Macronix - Interim / Quarterly Report 2017

Macronix International Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Nine Months Ended September 30, 2017 and 2016 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and the Shareholders Macronix International Co., Ltd.

We have reviewed the accompanying consolidated balance sheets of Macronix International Co., Ltd. (the Company) and its subsidiaries (the Group) as of September 30, 2017 and 2016 and the related consolidated statements of comprehensive income for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, as well as the consolidated statements of changes in equity and cash flows for the nine months ended September 30, 2017 and 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

Except that which is stated in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36 “Review Financial Statements” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

As disclosed in Note 13 to the accompanying consolidated financial statements, the financial statements of some insignificant subsidiaries included in the consolidated financial statements were not reviewed. As of September 30, 2017 and 2016, the combined total assets of these insignificant subsidiaries were respectively NT$3,382,436 thousand and NT$4,105,181 thousand, representing 8.18% and 11.61% of the corresponding consolidated total assets, and the combined total liabilities of these subsidiaries were respectively NT$279,780 thousand and NT$875,227 thousand, representing 1.42% and 4.92% of the corresponding consolidated total liabilities. For the three months ended September 30, 2017 and 2016, the combined comprehensive income of these subsidiaries respectively amounted to NT$272,695 thousand and NT$36,578 thousand, representing 12.06% and 4.46% of the corresponding consolidated total comprehensive income, and for the nine months ended September 2017 and 2016, the combined comprehensive income and loss of these subsidiaries respectively amounted to comprehensive income NT$486,885 thousand and comprehensive loss NT$146,318 thousand, representing 15.19% and 14.58% of the corresponding consolidated total comprehensive income and loss. As stated in Note 14 to the consolidated financial statements disclosed, we did not review the financial statements of investees accounted for by the equity-method as of and for the nine months ended September 30, 2017 and 2016. The carrying amounts of the related investments as of September 30, 2017 and 2016 were respectively NT$0 and NT$68 thousand; the share of comprehensive loss of such associates respectively were NT$0 and NT$3,820 thousand for the three months ended September 30, 2017 and 2016 and the share of comprehensive loss of these associates respectively were NT$0 and NT$12,198 thousand for the nine months ended September 30, 2017 and 2016. These amounts as well as the related financial information of the investee as disclosed in Note 39 to the accompanying consolidated financial statements were based on the subsidiaries’ and associates’ unreviewed financial statements for the same reporting periods as those of the Company.

Based on our reviews, except that which is discussed in the preceding paragraph, namely that the carrying amounts of the investments in subsidiaries and associates as well as the related disclosures of the investment information were based on unreviewed financial statements of the subsidiaries and associates, and except for the effects of any necessary adjustments as might have been made had we applied review procedures to the financial statements of the investees referred to in the preceding paragraph, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity 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 October 24, 2017

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 Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally applied in the Republic of China.

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 Republic of China. 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.

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 6 and 34) Financial assets at fair value through profit or loss - current (Notes 7 and 34) Notes receivable and trade receivables, net (Notes 11 and 34) Receivables from related parties, net (Notes 34 and 35) Other receivables (Notes 11, 34 and 35) Inventories (Note 12) Other current assets (Notes 17 and 19) Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Notes 8 and 34) Financial assets measured at cost - non-current (Notes 9 and 34) Debt investments with no active market - non-current (Notes 10 and 34) Investments accounted for using equity method (Note 14) Property, plant and equipment (Notes 15 and 36) Intangible assets (Note 16) Deferred tax assets (Notes 4 and 28) Other financial assets - non-current (Notes 18, 34 and 36) Other non-current assets (Notes 17 and 19) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 20 and 34) Financial liabilities at fair value through profit or loss - current (Notes 7 and 34) Notes payable and trade payables (Notes 21 and 34) Payables to related parties (Notes 34 and 35) Accrued employees' compensation and remuneration of directors (Notes 27 and 34) Payables for purchases of equipment (Note 34) Other payables (Notes 22 and 34) Other payables to related parties (Notes 34 and 35) Current tax liabilities (Notes 4 and 28) Provisions - current (Note 23) Current portion of long-term borrowings (Notes 20, 34 and 36) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 20, 34 and 36) Net defined benefit liabilities (Notes 4 and 24) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT (Note 25) Share capital Ordinary shares Share capital to be cancelled Total share capital Capital surplus Retained earnings Unappropriated earnings (accumulated deficit) Other equity Treasury shares Equity attributable to shareholders of the parent NON-CONTROLLING INTERESTS (Note 25) Total equity TOTAL		September 30, 2017 (Reviewed) Amount % $ 6,882,717 17 - - 4,177,782 10 2,120,721 5 171,145 - 9,388,935 23 171,653 - 22,912,953 55 1,603,436 4 91,181 - 27,306 - - - 15,490,334 38 50,197 - 996,677 3 168,762 - 19,695 - 18,447,588 45 $ 41,360,541 100 $ - - - - 2,733,235 7 3,737,959 9 602,626 1 302,883 1 1,202,551 3 4,930 - 5,138 - 242,123 1 8,233,416 20 104,825 - 17,169,686 42 962,641 2 1,518,375 4 5,383 - 2,486,399 6 19,656,085 48 18,050,281 44 (897) - 18,049,384 44 (225,848) (1) 2,942,231 7 1,096,979 3 (159,061) (1) 21,703,685 52 771 - 21,704,456 52 $ 41,360,541 100		December 31, 2016 (Audited) Amount % $ 6,368,339 18 - - 3,121,835 9 540,944 1 120,597 - 7,087,417 20 228,983 1 17,468,115 49 1,283,702 4 93,330 - - - - - 15,500,459 44 29,824 - 996,856 3 151,856 - 20,373 - 18,076,400 51 $ 35,544,515 100 $ 400,000 1 - - 2,592,144 7 1,139,684 3 - - 168,692 1 1,177,767 3 - - 2,831 - 225,659 1 4,280,876 12 65,737 - 10,053,390 28 5,635,544 16 1,533,287 4 2,894 - 7,171,725 20 17,225,115 48 36,153,535 102 (7,654) - 36,145,881 102 340,713 1 (18,651,070) (53) 641,251 2 (159,061) - 18,317,714 52 1,686 - 18,319,400 52 $ 35,544,515 100		September 30, 2016 (Reviewed)
						Amount % $ 5,393,227 15 2,180 - 3,149,328 9 1,418,574 4 146,817 - 6,760,777 19 236,004 1 17,106,907 48 1,210,098 3 92,369 - - - 68 - 15,819,833 45 57,727 - 911,404 3 153,646 1 20,841 - 18,265,986 52 $ 35,372,893 100 $ 1,046,453 3 482 - 2,074,368 6 594,845 1 - - 123,838 - 959,261 3 4,825 - 3,543 - 258,758 1 4,595,293 13 63,009 - 9,724,675 27 6,641,546 19 1,426,496 4 3,610 - 8,071,652 23 17,796,327 50 36,157,168 102 (3,633) - 36,153,535 102 76,370 - (19,250,022) (54) 753,049 2 (159,061) - 17,573,871 50 2,695 - 17,576,566 50 $ 35,372,893 100

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

(With Deloitte & Touche review report dated October 24, 2017)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

NET OPERATING REVENUE (Notes 26 and 35) OPERATING COSTS (Notes 12, 24, 27 and 35) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 24, 27 and 35) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses INCOME (LOSS) FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Notes 27 and 35) Other gains and losses (Note 27) Finance costs (Note 27) Share of loss of associates (Note 14) Total non-operating income and expenses INCOME (LOSS) BEFORE INCOME TAX FROM CONTINUING OPERATIONS INCOME TAX (EXPENSE) BENEFIT (Notes 4 and 28) NET INCOME (LOSS) FOR THE PERIOD OTHER COMPREHENSIVE INCOME (LOSS) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (Note 25) Unrealized gain on available-for-sale financial assets (Note 25) Share of the other comprehensive loss of associates accounted for using equity method (Note 25) Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD		For the Three Months	En	ded September 30		For the Nine Months	En	ded September 30
		2017		2016		2017		2016
		Amount % $ 10,467,282 100 6,445,720 62 4,021,562 38 - - 4,021,562 38 291,256 3 448,061 4 1,184,110 11 1,923,427 18 2,098,135 20 70,905 1 9,531 - (50,578 ) (1 ) - - 29,858 - 2,127,993 20 (4,954) - 2,123,039 20 2,780 - 134,889 2 - - 137,669 2 $ 2,260,708 22		Amount % $ 7,091,669 100 4,916,153 69 2,175,516 31 (8) - 2,175,508 31 274,132 4 300,538 4 925,012 13 1,499,682 21 675,826 10 64,432 1 (27,552 ) (1 ) (73,946 ) (1 ) (3,820) - (40,886) (1) 634,940 9 (2,208) - 632,732 9 (41,204 ) - 228,814 3 (18) - 187,592 3 $ 820,324 12		Amount % $ 23,640,244 100 15,587,608 66 8,052,636 34 - - 8,052,636 34 804,100 3 1,112,902 5 3,038,620 13 4,955,622 21 3,097,014 13 129,555 1 (108,055 ) - (164,406 ) (1 ) - - (142,906) - 2,954,108 13 (12,331) - 2,941,777 13 (60,121 ) - 323,790 1 - - 263,669 1 $ 3,205,446 14		Amount % $ 17,359,126 100 13,686,099 79 3,673,027 21 (22) - 3,673,005 21 774,129 4 953,157 6 2,921,382 17 4,648,668 27 (975,663) (6) 141,637 1 (3,462 ) - (239,934 ) (2 ) (12,198) - (113,957) (1) (1,089,620 ) (7 ) 140,861 1 (948,759) (6) (68,679 ) - 13,615 - (57) - (55,121) - $ (1,003,880) (6) (Continued)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

NET INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent Non-controlling interests EARNINGS (LOSS) PER SHARE (Note 29) Basic Diluted		For the Three Months	En	ded September 30		For the Nine Months	En	ded September 30
		2017		2016		2017		2016
		Amount % $ 2,123,322 20 (283) - $ 2,123,039 20 $ 2,260,993 22 (285) - $ 2,260,708 22 $ 1.20 $ 1.18		Amount % $ 633,288 9 (556) - $ 632,732 9 $ 820,942 12 (618) - $ 820,324 12 $ 0.36 $ 0.36		Amount % $ 2,942,231 12 (454) - $ 2,941,777 12 $ 3,205,907 14 (461) - $ 3,205,446 14 $ 1.67 $ 1.63		Amount % $ (945,749 ) (5 ) (3,010) - $ (948,759) (5) $ (1,000,677 ) (6 ) (3,203) - $ (1,003,880) (6) $ (0.54) $ (0.54)

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

(With Deloitte & Touche review report dated October 24, 2017)

(Concluded)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

Equity Attributable toShareholders of the Parent	Equity Attributable toShareholders of the Parent
Unappropriated ShareCapital Earnings Shares (Thousands) Ordinary Shares Share Capital to be Cancelled Capital Surplus (Accumulated Deficit) 3,617,849 $ 36,178,489 $ (6,898 ) $ 54,936 $ (18,304,273 ) - - - - (945,749 ) - - - - - - - - - (945,749) - - - 327 - (2,132 ) (21,321 ) 3,265 18,056 - - - - 3,051 - 3,615,717 $ 36,157,168 $ (3,633) $ 76,370 $ (19,250,022) 3,615,354 $ 36,153,535 $ (7,654 ) $ 340,713 $ (18,651,070 ) - - - - 2,942,231 - - - - - - - - - 2,942,231 (1,865,107 ) (18,651,070 ) - - 18,651,070 57,475 574,756 - (574,756 ) - - - - (12,335 ) - (2,694 ) (26,940 ) 6,757 20,183 - - - - 347 - 1,805,028 $ 18,050,281 $ (897) $ (225,848) $ 2,942,231	Other Equity	Employee Unearned Compensation Treasury Shares $ (263,407 ) $ (159,061 ) - - - - - - 151,093 - - - - - $ (112,314) $ (159,061) $ (306,958 ) $ (159,061 ) - - - - - - - - - - 192,052 - - - - - $ (114,906) $ (159,061)
	Exchange Differences on Unrealized Translating Gain from Foreign Operations Available-for-sale Financial Assets $ 48,923 $ 871,368 - - (68,543) 13,615 (68,543) 13,615 - - - - - - $ (19,620) $ 884,983 $ (8,565 ) $ 956,774 - - (60,114) 323,790 (60,114) 323,790 - - - - - - - - - - $ (68,679) $ 1,280,564

