Altek - Interim / Quarterly Report 2018

ALTEK CORPORATION AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

SEPTEMBER 30, 2018 AND 2017

REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 18000113 (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 September 30, 2018 and 2017, and the related consolidated statements of comprehensive income for the three-month and nine-month periods then ended, as well as the consolidated statements of changes in equity and of cash flows for the nine-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 insignificant consolidated subsidiaries were not reviewed by independent accountants. Those statements reflect total assets of $5,898,888 and $4,138,671, constituting 34% and 28% of the consolidated total assets, and total liabilities of $317,181 and $355,857, constituting 4% and 6% of the consolidated total liabilities as of September 30, 2018 and 2017, respectively, and total comprehensive income of $9,868, $40,372, $109,215 and $108,247,

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constituting 4%, 15%, 20% and 11% of the absolute values of the consolidated total comprehensive income for the three-month and nine-month periods then ended.

As described in Note 6(6) to the consolidated financial statements, the financial statements of investments accounted for under the equity method were not reviewed by independent accountants. Equity method investments in these investee companies had book values both amounting to $0 as of September 30, 2018 and 2017, and the related investment income both amounted to $0 for the threemonth and nine-month periods then ended. These amounts were based solely on their unreviewed financial statements.

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 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 September 30, 2018 and 2017, and of its consolidated financial performance and its consolidated cash flows for the nine-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

November 9, 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.

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

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

Assets	Notes	September30,2018 AMOUNT % `$` `5,809,297` `34` `771,017` `4` `1,733,389` `10` `3,089,810` `18` `38,263` `-` `1,172` `-` `1,049,008` `6` `126,902` `1` `10,500` `-` `12,629,358` `73` `10,601` `-` `112,668` `1` `-` `-` `-` `-` `3,406,993` `20` `772,255` `4` `105,746` `1` `132,039` `1` `70,164` `-` `4,610,466` `27` `$` `17,239,824` `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`	September30,2017	September30,2017
		AMOUNT `$` `5,809,297` `771,017` `1,733,389` `3,089,810` `38,263` `1,172` `1,049,008` `126,902` `10,500` `12,629,358` `10,601` `112,668` `-` `-` `3,406,993` `772,255` `105,746` `132,039` `70,164` `4,610,466` `$` `17,239,824`	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 `$` `5,757,845` `862,137` `-` `2,143,345` `19,045` `6,418` `1,141,366` `165,726` `23,579` `10,119,461` `-` `-` `158,019` `-` `4,279,724` `205,541` `79,864` `96,581` `65,562` `4,885,291` `$` `15,004,752`	%
Current assets 1100 Cash and cash equivalents 1110 Current financial assets at fair value through profit or loss 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(4) 6(4) 6(5) 6(2) 6(3) 12(4) 6(6) 6(7) 6(8) 6(9) 6(10)				`38` `6` `-` `14` `-` `-` `8` `1` `-`
					`67`
					`-` `-` `1` `-` `29` `1` `1` `1` `-`
					`33`
					`100`

(Continued)

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

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

					September30,2018	September30,2018			December31,2017	December31,2017			September30,2017	September30,2017
	Liabilities and Equity	Notes			AMOUNT	%			AMOUNT	%			AMOUNT	%
	Current liabilities
2100	Short-term borrowings	6(11)		`$`	`1,645,000`	`10`		`$`	`2,021,000`	`14`		`$`	`2,366,000`	`16`
2110	Short-term notes and bills	6(12)
	payable				`199,814`		`1`		`199,797`		`2`		`-`		`-`
2150	Notes payable				`1,204,945`		`7`		`30,335`		`-`		`-`		`-`
2170	Accounts payable				`2,707,842`	`16`			`2,097,254`	`14`			`1,874,940`	`13`
2200	Other payables				`393,402`		`2`		`420,452`		`3`		`427,830`		`3`
2230	Current income tax liabilities				`47,211`		`-`		`62,053`		`-`		`58,194`		`-`
2250	Provisions for liabilities -	6(16)
	current				`36,107`		`-`		`30,177`		`-`		`49,642`		`-`
2300	Other current liabilities				`228,115`		`1`		`181,824`		`1`		`194,985`		`1`
21XX	Current Liabilities				`6,462,436`	`37`			`5,042,892`	`34`			`4,971,591`	`33`
	Non-current liabilities
2540	Long-term borrowings	6(13)			`600,000`		`3`		`-`		`-`		`-`		`-`
2550	Provisions for liabilities -	6(16)
	noncurrent				`107,907`		`1`		`93,818`		`-`		`88,436`		`1`
2570	Deferred income tax liabilities				`446,294`		`3`		`394,939`		`3`		`416,571`		`3`
2600	Other non-current liabilities				`28,614`		`-`		`32,097`		`-`		`30,370`		`-`
25XX	Non-current liabilities				`1,182,815`		`7`		`520,854`		`3`		`535,377`		`4`
2XXX	Total Liabilities				`7,645,251`	`44`			`5,563,746`	`37`			`5,506,968`	`37`
	Equity attributable to owners of
	parent
	Share capital	6(17)
3110	Common stock				`2,740,488`	`16`			`2,738,188`	`18`			`2,738,688`	`19`
	Capital surplus	6(18)
3200	Capital surplus				`2,263,050`	`13`			`2,256,692`	`15`			`2,231,150`	`15`
	Retained earnings	6(19)
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				`2,449,927`	`14`			`2,737,026`	`18`			`2,729,293`	`18`
	Other equity interest	6(20)
3400	Other equity interest		`(`		`355,698 ) (`		`2) (`		`302,339) (`		`2) (`		`256,434) (`		`2)`
3500	Treasury stocks	6(17)			`-`		`- (`		`96,138)`		`- (`		`129,393) (`		`1)`
31XX	Equity attributable to
	owners of the parent				`8,904,441`	`52`			`8,855,639`	`59`			`8,835,514`	`59`
36XX	Non-controlling interest				`690,132`		`4`		`629,586`		`4`		`662,270`		`4`
3XXX	Total equity				`9,594,573`	`56`			`9,485,225`	`63`			`9,497,784`	`63`
	Significant contingent liabilities	9
	and unrecognised contract
	commitments
3X2X	Total liabilities and equity			`$`	`17,239,824`	`100`		`$`	`15,048,971`	`100`		`$`	`15,004,752`	`100`

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

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	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 September30							Nine-monthperiods ended September30
				2018			2017				2018			2017
	Items	Notes		AMOUNT	%	AMOUNT		%			AMOUNT	%		AMOUNT	%
4000	Sales revenue	6(21) and
		12(5)	`$`	`3,086,368`	`100`	`$`	`2,634,947`	`100`		`$`	`8,877,914`	`100`	`$`	`7,769,096`	`100`
5000	Operating costs	6(5)(25)(26)	`(`	`2,711,453) (`	`88) (`		`2,307,783) (`		`88) (`		`7,846,406) (`	`88) (`		`6,699,948) (`	`86 )`
5900	Net operating margin			`374,915`	`12`		`327,164`		`12`		`1,031,508`	`12`		`1,069,148`	`14`
	Operating expenses	6(25)(26)
6100	Selling expenses		`(`	`15,848)`	`- (`		`16,509)`		`- (`		`48,577) (`	`1) (`		`53,080) (`		`1 )`
6200	General and administrative
	expenses		`(`	`86,836) (`	`3) (`		`81,155) (`		`3) (`		`251,006) (`	`3) (`		`256,708) (`		`3 )`
6300	Research and development
	expenses		`(`	`219,589) (`	`7) (`		`204,902) (`		`8) (`		`609,958) (`	`7) (`		`688,181) (`		`9 )`
6450	Expected credit losses	12(2)	`(`	`26)`	`-`		`-`		`- (`		`1,812)`	`-`		`-`		`-`
6000	Total operating expenses		`(`	`322,299) (`	`10) (`		`302,566) (`		`11) (`		`911,353) (`	`11) (`		`997,969) (`	`13 )`
6900	Operating profit			`52,616`	`2`		`24,598`		`1`		`120,155`	`1`		`71,179`		`1`
	Non-operating income and
	expenses
7010	Other income	6(22)		`43,835`	`1`		`34,047`		`1`		`134,597`	`2`		`79,160`		`1`
7020	Other gains and losses	6(23)		`32,428`	`1 (`		`34,202) (`		`1)`		`2,592`	`- (`		`86,045) (`		`1 )`
7050	Finance costs	6(24)	`(`	`6,408)`	`- (`		`6,257)`		`- (`		`18,749)`	`- (`		`19,807)`		`-`
7000	Total non-operating
	income and expenses			`69,855`	`2 (`		`6,412)`		`-`		`118,440`	`2 (`		`26,692)`		`-`
7900	Profit before income tax			`122,471`	`4`		`18,186`		`1`		`238,595`	`3`		`44,487`		`1`
7950	Income tax expense	6(27)	`(`	`39,772) (`	`1) (`		`23,850) (`		`1) (`		`68,716) (`	`1) (`		`39,956) (`		`1 )`
8200	Profit (loss) for the period		`$`	`82,699`	`3 ($`		`5,664)`		`-`	`$`	`169,879`	`2`	`$`	`4,531`		`-`

