Stock Code
5263

Brogent

Technologies

Inc.

2017
Annual Report
Notice to readersThis English-version annual report is a summary translation of the Chinese version and is not an
official document of the shareholders’ meeting. If there is any discrepancy between the English andChinese versions, the Chinese version shall prevail.

Date Printed: 02 April, 2018
Taiwan Stock Exchange Market Observation Post System: http://newmops.twse.com.tw1. Name, Title, Contact No., and Email of the Company's spokesperson
Spokesperson name: Chih-Hung Ouyang
Title: President
Telephone:(07)537-2869
Email:stock@brogent.com
Representative spokesperson: Hui-Chuang Lin
Title: Chief Financial Officer
Telephone:(07)537-2869
Email:stock@brogent.com
2. Head office address and telephone no.
Head office: Number 9, Fuxing 4th Rd., Qianzhen District, Kaohsiung City (80661) Taiwan
Telephone:(07)537-2869
3. Name, address, website, and telephone no. of stock transfer agency
Stock transfer institute: Share Administration Agency, Taishin International Bank
Address: No.96, Sec. 1, Jianguo N. Rd., Jhongshan District, Taipei City 10489, Taiwan
Website:www.taishinbank.com.tw
Telephone:(02)2504-8125
4. External auditor for most recent financial statement
External auditor: Yielson Chang, CPA
Yu-Chieh Lo, CPA
Accounting firm: Grant Thornton Taiwan
Address: 13F.-2&-3, No.91 Chung Shan 2nd Road, Kaohsiung, Taiwan
Website:www.gti.com.tw
Telephone:(07)537-2589
5. Name of overseas trading office of listed valuable securities and method of searching for
information of valuable overseas securities: None.
6. Company website:www.brogent.com

Table of Contents
Page
I.

LETTER TO SHAREHOLDERS ............................................................................................ - 1 -II. COMPANY PROFILE ............................................................................................................. - 6 1.

DATE OF ESTABLISHMENT ................................................................................................... - 6 -2.

COMPANY HISTORY............................................................................................................... - 6 -III. CORPORATE GOVERNANCE REPORT.............................................................................. - 9 1.

ORGANIZATIONAL SYSTEM ................................................................................................. - 9 -2.

PROFILE OF DIRECTORS, SUPERVISORS, PRESIDENT, VICE PRESIDENTS, ASSISTANT
VICE PRESIDENTS, AND DEPARTMENT AND BRANCH DIRECTORS ................................. 11

4. IMPLEMENTATION OF CORPORATE GOVERNANCE .............................................................. 20
5. INFORMATION ON FEES TO CPA ............................................................................................... 44
6.

CHANGES TO CPA INFORMATION .......................................................................................... 45

7.

THE CHAIRMAN, PRESIDENT, FINANCIAL OR ACCOUNTING MANAGER OF THE
COMPANY WHO HAD WORKED FOR THE CERTIFYING ACCOUNTING FIRM OR ITSAFFILIATED ENTERPRISE IN THE PAST YEAR ..................................................................... 45

8.

SHARE TRANSFER BY DIRECTORS, SUPERVISORS, MANAGERS AND SHAREHOLDERSHOLDING MORE THAN 10% INTERESTS AND CHANGES TO SHARE PLEDGING BY THEM
IN THE PAST YEAR AND UP TO THE DATE OF REPORT ....................................................... 46

9.

INFORMATION ON RELATIONSHIP BETWEEN ANY OF THE TOP TEN SHAREHOLDERS(RELATED PARTY, SPOUSE, OR KINSHIP WITHIN THE SECOND DEGREE) ....................... 47

10. THE SHAREHOLDING OF THE COMPANY, DIRECTOR, SUPERVISOR, MANAGEMENT
AND AN ENTERPRISE THAT IS DIRECTLY OR INDIRECTLY CONTROLLED BY THE
COMPANY IN THE INVESTED COMPANY, AND CONSOLIDATE THE SHAREHOLDINGPERCENTAGE:........................................................................................................................... 48
IV. PLACEMENT SITUATION ...................................................................................................... 49
1.

COMPANY CAPITAL AND SHARE CAPITAL........................................................................... 49

2.

CORPORATE BOND (INCLUDING OVERSEAS CORPORATE BOND) ................................... 56

3.

ISSUANCE OF PREFERRED STOCKS ...................................................................................... 58

4.

ISSUANCE OF GLOBAL DEPOSITARY RECEIPTS (GDR) ...................................................... 58

5.

EXERCISE OF EMPLOYEE STOCK OPTION PLAN (ESOP) .................................................... 58

6.

RESTRICTED STOCK AWARDS................................................................................................ 58

7.

MERGER AND ACQUISITION .................................................................................................. 58

8.

ISSUANCE OF NEW SHARES FOR ACQUISITION OF SHARES OF OTHER COMPANIES ... 58

9.

IMPLEMENTATION OF CAPITAL ALLOCATION PLAN.......................................................... 58

V. BUSINESS OVERVIEW ........................................................................................................... 59
I.

BUSINESS ACTIVITIES............................................................................................................. 59

II. MARKET, PRODUCTION AND SALES ..................................................................................... 70
III. EMPLOYEE INFORMATION IN THE PAST 2 YEARS TO THE DATE OF THE ANNUALREPORT...................................................................................................................................... 84
IV. ENVIRONMENTAL PROTECTION EXPENDITURE INFORMATION ...................................... 84
V. LABOR RELATIONS.................................................................................................................. 87
VI. IMPORTANT CONTRACTS ....................................................................................................... 90
VI. FINANCIAL OVERVIEW......................................................................................................... 91
1. CONDENSED BALANCE SHEETS AND STATEMENT OF INCOME (2011 - 2015) .................... 91
2.

FINANCIAL ANALYSIS ............................................................................................................. 96

3.

SUPERVISOR REVIEW REPORT............................................................................................. 100

4. FINANCIAL REPORT AND CPA REVIEW REPORT .................................................................. 100
5. INDIVIDUAL FINANCIAL REPORT REVIEWED BY CPA (2011 - 2015) ................................... 100
6. FINANCIAL DIFFICULTIES AND CORPORATE EVENTS ENCOUNTERED BY THE COMPANY
AND AFFILIATES IN THE PAST TWO YEARS AND UP TO THE DATE OF REPORT THATHAVE MATERIAL IMPACT ON THE FINANCIAL STATUS OF THE COMPANY. .................. 100
VII.PRECAUTIONS OF REVIEW AND ANALYSIS OF FINANCIAL STATUS AND BUSINESSPERFORMANCE .................................................................................................................... 101
1.

FINANCIAL STATUS ............................................................................................................... 101

2.

FINANCIAL PERFORMANCE ................................................................................................. 102

3. CASH FLOWS ............................................................................................................................. 103
4. EFFECT OF MAJOR CAPITAL SPENDING ON FINANCIAL POSITION AND BUSINESSOPERATION ............................................................................................................................. 104
5. INVESTMENT POLICY IN THE PAST YEAR, PROFIT/LOSS ANALYSIS, IMPROVEMENT
PLAN, AND INVESTMENT PLAN FOR THE COMING YEAR ............................................... 104
6. ANALYSIS OF RISKS IN RECENT YEARS UP TO THE PUBLISHING DATE OF THE ANNUALREPORT.................................................................................................................................... 105
I.

OTHER IMPORTANT EVENTS.................................................................................................110

VIII.

IMPORTANT NOTICES.................................................................................................. 111

1.

PROFILE ON AFFILIATES AND SUBSIDIARIES..................................................................... 111

2.

PRIVATE PLACEMENT OF CORPORATE BONDS IN THE PAST YEARS TO THE DATE OF
THE ANNUAL REPORT ............................................................................................................115

3.

HOLDING OR DISPOSAL OF STOCKS OF THE COMPANY BY SUBSIDIARIES IN THE PASTYEAR AND UP TO THE DATE OF REPORT: NOT APPLICABLE. ...........................................118

4.

OTHER SUPPLEMENTAL INFORMATION ..............................................................................118

IX. ITEMS OF IMPACT OF INTERESTS OF SHAREHOLDERS OR STOCK PRICE .............118
APPENDIX ......................................................................................................................................119
APPENDIX 1：STATEMENT OF INTERNAL CONTROL SYSTEM ...............................................119
APPENDIX 2：SUPERVISOR’S REVIEW REPORT ....................................................................... 120
APPENDIX 3：CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’REPORT.................................................................................................................................... 121

I. Letter to Shareholders
Dear Shareholders,

We thank you for your support to Brogent Technologies (hereafter "Brogent") and forattending our annual 2018 shareholders' meeting amidst your busy schedule.
In 2017, Brogent’s revenue amounted to NT$1,514 million. The gross profit was
NT$725 million. The operating profit was NT$340 million. The net income was NT$271
million, the earnings per share reached NT$6.00. The total amount of new contract signed
in 2017 broke our company’s record again. There was an 8.5% growth on the total amountof new contracts in 2017. In addition to construction contracts, film production and service
and maintenance revenue made significant improvement over the year.

In 2017, there were three flying theaters opening in Europe, i.e. German, Spain andNetherland. Among them, Europa Park had an outstanding record by its over 2 million
visitors within only 6 months. In addition, the i-Ride “Voletarium” of Europa Park hasawarded Europe’s Best New Ride, which further established the leading status ofBrogent’s brand in the high-end theme park market. As for the Asian market, we expectthat Chinese theme parks will head for a high-value direction in the near future; Brogent
had several sales contracts signed with premium Chinese franchise companies. Starting
this year, our revenue will benefit from the mid-to-low end market; though the revenue
from high-end market will grow steadily, the profit from the mid-to-low end one will surge
significantly. The equipment maintenance cycle of the mid-to-low end market is relatively
short; therefore, we look forward to seeing that the service and maintenance revenue
becomes our next profit driver which cannot be underestimated. The Company continues
to expand its scale of operations and diversification; in the foreseeable future, theoperation of Brogent will be driven by three aspects, i.e. the high-end market, themid-to-low end market and film and equipment maintenance.
For years, the Company continues to engage in advanced technological R&D andinnovative applications, and implement product-centric design and research as well as-1-systematic management to maintain the leading position of products and technologies. Our
new product Q-Ride launched in IAAPA Attractions Expo in Orlando, Florida, U.S.A.
Q-Ride combines AR and VR technology; with a VR gaggle, Q-Ride can extend theexperience of premium theme parks to the undeveloped and unsatisfied markets. The
current market looks high on this new product; we are confident to win more newcontracts through it!

As Brogent expands its operation globally and the profit grows steadily, we haveinitiated the construction of Taiwan’s theme park industry supply chain. Last October, we
held our “i-Ride Experience Center” grand opening ceremony in our Kaohsiung
headquarters; the center has earned positive reviews. The “i-Ride Experience Center” hasrun by its subsidiary “Brogent Global Inc.” for the operation execution and been supported
by Brogent for the integration of software and hardware. We expect to connect Taiwan’s
premium manufacturers through this “store-front-and-factory-back” business model, inorder to present sophisticated craftworks of Taiwan to the world. Looking ahead, theCompany and all of its employees will continue to achieve the Company's various
operating goals in gratitude of each and every shareholder's long-term support andencouragement.

Our best wishes for the health and prosperity of all our shareholders!

Chairman, Chung-Ming Huang-2-

1. Accomplishments in 2017
(1) Business Plan Implementation Outcomes in 2017
Unit: NT$1,000

Year

2016

2017

Change(amount)% Change

Sales revenue

881,670

1,514,469

632,799

71.77

Gross profit

444,937

725,335

280,398

63.02

Operatingexpenses

336,429

384,601

48,172

14.32

Operatingincome108,508

340,734

232,226214.02

Net income(loss) before tax

129,584

327,563

197,979152.78Net income(loss)

106,112271,181

165,069

155.56Item(2) 2017 Budget Execution
According to the Regulations Governing the Publication of Financial Forecastsof Public Companies, the Company did not need to compile a financial forecast for
2017, and therefore this section is not disclosed.

(3) Analysis of Financial Gains and Losses and Profitability
Unit: NT1,000

Year
Item
Financial
structure (%)
Solvency (%)

Profitability

Debt-to-assets ratio
Long-term fund to property, plantand equipment (fixed assets) ratio
Current ratio
Quick ratio
Times interest earned
Return on assets (%)
Return on equity (%)
Paid-in capital to income before tax(%)
Net profit margin (%)
Earnings per share (NT$)
-3-

2016

2017

19.56

19.26

370.76332.31

728.64537.882615.713.45
4.08

703.72451.845351.09
8.17
9.95

29.00

73.32

12.04
2.30

17.91
6.0

(4) Research and Development
To continuously enhance the Company’s competitiveness, the Company
has always actively invested in R&D efforts. In 2016 and 2017, it has
expended a total of NT$95.569 million and NT$129.949 million in R&D,
respectively accounting for10.84% and 8.58% of the net operating income.
2017 R&D expense was lowered maily because the development of new
projects was encluded in the cost of good sold.

(5) Impacts of External Competitive Environment, Regulatory
Environment, and Overall Operation Environment
The Company operates its business in accordance with domestic andforeign laws and regulations and periodically notes any changes in domestic
and foreign policies and development trends, to facilitate immediate
response. The Company's employees also receive training regularly to
update them on current political and economic changes and trends; therefore,changes to laws and regulations will not exert a material impact on the
Company's business development.
Regarding external competition and the overall business environment,
because the Company has successfully expanded into overseas markets in
2016, we will continue to develop our businesses based on market
internationalization. By seeking high-quality customers, attaining productrecognition, raising product sales prices, and adopting a product composite
marketing model concurrent with mature technologies and scaled production,
the Company expects to accurately ascertain the pulse of the global market.
Thus, based on the economic recovery of European and American countries
as well as China’s entertainment market demand, Brogent will expand its
businesses into the global market, thereby enhancing its overall revenue
performance.

2. Summary of Business Plan for 2018(1) 2018 Operational Goals and Crucial Product Marketing
Policies
1. Continue to optimize the quality of sensory simulation amusement park
facilities and diversify product category.
2. Actively extend into the international market and raise its global brand-4-

awareness.
3. Deepen the design and production of digital contents and heighten
product added value.
4. Engage in industry–academic cooperation to actively cultivate
high-quality specialists in digital content.

(2) Expected Sales Volume and Criteria
The Company's operational revenues mainly come from the sales of motion
simulation entertainment facilities. According to the Regulations Governing the
Publication of Financial Forecasts of Public Companies, the Company did notneed to compile a financial forecast for 2016, and therefore this section is notdisclosed.

3. Future Corporate Development Strategy(1) Product diversification: We will continue to extend our product linefrom the current 15 product types.
(2) Market internationalization: The North America and European markets
are growing rapidly, with the Chinese market will become the largest
single market.
(3) Diversification of revenue models: In addition to the outright selling of
our equipment, profit distribution, ventures, peripheral products,
themed IP, and content licensing will also be our stable source ofincome.
(4) Integration of strategic partner resources: Licensing of themed IPs will
be strengthened, and more business locations will be established.

-5-

II. Company Profile
1.

Date of Establishment
October 30, 2001.

2.

Company History
Company milestones up to the date of this report:

April 2011
June 2011
September 2011
October 2011
December 2011
June 2012
September 2012
November 2012
December 2012
January 2013
February 2013
April 2013
July 2013
October 2013
October 2013
October 2013
February 2014

Opening of 4D Theater at Formosan Aboriginal Culture Village.
Conversion of employee stock options to 1,744,000 ordinary shares; the paid-up
capital following capital increase totaled to NT$213,560,000.
Seasoned equity offering (SEO) of NT$12,700,000; following capital increase, thepaid-up capital totaled to NT$226,260,000.
Approved public offering of stock.
Registered on emerging stock market.
Constructed started on new research and test center at Kaohsiung Software Park.
Passed the market listing application by the Board of Directors of the Taipei Exchange.
Public underwriting of SEO prior to listing amounted to NT$28,290,000, and thepaid-up capital following capital increase totaled to NT$254,550,000.
Stock market launch.
Completion of the operational headquarters and R&D test center.
The i-Ride passed China’s A-grade large-scale amusement park facility
authentication and a commercial business license was received for it.
The i-Ride opened at an anime themed shopping center in Hangzhou, China.
The new generation of i-Ride, Fly Over Canada, opened in Vancouver,
Canada.
Attended the National Palace Museum First New Media creative contest; theCompany's 3D interactive new media art gained honorable mention.
Signed a Memorandum of Understanding with Kodansha, Japan.
Surplus transfer of NT$12,727,500, and the paid-up capital following capital increase
totaled to NT$267,277,500.
Conversion of convertible corporate bond to ordinary bond totaled to NT$7,422,770;
the paid-up capital following capital increase totaled to NT$274,700,270.
First-quarter revenue reached NT$312 million, with net profit after tax

March 2014

amounting to NT$100 million, both represented record highs in Brogent's
history.

April 2014

The i-Ride received the 2014 Taiwan Excellence Reward for the category of-6-fashion, life, culture and creativity product.

May 2014
June 2014
July 2014
July 2014
September 2014
October 2014
November 2014
January 2015
January 2015

Conversion of convertible corporate bond to ordinary bond totaled to NT$15,433,990;
the paid-up capital following capital increase totaled to NT$290,134,260.
Held the Groundbreaking Ceremony for the 2nd stage of the R&D Center.
Fuji Q Highland held the Grand Opening of the i-Ride flight theater "Fuji
Airways" in Fujiyoshida, Japan.
Conversion of convertible corporate bond to ordinary bond totaled to NT$18,753,440;
the paid-up capital following capital increase totaled to NT$308,887,700.
Capital reserve transfer of NT$27,470,020; the paid-up capital following capitalincrease totaled to NT$336,357,720.
Signed the "Attack on Titan" IP licensing contract with Kodansha Ltd.
Conversion of convertible corporate bond to ordinary bond totaled to NT$442,070; thepaid-up capital following capital increase totaled to NT$336,799,790.
Seasoned equity offering (SEO) of NT$60,000,000; following capital increase, thepaid-up capital totaled to NT$396,799,770.
Signed another MOU with Kodansha Ltd. to establish marketing companies
for peripheral products.
Awarded the Potential Mittelstand Enterprise for the 3rd Taiwan MittelstandMarch 2015

Award held by the Industrial Development Bureau, Ministry of Economic
Affairs (MOEA).

June 2015
July 2015
November 2015
December 2015
January 2016
March 2016
April 2016
May 2016

Seasoned equity offering (SEO) of NT$10,300,000, following capital increase, thepaid-up capital totaled to NT$407,099,770.
Surplus transfer of NT$39,680,000, following capital increase, the paid-up capital
totaled to NT$446,779,770.
Awarded government subsidies under the international market development
program by the Bureau of Foreign Trade, Ministry of Economic Affairs.
The grand opening of i-Ride flight theater themed “ Attack on Titan” washeld in Shan-Shun World, Toufen Township, Miaoli County, Taiwan.
Grand opening of the 2 nd stage Office Building.
Grand opening of the 4D motion simulating theater in the famous European
safari “ Zoo Emmen” in Netherlands.

New launch of i-Ride flight theater “FlyOver America”in Mall of
America, Minnesota, U.S.A.
The Joint Research and Development Center between Brogent andNational Sun Yat-Sen University was established.
-7-

July 2016
September 2016
December 2016
March 2017
March 2017
April 2017
June 2017
September 2017
October 2017
November 2017
November 2017
December 2017
December 2017

The Research and Development Center of Somatosensory Content
between Brogent and Southern Taiwan University of Science andTechnology was established.
The Lord Mayor of Brisbane, Australia, Graham Quirk, visited Brogent
with the Brisbane delegation and experienced i-Ride flight theater.
Awarded the Enterprise with Outstanding Contribution by Export
Processing Zone, M.O.E.
Feng Tang, Minister without Portfolio of Executive Yuan, came to Brogent
to experience i-Ride flight theater.
Activated the filming project “Flying Over Australia” with Cutting Edge, aleading Australian filmmaker.
The Flying Theater of Spain’s famous theme park officially opened
The Flying Theater “Voletarium” of Germany’s prestigious Europa Park
officially opened.
Won Europe’s Best New Ride of the European Star Awards 2017.
The Flying Theater “This is Holland” of Netherland officially opened in
Amsterdam.
Brognet’s i-Ride Experience Center officially opened in Kaohsiung
Software Park.
Brogent’s new VR product “Q-Ride” launched in IAAPA Attractions Expoin Orlando, Florida, U.S.A.
Dentsu Japan invested in Brogent’s subsidiary “Brogent JapanEntertainment.”
Vice President Chien-Jen Chen visited i-Ride Experience Center ofBrogent.

-8-

III. Corporate Governance Report
1. Organizational System(1) Organizational Profile(2) Business Activities of Each Major Division
Major Divisions

Primary Duties

Chairman's Office Supervise the execution of the corporate internal audit

Audit Office

President's Office

A.Inspects and evaluates whether internal control systems are
sound and provides recommendations relating to analysis
and evaluations.
B.Plan, implement, and improve internal auditing systems;
requests operational procedures to comply with laws,
regulations, and articles of incorporation; and assists inincreasing business performance.
A.Plan the corporate mid-term and long-term businessstrategy, as well as the new business direction and market
deployment.
B.Control and evaluate the operation results of subsidiaries.

-9-

Major Divisions

Primary Duties

A. Plan and implement marketing strategies.
B.Achieve company-defined business goals and prepare foroverseas exhibitions.
Sales & Marketing C.Handle general tasks (product presentation, proposal,
quotation, negotiation, payment collection, and payment
Centernotification) and determine customer's status in contract
compliance.
D.Coordinate and communicate with marketing business andtechnical teams.
A.Design and excute new technology and products.
Innovation Center B. Develop new interactive game.
C. Produce animation.
A.Supervisor implementation and management of construction
projects.
Project Center
B.Communicate and manage customers when implementing
projects.
A.Design, develop, and produce hardware structures such as
six-axis platforms, steel structures, and dynamic structures
such as elevators.
Technology Center B.Organize and archive information for certification
regulations and product technical operating maintenancehandbook.
A.Formulate financial plans, business strategy, treasury andrisk management.
B.Manage and operate accounting, budgeting, tax, and stock
Finance Center
affairs, and provide analysis and reports to assist
decision-making.
A.Organize and plan human resources, recruit and train
employees, develop and plan employee salaries.
B.Carry out performance evaluations and devise welfare
policies
C.Assisting departments' Chinese and English contract(s)Administration
drafting and reviewing, providing negotiation strategies andanalysis of legal risks.Assisting departments' legal dispute
Centerconducting and discussing risk preventing strategies.
D.Assist in executing and promoting general affairs andcooperate with establishing relevant systems
E.Control product production processes and manage
outsourced contractors.
A.Develop and maintain computer networks and application
systems.
IT Department
B.Maintain and manage computer hardware, peripheral
equipment, and information files.
C.Plan and execute system safety.

- 10 -

2. Profile of Directors, Supervisors, President, Vice Presidents, Assistant Vice Presidents, and Department andBranch Directors(1) Directors and Supervisors
1. Directors and Supervisors
March 31, 2018; Unit: Shares; %Title

Nationality
or place ofregistration

Name

Date
electedNumber of
Shares held by Number of shares
Number of sharesshares held when
spouse and minor held in the namecurrently held
Date firstelectedchildrenof others
TermelectedSharesShare Number Shareholding Numberof shares Percentage of shares
Percentage
holding

3

Chairman ROC Chung-Ming 2017.05.31 years 2011.10.05 2,381,654 5.33% 2,381,654 5.33%
Huang269,7843
2011.10.05 2,822,581 6.32% 2,822,581 6.32%
years

80,308

Director ROC

Chih-Hung
OuyangDirector ROC

Chin-Huo
3
2017.05.31
2011.10.05 912,256 2.04% 912,256
years
Huang

Direcor2017.05.31

2.04%

Chang
chun
1,706,565 3.82% 1,706,565 3.82%
Investment
Co. Ltd.
3
ROC
2017.05.31
2016.05.31
years
Representa-tive:
24,144 0.05% 24,144 0.05%
Chih-Chuan Chen200,771－－

Shareholding

Percentage

Education/work experience

Other positions

Number of Shareh
oldingshares Percentage

1.Ph.D in Engineering Management, 1. Director, Fu Yi
University Of Missouri-Rolla
Investment Ltd.
2.Director, Business Administration 2. Professor,
Office; Dean, Engineering &Engineering &Management of Advanced
Management of
0.60% 2,381,654 5.33%
Technology Dept; Dean,
Advanced
International Business Dept, Chang Technology Dept,
Jung Christian University
Chang Jung
3.Supervisor, Taiwan Water
ChristianCorporation
University
1.Electrical Engineering, National
1. President, Brogent
Sun Yat-sen University
Techonologies Inc.
2.R&D Engineer, Acer Incorporated 2. Chairman, Fu Wu
3.Project Manager, Ai West Co. Ltd.
Investment Ltd.
0.18% 2,822,581 6.32%
4.President, Micro Sova
3. Chairman, Brogent
Global Inc.
4. Chairman, Brogent
Mechanical Inc.
1.Chang Hua Industrial Vocational
1. Chairman, Fu Ying
High School
Metal Industrial
2.Director, SANFU Motors Industrial
0.45% 912,256 2.04%
Co., Ltd.
Corp.
2. Chairman, Fujing
3.Director, Chun Ying Metal
Co., Ltd.
Industrial Co., Ltd.
1. M.B.A., National Taiwan
Vice President,－
1,706,565 3.82%
University
Investment
2. Director, Mass Solutio
Administration
Technologies
Division, RT-Mart－
24,144 0.05% 3.Supervisor, RT-Mart International
International
4.Supervisor, Gogoro Taiwan Limited- 11 -

Other officer, director
or supervisor who isthe spouse or a
relative within thesecond degree
Title

Name

RelationshipNone. None. None.

None. None. None.

None. None. None.

None. None. None.

TitleNationality
or place ofregistration

Name

Date
electedNumber of
Shares held by Number of shares
Number of sharesshares held when
spouse and minor held in the namecurrently held
Date firstelectedchildrenof others
TermelectedSharesShare Number Shareholding Numberof shares Percentage of shares

holding

Shareholding

Percentage

Percentage

Direcor

Chun-Hao
ROC Cheng(Note 1)

Independent
Director

ROC

Independent
Director

ROC

Supervisor ROC

3
2017.05.31
2016.05.31 125,781 0.28% 125,781
years

Chin-We3
2017.05.31
2011.11.23
years
n Chuang

Shun-Jen3
2017.05.31
2013.06.19
years
Cheng

－

－

－

－

－

－

Yung-Lia3
2017.05.31
2014.06.11 1,050,466 2.35% 1,050,466
years
ng Huang

Yi-Hsiang
Supervisor ROC
Huang

3
2017.05.31
2016.05.31
years

－

－

－

－

－

－

－

－

2,291

0.01%

－

－

2.35%

－

－

－

－

－

－

－

- 12 -

Other positions

Number of Shareh
oldingshares Percentage

0.28%

－

Education/work experience

－

－

－

－

－

－

Other officer, director
or supervisor who isthe spouse or a
relative within thesecond degree
Title

1.Ph.D in Business Studies, Meiji
University
2.Supervisor, Taiwan Water
Corporation
3.Associate Professor, Department of
Finance, I-Shou University
4.Associate Professor, Graduate
Institute of Hospitality
Management, NKUHT
1. Ph D in Control System,
Department of ElectricalEngineering, National Sun
Yat-sen University (NSYSU)
2.Professor of the Department ofElectrical Engineering, I Shou
University
3. Dean of College of Electrical andInformation Engineering
1.Ph.D in Business Studies, Manuel
L.Q University
2.Doctoral Seminar in Institute ofTechnology & Innovation
Management, Chung Hua
University
1.Masters in Business Management,
US International Asia Pacific
University
2.Continued education in Masters
Program at Dayeh University
3.Media advertisement agency
1.Ph.D, Financial Management,
National Central University
2.Department Chair, Department of
Finance, National University ofKaohsiung
3.Director, Extension Education
Center, National University ofKaohsiung

Name

RelationshipProfessor, Graduate
Institute of Hospitality
None. None. None.
Management,
NKUHT

－

1. Consultant at
Kaohsiung City
Government
2. Vice President,
Cheng Shiu
University

None. None. None.

None. None. None.

Director, Wing Yue
None. None. None.
Advertising Company

Professor, Departmentof Finance, National
None. None. None.
University ofKaohsiungTitleNationality
or place ofregistration

Name

Date
electedNumber of
Shares held by Number of shares
Number of sharesshares held when
spouse and minor held in the namecurrently held
Date firstelectedchildrenof others
TermelectedSharesShare Number Shareholding Numberof shares Percentage of shares

holding

Shareholding

Percentage

Percentage

Supervisor

ROC

Ken-Hua2017.05.31
ng Lin2016.05.31

0.00%

0

0.00%

0

4,000

0.01%

- 13 -

Education/work experience

Other positions

Number of Shareh
oldingshares Percentage

0.00%

1.Ph.D., Department of ElectricalEngineering, University of Illinois,
Urbana-Champaign.
0
2. master of science, the Graduate
Institute of Electrical Engineering,
National Taiwan University.

Other officer, director
or supervisor who isthe spouse or a
relative within thesecond degree
Title

Director of southern
taiwan industry
promotion center

Name

RelationshipNone. None. None.

2. Director and Supervisor Expertise and Independence
Has at least 5 years of work experience and meets one of
the following professional qualifications

Criteria
Name

An instructor or
higher position in

A judge, publicprosecutor, attorney,

Has work
experience ina department ofcommerce, law,finance,accounting or

accountant, or otherprofessional or
technical specialist
related to the needs ofcommerce,
law, finance,or accounting
or a profession

other department
related to thebusiness needs of
the Company in a

the Company who has necessary forpassed a national
the business of
examination and
the Company
received a certificate

public or private
junior college oruniversity

thereforNumber ofother publiccompaniesin which

Meet the independence criteria (Note 1)

the Director
also serves
as an
Independen
3

4

5

6



 

-



-

    

None.

Chih-Hung Ouyang



-

-

-



-

    

None.

Chin-Huo Huang



 

-

      

None.

Chang
chun Investment Co. Ltd
Representative:
Chih-Chuan Chen



 

-

     

-

None.



   None.

      

None.
2



 -                -      None.

Chun-Hao Cheng
Chin-Wen ChuangShun-Jen Cheng










Yung-Liang Huang

7

8

9

10

t Director

2

Chung-Ming Huang

1

Yi-Hsiang Huang         

None.

Ken-Huang Lin         

None.

Note 1: If a director or supervisor meets any of the following criteria in the two years before being elected or during theterm of office, a check "" is placed in the corresponding boxes.
(1) Not an employee of the Company or any of its affiliates.
(2) Not a Director or Supervisor of the Company or any of its affiliates unless the person is an Independent Director of
the Company or its parent company, or any subsidiary in which the Company holds, directly and indirectly, morethan 50% of the voting shares.
(3) Not a natural-person shareholder whose shareholding, together with those of his/her spouse, minor children, andshares held under others' names, exceed 1% of the total number of outstanding shares of the Company, or ranks the
person in the top ten shareholders of the Company.
(4) Not a spouse, relative within second degree of kinship, or lineal relative within third degree of kinship of any ofthe persons in the preceding three paragraphs.
(5) Not a director, supervisor or employee of a juristic-person shareholder that holds directly 5% or more of the total
number of outstanding shares of the Company or ranks in the top five shareholders.
(6) Not a director, supervisor, manager or shareholder holding 5% or more of the shares of a specified company or
institution that has a financial or business relationship with the Company.
(7) Not a professional or an owner, partner, director, supervisor, manager or a spouse of the abovementioned who
provides commercial, legal, financial, accounting services or consultation to the Company or an affiliate of theCompany. Excluding members of compensation committee who exercise power in accordance with Article 7 of theRegulations Governing the Appointment and Exercise of Powers by the Compensation committee of a Company
Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.
(8) Not having a marital relationship or a relative within the second degree of kinship to any other director of theCompany.
(9) Not corresponding to any of the situations set forth in Article 30 of the Company Act of the R.O.C.
(10) Not a government agency, juristic person, or its representative set forth in Article 27 of the Company Act of the
R.O.C.

- 14 -

(2) Profile of President, Vice Presidents, Assistant Vice Presidents, and Department Directors

Title

Nationality

Name

Date
appointed

Shares held

SharesShareholding

Shares held by Shares held
spouse andin the namechildrenof others
SharesPercentage

President

ROC

Chih-Hung
Ouyang2001.102,822,581 6.32%

Shareholding

Education/work experience

March 31, 2018; Unit: Shares; %Other officer, director orsupervisor who is the
spouse or a relative within
Other positions
second degree

Shareholding

Title Name Relationship

SharesPercentage

80,308 0.18%

Percentage--

Electrical Engineering, National Sun
Yat-sen University
R&D Engineer, Acer Incorporated
Project Manager, Ai West Co. Ltd.
President, Micro Sova

Chairman, Fu Wu
Investment Ltd.
Chairman, Brogent
Global Inc.

-

-

-

Supervisor, Brogent
Global Inc.

-

-

-

Director, Brogent
Machanical Inc.

-

-

-

-

-

-

-

-

-

Chairman, Brogent
Machanical Inc.

Master Graduate from the Department ofChief Financial
Officer

ROC

Sui-Chuan
2013.01Lin

170,462 0.38%

22,585 0.05%--

Finance, National Sun Yat-sen University
Finance Office at Chienmei Construction
Development Corp.
Finance Department Manager at Brogent
Technology
Masters in the Department of Computer

Director ofTechnology
CenterROC

Teng-HungLai

2010.1125,442

0.06

-

-

-

-

Science and Engineering at National
Chung-Hsing University
Technical Chief Officer at Meihsing
Technology
President of Liang Chuan Co. Ltd.
PhD, Electrical Engineering, National Sun

Chief Engineer& Director of
Project Center

ROC

Yi-ChungHuang

2015.08

19,313

0.04

-

-

-

-

Yat-sen University
Chang Gu Construction Inc.
Manager, KungYuanInternational

Chairman,Tong Shun
Technology Inc.

Technology

Senior Manager
of Audit Office

ROC

Hui-Ping
Li

Master Graduate from the Department of
Finance, National Sun Yat-sen University

2008.03

30,077

0.07

3,000

0.01

-

-

Accounting Department in Taiflex
Scientific Co. Ltd.
Auditor at Ernst & Young Global Limited- 15 -

None.

3. Remunerations to Directors, Supervisors, President, and Vice Presidents in recent years
1. Remunerations to Directors (including Independent Directors) in the most recent year (2017)
Unit: NT$1,000
Director's remuneration

Remuneration
(A)

Title

Ratio of total A,
Sharessubscribable Shares obtained B, C, D, E, F,
and G toPension (F) Profit sharing & bonus (G)underthrough restricted
after-tax income
employee stock stock award
options (H)Brogent

statements

－

－

－

－

－

－

－

－

－

－

1.55

1.52

None.

－

－

985

985

60

60

0.39

0.87 3,071 3,071

－

－

－

－

－

－

－

－

－

－

1.55

2.00

None.

－

－

985

985

60

60

0.39

0.39

－

－

－

－

－

－

－

－

－

－

－

－

0.39

0.39

None.

Brogent

All companies in consolidated

All companies in consolidated－

statements

Brogent－

Cash Stock Cash Stockbonus bonus bonus bonus

statements

1.52

Brogent

All companies in consolidated

All companies in

1.55

statements

Brogent

consolidated

All companies in consolidated

60

statements

Brogent

All companies in consolidated

All companies in consolidated

60

statements

Brogent985

statements

All companies in consolidated

985

statements

Brogent－

statements

All companies in consolidated－

statements

Brogent

Remuneration
received frominvestees otherthan subsidiaries

All companies in consolidated

Chung-Ming
3,071 3,071
Huang
Chih-Hung－ 1,312
OuyangChin-Huo－－
Huang

Brogent

statements

Director

All companies in consolidated

Director(C)

Ratio of total A,
B, C, and D to Salary, bonus
Business
after-tax income and special
expense (D)allowance (E)NameBrogent

ChairmanPension (B)Earnings
appropriation

Pay received as an employee

Director

Chang chun
Investment Co.
Ltd.
Representative:
Chih-Chuan
Chen

－

－

－

－

985

985

54

54

0.39

0.38

－

－

－

－

－

－

－

－

－

－

－

－

0.39

0.38

None.

Director

Chun-Hao
Cheng

－

－

－

－

985

985

60

60

0.39

0.39

－

－

－

－

－

－

－

－

－

－

－

－

0.39

0.39

None.

Chin-Wen
Chuang

210

210

－

－

－

－

42

42

0.09

0.09

－

－

－

－

－

－

－

－

－

－

－

－

0.09

0.09

None.

Shun-Jen
Cheng

340

340

－

－

－

－

48

48

0.15

0.14

－

－

－

－

－

－

－

－

－

－

－

－

0.15

0.14

None.

Independent
Director
Independent
Director- 16 -Name of Directors
Total of (A+B+C+D)
Range of Remuneration
The company

Under NT$ 2,000,000

NT$2,000,001 ~ NT$5,000,000
NT$5,000,001 ~ NT$10,000,000
NT$10,000,001 ~ NT$15,000,000
NT$15,000,001 ~ NT$30,000,000
NT$30,000,001~ NT$50,000,000
NT$50,000,001 ~ NT$100,000,000
Over NT$100,000,000
Total

Companies in the
consolidated financial
statements

Total of (A+B+C+D+E+F+G)
The company

Companies in the
consolidated financial
statements

Chih-Hung Ouyang
Chih-Hung Ouyang
Chin-Huo Huang
Chin-Huo Huang
Chin-Huo Huang
Chin-Huo Huang
Changchun Investment Changchun Investment
Changchun Investment Changchun Investment
Co. Ltd.
Co. Ltd.
Co. Ltd.
Co. Ltd.
Representative:
Representative:
Representative:
Representative:
Chih-Chuan Chen
Chih-Chuan Chen
Chih-Chuan Chen
Chih-Chuan Chen
Chun-Hao Cheng
Chun-Hao Cheng
Chun-Hao Cheng
Chun-Hao Cheng
Chin-Wen Chuang

Chin-Wen ChuangShun-Jen Cheng
Chung-Ming Huang

Shun-Jen Cheng
Chung-Ming Huang

77

Chin-Wen Chuang

Chin-Wen ChuangShun-Jen Cheng

Shun-Jen Cheng

Chung-Ming Huang
Chih-Hung Ouyang

Chung-Ming Huang
Chih-Hung Ouyang

7

7.
＊The compensation content disclosed in this table differs from the income concept of the Income Act; therefore, this table serves to disclose information rather than for tax purposes.

