MSI — Audit Report / Information 2020

Nov 12, 2020

MICRO-STAR INTERNATIONAL CO., LTD.

PARENT COMPANY ONLY FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’

REPORT DECEMBER 31, 2020 AND 2019

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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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INDEPENDENT AUDITORS’ REPORT TRANSLATED FROM CHINESE

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

Opinion

We have audited the accompanying parent company only balance sheets of MICRO-STAR INTERNATIONAL CO., LTD. (the “Company”) as at December 31, 2020 and 2019, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as at December 31, 2020 and 2019, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountants in the Republic of China (the “Norm”), and we have fulfilled our ethical responsibilities in accordance with the Norm. Based on our audits and the audit reports of other independent auditors, 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 judgment, were of most significance in our audit of the parent company only financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

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Key audit matters for the Company’s parent company only financial statements for the year ended December 31, 2020 are stated as follows:

Recognition of sales revenue generated from own-brand products

Description

Please refer to Note 4(24) for accounting policies on revenue recognition. The sales revenue from ownbrand products for the year ended December 31, 2020 is higher than previous year due to the substantial increase in demand for notebook computers and peripherals. The recognition of sales revenue generated from own-brand products is critical to the Company’s financial statements. 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. Obtained an understanding of and assessed internal controls in relation to sales revenue, and validated the operating effectiveness of those above-mentioned internal controls.

• B. Obtained detailed listing of sales revenue from own-brand products in the current year, and validated supporting documents, including sales invoices, customer purchase orders and delivery documents to ensure the appropriateness of recognition.

• C. Inspected contents and relevant evidences in relation to sales returns and discounts occurring subsequent to the reporting period.

• D. Performed accounts receivable confirmation procedure to significant customers.

Estimation of allowance for inventory valuation losses

Description

Please refer to Note 4(11) for accounting policies on inventory valuation, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on inventory valuation, and Note 6(6) for details of inventories. As of December 31, 2020, the balances of inventories and allowance for inventory valuation losses are NT$27,539,446 thousand and NT$423,070 thousand, respectively.

The Company is primarily engaged in manufacturing and sales of motherboards, interface cards, notebook computers and other electronic products. Due to the rapid technological innovations and competition within the industry as well as frequent releases of new products resulting in potential price fluctuations, there is a higher risk of inventory losses due from market value decline or obsolescence. The Company recognises inventories at the lower of cost and net realisable value. As the monetary values

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of allowance for inventory valuation losses is critical to the financial statements as of December 31, 2020. 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. Inquired with management, and assessed the reasonableness in relation to the provision of allowance for inventory valuation losses.

• B. Validated the accuracy of the system logic in calculating the ageing of inventories, and confirmed the consistency with the Company’s policies.

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

• D. Sampled and tested the net realisable value basis of the individual inventory and validated the appropriateness.

Other matter-Reference to audits of other independent auditors

We did not audit the financial statements of certain investments accounted for under the equity method that are included in the parent company only financial statements. Those financial statements were audited by other independent auditors, whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on reports of the other independent auditors. Total assets of the abovementioned investees (including investments accounted for under the equity method) amounted to NT$1,230,304 thousand and NT$1,097,458 thousand as at December 31, 2020 and 2019, constituting 1.52% and 1.75% of total assets, respectively. Comprehensive income of the above-mentioned investees amounted to NT$121,586 thousand and NT$88,436 thousand for the years ended December 31, 2020 and 2019, constituting 1.51% and 1.67% of total comprehensive income, respectively.

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Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company’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 Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Company’s financial reporting process.

Independent auditors’ responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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 parent company only 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 parent company only 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.

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1. 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 Company’s internal control.

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

3. 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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the parent company only 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 auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

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

5. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the 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.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ 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 22, 2021

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The accompanying parent company only 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 parent company only 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. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

Assets	December 31, 2020 Notes AMOUNT % 6(1) $ 15,776,634 20 6(2) 79,297 - 6(4) 1,000,000 1 6(5) 672 - 6(5) 13,004,695 16 7 10,287,629 13 219,767 - 6(6) 27,116,376 33 1,377,599 2 68,862,669 85 6(3) 124,338 - 6(7) 8,313,914 11 6(8) 2,660,668 3 6(9) 159,609 - 6(22) 713,301 1 24,723 - 11,996,553 15 $ 80,859,222 100 (Continued)	December 31, 2019	December 31, 2019
		AMOUNT $ 8,881,827 56,641 1,200,000 3,929 10,846,273 6,632,030 157,760 22,756,055 1,351,294 51,885,809 151,975 7,496,491 2,567,030 179,398 407,702 18,890 10,821,486 $ 62,707,295	%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Current financial assets at amortised cost 1150 Notes receivable, net 1170 Accounts receivable, net 1180 Accounts receivable - related parties 1200 Other receivables 130X Inventories, net 1410 Prepayments 11XX Total current assets Non-current assets 1517 Non-current financial assets at fair value through other comprehensive income 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets			14 - 2 - 18 11 - 36 2
			83
			- 12 4 - 1 -
			17
			100

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MICRO-STAR INTERNATIONAL CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

December 31, 2020 December 31, 2019 Notes AMOUNT % AMOUNT % 6(10) $ 3,000,000 4 $ 1,500,000 2 6(2) 103,885 - 24,943 - 26,409,577 33 19,764,458 32 6(11) 4,340,669 6 3,049,919 5 7 4,964,060 6 4,272,610 7 1,499,604 2 362,183 1 6(13) 873,229 1 579,337 1 97,029 - 71,892 - 3,418,122 4 1,555,509 2 215,875 - 65,353 - 44,922,050 56 31,246,204 50 6(22) 6,084 - 26,830 - 63,594 - 108,013 - 6(12) 220,314 - 221,974 1 107,328 - 91,809 - 397,320 - 448,626 1 45,319,370 56 31,694,830 51 6(14) 8,448,562 10 8,448,562 13 6(15) 804,214 1 803,918 1 6(16) 5,541,298 7 4,982,577 8 794,525 1 505,966 1 20,625,711 26 17,065,967 27 ( 674,458) ( 1) ( 794,525) ( 1 ) 35,539,852 44 31,012,465 49 $ 80,859,222 100 $ 62,707,295 100

Current liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2170 Accounts payable 2200 Other payables 2220 Other payables - related parties 2230 Current income tax liabilities 2250 Provisions for liabilities - current 2280 Current lease liabilities 2365 Refund liabilities-current 2399 Other current liabilities, others 21XX Total current Liabilities Non-current liabilities 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 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 3XXX Total equity 3X2X Total liabilities and equity

The accompanying notes are an integral part of these parent company only financial statements.

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MICRO-STAR INTERNATIONAL CO., LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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

Items

Year ended December 31 2020 2019 Notes AMOUNT % AMOUNT % 6(17) and 7 $ 144,805,966 100 $ 118,740,373 100 6(6)(20) and 7 ( 125,877,926) ( 87) ( 105,097,585) ( 89) 18,928,040 13 13,642,788 11 6(20) and 7 ( 6,079,422) ( 4) ( 4,689,816) ( 4) ( 842,682) ( 1) ( 526,354) - ( 3,349,045) ( 2) ( 2,937,315) ( 2) 6(5) ( 2,446) - ( 4,095) - ( 10,273,595) ( 7) ( 8,157,580) ( 6) 8,654,445 6 5,485,208 5 6(18) 49,551 - 57,384 - 216,357 - 240,016 - 6(2)(19) ( 138,396) - ( 50,864) - ( 21,446) - ( 13,504) - 6(7) 667,569 - 685,979 1 773,635 - 919,011 1 9,428,080 6 6,404,219 6 6(22) ( 1,468,575) ( 1) ( 817,009) ( 1) $ 7,959,505 5 $ 5,587,210 5 6(12) ($ 5,106) - ($ 10,079) - ( 27,637) - - - 6(22) 1,021 - 2,016 - ( 31,722) - ( 8,063) - 147,704 - ( 288,559) - 147,704 - ( 288,559) - $ 115,982 - ($ 296,622) - $ 8,075,487 5 $ 5,290,588 5 6(23) $ 9.42 $ 6.61 $ 9.34 $ 6.56

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 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Finance costs 7070 Share of profit of associates and joint ventures accounted for using equity method, net 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 Other comprehensive loss, before tax, actuarial losses on defined benefit plans 8316 Unrealised losses from investments in equity instruments measured at fair value through other comprehensive income 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 (loss) that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8300 Total other comprehensive income (loss) for the year 8500 Total comprehensive income for the year Earnings per share (in dollars) 9750 Basic earnings per share 9850 Diluted earnings per share

The accompanying notes are an integral part of these parent company only financial statements.

