cpc — Interim / Quarterly Report 2018

Nov 13, 2018

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

JUNE 30, 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.

REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

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

Introduction

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

Scope of Review

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

Basis for Qualified Conclusion

As explained in Note 4(3), the financial statements and related information disclosed in Note 13 of certain insignificant consolidated subsidiaries were not reviewed by independent accountants. Those statements reflect total assets of NTD$512,820 thousand and NTD$131,838 thousand, constituting 16% and 6% of the consolidated total assets, and total liabilities of NTD$234,700 thousand and NTD$7,793 thousand, constituting 16% and 1% of the consolidated total liabilities as at June 30, 2018 and 2017, respectively, and total comprehensive income of NTD$7,656 thousand, NTD$4,372 thousand, NTD$3,924 thousand and NTD$4,430 thousand, constituting 5%, 7%, 2% and 7% of the consolidated

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total comprehensive income for the three-month and six-month periods then ended, respectively.

Qualified Conclusion

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

Lin, Yung-Chih

Independent Accountants

Lin, Tzu-Shu

PricewaterhouseCoopers, Taiwan

Republic of China August 9, 2018

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

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2018, DECEMBER 31, 2017 AND JUNE 30, 2017

(Expressed in thousands of New Taiwan dollars)

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

Assets	Notes	June 30, 2018 AMOUNT % $ 873,338 27 31,973 1 542,641 17 8,641 - 527,581 17 32,574 1 2,016,748 63 1,028,132 32 129,558 4 23,802 1 10,650 - 5,257 - - - 2,128 - 1,199,527 37 $ 3,216,275 100	December 31, 2017 AMOUNT % $ 651,824 25 26,540 1 400,091 15 4,522 - 374,046 14 22,598 1 1,479,621 56 999,260 38 123,173 5 16,552 1 11,561 - 5,161 - 1,445 - 2,046 - 1,159,198 44 $ 2,638,819 100	June 30, 2017
				AMOUNT % $ 645,422 27 41,723 2 352,785 15 4,085 - 325,041 14 19,081 1 1,388,137 59 847,878 36 98,636 4 14,780 1 10,234 - 4,994 - 1,445 - 1,507 - 979,474 41 $ 2,367,611 100
Current assets 1100 Cash and cash equivalents 1150 Notes receivable, net 1170 Accounts receivable, net 1200 Other receivables 130X Inventory 1410 Prepayments 11XX Total current assets Non-current assets 1600 Property, plant and equipment 1780 Intangible assets 1840 Deferred income tax assets 1915 Prepayments for equipment 1920 Guarantee deposits paid 1980 Other financial assets - non-current 1990 Other non-current assets 15XX Total non-current assets 1XXX Total assets	6(1) 6(2) and 12 6(2) and 12 5 and 6(3) 6(4)(5) and 8 6(5) 6(19) 6(4) 8

(Continued)

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2018, DECEMBER 31, 2017 AND JUNE 30, 2017

(Expressed in thousands of New Taiwan dollars)

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

					June 30, 2018				December 31, 2017	December 31, 2017		June 30, 2017
	Liabilities and Equity	Notes			AMOUNT	%			AMOUNT	%		AMOUNT	%
	Liabilities
	Current liabilities
2100	Short-term borrowings	6(6)(23)		$	270,214		8	$	214,755		8 $	219,232		9
2130	Current contract liabilities	12			5,520		-		-		-	-		-
2150	Notes payable				171,566		5		115,672		4	93,365		4
2170	Accounts payable				162,162		5		91,689		4	77,400		3
2200	Other payables	6(7)			280,832		9		140,970		5	174,506		7
2230	Current income tax liabilities	6(19)			54,954		2		27,276		1	10,511		1
2310	Advance receipts	12			1,791		-		3,422		-	3,272		-
2320	Long-term liabilities, current	6(8)(23)
	portion	and 8			64,785		2		69,935		3	58,533		3
21XX	Total current liabilities				1,011,824	31			663,719	25		636,819	27
	Non-current liabilities
2540	Long-term borrowings	6(8)(23)
		and 8			451,985	14			430,993	17		361,367	15
2570	Deferred income tax liabilities	6(19)			22,274		1		8,697		-	2,420		-
2640	Net defined benefit liabilities	6(9)			5,525		-		5,674		-	4,476		-
25XX	Total non-current liabilities				479,784	15			445,364	17		368,263	15
2XXX	Total liabilities				1,491,608	46			1,109,083	42		1,005,082	42
	Equity
	Share capital	6(10)(12)
3110	Share capital - common stock				590,455	18			620,455	23		620,455	26
3150	Stock dividends to be distributed				147,614		5		-		-	-		-
	Capital reserves	6(10)(11)
3200	Capital surplus				440,667	14			463,051	18		463,051	20
	Retained earnings	6(10)(12)
3310	Legal reserve				97,280		3		73,463		3	73,463		3
3320	Special reserve				12,367		-		5,928		-	5,928		-
3350	Unappropriated retained earnings				447,046	14			497,930	19		333,663	14
3400	Other equity interest		(		9,255 )		- (		12,367)		- (	15,458)		-
3500	Treasury stocks	6(10)			-		- (		118,544) (		5 )(	118,544) (		5)
31XX	Equity attributable to owners
	of the parent				1,726,174	54			1,529,916	58		1,362,558	58
36XX	Non-controlling interest		(		1,507 )		- (		180)		- (	29)		-
3XXX	Total equity				1,724,667	54			1,529,736	58		1,362,529	58
	Significant Contingent Liabilities	6(21) and 9
	and Unrecognized Contract
	Commitments
3X2X	Total liabilities and equity			$	3,216,275	100		$	2,638,819	100 $		2,367,611	100

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except for earnings per share amounts) (REVIEWED, NOT AUDITED)

					Three months ended June 30	Three months ended June 30	Three months ended June 30	Three months ended June 30			Six months ended June 30	Six months ended June 30	Six months ended June 30	Six months ended June 30
					2018			2017			2018			2017
	Items	Notes			AMOUNT	%	AMOUNT		%		AMOUNT	%	AMOUNT		%
4000	Sales revenue	6(13)		$	584,877	100	$	375,210	100	$	1,089,719	100	$	631,284	100
5000	Operating costs	6(3)(5)(9)(17)(
		18)(21)	(		299,744 ) (	51) (		224,433 ) (	60) (		563,100 ) (	52) (		385,818) (	61 )
5900	Net operating margin				285,133	49		150,777	40		526,619	48		245,466	39
	Operating expenses	6(5)(9)(17)(18
		) and 7
6100	Selling expenses		(		21,712 ) (	4) (		24,958 ) (	7) (		49,975 ) (	5) (		45,623) (	7 )
6200	General and administrative
	expenses		(		63,816 ) (	11) (		32,899 ) (	9) (		110,549 ) (	10) (		55,164) (	9 )
6300	Research and development
	expenses		(		26,762 ) (	4) (		20,468 ) (	5) (		51,962 ) (	5) (		33,262) (	5 )
6450	Expected credit impairment	12
	loss		(		1,069 )	-		-	- (		5,056 )	-		-	-
6000	Total operating expenses		(		113,359 ) (	19) (		78,325 ) (	21) (		217,542 ) (	20) (		134,049) (	21 )
6900	Operating profit				171,774	30		72,452	19		309,077	28		111,417	18
	Non-operating income and
	expenses
7010	Other income	6(14) and 12			2,514	-		2,346	1		3,880	1		4,565	1
7020	Other gains and losses	6(15) and 12			27,017	5		6,876	2		20,943	2 (		17,006) (	3 )
7050	Finance costs	6(6)(16)	(		3,949 ) (	1) (		2,490 ) (	1) (		7,794 ) (	1) (		4,992) (	1 )
7000	Total non-operating
	income and expenses				25,582	4		6,732	2		17,029	2 (		17,433) (	3 )
7900	Profit before income tax				197,356	34		79,184	21		326,106	30		93,984	15
7950	Income tax expense	6(19)	(		46,051 ) (	8) (		18,594 ) (	5) (		75,439 ) (	7) (		21,292) (	3 )
8200	Profit for the period			$	151,305	26	$	60,590	16	$	250,667	23	$	72,692	12
	Other comprehensive income
	(loss)(Net)
	Components of other
	comprehensive income (loss)
	that will not be reclassified to
	profit or loss
8349	Income tax related to	6(19)
	components of other
	comprehensive income that
	will not be reclassified to
	profit or loss			$	-	-	$	-	-	$	182	-	$	-	-
	Components of other
	comprehensive income (loss)
	that will be reclassified to profit
	or loss
8361	Financial statements
	translation differences of
	foreign operations		(		412 )	-		3,407	1		3,127	- (		9,534) (	2 )
8300	Total other comprehensive
	income (loss) for the period		($		412 )	-	$	3,407	1	$	3,309	- ($		9,534) (	2 )
8500	Total comprehensive income for
	the period			$	150,893	26	$	63,997	17	$	253,976	23	$	63,158	10
	Profit (loss) attributable to:
8610	Owners of the parent			$	152,043	26	$	60,684	16	$	252,009	23	$	72,840	12
8620	Non-controlling interest		(		738 )	- (		94 )	- (		1,342 )	- (		148)	-
				$	151,305	26	$	60,590	16	$	250,667	23	$	72,692	12
	Comprehensive income (loss)
	attributable to:
8710	Owners of the parent			$	151,617	26	$	64,091	17	$	255,303	23	$	63,310	10
8720	Non-controlling interest		(		724 )	- (		94 )	- (		1,327 )	- (		152)	-
				$	150,893	26	$	63,997	17	$	253,976	23	$	63,158	10
	Earnings per share (in dollars)	6(20)
9750	Basic			$		2.06	$		0.82	$		3.41	$		0.99
9850	Diluted			$		2.05	$		0.82	$		3.40	$		0.98

