 were NTD68,595 thousand and NTD69,421 thousand, respectively.

Defined benefits plan

The Company adopts a defined benefit plan in accordance with the Labor Standards Act ofthe R.O.C. The pension benefits are disbursed based on the units of service years and theaverage salaries in the last month of the service year. Two units per year are awarded for thefirst 15 years of services while one unit per year is awarded after the completion of the 15th

year. The total units shall not exceed 45 units. Under the Labor Standards Act, theCompany contributes an amount equivalent to 4% of the employees’ total salaries and wageson a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of theadministered pension fund committee. Before the end of each year, the Company assessesthe balance in the designated labor pension fund. If the amount is inadequate to pay pensionscalculated for workers retiring in the same year, the Company will make up the difference inone appropriation before the end of March the following year.

The Ministry of Labor is in charge of establishing and implementing the fund utilization planin accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization ofthe Labor Retirement Fund. The pension fund is invested in-house or under mandates, basedon a passive-aggressive investment strategy for long-term profitability. The Ministry ofLabor establishes checks and risk management mechanism based on the assessment of riskfactors including market risk, credit risk and liquidity risk, in order to maintain adequatemanager flexibility to achieve targeted return without over-exposure of risk. With regard toutilization of the pension fund, the minimum earnings in the annual distributions on the finalfinancial statement shall not be less than the earnings attainable from the amounts accruedfrom two-year time deposits with the interest rates offered by local banks. Treasury Fundscan be used to cover the deficits after the approval of the competent authority. As theCompany does not participate in the operation and management of the pension fund, nodisclosure on the fair value of the plan assets categorized in different classes could be madein accordance with paragraph 142 of IAS 19. The Company expects to contributeNTD72,000 thousand to its defined benefit plan during the 12 months beginning afterDecember 31, 2017.

As of December 31, 2017 and 2016, the maturity year of the defined benefit plan is 2028.

Pension costs recognized in profit or loss for the years ended December 31, 2017 and 2016:


2017 2016Current period service costs $22,069 $14,272Interest income or expense 26,014 13,229Expected return on plan assets (8,639) (278)Total $39,444 $27,223



338



66

Changes in present value of defined benefit obligation and fair value of plan assets are asfollows:

As of2017.12.31 2016.12.31 2016.01.01

Present value of the defined benefitobligation $2,145,834 $2,314,571 $2,645,880

Fair value of plan assets (973,695) (485,830) (55,639)Subtotal 1,172,139 1,828,741 2,590,241Other 2,622 2,610 2,610Other non-current liabilities - net

defined benefit liabilities(assets) $1,174,761 $1,831,351 $2,592,851

Reconciliation of net defined benefit liability (asset) is as follows:

Present value ofDefined benefit

obligationFair value ofplan assets

Net definedbenefit liability

(asset)As of January 1, 2016 $2,645,880 $(55,639) $2,590,241Current period service costs 14,272 - 14,272Net interest expense (income) 13,229 (278) 12,951Subtotal 2,673,381 (55,917) 2,617,464Remeasurements of the net defined benefit

liability (asset):Actuarial gains and losses arising fromchanges in population assumptions 27,984 - 27,984Actuarial gains and losses arising fromchanges in financial assumptions 144,262 - 144,262Experience adjustments (266,453) - (266,453)Retrun on plan assets - (1,616) (1,616)Subtotal (94,207) (1,616) (95,823)

Payments from the plan (88,705) 88,705 -Benefits paid (175,898) - (175,898)Contributions by employer - (517,002) (517,002)As of December 31, 2016 2,314,571 (485,830) 1,828,741Current period service costs 22,069 - 22,069Net interest expense (income) 26,014 (8,639) 17,375Subtotal 2,362,654 (494,469) 1,868,185Remeasurements of the net defined benefit

liability (asset):Actuarial gains and losses arising fromchanges in financial assumptions - - -Experience adjustments 4,946 - 4,946Return on plan assets - 2,830 2,830Subtotal 4,946 2,830 7,776

Payments from the plan (100,054) 100,054 -Benefits paid (121,712) - (121,712)Contributions by employer - (582,110) (582,110)As of December 31, 2017 $2,145,834 $(973,695) $1,172,139



339



67

The following significant actuarial assumptions are used to determine the present value of thedefined benefit obligation:


Discount rate 1.250% 1.125%Expected rate of salary increases 2.250% 2.250%

A sensitivity analysis for significant assumption as at December 31, 2017 and 2016 is, asshown below:

Effect on the defined benefit obligation2017 2016


obligation


obligation


obligation


obligationDiscount rate increase by 0.25% $- $54,073 $- $62,485Discount rate decrease by 0.25% 56,243 - 62,550 -

The sensitivity analyses above are based on a change in the actuarial assumption (for example:change in discount rate or future salary), keeping all other assumptions constant. Thesensitivity analyses may not be representative of an actual change in the defined benefitobligation as it is unlikely that changes in assumptions would occur in isolation of one another.

There was no change in the methods and assumptions used in preparing the sensitivityanalyses compared to the previous period.

(21)Provisions, current

Maintenancewarranties

As of January 1, 2017 $47,551Arising during the period 11,459As of December 31, 2017 $59,010

As of December 31, 2017 $59,010As of December 31, 2016 $47,551





340



68

(22)Equities

A. Common stock

As of December 31, 2017 and 2016, the Company’s authorized capital and issued capitalwere NTD100,000,000 thousand and NTD23,395,367 thousand, with a par value ofNTD10, totaling 10,000,000 thousand shares and 2,339,537 thousand shares, respectively.Each share is entitled to one voting right and the right to receive dividends.

As of December 31, 2017 and 2016, 1,000,000 thousand shares of the Company wereissued as 50,000 thousand units of global depositary receipts (“GDR”), each GDR equalingto 20 shares. The GDR were listed on Luxembourg Stock Exchange.

B. Capital reserve


Share of changes in net assets of associates and jointventures accounted for using the equity method $3,168,370 $2,759,706

Other 105,135 105,135Total $3,273,505 $2,864,841

According to the Company Act, the capital reserve shall not be used except for offsettingthe deficit of the company. When a company incurs no loss, it may distribute the capitalreserves related to the income derived from the issuance of new shares at a premium orincome from endowments received by the Company. The distribution could be made incash or in the form of dividend shares to its shareholders in proportion to the number ofshares being held by each of them.

C. Treasury stock

As of December 31, 2017 and 2016 the Company’s subsidiaries, CPT and its subsidiaries,and Chunghwa Electronics Investment Co., held 70,598 thousand shares and 334 thousandshares of the Company’s stock. The stocks mentioned above were held for financingpurpose before the amendments of the Company Act on November 12, 2001. In addition,FD, a subsidiary of the Company, purchased shares of the Company in 2016 and sold aportion of them in 2017. It held 33,166 thousand shares and 36,236 thousand shares of theCompany’s stock as of December 31, 2017 and 2016. Because the holding percentage ofChunghwa Picture Tubes, Ltd. increased, the recognized treasury stock increased toNTD1,629,899 thousand as of December 31, 2017.



341



69

D. Retained earnings and dividend policies:

According to the Company’s Articles of Incorporation, current year’s earnings, if any, shallbe distributed in the following order:

(a) Payment of all taxes and dues(b) Offset prior years’ operation losses(c) Appropriate 10% of the remaining amount after deducting items (a) and (b) as a legal

reserve(d) Appropriate or reverse special reserve in accordance with relevant laws or regulations(e) After deducting items (a), (b), (c) and (d) above from the current year’s earnings, the

distribution of the remaining portion, if any, will be recommended by the board ofdirectors and resolved in the stockholders’ meeting.

