cpc — Interim / Quarterly Report 2018

Nov 13, 2018

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

SEPTEMBER 30, 2018 AND 2017

$\lambda$

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 September 30, 2018 and 2017, and the related consolidated statements of comprehensive income for the three-month and nine-month periods then ended, as well as the consolidated statements of changes in equity and of cash flows for the nine-month periods then ended, and notes to the consolidated financial statements, including 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\$535,475 thousand and NTD\$358,712 thousand, constituting 16% and 14% of the consolidated total assets, and total liabilities of NTD\$258,592 thousand and NTD\$124,181 thousand, constituting 17% and 11% of the consolidated total liabilities as at September 30, 2018 and 2017, respectively, and total comprehensive income of NTD\$13,366 thousand, NTD\$3,845 thousand, NTD\$17,290 thousand and NTD\$8,275 thousand, constituting 12%, 5%, 5% and 6% of the

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

Oualified 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 September 30, 2018 and 2017, and of its consolidated financial performance for the three-month and nine-month periods then ended and its consolidated cash flows for the nine-month periods then ended in accordance with "Regulations" Governing the Preparation of Financial Reports by Securities Issuers" and International Accounting Standard 34, "Interim Financial Reporting" as endorsed by the Financial Supervisory Commission.

Lin, Yung-Chih

Independent Accountants

Lin, Tzu-Shu

---

PricewaterhouseCoopers, Taiwan Republic of China November 9, 2018

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.

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.

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2018, DECEMBER 31, 2017 AND SEPTEMBER 30, 2017
(Expressed in thousands of New Taiwan dollars)
(The consolidated balance sheets as of S

			September 30, 2018		December 31, 2017		September 30, 2017
	Assets	Notes	AMOUNT	%	AMOUNT	℅	AMOUNT	%.
	Current assets
1100	Cash and cash equivalents	6(1)	\$ 875,461	26	\$ 651,824	25	\$ 646,301	25
1150	Notes receivable, net	$6(2)$ and 12	52,260	2	26,540	$\mathbf{1}$	48,496	$\overline{2}$
1170	Accounts receivable, net	$6(2)$ and 12	541,707	16	400,091	15	366,711	14
1200	Other receivables		15,711		4,522		3,082
1220	Current income tax assets	6(20)	2,373
130X	Inventories	5 and $6(3)$	646,677	19	374,046	14	348,042	13
1410	Prepayments		28,170	1	22,598	$\mathbf{1}$	25,777	$\mathbf{1}$
11XX	Total current assets		2,162,359	64	1,479,621	56	1,438,409	55
	Non-current assets
1600	Property, plant and equipment	$6(4)(5)$ and
		8	1,030,010	30	999,260	38	1,000,321	39
1780	Intangible assets	6(5)	133,156	4	123, 173	5	114,860	4
1840	Deferred income tax assets	6(20)	24,877	$\mathbf{1}$	16,552	$\mathbf{1}$	14,013	$\mathbf{1}$
1915	Prepayments for equipment	6(4)	21,524	1	11,561		17,308	$\mathbf{1}$
1920	Guarantee deposits paid		6,779		5,161		5,358
1980	Other financial assets - non-current 8				1,445		1,445
1990	Other non-current assets		1,498		2,046		2,219
15XX	Total non-current assets		1,217,844	36	1,159,198	44	1,155,524	45
1XXX	Total assets		\$ 3,380,203	100	\$ 2,638,819	100	2,593,933 \$	100

(Continued)

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2018, DECEMBER 31, 2017 AND SEPTEMBER 30, 2017
(Expressed in thousands of New Taiwan dollars)
(The consolidated balance sheets as

	Liabilities and Equity	Notes		September 30, 2018 AMOUNT	℅	December 31, 2017 AMOUNT	$\overline{\%}$	September 30, 2017 AMOUNT	%
	Current liabilities
2100	Short-term borrowings	6(6)(24)	\$	263,377	8	\$ 214,755	8	\$ 234,845	9
2110	Short-term notes and bills payable	6(7)						30,000	1
2130	Current contract liabilities	$6(14)$ and
		12		3,810
2150	Notes payable			220,483	7	115,672	4	108,001	4
2170	Accounts payable			143,148	4	91,689	4	77,010	3
2200	Other payables	6(8)		218,238	6	140,970	5	140,514	5
2230	Current income tax liabilities	6(20)		56,952	$\overline{2}$	27,276	1	13,795	$\mathbf 1$
2310	Advance receipts	12		1,795		3,422		5,808
2320	Long-term liabilities, current	6(9)(24)
	portion	and 8		61,260	$\boldsymbol{2}$	69,935	3	69,990	3
21XX	Total current liabilities			969,063	29	663,719	25	679,963	26
	Non-current liabilities
2540	Long-term borrowings	6(9)(24)
		and 8		536,980	16	430,993	17	458,852	18
2570	Deferred income tax liabilities	6(20)		29,197	$\mathbf{1}$	8,697	$\frac{1}{2}$	4,667
2640	Net defined benefit liabilities	6(10)		5,451	$\blacksquare$	5,674	$\overline{\phantom{0}}$	4,402
25XX	Total non-current liabilities			571,628	17	445,364	17	467,921	18
2XXX	Total liabilities			1,540,691	46	1,109,083	42	1,147,884	44
	Equity
	Share capital	6(11)(13)
3110	Share capital - common stock			738,069	22	620,455	23	620,455	24
	Capital reserves	6(11)(12)
3200	Capital surplus			440,667	13	463,051	18	463,051	18
	Retained earnings	6(11)(13)
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			572,545	17	497,930	19	414,383	16
3400	Other equity interest		€	$19,795$ )(	$1$ )(	12,367)	$-$ (	12,573)
3500	Treasury stocks	6(11)				$118,544$ )(	5(	$118,544$ )(	5)
31XX	Equity attributable to owners
	of the parent			1,841,133	54	1,529,916	58	1,446,163	56
36XX	Non-controlling interest			1,621)	$\blacksquare$	180)	$\blacksquare$	114)	$\overline{\phantom{a}}$
3XXX	Total equity			1,839,512	54	1,529,736	58	1,446,049	56
	Significant Contingent Liabilities	$6(22)$ and 9
	and Unrecognized Contract Commitments
3X2X	Total liabilities and equity		\$	3,380,203	100	\$ 2,638,819	100	2,593,933 -\$	100

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars, except for earnings per share amounts)
(REVIEWED,

							Three months ended September 30				Nine months ended September 30
				2018			2017		2018		2017
	Items	Notes		AMOUNT	$\%$		AMOUNT	%	AMOUNT	$\frac{9}{6}$	AMOUNT	%
4000	Sales revenue	6(14)	\$	584,667	100	\$	410,296	100	\$ 1,674,386	100	\$ 1,041,580	100
5000	Operating costs	6(3)(5)(10)(18)
		(19)(22)		318,870)(	55(		236,100)	58(	881,970)(	53)	$621,918$ ) (	59)
5900	Net operating margin			265,797	45		174,196	42	792,416	47	419,662	41
	Operating expenses	6(5)(10)(18)(1)
		9) and 7
6100 6200	Selling expenses General and administrative		€	40,017)(	$7)$ (		$24,376$ ) (	$6)$ (	89,992)(	$6)$ (	$69,999$ ) (	7)
	expenses		t	43,985)(	$7)$ (		32,886)(	$8)$ (	154,534)(	9) (	$88,050$ ) (	8)
6300	Research and development
	expenses		t	$17,046$ ) (	$3)$ (		$16,636$ ) (	$4)$ (	$69,008$ ) (	$4)$ (	49,898)(	5)
6450	Expected credit impairment	12
	loss			341)				$\blacksquare$	5,397)
6000	Total operating expenses			101,389)	$\overline{17})$		$\overline{73,898}$ )	$\overline{18}$ ) (	318,931)	$\overline{19})$	$\overline{207,947}$	(20)
6900	Operating profit			164,408	$\overline{28}$		100,298	$\overline{24}$	473,485	28	211,715	21
	Non-operating income and
	expenses
7010 7020	Other income Other gains and losses	$6(15)$ and $12$ $6(16)$ and 12		2,037 $5,138$ ) (	1 1)		1,659 982	1 $\overline{a}$	5,917 15,805	1 $\mathbf{1}$	6,224	1
7050	Finance costs	6(6)(17)		4,225	$1)$ (		3,211)	$\overline{1}$ ) (	$12,019$ $($	-0 $\perp$ (	$16,024$ ) ( 8,203)	2) 1)
7000	Total non-operating
	income and expenses			$7,326$ ) (	1) (		570)		9,703		18,003(	$\overline{2}$
7900	Profit before income tax			157,082	$\overline{27}$		99,728	$\overline{24}$	483.188	$\overline{29}$	193,712	19
7950	Income tax expense	6(20)		31,693)(	5)		19,092)	$5)$ (	$107, 132$ ) (	7)	$40,384$ ) (	4)
8200	Profit for the period			125,389	22		80,636	19	\$ 376,056	$\overline{22}$	$\overline{53,328}$	15
	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(20)
	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			$10,544$ ) (	2)		2,884		7.417)		$6,650$ ) (
8300	Total other comprehensive
	income (loss) for the period		(\$	$10, 544)$ (	$\overline{2}$ )	\$	2,884		$($ \$ 7,235		6,650 (\$
8500	Total comprehensive income for the period			114,845	$\overline{20}$		83,520	20	368,821		146,678
	Profit (loss) attributable to:		\$			↨			\$.	$\overline{22}$	$\overline{r}$	$\frac{14}{}$
8610	Owners of the parent		\$	125,499	$22\,$	\$	80,720	19	377,508 \$	$22\,$	153,560 S	15
8620	Non-controlling interest			110)	$\bullet$		$\frac{84}{5}$	٠	1,452)	٠	232)
				125,389	$\overline{22}$	\$	80,636	$\overline{19}$	\$ 376,056	$\overline{22}$	$\overline{v}$ 153,328	$\overline{\overline{15}}$
	Comprehensive income (loss)
	attributable to:
8710	Owners of the parent		\$	114,959	20	\$	83,605	20	\$ 370,262	22	\$ 146,915	14
8720	Non-controlling interest			114 )			85)	ż	1,441	$\overline{\phantom{a}}$	237)
			\$	114,845	$\overline{20}$	\$	83,520	$\overline{20}$	368,821 \$	22	\$ 146,678	14
9750	Earnings per share (in dollars) Basic	6(21)			1.70	$\overline{r}$		1.09		5.11		2.08
9850	Diluted		↨ $\frac{3}{2}$		1.68			1.09	₹ \$	5.08	≗ $\overline{r}$	2.07
						\$