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars) (REVIEWED, NOT AUDITED)

F	or the six-month period ended June 30, 2017 Balance at January 1, 2017 Profit for the period Other comprehensive loss for the period Total comprehensive income (loss) for the period Distribution of earnings for 2016 net income : Legal reserve Special reserve Cash dividends Balance at June 30, 2017 or the six-month period ended June 30, 2018 Balance at January 1, 2018 Profit for the period Other comprehensive income for the period Total comprehensive income (loss) for the period Distribution of earnings for 2017 net income : Legal reserve Special reserve Cash dividends Stock dividends Retirement of treasury stock Balance at June 30, 2018	Notes								Equityattributable to owners of theparent	Equityattributable to owners of theparent	Equityattributable to owners of theparent	Equityattributable to owners of theparent	Equityattributable to owners of theparent					Non-controlling interest		Total equity
				Share Capital				Capital reserve				Retained Earnings			Other Equity Interest	Treasury stocks		Total
				Common stock	S	tock dividends to be distributed				Legal reserve		Special reserve		Unappropriated retained earnings	Financial statements translation differences of foreign operations
		6(12) 6(7)(12) 6(19) 6(12) 6(7)(12) 6(10)(12) 6(10)(11)	$ 620,455 - - - - - - $ 620,455 $ 620,455 - - - - - - - ( 30,000 ) $ 590,455			$ - - - - - - - $ - $ - - - - - - - 147,614 - $ 147,614	$ 463,051 - - - - - - $ 463,051 $ 463,051 - - - - - - - ( 22,384 ) $ 440,667			$ 64,905 - - - 8,558 - - $ 73,463 $ 73,463 - - - 23,817 - - - - $ 97,280		$ - - - - - 5,928 - $ 5,928 $ 5,928 - - - - 6,439 - - - $ 12,367	$ 334,354 72,840 - 72,840 ( 8,558 ) ( 5,928 ) ( 59,045 ) $ 333,663 $ 497,930 252,009 182 252,191 ( 23,817 ) ( 6,439 ) ( 59,045 ) ( 147,614 ) ( 66,160 ) $ 447,046		($ 5,928 ) - ( 9,530 ) ( 9,530 ) - - - ($ 15,458 ) ($ 12,367 ) - 3,112 3,112 - - - - - ($ 9,255 )	($ 118,544 ) - - - - - - ($ 118,544 ) ($ 118,544 ) - - - - - - - 118,544 $ -	$ 1,358,293 72,840 ( 9,530 ) 63,310 - - ( 59,045 ) $ 1,362,558 $ 1,529,916 252,009 3,294 255,303 - - ( 59,045 ) - - $ 1,726,174		$ 123 ( 148 ) ( 4 ) ( 152 ) - - - ($ 29 ) ($ 180 ) ( 1,342 ) 15 ( 1,327 ) - - - - - ($ 1,507 )	$ 1,358,416 72,692 ( 9,534 ) 63,158 - - ( 59,045 ) $ 1,362,529 $ 1,529,736 250,667 3,309 253,976 - - ( 59,045 ) - - $ 1,724,667
F

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)

(REVIEWED, NOT AUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Expected credit impairment loss Reversal of allowance for doubtful accounts Reversal of inventory market price decline Depreciation Loss on disposal of property, plant and equipment Amortization Reversal of current contract liabilities Interest income Interest expense Changes in operating assets and liabilities Changes in operating assets Notes receivable Accounts receivable Other receivables Inventories Prepayments Changes in operating liabilities Current contract liabilities Notes payable Accounts payable Other payables Advance receipts Net defined benefit liabilities Cash inflow generated from operations Interest received Interest paid Income tax paid Net cash flows from operating activities

For the six-month periods ended June 30, Notes 2018 2017 $ 326,106 $ 93,984 12 5,056 - 6(14) and 12 - ( 2,452 ) 6(3) ( 748 ) ( 5,060 ) 6(4)(5)(17) 40,791 55,573 6(15) - 14 6(5)(17) 1,250 965 6(13) ( 1,953 ) - 6(14) ( 2,373 ) ( 839 ) 6(16) 7,794 4,992 ( 5,433 ) ( 9,528 ) ( 147,604 ) ( 26,251 ) ( 4,119 ) ( 2,160 ) ( 153,020 ) ( 878 ) ( 9,976 ) ( 2,573 ) 7,473 - 56,557 27,955 70,473 34,706 78,815 37,943 ( 1,631 ) 2,300 ( 149 ) ( 149 ) 267,309 208,542 2,373 839 ( 7,547 ) ( 4,920 ) ( 41,252 ) ( 10,420 ) 220,883 194,041

(Continued)

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)

(REVIEWED, NOT AUDITED)

CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Cash paid for acquisition of intangible assets Increase in prepayment for equipment Increase in guarantee deposits paid Decrease (increase) in other financial assets - non-current (Increase) decrease in other non-current assets Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Increase in long-term borrowings Decrease in long-term borrowings Net cash flows from financing activities Effect of foreign exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

For the six-month periods ended June 30, Notes 2018 2017 6(22) ($ 29,105 ) ($ 10,980 ) - 200 6(5) ( 8,060 ) ( 29,084 ) ( 34,681 ) ( 6,405 ) ( 96 ) ( 997 ) 1,445 ( 15 ) ( 82 ) 2,107 ( 70,579 ) ( 45,174 ) 6(23) 54,295 31,517 6(23) 360,000 - 6(23) ( 346,118 ) ( 29,266 ) 68,177 2,251 3,033 ( 12,126 ) 221,514 138,992 6(1) 651,824 506,430 6(1) $ 873,338 $ 645,422

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated) (REVIEWED, NOT AUDITED)

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 and its subsidiaries (collectively referred herein as the “Group”) are 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.

• THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were reported to the Board of Directors on August 9, 2018.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“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:

New Standards,Interpretations and Amendments

Effective date by International Accounting Standard Board(“IASB”)

Amendments to IFRS 2, ‘Classification and measurement of share- based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9, Financial instruments with IFRS 4, Insurance contracts’ IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Amendments to IFRS 15, ‘Clarifications to IFRS 15, Revenue from contracts with customers’ Amendments to International Accounting Standards (“IAS”) 7, ‘Disclosure initiative’ Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealized losses’

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017

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New Standards,Interpretations andAmendments Amendments to IAS 40, ‘Transfers of investment property’ International Financial Reporting Interpretations Committee(“IFRIC”) 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IAS 28, ‘Investments in associates and joint ventures’

Effective date by International Accounting StandardBoard (“IASB”)

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

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

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

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

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

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

• B. In the first quarter of 2018, the Group reported to the Board of Directors that IFRS 16 has no significant impact to the Group.

• C. The Group expects to recognize the lease contract of lessees in line with IFRS 16. However, the Group intends not to restate the financial statements of prior period (referred herein as the “modified retrospective approach”), and the effects will be adjusted on January 1, 2019.

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

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

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

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated 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 consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, and the IAS 34, ‘Interim financial reporting’ as endorsed by the FSC.

(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 consolidated 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 Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5, critical accounting judgements, estimates and key sources of assumption uncertainty.

• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognized as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 and the second quarter of 2017 were not restated. The financial statements for the year ended December 31, 2017 and for the six-month period ended June 30, 2017 were prepared in compliance with International Accounting Standard 39 (“IAS 39”), International Accounting Standard 11 (“IAS 11”), International Accounting Standard 18 (“IAS 18”) and related financial reporting interpretations. Please refer to Notes 12(4), ‘Effects on initial application of

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IFRS 9, and information on application of IAS 39 for the six-month period ended June 30, 2017’ and 12(5), ‘Effects of initial application of IFRS 15 and information on application of IAS 18 for the six-month period ended June 30, 2017’ for details of significant accounting policies and details of significant accounts.

