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cpc Interim / Quarterly Report 2020

Dec 25, 2020

51873_rns_2020-12-25_84ce1f57-7847-448f-96a0-c38e401863f9.pdf

Interim / Quarterly Report

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REVIEW REPORT SEPTEMBER 30, 2020 AND 2019

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

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INDEPENDENT AUDITORS' REVIEW REPORT TRANSLATED FROM CHINESE

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

Introduction

We have reviewed the accompanying consolidated balance sheets of CHIEFTEK PRECISION CO., LTD. and subsidiaries (the “Group”) as of September 30, 2020 and 2019, and the related consolidated statements of comprehensive income for the three-month and nine-month periods then ended, as well as the consolidated statements of changes in equity and of cash flows for the nine-month periods then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission. Our responsibility is to express a conclusion on these consolidated financial statements based on our reviews.

Scope of Review

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

Basis for Qualified Conclusion

As explained in Note 4(3), the financial statements and related information disclosed in Note 13 of insignificant consolidated subsidiaries were not reviewed by independent auditors. Those statements reflect total assets of NT$274,928 thousand and NT$491,364 thousand, constituting 8% and 15% of the consolidated total assets, and total liabilities of NT$79,109 thousand and NT$186,303 thousand, constituting 5% and 13% of the consolidated total liabilities as of September 30, 2020 and 2019, respectively, and total comprehensive income of NT$4,833 thousand, NT$2,714 thousand, NT$10,636

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thousand, and NT$3,751 thousand, constituting 10%, 9%, 8%, and 3% of the consolidated total comprehensive income for the three-month and nine-month periods then ended, respectively.

Qualified Conclusion

Except for the adjustments to the consolidated financial statements, if any, as might have been determined to be necessary had the financial statements of consolidated subsidiaries been reviewed by independent auditors, that we might have become aware of had it not been for the situation described above, based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of September 30, 2020 and 2019, and of its consolidated financial performance for the three-month and nine-month periods then ended and its consolidated cash flows for the nine-month periods then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.

Lin, Yung-Chih

Independent Accountants

Lin, Tzu-Shu

PricewaterhouseCoopers, Taiwan Republic of China

November 3, 2020

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

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2020, DECEMBER 31, 2019 AND SEPTEMBER 30, 2019

(Expressed in thousands of New Taiwan dollars)

(The consolidated balance sheets as of September 30, 2020 and 2019 are reviewed, not audited)

==> picture [521 x 486] intentionally omitted <==

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September 30, 2020 December 31, 2019 September 30, 2019
Assets Notes AMOUNT % AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents 6(1) $ 673,191 19 $ 678,134 21 $ 765,390 23
1136 Financial assets at amortized cost - 6(2)
current 7,502 - 7,629 - - -
1150 Notes receivable, net 6(3) 28,339 1 27,559 1 17,894 1
1170 Accounts receivable, net 6(3) and 12 345,338 10 298,789 9 353,248 10
1200 Other receivables 2,970 - 3,252 - 6,906 -
1220 Current income tax assets 6(23) 33,121 1 2,992 - 4,963 -
130X Inventories 5 and 6(4) 593,523 17 637,277 19 682,584 20
1410 Prepayments 38,108 1 28,538 1 32,444 1
11XX Total current assets 1,722,092 49 1,684,170 51 1,863,429 55
Non-current assets
1600 Property, plant and equipment 6(5) and 8 1,474,516 41 1,290,959 39 1,138,477 34
1755 Right-of-use assets 6(6) 131,157 4 130,248 4 131,728 4
1780 Intangible assets 6(7) 112,996 3 120,990 3 121,991 4
1840 Deferred income tax assets 6(23) 24,480 1 26,060 1 26,905 1
1915 Prepayments for equipment 6(5) 62,031 2 57,161 2 77,916 2
1920 Guarantee deposits paid 7,567 - 7,700 - 5,880 -
1990 Other non-current assets 5,437 - 2,879 - 3,274 -
15XX Total non-current assets 1,818,184 51 1,635,997 49 1,506,171 45
1XXX Total assets $ 3,540,276 100 $ 3,320,167 100 $ 3,369,600 100
----- End of picture text -----

(Continued)

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2020, DECEMBER 31, 2019 AND SEPTEMBER 30, 2019

(Expressed in thousands of New Taiwan dollars)

(The consolidated balance sheets as of September 30, 2020 and 2019 are reviewed, not audited)

==> picture [526 x 615] intentionally omitted <==

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September 30, 2020 December 31, 2019 September 30, 2019
Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT %
Liabilities
Current liabilities
2100 Short-term borrowings 6(8)(26) $ 420,442 12 $ 313,315 9 $ 281,480 8
2110 Short-term notes and bills payable 6(9)(26) 40,000 1 - - - -
2130 Current contract liabilities 6(16) 3,944 - 3,964 - 2,433 -
2150 Notes payable 84,501 2 79,155 2 75,526 2
2170 Accounts payable 22,825 1 18,711 1 31,713 1
2200 Other payables 6(10) 130,204 4 135,507 4 203,065 6
2230 Current income tax liabilities 6(23) 4,687 - 18,700 1 17,891 1
2280 Current lease liabilities 6(6)(19)(26) 5,190 - 4,912 - 4,890 -
2310 Advance receipts - - 1,699 - 1,717 -
2320 Long-term liabilities, current 6(11)(26), 8
portion and 9 88,164 3 101,136 3 88,686 3
21XX Total current liabilities 799,957 23 677,099 20 707,401 21
Non-current liabilities
2540 Long-term borrowings 6(11)(26), 8
and 9 534,412 15 480,977 15 519,701 15
2570 Deferred income tax liabilities 6(23) 16,597 - 4,211 - 18,176 1
2580 Non-current lease liabilities 6(6)(19)(26) 127,898 4 126,431 4 127,668 4
2640 Net defined benefit liabilities 6(12) 6,441 - 6,664 - 7,221 -
25XX Total non-current liabilities 685,348 19 618,283 19 672,766 20
2XXX Total liabilities 1,485,305 42 1,295,382 39 1,380,167 41
Equity
Share capital 6(13)(15)
3110 Common stock 811,876 23 811,876 25 811,876 24
Capital reserves 6(14)
3200 Capital surplus 440,667 12 440,667 13 440,667 13
Retained earnings 6(13)(15)
3310 Legal reserve 162,016 5 144,552 4 144,552 4
3320 Special reserve 29,394 1 17,047 1 17,047 1
3350 Unappropriated retained earnings 674,568 19 640,037 19 596,043 18
3400 Other equity interest ( 37,000)( 1)( 29,394)( 1)( 20,752)( 1)
3500 Treasury stocks 6(13) ( 26,550)( 1) - - - -
3XXX Total equity 2,054,971 58 2,024,785 61 1,989,433 59
Significant Contingent Liabilities and 6(6) and 9
Unrecognized Contract Commitments
3X2X Total liabilities and equity $ 3,540,276 100 $ 3,320,167 100 $ 3,369,600 100
----- End of picture text -----

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

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

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019 (Expressed in thousands of New Taiwan dollars, except for earnings per share amounts) (REVIEWED, NOT AUDITED)

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Three months ended September 30 Nine months ended September 30
2020 2019 2020 2019
Items Notes AMOUNT % AMOUNT % AMOUNT % AMOUNT %
4000 Sales revenue 6(16) $ 347,443 100 $ 321,874 100 $ 1,029,218 100 $ 1,000,252 100
5000 Operating costs 6(4)(12)(21)(2
2) ( 209,549) ( 60) ( 176,507) ( 55) ( 600,646) ( 58) ( 556,584) ( 56)
5900 Net operating margin 137,894 40 145,367 45 428,572 42 443,668 44
Operating expenses 6(7)(12)(21)(2
2) and 7
6100 Selling expenses ( 23,340) ( 7) ( 27,046) ( 8) ( 67,303) ( 7) ( 83,013) ( 8)
6200 General and administrative
expenses ( 36,072) ( 10) ( 33,489) ( 10) ( 115,118) ( 11) ( 117,104) ( 12)
6300 Research and development
expenses ( 18,241) ( 5) ( 18,803) ( 6) ( 53,603) ( 5) ( 50,701) ( 5)
6450 Expected credit impairment 12
gain (loss) 5,492 1 ( 2,146) ( 1) 1,695 - ( 6,915) ( 1)
6000 Total operating expenses ( 72,161) ( 21) ( 81,484) ( 25) ( 234,329) ( 23) ( 257,733) ( 26)
6900 Operating profit 65,733 19 63,883 20 194,243 19 185,935 18
Non-operating income and
expenses
7100 Interest income 6(2)(17) 363 - 560 - 1,610 - 2,915 -
7010 Other income 6(18) 2,343 1 1,773 - 8,602 1 6,957 1
7020 Other gains and losses 6(6)(19) and
12 ( 3,249) ( 1) ( 9,591) ( 3) ( 6,591) ( 1) ( 344) -
7050 Finance costs 6(6)(20) ( 4,060) ( 1) ( 4,376) ( 1) ( 13,098) ( 1) ( 12,867) ( 1)
7000 Total non-operating income
and expenses ( 4,603) ( 1) ( 11,634) ( 4) ( 9,477) ( 1) ( 3,339) -
7900 Profit before income tax 61,130 18 52,249 16 184,766 18 182,596 18
7950 Income tax expense 6(23) ( 14,202) ( 4) ( 10,164) ( 3) ( 39,681) ( 4) ( 51,506) ( 5)
8200 Profit for the period $ 46,928 14 $ 42,085 13 $ 145,085 14 $ 131,090 13
Other comprehensive income
(loss) (Net)
Components of other
comprehensive income (loss)
that will be reclassified to profit
or loss
8361 Financial statements
translation differences of
foreign operations $ 1,735 - ($ 10,338) ( 3) ($ 7,606) ( 1) ($ 3,705) -
8300 Total other comprehensive
income (loss) for the period $ 1,735 - ($ 10,338) ( 3) ($ 7,606) ( 1) ($ 3,705) -
8500 Total comprehensive income for
the period $ 48,663 14 $ 31,747 10 $ 137,479 13 $ 127,385 13
Earnings per share (in dollars) 6(24)
9750 Basic $ 0.58 $ 0.52 $ 1.79 $ 1.61
9850 Diluted $ 0.58 $ 0.52 $ 1.79 $ 1.61
----- End of picture text -----

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

(REVIEWED, NOT AUDITED)