According to the Company Act, the Company needs to set aside amount to legal reserveunless where such legal reserve amounts to the total authorized capital. The legal reservecan be used to offset the deficit of the Company. When the Company incurs no loss, it maydistribute the portion of legal reserve which exceeds 25% of the paid-in capital by issuingnew shares or by cash in proportion to the number of shares being held by each of theshareholders.

Following the adoption of T-IFRS, the FSC on April 6, 2012 issued Order No. Jin-Guan-Zheng-Fa-Zi No. 1010012865, which sets out the following provisions for compliance:

On a public company's first-time adoption of the T-IFRS, for any unrealized revaluationgains and cumulative translation adjustments (gains) recorded to shareholders’ equity thatthe company elects to transfer to retained earnings by application of the exemption underIFRS 1, the company shall set aside an equal amount of special reserve. Following acompany’s adoption of the T-IFRS for the preparation of its financial reports, whendistributing distributable earnings, it shall set aside special reserve, from the profit/loss ofthe current period and the undistributed earnings from the previous period, an amount equalto “other net deductions from shareholders’ equity for the current fiscal year, provided thatthe company has already set aside special reserve according to the requirements in thepreceding point, it shall set aside supplemental special reserve based on the differencebetween the amount already set aside and other net deductions from shareholders’ equity.For any subsequent reversal of other net deductions from shareholders’ equity, the amountreversed may be distributed.



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As of January 1, 2014, special reserve set aside for the first-time adoption of T-IFRSamounted to NTD15,894,690 thousand. In the shareholders’ meeting last year, theCompany resolved to make up for its losses by special reserve of NTD11,195,032 thousandand to recover the special reserve amounted to NTD124,233 thousand. Therefore theunrecovered special reserve amounted to NTD11,070,799 thousand. Also, after theCompany disposed of related assets and reversed special reserves of NTD70,865 thousandto retained earnings, special reserve set aside for the first-time adoption of T-IFRSamounted to NTD4,753,026 thousand as of December 31, 2017.

Details of the 2017 deficits compensation as approved by the boards’ meeting on March15, 2018, and details of the 2016 deficits compensation as approved by the shareholders’meeting on May 11, 2017 are as follows:

Deficits compensation2017 2016

Special reserve $281,015 $2,175,074

Please refer to Note 6(25) for more details about provision for employees’ bonuses andcompensation for directors and supervisors.

(23)Operating revenue


2017 2016Sale of goods $15,951,584 $15,813,268Less: sales returns, discounts and allowances (168,295) (132,149)Revenue arising from rendering of services 630,987 490,028Construction contract revenue 547,845 585,661Other operating revenues 520,714 502,824Total $17,482,835 $17,259,632

(24)Operating leases

Company as lessee

The Company entered into commercial leases on land and plants. These leases have an averagelife of one year with no renewal option included in the contracts. There are no restrictionsplaced upon the Company by entering into these leases.



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Future minimum rentals payable under non-cancellable operating leases as of December 31,2017 and 2016 are as follows:


Not later than one year $233,841 $244,299

Operating lease expenses recognized are as follows:


2017 2016Not later than one year $256,546 $254,919

(25)Summary statement of employee benefits, depreciation and amortization expenses by function:

By Function

By Nature


2017 2016

Operatingcosts

Operatingexpenses

Totalamount

Operatingcosts

Operatingexpenses

Totalamount

Employee benefits expense

Salaries $860,469 $1,179,873 $2,040,342 $904,334 $1,169,334 $2,073,668

Labor and health insurance 79,477 105,527 185,004 81,631 103,486 185,117

Pension 33,921 74,118 108,039 27,223 69,421 96,644

Other employee benefits expense 36,016 9,685 45,701 38,096 9,782 47,878

Depreciation 466,146 99,680 565,826 469,772 90,208 559,980

Amortization 2,210 33,649 35,859 2,210 50,835 53,045

As of December 31, 2017 and 2016, the Company employed 3,070 and 3,167 employees,respectively.

The Company’s Article of Incorporation states that if there is a profit, the Company shouldset aside employee compensation no less than 1% of the profit and board membercompensation no more than 2%. When the Company suffers an accumulated deficit, the profitshould be retained to recover the deficit. The employee compensation should be paid out byshares or cash, and should be resolved in the board of directors’ meeting, with 2/3 of the boardmembers present and over half of the present members agree. Information of the board ofdirectors’ resolution regarding the employees’ compensation and remuneration to directorsand supervisors can be obtained from the “Market Observation Post System” on the websiteof the TWSE.



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The Company had net income in 2017. However, there is still accumulated deficits that needto be covered, hence, the Company did not estimate employees’ compensation andremuneration to directors and supervisors.

The Company suffered net loss in 2016 and thus did not estimate employee compensation andremuneration for the directors and supervisors.

(26)Non-operating income and expenses

A. Other income


2017 2016Dividend income $39,399 $35,994Interest income 80,419 80,219Others 349,609 351,193Total $469,427 $467,406

B. Other gains and losses


2017 2016Gains (losses) on disposal of property, plant and

equipment $1,026 $(1,900)Impairment loss of property, plant and equipment (2,098) -Gains (losses) on disposal of investments (19,381) 194Foreign exchange gains (losses), net (200,715) (40,058)Gains (losses) on financial assets / financial liabilities at

fair value through profit or loss 3,533 (19,874)Other gains and losses (317,239) (398,645)Total $(534,874) $(460,283)

C. Finance costs


2017 2016Interest on borrowings from bank $721,032 $695,579Other 304 449Total finance costs $721,336 $696,028



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(27)Components of other comprehensive income


Arising duringthe period

Reclassificationadjustmentsduring the

period

Othercomprehensiveincome, before

tax

Income taxbenefit (expense)

relating tocomponents of

othercomprehensive

income

Othercomprehensiveincome, net of

taxNot to be reclassified to profit or

loss in subsequent periods:Remeasurements of defined

benefit plans $(7,776) $- $(7,776) $- $(7,776)Share of other comprehensive

income of associates andjoint ventures accounted forusing the equity method 15,279 - 15,279 - 15,279

To be reclassified to profit or lossin subsequent periods:

Unrealized gains (losses) fromavailable-for-sale financialassets 6,707 - 6,707 - 6,707

Share of other comprehensiveincome (loss) of associates andjoint ventures accounted forusing the equity method (176,516) 38,848 (137,668) - (137,668)

Total of other comprehensiveincome (loss) $(162,306) $38,848 $(123,458) $- $(123,458)


Arising duringthe period

Reclassificationadjustmentsduring the

period

Othercomprehensiveincome, before

tax

Income taxbenefit (expense)

relating tocomponents of

othercomprehensive

income

Othercomprehensiveincome, net of

taxNot to be reclassified to profit or

loss in subsequent periods:Remeasurements of defined

benefit plans $95,823 $- $95,823 $- $95,823Share of other comprehensive

income of associates andjoint ventures accounted forusing the equity method 96,246 - 96,246 - 96,246

To be reclassified to profit or lossin subsequent periods:

Unrealized gains (losses) fromavailable-for-sale financialassets (555) - (555) - (555)

Share of other comprehensiveincome of associates and jointventures accounted for using theequity method (612,693) - (612,693) - (612,693)

Total of other comprehensiveincome $(421,179) $- $(421,179) $- $(421,179)

The Company has accumulated a large amount of loss carry forward. Therefore, there was notsignificant deferred income tax effect resulted from other comprehensive income and changesin equity in 2017 and 2016, and thus the Company did not record related income tax.