(Continued)

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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 September	Three- monthperiods ended September	Three- monthperiods ended September	30		Nine-month	periods ended September30	periods ended September30	periods ended September30	periods ended September30
					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		`($`		`12,169) (`	`1) $`	`-`	`- ($`		`13,429)`	`-`	`$`	`-`	`-`
8349	Income tax related to	6(27)
	components of other
	comprehensive income that
	will not be reclassified to
	profit or loss		`(`		`726)`	`-`	`-`	`- (`		`845)`	`-`		`-`	`-`
8310	Components of other
	comprehensive income that
	will not be reclassified to
	profit or loss		`(`		`12,895) (`	`1)`	`-`	`- (`		`14,274)`	`-`		`-`	`-`
	Components of other
	comprehensive income that will
	be reclassified to profit or loss
8361	Currency translation
	differences of foreign
	operations		`(`		`187,229) (`	`6)`	`54,089`	`2 (`		`40,598)`	`- (`		`318,431) (`	`4 )`
8370	Share of other comprehensive
	income of associates and joint
	ventures accounted for uner
	equity method				`-`	`-`	`-`	`-`		`-`	`-`		`1,520`	`-`
8399	Income tax relating to the	6(27)
	components of other
	comprehensive income				`37,309`	`1 (`	`9,722)`	`-`		`20,300`	`-`		`53,977`	`1`
8360	Components of other
	comprehensive income
	(loss) that will be
	reclassified to profit or loss		`(`		`149,920) (`	`5)`	`44,367`	`2 (`		`20,298)`	`- (`		`262,934) (`	`3 )`
8300	Total other comprehensive
	income (loss) for the period		`($`		`162,815) (`	`6) $`	`44,367`	`2 ($`		`34,572)`	`- ($`		`262,934) (`	`3 )`
8500	Total comprehensive income
	(loss) for the period		`($`		`80,116) (`	`3) $`	`38,703`	`2`	`$`	`135,307`	`2 ($`		`258,403) (`	`3 )`
	Profit (loss), attributable to:
8610	Owners of the parent			`$`	`80,015`	`3 ($`	`10,385)`	`-`	`$`	`109,062`	`1`	`$`	`4,177`	`-`
8620	Non-controlling interest				`2,684`	`-`	`4,721`	`-`		`60,817`	`1`		`354`	`-`
	Profit (loss) for the period			`$`	`82,699`	`3 ($`	`5,664)`	`-`	`$`	`169,879`	`2`	`$`	`4,531`	`-`
	Comprehensive (loss) income
	attributable to:
8710	Owners of the parent		`($`		`82,117) (`	`3) $`	`37,077`	`2`	`$`	`64,754`	`1 ($`		`259,359) (`	`3 )`
8720	Non-controlling interest				`2,001`	`-`	`1,626`	`-`		`70,553`	`1`		`956`	`-`
	Total comprehensive income
	(loss) for the period		`($`		`80,116) (`	`3) $`	`38,703`	`2`	`$`	`135,307`	`2 ($`		`258,403) (`	`3 )`
		6(28)
9750	Basic (loss) earnings per
	share			`$`		`0.29 ($`		`0.04)`	`$`		`0.40`	`$`		`0.02`
		6(28)
9850	Diluted (loss) earnings per
	share			`$`		`0.29 ($`		`0.04)`	`$`		`0.40`	`$`		`0.02`

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

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ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars)

(UNAUDITED)

Notes				Equityatt	butableto owners of t	he parent	he parent		Non-controlling interest	Total equity
	Common stock	Capital surplus		Retained earnings	Unappropriated retained earnings	Otherequityinterest		Treasurystocks `($` `129,393)` `-` `-` `-` `-` `-` `-` `-` `-` `-` `($` `129,393)` `($` `96,138)` `-` `(` `96,138)` `-` `-` `-` `-` `-` `-` `-` `96,138` `-` `-` `$` `-`
			Legal reserve	Special reserve		Currency translation differences of foreign operations `$` `35,009` `-` `(` `263,536)` `(` `263,536)` `-` `-` `-` `-` `-` `-` `($` `228,527)` `($` `283,124)` `-` `(` `283,124)` `-` `(` `30,034)` `(` `30,034)` `-` `-` `-` `-` `-` `-` `-` `($` `313,158)`	Other equity- others
6(20) 6(19) 6(15)(17)(18)(20) 6(15)(17)(18)(20) 6(18)(29) 6(29) 6(20) 6(20) 6(19) 6(15)(17)(18)(20) 6(17)(18) 6(15)(17)(18)(20)	`$ 2,739,788` `-` `-` `-` `-` `-` `1,300` `(` `2,400)` `-` `-` `$ 2,738,688` `$ 2,738,188` `-` `2,738,188` `-` `-` `-` `-` `-` `-` `3,200` `-` `(` `900)` `-` `$ 2,740,488`	`$ 1,862,914` `-` `-` `-` `-` `-` `2,404` `(` `3,957)` `369,789` `-` `$ 2,231,150` `$ 2,256,692` `-` `2,256,692` `-` `-` `-` `-` `-` `-` `6,624` `1,246` `(` `1,512)` `-` `$ 2,263,050`	`$ 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`	`$` `2,946,092` `4,177` `-` `4,177` `(` `5,380` `)` `(` `215,596` `)` `-` `-` `-` `-` `$` `2,729,293` `$` `2,737,026` `23,600` `2,760,626` `109,062` `(` `119` `)` `108,943` `(` `1,340` `)` `(` `283,124` `)` `(` `135,178` `)` `-` `-` `-` `-` `$` `2,449,927`		`($` `60,530)` `-` `-` `-` `-` `-` `26,266` `6,357` `-` `-` `($` `27,907)` `($` `19,215)` `(` `23,600)` `(` `42,815)` `-` `(` `14,155)` `(` `14,155)` `-` `-` `-` `12,018` `-` `2,412` `-` `($` `42,540)`		`$` `122,283` `354` `602` `956` `-` `-` `-` `-` `(` `369,789)` `908,820` `$` `662,270` `$` `629,586` `-` `629,586` `60,817` `9,736` `70,553` `-` `-` `-` `-` `-` `-` `(` `10,007)` `$` `690,132`	`$` `9,032,993` `4,531` `(` `262,934` `)` `(` `258,403` `)` `-` `(` `215,596` `)` `29,970` `-` `-` `908,820` `$` `9,497,784` `$` `9,485,225` `-` `9,485,225` `169,879` `(` `34,572` `)` `135,307` `-` `-` `(` `135,178` `)` `21,842` `97,384` `-` `(` `10,007` `)` `$` `9,594,573`

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

Dividend income

Share-based payment compensation cost

Loss on disposal of investment

Loss (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
Dividends received
Interest paid
Income tax paid
Net cash flows (used in) from operating activities Nine-month periods ended
September 30
Notes
2018
2017
$
238,595 $
44,487
6(7)(8)(25)
168,804
205,604
6(9)(10)(25)
21,967
10,583
12(2)
1,812
-
12(4)
- (
571 )
(
1,281 )
440
6(24)
18,749
19,807
6(22)
(
89,498 ) (
54,352 )
6(22)
(
915 ) (
3,113 )
6(15)(26)
14,799
26,266
6(23)
-
4,206
6(23)
1,370 (
460 )
(
184,937 ) (
168,868 )
(
857 )
-
(
1,764,450 )
346
(
808,314 )
612,295
(
14,947 )
3,522
91,921
296,890
47,990
41,816
5,390 (
4,080 )
1,217,207
-
686,456 (
498,944 )
(
12,833 ) (
31,147 )
20,649 (
35,990 )
46,515 (
9,545 )
90
145
(
295,718 )
459,337
84,299
51,378
915
3,113
(
17,153 ) (
20,061 )
(
59,846 ) (
61,947 )
(
287,503 )
431,820

