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GEM Interim / Quarterly Report 2019

Dec 23, 2019

52099_rns_2019-12-23_1b99bd23-4815-409e-b8d5-8ae6193a72ce.pdf

Interim / Quarterly Report

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GEM Terminal Ind. Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Nine Months Ended September 30, 2019 and 2018 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

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

Introduction

We have reviewed the accompanying consolidated balance sheets of GEM Terminal Ind. Co., Ltd. and its subsidiaries (the “Group”) as of September 30, 2019 and 2018, the related consolidated statements of comprehensive income for the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2019 and 2018, the consolidated statements of changes in equity and cash flows for the nine months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

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

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of September 30, 2019 and 2018, its consolidated financial performance for the three months ended September 30, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the nine months ended September 30, 2019 and 2018 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

  • 1 -

The engagement partners on the reviews resulting in this independent auditors’ review report are Chen-Li Chen and Chiu-Yen Wu.

Deloitte & Touche Taipei, Taiwan Republic of China

November 11, 2019

Notice to Readers

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

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

  • 2 -

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss - current (Note 7)
Financial assets at fair value through other comprehensive income - current
(Note 8)
Notes receivable (Note 9)
Accounts receivable, net (Note 9)
Other receivables
Current tax assets (Note 4)
Inventories (Note 10)
Other financial assets - current (Notes 11 and 28)
Other current assets (Notes 15 and 28)
Total current assets
NONCURRENT ASSETS
Property, plant and equipment (Notes 13, 28 and 29)
Right-of-use assets (Notes 3, 4, 14, 27 and 28)
Deferred tax assets (Note 4)
Prepayments for equipment (Note 29)
Other financial assets - noncurrent (Note 11)
Long-term prepayments for lease (Notes 15 and 28)
Other noncurrent assets
Total noncurrent assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 18 and 28)
Short-term bills payable (Note 18)
Financial liabilities at fair value through profit or loss-current (Note 7)
Notes payable (Note 16)
Accounts payable (Note 16)
Other payables (Note 17)
Current tax liabilities (Note 4)
Lease liabilities - current (Notes 3, 4, 14 and 27)
Long-term borrowings - current portion (Notes 18 and 28)
Other current liabilities
Total current liabilities
NONCURRENT LIABILITIES
Long-term borrowings (Notes 18 and 28)
Deferred tax liabilities (Note 4)
Lease liabilities - noncurrent (Notes 3, 4, 14 and 27)
Net defined benefit liabilities (Note 4)
Total noncurrent liabilities
Total liabilities
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 20)
Ordinary shares
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Total equity
TOTAL		 September 30, 2019
(Reviewed)
Amount
%
$ 977,427
18
-
-
111,569
2
114,579
2
905,782
17
17,000
-
1,043
-
1,012,522
18
169,551
3

144,285

3

3,453,758
63
1,806,597
33
79,851
2
132,810
2
15,717
-
1,656
-
-
-

7,674

-

2,044,305
37
$ 5,498,063
100
$ 1,014,326
18
100,000
2
1,172
-
147,928
3
256,370
5
160,362
3
-
-
1,629
-
802,308
14

10,299

-

2,494,394
45
481,987
9
77,236
1
5,389
-

25,522

1

590,134
11

3,084,528
56

1,692,000
31

271,315

5
343,170
6
40,765
1

180,818

3
564,753
10

(114,533
)
(2
)

2,413,535
44
$ 5,498,063
100		 December 31, 2018
(Audited)
Amount
%
$ 1,501,888
25
-
-
93,727
2
86,222
1
1,083,129
18
8,745
-
2,502
-
809,566
14
176,980
3

140,197

2

3,902,956
65
1,861,249
31
-
-
129,798
2
20,411
-
1,696
-
90,040
2

5,616

-

2,108,810
35
$ 6,011,766
100
$ 884,377
15
100,000
2
832
-
185,096
3
493,159
8
178,335
3
5,480
-
-
-
613,128
10

7,649

-

2,468,056
41
899,451
15
78,732
1
-
-

26,221

1

1,004,404
17

3,472,460
58

1,692,000
28

271,315

5
343,170
6
-
-

273,586

4

616,756
10

(40,765
)
(1
)

2,539,306
42
$ 6,011,766
100		 September 30, 2018
(Reviewed)






















































Amount
%
$ 1,270,946
22
18
-
131,795
2
176,302
3
1,075,304
19
777
-
2,459
-
655,298
12
170,064
3

137,434

2

3,620,397
63
1,865,344
32
-
-
150,833
3
13,388
-
1,686
-
89,960
2

5,288

-

2,126,499
37
$ 5,746,896
100
$ 760,375
13
70,000
1
-
-
91,211
2
410,012
7
140,248
3
-
-
-
-
622,199
11

8,875

-

2,102,920
37
958,275
17
101,374
2
-
-

34,856

-

1,094,505
19

3,197,425
56

1,692,000
29

271,315

5
343,170
6
-
-

291,211

5

634,381
11

(48,225
) (1
)

2,549,471
44
$ 5,746,896
100

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

  • 3 -

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Net Loss Per Share) (Reviewed, Not Audited)

OPERATING REVENUE,
NET (Note 21)

OPERATING COSTS (Notes
10 and 22)

GROSS PROFIT

OPERATING EXPENSES
(Note 22)
Marketing
General and administrative
Research and development
Expected credit loss
(reversed) (Note 9)

Total operating
expenses

LOSS FROM OPERATIONS
NON-OPERATING INCOME
AND EXPENSES (Note
22)
Other income
Other gains and losses
Finance costs

Total non-operating
income and
expenses

CONSOLIDATED LOSS
BEFORE INCOME TAX
INCOME TAX BENEFIT
(Notes 4 and 23)

CONSOLIDATED NET
LOSS

OTHER COMPREHENSIVE
INCOME (LOSS) (Notes
20 and 23)
Items that will not be
reclassified subsequently
to profit or loss
Unrealized gain (loss) on
investments in equity
instruments designated
as at fair value through
other comprehensive
income
Income tax relating to
items that will not be
reclassified
subsequently to profit
or loss		 For the Three Months Ended September 30 For the Three Months Ended September 30 For the Three Months Ended September 30 For the Nine Months Ended September 30 Ended September 30
2019 2018 2019 2018











Amount
%
$ 849,990
100

795,488

94

54,502

6
36,467
4

50,918
6

2,318
-

272

-

89,975

10

(35,473
)
(4
)
7,406
1
12,680
2

(12,996
)
(2
)

7,090

1
(28,383 )
(3 )

(9,002
)
(1
)

(19,381
)
(2
)
(9,477 )
(1 )
2,105
-








Amount
%
$ 970,890
100

938,394

97

32,496

3
36,802
4
53,789
5
1,782
-

552

-

92,925

9

(60,429
)

(6
)
13,752
1
7,036
1

(13,658
)

(1
)

7,130

1
(53,299 )
(5 )

(13,522
)

(1
)

(39,777
)

(4
)
(9,820 )
(1 )
1,493
-








Amount
%
$ 2,541,753
100

2,312,067

91


229,686

9

110,798
4
145,779
6
11,169
-

(1,193
)
-


266,553

10


(36,867
)
(1
)
29,342
1
(10,094 )
-

(40,615
)
(2
)

(21,367
)
(1
)
(58,234 )
(2 )

(3,584
)
-


(54,650
)
(2
)
2,403
-
(722 )
-
















Amount
%
$ 2,972,785
100

2,789,118

94

183,667

6

110,113
4

154,105
5

13,929
-

(2,040
)

-

276,107

9

(92,440
)

(3
)

22,155
1

11,899
-

(42,749
)

(2
)

(8,695
)

(1
)

(101,135 )
(4 )

(18,044
)

(1
)

(83,091
)

(3
)

(18,950 )
-

2,914
-
(Continued)
  • 4 -

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Net Loss Per Share) (Reviewed, Not Audited)

Items that may be
reclassified subsequently
to profit or loss
Exchange differences on
translating foreign
operations

Income tax relating to
items that may be
reclassified
subsequently to profit
or loss

Other comprehensive
loss for the period,
net of income tax

TOTAL COMPREHENSIVE
LOSS FOR THE PERIOD

NET LOSS
ATTRIBUTABLE TO:
Owners of the Company

TOTAL COMPREHENSIVE
LOSS ATTRIBUTABLE
TO:
Owners of the Company

NET LOSS PER SHARE
(Note 24)

Basic

Diluted
 For the Three Months Ended September 30 For the Three Months Ended September 30 For the Three Months Ended September 30 For the Nine Months Ended September 30 Ended September 30
2019 2018 2019 2018








Amount
%
$ (109,533 )
(13 )

(223
)
-

(117,128
)
(14
)
$ (136,509
)
(16
)
$ (19,381
)
(2
)
$ (136,509
)
(16
)
$ (0.11
)
$ (0.11
)




Amount
%
$ (105,997 )
(11 )

749

-

(113,575
)

(12
)
$ (153,352
)

(16
)
$ (39,777
)

(4
)
$ (153,352
)

(16
)
$ (0.24
)
$ (0.24
)




Amount
%
$ (72,154 )
(3 )

(648
)
-


(71,121
)
(3
)
$ (125,771
)
(5
)
$ (54,650
)
(2
)
$ (125,771
)
(5
)

$ (0.32
)

$ (0.32
)








Amount
%
$ (83,018 )
(3 )

2,832

-

(96,222
)

(3
)
$ (179,313
)

(6
)
$ (83,091
)

(3
)
$ (179,313
)

(6
)
$ (0.49
)
$ (0.49
)
$ $ $
$
$ $ $
$
$ $ $
$


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

(Concluded)

  • 5 -

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

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

BALANCE, JANUARY 1, 2019

Net loss for the nine months ended September 30, 2019
Other comprehensive income (loss) for the nine months ended September
30, 2019, net of income tax

Total comprehensive income (loss) for the nine months ended September
30, 2019

Appropriation of 2018 earnings
Special reserve

Disposal of investments in equity instruments designated as at fair value
through other comprehensive income

BALANCE, SEPTEMBER 30, 2019

BALANCE, JANUARY 1, 2018

Effect of retrospective application

BALANCE, JANUARY 1, 2018 AS ADJUSTED

Net loss for the nine months ended September 30, 2018
Other comprehensive loss for the nine months ended September 30, 2018,
net of income tax

Total comprehensive loss for the nine months ended September 30, 2018

Disposals of investments in equity instruments designated as at fair value
through other comprehensive loss

BALANCE, SEPTEMBER 30, 2018
 Equity Attributable to the Owners of the Company Equity Attributable to the Owners of the Company Equity Attributable to the Owners of the Company Total
$ (40,765
)

-

(71,121
)


(71,121
)


-


(2,647
)

$ (114,533
)

$ 36,102


-


36,102

-

(96,222
)


(96,222
)


11,895

$ (48,225
)
 Total Equity
$ 2,539,306
(54,650 )

(71,121
)

(125,771
)

-

-
$ 2,413,535
$ 2,728,784

-

2,728,784
(83,091 )