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

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

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)
(Expressed in thousands

Equity attributable to owners of the parent
Retained Earnings
Financial statements

	Notes	common stock Share capital	Capital reserve Legal reserve		Special reserve	retained earnings Unappropriated	translation differences of foreign operations THE REAL PROPERTY	Treasury stocks	Total	Non-controlling interest	Total equity
For the nine-month period ended September 30, 2017
Balance at January 1, 2017		\$620,455	\$463,051	64,905 ↔		334,354 مە	త	5,928) (\$ 118,544)	\$1,358,293	123 ₩	\$1,358,416
Profit (loss) for the period						153,560			153,560	232	153,328
Other comprehensive loss for the period							6.645		$6,645$ )	$\widehat{\phantom{a}}$	6,650
Total comprehensive income (loss) for the period						153,560	6,645		146,915	237)	146.678
Distribution of 2016 profit:
Legal reserve				8.558		8,558)
Special reserve					5,928	5,928)
Cash dividends	6(13)					59,045			59,045		59,045
Balance at September 30, 2017		620,455 ∣د⊶	\$463,051	$\frac{73,463}{2}$ ↔	5,928 ↔∣	414,383 ⊷	12,573 G	118,544 Ģ	\$1,446,163	$\frac{1}{11}$ ی	\$1,446,049
For the nine-month period ended September $30$ , $2018$
Balance at January 1, 2018		620,455 امه	\$463,051	463 $\mathbf{r}$ e۶	5,928 ₩,	497,930 ⊷	12,367) ⊷	(18, 544)	\$1,529,916	180) ٩	\$1,529,736
Profit (loss) for the period						377,508			377,508	1,452	376,056
Other comprehensive income (loss) for the period	6(20)					182	7,428)		7,246		$7,235$ )
Total comprehensive income (loss) for the period						377,690	7.428		370,262	1,441	368,821
Distribution of 2017 profit:
Legal reserve				23,817		23,817)
Special reserve					6,439	$6,439$ )
Cash dividends	6(13)					59,045)			59,045)		59,045)
Stock dividends	6(11)(13)	147,614				147,614
Retirement of treasury stock	6(1)(12)	30,000)	(22,384)			66,160		118,544
Balance at September 30, 2018		\$738,069	\$440,667	97.280 ⇔∣	12,367 ↔	572,545 ا وج	19,795) ٩		\$1,841,133	$\frac{1,621}{2}$ امی	\$1,839,512

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

$-\frac{6}{5}$

$\underbrace{\text{CHIEFTEK PRECISION CO.}, \text{LTD. AND SUBSIDIARIES}}{\text{CONSOLIDATED STATEMENTS OF CASH FLOWS}}\ \text{FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017}$ (Expressed in thousands of New Taiwan dollars)
(REVIEWED, NOT AUDITED)

			For the nine-month periods ended, September 30,
	Notes		2018		$\frac{2017}{ }$
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax		\$	483,188	\$	193,712
Adjustments
Adjustments to reconcile profit (loss)
Expected credit impairment loss	12		5,397
Reversal of allowance for doubtful accounts	$6(15)$ and 12			€	2,897)
Loss on (reversal of) inventory market price decline	6(3)		450	€	$7,345$ )
Depreciation	6(4)(5)(18)		60,754		80,262
Loss on disposal of property, plant and equipment	6(16)				14
Amortization	6(5)(18)		1,925		1,504
Interest income	6(15)	(	$3,776$ ) (		1,417)
Interest expense	6(17)		12,019		8,203
Changes in operating assets and liabilities
Changes in operating assets
Notes receivable		(	$25,720$ ) (		16,301)
Accounts receivable			$146,639$ ) (		39,924)
Other receivables			$11,189$ ) (		1,157)
Inventories			$273,113$ ) (		22,613)
Prepayments			$5,572$ ) (		9,269)
Changes in operating liabilities
Current contract liabilities			3,810
Notes payable			105,115		42,362
Accounts payable			51,459		34,316
Other payables			72,629		63,899
Advance receipts			1,627)		4,836
Net defined benefit liabilities			223)		223)
Cash inflow generated from operations			328,887		327,962
Interest received			3,776		1,417
Interest paid			$11,336$ ) (		7,888)
Income tax paid			67,472)		23,214)
Net cash flows from operating activities			253,855		298, 277

(Continued)

$\sim$ $\sim$

$\underbrace{\text{CHIEFTEK PRECISION CO.}, \text{LTD. AND SUBSIDIARIES}\underbrace{\text{CONSOLIDATED STATEMENTS OF CASH FLOWS}}{\text{FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017}}$ (Expressed in thousands of New Taiwan dollars)
(REVIEWED, NOT AUDITED)

			For the nine-month periods ended, September 30,
	Notes		2018		2017
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment	6(23)	(3)	$41,410$ ) (\$		189,389)
Proceeds from disposal of property, plant and equipment					200
Acquisition of intangible assets	6(5)		$12,152$ ) (		44,349)
Increase in prepayment for equipment		(	$52,222$ ) (		14,139)
Increase in guarantee deposits paid			$1,618$ ) (		1,361)
Decrease (increase) in other financial assets - non-current			1,445	€	15)
Decrease in other non-current assets			548		1,395
Net cash flows used in investing activities			105,409) (		247,658)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings	6(24)		46,731		47,130
Increase in short-term notes and bills payable					30,000
Increase in long-term borrowings	6(24)		460,000		114,194
Decrease in long-term borrowings	6(24)	€	364,934) (		35,166)
Payments of cash dividends			59,045)		59,045)
Net cash flows from financing activities			82,752		97,113
Effect of foreign exchange rate changes on cash and cash
equivalents			7,561)		7,861)
Net increase in cash and cash equivalents			223,637		139,871
Cash and cash equivalents at beginning of period	6(1)		651,824		506,430
Cash and cash equivalents at end of period	6(1)	\$	875,461	\$	646,301

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

$\sim$

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 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.

2. 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 November 9, 2018.

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

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

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

	Effective date by
	International Accounting
New Standards, Interpretations and Amendments	Standard Board ("IASB")
Amendments to IAS 40, 'Transfers of investment property'	January 1, 2018
International Financial Reporting Interpretations Committee("IFRIC") 22, 'Foreign currency transactions and advance consideration'	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1, 'First-time adoption of International Financial Reporting Standards'	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, 'Disclosure of interests in other entities'	January 1, 2017
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IAS 28, 'Investments in associates and joint ventures'	January 1, 2018
The above standards and interpretations have no significant impact to the 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 and Amendments	Effective date by IASB
Amendments to IFRS 9, 'Prepayment features with negative compensation'	January 1, 2019
IFRS 16, 'Leases'	January 1, 2019
Amendments to IAS 19, 'Plan amendment, curtailment or settlement'	January 1, 2019
Amendments to IAS 28, 'Long-term interests in associates and joint ventures'	January 1, 2019
IFRIC 23, 'Uncertainty over income tax treatments'	January 1, 2019
Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019
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 does not restate the financial statements of prior period (referred herein as the "modified retrospective approach"), and the effects will be adjusted on January 1, 2019.