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

(With Deloitte & Touche review report dated October 24, 2017)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax Adjustments for: Depreciation expense Amortization expense Impairment loss recognized on trade receivables Finance costs Interest income Dividend income Compensation cost of employee restricted shares Share of loss of associates Gain on disposal of property, plant and equipment Gain on disposal of intangible assets Loss on disposal of investments Impairment loss on non-financial assets Unrealized gain on transactions with associates Net loss on foreign currency exchange Changes in operating assets and liabilities Financial assets held for trading Notes receivable and trade receivables Receivables from related parties Other receivables Inventories Other current assets Financial liabilities held for trading Notes payable and trade payables Payables to related parties Payables for employees' compensation and director's remuneration Other payables Other payables to related parties Provisions Other current liabilities Net defined benefit liabilities Cash generated from operations Interest received Dividend received Interest paid Income tax paid Net cash generated from operating activities	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2017 $ 2,954,108 1,458,096 21,533 - 164,406 (18,150) (86,724) 179,717 - (9,768) (8,333) 2,517 1,485 - 83,528 - (1,090,404) (1,600,850) (50,322) (2,301,518) 31,261 - 148,802 2,575,907 602,626 32,281 4,839 19,097 39,131 (14,912) 3,138,353 17,710 86,001 (166,824) (9,845) 3,065,395	2016 $ (1,089,620) 1,466,354 69,454 17,375 239,934 (14,565) (97,030) 151,420 12,198 (5,344) - - - 22 12,949 (2,180) (335,402) (1,020,095) (41,987) 2,573,507 (25,134) (235) 362,999 569,795 - (333,494) 5,957 84,786 (3,172) 6,261 2,604,753 15,178 97,030 (242,855) (40,982) 2,433,124 (Continued)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM INVESTING ACTIVITIES Payments for debt investments with no active market Disposal of subsidiaries Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Payments for intangible assets Disposal of intangible assets Decrease in other financial assets Decrease in other non-current assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Refund of guarantee deposits received Increase in other non-current liabilities Increase in non-controlling interests Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2017 $ (26,916) (3,892) (1,341,577) 19,340 (1,610) 1,153 (48,062) 13,000 6,234 678 (1,381,652) 971,597 (1,371,597) 5,115,006 (5,835,965) 3,455 (887) (99) 5,707 (1,112,783) (56,582) 514,378 6,368,339 $ 6,882,717	2016 $ - - (808,216) 5,791 (1,612) 256 (18,277) - 1,109 8,036 (812,913) 2,960,037 (3,429,949) 3,896,775 (5,217,398) 50 (100) 17 186 (1,790,382) (29,150) (199,321) 5,592,548 $ 5,393,227

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

(With Deloitte & Touche review report dated October 24, 2017)

(Concluded)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

Macronix International Co., Ltd. (the Company) was incorporated in the Republic of China (ROC) on December 9, 1989 and commenced business in December 1989. The Company operates principally as a designer, manufacturer and supplier of integrated circuits (ICs) and memory chips. The Company also performs design, research and development, consultation and trade of relevant products.

The Company’s shares have been listed on the Taiwan Stock Exchange (TWSE) since March 15, 1995.

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

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were reported to the Company’s board of directors and issued on October 24, 2017.

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

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 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:

1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Group is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 2 or Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment should be applied retrospectively from January 1, 2017.

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2) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards, including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments”, were amended in this annual improvement.

The amended IFRS 2 changes the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Group or another entity in the same group or the market price of the equity instruments of the Group or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Group as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Group, but also of other entities outside the Group. The share-based payment arrangements with market conditions, non-market conditions or non-vesting conditions are accounted for differently, and the aforementioned amendment should be applied to those share-based payments granted in 2017.

IFRS 3 was amended to clarify that contingent consideration should be measured at fair value, irrespective of whether the contingent consideration is a financial instrument within the scope of IFRS 9 or IAS 39. Changes in fair value should be recognized in profit or loss. The amendment should be applied prospectively to business combination with acquisition date on or after January 1, 2017.

The amended IFRS 8 requires the Group to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker. The judgements made in applying aggregation criteria should be disclosed retrospectively upon initial application of the amendment in 2017. (Refer to Note 40)

When the amended IFRS 13 becomes effective in 2017, the short-term receivables and payables with no stated interest rate should be measured at their invoice amounts without discounting, if the effect of not discounting is immaterial.

IAS 24 “Related Party Disclosures” was amended to clarify that a management entity providing key management personnel services to the Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

3) Annual Improvements to IFRSs: 2011-2013 Cycle

Several standards, including IFRS 3 and IFRS 13, were amended in this annual improvement.

The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.

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4) Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization”

The entity should use appropriate depreciation and amortization method to reflect the pattern in which the future economic benefits of the property, plant and equipment and intangible asset are expected to be consumed by the entity.

The amended IAS 16 “Property, Plant and Equipment” stipulates that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The amended standard does not provide any exception from this requirement.

The amended IAS 38 “Intangible Assets” clarifies there is a rebuttable presumption that an amortization method that is based on revenue that is generated by an activity that includes the use of an intangible asset is not appropriate. This presumption can be overcome only in the following limited circumstances:

a) In which the intangible asset is expressed as a measure of revenue (for example, the contract that specifies the entity’s use of the intangible asset will expire upon achievement of a revenue threshold); or
b) When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated.
5) Annual Improvements to IFRSs: 2012-2014 Cycle

Several standards including IFRS 5 “Non-current assets held for sale and discontinued operations”, IFRS 7, IAS 19 and IAS 34 were amended in this annual improvement. IFRS 5 was amended to clarify that reclassification between non-current assets (or disposal group) “held for sale” and non-current assets “held for distribution to owners” does not constitute a change to a plan of sale or distribution. Therefore, previous accounting treatment is not reversed. The amendment also explains that assets that no longer meet the criteria for “held for distribution to owners” and do not meet the criteria for “held for sale” should be treated in the same way as assets that cease to be classified as held for sale. The amendment should be applied prospectively to transactions that occur on or after January 1, 2017.

6) Amendments to IFRS 10, IFRS 12 and IAS 28 “'Investment Entities: Applying the Consolidation Exception”

The amendments clarified that when the Group (non-investment entity) applies the equity method to an associate or a joint venture that is an investment entity, the Group may retain the fair value measurements that the associate or joint venture used for its subsidiaries. Prior to the amendments, the associate or joint venture measures its interest in subsidiaries at fair value but the fair value is unwound, and instead, those subsidiaries are consolidated in the associate’s or joint venture’s result in order to be equity-accounted by the Group.

7) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

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The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Group has transaction. If the transaction or balance with a specific related party is 10% or more of the Group’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

When the amendments are applied retrospectively from January 1, 2017, the disclosures of related party transactions are enhanced. Refer to Note 35 for related disclosures.

b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2018

New IFRSs
Annual Improvements to IFRSs 2014-2016 Cycle

Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”

Amendments to IFRS 4“Applying IFRS 9 Financial Instruments with
IFRS 4 Insurance Contracts”

IFRS 9 “Financial Instruments”

Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”

IFRS 15 “Revenue from Contracts with Customers”

Amendments to IFRS 15 “Clarifications to IFRS15 Revenue from
Contracts with Customers”

Amendment to IAS 7 “Disclosure Initiative”

Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”

Amendments to IAS 40 “Transfers of investment property”

IFRIC 22 “Foreign Currency Transactions and Advance
Consideration” Effective Date
Announced by IASB (Note 1)

Note 2
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018

New IFRSs Annual Improvements to IFRSs 2014-2016 Cycle Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” Amendments to IFRS 4`“`Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” IFRS 9 “Financial Instruments” Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures” IFRS 15 “Revenue from Contracts with Customers” Amendments to IFRS 15 “Clarifications to IFRS15 Revenue from Contracts with Customers” Amendment to IAS 7 “Disclosure Initiative” Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of investment property” IFRIC 22 “Foreign Currency Transactions and Advance Consideration”	Effective Date Announced by IASB (Note 1)
	Note 2 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018

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 amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.
1) Annual Improvements to IFRSs 2014-2016 Cycle

Several standards, including IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures,” were amended in this annual improvement.

The amendment to IFRS 12 clarified that when an entity’s interest in a subsidiary, a joint venture or an associate is classified as held for sale or is included in a disposal group that is classified as held for sale, the entity is not required to disclose summarized financial information of that subsidiary, joint venture or associate in accordance with IFRS 12. The Group will apply the aforementioned amendments retrospectively.

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2) IFRS 9 “Financial Instruments” and related amendment

Recognition, measurement and impairment of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

Based on an analysis of the Group’s financial assets as at September 30, 2017, on the basis of the facts and circumstances that exist at that date, the Group has performed a preliminary assessment of the impact of IFRS 9 to the classification and measurement of financial assets as follows:

a) Listed shares, emerging market shares, and unlisted shares classified as available-for-sale will be designated as at fair value through other comprehensive income and the fair value gains or losses accumulated in other equity will be transferred directly to retained earnings instead of being reclassified to profit or loss on disposal. Besides, unlisted shares measured at cost will be measured at fair value instead;
b) Debt investments classified as debt investments with no active market and measured at amortized cost will be classified as measured at amortized cost under IFRS 9 because on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows.

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. The loss allowance is required for financial assets measured at amortized cost, investments in debt instruments measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss

13 -

allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

The Group has performed a preliminary assessment that the Group will apply the simplified approach to recognize lifetime expected credit losses for trade receivables, contract assets and lease receivables. In relation to the debt instrument investments and the financial guarantee contracts, the Group will assess whether there has been a significant increase in the credit risk to determine whether to recognize 12-month or lifetime expected credit losses. In general, the Group anticipates that the application of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses for financial assets.

The Group elects not to restate prior periods when applying the requirements for the recognition, measurement and impairment of financial assets under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application of IFRS 9. Furthermore, the Group will provide disclosures of the differences in amounts if the Group continues to apply the existing accounting treatments in 2018.

3) IFRS 15 “Revenue from Contracts with Customers” and related amendment

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations.

When applying IFRS 15, the Group recognizes revenue by applying the following steps:

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when the entity satisfies a performance obligation.

IFRS 15 and related amendment require that when another party is involved in providing goods or services to a customer, the Group is a principal if it controls the specified good or service before that good or service is transferred to a customer. Since a specified good or service is a distinct good or service, the Group determines whether it is a principal or an agent for each specified good or service.

The Group is a principal if it obtains control of any one of the following:

a) The good or another asset that it then transfers to the customer.
b) The right to a service to be performed by other party, which gives the Group the ability to direct that party to provide the service to the customer on its behalf.
c) The good or service from the other party that it then combines with the other goods or services in providing the specified good or service to the customer.
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Indicators to support the Group’s assessment of whether it controls a specified good or service include, but are not limited to, the following:

a) The Group is primarily responsible for fulfilling the promise to provide the specified good or service.
b) The Group has inventory risk before or after the specified good or service is transferred to the customer.
c) The Group has discretion in establishing the price of the specified good or service.

For the sale with a right of return, the Group will recognize a refund liability (other liability) and a right to recover a product (other asset) when recognizing revenue. Currently, return provisions are recognized when recognizing revenue.

The Group elects to retrospectively apply IFRS 15 to contracts that are not complete on January 1, 2018 and recognize the cumulative effect of the change in the retained earnings on January 1, 2018.

In addition, the Group will disclose the difference between the amount that results from applying IFRS 15 and the amount that results from applying current standards for 2018.

4) IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

IAS 21 stipulated that a foreign currency transaction shall be recorded on initial recognition in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. IFRIC 22 further explains that the date of the transaction is the date on which an entity recognizes a non-monetary asset or non-monetary liability from payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine the date of the transaction for each payment or receipt of advance consideration.

The Group will apply IFRIC 22 prospectively to all assets, expenses and income recognized on or after January 1, 2018, within the scope of the Interpretation.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, 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

New IFRSs Amendments to IFRS 9 “Prepayment Features with Negative Compensation” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 16 “Leases” IFRS 17 “Insurance Contracts” 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)
	January 1, 2019 To be determined by IASB January 1, 2019 January 1, 2021 January 1, 2019 January 1, 2019

New IFRSs
Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”

IFRS 16 “Leases”

IFRS 17 “Insurance Contracts”

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)

January 1, 2019
To be determined by IASB
January 1, 2019
January 1, 2021
January 1, 2019
January 1, 2019

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

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1) IFRS 16 “Leases”

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

Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor.

When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

2) IFRIC 23 “Uncertainty Over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Group should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Group concludes that it is probable that the taxation authority will accept an uncertain tax treatments, the Group should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Group should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Group has to reassess its judgments and estimates if facts and circumstances change.

On initial application, the Group shall apply IFRIC 23 either retrospectively to each prior reporting period presented, if this is possible without the use of hindsight, or retrospectively with the cumulative effect of the initial application of IFRIC 23 recognized at the date of initial application.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

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 annual financial statements.

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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.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on 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

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

d. Other important accounting policies

Except for the following the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2016. For the summary of other significant accounting policies, please refer to the consolidated financial statements for the year ended December 31, 2016.

1) 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.

2) 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 the tax rate that would be applicable to expected total annual earnings.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The same critical accounting judgments and key sources of estimates uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the consolidated financial statements for the year ended December 31, 2016.

