GEM - Interim / Quarterly Report 2018

GEM Terminal Ind. Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Nine Months Ended September 30, 2018 and 2017 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Stockholders GEM Terminal Ind. Co., Ltd.

Introduction

We have reviewed the accompanying consolidated balance sheets of GEM Terminal Ind. Co., Ltd. and its subsidiaries (the “Group”) as of September 30, 2018 and 2017 and the related consolidated statements of comprehensive income for the three months ended September 30, 2018 and 2017 and for the nine months ended September 30, 2018 and 2017, the consolidated statements of changes in equity and cash flows for the nine-month periods then ended, and related notes, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. 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.

Conclusion

Based on our reviews, nothing has come to our attention that caused 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 of September 30, 2018 and 2017, its consolidated financial performance for the three months ended September 30, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the nine months ended September 30, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Deloitte & Touche Taipei, Taiwan Republic of China November 9, 2018

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the ROC and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally applied in the ROC.

For the convenience of readers, the independent auditors’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the ROC. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review report and consolidated financial statements shall prevail.

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss-current (Notes 4 and 7) Financial assets at fair value through other comprehensive income - current (Notes 3, 4 and 8) Available-for-sale financial assets - current (Notes 3, 4 and 9) Notes receivable (Note 10) Accounts receivable, net (Notes 3, 4, 5 and 10) Other receivables Current tax assets (Note 4) Inventories (Note 11) Other financial assets - current (Notes 12 and 28) Other current assets (Notes 15 and 28) Total current assets NONCURRENT ASSETS Property, plant and equipment (Notes 14, 28 and 29) Deferred tax assets (Note 4) Prepayments for equipment Other financial assets - noncurrent (Note 12) Long-term prepayments for lease (Notes 15 and 28) Other noncurrent assets Total noncurrent assets TOTAL		September 30, 2018 (Reviewed) Amount % $ 1,270,946 22 18 - 131,795 2 - - 176,302 3 1,075,304 19 777 - 2,459 - 655,298 12 170,064 3 137,434 2 3,620,397 63 1,865,344 32 150,833 3 13,388 - 1,686 - 89,960 2 5,288 - 2,126,499 37 $ 5,746,896 100	December 31, 2017 (Audited) Amount % $ 1,430,724 22 - - - - 113,167 2 150,463 2 1,216,725 19 1,774 - 1,250 - 973,975 15 269,963 4 169,358 3 4,327,399 67 1,933,646 30 116,795 2 22,753 - 1,727 - 92,706 1 6,192 - 2,173,819 33 $ 6,501,218 100	September 30, 2017 (Reviewed) Amount % LIABILITIES AND EQUITY CURRENT LIABILITIES $ 1,310,670 21 Short-term borrowings (Notes 18 and 28) Short-term bills payable (Note 18) - - Financial liabilities at fair value through profit or loss-current (Note 7) - - Notes payable (Note 16) 79,474 1 Accounts payable (Note 16) 156,710 3 Other payables (Note 17) 1,099,828 18 Current tax liabilities (Note 4) 1,050 - Long-term borrowings - current portion (Notes 18 and 28) 74 - Other current liabilities 1,012,268 16 276,883 4 Total current liabilities 130,572 2 NONCURRENT LIABILITIES 4,067,529 65 Long-term borrowings (Notes 18 and 28) Deferred tax liabilities (Note 4) Net defined benefit liabilities (Note 4) 1,897,020 30 123,289 2 Total noncurrent liabilities 49,122 1 1,721 - Total liabilities 93,926 2 6,289 - EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 20) 2,171,367 35 Ordinary shares Capital surplus Retained earnings Legal reserve Unappropriated earnings Total retained earnings Other equity Total equity $ 6,238,896 100 TOTAL		September 30, 2018 (Reviewed)		December 31, 2017 (Audited) Amount % $ 834,920 13 100,000 2 - - 148,970 2 590,422 9 185,507 3 7,636 - 716,111 11 3,528 - 2,587,094 40 1,057,653 16 89,965 1 37,722 1 1,185,340 18 3,772,434 58 1,692,000 26 271,315 4 343,170 5 386,197 6 729,367 11 36,102 1 2,728,784 42 $ 6,501,218 100	September 30, 2017 (Reviewed)
						Amount % $ 760,375 13 70,000 1 - - 91,211 2 410,012 7 140,248 3 - - 622,199 11 8,875 - 2,102,920 37 958,275 17 101,374 2 34,856 - 1,094,505 19 3,197,425 56 1,692,000 29 271,315 5 343,170 6 291,211 5 634,381 11 (48,225 ) (1 ) 2,549,471 44 $ 5,746,896 100			Amount % $ 594,136 10 - - 9 - 191,067 3 643,074 10 157,153 3 5,496 - 704,151 11 4,343 - 2,299,429 37 1,103,742 18 100,530 1 43,949 1 1,248,221 20 3,547,650 57 1,692,000 27 271,315 4 343,170 5 354,808 6 697,978 11 29,953 1 2,691,246 43 $ 6,238,896 100

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

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Net Loss) Per Share) (Reviewed, Not Audited)

OPERATING REVENUE, NET (Notes 4 and 21) OPERATING COSTS (Notes 11, 22 and 27) GROSS PROFIT OPERATING EXPENSES (Notes 22 and 27) Marketing General and administrative Research and development Expected credit loss (reversed) (Note 10) Total operating expenses GAIN (LOSS) FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Note 22) Other income Other gains and losses Finance costs Total non-operating income and expenses CONSOLIDATED PROFIT (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (BENEFIT) (Notes 4 and 23) CONSOLIDATED NET INCOME (LOSS) OTHER COMPREHENSIVE INCOME (LOSS) (Notes 20 and 23) Items that will not be reclassified subsequently to profit or loss Unrealized loss on investments in equity instruments designated as at fair value through other comprehensive income		For the Three Months Ended September 30	For the Three Months Ended September 30	For the Three Months Ended September 30		For the Nine Months	Ended September 30	Ended September 30
		2018		2017		2018		2017
		Amount % $ 970,890 100 938,394 97 32,496 3 36,802 4 53,789 5 1,782 - 552 - 92,925 9 (60,429 ) (6 ) 13,752 1 7,036 1 (13,658 ) (1 ) 7,130 1 (53,299 ) (5 ) (13,522 ) (1 ) (39,777 ) (4 ) (9,820 ) (1 )		Amount % $ 1,000,146 100 892,055 89 108,091 11 40,128 4 48,081 5 11,916 1 - - 100,125 10 7,966 1 6,529 - (1,268 ) - (12,066 ) (1 ) (6,805 ) (1 ) 1,161 - 1,092 - 69 - - -		Amount % $ 2,972,785 100 2,789,118 94 183,667 6 110,113 4 154,105 5 13,929 - (2,040 ) - 276,107 9 (92,440 ) (3 ) 22,155 1 11,899 - (42,749 ) (2 ) (8,695 ) (1 ) (101,135 ) (4 ) (18,044 ) (1 ) (83,091 ) (3 ) (18,950 ) -		Amount % $ 2,757,535 100 2,477,570 90 279,965 10 109,172 4 147,596 5 24,778 1 - - 281,546 10 (1,581 ) - 18,244 1 (9,798 ) (1 ) (36,498 ) (1 ) (28,052 ) (1 ) (29,633 ) (1 ) 2,616 - (32,249 ) (1 ) - - (Continued)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Net Loss) Per Share) (Reviewed, Not Audited)

For the Three Months Ended September 30	For the Three Months Ended September 30	For the Nine Months	Ended September 30
2018	2017	2018	2017
Amount % $ 1,493 - (105,997 ) (11 ) - - 749 - (113,575 ) (12 ) $ (153,352 ) (16 ) $ (39,777 ) (4 ) $ (153,352 ) (16 ) $ (0.24 ) $ (0.24 )	Amount % $ - - 42,219 4 (267 ) - 231 - 42,183 4 $ 42,252 4 $ 69 - $ 42,252 4 $ - $ -	Amount % $ 2,914 - (83,018 ) (3 ) - - 2,832 - (96,222 ) (3 ) $ (179,313 ) (6 ) $ (83,091 ) (3 ) $ (179,313 ) (6 ) $ (0.49 ) $ (0.49 )	Amount % $ - - (76,784 ) (3 ) (1,484 ) - 3,986 - (74,282 ) (3 ) $ (106,531 ) (4 ) $ (32,249 ) (1 ) $ (106,531 ) (4 ) $ (0.19 ) $ (0.19 )

$	$	$	$
$	$	$	$
$	$	$	$

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

(Concluded)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

		Equity Attributable to the Owners of the Company	Equity Attributable to the Owners of the Company	Equity Attributable to the Owners of the Company
Ordinary Shares $ 1,692,000 - 1,692,000 - - - - $ 1,692,000 $ 1,692,000 - - - - $ 1,692,000	Capital Surplus $ 271,315 - 271,315 - - - - $ 271,315 $ 271,315 - - - - $ 271,315	Retained Earnings	Total $ 729,367 - 729,367 (83,091) - (83,091 ) (11,895 ) $ 634,381 $ 730,227 - (32,249) - (32,249 ) $ 697,978		Other Equity
				Unrealized Loss on Financial Assets at Fair Value Through Unrealized Loss Other on Available Comprehensive -for-sale Income Financial Assets $ - $ (3,166) (3,166 ) 3,166 (3,166 ) - - - (15,818 ) - (15,818 ) - 11,895 - $ (7,089 ) $ - $ - $ - - - - - - (1,213 ) - (1,213 ) $ - $ (1,213 )	Exchange Differences on Translating Remeasurement Foreign of Defined Operations Benefit Plans $ 33,232 $ 6,036 - - 33,232 6,036 - - (80,186 ) (218 ) (80,186 ) (218 ) - - $ (46,954 ) $ 5,818 $ 97,341 $ 6,894 - - - - (73,069 ) - (73,069 ) - $ 24,272 $ 6,894
		Unappropriated Legal Reserve Earnings $ 343,170 $ 386,197 - - 343,170 386,197 - (83,091) - - - (83,091 ) - (11,895 ) $ 343,170 $ 291,211 $ 338,662 $ 391,565 4,508 (4,508 ) - (32,249) - - - (32,249 ) $ 343,170 $ 354,808

