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TASC Interim / Quarterly Report 2021

Dec 14, 2021

52015_rns_2021-12-14_c3115e89-6286-4288-926f-c6b7657dc280.pdf

Interim / Quarterly Report

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OPTO TECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REVIEW REPORT SEPTEMBER 30, 2021 AND 2020

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.

~1~

INDEPENDENT AUDITORS’ REVIEW REPORT TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of Opto Tech Corporation

Introduction

We have reviewed the accompanying consolidated balance sheets of Opto Tech Corporation and subsidiaries (the “Group”) as at September 30, 2021 and 2020, and the related consolidated statements of comprehensive income for the three months and nine months then ended, as well as the consolidated 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 the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission. Our responsibility is to express a conclusion on these consolidated financial statements based on our reviews.

Scope of review

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

Basis for qualified conclusion

As explained in Notes 4(3)B and 6(7), the amounts and information of the financial statements of insignificant consolidated subsidiaries and investments accounted for using the equity method were not reviewed by independent auditors. Those statements reflect total assets of NT$874,360 thousand and NT$413,405 thousand, constituting 7.14% and 3.88% of the consolidated total assets, and total liabilities of NT$167,320 thousand and NT$163,957 thousand, constituting 5.66% and 4.82% of the consolidated total liabilities as of September 30, 2021 and 2020, and total comprehensive income (including income and loss of the associates accounted for using the equity method) of NT$2,602 thousand and NT$2,620

~2~

thousand, for the three months ended September 30, 2021 and 2020, respectively, and NT$31,677 and NT($947) for the nine months ended September 30, 2021 and 2020, constituting 1.07%, 1.29%, 4.52% and (0.27%) of the consolidated total comprehensive income, respectively.

Qualified conclusion

Except for the adjustments to the consolidated financial statements, if any, as might have been determined to be necessary had the financial statements of the insignificant subsidiaries and equity method investees 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, 2021 and 2020, 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 the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34, “ Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.

Chiang, Tsai-Yen

[Lai, Chung-Hsi ]

For and on behalf of PricewaterhouseCoopers, Taiwan Nov 3, 2021

------------------------------------------------------------------------------------------------------------------------------------------------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 independent auditors' review report 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.

~3~

OPTO TECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2021, DECEMBER 31, 2020 AND SEPTEMBER 30, 2020 (Expressed in thousands of New Taiwan dollars) (The balance sheets as of September 30, 2021 and 2020 are reviewed, not audited)

Assets Notes September 30, 2021
AMOUNT
%
$
3,513,944
29
682,606
6
911,238
7
2,846
-
1,516,024
12
36,977
-
14,427
-
1,072,575
9
68,351
1
3,412
-
7,822,400
64
106,990
1
806,846
7
73,145
1
2,598,161
21
220,195
2
399,307
3
15,610
-
41,035
-
166,214
1
4,427,503
36
$
12,249,903
100
(Continued)		 December 31, 2020
AMOUNT
%
$
3,100,161
29
320,419
3
22,810
-
8,873
-
1,634,913
16
16,880
-
20,218
-
1,155,589
11
24,202
-
2,435
-
6,306,500
59
106,990
1
783,998
7
5,394
-
2,705,133
26
236,135
2
399,307
4
14,318
-
48,337
1
35,315
-
4,334,927
41
$
10,641,427
100		 September 30, 2020 September 30, 2020
AMOUNT
$
3,100,161
320,419
22,810
8,873
1,634,913
16,880
20,218
1,155,589
24,202
2,435
6,306,500
106,990
783,998
5,394
2,705,133
236,135
399,307
14,318
48,337
35,315
4,334,927
$
10,641,427		 AMOUNT
$
3,109,626
270,092
22,810
6,239
1,912,022
32,397
27,726
1,126,555
39,021
1,332
6,547,820
106,853
870,036
5,485
2,755,733
239,861
-
15,219
63,315
38,712
4,095,214
$
10,643,034		 %
Current assets
Cash and cash equivalents
Financial assets at fair value through
profit or loss - current
Current financial assets at amortised
cost, net
Notes receivable, net
Accounts receivable - net
Accounts receivable - related parties
- net
Other receivables
Inventories - net
Prepayments
Other current assets
Current Assets
Total current assets
Financial assets at fair value through
profit or loss - non - current
Financial assets at fair value through
other comprehensive income or loss
- non-current
Investments accounted for using
equity method
Property, plant and equipment - net
Right-of-use assets
Investment property, net
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets		 6(1)
6(2)
6(3) and 8
6(5)
6(5)
6(5) and 7
6(6)
6(2)
6(4)
6(7)
6(8) and 7
6(9)
6(10)
6(11)
6(31) and 7		 29
3
-
-
18
-
-
11
1
-
62
1
8
-
26
2
-
-
1
-
38
100

~4~

OPTO TECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2021, DECEMBER 31, 2020 AND SEPTEMBER 30, 2020

(Expressed in thousands of New Taiwan dollars)

(The balance sheets as of September 30, 2021 and 2020 are reviewed, not audited)

September 30, 2021 September 30, 2021 December 31, 2020 September 30, 2020 September 30, 2020
Liabilities andEquity Notes AMOUNT % AMOUNT % AMOUNT %
Current liabilities
Short-term loans 6(12) $ 341,071 3 $ 230,758 2 $ 223,748 2
Financial liabilities at fair value 6(2)
through profit or loss - current 77 - 799 - - -
Notes payable - - 1,757 - 341 -
Accounts payable 727,507 6 665,926 6 589,368 5
Accounts payable - related parties 7 45,112 - 51,920 1 74,093 1
Other payables 6(13) and 7 682,584 6 619,042 6 1,060,747 10
Current income tax liabilities 172,667 1 25,969 - 69,676 1
Provisions for liabilities - current 6(17) 6,850 - 4,033 - 5,848 -
Current lease liabilities 7 19,048 - 19,560 - 19,340 -
Long-term liabilities, current portion 6(14) 484,536 4 62,960 1 63,409 1
Other current liabilities 6(22) and 7 31,120 - 50,840 - 57,065 -
Current Liabilities 2,510,572 20 1,733,564 16 2,163,635 20
Non-current liabilities
Long-term loans 6(14) - - 748,555 7 736,311 7
Provisions for liabilities - non- 6(17)
current 19,341 - 18,808 - 17,030 -
Deferred tax liabilities 43,375 - 42,986 1 73,231 1
Non-current lease liabilities 7 202,581 2 216,706 2 220,216 2
Other non-current liabilities 180,696 2 187,482 2 189,396 2
Total non-current liabilities 445,993 4 1,214,537 12 1,236,184 12
Total liabilities 2,956,565 24 2,948,101 28 3,399,819 32
Equity attributable to owners of
parent
Capital 6(18)
Common stock 4,386,228 36 3,786,228 35 3,786,228 35
Capital Reserve 6(19)
Capital surplus 1,489,822 12 703,108 7 702,965 7
Retained Earnings 6(20)
Legal reserve 786,944 6 729,360 7 729,360 7
Special reserve 2,423 - 3,743 - 3,743 -
Unappropriated earnings 2,465,649 20 2,361,920 22 1,805,232 17
Other Equity Adjustments 6(21)
Other equity interest 213,592 2 187,351 2 235,216 2
Treasury stocks 6(16)(18)
Treasury stocks ( 54,954 ) - ( 82,021) ( 1) ( 23,172) -
Equity attributable to owners of
parent 9,289,704 76 7,689,689 72 7,239,572 68
Non-controlling interest 3,634 - 3,637 - 3,643 -
Total equity 9,293,338 76 7,693,326 72 7,243,215 68
Significant contingent liabilites and 9
unrecognised contract commitments
Significant events after the balance 11
sheet date
Total liabilities and equity $ 12,249,903 100 $ 10,641,427 100 $ 10,643,034 100

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

~5~

OPTO TECH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

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

(UNAUDITED)

Threemonths ended Threemonths ended Threemonths ended September30 Ninemonths ended Ninemonths ended Ninemonths ended September30
2021 2020 2021 2020
Items Notes AMOUNT % AMOUNT % AMOUNT % AMOUNT %
Operating revenue 6(22) and 7 $ 1,809,464 100 $ 1,665,499 100 $ 4,776,743 100 $ 4,207,493 100
Operating costs 6(6)(16)(27)
(28) and 7 ( 1,193,330) ( 66) ( 1,169,623) ( 70) ( 3,216,059) ( 67) ( 3,003,369) ( 71 )
Gross profit, net 616,134 34 495,876 30 1,560,684 33 1,204,124 29
Operating expenses 6(16)(27)(28)
Selling expenses ( 34,336) ( 2) ( 30,595) ( 2) ( 89,411) ( 2) ( 91,082) ( 2 )
General and administrative expenses ( 201,569) ( 11) ( 138,428) ( 8) ( 530,323) ( 11) ( 350,805) ( 9 )
Research and development expenses ( 45,939) ( 3) ( 84,283) ( 5) ( 102,874) ( 2) ( 244,764) ( 6 )
Expected credit gain (loss) on financial 12(2)
assets 24 - 2,700 - ( 2,136) - ( 5,178) -
Total operating expenses ( 281,820) ( 16) ( 250,606) ( 15) ( 724,744) ( 15) ( 691,829) ( 17 )
Operating profit 334,314 18 245,270 15 835,940 18 512,295 12
Non-operating income and expenses
Interest income 6(23) 1,835 - 2,107 - 6,659 - 9,099 -
Other income 6(24) 11,096 1 13,685 1 29,045 - 41,342 1
Other gains and losses 6(25) ( 9,655) ( 1) ( 36,971) ( 2)
2,293		 - ( 71,171) ( 2 )
Finance costs 6(26) ( 4,065) - ( 6,586) ( 1) ( 14,191) - ( 21,936) -
Share of loss of associates and joint 6(7)
ventures accounted for under equity
method ( 2,266) - ( 551) - ( 1,971) - ( 374) -
Total non-operating income and
expenses ( 3,055) - ( 28,316) ( 2)
21,835		 - ( 43,040) ( 1 )
Profit before income tax 331,259 18 216,954 13 857,775 18 469,255 11
Income tax expense 6(29) ( 84,392) ( 5) ( 10,881) ( 1) ( 182,853) ( 4) ( 71,661) ( 2 )
Net income $
246,867		 13 $
206,073		 12 $
674,922		 14 $
397,594		 9

(Continued)

~6~

OPTO TECH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

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

Threemonths ended Threemonths ended Threemonths ended September30 Ninemonths ended Ninemonths ended Ninemonths ended September30
2021 2020 2021 2020
Items Notes AMOUNT % AMOUNT % AMOUNT % AMOUNT %
Other comprehensive income (loss)
Items that will not be reclassified to
profit or loss
Unrealised gains (losses) on valuation of 6(4)(21)
fiancial assets at fair value through other
comprehensive (loss) income ($
3,162)
- ($
3,305)
-		 $
22,848		 1 ($
51,557) (		 1 )
Income tax related to components of 6(29)
other comprehensive (loss) income that
will not be reclassified to profit or loss - - - - - - 8,364 -
Total other comprehensive (loss)
income that will not be reclassified to
profit or loss, net of tax ( 3,162) - ( 3,305) - 22,848 1 ( 43,193) ( 1)
Items that will be reclassified to profit or
loss
Currency translation differences of 6(21)
foreign operations ( 189)
-		 851 - 3,666 - ( 1,187) -
Share of other comprehensive income 6(7)(21)
(loss) of associates and joint ventures
accounted for using equity method ( 117) - 269 - ( 278)
-		 308 -
Total other comprehensive
income(loss) that will be reclassified
to profit or loss, net of tax ( 306) - 1,120 - 3,388 - ( 879) -
Other comprehensive (loss) income that
will be reclassified to profit or loss, net of
tax ($ 3,468) - ($ 2,185) - $ 26,236 1 ($ 44,072) ( 1)
Total comprehensive income for the
period $ 243,399 13 $ 203,888 12 $ 701,158 15 $ 353,522 8
Profit, attributable to:
Owners of the parent $
246,867		 13 $
206,072		 12 $
674,920		 14 $
397,593		 9
Non-controlling interest - - 1 - 2 - 1 -
$ 246,867 13 $ 206,073 12 $ 674,922 14 $ 397,594 9
Total comprehensive income (loss)
attributable to:
Owners of the parent $
243,399		 13 $
203,886		 12 $
701,161		 15 $
353,520		 8
Non-controlling interest - - 2 - ( 3)
-		 2 -
$ 243,399 13 $ 203,888 12 $ 701,158 15 $ 353,522 8
Earnings per share
Profit for the period 6(30) $ 0.62 $ 0.55 $ 1.78 $ 1.05
Diluted earnings per share
Profit for the period 6(30) $ 0.62 $ 0.54 $ 1.75 $ 1.03