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

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as

endorsed by the FSC are as follows:

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

The above standards and interpretations have no significant impact to the 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 third quarter of 2017 were not restated. The financial statements for the year ended December 31, 2017 and for the nine-month period ended September 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 Note 12(4), 'Effects on initial application of IFRS 9, and information on application of IAS 39 for the nine-month period ended September 30, 2017' and Note 12(5), 'Effects of initial application of IFRS 15 and information on application of IAS 18 for the nine-month period ended September 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.

				Ownership (%)
Name of investor	Name of subsidiary	Business activities	September 30, 2018	December 31, 2017	September 30, 2017	Note
CHIEFTEK PRECISION CO., LTD. ("CHIEFTEK PRECISION")	CHIEFTEK PRECISION HOLDING CO., LTD.	Professional investment	100	100	100	۰
CHIEFTEK PRECISION CO., LTD.	cpc Europa GmbH ("cpc Europa")	Sale of high precision linear motion components and rendering after-sales service	100	100	100	Note 1
CHIEFTEK PRECISION CO., LTD.	CHIEFTEK PRECISION INTERNATIONAL LLC	Lease of real estate property	100	100	100	Note 2

B. Subsidiaries included in the consolidated financial statements:

				Ownership (%)
Name of investor	Name of subsidiary	Business activities	September 30, 2018	December 31, 2017	September 30, 2017	Note
CHIEFTEK PRECISION CO., LTD.	CSM Maschinen GmbH	Research, manufacture and sale of machineries	80	80	80	Note 2
CHIEFTEK PRECISION HOLDING CO., LTD.	Chieftek Precision (Hong Kong) Co., Limited	Professional investment	100	100	100
CHIEFTEK PRECISION HOLDING CO., LTD.	CHIEFTEK PRECISION USA CO., LTD. ("cpc USA")	Sale of high precision linear motion components and rendering after-sales service	100	100	100	Note 2
Chieftek Precision (Hong Kong) Co., Limited	Chieftek Machinery (Kunshan) Co., Ltd. ("Chieftek (Kunshan)")	Production, processing and sale of high precision linear motion components and after- sales service	100	100	100

• Note 1: The financial statements of the entity as of and for the nine-month period ended September 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 nine-month periods ended September 30, 2018 and 2017 were not reviewed by the independent accountants as the entity did not meet the definition of a significant subsidiary.

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 \$535,475 and \$358,712, constituting 16% and 14% of the consolidated total assets, and total liabilities of \$258,592 and \$124,181, constituting 17% and 11% of the consolidated total liabilities as at September 30, 2018 and 2017, respectively, and total comprehensive income of \$13,366, \$3,845, \$17,290 and \$8,275, constituting 12%, 5%, 5% and 6% of the consolidated total comprehensive income for the three-month and nine-month periods ended September 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 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.

(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.

(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.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

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

Assets		Useful lives
Buildings and structures	$3 \sim 50$		years
Machinery and equipment		$2 \sim 15$	years
Transportation equipment			$3 \sim 10$ years
Office equipment			$1 \sim 10$ years
Leasehold improvements	$2 \sim 15$		years
Other equipment	$2 \sim$	$\overline{10}$	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;
• 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.

(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.

• $(21)$ 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 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.
• 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 $30 \sim 180$ days after monthly closing. As the time interval between the transfer of committed goods and the payment of customer does not exceed one year, the 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.

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 September 30, 2018, the carrying amount of inventories was \$646,677.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

	September 30, 2018		December 31, 2017		September 30, 2017
Cash:
Cash on hand	\$ 1,571	- \$	1,051	- \$	1,030
Checking accounts and demand deposits	779,967		649,244		643,734
	781,538		650,295		644,764
Cash Equivalents:
Time deposits	93,923		1,529		1,537
	\$ 875,461	\$	651,824		646,301

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

B. Details of the Group's cash and cash equivalents pledged to others as collateral as of September 30, 2018, December 31, 2017 and September 30, 2017 are provided in Note 8, 'Pledged assets'.

(2) Notes and accounts receivable, net

	September 30, 2018		December 31, 2017		September 30, 2017
Notes receivable	52,260		26,540	\$	48,496
	September 30, 2018		December 31, 2017		September 30, 2017
Accounts receivable	\$ 557,534	-S	410,895	S	376,989
Less: Allowance for doubtful accounts	15,827)		10,804)		10,278)
	541,707		400,091	S	366,711

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

		September 30, 2018		December 31, 2017				September 30, 2017
		Accounts	Notes	Accounts		Notes		Accounts		Notes
		receivable	receivable	receivable		receivable		receivable		receivable
Not past due	S	453,054	\$ 52,260	\$ 339,738	\$	25,486	\$	325,904	S	39,787
Less than 30 days		46,323		23,282		187		27,251		637
31 to 90 days		23,161		26,369				7.542		4.080
91 to 180 days		16,490		6,111		456		9.793		3.148
Over 181 days		18,506		15,395		411		6,499		844
		557,534	52,260	410,895	26,540		376,989			48,496

The above ageing analysis was based on past due date.

• B. As of September 30, 2018, December 31, 2017 and September 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

			September 30, 2018
			Allowance for
	Cost		market price decline	Book value
Raw materials	\$ 115,494	(S)	$19)$ \$	115,475
Supplies	90.183		3,340)	86,843
Work in progress	298,594		12,933)	285,661
Finished goods	201,480		42,782)	158,698
	705,751	(\$	59,074)	646,677

				December 31, 2017
				Allowance for
		Cost		market price decline	Book value
Raw materials	S	44,081	$\left( \mathcal{S}\right)$	$295$ ) \$	43,786
Supplies		60,453		3,920	56,533
Work in progress		173,786		14,562)	159,224
Finished goods		154,318		39,815)	114,503
	\$	432,638	$($ \$	58,592)	\$ 374,046
				September 30, 2017
				Allowance for
		Cost		market price decline	Book value
Raw materials	\$	35,408 (\$		$242)$ \$	35,166
Supplies		55,204		4,343)	50,861
Work in progress		167,986		10,314)	157,672
Finished goods		155,893		51,550)	104,343
	\$	414,491	$($ \$	66,449)	\$ 348,042

The cost of inventories recognized as expense for the period:

		For the three-month periods ended September 30,
		2018		2017
Cost of goods sold	\$	317,666	-S	238,854
Provision (reversal of allowance) for inventory
market price decline (Note)		1,198		2,285)
Loss (gain) on physical inventory		166		420)
Revenue from sale of scraps		160)		49)
		318,870		236,100
		For the nine-month periods ended September 30,
		2018		2017
Cost of goods sold	\$	882,700	S.	630,650
Provision (reversal of allowance) for inventory
market price decline (Note)		450		7,345)
Gain on physical inventory		$739)$ (		1,284)
Revenue from sale of scraps		441)		103)
	S	881,970	S	621,918

$\cdot$

$\sim$ $\sim$

(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.

