MSI — Audit Report / Information 2019

Nov 12, 2019

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2019 AND 2018

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

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Representation Letter

In connection with the Consolidated Financial Statements of Affiliated Enterprises of MICRO-STAR INTERNATIONAL CO., LTD. and its subsidiaries (the “Consolidated FS of the Affiliates”), we represent to you that, the entities required to be included in the Consolidated FS of the Affiliates as of and for the year ended December 31, 2019 in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” are the same as those required to be included in the Consolidated Financial Statements of MICRO-STAR INTERNATIONAL CO., LTD. and its subsidiaries (the “Consolidated FS of the Group”) in accordance with International Financial Reporting Standard 10. Additionally, the information required to be disclosed in the Consolidated FS of Affiliates is disclosed in the Consolidated FS of the Group. Consequently, MICRO-STAR INTERNATIONAL CO., LTD. and its subsidiaries do not prepare a separate set of Consolidated FS of Affiliates.

Very truly yours,

MICRO-STAR INTERNATIONAL CO., LTD. By

Joseph Hsu, Chairman March 20, 2020

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Opinion

We have audited the accompanying consolidated balance sheets of MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES (the “Group”) as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our ethical responsibilities in accordance with the Code. Based on our audits and the audit reports of other independent accountants, we believe that the audit evidences we have obtained are sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in

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our audit of the consolidated financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements of the year ended December 31, 2019 are stated as follows:

Occurrence of sales revenue from significant customers

Description

Please refer to Note 4(26) for accounting policies on revenue recognition. Other than international brands, the Group sells its products to customers in various countries. With the Group actively developing new products, sales revenue increases progressively every year, and the occurrence of sales revenue is critical to the financial statements. Thus, the occurrence of sales revenue from new significant customers, excluding international brands, was identified as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

• A. Obtained an understanding of and assessed internal controls in relation to sales revenue from new significant customers, and validated the operating effectiveness of those above mentioned internal controls.

• B. Obtained detailed listing of sales revenue from new significant customers in the current year, and validated supporting documents, including sales invoices, customer purchase orders and delivery documents.

• C. Inspected contents and relevant evidences in relation to sales returns and discounts occurring subsequent to the reporting period and assessed the reasonableness of respective sales revenue recognised.

Estimation of allowance for inventory valuation losses

Description

Please refer to Note 4(12), for accounting policies on inventory valuation, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on inventory valuation, and Note 6(5)

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for details of inventories. As of December 31, 2019, the balances of inventories and allowance for inventory valuation losses are NT$23,062,460 thousand and NT$534,260 thousand, respectively. The Group is primarily engaged in manufacturing and sales of motherboard, interface card, notebook computer and other electronic products. Due to the rapid technological innovations, shorter electronic product life cycles, and the fluctuation of market prices within the industry, there is a higher risk of inventory losses due from market value decline or obsolescence. The Group recognises inventories at the lower of cost and net realisable value. As the monetary values of inventories are material, and there are various types of inventories, the estimation and determination of the net realisable value of inventories as of the balance sheet date are subject to management’s judgement and contain a high level of uncertainty and have material effects on the financial statements, and therefore, it was identified as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

• A. Assessed the reasonableness and the consistency of policies in relation to the provision of allowance for inventory valuation losses and procedures based on our understanding of the Group’s operations and industry.

• B. Validated the appropriateness of system logic of the report of individually identified obsolete inventory prepared by management and confirmed the consistency with Group’s policies.

• C. Validated the appropriateness of estimation basis for net realisable value of inventories and inspected respective supporting documents, including sales prices or purchase prices, reperformed the calculation of the report and assessed the reasonableness of management’s determination of net realisable value of inventories.

Other matter –Reference to audits of other independent accountants

We did not audit the financial statements of certain consolidated subsidiaries and investments accounted for under the equity method that are included in the consolidated financial statements. Those financial statements were audited by other independent accountants, whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on reports of the other independent accountants. Total assets of the abovementioned entities (including investments accounted for under the equity method) amounted to NT$11,727,830 thousand and NT$9,411,349

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thousand as of December 31, 2019 and 2018, constituting 19% and 17% of consolidated total assets, respectively. Sales revenue of the above mentioned entities amounted to NT$23,178,240 thousand and NT$22,331,098 thousand, for the years ended December 31, 2019 and 2018, constituting 19% and 19% of consolidated total sales revenue, respectively.

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion with other matter section on the parent company only financial statements of MICRO-STAR INTERNATIONAL CO., LTD. as of and for the years ended December 31, 2019 and 2018.

Responsibilities of management and those charged with governance for 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 the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including supervisors, are responsible for overseeing the Group’s financial reporting process.

Independent accountant’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s

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report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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1. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Liang, Hua-Ling Lai, Chung-Hsi

For and on behalf of PricewaterhouseCoopers, Taiwan March 20, 2020

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

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(4) 6(4) 6(5) 6(6) 6(3) 6(7) and 8 6(8) 6(10) 6(25) 6(11) and 8	December 31, 2019 AMOUNT % $ 10,834,884 18 152,805 - 47,114 - 17,205,783 29 227,116 - 16,417 - 22,527,840 37 1,675,701 3 1,200,000 2 53,887,660 89 151,975 - 4,893,433 8 474,897 1 300,559 1 471,523 1 168,661 - 6,461,048 11 $ 60,348,708 100	December 31, 2018	December 31, 2018
		AMOUNT $ 10,834,884 152,805 47,114 17,205,783 227,116 16,417 22,527,840 1,675,701 1,200,000 53,887,660 151,975 4,893,433 474,897 300,559 471,523 168,661 6,461,048 $ 60,348,708	AMOUNT $ 8,815,680 98,400 35,183 16,040,189 159,681 44,944 22,052,862 1,381,022 728,936 49,356,897 - 4,738,544 - 341,241 438,204 299,287 5,817,276 $ 55,174,173	%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1150 Notes receivable, net 1170 Accounts receivable, net 1200 Other receivables 1220 Current income tax assets 130X Inventories, net 1410 Prepayments 1476 Other current financial assets 11XX Total current assets Non-current assets 1517 Non-current financial assets at fair value through other comprehensive income 1600 Property, plant and equipment 1755 Right-of-use assets 1760 Investment property - net 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets				16 - - 29 - - 40 3 1
				89
				- 9 - 1 1 -
				11
				100

(Continued)

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

December 31, 2019 December 31, 2018 Notes AMOUNT % AMOUNT % 6(12) $ 1,500,000 3 $ 3,000,000 6 6(2) 24,943 - 5,555 - - - 200 - 20,391,520 34 14,933,624 27 6(13) 3,844,835 6 3,418,250 6 402,714 1 1,017,290 2 6(16) 556,720 1 501,095 1 159,081 - - - 1,636,499 3 1,796,905 3 108,961 - 92,142 - 28,625,273 48 24,765,061 45 6(14) and 8 15,095 - 16,442 - 6(25) 27,214 - 2,297 - 247,767 1 - - 6(15) 221,974 - 217,609 - 198,920 - 226,903 1 710,970 1 463,251 1 29,336,243 49 25,228,312 46 6(17) 8,448,562 14 8,448,562 15 6(18) 803,918 1 1,226,049 2 6(19) 4,982,577 8 4,378,464 8 505,966 1 421,815 1 17,065,967 28 15,976,937 29 ( 794,525)( 1) ( 505,966)( 1) 31,012,465 51 29,945,861 54 31,012,465 51 29,945,861 54 $ 60,348,708 100 $ 55,174,173 100

Current liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2150 Notes payable 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2250 Provision for liabilities - current 2280 Current lease liabilities 2365 Refund liabilities- current 2399 Other current liabilities, others 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2580 Non-current lease liabilities 2640 Net defined benefit liability, non- current 2670 Other non-current liabilities, others 25XX Total non-current liabilities 2XXX Total liabilities Equity attributable to owners of parent Share capital 3110 Share capital - common stock Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Other equity interest 3400 Other equity interest 31XX Equity attributable to owners of the parent 3XXX Total equity 3X2X Total liabilities and equity

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except earnings per share)

Items

Year ended December 31 2019 2018 Notes AMOUNT % AMOUNT % 6(20) $ 120,491,417 100 $ 118,527,273 100 6(5)(23) ( 104,629,261)( 87) ( 102,397,587) ( 86) 15,862,156 13 16,129,686 14 6(23) ( 5,508,321) ( 4 ) ( 5,166,468) ( 4) ( 1,070,509) ( 1 ) ( 921,767) ( 1) ( 3,315,224) ( 3 ) ( 3,347,836) ( 3) ( 15,696) - ( 1,665) - ( 9,909,750)( 8) ( 9,437,736)( 8) 5,952,406 5 6,691,950 6 6(21) 715,283 - 655,733 - 6(22) ( 125,710) - ( 182,141) - ( 23,546) - ( 14,408) - 566,027 - 459,184 - 6,518,433 5 7,151,134 6 6(25) ( 931,223)( 1) ( 1,110,005) ( 1) $ 5,587,210 4 $ 6,041,129 5 6(15) ($ 10,079) - ($ 21,430) - 6(25) 2,016 - 8,461 - ( 8,063) - ( 12,969) - ( 288,559) - ( 84,151) - ( 288,559) - ( 84,151) - ($ 296,622) - ($ 97,120) - $ 5,290,588 4 $ 5,944,009 5 $ 5,587,210 4 $ 6,041,129 5 $ 5,290,588 4 $ 5,944,009 5 6(26) $ 6.61 $ 7.15 $ 6.56 $ 7.08

4000 Sales revenue 5000 Operating costs 5900 Net operating margin Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6450 Expected credit loss 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the year Other comprehensive income Components of other comprehensive loss that will not be reclassified to profit or loss 8311 Actuarial loss on defined benefit plan 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8310 Components of other comprehensive loss that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations 8360 Components of other comprehensive loss that will be reclassified to profit or loss 8300 Total other comprehensive loss for the year 8500 Total comprehensive income for the year Profit attributable to: 8610 Owners of the parent Comprehensive income attributable to: 8710 Owners of the parent Earnings per share (in dollars) 9750 Basic earnings per share 9850 Diluted earnings per share