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MICRO-STAR INTERNATIONAL CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

2019 Balance at January 1, 2019 Profit for the year Other comprehensive loss for the year Total comprehensive income (loss) Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends Cash dividends from capital surplus Due to donated assets received Balance at December 31, 2019 2020 Balance at January 1, 2020 Profit for the year Other comprehensive income (loss) for the year Total comprehensive income (loss) Appropriation of 2019 earnings Legal reserve Special reserve Cash dividends Due to donated assets received Balance at December 31, 2020	Notes		Share capital - common stock				Capital	Surplus	Surplus						Retained Earnings			Other Equity Interest	Other Equity Interest	Other Equity Interest		Total equity
					Additional paid-in capital		Treasury stock transactions		Donated assets received		Employee stock warrants		Legal reserve		Special reserve		Unappropriated retained earnings	Financial statements translation differences of foreign operations	a f	Unrealised losses from financial ssets measured at air value through other comprehensive income
	6(16) 6(16) 6(16)		$ 8,448,562 - - - - - - - - $ 8,448,562 $ 8,448,562 - - - - - - - $ 8,448,562	$ 1,050,563 - - - - - - ( 422,429 ) - $ 628,134 $ 628,134 - - - - - - - $ 628,134			$ 130,592 - - - - - - - - $ 130,592 $ 130,592 - - - - - - - $ 130,592		$ 434 - - - - - - - 298 $ 732 $ 732 - - - - - - 296 $ 1,028		$ 44,460 - - - - - - - - $ 44,460 $ 44,460 - - - - - - - $ 44,460		$ 4,378,464 - - - 604,113 - - - - $ 4,982,577 $ 4,982,577 - - - 558,721 - - - $ 5,541,298		$ 421,815 - - - - 84,151 - - - $ 505,966 $ 505,966 - - - - 288,559 - - $ 794,525	$ 15,976,937 5,587,210 ( 8,063 ) 5,579,147 ( 604,113 ) ( 84,151 ) ( 3,801,853 ) - - $ 17,065,967 $ 17,065,967 7,959,505 ( 4,085 ) 7,955,420 ( 558,721 ) ( 288,559 ) ( 3,548,396 ) - $ 20,625,711		($ 505,966 ) - ( 288,559 ) ( 288,559 ) - - - - - ($ 794,525 ) ($ 794,525 ) - 147,704 147,704 - - - - ($ 646,821 )	$ - - - - - - - - - $ - $ - - ( 27,637 ) ( 27,637 ) - - - - ($ 27,637 )		$ 29,945,861 5,587,210 ( 296,622 ) 5,290,588 - - ( 3,801,853 ) ( 422,429 ) 298 $ 31,012,465 $ 31,012,465 7,959,505 115,982 8,075,487 - - ( 3,548,396 ) 296 $ 35,539,852

The accompanying notes are an integral part of these parent company only financial statements.

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MICRO-STAR INTERNATIONAL CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(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) Amortization Expected credit loss Net loss (gain) on financial assets and liabilities at fair value through profit or loss Interest expense Interest income Share of profit of associates and joint ventures accounted for using equity method Gain on disposal of property, plant and equipment Gain on lease modification Changes in operating assets and liabilities Changes in operating assets Notes receivable, net Accounts receivable Accounts receivable due from related parties Other receivables Inventories, net Prepayments Changes in operating liabilities Notes payable Accounts payable Other payables Other payables - related parties Provisions for liabilities - current Refund liabilities - current 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

Year ended December 31 Notes 2020 2019 $ 9,428,080 $ 6,404,219 6(8)(9)(20) 280,442 157,384 6(20) 3 4 6(5) 2,446 4,095 56,286 ( 22,921 ) 21,446 13,504 6(18) ( 49,551 ) ( 57,384 ) ( 667,569 ) ( 685,979 ) 6(19) - ( 11 ) 6(9) ( 53 ) ( 163 ) 3,257 ( 1,552 ) ( 2,160,868 ) ( 113,958 ) ( 3,655,599 ) ( 750,153 ) ( 60,584 ) ( 70,283 ) ( 4,360,321 ) ( 589,004 ) ( 26,305 ) ( 235,903 ) - ( 200 ) 6,645,119 5,105,653 1,288,865 295,762 691,450 600,849 293,892 64,736 1,862,613 ( 147,149 ) 150,522 37,814 ( 6,766 ) ( 5,714 ) 9,736,805 10,003,646 48,128 61,236 ( 19,561 ) ( 13,859 ) ( 656,478 ) ( 1,403,648 ) 9,108,894 8,647,375

(Continued)

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MICRO-STAR INTERNATIONAL CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at amortised cost Proceeds from disposal of financial assets at amortised cost Acquisition of financial assets at fair value through other comprehensive income Acquisition of investment accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term borrowings Repayment of the principal portion of lease liabilities Increase (decrease) in guarantee deposits received Cash dividends paid Cash distribution from capital surplus Due to donated assets received Net cash flows used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Year ended December 31 Notes 2020 2019 $ - ($ 471,064 ) 200,000 - 6(3) - ( 151,975 ) ( 2,150 ) - 6(8) ( 270,927 ) ( 298,543 ) - 13 ( 5,836 ) ( 13,291 ) ( 78,913 ) ( 934,860 ) 1,500,000 ( 1,500,000 ) ( 102,593 ) ( 62,065 ) 15,519 ( 24,081 ) 6(16) ( 3,548,396 ) ( 3,801,853 ) 6(16) - ( 422,429 ) 296 298 ( 2,135,174 ) ( 5,810,130 ) 6,894,807 1,902,385 6(1) 8,881,827 6,979,442 6(1) $ 15,776,634 $ 8,881,827

The accompanying notes are an integral part of these parent company only financial statements.

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MICRO-STAR INTERNATIONAL CO., LTD. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(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 is 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.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE PARENT COMPANY ONLY

FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These parent company only financial statements were authorised for issuance by the Board of Directors on March 22, 2021.

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 2020 are as follows:

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

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

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

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

• (a) Changes in lease payments result in the revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

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

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

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

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

follows:
	Effective date by
	International Accounting
New Standards,Interpretations and Amendments	Standards Board
Amendments to IFRS 4, ‘Extension of the temporary exemption from	January 1, 2021
applying IFRS 9’
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16,	January 1, 2021
‘Interest rate benchmark reform - Phase 2’

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’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 3, ‘Reference to the conceptual framework’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’ Amendments to IFRS 17, ‘Insurance contracts’ Amendments to IAS 1, ‘Classification of liabilities as current or non- current’ Amendments to IAS 1, ‘Disclosure of accounting policies’ Amendments to IAS 8, ‘Definition of accounting estimates’ Amendments to IAS 16, ‘Property, plant and equipment:proceeds before intended use’ Amendments to IAS 37, ‘Onerous contracts-cost of fulfilling a contract’ Annual improvements to IFRS Standers 2018-2020	January 1, 2022 To be determined by International Accounting Standards Board January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2022 January 1, 2022 January 1, 2022

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these parent company only financial

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

(1) Compliance statement

The parent company only financial statements of the Company 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”).

(2) Basis of preparation

• A. Except for the following items, the parent company only 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 Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

(3) Foreign currency translation

The parent company only financial statements are presented in New Taiwan Dollars, which is the Company’s functional and presentation currency.

• A. Foreign currency transactions and balance

• (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, non-

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monetary 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 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 Company 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.