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(28)Income tax

The major components of income tax expense (income) are as follows:

Income tax expense (income) recognized in profit or loss


2017 2016Current income tax expense (income):

Current income tax charge $(56,675) $(90,829)Deferred tax expense (income):

Deferred tax expense (income) relating to originationand reversal of temporary differences 20,000 19,999

Total income tax (income) expense $(36,675) $(70,830)

There was not significant deferred income tax effect resulted from other comprehensiveincome and changes in equity in 2017 and 2016, and thus the Company did not record relatedincome tax.

A reconciliation between tax expense and the product of accounting profit multiplied byapplicable tax rates is as follows:


2017 2016Accounting income (loss) before tax from continuing operations $37,395 $(2,414,775)

Tax at the domestic rates applicable to profits in thecountry concerned $6,357 $(410,512)Tax effect of revenues exempt from taxation (6,736) 275,515Tax effect of expenses not deductible for tax purposes (187,175) 8,764Other 6,530 6,497Tax effect of deferred tax assets/liabilities 201,024 139,735Income tax benefit from consolidated return system (56,675) (90,829)Total income tax expense (income) recognized in profit or loss $(36,675) $(70,830)



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Deferred tax assets (liabilities) relate to the following:

For the year ended December 31, 2017Beginning

balanceRecognized inprofit or loss

Endingbalance

Temporary differencesDeferred tax assets

Investments accounted for using theequity method $413,936 $38,940 $452,876

Unrealized intragroup profits and losses 12,505 154 12,659Allowance for doubtful accounts 67,769 (877) 66,892Others 8,084 1,949 10,033Subtotal 502,294 40,166 542,460

Deferred tax liabilitiesInvestments accounted for using the

equity method (141,934) (43,006) (184,940)

Unrealized gain on foreign exchange (155,626) (17,160) (172,786)Reserve for land revaluation (3,417) - (3,417)Subtotal (300,977) (60,166) (361,143)

Deferred tax (expense)/ income $(20,000)Net deferred tax assets/(liabilities) $201,317 $181,317Reflected in balance sheet as follows:Deferred tax assets $502,294 $542,460Deferred tax liabilities $(300,977) $(361,143)

For the year ended December 31, 2016Beginning

balanceRecognized inprofit or loss

Endingbalance

Temporary differencesDeferred tax assets

Investments accounted for using theequity method $424,698 $(10,762) $413,936

Unrealized intragroup profits and losses 11,245 1,260 12,505Allowance for doubtful accounts 66,446 1,323 67,769Others 7,675 409 8,084Subtotal 510,064 (7,770) 502,294

Deferred tax liabilitiesInvestments accounted for using theequity method (130,598) (11,336) (141,934)

Unrealized gain on foreign exchange (154,733) (893) (155,626)Reserve for land revaluation (3,417) - (3,417)Subtotal (288,748) (12,229) (300,977)

Deferred tax (expense)/ income $(19,999)Net deferred tax assets/(liabilities) $221,316 $201,317Reflected in balance sheet as follows:Deferred tax assets $510,064 $502,294Deferred tax liabilities $(288,748) $(300,977)



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The following table contains information of the unused tax losses of the Company:

Tax losses for Unused tax losses as of December 31, ExpirationYear the period 2017 2016 year2017 $958,696 $622,552 $- 20272016 954,656 325,961 325,961 20262015 426,620 - - 20252014 822,903 506,008 506,008 20242013 1,307,119 1,197,171 1,197,171 20232012 247,968 - - 20222010 2,041,023 1,781,104 1,781,104 20202009 1,782,046 1,627,157 1,627,157 2019

$8,541,031 $6,059,953 $5,437,401

Unrecognized deferred tax assets

As of December 31, 2017 and 2016, deferred tax assets that have not been recognized as theymay not be used to offset taxable profits amounted to NTD3,687,984 thousand, andNTD3,699,987 thousand, respectively.

Imputation credit informationAs of December 31,2017 2016

Balances of imputation credit amounts $-(Note 1)

$1,457,642(Note 2)

The actual creditable ratio for 2016 was 0%.

The Company’s earnings generated in the year ended December 31, 1997 and prior years havebeen fully appropriated.

(Note 1): The amendments to the Income Tax Act with retrospective effect from January 1,2018 were passed by the Legislative Yuan on January 18, 2018, and announced by thePresident on February 7, 2018. According to the amendments, the imputation tax schemeunder the integrated income tax system is repealed.

(Note 2): According to Article 66-6 of the Income Tax Act, the imputation credit ratio for theearnings of 2016 distributed to individual stockholders residing in R.O.C. would be half ofthe original ratio.

The assessment of income tax returns

As of December 31, 2017, the R.O.C. income tax authorities have assessed the income taxreturns of the Company through 2014.



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(29)Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributableto ordinary equity holders of the parent entity by the weighted average number of ordinaryshares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable toordinary equity holders of the Company (after adjusting for interest on the convertiblepreference shares) by the weighted average number of ordinary shares outstanding during theyear plus the weighted average number of ordinary shares that would be issued on conversionof all the dilutive potential ordinary shares into ordinary shares.


2017 2016Basic and diluted earnings (loss) per share:Net income (loss) (in thousands of NTD) $74,070 $(2,343,945)Weighted average number of ordinary shares outstanding

for basic and diluted earnings per share (in thousands) 2,233,870 2,259,391Basic and diluted earnings (loss) per share $0.03 $(1.03)

There were no other transactions involving ordinary shares or potential ordinary sharesbetween the balance sheet date and the issuance date of the financial statements.

7. Related party transactions

Related parties and relationship

Name of related parties Relationship with the CompanyTatung University Significant influence over the

CompanyTatung Senior High School Significant influence over the

CompanyChunghwa Picture Tubes, Ltd. (“CPT”) SubsidiariesTatung System Technologies Inc. (“TSTI”) SubsidiariesForward Electronics Co., Ltd. (“FD”) SubsidiariesSan Chih Semiconductor Co., Ltd.(“SCSC”) SubsidiariesTatung Fine Chemicals Co., Ltd. SubsidiariesTaiwan Telecommunication Industry Company Ltd. SubsidiariesCentral Research Technology Co. SubsidiariesTatung Consumer Products (Taiwan) Co., Ltd. Subsidiaries



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Name of related parties Relationship with the CompanyTatung SM-Cyclo Co. SubsidiariesShan-Chih Asset Development Co. (“SCAD”) SubsidiariesTatung Die Casting Co. SubsidiariesTatung (Thailand) Co., Ltd. SubsidiariesTatung Co. of Japan, Inc. SubsidiariesTatung Electronics (S) Pte. Ltd. SubsidiariesTatung Electric (Singapore) Pte. Ltd. SubsidiariesTatung Co. of America Inc. SubsidiariesTMX Logistics, Inc SubsidiariesTatung Electric Company of America, Inc. SubsidiariesTATUNG CZECH S.R.O SubsidiariesTatung Medical Healthcare Technologies Co., Ltd. SubsidiariesToes Opto-Mechatronics Co. SubsidiariesTatung Vietnam Co. Ltd. SubsidiariesTatung Electric Technology (VN) Co., Ltd. SubsidiariesShan Chih Investment Co., Ltd. SubsidiariesChih Sheng Investment Co., Ltd. SubsidiariesTaipei Industry Corporation SubsidiariesTatung Forever Energy Co., Ltd. SubsidiariesTatung Global Strategy Investment and Trading (BVI)Inc. (The liquidation procedure was completed inDecember 2017.)