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

2018 Balance at January 1, 2018 Profit for the year Other comprehensive loss for the year Total comprehensive income Appropriations of 2017 earnings : Legal reserve Special reserve Cash dividends Due to donated assets received Balance at December 31, 2018 2019 Balance at January 1, 2019 Profit for the year Other comprehensive loss for the year Total comprehensive income Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends Cash distribution from capital surplus Due to donated assets received Balance at December 31, 2019	Notes						Equity	Equity	Equity	at	tributable to own	er	s ofthe parent							Totalequity
			Share capital - commonstock				Capital surplus								Retained earnings			Financial statements translation differences of foreignoperations
					Additional paid-in capital		Treasury stock transactions		Donated assets received		Employee stock warrants		Legal reserve		Special reserve		Unappropriated retained earnings
	6(19) 6(19) 6(19)		$8,448,562 - - - - - - - $8,448,562 $8,448,562 - - - - - - - - $8,448,562	$1,050,563 - - - - - - - $1,050,563 $1,050,563 - - - - - - ( 422,429 ) - $ 628,134			$130,592 - - - - - - - $130,592 $130,592 - - - - - - - - $130,592		$ - - - - - - - 434 $ 434 $ 434 - - - - - - - 298 $ 732		$ 44,460 - - - - - - - $ 44,460 $ 44,460 - - - - - - - - $ 44,460		$3,884,722 - - - 493,742 - - - $4,378,464 $4,378,464 - - - 604,113 - - - - $4,982,577		$389,482 - - - - 32,333 - - $421,815 $421,815 - - - - 84,151 - - - $505,966	$14,276,704 6,041,129 ( 12,969 ) 6,028,160 ( 493,742 ) ( 32,333 ) ( 3,801,852 ) - $15,976,937 $15,976,937 5,587,210 ( 8,063 ) 5,579,147 ( 604,113 ) ( 84,151 ) ( 3,801,853 ) - - $17,065,967		($ 421,815 ) - ( 84,151 ) ( 84,151 ) - - - - ($ 505,966 ) ($ 505,966 ) - ( 288,559 ) ( 288,559 ) - - - - - ($ 794,525 )	$27,803,270 6,041,129 ( 97,120 ) 5,944,009 - - ( 3,801,852 ) 434 $29,945,861 $29,945,861 5,587,210 ( 296,622 ) 5,290,588 - - ( 3,801,853 ) ( 422,429 ) 298 $31,012,465

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Depreciation (including right-of-use assets and investment properties) Amortization (including long-term prepaid rents) Expected credit loss Net gains on financial assets and liabilities at fair value through profit or loss Interest expense Interest income Gain on disposal of property, plant and equipment Loss on disposal of investments Gain on lease modification Loss on unrealized foreign currency exchange Changes in operating assets and liabilities Changes in operating assets Financial assets held for trading Notes receivable, net Accounts receivable Other receivables Inventories, net Prepayments Other current financial assets Other non-current assets Changes in operating liabilities Notes payable Accounts payable Other payables Provision for liabilities - current Current refund liabilities Other current liabilities, others Net defined benefit liability Cash inflow generated from operations Interest received Interest paid Income tax paid Net cash flows from operating activities

Years ended December 31 Notes 2019 2018 $ 6,518,433 $ 7,151,134 890,056 685,785 6(23) 224 9,188 15,696 1,665 ( 39,222 ) ( 70,334 ) 23,546 14,408 6(21) ( 82,368 ) ( 88,788 ) 6(22) ( 2,906 ) ( 46,913 ) - 2,849 ( 214 ) - 24,242 28,275 - ( 26,147 ) ( 11,931 ) ( 35,162 ) ( 1,179,668 ) 899,718 ( 70,951 ) 182,643 ( 474,978 ) ( 5,731,835 ) ( 294,679 ) ( 88,294 ) ( 471,064 ) ( 660,101 ) 97,176 3,808 ( 200 ) 200 5,457,896 ( 1,098,711 ) 427,104 ( 70,215 ) 55,625 46,351 ( 160,406 ) ( 36,726 ) 16,728 ( 12,732 ) ( 5,714 ) ( 6,578) 10,732,425 1,053,488 84,991 86,892 ( 23,559 ) ( 13,974 ) ( 1,520,287 ) ( 1,042,224) 9,273,570 84,182

(Continued)

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition 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 investment properties Increase in refundable deposits Increase in other financial assets Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Decrease (increase) in short-term borrowings Repayment of the principal portion of lease liabilities Payment of long-term borrowings (Decrease) increase in guarantee deposits received Cash dividends paid Cash distribution from capital surplus Due to donated assets received Net cash flows used in financing activities Effect of exchange rate Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Years ended December 31 Notes 2019 2018 6(3) ($ 151,975 ) $ - 6(7) ( 982,667 ) ( 450,502 ) 57,700 50,311 6(10) ( 3,602 ) ( 2,409 ) ( 15,894 ) ( 3,620 ) ( 19,121 ) ( 46,369 ) ( 1,115,559 ) ( 452,589 ) ( 1,500,000 ) 3,000,000 ( 152,916 ) - ( 843 ) ( 898 ) ( 27,983 ) 33,807 6(19) ( 3,801,853 ) ( 3,801,852 ) 6(19) ( 422,429 ) - 298 434 ( 5,905,726 ) ( 768,509 ) ( 233,081 ) ( 75,468 ) 2,019,204 ( 1,212,384 ) 6(1) 8,815,680 10,028,064 6(1) $ 10,834,884 $ 8,815,680

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

1. HISTORY AND ORGANISATION

MICRO-STAR INTERNATIONAL CO., LTD. (the “Company”) was incorporated as a company limited by shares under the laws of the Republic of China (R.O.C.) in August 1986 and started its operations in the same year. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the manufacture and sale of motherboards and computer hardware. The shares of the Company have been listed on the Taiwan Stock Exchange since October 1998. The Company is the Group’s ultimate parent company.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were reported to the Board of Directors on March 20, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

New standards, interpretations and amendments endorsed by the FSC follows:	effective from 2019 are as
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. IFRS 16, ‘Leases

• A. IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a right-of-use asset and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided

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by lessors.

• B. The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ by $401,094, increased ‘lease liability’ by $319,195 and decreased other non-current assets by $81,899 with respect to the lease contracts of lessees on January 1, 2019.

• C. The Group has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

• (a).Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.

• (b).The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.

• (c).The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.

• (d).The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

• D. The Group calculated the present value of lease liabilities by using the weighted average incremental borrowing interest rate range from 0.3% to 7.75%.

• E. The Group recognised lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognised as of January 1, 2019 is as follows:

follows:
Operating lease commitments disclosed by applying IAS 17 as at
December 31, 2018		$	289,555
Less: Short-term leases	(		11,687)
Less: Low-value assets	(		5,304)
Add: Adjustments as a result of a different treatment of extension
and termination options			56,399
Total lease contracts amount recognised as lease liabilities by applying
IFRS 16 on January 1, 2019		$	328,963
Incremental borrowing interest rate at the date of initial application			0.3%~7.75%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16		$	319,195

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

the Group

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

the Group New standards, interpretations and amendments endorsed by the FSC follows:	effective from 2020 are as
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendment to IFRS 9, IAS 39 and IFRS 7, ‘Interest rate benchmark reform’	January 1, 2020 January 1, 2020 January 1, 2020

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

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

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

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’ Amendments to IAS 1, ‘Classification of liabilities as current or non- current’	To be determined by International Accounting Standards Board January 1, 2021 January 1, 2022

The above standards and interpretations have no significant impact to the Group’s financial condition

and operating result based on the Group’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

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(2) Basis of preparation

• A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:

• (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

• (b) Financial assets at fair value through other comprehensive income.

• (c) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

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

(3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

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

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

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

• (d) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified

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to profit or loss when the related assets or liabilities are disposed of.

B. Subsidiaries included in the consolidated financial statements:

Name of investor	Name of subsidiaries	Main business activities	Ownership(%)	Ownership(%)	Note
			2019/12/31	2018/12/31
MICRO-STAR INTERNATIONAL CO., LTD. 〃 〃 〃 〃 〃 MSI (HOLDING) 〃 〃 〃 〃	MICRO-STAR NETHERLANDS HOLDING B.V. [MSI (HOLDING)] MSI COMPUTER CORP. [MSI (LA)] MSI PACIFIC INTERNATIONAL HOLDING CO., LTD. [MSI (PACIFIC)] MSI COMPUTER JAPAN CO., LTD. [MSI (JAPAN)] MSI COMPUTER (AUSTRALIA) PTY. LTD. [MSI (AUSTRALIA)] MSI COMPUTER (CAYMAN) CO., LTD. [MSI COMPUTER (CAYMAN)] MYSTAR COMPUTER B.V. [MYSTAR] MSI TECHNOLOGY GMBH [MSI (GMBH)] MSI COMPUTER SARL [MSI (SARL)] MSI COMPUTER (UK) LTD. [MSI (UK)] MSI POLSKA SP. Z O. O. [MSI (POLSKA)]	Investment holding company Sales and maintenance of computers and electronic components Investment holding company Sales support and maintenance of computers and electronic components Maintenance and after-sales services of computers and electronic components Investment holding company Sales support of computers and electronic components 〃 〃 〃 Sales support and maintenance and after-sales services of computers and electronic components	100 100 100 100 100 100 100 - 100 100 99	100 100 100 100 100 100 100 - 100 100 99	B 〃 A 〃 〃 B 〃 E B 〃 〃

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Main business Name of investor Name of subsidiaries activities MSI (HOLDING) MSI COMPUTER EUROPE B.V. [MSI (EUROPE)] Logistics services of computers and electronic components 〃 LLC MSI COMPUTER [MSI (RUSSIA)] Sales support and maintenance of computers and electronic components 〃 MSI COMPUTER TECHNOLOGIES LIMITED COMPANY [MSI (TURKEY)] Sales support of computers and electronic components 〃 MSI ITALY S.R.L. [MSI (ITALY)] 〃 〃 MSI IBERIA S.L. [MSI (IBERIA)] 〃 MSI (EUROPE) MSI POLSKA SP. Z O. O. [MSI (POLSKA)] Sales support and maintenance and after-sales services of computers and electronic components 〃 LLC MSI COMPUTER [MSI (RUSSIA)] Sales support and maintenance of computers and electronic components 〃 MSI COMPUTER TECHNOLOGIES LIMITED COMPANY [MSI (TURKEY)] Sales support of computers and electronic components MSI (PACIFIC) MSI KOREA CO., LTD. [MSI (KOREA)] Sales and maintenance of computers and electronic components 〃 STAR INFORMATION HOLDING CO., LTD. [STAR INFORMATION] Investment holding company 〃 MEGA INFORMATION HOLDING CO., LTD. [MEGA INFORMATION] 〃	Name of investor	Name of subsidiaries	Main business activities	Ownership(%)	Ownership(%)	Note
				2019/12/31	2018/12/31
				100 99 99 100 100 1 1 1 100 100 -

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Main business Name of investor Name of subsidiaries activities MSI (PACIFIC) MICRO-STAR INTERNATIONAL (B.V.I) HOLDING CO., LTD. [MSI (B.V.I.)] Investment holding company 〃 MICRO ELECTRONICS HOLDING CO., LTD. [MICRO ELECTRONICS] 〃 〃 MEGA TECHNOLOGY HOLDING CO., LTD. [MEGA TECHNOLOGY] 〃 〃 MEGA COMPUTER CO., LTD. [MEGA COMPUTER] Sales support of computers and electronic components 〃 MHK INTERNATIONAL CO., LTD. [MSI (MHK)] 〃 〃 MSI (SHANGHAI) Sales and maintenance of computers and electronic components 〃 SHENZHEN MEGA INFORMATION CO., LTD. [SHENZHEN MEGA INFORMATION] Examination and maintenance of computers, and electronic components 〃 STAR COMPUTER HOLDING CO., LTD. [STAR COMPUTER] 〃 〃 MOSA CO., LTD. [MOSA] 〃 〃 LINKING FUTURE CO., LTD. [LINKING] 〃 MEGA INFORMATION SHENZHEN MEGA INFORMATION CO., LTD. [SHENZHEN MEGA INFORMATION] Examination and maintenance of computers, and electronic components	Name of investor	Name of subsidiaries	Main business activities	Ownership(%)	Ownership(%)	Note
				2019/12/31	2018/12/31
				100 100 100 100 100 100 100 - - - -