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

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Consolidated loss before income tax Adjustments for: Depreciation expense Amortization expense Expected credit loss reversed Allowance for doubtful accounts Finance costs Interest income Dividend income Loss on disposal of property, plant and equipment, net Gain on disposal of investments, net Write-down (reversal) of inventories Other non-cash items Changes in operating assets and liabilities Financial assets held for trading Notes receivable Accounts receivable Inventories Other current assets Financial liabilities held for trading Notes payable Accounts payable Other payables Other current liabilities Net defined benefit liabilities Cash generated from (used in) operations Interest received Income tax paid Net cash generated from (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at fair value through other comprehensive income Proceeds from disposal of financial assets at fair value through other comprehensive income Acquisition of available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in other financial assets Increase in other noncurrent assets	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2018 $ (101,135) 193,931 3,839 (2,040) - 42,749 (7,088) (3,680) 5,100 - 5,051 1,717 - (25,839) 143,521 314,236 31,904 (254) (57,759) (180,410) (22,710) 4,761 (9,956 ) 335,938 8,152 (10,152 ) 333,938 (1,166,144) 1,126,051 - - (192,074) 737 99,940 (1,180)	2017 $ (29,633) 179,404 3,901 - 2,431 36,498 (8,597) (781) 6,071 (12,826) (2,335) 3,005 48 (10,728) 17,224 (265,425) (15,623) (107) (7,153) 112,158 (5,524) 102 (2,782 ) (672) 9,339 (15,162 ) (6,495 ) - - (341,059) 273,028 (181,567) 648 37,666 (1,099) (Continued)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

Dividend received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Decrease in short-term borrowings Increase in short-term bills payable Decrease in short-term bills payable Increase in long-term borrowings Repayment of long-term borrowings Interest paid Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2018 $ 3,680 (128,990 ) 645,938 (718,917) 70,000 (100,000) 440,846 (635,001) (45,425 ) (342,559 ) (22,167 ) (159,778) 1,430,724 $ 1,270,946	2017 $ 781 (211,602 ) 1,537,062 (1,755,333) 300,000 (350,000) 670,000 (489,811) (39,590 ) (127,672 ) (61,947 ) (407,716) 1,718,386 $ 1,310,670

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

(Concluded)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

GEM Terminal Ind. Co., Ltd. (the “Company”) was incorporated in July 1993 under the laws of the Republic of China (ROC). The Company mainly manufactures and sells the following products:

Series terminals, plug inserts, housing and electronic connectors for AC and DC power cords.
Electric and motor parts terminal.
Electric and communication terminal.
Optical communication passive devices.
Lead frames.

The Company’s shares have been traded on the Taiwan Stock Exchange since September 2001.

The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were reported to the board of directors for issue on November 9, 2018.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERNATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC).

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

IFRS 9 “Financial Instruments” and related amendment

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets as at January 1, 2018.

		Measurement Category	Measurement Category	Measurement Category			Carrying Amount	Carrying Amount
Financial Assets		IAS 39		IFRS 9			IAS 39	IFRS 9	Remark
Cash and cash equivalents	Loans and	receivables	Amortized	cost		$	1,430,724 $	1,430,724		2)
Equity securities	Available	for sale	Fair value through other				113,167	113,167		1)
			comprehensive		income
			(FVTOCI) - equity
			instruments
Notes receivable and accounts	Loans and	receivables	Amortized	cost			1,367,188	1,367,188		2)
receivable
Other receivables	Loans and	receivables	Amortized	cost			1,774	1,774		2)
Other financial assets (current	Loans and	receivables	Amortized	cost			271,690	271,690		2)
and non-current)
			IAS 39
			Carrying				IFRS 9
			Amount				Carrying
		as	of January 1,	Reclassifi-			Amount as	of
Financial Assets			2018		cations		January 1, 2018		Remark
FVTOCI
Reclassification from		$ -		$	113,167		$ 113,167		1)
available-for-sale (IAS 39)
Amortized cost
Reclassification from loans and			-		3,071,376		3,071,376		2)
receivables (IAS 39)
		$ -		$	3,184,543		$ 3,184,543

1) The Group elected to designate all of its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized loss on available-for-sale financial assets of $3,166 thousand was reclassified to other equity - unrealized loss on financial assets at FVTOCI.
2) Cash and cash equivalents, notes receivable, account receivables, other receivables and other financial assets that were previously classified as loans and receivables under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9.
b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019.

Effective Date New IFRSs Announced by IASB (Note 1) Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019 Amendments to IFRS 9 “Prepayment Features with Negative January 1, 2019 (Note 2) Compensation”

(Continued)

New IFRSs IFRS 16 “Leases” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty Over Income Tax Treatments”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 3) January 1, 2019 January 1, 2019 (Concluded)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.
Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply IFRS 16 only to contracts entered into (or changed) on or after January 1, 2019 in order to determine whether those contracts are, or contain, a lease. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal and interest of lease liabilities are both classified within financing activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Prepaid lease payments for land and property use rights located in China and Vietnam are recognized as prepayments for leases. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. The Group will apply IAS 36 to all right-of-use assets.

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The Group expects to apply the following practical expedients:

1) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
2) The Group will account for those leases for which the lease term ends on or before December 31 , 2019 as short-term leases.
3) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.

Except for the aforementioned impact, as of the date the consolidated financial statements were reported to the board of directors, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date New IFRSs Announced by IASB (Note 1) Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3)

Note1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

Note2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

The Group assesses the implication of the above New IFRSs will not have material impact on the Group’s accounting policies.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

These interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” as endorsed and issued into effect by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosure information required in a complete set of IFRSs annual financial statements.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are

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measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Basis of consolidation

The basis of preparation applied in the consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2017.

See Note 13, table 5 and 6 for the detailed information of subsidiaries (including percentage of ownership and main business).

d. Other significant accounting policy

Except for financial assets, revenue from sale of goods and the following, please refer to the summary of significant accounting policy in the consolidated financial statements for the year ended December 31, 2017.

1) Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

a) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

i Measurement category

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI.

i) Financial asset at FVTPL

Financial asset is classified as at FVTPL when such a financial asset is mandatorily classified as at FVTPL, which are derivative instruments.

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Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 26.

ii) Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes receivable, accounts receivable, other receivables and other financial assets, are measured at amortized cost, which equals to gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

iii) Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, they will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: available-for-sale financial assets and loans and receivables.

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i) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets (relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments) are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when such investments are disposed of or are determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

ii) Loans and receivables

Loans and receivables (including cash and cash equivalents, notes receivable, accounts receivable, other receivables and other financial assets) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

ii Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including notes receivable and accounts receivable).

The Group always recognizes lifetime Expected Credit Loss (ECL) for notes receivable and accounts receivable. For all other financial instruments, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

14 -

2017

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial assets, that the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as accounts receivable, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For a financial asset carried at amortized cost, the amount of the impairment loss recognized is 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.

For financial assets carried at amortized cost, 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 was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

For any available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. When accounts receivable are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible accounts receivable that are written off against the allowance account.

iii Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

2018

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2017

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the

15 -

cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

2) Revenue recognition

2018

The Group identifies the contract with the customers, allocates the transaction price to the performance obligations, and recognizes revenue when performance obligations are satisfied.

Revenue from sale of goods

Revenue from sale of goods comes from sales of terminals. Sales of terminals are recognized as revenue when the goods are shipped or delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers, and bears the risks of obsolescence. Accounts receivable are recognized concurrently.

The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
d) It is probable that the economic benefits associated with the transaction will flow to the Group; and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

3) Retirement benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

16 -
4) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income and the tax rate that would be applicable to expected total annual earnings. The effect of a change in tax rate resulting from a change in tax law is recognized consistent with the accounting for the transaction itself which gives rise to the tax consequence, and is recognized in profit or loss or other comprehensive income in full in the period in which the change in tax rate occurs.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Except for the following item, for the critical accounting judgments and key sources of estimation, uncertainty and assumption applied in these consolidated financial statements, please refer to the consolidated financial statements for the year ended December 31, 2017.

Estimated impairment of financial assets

The provision for impairment of accounts receivable is based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. For details of the key assumptions and inputs used, see Note 10. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2018		2017		2017
Cash on hand	$	3,586	$	2,677	$	2,465
Checking accounts and demand deposits		863,401		929,940		782,623
Cash equivalent
Time deposits with original maturities less than
3 months		403,959		498,107		525,582
	$	1,270,946	$	1,430,724	$	1,310,670

The market rate intervals of cash equivalents at the end of the reporting period were as follow:

	September 30,	December 31,	September 30,
	2018	2017	2017
Time deposits (%)	0.55-2.58	0.55-1.98	0.55-1.46

17 -

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
	2018		2017		2017
Financialassets-current
Mandatorily classified as at FVTPL
Derivatives (not designated for hedge)
Copper futures	$	18	$	-	$	-
Financial liabilities-current
Held for trading
Derivatives (not designated for hedge )
Copper futures	$	-	$	-	$	9

The copper futures above did not meet the criteria of hedge effectiveness and, therefore, were not accounted for using hedge accounting.

At the end of reporting period, outstanding copper futures not under hedge accounting were as follows:

			Contract	Contract
			Amount
	Futures Month	Lots	(In thousands)
September30,2018
Copper futures
Refined copper	December, 2018	1	US$	71
September 30, 2017
Copper futures
Refined copper	December, 2017	2	US$	148

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - CURRENT

	September 30,	September 30,
		2018
Investments in equity instruments at FVTOCI
Domestic listed shares	$	34,044
Overseas listed shares		97,751
	$	131,795

These investments in equity instruments are not held for trading. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Note 3 and Note 9 for information relating to their reclassification and comparative information for 2017.

In the nine months ended September 30, 2018, the Group acquired $1,166,144 thousand of domestic and overseas listed shares for medium to long-term strategic purposes; the management designated these investments as at FVTOCI.

In the nine months ended September 30, 2018, the Group sold its domestic and overseas listed shares in order to manage credit concentration risk. The sold shares had a fair value of $1,126,051 thousand and the Group transferred a loss of $11,895 thousand from other equity to retained earnings.