(Continued)

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

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

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at cost
Loss on disposal of investments accounted for under the
equity method
Proceeds from capital reduction of financial assets at cost
Acquisition of property, plant and equipment

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

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

Proceeds from issuance of short-term notes and bills
payable
Repayment of short-term notes and bills payable
Increase in long-term borrowings

Increase (decrease) in deposits-in

Cash dividends for capital surplus

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 Nine-month periods ended
September 30
Notes
2018
2017
$
- ($
13,470 )
-
123,572
-
2,758
6(31)
(
27,961 ) (
82,131 )
42,140
21,255
6(31)
(
6,692 ) (
6,163 )
(
4,651 )
13,433
(
8,000 )
-
(
5,164 )
59,254
6(32)
(
376,000 ) (
49,000 )
798,756
-
(
800,000 )
-
6(32)
600,000
-
6(32)
(
3,233 )
13,964
6(19)
(
135,178 ) (
215,596 )
9,824
3,704
94,603
-
6(29)
-
908,820
188,772
661,892
38,210 (
245,110 )
(
65,685 )
907,856
6(1)
5,874,982
4,849,989
6(1)
$
5,809,297 $
5,757,845

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

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ALTEK CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 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 November 9, 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 and Amendments

Effective date by
International Accounting
Standards Board

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

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New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
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

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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:

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

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	Effective date by
	International Accounting
New Standards,Interpretations and Amendments	Standards Board
Amendments to IFRS 9, ‘Prepayment features with negative	January 1, 2019
compensation’
IFRS 16, ‘Leases’	January 1, 2019
Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’	January 1, 2019
Amendments to IAS 28, ‘Long-term interests in associates and joint	January 1, 2019
ventures’
IFRIC 23, ‘Uncertainty over income tax treatments’	January 1, 2019
Annual improvements to IFRSs 2015-2017 cycle	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 and Amendments	Effective date by International Accounting Standards Board
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ 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’	January 1, 2020 January 1, 2020 To be determined by International Accounting Standards Board January 1, 2021

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

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.

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(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.
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.

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B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name ofSubsidiaries	Main Business Activities	Ownership (%)	September30,2017 Note
			September30,2018 December31,2017
Altek Corporation Altek International Investment Co., Ltd. Investments and general business operations 100 100 100 - " Altek Japan Corporation Sales of optical instruments 100 100 100 Note 5 " Altek Investment Co., Ltd. Investments 100 100 100 Note 5 " Altek Autotronics Corporation Research design, manufacture and sales of car electronic components - - - Note 4 " Altek International Holding (BVI) Co.,Ltd. Investments and general business operations 100 100 100 Note 5 Altek International Investment Co., Ltd. Altek Lab Inc. Design service 100 100 100 Note 5 " Altek Optical (Cayman) Co., Ltd. Investments and general business operations 100 100 100 Note 5 " Altek Semiconductor (Cayman) Co., Ltd. Investments and general business operations 50 50 50 Note 6 Note 1 Altek (Kunshan) Co., Ltd. Manufacture and sales of digital still camera and its accessories 100 100 100 - Note 1 Altek EMS (Kunshan) Co., Ltd. Manufacture and sales of related engineering services 100 100 100 Note 5 Note 1 Altek Precision (Kunshan) Co., Ltd. Manufacture and sales of digital camera parts 100 100 100 Note 5 Note 1 Altek Trading (Shanghai) Limited Wholesale, import and export of related electronic and their associated accessories 100 100 100 Note 5 Note 2 Altek Biotechnology Corporation Research and development, manufacture and sales of medical electronic equipments 100 100 100 Note 5 Altek Semiconductor (Cayman) Co., Ltd. Altek Semiconductor Corporation Research design and sales of ASIC 100 100 100 Note 6 " Altek Semiconductor (Shanghai) Co., Ltd. Research design and sales of imaging technologies, electronic software and hardware 100 100 100 Note 3`、`Note 5 Note 1 Altek Optical Technology (Kunshan) Co., Ltd. Manufacture and sales of related electronic services and its accessories and optical components 100 100 100 Note 5 Note 1: 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 2: Invested by Altek Biotechnology Holding (Cayman) Co., Ltd., which is wholly owned by Altek International Holding (BVI) Co., Ltd. Note 3: It was invested by Altek Semiconductor (Cayman) Co., Ltd. and was incorporated in January 2017. Note 4: On June 30, 2017, Altek Corporation consummated a short-form merger with Altek Autotronics Corporation and the former is the surviving company. Note 5: As the subsidiaries do not meet the definition of significant subsidiaries, their financial statements as of September 30, 2018 and 2017 both were not reviewed by independent accountants. Note 6: As the subsidiaries meet the definition of significant subsidiaries in 2018, the financial statements as of September 30, 2018 were reviewed by independent accountants. However, in 2017 as the subsidiaries did not meet the definition of significant subsidiaries, their financial statements as of September 30, 2017 were not reviewed by independent accountants.

~15~

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.

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(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

~17~

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.

~18~

(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 customers pays the contract price in accordance with the agreed payment schedule. When the service provided by the Group exceeds the customers’ 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 September 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

0 Cash on hand Checking accounts and demand deposits Time deposits Total	September 30,2018 1,020 $ 681,008 5,127,269 5,809,297 $	December 31,2017 840 $ 411,191 5,462,951 5,874,982 $	September 30,2017 1,280 $ 213,759 5,542,806 5,757,845 $

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

B. The Group has no cash and cash equivalents pledged to Financial assets at fair value through profit or loss	others.
Items September 30,2018 Current items: Beneficiary certificates 766,682 $ Valuation adjustment 4,335 Total 771,017 $ Non-current items: Unlisted stocks 16,647 $ Valuation adjustment 6,046) ( Total 10,601 $	December 31,2017 581,745 $ 3,054 584,799 $ - $ - - $	September 30,2017
		859,317 $ 2,820
		862,137 $
		- $ -
		- $

A. The Group recognized net gain of $866 and $712 for the three-month periods ended September 30, 2018 and 2017, respectively, and net gain of $2,508 and $1,880 for the nine-month periods ended September 30, 2018 and 2017, respectively.
B. As of September 30, 2018, December 31, 2017, and September 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 September 30, 2017 is provided

~19~

in Note 12(4).

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

Items		30,2018
Non-current items`：`
Equity instruments
Unlisted stocks	$	149,697
Valuation adjustment	(	37,029)
	$	112,668

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 $112,668 as at September 30, 2018.
B. The Group recognized fair value change in other comprehensive (loss) income of ($12,169) and ($13,429) for the three-month and nine-month periods ended September 30, 2018, respectively.
C. As at September 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 September 30, 2017 is provided in Note 12(4).

(4) Notes and accounts receivable

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 September 30, 2017 is provided in Note 12(4). Notes and accounts receivable	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 September 30, 2017 is provided in Note 12(4). Notes and accounts receivable	0, 2017 is provided	0, 2017 is provided
A. The ageing analysis of accounts receivable that were past due but not impaired is as follows: 項目 September 30,2018 December 31,2017 September 30,2017 Notes receivable 1,733,389 $ 30,335 $ - $ Accounts receivable 3,099,503 $ 2,351,116 $ 2,152,196 $ Less: Allowance for uncollectible accounts 9,693) ( 8,747) ( 8,851) ( 3,089,810 $ 2,342,369 $ 2,143,345 $ Notes Accounts Notes Accounts Notes Accounts receivable receivable receivable receivable receivable receivable Not overdue 1,733,389 $ 2,909,681 $ 30,335 $ 2,334,755 $ - $ 2,135,995 $ Up to 30 days - 77,636 - 334 - - 31 to 90 days - 21,024 - - - - 91 to 180 days - 25 - 218 - - Over 181 days - 91,137 - 15,809 - 16,201 1,733,389 $ 3,099,503 $ 30,335 $ 2,351,116 $ - $ 2,152,196 $ September 30,2017 December 31,2017 September 30,2018		September 30,2017
		- $
	Notes receivable - $ - - - - - $		Accounts receivable
			2,135,995 $ - - - 16,201
			2,152,196 $

The above ageing analysis was based on past due date.