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

~7~

OPTO TECH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

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

Note
Nine months ended September 30, 2020
Balance at January 1, 2020
Net income for the period
Other comprehensive loss for the period
6(4)(21)
Total comprehensive income (loss)
Distribution of 2019 earnings:
6(20)
Legal reserve
Special reserve
Cash dividends
Disposal of financial assets at fair value through
other comprehensive income
6(4)
Balance at September 30, 2020
Nine months ended September 30, 2021
Balance at January 1, 2021
Net income for the period
Other comprehensive income (loss) for the period 6(4)(21)
Total comprehensive income(loss)
Capital surplus changes in ownership interests in
subsidiaries
4(3)
Distribution of 2020 earnings
6(20)
Legal reserve
Special reserve
Cash dividends
Proceeds from issuance of shares
6(18)
Stock repurchased
6(18)
Treasury shares transferred to employees
6(18)
Other changes in capital surplus:
Adjustments of capital surplus for the Company’s
cash dividends received by subsidiaries
6(19)
Balance at September 30, 2021		 Note Equity attr ibutableto owners of the parent of the parent of the parent Non-controlling
interest		 Total equity
Common stock Capital reserve R etainedEarnings Otherequityinterest Treasurystocks Total
Legal reserve Special reserve Unappropriated
earnings		 Financial
statements
translation
differences of
foreign
operations		 Unrealised gains
(losses) from
financial assets
measured at fair
value through
other
comprehensive
income
$ 3,786,228
-
-
-
-
-
-
-
$ 3,786,228
$ 3,786,228
-
-
-
-
-
-
-
600,000
-
-
-
$ 4,386,228		 $ 702,965
-
-
-
-
-
-
-
$ 702,965
$ 703,108
-
-
-
(
4,105 )
-
-
-
775,800
-
13,968
1,051
$ 1,489,822		 $ 669,312
-
-
-
60,048
-
-
-
$ 729,360
$ 729,360
-
-
-
-
57,584
-
-
-
-
-
-
$ 786,944		 $
8,392
-
-
-
-
(
4,649 )
-
-
$
3,743
$
3,743
-
-
-
-
-
(
1,320 )
-
-
-
-
-
$
2,423		 $ 1,841,481
397,593
-
397,593
(
60,048 )
4,649
(
378,623 )
180
$ 1,805,232
$ 2,361,920
674,920
-
674,920
-
(
57,584 )
1,320
(
514,927 )
-
-
-
-
$ 2,465,649		 ($
9,372 )
-
(
880 )
(
880 )
-
-
-
-
($
10,252 )
($
4,063 )
-
3,393
3,393
-
-
-
-
-
-
-
-
($
670 )		 $
288,841
-
(
43,193 )
(
43,193 )
-
-
-
(
180 )
$
245,468
$
191,414
-
22,848
22,848
-
-
-
-
-
-
-
-
$
214,262		 ($
23,172 )
-
-
-
-
-
-
-
($
23,172 )
($
82,021 )
-
-
-
-
-
-
-
-
(
162,408 )
189,475
-
($
54,954 )		 $ 7,264,675
397,593
(
44,073 )
353,520
-
-
(
378,623 )
-
$ 7,239,572
$ 7,689,689
674,920
26,241
701,161
(
4,105 )
-
-
(
514,927 )
1,375,800
(
162,408 )
203,443
1,051
$ 9,289,704		 $
3,641
1
1
2
-
-
-
-
$
3,643
$
3,637
2
(
5 )
(
3 )
-
-
-
-
-
-
-
-
$
3,634		 $ 7,268,316
397,594
(
44,072 )
353,522
-
-
(
378,623 )
-
$ 7,243,215
$ 7,693,326
674,922
26,236
701,158
(
4,105 )
-
-
(
514,927 )
1,375,800
(
162,408 )
203,443
1,051
$ 9,293,338

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

~8~

OPTO TECH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Expressed in thousands of New Taiwan dollars)

(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Income and expenses having no effect on cash flows
Expected credit losses on financial assets

Depreciation

Amortization

Net profit on financial assets and liabilities at fair
value through profit or loss

Interest income

Dividend income

Loss on disposal of property, plant and equipment

Interest expense

Share of profit of associates accounted for using
equity method

Gain on lease termination

Impairment loss on non-financial assets

Share-based payments

Changes in assets/liabilities relating to operating
activities
Changes in operating assets
Acquisition of financial assets at fair value through
profit or loss
Notes receivable - net
Accounts receivable - net
Accounts receivable - related parties - net
Other receivables
Inventories - net
Current prepayments
Other current assets
Other non-current assets
Net changes in liabilities relating to operating
activities
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Other current liabilities
Provisions for liabilities
Net defined benefit liability
Cash inflow generated from operations
Interest received
Dividends received
Interest paid
Income tax paid
Net cash flows from operating activities		 Nine months ended September 30
Notes
2021
2020
$
857,775 $
469,255
12(2)
2,136
5,178
6(8)(9)(27)
342,218
345,909
6(11)(27)
13,634
11,104
6(2)(25)
(
1,934 ) (
808 )
6(23)
(
6,659 ) (
9,099 )
6(24)
(
18,763 ) (
14,454 )
6(25)
239
28,340
6(26)
13,290
21,034
6(7)
1,971
374
6(8)(25)
- (
4 )
6(7)(23)
-
35,585
6(16)
105,473
-
(
360,975 ) (
100,000 )
6,027
6,812
116,753 (
502,037 )
(
20,097 )
391
6,133 (
12,610 )
83,014
113,143
(
44,149 )
6,081
(
977 )
2,117
5,914
1,553
(
1,757 )
335
61,581 (
61,699 )
(
6,808 ) (
4,598 )
64,323
133,900
(
19,720 )
21,559
3,350 (
1,125 )
(
8,897 ) (
11,926 )
1,193,095
484,310
6,317
9,777
18,763
17,671
(
14,071 ) (
21,798 )
(
28,465 ) (
79,258 )
1,175,639
410,702

(Continued)

~9~

OPTO TECH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Expressed in thousands of New Taiwan dollars)

(UNAUDITED)

CASH FLOWS FROM INVESTING ACTIVITIES
Financial assets at amortised cost

Proceeds from disposal of financial assets at fair value
through other comprehensive income

Increase in investments accounted for using the equity
method

Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets

(Increase)decrease in deposits-out
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans

Decrease in short-term loans

Decrease in long-term loans

Repayments of principal portion of lease liabilities

Decrease in guarantee deposits

Stock repurchased

Proceeds from issuance of shares

Cash dividends paid

Treasury shares transferred to employees

Net cash flows from (used in) financing activities
Effect of change in 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		 Nine months ended September 30
Notes
2021
2020
6(3)
($
888,428 ) $
-
6(4)
-
3,780
6(7)
(
70,000 )
-
6(8)(31)
(
346,156 ) (
239,891 )
139
-
6(11)
(
14,926 ) (
12,094 )
(
10,609 )
1,986
(
1,329,980 ) (
246,219 )
6(32)
596,941
496,465
6(32)
(
485,807 ) (
521,871 )
6(32)
(
322,862 )
-
6(32)
(
14,746 ) (
15,414 )
6(32)
2,111 (
87 )
6(18)
(
162,408 )
-
6(18)
1,375,800
-
6(20)
(
513,876 )
-
6(18)
97,970
-
573,123 (
40,907 )
(
4,999 ) (
11,415 )
413,783
112,161
3,100,161
2,997,465
$
3,513,944 $
3,109,626

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

~10~

OPTO TECH CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

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

(Reviewed, not audited)

1. HISTORY AND ORGANIZATION

Opto Tech Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.). The shares of the Company have been traded on the Taiwan Stock Exchange since May 2, 1995. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the manufacture and sales of semiconductor components as well as research and development, design, manufacture and sales of systems products.

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

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were reported to the Board of Directors on November 3, 2021.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”) New standards, interpretations and amendments endorsed by the FSC effective from 2021 are as follows:

follows:
New Standards,Interpretations and Amendments Effective date by
International Accounting
Standards Board
Amendments to IFRS 4, ‘Extension of the temporary exemption
from applying IFRS 9’
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, ‘
Interest Rate Benchmark Reform— Phase 2’
Amendment to IFRS 16, ‘Covid-19-related rent concessions beyond
30 June 2021’
Note：Earlier application from January 1, 2021 is allowed by FSC.		 January 1, 2021
January 1, 2021
April 1, 2021 (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.

~11~

(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 2022 are as follows:

follows:
Effective date by
International Accounting
New Standards,Interpretations and Amendments Standards Board
Amendments to IFRS 3, ‘Reference to the conceptual framework’ January 1, 2022
Amendments to IAS 16, ‘Property, plant and equipment:proceeds January 1, 2022
before intended use’
Amendments to IAS 37, ‘Onerous contracts—cost of fulfilling a January 1, 2022
contract’
Annual improvements to IFRS Standards 2018–2020 January 1, 2022

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

(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 endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments Effective date by
International Accounting
Standards Board
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets
between an investor and its associate or joint venture’
IFRS 17, ‘Insurance contracts’
Amendments to IFRS 17, 'Insurance contracts'
Amendments to IAS 1, ‘Classification of liabilities as current or
non-current’
Amendments to IAS 1, ‘Disclosure of accounting policies’
Amendments to IAS 8, ‘Definition of accounting estimates’
Amendments to IAS 12, ‘Deferred tax related to assets and liabilities
arising from a single transaction’		 To be determined by
International Accounting
Standards Board
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023

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

~12~

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted are consistent with Note 4 in the consolidated financial statements for the year ended December 31, 2020, except for the compliance statement, basis of preparation, basis of consolidation and additional policies as set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

  • (1) Compliance statement

  • A. 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.

  • B. These consolidated financial statements are to be read in conjunction with the consolidated financial statements for the year ended December 31, 2020.

  • (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 present value of defined benefit obligation less the net amount of pension fund assets.

  • 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. The basis for preparation of consolidated financial statements are consistent with those of the year ended December 31, 2020.

~13~

B. Subsidiaries included in the consolidated financial statements:

Name of
Investor		 Name of
Subsidiary		 Main Business
Activities		 September
30,2021
December
31,2020
September
30,2020

100.00
100.00
100.00
-
-
100.00
-
-
-
99.87
99.87
99.87
50.00
50.00
-
100.00
-
-
100.00

100.00
-
100.00

-
-
-
-
-
-
-
50.00
-
100.00
100.00
50.00
50.00
50.00
100.00
100.00
100.00
Ownership (%)		 September
30,2021
December
31,2020
September
30,2020

100.00
100.00
100.00
-
-
100.00
-
-
-
99.87
99.87
99.87
50.00
50.00
-
100.00
-
-
100.00

100.00
-
100.00

-
-
-
-
-
-
-
50.00
-
100.00
100.00
50.00
50.00
50.00
100.00
100.00
100.00
Ownership (%)		 Description
Notes 1&7
Notes 2&7
Notes 3&7
Note 4&7
Note 2&7
Note 4&7
Note 5&7
Note 6&7
Note 2&7
Note 2&7
Note 4&7
Note 7
Note 7
September
30,2021		 December
31,2020
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
OTIG
OTIG
CSB
Bright
Everyung		 Ho Chung Investment
Co., Ltd. (Ho Chung
Investment)
Opto Technology
International Group
Co., Ltd. (OTIG)
Opto Tech (Macao)
Co., Ltd. (Opto
Macao)
CS Bright
Corporation(CSB)
Everyung Investment
Ltd.( Everyung)
Bright Investment
International
Ltd. (Bright)
Dongzhen Asset Co.,
Ltd.
Opto System
Technologies Inc.
Opto Tech (Cayman)
Co., Ltd. ( Opto
(Cayman) )
Everyung Investment
Ltd. (Everyung)
Bright Investment
International
Ltd. (Bright)
Everyung Investment
Ltd. (Everyung)
Opto Plus
Technology Co.,
Ltd. (Opto Plus)		 Investment business
Holding company
International trade
Manufacture and sales
of LED and electronic
products
Holding company
Holding company
Investment business
Manufacture and sales
of lighting equipment
Holding company
Holding company
Holding company
Holding company
Manufacture and
sales of LED and
electronic products		 100.00
-
-
99.87
50.00
100.00
100.00

100.00

-
-
-
50.00
100.00		 100.00
-
-
99.87
50.00
-
100.00
-
-
-
100.00
50.00
100.00

Note 1: Ho Chung Investment has been continuously acquiring the Company’s common stock amounting to 755 thousand shares (after capital reduction amounting to 352 thousand shares) from 1998 to 2000. It holds about 0.2% of the Company’s outstanding common stock.

~14~

  • Note 2: The Board of Directors of the Company resolved the liquidation of foreign subsidiaries, Opto Technology International Group Co., Ltd.(OTIG) and OptoTech (Cayman)Co., Ltd.(Opto(Cayman)), on August 14, 2017.Opto(Cayman) has completed the liquidation process on September 16, 2020 and remitted share capital black to OTIG. OTIG has completed the liquidation process on October 26, 2020. The Company formerly held 50% equity shares of foreign controlling company, Everyung Investment Ltd. (Everyung), through OTIG. After OTIG completed the liquidation process, the Company generally accepted its assets and directly held 50% equity shares of Everyung.

  • Note 3: The Board of Directors of the Company resolved the liquidation of foreign subsidiary, Opto Macao on April 28, 2020. Opto Macao has completed the liquidation process on September 29, 2020 and remitted share capital back to Opto Tech Corporation.

  • Note 4: The Board of Directors of the Company resolved the liquidation of foreign subsidiary, CS Bright Corporation (CSB), on September 10, 2020. The effective date was set on December 31, 2020, and the liquidation is still in process. The share equity of Bright Investment International Ltd. which was held by CSB had been transferred to the Company on April 22, 2021.

  • Note 5: The subsidiary - Dongzhen Asset Co., Ltd. is a wholly-owned subsidiary established by the Company on November 25, 2020, and has been included in the consolidated financial statements since the date of acquisition.

  • Note 6: The subsidiary - Opto System Technologies Inc. is a wholly-owned subsidiary established by the Company on September 16, 2021, and has been included in the consolidated financial statements since the date of acquisition.

  • Note 7: The financial statements of the entity as of and for the nine months ended September 30, 2021 and 2020 were not reviewed by independent auditors as the entity did not meet the definition of a significant subsidiary.