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Equity attributable to owners of the parent
Retained Earnings
Financial statements
translation
Share capital - Unappropriated retained differences of
Notes common stock Capital reserve Legal reserve Special reserve earnings foreign operations Treasury stocks Total equity
For the nine-month period ended
September 30, 2019
Balance at January 1, 2019 $ 738,069 $ 440,667 $ 97,280 $ 12,367 $ 664,519 ($ 17,047 ) $ - $ 1,935,855
Profit for the period - - - - 131,090 - - 131,090
Other comprehensive loss for the period - - - - - ( 3,705 ) - ( 3,705 )
Total comprehensive income (loss) for
the period - - - - 131,090 ( 3,705 ) - 127,385
Appropriations of 2018 earnings
Legal reserve - - 47,272 - ( 47,272 ) - - -
Special reserve - - - 4,680 ( 4,680 ) - - -
Cash dividends 6(10)(15) - - - - ( 73,807 ) - - ( 73,807 )
Stock dividends 6(13)(15) 73,807 - - - ( 73,807 ) - - -
Balance at September 30, 2019 $ 811,876 $ 440,667 $ 144,552 $ 17,047 $ 596,043 ($ 20,752 ) $ - $ 1,989,433
For the nine-month period ended
September 30, 2020
Balance at January 1, 2020 $ 811,876 $ 440,667 $ 144,552 $ 17,047 $ 640,037 ($ 29,394 ) $ - $ 2,024,785
Profit for the period - - - - 145,085 - - 145,085
Other comprehensive loss for the period - - - - - ( 7,606 ) - ( 7,606 )
Total comprehensive income (loss) for
the period - - - - 145,085 ( 7,606 ) - 137,479
Appropriations of 2019 earnings
Legal reserve - - 17,464 - ( 17,464 ) - - -
Special reserve 6(15) - - - 12,347 ( 12,347 ) - - -
Cash dividends 6(15) - - - - ( 80,743 ) - - ( 80,743 )
Purchase of treasury stocks 6(13) - - - - - - ( 26,550 ) ( 26,550 )
Balance at September 30, 2020 $ 811,876 $ 440,667 $ 162,016 $ 29,394 $ 674,568 ($ 37,000 ) ($ 26,550 ) $ 2,054,971
----- End of picture text -----

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

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

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

(REVIEWED, NOT AUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Expected credit impairment (gain) loss
Reversal of (loss on) inventory market price
decline
Depreciation
Gain arising from lease modifications
Amortization
Interest income
Interest expense
Changes in operating assets and liabilities
Changes in operating assets
Notes receivable
Accounts receivable
Other receivables
Inventories
Prepayments
Changes in operating liabilities
Current contract liabilities
Notes payable
Accounts payable
Other payables
Advance receipts
Net defined benefit liabilities
Cash inflow generated from operations
Interest received
Interest paid
Income tax paid
Net cash flows from operating activities		 For the nine-month periods ended
September 30,
Notes
2020
2019
$
184,766
$
182,596
12
(
1,695 )
6,915
6(4)
10,838
(
888 )
6(5)(6)(21)
59,026
64,199
6(6)(19)
(
251 )
-
6(7)(21)
8,461
2,283
6(17)
(
1,610 ) (
2,915 )
6(20)
13,098
12,867
(
780 )
32,828
(
44,765 )
72,979
282
5,465
32,873
2,647
(
9,570 ) (
10,619 )
(
20 )
605
22,196
(
91,268 )
4,114
(
37,227 )
18,360
(
55,168 )
(
1,699 ) (
64 )
(
223 ) (
223 )
293,401
185,012
1,610
2,915
(
13,310 ) (
13,450 )
(
69,857 ) (
129,455 )
211,844
45,022

(Continued)

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

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

(REVIEWED, NOT AUDITED)

CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in financial assets at amortized cost -
current
Cash paid for acquisition of property, plant and
equipment
Acquisition of intangible assets
Increase in prepayments for equipment
Decrease (increase) in guarantee deposits paid
(Increase) decrease in other non-current assets
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Increase in short-term notes and bills payable
Payments of lease liability
Increase in long-term borrowings
Decrease in long-term borrowings
Payments of cash dividends
Purchase of treasury stocks
Net cash flows from financing activities
Effect of foreign exchange rate changes on cash and
cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 For the nine-month periods ended
September 30,
Notes
2020
2019
$
127
$
-
6(25)
(
254,862 ) (
137,760 )
6(7)
(
459 ) (
119 )
(
33,141 ) (
47,630 )
133
(
804 )
(
2,558 )
369
(
290,760 ) (
185,944 )
6(26)
106,900
73,214
6(26)
40,000
-
6(26)
(
3,581 ) (
3,610 )
6(26)
400,000
200,000
6(26)
(
357,199 ) (
153,697 )
6(15)(25)
(
80,743 )
-
6(13)
(
26,550 )
-
78,827
115,907
(
4,854 ) (
6,995 )
(
4,943 ) (
32,010 )
6(1)
678,134
797,400
6(1)
$
673,191
$
765,390

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

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CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

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

(REVIEWED, NOT AUDITED)

1. HISTORY AND ORGANIZATION

  • (1) CHIEFTEK PRECISION CO., LTD. (the “Company”) was incorporated on October 19, 1998 as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.). and other related regulations. The Company and its subsidiaries (collectively referred herein as the “Group”) primarily engages in the research, development, manufacture and sale of miniature linear guides, miniature ball screws, miniature linear modules, electro-optics equipment and semiconductor process equipment.

  • (2) The common stocks of the Company have been listed on the Taipei Exchange since December 28, 2012.

  • THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

  • These consolidated financial statements were authorized for issuance by the Board of Directors on November 3, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

  • (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments as endorsed by the FSC effective from 2020 are as follows:

follows:
New Standards,InterpretationsandAmendments Effective date by
International Accounting
StandardsBoard (“IASB”)
Note: Earlier application from January 1, 2020 is allowed by the FSC.
Amendments to IAS 1 and IAS 8, ‘Disclosure initiative - definition
of material’
Amendments to IFRS 3, ‘Definition of a business’
Amendments to IFRS 9, IAS 39 and IFRS 7, ‘Interest rate
benchmark reform’
Amendment to IFRS 16, ‘Covid-19 - related rent concessions’		 January 1, 2020
January 1, 2020
January 1, 2020
June 1, 2020 (Note)

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

Amendment to IFRS 16, ‘Covid-19-related rent concessions’

This amendment provides a practical expedient for lessees from assessing whether a rent concession related to COVID-19, and that meets all of the following conditions, is a lease modification:

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  • (a) Changes in lease payments result in the revised consideration for the lease that is substantially the

  • same as, or less than, the consideration for the lease immediately preceding the change;

  • (b) Any reduction in lease payments affects only payments originally due on or before June 30, 2021; and

  • (c) There is no substantive change to other terms and conditions of the lease.

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

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2021 are as follows:

Effective date by New Standards, Interpretations and Amendments IASB Amendments to IFRS 4, ‘Extension of the temporary exemption from January 1, 2021 applying IFRS 9’

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

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

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

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments Effective date by
IASB
Amendments to IFRS 3, ‘Reference to the conceptual framework’
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets
between an investor and its associate or joint venture’
IFRS 17, ‘Insurance contracts’
Amendments to IFRS 17, ‘Insurance contracts’
Amendments to IAS 1, ‘Classification of liabilities as current or
non-current’
Amendments to IAS 16, ‘Property, plant and equipment: proceeds before
intended use’
Amendments to IAS 37, ‘Onerous contracts – cost of fulfilling a contract’
Annual improvements to IFRS Standards 2018 – 2020
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16,
‘Interest Rate Benchmark Reform – Phase 2’		 January 1, 2022
To be determined by
IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2022
January 1, 2022
January 1, 2022
January 1, 2021

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements

are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

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(1) Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Accounting Standard 34, ‘Interim financial reporting’ endorsed by the FSC.

(2) Basis of preparation

  • A. Except for the defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation, the consolidated financial statements have been prepared under the historical cost convention.

  • B. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5, ‘Critical accounting judgments, estimates and key sources of assumption uncertainty’.

(3) Basis of consolidation

  • A. Basis for preparation of consolidated financial statements:

  • (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

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

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

  • (d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.

  • (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognized in profit or loss. All

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amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

B. Subsidiaries included in the consolidated financial statements:

Name of investor Name of subsidiary Business
September 30,December 31,September 30,
activities
2020
2019
2019
Professional
investment
100
100
100
Sale of high
precision
linear motion
components
and rendering
after-sales
service
100
100
100
Lease of
real estate
property
100
100
100
Research,
manufacture
and sale of
machineries
100
100
100
Sale of high
precision
linear motion
components
and rendering
after-sales
service
100
100
-
Professional
investment
100
100
100
Ownership (%)		 Note
CHIEFTEK
PRECISION
CO., LTD.
(“CHIEFTEK
PRECISION”)
CHIEFTEK
PRECISION
CO., LTD.
CHIEFTEK
PRECISION
CO., LTD.
CHIEFTEK
PRECISION
CO., LTD.
CHIEFTEK
PRECISION
CO., LTD.
CHIEFTEK
PRECISION
HOLDING CO.,
LTD.		 CHIEFTEK
PRECISION
HOLDING
CO., LTD.
cpc Europa GmbH
(“cpc Europa”)
CHIEFTEK
PRECISION
INTERNATIONAL
LLC
CSM Maschinen
GmbH
CHIEFTEK
PRECISION
USA CO., LTD.
(“cpc USA”)
CHIEFTEK
PRECISION
(Hong Kong)
Co., Limited		 -
Note 1
Note 2
Note 2
Note 2
Note 3
-

~13~

Name of investor Name of subsidiary Business
September 30,December 31,September 30,
activities
2020
2019
2019
Ownership (%)
Sale of high
precision
linear motion
components
and rendering
after-sales
service
-
-
100
Production,
processing
and sale of
high precision
linear motion
components
and after-sales
service
100
100
100		 Note
CHIEFTEK
PRECISION
HOLDING CO.,
LTD.
CHIEFTEK
PRECISION
(Hong Kong)
Co., Limited		 CHIEFTEK
PRECISION
USA CO., LTD.
Chieftek Machinery
(Kunshan) Co.,
Ltd. (“Chieftek
(Kunshan)”)		 Note 2
Note 3
-

  • Note 1: The financial statements of the entity as of and for the nine-month period ended September 30, 2019 were not reviewed by independent auditors as the entity did not meet the definition of a significant subsidiary.

  • Note 2: The financial statements of the entities as of and for the nine-month periods ended September 30, 2020 and 2019 were not reviewed by independent auditors as the entity did not meet the definition of a significant subsidiary.

  • Note 3: On December 31, 2019, the Group has commenced organizational restructuring through capital reduction and withdrawing 100% share capital of CHIEFTEK PRECISION USA CO., LTD. from CHIEFTEK PRECISION HOLDING CO., LTD. and transferred the shares to the Company.

The financial statements and related information disclosed in Note 13 of insignificant consolidated subsidiaries were not reviewed by independent auditors. Those statements reflect total assets of $274,928 and $491,364, constituting 8% and 15% of the consolidated total assets, and total liabilities of $79,109 and $186,303, constituting 5% and 13% of the consolidated total liabilities as of September 30, 2020 and 2019, respectively, and total comprehensive income of $4,833, $2,714, $10,636 and $3,751, constituting 10%, 9%, 8% and 3% of the consolidated total comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019, respectively.

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

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

  • E. Significant restrictions: None.

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

~14~

(4) Foreign currency translation

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

  • A. Foreign currency transactions and balances

  • (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.

  • (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.

  • (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

  • (d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘other gains and losses’.

  • B. Translation of foreign operations

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

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

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

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

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

~15~

(5) Classification of current and non-current items

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

  • (a) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;

  • (b) Assets held mainly for trading purposes;

  • (c) Assets that are expected to be realized within 12 months from the balance sheet date;

  • (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than 12 months after the balance sheet date.

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

  • (a) Liabilities that are expected to be settled within the normal operating cycle;

  • (b) Liabilities arising mainly from trading activities;

  • (c) Liabilities that are to be settled within 12 months from the balance sheet date;

  • (d) Liabilities for which the repayment date cannot be extended unconditionally to more than 12 months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

  • A. Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value.