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Main business Name of investor Name of subsidiaries activities MICRO ELECTRONICS MSI ELECTRONICS (KUNGSHAN) CO., LTD. [MSI ELECTRONICS (KUNSHAN)] Manufacture and maintenance of computers, and electronic components STAR INFORMATION MSI (SHENZHEN) CO., LTD. [MSI SHENZHEN] Sales and maintenance of computers and electronic components MSI (B.V.I.) MSI COMPUTER (SHENZHEN) CO., LTD. [MSI COMPUTER (SHENZHEN)] Manufacture and maintenance of computers, and electronic components MEGA TECHNOLOGY MSI COMPUTER TRADING (SHENZHEN) CO., LTD. [MSI TRADING (SHENZHEN)] Sales and maintenance of computers and electronic components 〃 RAIDEALS INC. [RAIDEALS] Sales computers and electronic components STAR COMPUTER MIDI CO., LTD. General trade MOSA CLICK TRADING CO., LTD. 〃 〃 EASYGOLD TRADING CO., LTD. 〃 〃 MRL TRADING CO., LTD. 〃 〃 BETTER TECHWIDE CO., LTD. 〃 〃 LEAD TREND CO., LTD. 〃 〃 SAILING OCEAN CO., LTD. 〃 〃 MULTI-STAR SHINE CO., LTD. 〃 〃 WIDE RANGE TRADING CO., LTD. 〃 〃 IDEAPLUS TRADING CO., LTD. 〃 〃 MAXWIDE TRADING CO., LTD. 〃 〃 STAR FIRST TRADING CO., LTD. 〃	Name of investor	Name of subsidiaries	Main business activities	Ownership(%)	Ownership(%)	Note
				2019/12/31	2018/12/31
				100 100 100 100 100 - - - - - - - - - - - -

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• Note A: These investee companies are included in the consolidated financial statement based on their financial statements which were audited by the Group’s independent accountants for the corresponding period.

• Note B: There investee companies are included in the consolidated financial statement based on their financial statements which were audited by other independent accountants for the corresponding period.

• Note C: As of December 31, 2018, these investee companies are included in the consolidated financial statements based on their financial statements which were audited by the Group’s independent accountants for the correponding period.

• Note D: Registration of MSI IBERIA was completed on May 6 , 2019. Thus, it has been included in the consolidated financial statements from that date.

• Note E: In November 2018, this subsidiary has completed the liquidation process.

• Note F: The subsidiary is in the process of liquidation.

• Note G: MSI (SHANGHAI) received capital infusion from MSI (PACIFIC) on March 7, 2018. Thus, it has been included in the consolidated financial statements from that date.

• Note H: RAIDEALS received capital infusion from MEGA TECHNOLOGY on July 2, 2018. Thus, it has been included in the consolidated financial statements from that date.

• Note I: SHENZHEN MEGA INFORMATION has completed a shareholder structure change during the third quarter of 2018. It was changed from its original shareholder of MEGA INFORMATION to MSI (PACIFIC) directly holding the entire equity.

• Note J: The company only sets up registration without any capital injection nor has any actual operation.

• Note K: On May 1, 2018, this subsidiary has cancelled the registration.

• Note L: On November 1, 2018, this subsidiary has cancelled the registration.

• Note M: On June 14, 2019, this subsidiary has cancelled the registration.

• Note N: On May 1, 2019, this subsidiary has cancelled the registration.

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

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

• E. Significant restrictions: None.

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

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(4) Foreign currency translation

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

• A. Foreign currency transactions and balances

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

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

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

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

• B. Translation of foreign operations

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

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

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

  • iii. All resulting exchange differences are recognised in other comprehensive income.

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

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(5) Classification of current and non-current items

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

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

• (b) Assets held mainly for trading purposes;

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

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

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

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

• (b) Liabilities arising mainly from trading activities;

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

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

(6) Cash equivalents

• Cash equivalents refer to short-term highly liquid investments that readily convert to known amount of cash and subject to an insignificant effect of value of changes in rate. Time deposits and money market fund that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.

(8) Financial assets at fair value through other comprehensive income

• A. Financial assets at fair value through over comprehensive in come comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:

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

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flows and selling financial assets; and

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

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:

  • The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

• (9) Accounts and notes receivable

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

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

(10) Impairment of financial assets

• For financial assets measured at amortised cost including accounts receivable that have a significant financing component , at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

• －

• (11) Leasing arrangements (lesser) Operating leases

• Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(12) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work-in-process comprises raw materials, other direct costs and related production overheads. The item-by-item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(13) Property, plant and equipment

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

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

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

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

Buildings 5~55 years Machinery and equipment 2~10 years Other properties (include transportation equipment, office equipment, 2~10 years and leasehold improvements)

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

Effective 2019 (modified retrospective approach)

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

• B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are mainly fixed payments, less any fixed payments that can be received.

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

• C. At the commencement date, the right-of-use asset is stated at cost mainly comprising the amount of the initial measurement of lease liability.

• The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term.

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When the lease liability is remeasured, the amount of remeasurement is recognised as an adjustment to the right-of-use asset.

(15) Operating leases (lessee)

Prior to 2018

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(16) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 20 years.

(17) Impairment of non-financial assets

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

(18) Borrowings

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

(19) Notes and accounts payable

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

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

(20) Financial liabilities at fair value through profit or loss

• A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges.

• B. At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognized in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

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(21) Provisions

Provisions of warranties are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

(22) Employee benefits

• A. Short-term employee benefits

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

• B. Pensions

• (a) Defined contribution plans

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

• (b) Defined benefit plans

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

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

  • iii. Past service costs are recognised immediately in profit or loss.

• C. Termination benefits

• Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognizes expense as it can no longer withdraw an offer of termination benefits or it recognises relating restructuring costs,

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whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

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

• (23) Income tax

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

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

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

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

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

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Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

(24) Share capital

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

(25) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. Cash dividends are recorded as liabilities.

(26) Revenue recognition

• A. Sales of goods

• (a) The Group manufactures and sells motherboards, graphic cards, a variety of computer hardware, and electronic components. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

• (b) Revenue from the products is recognised based on the price specified in the contract, net of the estimated value added tax, returns and volume discounts and rebates. The volume discounts to the customers are estimated based on the anticipated annual sales quantities and the right of return for defective products is estimated on the basis of historical experience. Revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. A refund liability is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. The period between the transfer of the promised goods or services to the customer and payment by the customer does not exceed one year. As a result, the Group does not adjust any of the transaction prices for the time value of money.

• (c) The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision.

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

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• B. Incremental costs of obtaining a contract

Given that the contractual period lasts less than one year, the Group recognises the incremental costs of obtaining a contract as an expense when incurred although the Group expects to recover those costs.

(27) Operating segments

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

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

UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. The information is addressed below:

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

None.

(2) Critical accounting estimates and assumptions

• Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation. As of December 31, 2019, the carrying amount of inventories was $22,527,840.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

inventories was $22,527,840. TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and petty cash Checking accounts and demand deposits Time deposits Total	December31,2019 4,210 $ 9,651,879 1,178,795 10,834,884 $	December31,2018
		4,007 $ 6,827,542 1,984,131
		8,815,680 $

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

• B. As of December 31, 2019 and 2018, cash and cash equivalents amounting to $100,244 and

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$69,316, respectively, were pledged to others as collateral and classified as other non-current financial assets.

(2) Financial assets and liabilities at fair value through profit or loss - current

Asset items Financial assets mandatorily measured at fair value through profit or loss Stock of publicly traded or listed companies Derivatives – Forward exchange contract Derivatives – Foreign exchange swap Evaluation adjustment ( Total Liabilityitems Financial liabilities held for trading Derivatives – Forward exchange contract	December31,2019 119,571 $ 3,660 52,981 176,212 23,407) ( 152,805 $ December31,2019 24,943 $	December31,2018
		125,303 $ 6,376 7,956
		139,635 41,235)
		98,400 $
		December31,2018
		5,555 $

• A. The Group recognised net (loss) gain of ($5,089) and $70,334 on financial assets held for trading for the years ended December 31, 2019 and 2018, respectively.

• B. The Group entered into contract related to derivative financial asset and liabilities which was not accounted with Hedge Accounting and contract information are as follows:

Derivative Financial Assets		December	31,2019
		Contract Amount Notional Principal (In thousands) EUR 2,000 GBP 500 KRW 1,156,000 SEK 4,650 JPY 216,310 USD 94,000 CNY 473,584	Contractperiod
Forward exchange contracts 〃 〃 〃 〃 Foreign exchange swap 〃			2019.10.21~2020.02.10 2019.12.09~2020.02.18 2019.12.30~2020.01.15 2019.12.30~2020.02.10 2019.12.04~2020.02.03 2019.11.07~2020.02.24 2019.08.14~2020.05.18

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Derivative Financial Liabilities		December	31,2019
		Contract Amount Notional Principal (In thousands) CAD 8,000 RUB 224,291 EUR 44,000 SEK 2,852 GBP 5,500 AUD 6,500 December	Contractperiod
Forward exchange contracts 〃 〃 〃 〃 〃 Derivative Financial Assets			2019.10.21~2020.03.24 2019.12.05~2020.01.16 2019.10.15~2020.04.08 2019.12.03~2020.01.08 2019.10.17~2020.02.18 2019.10.31~2020.02.24 31,2018
		Contract Amount Notional Principal (In thousands) EUR 6,000 GBP 3,500 AUD 4,200 USD 158,000 December	Contractperiod
Forward exchange contracts 〃 〃 Foreign exchange swap Derivative Financial Liabilities			2018.11.20~2019.01.08 2018.10.22~2019.02.01 2018.11.01~2019.02.01 2018.11.15~2019.02.25 31,2018
		Contract Amount Notional Principal (In thousands) JPY 381,282 EUR 24,000 GBP 1,300	Contractperiod
Forward exchange contracts 〃 〃			2018.11.19~2019.02.01 2018.11.29~2019.02.11 2018.12.20~2019.01.24

The Group entered into forward foreign exchange contracts to hedge exchange risk. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

• C. The Group has no financial assets at fair value through profit or loss pledged to others.

• D. Information relating to financial assets at fair value through other comprehensive income is provided in Note 12(2)(3).

