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Altek Interim / Quarterly Report 2018

Nov 14, 2018

52290_rns_2018-11-14_972c415e-a5d9-4964-a6bb-4afbf9367f7e.pdf

Interim / Quarterly Report

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ALTEK CORPORATION AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

JUNE 30, 2018 AND 2017

REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 18000049 (In Thousands of New Taiwan Dollars)

To Altek Corporation

Introduction

We have reviewed the accompanying consolidated balance sheets of Altek Corporation and subsidiaries as of June 30, 2018 and 2017, and the related consolidated statements of comprehensive income for the three-month and six-month periods then ended, as well as the consolidated statements of changes in equity and of cash flows for the six-month periods then ended, and notes to the consolidated financial statements, including the summary of significant accounting policies. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with “Regulations Governing the Preparation of Financial Report by Securities Issuers” and International Accounting Standard 34 “Interim Financial Reporting” as endorsed by Financial Supervisory Commission. Our responsibility is to express a conclusion on these consolidated financial statements based on our reviews.

Scope of Review

Except as discussed in the following paragraph, we conducted our reviews in accordance with the Statement of Auditing Standards No. 65, “Review of Financial Information Performed by the Independent Auditor of the Entity” of the Republic of China. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

As explained in Note 4(3), the financial statements of certain insignificant consolidated subsidiaries were not reviewed by independent accountants. Those statements reflect total assets of $5,390,149 and $3,159,904, constituting 32% and 21% of the consolidated total assets, and total liabilities of $267,761 and $522,080, constituting 4% and 9% of the consolidated total liabilities as of June 30, 2018 and 2017, respectively, and total comprehensive income of $9,665, $29,285, $99,347 and $54,124, constituting

~1~

1%, 12%, 25% and 7% of the absolute values of the consolidated total comprehensive income for the three-month and six-month periods then ended.

Qualified Conclusion

Except for the adjustments to the consolidated financial statements, if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries and equity method investees been reviewed by independent accountants, that we might have become aware of had it not been for the situation described above, based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as at June 30, 2018 and 2017, and of its consolidated financial performance and its consolidated cash flows for the six-month periods then ended in accordance with “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.

Tsang, Kwok-Wah

[Li, Tien-Yi ]

For and on behalf of PricewaterhouseCoopers, Taiwan

August 10, 2018

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

~2~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

(The balance sheets as of June 30, 2018 and 2017 are reviewed, not audited)

Assets Notes June 30,2018
AMOUNT
%
$
5,794,436
35
968,641
6
4,943
-
690,401
4
3,421,311
20
32,646
-
869
-
1,059,224
6
163,395
1
19,362
-
12,155,228
72
10,601
-
126,700
1
-
-
-
-
3,553,601
21
773,959
5
111,521
1
92,136
-
71,644
-
4,740,162
28
$
16,895,390
100		 December31,2017
AMOUNT
%
$
5,874,982
39
584,799
4
-
-
30,335
-
2,342,369
16
18,976
-
3,339
-
1,165,926
8
176,696
1
16,080
-
10,213,502
68
-
-
-
-
138,011
1
-
-
3,648,788
24
777,368
5
121,538
1
82,415
1
67,349
-
4,835,469
32
$
15,048,971
100		 June 30,2017 June 30,2017
AMOUNT
$
5,794,436
968,641
4,943
690,401
3,421,311
32,646
869
1,059,224
163,395
19,362
12,155,228
10,601
126,700
-
-
3,553,601
773,959
111,521
92,136
71,644
4,740,162
$
16,895,390		 AMOUNT
$
5,874,982
584,799
-
30,335
2,342,369
18,976
3,339
1,165,926
176,696
16,080
10,213,502
-
-
138,011
-
3,648,788
777,368
121,538
82,415
67,349
4,835,469
$
15,048,971		 AMOUNT
$
5,931,012
610,425
-
-
1,930,717
21,600
4,223
1,124,767
187,838
23,911
9,834,493
-
-
160,005
-
4,293,964
198,246
83,229
104,216
67,286
4,906,946
$
14,741,439		 %
Current assets
1100
Cash and cash equivalents
1110
Current financial assets at fair
value through profit or loss
1140
Current contract assets
1150
Notes receivable, net
1170
Accounts receivable, net
1200
Other receivables
1220
Current income tax assets
130X
Inventories, net
1410
Prepayments
1470
Other current assets
11XX
Current Assets
Non-current assets
1510
Non-current financial assets at
fair value through profit or loss
1517
Non-current financial assets at
fair value through other
comprehensive income
1543
Non-current financial assets at
cost
1550
Investments accounted for
using equity method
1600
Property, plant and equipment,
net
1760
Investment property, net
1780
Intangible assets, net
1840
Deferred income tax assets
1900
Other non-current assets
15XX
Non-current assets
1XXX
Total assets		 6(1)
6(2)
6(20)
6(4)
6(4)
6(5)
6(2)
6(3)
12(4)
6(6)
6(7)
6(8)
6(9)
6(10)		 41
4
-
-
13
-
-
8
1
-
67
-
-
1
-
29
1
1
1
-
33
100

(Continued)

~3~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

(The balance sheets as of June 30, 2018 and 2017 are reviewed, not audited)

June 30,2018 December31,2017 December31,2017 June 30,2017
Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings 6(11) $ 2,150,000 13 $ 2,021,000 14 $ 2,158,000 15
2110 Short-term notes and bills 6(12)
payable 199,945 1 199,797 2 - -
2150 Notes payable 775,783 5 30,335 - - -
2170 Accounts payable 2,730,499 16 2,097,254 14 1,643,882 11
2200 Other payables 515,323 3 420,452 3 619,721 4
2230 Current income tax liabilities 43,691 - 62,053 - 44,995 -
2250 Provisions for liabilities - 6(15)
current 40,415 - 30,177 - 46,028 -
2300 Other current liabilities 255,771 2 181,824 1 621,926 4
21XX Current Liabilities 6,711,427 40 5,042,892 34 5,134,552 34
Non-current liabilities
2550 Provisions for liabilities - 6(15)
noncurrent 101,924 1 93,818 - 84,230 1
2570 Deferred income tax liabilities 426,435 2 394,939 3 411,664 3
2600 Other non-current liabilities 29,949 - 32,097 - 29,445 -
25XX Non-current liabilities 558,308 3 520,854 3 525,339 4
2XXX Total Liabilities 7,269,735 43 5,563,746 37 5,659,891 38
Equity attributable to owners of
parent
Share capital 6(16)
3110 Common stock 2,738,288 16 2,738,188 18 2,739,088 19
3140 Advance receipts for share
capital 3,070 - - - - -
Capital surplus 6(17)
3200 Capital surplus 2,259,169 13 2,256,692 15 2,112,898 14
Retained earnings 6(18)
3310 Legal reserve 1,381,094 8 1,379,754 9 1,379,754 9
3320 Special reserve 425,580 3 142,456 1 142,456 1
3350 Unappropriated retained
earnings 2,369,912 14 2,737,026 18 2,739,678 19
Other equity interest 6(19)
3400 Other equity interest ( 197,292 ) ( 1) ( 302,339) ( 2) ( 315,186) ( 2)
3500 Treasury stocks 6(16) ( 52,304 ) - ( 96,138) - ( 129,393) ( 1)
31XX Equity attributable to
owners of the parent 8,927,517 53 8,855,639 59 8,669,295 59
36XX Non-controlling interest 698,138 4 629,586 4 412,253 3
3XXX Total equity 9,625,655 57 9,485,225 63 9,081,548 62
Significant contingent liabilities 9
and unrecognised contract
commitments
Significant subsequent event
3X2X Total liabilities and equity $ 16,895,390 100 $ 15,048,971 100 $ 14,741,439 100

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

~4~

ALTEK CORPORATION AND ALTEK CORPORATION AND ALTEK CORPORATION AND ALTEK CORPORATION AND ALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of New Taiwan dollars, except (loss) earnings per share amount)
(UNAUDITED)
Three-monthperiods ended June 30 Six-month periods ended June 30
2018 2017 2018 2017
Items Notes AMOUNT % AMOUNT % AMOUNT % AMOUNT %
4000 Sales revenue 6(20) and
12(5) $ 3,455,233 100 $ 2,473,042 100 $ 5,791,546 100 $ 5,134,149 100
5000 Operating costs 6(5)(24)(25) ( 3,097,483) ( 90) ( 2,132,324) ( 86) ( 5,134,953) ( 89) ( 4,392,165) ( 86)
5900 Net operating margin
357,750		 10
340,718		 14 656,593 11
741,984		 14
Operating expenses 6(24)(25)


6100 Selling expenses (
17,597)		 -(
17,901) (		 1) ( 32,729) -(
36,571) (		 1)
6200 General and administrative
expenses (
92,095) (		 3) (
84,327) (		 3) ( 164,170) ( 3) (
175,553) (		 3)
6300 Research and development
expenses (
194,678) (		 6) (
239,235) (		 10) ( 390,369) ( 7) (
483,279) (		 9)
6450 Expected credit losses 12(2) (
1,919)		 -
-		 - ( 1,786) -
-		 -
6000 Total operating expenses (
306,289) (		 9) (
341,463) (		 14) ( 589,054) ( 10) (
695,403) (		 13)
6900 Operating profit (loss)
51,461		 1(
745)		 - 67,539 1
46,581		 1
Non-operating income and
expenses


7010 Other income 6(21)
54,873		 2
26,760		 1 90,762 2
45,113		 -
7020 Other gains and losses 6(22)
3,166		 -(
24,554) (		 1) ( 29,836) ( 1) (
51,843) (		 1)
7050 Finance costs 6(23) (
6,282)		 -(
6,656)		 - ( 12,341) -(
13,550)		 -
7000 Total non-operating
income and expenses
51,757		 2(
4,450)		 - 48,585 1(
20,280) (		 1)
7900 Profit (loss) before income tax
103,218		 3(
5,195)		 - 116,124 2
26,301		 -
7950 Income tax expense 6(26) (
19,620) (		 1) (
9,740) (		 1) ( 28,944) -(
16,106)		 -
8200 Profit (loss) for the period $
83,598		 2($
14,935) (		 1) $ 87,180 2 $
10,195		 -

(Continued)

~5~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands (Expressed in thousands of New Taiwan dollars, except of New Taiwan dollars, except of New Taiwan dollars, except of New Taiwan dollars, except (loss) earnings per share amount) (loss) earnings per share amount) (loss) earnings per share amount) (loss) earnings per share amount)
(UNAUDITED)
Three-monthperiods ended June 30 Six-monthperiods ended June 30
2018 2017 2018 2017
Items Notes
 AMOUNT % AMOUNT % AMOUNT % AMOUNT %
Other comprehensive income

Components of other
comprehensive income that will
not be reclassified to profit or
loss

8316 Unrealised gains from
financial assets measured at
fair value through other
comprehensive income ($
5,340)		 - $ - - ($ 1,260)
-		 $
-		 -
8349 Income tax related to
 6(26)
components of other
comprehensive income that
will not be reclassified to
profit or loss
-		 - - - ( 119)
-
-		 -
8310 Components of other
comprehensive income that
will not be reclassified to
profit or loss (
5,340)		 - - - ( 1,379)
-
-		 -
Components of other
comprehensive income that will
be reclassified to profit or loss

8361 Currency translation
differences of foreign
operations
150,271		 5 122,316 5 146,631 2(
372,520) (		 7)
8370 Share of other comprehensive
income of associates and joint
ventures accounted for uner
equity method
-		 - 8,676 - - -
1,520		 -
8399 Income tax relating to the
 6(26)
components of other
comprehensive income (
25,946) (		 1) ( 21,500) - ( 17,009)
-
63,699		 1
8360 Components of other
comprehensive income
(loss) that will be
reclassified to profit or loss
124,325		 4 109,492 5 129,622 2 (
307,301) (		 6)
8300 Total other comprehensive
income (loss) for the period $
118,985		 4 $ 109,492 5 $ 128,243 2 ($
307,301) (		 6)
8500 Total comprehensive income
(loss) for the period $
202,583		 6 $ 94,557 4 $ 215,423 4 ($
297,106) (		 6)
Profit (loss), attributable to:

8610 Owners of the parent
 $
56,200		 1($ 16,575) ( 1) $ 29,047 1 $
14,562		 -
8620 Non-controlling interest
27,398		 1 1,640 - 58,133 1 (
4,367)		 -
Profit (loss) for the period
 $
83,598		 2 ($ 14,935) ( 1) $ 87,180 2 $
10,195		 -
Comprehensive (loss) income
attributable to:

8710 Owners of the parent
 $
154,646		 5 $ 88,399 4 $ 146,871 3($
296,436) (		 6)
8720 Non-controlling interest
47,937		 1 6,158 - 68,552 1 (
670)		 -
Total comprehensive income
(loss) for the period $
202,583		 6 $ 94,557 4 $ 215,423 4 ($
297,106) (		 6)


6(27)









9750 Basic (loss) earnings per
share $ 0.21 ($ 0.06) $ 0.11 $ 0.05
6(27)
9850 Diluted (loss) earnings per
share $ 0.21 ($ 0.06) $ 0.11 $ 0.05