														Construction
												Leasehold		in progress
				Buildings								improvements		and equipment
				$\overline{a}$		Machinery and Transportation			Office			and other		before acceptance
January 1, 2018		Land		structures		cquipment	equipment		equipment			equipment		inspection		Total
Accumulated depreciation Cost	မာ	414,740	⊷	4 535,00 105,77		⊷ 685,013 800,132		↔ 4,061) 5,282		16,576 18,060	₩	(13, 164) 133,253	⊷	17,380	⊷	924,591) 1,923,851
	ఈ∣	414,740	s	429,227	↮	⊷ 115,119		s 1,221		1,484	↔	20,089	↔	17,380	↔	999,260
For the nine-month period ended September 30, 2018
At January 1		\$414,740	↔	429,22	↔	115,119	↮	မာ 1,221		1,484	$\varphi$	20,089	↔	17,380	မာ	999,260
Additions				4 2,91		7,602				793		6,350		27,403		45,062
Transferred from prepayments for														42,259		42,259
equipment
Transferred after acceptance inspection						48,704						1,290		49,994)
Reclassifications		45,635)		n 45,63
Depreciation (Note)				ন 12,64		40,715)		393)		(695)		6,342)				60,791)
Disposals-Cost						1,144)		(645)		424)		427)				2,344)
- Accumulated depreciation						1,144		349		424		427				2,344
Net currency exchange differences		1,625		7 2,68		75)		$\widehat{\mathcal{L}}$		$\widehat{4}$		$\widehat{\infty}$				4,220
At September 30	↔∥	370,730	⇔∣	467,818	⊷	130,635	ఈ∣	€ 826		1,574	ڿ	21,379	↔	37,048	Ø	1,030,010
September 30, 2018
Cost	↔	370,730	∽	€ 591,752 123,93		724,871) 855,506	69	∽ 4,061) 4,887		16,849) 18,423	↔	119,046) 140,425	↔	37,048	↔	988,761) 2,018,771
Accumulated depreciation
	୫ା	370,730	↮	∞∥ 467,81	↔	130,635	↔	⊷ 826		1,574	احی	21,379	↔	37,048	ڇ	1,030,010

(4) Property, plant and equipment

$\ddot{\phantom{a}}$

$-25-$

														Construction
				Buildings									improvements Leasehold	and equipment in progress
				ਬੂ			Machinery and Transportation				Office		and other	before acceptance
January 1, 2017		Land		structures			equipment		equipment		equipment		equipment	mspection			Total
Cost	Ģ,	316,864	⊷	462,35	$\mathbf{r}$		818,978	θĄ	5,384	$\leftrightarrow$	17,470	↔	123,646	⊷	2,837	မာ	1,747,532
Accumulated depreciation					91,795)		637,144)		4,449)		(6, 421)		105,704)				855,513)
	ఈ∣	316,864	↮	370,558		⊷	181,834	↔	935	↮	1,049	4	17,942	⊷	2,837	↮	892,019
For the nine-month period ended
September 30, 2017
At January 1	↔	316,864	69	370,55	∞	69	181,834	69	935	↔	1,049	₩	17,942	↔	2,837	69	892,019
Additions		100,343		73,70	S		7,907		790		853		1,636		1,874		187,108
Transferred from prepayments for
equipment															2,668		2,668
Transferred after acceptance inspection													3,034		3,034)
Depreciation (Note)				10,19	╤		$62,308$ ) (		350(		498)		7,171)				80,521)
Disposals-Cost							5,283)		(068)		248)		852)				7,273)
- Accumulated depreciation							5,069		890		248		852				7,059
Net currency exchange differences			823)		600		508		$\widehat{\Gamma}$		96		86				739)
At September 30	ç4	416,384	↮	433,469		⊷	127,727	GĄ	1,368	မာ	1,500	€	15,527	↔	4,346	Ø	1,000,321
September 30, 2017
Cost	69	416,384	⊷	535,45	ě.		822,151	5	5,278	ĢĢ,	17,999	s	127,676	ِص	4,346	↔	1,929,292
Accumulated depreciation					101,989)		694,424)		3,910)		16,499		112,149)				928,971)
	امه	416,384	↮	433,469		୫୨∣	127,727	S	1,368	£	1,500	↔	15,527	↔	4,346	اده	1,000,321
														$\frac{1}{2}$

(Note) Depreciation of certain machinery and 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 nine-month periods ended September 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 September 30, 2018, December 31, 2017 and September 30, 2017 is provided in Note 8, 'Pledged assets'.

È
t
ċ

$\frac{1}{2}$

(5) Intangible assets							Internally
	Trademarks		Patents		Software		intangible assets generated		Others	Total
At January 1, 2018 Cost	⊷	⊷ 578	9,231	⊷	10,067	↔	79,865	⊷	⊷ 60,000	159,741
Accumulated amortization		578) ı	1,945)		6,085)				13,500) 14,460)	22,108) 14,460)
Accumulated impairment Net value	⊷	↔ 1	7,286	↔	3,982	↔	79,865	↔	$\leftrightarrow$ 32,040	123,173
Net value at January 1, 2018	↔	$\bullet$	7,286	↮	3,982	⊷	79,865	↔	↮ 32,040	123,173
Additions-acquired separately					384					384
Additions-from internal development							11,768			11,768
Additions-depreciation reclassified							57 $\overline{1}$			37 $\Gamma$
Additions - amortization reclassified										1,942)
Amortization		1	437)		1,505)		281)			281)
Net currency exchange differences Net value at September 30, 2018	↮	↔ ţ	6,849	↔	2,861	69	91,406	↔	↔ 32,040	133,156
At September 30, 2018 Cost	∽	မာ 578	9,231	⊷	10,451	€Ą	91,406	မာ	⊷ 60,000	171,666
Accumulated amortization		578)	2,382)		7,590)				13,500)	14,460) 24,050)
Accumulated impairment Net value		မျှ	6,849	↮	2,861	اجہ	91,406	€	↔ 14,460) 32,040	133,156

$-28$ ~

								Internally generated
	Trademarks			Patents		Software		intangible assets		Others		Total
At January 1, 2017 Cost		578		9,146	∽	6,156		16,987		60,000		92,867
Accumulated amortization		578)		1,363)		4,421)				13,500) 4,298)		19,862) 4,298)
Accumulated impairment Net value			မာ	7,783	↔	1,735	∽	16,987	⊷	42,202	↔	68,707
Net value at January 1, 2017	⊷		ഗ	7,783	↔	1,735	⊷	16,987	⊷	42,202	↔	68,707
Additions-acquired separately				85		2,675		41,589				44,349
Additions - depreciation reclassified								259				259
Additions-amortization reclassified								124				124
Amortization				436)		1,192)						1,628)
Net currency exchange differences						26		3,023				3,049
Net value at September 30, 2017	⊷		∽	7,432	Ø	3,244	⊷	61,982		42,202	⊷	114,860
At September 30, 2017 Cost		578		9,231		8,877		61,982		60,000		140,668
Accumulated amortization		578)		$1,799$ )		5,633)				13,500)		21,510)
Accumulated impairment										4,298)		4,298)
Net value			⊷	7,432	မာ	3,244	⊷	61,982	∽	42,202		114,860

$-29-$

• A. For the three-month and nine-month periods ended September 30, 2018 and 2017, no borrowing costs were capitalized as part of intangible assets.
• B. Details of amortization on intangible assets are as follows:

				For the three-month periods ended September 30,
			2018	2017
Manufacturing overhead		$\mathbf{\hat{S}}$		\$ 24
General and administrative expenses			68	57
Research and development expenses			607	492
		\$	675	\$ 573
				For the nine-month periods ended September 30,
			2018	2017
Manufacturing overhead		\$		$\boldsymbol{\mathsf{S}}$ 105
General and administrative expenses			213	194
Research and development expenses			1,729	1,329
		\$	1,942	\$ 1,628
(6) Short-term borrowings
Nature	September 30, 2018		Interest rate range	Collateral
Bank unsecured borrowings	S	120,000	$0.99\% \sim 1.04\%$	None
Bank secured borrowings		143,377	$1.14\% \sim 3.34\%$	Endorsements and
				guarantees by the
				Company
	\$	263,377
Nature	December 31, 2017		Interest rate range	Collateral
Bank unsecured borrowings	\$	125,000	$1.03\% \sim 1.05\%$	None
Bank secured borrowings		89,755	$1.20\% \sim 3.03\%$	Endorsements and
				guarantees by the
				Company
	\$	214,755
Nature		September 30, 2017	Interest rate range	Collateral
Bank unsecured borrowings	-S	135,000	$1.05\% \sim 1.12\%$	None
Bank secured borrowings		99,845	$1.20\% \sim 2.98\%$	Endorsements and
				guarantees by the Company
	\$	234,845

Interest expense recognized in profit or loss amounted to \$4,225, \$3,211, \$12,019 and \$8,203 for the three-month and nine-month periods ended September 30, 2018 and 2017, respectively.

(7) Short-term notes and bills payable

	September 30, 2017	Interest rate range	Collateral
Commercial paper payable \$	30,000	$0.46\%$	None

There is no short-term notes and bills payable as of September 30, 2018 and December 31, 2017. The above commercial paper was issued and secured by Union Bank of Taiwan for short-term financing.