(96,222
)

(179,313
)

-
$ 2,549,471












Ordinary
shares
Capital Surplus
$ 1,692,000
$ 271,315

-
-

-

-


-

-


-

-


-

-

$ 1,692,000
$ 271,315

$ 1,692,000
$ 271,315


-

-


1,692,000

271,315

-
-

-

-


-

-


-

-

$ 1,692,000
$ 271,315
 Retained Earnings Total
$ 616,756
(54,650 )

-

(54,650
)

-

2,647
$ 564,753
$ 729,367

-

729,367
(83,091 )

-

(83,091
)

(11,895
)
$ 634,381		 Other Equity
Unrealized Loss
on Financial
Assets at Fair
Value Through
Unrealized
Other
Loss on
Comprehensive
Available-for-sale
Income
Financial Assets
$ (8,988
)
$ -

-
-

1,681

-


1,681

-


-

-


(2,647
)

-

$ (9,954
)
$ -

$ -
$ (3,166 )


(3,166
)

3,166


(3,166
)

-

-
-

(15,818
)

-


(15,818
)

-


11,895

-

$ (7,089
)
$ -
 Exchange
Differences on
Translating
Remeasurement
Foreign
of Defined
Operations
Benefit Plans
$ (37,167
)
$ 5,390

-
-

(72,802
)

-


(72,802
)

-


-

-


-

-

$ (109,969
)
$ 5,390

$ 33,232
$ 6,036


-

-


33,232

6,036

-
-

(80,186
)

(218
)


(80,186
)

(218
)


-

-

$ (46,954
)
$ 5,818












Unappropriated
Legal Reserve
Special Reserve
Earnings
$ 343,170
$ -
$ 273,586

-
-
(54,650 )

-

-

-


-

-

(54,650
)


-

40,765

(40,765
)


-

-

2,647

$ 343,170
$ 40,765
$ 180,818

$ 343,170
$ -
$ 386,197


-

-

-


343,170

-

386,197

-
-
(83,091 )

-

-

-


-

-

(83,091
)


-

-

(11,895
)

$ 343,170
$ -
$ 291,211

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

  • 6 -

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated loss before income tax
Adjustments for:
Depreciation expense
Amortization expense
Expected credit loss reversed
Finance costs
Interest income
Dividend income
Loss on disposal of property, plant and equipment and fire loss, net
Loss on disposal of right-of-use assets
Write-down of inventories and fire damage
Other non-cash items
Changes in operating assets and liabilities
Notes receivable
Accounts receivable
Other receivables
Inventories
Other current assets
Financial liabilities held for trading
Notes payable
Accounts payable
Other payables
Other current liabilities
Net defined benefit liabilities
Cash generated from (used in) operations
Interest received
Income tax paid
Net cash generated from (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through other
comprehensive income
Proceeds from disposal of financial assets at fair value through other
comprehensive income
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of right-of-use assets
Proceeds from disposal of right-of-use assets
Decrease in other financial assets
Increase in other noncurrent assets
Dividend received
Net cash used in investing activities		 Nine Months Ended September 30 Nine Months Ended September 30 Nine Months Ended September 30





2019
$ (58,234)
197,268
2,042
(1,193)
40,615
(6,083)
(3,428)
27,071
2,262
21,104
(2,072)
(28,357)
178,658
(8,967)
(223,219)
(6,443)
(509)
(37,168)
(236,789)
(18,612)
3,355
(9,723
)
(168,422)
6,795

(6,929
)

(168,556
)
(879,583)
862,259
(188,777)
51
(3,861)
18,031
7,469
(4,168)

3,428

$ (185,151
)		 2018
$ (101,135)
193,931
3,839

(2,040)
42,749

(7,088)

(3,680)
5,100
-
5,051

1,717

(25,839)
143,521

-

314,236

31,904

(254)

(57,759)

(180,410)

(22,710)
4,761

(9,956
)

335,938
8,152

(10,152
)

333,938
(1,166,144)
1,126,051

(192,074)
737

-
-
99,940

(1,180)

3,680
$ (128,990
)
(Continued)
  • 7 -

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Decrease in short-term borrowings
Increase in short-term bills payable
Decrease in short-term bills payable
Increase in long-term borrowings
Repayment of long-term borrowings
Interest paid
Net cash used in financing activities
EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF
CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD		 Nine Months Ended September 30 Nine Months Ended September 30 Nine Months Ended September 30






2019
$ 1,299,002

(1,164,865)
100,000
(100,000)
250,000
(478,730)

(42,449
)

(137,042
)

(33,712
)
(524,461)

1,501,888

$ 977,427
 2018
$ 645,938

(718,917)
70,000

(100,000)
440,846

(635,001)

(45,425
)

(342,559
)

(22,167
)

(159,778)

1,430,724
$ 1,270,946

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

(Concluded)

  • 8 -

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

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

  • Series terminals, plug inserts, housing and electronic connectors for AC and DC power cords.

  • Electric and motor parts terminal.

  • Electric and communication terminal.

  • Optical communication passive devices.

  • Lead frames.

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

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

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were reported to the board of directors for issue on November 11, 2019.

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

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

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

IFRS 16 “Leases”

IFRS 16 provides a comprehensive model for the identification of lease arrangements and their accounting treatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, and a number of related interpretations. Refer to Note 4 for information relating to the relevant accounting policies.

  • 9 -

Definition of a lease

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

The Group as lessee

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

The Group elects to apply IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information is not restated.

Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid lease payments. The Group applies IAS 36 to all right-of-use assets.

The Group also applies the following practical expedients:

  • 1) The Group applies a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

  • 2) The Group accounts for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

  • 3) The Group excludes initial direct costs from the measurement of right-of-use assets on January 1, 2019.

The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 1.69%. The difference between the (i) lease liabilities recognized and (ii) operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future minimum lease payments of non-cancellable operating lease
commitments on December 31, 2018


Less: Recognition exemption for short-term leases

Less: Recognition exemption for leases of low-value assets


Undiscounted amounts on January 1, 2019

 $ 1,962
(970)
(224
)
$ 768

(Continued)

  • 10 -
Discounted amounts using the incremental borrowing rate on January 1, 2019

Add: Adjustments as a result of a different treatment of extension options
Lease liabilities recognized on January 1, 2019		 $ 755
3,592
$ 4,347
(Concluded)

The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows:

Adjustments Adjustments
As Originally Arising from Adjusted
Stated on Initial Amount as of
January 1, 2019 Application January 1, 2019
Right-of-use assets $
-		 $ 96,742 $ 96,742
Other current assets 2,355 (2,355) -
Long-term prepayments for lease 90,040 (90,040
)		 -
Total effect on assets $ 92,395 $
4,347		 $ 96,742
Lease liabilities - current $
-		 $
694		 $ 694
Lease liabilities - noncurrent - 3,653 3,653
Total effect on liabilities $
-		 $
4,347		 $ 4,347
Total effect on equity $
-		 $
-		 $ -
  • b. The IFRSs endorsed by the FSC for application starting from 2020
New IFRSs
Amendments to IFRS 3 “Definition of a Business”
Amendments to IAS 1 and IAS 8 “Definition of Material”		 Effective Date
Announced by IASB
January 1, 2020 (Note 1)
January 1, 2020 (Note 2)

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

  • Note 2: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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

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

New IFRSs

Effective Date Announced by IASB (Note)

  • Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 Reform”

(Continued)

  • 11 -
New IFRSs
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”		 Effective Date
Announced by IASB (Note)
To be determined by IASB
January 1, 2021
(Concluded)

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

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  • a. Statement of compliance

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

  • b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

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

  • 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

  • 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

  • 3) Level 3 inputs are unobservable inputs for the asset or liability.

  • c. Basis of consolidation

The basis of preparation applied in the consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2018.

See Note 12, table 5 and 6 for detailed information on subsidiaries (including percentages of ownership and main businesses).

  • 12 -

d. Other significant accounting policy

Except for leases and the following, please refer to the summary of significant accounting policy in the consolidated financial statements for the year ended December 31, 2018.

1) Leases

a) 2019

At the inception of a contract, the Group assesses whether the contract is, or contains, a lease.

The Group as lessee

The Group recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made before the commencement date. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments (including fixed payments). The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is change in a lease term, the Group remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the consolidated balance sheets.

b) 2018

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

2) Retirement benefits

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

  • 13 -

3) Taxation

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

For the critical accounting judgments and key sources of estimation, uncertainty and assumption applied in these consolidated financial statements, please refer to the consolidated financial statements for the year ended December 31, 2018.

6. CASH AND CASH EQUIVALENTS

Cash on hand

Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities less than
3 months

 September 30,
2019
December 31,
2018
September 30,
2018
$ 1,862
$ 2,204
$ 3,586
866,874
1,144,415
863,401

108,691

355,269

403,959
$ 977,427
$ 1,501,888
$ 1,270,946

a. The market rate intervals of cash equivalents at the end of the reporting period were as follows:

September 30, December 31, September 30,
2019 2018 2018
Time deposits (%) 0.55-1.85 0.55-2.58 0.55-2.58
  • b. The Group transacted with a variety of financial institutions with high credit quality to disperse credit risk, hence, there was no expected credit loss.

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

September 30, September 30, September 30, December 31, December 31, December 31, September 30, September 30,
2019 2018 2018
Financial assets-current
Mandatorily classified as at FVTPL
Derivatives (not designated for hedge)
Copper futures $ - $ - $
18

(Continued)

  • 14 -
September 30, September 30, December 31, December 31, December 31, September 30, September 30, September 30,
2019 2018 2018
Financial liabilities-current
Held for trading
Derivatives (not designated for hedge )
Copper futures $
553		 $
832		 $ -
Foreign exchange forward contracts 619 - -
$ 1,172 $
832		 $ -
(Concluded)
  • a. At the end of reporting period, outstanding copper futures not under hedge accounting were as follows:
Contract
Amount
Futures Month Lots (In thousands)
September30,2019
Copper futures
Refined copper December, 2019 16 US$1,049
December31,2018
Copper futures
Refined copper March 2019 20 US$1,338
Refined copper May 2019 5 US$ 334
September30,2018
Copper futures
Refined copper December, 2018 1 US$ 71

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

  • b. At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:
Notional
Amount
Currency Maturity Date
(In Thousands)
September 30, 2019
Sell USD/CNY August, 2020 US$2,000/CNY$
14,220

The foreign exchange forward contracts above did not meet the criteria of hedge effectiveness and, therefore, were not accounted for using hedge accounting.

  • 15 -

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

September 30, September 30, December 31, December 31, September 30, September 30,
2019 2018 2018
Investments in equity instruments at FVTOCI
Domestic listed shares $ 19,844 $ 26,234
 $ 34,044
Overseas listed shares 91,725 67,493
 97,751
$ 111,569 $ 93,727
 $ 131,795

These investments in equity instruments are not held for trading. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI.

