MSI - Interim / Quarterly Report 2020

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

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

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INDEPENDENT AUDITORS' REVIEW REPORT TRANSLATED FROM CHINESE

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

Introduction

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

Scope of Review

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

Basis for Qualified Conclusion

As explained in Note 4(3), the financial statements of certain insignificant consolidated subsidiaries were not reviewed by independent auditors. Those statements reflect total assets of NT$18,261,349 thousand and NT$16,715,697 thousand, constituting 24% and 27% of the consolidated total assets, and total liabilities of NT$3,790,213 thousand and NT$2,453,675 thousand, constituting 9% and 8%

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of the consolidated total liabilities as at September 30, 2020 and 2019, and total comprehensive income of NT$163,035 thousand, NT$289,837 thousand, NT$409,195 thousand and NT$526,457 thousand, constituting 6%, 20%, 7% and 13% of the consolidated total comprehensive income for the three months and nine months then ended.

Qualified Conclusion

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

Liang, Hua-Ling Lai, Chung-Hsi

For and on behalf of PricewaterhouseCoopers, Taiwan November 10, 2020

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

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

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

(Expressed in thousands of New Taiwan dollars) (The balance sheets as of September 30, 2020 and 2019 are reviewed, not audited)

Assets	Notes	September 30, 2020 AMOUNT % `$` `12,317,443` `17` `134,247` `-` `6,200,434` `8` `118,791` `-` `22,769,047` `30` `266,374` `-` `10,809` `-` `25,369,452` `34` `1,651,948` `2` `68,838,545` `91` `129,297` `-` `106,560` `-` `4,980,937` `7` `532,055` `1` `211,570` `-` `632,104` `1` `92,289` `-` `6,684,812` `9` `$` `75,523,357` `100` (Continued)	December 31, 2019 AMOUNT % `$` `10,834,884` `18` `152,805` `-` `1,200,000` `2` `47,114` `-` `17,205,783` `29` `227,116` `-` `16,417` `-` `22,527,840` `37` `1,675,701` `3` `53,887,660` `89` `151,975` `-` `102,009` `-` `4,893,433` `8` `474,897` `1` `300,559` `1` `471,523` `1` `66,652` `-` `6,461,048` `11` `$` `60,348,708` `100`	September 30, 2019	September 30, 2019
		AMOUNT `$` `12,317,443` `134,247` `6,200,434` `118,791` `22,769,047` `266,374` `10,809` `25,369,452` `1,651,948` `68,838,545` `129,297` `106,560` `4,980,937` `532,055` `211,570` `632,104` `92,289` `6,684,812` `$` `75,523,357` (Continued)	AMOUNT `$` `10,834,884` `152,805` `1,200,000` `47,114` `17,205,783` `227,116` `16,417` `22,527,840` `1,675,701` `53,887,660` `151,975` `102,009` `4,893,433` `474,897` `300,559` `471,523` `66,652` `6,461,048` `$` `60,348,708`	AMOUNT `$` `9,681,480` `107,215` `1,200,000` `104,874` `20,307,000` `178,992` `9,709` `21,983,824` `1,571,635` `55,144,729` `-` `50,933` `4,584,473` `531,784` `321,052` `521,578` `85,799` `6,095,619` `$` `61,240,348`	%
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 1200 Other receivables 1220 Current income tax assets 130X Inventories, net 1410 Prepayments 11XX Total current assets Non-current assets 1517 Non-current financial assets at fair value through other comprehensive income 1535 Non-current financial assets at amortised cost 1600 Property, plant and equipment 1755 Right-of-use assets 1760 Investment property - net 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets	6(1) 6(2) 6(4) 6(5) 6(5) 6(6) 6(7) 6(3) 6(4) and 8 6(8) and 8 6(9) 6(11) 6(26)				`16` `-` `2` `-` `33` `-` `-` `36` `3`
					`90`
					`-` `-` `7` `1` `1` `1` `-`
					`10`
					`100`

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

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

(Expressed in thousands of New Taiwan dollars) (The balance sheets as of September 30, 2020 and 2019 are reviewed, not audited)

					September 30, 2020	September 30, 2020			December 31, 2019	December 31, 2019			September 30, 2019	September 30, 2019
	Liabilities andEquity	Notes			AMOUNT	%			AMOUNT	%			AMOUNT	%
	Current liabilities
2100	Short-term borrowings	6(12)		`$`	`3,000,000`		`4`	`$`	`1,500,000`		`3`	`$`	`3,500,000`	`6`
2120	Financial liabilities at fair value	6(2)
	through profit or loss - current				`53,824`		`-`		`24,943`		`-`		`35,850`	`-`
2170	Accounts payable				`28,131,559`	`37`			`20,391,520`	`34`			`19,968,598`	`33`
2200	Other payables	6(13)			`4,761,389`		`7`		`3,844,835`		`6`		`3,410,521`	`5`
2230	Current income tax liabilities				`1,098,483`		`1`		`402,714`		`1`		`1,214,009`	`2`
2250	Provision for liabilities -	6(16)
	current				`713,535`		`1`		`556,720`		`1`		`569,050`	`1`
2280	Current lease liabilities				`224,082`		`-`		`159,081`		`-`		`174,052`	`-`
2365	Refund liabilities- current				`3,235,581`		`5`		`1,636,499`		`3`		`1,693,277`	`3`
2399	Other current liabilities, others				`281,067`		`-`		`108,961`		`-`		`153,998`	`-`
21XX	Total current liabilities				`41,499,520`	`55`			`28,625,273`	`48`			`30,719,355`	`50`
	Non-current liabilities
2540	Long-term borrowings	6(14) and 8			`-`		`-`		`15,095`		`-`		`15,897`	`-`
2570	Deferred income tax liabilities	6(26)			`6,645`		`-`		`27,214`		`-`		`547`	`-`
2580	Non-current lease liabilities				`248,340`		`1`		`247,767`		`1`		`287,250`	`1`
2640	Net defined benefit liability,	6(15)
	non-current				`216,882`		`-`		`221,974`		`-`		`213,332`	`-`
2670	Other non-current liabilities,
	others				`210,437`		`-`		`198,920`		`-`		`202,084`	`-`
25XX	Total non-current
	liabilities				`682,304`		`1`		`710,970`		`1`		`719,110`	`1`
2XXX	Total liabilities				`42,181,824`	`56`			`29,336,243`	`49`			`31,438,465`	`51`
	Equity attributable to owners of
	parent
	Share capital	6(17)
3110	Share capital - common stock				`8,448,562`	`11`			`8,448,562`	`14`			`8,448,562`	`14`
	Capital surplus	6(18)
3200	Capital surplus				`804,214`		`1`		`803,918`		`1`		`803,918`	`1`
	Retained earnings	6(19)
3310	Legal reserve				`5,541,298`		`7`		`4,982,577`		`8`		`4,982,577`	`8`
3320	Special reserve				`794,525`		`1`		`505,966`		`1`		`505,966`	`1`
3350	Unappropriated retained
	earnings				`18,637,173`	`25`			`17,065,967`	`28`			`15,762,481`	`26`
	Other equity interest
3400	Other equity interest		`(`		`884,239 ) (`		`1) (`		`794,525) (`		`1) (`		`701,621) (`	`1)`
31XX	Equity attributable to
	owners of the parent				`33,341,533`	`44`			`31,012,465`	`51`			`29,801,883`	`49`
3XXX	Total equity				`33,341,533`	`44`			`31,012,465`	`51`			`29,801,883`	`49`
3X2X	Total liabilities and equity			`$`	`75,523,357`	`100`		`$`	`60,348,708`	`100`		`$`	`61,240,348`	`100`

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

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

Items	Notes	Three	months end	ed September30
		2020		2019
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 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the period Other comprehensive income Components of other comprehensive loss that will not be reclassified to profit or loss 8316 Unrealised losses from investments in equity instruments measured at fair value through other comprehensive income 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 period 8500 Total comprehensive income for the period Profit attributable to: 8610 Owners of the parent Comprehensive income attributable to: 8710 Owners of the parent Earnings per share (in dollars) 9750 Basic earnings per share 9850 Diluted earnings per share

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

(UNAUDITED)

Notes						Equity attributa	Equity attributa	eto owners of the	parent	parent
	Share capital - commonstock			CapitalSurplus					RetainedEarnings			Other Equity	In	terest
			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 foreignoperations	a	Unrealised losses from financial ssets measured at fair value through other comprehensive income
6(19) 6(19)	`$ 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` `4,275,661` `-` `4,275,661` `(` `604,113 )` `(` `84,151 )` `(` `3,801,853 )` `-` `$ 15,762,481` `$ 17,065,967` `5,966,882` `-` `5,966,882` `(` `558,721 )` `(` `288,559 )` `(` `3,548,396 )` `-` `$ 18,637,173`		`($` `505,966` `)` `-` `(` `195,655` `)` `(` `195,655` `)` `-` `-` `-` `-` `($` `701,621` `)` `($` `794,525` `)` `-` `(` `67,036` `)` `(` `67,036` `)` `-` `-` `-` `-` `($` `861,561` `)`	`$` `-` `-` `-` `-` `-` `-` `-` `-` `$` `-` `$` `-` `-` `(` `22,678 )` `(` `22,678 )` `-` `-` `-` `-` `($` `22,678 )`		`$ 29,945,861` `4,275,661` `(` `195,655 )` `4,080,006` `-` `-` `(` `4,224,282 )` `298` `$ 29,801,883` `$ 31,012,465` `5,966,882` `(` `89,714 )` `5,877,168` `-` `-` `(` `3,548,396 )` `296` `$ 33,341,533`

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars) (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation (including right-of-use assets and
investment properties)

Amortization

Expected credit loss
Net (gain) loss on financial assets and liabilities
at fair value through profit or loss
Interest expense
Interest income

Loss (gain) on disposal of property, plant and
equipment

Gain on lease modification

Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or
loss
Notes receivable, net
Accounts receivable
Other receivables
Inventories, net
Prepayments
Other non-current assets
Changes in operating liabilities
Notes payable
Accounts payable
Other payables
Provision 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 For the nine months ended September 30,
Notes
2020
2019
$
7,207,504 $
5,113,873
6(24)
802,078
654,666
6(24)
161
169
7,630
10,845
(
1,190 )
18,087
24,636
16,098
6(21)
(
70,499 ) (
62,480 )
6(23)
258 (
3,236 )
6(9)
(
365 )
-
50,309
-
(
71,677 ) (
69,691 )
(
5,569,999 ) (
4,276,743 )
(
35,914 ) (
21,433 )
(
2,841,612 )
69,038
23,753 (
190,613 )
9,494
76,374
- (
200 )
7,740,039
5,034,974
915,500 (
8,207 )
156,815
67,955
1,599,082 (
103,628 )
158,242
61,775
(
5,092 ) (
4,277 )
10,099,153
6,383,346
66,722
64,094
(
23,365 ) (
15,399 )
(
721,230 ) (
686,985 )
9,421,280
5,745,056