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

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

  • E. Nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities of the Group ： None.

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

(4) Employee benefits

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. And, the related information is disclosed accordingly.

(5) Income tax

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

~15~

  • B. If a change in tax rate is enacted or substantively enacted in an interim period, the Group recognises the effect of the change immediately in the interim period in which the change occurs. The effect of the change on items recognised outside profit or loss is recognised in other comprehensive income or equity while the effect of the change on items recognised in profit or loss is recognised in profit or loss.

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

UNCERTAINTY

There have been no significant change as of September 30, 2021. Please refer to Note 5 in the consolidated financial statements for the year ended December 31, 2020.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash on hand
Checking accounts and demand
deposits
Time deposits
Cash equivalents - Resale bonds
Total		 September 30,2021

168
$ 1,388,444
1,964,332
161,000
3,513,944
$		 December 31,2020

341
$ 677,614
2,064,206
358,000

3,100,161
$		 September 30,2020
470
$ 716,583
1,872,573
520,000
3,109,626
$

  • 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. Cash and cash equivalents all amounting to $22,810 were pledged to others as collateral for the leases of land and dormitory as of September 30, 2021, December 31, 2020 and September 30, 2020, and were classified as financial assets at amortised cost. Please refer to Notes 6(3) and 8 for the details.

~16~

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

Items September 30,2021 December 31,2020 September 30,2020
Current items:
Financial assets mandatorily
measured at fair value
through profit or loss
Funds $ 565,000
 $ 315,000
 $ 265,000
Listed stocks 146,730 - -
Valuation adjustment
Funds 6,094 5,248 4,977
Forward exchange contracts - 171 115
Equity instruments ( 35,218) - -
Total $ 682,606 $ 320,419 $ 270,092
Financial liabilities mandatorily
measured at fair value
fair value through profit and loss
Forward exchange contracts ($ 77)
 ($ 799)
 $ -
Non-current items:
Financial assets mandatorily
measured at fair value
through profit or loss
Unlisted stocks $ 127,048
 $ 127,048
 $ 127,048
Valuation adjustment ( 20,058) ( 20,058)
 ( 20,195)
Total $ 106,990 $ 106,990 $ 106,853

  • A. The Group recognised net gain (loss) of ($16,919), ($18), $1,934 and $808 on financial assets and financial liabilities held for trading for the three months and nine months ended September 30, 2021 and 2020, respectively.

  • B. The non-hedging derivative instrument transactions and contract information are as follows:

Derivative Instruments
Liabilities-Current items:
Forward exchange contracts		 September 30,2021 September 30,2021
USD
2,000
$ (thousands)
Contract Amount
(Nominal Principal)		 Contractperiod
USD September 29, 2021~
October 14, 2021

~17~

==> picture [457 x 252] intentionally omitted <==

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

December 31, 2020
Contract Amount
Derivative Instruments (Nominal Principal) Contract period
Assets - Current items:
Forward exchange contracts USD $ 2,000 December 1, 2020~
(thousands) January 21, 2021
Liabilities-Current items:
Forward exchange contracts USD $ 3,000 December 21, 2020~
(thousands) January 26, 2021
September 30, 2020
Contract Amount
Derivative Instruments (Nominal Principal) Contract period
Assets-Current items:
Forward exchange contracts USD $ 1,000 September 25, 2020~
(thousands) October 20, 2020
----- End of picture text -----

The Group entered into forward exchange contracts to sell USD and buy TWD to hedge exchange rate risk of export proceeds. However, these forward 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 credit risk of financial assets at fair value through profit or loss is provided in Note 12(2).

(3) Financial assets at amortised cost

Items

Current items:
Time deposits with maturity
over three months
Restricted time deposit		 September 30,2021
888,428
$ 22,810
911,238
$		 December 31,2020
September 30,2020
-
$ -
$ 22,810
22,810
22,810
$ 22,810
$

  • A. The Group recognised interest income of $633, $19, $1,024 and $75 for financial assets at amortised cost for the three months and nine months ended September 30, 2021 and 2020, respectively.

  • B. Details of the Group’s financial assets at amortised cost pledged to others as collateral are provided in Note 8.

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

~18~

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

Items

Non-current items:
Equity instruments
Listed stocks
Unlisted stocks
Subtotal
Valuation adjustment
Total		 September 30,2021
December 31,2020

73,574
$ 73,574
$ 477,809

477,809
551,383

551,383
255,463
232,615

806,846
$ 783,998
$		 September 30,2020
73,574
$ 477,809
551,383
318,653
870,036
$

  • A. The Group sold all its stocks of Guang Xin Vision Co., Ltd. for $3,780 and resulted in transfers of $180 from other equity to retained earnings on disposal during the second quarter of 2020.

  • B. 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 $806,846, $783,998 and $870,036 as at September 30, 2021, December 31, 2020 and September 30, 2020, respectively.

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

  • D. Amounts recognised in profit or los and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

Three months ended September Three months ended September 30
2021 2020
Equity instrument at fair value through other
comprehensive income
Fair value change recognised in other
comprehensive income (loss) ($ 3,162) ($ 3,305)
Cumulative gains reclassified to retained
earnings due to recognition $ - $ -
Dividend income recognised in profit or loss
Held at end of period $ 8,419 $ 2,011
Nine months ended September 30
2021 2020
Equity instrument at fair value through other
comprehensive income
Fair value change recognised in other
comprehensive income (loss) $ 22,848 ($ 43,193)
Cumulative gains reclassified to retained
earnings due to recognition $ - $ 180
Dividend income recognised in profit or loss
Held at end of period $ 18,763 $ 14,454

~19~

(5) Notes and accounts receivable

Notes and accounts receivable
September 30,2021 December 31,2020 September 30,2020
Notes receivable $ 2,846
 $ 8,873
 $ 6,239
Accounts receivable 1,524,197 1,642,933
 1,922,733
Accounts receivable - related parties 36,977 16,880 32,397
Less : Allowance for uncollectible
accounts ( 8,173)
 ( 8,020)
 ( 10,711)
$ 1,555,847 $ 1,660,666 $ 1,950,658

As of September 30, 2021, December 31, 2020 and September 30, 2020, accounts receivable and notes receivable were all from contracts with customers. And as of January 1, 2020, the balance of receivables from contracts with customers amounted to $ 1,482,823.

A. The ageing analysis of accounts receivable is as follows:

Without past due
Up to 180 days
181 to 360 days
Over 361 days		 September 30,2021
December 31, 2020
September 30, 2020
1,544,599
$ 1,618,397
$ 1,895,214
$ 8,402
34,823
52,740
6,273
4,771
4,252
1,900
1,822

2,924
1,561,174
$ 1,659,813
$ 1,955,130
$

The ageing analysis was based on past due date.

B. The ageing analysis of notes receivable is as follows:

Without past due September30,2021

2,846
$		 December31,2020

8,873
$		 September30,2020
6,239
$

The ageing analysis was based on the maturity date of the promissory note.

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

(6) Inventories

Raw materials
Supplies
Work in process
Semi-finished goods
Finished goods
Total		 September 30,2021

267,789
$ 273,297
299,100
114,988
117,401
1,072,575
$		 December 31,2020

196,857
$ 252,103
261,112
88,817
356,700
1,155,589
$		 September 30,2020
204,890
$ 256,320
319,268
82,746
263,331
1,126,555
$

~20~

A. The cost of inventories recognised as expense for the period:

Three months ended Three months ended September 30
2021 2020
Cost of goods sold $ 1,198,233
 $ 1,130,953
(Gain on reversal ) loss on decline in
market value ( 4,903) 38,670
$ 1,193,330 $ 1,169,623
Nine months ended September 30
2021 2020
Cost of goods sold $ 3,229,570
 $ 2,902,813
(Gain on reversal ) loss on decline in
market value ( 13,511) 100,556
$ 3,216,059 $ 3,003,369

B. For the three months amd nine months ended September 30, 2021, because of the rise of the Group’s product price, the net realised value was reversed and recognised as reduction of cost of goods sold.

  • C. For the three months and nine months ended September 30, 2021 and 2020, the Group wrote down inventory from cost to net realisable value accounted for as 'cost of goods sold'.

(7) Investments accounted for using equity method

Investments accounted for using equity method
2021
At January 1
5,394
$ $ Share of profit of investment accounted for using
equity method
1,971)
(
(
Earnings distribution of investments accounted
for using equity method
-
(
Increase in investment cost
(transferred from prepayments for investments)
70,000
Change in other equity items (Note 6(20))
278)
(
At September 30
73,145
$ $ Associated enterprises
September 30,2021
December 31,2020
NEW SMART TECHNOLOGY
CO., LTD.
67,752
$ -
$ VML TECHNOLOGIES B.V.
5,393
5,394
73,145
$ 5,394
$		 2020
8,768

374)

3,217)

-
308
5,485

September 30,2020
-
$ 5,485
5,485
$

~21~

(8) Property, plant and equipment

2021

2021
Construction in
Pollution progress and
Buildings Utility prevention Transportation Office Other prepayment for
At January 1 and structures Machinery facilities facilities equipment equipment equipment equipment Total
Cost $ 2,041,199
 $ 5,444,530
 $ 1,050,132
 $ 707,319
 $ 13,288
 $ 81,650
 $ 1,937,717
 $ 114,523
 $ 11,390,358
Accumulated depreciation ( 1,193,941)
 ( 4,277,941)
 ( 931,593)
 ( 597,978)
 ( 8,104)
 ( 69,172)
 ( 1,570,993)
 - ( 8,649,722)
Accumulated impairment ( 59)
 ( 35,388)
 - - -
 ( 19)
 ( 37)
 - ( 35,503)
$ 847,199 $ 1,131,201 $ 118,539 $ 109,341 $ 5,184
 $ 12,459 $ 366,687 $ 114,523 $ 2,705,133
Nine months ended September 30
Opening net book amount $ 847,199
 $ 1,131,201
 $ 118,539
 $ 109,341
 $ 5,184
 $ 12,459
 $ 366,687
 $ 114,523
 $ 2,705,133
Additions 419 5,950 3,026 1,640 - 2,322 5,788 200,807 219,952
Disposals - ( 246)
 - - - ( 133)
 - - ( 379)
Reclassifications - 76,565 10,545 21,540 - 9,983 14,846 ( 133,479)
 -
Depreciation expense ( 44,113)
 ( 206,743)
 ( 14,677)
 ( 11,361)
 ( 1,023)
 ( 4,553)
 ( 43,710)
 - ( 326,180)
Net exchange differences ( 315)
 ( 51)
 - - 1 - - - ( 365)
Closing net book amount $ 803,190 $ 1,006,676 $ 117,433 $ 121,160 $ 4,162 $ 20,078 $ 343,611 $ 181,851
 $ 2,598,161
At September 30
Cost $ 2,040,756
 $ 5,421,431
 $ 1,063,703
 $ 730,500
 $ 13,284
 $ 89,181
 $ 1,958,352
 $ 181,851
 $ 11,499,058
Accumulated depreciation ( 1,237,507)
 ( 4,379,367)
 ( 946,270)
 ( 609,340)
 ( 9,122)
 ( 69,084)
 ( 1,614,704)
 - ( 8,865,394)
Accumulated impairment ( 59)
 ( 35,388)
 - - - ( 19)
 ( 37)
 - ( 35,503)
$ 803,190 $ 1,006,676 $ 117,433 $ 121,160 $ 4,162 $ 20,078 $ 343,611 $ 181,851 $ 2,598,161

~22~

2020

2020
Construction in
Pollution progress and
Buildings Utility prevention Transportation Office Other prepayment for
At January 1 and structures Machinery facilities facilities equipment equipment equipment equipment Total
Cost $ 2,028,554
 $ 5,625,019
 $ 1,118,047
 $ 717,932
 $ 8,703
 $ 78,865
 $ 1,949,344
 $ 116,824
 $ 11,643,288
Accumulated depreciation ( 1,135,179)
 ( 4,381,982)
 ( 974,309)
 ( 594,031)
 ( 7,337)
 ( 66,858)
 ( 1,567,562)
 - ( 8,727,258)
Accumulated impairment ( 59)
 ( 6,742)
 - - -
 ( 19)
 ( 83)
 - ( 6,903)
$ 893,316 $ 1,236,295 $ 143,738 $ 123,901 $ 1,366
 $ 11,988 $ 381,699 $ 116,824 $ 2,909,127
Nine months ended September 30
Opening net book amount $ 893,316
 $ 1,236,295
 $ 143,738
 $ 123,901
 $ 1,366
 $ 11,988
 $ 381,699
 $ 116,824
 $ 2,909,127
Additions 2,127 29,931 2,581 2,204 2,155
 4,326 10,579 187,230 241,133
Disposals - ( 3,269)
 ( 12,480)
 ( 1,104)
 -
 ( 39)
 ( 11,448)
 - ( 28,340)
Reclassifications 8,846 111,309 5,131 1,229 2,155 ( 17)
 39,348 ( 168,001)
 -
Depreciation expense ( 43,623)
 ( 207,850)
 ( 16,270)
 ( 12,956)
 ( 444)
 ( 3,049)
 ( 44,530)
 - ( 328,722)
Impairment loss - ( 35,585)
 - - - - - - ( 35,585)
Net exchange differences ( 1,436)
 ( 434)
 - - ( 6)
 ( 4)
 - - ( 1,880)
Closing net book amount $ 859,230 $ 1,130,397 $ 122,700 $ 113,274 $ 5,226 $ 13,205 $ 375,648 $ 136,053 $ 2,755,733
At September 30
Cost $ 2,036,380
 $ 5,597,509
 $ 1,066,835
 $ 707,635
 $ 12,996
 $ 81,489
 $ 1,934,387
 $ 136,053
 $ 11,573,284
Accumulated depreciation ( 1,177,091)
 ( 4,429,518)
 ( 944,135)
 ( 594,361)
 ( 7,770)
 ( 68,265)
 ( 1,558,702)
 - ( 8,779,842)
Accumulated impairment ( 59)
 ( 37,594)
 - - - ( 19)
 ( 37)
 - ( 37,709)
$ 859,230 $ 1,130,397 $ 122,700
 $ 113,274 $ 5,226 $ 13,205 $ 375,648 $ 136,053 $ 2,755,733

~23~

  • A. Amount of borrowing costs capitalised as part of property, plant and equipment and the range of the interest rates for such capitalization are as follows:
Nine months ended September 30 Nine months ended September 30
2021 2020
Amount capitalised 159
$		 808
$
Interest rate 0%~0.53% 0.24%~1.38%

  • B. In June 2020, in consideration of its future operation plan, the Group assessed that certain machineries did not meet production requirements and showed an indication of idling. As a result, the Group recognised an impairment loss amounting to $35,585 as the recoverable amounts of these machineries were less than their carrying amounts. The Group used the value-in-use standard recoverable amount and the discount rate used was 9.82%.