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

~6~

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars) (UNAUDITED)

Six-month period ended June 30, 2017
Balance at January 1, 2017
Profit (loss) for the period
Other comprehensive income (loss) for the period
Total comprehensive income (loss)
Appropriation of 2016 earnings
Legal reserve
Cash dividends
Share-based payment transactions
Retirement of employee restricted shares
Changes in ownership interests in subsidiaries
Non-controlling interest
Balance at June 30, 2017
Six-month period ended June 30, 2018
Balance at January 1, 2018
Effects of retrospective application
Equity at beginning of period after adjustments
Profit for the period
Other comprehensive income (loss) for the period
Total comprehensive income (loss)
Appropriation of 2017 earnings
Legal reserve
Special reserve
Cash dividends
Share-based payment transactions
Treasury stock sold to employees
Retirement of employee restricted shares
Balance at June 30, 2018		 Notes Equityattributableto owners of the parent Total
$ 8,910,710
14,562

(
310,998)
(
296,436)
-
(
215,596)
19,457
-
251,160

-
$ 8,669,295
$ 8,855,639
-
8,855,639
29,047
117,824
146,871
-
-
(
135,178)
14,432
45,753
-
$ 8,927,517		 Non-controlling
interest		 Total equity
Share c apital
Advance receipts
for share capital		 Capital surplus Retained earnings Unappropriated
retained earnings		 Otherequityinterest
Currency
translation
differences of
foreign operations
Other equity-
others
$
35,009
($
60,530)
-
-
(
310,998)
-
(
310,998)
-
-
-
-
-
-
19,457
-
1,876
-
-
-
-
($
275,989) ($
39,197)
($
283,124) ($
19,215)
-
(
23,600)
(
283,124) (
42,815)
-
-
119,203
(
1,260)
119,203
(
1,260)
-
-
-
-
-
-
-
8,292
-
-
-
2,412
($
163,921) ($
33,371)		 Treasurystocks
Common stock
$ 2,739,788
-
-
-
-
-
-
(
700)
-
-
$ 2,739,088
$ 2,738,188
-
2,738,188
-
-
-
-
-
-
1,000
-
(
900)
$ 2,738,288		 Legal reserve Special reserve Currency
translation
differences of
foreign operations
$
35,009

-
(
310,998)
(
310,998)
-
-
-
-
-
-
($
275,989)
($
283,124)
-

(
283,124)
-
119,203

119,203

-
-
-
-
-
-
($
163,921)
6(19)
6(18)
6(14)(19)
6(14)(16)(17)
(19)

6(17)(28)
6(28)
6(19)
6(19)
6(18)
6(14)(16)(17)
(19)
6(16)(17)
6(14)(16)(17)
(19)
 $
-
-
-
-
-
-
-
-
-
-
$
-
$
-
-
-
-
-
-
-
-
-
3,070
-
-
$
3,070		 $ 1,862,914
-
-
-
-
-
-
(
1,176)
251,160
-
$ 2,112,898
$ 2,256,692
-
2,256,692
-
-
-
-
-
-
2,070
1,919
(
1,512)
$ 2,259,169		 $ 1,374,374
-
-
-
5,380
-
-
-
-
-
$ 1,379,754
$ 1,379,754
-
1,379,754
-
-
-
1,340
-
-
-
-
-
$ 1,381,094		 $
142,456
-
-
-
-

-

-
-
-
-
$
142,456
$
142,456
-
142,456
-
-

-
-

283,124

-

-
-
-
$
425,580		 $
2,946,092
14,562
-

14,562

(
5,380 )
(
215,596 )
-
-
-
-
$
2,739,678

$
2,737,026

23,600
2,760,626

29,047
(
119 )
28,928
(
1,340 )
(
283,124 )
(
135,178 )
-
-
-
$
2,369,912
 ($
60,530)
-
-
-
-
-
19,457
1,876
-
-
($
39,197)
($
19,215)
(
23,600)
(
42,815)
-
(
1,260)
(
1,260)
-
-
-
8,292
-
2,412
($
33,371)		 ($
129,393)
-
-

-

-
-

-
-
-
-
($
129,393)
($
96,138)
-
(
96,138)
-
-
-
-
-
-

-
43,834
-
($
52,304)		 $
122,283
(
4,367)
3,697

(
670)
-
-

-
-
(
251,160)
541,800
$
412,253
$
629,586
-
629,586
58,133
10,419
68,552
-
-
-

-
-
-
$
698,138		 $
9,032,993
10,195
(
307,301 )
(
297,106 )
-
(
215,596 )
19,457
-
-
541,800
$
9,081,548
$
9,485,225
-
9,485,225
87,180
128,243
215,423
-
-
(
135,178 )
14,432
45,753
-
$
9,625,655

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

~7~

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation (included depreciation of investment property)

Amortisation

Expected credit losses

Reversal of for doubtful accounts

Net loss (gain) on financial assets at fair value through profit or loss
Interest expense

Interest income

Share-based payment compensation cost

Loss on disposal of investment

Gain on disposal of property, plant and equipment

Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or loss - current
Contract asset
Notes receivable
Accounts receivable
Other receivables
Inventories
Prepayments
Other current assets
Changes in operating liabilities
Notes payable
Accounts payable
Other payables
Provisions for liabilities
Other current liabilities
Other non-current liabilities
Cash (outflow) inflow generated from operations
Interest received
Interest paid
Income tax paid
Net cash flows (used in) from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at cost
Loss on disposal of investments accounted for under the equity method
Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and equipment
Increase in intangible assets

Decrease in deposits-out
Acquisition of investment property
Net cash flows (used in) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings

Proceeds from issuance of short-term notes and bills payable

Repayment of short-term notes and bills payable

Increase (decrease) in deposits-in

Employee stock options exercised
Treasury shares sold to employees
Changes in non-controlling interest

Net cash flows from financing activities
Effect of exchange rate
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period
 Notes
Six-monthperiods ended June 30
2018
2017
$
116,124 $
26,301
6(7)(8)(24)
114,831
143,901
6(9)(10)(24)
15,105
7,255
12(2)
1,786
-
12(4)
- (
538 )
(
1,355 )
1,137
6(23)
12,341
13,550
6(21)
(
56,876 ) (
33,032 )
6(14)(25)
11,073
19,457
6(22)
-
4,226
6(22)
6,529 (
39 )
(
382,488 )
82,147
(
5,820 )
-
(
664,689 )
346
(
1,081,042 )
810,224
(
10,757 )
1,173
120,668
296,199
14,709
18,515
(
3,153 ) (
4,606 )
750,712
-
615,921 (
700,770 )
(
29,605 ) (
29,552 )
18,420 (
43,808 )
73,578
415,770
90
146
(
363,898 )
1,028,002
54,102
29,766
(
11,563 ) (
13,782 )
(
40,217 ) (
51,854 )
(
361,576 )
992,132
- (
13,399 )
-
123,572
6(30)
(
17,693 ) (
72,974 )
11,253
7,698
6(30)
(
220 ) (
6,016 )
(
4,373 )
11,347
(
6,520 )
-
(
17,553 )
50,228
6(31)
129,000 (
257,000 )
6(31)
399,314
-
6(31)
(
400,000 )
-
6(31)
(
2,444 )
13,268
6,140
-
42,972
-
6(28)
-
541,800
174,982
298,068
123,601 (
259,405 )
(
80,546 )
1,081,023
6(1)
5,874,982
4,849,989
6(1)
$
5,794,436 $
5,931,012

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

~8~

ALTEK CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

(Unaudited)

1. HISTORY AND ORGANIZATION

Altek Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.). The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the development, manufacturing and sale of digital image technology application, and related export and import trade.

The Company was listed in the Taiwan Stock Exchange on December 24, 2002, as approved by the TaiTz (91) Letter No. 024976 of the former Securities and Futures Commission, Ministry of Finance, R.O.C., dated September 27, 2002.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on August 10, 2018.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

  • (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”) New standards, interpretations and amendments endorsed by the FSC effective from 2018 are as follows:
follows:
New Standards,Interpretations andAmendments Effective date by
International Accounting
StandardsBoard
Amendments to IFRS 2, ‘Classification and measurement of share-based
payment transactions’
Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with
IFRS 4 Insurance contracts’
IFRS 9, ‘Financial instruments’
IFRS 15, ‘Revenue from contracts with customers’
Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from
contracts with customers’
Amendments to IAS 7, ‘Disclosure initiative’
Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised
losses’
Amendments to IAS 40, ‘Transfers of investment property’
IFRIC 22, ‘Foreign currency transactions and advance consideration’		 January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018		 
~9~
New Standards,Interpretations andAmendments Effective date by
International Accounting
StandardsBoard
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS
1, ‘First-time adoption of International Financial Reporting Standards’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS
12, ‘Disclosure of interests in other entities’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS
28, ‘Investments in associates and joint ventures’		 January 1, 2018
January 1, 2017
January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete. A. IFRS 9, ‘Financial instruments’

  • (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

  • (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognize 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

  • B. IFRS 15, ‘Revenue from contracts with customers’

  • IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction contracts’, IAS 18 ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognized when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognizes revenue in 

~10~

accordance with that core principle by applying the following steps:

Step 1: Identify contracts with customer.

Step 2: Identify separate performance obligations in the contract(s).

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

Step 5: Recognize revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Under IFRS 15, depending on the nature of licences, they are either (1) a promise to provide a right to access to an entity’s intellectual property as it exists throughout the licence period, or (2) a promise to provide a right to use an entity’s intellectual property as it exists at the point in time when the licence is granted.

Licences that meet all of the following criteria provide access to an entity’s intellectual property, and revenue is recognized based on the performance obligation's progress towards completion:

  1. the contract requires, or the customer reasonably expects, that the entity will undertake activities that significantly affect the intellectual property to which the customer has rights;

  2. the rights granted by the licence directly expose the customer to any positive or negative effects of the entity’s activities identified above; and

  3. those activities do not result in the transfer of a good or service to the customer as those activities occur.

If licences cannot meet all criteria listed above, the entity provides a right to use the entity’s intellectual property. Revenue shall be recognized at the point in time at which the licence is granted to the customer.

When adopting the new standards endorsed by the FSC effective from 2018, the Group will apply the

new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. Further, the Group expects to adopt IFRS 15 using the modified retrospective approach. The significant effects of applying the new standards as of January 1, 2018 are provided in Note 12(4) and (5).

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows: 

~11~
New Standards,Interpretations andAmendments Effective date by
International Accounting
StandardsBoard
Amendments to IFRS 9, ‘Prepayment features with negative
compensation’
IFRS 16, ‘Leases’
Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’
Amendments to IAS 28, ‘Long-term interests in associates and joint
ventures’
IFRIC 23, ‘Uncertainty over income tax treatments’
Annual improvements to IFRSs 2015-2017 cycle		 January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the

Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
New Standards,Interpretations andAmendments Effective date by
International Accounting
StandardsBoard
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets
between an investor and its associate or joint venture’
IFRS 17, ‘Insurance contracts’		 To be determined by
International Accounting
Standards Board
January 1, 2021

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted are consistent with Note 4 in the consolidated financial statements for the year ended December 31, 2017, except for the compliance statement, basis of preparations, basis of consolidation and additional policies as set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

  • A. The consolidated financial statements of the Group have been prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and IAS 34, ‘Interim Financial Reporting’ as endorsed by the FSC. 
~12~

  • B. The consolidated financial statements should be read together with the 2017 consolidated financial statements.

  • (2) Basis of preparation

  • A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:

    • (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

    • (b) Financial assets at fair value through other comprehensive income.

    • (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation.

  • B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

  • C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognized as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 was not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. The significant accounting policies is the same as that in Note 4 of the financial statements for the year ended December 31, 2017.

(3) Basis of consolidation

  • A. Basis for preparation of consolidated financial statements:

  • Basis for preparation of consolidated financial statements is consistent with the 2017 consolidated financial statements. 