(3) Financial assets at fair value through other comprehensive income

provided in Note 12(2)(3). inancial assets at fair value through other comprehensive income
Items Non-current items: Equity instruments Unlisted stocks Valuation adjustment Total		December31,2019
		151,975 $ - 151,975 $

• A. The Group has elected to classify equity instruments that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such

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investments amounted to $151,975 at December 31, 2019.

• B. As at December 31, 2019, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income held by the Group was $151,975.

• C. The Group has no financial assets at fair value through other comprehensive income pledged to others as collateral.

• D. Information relating to credit risk of financial assets at fair value through other comprehensive income is provided in Note 12(2)(3).

(4) Accounts receivable

income is provided in Note 12(2)(3). Accounts receivable
Notes receivable Accounts receivable Less: Allowance for doubtful accounts (	December31,2019 47,114 $ 17,237,493 $ 31,710) ( 17,205,783 $	December31,2018
		35,183 $
		16,059,595 $ 19,406)
		16,040,189 $

• A. The ageing analysis of accounts receivable and notes receivable:

Not past due 1 to 75 days 76 to 365 days Over 365 days	December	Notes receivable 47,114 $ - - - 47,114 $ 31,2019	December	31,2018
	Accounts receivable 14,068,801 $ 3,044,781 120,008 3,903 17,237,493 $		Accounts receivable 12,943,013 $ 3,078,726 37,097 759 16,059,595 $	Notes receivable
				35,183 $ - - -
				35,183 $

The above ageing analysis was based on past due date.

• B. As of December 31, 2019 and 2018, accounts receivable and notes receivable were all from contracts with customers. And as of January 1, 2018, the balance of receivables from contracts with customers amounted to $15,108,124.

• C. Most of the Group’s accounts receivable have been insured or have collateral as security, and the Group will be able to obtain insurance claims or enforce a collateral in case these accounts default.

• D. As of December 31, 2019 and 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s notes and accounts receivable were $47,114 and $35,183 ； $17,205,783 and $16,040,189, respectively.

• E. Information relating to credit risk of accounts receivable and notes receivable is provided in Note 12(2).

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(5) Inventories

Inventories
Raw material Work-in-process Finished goods Raw material Work-in-process Finished goods		December31,2019
	Cost 6,579,127 $ 1,378,828 15,104,505 23,062,460 $	Allowance for valuation loss 130,049) ($ 1,311) ( 403,260) ( 534,620) ($ December31,2018	Bookvalue
			6,449,078 $ 1,377,517 14,701,245
			22,527,840 $
	Cost 7,536,411 $ 1,343,677 13,904,487 22,784,575 $		Book value
			7,210,674 $ 1,341,690 13,500,498
			22,052,862 $

The cost of inventories recognised as expense for the period:

The cost of inventories recognised as expense for the period:
2019 Cost of inventories recognised as expense 104,629,261 $ (Gains on reversal of decline) losses on decline in market value 191,805) (	2018
	102,397,587 $ 392,240

The Group reversed from a previous inventory write-down and accounted for as reduction of cost of goods sold because parts of inventories which were recognized as expense have been sold in 2019.

(6) Prepayments

Prepayments
Overpaid tax for offsetting the future tax payable Office supplies Prepayment for goods Others	December 31,2019 922,464 $ 490,408 30,266 232,563 1,675,701 $	December 31,2018
		780,088 $ 364,726 20,507 215,701
		1,381,022 $

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(7) Property, plant and equipment

At January 1 Cost Accumulated depreciation Balance at January 1 Additions Reclassifications Disposals Depreciation charge Net exchange differences ( Balance at December 31 At December 31 Cost Accumulated depreciation At January 1 Cost Accumulated depreciation Balance at January 1 Additions Reclassifications Disposals Depreciation charge Net exchange differences Balance at December 31 At December 31 Cost Accumulated depreciation			2019

Information about the property, plant and equipment that were pledged to others as collaterals is provided in Note 8.

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－ (8) Leasing arrangements lessee

Effective 2019 (modified retrospective approach)

• A. The Group leases various assets including land, buildings, machinery and equipment, and other equipment. Rental contracts are typically made for periods of 2 months to 10 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

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

Land Buildings Machinery and equipment Other equipment	December31,2019 2019 Carrying amount Depreciationcharge 70,355 $ 8,809 $ 361,312 132,799 6,717 2,433 36,513 20,153 474,897 $ 164,194 $

• C. For the year ended December 31, 2019, the additions to right-of-use assets were $290,570.

• D. The information on profit and loss accounts relating to lease contracts is as follows:

Items affecting profit or loss Interest expense on lease liabilities Expense on leases of low-value and short-term assets Expense on variable lease payments	#VALUE! $ 1,489 31,713 8,916	2019
		$ 6,450 52,040 37,443

• E. For the year ended December 31, 2019, the Group’s total cash outflow for leases were $248,697.

• (9) Leasing arrangements – lessor

• A. The Group recognised rental income of $ 116,675 and $ 97,487 based on operating lease contracts in year 2019 and 2018, respectively. None of these included variable lease payments..

• B. The maturity analysis of the undiscounted lease payments in the operating lease is as follows:

Year 2020 After year 2021 Total		December 31,2019 $ 71,211 Year 2019 61,051 After year 2020 132,262 $ Total	December 31,2018
			$ 81,544 79,990 161,534 $

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(10) Investment property

)Investment property
			2019
			Buildings
At January 1
Cost		$	1,129,777
Accumulated depreciation	(		788,536)
		$	341,241
Balance at January 1		$	341,241
Additions			3,602
Reclassifications			21,319
Depreciation charge	(		54,841)
Net exchange differences	(		10,762)
Balance at December 31		$	300,559
At December 31
Cost		$	1,167,190
Accumulated depreciation	(		866,631)
		$	300,559
			2018
			Buildings
At January 1
Cost		$	957,443
Accumulated depreciation	(		619,551)
		$	337,892
Balance at January 1		$	337,892
Additions			2,409
Reclassifications			57,691
Depreciation charge	(		50,775)
Net exchange differences	(		5,976)
Balance at December 31		$	341,241
At December 31
Cost		$	1,129,777
Accumulated depreciation	(		788,536)
		$	341,241

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• A. Rental income from the lease of the investment and direct operating expenses arising from the investment property:

investment property:
Rental income from the lease of the investment property Direct operating expenses arising from the investment property	2019 116,675 $ 76,351 $	2018
		97,487 $
		69,936 $

• B. As of December 31, 2019 and 2018, the fair value of the Group’s investments in property amounting to $3,403,426 and $2,484,968, respectively, as derived from market prices in the nearby area, are included in Level 2.

(11) Long-term prepaid rents (shown as ‘Other non-current assets’)

Land use right

	December	31,2018
	$	81,899

• A. A subsidiary of the Group signed a land use right contract with the Ministry of Land and Resources of the People's Republic of China for the use of the land at Kunshan City and Shenzhen City with a term of 50 years. The Group recognized rental expenses of $8,986 for the year ended December 31, 2018.

• B. The Group applied IFRS 16 for the first time on January 1, 2019. For the impact of its application, please refer to Note 3(1). For the details of significant accounts, please refer to Note 6(8).

• (12) Short-term borrowings

Short-term borrowings
Type ofborrowings Bank borrowings Bank unsecured borrowings Type ofborrowings Bank borrowings Bank unsecured borrowings	December31,2019 1,500,000 $ December31,2018 3,000,000 $	Interest raterange 0.88%～0.90% Interest raterange 0.94%～0.99%	Collateral
			None Collateral
			None

(13) Other payables

Accrued salary and bonus Directors’ and supervisors’ remuneration and employees’ bonus Accrued freight Advertising expenses payable Accrued molding expense Other accrued expenses	December31,2019 1,303,131 $ 554,500 617,251 355,107 217,077 797,769 3,844,835 $	December31,2018 1,319,253 $ 564,500 502,979 273,429 164,846 593,243 3,418,250 $

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- (14) Long term borrowings

Borrowing period and

	Borrowing period and
Type of borrowings	repayment term	Interest rate range	Collateral Land and Building ( Collateral Land and Building	December 31,2019 16,026 $ 931) 15,095 $ December31,2018 17,282 $
Long-term bank borrowings Secured borrowings Less: current portion Type ofborrowings	Starting from March 24, 2016 to March 24, 2021, repayment of principal and interest of USD 4,307.77 monthly and remaining principal on the due date. Borrowing period and repayment term	Three month LIBOR plus 1.75% Interest raterange
Long-term bank borrowings Secured borrowings	Starting from March 24, 2016 to March 24, 2021, repayment of principal and interest of USD 4,307.77 monthly and remaining principal on the due date.	Three month LIBOR plus 1.75%

Less: current portion

( 840) $ 16,442

(15) Pensions

• A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company and its domestic subsidiaries contribute monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement

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in the following year, the Company will make contributions for the deficit by next March.

(b) The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligations Fair value of plan assets ( Net defined benefit liability	December31,2019 524,869 $ 302,895) ( 221,974 $	December31,2018 502,487 $ 284,878) 217,609 $

(c) Movements in net defined benefit liabilities are as follows:

2019 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension Balance at December 31		Present value of defined benefit obligations	Fair value of plan assets		Net defined benefit liability
	(	502,487 $ 3,710 5,025 511,222 - 15,767 4,224 19,991 - 6,344) 524,869 $	284,878) ($ - 2,849) ( 287,727) ( 9,912) ( - - 9,912) ( 11,600) ( 6,344 302,895) ($	217,609 $ 3,710 2,176 223,495 9,912) ( 15,767 4,224 10,079 11,600) ( - 221,974 $

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2018 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension Balance at December 31		Present value of defined benefit obligations	Fair value of plan assets		Net defined benefit liability
	(	470,631 $ 2,764 5,177 478,572 - 5,335 23,774 29,109 - 5,194) 502,487 $	267,874) ($ - 2,947) ( 270,821) ( 7,679) ( - - 7,679) ( 11,572) ( 5,194 284,878) ($	202,757 $ 2,764 2,230 207,751 7,679) ( 5,335 23,774 21,430 11,572) ( - 217,609 $

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company and its domestic subsidiaries have no right to participate in managing and operating that fund and hence the Company and its domestic subsidiaries are unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	2019 0.70% 2.75%	2018
		1.00%
		2.75%

Assumptions regarding future mortality experience are set based on the fifth round of empirical life tables of the Taiwan life insurance industry.

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Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

		Discount rate	Discount rate			Future salaryincreases	Future salaryincreases	Future salaryincreases
	Increase0.25%		Decrease0.25%		Increase0.25%		Decrease0.25%
December 31, 2019
Effect on present value of
defined benefit obligation	($	13,187)	$	13,680	$	12,065	($	11,713)
December 31, 2018
Effect on present value of
defined benefit obligation	($	13,186)	$	13,699	$	12,176	($	11,802)

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

• (f) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2020 amount to $11,628.