18 -

The dividends for the three and nine months ended September 30, 2018 were $2,139 thousand and $3,680 thousand, respectively. Those related to investments derecognized during the period were $1,407 thousand and those related to investments held at the end of the reporting period were $2,273 thousand.

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - CURRENT

			December 31,	December 31,	September 30,	September 30,
				2017		2017
Domestic listed shares			$	29,730	$	19,339
Overseas listed shares				83,437		60,135
			$	113,167	$	79,474
NOTES AND ACCOUNTS RECEIVABLE, NET
	September 30,		December 31,		September 30,
		2018		2017		2017
Notes receivable
Notes receivable - operating	$	176,302	$	150,463	$	156,710
Accounts receivable
Accounts receivable
Gross carrying amount	$	1,086,804	$	1,232,198	$	1,113,791
Less: Allowance for impairment loss		11,500		15,473		13,963
	$	1,075,304	$	1,216,725	$	1,099,828

10. NOTES AND ACCOUNTS RECEIVABLE, NET

a. Notes and accounts receivable

For the nine months ended September 30, 2018

The average credit period of sales of goods was 30-120 days. In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all accounts receivable. The expected credit losses on accounts receivable are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

19 -

The Group writes off accounts receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation. For accounts receivable that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of notes and accounts receivable based on the Group’s provision matrix.

September 30, 2018

Expected credit loss rate (%) Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost			Coll	a	teral not Provided				Collateral Provided Past Due ver 180 Days 6 $ 4,191 (251 ) $ 3,940	Total $ 1,263,106 (11,500 ) $ 1,251,606
	N	ot Past Due 0-0.6 $ 1,190,331 (4,967 ) $ 1,185,364	Past Due 1to 60 Days 2-10 $ 65,349 (3,818 ) $ 61,531	6	Past Due 1 to 90 Days 9 20-30 $ 398 (102 ) $ 296	Past Due 1 to 180 Days O 30-55 $ 50 (24 ) $ 26	Past Due ver 180 Days 70-100 $ 2,787 (2,338 ) $ 449	O

Parts of the Group’ customer provided property, plant and equipment as collateral to lower the risk of expected credit loss.

The movements of the loss allowance of accounts receivable were as follows:

	For the Nine
	Months Ended
	September
	30,2018
Balance at January 1, IAS 39	$ 15,473
Adjustment on initial application of IFRS 9	-
Balance at January 1, IFRS 9	15,473
Loss allowance reversed	(2,040)
Amounts written off	(1,873)
Foreign exchange gains and losses	(60 )
Balance at September 30, 2018	$ 11,500

2017

The average credit period of sales of goods was 30-120 days. The Group considered any change in the credit quality of the accounts receivable since the date credit was initially granted to the end of the reporting period. The Group recognized an allowance for impairment loss of 100% against all receivables over 360 days because historical experience revealed that receivables that are past due beyond 360 days were not collectible. Allowance for impairment loss was recognized against accounts receivable between 0 days and 360 days based on the estimated uncollectible amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

There were no accounts receivable that were past due and not impaired at the end of the reporting period. Inspection on customers’ credit was taken regularly and aging analysis was preformed based on the past due date.

20 -

Aging analysis of notes and accounts receivable was as follows:

	December 31,	September 30,	September 30,
	2017		2017
Not past due	$ 1,279,977	$	1,186,185
Past due 1-60 days	90,972		74,599
Past due 61-90 days	4,000		6,236
Past due 91-180 days	4,414		197
Past due over 181 days	3,298		3,284
	$ 1,382,661	$	1,270,501
Movements of the allowance for impairment loss on accounts receivable were as follows:
		Collectively
		Assessed for
		Impairment
		For the Nine
		Months Ended
		September 30,
			2017
Balance, beginning of period			$ 12,988
Impairment losses recognized			2,431
Amounts written off as uncollectible			(1,137)
Foreign exchange gains and losses			(319 )
Balance, end of period			$ 13,963

b. Credit risk of notes and accounts receivable

The Group’s receivables are significantly concentrated in certain individuals, most of which have similar business operations and economic features. Concentration of credit risk occurs when the counterparties to financial instrument transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

The balances of the notes and accounts receivable from certain customers with significant carrying amounts as of each reporting date were as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2018		2017		2017
Group A		$ 161,203		$ 197,695		$ 185,094
INVENTORIES
	September 30,		December 31,		September 30,
		2018		2017		2017
Finished goods	$	167,994	$	288,951	$	338,269
Work in process		177,343		222,672		295,058
						(Continued)

11. INVENTORIES

21 -

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2018		2017		2017
Raw materials	$	244,295	$	373,110	$	301,673
Supplies		65,666		89,242		77,268
	$	655,298	$	973,975	$	1,012,268
						(Concluded)

The cost of goods sold for the three months ended September 30, 2018 and 2017 and for the nine months ended September 30, 2018 and 2017 included the following items:

Write-down (reversal of write - down) of inventories Others		For the Three Months Ended September 30	For the Three Months Ended September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ (958) 2,383 $ 1,425	2017 $ (10,210) (1,130 ) $ (11,340 )		2018 $ 5,051 4,394 $ 9,445	2017 $ (2,335) (548 ) $ (2,883 )

12. OTHER FINANCIAL ASSETS

	September 30,	December 31,	September 30,
	2018	2017	2017
Time deposits with original maturities more than
3 months	$ 154,703	$ 242,176	$ 244,417
Pledge time deposits	6,285	23,459	29,370
Refundable deposits	10,762	6,055	4,817
	$ 171,750	$ 271,690	$ 278,604
Current	$ 170,064	$ 269,963	$ 276,883
Non-current	1,686	1,727	1,721
	$ 171,750	$ 271,690	$ 278,604
a. The market rate intervals of other financial assets	at the end of the	reporting period were as followings:
	September 30,	December 31,	September 30,
	2018	2017	2017
Time deposits (%)	1.35-1.55	1.10-1.55	1.35-1.55

b. Refer to Note 28 for the pledge information of other financial assets.

22 -

13. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements were as follows:

Name of Investor Name of Investee Main Businesses and Products The Company Global Electronics Terminal (Cayman) Co., Ltd. (Global (Cayman)) Note 1 Genius Terminal Co., Ltd. (Genius) Notes 1 and 2 GEM Terminal (Cayman) Co., Ltd. (GEM (Cayman)) Note 1 Global (Cayman) Vibo Gem International Co., Ltd. (Vibo) Notes 1 and 2 Global Electronics Terminal (HK) Co., Ltd. (Global (HK)) Note 2 Genius Genius Terminal (HK) Ltd. (Genius (HK)) Note 2 GEM (Cayman) Vietnam Gem Electronic and Metal Co., Ltd (GEM (VN)) Note 3 Vibo Suzhou Gem Opto-Electronics Terminal Co., Ltd. (GEM (Suzhou)) Note 3 Dongguan Gem Electronics & Metal Co., Ltd. (GEM (Dongguan)) Note 3	Percentage of Ownership (%)
	September 30, 2018 December 31, 2017 September 30, 2017 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Name of Investor
Name of Investee
Main Businesses and
Products
The Company
Global Electronics
Terminal (Cayman) Co.,
Ltd. (Global (Cayman))
Note 1
Genius Terminal Co., Ltd.
(Genius)
Notes 1 and 2
GEM Terminal (Cayman)
Co., Ltd. (GEM
(Cayman))
Note 1
Global (Cayman)
Vibo Gem International
Co., Ltd. (Vibo)
Notes 1 and 2
Global Electronics
Terminal (HK) Co., Ltd.
(Global (HK))
Note 2
Genius
Genius Terminal (HK)
Ltd. (Genius (HK))
Note 2
GEM (Cayman)
Vietnam Gem Electronic
and Metal Co., Ltd
(GEM (VN))
Note 3
Vibo
Suzhou Gem
Opto-Electronics
Terminal Co., Ltd. (GEM
(Suzhou))
Note 3
Dongguan Gem
Electronics & Metal Co.,
Ltd. (GEM (Dongguan))
Note 3

Percentage of Ownership (%)

September
30, 2018
December 31,
2017
September
30, 2017
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Note 1: International investment.

Note 2: International trading.

Note 3: Production of hardware; machine processing; electroplating for metal processing; production and processing of molds and related accessories; plastic products and related plastic accessory production.

14. PROPERTY, PLANT, AND EQUIPMENT

The Company purchased land of $7,908 thousand for the purpose of a resort constructed for the employees. However, a part of the land is agricultural land that cannot be transferred to the Company because of statutory limitations; thus, the Company registered the property rights in the name of related party in substance, Su Chung - Hong. The land is mortgaged to the Company and the agreement stipulated unconditional conveyance of the land to the Company.

a. Movements of cost and accumulated depreciation were as follows:

Nine months ended September 30, 2018

										Construction	Construction
										in	Progress
				Machinery							and
					and	Transportation				Equipment to
		Land	Buildings	Equipment		Equipment			Others	be	Inspected		Total
Cost
Balance at January 1, 2018	$	146,218	$ 1,046,950	$	1,629,392	$	57,436	$	690,093	$	176,368	$	3,746,457
Additions		-	16,463		126,051		11,962		101,050		(66,870 )		188,656
Disposal		-	(5,682 )		(163,902 )		(7,263 )		(27,244 )		-		(204,091 )
												(Continued)

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Effect of foreign currency exchange differences Balance at September 30, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation expenses Disposal Effect of foreign currency exchange differences Balance at September 30, 2018 Carrying amounts at December 31, 2017 and January 1, 2018 Carrying amounts at September 30, 2018	Land $ - $ 146,218 $ - - - - $ - $ 146,218 $ 146,218	Buildings $ (7,711 ) $ 1,050,020 $ (430,535 ) (34,079 ) 5,682 (2,566 ) $ (461,498 ) $ 616,415 $ 588,522	Machinery and Equipment Transportation Equipment $ (42,599 ) $ (665 ) $ 1,548,942 $ 61,470 $ (972,172 ) $ (48,426 ) (86,294 ) (2,131 ) 159,634 7,157 8,563 343 $ (890,269 ) $ (43,057 ) $ 657,220 $ 9,010 $ 658,673 $ 18,413	Others Construction in Progress and Equipment to be Inspected Total $ (11,706 ) $ (3,784 ) $ (66,465 ) $ 752,193 $ 105,714 $ 3,664,557 $ (361,678 ) $ - $ (1,812,811 ) (71,427 ) - (193,931 ) 25,781 - 198,254 2,935 - 9,275 $ (404,389 )$ - $ (1,799,213 ) $ 328,415 $ 176,368 $ 1,933,646 $ 347,804 $ 105,714 $ 1,865,344 (Concluded)