For the nine months ended September 30, 2019 and 2018, the Group acquired $879,583 thousand and $1,166,144 thousand of domestic and overseas listed shares for medium and long-term strategic purposes; the management designated these investments as at FVTOCI.

For the nine months ended September 30, 2019 and 2018, the Group sold its domestic and overseas listed shares in order to manage credit concentration risk. The sold shares had a fair value of $862,259 thousand and $1,126,051 thousand and the Group transferred a gain of $2,647 thousand and a loss of $11,895 thousand from other equity to retained earnings.

The dividends for the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2019 and 2018 were $3,369 thousand, $2,139 thousand, $3,428 thousand and $3,680 thousand. Those related to investments derecognized during the period were $130 thousand, $1,344 thousand, $131 thousand, and $1,407 thousand and those related to investments held at the end of the reporting period were $3,239 thousand, $795 thousand, $3,297 thousand and $2,273 thousand.

9. NOTES, ACCOUNTS RECEIVABLE, NET AND OVERDUE RECEIVABLE

September 30, September 30, December December 31, September September 30,
2019 2018 2018
Notesreceivable
Notes receivable - operating $ 114,579 $ 86,222
 $ 176,302
Accounts receivable
At amortized cost
Gross carrying amount $ 914,721 $ 1,093,995
 $ 1,086,804
Less: Allowance for impairment loss 8,939 10,866
 11,500
$ 905,782 $ 1,083,129
 $ 1,075,304
Overdue receivable
At amortized cost
Gross carrying amount $ 616 $ -
 $ -
Less: Allowance for impairment loss 616 -
 -
$ - $ -
 $ -
  • 16 -

a. Notes and accounts receivable

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

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

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

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

September 30, 2019


Expected credit loss rate (%)
Gross carrying amount

Loss allowance (Lifetime ECL)

Amortized cost

December 31, 2018

Expected credit loss rate (%)
Gross carrying amount

Loss allowance (Lifetime ECL)

Amortized cost

September 30, 2018		 Not Past Due
0-0.6
$ 976,942


(4,124
)

$ 972,818

Not Past Due
0-0.6
$ 1,117,705


(4,888
)

$ 1,112,817
 Past Due
1to 60 Days
0.5-10
$ 48,896


(2,299
)

$ 46,597

Past Due
1to 60 Days
2-10
$ 58,633


(3,302
)

$ 55,331
 Past Due
61 to 90 Days
9
20-55
$ 1,333


(490
)

$ 843

Past Due
61 to 90 Days
9
20-50
$ 1,586


(744
)

$ 842
 Past Due
1 to 180 Days

40-55
$ 15

(6
)
$ 9

Past Due
1 to 180 Days

30-60
$ 315

(166
)
$ 149
 Past Due
Over 180 Days
80-100
$ 2,114


(2,020
)

$ 94

Past Due
Over 180 Days
70-100
$ 1,978


(1,766
)

$ 212
 Total
$ 1,029,300
(8,939

$ 1,020,361
Total
$ 1,180,217

(10,866
)
$ 1,169,351
September 30, 2018
Expected credit loss rate (%)
Gross carrying amount
Loss allowance (Lifetime ECL)

Amortized cost		 Collat eral not Provided Past Due
ver 180 Days
70-100
$ 2,787
(2,338
)
$ 449		 Collateral
Provided
Past Due
ver 180 Days
6
$ 4,191

(251
)

$ 3,940
 Total
$ 1,263,106
(11,500
)
$ 1,251,606
N


 ot Past Due

0-0.6
$ 1,190,331

(4,967
)
$ 1,185,364
 Past Due
1to 60 Days
6
2-10
$ 65,349

(3,818
)

$ 61,531
 Past Due
1 to 90 Days
9
20-30
$ 398

(102
)

$ 296
 Past Due
1 to 180 Days
O
30-55
$ 50

(24
)

$ 26
 O

Parts of the Group’ customer provided property, plant and equipment as collateral to lower the risk of expected credit loss on September 30, 2018.

  • 17 -

The movements of the loss allowance of notes, accounts and overdue receivable were as follows:

Balance at January 1
Less: Loss allowance reversed
Amounts written off
Foreign exchange gains and losses
Balance at September 30		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
$ 10,866

(1,193)
-

(118
)

$ 9,555
 2018
$ 15,473
(2,040)
(1,873)

(60
)
$ 11,500
  • b. Credit risk of notes and accounts receivable

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

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

September 30, September 30, December 31, December 31, September 30, September 30,
2019 2018 2018
Group A $ 142,649 $ 146,965
 $ 161,203
INVENTORIES
September 30, December 31, September 30,
2019 2018 2018
Work in process $
314,450		 $
161,590
$
177,343
Finished goods 264,369 217,798 167,994
Raw materials 363,903 367,997 244,295
Supplies 69,800 62,181
 65,666
$ 1,012,522 $
809,566
 $
655,298

10. INVENTORIES

All operating costs recognized for the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2019 and 2018 were the cost of inventories, which included the following items:

Write-down (reversal of
write-down) of inventories

Fire damage (Note 22)
Others

 For the Three Months
Ended September 30		 For the Three Months
Ended September 30

For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
$ 13,126

-
(3,584
)

$ 9,542
 2018
$ (958)
-

2,383
$ 1,425		 2019
$ 18,609

2,495

(327
)

$ 20,777
 2018
$ 5,051
-

4,394
$ 9,445
  • 18 -

11. OTHER FINANCIAL ASSETS

September 30, December 31, September 30,
2019 2018 2018
Time deposits with original maturities more than
3 months
 $ 142,071 $ 155,815 $ 154,703
Pledge time deposits 15,502 9,632 6,285
Refundable deposits
13,634
13,229
10,762
$ 171,207 $ 178,676
 $ 171,750
Current
 $ 169,551 $ 176,980
$ 170,064
Noncurrent
1,656
1,696
1,686
$ 171,207 $ 178,676
 $ 171,750
a. The market rate intervals of other financial assets at the end of the reporting period were as follows:
September 30, December 31, September 30,
2019 2018 2018
Time deposits (%) 1.35-2.8 0.30-1.55
1.35-1.55

  • b. The counterparties of the Group’s time deposits were banks with good credit and no significant default concerns, hence, there was no expected credit loss.

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

12. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements were as follows:

Name of Investor
Name of Investee
Main Businesses and
Products
The Company
Global Electronics Terminal
(Cayman) Co., Ltd. (Global
Cayman)
Note 1
Genius Terminal Co., Ltd.
(Genius)
Notes 1 and 2
GEM Terminal (Cayman) Co.,
Ltd. (GEM Cayman)
Note 1
Global Cayman
Vibo Gem International Co.,
Ltd. (Vibo)
Notes 1 and 2
Global Electronics Terminal
(HK) Co., Ltd. (Global HK)
Note 2
Genius
Genius Terminal (HK) Ltd.
(Genius HK)
Note 2
GEM Cayman
Vietnam Gem Electronic and
Metal Co., Ltd (GEM VN)
Note 3
Vibo
Suzhou Gem Opto-Electronics
Terminal Co., Ltd. (GEM
Suzhou)
Note 3
Dongguan Gem Electronics &
Metal Co., Ltd. (GEM
Dongguan)
Note 3		 Percentage of Ownership (%)
September 30,
2019
December 31,
2018
September 30,
2018
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Note 1: International investment.

Note 2: International trading.

  • 19 -

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

13. PROPERTY, PLANT, AND EQUIPMENT

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

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

Nine months ended September 30, 2019


Cost
Balance at January 1, 2019

Additions
Fire damage
Disposal
Effect of foreign currency exchange
differences

Balance at September 30, 2019

Accumulated depreciation
Balance at January 1, 2019

Depreciation expenses
Fire damage
Disposal
Effect of foreign currency exchange
differences

Balance at September 30, 2019

Carrying amounts at December 31, 2018
and January 1, 2019

Carrying amounts at September 30, 2019
 Land
$ 146,218

-
-
-

-

$ 146,218

$ -

-
-
-

-

$ -

$ 146,218

$ 146,218
 Buildings
Machinery and
Equipment
Transportation
Equipment
$ 1,054,182
$ 1,564,038
$ 61,923

19,756
96,965
2,999
(13,591 )
(9,188 )
-
(394 )
(16,570 )
(1,106 )

(16,535
)

(64,898
)

(1,022
)

$ 1,043,418
$ 1,570,347
$ 62,794

$ (474,555 )
$ (904,637 )
$ (43,065 )

(32,873 )
(79,922 )
(2,344 )
1,413
1,252
-
320
14,578
1,080

10,910

33,332

944

$ (494,785
)
$ (935,397
)
$ (43,385
)

$ 579,627
$ 659,401
$ 18,858

$ 548,633
$ 634,950
$ 19,409
 Others
$ 773,416

74,703
(4,969 )
(40,897 )

(15,253
)
$ 787,000

$ (424,392 )
(79,386 )
936
40,014

12,412

$ (450,416
)
$ 349,024

$ 336,584
 Construction
in Progress
and
Equipment to
be Inspected
$ 108,121

10,634

-

-

2,048

$ 120,803

$ -


-
-
-

-

$ -

$ 108,121

$ 120,803
 Total
$ 3,707,898
205,057
(27,748 )
(58,967 )

(95,660
)
$ 3,730,580
$ (1,846,649 )
(194,525 )
3,601
55,992

57,598
$ (1,923,983
)
$ 1,861,249
$ 1,806,597

Nine months ended September 30, 2018


Cost
Balance at January 1, 2018

Additions
Disposal
Effect of foreign currency exchange
differences

Balance at September 30, 2018

Accumulated depreciation
Balance at January 1, 2018

Depreciation expenses
Disposal
Effect of foreign currency exchange
differences

Balance at September 30, 2018

Carrying amounts at September 30, 2018
 Land
$ 146,218

-
-

-

$ 146,218

$ -

-
-

-

$ -

$ 146,218
 Buildings
Machinery and
Equipment
Transportation
Equipment
$ 1,046,950
$ 1,629,392
$ 57,436

16,463
126,051
11,962
(5,682 )
(163,902 )
(7,263 )

(7,711
)

(42,599
)

(665
)

$ 1,050,020
$ 1,548,942
$ 61,470

$ (430,535 )
$ (972,172 )
$ (48,426 )

(34,079 )
(86,294 )
(2,131 )
5,682
159,634
7,157

(2,566
)

8,563

343

$ (461,498
)
$ (890,269
)
$ (43,057
)

$ 588,522
$ 658,673
$ 18,413
 Others
$ 690,093

101,050
(27,244 )

(11,706
)
$ 752,193

$ (361,678 )
(71,427 )
25,781

2,935

$ (404,389
)
$ 347,804
 Construction
in Progress
and
Equipment to
be Inspected
$ 176,368

(66,870 )

-

(3,784
)

$ 105,714

$ -


-
-

-

$ -

$ 105,714
 Total
$ 3,746,457
188,656
(204,091 )

(66,465
)
$ 3,664,557
$ (1,812,811 )
(193,931 )
198,254

9,275
$ (1,799,213
)
$ 1,865,344

  • 20 -

  • b. Estimated useful lives

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

Buildings
Factory facilities 5-25 years
Building facilities 5-25 years
Main buildings of the factory 19-50 years
Main buildings of the office 20-55 years
Machinery and equipment 5-10 years
Transportation equipment 4-12 years
Others 3-15 years

  • c. Refer to Note 28 for the carrying amount of property, plant and equipment pledged as collateral for bank borrowings.

