cpc — Audit Report / Information 2018

Nov 13, 2018

CHIEFTEK PRECISION CO., LTD.

PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS

DECEMBER 31, 2018 AND 2017

For the convenience of readers and for information purpose only, the auditors' report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors' report and financial statements shall prevail.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of CHIEFTEK PRECISION CO., LTD.

Opinion

We have audited the accompanying parent company only balance sheets of CHIEFTEK PRECISION CO., LTD. (the "Company") as at December 31, 2018 and 2017, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers".

Basis for opinion

We conducted our audits in accordance with the "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants" and generally accepted auditing standards in the Republic of China (R.O.C. GAAS). Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Parent Company Only Financial Statements" section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Company's financial statements of the current period are stated as follows:

Adequacy of allowance for valuation loss on individually recognized obsolete or damaged inventories

Description

Refer to Note 4(9) for description of accounting policy on inventory, Note 5 for accounting estimates and assumption uncertainty in relation to inventory valuation, and Note 6(3) for description of inventory. As of December 31, 2018, the balances of inventories and allowance for inventory valuation losses were NT\$561,905 thousand and NT\$13,801 thousand, respectively.

The Company is primarily engaged in the manufacture and sales of linear slide and slide base. As users have high-level quality requirement, there is risk of inventory valuation losses or obsolescence. The Company measures its inventories at the lower of cost and net realizable value. For inventories aged over a certain period, the net realizable value is calculated based on the inventory clearance and historical data of discounts. The allowance for valuation loss mainly arises from individually recognized obsolete inventories. As the basis for individual recognition of inventory obsolescence involves subjective judgment resulting in high degree of estimation uncertainty, and considering that the Company's inventory and the allowance for inventory valuation losses are material to the financial statements, we identified the adequacy of the allowance for inventory valuation loss a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• A. We obtained understanding of the Company's operations and its industry to assess the reasonableness of policies and procedures on allowance for inventory valuation loss.
• B. We verified whether the date used in the inventory aging reports that the Company applied to value inventories were accurate and complete. We recalculated and evaluated the reasonableness of allowance for inventory valuation losses in order to confirm whether the reported information was in line with the Company's policies.
• C. We selected samples from inventory items by each sequence number to verify its realizable value and to evaluate the reasonableness of allowance for inventory valuation loss.

Cut off of operating revenue from export sales

Description

Refer to Note 4(23) for the accounting policies on revenue recognition.

The Company sells in both domestic and foreign countries, and export sales is significant to the Company. Based on the Company's accounting policy, revenue is recognized when the significant risks and rewards

of ownership have been transferred to the customers. The terms and conditions of transactions vary from different export customers, and manual process of obtaining evidence of ownership transferred after delivery and judging the timing of revenue recognition are essential. As export sales involve manual process, daily transaction amounts are significant, timing of revenue recognition may not be in the proper period, and the transaction amounts around the balance sheet date are material, we consider the cut-off of export sales revenue a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• A. We obtained an understanding and evaluated the effectiveness of internal controls relevant to cut-off of revenue, and tested the internal controls over goods delivery and customer billing process.
• B. We selected samples from details of export sales revenue around the balance sheet date, confirmed data completeness, performed cut-off tests on a sampling basis, including checking the terms and conditions of contracts, verifying the evidence of ownership transferred, and examining and analyzing the returns of goods of export sales after the balance sheet date to check whether export revenue, changes in inventories and cost of goods sold were recorded in the appropriate period.

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers", and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement. whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including supervisors, are responsible for overseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with R.O.C. GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if. individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with R.O.C. GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• A. Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• D. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• F. Obtain sufficient appropriate audit evidence regarding the parent company only financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope

and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Lin, Yung-Chih

Independent Accountants

Lin. Tzu-Shu

PricewaterhouseCoopers, Taiwan Republic of China March 12, 2019

The accompanying parent company only 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 parent company only 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.

CHIEFTEK PRECISION CO., LTD.
PARENT COMPANY ONLY BALANCE SHEETS
DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)

			December 31, 2018		December 31, 2017
	Assets	Notes	AMOUNT	℅	AMOUNT		$\frac{0}{2}$
	Current assets
1100	Cash and cash equivalents	6(1)	\$ 513,703	17	\$	345,051	14
1150	Notes receivable, net	$6(2)$ and 12	25,223	$\mathbf{1}$		23,933	1
1170	Accounts receivable, net	$6(2)$ and 12	193,483	6		209,939	9
1180	Accounts receivable-related	7
	parties		331,376	11		215,744	9
1200	Other receivables		4,209			4,028
1210	Other receivables-related parties	-7				45,033	$\boldsymbol{2}$
130X	Inventory	5 and $6(3)$	548,104	18		293,179	12
1410	Prepayments		13,601			8,223
11XX	Total current assets		1,629,699	53		1,145,130	47
	Non-current assets
1550	Investments accounted for under	6(4)
	equity method		404,277	13		306,036	13
1600	Property, plant and equipment	$6(5)$ and 8	848,825	28		814, 135	34
1780	Intangible assets	6(6)(7)	101,446	3		42,907	$\boldsymbol{2}$
1840	Deferred income tax assets	6(21)	27,076	$\mathbf{1}$		16,552	$\mathbf{1}$
1915	Prepayments for equipment	6(5)	52,737	2		11,561
1920	Guarantee deposits paid		1,567			1,561
1980	Other financial assets-non-current 8					1,445
1990	Other non-current assets	$6(6)$ and 7	3,436			73,185	3
15XX	Total non-current assets		1,439,364	47		1,267,382	53
1XXX	Total assets		3,069,063	100	\$	2,412,512	100

(Continued)

CHIEFTEK PRECISION CO., LTD.
PARENT COMPANY ONLY BALANCE SHEETS
DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)

	Liabilities and Equity	Notes		December 31, 2018			December 31, 2017
	Liabilities			AMOUNT	%		AMOUNT	$\overline{\frac{0}{0}}$
	Current liabilities
2100	Short-term borrowings	6(8)(25)	\$	120,000	4	\$	125,000	5
2130	Current contract liabilities	$6(15)$ and 12		94
2150	Notes payable			154,647	5		115,672	5
2170	Accounts payable			67,610	2		90,645	$\overline{4}$
2200	Other payables	6(9)		166,059	5		113,081	5
2230	Current income tax liabilities	6(21)		81,873	3		21,642	$\mathbf{1}$
2310	Advance receipts	12					727
2320	Long-term liabilities, current	$6(10)(25)$ , 8 and 9
	portion			55,134	2		58,533	$\boldsymbol{2}$
21XX	Total current liabilities			645,417	21		525,300	22
	Non-current liabilities
2540	Long-term borrowings	$6(10)(25)$ , 8 and 9		421,116	14		332,100	14
2570	Deferred income tax liabilities	6(21)		25,827	1		8,697
2640	Net defined benefit liabilities	6(11)		7,444			5,674
2670	Other non-current liabilities	6(4)		33,404	1		10,825	$\perp$
25XX	Total non-current liabilities			487,791	16		357,296	15
2XXX	Total liabilities			1,133,208	37		882,596	37
	Equity
	Share capital	6(12)(14)
3110	Share capital - common stock			738,069	24		620,455	26
	Capital reserves	6(13)(14)
3200	Capital surplus			440,667	14		463,051	19
	Retained earnings	6(12)(14)(21)
3310	Legal reserve			97,280	3		73,463	3
3320	Special reserve			12,367			5,928
3350	Unappropriated retained earnings			664,519	22		497,930	21
3400	Other equity interest		t	17,047)	$\blacksquare$	€	$12,367$ ) (	1)
3500	Treasury stocks	6(12)					118,544)(	5)
3XXX	Total equity			1,935,855	63		1,529,916	63
	Significant Contingent Liabilities 6(23), 7 and 9
	and Unrecognized Contract
	Commitments
3X2X	Total liabilities and equity		\$	3,069,063	100	\$	2,412,512	100

CHIEFTEK PRECISION CO., LTD.
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars, except for earning per share amounts)

				Year ended December 31
				2018			2017
	Items	Notes		AMOUNT	%		AMOUNT	%
4000 5000	Sales revenue Operating costs	$6(15)$ and $7$ 6(3)(6)(11)(19)(20)(2	\$	1,836,489	100	\$	1,198,518	100
		3)		$1,060,083$ ) (	58)		788,524)(	66)
5900	Gross profit			776,406	42		409,994	34
5910	Unrealized gain from inter-affiliate accounts	6(4)
5920	Realized gain from inter-affiliate	6(4)	€	94,712) (		$5)$ (	52,500) (	4)
	accounts			52,500	3		61,186	5
5950	Net operating margin			734,194	40		418,680	35
	Operating expenses	6(6)(11)(19)(20) and 7
6100	Selling expenses			45,427) (		$3)$ (	$39,451)$ (	3)
6200	General and administrative expenses			$116,820$ (		6) (	74,813) (	6)
6300	Research and development expenses			78,768) (		$4)$ (	65,382) (	6)
6450	Expected credit impairment profit	12		908
6000 6900	Total operating expenses Operating profit			240,107) (	13)		$179,646$ ) (	15)
	Non-operating income and expenses			494,087	27		239,034	$20\,$
7010	Other income	$6(16)$ , 7 and 12		4,223	$\overline{\phantom{a}}$		7,694	1
7020	Other gains and losses	$6(6)(7)(17)$ and 12		19,948	1	1	34,328) (	3)
7050	Finance costs	6(18)	(	8,602)		ſ	$9,043$ ) (	1)
7070	Share of profit of subsidiaries, associates and joint ventures	6(4)
7000	accounted for under equity method			77,804	4		75,133	6
	Total non-operating income and expenses			93,373	$\overline{5}$		39,456
7900	Profit before income tax			587,460	$\overline{32}$		278,490	3 23
7950	Income tax expense	6(21)		114,743)	6)		40,319)	$\overline{3}$
8200	Profit for the year		S	472,717	26	$\mathbf{s}$	238,171	20
	Other comprehensive income (loss)(Net)
	Components of other comprehensive income (loss) that will not be reclassified to profit or loss
8311	Actuarial loss on defined benefit	6(11)
	plans		(3)	2,005)	$\overline{\phantom{a}}$	$\sqrt{S}$	1,281)
8349	Income tax related to components of $6(21)$ other comprehensive income that will not be reclassified to profit or
	loss Components of other comprehensive			583			217
	income (loss) that will be reclassified
	to profit or loss
8361	Financial statements translation differences of foreign operations Other comprehensive loss for the	6(4)		$4,680$ ) (		$\frac{1}{2}$ (	$6,439$ (	1)
8300	year		$($ \$	$6,102)$ (		$\frac{1}{6}$ (\$	$7,503$ (	1)
8500	Total comprehensive income for the year			466,615	25		230,668
			\$			$\mathbf{\hat{z}}$		19
	Earnings per share (in dollars)	6(22)
9750	Basic		≗		6.40	\$		3.23
9850	Diluted		\$		6.35	$\overline{\$}$		3.21

		PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EOUTLY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)	CHIEFTEK PRECISION CO., LTD
					Retained earnings		Other equity interest
		Share capital-				Unappropriated retained	differences of statements translation Financial foreign
	Notes	common stock	Capital reserve	Legal reserve	Special reserve	camings	operations	Treasury stocks	Total
For the year ended December 31, 2017
Balance at January 1, 2017		620,455 ⇔∣	463,051 ↔	64,905 ↔	وسه	334,354 6Ą	$5,928$ ) ٩	118,544) G	\$1,358,293
Profit for the year						238,171			238, 171
Other comprehensive loss for the year						1,064)	6,439		$7,503$ )
Total comprehensive income (loss) for the year						237,107	$6,439$ )		230,668
Distribution of 2016 profit:
Legal reserve				8,558		8,558)
Special reserve	6(14)				5,928	5,928)
Cash dividends	6(14)					59,045)			59,045
Balance at December 31, 2017		620,455 ∥⊶	463,051 ا⊕	73,463 ⊷	5,928 ↮	497,930 s,	12,367) ٩	118,544) ٣	\$1,529,916
For the year ended December 31, 2018
Balance at January 1, 2018		620, 455 69	463,051 Ø	73,463 ↔	5,928 چينه	497,930 ↮	$12,367$ ) ٷ	118,544) G	\$1,529,916
Profit for the year						472,717			472, 717
Other comprehensive loss for the year						1,422	4,680)		$6,102$ )
Total comprehensive income (loss) for the year						471,295	4,680		466,615
Distribution of 2017 profit:
Legal reserve				23,817		23,817)
Special reserve	6(14)				6,439	$6,439$ )
Cash dividends						59,045)			59,045)
Stock dividends	$6(14)$ $6(12)(14)$ $6(12)(13)$	147,614				147,614)
Retirement of treasury stock		30,000)	$22,384$ )			66,160		118,544
Difference between the acquisition price and carrying amount of subsidiaries	6(14)					1,631			1,631
Balance at December 31, 2018		738,069	440,667 69	97.280 پ	12,367	664,519	17,047 G		\$1,935 855