  • B. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitment in operations are classified as cash equivalents.

  • (7) Financial assets at amortized cost

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

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

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

  • B. The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

  • (8) Accounts and notes receivable

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

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

(9) Impairment of financial assets

For debt instruments measured as financial assets at amortized cost, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for

~16~

the lifetime expected credit losses (“ECLs”) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.

(10) Derecognition of financial assets

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

(11) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in process comprises raw materials, direct labor, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses. When the cost of inventory is lower than net realizable value, a write-down is provided and recognized in operating costs. If the circumstances that caused the write-down cease to exist, such that all or part of the write-down is no longer needed, it should be reversed to that extent and recognized as deduction of operating costs.

(12) Property, plant and equipment

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

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

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

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

~17~

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

(13) Leasing arrangements (lessee) － right-of-use assets/ lease liabilities

  • A. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of lowvalue assets, lease payments are recognized as an expense on a straight-line basis over the lease term.

  • B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of the following:

  • (a) Fixed payments, less any lease incentives receivable;

  • (b) Amounts expected to be payable by the lessee under residual value guarantees; and

  • (c) Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The Group subsequently measures the lease liability at amortized cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

  • C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability;

  • (b) Any lease payments made at or before the commencement date;

  • (c) Any initial direct costs incurred by the lessee; and

  • (d) An estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right-of-use asset.

  • D. For lease modifications that decrease the scope of the lease, the lessee shall decrease the carrying amount of right-of-use assets to reflect the partial or full termination of the lease, and recognize the difference between remeasured lease liability in profit or loss.

~18~

(14) Intangible assets

  • A. Trademarks and patents

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

  • B. Computer software

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

  • C. Turn-key professional technique

  • The subsidiary, CSM Maschinen GmbH, was commissioned the Company to develop and design linear guide, robotic arm and equipment for exhibition which are stated initially at cost and amortized over the economic life of Turn-key professional technique of 10 years.

  • D. Other intangible assets

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

(15) Impairment of non-financial assets

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

  • (16) Borrowings

  • A. Borrowings comprise long-term and short-term banks loans. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.

  • B. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as other non-current assets for liquidity services and amortized over the period of the facility to which it relates.

  • (17) Notes and accounts payable

  • A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

~19~

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

(18) Derecognition of financial liabilities

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

(19) Offsetting financial instruments

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

(20) Employee benefits

  • A. Short-term employee benefits

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

  • B. Pensions

  • (a) Defined contribution plans

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

  • (b) Defined benefit plans

    • i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.

    • ii. Remeasurement arising on defined benefit plans is recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

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

  • C. Employees’ compensation and directors’ and supervisors’ remuneration

  • Employees’ compensation and directors’ and supervisors’ remuneration are recognized as

~20~

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

  • (21) Income tax

  • A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.

  • B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

  • C. Deferred tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.

  • D. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred tax assets are reassessed.

  • E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.

~21~

  • F. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.

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

  • (22) Share capital

  • A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

  • B. Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is resolved from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(23) Dividends

  • Prior to 2019, dividends are recorded as liabilities in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

From 2019, cash dividends are recorded as liabilities in the Company’s financial statements in the period in which they are resolved by the Board of Directors. Stock dividends are recorded as stock dividends to be distributed in which they are resolved by the Company’s shareholders, and are reclassified to ordinary shares on the effective date of new shares issuance.

  • (24) Revenue recognition

Sales of goods

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

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

~22~

  • C. A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(25) Operating segments

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

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION

UNCERTAINTY

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

(1) Critical judgements in applying the Group’s accounting policies

None.

(2) Critical accounting estimates and assumptions

Evaluation of inventories

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

  • B. As of September 30, 2020, the carrying amount of inventories was $593,523.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
Cash:
Cash on hand
Checking accounts and
demand deposits
Cash Equivalents:
Time deposits		 September30,2020
1,401
$ 670,324
671,725
1,466
673,191
$		 December31,2019
1,308
$ 675,382
676,690
1,444
678,134
$		 September30,2019
1,273
$ 762,658
763,931
1,459
765,390
$

~23~

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

  • B. The Group has no cash and cash equivalents pledged to others as of September 30, 2020, December 31, 2019 and September 30, 2019.

(2) Financial assets at amortized cost - current

  • September 30, 2020 December 31, 2019 September 30, 2019

  • Time deposits with maturity of over 3 months $ 7,502 $ 7,629 $ -

  • － －

  • A. The Group recognized interest income of $18, $ , $99 and $ from financial assets at amortized cost for the three-month and nine-month periods ended September 30, 2020 and 2019, respectively, shown as part of “Interest Income”.

  • B. As of September 30, 2020, December 31, 2019 and September 30, 2019, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at amortized cost held by the Group was its book value.

  • C. The Group has no financial assets at amortized cost pledged to others as of September 30, 2020, December 31, 2019 and September 30, 2019.

  • D. Information relating to credit risk of financial assets at amortized cost is provided in Note 12(2), ‘Financial instruments’.

(3) Notes and accounts receivable, net

‘Financial instruments’.
Notes and accounts receivable, net		 ‘Financial instruments’.
Notes and accounts receivable, net		 ‘Financial instruments’.
Notes and accounts receivable, net
A. The ageing analysis of the Group’s notes and accounts receivable is as follows:
September30,2020
December31,2019
September30,2019
Notes receivable
28,339
$ 27,559
$ 17,894
$ September30,2020
December31,2019
September30,2019
Accounts receivable
369,350
$ 324,703
$ 375,349
$ Less: Allowance for doubtful
accounts
24,012)
(
25,914)
(
22,101)
(
345,338
$ 298,789
$ 353,248
$ Accounts
Notes
Accounts
Notes
Accounts
Notes
receivable
receivable
receivable
receivable
receivable
receivable
Not past due
307,921
$ 28,168
$ 240,138
$ 27,450
$ 257,983
$ 17,745
$ Up to 30 days
28,099
-
12,647
109
44,556
149
31 to 90 days
11,472
-
32,387
-
18,866
-
91 to 180 days
662
-
7,936
-
15,349
-
Over 180 days
21,196
171
31,595
-
38,595
-
369,350
$ 28,339
$ 324,703
$ 27,559
$ 375,349
$ 17,894
$ December31,2019
September30,2019
September30,2020
Accounts
receivable
257,983
$ 44,556
18,866
15,349
38,595
375,349
$		 Notes
receivable
17,745
$ 149
-
-
-
17,894
$

The above ageing analysis was based on past due date.

~24~

  • B. As of September 30, 2020, December 31, 2019, September 30, 2019 and January 1, 2019, the balances of notes receivable and accounts receivable from contracts with customers amounted to $397,689, $352,262, $393,243 and $499,050, respectively.

  • C. Without taking into account of any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s notes and accounts receivable was its book value.

  • D. As of September 30, 2020, December 31, 2019 and September 30, 2019, the Group does not hold any collateral as security for accounts receivable.

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

  • (4) Inventories

Raw materials
Supplies
Work in process
Finished goods
Raw materials
Supplies
Work in process
Finished goods
Raw materials
Supplies
Work in process
Finished goods		 September30,2020
Allowance for
Cost
marketprice decline
88,976
$ 2,670)
($ 56,120
9,712)
(
304,297
10,540)
(
204,854
37,802)
(
654,247
$ 60,724)
($ December31,2019		 Bookvalue
86,306
$ 46,408
293,757
167,052
593,523
$
Allowance for
Cost
marketprice decline
83,509
$ 36)
($ 62,618
5,576)
(
336,583
5,945)
(
204,410
38,286)
(
687,120
$ 49,843)
($ September30,2019		 Bookvalue
83,473
$ 57,042
330,638
166,124
637,277
$
Allowance for
Cost
marketprice decline
89,842
$ 14)
($ 67,575
5,046)
(
357,735
10,530)
(
220,589
37,567)
(
735,741
$ 53,157)
($		 Bookvalue
89,828
$ 62,529
347,205
183,022
682,584
$

~25~

The cost of inventories recognized as expense for the period:

For thethree-monthperiods ended September30, For thethree-monthperiods ended September30, For thethree-monthperiods ended September30, For thethree-monthperiods ended September30, For thethree-monthperiods ended September30,
2020 2019
Cost of goods sold $ 202,321
 $ 176,216
(Gain) loss on physical inventory ( 394)
 1,583
(Reversal of) allowance for
inventory market price decline 7,777 ( 1,153)
Revenue from sale of scraps ( 155)
 ( 139)
$ 209,549
 $ 176,507
For the nine-monthperiods ended September 30,
2020 2019
Cost of goods sold $ 590,204
 $ 556,509
(Gain) loss on physical inventory ( 83)
 1,315
(Reversal of) allowance for
inventory market price decline 10,838 ( 888)
Revenue from sale of scraps ( 313)
 ( 352)
$ 600,646
 $ 556,584

~26~

(5) Property, plant and equipment

AtJanuary1,2020
Cost
Accumulated depreciation
For the nine-month period ended
September30,2020
At January 1, 2020
Additions
Transferred from prepayments for
equipment
Transferred after acceptance inspection
Depreciation
Disposals－Cost
－Accumulated depreciation
Net currency exchange differences

At September 30, 2020
AtSeptember30,2020
Cost
Accumulated depreciation		 Construction
Leasehold
in progress
Buildings
improvements
and equipment
and
Machinery and Transportation
Office
and other
before acceptance
Land
structures
equipment
equipment
equipment
equipment
inspection
Total
369,768
$ 606,091
$ 896,524
$ 6,654
$ 21,295
$ 146,309
$ 335,290
$ 2,381,931
$ -
151,497)
(
788,483)
(
4,354)
(
17,750)
(
128,888)
(
-
1,090,972)
(
369,768
$ 454,594
$ 108,041
$ 2,300
$ 3,545
$ 17,421
$ 335,290
$ 1,290,959
$ 369,768
$ 454,594
$ 108,041
$ 2,300
$ 3,545
$ 17,421
$ 335,290
$ 1,290,959
$ -
924
7,398
95
994
3,775
201,375
214,561
-
-
-
-
-
-
28,271
28,271
-
-
41,409
-
-
3,304
44,713)
(
-
-
13,367)
(
33,191)
(
392)
(
1,350)
(
6,058)
(
-
54,358)
(
-
-
2,211)
(
-
67)
(
241)
(
-
2,519)
(
-
-
2,211
-
67
241
-
2,519
1,553)
(
3,419)
(
39
-
3)
(
19
-
4,917)
(
368,215
$ 438,732
$ 123,696
$ 2,003
$ 3,186
$ 18,461
$ 520,223
$ 1,474,516
$ 368,215
$ 602,956
$ 943,181
$ 6,743
$ 22,235
$ 153,214
$ 520,223
$ 2,616,767
$ -
164,224)
(
819,485)
(
4,740)
(
19,049)
(
134,753)
(
-
1,142,251)
(
368,215
$ 438,732
$ 123,696
$ 2,003
$ 3,186
$ 18,461
$ 520,223
$ 1,474,516
$