- 17 -

2. Remunerations to Supervisors in the most recent year (2017)
Unit: NT$1,000
Supervisor's Remuneration

Title

Ratio of total A, B, andRemuneration
C to after-tax income
Remuneration (A)Profit sharing (B)Business expense (C)received from
Investees
All companies
All companies
All companies
All companies
other thanBrogent in consolidated Brogent in consolidatedBrogent in consolidated Brogent in consolidated
subsidiaries
statements
statements
statements
statements

Name

Su p er v i so r Yung-Liang Huang

－

－

985

985

60

60

0.39

0.39

None.

Su p er v i so r

Yi-Hsiang Huang

210

210

－

－

24

24

0.09

0.09

None.

Su p er v i so r

Ken-Huang Lin

210

210

－

－

30

30

0.09

0.09

None.

Name of Supervisors
Total of (A+B+C)
Companies in the consolidated
The company
financial statements

Range of Remuneration

Under NT$ 2,000,000

Chun-Hao Cheng

Chun-Hao Cheng

Yi-Hsiang Huang

Yi-Hsiang Huang

Ken-Huang Lin

Ken-Huang Lin

3

3

NT$2,000,001 ~ NT$5,000,000
NT$5,000,001 ~ NT$10,000,000
NT$10,000,001 ~ NT$15,000,000
NT$15,000,001 ~ NT$30,000,000
NT$30,000,001 ~ NT$50,000,000
NT$50,000,001 ~ NT$100,000,000
Over NT$100,000,000
Total*The compensation content disclosed in this table differs from the income concept of the Income Act; therefore, thistable serves to disclose information rather than for tax purposes.

3. Remunerations to President, and Vice Presidents in the last year (2017)
Unit: NT$1,000

Salary (A)Title

Pension

Bonus and special(B)

allowance (C)Employee bonus (D)Name

Shares obtained
throughafter-tax income under employee restricted stock(%)
stock options
award

All companies

inBrogent

All companies

statements

Brogent in consolidated Brogent

statements

Cash

Stock

Cash

Stock

bonus

bonus

bonus

bonus

-

-

companies in
consolidated

subsidiaries

statements

statements

700

700

-

-

-

-

- 18 -

Brogent

statements

statements

Ouyangn received
fromconsolidatedAll

companies inBrogent in consolidated

consolidated
statements

3,683

in consolidatedin
Brogent

consolidated

2,371

Brogent

Remuneratio

Investeesother thanAll
All companies

Chih-Hung

SharessubscribableAll companies
All companies

President

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

1.16

1.13

-

-

-

-

None.

Name of President
Companies in the consolidated
The company
financial statements-

Range of Remuneration
Under NT$ 2,000,000
NT$2,000,001 ~ NT$5,000,000

Chih-Hung Ouyang

Chih-Hung Ouyang

1

1

NT$5,000,001 ~ NT$10,000,000
NT$10,000,001 ~ NT$15,000,000
NT$15,000,001 ~ NT$30,000,000
NT$30,000,001 ~ NT$50,000,000
NT$50,000,001 ~ NT$100,000,000
Over NT$100,000,000
Total＊The compensation content disclosed in this table differs from the income concept of the Income Act;
therefore, this table serves to disclose information rather than for tax purposes.

4. Manager name and distribution situation regarding employee bonus in the last year (2016):
Title
President
Director ofTechnology Center
Chief Engineer &Managerial
Director of Project
officer

Name

Stock
bonus

Cash
bonus

Total

Total amount as a percentage of
earnings (%)

0

1,718

1,718

1.70

Chih-Hung
OuyangTeng-Hung Lai
Yi-Chung Huang

CenterChief Financial
Sui-Chuan Lin
Officer
Senior Manager of Hui-Ping Li
Audit Office
Note: As of the printing date of this Annual Report, the distribution list of employee profit sharing has not been fixed,
and shall be proposed as stipulated according to the actual distribution of last year.

(4) Respectively compare and describe the analysis of remunerations to Directors, Supervisors,
President and Vice Presidents as a percentage of earnings in the last two years anddescription of the policy, standards and packages of remunerations, procedure for making
such decision and relation to business performance and future risks:
Unit: NT$1,000
Title

Brogent

2017
All companies in
consolidated
statements

Director
Supervisor
13,72017,579President
Note : The Company did not set up a Vice President position.
- 19 -

Brogent

9,668

2016
All companies in
consolidated
statements
13,339

The total amount as a percentage of earnings (losses) in 2017 and 2016 wererespectively 6.48% and 12.57%. The Company determines the aforementioned
personnel remunerations according to the Company's business performance,
management performance, and standards in the market. The paid remuneration also
conforms to the Company's salary-related management regulations and should be
adequate for assuming responsibilities and risks.

4. Implementation of corporate governance(1)Operations of the Board of Directors
In 2017, a total of 9 (A) meetings of the Board of Directors were held in the most recent
year. The attendance was as follows:
Title

Name

Attendance in(Note 1)

person (B)Chung-M ing
H uangChih -H ung
O uyang
Chin -H uo
H uangChangchun

Attendance rate (%)
By proxy

[B/A]

Note

(Note 2)

Reelected on
2017.05.31
Reelected on
2017.05.31
Reelected on
2017.05.31

90

100.0090100.0090100.0090100.00Reelected on
2017.05.31

Chun-Hao
Cheng

9

0

100.00Reelected on
2017.05.31

DirectorYi- H siang
H uang4

0

100.00

Removed on
2017.05.31

Independent
Director

Chin -Wen
Chuang50

100.00Elected on
2017.05.31

Independent
Director

S hun-J en
Cheng

7

0

77.78

Reelected on
2017.05.31

Chairman
Director
Director

Director

Investment Co.
Ltd.
Representative:
Chih-Chuan
Chen

Director
Independent

Other matters that require reporting:
1. Matters stipulated in Article 14-3 of the Securities and Exchange Act and resolutions adopted by
the Board of Directors, to which an Independent Director has a dissenting or qualified opinion
that is on record or stated in a written statement,shall describe the date of the board meeting,term of the board, agenda items, opinions of Independent Directors, and actions taken by thecompany in response to the opinion of the Independent Directors: None.
- 20 -

Title
2.

3.

Name

Attendance in(Note 1)

person (B)Attendance rate (%)
By proxy

[B/A]

Note

(Note 2)
Regarding Directors who recuse themselves from discussion or voting on an agenda item inwhich they have an interest, their names, agenda items, reason for recusal, and voting on an
agenda item shall be stated: Please refer to the Opinions from all the directors in the record of
Board of Directors’ Meetings.
An evaluation of the goals set for strengthening the functions of the Board (e.g., setting up an
auditing committee and enhancing information transparency) and implementation status during
the current and immediately preceding fiscal years.
(1) The operation of the Board of the Company complies with laws and regulations, the Articles
of Incorporation, and the Exercise of Powers of the resolutions in shareholders' meetings. All
Directors adhere to the principle of good faith and duty of care in addition to possessing theexpertise, skills, and literacy required for exercising their powers, in order to maximize
benefits for all of their shareholders.
(2) To establish a favorable governing system for the Company's Board of Directors, a soundsupervision function, and strengthened management mechanism, the Company formulated theBoard of Director Meeting Agenda Regulations in accordance with Article 26-3 of the
Securities and Exchange Act, including agenda items, execution of operations, matters thatshould be recorded in meeting minutes, announcements, and other matters that should be
adhered to, and the aforementioned shall be handled in accordance with the formulated
regulations.
(3) In addition to regularly conducting self-examination of the operation of the Board of
Directors and reinforcing the functions of the Board, the Company requires its internal
auditors to produce auditing reports that describe the Board operations in order to conformwith government regulations.
(4) Establish a Remuneration Committee to assist the Board of Directors in executing its duties.

Note 1: Directors and Supervisors who are also legal persons shall disclose the name ofcorporate shareholders and their representatives.
Note 2:(1) For Directors or Supervisors who resigned from their position prior to the end of thefinancial year, the date of their resignation shall be noted in the Note column. Theiractual attendance rate (%) shall be calculated according to the frequency they attended
meetings of the Board during their tenure and their attendance in person.
(2) For changes to Directors or Supervisors before the end of the financial year, the new
and old Directors or Supervisors shall be listed and Directors or Supervisors who are
old or new and the date of their reelection and changes shall be noted in the Notecolumn. Their actual attendance rate (%) shall be calculated according to thefrequency they attended meetings of the Board during their tenure and theirattendance in person.

(2)State of operations of the audit committee or attendance ofSupervisors in board meetings: The Company does not have anaudit committee set up. Attendance of Supervisors in board
meetings:
In 2016, a total of 8 (A) meetings of the Board of Directors were held in the most- 21 -

recent year. The Supervisor attendance was as follows:
Attendance rate
Attendance in
Title
Name
(%)
person (B)(B/A) (Note)
Supervisor

Chun -Nan
Chen

4100.00Supervisor

Yung- Liang Huang

9100.00Supervisor

Yi- H siang
H uang5100.00Supervisor

K en -H uan
g Lin

5

100.00Note
Removed on
2017.05.31
Reelected on
2017.05.31
Elected on
2017.05.31
Elected on
2017.05.31

1. Composition and responsibility of Supervisors:(1) Communication between Supervisors and Company's employees and shareholders:Supervisors communicate with employees and shareholders through the company
spokesperson. This communication channel has been effective in past years,
thereby facilitating supervisory functions.
(2) Communication between Supervisors and the Company's internal Audit Manager
and CPA (e.g., items, methods, and outcomes of communicating company
financial status and business conditions): The Company invites its Supervisors toattend board meetings; therefore, the Company reports the financial statement andbusiness conditions of the Company during the board meetings or designates the
Audit Manager to report the evaluation results of internal audits. All Supervisors
may express their opinions during the meetings. Moreover, the financial
statements approved by the CPA are submitted to the Supervisors for approval. If
Supervisors voice their opinion when reviewing the financial statements, such
opinion shall be either first explained by the CPA or be communicated to the
CPA.
2. If a Supervisor voices an opinion in the Board of Directors meeting, the date of theboard meeting, term of the board, agenda items, resolutions adopted by the board, andactions taken by the company in response to the opinion of the Supervisor shall be
described: None.

Note:＊For Independent Directors who resigned from their position prior to the end of thefinancial year, the date of their resignation shall be noted in the Note column. Theiractual attendance rate (%) shall be calculated according to the frequency they attended
meetings of the Board during their tenure and their attendance in person.
＊For changes to Independent Directors before the end of the financial year, the new and
old Independent Directors shall be listed and Independent Directors who are old or new
and the date of their reelection and changes shall be noted in the Note column. Theiractual attendance rate (%) shall be calculated according to the frequency they attended
meetings of the audit committee during their tenure and their attendance in person.

- 22 -

(3)Corporate governance implementation status and deviations from Corporate Governance Best-PracticePrinciples for TWSE/TPEx Listed Companies and reasons
State of Operations (Note 1)
Assessed areas

1. Does the company establish and disclose its
corporate governance principles inaccordance with the Corporate GovernanceBest-Practice Principles for TWSE/TPEx
Listed Companies?
2. Shareholding structure & shareholders' rights(1) Does the company establish internal operatingprocedures for handling shareholder
suggestions, questions, complaints orlitigation and handled related mattersaccordingly?
(2) Does the company have a list of major
shareholders that have actual control over theCompany and a list of ultimate owners of
those major shareholders?
(3) Does the company establish and implement
risk management and firewall systems
between the Company and its affiliates?
(4) Does the company establish internal rules
against insiders trading with undisclosed
information?
3. Composition and responsibilities of the Boardof Directors(1) Does the Board of Directors develop andimplement a diversified policy for the

Yes

V

No

Summary
Handled in accordance with Corporate GovernanceBest-Practice Principles for TWSE/GTSM Listed
Companies.

(1) The Company has stock affairs specialists and astock affairs proxy agency to assist withhandling such affairs.

V

V

Deviations from Corporate
Governance Best-PracticePrinciples for TWSE/TPEx
Listed Companies andreasons
No deviation from Corporate
Governance Best-PracticePrinciples for TWSE/GTSM
Listed Companies.

No deviation from Corporate
Governance Best-PracticePrinciples for TWSE/GTSM
Listed Companies.

(2) Yes, according to the shareholders' registry
provided by the stock affairs proxy agency, andwe regularly report changes to the stock rights of
our Directors, Supervisors, and managerial
officers.
(3) The Companyhas set up internal rules in the
Company’s Internal Control System and AffiliatedCorporations Management.
(4) The Company's operation is conducted according to
the extent of internal control.

(1) The Company has set up 2 seats for Independent
Directors.

- 23 -

No deviation from Corporate
Governance Best-PracticePrinciples for TWSE/GTSM

State of Operations (Note 1)
Assessed areas

Yes

composition of its members?
(2) Does the company voluntarily establish otherfunctional committees in addition to
remuneration committee and audit committee?
(3) Does the company establish standards andmethod for evaluating the performance of theBoard of Directors, and implemented it
annually?
(4) Does the company regularly evaluate theindependence of CPAs?

4. Does the Company established a full- (or part-)
time corporate governanceunit or personnel tobe in charge of corporate governance affairs(includingbut not limited to furnish information
required for business execution bydirectors,
handle matters relating to board meetings andshareholders’meetings according to laws,
handle corporate registration andamendmentregistration, produce (or record?)minutes of board meetings andshareholders
meetings, etc.

No

Summary(2) The Company has established a Remuneration
Committee and proposed recommendations
regarding the remunerations to its Directors,
Supervisors, and managerial officers.

Deviations from Corporate
Governance Best-PracticePrinciples for TWSE/TPEx
Listed Companies andreasons
Listed Companies.

(3) The Company currently has no method forevaluating the performance of the Board of
Directors.
(4) The Company regularly evaluates theindependence of CPAs. The Company's CPAs
are hired by the Board of Directors at least once
per year, and they have no interest relationshipwith the Company and are strictly independent.
We arrange specific officers in charge of corporate
No deviation from Corporate
governance affairs
Governance Best-PracticePrinciples for TWSE/GTSM
Listed Companies.
V- 24 -

State of Operations (Note 1)

Assessed areas

5. Does the company establish a communication
channel and build a designated section on its
website for stakeholders, and properly respondto corporate social responsibility issues ofconcern to the stakeholders?
6. Does the company designate a professional
shareholder service agency to deal withshareholder affairs?
7. Information disclosure(1) Does the company establish a corporatewebsite to disclose information regarding thecompany's financial, business and corporate
governance status?
(2) Does the company have other information
disclosure channels (e.g., maintaining an
English-language website, appointing
responsible people to handle informationcollection and disclosure, creating a
spokesperson system, webcasting investor
conference on the company website)?
8. Is there any other important information tofacilitate a better understanding of thecompany’s corporate governance practices(including but not limited to employee rights,
employee wellness, investor relations, supplier
relations, rights of stakeholders, continuing
education of Directors and Supervisors, theimplementation of risk management policies

Yes

V

V

V

V

Deviations from Corporate
Governance Best-PracticePrinciples for TWSE/TPEx
No
Summary
Listed Companies andreasons
The Company has a spokesperson and representative No deviation from Corporate
spokesperson who act as the communication channel Governance Best-Practicefor the Company.
Principles for TWSE/GTSM
Listed Companies.
The Company commissions the stock affairs agency No deviation from Corporate
department of Taishin International Bank to handle Governance Best-Practice
shareholder affairs.
Principles for TWSE/GTSM
Listed Companies.
(1) Web address: www.brogent.com; the Company No deviation from Corporate
has designated personnel to collect and disclose Governance Best-PracticeCompany information.
Principles for TWSE/GTSM(2) Spokesperson: President Chih-Hung Ouyang; Listed Companies.
investors can also access the Company's
information regarding the company's financial,business and corporate governance status from
the Market Observation Post System.

(1) Employee rights protection and employee care No deviation from Corporate
measures adopted by the Company:
The Governance Best-PracticeCompany
providesequal
employment Principles for TWSE/GTSM
opportunities, offers employee group insurance, Listed Companies.
arranges health check ups regularly, andestablishes legal employee welfare committee toprotect employee rights. Furthermore, we
comply with law in enrolling every employee in- 25 -

State of Operations (Note 1)
Assessed areas

and risk evaluation standards, theimplementation of customer relations policies,
and purchasing insurance for Directors andSupervisors)?

Yes

No

Summarylabor and health insurance and disburse pension
reserve funds to them. The Company establishes
appropriate channels for employees to file theircomplaint and values the importance of
employee training.
(2) The Company's relationship with its investors:
The Company holds shareholder meetings
according to law every year and adequately gives
its shareholders the chance to raise questions andmake proposals. In addition, we also have set up
spokespersons and representative spokespersonin accordance with law and designate them tohandle matters between the Company and its
investors. Moreover, the Company announcesand reports any information that should be
disclosed as required by the competentauthorities. Thus, information that potentiallyinfluences investor decisions is provided inreal-time.
(3)
The
Company maintainsasmoothcommunication channel with its suppliers andstakeholders, including partner banks, othercreditors, employees, and clients.
(4) Continuing education of Directors andSupervisors: The members of the Company's
Board of Directors possess professional
backgrounds and practical experience in business
management; they occasionally attend relevant
educational courses. The continuing education- 26 -

Deviations from Corporate
Governance Best-PracticePrinciples for TWSE/TPEx
Listed Companies andreasons

State of Operations (Note 1)
Assessed areas

Yes

No

Summary
status of the Board of Directors in 2016 and2017 to the print date of the Prospectuses are
displayed in the following table.
(5) Implementation status of risk management
policies and standard risk measures:
The
Company emphasizes the importance of risk
management, complies with relevant laws andregulations in executing various policies, andestablishes internal auditors who ensure that theexecution of relevant policies conforms toregulations.
(6) Accountability insurance for Directors andSupervisors: The Company has purchased
relevant accountability insurance for its
Directors, Supervisors, and managerial officers.

- 27 -

Deviations from Corporate
Governance Best-PracticePrinciples for TWSE/TPEx
Listed Companies andreasons

The Continuing Education Status of Directors and Supervisors in 2017 and 2018 to the date of this Annual Report
Title
Chairman
Chairman
Chairman
Director
Director
Director
Director
Director

Director

Director
Director

Name

Organizer

Course name

Hours

Chung-Ming
Huang
Chung-Ming
Huang
Chung-Ming
Huang
Chih-Hung
OuyangChih-Hung
OuyangChin-Huo
Huang
Chin-Huo
Huang

Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association

Changchun
Investment Co. Ltd.
Representative:
Chih-Chuang Chen
Changchun
Investment Co. Ltd.
Representative:
Chih-Chuang Chen
Changchun
Investment Co. Ltd.
Representative:
Chih-Chuang Chen

Regulation and Practical Application of Corporate
Accounting Research andPreventing Money Laundering and Combating theDevelopment Foundation
Financing of Terrorism

3 hours

Major Economy and Tax Policies under Trump
Accounting Research and
Administration and the Accordance Strategy for
Development Foundation
Taiwanese Corporates

3 hours

Accounting Research and Discussion on "Special Perfidious Crimes" in Economic
Development Foundation
Crimes and Related Leagal Resposibilities

3 hours

Chun-Hao
Cheng

Taiwan Corporate GovernanceGroup Governance
Association

3 hours

Group GovernanceUsing Corporate Governance to Reinforce Corporate
Operation
Corporate Governance ForumFamily Business Succession

3 hours
3 hours
3 hours

Group Governance3 hours

Using Corporate Governance to Reinforce Corporate
Operation

3 hours

Group Governance3 hours

Using Corporate Governance to Reinforce Corporate
Operation

3 hours- 28 -

Director
Independent
Director
Independent
Director
Independent
Director(Note1)
Independent
Director(Note1)Supervisor(Note 2)
Supervisor(Note 2)
Supervisor
Supervisor
Supervisor

Chun-Hao
Cheng
Shun-Jen
Cheng
Shun-Jen
Cheng

TaiwanCorporate
Governance Association
TaiwanCorporate
Governance Association
TaiwanCorporate
Governance Association

Using Corporate Governance to Reinforce Corporate
Operation

3 hours

Group Governance3 hours

Using Corporate Governance to Reinforce Corporate
Operation

3 hours

Yi-Hsiang
Huang

TaiwanCorporate
Governance Association

Group Governance3 hours

Yi-Hsiang
Huang

TaiwanCorporate
Governance Association

Using Corporate Governance to Reinforce Corporate
Operation

3 hours

Chun-Nan
Chen
Chun-Nan
Chen
Yung-Liang
Huang
Yung-Liang
Huang
Gen-Huang
Lin

TaiwanCorporate
Governance Association
TaiwanCorporate
Governance Association
TaiwanCorporate
Governance Association
TaiwanCorporate
Governance Association

Group Governance3 hours

Using Corporate Governance to Reinforce Corporate
Operation

3 hours

Group Governance3 hours

Taipei Exchange

Using Corporate Governance to Reinforce Corporate
Operation
Seminar on Insiders’ Equity of Emerging andOver-the-Counter Stock Market Listed Companies

Note 1: Independent Director, Yi-Hsiang Huang, was re-elected as supervisor on May 31, 2017.
Note 2: Supervisor, Chun-Nan Chen, resigned on May 31, 2017.

- 29 -

3 hours
3 hours

(4) If the company has established a remuneration committee, it shall disclose thecomposition, duties, and operation of the committee
1. Members of the Compensation Committee
Criteria

Has at least 5 years of work experienceand meets one of the following
professional qualifications
An instructor A judge, public

Meet the independence criteria(Note 1)Have workor higher
prosecutor,
experience inposition in
attorney,commerce,
the epartment accountant, orlaw, finance,of commerce, other professional orlaw, finance, or technicalaccounting

Number ofother publiccompanies inwhich theaccounting or specialist related or aotherto the needs of the profession
department
Company who has necessary for 1
related to the passed a national the business

Position

member also
serves as a

2

3

4

5

6

7

8

business
examination and of theneeds of the received aCompany
Company in a certificate therefor
public or

Name
Independent Ching-Wen
Director
ChuangExternal
Liang-Chien
committee
LimemberExternal
Rong-Da
committee
Liangmember

Note(Note 2)

member of
their
compensation committee

private juniorcollege oruniversity



-



       

-



-



       

2



-



       

-

None.

Note 1: If the committee member meets any of the following criteria in the two years before being appointed or during the term ofoffice, please check "" in the corresponding boxes.
(1) Not an employee of the Company or any of its affiliates;(2) Not a Director or Supervisor of the Company or any of its affiliates; The same does not apply, however, in cases where thecommittee member is an Independent Director of the Company, its parent company, or any subsidiary in which the Company
holds, directly or indirectly, more than 50 percent of the voting shares.
(3) Not a natural-person shareholder whose shareholding, together with those of his/her spouse, minor children, and shares held
under others’ names, exceed 1% of the total number of outstanding shares of the Company, or ranks the person in the top ten
shareholders of the Company.
(4) Not a spouse, relative within second degree of kinship, or lineal relative within third degree of kinship of any of the p ersons
in the preceding three paragraphs.
(5) Not a Director, Supervisor or employee of an institutional shareholder that holds directly 5% or more of the total number ofoutstanding shares of the Company or ranks in the top five shareholders.
(6) Not a Director, Supervisor, manager or shareholder holding 5% or more of the shares of a specified company or institutionthat has a financial or business relationship with the Company.
(7) Not a professional or an owner, partner, Director, Supervisor, manager or a spouse of the above mentioned who provides
commercial, legal, financial, accounting services or consultation to the Co mpany or an affiliate of the Company.
(8) Not having any of the situations set forth in Article 30 of the Company Act of the R.O.C.

Note 2: If the member is a Director, please describe whether it conforms to Article 6-5 of the Regulations Governing the Appointment
and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded
Over the Counter.

2. State of operations of the compensation committee(A) The Compensation Committee comprises 3 members.
Current term of office: August 9, 2017–May 30, 2020; a total of 2 (A) meetings of theCompensation Committee were held in the most recent year. The members'- 30 -

qualifications and attendance were as follows:
Title

Name

ConvenorChing-Wen
Independent Director,
ChuangBrogent
Committeemember-External
Liang-Chien Li
committee member
Committee
member-External
Rong-Da Liangcommittee member

Attendance inperson(B)

By proxyAttendance rate (%) (B/A)
Frequency

Note

2

0

100.00-20100.00-20100.00-

Other matters that require reporting:
1. If the Board of Directors did not adopt or revised the recommendations of the compensation committee, describe thedate of the board meeting, term of the board, agenda item, resolutions adopted by the board, and actions taken by
the company in response to the opinion of the compensation committee (if the remunerations approved by the
Board of Directors are better than those recommended by the compensation committee, describe the difference andreasons): None.
2. If with respect to any resolution of the compensation committee, any member has a dissenting or qualified opinion
that is on record or stated in a written statement, describe the date of committee meeting, term of the committee,
agenda item, opinions of all members, and actions taken by the company in response to the opinion of members:None.

- 31 -

(5) Implementation of corporate social responsibility (CSR)
State of Operations (Note 1)
Assessed areas

Yes

1. Corporate governance implementation(1) Does the company establish corporate social
responsibility policy or system and examine its
implementation results?
(2) Does the company provide educational training on
corporate social responsibility on a regular basis?
(3) Does the company establish a dedicated or
concurrent unit in charge of promoting CSR withV
senior management authorized by the board to takecharge of proposing CSR policies and reporting to
the board?
(4) Does the company establish a reasonable salary
remuneration policy, and integrate the employee
performance evaluation system with its CSR
policy, and establish an effective reward anddisciplinary system?
2. Fostering a sustainable environment(1) Does the company endeavor to improve theefficiency of resource utilization and use recycledmaterials which have a low impact on theenvironment?
V(2) Does the company establish a proper environmental
management system based on the characteristics of
the industry?
(3) Does the company monitor the impact of climatechange on business operations, conduct

No

Summary (Note 2)

Departure from Corporate Social
Responsibility Best PracticePrinciples for TWSE/GTSM
listed companies and reasons(1) The Company has established Corporate Social No deviation from Corporate
Responsibility Best Practice Principles andGovernance Best-Practice
examined its implementation effectiveness.
Principles for TWSE/GTSM(2) The departments related to the social
Listed Companies.
responsibility of the Company all handle
relevant matters according to their duties.
(3) The Company has established the Ethical Codeof Conducts for Directors, Supervisors, andManagerial Officers.
(4) The Company has established Work Rules
Guideline for Salary Management andGuideline for Performance Management, whichclearly specifies relevant effective rewarding
and punishment systems.

(1) The Company generally endeavor to increase the No deviation from Corporate
efficiency of resource utilization and use Governance Best-Practiceenvironmentally friendly materials as much as Principles for TWSE/GTSM
possible to reduce the impact on the Listed Companies.
environment.
(2) The Company has established relevant
management regulations for the safety ofworking environment.
(3) The Company often holds internal promotional- 32 -

State of Operations (Note 1)
Assessed areasYesgreenhouse gas inventory and formulate strategies
for energy conservation and carbon andgreenhouse gas reduction?
3. Upholding public interests(1) Does the company formulate appropriate
management policies and procedures according torelevant regulations and the International Bill of
Human Rights?
(2) Has the company set up an employee hotline orgrievance mechanism to handle complaints
properly?
(3) Does the company provide a safe and healthy
working environment and provide employees withregular safety and health training?
(4) Does the company set up a channel forcommunicating with employees on a regular basis,V
and reasonably inform employees of any
significant changes in operations that may have an
impact on them?
(5) Does the company set up effective careerdevelopment and training programs for its
employees?
(6) Does the company establish any consumer
protection mechanisms and complaint procedures
regarding R&D, purchasing, production, operationand service?
(7) Does the company advertise and label its goods andservices according to relevant regulations andinternational standards?

No

Summary (Note 2)

Departure from Corporate Social
Responsibility Best PracticePrinciples for TWSE/GTSM
listed companies and reasonsactivity, reminds employees to switch off lights
when leaving a room and classify their trash, tofacilitate reducing the environmental impact of
the company's operation.
(1) The Company adheres to the labor regulations in No deviation from Corporate
the Labor Standards Act to protect employees' legal Governance Best-Practicerights. In addition, the Company disburses pension Principles for TWSE/GTSM
fund and labor welfare fund in accordance with law. Listed Companies.
Concurrently, the Company and its employees havealso established employee welfare committee andhold employer–employee meetings to implement
various welfare activities and coordinate employer–
employee relationship, thereby promoting mattersrelated to employer–employee cooperation.
(2) Yes, the Company has set up employee
grievance mailbox and has designatedpersonnel to handle relevant matters.
(3) The Company endeavors to provide a safe andhealthy working environment and provide
employees with regular safety and healthtraining.
(4) The Company regularly convenes meetings topresent and communicate the Company’sbusiness development direction and strategies
to its employees.
(5) The Company has two training programs,
namely Supervisors/regular training and generalemployee/occasional training. The content of- 33 -

State of Operations (Note 1)
Assessed areas

(8)

(9)

Yes

Does the company evaluate the records ofsuppliers’ impact on the environment andsociety before doing business with the supplier?
Do the contracts between the company and its
major suppliers include termination clauses
which come into force once the suppliers breachthe corporate social responsibility policy andcause significant impact on the environmentand society?

No

Summary (Note 2)

Departure from Corporate Social
Responsibility Best PracticePrinciples for TWSE/GTSM
listed companies and reasonstraining depends on the job position of theemployees.
(6) There are no relevant operations currently.

(7)

Company products are designed andmanufactured in accordance with standard
regulations of various countries. These products
have also been certified by the following:
China: GB-8408 Amusement Device Safety
Code(Amusement device satety Cood)Europe: EN-13814(Fairground and amusementpark machinery and Structure-Safety)
USA and Canada: ASTM-F2291 (Standard
Practice for Design of Amusement and Devices)(8) No, a list of supplier evaluation standards wasadded.
(9) The Company upholds the principle of ethicalcorporate management and collectively
cooperate with the suppliers in development
projects to facilitate coexistence and collective
prosperity.

4. Enhancing information disclosure(1) Does the company disclose relevant and reliable
information regarding its corporate social V
responsibility on its website and the Market
Observation Post System?

The Company discloses relevant information No deviation from Corporate
regarding its corporate social responsibility on its Governance Best-Practicewebsite, annual report, and the prospectuses.
Principles for TWSE/GTSM
Listed Companies.

- 34 -

State of Operations (Note 1)

Departure from Corporate Social
Responsibility Best PracticeAssessed areas
Principles for TWSE/GTSM
Yes NoSummary (Note 2)
listed companies and reasons
5. If the Company has established the corporate social responsibility principles based on "Corporate Social Responsibility Best Practice Principles for
TWSE/TPEx Listed Companies", please describe any discrepancy between the principles and their implementation: Not applicable

6. Other important information to facilitate a better understanding of the company’s corporate social responsibility practices: None.
7. If the corporate social responsibility reports have received assurance from external institutions, they should state so below: Not applicable

Note 1: The operating condition shall be described in the Summary column regardless of whether "Yes" or "No" is selected.
Note 2: For companies that have compiled CSR reports, the summary may specify the CSR reporting method and page numbers.

- 35 -

(6) Implementation of ethical corporate management
State of Operations (Note 1)

Assessed areas

Yes

1. Establishment of ethical corporate management policy
and approaches(1) Does the company declare its ethical corporate
management policies and procedures in its rules andexternal documents, as well as the commitment of its
board and management to implementing themanagement policies?
(2) Does the company establish policies to prevent
unethical conduct with relevant procedures, guidelines
of conduct, punishment for violation, rules of appeal
clearly stated in the policies, and implement thepolicies?

(3) Does the company establish appropriate precautionary
measures for operating activities with higher risk ofunethical conducts provided in Paragraph 2, Article 7 of
the Ethical Corporate Management Best-PracticePrinciples for TWSE/TPEx Listed Companies or within
its scope of business?

V

Departure from "EthicalCorporate Management
Best Practice Principles forNo
Summary
TWSE/GTSM Listed
Companies" and reasons(1) The Company strictly adheres to the laws and No deviation from
regulations stipulated in the Company Act, Corporate Governance
Securities and Exchange Act, Business Entity Best-Practice Principles for
Accounting Act, and other regulations for listed TWSE/GTSM Listed
and OTC companies. The Company has Companies.
formulated internal control systems according
to regulations, established internal auditing
office,andensuredtheeffective
implementation of relevant operations, torealize the fundamental concepts of ethicalcorporate management.
(2) The Company has formulated Ethical Corporate
Management Principle according to the EthicalCorporate Management Best Practice Principles
for TWSE/GTSM Listed Companies andpromoted the importance of ethical code of
conduct, educating each employee on thecompany's core value and compliance systems.
The Company regularly offers training
programs.
(3) The Company requires its Directors,
Supervisors, managerial officers, andemployees to refrain from engaging in bribery
or providing illegal political donations during a- 36 -

State of Operations (Note 1)
Assessed areas

Yes

No

Summary

Departure from "EthicalCorporate Management
Best Practice Principles for
TWSE/GTSM Listed
Companies" and reasonsbusiness activity. The Company stipulates thatthey may not directly or indirectly provide orreceive unreasonable gifts, treatments, or otherimproper benefits to prevent employees frompursuing personal interests at the expense of
the company's rights and interests.
2. Implementation of ethical corporate management(1) Does the company evaluate the ethical records of parties
it does business with and stipulate ethical conduct
clauses in business contracts?
(2) Does the company establish a dedicated (concurrent)
unit under the Board of Directors to promote ethicalcorporate management, and report the status of
implementation to the board?
(3) Does the company establish policies to prevent conflictsof interest, provide appropriate channels for filingrelated complaints and implement the policies
accordingly?
(4) Does the company have effective accounting system andinternal control systems set up to facilitate ethicalcorporate management, and are those systems audited byeither internal auditors or CPAs on a regular basis?

V

No deviation from
(1) The Company's clients and suppliers are mostly Corporate Governancewell-known
companies
whose
ethical Best-Practice Principles for
management information is easily accessible. TWSE/GTSM Listed
When signing a business contract, the contract Companies.
also incorporates regulations regarding ethicalmanagement.
(2) The Company invites Supervisors to attend themeeting of the Board of Directors, thereby
maximizing the supervisory functions ofSupervisors.
(3) The Company has an Internal Material
Information Processing Operating Procedure,
specifying
that
Directors,
Supervisors,
managerial offices, and employees may not leakinternal material information to others, inquire
the company's internal material informationfrom others, or collate unpublished internalmaterial information of companies that are
irrelevant to their job duties. They are also
prohibited from leaking the company's- 37 -

State of Operations (Note 1)
Assessed areas

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

3. Operation of whistleblowing system(1) Does the company establish concrete whistleblowing
and reward system and have a convenient reporting
channel in place, and assign an appropriate person tocommunicate with the accused?
(2) Does the company establish standard operatingprocedures for investigating reported cases and related
confidentiality mechanism?
(3) Does the company provide proper whistleblower
protection?

No

Summary

Departure from "EthicalCorporate Management
Best Practice Principles for
TWSE/GTSM Listed
Companies" and reasons

unpublished internal material information toothers.
(4) To implement ethical management, theCompany has established effective accounting
system and internal control system, and hasinternal auditors regularly check the situation
regarding compliance with the aforementioned
systems. To implement ethical management, theCompany has established effective accounting
system and internal control system, and hasinternal auditors regularly check the situation
regarding compliance with the aforementioned
systems.
(5) The Company promotes the concepts of
ethical management in Director andSupervisor training and managerial
meetings.

V(1) The Company has established whistleblowing No departure from "Ethicalchannels and developed relevant punishment Corporate Management Bestsystems and reporting mechanisms.
Practice
Principles
for
TWSE/GTSM
Listed(2) Yes.
Companies."(3) The Company adopts an anonymous reporting
policy.

- 38 -

State of Operations (Note 1)
Assessed areas

Yes

No

Summary

Departure from "EthicalCorporate Management
Best Practice Principles for
TWSE/GTSM Listed
Companies" and reasons

4. Enhancing information disclosure(1) Does the company disclose information regarding thecompany's ethical corporate management principles andimplementation status on its website and the Market
Observation Post System?

(1) The Company has set up a website for disclosing No departure from "Ethicalcorporate governance information.
Corporate Management BestV
Practice Principles for
TWSE/GTSM Listed
Companies."
5. If the company has established Ethical Corporate Management Principles in accordance with the "Ethical Corporate Management Best PracticePrinciples for TWSE/TPEx Listed Companies", describe any discrepancy between the principles and their implementation: None.
6. Other important information to facilitate a better understanding of the company's implementation of ethical corporate management: (e.g., inspect andrevise existing ethical management principles) None

Note 1: The operating condition shall be described in the Summary column regardless of whether "Yes" or "No" is selected.

- 39 -

(7) If the company has established corporate governance principles andrelated guidelines, disclose the means of accessing this information:
The Company has not formulated corporate governance principles
but has disclosed rules pertaining to corporate governance on theMarket Observation Post System, such as: Ethical Corporate
Management Principles and Remuneration Committee Organization
Rules.
(8) Other significant information which may improve the understanding ofcorporate governance and operation: None.
(9) The following matters pertaining to the implementation status ofinternal control systems should be disclosed:
1. Statement on Internal Control: (Please refer to Appendix 1).
2.The Company engages an accountant to examine its internal control system, disclose the
CPA examination report: None.

(10) Penalty on the Company and its personnel or punishment imposed by
the Company on personnel in violation of internal control systemregulations, major deficiencies and improvement in the past year and
up to the date of report: None.
(11) Important resolutions adopted in shareholders meeting and Board of
Directors' meeting in the past year and up to the date of report.