(8) Other payables

		September 30, $2018$		December 31, 2017	September 30, 2017
Accrued salaries and bonuses \$		77.605	-\$	55,278	\$ 54.689
Employees' compensation
and directors' and
supervisors' remuneration
payable		72,796		29,687	34,496
Equipment payable		9,192		5.236	1,510
Others		58,645		50,769	49,819
	S	218,238	S	140,970	140,514

(9) Long-term borrowings

$\bar{a}$

				Interest rate
Nature	Expiry date		September 30, 2018	range	Collateral
Long-term bank borrowings
Secured borrowings	July 25, 2020 $\sim$ August 25, 2024	\$	529,908	$1.37\%$ $\sim$ 4.43%	Land, buildings and structures, and endorsed and guaranteed by the Company
Unsecured borrowings	September 23, 2019 $\sim$ October 5, 2022		68,332 598,240	$1.29\%$ ~ 1.80%	None
Less: Current portion		S	61,260) 536.980

Nature	Expiry date	December 31, 2017	Interest rate range	Collateral
Long-term bank borrowings
Secured borrowings	February 17, 2019 $\sim$ August 25, 2024	\$ 486,345	$1.27\%$ ~ 4.43%	Time deposits (Note), land, buildings and structures, machinery and equipment and endorsed and guaranteed by the Company
Unsecured borrowings	September 23, 2019	14,583 500,928	1.27%	None
Less: Current portion		\$ 69,935) 430,993

				Interest rate
Nature	Expiry date		September 30, 2017	range	Collateral
Long-term bank borrowings
Secured borrowings	February 17, 2019 $\sim$ August 25, 2024	S	512,175	$1.27\% \sim$ 4.43%	Time deposits (Note), land, buildings and structures. machinery and equipment
Unsecured borrowings	September 23, 2019		16,667 528,842	1.27%	None
Less: Current portion			69,990) 458,852

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

(10) 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 nine-month periods ended September 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

under the defined contribution pension plans of the Group for the three-month and nine-month periods ended September 30, 2018 and 2017 were \$4,419, \$3,342, \$12,770 and \$9,012, respectively.

• $(11)$ Share capital common stock
• A. Movements in the number of the Company's ordinary shares outstanding are as follows (in thousands of shares):

	For the nine-month periods ended September 30,
	2018	2017
Balance at beginning of period	59,046	59,046
Stock dividends	14,761
Balance at end of period	73,807	59,046

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

				For the nine-month period ended September 30, 2018
	Shares at beginning			Shares at
Reason for reacquisition	of period	Increase	Decrease	end of period
To be reissued to employees	3,000		3,000
				For the nine-month period ended September 30, 2017
	Shares at
	beginning			Shares at
Reason for reacquisition	of period	Increase	Decrease	end of period
To be reissued to employees	3,000			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 September 30, 2018, December 31, 2017 and September 30, 2017, the treasury shares amounted to $\gamma$ , \$118,544, \$118,544, respectively.
• (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. The Company debited 'share capital – common stock' and 'capital surplus–share premium' in the amounts of \$30,000 and \$22,384, respectively, and 'unappropriated retained earnings' was offset by the remaining amount of \$66,160.

• E. As of September 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 \$738,069 (73,807 thousand shares) with par value of \$10 (in dollars) per share.

(12) Capital reserve

For the nine-month period ended September 30, 2018		Share premium	Others	Total
At January 1	S	462.937	114	463,051
Retirement of treasury shares		22,384)	$\overline{\phantom{a}}$	22,384)
At September 30	\$	440.553	114	440,667
For the nine-month period ended September 30, 2017		Share premium	Others	Total
Balances at beginning and end of period		462.937	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 $6(11)$ , 'Share capital – common stock'.

(13) Retained earnings

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

• (2) offset any loss of prior years;

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

• (4) set aside or reverse special reserve as required by regulations or the Competent Authority;
• (5) The appropriation of the remaining amount after deducting items (1) to (4), along with the unappropriated retained earnings of prior years can be distributed in accordance with a resolution passed during a meeting of the Board of Directors and approved at the shareholders' meeting. However, the distribution of dividends shall not be lower than 20% of the current year's profit after deducting items (1) to (4). In order to continually expand the scale of operation, increase competitiveness as well as cooperate with the Company's long-term development, future capital requirements and long-term financial plan, the dividend policy is to distribute stock dividends and partially as cash dividends. Cash dividends shall not be less than 10% of the total dividends distributed to shareholders.
• C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings. As of December 31, 2017, pursuant to the regulations for the deduction amount to stockholders' equity from other equity items, the Company has set aside special reserve of \$12,367 which cannot be distributed to shareholders.
• D. The Company recognized cash dividends distributed to owners amounting to \$59,045 (\$1.0 (in dollars) per share) 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.
• E. Information relating to retain earnings offset by the retirement of treasury shares is provided in Note $6(11)$ , 'Share capital – common stock'.
• (14) Operating revenue

	For the three-month	For the nine-month
	period ended September 30, period ended September 30,
	2018		2018
Revenue from contracts with customers	584,667		1,674,386

• 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 nine-month periods ended September 30, 2018, revenue from contracts with customers recognized that were included in the current contract liabilities at January 1, 2018 were \$13 and \$1,966, respectively.
• C. Related disclosures on operating revenue for the nine-month period ended September 30, 2017 are provided in Note 12(5), 'Effects of initial application of IFRS 15 and information on application of IAS 18 for the nine-month period ended September 30, 2017'.

$(15)$ Other income

				For the three-month periods ended September 30,
		2018		2017
Interest income: Interest income from bank deposits Reversal of allowance for doubtful accounts	\$	1,403 634	S	578 445 636
Other income-others	\$	2,037	\$	1,659
				For the nine-month periods ended September 30,
		2018		2017
Interest income:
Interest income from bank deposits Reversal of allowance for doubtful accounts	\$	3,776	\$	1,417 2,897
Other income-others		2,141		1,910
	\$	5,917	$\mathbb{S}$	6,224
(16) Other gains and losses
				For the three-month periods ended September 30,
		2018		2017
Currency exchange (loss) gain	(\$	$5,133$ ) \$		982
Others		5)
	(\$	5,138)	\$	982
				For the nine-month periods ended September 30,
		2018		2017
Currency exchange gain (loss)	\$	15,817	$($ \$	16,010)
Loss on disposal of property, plant, and				14)
equipment Others		12)
	\$	15,805	$\left( \text{\$} \right)$	16,024)
$(17)$ Finance costs
				For the three-month periods ended September 30,
		2018		2017
Interest expense on bank borrowings	\$	4,225	\$	3,211
				For the nine-month periods ended September 30,
		2018		2017
Interest expense on bank borrowings	\$	12,019	\$	8,203

(18) Expenses by nature

		For the three-month period ended September 30, 2018
		Operating cost		Operating expense		Total
Employee benefit expense	$\mathbf S$	89,372	$\mathbf S$	63,130	\$	152,502
Depreciation		16,478		3,485		19,963
Amortization				675		675
	\$	105,850	\$	67,290	\$	173,140
			For the three-month period ended September 30, 2017
		Operating cost		Operating expense		Total
Employee benefit expense	\$	59,767	\$	41,621	\$	101,388
Depreciation		21,934		2,755		24,689
Amortization		24		515		539
	\$	81,725	\$	44,891	\$	126,616
				For the nine-month period ended September 30, 2018
		Operating cost		Operating expense		Total
Employee benefit expense	\$	236,045	$\mathbf{\hat{S}}$	195,952	$\mathbf{\hat{s}}$	431,997
Depreciation		49,941		10,813		60,754
Amortization				1,925		1,925
	\$	285,986	\$	208,690	\$	494,676
				For the nine-month period ended September 30, 2017
		Operating cost		Operating expense		Total
Employee benefit expense	\$	151,069	\$	120,561	$\mathbf S$	271,630
Depreciation		71,998		8,264		80,262
Amortization		105		1,399		1,504
	\$	223,172	\$	130,224	\$	353,396

$\overline{1}$ $\overline{1}$ $\overline{0}$ $\overline{1}$ ليدعد $\mathbf{r}$ $\mathbf{A}$ $\ddot{\phantom{a}}$ $\mathbf{r}$ . $-20.2018$ $\rightarrow$

(19) Employee benefit expense

	For the three-month period ended September 30, 2018
		Operating cost		Operating expense		Total
Wages and salaries	\$	77,872	\$	57,350	\$	135,222
Labor and health insurance expense		6,285		2,588		8,873
Pension costs		2,902		1,517		4,419
Other personnel expenses		2,313		1,675		3,988
	\$	89,372	\$	63,130	\$	152,502
				For the three-month period ended September 30, 2017
		Operating cost		Operating expense		Total
Wages and salaries	\$	51,755	\$	37,638	\$	89,393
Labor and health insurance expense		4.491		1,530		6,021
Pension costs		2,014		1,328		3,342
Other personnel expenses		1,507		1,125		2,632
	\$	59,767	\$	41,621	\$	101,388
				For the nine-month period ended September 30, 2018
		Operating cost		Operating expense		Total
Wages and salaries	\$	204,182	\$	177,643	\$	381,825
Labor and health insurance expense		17,478		8,794		26,272
Pension costs		8,007		4,763		12,770
Other personnel expenses		6,378		4,752		11,130
	\$	236,045	\$	195,952	\$	431,997
				For the nine-month period ended September 30, 2017
		Operating cost		Operating expense		Total
Wages and salaries	$\mathbf S$	129,880	\$	106,840	\$	236,720
Labor and health insurance expense		11,833		7,229		19,062
Pension costs		5,353		3,659		9,012
Other personnel expenses		4,003		2,833		6,836
	\$	151,069	\$	120,561	\$	271,630