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6. CASH AND CASH EQUIVALENTS

September 30,
2017
December 31,
2016
September 30,
2016
Cash on hand
$ 121
$ 256
$ 321
Checking accounts and demand deposits
5,671,480

3,986,055

3,383,175
Cash equivalents

Time deposits

1,211,116

2,382,028

2,009,731

$ 6,882,717
$ 6,368,339
$ 5,393,227
FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
September 30,
2017
December 31,
2016
September 30,
2016
Financial assets at FVTPL-current
Financial assets held for trading
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts
$ -
$ -
$ 2,180
Financial liabilities at FVTPL-current

Financial liabilities held for trading

Derivative financial liabilities (not under hedge
accounting)

Foreign exchange forward contracts
$ -

$ -

$ 482

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

					Contract Amount
			Currency	Maturity Date	(In Thousands)
September	30,	2016
Sell			JPY/NTD	2016.10	JPY2,400,000/NTD747,280

The Group entered into foreign exchange forward contracts to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities.

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8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

	September 30,	December 31,	December 31,	September 30,	September 30,
	2017		2016		2016
Non-current
Domestic investments
Listed shares	$ 1,031,215	$	909,258	$	909,204
Foreign investments
Listed shares	572,221		374,444		300,894
	$ 1,603,436	$	1,283,702	$	1,210,098
FINANCIAL ASSETS MEASURED AT COST
	September 30,	December 31,		September 30,
	2017		2016		2016
Non-current
Domestic unlisted ordinary shares	$ 58,500		$ 58,500	$	58,500
Overseas unlisted ordinary shares	32,681		34,830		33,869
	$ 91,181		$ 93,330	$	92,369
Classified according to financial asset
measurement categories
Available-for-sale financial assets	$ 91,181		$ 93,330	$	92,369

9. FINANCIAL ASSETS MEASURED AT COST

Management believed that the fair value of the above unlisted equity investments held by the Group could not be reliably measured because the range of reasonable fair value estimates was so significant. Therefore, the fair values were measured at cost less impairment at the end of the reporting period.

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET

	September 30,	December	December	31,	September	30,
	2017		2016		2016
Non-current
Time deposits with original maturity exceeding 1
year	$ 27,306	$		-	$	-

As of September 30, 2017, the interest rate of time deposits with original maturities exceeding 1 year was 2.73%.

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11. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
Notes receivable and trade receivables
Notes receivable	$	-	$	542	$	-
Trade receivables		4,195,242		3,138,753		3,166,703
Less: Allowance for impairment loss		(17,460)		(17,460)		(17,375)
	$	4,177,782	$	3,121,835	$	3,149,328
Other receivables
Tax receivable	$	126,765	$	112,369	$	133,799
Others		44,380		8,228		13,018
	$	171,145	$	120,597	$	146,817

a. Notes receivable and trade receivables

The average credit period for sales of goods was 60 days. In determining the recoverability of a trade receivable, the Group evaluates each customer’s credibility and financial position and considers any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period.

Before trading with any new customer, the Group assesses the potential customer’s credit quality and defines credit limits based on an internal credit scoring system.

For the trade receivables balances that were past due at the end of the reporting period, the Group had not recognized an allowance for impairment loss, because there was not a significant change in credit quality and the amounts were still considered recoverable.

The aging of notes receivable and trade receivables was as follows:

	September 30,	December 31,	September 30,
	2017	2016	2016
Neither past due nor impaired	$ 4,106,221	$ 3,064,828	$ 3,089,650
Past due but not impaired
Within 60 days	63,470	42,064	54,060
61-120 days	5,372	11,855	5,618
Over 120 days	2,719	3,088	-
	$ 4,177,782	$ 3,121,835	$ 3,149,328

The above aging schedule was based on the past due days from the end of the credit term.

As of September 30, 2017, the Group did not hold collateral for most of its receivables.

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The movements of the allowance for doubtful notes receivable and trade receivables were as follows:

Individually Assessed for Impairment Assembly Assessed for Impairment Balance at January 1, 2016 $ 271 $ - Add: Impairment losses recognized on receivables 17,375 - Less: Amounts written off during the period as uncollectable (271) - Balance at September 30, 2016 $ 17,375 $ - Balance at January 1 and September 30, 2017 $ 17,460 $ -	Total $ 271 17,375 (271) $ 17,375 $ 17,460

The Group recognized impairment loss on trade receivables amounting to $16,812 thousand as of September 30, 2017. This amount mainly related to customers that were experiencing severe financial difficulties. The Group did not hold any collateral over these balances.

The carrying amount of trade receivables pledged as collateral for borrowings is disclosed in Note 36.

b. Other receivables

No allowance for impairment loss of other receivables was recognized since the other receivables of the Group were not past due and the Group assessed that there was no uncertainty of recoverability.

12. INVENTORIES

	September 30,	December 31,	December 31,	September 30,	September 30,
	2017		2016		2016
Finished goods and merchandise	$ 1,030,956	$	950,104	$	1,133,819
Work in progress	7,795,312		5,781,372		5,302,464
Raw materials	562,667		355,941		324,494
	$ 9,388,935	$	7,087,417	$	6,760,777

The write-down of inventories to the net realizable value and the reversal of inventory write-downs resulting from the increase in the net realizable value were included in the cost of goods sold as below. Previous write-downs were reversed as a result of stock clearance.

Reversal of inventory write-downs		Three Months Ended September 30 2017 2016 $ 37,912 $ 558,318		Nine Months Ended September 30	Nine Months Ended September 30
		2017 $ 37,912		2017 $ 505,043	2016 $ 790,185

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13. SUBSIDIARIES

Subsidiary included in consolidated financial statements

As of September 30, 2017, the Company has direct and indirect majority ownership over the following subsidiaries: Run Hong Investment, Ltd. (Run Hong), Hui Ying Investment, Ltd. (Hui Ying), Mxtran Inc. (Mxtran), Macronix America Inc. (MXA), Macronix (BVI) Co., Ltd. (MXBVI), Mxtran Holding (Samoa) Co., Ltd. (Mxtran Samoa), Mxtran (H.K.) Holding Co., Limited (Mxtran HK), New Trend Technology Inc. (NTTI), Macronix (Asia) Limited (MX Asia), Macronix Pte. Ltd. (MPL), Macronix Europe NV. (MXE), Macronix (Hong Kong) Co., Limited (MXHK) and Macronix Microelectronics (Suzhou) Co., Ltd. (MXm).

Investor Investee Nature of Activities The Company Run Hong Investment company The Company Hui Ying Investment company The Company and Run Hong Mxtran Combi-SIM IC and the related service The Company and Run Hong Infomax Communication Co., Ltd (INFOMAX) Baseband chip, analog baseband chip, and power management chip The Company MXA Sales and marketing The Company MXBVI Investment holding company Mxtran Mxtran Samoa Investment holding company Mxtran Samoa Mxtran HK Investment holding company Mxtran HK Maxtran Technology Co., Ltd. (Maxtran Beijing) Technical support of Combi-SIM IC INFOMAX Infomax Holding Co., Ltd. (Infomax Samoa) Investment holding company Infomax Samoa Infomax Holding Company Limited (Infomax HK) Investment holding company Infomax HK Infomax Communication (Suzhou) Co., Ltd. (Infomax SU) Software, rendering and technical service MXBVI NTTI IC design MXBVI MX Asia Investment holding company MXBVI MPL After-sales service MXBVI MXE After-sales service MXBVI MXHK Sales and marketing MXHK MXm Development of integrated circuit system and software	% ofOwnership
	September 30 2017 December 31, 2016 September 30 2016 100.00 100.00 100.00 100.00 100.00 100.00 94.84 94.84 94.84 Note 1 99.02 99.02 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Note 2 100.00 100.00 Note 1 100.00 100.00 Note 1 100.00 100.00 Note 1 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Investor
Investee
Nature of Activities
The Company
Run Hong
Investment company
The Company
Hui Ying
Investment company
The Company and Run
Hong
Mxtran
Combi-SIM IC and the related service
The Company and Run
Hong
Infomax Communication
Co., Ltd (INFOMAX)
Baseband chip, analog baseband chip,
and power management chip
The Company
MXA
Sales and marketing
The Company
MXBVI
Investment holding company
Mxtran
Mxtran Samoa
Investment holding company
Mxtran Samoa
Mxtran HK
Investment holding company
Mxtran HK
Maxtran Technology Co.,
Ltd. (Maxtran Beijing)
Technical support of Combi-SIM IC
INFOMAX
Infomax Holding Co.,
Ltd. (Infomax Samoa)
Investment holding company
Infomax Samoa
Infomax Holding
Company Limited
(Infomax HK)
Investment holding company
Infomax HK
Infomax Communication
(Suzhou) Co., Ltd.
(Infomax SU)
Software, rendering and technical
service
MXBVI
NTTI
IC design
MXBVI
MX Asia
Investment holding company
MXBVI
MPL
After-sales service
MXBVI
MXE
After-sales service
MXBVI
MXHK
Sales and marketing
MXHK
MXm
Development of integrated circuit
system and software

% ofOwnership

September 30
2017
December 31,
2016
September 30
2016
100.00
100.00
100.00
100.00
100.00
100.00
94.84
94.84
94.84
Note 1
99.02
99.02
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Note 2
100.00
100.00
Note 1
100.00
100.00
Note 1
100.00
100.00
Note 1
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00

Note 1: On March 22, 2017, INFOMAX’s liquidation was approved in its shareholders’ meeting. Since the Group had lost control over INFOMAX as well as the subsidiaries of INFOMAX, the Group no longer includes INFOMAX in its consolidated financial statements.

Note 2: The liquidation of Maxtran Beijing was completed in January 2017.

Except for MXHK, the subsidiaries included in the consolidated financial statements are immaterial, and their financial statements have not been reviewed.

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14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates

September 30, 2017 December 31, 2016 September 30, 2016 Associates Modiotek Co., Ltd. (Modiotek) $ - $ - $ 68 % of Ownership Name of Associate Main Business Principal Place of Business September 30, 2017 December 31, 2016 September 30, 2016 Modiotek Wi-Fi audio and video transmission devices, ICs and smart security systems Hsinchu City Note 23.39 23.39	September 30, 2017 December 31, 2016 September 30, 2016 Associates Modiotek Co., Ltd. (Modiotek) $ - $ - $ 68 % of Ownership Name of Associate Main Business Principal Place of Business September 30, 2017 December 31, 2016 September 30, 2016 Modiotek Wi-Fi audio and video transmission devices, ICs and smart security systems Hsinchu City Note 23.39 23.39	September 30, 2017 December 31, 2016 September 30, 2016 Associates Modiotek Co., Ltd. (Modiotek) $ - $ - $ 68 % of Ownership Name of Associate Main Business Principal Place of Business September 30, 2017 December 31, 2016 September 30, 2016 Modiotek Wi-Fi audio and video transmission devices, ICs and smart security systems Hsinchu City Note 23.39 23.39
	September 30, 2017 December 31, 2016 Note 23.39	September 30, 2016 23.39

Note: In the May 26, 2017 shareholders’ meeting, the decision for the liquidation of Modiotek and the election of its liquidator were resolved. The Group has hence lost its significant influence over Modiotek and Modiotek’s subsidiaries.

The investments accounted for by using the equity method and the share of profit or loss and other comprehensive income of those investments were based on unreviewed financial statements for the same reporting period.

15. PROPERTY, PLANT AND EQUIPMENT

Cost Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Advance payments and construction in progress Accumulated depreciation and impairment Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Carrying amounts at September 30, 2017				Nine Months	Ended September	30, 2017
		Balance, Beginning of Period $ 1,307,700 24,387,886 82,761,938 5,971,627 24,990 41,540 1,148,741 385,626 116,030,048 400,705 19,477,378 75,819,885 3,665,960 23,119 34,366 1,108,176 100,529,589 $ 15,500,459	Additions $ - - - 4,312 - - 3,194 1,473,136 $ 1,480,642 $ - 271,386 1,032,342 128,431 971 3,776 21,190 $ 1,458,096	Disposals $ - 1,214 417,954 52,303 2,650 478 28,291 - $ 502,890 $ - 1,214 417,299 44,731 2,650 478 26,946 $ 493,318	Net Exchange Differences $ (43,788 ) (3,267 ) - (374 ) (21 ) (867 ) (1,979 ) (24) $ (50,320) $ (24,726 ) (607 ) - (319 ) (19 ) (751 ) (1,794) $ (28,216)	Individual Group Entity Effects $ - - - (6,888 ) - - (2,000 ) - $ (8,888) $ - - - (6,080 ) - - (1,813) $ (7,893)	Reclassification Balance, End of Period $ - $ 1,263,912 78,285 24,458,690 2,788,388 85,132,372 (2,552,893 ) 3,363,481 900 23,219 - 40,195 28,444 1,148,109 (340,124) 1,518,614 $ - 116,948,592 $ - 375,979 - 19,746,943 1,777,310 78,212,238 (1,777,310 ) 1,965,951 - 21,421 - 36,913 - 1,098,813 $ - 101,458,258 $ 15,490,334

23 -

Cost Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Advance payments and construction in progress Accumulated depreciation and impairment Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Carrying amount at September 30, 2016			Ni	ne Months Ended September 30, 2016	ne Months Ended September 30, 2016
		Balance, Beginning of Period $ 1,320,487 23,709,538 82,541,070 5,168,722 30,285 43,850 1,163,014 1,425,924 115,402,890 407,984 19,142,362 74,541,409 3,575,569 25,177 30,126 1,084,140 98,806,767 $ 16,596,123	Additions $ - - - 3,629 - 14 3,159 714,292 $ 721,094 $ - 260,471 976,856 183,903 2,569 4,591 37,964 $ 1,466,354	Disposals $ - 11,324 167,199 4,845 5,152 - 17,389 - $ 205,909 $ - 11,324 167,169 4,503 5,152 - 17,314 $ 205,462	Net Exchange Differences $ (32,241 ) (17,916 ) - (2,594 ) (118 ) (1,164 ) (5,230 ) 41 $ (59,222) $ (18,208 ) (3,431 ) - (1,757 ) (106 ) (802 ) (4,335) $ (28,639)	Reclassification Balance, End of Period $ - $ 1,288,246 699,382 24,379,680 218,847 82,592,718 563,450 5,728,362 - 25,015 - 42,700 2,260 1,145,814 (1,483,939) 656,318 $ - 115,858,853 $ - 389,776 - 19,388,078 3,671 75,354,767 (2,954 ) 3,750,258 - 22,488 - 33,915 (717) 1,099,738 $ - 100,039,020 $ 15,819,833

The carrying amount of the freehold land in the U.S.A. which was unutilized by the Group as of September 30, 2017, December 31, 2016 and September 30, 2016 was US$9,579 thousand.