~27~

AtJanuary1,2019
Cost
Accumulated depreciation
For the nine-month period ended
September30,2019
At January 1, 2019
Additions
Transferred from prepayments for
equipment
Transferred after acceptance inspection
Depreciation
Disposals－Cost
－Accumulated depreciation
Net currency exchange differences
At September 30, 2019
AtSeptember30,2019
Cost
Accumulated depreciation		 Construction
Leasehold
in progress
Buildings
improvements
and equipment
and
Machinery and Transportation
Office
and other
before acceptance
Land
structures
equipment
equipment
equipment
equipment
inspection
Total
371,065
$ 594,260
$ 862,353
$ 5,444
$ 18,722
$ 140,948
$ 53,833
$ 2,046,625
$ -
129,677)
(
738,907)
(
4,136)
(
16,936)
(
121,399)
(
-
1,011,055)
(
371,065
$ 464,583
$ 123,446
$ 1,308
$ 1,786
$ 19,549
$ 53,833
$ 1,035,570
$ 371,065
$ 464,583
$ 123,446
$ 1,308
$ 1,786
$ 19,549
$ 53,833
$ 1,035,570
$ -
6,102
19,621
-
1,604
2,280
109,235
138,842
-
-
-
-
-
-
22,451
22,451
-
768
11,087
-
582
1,027
13,464)
(
-
-
13,625)
(
39,680)
(
198)
(
685)
(
5,571)
(
-
59,759)
(
-
-
1,354)
(
-
83)
(
-
-
1,437)
(
-
-
1,354
-
83
-
-
1,437
574
1,248
356)
(
6)
(
26)
(
61)
(
-
1,373
371,639
$ 459,076
$ 114,118
$ 1,104
$ 3,261
$ 17,224
$ 172,055
$ 1,138,477
$ 371,639
$ 602,495
$ 890,960
$ 5,389
$ 20,693
$ 144,060
$ 172,055
$ 2,207,291
$ -
143,419)
(
776,842)
(
4,285)
(
17,432)
(
126,836)
(
-
1,068,814)
(
371,639
$ 459,076
$ 114,118
$ 1,104
$ 3,261
$ 17,224
$ 172,055
$ 1,138,477
$

~28~

  • A. Property, plant and equipment of the Group were all for operating purposes as of September 30, 2020, December 31, 2019 and September 30, 2019.

  • B. For the three-month and nine-month periods ended September 30, 2020 and 2019, no borrowing costs were capitalized as part of property, plant and equipment.

  • C. Information about the property, plant and equipment that were pledged to others as collateral as of September 30, 2020, December 31, 2019 and September 30, 2019 is provided in Note 8, ‘Pledged assets’.

  • －

  • (6) Leasing arrangements lessee

  • A. The Group leases land in Southern Taiwan Science Park of Ministry of Science and Technology. Rental contracts are typically made for a period of 20 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.

  • B. The Group leases various assets including offices, warehouses and business vehicles. As of September 30, 2020, December 31, 2019 and September 30, 2019, the future lease commitments for short-term leases amounted to $2,988, $11,724 and $3,008, respectively.

  • C. The carrying amount of right-of-use assets and the depreciation charge are as follows: Carrying amount:

Carrying amount:
Land
Depreciation charge:
Land
Land		 September30,2020
December31,2019
September30,2019
131,157
$ 130,248
$ 131,728
$ 2020
2019
1,556
$ 1,480
$ 2020
2019
4,668
$ 4,440
$ For thethree-monthperiods ended September30,
For thenine-monthperiods ended September30,		 September30,2019
131,728
$
2020
2019
1,556
$ 1,480
$ For thenine-monthperiods ended September30,		 2019
1,480
$
2020
4,668
$		 2019
4,440
$

  • D. For the nine-month periods ended September 30, 2020 and 2019, the Group has no additions to right-of-use assets.

  • E. The information on income and expense accounts relating to lease contracts is as follows:

Items affecting profit or loss
Interest expense on lease liabilities
Expense on short-term lease contracts
Gain from leases modification
(		 For thethree-monthperiods ended September30, For thethree-monthperiods ended September30,
2020
602
$ 2,993
$ 251)
$		 2019
599
$
2,854
$
-
$

~29~

Items affecting profit or loss
Interest expense on lease liabilities
Expense on short-term lease contracts
Gain from leases modification
(		 For thenine-monthperiods ended September30, For thenine-monthperiods ended September30,
2020
1,823
$ 8,965
$ 251)
$		 2019
1,814
$
9,023
$
-
$

  • F. For the nine-month periods ended September 30, 2020 and 2019, the Group’s total cash outflow for leases were $14,369 and $14,447, respectively.

  • G. The Group has applied the practical expedient to “Covid-19-related rent concessions”, and recognized the gain from changes in lease paymants arising from the rent concessions amounting to $251 for the nine-month period ended September 30, 2020, shown as part of “Other gains and losses”.

~30~

(7) Intangible assets

Intangible assets
Turn-key
professional
Trademarks Patents Software technique Others Total
At January 1, 2020
Cost $ 578
 $ 9,323
 $ 12,746
 $ 90,718
 $ 60,000
 $ 173,365
Accumulated amortization ( 578)
 ( 3,114)
 ( 10,606)
 - ( 13,500)
 ( 27,798)
Accumulated impairment - - - - ( 24,577)
 ( 24,577)
Net value $ -
 $ 6,209
 $ 2,140
 $ 90,718
 $ 21,923
 $ 120,990
For the nine-month period ended
September30,2020
Net value at January 1, 2020 $ -
 $ 6,209
 $ 2,140
 $ 90,718
 $ 21,923
 $ 120,990
Additions－acquired separately - 459 - - - 459
Amortization - ( 453)
 ( 1,204)
 ( 6,804)
 - ( 8,461)
Net currency exchange differences - - 8 - - 8
Net value at September 30, 2020
At September 30, 2020		 $ -
 $ 6,215
 $ 944
 $ 83,914
 $ 21,923
 $ 112,996
Cost $ 578
 $ 9,782
 $ 12,786
 $ 90,718
 $ 60,000
 $ 173,864
Accumulated amortization ( 578)
 ( 3,567)
 ( 11,842)
 ( 6,804)
 ( 13,500)
 ( 36,291)
Accumulated impairment - - - - ( 24,577)
 ( 24,577)
Net value $ -
 $ 6,215
 $ 944
 $ 83,914
 $ 21,923
 $ 112,996

~31~

Trademarks
Patents
Software
At January 1, 2019
Cost
578
$ 9,288
$ 12,777
$ Accumulated amortization
578)
(
2,528)
(
8,262)
(
Accumulated impairment
-
-
-
Net value
-
$ 6,760
$ 4,515
$ For the nine-month period ended
September30,2019
Net value at January 1, 2019
-
$ 6,760
$ 4,515
$ Additions－acquired separately
-
35
84
Amortization
-
439)
(
1,844)
(
Net currency exchange differences
-
-
42)
(
(
Net value at September 30, 2019
-
$ 6,356
$ 2,713
$ At September 30, 2019
Cost
578
$ 9,323
$ 12,451
$ Accumulated amortization
578)
(
2,967)
(
9,738)
(
Accumulated impairment
-
-
-
Net value
-
$ 6,356
$ 2,713
$		 Turn-key
professional
technique
Others
Total
91,779
$ 60,000
$ 174,422
$ -
13,500)
(
24,868)
(
-
24,577)
(
24,577)
(
91,779
$ 21,923
$ 124,977
$ 91,779
$ 21,923
$ 124,977
$ -
-
119
-
-
2,283)
(
780)

-
822)
(
90,999
$ 21,923
$ 121,991
$ 90,999
$ 60,000
$ 173,351
$ -
13,500)
(
26,783)
(
-
24,577)
(
24,577)
(
90,999
$ 21,923
$ 121,991
$

~32~

  • A. For the three-month and nine-month periods ended September 30, 2020 and 2019, no borrowing costs were capitalized as part of intangible assets.

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

General and administrative expenses
Research and development expenses
General and administrative expenses
Research and development expenses		 For thethree-monthperiods ended September30, For thethree-monthperiods ended September30,
2020
2019
224
$ 264
$ 2,520
446
2,744
$ 710
$ For thenine-monthperiods ended September30,		 2019
264
$ 446
710
$
2020
677
$ 7,784
8,461
$		 2019
811
$ 1,472
2,283
$

(8) Short-term borrowings

Short-term borrowings
Nature
Bank unsecured borrowings
Bank secured borrowings
Nature
Bank unsecured borrowings
Bank secured borrowings
Nature
Bank unsecured borrowings
Bank secured borrowings		 September 30,2020
388,000
$ 32,442
420,442
$ December 31,2019
220,000
$ 93,315
313,315
$ September 30,2019
200,000
$ 81,480
281,480
$		 Interest rate range
0.51%~0.95%
1.30%
Interest rate range
0.85%～1.03%
1.30%～3.43%
Interest rate range
0.95%～1.03%
1.30%		 Collateral
None
Endorsements and
guarantees by the
Company
Collateral
None
Endorsements and
guarantees by the
Company
Collateral
None
Endorsements and
guarantees by the
Company

For more information about interest expense recognized by the Group for the three-month and ninemonth periods ended September 30, 2020 and 2019, please refer to Note 6(20), ‘Finance costs’.

(9) Short-term notes and bills payable

September 30, 2020 Interest rate range Collateral Commercial papers payable $ 40,000 0.85% None The Group had no short-term notes and bills payable as of December 31, 2019 and September 30, 2019.

~33~

  • A. The above commercial papers were issued and secured by Union Bank of Taiwan Co., Ltd. for short-term financing.

  • B. For more information about interest expense recognized by the Group for the three-month and nine-month periods ended September 30, 2020 and 2019, please refer to Note 6(20), ‘Finance costs’.

(10) Other payables

costs’.
Other payables
Accrued salaries and bonuses
Employees’ compensation
and directors’ and
supervisors’ remuneration
payable
Equipment payable
Dividends payable
Others		 September30,2020
57,566
$ 31,223
7,150
-
34,265
130,204
$		 December31,2019
47,840
$ 20,500
30,601
-
36,566
135,507
$		 September30,2019
36,154
$ 31,000
3,756
73,807
58,348
203,065
$

- (11) Long term borrowings

Long-term borrowings
Nature Expirydate
September 30,2020
January 24, 2023～
May 15, 2027
437,576
$ February 22, 2022～
May 15, 2027
185,000
622,576
88,164)
(
534,412
$ Expirydate
December 31,2019
October 5, 2022～
August 25, 2024
424,113
$ November 1, 2020～
October 5, 2022
158,000
582,113
101,136)
(
480,977
$		 Interest rate
range		 Collateral
Long-term bank borrowings
Secured borrowings
Unsecured borrowings
Less: Current portion
Nature		 1.04%～
4.43%
1.25%～
1.30%
Interest rate
range		 Land, buildings
and structures
None
Collateral
Long-term bank borrowings
Secured borrowings
Unsecured borrowings
Less: Current portion		 1.35%～
4.43%
1.25%～
1.80%		 Land, buildings
and structures
None

~34~

Nature Expirydate
October 5, 2022～
August 25, 2024
November 1, 2020～
October 5, 2022
 September 30,2019
448,387
$ 160,000
608,387
88,686)
(
519,701
$		 Interest rate
range		 Collateral
Long-term bank borrowings
Secured borrowings
Unsecured borrowings
Less: Current portion		 1.35%～
4.43%
1.25%～
1.80%		 Land, buildings
and structures
None

For more information about interest expense recognized by the Group for the three-month and ninemonth periods ended September 30, 2020 and 2019, please refer to Note 6(20), ‘Finance costs’.

(12) Pensions

  • A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next March.