Nine months ended September 30, 2017

Cost Balance at January 1, 2017 Additions Disposal Reclassification Effect of foreign currency exchange differences Balance at September 30, 2017 Accumulated depreciation Balance at January 1, 2017 Depreciation expenses Disposal Effect of foreign currency exchange differences Balance at September 30, 2017 Carrying amounts at September 30, 2017	Land $ 146,218 - - - - $ 146,218 $ - - - - $ - $ 146,218	Buildings $ 1,049,205 5,410 (3,826 ) 27,876 (23,412 ) $ 1,055,253 $ (405,473 ) (33,030 ) 3,750 4,395 $ (430,358 ) $ 624,895	Machinery and Equipment Transportation Equipment $ 1,676,636 $ 56,535 34,234 3,309 (56,558 ) (939 ) 29,377 - (63,837 ) (705 ) $ 1,619,852 $ 58,200 $ (956,901 ) $ (47,939 ) (84,783 ) (2,051 ) 50,362 872 26,730 537 $ (964,592 ) $ (48,581 ) $ 655,260 $ 9,619	Others Construction in Progress and Equipment to be Inspected $ 731,408 $ 137,008 42,393 61,555 (4,452 ) - 17,087 (82,368 ) (25,269 ) 28,152 $ 761,167 $ 144,347 $ (397,720 ) $ - (59,540 ) - 4,072 - 8,702 - $ (444,486 )$ - $ 316,681 $ 144,347	Total $ 3,797,010 146,901 (65,775 ) (8,028 ) (85,071 ) $ 3,785,037 $ (1,808,033 ) (179,404 ) 59,056 40,364 $ (1,888,017 ) $ 1,897,020

b. Estimated useful lives

Depreciation is provided on a straight-line basis over estimated useful lives as follows:

Buildings
Factory	5-25 years
Main building	5-25 years
The major component part of the factory	10-50 years
The major component part of the office	20-55 years
Machinery and equipment	3-15 years
Transportation equipment	4-12 years
Others	3-20 years

24 -

Refer to Note 28 for the carrying amount of property, plant and equipment that had been pledged by the Group to secure borrowings/general banking facilities granted to the Group.

c. Investing activities affecting both cash and non-cash items

Acquisition of property, plant and equipment Capitalized interest Increase (decrease) in prepayments for equipment Decrease in payable for purchase of equipment Cash paid for acquisition of property, plant and equipment		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ 188,656 (2,300) (9,365) 15,083 $ 192,074	2017 $ 146,901 (2,869) 9,582 27,953 $ 181,567

15. PREPAYMENT FOR LEASE

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2018		2017		2017
Current (included in other current assets)	$	2,338	$	2,283	$	2,298
Noncurrent (included in long-term prepayments
for lease)		89,960		92,706		93,926
	$	92,298	$	94,989	$	96,224

Prepayments for lease are for land use rights and property use rights in Mainland China and Vietnam, of which $5,326 thousand are in the process of obtaining the land use right certificate. The amortization period of land use rights in Mainland China is 50 years, which will expire from December 2046 to September 2061 in a row. The amortization periods of land and property use rights in Vietnam are 40-50 years, which will expire from October 2054 to December 2066 in a row.

Refer to Note 28 for the carrying amount of prepayments for lease that had been pledged by the Group to secure borrowings/general banking facilities granted to the Group.

16. NOTES PAYABLE AND ACCOUNTS PAYABLE

The Group’s notes payable and accounts payable were from operating activities and were not secured by collaterals.

The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms, therefore, no interest was charged on the outstanding accounts payable.

17. OTHER PAYABLES

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2018		2017		2017
Payable for salaries and bonus	$	36,932	$	44,315	$	43,130
Payable for purchase of equipment		32,194		47,277		35,376
						(Continued)

25 -

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2018		2017		2017
Payable for freight	$	15,525	$	14,019	$	11,482
Payable for professional service fees		8,603		8,129		6,863
Payable for tax		3,620		3,298		2,671
Payable for utilities expense		3,312		8,579		9,430
Payable for pension		801		7,906		822
Payable for employees compensation and
remuneration of directors and supervisors		-		2,539		-
Others		39,261		49,445		47,379
	$	140,248	$	185,507	$	157,153

(Concluded)

Other payables - others were payables for labor and health insurance, rent, and interest, etc.

18. BORROWINGS

a. Short-term borrowings

	September 30,	December 31,	September 30,
	2018	2017	2017
Unsecured borrowings	$ 294,771	$ 274,774	$ 157,420
Secured borrowings	465,604	560,146	436,716
	$ 760,375	$ 834,920	$ 594,136

The annual interest rates of short-term borrowings were as follows:

	September 30,	December 31,	September 30,
	2018	2017	2017
Unsecured borrowings (%)	1.35-3.35	1.23-2.26	1.42-2.51
Secured borrowings (%)	3.14-4.35	2.42-4.35	2.36-4.35

b. Short-term bills payable

The annual interest rates of short-term bills payable were as follows:

	September 30,	December 31,	September 30,
	2018	2017	2017
Short-term bills payable (%)	1.17-1.19	1.10-1.16	-

As of September 30, 2018 commercial papers of $50,000 thousand and $20,000 thousand were issued and granted by International Bills Corporation and China Bills Finance Corporation. As of December 31, 2017, commercial papers of $50,000 thousand were issued and granted by China Bills Finance Corporation and International Bills Corporation, respectively. The commercial papers above were issued with one year revolving credit facilities.

26 -

c. Long-term borrowings

	September 30,	September 30,	December 31,	September 30,
		2018	2017	2017
Unsecured borrowings	$	1,511,000	$ 1,730,084	$ 1,754,667
Secured borrowings		69,474	43,680	53,226
		1,580,474	1,773,764	1,807,893
Less: Current portion		622,199	716,111	704,151
	$	958,275	$ 1,057,653	$ 1,103,742

The annual interest rates of long-term borrowings were as follows:

	September 30,	December 31,	September 30,
	2018	2017	2017
Unsecured borrowings (%)	1.49-2.06	1.49-2.09	1.49-2.09
Secured borrowings (%)	3.5-3.6	2.85	2.85

Under the loan agreements with several banks, the Group should maintain certain financial ratios based on reviewed semiannual and audited annual consolidated financial statements. The financial ratio of the Group as of June 30, 2018, December 31, 2017 and June 30, 2017 were in compliance with the requirements stated in the loan agreements.

19. RETIREMENT BENEFIT PLANS

For the three months ended September 30, 2018 and 2017 and for the nine months ended September 30, 2018 and 2017, employee benefit expenses in respect of the Group’s defined benefit retirement plans were $303 thousand, $371 thousand, $910 thousand and $1,113 thousand, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2017 and 2016.

20. EQUITY

a. Ordinary shares

	September 30,	December 31,	September 30,
	2018	2017	2017
Number of shares authorized (in thousands)	221,000	221,000	221,000
Shares authorized	$ 2,210,000	$ 2,210,000	$ 2,210,000
Number of shares issued and fully paid (in
thousands)	169,200	169,200	169,200
Shares issued	$ 1,692,000	$ 1,692,000	$ 1,692,000

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

27 -

b. Capital Surplus

	September 30,	December 31,	September 30,
	2018	2017	2017
May be used to offset a deficit,
distributed as cash dividends,
or transferred to ordinaryshares
Arising from issuance of common shares	$ 266,411	$ 266,411	$ 266,411
Arising from treasury share transactions	4,904	4,904	4,904
	$ 271,315	$ 271,315	$ 271,315

The capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

c. Appropriation of Earnings and Dividend Policy

According the dividend policy in the Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the stockholders’ meeting for distribution of dividends and bonus to stockholders.

The Company’s dividend policy is in line with the Company’s operating scale and research and development needs as well as the status of the economy and industry in order to maintain sound management and promote stockholders’ long-term interests. Thus, the Company adopted Residual dividend policy as its stockholder dividends’ policy. Company’s profits may be distributed in the form of cash and/or stock. However, distribution of profits should preferably be in the form of cash dividend. Cash dividends should be at least 10% of total dividends. But if a cash dividend is less than $0.2, the Company may choose to appropriate stock dividends instead.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and when the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

The deficit compensation for 2017 and the appropriations of earnings for 2016 had been approved in the stockholders’ meeting on June 13, 2018 and June 14, 2017, respectively. The appropriation of earnings for 2016 was as follow:

Appropriation of Earnings Legal reserve $ 4,508

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d. Other Equity Items

1) Exchange differences on translating foreign operations

Balance at January 1 Effect of change in tax rate Recognized during the period Exchange differences on translating foreign operations Balance at September 30 2) Unrealized loss on available-for-sale financial assets Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at September 30, 2018 per IFRS 9 Balance at January 1, 2017 Recognized during the period Unrealized loss on available-for-sale financial assets Reclassification adjustment Disposal of available-for-sale financial assets Balance at September 30, 2017 3) Unrealized loss on financial assets at FVTOCI Balance at January 1 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1 per IFRS 9 Recognized during the period Unrealized loss - equity instruments Cumulative unrealized loss of equity instruments transferred to due to disposal Balance at September 30		For the Nine Months Ended September 30
	2018 2017 $ 33,232 $ 97,341 2,914 - (83,100 ) (73,069 ) $ (46,954 ) $ 24,272 For the Nine Months Ended September 30, 2018 $ (3,166) 3,166 $ - For the Nine Months Ended September 30, 2017 $ - 8,414 (9,627 ) $ (1,213 ) For the Nine Months Ended September 30, 2018 $ - (3,166 ) (3,166) (15,818) retained earnings 11,895 $ (7,089 )

29 -
4) Remeasurement of defined benefit plans

Balance at January 1 Effect of change in tax rate Balance at September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ 6,036 (218 ) $ 5,818	2017 $ 6,894 - $ 6,894

21. OPERATING REVENUE

For the three months ended September 30, 2018 and 2017 and for the nine months ended September 30, 2018 and 2017, operating revenues arose from contracts with customer by selling terminals products. Please refer to Note 32 the revenue information. The contract balances as of September 30, 2018, December 31, 2017 and September 30, 2017 were all notes receivable and accounts receivable.