• (g) As of December 31, 2019, the weighted average duration of the retirement plan is 11 years. The analysis of timing of the future pension payment was as follows:

The analysis of timing of the future pension payment was as follows:
Within 1 year 1-2 year(s) 2-3 years 3-4 years 4-5 years 6-10 years Over 10 years	28,485 $ 32,316 35,314 26,862 24,649 134,261 282,604
	564,491 $

• B. (a) Effective July 1, 2005, the Company has established a defined

  • contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

• (b) The Company’s mainland China subsidiaries have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentage of employees’ monthly salaries and wages. Other than the monthly contributions, the Group has no further obligations.

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• (c) The pension costs under defined contribution pension plans of the Group for the years ended December 31, 2019 and 2018, were $279,412 and $262,954, respectively.

(16) Provisions for liabilities

Provisions for liabilities
Warranty		2019		2018
At January 1	$	501,095	$	454,744
Additional provisions		748,955		680,895
Used during the period	(	693,294)	(	634,589)
Exchange differences	(	36)		45
At December 31	$	556,720	$	501,095
Analysis of total provisions:
	December31,2019		December31,2018
Current	$	556,720	$	501,095

The Group gives warranties on computer components and personal computers sold. Provision for warranty is estimated based on historical warranty data.

(17) Share capital

As of December 31, 2019, the Company’s authorized capital was $15,000,000 (including 80,000 thousand shares reserved for employee stock options and 150,000 thousand shares reserved for convertible bonds issued by the Company), and the paid-in capital was $8,448,562 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

(18) Capital surplus

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

(19) Retained earnings

• A. Under the Company's Articles of Incorporation, the current year's earnings, if any, shall first be used to pay all taxes and offset prior year's operating losses, then 10% of the remaining amount shall be set aside or reversed as legal reserve. The balance plus unappropriated retained earnings at the beginning of the period shall be appropriated 10%~90% as proposed by the Board of Directors and resolved by the stockholders during their meeting.

• B. The Company’s dividend policy is summarized below: as the Company operates in a volatile business environment and is in the stable growth stage, except for the Company’s future expansion plans, stockholders’ interest is taken into consideration. The Group appropriated dividends in proportion to total number of shares, dividends could be distributed in stock or cash, and cash dividends shall account for at least 30% of the total dividends distributed.

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• C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

• D. (a) In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• (b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.

• E. The appropriations of 2018 and 2017 earnings had been resolved at the stockholders’ meeting on June 14, 2019 and June 15, 2018, respectively, were as follows:

Legal reserve Special reserve Cash dividend	Amount Dividends per share(dollar) 604,113 $ 84,151 3,801,853 4.50 $ 2018	Amount Dividends per share(dollar) 493,742 $ 32,333 3,801,852 4.50 $ 2017
	Amount 604,113 $ 84,151 3,801,853

The cash dividends of the Company from capital surplus has been approved by the stockholders on June 14, 2019 amount to $422,429.

The appropriation of 2018 earnings as approved by the stockholders is the same as with the appropriation resolved by the Board of Directors during its meeting on April 30, 2019. Information about earnings appropriation of the Company as resolved by Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

• F. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(24).

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(20) Operating revenue

The Group derives revenue from the transfer of goods at a point in time in the following major segment:

segment:
Other income Other gains and losses 2019 Computer and peripherals segment Total segment revenue 120,486,414 $ Timing of revenue recognition At a point in time 120,486,414 $ 2018 Computer and peripherals segment Total segment revenue 118,523,473 $ Timing of revenue recognition At a point in time 118,523,473 $ Rental revenue Interest income Others Total (Losses) gains on financial assets and liabilities at fair value through profit or loss Net gains on disposal of property, plant and equipment Net currency exchange losses Other losses Total		Computer and peripherals segment			Other		Total 120,491,417 $ 120,491,417 $ Total 118,527,273 $ 118,527,273 $ 2018 97,487 88,788 469,458 655,733 2018 70,334 46,913 185,053) 114,335) 182,141)
		120,486,414 $ 120,486,414 $ Computer and peripherals segment		$	5,003
				$	5,003
					Other
				$	3,800
				$	3,800
						$
						$

(21) Other income

(22) Other gains and losses

(23) Expenses by nature

By function Bynature	2019	2019	2019	2018	2018	2018
	Operatingcosts	OperatingExpense	Total	Operatingcosts	OperatingExpense	Total
Employee benefit expense	2,270,444 $	4,977,124 $	7,247,568 $	2,201,288 $	4,858,915 $	7,060,203 $
Depreciation charges on property, plant and equipment	531,806	358,250	890,056	477,940	207,845	685,785
Amortization charges	201	23	224	8,226	962	9,188

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(24) Employee benefit expense

Employee benefit expense
Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses Total	2019 6,241,522 $ 396,369 285,297 324,380 7,247,568 $	2018
		6,090,327 $ 378,343 267,948 323,585
		7,060,203 $

• A. According to the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees’ compensation and directors’ remuneration. The ratio shall be 6%~10% for employees’ compensation and shall not be higher than 1% for directors’ remuneration.

• B. For the years ended December 31, 2019 and 2018, employees’ remuneration was accrued at $505,000 and $515,000, respectively; while directors’ remuneration was accrued at $49,500 and

• $49,500, respectively. The aforementioned amounts were recognized in salary expenses respectively.

The employees’ compensation and directors’ remuneration were estimated and accrued based on the historical distribution ratio and the profit of the current year for the year ended December 31, 2019.

Employees’ compensation and directors’ remuneration of 2018 as resolved at the meeting of Board of Directors were in agreement with those amounts recognized in the 2018 financial statements.

Information about employees’ compensation and directors’ remuneration of the Company as resolved by the Board of Directors and shareholders will be posted in the “Market Observation Post System” website of the Taiwan Stock Exchange.

(25) Income tax

• A. Income tax expense

• (a) Components of income tax expense:

e tax ome tax expense Components of income tax expense:
			2019			2018
Current tax:
Current tax on profits for the period		$	1,076,139		$	1,374,017
Prior year income tax overestimation	(		138,530)	(		167,618)
Total current tax			937,609			1,206,399
Deferred tax:
Origination and reversal of temporary
differences	(		6,386)	(		118,020)
Impact of change in tax rate			-			21,626
Total deferred tax	(		6,386)	(		96,394)
Income tax expense		$	931,223		$	1,110,005

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(b) The income tax charge relating to components of other comprehensive income:

			2019			2018
Remeasurement of defined benefit obligations		$	2,016		$	4,286
Impact of change in tax rate			-			4,175
		$	2,016		$	8,461
Reconciliation between income tax expense and accounting			profit
			2019			2018
Tax calculated based on profit before tax and		$	1,409,440		$	1,525,635
statutory tax rate (Note)
Effect from items disallowed by tax regulation			2,886			6,086
Temporary differences not recognised as deferred tax	(		137,196)	(		83,280)
liabilities
Effect from investment tax credits	(		282,279)	(		250,279)
Prior year income tax overestimation	(		138,530)	(		167,618)
Additional 10% tax on undistributed earnings			76,902			57,835
Impact of change in tax rate			-			21,626
Income tax expense		$	931,223		$	1,110,005

B. Reconciliation between income tax expense and accounting profit

Note: The basis for computing the applicable tax rate are the rates applicable in the respective countries where the Group entities operate.

• C. Amounts of deferred tax assets or liabilities as a result of temporary differences, tax losses and investment tax credits are as follows:

Temporary differences: -Deferred tax assets: Unrealized gross profit Loss on inventory Allowance for bad debts excess tax limitation Unrealized exchange loss Remeasurement of defined benefit obligations Adjustment to unused paid annual leave Others Subtotal		2019	2019	2019
	January1 148,181 $ 147,632 1,257 3,462 32,119 5,813 99,740 438,204	Recognised in profit or loss		Recognised in other comprehensive income - $ - - - 2,016 - - 2,016	December 31
		55,084 $ 37,275) ( 6,001 3,462) ( - 4,187 6,768 31,303			203,265 $ 110,357 7,258 - 34,135 10,000 106,508
					471,523

~49~

January1 -Deferred tax liabilities: Unrealised exchange gain - Unrealized gains on forward exchange contract 1,755) ( Others 542) ( Subtotal 2,297) ( Total 435,907 $ January1 Temporary differences: -Deferred tax assets: Unrealized gross profit 162,601 $ Loss on inventory 60,006 Allowance for bad debts excess tax limitation 1,161 Unrealized exchange loss - Remeasurement of defined benefit obligations 23,658 Adjustment to unused paid annual leave 4,942 Unrealized losses on forward exchange contract 600 Others 95,051 Subtotal 348,019 -Deferred tax liabilities: Unrealised exchange gain 16,252) ( Unrealized gains on forward exchange contract - Others 715) ( Subtotal 16,967) ( Total 331,052 $		2019	2019	2019
		Recognised in profit or loss
			Recognised in profit or loss
		14,420) ($ 87,626 96 3,462 - 871 600) ( 4,689 81,724 16,252 1,755) ( 173 14,670 96,394 $

• D. The Company has not recognised taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2019 and 2018, the amounts of temporary difference unrecognised as deferred tax liabilities were $5,042,672 and $4,636,390, respectively.

• E. The Company’s income tax returns through 2017 have been assessed and approved by the Tax

~50~

Authority.

• F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

(26) Earnings per share

Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares		Retroactively adjusted weighted-average outstanding ordinary Earnings per share shares(in thousands) (in NT dollars) 844,856 6.61 $ 844,856 7,378 852,234 6.56 $ Retroactively adjusted weighted-average outstanding ordinary Earnings per share shares (in thousands) (inNTdollars) 844,856 7.15 $ 844,856 7,926 852,782 7.08 $ 2018 2019
	Amount after tax 5,587,210 $ 5,587,210 $ - 5,587,210 $
	Amount after tax 6,041,129 $ 6,041,129 $ - 6,041,129 $

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7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

None.

(2) Significant related party transactions

None.

(3) Key management compensation

Salaries and other employee benefits

2019 350,353 $	2018
	343,134 $

8. PLEDGED ASSETS

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

Book value

Asset items Other non-current assets - Other financial assets Property, plant and equipment	December 31, 2019 100,244 $ 126,733 226,977 $	December 31, 2018 Purpose 69,316 $ Performance security guarantee 133,634 For guarantee of long-term loans 202,950 $

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1) Contingencies ： None.

• (2) Commitments ： None.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or repurchase outstanding shares.

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(2) Financial instruments

A. Financial instruments by category

ancial instruments Financial instruments by category
Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Designation of equity instrument Financial assets at amortised cost Cash and cash equivalents Notes receivable Accounts receivable Other receivables Other current financial assets Other non-current financial assets Guarantee deposits paid Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities held for trading Financial liabilities at amortised cost Short-term borrowings Notes payable Accounts payable Other accounts payable Long-term borrowings (including current portion) Guarantee deposits received Lease liabilities	December31,2019 152,805 $ 151,975 10,834,884 47,114 17,205,783 227,116 1,200,000 102,009 42,242 29,963,928 $ December 31,2019 24,943 $ 1,500,000 - 20,391,520 3,844,835 16,026 198,920 25,976,244 $ 406,848 $	December31,2018
		98,400 $ - $ 8,815,680 35,183 16,040,189 159,681 728,936 82,889 26,348
		25,987,306 $
		December 31,2018
		5,555 $ 3,000,000 200 14,933,624 3,418,250 17,282 226,903
		21,601,814 $
		- $

B. Risk management policies

The Group’s activities expose it to a variety of financial risks: including market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial

~53~

performance.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

• ii. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency.