  • －

  • (9) Leasing arrangements lessee

  • A. The Group leases various assets including land, buildings and business vehicles. Rental contracts are typically made for periods of 3 to 20 years.

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

September 30,2021
Carryingamount
Land
212,000
$ Buildings
2,897
Transportation equipment
(Business Vehicles)
3,621
Office equipment
(Internet equipment)
1,677

220,195
$
Land
Buildings
Transportation equipment (Business Vehicles)
Office equipment (Internet equipment)		 December 31,2020
September 30, 2020
Carrying amount
Carryingamount
223,498
$ 227,276
$ 4,635

5,214
5,400
6,063
2,602
1,308
236,135
$ 239,861
$ 2021
2020
Depreciation charge
Depreciation charge
3,829
$ 3,829
$ 579
782
628
760
308
230
5,344
$ 5,601
$ Three months ended September 30
2021
Depreciation charge

3,829
$ 579
628
308
5,344
$

~24~

Nine months ended Nine months ended September 30
2021 2020
Depreciation charge Depreciation charge
Land $ 11,487
 $ 11,486
Buildings 1,738
 2,346
Transportation equipment (Business Vehicles) 1,888
 2,663
Office equipment (Internet equipment) 925
 692
$ 16,038 $ 17,187

  • C. For the three months and nine months ended September 30, 2021 and 2020, the additions to rightof-use assets amounted to $0, $3,708, $109 and $5,971, respectively.

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

Items affecting profit or loss
Interest expense on lease liabilities
Expense on short-term lease contracts
Items affecting profit or loss
Interest expense on lease liabilities
Expense on short-term lease contracts		 Three months ended September 30 Three months ended September 30
2021
2020
1,012
$ 1,081
$ 2,005
$ 2,735
$ 2021
2020
3,092
$ 3,283
$ 7,034
$ 8,031
$ Nine months ended September 30		 2020
1,081
$
2,735
$
3,283
$
8,031
$

  • E. For the three months and nine months ended September 30, 2021 and 2020, the Group’s total cash outflow for leases amounted to $7,986, $8,698, $24,872 and $26,728, respectively.

  • F. The Group terminated the lease of the subsidiary's office prior to the expiration date in September 2020, recognised gain on lease termination amounting to $4, and decreased right-of-use asset and lease liability by $402 and $469, respectively. No penalty was paid due to the early termination.

(10) Investment property

At January 1 (September 30)
September 30, 2020: None.		 2021
Land
399,307
$

  • A. On September 30, 2021, the fair value of investment properties was $410,640, which was based on the market evidence on transaction price of similar property and publicly announced present value. On December 31, 2020, the fair value of investment properties was $410,640, which was based on the valuation results from independent appraisers.

  • B. The Group has no investment properties pledged to others.

~25~

(11) Intangible assets

==> picture [470 x 431] intentionally omitted <==

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

2021 2020
At January 1 Software Software
Cost $ 40,624 $ 38,298
Accumulated amortisation ( 26,306) ( 24,069)
$ 14,318 $ 14,229
Nine months ended September 30
Opening net book amount $ 14,318 $ 14,229
Additions 14,926 12,094
Amortisation expense ( 13,634) ( 11,104)
Closing net book amount $ 15,610 $ 15,219
At September 30
Cost $ 39,378 $ 37,539
Accumulated amortisation ( 23,768) ( 22,320)
$ 15,610 $ 15,219
Details of amortisation on intangible assets are as follows:
Three months ended September 30
2021 2020
Operating costs $ 2,252 $ 1,143
Operating expenses 2,328 2,788
Total $ 4,580 $ 3,931
Nine months ended September 30
2021 2020
Operating costs $ 6,917 $ 3,262
Operating expenses 6,717 7,842
Total $ 13,634 $ 11,104
----- End of picture text -----

Details of amortisation on intangible assets are as follows:

(12) Short-term borrowings

Type of borrowings

Unsecured bank borrowings
Interest rate range		 September 30,2021
341,071
$ 0.53%~5%		 December 31,2020

230,758
$ 0.51%~5.25%		 September 30,2020
223,748
$ 0.51%~5.25%

~26~

(13) Other payables

September 30,2021 December 31,2020 September 30,2020 September 30,2020
Salaries and bonus payable $ 199,570
 $ 186,138
 $ 133,077
Compensation payable to
employees 160,923 115,354 198,174
Remuneration payable to
directors		 53,696 38,410 65,854
Dividends payable - -
 378,623
Others 268,395 279,140 285,019
Total $ 682,584 $ 619,042 $ 1,060,747

- (14) Long term borrowings

Long-term borrowings
Type of borrowings
Credit line
Syndicated borrowings with
four financial institutions
including China Trust
Commercial
Bank(Unsecured)
$ 1,200,000
Less: Current portion (shown as “Other current
Type of borrowings
Credit line
Syndicated borrowings with
four financial institutions
including China Trust
Commercial
Bank(Unsecured)
$ 1,200,000
Less: Current portion (shown as “Other current
Type of borrowings
Credit line
Syndicated borrowings with
four financial institutions
including China Trust
Commercial Bank
(Unsecured)
$ 1,200,000
Less: Current portion (shown as “Other current		 Period Interest rate
range
1.0797%~
1.797%
Interest rate
range		 September 30,
2021
2019.02.20~
2022.02.20
liabilities”)
Period		 484,536
$ 484,536)
(
-
$ December 31,2020
2019.02.20~
2022.02.20
liabilities”)
Period		 1.169%~
1.797%
Interest rate
range		 811,515
$ 62,960)
(
748,555
$ September 30,
2020
2019.02.20~
2022.02.20
liabilities”)		 1.2188%~
3.1712%		 799,720
$ 63,409)
(
736,311
$

~27~

On January 15, 2019, the Company signed a joint credit facility of $1.2 billion with four financial institution including China Trust Commercial Bank. The loan agreement includes the following covenants.

  • (a) The current ratio should be no less than 100% per share every half year.

  • (b) The debt ratio should not be higher than 100%.

  • (c) The interest coverage ratio shall not be less than 300%.

  • (d) The tangible net value shall be maintained at more than 5 billion yuan (inclusive).

If the Company fails to meet the required financial ratios, the bank will stop the allocation. In case of violation of the contract, the bank has the right to ask the Company to repay in full the unpaid balance of the loan in advance.

(15) Pensions

  • A. (a) The Company and CS Bright Corporation have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company and CS Bright Corporation contribute monthly an amount equal to 2.68% and 3.18% 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 the end of December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method, to the employees expected to be qualified for retirement next year, the Company will make contributions to cover the deficit.

  • (b) For the aforementioned pension plan, the Group recognised pension costs of $1,710, $2,411, $5,130 and $7,230 for the three months and nine months ended September 30, 2021 and 2020, respectively.

  • (c) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2021 amount to $8,059.

~28~

  • B. (a) Effective July 1, 2005, the Company and its CS Bright Corporation 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 and CS Bright Corporation contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

  • (b) The Company’s Mainland China subsidiary, Opto Plus Technology Co., Ltd., has defined contribution plans. Monthly contributions to an administered by the government in accordance with the pension regulations in the People’s Republic of China (P.R.C.) are based on certain percentage of employees’ monthly salaries and wages. The above Mainland China subsidiaries’ contribution percentage for both the nine months ended September 30, 2021 and 2020 was both 14%. 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, 2021 and 2020 were $8,451, $8,770, $25,367 and $27,158, respectively.

(16) Share-based payment

  • A. For the nine months ended September 30, 2021, the Group’s share-based payment arrangements were as follows:
were as follows:
Type of arrangement Grant date Quantity
granted		 Contract
period
Vesting conditions
-
Vested immediately
Treasury stock transferred to
employees		 2021.07.20 7,588

Transfer restriction is no transfer within two years.

The grant date is the date that the number of shares subscribable by employees is confirmed by the Company.

  • B. The fair value of stock options granted on grant date is measured using the Black-Scholes optionpricing model. Relevant information is as follows:
Type of
arrangement		 Grant date Stock
price		 Exercise
price		 Expected
price
volatility		 Expected
option
life		 Expected
dividends		 Risk-free
interest
rate		 Fair
value
per unit
Treasury
stock
transferred to
employees		 110.07.20 31.6 12.95 40.63% 0.01～
0.02years		 - 0.1241% 13.91

~29~

C. Expenses incurred on share-based payment transactions are shown below:

Nine months ended September 30 Equity-settled $ 105,473

For the nine months ended September 30, 2020: None.

  • (17) Provisions
Analysis of total provisions:
Warranty
At January 1
Accrued during the period
Used during the period
Exchange differences
At September 30

Current
Non-current		 2021
2020
22,841
$ 24,017
$ 7,835
6,324
4,485)
(
7,449)
(
-
14)
(
26,191
$ 22,878
$ September 30,2021
December 31, 2020
September 30, 2020
6,850
$ 4,033
$ 5,848
$ 19,341
$ 18,808
$ 17,030
$

The Group provides warranties on products sold. Provision for warranties is estimated based on historical warranty date of products.

(18) Share capital

A. As of September 30, 2021, the Company’s authorized capital was $10,000,000, consisting of 1,000,000 thousand shares of common stock, and the paid-in capital was $4,386,228, consisting of 438,623 thousand shares of common stock with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected. Movements in the number of the Company’s ordinary shares outstanding for the nine months ended September 30, 2021 and 2020 are as follows:

follows:
(In thousands of shares)
2021 2020
At January 1 375,541 377,868
Cash capital increase 60,000 -
Purchase of treasury shares ( 6,566)
 -
Treasury stock transferred to employees 7,588 -
At September 30 436,563 377,868
  • B. In accordance with paragraph 7, Article 43-6 of Securities and Exchange Act, private placements of securities can be conducted subsequently within one year after the date that shareholders made their resolution as approved by the Board of Directors on March 18, 2021, which has not yet been approved at the shareholders’ meeting. Taking into consideration capital market condition, the Company discontinued the private replacement of securities as approved by the shareholders in 2020.

~30~

  • C. To meet the strategic cooperation needs of the Company’s long-term development, strengthen the Company’s competitiveness and introduce strategic investors, the Company raised additional cash by issuing 60 million new shares at the price of $22.93 (in dollars) per share, totaling $1,375,800 as approved by the Board of Directors on July 1, 2021. All proceeds from shares issued have been collected. Pursuant to the Securities and Exchange Act, the ordinary shares raised through the private placement are subject to certain transfer restrictions and cannot be listed on the stock exchange until three years after they have been issued and have been offered publicly. Other than these restrictions, the rights and obligations of the ordinary shares raised through the private placement are the same as other issued ordinary shares. The effective date for the aforesaid cash capital increase was set on August 30, 2021, the registration was completed on September 9, 2021.

  • D. Treasury stock

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

Name of company
holdingthe shares
The Company
The Company
Subsidiary-Ho Chung
Investment Co., Ltd.
Name of company
holdingthe shares
The Company
The Company
Subsidiary-Ho Chung
Investment Co., Ltd.
Name of company
holdingthe shares
The Company
Subsidiary-Ho Chung
Investment Co., Ltd.		 Reason for reacquisition
For transfer of shares to
empoyees
The Company’s shares
held by its subsidiary
Reason for reacquisition
For transfer of shares to
empoyees
The Company’s shares
held by its subsidiary
Reason for reacquisition
The Company’s shares
held by its subsidiary		 September 30, 2021
Number of
Shares
1,305
755

2,060
December		 Carryingamount
31,782
$ 23,172
54,954
$
31,2020
Number of
Shares
2,327
755
3,082
September		 Carrying
amount
58,849
$ 23,172
82,021
$
30,2020
Number of
Shares
755		 Carrying
amount
23,172
$

~31~

  • (b) The Company’s shares held by its subsidiary had no voting rights before being transferred to the third party.

  • (c) On November 6, 2020, the Board of Directors of the Company approved to repurchase the Company’s common shares and transfer them to employees. The Company expected to repurchase 7,500,000 shares with an upper limit of cash amount of $3,103,739. As of January 8, 2021, the final date of repurchase period, the Company repurchased 4,294 thousand shares for a total consideration of $109,251.

  • (d) On January 8, 2021, the Board of Directors of the Company approved to repurchase the Company’s common shares and transfer to employees. The Company expected to repurchase 7,500,000 shares with an upper limit of cash amount of $3,482,361. As of March 10, 2021, the final date of repurchase period, the Company repurchased 4,599 thousand shares for a total consideration of $112,006.