(3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

• (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group 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. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

• (b) Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

• B. Subsidiaries included in the consolidated financial statements:

Name of investor	Name of subsidiary	Business activities		Ownership (%)	June 30, 2017 100 100 - 80	Note
			June 30, 2018 100 100 100 80	December 31, 2017 100 100 100 80
CHIEFTEK PRECISION CO., LTD. (“CHIEFTEK PRECISION”) CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD.	CHIEFTEK PRECISION HOLDING CO., LTD. cpc Europa GmbH (“cpc Europa”) CHIEFTEK PRECISION INTERNATIONAL LLC CSM Maschinen GmbH	Professional investment Sale of high precision linear motion components and rendering after-sales service Lease of real estate property Research, manufacture and sale of machineries				- Note 1 Note 1 Note 3 Note 2

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Name of investor	Name of subsidiary	Business activities		Ownership (%)	June 30, 2017 100 100 100	Note
			June 30, 2018 100 100 100	December 31, 2017 100 100 100
CHIEFTEK PRECISION HOLDING CO., LTD. CHIEFTEK PRECISION HOLDING CO., LTD. Chieftek Precision (Hong Kong) Co., Limited	Chieftek Precision (Hong Kong) Co., Limited CHIEFTEK PRECISION USA CO., LTD. (“cpc USA”) Chieftek Machinery (Kunshan) Co., Ltd. (“Chieftek (Kunshan)”)	Professional investment Sale of high precision linear motion components and rendering after-sales service Production, processing and sale of high precision linear motion components and after- sales service				- Note 2 -

• Note 1: The financial statements of the entity as of and for the six-month period ended June 30, 2018 were not reviewed by the independent accountants as the entity did not meet the definition of a significant subsidiary.

• Note 2: The financial statements of the entity as of and for the six-month periods ended June 30, 2018 and 2017 were not reviewed by the independent accountants as the entity did not meet the definition of a significant subsidiary.

Note 3: Newly established company in July 2017.

The financial statements and the related information disclosed in Note 13 of certain insignificant consolidated subsidiaries were not reviewed by independent accountants. Those statements reflect total assets of $512,820 and $131,838, constituting 16% and 6% of the consolidated total assets, and total liabilities of $234,700 and $7,793, constituting 16% and 1% of the consolidated total liabilities as at June 30, 2018 and 2017, respectively, and total comprehensive income of $7,656, $4,372, $3,924 and $4,430, constituting 5%, 7%, 2% and 7% of the consolidated total comprehensive income for the three-month and six-month periods ended June 30, 2018 and 2017, respectively.

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

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

• E. Significant restrictions: None.

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

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the

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currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions and balances

• (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 retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation 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 re-translated 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’.

• B. Translation of foreign operations

• (a) The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  • i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

  • ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

  • iii. All resulting exchange differences are recognized in other comprehensive income.

• (b) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Group retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

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• (5) 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.

(6) 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.

(7) Financial assets at amortized cost

• A. Financial assets at amortized cost are those that meet all of the following criteria:

• (a) The objective of the Group’s business model is achieved by collecting contractual cash flows.

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

• B. On a regular way purchase or sale basis, financial assets at amortized cost are recognized and derecognized using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognized in profit or loss when the asset is derecognized or impaired.

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(8) Accounts and notes receivable

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

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

(9) Impairment of financial assets

For debt instruments measured as financial assets at amortized cost, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (“ECLs”) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.

• (10) Derecognition of financial assets

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

• (11) 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.

(12) 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 Group 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.

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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 Buildings and structures Machinery and equipment Transportation equipment Office equipment Leasehold improvements Other equipment	Useful lives
	3 ～ 50 years 2 ～ 15 years 3 ～ 10 years 1 ～ 10 years 2 ～ 15 years 2 ～ 10 years

(13) 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.

(14) 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. Internally generated intangible assets research and development expenditures

• (a) Research expenditures are recognized as an expense as incurred.

• (b) Development expenditures that do not meet the following criteria are recognized as expenses as incurred, but are recognized as intangible assets when the following criteria are met:

  • i. It is technically feasible to complete the intangible asset so that it will be available for use or sale;

  • ii. An entity intends to complete the intangible asset and use or sell it;

  • iii. An entity has the ability to use or sell the intangible asset;

  • iv. It can be demonstrated how the intangible asset will generate probable future economic benefits;

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  - v. Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and

  - vi. The expenditure attributable to the intangible asset during its development can be reliably measured.

• (c) Upon being available for use, internally generated intangible assets are amortized on a straight-line basis over their estimated useful life.

• 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.

(15) Impairment of non-financial assets

The Group 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.

(16) 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.

(17) 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.

(18) Derecognition of financial liabilities

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

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(19) 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.

(20) 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 plans

For defined contribution plans, 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 plans

  • 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 Group 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 plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

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

• 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 Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

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(21) 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 10% 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 consolidated 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 Group 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.

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

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

(22) Share capital

• A. Ordinary shares are classified as equity.

• 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.

• (23) 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.

• (24) Revenue recognition

Sales of goods

• A. The Group 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 Group 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 ~ 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 Group 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.

(25) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

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5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’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 Group must determine the net realizable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group 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 June 30, 2018, the carrying amount of inventories was $527,581.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash: Cash on hand Checking accounts and demand deposits Cash Equivalents: Time deposits	June 30,2018 1,636 $ 777,783 779,419 93,919 873,338 $	December31,2017 1,051 $ 649,244 650,295 1,529 651,824 $	June 30,2017
			563 $ 643,366
			643,929
			1,493
			645,422 $

• A. The Group associates 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 Group’s cash and cash equivalents pledged to others as collateral as of June 30, 2018, December 31, 2017 and June 30, 2017 are provided in Note 8, ‘Pledged assets’.

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(2) Notes and accounts receivable, net

			June 30,2018	December	December	31,2017			June 30,2017
Notes receivable		$	31,973		$	26,540		$	41,723
			June 30,2018	December		31,2017			June 30,2017
Accounts receivable		$	558,499		$	410,895		$	363,316
Less: Allowance for doubtful
accounts	(		15,858)	(		10,804)	(		10,531)
		$	542,641		$	400,091		$	352,785

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

Not past due Less than 30 days 31 to 90 days 91 to 180 days Over 181 days	June 30,	Notes receivable 31,973 $ - - - - 31,973 $ 2018	Accounts Notes receivable receivable 339,738 $ 25,486 $ 23,282 187 26,369 - 6,111 456 15,395 411 410,895 $ 26,540 $ December31,2017	June 30,	2017
	Accounts receivable 478,713 $ 25,966 18,494 18,649 16,677 558,499 $		Accounts receivable 339,738 $ 23,282 26,369 6,111 15,395 410,895 $	Accounts receivable 281,086 $ 34,767 16,096 19,470 11,897 363,316 $	Notes receivable
					28,854 $ 6,115 4,001 2,618 135
					41,723 $

The above ageing analysis was based on past due date.

• B. As of June 30, 2018, December 31, 2017 and June 30, 2017, the Group does not hold any collateral as security for accounts receivable.

• C. Information relating to credit risk is provided in Note 12(2), ‘Financial instruments’.

(3) Inventories

Inventories
Raw materials Supplies Work in progress Finished goods		June 30,2018
	Allowance for Cost marketprice decline 80,247 $ 64) ($ 84,757 3,257) ( 240,153 13,534) ( 180,501 41,222) ( 585,658 $ 58,077) ($		Bookvalue
			80,183 $ 81,500 226,619 139,279
			527,581 $

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December 31, 2017

Allowance for

	Allowance for December31,2017
Raw materials Supplies Work in progress Finished goods Raw materials Supplies Work in progress Finished goods	Cost marketprice decline 44,081 $ 295) ($ 60,453 3,920) ( 173,786 14,562) ( 154,318 39,815) ( 432,638 $ 58,592) ($ June 30,2017	Bookvalue
		43,786 $ 56,533 159,224 114,503
		374,046 $
	Allowance for Cost marketprice decline 34,853 $ 243) ($ 47,684 4,510) ( 157,320 10,573) ( 152,899 52,389) ( 392,756 $ 67,715) ($	Bookvalue
		34,610 $ 43,174 146,747 100,510
		325,041 $

The cost of inventories recognized as expense for the period:

Cost of goods sold Reversal of allowance for inventory market price decline (Note) Gain on physical inventory Revenue from sale of scraps Cost of goods sold Reversal of allowance for inventory market price decline (Note) Gain on physical inventory Revenue from sale of scraps
		2018
		2018
	565,034 $ 748) ( 905) ( 281) ( 563,100 $		391,796 $ 5,060) ( 864) ( 54) ( 385,818 $

(Note) The Group 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 and 2017.