~13~

B. Subsidiaries included in the consolidated financial statements:

Name of Investor Name of Subsidiaries Main Business Activities Ownership (%) Note
June 30,2018 December 31,2017 June 30,2017
Altek Corporation
Altek International Investment Co., Ltd.
Investments and general business operations
100
"
Altek Japan Corporation
Sales of optical instruments
100
"
Altek Investment Co., Ltd.
Investments
100
"
Altek Autotronics Corporation
Research design, manufacture and sales of car electronic
components
-
"
Altek International Holding (BVI) Co.,Ltd.
Investments and general business operations
100
Altek International Investment Co., Ltd.
Altek Lab Inc.
Design service
100
"
Altek Optical (Cayman) Co., Ltd.
Investments and general business operations
100
"
Altek Semiconductor (Cayman) Co., Ltd.
Investments and general business operations
50
Note 2
Altek (Kunshan) Co., Ltd.
Manufacture and sales of digital still camera and its
accessories
100
Note 2
Altek EMS (Kunshan) Co., Ltd.
Manufacture and sales of related engineering services
100
Note 2
Altek Precision (Kunshan) Co., Ltd.
Manufacture and sales of digital camera parts
100
Note 2
Altek Trading (Shanghai) Limited
Wholesale, import and export of related electronic and their
associated accessories
100
Note 3
Altek Biotechnology Corporation
Research and development, manufacture and sales of medical
electronic equipments
100
Altek Semiconductor (Cayman) Co., Ltd.
Altek Semiconductor Corporation
Research design and sales of ASIC
100
"
Altek Semiconductor (Shanghai) Co., Ltd.
Research design and sales of imaging technologies, electronic
software and hardware
100
Note 2
Altek Optical Technology (Kunshan) Co.,
Ltd.
Manufacture and sales of related electronic services and its
accessories and optical components
100
Note 1: The Group did not participate in the subsidiary’s capital increase, thus, the share ownership was decreased.
Note 2: Invested by Leading Tech. Co., Ltd., Toptek Investment Cayman Co., Ltd., Altek Imaging Technology (Cayman) Co., Ltd., Altek Trading (Cayman) Co., Ltd.,
Altek Optical Technology (Cayman) Co., Ltd. , which are wholly owned by Altek International Investment Co., Ltd.
Note 3: Invested by Altek Biotechnology Holding (Cayman) Co., Ltd., which is wholly owned by Altek International Holding (BVI) Co., Ltd.
Note 4: It was invested by Altek Semiconductor (Cayman) Co., Ltd. and was incorporated in January 2017.
Note 5: On June 30, 2017, Altek Corporation consummated a short-form merger with Altek Autotronics Corporation and the former is the surviving company.
Note 6: As the subsidiaries do not meet the definition of significant subsidiaries, their financial statements as of June 30, 2018 were not reviewed by independent accountants
Note 7: As the subsidiaries do not meet the definition of significant subsidiaries, their financial statements as of June 30, 2017 were not reviewed by independent accountants		 100
100
100
-
100
100
100
50
100
100
100
100
100
100
100
100
.
.		 100
100
100
-
100
100
100
56.82
100
100
100
100
100
100
100
100		 -
Note 6、Note 7
Note 6、Note 7
Note 5
Note 6、Note 7
Note 6、Note 7
Note 6、Note 7
Note 1、Note 7
-
Note 6、Note 7
Note 6、Note 7
Note 6、Note 7
Note 6
Note 7
Note 4、Note 6、
Note7
Note 6、Note 7		 
~14~

  • C. Subsidiaries not included in the consolidated financial statements: None.

  • D. Adjustments for subsidiaries with different balance sheet dates: None.

  • E. Significant restrictions: None.

  • F. Subsidiaries that have non-controlling interests that are material to the Group: None.

  • (4) Financial assets at fair value through profit or loss

  • A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

  • B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using settlement date accounting.

  • C. At initial recognition, the Group measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.

  • D. The Group recognizes the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

  • (5) Financial assets at fair value through other comprehensive income

  • A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:

    • (a) The objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets; and

    • (b) The assets’ contractual cash flows represent solely payments of principal and interest.

  • B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognized and derecognized using settlement date accounting.

  • C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value: The changes in fair value of equity investments that were recognized in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

  • (6) Accounts and notes receivable

  • A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

  • B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial. 

~15~

(7) Impairment of financial assets

For debt instruments measured at fair value through other comprehensive income and financial assets at amortised cost including accounts receivable or contract assets that have a significant financing component, lease receivables, loan commitments and financial guarantee contracts, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.

  • (8) Borrowings

  • A. Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.

  • B. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

  • (9) Notes and accounts payable

  • A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

  • B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

  • (10) Employee benefits

  • Pension cost for the interim period is calculated on a year-to-date basis by using the pension cost rate derived from the actuarial valuation at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events. Also, the related information is disclosed accordingly.

(11) Income tax

  • A. The interim period income tax expense is recognized based on the estimated average annual effective income tax rate expected for the full financial year applied to the pretax income of the interim period, and the related information is disclosed accordingly.

  • B. If a change in tax rate is enacted or substantively enacted in an interim period, the Group recognizes the effect of the change immediately in the interim period in which the change occurs. The effect of the change on items recognized outside profit or loss is recognized in other 

~16~

comprehensive income or equity while the effect of the change on items recognized in profit or loss is recognized in profit or loss.

(12) Revenue recognition

  • A. Sales of goods

  • (a) The Group manufactures and sells digital image technology application products. Sales are recognized when control of the products has transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customers’ acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customers, and either the customers have accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

  • (b) Revenue from these sales is recognized based on the price specified in the contract, net of the value-added tax, sales returns, discounts and allowances.

  • (c) A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

  • B. Technical service revenue

The Group provides technical support service. Revenue from providing services is recognized in the accounting period in which the services are rendered. For fixed price contracts, revenue is recognized based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined by the percentage of completion of the service based on actual contractual progress.

  • C. Royalty income

  • (a) The Group entered into a contract with a customer to grant a licence of patented technology to the customer. Given the licence is distinct from other promised goods or services in the contract, the Group recognizes the revenue from licencing when the licence transfers to a customer either at a point in time or over time based on the nature of the licence granted. The nature of the Group’s promise in granting a licence is a promise to provide a right to access the Group’s intellectual property if the Group undertakes activities that significantly affect the patented technology to which the customer has rights, the customer is affected by the Group’s activities and those activities do not result in the transfer of a good or a service to the customer as they occur. The royalties are recognized as revenue on a straight-line basis throughout the licencing period. In case the abovementioned conditions are not met, the nature of the Group’s promise in granting a licence is a promise to provide a right to use the Group’s intellectual property and therefore the revenue is recognized when transferring the licence to a customer at a point in time. 

~17~
  • (b) Some contracts require a usage-based royalty in exchange for a licence of intellectual property. The Group recognizes revenue when the performance obligation has been satisfied and the subsequent usage occurs. The customer pays the contract price in accordance with the agreed payment schedule. When the service provided by the Group exceeds the customer's payables, it is recognized as a contract asset. If the customer pays more than the services provided by the Group, it is recognized as a contract liability.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

  • There have been no significant changes as of June 30, 2018. Please refer to Note 5 in the consolidated financial statements for the year ended December 31, 2017.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
Cash on hand
Checking accounts and demand
deposits
Time deposits
Total		 June30,2018

938
$ 251,672
5,541,826
5,794,436
$		 December31,2017
840
$
411,191
5,462,951
5,874,982
$		 June30,2017
1,140
$ 168,048
5,761,824
5,931,012
$

  • A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

  • B. The Group has no cash and cash equivalents pledged to others.

(2) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss
Items
June 30,2018
Current items:
Beneficiary certificates
964,232
$ Valuation adjustment
4,409
Total
968,641
$ Non-current items:
Unlisted stocks
16,647
$ Valuation adjustment
6,046)
(
Total
10,601
$		 December31,2017
581,745
$ 3,054
584,799
$ -
$ -
-
$		 June 30,2017
608,302
$ 2,123
610,425
$
-
$ -
-
$

  • A. The Group recognized net gain of $871 and $633 for the three-month periods ended June 30, 2018 and 2017, respectively, and net gain of $1,642 and $1,168 for the six-month periods ended June 30, 2018 and 2017, respectively.

  • B. As of June 30, 2018, December 31, 2017, and June 30, 2017, no financial assets measured at cost held by the Group were pledge to others.

  • C. Information relating to credit risk is provided in Note 12(2).

  • D. Information of financial assets at cost as of December 31, 2017 and June 30, 2017 is provided in 

~18~

Note 12(4).

(3) Financial assets at fair value through other comprehensive income

Items June30,2018
Non-current items：
Equity instruments
Unlisted stocks $ 151,560
Valuation adjustment ( 24,860)
$ 126,700

  • A. The Group has elected to classify strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $126,700 as at June 30, 2018.

  • B. The Group recognized fair value change in other comprehensive (loss) income of ($5,340) and ($1,260) for the three-month and six-month periods ended June 30, 2018, respectively.

  • C. As at June 30, 2018, no non-current financial assets at fair value through other comprehensive income held by the Group were pledged to others.

  • D. Information relating to credit risk is provided in Note 12(2).

  • E. Information of financial assets at cost as of December 31, 2017 and June 30, 2017 is provided in Note 12(4).

(4) Notes and accounts receivable

Note 12(4).
Notes and accounts receivable
June 30,2018 December31,2017 June 30,2017
Notes receivable $ 690,401 $ 30,335 $ -
Accounts receivable $ 3,430,984
 $ 2,351,116
 $ 1,939,559
Less: Allowance for uncollectible
accounts
( 9,673)
 ( 8,747)
 ( 8,842)
$ 3,421,311 $ 2,342,369 $ 1,930,717
  • A. The ageing analysis of accounts receivable that were past due but not impaired is as follows:
Not overdue
Up to 30 days
31 to 90 days
91 to 180 days
Over 181 days		 Notes
Accounts
receivable
receivable
690,401
$ 3,341,654
$ -
-
-
-
-
83,166
-
6,164
690,401
$ 3,430,984
$ June30,2018		 Notes
Accounts
receivable
receivable
30,335
$ 2,334,755
$ -
334
-
-
-
218
-
15,809
30,335
$ 2,351,116
$ December31,2017		 June30,2017 June30,2017
Notes
receivable
690,401
$ -
-
-
-
690,401
$		 Notes
receivable
30,335
$ -
-
-
-
30,335
$		 Notes
receivable
-
$ -
-
-
-
-
$		 Accounts
receivable
1,920,301
$ 2,245
174
2,060
14,779
1,939,559
$

The above ageing analysis was based on past due date.

  • B. The Group does not hold any collateral as security. 
~19~

  • C. As at June 30, 2018, December 31, 2017, and June 30, 2017, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s notes receivable were $690,401, $30,335 and $0, respectively. The maximum exposure to credit risk in respect of the amount that best represents the Group’s accounts receivable were $3,421,311, $2,342,369 and $1,930,717, respectively.

  • D. Information relating to credit risk of notes receivables and accounts receivables is provided in Note 12(2).

(5) Inventories

Note 12(2).
Inventories
Raw materials
Work-in-process
Finished goods
Total
Raw materials
Work-in-process
Finished goods
Total
Raw materials
Work-in-process
Finished goods
Total		 June 30,2018
Allowance for
Cost
valuation loss
738,169
$ 37,049)
($ 112,323
5,526)
(
260,854
9,547)
(
1,111,346
$ 52,122)
($ December31,2017		 Bookvalue
701,120
$ 106,797
251,307
1,059,224
$
Allowance for
Cost
valuation loss
737,657
$ 48,162)
($ 136,416
5,601)
(
355,434
9,818)
(
1,229,507
$ 63,581)
($ June 30,2017		 Bookvalue
689,495
$ 130,815
345,616
1,165,926
$
Allowance for
Cost
valuation loss
762,352
$ 51,487)
($ 173,101
17,103)
(
273,873
15,969)
(
1,209,326
$ 84,559)
($		 Bookvalue
710,865
$ 155,998
257,904
1,124,767
$		 
~20~

The cost of inventories recognized as expense for the periods:

(6) Investments accounted for under the equity method
For the three-month period
For the three-month period
ended June 30,2018
ended June 30,2017
Cost of goods sold
3,169,193
$ 2,145,577
$ Reversal of in market value
71,710)
(
13,253)
(
Total
3,097,483
$ 2,132,324
$ For the six-month period
For the six-month period
ended June 30,2018
ended June 30,2017
Cost of goods sold
5,241,167
$ 4,444,724
$ Reversal of in market value
106,214)
(
52,559)
(
Total
5,134,953
$ 4,392,165
$ June 30,2018
December 31,2017
June 30,2017
JinJing Optical Technology Co., Ltd.
44,028
$ 44,028
$ 44,028
$ Less: Accumulated impairment loss
44,028)
(
44,028)
(
44,028)
(
-
$ -
$ -
$

The carrying amount of the Group’s interests in all individually immaterial associates and the Group’s share of the operating results are summarized below:

As of June 30, 2018, December 31, 2017, and June 30, 2017, the carrying amount of the Group’s individually immaterial associates amounted to $0.