  • (e) The Company passed a resolution at the shareholders’ meeting on July 1, 2021 to transfer treasury shares to employees at a price lower than the average price of the shares actually bought back. The transfer price was set at $12.95 (in dollars) per share and approved by the Board of Directors on the same day, and will buy back shares to transfer to employees. The regulations stipulate that 8,893 thousand shares of treasury shares shall be transferred to employees. (The actual number of treasury shares transferred was 7,588 thousand shares.)

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

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

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

(19) Capital reserve

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

~32~

==> picture [473 x 272] intentionally omitted <==

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

2021
Share Treasury share Long-term Employee
premium transactions investments stock options
At January 1 $ 373,792 $ 60,256 $ 82,760 $ 186,300
Cash capital increase 775,800 - - -
Changes in ownership
interests in subsidiaries - - ( 4,105) -
Treasury stock transferred
- - -
to employees 13,968
Adjustments of capital
surplus for the Company's
cash dividends received
by subsidiaries - - 1,051 -
At September 30 $ 1,149,592 $ 74,224 $ 79,706 $ 186,300
2020
Share Treasury share Long-term
premium transactions investments Employee stock options Total
At January 1/
September 30 $ 373,792 $ 60,256 $ 82,617 $ 186,300 $ 702,965
----- End of picture text -----

(20) Retained earnings

  • A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be distributed as follows:

  • (a) Offset prior years’ operating losses.

  • (b) 10% of the remaining amount shall be set aside as legal reserve, unless the accumulated legal reserve equals the total capital of the Company.

  • (c) Special reserve set aside in accordance with relevant laws or regulations or as required for operations.

  • (d) Aside from some of accumulated unappropriated retained earnings that will be reserved, remaining retained earnings will be allocated to shareholders as dividends. The Board of Directors proposes a dividend distribution plan for approval by resolution at the shareholders’ meeting.

  • (e) The Company appropriated all or some dividends, bonus, capital surplus or legal reserve in the form of cash, which were resolved by the Board of Directors and reported to the shareholders.

  • B. The Company operates in the high-tech industry and its business life cycle is in the growth stage. In view of its capital expenditure demand and comprehensive financial plan for continuous development, the Company issues both stock and cash dividends. The proportion of dividends to be distributed in stocks and cash is determined based on the Company’s rate of growth and capital expenditures. However, the amount of cash dividends shall not be lower than 50% of the dividends distributed.

  • C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in

~33~

proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve is in excess of 25% of the Company’s paid-in capital.

  • D. 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.

  • E. The appropriation of 2020 earnings as resolved by the Board of Directors on July 1, 2021 and the appropriation of 2019 earnings as resolved by the shareholders on June 16, 2020 are as follows:

follows:
2020 2019
Dividends Dividends
per share per share
Amount (in dollars) Amount (in dollars)
Legal reserve $ 57,584
 $ 60,048
Reversal of special
reserve		 ( 1,320)
 ( 4,649)
Cash dividends 514,927 $ 1.39
 - $ -
Total $ 571,191 $ 55,399

  • (a) The distribution of cash dividends in 2020 was approved by the Company's Board of Directors on March 18, 2021. The statutory surplus reserve and the special surplus reserve were approved at the general meeting of shareholders on July 1, 2021. There was no difference between the surplus distribution in 2020 and the Company's approval by the Board of Directors on March 18, 2021. For the surplus distribution approved by the Board of Directors and resolutions of the shareholders' meeting, please refer to the Market Observation Post System for further information.

  • (b) On March 19, 2020, the Board of Directors of the Company resolved the appropriation of earnings and expected to distribute cash dividends of $378,623 with $1 per share. On June 16, 2020, shareholders proposed an amendment, “shareholders’ bonus – cash” is $0, for the proposed resolution of 2019 earnings appropriation, which means that cash dividends will be distributed at $0 per share. The Board of Directors shall subsequently distribute dividends following the resolution of shareholders. Consequently, the Company’s Board of Directors resolved the amendments to the appropriation of earnings on December 18, 2020 and no cash dividend will be distributed. Please refer to the website of Market Observation Post System for information about appropriation of earnings which was approved by the Board of Directors and resolved by shareholders.

~34~

(21) Other equity items

(21) Other equity items Other equity items Other equity items
(22) Operating revenue
Currency translation
differences of foreign Unrealized gain (loss) on
operations
valuation
Total
At January 1
4,063)
($ 191,414
$ 187,351
$ Financial assets at fair value
through other comprehensive
income(loss)
Revaluation - Group
-

22,848
22,848
Currency translation differences:
-Group
3,671

-
3,671
-Associates
278)
(
-
278)
(
At September 30
670)
($ 214,262
$ 213,592
$ 2021
Currency translation
differences of foreign Unrealized gain (loss) on
operations
valuation
Total
At January 1
9,372)
($ 288,841
$ 279,469
$ Financial assets at fair value
through other comprehensive
income(loss)
Revaluation - Group
51,557)
(
51,557)
(
Tax on revaluation
-

8,364
8,364
Revaluation transferred to
retained earnings
-
180)
(
180)
(
Currency translation differences:
-Group
1,188)
(
-
1,188)
(
-Associates
308
-
308
At September 30
10,252)
($ 245,468
$ 235,216
$ 2020
2021
2020
Revenue from contracts with customers
1,809,464
$ 1,665,499
$ 2021
2020
Revenue from contracts with customers
4,776,743
$ 4,207,493
$ Three months ended September 30
Nine months ended September 30
2021
2020
1,809,464
$ 1,665,499
$ Nine months ended September 30		 2020
1,665,499
$
2021
4,776,743
$		 2020
4,207,493
$

~35~

A. The Group derives revenue in the following major product lines:

==> picture [467 x 337] intentionally omitted <==

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

LED and Silicon Displays and Packaging
Three months ended Sensor Chips Lighting Business Other
September 30, 2021 Group Group Group segments Total
Revenue from external
-
contracts customers $ 1,412,934 $ 291,896 $ 104,634 $ $ 1,809,464
LED and Silicon Displays and Packaging
Three months ended Sensor Chips Lighting Business Other
September 30, 2020 Group Group Group segments Total
Revenue from external
contracts customers $ 1,320,343 $ 258,644 $ 82,047 $ 4,465 $ 1,665,499
LED and Silicon Displays and Packaging
Nine months ended Sensor Chips Lighting Business Other
September 30, 2021 Group Group Group segments Total
Revenue from external
contracts customers $ 3,948,376 $ 590,700 $ 237,667 $ - $ 4,776,743
LED and Silicon Displays and Packaging
Nine months ended Sensor Chips Lighting Business Other
September 30, 2020 Group Group Group segments Total
Revenue from external
contracts customers $ 3,250,155 $ 740,617 $ 204,038 $ 12,683 $ 4,207,493
----- End of picture text -----

B. The Group has recognised the following revenue-related contract liabilities:

September 30, 2021
December 31,2020
Contract
liabilities
21,500
$ 44,086
$ Revenue recognised that was included in the
contract liability balance at the beginning
of the period
Revenue recognised that was included in the
contract liability balance at the beginning
of the period		 September 30,2020
January1,2020
51,903
$
30,360
$ Three months ended September 30		 January1,2020
30,360
$
2021
2020
8,944
$ 1,116
$ Nine months ended September 30		 2020
1,116
$
2021
40,838
$		 2020
12,441
$

~36~

(23) Interest income

Three months ended September 30

Interest income from bank deposits Interest income from resale bonds Other interest income

Interest income from bank deposits Interest income from resale bonds Other interest income

==> picture [234 x 176] intentionally omitted <==

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

2021 2020
$ 1,730 $ 1,719
104 386
1 2
$ 1,835 $ 2,107
Nine months ended September 30
2021 2020
$ 6,118 $ 7,742
534 1,250
7 107
$ 6,659 $ 9,099
----- End of picture text -----

(24) Other income

Three months ended Three months ended Three months ended September 30
2021 2020
Rental income $ 20
 $ 20
Dividend income 8,419 2,011
Other income 2,657 11,654
$ 11,096 $ 13,685
Nine months ended September 30
2021 2020
Rental income $ 60
 $ 60
Dividend income 18,763 14,454
Other income 10,222 26,828
$ 29,045 $ 41,342
Other gains and losses
Three months ended September 30
2021 2020
Gain on disposals of property, plant and
equipment ($ 182)
 ($ 28,340)
Net currency exchange gain (loss) 7,894 ( 8,505)
Net loss on financial assets and liabilities
at fair value through profit or loss ( 16,619)
 ( 18)
Gain on lease termination - 4
Others ( 748) ( 112)
Total ($ 9,655) ($ 36,971)

(25) Other gains and losses

~37~

Nine months ended September 30

2021 2020
Loss on disposals of property, plant and
equipment ($ 239)
 ($ 28,340)
Net currency exchange gain (loss) 1,782 ( 7,885)
Net gain on financial assets and liabilities
at fair value through profit or loss 1,934 808
Impairment loss on disposal of property, plant
and - ( 35,585)
Gain on lease termination - 4
Others ( 1,184) ( 173)
Total $ 2,293 ($ 71,171)

(26) Finance costs

Finance costs
Three months ended September 30
2021 2020
Interest expense:
Bank borrowings $ 2,857
 $ 5,529
Lease liabilities 1,012 1,081
Less: Capitalisation of qualifying assets ( 20) ( 253)
3,849 6,357
Other financial costs 216 229
Total $ 4,065 $ 6,586
Nine months ended September 30
2021 2020
Interest expense:
Bank borrowings $ 10,357
 $ 18,559
Lease liabilities 3,092 3,283
Less: Capitalisation of qualifying assets ( 159) ( 808)
13,290 21,034
Other financial costs 901 902
Total $ 14,191 $ 21,936

(27) Expenses by nature

Expenses by nature
Employee benefit expense
Depreciation on property, plant
and equipment
Amortisation on intangible assets
Total		 Three months ended September 30
2021
465,958
$ 113,294
4,580
583,832
$		 2020
359,107
$ 112,373
3,931
475,411
$

~38~

Employee benefit expense
Depreciation on property, plant
and equipment
Amortisation on intangible assets
Total		 2021
2020
1,138,045
$ 979,300
$ 342,218

345,909

13,634
11,104
1,493,897
$ 1,336,313
$ Nine months ended September 30

(28) Employee benefit expense

Employee benefit expense
Wages and salaries
Termination benefits
Labor and health insurance fees
Pension costs
Other personnel expenses
Wages and salaries
Termination benefits
Labor and health insurance fees
Pension costs
Other personnel expenses		 2021
2020
429,753
$ 293,860
$ -
22,625

21,242
21,864

10,161
11,181
4,802
9,577

465,958
$ 359,107
$ 2021
2020
1,027,846
$ 832,836
$ -

22,625
63,953
66,512
30,497
34,388
15,749

22,939
1,138,045
$ 979,300
$ Three months ended September 30
Nine months ended September 30
832,836
$ 22,625
66,512
34,388
22,939
979,300
$

A. According to the Articles of Incorporation of the Company, if the Company has profit during the year, the Company shall distribute bonus to the employees that account for 10%~15% and pay remuneration to the directors that shall not be higher than 5%, of the total distributed amount. If the Company has an accumulated deficit, earnings should be used to cover losses. Employees’ compensation can be distributed in the form of shares or in cash. Qualification requirements of employees, including the employees of subsidiaries of the Company meeting certain specific requirements, entitled to receive aforementioned stock or cash may be specified in the Articles of Incorporation. The shareholders’ meeting on July 1, 2021 approved the amendment to the Company’s Articles of Incorporation, and revised the employee remuneration ratio to 10%~20% based on profitability, and the directors’ remuneration ratio to no more than 10%.

~39~

  • B. For the three months and nine months ended September 30, 2021 and 2020, employees’ compensation was accrued at $62,111, $39,899, $160,716 and $86,981, respectively; directors’ remuneration was accrued at $20,704, $13,300, $53,572 and $28,994, respectively. The aforementioned amounts were recognised in salary expense. The employees’ compensation and directors’ and supervisors’ remuneration were estimated and accrued based both on 15% and 5%.

  • C. For the three months and nine months ended September 30, 2021, the Company’s subsidiary, CS Bright Corporation, was liquidated. Therefore, remuneration for directors and employees is not estimated. For the three months and nine months ended September 30, 2020, employees’ compensation of the Company’s subsidiary, CS Bright Corporation, was accrued at $714 and $970, respectively; while directors’ and supervisors’ remuneration was accrued at $178 and $242, respectively. The aforementioned amounts were recognised in salary expenses, which were accrued based on distributable profit of current year as of the end of reporting period. And for the nine months ended September 30, 2020, the subsidiary accrued employees’ compensation and directors’ remuneration at 12% and 3%, respectively.

  • D. For the three months and nine months ended September 30, 2021, employees’ compensation of the Company’s subsidiary, Dongzhen Asset Co., Ltd., was accrued both at $207; while directors’ remuneration was accrued both at $124.

  • E. Employees’ compensation and directors’ remuneration of 2020 as resolved by the Board of Directors are the same as the amount recognised in the consolidated financial statements.

  • F. Information about employees’ compensation and directors’ remuneration of the Company as resolved at the Board of Directors’ meeting will be posted in the Market Observation Post System at the website of the Taiwan Stock Exchange.