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(4) Property, plant and equipment

															Construction
													Leasehold		in progress
					Buildings							improvements			and equipment
					and	Machinery and		Transportation			Office		and other	before acceptance
January1,2018			Land		structures		equipment		equipment	equipment			equipment		inspection		Total
Cost		$	414,740	$	535,004	$	800,132	$	5,282	$	18,060	$	133,253	$	17,380	$	1,923,851
Accumulated	depreciation		-	(	105,777)	(	685,013)	(	4,061)	(	16,576)	(	113,164)		-	(	924,591)
		$	414,740	$	429,227	$	115,119	$	1,221	$	1,484	$	20,089	$	17,380	$	999,260
For the six-month period ended
	June30,2018
At January 1		$	414,740	$	429,227	$	115,119	$	1,221	$	1,484	$	20,089	$	17,380	$	999,260
Additions			-		1,813		7,155		-		517		3,319		17,393		30,197
Transferred from prepayments for
equipment			-		-		-		-		-		-		35,592		35,592
Transferred after acceptance inspection			-		-		6,729		-		-		1,290	(	8,019)		-
Reclassifications		(	45,040)		45,040		-		-		-		-		-		-
Depreciation	(Note)		-	(	8,488)	(	27,525)	(	281)	(	438)	(	4,096)		-	(	40,828)
Disposals－Cost			-		-	(	1,144)		-	(	416)	(	427)		-	(	1,987)
' －Accumulated depreciation			-		-		1,144		-		416		427		-		1,987
Net currency	exchange differences		915		3,035	(	35)		4	(	1)	(	7)		-		3,911
At June 30		$	370,615	$	470,627	$	101,443	$	944	$	1,562	$	20,595	$	62,346	$	1,028,132
	June30,2018
Cost		$	370,615	$	590,399	$	813,201	$	5,290	$	18,170	$	137,419	$	62,346	$	1,997,440
Accumulated	depreciation		-	(	119,772)	(	711,758)	(	4,346)	(	16,608)	(	116,824)		-	(	969,308)
		$	370,615	$	470,627	$	101,443	$	944	$	1,562	$	20,595	$	62,346	$	1,028,132

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January1,2017 Cost Accumulated depreciation For the six-month period ended June 30,2017 At January 1 Additions Transferred from prepayments for equipment Transferred after acceptance inspection Depreciation (Note) Disposals－Cost ' －Accumulated depreciation Net currency exchange differences At June 30 June 30,2017 Cost Accumulated depreciation

Construction Leasehold in progress Buildings improvements and equipment and Machinery and Transportation Office and other before acceptance Land structures equipment equipment equipment equipment inspection Total 316,864 $ 462,353 $ 818,978 $ 5,384 $ 17,470 $ 123,646 $ 2,837 $ 1,747,532 $ - 91,795) ( 637,144) ( 4,449) ( 16,421) ( 105,704) ( - 855,513) ( 316,864 $ 370,558 $ 181,834 $ 935 $ 1,049 $ 17,942 $ 2,837 $ 892,019 $ 316,864 $ 370,558 $ 181,834 $ 935 $ 1,049 $ 17,942 $ 2,837 $ 892,019 $ - 401 6,181 - 379 1,412 1,243 9,616 - - - - - - 2,008 2,008 - - - - - 1,983 1,983) ( - - 6,832) ( 43,520) ( 225) ( 335) ( 4,848) ( - 55,760) ( - - 1,100) ( - 231) ( 837) ( - 2,168) ( - - 886 - 231 837 - 1,954 - - 112 17) ( 83 30 1 209 316,864 $ 364,127 $ 144,393 $ 693 $ 1,176 $ 16,519 $ 4,106 $ 847,878 $ 316,864 $ 462,754 $ 824,003 $ 5,346 $ 17,471 $ 126,276 $ 4,106 $ 1,756,820 $ - 98,627) ( 679,610) ( 4,653) ( 16,295) ( 109,757) ( - 908,942) ( 316,864 $ 364,127 $ 144,393 $ 693 $ 1,176 $ 16,519 $ 4,106 $ 847,878 $

(Note) Depreciation of certain research and development equipment was capitalized as intangible assets as it met the criteria for capitalization. Please refer to Note 6(5), ‘Intangible assets’.

~26~

• A. For the three-month and six-month periods ended June 30, 2018 and 2017, no borrowing costs were capitalized as part of property, plant and equipment.

• B. Information about the property, plant and equipment that were pledged to others as collateral as of June 30, 2018, December 31, 2017 and June 30, 2017 is provided in Note 8, ‘Pledged assets’.

~27~

(5) Intangible assets

For the six-month periods ended June 30, 2018 and 2017, reconciliation of the initial cost, accumulated amortization amount and carrying amount at beginning and end of period of intangible assets is as follows:

For the six-month period ended June 30, 2018

Trademarks Patents Software At January 1, 2018 Cost 578 $ 9,231 $ 10,067 $ Accumulated amortization 578) ( 1,945) ( 6,085) ( Accumulated impairment - - - Net value - $ 7,286 $ 3,982 $ Net value at January 1, 2018 - $ 7,286 $ 3,982 $ Additions－acquired separately - - 236 Additions－from internal development - - - Additions－depreciation reclassified - - - Additions－amortization reclassified - - - Amortization - 291) ( 976) ( Net currency exchange differences - - 3) ( Net value at June 30, 2018 - $ 6,995 $ 3,239 $ At June 30, 2018 Cost 578 $ 9,231 $ 10,297 $ Accumulated amortization 578) ( 2,236) ( 7,058) ( Accumulated impairment - - - Net value - $ 6,995 $ 3,239 $

~28~

For the six-month period ended June 30, 2017

Trademarks Patents Software At January 1, 2017 Cost 578 $ 9,146 $ 6,156 $ Accumulated amortization 578) ( 1,363) ( 4,421) ( Accumulated impairment - - - Net value - $ 7,783 $ 1,735 $ Net value at January 1, 2017 - $ 7,783 $ 1,735 $ Additions－acquired separately - 85 2,673 Additions－from internal development - - - Additions－depreciation reclassified - - - Additions－amortization reclassified - - - Amortization - 291) ( 764) ( Net currency exchange differences - - 11 Net value at June 30, 2017 - $ 7,577 $ 3,655 $ At June 30, 2017 Cost 578 $ 9,231 $ 8,851 $ Accumulated amortization 578) ( 1,654) ( 5,196) ( Accumulated impairment - - - Net value - $ 7,577 $ 3,655 $		Internally generated intangible assets Others Total 16,987 $ 60,000 $ 92,867 $ - 13,500) ( 19,862) ( - 4,298) ( 4,298) ( 16,987 $ 42,202 $ 68,707 $ 16,987 $ 42,202 $ 68,707 $ - - 2,758 26,326 - 26,326 187 - 187 90 - 90 - - 1,055) ( 1,612 - 1,623 45,202 $ 42,202 $ 98,636 $ 45,202 $ 60,000 $ 123,862 $ - 13,500) ( 20,928) ( - 4,298) ( 4,298) ( 45,202 $ 42,202 $ 98,636 $

~29~

• A. For the three-month and six-month periods ended June 30, 2018 and 2017, no borrowing costs were capitalized as part of intangible assets.

• B. Details of amortization on intangible assets are as follows:

Manufacturing overhead General and administrative expenses Research and development expenses Manufacturing overhead General and administrative expenses Research and development expenses	Forthe three-monthperiods ended June 30,	Forthe three-monthperiods ended June 30,
	2018 2017 - $ 39 $ 80 72 560 476 640 $ 587 $ For the six-monthperiods endedJune30,	2017
		39 $ 72 476
		587 $
	2018 - $ 145 1,122 1,267 $	2017
		81 $ 137 837
		1,055 $

(6) Short-term borrowings

Short-term borrowings
Nature Bank unsecured borrowings Bank secured borrowings Nature Bank unsecured borrowings Bank secured borrowings Nature Bank unsecured borrowings Bank secured borrowings	June 30,2018 170,000 $ 100,214 270,214 $ December31,2017 125,000 $ 89,755 214,755 $ June30,2017 155,000 $ 64,232 219,232 $		Interestraterange 0.99%～1.04% 1.14%～3.84% Interestraterange 1.03%～1.05% 1.20%～3.03% Interest rate range 1.05%～1.12% 1.20%～1.49%	Collateral None Endorsements and guaruantees by the Company Collateral None Endorsements and guaruantees by the Company Collateral None Endorsements and guaruantees by the Company
					None Endorsements and guaruantees by the Company

Interest expense recognized in profit or loss amounted to $3,949, $2,490, $7,794 and $4,992 for the three-month and six-month periods ended June 30, 2018 and 2017, respectively.