B. The Group does not hold any collateral as security.

~20~

C. As at September 30, 2018, December 31, 2017, and September 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 $1,733,389, $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 $3,089,810, $2,342,369 and $2,143,345, 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		September 30,2018
	Allowance for Cost valuation loss 781,528 $ 33,427) ($ 153,574 16,684) ( 172,410 8,393) ( 1,107,512 $ 58,504) ($ December 31,2017		Book value
			748,101 $ 136,890 164,017
			1,049,008 $

	Allowance for Cost valuation loss 737,657 $ 48,162) ($ 136,416 5,601) ( 355,434 9,818) ( 1,229,507 $ 63,581) ($ September 30,2017		Book value
			689,495 $ 130,815 345,616
			1,165,926 $

	Allowance for Cost valuation loss 767,835 $ 51,560) ($ 234,147 19,794) ( 222,695 11,957) ( 1,224,677 $ 83,311) ($		Book value
			716,275 $ 214,353 210,738
			1,141,366 $

~21~

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 September 30,2018 ended September 30,2017 Cost of goods sold 2,703,056 $ 2,332,347 $ Decline (reversal of) in market value 8,397 24,564) ( Total 2,711,453 $ 2,307,783 $ For the nine-month period For the nine-month period ended September 30,2018 ended September 30,2017 Cost of goods sold 7,944,223 $ 6,777,071 $ Decline in market value 97,817) ( 77,123) ( Total 7,846,406 $ 6,699,948 $ - September 30,2018 December 31,2017 September 30,2017 JinJing Optical Technology Co., Ltd. 44,028 $ 44,028 $ 44,028 $ Less: Accumulated impairment loss 44,028) ( 44,028) ( 44,028) ( - $ - $ - $	For the three-month period ended September 30,2017

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

Income (loss) for the period from continuing operations Other comprehensive income - net of tax Total comprehensive income (loss)	For the nine-month period For the nine-month period ended September 30,2018 ended September 30,2017 113,623 $ 21,555) ($ - 3,050 113,623 $ 18,505) ($

~22~

(7) Property, plant and equipment

At January 1, 2018 Cost Accumulated depreciation For the nine-month period ended September 30, 2018 Opening net book amount Additions Disposals Reclassifications Depreciation charge Net exchange differences Closing net book amount At September 30, 2018 Cost Accumulated depreciation	Construction in progress and Buildings and prepayment for Land structures Machinery Test equipment equipment Others Total 468,684 $ 3,353,156 $ 1,366,032 $ 170,311 $ - $ 533,260 $ 5,891,443 $ - 685,644) ( 903,610) ( 158,744) ( - 494,657) ( 2,242,655) ( 468,684 $ 2,667,512 $ 462,422 $ 11,567 $ - $ 38,603 $ 3,648,788 $ 468,684 $ 2,667,512 $ 462,422 $ 11,567 $ - $ 38,603 $ 3,648,788 $ - 1,910 - 1,515 9,875 4,320 17,620 - - 42,316) ( 848) ( - 346) ( 43,510) ( - - - - - 280) ( 280) ( - 66,841) ( 73,202) ( 5,317) ( - 18,331) ( 163,691) ( - 43,620) ( 7,932) ( 72) ( 13) ( 297) ( 51,934) ( 468,684 $ 2,558,961 $ 338,972 $ 6,845 $ 9,862 $ 23,669 $ 3,406,993 $ 468,684 $ 3,298,717 $ 1,080,761 $ 158,604 $ 9,862 $ 474,301 $ 5,490,929 $ - 739,756) ( 741,789) ( 151,759) ( - 450,632) ( 2,083,936) ( 468,684 $ 2,558,961 $ 338,972 $ 6,845 $ 9,862 $ 23,669 $ 3,406,993 $	Total

~23~

At January 1, 2017 Cost Accumulated depreciation For the nine-month period ended September 30, 2017	Construction in progress and Buildings and prepayment for Land structures Machinery Test equipment equipment Others Total 1,042,216 $ 3,522,603 $ 1,443,305 $ 199,899 $ 29,043 $ 678,217 $ 6,915,283 $ - 643,506) ( 840,003) ( 178,950) ( - 594,976) ( 2,257,435) ( 1,042,216 $ 2,879,097 $ 603,302 $ 20,949 $ 29,043 $ 83,241 $ 4,657,848 $ 1,042,216 $ 2,879,097 $ 603,302 $ 20,949 $ 29,043 $ 83,241 $ 4,657,848 $ - 83,646 545 818 57 10,543 95,609 - - 19,977) ( 186) ( - 632) ( 20,795) ( - 170,019) ( - - 29,043) ( - 199,062) ( - 65,314) ( 82,347) ( 7,780) ( - 47,642) ( 203,083) ( - 35,866) ( 13,204) ( 254) ( 1 1,470) ( 50,793) ( 1,042,216 $ 2,691,544 $ 488,319 $ 13,547 $ 58 $ 44,040 $ 4,279,724 $ 1,042,216 $ 3,355,493 $ 1,370,158 $ 180,397 $ 58 $ 556,457 $ 6,504,779 $ - 663,949) ( 881,839) ( 166,850) ( - 512,417) ( 2,225,055) ( 1,042,216 $ 2,691,544 $ 488,319 $ 13,547 $ 58 $ 44,040 $ 4,279,724 $	Total
Opening net book amount Additions Disposals Reclassifications Depreciation charge Net exchange differences Closing net book amount At September 30, 2017 Cost Accumulated depreciation
		4,279,724 $

A. For the nine-month periods ended September 30, 2018 and 2017, there was no capitalisation of borrowing interests attributable to the property, plant and equipment.

B. Information about the property, plant and equipment that were pledged to others as collaterals is provided in Note 8.

~24~

(8) Investment property

At January 1, 2018
Cost
Accumulated depreciation
For the nine-month period
ended September 30,2018
Opening net book amount
Depreciation charge
Closing net book amount
At September 30, 2018
Cost
Accumulated depreciation
At January 1, 2017
Cost
Accumulated depreciation
For the nine-month period
ended September 30,2017
Opening net book amount
Additions - from acquisitions
Reclassifications
Depreciation charge
Closing net book amount
At September 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
$ -
5,113)
(
5,113)
(
573,532
$ 198,723
$ 772,255
$ 573,532
$ 245,710
$ 819,242
$ -
46,987)
(
46,987)
(
573,532
$ 198,723
$ 772,255
$ Land
Buildings and structures
Total
-
$ -
$ -
$ -
-
-
-
$ -
$ -
$ -
$ -
$ -
$ -
9,000
9,000
-
199,062
199,062
-
2,521)
(
2,521)
(
-
$ 205,541
$ 205,541
$ -
$ 245,710
$ 245,710
$ -
40,169)
(
40,169)
(
-
$ 205,541
$ 205,541
$

~25~

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 September 30,2018 6,529 $ 2,076 $ - $ For the nine-month period ended September 30,2018 19,599 $ 6,185 $ - $	For the three-month period ended September 30,2017
		6,529 $
		1,901 $
		- $
		For the nine-month period ended September 30,2017
		10,770 $
		2,851 $
		- $

B. As at September 30, 2018, the fair value of investment property held by the Group all amounted to $870,022. The fair value was valuated by independent valuers. Valuations were made using the comparative approach and income approach of direct capitalization method.
C. There was no capitalisation of borrowing interests attributable to investment property.
D. Information about the investment property that was pledged to others as collaterals is provided in Note 8.

~26~

(9) Intangible assets

Intangible assets	Intangible assets	Intangible assets
A. Details of amortisation on intangible assets are as follows: 2018 2017 At January 1 Cost 165,921 $ 129,020 $ Accumulated amortisation 44,383) ( 36,103) ( 121,538 $ 92,917 $ For the nine-month period ended September 30 Opening net book amount 121,538 $ 92,917 $ Additions 3,801 1,445 Amortisation charge 21,269) ( 9,901) ( Net exchange differences 1,676 4,597) ( Closing net book amount 105,746 $ 79,864 $ At September 30 Cost 167,424 $ 125,431 $ Accumulated amortisation 61,678) ( 45,567) ( 105,746 $ 79,864 $ For the three-month period ended For the three-month period ended September 30,2018 September 30,2017 Operating costs 240 $ 1,327 $ Operating expense 6,394 1,772 6,634 $ 3,099 $ For the nine-month period ended For the nine-month period ended September 30,2018 September 30,2017 Operating costs 2,473 $ 3,963 $ Operating expense 18,796 5,938 21,269 $ 9,901 $

		1,327 $ 1,772
		3,099 $
		For the nine-month period ended September 30,2017
		3,963 $ 5,938
		9,901 $

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

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

0 Land-use right	September 30,2018 31,765 $	December 31,2017 33,296 $	September 30,2017
			33,563 $

The Group recognized amortisation expenses for the three-month periods ended September 30, 2018 and 2017 amounting to $228 and $229, and for the nine-month periods ended September 30, 2018 and 2017 amounting to $698 and $682, respectively.