• iii. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.

• iv. The Group hedges foreign exchange rate by using forward exchange contracts. However, the Group does not adopt hedging accounting. Details of financial assets or liabilities at fair value through profit or loss are provided in Note 6(2).

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

(Foreign currency: functional currency) Financial assets Monetary items USD: NTD EUR: NTD RMB: NTD GBP: NTD CAD: NTD Financial liabilities Monetary items USD: NTD USD: RMB EUR: NTD		December31,2019
	Foreign Currency Amount (In Thousands) 396,064 $ 51,697 162,475 7,794 10,468 673,526 16,433 11,924	Book Value Exchange rate (NTD) 29.9800 11,873,988 $ 33.5900 1,736,500 4.3050 699,454 39.3600 306,785 22.9900 240,670 29.9800 20,192,315 6.9640 492,673 33.5900 400,520

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December 31, 2018

		December31,2018
(Foreign currency: functionalcurrency) Financial assets Monetary items USD: NTD RMB:NTD EUR: NTD CAD: NTD GBP: NTD USD: RMB RUB: NTD Financial liabilities Monetary items USD: NTD USD: RMB EUR: NTD	Foreign Currency Amount (In Thousands) 330,728 $ 352,127 44,719 15,079 8,128 8,443 585,852 488,018 22,115 10,117	Book Value Exchangerate (NTD) 30.7150 10,158,307 $ 4.4720 1,574,712 35.2000 1,574,113 22.5800 340,492 38.8800 315,999 6.8683 259,331 0.4421 259,005 30.7150 14,989,481 6.8683 679,263 35.2000 356,121

• vi. The exchange loss arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2019 and 2018, amounted to $34,836 and $185,053, respectively.

• vii. Analysis of foreign currency market risk arising from significant foreign exchange variation:

variation:
(Foreign currency: functional currency)			2019	Effect on other comprehensive income
			Sensitivityanalysis
		Degree of variation	Effect on profit or loss (before tax)
Financial assets Monetary items USD: NTD EUR: NTD RMB: NTD GBP: NTD CAD: NTD Financial liabilities Monetary items USD: NTD USD: RMB EUR: NTD		1% 1% 1% 1% 1% 1% 1% 1%	118,740 $ 17,365 6,995 3,068 2,407 201,923 4,927 4,005	- $ - - - - - - -

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(Foreign currency: functional currency)			2018	Effect on other comprehensive income
			Sensitivityanalysis
		Degree of variation	Effect on profit or loss (before tax)
Financial assets Monetary items USD: NTD RMB:NTD EUR: NTD CAD: NTD GBP: NTD USD: RMB RUB: NTD Financial liabilities Monetary items USD: NTD USD: RMB EUR: NTD		1% 1% 1% 1% 1% 1% 1% 1% 1% 1%	101,583 $ 15,747 15,741 3,405 3,160 2,593 2,590 149,895 6,793 3,561	- $ - - - - - - - - -

Price risk

• i. The Group’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

• ii. The Group has investments in equity securities. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 1% with all other variables held constant, posttax profit for the years ended December 31, 2019 and 2018 would have increased/decreased by $769 and $673, as a result of gain or loss of equity instruments at fair value through profit or loss.

Cash flow and fair value interest rate risk

• i. The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. For the years ended December 31, 2019 and 2018, the Group borrowings are issued at variable rate denominated in US dollars.

• ii. The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the

~56~

major interest-bearing positions.

• iii. At December 31, 2019 and 2018, if interest rates on USD and NTD denominated borrowings had been 1% higher/lower with all other variables held constant, post-tax profit for the years ended December 31, 2019 and 2018 would have been $128 and $138 lower/higher, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.

• (b) Credit risk

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

• ii. The Group manages their credit risk taking into consideration the entire group’s concern. For banks and financial institutions, only parties with a rating of investment grade are accepted. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the management. The utilisation of credit limits is regularly monitored. Credit risk arises from credit exposures to wholesale and retail customers, including outstanding receivables.

• iii. The Group adopts assumptions, if the contract payments were past due over 90 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

• iv. The Group adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 150 days.

• v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

• (i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;

• (ii) The disappearance of an active market for that financial asset because of financial difficulties;

• (iii) Default or delinquency in interest or principal repayments;

• (iv) Adverse changes in national or regional economic conditions that are expected to cause a default.

• vi. The Group applies the modified approach using provision matrix, loss rate methodology to estimate expected credit loss under the provision matrix basis.

• vii. The Group wrote-off the financial assets, which cannot be reasonably expected to be

~57~

recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.

• viii. The Group used the forecastability to adjust historical and timely information to assess the default possibility of debt instrument on December 31, 2019 and 2018.The except credit loss rate of the Group’s overdue accounts receivable was not material as of December 31, 2019 and 2018.

• ix. The Group applies the simplified approach to provide loss allowance for accounts receivable that have no significant impact. The Company had not recognized related impact for the years ended December 31, 2019 and 2018.

• (c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the Group’s internal balance sheet ratio targets and external regulatory or legal requirements.

• ii. The table below analyses the Group’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:

Non-derivative financial liabilities:	lities:
December 31, 2019 Less than 1 year Short-term borrowings 1,500,000 $ Accounts payable 20,391,520 Other payables 3,844,835 Lease liabilities 194,646 Long-term borrowings (including current portion) 1,550 Other financial liabilities 605 Non-derivative financial liabilities: December 31, 2018 Less than 1 year Short-term borrowings 3,000,000 $ Notes payable 200 Accounts payable 14,933,624 Other payables 3,418,250 Long-term borrowings (including current portion) 1,588 Other financial liabilities 21,665	Less than 1 year	Between 1 to 2years	Between 2 to 3years	Over 3years
		- $ - - 144,775 14,266 106,506 Between 1 to 2years	- $ - - 80,921 - - Between 2 to 3years	- $ - - 38,352 - 91,809 Over 3years
December 31, 2018 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) Other financial liabilities
	3,000,000 $ 200 14,933,624 3,418,250 1,588 21,665	- $ - - - 1,588 110,576	- $ - - - 14,616 437	- $ - - - - 94,225

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Derivative financial liabilities

As of December 31, 2019 and 2018, the derivative financial liabilities mature within 1 year.

• iii. The Group does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

(3) Fair value information

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability takes place with sufficient frequency and volume to provide pricing information on an on going basis.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: Unobservable inputs for the asset or liability.

• B. Financial instruments not measured at fair value

• The Group’s cash and cash equivalents, notes receivable, accounts receivable, other receivables, other financial assets, long-term borrowings, guarantee deposits paid, short-term borrowings, notes payable, accounts payable and other payables, guarantee deposits received are approximate to their fair values. The transaction value information is provided in Note 12(2)A. The fair value information of the Group’s investments in property is provided in Note 6(10).

• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities is as follows:

~59~

December 31, 2019 Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Equity security -Forward exchange contract -Foreign exchange swap Financial assets at fair value through other comprehensive income -Equity securities Total Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract December 31, 2018 Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Equity security -Forward exchange contract -Foreign exchange swap Total Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract	Level 1 96,164 $ - - - 96,164 $ - $ Level 1 84,068 $ - - 84,068 $ - $	Level 2 - $ 3,660 52,981 - 56,641 $ 24,943 $ Level 2 - $ 6,376 7,956 14,332 $ 5,555 $	Level3 - $ - - 151,975 151,975 $ - $ Level3 - $ - - - $ - $	Total
				96,164 $ 3,660 52,981 151,975
				304,780 $
				24,943 $
				Total
				84,068 $ 6,376 7,956
				98,400 $
				5,555 $

• D. The methods and assumptions the Group used to measure fair value are as follows:

• (a) The level 1 financial instruments-equity security held by the Group are listed shares, and the market quoted price is determined by the closing price of the security.

• (b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes.

• (c) When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Group adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments

~60~

are normally observable in the market.

• (d) The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.

• E. For the years ended December 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.

• F. For the years ended December 31, 2019 and 2018, there was no transfer in or out from Level 3.

• G. The Group entrusts an external evaluation agency to evaluate the fair value classified as the third level.

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: None.

• B. Provision of endorsements and guarantees to others: None.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 1.

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

• E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

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

• G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paidin capital or more: Please refer to table 2.

• H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 3.

• I. Derivative financial instruments transactions: Please refer to Note 6(2).

• J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 5.

(3) Information on investments in Mainland China

• A. Basic information: Please refer to table 6.

• B. Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas: Please refer to table 7.

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14. SEGMENT INFORMATION

(1) General information and measurement of segment information

The Group’s operating segment profit (loss) is measured by the operating income (loss), which is used as a basis in assessing the performance of operating segments. “Operating Segments,” the Group’s reportable operating segments are as follows:

Computer and peripherals business group: Mainly engages in development and sale of mother

boards, graphic cards, notebooks, and computer peripherals.

Other segments: Mainly engages in development and sale of other products and in charge of general

administration department expenses.

There is no material change in the basis for grouping of entities and division of segments in the Group or in the measurement basis for segment information during this period.

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

• A. The revenue and segment information provided to the chief operating decision-maker for the reportable segments is as follows:

For the year ended December 31, 2019

For theyear ended December	31, 2019
Total segment revenue Operating income Other non-operating revenue Profit before tax	Computer and peripherals segment 120,486,414 $ 6,141,732 $ (	Other 5,003 $ 189,326) $	Total
			120,491,417 $
			5,952,406 $
			566,027
			6,518,433 $

For the year ended December 31, 2018

For theyear ended December	31, 2018
Total segment revenue Operating income (loss) Other non-operating revenue Profit before tax	Computer and peripherals segment 118,523,473 $ 6,991,151 $ (	Other 3,800 $ 299,201) $	Total
			118,527,273 $
			6,691,950 $
			459,184
			7,151,134 $

The above revenue was derived from the transactions with external customers. The above amounts are provided to the chief operating decision-maker for allocating resources and assessing performance of operating segments.

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• B. The adoption of IFRS 16, ‘Leases’, had the following impact on the segment information in 2019:

Depreciation expense increased Segment assets increased Segment liabilities increased		Computer and peripherals segments
		164,194 $ 474,897 $ 406,848 $

(3) Reconciliation for segment income

Sales between segments are carried out at arm’s length. The revenue from external customers reported to the chief operating decision-maker is measured in a manner consistent with that in the statement of comprehensive income.