CHIEFTEK PRECISION CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

For the years ended December 31, 2018 $\frac{2017}{ }$ Notes CASH FLOWS FROM OPERATING ACTIVITIES \$ $\mathbf{\hat{S}}$ 278,490 Profit before tax 587,460 Adjustments Adjustments to reconcile profit (loss) Expected credit impairment profit $908)$ 12 $\overline{(\ }$ $6(16)$ and 12 $1,176)$ Reversal of allowance for doubtful accounts $\overline{\phantom{a}}$ (Gain) loss on inventory market price decline $6(3)$ $\overline{(\ }$ 8,690) 9,119 Share of profit of subsidiaries, associates and $6(4)$ joint ventures accounted for under equity method $\overline{\mathcal{L}}$ 77,804) ( 75,133) Unrealized gain from inter-affiliate accounts $6(4)$ 94,712 52,500 Realized gain from inter-affiliate accounts $6(4)$ $\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\over$ 52,500) ( 61,186) Depreciation $6(5)(19)$ 75,652 98,067 Gain on disposal of property, plant and $6(17)$ equipment $\overline{(\ }$ $2,027$ ) 2,319 1,962 Amortization $6(6)(19)$ $6(6)(7)(17)$ 10,117 Impairment loss 10,162 $3,372$ ) ( Interest income $6(16)$ 775) $\mathcal{L}{\mathcal{L}}$ 8,602 $6(18)$ 9,043 Interest expense Changes in operating assets and liabilities Changes in operating assets Notes receivable $1,290$ ) ( $5,087$ ) $\overline{(\ }$ Accounts receivable 17,364 $35,097$ ) Accounts receivable-related parties $115,632$ ) ( $64,478$ ) $\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\overline{\over$ Other receivables $181)$ ( $2,540)$ $\mathcal{L}{\mathcal{L}}$ Other receivables-related parties 4,525) 4,602 - ( $246, 235)$ 93,720) Inventories ( - ( $5,378$ ) ( Prepayments $2,565)$ $\mathcal{L}_{\mathcal{L}}$ Changes in operating liabilities Current contract liabilities 94 40,200 46,615 Notes payable 23,035) 47,777 Accounts payable l Other payables 43,425 46,356 Advance receipts $727)$ 469 235) Net defined benefit liabilities $232)$ Cash inflow generated from operations 348,560 252,019 Interest received 3,276 521 8,596) $9,075)$ Interest paid 47,323) 13,594) Income tax paid $\overline{229,871}$ 295.917 Net cash flows from operating activities

(Continued)

CHIEFTEK PRECISION CO., LTD.
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

				For the years ended December 31,
	Notes		2018		2017
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in other non-operating
receivables due from related parties		\$	40,431	(	40,431)
Interest received from borrowings and lending
among related parties			96		254
Cash paid for acquisition of investments accounted	6(4)
for under equity method-subsidiaries		(	46,381) (		15,170)
Cash paid for acquisition of property, plant and	6(24)
equipment			58,123) (		31,934)
Interest paid for acquisition of property, plant and	6(5)(18)(24)
equipment			845)
Proceeds from disposal of property, plant and
equipment					2,600
Cash paid for acquisition of intangible assets	6(6)	ţ.	$1,170$ ) (		3,899)
Increase in prepayment for equipment			84,228) (		8,758)
(Increase) decrease in guarantee deposits paid			6)		412
Decrease (increase) in other financial assets-non-
current			1,445		15)
Increase in other non-current assets			56)		35,671)
Net cash flows used in investing activities			148,837)		132,612)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings	6(25)	l	5,000)
Increase in long-term borrowings	6(25)		510,000
Decrease in long-term borrowings	6(25)		424,383) (		58,533)
Payment of cash dividends	6(14)		59,045)		59,045)
Net cash flows from (used in) financing
activities			21,572		117,578)
Net increase (decrease) in cash and cash equivalents			168,652		$20,319$ )
Cash and cash equivalents at beginning of year	6(1)		345,051		365,370
Cash and cash equivalents at end of year	6(1)	\$	513,703	$\frac{1}{2}$	345,051

CHIEFTEK PRECISION CO., LTD. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

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

1. HISTORY AND ORGANIZATION

• (1) CHIEFTEK PRECISION CO., LTD. (the "Company") was incorporated as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.) on October 19. 1998. The Company is primarily engaged in research, development, manufacture and sale of miniature linear guide, miniature ball screw, miniature linear modules, electro-optics equipment and semiconductor process equipment.
• (2) The common shares of the Company have been listed on the Taipei Exchange since December 28, 2012.

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

These parent company only financial statements were authorized for issuance by the Board of Directors on March 12, 2019.

• 1. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards ("IFRS") as endorsed by the Financial Supervisory Commission ("FSC")

New standards, interpretations and amendments as endorsed by the FSC effective from 2018 are as follows:

	Effective date by
	International Accounting
New Standards, Interpretations and Amendments	Standard Board ("IASB")
Amendments to IFRS 2, 'Classification and measurement of share- based payment transactions'	January 1, 2018
Amendments to IFRS 4, 'Applying IFRS 9, Financial instruments with IFRS 4, Insurance contracts'	January 1, 2018
IFRS 9, 'Financial instruments'	January 1, 2018
IFRS 15, 'Revenue from contracts with customers'	January 1, 2018
Amendments to IFRS 15, 'Clarifications to IFRS 15, Revenue from contracts with customers'	January 1, 2018
Amendments to International Accounting Standards ("IAS") 7, 'Disclosure initiative'	January 1, 2017
Amendments to IAS 12, 'Recognition of deferred tax assets for unrealized losses'	January 1, 2017

	Effective date by International Accounting
New Standards, Interpretations and Amendments	Standard Board ("IASB")
Amendments to IAS 40, 'Transfers of investment property'	January 1, 2018
International Financial Reporting Interpretations Committee("IFRIC") 22, 'Foreign currency transactions and advance consideration'	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1, 'First-time adoption of International Financial Reporting Standards'	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, 'Disclosure of interests in other entities'	January 1, 2017
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IAS 28, 'Investments in associates and joint ventures'	January 1, 2018

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

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

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

New Standards, Interpretations and Amendments	Effective date by IASB
Amendments to IFRS 9, 'Prepayment features with negative compensation'	January 1, 2019
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 ventures'	January 1, 2019
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 Company's financial condition and financial performance based on the Company'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. The Company expects to recognise the lease contract of lessees in line with IFRS 16. However, the

Company does not intend to restate the financial statements of prior period (referred herein as the "modified retrospective approach"). On January 1, 2019, it is expected that right-of-use asset and lease liability will be both increased by \$136,168.

(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:

New Standards, Interpretations and Amendments	Effective date by IASB
Amendments to IAS 1 and IAS 8, 'Disclosure Initiative-Definition of	January 1, 2020
Material'
Amendments to IFRS 3, 'Definition of a business'	January 1, 2020
Amendments to IAS 10 and IAS 28, 'Sale or contribution of assets	To be determined
between an investor and its associate or joint ventures'	by IASB
IFRS 17, 'Insurance contracts'	January 1, 2021

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Statement of compliance

The parent company only financial statements of the Company have been prepared in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers".

• (2) Basis of preparation
• A. Except for the defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation, these parent company only financial statements have been prepared under the historical cost convention.
• 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 Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5, critical accounting judgements, estimates and key sources of assumption uncertainty.
• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Company 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 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with IAS 39, IAS 11, IAS 18 and related financial reporting interpretations. Please refer to Note 12(4), 'Effects on initial application of IFRS 9, and information on application of IAS 39' and Note 12(5), 'Effects of initial application of IFRS 15 and information on application of IAS 18' for details of significant accounting policies and details of significant accounts.

(3) Foreign currency translation

Items included in the financial statements of each of the Company's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The parent company only financial statements are presented in New Taiwan dollars, which is the Company's functional and presentation currency.

• A. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.
• B. Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon retranslation at the balance sheet date are recognized in profit or loss.
• C. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are retranslated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
• D. All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within 'other gains and losses'.
• (4) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

  • (a) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
  • (b) Assets held mainly for trading purposes;
  • (c) Assets that are expected to be realized within twelve months from the balance sheet date;
  • (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

• (a) Liabilities that are expected to be settled within the normal operating cycle;
• (b) Liabilities arising mainly from trading activities;
• (c) Liabilities that are to be settled within twelve months from the balance sheet date;
• (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
• $(5)$ Cash equivalents
• A. Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value.
• B. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitment in operations are classified as cash equivalents.
• (6) Accounts and notes receivable
• A. Accounts and notes receivable entitle the Company 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.
• (7) Impairment of financial assets

For debt instruments measured as financial assets at amortized cost, at each reporting date, the Company 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 Company recognizes the impairment provision for lifetime ECLs.

(8) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(9) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in process comprises raw materials, direct labor, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course

of business, less the estimated cost of completion and applicable variable selling expenses. When the cost of inventory is higher than net realizable value, a write-down is provided and recognized in operating costs. If the circumstances that caused the write-down cease to exist, such that all or part of the write-down is no longer needed, it should be reversed to that extent and recognized as deduction of operating costs.

$(10)$ Investments accounted for using equity method / subsidiaries

• A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
• B. Unrealized gains or losses resulting from inter-company transactions with subsidiaries are eliminated. Necessary adjustments are made to the accounting policies of subsidiaries, to be consistent with the accounting policies of the Company.
• C. After acquisition of subsidiaries, the Company recognizes proportionately the share of profit and loss and other comprehensive income in the income statement as part of the Company's profit and loss and other comprehensive income, respectively. When the share of loss from a subsidiary exceeds the carrying amount of Company's interest in that subsidiary, the Company continues to recognize its share in the subsidiary's loss proportionately.
• D. Changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.
• E. According to "Regulations Governing the Preparation of Financial Statements by Securities Issuers", "Profit for the year" and "Other comprehensive income for the year" reported in an entity's nonconsolidated statement of comprehensive income, shall equal to "profit for the year" and "Other comprehensive income" attributable to owners of the parent reported in that entity's consolidated statement of comprehensive income. Total equity reported in an entity's nonconsolidated financial statements, shall equal to equity attributable to owners of parent reported in that entity's consolidated financial statements.

(11) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.

• B. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. If expectations for the assets' residual values and useful lives differ from previous estimates or the patterns of consumption of the assets' future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, 'Accounting Policies, Changes in Accounting Estimates and Errors', from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Assets		Useful lives
Buildings and structures			$3 \sim 50$ years
Machinery and equipment			$2 \sim 12$ years
Transportation equipment			$5 \sim 8$ years
Office equipment			$2 \sim 8$ years
Other equipment			$2 \sim 10$ years

(12) Operating leases (lessee)

Payments made under an operating lease (net of any incentives received from the lessor) are recognized in profit or loss on a straight-line basis over the lease term.

(13) Intangible assets

A. Trademarks and patents

Separately acquired trademarks of corporate identity system and patents are stated initially at cost. Trademarks and patents have a finite useful life and are amortized on a straight-line basis over their estimated useful lives of 10 to 20 years.

B. Computer software

Computer software is stated initially at cost and amortized on a straight-line basis over its estimated useful life of 3 years.

C. Turn-key professional technique

The subsidiaries, CSM Maschinen GmbH, was commissioned to develop and design linear guide, robotic arm and equipment for exhibition which are stated initially at cost and amortized on the economic life of Turn-key professional technique.

D. Other intangible assets

Technology contribution is stated initially at cost, and regarded as having an indefinite useful life as it was assessed to generate continuous net cash inflow in the foreseeable future. Technology contribution is not amortized, but is tested annually for impairment.

(14) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where

there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been recognized.

$(15)$ Borrowings

• A. Borrowings comprise long-term and short-term banks loans. 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 drawdown 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 other non-current assets for liquidity services and amortized over the period of the facility to which it relates.

(16) 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.
• (17) Derecognition of financial liabilities

A financial liability is derecognized when the obligation specified in the contract is either discharged or cancelled or expires.

(18) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

$(19)$ Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expense in that period when the employees render service.

• B. Pensions
• (a) Defined contribution plan

For defined contribution plan, the contributions are recognized as pension expense when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.

• (b) Defined benefit plan
• i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.
• ii. Remeasurements arising on defined benefit plan are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.
• C. Employees' compensation and directors' and supervisors' remuneration

Employees' compensation and directors' and supervisors' remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

$(20)$ Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.
• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
• C. Deferred tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable

that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.

• D. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred tax assets are reassessed.
• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.
• F. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.

$(21)$ Share capital

• A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.
• B. Where the Company repurchases the Company's equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is resolved from equity attributable to the Company's equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.