(Continued)

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (Expressed in thousands of New Taiwan dollars)

(UNAUDITED)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at amortised cost
Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and
equipment
Increase in refundable deposits
Acquisition of investment properties

Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Repayment of the principal portion of lease
liabilities
Payment of long-term borrowings
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
Effect of exchange rate
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period For the nine months ended September 30,
Notes
2020
2019
($
5,004,985 ) ($
439,108 )
6(8)
(
642,031 ) (
478,885 )
163
59,485
(
31,293 ) (
14,887 )
6(11)
(
308 ) (
3,644 )
(
5,678,454 ) (
877,039 )
1,500,000
500,000
(
177,726 ) (
106,430 )
(
760 ) (
636 )
11,517 (
24,819 )
6(19)
(
3,548,396 ) (
3,801,853 )
6(19)
- (
422,429 )
296
298
(
2,215,069 ) (
3,855,869 )
(
45,198 ) (
146,348 )
1,482,559
865,800
6(1)
10,834,884
8,815,680
6(1)
$
12,317,443 $
9,681,480

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

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MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

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

(Reviewed, not audited)

1. HISTORY AND ORGANISATION

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

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

STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on November 10, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

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

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 IFRS7 ,‘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 January 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:

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(a) Changes in lease payments result in the revised consideration for the lease that is substantially
the same as, or less than, the consideration for the lease immediately preceding the change;
(b) Any reduction in lease payments affects only payments originally due on or before June 30 2021; and
(c) There is no substantive change to other terms and conditions of the lease.

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

the Group

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

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

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

(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:

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 16, ‘Property, plant and equipment:proceeds before intended use’ Amendments to IAS 37, ‘Onerous contracts—cost of fulfilling a contract Annual improvements to IFRS Standards 2018–2020 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, ‘Interest Rate Benchmark Reform— Phase 2’	January 1, 2022 To be determined by International Accounting Standards Board January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2022 January 1, 2022 January 1, 2022 January 1, 2021

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 16, ‘Property, plant and equipment:proceeds before
intended use’
Amendments to IAS 37, ‘Onerous contracts—cost of fulfilling a contract
Annual improvements to IFRS Standards 2018–2020
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, ‘Interest
Rate Benchmark Reform— Phase 2’

January 1, 2022
To be determined by
International Accounting
Standards Board
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2022
January 1, 2022
January 1, 2022
January 1, 2021

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the

“Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Accounting Standard 34, “Interim financial reporting” as endorsed by the FSC.

(2) Basis of preparation

A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:
(a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(b) Financial assets at fair value through other comprehensive income.
(c) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.
B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “ IFRSs ” ) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:
(a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
(b) Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(c) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.
(d) When the Group loses control of a subsidiary, the Group remeasures any investment retained

~12~

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

B. Subsidiaries included in the consolidated financial statements:

Name of investor	Name of subsidiaries	Main business activities	Ownership(%)	Ownership(%)	Ownership(%)	Note
			2020/9/30 2019/12/31 2019/9/30
MICRO-STAR INTERNATIONAL CO., LTD. `〃` `〃` `〃` `〃` `〃` `〃` MSI (HOLDING)	MICRO-STAR NETHERLANDS HOLDING B.V. [MSI (HOLDING)] MSI COMPUTER CORP. [MSI (LA)] MSI PACIFIC INTERNATIONAL HOLDING CO., LTD. [MSI (PACIFIC)] MSI COMPUTER JAPAN CO., LTD. [MSI (JAPAN)] MSI COMPUTER (AUSTRALIA) PTY. LTD. [MSI (AUSTRALIA)] MSI COMPUTER (CAYMAN) CO., LTD. [MSI COMPUTER (CAYMAN)] MICRO-STAR CANADA LTD. [MSI (CANADA)] MYSTAR COMPUTER B.V. [MYSTAR]	Investment holding company Sales and maintenance of computers and electronic components Investment holding company Sales support and maintenance of computers and electronic components `〃` Investment holding company Sales support of computers and electronic components 〃	100 100 100 100 100 100 100 100	100 100 100 100 100 100 - 100	100 100 100 100 100 100 - 100	A and D 〃 A and C 〃〃 A and D B and G A and D

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

Main business Ownership(%)
Name of investor Name of subsidiaries activities 2020/9/302019/12/312019/9/30 Note
----- End of picture text -----

MSI (HOLDING)	MSI COMPUTER SARL	Sales support of	100	100	100	A and D
	[MSI (SARL)]	computers and
		electronic components
`〃`	MSI COMPUTER (UK)	`〃`	100	100	100	`〃`
	LTD. [MSI (UK)]
`〃`	MSI POLSKA SP. Z O. O.	Sales support and	99	99	99	`〃`
	[MSI (POLSKA)]	maintenance and
		after-sales services of
		computers and
		electronic components
`〃`	MSI COMPUTER	Logistics services of	100	100	100	`〃`
	EUROPE B.V.	computers and
	[MSI (EUROPE)]	electronic components
`〃`	LLC MSI COMPUTER	Sales support and	99	99	99	`〃`
	[MSI (RUSSIA)]	maintenance of
		computers and
		electronic components
`〃`	MSI COMPUTER	Sales support of	99	99	99	A, D
	TECHNOLOGIES	computers and				and E
	LIMITED COMPANY	electronic components
	[MSI (TURKEY)]
`〃`	MSI ITALY S.R.L.	`〃`	100	100	100	A and D
	[MSI (ITALY)]
`〃`	MSI IBERIA S.L.	`〃`	100	100	100	A, D
	[MSI (IBERIA)]					and F
MSI (EUROPE)	MSI POLSKA SP. Z O. O.	Sales support and	1	1	1	A and D
	[MSI (POLSKA)]	maintenance and
		after-sales services of
		computers and
		electronic components
`〃`	LLC MSI COMPUTER	Sales support and	1	1	1	`〃`
	[MSI (RUSSIA)]	maintenance of
		computers and
		electronic components
`〃`	MSI COMPUTER	Sales support of	1	1	1	A, D
	TECHNOLOGIES	computers and				and E
	LIMITED COMPANY	electronic components
	[MSI (TURKEY)]
MSI (PACIFIC)	MSI KOREA CO.,	Sales and maintenance	100	100	100	A and D
	LTD. [MSI (KOREA)]	of computers and
		electronic components

~14~

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

Main business Ownership(%)
Name of investor Name of subsidiaries activities 2020/9/302019/12/312019/9/30 Note
----- End of picture text -----

MSI (PACIFIC)	STAR INFORMATION	Investment holding	100	100	100	A and C
	HOLDING CO., LTD.	company
	[STAR INFORMATION]
`〃`	MICRO-STAR	`〃`	100	100	100	`〃`
	INTERNATIONAL
	(B.V.I) HOLDING
	CO., LTD. [MSI (B.V.I.)]
`〃`	MICRO ELECTRONICS	`〃`	100	100	100	`〃`
	HOLDING CO., LTD.
	[MICRO ELECTRONICS]
`〃`	MEGA TECHNOLOGY	`〃`	100	100	100	`〃`
	HOLDING CO., LTD.
	[MEGA TECHNOLOGY]
`〃`	MEGA COMPUTER CO.,	Sales support of	100	100	100	A and D
	LTD.	computers and
	[MEGA COMPUTER]	electronic components
`〃`	MHK INTERNATIONAL	`〃`	100	100	100	`〃`
	CO., LTD. [MSI (MHK)]
`〃`	MSI (SHANGHAI) CO.,	Sales and	100	100	100	A and C
	LTD. [MSI (SHANGHAI)]	maintenance of
		computers and
		electronic
		components
`〃`	SHENZHEN MEGA	Examination and	100	100	100	`〃`
	INFORMATION CO.,	maintenance of
	LTD. [SHENZHEN	computers, and
	MEGA INFORMATION]	electronic components
MICRO	MSI ELECTRONICS	Manufacture and	100	100	100	`〃`
ELECTRONICS	(KUNSHAN) CO., LTD.	maintenance of
	[MSI ELECTRONICS	computers, and
	(KUNSHAN)]	electronic components
STAR	MSI (SHENZHEN) CO.,	Sales and maintenance	100	100	100	`〃`
INFORMATION	LTD. [MSI SHENZHEN]	of computers and
		electronic components
MSI (B.V.I.)	MSI COMPUTER	Manufacture and	100	100	100	`〃`
	(SHENZHEN) CO., LTD.	maintenance of
	[MSI COMPUTER	computers, and
	(SHENZHEN)]	electronic components
MEGA	MSI COMPUTER	Sales and maintenance	-	100	100	A, C
TECHNOLOGY	TRADING (SHENZHEN)	of computers and				and H
	CO., LTD. [MSI	electronic components
	TRADING (SHENZHEN)]
`〃`	RAIDEALS INC.	Sales computers	100	100	100	A and C
	[RAIDEALS]	and electronic
		components

~15~

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

  - Note B: The financial statements of the entity as of and for the nine months ended September 30, 2020 were not reviewed by the independent auditors as the entity did not meet the definition of a significant subsidiary.

  - Note C: As of December 31, 2019, these investee companies are included in the consolidated financial statements based on their financial statements which were audited by the Group’s independent auditors for the correponding period.

  - Note D: As of December 31, 2019, these investee companies are included in the consolidated financial statements based on their financial statements which were audited by other independent auditors for the correponding period.

  - Note E: The subsidiary is in the process of liquidation.

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

  - Note G: MSI CANADA received capital infusion from MSI on April 8, 2020. Thus, it has been included in the consolidated financial statements from that date.

  - Note H: On June 10, 2020, this subsidiary has cancelled the registration.

C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.
(4) Foreign currency translation

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

A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and

~16~

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

(d) All foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains and losses’.
B. Translation of foreign operations
(a) The operating results and financial position of all the group entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
- iii. All resulting exchange differences are recognised in other comprehensive income.
(b) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Group retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

(5) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realized within twelve months from the balance sheet date;
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a) Liabilities that are expected to be settle within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be settled within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than

~17~

twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

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

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

A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.

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

A. Financial assets at fair value through over comprehensive in come comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:
(a) The objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets; and
(b) The assets’ contractual cash flows represents solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value: The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(9) 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 Group’s business model is achieved by collecting contractual cash flows.
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and

~18~

derecognised using trade date accounting.

C. The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.
(10) Accounts and notes receivable
A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
(11) Impairment of financial assets
For financial assets measured at amortised cost including accounts receivable that have a significant financing component, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.
－
(12) Leasing arrangements (lesser) Operating leases

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

(13) Inventories

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

(14) 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 Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation

~19~

to the total cost of the item must be depreciated separately.