  • (b) No pension cost was recognized under the aforementioned defined benefit pension plan of the Company for the three-month and nine-month periods ended September 30, 2020 and 2019.

  • (c) Expected contributions to the defined benefit pension plan of the Company for the year ending December 31, 2020 amount to $297.

  • B. Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. The other subsidiaries are subject to local government sponsored defined contribution plan. In accordance with related laws of the respective local government, the independent pension fund of employees is administered by the government. Other than the

~35~

monthly contributions, these subsidiaries do not have further obligations. The pension costs under the defined contribution pension plans of the Group for the three-month and nine-month periods ended September 30, 2020 and 2019 were $4,004, $3,739, $10,736 and $12,240, respectively.

(13) Share capital

  • A. Movements in the number of the Company’s ordinary shares outstanding are as follows (in thousands of shares):
thousands of shares):
Balance at beginning of period
Stock dividends
Purchase of treasury stocks
(
Balance at end of period		 For thenine-monthperiods ended September30,
2020
81,188
-
445)

80,743		 2019
73,807
7,381
-
81,188

  • B. On June 12, 2019, the Company’s stockholders adopted a resolution to issue shares of common stock due to capitalization of retained earnings of $73,807 and obtained approval from the SFC. The effective date of capitalization was set on August 7, 2019.

  • C. Treasury stocks

  • (a) Reason for share reacquisition and movements in the number of the Company’s treasury stocks are as follows (in thousands of shares):

Reason for reacquisition
To be reissued to employees		 For thenine-monthperiod For thenine-monthperiod ended September30,2020 ended September30,2020
Shares at
beginning
ofperiod
-		 Increase
445		 Decrease
-		 Shares at
end ofperiod
445

No treasury stocks were reacquired or retired by the Company for the nine-month period ended September 30, 2019.

  • (b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury stock should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus. As of September 30, 2020, －

  • December 31, 2019 and September 30, 2019, the treasury shares amounted to $26,550, $ －

  • and $ , respectively.

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

  • (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury stocks should be reissued to the employees within 5 years from the reacquisition date and shares not reissued within the 5- year period are to be retired.

  • D. As of September 30, 2020, the Company’s authorized capital was $1,500,000 (including $30,000

~36~

reserved for employee stock options), and the paid-in capital was $811,876 (81,188 thousand shares) with par value of $10 (in dollars) per share.

(14) Capital reserve

Capital reserve
For the nine-month periods ended
September30,2020and2019
Balances at beginning and end of period		 Share premium
440,553
$		 Others
114
$		 Total
440,667
$

Pursuant to the R.O.C. Company Act, capital reserve arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital reserve to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital reserve should not be used to cover accumulated deficit unless the legal reserve is insufficient.

(15) Retained earnings

  • A. The legal reserve shall be exclusively used to cover accumulated deficit, to issue new stocks, or to distribute cash to shareholders in proportion to their share ownership. The use of legal reserve for the issuance of stocks or cash dividends to shareholders in proportion to their share ownership is permitted provided that the balance of such reserve exceeds 25% of the Company’s paid-in capital.

  • B. According to the Company’s Articles of Incorporation, the Company’s dividend policy is to distribute the current year’s earnings, if any, in the following order:

  • (1) pay all taxes and dues;

  • (2) offset any loss of prior years;

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

  • (4) set aside or reverse special reserve as required by regulations or the Competent Authority;

  • (5) The appropriation of the remaining amount after deducting items (1) to (4), along with the unappropriated retained earnings of prior years can be distributed in accordance with a resolution passed during a meeting of the Board of Directors and approved at the shareholders’ meeting. However, the distribution of dividends shall not be lower than 20% of the current year’s profit after deducting items (1) to (4). In order to continually expand the scale of operations, increase competitiveness and support the Company’s long-term development plans, future capital requirements and long-term financial plan, the Company’s dividend policy is to distribute stock dividends and partially as cash dividends. Cash dividends shall not be less than 10% of the total dividends distributed to shareholders. The Board of Directors of the Company shall adopt a resolution by a majority of more than two-thirds of the directors present to distribute whole or a part of the distributable dividends, bonuses, capital reserves or legal reserve in the form of cash, and report to the shareholders during their meetings, which is not applicable to the aforementioned provisions that are subject to shareholders’

~37~

resolutions.

  • C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings. As of December 31, 2019, pursuant to the regulations for the deduction amount to stockholders’ equity from other equity items, the Company has set aside special reserve of $29,394, which cannot be distributed to shareholders.

  • D. The Company recognized cash dividends distributed to owners amounting to $73,087 ($1.0 (in dollars) per share) and stock dividends amounting to $73,807 ($1.0 (in dollars) per share) for the year ended December 31, 2019. On June 8, 2020, the Company’s stockholders adopted a resolution to distribute cash dividends from 2019 earnings of $80,743 ($1.0 (in dollars) per share), which have not yet been distributed.

(16) Operating revenue

which have not yet been distributed.
Operating revenue
Revenue from contracts with customers
Revenue from contracts with customers		 For thethree-monthperiods ended September30,
2020
2019
347,443
$ 321,874
$ For thenine-monthperiods ended September30,		 2019
321,874
$
2020
1,029,218
$		 2019
1,000,252
$

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

  • B. The Group has recognized revenue-related contract liabilities amounting to $3,944, $3,964, $2,433 and $1,828 as of September 30, 2020, December 31, 2019, September 30, 2019 and January 1, 2019, respectively. Revenue recognized that were included in the contract liability balance at the beginning of 2020 and 2019 for the three-month and nine-month periods ended －

  • September 30, 2020 and 2019 were $4, $ , $2,529 and $188, respectively.

~38~

(17) Interest income

For the three-month periods ended September 30,

Interest income from bank deposits Interest income from financial assets measured at amortized cost Other interest income

Interest income from bank deposits Interest income from financial assets measured at amortized cost Other interest income

For thethree-monthperiods ended September30, ds ended September30,
2020
2019
345
$ 556
$ 18
-
-
4
363
$ 560
$ For the nine-month periods ended September 30,		 2019
556
$ -
4
560
$
2020
1,508
$ 99
3
1,610
$		 2019
2,905
$ -
10
2,915
$

(18) Other income

Other income – others

Other income – others

For thethree-monthperiods ended September30, For thethree-monthperiods ended September30,
2020
2019
2,343
$ 1,773
$ For thenine-monthperiods ended September30,		 2019
1,773
$
2020
8,602
$		 2019
6,957
$

(19) Other gains and losses

Other gains and losses
For thethree-monthperiods ended September30,
2020 2019
Gain on reversal of impairment $ 251
 $ -
Currency exchange loss ( 3,460)
 ( 9,589)
Other losses ( 40)
 ( 2)
($ 3,249)
 ($ 9,591)
For thenine-monthperiods ended September30,
2020 2019
Gain on reversal of impairment $ 251
 $ -
Currency exchange loss ( 6,785)
 ( 342)
Other losses ( 57)
 ( 2)
($ 6,591)
 ($ 344)

~39~

(20) Finance costs

Interest expense: Interest expense on bank borrowings Interest expense on lease liabilities

For thethree-monthperiods ended September30, For thethree-monthperiods ended September30,
2020
3,458
$ 602
4,060
$		 2019
3,777
$ 599
4,376
$
Interest expense:
Interest expense on bank borrowings
Interest expense on lease liabilities		 For thenine-monthperiods ended September30, For thenine-monthperiods ended September30,
2020
11,275
$ 1,823
13,098
$		 2019
11,053
$ 1,814
12,867
$

(21) Expenses by nature

Expenses by nature
Employee benefit expense
Depreciation
Amortization
Employee benefit expense
Depreciation
Amortization
Employee benefit expense
Depreciation
Amortization
Employee benefit expense
Depreciation
Amortization		 For thethree-monthperiod ended September30,2020
Operating cost
Operating expense
Total
52,794
$ 43,785
$ 96,579
$ 14,863
4,896
19,759
-
2,744
2,744
67,657
$ 51,425
$ 119,082
$ For thethree-monthperiod ended September30,2019		 Total
96,579
$ 19,759
2,744
119,082
$
Operating cost
Operating expense
Total
50,799
$ 45,038
$ 95,837
$ 16,220
3,414
19,634
-
710
710
67,019
$ 49,162
$ 116,181
$ For thenine-monthperiod ended September30,2020		 Total
95,837
$ 19,634
710
116,181
$
Operating cost
Operating expense
Total
168,319
$ 136,977
$ 305,296
$ 45,698
13,328
59,026
-
8,461
8,461
214,017
$ 158,766
$ 372,783
$ For thenine-monthperiod ended September30,2019		 Total
305,296
$ 59,026
8,461
372,783
$
Operating cost
170,221
$ 52,994
-
223,215
$		 Operating expense
145,616
$ 11,205
2,283
159,104
$		 Total
315,837
$ 64,199
2,283
382,319
$

~40~

(22) Employee benefit expense

For the three-month period ended September 30, 2020

Employee benefit expense For thethree-monthperiod ended September30,2020 For thethree-monthperiod ended September30,2020 ember30,2020
Wages and salaries
Labor and health insurance
expense
Pension costs
Other personnel expenses
Wages and salaries
Labor and health insurance
expense
Pension costs
Other personnel expenses
Wages and salaries
Labor and health insurance
expense
Pension costs
Other personnel expenses
Wages and salaries
Labor and health insurance
expense
Pension costs
Other personnel expenses		 Operating cost
Operating expense
Total
42,989
$ 38,686
$ 81,675
$ 5,177
2,303
7,480
2,546
1,458
4,004
2,082
1,338
3,420
52,794
$ 43,785
$ 96,579
$ For thethree-monthperiod ended September30,2019		 Total
81,675
$ 7,480
4,004
3,420
96,579
$
Operating cost
Operating expense
Total
41,208
$ 38,944
$ 80,152
$ 5,157
2,939
8,096
2,166
1,573
3,739
2,268
1,582
3,850
50,799
$ 45,038
$ 95,837
$ For the nine-monthperiod ended September 30,2020		 Total
80,152
$ 8,096
3,739
3,850
95,837
$
Operating cost
Operating expense
Total
141,349
$ 121,506
$ 262,855
$ 14,186
7,306
21,492
6,473
4,263
10,736
6,311
3,902
10,213
168,319
$ 136,977
$ 305,296
$ For thenine-monthperiod ended September30,2019		 Total
262,855
$ 21,492
10,736
10,213
305,296
$
Operating cost
138,480
$ 17,897
7,436
6,408
170,221
$		 Operating expense
128,134
$ 8,019
4,804
4,659
145,616
$		 Total
266,614
$ 25,916
12,240
11,067
315,837
$

  • A. According to the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees’ compensation and directors’ and supervisors’ remuneration. The ratio shall be 3% to 15% for employees’ compensation and shall not be higher than 3% for directors’ and supervisors’ remuneration.

  • B. For the three-month and nine-month periods ended September 30, 2020 and 2019, the Company’s employees’ compensation was accrued at $8,035, $7,133, $24,978 and $24,800, respectively; while directors’ and supervisors’ remuneration was accrued at $2,009, $1,783, $6,245 and $6,200, respectively. The aforementioned amounts were recognized in salary expenses, and were

~41~

estimated and accrued based on the profit as of the end of the reporting period and the percentage specified in the Articles of Incorporation of the Company.