Subsidiaries

Tatung Forestry and Construction Co. SubsidiariesGiantplus Technology Co., Ltd. (“Giantplus”) (CPT hassold all of its shares of Giantplus in March 2017.

Subsidiaries

Green Energy Technology Inc. (“GET”) SubsidiariesSheng Yang Energy Co., Ltd. SubsidiariesTatung (Shanghai) Co., Ltd SubsidiariesTatung Information Technology (Jiangsu) Co., Ltd. SubsidiariesTATUNG COMPRESSORS (ZHONG SHAN) CO. SubsidiariesTMX TECHNOLOGIES,INC. SubsidiariesWu-jiang Tatung Electronics Trading Co. LTD SubsidiariesSHAN-CHIH WIRE & CABLE TECHNOLOGY(WUJIANG) CO. SubsidiariesTATUNG SCIENCE & TECHNOLOGY,INC. SubsidiariesTatung Netherlands B.V. SubsidiariesTatung Medical Healthcare Technologies Co., Ltd. SubsidiariesApollo Solar Energy Co., Ltd. Subsidiaries



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(2) Purchase


2017 2016Subsidiaries $1,120,549 $1,458,905Associates 48,689 9,494Total $1,169,238 $1,468,399

The purchase price from related parties was determined through mutual agreement based onmarket conditions. The payment terms to related parties and third parties for domesticpurchases were both net 30-150 days, while the terms for overseas purchases were both net30-120 days.

(3) Accounts receivable – related parties


Entity with joint control or significant influence over theCompany $812 $1,409

SubsidiariesTatung Consumer Products (Taiwan) Co., Ltd. 1,740,419 1,531,309Others 458,071 421,477

Associates 19,209 2,635Other related parties - 1Total 2,218,511 1,956,831Less: allowance for doubtful accounts (1,119) (315)

Unrealized interest revenue – trade receivables frominstalment sales (2,168) (855)

Net $2,215,224 $1,955,661

(4) Construction receivables


SubsidiariesChunghwa Picture Tubes, Ltd. $17,299 $59,822Shan-Chih Asset Development Co. 7,113 5,247

$24,412 $65,069



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(5) Others receivable – related parties (current and non-current)


Loans receivable(Note) $- $1,421,009Reclassified from accounts receivable due to over-due:

Entity with joint control or significant influence over theCompany

329 135

SubsidiariesTatung Information Technology (Jiangsu) Co., Ltd. 559,330 1,186,274Green Energy Technology Inc. 989,537 553,219Shan-Chih Asset Development Co. 453,453 355,373Others 254,117 419,128

Associates 5,160 1,548Total 2,261,926 3,936,686Less: allowance for doubtful accounts (65,352) (84,168)Net 2,196,574 3,852,518Non-current portion (Reclassified as non-current assets) (1,168,155) (2,728,002)Current portion $1,028,419 $1,124,516

Note:

Loans receivable details are as below:

December 31, 2017

Name of related parties

2017Maximum

balance

Balance as ofDecember 31,

2017Interest

rates Interest revenueTatung Vietnam Co. Ltd. $495,653 $- 2% $10,139

Tatung Global Strategy Investmentand Trading (BVI) Inc. $815,641 $- 2% $16,458

December 31, 2016

Name of related parties

2016Maximum

balance

Balance as ofDecember 31,

2016Interest

rates Interest revenueTatung Vietnam Co. Ltd. $537,124 $537,124 2% $10,774

Tatung Global Strategy Investmentand Trading (BVI) Inc. $883,885 $883,885 2% $17,682



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(6) Prepayments


Subsidiaries $- $17,464

(7) Prepayments for business facilitiesAs of December 31,2017 2016

Subsidiaries $149,624 $-

(8) Accounts payable – related parties


SubsidiariesTatung Co. of Japan, Inc. $200,204 $55,741Others 135,255 178,728

Associates 28,783 111Total $364,242 $234,580

(9) Other payable– related parties



SubsidiariesTatung Forever Energy Co., Ltd. 37,000 -Tatung System Technologies Inc. 19,430 17,453Apollo Solar Energy Co., Ltd. 5,635 7,293Green Energy Technology Inc. 6,671 5,589Others 10,898 12,680

Associates 1,357 1,353Other related parties 50 50Total $81,111 $44,942



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(10)Acquisition of property, plant and equipment and intangible assets

Acquisition proceeds2017 2016

Subsidiaries

Apollo Solar Energy Co., Ltd. $381,915 $269,690

Tatung Forever Energy Co., Ltd. 88,190 135,532

Green Energy Technology Inc. - 124,918

Others 28,849 14,919

Associates 940 3,154

Total $499,894 $548,213

(11)Compensation of key management personnel


2017 2016

Short-term employee benefits $33,034 $29,434

Post-employment benefits 155 222

Total $33,189 $29,656

(12)Operating expense－rent expenditure


2017 2016Entity with joint control or significant influence over theCompany $30 $30Subsidiaries

Shan-Chih Asset Development Co. 127,996 130,287$128,026 $130,317

There were no significant differences in terms of rental between related parties and arm’slength transactions. The rent was decided by the local market, location, floor, and size.



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(3) Performance bond issued by financial institutions amounted to NTD846,907 thousand, andUSD131 thousand.

(4) The Company applied to Mega International Commercial Bank and Bank of Taiwan for creditlines to be issued for Tatung Co., of Japan, Inc. The promissory notes amounted toNTD972,400 thousand and NTD800,000 thousand. The Company applied to Industrial Bankof Taiwan, Fubon Bank and Far Eastern Commercial Bank for credit lines to be issued forCPT. The promissory notes of credit amounted to NTD1,000,000 thousand, NTD500,000thousand and NTD1,500,000 thousand.

(5) As of December 31, 2017, the significant contingencies and unrecognized contractcommitments of the Company are as follows:

A. King Pro Group (“King Pro”) and Ka Hung Exhibition Co., Ltd. (“Ka Hung”) contractedwith the Company as subcontractors to construct part of the Talin Power Plant, for whichtender the Company contracted with Kai Yuan Construction Co., Ltd. However, KingPro and Ka Hung failed to complete the construction upon deadline and both partiesclaimed to terminate the contract. King Pro and Ka Hung claimed that the Company hadnot paid construction examination fees, prepayments and advances and filed an actionagainst the Company to claim payment of NTD23,610 thousand. The next trial date wasset on May 8, 2018. In addition, the Company filed for provisional seizure against KingPro and Ka Hung on March 21, 2016 and claimed indemnities resulted from advances andcontract termination. The next trial date is April 11, 2018.

B. The Company engaged in a construction project with Taiwan Railways Administration,MOTC (“Taiwan Railways”). There is still a dispute regarding the overdue fine chargedby Taiwan Railways as the Company didn’t complete the project on time. The Companyhad engaged an attorney to file a mediation to the Public Construction Commission.

C. Yung Loong Engineering Corp. (Yung Loong) was engaged in a construction project,“BI-HAI machinery installing project”, with the Company, however, Yung Loongclaimed that the Company’s power generation set was defective and caused delay in theconstruction. Therefore, Yung Loong claimed payment of NTD56,997 thousand from theCompany. After failing a mediation on July 22, 2014, the action is pending at the court offirst instance. Yung Loong requested for an appraisal for the items in dispute on court.The appraisal report was filed on February 21, 2017 and the counterparty filed anapplication to the court for re-appraisal.