~27~

(11) Short-term borrowings

Short-term borrowings	Short-term borrowings	Short-term borrowings
Short-term notes and bills payable Long-term borrowings Type of borrowings September 30,2018 Interest rate range Collateral Bank borrowings Unsecured borrowings 1,645,000 $ 1% ~1.13% None Type of borrowings December 31,2017 Interest rate range Collateral Bank borrowings Unsecured borrowings 2,021,000 $ 1% ~1.19% None Type of borrowings September 30,2017 Interest rate range Collateral Bank borrowings Unsecured borrowings 2,366,000 $ 1%~1.19% None September 30,2018 December 31,2017 September 30,2017 Commercial paper payable 200,000 $ 200,000 $ - $ Less: Discount on short-term notes and bills payable 186) ( 203) ( - 199,814 $ 199,797 $ - $ Interest rate ranges 0.85% 0.84% - Type of borrowings Borrowing period and repayment term Interest rate range Collateral September 30,2018 Secured borrowings Borrowing period is from August 24, 2018 to May 8, 2021. Revolving credit facility. 1.1%~1.25% Yes (Note) 600,000 $ Less: Current portion - 600,000 $
Type of borrowings Secured borrowings Less: Current portion
	Borrowing period is from August 24, 2018 to May 8, 2021. Revolving credit facility.	600,000 $ -
		600,000 $

(12) Short-term notes and bills payable

- (13) Long term borrowings

During the terms of the unsecured borrowing, in accordance with the unsecured borrowing agreements contracted with bank, the Group is required to maintain the consolidated net value over $8 billion and the debt ratio under 100% based on the annual consolidated financial statements and the semi-annual consolidated financial statements.

Note: Information about collateral for long-term borrowings is provided in Note 8.

~28~

(14) 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 $3 and $0 for the three-month periods ended September 30, 2018 and 2017, and of $99 and $151 for the nine-month periods ended September 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.
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 September 30, 2018 and 2017, the Group had recognized pension costs of $7,335 and $7,720, and for the nine-month periods ended September 30, 2018 and 2017, the Group had recognized pension costs of $21,665 and $24,434 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 $6,369 and $6,529 for the three-month periods ended September 30, 2018 and 2017, respectively, and of $20,792 and $20,354 for the nine-month periods ended September 30, 2018 and 2017, respectively.

~29~

(15) Share-based payment

A. As of September 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.
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 nine-month periods ended September 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:

~30~

		For the nine-month period	For the nine-month period	For the nine-month period		For the nine-month period	For the nine-month period	For the nine-month period
		endedSeptember30,2018				endedSeptember30,2017
			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	(	192)		-	(	1,572)		-
Options exercised	(	320)		30.70	(	130)		28.49
Options outstanding at end
of the period		1,941		30.61		3,453		30.32
Options exercisable at end
of the period		1,941		30.61		3,453		30.32
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 nine-month period ended September 30, 2018.
(c) The weighted-average stock price of stock options at exercise dates for the three-month periods ended September 30, 2018 and 2017 was $34.28 and $30.35, respectively. The weighted-average stock price of stock options at exercise dates for the nine-month periods ended September 30, 2018 and 2017 was $33.42 and $26.91, respectively.
(d) The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:

follows:
Issue date approved	Expirydate	Exercise price No. of shares (in dollars) (in thousands) (Note) - $ - - - 1,100 30.7 841 30.5 September30,2018	December	Exercise price (in dollars) (Note) $ - - 30.7 30.5 31,2017	September30,2017
		No. of shares (in thousands) - - 1,100 841	No. of shares (in thousands) - - 1,420 1,033		No. of shares (in thousands) 1,000 - 1,420 1,033	Exercise price (in dollars) (Note)
June 13, 2008 October 31, 2008 October 28, 2011 March 21, 2012	December 31, 2017 December 31, 2017 December 31, 2020 December 31, 2020					$ 29.6 24.8 30.7 30.5

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:

~31~

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 nine-month		For the nine-month
		period ended		period ended
		September 30, 2018		September 30, 2017
		(share in thousands)		(share in thousands)
Shares ungranted beginning balance		3,435		3,725
Shares granted	(	1,718)		-
Restricted shares forfeited - retired	(	90)	(	240)
Shares ungranted ending balance		1,627		3,485

(b) As of September 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 September30,2018 3,726 $ For the nine-month period ended September30,2018 14,799 $	For the three-month period ended September30,2017
		6,809 $
		For the nine-month period ended September30,2017
		26,266 $

~32~

(16) Provisions

At January 1, 2018 Additional provisions Reversed during the period Exchange differences At September 30, 2018 Current Non-current	September30,2018 36,107 $ 107,907 $	Warranty 123,995 $ 37,913 17,256) ( 638) ( 144,014 $ December31,2017 September30,2017 30,177 $ 49,642 $ 93,818 $ 88,436 $

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.

(17) Share capital

As of September 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 $2,740,488 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)


At January 1		270,386		269,565
Employee stock options exercised		320		130
Treasury stock sold to employees		3,433		-
Retired restricted shares to employees that
did not meet the vesting conditions	(	90)	(	240)
At September 30		274,049		269,455

B. Treasury shares

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

Shares held by	Reason for reacquisition To be reissued to employees	September 30, 2018 (Expressed in thousands of shares)	September 30, 2018 (Expressed in thousands of shares)
		Number of shares -	Book value
Altek Corporation			- $

~33~

December 31, 2017

(Expressed in thousands of shares)

		December 31, 2017 (Expressed in thousands of shares)	31, 2017 usands 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 Book value 3,433 96,138 $ September 30, 2017 (Expressed in thousands of shares)	Book value
Altek Corporation Shares held by			96,138 $
		Number of shares 981 3,433 4,414	Book value
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.
C. For the nine-month period ended September 30, 2017, the Company issued 120 thousands shares for employee stock options exercised and the registration for issuance will be completed pursuant to the regulation.

(18) 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.

~34~

At January 1, 2018 Employee stock options exercised Treasury stock sold to employees Employee restricted share granted Retirement of employee restricted shares At September 30, 2018	Share Employee stock Difference between consideration and carrying amount of subsidiaries acquired or premium options disposed 1,750,223 $ 51,476 $ 1,534 $ 8,108 1,484) ( - - - - 28,738 - - - - - 1,787,069 $ 49,992 $ 1,534 $	Changes in ownership interests in Proceeds from sales of treasury Restricted shares to subsidiaries shares employees Total 395,774 $ 209 $ 57,476 $ 2,256,692 $ - - - 6,624 - 1,246 - 1,246 - - 28,738) ( - - - 1,512) ( 1,512) ( 395,774 $ 1,455 $ 27,226 $ 2,263,050 $

At January 1, 2017 Employee stock options exercised Subsidiaries’ capital increase not participated proportionately to the original shareholding ratio Retirement of employee restricted shares At September 30, 2017	Share Employee stock premium options 1,746,566 $ 52,729 $ 3,657 1,253) ( - - - - 1,750,223 $ 51,476 $	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 $ - - 2,404 369,789 - 369,789 - 3,957) ( 3,957) ( 369,789 $ 58,128 $ 2,231,150 $

(19) 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

~35~

dividend policy adopted by the Board of Directors, cash dividends shall account for at least 20% 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 (in NT dollars) 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 (in NT dollars)
			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(26).