(29) Income tax

  • A. Income tax expense

  • (a) Components of income tax expense:

Current tax:
Current tax on profits for the period
Tax on undistributed surplus earnings
Prior year income tax underestimation
Total current tax
Deferred tax:
Origination and reversal of temporary
differences
Income tax expense		 2021
2020
81,168
$ 1,195)
($ 232
-
-
-
81,400
1,195)
(
2,992
12,076
84,392
$ 10,881
$ Three months ended September 30

~40~

Nine months ended September 30 Nine months ended September 30 Nine months ended September 30
2021 2020
Current tax:
Current tax on profits for the period $ 173,596
 $ 68,405
Tax on undistributed surplus earnings 232 8,323
Prior year income tax underestimation 1,335 ( 25,336)
Total current tax 175,163 51,392
Deferred tax:
Origination and reversal of temporary
differences 7,690 20,269
Income tax expense $ 182,853 $ 71,661
The income tax charge relating to components of other comprehensive income are as follows:
Three months ended September 30
2021 2020
Changes in fair value of financial assets
at fair value through other comprehensive
income $ -
 $ -
Nine months ended September 30
2021 2020
Changes in fair value of financial assets
at fair value through other comprehensive
income $ -
 $ 8,364
  • (b) The income tax charge relating to components of other comprehensive income are as follows:

B. As of September 30, 2021, the Company’s income tax returns through 2019 have been assessed and approved by the Tax Authority.

(30) Earnings per share

and approved by the Tax Authority.
Earnings per share
Basic earnings per share
Profit attributable to owners of
the parent
Dilutive effect of common stock
equivalents:
Employees’ compensation
Diluted earnings per share
Profit attributable to owners of
the parent plus dilutive effect
of common stock equivalents		 Three months ended September 30,2021
Profit after tax
246,867
$ -
246,867
$		 Weighted-average
outstanding
common shares
(in thousands)
395,618
4,953
400,571		 Earnings per
share
(in dollars)
0.62
$
0.62
$

~41~

Basic earnings per share
Profit attributable to owners of
the parent
Dilutive effect of common stock
equivalents:
Employees’ compensation
Diluted earnings per share
Profit attributable to owners of
the parent plus dilutive effect
of common stock equivalents
Basic earnings per share
Profit attributable to owners of
the parent
Dilutive effect of common stock
equivalents:
Employees’ compensation
Diluted earnings per share
Profit attributable to owners of
the parent plus dilutive effect
of common stock equivalents		 Weighted-average
outstanding
common shares
Earnings per
share
Profit after tax
(in thousands)
(in dollars)
206,072
$ 377,868
0.55
$ -
3,757
206,072
$ 381,625

0.54
$ Three months ended September 30,2020
Nine months ended September 30,2021		 Weighted-average
outstanding
common shares
Earnings per
share
Profit after tax
(in thousands)
(in dollars)
206,072
$ 377,868
0.55
$ -
3,757
206,072
$ 381,625

0.54
$ Three months ended September 30,2020
Nine months ended September 30,2021		 Weighted-average
outstanding
common shares
Earnings per
share
Profit after tax
(in thousands)
(in dollars)
206,072
$ 377,868
0.55
$ -
3,757
206,072
$ 381,625

0.54
$ Three months ended September 30,2020
Nine months ended September 30,2021
Profit after tax
674,920
$ -
674,920
$		 Weighted-average
outstanding
common shares
(in thousands)
378,475
6,181
384,656		 Earnings per
share
(in dollars)
1.78
$
1.75
$

~42~

Nine months ended September Nine months ended September 30,2020
Weighted-average
outstanding Earnings per
common shares share
Profit after tax
(in thousands)		 (in dollars)
Basic earnings per share
Profit attributable to owners of
the parent $ 397,593
 377,868 $ 1.05
Dilutive effect of common stock
equivalents:
Employees’ compensation - 6,754
Diluted earnings per share
Profit attributable to owners of
the parent plus dilutive effect
of common stock equivalents $ 397,593

 384,622
 $ 1.03
Supplemental cash flow information
Investing activities with partial cash payments：
Nine months ended September 30
2021 2020
Purchase of property, plant and equipment $ 219,952
 $ 241,133
Add：Ending balance of prepayments
business facilities		 for 130,147 6,205
Less:Opening balance of prepayments
business facilities		 for ( 3,943)
 ( 7,447)
Cash paid during the period $ 346,156
 $ 239,891
Financing activities with no cash flow effects
Nine months ended September 30
2021 2020
Distribution of cash dividends
(shown as "other payables")		 $ - $ 378,623

(31) Supplemental cash flow information Investing activities with partial cash payments ：

~43~

(32) Changes in liabilities from financing activities

==> picture [493 x 431] intentionally omitted <==

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

2021
Short-term Long-term borrowings Lease Guarantee Liabilities from
borrowings ( including current portion) liabilities deposits financing activities-gross
At January 1 $ 230,758 $ 811,515 $ 236,266 $ 869 $ 1,279,408
Changes in cash
flow from financing
activities 111,134 ( 322,862) ( 14,746) 2,111 ( 224,363)
- - -
Interest payment ( 3,092) ( 3,092)
Amorization of
- - -
interest expenses 3,092 3,092
Increase in lease
liabilities - - 109 - 109
Impact of changes in
foreign exchange
rate ( 821) ( 4,117) - - ( 4,938)
At September 30 $ 341,071 $ 484,536 $ 221,629 $ 2,980 $ 1,050,216
2020
Short-term Long-term borrowings Lease Guarantee Liabilities from
borrowings ( including current portion) liabilities deposits financing activities-gross
At January 1 $ 249,640 $ 814,504 $ 249,496 $ 1,545 $ 1,315,185
Changes in cash flow
-
from financing activities ( 25,406) ( 15,414) ( 87) ( 40,907)
- - -
Interest payment ( 3,283) ( 3,283)
- - -
Interest in lease principal 5,971 5,971
Amorization of
-
interest expenses 3,283 3,283
- - -
Decrease for the period ( 469) ( 469)
Impact of changes in
foreign exchange rate ( 486) ( 14,784) ( 28) - ( 15,298)
At September 30 $ 223,748 $ 799,720 $ 239,556 $ 1,458 $ 1,264,482
----- End of picture text -----

~44~

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

Names of related parties

Opto Medical Public Welfare Foundation Shin-Etsu Opto Electronic Co., Ltd.

Giga Epitaxy Technology Corp.

Nichia Taiwan Corp. Nichia Corp.

VML Technologies B.V.

Relationship with the Company

Other related parties The Company is the director of this company; this company is the director of the Company.(Note 1) The Company is the director of this company.(Note 3) This company investments by the Company accounted for using the equity method.(Note 4)

This company is the Company's parent company of enterprise group accounted for using equity method. This company is an investment of Ho Chung Investment Co., Ltd. accounted for using equity method.

Shen Zhen Guabg Xin Vision Technology The chairman of this company is an independent director CO., Ltd.( Shen Zhen Guang Xin) of the Company.(Note 2) Guang Xin Vision Tech. (HK) CO., Ltd. The chairman of this company is an independent director (Hong Kong Guang Xin) of the Company.(Note 2) NEW SMART TECHNOLOGY CO., The company is the company's direct and indirect LTD. investment using the equity method company.

  • Note 1: The shareholders of the Company during their meeting resolved to reelect all its directors on June 16, 2020. The shareholders of Shin-Etsu Opto Electronic Co., Ltd. (Shin-Etsu) also resolved to reelect all its directors on June 18, 2020. After the reelection, the Company is no longer a legal person of Shin-Etsu and has not been a related party of the Company since June 18, 2020.

  • Note 2: The chairman of this Company was no longer an independent director of the Company after the re-election at the stockholders’ meeting on June 16, 2020. Thereafter, it was no longer a related party.

  • Note 3: It was no longer a related party of the Company after the Company resigned as director on February 28, 2021.

  • Note 4: The shareholders of the Company during their meeting resolved to issue common shares for capital increase through a private placement on July 1, 2021. The entity became an investor which accounted for its investment in the Company using the equity method after the effective date (August 30, 2021) for capital increase.

~45~

(2) Significant transactions and balances with related parties

A. Operating revenue:

Operating revenue:
Sales of goods:
-Associates
-Individuals with significant
influence on the Group
-Other related parties
Total
Sales of goods:
-Associates
-Individuals with significant
influence on the Group
-Other related parties
Total		 2021
2020
20,177
$ 59
$ 28,487
-
59,709
59,276
108,373
$ 59,335
$ Three months ended September 30
Nine months ended September 30
2021
2020
22,456
$ 59
$ 28,487
-
241,763

189,743
292,706
$ 189,802
$

The selling prices charged to the above related parties are not materially different from those charged to non-related parties. For the nine months ended September 30, 2021 and 2020, the credit term was 45 ~ 136 days, some related parties adopt advance payment post-shipment method and 90 ~ 150 days for the non-related parties for both periods.

B. Purchases:

Purchases:
Purchases of goods:
-Individuals with significant
influence on the Group
-Other related parties
Purchases of goods:
-Individuals with significant
influence on the Group
-Other related parties		 Three months ended September 30
2021
2020
9,288
$ -
$ 23,836
53,960
33,124
$ 53,960
$ Nine months ended September 30		 2020
-
$ 53,960
53,960
$
2021
9,288
$ 94,122
103,410
$		 2020
-
$ 165,246
165,246
$

~46~

The purchase prices charged by the above related parties were not materially different from those charged by non-related parties. For the nine months ended September 30, 2021 and 2020, the credit term was 60 ~ 120 days and 90 ~ 120 days for the non-related parties, respectively.

C. Accounts receivable:

C. Accounts receivable:
September 30,2021 December 31,2020 September 30,2020
Receivables from related parties:
-Other related parties $ -
 $ 16,880
 $ 32,397
-Individuals with significant
influence on the Group 35,982 - -
-Associates 995 - -
$ 36,977
 $ 16,880 $ 32,397
D. Accounts payable:
September 30,2021 December 31,2020 September 30,2020
Payables to related parties:
-Individuals with significant
influence on the Group $ 45,112
 $ -
 $ -
-Other related parties - 51,920 74,093
Total $ 45,112 $ 51,920 $ 74,093
Other payables:
-Individuals with significant
influence on the Group $ 210
 $ -
 $ -
-Other related parties -
 211 70
-Associates 2,328 -
 -
Total $ 2,538 $ 211 $ 70
E. Advance receipt
September 30,2021 December 31, 2020 September 30,2020
Associates $ - $ 942 $ 63

~47~

F. Property transactions:

  • (a) Acquisition of property, plant and equipment(including prepayments for business facilities shown as other non-current assets):
NEW SMART TECHNOLOGY
CO., LTD.
NEW SMART TECHNOLOGY
CO., LTD.		 2021
2020
101,071
$
-
$ 2021
2020
101,071
$
-
$ Three months ended September 30
Nine months ended September 30
  • (b) Acquisition of financial assets:
b) Acquisition of financial assets: b) Acquisition of financial assets:
For the nine months ended September 30, 2020:
ease
a) Rent expense
Accounts
No. of
shares
Associates
Investments
accounted for using
the equity method
5,000
-Other related parties
$ -Individuals with significant
influence on the Group
$ -Other related parties
$ -Individuals with significant
influence on the Group
$		 None
Objects
Consideration
Common
stocks
70,000
$ Nine months ended September 30
Three months ended September 30
2021
2020
400

600
$ 200
-
600
600
$ Nine months ended September 30		 2020
$ 600
$ -
$ 600
$
2021
1,600

200
1,800		 2020
$ 1,800
$ -
$ 1,800
$

G. Lease

  • (a) Rent expense

The Company leases plant and machinery from related parties. The monthly rental payments are mutually agreed upon. The payment terms are not materially different from those charged by non-related parties.

~48~

(b) Lease liabilities

(i) Outstanding balance:

September 30, 2021 December 31, 2020 September 30, 2020

Interest expense
Other related parties
-Other related parties
-Individuals with significant
influence on the Group
-Other related parties
-Individuals with significant
influence on the Group		 $ 2,769
4,518
$ 5,096
$ Three months ended September 30		 2,769
4,518
$ 5,096
$ Three months ended September 30
2021
2020
9
$ 25
$ 5
-
14
$ 25
$ Nine months ended September 30		 2020
25
$ -
25
$
2021
45
$ 5
50
$		 2020
82
$ -
82
$

(ii) Interest expense

H. Others

Others
-Other related parties
-Individuals with significant
influence on the Group		 45
$ 82
$ 5
-
50
$ 82
$		 45
$ 82
$ 5
-
50
$ 82
$		 45
$ 82
$ 5
-
50
$ 82
$
Donation expense：
-Opto Medical Public Welfare Foundation
Expenditure of labor service：
-Associates		 Three months ended
September 30
Nine months ended
September 30
-
$
50,000
$ 11,000
$ 11,000
$ 2021
Three months ended
September 30
-
$
11,000
$		 50,000
$ 11,000
$

January 1, 2020 to September 30, 2020 ： None.

The purpose of the donation is mainly for the medical emergency relief needed by the society and the cooperative development of medical technology. The above-mentioned donation has no major agreement between the Group and the recipient.