1. Shareholder’s Meeting
Date

Type of Meeting

Resolutions

Implementation Status

A. Matters for Discussion

2017.05.31

Shareholders'meeting

All items passed and(1): Amendment of clauses of the "Articles of executed as scheduled.
Incorporation."(2): Amendment of clauses of the "Proceduresfor the Acquisition or Disposal of Assets."(3) Amendment of clauses of the "Guidelines
for the Election of Directors and Supervisors."

B. Reporting Items(1) 2016 Business Report(2) 2016 Supervisor’s Audit Report(3) 2016 Report on Remuneration Distributionof Employees, Directors, and Supervisors.
(4) Report on Private Placement Status- 40 -All items passed andexecuted as scheduled.

DateType of Meeting

Resolutions

Implementation Status

All items passed and(1) 2016 Business Report and Financial Report executed as scheduled.
The distributable profits(2) 2016 Earnings Distribution Proposal.
available as of the end of2016 amounted to
NT$110,609,943. According
to Article 22 of theCompany's Articles ofIncorporation, a cash
dividend of NT$2.5 pershare is proposed for thecurrent year.

C. Passed Items

D.Vote Items
Comprehensive Re-election of Directors andSupervisors.

E. Discussion Items
Proposal for lifting the ban on competition
between newly elected Directors and theirrepresentatives.

All items passed andexecuted as scheduled.
The list of elected Directs:
Chih-Hung Ouyang、
Chih-Chuan Chen(TheRepresentative of Changchun Investment Co. Ltd.)、
Chung-Ming Huang、Chin-Huo Huang、
Chun-Hao Cheng.
The list of elected
Independent Directs:
Chin-Wen Chuang、
Shun-Jen Cheng
The list of elected
Supervisors:
Yung-Liang Huang、
Yi-Hsiang Huang、
Ken-Huang Lin
All items passed andexecuted as scheduled.

2. Board of Directors’ Meeting
Date

ProposalApproved the Year-End Bonus Disbursement Principle and Manager Year-End Bonus.
Approved the Amended Plan of the Manager Remuneration.
Approved the Evaluation plan of the independence of CPAs.

2017.01.18

Approved the Authorization of Grant Thorton as 2017 Auditor for the Company’s financial report.
Approved the Plan of establishing the exhibition center.
Approved the Leasing plan of the operation equipment.
Approved the Endorsement and Guarantee Plan for Subsidiaries- Brogent Rides (Shanghai) Limited
Approved the Endorsement and Guarantee Plan for Subsidiaries-Brogent Creative (Shanghai) Limited.

- 41 -

Date
ProposalOpinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
Approved the 2016 Statement on Internal Control.
Approved the 2016 Director and Employee Bonus Plan
Approved the 2016 Business report and financial statements.
Approved the 2016 Earnings distribution plan.
2017.03.14

Approved the Amendment of the Article of Incorporation.
Approved the Amendment of the Criteria for Handling Acquisition and Disposal of Assets.
Approved the Amendment of the Rules and Procedures of Board of Directors Meetings.
Approved the Re-election of the Board of Directors and Supervisors.
Approved the Dissolution of Business Strife Limitation Clause of New Director and Its Representative.

Approved the Proposed calling of 2017 General Shareholders' Meeting.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
Approved the Examination of the Nominees' Qualification of Independent Directors.
Approved the 2016 Director and Employee Remuneration Plan.
2017.04.19

Approved the Adjustment of the Manager Remuneration.
Approved the Remuneration Plan for Independent directors, Directors and Supervisors without
shareholdings.

Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
2017.05.09
Approved the 2017 First Quarter Financial Report.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
2017.05.31
Approved the Election of Chairman.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
Approved the Resolution on determing the 2017ex-dividend date and payable date.
2017.06.23
Approved to change Chartered Public Accountant due to the internal reorganization of the CPA firm.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
Approved the 2017 Second Quarter Financial Report.
2017.08.09
Approved the Proposal for Appointment of Remuneration Committee.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
Approved to change Chartered Public Accountant due to the internal reorganization of the CPA firm.
Approved the Honorarium for the member attends the Meeting of Remuneration Committee.
2017.11.08

Approved the Amendment of the Rules and Procedures of Board of Directors Meetings.
Approved the the Financing limitexpansion plan.

Approved the 2017 Third Quarter Financial Report.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
2017.12.27
Approved the 2018 Operation Budget Plan.

- 42 -

Date

ProposalApproved the 2018 Audit Plan.
Approved the Financing application plan.

Approved the Resolution on the Facility for Loaning of Company Funds.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
Approved the Year-End Bonus Disbursement Principle and Manager Year-End Bonus.
Approved the Eveluatio plan of the independence of CPAs.
2018.01.24

Approved the Authorization of Grant Thorton as 2018 Auditor for the Company’s financial report.
Approved the change in use of the fund from the 2014 Private Placement
Approving the capital injection to Brogent Hong Kong Limited.

Approved to establish a wholly-owned offshore subsidiary.
Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions
Approved the 2017 Statement on Internal Control.
Approved the 2017 Director and Employee Bonus Plan.
Approved the Evaluation of the result in adopting IFRS 16 「Leases 」of the company
Approved the 2017 Business Report and Financial Statements.
Approved the 2017 Earnings Distribution Plan.
Approved the Amendment of the Article of Incorporation.
2018.3.12

Approved the Proposal for a new share issue through capitalization of 2017 earnings.
Approved the application of listing on OTC and Public Issuance for the Ordinary Shares of the 2014
Private Placement No.1
Approved the Liability Insurance Renewal Plan for the Directors, Supervisors and Managers
Approved the Adjument of the Manager Remuberation.
Approved the Promotion of the Senior Manager
Approved the proposed calling of 2018 general shareholders' meeting.

Opinions from all theOpinion from independent directors: none
independent directors and
The company’s response to such opinions: none
the company’s response to
Resolution: unanimous consent from all the directors present
such opinions(12) Dissenting or qualified opinion of Directors or Supervisors against an
important resolution passed by the Board of Directors that is on
record or stated in a written statement in the past year and up to thedate of report: None.
(13) Resignation and dismissal of managerial officers related to thefinancial report (including Chairman, President, Chief Accounting
Officer, Chief Financial Officer, Chief R&D Officer and Audit
Manager) in the past year and up to the date of report: Not applicable.

- 43 -

5. Information on fees to CPA(1) Information on fees to CPA classification table
Name of accounting firm

CPA
Yu-Chieh Lo
HuiPing Liu

Grant Thornton Taiwan

Duration of audit

Note2017/1/1-2017/12/31-

Unit: NT$1,000
Public fee item
Audit feeAmount classification
1
2
3
4
5
6

Non-audit fee

Total



<NT$2,000,000
NT$2,000,000 (incl.)–
NT$4,000,000
NT$4,000,000 (incl.)–
NT$6,000,000
NT$6,000,000 (incl.)–
NT$8,000,000
NT$8,000,000 (incl.)–
NT$10,000,000
NT$10,000,000 or above(2) When nonaudit fees paid to affiliates, CPA firm, and CPA
equal more than one-fourth of the audit fee, the audit andnonaudit fees amount and nonaudit service content shall be
disclosed.
The Company's nonaudit fees are less than one-fourth of the audit fee; however,
we voluntarily disclose the information as follows:
Name ofaccounting
firm

CPA

Grant
Thornton
TaiwanYu-Chieh
Lo.
HuiPing
Liu

Audit fee

3,140

Non-audit fee
Systemdesign-BusinessHumanregistration Resources

6-

Audit period

Note

Others Subtotal
244

250

TP report and2017/1/1Consultation
2017/12/31
fee(3) If the company changes accounting firm and the amount ofaudit fee paid in the year of change is less than that in the year
before: N/A.
(4) If the audit fee is more than 15% less than that paid in theprevious year: N/A.
- 44 -

6. Changes to CPA information(1) Concerning former CPA: Not applicable(2) Concerning succeeding CPA : Not applicable.
(3) Previous CPA response to items in Article 10.5.1 and 10.5.2.3 of
the Criteria: Not applicable.
7. The Chairman, President, financial or accounting manager of thecompany who had worked for the certifying accounting firm or its
affiliated enterprise in the past year
None.

- 45 -

8. Share transfer by Directors, Supervisors, managers andshareholders holding more than 10% interests and changes to sharepledging by them in the past year and up to the date of report(1) Changes to the share rights of Directors, Supervisors, managerial
officers, and major shareholders
2017
Title

Name

Chung-Ming
Huang
Chih-Hung
Director (President)
OuyangChin-Huo
Director
Huang
Changchun
Director
Investment
Co. Ltd.
Chairman

Current year up to March 31

Increase (decrease) Increase (decrease) Increase (decrease) Increase (decrease)in shares heldin pledged sharesin shares heldin pledged shares

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

Director
Representative

Chih-Chuan
Chen

－

－

Director (Note 1)

Chun-Hao
Cheng

－

－

Supervisor

Yi Chung
Huang

－

－

－

－

Supervisor

Yung-Liang
Huang

－

－

－

－

Teng-Hung
Lai

－

－

－

－

Yi Chung
Huang

－

－

－

－

Independent Director

Ching-Wen
Chuang－－－－Independent Director

Shun-Jen
Cheng

－

－

－

－

Director of
Sui-Chuan
Administration Center
Lin

－

－

－

－

－

－

－

－

Director ofTechnology Center
Chief Engineer &Director of ProjectCenterAudit Manager

Hui-Ping Li(2) Information on relative person of share transfer as related party: None.
(3) Information on relative person of share pledging as related party:None.

- 46 -

9.

Information on relationship between any of the top ten shareholders(related party, spouse, or kinship within the second degree)
March 31, 2018; Unit: Shares; %NAME

TITLES, NAMES ANDTOTALRELATIONSHIPS BETWEENSHARES HELDSHAREHOLDIN TOP 10 SHAREHOLDERSSHAREHOLDING BY SPOUSE ANDNOTE
G BY NOMINEE (RELATED PARTY, SPOUSE,CHILDREN
ARRANGEMENT OR KINSHIP WITHIN THE
SECOND DEGREE).
SharesShareholding
Percentage

Shares－Shareholding
Shareholding
SharesPercentage
Percentage

Name

Relationship

Fu Wu
Investment
Ltd.

Legal
representative－

Chih-Hung Ouyang

2,822,581

6.32%

80,308

0.18%

－

－

Sen-Hao Cheng

2,642,888

5.92%

－

－

－

－

－

－

－

Chung-Ming Huang

2,381,654

5.33% 269,784

0.60%

－

－

－

－

－

Ruentex Development
Co. Ltd.
1,975,445
Representative:
Chang-Cheng Chien
Ruentex Industries Ltd.
1,975,445
Representative:
Chih-Fan Wang
Changchun Investment
Co. Ltd.
1,706,565
Representative:
Chuan-Thai Cheng

4.42%

－

－

－

－

－

－

－

4.42%

－

－

－

－

－

－

－

3.82%

－

－

－

－

－

－

－

Fu Wu Investment Ltd.
1,192,879
Representative:
Chih-Hung Ouyang

2.67%

－

－

－

－

Chih-Hung
OuyangLegal
representative－

Yung-Liang Huang

1,050,466

2.35%

－

－

－

－

－

－

－

Chin-Huo Huang

912,256

2.04% 200,771

－

－

－

－

－

Chun-Nan Chen

895,426

2.00%

－

－

－

0.45
－

- 47 -

10. The shareholding of the Company, Director, Supervisor,
management and an enterprise that is directly or indirectly controlled
by the Company in the invested company, and consolidate theshareholding percentage:

Investee Company

Investor Company
SharesBrogent Creative
900,000
Inc.
Brogent
7,199,500
Mechanical Inc.
Brogent Hong
Kong Limited
Brogent Global
30,000,000
Inc.
Brogent Rides(Shanghai)
LimitedBrogent Creative(Shanghai)
LimitedBrogent JapanEntertainment
Joint-Stock
Corporation

700

Shareholding
Percentage

Director, Supervisor,
Manger anddirector
indirect investment
Shareholding
SharesPercentage

Total
Shareholding
Percentage

Shares60%--

900,000

60%

61.11%--

7,199,500

61.11%

100%

-

-

-

100%

100%

-

-

30,000,00

100%

100%

-

-

-

100%

100%

-

-

-

100%

700

40%

- 48 -

40%

IV. Placement Situation
1.

Company capital and share capital(1) Sources of capital property other than cash is paid by subscribers
1. Type of stock
March 31, 2018; Unit: Shares
Authorized capital
Type of stock
Ordinaryshares

Note

Shares issued andoutstanding

Unissued shares

Total

44,677,977

5,322,023

50,000,000

OTC shares (Including 434,000

treasury shares)

2. Sources of capital
March 31, 2018; Unit: 1,000 shares; NT$1,000
Authorized capital
Issue
Year/month priceAmount(NTD) Shares

Paid-in capital
SharesAmountNote
Sources of capital property Subscriptions paid
other than cash is paid by with property othersubscribers
than cash

2001.1010

5,000

50,0001,500

15,000 Cash set up

2002.07

10

5,000

50,0005,000

50,0002003.1010

6,000

60,0006,000

2004.0910

12,000120,000

8,106

Capital increase of
NT$35,000,000
Capital increase of
60,000
NT$10,000,000
81,060 Capital increase of- 49 -

None.
None.
None.
None.

OthersApproval by Kaoshifu Jianergongzi Letter No.
09007412400
Approval by Kaoshifu Jianergongzi Letter No.
09109112601
Approval by Kaoshifu Jianergongzi Letter No.
09205920530
Approval by Kaoshifu Jianergongzi Letter No.

Authorized capital
Issue
Year/month priceAmount(NTD) Shares

Paid-in capital
Shares2005.03

10

12,000120,000

9,610

2005.0510

12,896

128,960

12,896

2006.0810

20,000200,000

17,442

2010.03

10

20,000200,000

19,612

2011.0610

30,000300,000

21,3562011.0910

30,000300,000

22,6262012.1010

30,000300,000

25,4552013.1010

30,000300,000

26,727.75

2014.0210

30,000300,000

27,470.02

2014.05

10

30,000300,000

29,013.43

2014.0710

50,000500,000

30,888.77

AmountNote
Sources of capital property Subscriptions paid
other than cash is paid by with property othersubscribers
than cash
NT$21,060,000
09300940610

Capital increase of
NT$15,040,000
Capital increase of
128,960
NT$32,860,000
Capital increase of
174,420
NT$45,460,000
Capital increase of
196,120
NT$21,700,000
Stock option conversion of
213,560
NT$17,440,000
Capital increase of
226,260
NT$12,700,000
Capital increase of
254,550
NT$28,290,000
Dividends and bonuses of
267,277.5
NT$12,727,500
First domestic conversion of
convertible corporate bond of
NT$1,274,400
274,700.2
Second domestic conversionof convertible corporate bondof NT$6,148,300
First domestic conversion of
convertible corporate bond of
NT$9,103,500
290,134.3
Second domestic conversionof convertible corporate bondof NT$6,660,500
First domestic conversion of
308,887.7 convertible corporate bond of
NT$10,350,100
96,100- 50 -

None.
None.
None.
None.
None.
None.
None.
None.

OthersApproval by Kaoshifu Jianergongzi Letter No.
09400391490
Approval by Kaoshifu Jianergongzi Letter No.
09400469250
Approval by Kaoshifu Jianergongzi Letter No.
09500652270
Approval by Kaoshifu Jianergongzi Letter No.
09900452210
Approval by Kaoshifu Siweijingshanggongzi
Letter No. 10001224680
Approval by Kaoshifu Siweijingshanggongzi
Letter No. 10001356410
Approval by Jingguangzhengfazi Letter No.
1010048593
Approval by Jingjiasanshangzi Letter No.
10200112100

None.

Approval by Jingjiasanshangzi Letter No.
10300015650

None.

Approval by Jingjiasanshangzi Letter No.
10300054610

None.

Approval by Jingjiasanshangzi Letter No.
10300090820

Authorized capital
Issue
Year/month priceAmount(NTD) Shares

Paid-in capital
Shares2014.0910

50,000500,000

33,635.77

2014.10

10

50,000500,000

33,679.98

2015.01

10

50,000500,000

39,679.98

2015.0610

50,000500,000

40,709.98

2015.0710

50,000500,000

44,677.98

Note

Sources of capital property Subscriptions paid
other than cash is paid by with property other
Otherssubscribers
than cash
Second domestic conversionof convertible corporate bondof NT$8,403,400
Capital reserve transfer
Approval by Jingjiasanshangzi Letter No.
336,357.7
None.
increase
10300104170
First domestic conversion ofApproval by Jingjiasanshangzi Letter No.
336,799.8 convertible corporate bond ofNone.
10300137580
NT$442,100
Approval by Jingjiasanshangzi Letter No.
396,799.8 Cash issueNone.
10400008080
Approval by Jingjiasanshangzi Letter No.
407,099.8 Cash issueNone10400066620
Approval by Jingjiasanshangzi Letter No.
446,779.8 Stock dividends
None
10400074690

Amount- 51 -

(2) Shareholder structure
March 31, 2018

Shareholder
structurequantity
Number of
Shareholders
No. of shares
held
Shareholding
percentage (%)

Otherjuristic
persons

Government Financial
institution institutions
1

24

Foreign
Individual institutions
investors
andforeigners

39

2,999

57

Total

3,120

248,000 2,711,477 11,897,506 27,223,680 2,597,314 44,677,977
0.56%

6.07%

26.63%

60.93%

5.81%

100.00%(3) Dispersion of equity ownership
Ordinary shares
Shares
1~ 9991,000~ 5,000
5,001~ 10,000
10,001~ 15,000
15,001~ 20,000
20,001~ 30,000
30,001~ 40,000
40,001~ 50,000
50,001~ 100,000
100,001~ 200,000
200,001~ 400,000
400,001~ 600,000
600,001~ 800,000
800,001~1,000,000>1,000,001
Total

Number ofshareholders
812
1,731
227
80
44
75
37
18
39
18
19
6
3
3
8
3,120

- 52 -March 31, 2018
Shares held
Shareholding
percentage (%)
139,855
0.31%
3,333,348
7.46%
1,696,205
3.80%
992,2532.22%
787,996
1.76%
1,894,625
4.24%
1,268,781
2.84%
801,0211.79%
2,808,677
6.29%
2,345,285
5.25%
5,304,782
11.87%
2,956,192
6.62%
1,977,717
4.43%
2,623,317
5.87%
15,747,923
44,677,977

35.25%
100.00%(4) List of major shareholder (shareholders holding more than 5%of shares or top ten shareholders)March 31, 2018
SharesShareholding percentage
No. of shares held
Name of major shareholder(%)
Chih-Hung Ouyang
1,975,445
4.42%
Sen-Hao Cheng
1,975,445
4.42%
Chung-Ming Huang
1,706,565
3.82%
Ruentex Development Co. Ltd.
1,192,879
2.67%
Ruentex Industries Ltd.
1,050,466
2.35%
Changchun Investment Co. Ltd.
912,256
2.04%
Fu Wu Investment Ltd.
895,426
2.00%
Yung-Liang Huang
1,975,445
4.42%
Chin-Huo Huang
1,975,445
4.42%
Chun-Nan Chen
1,706,565
3.82%(5) Stock price, net worth, earnings, dividends and related
information (2016-2017)
Unit: NT$
Year
2016

2017

Current year up to
March 31, 2018

Maximum

343

295.5

266.5

Minimum

164.5

179

203.5

Average

242.61

236.13231.70

Basic

58.06

63.41

(Note 2)

Diluted57.33(Not Resolved)(Note 2)

Earnings Weighted average shares

44,142

44,244(Note 2)

per share Earnings per share

2.30

6

(Note 2)2.5

4.0(Note 1)(Note 2)Item

Cash dividend
Dividends
per share

Stock

-

-

2.0(Note 1)(Note 2)

grants---(Note 2)--

(Note 2)

Price-earnings ratio

105.4839.36(Note 2)

Price-dividend ratio

97.04

59.0325(Note 2)

Cash dividend yield

0.01030.0169(Note 2)

Accumulated unpaid
dividend
Returnanalysis

Note 1: The 2017 proposal of surplus distribution has not been resolved in theshareholders' meeting.
Note 2 : Earnings not yet calculated.

- 53 -

(6) Dividend policy and implementation status
1. Dividend policy
When allocating the net profits for each fiscal year, the Company shall first
offset its losses in previous years and set aside a legal capital reserve at 10% of the
profits left over, until the legal capital reserve has equaled the total capital of theCompany; the remaining balance and unappropriated earnings for the year shall be
adjusted. Then, set aside special capital reserve in accordance with relevant laws or
regulations or as requested by the authorities in charge and to satisfy business needsof the Company. And the Board shall propose a distribution plan for any balanceremaining, and such balance shall be distributed in accordance with the resolution of
the shareholders’ meeting.
The Company is situated in a changing industrial environment, wherein thecompany life cycle is at a stable growth stage. Considering the Company's capitalrequirement for continuous expansion and business operations, as well as long-term
financial planning to satisfy shareholders’ needs for cash flow, the Company's
dividend policy was based on the residual dividend policy in the relevant laws andregulations of the Company Act. The future capital requirement is measured
according to the future capital budget plan of the Company; then, set aside the capitalrequired for earnings financing, and the remaining earnings shall be distributed by
way of cash or stock dividend. Particularly, cash dividend may not exceed 10% of thetotal dividend.

2. Dividend distribution to be proposed to the shareholders’meeting:
The Company's 2017 earnings distribution plan was approved by the Board on
March 12, 2018. Shareholders' meeting has not yet been held. The 2017 earnings
distribution plan is as follows:
Amount(NT$1,000)
197,976
88,488Cash dividend
Shares dividend

Dividends per
share (NT$)42(7) Effect of the proposed stock dividends (to be adopted by the
Shareholders' Meeting) on the operating performance andearnings per share:
The Company did not release financial forecasts in 2017 and hence it is not- 54 -

applicable.

(8) Employee bonus and remuneration to Directors andSupervisors
1. Dividend Policy for terms stated in the Articles ofIncorporation regarding employees' bonus and Directors'
and Supervisors' remuneration:
The Company shall pay dividends or bonuses when there is profit.
Any unappropriated earnings may be distributed as employee bonus
in the sum of 5% to 15%. The Director and Supervisor remuneration
may not exceed 2%. If there are accumulated losses of the company,
the earnings should be reserved in advance to make up the amount.
Employee bonus shall be paid by stock or cash; nevertheless, thecriteria of qualified employee should be determined by the Board of
Directors.

2. Basis for estimating the amount of employee bonuses
and remuneration to Directors/Supervisors, basis forcalculating the number of shares to be distributed as
stock bonuses, and the accounting treatment of thediscrepancy, if any, between the actual distributed
amount and the estimated amount, for the current
period:The Company estimates employee bonus and remunerations to
Directors and Supervisors according to the annual net profit, legal
capital reserve, and the value specified in the Article of Incorporation.
The estimated values shall be recognized as the expense for thecurrent period. If thereafter, the actual distribution differs from theestimated values in the resolution of shareholders' meeting, then it
shall be regarded as loss for the next year and shall not influence theratified financial report.
The Company was approved by the Board of Directors’ meeting on
March

12,

2018.

The

distributed

employee

bonus

was

NT$28,115,000 and Director and Supervisor remuneration was
NT$5,9070,000.

3. Earnings distribution proposal has passed the Boardof Directors but not the resolution of theshareholders' meeting:- 55 -

The Company’s 2017 earnings distribution was approved by the
Board of Directors’ meeting on March 12, 2018. A cash dividend of
NT$4.0 per share and a stock dividend of NT$2.0 per share is
proposed, the total cash dividend to be distributed is NT$176,975,908
and total stock dividend amount is NT$88,487,950.

4. Earnings distribution proposal passed in the
resolution of the shareholders' meeting:
Not applicable. The Company’s 2017 earnings distribution plan wasapproved by the Board of Directors’ meeting on March 12, 2018.
Shareholders’ meeting has not yet been held.

5. Describe, where applicable, the reason and handlingapproach for the difference (including the number ofshares, the monetary amount, and the face value ofshares distributed) between the actual distribution of
employee bonus and remunerations to Directors andSupervisors and the approved employee bonus andremunerations to Directors and Supervisors:
Not applicable.
These values did not differ from the recognized expense and theannual estimated amount.

(9) Buyback of Treasury Stock:
March 31, 2018
Treasury stocks: Batch Order

1st Batch

Purpose of buy-backTransfer to employees

Timeframe of buy-back2015.07.22 to 2015.09.01

Price range

NTD 170.00 to NTD 488.00

Class, quantity of shares bought back

1,000,000 Ordinary Shares

Value of shares bought-back (in NT$ thousands)

266,071,991

Shares sold/transferred

566,000

Accumulated number of company shares held

434,000

Percentage of total company shares held (%)

0.97%

2.

Corporate bond (including overseas corporate bond)(1) Issued corporate bond:First domestic secured corporate bond and second domestic unsecured corporate- 56 -

bond have all been converted into ordinary share by the end of December 31, 2014.

(2) Information of corporate bond conversion:
First domestic secured corporate bond and second domestic unsecured corporatebond have all been converted into ordinary share by the end of December 31, 2014(3) Issued exchanged corporate bond: None.

- 57 -

(4) Adopt shelf registration method to collect and issue ordinary
corporate bond: None.
(5) Issued subscribed corporate bond: None.
(6) Private placement of corporate bonds in the past three years to
the date of the annual report: None.
3.

Issuance of preferred stocks
None.

4.

Issuance of global depositary receipts (GDR)
None.

5.

Exercise of employee stock option plan (ESOP)
None.

6.

Restricted stock awards
None.

7.

Merger and acquisition
None.

8.

Issuance of new shares for acquisition of shares of othercompanies
None.

9.

Implementation of capital allocation plan

ExpandOperation
Expenses0

Otherexpenses0

Expected NT$817,240,000 The total amount of 2015 seasoned
equity offering was NT$1,757,240,000.
Actual NT$786,046,000 Among it, NT$817,240,000 was usedmainly for operation expenses. The plan
Accumulated Expected
100% was executed as scheduled; there were
implementati
no major abnormal events.
on progress Actual
96.18%
Expenditure

Expected NT$940,000,000 The total amount of 2015 seasoned
Expenditure
equity offering was NT$1,757,240,000.
Actual NT$418,063,000 Among it, NT$940,000,000 was used
for establishing affiliates. The fund was
Accumulated Expected
100% used up as expected; there were no
implementati
major abnormal events.
on progress Actual
44.47%- 58 -

V. Business Overview
I. Business Activities(1) Business Scope
1. Company's primary business activity
Information software
retailer

Electronic material retailer Computer installation

Information software
wholesaler
Information processing
serviceElectronic material
wholesaler
Electronic information
supply service

General advertising service Sound publishing

Automated control
equipment engineering

Machinery installation

Machinery wholesaler

Computer and businessmachinery wholesaler

Electronic retailer

Computer and businessmachinery retailer

Intellectual property

Product design

Machinery retailer

Other machinery retailer

Information software
service
Arts service
Arts performance activity
Wholesale of cultural
education, musicalinstrument, andeducational entertainment
necessities
Retailer of cultural
education, musicalinstrument, andeducational entertainment
necessities
International trade
Landscape and interior
designExcept for approved
business activities, may
engage in activities that are
not prohibited or restrictedby law

2. Company's primary products and their operating
weightUn it : N T$1, 000

Product Category
Simulator rides
Mobile device software
Others (Note)
Net revenue

2016
2017
Net revenue
Operating Net revenue Operating
weightweight818,10992.79
1,436,045
94.82
63,561
7.21
78,424
5.18
881,670
100.001,514,469
100.00N ot e : O the rs p r im a r ily r e fe r to incom e f rom rep a ir, m a int enan ce , and labo r a f fa irs .

- 59 -

3. The Company's products
Simulator Rides are the Company’s main product. Since moving to the Kaohsiung
Software Park in 2013, the Company has gradually placed its business focus on the
media-based attraction (MBA) industry, meaning that we combined our previously developed
3D real-time imaging and audiovisual multimedia technologies with the Stewart six-axis
motion platform and dynamic simulation techniques. Subsequently, the Company successfullycompleted the FlyOver Canada project in Vancouver, becoming the leader of the flyingtheater
industry. The Company's operating model has extended from selling hardware to digitalcontent development in recent years. Since October 2013, we cooperate with Japan's
Kodansha in integrating Kodansha's comic characters into our simulator ride products. The
first result is the 4D animation ride film around Attack on Titan. In 2014, Kodansha licensed
its IP to us, enabling the Company to sell the 4D product to its customers. Starting from 2015,
the Company has changed its management model, from once-off selling of simulator rides tomanaging it with its customers. Moreover, the Company is working with customers inplanning and developing relevant peripheral products, thereby expanding the sources ofincome.
In December 2015, The grand opening of i-Ride flyingtheater themed “ Attack
on Titan ” was held in Shang-Shun World, Toufen Township, Miaoli County,
Taiwan.

In addition to providing fun experiences, Brogent’s product development team proceeds
to put more stringent requirements to improve qualityand security. Our flying theaters havebeen formally adopted by the United States UL certification and the TUV SOUTH. The 4D
motion cinema in the Netherlands, which can carry 100 people, also passed the European
TUV NORD safety certification. An introduction to our products :- 60 -

Product namei-RideDescription
The i-Ride, featuring a suspended
seat platform, is the only dynamic
flyingtheater on the market built ona six degrees of freedom (6DOF)
motion platform. It not only
delivers super realism and fantastic
entertainment effects, but is also
the most representative device
among all extant indoor gaming
devices.

ImagesRiders' feet hang freely, to deliver
the true sensation of flying throughthe air. The sweeping bird’s eye
perspective delivers unobstructed
realism with no blind spots. Wind,
sound, light, water, and aromasheightenthesensationofconquering the air.

1) Unlimited story topics
2) Trackless or track bound andnoiseless design for self-driving
cars
d-Ride3) Flexible plan scenes according
to actual needs onsite4) Combined with interactive gamedesign, with touch, shoot, and hand
gesture control operating methods

1) The 360° massive cylinder
screen delivers heightened realism
and an unobstructed panoramicview with no blind spots
v-Ride 360

2) Passengers can walk safely andfreely, selecting their favorite
perspective3) Suitable for various themes;
with special 4D effects, users canimmerse into the video content- 61 -

Product name

Description

ImagesThe modern version of the classic
4D cinema. The electrical motion
base together with a wide range of
special effects delivers a great
experience.
v-Ride basic

1) High G-Force: Uses large-scale
motion platform that creates effects
that simulate high g-forces
2) 16:9 screen suitable for adiversity of video topics; withspecial 4D effects, a realistic
experience is created

The most advanced immersive
tunnel experience in the market
with a vehicle that can move with
six degrees of freedom.

t-Ride1) Two-sided curved screen
design, increasing visual sense ofrealism and excitement
2) Vehicle can be changed
depending on the theme, such as
traveling on the same car, and withspecial 4D effects, it's as if you're
there in person

The next step in advanced
interactivity: Gesture based 3D
GestureMagicexperience that let’s guests fightvirtual monsters.

- 62 -

Product name

Description

Q-RideBrogent’s product for the compact
indoor market and a breakthroughfor the VR market. The first
product from Brogent that uses VR
glasses instead of a traditional
screen. It comes with preinstalledride content, simulating an
underwater experience and a tour
around the world.

Images

4. The Company's new future products (services)
Furthermore, in response to the prevalence of online shopping activities, theconvenience of mobile devices, and the fact that people cannot visit large theme parks inremote areas whenever they desire, the Company has endeavored to build a CitiPark
indoor experience center in the city, where transport is convenient. Using the Company's
innovative imagination, we combined simulator ride technologies with a variety ofimages, music, apparatuses, special effects, and themes, enabling visitors to travel
through space and time. Thus, with this innovation, the benefits of edutainment inlearning geography and astronomy and experiencing foreign cultures can be achieved.
CitiPark is based on the operating model of Disneyland; however, unlike Disneyland andUniversal Studios Japan, which are located in a suburban areas, CitiPark will beestablished in an area easily accessible to tourists, who can then imagine themselves as astory character whenever, wherever they desire, thus creating an experience economy thatis just around the corner. The first CitiPark opened in Miaoli of Taiwan.

Regarding the development of simulator rides, in addition to continuing investing in
the R&D and product optimization based on existing hardware designs, the Company alsoendeavors to add different product lines in response to global customer demand,customizing products that are suitable for various types of customers.
In 2017, the company has launched the compact simulator Q-Ride during the IAE
trade show in Orlando and has received very positive reviews by the international
industry press.

- 63 -

(2) Industry overview
1.

Industry's current trends and future outlook

Since moving to the Kaohsiung Software Park in 2013, the Company has graduallyplaced its business focus on the media-based attraction (MBA) industry. The following section
presents an overview of the new media entertainment industries:
In the early days, theme parks were mainly equipped with mechanical and simple electronic
facilities such as the Ferris wheel, bumper cars, carousels, and roller coasters. However, as
new technologies emerged, consumers gradually started to entertain themselves by engaging
in experience-based consumption activities. Thus, these facilitates can no longer attract
consumers, leading to the gradual decline of the once thriving theme parks. In replace of suchtheme parks is the simulator ride equipment that combines digital contents and fantasies
well-known to adolescents. Moreover, simulator ride equipment is not only entertaining but
also educational. This trend of the experience economy is increasing in the Asian market.
According to the 2015 global tourist attraction report published by the authoritative
Theme Entertainment Association (TEA), the global theme park industry has showed steady
growth in 2015. Particularly, the number of visitors to top 10 theme parks worldwide grew by
7.2% in from 2014 to 15, and the growth rate for the top 25 theme parks was 5.4%. The
growth in the number of visitors from Asian regions was the most significant, at 7.5%. In the
Middle East regions, construction for large-scale theme parks has commenced such as theWarner Bros in Abu Dhabi, which is scheduled to open in 2018. The overall growth rate forEurope remained steady, but United Kingdom, Germany, and Denmark all exhibited stronger
growth.
Current Asian theme parks are experiencing the same bottleneck. For example, China's
theme park exhibited overly high ratio of entrance fees to total revenue (80%) and low tourist
revisit rate (20%). To effectively solve the aforementioned problems, new amusement parks
must focus on product structures and customer services. While theme parks in Taiwan and
China had committed to raising their entrance price to increase their income, theme parks in
non-Asian countries such as the European and American regions have developed peripheralproducts, lowering the proportion of entrance fee income to 50%.
The further expansion of Disney through acquisition of Marvel earlier and Fox in 2017
has underlined the importance of intellectual property for the industry. . In collaboration with
Kodansha, Brogent was able to display the characters and storyline of the Attack on Titan IP- 64 -

through its simulator ride devices. Concurrently, the Company develops fine cultural andcreative products, which can be promoted through tourists' word of mouth after thenexperienced. Thus, the popularity of these products can be increased, thereby elevating thetotal amount of spending per capita.
Asia has shown strong growth in recent years and neighboring countries in South East
Asia are following with with projects like Chimelong Ocean Kingdom in China that become
Asia’s biggest domestic operated theme park in it’s first year of operation. Similar projects by
local investors opened or will open in Vietnam and Indonesia and large investments are
flowing into Japan to gear the local attractions up for the 2020 Olympic games.

2.

Relationship between up-, mid-, and down-stream suppliers in theindustry's supply chain
Upstream industry
Midstream industry
Hardware:Integrated hardware
1.Precision machineryand software
industry
technologies
2.Spherical screen
3.Projector
Software:
1.Wireless embedded control
system2.Spherical projector andplayback control system
3.High-definition digitalcontent

Downstream industry
Global theme parks
Exhibition
Shopping mall
Tourist attractions
Urban experience
center

The upstream industries associated with the simulator ride equipment comprisethe hardware section, including precision machinery industry and manufacturers of
spherical screens and projectors, and the software section, including wirelessembedded control system, spherical projector and playback control systems, anddigital contents. The Company designs and integrates various software andhardware technologies according to customer needs, and then sells the products todownstream industries such as theme parks, museums, shopping mall, and urban
experience centers.

3.

Product development trends
Previous theme parks: Mainly equipped with mechanical and simple electronic

facilities such as the Ferris wheel, bumper cars, carousels, and roller coasters.
Generally, in bad weather, these theme parks must cease their operation,
substantially impacting business operations. By comparison, multimedia simulator- 65 -

ride facilities can be installed indoors free from environmental influences; thus, theusage rate of theme park equipment can be enhanced, increasing the economic
benefits of theme parks. Europa-Park in Germany was able to increase it’s annual
attendance from 5.5 to 5.6 million visitors especially in the winter months of its
2017 season thanks to the opening of the Brogent delivered “Voletarium” attraction.
Moreover, simulator ride facilities have become the options for updating themeparks in European and American countries and for planning and constructing themeparks in emerging countries. In recent years, under the influence of mature digital
video technologies and Hollywood films, traditional mechanical amusement
facilities are no longer effective for attracting new-generation tourists. To satisfy
tourists' entertainment needs and novelty, new amusement parks have successively
incorporated digital video technologies with electromechanical equipment. Thus,
tourists can not only enjoy the excitement of conventional outdoor facilities, butalso experience indoor facilities with excellent sound and lighting effects without
being influenced by weather conditions. Furthermore, the Company's simulator
rides that stimulate both sensory experiences and thrilling sensations, which are inline with the current trend of experience economy.

4.

Product competition
Simulator rides are a type of amusement facilities featuring sound, lighting,and realistic effects that are developed to satisfy the entertainment needs ofconsumers. Consumers are given the options of playing on either mechanicalfacilities (e.g., roller coaster, free fall, and pirate ships) or static activities such as
watching a film. However, the mechanical amusement facilities provide relatively
monotonous entertainment effects, involve high construction cost, pose safetyconcerns, and are limited to certain age groups. In addition, the operation of thesefacilities is easily affected by weather conditions. Watching a film is a type ofleisure static activity, providing only visual entertainment effects and thus failing tosatisfy the needs for sound and light sensory stimulations pursued among theyounger generations. Therefore, such amusement facilities cannot yield satisfactory
entertainment effects or enhance the parks’ benefits. An overview of the current
domestic market reveals that the Company has no competitors involved in similarbusiness operations. Thus, there are no alternative or competing products on themarket.