~30~

(7) Other payables

Other payables
Dividends payable Accrued salaries and bonuses Employees’ compensation and directors’ and supervisors’ remuneration payable Equipment payable Others	June 30,2018 59,045 $ 69,086 77,303 6,991 68,407 280,832 $	December31,2017 - $ 55,278 29,687 5,236 50,769 140,970 $	June 30,2017
			59,045 $ 46,846 22,912 2,656 43,047
			174,506 $

- (8) Long term borrowings

Long-term borrowings
Nature	Expiry date	June 30,2018	Interest rate range Collateral 1.37%～ 4.43% Land, buildings and structures, and endorsed and guaranteed by the Company 1.29%～ 1.80% None Interest rate range Collateral 1.27%～ 4.43% Time deposits (Note), land, buildings and structures, machinery and equipment and endorsed and guaranteed by the Company 1.27% None	Collateral
Long-term bank borrowings Secured borrowings Unsecured borrowings Less: Current portion Nature		446,354 $ 70,416 516,770 64,785) ( 451,985 $ December31,2017
		486,345 $ 14,583 500,928 69,935) ( 430,993 $		Time deposits (Note), land, buildings and structures, machinery and equipment and endorsed and guaranteed by the Company None

~31~

Nature Expiry date Long-term bank borrowings Secured borrowings February 17, 2019～ September 23, 2021 Unsecured borrowings September 23, 2019 Less: Current portion	June 30,2017 401,150 $ 18,750 419,900 58,533) ( 361,367 $	Interest rate range Collateral 1.27%～ 2.01% Time deposits (Note), land, buildings and structures, machinery and equipment 1.27% None

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

(9) 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) No pension cost was recognized under the aforementioned defined benefit pension plan of the Company for the three-month and six-month periods ended June 30, 2018 and 2017.

• (c) Expected contributions to the defined benefit pension plan of the Company for the year ending December 31, 2018 amount to $297.

• 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 other subsidiaries are subject to local government sponsored defined contribution plan. In accordance with the related laws of the respective local government, the independent pension fund of employees is administered by the government. Other than the monthly contributions, these subsidiaries do not have further obligations. The pension costs

~32~

under the defined contribution pension plans of the Group for the three-month and six-month periods ended June 30, 2018 and 2017 were $4,430, $2,661, $8,351 and $5,670, respectively.

• (10) Share capital - common stock and stock dividends to be distributed

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

thousands of shares):
At January and June 30	For the six-monthperiods endedJune30,
	2018 59,046	2017
		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):

Reason for reacquisition To be reissued to employees Reason for reacquisition To be reissued to employees	Forthe six-monthperiod ended June 30,2018	Forthe six-monthperiod ended June 30,2018	Forthe six-monthperiod ended June 30,2018	Forthe six-monthperiod ended June 30,2018
	Shares at beginning Shares at ofperiod Increase Decrease end ofperiod 3,000 - 3,000) ( - Forthe six-monthperiod ended June 30,2017			Shares at end ofperiod
				-
	Shares at beginning ofperiod 3,000	Increase -	Decrease -	Shares at end ofperiod
				3,000

• (b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus. As of December 31, 2017 and June 30, 2017, the treasury shares both amounted to $118,544.

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

• (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired.

• 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 deduction became effective on the same date and the registration has been approved by the Southern Taiwan Science Park Bureau, Ministry of Science and Technology.

~33~

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 short amount of $66,160.

• E. As of June 30, 2018, the Company’s authorized capital was $1,200,000 (including $30,000 reserved for employee stock options), and the paid-in capital was $590,455 (59,046 thousand shares) with par value of $10 (in dollars) per share.

(11) Capital reserve

Forthe six-monthperiod ended June 30,2018 Share premium At January 1 462,937 $ Retirement of treasury shares 22,384) ( At June 30 440,553 $ Forthe six-monthperiod ended June 30,2017 Share premium Balances at beginning and end of period 462,937 $	Others Total 114 $ 463,051 $ - 22,384) ( 114 $ 440,667 $ Others Total 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(10), ‘Share capital – common stock’.

(12) 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

~34~

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) for the year ended December 31, 2017. On May 28, 2018, the Company’s stockholders adopted a resolution to distribute cash dividends and stock dividends for 2017 of $59,045 ($1.0 (in dollars) per share) and $147,614 ($2.5 (in dollars) per share), respectively.

(13) Operating revenue

Operating revenue
Revenue from contracts with customers	For the three-month period ended June 30, 2018 584,877 $	For the six-month period ended June 30, 2018
		1,089,719 $

• A. The Group derives revenue from the transfer of goods at a point in time in segments. Please refer to Note 14, ‘Segment information’ for details.

• B. For the three-month and six-month periods ended June 30, 2018, revenue from contracts with customers recognized that were included in the current contract liabilities at January 1, 2018 were $264 and $1,953, respectively.

• C. Related disclosures on operating revenue for the six-month period ended June 30, 2017 are provided in Note 12(5), ‘Effects of initial application of IFRS 15 and information on application of IAS 18 for the six-month period ended June 30, 2017’.

~35~

(14) Other income

For the three-month periods ended June 30,

Other income	Forthe three-monthperiods ended June 30,	riods ended June 30,
Interest income: Interest income from bank deposits Reversal of allowance for doubtful accounts Other income－others Interest income: Interest income from bank deposits Reversal of allowance for doubtful accounts Other income－others	2018 2017 1,845 $ 553 $ - 1,306 669 487 2,514 $ 2,346 $ Forthe six-monthperiods ended June 30,	2017
		553 $ 1,306 487
		2,346 $
	2018 2,373 $ - 1,507 3,880 $	2017
		839 $ 2,452 1,274
		4,565 $

(15) Other gains and losses

Currency exchange gain Loss on disposal of property, plant, and equipment Others

		Forthe three-monthperiods	Forthe three-monthperiods	ended June 30,
		2018		2017
	$	27,021	$	6,890
		-	(	14)
(		4)		-
	$	27,017	$	6,876

Currency exchange gain (loss) Loss on disposal of property, plant, and equipment Others

		Forthe six-monthperiods	Forthe six-monthperiods	ended June 30,
		2018		2017
	$	20,950	($	16,992)
		-	(	14)
(		7)		-
	$	20,943	($	17,006)

(16) Finance costs

Interest expense on bank borrowings

Interest expense on bank borrowings

For the three-monthperiods endedJune30,	For the three-monthperiods endedJune30,
2018 2017 3,949 $ 2,490 $ Forthe six-monthperiods ended June 30,	2017
	2,490 $
2018 7,794 $	2017
	4,992 $

~36~

(17) Expenses by nature

Expenses by nature
Employee benefit expense Depreciation Amortization Employee benefit expense Depreciation Amortization Employee benefit expense Depreciation Amortization Employee benefit expense Depreciation Amortization	For the three-monthperiod endedJune30,2018
	Operatingcost Operatingexpense Total 80,989 $ 69,587 $ 150,576 $ 16,039 3,421 19,460 - 640 640 97,028 $ 73,648 $ 170,676 $ For the three-monthperiod endedJune30,2017		Total
			150,576 $ 19,460 640
			170,676 $
	Operatingcost Operatingexpense Total 49,349 $ 48,515 $ 97,864 $ 24,235 2,699 26,934 39 458 497 73,623 $ 51,672 $ 125,295 $ For the six-monthperiod endedJune30,2018		Total
			97,864 $ 26,934 497
			125,295 $
	Operatingcost Operatingexpense Total 146,673 $ 132,822 $ 279,495 $ 33,463 7,328 40,791 - 1,250 1,250 180,136 $ 141,400 $ 321,536 $ For the six-monthperiod endedJune30,2017		Total
			279,495 $ 40,791 1,250
			321,536 $
	Operatingcost 91,302 $ 50,064 81 141,447 $	Operatingexpense 78,940 $ 5,509 884 85,333 $	Total
			170,242 $ 55,573 965
			226,780 $

~37~

(18) Employee benefit expense

Employee benefit expense
Wages and salaries Labor and health insurance expense Pension costs Other personnel expenses Wages and salaries Labor and health insurance expense Pension costs Other personnel expenses Wages and salaries Labor and health insurance expense Pension costs Other personnel expenses Wages and salaries Labor and health insurance expense Pension costs Other personnel expenses	Forthe three-monthperiod ended June 30,2018
	Operating cost Operating expense Total 70,037 $ 63,165 $ 133,202 $ 5,873 2,774 8,647 2,724 1,706 4,430 2,355 1,942 4,297 80,989 $ 69,587 $ 150,576 $ Forthe three-monthperiod ended June 30,2017		Total
			133,202 $ 8,647 4,430 4,297
			150,576 $
	Operating cost Operating expense Total 42,736 $ 43,194 $ 85,930 $ 3,853 3,267 7,120 1,458 1,203 2,661 1,302 851 2,153 49,349 $ 48,515 $ 97,864 $ Forthe six-monthperiod ended June 30,2018		Total
			85,930 $ 7,120 2,661 2,153
			97,864 $
	Operating cost Operating expense Total 126,310 $ 120,293 $ 246,603 $ 11,193 6,206 17,399 5,105 3,246 8,351 4,065 3,077 7,142 146,673 $ 132,822 $ 279,495 $ Forthe six-monthperiod ended June 30,2017		Total
			246,603 $ 17,399 8,351 7,142
			279,495 $
	Operating cost 78,125 $ 7,342 3,339 2,496 91,302 $	Operating expense 69,202 $ 5,699 2,331 1,708 78,940 $	Total
			147,327 $ 13,041 5,670 4,204
			170,242 $

• A. According to the Articles of Incorporation of the Company, a ratio of profit of the current year distributable, 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.