(22) Dividends

Dividends are recorded in the Company's financial statements in the period in which they are resolved by the Company's shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(23) Revenue recognition

Sales of goods

A. The Company manufactures and sells linear guide, ball screw and linear modules. Sales are recognized when control of the products has transferred, being when the products are delivered to the external customer, and there is no unfulfilled obligation that could affect the buyer's 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 customer, and either the customer has accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied.

• B. Sales revenue is recognized based on the contract price, net of output tax and sales returns and discounts. The sales are made with a credit term of $30 \sim 180$ days after monthly closing. As the time interval between the transfer of committed goods and the payment of customer does not exceed one year, the Company does not adjust the transaction price to reflect the time value of money.
• 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.

(24) Government grants

Government grants are recognized at their fair value only when there is reasonable assurance that the Company will comply with any conditions attached to the grants and the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes expenses for the related costs for which the grants are intended to compensate.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company's accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below: Evaluation of inventories

• A. As inventories are stated at the lower of cost and net realizable value, the Company must determine the net realizable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value. Such an evaluation of inventories is calculated based on the inventory clearance and historical date of discounts. Therefore, there might be material changes to the evaluation.
• B. As of December 31, 2018, the carrying amount of inventories was \$548,104.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

December 31, 2018 December 31, 2017
953
344,098
345,051
345,051

A. The Company 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. Details of the Company's cash and cash equivalents pledged to others as collateral as of December 31, 2018 and 2017 are provided in Note 8, 'Pledged assets'.

(2) Notes and accounts receivable, net

		December 31, 2018	December 31, 2017
Notes receivable	S	25,223	23,933
		December 31, 2018 December 31, 2017
Accounts receivable		193,736 \$	211,100
Less: Allowance for doubtful accounts		253)	1,161)
		193,483	209,939

A. The ageing analysis of accounts receivable and notes receivable that were past due is as follows:

		December 31, 2018			December 31, 2017
		Accounts receivable	Notes receivable		Accounts receivable	Notes receivable
Not past due	\$	179,194	\$ 25,106	S	189,712	\$ 23,746
Less than 30 days		1,871	117		2,848	187
31 to 90 days		3,157			13,465
91 to 180 days		9,512			2,755
Over 180 days					2,320
	c	193,736	\$ 25,223	S	211,100	\$ 23.933

The above ageing analysis was based on past due date.

B. As at December 31, 2018 and 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 and accounts receivable were its book value.

• C. As of December 31, 2018 and 2017, the Company does not hold any collateral as security for accounts receivable.
• D. Information relating to credit risk is provided in Note 12(2), 'Financial instruments'.
• E. Credit risk information for the year ended December 31, 2017 is provided in Note 12(4), 'Effects on initial application of IFRS 9 and information on application of IAS 39 for the year ended December 31, 2017'.

(3) Inventories

				December 31, 2018
				Allowance for
		Cost		market price decline		Book value
Raw materials	\$	110,259	\$		S	110,259
Supplies		76,399		3,245)		73,154
Work in progress		320,238		9,960)		310,278
Finished goods		55,009		596)		54,413
	S	561,905	(\$	13,801)	\$	548,104
				December 31, 2017
				Allowance for
		Cost		market price decline		Book value
Raw materials	$\mathbb{S}$	44,081	(	$295)$ \$		43,786
Supplies		56,945		3,380)		53,565
Work in progress		171,935		14,530)		157,405
Finished goods		42,709		4,286)		38,423
	S	315,670	(\$	22,491)	S	293,179

The cost of inventories recognized as expense for the year:

		For the years ended December 31,
		2018	2017
Cost of goods sold	S	$1,069,146$ \$	780,990
(Reversal of allowance) provision for inventory
market price decline (Note)		8,690)	9,119
Loss (gain) on physical count of inventory		248	1,355)
Revenue from sale of scraps		621)	230)
		1,060,083	788.524

(Note) The Company reversed a previous inventory write-down which was accounted for as reduction of cost of goods sold as certain inventory items which were previously provided with allowance were subsequently sold and scrapped in 2018.

(4) Investments accounted for under equity method

A. Movements in investment accounted for under equity method were as follows:

		For the years ended December 31,
		2018		2017
At January 1	S	295,211	S	202,661
Addition of investments accounted for using
equity method		44,750		15,170
Share of profit or loss of subsidiaries,
associates and joint ventures accounted
for under equity method		77,804		75,133
Other equity interest-financial statement
translation differences of foreign operations		$4,680$ (		6,439
Unrealized gain from downstream sales		94,712) (		52,500)
Realized gain from downstream sales		52,500		61,186
At December 31		370,873		295,211

B. Details of investment accounted for under equity method (Negative amounts were listed as "Other non-current liabilities")

		December 31, 2018		December 31, 2017
CHIEFTEK PRECISION HOLDING CO., LTD.	S	343,745	ß.	294,636
CHIEFTEK PRECISION INTERNATIONAL LLC		60,532		11,400
		404,277		306,036
cpc Europa GmbH		$24,075$ ) (		10,107
CSM Maschinen GmbH		9,329)		718)
		33,404)		10,825)
		370,873	S	295,211

C. For more information regarding the subsidiaries of the Company, please refer to Note 4(3), 'Basis of consolidation' of the 2018 consolidated financial statements.

D. As of December 31, 2018 and 2017, no investments accounted for under equity method held by the Company were pledged to others.

At January 1, 2018		Land		structures Buildings and 5		Machinery and Transportation equipment		equipment		equipment Office		equipment Other	before acceptance and equipment Construction in progress inspection			Total
Accumulated depreciation Cost		\$316,864	↔	105,033) 463,580		671,635) 773,125		2,598) 3,369	∽	12,704) 13,514		109,659) 127,932		17,380	↮	901,629) 1,715,764
2018	ఈ∣	316,864	÷۹	358,547	↮	101,490	↮	771	∽	810	S	18,273	↔	↮ 17,380		814,135
At January 1 Additions		\$316,864	$\boldsymbol{\omega}$	1,468 358,547	↔	101,490 12,609	S	771 517	↔	810 342	$\Theta$	18,273	↔	↔ 17,380		814,135
Transferred from prepayments for												5,878		46,476		67,290
equipment														43,052		43,052
Transferred after acceptance inspection						51,204						1,871		53,075)
Depreciation				13,345)		53,466)		181)		268)		8,392)				75,652)
Disposals-Cost				t		1,144)		349)		75)		427)				1,995)
$-A$ ccumulated depreciation						1,144		349		75		427				1,995
At December 31	مە	316,864	ఈ∣	346,670	69	111,837	↮	,107		884	↔	17,630	53,833 ⊷	⊷		848,825
At December 31, 2018
Cost	s S	316,864	S	465,048		835,794		3,537	G	13,781	∽	135,254	53,833			\$1,824,111
Accumulated depreciation				118,378)		723,957)		2,430)		(2, 897)		(17,624)				975,286)
	↔	316,864	69	346,670	s	111,837	↮	1,107	↔	884	မာ	17,630	53,833 ⊷	↮		848,825

(5) Property, plant and equipment

$-26$ ~

					Buildings									and equipment Construction in progress
					$\vec{a}$				Machinery and Transportation		Office		Other	before acceptance
At January 1, 2017		Land			structures		equipment		equipment		equipment		equipment	inspection			Total
Accumulated depreciation Cost		\$316,864		⊷	91,795) 462,353		626,200) 792,526	∽	3,369) 3,469	∽	12,589) 13,083		102,753) 118,518	↔	2,837	⊷	836,706) 1,709,650
	બ્ર∣	316,864		↔	370,558	↔∣	166,326	↮	$\overline{100}$	⊷	494	↔	15,765	↔	2,837	⇔	872,944
2017
At January	s		316,864	$\bm{\omega}$	370,558 722	⊷	166,326	5	100	69	494	Ø	15,765	မာ	2,837	↔	872,944
Additions							11,061		790		715		8,165		15,344		36,797
Transferred from prepayments for
equipment															3,034		3,034
Transferred after acceptance inspection					801								3,034		3,835)
Depreciation					13,534)		75,324)		119		399		8,691)				98,067)
Disposals-Cost					296)		30,462)		(068)		284)		1,785)				33,717)
- Accumulated depreciation					296		29,889		890		284		1,785				33,144
At December 31	⊷	316,864		Ģ	358,547	69	101,490	↮	771	sĄ,	810	₩	18,273	⊷	17,380	⊷	814,135
At December 31, 2017
Cost	S	316,864		↔	463,580		773,125	⊷	3,369	⊷	13,514	S	127,932	↔	17,380		\$1,715,764
Accumulated depreciation					105,033)		671,635)		2,598)		12,704)		(09, 659)				901,629)
	∞∣	316,864		↮	358,547	€	101,490	69	111	↔	810	69	18,273	↮	17,380	s	814,135

$\sim$ 27 $\sim$

$\label{eq:2.1} \frac{1}{\sqrt{2}}\int_{0}^{\infty}\frac{1}{\sqrt{2\pi}}\left(\frac{1}{\sqrt{2\pi}}\right)^{2}d\mu\,d\mu\,d\mu\,d\mu\,d\mu\,d\mu\,d\mu\,d\mu\$

A. Amount of borrowing costs capitalized as part of property, plant and equipment and the range of the interest rates for such capitalization are as follows:

	For the years ended December 31,
	2018	2017
Amount capitalized	845	-
Interest rate	1.51%

B. Information about the property, plant and equipment that were pledged to others as collateral as of December 31, 2018 and 2017 is provided in Note 8, 'Pledged assets'.'

$\ddot{\phantom{a}}$

$\epsilon$

								Tum-key
								professional
	Trademarks			Patents		Software		technique		Others		Total
At January 1, 2018 Cost		$\frac{8}{20}$ ∽		9,231		9,173	∽			60,000		78,982
Accumulated amortization		578)		1,945)		5,592)						21,615)
Accumulated impairment										13,500) 14,460)		14,460)
Net value			⊷	7,286	⊷	3,581	↮		↮	32,040	⊷	42,907
Net value at January 1, 2018	⊷		∽	7,286	မာ	3,581	မာ		∽	32,040	↮	42,907
Additions-acquired separately				57		1,113						1,170
Transferred from long-term
prepayments-related parties (Note)								69,805				69,805
Amortization				583)		1,736)						2,319)
Impairment loss										10,117)		10,117)
Net value at December 31, 2018			↔	6,760		2,958	↔	69,805	⊷	21,923	∽	101,446
At December $31,2018$
$\cot$		578		9,288		10,286	↔	69,805		60,000		149,957
Accumulated amortization		578)		2,528)		7,328)				13,500)		23,934)
Accumulated impairment										24,577)		24,577)
Net value			↮	6,760	∽	2,958	S	69,805		21,923	↮	101,446

(6) Intangible assets

(Note) Listed as 'Other non-current assets'.

$-29-$

	Trademarks	Patents	Software	Others	Total
At January 1, 2017
Cost	578	9,146	5,359	60,000	75,083
Accumulated amortization	578)	1,363)	4,212)	13,500	19,653)
Accumulated impairment				4,298)	4,298)
Net value		7,783	v. 147	42,202	51,132
Net value at January 1, 2017		7,783 85	∽ 1,147	42,202	51,132
Additions-acquired separately			3,814		3,899
Amortization		582) (	1,380)		1,962)
Impairment loss				10,162)	10,162)
Net value at December 31, 2017		7,286	မာ 3,581	32,040	42,907
At December 31, 2017
Cost	578	9,231	9,173	60,000	78,982
Accumulated amortization	578)	$1,945$ )	5,592)	13,500	21,615)
Accumulated impairment				14,460)	14,460)
Net value		7,286	3,581	32,040	42,907

$~50~$

• A. For the years ended December 31, 2018 and 2017, no borrowing costs were capitalized as part of intangible assets.
• B. Details of amortization on intangible assets are as follows:

	For the years ended December 31,
	2018	2017
Manufacturing overhead		104
General and administrative expenses	235	222
Research and development expenses	2.084	1,636
	2,319	1,962

C. Impairment information about the intangible assets is provided in Note $6(7)$ "Impairment of nonfinancial assets".

(7) Impairment of non-financial assets

A. The Company recognized impairment loss for the years ended December 31, 2018 and 2017 of \$10,117 and \$10,162, respectively (Listed as 'Other gains and losses'). Details of such loss are as follows:

			For the years ended December 31,
		2018	2017
		Recognized in		Recognized in
		other		other
	Recognized in	comprehensive	Recognized in	comprehensive
	profit or loss	income	profit or loss	income
Impairment loss- intangible assets	10,117	S $\overline{\phantom{a}}$	10,162

B. The Company has assessed that the recoverable amount of the special technology (shown as 'intangible assets – other intangible assets') acquired by technology contribution of the Company was impaired based on the residual life of the patent. For the years ended December 31, 2018 and 2017, the Company recognized impairment loss of \$10,117 and \$10,162, respectively. The recoverable amount was assessed based on the use right of the intangible assets. For the years ended December 31, 2018 and 2017, the discount rates were 7% and 6.68%, respectively.