For the six-month period For the six-month period For the six-month period For the six-month period
ended June 30,2018 ended June 30,2017
Loss for the period from continuing ($ 23,135)
 ($ 15,909)
operations
Other comprehensive income (loss)
- net of tax ( 204) 1,676
Total comprehensive loss ($ 23,339) ($ 14,233) 
~21~

(7) Property, plant and equipment

At January 1, 2018
Cost
Accumulated depreciation
For the six-month period
ended June 30, 2018
Opening net book amount
Additions
Disposals
Reclassifications
Depreciation charge
Net exchange differences
Closing net book amount
At June 30, 2018
Cost
Accumulated depreciation		 Buildings and
Land
structures
Machinery
Test equipment
468,684
$ 3,353,156
$ 1,366,032
$ 170,311
$ -
685,644)
(
903,610)
(
158,744)
(
468,684
$ 2,667,512
$ 462,422
$ 11,567
$ 468,684
$ 2,667,512
$ 462,422
$ 11,567
$ -
810
-
1,458
-
-
17,583)
(
-
-
-
-
-
-
44,783)
(
50,000)
(
3,581)
(
-
18,986
5,486
65
468,684
$ 2,642,525
$ 400,325
$ 9,509
$ 468,684
$ 3,377,560
$ 1,244,045
$ 172,542
$ -
735,035)
(
843,720)
(
163,033)
(
468,684
$ 2,642,525
$ 400,325
$ 9,509
$		 Construction in
progress and
prepayment for
equipment
Others
Total
-
$ 533,260
$ 5,891,443
$ -
494,657)
(
2,242,655)
(
-
$ 38,603
$ 3,648,788
$ -
$ 38,603
$ 3,648,788
$ 4,494
2,597
9,359
-
199)
(
17,782)
(
-
282)
(
282)
(
-
13,058)
(
111,422)
(
-
403
24,940
4,494
$ 28,064
$ 3,553,601
$ 4,494
$ 527,035
$ 5,794,360
$ -
498,971)
(
2,240,759)
(
4,494
$ 28,064
$ 3,553,601
$		 
~22~
At January 1, 2017
Cost
Accumulated depreciation
For the six-month period
ended June 30, 2017
Opening net book amount
Additions
Disposals
Reclassifications
Depreciation charge
Net exchange differences
Closing net book amount
At June 30, 2017
Cost
Accumulated depreciation		 Buildings and
Land
structures
Machinery
Test equipment
1,042,216
$ 3,522,603
$ 1,443,305
$ 199,899
$ -
643,506)
(
840,003)
(
178,950)
(
1,042,216
$ 2,879,097
$ 603,302
$ 20,949
$ 1,042,216
$ 2,879,097
$ 603,302
$ 20,949
$ -
300
57
347
-
-
6,846)
(
184)
(
-
199,062)
(
-
-
-
43,205)
(
55,881)
(
5,723)
(
-
62,581)
(
20,912)
(
362)
(
1,042,216
$ 2,574,549
$ 519,720
$ 15,027
$ 1,042,216
$ 3,209,968
$ 1,370,225
$ 178,565
$ -
635,419)
(
850,505)
(
163,538)
(
1,042,216
$ 2,574,549
$ 519,720
$ 15,027
$		 Construction in
progress and
prepayment for
equipment
Others
Total
29,043
$ 678,217
$ 6,915,283
$ -
594,976)
(
2,257,435)
(
29,043
$ 83,241
$ 4,657,848
$ 29,043
$ 83,241
$ 4,657,848
$ 63,743
7,396
71,843
-
629)
(
7,659)
(
-
-
199,062)
(
-
38,276)
(
143,085)
(
1
2,067)
(
85,921)
(
92,787
$ 49,665
$ 4,293,964
$ 92,787
$ 584,351
$ 6,478,112
$ -
534,686)
(
2,184,148)
(
92,787
$ 49,665
$ 4,293,964
$		 Total
4,293,964
$

For the six-month periods ended June 30, 2018 and 2017, there was no capitalisation of borrowing interests attributable to the property, plant and equipment and the Group did not pledge any fixed asset as collateral. 

~23~

(8) Investment acquisition

At January 1, 2018
Cost
Accumulated depreciation
For the six-month period
ended June 30,2018
Opening net book amount
Depreciation charge
Closing net book amount
At June 30, 2018
Cost
Accumulated depreciation
At January 1, 2017
Cost
Accumulated depreciation
For the six-month period
ended June 30,2017
Opening net book amount
Reclassifications
Depreciation charge
Closing net book amount
At June 30, 2017
Cost
Accumulated depreciation		 Land
Buildings and structures
Total
573,532
$ 245,710
$ 819,242
$ -
41,874)
(
41,874)
(
573,532
$ 203,836
$ 777,368
$ 573,532
$ 203,836
$ 777,368
$ -
3,409)
(
3,409)
(
573,532
$ 200,427
$ 773,959
$ 573,532
$ 245,710
$ 819,242
$ -
45,283)
(
45,283)
(
573,532
$ 200,427
$ 773,959
$ Land
Buildings and structures
Total
-
$ -
$ -
$ -
-
-
-
$ -
$ -
$ -
$ -
$ -
$ -
199,062
199,062
-
816)
(
816)
(
-
$ 198,246
$ 198,246
$ -
$ 236,711
$ 236,711
$ -
38,465)
(
38,465)
(
-
$ 198,246
$ 198,246
$		 
~24~
  • A. Rental income from investment property and direct operating expenses arising from investment property are shown below:
roperty are shown below:
Rental income from investment
property
Direct operating expenses arising
from the investment property that
generated rental income during the
period
Direct operating expenses arising
from the investment property that
did not generate rental income
during the period
Rental income from investment
property
Direct operating expenses arising
from the investment property that
generated rental income during the
period
Direct operating expenses arising
from the investment property that
did not generate rental income
during the period		 For the three-month
period ended
June30,2018
6,528
$ 2,013
$ -
$ For the six-month
period ended
June30,2018
13,070
$ 4,109
$ -
$		 For the three-month
period ended
June30,2017
4,241
$
950
$
-
$
For the six-month
period ended
June30,2017
4,241
$
950
$
-
$

  • B. As at June 30, 2018, December 31, 2017, and June 30, 2017, the fair value of investment property held by the Group all amounted to $886,343. The fair value was valuated with a technique that is widely adopted by market participants by referring to substantiating evidence such as transaction price of similar properties.

  • C. There was no capitalisation of borrowing interests attributable to investment property.

  • D. The Group did not pledge any investment property as collateral. 

~25~

(9) Intangible assets

2018 2017
At January 1
Cost $ 165,921
 $ 129,020
Accumulated amortisation ( 44,383)
 ( 36,103)
$ 121,538 $ 92,917
For the six-month period ended June 30
Opening net book amount $ 121,538
 $ 92,917
Additions 3,035 1,444
Amortisation charge ( 14,635)
 ( 6,802)
Net exchange differences 1,583 ( 4,330)
Closing net book amount $ 111,521 $ 83,229
At June 30
Cost $ 167,680
 $ 125,258
Accumulated amortisation ( 56,159)
 ( 42,029)
$ 111,521 $ 83,229
A. Details of amortisation on intangible assets are as follows:
For the three-month For the three-month
period ended period ended
June 30,2018 June 30,2017
Operating costs $ 1,041
 $ 1,298
Operating expense 6,632 2,093
$ 7,673 $ 3,391
For the six-month For the six-month
period ended period ended
June 30,2018 June 30,2017
Operating costs $ 2,233
 $ 2,636
Operating expense 12,402 4,166
$ 14,635 $ 6,802

B. The Group has no intangible assets pledged to others.

(10) Long-term prepaid rents ( shown as ‘Other non-current assets’)

Land-use right June30,2018
33,188
$		 December31,2017
33,296
$		 June30,2017
33,283
$

The Group recognized amortisation expenses for the three-month periods ended June 30, 2018 and 2017 amounting to $237 and $224, and for the six-month periods ended June 30, 2018 and 2017 amounting to $470 and $453, respectively. 

~26~

(11) Short-term borrowings

Short-term borrowings Short-term borrowings
Short-term notes and bills payable
Type of borrowings
Bank borrowings
Unsecured borrowings
Type of borrowings
Bank borrowings
Unsecured borrowings
Type of borrowings
Bank borrowings
Unsecured borrowings		 June30,2018
Interest rate range
Collateral
2,150,000
$ 1% ~1.13%
None
December31,2017
Interest rate range
Collateral
2,021,000
$ 1% ~1.19%
None
June30,2017
Interest rate range
Collateral
2,158,000
$ 1%~1.19%
None
June 30,2018
December31,2017
June 30,2017
200,000

200,000
$ -
$ 55)

203)
(
-
199,945
199,797
$ -
$ 0.84%
0.84%
-		 Collateral
None
Collateral
None
Collateral

Commercial paper payable
$ Less: Discount on short-term
notes and bills payable
(
$ Interest rate ranges
-
$ -
$ -
$
-

(12) Short-term notes and bills payable

(13) Pensions

  • A. (a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.

  • (b) For the aforementioned pension plan, the Group recognized pension costs of $0 and $148 for the three-month periods ended June 30, 2018 and 2017, and of $96 and $151 for the six-month periods ended June 30, 2018 and 2017, respectively.

  • (c) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2019 amounts to $12. 

~27~

  • B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly and amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. For the three-month periods ended June 30, 2018 and 2017, the Group had recognized pension costs of $7,059 and $8,331, and for the six-month periods ended June 30, 2018 and 2017, the Group had recognized pension costs of $14,330 and $16,711 respectively, under the above pension scheme.

  • (b) The subsidiaries provided defined contribution plans for its employees. Pursuant to local regulations, such employees and the subsidiaries each make contributions based on a certain percentage based of the salaries and wages to the pension funds. The subsidiaries had recognized pension costs of $7,996 and $6,828 for the three-month periods ended June 30, 2018 and 2017, respectively, and of $14,423 and $13,825 for the six-month periods ended June 30, 2018 and 2017, respectively.

(14) Share-based payment

  • A. As of June 30, 2018 and 2017, the Company’s share-based payment arrangements were as follows:
follows:
Type of arrangement Grant date Quantity
granted		 Contract
period		 Vesting
conditions
Employee stock options
"
"
"
First time issuance of restricted
shares to employees
"
"
Treasury stock transferred to
employees		 June 13, 2008
October 31, 2008
October 28, 2011
March 21, 2012
November 13,
2015
March 18, 2016
May 5, 2016
March 23, 2018		 8,000
1,000
3,000
3,000
2,440
1,190
370
3,433		 9.6 years
9.2 years
9.2 years
8.9 yesrs
3 years
3 years
3 years
-		 Note 1
Note 1
Note 1
Note 1
Note 2, Note 3
Note 2, Note 3
Note 2, Note 3
Vested
immediately
  • Note 1: 2 years’ service vest 40%, 3 years’ service vest 70%, 4 years’ service vest 100%. Note 2: The restricted shares were issued at no consideration to the Company’s existing employees whose service years have reached 2 years and 3 years and who achieved the performance requirement. The vested ratio is 50% and 50%, respectively. If employees who are entitled to receive restricted stocks do not meet the vesting conditions, the Company will redeem at no consideration and retire those shares. 
~28~

  • Note 3: The stocks and dividends distributed to employees during the vesting period shall be given by the Company at no consideration. Employees are not required to return the stocks and dividends if they resign during the vesting period.

  • B. Details of the share-based payment arrangements are as follows:

  • (a) For the six-month periods ended June 30, 2018 and 2017, the information on the share options and the weighted number of average exercise price of compensation plan employee stock options are as follows:

options are as follows:
For the six-month period For the six-month period
endedJune 30,2018 endedJune 30,2017
Weighted-average Weighted-average
exercise price exercise price
No. of options (in dollars)(Note) No. of options (in dollars)(Note)
Options outstanding at
beginning of the period 2,453 $ 30.62
 5,155 $ 31.30
Option expired ( 132)
 - ( 1,512)
 -
Options exercised ( 200)
 30.70 - -
Options outstanding at end
of the period 2,121 30.62 3,643 31.30
Options exercisable at end
of the period 2,121 30.62 3,643 31.30
Approved and not yet
issued options at the end
of the period - -

  • Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.

  • (b) The weighted number of average exercise price was $27.64 of treasury stock transferred to employees for the six-month period ended June 30, 2018.

  • (c) The weighted-average stock price of stock options at exercise dates for the three-month period ended June 30, 2018 and six-month period ended June 30, 2018 was $34.43 and $33, respectively. No stock options were exercised during the three-month periods ended June 30, 2017, and six-month periods ended June 30, 2017.

  • (d) The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:

follows:
Issue date
approved		 Expirydate
December 31, 2017
December 31, 2017
December 31, 2020
December 31, 2020		 Exercise price
No. of shares
(in dollars)
(in thousands)
(Note)

- $ -
- -
1,220 30.7
901 30.5
June 30,2018		 December Exercise price
(in dollars)
(Note)
$ -
-
30.7
30.5
31,2017		 Exercise price
No. of shares
(in dollars)
(in thousands)
(Note)
1,100 $ 30.6
30 25.6
1,420 31.7
1,093 31.5
June 30,2017
No. of shares
(in thousands)
-
-
1,220
901		 No. of shares
(in thousands)
-
-
1,420
1,033		 No. of shares
(in thousands)
1,100
30
1,420
1,093
June 13, 2008
October 31, 2008
October 28, 2011
March 21, 2012		 
~29~

  • Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.

  • (e) The fair value of stock options granted is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Type of
arrangement		 Grant date Stock
price
(in dollars)		 Exercise
price
(Note)
(in dollars)		 Expected
price
volatility		 Expected
option
life		 Expected
dividends		 Risk-
free
interest
rate		 Fair value
per unit
(in
dollars)
Employee
stock options
"
"
"		 June 13, 2008
October 31, 2008
October 28, 2011
March 21, 2012		 $ 45.50
32.60
30.65
27.85		 -
$ -
30.7
30.5		 24.45%
22.11%
30.27%
33.54%		 6 years
6 years
5 years
4.9 years		 1.5%
1.5%
1.4%
1.4%		 2.40%
1.88%
1.18%
1.08%		 10.56
6.54
7.42
7.35		 
  - Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.