22. CONSOLIDATED PROFIT (LOSS) BEFORE INCOME TAX

Consolidated profit (loss) before income tax was as follows:

a. Other income

Interest income Dividends Others Other gains and losses Foreign exchange gains (losses), net Loss on disposal of property, plant and equipment, net Gain on disposal of investments, net Others		For the Three Months Ended September 30 2018 2017 $ 2,149 $ 2,663 2,139 500 9,464 3,366 $ 13,752 $ 6,529 For the Three Months Ended September 30 2018 2017 $ 8,616 $ (7,146) (682) (3,361) - 10,678 (898 ) (1,439 ) $ 7,036 $ (1,268 )		For the Nine Months Ended September 30	For the Nine Months Ended September 30
				2018 2017 $ 7,088 $ 8,597 3,680 781 11,387 8,866 $ 22,155 $ 18,244 For the Nine Months Ended September 30
		2018 $ 8,616 (682) - (898 ) $ 7,036		2018 $ 18,489 (5,100) - (1,490 ) $ 11,899	2017 $ (14,853) (6,071) 12,826 (1,700 ) $ (9,798 )

b. Other gains and losses
30 -

c. Finance costs

For the Three Months Ended September 30 2018 2017 Interest expense of borrowings $ 14,412 $ 12,876 Less: Amounts included in the cost of qualifying assets 754 810 $ 13,658 $ 12,066 Information about capitalized interest was as follows: For the Three Months Ended September 30 2018 2017 Capitalized interest (classified under property, plant and equipment and prepayments for equipment) $ 754 $ 810 Capitalization rate (%) 1.65-5.16 1.71-4.68 d. Depreciation and amortization For the Three Months Ended September 30 2018 2017 Property, plant and equipment $ 64,129 $ 59,142 Prepayments for lease (including current/noncurrent portion) 590 573 Other assets 675 630 $ 65,394 $ 60,345		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 2017 $ 45,049 $ 39,367 2,300 2,869 $ 42,749 $ 36,498 For the Nine Months Ended September 30
		2018 2017 $ 2,300 $ 2,869 1.33-5.16 1.63-6.46 For the Nine Months Ended September 30
		2018 $ 193,931 1,848 1,991 $ 197,770	2017 $ 179,404 1,723 2,178 $ 183,305

Other assets were long-term prepayments for computer software, etc.

Analysis of depreciation by function Operating costs Operating expenses		For the Three Months Ended September 30 2018 2017 $ 55,085 $ 49,756 9,044 9,386 $ 64,129 $ 59,142		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ 55,085 9,044 $ 64,129		2018 $ 166,759 27,172 $ 193,931	2017 $ 150,070 29,334 $ 179,404

(Continued)

31 -

Analysis of amortization by function Operating costs Operating expenses e. Employee benefits expense Short-term employee benefits Post-employment benefits Defined contribution plans Defined benefit plans (Note 19) Analysis of employee benefits expense by function Operating costs Operating expenses		For the Three Months Ended September 30 2018 2017 $ 46 $ 63 1,219 1,140 $ 1,265 $ 1,203 For the Three Months Ended September 30 2018 2017 $ 139,076 $ 147,203 7,521 8,734 303 371 7,824 9,105 $ 146,900 $ 156,308 $ 106,270 $ 120,349 40,630 35,959 $ 146,900 $ 156,308		For the Nine Months Ended September 30	For the Nine Months Ended September 30
				2018 2017 $ 186 $ 222 3,653 3,679 $ 3,839 $ 3,901 (Concluded) For the Nine Months Ended September 30
		2018 $ 139,076 7,521 303 7,824 $ 146,900 $ 106,270 40,630 $ 146,900		2018 $ 422,827 23,986 910 24,896 $ 447,723 $ 331,813 115,910 $ 447,723	2017 $ 414,619 25,354 1,113 26,467 $ 441,086 $ 334,477 106,609 $ 441,086

f. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation and remuneration of directors and supervisions at rates of no less than 3% and $2,100 thousand, respectively, of net profit before income tax, employees’ compensation and remuneration of directors and supervisors. For the nine months ended September 30, 2018 and 2017, the Company had incurred net loss, hence, no employees’ compensation and remuneration of directors and supervisors were accrued for the period.

If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

The appropriations of employees’ compensation and remuneration of directors and supervisors for 2017 and 2016 resolved by the board of directors on March 23, 2018 and March 23, 2017, respectively, were as below:

32 -

Employees’ compensations Remuneration of directors and supervisors	For the Year Ended December 31
	Cash
	2017 2016 $ 439 $ 1,404 2,100 2,100

There was no difference between the actual amounts of employees’ compensation and remuneration of directors and supervisors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Company’s board of directors in 2018 and 2017 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

23. INCOME TAX

a. Income tax recognized in profit or loss

The major components of income tax expense (benefit) were as follows:

Current tax In respect of the current period Income tax on unappropriated earnings Adjustments for prior periods Deferred tax In respect of the current period Effect of change in tax rate Income tax expense (benefit) recognized in profit or loss		For the Three Months Ended September 30 2018 2017 $ (2,355) $ 2,840 - - - - (2,355 ) 2,840 (11,167) (1,748) - - (11,167 ) (1,748 ) $ (13,522 ) $ 1,092		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ (2,355) - - (2,355 ) (11,167) - (11,167 ) $ (13,522 )		2018 $ 106 - 1,201 1,307 (6,933) (12,418 ) (19,351 ) $ (18,044 )	2017 $ 2,954 3,841 730 7,525 (4,909) - (4,909 ) $ 2,616

The Income Tax Act in the ROC was amended in 2018 and the corporate income tax rate was adjusted from 17% to 20% effective in 2018. The effect of the change in tax rate on deferred tax income to be recognized in profit or loss is recognized in full in the period which the change in tax rate occurs. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%.

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b. Income tax recognized in other comprehensive income (loss)

Deferred tax Effect of change in tax rate In respect of the current period Translations of foreign operations Unrealized loss on available-for-sale financial assets Unrealized loss on financial assets at FVTOCI		For the Three Months Ended September 30 2018 2017 $ - $ - 749 268 - (37) 1,493 - $ 2,242 $ 231		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ - 749 - 1,493 $ 2,242		2018 $ 2,696 (82) - 3,132 $ 5,746	2017 $ - 3,715 271 - $ 3,986

c. Income tax assessments

The tax returns of the Company as of 2016 have been assessed by the tax authorities.

GEM (Dongguan) and GEM (Suzhou) and GEM (VN) had completed the filing of their income tax returns through 2017 with the tax authorities.

24. EARNING (NET LOSS) PER SHARE (EPS)

There is no diluted effect for the nine months ended September 30, 2018 and 2017 for net loss incurred in the reporting period.

The net profit (loss) and weighted average number of ordinary shares outstanding in the computation of EPS were as follows:

Net profit (loss) for the periods attributable to owners of the Company

Net profit (loss) used in the computation of basic/diluted EPS		For the Three Months Ended September 30 2018 2017 $ (39,777 ) $ 69		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ (39,777 )		2018 $ (83,091 )	2017 $ (32,249 )

Weighted average number of ordinary shares outstanding (in thousand shares)

Weighted average number of ordinary shares in computation of basic/diluted EPS	For the Three Months Ended September 30 2018 2017 169,200 169,200	For the Nine Months Ended September 30
		2018 2017 169,200 169,200

34 -

25. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns through the optimization of the debt and equity balance. The capital structure of the Group consists of net debt and equity of the Group. The Group is not subject to any externally imposed capital requirements, except to maintain certain financial ratios specified under loan agreements. (Refer to Note 18)

Key management personnel of the Group review the capital structure on a quarterly basis. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of liabilities paid and current assets management to balance its entire capital structure.

26. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments not measured at fair value

The Group’s management considers that the carrying amounts of financial assets and financial liabilities which are not measured at fair value approximate their fair values.

b. Fair value of financial instruments measured at fair value on a recurring basis

September 30, 2018

Financialassets atFVTPL Derivative instruments Copper futures Financialassets atFVTOCI Investments in equity instruments Domestic listed shares Overseas listed shares December 31, 2017 Available-for-sale financialassets Investments in equity instruments Domestic listed shares Overseas listed shares	Level 1 $ 18 $ 34,044 97,751 $ 131,795 Level 1 $ 29,730 83,437 $ 113,167	Level 2 $ - $ - - $ - Level 2 $ - - $ -	Level 3 $ - $ - - $ - Level 3 $ - - $ -	Total $ 18 $ 34,044 97,751 $ 131,795 Total $ 29,730 83,437 $ 113,167

35 -

September 30, 2017 Available-for-sale financial assets Investments in equity instruments Domestic listed shares Overseas listed shares Financial liabilities atFVTPL Derivative instruments Copper futures	Level 1 $ 19,339 60,135 $ 79,474 $ 9	Level 2 $ - - $ - $ -	Level 3 $ - - $ - $ -	Total $ 19,339 60,135 $ 79,474 $ 9

There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2018 and 2017.

c. Categories of financial instruments

	September	30,	December	31,	September	30,
	2018		2017		2017
Financialassets
Loans and receivables (Note 1)	$	-	$ 3,071,376		$ 2,846,862
Available-for-sale financial assets		-	113,167		79,474
Measured at amortized cost (Note 1)	2,695,079			-		-
Financial assets at FVTPL
Mandatorily at FVTPL		18		-		-
Financial assets at FVTOCI
Equity instruments	131,795			-		-
Financial liabilities
Financial liabilities at FVTPL
Held for trading		-		-		9
Measured at amortized cost (Note 2)	3,052,320		3,633,583		3,393,323

Note 1: The balances included in loans and receivables measured at amortized cost, comprise cash and cash equivalents, notes receivable, accounts receivable, net, other receivables and other financial assets.
Note 2: The balances included in financial liabilities measured at amortized cost, comprise short-term borrowings, short-term bills payable, notes payable, accounts payable, other payables, and long-term borrowings (including current portion).
36 -

d. Financial risk management objectives and policies

The Group’s major financial instruments include equity investments, notes receivable, accounts receivable, other financial assets, borrowings, short - term bills payable, notes payable and accounts payable. The Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

The Corporate Treasury function reports monthly to the Group's risk management committee.