  • d. Investing activities affecting both cash and non-cash items

Acquisition of property, plant and equipment
Capitalized interest
Decrease in prepayments for equipment
Decrease (increase) in payable for purchase of equipment
Cash paid		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
$ 205,057

(1,502)
(4,694)

(10,084
)

$ 188,777
 2018
$ 188,656
(2,300)
(9,365)

15,083
$ 192,074

14. LEASE ARRANGEMENTS

  • a. Right-of-use assets - 2019
September 30,
2019
Carrying amounts
Land $ 70,469
Buildings
9,382
$ 79,851
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2019 2019
Additions to right-of-use assets $ 3,861 $ 6,443
Depreciation charge for right-of-use assets
Land $
526		 $ 1,461
Buildings 231
1,282
$
757		 $ 2,743
  • 21 -

b. Lease liabilities - 2019

September 30,
2019
Carrying amounts
Current $ 1,629
Noncurrent $ 5,389
Range of discount rate for lease liabilities were all 1.69%.
  • c. Material lease-in activities and terms

The Group leases land and buildings for the use as plants and offices with lease terms of 1 to 50 years, refer to Note 15. The Group does not have bargain purchase options to acquire the leasehold land and buildings but have extension options at the end of the lease terms. In addition, the Group is prohibited from subleasing or transferring all or any portion of the underlying assets without the lessor’s consent.

In 2019, Subsidiary GEM VN terminated some of its building lease contracts for purchase and collected the refunded rent of $18,031 thousand. The difference between the refunded rent and the right-of-use assets was $ 2,262 thousand recognized as non-operating loss. As of September 30, 2019, partial land lease of $9,080 thousand are in the process of obtaining the land use right certificate.

  • d. Refer to Note 28 for the carrying amount of right-of-use assets pledged as collateral for bank borrowings.

15. PREPAYMENT FOR LEASE

December 31, December 31, September 30, September 30,
2018 2018
Current (included in other current assets) $ 2,355
$		 2,338
Noncurrent (included in long-term prepayments for lease) 90,040 89,960
$ 92,395 $ 92,298

Prepayments for lease are for land use rights and property use rights in China and Vietnam. The years of use for land use rights in China is 50 years, which will expire from December 2046 to September 2061 in a row. The years of use for land and property use rights in Vietnam are 40-50 years, which will expire from October 2054 to December 2066 in a row.

Refer to Note 28 for the carrying amount of prepayments for lease pledged as collateral for bank borrowings.

16. NOTES PAYABLE AND ACCOUNTS PAYABLE

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

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

  • 22 -

17. OTHER PAYABLES

September 30, September 30, December 31, December 31, September 30, September 30,
2019 2018 2018
Payable for purchase of equipment $ 47,451 $ 37,367
$		 32,194
Payable for salaries and bonuses 39,887 45,430 36,932
Payable for freight 16,000 18,091 15,525
Payable for service fees 6,921 13,385 8,603
Payable for utilities expense 3,722 6,250 3,312
Payable for tax 3,829 1,619 3,620
Payable for pension 827 9,830 801
Others 41,725 46,363
 39,261
$ 160,362 $ 178,335
 $ 140,248

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

18. BORROWINGS

a. Short-term borrowings

September 30, September 30, December 31, December 31, September 30, September 30,
2019 2018 2018
Unsecured borrowings $
450,114
 $
387,051
$
294,771
Secured borrowings (Note 28) 564,212
 497,326
 465,604
$ 1,014,326
 $
884,377
 $
760,375
The annual interest rates of short-term borrowings were as follows:
September 30, December 31, September 30,
2019 2018 2018
Unsecured borrowings (%) 1.20-3.50 1.25-3.60 1.35-3.35
Secured borrowings (%) 2.62-4.57 3.48-4.57 3.14-4.35

b. Short-term bills payable

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

September 30, December 31, September 30,
2019 2018 2018
Short-term bills payable (%) 1.48-1.50 1.17-1.24 1.17-1.19

As of September 30, 2019 and December 31, 2018, commercial papers of $50,000 thousand were issued and granted by China Bills Finance Corporation and International Bills Corporation, respectively. As of September 30, 2018, commercial paper of $50,000 thousand and $20,000 thousand were issued and granted by International Bills Corporation and China Bills Finance Corporation, respectively. The commercial papers above were issued with one year revolving credit facilities.

  • 23 -

c. Long-term borrowings

September 30, December 31, September 30, September 30,
2019 2018 2018
Unsecured borrowings $ 1,237,334 $ 1,433,917
$		 1,511,000
Secured borrowings (Note 28)
46,961
78,662
 69,474
1,284,295 1,512,579 1,580,474
Less: Current portion
802,308
613,128
 622,199
$ 481,987 $ 899,451
 $
958,275
The annual interest rates of long-term borrowings were as follows:
September 30, December 31, September 30,
2019 2018 2018
Unsecured borrowings (%) 1.49-2.06 1.49-2.06 1.49-2.06
Secured borrowings (%) 3.80-4.00 3.75-4.00 3.50-3.60
The maturity date of long-term borrowings were as follows:
September 30, December 31, September 30,
2019 2018 2018
Unsecured borrowings October 2019- February 2019- July 2018-
November 2022 November 2022 November 2022
Secured borrowings March 2019- March 2019-
February 2021 February 2021 December 2021

Under the loan agreements with certain banks, the Group should maintain certain financial ratios based on reviewed semiannual and audited annual consolidated financial statements. The financial ratio of the Group as of June 30, 2019, December 31, 2018 and June 30, 2018, were in compliance with the requirements stated in the loan agreements.

19. RETIREMENT BENEFIT PLANS

For the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2019 and 2018, employee benefit expenses in respect of the Group’s defined benefit retirement plans were $229 thousand, $303 thousand, $687 thousand and $910 thousand, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2018 and 2017.

20. EQUITY

a. Ordinary shares

September 30, December 31, September 30,
2019 2018 2018
Number of shares authorized (in thousands)
221,000
221,000
221,000
Shares authorized $ 2,210,000 $ 2,210,000
 $ 2,210,000

(Continued)

  • 24 -
September 30, December 31, September 30,
2019 2018 2018
Number of shares issued and fully paid (in
thousands)
169,200
169,200
169,200
Shares issued $ 1,692,000 $ 1,692,000 $ 1,692,000
(Concluded)
Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to
dividends.
Capital Surplus
September 30, December 31, September 30,
2019 2018 2018
May be used to offset a deficit, distributed
as cash dividends, or transferred
to ordinaryshares
Issuance of ordinary shares $ 266,411 $ 266,411
$ 266,411
Treasury share transactions
4,904
4,904
4,904
$ 271,315 $ 271,315 $ 271,315

b. Capital Surplus

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

c. Retained Earnings and Dividend Policy

The stockholders held their regular meeting on June 25, 2019 and in that meeting, resolved the amendments to the Company’s Articles of Incorporation (the “Articles”). According the dividend policy in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit (except when legal reserve equals to the Company’s paid-in capital, may also set aside or not), setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the stockholders’ meeting for distribution of stock dividends and bonuses to stockholders.

The Articles explicitly stipulate that according to the article 240 of the Company Art, the board of directors is authorized to resolve to distribute dividends and bonuses, legal reserve and capital reserve provided by the article 241 of the Company Art in cash, in whole or in part; and in addition there to a report of such distribution shall be submitted to the shareholders’ meeting.

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

  • 25 -

The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

The deficit compensation for 2018 and 2017 were approved in the stockholders’ meeting on June 25, 2019 and June 13, 2018, respectively. A special reserve of $40,765 thousand was approved in the stockholder’s meeting on June 25, 2019.

  • d. Other Equity Items

  • 1) Exchange differences on translating foreign operations

Balance at January 1
Effect of change in tax rate
Recognized during the period
Exchange differences on translating the financial
statements of foreign operations
Balance at September 30		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
$ (37,167)

-

(72,802
)

$ (109,969
)
 2018
$ 33,232
2,914

(83,100
)
$ (46,954
)
  • 2) Unrealized loss on financial assets at FVTOCI
Balance at January 1
Recognized during the period
Unrealized gain (loss) - equity instruments
Cumulative unrealized gain (loss) of equity instruments
transferred to retained earnings due to disposal
Balance at September 30
Remeasurement of defined benefit plans
Balance at January 1
Effect of change in tax rate
Balance at September 30		 For the Nine Months
Ended September 30
2019
2018
$ (8,988)
$ (3,166)
1,681
(15,818)

(2,647
)

11,895
$ (9,954
)
$ (7,089
)
For the Nine Months
Ended September 30
2019
2018
$ 5,390
$ 6,036
-

(218
)
$ 5,390
$ 5,818
2019
$ 5,390

-

$ 5,390

  • 3) Remeasurement of defined benefit plans

  • 26 -

21. OPERATING REVENUE

For the Three Months For the Three Months For the Three Months For the Nine Months Months
Ended September 30 Ended September 30
2019 2018 2019 2018
Revenue from contracts with
customers
Revenue from sale of goods $ 849,990 $ 970,890 $ 2,541,753
 $ 2,972,785
a. Contract balances (Note 9)
September 30, December 31, September 30, January 1,
2019 2018 2018 2018
Notes receivable $
114,579		 $ 86,222 $
176,302		 $
150,463
Accounts receivable, net 905,782 1,083,129 1,075,304
 1,216,725
$ 1,020,361 $ 1,169,351 $ 1,251,606
 $ 1,367,188
  • b. Disaggregation of revenue

Refer to Note 32 for the disaggregation of revenue and revenue of segment information.

22. CONSOLIDATED LOSS BEFORE INCOME TAX

Consolidated loss before income tax including following items:

a. Other income

Interest income

Dividends
Fire damage insurance claims
income
Others

 For the Three Months
Ended September 30
2019
2018
$ 1,516
$ 2,149
3,369
2,139
-
-

2,521

9,464
$ 7,406
$ 13,752		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
$ 1,516

3,369
-

2,521

$ 7,406

2019
$ 6,083

3,428
14,021

5,810

$ 29,342
 2018
$ 7,088
3,680
-

11,387
$ 22,155

In January 2019, a fire accident occurred in the certain area of Subsidiary GEM VN, causing damage to some inventories and property, plant and equipment and recognizing the loss as operating costs and non-operating losses, respectively. According to the investigation report from the claim adjuster, GEM VN estimated the insurance claim receivable to be $14,021 thousand recognized as non-operating income. As of November 11, 2019, GEM VN still negotiated with the insurance company for the insurance claim.