A reconciliation of reportable segment income to the income before tax from continuing operations for the years ended December 31, 2019 and 2018 is provided as follows:

Reportable segments income Unappropriated amount: Other non-operating income Income before tax from continuing operations	2019 5,952,406 $ 566,027 6,518,433 $	2018
		6,691,950 $ 459,184
		7,151,134 $

(4) Information on products and services

Revenue from external customers is mainly from the sales of computer and peripherals and related components. Details of revenue are as follows:

components. Details of revenue are as follows:
Computer and peripherals sale revenue	2019 120,491,417 $	2018
		118,527,273 $

(5) Geographical information

Geographical information for the years ended December 31, 2019 and 2018 is as follows:

Asia Europe America Others	Revenue Non-current assets 52,938,443 $ 5,395,625 $ 32,331,545 283,179 33,122,365 154,501 2,099,064 852 120,491,417 $ 5,834,157 $ 2019	Revenue Non-current assets 56,989,139 $ 5,006,120 $ 31,237,944 175,745 28,327,803 138,585 1,972,387 417 118,527,273 $ 5,320,867 $ 2018
	Revenue 52,938,443 $ 32,331,545 33,122,365 2,099,064 120,491,417 $	Revenue 56,989,139 $ 31,237,944 28,327,803 1,972,387 118,527,273 $

(6) Major customer information

The Group had no individual customer whose sales amount accounts for more than 10% of net operating revenue in the consolidated statement of comprehensive income.

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

For the year ended December 31, 2019

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account	As of December 31,2019	As of December 31,2019	As of December 31,2019	As of December 31,2019	Footnote
				Number of shares	Book value	Ownership (%)	Fair value
MSI (HOLDING)	CVA ING GROEP	-	Financial assets at fair value through profit or loss - current	80,000	26,283 $	-	26,283 $	-
MSI (HOLDING)	DAIMLER	-	Financial assets at fair value through profit or loss - current	20,000	30,903	-	30,903	-
MSI (HOLDING)	DEUTSCHE POST	-	Financial assets at fair value through profit or loss-current	30,000	31,144	-	31,144	-
MICRO-STAR INTERNATIONAL CO., LTD.	BLUESTACK SYSTEM, INC.	-	Financial assets at fair value through other comprehensive income - non current	516,052	151,975	-	151,975	-

Table 1 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more

For the year ended December 31, 2019

			For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019
Table 2			(Except as otherwise indicated) Expressed in thousands of NTD
Transaction company (Note 4)	Name of the counter party (Note 4)	Relationship with the counterparty	Description of the transaction				Description and reasons of difference in transaction terms compared to third party transactions		Accounts or notes receivable (payable)		Footnote
			Purchases/(Sales)	Amount (Note 3)	% of total purchase (sale)	Credit terms	Unit price	Credit terms	Balance (Note 3)	% of total accounts or notes receivable/(payable)
MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Subsidiary	Sales	(16,439,951) $	(14)	80~100 days	Insignificant difference	Note 1	5,255,324 $	30	-
MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Second-tier Subsidiary	Sales	(6,006,849)	(5)	40-70 days	Insignificant difference	Note 1	1,092,387	6	-
MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Second-tier Subsidiary	Sales	(1,766,513)	(1)	40-70 days	Insignificant difference	Note 1	268,427	2	-
MICRO-STAR INTERNATIONAL CO., LTD.	MSI (KOREA)	Second-tier Subsidiary	Sales	(4,052,002)	(3)	50-70 days	Insignificant difference	Note 1	16,046	-	-
MEGA COMPUTER	MSI (SHANGHAI)	Affiliated company	Sales	(6,161,555)	(100)	40-70 days	Insignificant difference	Note 1	1,926,413	100	-
MSI (PACIFIC)	MSI COMPUTER (SHENZHEN)	Subsidiary	Processing overhead	1,434,356	72	Note 2	Insignificant difference	Note 2	(2,858,031)	(70)	-
MSI (PACIFIC)	MSI ELECTRONICS (KUNSHAN)	Subsidiary	Processing overhead	538,107	27	Note 2	Insignificant difference	Note 2	(972,705)	(24)	-
MSI (PACIFIC)	MICRO-STAR INTERNATIONAL CO., LTD.	Ultimate parent company	Revenue from processing	(1,989,521)	(100)	Note 2	Insignificant difference	Note 2	4,064,144	100	-
MSI (LA)	RAIDEALS	Affiliated company	Sales	(128,149)	(1)	40-70 days	Insignificant difference	Note 1	6,190	-	-

Note 1: The credit terms to third parties are approximately 30 to 120 days. Note 2: Credit terms depend on the financial condition of the paying firm. Note 3: Balances after elimination in conformity with regulations. Note 4: Corresponding transactions are not disclosed.

Table 2 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

December 31, 2019

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor	Counterparty	Relationship with the counterparty	Balance as of December 31, 2019	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
					Amount	Action taken
MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Subsidiary	$ 5,255,324	3.27	$ -	-	2,816,226 $	$ -
MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Second-tier Subsidiary	1,092,387	6.37	-	-	382,813	-
MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Second-tier Subsidiary	268,426	6.29	-	-	239,211	-
MSI (PACIFIC) (Note)	MICRO-STAR INTERNATIONAL CO., LTD.	Ultimate parent company	4,064,144	0.53	-	-	559,514	-
MSI COMPUTER (SHENZHEN) (Note)	MSI (PACIFIC)	Parent Company	2,858,031	0.53	-	-	364,021	-
MSI ELECTRONICS (KUNSHAN) (Note)	MSI (PACIFIC)	Parent Company	972,705	0.64	-	-	195,493	-
MSI (B.V.I.)	MSI (PACIFIC)	Parent Company	140,104	-	-	-	-	-
MEGA COMPUTER	MSI (SHANGHAI)	Affiliated company	1,926,413	3.58	-	-	378,840.00	-

Note: Processing overhead receivable.

Table 3 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Significant inter-company transactions during the year ended December 31, 2019

Expressed in thousands of NTD

Table 4

(Except as otherwise indicated)

Table 4				合併資產 46,184,753 合併營收 24,553,252 (Except as otherwise indicated)	合併資產 46,184,753 合併營收 24,553,252 (Except as otherwise indicated)	合併資產 46,184,753 合併營收 24,553,252 (Except as otherwise indicated)	合併資產 46,184,753 合併營收 24,553,252 (Except as otherwise indicated)
Number	Company name (Note 4)	Counterparty (Note 4)	Relationship	Transaction
				General ledger account	Amount (Note 1)	Transaction terms	Percentage of consolidated total operating revenues or total assets
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (KOREA)	Parent company to second-tier subsidiary	Sales	4,052,002 $	Note 2	3.36%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Parent company to subsidiary	Sales	16,439,951	Note 2	13.64%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Parent company to second-tier subsidiary	Sales	6,006,849	Note 2	4.99%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Parent company to second-tier subsidiary	Sales	1,766,513	Note 2	1.47%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Parent company to subsidiary	Accounts receivable	5,255,324	Note 2	8.71%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Parent company to second-tier subsidiary	Accounts receivable	1,092,387	Note 2	1.81%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Parent company to second-tier subsidiary	Accounts receivable	268,426	Note 2	0.44%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (PACIFIC)	Parent company to subsidiary	Processing cost	1,895,512	Note 3	1.57%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (PACIFIC)	Parent company to subsidiary	Manufacturing and operating expense	66,080	Note 3	0.05%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (JAPAN)	Parent company to subsidiary	Manufacturing and operating expense	81,319	Note 2	0.07%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (KOREA)	Parent company to second-tier subsidiary	Manufacturing and operating expense	74,374	Note 2	0.06%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Parent company to second-tier subsidiary	Manufacturing and operating expense	272,264	Note 2	0.23%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (PACIFIC)	Parent company to subsidiary	Manufacturing and operating expense	53,226	Note 2	0.04%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (EUROPE)	Parent company to second-tier subsidiary	Manufacturing and operating expense	222,778	Note 2	0.18%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Parent company to second-tier subsidiary	Manufacturing and operating expense	172,203	Note 2	0.14%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (POLSKA)	Parent company to second-tier subsidiary	Manufacturing and operating expense	145,120	Note 2	0.12%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (MHK)	Parent company to second-tier subsidiary	Manufacturing and operating expense	149,473	Note 2	0.12%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (RUSSIA)	Parent company to second-tier subsidiary	Manufacturing and operating expense	102,039	Note 2	0.08%

Table 4 Page 1

Number	Company name (Note 4)	Counterparty (Note 4)	Relationship	Transaction	Transaction	Transaction	Transaction
				General ledger account	Amount (Note 1)	Transaction terms	Percentage of consolidated total operating revenues or total assets
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (SARL)	Parent company to second-tier subsidiary	Manufacturing and operating expense	85,024	Note 2	0.07%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (UK)	Parent company to second-tier subsidiary	Manufacturing and operating expense	61,075	Note 2	0.05%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Parent company to subsidiary	Manufacturing and operating expense	101,197 $	Note 2	0.08%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI ELECTRONICS (KUNSHAN)	Parent company to second-tier subsidiary	Processing cost	630,364	Note 3	0.52%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI COMPUTER (SHENZHEN)	Parent company to second-tier subsidiary	Processing cost	1,627,044	Note 3	1.35%
1	MSI (PACIFIC)	MICRO ELECTRONICS	Subsidiary to second-tier subsidiary	Accrued expenses payable	93,304	Note 3	0.15%
1	MSI (PACIFIC)	MSI (B.V.I.)	Subsidiary to second-tier subsidiary	Accrued expenses payable	140,104	Note 3	0.23%
1	MSI (PACIFIC)	MSI ELECTRONICS (KUNSHAN)	Subsidiary to second-tier subsidiary	Accrued expenses payable	972,705	Note 3	1.61%
1	MSI (PACIFIC)	MSI COMPUTER (SHENZHEN)	Subsidiary to second-tier subsidiary	Accrued expenses payable	2,858,031	Note 3	4.74%
1	MSI (PACIFIC)	MICRO-STAR INTERNATIONAL CO., LTD.	Subsidiary to parent	Accounts receivable	4,064,144	Note 3	6.73%
1	MSI (PACIFIC)	MICRO-STAR INTERNATIONAL CO., LTD.	Subsidiary to parent	Processing Revenue	1,989,521	Note 3	1.65%
1	MSI (PACIFIC)	MSI ELECTRONICS (KUNSHAN)	Subsidiary to second-tier subsidiary	Processing cost	495,168	Note 3	0.41%
1	MSI (PACIFIC)	MSI COMPUTER (SHENZHEN)	Subsidiary to second-tier subsidiary	Processing cost	1,400,344	Note 3	1.16%
2	MEGA COMPUTER	MSI (SHANGHAI)	Second-tier subsidiary to second-tier subsidiary	Sales	6,161,555	Note 2	5.11%
2	MEGA COMPUTER	MSI (SHANGHAI)	Second-tier subsidiary to second-tier subsidiary	Accounts receivable	1,926,413	Note 2	3.19%
3	MSI (LA)	RAIDEALS	Subsidiary to second-tier subsidiary	Sales	128,149	Note 2	0.21%

Note 1: Balances after elimination in conformity with regulations.