• (4) 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 settle 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.

~17~

(5) 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.

(6) 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 recognized and derecognised using trade date accounting.

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

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

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Company 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 Company’s business model is achieved both by collecting contractual cash 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 Company measures the financial assets at fair value plus transaction costs. The Company 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 Company and the amount of the dividend can be measured reliably.

(8) Financial assets at amortised cost

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

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

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

• B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.

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

~18~

immaterial.

(9) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Company 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 Company 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 Company recognises the impairment provision for lifetime ECLs.

• (11) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, 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.

(12) Investments accounted for using the equity method / Subsidiaries

• A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company 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.

• B. Inter-company transactions, balances and unrealised gains or losses on transactions between the Company and its subsidiaries are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

• C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise the losses in proportion to the ownership.

• D. Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between

~19~

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.

• E. When the Company loses control of a subsidiary, the Company 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 Company 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 to profit or loss when the related assets or liabilities are disposed of.

• F. Pursuant to the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the consolidated financial statements. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the consolidated financial statements.

• (13) Property, plant and equipment

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

• 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 Company 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:

~20~

Buildings and structures Machinery and equipment Other properties (include transportation equipment, office equipment, and leasehold improvements)

3~55 years 2~10 years 1.5~10 years

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

• 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 Company. For short-term leases or leases of low-value 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 lease incentives that can be received.

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

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

(15) Impairment of non-financial assets

• The Company 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.

(16) 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

~21~

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.

• (17) Notes and accounts payable

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

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

• (18) 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 categorised as financial liabilities held for trading unless they are designated as hedges.

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

(19) Provisions

• Provisions of warranties are recognised when the Company 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.

• (20) Employee benefits

• A. Short-term employee benefits

  • Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees, and should be recognised 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 Company in current period or prior periods. The liability recognised in the balance sheet

~22~

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 Company’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 Company recognises expense as it can no longer withdraw an offer of termination benefits or it recognises relating restructuring costs, 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’ bonus 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 Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

• (21) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is 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 Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred 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

~23~

the parent company only 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 Company 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. 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.

• (22) 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.

(23) 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.

• (24) Revenue recognition

• A. Sales of goods

  • (a) The Company 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 customers’ 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 the customer has accepted the products in accordance with the sales contract, or the Company 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

~24~

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 Company does not adjust any of the transaction prices for the time value of money.

• (c) The Company’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.

• B. Incremental costs of obtaining a contract

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

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’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 Company’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 Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory comsumption, 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, 2020, the carrying amount of inventories was $27,116,376.

~25~

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
	December 31, 2020		December31,2019
Cash on hand and petty cash	$	1,400	$	1,828
Checking accounts and demand deposits		11,445,155		8,363,399
Time deposits		4,330,079		516,600
Total	$	15,776,634	$	8,881,827

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

• B. The Company’s time deposits with maturity periods over three months are reclassified as “financial assets at amortised cost.” Details of financial assets at amortised cost are provided in Note 6(4).

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

==> picture [486 x 146] intentionally omitted <==

----- Start of picture text -----

Asset items December 31, 2020 December 31, 2019
Financial assets mandatorily measured at fair value through
profit or loss
Derivatives – Forward exchange contract $ 37 $ 3,660
Derivatives – Foreign exchange swap 79,260 52,981
$ 79,297 $ 56,641
Liability items December 31, 2020 December 31, 2019
Financial liabilities held for trading
Derivatives – Forward exchange contract $ 103,885 $ 24,943
----- End of picture text -----

• A. The Company recognised net loss of $57,442 and $21,390 for the years ended December 31, 2020 and 2019, respectively.

• B. The Company entered into contracts related to derivative financial assets and liabilities which were not accounted for under hedge accounting. The contract information are as follows:

~26~

		December	31,2020
		Contract Amount
		Notional Principal
Derivative Financial Assets		(In thousands)	Contract period
Forward exchange contracts	CAD	1,000	2020.12.16~2021.03.24
Foreign exchange swap	USD	80,000	2020.11.06~2021.02.09
〃	CNY	591,911	2020.08.13~2021.05.17
		December	31,2020
		Contract Amount
		Notional Principal
Derivative Financial Liabilities		(In thousands)	Contract period
Forward exchange contracts	GBP	6,000	2020.10.22~2021.03.08
〃	AUD	8,200	2020.10.28~2021.02.24
〃	CAD	6,000	2020.11.06~2021.03.24
〃	KRW	6,576,400	2020.12.02~2021.01.28
〃	SEK	7,575	2020.11.20~2021.02.08
〃	EUR	68,000	2020.08.25~2021.03.16

Derivative Financial Assets	December	31,2019
	Contract Amount Notional Principal (In thousands)	Contract period
Forward exchange contracts 〃 〃 〃 〃 Foreign exchange swap 〃	EUR 2,000 GBP 500 KRW 1,156,000 SEK 4,650 JPY 216,310 USD 94,000 CNY 473,584 December	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 31,2019

December	31,2019
Derivative Financial Liabilities Forward exchange contracts CAD 8,000 〃 RUB 224,291 〃 EUR 44,000 〃 SEK 2,852 〃 GBP 5,500 〃 AUD 6,500 Contract Amount Notional Principal (In thousands)	Contractperiod
	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

The Company entered into forward foreign exchange contracts to hedge exchange risk. However, these forward foreign exchange contracts are not accounted under Hedge Accounting.

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

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• D. Information relating to fair value of financial assets at fair value through profit or loss is provided in Note 12(3).

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

	Items	December	31, 2020	December	31, 2019
Non-current items:
Equity instruments
Unlisted stocks		$	151,975	$	151,975
Valuation adjustment	(		27,637)		-
Total		$	124,338	$	151,975

• A. The Company 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 investments amounted to $124,338 and $151,975 as at December 31, 2020 and 2019, respectively.

• B. As at December 31, 2020 and 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 Company were $124,338 and $151,975, respectively.

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

• D. Information relating to price risk and fair value of financial assets at fair value through other 、

• comprehensive income is provided in Note 12(2) (3).

(4) Financial assets at amortised cost

Financial assets at amortised cost
Items Current items: Time deposits over three months	December31,2020 1,000,000 $	December31,2019
		1,200,000 $

• A. Amounts recognised in profit or loss in relation to financial assets at amortised cost are listed below:

Interest income	2020 7,362 $	2019
		8,310 $

• B. As at December 31, 2020 and 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 amortised cost held by the Company were $1,000,000 and $1,200,000, respectively.

• C. Information relating to credit risk of financial assets at amortised cost is provided in Note 12(2).

~28~

(5) Notes and accounts receivable

Notes and accounts receivable
	December31,2020			December31,2019
Notes receivable		$	672		$	3,929
Accounts receivable		$	13,011,321		$	10,850,453
Less: Allowance for doubtful accounts	(		6,626)	(		4,180)
		$	13,004,695		$	10,846,273

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

==> picture [464 x 102] intentionally omitted <==

----- Start of picture text -----

December 31, 2020 December 31, 2019
Accounts receivable Notes receivable Accounts receivable Notes receivable
Not past due $ 11,855,269 $ 672 $ 9,415,881 $ 3,929
- -
1 to 75 days 1,136,575 1,418,600
- -
76 to 365 days 19,145 13,174
Over 365 days 332 - 2,798 -
$ 13,011,321 $ 672 $ 10,850,453 $ 3,929
----- End of picture text -----

The above ageing analysis was based on past due date.

• B. As of December 31, 2020 and 2019, accounts receivable and notes receivable were all from contracts with customers. And as of January 1, 2019, the balance of receivables from contracts with customers amounted to $10,738,787.

• C. Most of the Company’s accounts receivable have been insured, and the Company will be able to obtain insurance claims.

• D. The Company does not hold any collateral.

• E. As of December 31, 2020 and 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 Company’s notes and accounts receivable were $672 and $3,929; $13,004,695 and $10,846,273, respectively.