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

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

(15) 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 Group. For short-term leases or leases of lowvalue assets, lease payments are recognised as an expense on a straight-line basis over the lease term.
B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are mainly fixed payments, less any fixed payments that can be received.
The Group subsequently measures the lease liability at amortised cost using the interest method and recognises interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.
C. At the commencement date, the right-of-use asset is stated at cost mainly comprising the amount of the initial measurement of lease liability.
The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. 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.

(16) Investment property

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

~20~

(17) Impairment of non-financial assets

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

(18) Borrowings

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

(19) Notes and accounts payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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

A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges.
B. At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognized in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

(21) Provisions

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

(22) Employee benefits

A. Short-term employee benefits

Sort-term employee benefits are measured at the undiscounted amount of the benefits expected

~21~

to be paid in respect of service rendered by employees, and should be recognized as expense in that period when the employees render service.

B. Pensions
(a) Defined contribution plans

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

(b) Defined benefit plans
- i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised past service costs. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date).
- ii. Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.
- iii. Past service costs are recognised immediately in profit or loss.
- iv. Pension cost for the interim period is calculated on a year-to-date basis by using the pension cost rate derived from the actuarial valuation at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events. The related information is disclosed accordingly.
C. Termination benefits
Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognizes expense as it can no longer withdraw an offer of termination benefits or it recognises relating restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.
D. Employees’ compensation and directors’ and supervisors’ remuneration Employees’ remuneration and directors’ and supervisors’ remuneration are recognised as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee

~22~

compensation is distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

(23) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.
E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 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.
F. The interim period income tax expense is recognised based on the estimated average annual effective income tax rate expected for the full financial year applied to the pretax income of the interim period. The related information is disclosed accordingly.

~23~

(24) Share capital

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

(25) Dividends

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

(26) Revenue recognition

A. Sales of goods
(a) The Group manufactures and sells motherboards, graphic cards, a variety of computer hardware, and electronic components. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.
(b) Revenue from the products is recognised based on the price specified in the contract, net of the estimated value added tax, returns and volume discounts and rebates. The volume discounts to the customers are estimated based on the anticipated annual sales quantities and the right of return for defective products is estimated on the basis of historical experience. Revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. A refund liability is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. The period between the transfer of the promised goods or services to the customer and payment by the customer does not exceed one year. As a result, the Group does not adjust any of the transaction prices for the time value of money.
(c) The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision.
(d) A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
B. Incremental costs of obtaining a contract
Given that the contractual period lasts less than one year, the Group recognises the incremental costs of obtaining a contract as an expense when incurred although the Group expects to recover those costs.

(27) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the

~24~

chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

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

UNCERTAINTY

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

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

None.

(2) Critical accounting estimates and assumptions

Evaluation of inventories
As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation. As of September 30, 2020, the carrying amount of inventories was $25,369,452.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
Cash on hand and petty cash Checking accounts and demand deposits Time deposits Total	September 30,2020 5,156 $ 10,329,163 1,983,124 12,317,443 $	December 31,2019 4,210 $ 9,651,879 1,178,795 10,834,884 $	September 30, 2019
			3,788 $ 6,612,645 3,065,047
			9,681,480 $

A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.
B. The Group’s time deposits with maturity periods over three months or pledged to others are reclassified as “financial assets at amortised cost.” Details of financial assets at amortised cost are provided in Notes 6(4) and 8.

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

Asset items	September	30,2020	December	31,2019	September	30,2019
Financial assets mandatorily
measured at fair value through
profit or loss
Stock of publicly traded or listed
companies	$	54,684	$	119,571	$	120,569
Derivatives – Forward exchange
contract		26,437		3,660		18,885
Derivatives – Foreign exchange
swap		58,748		52,981		-
		139,869		176,212		139,454
Evaluation adjustment	(	5,622)	(	23,407)	(	32,239)
Total	$	134,247	$	152,805	$	107,215
Liabilityitems	September	30, 2020	December	31,2019	September	30, 2019
Financial liabilities held for trading
Derivatives – Forward exchange
contract	$	53,824	$	24,943	$	2,980
Derivatives – Foreign exchange
swap		-		-		32,870
Total	$	53,824	$	24,943	$	35,850

A. Amounts recognised in profit or loss in relation to financial assets and liabilities at fair value through profit or loss are listed below:

through profit or loss are listed below:
		For	the three	months	ended	September 30,
			2020			2019
Financial assets and liabilities mandatorily
measured at fair value through profit or loss
Equity instruments	$			12,626	($		1,981)
Derivatives	(			41,182)	(		31,904)
	($			28,556)	($		33,885)

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		the nine	months	ended	September 30,
		2020			2019
Financial assets and liabilities mandatorily
measured at fair value through profit or loss
Equity instruments	$		1,526	$	7,655
Derivatives	(		25,316)	(	101,436)
	($		23,790)	($	93,781)

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

Derivative Financial Assets	September	30,2020
	Contract Amount Notional Principal (In thousands) GBP 8,700 AUD 8,300 JPY 115,287 CAD 5,000 KRW 2,322,500 SEK 4,332 EUR 32,000 CNY 581,534 September	Contractperiod
Forward exchange contracts `〃` `〃` `〃` `〃` `〃` `〃` Foreign exchange swap Derivative Financial Liabilities		2020.07.31～2020.12.16 2020.07.31～2020.11.16 2020.09.18～2020.10.30 2020.07.23～2020.12.24 2020.09.18～2020.10.29 2020.07.31～2020.10.05 2020.08.07～2021.01.19 2020.05.14～2021.02.18 30,2020
	Contract Amount Notional Principal (In thousands) GBP 2,000 AUD 3,000 JPY 105,710 CAD 5,000 KRW 7,034,700 EUR 58,000	Contractperiod
Forward exchange contracts `〃` `〃` `〃` `〃` `〃`		2020.07.21～2020.12.08 2020.09.28～2020.12.08 2020.09.01～2020.10.30 2020.07.09～2020.10.05 2020.09.16～2020.10.29 2020.05.29～2021.02.01

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December 31, 2019 Contract Amount Notional Principal

	Contract Amount Notional Principal December	31,2019
Derivative Financial Assets	(In thousands) EUR 2,000 GBP 500 KRW 1,156,000 SEK 4,650 JPY 216,310 USD 94,000 CNY 473,584 December	Contractperiod
Forward exchange contracts `〃` `〃` `〃` `〃` Foreign exchange swap `〃` Derivative Financial Liabilities		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
	Contract Amount Notional Principal (In thousands) CAD 8,000 RUB 224,291 EUR 44,000 SEK 2,852 GBP 5,500 AUD 6,500	Contractperiod
Forward exchange contracts `〃` `〃` `〃` `〃` `〃`		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

`〃` `〃` `〃` `〃` `〃`	RUB 224,291 EUR 44,000 SEK 2,852 GBP 5,500 AUD 6,500	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
Derivative Financial Assets	September	30,2019
	Contract Amount Notional Principal (In thousands) JPY 605,387 RUB 115,562 EUR 29,500 SEK 14,434 AUD 6,100 CAD 4,000 GBP 3,000 September	Contractperiod
Forward exchange contracts `〃` `〃` `〃` `〃` `〃` `〃` Derivative Financial Liabilities		2019.08.15~2019.11.01 2019.09.16~2019.11.01 2019.08.15~2019.11.25 2019.09.09~2019.11.18 2019.08.16~2019.11.18 2019.06.28~2019.11.25 2019.09.16~2019.11.18 30,2019
	Contract Amount Notional Principal (In thousands) RUB 232,343 EUR 2,000 AUD 1,500 GBP 1,500 CNY 426,251 USD 100,000	Contractperiod
Forward exchange contracts `〃` `〃` `〃` Foreign exchange swap `〃`		2019.09.05~2019.10.08 2019.09.27~2019.12.02 2019.09.27~2019.11.25 2019.08.26~2019.10.08 2019.04.29~2020.02.18 2019.08.22~2019.11.18

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

C. The Group has no financial assets at fair value through profit or loss pledged to others.
D. Information relating to financial assets at fair value through other comprehensive income is provided in Note 12(2)(3).

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

Items September 30, 2020 Non-current items: Equity instruments Unlisted stocks 151,975 $ Valuation adjustment 22,678) ( Total 129,297 $	December 31, 2019 151,975 $ - 151,975 $	September 30,2019 - $ -
		- $

A. The Group has elected to classify equity instruments that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $129,297, $151,975 and $0 as at September 30, 2020, December 31, 2019, and September 30, 2019, respectively.
B. As at September 30, 2020, December 31, 2019 and September 30, 2019, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income held by the Group were $129,297, $151,975 and $0, respectively.
C. The Group has no financial assets at fair value through other comprehensive income pledged to others as collateral.
D. Information relating to credit risk of financial assets at fair value through other comprehensive income is provided in Note 12(3).

(4) Financial assets at amortised cost

Items Current items: Time deposits over three months Non-current items: Pledge bank deposits Others Total	September 30,2020 6,200,434 $ 105,894 $ 666 106,560 $	December 31,2019 1,200,000 $ 100,244 $ 1,765 102,009 $	September 30,2019
			1,200,000 $
			49,148 $ 1,785
			50,933 $

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

For the three months ended September 30, 2020 2019 Interest income $ 3,065 $ 572 For the nine months ended September 30, 2020 2019 Interest income $ 7,622 $ 6,325

B. As at September 30, 2020, December 31, 2019 and September 30, 2019, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at amortised cost held by the Group were $6,306,994, $1,302,009 and $1,250,933, respectively.
C. Details of the Group’s financial assets at amortised cost pledged to others as collateral are provided in Note 8.
D. Information relating to credit risk of financial assets at amortised cost is provided in Note 12(2).

(5) Accounts receivable

Accounts receivable
	September 30, 2020		December 31, 2019		September 30,2019
Notes receivable	$	118,791	$	47,114	$	104,874
Accounts receivable	$	22,803,256	$	17,237,493	$	20,336,337
Less: Allowance for doubtful
accounts	(	34,209)	(	31,710)	(	29,337)
	$	22,769,047	$	17,205,783	$	20,307,000

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

Accounts Notes receivable receivable 19,977,772 $ 118,791 $ 2,785,772 - 38,794 - 918 - 22,803,256 $ 118,791 $ September30,2020	Accounts Notes receivable receivable 14,068,801 $ 47,114 $ 3,044,781 - 120,008 - 3,903 - 17,237,493 $ 47,114 $ December31,2019	September30,2019	September30,2019
Accounts receivable 19,977,772 $ 2,785,772 38,794 918 22,803,256 $	Accounts receivable 14,068,801 $ 3,044,781 120,008 3,903 17,237,493 $	Accounts receivable 17,629,716 $ 2,582,139 107,955 16,527 20,336,337 $	Notes receivable
			104,874 $ - - -
			104,874 $

The above ageing analysis was based on past due date.