(8) Short-term borrowings

Nature	December 31, 2018	Interest rate range	Collateral
Bank unsecured borrowings \$	120,000	$0.99\% \sim 1.03\%$	None
Nature	December 31, 2017	Interest rate range	Collateral
Bank unsecured borrowings \$	125,000	$1.03\% \sim 1.05\%$	None

For more information about interest expense recognized by the Company for the years ended December 31, 2018 and 2017, please refer to Note 6(18), "Finance costs".

$(9)$ Other payables

		December 31, 2018		December 31, 2017
Accrued salaries and bonuses	S	55,619	- \$	51,775
Employees' compensation and directors' and
supervisors' remuneration payable		61,248		29,687
Equipment payable		14,783		5,236
Miscellaneous payable		8.433		6,746
Others		25,976		19,637
		166,059		113,081

(10) Long-term borrowings

			Interest rate
Nature	Expiry date	December 31, 2018	range	Collateral
Long-term bank borrowings
Secured borrowings	September 23, 2021 $\sim$ August 21, 2023	\$ 416,250	$1.35\% \sim$ 1.80%	Land, buildings and structures
Unsecured borrowings	November 1, 2020 $\sim$ October 5, 2022	60,000 476,250	$1.29\%$ ~ 1.80%	None
Less: Current portion		55,134) 421,116

$\ddot{\phantom{0}}$

$\sim$

				Interest rate
Nature	Expiry date	December 31, 2017		range	Collateral
Long-term bank borrowings
Secured borrowings	February 17, 2019 $\sim$ September 23, 2021	- \$	376,050	$1.27\% \sim$ 2.01%	Time deposits (Note), land, buildings and structures. machinery and equipment
Unsecured borrowings September 23, 2019			14,583	1.27%	None
			390,633
Less: Current portion			58,533)
			332,100

(Note) Listed as 'Other financial assets – non-current'.

For more information about interest expense recognized by the Company for the years ended December 31, 2018 and 2017, please refer to Note 6(18), "Finance costs".

$(11)$ Pensions

• A.(a) The Company has 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. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next March.
• (b) The amounts recognized in the balance sheet are as follows:

		December 31, 2018 December 31, 2017
Present value of defined benefit obligations	$12,050$ (\$)		9.821)
Fair value of plan assets	4.606		4.147
Net defined benefit liability	$7,444$ ) (\$		5,674)

(c) Movements in net defined benefit liabilities are as follows:

		Present value of
		defined benefit		Fair value of plan		Net defined
		obligations		assets		benefit liability
Year ended December 31, 2018
Balance at January 1	$\left( \mathbb{S}\right)$	9,821)	S	4,147	(	5,674)
Interest (expense) income		107)		45		62)
		9,928)		4,192		5,736)
Remeasurements:
Return on plan assets				117		117
Change in financial assumptions		211)				211)
Experience adjustments		1,911)				1,911)
		2,122)		117		2,005)
Pension fund contribution				297		297
Balance at December 31	(\$	12,050)	\$	4,606	$($ \$	7,444)
		Present value of
		defined benefit		Fair value of plan		Net defined
		obligations		assets		benefit liability
Year ended December 31, 2017
Balance at January 1	$($ \$	8,437)	\$	3,812	$($ \$	4,625)
Interest (expense) income		118)		53		65)
		8,555)		3,865		4,690)
Remeasurements:
Return on plan assets				$15)$ (		15)
Change in financial assumptions		294)				294)
Experience adjustments		972)				972)
		1,266)		15)		1,281)
Pension fund contribution				297		297
Balance at December 31	(\$	9,821)	$\mathbf{3}$	4,147	(S)	5,674)

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company's defined benefit pension plan in accordance with the Fund's annual investment and utilisation plan and the "Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund" (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, the Company shall make payment for the deficit after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2018 and 2017 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

		For the years ended December 31,
	2018	2017
Discount rate	0.90%	1.10%
Future salary increases	3.25%	$3.25\%$

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with Taiwan Life Insurance 5th Mortality Table.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

		Discount rate				Future salary increases
						Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%
December 31, 2018
Effect on present value of
defined benefit obligation (\$)	262)		274	S	237		228)
December 31, 2017
Effect on present value of
defined benefit obligation (\$	246		258	S	228		219)

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

• (f) Expected contributions to the defined benefit pension plan of the Company for the year ending December 31, 2019 amount to \$297.
• (g) As of December 31, 2018, the weighted average duration of the retirement plan is 10 years. The analysis of timing of the future pension payment was as follows:

Within 1 year	1,204 \$
2-5 years	5,848
Over 6 years	6,045
	13,097

B. Effective July 1, 2005, the Company has 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 contributes monthly an 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. The pension costs under the defined contribution pension plan of the Company for the years ended December 31, 2018 and 2017 were \$13,025 and \$9,525, respectively.

$(12)$ Share capital - common stock

A. Movements in the number of the Company's ordinary shares outstanding are as follows (in thousands of shares):

	For the years ended December 31,
At January 1	2018	2017
	59,046	59,046
Stock dividends	14,761
At December 31	73,807	59,046

• B. On May 28, 2018, the Company's stockholders adopted a resolution to issue shares of common stock due to capitalization of retained earnings of \$147,614 and obtained approval from the SFC. The effective date of capitalization was set on August 5, 2018.
• C. Treasury shares
• (a) Reason for share reacquisition and movements in the number of the Company's treasury shares are as follows (in thousands of shares):

		For the year ended December 31, 2018
	Shares at beginning			Shares at
Reason for reacquisition	of year	Increase	Decrease	end of year
To be reissued to employees	3,000		3,000
		For the year ended December 31, 2017
	Shares at
	beginning			Shares at
Reason for reacquisition	of year	Increase	Decrease	end of year
To be reissued to employees	3,000			3,000

• (b) Pursuant to the 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 realized capital surplus. As of December 31, 2018 and 2017, the treasury shares were $\frac{6}{3}$ and \$118,544, respectively.
• (c) Pursuant to the 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 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.

• D. The Company acquired a total of 3 million treasury shares during the period from November 2014 to January 2015. On February 9, 2018, the shares were retired as resolved by the Board of Directors. The capital reduction became effective on the same date and the registration has been approved by the Southern Taiwan Science Park Bureau, Ministry of Science and Technology. The Company debited 'share capital - common stock' and 'capital surplus-share premium' in the amounts of \$30,000 and \$22,384, respectively, and 'unappropriated retained earnings' was offset by the remaining amount of \$66,160.

• E. As of December 31, 2018, the Company's authorized capital was \$1,200,000 (including \$30,000) reserved for employee stock options), and the paid-in capital was \$738,069 (73,807 thousand shares) with par value of \$10 (in dollars) per share.

(13) Capital reserve

2018	Share premium			Total
At January 1	\$ 462,937		114	- \$	463.051
Retirement of treasury shares	22,384)		$\blacksquare$		22,384)
At December 31	440,553	\$	- 114		440,667
2017	Share premium		Others		Total
Balances at beginning and end of year	462.937	S	114		463.051

• A. 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 Law requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.
• B. Information relating to capital surplus offset by the retirement of treasury shares is provided in Note $6(12)$ , 'Share capital – common stock'.

(14) Retained earnings

• A. The legal reserve shall be exclusively used to cover accumulated deficit, to issue new stocks, or to distribute cash to shareholders in proportion to their share ownership. The use of legal reserve for the issuance of stocks or cash dividends to shareholders in proportion to their share ownership is permitted provided that the balance of such reserve exceeds 25% of the Company's paid-in capital.
• B. According to the Company's Articles of Incorporation, the Company's dividend policy is to distribute the current year's earnings, if any, in the following order:
• (1) pay all taxes and dues;

• (2) offset any loss of prior years;

• $(3)$ set aside 10% as legal reserve;

• (4) set aside or reverse special reserve as required by regulations or the Competent Authority;
• (5) The appropriation of the remaining amount after deducting items (1) to (4), along with the unappropriated retained earnings of prior years can be distributed in accordance with a resolution passed during a meeting of the Board of Directors and approved at the shareholders' meeting. However, the distribution of dividends shall not be lower than 20% of the current year's profit after deducting items (1) to (4). In order to continually expand the scale of operation, increase competitiveness as well as cooperate with the Company's long-term development, future capital requirements and long-term financial plan, the dividend policy is to distribute stock dividends and partially as cash dividends. Cash dividends shall not be less than 10% of the total dividends distributed to shareholders.
• C. 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. As of December 31, 2017, pursuant to the regulations for the deduction amount to stockholders' equity from other equity items, the Company has set aside special reserve of \$12,367 which cannot be distributed to shareholders.
• D. The Company recognized cash dividends distributed to owners amounting to \$59,045 (\$1.0 (in dollars) per share) and \$59,045 (\$1.0 (in dollars) per share) and stock dividends amounting to \$147,614 (\$2.5 (in dollars) per share) and $\gamma$ — for the years ended December 31, 2018 and 2017, respectively. The Board of Directors has not yet adopted a resolution to distribute dividends as of March 12, 2019. Information about the distribution of dividends by the Company as proposed by the Board of Directors will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.
• E. Information relating to retained earnings offset by the retirement of treasury shares is provided in Note $6(12)$ , 'Share capital – common stock'.
• F. For the year ended December 31, 2018, the Company's changes in retained earnings resulted from difference between proceeds and carrying amount from acquisition of subsidiary. Please refer to Note 6(22) of the Company and its subsidiaries' 2018 consolidated financial statements for the information on transactions with non-controlling interest.

(15) Operating revenue

A. Disaggregation of revenue from contracts with customers The Company derives revenue from the transfer of goods at a point in time in the following major geographical regions:

2018	China	Taiwan	Germany	America	Others	Total
Revenue from external
customer contracts						\$517,459 \$421,983 \$256,591 \$113,916 \$526,540 \$1,836,489
Timing of revenue
$-$ At a point in time						\$517,459 \$421,983 \$256,591 \$113,916 \$526,540 \$1,836,489

B. Contract liabilities

• (1) The Company has recognized revenue-related contract liabilities amounted to \$94.
• (2) Revenue recognized that was included in the contract liability balance at January 1, 2018 was \$718 for the year ended December 31, 2018.
• C. Related disclosures on operating revenue for the year ended December 31, 2017 are provided in Note 12(5), 'Effects of initial application of IFRS 15 and information on application of IAS 18 for the years ended December 31, 2017'.

(16) Other income

	For the years ended December 31,
	2018			2017
Interest income:
Interest income from bank deposits	\$	2,707	S	518
Other interest income		665		257
Revenue from management services				4,311
Government grant income				1,150
Other income:
Reversal of allowance for doubtful accounts				1,176
Other income – others		851		282
	D	4.223		7.694

(17) Other gains and losses

	For the years ended December 31,
	2018	2017
Currency exchange gain (loss)	$30,065$ (\$)	26,193)
Gain on disposal of property, plant, and
equipment		2,027
Impairment loss	10,117	10,162)
	19.948	34,328)

$(18)$ Finance costs

	For the years ended December 31,
		2018		2017
Interest expense on bank borrowings		9.447		9,043
Less: Capitalization of qualifying assets		845)
		8.602		9.043

$\label{eq:1} \mathbf{v} = \mathbf{v} + \mathbf{v} + \mathbf{v} + \mathbf{v} + \mathbf{v} + \mathbf{v}$

(19) Expenses by nature

	For the year ended December 31, 2018
		Operating cost		Operating expense		Total
Employee benefit expense	S	285,494 \$		142,178	\$	427,672
Depreciation		67,800		7,852		75,652
Amortization				2,319		2,319
		353,294	\$	152,349	\$	505,643
	For the year ended December 31, 2017
		Operating cost		Operating expense		Total
Employee benefit expense	\$	202,469	\$	99,220	\$	301,689
Depreciation		89,911		8,156		98.067
Amortization		104		1,858		1,962
		292,484	\$	109,234	S	401,718

(20) Employee benefit expense

	For the year ended December 31, 2018
		Operating cost		Operating expense		Total
Wages and salaries	S	245,418	-S	116,241	\$	361,659
Labor and health insurance expense		22,821		6,842		29,663
Pension costs		9,774		3,313		13,087
Directors' and supervisors'
remuneration				12,787		12,787
Other personnel expenses		7,481		2,995		10,476
	\$	285,494	\$	142,178	\$	427,672
	For the year ended December 31, 2017
		Operating cost	Operating expense			Total
Wages and salaries	\$	174,493	Ŝ.	83,428	\$	257,921
Labor and health insurance expense		16,000		5,540		21,540
Pension costs		6,688		2,902		9,590
Directors' and supervisors'
remuneration				4,974		4,974
Other personnel expenses		5,288		2,376		7,664
	\$	202,469	\$	99,220	\$	301,689

• A. As of December 31, 2018 and 2017, the Company had 543 and 476 employees, respectively and six of the employees were directors who haven't served as employees both as of December 31, 2018 and 2017.
• B. According to the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees' compensation and directors' and supervisors' remuneration. The ratio shall be 3% to 8% for employees' compensation and shall not be higher than 3% for directors' and supervisors' remuneration. On May 28, 2018, the Company's stockholders adopted a resolution to amend the Articles of Incorporation of the Company. The ratio shall be 3% to 15% for employees' compensation and shall not be higher than 3% for directors' and supervisors' remuneration.
• C. For the years ended December 31, 2018 and 2017, the Company's employees' compensation was accrued at 48,000 and \$24,687, respectively; while directors' and supervisors' remuneration was accrued at \$13,013 and \$5,000, respectively. The aforementioned amounts were recognized in salary expenses.