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

(6) Inventories

Raw materials Work in progress Finished goods		December31,2020
	Cost 8,292,346 $ 1,502,072 17,745,028 27,539,446 $	Allowance for valuation loss 154,873) ($ 2,198) ( 265,999) ( 423,070) ($	Bookvalue
			8,137,473 $ 1,499,874 17,479,029
			27,116,376 $

~29~

			December31,2019	December31,2019
				Allowance for
		Cost		valuation loss		Book value
Raw materials	$	6,579,127	($	130,049)	$	6,449,078
Work in progress		1,378,828	(	1,311)		1,377,517
Finished goods		15,179,947	(	250,487)		14,929,460
	$	23,137,902	($	381,847)	$	22,756,055
The cost of inventories recognised as expense		for the year:
				2020		2019
Cost of inventories recognised as expense			$	125,877,926	$	105,097,585
Losses on decline (gains on reversal of decline) in market
value				41,223	(	245,353)

The Company reversed a previous inventory write-down and accounted for as reduction of cost of goods sold because some inventories which were recognised as expense have been sold in 2019.

(7) Investments accounted for using equity method

Investments accounted for using equity method
MSI PACIFIC INTERNATIONAL HOLDING CO., LTD. MICRO-STAR NETHERLANDS HOLDING B.V. MSI COMPUTER (CAYMAN) CO., LTD. MSI COMPUTER CORP. MSI COMPUTER JAPAN CO., LTD. MSI COMPUTER (AUSTRALIA) PTY. LTD. MICRO-STAR CANADA LTD.	December31,2020 7,406,724 $ 685,857 117,549 72,605 19,238 8,644 3,297 8,313,914 $	December31,2019 6,686,248 $ 629,384 123,564 36,011 14,531 6,753 -
		7,496,491 $

• A. Details of the Company’s subsidiaries are provided in Note 4(3) of the Company’s consolidated financial statements as of and for the year ended December 31, 2020.

• B. For the years ended December 31, 2020 and 2019, certain investments accounted for using equity method were MSI COMPUTER CORP., MICRO-STAR NETHERLANDS HOLDING B.V., MSI COMPUTER (CAYMAN) CO., LTD., MSI KOREA CO., LTD., MEGA COMPUTER CO., LTD. and MHK INTERNATIONAL CO., LTD., such investments were recognised based on the investees’ financial statements audited by independent auditors and the portion of abovementioned subsidiaries accounted for using equity method was $121,586 and $88,436, respectively.

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(8) Property, plant and equipment

At January 1 Cost Accumulated depreciation Balance at January 1 Additions Reclassifications Depreciation charge Balance at December 31 At December 31 Cost Accumulated depreciation At January 1 Cost Accumulated depreciation Balance at January 1 Additions Disposals Reclassifications Depreciation charge Balance at December 31 At December 31 Cost Accumulated depreciation

Land Buildings Machineries Others Total 1,331,538 $ 1,487,824 $ 526,019 $ 341,693 $ 3,687,074 $ - 586,296) ( 329,857) ( 203,891) ( 1,120,044) ( 1,331,538 $ 901,528 $ 196,162 $ 137,802 $ 2,567,030 $ 1,331,538 $ 901,528 $ 196,162 $ 137,802 $ 2,567,030 $ - 7,304 73,342 190,281 270,927 - 28,890 43,543 ( 72,433) - - 36,937) ( 67,866) ( 72,486) ( 177,289) ( 1,331,538 $ 900,785 $ 245,181 $ 183,164 $ 2,660,668 $ 1,331,538 $ 1,524,018 $ 640,751 $ 429,069 $ 3,925,376 $ - 623,233) ( 395,570) ( 245,905) ( 1,264,708) ( 1,331,538 $ 900,785 $ 245,181 $ 183,164 $ 2,660,668 $ 2020 Land Buildings Machineries Others Total 1,331,538 $ 1,445,791 $ 412,750 $ 300,924 $ 3,491,003 $ - 554,322) ( 343,443) ( 230,100) ( 1,127,865) ( 1,331,538 $ 891,469 $ 69,307 $ 70,824 $ 2,363,138 $ 1,331,538 $ 891,469 $ 69,307 $ 70,824 $ 2,363,138 $ - 20,028 148,435 130,080 298,543 - - - ( 2) 2) ( - 22,005 800 ( 22,805) - - (31,974) ( 22,380) ( 40,295) 94,649) ( 1,331,538 $ 901,528 $ 196,162 $ 137,802 $ 2,567,030 $ 1,331,538 $ 1,487,824 $ 526,019 $ 341,693 $ 3,687,074 $ - 586,296) ( 329,857) ( 203,891) ( 1,120,044) ( 1,331,538 $ 901,528 $ 196,162 $ 137,802 $ 2,567,030 $ 2019

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－ (9) Leasing arrangements lessee

• A. The Company leases various assets including buildings and other equipment. Rental contracts are typically made for periods of 3 months to 9 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:

Buildings Transportation equipment(Business vehicles) Buildings Transportation equipment(Business vehicles)	December31,2020 Carrying amount $ 150,121 9,488 159,609 $ 2020 Depreciationcharge $ 98,874 4,279 103,153 $	December31,2019 Carrying amount $ 169,638 9,760
		179,398 $
		2019
		Depreciationcharge
		$ 58,568 4,167
		62,735 $

• C. For the years ended December 31, 2020 and 2019, the additions to right-of-use assets were $83,729 and $188,292, respectively.

• 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 Gain on lease modification	2020 $ 2,086 13,562 29,530 53	2019
		$ 1,603 11,991 37,443 163

• E. For the years ended December 31, 2020 and 2019, the Company’s total cash outflow for leases were $147,771 and $113,102, respectively.

(10) Short-term borrowings

)Short-term borrowings
Type ofborrowings Bank borrowings Unsecured borrowings Type ofborrowings Bank borrowings Unsecured borrowings	December31,2020 3,000,000 $ December31,2019 1,500,000 $	Interestraterange 0.73%～0.85% Interestraterange 0.88%～0.90%	Collateral
			None Collateral
			None

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(11) Other payables

	December 31, 2020	December 31, 2020	December31,2019	December31,2019
Accrued salary and bonus	$	1,186,226	$	922,399
Directors' remuneration and employees' compensation		796,500		554,500
Accrued freight		945,457		617,251
Advertising expense payable		659,268		355,107
Accrued molding expense		333,861		217,077
Other accrued expenses		419,357		383,585
	$	4,340,669	$	3,049,919

(12) Pensions

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

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

	December	31,2020	December 31, 2019	December 31, 2019
Present value of defined benefit obligations	$	535,344		524,869 $
Fair value of plan assets	(	315,030)	(	302,895)
Net defined benefit liability	$	220,314		221,974 $

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

2020 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 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
	524,869 $ 3,359 3,674 531,902 - 20,532 5,112) ( 15,420 - 11,978) ( 535,344 $ Present value of defined benefit obligations		302,895) ($ - 2,120) ( 305,015) ( 10,314) ( - - 10,314) ( 11,679) ( 11,978 315,030) ($ Fair value of plan assets	221,974 $ 3,359 1,554 226,887 10,314) ( 20,532 5,112) ( 5,106 11,679) ( - 220,314 $ 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 $

(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

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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 has no right to participate in managing and operating that fund and hence the Company is 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, 2020 and 2019 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	2020 2019 0.30% 0.70% 2.75% 2.75%

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

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

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----- Start of picture text -----

Discount rate Future salary increases
Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%
December 31, 2020
Effect on present value of
defined benefit obligation ($ 12,970) $ 13,446 $ 11,756 ($ 11,422)
December 31, 2019
Effect on present value of
defined benefit obligation ($ 13,187) $ 13,680 $ 12,065 ($ 11,713)
----- End of picture text -----

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 Company for the year ending December 31, 2021 amount to $11,593.