  • C. Restricted shares to employees:

  • (a) The information on restricted shares to employees is as follows:

For the six-month period For the six-month period For the six-month period For the six-month period
ended ended
June 30, 2018 June 30, 2017
(shareinthousands) (shareinthousands)
Shares ungranted beginning balance 3,435 3,725
Shares granted ( 1,718)
 -
Restricted shares forfeited - retired ( 90)
 ( 70)
Shares ungranted ending balance 1,627 3,655

  • (b) As of June 30, 2018, the Company collected 90 thousand shares of restricted shares because certain employees did not meet the vesting condition, and the change of registration has been completed.

  • D. Expenses incurred on share-based payment transactions are shown below:

Equity-settled
Equity-settled		 For the three-month
period ended
June 30,2018
5,221
$ For the six-month
period ended
June 30,2018
11,073
$		 For the three-month
period ended
June 30,2017
10,152
$
For the six-month
period ended
June 30,2017
19,457
$		 
~30~

(15) Provisions

At January 1, 2018
Additional provisions
Reversed during the period
Exchange differences
At June 30, 2018
Current
Non-current		 June30,2018
40,415
$ 101,924
$		 Warranty
123,995
$ 23,839
5,419)
(
76)
(
142,339
$ December31,2017
June30,2017
30,177
$ 46,028
$ 93,818
$ 84,230
$

The Group gives warranties on digital image technology application products sold. Provision for warranty is estimated based on historical warranty data of digital image technology application products.

(16) Share capital

As of June 30, 2018, the Company’s authorized capital was $5,000,000, consisting of 500,000 thousand shares of ordinary stock, and the paid-in capital was $2,738,288 with a par value of $10 (in dollars) per share.

A. Movements in the number of the Company’s ordinary shares outstanding are as follows:

(Expressed in thousands of shares)
2018 2017
At January 1 270,386 269,565
Employee stock options exercised 100 -
Treasury stock sold to employees 1,565 -
Retired restricted shares to employees that
did not meet the vesting conditions ( 90)
 ( 70)
At June 30 271,961 269,495

B. Treasury shares

(a) As of June 30, 2018, December 31, 2017, and June 30, 2017, the reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

Sharesheld by Reason for reacquisition
To be reissued to employees		 June 30, 2018
(Expressedinthousands ofshares)		 June 30, 2018
(Expressedinthousands ofshares)
Number
ofshares
1,868		 Bookvalue
Altek Corporation 52,304
$		 
~31~

December 31, 2017 (Expressed in thousands of shares)

December 31, 2017
(Expressed in thousands of shares)		 31, 2017
sands of shares)
Shares held by Reason for reacquisition
To be reissued to employees
Reason for reacquisition
Repurchase shares under
the R.O.C. Company Law
Section 186 and the
Enterprises Mergers and
Acquisitions Act Section 12
To be reissued to employees		 Number
of shares
Bookvalue
3,433
96,138
$ June 30, 2017
(Expressed in thousands of shares)		 Bookvalue
Altek Corporation
Sharesheld by		 96,138
$
Number
ofshares
981
3,433
4,414		 Bookvalue
Altek Corporation
Altek Corporation		 33,255
$ 96,138
129,393
$

  • (b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.

  • (c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

  • (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

(17) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paidin capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient. 

~32~

Difference between

Difference
between
At January 1, 2018
Employee stock options
exercised
Treasury stock sold to
employees
Employee restricted share
granted
Retirement of employee
restricted shares
At June 30, 2018		 Share
Employee
stock
consideration and
carrying amount
of subsidiaries
acquired or
premium
options
disposed
1,750,223
$ 51,476
$ 1,534
$ 2,812
742)
(
-
-
-
-
28,738
-
-
-
-
-
1,781,773
$ 50,734
$ 1,534
$		 Changes in
ownership
interests in
subsidiaries
395,774
$ -
-
-
-
395,774
$		 Proceeds
from sales
of treasury
Restricted
shares to
shares
employees
Total
209
$ 57,476
$ 2,256,692
$ -
-
2,070
1,919
-
1,919
-
28,738)
(
-
-
1,512)
(
1,512)
(
2,128
$ 27,226
$ 2,259,169
$		 Total
2,259,169
$
At January 1, 2017
Subsidiaries’ capital increase
not participated
proportionately to the original
shareholding ratio
Retirement of employee
restricted shares
At June 30, 2017		 Share
premium
1,746,566
$ -
-
1,746,566
$		 Employee
stock
options
52,729
$ -
-
52,729
$		 Difference
between
consideration and
carrying amount
of subsidiaries
acquired or
disposed
1,534
$ -
-
1,534
$		 Changes in
ownership
interests in
Restricted
shares to
subsidiaries
employees
Total
-
$ 62,085
$ 1,862,914
$ 251,160
-
251,160
-
1,176)
(
1,176)
(
251,160
$ 60,909
$ 2,112,898
$

(18) Retained earnings

  • A. According to the Company’s Articles of Incorporation, the annual earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. Special reserve shall be set aside in accordance with the rules set forth in the Securities and Exchange Act, and distributing the remaining amount as common stockholders’ dividends in accordance with the resolution adopted by the Board of Directors and approved at the stockholders’ meeting.

  • B. The amount of dividends appropriated is based on the Company’s current year’s net income and prior years’ retained earnings, taking into account the Company’s financial structure and future operating plans. The distribution ratio of cash dividends to stock dividends is based on the Company’s funding status, diluted earnings per share and other factors. According to the dividend policy adopted by the Board of Directors, cash dividends shall account for at least 20% 

~33~

of the total dividends distributed. Dividends appropriation shall be resolved by the stockholders at the stockholders’ meeting.

  • C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, 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 in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

  • D. (a) In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

  • (b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.

  • E. The appropriation of 2017 and 2016 earnings had been resolved at the stockholders’ meeting on June 15, 2018, and June 16, 2017, respectively. Details are summarized below:

Legal reserve
Special reserve
Cash dividends		 Dividends per share
Amount
(inNTdollars)
1,340
$ 283,124
135,178
0.5
$ 419,642
$ 2017		 2016 2016
Amount
1,340
$ 283,124
135,178
419,642
$		 Amount
5,380
$ -
215,596
220,976
$		 Dividends per share
(inNTdollars)
0.8
$

The appropriation of 2017 and 2016 earnings were the same as that approved by the Board of Directors on March 23,2018 and March 27, 2017, respectively.

  • F. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(25). 
~34~

(19) Other equity items

Other equity items
Foreign currency Unrealized
translation losses on Unearned
adjustment valuation compensation Total
At January 1, 2018 ($ 283,124)
 $ -
 ($ 19,215)
 ($ 302,339)
Effects of retrospective application - ( 23,600) - ( 23,600)
After adjustment ( 283,124) ( 23,600) ( 19,215) ( 325,939)
Valuation adjustment - ( 1,260)
 - ( 1,260)
Currency translation differences:
Group 119,203 - - 119,203
Retirement of restricted shares
to employees - - 2,412 2,412
Share-based payment transactions - - 8,292 8,292
At June 30, 2018 ($ 163,921) ($ 24,860) ($ 8,511) ($ 197,292)
Foreign currency Unearned
translation adjustment compensation Total
At January 1, 2017 $ 35,009
 ($ 60,530)

($		 25,521)
Currency translation differences:
Group ( 312,260)
 -
(		 312,260)
Associates 1,262 - 1,262
Retirement of restricted shares - 1,876 1,876
to employees
Share-based payment transactions - 19,457 19,457
At June 30, 2017 ($ 275,989) ($ 39,197)
($		 315,186)
Operating revenue
For the three-month For the six-month
period ended period ended
June 30, 2018 June 30,2018
Revenue from contracts with customers $ 3,455,233 5,791,546
$

(20) Operating revenue 

~35~

A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines and geographical regions:

For the three-month

For the three-month
period ended
June 30,2018
Revenue from
external customer
contracts
Timing of revenue
recognition
At a point in time
Over time
For the six-month
period ended
June 30,2018
Revenue from
external customer
contracts
Timing of revenue
recognition
At a point in time
Over time		 Asia
3,006,836
$ 3,006,836
$ -
3,006,836
$ Asia
4,940,532
$ 4,932,837
$ 7,695
4,940,532
$		 Europe
339,159
$ 339,159
$ -
339,159
$ Europe
636,288
$ 636,288
$ -
636,288
$		 America
92,130
$ 92,130
$ -
92,130
$ America
178,033
$ 178,033
$ -
178,033
$		 Taiwan
17,108
$ 17,108
$ -
17,108
$ Taiwan
36,693
$ 36,693
$ -
36,693
$		 Total
3,455,233
$
3,455,233
$ -
3,455,233
$
Total
5,791,546
$
5,783,851
$ 7,695
5,791,546
$

B. Contract assets

The Group has recognized the following revenue-related contract assets:

June 30,2018
Technical license contract $ 5,820
Allowance for uncollectible account ( 877)
Total $ 4,943
  • C. Related disclosures for 2017 operating revenue are provided in Note 12(5). 
~36~

(21) Other income

Other income
Interest income:
Interest income from bank deposits
Others
Rental revenue
Other income - others
Total
Interest income:
Interest income from bank deposits
Others
Rental revenue
Other income - others
Total		 For the three-month
period ended
June30,2018
30,940
$ 6
15,545
8,382
54,873
$ For the six-month
period ended
June30,2018
56,866
$ 10
19,991
13,895
90,762
$		 For the three-month
period ended
June30,2017
16,856
$ 15
4,241
5,648
26,760
$
For the six-month
period ended
June30,2017
33,004
$ 28
4,241
7,840
45,113
$

(22) Other gains and losses

Other gains and losses
For the three-month For the three-month
period ended period ended
June 30,2018 June 30,2017
Losses on disposal of property, plant
and equipment		 ($ 6,529)
 ($ 357)
Net currency exchange gains (losses) 12,783 ( 19,654)
Net gains on financial assets at fair value
through profit or loss 871 633
Loss on disposal of investments - ( 4,226)
Other expenses ( 3,959) ( 950)
Total $ 3,166 ($ 24,554) 
~37~
(23)
(24)		 Finance costs
Expenses by nature
(Losses) gains on disposal of property, plant
and equipment
Net currency exchange losses
Net gains on financial assets at fair value
through profit or loss
Loss on disposal of investments
Other expenses
Total
Interest expense
Interest expense
Employee benefit expenses
Depreciation charges on property, plant
and equipment
Amortisation charges on intangible assets
Total		 For the six-month
period ended
For the six-month
period ended
June 30,2018
June 30,2017
6,529)
($ 39
$ 20,913)
(
47,848)
(
1,642
1,168
-
4,226)
(
4,036)
(
976)
(
29,836)
($ 51,843)
($ For the three-month
period ended
For the three-month
period ended
June 30,2018
June 30,2017
6,282
$ 6,656
$ For the six-month
period ended
For the six-month
period ended
June 30,2018
June 30,2017
12,341
$ 13,550
$ For the three-month
period ended
For the three-month
period ended
June 30,2018
June 30,2017
333,503
$ 320,698
$ 56,862
69,851
7,673
3,391
398,038
$ 393,940
$		 
~38~
Employee benefit expenses
Employee benefit expenses
Depreciation charges on property, plant
and equipment
Amortisation charges on intangible assets
Total
Wages and salaries
Employee stock options
Labour and health insurance fees
Pension costs
Other personnel expenses
Total
Wages and salaries
Employee stock options
Labour and health insurance fees
Pension costs
Other personnel expenses
Total		 For the six-month
period ended
June30,2018
656,674
$ 114,831
14,635
786,140
$ For the three-month
period ended
June 30,2018
288,710
$ 5,221
13,417
15,055
11,100
333,503
$ For the six-month
period ended
June30,2018
566,599
$ 11,073
28,320
28,849
21,833
656,674
$		 For the six-month
period ended
June30,2017
648,695
$ 143,901
6,802
799,398
$
For the three-month
period ended
June 30,2017
269,422
$ 10,152
15,277
15,307
10,540
320,698
$
For the six-month
period ended
June30,2017
546,148
$ 19,457
31,103
30,687
21,300
648,695
$

(25) Employee benefit expenses

  • A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute compensation to the employees and pay remuneration to the directors that account for 10% to 20% and no higher than 2%, respectively, of distributable profit of the current period. If a company has accumulated deficit, earnings should be channeled to cover losses. Employees’ compensation can be distributed in the form of shares or in cash. Employees of subsidiaries that the Company holds more than 50% shareholding are entitled to receive aforementioned stock or cash.

Abovementioned distributable profit of the current period refers to the pre-tax profit before deduction of employees’ compensation and directors’ remuneration. A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributed as employees’ compensation and directors’ remuneration; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting. 