Note 2: Transaction terms were approximately the same as those to third parties.

Note 3: Processing overhead was determined based on the quantities, contract amount and delivery time.

Note 4: Individual transactions not exceeding $50,000 and their corresponding transactions are not disclosed.

Table 4 Page 2

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Information on investees (not including investees in Mainland China)

For the year ended December 31, 2019

Expressed in thousands of NTD

Table 5

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December 31, 2019	Shares held as at December 31, 2019	Shares held as at December 31, 2019	Net profit (loss) of the investee for the year ended December 31, 2019	Investment income (loss) recognised by the Company for the year ended December 31, 2019	Footnote
				Balance as at December 31, 2019	Balance as at December 31, 2018	Number of shares	Ownership (%)	Book value
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (LA)	U.S.A	Sales and maintenance of computers,and electronic components	258,468 $	258,468 $	575,458	100.00	36,011 $	1,344 $	1,344 $	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (AUSTRALIA)	Australia	Maintenance and after-sales service of computers and electronic components	57,420	57,420	221,836	100.00	6,753	444	444	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (JAPAN)	Japan	Sales support and maintenance of computers and electronic components	20,411	20,411	1,400	100.00	14,531	1,737	1,737	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (PACIFIC)	Cayman Islands	Holding company	1,511,382	1,511,382	30,204,118	100.00	6,686,248	637,111	627,111	Direct subsidiary
MICRO-STAR INTERNATIONAL CO., LTD.	MSI (HOLDING)	Netherlands	Holding company	45,724	45,724	424,000	100.00	629,384	55,869	55,869	Direct subsidiary
MICRO-STAR INTERNATIONAL CO., LTD.	MSI COMPUTER (CAYMAN)	Cayman Islands	Holding company	99,093	99,093	50,000	100	123,564	(526)	(526)	Direct subsidiary
MSI (PACIFIC)	MSI (KOREA)	South Korea	Sales and maintenance of computers and electronic components	24,374	24,374	80,000	100.00	281,781	23,988	-	Indirect subsidiary
MSI (PACIFIC)	MSI (B.V.I.)	British Virgin Island	Holding company	1,784,681	1,784,681	47,465,071	100.00	3,966,728	358,243	-	Indirect subsidiary
MSI (PACIFIC)	MICRO ELECTRONICS	British Virgin Island	Holding company	1,168,593	1,168,593	33,315,472	100.00	2,422,421	237,493	-	Indirect subsidiary
MSI (PACIFIC)	STAR INFORMATION	British Virgin Island	Holding company	144,721	144,721	4,502,601	100.00	27,461	(7,397)	-	Indirect subsidiary

Table 5 Page 1

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December 31, 2019	Shares held as at December 31, 2019	Shares held as at December 31, 2019	Net profit (loss) of the investee for the year ended December 31, 2019	Investment income (loss) recognised by the Company for the year ended December 31, 2019	Footnote
				Balance as at December 31, 2019	Balance as at December 31, 2018	Number of shares	Ownership (%)	Book value
MSI (PACIFIC)	MEGA TECHNOLOGY	British Virgin Island	Holding company	92,819	92,819	3,050,000	100.00	(6,638)	(850)	-	Indirect subsidiary
MSI (PACIFIC)	MEGA COMPUTER	Hong Kong	Sales support of computers and electronic components	-	-	1	100.00	6,040 $	(370) $	$ -	Indirect subsidiary
MSI (PACIFIC)	MSI (MHK)	Hong Kong	Sales support of computers and electronic components	-	-	1	100.00	20,678	8,131	-	Indirect subsidiary
MSI (HOLDING)	MYSTAR	Netherlands	Sales support of computers and electronic components	71,353	71,353	-	100.00	146,360	17,981	-	Indirect subsidiary
MSI (HOLDING)	MSI (RUSSIA)	Russia	Sales support and maintenance of computers and electronic components	68,258	68,258	-	99.00	39,891	6,482	-	Indirect subsidiary
MSI (HOLDING)	MSI (POLSKA)	Poland	Maintenance and after-sales service of computers and electronic components	46,077	46,077	-	99.00	33,054	1,708	-	Indirect subsidiary
MSI (HOLDING)	MSI (SARL)	France	Sales support of computers and electronic components	26,646	26,646	-	100.00	52,453	4,824	-	Indirect subsidiary
MSI (HOLDING)	MSI (UK)	Britan	Sales support of computers and electronic components	37,226	37,226	-	100.00	15,598	2,952	-	Indirect subsidiary
MSI (HOLDING)	MSI (TURKEY)	Turkey	Sales support of computers and electronic components	3,229	3,229	-	99.00	(80)	-	-	Indirect subsidiary (Note 2)
MSI (HOLDING)	MSI (ITALY)	Italy	Sales support of computers and electronic components	2,153	2,153	-	100.00	2,554	1,107	-	Indirect subsidiary
MSI (HOLDING)	MSI (EUROPE)	Netherlands	Logistics services of computers and electronic components	37,620	37,620	-	100.00	45,162	3,590	-	Indirect subsidiary
MSI (HOLDING)	MSI (IBERIA)	Spain	Sales support of computers and electronic components	5,177	-	-	100.00	5,805	790	-	Indirect subsidiary
MSI (EUROPE)	MSI (RUSSIA)	Russia	Sales support of computers and electronic components	689	689	-	1.00	537	6,482	-	Indirect subsidiary
MSI (EUROPE)	MSI (POLSKA)	Poland	Sales support of computers and electronic components	467	467	-	1.00	172	1,708	-	Indirect subsidiary
MSI (EUROPE)	MSI (TURKEY)	Turkey	Sales support of computers and electronic components	33	33	-	1.00	26	-	-	Indirect subsidiary (Note 2)
MEGA TECHNOLOGY	RAIDEALS	U.S.A	Sales support of computers and electronic components	1,523	1,523	-	100.00	1,690	233	-	Indirect subsidiary

Note 1: The table is presented in New Taiwan dollars. Except for the initial investment amount is valued at historical exchange rate, the others are valued with exchange rate 1USD=29.98 NTD; 1EUR=33.59 NTD on December 31, 2019 and average rate with 1USD=30.9059 NTD; 1EUR=34.6139 NTD for the year ended December 31, 2019.

Note 2: As of December 31, 2019, the liquidation process has not been completed.

Note 3: In November 2018, this subsidiary has completed the liquidation process.

Table 5 Page 2

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Information on investments in Mainland China - Basic information

For the year ended December 31, 2019

Expressed in thousands of NTD

Table 6

(Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2019	Amount remitted from Taiwan to Mainland China/ Amount remitted back to Taiwan for the year ended December 31, 2019	Amount remitted from Taiwan to Mainland China/ Amount remitted back to Taiwan for the year ended December 31, 2019	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2019	Net income of investee as of December 31, 2019	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2019 (Note 2)	Book value of investments in Mainland China as of December 31, 2019	Accumulate d amount of investment income remitted back to Taiwan as of December 31, 2019	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
MSI COMPUTER (SHENZHEN)	Sales and manufacture of computers, and electronic components	1,726,857 $	Note 1	1,726,857 $	$ -	$ -	1,726,857 $	358,343 $	100.00	358,343 $	3,808,594 $	$ -	-
MSI ELECTRONICS (KUNSHAN)	Sales and manufacture of computers, and electronic components	1,772,675	Note 1	1,772,675	-	-	1,772,675	235,827	100.00	235,827	2,316,988	-	-
SHENZHEN MEGA INFORMATION	Examination and maintenance of computers, and electronic components	23,940	Note 1	23,940	-	-	23,940	194	100.00	194	21,493	-	-
MSI COMPUTER TRADING (SHENZHEN)	Sales and maintenance of computers and electronic components	91,296	Note 1	-	-	-	-	(1,082)	100.00	(1,082)	(8,328)	-	Note 3
MSI (SHENZHEN)	Sales and maintenance of computers and electronic components	30,092	Note 1	-	-	-	-	(7,662)	100.00	(7,662)	13,834	-	Note 4
MSI (SHANGHAI)	Sales and maintenance of computers and electronic components	29,275	Note 1	-	-	-	-	11,614	100.00	11,614	(26,334)	-	Note 5
Companyname		Accumulated amount of remittance from Taiwan to Mainland China as of September 30,2019		Investment amount approved by the Investment Commission of the Ministry of Economic Affairs(MOEA)			Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA 17,881,130 $
MICRO-STAR INTERNATIONAL CO., LTD.		3,602,547 $		3,850,987 $

Note 1: The investments were made indirectly through 100% owned subsidiary of the Company. Note 2: Evaluated based on financial statement not reviewed by other auditors of the investee companies. Note 3: The amount of US $3,000 thousand was remitted by the Company's subsidiary, MSI (Pacific), to MSI COMPUTER TRADING (SHENZHEN). Note 4: The amount of US $1,000 thousand was remitted by the Company's subsidiary, MSI (Pacific), to MSI (SHENZHEN).

Note 5: The amount of US $1,000 thousand was remitted by the Company's subsidiary, MSI (Pacific), to MSI (SHANGHAI).

Note 6: In pursuance of Shen-Zi Letter No.09704604680 from the Ministry of Economic Affairs dated August 29, 2008. The amended "Regulations for examination of investments and technical cooperation in Mainland Area" sets the limitation for investments in Mainland China to be higher of net book value or 60% of consolidated net book value.

Note 7: The table is presented in New Taiwan dollars. Except for the initial investment amount is valued at historical exchange rate, the others are valued with exchange rate 1USD=29.98 NTD on December 31, 2018 and average rate with 1USD=30.9059 NTD for the year ended December 31, 2019.

Table 6 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Information on investments in Mainland China - Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in third areas

For the year ended December 31, 2019

Expressed in thousands of NTD

Table 7

(Except as otherwise indicated)

Investee in Mainland China	Sales/(Purchase)	Sales/(Purchase)	Propertytransaction	Propertytransaction	Accounts receivable/(payable)	Accounts receivable/(payable)	Amount of endorsements/guarantees secured with collaterals	Amount of endorsements/guarantees secured with collaterals		Accommodation of funds	Accommodation of funds		Others(Note)
	Amount	%	Amount	%	Balance as of December 31,2019	%	Balance as of December 31,2019	Purpose	Ceiling amount	Balance as of December 31,2019	Interest rate range	Interest expense
MSI COMPUTER (SHENZHEN) MSI ELECTRONICS (KUNSHAN) MSI (SHANGHAI)	$ - - 6,161,555	- - 100	$ - - -	- - -	(2,858,031) $ (972,705) 1,926,413	70) ( 24) ( 100	$ - - -	- - -	$ - - -	$ - - -	- - -	$ - - -	1,434,356 $ 538,107 -

Note: Processing overhead.

Table 7 Page 1