The expenses recognized for 2018 were accrued based on the earnings of current year and the percentage specified in the Articles of Incorporation of the Company. The employees' compensation and directors' and supervisors' remuneration for 2018 as resolved by the Board of Directors was \$48,000 and \$13,013, respectively. The employees' compensation will be distributed in the form of cash.

The employees' compensation and directors' and supervisors' remuneration for 2017 as resolved

by the Board of Directors was \$31,741, which was different from the estimated amount of \$24,687 and \$5,000 recognized in the 2017 financial statements by \$2,054. Such difference was recognized in profit and loss for the year ended December 31, 2018.

Information about the appropriation of employees' compensation and directors' and supervisors' remuneration of the Company as resolved by the Board of Directors will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.

$(21)$ Income tax

A. Income tax expense:

(a) Components of income tax expense:

For the years ended December 31,
	2018	2017
\$	101,249		28,320
	19		1,130
	6.286		165)
	107,554		29,285
	8.393		11,034
	1,204)
	7.189		11,034
	114,743	R	40,319
			-\$

(b) The income tax relating to components of other comprehensive income is as follows:

	For the years ended December 31,
		2018	2017
Remeasurement of defined benefit
obligations	(\$	401) $($	217)
Impact of change in tax rate		182)

B. Reconciliation between income tax expense and accounting profit

	For the years ended December 31,
		2018	2017
Tax calculated based on profit before tax and
statutory tax rate	S	117,492 \$	47,343
Effect of items disallowed by tax regulation		1,979	29)
Effect from investment tax credits		$9,829$ (	7,960)
Tax on unappropriated earnings		19	1.130
Prior year income tax under (over) estimation		6,286	165)
Impact of change in tax rate		1,204)
Income tax expense		114,743 S	40,319

A. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

	2018
						Recognized
				Recognized	in other
				in profit or	comprehensive
		January 1		loss		income		December 31
Temporary differences:
Deferred tax assets:
Loss on inventory market
value decline	\$	$3,823$ (\$)		$1,063)$ \$			\$	2,760
Unused compensated
absences		2,429		926				3,355
Unrealized gain on inter affiliates		8,925		10,017				18,942
Pensions		1,375		61		583		2,019
	\$	16,552	\$	9,941	\$	583	\$	27,076
Deferred tax liabilities:
Investment income	(\$	$6,864)$ (\$		$16,772$ \$			- (\$	23,636)
Depreciation		$1,703)$ (		250)		÷.		1,953)
Unrealized gain on foreign		130)		108)				238)
currency exchange
	$\overline{2}$	8,697)	(	17,130)	S		΄\$	25,827)
	\$	7,855	$($ \$	7,189)	\$	583	\$	1,249

	2017
						Recognized
						in other
						Recognized in comprehensive
	January 1			profit or loss		income		December 31
Temporary differences:
Deferred tax assets:
Loss on inventory market
value decline	\$	$2,273$ \$		1,550	\$		$\mathbb{S}$	3,823
Investment income		5,909 (		5,909)
Unused compensated
absences		1,545		884				2,429
Unrealized gain on inter
affiliates		$10,401$ (		1,476)				8,925
Pensions		1,158				217		1,375
	\$	21,286	(S)	4,951)	\$	217	\$	16,552
Deferred tax liabilities:
Investment income	\$		$($ \$	$6,864$ ) \$			$($ \$	6,864)
Depreciation		1,747)		44				1,703)
Unrealized gain on foreign
currency exchange		867)		737				130)
	(\$	2,614)	(\$	6,083)	\$		$($ \$	8,697)
	\$	18,672	(	11,034)	\$	217	\$	7,855

B. The Company's income tax returns through 2016 have been assessed and approved by the Tax Authority. There were no disputes existing between the Company and the Tax Authority as of March 12, 2019.

C. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company's applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate and reflected in current profit or loss or other comprehensive income for the origination and reversal of temporary differences.

(22) Earnings per share ("EPS")

		For the year ended December 31, 2018
		Weighted average number
		of shares outstanding	EPS
	Amount after tax	(shares in thousands)	(in dollars)
Basic earnings per share
Profit attributable to ordinary shareholders	\$ 472,717	73,807	\$ 6.40
Diluted earnings per share
Profit attributable to ordinary shareholders Assumed conversion of all dilutive potential ordinary shares	\$ 472,717	73,807
Employees' compensation		651
Profit attributable to ordinary shareholders plus assumed conversion of all dilutive potential
ordinary shares	\$ 472,717	74,458	\$ 6.35
		For the year ended December 31, 2017
		Weighted average number
		of shares outstanding	EPS
	Amount after tax	(shares in thousands)	(in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders	\$ 238,171	73,807	\$ 3.23
Diluted earnings per share Profit attributable to ordinary
shareholders	\$ 238,171	73,807
Assumed conversion of all dilutive potential ordinary shares
Employees' compensation		420
Profit attributable to ordinary shareholders plus assumed conversion of all dilutive
potential ordinary shares	\$ 238,171	74,227	\$ 3.21

The abovementioned weighted average number of ordinary shares outstanding to conversion has been adjusted to unappropriated retained earnings as proportional increase in capital for the year ended December 31, 2017.

(23) Operating leases

The Company entered into non-cancellable operating lease agreements for the periods from January

1, 2003 to December 31, 2022 and from August 28, 2014 to August 27, 2034 for the land in Southern Taiwan Science Park. The lease agreement is renewable at the end of the lease term. The Company pays monthly rent. If the announced land values, state-owned land rent rate, or other factors change, the monthly rent paid by the Company will be adjusted accordingly on the following month. The Company may have to pay additional rent or get a refund on its last rental payment because of such adjustment. The rent expense of \$7,232 and \$6,833 was recognized in profit or loss for the years ended December 31, 2018 and 2017, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

		December 31, 2018	December 31, 2017
Within one year		7.594		7,594
Later than one year but not exceeding five years		22,838		30,375
Exceeding five years		603		660
	S	31.035		38,629

(24) Supplemental cash flow information

A. Investing activities with partial cash payments

	For the years ended December 31.
		2018		2017
Purchase of property, plant and equipment	S	67,290	S	36,797
Add: Opening balance of notes payable		4,858		1,575
Opening balance of payable for
equipment		5,236		3,656
Less: Ending balance of notes payable		$3,633)$ (		4,858)
Ending balance of payable for equipment (		$14,783)$ (		5,236
Capitalization for interest		845)
Cash paid during the year		58,123		31,934

B. Investing and financing activities with no cash flow effects

	For the years ended December 31,
	2018		2017
a. Prepayments for equipment reclassified to property, plant and equipment		43,052		3,034
b. Long-term prepayments - related parties transferred into to intangible assets		69,805

(25) Changes in liabilities from financing activities

						Liabilities from
	Short-term			Long-term	financing activities-
	borrowings			borrowings		gross
January 1, 2018	\$	125,000	\$	390,633	$\mathbb{S}$	515,633
Changes in cash flow from financing
activities		5,000		85,617		80,617
December 31, 2018	\$	120,000	\$	476,250	$\mathbf S$	596,250
7. RELATED PARTY TRANSACTIONS
(1) Names of related parties and relationship
	Names of related parties					Relationship with the Company
cpc Europa GmbH						A subsidiary of the Company
CSM Maschinen GmbH						A subsidiary of the Company
CHIEFTEK PRECISION INTERNATIONAL LLC						A subsidiary of the Company
CHIEFTEK PRECISION USA CO., Ltd.						A subsidiary of the Company
Chieftek Machinery (Kunshan) Co., Ltd.						A subsidiary of the Company
(2) Key management compensation
A. Sales of goods and services
				For the years ended December 31,
				2018		2017
Chieftek Machinery (Kunshan) Co., Ltd.			$\mathbf S$	517,459	$\mathcal{S}$	382,199
cpc Europa GmbH				256,591		103,172
CHIEFTEK PRECISION USA CO., Ltd.				113,915		75,933
			\$	887,965	\$	561.304
Prices of goods sold to related parties are determined based on mutual agreement at each time, and
the credit term is 180 days after monthly-closing, T/T. For third parties, the credit terms range from
30 to 180 days after monthly-closing.

A. Other income

	For the years ended December 31,
		2018			2017
CHIEFTEK PRECISION USA CO., Ltd.			$\overline{\phantom{0}}$

B. Receivables from related parties

	December 31, 2018	December 31, 2017
Accounts receivable:
Chieftek Machinery (Kunshan) Co., Ltd.	\$ 155,330	- S	160,910
cpc Europa GmbH	133,813		32,777
CHIEFTEK PRECISION USA CO., Ltd.	42,233		22,057
	331,376	-S	215,744
	December 31, 2018		December 31, 2017
Other receivables:
Subsidiaries			4.602

The receivables from related parties arise mainly from sale transactions and sales of property. The receivables are unsecured in nature and bear no interest. There are no provisions held against receivables from related parties.

D. Long-term prepayment (Listed as 'Other non-current assets')

	December 31, 2018		December 31, 2017
CSM Maschinen GmbH		\$	69,805
E. Loans to related parties
Loans to related parties:
(a) Outstanding balance:
	December 31, 2018		December 31, 2017
CHIEFTEK PRECISION	\$	\$	29,760
INTERNATIONAL LLC
CSM Maschinen GmbH			10,671
	\$	S	40,431
(b) Interest income:
	For the years ended December 31,
	2018		2017
CHIEFTEK PRECISION	\$ 342	$\mathbf{s}$	227
INTERNATIONAL LLC
Other subsidiaries	312		27
	\$ 654	\$	254

The loans to subsidiaries are repayable upon maturity and carry interest at $1.5\%$ $\sim$ 2.0% for the years ended December 31, 2018 and 2017.

F. Endorsements and guarantees provided to subsidiaries

	Nature	December 31, 2018		December 31, 2017
cpc Europa GmbH	Guarantee for financing \$	200,640	S	142,280
CSM Maschinen GmbH CHIEFTEK	Guarantee for financing	123,200
PRECISION	Guarantee for financing	92,145		59,520
		415,985		201,800

As of December 31, 2018 and 2017, the subsidiaries have drawn from the endorsements and guarantees, which are provided by the Company, in the amount of \$90,407 and \$115,839. respectively.

(3) Key management compensation

	For the years ended December 31,
		2018		2017
Salaries and other short-term employee benefits		30,878		17.097

8. PLEDGED ASSETS

The Company's assets pledged as collateral are as follows:

	Book value
Asset pledged	December 31, 2018		December 31, 2017	Purpose of collateral
Land (Note 1)	\$ 316,864	S		316,864 Guarantee for $long-$ term borrowings
Buildings and structures-net (Note 1)	310,851		318,581	Guarantee for $long-$ term borrowings
Machinery and equipment-net (Note 1)			8,749	Guarantee for $long-$ term borrowings
Pledged time deposits				Guarantee for $long-$
(Note 2)			1,445	term borrowings
	627,715		645,639

(Note 1) Listed as 'Property, plant and equipment'.

(Note 2) Listed as 'Other financial assets - non-current'.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

• (1) For details of endorsements and guarantees provided to others by the Company, please refer to Note 7(2) F. 'Endorsements and guarantees provided to subsidiaries'.
• (2) As of December 31, 2018 and 2017, the Company's remaining balance due for construction in progress and prepayments for equipment were \$168,110 and \$30,854, respectively.
• (3) On July 5, 2017, the Company entered into a mid-term secured syndicated loan contract for a credit line of \$1,200,000 with 9 financial institutions including E. Sun Commercial Bank, Ltd.. The credit term is 5 years. Under the terms of the syndicated loan, the Company agrees that:

A. Under the terms of the syndicated loan, the financial ratios stated in the Company's semi-annual

reviewed financial statements and annual audited financial statements shall comply with the following financial ratios and will be assessed semi-annually:

• (a) Current ratio (current assets/current liabilities): At least 100%.
• (b) Liability ratio (total liabilities/net equity): Less than 150%.
• (c) Tangible net value (shareholders' equity less intangible assets): At least \$1,000,000.
• B. If the Company violates the above financial covenants, the Company should improve within nine months after fiscal year or half fiscal year. It will not be considered to default, if the audited or reviewed financial rates comply with the covenants after the improvement period. During the improvement period, the credit line which has not been withdrawn will be frozen, until the financial covenants are met. In addition, for withdrawn credit, its financing rate shall be increased by an additional 0.125% per annum from the date after the notification by the management bank to the date after the completion of improvement.