D. Compal Electronics, Inc. (“Compal”) made a public announcement on March 29, 2013 torequest the Company to purchase shares of Chunghwa Picture Tubes Ltd. held by Compaland it filed for arbitration to the Arbitration Association of the Republic of China. TheCompany received the arbitration appeal submitted by Compal from the Association onApril 3, 2013. The Company received on May 19, 2014 the arbitration award 102-Chung-Sheng-He-Zi No. 25 Arbitration Judgment, which was issued on May 16, 2014, from theArbitration Association of the Republic of China. The main context is as follows:



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a. The respondent (referring to the Company) shall make a payment to the claimant(“Compal” ) for NTD2,118,607 thousand. The first payment of NTD718,607thousand shall be paid within a month after the arbitration award is delivered to therespondent. The second payment of NTD700,000 thousand shall be paid within fourmonths after the arbitration award is delivered to the respondent. The third paymentof NTD700,000 thousand shall be paid within seven months after the arbitrationaward is delivered to the respondent. In addition, the Company shall pay the interestat an annual rate of 5% from April 3, 2013 to full repayment day.

b. The claimant shall deliver the private placement shares in question for thecorresponding payments in 374,274,704 shares, 364,583,334 shares and 364,583,333shares.

c. Other claims from Compal are dismissed.

d. Two thirds of the arbitration fees shall be borne by the claimant while the rest is borneby the respondent.

Compal was dissatisfied with the outcome of the arbitration award and filed an action torevoke the unfavorable part of the arbitration award. On January 11, 2017, the SupremeCourt of the ROC ruled to revoke the appeal of Compal. After this ruling, Compal cannotcontinue to argue against the arbitration. Both parties settled the shares on February 9,2017. The representatives of both parties were present to confirm accuracy of the stocktransferred and payments and then signed a memorandum.

E. The Company and Toshiba Electronics Components Taiwan Corporation (“Toshiba”)signed a contract regarding “the purchase and the assembly of motor and fan of theTaiwan Railways TILTING train and EMU800 train”. The Company completelyfollowed the blueprint of Toshiba, but Toshiba claimed that the products were faulty andclaimed damages amounting to NTD58,125 thousand, requiring the Company to pay. TheChinese Arbitration Association, Taipei made a judgement that it wouldn’t handle thiscase because of the jurisdiction. Toshiba also filed an arbitration in Tokyo. The JapanCommercial Arbitration Association held the first arbitration on October 17, 2017, andthe second one will be held on March 5, 2018.

F. The Company engaged in a smart electrical meter project with Taiwan Power Company,(“Taiwan Power”). The Company delivered the products according to the purchasecontracts signed and finished the inspection and acceptance, and payment collection.However, there is still a dispute regarding the warranty coverage of “Meter Interface Unit”of the smart electrical meter.



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G. Hwang Chang General Contractor Co., LTD (“Hwang Chang”) engaged in a constructionproject led by the East District Project Office of the Department of Rapid Transit Systems,Taipei City Government: “Taipei Urban Metro System Circular Line Sections CF640 toCF641A Electricity, Plumbing and Environmental Control Construction.” Such projectwas outsourced to the Company on August 3, 2014. However, the Company deemed thatHwang Chang delayed in delivering the construction site for about a year during thecontract period. The Company couldn’t start the construction and collect payments duringthe delay period. Hence, the construction cost was a lot higher than expected. TheCompany terminated the contract after giving notice to Hwang Chang. Afterwards,Hwang Chang claimed against the Company for damages of price differences betweencontract prices with other subcontractors. This legal action is under Taiwan Shilin DistrictCourt’s jurisdiction and the trial date would be decided when both parties provide relatedinformation.

H. The Company outsourced “Office relocation and expansion of Taiwan Taoyuan DistrictCourt and new construction project of Dang Cheng Building” to Da Hong ChungTechnical Engineering Co., Ltd (“Da Hong Chung”). The Company deemed that Da HongChung did not assign sufficient workers as contracted and hence delayed the constructionprogress. The Company notified Da Hong Chung to increase manpower for the project.However, Da Hong Chung refused to do so because it claimed that the Company had notpaid the additional construction fee. The Company terminated the contract on October 19,2017 and would claim damages against Da Hong Chung for the delay when theconstruction is completed. Da Hong Chung filed a legal action to the Taiwan TaipeiDistrict Court to claim its construction receivable in February 2018. As of now, Da HongChung has not paid the judgement fee, and the trial date hasn’t been decided. Therefore,there is no actual legal action at the moment.

I. United Aerotech System Corporation filed a legal action against the Company on January6, 2010, claiming payments of consultant fees amounting to NTD1,490 thousand. Bothparties reached a settlement in 2017. However, on March 12, 2018, the Company receivedthe indictment from United Aerotech System Corporation claiming consulting feeamounting to NTD32,643 thousand. The Company had appointed attorneys to handle theissue.

10. Significant disaster loss

None.

11. Significant subsequent events

(1) The amendments to the Income Tax Act were passed by the Legislative Yuan on January 18,2018, and announced by the President in February 2018. According to the amendments, thecorporate income tax rate was raised from 17% to 20%. If recalculated with the new tax rates,there might be impact of NTD95,728 thousand and NTD63,731 thousand on the deferred taxassets and deferred tax liabilities as of December 31, 2017, respectively.



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(2) According to the resolutions of the board of directors on February 1, 2018, the Company starteda joint venture with financial investors to establish a solar power project developmentcompany. The capital was set at NTD4,000,000 thousand.

(3) According to the resolutions of the board of directors on February 1, 2018, the Company agreedto invest in Tainan Qigu Yuguang District Phase 2 solar power plant. The plant would be builtby the Company’s fully-owned subsidiary, Tungyang Energy Co., Ltd. in the future.

(4) The responsible person of the Company has changed from W. S. Lin to Wen-Yen Lin Kuoaccording to the resolutions of the board of directors on February 1, 2018 and the alternationregistration with the Ministry of Economic Affairs was completed on February 8, 2018.

12. Others

(1) Categories of financial instruments

Financial assetsAs of December 31,2017 2016

Financial assets at fair value through profit or loss:Held for trading $2,994 $23,930Available-for-sale financial assets (including $31,538

reported as financial assets measured at cost) (includingthe non-current portion) 432,501 425,795

Held-to-maturity financial assets - 826,250Loans and receivables:

Cash and cash equivalents (excluding cash on hand anddemand deposit) 1,744,278 2,044,349

Debt instrument investments with no active market exists(including the non-current portion) 4,061,106 3,782,368

Notes receivable (including related parties) 262,273 256,817Accounts receivable (including related parties)(including

the construction receivable) 4,707,447 4,414,986Other receivables (including related parties)(including

the non - current portion) 2,388,106 4,105,418Other non - current assets－deposits-out 287,757 259,107Subtotal 13,450,967 14,863,045Total $13,886,462 $16,139,020



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89

Financial liabilitiesAs of December 31,2017 2016

Financial liabilities at amortized cost:Short-term loan $4,875,438 $3,968,758Short-term notes and bills payable 301,848 199,923Payables (including related parties)(including non-

current)4,283,164 6,351,344

Loan (including the current portion) 28,238,370 25,515,258Deposits in 1,755 4,390Subtotal 37,700,575 36,039,673

Financial liabilities at fair value through profit or loss:Held-for-trading 627 260Total $37,701,202 $36,039,933

(2) Financial risk management objectives and policies

The Company’s risk management objectives are to manage market risk, credit risk andliquidity risk related to its operating activities. The Company identifies measures and managesthe aforementioned risks based on policy and risk preference.