- 66 -

(3) Overview of Technology and R&D
1.

2.

R&D investments in recent years to the date of the annual report
Year

2017

R&D expenses

129,949

Unit: NT$1,000
2018Q1-

Successfully developed technologies and products in recent years
Year

2011

2012

2013

2014

R&D Accomplishments
Novel modularized suspension spherical theater based on a vertical
six-axis actuating platform
Ski simulator
Tablet 3D man-machine interface (Android 3.2)
9s series software downloading tool (Android platform)
Commercial electronic games－ The Legend of a Golden City
Novel special drive method
Web-shaped seat design mold
Seat cover design and production
Actuator cantilever turning gate
Suspension two-axis actuator platform stress analysis
Smart TV man-machine interface (Android 2.3)
Tablet 3D man-machine interface (Android 4.0)
9s series software downloading tool (iOS platform)
Smart TV software
Electrical gas six-axis platform design
Suspension two-axis actuator platform design and production
Completely dark ride (d-Ride) design
Balloon Ride design
Media Free Fall Design
Interactive walking theater
Joey's Aquarium (sketch-type aquarium)
Track d-Ride system

2015“Attack on Titan” i-Ride Film
Car Racing simulator ride

2016

Q-Ridei-FUN HUB

2017

m-Ride(4) Business plan - long-term and short-term
1.Short-term development plan
(1) Marketing and product plan
- 67 -

A.Commit to on-going projects because successful performance is the best
marketing tool for a company; strengthen digital content development capacity
to satisfy future market demands for videos.
B.Design and plan highly modularized projects, provide affordable modularized
system, and improve competitive advantage.
C. regulate outsourced vendors' production operation so that the products meetinternational standards; and continue to design products conforming tointernational environmental regulations to become a benchmark of green
enterprises. Our flying theater is already EN and ASTM certified.
D.Sales channels are relatively closed; considering the ecological layout of local
markets of various regions, the Company will adopt a cooperative model inwhich it forms a strategic alliance with its agents.
E.Participate in international exhibitions (e.g., IAAPA), keep increasing thevisibility of the company's product, and expand the range of regional buyers.

(2) R&D plan
A.Apply the ability to integrate six-axis actuator platform with multimedia
technologies, optimize d-Ride and innovative Media Free Fall Ride to expand
the Company's product line, and satisfy customers' diversified needs.
B.Reinforce knowledge management and integrate existing data, so thattechnological resources can be shared to enhance technological capacities.

(3) Human resources and informatization plan
A. Strengthen training programs and enhance the quality of R&D personnel sothat employees can improve as the company develops.
B. Effectively integrate company's internal resources to enhance work
effectiveness.

(4) Financial Plan
A. Use appropriate financial instruments and formulate contract-based sales plan
to avoid risk of currency fluctuations.
B.Strengthen project management and reduce receivables to increase theturnover rate of receivables.
- 68 -

2.Mid- and Long-term development plan
(1)Marketing and product plan
A.T arget the future demand market of Asian regions where
economic growth is high and then ad vance toward the global
market, thereby becoming internationally recognized primary
supplier of simulator rides.
B.S eize business opportunities in replacing, renewing, or adding
construction projects in the future European and US markets
and jointly work w ith strategic alliance partners in market
expansion.

(2)R&D plan
A. Cooperate with domestic research institutes and academic units
to acquire leading technologies.
B.Continue to develop new technologies and acquire patents.

(3)Human resources and informatization plan
A.Strengthen training to enhance employee skills.
B.Recruit professional managers to improve business performance.
C.Purchase professional collaborative operating software to provide
employees around the world with a joint operating platform.

(4)Financial Plan
A.Use various fund-sourcing channels to create optimal financial structuresthat maximize company value.
B.Issue financial instruments in a timely manner for the company to acquire
minimum capital cost.
C.Properly use financial instruments to reduce currency risks.

- 69 -

II.

Market, production and sales(1)Market analysis

1. Product sales region
Year
Sales Region
Domestic
Taiwansales
Asia
Americas
Exports
EuropeAustralia
Subtotal
Total

2016
Net revenue%

Unit: NT$1,000
2017
Net revenue%

107,566

12.20

25,815

1.71

389,41128,357356,336
774,101
881,670

44.17
3.21
40.42
87.80
100.001,209,646
152,023
115,568
11,417
1,488,654
1,514,469

79.87
10.04
7.63
0.75
98.29
100.002. Market Share
An overview of the current domestic market reveals that the Company has nocompetitors; therefore, no information regarding market shares is currently available
for comparison. Regarding simulator rides in new media amusement industries, theCompany is the first to integrate precision machinery, spherical projectors,
audiovisual control, and wireless embedded system and became the company the
independently developed simulator ride technologies. In 2017 four flying theaters
opened in Europe, three of which are delivred by Brogent. We have once again
confirmed our strong position as global market leader in the flying theater market.
Internationally, in addition to Disney in the United States possessing threesimilar theaters that are expensive and not available for third party purchase,
Dynamic Attractions in Canada and Huss and Simtec from Germany both have also
introduced simulator rides. However, these three companies only adopt motion
platform-based hardware technologies and are not equipped with the ability tointegrate hardware and software technologies, rendering them incapable of offering acomprehensive solution regarding simulator rides to business operators. Furthermore,apart from the Simtec solution, their platform moves merely in a maximum of two
axial directions, yielding poor realistic effects. Therefore, after the Company entered
the simulator ride market, the Company will leverage its advantages (technology andcosts), cooperate with Vekoma Rides Manufacturing BV, and introduce simulator
rides to theme parks and tourist attractions around the world. Thus, tourists
worldwide can perceive the enjoyment generated from riding the simulator rides, and- 70 -

the Company's business scale can be enhanced.

3. Future market demand and supply and growth potential
The Company implemented the Content–Channel (CC) Strategy in recent years,transforming from being merely a supplier of amusement facilities to an operator ofentertainment businesses. To achieve this goal, the Company recruited strategic
investors over the past year, while adopting diversified management strategies that
integrate profit distribution models to replace the model where devices are just soldonce. CitiPark has become the Company's business demonstration site where a profit
distribution business model has been adopted. Taiwan's first standalone i-Ride is now
in operation at the Experience Center at Brogent’s headquarter in Kaohsiung,
providing Taiwanese citizens with diverse sensory experiences. In addition to
outright selling its equipment, Brogent has not only delivered technology but also
creatively planned an experience center exhibit, in the hopes of educating children
through fun, thereby bringing parents and children closer together. In fact that people
cannot visit large theme parks in remote areas whenever they desire, the Company
has endeavored to build the experience center in the city where transport isconvenient. The goal was to make fun more accessible.
Regarding the Company's main product—i-Ride—beginning with its Fly Overthe World project in Taiwan, Brogent is no longer merely a slogan. Within years, it
has exploited its technological advantages with its hardware design integrated withcreative software technologies. Brogent has extended its arm into the global sales
channel with its hardware and software products, acquiring a solid status in themultimedia industry. Regardless of product safety or technological stability, Brogent
has become increasingly mature with the globalization of the sales market, achieving
the industry leader status. After flying across the world, the Company has also beganplanning the locations for the FlyOver project that are most representative of Taiwan;
thus, tourists visiting Taiwan will be given an additional must-see tourist attraction.
Regarding the growth potential of the simulator ride market, according to the
Global Entertainment and Media Outlook: 2012-2016 by PricewaterhouseCoopers,
the total global entertainment spending will increase from US$1600 billion in 2011 to
US$2100 billion in 2016, at a growth rate of 5.7%. Furthermore, Vekoma Rides
Manufacturing BV, a well-known roller coaster manufacturer in Holland with over 40
years of history in the theme park market and possessing world-class clients- 71 -

including Disney and Universal, estimated that there will be over 2000 large themeparks across the world. Moreover, numerous theme parks are in the process ofconstruction as the spending power of these countries continues to rise.
The Chinese consulting firm CIConsulting reported that in 2011 - 2015, theChinese theme park market will exceed RMB 10 billion each year, and in the next 25
to 30 years, at least 10 theme parks with a scale similar to that of Disneyland can beconstructed in China. In the past, simulator rides involved high development cost andwere restricted under Disneyland's patents, which made them relatively rare in themeparks. The Company's research team has devoted its efforts to acquiring patents frommany countries, contributing to the Company's development in integrated softwareand hardware technologies and leveraging the advantages in manufacturing costs in
Taiwan. By collaborating with internationally known marketing strategic partners, theCompany has actively negotiated, planned, and constructed simulator rides frommajor theme parks all over the world. In recent years, countries in Europe and the US
have gradually restructured existing large shopping centers, cinemas, and movie
theaters in tourist attraction areas into popular leisure venues to attract visitors.
Because a simulator ride can be customized according to the height restrictions of
their buildings, they can provide consumers with an all-new entertainment experience.
Simulator rides have become the focus of tourism industries in restructuring
amusement facilities in Europe and the US. In summary, the business opportunities
brought by the efforts of emerging countries in building amusement parks and ofEurope and the US in reforming tourism facilities will contribute to the unlimited
growth of simulator rides in the future.

4. Competitive Niches
A. Globally Recognized Technology
The Company's management teams are relatively experienced in the industrial
sector, making them capable of launching new products to customers at the right timeand rapidly responding to customer demand. In addition, our service quality is trusted
by our clients, and the quality of our products is ensured during the softwaredevelopment process (including the design, implementation, and testing stages). Thus
through enriched project management experiences, the Company offers customers
excellent quality software services, contributing to the value of our software
products.
In contrast to Disney's simulator rides, which feature a two-axis arm lift
platform with two motion directions (heave and pitch), the Company's products adopt- 72 -

a six motion direction side-standing suspended six-axis platform. Our platform not
only enables riders to fully experience realism and enjoyment but also facilitatessaving space in the theater. Thus, business benefits could be maximized byadequately utilizing the space in the theaters. The Company has applied for patentsfrom Taiwan, China, the United States, and the European Union for the side-standing
suspension framework of the six-axis platform to protect our technology and increase
the threshold for other vendors to enter the market.

B. Premium Brand Equity
Theme parks, museums, and exhibition centers are generally a closed market.
The Company combines the marketing channels of internationally well-known theme
park facility suppliers, enabling the successful transition into the theme park supply
chain. This transition will be advantageous for expansion into the global market.
Furthermore, the Company possesses excellent professional technological know-how
and development experience; its products are strongly recognized by international
clients. From 2008 to 2017, product sales distribution has gradually extended into
international communities; Brogent’s products can be found in the following
locations:- 73 -

In 2017 the main focus for openings was in Europe with a major mile stone
opening of a double i-Ride installation at Europa-Park, Germany’s leading theme
park. The attraction also received the European Star Award as best new ride in 2017.
We had two more openings with “This is Holland” in Amsterdam and at a major
theme park in Spain. Our future business development will continue to involve
market internationalization to expand our marketing scope of the global market,
thereby improving the overall revenue performance.
C. Product modularization lowers cost and increases competitiveness
Simulator ride facilities involve a wide range of technical aspects, covering
hardware systems (suspension, spherical screen with audiovisual systems) andsoftware technologies (projector, playback, wireless embedded control, andhigh-definition digital content). Therefore, the technical teams of the Company
performed high modularization engineering analysis and planning of large complex
system frameworks based on the existing six-axis platform technologies. In addition,
our design, production, transportation, and assembly processes are all designed andmodularized in accordance with international standard regulations. Suchmodularization enables saving large amount of construction time and manpower,
which considerably lowers construction cost and raises the Company's
competitiveness.
D. Collaboration with international strategic partners in digital content
development
The Company holds a solid foundation for software technology development.
Brogent supports the software technology development required for simulator rides.
In 2013, the flying theater i-Ride received the attention of Kodansha. Through theassistance of the Institute for Information Industry Taiwan - Japan Industry
Promotion Center, the Company signed the first memorandum of understanding(MOU) with Kodansha in October 2013. Thereafter, frequent business meetings
were held with the Japanese company, with the hope of integrating Brogent's
product technologies with Kodansha's manga series to launch a highly entertaining
amusement facility. The manga of choice in this cooperation was the popular Attack
on Titan. With Kodansha's support, Brogent officially received authorization for the
manga series Attack on Titan, and began producing related films for the i-Ridefacility.

- 74 -

In 2015, both parties once again signed an MOU with the premise of
expanding their scope of cooperation to including all of Brogent's simulator ride
products. Thus, Kodansha's numerous, popular works can now be displayed throughBrogent's simulator rides and technologies, enabling passengers to immersethemselves in the story. Concurrently, the Company collaborates with suppliers ofperipheral products; sales channels for these products will be established while
theme-based entertainment activities are launched to allow passengers to receive
satisfactory services and products. Consequently, a new sales platform will becreated, elevating the value of cultural and creative products.

5. Competitive Edge, Favorable and Adverse Factors forLong-term Growth and Response Strategy(1) Favorable factors
A. Needs of emerging countries and reconstruction business opportunities in
Europe and the US
As the economy of emerging countries develop, these countries have graduallyfocused on the construction and development of leisure entertainment industries,
specifically large theme parks, the existence of which can not only create domestic
demand and employment opportunities, but also promote urban tourism
development. Low income level in emerging countries render the entrance fees totheme parks in these countries incomparable to those in developed countries (e.g.,
European countries, North America, and Japan). To effectively increase theeconomic benefits of amusement parks, governments of emerging countries strictly
regulated the benefits generated by amusement facilities. In addition, becauseindoor amusement facilities allow customers to still enjoy themselves during bad
weather, and because of the rapid development of digital audiovisual technologies
in recent years, traditional mechanical amusement facilities are no longer effective
for attracting the attention of new-generation tourists. Therefore, when planning andconstructing theme parks, emerging countries typically prioritized their focus onindoor amusement facilities that feature 3D sound and lighting effects and stimulatea sense of excitement in users. To reconstruct their tourism industries and boost
their economy, European countries and the US have successively initiated tourist
attraction reform projects, building leisure facilities by restricting existing buildings
and movie theaters. These leisure facilities are based on a composite business modelcomprising department stores and hotels to attract visitors. Because simulator rides
are built according to the height restrictions of existing buildings to provide
consumers with an all-new entertainment experience, this type of facility became- 75 -

the primary focus of Europe and the US in reconstructing amusement facilities.

B. Construction and formation of industry supply chain
Before the Company entered the simulator ride market, there were no vendors
investing in similar products in Taiwan. Since undertaking the “Taiwan Formosa”
project for E-DA Theme Park, the Company has adequately leveraged Taiwan'
strong R&D and production capabilities of information hardware and precision
machinery industries. With the efforts devoted by the Company's R&D personnel
and domestic vendors, Taiwan has become one of the few countries worldwide
capable of constructing simulator ride bases. Not only were the production costs ofamusement facilities lowered, but the quality of these facilities reached international
standard. Subsequently, a complete and tight supply chain in the simulator rideindustry was established. Because simulator rides are completely customized
according to customer needs, the Company's supply chain system enable the design,
motion control, or digital content of such rides to be adjusted whenever required
depending on customer needs. Thus, customer demand can be satisfied, thereby
increasing the overall competitiveness of the Company.
C. Establishing word of mouth facilitates business promotion
Distinct from general consumer electronic products, simulator rides featurelong life cycle, high degree of customization, high technical threshold, and highcost; therefore, customer repurchase and loyalty increased after establishing theword of mouth for the technology and quality of this product. Since completing“Taiwan Formosa” and “FlyOver Canada” projects, the Company has accumulated
considerable experience, word of mouth, and popularity in the simulator ride market.
The 2016 opening of “FlyOver America” created additional buzz. In addition, by
forming strategic alliance with internationally well-known amusement facility
suppliers, the Company will acquire more competitive advantage in businessexpansion.
D. Supported by strong technology
Since its inception in 2001, the Company has endeavored to develop
audiovisual multimedia technologies, accumulating considerable experiences intechnological development. Thus, the Company has established partnership withmultiple international mobile phone factories, and received Small Business
Innovation Research (SBIR) subsidies from the Ministry of Economic Affairs- 76 -

(MOEA) multiple times. In 2007, the Company was honored with the award of
excellence in SBIR from the Department of Industrial Technology, MOEA.
Regarding simulator ride facilities, the Company has received recognition for its
technological capability since the successful implementation of the FlyOver Taiwan
and FlyOver Canada projects. For example, the unique fish eye lens designed by theCompany can achieve the projection effects of a spherical screen simply by
installing them with a projector. Thus, the cost and space required for projector
installation are substantially reduced, and the stability and image quality of the
projector system are considerably enhanced. The Company's self-developed
automated control technology can integrate motion platforms with video systems
with increased precision. This way, riders can perceive the flow experience ofrealism. Furthermore, the Company also possesses the capacity to develop digitalcontent, and customize it according to customer needs, thereby providing multiple
choices to our customers. Therefore, the Company enhances the technologicalcapacity of its research team, and therefore has substantial room for improvement.
(2) Unfavorable factors and their response strategies
A. Closed sales channel for simulator rides, impeding business expansion
Simulator rides are primarily built in theme parks, museums, and exhibition
halls. Unlike general daily necessities, the sales channel of simulator rides isrelatively closed, and suppliers specializing in this market are mostly business
operators who have established their status for a long time. Thus, new vendors
cannot easily directly enter this supply chain system and expand their businesses.
Response strategies:
The Company fully understands the characteristics of this industry. To expand
its market and increase its market share, the Company formed a strategic alliancewith internationally known suppliers of amusement facilities who have had ahistory of more than 40 years in the industry. These suppliers assist the Company inexpanding its market channel to successfully enter the supply chain of the theme
park industry and facilitate its expansion into the global market. In addition, theCompany adopts "experiencing in an urban setting" as a strategy to actively develop
miniature simulator rides and compete in the market.
B. Shortage of professional talent, hindering talent recruitment
Because information electronic related industries remain the dominant of thedomestic market, and domestic vendors have already established a complete supply- 77 -

chain in the information hardware industry, general graduates still prefer to enter
industries relevant to information electronics. Furthermore, domestic universities
and colleges have established faculty departments associated with software design
or amusement facilities in recent years. However, talent still require additional
training, and simulator ride technologies encompass a wide variety of aspects, thus
making R&D talent recruitment and cultivation difficult.
Response measures:
Engage in industry-academia cooperation to cultivate high-quality experts ofdigital content development and foster technological talent that industries require;provide employees with favorable working environment, perfect employee welfare
systems, and formulate reward/punishment systems as well as employee training
programs; and establish job positions according to employees’ expertise andcharacteristics and provide employees with the opportunity to become a shareholderof the Company so that they could share business outcomes with the Company,
thereby cohering their efforts and reducing turnover rate.
C. Raw material price and supply stability
The hardware system of the Company's simulator rides comprises thefollowing: The raw materials of carriers, six-axis platform, and steel structures aremostly steel and iron. The prices of these raw materials may vary according tomarket supply and demand, causing price fluctuations, thereby influencing theCompany's purchasing cost and profitability.
Response strategies:
In addition to having maintained a positive and long-term cooperative
relationship with its suppliers, the Company appropriately adjusts its sources ofprocurement and disperses different purchasing vendors to seek the most optimal
price quotation. Thus, over-concentration in purchasing, thereby increasing
operating risks can be avoided.

- 78 -

(2) Major product usage and manufacturing processes
1. Main purposes
Theme park, museum, exhibition hall, shopping center, andindoor experience center afford entertainment and educational
functions, provide adventurous experiences, and elic it sense of
excitement.

2.

Manufacturing process
A. Digital content:

Product/planning/R&D proposal
requirement

Customer demand

Conducted commericalmarketing research,technology feasibility
study, and patent survey.

Passed project proposal and initiated project
implementation

Compiled story

Produced art works

content

Conducted integration, troubleshooting, testing, andmodification

Completed digital content- 79 -Developed programs

B. Simulator rides:

Customer demand(simulator rides)

Convened productproject meeting andapproved forexecution

Hardwaretechnologies

Motionplatform
systemSoftwaretechnologies

Verticalspherical
screen system

Spherical projector
andplayback control
systemWireless
embedded control
systemConducted integration, troubleshooting, testing, and modification of pilot
machines

Machine operation test and product delivery- 80 -

High-definition
digital content

3. State of supply of chief raw materials
Primary spare parts

Supply condition

1.Stewart six-axis platform

Good, stable

2.Structure of ride carriers

Good, stable

3.Spherical screen

Good, stable

4.Servo valve, motor

Good, stable

5.Projector

Good, stable

6.Acoustic equipment

Good, stable

7.Digital content contractor

Good, stable

The Company develops its own mobile device software instead of outsourcing it.
The hardware and software systems of the simulator rides are designed anddeveloped by the Company. Regarding the mechanical hardware parts, the Company
cooperates with its vendor and commissions contractors for assistance. The Company
and its suppliers have a stable cooperative relationship, facilitating the stable material
supply. Therefore, there were no incidences of supply interruption.
4. Major buying and selling vendors/customer information(1) Names of customers who accounted for more than 10% of the sales in the last two
years, sales as a percentage of total sales, and reasons of change
Unit: NT$1,000
2016
Item

Name

1
2
3
4

DEU0001
ESP0001
ARE0001
NLD0003
OthersTotal

2017

Percentage
Percentage
Relationship
Relationshipof netName
Amountof netwith issuer
with issuer
sales (%)
sales (%)
252,980
28.69%
None.
CHN0005
538,330
35.55%
None.
118,480
13.44%
None.
CHN0006
320,163
21.14%
None.
111,023
12.59%
None.
CHN0014161,699
10.68%
None.
103,201
11.71%
None.
None.
295,986
33.57%
494,277
32.63%
Others881,670
100.00%1,514,469
100.00%
Total

AmountReasons for changes:
The Company's chief products are simulator rides. Because simulator ride
projects involve high costs, the sales target in the most recent two years iscustomers who purchase simulator rides. In 2017, the Company successfully
extended its reach into the overseas market. Nearly 10% of the net sales in 2017
are new buyers of the Company’s customer orders. The major projects were underconstruction and the revenues were received according to the percentage ofcompletion.
- 81 -

To increase its market share in the global market, the Company continues towork with international vendors and Taiwanese vendors, actively vie for theircooperation, and devoted to seeking new client base to disperse sources ofcustomer order and maintain robust growth.

(2) Names vendors who accounted for more than 10% of the purchases in the last
two years, purchases as a percentage of total purchase, and reasons of change
Unit: NT$1,000
2016
Item

Name

1
2
3

A0000008
A0000072
A0000012
OthersAmount2017

Percentage
of total Relationshippurchase with issuer(%)

95,04046,02045,468231,024
417,552

22.76%
11.02%
10.89%
55.33%
100.00%

None.
None.
None.

Name
A0000419
A0000012
A0000008
OthersAmount110,139
44,45043,335
243,095
441,019

Percentage
of total Relationshippurchase with issuer(%)
24.97%
10.08%
9.83%
55.12%
100.00%

None.
None.
None.

Reasons for changes:
To develop simulator rides, the Company adequately uses the technicalstrength, flexibility, and willingness of small and medium enterprises to cooperate.
In addition, the Company plans, designs, and collects the various technical andproduction information of international companies, commissioning contractors to
manufacture our products. Furthermore, the Company cooperates with small andmedium enterprises to construct the supply chain system of simulator ride facilities.
The Company primarily procures six-axis platform, ride carriers, spherical screens,
servo valve, and projector and acoustic equipment. Except for when customers
designate their preferred suppliers, the Company's suppliers are selected according
to their quality, stability, delivery date, and price.
The Company made a total purchase of NT$110,139 thousand to supplier
A0000419, who became the company’s largest supplier in 2017. A0000012 is theCompany's second largest supplier of the spherical screen manufacturer, fromwhom the Company made a total purchase of NT$44,450 thousand in 2017.
A000008 is the Company's third largest supplier of steel structures and push
carriers from whom we made a total purchase of NT$43,335 thousand. Overall,the changes in the primary suppliers of the Company in the past two years werebased on the project scale and job completion progression. There were no major- 82 -

abnormalities.

5. Output volume and value during the most recent two years
The Company's primary business involved the R&D and sales of simulator rides.
Since 2008 when the Company started the development and selling of simulator ridefacilities, these facilities, including their hardware and software systems andautomated control system, were designed and developed by the Company. The
mechanical body engineering part was commissioned to external contractors, and theCompany purchases the final product from the supplier and therefore is not a
manufacturing industry. Thus, the Company is not associated with output volume andvalue.

6. Sales volume and value during most recent two years
Unit: NT$1,000
2016

Year
Sales volume and value

Domestic sales

Primary products

Quantity

Value

2017
Exports

Quantity

Mobile device software-

Simulator rides-

Others (Note)

-

Total

- 107,566

Value

Domestic sales
Quantity

Exports

Value

Quantity

Value

-

-

-

-

69,314- 748,795--- 1,436,045

38,252-25,309-20,277-- 774,104-

20,277- 1,494,192

58,147

Note: Others refer to repair and maintenance and income generated sales (gaming machines) and laboraffairs

Reasons for changes:
The Company's adjustment to its sales strategy to reduce the number ofcustomized software projects accepted. Regarding the simulator ride, the external sales
amount increased in 2017 compared with 2016; this is primarily attributed to thesuccessive orders received from the overseas market in 2017.

- 83 -

III. Employee Information in the Past 2 Years to the Date of theAnnual Report
End of 2016

End of 2017

Up toMarch 31, 2018

Managerial officer

25

20

20

R&D personnel

97

78

82

General employee

47

46

46

Total

169

144

148

Average age

34.07

34.07

34.95

Average years of service (year)

3.10

3.10

3.06

Ph.D

1.8

2.1

2.0

Master's

47.9

51.3

52.1

University

43.2

38.2

39.2

College

5.3

6.3

4.7

Senior high school

1.8

2.1

2.0

Year

Number of
employees

Education
distribution (%)

IV. Environmental protection expenditure information(1) The Company primarily engages digital content development and selling of simulator
rides, the production of which is entirely outsourced to external contractors.
Therefore, the Company is not associated with pollution concerns.
1. According to laws and regulations if it is required to apply for a permit for installing
anti-pollution facilities, or permit of pollution drainage, or to pay anti-pollution fees,or to organize and set up an exclusively responsible unit/office for environmental
issues, the description of the status of such applications, payment or establishment
shall be made: Not applicable.
2. Setting forth the company's investment in the major anti-pollution facilities, the use
purpose of such facilities and the possible effects to be produced: None.
3. Describe the process undertaken by the company on environmental pollution
improvement for the most recent 2 fiscal years and up to the publishing date of theannual report. If there had been any pollution dispute, its handling process shall also
be described: None.

- 84 -

4. Describe the loss (including damage compensations paid) suffered by the company
due to environmental pollution incidents occurred in the most recent 2 fiscal years
and up to the annual report publishing date, the total penalty/fine amount, as well as
disclosing its future preventive policies (including improvement measures) andpossible expenses to be incurred (including possible loss if no preventive measures
are taken, and the penalties and estimated damage compensation amount; if
reasonable estimation cannot be made, explanation on the facts why it cannot bemade shall be stated): None.
5. Explain the current condition of pollution and the impact of its improvement to the
profits, competitive position and capital expenditures of the company, as well as the
projected major environment-related capital expenses to be made for the coming 2
fiscal years: None.
(2) The 2nd stage of R&D and experience center was completed in 2016 and awared thegreen building certificate issued by Ministry of the Interior (Certification No.
GB-BC-01-00164 on 105.12.16) The related green power arrangement is explained
as followings:

1.Installation of solar power-Using the roof space to install solar electric
power generation can output electricity without any pollution, noise anddanger ; Besides, the solar panels are able to beautify the roof, resist theirradiatioh of sun, and reduce indoor temperature in summer for energy
saving and carbon reduction
2.

Installation of central air-conditioning control system-The
air-conditioning is operated by the central air-conditioning control system.
It can monitor the situation of all air-conditionings for avoiding
unnecessary waste

3. Installation of all heat exchangers-All heat exchangers, as a part of thecentral air-conditioning control system, it achieves increasing the air
convection, improving indoor air quality(reduce CO2 concentration),decreasing the electricity fee and energy loss made by air exchange

4. Build up rain storage and recycle irrigation systems-We recycle rain and- 85 -

store it after filtering, in order to irrigate the plants. In this way, we canreuse the resource and cut down the waste of water resource
5.Use LED lightening system-All of office area and the test area of factorybuilding are equipped with LED lighting. Additionally, we have theswitch schedule to every illumination area for energy saving and carbon
reduction
6.Set up indoor air quality supervisory system-We regularly supervise theindoor pollutants, and ensure air quality with the current National andInternational Standards.
(3) Brogent technologies INC. is an executive and administrative office instead of
manufacturing industry in Kaohsiung Software Park. We are willing to be coordinate
with the government policy to promote every energy saving measures(4) We make effort to develop every energy saving measures aggressively. We takemeasures to use the office supplies with energy saving mark, increase the usage rate bymanaging the classification of waste, and strengthen indoor greening to improve air
quality(5) Brogent technologies INC. belongs to cultural and creative industry and our producs aremostly made by subcontractors. We enact the safe policy and irregularly execute thetraining of labor safety. Our secuity system and environment maintenance are both
responsible by the professional subcontractors. All of the fire equipments are regurly
maintained and declared by the related departments; In addition, the access control isrestricted by the identification card. For safety, everyone has to swipe the identification
card to get in each entrance.

- 86 -

V. Labor Relations
1. Set forth all employee benefits, continuing education, training, retirement systems, andthe status of their implementation, as well as the status of agreements between laborand management, and all measures aimed at preserving the rights and interests of
employees:(1) Employee welfare measures and implementation status
The Company offers the following welfare to its employees: labor and healthinsurance, employee group insurance, business travel accident insurance, employee
health examination, holiday bonus, year-end bonus, employee stock option bonus, andallowances for marriage, bereavement, and maternity as well as year-end party.
In addition, the Company has also set up an Employee Welfare Committee that
handles employees' various welfare affairs, including employee marriage, funeral, sickleave, and maternal leave subsidies, annual employee travel benefit, three-festival
bonuses (Dragon Boat Festival, Moon Festival, and Chinese New Year), birthday bonus,
seasonal gatherings and family days.
(2) Employee continuing education, training, and status of their implementation
To enhance employee quality and their work efficiency and quality, theCompany requires all its new recruits to receive immediate training and guidance on
their job content. During their period of employment, employees must regularly
undergo professional training, both internal and external, on employee job duties.
Internal training courses entail exchanging internal professional technologies andimproving employee productivity; external courses depend on company requirements.
Employees may be dispatched to attend external seminars and courses. Thus, theCompany's employees are provided with opportunities to receive professional
training. Actual training attendance is registered and managed with the hope of
fostering professional talent and effectively nurture and utilize talent.
(3) Employee pension system and status of implementation
The Company regulates employee pension system according to the Labor
Standard Act, formulates Employee Retirement Regulation, and establishes laborpension account with the Central Trust of China to which a labor pension reserve
equivalent to 10% of employees' monthly salary is contributed.

As of July 1, 2005,

when the new labor pension system was implemented by the government, theCompany asks its employees whether they wish to adopt the new or old labor- 87 -

pension systems. Employees who prefer the new pension system shall have 6% of
their monthly salary contributed to their personal pension account and shall retain
their seniority status as required by the Labor Standard Act, to ensure their living
needs after they retire. No employees have retired since the Company's
establishment.
(4) Labor negotiations
The Company is subject to the Labor Standard Act, operating its business inaccordance with the Labor Standard Act. Generally, the Company emphasizes theimportance of employee welfares and communication with its employees; therefore,
it has maintained a harmonious relation with its employees. In addition, to maintainpositive labor relation, the Company attaches increased importance on employee
opinions, which can be communicated by the employees via email. Since its
establishment, the Company has not been involved in labor disputes. However, theCompany will still strengthen its labor communication protocols and endeavor toformulate effective welfare measures for its employees so that a more harmonious
labor relationship can be sustained to prevent any possibilities of labor disputes fromoccurring.
(5) Measures for protecting employee rights and interests
The Company has a complete document management system that specifies
various management regulations, employee rights and obligations and their welfares,
to protect employee rights and interests.
(6) Preventive measures taken to ensure a safe working environment and maintainemployees' personal safety:
The Company hires designated personnel to plant flowers and trees invacant spaces surrounding the Company. By applying the practice of landscapegreening, the Company creates a comfortable, safe working environment and plans
an effective parking space. The Company constructs a safe, healthy working
environment and regularly provides employee health examination to maintainemployee physical and mental health. In addition, a Labor Safety and HealthCommittee is established to engage in promotion efforts for environmental protection
and labor safety and health. The Company also offers employee safety and healthtraining programs to help employees enhance their health and safety related
knowledge and skills.

- 88 -

2. Describe the loss suffered by the company due to labor disputes occurring in the mostrecent 2 fiscal years and up to the annual report publishing date, and disclose theestimated amount expected to be incurred for the present and future as well as thepreventive measures:
The Company maintains a harmonious relationship with its employees. There
were no losses incurred from incidences of labor disputes during the most recent 2
years up to the publishing date of the annual report. The Company upholds theprinciple of maintaining a reciprocal relationship and sharing profits with its
employees. There is minimum likelihood of losses due to labor disputes occurring in
the future.

- 89 -

VI. Important contracts
Nature ofcontract

Contracting parties

China Company

Date of contract startand endContent

2017.12.06~May
terminate the contract Simulator rides

CHN0014according to agreement

Restriction
clauses
Exclusivity fordesignated area

2017.08.28~May
terminate the contract Simulator rides
China Company

according to agreement

CHN00152017.12.25~May

None.
terminate the contract Simulator rides
according to agreement

Sales
Australia Company

2017.12.21~May
terminate the contract Simulator rides

None.

AUS0001

according to agreement
Malaysia Company

2017.09.13~May
terminate the contract Simulator rides

None.

MYS0001

according to agreement
Mexico Company

2017.11.20~May
terminate the contract Simulator rides

None.

MEX0001

according to agreement
Land
RentalLoan

Export Processing
Zone Administration, 2012.3.14 - 2032.3.13
MOEA
Taiwan CooperativeBank

Renting of Kaohsiung
Software Park Land

None.

Long-term
2016.04.11 - 2031.10.13 collateral-based loan
application- 90 -

None.

VI. Financial Overview
1. Condensed balance sheets and statement of income (2013 - 2017)(1) Condensed balance sheets
1. Condensed balance sheets- International Financial ReportingStandards (IFRS)- Consolidated
Unit: NT$1,000
Financial information: FY2013 - FY2017(Note 1)Year
Item
Current assets
Property, plant andequipment
Intangible assets
Other assets
Total Assets
Basic
Current
liabilities
DilutedNon-current liabilities
Basic
Total liabilities
DilutedEquity attributable toowners of parent
Share capital
Capital reserve
Basic
Retainedearnings
Diluted
Other interests
Treasury stock
Non-controllinginterests
Total
Basic
shareholders' Diluted
equityAs ofMarch 31,2018
2017
(Note 3)2,203,637
-

2013

2014

2015

2016

-

-

2,341,930

2,238,894--

557,047804,714

951,441---

13,987
235,074
3,148,038
566,592
547,321
88,140654,732
635,461

149,155
98,0813,290,844
307,270
290,894
336,388643,658
627,282

120,157
199,6673,474,902
313,143(Note 2)356,039
669,182(Note 2)---

2,444,938

2,594,050

2,746,998---

446,780
2,043,087
220,459
109,849684
266,072

446,780
2,052,669
211,682
90,937(1,605)
115,476---

48,36853,136446,780
2,053,485
366,258(Note 2)
(4,049)(115,476)
58,722--

2,493,306

2,647,186---

2,382,696

2,526,441

2,805,720(Note 2)--

Note 1: Starting from 2015, the Company has consolidated financial reports.
Note 2: The 2017 proposal of surplus distribution has not been resolved in the shareholders'meeting.
Note 3: The year to date March 31. 2018 financial results has not yet been reviewed by a CPA.

- 91 -

2. Condensed balance sheets- International Financial Reporting Standards(IFRS)- Individual
Unit: NT$1,000
Financial information: FY2013 - FY2017(Note 1)Year
Item
Current assets
Property, plant andequipment
Intangible assets
Other assets
Total Assets
Basic
Current
liabilities
DilutedNon-current liabilities
Basic
Total liabilities
DilutedEquity attributable toowners of parent
Share capital
Capital reserve
Basic
Retainedearnings
Diluted
Other interests
Treasury stock
Non-controllinginterests
Total
Basic
shareholders'
DilutedequityAs ofMarch 31,2018
2017
(Note 3)
1,881,423
-

2013

2014

2015

2016

717,863

1,046,900

1,967,995

1,939,408

161,607

310,698

551,001

617,103704,900-

3,284
105,798
988,552
192,503
192,503329,297
521,800
521,800

6,086
53,163
1,416,847
208,712
288,072
180,165
388,877
468,237

13,934
594,044
3,126,974
593,896
577,625
88,140682,036
665,765

146,666
437,806
3,140,983
322,545
306,169
224,388546,933
530,557

117,987
543,585
3,247,895
289,921(Note 2)210,976
500,897(Note 2)-466,752

1,027,970

2,444,938

2,594,050

2,746,998-

267,277
188,618
3,434
3,434
-

341,294
459,496
227,180
147,820-446,780
2,043,087
220,459
109,849684
266,072

446,780446,780
2,052,669 2,053,485
211,682
366,258
90,937 (Note 2)(1,605)(4,049)115,476(115,476)

-

-

-

-

-

-

-

466,752

1,027,970

2,444,938

2,594,050

2,746,998-

466,752

948,6102,334,328

2,473,305(Note 2)---

Note 1: The 2013 - 2017 financial reports have been certified by the CPA.
Note 2: The 2017 proposal of surplus distribution has not been resolved in the shareholders' meeting.
Note 3: The company does not have individual financial report as of March 31, 2018.