The employees’ compensation and directors’ and supervisors’ remuneration for 2019 as resolved by the Board of Directors were $16,000 and $4,500, respectively, and the employees’ compensation was distributed in the form of cash. Employees’ compensation and directors’ and supervisors’ remuneration for 2019 as resolved by the Board of Directors were equal to the amounts recognized in the 2019 financial statements.

Information about the appropriation of employees’ compensation and directors’ and supervisors’ remuneration by the Company as proposed by the Board of Directors is posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(23) Income tax

  • A. Income tax expense:

Components of income tax expense:

remuneration by the Company as proposed
Observation Post System” at the website of
ome tax
Income tax expense:
Components of income tax expense:		 by the Board of Directors is posted in the “Marke
the Taiwan Stock Exchange.
Current income tax:
Income tax incurred in current period
Deferred income tax:
Origination and reversal of temporary
differences
Income tax expense
Current income tax:
Income tax incurred in current period
Tax on unappropriated earnings
Prior year income tax (over) under
estimation
(
Total current income tax
Deferred income tax:
Origination and reversal of temporary
differences
Income tax expense		 2020
2019
9,483
$ 8,149
$ 4,719
2,015
14,202
$ 10,164
$ 2020
2019
29,581
$ 44,271
$ -
13,586
3,866)

1,129
25,715
58,986
13,966
7,480)
(
39,681
$ 51,506
$ For thethree-monthperiods ended September30,
For thenine-monthperiods ended September30,
2020
29,581
$ -
3,866)

25,715
13,966
(
39,681
$

B. The Company’s income tax returns through 2018 have been assessed and approved by the Tax Authority. There were no disputes existing between the Company and the Tax Authority as of November 3, 2020.

~42~

(24) Earnings per share (“EPS”)

Earnings per share (“EPS”)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent
Assumed conversion of all dilutive
potential ordinary shares
Employees’ compensation
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent
Assumed conversion of all dilutive
potential ordinary shares
Employees’ compensation
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares		 For thethree-monthperiod ended September 30,2020
Weighted average number
of shares outstanding
Amount after tax
(sharesin thousands)
46,928
$ 80,743
46,928
$ 80,743
-
326
46,928
$ 81,069
For thethree-monthperiod ended September		 EPS
(indollars)
0.58
$
0.58
$
30,2019
Weighted average number
of shares outstanding
Amount after tax
(sharesin thousands)
42,085
$ 81,188
42,085
$ 81,188
-
288
42,085
$ 81,476		 EPS
(indollars)
0.52
$
0.52
$

~43~

Basic earnings per share
Profit attributable to ordinary
shareholders of the parent
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent
Assumed conversion of all dilutive
potential ordinary shares
Employees’ compensation
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent
Assumed conversion of all dilutive
potential ordinary shares
Employees’ compensation
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares		 For thenine-monthperiod ended September30,2020 For thenine-monthperiod ended September30,2020
Weighted average number
of shares outstanding
EPS
Amount after tax
(sharesin thousands)
(indollars)
145,085
$ 80,882
1.79
$ 145,085
$ 80,882
-
374
145,085
$ 81,256
1.79
$ For thenine-monthperiod ended September30,2019		 EPS
(indollars)
1.79
$
1.79
$
Weighted average number
of shares outstanding
Amount after tax
(sharesin thousands)
131,090
$ 81,188
131,090
$ 81,188
-
424
131,090
$ 81,612		 EPS
(indollars)
1.61
$
1.61
$

~44~

(25) Supplemental cash flow information

A. Investing activities with partial cash payments

For the nine-month periods ended September 30,

2020 2019
Purchase of property, plant and equipment $ 214,561
 $ 138,842
Add: Opening balance of notes payable 25,323 3,633
Opening balance of payable for
equipment 30,601 14,821
Less: Ending balance of notes payable ( 8,473)
 ( 15,780)
Ending balance of payable for
equipment ( 7,150)
 ( 3,756)
Cash paid during the period $ 254,862
 $ 137,760

B. Operating investing and financing activities with no cash flow effects

Operating investing and financing activities with no cash flow effects
(a) Write-offs of allowance for bad debts
(b) Prepayments for equipment reclassified
to property, plant and equipment
(c) Cash dividends appropriation
Less: Ending balance of cash dividends
payable (listed as
‘other payables’)
Cash outflows for cash dividends
appropriation		 2020
2019
118
$ -
$ 2020
2019
28,271
$ 22,451
$ 2020
2019
80,743
$ 73,807
$ -
73,807)
(
80,743
$ -
$ For thenine-monthperiods ended September30,
For thenine-monthperiods ended September30,
For thenine-monthperiods ended September30,
2020
80,743
$ -

80,743
$

(26) Changes in liabilities from financing activities

At January 1, 2020
Changes in cash flow from
financing activities
Changes in cash flow from
other non-financing
activities
Impact of changes in
foreign exchange rate
At September 30, 2020		 Short-term
borrowings
313,315
$ 106,900
-
227
420,442
$		 Short-term
notes and
billspayable
Lease liability
-
$ 131,343
$ 40,000
3,581)
(
-
5,326
-
-
(
40,000
$ 133,088
$		 Long-term
borrowings
582,113
$ 42,801
-
2,338)


622,576
$		 Liabilities from
financing
activities-gross
1,026,771
$ 186,120
5,326
2,111)
(
1,216,106
$

~45~

At January 1, 2019
Effects of retrospective
application
Balance at January 1 after
adjustments
Changes in cash flow from
financing activities
Impact of changes in
foreign exchange rate
(
At September 30, 2019		 Short-term
borrowings
Leaseliability
210,407
$ -
$ -
136,168
210,407
136,168
73,214
3,610)
(
2,141)

-
281,480
$ 132,558
$		 Long-term
borrowings
561,184
$ -
561,184
46,303
900
(
608,387
$		 Liabilities from
financing
activities-gross
771,591
$ 136,168
907,759
115,907
1,241)

1,022,425
$

7. RELATED PARTY TRANSACTIONS

(1) Significant transactions and balances with related parties

None.

(2) Key management compensation

For the three-month periods ended September 30,

None.
Key management compensation		 For thethree-monthperiods ended September30, ds ended September30,
Salaries and other short-term employee benefits
Salaries and other short-term employee benefits		 2020
2019
8,132
$ 9,073
$ For thenine-monthperiods ended September30,		 2019
9,073
$
2020
25,026
$		 2019
25,436
$

8. PLEDGED ASSETS

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

Assetpledged
Land (Note)
Buildings and structures-net
(Note)
Construction in Progress
(Note)		 Book value September 30,2019
371,639
$ 424,207
-
795,846
$		 Purpose ofcollateral
September 30,2020
368,215
$ 409,838
145,250
923,303
$		 December 31,2019
369,768
$ 354,146
-
723,914
$
Guarantee for long-
term borrowings
Guarantee for long-
term borrowings
Guarantee for long-
term borrowings

(Note) Listed as ‘Property, plant and equipment’.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT

COMMITMENTS

(1) As of September 30, 2020, December 31, 2019 and September 30, 2019, the endorsements and guarantees provided by the Company to the subsidiary, cpc Europa GmbH, amounted to $153,675, $201,540 and $152,775, respectively, and the actual amounts drawn down were $32,442, $45,347

~46~

and $45,833, respectively; the endorsements and guarantees provided by the Company to the － subsidiary, CSM Maschinen GmbH, amounted to $ , $50,385 and $50,925, respectively, and the － － actual amounts drawn down were $ , $ and $35,647, respectively; the endorsements and guarantees provided by the Company to the subsidiary, CHIEFTEK PRECISION INTERNATIONAL － LLC, amounted to $ , $59,960 and $62,080, respectively, and the actual amounts drawn down were － － $ , $47,968 and $ , respectively.

  • (2) As of September 30, 2020, December 31, 2019 and September 30, 2019, the Group’s remaining balance due for construction in progress and prepayments for equipment were $428,699, $625,769 and $747,078, respectively.

  • (3) On February 19, 2020, the Company entered into a mid-term secured syndicated loan contract for a credit line facility of $2,900,000 with 11 financial institutions including Mega International Commercial Bank Co., Ltd.. The credit term is 7 years. Under the terms of the syndicated loan, the Company agrees that:

  • A. The financial ratios stated in the Company’s semi-annual reviewed financial statements and annual audited financial statements shall meet the following financial ratios which will be assessed semiannually:

    • (a) Current ratio (current assets/current liabilities): At least 100%.

    • (b) Liability ratio (total liabilities/net equity): Less than 220% in 2020; less than 200% in 2021 and 2022; less than 180% from 2023.

    • (c) Tangible net value (shareholders’ equity less intangible assets): At least $1,000,000.

  • B. If the Company violates the above financial covenants, the Company should improve within 9 months after the fiscal year or half fiscal year. It will not be considered to default, if the audited or reviewed financial rates comply with the covenants after the improvement period. During the improvement period, the credit line which has not been withdrawn will be frozen, until the financial covenants are met. In addition, for withdrawn credit, its financing rate shall be increased by an additional 0.125% per annum from the date after the notification by the management bank to the date after the completion of improvement.

As of September 30, 2020, the Company has not violated any of the above covenants.

  • －

  • (4) For the details of operating lease agreements, please refer to Note 6(6), ‘Leasing arrangements lessee’.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT SUBSEQUENT EVENTS

None.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital

~47~

structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce the level of debt.

(2) Financial instruments

  • A. Details of the Group’s financial instruments by category are provided in Note 6.

  • B. Financial risk management policies

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

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

  • C. Significant financial risks and degrees of financial risks

  • (a) Market risk

    • I. Foreign exchange risk

    • (i) The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company and its subsidiaries denominated in various functional currency, primarily with respect to USD, EUR and JPY. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities.

    • (ii)Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Group treasury.

    • (iii)The Group treasury’s risk management policy is to hedge anticipated cash flows (mainly sale export and purchase of inventory) in the major foreign currency in the future so as to decrease the risk exposure in the major foreign currency.

    • (iv)The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. However, as the objective of the net investments in foreign operations is for strategic purposes, the Group does not hedged the investments.

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

~48~

September30,2020 September30,2020
Foreign currency Exchange Book value
amount(in thousands) rate (NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD $ 13,610
 29.10 $ 396,062
JPY:NTD 21,176 0.2756 5,836
EUR:NTD 1,253 34.15 42,804
Financial liabilities
Monetary items
JPY:NTD 4,190 0.2756 1,155
EUR:NTD 210 34.15 7,167
December31,2019
Foreign currency Exchange Book value
amount(in thousands) rate (NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD $ 11,917
 29.98 $ 357,279
JPY:NTD 63,563 0.2760 17,543
EUR:NTD 1,826 33.59 61,352
Financial liabilities
Monetary items
USD:NTD 5 29.98 154
JPY:NTD 337 0.2760 93
EUR:NTD 183 33.59 6,264
September30,2019
Foreign currency Exchange Book value
amount(in thousands) rate (NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD $ 7,951
 31.04 $ 246,809
JPY:NTD 39,077 0.2878 11,246
EUR:NTD 3,055 33.95 103,715
Financial liabilities
Monetary items
USD:NTD 6 31.04 193
JPY:NTD 2,662 0.2878 766
EUR:NTD 516 33.95 17,502
Sensitivity analysis of foreign exchange risk is primarily for foreign currency monetary
items at financial reporting date. If the exchange rate of NTD to other currencies had

~49~

appreciated/depreciated by 1% with all other factors remaining constant, the Group’s net profit (loss) after tax for the nine-month periods ended September 30, 2020 and 2019 would increase/decrease by $3,491 and $2,746, respectively.