• B. For the three-month and six-month periods ended June 30, 2018 and 2017, the Company’s employees’ compensation was accrued at $23,648, $6,501, $34,774 and $7,688, respectively; while directors’ and supervisors’ remuneration was accrued at $6,616, $2,438, $10,788 and

~38~

$2,883, respectively. The aforementioned amounts were recognized in salary expenses that were estimated and accrued based on the profit as of the end of reporting period and the percentage specified in the Articles of Incorporation of the Company.

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 six-month period ended June 30, 2018. The employees’ compensation will be distributed in the form of cash. The employees’ compensation and directors’ and supervisors’ remuneration for 2017 have not yet been distributed.

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.

(19) Income tax

A. Income tax expense:

(a) Components of income tax expense:

omponents of income tax expense:
	Forthe three-monthperiods ended June 30,
		2018		2017
Current income tax:
Income tax incurred in current period	$	37,458	$	9,622
10% tax on unappropriated earnings		19		1,130
Prior year’s income tax under (over) estimation		3,509	(	165)
Total current income tax		40,986		10,587
Deferred income tax:
Origination and reversal of temporary
differences		5,065		8,007
Income tax expense	$	46,051	$	18,594
	Forthe six-monthperiods ended June 30,
		2018		2017
Current income tax:
Income tax incurred in current period	$	64,239	$	14,015
10% tax on unappropriated earnings		19	$	1,130
Prior year’s income tax under (over) estimation		4,672	(	165)
Total current income tax		68,930		14,980
Deferred income tax:
Origination and reversal of temporary
differences		7,713		6,312
Impact of change in tax rate	(	1,204)		-
Total deferred tax		6,509		6,312
Income tax expense	$	75,439	$	21,292

~39~

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

		Forthe three-monthperiods ended June 30,	Forthe three-monthperiods ended June 30,	Forthe three-monthperiods ended June 30,
			2018	2017
Impact	of change in tax rate	$	-	$	-
		For the six-monthperiods endedJune30,
			2018	2017
Impact	of change in tax rate	($	182)	$	-

• B. The Company’s income tax returns through 2015 have been assessed and approved by the Tax Authority. There were no disputes existing between the Company and Tax Authority as of August 9, 2018.

• 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 Group 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.

• (20) Earnings per share (“EPS”)

Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	For the three-monthperiod endedJune30,2018
	Weighted average number of shares outstanding EPS Amount aftertax (sharesinthousands) (indollars) 152,043 $ 73,807 2.06 $ 152,043 $ 73,807 - 279 152,043 $ 74,086 2.05 $

~40~

For the three-month period ended June 30, 2017

	For the three-monthperiod endedJune30,2017
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Weighted average number of shares outstanding EPS Amount aftertax (sharesinthousands) (indollars) 60,684 $ 73,807 0.82 $ 60,684 $ 73,807 - 190 60,684 $ 73,997 0.82 $ For the six-monthperiod endedJune30,2018
	Weighted average number of shares outstanding EPS Amount aftertax (sharesinthousands) (indollars) 252,009 $ 73,807 3.41 $ 252,009 $ 73,807 - 345 252,009 $ 74,152 3.40 $

~41~

For the six-month period ended June 30, 2017

Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Weighted average number of shares outstanding EPS Amount aftertax (sharesinthousands) (indollars) 72,840 $ 73,807 0.99 $ 72,840 $ 73,807 - 325 72,840 $ 74,132 0.98 $

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.

(21) Operating leases

The Group entered into a non-cancellable operating lease agreement 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 Group will be adjusted accordingly on the following month. The Group may have to pay additional rent or get a refund on its last rental payment because of such adjustment. The rent expense of $1,808, 1,709, 3,616 and $3,417 was recognized in profit or loss for the threemonth and six-month periods ended June 30, 2018 and 2017, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Within one year Later than one year but not exceeding five years Exceeding five years	June30,2018 7,594 $ 26,607 631 34,832 $	December31,2017 7,594 $ 30,375 660 38,629 $	June30,2017
			7,175 $ 28,700 4,210
			40,085 $

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(22) Supplemental cash flow information

A. Investing activities with partial cash payments

			Forthe six-monthperiods	Forthe six-monthperiods	ended June 30,
			2018		2017
Purchase of property, plant and equipment		$	30,197	$	9,616
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	(		4,195)	(	1,211)
Ending balance of payable for equipment	(		6,991)	(	2,656)
Cash paid during the period		$	29,105	$	10,980

B. Investing and financing activities with no cash flow effects

B. Investing and financing activities with no cash flow effects	B. Investing and financing activities with no cash flow effects	B. Investing and financing activities with no cash flow effects	B. Investing and financing activities with no cash flow effects	B. Investing and financing activities with no cash flow effects	B. Investing and financing activities with no cash flow effects	B. Investing and financing activities with no cash flow effects
Changes in liabilities from financing activities 2018 2017 (a) Prepayments for equipment reclassified to property, plant and equipment 35,592 $ 2,008 $ 2018 2017 (b) Cash dividends distribution 59,045 $ 59,045 $ Less: Ending balance of payable on cash dividends (other payable) 59,045) ( 59,045) ( Cash paid for cash dividends distribution - $ - $ Forthe six-monthperiods ended June 30, Forthe six-monthperiods ended June 30, Short-term borrowings Long-term borrowings Liabilities from financing activities-gross January 1, 2018 214,755 $ 500,928 $ 715,683 $ Changes in cash flow from financing activities 54,295 13,882 68,177 Impact of changes in foreign exchange rate 1,164 1,960 3,124 June 30, 2018 270,214 $ 516,770 $ 786,984 $
			$
				Long-term borrowings
January 1, 2018 Changes in cash flow from financing activities Impact of changes in foreign exchange rate June 30, 2018
		214,755 $ 54,295 1,164 270,214 $		500,928 $ 13,882 1,960 516,770 $		715,683 $ 68,177 3,124 786,984 $

(23) Changes in liabilities from financing activities

7. RELATED PARTY TRANSACTIONS

(1) Significant transactions and balances with related parties

None.

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(2) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Salaries and other short-term employee benefits	Forthe three-monthperiods ended June 30,
	2018 2017 14,585 $ 8,290 $ Forthe six-monthperiods ended June 30,	2017
		8,290 $
	2018 27,292 $	2017
		12,130 $

8. PLEDGED ASSETS

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

Asset pledged Land (Note 1) Buildings and structures-net (Note 1) Machinery and equipment-net (Note 1) Pledged time deposits (Note 2)		Bookvalue	June 30,2017 316,864 $ 322,369 15,740 1,445 656,418 $	Purpose ofcollateral
	June 30,2018 370,615 $ 431,510 - - 802,125 $	December31,2017 414,740 $ 389,261 8,749 1,445 814,195 $
				Guarantee for long－ term borrowings Guarantee for long－ term borrowings Guarantee for long－ term borrowings Guarantee for long－ term borrowings

(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) As of June 30, 2018, December 31, 2017 and June 30, 2017, the endorsements and guarantees provided by the Company to the subsidiary, cpc Europa GmbH, amounted to $194,700, $142,280 and $156,240, respectively, and the actual amount drawn down was $51,684, $56,319 and $64,232, respectively; and provided to the subsidiary, CHIEFTEK PRECISION INTERNATIONAL LLC, －

• amounted to $60,920, $59,520 and $ , respectively, and the actual amount drawn down was －

• $60,920, $59,520 and $ , respectively.

• (2) As of June 30, 2018, December 31, 2017 and June 30, 2017, the Group’s remaining balance due for construction in progress and prepayments for equipment were $140,816, $30,854 and $17,944, 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 agree that:

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• 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 June 30, 2018, the Company has not violated any of the above covenants.

• (4) For the details of operating lease agreements, please refer to Note 6(21), ‘Operating leases’.

10. SIGNIFICANT DISASTER LOSS

• None.

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

• None.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

• A. Details of the Group’s financial instruments by category are provided in Notes 6 and 12(4).

• B. Financial risk management policies

• (a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

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

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• C. Significant financial risks and degrees of financial risks

• (a) Market risk

  • I. Foreign exchange risk

  • (i) The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company and its subsidiaries 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 group companies to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Group treasury.

  • (iii)The Group treasury’s risk management policy is to hedge anticipated cash flows (mainly 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 Group 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 Group does not hedged the investments.