- 92 -

(2) Condensed statements of income
1. Condensed statements of income- International Financial ReportingStandards (IFRS)-Consolidated (Note 1)
Unit: NT$1,000
Year
Item
Sales revenue
Gross profit
Operating income(loss)
Non-operating
income and expense
Net income (loss)
before tax
Continuing
operations
Net income
Profit and loss of
discontinuing
operations
Net income (loss)
Other comprehensive
income(net income)
Total comprehensive
incomeNet income belongs to
the parent company
Net income belongs to
non-controllinginterests
Total comprehensive
income belongs to theparent company
Total comprehensive
income belongs to thenon-controllinginterests
Earnings per share

As ofMarch 31,2018
2017
(Note 3)
1,514,469
725,335-

Financial information: FY2013 - FY2017 (Note 2)
2013

2014

2015

2016

-

-

705,424
333,961

881,670444,937--

130,412

108,508

340,734---

21,81521,076(13,171)-

152,227

129,584

327,563--

119,769

106,112271,181

-

-

-

-

-

-

-

-

-

119,769

106,112271,181

-

-

-

619

(1,810)(2,928)---120,388

104,302268,253---

112,384

101,354

265,670

-

-

-

7,385

4,758

5,511

-

-

-

113,003

99,544

262,742

-

-

-

7,385

4,758

5,511

-

-

-

2.57

2.30

6.00

-

Note 1: Starting from 2015, the Company has consolidated financial reports..
Note 2: The 2015-2017 consolidate financial results has been verified by a CPA.
Note 3: The year to date March 31. 2018 financial results has not yet been reviewed by a CPA.

- 93 -

2. Condensed statements of income- International Financial ReportingStandards (IFRS)-Individual
Unit: NT$1,000
Year
Item
Sales revenue
Gross profit
Operating income(loss)
Non-operating
income and expense
Net income (loss)
before tax
Continuing
operations
Net income
Profit and loss of
discontinuing
operations
Net income (loss)
Other comprehensive
income(net income)
Total comprehensive
incomeNet income belongs to
the parent company
Net income belongs to
non-controllinginterests
Total comprehensive
income belongs to theparent company
Total comprehensive
income belongs to thenon-controllinginterests
Earnings per share

As ofMarch 31,2018
2017
(Note 2)
1,202,199
540,111
219,061-

Financial information: FY2013 - FY2017 (Note 1)
2013

2014

2015

2016

333,559
140,655

829,511
426,915

690,617304,396865,220
390,441

2,134

231,250

110,586

110,972

2,863

38,49230,73010,463

4,997

269,742

141,316

121,435(5,982)

224,432

112,384

101,354

265,670

-

-

-

-

-

-

-

(5,982)

224,432

112,384

101,354

265,670

-

41

(686)

619

(1,810)(2,928)-(5,941)

223,746

113,003

99,544(5,982)

224,432

112,384

101,354

265,670

-

-

-

-

-

-

-

(5,941)

223,746

113,003

99,544

262,742

-

-

-

-

-

-

-

(0.22)

6.83

2.57

2.30

Note 1: Th e 2 013 - 201 7 fin an ci al repo rts have b een certi fi ed b y t he CPA.
Note 2: The company does not have individual financial report as of March 31, 2018.

- 94 -

81,036300,097262,742

6.00

-

-

-

3.

The 2013 - 2017 Names of auditors and audit opinions
Year

Name of accounting firm

2013

Grant Thornton Taiwan

2014

Grant Thornton Taiwan

2015

Grant Thornton Taiwan

2016

Grant Thornton Taiwan

2017

Grant Thornton Taiwan

CPA
Yi-Shun Chang,
Yu-Chieh Lo
Yi-Shun Chang,
Yu-Chieh Lo
Yi-Shun Chang,
Yu-Chieh Lo
Yi-Shun Chang,
Yu-Chieh Lo
Yu-Chieh Lo
HuiPing Liu- 95 -

Audit opinion
Unqualified opinion
Unqualified opinion
Unqualified opinion
Unqualified opinion
Unqualified Opionoin(Emphasis of Matter orOther Matters)

2. Financial Analysis(1) Financial analysis (2013 - 2017)
1. Financial Analysis - International Financial Reporting Standards(IFRSs)-Consolidated (Note 1)
Financial analysis (2013 - 2017) (Note2)

Year (Note 1)

2013

2014

-

-

20.80

19.56

19.26

-

-

-

463.42370.76332.31-

Current ratio--

413.34728.64703.72-

Solvency
Quick ratio
(%)

-

-

361.30537.88451.84-

Times interest earned--

31,358.11

2,615.71

5351.09-

Receivables turnover ratio (times)
Average days of collection
Inventory turnover ratio (times)(Note 2)
Operating Payables turnover ratio (times)
ability
Average days of sales

-

-

4.05
90.12

3.29
110.94

5.37
67.97

-

-

-

-

-

-

-

1.36

-

-

-

Item (Note 3)
Financial Debt-to-assets ratio
structure
Long-term fund to property, plant and(%)
equipment (fixed assets) ratio

2015

-

2016

2017

As of
March
31, 2018(Note 3)

-

-

1.10

1.72

-

0.23
3.89
4.82

0.28
3.45
4.08

0.45
8.17
9.95

-

-

34.07

29.00

73.32

-

-

16.98
2.57

12.04
2.3

17.91
6.00

Cash flow ratio (%)-(52.84)(44.9)

55.05-

Cash flows Cash flow adequacy ratio (%)

-

-

24.42

23.47

11.59

-

Cash reinvestment ratio (%)--(14.91)(8.74)

2.00-

Operating leverage

-

-

1.27

1.75

1.29

-

Leverage

-

3.52

7.33

Property, plant and equipment (fixed
assets) turnover ratio (times)
Total assets turnover ratio (times)
Return on assets (%)
Return on equity (%)
Paid-in capital to income before tax
Profitability(%) (Note 8)
Net profit margin (%)
Earnings per share (NT$)

3.74

-

-

-

1.00
1.05
1.02
Reasons for changes in financial ratios in the most recent 2 years. (Can be left blank of the increase or
decrease is less than 20%)
Financial leverage

1. Solvency, operating ability and profitability were improved maily because of the growth of 2017 revenue.
2. Cash flow ratio increased by the net cash generated from operating activities in 2017.

Note 1: Starting from 2015, the Company has consolidated financial reports..
Note 2: The 2015-2017 consolidate financial results has been verified by a CPA.
Note 3: The year to date March 31. 2018 financial results has not yet been reviewed by a CPA.

- 96 -

2. Financial Analysis - International Financial Reporting Standards(IFRSs)-Individual (Note 1)

Item (Note 3)

As of
March
31, 2018(Note 3)Financial analysis (2012 - 2016)

Year (Note 1)
2013

2014

2015

2016

2017

52.78

27.45

21.81

17.41

15.42

-

492.58386.42459.72456.72419.63-Current ratio

372.91501.60331.37601.28648.94-

Solvency
Quick ratio(%)

342.50445.08280.17509.64563.3-

Times interest earned

1.96

85.32

29,117.66

4202.538020.22-

Receivables turnover ratio(times)Average days of collection

4.08

5.46

4.03

2.78

3.22

-

89.46

66.8

90.57

32.37

27.95

-

-

-

4.17

-

-

-

Debt-to-assets ratio
Financial
structure (%) Long-term fund to property,
plant and equipment (fixed
assets) ratio

Inventory turnover ratio(times) (Note 2)
Payables turnover ratio
Operating (times)
ability
Average days of sales
Property, plant andequipment (fixed assets)turnover ratio (times)
Total assets turnover ratio(times)Return on assets (%)

9.46

-

7.37

-

3.55

-

3.09
-

2.08

3.51

1.33

1.48

1.82

-

0.43

0.69

0.22

0.28

37.63

-

(0.21)(1.32)

18.88
30.03

3.66
4.60

3.31
4.02

8.42
9.95

-

1.87

80.09

31.63

27.18

67.17

-

(1.79)(0.22)
53.14

27.06
6.83
28.21

16.27
2.57
(50.73)11.71
2.30(7.61)

22.1
6.00
11.83

-

Cash flow adequacy ratio
(%)

15.2

(25.39)

25.92

15.78

16.15

-

Cash reinvestment ratio (%)

9.69

4.79

(17.96)(5.80)(3.1)-

Operating leverage

11.47

1.12

1.37

1.66

1.41

-

Financial leverage(0.69)

1.01

1.00

1.03

1.02

-

Return on equity (%)
Paid-in capital to income
Profitability
before tax (%) (Note 8)
Net profit margin (%)
Earnings per share (NT$)
Cash flow ratio (%)
Cash flows-

Leverage- 97 -

Reasons for changes in financial ratios in the most recent 2 years. (Can be left blank of the increaseor decrease is less than 20%)
1. Solvency, operating ability and profitability were improved maily because of the growth of 2017 revenue.
2. Cash flow ratio increased by the net cash generated from operating activities in 2017.

Note 1: The 2013-2017 Financial Reports of the Company have been reviewed by the CPA.
Note 2: The Company primarily focuses on the R&D and design of simulator rides by using its design, R&D, andsystem integration capabilities as well as the hardware equipment of outsourced vendors. Because theCompany's core value is its design, R&D, and system integration capabilities, its business characteristic
differs from general manufacturing industries in that the Company manufactures and sells physicalproducts. Therefore, inventory turnover ratio is not calculated.
Note 3: The company does not have individual financial report as of March 31, 2018
Note 4: The following calculation formulas shall be displayed at the end of the tables of the annual report.
1. Financial structure(1) Debt-to-asset ratio = total liabilities / total assets.
(2) Long-term fund to property, plant and equipment ratio = (total equity + non-current liabilities) / netproperty, plant and equipment.
2. Solvency(1) Current ratio = current assets / current liabilities.
(2) Quick ratio = (current assets - inventory - prepaid expense) / current liabilities.
(3) Times interest earned = net income before income tax and interest expense / current interest expense.
3. Operating ability(1) Receivable (including accounts receivable and business-related notes receivable) turnover ratio = net
operating revenue / average balance of receivable of the period (including accounts receivable andbusiness-related notes receivable).
(2) Average days of collection = 365 / receivables turnover ratio.
(3) Inventory turnover ratio = cost of goods sold / average amount of inventory.
(4) Payable (including accounts payable and business-related notes payable) turnover ratio = cost of goods
sold / average balance of payable of the period (including accounts payable and business-related notes
payable).
(5) Average days of sales = 365 / inventory turnover ratio.
(6) Property, plant and equipment turnover ratio = net sales / net average property, plant and equipment.
(7) Total assets turnover ratio = net sales / total average assets.
4. Profitability(1) Return on assets ＝ [net income + interest expense (1 - tax rate)] / average total assets.
(2) Return on equity = after-tax profit /total average equity.
(3) Net profit margin = net income / net sales.
(4) Earnings per share = ( income attributable to owners of parent - dividend to preferred stock) / weighted
average of shares issued. (Note 4)
5. Cash flows(1) Cash flow ratio = new cash flows from operating activities / current liabilities.
(2) Cash flow adequacy ratio = net cash flows from operating activities in the past five years / (capital
expenditure + increase in inventory + cash dividend) in the past five years.
(3) Cash reinvestment ratio = (net cash flows from operating activities - cash dividend) / (gross margin of
property, plant and equipment + long-term investment + other non-current assets + working capital).
(Note 5)
6. Leverage:(1) Operating leverage = (net operating income - variable operating cost and expenses) / operating income(Note 6).
(2) Financial leverage = operating income / (operating income - interest expense).
Note 5: Precautions shall be taken when measuring the aforementioned earnings per share:
1. Based on the weighted average number of ordinary shares, rather than on the year-end number ofissued shares.
2. Weighted average number of shares shall be based on the flow period during capital increase ortreasury stock transactions.
3. For earnings transfer or capital reserve transfer, annual and semiannual earnings per share shall be
tracked and adjusted according to the proportion of capital increase without considering the- 98 -

issuance period when capital increased.
4. If the preferred stocks are nonconvertible cumulative preferred stocks, the annual stock dividend(issued or not issued) shall exclude after-tax income or include after-tax loss. If the preferredstocks are noncumulative, then when there is after-tax income, preferred stocks shall exclude
after-tax income, and no adjustment to preferred stocks is required when there are losses.
Note 6: The following precautions shall be taken when measuring cash flow:
1. Net cash flow of business activities refer to the net cash inflow in the company's business activity.
2. Capital expenditure refers to the cash outflow for annual capital investments.
3. Increase in inventory is calculated only when the balance at the end of a period exceeds the balance at
the initial period; if the year-end inventory is reduced, then it shall be zeroed.
4. Cash dividend includes the cash dividend from holding ordinary and preferred stocks.
5. Gross property, plant, and equipment refer to the total property, plant, and equipment values before
cumulative depreciation.
Note 7: Issuer shall categorize operating costs and expenditures into fixed or variable costs and expenditures
according to their characteristics; when costs and expenditures are estimated or subjectively determined,
their rationality and consistency shall be ensured.
Note 8: When company stocks have no face value or the face value per share is not NT$10, face value to paid-in
capital shall be calculated according to the equity ratio that is based on the balance sheets of the ownerof the parent.

- 99 -

3. Supervisor Review Report
Refer to Appendix 2.

4. Financial Report and CPA Review Report
Refer to Appendix 3.

5. Individual financial report reviewed by CPA
Refer to Appendix 3 of the company’s Chinese version 2017 annual report.

6. Financial difficulties and corporate events encountered by the Company andaffiliates in the past two years and up to the date of report that have material
impact on the financial status of the Company: None.

- 100 -

Precautions of Review and Analysis of Financial
Status and Business Performance

VII.
1.

Financial status(1) Consolidated
Unit: NT$1,000
Year

Item

2016

Variation
Amount2017%

2,238,894

2,203,637(35,257)(1.57)

Property, plant and equipment

804,714

951,441

146,727

18.23

Other assets

247,236

72,588

29.36

Total Assets

3,290,844

319,824
3,474,902

184,058

5.59

Current liabilities

307,270

313,143

5,873

1.91

Non-current liabilities

336,388356,039

19,651

5.80

Total liabilities

643,658

669,182

25,524

3.97

Share capital

446,780446,780--

Capital reserve

2,052,669

2,053,485

816

0.04

Undistributed earnings

211,682

366,258

154,576

73.02

Total shareholders' equity

2,647,186

2,805,720

158,534

5.99

Current assets

Analysis and explanation of changes:(1) Increase in other assets in 2017 was attributed to the reclassifying the current assets.
(2) Increase in undistributed earings in 2017 was because of the revenue growth.

(2) Induvidual
Unit: NT$1,000
Year
Item

2016

Variation
Amount2017%

1,939,408

1,881,423(57,985)(2.99)

617,103704,900

87,797

14.23

584,472
3,140,983

661,572
3,247,895

77,100106,912

13.19
3.40

Current liabilities

322,545289,921(32,624)(10.11)

Non-current liabilities

224,388

210,976(13,412)(5.98)

Total liabilities

546,933

500,897(46,036)(8.42)

Share capital

446,780446,780--

Capital reserve

2,052,669

2,053,485

816

0.04

Undistributed earnings

211,682

366,258

154,576

73.02

Total shareholders' equity

2,594,050

2,746,998

152,948

5.90

Current assets
Property, plant and equipment
Other assets
Total Assets

Analysis and explanation of changes:(1) Increase in undistributed earings in 2017 was because of the revenue growth.

- 101 -

2. Financial performance(1) Comparative analysis of business performance- Consolidate
Unit: NT$1,000
Year
Item

2016

2017

881,670

Sales revenue-

Less: Returns and Allowances

Variation as apercentage (%)

Change (amount)

1,514,469

632,799

71.77

-

-

-

Net revenue

881,670

1,514,469

632,799

71.77

Operating cost

436,733

789,135

352,402

80.69

Gross profit

444,937

725,335

280,398

63.02

Operating expenses

336,429

384,601

48,172

14.32

Operating income

108,508

340,734

232,226214.02Non-operating income and gain

34,02945,881

11,852

34.83

Non-operating expense and loss

12,953(59,052)

46,099355.89

Income (loss) before tax

129,584

327,563

197,979152.78

Income tax benefits (expenses)(23,472)(56,382)

32,910140.21

Net profit (loss)

106,112271,181

165,069

155.56

Analysis and explanation of changes:(1) Increase in net revenue, gross profit is due to the growth of the copany’s business in 2017.

(2)

Comparative analysis of business performance- Individual
Unit: NT$1,000
Year

Item
Sales revenue
Less: Returns and Allowances

2016

2017

865,220-

Change (amount)

Variation as apercentage (%)

1,202,199

336,979

38.95

-

-

-

Net revenue

865,220

1,202,199

336,979

38.95

Operating cost

474,779

662,088

187,309

39.45

Gross profit

395,515

540,111

144,596

36.56

Operating expenses

284,543

321,050

36,507

12.83

Operating income

110,972

219,061

108,089

97.40

Non-operating income and gain

34,513

131,941

97,428282.29Non-operating expense and loss

24,05050,90526,855111.64

Income (loss) before tax

121,435

300,097

178,662147.12

Income tax benefits (expenses)(20,081)(34,427)

14,34671.44

Net profit (loss)

101,354

265,670

164,316

162.12Analysis and explanation of changes:(1) Increase in net revenue, operating cost, gross profit and operating expenses is due to the growth of the company’sbusiness in 2017.
(2) Non-operating expense and loss is caused by the recognition of loss on financial assets at fair value through profit
or loss(3) Increase in income tax expense was caused by reasons mentioned above.

- 102 -

(3) Expected Sales Volume and Criteria
On the basis of current industrial environment and future market supply and demand, as well as
information relevant to R&D schedule and business development, the Company expects its
business to growth steadily in 2018.

3. Cash flows(1) Analysis on the cash flow changes - Consolidated
Unit: NT$1,000
Item

2016

2017

Changes (increase/decrease)

Net cash inflow (outflow) from operating activities(171,326)

172,390343,716

Net cash inflow (outflow) from investing activities(133,529)

165,023

298,552

Net cash inflow (outflow) from financing activities

86,699(106,572)(193,271)

Analysis and explanation of changes:(1) In 2017, net business cash intflow increased primarily because of the change of net income and related assets and liabilities.
(2)In 2017, net investment cash inflow increased primarily because of Acquisition of held-to-maturity financial assets.
(3) In 2017, the net financing cash outflow increased because of cash dividends paid.

(2) Analysis on the cash flow changes - Individual
Unit: NT$1,000
Item

2016

2017

Changes (increase/decrease)

Net cash inflow (outflow) from operating activities(51,514)

34,29185,805

Net cash inflow (outflow) from investing activities

82,995242,388

159,393

Net cash inflow (outflow) from financing activities(51,270)(128,259)(76,989)

Analysis on the cash flow changes of in these two years:(1) In 2017, net business cash intflow increased primarily because of net income and the change of related assets and liabilities.
(2)In 2017, net investment cash intflow increased primarily because of Acquisition of held-to-maturity financial assets, acquisitionof investments accounted for using equity method, and the construction of the Phase 2 R&D Testing and Experience Center.
(3) In 2017, the net financing cash outflow increased because of cash dividends paid.

(3) Improvement plan for inadequate liquidity: None.
(4) Cash flow analysis for the coming year
Unit: NT$1,000
Expected cash
Expected cash
Remedial measures for expected cash deficit
flow from
Expected cash
Cash balance,
flow frominvestment and surplus (deficit)
beginning
operatingfinancing+ Investment plan
Financing plan
activities
activities
710,647
200,000(423,992)
486,655(1) Expected cash flow from operating activities: Cash inflow will be attribute to net income and the change of related
assets and liabilities.
(2) Expected cash flow from investment and financing activities: Cash inflow will be attribute to share of the profit ofsubsidiaries and associates and interest earned.
(3) Remedial measures for expected cash deficit: None

- 103 -

4. Effect of major capital spending on financial position and business operation(1) Major capital spending and sources of funds
Unit: NT$1,000
Project
Business office

Actual or
expected sourceof funds
Marketfund-raising

Actual or
estimatedcompletion date

Total funding need

106.11

940,000

Actual or expected status ofspending
2016
2017
418,063-(2) Anticipated benefit(1) Enhance R&D testing capacity to increase corporate competitiveness(2) Integrate office and plant to raise operational efficiency(3) Improve working environment to increase employee commitment

5. Investment policy in the past year, profit/loss analysis, improvement plan,and investment plan for the coming year
(1) Investment transfer policy
The Company currently focuses its investment transfer policy on business investment related targets
and does not invest in other businesses. Related executing department handles affairs according to
the Investment Circulation regulations of its internal control system and Procedure for Processing
the Acquisition and Disposal of Assets, both of which have been reviewed and approved by the
Board of Directors.

(2) Reasons for investment profit or loss in recent years
In accordance with the Company’s business expansion and future development, Brogent’s
subsidiaries were set up in 2015 and 2016 for different purposes listed as below:
Investee Company

Business Scope

Brogent Mechanical Inc.

Manufacture and sales of the simulator rides and its key components

Brogent Creative Inc.

Development and sales of the peripheral products of simulator rides

Brogent Global Inc.

Development and management business of self-operated outlets

Brogent Hong Kong Limited

Reinvestment and trading businessBrogent Rides (Shanghai) Limited

Import and export businessBrogent Creative (Shanghai)
LimitedBrogent Japan Entertainment
Joint-Stock Corporation

Development and management business of self-operated outlets
Management business and development and sales of the peripheralproducts of simulator rides in Japan

In 2017, the Company’s Operational Highlights of Subsidiaries, please item VIII. Important Notices (2)Operational Highlights of Subsidiaries.
- 104 -

(3) Investment plan for the next year
The Company will review and evaluate our investment plant from a long-term strategic perspective
to strengthen the channel-content management strategy and continue to strengthen our global
competitiveness.

6. Analysis of risks in recent years up to the publishing date of the annual report(1) Impact of interest rate and exchange rate changes and inflation on
Company’s profit and response measures:(A) Impact of interest rate on Company's profit and response measures
The Company uses its funds conservatively and steadily; the operation-generated funds are stored
as time deposits and current deposits. The interests earned in 2016 and 2017 were respectively
NT$7,836 thousand and 7,216 thousand. The bank loan interest expenses were respectively
NT$5,151thousand and NT$6,238 thousand. The interest earned and ratio of expenditure as apercentage of operating income and net income before tax was low. Because the Company isincreasing its business scale and building the R&D Testing and Experience Center, it is expectedthat the Company will need more loans in NTD. The Company will remain vigilant at changes inthe banks' interest rate and maintain a good relationship with its cooperating banks so that theCompany can acquire preferential interest rate to reduce the effects of interest rate variations on the
Company operation.
(B) During recent years up to the annual report publishing date, the effects of exchange rate variations
on the Company's profit and its future response measures
The business focus of the Company is mobile device software and simulator rides; the downstream
customers are major foreign and domestic cellphone manufacturers as well as developers of themeparks. Our mobile device software is priced in USD, and the simulator rides are priced in either
NTD or foreign currency depending on the region of sale. Therefore, foreign currency assets are
generated. The net foreign exchange gain was NT$(NT$6,841) thousand accounting for (0.78%)
and (5.28%) of the operating income and net profit margin before tax of 2016 ; he net foreignexchange gain was (NT$46,404) thousand accounting for (3.06%) and (14.17%) of the operating
income and net profit margin before tax of 2017. Because exchange rate changes influence theprofits of the Company, the Company's management authorities pay close attention to the exchange
rate trends and reinforce the management of risks in exchange rate fluctuations. The corresponding
measures adopted are as follows:Because of the gradual increase in export sales, the Company attempts to mitigate the effects of- 105 -

exchange rate changes by setting up a foreign currency savings account to manage foreign
currencies. The Company assigns designated personnel from the finance department to sell excess
foreign currencies under optimal conditions according to the daily foreign currency balance andmonthly fund estimates, to reduce the impact of exchange rate changes on the profit.
When giving quotes to foreign customers, the business department considers the effects of
exchange rate variations on product prices and refers to the prices adjusted according to thechanging exchange rates, or negotiates a new price in NTD with the customer, thereby mitigating
the effects of exchange rate variations on the profit of the Company.
Our finance department personnel maintains a close contact with the foreign exchange
departments of frequent interacting banks to adequately acquire market information and use suchinformation to forecast the long- and short-term trends of the exchange rage and sell or buy inforeign currencies in a timely manner. Thus, the effects of exchange rate variations on the
profitability of the Company can be reduced.
At the appropriate timing, the Company will have its finance department personnel to review thechanges in the foreign exchange market and consider foreign exchange fund requirements andbalances to determine whether hedging derivative financial instrument operating strategies should
be used in accordance with the Procedure for Processing the Acquisition and Disposal of Assets,such as buying forwards in advance to avert exchange rate risks, thereby minimizing the effects of
exchange rate variations on the profit of the Company.
(C) During recent years up to the annual report publishing date, the effects of inflation on the Company's
profit and its future response measures:
The Company profits have not experienced material influence from inflation; it is predicted thatsuch effect remains limited on the Company's profits. The Company will continue to monitor the
inflation situation and adequately adjust its product prices accordingly.

(2) Policies of engaging in high-risk, high-leverage investments, lending toothers, providing endorsement and guarantee, and derivatives transactions,profit/loss analysis, and future response measures:(A) The Company has always focused on its main business activities and upheld the practicalprinciple of managing a business. Our financial policy is based on the principle of robustness
and conservativeness, and thus the Company does not engage in high-risk, high-leveraging
investment as well as derivative instrument transactions.
(B) From 2016 to 2017 and up to the annual report publishing date, the Company has not engaged
in providing endorsement and guarantee, lending to others, and derivatives transactions. If such
- 106 -

engagements are required in the future, it shall be executed in accordance with the "Operating
Procedure for Endorsements and Guarantees," "Operating Procedure for Fund Lending," and"Procedure for Acquisition or Disposal of Assets" and relevant transaction information shall beannounced in accordance with laws and regulations.

(3) Future R&D projects and estimated R&D expenditure:
To continuously enhance the Company’s competitiveness, the Company has always actively
invested in R&D efforts. In 2016 and 2017, it has expended a total of NT$95,569 thousand andNT$95,569 thousand in R&D, respectively accounting for 10.84% and 8.58% of the net operating
income. It is expected that a total of NT$153,338 thousand will be expended in R&D in 2018, andthe Company's future R&D projects are as follows:
Unit
Creativity center

Technical center

New products under development
A.Games(1).Interactive game combining motion simulation and technology(2).Sensory interactive game combining augmented reality and related 3D
imaging technologies(3).d-Ride interactive shooting game
B.Digital content production (including cooperative development)
C.Theme planning and renovation design
D.Applied equipment combined with wearable device
E.Novel projector technical development
F.Theme-based peripheral product development
A.Group interactive motion theater development
B.Novel simulator ride product development

C.Platform-controlled technological optimization
D.Mechanical design optimization
E.Arts design refinement
F.Equipment miniaturization(4) Major changes in government policies and laws at home and broad andthe impact on Company finance and business and response measures:
During recent years up to the annual report publishing date, major changes in government
policies and laws at home and broad exerted no material effect on Company finance and business.
The Company will acquire relevant information in a timely manner and formulate necessary
response measures to meet company operation requirements.

(5) Impact of recent technological and market changes during recent years up
to the annual report publishing date on the Company's finance andbusiness, and response measures:
The Company has constantly paid attention to technological and market changes anddesignated personnel to search for information regarding industry-related technologies and trend
variations to provide a reference for decision-making at the management level. The information
can facilitate adjusting operational strategies and devise response measures. Therefore, there were
- 107 -

no impact of recent technological and market changes on the Company's finance and business.

(6) Impact of corporate image change on risk management and response
measures:
Since its inception, the Company actively strengthens its internal management, focusing on
the management of its main business activities. In addition, it endeavors to maintain corporate
image and compliance with relevant laws and regulations. To date, there have been no changes to
the Company's image that would cause risks to company operation. In future, the Company willcontinue to comply with and implement corporate governance requirement, and consult relevant
experts in a timely manner, to reduce the effects of such risk on the Company's finance andbusiness.

(7) Expected benefits and potential risks of merger and acquisition andresponse measures:
During recent years up to the annual report publishing date, the Company has not undertaken
merger and acquisition plans. In the future, when evaluating and implementing relevant plans, theCompany shall handle related matters according to laws and regulations and the Company's
internal management regulations.

(8) Expected benefits and potential risks of capacity expansion and response
measures:
The Company has relocated to the newly constructed R&D Testing Center in January 2013,as a response to prepare for the Company's future expansion, increase its R&D and testing
capacities, and raise its operational efficiency requirements. After relocating to the new plant, theCompany's image, ability to receive orders, and management efficiency have improved, which is
conducive to its business expansion. Because of the currently accepted and expected projects, theCompany's R&D testing capacity is inadequate. The Company has started the construction of a
R&D Testing and Experience Center in the lower half of 2014 and completed construction in 2016.
The R&D Testing and Experience Center not only facilitates determining consumers'
entertainment needs regarding simulator rides, but also improves product development, testing andproduction capacity, increases the capacity to receive more orders and market share, and magnify
the gap between the Company and its competitors in competitive advantage.

The Company has

carefully evaluated the funding requirement for business expansion and properly planned the useof the funds. The Company will raise funds in a capital market to support the construction works.
However, if market fund-raising fails, the Company has a low credit limit remaining in bank loans
and thus it will apply for construction financing loans from the bank. In addition, the Company's
cash flow from operating activities should be enough to support the expansion requirement;- 108 -

therefore, the Company is not subject to the risk of shortage of funds caused by the construction of
the R&D Testing and Experience Center.

(9) Risks associated with over-concentration in purchase or sale and response
measures:(A) Purchases
The Company is a professional manufacturer of simulator rides, purchasing stocks according
to the project designs of various simulator rides. The Company also commissions manufacturers
to undergo hardware processing. In the past 2 years, purchases exceeding 15% of a single
manufacturer were made for precision mechanical products, in addition to the intensive shipments
in year 2016. Therefore, the Company is not associated with risks of overly concentrating stock
purchases.
(B) Sales
Because simulator rides involve high manufacturing cost, the Company primarily receives
income from selling simulator rides since our entry into the simulator ride market. The proportionof sales to simulator ride customers is also demonstrating an increasing trend annually. Following
the successful operation of the FlyOver Taiwan project, the Company has attracted the attention of
global amusement park and tourist attraction operators, and these operators have visited theCompany to engage in negotiations and experience the products themselves. According tocustomer demand, the Company designs and integrates upstream software and hardware systems
and technologies, selling them to downstream operators, including theme parks, museums,
shopping malls, and urban experience center. With the increasing popularity and word of mouth of
the Company as well as partnering with internationally well-known companies, the Company has
expanded from the domestic market to China, North American regions, and Euroasian regions,effectively reducing its reliance on a single customer, thereby mitigating the risk of sales
concentration.The upstream industries associated with the simulator ride equipment comprise thehardware section, including precision machinery industry and manufacturers of spherical screensand projectors, and the software section, including wireless embedded control system, sphericalprojector and playback control systems, and digital contents.

(10) Impact of mass transfer of equity by or change of directors, supervisors,or shareholders holding more than 10% interests on the Company,
associated risks and response measures:
During recent years up to the annual report publishing date, there were no mass transfers ofequity by or change of directors, supervisors, or shareholders holding more than 10% interests on
the Company.

(11) Impact of change of management rights on the Company, associated- 109 -

risk and response measures:
In 2017 and 2018 up to the annual report publishing date, there were no negative impacts
from changes in management rights.

(12) Litigation or non-litigation events(A) Disclose the litigation facts, target amount, litigation start date, main parties involved, andcurrent progress regarding concluded or pending litigious, non-litigious, or administrative
litigation events, the potential effects of the outcomes on shareholder equity or security
prices during the recent two years up to the annual report publishing date: None.
(B) The outcome of concluded or pending litigious, non-litigious, or administrative litigation
events involving the director, supervisor, president, de facto responsible person, major
shareholders holding more than 10% interest, or subsidiary of the Company during therecent two years up to the annual report publishing date: None.
(C) The involvement of the director, supervisor, president, and major shareholders holding morethan 10% interest in events regulated in Article 157 of the Securities and Exchange Act
during the recent two years up to the annual report publishing date, and the Company's
current progress in handling such events: None.

(13) Other significant risks and response measures: None.
7.Other important events: None.

- 110 -

VIII. Important Notices
1. Profile on affiliates and subsidiaries(1) Subsidiaries Iperation Report
A. Subsidiary Chart

B. Business Scope of each subsidiary

InvesteeCompany

Date of
Location
Establishment

Brogent
Mechanical Inc.

May, 2015

Brogent
Creative Inc.

April, 2015

Kaohsiung, Taiwan

Brogent Global
Inc.

September,
2015

Taipei,TaiwanTaoyuan,TaiwanInvestment
AmountBusiness Scope
Manufacture and sales

NTD 72,000,000 of the simulator rides- 111 -and its key components
Development and salesof the peripheral
NTD 9,000,000
products of simulator
rides
Development andNTD
300,000,000 management business of
self-operated outlets

Investee
Company
Brogent Hong
Kong Limited
Brogent Rides(Shanghai)
LimitedBrogent
Creative(Shanghai)
LimitedBrogent JapanEntertainment
Joint-Stock
Corporation

Date of
Location
Establishment

Investment
AmountBusiness Scope

June, 2015

Kowloon,Hong
Kong

USD1,700,000

Reinvestment andtrading business

July, 2015

Shanghai,
China

USD700,000

Import and export
business

September,
2015

Shanghai,
China

Development andRMB3,000,000 management business of
self-operated outlets

Tokyo,Japan

Management businessand development and
JPY25,000,000 sales of the peripheralproducts of simulator
rides in Japan

August,2016

C. Shareholders in Common of Brogent and Its Subsidiaries with Deemed Control andSubordination: None.
D. Rosters of Directors, Supervisors, and Presidents of Brogent’s Subsidiaries
Investee

Title
Chairman
Director
Director

Brogent
Creative Inc. Director
Director
Supervisor

Brogent
Mechanical Chairman
Inc.
Director
Director

Name or Representative

Shares Held
SharesPercentatge

Brogent Technologies Inc.
Representative：Chun-Hao Cheng
Brogent Technologies Inc.
Representative：Pei-Chi HoBrogent Technologies Inc
Representative：Shohei Yoshida
Brogent Technologies Inc
Representative：Tsuyoshi ItoMuse
Communication Co., Ltd.
Representative：Kuo-Hsiang Yang
Pei-Kuan Lee

900,000

60 %

900,000

60 %

900,000

60 %

900,000

60 %

75,0005%--

Brogent Technologies Inc.
Representative：Chih-Hung Ouyang

7,199,500

61.11%

Sunny Enterprises Co., Ltd.
Representative：Wen-Hsiang Kao
Brogent Technologies Inc.

4,581,500

38.89%

7,199,500

61.11%- 112 -

Investee

Title

Shares Held
SharesPercentatge

Name or Representative
Representative：Teng-Hung Lai

Supervisor

Brogent Hong
ChairmanKong Limited
Brogent Rides Chairman(Shanghai)Supervisor
LimitedBrogent
ChairmanCreative(Shanghai)Supervisor
Limited

Fei-Hsiu Hsu
Brogent Technologies Inc.
Representative：Pei-Chi HoBrogent Technologies Inc.
Representative：Pei-Chi HoBrogent Technologies Inc.
Representative：Pei-Kuan Lee

-

-

-

100%

-

100%

-

100%

Brogent Technologies Inc.
Representative：Pei-Chi Ho

-

100%

Brogent Technologies Inc.
Representative：Pei-Kuan Lee

-

100%

30,000,000

100%

30,000,000

100%

30,000,000

100%

30,000,000

100%

800

45.71%

800

45.71%

700

40%

700

40%

-

-

800

45.71%

250

14.29%

800

45.71%

700

40%

Brogent Technologies Inc.
Representative：Chih-Hung Ouyang
Brogent Technologies Inc.
Director
Representative：Pei-Chi HoBrogent
Brogent Technologies Inc.
Global Inc. Director
Representative：Ming-Chi Chang
Brogent Technologies Inc.
Supervisor
Representative：Sui-Chuan Lin
Kodansha Company, Limited
Chairman
Representative：Kohei Furukawa
Kodansha Company, Limited
Director
Representative：Shohei Yoshida
Brogent Hong Kong Limited
Director
Representative：Chih-Hung Ouyang
Brogent Hong Kong Limited
Brogent Japan Director
Representative：Chun-Hao ChengEntertainment
Director
DAISAKU SONODA
Joint-Stock
Kodansha Company, Limited
Corporation Director
Representative：Hiroshi Nakada
DENTSU INC.
Director
Representative：Toru Kimpara
Kodansha Company, Limited
Supervisor
Representative：Mitusyuki Shiraishi
Brogent Hong Kong Limited
Supervisor
Representative：Sen-Hao Cheng
Chairman(2) Operational Highlights of Subsidiaries

Investee

Capital

Total
Asset

Total
Liabilities

Net
Value

Unit: NT$1,000 As of Dec. 31, 2017
Net
IncomeEPS
Revenue
Profit(After(NTD)
Tax)

Brogent
Creative Inc

15,00014,984218- 113 -

14,766

361

(913)

(831)

(0.55)

Investee
Brogent
Mechanical Inc.
Brogent Global
Inc.
Brogent Hong
Kong Limited
Brogent Rides(Shanghai)
LimitedBrogent
Creative(Shanghai)
LimitedBrogent JapanEntertainment
Joint-Stock
Corporation

Capital

Total
Asset

Total
Liabilities

Net
Value

Revenue

ProfitNet
Income(After
Tax)

EPS
(NTD)

117,810350,275

213,520

136,755

129,964

20,012

15,0371.28

300,000

422,369

109,767

312,602

161,524

38,78634,177

1.14

54,063242,284

138,886

103,398

219,333

11,65355,610-22,690172,613108,087

64,526294,923

19,01845,139-14,961

170,863

127,380

43,483

380,474

39,24730,674-25,40320,937784

20,152-(2,558)(2,552)-(3) Consolidated Financial Statements: Please refer to Appendix 3.