~39~

Before the establishment of the Audit Committee of the Company, the remuneration of the supervisors and the directors shall be no higher than 2% of distributable profit of the current period.

  • B. For the three-month and six-month periods ended June 30, 2018 and 2017, employees’ compensation was accrued (reversed) at $5,606, ($3,046), $5,606 and $3,649, respectively; directors’ and supervisors’ remuneration was accrued (reversed) at $747, ($407), $747 and $486, respectively. The aforementioned amounts were recognized in salary expenses.

  • C. Employees’ compensation and directors’ and supervisors’ remuneration for 2017 amounting to $3,159 and $421, respectively, as resolved at the meeting of Board of Directors were in agreement with those amounts recognized in the 2017 financial statements. Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved at the meeting of Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(26) Income tax

  • A. Income tax expense

  • (a) Components of income tax expense:

e tax
ome tax expense
Components of income tax expense:
For the three-month For the three-month
period ended period ended
June 30,2018 June 30,2017
Current tax:
Current tax on profits for the year $ 26,358
 $ 13,562
Adjustments in respect of prior years ( 16,847) ( 3,150)
Total current tax 9,511 10,412
Deferred tax:
Origination and reversal of
temporary differences 10,109 ( 672)
Impact of change in tax rate - -
Total deferred tax 10,109 ( 672)
Income tax expense $ 19,620 $ 9,740 
~40~
For the six-month For the six-month
period ended period ended
June 30,2018 June 30,2017
Current tax:
Current tax on profits for the year $ 41,081
 $ 20,529
Adjustments in respect of prior years ( 16,784) ( 3,239)
Total current tax 24,297 17,290
Deferred tax:
Origination and reversal of
temporary differences ( 58,254)
 ( 1,184)
Impact of change in tax rate 62,901 -
Total deferred tax 4,647 ( 1,184)
Income tax expense $ 28,944 $ 16,106
The income tax charged to other comprehensive income is as follows:
For the three-month For the three-month
period ended period ended
June 30,2018 June 30,2017
Translation differences of foreign operations $ 25,946
 $ 21,500
Impact of change in tax rate - -
$ 25,946 $ 21,500
For the six-month For the six-month
period ended period ended
June 30,2018 June 30,2017
Translation differences of foreign operations $ 17,009
 ($ 63,699)
Impact of change in tax rate 119 -
$ 17,128 ($ 63,699)

(b) The income tax charged to other comprehensive income is as follows:

  • B. As of June 30, 2018, the Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority.

C. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate. 

~41~

(27) Earnings (losses) per share

Earnings (losses) per share
For the three-monthperiod ended June 30, 2018
Weighted average number of
ordinary shares outstanding Earnings per share
Amount after tax (share in thousands) (in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent $ 56,200 268,666 $ 0.21
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent $ 56,200
Assumed conversion of all dilutive
potential ordinary shares
Restricted shares to employees 1,423
Employee stock option certificates 136
Treasury stock sold to employees 290
Employees’ bonus 141
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares $ 56,200 270,656 $ 0.21
For the three-monthperiod endedJune 30, 2017
Weighted average number of
ordinary shares outstanding Losses per share
Amount after tax (share in thousands) (in dollars)
Basic losses per share
Loss attributable to ordinary
shareholders of the parent ($ 16,575) 265,840 ($ 0.06)

For the three-month period ended June 30, 2017, the Group's stock options, restricted the right of new employee shares and reward employees have anti-dilution effect. Thus, no diluted losses per share is calculated. 

~42~
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent
Assumed conversion of all dilutive
potential ordinary shares
Restricted shares to employees
Employee stock option certificates
Treasury stock sold to employees
Employees’ bonus
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent
Assumed conversion of all dilutive
potential ordinary shares
Restricted shares to employees
Employees’ bonus
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares		 For the six-monthperiod endedJune30,2018 For the six-monthperiod endedJune30,2018 For the six-monthperiod endedJune30,2018
Weighted average number of
ordinary shares outstanding
Earnings per share
Amount after tax
(share in thousands)
(in dollars)
29,047
$ 268,333
0.11
$ 29,047
$ 1,662
69
237
191
29,047
$ 270,492
0.11
$ For the six-monthperiod endedJune30,2017		 Earnings per share
(in dollars)
0.11
$
0.11
$
Amount after tax
14,562
$ 14,562
$ 14,562
$		 Weighted average number of
ordinary shares outstanding
(share in thousands)
265,840
2,060
400
268,300		 Earnings per share
(in dollars)
0.05
$
0.05
$		 
~43~

(28) Transactions with non-controlling interest

Grandson Altek Semiconductor (Cayman) Co., Ltd., a second-tier subsidiary of the Group, increased capital by issuing new shares on June 9, 2017. The Group did not acquire shares proportionally to its interest. As a result, the Group decreased its share interest to 14.61%. The transaction increased non-controlling interest by $290,640 and increased the equity attributable to owners of parent by $251,160. The effect of changes in interests in Altek Semiconductor (Cayman) Co., Ltd. on the equity attributable to owners of the parent as of 2017 is shown below:

Cash
Carrying amount of non-controlling
interest
Capital surplus-Changes in ownership
interests in subsidiaries		 For the six-month period
ended June 30,2017
541,800
$ 290,640)
(
251,160
$

(29) Operating leases

The Group leased part of the Taipei office building with operating leases. Contingent rents of $6,528, $4,241, $13,070 and $4,241 were recognized for these leases in profit or loss for the three-month and six-month periods ended June 30, 2018 and 2017, respectively. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

Not more than 1 year
More than 1 year but
not more than 5 years		 June30,2018
28,921
$ 24,101
53,022
$		 December31,2017
28,921
$ 38,561
67,482
$		 June 30,2017
28,921
$ 53,021
81,942
$

The Group leases office buildings for operational needs under non-cancellable operating lease agreements. These lease terms are between 2018 and 2027. Most of the lease agreements are renewable at the market price at the end of the lease period. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

Not more than 1 year
More than 1 year but not
more than 5 years
Over 5 years		 June30,2018
3,772
$ 15,087
16,973
35,832
$		 December31,2017
3,448
$ 13,794
17,243
34,485
$		 June30,2017
3,696
$ 14,785
20,330
38,811
$		 
~44~

(30) Supplemental cash flow information

A. Investing activities with partial cash payments

For the six-month For the six-month
period ended period ended
June 30,2018 June 30,2017
Acquisitions of property, plant, and
equipment $ 9,359
 $ 71,843
Add: Property and equipment and
construction billings payable at
beginning of period 12,340 6,848
Less: Property and equipment and
construction billings payable at end
of period ( 4,006) ( 5,717)
Cash paid $ 17,693 $ 72,974
For the six-month For the six-month
period ended period ended
June 30,2018 June 30,2017
Acquisitions of intangible assets $ 3,035
 $ 1,444
Add: Payable at beginning of period 4,763 9,067
Less: Payable at end of period ( 7,578) ( 4,495)
Cash paid $ 220 $ 6,016
Financing activities with no cash flow effects
For the six-month period For the six-month period
ended June 30,2018 ended June 30,2017
Declare cash dividends $ 135,178 $ 215,596

B. Financing activities with no cash flow effects

(31) Changes in liabilities from financing activities

At January 1, 2018
Changes in cash flow from
financing activities
Impact of changes in foreign
exchange rate
Changes in other non-cash items
At June 30, 2018		 Short-term
borrowings		 Short-term
notes and
billspayable		 Guarantee
deposits
received		 Total
2,021,000
$ 129,000
-
-
2,150,000
$		 199,797
$ 686)
(
-
834
199,945
$		 23,923
$ 2,444)
(
207
-
21,686
$		 2,244,720
$ 125,870
207
834
2,371,631
$		 
~45~

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship: None.

(2) Significant transactions and balances with related parties:

No significant related party transactions.

(3) Key management compensation

No significant related party transactions.
Key management compensation
Salaries and other short-term employee benefits
Post-employment benefits
Share-based payments
Total
Salaries and other short-term employee benefits
Post-employment benefits
Share-based payments
Total		 For the three-month
period ended
June 30,2018
9,213
$ 183
1,351
10,747
$ For the six-month
period ended
June 30,2018
17,816
$ 312
3,676
21,804
$		 For the three-month
period ended
June 30,2017
6,455
$ 190
2,440
9,085
$
For the six-month
period ended
June 30,2017
13,279
$ 298
5,204
18,781
$

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT

COMMITMENTS

Contingencies

On December 22, 2015, the Company filed a civil complaint against HTC Corporation with the Taiwan Taipei District Court, alleging HTC Corporation’s default in relation to the agreed upon Manufacturing and Supply Agreement and claiming damage of USD 11,126 thousand against HTC Corporation. As of August 10, 2018, the case is still under trial.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group 

~46~

may adjust the amount of dividends, return capital or issue new shares to achieve the optimal capital structure.

(2) Financial instruments

A. Financial instruments by category

ucture.
nancial instruments
Financial instruments by category
Financial assets
Financial assets measured at fair
value through profit or loss
Financial assets at fair value
through other comprehensive
income
Financial assets at cost
Financial assets at amortised cost/
Loans and receivables
Cash and cash equivalents
Current contract assets
Notes receivable
Accounts receivable
Other accounts receivables
Guarantee deposit paid
Financial liabilities
Financial liabilities at amortised
cost
Short-term borrowings
Short-term notes and bills payable
Notes payable
Accounts payable
Other accounts payable
Guarantee deposits received		 June30,2018
979,242
$ 126,700
-
5,794,436
4,943
690,401
3,421,311
32,646
38,456
11,088,135
$ June30,2018
2,150,000
$ 199,945
775,783
2,730,499
515,323
21,686
6,393,236
$		 December31,2017
584,799
$ -
138,011
5,874,982
-
30,335
2,342,369
18,976
34,053
9,023,525
$ December31,2017
2,021,000
$ 199,797
30,335
2,097,254
420,452
23,923
4,792,761
$		 June30,2017
610,425
$ -
160,005
5,931,012
-
-
1,930,717
21,600
34,003
8,687,762
$
June30,2017
2,158,000
$ -
-
1,643,882
619,721
23,054
4,444,657
$

B. Financial risk management policies

(a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. To minimize any adverse effects on the financial performance of the Group, derivative financial instruments, such as foreign exchange forward contracts and foreign currency option contracts are used to hedge certain exchange rate risk, and interest rate swaps are used to fix variable future cash flows. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments. 

~47~

  • (b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

  • C. Significant financial risks and degrees of financial risks

  • (a) Market risk

Foreign exchange risk

  • i. The Group operates internationally and is exposed to exchange rate risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD and RMB. Exchange rate risk arises from future commercial transactions and recognized assets and liabilities.

  • ii. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Group treasury. Exchange rate risk is measured through a forecast of highly probable USD and RMB expenditures. Forward foreign exchange contracts are adopted to minimize the volatility of the exchange rate affecting cost of forecast inventory purchases.

  • iii. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies. 

~48~

iv. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

June 30, 2018

June 30,2018 June 30,2018 2018 2018
Foreign Currency
Amount
(In thousands)
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD
56,667
USD
USD:RMB
37,147
USD
Financial liabilities
Monetary items
USD:NTD
55,466
USD
USD:RMB
31,706
USD
Foreign Currency
Amount
(In thousands)
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD
82,628
USD
USD:RMB
58,286
USD
Financial liabilities
Monetary items
USD:NTD
79,594
USD
USD:RMB
48,656
USD		 Effect on
Effect on
Other
Exchange Book Value
Extent of
Profit or Comprehensive
Rate
(NTD)
Variation
(Loss)
Income(Loss)
30.460
1,726,077
$ 1%
17,261
$ -
$ 6.6166
1,131,498
1%
11,315
-
30.460
1,689,494
$ 1%
16,895)
($ -
$ 6.6166
965,765
1%
9,658)
(
-
SensitivityAnalysis
Effect on
Effect on
Other
Exchange Book Value
Extent of
Profit or Comprehensive
Rate
(NTD)
Variation
(Loss)
Income(Loss)
29.760
2,459,009
$ 1%
24,590
$ -
$ 6.5342
1,734,591
1%
17,346
-
29.760
2,368,717
$ 1%
23,687)
($ -
$ 6.5342
1,448,003
1%
14,480)
(
-
December31,2017
SensitivityAnalysis		 SensitivityAnalysis
Exchange
Rate
29.760
6.5342
29.760
6.5342		 Book Value
(NTD)
2,459,009
$ 1,734,591
2,368,717
$ 1,448,003
Effect on
Effect on
Other
Extent of
Profit or Comprehensive
Variation
(Loss)
Income(Loss)
1%
24,590
$ -
$ 1%
17,346
-
1%
23,687)
($ -
$ 1%
14,480)
(
-
-
$ -
-
$ -		 


~49~

June 30, 2017

(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD
USD:RMB
Financial liabilities
Monetary items
USD:NTD
USD:RMB		 Foreign Currency
Amount
(In thousands)
72,364
USD
67,573
USD
66,363
USD
45,914
USD		 Exchange
Rate
30.420
6.7744
30.420
6.7744		 Book Value
(NTD)
2,201,313
$ 2,055,571
2,018,762
$ 1,396,704		 Effect on
Effect on
Other
Extent of
Profit or Comprehensive
Variation
(Loss)
Income(Loss)
1%
22,013
$ -
$ 1%
20,556
-
1%
20,188)
($ -
$ 1%
13,967)
(
-
SensitivityAnalysis


  • v. Total exchange gain (loss), including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the three-month and six-month periods ended June 30, 2018 and 2017 amounted to $12,783, ($19,654), ($20,913) and ($47,848), respectively.