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(g) As of December 31, 2020, the weighted average duration of the retirement plan is 10 years.	(g) As of December 31, 2020, the weighted average duration of the retirement plan is 10 years.	(g) As of December 31, 2020, the weighted average duration of the retirement plan is 10 years.
The analysis of timing of the future pension payment was as follows:
Within 1 year	$	40,867
1-2 year(s)		43,253
2-3 years		30,900
3-4 years		19,385
4-5 years		16,930
6-10 years		131,293
Over 10 years		268,910
	$	551,538

• 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 contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

• (b) The pension costs under defined contribution pension plans of the Company for the years ended December 31, 2020 and 2019 were $117,062 and $106,892, respectively.

(13) Provisions for liabilities

Provisions for liabilities
Warranty		2020		2019
At January 1	$	579,337	$	514,601
Additional provisions		852,890		758,066
Used during the period	(	558,932)	(	693,294)
Exchange differences	(	66)	(	36)
At December 31	$	873,229	$	579,337
Analysis of total provisions:
	December31,2020		December31,2019
Current	$	873,229	$	579,337

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

(14) Share capital

As of December 31, 2020 , 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.

(15) 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

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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.

• (16) 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 Company 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.

• 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 2019 and 2018 earnings had been resolved at the stockholders’ meeting on June 10, 2020 and June 14, 2019, respectively as follows:

Legal reserve Special reserve Cash dividend	Amount Dividends per share(dollar) 558,721 $ 288,559 3,548,396 4.20 $ 2019	Amount Dividends per share(dollar) 604,113 $ 84,151 3,801,853 4.50 $ 2018	Amount Dividends per share(dollar) 604,113 $ 84,151 3,801,853 4.50 $ 2018
	Amount 558,721 $ 288,559 3,548,396	Amount 604,113 $ 84,151 3,801,853
			4.50 $

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

The appropriation of 2019 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, 2020. 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’ remuneration, please refer to Note 6(21).

(17) Operating revenue

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

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----- Start of picture text -----

Computer and
2020 peripherals segment Other Total
Total segment revenue $ 144,645,875 $ 160,091 $ 144,805,966
Timing of revenue recognition
At a point in time $ 144,645,875 $ 160,091 $ 144,805,966
Computer and
2019 peripherals segment Other Total
Total segment revenue $ 118,735,370 $ 5,003 $ 118,740,373
Timing of revenue recognition
At a point in time $ 118,735,370 $ 5,003 $ 118,740,373
----- End of picture text -----

(18) Interest income

Interest income
			2020			2019
Interest income from bank deposits		$	42,189		$	49,074
Interest income from financial assets measured at
amortised cost			7,362			8,310
Total		$	49,551		$	57,384
Other gains and losses
			2020			2019
Losses on financial assets liabilities at fair value	($		57,442)	($		21,390)
through profit or loss
Net currency exchange losses	(		79,460)	(		31,685)
Gains on disposal of property, plant and equipment			-			11
Other (losses) gains	(		1,494)			2,200
	($		138,396)	($		50,864)

(19) Other gains and losses

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(20) Expenses by nature

Expenses by nature
		2020		2019
Employee benefit expense	$	4,910,328	$	3,813,370
Depreciation charges		280,442		157,384
Amortisation charges		3		4
	$	5,190,773	$	3,970,758

(21) Employee benefit expense

Wages and salaries Labor and health insurance fees Pension costs Directors’ remuneration Other personnel expenses Total	2020 4,365,632 $ 231,595 121,975 71,500 119,626 4,910,328 $	2019 3,346,942 $ 212,138 112,778 49,500 92,012
		3,813,370 $

• 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, 2020 and 2019, employees’ compensation was accrued at $725,000 and $505,000, respectively; while directors’ remuneration was accrued at $71,500 and $49,500, respectively. The aforementioned amounts were recognised 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, 2020.

Employees’ compensation and directors’ remuneration of 2019 as resolved at the meeting of Board of Directors were in agreement with those amounts recognised in the 2019 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.

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(22) Income tax

A. Income tax expense

(a) Components of income tax expense:

Income tax A. Income tax expense (a) Components of income tax expense:
			2020			2019
Current tax:
Current tax on profits for the period		$	1,751,542		$	852,051
Tax on undistributed earnings			52,357			76,902
Prior year income tax overestimation	(		10,000)	(		124,148)
Total current tax			1,793,899			804,805
Deferred tax:
Origination and reversal of temporary differences	(		325,324)			12,204
Total deferred tax	(		325,324)			12,204
Income tax expense		$	1,468,575		$	817,009
(b) The income tax (charge)/credit relating to components of other comprehensive						income:
			2020			2019
Remeasurement of defined benefit obligations		$	1,021		$	2,016
B. Reconciliation between income tax expense and accounting			profit
			2020			2019
Tax calculated based on profit before tax and		$	1,899,509		$	1,280,844
statutory tax rate
Effect from items disallowed by tax regulation			16,800			16,800
Temporary differences not recognised as deferred tax
liabilities	(		133,514)	(		137,196)
Effect from investment tax credits	(		302,078)	(		282,279)
Effect of different tax rates in countries in which the
group operates	(		54,499)	(		13,914)
Tax on undistributed earnings			52,357			76,902
Prior year income tax overestimation			(10,000)			(124,148)
Income tax expense		$	1,468,575		$	817,009

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C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

January1 Temporary differences: -Deferred tax assets: Unrealized losses on inventory valuation 76,369 $ Unrealized gross profit 203,265 Remeasurement of defined benefit obligations 34,135 Unrealized losses on forward exchange contract - Others 93,933 Subtotal 407,702 -Deferred tax liabilities: Unrealized exchange gain 20,491) ( Unrealized gains on forward exchange contract 6,339) ( Subtotal 26,830) ( Total 380,872 $ January1 Temporary differences: -Deferred tax assets: Unrealized losses on inventory valuation 125,440 $ Unrealized gross profit 148,181 Remeasurement of defined benefit obligations 32,119 Unrealized exchange loss 3,462 Others 83,613 Subtotal 392,815 -Deferred tax liabilities: Unrealized exchange gain - Unrealized gains on forward exchange contract 1,755) ( Subtotal 1,755) ( Total 391,060 $
		Recognised in profit or loss
	49,071) ($ 55,084 - 3,462) ( 10,320 12,871 20,491) ( 4,584) ( 25,075) ( 12,204) ($

D. The Company has not recognised taxable temporary differences associated with investment in

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subsidiaries as deferred tax liabilities. As of December 31, 2020 and 2019, the amounts of temporary difference unrecognized as deferred tax liabilities were $5,887,126 and $5,042,672, respectively.

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

(23) Earnings per share

Authority. 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	2020
	Retroactively adjusted weighted-average outstanding ordinary Amount aftertax shares (inthousands) 7,959,505 $ 844,856 7,959,505 $ 844,856 - 7,225 7,959,505 $ 852,081 2019	Earnings per share (inNTdollars)
		9.42 $
		9.34 $
	Retroactively adjusted weighted-average outstanding ordinary Amount aftertax shares (inthousands) 5,587,210 $ 844,856 5,587,210 $ 844,856 - 7,378 5,587,210 $ 852,234	Earnings per share (inNTdollars)
		6.61 $
		6.56 $

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7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party

The Company’s shares are held by public, therefore there is no ultimate parent and controlling party.