The Company has established appropriate policies, procedures and internal controls forfinancial risk management. Before entering into significant financial activities, due approvalprocess by the board of directors and audit committee must be carried out based on relatedprotocols and internal control procedures. The Company complies with its financial riskmanagement policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market prices. Market risks comprise of currency risk, interestrate risk, and other price risk (such as equity price risk).

In practice, it is rarely the case that a single risk variable will change independently from otherrisk variables, there is usually interdependencies between risk variables. However thesensitivity analysis disclosed below does not take into account the interdependencies betweenrisk variables.



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Foreign currency risk

The Company’s exposure to the risk of changes in foreign exchange rates relates primarily tothe Company’s operating activities (when revenue or expense are denominated in a differentcurrency from the Company’s functional currency) and the Company’s net investments inforeign subsidiaries.

The Company has certain foreign currency receivables to be denominated in the same foreigncurrency with certain foreign currency payables, therefore natural hedge is received. TheCompany also uses forward contracts to hedge the foreign currency risk on certain itemsdenominated in foreign currencies. Hedge accounting is not applied as they did not qualify forhedge accounting criteria. Furthermore, as net investments in foreign subsidiaries are forstrategic purposes, they are not hedged by the Company.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates onthe Company’s profit is performed on significant monetary items denominated in foreigncurrencies as of the end of the reporting period. The Company’s foreign currency risk ismainly related to the volatility in the exchange rates for USD and JPY.

The information of the sensitivity analysis is as follows:

A. When NTD appreciates or depreciates against USD by 1%, the profit for the years endedDecember 31, 2017 and 2016 will increase (decrease) by NTD3,104 thousand andNTD14,788 thousand respectively.

B. When NTD appreciates or depreciates against JPY by 1%, the profit for the years endedDecember 31, 2017 and 2016 would will increase (decrease) by NTD685 thousand andNTD1,228 thousand respectively.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrumentwill fluctuate because of changes in market interest rates. The Company’s exposure to the riskof changes in market interest rates relates primarily to the Company’s loans and receivablesat variable interest rates, bank borrowings with fixed interest rates and variable interest rates.

The Company manages its interest rate risk by having a balanced portfolio of fixed andvariable loans and borrowings and entering into interest rate swaps. Hedge accounting doesnot apply to these swaps as they do not qualify for it.



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The interest rate sensitivity analysis is performed on items exposed to interest rate risk as ofthe end of the reporting period, including investments and borrowings with variable interestrates and interest rate swaps. At the balance sheet date, a change of 10 basis points of interestrate could cause the profit for the years ended December 31, 2017 and 2016 to increase(decrease) by NTD31,091 thousand and NTD13,501 thousand, respectively.

Equity price risk

The Company’s listed and unlisted equity securities are susceptible to market price risk arisingfrom uncertainties about future values of the investment securities. The Company’s listedequity securities are classified under held for trading financial assets or available-for-salefinancial assets, while unlisted equity securities are classified as available-for-sale. TheCompany manages the equity price risk through diversification and placing limits onindividual and total equity instruments. Reports on the equity portfolio are submitted to theCompany’s senior management on a regular basis. The Company’s board of directors reviewsand approves all equity investment decisions.

At the balance sheet date, a decrease of 1% in the price of the listed equity securities classifiedunder available-for-sale could have an impact of NTD2,487 thousand and NTD2,590thousand on the Company’s equity for the years ended December 31, 2017 and 2016,respectively.

(4) Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a contract, leadingto a financial loss. The Company is exposed to credit risk from operating activities (primarilyfor accounts receivables and notes receivables) and from its financing activities, includingbank deposits and other financial instruments.

Customer credit risk is managed by each business unit subject to the Company’s establishedpolicy, procedures and control relating to customer credit risk management. Credit limits areestablished for all customers based on their financial position, rating from credit ratingagencies, historical experience, prevailing economic condition and the Company’s internalrating criteria etc. Certain customer’s credit risk will also be managed by taking creditenhancing procedures, such as requesting for prepayment or insurance.

As of December 31, 2017 and 2016, amounts receivables from top ten customers represented65.94% and 58.19% of the total accounts receivables of the Company, respectively. The creditconcentration risk of other accounts receivables is insignificant.



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Credit risk from balances with banks, fixed income securities and other financial instrumentsis managed by the Company’s treasury in accordance with the Company’s policy. TheCompany only transacts with counterparties approved by the internal control procedures,which are banks and financial institutions, companies and government entities with goodcredit rating and with no significant default risk. Consequently, there is no significant creditrisk for these counter parties.

(5) Liquidity risk management

The Company’s objective is to maintain a balance between continuity of funding andflexibility through the use of cash and cash equivalents, highly liquid equity investments, bankborrowings, convertible bonds and finance leases. The table below summarizes the maturityprofile of the Company’s financial liabilities based on the contractual undiscounted paymentsand contractual maturity. The payment amount includes the contractual interest. Theundiscounted payment relating to borrowings with variable interest rates is extrapolated basedon the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial instruments

Less Than 1 Year 2-3 Years 4-5 Years

More than 5 Years Total

December 31, 2017Loans (including contracted

interests) $6,055,052 $5,116,838 $2,226,039 $22,386,919 $35,784,848Short-term notes and bills

payable 302,000 - - - 302,000Payables (including related

parties) (including non-current portion) 4,249,800 28,598 4,766 - 4,283,164

Deposit-in 1,755 - - - 1,755

December 31, 2016Loans (including contracted

interests) 5,968,002 2,809,486 22,688,715 177,981 31,644,184Short-term notes and bills

payable 200,000 - - - 200,000Payables (including related

parties) (including non-current portion) 6,237,480 36,213 25,651 - 6,299,344

Deposit-in 4,390 - - - 4,390



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Derivative financial instruments

Less Than 1 Year 2-3 Years 4-5 Years

More than 5 Years Total

December 31, 2017Flow-in $- $- $- $- $-Flow-out (627) - - - (627)Net $(627) $- $- $- $(627)

December 31, 2016Flow-in $5,071 $- $- $- $5,071Flow-out (260) - - - (260)Net $4,811 $- $- $- $4,811

The above tables about the disclosures of derivative financial instruments used theundiscounted net cash flow.


A. the methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date. Thefollowing methods and assumptions were used by the Company to measure or disclose thefair values of financial assets and financial liabilities:

(a) The carrying amount of cash and cash equivalents, receivables, payables and othercurrent liabilities approximate their fair value due to their short maturities.

(b) For financial assets and liabilities traded in an active market with standard terms andconditions, their fair value is determined based on market quotation price (includinglisted equity securities, beneficiary certificates, bonds and futures etc.) at the reportingdate.

(c) Fair value of equity instruments without market quotations (including privateplacement of listed equity securities, unquoted public company and private companyequity securities) are estimated using the market method valuation techniques basedon parameters such as prices based on market transactions of equity instruments ofidentical or comparable entities and other relevant information (for example, inputssuch as discount for lack of marketability, P/E ratio of similar entities and Price-Bookratio of similar entities).



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(d) Fair value of debt instruments without market quotations, bank loans, bonds payableand other non-current liabilities are determined based on the counterparty prices orvaluation method. The valuation method uses DCF method as a basis, and theassumptions such as the interest rate and discount rate are primarily based on relevantinformation of similar instrument (such as yield curves published by the TaipeiExchange, average prices for Fixed Rate Commercial Paper published by Reuters andcredit risk, etc.)