• A. According to the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees' compensation and directors' and supervisors' remuneration. The ratio shall be 3% to 8% for employees' compensation and shall not be higher than 3% for directors' and supervisors' remuneration. On May 28, 2018, the Company's stockholders adopted a resolution to amend the Articles of Incorporation of the Company. The ratio shall be 3% to 15% for employees' compensation and shall not be higher than 3% for directors' and supervisors' remuneration.
• B. For the three-month and nine-month periods ended September 30, 2018 and 2017, the Company's employees' compensation was accrued at \$21,787, \$8,425, \$56,561 and \$16,113, respectively; while directors' and supervisors' remuneration was accrued at \$5,447 \$3,159, \$16,235 and

\$6,042, 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 nine-month period ended September 30, 2018. The employees' compensation will be distributed in the form of cash.

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.

$\mathbf{a}$

$(20)$ Income tax

A. Income tax expense:

(a) Components of income tax expense:

	For the three-month periods ended September 30,
		2018	2017
Current income tax:
Income tax incurred in current period	\$	25,845	S	16,078
Deferred income tax:
Origination and reversal of temporary
differences		5,848		3,014
Income tax expense		31,693	\$	19,092
				For the nine-month periods ended September 30,
		2018		2017
Current income tax:
Income tax incurred in current period	\$	90,084	S	30,093
Tax on unappropriated earnings		19		1,130
Prior year's income tax under (over)
estimation		4,672		165)
Total current income tax		94,775		31,058
Deferred income tax:
Origination and reversal of temporary
differences		13,561		9,326
Impact of change in tax rate		1,204)
Total deferred tax		12,357		9,326
Income tax expense		107,132		40,384

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

	For the three-month periods ended September 30,
	2018	2017
Impact of change in tax rate	-
	For the nine-month periods ended September 30,
	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 November 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.

(21) Earnings per share ("EPS")

		For the three-month period ended September 30, 2018
		Weighted average number
		of shares outstanding	EPS
	Amount after tax	(shares in thousands)	(in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent	\$ 125,499	73,807	\$ 1.70
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent	\$ 125,499	73,807
Assumed conversion of all dilutive
potential ordinary shares
Employees' compensation		524
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares	\$ 125,499	74,331	1.68

	For the three-month period ended September 30, 2017
			Weighted average number
			of shares outstanding		EPS
		Amount after tax	(shares in thousands)		(in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent	\$	80,720	73,807	\$	1.09
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent	\$	80,720	73,807
Assumed conversion of all dilutive
potential ordinary shares Employees' compensation			231
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares	\$	80,720	74,038	\$	1.09
			For the nine-month period ended September 30, 2018
			Weighted average number
			of shares outstanding		EPS
		Amount after tax	(shares in thousands)		(in dollars)
Basic earnings per share
Profit attributable to ordinary				\$	5.11
shareholders of the parent	\$	377,508	73,807
Diluted earnings per share Profit attributable to ordinary
shareholders of the parent	\$	377,508	73,807
Assumed conversion of all dilutive
potential ordinary shares
Employees' compensation			568
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of all dilutive potential
ordinary shares	\$	377,508	74,375	\$	5.08

$\bar{z}$

		For the nine-month period ended September 30, 2017
		Weighted average number
		of shares outstanding		EPS
	Amount after tax	(shares in thousands)		(in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent	\$ 153,560	73,807	\$	2.08
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent	\$ 153,560	73,807
Assumed conversion of all dilutive
potential ordinary shares
Employees' compensation		321
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares	\$ 153,560	74.128	S	2.07

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.

(22) 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, \$1,708, \$5,424 and \$5,125 was recognized in profit or loss for the threemonth and nine-month periods ended September 30, 2018 and 2017, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

			September 30, 2018 December 31, 2017 September 30, 2017
Within one year		7.594	7.594	7.175
Later than one year but not exceeding five years		24,722	30,375	28,700
Exceeding five years		617	660	2,417
	S	32,933	38,629	38,292

(23) Supplemental cash flow information

A. Investing activities with partial cash payments

			For the nine-month periods ended September 30,
	2018	2017
Purchase of property, plant and equipment	\$ 45,062	- \$	187,108
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	$4,554$ ) (		1,440)
Ending balance of payable for equipment	9,192)		1,510)
Cash paid during the period	41,410	S	189,389

B. Investing and financing activities with no cash flow effects

	For the nine-month periods ended September 30,
		2018	2017
Prepayments for equipment reclassified to
property, plant and equipment		42,259		2.668

(24) Changes in liabilities from financing activities

	Short-term		Long-term		Liabilities from
	borrowings		borrowings		financing activities-gross
January 1, 2018	\$ 214,755 \$		500,928	-S	715,683
Changes in cash flow
from financing activities	46,731		95,066		141,797
Impact of changes in
foreign exchange rate	1,891		2,246		4,137
September 30, 2018	\$ 263,377		598,240	S	861,617

7. RELATED PARTY TRANSACTIONS

(1) Significant transactions and balances with related parties None.

(2) Key management compensation

	For the three-month periods ended September 30,
		2018		2017
Salaries and other short-term employee benefits		15.153		8,755
				For the nine-month periods ended September 30,
		2018		2017
Salaries and other short-term employee benefits		42.445		20,885

8. PLEDGED ASSETS

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

			Book value
Asset pledged	September 30, 2018		December 31, 2017			September 30, 2017 Purpose of collateral
Land (Note 1)	\$ 370,730	S	414,740	\$		416,384 Guarantee for $long-$ term borrowings
Buildings and structures-net (Note 1)	429,059		389.261		393,139	Guarantee for $long-$ term borrowings
Machinery and equipment-net (Note 1)			8,749		12,229	Guarantee for $long-$ term borrowings
Pledged time deposits						Guarantee for $long-$
(Note 2)			1,445		1,445	term borrowings
	\$ 799,789		814,195		823,197

(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 September 30, 2018, December 31, 2017 and September 30, 2017, the endorsements and guarantees provided by the Company to the subsidiary, cpc Europa GmbH, amounted to \$159,660, \$142,280 and \$143,000 respectively, and the actual amount drawn down was \$51,801, \$56,319 and \$67,925, respectively; to the subsidiary, CSM Maschinen GmbH, amounted to \$70,960, \$- and \$ $-$ , respectively, and no actual amount was drawn down for the periods end; to the subsidiary, CHIEFTEK PRECISION INTERNATIONAL LLC, amounted to \$91,575, \$59,520 and \$60,520, respectively, and the actual amount drawn down was \$91,575, \$59,520 and \$60,520, respectively.
• (2) As of September 30, 2018, December 31, 2017 and September 30, 2017, the Group's remaining balance due for construction in progress and prepayments for equipment were \$170,475, \$30,854 and \$22,707, 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:
• 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 September 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(22), '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.
• 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 CNY). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

	September 30, 2018
	Foreign currency		Book value
		amount (in thousands)	Exchange rate	(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD.NTD	\$	11,744	30.62	359,628 S
JPY:NTD		121,155	0.2692	32,615
EUR:NTD		1,215	35.48	43,111
Financial liabilities
Monetary items
USD:NTD		270	30.53	8,228
JPY:NTD		7,188	0.2692	1,935
EUR:NTD		1,542	35.48	54,697

			December 31, 2017
	Foreign currency			Book value
	amount (in thousands)		Exchange rate	(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD	\$	11,452	29.76	340,815 $\mathbb{S}^-$
JPY:NTD		55,770	0.2642	14,734
EUR:NTD		618	35.57	21,968
Financial liabilities
Monetary items
USD:NTD		204	29.76	6,076
JPY:NTD		29,683	0.2642	7,842
EUR:NTD		1,174	35.57	41,776
			September 30, 2017
	Foreign currency			Book value
	amount (in thousands)		Exchange rate	(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD	\$	10,510	30.26	318,019 S.
JPY:NTD		16,174	0.2691	4,352
EUR:NTD		439	35.75	15,707
Financial liabilities
Monetary items
USD:NTD		214	30.26	6,461
JPY:NTD		35,096	0.2691	9,444
EUR:NTD		703	35.75	25,124

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 nine-month periods ended September 30, 2018 and 2017 would increase/decrease by \$2,955 and \$2,443, 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 nine-month periods ended September 30, 2018 and 2017 amounted to (\$5,133), \$982, \$15,817 and (\$16,010), 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.