B. As of September 30, 2020, December 31, 2019 and September 30, 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 $16,075,372.
C. Most of the Group’s accounts receivable have been insured or have collateral as security, and the Group will be able to obtain insurance claims or enforce a collateral in case these accounts default.
D. As of September 30, 2020, December 31, 2019 and September 30, 2019, without taking into

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account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s notes and accounts receivable were $118,791, $47,114 and $104,874; $22,769,047, $17,205,783 and $20,307,000, respectively.

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

(6) Inventories

12(2). Inventories
Raw materials Work-in-process Finished goods Raw materials Work-in-process Finished goods Raw materials Work-in-process Finished goods		September 30,2020
	Cost 8,571,845 $ 1,329,242 15,881,836 25,782,923 $	Allowance for valuation loss 111,016) ($ 2,052) ( 300,403) ( 413,471) ($ December 31,2019	Book value
			8,460,829 $ 1,327,190 15,581,433
			25,369,452 $

	Cost 6,579,127 $ 1,378,828 15,104,505 23,062,460 $	Allowance for valuation loss 130,049) ($ 1,311) ( 403,260) ( 534,620) ($ September 30,2019	Book value
			6,449,078 $ 1,377,517 14,701,245
			22,527,840 $

	Cost 6,615,153 $ 1,707,848 14,210,312 22,533,313 $	Allowance for valuation loss 185,462) ($ 1,873) ( 362,154) ( 549,489) ($	Book value
			6,429,691 $ 1,705,975 13,848,158
			21,983,824 $

The cost of inventories recognised as expense for the period:

	For the three months	For the three months	ended	September30,
		2020		2019
Cost of inventories recognised as expense	$	34,314,737	$	28,436,809
Gains on reversal of decline in market value	(	54,525)	(	109,523)
	For the nine months		ended	September 30,
		2020		2019
Cost of inventories recognised as expense	$	89,238,928	$	76,626,086
Gains on reversal of decline in market value	(	119,471)	(	181,506)

The Group reversed from a previous inventory write-down and accounted for as reduction of cost of goods sold because some inventories which were recognized as expense have been sold for the nine months ended September 30, 2020 and 2019.

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(7) Prepayments

Prepayments
Overpaid tax for offsetting the future tax payable Office supplies Prepayment for goods Others	September 30,2020 892,192 $ 505,172 54,363 200,221 1,651,948 $	December 31,2019 922,464 $ 490,408 30,266 232,563 1,675,701 $	September 30,2019
			932,410 $ 414,196 28,785 196,244
			1,571,635 $

(8) Property, plant and equipment

							2020
		Land		Buildings		Machineries			Others		Total
At January 1
Cost	$	1,462,282	$	5,251,609	$		2,550,199	$	1,776,223	$	11,040,313
Accumulated depreciation		-	(	3,387,842)	(		1,443,341)	(	1,315,697)	(	6,146,880)
	$	1,462,282	$	1,863,767	$		1,106,858	$	460,526	$	4,893,433
Balance at January 1	$	1,462,282	$	1,863,767	$		1,106,858	$	460,526	$	4,893,433
Additions		-		31,387			394,099		216,545		642,031
Reclassifications		-		68,999			43,543	(	66,646)		45,896
Disposals		-		-	(		87)	(	334)	(	421)
Depreciation charge		-	(	200,568)	(		256,275)	(	122,545)	(	579,388)
Net exchange differences	(	881)	(	8,257)	(		8,050)	(	3,426)	(	20,614)
Balance at September 30	$	1,461,401	$	1,755,328	$		1,280,088	$	484,120	$	4,980,937

At September 30
Cost	$	1,461,401	$	5,513,955	$		2,947,485	$	1,877,683	$	11,800,524
Accumulated depreciation		-	(	3,758,627)	(		1,667,397)	(	1,393,563)	(	6,819,587)
	$	1,461,401	$	1,755,328	$		1,280,088	$	484,120	$	4,980,937

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							2019
		Land		Buildings		Machineries			Others		Total
At January 1
Cost	$	1,467,630	$		5,368,187	$	3,713,051	$	1,715,434	$	12,264,302
Accumulated depreciation		-	(		3,298,694)	(	2,889,051)	(	1,338,013)	(	7,525,758)
	$	1,467,630	$		2,069,493	$	824,000	$	377,421	$	4,738,544
Balance at January 1	$	1,467,630	$		2,069,493	$	824,000	$	377,421	$	4,738,544
Additions		-			46,190		272,198		160,497		478,885
Reclassifications		-	(		14,715)		-	(	22,389)	(	37,104)
Disposals		-			-	(	54,873)	(	1,376)	(	56,249)
Depreciation charge		-	(		191,412)	(	210,638)	(	95,150)	(	497,200)
Net exchange differences	(	3,134)	(		24,099)	(	10,793)	(	4,377)	(	42,403)
Balance at September 30	$	1,464,496	$		1,885,457	$	819,894	$	414,626	$	4,584,473

At September 30
Cost	$	1,464,496	$		5,233,951	$	2,235,709	$	1,770,782	$	10,704,938
Accumulated depreciation		-	(		3,348,494)	(	1,415,815)	(	1,356,156)	(	6,120,465)
	$	1,464,496	$		1,885,457	$	819,894	$	414,626	$	4,584,473

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

`－` (9) Leasing arrangements lessee

A. The Group leases various assets including land, buildings, machinery and equipment, and other equipment. Rental contracts are typically made for periods of 6 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:

0 Land Buildings Machinery and equipment Other equipment	September 30,2020 Carryingamount 63,455 $ 415,436 6,897 46,267 532,055 $	December 31,2019 Carryingamount 70,355 $ 361,312 6,717 36,513 474,897 $	September 30,2019
			Carryingamount
			73,335 $ 413,005 7,400 38,044
			531,784 $

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Land Buildings Machinery and equipment Other equipment Land Buildings Machinery and equipment Other equipment	2020 2019 Depreciation charge Depreciation charge 2,092 $ 2,184 $ 55,163 40,220 697 610 6,227 5,805 64,179 $ 48,819 $ 2020 2019 Depreciation charge Depreciation charge 6,282 $ 6,681 $ 161,642 92,537 2,021 1,883 15,905 15,788 185,850 $ 116,889 $ For the nine months ended September 30, For the three months ended September 30,	2020 2019 Depreciation charge Depreciation charge 2,092 $ 2,184 $ 55,163 40,220 697 610 6,227 5,805 64,179 $ 48,819 $ 2020 2019 Depreciation charge Depreciation charge 6,282 $ 6,681 $ 161,642 92,537 2,021 1,883 15,905 15,788 185,850 $ 116,889 $ For the nine months ended September 30, For the three months ended September 30,
		Depreciation charge
		6,681 $ 92,537 1,883 15,788 116,889 $

C. For the three months and nine months ended September 30, 2020 and 2019, the additions to rightof-use assets were $17,738, $86,716, $272,655 and $260,170, respectively.
D. The information on profit and loss accounts relating to lease contracts is as follows:

	For	the three months ended September 30,	the three months ended September 30,
		2020	2019
Items affecting profit or loss
Interest expense on lease liabilities	$	2,487 $	1,830
Expense on leases of low-value or short-term assets		18,146	3,843
Expense on variable lease payments		7,056	9,413
Gain on lease modification		313	-
	For	the nine months ended September 30,
		2020	2019
Items affecting profit or loss
Interest expense on lease liabilities	$	7,922 $	4,961
Expense on leases of low-value or short-term assets		40,687	20,327
Expense on variable lease payments		22,814	28,527
Gain on lease modification		365	-

E. For the three months and nine months ended September 30, 2020 and 2019, the Group’s total cash outflow for leases were $89,634, $47,568, $249,045 and $111,391, respectively.
F. The Group has applied the practical expedient to “Covid-19-related rent concessions”, amount is not significant, and recognize changes in lease payments caused by rent concessions as deductions for expenses.

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(10) Leasing arrangements – lessor

A. The Group leases buildings. Rental contracts are typically made for periods of 1 to 5 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
B. The Group recognised rental income of $23,678, $30,169, $77,118 and $86,727 based on operating lease contracts for the three months and nine months ended September 30, 2020 and 2019, respectively. None of these included variable lease payments.
C. The maturity analysis of the undiscounted lease payments in the operating lease is as follows:

	September 30,2020	September 30,2020	September 30,2019	September 30,2019
Less than 1 year	$	84,777	$	92,236
Between 1 and 5 years		112,566		74,534
Total	$	197,343	$	166,770
Investment property
		2020		2019
		Buildings		Buildings
At January 1
Cost	$	1,167,190	$	1,129,777
Accumulated depreciation	(	866,631)	(	788,536)
	$	300,559	$	341,241
Balance at January 1	$	300,559	$	341,241
Additions		308		3,644
Reclassifications	(	49,895)		24,148
Depreciation charge	(	36,840)	(	40,577)
Net exchange differences	(	2,562)	(	7,404)
Balance at September 30	$	211,570	$	321,052
At September 30
Cost	$	917,470	$	1,192,402
Accumulated depreciation	(	705,900)	(	871,350)
	$	211,570	$	321,052

(11) Investment property

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

investment property:
	For the three months		ended	September 30,
		2020		2019
Rental income from the lease of the investment
property	$	23,678	$	30,169
Direct operating expenses arising from the
investment property	$	16,132	$	20,176
	For the nine months		ended	September 30,
		2020		2019
Rental income from the lease of the investment property	$	77,118	$	86,727
Direct operating expenses arising from the
investment property	$	51,209	$	57,406

B. As of September 30, 2020, December 31, 2019 and September 30, 2019, the fair value of the Group’s investments in property amounting to $2,666,431, $3,403,426 and $3,489,781, respectively, as derived from market prices in the nearby area, are included in Level 2.
(12) Short-term borrowings

Short-term borrowings
Type of borrowings Bank borrowings Unsecured borrowings Type of borrowings Bank borrowings Unsecured borrowings Type of borrowings Bank borrowings Unsecured borrowings	September 30,2020 3,000,000 $ December 31,2019 1,500,000 $ September 30,2019 3,500,000 $	Interest rate range 0.70%~0.84% Interest rate range 0.88%～0.90% Interest rate range 0.90%～0.95%	Collateral
			None Collateral
			None Collateral
			None

(13) Other payables

Other payables
Accrued salary and bonus Directors’ remuneration and employees’ bonus Accrued freight Advertising expenses payable Accrued molding expense Other accrued expenses	September 30,2020 1,851,977 $ 597,340 892,296 562,741 258,213 598,822 4,761,389 $	December 31,2019 1,303,131 $ 554,500 617,251 355,107 217,077 797,769 3,844,835 $	September 30,2019
			1,288,545 $ 422,470 428,601 279,181 201,118 790,606
			3,410,521 $

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- (14) Long term borrowings

Type of borrowings	Borrowing period and repayment term	Interest rate range
Long-term bank borrowings Secured borrowings Less: current portion Type of borrowings	Starting from March 24, 2016 to March 24, 2021, repayment of principal and interest of USD 4,307.77 monthly and remaining principal on the due date. Borrowing period and repayment term	Three month LIBOR plus 1.75% Interest rate range
Long-term bank borrowings Secured borrowings Less: current portion Type of borrowings	Starting from March 24, 2016 to March 24, 2021, repayment of principal and interest of USD 4,307.77 monthly and remaining principal on the due date. Borrowing period and repayment term	Three month LIBOR plus 1.75% Interest rate range
Long-term bank borrowings Secured borrowings Less: current portion	Starting from March 24, 2016 to March 24, 2021, repayment of principal and interest of USD 4,307.77 monthly and remaining principal on the due date.	Three month LIBOR plus 1.75%

(15) Pensions

A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law,

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

(b) The pension costs under defined contribution pension plans of the Group for the three months and nine months ended September 30, 2020 and 2019 were $1,229, $1,472, $3,685 and $4,415, respectively.
(c) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2021 amount to $11,628.
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 Company’s mainland China subsidiaries have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentage of employees’ monthly salaries and wages. Other than the monthly contributions, the Group has no further obligations.
(c) The pension costs under defined contribution pension plans of the Group for the three months and nine months ended September 30, 2020 and 2019 were $68,069, $70,744, $173,141 and $204,388, respectively.