  • 27 -

b. Other gains and losses

Foreign exchange gains, net

Loss on disposal of property,
plant and equipment, net
Loss on disposal of right-of-use
assets (Note 14)
Fire damage (Note 13)
Others

 For the Three Months
Ended September 30
2019
2018
$ 15,393
$ 8,616
(1,155)
(682)
(2,262)
-
-
-

704

(898
)
$ 12,680
$ 7,036		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
$ 15,393

(1,155)
(2,262)
-

704

$ 12,680


2019
$ 21,579

(2,924)
(2,262)
(24,147)

(2,340
)

$ (10,094
)
 2018
$ 18,489
(5,100)
-
-

(1,490
)
$ 11,899

c. Finance costs

Interest expense of borrowings
Interest on lease liabilities
Less: Amounts included in
the cost of
qualifying assets

 For the Three Months
Ended September 30
2019
2018
$ 13,429
$ 14,412
30
-

463

754
$ 12,996
$ 13,658		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
$ 13,429

30

463

$ 12,996

2019
$ 42,028

89

1,502

$ 40,615
 2018
$ 45,049
-

2,300
$ 42,749

Information about capitalized interest was as follows:

Capitalized interest (classified
under property, plant and
equipment and prepayments
for equipment)
Capitalization rate (%)
Depreciation and amortization
Property, plant and equipment
Prepayments for lease
(including current/noncurrent
portion)
Right-of-use assets
Other assets

 For the Three Months
Ended September 30
2019
2018
$ 463
$ 754
1.54-4.92
1.65-5.16
For the Three Months
Ended September 30
2019
2018
$ 65,750
$ 64,129
-
590
757
-

695

675
$ 67,202
$ 65,394		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30
2019
2018
$ 1,502
$ 2,300
1.54-4.92
1.33-5.16
For the Nine Months
Ended September 30


2019
$ 65,750

-
757

695

$ 67,202

2019
$ 194,525

-
2,743

2,042

$ 199,310
 2018
$ 193,931
1,848
-

1,991
$ 197,770

d. Depreciation and amortization

  • 28 -

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

An analysis of depreciation by
function
Operating costs

Operating expenses


An analysis of amortization by
function
Operating costs

Operating expenses


e. Employee benefits expense
Short-term employee benefits

Post-employment benefits
Defined contribution plans
Defined benefit plans (Note
19)



An analysis of employee
benefits expense by function
Operating costs

Operating expenses

 For the Three Months
Ended September 30
2019
2018
$ 56,889
$ 55,085
9,618

9,044
$ 66,507
$ 64,129
$ 32
$ 46
663

1,219
$ 695
$ 1,265
For the Three Months
Ended September 30
2019
2018
$ 133,870
$ 127,848
8,592
7,521

229

303

8,821

7,824
$ 142,691
$ 135,672
$ 108,077
$ 95,389
34,614

40,283
$ 142,691
$ 135,672		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30










2019
2018
$ 168,235
$ 166,759

29,033

27,172
$ 197,268
$ 193,931
$ 103
$ 186

1,939

3,653
$ 2,042
$ 3,839
For the Nine Months
Ended September 30







2019
$ 133,870

8,592

229


8,821

$ 142,691

$ 108,077

34,614

$ 142,691





2019
$ 384,567

23,526

687


24,213

$ 408,780

$ 304,953


103,827

$ 408,780
 2018
$ 379,576
23,986

910

24,896
$ 404,472
$ 289,629

114,843
$ 404,472

f. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation and remuneration of directors and supervisors at rates of no less than 3% and $2,100 thousand, respectively, of net profit before income tax, employees’ compensation and remuneration of directors and supervisors. For the nine months ended September 30, 2019 and 2018, the Company had incurred net loss, hence, no employees’ compensation and remuneration of directors and supervisors were accrued for the period.

For the year ended December 31, 2018, the Company had incurred net loss, hence, no employees’ compensation and remuneration of directors and supervisors were accrued for the year. The appropriations of employees’ compensation and remuneration of directors and supervisors for 2017 resolved by the board of directors on March 23, 2018 were as below:

  • 29 -
Employees’ compensation
Remuneration of directors and supervisors		 Amount
2018
$ 439
2,100

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

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

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

23. INCOME TAX

  • a. Income tax recognized in profit or loss

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

Current tax
In respect of the current
period

Adjustments for prior
periods


Deferred tax
In respect of the current
period

Effect of change in tax rate
Adjustments for prior
periods


Income tax benefit
recognized in profit or
loss
 For the Three Months
Ended September 30
2019
2018
$ 1,116
$ (2,355)

-

-

1,116

(2,355
)
(10,118)
(11,167)
-
-

-

-
(10,118
)
(11,167
)
$ (9,002
)
$ (13,522
)		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30






2019
$ 1,116


-


1,116

(10,118)

-

-

(10,118
)

$ (9,002
)





2019
$ 216


2,692


2,908

(17,273)
-


10,781


(6,492
)

$ (3,584
)
 2018
$ 106

1,201

1,307
(6,933)
(12,418)

-
(19,351
)
$ (18,044
)

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

  • 30 -

b. Income tax recognized directly in equity

For the Three Months
Ended September 30
2019
2018
Current Tax
Disposal of investments in
equity instruments
designated as at FVTOCI
$ 2,469
$ -
Deferred tax
Disposal of investments in
equity instruments
designated as at FVTOCI
(1,284
)

3,716
Income tax benefit (expense)
recognized directly in equity
$ 1,185
$ 3,716
Income tax recognized in other comprehensive income (loss)
For the Three Months
Ended September 30
2019
2018
Deferred tax
Effect of change in tax rate
$ -
$ -
In respect of the current
period
Translations of foreign
operations
(223)
749
Fair value changes of
financial assets at
FVTOCI

2,105

1,493
Income tax benefit (expense)
recognized in comprehensive
income (loss)
$ 1,882
$ 2,242		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30


2019
2018
$ -
$ -
(1,284
)

3,531
$ (1,284
)
$ 3,531
For the Nine Months
Ended September 30


2019
$ -

(648)

(722
)

$ (1,370
)
 2018
$ 2,696
(82)

3,132
$ 5,746

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

d. Income tax assessments

The tax returns of the Company through 2017 have been assessed by the tax authorities.

GEM Dongguan, GEM Suzhou and GEM VN had completed the filing of their income tax returns through 2018 with the tax authorities.

24. NET LOSS PER SHARE (EPS)

There is no diluted effect for the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2019 and 2018 for net loss incurred. The net loss and weighted average number of ordinary shares outstanding used in the computation of EPS were as follows:

  • 31 -

Net loss for the periods attributable to owners of the Company

For the Three Months
Ended September 30
For the Nine Months
Ended September 30
2019
2018
2019
2018
Net loss used in the computation of
basic/diluted EPS
$ (19,381
)
$ (39,777
)
$ (54,650
)
$ (83,091
)
Weighted average number of ordinary shares outstanding (in thousand shares)
For the Three Months
Ended September 30
For the Nine Months
Ended September 30
2019
2018
2019
2018
Weighted average number of
ordinary shares in computation
of basic/diluted EPS
169,200
169,200
169,200
169,200		 For the Three Months
Ended September 30
For the Nine Months
Ended September 30
2019
2018
2019
2018
Net loss used in the computation of
basic/diluted EPS
$ (19,381
)
$ (39,777
)
$ (54,650
)
$ (83,091
)
Weighted average number of ordinary shares outstanding (in thousand shares)
For the Three Months
Ended September 30
For the Nine Months
Ended September 30
2019
2018
2019
2018
Weighted average number of
ordinary shares in computation
of basic/diluted EPS
169,200
169,200
169,200
169,200		 For the Three Months
Ended September 30
For the Nine Months
Ended September 30
2019
2018
2019
2018
Net loss used in the computation of
basic/diluted EPS
$ (19,381
)
$ (39,777
)
$ (54,650
)
$ (83,091
)
Weighted average number of ordinary shares outstanding (in thousand shares)
For the Three Months
Ended September 30
For the Nine Months
Ended September 30
2019
2018
2019
2018
Weighted average number of
ordinary shares in computation
of basic/diluted EPS
169,200
169,200
169,200
169,200		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30

Weighted average number of
ordinary shares in computation
of basic/diluted EPS
For the Three Months
Ended September 30
2019
2018
169,200
169,200
2019
169,200		 2019
169,200		 2018
169,200

25. CAPITAL MANAGEMENT

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

Key management personnel of the Group review the capital structure on a quarterly basis. The capital structure comprises the consideration of costs and risks. The Group balances the overall capital structure based on recommendations of the key management personnel.

26. FINANCIAL INSTRUMENTS

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

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

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

September 30, 2019

Financial assets at FVTOCI
Investments in equity
instruments
Domestic listed shares

Overseas listed shares

 Level 1
$ 19,844


91,725

$ 111,569
 Level 2
$ -


-

$ -
 Level 3
$ -


-

$ -
 Total
$ 19,844

91,725
$ 111,569
(Continued)
  • 32 -
Financial liabilities atFVTPL
Derivative instruments
Copper futures

Foreign exchange forward
contracts


December 31, 2018
Financialassets atFVTOCI
Investments in equity
instruments
Domestic listed shares

Overseas listed shares


Financial liabilities at FVTPL
Derivative instruments
Copper futures

September 30, 2018
Financialassets atFVTOCI
Investments in equity
instruments
Domestic listed shares

Overseas listed shares


Financialassets atFVTPL
Derivative instruments
Copper futures
 Level 1
$ 553


-

$ 553

Level 1
$ 26,234


67,493

$ 93,727

$ 832

Level 1
$ 34,044


97,751

$ 131,795

$ 18
 Level 2
$ -


619

$ 619

Level 2
$ -


-

$ -

$ -

Level 2
$ -


-

$ -

$ -
 Level 3
$ -


-

$ -

Level 3
$ -


-

$ -

$ -

Level 3
$ -


-

$ -

$ -
 Total
$ 553

619
$ 1,172
(Concluded)
Total
$ 26,234

67,493
$ 93,727
$ 832
Total
$ 34,044

97,751
$ 131,795
$ 18

There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2019 and 2018.

Derivatives - foreign exchange forward contracts above have been determined in accordance with discounted cash flow approach, which are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

  • 33 -

c. Categories of financial instruments

September 30, December 31, September 30,
2019 2018 2018
Financialassets
Measured at amortized cost (Note 1) $ 2,185,995 $ 2,858,660
 $ 2,695,079
Financial assets at FVTPL
Mandatorily classified as at FVTPL - - 18
Financial assets at FVTOCI
Equity instruments 111,569 93,727 131,795
Financial liabilities
Measured at amortized cost (Note 2) 2,963,281 3,353,546 3,052,320
Financial liabilities at FVTPL
Held for trading 1,172 832 -

  • Note 1: Included cash and cash equivalents, notes receivable, net of accounts receivable, other receivables and other financial assets.