The above items of property, plant and equipment were depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 21-40 years Electronic equipment 11-20 years Facility equipment 6-15 years Landscape engineering 20 years Machinery equipment 4-11 years Research and development equipment 5-11 years Transportation equipment 5-6 years Leasehold improvements 3-16 years Miscellaneous equipment 2-16 years

Property, plant and equipment pledged as collateral for bank borrowings are set out in Note 36.

24 -

16. INTANGIBLE ASSETS

		Nine Months Ended September 30, 2017	Nine Months Ended September 30, 2017	Nine Months Ended September 30, 2017
		Additions Disposals Net Exchange Differences Impairment Loss Balance, End of Period $ 35,062 $ 114,286 $ (203) $ - $ 87,349 - 5,994 - - 4,745 13,000 514 - - 28,306 $ 48,062 $ 120,794 $ (203) $ - 120,400 $ 19,105 $ 114,286 $ (199) $ 1,331 47,985 167 1,328 - - 4,743 2,261 513 - 154 17,475 $ 21,533 $ 116,127 $ (199) $ 1,485 70,203 $ 50,197 Nine Months Ended September 30, 2016

30,
	Balance, Beginning of Period $ 309,702 58,407 18,691 386,800 232,616 31,926 13,241 277,783 $ 109,017		Additions $ 11,864 6,000 413 $ 18,277 $ 51,018 13,754 4,682 $ 69,454	Disposals Net Exchange Differences Balance, End of Period $ 137,166 $ (1,538) $ 182,862 2,202 - 62,205 3,349 (4) 15,751 $ 142,717 $ (1,542) 260,818 $ 137,166 $ (1,425) 145,043 2,202 - 43,478 3,349 (4) 14,570 $ 142,717 $ (1,429) 203,091 $ 57,727

Intangible assets were amortized on a straight-line basis over their estimated useful lives as follows:

Software 1-6 years Licenses 1-3 years Others 1-3 years

25 -

17. PREPAYMENTS FOR LEASES

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
Current assets (included in other current assets)	$	515	$	522	$	531
Non-current assets (included in other non-current
assets)		19,695		20,373		20,841
	$	20,210	$	20,895	$	21,372

Prepaid lease payments include payments for land use rights for land located in mainland China. The Group has obtained the land use right certificates.

18. OTHER FINANCIAL ASSETS

	September 30,	December 31,	September 30,
	2017	2016	2016
Non-current
Restricted time deposits (Note 36)	$ 134,231	$ 138,861	$ 138,861
Refundable deposits	11,641	11,645	12,384
Long-term receivables	22,890	1,350	2,401
	$ 168,762	$ 151,856	$ 153,646

19. OTHER ASSETS

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
Current
Prepayments	$	168,415	$	197,561	$	198,832
Offset against business tax payable		2,723		30,900		31,448
Prepayments for leases		515		522		531
Others		-		-		5,193
	$	171,653	$	228,983	$	236,004
Non-current
Prepayments for leases	$	19,695	$	20,373	$	20,841

26 -

20. BORROWINGS

a.
b.

Short-term borrowings
September 30,
2017
December 31,
2016
September 30,
2016

Unsecured borrowings

Import loans
$ -
$ -
$ 246,453
Unsecured borrowings

-

400,000

800,000

$ -
$ 400,000
$ 1,046,453

Interest rate
-
1.55%
1.39%-1.91%
Long-term borrowings
September 30,
2017
December 31,
2016
September 30,
2016

Secured borrowings

Loans from financial institutions
$ 7,627,643 $ 8,611,118 $ 9,612,415

Unsecured borrowings

Loans from financial institutions

1,580,000

1,326,667

1,646,667

9,207,643
9,937,785
11,259,082
Less: Current portion

8,233,416
4,280,876
4,595,293
Less: Arrangement fees

11,586

21,365

22,243

Long-term borrowings
$ 962,641
$ 5,635,544
$ 6,641,546
Interest rate
1.48%-2.21%
1.52%-2.81%
1.52%-2.81%
Borrowing Type
Repayment Terms
September 30,
2017
December 31,
2016
September 30,
2016
Secured syndicated loan
denominated in NT$ From June 2015 to June
2018.
$ 5,320,376 $ 6,120,000 $ 6,885,000
Unsecured bank
borrowing
denominated in NT$ From March 2017 to
September 2018.
800,000
-
-
Secured bank borrowing
denominated in NT$ From December 2015 to
December 2017.
800,000
800,000
800,000
Secured bank borrowing
denominated in NT$ From September 2017 to
September 2022.
500,000
-
-
Unsecured bank
borrowing
denominated in NT$ From August 2017 to
February 2019.
350,000
-
-
Secured bank borrowing
denominated in NT$ From September 2015 to
September 2018.
335,000
470,000
515,000
Unsecured bank
borrowing
denominated in NT$ From March 2016 to
January 2018.
280,000
460,000
500,000
(Continued)

27 -

		September	September	30,	December 31,	December 31,	September 30,	September 30,
Borrowing Type	Repayment Terms		2017			2016		2016
Secured bank borrowing	From October 2013 to	$	250,000		$	400,000	$	450,000
denominated in NT$	October 2018.
Secured bank borrowing	From December 2013 to		208,153			330,425		370,752
denominated in NT$	December 2018.
Unsecured bank	From February 2017 to		150,000			-		-
borrowing	April 2018.
denominated in NT$
Secured bank borrowing	From January 2015 to		157,437			204,669		220,412
denominated in NT$	January 2020.
Secured bank borrowing	From March 2014 to		41,677			64,024		80,251
denominated in JPY	March 2019.
Secured bank borrowing	From August 2015 to		15,000			42,000		51,000
denominated in NT$	February 2018.
Secured bank borrowing	Pay off in July 2017.			-		80,000		110,000
denominated in NT$
Secured bank borrowing	Pay off in September			-		100,000		130,000
denominated in NT$	2017.
Unsecured bank	Pay off in September			-		66,667		66,667
borrowing	2017.
denominated in NT$
Unsecured bank	Pay off in March 2017.			-		800,000		1,000,000
borrowing
denominated in NT$
Unsecured bank	Pay off in December			-		-		80,000
borrowing	2016.
denominated in NT$
Less: Current portion			8,233,416			4,280,876		4,595,293
Less: Arrangement			11,586			21,365		22,243
fees
Total long-term borrowings		$	962,641		$	5,635,544	$	6,641,546
								(Concluded)

To repay the vested liabilities, the Company has entered into a 3-year syndicated loan agreement with 15 financial institutions including Taiwan Cooperative Bank in June 2015. The total amount of $7.65 billion of the syndicated loan has been fully used as of September 30, 2017.

The Group had provided notes used as refundable guarantees for syndicated loan mentioned above that will be cancelled upon termination of the guarantee.

In addition, the Group’s floating borrowing rate on the above borrowing is reset every one to three months.

The loan agreement requires the maintenance of a current ratio, debt ratio, and interest coverage ratio based on the Group’s semi-annual and annual consolidated financial statements. For the six months ended June 30, 2017, the Group met the financial ratio covenants.

The details of assets pledged as collateral for long-term loans are set in Note 36.

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21. NOTES PAYABLE AND TRADE PAYABLES

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
Notes payable	$	-	$	939	$	7
Trade payables		2,733,235		2,591,205		2,074,361
	$	2,733,235	$	2,592,144	$	2,074,368

The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed upon credit terms.

22. OTHER PAYABLES

	September 30,	September 30,	September 30,	December 31,	December 31,	December 31,	September 30,	September 30,
			2017			2016		2016
Payable for maintenance and repair	$		153,467	$		187,436	$	148,292
Payable for bonus			132,770			252,140		137,792
Payable for patent			126,317			40,326		51,891
Payable for insurance premium			71,755			63,138		69,447
Others			718,242			634,727		551,839
	$		1,202,551	$		1,177,767	$	959,261
PROVISIONS
	September 30,			December 31,			September 30,
			2017			2016		2016
Current
Employee benefits (a)	$		57,865	$		88,652	$	84,664
Customer returns and rebates (b)			184,258			137,007		174,094
	$		242,123	$		225,659	$	258,758
				Customer
	Employee			Returns and
		Benefits			Rebates			Total
Balance at January 1, 2017	$		88,652	$		137,007	$	225,659
Additional provisions recognized			49,903			282,982		332,885
Reversing un-usage balances/usage			(80,410)			(232,545)		(312,955)
Net exchange differences			(280)			(3,186)		(3,466)
Balance at September 30, 2017	$		57,865	$		184,258	$	242,123

23. PROVISIONS

a. The provision for employee benefits represents vested long service leave entitlements accrued.

29 -
b. The provision of customer returns and rebates was based on historical experience, management’s judgment and other known reasons for why estimated product returns and rebates may occur in the period. The provision was recognized as a reduction of operating income in the period in which the related goods were sold.

24. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company, Mxtran of the Group adopted a pension plan under the Labor Pension Act (the LPA), which is a state-managed defined contribution plan. Under on the LPA, the Group makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiary in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiary is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

b. Defined benefit plans

Employee benefits expense in respect of the Group’s defined benefit retirement plans were respectively $5,616 thousand and $6,504 thousand for the three months ended September 30, 2017 and 2016 and $17,128 thousand and $19,511 thousand for the nine months ended September 30, 2017 and 2016, respectively, and were calculated using the respective annual, actuarially determined pension cost discount rate as of December 31, 2016 and 2015.

The Group maintains a separate executive pension plan and the net periodic pension costs were $2,849 thousand and $3,089 thousand for the three months ended September 30, 2017 and 2016, respectively, and $8,547 thousand and $9,266 thousand for the nine months ended September 30, 2017 and 2016, respectively.

25. EQUITY

a. Share capital

Ordinary shares

September 30, 2017 Numbers of shares authorized (in thousands) 6,550,000 Share authorized $ 65,500,000 Numbers of shares issued and fully paid (in thousands) 1,805,028 Shares issued $ 18,050,281	December 31, 2016 September 30, 2016 6,550,000 6,550,000 $ 65,500,000 $ 65,500,000 3,615,354 3,615,717 $ 36,153,535 $ 36,157,168

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

The Company resolved, in the May 26, 2017 shareholder’s meeting, a capital reduction for offsetting the accumulated deficit to improve the Company’s financial structure. The capital reduction will amount to $18,651,070 thousand, representing 1,865,107 thousand shares and approximately 51% of the Company’s original share capital. The reduction was approved by the FSC on June 26, 2017 and went into effect upon approval. Per the authority granted in the shareholders’ meeting, the chairman

30 -

of the Company determined June 29, 2017 as the basis date of the capital reduction. After the reduction, the paid-in capital would be $18,058,953 thousand, equivalent to 1,805,895 thousand shares.