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(16) Provisions for liabilities

==> picture [480 x 150] intentionally omitted <==

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

Warranty 2020 2019
At January 1 $ 556,720 $ 501,095
Additional provisions 546,875 563,897
Used during the period ( 390,132) ( 495,882)
Exchange differences 72 ( 60)
At September 30 $ 713,535 $ 569,050
Analysis of total provisions:
September 30, 2020 December 31, 2019 September 30, 2019
Current $ 713,535 $ 556,720 $ 569,050
----- End of picture text -----

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

(17) Share capital

As of September 30, 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.

(18) Capital surplus

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

(19) Retained earnings

A. Under the Company's Articles of Incorporation, the current year's earnings, if any, shall first be used to pay all taxes and offset prior year's operating losses, then 10% of the remaining amount shall be set aside or reversed as legal reserve. The balance plus unappropriated retained earnings at the beginning of the period shall be appropriated 10%~90% as proposed by the Board of Directors and resolved by the stockholders during their meeting.
B. The Company’s dividend policy is summarized below: as the Company operates in a volatile business environment and is in the stable growth stage, except for the Company’s future expansion plans, stockholders’ interest is taken into consideration. The Group appropriated dividends in proportion to total number of shares, dividends could be distributed in stock or cash, and cash dividends shall account for at least 30% of the total dividends distributed.
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.

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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, were 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 558,721 $ 288,559 3,548,396

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.

(20) Operating revenue

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

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For the three months		Computer and
ended September 30,2020	peripherals segment			Other		Total
Total segment revenue	$	40,697,861	$	57,852	$	40,755,713
Timing of revenue recognition
At a point in time	$	40,697,861	$	57,852	$	40,755,713
For the three months		Computer and
ended September 30,2019	peripherals segment			Other		Total
Total segment revenue	$	32,813,916	$	143	$	32,814,059
Timing of revenue recognition
At a point in time	$	32,813,916	$	143	$	32,814,059

For the nine months		Computer and
ended September 30,2020	peripherals segment			Other		Total
Total segment revenue	$	104,538,815	$	58,130	$	104,596,945
Timing of revenue recognition
At a point in time	$	104,538,815	$	58,130	$	104,596,945

For the nine months		Computer and
ended September 30,2019	peripherals segment			Other		Total
Total segment revenue	$	88,441,290	$	4,862	$	88,446,152

Timing of revenue recognition
At a point in time	$	88,441,290	$	4,862	$	88,446,152

Interest income
			For	the three months	ended	September 30,
				2020		2019
Interest income from bank deposits			$	21,719	$	17,287
Interest income from financial assets measured at
amortised cost				3,065		572
			$	24,784	$	17,859
			For	the nine months	ended	September 30,
				2020		2019
Interest income from bank deposits			$	62,877	$	56,155
Interest income from financial assets measured at
amortised cost				7,622		6,325
			$	70,499	$	62,480

(21) Interest income

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(22) Other income

Rental revenue Others Rental revenue Others

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For the three months ended September 30,
2020 2019
$ 23,678 $ 30,169
114,118 157,919
$ 137,796 $ 188,088
For the nine months ended September 30,
2020 2019
$ 77,118 $ 86,727
253,709 412,824
$ 330,827 $ 499,551
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(23) Other gains and losses

Other gains and losses
	For the three months		ended	September 30,
		2020		2019
Net (losses) gains on disposal of property, plant and	($	72)	$	2,149
equipment
Net currency exchange losses	(	4,439)	(	23,539)
Losses on financial assets and liabilities at fair value	(	28,556)	(	33,885)
through profit or loss
Other losses	(	28,028)	(	24,010)
	($	61,095)	($	79,285)
	For the nine months		ended	September 30,
		2020		2019
Net (losses) gains on disposal of property, plant and	($	258)	$	3,236
equipment
Net currency exchange (losses) gains	(	82,960)		54,839
Losses on financial assets and liabilities at fair value	(	23,790)	(	93,781)
through profit or loss
Other losses	(	59,204)	(	63,209)
	($	166,212)	($	98,915)

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(24) Expenses by nature

For the three months ended September 30,

Employee benefit expense Depreciation charges Amortisation charges

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2020 2019
$ 2,442,286 $ 1,862,453
275,778 229,896
46 56
$ 2,718,110 $ 2,092,405
For the nine months ended September 30,
2020 2019
$ 6,138,625 $ 5,340,151
802,078 654,666
161 169
$ 6,940,864 $ 5,994,986
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(25) Employee benefit expense

Employee benefit expense	Employee benefit expense	Employee benefit expense
2020 2019 Wages and salaries 2,196,396 $ 1,617,036 $ Labor and health insurance fees 100,195 89,931 Pension costs 69,298 72,217 Other personnel expenses 76,397 83,269 Total 2,442,286 $ 1,862,453 $ 2020 2019 Wages and salaries 5,439,773 $ 4,608,033 $ Labor and health insurance fees 295,729 284,873 Pension costs 176,826 208,804 Other personnel expenses 226,297 238,441 Total 6,138,625 $ 5,340,151 $ For the three months ended September 30, For the nine months ended September 30,
	2020 2019 2,196,396 $ 1,617,036 $ 100,195 89,931 69,298 72,217 76,397 83,269 2,442,286 $ 1,862,453 $ For the nine months ended September 30,	2019
		1,617,036 $ 89,931 72,217 83,269
		1,862,453 $
	2020 5,439,773 $ 295,729 176,826 226,297 6,138,625 $	2019
		4,608,033 $ 284,873 208,804 238,441
		5,340,151 $

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 three months and nine months ended September 30, 2020 and 2019, employees’ remuneration was accrued at $238,000, $152,000, $543,000 and $384,000, respectively; while directors’ remuneration was accrued at $23,790, $15,260, $54,340 and $38,470, respectively. The aforementioned amounts were recognized in salary expenses respectively.
The employees’ compensation and directors’ remuneration were estimated and accrued based on the historical distribution ratio and the profit of the current year for the nine months ended

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September 30, 2020.

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

(26) Income tax

A. Income tax expense
(a) Components of income tax expense:

e tax ome tax expense Components of income tax expense:
	For the three months		ended	September 30,
		2020		2019
Current tax:
Current tax on profits for the period	$	703,351	$	318,197
Prior year income tax overestimation		-	(	1,880)
Total current tax		703,351		316,317
Deferred tax:
Origination and reversal of temporary
differences	(	164,674)	(	4,457)
Total deferred tax	(	164,674)	(	4,457)
Income tax expense	$	538,677	$	311,860
	For the nine months		ended	September 30,
		2020		2019
Current tax:
Current tax on profits for the period	$	1,428,646	$	767,593
Prior year income tax overestimation	(	6,874)	(	14,505)
Total current tax		1,421,772		753,088
Deferred tax:
Origination and reversal of temporary
differences	(	181,150)		85,124
Total deferred tax	(	181,150)		85,124
Income tax expense	$	1,240,622	$	838,212

(b) The income tax (charge)/credit relating to components of other comprehensive income: None.

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

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(27) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Retroactively adjusted weighted-average outstanding ordinary Earnings per share Amount after tax shares(in thousands) (in NT dollars) 2,614,564 $ 844,856 3.09 $ 2,614,564 $ 844,856 - 1,789 2,614,564 $ 846,645 3.09 $ Retroactively adjusted weighted-average outstanding ordinary Earnings per share Amount after tax shares(in thousands) (in NT dollars) 1,713,533 $ 844,856 2.03 $ 1,713,533 $ 844,856 - 1,683 1,713,533 $ 846,539 2.02 $ For the three months ended September 30,2020 For the three months ended September 30,2019
		2.02 $

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For the nine months ended September 30, 2020

	For the nine	months ended September 30,2020	er 30,2020
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	Amount after tax 5,966,882 $ 5,966,882 $ - 5,966,882 $ For the nine	Retroactively adjusted weighted-average outstanding ordinary Earnings per share shares(in thousands) (in NT dollars) 844,856 7.06 $ 844,856 6,421 851,277 7.01 $ months ended September 30,2019	Earnings per share (in NT dollars)
			7.06 $
			7.01 $
	Amount after tax 4,275,661 $ 4,275,661 $ - 4,275,661 $	Retroactively adjusted weighted-average outstanding ordinary shares(in thousands) 844,856 844,856 6,323 851,179	Earnings per share (in NT dollars)
			5.06 $
			5.02 $

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

None.

(2) Significant related party transactions

None.

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(3) Key management compensation

Salaries and other employee benefits Salaries and other employee benefits

For	the three months	ended	September 30,
	2020		2019
$	89,628	$	65,678
For	the nine months	ended	September 30,
	2020		2019
$	311,146	$	251,831

8. PLEDGED ASSETS

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

Asset items Non-current financial assets at amortised cost Property, plant and equipment		Book value	September 30, 2019 49,148 $ 131,680 180,828 $	Purpose
	September 30, 2020 105,894 $ 119,931 225,825 $	December 31, 2019 100,244 $ 126,733 226,977 $
				Performance security guarantee For guarantee of long-term loans

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

(1) Contingencies ： None.