  • Note 2: Included short-term borrowings, short-term bills payable, notes payable, accounts payable, other payables, and long-term borrowings (including current portion).

d. Financial risk management objectives and policies

The Group’s major financial instruments include equity investments, notes receivable, accounts receivable, other financial assets, borrowings, short-term bills payable, notes payable, accounts payable and lease liabilities. The Group’s corporate treasury function provides services to the business, coordinates access to financial markets, and monitors and manages the financial risks relating to the operations of the Group through that analyze exposures to risks. These risks include market risk, credit risk and liquidity risk.

The corporate treasury function reports monthly to the Group’s management personnel.

1) Market risk

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

There has been no change to the Group’s exposure to market risks or the manner in which these risk are managed and measured.

a) Foreign currency risk

The Group had foreign currency denominated trades, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation), and the derivatives exposed to foreign currency risk at the end of the reporting year are set out in Note 30.

  • 34 -

Sensitivity analysis

The Group was mainly exposed to the USD and HKD.

The sensitivity rate used when reporting foreign currency risk internally to key management personnel is 1%. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign exchange forward contracts at the end of the reporting period. A positive (negative) number below indicates an increase (decrease) in pre-tax profit for a 1% weakening of the functional currency against the relevant currency.

USD
HKD		 For the Nine Months
Ended September 30
2019
2018
$ (56)
$ 2,019
1,358
1,960

b) Interest rate risk

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

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

September 30, September 30, December 31, December 31, September 30, September 30,
2019 2018 2018
Fair value interest rate risk
Financial assets $ 266,264 $ 520,716
 $ 564,948
Financial liabilities 753,605 942,286 896,153
Cash flow interest rate risk
Financial assets 866,743 1,144,284 863,269
Financial liabilities 1,652,034 1,554,670 1,514,696

Sensitivity analysis

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

If interest rates had been 1% higher/lower and all other variables were held constant, the Group’s pre-tax profit for the nine months ended September 30, 2019 and 2018 would decrease/increase $5,890 thousand and $4,886 thousand, respectively, which was mainly a result of the changes in the floating interest rate bank deposits and borrowings.

c) Other price risk

The Group was exposed to equity price risk through its investments in equity securities. Equity investments are held for strategic rather than for trading purposes, the Group manages this exposure by maintaining a portfolio of investments with different risks.

  • 35 -

Sensitivity analysis

The sensitivity analysis below was determined based on the Group’s exposure to equity price risk at the end of the reporting period. If equity prices had been 1% higher/lower, the pre-tax other comprehensive income for the nine months ended September 30, 2019 and 2018 would increase/decrease by $1,116 thousand and $1,318 thousand, respectively, as a result of the changes in fair value of financial assets at FVTOCI.

2) Credit risk

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

The Group’s receivables are significantly concentrated in certain individuals. Accounts receivable from customers with significant carrying amounts were disclosed in Note 9.

3) Liquidity risk

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

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

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

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

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

On Demand
or Less than
1 Month
September 30,2019
Fixed interest rate liabilities
$ 300,538

Variable interest rate liabilities
50,871
Lease liabilities
-
Non-interest bearing

321,123

$ 672,532
 1-3 Months
$ 94,777

242,862
-

182,503

$ 520,142
 3 Months to
1 Year
$ 358,776
897,170
1,658

59,509

$ 1,317,113
 1-5 Years
5-10 Years
$ -
$ -

488,339
-

4,852
768

-

-
$ 493,191
$ 768
(Continued)
  • 36 -
On Demand
or Less than
1 Month
December 31,2018
Fixed interest rate liabilities
$ 51,497

Variable interest rate liabilities
152,530
Non-interest bearing

500,833

$ 704,860

September 30,2018
Fixed interest rate liabilities
$ 148,921

Variable interest rate liabilities
71,797
Non-interest bearing

340,709

$ 561,427
 1-3 Months
$ 248,071

127,791

253,821

$ 629,683

$ 160,444

121,090

228,628

$ 510,162
 3 Months to
1 Year
$ 483,257
572,462

99,990

$ 1,155,709

$ 346,843
635,266

70,399

$ 1,052,508
 1-5 Years
5-10 Years
$ 175,930
$ -

733,934
-

-

-
$ 909,864
$ -
$ 252,630
$ -

718,681
-

-

-
$ 971,311
$ -
(Concluded)		 5-10 Years
$ -
-

-
$ -
$ -
-

-
$ -

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

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

b) Liquidity risk tables for derivative financial instruments

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

On Demand or On Demand or
Less than 3 Months to
1 Month 1-3 Months 1 Year
September30,2019
Net settled
Copper Futures $ - $ (553
)		 $
-
Gross settled
Foreign Exchange Forward
Contracts
Inflows $ - $ - $ 61,844
Outflows - - (62,080
)
$ - $ - $
(236
)
December31,2018
Net settled
Copper Futures $ - $ (702
)		 $
(130
)

(Continued)

  • 37 -
On Demand or
Less than 3 Months to
1 Month 1-3 Months 1 Year
September30,2018
Net settled
Copper Futures $ - $ 18 $ -
(Concluded)
  • e. Transfers of financial assets

The Group transferred a portion of its banker’s acceptance bills in mainland China to some of its suppliers in order to settle the trade payables to these suppliers. As the Group has transferred substantially all risks and rewards relating to these bills receivable, it derecognized the full carrying amount of the bills receivable and the associated trade payables. However, if the derecognized bills receivable are not paid at maturity, the suppliers have the right to request that the Group pay the unsettled balance; therefore, the Group still has continuing involvement in these bills receivable.

The maximum exposure to loss from the Group’s continuing involvement in the derecognized bills receivable is equal to the face amounts of the transferred but unsettled bills receivable, and as of September 30, 2019, the face amounts of these unsettled bills receivable were $91,375 thousand. The unsettled bills receivable will be due in 1-4 months after the end of the reporting period. Taking into consideration the credit risk of these derecognized bills receivable, the Group estimates that the fair values of its continuing involvement are not significant.

During the nine months ended September 30, 2019, the Group did not recognize any gains or losses upon the transfer of the banker’s acceptance bills. No gains or losses were recognized from the continuing involvement, both during the period or cumulatively.

27. TRANSACTIONS WITH RELATED PARTIES

Balances, transactions and revenues and expenses among the Group have been eliminated on consolidation and are not disclosed in this note. Details of transaction between the Group and other related parties were as follows:

  • a. Related party name and its relationship with the Group
Related Party Name Relationship with the Group
Su, Tun-Jen Related Party in Substance
Su, Tun-Yi Related Party in Substance
Su, Tun-Li Related Party in Substance
Su, Chung-Hong Related Party in Substance
Su, Bo-Chen Related Party in Substance
  • b. Compensation of key management personnel
Short-term employee benefits For the Three Months
Ended September 30
2019
2018
$ 2,951
$ 2,951		 For the Nine Months
Ended September 30
2019
2018
$ 8,349
$ 7,254
(Continued)
  • 38 -
Post-employment benefits For the Three Months
Ended September 30
2019
2018
$ 22
$ 53
$ 2,973
$ 3,004		 For the Nine Months
Ended September 30		 For the Nine Months
Ended September 30

2019
$ 22

$ 2,973
2019
$ 158

$ 8,507
 2018
$ 158
$ 7,412
(Concluded)

The remuneration of directors and other members of key management is determined by the remuneration committee based on the performance of individuals and market trends.

c. Lease arrangements

The Company leased its staff dormitory and Taipei office from related party in substance, Su, Tun-Jen, Su, Tun-Li, and Su, Tun-Yi. The rental terms were determined by negotiation. The rental rates were similar to the local market rate and the payment terms were at arm’s length.

The relevant information of the lease arrangements were as follows:

Acquisition of right-of-use
assets
Interest expense
Lease expense		 For the Three Months
Ended September 30
2019
2018
$ -
$ -
30
-
-
414		 For the Nine Months
Ended September 30
2019
2018
$ 2,582
$ -
89
-
-
1,243

The balance of lease liabilities as of September 30, 2019 was $7,018 thousand.

d. Guarantees

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

Guarantor
Su, Tun-Li

Su, Chung-Hong
Su, Bo-Chen

 Guarantee
Amount
$ 1,089,555
662,479

390,000
$ 2,142,034

28. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The Group provided the following assets as collateral for the borrowings and bank’s acceptance:

September 30, December 31, September 30,
2019 2018 2018
Property, plant and equipment $ 500,493 $ 550,759
 $ 522,278
Pledge deposits (under other financial assets-
current) 15,502 9,632 6,286
(Continued)
  • 39 -
September September 30, December December 31, September 30, September 30,
2019 2018 2018
Right-of-use assets $ 22,627 $ -
 $
-
Prepayments for lease (including current portion) - 23,494
 23,477
$ 538,622 $ 583,885
 $ 552,041
(Concluded)

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

The Group’s significant contingent liabilities and unrecognized commitments as of September 30, 2019, were as follows:

  • a. The amounts of contracts for the Group’s purchases of properties and materials were $158,259 thousand, of which $39,045 thousand had been paid.

  • b. Unused letters of credit for purchases of raw materials amounted to $16,349 thousand.

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

Foreign Carrying
Currencies Amount
(In Thousands) Exchange Rate (In Thousands)
September30,2019
Financial assets
Monetary items
USD $
13,921		 31.04 (USD:NTD) $
432,121
USD 9,422 7.1373 (USD:RMB) 292,472
USD 7,685 7.8404 (USD:HKD) 238,548
USD 3,926 23,199 (USD:VND) 121,861
HKD 65 3.959 (HKD:NTD) 258
HKD 49,966 0.9103 (HKD:RMB) 197,817
HKD 945 0.1275 (HKD:USD) 3,740
$ 1,286,817
Financial liabilities
Monetary items
USD 537 31.04 (USD:NTD) $
16,678
USD 2,731 7.1373 (USD:RMB) 84,776
USD 5,913 7.8404 (USD:HKD) 183,549
USD 25,934 23,199 (USD:VND) 805,001
HKD 16,442 3.959 (HKD:NTD) 65,095
HKD 233 0.9103 (HKD:RMB) 923
$ 1,156,022

(Continued)

  • 40 -
Foreign Carrying
Currencies Amount
(In Thousands) Exchange Rate (In Thousands)
Non-monetary items
Derivative instruments
USD $
2,000		 7.1373 (USD:RMB) $
619
December31,2018
Financial assets
Monetary items
USD 11,821 30.7 (USD:NTD) $
362,897
USD 11,392 6.868 (USD:RMB) 349,729
USD 13,727 7.8276 (USD:HKD) 421,429
USD 2,997 23,222 (USD:VND) 92,010
HKD 2,777 3.922 (HKD:NTD) 10,890
HKD 57,788 0.8774 (HKD:RMB) 226,643
HKD 933 0.1278 (HKD:USD) 3,659
$ 1,467,257
Financial liabilities
Monetary items
USD 517 30.7 (USD:NTD) $
15,859
USD 3,161 6.868 (USD:RMB) 97,040
USD 5,780 7.8276 (USD:HKD) 177,459
USD 22,156 23,222 (USD:VND) 680,189
HKD 18,716 3.922 (HKD:NTD) 73,404
HKD 500 0.8774 (HKD:RMB) 1,961
$ 1,045,912
September30,2018
Financial assets
Monetary items
USD 10,405 30.535 (USD:NTD) $
317,727
USD 8,438 6.880 (USD:RMB) 257,659
USD 11,865 7.820 (USD:HKD) 362,307
USD 2,548 23,291 (USD:VND) 77,803
HKD 3,388 3.905 (HKD:NTD) 13,231
HKD 68,984 0.880 (HKD:RMB) 269,381
HKD 928 0.128 (HKD:USD) 3,625
$ 1,301,733
Financial liabilities
Monetary items
USD 291 30.535 (USD:NTD) $
8,885
USD 2,575 6.880 (USD:RMB) 78,629
USD 4,723 7.820 (USD:HKD) 144,231
USD 19,056 23,291 (USD:VND) 581,860
HKD 23,120 3.905 (HKD:NTD) 90,285
$
903,890
(Concluded)

For the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2019 and 2018, realized and unrealized net foreign exchange gains were $15,393 thousand, $8,616

  • 41 -

thousand, $21,579 thousand and $18,489 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the Group’s entities.