~36~

(20) 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			-		(		14,155)					-	(	14,155)
Currency translation differences:
-Group	(		30,034)				-					-	(	30,034)
Retirement of restricted shares
to employees			-				-		2,412					2,412
Share-based payment transactions			-				-		12,018					12,018
At September 30, 2018	($		313,158)		($		37,755)	($	4,785)				($	355,698)
			Foreign currency				Unearned
			translation adjustment				compensation							Total
At January 1, 2017	$			35,009			($	60,530)			($			25,521)
Currency translation differences:
-Group	(		264,798)						-		(			264,798)
-Associates					1,262				-					1,262
Retirement of restricted shares						-		6,357						6,357
to employees
Share-based payment transactions						-		26,266						26,266
At September 30, 2017	($		228,527)				($	27,907)			($			256,434)
Operating revenue
						For the three-month				For the nine-month
							period ended					period ended
						September30,2018			September30,2018
Revenue from contracts with customers						$	3,086,368		$					8,877,914

(21) Operating revenue

~37~

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 September30,2018 Revenue from external customer contracts Timing of revenue recognition At a point in time Over time For the nine-month period ended September30,2018 Revenue from external customer contracts Timing of revenue recognition At a point in time Over time	Asia 2,487,326 $ 2,487,326 $ - 2,487,326 $ Asia 7,427,858 $ 7,420,163 $ 7,695 7,427,858 $	Europe 379,210 $ 379,210 $ - 379,210 $ Europe 1,015,498 $ 1,015,498 $ - 1,015,498 $	America 205,595 $ 205,595 $ - 205,595 $ America 383,628 $ 383,628 $ - 383,628 $	Taiwan 14,237 $ 14,237 $ - 14,237 $ Taiwan 50,930 $ 50,930 $ - 50,930 $	Total
					3,086,368 $
					3,086,368 $ -
					3,086,368 $
					Total
					8,877,914 $
					8,870,219 $ 7,695
					8,877,914 $

B. Contract assets

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

	September 30,2018	September 30,2018
Technical license contract	$	857
Allowance for uncollectible account	(	857)
Total	$	-

C. Related disclosures for 2017 operating revenue are provided in Note 12(5).

~38~

(22) Other income

Other income
		For the three-month			For	the three-month
			period ended			period ended
		September 30,2018			September 30,2017
Interest income:
Interest income from bank deposits		$	32,613	$		21,316
Others			9			4
Rental revenue			6,688			6,529
Dividend income			915			3,113
Other income - others			3,610			3,085
Total		$	43,835	$		34,047
		For the nine-month			For the nine-month
			period ended			period ended
		September 30,2018			September 30,2017
Interest income:
Interest income from bank deposits		$	89,479	$		54,320
Others			19			32
Rental revenue			26,679			10,770
Dividend income			915			3,113
Other income - others			17,505			10,925
Total		$	134,597	$		79,160
Other gains and losses
		For	the three-month		For the three-month
			period ended			period ended
		September 30,2018			September 30,2017
Gains on disposal of property, plant and equipment	$		5,159	$		421
Gains on disposal of investments			-			20
Net currency exchange gains (losses)			26,502	(		33,450)
Net gains on financial assets at fair value
through profit or loss			866			712
Other expenses	(		99)	(		1,905)
Total	$		32,428	($		34,202)

(23) Other gains and losses

~39~

(24) (25)	Finance costs Expenses by nature (Losses) gains on disposal of property, plant and equipment Loss on disposal of investments Net currency exchange gains (losses) Net gains on financial assets at fair value through profit or loss 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 nine-month period ended For the nine-month period ended September 30,2018 September 30,2017 1,370) ($ 460 $ - 4,206) ( 5,589 81,298) ( 2,508 1,880 4,135) ( 2,881) ( 2,592 $ 86,045) ($ For the three-month period ended For the three-month period ended September30,2018 September30,2017 6,408 $ 6,257 $ For the nine-month period ended For the nine-month period ended September30,2018 September30,2017 18,749 $ 19,807 $ For the three-month period ended For the three-month period ended September30,2018 September30,2017 328,086 $ 321,532 $ 53,973 61,703 6,634 3,099 388,693 $ 386,334 $

~40~

Employee benefit expenses Depreciation charges on property, plant and equipment Amortisation charges on intangible assets Total	For the nine-month period ended September30,2018 984,760 $ 168,804 21,269 1,174,833 $	For the nine-month period ended September30,2017
		970,227 $ 205,604 9,901
		1,185,732 $

(26) Employee benefit expenses

Employee benefit expenses
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 three-month period ended September30,2018 286,991 $ 3,726 13,591 13,707 10,071 328,086 $ For the nine-month period ended September30,2018 853,590 $ 14,799 41,911 42,556 31,904 984,760 $	For the three-month period ended September30,2017
		273,659 $ 6,809 16,248 14,252 10,564
		321,532 $
		For the nine-month period ended September30,2017
		819,807 $ 26,266 47,351 44,939 31,864
		970,227 $

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.

~41~

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 nine-month periods ended September 30, 2018 and 2017, employees’ compensation was accrued (reversed) at $18,001, ($2,558), $23,607 and $1,091, respectively; directors’ and supervisors’ remuneration was accrued (reversed) at $2,401, ($340), $3,148 and $146, 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.
(27) Income tax
A. Income tax expense
- (a) Components of income tax expense:

e tax ome tax expense Components of income tax expense:
Current tax: Current tax on profits for the year Adjustments in respect of prior years Total current tax Deferred tax: Origination and reversal of temporary differences Impact of change in tax rate Total deferred tax Income tax expense	For the three-month period ended September30,2018 23,232 $ 1 23,233 16,539 - 16,539 39,772 $	For the three-month period ended September30,2017
		21,027 $ 2
		21,029
		2,821 -
		2,821
		23,850 $

~42~

		For the nine-month	For the nine-month		For the nine-month	For the nine-month
			period ended			period ended
		September30,2018			September30,2017
Current tax:
Current tax on profits for the year		$	64,313		$	41,556
Adjustments in respect of prior years	(		16,783)	(		3,237)
Total current tax			47,530			38,319
Deferred tax:
Origination and reversal of
temporary differences	(		41,715)			1,637
Impact of change in tax rate			62,901			-
Total deferred tax			21,186			1,637
Income tax expense		$	68,716		$	39,956

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

		For	the three-month		For	the three-month
			period ended			period ended
		September30,2018			September30,2017
Changes in fair value of financial assets at		$	726		$	-
fair value through other comprehensive
income
Translation differences of foreign operations	(		37,309)			9,722
Impact of change in tax rate			-			-
	($		36,583)		$	9,722
		For the nine-month			For the nine-month
			period ended			period ended
		September30,2018			September30,2017
Changes in fair value of financial assets at		$	726		$	-
fair value through other comprehensive
income
Translation differences of foreign operations	(		20,300)	(		53,977)
Impact of change in tax rate			119			-
	($		19,455)	($		53,977)

B. As of September 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.

~43~

(28) Earnings (losses) per share

Earnings (losses) per share
		For the three-monthperiod ended September 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	$	80,015	272,195	$	0.29
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent	$	80,015
Assumed conversion of all dilutive
potential ordinary shares
Restricted shares to employees			1,486
Employee stock option certificates			179
Employees’ bonus			866
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares	$	80,015	274,726	$	0.29
		For the three-monthperiod ended September 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	($	10,385)	265,868	($	0.04)

For the three-month period ended September 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.

~44~

For the nine-monthperiod ended September 30,2018	For the nine-monthperiod ended September 30,2018	For the nine-monthperiod ended September 30,2018
Weighted average number of ordinary shares outstanding Earnings per share Amount after tax (share in thousands) (in dollars) 109,062 $ 269,634 0.40 $ 109,062 $ 1,681 106 899 109,062 $ 272,320 0.40 $ For the nine-monthperiod ended September 30,2017		Earnings per share (in dollars)
		0.40 $
		0.40 $
Amount after tax 4,177 $ 4,177 $ 4,177 $	Weighted average number of ordinary shares outstanding (share in thousands) 265,849 2,397 207 268,453	Earnings per share (in dollars)
		0.02 $
		0.02 $

~45~

(29) 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 and July 11, 2017. The Group did not acquire shares proportionally to its interest. As a result, the Group decreased its share interest to 21.43%. The transaction increased non-controlling interest by $539,031 and increased the equity attributable to owners of parent by $369,789. 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 nine-month period ended September 30,2017
	908,820 $ 539,031) ( 369,789 $

(30) Operating leases

The Group leased part of the Taipei office building with operating leases. Contingent rents of $6,529, $6,529, $19,599 and $10,770 were recognized for these leases in profit or loss for the three-month and nine-month periods ended September 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	September 30,2018 28,921 $ 16,870 45,791 $	December 31,2017 28,921 $ 38,561 67,482 $	September 30,2017
			28,921 $ 45,791
			74,712 $

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	September30,2018 3,772 $ 15,087 16,030 34,889 $	December31,2017 3,448 $ 13,794 17,243 34,485 $	September30,2017
			3,696 $ 14,785 19,406
			37,887 $

~46~

(31) Supplemental cash flow information

Investing activities with partial cash payments

			For the nine-month			For the nine-month
			period ended			period ended
			September30,2018			September30,2017
Acquisitions of property, plant, and
equipment		$	17,620		$	95,609
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	(		1,999)	(		20,326)
Cash paid		$	27,961		$	82,131
			For the nine-month			For the nine-month
			period ended			period ended
			September30,2018			September30,2017
Acquisitions of intangible assets		$	3,801		$	1,445
Add: Payable at beginning of period			4,763			9,067
Less: Payable at end of period	(		1,872)	(		4,349)
Cash paid		$	6,692		$	6,163

(32) 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 September 30, 2018	Short-term borrowings	Short-term notes and billspayable		Long-term borrowings	Guarantee deposits received		Total
	2,021,000 $ 376,000) ( - - 1,645,000 $	199,797 $ 1,244) ( - 1,261 199,814 $		- $ 600,000 - - 600,000 $	23,923 $ 3,233) ( - 339) ( 20,351 $		2,244,720 $ 219,523 - 922 2,465,165 $

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.