~49~

(3) Key management compensation

Three months ended September 30

Three months ended September 30 Three months ended September 30
Salaries and other short-term employee benefits
Post-employment benefits
Total
Salaries and other short-term employee benefits
Post-employment benefits
Total		 2021
2020
45,618
$ 29,829
$ 33
113

45,651
$ 29,942
$ 2021
2020
109,097
$ 63,434
$ 214
331
109,311
$ 63,765
$ Nine months ended September 30
63,434
$ 331
63,765
$

8. PLEDGED ASSETS

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

Pledged assets
Restricted assets-
Time deposits,
(shown as "other
current assets")		 September 30,
2021
22,810
$		 December 31,
2020
22,810
$ Book value		 September 30,
2020
22,810
$

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

(1) As of September 30, 2021, the guarantees provided by the Company through banks were as follows:

Guarantor
Far Eastern International Bank
Chang Hwa Commercial Bank

Chang Hwa Commercial Bank

Mega International Commercial Bank

Taipei Fubon Commercial Bank
Taishin International Bank		 Nature of Guarantee
Performance guarantee
Customs duty
Performance guarantee
Performance guarantee and warranty
Performance guarantee
Borrowing		 Amount
19,450
$ 15,000
3,360
7,071
755
97,423
143,059
$

~50~

  • (2) As of September 30, 2021, the outstanding letters of credit issued for the importation of raw materials and machinery were as follows:

==> picture [150 x 15] intentionally omitted <==

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

Amount (thousands)
----- End of picture text -----

TWD 14,447
JPY 6,821
USD 1,016

  • (3) Operating lease commitments: See Note 6(9).

  • (4) As of September 30, 2021, the promissory notes issued by the Company and subsidiary corporation for loans, performance guarantee for purchases and loans granted for subsidiaries amounted to $4,906,062.

  • (5) As of September 30, 2021, the capital expenditure contracted but not yet incurred is $168,619.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

  • A. For the Company’s future development and business expansion, the shareholders of the Company at their first interim meeting held on October 21, 2021 resolved to change its Chinese name to ‘Taiwan-Asia Semiconductor Corporation’, amend the Company’s Articles of Incorporation, and adjust the scope of business. The Company will announce its new name after approval by the regulatory authority.

  • B. For the Company’s future operational planning, the shareholders of the Company at their first interim meeting held on October 21, 2021 resolved to sell all of its ownership interest in a Mainland China subsidiary - Opto Plus Technology Co., Ltd. at an estimated price of no less than RMB 33,000 thousand.

  • C. To implement work specialisation and increase overall operational performance and market competitiveness of the Company through effective planning, the shareholders of the Company at their first interim meeting held on October 21, 2021 resolved to spin off the operations relating to the ‘Displays and Lighting Group’ (including assets, liabilities and operations) to an existing wholly-owned subsidiary, Opto System Technologies Inc. in accordance with the requirements stipulated in the Article 35 of Business Mergers And Acquisitions Act.

12. OTHERS

(1) Capital risk 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 or issue new shares to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total

~51~

capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt.

As of September 30, 2021, December 31, 2020 and September 30, 2020, the gearing ratios were (40.70%), (36.52%) and (40.45%), respectively.

(2) Financial instruments

A. Financial instrument by category

September 30,2021
Financial assets
Financial assets at fair value through profit or loss
Financial assets mandatorily measured at fair
value through profit or loss
789,596
$ Financial assets at fair value through other
comprehensive income
806,846
Financial assets at amortised cost/Loans and
receivables
Cash and cash equivalents
3,513,944
Financial assets at amortised cost
911,238
Notes receivable
2,846
Accounts receivable - net (including related
parties)
1,553,001
Other accounts receivable
14,427
Guarantee deposits paid
22,372
7,614,270
$ September 30,2021
Financial liabilities
Financial liabilities at fair value through profit or loss
Financial liabilities mandatorily measured at
fair value through profit or loss
77
$ Financial liabilities at amortised cost
Financial assets at fair value through other
comprehensive income
Short-term borrowings
341,071
Notes payable
-
Accounts payable (including related
parties)
772,619
Other accounts payable
682,584
Long-term borrowings (including current
portion)
484,536
Guarantee deposits received
2,980
2,283,790
$ Lease liabilities
221,629
$		 September 30,2021
Financial assets
Financial assets at fair value through profit or loss
Financial assets mandatorily measured at fair
value through profit or loss
789,596
$ Financial assets at fair value through other
comprehensive income
806,846
Financial assets at amortised cost/Loans and
receivables
Cash and cash equivalents
3,513,944
Financial assets at amortised cost
911,238
Notes receivable
2,846
Accounts receivable - net (including related
parties)
1,553,001
Other accounts receivable
14,427
Guarantee deposits paid
22,372
7,614,270
$ September 30,2021
Financial liabilities
Financial liabilities at fair value through profit or loss
Financial liabilities mandatorily measured at
fair value through profit or loss
77
$ Financial liabilities at amortised cost
Financial assets at fair value through other
comprehensive income
Short-term borrowings
341,071
Notes payable
-
Accounts payable (including related
parties)
772,619
Other accounts payable
682,584
Long-term borrowings (including current
portion)
484,536
Guarantee deposits received
2,980
2,283,790
$ Lease liabilities
221,629
$		 December 31,2020
427,409
$ 783,998
3,100,161
22,810
8,873
1,651,793
20,218
11,763
6,027,025
$ December 31,2020
799
$ 230,758
1,757
717,846
619,042
811,515
869
2,381,787
$ 236,266
$		 December 31,2020
427,409
$ 783,998
3,100,161
22,810
8,873
1,651,793
20,218
11,763
6,027,025
$ December 31,2020
799
$ 230,758
1,757
717,846
619,042
811,515
869
2,381,787
$ 236,266
$		 September 30,2020
376,945
$ 870,036
3,109,626
22,810
6,239
1,944,419
27,726
14,561
6,372,362
$ September 30,2020
-
$ 223,748
341
663,461
1,060,747
799,720
1,458
2,749,475
$ 239,556
$		 September 30,2020
376,945
$ 870,036
3,109,626
22,810
6,239
1,944,419
27,726
14,561
6,372,362
$ September 30,2020
-
$ 223,748
341
663,461
1,060,747
799,720
1,458
2,749,475
$ 239,556
$
77
$		 799
$		 -
$
341,071
-
772,619
682,584
484,536
2,980		 230,758
1,757
717,846
619,042
811,515
869		 223,748
341
663,461
1,060,747
799,720
1,458
2,283,790
$		 2,381,787
$		 2,749,475
$
221,629
$		 236,266
$		 239,556
$

~52~

  • B. Financial risk management policies

  • There was no significant change in the reporting period. Please refer to Note 12 in the consolidated financial statements for the year ended December 31, 2020.

  • 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 the transactions of the Company and its subsidiaries used in various currency exposures, primarily with respect to the USD and JPY. Exchange rate risk arises from future commercial transactions and recognised assets and liabilities.

  • ii. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Group use forward foreign exchange contracts, transacted with Group treasury. The expired dates of these forward foreign exchange contracts are shorter than 6 months and are not accounted for under hedge accounting. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

  • iii. As the foreign operations are strategic investments, the Company does not hedge for them.

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

~53~

Foreign
currency
amount
(in
thousands)
Exchange
rate
Book value
(TWD)
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD : TWD
45,675
$ 27.80
1,269,765
$ JPY : TWD
340,021
0.247
83,985
CNY : TWD
24,724
4.277
105,745
USD : CNY (Note)
931
6.4737
25,928
Non-monetary items
:None.
(Foreign currency:
functional currency)
Financial liabilities
Monetary items
USD : TWD
28,612
$ 27.90
798,275
$ JPY : TWD
565,746
0.2510
142,002
USD : CNY (Note)
1,170
6.4737
32,585
Non-monetary items
: None.
September 30,2021		 Extent
of
variation
Effect
on profit
or loss
Effect
on other
compre-
hensive
income
Unrealized
exchange
gain
(loss)
Nine months ended September 30,2021
SensitivityAnalysis		 Extent
of
variation
Effect
on profit
or loss
Effect
on other
compre-
hensive
income
Unrealized
exchange
gain
(loss)
Nine months ended September 30,2021
SensitivityAnalysis		 Extent
of
variation
Effect
on profit
or loss
Effect
on other
compre-
hensive
income
Unrealized
exchange
gain
(loss)
Nine months ended September 30,2021
SensitivityAnalysis		 Extent
of
variation
Effect
on profit
or loss
Effect
on other
compre-
hensive
income
Unrealized
exchange
gain
(loss)
Nine months ended September 30,2021
SensitivityAnalysis
SensitivityAnalysis
Extent
of
variation		 Effect
on profit
or loss		 Effect
on other
compre-
hensive
income
1%
1%
1%
1%
1%
1%
1%		 12,698
$ 840
1,057
259
7,983)
($ 1,420)
(
326)
(		 -
$ -

-
-

-
$ -
-		 2,690
$ 1,338)
(
193)
(
12
9,821
$ 1,596
133)
(

Note ： If the consolidated entities’ functional currency is not TWD, the foreign currency denominated assets and liabilities of the consolidated entities should be disclosed. For example, when the functional currency of a subsidiary is CNY, its USD foreign currency positions should also be disclosed.

~54~

Foreign
currency
amount
(in
thousands)
Exchange
rate
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD : TWD
47,188
$ 28.43
JPY : TWD
295,326
0.2743
CNY : TWD
25,061
4.3520
USD : CNY (Note)
877
6.5091
Non-monetary items
:None.
Financial liabilities
Monetary items
USD : TWD
32,237
$ 28.53
JPY : TWD
508,001
0.2783
USD : CNY (Note)
45
6.5091
Non-monetary items
:None.
December 31,		 December 31, December 31, Book value
(TWD)
2020		 Extent
of
variation
Effect
on profit
or loss
Effect
on other
compre-
hensive
income
Unrealized
exchange
gain(loss)
1%
13,416
$ -
$ 33,270)
($ 1%
810
-
483)
(
1%
1,091
-
97)
(
1%
246
-
136
1%
9,197)
($ -
$ 24,369
$ 1%
1,414)
(
-
265)
(
1%
13)
(
-
51)
(
Year ended December 31,2020
SensitivityAnalysis		 Extent
of
variation
Effect
on profit
or loss
Effect
on other
compre-
hensive
income
Unrealized
exchange
gain(loss)
1%
13,416
$ -
$ 33,270)
($ 1%
810
-
483)
(
1%
1,091
-
97)
(
1%
246
-
136
1%
9,197)
($ -
$ 24,369
$ 1%
1,414)
(
-
265)
(
1%
13)
(
-
51)
(
Year ended December 31,2020
SensitivityAnalysis		 Extent
of
variation
Effect
on profit
or loss
Effect
on other
compre-
hensive
income
Unrealized
exchange
gain(loss)
1%
13,416
$ -
$ 33,270)
($ 1%
810
-
483)
(
1%
1,091
-
97)
(
1%
246
-
136
1%
9,197)
($ -
$ 24,369
$ 1%
1,414)
(
-
265)
(
1%
13)
(
-
51)
(
Year ended December 31,2020
SensitivityAnalysis
SensitivityAnalysis
Exchange
rate		 Extent
of
variation		 Effect
on profit
or loss
Effect
on other
compre-
hensive
income
13,416
$ -
$ 810
-
1,091
-
246
-
9,197)
($ -
$ 1,414)
(
-
13)
(
-
28.43
0.2743
4.3520
6.5091
28.53
0.2783
6.5091		 1,341,555
$ 81,008
109,065
24,644
919,722
$ 141,377
1,265		 1%
1%
1%
1%
1%
1%
1%		 33,270)
($ 483)
(
97)
(
136
24,369
$ 265)
(
51)
(

Note ： If the consolidated entities’ functional currency is not TWD, the foreign currency denominated assets and liabilities of the consolidated entities should be disclosed. For example, when the functional currency of a subsidiary is CNY, its USD foreign currency positions should also be disclosed.

~55~

==> picture [411 x 309] intentionally omitted <==

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

Nine months ended September 3
September 30, 2020 Sensitivity Analysis
Foreign Effect
currency on other
amount Extent Effect compre-
(in Exchange Book value of on profit hensive
thousands) rate (TWD) variation or loss income
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD : TWD $ 56,861 29.05 $ 1,651,812 1% $ 16,518 $ -
JPY : TWD 274,904 0.2736 75,214 1% 752 -
CNY : TWD 28,797 4.244 122,214 1% 1,222 -
USD : CNY (Note) 1,113 6.8224 32,271 1% 323 -
Non-monetary items: None.
Financial liabilities
Monetary items
USD : TWD $ 30,522 29.15 $ 889,716 1% ($ 8,897) $ -
JPY : TWD 325,582 0.2776 90,382 1% ( 904) -
USD : CNY (Note) 43 6.8224 1,247 1% ( 12) -
Non-monetary items: None.
----- End of picture text -----

~56~

  • Note ： If the consolidated entities’ functional currency is not TWD, the foreign currency denominated assets and liabilities of the consolidated entities should be disclosed. For example, when the functional currency of a subsidiary is CNY, its USD foreign currency positions should also be disclosed.

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.

  • ii. The Group’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these domestic funds, equity securities of listed company or unlisted company had increased/decreased by 5%, 20% or 10%, respectively, with all other variables held constant, post-tax profit for the nine months ended September 30, 2021 and 2020 would have increased/decreased by $61,556 and $24,184, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $91,548 and $94,088 as a result of gains/losses on equity securities classified as 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 and short-term borrowings. Borrowings issued at floating rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at floating rates. During the nine months ended September 30, 2021 and 2020, the Group’s borrowings at floating rate were denominated in TWD, USD and JPY.

  • ii. At September 30, 2021, December 31, 2020 and September 30, 2020, if interest rates on borrowings had been 100 basis point higher/lower with all other variables held constant, post-tax profit for the nine months ended September 30, 2021 and 2020 would have been $4,921 and $6,106 lower/higher, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.

~57~

(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. 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, the utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as operating activities, including outstanding receivables.

  • ii. The Group adopts following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

  • iii. The default occurs when the contract payments are past due over 180 days for distributors and 360 days for other customers, respectively.