As of December 31, 2018, the Company has not violated any of the above covenants.

• (4) For the details of operating lease agreements, please refer to Note 6(23), 'Operating leases'.
• 1. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Company's objectives when managing capital are to safeguard the Company'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 Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

• A. Details of the Company's financial instruments by category are provided in Notes 6 and 12(4).
• B. Financial risk management policies
• (a) The Company'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.
• (b) Risk management is carried out by a central treasury department (Company treasury) under policies approved by the Board of Directors. Company treasury identifies, evaluates and hedges financial risks in close cooperation with the Company'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

I. Foreign exchange risk

• (i) The Company operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company used in various functional currency, primarily with respect to USD, EUR and JPY. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities.
• (ii) Management has set up a policy to require the Company to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Company treasury.
• (iii)The Company treasury's risk management policy is to hedge anticipated cash flows (mainly export sales purchase of inventory) in the major foreign currency in the future so as to decrease the risk exposure in the major foreign currency.
• (iv)The Company has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. However, as the objective of the net investments in foreign operations is for strategic purposes, the Company does not hedged the investments.
• (v)The Company's businesses involve some non-functional currency operations (the Company's functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

	December 31, 2018
	Foreign currency				Book value
			amount (in thousands) Exchange rate		(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD	\$	18,098	30.715	S.	555,878
JPY:NTD		46,827	0.2782		13,027
EUR:NTD		5.202	35.20		183,100
Investments accounted for
under equity method
USD:NTD		13,162	30.715		404,277
EUR:NTD		949)	$35.20$ (		33,404)
Financial liabilities
Monetary items
USD:NTD		98	30.715		3,013
JPY:NTD		5.316	0.2782		1.479
EUR:NTD		1,071	35.20		37,713

	December 31, 2017
		Foreign currency			Book value
	amount (in thousands)		Exchange rate		(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD	\$	18.754	29.76	S.	558,116
JPY:NTD		55,770	0.2642		14,734
EUR:NTD		1,841	35.57		65,502
Investments accounted for
under equity method
USD:NTD		10,283	29.76		306,036
EUR:NTD		304)	$35.57-1$		10,825)
Financial liabilities
Monetary items
USD:NTD		204	29.76		6,076
JPY.NTD		29,683	0.2642		7,842
EUR:NTD		1,174	35.57		41,776

Sensitivity analysis of foreign exchange risk is primarily for foreign currency monetary items at financial reporting date. If the exchange rate of NTD to other currencies had appreciated/depreciated by 1% with all other factors remaining constant, the Company's net profit after tax for the years ended December 31, 2018 and 2017 would increase/decrease by \$5,614 and \$4,874, respectively.

• (vi)The total exchange gain (loss), including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2018 and 2017 amounted to \$30,065 and $(\$26,193)$ , respectively.
• II. Price risk

The Company is not engaged in any financial instruments with price variations, thus, the Company does not expect market risk arising from variations in the market prices.

• III. Cash flow and fair value interest rate risk
• (i) The Company's main interest rate risk arises from short-term and long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. However, partial interest rate risk is offset by cash and cash equivalents held at variable rates. For the years ended December 31, 2018 and 2017, the Company's borrowings at variable rate were mainly denominated in NTD.
• (ii)The Company's borrowings are measured at amortized cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.
• (iii)If the borrowing interest rate had increased/decreased by 10% with all other variables held constant, profit, net of tax for the years ended December 31, 2018 and 2017 would

have decreased/increased by \$756 and \$751, respectively. The main factor is that changes in interest expense result from floating-rate borrowings.

• (b) Credit risk
• I. Credit risk refers to the risk of financial loss to the Company 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. According to the Company's credit policy, each local entity in the Company 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. The utilisation of credit limits is regularly monitored.
• III. The Company adopts management of credit risk as follows: if the contract payments are past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition, and the impairment is assessed when the contract payments are past due over certain days.
• IV. The Company classifies customers' accounts receivable in accordance with credit rating of customer and credit risk on trade. The Company applies the simplified approach using forecastable consideration to adjust historical and timely information to estimate expected credit loss. Movements in relation to the Company applying the simplified approach to provide loss allowance for accounts receivable are as follows:

	For the year ended December 31, 2018
		Accounts receivable
At January 1		1,161
Reversal of provision for impairment		908)
At December 31		253

• V. Credit risk information for the year ended December 31, 2017 is provided in Note 12(4), 'Effects on initial application of IFRS 9 and information on application of IAS 39 for the year ended December 31, 2017'.
• (c) Liquidity risk
• I. Cash flow forecasting is performed in Finance division of the Company. Finance division monitors rolling forecasts of the Company's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.
• II. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Company treasury. Company 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 headroom as determined by the abovementioned forecasts. The Company is expected to readily generate cash inflows for managing liquidity risk.

III. The Company has the following undrawn borrowing facilities:

	December 31, 2018		December 31, 2017
Floating rate:
Expiring within 1 year	S.	1,170,000		879,160
Expiring beyond 1 year		890,000		1,608,200
		2,060,000		2,487,360

IV. The table below analyzes the Company's non-derivative financial liabilities and relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

		Between 1		Between 2		More than
December 31, 2018	Less than 1 year	and 2 years		and 5 years		5 years
Non-derivative financial liabilities:
Short-term borrowings	\$ 120,370	\$	\$		S
Notes payable	154,647
Accounts payable	67,610
Other payables	166,059
Long-term borrowings (including current
portion)	63,014	79,303		357,585
		Between 1		Between 2		More than
December 31, 2017	Less than 1 year	and 2 years		and 5 years		5 years
Non-derivative financial liabilities:
Short-term borrowings	\$ 125,454	\$	$\mathbf{\hat{S}}$		S
Notes payable	115,672
Accounts payable	90,645
Other payables	113,081
Long-term borrowings
(including current

V. The Company does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

(3) Fair value information

• A. As of December 31, 2018 and 2017, the Company had no fair value financial instruments.
• B. Financial instruments not measured at fair value

The Company's financial instruments not measured at fair value (including cash and cash equivalents, notes receivable, accounts receivable, other receivables, guarantee deposits paid, other financial assets-non-current, short-term borrowings, notes payable, accounts payable, other payables and long-term borrowings (including current portion)) are approximate to their fair values.

• (4) Effects on initial application of IFRS 9 and information on application of IAS 39 for the year ended December 31, 2017
• A. Summary of significant accounting policies adopted for the year ended December 31, 2017:
  • (a) Receivables

Accounts receivable are 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. Accounts receivable are initially recognized at fair value and subsequently measured at amortized 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.

• (b) Impairment of financial assets
• I. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a Company 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 Company of financial assets that can be reliably estimated.

• II. The criteria that the Company 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) The Company, for economic or legal reasons relating to the borrower's financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
  • (iii) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
  • (iv) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a Company of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the Company, 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;

• III. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made according of financial assets. 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 recognized 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 recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortized cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• B. Credit risk information for the year ended December 31, 2017 is as follows:
• (a) Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Company's credit policy, the Company is responsible for managing and analysing the credit risk for each of their new clients. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. The utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents and credit exposures to customers, including outstanding receivables and committed transactions. For financial institutions, the Company also transacts with many different financial institutions to diversify credit risk.
• (b) The ageing analysis of the Company's accounts receivable that were past due but not impaired is as follows:

		December 31, 2017
Up to 30 days	S	2,848
31 to 90 days		13,196
91 to 180 days		2,700
181 to 365 days		1,483
		20,227

The above ageing analysis was based on past due date.

(c) Movement analysis of the Company's financial assets that were impaired is as follows:

		For the year ended December 31, 2017
	Group provision
At January 1 Reversal of allowance for doubtful		2,337
accounts (Note)		1,176)
At December 31		. 161

(Note) Listed as 'Other income'.

• (d) The Company's accounts receivable that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties' industrial characteristics, scale of business and profitability.
• (5) Effects of initial application of IFRS 15 and information on application of IAS 18 for the year ended December 31, 2017
• A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below:

Revenue is measured at the fair value of the consideration received or receivable taking into account sales tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Company's activities. Revenue arising from the sales of goods is recognized when the Company 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 Company retains neither 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.

• B. The effects and description of current balance sheet and comprehensive income statement if the Company continues adopting above accounting policies are as follows:
• December 31, 2018 Balance by using Effects from Balance by using previous accounting change in Balance sheet items IFRS 15 policies policy Contract liabilities - Current $\mathcal{S}$ 94 $\mathbf S$ $-$ \$ 94 Advance sales receipts 94 ( 94) $\overline{\phantom{a}}$
• (a) Effects and description of balance sheet:

Explanation:

Advance sales receipts in relation to the contract were previously presented in accordance with previous R.O.C. GAAP. Under IFRS 15 'Revenue from contracts with customers', the advance sales receipts are recognized as contract liabilities.

(b) There is no significant impact on current comprehensive income statement if the Company continues adopting above accounting policies.

13. SUPPLEMENTARY DISCLOSURES

(According to the regulatory requirement, information related to only the year ended December 31, 2018 is disclosed.)

• (1) Significant transactions information
• A. Loans to others: Please refer to table 1.
• B. Provision of endorsements and guarantees to others: Please refer to table 2.
• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): None.
• D. Acquisition or sale of the same security with the accumulated cost exceeding \$300 million or 20% of the Company's paid-in capital: None.
• E. Acquisition of real estate reaching \$300 million or 20% of paid-in capital or more: None.
• F. Disposal of real estate reaching \$300 million or 20% of paid-in capital or more: None.
• G. Purchases or sales of goods from or to related parties reaching \$100 million or 20% of paid-in capital or more: Please refer to table 3.
• H. Receivables from related parties reaching \$100 million or 20% of paid-in capital or more: Please refer to table 4.
• I. Trading in derivative instruments undertaken during the reporting period: None.
• J. Significant inter-company transactions during the reporting period: Please refer to table 5.
• (2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 6.

• (3) Information on investments in Mainland China
• A. Basic information: Please refer to table 7.
• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 8.

14. SEGMENT INFORMATION

Not applicable.

CHIEFTEK PRECISION CO., LTD. STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018

Expressed in thousands of NTD

Item	Description	Amount
Cash:
Cash on hand		\$ 1,024
Checking Deposits		8,559
Demand Deposits - New Taiwan dollar		172,905
$-$ Foreign Currency	Including USD8,169 thousand @30.715, JPY24,853 thousand $@0.2782$ and EUR1,221 thousand $@35.20$	300,807
		483,295
Cash equivalents:
Time Deposits	Due date is 2019.03.13, interest rate at 2.3%, including USD990 thousand @30.715	30,408 513,703

CHIEFTEK PRECISION CO., LTD. STATEMENT OF ACCOUNTS RECEIVABLE, NET DECEMBER 31, 2018

Expressed in thousands of NTD

Client Name	Description	Amount	Footnote
Company A	Accounts receivable	\$ 58,002	بسمع
Company B	$\boldsymbol{''}$	14,157
Company C	$\overline{\nu}$	11,912
Others (Note)	n	109,665
		193,736
Less: Allowance for doubtful accounts		253)	August
		193,483

CHIEFTEK PRECISION CO., LTD. STATEMENT OF ACCOUNTS RECEIVABLE-RELATED PARTIES DECEMBER 31, 2018

Expressed in thousands of NTD

Client Name	Description	Amount	Footnote
Cheiftek Machinery (Kunshan) Co., Ltd.	Accounts receivable	\$ 155,330
cpc Europa GmbH CHIEFTEK PRECISION USA	n	133,813
CO., LTD	n	42,233
		331,376

CHIEFTEK PRECISION CO., LTD. STATEMENT OF INVENTORIES DECEMBER 31, 2018

Expressed in thousands of NTD

		Amount
Item	Cost		Net Realizable Value	Footnote
Raw materials	\$ 110,259 \$		108,270	(Note)
Supplies	76,399		76,899	n
Work in progress	320,238		386,140	n
Finished goods	55,009		82,496	n
	561,905	\$	653,805
Less: Allowance for inventory valuation
losses	13,801)
	\$ 548,104

Note: Refer to Note 4(9), "Inventories" of parent company only financial statements for the way the Company determine net realizable value of inventories.