  • (vi)The total exchange loss, including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the three-month and nine-month periods ended September 30, 2020 and 2019 amounted to $3,460, $9,589, $6,785 and $342, respectively.

II. Price risk

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

III. Cash flow and fair value interest rate risk

  • (i) The Group’s main interest rate risk arises from short-term and long-term borrowings with variable rates, which expose the Group to cash flow interest rate risk. However, partial interest rate risk is offset by cash and cash equivalents held at variable rates. For the nine-month periods ended September 30, 2020 and 2019, the Group’s borrowings at variable rate were mainly denominated in NTD, USD and EUR.

  • (ii) The Group’s borrowings are measured at amortized cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.

  • (iii) If the borrowing interest rate had increased/decreased by 10% with all other variables held constant, profit, net of tax for the nine-month periods ended September 30, 2020 and 2019 would have decreased/increased by $902 and $884, respectively. The main factor is that changes in interest expense result from floating rate borrowings.

(b) Credit risk

  • I. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.

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

  • III.The Group manages its credit risk, whereby if the contract payments are past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition and the impairment is assessed when the contract payments are past due over certain days.

~50~

  • IV. The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights. As of September 30, 2020, December 31, 2019 and September 30, 2019, the Group’s written-off financial assets that －

  • are still under recourse procedures amounted to $784, $666 and $ , respectively.

  • V. The Group classifies customers’ accounts receivable in accordance with the credit rating of customers and credit risk on trade. The Group applies the simplified approach using the provision matrix and the forecast ability to adjust historical and timely information to estimate expected credit loss. The expected credit loss ranges from 0.03% to 100%. Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable are as follows:

For the nine-month periods ended September 30,

2020
Accountsreceivable
At January 1
25,914
$ Provision for impairment
1,695)
(
Write-offs
118)
(
Effect of foreign exchange
89)
(
(
At September 30
24,012
$		 2019
Accountsreceivable
15,885
$ 6,915
-
699)

22,101
$

(c) Liquidity risk

  1. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.

  2. II. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts. The Group is expected to readily generate cash inflows for managing liquidity risk.

  3. III. The Group has the following undrawn borrowing facilities:

~51~

Floating rate:
Expiring within
one year
Expiring beyond
one year		 September30,2020
1,098,233
$ 2,900,000
3,998,233
$		 December31,2019
1,417,801
$ 930,308
2,348,109
$		 September30,2019
1,414,300
$ 890,000
2,304,300
$
  • IV. The table below analyses the Group’s non-derivative financial liabilities and relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
undiscounted cash flows.
September30,2020
Non-derivative financial
liabilities:
Short-term borrowings
Short-term notes and
bills payable
Notes payable
Accounts payable
Other payables
Lease liability
Long-term borrowings
(including current
portion)
December31,2019
Non-derivative financial
liabilities:
Short-term borrowings
Notes payable
Accounts payable
Other payables
Lease liability
Long-term borrowings
(including current
portion)		 Lessthan 1year
421,346
$ 40,000
84,501
22,825
130,204
7,539
97,693
Lessthan 1year
314,099
$ 79,155
18,711
135,507
7,232
112,116		 Between 1
and2years
-
$ -
-
-
-
7,539
84,382
Between 1
and2years
-
$ -
-
-
7,232
115,108		 Between 2
and 5 years
-
$ -
-
-
-
22,618
349,754
Between 2
and 5 years
-
$ -
-
-
21,697
387,753		 More than
5 years
-
$ -
-
-
-
122,515
126,348
More than
5 years
-
$ -
-
-
122,948
-

~52~

September30,2019
Non-derivative financial
liabilities:
Short-term borrowings
Notes payable
Accounts payable
Other payables
Lease liability
Long-term borrowings
(including current
portion)		 Lessthan 1year
282,692
$ 75,526
31,713
203,065
7,232
99,444		 Between 1
and2years
-
$ -
-
-
7,232
117,355		 Between 2
and 5 years
-
$ -
-
-
21,697
428,224		 More than
5 years
-
$ -
-
-
124,757
-
  • V. The Group does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

(3) Fair value information

  • A. As of September 30, 2020, December 31, 2019 and September 30, 2019, the Group had no fair value financial instruments.

  • B. Financial instruments not measured at fair value

The carrying amounts of the Group’s financial instruments not measured at fair value (including cash and cash equivalents, financial assets at amortized cost - current, notes receivable, accounts receivable, other receivables, guarantee deposits paid, short-term borrowings, notes payable, accounts payable, other payables, lease liabilities (current and non-current) and long-term borrowings (including current portion) are approximate to their fair values.

(4) Others

As a cross-border operating group, due to the impact of COVID-19 pandemic, certain nations have taken prevention measures, which have reduced business activities and affected the sales of some operating entities of the Group in certain countries. The Group has taken relevant countermeasures, such as keeping in close contact with customers and manufacturers, strengthening employee health monitoring and continuing to pay attention to the development of the epidemic, in order to mitigate the impact on the operations. However, the actual extent of the possible impact will depend on the subsequent development of the pandemic.

13. SUPPLEMENTARY DISCLOSURES

(According to the regulatory requirement, only information for the nine-month period ended September 30, 2020 is disclosed.)

(1) Significant transactions information

  • A. Loans to others: Please refer to table 1.

  • B. Provision of endorsements and guarantees to others: Please refer to table 2.

  • C. Holding of marketable securities at the end of the period (not including subsidiaries, associates

~53~

and joint ventures): None.

  • D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Group’s paid-in capital: None.

  • E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: Please refer to table 3.

  • F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

  • G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.

  • H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.

  • I. Trading in derivative instruments undertaken during the reporting period: None.

  • J. Significant inter-company transactions during the reporting period: Please refer to table 6.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 7.

(3) Information on investments in Mainland China

  • A. Basic information: Please refer to table 8.

  • B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 9.

(4) Major shareholders information

Major shareholders information: Please refer to table 10.

14. SEGMENT INFORMATION

(1) General information

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

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

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

~54~

For the nine-month period ended September 30, 2020

For thenine-monthperiod ended September30,2020 For thenine-monthperiod ended September30,2020 For thenine-monthperiod ended September30,2020 For thenine-monthperiod ended September30,2020 For thenine-monthperiod ended September30,2020
Segment revenue
Inter-segment
revenue
External revenue
Interest income
Depreciation and
amortization
Capital expenditures
Interest expense
Segment pre-tax
income
Segment assets
Segment liabilities
Segment revenue
Inter-segment
revenue
External revenue
Interest income
Depreciation and
amortization
Capital expenditures
Interest expense
Segment pre-tax
income
Segment assets
Segment liabilities		 CHIEFTEK
Chieftek
PRECISION
(Kunshan)
cpcEuropa
cpc USA
Others
Total
805,673
$ 323,720
$ 193,954
$ 107,400
$ 9,177
$ 1,439,924
$ 401,529
-
-
-
9,177
410,706
404,144
323,720
193,954
107,400
-
1,029,218
388
917
1
206
98
1,610
62,295
285
1,974
490
2,443
67,487
247,318
-
133
710
-
248,161
9,658
-
359
-
3,081
13,098
176,929
45,953
12,151
11,442
411
246,886
2,776,889
315,810
109,449
88,708
249,420
3,540,276
1,352,769
6,944
46,459
569
78,564
1,485,305
For thenine-monthperiod ended September30,2019
CHIEFTEK
PRECISION
805,324
$ 401,592
403,732
1,069
60,382
181,314
9,227
175,779
2,527,140
1,191,550		 Chieftek
(Kunshan)
217,631
$ -
217,631
1,309
346
170
-
14,616
351,171
3,826		 cpcEuropa
249,342
$ 3,679
245,663
-
2,064
108
276
11,408
141,926
61,086		 cpc USA
Others
133,226
$ 8,315
$ -
8,315
133,226
-
317
220
1,178
2,512
962
4,037
-
3,364
12,716
3,742)
(
129,640
219,723
826
122,879		 Total
1,413,838
$ 413,586
1,000,252
2,915
66,482
186,591
12,867
210,777
3,369,600
1,380,167

(3) Reconciliation for segment income

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

~55~

For the nine-month periods ended September 30,

Reportable segments pre-tax income Other segments pre-tax gain (loss) Inter segments gain Profit before income tax

2020 2019
$ 246,475
 $ 214,519
411 ( 3,742)
( 62,120)
 ( 28,181)
$ 184,766
 $ 182,596

~56~

For the nine-month period ended September 30, 2020

Table 1

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Loans to others

Number
(Note 1)		 Creditor Borrower General ledger
account		 Is a related
party		 Maximum
outstanding
balance during
the nine-month
period ended
September 30,2020		 Balance at
September 30,2020		 Actual amount
drawn down		 Interest
rate		 Nature of
loan		 Amount of
transactions
with the
borrower		 Reason for
short-term
financing		 Allowance
for
doubtful
accounts		 Coll ateral Limit on loans
granted to
a single party
（Note 2）		 Ceiling on
total loans
granted
（Note 2）		 Footnote
Item Value
0 CHIEFTEK
PRECISION
CO., LTD.		 CHIEFTEK
PRECISION
INTERNATIONAL
LLC		 Other receivables Y 48,304
$		 -
$		 -
$		 2.0% Short-term
financing		 -
$		 Operational
use		 -
$		 － -
$		 821,988
$		 821,988
$		 －

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

  • (1) Parent company is ‘0’.

  • (2) The subsidiaries are numbered in order starting from ‘1’.

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

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

Table 1, Page 1

Provision of endorsements and guarantees to others

Table 2

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

For the nine-month period ended September 30, 2020

Nunber
(Note 1)		 Endorser/
guarantor		 Party being
endorsed/guaranteed		 Party being
endorsed/guaranteed		 Limit on
endorsements/
guarantees
provided for a
single party
(Note 3)		 Maximum
outstanding
endorsement/
guarantee
amount as of
September 30,
2020		 Outstanding
endorsement/
guarantee
amount at
September 30,
2020		 Actual
amount
drawn down		 Amount of
endorsements/
guarantees
secured with
collateral		 Ratio of
accumulated
endorsement/
guarantee
amount to net
asset value of
the endorser/
guarantor
company		 Ceiling on
total amount of
endorsements/
guarantees
provided
(Note 3)		 Provision of
endorsements/
guarantees by
parent
company to
subsidiary		 Provision of
endorsements/
guarantees by
subsidiary to
parent
company		 Provision of
endorsements/
guarantees to
the party in
Mainland
China		 Footnote
Companyname Relationship with
the endorser/
guarantor
（Note 2）
0
0
0		 CHIEFTEK
PRECISION CO.,
LTD.
CHIEFTEK
PRECISION CO.,
LTD.
CHIEFTEK
PRECISION CO.,
LTD.		 cpc Europa GmbH
CSM Maschinen GmbH
CHIEFTEK
PRECISION
INTERNATIONAL
LLC		 1
1
1		 1,027,486
$ 1,027,486
$ 1,027,486
$		 199,740
$ 49,935
60,500		 153,675
$ -
-		 32,442
$ -
-		 -
$ -
-		 7%
－
－		 1,027,486
$ 1,027,486
$ 1,027,486
$		 Y
Y
Y		 N
N
N		 N
N
N		 －
－
－

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

(1) Parent company is ‘0’.