31. ADDITIONAL DISCLOSURES

  • a. Information about significant transactions and investees:

  • 1) Financing provided to others: Table 1.

  • 2) Endorsement/guarantee provided: None.

  • 3) Marketable securities held: Table 2.

  • 4) Marketable securities acquired and disposed at cost or price at least NT$300 million or 20% of the paid-in capital: None.

  • 5) Acquisition of individual real estate at cost of at least NT$300 million or 20% of the paid-in capital: None.

  • 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.

  • 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3.

  • 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 4.

  • 9) Trading in derivative instruments: Note 7. For the nine months ended September 30, 2019, net losses of futures contracts and foreign exchange forward contracts were $862 thousand. The transaction amount was not significant.

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

  • 11) Information on investees: Table 5.

  • b. Information on investments in Mainland China

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

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

  • 1) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: Table 7.

  • 2) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 3 and Table 7.

  • 42 -

  • 3) The amount of property transactions and the amount of the resultant gains or losses: Table 7.

  • 4) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.

  • 5) The highest balance, the end of period balance, the interest rates range, and total current period interest with respect to financing of funds: Table 1.

  • 6) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services: Table 7 and Table 8.

32. SEGMENT INFORMATION

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

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

  • a. these operating segments have similar production and sales processes;

  • b. these operating segments have similar main businesses and products; and

  • c. the finance and business of these operating segments as to the consolidated financial statements are not material.

The Group’s reportable segments were as follows:

  • ․ The Company

  • ․ GEM Dongguan and Genius HK consolidated information

  • ․ GEM Suzhou and Global HK consolidated information

  • ․ Others

Segment revenues and results

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

The Company
For the nine months ended
September 30,2019
Revenue from external customers
$ 345,012

Inter-segment revenues

440,694

Segment revenues
$ 785,706
 GEM
Dongguan&
Genius HK
$ 1,028,414


482,630

$ 1,511,044
 GEM
Suzhou&
Global HK
$ 1,167,688


1,034,397

$ 2,202,085
 Others
$ 639

757,843

$ 758,482
 Adjustment
and
Elimination
Consolidated
Amount
$ -
$ 2,541,753
(2,715,564
)

-
$ (2,715,564
)
$ 2,541,753
(Continued)
  • 43 -
The Company
Segment loss
$ (27,853
)

Other income
Other gains and losses
Finance cost
Consolidated loss before income tax
Income tax
Consolidated net loss
September 30,2019

Segment assets
$ 4,407,754


Segment liabilities
$ 1,994,219


For the Nine months ended
September 30,2018
Revenue from external customers
$ 405,893

Inter - segment revenues

83,471

Segment revenues
$ 489,364

Segment income (loss)
$ (33,928
)

Other income
Other gains and losses
Finance cost
Consolidated loss before income tax
Income tax
Consolidated net loss
September 30,2018

Segment assets
$ 4,503,782


Segment liabilities
$ 1,954,311
 GEM
Dongguan&
Genius HK
$ (20,213
)

$ 1,463,949

$ 542,261

$ 1,213,060


403,923

$ 1,616,983

$ (37,990
)

$ 1,467,898

$ 501,945
 GEM
Suzhou&
Global HK
$ (25,039
)

$ 2,815,664

$ 866,907

$ 1,353,628


1,144,823

$ 2,498,451

$ 7,711
(
$ 2,808,136

$ 818,395
 Others
$ (14,737
)
$ 1,394,432

$ 1,005,063

$ 204

349,806

$ 350,010

$ 42,607
)
$ 1,048,566

$ 675,529
 Adjustment
and
Elimination
Consolidated
Amount
$ 50,975
$ (36,867 )
29,342
(10,094 )

(40,615
)
(58,234 )

3,584
$ (54,650
)
$ (4,583,736
)
$ 5,498,063
$ (1,323,922
)
$ 3,084,528
$ -
$ 2,972,785
(1,982,023 )

-
$ (1,982,023
)
$ 2,972,785
$ 14,374
$ (92,440 )
22,155
11,899

(42,749
)
(101,135 )

18,044
$ (83,091
)
$ (4,081,486
)
$ 5,746,896
$ (752,755
)
$ 3,197,425
(Concluded)
  • 44 -

TABLE 1

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 (In Thousands of New Taiwan Dollars)

No. Lender Borrower Financial
Statement
Account		 Related
Parties		 Highest Balance
for the Period		 Ending Balance
(Note 2)		 Actual
Borrowing
Amount
(Notes 2 and 3)		 Interest
Rate		 Nature of
Financing		 Business
Transaction
Amounts		 Reason for
Short-term
Financing		 Allowance for
Impairment
Loss		 **Collateral ** **Collateral ** Financing Limit
for Each
Borrower		 Aggregate
Financing Limits		 Note
Item Value
0
1
2
3		 The Company
Vibo
Global Cayman
GEM Suzhou		 GEM VN
GEM Suzhou
GEM Dongguan
GEM Suzhou
GEM VN
Global HK
Vibo		 Other receivables
- related parties
Other receivables
- related parties
Other receivables
- related parties
Other receivables
- related parties
Other receivables
- related parties
Other receivables
- related parties
Other receivables
- related parties		 Yes
Yes
Yes
Yes
Yes
Yes
Yes		 $ 360,438
92,295
30,820
31,595
31,390
24,944
155,200		 $ 263,840
-
-
-
31,040
12,416
155,200		 $ 170,720
-
-
-
31,040
-
62,080		 2.1-3.2
2.8
2.8
2.8
2.8
2.8～3.2
2.8		 Short-term
financing
Short-term
financing
Short-term
financing
Short-term
financing
Short-term
financing
Short-term
financing
Short-term
financing		 $ -
-
-
-
-
-
-		 Business
development
Business
development
Business
development
Business
development
Business
development
Business
development
Business
development		 $ -
-
-
-
-
-
-		 -
-
-
-
-
-
-		 $ -
-
-
-
-
-
-		 $ 482,707
482,707
568,946
568,946
568,946
573,824
387,789		 $ 965,414
965,414
1,137,892
1,137,892
1,137,892
1,147,648
775,578		 Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1

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

Note 2: The exchange rate was US$1 : NT$31.04.

Note 3: It was eliminated on consolidation.

  • 45 -

TABLE 2

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD SEPTEMBER 30, 2019

(In Thousands of New Taiwan Dollars)

Holding Company Name Type and Name of Marketable Securities Relationship
with the Holding
Company		 Financial Statement Account September 30, 2019 September 30, 2019 September 30, 2019 Note
Shares Carrying
Amount		 Percentage of
Ownership		 Fair Value
The Company
GEM Suzhou		 Stock
ESON Precision Engineering Co., Ltd.
Tai Tung Communication Co., Ltd.
Innolux Corporation
Microdectronics Technology Inc.
Asia Pacific Telecom Co., Ltd.
Shin Kong Financial Holding
Stock
Yantai Changya Pioneer Wine Co., Ltd.
Huarun Dong’s Ejiao Co., Ltd.
China Minsheng Banking Corp., Ltd.
Yanghe Distillery
Shede Spirits
Luzhoulaojiao Group Co., Ltd.		 -
-
-
-
-
-
-
-
-
-
-
-		 Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current
Financial assets at FVTOCI - current		 36,000
258,000
595,000
184,000
611,000
237,737
112,768
210,327
550,000
52,000
82,892
1,000




$ 1,431
4,154
3,927
4,416
3,684

2,232

19,844
14,737
27,880
14,400
23,519
10,819

370

91,725
$ 111,569		 -
-
-
-
-
-
-
-
-
-
-
-




$ 1,431
4,154
3,927
4,416
3,684

2,232

19,844
14,737
27,880
14,400
23,519
10,819

370

91,725
$ 111,569
  • 46 -

TABLE 3

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(In Thousands of New Taiwan Dollars)

Buyer Related Party Relationship Transaction Details Transaction Details Transaction Details Transaction Details Abnormal Transaction Abnormal Transaction Notes/Accounts Receivable
(Payable)		 Notes/Accounts Receivable
(Payable)		 Note
Purchases/Sales
Amount		 % to Total Payment Terms Unit Price Payment Term **Ending Balance ** % to Total
The Company
GEM Dongguan
GEM Suzhou
Global HK
GEM VN
Genius HK		 GEM VN
Genius HK
GEM Suzhou
GEM Dongguan
Global HK
GEM Suzhou
Global HK
Genius HK
The Company
GEM Dongguan		 Subsidiary
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Subsidiary
Affiliate		 Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales		 $ 391,421
465,863
230,718
828,439
161,162
105,494
103,194
448,458
154,537
470,537		 50
33
16
38
7
36
16
68
15
45		 120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing		 Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1		 Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2		 $ 120,802
186,552
167,350
302,776
33,360
-
-
54,811
51,052
56,470		 48
28
25
37
4
-
-
68
19
21		 Note 3
Note 3
Note 3
Note 3
Note 3
Note 3
Note 3
Note 3
Note 3
Note 3

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

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

Note 3: It was eliminated on consolidation.

  • 47 -

TABLE 4

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL SEPTEMBER 30, 2019

(In Thousands of New Taiwan Dollars)

Company Name Related Party Relationship Ending Balance (Notes 1 and 3) Ending Balance (Notes 1 and 3) Turnover Rate
(Note 2)		 Amount Amount Overdue
Actions Taken		 Amounts Received
in Subsequent
Period		 Amounts Received
in Subsequent
Period		 Allowance
Impairment		 for
Loss
The Company GEM VN Subsidiary $ 295,433 4.95 $ - - $
38,440		 $ -
GEM Suzhou GEM Dongguan Affiliate 303,411 3.57 - - 109,330 -
GEM Dongguan Genius HK Affiliate 190,518 3.41 - - 61,062 -
GEM Suzhou Affiliate 173,725 3.54 - - 51,828 -

Note 1: It included accounts receivable and other receivables.