- 114 -

2. Private placement of corporate bonds in the past years to the date of theannual report
Item

Private Placement No.1
Date of Issue: February 06, 2015

Types of Privately
Ordinary shares
Placed Securities
Date and number of
On December 19, 2014, the Shareholders' extraordinary meeting passed the private
shares passed in the placement of 6,000 ordinary shares, which shall take place once in a year starting fromshareholders' meeting the date of resolution.
The pricing criterion for the issuance of privately placed ordinary share resolved in
the shareholders' meeting on December 19, 2014 was no less than 60% of the reference
price. Because the private placement price was less than 80% of the private placement
Pricing criteria andreference price, CPA Shun-Fa Hsu from Deloitte & Touche was requested to produce a
rationality
private placement price rationality independent expert opinion book on November 1,
2014. This conforms to the regulation of public issuing companies regarding the terms
and condition of private placement securities; therefore, the price should be reasonable.
Method of selecting
Limited to the designated party as regulated under Article 43-6 of the Securities anddesignated party
Exchange Act.
The current private placement is aimed to recruit strategic investors through which
theCompany can strengthen its customer structure, product combination, andNecessary reason for marketing
abilities. Compared with publicly placed securities, privately placed
private placement
securities may not be transferred freely within three years, and such regulation ensuresthe long-term cooperation between the Company and placement subscribers.
Date of Payment
2015.01.05
Completion
Private placement
Number of
Relation
Participation in
Criteria
subject
shareswith
corporate(Note 6)(Note 5)subscribedcompany
management
Ruentex
1,800,000
Development Co.
None.
None.
Ltd.
Ruentex
1,800,000
None.
None.
Industries Ltd.
Changchun
1,555,000
Investment Co.
None.
None.
Ltd.
Chihping
200,000
Investment Co.
None.
None.
Ltd.
Yong-Fang
6,000
None.
None.
Subscriber
Chiang
Conforms to Article
information
6,000
Sheng-Yu Hsu
None.
None.
43-6 of the
Securities
andShou-Jen Chen
28,000None.
None.
Exchange Act
Ling-Chung
7,000
None.
None.
Meng
123,000
Shun-Long Chen
None.
None.
6,000
Kuo-Ming Lu
None.
None.
6,000
Deng-Chih Chang
None.
None.
6,000
Shu-Feng Yeh
None.
None.
6,000
Shu-Ming Liu
None.
None.
37,000
Bi-Yang Tsai
None.
None.
18,000
Hua-Tong Chao
None.
None.
18,000Chun-Hsiang Wu
None.
None.
3,000
Kuo-Song Chan
None.
None.
- 115 -

18,000
Tong-Hui Lin
1,000
Cheng-Cheng Liu
6,000
Chih-Tsang Lu
Chih-Chuan Chen
22,000Chen-Wei Mah
20,000Cheng-Chuan
22,000Chen
22,000Chih-Fan Wang
Chuan-Thai
22,000Cheng
22,000Chong-Hsian Liu
22,000
Dah-Meng Tseng
Conforms to Article
22,000
Fan-Wen Meng 43-6 of the
22,000Long-Yeh Chuo Securities andExchangeAct
22,000Chih-Chang Hsu
22,000Shih-Hsun Lai
44,000Shih-Ning Dong
Chang-Cheng
22,000Chien
Chih-Hong Li
22,00022,000Ming-Chun Chen
Actual subscription(or conversion) price
Actual subscription(or conversion) priceand difference withreference priceEffect of private
placement onshareholder's equity
Status of private
placement fundspending and project
implementation
progress
Manifestation ofprivate placement
benefits

None.
None.
None.
None.
None.

None.
None.
None.
None.
None.

None.

None.

None.

None.

None.

None.

None.
None.
None.
None.
None.
None.
None.

None.
None.
None.
None.
None.
None.
None.

None.

None.

None.
None.

None.
None.

NT$240.
No difference
The current private placement funds are utilized as operational funds to strengthen
financial structure, facilitate operation promotion, attract long-term partners, andpromote stable business growth, thus benefiting the shareholders' rights and interests.
All funds have been received and will be successively utilized following planningcompletion.

Not applicable.

- 116 -

Item

Private Placement No. 2
Date of Issue: July 06, 2015

Types of Privately
Ordinary shares
Placed Securities
Date and number of
On June 11, 2014, the Shareholders' meeting passed the private placement of 3,300
shares passed in theordinary shares, which shall take place once or twice in a year starting from the dateshareholders' meeting of resolution.
The pricing criterion for the issuance of privately placed ordinary share resolved intheshareholders' meeting on June 11, 2014, was no less than 6 80% of the private
Pricing criteria andplacement
reference price. This conforms to the regulation of public issuing
rationality
companies regarding the terms and condition of private placement securities;
therefore, the price should be reasonable.
Method of selecting
Not applicable.
designated party
The current private placement is aimed to recruit strategic investors through which
theCompany can strengthen its customer structure, product combination, andNecessary reason for marketing
abilities. Compared with publicly placed securities, privately placed
private placement
securities may not be transferred freely within three years, and such regulation ensuresthe long-term cooperation between the Company and placement subscribers.
Date of Payment
2015.06.03
Completion
Number Relation Participation
Private placement subject
Criteriaof shares within corporate
subscribed company management
Kodasha Custody Account
250,000 Nonein Taipei Fubon Financial
None
Bank
Gains Investment
500,000 None
None
Subscriber information Corporation
Conforms to Article
Shang Yang Investment
43-6 of the Securities
100,000 None
None
Corporationand Exchange Act
Chao Yang Investment
100,000 None
None
Corporation
50,000 None
Cheng-Chien Pu
None
30,000 None
Ming-Chu Kuo
None
Actual subscription (or NT$308
conversion) price
Actual subscription (orconversion) price andNo difference
difference withreference priceEffect of private
The current private placement funds are utilized as operational funds to strengthen
placement on
financial structure, facilitate operation promotion, attract long-term partners, andshareholder's equity
promote stable business growth, thus benefiting the shareholders' rights and interests.
Status of private
placement fundfunds have been received and will be successively utilized following planningspending and project Allcompletion.
implementation
progress
Manifestation ofprivate placement
Not applicable.
benefits- 117 -

3.

Holding or disposal of stocks of the Company by subsidiaries in the past
year and up to the date of report:
Not applicable.

4. Other supplemental information
Items of Commitment: The Company has executed or signed letter ofunderstanding regarding items of commitment to listing and trading overthe counter.

IX. Items of impact of interests of shareholders or
stock priceNone.

- 118 -

Appendix
Appendix 1：Statement of Internal Control System
Brogent Technologies Inc.
Statement of Internal Control System

Date: March 12, 2018
Based on the findings of a self-assessment, Brogent Technologies Inc. (Brogent) states the following
with regard to its internal control system during the year of 2016：
1. Brogent’s Board of Directors and Management are responsible for establishing, implementing,and maintaining an adequate internal control system. Our internal control is a process designed
to provide reasonable assurance over the effectiveness and efficiency of our operations(including profitability, performance, and safeguarding of assets), reliability, timeliness,transparency of our reporting, and compliance with applicable rulings, laws and regulations.
2. An internal control system has inherent limitations. No matter how perfectly designed, aneffective internal control system can provide only reasonable assurance of accomplishing its
stated objectives. Moreover, the effectiveness of internal control system may be subject tochanges due to extenuating circumstances beyond our control. Nevertheless, our internal control
system contains self-monitoring mechanisms, and Brogent takes immediate remedial actions in
response to any identified deficiencies.
3. Brogent evaluates 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 (herein below, the “Regulations”). The criteria adopted by theRegulations identify five key components of managerial internal control: (1) control
environment, (2) risk assessment, (3) control activities, (4) information and communication, and(5) monitoring activities.
4. Brogent has evaluated the design and operating effectiveness of its internal control system
according to the aforesaid Regulations.
5. Based on the findings of such evaluation, Brogent believes that, on December 31, 2017, it has
maintained, in all material respects, an effective internal control system (that includes thesupervision and management of our subsidiaries), to provide reasonable assurance over ouroperational effectiveness and efficiency, reliability, timeliness, transparency of reporting, andcompliance with applicable rulings, laws and regulations.
6. This Statement will be an integral part of Brogent’s Annual Report for the year 2017 andProspectus, and will be made public. Any falsehood, concealment, or other illegality in thecontent made public will entail legal liability under Articles 20, 32, 171, and 174 of the
Securities and Exchange Law.
7. This Statement has been passed by the Board of Directors in their meeting held on March 12,
2018, with the seven attending directors all affirming the content of this Statement.
Brogent Technologies Inc.
Chairman：Chung-Ming Huang
President： Chih-Hung Ouyang- 119 -

Appendix 2：Supervisor’s Review ReportSupervisor’s Review Report
The Board of Directors has prepared the Company’s 2017 Business Report, Financial
Statements, and proposal for allocation of profits. The CPA firm of Grant Thornton was retained toaudit the Company’s Financial Statements and has issued an audit report relating to the Financial
Statements. The Business Report, Financial Statements and Profit Allocation Proposal have beenreviewed and determined to be correct and accurate by the Audit Committee members of Brogent
Technologies Inc. According to Article 219 of the Company Law, we hereby submit the report.
To the 2018 Annual General Meeting

Brogent Technologies Inc.

Supervisor：Yi-Hsiang Huang

Supervisor：Yung-Liang Huang

Supervisor：Ken-Huang Lin

March 12, 2018120

Appendix 3：Consolidated Financial Statements and Independent Auditors’ Report

121

122

123

124

125

126

127

128

129

130

131

132

BROGENT TECHNOLOGIES INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

1. GENERAL
Brogent Technologies Inc. (the “Brogent” or the “Company”) was incorporated under theCompany Law of Taiwan, the Republic of China (R.O.C.) in October, 2001. On December 18,
2012, the Company’s shares were traded on the Taipei Exchange (TPEx). The Company and its
subsidiaries (collectively as the “Group”) are primarily engaged in the research, development,
design, production and sales of the simulation entertainment equipment and its key components
and peripheral products, embedded/mobile software, streaming media/video, real-time rendering(3D above), interactive multimedia network, and multi-screen seamless integration systems.
The address of the Group’s registered office and principal place of business is No.9, Fuxing 4th
Rd., Qianzhen Dist., Kaohsiung City, Taiwan.

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements were approved and authorized for issue by
the Board of Directors on March 12, 2018.

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIALREPORTING STANDARDS(1) Initial application of the amendments to the Regulations Governing the Preparation of
Financial Reports by Securities Issuers and the International Financial ReportingStandards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations(IFRIC), and SIC Interpretations (SIC) (collectively, “IFRSs”) endorsed and issued into
effect by the Financial Supervisory Commission (FSC)
The initial application of the amendments to the Regulations Governing the Preparation of
Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the
FSC did not have a significant effect on the Group’s accounting policies.
Amendments to the Regulations Governing the Preparation of Financial Reports by Securities
Issuers
The amendments include additions of several accounting items and requirements fordisclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed by
the FSC for application starting from 2017. In addition, as a result of the post implementation
review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition andmeasurement considerations and add requirements for disclosures of related party

133

transactions and goodwill.
The amendments stipulate that other companies or institutions of which the chairman of theboard of directors or president serves as the chairman of the board of directors or thepresident, or is the spouse or second immediate family of the chairman of the board of
directors or president of the Group, are deemed to have a substantive related party
relationship, unless it can be demonstrated that no control, joint control, or significant
influence exists. Furthermore, the amendments require the disclosure of the names of therelated parties and the relationship with whom the Group has significant transaction. If thetransaction or balance with a specific related party is 10% or more of the Group’s respective
total transaction or balance, such transaction should be separately disclosed by the name ofeach related party.
The amendments also require additional disclosure if there is a significant difference between
the actual operation after business combination and the expected benefit on acquisition date.
When the amendments are applied retrospectively starting on January 1, 2017, the disclosureof specific related party transactions or balance that are more than 10% of Group’s respective
total transaction or balance is further enhanced and disclosed in Note 7.
(2) The IFRSs endorsed by FSC with effective date starting 2018
New, Revised or Amended Standards and Interpretations

Effective Date Issued by
IASB

Annual Improvements to IFRSs 2014-2016 Cycle
Amendment to IFRS 12

January 1, 2017

Amendment to IAS 28

January 1, 2018

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

January 1, 2018

IFRS 9 “Financial Instruments”

January 1, 2018

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

January 1, 2018

IFRS 15 “Revenue from Contracts with Customers”

January 1, 2018

Amendment to IFRS 15 “Clarifications to IFRS 15”

January 1, 2018

Amendment to IAS 7 “Disclosure Initiative”

January 1, 2017

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

January 1, 2017

Amendment to IAS 40 “Transfers of Investment Property”

January 1, 2018

IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”

January 1, 2018

Except for the following items, the Group believes that the adoption of aforementioned
standards or interpretations will not have a significant effect on the Group’s accounting
policies.
134

A. IFRS 9 “Financial Instruments”
With regards to financial assets, all recognized financial assets that are within the scope of
IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently
measured at amortized cost or fair value. Under IFRS 9, the requirement for theclassification of financial assets is stated below.
For the Group’s debt instruments that have contractual cash flows use solely for the
purpose of principal and interest repayments, their classification and measurement are as
follows:(a) If the objective of the Group’s business model is to hold the financial asset for thecontractual cash flows purpose, such assets are measured at the amortized cost.
Interest revenue should be recognized in profit or loss by using the effective interest
method; and assessment on financial asset impairment should be performed on acontinuously basis. Impairment loss or reversal of impairment loss, if any, should berecognized in profit and loss.
(b) If the objective of the Group’s business model is to hold the financial asset for the
purpose of remitting contractual cash flows payments and to sell the financial assets,such assets are measured at fair value through other comprehensive income andshould be assessed for impairment on a continuously basis. Interest revenue should berecognized in profit or loss by using the effective interest method. Any gain or loss ona financial asset measured at fair value through other comprehensive income should
be recognized in other comprehensive income, except for gains or losses result from
impairment or due to foreign exchange fluctuations. When such financial asset isderecognized or reclassified, the cumulative gains or losses previously recognized inother comprehensive income is reclassified from equity to profit or loss.
The other financial assets which do not meet the aforementioned criteria should bemeasured at the fair value through profit or loss. However, the Group may irrevocably
designate an investment in equity instruments that is not held for trading as measured atfair value through other comprehensive income. All relevant gains and losses shall berecognized in other comprehensive income, except for dividends which are recognized in
profit or loss. No subsequent impairment assessment is required, and the cumulative gainor loss previously recognized in other comprehensive income cannot be reclassified fromequity to profit or loss.
Based on the facts and circumstances of the financial assets held on December 31, 2017and as of the current day, the Group initially estimated that the classification andmeasurement of the following financial assets will be changed by applying IFRS 9:(a) Non-publicly traded equity instruments classified as financial assets carried at costshould be measured at fair value in accordance with IFRS 9.
(b) Financial assets classified as debt investments with no active market andheld-to-maturity financial assets are classified as measured at amortized cost under135

IFRS 9 as these investments are held within a business model whose objective issolely for contractual cash flows purpose.
IFRS 9 adds a new expected loss impairment model to measure the impairment offinancial assets. A loss allowance for expected credit losses should be recognized forfinancial assets measured at amortized cost and financial assets mandatorily measured atfair value through other comprehensive income. If the credit risk on a financial instrument
has not increased significantly since initial recognition, the Group should measure the loss
allowance for that financial instrument at an amount equal to 12-month expected credit
losses. If the credit risk on a financial instrument has increased significantly since initialrecognition and is not deemed to be a low credit risk, the Group should measure the loss
allowance for that financial instrument at an amount equal to its lifetime expected credit
losses. The Group should always measure the loss allowance at an amount equal tolifetime expected credit losses for trade receivables.
For purchased or originated credit-impaired financial assets, the Group takes into accountthe expected credit losses on initial recognition in calculating the credit-adjusted effective
interest rate. Subsequently, any changes in expected losses are recognized as a loss
allowance with a corresponding gain or loss recognized in profit or loss
Preliminary assessment of the Group's assets of accounts receivable and related
construction contracts will be performed by applying a simplified approach to expectedcredit losses in calculating allowance for losses. The Group chose not to re-compile the2017 annual information when applying the classification, measurement and impairment
provisions of the International IFRS 9. The cumulative impact of the first-time projects
will be recognized at the date of initial application.
The retroactive application of IFRS 9 financial assets, measurement and impairment
provisions reveals the following classification and adjustment: :Assets and Equity Effect

Carrying Amount as

Adjustments

Retained Earnings

of December 31,

Arising from

Effect on

2017 (IAS 39)

Initial Application

January 1,2018

Carrying Amount
before adjusting asof January 1, 2018
(IFRS 9)Debt investments with noactive market-current$196,066($196,066)

$-

$-

-

196,066-

196,066

35,570(35,570)---

35,570-35,57017,856(17,856)--

Financial assets at
amortized cost-current
Held-to-maturity financial
assets- noncurrent
Financial assets at
amortized
cost-noncurrent
Financial assets carried at136

cost - noncurrent
Financial assets at fairvalue through profit orloss-noncurrent
Total effect on assets-

17,856(2,248)15,608$249,492$-($2,248)$247,244

The main changes in hedge accounting amended the application requirements for hedge
accounting to better reflect the Group’s risk management activities. Compared with IAS
39, the main changes include: (1) enhancing types of transactions eligible for hedge
accounting, specifically broadening the risks eligible for hedge accounting of
non-financial items; (2) changing the way derivative instruments are accounted for to
reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessmentwith the principle of economic relationship between the hedging instrument and thehedged item.
B. IFRS 15, “Revenue from Contracts with Customers” and related amendment
IFRS 15 establishes principles for recognizing revenue that apply to all contracts withcustomers, which has supersede IAS 18, “Revenue”, IAS 11, “Construction Contracts”,
and other revenue-related interpretations.
When applying IFRS 15, the Group shall recognize revenue by applying the following
steps:(a) Identify the contract with the customer;(b) Identify the performance obligations in the contract;(c) Determine the transaction price;(d) Allocate the transaction price to the performance obligations in the contracts; and(e) Recognize revenue when the entity satisfies a performance obligation.
The Group applies IFRS 15 and assesses the facts and circumstances of the contracts thatwere not completed on December 31, 2017. Noting IFRS 15 has not been applied
retrospectively nor has it had any cumulative effects for the initial application of theassessment of the recognition, measurement and presentation of revenue resulting from2018’s customer contracts.
C. IFRIC 22 “Foreign Currency Transactions and Advance Consideration”
IAS 21 stipulated that a foreign currency transaction shall be recorded initial in thefunctional currency by applying to the foreign currency amount at the spot exchange rateon the date of the transaction. IFRIC 22 further explains that the date of the transaction isthe date on which an entity recognizes a non-monetary asset or non-monetary liability
from payment or receipt of advance consideration. If there are multiple payments orreceipts in advance, the entity shall determine the date of the transaction for each payment

137

or receipt of advance consideration.
Except for the aforementioned impact, as of the date that the accompanying consolidated
financial statements were authorized for issue, the Group evaluates that there are no
significant effect on its financial position and financial performance as a result of the initialadoption of the other standards or interpretations.

(3) The IFRSs issued by IASB but not yet endorsed and issued into effect by FSC
New, Revised or Amended Standards and Interpretations

Effective Date Issued by
IASB

Annual Improvements to IFRSs 2015–2017 Cycle

January 1, 2019

Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

January 1, 2019

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

To be determined by

IFRS 16 “Leases”

January 1, 2019

IFRS 17 “Insurance Contracts”

January 1, 2021

Amendments to IAS 28 “Long-term Interests in Associates and Joint
Ventures”

January 1, 2019

IFRIC 23 “Uncertainty over Income Tax Treatments”

January 1, 2019

IASB

Except for the following items, the Group believes that the adoption of aforementioned
standards or interpretations will not have a significant effect on the Group’s accounting
policies.
A. IFRS 16 “Leases”
IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and anumber of related interpretations.
Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and leaseliabilities for all leases on the consolidated balance sheets except for low-value andshort-term leases. The Group may elect to apply the accounting method similar to theaccounting for operating lease under IAS 17 to the low-value and short-term leases. On
the consolidated statements of comprehensive income, the Company should present the
depreciation expense charged on the right-of-use asset separately from interest expense
accrued on the lease liability; interest is computed by using effective interest method. On
the consolidated statements of cash flows, cash payments for both the principal andinterest portion of the lease liability are classified within financing activities.
When IFRS 16 becomes effective, it is expected that there will be no significant impact
on the accounting treatment of the Group as lessor. For leases that are lessees, the Group138

may elect to apply this Standard either retrospectively to each prior reporting period
presented or retrospectively with the cumulative effect of the initial application of thisStandard recognized at the date of initial application. The Group chooses toretrospectively with the cumulative effect of the initial application of this Standard
recognized at the date of initial application, and it applies consistently to all leases of theGroup that are lessees, and does not retroactively re-compile comparative informationfrom previous reporting periods. For leases previously classified as operating leases, thelease liability is measured based on the present value of the remaining lease payments (thediscounted borrower’s borrowing interest rate on the initial application date), and theright-of-use asset is measured by the amount of the lease liability. There is no material
impact on the rights at the date of initial application.
Except for the aforementioned impact, as of the date the accompanying consolidated financial
statements were authorized for issue, the Group continues in evaluating the impact on its
financial position and financial performance as a result of the initial adoption of the otherstandards or interpretations. The related impact will be disclosed when the Group completes
the evaluation.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(1)Statement of Compliance
The accompanying consolidated financial statements have been prepared in conformity with
the Regulations Governing the Preparation of Financial Reports by Securities Issuers, andthe International Financial Reporting Standards, International Accounting Standards, IFRICInterpretations endorsed and issued into effect by the FSC.

(2)

Basis of Preparation
The accompanying consolidated financial statements have been prepared on the historicalcost basis except for financial instruments measured at fair value and defined benefit assets
or liabilities. Historical cost is generally based on the fair value of the consideration given in
exchange for the assets.

(3)

Basis of Consolidation
A. Basis for preparation of consolidated financial statements
The consolidated financial statements incorporate the financial statements of theCompany and entities controlled by the Company (its subsidiaries). Control is achieved
where Brogent has the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. Subsidiaries are fully consolidated from thedate on which control is transferred to the Group; and they are de-consolidated from thedate when control ceases.
Total comprehensive income of subsidiaries is attributed to the shareholders of the parent
and to the noncontrolling interests even if this results in a deficit balance in139

noncontrolling interests. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies in line with those used by theCompany.
All significant intra-group transactions, balances, income and expenses are eliminated infull upon consolidation.
Changes in the Company’s ownership interests in subsidiaries that do not result in the
Company losing control over the subsidiaries are accounted for as equity transactions.
The carrying amounts of the Company’s interests and the noncontrolling interests areadjusted to reflect the changes in their relative interests in the subsidiaries. Any
difference between the amount of which the noncontrolling interests are adjusted and thefair value of the consideration paid or received is recognized directly in equity andattributed to shareholders of the parent.
When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss,
and is calculated as the difference of: (a) the aggregate fair value of consideration
received and the fair value of any retained interest at the date when control is lost; and (b)the previous carrying amount of the assets (including goodwill), less liabilities of thesubsidiary and any noncontrolling interest. The fair value of any investment retained in
the former subsidiary at the date when control is lost is regarded as the cost on initialrecognition of an investment in an associate. The Group shall account for all amounts
recognized in other comprehensive income in relation to the subsidiary on the same basis
as if the Group had directly disposed of the related assets and liabilities. That is, when
the Group loses control of a subsidiary, all gains or losses previously recognized in othercomprehensive income in relation to the subsidiary should be reclassified from equity to
profit or loss.
B. Subsidiaries included in the consolidated financial statements
The detail information of the subsidiaries at the end of reporting period was as follows:
Percentage of Ownership
Name of

Name ofInvestor

InvesteeBusiness Scope

Location

Brogent

Brogent

Manufacture and sales ofMay, 2015

Technologies

Mechanical Inc.

the simulator rides andTaoyuan City

Inc.

December

December31, 2017

31, 2016

61.11%

61.11%

60.00%

60.00%

100%

100%

related key components
Brogent Creative

Development and sales

April, 2015

Inc.

of simulator rides andKaohsiung City

related peripheralproducts
Brogent Hong

Reinvestment andJune, 2015

Kong Limited

trading businessHong Kong

140

Note
1

Brogent Global

Development and

September, 2015

Inc.

management business

Kaohsiung City

100%

100%

100%

100%

100%

100%

of self-operated outlets
Brogent HongBrogent Rides

Import and export

July, 2015

Kong

(Shanghai)business

Shanghai

LimitedLimitedBrogent

Brogent Creative

Development andRides(Shanghai)

management business(Shanghai)

Limitedof self-operated outlets

September, 2015
Shanghai

LimitedNote 1: The 2017 financial statements of Brogent Mechanical Inc. is audited by the other auditors.
C. Subsidiaries not included in the consolidated financial statements: None.

141

(4)

Foreign Currency Translation
Foreign currency transactions of each of the Group’s entities are expressed in the functional
currency. Monetary assets and liabilities denominated in foreign currencies are recognizedusing the exchange rates at the dates of the transactions. Exchange differences arise whenmonetary items are settled or when monetary items are translated at rates different fromthose at which they were translated on initial recognition during the period or in previous
financial statements shall be recognized in profit or loss in the period in which they arise.
Financial statements for all foreign subsidiaries are translated into the functional currency as
follows: assets and liabilities are translated using the closing exchange rate at the balance
sheet date; income and expenses are translated at the average exchange rates of that period;
opening retained earnings carryforward from prior period are translated using the historicalexchange rates; dividends are translated using the exchange rates at the declaration date; anditems in other comprehensive income are translated using the rate at the balance sheet date.
Cumulative amount of the exchange differences relating to a suspending foreign operation
are recognized in other comprehensive income and accumulated in a separate component ofequity. Such amount is reclassified from equity to profit or loss when the gain or loss on
disposal is recognized.
When a gain or loss on a non-monetary item is recognized in other comprehensive income,any exchange component of that gain or loss shall be recognized in other comprehensive
income. Conversely, when a gain or loss on a non-monetary item is recognized in profit orloss, any exchange component of that gain or loss shall be recognized in profit or loss.

(5)

Classification of Current and Noncurrent Assets and Liabilities
Current assets include: (a) unrestricted cash or cash equivalents; (b) assets held mainly fortrading purposes; (c) assets that are expected to be realized within twelve months from thebalance sheet date; and (d) assets arising from operating activities that are expected to berealized, or are intended to be sold or consumed within the normal operating cycle. Current
liabilities include: (a) liabilities that are to be paid off within twelve months from the balance
sheet date; and (b) liabilities that are expected to be paid off within the normal operating
cycle. Assets and liabilities that are not classified as current are noncurrent assets andliabilities, respectively.
As the operating cycle for construction contracts usually exceeds one year, the Group uses
the operating cycle as its criteria for classifying current and noncurrent assets and liabilities
related to construction contracts. For other assets and liabilities, the criterion is one year.

(6)

Cash Equivalents
Cash equivalents refer to short-term, highly liquid investments that are readily convertible to
known amounts of cash and are subject to an insignificant risk of changes in value. Timedeposits that meet the above criteria and are held for the purpose of meeting short-term cash
commitment in operations are classified as cash equivalents.
142

(7)

Inventories
Inventories mainly include materials of simulation entertainment equipment. Inventories areaccounted for on a perpetual basis, and are stated at cost at the time of acquisition or initial
measurement. Cost is determined using the weighted average method. Except for allowancefor obsolescence, inventories are subsequently measured at the lower of cost and net
realizable value. The item by item approach is used in applying the lower of cost and net
realizable value. Write-downs of inventories and any reversal of write-downs are recorded ascost of goods sold for the period.

(8)Construction Contracts
If the outcome of a construction contract can be estimated reliably and it is probable that thiscontract would make a profit, contract revenue and costs should be recognized by reference
to the stage of completion of the contract activity at the end of the reporting period. The
stage of completion of a contract is measured by the percentage-of-completion method.
Contract revenue should include the revenue arising from variations in contract work, claims
and incentive payments as long as it is probable that they will result in revenue and can bemeasured reliably.
If the outcome of a construction contract cannot be estimated reliably, contract revenue
should be recognized only to the extent of which the related contract costs incurred arerecognized
If it is probable that total contract costs will exceed total contract revenue, the expected loss
should be recognized as an expense immediately.
The excess of the cumulative costs incurred plus recognized profits (less recognized losses)
over the progress billings on each construction contract is presented as an asset as“Construction receipts receivable”. While, the excess of the progress billings over the
cumulative costs incurred plus recognized profits (less recognized losses) on eachconstruction contract is presented as a liability as “Construction receipts payable”.

(9)

Investments Accounted for Using Equity Method
Investments accounted for using the equity method include investments in associates andinterests in joint ventures.
An associate is an entity over which the Group has significant influence. It is neither asubsidiary nor a joint venture. Significant influence is the power to participate in thefinancial and operating policy decisions of the investee but does not control or joint control
over those policies.
A joint venture is a joint arrangement established between the Group and other parties tohave joint control over the net assets of the joint arrangement. The operating results andassets and liabilities of associates and joint venture are incorporated in these consolidated
financial statements using the equity method of accounting. Under the equity method, an
investment in an associate or a joint venture is initially recognized in the consolidated

143

statement of financial position at cost and adjusted thereafter to recognize the Group’s shareof profit or loss and other comprehensive income of the associate and joint venture as well as
the distribution received. The Group also recognizes its share in the changes in the equities
of associates and joint venture.
Any excess of the cost of acquisition over the Group’s share of the net fair value of theidentifiable assets, liabilities and contingent liabilities of an associate or a joint venture
recognized at the date of acquisition is recognized as goodwill, which is included within the
carrying amount of the investment. Any excess of the Group’s share of the net fair value ofthe identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after
reassessment, is recognized immediately in profit or loss.
When necessary, the entire carrying amount of the investment (including goodwill) is tested
for impairment as a single asset by comparing its recoverable amount (higher of the value in
use or the fair value less costs to sell) with its carrying amount. Impairment loss isrecognized when the recoverable amount exceeds the carrying amount of the investment.
Any reversal of that impairment loss is recognized to the extent that the recoverable amountof the investment subsequently increases.
The Group discontinues the use of the equity method from the date when the Group ceases tohave significant influence over an associate. When the Group retains an interest in the former
associate, the Group measures the retained interest at fair value. The difference between the
carrying amount of the associate at the date the equity method was discontinued and the fairvalue of any retained interest and any proceeds from disposing of a part interest in theassociate is included in the determination of the gain or loss on disposal of the associate. In
addition, the Group shall account for all amounts recognized in other comprehensive income
in relation to that associate on the same basis as would be required if the associate had
directly disposed of the related assets or liabilities. If the Group’s ownership interest in an
associate is reduced as a result of disposal, but the investment continues to be an associate,
the Group should reclassify only a proportionate amount of the gain or loss previously
recognized in other comprehensive income to profit or loss.
When the Group subscribes to additional shares in an associate or a joint venture at apercentage different from its existing ownership percentage, the resulting carrying amount of
the investment differs from the amount of the Group’s proportionate interest in the net assetsof the associate or joint venture. The Group records such a difference as an adjustment toinvestments with the corresponding amount charged or credited to capital surplus. If theGroup’s ownership interest is reduced due to the additional subscription to the shares ofassociate or joint venture by other investors, the proportionate amount of the gains or losses
previously recognized in other comprehensive income in relation to that associate or joint
venture shall be reclassified to profit or loss on the same basis as would be required if theassociate or joint venture had directly disposed of the related assets or liabilities.
When a consolidated entity transacts with an associate or a joint venture, profits and losses
resulting from the transactions with the associate or joint venture are recognized in the144Group’s consolidated financial statements only to the extent of interests in the associate or
joint venture that are not owned by the Group.
(10) Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation andaccumulated impairment losses. Costs include any incremental costs that are directly
attributable to the construction or acquisition of property, plant and equipment.
Depreciation is computed using the straight-line method over the following estimated useful
lives: buildings – 5 to 50 years; machinery and equipment – 3 to 5 years; transportationequipment – 5 years; office equipment – 3 to 5 years; and other equipment – 3 to 15 years.
The estimated useful lives, residual values and depreciation method are reviewed at the endof each financial year, with the effect of any changes in estimates accounted for on aprospective basis.
Any gain or loss arising on the disposal or retirement of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset;
and is recognized in profit or loss.
(11) Intangible Assets
Intangible assets are carried at cost less accumulated amortization and accumulated
impairment losses. Cost is the amount of cash or cash equivalents paid or the fair value ofother consideration given to acquire an asset at the time of its acquisition or construction.
Computer software and franchise is amortized on an average basis over its estimated usefullife of 3 years. Patents is amortized on an average basis over its estimated useful life of 20
years. The exchange of simulation entertainment equipment for profit-sharing right of ticket
sales is amortized on an average basis over its estimated useful life of 5 to 10 years. If thefair value of the asset received cannot be measured reliably, its cost is measured at thecarrying amount of the asset given up.
The estimated useful life and amortization method are reviewed at the end of each financial
year, with the effect of any changes in estimate being accounted for on a prospective basis.
(12) Impairment of Tangible and Intangible Assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairment loss. When it is notpossible to estimate the recoverable amount of an individual asset, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. When areasonable and consistent basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they are allocated to the smallest