(2) Commitments ： None.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

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

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(2) Financial instruments

A. Financial instruments by category

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 Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities held for trading Financial liabilities at amortised cost Short-term borrowings Accounts payable Other accounts payable Long-term borrowings (including current portion) Guarantee deposits received Lease liabilities	September 30,2020 December 31,2019 134,247 $ 152,805 $ 129,297 151,975 12,317,443 10,834,884 6,306,994 1,302,009 118,791 47,114 22,769,047 17,205,783 266,374 227,116 73,535 42,242 42,115,728 $ 29,963,928 $ 53,824 $ 24,943 $ 3,000,000 1,500,000 28,131,559 20,391,520 4,761,389 3,844,835 14,795 16,026 210,437 198,920 36,172,004 $ 25,976,244 $ 472,422 $ 406,848 $	September 30,2019 107,215 $ - 9,681,480 1,250,933 104,874 20,307,000 178,992 41,235 31,671,729 $ 35,850 $ 3,500,000 19,968,598 3,410,521 16,818 202,084 27,133,871 $ 461,302 $

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B. Risk management policies

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

C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

i. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.
ii. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency.
iii. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
iv. The Group hedges foreign exchange rate by using forward exchange contracts. However, the Group does not adopt hedging accounting. Details of financial assets or liabilities at fair value through profit or loss are provided in Note 6(2).
v. The Group’s businesses involve some non-functional currency operations. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

September 30,2020	September 30,2020
Foreign Currency Amount (In Thousands) 411,742 $ 106,801 1,456,532 17,029 15,485 14,781 964,572 26,354 21,791	Exchange rate 29.1000 34.1500 0.3652 37.3000 21.7200 20.7150 29.1000 6.8166 34.1500	Book Value (NTD)
		11,981,681 $ 3,647,260 531,925 635,188 336,324 306,197 28,069,047 766,893 744,168

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Foreign Currency Amount (In Thousands) Exchange rate 396,064 $ 29.9800 51,697 33.5900 162,475 4.3050 7,794 39.3600 10,468 22.9900 673,526 29.9800 16,433 6.9640 11,924 33.5900 December 31,2019 September 30,2019	Foreign Currency Amount (In Thousands) Exchange rate 396,064 $ 29.9800 51,697 33.5900 162,475 4.3050 7,794 39.3600 10,468 22.9900 673,526 29.9800 16,433 6.9640 11,924 33.5900 December 31,2019 September 30,2019	Book Value (NTD)
		11,873,988 $ 1,736,500 699,454 306,785 240,670 20,192,315 492,673 400,520
Foreign Currency Amount (In Thousands) 377,304 $ 61,939 856,343 15,229 16,238,651 643,826 11,023	Exchange rate 31.0200 33.8700 0.4816 23.3900 0.0259 31.0200 33.8700	Book Value (NTD) 11,703,980 $ 2,097,873 412,415 356,196 420,581 19,971,470 373,360

vi. The exchange (loss) gain arising from significant foreign exchange variation on the monetary items held by the Group for the three months and nine months ended September 30, 2020 and 2019, amounted to ($4,439), ($23,539), ($82,960) and $54,839, respectively.

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

variation:
(Foreign currency: functional currency)	Degree of variation 1% 1% 1% 1% 1% 1% 1% 1% 1% For the nine For the nine	Effect on profit or loss (before tax) Effect on other comprehensive income 119,817 $ - $ 36,473 - 5,319 - 6,352 - 3,363 - 3,062 - 280,690 - 7,669 - 7,442 - months ended September 30,2020 Sensitivityanalysis Effect on profit or loss (before tax) Effect on other comprehensive income 117,040 $ - $ 20,979 - 4,124 - 3,562 - 4,206 - 199,715 - 3,734 - months ended September 30,2019 Sensitivityanalysis
Financial assets Monetary items USD: NTD EUR: NTD RUB: NTD GBP: NTD CAD: NTD AUD: NTD Financial liabilities Monetary items USD: NTD USD: RMB EUR: NTD (Foreign currency: functional currency)
		Sensitivityanalysis
	Degree of variation	Effect on profit or loss (before tax)
Financial assets Monetary items USD: NTD EUR: NTD RUB: NTD CAD: NTD KRW: NTD Financial liabilities Monetary items USD: NTD EUR: NTD	1% 1% 1% 1% 1% 1% 1%	117,040 $ 20,979 4,124 3,562 4,206 199,715 3,734	- $ - - - - - -

Price risk

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

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change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 1% with all other variables held constant, posttax profit for the nine months ended September 30, 2020 and 2019 would have increased/decreased by $392 and $707, as a result of gain or loss of equity instruments at fair value through profit or loss. Also, other components of equity would have increased/decreased by $1,293 and $0, 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

i. The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. For the nine months ended September 30, 2020 and 2019, the Group borrowings are issued at variable rate denominated in US dollars.
ii. The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions.
iii. As at September 30, 2020, December 31, 2019 and September 30, 2019, if interest rates on USD and NTD denominated borrowings had been 1% higher/lower with all other variables held constant, post-tax profit for the nine months ended September 30, 2020 and 2019 would have been $89 and 101 lower/higher, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.
(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable, notes receivable and financial assets at amortised cost cash flow based on the agreed terms.
ii. The Group manages their credit risk taking into consideration the entire group’s concern. For banks and financial institutions, only parties with a rating of investment grade are accepted. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the management. The utilisation of credit limits is regularly monitored. Credit risk arises from credit exposures to wholesale and

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retail customers, including outstanding receivables.

iii. The Group adopts assumptions, if the contract payments were past due over 90 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
iv. The Group adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 150 days.
v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii) The disappearance of an active market for that financial asset because of financial difficulties;
(iii) Default or delinquency in interest or principal repayments;
(iv) Adverse changes in national or regional economic conditions that are expected to cause a default.
vi. The Group applies the modified approach using provision matrix, loss rate methodology to estimate expected credit loss under the provision matrix basis.
vii. The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.
viii. The Group used the forecastability to adjust historical and timely information to assess the default possibility of debt instrument as at September 30, 2020, December 31, 2019 and September 30, 2019. The expected credit loss rate of the Group’s overdue accounts receivable was not material as of September 30, 2020, December 31, 2019 and September 30, 2019.
ix. The Group applies the simplified approach to provide loss allowance for accounts receivable that have no significant impact. The Group had not recognized related impact as at September 30, 2020, December 31, 2019 and September 30, 2019.
(c) Liquidity risk
i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the Group’s internal balance sheet ratio targets and external regulatory or legal requirements.
ii. The table below analyses the Group’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities and to the expected maturity date for derivative financial

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liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Non-derivative financial liabilities:

Non-derivative financial liabilities:	ilities:
September 30, 2020 Less than 1 year Short-term borrowings 3,000,000 $ Accounts payable 28,131,559 Other payables 4,761,389 Lease liabilities 224,271 Long-term borrowings (including current portion) 14,223 Other financial liabilities 1,481 Non-derivative financial liabilities: December 31, 2019 Less than 1 year Short-term borrowings 1,500,000 $ Accounts payable 20,391,520 Other payables 3,844,835 Lease liabilities 194,646 Long-term borrowings (including current portion) 1,550 Other financial liabilities 605 Non-derivative financial liabilities: September 30, 2019 Less than 1 year Short-term borrowings 3,500,000 $ Accounts payable 19,968,598 Other payables 3,410,521 Lease liabilities 182,050 Long-term borrowings (including current portion) 1,604 Other financial liabilities 285	Less than 1 year	Between 1 to 2years - $ - - 173,339 - 100,033 Between 1 to 2years - $ - - 144,775 14,266 106,506 Between 1 to 2years	Between 2 to 3years	Over 3years
			- $ - - 55,726 - - Between 2 to 3years	- $ - - 25,069 - 108,923 Over 3years
			- $ - - 80,921 - - Between 2 to 3years - $ - - 95,762 - -	- $ - - 38,352 - 91,809 Over 3years
September 30, 2019 Short-term borrowings Accounts payable Other payables Lease liabilities Long-term borrowings (including current portion) Other financial liabilities
	3,500,000 $ 19,968,598 3,410,521 182,050 1,604 285	- $ - - 140,943 15,162 107,071		- $ - - 49,498 - 94,728

Derivative financial liabilities

As of September 30, 2020, December 31, 2019 and September 30, 2019, the derivative financial liabilities mature within 1 year.

iii. The Group does not expect the timing of occurrence of the cash flows estimated through

the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

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(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. The fair value information of the Group’s investments in property is provided in Note 6(11).
C. 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.
D. 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:

September 30, 2020 Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Equity security -Forward exchange contract -Foreign exchange swap Financial assets at fair value through other comprehensive income -Equity securities Total Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract	Level 1 49,062 $ - - - 49,062 $ - $	Level 2 - $ 26,437 58,748 - 85,185 $ 53,824 $	Level 3 - $ - - 129,297 129,297 $ - $	Total
				49,062 $ 26,437 58,748 129,297
				263,544 $
				53,824 $

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December 31, 2019 Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Equity security -Forward exchange contract -Foreign exchange swap Financial assets at fair value through other comprehensive income -Equity securities Total Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract September 30, 2019 Assets: Recurring fair value measurements Financial assets at fair value through profit or loss -Equity security -Forward exchange contract Total Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contract -Foreign exchange swap Total	Level 1 96,164 $ - - - 96,164 $ - $ Level 1 88,330 $ - 88,330 $ - $ - - $	Level 2 - $ 3,660 52,981 - 56,641 $ 24,943 $ Level 2 - $ 18,885 18,885 $ 2,980 $ 32,870 35,850 $	Level 3 - $ - - 151,975 151,975 $ - $ Level 3 - $ - - $ - $ - - $	Total
				96,164 $ 3,660 52,981 151,975
				304,780 $
				24,943 $
				Total
				88,330 $ 18,885
				107,215 $
				2,980 $ 32,870
				35,850 $

E. The methods and assumptions the Group used to measure fair value are as follows:
(a) The level 1 financial instruments-equity security held by the Group are listed shares, and the market quoted price is determined by the closing price of the security.
(b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes.
(c) When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Group adopts valuation technique that is widely used by market

~56~

participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

(d) The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.
F. For the nine months ended September 30, 2020 and 2019, there was no transfer between Level 1 and Level 2.
G. For the nine months ended September 30, 2020 and 2019, there was no transfer in or out from Level 3.
H. The Group 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 Note 6(2).
J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

(2) Information on investees

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

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 6.
B. Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas: Please refer to table 7.

(4) Major shareholders information

Major shareholders information: Please refer to table 8.

~57~

14. SEGMENT INFORMATION

(1) General information and measurement of segment information

The Group operates business only in the manufacture and sale of motherboards and computer hardware and peripherals. The chief operating decision-maker is Board of Directors, who considers the whole business as a single performance entity, and assesses performance, makes decisions and allocates resources based on financial information. It has identified that the Group has only one reportable operating segment.

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

The Group's Board of Directors mainly evaluates the performance of the operating segments based on the Group's quarterly financial statements.

(3) Reconciliation for segment income

The Group is a single reportable segment. The profit and loss, assets and liabilities of the segment are the profit and loss, assets and liabilities shown in the financial statements, so there is no reconciliation required.