Price risk

The Group is exposed to price risk because of investments held by the Group. The Group sets limits to control the transaction volume and stop-loss amount to reduce its market risk.

Cash flow and fair value interest rate risk

Interest risk arises from the changes of market interest rate causing fluctuation in financial instruments’ fair value or cash received and paid in the future.

The Group raised short-term borrowings at fixed rates during the six-month periods ended June 30, 2018 and 2017, and thus had no significant cash flow interest rate risk.

  • (b) Credit risk

  • i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.

  • ii. The Group manages their credit risk taking into consideration the entire group’s concern. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings. The 

~50~

utilisation of credit limits is regularly monitored.

  • iii. The Group adopts following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition:

  • If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

  • iv. If the credit rating grade of an investment target degrades two scales, there has been a significant increase in credit risk on that instrument since initial recognition.

  • v. The Group adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.

  • vi. The Group classifies customers’ accounts receivable, contract assets and rents receivable in accordance with customer types. The Group applies the simplified approach using loss rate methodology to estimate expected credit loss under the provision matrix basis.

  • vii. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

  • (i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;

  • (ii) The disappearance of an active market for that financial asset because of financial difficulties;

  • (iii) Default or delinquency in interest or principal repayments;

  • (iv) Adverse changes in national or regional economic conditions that are expected to cause a default.

  • viii. The Group used the forecastability to adjust historical and timely information to access the default possibility of accounts receivable, contract assets and lease payments receivable. On June 30, 2018, the loss rate methodology is as follows:

At June 30,2018
Expected loss rate
Total book value
Loss allowance		 Individual A Individual B Total
0%
4,116,655
$ -
$		 100%
10,550
$ 10,550
$		 4,127,205
$ 10,550
$		 
~51~
  • ix. Movements in relation to the group applying the simplified approach to provide loss allowance for accounts receivable, contract assets and notes receivable are as follows:
At January 1_IAS 39
Adjustments under new standards
At January 1_IFRS 9
Provision for impairment
Reversal of impairment loss
Write-offs
Effect of foreign exchange
At June 30		 2018
Accounts
receivable		 Contract
assets		 Notes
receivable
8,747
$ -
8,747
3,651
2,742)
(
33)
(
50
9,673
$		 -
$ -
-
877
-
-
-
877
$		 -
$ -
-
-
-
-
-
-
$

  • x. Credit risk information of 2017 is provided in Note 12(4).

  • (c) Liquidity risk

  • i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, and compliance with internal balance sheet ratio targets.

  • ii. Surplus cash held by the operating entities over and above the balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

  • iii. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. 

~52~
Non-derivative financial liabilities:
June 30, 2018
Short-term borrowings
Short-term notes and bills payable
Notes payable
Accounts payable
Other payables
Guarantee deposits received
Non-derivative financial liabilities:
December 31, 2017
Short-term borrowings
Short-term notes and bills payable
Notes payable
Accounts payable
Other payables
Guarantee deposits received
Non-derivative financial liabilities:
June 30, 2017
Short-term borrowings
Accounts payable
Other payables
Guarantee deposits received		 Less than 1year
2,150,000
$ 199,945
775,783
2,730,499
515,323
-
Less than 1year
2,021,000
$ 199,797
30,335
2,097,254
420,452
-
Less than 1year
2,158,000
$ 1,643,882
619,721
-		 Over 1year
-
$ -
-
-
-
21,686
Over 1year
-
$ -
-
-
-
23,923
Over 1year
-
$ -
-
23,054

(3) Fair value estimation

  • A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

  • Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed beneficiary certificates, on-the-run derivative instruments with quoted market prices is included in Level 1.

  • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

  • Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in equity investment without active market is included in Level 3.

  • B. Fair value information of investment property at cost is provided in Note 6(8). 

~53~

C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities are as follows:

June 30, 2018
Assets
Recurring fair value
measurements
Financial assets at fair
value through profit
or loss
Beneficiary certificates
Unlisted stocks
Financial assets at fair
value through other
comprehensive income
Unlisted stocks
December 31, 2017
Assets
Recurring fair value
measurements
Financial assets at fair
value through profit
or loss
Beneficiary certificate
June 30, 2017
Assets
Recurring fair value
measurements
Financial assets at fair
value through profit
or loss
Beneficiary certificate		 Level 1
968,641
$ -
-
968,641
$ Level 1
584,799
$ Level 1
610,425
$		 Level 2
-
$ -
75,140
75,140
$ Level 2
-
$ Level 2
-
$		 Level3
-
$ 10,601
51,560
62,161
$ Level3
-
$ Level3
-
$		 Total
968,641
$ 10,601
126,700
1,105,942
$
Total
584,799
$
Total
610,425
$

  • D. The methods and assumptions the Group used to measure fair value are as follows:

  • (a) The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Market quoted price

Open-end fund Net asset value 

~54~

  • (b) The fair value of Level 2 financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date.

  • E. Accounting Department segment is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently calibrating valuation model, performing back-testing, updating inputs used to the valuation model and making any other necessary adjustments to the fair value. Investment property is valuated regularly by the Group’s Accounting Department segment based on the valuation methods and assumptions announced by the Financial Supervisory Commission, Securities and Futures Bureau or through outsourced appraisal performed by the external valuer.

  • F. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Financial assets at
fair value through
profit or loss
Unlisted shares
Financial assets at
fair value through
comprehensive
income
Unlisted shares		 Fair value at
June 30,2018		 Valuation
technique		 Significant
unobservableinput		 Relationship of
inputs tofairvalue
10,601
$ 51,560		 Net asset value
Net asset value		 Not applicable
Not applicable		 Not applicable
Not applicable		 
~55~

(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

  • A. Summary of significant accounting policies adopted in 2017:

  • (a) Financial assets at fair value through profit or loss

    • i. They are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

      • (i) Hybrid contracts; or

      • (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or

      • (iii)They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

    • ii. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using settlement date accounting.

    • iii. Financial liabilities at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognized in profit or loss. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets measured at cost’.

  • (b) Loans and receivables

    • Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are initially recognized at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

  • (c) Impairment of financial assets

    • i. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. 
~56~

  • ii. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:

  • (i) Significant financial difficulty of the issuer or debtor;

  • (ii) A breach of contract, such as a default or delinquency in interest or principal payments;

  • (iii) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;

  • (iv) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

  • (v) The disappearance of an active market for that financial asset because of financial difficulties;

  • (vi) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;

  • (vii) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;

  • (viii) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

  • iii. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

  • (i)Financial assets at amortised cost

    • The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. 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 recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account. 
~57~

  • (ii)Financial assets at cost

    • The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset through the use of an impairment allowance account.

  • B. The reconciliations of carrying amount of financial assets transfered from December 31, 2017, IAS 39, to January 1, 2018, IFRS 9, were as follows:

IAS 39
Transferred into and
measured at fair
value through profit
or loss
Transferred into and
measured at fair
value through other
comprehensive
income-equity
Impairment loss
adjustment
IFRS 9		 Measured at
fair value
through profit
or loss		 Measured at
fair value
through other
comprehensive
income-equity		 Measured
at cost		 Total Effects Effects
Retained
earnings		 Other
equity


$ -
10,601
-
-
10,601
$		 $ -
-
151,010
23,600)
(
127,410
$		 $ 138,011
( 10,601)
( 151,010)
23,600
-
$

$ 138,011
-
-
-
138,011
$		 $ -
-
-
23,600
23,600
$		 $ -
-
-
23,600)
(
23,600)
($

  • (a) Under IAS 39, because the equity instruments, which were classified as: financial assets at cost, amounting to $151,010, were not held for the purpose of trading, they were reclassified as "financial assets at fair value through other comprehensive income (equity instruments)", increased retained earnings and decreased other equity interest in the amount of $23,600 on initial application of IFRS 9.

  • (b) Under IAS 39, the equity instruments, which were classified as: financial assets at cost, amounting to $10,601, were reclassified as "financial assets at fair value through profit or loss (equity instruments)" under IFRS 9. 

~58~
  • C. The financial assets at cost as of June 30, 2017, and for the year ended December 31, 2017 are as follows:
follows:
Items December 31,2017 June 30,2017
Non-current items:
Unlisted stocks $ 167,657
 $ 172,601
Accumulated impairment ( 29,646)
 ( 12,596)
$ 138,011 $ 160,005

  • (a) Since to the Group’s investment stocks are not traded in active market, and have no sufficient industry information of companies similar to the investment stocks, the fair value of the investment stocks cannot be measured reliably. The Group classified those stocks as ‘financial assets measured at cost’.

  • (b) No impairment loss was recognized for the financial assets measured at cost for the threemonth and six-month periods ended June 30, 2017.

  • (c) As of June 30, 2017, and for the year ended December 31, 2017, no financial assets measured at cost held by the Group were pledged to others.

  • D. Credit risk information for 2017 are as follows:

  • (a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables.

  • (b) For the year ended December 31, 2017, no credit limits were exceeded during the reporting periods, and management does not expect any significant losses from non-performance by these counterparties.

  • (c) The credit quality of accounts receivable that were neither past due nor impaired was in the following categories based on the Group’s Credit Quality Control Policy:

Group 1
Group 2		 December31,2017
2,070,650
$ 264,105
2,334,755
$		 June 30,2017
1,854,539
$ 65,762
1,920,301
$		 
~59~

Note:

Group 1: Including domestic and foreign listed companies and their affiliated companies. Group 2: Others.

  • (d) The ageing analysis of accounts receivable that were past due but not impaired is as follows:
Up to 30 days
31 to 90 days
91 to 180 days
Over 181 days		 December31,2017
334
$ -
218
7,062
7,614
$		 June30,2017
2,245
$ 174
2,044
5,953
10,416
$

The above ageing analysis was based on past due date.

  • (e) Movements in the provision for impairment of accounts receivable are as follows:
Individualprovision
At January 1
9,477
$ Provision for impairment
538)
(
Effects of foreign
exchange
97)
(
At June 30
8,842
$		 2017

(5) Effects of initial application of IFRS 15 and information on application of IAS 11 and IAS 18 in

2017

  • A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

  • (a) Sales of goods

The Group manufactures and sells digital image technology application products. Revenue is measured at the fair value of the consideration received or receivable taking into account of value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods should be recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains either continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied. 

~60~

  • (b) Technical service revenue and royalty income

    • The Group provides and charges for technical service and royalty income. Revenue is recognised in accordance with the stage of completion of the transaction, and cost is recognised when incurred in the current period. The Group recognised losses immediately if any loss is expected to be incurred in the transaction. Revenue is recognised when the following conditions are met:

    • i. The amount of revenue can be measured reliably;

    • ii. It is probable that the economic benefits associated with the transaction will flow to the entity;

    • iii. The costs incurred or to be incurred in respect of the transaction can be measured reliably; and

    • iv. The stage of completion of the transaction at the end of the reporting period can be measured reliably.

  • B. The revenue recognised by using above accounting policies for the six-month period ended June 30, 2017 are as follows:

30, 2017 are as follows:
Sales revenue
Service revenue
Other		 Three-month period ended
June 30,2017		 Six-month period ended
June 30,2017
2,403,302
$ 11,686
58,054
2,473,042
$		 4,980,872
$ 59,468
93,809
5,134,149
$
  • C. The effects and description of current balance sheets and comprehensive income statements if the Group continues adopting the above accounting policies are as follows:
Balance sheetitems Description June 30,2018
Balance by using
IFRS15		 Balance by using
previous
accounting
policies		 Effects from
chages in
accounting policy
Accounts receivable
Contract assets		 Note
Note		 3,421,311
4,943		 3,426,254
-		 ( 4,943)
4,943

Note ： In accordance with IFRS 15, contract assets related to technology license agreement are presented as accounts receivable using previous accounting policies.

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

  • A. Loans to others: None.

  • B. Provision of endorsements and guarantees to others: None. 

~61~

  • C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) : Please refer to table 1.

  • D. Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or 20% of the Company’s paid-in capital: None.

  • E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

  • F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

  • G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 2.

  • H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 3.

  • I. Trading in derivative financial instruments undertaken during the reporting periods: None.

  • J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

  • (2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 5.

(3) Information on investments in Mainland China

  • A. The related information of investments in Mainland China: Please refer to table 6.

  • B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area:

For the significant purchases, sales, accounts payable and accounts receivable transactions between the Company and the investee companies in Mainland China through its subsidiaries, please refer to tables 2 and 4.