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

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

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

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

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

Table 2, Page 1

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more For the nine-month period ended September 30, 2020

Table 3

If the counterparty is a related party, information as to the last transaction of the real estate is disclosed below:

Real estate
acquired by		 Real estate
acquired		 Date of the
event		 Transaction
amount		 Status of
payment		 Counterparty Relationship
with the
counterparty		 Original owner
who
sold the real estate
to the counterparty		 Relationship
between the
original
owner and the
acquirer		 Date of the
original
transaction		 Amount Basis or
reference used
in setting the
price		 Reason for
acquisition of
real estate and
status of the
real estate		 Other
commitments
CHIEFTEK
PRECISION
CO., LTD.		 Sugu new factory
construcion
phase II		 May 17, 2019 $ 454,419 $ 275,256 Hong Sheng
Construction
Corp.		 － － － － $ - Negotiation Building for
operation use		 －

Table 3, Page 1

Table 4

Expressed in thousands of NTD

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

  • Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid in capital or more For the nine-month period ended September 30, 2020

Differences in transaction terms

Differences in transaction terms Differences in transaction terms
Purchaser/seller Counterparty Relationship with the
counterparty		 Transaction transactions
compared to third party		 Notes/accounts receivable(payable) Footnote
Purchases
(sales)		 Amount Percentage of
total purchases
(sales)		 Credit term Unitprice Credit term Balance Percentage of
total notes/accounts
receivable(payable)
CHIEFTEK
PRECISION
CO., LTD.
Chieftek Machinery
(Kunshan) Co., Ltd.		 Chieftek Machinery
(Kunshan) Co., Ltd.
CHIEFTEK
PRECISION
CO., LTD.		 Subsidiary
Parent company		 (Sales)
Purchases		 ($ 245,454)
245,454		 (30%)
100%		 (Note 1)
(Note 1)		 $ -
-		 (Note 2)
(Note 3)		 $ 147,673
147,673)
(		 37%
(100%)		 －
－

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

(Note 2) The Company's collection terms to third parties are 30 to 180 days after monthly statements.

(Note 3) The company has no purchase transactions with other suppliers.

Table 4, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

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

September 30, 2020

Relationship with
Creditor
Counterparty
the counterparty
Balance as ofSeptember30,2020
Table 5		 Turnover rate Overdue receivables Overdue receivables Amount collected
subsequent to the
Allowance for
balance sheet date
doubtful accounts
Expressed in thousands of NTD		 Amount collected
subsequent to the
Allowance for
balance sheet date
doubtful accounts
Expressed in thousands of NTD
Amount Action taken
CHIEFTEK
PRECISION
CO., LTD.
Chieftek Machinery
(Kunshan) Co., Ltd.
Subsidiary
147,673
$		 2.19 -
$		 － -
$		 -
$

Table 5, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

  • Significant inter company transactions during the reporting period

Table 6

Expressed in thousands of NTD

For the nine-month period ended September 30, 2020

Number
(Note1)		 Companyname Counterparty Relationship
(Note2)		 Transaction Transaction
General ledgeraccount Amount Transactionterms Percentage of
consolidated total
operating revenues or
totalassets (Note 3)
0
1
2
3		 CHIEFTEK PRECISION CO., LTD.
CHIEFTEK PRECISION HOLDING CO., LTD.
CHIEFTEK PRECISION USA CO., LTD.
Chieftek Precision (Hong Kong) Co., Limited		 cpc Europa GmbH
CHIEFTEK PRECISION USA CO., LTD.
Chieftek Machinery (Kunshan) Co., Ltd.
CHIEFTEK PRECISION USA CO., LTD.
CHIEFTEK PRECISION INTERNATINAL LLC
Chieftek Machinery (Kunshan) Co., Ltd.		 1
1
1
3
3
3		 Sales revenue
Accounts receivable
Endorsements and
guarantees
Sales revenue
Accounts receivable
Sales revenue
Accounts receivable
Dividends receivable
Rent payment
Refundable deposits
Dividend income		 ($ 99,355)
58,521
153,675
( 56,720)
27,031
( 245,454)
147,673
27,491
9,177
1,455
50,375)
(		 180 days after monthly-
closing, T/T
－
－
180 days after monthly-
closing, T/T
－
180 days after monthly-
closing, T/T
－
－
－
－
－		 (10%)
2%
4%
(6%)
1%
(24%)
4%
1%
1%
－
(5%)

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

(1) Parent company is ‘0’.

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

(Note 2) Relationship between transaction company and counterparty is classified into the following three categories:

(1) Parent company to subsidiary.

(2) Subsidiary to parent company.

(3) Subsidiary to subsidiary.

(Note 3) Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

(Note 4) Only transactions over 1 million are disclosed.

(Note 5) Foreign currencies were translated into New Taiwan Dollars using the exchange rate (USD:NTD 1:29.1) as of September 30, 2020.

Table 6, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Names, locations and other information of investee companies (not including investees in Mainland China) For the nine-month period ended September 30, 2020

Table 7

Expressed in thousands of NTD

Investor Investee Location Main business
activities		 Initial invest ment amount Shares held as ofSeptember30,2020 as ofSeptember30,2020 Net profit (loss)
of the investee for
the nine-month
period ended
September30,2020		 Investment income
(loss) recognized by
the Company for the
nine-month
period ended
September30,2020		 Footnote
Balance as of
September30,2020		 Balance as of
December31,2019		 Number of
shares		 Ownership
(%)		 Bookvalue
CHIEFTEK PRECISION
CO., LTD.
CHIEFTEK PRECISION
CO., LTD.
CHIEFTEK PRECISION
CO., LTD.
CHIEFTEK PRECISION
CO., LTD.
CHIEFTEK PRECISION
CO., LTD.
CHIEFTEK PRECISION
HOLDING CO., LTD.		 CHIEFTEK PRECISION
HOLDING CO., LTD.
cpc Europa GmbH
CSM Maschinen GmbH
CHIEFTEK PRECISION
INTERNATIONAL LLC
CHIEFTEK PRECISION USA
CO., LTD.
Chieftek Precision
(Hong Kong) Co., Limited		 Samoa
Germany
Germany
United States
of America
United States
of America
Hong Kong		 Professional
investment
Sale of high
precision linear
motion
components and
rendering after
-sale services
Research,
manufacture and
sale of
machineries
Lease of real estate
property
Sale of high
precision linear
motion
components and
rendering after
-sale services
Professional
investment		 152,263
$ 98,695
19,349
110,054
50,027
148,410		 152,263
$ 98,695
19,349
61,551
50,027
148,410		 5,100,000
-
-
-
1,660,000
5,100,000		 100
100
100
100
100
100		 251,884
$ 5,769
624)
(
105,778
35,071
243,733		 39,482
$ 12,151
1,362)
(
1,748
10,101
38,468		 39,482
$ 12,151
1,362)
(
1,748
10,101
-		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
(Note 1)

(Note 1) Not required to disclose income (loss) recognized by the Company.

(Note 2) Foreign currencies were translated into New Taiwan Dollars using the exchange rate (USD:NTD 1:29.1) as of September 30, 2020.

Table 7, Page 1

Information on investments in Mainland China - Basic information For the nine-month period ended September 30, 2020

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Table 8
Investee in Mainland
China		 Main business
activities		 Paid-in capital Investment
method		 Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of January 1,
2020		 Amount remitted from Taiwan to
Mainland China/
Amount remitted back
to Taiwan for the nine-month
period ended September 30,2020		 Amount remitted from Taiwan to
Mainland China/
Amount remitted back
to Taiwan for the nine-month
period ended September 30,2020		 Accumulated
amount
of remittance from
Taiwan to
Mainland China as
of September 30,
2020		 Net income of
investee for the
nine-month
period ended
September 30,
2020		 Ownership
held by
the Company
(direct or
indirect)		 Investment
income
(loss) recognized
by the Company
for the nine-
month
period ended
September 30,
2020
（Note 2）		 Accumulated
amount
of investment
income
remitted back to
Taiwan as of
September 30,
2020
Footnote
Book value of
investments in
Mainland China
as of September
30,2020
Expressed in thousands of NTD		 Accumulated
amount
of investment
income
remitted back to
Taiwan as of
September 30,
2020
Footnote
Book value of
investments in
Mainland China
as of September
30,2020
Expressed in thousands of NTD		 Accumulated
amount
of investment
income
remitted back to
Taiwan as of
September 30,
2020
Footnote
Book value of
investments in
Mainland China
as of September
30,2020
Expressed in thousands of NTD
Remitted to
Mainland China		 Remitted back to
Taiwan
Chieftek Machinery
(Kunshan) Co., Ltd
Company		 Production,
processing and
sale of high
precision linear
motion
components
and rendering
after-sale
services
name		 148,410
$ Note 1
Accumulated amount of remittance
from Taiwan to Mainland China as of
September 30,2020		 148,410
$ -
$ Investment amount approved by the
Investment Commission of the
Ministry of Economic Affairs
(MOEA)		 -
$ 148,410
$ Ceiling on investments in Mainland
China imposed by the Investment
Commission of MOEA(Note 3)		 38,469
$		 100% 38,469
$		 167,574
$		 121,770
$		 －
CHIEFTEK PRECISION CO., LTD. $ 148,410 $ 148,410 $ 1,232,983

(Note 1) Through investing in an existing company in the third area (Chieftek Precision (Hong Kong) Co., Ltd.) which then invested in the investee in Mainland China.

(Note 2) The investment income (loss) is recognized based on the investeesʼ financial statements that were reviewed by the parent company’s auditors for the nine-month period ended September 30, 2020. (Note 3) The ceiling amount is 60% of the higher of net worth or consolidated net worth.

(Note 4) Foreign currencies were translated into New Taiwan Dollars using the exchange rate (USD:NTD 1:29.1) as of September 30, 2020.

Table 8, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Information on investments in Mainland China - Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area For the nine-month period ended September 30, 2020 Table 9

Expressed in thousands of NTD

Investee in MainlandChina Sales(purchase) Sales(purchase) Propertytransaction Propertytransaction Accounts receivable (payable) Provision of
endorsements/guarantees
or collaterals		 Provision of
endorsements/guarantees
or collaterals		 Financing Financing Others
Amount % Amount % Balance at
September 30,
2020		 % Balance at
September 30,
2020		 Purpose Maximum balance
during the nine-month
period ended
September30,2020		 Balance at
September 30,
2020		 Interest rate Interest during
the nine-month
period ended
September 30,
2020
Chieftek Machinery
(Kunshan) Co., Ltd		 $ 245,454 30% $ - - $ 147,673 37% $ - - $ - -
$		 - -
$		 -
$

Table 9, Page 1

CHIEFTEK PRECISION CO., LTD. AND SUBSIDIARIES

Major shareholders information September 30, 2020

Table 10 Expressed in share Number of shares Name of the major shareholder Common stock Ownership (%) Hsu, Ming-Che 5,579,338 6.87% Note: The major shareholders information was derived from the data that the Company issued common shares (including treasury shares) and preference shares in dematerialised form which were registered and held by the shareholders above 5% on the last operating date of each quarter and was calculated by Taiwan Depository & Clearing Corporation. The share capital which was recorded in the financial statements is different from the actual number of shares issued in dematerialised form because of the different calculation basis.

Table 10, Page 1

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