(2) Names of related parties and relationship

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Names of related parties Relationship with the Company
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Names of related parties and relationship Names of relatedparties	Relationship with theCompany
MSI COMPUTER (AUSTRALIA) PTY. LTD. [MSI (AUSTRALIA)]	Subsidiary
MSI COMPUTER CORP. [MSI (LA)]	Subsidiary
MSI COMPUTER JAPAN CO., LTD. [MSI (JAPAN)]	Subsidiary
MICRO-STAR NETHERLANDS HOLDING B.V. [MSI (HOLDING)]	Subsidiary
MSI PACIFIC INTERNATIONAL HOLDING CO., LTD. [MSI(PACIFIC)]	Subsidiary
MICRO-STAR CANADA LTD. [MSI (CANADA)]	Subsidiary
MSI COMPUTER SARL [MSI (SARL)]	Second-tier subsidiary
MYSTAR COMPUTER B.V. [MYSTAR]	Second-tier subsidiary
MSI COMPUTER (UK) LTD. [MSI (UK)]	Second-tier subsidiary
MSI KOREA CO., LTD. [MSI (KOREA)]	Second-tier subsidiary
MSI POLSKA SP. Z O.O. [MSI (POLSKA)]	Second-tier subsidiary
MSI ITALY S.R.L. [MSI (ITALY)]	Second-tier subsidiary
MSI COMPUTER EUROPE B.V. [MSI (EUROPE)]	Second-tier subsidiary
LLC MSI COMPUTER [MSI (RUSSIA)]	Second-tier subsidiary
MHK INTERNATIONAL CO., LTD. [MSI (MHK)]	Second-tier subsidiary
MEGA COMPUTER CO., LTD. [MEGA COMPUTER]	Second-tier subsidiary
MSI IBERIA S.L. [MSI IBERIA]	Second-tier subsidiary
SHENZHEN MEGA INFORMATION CO., LTD. [MSI SHENZHEN]	Second-tier subsidiary
MSI ELECTRONICS (KUNSHAN) CO., LTD.[MSI ELECTRONICS (KUNSHAN)]	Second-tier subsidiary
MSI COMPUTER (SHENZHEN) CO., LTD.[MSI COMPUTER (SHENZHEN)]	Second-tier subsidiary

(3) Significant related party transactions

A. Sales revenue, net

gnificant related party transactions Sales revenue, net
Sales of goods: MSI (LA) Others Total	2020 28,697,320 $ 13,689,041 42,386,361 $	2019
		16,439,951 $ 11,828,366
		28,268,317 $

	2020 2019 Sales of goods: MSI (LA) 28,697,320 $ 16,439,951 $ Others 13,689,041 11,828,366 Total 42,386,361 $ 28,268,317 $	2020 2019 Sales of goods: MSI (LA) 28,697,320 $ 16,439,951 $ Others 13,689,041 11,828,366 Total 42,386,361 $ 28,268,317 $
B.	The sales price and payment terms to related parties were not significantly different from those sales to third parties. Manufacturing expense-processing costs 2020 2019 Subsidiary： MSI (PACIFIC) - $ 1,895,512 $ Second-tier Subsidiary： MSI ELECTRONICS (KUNSHAN) 1,191,748 630,364 MSI COMPUTER (SHENZHEN) 2,986,307 1,627,044 Total 4,178,055 $ 4,152,920 $
		1,895,512 $ 630,364 1,627,044
		4,152,920 $

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The Company subcontracts manufacturing to a second-tier subsidiary through first-tier subsidiaries. The transaction model is that the Company provides raw materials, mutually agreed with the second-tier subsidiary to process the products based on quantities, amounts and lead time of orders. The accounts payable would be paid depending on the cash flow situation of each company. The manner of carrying out the processing trade with the second-tier subsidiary is in accordance with (1998) Tai-Cai-Zheng (6) Letter No. 00747 of Securities and Futures Commission, Ministry of Finance, R.O.C. Starting July 1, 2019, the Company agreed on manufacturing items with the second-tier subsidiary directly.

C. Operating expenses - after-sales service and advertisement expense

Purchases of services: Others	2020 2019 2,166,466 $ 1,769,312 $

The Company recognised the operating expenses monthly based on the amount of services provided by subsidiaries and second-tier subsidiaries, with the same credit term available to third parties.

D. Receivables from related parties

parties. Receivables from related parties
Accounts receivable MSI (LA) Others Total	December31,2020 8,887,796 $ 1,399,833 10,287,629 $	December 31, 2019
		5,255,324 $ 1,376,706
		6,632,030 $

Accounts receivable mainly arises from sales, with the same credit term available to third parties.

E. Other payables

Other payables
MSI (PACIFIC) Others Total	December31,2020 $ 4,719,950 244,110 4,964,060 $	December31,2019
		$ 4,095,703 176,907
		4,272,610 $

The abovementioned other payables mainly arises from processing costs and purchases of services, with the same credit term available to third parties.

(4) Key management compensation

with the same credit term available to third parties. Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Total	2020 429,341 $ 2,052 431,393 $	2019
		319,047 $ 1,944
		320,991 $

8. PLEDGED ASSETS

None.

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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 Company’s objectives when managing capital are to safeguard the Company’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 Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or repurchase outstanding shares.

(2) Financial instruments

A. Financial instruments by category

ue new shares or repurchase outstanding shares. nancial 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 Financial assets at amortised cost Notes receivable Accounts receivable Other receivables Guarantee deposits paid	December31,2020 79,297 $ 124,338 15,776,634 1,000,000 672 23,292,324 219,767 24,719 40,517,751 $	December31,2019
		56,641 $ 151,975 8,881,827 1,200,000 3,929 17,478,303 157,760 18,883
		27,949,318 $

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December 31, 2020 December 31, 2019

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Financial liabilities
Financial liabilities at fair value through profit
or loss
Financial liabilities held for trading $ 103,885 $ 24,943
Financial liabilities at amortised cost
Short-term borrowings 3,000,000 1,500,000
Accounts payable 26,409,577 19,764,458
Other accounts payables 9,304,729 7,322,529
Guarantee deposits received 107,328 91,809
$ 38,925,519 $ 28,703,739
Lease liabilities $ 160,623 $ 179,905
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B. Risk management policies

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

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Company 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 manage their foreign exchange risk against their functional currency.

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

• iv. The Company hedges foreign exchange rate by using forward exchange contracts. However, the Company 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 Company’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:

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December 31, 2020
Foreign Currency
Book Value
(Foreign currency: Amount
functional currency) (In Thousands) Exchange rate (NTD)
Financial assets
Monetary items
USD: NTD $ 1,058,405 28.4800 $ 30,143,386
EUR: NTD 110,096 35.0200 3,855,550
RMB:NTD 554,222 4.3770 2,425,829
KRW:NTD 17,763,543 0.0262 465,405
GBP: NTD 10,763 38.9000 418,664
Non-monetary items
----- End of picture text -----

EUR: NTD RMB:NTD KRW:NTD GBP: NTD Non-monetary items	110,096 554,222 17,763,543 10,763	35.0200 4.3770 0.0262 38.9000	3,855,550 2,425,829 465,405 418,664
USD: NTD EUR: NTD Financial liabilities Monetary items USD: NTD RMB:NTD EUR: NTD (Foreign currency: functionalcurrency) Financial assets Monetary items USD: NTD RMB:NTD EUR: NTD KRW:NTD GBP: NTD CAD:NTD RUB: NTD JPY:NTD AUD:NTD Non-monetary items USD: NTD EUR: NTD Financial liabilities Monetary items USD: NTD RMB:NTD EUR: NTD JPY:NTD	266,744 19,585 1,007,071 1,151,692 27,089	28.4800 35.0200 28.4800 4.3770 35.0200 December31,2019	7,596,878 685,857 28,681,375 5,040,956 948,652
	Foreign Currency Amount (In Thousands) 729,998 $ 609,253 58,210 18,048,735 7,794 10,292 444,494 660,692 8,157 228,346 18,737 693,808 1,003,591 13,210 412,320	Exchangerate 29.9800 4.3050 33.5900 0.0260 39.3600 22.9900 0.4843 0.2760 21.0050 29.9800 33.5900 29.9800 4.3050 33.5900 0.2760	Book Value (NTD)
			21,885,332 $ 2,622,835 1,955,278 469,267 306,785 236,603 215,268 182,351 171,332 6,845,823 629,384 20,800,378 4,320,458 443,723 113,800

vi. The exchange loss arising from significant foreign exchange variation on the monetary

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items held by the Company for the years ended December 31, 2020 and 2019 amounted to $79,460 and $31,685, respectively.