(e) The fair value of derivatives which are not options and without market quotations, isdetermined based on the counterparty prices or discounted cash flow analysis usinginterest rate yield curve for the contract period. Fair value of option-based derivativefinancial instruments is obtained using on the counterparty prices or appropriate optionpricing model (for example, Black-Scholes model) or other valuation method (forexample, Monte Carlo Simulation).

B. The carrying amount of the Company’s financial instruments measured at amortized costsuch as cash and cash equivalents, accounts receivables, accounts payable, long-term andshort-term loans, short-term notes and bills payable approximate their fair value.

C. Fair value measurement hierarchy for financial instruments

Please refer to Note 12(8) for fair value measurement hierarchy for financial instrumentsof the Company.

(7) Derivative financial instruments

The Company’s derivative financial instruments include forward currency contracts andembedded derivatives. The related information for derivative financial instruments notqualified for hedge accounting and not yet settled as at December 31, 2017 and 2016 is asfollows:

Forward exchange contracts

Forward foreign exchange contracts to manage exposure part partial transactions, but notdesignated as hedging instruments:

December 31, 2017

Currency PeriodAmount

(thousands)Buying currencyexchange forward Buy USD Sell NTD 2017.09~2018.03 USD2,600

Buy RMB Sell USD 2017.12~2018.01 RMB6,621Buy JPY Sell USD 2017.11~2018.02 JPY167,430



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December 31, 2016

Currency PeriodAmount

(thousands)Buying currencyexchange forward Buy USD Sell NTD 2016.11~2017.03 USD9,500

Buy RMB Sell USD 2016.12~2017.01 RMB16,974Buy USD Sell JPY 2016.10~2017.01 JPY500

Exchange options

December 31, 2017


Counterpartybank

Foreignexchange

rate

Foreign exchange rateon the date ofsettlement FX Term of settlement (USD in thousands)

A USD/CNH FX > 6.68 Executing price at 6.68 to sell USD 1,000B USD/JPY FX < 110.60 Executing price at 110.60 to buy USD 1,000

As of December 31, 2017, foreign exchange options contracts that had settled amounted toUSD77,200 thousand, EUR3,000 thousand, and the remaining unsettled contracts amountedto USD2,000 thousand, with a fair value of NTD(36) thousand (including royalties amountedto NTD175 thousand and unrealized gain amounted to NTD139 thousand), recognized asfinancial liabilities carried at fair value through profit or loss - current.

December 31, 2016


Counterpartybank

Foreignexchange

rate

Foreign exchange rateon the date ofsettlement FX Term of settlement (USD in thousands)

A USD/TWD FX > 32.90 Executing price at 32.90 to sell USD1,000

B USD/TWD FX < 31.36 Executing price at 31.36 to buy USD1,000



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As of December 31, 2016, foreign exchange options contracts that had settled amounted toUSD150,000 thousand, EUR 500 thousand, and the remaining unsettled contracts amountedto USD2,000 thousand, with a fair value of NTD(260) thousand (including royalties amountedto NTD390 thousand and unrealized gain amounted to NTD130 thousand), recognized asfinancial liabilities carried at fair value through profit or loss - current.

The counterparties of the aforementioned derivative transactions are reputable financialinstitutions with good credit ratings, the credit risk is fairly low.

The forward foreign exchange contracts aim at hedging the exchange rate risk of net assets ornet liabilities with cash inflows or outflows upon maturity. The company also has sufficientworking capital so there’s no significant cash flow risk.

(8) Fair value measurement hierarchy

(a) Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financialstatements are categorized within the fair value hierarchy, based on the lowest level inputthat is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs aredescribed as follows:

Level 1– Quoted (unadjusted) market prices in active markets for identical assets orliabilities that the entity can access at the measurement date

Level 2 – Inputs other than quoted prices included within Level 1 that are observablefor the asset or liability, either directly or indirectly

Level 3 – Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurringbasis, the Company determines whether transfers have occurred between Levels in thehierarchy by re-assessing categorization at the end of each reporting period.

(b) Fair value measurement hierarchy of the Company’s assets and liabilities

The Company does not have assets that are measured at fair value on a non-recurringbasis. Fair value measurement hierarchy of the Company’s assets and liabilitiesmeasured at fair value on a recurring basis is as follows:



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December 31, 2017

Level 1 Level 2 Level 3 Total

Financial assets

Financial assets at fair value

through profit or loss:

Forward exchange contracts $- $- $- $-

Open-end funds - 2,994 - 2,994

Available-for-sale financial assets:

Stocks 248,688 - 152,275 400,963


Financial liabilities at fair value


Foreign currency option - 36 - 36

Forward exchange contracts - 591 - 591

December 31, 2016

Level 1 Level 2 Level 3 Total

Financial assets

Financial assets at fair value


Forward exchange contracts $- $5,071 $- $5,071

Open-end funds - 18,859 - 18,859

Available-for-sale financial assets:

Stocks 259,049 - 135,208 394,257


Financial liabilities at fair value


Forward exchange contracts - 260 - 260

Transfers between Level 1 and Level 2 during the period

There were no transfers between Level 1 and 2 for the years ended December 31, 2017and 2016.



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Reconciliation for fair value measurements in Level 3 of the fair value hierarchy formovements during the period is as follows:

StocksJanuary 1, 2017 $135,208Total income (loss) recognized, 2017:

Recognized in other comprehensive income, 2017 (recognizedunder unrealized gain or loss on valuation of Available-for-sale financial assets) 17,067

December 31, 2017 $152,275

January 1, 2016 $130,065Total income (loss) recognized, 2016:

Recognized in other comprehensive income, 2016 (recognizedunder unrealized gain or loss on valuation of Available-for-sale financial assets) 5,143

December 31, 2016 $135,208

Information on significant unobservable inputs to valuation in Level 3

Description of significant unobservable inputs to valuation of recurring fair valuemeasurements categorized within Level 3 of the fair value hierarchy is as follows:

As at December 31, 2017

Valuation

techniques

Significant

unobservable inputs

Quantitative

information

Relationship

between inputs

and fair value

Sensitivity of the input

to fair value

Available-for-sale


marketability


discount for lack

of marketability,

the lower the fair

value of the stocks

1% increase (decrease)

in the discount for lack

of marketability would

result in increase

(decrease) in the

Company’s equity by

NTD1,523 thousand



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As at December 31, 2016

Valuation

techniques

Significant

unobservable inputs

Quantitative

information

Relationship

between inputs

and fair value

Sensitivity of the input

to fair value

Available-for-sale


marketability


discount for lack

of marketability,

the lower the fair

value of the stocks

1% increase (decrease)

in the discount for lack

of marketability would

result in increase

(decrease) in the

Company’s equity by

NTD1,352 thousand

Valuation process used for fair value measurements categorized within Level 3 of the fairvalue hierarchy

The Company’s investment and accounting department is responsible for validating thefair value measurements and ensuring that the results of the valuation are in line withmarket conditions, based on independent and reliable inputs which are consistent withother information, and represent exercisable prices. The Department analyzes themovements in the values of assets and liabilities which are required to be re-measured orre-assessed as per the Group’s accounting policies at each reporting date to ensure thatthe valuation result is reasonable.