1) Market risk

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

a) Foreign currency risk

The Group had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts (including the denominated monetary items in consolidated financial statements which were eliminated) of the Group’s foreign currency denominated monetary assets and monetary liabilities exposing to foreign currency risk at the end of the reporting period are set out in Note 30.

Sensitivity analysis

The Group was mainly exposed to the risks from the fluctuation of USD and HKD.

The following table details the sensitivity to a 1% increase and decrease in the functional currency rate against the relevant foreign currencies of the Group’s outstanding foreign currency denominated monetary items at the end of the reporting period. A positive number below indicates an decrease in pre-tax loss associated with the functional currency.

Profit or loss	USD impact For the Nine Months Ended September 30 2018 2017 $ 2,019 $ 2,289	HKD impact
		For the Nine Months Ended September 30
		2018 2017 $ 1,960 $ 1,791

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings.

The carrying amounts of the Group's financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

37 -

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2018		2017		2017
Fair value interest rate risk
Financial assets	$	564,948	$	763,742	$	799,368
Financial liabilities		896,153		1,540,597		1,389,443
Cash flow interest rate risk
Financial assets		863,269		929,808		782,520
Financial liabilities		1,514,696		1,168,087		1,012,586

Sensitivity analysis

The sensitivity analysis below was based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate assets and liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole period.

If interest rates had been 1% higher/lower and all other variables were held constant, the Group’s pre-tax loss for the nine months ended September 30, 2018 and 2017 would have been higher/lower by $4,886 thousand and $1,725 thousand, respectively, which was mainly a result of the changes in floating rate bank deposits and borrowings.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. At the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to the counterparties’ failure to discharge an obligation and because of financial guarantees provided by the Group is the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

The Group adopted a policy of only dealing with creditworthy counterparties, and continuously monitoring the credit exposure and credit rating of the counterparties besides, controlling the credit exposure through the credit line limit of counterparties.

The Group’s receivables are significantly concentrated in certain individuals, most of which have similar business operations and economic features. Credit risk concentration occurs when the counterparties to financial instrument transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Accounts receivable from customers with significant carrying amounts are disclosed in Note 10.

3) Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the Group’s funding and liquidity management requirements.

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and loan commitments, and continuously monitoring forecast and actual cash flows as well as matching the maturity profiles of financial assets and liabilities.

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a) Liquidity risk tables for non-derivative financial liabilities

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment date.

The maturity dates for non-derivative financial liabilities based on the agreed repayment dates were as follows:

On Demand or Less than 1 Month September 30, 2018 Fixed interest rate liabilities $ 148,921 Variable interest rate liabilities 71,797 Non-interest bearing 340,709 $ 561,427 December31,2017 Fixed interest rate liabilities $ 346,945 Variable interest rate liabilities 37,255 Non-interest bearing 556,375 $ 940,575 September 30, 2017 Fixed interest rate liabilities $ 62,798 Variable interest rate liabilities 2,269 Non-interest bearing 496,686 $ 561,753	1-3 Months $ 160,444 121,090 228,628 $ 510,162 $ 269,475 56,989 303,099 $ 629,563 $ 303,057 75,479 402,260 $ 780,796	3 Months to 1 Year $ 346,843 635,266 70,399 $ 1,052,508 $ 575,877 403,491 63,314 $ 1,042,682 $ 603,529 286,678 90,400 $ 980,607	1-5 Years $ 252,630 718,681 -
			$ 971,311
			$ 375,316 699,845 -
			$ 1,075,161
			$ 447,166 675,282 -
			$ 1,122,448

Taking into account the Group's financial position, management does not believe that it is probable that the banks will exercise their discretionary rights to demand immediate repayment. Management believes that such bank loans will be repaid in one year after the end of reporting period in compliance with the scheduled repayment dates set out in the loan agreements.

The amounts included above for variable interest rate non-derivative financial liabilities were subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

39 -
b) Liquidity risk tables for derivative financial instruments

The following table details the Group’s liquidity analysis of its derivative financial instruments. The table is based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis.

	On Demand or	On Demand or
	Less	than			3 Months to
	1 Month		1-3	Months	1	Year	1-5	Years
September 30, 2018
Net settled
Copper Futures	$	-	$	18	$	-	$	-
September30,2017
Net settled
Copper Futures	$	-	$	(9 )	$	-	$	-

27. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Group have been eliminated on consolidation and are not disclosed in this note. Besides information disclosed elsewhere in the other notes, details of transactions between the Group and other related parties are disclosed below.

a. Related party name and its relationship with the Group

Related Party Name Su, Chung-Hong Su, Tun-Li Su, Tun-Jen Su, Tun-Yi	Relationship with the Group
	Related party in substance Related party in substance Related party in substance Related party in substance

b. Compensation of key management personnel

Short-term employee benefits Post-employment benefits		For the Three Months Ended September 30 2018 2017 $ 2,951 $ 2,238 53 68 $ 3,004 $ 2,306		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2018 $ 2,951 53 $ 3,004		2018 $ 7,254 158 $ 7,412	2017 $ 6,433 204 $ 6,637

The remuneration of directors and other members of key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends.

c. Property lease

The Company leased its Taipei office, factories and storehouse from related party in substance, Su, Tun-Jen, Su, Tun-Li, and Su, Tun-Yi, under one-year operating lease contracts. The rentals for the three months ended September 30, 2018 and 2017 were both $414 thousand; for the nine months ended

40 -

September 30, 2018 and 2017 were both $1,243 thousand, and were recorded as operating expenses and manufacturing cost.

The rental terms were determined by negotiation. The rental rates were similar to the local market rate and the payment terms were at arm’s length.

d. Guarantees

The Group’s related party in substance jointly provided the guarantee for the loans of the Group, the information were as follows:

	Guarantee	Guarantor
The Company		Su, Tun - Li and Su, Chung - Hong
Genius (HK)		Su, Chung - Hong
GEM (VN)		Su, Tun - Li

28. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The Group provided the following assets as collateral for the borrowings:

	September 30,	December 31,	September 30,
	2018	2017	2017
Property, plant and equipment	$ 522,278	$ 326,890	$ 334,375
Deposit account (under other financial assets-
current)	6,286	23,459	29,370
Prepayments for lease (including current portion)	23,477	18,318	18,330
	$ 552,041	$ 368,667	$ 382,075

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

As of September 30, 2018, significant contingent liabilities and unrecognized commitments of the Group were as follows:

a. The amounts of contracts for the Group’s purchases of properties and materials were $114,481 thousand, of which $12,832 thousand had been paid.
b. Unused letters of credit for purchases of raw materials amounted to $3,226 thousand.

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the Group’s entities and the exchange rates between foreign currencies and respective functional currencies were disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

41 -

		Foreign			Carrying	Carrying
	Currencies					Amount
	(In	Thousands)	Exchange Rate		(In	Thousands)
September30,2018
Financial assets
Monetary items
USD	$	10,405	30.535	(USD:NTD)	$	317,727
USD		8,438	6.880	(USD:RMB)		257,659
USD		11,865	7.820	(USD:HKD)		362,307
USD		2,548	23,291	(USD:VND)		77,803
HKD		3,388	3.905	(HKD:NTD)		13,231
HKD		68,984	0.880	(HKD:RMB)		269,381
HKD		928	0.128	(HKD:USD)		3,625
					$	1,301,733
Financial liabilities
Monetary items
USD		291	30.535	(USD:NTD)	$	8,885
USD		2,575	6.880	(USD:RMB)		78,629
USD		4,723	7.820	(USD:HKD)		144,231
USD		19,056	23,291	(USD:VND)		581,860
HKD		23,120	3.905	(HKD:NTD)		90,285
					$	903,890
December31,2017
Financial assets
Monetary items
USD		8,068	29.8	(USD:NTD)	$	240,433
USD		7,604	6.518	(USD:RMB)		226,620
USD		15,669	7.811	(USD:HKD)		466,937
USD		2,835	22,713	(USD:VND)		84,480
HKD		7,350	3.815	(HKD:NTD)		28,041
HKD		62,060	0.834	(HKD:RMB)		236,760
HKD		950	0.128	(HKD:USD)		3,622
					$	1,286,893
Financial liabilities
Monetary items
USD		1,032	29.8	(USD:NTD)	$	30,750
USD		4,809	6.518	(USD:RMB)		143,303
USD		6,237	7.811	(USD:HKD)		185,863
USD		15,351	22,713	(USD:VND)		457,467
HKD		16,550	3.815	(HKD:NTD)		63,137
HKD		154	0.834	(HKD:RMB)		588
					$	881,108

(Continued)

42 -

		Foreign			Carrying	Carrying
	Currencies					Amount
	(In	Thousands)	Exchange Rate		(In	Thousands)
September30,2017
Financial assets
Monetary items
USD	$	7,080	30.26	(USD:NTD)	$	214,227
USD		6,843	6.648	(USD:RMB)		207,084
USD		12,431	7.807	(USD:HKD)		376,151
USD		2,125	22,718	(USD:VND)		64,315
HKD		7,829	3.876	(HKD:NTD)		30,346
HKD		56,502	0.851	(HKD:RMB)		219,000
HKD		948	0.128	(HKD:USD)		3,675
					$	1,114,798
Financial liabilities
Monetary items
USD		505	30.26	(USD:NTD)	$	15,278
USD		2,931	6.648	(USD:RMB)		88,690
USD		5,817	7.807	(USD:HKD)		176,012
USD		11,661	22,718	(USD:VND)		352,874
HKD		18,743	3.876	(HKD:NTD)		72,650
HKD		337	0.851	(HKD:RMB)		1,308
					$	706,812
					(Concluded)

For the three months ended September 30, 2018 and 2017, and for the nine months ended September 30, 2018 and 2017, realized and unrealized foreign exchange gains (losses) were net gains $8,616 thousand, net losses $7,146 thousand, net gains $18,489 thousand and net losses $14,853 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the Group’s entities.