• 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 nine-month periods ended September 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 nine-month periods ended September 30, 2018 and 2017 would have decreased/increased by \$962 and \$681, 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 customers' 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:

		For the nine-month period ended September 30, 2018
		Accounts receivable
At January 1	5	10,804
Provision for impairment		5,397
Effect of foreign exchange		374)
At September 30		15.827

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

	September 30, $2018$	December 31, 2017		September 30, 2017
Floating rate:
Expiring within 1 year	1,266,899 \$	923,623		910,945
Expiring beyond 1 year	943,220	1,647,327		1,225,025
	2,210,119	2,570,950		2,135,970

IV. The table below analyzes 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.

		Between 1	Between 2	More than
September 30, 2018	Less than 1 year	and 2 years	and 5 years	5 years
Non-derivative financial liabilities:
Short-term borrowings	\$ 266,321	\$	\$	\$
Notes payable	220,483
Accounts payable	143,148
Other payables	218,238
Long-term borrowings
(including current
portion)	71,871	88,394	418,623	76,730
		Between 1	Between 2	More than
December 31, 2017	Less than 1 year	and 2 years	and 5 years	5 years
Non-derivative financial liabilities:
Short-term borrowings	\$ 216,411	\$	\$	\$
Notes payable	115,672
Accounts payable	91,689
Other payables	140,970
Long-term borrowings (including current
portion)	80,286	324,006	50,699	79,089
		Between 1	Between 2	More than
September 30, 2017	Less than 1 year	and 2 years	and 5 years	5 years
Non-derivative financial liabilities:
Short-term borrowings	\$ 236,801	\$	\$	\$
Short-term notes and
bills payable	30,000
Notes payable	108,001
Accounts payable	77,010
Other payables	140,514
Long-term borrowings (including current
portion)	80,717	245,930	156,653	81,969

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.

• (3) Fair value information
• A. As of September 30, 2018, December 31, 2017 and September 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 ninemonth period ended September 30, 2017
• A. Summary of significant accounting policies adopted for the nine-month period ended September 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 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 nine-month period ended September 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 institutions, 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:

		December 31, 2017		September 30, 2017
Up to 30 days		23.282		27,251
31 to 90 days		26,012		7,391
91 to 180 days		5,890		9,598
181 to 365 days		5.343		5,701
	S	60,527	S	49.941

The above ageing analysis was based on past due date.

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

	For the nine-month period ended September 30, 2017
	Group provision
At January 1	\$ 13,205
Reversal of allowance for doubtful accounts (Note)	2,897)
Effect of foreign exchange rate changes	30)
At September 30	10.278

(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 ninemonth period ended September 30, 2017
• A. The significant accounting policies applied on revenue recognition for the nine-month period ended September 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:

			September 30, 2018
			Balance by using		Effects from
Balance sheet items	Balance by using IFRS 15		previous accounting policies		change in accounting policy
Contract liabilities $-$ Current $\$$ Advance sales receipts	3,810 $\blacksquare$	- \$	3,810	- S	3,810 3,810)

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

(According to the regulatory requirement, information related to only the nine-month period ended September 30, 2018 is disclosed.)

• (1) Significant transactions information
• A. Loans to others: Please refer to table 1.
• B. Provision of endorsements and guarantees to others: Please refer to table 2.
• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): None.
• D. Acquisition or sale of the same security with the accumulated cost exceeding \$300 million or 20% of the 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:

			For the nine-month period ended September 30, 2018
	CHIEFTEK	Chieftek
	PRECISION	(Kunshan)	cpc Europa	cpc USA	Others	Total
Segment revenue	\$1,466,958	\$503,121	\$254,486	\$130,686	\$11,389	$\mathbf S$ 2,366,640
Inter-segment revenue	680,841		24		11,389	692,254
Revenue from external customers	786,117	503,121	254,462	130,686		1,674,386
Interest income	1,900	121		58	1.697	3.776
Depreciation and amortization	57,121	632	1,713	31	3,182	62,679
Interest expense	6,930		509		4.580	12,019
Segment pre-tax income	466,319	74,391	8,759	$11,737$ (	3,336)	557,870
Segment assets	2,278,370	564,757	145,267	92,556	299,253	3,380,203
			For the nine-month period ended September 30, 2017
	CHIEFTEK	Chieftek
	PRECISION	(Kunshan)	cpc Europa	cpc USA	Others	Total
Segment revenue	\$ 824,310	\$337,367	\$150,431	\$106,656	$\mathbb{S}$ $\overline{\phantom{0}}$	1,418,764 $\mathbf S$
Inter-segment revenue	376,771		413			377,184
Revenue from external customers	447,539	337,367	150,018	106,656		1,041,580
Interest income	298	1,114	1	4		1,417
Depreciation and amortization	79,386	683	1,629	22	46	81,766
Interest expense	6,842		693		668	8,203
Segment pre-tax income	178,910	48,811	4,478	15,320	2,198) $\left($	245,321
Segment assets	1,773,935	367,400	93,877	84,265	274,456	2,593,933

(3) Reconciliation for segment income

Sales between segments are carried out at arm's length. The revenue from external customers reported to the chief operating decision-maker is measured in a manner consistent with that in the statement of comprehensive income. A reconciliation of reportable segments pre-tax income to profit before income tax from continuing operations is provided as follows:

			For the nine-month periods ended September 30.
		2018	2017
Reportable segments pre-tax income	S	561,206 \$	247,519
Other segments pre-tax loss		$3,336)$ (	2,198
Inter segments loss		74,682)	51,609)
Profit before income tax		483,188	193.712

							I		I
Expressed in thousands of NTD				total loans					736,453
			Limit on loans Ceiling on	granted to	a single party granted		$-$ \$ 736,453 \$ 736,453		736,453
						Value (Note 2) (Note 2) Footnote
					Collateral	Item	I		l
			Allowance	. G	doubtful
				transactions Reason for	Nature of with the short-term	loan borrower financing accounts	Operational \$	S	- Operational š
			Amount of
							Short-term	financing	Short-term Imancing
							15%		2.0%
					Actual amount Interest		\$1,932
					Balance at		53,220
	Maximum	outstanding	balance during	the nine-month		$\frac{\text{account}}{\text{arcsum}}$ party september 30, 2018 September 30, 2018 drawn down $\frac{\text{rate}}{\text{arcsum}}$	54,360 \$		30.460
					General ledger Is a related period ended		Other receivables		Other receivables
						(Note 1) Creditor Borrower		CHIEFTEK CSM Maschinen PRECISION GmbH	PRECISION PRECISION CO., LTD. INTERNATIONAL LLC
								CO., LTD.	CHEFTEK CHEFTEK
Table 1					ż

CHEFTEK PRECISION CO., LTD, AND SUBSIDIARIES

For the pine-month period ended September 30, 2018

Loans to others

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

(1)Parent company is '0'.

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

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

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

CHIEFTEK PRECISION CO., LTD, AND SUBSIDIARIES

For the nine-month period ended September 30, 2018 Provision of endorsements and guarantees to others

Table 2

Expressed in thousands of NTD

								Footnot			$\begin{array}{c} \end{array}$		I
			Provision of	endorsements	guarantes to the party in Mainland Chima						z		z
			Provision of	andorsements/	guarantees by subsidiary to parent company				Z		z		z
			Provision of	andorsements	guarantees by parent company to company to subsidiary
			Ceiling on		total amount of endorsements/ guarantees provided provided				920,566		920,566		920,566
Ratio of	accumulated	endorsement	guarantee	amount to net	asset value of the endorser/		guarantor company		ž		\$		5%
				Amount of	endorsements			guarantees secured with collateral
						Actual	$\frac{1}{2}$		$\frac{d$ rawn down 5 51,801				91,575
			Outstanding	endorsement	guarantee	amount at	September 30,	2018	$\frac{159,660}{ }$		70,960		91,575
		Maximum	outstanding	endorsement	guarantee	amount as of	September 30,	2018	197,340		71,780		92,160
			Limiton	endorsements	guarantees	provided for a	single party	(Note 3)	920,566 \$		920,566		920,566
					with the	endorser/	guarantor	(Note2)
			Party being	endorsed/guaranteed				Company name	cpc Europa GmbH		CSM Maschinen GribH		CHIEFTEK	PRECISION	INTERNATIONAL DTI
							Endorser	guarantor	CHIEFTEK	PRECISION CO., É	CHIEFTEK	PRECISION CO. É.	CHIEFTEK	PRECISION CO.	Ė.
							ż	Note 1)

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

(1) Parent company is ' $0^{\circ}$ .