(c) Fair value measurement hierarchy of the Company’s assets and liabilities not measuredat fair value but for which the fair value is disclosed

As at December 31, 2017Level 1 Level 2 Level 3 Total

Investments accounted for using the equitymethod (please refer to Note 6 (11)) $3,026,637 $- $- $3,026,637

As at December 31, 2016Level 1 Level 2 Level 3 Total

Investments accounted for using the equitymethod (please refer to Note 6 (11)) $2,378,616 $- $- $2,378,616



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(9) Significant assets and liabilities denominated in foreign currencies

The exchange rates used to translate assets and liabilities denominated in foreign currenciesare disclosed as follows:

Foreign currency-dollar, NTD-thousandsAs of December 31, 2017

Foreign currency Exchange rate NTDFinancial Assets -Monetary items

USD $52,228,171 29.7600 $1,554,310JPY 660,376,800 0.26420 174,472EUR 878,275 35.5700 31,240RMB 539,664 4.55450 2,458

Non-Monetary itemsUSD 9,835,510 29.7600 292,705RMB 165,718,414 4.55450 754,764THB 492,517,515 0.91760 451,934JPY 2,421,667,298 0.26420 639,805SGD 4,304,247 22.2600 95,813MXN 101,031,135 1.51062 152,619VND (171,574,641,667) 0.00131 (224,847)

Financial Liabilities -Monetary items

USD 62,659,872 29.7600 1,864,758JPY 919,773,126 0.26420 243,004EUR 1,455,924 35.5700 51,787RMB 2,476,238 4.55450 11,278



USD $22,512,760 32.2500 $726,036JPY 224,255,614 0.27560 61,805EUR 281,727 33.9000 9,551RMB 1,346,984 4.64898 6,262

Non-Monetary itemsUSD 10,562,527 32.2500 340,642RMB 179,840,984 4.64898 836,078THB 472,079,084 0.9050 427,232JPY 2,273,292,089 0.27560 626,519SGD 4,762,600 22.29 106,158MXN 152,070,830 1.5571 236,785VND (143,666,313,030) 0.00142 (204,006)

Financial Liabilities -Monetary items

USD 68,366,685 32.2500 2,204,826JPY 699,251,330 0.27560 192,714EUR 632,899 33.90000 21,455RMB 7,840,364 4.64898 36,450



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The Company has various kinds of foreign currency transactions, and hence it’s impracticalto disclose the foreign exchange information of monetary financial assets and liabilities byeach significant foreign currencies. For the years ended 2017 and 2016, the foreign currencyexchange losses were NTD200,715 thousand and NTD40,058 thousand, respectively.

The above information is disclosed based on the carrying amount of foreign currency (afterconversion to functional currency).

(10)Capital management

The primary objective of the Company’s capital management is to ensure that it maintains astrong credit rating and healthy capital ratios in order to support its business and maximizeshareholder value. The Company manages its capital structure and makes adjustments to it, inlight of changes in economic conditions. To maintain or adjust the capital structure, theCompany may adjust dividend payment to shareholders, return capital to shareholders or issuenew shares.

(11)On December 7, 2015, the Supreme Court of the ROC revoked the judgment made by theTaiwan High Court on the Nature Worldwide Technology Co., case and remanded the case tothe Taiwan High Court. On August 23, 2017, former Chairman Lin was sentenced to fixed-term imprisonment and penalties by Taiwan High Court. Former Chairman Lin appealed tothe the Supreme Court of the ROC and the the Supreme Court of the ROC confirmed that alldocuments were successfully transferred.

According to the amended regulations regarding confiscation, the items to be confiscated shallbe possessions owned by the ultimate beneficiary. However, former Chairman Lin did nothave any actual gains and was not the ultimate beneficiary. The judgement seemed to bemistaken. Shang Chih Investment Co., Ltd. (“Shang Chih”) discovered the fraudulentfinancial reporting after investing in Nature Worldwide Technology Co. The financialstatements were modified and the fund from the fraudulent loan was nowhere to be found.Because of the loan fraud, Nature Worldwide Technology Co., was unable to pay back theirbank loans. In consideration of the Group’s credibility, the Company increased the capital ofNature Worldwide Technology Co., to pay back their bank loans. Former Chairman Lin neverhandled any of the payment and was not the final beneficiary.

As for guarantee responsibilities, the confiscation of guarantee expected gains is actuallyagainst the purpose of the legislation and related regulations of confiscation. Also, thecalculation of illegal income did not follow the rule of logic and empirical rule. The originaljudgement was wrong in both acknowledgement of the facts and legal citations. FormerChairman Lin had appointed an attorney to appeal to the the Supreme Court of the ROC.



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H. Receivables from related parties with amounts exceeding the lower of NTD100 million or20% of capital stock: refer to Attachment 8.

I. Engaging in derivative transactions: refer to Note 6 and Note 12 in the parent companyonly financial statements.

J. Intercompany Relationships and Significant Intercompany Transactions: refer toAttachment 12.

(2) Information on investees:

A. Of the investee company directly or indirectly has significant influence or control over,their investee companies’ information: refer to Attachment 10.

B. Of the investee company who directly or indirectly has control, the following informationis disclosed:

(a) Financing provided to others: refer to Attachment 1.

(b) Endorsement/Guarantee provided to others: refer to Attachment 2.

(c) Securities held: refer to Attachment 3.

(d) Individual securities acquired or disposed of with accumulated amount exceeding thelower of NTD300 million or 20% of the capital stock: refer to Attachment 4.

(e) Acquisition of real estate in the amount exceeding the lower of NTD300 million or20% of capital stock: refer to Attachment 5.

(f) Disposal of real estate up to the amount exceeding the lower of NTD300 million or20% of capital stock: refer to Attachment 6.

(g) Related party transactions for purchases and sales amounts exceeding the lower ofNTD100 million or 20% of capital stock: refer to Attachment 7.

(h) Receivables from related parties with amounts exceeding the lower of NTD100 millionor 20% of capital stock: refer to Attachment 8.

(i) Engaging in derivative transactions: Attachment 9.



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C. Information on investments in mainland China:

(a) The investee company name, main business, paid-in capital, investment, capitaloutflow, ownership, investment gains and losses, ending balance of investment,repatriation of investment income and have to go to the mainland investment limitscenario: refer to Attachment 11.

(b) With the investee companies directly or indirectly through a third country followingthe occurrence of significant transactions, prices, payment terms and unrealized gainsand losses were as follows:

i. Ending balance and percentage, purchase amount and percentage of relatedpayables: refer to Attachment 7.

ii. Sales amount and percentage of the balance and percentage of the relatedreceivables: refer to Attachment 7.

iii.Gains and loss on the transaction amount of property: None.iv. Endorsement guarantees or collateral ending balance and purpose: refer to

Attachment 2.v. The highest balance of financing, the total ending balance, and interest rate range

and current total interest: refer to Attachment 1.vi. Other transactions that have a significant impact on the profit or loss or financial

position of the current period, such as the provision of services or received, etc.:None.

Please refer to page 255 to 265 in the consolidated financial statements for the Attachment 1 to 8 to the parent company only financial statements, which are the Attachment 1 to 8 to the consolidated financial statements. Please refer to page 242 to 243 in the consolidated financial statements for the Attachment 9 to the parent company only financial statements, which are the information related to the derivatives financial instruments of the subsidiaries in the consolidated financial statements.Please refer to page 266 to 272 in the consolidated financial statements for the Attachment 10 to 12 to the parent company only financial statements, which are the Attachment 9 to 11 to the consolidated financial statements.

TATUNG COMPANY Chairman