Leer t o Shareholders - SERCOMM

1 Le er to ShareholdersCompany Highlight00 Review of 201 Business Results00 Performance and Pro tability Analysis00 Research and Development Status00 Summary of 2017 Business Plan00 Future Development StrategyCompany Overview0 Milestones0 Organiza on0 Board Members0 Management Team0 Corporate Governance0 Internal Control System Execu on Status 0 Resolu ons of Board Mee ngs 0 Cer ed Public Accountant (CPA) Informa on0 Changes in Share Posi ons among Directors, Supervisors, Managers0 Informa on of the Company s Top Ten Shareholders0 Long-Term Investments OwnershipCapital & Shares0 Capital & Shares0 0 Status of Employee Stock Op on PlanBusiness Overview0 Business Ac vi es0 Long-term and Short-term Business Development Plans0 Market, Produc on and Sales Outlook0 Main Product Applica ons0 Employer-employee Rela onships0 Environmental ExpenditureFinancial Review and Analysis0 Consolidated Financial Statements0 Financial Analysis0 2017 Audit Commi ee s Review report 0 Financial Status and Opera ng ResultsSpecial Disclosure0 SubsidariesFinancial Informa onContents2017 Annual report |001I.

2 Letter to Shareholders SERCOMM Corporation celebrated its 25th anniversary in 2017. The overall market was full of opportunities and challenges. SERCOMM adapted the advantages of system integration and grasped the business opportunities in broadband upgrades. The annual revenue and shipment volume hit a record high and created outstanding results. SERCOMM set a fourth consecutive company record in 2017 with sales of NT$ billion, a 5% increase over the NT$ billion sales in 2016. The operating profit was NT$ billion, the income before tax was NT$ billion, and the net income attributable to owners of parent was NT$ billion. Based on 244 million weighted average shares, the EPS for year 2017 was NT$ !Looking back at 2017, SERCOMM successfully dominated digital convergence opportunities.

3 Its principal products - FTTx products, Cable DOCSIS , Integrated Access Devices, and SMB products - boosted SERCOMM 's operating performance. Meanwhile, benefiting from the commission of the new plant in Suzhou and the automation of production lines, SERCOMM 's accumulated shipment volume of broadband devices reached 33 million units; the overall production capacity reached the next level, making SERCOMM the leader in the industry. SERCOMM continues to expand its global footprint and has gained ground in Europe, China, and other emerging markets. SERCOMM 's market share in telecommunications has continued to increase. It has also actively participated in the International Telecommunications Exhibition and has exchanged information on 5G communications technologies and artificial intelligence (AI) with major international telecommunications companies.

4 !! SERCOMM , an international corporate citizen, focuses on its own business ventures while maintaining its commitment to advancing corporate governance. In the area of corporate governance, SERCOMM was awarded by FinanceAsia with the Best Managed Company and Best Mid-Cap Company for the third consecutive year. SERCOMM actively concentrates on product innovation and R&D. The company received the Red Dot Product Award Design by | 2017 Annual report 002 Design Zentrum Nordrhein Westfalen in Germany, showing that SERCOMM 's R&D abilities are highly esteemed. SERCOMM also published its first Corporate Social Responsibility report , which was prepared according to international standards, demonstrating that 2017 was the first year of SERCOMM s corporate social responsibility in which it hoped to accomplish corporate social responsibility goals and declare its concept of perpetuating its business.

5 !Facing the Internet of Things and the 5G era, SERCOMM is optimistic about the AIoT (AI and IoT convergence) business trend and dominates the key technologies of communication. SERCOMM has become the major solution partner behind Telcos, and is able to launch high value-added products such as Cloud IoT, Smart Energy Management, Smart Health, Smart Cities, LPWA solutions, and Small Cells. We are living in an environment of rapid transformation in the world of technological development. SERCOMM and its employees will spare no effort to maintain the superior quality of the company(s research and development and to build on its operational efficiency, which is one of the company(s core competencies. SERCOMM has maintained a firm commitment to continually enhance its corporate governance and corporate social responsibility.))

6 SERCOMM will continue to move towards sustainable development and to seek better corporate value for its Shareholders , customers, and employees. James Wang President & CEO SERCOMM Corporation 2017 Annual report |003II. Company Highlight Review of 2017 Business Results Unit: Thousand NTD Item 2016 2017 Ye a r o n Ye a r Change (%) Wired Product 6,855,710 4,130,729 Wireless Product 29,264,024 33,925,943 Others 582,000 543,330 Total Revenue 36,701,734 38,600,002 Performance and Profitability Analysis Item 2016 2017 Financial Structure Debt over Equity (%)

7 Long-term Funds to Fixed Assets Ratio (%) Liquidity Analysis Current Ratio (%) Quick Ratio (%) Profitability Return on Assets (%) Return on Equity (%) To Paid-in Capital (%) Operating Income Pretax Income Profit Margin (%) Earning per Share(NTD) Research and Development Status At SERCOMM , new product R&D projects are formulated in response to market demand based on our core network communications technology, market trends and the evolving IT & communications industry.

8 All research proposals for new products must also undergo a review by R&D, marketing and sales units before R&D resources are invested. To accelerate the acquisition of new technologies, SERCOMM also actively seeks out partnership opportunities in addition to in-house R&D. This has led to the development of various application servers that offer high-performance, ease of administration and integration with the Internet. A total of 8 projects were completed from our 2017 R&D plan. | 2017 Annual report Summary of 2017 Business Plan (1) Business Direction 1. Deliver high performance in management to maintain the Company s high rate of growth and solid profitability. 2. Actively develop all kinds of specialized servers, maintain technical leadership and emphasize long-term cultivation of personnel.

9 3. Strengthen quality of service, continue the optimization of work processes and improve overall operational efficiency. 4. Consolidate existing gains in the European, American and Japanese markets while actively developing our distribution channels in other regions to establish a global distribution network. 5. Focus on cost and quality control while expanding our production capability to meet market demand. (2) Projected Sales and Basis Looking back at 2017, SERCOMM benefited from the booming development of the broadband telecommunications market. The company sales revenue hit a record high for the fourth consecutive year and performed excellently. With a strong knowledge base in software/hardware integration and mechanical design, SERCOMM has become a strategic partner in providing solutions to major telecom operators.

10 The company has successfully mastered key technologies in the broadband industry, including the home, enterprise, telecommunications, IoT, and cloud service markets. SERCOMM 's major products - FTTx products, Cable DOCSIS , and Integrated Access Device - continued to gain strength. Total shipments of wireless broadband equipment reached 33 million units in 2017, making SERCOMM a leader in the industry. The new production plant in Suzhou allowed for the continuing automation of the production line and optimization of the manufacturing management system, thus optimizing SERCOMM 's manufacturing capacity. SERCOMM 's commitment to increasing unit production efficiency leads to operating efficiency, reducing company costs, and implementing efficiency improvements. Looking forward to the overall economy in 2018 and facing the coming 5G Mobile Communications era, the development of IoT-related applications is flourishing.