31. ADDITIONAL DISCLOSURES

a. Information about significant transactions and investees:
1) Financing provided to others: Table 1 (attached).
2) Endorsement/guarantee provided: None.
3) Marketable securities held: Table 2 (attached).
4) Marketable securities acquired and disposed at cost or price at least NT$300 million or 20% of the paid-in capital: None.
5) Acquisition of individual real estate at cost of at least NT$300 million or 20% of the paid-in capital: None.
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.
43 -
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached).
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 4 (attached).
9) Trading in derivative instruments: Note 7. For the nine months ended September 30, 2018, net losses of futures contracts were $236 thousands. The transaction amount was not significant.

10) Inter - Company business relationship and material transactions and its amount: Table 8 (attached).

11) Information on investees: Table 5 (attached).

b. Information on investments in Mainland China

Information on any investee company in Mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the Mainland China areas: Table 6 (attached).

Any of the following significant transactions with investee companies in Mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses:

1) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: Table 7 (attached).
2) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 3 and Table 7 (attached).
3) The amount of property transactions and the amount of the resultant gains or losses: Table 7 (attached).
4) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.
5) The highest balance, the end of period balance, the interest rates range, and total current period interest with respect to financing of funds: Table 1 (attached).
6) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services: Table 7 and Table 8 (attached).

32. SEGMENT INFORMATION

Information reported to the Group’s chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on type of goods or services delivered or provided.

Each entity of the Group is considered separate operating segment by the chief operating decision maker (CODM). For financial statements presentation purposes, these individual operating segments have been aggregated into a single operating segment taking into account the following factors:

44 -
a. these operating segments have similar production and sales processes;
b. these operating segments have similar main businesses and products; and
c. the finance and business of these operating segments as to the consolidated financial statements are not material.

The Group’s reportable segments were as follows:

․ The Company
․ GEM (Dongguan) and Genius (HK) consolidated information
․ GEM (Suzhou) and Global (HK) consolidated information
․ Others

Segment revenues and results

The following was an analysis of the Group’s revenue, results from operations, segment assets and liabilities by reportable segment:

The Company GEM (Dongguan)& Genius (HK) For the Nine months ended September 30,2018 Revenue from external customers $ 405,893 $ 1,213,060 Inter - segment revenues 83,471 403,923 Segment revenues $ 489,364 $ 1,616,983 Segment income (loss) $ (33,928 ) $ (37,990 ) Other income Other gains and losses Finance cost Consolidated loss before income tax Income tax Consolidated net loss September 30,2018 Segment assets $ 4,503,782 $ 1,467,898 Segment liabilities $ 1,954,311 $ 501,945 For the Nine months ended September 30,2017 Revenue from external customers $ 372,644 $ 1,104,648 Inter - segment revenues 111,595 310,842 Segment revenues $ 484,239 $ 1,415,490 Segment income (loss) $ (4,987 ) $ (34,184 ) Other income Other gains and losses Finance cost Consolidated loss before income tax Income tax Consolidated net loss	GEM (Suzhou)& Global (HK) $ 1,353,628 1,144,823 $ 2,498,451 $ 7,711 $ 2,808,136 $ 818,395 $ 1,279,849 1,187,571 $ 2,467,420 $ 11,466	Others $ 204 349,806 $ 350,010 ( $ 42,607 ) $ 1,048,566 $ 675,529 $ 394 262,767 $ 263,161 $ 11,212	Adjustment and Elimination Consolidated Amount $ - $ 2,972,785 (1,982,023 ) - $ (1,982,023 ) $ 2,972,785 $ 14,374 $ (92,440 ) 22,155 11,899 (42,749 ) (101,135 ) 18,044 $ (83,091 ) $ (4,081,486 ) $ 5,746,896 $ (752,755 ) $ 3,197,425 $ - $ 2,757,535 (1,872,775 ) - $ (1,872,775 ) $ 2,757,535 $ 14,912 $ (1,581 ) 18,244 (9,798 ) (36,498 ) (29,633 ) (2,616 ) $ (32,249 )

(Continued)

45 -

The Company GEM (Dongguan)& Genius (HK) September 30,2017 Segment assets $ 4,682,366 $ 1,698,196 Segment liabilities $ 1,991,120 $ 700,370	GEM (Suzhou)& Global (HK) $ 3,244,131 $ 1,208,921	Others $ 893,380 $ 452,320	Adjustment and Elimination Consolidated Amount $ (4,279,177 ) $ 6,238,896 $ (805,081 ) $ 3,547,650 (Concluded)

46 -

TABLE 1

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 (In Thousands of New Taiwan Dollars)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period	Ending Balance (Note 2)	Actual Borrowing Amount (Notes 2and 3)	Interest Rate	Nature of Financing	Business Transaction Amounts	Reason for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limits	Note
													Item	Value
0 0 1 1 2	The Company The Company Vibo Vibo Global (Cayman)	GEM (VN) GEM (Suzhou) GEM (Dongguan) GEM (Suzhou) Global (HK)	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes	$ 245,720 146,050 60,320 30,715 23,970	$ 183,210 91,605 30,535 30,535 12,214	$ 167,943 - - 30,535 12,214	2.1-2.8 2.1-2.8 2.0-2.8 2.8 2.0-2.8	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	$ - - - - -	Business development Business development Business development Business development Business development	$ - - - - -	- - - - -	$ - - - - -	$ 509,894 509,894 575,258 575,258 579,884	$ 1,019,788 1,019,788 1,150,516 1,150,516 1,159,768	Note 1 Note 1 Note 1 Note 1 Note 1

Note 1: Under the Company’s and the subsidiaries’ “Operational Procedures for Loaning Funds to Others,” if short-term financing is needed, total amounts of these financings should not exceed 40% of the Company’s and the subsidiaries’ stockholders’ equity, and individual financing should not exceed 20% of the Company’s and the subsidiaries’ stockholders’ equity.

Note 2: The exchange rate on September 28, 2018 was US$1 : NT$30.535.

Note 3: It was eliminated on consolidation.

47 -

TABLE 2

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD SEPTEMBER 30, 2018

(In Thousands of New Taiwan Dollars)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			September 30, 2018	September 30, 2018	September 30, 2018	September 30, 2018	Note
				Shares		Carrying Amount	Percentage of Ownership	Fair Value
The Company GEM (Suzhou)	Stock ESON Precision Engineering Co., Ltd. Tai Tung Communication Co., Ltd. Innolux Corporation Microdectronics Technology Inc. Asia Pacific Telecom Co., Ltd. Shin Kong Financial Holding Stock Yantai Changya Pioneer Wine Co., Ltd. Jiugui Liquor Co., Ltd. China Minsheng Banking Corp., Ltd. Ningbo Boway Alloy Material Huarun Dong’s Ejiao Co., Ltd. Tsingtao Brewery Co., Ltd. Luzhoulaojiao Group Co., Ltd.	- - - - - - - - - - - - -	Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current	139,000 429,000 615,000 309,000 910,000 200,000 46,627 83,000 330,000 513,400 106,000 81,000 106,000		$ 4,253 8,130 6,519 6,427 6,325 2,390 30,444 7,578 7,485 9,285 16,223 22,331 12,499 22,350 97,751 $ 131,795	- - - - - - - - - - - - -		$ 4,253 8,130 6,519 6,427 6,325 2,390 30,444 7,578 7,485 9,285 16,223 22,331 12,499 22,350 97,751 $ 131,795

48 -

TABLE 3

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(In Thousands of New Taiwan Dollars)

Buyer	Related Party	Relationship	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchases/Sales	Amount	% to Total	Payment Terms	Unit Price	Payment Term	Ending Balance	% to Total
GEM (Dongguan) GEM (VN) GEM (Suzhou) Genius (HK) Global (HK)	Genius (HK) Global (HK) Genius (HK) GEM (Dongguan) Global (HK) GEM (Dongguan) The Company GEM (VN) GEM (Suzhou) GEM (VN)	Affiliate Affiliate Affiliate Affiliate Affiliate Affiliate Parent Affiliate Affiliate Affiliate	Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales	$ 610,220 149,623 188,732 927,549 225,322 201,290 185,108 179,705 149,490 132,035	42 43 54 37 9 20 19 18 38 33	120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2	$ 229,422 8,911 13,638 187,839 68,120 20,415 73,250 40,244 16,956 41,735	41 36 56 23 8 6 23 13 17 43	Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3

Note 1: The sales price of finished goods is not significantly different from those to third parties, except for the stated sales price of finished goods, other types of sales price have no comparable transactions with those in the market.

Note 2: The sales payment terms of intercompany sales are not significantly different from those to third parties.

Note 3: It was eliminated on consolidation.

49 -

TABLE 4

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL SEPTEMBER 30, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance (Notes1 and 3)	Turnover Rate (Note 2)	Amount	Amount	Overdue Actions Taken	Amounts Received in Subsequent Period	Allowance Impairment	for Loss
GEM (Suzhou)	GEM (Dongguan)	Affiliate	$ 189,826	4.44	$	-	-	$ 178,103	$	-
GEM (Dongguan)	Genius (HK)	Affiliate	244,821	3.84		-	-	106,881		-
The Company	GEM (VN)	Subsidiary	184,389	2.43		-	-	5,625		-

Note 1: It included accounts receivable and other receivables

Note 2: The computation of Turnover Rate didn’t include other receivables.

Note 3: It was eliminated on consolidation.