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

Note 3: It was eliminated on consolidation.

  • 48 -

TABLE 5

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 (In Thousands of New Taiwan Dollars)

Investor Company Investee Company Location Main Businesses and Products Original Investment Amount Original Investment Amount As of September 30, 2019 of September 30, 2019 Net Income
(Loss) of the Investee		 Share of profit (Loss) Note
September 30,
2019		 December 31,
2018
Shares/ Units % Carrying Amount
The Company
Genius
Global Cayman
GEM Cayman		 Global Cayman
GEM Cayman
Genius
Genius HK
Vibo
Global HK
GEM VN		 Grand Cayman, Cayman Islands
Grand Cayman, Cayman Islands
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Vietnam		 International investment
International investment
International investment and trading, etc.
International trading
Trading and investment
International trading
Production of hardware; machine processing;
electroplating for hardware processing;
production and processing of molds and related
accessories; plastic products and related plastic
accessory production;		 $ 1,295,208
392,669
23,282
90,134
1,541,063
3,747
386,780		 $ 1,295,208
392,669
23,282
90,134
1,541,063
3,747
386,780		 40,137,184
12,598,333
750,000
21,999,998
359,972,616
1,000,000
386,780		 100
100
100
100
100
100
100		 $ 2,755,953
247,064
85,761
85,642
2,844,729
8,548
250,395		 $ (19,868 )
(27,764 )
3,137
2,920
(20,564 )
165
(32,088 )		 $ (19,909 )
(27,637 )
3,137
2,986
(20,564 )
578
(27,596 )		 Notes 1 and 2
Notes 1 and 2
Note 1
Notes 1 and 2
Note 1
Notes 1 and 2
Notes 1 and 2

Note 1: It was eliminated on consolidation.

Note 2: Net of unrealized profits.

  • 49 -

TABLE 6

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 (In Thousands of New Taiwan Dollars; Unless Stated Otherwise)

Investee Company Main Businesses and Products Main Businesses and Products Paid-in Capital Method of
Investment		 Accumulated
Outward Remittance
for Investment from
Taiwan as of January
1, 2019		 Remittance of Funds Remittance of Funds Remittance of Funds Accumulated
Outward Remittance
for Investment from
Taiwan as of
September 30, 2019		 Net Loss of the
Investee		 % of
Ownership of
Direct or
Indirect
Investment		 Investment Loss
(Notes 1 and 3)		 Carrying Amount as
of September 30, 2019
(Notes 1 and 3)		 Accumulated
Repatriation of
Investment Income as
of September 30, 2019		 Note
Outward Inward
GEM Dongguan
GEM Suzhou		 Production of hardware; machine
processing; electroplating for metal
processing; production and
processing of molds and related
accessories; plastic products and
related plastic accessory production.
Production of hardware; machine
processing; electroplating for metal
processing; production and
processing of molds and related
accessories; plastic products and
related plastic accessory production.		 $ 737,000
1,090,187		 The investment
was made
through a
corporation
established
in a third
country to
invest in
companies
located in
Mainland
China.
The investment
was made
through a
corporation
established
in a third
country to
invest in
companies
located in
Mainland
China.		 $ 452,130
741,320		 $ -
-		 $ -
-		 $ 452,130
741,320		 $ (20,708 )
(17,374 )		 100
100		 $ (10,499 )
(5,337 )		 $ 797,510
1,930,649		 $ -
-
Upper Limit on the Amount of
Investment Stipulated by Investment
Commission, MOEA(Note 2)
$1,448,121
Investor Company Accumulated Outward Remittance for
Investment in Mainland China as of
September 30, 2019		 Investment Amounts Authorized by
Investment Commission, MOEA		 Upper Limit on the Amount of
Investment Stipulated by Investment
Commission, MOEA(Note 2)
The Company $1,193,450 $1,759,968
(US$56,700 thousand)		 $1,448,121

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

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

Note 3: It was eliminated on consolidation.

  • 50 -

TABLE 7

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(In Thousands of New Taiwan Dollars)

Investee Company Counterparty Transaction Type Price Transaction Details Transaction Details Notes/Accounts Receivable
(Payable)		 Notes/Accounts Receivable
(Payable)		 Unrealized
(Gain) Loss		 Note
Payment Term Comparison with Normal Transaction Ending Balance
%
The Company
Genius HK
Global HK
Vibo
GEM VN		 GEM Suzhou
GEM Dongguan
GEM Dongguan
GEM Suzhou
GEM Suzhou
GEM Suzhou		 Sales
Purchase
Disposal of property,
plant, and equipment
Sales
Purchase
Sales
Purchase
Purchase of property
plant, and equipment
Sales
Purchase
Purchase of property
plant, and equipment
Sales
Purchase
Purchase of property
plant, and equipment		 $ 38,677
18,685
26,950
3,407
785
470,537
465,863
6,224
105,494
161,162
25,532
95,749
45,726
6,838		 120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing
120 days after monthly closing		 No significant difference with those to third
parties
No significant difference with those to third
parties
No comparable transactions with those in
the market
No significant difference with those to third
parties
No significant difference with those to third
parties
No significant difference with those to third
parties
No comparable transactions with those in
the market
No comparable transactions with those in
the market
No significant difference with those to third
parties
No comparable transactions with those in
the market
No comparable transactions with those in
the market
No comparable transactions with those in
the market
No comparable transactions with those in
the market
No comparable transactions with those in
the market		 $ 8,574
(589)
4,744
-
-
56,470
(186,552)
(3,966)
-
(33,360)
(1,034)
15,906
(45,636)
(7,155)		 3
1
3
-
-
21
75
2
-
91
3
100
22
3		 $ 6,276
(170)
14,264
923
14
3,239
-
207
-
-
2,854
932
(1,847)
-
  • 51 -

TABLE 8

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INTERCOMPANY BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 (In Thousands of New Taiwan Dollars)

No.
Company Name		 Counterparty Nature of
Relationship
(Note 2)		 Intercompany Transactions Intercompany Transactions Intercompany Transactions Intercompany Transactions

Financial Statement Item		 Amount
(Note 1)		 Terms Percentage of
Consolidated
Total Gross
Sales or Total
Assets
0 The Company Genius HK
Genius HK
GEM Suzhou
GEM Suzhou
GEM Suzhou
GEM Suzhou
GEM VN
GEM VN
GEM VN
GEM VN
GEM VN
GEM VN
GEM VN
GEM Dongguan
Global HK
Global HK		 1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1		 Sales
Disposal of property, plant and equipment
Sales
Accounts receivable
Disposal of property, plant and equipment
Other receivables
Sales
Accounts receivable
Disposal of property, plant and equipment
Other income
Other receivables
Interest income
Other receivables
Sales
Sales
Accounts receivable		 $ 5,131
9,576
38,677
8,574
26,950
4,744
391,421
120,802
16,561
688
1,797
3,902
172,834
3,407
2,058
2,058		 Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Annual Interest rates are 2.8%-3.2%
According to working, capital conditions to change payment
deeding
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months		 -
-
2
-
1
-
15
2
1
-
-
-
3
-
-
-
1 GEM Dongguan The Company
Genius HK
Genius HK
Genius HK
Genius HK
Genius HK
GEM Suzhou
GEM Suzhou
GEM Suzhou
GEM Suzhou
GEM Suzhou		 2
3
3
3
3
3
3
3
3
3
3		 Sales
Sales
Accounts receivable
Disposal of property, plant and equipment
Other income
Other receivables
Sales
Accounts receivable
Disposal of property, plant and equipment
Other income
Other receivables		 785
465,863
186,552
6,224
23
3,966
230,718
167,350
5,197
72
6,375		 Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months		 -
18
3
-
-
-
9
3
-
-
-
2 Genius HK The Company
The Company
The Company
GEM Dongguan
GEM Dongguan
GEM Dongguan
GEM VN
GEM VN		 2
2
2
3
3
3
3
3		 Sales
Accounts receivable
Other receivables
Sales
Accounts receivable
Other receivables
Sales
Accounts receivable		 154,537
51,052
14,071
470,537
56,470
392
96,590
38,507		 Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months		 6
1
-
19
1
-
4
1

(Continued)

  • 52 -
No.
Company Name		 Counterparty Nature of
Relationship
(Note 2)		 Intercompany Transactions Intercompany Transactions Intercompany Transactions Intercompany Transactions

Financial Statement Item		 Amount
(Note 1)		 Terms Percentage of
Consolidated
Total Gross
Sales or Total
Assets
3 Global HK The Company
The Company
GEM Suzhou
GEM Suzhou
GEM VN
GEM VN		 2
2
3
3
3
3		 Sales
Accounts receivable
Sales
Other income
Sales
Accounts receivable		 $ 69,867
9,579
105,494
331
71,680
90		 Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months		 3
-
4
-
3
-
4 GEM Suzhou The Company
The Company
The Company
Global HK
Global HK
Global HK
Global HK
Global HK
GEM Dongguan
GEM Dongguan
GEM Dongguan
GEM Dongguan
GEM VN
GEM VN
GEM VN
GEM VN
GEM VN
Vibo
Vibo		 2
2
2
3
3
3
3
3
3
3
3
3
3
3
3
3
3
2
2		 Sales
Accounts receivable
Disposal of property, plant and equipment
Sales
Accounts receivable
Disposal of property, plant and equipment
Other receivables
Other income
Sales
Accounts receivable
Disposal of property, plant and equipment
Other receivables
Sales
Accounts receivable
Disposal of property, plant and equipment
Other income
Other receivables
Interest income
Other receivables		 18,685
589
21
161,162
33,360
25,532
1,034
385
828,439
302,776
1,439
635
45,726
45,636
6,838
333
7,155
106
61,623		 Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Annual Interest rate is 2.8%
According to working, capital conditions to change payment
deeding		 1
-
-
6
1
1
-
-
33
6
-
-
2
1
-
-
-
-
1
5 Vibo GEM Suzhou
GEM Suzhou
GEM Suzhou
GEM VN
GEM VN		 1
1
1
3
3		 Sales
Accounts receivable
Interest income
Interest income
Other receivables		 95,749
15,906
202
201
31,240		 Payment terms are 4 months
Payment terms are 4 months
Annual Interest rate is 2.8%
Annual Interest rate is 2.8%
According to working, capital conditions to change payment
deeding		 4
-
-
-
1
6 Global Cayman Global HK 1 Interest income 140 Annual Interest rate is 3.2% -
7 GEM VN The Company
The Company
Genius HK
Genius HK
Global HK
Vibo
Vibo		 2
2
3
3
3
3
3		 Sales
Accounts receivable
Sales
Accounts receivable
Sales
Sales
Accounts receivable		 15,157
6,479
448,458
54,811
103,194
95,285
19,713		 Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months
Payment terms are 4 months		 1
-
18
1
4
4
-

(Concluded)

Note 1: It was eliminated on consolidation.

Note 2: 1) Parent to subsidiary.

  • 2) Subsidiary to parent.

  • 3) Subsidiary to subsidiary.

  • 53 -

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