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(3) Key management compensation

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 September30,2018 5,873 $ 155 929 6,957 $ For the nine-month period ended September30,2018 23,689 $ 467 4,605 28,761 $	For the three-month period ended September30,2017
		5,523 $ 141 2,190
		7,854 $
		For the nine-month period ended September30,2017
		18,802 $ 439 7,394
		26,635 $

8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

Pledged asset	Purpose		Book	value	value
			September30,2018		September30,2017
Land, buildings and structures Investment acquisition	Long-term borrowings Long-term borrowings		749,359 $ 772,255 1,521,614 $		- $ - - $

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 November 9, 2018, the case is still under trial.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

None.

~48~

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 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 receivable 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 Long-term borrowings (including current portion) Guarantee deposits received	September30,2018 781,618 $ 112,668 - 5,809,297 - 1,733,389 3,089,810 38,263 38,399 11,603,444 $ 1,645,000 $ 199,814 1,204,945 2,707,842 393,402 600,000 20,351 6,771,354 $	December31,2017 584,799 $ - 138,011 5,874,982 - 30,335 2,342,369 18,976 34,053 9,023,525 $ 2,021,000 $ 199,797 30,335 2,097,254 420,452 - 23,923 4,792,761 $	September30,2017
			862,137 $ - 158,019 5,757,845 - - 2,143,345 19,045 31,999
			8,972,390 $
			2,366,000 $ - - 1,874,940 427,830 - 23,979
			4,692,749 $

~49~

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.
(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.
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:

~50~

September 30, 2018

Exchange Rate 30.525 6.8792 30.525 6.8792	Effect on Effect on Other Book Value Extent of Profit or Comprehensive (NTD) Variation (Loss) Income(Loss) 2,289,283 $ 1% 22,893 $ - $ 1,252,838 1% 12,528 - 2,048,746 $ 1% 20,487) ($ - $ 1,177,136 1% 11,771) ( - SensitivityAnalysis December 31,2017	Effect on Effect on Other Book Value Extent of Profit or Comprehensive (NTD) Variation (Loss) Income(Loss) 2,289,283 $ 1% 22,893 $ - $ 1,252,838 1% 12,528 - 2,048,746 $ 1% 20,487) ($ - $ 1,177,136 1% 11,771) ( - SensitivityAnalysis December 31,2017	Effect on Effect on Other Book Value Extent of Profit or Comprehensive (NTD) Variation (Loss) Income(Loss) 2,289,283 $ 1% 22,893 $ - $ 1,252,838 1% 12,528 - 2,048,746 $ 1% 20,487) ($ - $ 1,177,136 1% 11,771) ( - SensitivityAnalysis December 31,2017

Exchange Rate	Book Value (NTD) 2,459,009 $ 1,734,591 2,368,717 $ 1,448,003	SensitivityAnalysis
		Effect on Extent of Profit or Variation (Loss) 1% 24,590 $ 1% 17,346 1% 23,687) ($ 1% 14,480) (	Effect on Other Comprehensive Income(Loss)
29.760 6.5342 29.760 6.5342			- $ - - $ -

~51~

September 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) 71,152 USD 63,521 USD 69,259 USD 49,649 USD	Exchange Rate 30.260 6.6369 30.260 6.6369	Book Value (NTD) 2,153,060 $ 1,922,145 2,095,777 $ 1,502,379	SensitivityAnalysis	SensitivityAnalysis
				Effect on Extent of Profit or Variation (Loss) 1% 21,531 $ 1% 19,221 1% 20,958) ($ 1% 15,024) (	Effect on Other Comprehensive Income(Loss)
					- $ - - $ -

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 nine-month periods ended September 30, 2018 and 2017 amounted to $26,502, ($33,450), $5,589 and ($81,298), 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 and long-term borrowings at fixed rates during the nine-month periods ended September 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

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and other factors. Individual risk limits are set based on internal or external ratings. The 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 September 30, 2018, the loss rate methodology is as follows:

At September 30,2018 Expected loss rate Total book value Loss allowance	Individual A	Individual B	Total
	0% 4,823,199 $ - $	100% 10,550 $ 10,550 $	4,833,749 $ 10,550 $

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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:

2018

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 September 30	Accounts receivable		Contract assets		Notes receivable
	8,747 $ - 8,747 3,671 2,716) ( 33) ( 24 9,693 $		- $ - - 857 - - - 857 $		- $ - - - - - - - $

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 Group has following undrawn borrowing facilities:

0[Septe][m][be][r ][30,][ 2][0][1][8] December 31, 2017 September 30, 2017

0	September30,2018	December31,2017	September30,2017
Fixed rate: Expiring within one year Expiring beyond one year	2,428,160 $ 600,000 3,028,160 $	1,114,700 $ - 1,114,700 $	1,269,700 $ -
			1,269,700 $

iv. 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.

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Non-derivative financial liabilities: September 30, 2018 Short-term borrowings Short-term notes and bills payable Notes payable Accounts payable Other payables Long-term borrowings (including current portion) 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: September 30, 2017 Short-term borrowings Accounts payable Other payables Guarantee deposits received	Less than 1year 1,645,000 $ 199,814 1,204,945 2,707,842 393,402 - - Less than 1year 2,021,000 $ 199,797 30,335 2,097,254 420,452 - Less than 1year 2,366,000 $ 1,874,940 427,830 -	Less than 1year 1,645,000 $ 199,814 1,204,945 2,707,842 393,402 - - Less than 1year 2,021,000 $ 199,797 30,335 2,097,254 420,452 - Less than 1year 2,366,000 $ 1,874,940 427,830 -	Over 1year - $ - - - - 600,000 20,351 Over 1year - $ - - - - 23,923 Over 1year - $ - - 23,979	Over 1year - $ - - - - 600,000 20,351 Over 1year - $ - - - - 23,923 Over 1year - $ - - 23,979
		2,021,000 $ 199,797 30,335 2,097,254 420,452 - Less than 1year		- $ - - - - 23,923 Over 1year
		2,366,000 $ 1,874,940 427,830 -		- $ - - 23,979

(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).

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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:

September 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 September 30, 2017 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Beneficiary certificate	Level 1 771,017 $ - - 771,017 $ Level 1 584,799 $ Level 1 862,137 $	Level 2 - $ - 59,340 59,340 $ Level 2 - $ Level 2 - $	Level 3 - $ 10,601 53,328 63,929 $ Level 3 - $ Level 3 - $	Total
				771,017 $ 10,601 112,668
				894,286 $
				Total
				584,799 $
				Total
				862,137 $

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:

Open-end fund Market quoted price Net asset value

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(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:

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 September 30, 2018	Valuation technique	Significant unobservable input	Relationship of inputs to fairvalue
	10,601 $ 53,328	Net asset value Net asset value	Not applicable Not applicable	Not applicable Not applicable

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(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.

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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.

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(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.

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C. The financial assets at cost as of September 30, 2017 and December 31, 2017 are as follows:

Items	December	31,2017	September	30,2017
Non-current items:
Unlisted stocks	$	167,657	$	170,615
Accumulated impairment	(	29,646)	(	12,596)
	$	138,011	$	158,019

(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 nine-month periods ended September 30, 2017.
(c) As of September 30, 2017 and 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	December 31,2017 2,070,650 $ 264,105 2,334,755 $	September 30,2017
		2,013,026 $ 122,969
		2,135,995 $

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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	December 31,2017 334 $ - 218 7,062 7,614 $	September 30,2017 - $ - - 7,350 7,350 $

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 571) ( Effects of foreign exchange 55) ( At September 30 8,851 $		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.