  • (v)The Group’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD, the subsidiaries’ functional currency: USD, EUR and CYN). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD 11,466 $ JPY:NTD 218,600 EUR:NTD 1,217 Financial liabilities Monetary items USD:NTD 419 JPY:NTD 21,034 EUR:NTD 1,770 June Foreign currency amount(in thousands)		June	30,2018	Book value (NTD)
			Exchangerate 30.58 0.2754 35.40 30.46 0.2754 35.40
				350,580 $ 60,202 43,091 12,749 5,793 62,655

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Exchange rate (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 11,452 $ 29.76 JPY:NTD 55,770 0.2642 EUR:NTD 618 35.57 Financial liabilities Monetary items USD:NTD 204 29.76 JPY:NTD 29,683 0.2642 EUR:NTD 1,174 35.57 Exchange rate (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 12,714 $ 30.42 JPY:NTD 26,272 0.2716 EUR:NTD 815 34.72 Financial liabilities Monetary items USD:NTD 48 30.42 JPY:NTD 27,248 0.2716 EUR:NTD 1,079 34.72 Foreign currency amount(in thousands) December31,2017 Foreign currency amount(in thousands) June30,2017		December31,2017	December31,2017	Book value (NTD)
			Exchange rate 29.76 0.2642 35.57 29.76 0.2642 35.57 30,2017
				340,815 $ 14,734 21,968 6,076 7,842 41,776 Book value (NTD)
			Exchange rate 30.42 0.2716 34.72 30.42 0.2716 34.72
				386,772 $ 7,135 28,283 1,468 7,401 37,477

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 Group’s net profit (loss) after tax for the six-month periods ended June 30, 2018 and 2017 would increase/decrease by $2,939 and $3,075, respectively.

(vi)The total exchange gain (loss), including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the three-month and six-month periods ended June 30, 2018 and 2017 amounted to $27,021, $6,890, $20,950 and ($16,992), respectively.

II. Price risk

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

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III. Cash flow and fair value interest rate risk

• (i)The Group’s main interest rate risk arises from short-term and long-term borrowings with variable rates, which expose the Group to cash flow interest rate risk. However, partial interest rate risk is offset by cash and cash equivalents held at variable rates. For the sixmonth periods ended June 30, 2018 and 2017, the Group’s borrowings at variable rate were mainly denominated in NTD, USD and EUR.

• (ii)The Group’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 six-month periods ended June 30, 2018 and 2017 would have decreased/increased by $624 and $208, 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 Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.

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

• III. The Group adopts the assumption under IFRS 9 whereby, 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.

• IV. The Group adopts the assumption under IFRS 9 whereby, the impairment is assessed when the contract payments are past due over certain days.

• V. The Group classified customer’s accounts receivable in accordance with credit rating of customer and credit risk on trade. The Group applies the simplified approach using forecastable consideration to adjust historical and timely information to estimate expected credit loss. Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable are as follows:

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		For the six-month period	For the six-month period
			endedJune30,2018
			Accountsreceivable
At January 1		$	10,804
Provision for impairment			5,056
Effect of foreign exchange	(		2)
At June 30		$	15,858

• VI. Credit risk information for the six-month period ended June 30, 2017 is provided in Note 12.(4), ‘Effects on initial application of IFRS 9 and information on application of IAS 39 for the six-month period ended June 30, 2017’.

• (c) Liquidity risk

• I. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group 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 Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts. The Group is expected to readily generate cash inflows for managing liquidity risk.

III. The Group has the following undrawn borrowing facilities:

Floating rate: Expiring within 1 year Expiring beyond 1 year	June30,2018 1,207,306 $ 1,014,780 2,222,086 $	December31,2017 923,623 $ 1,647,327 2,570,950 $	June30,2017
			1,058,353 $ 442,680
			1,501,033 $

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• IV. The table below analyses the Group’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.

undiscounted cash flows.
June 30,2018 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) December31,2017 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) Non-derivative financial liabilities: Non-derivative financial liabilities: June 30,2017		Less than 1year		Between 1 and2years		Between 2 and 5 years		More than 5 years
		271,042 $ 171,566 162,162 280,832 75,512 Less than 1year		- $ - - - 67,806 Between 1 and2years		- $ - - - 340,788 Between 2 and 5 years		- $ - - - 78,016 More than 5 years
				- $ - - - 324,006 Between 1 and2years		- $ - - - 50,699 Between 2 and 5 years		- $ - - - 79,089 More than 5 years - $ - - - -
Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) Non-derivative financial liabilities:	219,660 $ 93,365 77,400 174,506 65,352			- $ - - - 231,356		- $ - - - 136,243

• V. The Group 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.

~50~

(3) Fair value information

• A. As of June 30, 2018, December 31, 2017 and June 30, 2017, the Group had no fair value financial instruments.

• B. Financial instruments not measured at fair value

• The Group’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 six-month

• period ended June 30, 2017

• A. Summary of significant accounting policies adopted for the six-month period ended June 30, 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 Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

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

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

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

    • (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 group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in

~51~

the group;

• III. When the Group 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 and the six-month period ended June 30, 2017 are as follows:

• (a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, the Group 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 institutes, the Group also transacts with many different financial institutions to diversify credit risk.

• (b) The ageing analysis of the Group’s accounts receivable that were past due but not impaired is as follows:

is as follows:
Up to 30 days 31 to 90 days 91 to 180 days 181 to 365 days	December31,2017 23,282 $ 26,012 5,890 5,343 60,527 $	June30,2017
		34,767 $ 15,774 19,081 2,077
		71,699 $

The above ageing analysis was based on past due date.

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

		For the six-month period ended	For the six-month period ended
			June 30,2017
			Group provision
At January 1		$	13,205
Reversal of allowance for doubtful	(		2,452)
accounts (Note)
Effect of foreign exchange rate changes	(		222)
At June 30		$	10,531

     - (Note) Listed as ‘other income’.

  - (d) The Group’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 six month period ended June 30, 2017

• A. The significant accounting policies applied on revenue recognition for the six-month period ended June 30, 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 Group’s activities. Revenue arising from the sales of goods is recognized when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains 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 Group continues adopting above accounting policies are as follows:

  • (a) Effects and description of balance sheet:

Balance sheetitems Contract liabilities－Current Advance sales receipts		June 30,2018	Effects from change in accounting policy
	Balance by using IFRS15 5,520 $ -	Balance by using previous accounting policies
		- $ 5,520	5,520 $ 5,520) (

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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 Group continues adopting above accounting policies.

13. SUPPLEMENTARY DISCLOSURES

Information related to the six-month period ended June 30, 2018 will be 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 Group’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

(1) General information

The management of the Group has identified the operating segments based on how the Group’s chief operating decision maker regularly reviews information in order to make decisions.

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

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

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Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortization Interest expense Income from segment pre-tax income Segment assets Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortization Interest expense Income from segment pre-tax income Segment assets	Forthe six-monthperiod ended June 30,2018	Forthe six-monthperiod ended June 30,2018	Forthe six-monthperiod ended June 30,2018
	CHIEFTEK Chieftek PRECISION (Kunshan) cpcEuropa cpc USA Others 963,532 $ 314,495 $ 154,445 $ 82,383 $ 8,603 $ 425,112 - 24 - 8,603 538,420 314,495 154,421 82,383 - 1,301 1,040 - 32 - 38,141 439 1,230 26 2,205 4,542 - 346 - 2,906 311,998 55,785 3,274 5,273 3,045) ( 2,246,591 456,803 125,118 90,638 297,125 Forthe six-monthperiod ended June 30,2017			Total
				1,523,458 $ 433,739 1,089,719 2,373 42,041 7,794 373,285 3,216,275 Total 835,663 $ 204,379 631,284 839 56,538 4,992 121,005 2,367,611
	CHIEFTEK Chieftek PRECISION (Kunshan) 486,475 $ 187,613 $ 204,326 - 282,149 187,613 212 624 54,993 451 4,571 - 85,528 24,833 1,829,023 324,456	cpcEuropa 92,951 $ 53 92,898 - 1,066 421 2,417 82,284	cpc USA Others 68,624 $ - $ - - 68,624 - 3 - 28 - - - 8,804 577) ( 72,552 59,296

(3) Reconciliation for segment income

The sales between segments were under the arms’ length principle. The external revenues reported to the chief operating decision maker adopt the same measurement for revenues in statement of comprehensive income. The reconciliations of pre-tax income between reportable segments and continuing operations were as follows :

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For the six-month periods ended June 30,

			2018				2017
Reportable segments profit before income tax		$		376,330		$		121,582
Other segments loss before income tax	(			3,045)	(			577)
Inter segments income	(			47,179)	(			27,021)
Profit before income tax		$		326,106		$		93,984

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Table 1

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Loans to others

For the six-month period ended June 30, 2018

No. (Note 1)	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the six-month period ended June 30,2018	Balance at June 30,2018	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Coll	ateral	Limit on loans granted to a single party （Note 2）	Ceiling on total loans granted （Note 2）	Footnote
													Item	Value
0 0	CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD.	CSM Maschinen GmbH CHIEFTEK PRECISION INTERNATIONAL LLC	Other receivables Other receivables	Y Y	54,360 $ 30,460	53,100 $ 30,460	28,320 $ 30,460	1.5% 2.0%	Short-term financing Short-term financing	- $ -	Operational use Operational use	- $ -	－ －	- $ -	690,470 $ 690,470	690,470 $ 690,470	－ －

(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:

Short-term financing: The maximum loan amount is 40% of the Company’s net assets and the maximum amount for short-term financing is 40% of its assets.