A total of 864,704 thousand shares and 650,000 thousand shares of the Company’s authorized shares were reserved for the issuance of convertible bonds and employee share options.

b. Capital surplus

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
May be used to offset a deficit, distributed as
cash dividends, or transferred to share
capital (1)
Issuance of ordinary shares	$	109,401	$	186,269	$	186,358
Donations		37		37		37
Treasury share transactions		6,422		6,422		6,422
	$	115,860	$	192,728	$	192,817
May be used to offset a deficit only
Changes in percentage of ownership interests
in subsidiaries (2)	$	4,609	$	4,262	$	4,302
Treasury share transactions		20,080		20,080		20,080
	$	24,689	$	24,342	$	24,382
May not be used for any purpose
Employee restricted shares	$	(366,397)	$	123,643	$	(140,829)

1) Such 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 paid-in capital and once a year).
2) Such capital surplus arises from changes in capital surplus of subsidiaries accounted for by using the equity method.
c. Retained earnings and dividend policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The shareholders held their regular meeting on June 18, 2015 and, in that meeting, resolved amendments to the Company’s Articles of Incorporation (the Articles), particularly the amendment to the policy on dividend distribution. In accordance with the order No. 1040247800 issued by the Ministry of Economic Affairs, amendments to the Company’s Articles of Incorporation were approved by the meeting of shareholders on May 26, 2017.

31 -

The Company’s Articles of Incorporation, amended on May 26, 2017 , state that, 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 a legal reserve 10% of the remaining profit (until the amount of the legal reserve equals the amount of the Company’s paid-in capital), setting aside or reversing a 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 shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors after the amendment, refer to “Employees’ compensation and remuneration of directors” in Note 27 (f).

The Company is classified under the capital intensive industry. In accordance with the long-term financial program of the Company, the above shareholders’ dividends can be retained as undistributed earnings and then be distributed in future, as determined by the shareholders at the Annual General Meeting.

Distributions shall be prioritized to take the form of cash dividends. Nevertheless, it still depends on the Company’s financial, sales or operating conditions. The Company’s Articles of Incorporation provide that no more than 50% of the current year’s total amount of distributable earnings can be distributed in the form of share dividends.

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

Except for non-ROC resident shareholders, all shareholders receiving dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

d. Other equity items
1) Exchange differences on translating foreign operations

Balance at January 1 Exchange differences on translating foreign operations Balance at September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ (8,565) (60,114) $ (68,679)	2016 $ 48,923 (68,543) $ (19,620)

2) Unrealized gain on available-for-sale financial assets

Balance at January 1 Unrealized gain on available-for-sale financial assets Balance at September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 956,774 323,790 $ 1,280,564	2016 $ 871,368 13,615 $ 884,983

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3) Employee unearned benefits

In the meetings of shareholders on June 18, 2014 and June 16, 2016, the shareholders approved a restricted share plan for employees. Refer to Note 30 for the information on restricted shares issued.

Balance at January 1 Share-based payment expenses recognized Adjustments for charge of turnover rate Balance at September 30 Non-controlling interests Balance at January 1 Attributable to non-controlling interests: Share of loss for the period Exchange difference on translating foreign operations Non-controlling interest relating to outstanding vested share options held by the employees of subsidiaries Disposal of subsidiaries Balance at September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 2016 $ (306,958) $ (263,407) 179,717 151,420 12,335 (327) $ (114,906) $ (112,314) For the Nine Months Ended September 30
		2017 $ 1,686 (454) (5) - (456) $ 771	2016 $ 8,763 (3,010) (193) (2,865) - $ 2,695

e. Non-controlling interests

f. Treasury shares

The Company’s shares held by its subsidiaries at the end of the reporting period were as follows:

		Number of
		Shares Held	Carrying
	Name of Subsidiary	(In Thousands)	Amount		Market Price
September	30, 2017
Hui Ying		1,918	$	159,061	$	92,651
December	31, 2016
Hui Ying		3,899		159,061		18,054
September	30, 2016
Hui Ying		3,899		159,061		16,338

The Company’s shares held by subsidiaries are regarded as treasury shares; shareholder’s rights are retained, except for the rights to participate in any share issuances for cash and to vote.

The Company implemented a capital reduction on June 29, 2017, with 1,918 thousand treasury shares remaining after the reduction; refer to Note 25 (a).

33 -

26. REVENUE

Revenue from the sale of goods Royalty income and others		For the Three Months Ended September 30 2017 2016 $ 10,464,882 $ 7,088,682 2,400 2,987 $ 10,467,282 $ 7,091,669		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 10,464,882 2,400 $ 10,467,282		2017 $ 23,632,156 8,088 $ 23,640,244	2016 $ 17,350,382 8,744 $ 17,359,126

The analysis of the Group’s revenue and main products was disclosed in Note 40.

27. NET PROFIT (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) FROM CONTINUING OPERATIONS

a. Other income

Dividend income Interest income Others b. Other gains and losses Net foreign exchange gains (losses) Gains (losses) on disposal of investments Net gain arising on financial assets designated as at FVTPL Impairment losses Others	For the Three Months Ended September 30 2017 2016 $ 47,493 $ 48,839 5,018 4,072 18,394 11,521 $ 70,905 $ 64,432 For the Three Months Ended September 30 2017 2016 $ 7,130 $ (37,675) 5,357 - - 14,318 - - (2,956) (4,195) $ 9,531 $ (27,552)	For the Three Months Ended September 30 2017 2016 $ 47,493 $ 48,839 5,018 4,072 18,394 11,521 $ 70,905 $ 64,432 For the Three Months Ended September 30 2017 2016 $ 7,130 $ (37,675) 5,357 - - 14,318 - - (2,956) (4,195) $ 9,531 $ (27,552)		For the Nine Months Ended September 30	For the Nine Months Ended September 30
				2017 2016 $ 86,724 $ 97,030 18,150 14,565 24,681 30,042 $ 129,555 $ 141,637 For the Nine Months Ended September 30
		2017 $ 7,130 5,357 - - (2,956) $ 9,531		2017 $ (93,096) (2,517) - (1,485) (10,957) $ (108,055)	2016 $ (7,381) - 16,307 - (12,388) $ (3,462)

34 -

c. Finance costs

Interest on loans Other interest expenses Less: Amounts included in the cost of qualifying assets	For the Three Months Ended September 30 2017 2016 $ 50,630 $ 70,991 - 3,965 (52) (1,010) $ 50,578 $ 73,946	For the Three Months Ended September 30 2017 2016 $ 50,630 $ 70,991 - 3,965 (52) (1,010) $ 50,578 $ 73,946	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 50,630 - (52) $ 50,578		2017 $ 164,494 18 (106) $ 164,406	2016 $ 238,007 3,987 (2,060) $ 239,934

Information about capitalized interest was as follows:

Capitalized interest Capitalization rate d. Depreciation and amortization Property, plant and equipment Intangible assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Selling and marking expenses General and administration expenses Research and development expenses		For the Three Months Ended September 30 2017 2016 $ 52 $ 1,010 0.90% 1.80% For the Three Months Ended September 30 2017 2016 $ 481,799 $ 489,206 6,620 21,281 $ 488,419 $ 510,487 $ 399,439 $ 387,320 82,360 101,886 $ 481,799 $ 489,206 $ 2,995 $ 11,839 24 149 2,498 1,821 1,103 7,472 $ 6,620 $ 21,281		For the Nine Months Ended September 30	For the Nine Months Ended September 30
				2017 2016 $ 106 $ 2,060 0.90% 1.33% For the Nine Months Ended September 30
		2017 $ 481,799 6,620 $ 488,419 $ 399,439 82,360 $ 481,799 $ 2,995 24 2,498 1,103 $ 6,620		2017 $ 1,458,096 21,533 $ 1,479,629 $ 1,204,219 253,877 $ 1,458,096 $ 11,596 117 7,110 2,710 $ 21,533	2016 $ 1,466,354 69,454 $ 1,535,808 $ 1,157,641 308,713 $ 1,466,354 $ 39,346 451 7,286 22,371 $ 69,454

35 -

e. Employee benefits expense

Post-employment benefits (Note 24) Defined contribution plans Defined benefit plans Share-based payments Equity-settled Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses		For the Three Months Ended September 30 2017 2016 $ 62,695 $ 60,848 8,465 9,593 71,160 70,441 54,557 34,676 1,934,549 1,320,084 $ 2,060,266 $ 1,425,201 $ 949,463 $ 634,003 1,110,803 791,198 $ 2,060,266 $ 1,425,201		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 62,695 8,465 71,160 54,557 1,934,549 $ 2,060,266 $ 949,463 1,110,803 $ 2,060,266		2017 $ 181,484 25,675 207,159 179,717 4,825,369 $ 5,212,245 $ 2,394,906 2,817,339 $ 5,212,245	2016 $ 184,120 28,777 212,897 151,420 4,043,308 $ 4,407,625 $ 1,942,573 2,465,052 $ 4,407,625

f. Employees’ compensation and remuneration of directors

In compliance with the Company Act as amended in May 2015 and the amended Articles of Incorporation of the Company approved by the shareholders in their meeting on May 26, 2017, the Company accrued employees’ compensation and remuneration of directors at the rates of 15% and no higher than 2%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. Due to the net loss for the nine months ended September 30, 2016, there was no accrual for compensation of employees and remuneration of directors. For the three months ended September 30, 2017 and 2016, and the nine months ended September 30, 2017 and 2016, the employees’ estimated compensation and the remuneration of directors were as follows:

Amount

Employees’ compensation Remuneration of directors	For the Three Months Ended September 30 2017 2016 $ 383,733 $ - $ 51,165 $ -	For the Three Months Ended September 30 2017 2016 $ 383,733 $ - $ 51,165 $ -	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 383,733 $ 51,165		2017 $ 531,729 $ 70,897	2016 $ - $ -

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.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2017 and 2016 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

36 -

28. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Major components of income tax expense (benefit) recognized in profit or loss

For the Three Months Ended September 30 2017 2016 Current tax In respect of the current period $ 4,926 $ 2,382 Adjustments for prior periods - (291) Deferred tax In respect of the current period 28 117 Income tax expense (benefit) recognized in profit or loss $ 4,954 $ 2,208 b. Integrated income tax September 30, 2017 Unappropriated earnings accumulated deficit Generated before January 1, 1998 $ - Generated on and after January 1, 1998 2,942,231 $ 2,942,231 Shareholder - imputation credit accounts $ 490,062	For the Three Months Ended September 30	For the Nine Months Ended September 30 2017 2016 $ 12,151 $ 6,613 - (145,300) 180 (2,174) $ 12,331 $ (140,861) December 31, 2016 September 30, 2016 $ - $ - (18,651,070) (19,250,022) $ (18,651,070) $ (19,250,022) $ 473,568 $ 473,568

No tax creditable ratios were calculated for accumulated deficit as of December 31, 2016.

c. Income tax assessments

The Company’s tax returns through 2014 have been assessed by the tax authorities.

29. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share Diluted earnings (loss) per share	For the Three Months Ended September 30	For the Three Months Ended September 30	For the Three Months Ended September 30	Unit: NT$ Per Share For the Nine Months Ended September 30 2017 2016 $ 1.67 $ (0.54) $ 1.63 $ (0.54)	Unit: NT$ Per Share For the Nine Months Ended September 30 2017 2016 $ 1.67 $ (0.54) $ 1.63 $ (0.54)	Unit: NT$ Per Share For the Nine Months Ended September 30 2017 2016 $ 1.67 $ (0.54) $ 1.63 $ (0.54)
		2017 $ 1.20 $ 1.18	2016 $ 0.36 $ 0.36		2017 $ 1.67 $ 1.63	2016 $ (0.54) $ (0.54)

37 -

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the capital reduction implemented to offset accumulated deficits on June 29, 2017. The basic and diluted earnings per share adjusted retrospectively for the three months ended September 30, 2016, and the nine months ended September 30, 2016 were as follows:

Basic loss per share Diluted loss per share	Before Retrospective Adjustment 2016 For the Three Months Ended September 30 For the Nine Months Ended September 30 $ 0.18 $ (0.27) $ 0.18 $ (0.27)	Unit: NT$ Per Share After Retrospective Adjustment
		2016
		For the Three Months Ended September 30 For the Nine Months Ended September 30 $ 0.36 $ (0.54) $ 0.36 $ (0.54)

The income (loss) and weighted average number of ordinary shares outstanding in the computation of earnings (loss) per share from continuing operations were as follows:

Net Income (Loss) for the Period

Income (loss) for the period attributable to owners of the company		For the Three Months Ended September 30 2017 2016 $ 2,123,322 $ 633,288		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 2,123,322		2017 $ 2,942,231	2016 $ (945,749)

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

Weighted average number of ordinary shares in computation of basic earnings (loss) per share Weighted average number of ordinary shares in computation of diluted earnings (loss) per share		For the Three Months Ended September 30 2017 2016 1,766,129 1,750,963 1,801,656 1,762,374		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 1,766,129 1,801,656		2017 1,762,671 1,799,778	2016 1,746,543 1,746,543

As disclosed in Note 30 to the financial statements in determining whether the share-based payments are potential ordinary shares. The aforementioned stock options were anti - dilutive and excluded from the computation of diluted loss per share for the nine months ended September 30, 2016.

38 -

30. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee share option plan

Mxtran

Approved by the board of directors of Mxtran on August 12, 2011, Mxtran was authorized to issue 2,344 thousand units of employee share options. For each share option, the holder may subscribe for one new share of ordinary shares of Mxtran. The options are valid for six years and exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in Mxtran’s capital surplus, the exercise price is adjusted accordingly.