$\frac{1}{2}$

	Expressed in thousands of NTD			Footnote	$\begin{array}{c} \end{array}$		ľ			(Note) (Note)
				Collateral	None
		subsidiaries and Associates Market price or Equity of	Unit Price	Total price (QID)	343,745 6Ą		60,532	404,277		9,329) 24,075)	33,404)	370,873 ÷,
				Amount	343,745		60,332	404.277		9,329) 24,075)	33,404)	$5 - 370,873$
			Percentage	of ownership	100%		100%			100% 100%
		Balances as of December 31, 2018	Number of shares	(thousands of shares)	6,760			6.760				6,760
FOR THE YEAR ENDED DECEMBER 31, 2018 CHIEFTEK PRECISION CO., LTD. Decreases		Number of shares	Amount (thousands of shares)	$(6 \t25,341)$			25,341)		8,700) 21,744)	30,444)	6 55.785)
STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD Additions		Amount	74,450 64		$\frac{49.132}{20}$	123,582		S) 7,776	1 7,865	I 131,447
	Number of shares	(thousands of shares)
				Amount	3 294,636		11,400	306,036		718) 10,107)	10,825	$6.760$ $5$ 295,211
		Balance as of January 1, 2018	Number of shares	(thousands of shares)	6,760			6.760			ï
				Name	PRECISION HOLDING CO., LTD. CHIEFTEK	INTERNATIONAL PRECISION CHIEFTEK	CLI	Subtotal	CSM Maschinen CmbH	cpc Europa GmbH	Subtotal	Total

$\frac{1}{2}$

Note: Listed as "Other non-current liabilities-others".

$\frac{1}{2}$

$-63-$

CHIEFTEK PRECISION CO., LTD. STATEMENT OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT-COST FOR THE YEAR ENDED DECEMBER 31, 2018 Expressed in thousands of NTD

Refer to Note 6(5), "Property, plant and equipment" of parent company only financial statements.

CHIEFTEK PRECISION CO., LTD. STATEMENT OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT-ACCUMULATED DEPRECIATION FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

Refer to Note 6(5), "Property, plant and equipment" of parent company only financial statements for the change in accumulated depreciation of property, plant and equipment.

Refer to Note 4(11), "Property, plant and equipment" of parent company only financial statements for the depreciation method and useful lives of the assets.

CHIEFTEK PRECISION CO., LTD. STATEMENT OF CHANGES IN INTANGIBLE ASSETS FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

$\bar{z}$

Refer to Note 6(6), "Intangible assets" of parent company only financial statements for the change in cost and accumulated amortization of intangible assets.

Refer to Note 4(13), "Intangible assets" of parent company only financial statements for the amortization method and useful lives of the assets.

$\ddot{\phantom{a}}$

CHIEFTEK PRECISION CO., LTD. STATEMENT OF CHANGES IN PREPAYMENTS FOR EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

	Balance as of			Balance as of
Item	January 1, 2018	Additions	Reclassifications (Note)	December 31, 2018
Prepayments for equipment	11.561	84.228	43.052)	52,737

Note: Transferred to "Property, plant and equipment".

CHIEFTEK PRECISION CO., LTD.
STATEMENT OF SHORT-TERM BORROWINGS

Expressed in thousands of NTD

$\ddot{\cdot}$

		Ī	İ
Loan Commitments Collateral Footnote	None
	60,000	45,000	50,000
Interest rate	1.03%	1.00%	0.99%
Expiry date	$7018.12.25 - 2019.06.21$	2018.10.01~2019.04.01	2018.10.11~2019.01.09
1,2018 December 3	60,000	30,000	30,000
Description	Mega International Commercial Bank	Hua Nan Bank	DBS Bank
Nature	secured borrowings

CHIEFTEK PRECISION CO., LTD. STATEMENT OF NOTES PAYABLE DECEMBER 31, 2018

Expressed in thousands of NTD

Client Name	Description		Amount	Footnote
Company D	Notes payable	\$	14,218
Company E	n		10,267
Company F	$^{\prime\prime}$		8,948
Company G	$^{\prime\prime}$		8,913
Others (Note)	$^{\prime\prime}$		112,301	$-$
		S	154,647

CHIEFTEK PRECISION CO., LTD. STATEMENT OF ACCOUNTS PAYABLE DECEMBER 31, 2018

Expressed in thousands of NTD

Client Name	Description		Amount	Footnote
Company H	Accounts payable	S	36,909
Company I	$^{\prime\prime}$		4,920
Company J	$^{\prime\prime}$		4,249	–
Others (Note)	$^{\prime\prime}$		21,532
		\$	67,610

CHIEFTEK PRECISION CO., LTD. STATEMENT OF OTHER PAYABLES DECEMBER 31, 2018

Expressed in thousands of NTD

Refer to Note 6(9), "Other payables" of parent company only financial statements.

CHIEFTEK PRECISION CO., LTD. STATEMENT OF CURRENT INCOME TAX LIABILITIES DECEMBER 31, 2018

$\mathcal{A}^{\pm}$

Expressed in thousands of NTD

Item		Amount
Income tax payable in 2018	S	81,854
Tax on undistributed earnings payable in 2017		19
	S	81,873

STATEMENT OF LONG-TERM LIABILITIES, CURRENT PORTION CHIEFTEK PRECISION CO., LTD. DECEMBER 31, 2018

Expressed in thousands of NTD

Creditor	Description	Loan amount	Expiry date	Rate	Collateral	Footnote
E.SUN Commercial Bank	Secured loan	4,500	2018.1.22~2022.10.5	1.80%	Land	Syndicated loan contract with 9 financial
Mega International Commercial Bank		3,750				institutions including E.SUN
Chang Hwa Bank		3,750				Commercial Bank - Programs A.
DBS Bank		3,750
Bank of Taiwan		3,750
Taipei Fubon Commercial Bank		3,750
Bank SinoPac		3,000
Cathay United Commercial Bank		1,875
Taishin International Bank		1,875
Mega International Commercial Bank		11,770	$2018.8.21 \sim 2023.8.21$	1.35%	Buildings and Structures	I
			$7,634$ 2016.10.5~2021.9.23	1.37%		$\overline{\phantom{a}}$
E.SUN Commercial Bank
		3,730	$2016.923 - 2021.9.23$	1.37%
O-Bank	Unsecured borrowings	2,000	$2018.5.11 \sim 2020.11.1$	1.29%	None	1
		55,134

$-73-$

Creditor	Description	Loan amount	Expiry date	Rate	Collateral
						Footnote
E.SUN Commercial Bank	Secured borrowings	42,750 6A	2018.1.22~2022.10.5	1.80%	Land	Syndicated loan contract with 9 financial institutions including the
Mega International Commercial Bank		625 55,				arranger bank E.SUN Commercial Bank - contains Program A
Chang Hwa Bank		35,625				and Program B:
DBS Bank		35,625				Program A is secured borrowings, repayable every six months
Bank of Taiwan
Taipei Fubon Commercial Bank		$\begin{array}{l} 3,2,3,4\ 3,4,5,6\ 4,5,6,7\ 5,6,7,8\ 6,7,8,12,8\ 7,7,6,7,7,8\ 8,7,7,7,7,8\ 9,6,7,7,7,7,8\ 10,7,7,7,7,7\ 10,7,7,7,7,7\ 10,7,7,7,7,7\ 11,7,7,7,7,7,7\ 12,7,7,7,7,7,7\ 13,7,7,7,7,7,7\ 14,7,7,7,7,7,7\ 15,7,7,7,7,7,7\ 1$				from 2018.10.5, totaling 9 installments. The first to 8th period will
Bank SinoPac						repay \$15,000, and the 9th period will repay \$180,000.
Cathay United Commercial Bank
Taishin International Bank
E.SUN Commercial Bank	Unsecured borrowings		2018.1.22~2022.10.5	80%	None	Syndicated loan contract with 9 financial institutions including the
Mega International Commercial Bank						arranger bank E.SUN Commercial Bank - contains Program A
Chang Hwa Bank						and Program B
DBS Bank						Program B is unsecured borrowings with due date 2022.10.5.
Bank of Taiwan
Taipei Fubon Commercial Bank
Bank SinoPac
Cathay United Commercial Bank
Taishin International Bank
Mega International Commercial Bank	Secured borrowings	8 $\overline{5}$	$2018.8.21 - 2023.8.21$	1.35%	Buildings	date, and after, the loan is repayable quarterly in 17 installment. The first repayment date is 12 months after the first drawdown
E.SUN Commercial Bank		20,993	2016.10.5~2021.9.23	1.37%		From the first drawdown date, the loan is repayable quarterly in 20 installments.
		10,257	2016.9.23~2021.9.23
O-Bank	Unsecured borrowings	10,000	2018.5.11~2020.11.1	1.29%	None	date, and after that, the loan is repayable quarterly in 5 installments. The first repayment date is 18 months after the first drawdown
		476,250
	Less : Current portion	$\mathfrak{g}$ $\overline{5}$

CHIEFTEK PRECISION CO., LTD.
STATEMENT OF LONG-TERM BORROWINGS
DECEMBER 31, 2018

Expressed in thousands of NTD

$\frac{1}{2}$

$421,116$

∥⊶

$-74-$

CHIEFTEK PRECISION CO., LTD.
STATEMENT OF SALES REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

$\sim 10^{-1}$

			Amount
Item	Quantity	Subtotal		Total	Footnote
Sales:
Linear guide	1,049,000	\$ 1,776,257
Others		60,745
Sales			\$	1,837,002
Less: Sales returns				263)
Sales discounts and allowances				250)
Sales revenue, net			\$	1,836,489

CHIEFTEK PRECISION CO., LTD.
STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2018

	Pyhressen in monsuling of 14 I I
Item		Amount
Raw materials at January 1, 2018	\$	44,081
Add: Raw materials purchased		353,753
Gains on physical count of raw materials		124
Raw materials at December 31, 2018		110,259)
Raw materials during the year		287,699
Supplies at January 1, 2018		56,945
Add: Supplies purchased		159,716
Less: Transfer to expenses		7,845)
Losses on physical count of supplies		646)
Sale of supplies		7,224)
Supplies at December 31, 2018		76,399)
Supplies used during the year		124,547
Direct labor		213,027
Manufacturing overhead		547,590
Manufacturing cost		1,172,863
Work in progress at January 1, 2018		171,935
Add: Work in progress purchased		66,095
Less: Transfer to expenses		16, 125)
Losses on physical count of work in progress		597)
Sale of work in progress		9)
Work in progress at December 31, 2018		320,238)
Cost of finished goods	\$	1,073,924

Expressed in thousands of NTD

$\overline{a}$

CHIEFTEK PRECISION CO., LTD.
STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2018

$\sim$ $\sim$

	Expressed in thousands of NTD
Item	Amount
Finished goods at January 1, 2018	\$ 42,709
Add: Finished goods purchased	1,653
Gains on physical count of finished goods	871
Less: Transfer to expenses	2,235)
Finished goods at December 31, 2018	55,009)
Cost of production and marketing	1,061,913
Sale of cost of supplies	7,224
Sale of cost of work in progress	9
Cost of goods sold	1,069,146
Reversal of allowance for inventory market price decline	8,690)
Losses on physical count of inventory	248
Revenue from sale of scrap	621)
Operating costs	1,060,083

$\sim$ $\sim$

CHIEFTEK PRECISION CO., LTD. STATEMENT OF MANUFACTURING OVERHEAD FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

Item	Description	Amount	Footnote
Wages and salaries		\$ 42,165
Depreciation		67,800
Miscellaneous purchase expense		97,269
Processing fee		228,964
Others (Note)		111,392
		\$ 547,590

CHIEFTEK PRECISION CO., LTD. STATEMENT OF SELLING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018

$\hat{\mathcal{A}}$

Expressed in thousands of NTD

Item	Description	Amount	Footnote
Wages and salaries		\$ 19,209
Traveling expense		2,163
Freight		5,768
Advertisement expense		3,291
Import/Export expense		5,227
Others (Note)		9,769
		\$ 45,427

CHIEFTEK PRECISION CO., LTD. STATEMENT OF GENERAL AND ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

Item	Description	Amount		Footnote
Wages and salaries		\$	62,452
Director's remuneration			12,787
Others (Note)			41,581
		\$	116,820

CHIEFTEK PRECISION CO., LTD. STATEMENT OF RESEARCH AND DEVELOPMENT EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

Item	Description		Amount	Footnote
Wages and salaries		\$	37,893
Research material expense			22,592
Miscellaneous purchase expense			4,594
Others (Note)			13,689
		S	78,768

CHIEFTEK PRECISION CO., LTD. STATEMENT OF SUMMARY OF EMPLOYEE BENEFITS, DEPRECIATION, AND AMORTIZATION EXPENSES IN THE CURRENT PERIOD FOR THE YEAR ENDED DECEMBER 31, 2018

Expressed in thousands of NTD

Refer to Note 6(19), "Expense by nature" and Note 6(20), "Employee benefit expense" of parent company only financial statements.