~58~

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

For the nine months ended September 30, 2020

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account	As of September 30,2020	As of September 30,2020	As of September 30,2020	As of September 30,2020	Footnote
				Number of shares	Book value	Ownership (%)	Fair value
MSI (HOLDING)	CVA ING GROEP	-	Financial assets at fair value through profit or loss - current	60,000	$ 12,315	-	$ 12,315	-
MSI (HOLDING)	DAIMLER	-	Financial assets at fair value through profit or loss - current	15,000	23,333	-	23,333	-
MSI (HOLDING)	DEUTSCHE POST	-	Financial assets at fair value through profit or loss - current	10,000	13,414	-	13,414	-
MICRO-STAR INTERNATIONAL CO., LTD.	BLUESTACK SYSTEM, INC.	-	Financial assets at fair value through other comprehensive income - non current	516,052	129,297	-	129,297	-

Table 1 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

For the nine months ended September 30, 2020

			For the nine months ended September 30, 2020	For the nine months ended September 30, 2020	For the nine months ended September 30, 2020	For the nine months ended September 30, 2020	For the nine months ended September 30, 2020	For the nine months ended September 30, 2020	For the nine months ended September 30, 2020	For the nine months ended September 30, 2020	For the nine months ended September 30, 2020
Table 2			(Except as otherwise indicated) Expressed in thousands of NTD
Transaction company (Note 4)	Name of the counter party (Note 4)	Relationship with the counterparty	Description of the transaction				Description and reasons of difference in transaction terms compared to third party transactions		Accounts or notes receivable (payable)		Footnote
			Purchases/(Sales)	Amount (Note 3)	% of total purchase (sale)	Credit terms	Unit price	Credit terms	Balance (Note 3)	% of total accounts or notes receivable/(payable)
MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Subsidiary	Sales	(19,230,967) $	(18)	60-100 days	Insignificant difference	Note 1	7,237,171 $	32	-
MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Second-tier Subsidiary	Sales	(5,331,964)	(5)	40-70 days	Insignificant difference	Note 1	1,304,317	6	-
MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Second-tier Subsidiary	Sales	(1,580,718)	(2)	30-100 days	Insignificant difference	Note 1	289,476	1	-
MICRO-STAR INTERNATIONAL CO., LTD.	MSI (KOREA)	Second-tier Subsidiary	Sales	(3,215,982)	(3)	50-70 days	Insignificant difference	Note 1	15,167) (	-	-
MICRO-STAR INTERNATIONAL CO., LTD.	MSI COMPUTER (SHENZHEN)	Second-tier Subsidiary	Processing overhead	2,179,135	2	Note 2	Insignificant difference	Note 2	2,833,852) (	10) (	-
MICRO-STAR INTERNATIONAL CO., LTD.	MSI ELECTRONICS (KUNSHAN)	Second-tier Subsidiary	Processing overhead	864,474	1	Note 2	Insignificant difference	Note 2	1,288,838) (	5) (	-
MEGA COMPUTER	MSI (SHANGHAI)	Affiliated company	Sales	(5,208,528)	(100)	40-70 days	Insignificant difference	Note 1	2,050,376	100	-
MSI (LA)	RAIDEALS	Affiliated company	Sales	(192,736)	(1)	40-70 days	Insignificant difference	Note 2	4,888	-	-

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

Table 2 Page 1

Expressed in thousands of NTD (Except as otherwise indicated)

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more September 30, 2020

Table 3

Creditor	Counterparty	Relationship with the counterparty	Balance as of September 30, 2020	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
					Amount	Action taken
MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Subsidiary	$ 7,237,171	4.11	$ -	-	$ 1,720,982	$ -
MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Second-tier Subsidiary	1,304,317	5.93	-	-	308,160	-
MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Second-tier Subsidiary	289,476	7.56	-	-	54,972	-
MSI (PACIFIC) (Note)	MICRO-STAR INTERNATIONAL CO., LTD.	Ultimate parent company	4,349,248	-	-	-	476,310	-
MSI COMPUTER (SHENZHEN) (Note)	MSI (PACIFIC)	Parent Company	2,833,852	-	-	-	317,882	-
MSI ELECTRONICS (KUNSHAN) (Note)	MSI (PACIFIC)	Parent Company	1,288,838	-	-	-	158,429	-
MSI (B.V.I.)	MSI (PACIFIC)	Parent Company	135,992	-	-	-	-	-
MEGA COMPUTER	MSI (SHANGHAI)	Affiliated company	2,050,376	3.49	-	-	307,368	-

Note: MSI (PACIFIC) processing overhead receivable between MICRO-STAR INTERNATIONAL CO., LTD. and both of MSI COMPUTER (SHENZHEN) and MSI ELECTRONICS (KUNSHAN).

Table 3 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Significant inter-company transactions during the nine months ended September 30, 2020

Expressed in thousands of NTD

Table 4

(Except as otherwise indicated)

Table 4				`合併資產` 46,184,753 `合併營收` 24,553,252 (Except as otherwise indicated)	`合併資產` 46,184,753 `合併營收` 24,553,252 (Except as otherwise indicated)	`合併資產` 46,184,753 `合併營收` 24,553,252 (Except as otherwise indicated)	`合併資產` 46,184,753 `合併營收` 24,553,252 (Except as otherwise indicated)
Number	Company name (Note 4)	Counterparty (Note 4)	Relationship	Transaction
				General ledger account	Amount (Note 1)	Transaction terms	Percentage of consolidated total operating revenues or total assets
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (KOREA)	Parent company to second-tier subsidiary	Sales	3,215,982 $	Note 2	3.07%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Parent company to subsidiary	Sales	19,230,967	Note 2	18.39%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Parent company to second-tier subsidiary	Sales	5,331,964	Note 2	5.10%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Parent company to second-tier subsidiary	Sales	1,580,718	Note 2	1.51%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Parent company to subsidiary	Accounts receivable	7,237,171	Note 2	9.58%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Parent company to second-tier subsidiary	Accounts receivable	1,304,317	Note 2	1.73%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Parent company to second-tier subsidiary	Accounts receivable	289,476	Note 2	0.38%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI ELECTRONICS (KUNSHAN)	Parent company to second-tier subsidiary	Processing overhead	864,474	Note 3	0.83%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI COMPUTER (SHENZHEN)	Parent company to second-tier subsidiary	Processing overhead	2,179,135	Note 3	2.08%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI ELECTRONICS (KUNSHAN)	Parent company to second-tier subsidiary	Manufacturing and operating expense	75,282	Note 2	0.07%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI COMPUTER (SHENZHEN)	Parent company to second-tier subsidiary	Manufacturing and operating expense	65,296	Note 2	0.06%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MEGA COMPUTER	Parent company to second-tier subsidiary	Manufacturing and operating expense	163,827	Note 2	0.16%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (EUROPE)	Parent company to second-tier subsidiary	Manufacturing and operating expense	198,828	Note 2	0.19%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MYSTAR	Parent company to second-tier subsidiary	Manufacturing and operating expense	106,286	Note 2	0.10%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (MHK)	Parent company to second-tier subsidiary	Manufacturing and operating expense	121,090	Note 2	0.12%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (POLSKA)	Parent company to second-tier subsidiary	Manufacturing and operating expense	105,425	Note 2	0.10%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (RUSSIA)	Parent company to second-tier subsidiary	Manufacturing and operating expense	64,862	Note 2	0.06%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Parent company to subsidiary	Manufacturing and operating expense	232,049	Note 2	0.22%

Table 4 Page 1

Number	Company name (Note 4)	Counterparty (Note 4)	Relationship	Transaction	Transaction	Transaction	Transaction
				General ledger account	Amount (Note 1)	Transaction terms	Percentage of consolidated total operating revenues or total assets
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (SARL)	Parent company to second-tier subsidiary	Manufacturing and operating expense	70,370 $	Note 2	0.07%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (JAPAN)	Parent company to subsidiary	Manufacturing and operating expense	87,712	Note 2	0.08%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (KOREA)	Parent company to second-tier subsidiary	Manufacturing and operating expense	57,929	Note 2	0.06%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (UK)	Parent company to second-tier subsidiary	Manufacturing and operating expense	55,996	Note 2	0.05%
0	MICRO-STAR INTERNATIONAL CO., LTD.	MSI (LA)	Parent company to subsidiary	Other payables	83,372	Note 2	0.11%
1	MSI (PACIFIC)	MICRO ELECTRONICS	Subsidiary to second-tier subsidiary	Other payables	90,566	Note 3	0.12%
1	MSI (PACIFIC)	MSI (B.V.I.)	Subsidiary to second-tier subsidiary	Other payables	135,992	Note 3	0.18%
1	MSI (PACIFIC)	MSI ELECTRONICS (KUNSHAN)	Subsidiary to second-tier subsidiary	Other payables	1,288,838	Note 3	1.71%
1	MSI (PACIFIC)	MSI COMPUTER (SHENZHEN)	Subsidiary to second-tier subsidiary	Other payables	2,833,852	Note 3	3.75%
1	MSI (PACIFIC)	MICRO-STAR INTERNATIONAL CO., LTD.	Subsidiary to parent	Other receivables	4,349,248	Note 3	5.76%
2	MEGA COMPUTER	MSI (SHANGHAI)	Second-tier subsidiary to second-tier subsidiary	Sales	5,208,528	Note 2	4.98%
2	MEGA COMPUTER	MSI (SHANGHAI)	Second-tier subsidiary to second-tier subsidiary	Accounts receivable	2,050,376	Note 2	2.71%
3	MSI (LA)	RAIDEALS	Subsidiary to second-tier subsidiary	Sales	192,736	Note 2	0.18%

Note 1: Balances after elimination in conformity with regulations.

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

Note 3: Processing overhead was determined based on the quantities, contract amount and delivery time. Note 4: Individual transactions not exceeding $50,000 and their corresponding transactions are not disclosed.