(2) The subsidiaries are numbered in order starting from $11$ .
(Note 2) The following code respresents the relationship with the Company:

v.v.v.ey ...............................

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 nine-month period ended September 30, 2018

Expressed in thousands of NTD

										transaction terms compared to third party Discription and reasons for difference in
					Transaction				transactions			Notes/accounts receivable (payable)
												Percentage of total
												notes/accounts
		Relationship with				Percentage of total						receivable
Purchaser/seller	Counterparty	the counterparty Purchases (sales)			Amount	purchases (sales)	Credit term	Unit price		Credit term	Balance	(payable)	Footnote
CHIEFTEK	cpc Europa GmbH	Subsidiary	(Sales)	G	187,821)	(13%)	(Note I)			(Note 2)	91,537	13%	I
PRECISION
CO., LTD.												39%
CHIEFTEK	Chieftek Machinery	Subsidiary	(Sales)		409,552)	(28%)	(Note I)			(Note 2)	268,462		I
PRECISION	(Kunshan) Co., Ltd.
CO., LTD.												(96%)	ļ
cpc Europa GmbH	CHIEFTEK	The Company	Purchases		187,821	100%	(Note 1)			(Note 3)	91,537)
	PRECISION
	CO., LTD.
Chieftek Machinery	CHIEFTEK	The Company	Purchases		409,552	100%	(Note 1)			(Note 3)	268,462)	(100%)	I
(Kunshan) Co., Ltd.	PRECISION
	CO., LTD.

(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 othe

Table 3, Page 1

Table 3

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Receivables from related parties reaching NTS100 million or 20% of paid-in capital or more

September 30, 2018

Expressed in thousands of NTD

Allowance for	doubtful accounts
subsequent to the Amount collected	balance sheet date
	Action taken
Overdue receivables	Amount
		2.54
	the counterparty Balance as at September 30, 2018 Tumover rate	268,462
Relationship with		Subsidiary
	Counterparty	(Kunshan) Co., Ltd Chieftek Machinery
	Creditor	RECISION HIEFTEK 00, LTD.

$\hat{\boldsymbol{\beta}}$

Table 4

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

For the nine-month period ended September 30, 2018

Table 5

Expressed in thousands of NTD

Transaction

						Percentage of
						consolidated total
Number		Relationship				operating revenues or
Company name	Counterparty	(Note 2)	General ledger account	Amount	Transaction terms	total assets (Note 3)
CHIEFTEK PRECISION CO., LTD. $\frac{\text{Note 1}}{\text{Note}}$ $\circ$	cpc Europa GrabH		G Sales revenue		187, 821) 180 days after monthly- $\mathsf{closing},\mathsf{T}\mathsf{T}$	(11%)
			Accounts receivable	91,537	I	$3\%$
			Endorsements and	159,660		5%
			guarantees		I
	CSM Maschinen GmbH		Long-term prepayment	69,805	1	$2\%$
			Other receivables	32,296	I	$1\%$
			Endorsements and	10,960		$2\%$
			guarantees
	CHIEFTEK PRECISION USA CO., LTD.		Sales revenue		83,468) 180 days after monthly- closing, T/T	(5%)
			Accounts receivable	37,994	$\overline{\phantom{a}}$	$1\%$
	Chieflek Machinery (Kunshan) Co., Ltd.		Sales revenue		409,552) 180 days after monthly- closing, T/T	(24%)
			Accounts receivable	268,462		8%
	CHIEFTEK PRECISION INTERNATINAL LLC.		Endorsements and	91,575		3%
	CHIEFTEK PRECISION INTERNATINAL LLC.		Lease payable guarantees			兰
CHIEFTEK PRECISION USA CO., LTD.			Refundable deposits	11,389 1,526	$\mathbf I$	$\overline{\phantom{a}}$
(Note 1) The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1) Parent company is '0'.
(Note 2) Relationship between transaction company and counterparty is classified into the following three categories: (2) The subsidiaries are numbered in order starting from '1'.

(2) Subsidiary to parent company.
(3) Subsidiary to parent company.
(Note 3) Regarding percentage of transaction amount to consolidated total operating revenues on it is computed based on period-end balance of transaction

(1) Parent company to subsidiary.

		Footnote	Subsidiary	Subsidiary	5,809) Subsidiary	Subsidiary	Subsidiary (Note 1)	Subsidiary (Note 1)
(loss) recognized by Investment income nine-month	period ended		67,946	8,759		3,786	ı	$\bullet$
of the investee for the Company for the Net profit (loss) the nine-month	period ended	September 30, 2018 September 30, 2018	÷ 67,946	8,759	7,261)(	3,786	57,034	12,240
		Book value	U, 342,419	17,278	6,486) (	15,552	316,134	73,096
			o,
	Ownership	E	$\frac{8}{2}$	301	SO.	$\overline{5}$	100	$\tilde{e}$
Shares held as at September 30, 2018	Number of	slarcs	6,760,000	$\mathbf{I}$		$\ddot{\phantom{0}}$	5,100,000	1,660,000
	Balance as at		202,290	98,695	726	15,170	155,678	50,672
Initial investment amount	Balance as at	September 30, 2018 December 31, 2017	Ø 202,290 ω,	98,695	726	15,170	155,678	50,672
	Main business	activities	investment Professional	components and Sale of high precision linear rendering after -sale services motion	manufacture and machineries Research, sale of	Lease of real estate property	Professional investment	components and Sale of high precision linear rendering after -sale services motion
		Location	Samoa	Germany	Germany	America	Hong Kong
		Investee	CHIEFTEK PRECISION HOLDING CO., LTD.	cpc Europa GmbH	CSM Maschinen GmbH	INTERNATIONAL LLC CHIEFTEK PRECISION	(Hong Kong) Co., Limited Chieflek Precision	CHIEFTEK PRECISION USA America $\overline{100}$
		Investor	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.

(Note 1) Not required to disclose income (loss) recognized by the Company.
(Note 2) Foreign currencies were translated into New Taiwan Dollars using the exclange rate (USD:NTD 1:30.325) as at September 30, 2018.

Table 6

Expressed in thousands of NTD

Names, locations and other information of investee companies (not including investees in Mainland Clitiaa). CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

For the nine-month period ended September 30, 2018

For the nine-month period ended September 30, 2018

Expressed in thousands of NTD

Footnote	I
A THE ASSESSMENT IN THE PACEMENT WAT Accumulated of investment 2018 income amount	s,
investments in remitted back to as of September September 30, Book value of 30,2018	316,134 ٩,
Company ended September Mainland China Taiwan as of for the nine- month period (Note 2) (loss) recognized Net income of Ownership by the Company 30, 2018 Investment income	57,034
indirect) £	100%\$
nine-month 2018	57,034 S,
of remittance from investee for the held by Mainland China as period ended Taiwan to Accumulated amount 2018	155,678 o,
Mainland Remitted back to of September 30, September 30, (direct or Amount remitted from Taiwan to to Taiwan for the nine-month period ended September 30, Iaiwan Amount remitted back Mainland China/ 2018	÷,
Remitted to China	₩
remittance from Mainland China as of January 1, Accumulated amount of Taiwan to 2018	155,678 s
Investment method	Note 1
Paid-in capital	155,678
activities	processing and sale of high precision linear motion and rendering components Production, after-sale services
Investee in Mainland Main business China Table 7	(Kunshan) Co., Ltd Chieflek Machinery

		nvestment amount approved by
			Accumulated amount of remittance the Investment Commission of the Ceiling on investments in Mainland
	Forn Taiwan to Mainland China as of Ministry of Economic Affairs		China imposed by the Investment
Company name	September 30, 2018	(MOEA)	Commission of MOEA (Note 3)
CHIEFTEK PRECISION CO., LTD.	155,678	155,678	,104,679

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

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

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

For the nine-month period ended September 30, 2018

Table 8

Expressed in thousands of NTD

							Others
			Interest during	he nine-month	period ended	September 30,	$\frac{2018}{2018}$
							Interest rate
		Financing			Balance at	September 30,	2018
				Maximum balance	during the nine-month	period ended	September 30, 2018
							Purpose
Provision of	endorsements/guarantees	or collaterals			Balance at	September 30,	2018
								39%
		Accounts receivable (payable)			Balance at	lember 30, Š	2018	268,462
		Property transaction					Amount
							ž
		Sales (purchase)						409,552 28%
							Investee in Mainland China Amount	(Kunshan) Co., Ltd Chieftek Machinery

$\frac{1}{2}$