50 -

TABLE 5

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of September 30,	As of September 30,	2018	Net Income (Loss) of the Investee	Share of profit (Loss)	Note
				September 30, 2018	December 31, 2017
						Shares/ Units	%	Carrying Amount
The Company Genius Global (Cayman) GEM (Cayman)	Global (Cayman) GEM (Cayman) Genius Genius (HK) Vibo Global (HK) GEM (VN)	Grand Cayman, Cayman Islands Grand Cayman, Cayman Islands British Virgin Islands Hong Kong Hong Kong Hong Kong Vietnam	International investment International investment International investment and trading, etc. International trading Trading and investment International trading Production of hardware; machine processing; electroplating for hardware processing; production and processing of molds and related accessories; plastic products and related plastic accessory production;	$ 1,295,208 392,669 23,282 90,134 1,541,063 3,747 386,780	$ 1,295,208 392,669 23,282 90,134 1,541,063 3,747 386,780	40,137,184 12,598,333 750,000 21,999,998 359,972,616 1,000,000 386,780	100 100 100 100 100 100 100	$ 2,787,020 281,023 80,044 81,599 2,876,292 7,750 284,543	$ (33,435 ) (55,493 ) (189 ) (364 ) (33,223 ) (395 ) (58,239 )	$ (30,765 ) (56,244 ) (189 ) (308 ) (33,223 ) (255 ) (55,316 )	Notes 1 and 2 Notes 1 and 2 Note 1 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2

Note 1: It was eliminated on consolidation.

Note 2: Net of unrealized profits.

51 -

TABLE 6

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 (In Thousands of New Taiwan Dollars)

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018	Remittance of Funds	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of September 30, 2018	Net Loss of the Investee	% of Ownership of Direct or Indirect Investment	Investment Loss (Notes 1 and 3)	Carrying Amount as of September 30, 2018 (Notes 1 and 3)	Accumulated Repatriation of Investment Income as of September 30, 2018
						Outward		Inward
GEM (Dongguan) GEM (Suzhou)	Production of hardware; machine processing; electroplating for metal processing; production and processing of molds and related accessories; plastic products and related plastic accessory production. Production of hardware; machine processing; electroplating for metal processing; production and processing of molds and related accessories; plastic products and related plastic accessory production.		$ 752,094 1,112,514	The investment was made through a corporation established in a third country to invest in companies located in Mainland China. The investment was made through a corporation established in a third country to invest in companies located in Mainland China.	$ 452,130 741,320	$	- -	$ - -	$ 452,130 741,320	$ (24,272) 8,534	100 100	$ (16,681) (2,485)	$ 838,841 1,963,390	$ - -
							Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA(Note 2) $1,529,683
Investor Company		Accumulated Outward Remittance for Investment in Mainland China as of September 30, 2018		Investment Amounts Authorized by Investment Commission, MOEA			Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA(Note 2)
The Company		$1,193,450		$1,731,335 (US$56,700 thousand)			$1,529,683

Note 1: Amount was recognized based on the reviewed financial statement.

Note 2: Under the “Principles Governing the Review of Investments or Technical Cooperation in Mainland China” issued by the Investment Commission on August 29, 2008, the maximum amount that can be invested in companies located in mainland China is 60% of the Company’s net value.

Note 3: It was eliminated on consolidation.

52 -

TABLE 7

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(In Thousands of New Taiwan Dollars)

Investee Company	Counterparty	Transaction Type	Price	Transaction Details	Transaction Details	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Unrealized (Gain) Loss
				Payment Term	Comparison with Normal Transaction	Ending Balance	%
The Company Genius (HK) Global (HK)	GEM (Suzhou) GEM (Dongguan) GEM (Dongguan) GEM (Suzhou)	Sales Purchase Disposal of property, plant, and equipment Sales Sales Purchase Sales Purchase	$ 38,514 26,414 34,098 2,144 201,290 610,220 149,490 225,322	120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing	No significant difference with those to third parties No significant difference with those to third parties No comparable transactions with those in the market No significant difference with those to third parties No significant difference with those to third parties No comparable transactions with those in the market No significant difference with those to third parties No comparable transactions with those in the market	$ 2,521 (23) 288 - 20,415 (229,422) 16,956 (68,120)	1 - - - 6 81 17 80	$ 4,160 - 13,540 - (1,448) (427) (1,467) 1,813

53 -

TABLE 8

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INTERCOMPANY BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 (In Thousands of New Taiwan Dollars)

No.	Investee Company	Counterparty	Nature of Relationship (Note 2)	Intercompany Transactions	Intercompany Transactions	Intercompany Transactions	Intercompany Transactions
				Financial Statement Item	Amount (Note 1)	Terms	Percentage of Consolidated Total Gross Sales or Total Assets
0	The Company	Genius (HK) Genius (HK) GEM (Suzhou) GEM (Suzhou) GEM (Suzhou) GEM (Suzhou) GEM (VN) GEM (VN) GEM (VN) GEM (VN) GEM (VN) GEM (Dongguan)	1 1 1 1 1 1 1 1 1 1 1 1	Sales Disposal of property, plant and equipment Other receivables Sales Accounts receivable Disposal of property, plant and equipment Sales Accounts receivable Disposal of property, plant and equipment Interest income Other receivables Sales	$ 3,229 6,897 288 38,514 2,521 34,098 39,584 15,049 11,596 2,293 169,340 2,144	Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Annual Interest rates are 2.1%-2.8% According to working, capital conditions to change payment deeding Payment terms are 4 months	- - - 1 - 1 1 - - - 3 -
1	GEM (Dongguan)	Genius (HK) Genius (HK) Genius (HK) Genius (HK) GEM (Suzhou) GEM (Suzhou) GEM (Suzhou) GEM (Suzhou) GEM (Suzhou)	3 3 3 3 3 3 3 3 3	Sales Accounts receivable Disposal of property, plant and equipment Other receivables Sales Accounts receivable Disposal of property, plant and equipment Other receivables Other income	610,220 229,422 13,459 15,399 39,110 6,323 7,283 976 657	Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months	21 4 - - 1 - - - -
2	Genius (HK)	The Company The Company The Company GEM (Dongguan) GEM (Dongguan) GEM (Dongguan) GEM (VN) GEM (VN)	2 2 2 3 3 3 3 3	Sales Accounts receivable Other receivables Sales Accounts receivable Other receivables Sales Accounts receivable	185,108 73,250 17,035 201,290 20,415 400 179,705 40,244	Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months	6 - - 7 - - 6 1
3	Global (HK)	The Company The Company GEM (Suzhou) GEM (Suzhou) GEM (VN) GEM (VN)	2 2 3 3 3 3	Sales Accounts receivable Sales Accounts receivable Sales Accounts receivable	58,825 6,960 149,490 16,956 132,035 41,735	Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months	2 - 5 - 4 1

(Continued)

54 -

No.	Investee Company	Counterparty	Nature of Relationship (Note 2)		Intercompany Transactions	Intercompany Transactions
				Financial Statement Item	Amount (Note 1)	Terms	Percentage of Consolidated Total Gross Sales or Total Assets
4	GEM (Suzhou)	The Company The Company Global (HK) Global (HK) Global (HK) Global (HK) Global (HK) GEM (Dongguan) GEM (Dongguan) GEM (Dongguan) GEM (Dongguan)	2 2 3 3 3 3 3 3 3 3 3	Sales Accounts receivable Sales Accounts receivable Disposal of property, plant and equipment Other receivables Other income Sales Accounts receivable Other receivables Disposal of property, plant and equipment	26,414 23 225,322 68,120 18,616 7,584 96 927,549 187,839 1,987 1,738	Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months	1 - 8 1 1 - - 31 3 - -
5	Vibo	GEM (Dongguan) GEM (Suzhou) GEM (Suzhou)	1 1 1	Interest income Interest income Other receivables	369 99 30,633	Annual Interest rate is 2.0%- 2.8% Annual Interest rate is 2.8% According to working, capital conditions to change payment deeding	- - 1
6	Global (Cayman)	Global (HK) Global (HK)	1 1	Other receivables Interest income	12,395 229	According to working, capital conditions to change payment deeding Annual Interest rates are 2.0% - 2.8%	- -
7	GEM (VN)	The Company The Company Genius (HK) Genius (HK) Global (HK) Global (HK)	2 2 3 3 3 3	Sales Accounts receivable Sales Accounts receivable Sales Accounts receivable	11,451 1,902 188,732 13,638 149,623 8,911	Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months Payment terms are 4 months	- - 6 - 5 -

(Concluded)

Note 1: It was eliminated on consolidation.

Note 2: 1) Parent to subsidiary

2) Subsidiary to parent
3) Subsidiary to subsidiary
55 -

AI assistant

GEM — Interim / Quarterly Report 2018

52099_rns_2018-12-20_6fead4e9-9c69-4f3c-b544-14db9de02885.pdf

GEM Terminal Ind. Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Introduction

Scope of Review

Conclusion

Notice to Readers

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Net Loss) Per Share) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Net Loss) Per Share) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERNATIONS

Classification, measurement and impairment of financial assets

Definition of a lease

The Group as lessee

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2018

2017

i) Available-for-sale financial assets

ii) Loans and receivables

ii Impairment of financial assets

iii Derecognition of financial assets

2018

2017

2018

Revenue from sale of goods

2017

Sale of goods

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Estimated impairment of financial assets

6. CASH AND CASH EQUIVALENTS

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - CURRENT

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - CURRENT

10. NOTES AND ACCOUNTS RECEIVABLE, NET

September 30, 2018

2017

11. INVENTORIES

12. OTHER FINANCIAL ASSETS

13. SUBSIDIARIES

14. PROPERTY, PLANT, AND EQUIPMENT

b. Estimated useful lives

15. PREPAYMENT FOR LEASE

16. NOTES PAYABLE AND ACCOUNTS PAYABLE

17. OTHER PAYABLES

18. BORROWINGS

b. Short-term bills payable

c. Long-term borrowings

19. RETIREMENT BENEFIT PLANS

20. EQUITY

b. Capital Surplus

c. Appropriation of Earnings and Dividend Policy

d. Other Equity Items

21. OPERATING REVENUE

22. CONSOLIDATED PROFIT (LOSS) BEFORE INCOME TAX

c. Finance costs

23. INCOME TAX

b. Income tax recognized in other comprehensive income (loss)

24. EARNING (NET LOSS) PER SHARE (EPS)

25. CAPITAL MANAGEMENT

26. FINANCIAL INSTRUMENTS

d. Financial risk management objectives and policies

1) Market risk

a) Foreign currency risk

Sensitivity analysis

b) Interest rate risk

2) Credit risk

GEM Interim / Quarterly Report 2018