Information on employee share options is as follows:

Balance at January 1 Options cancelled Balance at September 30	For the Nine Months	Ended September 30
	2017 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 688 $ 10.00 (688) - - 10.00	2016
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 1,181 $ 10.00 (493) - 688 10.00

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$)	$	3.23
Exercise price (NT$)		10.00
Expected volatility		44.82%
Expected life (years)		4.25
Expected dividend yield		-
Risk-free interest rate		1.11%

For both the three months ended September 30, 2017 and 2016 as well as both the nine months ended September 30, 2017 and 2016, the compensation costs recognized were $0. As of September 30, 2016, the estimated percentage of forfeiture due to the termination of employment over the remaining vesting period was 52.76%.

INFOMAX

Approved by the board of directors of INFOMAX on January 26, 2011, INFOMAX was authorized to issue 1,346 thousand units of employee share options. For each share option, the holder may subscribe for one new share of ordinary shares of INFOMAX. The options are for the earlier of six years to the grant date or two months to the date of application for share listing on the TWSE or Taipei Exchange. The options granted are exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in INFOMAX’s capital surplus, the exercise price is adjusted accordingly.

INFOMAX made a capital deduction and increased its share capital by 109,797 thousand shares and 100,000 thousand shares on December 1, 2012 and April 3, 2013, respectively. The subscription ratio for each share option is 0.3 ordinary shares and the exercise price is subject to adjustments for any change of capital structure.

39 -

Information on employee share options is as follows:

Balance at January 1 Options cancelled Balance at September 30	For the Nine Months	Ended September 30
	2017 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) - $ - - - - -	2016
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 5,121 $ 31.87 (4,742) - 379 31.87

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$)	$	5.17
Exercise price (NT$)		10.00
Expected volatility		37.82%
Expected life (years)		4.25
Expected dividend yield		-
Risk-free interest rate		0.91%

For the three months ended September 30, 2016 and the nine months ended September 30, 2016, the compensation costs weren’t recognized because they were minute. As of September 30, 2016, the estimated percentage of forfeiture due to the termination of employment over the remaining vesting period was 3%.

b. Restricted share plan for employees

Information on share plan for employees were as below:

		Board of
		Directors
		Approved			Issued
Approved	Grant Shares	Grant Shares			Shares
Date	(Thousand)	(Thousand)	Grant Date	Issued Date	(Thousand)	Fair	Value
2014/06/18	123,251	38,365	2014/08/28	2014/12/25	37,301	$	7.76
		62,213	2015/03/16	2015/07/22	61,279		6.82
2016/06/16	123,535	58,971	2016/10/25	2017/01/03	57,476		4.73

To meet the vesting conditions, an employee has to meet performance and other conditions over the vesting period, as follows:

1) Remain employed by the Company within one year after the grant date; and has a current year’s performance rating of “successful” (or higher) - 40% of restricted shares will be vested;
2) Remain employed by the Company within two years after the grant date; and has a current year’s performance rating of “successful” (or higher) - 30% of restricted shares will be vested;
3) Remain employed by the Company within three years after grant date; and has a current year’s performance rating of “successful” (or higher) - 30% of restricted shares will be vested.
40 -

In addition to the vesting conditions, the limitations are as follows:

1) Employees, except for inheritance, should not sell, transfer, pledge, donate or in any other way dispose of the shares.
2) The shares should be held in a share trust.
3) Except for the above two paragraphs, the other rights of the restricted share plan for employees, which include, but are not limited to, dividends, bonuses, the distribution rights of the legal reserve and capital surplus, share options of cash capital, voting rights of shareholders, etc., are the same as the Group’s issued ordinary shares.
4) The dividends of restricted share plan for employees are not restricted by existing conditions.

When employees do not reach the vesting conditions of restricted share plan for employees during the year, the Company will recover and cancel the shares.

Information on restricted share plan for employees was as follows:

Balance at January 1 Vested Forfeited (Notes 1 and 2) Cancelled by capital reduction (Note 3) Balance at September 30	Number of Shares (In Thousands)	Number of Shares (In Thousands)	Number of Shares (In Thousands)
		For the Nine Months Ended September 30
		2017 103,593 (21,783) (3,513) (42,737) 35,560	2016 81,407 (34,174) (1,806) - 45,427

Note 1: The forfeited shares for the nine months ended September 30, 2017 consisted of 89 thousand shares that are not yet cancelled, 1,929 thousand shares already cancelled, and 1,495 thousand shares representing the difference between granted and issued shares as of October 25, 2016.
Note 2: The forfeited shares for the nine months ended September 30, 2016 consisted of 363 thousand shares not yet cancelled and 1,443 thousand shares already cancelled.
Note 3: Based on the capital reduction ratio as of June 29, 2017, 42,737 thousand shares were cancelled.

For the three months ended September 30, 2017 and 2016, the compensation costs recognized were $54,557 thousand and $34,676 thousand, respectively. For the nine months ended September 30, 2017 and 2016, the compensation costs recognized were $179,717 thousand and $151,420 thousand, respectively.

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31. DISPOSAL OF SUBSIDIARIES

On March 22, 2017, INFOMAX filed for liquidation per the resolution reached in its shareholders’ meeting; therefore, the Group has no control over INFOMAX as well as the subsidiaries of INFOMAX.

a. Analysis of assets and liabilities on the date of losing control

	March 22,	March 22,
		2017
Current assets
Cash and cash equivalents	$	3,892
Other receivables		365
Others		26,792
Non-current assets
Property, plant and equipment		995
Current liabilities
Other payables		(822)
Net assets disposed of	$	31,222
Loss on disposal of subsidiaries
	Nine Months
		Ended
	September 30,
		2017
Fair value of interest retained	$	22,889
Net assets disposed of		(31,222)
Non-controlling interests		459
Loss on disposal	$	(7,874)

b. Loss on disposal of subsidiaries

32. OPERATING LEASE ARRANGEMENTS

a. The Group as lessee

Operating leases relate to leases of land, offices, employee dormitories and office equipment with lease terms between 1 and 50 years. The Group does not have a bargain purchase options to acquire the leased land, offices, employee dormitories and office equipment at the expiration of the lease periods.

The future minimum lease payments for non-cancellable operating lease commitments were as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
Not later than 1 year	$	84,780	$	90,998	$	89,346
1 - 5 years		306,160		317,109		327,949
Later than 5 years		774,551		850,651		902,562
	$	1,165,491	$	1,258,758	$	1,319,857

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The lease payments recognized in profit or loss for the current period were as follows:

Minimum lease payments	For the Three Months Ended September 30 2017 2016 $ 29,315 $ 30,333	For the Three Months Ended September 30 2017 2016 $ 29,315 $ 30,333	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 29,315		2017 $ 97,664	2016 $ 100,441

b. The Group as lessor

Operating leases relate to the sole building owned by the Group with lease terms between 2 to 5 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessees do not have bargain purchase options to acquire the property at the expiration of the lease periods.

The future minimum lease revenue from non-cancellable operating leases were as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
Not later than 1 year	$	563	$	1,219	$	1,823
1 - 5 years		726		580		667
	$	1,289	$	1,799	$	2,490

33. CAPITAL MANAGEMENT

The Group manages its capital to ensure that the Group will be able to operate under the premises of going concerns and growth while maximizing the return to shareholders through the optimization of the debt and equity balance.

The Group’s strategy for managing the capital structure is to lay out the plan of product development and expand the market share considering the growth and the magnitude of industry and further developing an integral plan founded on the required capacity, capital outlay, and magnitude of assets in long-term development. Ultimately, considering the risk factors such as the fluctuation of the industry cycle and the life cycle of products, the Group determines the optimal capital structure by estimating the profitability of products, operating profit ratio, and cash flow based on the competitiveness of products.

The management of the Group periodically examines the capital structure and contemplates on the potential costs and risks involved while exerting different financial tools. In general, the Group implements prudent strategy of risk management.

34. FINANCIAL INSTRUMENTS

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

The management considers that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values or their fair values cannot be reliably measured.

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

September 30, 2017

Available-for-sale financial assets Securities listed in ROC Securities listed in other countries December 31, 2016 Available-for-sale financial assets Securities listed in ROC Securities listed in other countries September 30, 2016 Financial assets at FVTPL derivative financial instruments Available-for-sale financial assets Securities listed in ROC Securities listed in other countries Financial liabilities at FVTPL Derivative financial instruments	Level 1 $ 1,031,215 572,221 $ 1,603,436 Level 1 $ 909,258 374,444 $ 1,283,702 Level 1 $ - $ 909,204 300,894 $ 1,210,098 $ -	Level 2 $ - - $ - Level 2 $ - - $ - Level 2 $ 2,180 $ - - $ - $ 482	Level 3 $ - - $ - Level 3 $ - - $ - Level 3 $ - $ - - $ - $ -	Total $ 1,031,215 572,221
				$ 1,603,436
				Total $ 909,258 374,444
				$ 1,283,702
				Total $ 2,180
				$ 909,204 300,894
				$ 1,210,098
				$ 482

There were no transfers between Level 1 and Level 2 in the current and prior periods.

2) Valuation techniques and inputs applied for Level 2 fair value measurement

Financial Instruments Derivatives - foreign exchange forward contracts	Valuation Techniques and Inputs
	Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates.

44 -

c. Categories of financial instruments

	September	30,	December	31,	September 30,	September 30,
	2017		2016			2016
Financial assets
Fair value through profit or loss (FVTPL)
Held for trading	$	-	$	-	$	2,180
Loans and receivables (i)	13,548,433		10,303,571			10,261,592
Available-for-sale financial assets (ii)	1,694,617		1,377,032			1,302,467
Financial liabilities
Fair value through profit or loss (FVTPL)
Held for trading		-		-		482
Measured at amortized cost (iii)	17,177,615		15,394,707			16,040,429

i) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, notes receivable and trade receivables (including receivables from related parties), other receivables and other financial assets.
ii) The balances included the carrying amount of available-for-sale financial assets measured at cost.
iii) The balances included financial liabilities measured at amortized cost, which comprise short-term loans, notes payable and trade payables (including payables to related parties), other payables (including other payables to related parties), payables for purchases of equipment and long-term loans (including current portion).
d. Financial risk management objectives and policies

The Group manages its exposure to risks relating to the operations through market risk, credit risk, and liquidity risk with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by management in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, the Group must comply with certain treasury procedures that provide guiding principles for overall financial risk management.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below), interest rates (see (b) below), and other price risk (see (c) below).

a) Foreign currency risk

The Group had foreign currency sales and purchases, which exposed the Group to foreign currency risk. Exchange rate exposures were managed within approved policy parameters utilizing foreign exchange forward contracts.

45 -

Sensitivity analysis

The Group was mainly exposed to the USD and JPY.

The sensitivity analysis of rate is for the transactions in currencies other than the entity’s functional currency (i.e. foreign currencies) which are recognized at the rates of exchange prevailing at the end of each reporting period.

The following table details the Group’s sensitivity to a 3% and 10% increase in the New Taiwan dollar (i.e. the functional currency) against the USD and JPY, respectively. The sensitivity rates used are 3% and 10% when reporting foreign currency risk internally to key management personnel.

Pre-tax profit decrease (increase)	USD Impact For the Nine Months Ended September 30 2017 2016 $ 71,190 $ 62,478	USD Impact For the Nine Months Ended September 30 2017 2016 $ 71,190 $ 62,478	JPY Impact	JPY Impact	JPY Impact
			For the Nine Months Ended September 30
		2017 $ 71,190		2017 $ 113,504	2016 $ 14,552

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:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2017		2016		2016
Fair value interest rate risk
Financial assets	$	1,331,766	$	2,483,341	$	2,109,263
Financial liabilities		-		400,000		792,488
Cash flow interest rate risk
Financial assets		5,712,366		4,023,604		3,422,504
Financial liabilities		9,207,643		9,937,785		11,513,047

Sensitive analysis

The sensitivity analysis of interest is performed based on the financial liabilities exposed to cash flow interest rate risk at the end of each reporting period.

If interest rates had been 50 basis points higher/lower, the Group’s pre-tax profit for the nine months ended September 30, 2017 and 2016 would decrease/increase by $34,529 thousand and $43,091 thousand, respectively.

c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

46 -

Sensitive analysis

A sensitivity analysis of equity prices is performed based on the fair values of available-for-sale investments at the end of each reporting period.

If equity prices had been 10% higher/lower, equity for the nine months ended September 30, 2017 and 2016 would have increased/decreased by $160,344 thousand and $121,010 thousand, respectively, as a result of the changes in fair value of available-for-sale investments.

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group’s exposure to credit risk mainly arises from trade receivables - operating, bank deposits, and other financial instruments. Credit risk is managed separately for business related and financial related exposures.

Business related credit risk

In order to maintain the credit quality of trade receivables, the Group has established procedures to monitor and limit exposure to credit risk on trade receivables.