14. SEGMENT INFORMATION

(1) General information

The Group mainly operates in one segment. The Chief Operating Decision-Maker reviews the Group’s reporting to assess performance and allocate resources. The Group mainly has a single reportable segment.

(2) Measurement of segment information

  • The Group has a single reportable segment. The revenue from external customers, the related gain or loss, and the assets correspond with the consolidated revenue, consolidated operating income, and consolidated assets.

(3) Information about segment profit or loss, assets and liabilities

None. 

~62~

Altek Corporation and subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

June 30, 2018

June 30, 2018
Table 1
Securities held by		 Marketable securities Relationship with the
securities issuer		 General
ledger account		 As ofJune 30,2018
Expressed in thousands of NTD
(Except as otherwise indicated)
Number of shares Bookvalue Ownership (%) Fairvalue
Altek Corporation
"
"
Altek (Kunshan) Co., Ltd.
"
Altek Investment Co., Ltd.
Altek Semiconductor
Corporation
Altek Biotechnology
Corporation		 Gianta Co., Ltd. - Common stock
Yung Li Investments Inc. - Common
stock
Hua-chuang Automobile Information
Technical Center Co., Ltd. - Common
stock
Guangdong Kingding Optical Technology
Co., Ltd.
CPEC Huachuang Private Equity
(Kunshan) Enterprise (Limited
Partnership)
Money Market Fund
Money Market Fund
Money Market Fund		 Director
None
None
None
None
None
None
None		 Financial assets at fair value
through profit or loss
- non-current
"
Financial assets measured at
fair value through other
comprehensive income
- non-current
"
"
Financial assets at fair value
through profit or
loss-current
"
"		 762,876
633,483
10,000,000
1,200,000
N/A
2,481,426
5,066,411
40,280,832		 10,312
$ 289
75,140
5,524
46,036
39,885
186,063
742,693		 14.55%
4.84%
2.00%
6.45%
(Note)
N/A
N/A
N/A		 10,312
$ 289
75,140
5,524
46,036
39,885
186,063
742,693

Note : 1% of CPEC Huachuang Private Equity (Kunshan) Enterprise (Limited Partnership)’s capital contribution.

Table 1, Page 1

Altek Corporation and subsidiaries

Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more

For the six-month period ended June 30, 2018

Table 2

Expressed in thousands of NTD

(Except as otherwise indicated)

Purchaser/seller Counterparty Relationship with the
counterparty		 Transaction Transaction Differences in transaction terms
compared to third party
transactions		 Differences in transaction terms
compared to third party
transactions		 Notes/accounts
receivable(payable)		 Notes/accounts
receivable(payable)
Purchases
(sales)		 Amount Percentage of
total purchases
(sales)		 Credit term Unitprice Credit term Balance Percentage of
total notes/accounts
receivable(payable)
Altek Corporation
Altek International
Investment Co.,
Ltd.
Altek Semiconductor
Corporation
Altek Biotechnology
Corporation
Altek Trading (Shanghai)
Limited
Altek Semiconductor
(Shanghai) CO., Ltd.		 Altek International
Investment Co., Ltd.
Altek (Kunshan) Co., Ltd.
Altek International
Investment Co., Ltd.
"
Altek (Kunshan) Co., Ltd.
"		 Parent and affiliated
company
"
"
The same ultimate
parent company
"
"		 Purchases
Purchases
Purchases
Purchases
Purchases
Purchases		 1,536,096
$ 2,327,158
193,100
433,086
271,184
2,054,304		 100%
100%
84%
100%
84%
100%		 Net 120 days
Net 75 days
"
"
"
"		 Approximately
the same price
with third
parties
"
"
"
"
"		 Note
"
"
"
"
"		 1,226,620)
($ 858,696)
(
143,760)
(
295,609)
(
196,005)
(
2,431,089)
(		 99%
98%
85%
98%
85%
100%

Note: The payment term with third parties was net 60~120 days.

Table 2, Page 1

Altek Corporation and subsidiaries

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

June 30, 2018

June 30, 2018
Table 3
Creditor		 Counterparty Relationship
with the counterparty		 Balance as atJune30,2018 Turnover rate Overdue receivables Amount collected
subsequent to the
balance sheet date
Allowance for
doubtful accounts
Expressed in thousands of NTD
(Except as otherwise indicated)
Amount Action taken
Altek International
Investment Co., Ltd.
"
"
Altek (Kunshan) Co., Ltd.
"
"		 Altek Corporation
Altek Semiconductor
Corporation
Altek Biotechnology
Corporation
Alteck International Investment
Co., Ltd.
Altek Trading (Shanghai)
Limited
Altek Semiconductor
(Shanghai) Co., Ltd.		 Parent company
Parent company
The same ultimate
parent company
Parent company
The same ultimate
parent company
The same ultimate
parent company		 1,226,620
$ 143,760
295,609
858,696
196,005
2,431,089		 2.70
2.42
3.15
5.12
3.90
3.77		 -
$ -
-
-
-
-		 N/A
N/A
N/A
N/A
N/A
N/A		 246,865
$ -
93,743
463,068
103,519
185,057		 -
$ -
-
-
-
-

Table 3, Page 1

Altek Corporation and subsidiaries

Significant inter-company transactions during the reporting periods

For the six-month period ended June 30, 2018

Table 4

Expressed in thousands of NTD

(Except as otherwise indicated)

Transaction

Transaction
Companyname Counterparty Relationship
(Note 1)		 General ledger account Amount Transaction terms Percentage of consolidated total operating
revenues or total assets(Note 2)
Altek Corporation
"
Altek International Investment Co., Ltd.
"
Altek Semiconductor Corporation
"
"
"
"
"
Altek Biotechnology Corporation
"
Altek (Kunshan) Co., Ltd.
Altek Trading (Shanghai) Limited
"
"
"
Altek Semiconductor (Shanghai) Co., Ltd.
"		 Altek International Investment Co., Ltd.
"
Altek (Kunshan) Co., Ltd.
"
Altek International Investment Co., Ltd.
"
"
"
Altek Semiconductor (Shanghai) Co., Ltd.
"
Altek International Investment Co., Ltd.
"
"
"
"
Altek (Kunshan) Co., Ltd.
"
"
"		 (1)
(1)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)
(3)		 Purchases
Accounts payable
Purchases
Accounts payable
Purchases
Accounts payable
Sales
Accounts receivable
Royalty income
Other receivables
Purchases
Accounts payable
Purchases
Purchases
Accounts payable
Purchases
Accounts payable
Purchases
Notes/accounts payable		 1,536,096
$ 1,226,620
2,327,158
858,696
193,100
143,760
31,824
18,195
156,501
143,854
433,086
295,609
33,267
50,980
35,186
271,184
196,005
2,054,304
2,431,089		 Net 120 days
"
Net 75 days
"
"
"
"
"
"
"
"
"
"
"
"
"
"
"
"		 27%
7%
40%
5%
3%
1%
1%
0%
3%
1%
7%
2%
1%
1%
0%
5%
1%
35%
14%

Note 1: Relationship between transaction and counterparty is classified into the following categories:

  • (1) Parent company to subsidiary.

  • (2) Subsidiary to parent company.

(3) Subsidiary to subsidiary.

Note 2: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 3: The Company may decide to disclose or not to disclose transaction details in this table based on the Materiality Principle.

Table 4, Page 1

Altek Corporation and subsidiaries

Information on investees

For the six-month period ended June 30, 2018

Table 5
Investor		 Investee Location Main business activities Initial invest ment amount Shares held as at June 30,2018 held as at June 30,2018 Net profit (loss) of
the investee for the
six-month period
ended June 30,2018		 Investment income(loss)
recognised by the Company
for the six-month period
ended June 30,2018
Expressed in thousands of NTD
(Except as otherwise indicated)
Balance
as at June 30,2018		 Balance
as at December 31,
2017		 Number of shares Ownership (%) Book value
Altek Corporation
"
"
"
Altek International
Investment Co., Ltd.
"
"
Altek Semiconductor
(Cayman) Co., Ltd.
Altek Biotechnology
Holding (Cayman)
Co., Ltd.		 Altek International
Investment Co., Ltd.
Altek Japan Corporation
Altek Investment Co.,
Ltd.
Altek International
Holding (BVI) Co, Ltd.
Altek Lab Inc.
JinJing Optical
Technology Co., ltd.
Altek Semiconductor
(Cayman) Co., Ltd.
Altek Semiconductor
Corporation
Altek Biotechnology
Corporation		 British Virgin
Islands
Japan
Republic of China
British Virgin
Islands
U.S.A.
Samoa
Cayman Islands
Republic of China
Republic of China		 Investment and general business
operations
Sale of optical optical instruments
Investment
Investment and general business
operations
Design service
Investment and general business
operations
Investment and general business
operations
Research design and sales of ASIC
Research and development,
manufacture and sales of
medical electronic equipments		 2,910,046
$ 2,869
50,000
415,376
112,085
106,610
187,245
200,000
415,376		 2,910,046
$ 2,869
50,000
415,376
112,085
106,610
187,245
200,000
415,376		 88,662,059
1,000
5,000,000
12,865,921
11,311,875
3,500,000
20,000,000
20,000,000
40,100,000		 100%
100%
100%
100%
100%
23.33%
50%
100%
100%		 9,095,366
$ 11,390
39,957
546,601
59,886
-
696,045
288,679
460,456		 46,492
$ 3
64
49,884
95)
(
23,135)
(
116,266
54,111
49,884		 46,492
$ 3
64
49,884
126)
(
-
58,133
27,055
49,884

Table 5, Page 1

Altek Corporation and subsidiaries

Information on investments in Mainland China For the six-month period ended June 30, 2018

Table 6

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland
China		 Main business activities Paid-in capital Investment
method
（Note 1）		 Accumulated amount
of remittance from
Taiwan to Mainland
China as of
January1,2018		 Amount remitte
Mainland C
remitted back
the six-mont
June 3		 d from Taiwan to
hina/Amount
to Taiwan for
h period ended
0,2018		 Accumulated amount
of remittance from
Taiwan toMainland
China as of
June 30,2018		 Net profit (loss) of investee for
the six-month period
ended June 30,2018		 Ownership held by
the Company
(direct or indirect)		 Investment income
(loss) recognised
by the Company
for the six-month period
ended June 30,2018		 Book value of
investments in
Mainland China as of
June 30,2018		 Accumulated amount
of investment income
remitted back to
Taiwan as of June 30,
2018
Remitted to Mainland China Remitted back to Taiwan
Altek (Kunshan) Co.,
Ltd. (Note 2)
Altek EMS (Kunshan)
Co., Ltd. (Note 3)
Altek Trading
(Shanghai) Limited
Kinko Optical (Suzhou)
Co., Ltd.
Altek Precision
(Kunshan) Co., Ltd.
Altek Optical
Technology
(Kunshan)
Co., Ltd.
Altek Semiconductor
(Shanghai) Co., Ltd.
Note 1: Investment metho
(1)Directly invest
(2)Through invest
(3)Others.
Note 2: Including retaine
Note 3: Including retaine		 Manufacture and sale of digital
still cameras and its accessories
Manufacture and sale of related
engineering services
Wholesale, import and export of
digital cameras, digital video
cameras and their
associated accessories
Manufacture and sale of
optical components
Design, manufacture and sales of
digital camera parts
Manufacture and sales of
digital camera and its
accessories and
optical components
Research design and sales of
imaging technologies,
electronic software and
hardware
ds are classified into the following
in a company in Mainland China.
ing in an existing company in the t
d earnings capitalized of US$4,600
d earnings capitalized of US$3,600		 1,510,816
$ 152,300
258,910
456,900
420,348
341,152
45,690
three categories; fil
hird area,which then
(In thousand of US
(In thousand of US		 2
2
2
2
2
2
2
l in the numbe
investeed in t
dollars).
dollars).		 1,370,700
$ 276,668
258,910
106,610
420,348
341,152
-
r of category each case belongs to
he investee in Mainland China.		 -
$ -
-
-
-
-
-
:		 -
$ -
-
-
-
-
-		 1,370,700
$ 276,668
258,910
106,610
420,348
341,152
-		 66,883
$ 8,180
5,878
( 20,111)
1,145
( 2,456)
54,057		 100%
100%
100%
23.33%
100%
100%
50%		 66,883
$ 8,180
5,878
-
1,145
( 2,456)
27,028		 4,069,253
$ 778,093
310,111
-
152,924
10,276
94,065		 -
$ -
-
-
-
-
-
Companyname Accumulated amount of remittance from Taiwan to
Mainland China as of June 30,2018		 Investment amount approved by the Investment
Commission of the Ministryof Economic Affairs(MOEA)		 Ceiling on investments in Mainland China imposed
bythe Investment Commission of MOEA
Altek Corporation 2,774,388
$		 2,983,374
$		 -
$

Note:According to “REGULATIONS GOVERNING THE APPROVAL OF INVESTMENT OR TECHNICAL IN MAINLAND CHINA”on August 29, 2008, Altek Corporation obtained the approval

from the Industrial Development Bureau of Ministry of Economics Affairs issued to Headquarters, so there is no need to compute the ceiling amount of the Company.

Table 6, Page 1

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