Table 1, Page 1

Table 2

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Provision of endorsements and guarantees to others

For the six-month period ended June 30, 2018

No. (Note 1)	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party (Note 3)	Maximum outstanding endorsement/ guarantee amount as of June 30, 2018	Outstanding endorsement/ guarantee amount at June 30, 2018	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided (Note 3)	Provision of endorsements/ guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
		Companyname	Relationship with the endorser/ guarantor （Note 2）
0 0	CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD.	cpc Europa GmbH CHIEFTEK PRECISION INTERNATIONAL LLC	1 1	863,087 $ 863,087	197,340 $ 60,920	194,700 $ 60,920	51,684 $ 60,920	- $ -	11% 4%	863,087 $ 863,087	Y Y	N N	N N	－ －

• (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) The following code respresents the relationship with the Company:

• (1) The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary.

• (Note 3) (1) The total endorsements/guarantees provided shall not exceed 50% of the Companyʼs net assets, and the amount provided for each counterparty shall not exceed 20% of the Companyʼs paid-in capital. However, the limitation is not applied to subsidiaries that the Company directly or indirectly holds more than 50% of the voting shares.

• (2) For trading partner, except for the abovementioned limit, the maximum amount for individual trading partner shall not exceed the higher of total purchase and sale transations during the most recent year.

Table 2, Page 1

Table 3

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

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

For the six-month period ended June 30, 2018

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Discription and reasons for difference in transaction terms compared to third party transactions	Discription and reasons for difference in transaction terms compared to third party transactions	Notes/accounts receivable(payable)	Notes/accounts receivable(payable)	Footnote
			Purchases(sales)	Amount	Percentage of total purchases(sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. cpc Europa GmbH Chieftek Machinery (Kunshan) Co., Ltd.	cpc Europa GmbH Chieftek Machinery (Kunshan) Co., Ltd. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD.	Subsidiary Subsidiary The Company The Company	(Sales) (Sales) Purchases Purchases	110,451) ($ 256,546) ( 110,451 256,546	(11%) (27%) 100% 100%	(Note 1) (Note 1) (Note 1) (Note 1)	- $ - - -	(Note 2) (Note 2) (Note 3) (Note 3)	62,447 $ 164,785 62,147) ( 164,785) (	10% 27% (96%) (100%)	－ － － －

(Note 1) 180 days after monthly-closing, T/T.

(Note 2) The collection periods for third parties are from 15 days after monthly-closing to 150 days after next monthly-closing. (Note 3) The company had no purchases from other suppliers.

Table 3, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

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

June 30, 2018

Creditor Table 4	Counterparty	Relationship with the counterparty	Balance as at June 30, 2018	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD
					Amount	Action taken
CHIEFTEK PRECISION CO., LTD.	Chieftek Machinery (Kunshan) Co., Ltd.	Subsidiary	164,785 $	3.15	- $	-	- $ - $

Table 4, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

• Significant inter company transactions during the reporting period

For the six-month period ended June 30, 2018

Table 5

Expressed in thousands of NTD

Number (Note1)	Companyname	Counterparty	Relationship (Note2)		Transaction	Transaction
				General ledgeraccount	Amount	Transactionterms	Percentage of consolidated total operating revenues or totalassets (Note 3)
0 1	CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION USA CO., LTD.	cpc Europa GmbH CSM Maschinen GmbH CHIEFTEK PRECISION USA CO., LTD. Chieftek Machinery (Kunshan) Co., Ltd. CHIEFTEK PRECISION INTERNATINAL LLC. CHIEFTEK PRECISION INTERNATINAL LLC.	1 1 1 1 1 3	Sales revenue Accounts receivable Endorsements and guarantees Long-term prepayment Other receivables Sales revenue Accounts receivable Sales revenue Accounts receivable Other receivables Endorsements and guarantees Lease payable Refundable deposits	($ 110,451) 62,447 194,700 69,805 28,573 ( 58,115) 45,891 ( 256,546) 164,785 30,992 60,920 8,603 1,523	180 days after monthly- closing, T/T － － － － 180 days after monthly- closing, T/T － 180 days after monthly- closing, T/T － － － － －	(10%) 2% 6% 2% 1% (5%) 1% (24%) 5% 1% 2% 1% －

(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) 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.

(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 accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Table 5, Page 1

Information on investees

Table 6

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

For the six-month period ended June 30, 2018

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shares h	eld as atJune	30,2018	Net profit (loss) of the investee for the six-month period ended June30,2018	Investment income (loss) recognized by the Company for the six-month period ended June30,2018	Footnote
				Balance as at June30,2018	Balance as at December31,2017	Number of shares	Ownership (%)	Bookvalue
CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION CO., LTD. CHIEFTEK PRECISION HOLDING CO., LTD. CHIEFTEK PRECISION HOLDING CO., LTD.	CHIEFTEK PRECISION HOLDING CO., LTD. cpc Europa GmbH CSM Maschinen GmbH CHIEFTEK PRECISION INTERNATIONAL LLC Chieftek Precision (Hong Kong) Co., Limited CHIEFTEK PRECISION USA CO., LTD.	Samoa Germany Germany America Hong Kong America	Professional investment Sale of high precision linear motion components and rendering after -sale services Research, manufacture and sale of machineries Lease of real estate property Professional investment Sale of high precision linear motion components and rendering after -sale services	202,290 $ 98,695 726 15,170 155,346 50,564	202,290 $ 98,695 726 15,170 155,346 50,564	6,760,000 - - - 5,100,000 1,660,000	100 100 80 100 100 100	326,466 $ 12,467) ( 6,028) ( 15,304 312,859 64,676	45,744 $ 3,274 6,708) ( 3,527 43,204 3,949	45,744 $ 3,274 5,367) ( 3,527 - -	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary (Note 1) 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 1:30.46) as at June 30, 2018.

Table 6, Page 1

Information on investments in Mainland China

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

For the six-month period ended June 30, 2018

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Table 7
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Expressed in thousands of NTD

Investment Amount remitted from Taiwan to income Mainland China/ Accumulated (loss) recognized Accumulated Amount remitted back amount of Accumulated Ownership by the Company amount to Taiwan for the six-month remittance from amount Net income of held by for the sixBook value of of investment period ended June 30, 2018 Taiwan to of remittance from investee for the the month period investments in income Mainland China Remitted to Taiwan to six-month Company ended June 30, Mainland China remitted back to Investee in Mainland Main business Investment as of January 1, Mainland Remitted back to Mainland China as period ended (direct or 2018 as of June 30, Taiwan as of China activities Paid-in capital method 2018 China Taiwan of June 30, 2018 June 30, 2018 indirect) （ Note 2 ） 2018 June 30, 2018 Footnote Chieftek Machinery Production, $ 155,346 Note 1 $ 155,346 $ - $ - $ 155,346 $ 43,204 100% $ 43,204 $ 312,858 $ - － (Kunshan) Co., Ltd processing and sale of high precision linear motion components and rendering after-sale services

Investment amount approved by Accumulated amount of remittance the Investment Commission of the Ceiling on investments in Mainland from Taiwan to Mainland China as of Ministry of Economic Affairs China imposed by the Investment Company name June 30, 2018 (MOEA) Commission of MOEA (Note 3) CHIEFTEK PRECISION CO., LTD. $ 155,346 $ 155,346 $ 1,035,704

(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 based on the investeesʼ financial statements that were reviewed by parent company’s accountant for the six-month period ended June 30, 2018. (Note 3) The ceiling amount is 60% of the higher of net worth or consolidated net worth.

(Note 4) Foreign currencies were translated into New Taiwan Dollars using the exchange rate (USD:NTD 1:30.46) as at June 30, 2018.

Table 7, Page 1

Table 8

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas For the six-month period ended June 30, 2018

Investee in Mainland China	Sale(purchase)	Sale(purchase)	Propertytransaction	Propertytransaction	Accounts receivable(payable)	Accounts receivable(payable)	Provision of endorsements/guarantees or collaterals	Provision of endorsements/guarantees or collaterals		Financing	Financing		Others
	Amount	%	Amount	%	Balance at June 30, 2018	%	Balance at June 30, 2018	Purpose	Maximum balance during the six-month period ended June 30,2018	Balance at June 30, 2018	Interest rate	Interest during the six-month period ended June 30,2018
Chieftek Machinery (Kunshan) Co., Ltd	$ 256,546	27%	$ -	-	$ 164,785	27%	$ -	-	$ -	- $	-	- $	- $

Table 8, Page 1