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

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2020
Sensitivity analysis
Effect on profit Effect on other
(Foreign currency: Degree of or loss comprehensive
functional currency) variation (before tax) income
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(Foreign currency: functional currency)		Degree of variation	Effect on profit or loss (before tax) 2020 Sensitivity analysis	Effect on other comprehensive income
Financial assets Monetary items USD: NTD EUR: NTD RMB:NTD KRW:NTD GBP: NTD Financial liabilities Monetary items USD: NTD RMB:NTD EUR: NTD (Foreign currency: functional currency)		1% 1% 1% 1% 1% 1% 1% 1%	301,434 $ 38,556 24,258 4,654 4,187 286,814 50,410 9,487 2019	- $ - - - - - - - Effect on other comprehensive income
			Sensitivity analysis
		Degree of variation	Effect on profit or loss (before tax)
Financial assets Monetary items USD: NTD RMB:NTD EUR: NTD KRW:NTD GBP: NTD CAD:NTD RUB: NTD JPY:NTD AUD:NTD Financial liabilities Monetary items USD: NTD RMB:NTD EUR: NTD JPY:NTD		1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%	218,853 $ 26,228 19,553 4,693 3,068 2,366 2,153 1,824 1,713 208,004 43,205 4,437 1,138	- $ - - - - - - - - - - - -

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Price risk

• i. The Company’s equity securities, which are exposed to price risk, are the held financial assets at fair value through other comprehensive income.

• ii. The Company has investments in equity securities. The prices of equity securities would change due to the change in the future value of investee companies. If the prices of these equity securities had increased/decreased by 1% with all other variables held constant, other components of equity for the years ended December 31, 2020 and 2019 would have increased/decreased by $995 and $1,216, respectively, as a result of other comprehensive income classified as equity investment at fair value through other comprehensive income.

Cash flow and fair value interest rate risk

The Company 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 Company 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 major interest-bearing positions.

• (b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Company 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, notes receivable and financial assets at amortised cost cash flow based on the agreed terms.

• ii. The Company manages their credit risk taking into consideration the entire company’s concern. For banks and financial institutions, only parties with a rating of investment grade are accepted. According to the Company’s credit policy, each local entity in the Company 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 Company 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 Company 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

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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 Company applies the modified approach using provision matrix, loss rate methodology to estimate expected credit loss under the provision matrix basis.

• vii. The Company wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Company will continue executing the recourse procedures to secure their rights.

• viii. The Company used the forecastability to adjust historical and timely information to assess the default possibility of debt instrument on December 31, 2020 and 2019. The expected credit loss rate of the Company’s overdue accounts receivable was not material as of December 31, 2020 and 2019.

• ix. The Company applies the simplified approach to provide loss allowance for accounts receivable that have no significant impact. The Company had not recognized the related impact as at December 31, 2020 and 2019.

• (c) Liquidity risk

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

• ii. The table below analyses the Company’s non-derivative financial liabilities and netsettled 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 non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

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Non-derivative financial liabilities:

December 31, 2020 Less than 1 year Short-term borrowings 3,001,922 $ Accounts payable 26,409,577 Other payables 9,304,729 Lease liabilities 100,705 Other financial liabilities - December 31, 2019 Less than 1 year Short-term borrowings 1,500,037 $ Accounts payable 19,764,458 Other payables 7,322,529 Lease liabilities 75,925 Other financial liabilities - Non-derivative financial liabilities:	Between 1 to 2years	Between 2 to 3years Over 3years - $ - $ - - - - 4,727 3,043 - 107,328 Between 2 to 3years Over 3 years - $ - $ - - - - 33,706 5,069 - 91,809
	- $ - - 53,088 - Between 1 to 2years
	- $ - - 67,262 -

Derivative financial liabilities

As of December 31, 2020 and 2019, the derivative financial liabilities mature within 1 year.

• iii. The Company 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, financial assets at amortised cost, notes receivable, accounts receivable, other receivables, guarantee deposits paid, short-term borrowings, notes payable, accounts payable, other payables, long-term borrowings and guarantee deposits received are approximate to their fair values. The transaction value information is provided in Note 12(2)A.

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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: December 31, 2020 Level 1 Level 2 Level3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Forward exchange contract - $ 37 $ - $ 37 $ -Foreign exchange swap - 79,260 - 79,260 Financial assets at fair value through other comprehensive income -Equity securities - - 124,338 124,338 Total - $ 79,297 $ 124,338 $ 203,635 $ Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract - $ 103,885 $ - $ 103,885 $ December 31, 2019 Level 1 Level 2 Level3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Forward exchange contract - $ 3,660 $ - $ 3,660 $ -Foreign exchange swap - 52,981 - 52,981 Financial assets at fair value through other comprehensive income -Equity securities - - 151,975 151,975 Total - $ 56,641 $ 151,975 $ 208,616 $ Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract - $ 24,943 $ - $ 24,943 $	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: December 31, 2020 Level 1 Level 2 Level3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Forward exchange contract - $ 37 $ - $ 37 $ -Foreign exchange swap - 79,260 - 79,260 Financial assets at fair value through other comprehensive income -Equity securities - - 124,338 124,338 Total - $ 79,297 $ 124,338 $ 203,635 $ Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract - $ 103,885 $ - $ 103,885 $ December 31, 2019 Level 1 Level 2 Level3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Forward exchange contract - $ 3,660 $ - $ 3,660 $ -Foreign exchange swap - 52,981 - 52,981 Financial assets at fair value through other comprehensive income -Equity securities - - 151,975 151,975 Total - $ 56,641 $ 151,975 $ 208,616 $ Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract - $ 24,943 $ - $ 24,943 $
		203,635 $
		103,885 $
		Total
		3,660 $ 52,981 151,975
		208,616 $
		24,943 $

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

• (a) 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 Company adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

• (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.

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• (c) 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, 2020 and 2019, there was no transfer between Level 1 and Level 2.

• F. For the years ended December 31, 2020 and 2019, there was no transfer in or out from Level 3.

• G. The Company entrusts an external evaluation agency to evaluate the fair value classified as Level 3.

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 Notes 6(2) and 12(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.

(4) Minority shareholders information

Major shareholders information: Please refer to table 8.

14. SEGMENT INFORMATION

Not applicable.

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MICRO-STAR INTERNATIONAL CO., LTD. CASH AND CASH EQUIVALENTS DECEMBER 31, 2020

Table 1 Items Cash and cash in banks Cash on hand and petty cash Checking accounts deposits Demand deposits Foreign exchange deposits Time deposits	Expressed in thousands of NTD Summary Amount $.1,400 83 7,258,663 US$120,955 thousand, conversion rate $28.48 3,444,796 Others 741,613 Interest rate range from 0.35% to 2.20% 4,330,079 $ 15,776,634	Expressed in thousands of NTD Summary Amount $.1,400 83 7,258,663 US$120,955 thousand, conversion rate $28.48 3,444,796 Others 741,613 Interest rate range from 0.35% to 2.20% 4,330,079 $ 15,776,634	Expressed in thousands of NTD Summary Amount $.1,400 83 7,258,663 US$120,955 thousand, conversion rate $28.48 3,444,796 Others 741,613 Interest rate range from 0.35% to 2.20% 4,330,079 $ 15,776,634
			$.1,400 83 7,258,663 3,444,796 741,613 4,330,079 $ 15,776,634

Table 1, Page 1

Table 2 Customer name		MICRO-STAR INTERNATIONAL CO., LTD. ACCOUNTS RECEIVABLE DECEMBER 31, 2020 Expressed in thousands of NTD Summary Amount Note $.2,015,171 1,003,136 700,411 9,292,603 The balance of each customer has not exceeded 5% of the accounts receivable. (6,626) $.13,004,695
Non-related parties: AA Company DD Company CC Company Others Less: Allowance for .doubtful accounts		(

Table 2, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. INVENTORIES DECEMBER 31, 2020

Table 3 Items Summary Materials and supplies Work in progress Finished goods Less: Allowance for .inventory valuation loss		Expressed in thousands of NTD Amount Cost Net realisable value Note $.8,292,346 $ 8,391,941 1,502,072 1,877,266 .17,745,028 20,140,058 27,539,446 $ 30,409,265 423,070 ) $.27,116,376
		Cost $.8,292,346 1,502,072 .17,745,028 27,539,446 423,070 ) $.27,116,376
	(

Table 3, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. MOVEMENT SUMMARY OF INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD DECEMBER 31, 2020