Credit evaluation is performed in the consideration of the relevant factors, such as financial condition, external and internal credit scoring, historical experience, and economic conditions, which may affect the customer’s paying ability. The Group holds some of the credit enhancements such as prepayments and collateral to mitigate its credit risks.

Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluations are performed on the financial condition of trade receivables and, where appropriate, credit guarantee insurance cover is purchased.

As of September 30, 2017, December 31, 2016 and September 30, 2016, the Group’s ten largest customers accounted for 63%, 48% and 58% of its total trade receivables (including receivables from related parties), respectively. The Group believes that the concentration of credit risk is relatively insignificant for the remaining trade receivables.

Financial credit risk

The Group’s exposure to financial credit risk which pertained to bank deposits and other financial instruments were evaluated and monitored by Corporate Treasury function. The Group only deals with creditworthy counterparties and banks so that no significant credit risk was identified.

3) Liquidity risk

The objective of liquidity risk management is to ensure the Group has sufficient liquidity to fund its business requirements of cash and cash equivalents and the unused of financing facilities associated with existing operations.

The Group relies on bank borrowings as a significant source of liquidity. As of September 30, 2017, December 31, 2016 and September 30, 2016, the Group had available unutilized overdraft and short-term bank loan facilities of approximately $3,960,916 thousand, $3,097,404 thousand and $2,760,056 thousand, respectively.

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a) Liquidity and interest rate risk tables for non-derivative financial liabilities

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

To the extent that interest flows are floating rate, the undiscounted amount was derived from the expected borrowing interest rate at the end of the reporting period.

September 30, 2017

On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing $ 8,584,184 Variable interest rate liabilities 8,365,848 Fixed interest rate liabilities - $ 16,950,032 December 31, 2016 On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing $ 5,078,287 Variable interest rate liabilities 4,472,702 Fixed interest rate liabilities 400,034 $ 9,951,023 September 30, 2016 On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing $ 3,757,137 Variable interest rate liabilities 5,043,097 Fixed interest rate liabilities 792,703 $ 9,592,937	1-3 Years $ - 726,929 - $ 726,929 1-3 Years $ - 5,679,701 - $ 5,679,701 1-3 Years $ - 6,701,242 - $ 6,701,242	3-5 Years $ - 251,494 - $ 251,494 3-5 Years $ - 15,744 - $ 15,744 3-5 Years $ - 31,516 - $ 31,516	5+ Years $ - - - $ - 5+ Years $ - - - $ - 5+ Years $ - - - $ -	Total $ 8,584,184 9,344,271 -
				$ 17,928,455
				Total $ 5,078,287 10,168,147 400,034
				$ 15,646,468
				Total $ 3,757,137 11,775,855 792,703
				$ 16,325,695

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

48 -
b) Liquidity and interest risk rate tables for derivative financial liabilities

The following table detailed the Group’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.

September 30, 2016

	On Demand or	On Demand or
		Less than			3	Months to
		1 Month	1-3	Months		1 Year	1-5 Years			5+ Years
Gross settled
Foreign exchange forward
contracts
Inflows	$	747,280	$	-	$	- $		-	$		-
Outflows		745,582		-		-		-			-

35. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, 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 parties and their relationships associated with the Company:

Related Parties	Relationship with the Company Associates (Note) Key management personnel The Group is its major management authority Others Others
Modiotek Co., Ltd. (Modiotek) MegaChips Corporation (MegaChips) Ardentec Corporation (Ardentec) TM Technology, Inc. (TMTECH) Macronix Education Foundation (MXIC Education)

b. Operating revenues

Related Parties Listed Account Categories/Name Sales Key management personnel MegaChips Others Associates		For the Three Months Ended September 30 2017 2016 $ 3,464,769 $ 2,047,062 270 229 - 171 $ 3,465,039 $ 2,047,462		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 3,464,769 270 - $ 3,465,039		2017 $ 6,075,619 683 41 $ 6,076,343	2016 $ 3,136,577 2,251 1,631 $ 3,140,459

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Sales prices for the related parties were not comparable to those for external customers as the Group was the sole provider of these customers. The sales terms for the related parties were between 30 to 60 days after monthly closing, similar to those with external customers.

c. Purchases

Related Parties Categories/Name Key management personnel MegaChips	For the Three Months Ended September 30 2017 2016 $ 1,599,192 $ 548,789	For the Three Months Ended September 30 2017 2016 $ 1,599,192 $ 548,789		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 1,599,192		2017 $ 4,137,289	2016 $ 550,290

Materials purchased from related parties were for manufacturing process. The payment term was 30 days after monthly closing after acceptance of materials, similar to those with external vendors.

d. Trade receivables from related parties

	Related Parties	September	September	30,	December 31,	December 31,	September 30,	September 30,
Line Items	Categories/Name		2017			2016		2016
Receivables from	Key management personnel
related parties,	MegaChips	$	2,120,721		$	540,738	$	1,418,497
net	Associates			-		21		77
	Others			-		185		-
		$	2,120,721		$	540,944	$	1,418,574
Other receivables	Associates
	Modiotek	$		-	$	303	$	155
	Others
	MXIC Education			-		97		114
		$		-	$	400	$	269

The outstanding trade receivables from related parties are unsecured. For the nine months ended September 30, 2017 and 2016, no impairment loss was recognized for trade receivables from related parties.

e. Payables to related parties

	Related Parties	September 30,	December 31,	September 30,	September 30,
Line Items	Categories/Name	2017	2016		2016
Payables to related	Key management personnel
parties	MegaChips	$ 3,668,300	$ 1,082,381	$	549,183
	The Group is its major	69,659	57,303		45,662
	management authority
		$ 3,737,959	$ 1,139,684	$	594,845
					(Continued)

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	Related Parties	September 30,	September 30,	December	31,	September 30,	September 30,
Line Items	Categories/Name		2017	2016			2016
Other payables to	Others
related parties	MXIC Education	$	4,930	$	-	$	4,825
							(Concluded)

The outstanding trade payables from related parties are unsecured and will be settled in cash.

f. Other transactions with related parties

Related Parties Line Items Categories/Name Manufacturing expense The Group is its major management authority Ardentec Operating expense Others MXIC Education Key management personnel MegaChips Associates Software and pattern Associates revenue Modiotek The Group is its major management authority Ardentec Key management personnel Rental revenue Associates Modiotek	For the Three Months Ended September 30 2017 2016 $ 65,903 $ 41,826 $ 2,750 $ 882 - - - - $ 2,750 $ 882 $ - $ 161 - - - - $ - $ 161 $ - $ 1,141	For the Three Months Ended September 30 2017 2016 $ 65,903 $ 41,826 $ 2,750 $ 882 - - - - $ 2,750 $ 882 $ - $ 161 - - - - $ - $ 161 $ - $ 1,141	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2017 $ 65,903 $ 2,750 - - $ 2,750 $ - - - $ - $ -		2017 $ 183,166 $ 8,250 - 1 $ 8,251 $ 330 - - $ 330 $ 963	2016 $ 86,448 $ 11,765 2,430 303 $ 14,498 $ 558 1,951 4 $ 2,513 $ 3,672

The manufacturing expense of related parties were comparable to those with other vendors. The payment term was 75 days after monthly closing.

The Group leases offices to associates (rentals are classified under other gains and losses). The amount of lease payment was based on the office space leased by each related party and was collected on a monthly basis.

Under certain contracts, the Group authorized the above related parties to use the Group’s pattern and software. The specifically negotiated terms were not comparable to those with external customers.

51 -

g. Compensation of key management personnel

Short-term benefits Post-employment benefits Share-based payments Other long-term employee benefits	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 2017 2016 $ 260,901 $ 96,791 8,551 9,347 23,219 17,075 62 25 $ 292,733 $ 123,238	For the Nine Months Ended September 30 2017 2016 $ 260,901 $ 96,791 8,551 9,347 23,219 17,075 62 25 $ 292,733 $ 123,238	For the Nine Months Ended September 30 2017 2016 $ 260,901 $ 96,791 8,551 9,347 23,219 17,075 62 25 $ 292,733 $ 123,238
		2017 $ 145,512 2,849 7,170 129 $ 155,660	2016 $ 26,074 3,116 3,986 (107) $ 33,069		2017 $ 260,901 8,551 23,219 62 $ 292,733	2016 $ 96,791 9,347 17,075 25 $ 123,238

The remuneration of key executives was determined by the remuneration committee based on the performance of individuals and market trends.

36. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings, the tariff of imported raw materials guarantees, natural gas agreements, land lease agreements or the deposits for hiring foreign workers:

September 30, 2017 Property, plant and equipment, net $ 10,581,438 Trade receivables 1,192,172 Pledge deposits (classified as other financial assets - non-current) 134,231 $ 11,907,841	December 31, 2016 September 30, 2016 $ 11,226,873 $ 11,576,074 729,891 861,274 138,861 138,861 $ 12,095,625 $ 12,576,209

37. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of September 30, 2017 were as follows:

a. As of September 30, 2017, December 31, 2016 and September 30, 2016, unused letters of credit amounted to approximately $117,377 thousand, $0 and $42,734 thousand, respectively.
b. Unrecognized commitments are as follows:

				September 30,	December 31,	December 31,	September 30,	September 30,
				2017		2016		2016
Acquisition	of property,	plant	and equipment	$ 1,724,568	$	686,864	$	204,418

c. The Group entered into a phase-change memory technology development agreement with IBM in January 2010, and the agreement is renewed every three years. Under the agreement, both parties share the related expenditures of the technology development. The term of the second agreement was from January 2013 to January 2016. The Group made all the payment for the second agreement. In addition, the Group entered into another phase-change memory technology agreement with IBM in January 2016, and the term of the agreement is from January 2016 to January 2019. As of September 30, 2017, the unrecognized commitment was US$3,200 thousand.
52 -

38. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

September 30, 2017

Foreign
Exchange
Currencies
Rate
Financial assets
Monetary items
JPY
$ 18,789,509
0.2691
USD
121,849
30.26

Financial liabilities
Monetary items
JPY
14,571,594
0.2691
USD
43,429
30.26

December 31, 2016
Foreign
Exchange
Currencies
Rate
Financial assets
Monetary items
JPY
$ 6,847,403

0.2756

USD
81,540

32.25

Financial liabilities
Monetary items
JPY
4,504,143

0.2756

USD
33,586

32.25

Carrying
Amount
$ 5,056,257

3,687,151
$ 8,743,408
$ 3,921,216

1,314,162
$ 5,235,378
Carrying
Amount
$ 1,887,144

2,629,665
$ 4,516,809
$ 1,241,342

1,083,149
$ 2,324,491

53 -

September 30, 2016

Foreign Exchange Currencies Rate Financial assets Monetary items JPY $ 5,211,069 0.3109 USD 105,057 31.36 Financial liabilities Monetary items JPY 2,343,022 0.3109 USD 38,648 31.36	Carrying Amount $ 1,620,121 3,294,588 $ 4,914,709 $ 728,446 1,212,001 $ 1,940,447

For the three and the nine months ended September 30, 2017, realized and unrealized net foreign exchange gains (losses) were $7,130 thousand, $(93,096) thousand, respectively. For the three and the nine months ended September 30, 2016, realized and unrealized net foreign exchange losses were $37,675 thousand and $7,381 thousand, respectively. It is impractical to disclose net foreign exchange losses by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

39. SEPARATELY DISCLOSED ITEMS

Information on significant transactions and information on investees:

a. Financing provided to others: None
b. Endorsements/guarantees provided: None
c. Marketable securities held (excluding investment in subsidiaries, associates and joint ventures): Table 1 (attached)
d. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None
e. Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None
f. Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None
g. Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 2 (attached)
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached)
i. Trading in derivative instruments: Note 7
54 -
j. Intercompany relationships and significant intercompany transactions: Table 4 (attached)
k. Information on investees: Table 5 (attached)
l. Information on investments in mainland China
1) 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, shareholding ratio, investment gains or losses, carrying amount of the investment at the end of the period, repatriated investment gains or losses, and limit on the amount of investment in the mainland China area: Table 6 (attached)
2) Any of the 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: Table 4 (attached)

40. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and the assessment of segment performance emphasizes on the types of goods or services delivered or provided. Considering the nature of the product and the process of manufacture, the management integrated those divisions of similar operation functions into one operation segment. The reporting segments of the Group were as follows:

Memory products and wafer fabrication IC design

There was no material difference between the accounting policies of the reportable segment and those described in Note 4.

a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segment.