Table 4 Page 2

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Information on investees (not including investees in Mainland China)

For the nine months ended September 30, 2020

Expressed in thousands of NTD

Table 5

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at September 30, 2020	Shares held as at September 30, 2020	Shares held as at September 30, 2020	Net profit (loss) of the investee for the nine months ended September 30, 2020	Investment income (loss) recognised by the Company for the nine months ended September 30, 2020	Footnote
				Balance as at September 30, 2020	Balance as at December 31, 2019	Number of shares	Ownership (%)	Book value
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (LA)	U.S.A	Sales and maintenance of computers and electronic components	258,468 $	258,468 $	575,458	100.00	60,898 $	26,434 $	26,434 $	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (AUSTRALIA)	Australia	Sales support and maintenance of computers and electronic components	57,420	57,420	221,836	100.00	9,426	2,129	2,129	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (JAPAN)	Japan	Sales support and maintenance of computers and electronic components	20,411	20,411	1,400	100.00	17,071	2,581	2,581	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (PACIFIC)	Cayman Islands	Holding company	1,511,382	1,511,382	30,204,118	100.00	6,974,021	352,658	352,658	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (HOLDING)	Netherlands	Holding company	45,724	45,724	424,000	100.00	656,548	24,656	24,656	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI COMPUTER (CAYMAN)	Cayman Islands	Holding company	99,093	99,093	50,000	100.00	120,080	146	146	Direct subsidiary
MICRO-STAR INTERNATIONAL CO.,LTD.	MSI (CANADA)	Canada	Sales support of computers and electronic components	2,150	-	100,000	100.00	2,756	591	591	Direct subsidiary
MSI (PACIFIC)	MSI (KOREA)	South Korea	Sales and maintenance of computers and electronic components	24,374	24,374	80,000	100.00	299,910	28,392	-	Indirect subsidiary
MSI (PACIFIC)	MSI (B.V.I.)	British Virgin Island	Holding company	1,784,681	1,784,681	47,465,071	100.00	4,103,852	172,113	-	Indirect subsidiary
MSI (PACIFIC)	MICRO ELECTRONICS	British Virgin Island	Holding company	1,168,593	1,168,593	33,315,472	100.00	2,556,406	155,297	-	Indirect subsidiary
MSI (PACIFIC)	STAR INFORMATION	British Virgin Island	Holding company	144,721	144,721	4,502,601	100.00	20,984	(5,930)	-	Indirect subsidiary
MSI (PACIFIC)	MEGA TECHNOLOGY	British Virgin Island	Holding company	92,819	92,819	3,050,000	100.00	5,440	6,617	-	Indirect subsidiary
MSI (PACIFIC)	MEGA COMPUTER	Hong Kong	Sales support of computers and electronic components	-	-	1	100.00	5,417	(574)	-	Indirect subsidiary
MSI (PACIFIC)	MSI (MHK)	Hong Kong	Sales support of computers and electronic components	-	-	1	100.00	23,332	2,118	-	Indirect subsidiary
MSI (HOLDING)	MYSTAR	Netherlands	Sales support of computers and electronic components	71,353	71,353	-	100.00	161,627	12,592	-	Indirect subsidiary

Table 5 Page 1

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at September 30, 2020	Shares held as at September 30, 2020	Shares held as at September 30, 2020	Net profit (loss) of the investee for the nine months ended September 30, 2020	Investment income (loss) recognised by the Company for the nine months ended September 30, 2020	Footnote
				Balance as at September 30, 2020	Balance as at December 31, 2019	Number of shares	Ownership (%)	Book value
MSI (HOLDING)	MSI (RUSSIA)	Russia	Sales support and maintenance of computers and electronic components	68,258 $	68,258 $	-	99.00	32,138 $	2,105 $	- $	Indirect subsidiary
MSI (HOLDING)	MSI (POLSKA)	Poland	Sales support, maintenance and after-sales service of computers and electronic components	46,077	46,077	-	99.00	33,893	2,301	-	Indirect subsidiary
MSI (HOLDING)	MSI (SARL)	France	Sales support of computers and electronic components	26,646	26,646	-	100.00	57,003	3,608	-	Indirect subsidiary
MSI (HOLDING)	MSI (UK)	Britan	Sales support of computers and electronic components	37,226	37,226	-	100.00	17,384	2,650	-	Indirect subsidiary
MSI (HOLDING)	MSI (TURKEY)	Turkey	Sales support of computers and electronic components	3,229	3,229	-	99.00	(66)	-	-	Indirect subsidiary (Note 2)
MSI (HOLDING)	MSI (ITALY)	Italy	Sales support of computers and electronic components	2,153	2,153	-	100.00	3,538	925	-	Indirect subsidiary
MSI (HOLDING)	MSI (EUROPE)	Netherlands	Logistics services of computers and electronic components	37,620	37,620	-	100.00	50,778	4,774	-	Indirect subsidiary
MSI (HOLDING)	MSI (IBERIA)	Spain	Sales support of computers and electronic components	5,177	5,177	-	100.00	7,261	1,335	-	Indirect subsidiary
MSI (EUROPE)	MSI (RUSSIA)	Russia	Sales support and maintenance of computers and electronic components	689	689	-	1.00	546	2,105	-	Indirect subsidiary
MSI (EUROPE)	MSI (POLSKA)	Poland	Sales support, maintenance and after-sales service of computers and electronic components	467	467	-	1.00	174	2,301	-	Indirect subsidiary
MSI (EUROPE)	MSI (TURKEY)	Turkey	Sales support of computers and electronic components	33	33	-	1.00	26	-	-	Indirect subsidiary (Note 2)
MEGA TECHNOLOGY	RAIDEALS	U.S.A	Sales of computers and electronic components	1,523	1,523	-	100.00	1,851	216	-	Indirect subsidiary

Note 1: The table is presented in New Taiwan dollars. Except for the initial investment amount is valued at historical exchange rate, the others are valued with exchange rate 1USD=29.1 NTD; 1EUR=34.15 NTD on September 30, 2020 and average rate with 1USD=29.8191 NTD; 1EUR=33.5237 NTD for the nine months ended September 30, 2020.

Note 2: As of September 30, 2020, the liquidation process has not been completed.

Table 5 Page 2

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Information on investments in Mainland China - Basic information

For the nine months ended September 30, 2020

Table 6

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2020	Amount remitted from Taiwan to Mainland China/ Amount remitted back to Taiwan for the nine months ended September 30, 2020	Amount remitted from Taiwan to Mainland China/ Amount remitted back to Taiwan for the nine months ended September 30, 2020	Accumulated amount of remittance from Taiwan to Mainland China as of September 30, 2020	Net income of investee as of September 30, 2020	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the nine months ended September 30, 2020 (Note 2)	Book value of investments in Mainland China as of September 30, 2020	Accumulated amount of investment income remitted back to Taiwan as of September 30, 2020	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
MSI COMPUTER (SHENZHEN)	Manufacture and maintenance of computers, and electronic components	$ 1,726,857	Note 1	1,726,857 $	$ -	$ -	$ 1,726,857	172,037 $	100.00	$ 172,037	$ 3,950,286	$ -	-
MSI ELECTRONICS (KUNSHAN)	Manufacture and maintenance of computers, and electronic components	1,772,675	Note 1	1,772,675	-	-	1,772,675	155,089	100.00	155,089	2,453,866	-	-
SHENZHEN MEGA INFORMATION	Examination and maintenance of computers, and electronic components	23,940	Note 1	23,940	-	-	23,940	1,053	100.00	1,053	22,371	-	-
MSI COMPUTER TRADING (SHENZHEN)	Sales and maintenance of computers and electronic components	-	Note 1	-	-	-	-	11,794	-	11,794	-	-	Note 3
MSI (SHENZHEN)	Sales and maintenance of computers and electronic components	30,092	Note 1	-	-	-	-	(5,985)	100.00	(5,985)	7,702	-	Note 4
MSI (SHANGHAI)	Sales and maintenance of computers and electronic components	29,275	Note 1	-	-	-	-	(8,744)	100.00	(8,744)	(34,570)	-	Note 5

Companyname	Accumulated amount of remittance from Taiwan to Mainland China as of September 30,2020	Investment amount approved by the Investment Commission of the Ministry of Economic Affairs(MOEA)	Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA
MICRO-STAR INTERNATIONAL CO., LTD.	3,602,547 $	3,850,987 $	20,004,920 $

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

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

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

Note 7: The table is presented in New Taiwan dollars. Except for the initial investment amount is valued at historical exchange rate, the others are valued with exchange rate 1USD=29.1 NTD on September 30, 2020 and average rate with 1USD=29.8191 NTD for the nine months ended September 30, 2020.

Table 6 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

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

For the nine months ended September 30, 2020

Expressed in thousands of NTD

Table 7

(Except as otherwise indicated)

Amount of endorsements/guarantees

							Amount of endorsements/guarantees	Amount of endorsements/guarantees
Investee in Mainland China	Sales/(Purchase)		Propertytransaction		Accounts receivable/(payable)		secured with collaterals			Accommodation of funds			Others(Note)
	Amount	%	Amount	%	Balance as of September 30,2020	%	Balance as of September 30,2020	Purpose	Ceiling amount	Balance as of September 30,2020	Interest rate range	Interest expense
MSI COMPUTER (SHENZHEN) MSI ELECTRONICS (KUNSHAN) MSI (SHANGHAI)	$ - - 5,208,528	- - 100	$ - - -	- - -	(2,833,852) $ (1,288,838) 2,050,376	10) ( 5) ( 100	$ - - -	- - -	$ - - -	$ - - -	- - -	$ - - -	2,179,135 $ 864,474 -

Note: Processing overhead.

Table 7 Page 1

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

Major shareholders information

For the nine months ended September 30, 2020

Table 8

Name of major shareholders	Shares held as at September 30,2020	Shares held as at September 30,2020
	Number of shares	Ownership(%)
Hsu Hsiang	51,983,151	6.15%

Table 8 Page 1

AI assistant

MSI — Interim / Quarterly Report 2020

52042_rns_2020-11-12_1ef07e70-ce38-43f7-91be-298620120cc5.pdf

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES

INDEPENDENT AUDITORS' REVIEW REPORT TRANSLATED FROM CHINESE

Introduction

Scope of Review

Basis for Qualified Conclusion

Qualified Conclusion

Liang, Hua-Ling Lai, Chung-Hsi

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

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

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

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

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

MICRO-STAR INTERNATIONAL CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

1. HISTORY AND ORGANISATION

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

STATEMENTS AND PROCEDURES FOR AUTHORISATION

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

the Group

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Compliance statement

(2) Basis of preparation

(3) Basis of consolidation

(6) Cash equivalents

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

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

(9) Financial assets at amortised cost

(14) Property, plant and equipment

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

(16) Investment property

(17) Impairment of non-financial assets

(18) Borrowings

(19) Notes and accounts payable

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

(21) Provisions

(22) Employee benefits

(23) Income tax

(24) Share capital

(25) Dividends

(26) Revenue recognition

(27) Operating segments

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

UNCERTAINTY

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

(2) Critical accounting estimates and assumptions

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

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

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

(5) Accounts receivable

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

(6) Inventories

(7) Prepayments

(8) Property, plant and equipment

－ (9) Leasing arrangements lessee

(10) Leasing arrangements – lessor

(13) Other payables

- (14) Long term borrowings

(15) Pensions

(16) Provisions for liabilities

(17) Share capital

(19) Retained earnings

(20) Operating revenue

(22) Other income

(23) Other gains and losses

(24) Expenses by nature

(25) Employee benefit expense

(26) Income tax

(27) Earnings per share

For the nine months ended September 30, 2020

7. RELATED PARTY TRANSACTIONS

(2) Significant related party transactions

MSI Interim / Quarterly Report 2020

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

`－` (9) Leasing arrangements lessee