Table 4

Table 4 Name MSI PACIFIC INTERNATIONAL HOLDING CO., LTD. MICRO-STAR NETHERLANDS HOLDING B.V. MSI COMPUTER (AUSTRALIA) PTY. LTD. MSI COMPUTER JAPAN CO., LTD. MSI COMPUTER CORP. MSI COMPUTER (CAYMAN) CO., LTD. MICRO-STAR CANADA LTD.	Openingbalance Number of Shares (per thousand share) Amounts 30,204 $ 6,686,248 424 629,384 222 6,753 1 14,531 575 36,011 50 - 123,564 .- $ 7,496,491	Additions	Additions	Reductions	Reductions	Reductions	Reductions	Reductions
	Number of Shares (per thousand share) 30,204 424 222 1 575 50 -	Number of Shares (per thousand share) - - - - - - 100	Amounts	Number of Shares (per thousand share)	Amounts - $...- - - - - - - - - - ( 6,015) .-	Amounts	Number of shares (per thousand share)	Ownership (%)
			$ 720,476 56,473 1,891 4,707 35,594 - .3,297 $.823,438					100% 100% 100% 100% 100% 100% 100%

Table 4, Page 1

Expressed in thousands of NTD

MICRO-STAR INTERNATIONAL CO., LTD. MOVEMENT SUMMARY OF PROPERTY, PLANT AND EQUIPMENT DECEMBER 31, 2020

Table 5

Please refer to the disclosure in note 6(8).

Table 5, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. ACCOUNTS PAYABLE DECEMBER 31, 2020

Table 6 Vendor name AA Company HH Company Others	Summary	Expressed in thousands of NTD Amount Note $ 4,846,983 1,359,016 20,203,578 The balances of each expense account has not exceeded 5% of the accounts payable. $ 26,409,577

Table 6, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. OPERATING REVENUE FOR THE YEAR ENDED DECEMBER 31, 2020

Table 7 Items Computer and peripherals Others	Quantity		Expressed in thousands of NTD Amount Note $ 144,645,875 160,091 $ 144,805,966	Expressed in thousands of NTD Amount Note $ 144,645,875 160,091 $ 144,805,966

Table 7, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. OPERATING COST FOR THE YEAR ENDED DECEMBER 31, 2020

Table 8 Direct material Raw materials at beginning Add: Material purchased during the period Less: Raw materials at the end .Cost of raw materials sales .Loss on physical raw materials .Loss on raw materials obsolescence Consumption of materials for the period Overhead Manufacturing Cost Add: Work in progress at the beginning Less: Work in progress Finished goods cost Add: Finished goods at the beginning .Material purchases for the period Less: Finished goods at the end Loss on physical finished goods Loss on finished goods obsolescence Cost of sales Add: Cost of raw material sales .Loss on scrapping inventory .Loss on physical inventory .Transfer of warranty costs Loss on decline in market value Operating costs	Expressed in thousands of NTD Amount	Expressed in thousands of NTD Amount	Expressed in thousands of NTD Amount	Expressed in thousands of NTD Amount
	( ( ( ( ( ( ( (	$		6,579,127 113,970,395 8,292,346) 2,758,855 ) 158 ) 14,769 ) 109,483,394 5,109,364 114,592,758 1,378,828 1,502,072 ) 114,469,514 15,179,947 10,200,553 17,745,028) 7) 1,236 ) 122,103,743 2,758,855 16,000 171 957,934 41,223 125,877,926
		$

Table 8, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. MANUFACTURING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2020

Table 9 Items	Summary	Expressed in thousands of NTD Amount Note $ 4,176,287 473,098 .459,979 The balances of each expense account has not exceeded 5% of the manufacturing expenses. $ 5,109,364
Processing Wages and salaries Other manufacturing expenses

Table 9, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. SELLING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2020

Table 10 Items Advertisement expense and international brand image expense Freight Wages and salaries Import and export expenses Other expenses	Summary		Expressed in thousands of NTD Amount Note $ 2,051,560 1,833,171 1,113,100 566,537 .515,054 The balances of each expense account has not exceeded 5% of the selling expenses. $ 6,079,422

Table10, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. RESEARCH AND DEVELOPMENT EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2020

Table 11 Items Wages and salaries Moulds cost Others	Summary		Expressed in thousands of NTD Amount Note $ 2,302,952 320,580 .725,513 The balances of each expense account has not exceeded 5% of the research and development expenses. $ 3,349,045

Table11, Page 1

MICRO-STAR INTERNATIONAL CO., LTD. EMPLOYEE BENEFITS, DEPRECIATION AND AMORTISATION EXPENSES SUMMARISED BY FUNCTION FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019

Table 12

Expressed in thousands of NTD

By function By nature		2020			2019
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefit expense
Wages and salaries	$ 473,098	$ 3,892,534	$ 4,365,632	$ 282,790	$ 3,064,152	$ 3,346,942
Labor and health insurance fees	29,394	202,201	231,595	19,170	192,968	212,138
Pension expense	14,685	107,290	121,975	10,050	102,728	112,778
Directors’ remuneration	-	71,500	71,500	4,811	44,689	49,500
Other employee benefit expense	16,462	103,164	119,626	8,390	83,622	92,012
	$ 533,639	$ 4,376,689	$ 4,910,328	$ 325,211	$ 3,488,159	$ 3,813,370
Depreciation	$ 168,581	$ 111,861	$ 280,442	$ 23,541	$ 133,843	$.157,384
Amortisation	$ -	$3	$ 3	$ -	$. 4	$4

Note:

1. As at December 31, 2020 and 2019, the Company had 2,852 and 2,760 employees, including 3 and 3 non-employee directors, respectively.

2. A company whose stock is listed for trading on the stock exchange or over-the-counter securities exchange shall additionally disclose the following information ：

3. (1) Average employee benefit expense in current year $1,698 (in thousand dollars) ( 『 Total employee benefit expense in current year- Total directors’ remuneration 』 / 『 Number of employee in current year-Number of non-employee directors 』 ).

Average employee benefit expense in previous year $1,365 (in thousand dollars) ( 『 Total employee benefit expense in previous year- Total directors’ remuneration 』 / 『 Number of employee in previous year-Number of non-employee directors 』 ).

Table12, Page 1

• (2) Average employees salaries in current year $1,532 (in thousand dollars) (Total wages and salarie in current year/ 『 Number of employee in current year-Number of non-employee directors 』 ).Average employees salaries in previous year $1,214 (in thousand dollars) (Total wages and salarie in 『

• previous year/ Number of employee in previous year-Number of non-employee directors 』 ).

• (3) Adjustments of average employees salaries 26.19% ( 『 Average employees salaries in current year-Average employees salaries in previous year 』 / Average employees salaries in previous year).

• (4) The Company did not have supervisors for the years ended December 31, 2020 and 2019. Therefore, there was no compensation to the supervisors.

• (5) The Company’s compensation policies:

• A. The directors’ remuneration policies:

The Company’s directors’ remuneration policy is in accordance with Articles 16-4 and 19-1 of the Articles of Incorporation, directors’ remuneration shall not be higher than 1% of the pre-tax profit before deduction of directors’ remuneration and employees’ compensation. The accumulated losses must be covered before distribution of remuneration. The project is proposed by the Compensation Committee then submitted to the Board of Directors for approval, and reported to the shareholders.

• B. The executive officers’ compensation policies:

The total compensation paid to the executive officers is decided based on their job responsibility, contribution, company performance and projected future development. It is reviewed by the Compensation Committee then submitted to the Board of Directors for approval.

• C. The employees’ compensation policies:

The Company has established “Regulations for Compensation Administration”, “Regulations for Performance Evaluation” and “Employee Compensation Distribution and Shareholding Method”, which provide reasonable salary and compensation through performance evaluation according to the position and contribution of employees. The compensation policies and methods are approved by the Compensation Committee; in addition, the “Company Regulations” clearly regulate employee behavior based on the appropriate rewards and penaltiess related to employee performance.

Table12, Page 2