145

group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate which reflects the current market assessments of (a) the time value ofmoney, and (b) the risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its
carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its
recoverable amount. An impairment loss is recognized immediately in profit or loss.
When an impairment loss is subsequently reversed, the carrying amount of the asset or acash-generating unit is increased to the revised estimate of its recoverable amount; however,
the increased carrying amount shall not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset or cash-generating unit inprior years. Any reversal of an impairment loss is recognized immediately in profit or loss.
(13) Provisions
Provisions are recognized when: (a) the Group has a present legal or constructive obligation
as a result of a past event; (b) it is probable that the Group will be required to settle theobligation; and (c) a reliable estimate can be made on the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required tosettle the present obligation at the end of the reporting period, taking into account the risks
and uncertainties surrounding the obligation. When a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows.
(14) Employee Benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits
expected to be paid in respect of service rendered by employees in a period and should berecognized as expenses in that period when service is rendered.
For defined contribution plan, payments to the benefit plan are recognized as an expense
when the employees have rendered service that entitling them to the contribution. For
defined benefit plan, the cost of providing benefit is recognized based on actuarial
calculations.
Net obligation under a defined benefit plan is defined as the present value of an amount ofpension benefits that employees will receive upon retirement for services provided to theGroup in current period or prior periods. The liability recognized in the balance sheet inrespect of defined benefit plans is the present value of the defined benefit obligation at thebalance sheet date less the fair value of plan assets. The net defined benefit obligation is146

calculated annually by independent actuaries using the projected unit credit method. The
discount rate is referencing to government bonds interest rates (at the balance sheet date).
Remeasurement under a defined benefit plan recognized in other comprehensive income isreflected immediately in retained earnings. Past service costs are recognized immediately in
profit or loss.
(15) Financial Instruments
Financial assets and liabilities shall be recognized when the Group becomes a party to thecontractual provisions of the instruments.
Financial assets and liabilities are initially recognized at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities(other than financial assets and financial liabilities at fair value through profit or loss) areadded to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition.
(16) Financial Assets
Ordinary purchases or sales of financial assets are recognized and derecognized on asettlement date basis.
Financial assets are classified as “Financial assets at fair value through profit or loss,”“Held-to-maturity financial assets,” “Financial assets carried at cost,” “Debt investmentswith no active market,” or “Loans and receivables” by nature.
A. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are stated at fair value at the end of thereporting period, with any gains or losses arising on remeasurement recognized in profit
or loss. Such gains or losses include any dividends and interest received.
B. Held-to-maturity financial assets
Held-to-maturity investments are non-derivative financial assets with fixed ordeterminable payments and fixed maturity dates, and it is probable that the Group has the
positive intent and ability to hold to maturity. Subsequent to initial recognition,
held-to-maturity financial assets are measured at amortized cost using the effective
interest method less any impairment.
C. Financial assets carried at cost
Financial assets carried at cost are investments in equity instruments that do not have aquoted market price in an active market and whose fair value cannot be reliably
measured; financial assets are measured at cost, derivatives are linked to and must be
settled by delivery of such unquoted equity instruments; and the Group do not havesignificant influence over these financial assets. Cost of investments sold are determinedusing the weighted moving-average method. In a subsequent period, if there is objective
evidence that an impairment loss has been incurred, the amount of the impairment loss is147

recognized. Such impairment losses shall not be reversed.
D. Debt investments with no active market
Debt investments with no active market are bond investments with fixed or determinable
payments that are not quoted in an active market. Such financial assets are initiallyrecognized at cost, and subsequently measured at amortized cost using the effective
interest method, less any impairment.
E. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Financial assets, other than (a) financial
assets at fair value through profit or loss; (b) available-for-sale financial assets; (c)financial assets of which the holder may not recover substantially all of its initialinvestment for reasons other than credit deterioration, are measured at amortized costusing the effective interest method less any impairment, except for those loans andreceivables with immaterial discounted effect. The effective interest rate calculation
includes discounts or premiums and transaction costs.
F. Impairment of financial assets
Financial assets, other than those carried at fair value through profit or loss, are assessed
for indicators of impairment at the end of the reporting period. Those financial assets are
considered to be impaired when there is objective evidence that, as a result of one ormore events that occurred after the initial recognition of the financial assets, theirestimated future cash flows have been negatively affected.
The amount of the impairment loss is measured as the difference between the asset’s
carrying amount and the present value of the estimated future cash flows (including
collateral and guarantee) discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for
all financial assets with the exception of loans and receivables, where the carrying
amount is reduced through the use of an allowance account. When loans and receivables
are considered uncollectible, the allowance account is written off . Recoveries of amounts
previously written off are credited against the allowance account when loans andreceivables are subsequently collected.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment loss was recognized,
the previously recognized impairment loss is reversed through profit or loss to the extent
that the carrying amount of the financial assets at the date the impairment loss is reversed
does not exceed the amortized cost were the impairment loss had not been recognized.
G. Derecognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash
flows from the financial asset expire, or when it transfers the financial asset and148

substantially all the risks and rewards of ownership of the financial asset to anotherentity.
When derecognition a financial asset, the difference between the financial asset’s
carrying amount and the consideration received (or receivable) is recognized in profit orloss.
(17) Financial Liabilities and Equity Instruments
A. Classification as debt or equity
Debt and equity instruments issued by the Group are classified as either financial
liabilities or as equity in accordance with 1) the substance of the contractual
arrangements, and 2) the definitions of a financial liability and an equity instrument.
B. Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of theGroup after deducting all of its liabilities. Equity instruments issued by the Group arerecognized at the balance of proceeds received, net of direct issue costs.
C. Financial liabilities
Financial liabilities other than those held for trading purposes and designated as at fairvalue through profit or loss are subsequently measured at amortized cost at the end ofeach reporting period.
Financial liabilities at fair value through profit or loss are stated at fair value at the end of
the reporting period, with any gains or losses arising on remeasurement being recognizedin profit or loss.
D. Derecognition of financial liabilities
The Group derecognizes financial liabilities only when the obligations are discharged,
cancelled, or expired. The difference between the carrying amount of the financial
liability derecognized and the consideration paid (or payable) is recognized in profit orloss.
(18) Share-based Payment
For the equity-settled share-based payment arrangements, the equity instruments aremeasured at the fair value on the grant date, and are recognized as compensation cost overthe vesting period with a corresponding adjustment to equity. The fair value of the equity
instruments is measured by an appropriate pricing model.
(19) Employees’ Compensation and Directors’ and Supervisors’ Remuneration
Employees’ compensation and directors’ and supervisors’ remuneration are recognized as
expenses and liabilities, provided that such recognition is required under legal obligation orconstructive obligation and those amounts can be estimated reliably. However, if the accrued
amounts for employees’ compensation and directors’ and supervisors’ remuneration are
149different from the actual distributed amounts as resolved subsequently by the board of
directors, the differences shall be recognized based on the accounting for changes in
estimates.
(20) Income Tax
Income tax expense (benefit) for the period comprises current and deferred tax.
A. Current tax
The tax expense for the period comprises current and deferred tax. Income tax is recognizedin profit or loss, except to the extent that it relates to items recognized in othercomprehensive income or items recognized directly in equity, in which cases the tax isrecognized in other comprehensive income or equity.
The current tax expense is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the Group operates and generates
taxable income. An additional 10% tax is levied on the unappropriated retained earnings
and is recorded as income tax expense in the year the stockholders resolve to retain theearnings.
B. Deferred tax
Deferred tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax is determined using tax rate (and laws) that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that futuretaxable profit will be available to offset against which the temporary differences can beutilized. At each balance sheet date, unrecognized and recognized deferred income tax assets
are reassessed.
C. Others
Income tax is recognized in profit or loss, except to the extent that it relates to items
recognized in other comprehensive income or directly in equity, where the tax is also
recognized in other comprehensive income or directly in equity, respectively.
Research and development expenses are recognized as income tax credits, which lead to a
tax privilege for the Group.
(21) Government Grants
Government grants are recognized at the fair value only when there is reasonable assurance
that (a) the Group will comply with any conditions attached to the grants and (b) the grants
will be received.
Government grants related to income should be recognized as revenue in a rational and150systematic way over the periods when the related costs are expected to be incurred. However,
the government grants that are not yet realized should be presented as deferred revenue. If norational evaluating approach is available to recognize such government grants, then theamount of government grants should be recognized in full when received.
Government grants related to assets should be recognized as deferred revenue. If thegovernment grants are related to depreciable assets, they should be recognized as revenue
over the useful lives in proportions to which depreciation expenses on those assets arecharged. If the government grants are not related to depreciable assets and if the government
grants require certain obligations to be fulfilled, the enterprise should recognize suchgovernment grants over the periods in proportions to which the related costs are incurred by
the enterprise to fulfill these obligations.
If the government grants are intended to compensate for expenses or losses that have alreadyincurred, or are intended to give immediate financial support with no future related costs, theamount of government grants should be recognized in full when there is reasonableassurance that the grants will be received.
(22) Revenue and Expense Recognition
Income and expenses are recognized in the consolidated statements of comprehensive
income when an increase or decrease in economic benefits can be measured reliably. Income
includes revenues and gains, while expenses include costs, losses and other expenses. If theexpenditures cannot generate future economic benefits, or if the future economic benefits do
not meet the criteria for recognition as an asset, the expenditures should be recognized as
expenses in the consolidated statements of comprehensive income.
Revenues is recognized when it is realized or realizable and earned, that is, when the earning
process is complete or virtually complete. Expense is recognized when it is incurred.
The Group provides customized software development services. When the outcome of thetransaction involving the rendering of services can be estimated reliably, revenue associatedwith the transaction shall be recognized by reference to the stage of completion of thetransaction at the end of the reporting period. When the outcome of the transaction involving
the rendering of services cannot be estimated reliably, revenue shall be recognized only tothe extent of the costs incurred that are recoverable. If it is not probable that the costs
incurred will be recovered, revenue is not recognized and the costs incurred are recognized
as expenses.
If the outcome of the transaction involving the rendering of services is estimated to bear aloss, the loss should be recognized immediately. However, if the loss is estimated to besmaller in future years, the difference should be reversed and recognized as a gain in that
year.
(23) Earnings Per Share
Basic earnings per share are calculated as net income divided by the weighted average
number of common shares outstanding. Basic earnings per share are retrospectively adjusted151

to reflect the effect of the capitalization of stock dividends from capital reserve and retained
earnings. For the purpose of calculating the diluted earnings per share, potentially dilutive
common shares are deemed to have been converted into common stock at the beginning of
the period, and the effect on the net income attributable to additional common shares
outstanding is considered accordingly.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF
ESTIMATION AND UNCERTAINTY
The preparation of these consolidated financial statements requires management to make critical
judgments in applying International Financial Reporting Standards endorsed by the FSC and makecritical assumptions and estimates concerning future events. Judgments and estimates arecontinually evaluated and adjusted based on historical experience and other factors that areconsidered to be relevant. Actual results may differ from these estimates.
The following are information on key assumptions about the future and other key sources of
estimation and uncertainty at the end of the reporting period. Such assumptions and estimates may
have a significant risk of causing a material adjustment to the carrying amounts of assets andliabilities within the next financial year.
(1)

Allowance for bad debts on receivables
The Group assesses the recoverable receivables and estimates its allowance for bad debts
based on the credit quality of customers, the collectivity of accounts, and the past history on
actual bad debt incurred. When there is an indication for potential uncollectability, anallowance for bad debts will be made. The identification of allowance for doubtful debts
requires an estimate. If the expected future cash flow is differs from the original estimate, thedifference will create a change in the carrying amount of accounts receivable and bad debts
expenses for the year when change in estimate is made.

(2)

Valuation of Inventory
Inventories are stated at the lower of cost or net realizable value, and the Group uses
judgments and estimates to determine the net realizable value of inventory at the end of thereporting period.
Due to the rapid technological changes, the Group estimates the net realizable value of
inventory for obsolescence and unmarketable items at the end of each reporting period.
Impairment is recognized when cost of inventories is lower than its net realizable value. The
net realizable value of the inventory is mainly determined based on assumptions of future
demand within a specific time horizon.

(3)

Impairment of Tangible and Intangible Assets
In the process of evaluating the potential impairment of tangible and intangible assets otherthan goodwill, the Group is required to make subjective judgments in determining theindependent cash flows, useful lives, expected future revenue and expenses related to the152specific asset groups with the consideration of the nature of industry. Any changes in theseestimates based on changed in economic conditions or business strategies could result insignificant impairment charges or reversal in future years.
(4)

Realization of Deferred Income Tax Assets
Deferred tax assets are recognized to the extent that it is probable that future taxable profits
will be available against which those deferred tax assets can be utilized. Assessment of therealization of the deferred tax assets requires the Group’s subjective judgments and estimates,
including the future revenue growth and profitability, tax holidays, the amount of tax credits
can be utilized and feasible tax planning strategies. Any changes in the global economic
environment, the industry trends and relevant laws and regulations could result in significant
adjustments to the deferred tax assets.

(5)

Accrued Pension Liabilities
When calculating the present value of defined benefit obligation, the Group should use
judgments and estimates to determine relevant actuarial assumptions at the end of thereporting period. Actuarial assumptions comprise the discount rate and expected rate of
return on plan assets. Changes in any actuarial assumptions may have a material impact on
the amount of defined benefit obligation.

(6)

Share-based Payment
Equity-settled share-based payments are measured at the fair value of equity instruments inaccordance with the given terms to determine the best pricing model. Parameters used for theestimation of the pricing model including stock options’ expected duration, expectedvolatility, expected dividend yield, and other assumptions.

(7)

Recognition of profits and losses from construction contract project
When the outcome of a construction contract can be reliably estimated, the contract revenue
and costs associated with the construction contract should be recognized as income andexpenses at the end of the reporting period using the percentage of completion method.
Transactions can be reliably estimated only when all of the following criteria is met:
A. The amount of income can be reliably measured.
B. It is probably that the economic benefits associated with the transaction will flow into theGroup.
C. The cost and the project completion percentage can be reliably estimated at the end of
the reporting period.
D. The costs attributable to the contract can be clearly identified and reliably measured.
Most of the construction contracts entered by the Group are fixed in contract prices.
However, depending on customer’s request, change in scope and prices may be required.
Any changes in project scope or prices will affect the determination of the revenue, contract153

cost attribution, and the estimated cost expected to complete, including changes in software,equipment, testing and labor costs, and estimates of total number of workweeks calculated
based on the percentage of completion. All these factors will affect the Group’s recognitionof the profit or loss of a construction contract project.
(8) Changed The Useful Life of Depreciation Assets
The Company’s buildings are structured with a steel-reinforced concrete construction. Afterconsidering the main structure and actual usage of the buildings, the buildings were assessed
to have a longer than expected useful life. Therefore, to be in compliance with theconsumption of the future economic benefits of the buildings, the Company has
re-considered the estimated useful life of these buildings. In response to the buildings’
current status and future economic benefits, the Board of Directors resolved to change theuseful life from 20 years to 50 years on December 30, 2015, which was effective in 2016.
The change of the estimated useful life decreased depreciation expenses by NT$3,622
thousand in 2016, with the effect of changes in estimates accounted for on a prospective
basis.

6. DETAILS OF SIGNIFICANT ACCOUNTS(1)

Cash and Cash Equivalents
December 31, 2017

December 31, 2016

Cash
Checking accounts
Demand deposits$905
53
296,821$850
53
197,687

Foreign currency demand deposits
Cash equivalents

54,844
358,024

46,027
237,604

Total$710,647$482,221

Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly
liquid time deposits and short-term investments that are readily convertible to known
amounts of cash that are subject to an insignificant risk of changes in value.
(2)

Financial Assets at Fair Value through Profit or Loss-Current
Held for Trading Financial Assets
Beneficiary certificates
Publicly traded stocks(3)

December 31, 2017
$226,727
4,240

December 31, 2016
$135,675-$230,967$135,675

Debt Investments with No Active Market
December 31, 2017

154

December 31, 2016

$196,066

Time deposits$533,600

Time deposits represent deposits with maturities more than three months.
(4)

Accounts Receivables and Long-term Accounts Receivables
December 31, 2017
Accounts receivable-current

December 31, 2016
$313,390

Less：Allowance for doubtful receivables$225,968-

Accounts receivable, net$225,968$312,405

Accounts receivable-related parties$-$25,681Less：Allowance for doubtful receivables--

Accounts receivable-related parties, net$-$25,681

December 31, 2017$28,215

December 31, 2016
$18,559(18,559)(18,559)$9,656$-Long-term accounts receivable
Less：Allowance for doubtful receivables
Long-term accounts receivable, net(985)

In principle, the payment term granted to customers is normally 60 days from the invoicedate. The allowance for bad debts is assessed by reference to the collectability of receivables,
taking into account of account aging analysis, historical collection experience and current
financial condition of customers.
Except for the impaired balances, for the rest of accounts receivable, the account aging
analysis at the end of the reporting period is summarized in the following table. Accounts
receivables include amounts that are past due but for which the no allowance for doubtfulreceivables is recognized. As of the date of balance sheets, the Group does not hold any
collateral for accounts receivables.

155

Aging analysis of accounts receivable
December 31, 2017
Neither past due nor impaired
Past due but not impaired
within 30 days
31-90 days
91-180 days
over 181 days
Total

December 31, 2016

$125,173$242,903

704
2,313
2,040

211
18,088105,394

76,884$235,624$338,086

Movements of the allowance for doubtful receivables
2017
Balance at January 1
Amount written off during the year
Balance transfer to revenue during theyear
Balance at December 31
(5)

2016
($19,544)($19,544)

85

-

900

-

($18,559)($19,544)

Construction Receipts Receivable (Payable)
December 31, 2017

December 31, 2016

Aggregate costs incurred plus
recognized profits$1,466,281$1,001,179

Less：Progress billings(1,119,801)(727,504)

Net balance sheet position for
construction in progress$346,480$273,675

Construction Receipts Receivable$440,021$279,410

Construction Receipts Payable(93,541)(5,735)$346,480$273,675

Presented as:

156

(6)

Inventories
December 31, 2017

December 31, 2016

Raw materials
Supplies$260
59,392$618
36,815Work in process
Finished goods
Merchandise

13,6262,558
2,470

12,749
7,673
3,415

Simulator ride materials
Less：Allowance for losses

110,809-

89,073-

Total$189,115$150,343(7) Held-to-maturity Financial Assets-noncurrent
Held-to-maturity financial assets

December 31, 2017

Non-publicly traded stocks Preferred shares$35,570

December 31, 2016$33,900

Preferred shares are financial assets with fixed or determinable payments and fixed maturity
dates, and that the Group has the positive intent and ability to hold to maturity. Preferredshares held are classified as Held-to-maturity Investment.
(8)

Financial Assets Carried at Cost-noncurrent
Financial Assets Carried At Cost

December 31, 2017

Non-publicly traded equity
instruments$17,856

December 31, 2016
$25,356

Equity instruments are not traded in an active markets, and the Group cannot obtainsufficient information about the industry and the relevant financial information of theinvestee company. Therefore, it is not possible to reasonably and reliably measure the fairvalue of equity instruments that are classified as Financial Assets Carried At Cost.
Because the equity instruments of Jump Media Co., Ltd. have gone listed on Taiwan
emerging stock market since April 7, 2017, the Group has reclassified the above investmentsfrom financial assets carried at cost - noncurrent to financial assets at fair value throughprofit or loss-current during the period.
(9)

Investments Accounted for Using Equity Method
There is no material joint venture and associate of the Group. The carrying amount of theGroup’s interests in all individually immaterial associates and related share of the operating
results are summarized below :157

% of Ownership and Voting
Rights Held by the Group

Carrying Amount
Name of
AssociatePrincipal
Activities

Brogent JapanEntertainment
Corporation

Development and salesof simulator rides andrelated peripheralproducts in Japan

Place of
Incorporation
and Operation
August 2016
Tokyo, Japan

December31, 2017

December31, 2016$8,061$6,640December31, 2017

December31, 2016

40%

50%

2017
Net Income (Loss)

2016($1,238)($270)$81($632)($1,157)($902)

Other comprehensive income (loss) for
the year, net of income tax
Total Comprehensive Income (Loss)
For The Year(10)

Property, Plant and Equipment
2017
MachineryLand

Buildings

andEquipment

Equipment Under
Transportation

OfficeOther

Installation andEquipment

Equipment

Equipment

Construction in

Total

Progress

Cost
Balance at January 1$139,868$632,213$11,620$1,140$37,158$67,023$48$889,070

Additions

-

1,377

7,334

59

3,834

4,135

60,57777,316

Disposals

-

-

-

-

-

(200)

-

(200)

Reclassifications

-

-

-

-

-

1,463

114,718

116,181

139,868

633,590

18,954

1,199

40,992

72,421

175,343

1,082,367

Balance at January 1-

45,0697,594

284

17,87013,539-84,356

Depreciation-

24,123

3,093

241

8,814

10,455-46,726

Disposals

-

-

-

-

-

(156)

-

(156)

Balance at December 31-

69,192

10,687525

26,684

23,838-130,926

Balance at December 31, net$139,868$564,398$8,267$674$14,308$48,583$175,343$951,441

Balance at January 1, net$139,868$587,144$4,026$856$19,288$53,484$48$804,714

Balance at December 31

Accumulated Depreciation
and Impairment

158

2016
MachineryLand

Buildings

andEquipment

Equipment Under
Transportation

OfficeOther

Installation andEquipment

Equipment

Equipment

Construction in

Total

Progress

Cost
Balance at January 1$153,278$11,034$1,140$20,669$22,622

139,868

57,255586-

11,891-

421,680

-

-

4,598

139,868

632,213

11,6201,140Balance at January 1-

26,424

5,470

Depreciation-

18,645

Balance at December 31-

Additions
Reclassifications
Balance at December 31$-$395,961$604,704

37,807

38,243285,6506,594(434,156)(1,284)37,15867,02348

889,070

56

10,013

5,694-

47,657

2,124

228

7,857

7,845

-

36,69945,0697,594

284

17,87013,539-84,356$139,868$587,144$4,026$856$19,288$53,484$48$804,714$-$126,854$5,564$1,084$10,656$16,928$395,961$557,047

Accumulated Depreciation
and Impairment

Balance at December 31, net
Balance at January 1, net

A. As of December 31, 2017, the company has reclassified equipment under installation andconstruction in progress from prepayment for the amount of NT$114,470 thousand. In
January 2017, the equipment has arrived at the warehouse and passed the inspection for
acceptance. In the first quarter of 2017, the internal management has decided to transfer thematerials for self-use after assembly test.
B. Research and Testing Center - Phase 2 that the Company invested in Kaohsiung Software
Technology Park was completed and ready for intended use in March 2016. Related costs
have been reclassified to buildings during the period accordingly.
C. In January, 2016, Brogent Mechanical Inc., a subsidiary of the Company, has purchased
land and plant amounting to NT$168,000 thousand.
D. The significant components of the Group’s buildings include main plants, electricity,
decoration, plumbing and drainage, extinguishing protection and air conditioning
equipment. The related depreciation for Group’s building components is calculated using
the estimated useful lives of 50 years, 20 years,10 years, 10 years and 8 years, respectively.
E. Part of the land owns by Brogent Mechanical Inc. which locates in Zhongshan Rd., Xinwu
Dist., Taoyuan City is used solely for farming purpose. In accordance with the regulations,the farmland is owned and registered in the name of an individual. However, Brogent
Mechanical Inc. has obtained the agreement of the counterparty that at any time as therequest of Brogent Mechanical Inc., the counterparty shall change the registration of theland to Brogent Mechanical Inc. or other person designated by Brogent Mechanical Inc.,

159

without any consideration. As of December 31, 2017, the farmland amounting to NT$2,202
thousand was mainly used for plants, was accounted for 1.6% of the total land areas of theGroup.
F. The amount of capitalized interest for the years ended December 31, 2017 and 2016 was
NT$0 thousand and NT$1,274 thousand, respectively.
G. Please refer to Note 8 for details note disclosure for topics of pledged property, plant andequipment.
(11)

Intangible Assets
2017
Computer

Profit sharing

SoftwarePatentFranchise

right

Total

Cost
Balance at January 1$60,105$325$14,600$113,037$188,067

Additions

6,413

302

-

-

6,715

Balance at December 31

66,518627

14,600113,037

194,782

Balance at January 1

24,10652

4,392

10,362

38,912

Amortization

19,489108

4,813

11,30335,713

Balance at December 31

43,595160

9,205

21,66574,625

Balance at December 31, net$22,923$467$5,395$91,372$120,157

Balance at January 1, net$35,999$273$10,208$102,675$149,155

Accumulated amortizationand impairment

2016
Computer

Profit sharing

SoftwarePatentFranchise

right

Total

Cost
Balance at January 1$24,119

$-

$-

$-

$24,119

Additions

38,422325

232

15,76354,742

Disposals(2,436)---(2,436)--

14,36897,274

111,642

60,105325

14,600113,037

188,067

Reclassifications
Balance at December 31

160

Accumulated amortizationand impairment
Balance at January 1

10,132---

10,132

Amortization

16,41052

4,392

10,362

31,216

Disposals(2,436)---(2,436)

Balance at December 31

24,10652

4,392

10,362

38,912

Balance at December 31, net$35,999$273$10,208$102,675$149,155

Balance at January 1, net$13,987

$-

$-

$-

$13,987

The Company has entered into a construction contract for indoor playground equipment of atheme park. As stated in the contract, the Company has agreed to exchange the simulationentertainment equipment for the right to share profits generated from sales of the theme
part tickets (“profit sharing right”). The cost of profit sharing right was measured at thecarrying amount of the simulation entertainment equipment given up.
Since February 2016, profit sharing right was amortized on an average basis over simulationentertainment equipment’s estimated useful life of 10 years. Refer to Note 6(22) for thedetails note disclosure on profit sharing right, and Notes 9(4) and 9(5) for details note
disclosure in relation to the related contract commitments.
(12)

Other Current and Noncurrent Assets
December 31, 2017
Other financial assets

December 31, 2016

$55,983$148,620

356-

20,5996,239
2,543

Others

91,18010,916

Other prepayment-noncurrent

6,426

2,665

$153,945$191,582

Tax refund receivable
Temporary payments
Prepayments for equipment

Total

December 31, 2017

December 31, 2016

Current portion
Noncurrent portion$41,607112,338$163,123
28,582

Total$153,945$191,582

Please refer to Note 8 for discussion around other financial assets used as collateral.
(13)

Short-Term Loans

161

December 31, 2017
Line of credit borrowings

December 31, 2016$-

Annual interest rate-

$20,000
1.700%

Short-Term Loans is maintained for working capital purpose.
(14)

Other Payables
December 31, 2017(15)

December 31, 2016

Accrued payroll
Payables on equipment$69,289805$43,407
3,542

Accrued insurance
Accrued professional fee
Accrued pension

2,337
1,388
1,159

2,604
1,083
1,262

Others21,12325,888

Total$96,101$77,786

Long-term Bank Loans
December 31, 2017

December 31, 2016

$217,050$230,897

114,000

120,000

Secured Loans
Taiwan Cooperative Bank：
Loan period from April 2016 to October

2031; monthly repayment of interest
at an annual rate of 1.57%~1.82%
effective in April 2016, with monthly
repayment of principal.
CTBC Bank：
Loan period from January 2016 toJanuary 2032; monthly payment ofinterest at an annual rate of 1.94%~2.00% effective in January 2016,
with quarterly repayment of principal.

162

Loan period from September 2017 to

September 2020; monthly payment
of interest at an annual rate of

1.908% effective in September 2017,with quarterly repayment of principal.

40,000-quarterly repayment of principal.

10,000-Less：Current portion

381,050(38,576)

350,897(21,681)Noncurrent liabilities$342,474$329,216

Loan period from November 2017 toNovember 2020; monthly payment ofinterest at an annual rate of 1.908%
effective in November 2017, withThe Group’s land and buildings were used as first-priority mortgage collateral is securing
the loans. Details are summarized in Note 8.
(16)

Pensions
2017

2016

Defined benefit pension costs

$319

$410

Defined contribution pensions

7,714

7,598

Total

$8,033$8,008

A. The Company has a defined benefit plan under the Labor Standards Law that provides
benefits based on an employee’s length of service and average monthly salary for thesix-month period prior to retirement. The Company makes monthly contributions to theretirement fund deposited with Bank of Taiwan, the trustee, under the name of the
independent retirement fund committee. Before the end of each year, the Company
assesses the balance in the Funds. If the amount of the balance in the Funds is insufficient
to pay-off retirement benefits for employees who conform to retirement requirements inthe next year, the Company is required to fund the difference in one appropriation thatshould be made before the end of March of the next year. The Funds are operated andmanaged by the government’s designated authorities; as such, the Company does not have
any right to intervene in the investments of the Funds. As of December 31, 2017 and 2016,
the Company’s pension account balance was NT$1,487 thousand and NT$1,236 thousand,respectively.
B. Reconciliation on the present value of defined benefit obligation and the fair value of plan
assets were as follows:
December 31, 2017
December 31, 2016
Present value of defined benefit obligation

163$9,331$8,416

Fair value of plan assets(1,496)(1,244)

Accrued pension liabilities$7,835$7,172

C. Movements in net defined benefit liability (asset) were as follows:
Present ValueNet Definedof the Defined

Fair Value ofBenefit Obligation the Plan Assets

BenefitLiability(Asset)$8,416($1,244)$7,172Service cost

196

-

196

Net interest expense (income)

147

(23)

124

Recognized in profit or loss

343

(23)

320

Actuarial loss (gain) of return on plan assets

-

11

11

Actuarial loss (gain) from changes in financial
assumptions

332

-

332

240

-

240

572

11

583

Contributions by the Company

-

(240)

(240)

Balance at December 31, 2017$9,331($1,496)$7,835

Balance at January 1, 2016

$8,576($1,000)$7,576

Service cost

276

-

276

Net interest expense (income)

154

(20)

134

Recognized in profit or loss

430

(20)

410

-

13

13

65

-

65

(655)

-

(655)

Recognized in other comprehensive income

(590)

13

(577)

Contributions by the Company

-

(237)

(237)

Balance at December 31, 2016

$8,416($1,244)$7,172

Balance at January 1, 2017

Remeasurement

Actuarial loss (gain) from experience
adjustments
Recognized in other comprehensive income

Remeasurement
Actuarial loss (gain) of return on plan assets
Actuarial loss (gain) from changes in financial
assumptions
Actuarial loss (gain) from experience
adjustments

Through the defined benefit plans under the Labor Standards Law, the Company is exposedto the following risks:(1) Investment risk: The pension funds are invested in equity and debt securities, bank164

deposits, and etc. The investment is conducted at the discretion of the government’s
designated authorities or under the mandated management. However, under the Labor
Standards Law, the rate of return on assets shall not be less than the average interest rate
on a two-year time deposit published by the local banks; the government is responsible
for any shortfall in the event that the rate of return is less than the required rate of
return.
(2) Interest risk: A decrease in the government bond interest rate will increase the present
value of the defined benefit obligation; however, this will be partially offset by anincrease in the return on the debt investments of the plan assets.
(3) Salary risk: The present value of the defined benefit obligation is calculated byreference to the future salaries of plan participants. As such, an increase in the salary of
the plan participants will increase the present value of the defined benefit obligation.
D. Actuarial assumptions:
December 31, 2017

December 31, 2016

Discount rate

1.50%

1.75%

Future salary increase rate

2.00%

2.00%

In scenario where a reasonable fluctuation in each of the significant actuarial assumptions
occur, considering all other assumptions remain constant, the present value of the defined
benefit obligation would increase (decrease) as follows:
December 31, 2017

December 31, 2016

Discount rate
0.25% increase($332)($318)

0.25% decrease

$346

$331

1% increase$1,452$1,401

1% decrease($1,255)($1,199)

Future salary increase rate

The sensitivity analysis presented above may not be a representative of the actual change inthe present value of the defined benefit obligation as it is unlikely that the change inassumptions would occur in isolation of one another and the assumptions may becorrelated.
December 31, 2017
December 31, 2016
The expected contributions to the planfor the next year
The average duration

165

$240

$240

17 years

18 years

E. The new pension plan under the Labor Pension Act which became effective on July 1,
2005, is deemed a defined contribution plan. The employees with R.O.C. nationality canchoose to continue to use the Labor Standards Law’s pension regulations, or be subject tothe pension mechanism under the Labor Pension Act, and their seniority prior to theenforcement of this Act shall be maintained. The Company and its domestic subsidiaries
have made monthly contributions equal to 6% of each employee’s monthly salaries andwages to the employees’ individual pension accounts at the Bureau of Labor Insurance. For
defined contribution plan, payments to the benefit plan are recognized as an expense.
(17)

Capital Stock
December 31, 2017

December 31, 2016

Authorized capital$500,000$500,000

Issued capital$446,780$446,780

As of December 31, 2017, the authorized shares were 50,000 thousand shares, including 2,000
thousand shares reserved for employee stock options. A holder of issued shares with par valueof NT$10 per share is entitled to vote and to receive dividends. The issued and paid shareswere 44,678 thousand shares as of the date of the consolidated financial statements
In order to gather strategic investors, the issuance of 6,000 thousand shares at a premium of
NT$240 per share by private placement had been resolved at the interim shareholders’ meetingon December 19, 2014. To fulfill the needs of future operation and enhancing the working
capital, the issuance of not more than 3,300 thousand shares by private placement had been
resolved at the general shareholders’ meeting on June 11, 2014. The privately placed shares
may be issued in one or several installments (not more than two times) within one year after
the resolution of the shareholders’ meeting. The shareholders’ meeting authorized the Board of
Directors with full power and authority to handle private placement related matters. The record
date determined by the resolution of the Board of Directors was June 4, 2015, with 1,030
thousand shares being issued by private placement at a premium of NT$308 per share, and theaforementioned issuance of new shares had already been registered. As of the date of theconsolidated financial statements, 7,030 thousand shares are issued by private placement. Allof the rights and obligations for the privately placed shares are consistent with those for theissued common shares of the Company. However, except for being transferred to a transferee
meeting the requirement under Article 43-8 of the Securities and Exchange Act, the privately
placed shares cannot be sold within three years after delivery of shares.
(18)

Additional Paid-in Capital
Under the R.O.C. Company Law, except for covering accumulated deficit or issuing newshares or cash to shareholders, the capital reserve shall not be used for any other purpose.
Unless the legal reserve is insufficient, the capital reserve should not be used to coveraccumulated deficit.

166

The capital reserve arising from paid-in capital in excess of par value on issuance of common
stocks and donations can be used to issue new shares or cash to shareholders by the special
resolution of the shareholders’ meeting, provided that the Company has no accumulated deficit.
Further, the amount of capital reserve to be capitalized mentioned above should not exceed
10% of the paid-in capital each year.
(19)

Retained Earnings and Dividend Policy
A. If there are net profits of each fiscal year, the Company shall set aside 5% to15% of the
profits as employees’ compensations and no more than 2% as directors’ and supervisors’
remuneration; however, the Company shall first offset the accumulated deficits, if any. The
employees’ compensations referred above are able be paid in stocks or cash, and theemployees include the employees of affiliated companies, who are qualified for certain
conditions set by Board of Directors.
When allocating the net profits for each fiscal year, the Company shall first pay all taxes,
offset its losses in previous years, and set aside a legal capital reserve at 10% of the profits
left over, until the accumulated legal capital reserve has equaled the total capital of theCompany. The remainder together with undistributed earnings accrued from prior years(“Accumulated Distributable Earnings”) shall be set aside or reverse special capital reservein accordance with relevant laws or regulations, or reserve for specific business purpose.
And the remaining is distributed as dividends and the appropriation proposed by the Boardof Directors and to be approved by the shareholders’ meeting.
As the Company operates in a volatile business environment and is in the stable growthstage, the residual dividend policy is adopted taking into consideration the Company’s
operation expansion, working capital and long-term financial planning. The Company
measures future capital needs through future capital budgeting, then use retained earnings tofund its capital needs. The remainder will be distributed by way of cash dividend or stock
dividend, and the cash dividend shall not be less than 10% of total dividends.
B. Under the R.O.C. Company Law, the Company shall not pay dividends or bonuses when
there is no profit. Except for covering accumulated deficit or issuing new shares or cash toshareholders, the legal reserve shall not be used for any other purpose. The use of legal
reserve for the issuance of stocks or cash to shareholders is permitted, provided that thebalance of the reserve exceeds 25% of the Company’s paid-in capital.
C. Pursuant to existing regulations, the Company is required to set aside additional special
capital reserve equivalent to the net debit balance of the other components of stockholders’equity. For the subsequent decrease in the deduction amount to stockholders’ equity, any
special reserve appropriated may be reversed to the extent that the net debit balance reverses.
D. The appropriations of earnings for 2016 had been resolved at the shareholders’ meeting on
May 31, 2017. The appropriations were as follows:
2016

167

Dividends Per Share
(NT$)

AmountLegal reserve$10,135

Cash dividends

110,610
Total

$2.50

$120,745

E. The appropriations of earnings for 2017 had been approved in the meeting of the Board of
Directors held on March 12, 2018 and are to be presented for approval in the shareholders’meeting. The appropriations were as follows:
2017
Dividends Per Share

AmountLegal reserve$26,567

Special reserve

4,049

Reserve special reserve(751)

Cash dividends

176,976$4.00

Stock dividend

88,4882.00$295,329

Total
(20)

(NT$)

Treasury Stock
In order to retain and recruit talents, motivate employees and enhance their centripetal force,
the Company has repurchased 1,000 thousand shares at the price of NT$249.5 to NT$283 pershare during the period from July 23 to September 1, 2015 for the total amount of NT$266,072
thousand. As of December 31, 2017, the Company had 44,244 thousand shares outstanding.
No treasury shares transactions were occurred for the years ended December 31, 2017.
The appropriations of treasury stocks transferred to employees had been approved in themeeting of the Board of Directors on January 27, 2016.
A. The details of employee stock options referred above were as follows:
Granted numbers
Grant date
Vesting conditions
Type of agreement(thousand shares)
Treasury stocks transferred
2016.1.27
566
Vestedto employees

168

B. The details of the share-based payments referred above were as follows:
2016
Numbers
Weighted-average
Stock options(thousand shares)
price (NT$)
Issued options at January 1$Stock options granted in current period
566
266.07
Options exercised in current period(566)
266.07
Issued options at December 31
Options exercisable at December 31-

C. The fair value of stock options referred above was estimated at the granted date using
Black-Scholes Model. The relevant information was as follows :Type ofAgreement
Treasurystockstransferred to
employees

Grant Date

Stock
Price

Exercise
Price

Expected life
Volatility( year )Risk-free
Fair
Interest Value Per
Rate
Option2016.1.27

268

266.0746.21%

0.21%

0.1151$17.70D. The Company recognized the compensation costs amounting to NT$10,018 thousand at the
grant date.
E. The expense incurred by the transaction of share-based payment in equity was NT$452
thousand.
(21)

Share-based Payment
A. Brogent Global Inc.
(1) As of 31 December, 2017, Brogent Global Inc. has issued the following employee shareoptions:
OptionExercise
Items
Grant Date
Units
lifetime
price2017 Employee stock option

2017.02.20

500

2017.02.20~
2027.02.20

NT $10(2) Brogent Global Inc. recognized its employee share options as an operating expense;with related additional paid-in capital amounting to NT$310 thousand due to the above
issued employee stock option.
(3) Brogent Global Inc. estimated the fair value of employee stock option using Binomial
Option Pricing Model with the follows assumptions:1692017 Employee share option plan-%
38.06%
1.1214%10 years
NT$ 1.82

Dividend ratio
Expected volatility
Risk-free interest rate
Expected life
Fair value at grant date
B. Brogent Mechanical Inc.