$\bar{z}$

$\ddot{\phantom{a}}$

For the year ended December 31, 2018 CHIEFTEK PRECISION CO., LTD. Loans to others

Table 1

Expressed in thousands of NTD

				Footnote	ľ
		total loans	granted	(Note2)	774342	774.342
	Limit on loans Ceiling on	granted to	a single party	(Note 2)	774,342 \$	774,342
				Value
			Collateral	ltem		I
	Allowance	ä	doubtful	accounts
		transactions Reason for	short-term	financing	- Operational ya	Operational SS.
	Amount of		with the	borrower
			Nature of	loan	Short-term financing	Short-term financing
					1.5%	2.0%
			Actual amount Interest
			Balance at	$\frac{\text{account}}{\text{right}}$ party December 31, 2018 December 31, 2018 drawn down rate
Maximum	outstanding	balance during	General ledger Is a related the year ended		54,360	30,460
					Other receivables	Other receivables
				(Note I) Creditor Borrower	CHIEFTEK CSM Maschinen PRECISION GmbH CO., LTD.	CO., LTD. INTERNATIONAL PRECISION PRECISION CHIEFTEK CHIEFTEK
			ż

(Note 1) The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1) Parent company is '0'.

(2) The subsidiaries are numbered in order starting from '1'.

(Note 2) Calculation of limit on loans granted to a single party and ceiling on total loans granted are as follows:

The limit on total amount of loan granted to certain entities with short-term financing need is set at 40% of the Company's net assets the limit on an amount of loan granted to a single entity could not exceed 40% of the C

Provision of endorsements and guarantees to others For the vear ended December 31, 2018 CHIEFT EK PRECISION CO., LTD.

Expressed in thousands of NTD

							Footnote		I		$\overline{\phantom{a}}$
		Provision of	endorsements			guarantees to the party in Mainland	$China$		z		z
		Provision of	endorsements/			$\frac{1}{2}$ guarantees by subsidiary to parent company					z
		Provision of	endorsements	guarantees by		parent company to	subsidiary
		Ceiling on	otal amount of	endorsements		guarantees provided	(Note3)	967,928	967,928		907,928
accumulated Ratio of	endorsement	guarantee	anount to net	asset value of	the endorser/	guarantor	Auredraco	10%	š		ž
			Amount of	endorsements		guarantees secured with	collateral
					Actual	amount	$\frac{d$ trawn down		32,014		46,073
		Outstanding	endorsement	guarantee amount at December 31,			$\frac{2018}{200,640}$		123,200		92,145
	Maximum	outstanding	endorsement	guarantee	amount as of	December 31,	2018	200,640	123,200		92,865
		Limit on	endorsements/	guarantees	provided for a	single party	Mote 3	967,928 \$	967,928		967,928
				Relationship with	the endorser/	guarantor	(Note 2)
		Party being	endorsed/guaranteed				Company name	cpc Europa GrabH	CSM Maschinen GmbH		INTERNATIONAL PRECISION CHIEFTEK 9 E
						Endorser/	guarantor	PRECISION CO., CHIEFTEK É.	PRECISION CO., CHIEFTEK	LTD.	PRECISION CO., CHIEFTEK Ê
						ż	(Net 1)

(Note 1) The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(2) The subsidiaries are numbered in order starting from '1'. (1) Parent company is ' $0^{\circ}$ .

(Note 2) The following code respresents the relationship with the Company:

......................................

Table 2, Page 1

CHIEFTEK PRECISION CO., LTD.

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

For the year ended December 31, 2018

Expressed in thousands of NTD

										transaction terms compared to third party Discription and reasons for difference in
					Transaction					transactions			Notes/accounts receivable (payable)
													Percentage of total
													notes/accounts
		Relationship with				Percentage of total							receivable
Purchaser/seller	Counterparty	the counterparty	Purchases (sales)		Amount	purchases (sales)	Credit term		Unit price	Credit term		Balance	(payable)	Footnote
PRECISION CHIEFTEK CO., LTD.	cpc Europa GmbH	Subsidiary	(Sales)	٩	256,591)	(14%)	(Note 1)	ی		(Note 2)	Ŵ	133,813	24%	$\overline{\phantom{a}}$
	PRECISION USA $CO,$ LTD. CHIEFTEK	Subsidiary	(Sales)		13,915)	(6%)	(Note 1)			(Note 2)		42,233	8%	I
	(Kunshan) Co., Ltd. Chieflek Machinery	Subsidiary	(Sales)		517,459)	(28%)	(Note 1)			(Note 2)		155,330	28%	$\overline{\phantom{a}}$
cpc Europa GmbH	PRECISION CO., LTD. CHIEFTEK	The Company	Purchases		256,591	100%	(Note 1)			(Note 3)		133,813)	(96%)	Í
PRECISION USA $CO,$ , LTD. CHIEFTEK	PRECISION CO., LTD. CHIEFTEK	The Company	Purchases		13,915	100%	(Note 1)			(Note 3)		42,233)	(100%)	$\mid$
(Kunshan) Co., Ltd. Chieftek Machinery	PRECISION CHIEFTEK CO., LTD.	The Company	Purchases		17,459 in	100%	(Note 1)			(Note 3)		155,330)	(100%)	I

(Note 1) 180 days after monthly-closing, T/T.
(Note 2) The collection periods for third parties are from 30 to 180 days after monthly-closing.
(Note 3) The company had no purchases from other suppliers.

Table 3

Expressed in thousands of NTD	Allowance for subsequent to the Amount collected	balance sheet date doubtful accounts	36,963		23,889
	Overdue receivables	Action taken
		Amount
			3.08		3.27
		ecember $31,2018$ Turnover rate the counterparty Balance as at D	133,813		155,330
	Relationship with		Subsidiary		Subsidiary
		Counterparty	cpc Europa GmbH		Chieftek Machinery	(Kunshan) Co., Ltd.
Table 4		Creditor	HIEFTEK	PRECISION CO., LTD.	CHIEFTEK	PRECISION CO., LTD.

CHIEFTEK PRECISION CO., LTD.

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

Significant inter-company transactions during the reporting period CHIEFTEK PRECISION CO., LTD.

For the year ended December 31, 2018

Expressed in thousands of NTD

						Transaction
								Percentage of
								consolidated total
Number			Relationship					operating revenues or
(Note 1)	Company name	Counterparty	(Note 2)	General ledger account		Amount	Transaction terms	total assets (Note 3)
$\bullet$	CHIEFTEK PRECISION CO., LTD.	cpc Europa GmbH		Sales revenue	G		256,591) 180 days after monthly-	(12%)
							closing, T/T
				Accounts receivable		133,813	1	4%
				Endorsements and		200,640		6%
				guarantees			ţ
		CSM Maschinen GmbH		Endorsements and guarantees		123,200	J	4%
		CHIEFTEK PRECISION USA CO., LTD.		Sales revenue			113,915) 180 days after monthly- closing, T/T	(5%)
				Accounts receivable		42,233	$\mathsf I$	$\frac{8}{2}$
		Chieflek Machinery (Kunshan) Co., Ltd.		Sales revenue			517,459) 180 days after monthly- closing, T/T	(25%)
				Accounts receivable		155,330		5%
		CHIEFTEK PRECISION INTERNATINAL LLC		Endorsements and		92,145
				guarantees			T	3%
	CHIEFTEK PRECISION USA CO., LTD.	CHIEFTEK PRECISION INTERNATINAL LLC		Lease payable		14,173 1,536 61,698) 62,792		1%
				Refundable deposits			$\mathbf{I}$
$\mathbf{\hat{c}}$	Chieftek Precision (Hong Kong) Co., Limited.	Chieftek Machinery (Kunshan) Co., Ltd.		Dividend revenue			I	$\mathcal{E}$
				Dividend receivable			-1	2%
	$(1)$ Parent company is ' $0$ '.	(Note 1) The numbers filled in for the transaction company in respect of inter-company transactions are as follows:
	(2) The subsidiaries are numbered in order starting from '1'.
		(Note 2) Relationship between transaction company and counterparty is classified into the following three categories:
	(1) Parent company to subsidiary.
	(2) Subsidiary to parent company.
	(3) Subsidiary to subsidiary.

Table 5, Page 1

(Note 3) 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 account

Table 5

				Initial investment amount				Shares held as at December 31, 2018	of the investee for Net profit (loss)	(loss) recognized by Investment income the Company for
Investor	Investee	Location	Main business activities	December 31, 2018 December 31, 2017 Balance as at	Balance as at	Number of shares	Ownership E	Book value	the year ended	December 31, 2018 December 31, 2018 the year ended	Footnote
CHIEFTEK PRECISION $\infty$ , $\mathsf{Lm}$	CHIEFTEK PRECISION HOLDING CO., LTD.	Samoa	investment Professional	202,290 \$ s,	202,290	6,760,000	100%	343,745 S	74,450 Ģ,	74,450 S	Subsidiary
CHIEFTEK PRECISION co.,LTD.	cpc Europa GmbH	Germany	components and precision linear rendering after sale services Sale of high motion	98,695	98,695		100%	24,075)	7,776	1,776	Subsidiary
CHIEFTEK PRECISION CO., LTD.	CSM Maschinen GmbH	Germany	manufacture and machineries Research, sale of	726	726	ı	100%		$8,534)$ ( $9,329$ (		7,069) Subsidiary
CHIEFTEK PRECISION CO., LTD.	INTERNATIONAL LLC CHIEFTEK PRECISION	America	Lease of real estate property	61,551	15,170	$\ddot{\phantom{0}}$	100%	60,532	2,647	2,647	Subsidiary
CHIEFTEK PRECISION HOLDING CO., LTD.	(Hong Kong) Co., Limited Chieftek Precision	Hong Kong	Professional investment	156,647	156,647	5,100,000	100%	322,367	60,587		Subsidiary (Note 1)
CHIEFTEK PRECISION HOLDING CO., LTD.	CHIEFTEK PRECISION USA America CO., LTD.		components and Sale of high precision linear rendering after sale services motion	50.987	50,987	1,660,000	100%	76,418	15,183	,	Subsidiary (Note 1)

(Note 1) Not required to disclose income (loss) recognized by the Company.
(Note 2) Foreign currencies were translated into New Taiwan Dollars using the exchange rate (USD:NTD 1:30.715) as at December 31, 2018.

Expressed in thousands of NTD

Names, locations and other information of investee companies (not including investees in Mainland China) For the year ended December 31, 2018

CHIEFTEK PRECISION CO. LTD.

Table 6

Table 6, Page 1

CHIEFTEK PRECISION CO., LTD.

Information on investments in Mainland China - Basic information For the year ended December 31, 2018

Expressed in thousands of NTD

Footnote	l
investments in remitted back to Taiwan as of December 31, Accumulated of investment income amount 2018
as of December Book value of 31, 2018	259,575 \$ Ç۹
Company ended December Mainland China by the Company for the year Ownership (loss) recognized 31,2018 (Note 2) Investment income	60,588
indirect) the	100% \$
investee for the 2018	60,588
of remittance from Net income of held by Mainland China as year ended Taiwan to Accumulated 2018 anount	156,647 \$ Ø
Remitted back to of December 31, December 31, (direct or Amount remitted from Taiwan to ended December 31, 2018 Taiwan Amount remitted back to Taiwan for the year Mainland China/	$\overline{1}$
Mainland Remitted to China	Ø
Mainland China remittance from as of January 1. Taiwan to Accumulated amount of 2018	156,647
Investment method	Note 1
Paid-in capital	156,647
activities	precision linear processing and and rendering sale of high components Production, after-sale motion services
Investee in Mainland Main business China	(Kunshan) Co., Ltd. Chieflek Machinery

		China imposed by the Investment	Commission of MOEA (Note 3)	,161,513
avestment amount approved by			(MOEA)	156,647
	coumulated amount of remittance the Investment Commission of the Ceiling on investments in Mainland	from Taiwan to Mainland China as of Ministry of Economic Affairs	December 31, 2018	56,647
				CHIEFTEK PRECISION CO., LTD.

(Note 1) Through investing in an existing company in the third area (Chieftek Precision (Hong Kong) Co., Ltd.) which then invested in the investee in Mainland China.
(Note 2) The investment income (loss) is recognized bas

Table 7

CHIEFTEK PRECISION CO., LTD.

Information on investments in Mainland China - Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area

For the year ended December 31, 2018

Table 8

Expressed in thousands of NTD

	Sales (purchase)			Property transaction Accounts receivable (payable)		endorsements/guarantees Provision of or collaterals			Financing
Investee in Mainland China Amount (Kunshan) Co., Ltd. Chieftek Machinery	517,459 28%	Amount		155,330 December 31, Balance at 2018	28% ℅	December 31, Balance at 2018	Purpose	during the year ended December 31, December 31, 2018 Maximum balance	Balance at 2018	Interest rate	Interest during the year ended December 31, 2018	Others