Memory products and wafer fabrication IC design Total Other income Other gains and losses Finance costs Share of loss of associates Income (loss) before tax (continuing operations)		Segment Net Operating Revenue For the Three Months Ended September 30 For the Nine Months Ended September 30 2017 2016 2017 2016 $ 10,466,230 $ 7,084,052 $ 23,628,808 $ 17,345,692 1,052 7,617 11,436 13,434 $ 10,467,282 $ 7,091,669 $ 23,640,244 $ 17,359,126	Segment Net Operating Revenue For the Three Months Ended September 30 For the Nine Months Ended September 30 2017 2016 2017 2016 $ 10,466,230 $ 7,084,052 $ 23,628,808 $ 17,345,692 1,052 7,617 11,436 13,434 $ 10,467,282 $ 7,091,669 $ 23,640,244 $ 17,359,126	Segment Net Operating Revenue For the Three Months Ended September 30 For the Nine Months Ended September 30 2017 2016 2017 2016 $ 10,466,230 $ 7,084,052 $ 23,628,808 $ 17,345,692 1,052 7,617 11,436 13,434 $ 10,467,282 $ 7,091,669 $ 23,640,244 $ 17,359,126		Segment Income (Loss) from Operations and Net Income (Loss)	Segment Income (Loss) from Operations and Net Income (Loss)	Segment Income (Loss) from Operations and Net Income (Loss)	Segment Income (Loss) from Operations and Net Income (Loss)
		For the Three Months Ended September 30 2017 2016 $ 10,466,230 $ 7,084,052 1,052 7,617 $ 10,467,282 $ 7,091,669				For the Three Months Ended September 30 2017 2016 $ 2,103,609 $ 712,674 (5,474) (36,848) 2,098,135 675,826 70,905 64,432 9,531 (27,552 ) (50,578 ) (73,946 ) - (3,820) $ 2,127,993 $ 634,940		For the Nine Months Ended September 30
		2017 $ 10,466,230 1,052 $ 10,467,282		2017 $ 23,628,808 11,436 $ 23,640,244		2017 $ 2,103,609 (5,474) 2,098,135 70,905 9,531 (50,578 ) - $ 2,127,993		2017 $ 3,105,086 (8,072) 3,097,014 129,555 (108,055 ) (164,406 ) - $ 2,954,108	2016 $ (797,169 ) (178,494) (975,663 ) 141,637 (3,462 ) (239,934 ) (12,198) $ (1,089,620)

55 -

b. Segment total assets and liabilities

September 30, 2017 Segment assets Memory products and wafer fabrication $ 41,347,285 IC design 13,256 Consolidated total assets $ 41,360,541 Segment liabilities Memory products and wafer fabrication $ 19,653,979 IC design 2,106 Consolidated total liabilities $ 19,656,085	December 31, 2016 September 30, 2016 $ 35,438,701 $ 35,233,223 105,814 139,670 $ 35,544,515 $ 35,372,893 $ 17,171,507 $ 17,776,476 53,608 19,851 $ 17,225,115 $ 17,796,327

56 -

TABLE 1

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

MARKETABLE SECURITIES HELD SEPTEMBER 30, 2017

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		September 30, 2017	September 30, 2017		Shares as Collateral
				Shares/Units (In Thousands)	Carrying Amount	Percentage of Ownership	Fair Value (Note)
The Company MXBVI Hui Ying	Shares Ardentec Corporation United Industrial Gases Co., Ltd. Aetas Technology Inc. Zowie Technology Co., Ltd. Quality Test System Inc. Shares Chipbond Technology Corporation Key ASIC Bhd Tower Semiconductor Ltd. Global Strategic Investment Fund (Cayman) Global Strategic Investment Fund (Samoa) Shares Macronix International Co., Ltd. Raio Technology Co., Ltd.	The Company serves as member of its board of directors None None None None None None None None None The Company None	Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Available-for-sale financial assets - non-current Financial assets measured at cost - non-current	35,951,871 6,671,877 145,850 20,426 4,538,333 1,088,319 26,924,500 584,893 490,000 1,739,783 1,918,243 1,089,430	$ 974,296 58,500 - - - 56,919 27,981 544,240 - 32,681 92,651 -	7.41 3.06 0.29 0.14 14.64 0.17 3.02 0.60 2.52 4.90 0.11 10.23	$ 974,296 58,500 - - - 56,919 27,981 544,240 - 32,681 92,651 -	None None None None None None None None None None None None

Note: The fair value of financial assets measured at cost is recognized at its original cost less accumulated impairment loss.

57 -

TABLE 2

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

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, 2017

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Term	Ending Balance	% to Total
The Company MXHK MXA	MegaChips Corporation MXHK MXA MegaChips Corporation The Company The Company	Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary Subsidiary Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary Subsidiary	Sales Sales Sales Purchase Purchase Purchase	$ 6,075,619 3,963,436 816,547 4,137,289 US$ 130,094 US$ 26,792	26 17 3 47 100 100	30 days after monthly closing 45 days after monthly closing Net 60 days 30 days post acceptance month's closing 45 days after monthly closing Net 60 days	Note 35 Note 35 Note 35 Note 35 No material difference No material difference	Note 35 Note 35 Note 35 Note 35 No material difference No material difference	$ 2,120,721 931,980 172,215 3,668,300 US$ 30,801 US$ 5,591	32 14 3 57 100 100	- - - - - -

58 -

TABLE 3

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL SEPTEMBER 30, 2017

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Action Taken
The Company	MegaChips Corporation MXHK MXA	Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary Subsidiary	$ 2,120,721 931,980 172,215	6.09 times 6.25 times 8.61 times	$ - - -	- - -	JPY 6,970,887 thousand US$ 17,807 thousand US$ 3,748 thousand	$ - - -

59 -

TABLE 4

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Counterparty	Relationship (Note 1)	Transaction Details	Transaction Details
			Financial Statement Account	Amount	Payment Terms	% to Total Revenues or Assets
MXIC	MXHK	1	Sales	$3,963,436	Note 2	17
			Notes receivable and trade receivables	931,980		2
	MXE	1	Operatingexpenses	96,847		-
			Otherpayables	33,857		-
	MXA	1	Sales	816,547	Note 2	3
			Operatingexpenses	145,602		1
			Notes receivable and trade receivables	172,215		-
			Otherpayables	81,842		-
	Mxtran	1	Rental revenue	775	Note3	-
	MX Asia	1	Operatingexpenses	65,629		-
			Otherpayables	18,948		-
	INFOMAX	1	Purchase ofproperty, plant and equipment	6,000		-
			Purchase of intangible assets	13,000		-
MXHK	MXm	3	Operatingexpenses	164,599		1

Note 1: The transactions from the parent company to the subsidiary are denoted as 1.

The transactions from the subsidiary to the parent company are denoted as 2. The transactions between two subsidiaries are denoted as 3.

Note 2: The sales price refers to the agreed upon product price for the end customer.

Note 3: The Company leased office space to related parties and collected rental revenue according to the floor space per month.

Note 4: The transaction terms with related parties were 30 to 60 days after monthly closing and were similar to those with third parties.

60 -

TABLE 5

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INFORMATION ON INVESTEES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance a	s ofSeptember 30, 2017	s ofSeptember 30, 2017	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				September 30, 2017	December 31, 2016	Shares	%	Carrying Amount
The Company MXBVI Run Hong Hui Ying Mxtran Mxtran Samoa	MXA MXBVI Hui Ying Run Hong INFOMAX Mxtran Modiotek NTTI MXE MPL MXHK MX Asia INFOMAX Mxtran Modiotek Modiotek Mxtran Samoa Mxtran HK	San Jose, California, U.S.A. Tortola, British Virgin Islands Taipei, Taiwan Taipei, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan San Jose, California, U.S.A. Belgium Singapore Hong Kong Cayman Island Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Samoa Hong Kong	Sales and marketing Investment holding company Investment Investment Baseband chip, analog baseband chip, and power management chip Combi-SIM IC and the related service Wi-Fi video transmission IC and smart security systems IC design After-sales service After-sales service Sales and marketing Investment holding company Baseband chip, analog baseband chip, and power management chip Combi-SIM IC and the related service Wi-Fi video transmission IC and smart security systems Wi-Fi video transmission IC and smart security systems Investment holding company Investment holding company	$ 2,640 7,348,057 500,000 984,432 - 755,287 - 874,418 2,106 3,291 378,427 26,325 - 40,318 - - 35,979 23,880	$ 2,640 7,348,057 500,000 984,432 2,876,842 755,287 430,232 866,796 2,106 3,291 378,427 26,325 111,028 40,318 30,442 30,442 35,979 23,880	100,000 212,048,000 - - - 69,627,323 - 26,600,000 999 174,000 89,700,000 700,000 - 3,393,200 - - 1,170,000 6,152,000	100.00 100.00 100.00 100.00 - 90.43 - 100.00 100.00 100.00 100.00 100.00 - 4.41 - - 100.00 100.00	$ 87,206 1,967,129 24,462 14,048 - 10,083 - 296,734 108,983 18,045 623,692 56,591 - 492 - - 1,040 442	$ (8,195 ) 140,527 820 (418 ) (1,186 ) (8,564 ) - (3,815 ) 5,583 687 131,478 2,212 (1,186 ) (8,564 ) - - (7 ) (7 )	$ (7,934 ) 140,527 820 (418 ) (1,153 ) (7,744 ) - Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1	Subsidiary Subsidiary Subsidiary Subsidiary Note 2 Subsidiary Note 3 Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Note 2 Subsidiary Note 3 Note 3 Subsidiary Subsidiary

Note 1: Under relevant regulations, no disclosure of investment gain (loss) is needed.

Note 2: On March 22, 2017, INFOMAX filed for liquidation per the resolution reached in its shareholders’ meeting; hence, the Group has no control over INFOMAX as well as the subsidiaries of INFOMAX.

Note 3: In the May 26, 2017 shareholders’ meeting, the decision for the liquidation of Modiotek and the election of its liquidator were resolved. The Group has hence lost its significant influence over Modiotek and Modiotek’s subsidiaries.

61 -

TABLE 6

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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, 2017	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of September 30, 2017	Net Income (Loss) of the Investee	% Ownership for Direct or Indirect Investment	Investment Gain (Loss) (Note 2)	Carrying Amount as of September 30, 2017	Accumulated Repatriation of Investment Income as of September 30, 2017
						Outward	Inward
MXm Maxtran Beijing (Note 3)	Development of integrated circuit system and software Technical support of Combi-SIM IC		$ 296,160 23,435	MXHK (Note 1) Mxtran HK (Note 1)	$ 296,160 23,435	$ - -	$ - -	$ 296,160 23,435	$ 41,196 (3 )	100 -	$ 41,196 (2 )	$ 361,016 -	$ - -

Accumulated Outward Remittance for Investment in Mainland China as of September 30, 2017		Investment Amount Authorized by the Investment Commission, MOEA			Upper Limit on the Amounts of Investment Stipulated by Investment Commission, MOEA
$ 296,160		$ 296,160			(Note 4)

Note 1: The Company invested in a company located in mainland China indirectly through an existing company in a third country.

Note 2: The amount was recognized based on the unreviewed financial statements of the investee company.

Note 3: The liquidation of Maxtran Beijing was completed in January 2017. The cancellation of the registration of Maxtran Beijing was filed with the Investment Commission, MOEA for recordation and approved in July 2017.

Note 4: As the Company has obtained the certificate of being qualified for operating headquarters issued by the Industrial Development Bureau, MOEA in March 2017, the upper limit on investments in mainland China pursuant to “Principle of investment or Technical Cooperation in Mainland China” is not applicable.

62 -

AI assistant

Macronix — Interim / Quarterly Report 2017

52013_rns_2017-11-14_c27088a1-6986-44b5-b88d-393defc0ac4b.pdf

Macronix International Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Notice to Readers

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

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

Recognition, measurement and impairment of financial assets

1) IFRS 16 “Leases”

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

1) Retirement benefits

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

9. FINANCIAL ASSETS MEASURED AT COST

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET

11. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

b. Other receivables

12. INVENTORIES

13. SUBSIDIARIES

Subsidiary included in consolidated financial statements

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

15. PROPERTY, PLANT AND EQUIPMENT

16. INTANGIBLE ASSETS

17. PREPAYMENTS FOR LEASES

18. OTHER FINANCIAL ASSETS

19. OTHER ASSETS

20. BORROWINGS

21. NOTES PAYABLE AND TRADE PAYABLES

22. OTHER PAYABLES

23. PROVISIONS

24. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

25. EQUITY

Ordinary shares

3) Employee unearned benefits

e. Non-controlling interests

26. REVENUE

27. NET PROFIT (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) FROM CONTINUING OPERATIONS

a. Other income

c. Finance costs

e. Employee benefits expense

f. Employees’ compensation and remuneration of directors

Amount

28. INCOME TAXES RELATING TO CONTINUING OPERATIONS

c. Income tax assessments

29. EARNINGS (LOSS) PER SHARE

Net Income (Loss) for the Period

30. SHARE-BASED PAYMENT ARRANGEMENTS

Mxtran

INFOMAX

31. DISPOSAL OF SUBSIDIARIES

32. OPERATING LEASE ARRANGEMENTS

b. The Group as lessor

33. CAPITAL MANAGEMENT

34. FINANCIAL INSTRUMENTS

c. Categories of financial instruments

1) Market risk

a) Foreign currency risk

Sensitivity analysis

b) Interest rate risk

Sensitive analysis

c) Other price risk

Sensitive analysis

2) Credit risk

Business related credit risk

Macronix Interim / Quarterly Report 2017