(1) As of 31 December, 2017, Brogent Mechanical Inc. has issued the following employee
share option:
OptionExercise
Items
Grant Date
Units
lifetime
price2016 Employee stock option

2016.11.10

2016.11.10~
2026.11.10

250

NT $10(2) Due to the above issued employee stock option, Brogent Mechanical Inc. hasrecognized its employee share options as an operating expense, with related additional
paid-in capital amounting for the ended December 31, 2017 and 2016 at NT$194 andNT$27 thousand, respectively.
(3) Brogent Mechanical Inc. estimated the fair value of employee stock option using
Binomial Option Pricing Model with the follows assumptions:2016 Employee share option plan
Dividend ratio-%
Expected volatility
38.17%
Risk-free interest rate
1.0692%
Expected life
10 years
Fair value at grant date
NT$ 1.97(22)

Net Revenue
Items
Construction contract revenue
Mobile phone software revenue
Royalty revenue
Service and maintenance revenue
Sales revenue
Profit sharing of ticket sales
Total

(23)

2017
$1,436,045
56,074
3,889
18,461$1,514,469

2016$818,109
57
25,30817,043
6,837
14,316$881,670

2017

2016

Other Gains and Losses

170

Loss on financial assets at fair value through profit orloss
Net currency exchange gain
Gain on disposal of investment
Loss on disposal of property, plant and equipment
Other gains
Other losses
Total
(24)

($2,400)(46,404)(44)
36,445(508)($12,911)($515)(6,841)
2,405
23,789(177)$18,661

Additional Information of Expenses by Nature

Cost of
Revenue

Items

2017
OperatingExpenses

Total

Employee benefit expense
Salaries and wages
Labor/Health insurance expenses
Pension costs
Other employee benefit expenses
Total$31,681
3,312
1,762
1,827
$38,582$170,890
11,2496,271
7,879$196,289$202,571
14,561
8,033
9,706$234,871

Depreciation expense
Amortization expense$7,017$23,744$39,709$11,969$46,726$35,713

Cost of
Revenue

Items

2016
OperatingExpenses

Total

Employee benefit expense
Salaries and wages
Labor/Health insurance expenses
Pension costs
Other employee benefit expenses
Total$34,427
2,782
2,068
1,941
$41,218$145,699
10,5785,940
8,697$170,914$180,126
13,360
8,008
10,638$212,132

Depreciation expense
Amortization expense$4,831$20,812$31,868$10,404$36,699$31,216

As of December 31, 2017 and 2016, the number of the Company’s employees was 217 and242, respectively. The headcount is consistent with the calculation basis of employee benefit
expense recognized above.
The accrued amounts of employees’ compensation and directors’ and supervisors’
remuneration for 2017 and 2016 based on income before employees’ compensation anddirectors’ and supervisors’ were estimated by a pre-determined ratio. The board of directors

171

has decided to issue compensation of employees and remuneration of directors andsupervisors amounting to NT$28,115 thousand and NT$5,907 on March 12, 2018, andNT$13,647 thousand and NT$2,729 thousand on March 14, 2017, for year ended December
31, 2017 and 2016, respectively. There is no material difference between the aforesaid
amounts to be allocated and the amount has been respectively recognized as expenses in theyear incurred.
The accrued amounts of employees’ compensation and directors’ and supervisors’
remuneration were recognized as expenses. If the actual distribution amounts that aresubsequently resolved by the shareholders’ meeting differ from the accrued amounts, thedifferences should be recognized in profit or loss in next year. The information about theappropriations of employees’ compensation and directors’ and supervisors’ remuneration as
proposed by the Board of Directors and resolved by the shareholders’ meeting will be posted
in the “Market Observation Post System” at the website of Taiwan Stock Exchange.
(25)

Income Tax
A. Income tax expense recognized in profit or loss consisted of the following:
2017

2016

Current tax:
Current tax on profits for the period
Additional income tax on unappropriatedearnings
Current adjustments on prior years tax
estimation$52,975$28,49749

4(1,186)(1,064)

Total current tax

51,83827,437

Deferred tax:
The origination and reversal of temporary
differences

4,544(3,980)-15

Total deferred tax

4,544(3,965)

Income tax expense$56,382$23,472

Loss carryforwards

A reconciliation of income before income tax and income tax expense recognized in
profit or loss was as follows:
2017
172

2016

Income before income tax$327,563$129,584

Income tax expense at the statutory rate (17%)
Tax-exempt income and non- exempt expense intaxable purposes
Tax-exempt income$62,202$21,588(1,342)
300

114

Movement of unrecognized temporary differences

(320)

515

Unrecognized loss carryforwards
The origination and reversal of temporary
differences
Changes in. accounting estimates of realizabilityof deferred income tax assets
Loss carryforwards

141

3,616

-

(1,676)(3,462)360
15Income tax adjustments on prior years
Additional income tax on unappropriated earnings(1,186)49(1,064)
4

Income tax expense recognized in profit or loss

$56,382$23,472

Non- exempt expense

According to the Income Tax Act revised in January 2018, income tax ratio for
profit-seeking enterprise has been adjusted from 17% to 20%; the change will beeffective from 2018. In addition, additional income tax ratio on unappropriated earnings
has been adjusted from 10% to 5%. It is expected that the change in the tax rate would
have increased (or decreased) the deferred income tax assets and the deferred income tax
liabilities for the years ended December 31, 2017 by NT$1,128 thousand and NT$0,
respectively.
B. Income tax expense recognized in other comprehensive income:
2017

2016

Deferred income tax expense (benefit)
Remeasurement of defined benefit plans
Exchange differences arising on translation offoreign operations

173

($99)

$99

329

(469)

$230

($371)

C. Changes in deferred income tax assets or liabilities due to temporary differences and loss
carryforwards:
2017
January

Recognize in

Recognize in other

1,2017

profit or loss comprehensive profit
or loss

Foreign exchange December
adjustments

31,2017

Temporary differences
Unrealized defined
benefit pensions
Loss on valuation of

$495

$13

$-

$-

$508

accounts receivable
Unrealized exchange
loss (gains)

689

237

-

-

926

1,032

1,414

-

-

2,446

Depreciation expense

1,666

(24)

-

-

1,642

444

(444)

-

-

-

943

(88)

-

-

855

(85)

-

99

-

14

translation offoreign operations
Others

329
-

1

(329)
-

-

1

Deferred income tax assets$5,513$1,109($230)$-$6,392

Deferred net profit-($5,653)-($77)($5,730)

Deferred income tax
liabilities$-($5,653)

$-

($77)

($5,730)

Loss (gain) on
investment using
equity method
Unrealized warranty
expenseRemeasurement ofdefined benefit
plans
Exchange differences
arising on

174

2016
January
1,2016

Recognize in Recognize in other Foreign exchange December
profit or loss comprehensive profit
adjustments
31,2016or loss

Temporary differences
Unrealized defined
benefit pensions

$465

$30

$-

$-

$495

Loss on valuation of
accounts receivable

278

411

-

-

689

Unrealized exchange
loss (gains)(1,161)

2,193

-

-

1,032

Loss (gain) on valuationof financial assets

342

(342)

-

-

-

Depreciation expense

1,701

(35)

-

-

1,666

Unrealized sales profit

863

(863)

-

-

-

Loss (gain) on
investment using
equity method(1,559)

2,003

-

-

444

Unrealized warranty
expenseRemeasurement of

-

943

-

-

943

defined benefit
plans
Exchange differences

13

-

(98)

-

(85)

(140)

-

469

-

329

375
$1,177(375)$3,965$371$-$5,513

arising ontranslation offoreign operations
Loss carryforwards
Deferred income tax assets

D. Unrecognized deductible temporary difference amount of deferred income tax assets:
December
31,2017
Deductible temporary difference from investment using the175$4,197

December
31,2016$21,886equity method
Other deductible temporary difference

14,174

15,975$18,371$37,861

E. Unused loss carryforwards as follow:
In Taiwan area:
December 31,2017
Year Incurred Audited/Declared amount Unused Creditable Amount Usable Until Year2017

Estimated amount

$830

2027

December 31,2016
Year Incurred Audited/Declared amount Unused Creditable Amount Usable Until Year
2015

Audited amount$2,1152025

2016

Declared amount

18,2462026$20,361
F. Unrecognized deductible temporary difference amount of deferred income tax liabilities:
December
December
31,2017
31,2016
Taxable temporary difference from investment using
the equity method$52,997$-

G. Integrated income tax information of the Company:
Balance of the Imputation Credit AccountTax creditable ratio of earnings distribution

December 31, 2017

December 31, 2016

$14,692$31,854

2017(Expected)
15.73%

2016(Actual)
24.79%

According to the Income Tax Act, the creditable ratio for individual shareholders residingin the Republic of China is half of the original creditable ratio. However, according to the
Income Tax Act revised in January 2018, the part of the Integrated Income Tax System will
be repealed on January 1, 2018. There will no longer be any imputation tax credit.
H. The Company’s income tax returns through 2015 have been assessed and approved by
the Tax Authority.

176

(26)

Earnings per Share
2017

2016

Basic earnings per share

$6.00

$2.30

Diluted earnings per share

$6.00

$2.30

177

Earnings per share is computed as follows:
Amount(In Thousands)
2017
Basic earnings per share
Net income attributable to commonshareholders of the parent

Number of Shares(In Thousands)

Earnings Per Share(NT$)$265,670

44,244$6.00

Effect of dilutive potential common shares
Diluted earnings per share
Net income attributable to commonshareholders of the parent (including
effect of dilutive potential commonshares)--$265,670

44,244$6.00

2016
Basic earnings per share
Net income attributable to commonshareholders of the parent$101,354

44,142

$2.30

-

-

$101,354

44,142

Effect of dilutive potential common shares
Diluted earnings per share
Net income attributable to commonshareholders of the parent (including
effect of dilutive potential commonshares)$2.30

7. RELATED PARTY TRANSACTIONSIn preparing the consolidated financial statements, the transaction amounts and balances between
the Company and its subsidiaries (the Company’s related parties) had been eliminated and were
not disclosed in this Note. The significant transactions between the Group and other related parties
were as follows:(1) Related party name and categories:
Related Party Name
Brogent Japan Entertainment Joint-Stock Corporation
KODANSHA TAIWAN MEDIA GROUP CO., LTD.
KODANSHA LTD.
SUNNY ENTERPRISES CO., LTD.
MUSE COMMUNICATION CO., LTD.

178

Related Party Categories
Joint venture
Associates
Associates
Associates
Associates

(2) Significant transactions with related parties
A. Revenues
Type of Related Parties

2017

Entities with significant influence over thesubsidiary

2016
$-

$25,445

B. Purchases
Type of Related Parties
Entities with significant influence over thesubsidiary

2017

2016
$-

$4,456

December 31, 2017

December 31, 2016$-

$25,681

C. Receivables from related parties
Financial Statement
Items
Accounts
receivable-relatedparties

Type of Related Parties
Entities withsignificant influence
over the subsidiary

D. Acquirement of other assets
Type of Related Parties
Entities with significant influence over thesubsidiary

2017

2016
$-

$316

E. Other related parties transactions
Financial Statement
Items
Other revenue

Type of Related Parties
2017

Entities withsignificant influence
over the subsidiary
Manufacturing expenses Entities withsignificant influence
over the subsidiary

2016

$144

$120

$-

$1,964$-$565

Administrative expenses Entities withsignificant influence
over the subsidiary

The sales prices and payment terms between the Group and its related parties are notsignificantly different from those of the non-related parties. For other related party
transactions without similar classification, prices and terms are determined independently inaccordance with terms mutually agreed by both parties.

179

(3) Key management compensation was as follows:
2017

2016

Short-term employee benefits
Post-employment benefits$19,274535$15,867
410

Total$19,809$16,277

8、PLEDGED ASSETS
Pledged Assets

December 31, 2017

December 31, 2016

Other financial

PurposeConstruction performance

assets-current (Pledged
time deposits)
Other financial$34,825

assets-noncurrent(Pledged time deposits)
Other financial

15,000$133,620

guarantee and warranty
Lease development

15,000

guarantee
Construction performance

assets-current (Restrictedassets-reserve account)
Land

6,158
139,868

guarantee
139,868 Long-term loans

Buildings

433,379

449,848 Long-term loans

Total book value$629,230$738,336

9. SIGNIFICANT CONTINGENTCONTRACT COMMITMENTS

LIABILITIESAND

UNRECOGNIZED(1) As of December 31, 2017 and 2016, the Group had outstanding notes payable for the purpose of
construction performance guarantee and warranty amounting to NT$15,468 thousand.
(2) As of December 31, 2017 and 2016, the Group had outstanding refundable deposits for the
purpose of construction performance guarantee and warranty amounting to NT$66,519
thousand and NT$182,826 thousand, respectively.
(3) Significant Operating Lease Arrangements
In order to raise up the technical level, corporate image, and focus on research anddevelopment resources in response to future continual growth, the Company has increased its
capacity to achieve the goal of sustainable management. The Company leased 1.85 hectaresof land from the Kaohsiung Software Technology Park to establish the Operations Researchand Development Center on February 29, 2012. The lease has a period of 20 years, beginningfrom March 14, 2012 to March 13, 2032, and the lease agreements can be renewed upon180

expiration. As of December 31, 2017, the Company had pledged time deposits for the purposeof lease development guarantee amounting to NT$15,000 thousand. The lease payments
recognized in 2017 and 2016 were NT$8,805 thousand and NT$7,424 thousand, respectively.
Notified by Kaohsiung City Government, the monthly lease fee for land has been adjusted
from NT$ 50 to NT$ 68.75 per square meter starting on February 1, 2016. However, in orderto improve the investment in Export Processing Zone, to create high-quality industrial
environment and to reduce the impact from the increase of assessed present value of the landannounced in 2016, the Zone Administration has introduced a lease fee relief program forthe period from January 1 to December 31, 2017. Accordingly, the monthly lease fee of landhas been adjusted from NT$ 68.75 to NT$ 53.76 per square meter.
The future aggregated minimum lease payments are as follows:
Years Range on the Lease
Within 1 year
Over 1 year and not later than 5 years
Later than 5 years
Total

December 31, 2017

December 31, 2016$12,21160,441
140,455$213,107$9,06857,388
155,719$222,175(4) The Company has entered into a construction contract for indoor playground equipment of
the theme park amounting to NT$375,000 thousand in July 2014. The buyer shall made an
initial payment of NT$150,000 thousand for construction work incurred by the Company ;with the remaining NT$225,000 thousand to be paid off from proceeds from the profit sharingof ticket sales. Upon completion of full payments of $375,000, the buyer is obligated tocontinue to share the profit generated from ticket sales.
(5) The Company has entered into a copyright contract including franchise fees amounting to
6,250 thousand yen and guaranteed royalties amounting to 48,000 thousand yen, with theseller in October 2014. The Company shall continue to remitting royalties payments based on
the contract provision even through the guaranteed royalties are insufficient during the
copyright period.

10. SIGNIFICANT DISASTER LOSS
None

11. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
None

181

12. OTHERS(1)

Financial Instruments
A. Categories of financial instruments
December 31, 2017 December 31, 2016
Financial Assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Debt investments with no active market-current
Accounts and notes receivable
Accounts and notes receivable-related parties
Other receivables
Held-to-maturity financial assets-noncurrent
Financial assets carried at cost-noncurrent
Refundable deposits
Other financial assets
Long-term receivables
Total$710,647
230,967
196,066
225,968
2,721
35,57017,856
9,794
55,983
9,656$1,495,228$482,221
135,675
533,600
312,405
25,68122,06633,90025,356
9,129
148,620$1,728,653

Financial Liabilities
Short-term bank loans
Accounts and notes payable
Other payables
Long-term bank loans (including current portion)
Total$50,923
96,101
381,050$528,074$20,000
164,491
77,786
350,897$613,174

B. Financial risk management objectives
The Group manages its exposure to market risk (including foreign currency risk, interest
rate risk and price risk), credit risk and liquidity risk with the objective to reduce thepotentially adverse effects the market uncertainties may have on its financial
performance.
The plans for material treasury activities are reviewed by the Board of Directors inaccordance with procedures required by relevant regulations and internal controls. During
the implementation of such plans, the Group must comply with certain treasury
procedures that provide guides for overall financial risk management and segregation ofduties.
C. Market risk
The Group is exposed to the market risks arising from changes in foreign exchange rates
and interest rates.

182

(a) Foreign currency risk
Majority of the Group’s operating activities are denominated in foreign currencies.
Consequently, the Group is exposed to foreign currency risk.
The Group’s sensitivity analysis to foreign currency risk is mainly focused on theforeign currency monetary items at the end of the reporting period. Assuming an
unfavorable (or favorable) 10% movement in the levels of the United States dollar
against the New Taiwan dollar, the net income for the years ended December 31,
2017 and 2016 would have decreased (or increased) by NT$210,139 thousand andNT$126,016 thousand, respectively. Assuming an unfavorable (or favorable) 10%
movement in the levels of the Canadian dollar against the New Taiwan dollar, the net
income for the years ended December 31, 2017 and 2016 would have decreased (orincreased) by NT$3,065 thousand and NT$1,200 thousand, respectively. Assuming an
unfavorable (or favorable) 10% movement in the levels of the Euro against the New
Taiwan dollar, the net income for the years ended December 31, 2017 and 2016
would have decreased (or increased) by NT$7,103 thousand and NT$3,193 thousand,respectively. Assuming an unfavorable (or favorable) 10% movement in the levels of
the Chinese Yuan against the New Taiwan dollar, the net income for the years ended
December 31, 2017 and 2016 would have decreased (or increased) by NT$54,100
thousand and NT$9,347 thousand, respectively.
(b) Interest rate risk
Interest rate risk refers to the risk that the fair value of financial instruments willchange as a result of changes in market interest rates. The Group is exposed tointerest rate risk arising from fixed-income investments and fixed-rate loans.
The Group’s sensitivity analysis to interest rate risk is mainly focused on changes ininterest rates of fixed-income investments and fixed-rate loans at the end of thereporting period. Assuming an increase (or decrease) in interest rates of 10 basis point(0.1%), the net income for the years ended December 31, 2017 and 2016 would havedecreased (or increased) by NT$119 thousand and NT$160 thousand, respectively.
(c) Other price risk
The Group is exposed to price risk arising from financial assets and liabilities at fairvalue through profit or loss.
The Group’s sensitivity analysis to price risk is mainly focused on changes in fairvalue at the end of the reporting period. Assuming an increase (or decrease) of 7% inprices of financial instruments, the net income for the years ended December 31,
2017 and 2016 would have increased (or decreased) by NT$16,168 thousand andNT$9,497 thousand, respectively.

183

D. Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the Group. The Group is exposed to credit risk fromoperating activities, primarily accounts receivables, and from financing activities,
primarily bank deposits, fixed-income investments and other financial instruments. Credit
risk is managed separately for business related and financial related exposures.
(a) Business related credit risk
The Group has set the procedures for business related credit risk to maintain thequality of accounts receivable. The Group assesses the credit quality of the customers
by taking into account their financial position, the credit rating agencies’ rating, theGroup’s internal credit rating, historical trading records, current economic situationand other factors. The Group also uses some credit enhancement instruments such as
prepayment for purchases and credit insurance to reduce certain customers’ creditrisk.
As of December 31, 2017 and 2016, the Group’s top three largest customers
accounted for 69.91% and 71.64% of accounts receivable, respectively. The Group
believes the concentration of credit risk is insignificant for the remaining accounts
receivable.
(b) Financial credit risk
The Group monitors and reviews credit risk of bank deposits, fixed-income
investments and other financial instruments. The counterparties are banks with good
credit quality, financial institutions with investment grade or above, corporations andgovernment agencies, so there is no significant compliance concerns and credit risk.
E. Liquidity risk management
The objective of liquidity risk management is to ensure the Group has sufficient cash andcash equivalents, highly liquid securities and adequate bank lines to maintain financial
flexibility.
The table below summarizes the maturity profile of the Group’s financial liabilities basedon contractual undiscounted payments, including principal and interest.
Less than
1 yearDecember 31, 2017
Accounts and notes
payablesOther payables
Long-term bank loans$50,923
96,10145,090

Total$192,114

2-3 years

4-5 years

Over 5 years$88,973

54,391

237,960$50,923
96,101
426,414$88,973$54,391$237,960$573,438

184

Total

Less than
1 yearDecember 31, 2016
Short-term bank loans
Accounts and notes
payablesOther payables
Long-term bank loans
Total

2-3 years

4-5 years

Over 5 years

Total$20,000

$-

$-

$-

$20,000

164,491
77,786---

164,491
77,78647,84755,43454,814

263,279

421,374$310,124$55,434$54,814$263,279$683,651

F. Fair value of financial instruments(a) Fair value of financial instruments carried at amortized cost
The Group considers that the carrying amounts of financial assets and financial
liabilities carried at amortized cost in the consolidated financial statements
approximate to their fair values.
(b) Valuation techniques and assumptions used in fair value measurement are as follows:
I. The fair values of cash and cash equivalents, accounts receivable, other financial
assets-current, short-term loans and accounts payable are approximately equal tothe carry amounts due to their short maturity.
II. The fair values of financial assets and financial liabilities with standard terms andtrading in active liquid markets are determined with reference to quoted market
prices (includes publicly traded stocks and beneficiary certificates).
III. The fair values of other financial assets and financial liabilities are determined inaccordance with generally accepted pricing models based on discounted cash flow
analysis.
(c) Fair value measurements recognized in the consolidated balance sheets
The following table provides an analysis of financial instruments that are measured
subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable:
I. Level 1 fair value measurements are those derived from quoted prices (unadjusted)in active markets for identical assets or liabilities;
II. Level 2 fair value measurements are those derived from inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); andIII. Level 3 fair value measurements are those derived from valuation techniques that
include inputs for the asset or liability that are not based on observable market data185

(unobservable inputs).
Financial assets and liabilities measured at fair value on a recurring basis
Financial instruments that are measured subsequent to initial recognition at fair value
are primarily publicly traded stocks and beneficiary certificates that their fair value
measurements are those derived from quoted prices in active markets for identicalassets.
The following table presents the Group’s financial assets and liabilities measured atfair value on a recurring basis:
December 31, 2017
Level 1
Financial Assets at
Fair Value ThroughProfit or Loss
Beneficiary
certificates
Publicly traded stocks

Level 2

Level 3

Total

719,955$226,727
4,240

$-

$-

$226,727
4,240$230,967$-$-$230,967

December 31, 2016
Level 1

Level 2

Level 3

Total

Financial Assets at
Fair Value ThroughProfit or Loss
Beneficiary
certificates$-$135,675$-$135,675

There were no transfers between Level 1 and Level 2 of the fair value hierarchy orassets and liabilities held as of December 31, 2017 and 2016 that are measured at fairvalue on a recurring basis
There were no purchases and disposals for assets on Level 3 for the years ended
December 31, 2017 and 2016, respectively.
(2)

Capital Risk Management
The Group’s objective of capital management is to maintain robust credit rating and good
capital ratio to support business operations and maximize shareholders’ interests. In order tomaintain and adjust the capital structure, the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders or issue new shares.

186

(3) Information about Foreign Currency Financial Assets and Liabilities with a Significant
Impact on the Group
December 31, 2017
Foreign
Currencies

ExchangeRate$71,177

29.76

1,282

December 31, 2016
Foreign
Currencies

ExchangeRate$2,118,228$39,74432.25$1,281,740

23.91

30,653502

23.91

12,003

1,997

35.57

71,033

1,011

33.90

34,273125,044

4.57

571,451

22,123

4.62

102,208

180

0.26

47

180

0.28

50

19,590

0.26

5,093

33,333

0.28

9,333

Monetary items
USD
EUR

$566

29.76

$16,844

$669

32.25

$21,575

-

-

-

69

33.90

2,339

CNY

6,664

4.57

30,454

1,891

4.62

8,736

TWD

TWD

Financial Assets
Monetary items
USD
CAD
EUR
CNY
JPY
Non-monetary items
JPY
Financial Liabilities187

13. ADDITIONAL DISCLOSURES(1)

Related Information on Significant Transactions
No.

Items

Table

1
2
3

Financings provided
Endorsement/guarantee provided
Marketable securities held at the end of the period (excluding

1
2
3

4

investments in subsidiaries, associates and jointly controlled
entities)
Aggregate purchases or sales of the same securities reaching

None

5

NT$300 million or 20% of the paid-in capital or more
Acquisition of individual real estate reaching NT$300 million or
20% of the paid-in capital or more

None

6

Disposal of individual real estate reaching NT$300 million or 20%of the paid-in capital or more

None

7

Total purchases from or sales to related parties reaching NT$100
million or 20% of the paid-in capital or more

48

Receivables from related parties reaching NT$100 million or 20%

5of the paid-in capital or more(2)

9Derivative financial instruments undertaken during the reporting
periodNone

10

Others: The business relationship between the parent and thesubsidiaries and significant transactions between them

6

Information on Investees
Please see Table 7 attached (excluding the investee in Mainland China).

(3)

Information on Investments in Mainland China
Please see Table 8 attached.

188

Table 1: Financings provided as of December 31, 2017
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)N

FinancingCounter

Financial

RelatedMaximumEnding Balance

Amount ActuallyInterest

Nature forTransaction

Reason for

Allowanceo.

Company-partyStatement

Party

Balance for the(Foreign

Drawn (Foreign

Rate

FinancingAmounts

Financingfor BadPeriod (Foreign

Currencies in

Currencies in

Currencies inThousands)

Thousands)

Thousands)(Note 3)

Account(Note 4)

Collateral
Item

Value

Debt

(Note 3)0Brogent

Brogent

Other

Technologies

Globalreceivables

Inc.

Financing

LimitsCompany’s

for Each

Total

Borrowing

FinancingCompany

Amount Limits(Note 2)

(Note 1)

Operating
Yes

Inc.

Financing$264,352$264,352

$-

-

2

$-

from related

$-

-

$-

$274,699$1,098,799--

274,699

1,098,799--

274,699

1,098,799

capitalparties
Brogent

Other

Hong

receivables

Operating
Yes

Kong

from related

Limitedparties

Brogent

Other

Mechanreceivables

264,352--2

capitalOperatingYesical Inc.

264,352

264,352

264,352--

from related

2

capitalparties
Note 1: The total amount available for lending purpose shall not exceed forty percent (40%) of Brogent Technologies Inc.’s net equity.
Note 2：Subsidy to individual subsidiaries is limited to 10% of its net equity.
Note 3：The amount was determined by the Board of Directors.
Note 4：The nature of the loan, such as:
1. Business189

2. The need for short-term financing

Table 2: Endorsement/guarantee provided as of December 31, 2017
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
No.

Endorsement/
Guarantee

Guaranteed Party
Name

ProviderLimits on

MaximumEndingAmountAmount ofRatio ofMaximum

Guarantee

Guarantee

Guarantee

Nature ofEndorsement/

Balance forBalance

Actually

Endorsement/

Accumulated

Endorsement/

Provided by

Provided by

Provided toRelationship

Guarantee

the Period(Note 3)

Drawn

Guarantee

Endorsement/

Guarantee

Parenta Subsidiary

Subsidiaries inAmount Provided(Note 3)(Foreign

Collateralized

Guarantee toAmountCompany

to EachCurrents in

by Properties

Net Equity per

Allowable

Guaranteed Party

Thousands)

Latest Financial(Note 2)

(Note 1 and 2)
0

Brogent
Technologies

Brogent Rides(Shanghai) Limited

Investee ofMainlandChina

Statements$824,099$210,180$210,180

-

-

7.65%

$1,373,499

Yes

No

Yes

824,099

140,120140,120

-

-

5.10%

1,373,499

Yes

No

Yes

Subsidiary

Inc.
Brogent Creative(Shanghai) Limited

Investee of
Subsidiary

Note 1：The amount provided to each guaranteed party shall not exceed thirty percent (30%) of Brogent Technologies Inc.’s net equity.
Note 2：The total amount of guarantee provided shall not exceed fifty percent (50%) of Brogent Technologies Inc.’s net equity.
Note 3：The amount was determined by the Board of Directors.

190

Table 3: Marketable Securities Held as of December 31, 2017 (Excluding Investments in Subsidiaries, Associates and Jointly
Controlled Entities)(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
December 31, 2017
Carrying Value(Foreign

Held Company

Type and Name of Marketable

Relationship with the

Name

Securities (Note 1)

Securities Issuer (Note 2)

Brogent

Financial Statement Item

Fair Value

Currencies in

Percentage of(Foreign

Shares/Units

Thousands)

Ownership

Currencies inRemark(In Thousands)(Note 3)(%)

Thousands)( Note 4)

Callable Bond

Technologies
Inc.
Formosa Group (Cayman) Limited

None

Cash equivalents

None

Financial assets at fair value-

USD 2,000-

USD 2,000

957

RMB 10,535-

RMB 10,535

983

9,394

-

9,394

363

5,100

-

5,100

50

USD 511-

USD 5117

USD 1,223-

USD 1,223

36

USD 757-

USD 757

Fund
Prudential Financial RMB Money
Market Fund RMB
Yuanta Global USD Corporate Bondthrough profit or loss-current
None

Fund
Eastspring Investments Umbrella Fundthrough profit or loss-current
None- Global Bond Fund of Fund A TWD

M&G Optimal Income Fund - M&G

None

Financial assets at fair value
through profit or loss-current

None

Income - USD
JPMorgan Funds - Emerging Markets

Financial assets at fair value
through profit or loss-current

Optimal Income Fund
JPMorgan Investment Funds - Global

Financial assets at fair value

Financial assets at fair value
through profit or loss-current

None

Financial assets at fair value

191

December 31, 2017
Carrying Value(Foreign

Held Company

Type and Name of Marketable

Relationship with the

Name

Securities (Note 1)

Securities Issuer (Note 2)

Debt - USD
JPMorgan Funds - Global Corporate

Currencies in

Percentage of(Foreign

Shares/Units

Thousands)

Ownership

Currencies inRemark(In Thousands)(Note 3)(%)

Thousands)( Note 4)

through profit or loss-current
None

Bond - USD
Nomura Asia Pacific Bond Fund-Acc

Financial Statement Item

Fair Value

Financial assets at fair value

62

USD 1,062-

USD 1,062

483

RMB 5,074-

RMB 5,074

113

USD 1,204-

USD 1,204-

17,856-

17,856

264

8,860

0.93%

8,860

-

35,570-35,570through profit or loss-current
None

Financial assets at fair value
through profit or loss-current

Nomura Global Short Duration Bond

None

Fund USD
Brogent

Financial assets at fair value
through profit or loss-current

Common Stock

Global Inc.
This is Holland B.V.

None

Financial assets carried at cost
- noncurrent

Jump Media International Co., LTD.

None

Financial assets at fair value
through profit or loss-current

Preferred Stock
Brogent

This is Holland B.V.

Global Inc.

None

Financial assets inheld-to-maturity - noncurrent

Note 1：Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities within the scope of IAS 39, “Financial instruments : Recognition andMeasurement”.

192

December 31, 2017
Carrying Value(Foreign

Held Company

Type and Name of Marketable

Relationship with the

Name

Securities (Note 1)

Securities Issuer (Note 2)

Financial Statement Item

Fair Value

Currencies in

Percentage of(Foreign

Shares/Units

Thousands)

Ownership

Currencies inRemark(In Thousands)(Note 3)(%)

Thousands)( Note 4)Note 2：Leave the column blank if the issuer of marketable securities is non-related party.
Note 3：For items measured at fair value, the carrying value represents fair value adjustments less accumulated impairment. For items that are not measured at fair value, the carrying value represents
original cost or amortized cost less accumulated impairment.
Note 4：The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the
securities presented herein have such conditions.

Table 4: Intercompany Relationships and Significant Intercompany Transactions or 20% of the Paid-in Capital or More(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Reasons and Situations ofDifferent of Trading Conditions
Transaction Details

and General Transactions

Notes/Accounts Receivables or Payables

Purchases

Ratio of Total/SalesName of

Nature ofCompanytransactions

RelationshipBrogent

Brogent MechanicalTechnologies

Inc.

Purchases/Sales

Amounts

Ratio of Total

Payment

Purchases/Sales

Terms

Payment
Unit Price

Notes/Accounts

Terms

Ending Balance

Receivables or Payables

Subsidiary

Purchases$128,465

18%

OA 60 Days$-$-($55,934)(55%)

SubsidiarySales

166,391

14%

OA 60 Days--

93,23821%

Investee ofSales

127,383

11%

OA 60 Days--

91,30021%

Inc.
Brogent Hong Kong
LimitedBrogent Rides

193

Note

(Shanghai) Limited

Subsidiary

Brogent Global

Brogent Creative

Associate

Sales

127,264

79%

OA 60 Days--

24,651

79%

Inc.

(Shanghai) Limited

Brogent HongBrogent Creative

Investee ofSales

219,333

100%

OA 60 Days

-

-

-

-

Kong Limited(Shanghai) Limited

Subsidiary

194

Table 5: RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE
PAID-IN CAPITAL(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Company Name

Related Party

Nature ofEnding Balance

TurnoverRelationships(Foreign Currencies

Day

OverdueAmountin Thousands)
Brogent

Brogent Hong

Technologies Inc.

Kong Limited

Amounts Received

Allowance

Actionin Subsequent

for Bad Debts

Taken

PeriodSubsidiary$93,238

82

$-

-

$-

$-

Brogent Rides

Investee of

91,300

91

-

-

-

-

(Shanghai) Limited

Subsidiary

Note

Note 1: The calculation of turnover days excludes other receivables from related parties.

Table 6: Intercompany Relationships and Significant Intercompany Transactions(Amounts in Thousands of New Taiwan Dollars/Foreign Currencies in Thousands)
Transaction situations

Name of
Numbers0transactions
Brogent

Counterparty
Brogent Mechanical Inc.

Nature ofTransacti

Percentage ofRelationshipon Terms

Consolidated Net(Note2)

Revenue or Total Assets(Note1)

Amounts

Payables to related parties$57,970-

2%

Technologies

Prepayments

71,280

-

2%

Inc.

Purchases

128,465-

8%Construction receipts payable

60,000

-

2%

Sales

9,386

-

1%

Receivables to related parties

93,238-3%

Construction receipts payable

240,482

-

7%

Sales

166,391-

11%

Brogent Global Inc.

Brogent Hong Kong Limited

1

Financial Statements Items

1

1

195

Transaction situations

Name of
Numbers1

transactions

Nature ofTransacti

Percentage ofRelationshipon Terms

Consolidated Net(Note2)

Revenue or Total Assets

Counterparty(Note1)

Financial Statements Items

Amounts

Brogent Rides (Shanghai) Limited

1

Receivables to related parties

91,300-3%

Construction receipts payable

91,300

-

3%

Sales

127,383-8%

43,528-

1%

Brogent

Brogent Global Inc.

2

Prepayments

Hong Kong

Brogent Creative (Shanghai) Limited

2

Construction receipts payable

USD 8,253-

7%

Advance by projects

USD 1,450

-

1%

Sales

USD 7,205-

14%Construction receipts payable

24,651-

1%

Receivables to related parties

24,651

-

1%

Sales

127,264-

8%

Limited

2

Brogent

Brogent Creative (Shanghai) Limited

Global Inc.

2

Note1: “1” represents the transactions from parent company to subsidiary.
“2” represents the transactions from subsidiary to subsidiary.
Note2: The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices andterms are determined in accordance with mutual agreements.

196

Table 7: Information on Investees (Excluding the Investee in Mainland China)(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Investor
Company
Brogent
Technologies
Inc.

InvesteeCompany
Brogent
Mechanical
Inc.

Location
TaoyuanCity

Brogent
Creative Inc.

Kaohsiung
City

Brogent Hong
Kong Limited

Hong Kong

Brogent Global
Inc.

Kaohsiung
City

Business Scope
Manufacture andsales of thesimulator rides
and its key
components
Development andsales of theperipheralproducts ofsimulator rides
Reinvestment andtrading business

Original Investment Amount
December 31,
2017(Foreign
Currencies in
DecemberThousands)
31, 2016$55,000$55,000

Balance as of December 31, 2017
Carrying
Percentage Value(Foreign
Shares (InofCurrencies inThousands) Ownership
Thousands)
7,200
61.11%$83,572

Net Income(Loss) of theInvestee$15,037

Share of
Profits/Lossesof Investee(Note 1)
$9,1899,000$9,000900

60.00%

8,332

(831)

(506)

54,063(USD 1,700)

54,063(USD 1,700)-

100.00%103,398(USD3,474)

55,610(USD 1,827)

55,610(USD 1,827)

Development and
300,000
300,000
30,000100.00%304,911
34,117
managementbusiness of
self-operated
outlets
Brogent
Japan
Tokyo
Management
10,161
7,458
40.00%
8,061
Brogent Hong
(2,552)Entertainment
business and(JPY 35,000) (JYP25,000)(JPY 30,511)(JPY (9,407))
Kong Limited Joint-Stockdevelopment
Corporationand sales of theperipheralproducts ofsimulator rides
in Japan
Note 1: The share of profits (losses) of investee recognized in current period concludes the components of unrealized profit or loss from intercompany transactions.
Note 2: The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.

197

26,487Note 2

Note
Subsidiary

Subsidiary

Subsidiary

Subsidiary

Joint
VentureTable 8: Information on Investments in Mainland China(Amounts in Thousands of New Taiwan Dollars/Foreign Currencies in Thousands)
Accumulated

Accumulated

Accumulated

Outflow of

InwardOutflow ofInvestment

Investment Flows

Total Amount Method of Investment from

Investee Company

Main Businesses

Brogent Rides (Shanghai) Import and export
Limitedbusinessof Paid-in

Investment

Taiwan as of

Capital(Note 1)January 1, 2017$22,690

2(USD 700)Net Income

from Taiwan as (Loss) of the

Outflow$22,690

Inflow$-$-(USD 700)

of December

Investee

31, 2017

Company$22,690$45,139(USD 700)(USD 1,483)

Carrying
PercentageofAmount as of Earnings as of
Share ofOwnership Profits/Losses
100%

Remittance of$45,139

December 31, December 31,
2017$64,526

2017$-(USD 2,168)(Note2)

Brogent Creative(Shanghai) Limited

Development andmanagement

14,961

3--(RMB 3,000)--

30,674100%(RMB 6,810)

business of

30,674

43,483(RMB 9,525)(Note2)

self-operated
outlets

Accumulated Investment in Mainland China as

Investment Amounts Authorized byof December 31, 2017

Investment Commission, MOEA

$22,690$22,690

Upper Limit on Investment$1,648,199(USD 700)(USD 700)
Note 1：Investment methods are classified into the following three categories; fill in the number of category each case belongs to:(1) Directly invest in a company in Mainland China.
(2) Through investing in an existing company in the third area (Brogent Hong Kong Limited), which then invested in the investee in Mainland China.
(3) Others.
Note 2：Amount was recognized based on the audited financial statements.

198-14. OPERATING SEGMENTS INFORMATION(1) Operating Segments
The Group’s revenues are principally from the research, development, design, production andsales of the media-based attraction (MBA). The Group upholds the concept of sustainable
development, and achieve the objective of making profits for the shareholders in the coming
years. The Group executes the operating strategy of double C by taking a two-pronged
approach (“channel” and “content”) to transform into the cooperators of the entertainment
industry from a supplier of amusement park facilities. In the meantime, the Group implements
the diversification strategy, the profit sharing model, and the integration of the one-time
outright sale of equipment to expand the sites of global sales and optimize the product content
and value.
The Group’s operating decision maker reviews the Groups’ overall operating results to makedecisions about resource allocation and assess the Groups’ overall performance. Therefore, theGroup has a single operating segment.
(2) Geographic Information
RevenueTaiwanAsia
EuropeUnited States
Australia
Total

Noncurrent Assets

2017

2016

$25,815
1,209,646
115,568
152,023
11,417$1,514,469$107,566
389,411356,336
28,357$881,670

December 31, 2017

December 31, 2016

$957,128
114,470$1,071,598$956,412$956,412

The Group categorized the revenues mainly by region. Noncurrent assets include property,
plant and equipment, intangible assets and other assets, except for financial instruments,
deferred tax assets and pension assets.
(3) Production and Service Information
Production/Service

2017

2016

Construction contract revenue
Mobile phone software revenue
Royalty revenue$1,436,045
18,461$818,109
25,30814,316

Service and maintenance revenue
Others56,074
3,889

17,043
6,894$1,514,469$881,670

Total

199

(4) Major Customer’s Information
2017

2016

Percentage of Net

Percentage of Net

CustomerAmountCustomer R$432,527

28.56$105,848

12.00

Customer T

320,163

84,256

Customer A

161,699

21.14
10.68

-

9.56
-

Customer B

131,082

8.66

-

-

Customer C

105,803

6.99

-

-

Customer D

77,771

5.14--

Customer S

51,781

103,201

Customer Q

45,071

3.42
2.98

252,980

11.71
28.69

Customer O

28,8923.45

111,023

12.59

Customer P

10,7950.71

118,480

13.44

Revenue- 200 -

AmountRevenue智崴資訊科技股份有限公司

董事長

黃仲銘

- 201 -