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(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 nine-month period ended September 30, 2017 are as follows:

September 30, 2017 are as follows:
Sales revenue Service revenue Other	Three-month period ended September 30,2017	Nine-month period ended September 30,2017
	2,534,680 $ 62,741 37,526 2,634,947 $	7,515,552 $ 122,209 131,335
		7,769,096 $

C. The effects and description of current balance sheets items if the Group continues adopting the above accounting policies are as follows:

Balance sheet items	Description		September 30,2018	September 30,2018
		Balance by using IFRS 15	Balance by using previous accounting policies	Effects from changes in accounting policy
Accounts receivable Contract assets	Note Note	3,089,810 -	3,089,810 -	- -

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.

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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.

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Altek Corporation and subsidiaries

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

September 30, 2018

			September 30, 2018
Table 1 Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account		As of September 30,2018 Expressed in thousands of NTD (Except as otherwise indicated)
				Number of shares	Bookvalue	Ownership (%)	Fairvalue
Altek Corporation " " Altek (Kunshan) 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	Director 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 3,329,796 35,341,960	10,312 $ 289 59,340 6,509 46,819 90,112 680,905	14.55% 4.84% 2.00% 6.45% (Note) N/A N/A	10,312 $ 289 59,340 6,509 46,819 90,112 680,905

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 nine-month period ended September 30, 2018

Table 2 Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Differences in transaction terms compared to third party transactions Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Differences in transaction terms compared to third party transactions Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Differences in transaction terms compared to third party transactions Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)
			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	2,530,527 $ 3,680,307 219,080 727,970 325,551 3,142,330	99% 100% 80% 100% 83% 100%	Net 120 days Net 75 days " " " "	Approximately the same price with third parties " " " " "	Note " " " " "	1,400,274) ($ 914,828) ( 117,607) ( 367,264) ( 63,713) ( 2,973,971) (	98% 97% 81% 98% 73% 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

September 30, 2018

Table 3 Creditor	Counterparty	Relationship with the counterparty	Balance as at September 30,2018	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)	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 Semiconductor (Shanghai) Co., Ltd.	Parent company Parent company The same ultimate parent company Parent company The same ultimate parent company	1,400,274 $ 117,607 367,264 914,828 2,973,971	2.67 2.17 3.12 5.35 2.54	- $ - - - -	N/A N/A N/A N/A N/A	309,811 $ - 85,102 430,306 404,015	- $ - - - -

Table 3, Page 1

Altek Corporation and subsidiaries

Significant inter-company transactions during the reporting periods

For the nine-month period ended September 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	2,530,527 $ 1,400,274 3,680,307 914,828 219,080 117,607 53,916 22,841 237,884 117,692 727,970 367,264 69,183 68,446 17,323 325,551 63,713 3,142,330 2,973,971	Net 120 days " Net 75 days " " " " " " " " " " " " " " " "	29% 8% 41% 5% 2% 1% 1% 0% 3% 1% 8% 2% 1% 1% 0% 4% 0% 35% 17%

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 nine-month period ended September 30, 2018

Table 5 Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at September 30,2018	Shares held as at September 30,2018	Shares held as at September 30,2018	Net profit (loss) of the investee for the nine-month period ended September 30,2018	Investment income(loss) recognised by the Company for the nine-month period ended September 30,2018 Expressed in thousands of NTD (Except as otherwise indicated)
				Balance as at September 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 50,000 415,376 112,324 106,838 187,664 200,000 415,376	2,910,046 $ 2,869 50,000 415,376 112,324 106,838 187,664 200,000 415,376	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%	8,977,576 $ 11,255 39,959 577,505 60,463 - 687,964 264,516 491,175	111,111 $ 127 66 80,603 343 113,623 121,634 29,948 80,603	111,111 $ 127 66 80,603 312 - 60,817 14,974 80,603

Table 5, Page 1

Table 6

Expressed in thousands of NTD (Except as otherwise indicated)

Altek Corporation and subsidiaries

Information on investments in Mainland China

For the nine-month period ended September 30, 2018

Investee in Mainland China	Investment method `（`Note 1`）`	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the nine-month period ended September 30,2018	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the nine-month period ended September 30,2018	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the nine-month period ended September 30,2018	Accumulated amount of investment income remitted back to Taiwan as of September 30, 2018
		Remitted to Mainland China	Remitted back to Taiwan
Altek (Kunshan) Co., Ltd. (Note 2) Manufacture and sale of digital still cameras and its accessories 1,514,040 $ 2 1,373,625 $ - $ Altek EMS (Kunshan) Co., Ltd. (Note 3) Manufacture and sale of related engineering services 152,625 2 277,259 - Altek Trading (Shanghai) Limited Wholesale, import and export of digital cameras, digital video cameras and their associated accessories 259,463 2 259,463 - Kinko Optical (Suzhou) Co., Ltd. Manufacture and sale of optical components 457,875 2 106,838 - Altek Precision (Kunshan) Co., Ltd. Design, manufacture and sales of digital camera parts 421,245 2 421,245 - Altek Optical Technology (Kunshan) Co., Ltd. Manufacture and sales of digital camera and its accessories and optical components 341,880 2 341,880 - Altek Semiconductor (Shanghai) Co., Ltd. Research design and sales of imaging technologies, electronic software and hardware 45,788 2 - - Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to: (1)Directly invest in a company in Mainland China. (2)Through investing in an existing company in the third area,which then investeed in the investee in Mainland China. (3)Others. Note 2: Including retained earnings capitalized of US$4,600 (In thousand of US dollars). Note 3: Including retained earnings capitalized of US$3,600 (In thousand of US dollars). Note 4: JinJing Optical Technology Co., Ltd has sold its stake in Kinko Optical (Suzhou) Co., Ltd. Companyname Accumulated amount of remittance from Taiwan to Mainland China as of September 30,2018			- $ 1,373,625 $ 121,563 $ - 277,259 16,728 - 259,463 2,118 - 106,838 - - 421,245 2,244 - 341,880 ( 3,389) - - 77,508 Investment amount approved by the Investment Commission of the Ministryof Economic Affairs(MOEA)	100% 100% 100% - 100% 100% 50%	121,563 $ 3,979,300 $ 16,728 758,314 2,118 295,331 - - 2,244 148,472 ( 3,389) 8,982 38,754 113,796 Ceiling on investments in Mainland China imposed bythe Investment Commission of MOEA	- $ - - - - - -
Altek Corporation	2,780,310 $		2,989,741 $	$		-

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

AI assistant

Altek — Interim / Quarterly Report 2018

52290_rns_2018-11-14_269e0cfd-11e4-404f-b555-e4804adca4ac.pdf

ALTEK CORPORATION AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

Introduction

Scope of Review

Basis for Qualified Conclusion

Qualified Conclusion

Tsang, Kwok-Wah

November 9, 2018

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

ALTEK CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

1. HISTORY AND ORGANIZATION

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

the Group

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Compliance statement

(2) Basis of preparation

B. Subsidiaries included in the consolidated financial statements:

(7) Impairment of financial assets

(11) Income tax

(12) Revenue recognition

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

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

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

in Note 12(4).

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

(4) Notes and accounts receivable

(5) Inventories

(7) Property, plant and equipment

(8) Investment property

(9) Intangible assets

(11) Short-term borrowings

(12) Short-term notes and bills payable

- (13) Long term borrowings

(14) Pensions

(15) Share-based payment

(16) Provisions

(17) Share capital

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

B. Treasury shares

December 31, 2017

(18) Capital surplus

(19) Retained earnings

(20) Other equity items

(21) Operating revenue

A. Disaggregation of revenue from contracts with customers

B. Contract assets

C. Related disclosures for 2017 operating revenue are provided in Note 12(5).

(22) Other income

(23) Other gains and losses

(26) Employee benefit expenses

(28) Earnings (losses) per share

(29) Transactions with non-controlling interest

(30) Operating leases

(31) Supplemental cash flow information

(32) Changes in liabilities from financing activities

7. RELATED PARTY TRANSACTIONS

(3) Key management compensation

8. PLEDGED ASSETS

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT

COMMITMENTS

Contingencies

10. SIGNIFICANT DISASTER LOSS

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

Altek Interim / Quarterly Report 2018