  • iv. The Group classifies customer’s accounts receivable, in accordance with credit risk on trade and customer types. The Group applies the simplified approach using loss rate methodology to estimate expected credit loss under the provision matrix basis.

  • 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 reorganisation 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.

  • viii. The Group used historical and timely information to assess the default possibility of notes receivable and accounts receivable ( including related parties). As of September 30, 2021, December 31, 2020 and September 30, 2020, the loss rate methodology is as follows :

~58~

==> picture [428 x 274] intentionally omitted <==

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

Individual Group Total
At September 30, 2021
Expected loss rate 100% 0.01%~100%
Total book value $ 6,273 $ 1,557,747 $ 1,564,020
$ 6,273 $ 1,900 $ 8,173
Loss allowance
At December 31, 2020 Individual Group Total
Expected loss rate 100% 0.01%~100%
Total book value $ 4,997 $ 1,663,689 $ 1,668,686
Loss allowance $ 4,997 $ 3,023 $ 8,020
Individual Group Total
At September 30, 2020
Expected loss rate 100% 0.01%~100%
Total book value $ 1,072 $ 1,960,297 $ 1,961,369
Loss allowance $ 1,072 $ 9,639 $ 10,711
----- End of picture text -----

vi. As at September 30, 2021, December 31, 2020 and September 30, 2020, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s accounts receivable and notes receivable was $1,555,847, $1,660,666 and $1,950,658, respectively.

  • vii. Movements in relation to the Group applying the simplified approach to provided loss allowance for accounts receivable are as follows:
At January 1
Provision for impairment loss
Write-offs
At September 30		 2021
2020
Accounts receivable
Accounts receivable
8,020
$ 21,821
$ 2,136
5,178
1,983)
(
16,288)
(
8,173
$ 10,711
$

vii. The Group conducts business with banks and financial institutions with sound reputation, and therefore do not expect the financial assets at amortized cost to have credit risk.

~59~

ix. For investments in debt instruments at amortised cost, the credit rating levels are presented below:

below:
Financial assets at amortised cost
Financial assets at amortised cost
Financial assets at amortised cost		 12 months September 30,2021
Lifetime		 Total
Significant
increase in
credit risk
Impairment
of credit
-
$ -
$ December 31,2020
Lifetime		 Impairment
of credit
911,238
$ 12 months		 911,238
$ Total
Significant
increase in
credit risk		 Impairment
of credit
22,810
$ 12 months		 22,810
$ Total
Significant
increase in
credit risk		 Impairment
of credit
22,810
$		 -
$		 -
$		 22,810
$

~60~

(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 while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times.

  • ii. The table below analyses the Group’s non-derivative financial liabilities and derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities.

September 30, 2021
Non-derivative financial liabilities
：
Short-term borrowings
Accounts payable
(including related parties)
Lease liabilities
Other payables
Long-term borrowings
(including current portion)
Derivative financial liabilities
：
Forward exchange contracts
December 31, 2020
Non-derivative financial liabilities
：
Short-term borrowings
Notes payable
Accounts payable
(including related parties)
Lease liabilities
Other payables
Long-term borrowings
(including current portion)
Derivative financial liabilities
：
Forward exchange contracts		 Less than
1year
341,386
$ 722,619
22,871
682,584
490,498
77
$ Less than
1year
231,089
$ 1,757
717,846
23,642
619,042
74,285
799
$		 Between
1 and 2
years
-
$ -
19,832
-
-
-
$ Between
1 and 2
years
-
$ -
-
22,305
-
751,637
-
$		 Between
2 and 3
years
-
$ -
17,892
-
-
-
$ Between
2 and 3
years
-
$ -
18,933
-
-
-
$		 Between
3 and 5
years
-
$ -
35,540
-
-
-
$ Between
3 and 5
years
-
$ -
35,782
-
-
-
$		 Over 5
years
-
$ -
154,928
-
-
-
$ Over 5
years
-
$ -
168,130
-
-
-
$

~61~

Between
Less than
1 and 2
September 30, 2020
1 year
years
Non-derivative financial liabilities
：
Short-term borrowings
224,119
$ -
$ Notes payable
341
-
Accounts payable
663,461
-
(including related parties)
Lease liabilities
23,485
22,458
Other payables
1,060,747
-
Long-term borrowings
74,486
730,511
(including current portion)		 Between
2 and 3
years
-
$ -
-
19,508

-
-
 Between
3 and 5
Over 5
years
years
-
$ -
$ -
-
-
-

35,135
172,495
-

-
-
-

(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 take place with sufficient frequency and volume to provide pricing information on an ongoing 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. Fair value information of investment property at cost is provided in Note 6(10).

  • C. The carrying amounts of cash and cash equivalent, notes receivable, accounts receivable, other receivables, long-term and short-term borrowings, notes payable, accounts payable, other payables and lease liabilities are approximate to their fair value.

  • 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 at September 30, 2021, December 31, 2020 and September 30, 2020 is as follows:

~62~

==> picture [458 x 602] intentionally omitted <==

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

September 30, 2021 Level 1 Level 2 Level 3 Total
Assets:
Recurring fair value measurements
Financial assets at fair value through
profit or loss
Domestic funds $ 571,094 $ - $ - $ 571,094
-
Equity securities 111,512 106,990 218,502
Financial assets at fair value through other
comprehensive income
Equity securities 108,637 - 698,209 806,846
Total $ 791,243 $ - $ 805,199 $ 1,596,442
Liabilities:
Recurring fair value measurements
Financial liabilities at fair value through
profit or loss
Forward exchange contract $ - $ 77 $ - $ 77
December 31, 2020 Level 1 Level 2 Level 3 Total
Assets:
Recurring fair value measurements
Financial assets at fair value through
profit or loss
Domestic funds $ 320,248 $ - $ - $ 320,248
- -
Equity securities 106,990 106,990
Forward exchange contract - 171 - 171
Financial assets at fair value through other
comprehensive income
Equity securities 85,789 - 698,209 783,998
Total $ 406,037 $ 171 $ 805,199 $ 1,211,407
Liabilities:
Recurring fair value measurements
Financial liabilities at fair value through
profit or loss
Forward exchange contract $ - $ 799 $ - $ 799
September 30, 2020 Level 1 Level 2 Level 3 Total
Assets:
Recurring fair value measurements
Financial assets at fair value through
profit or loss
Domestic funds $ 269,977 $ - $ - $ 269,977
- -
Equity securities 106,853 106,853
Forward exchange contract - 115 - 115
Financial assets at fair value through other
comprehensive income
Equity securities 70,844 - 799,192 870,036
Total $ 340,821 $ 115 $ 906,045 $ 1,246,981
----- End of picture text -----

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

(a) The instruments the Group used market quoted prices as their fair values (that is, Level 1) are composed of: listed shares using closing price and open-end fund using net asset value at balance sheet date.

~63~

  • (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, the Group adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market. Forward exchange contracts are usually valued based on the current forward exchange rate.

  • (d) The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs. In accordance with the Group’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

  • F. For the nine months ended September 30, 2021 and 2020, there was no transfer between Level 1 and Level 2.

  • G. The following chart is the movement of Level 3 financial instruments of equity securities for the nine months ended September 30, 2021 and 2020.

At January 1
Losses recognised in other
comprehensive income
Sold in the period
At September 30		 2021
2020
805,199
$ 951,466
$ -
41,821)
(
-
3,600)
(
805,199
$ 906,045
$

  • H. For the nine months ended September 30, 2021and 2020, there was no transfer into or out from Level 3.

  • I. Financial segment is in charge of valuation procedures for fair value measurements being categorized within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions and reviewing periodically.

  • J. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

~64~

Unlisted shares
Unlisted shares
Non-derivative
equity:
Unlisted shares
Unlisted shares
Non-derivative
equity:		 Fair
value at
September
30,2021
698,209
$ 106,990
Fair
value at
December
31,2020
698,209
$ 106,990		 Valuation
technique
Market
comparable
companies
Net asset
value
Valuation
technique
Market
comparable
companies
Net asset
value		 Significant
unobservable
input
Price to
earnings
ratio multiple
Discount for
lack of
volatility
Discount for
lack of
volatility
Significant
unobservable
input
Price to
earnings
ratio multiple
Discount for
lack of
volatility
Discount for
lack of
volatility		 Range
(weighted
average)
0.94~2.3
30%~35%
19.25%
Range
(weighted
average)
0.94~2.3
30%~35%
19.25%		 Relationship
of inputs to
fair value
The higher the multiple,
the higher the fair value.
The higher the discount
for lack of marketability,
the lower the fair value.
The higher the discount
for lack of marketability,
the lower the fair value.
Relationship
of inputs to
fair value
The higher the multiple,
the higher the fair value.
The higher the discount
for lack of marketability,
the lower the fair value.
The higher the discount
for lack of marketability,
the lower the fair value.

~65~

Unlisted shares
Unlisted shares
Non-derivative
equity:		 Fair
value at
September
Valuation
30,2020
technique
799,192
$ Market
comparable
companies
106,853
Net asset
value		 Significant
unobservable
Range
(weighted
Relationship
of inputs to
input
average)
fair value
Price to
0.75~1.09 The higher the multiple,
earnings
the higher the fair value.
ratio multiple
Discount for
25%~35% The higher the discount
lack of
for lack of marketability,
volatility
the lower the fair value.
Discount for
19.25% The higher the discount
lack of
for lack of marketability,
volatility
the lower the fair value.
  • K. The Group has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in difference measurements. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:
Financial assets
Equity
instrument
Financial assets
Equity
instrument		 Input Change
±5%
Change
±5%		 Favourable Unfavourable
change
change
1,275
$ 1,275)
($ September
Recognised inprofit or loss
December		 30,2021
Recognised in other
comprehensive income		 30,2021
Recognised in other
comprehensive income
Favourable Unfavourable
change
change
15,582
$ 15,582)
($ 31,2020
Discount of
lack of
volatility
Input
Favourable Unfavourable
change
change
1,275
$ 1,275)
($ Recognised inprofit or loss		 Recognised in other
comprehensive income
Favourable Unfavourable
change
change
15,582
$ 15,582)
($		 Unfavourable
change
Discount of
lack of
volatility

~66~

Financial assets
Equity
instrument		 Input Change September 30,2020
Favourable Unfavourable
change
change
1,274
$ 1,274)
($ Recognised inprofit or loss		 Recognis
comprehen
Favourable
change
13,874
$
Discount of
lack of
volatility		 ±5%

- ’ (4) Impact of the COVID 19 pandemic to the Group s operation in the third quarter of 2021

With the ever-changing situation of the global pandemic, the global supply chains were impacted at different levels by the preventive measures against the pandemic and the stress on shipping. Moreover, the prices of raw materials have risen due to the strong demand to replenish inventories. The Group will continue to follow up the situation and timely adjust the countermeasures.

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

  • A. Loans to others: None.

  • B. Provision of endorsements and guarantees to others: Please refer to table 1.

  • C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 2.

  • 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 $300 million or 20% of paid-in capital or more: None.

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

  • G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 3.

  • H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: None.

  • I. Trading in derivative instruments undertaken during the reporting periods: Please refer to 6(2).

  • J. Significant inter-company transactions during the reporting periods: Amounts were insignificant and did not reach the Company’s disclosure threshold of $10,000.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China) ： Please refer to table 4.

(3) Information on investments in Mainland China

Basic information: Please refer to table 5.

(4) Information on major shareholders

Please refer to table 6.

~67~

14. SEGMENT INFORMATION

(1) General information

There was no significant change in the reporting period. Please refer to Note 14 in the consolidated financial statements for the year ended December 31, 2020.

(2) Segment information

The segment information provided to the Chief Operating Decision-Maker for the reportable segments is as follows:

Revenue from
external customers
Segment income
(loss)
Revenue from
external customers
Segment income
(loss)
Revenue from
external customers
Segment income
(loss)
Revenue from
external customers
Segment income
(loss)		 LED and
Displays and
Packaging
Silicon Sensor
Lighting
Business
Other
Chips Group
Group
Group
segments
1,412,934
$ 291,896
$ 104,634
$ -
$ 329,163
$ 10,048)
($ 7,827
$ 4,317
$ LED and
Displays and
Packaging
Silicon Sensor
Lighting
Business
Other
Chips Group
Group
Group
segments
1,320,343
$ 258,644
$ 82,047
$ 4,465
$ 263,635
$ 12,535)
($ 7,014
$ 41,160)
($ Three months ended September 30,2021
Three months ended September 30,2020
Nine months ended September 30,2021		 LED and
Displays and
Packaging
Silicon Sensor
Lighting
Business
Other
Chips Group
Group
Group
segments
1,412,934
$ 291,896
$ 104,634
$ -
$ 329,163
$ 10,048)
($ 7,827
$ 4,317
$ LED and
Displays and
Packaging
Silicon Sensor
Lighting
Business
Other
Chips Group
Group
Group
segments
1,320,343
$ 258,644
$ 82,047
$ 4,465
$ 263,635
$ 12,535)
($ 7,014
$ 41,160)
($ Three months ended September 30,2021
Three months ended September 30,2020
Nine months ended September 30,2021
LED and
Displays and
Packaging
Silicon Sensor
Lighting
Business
Other
Chips Group
Group
Group
segments
3,948,376
$ 590,700
$ 237,667
$ -
$ 906,550
$ 87,860)
($ 14,419
$ 24,666
$ Nine months ended September 30,2020
LED and
Displays and
Silicon Sensor
Lighting
Chips Group
Group
3,250,155
$ 740,617
$ 514,410
$ 6,516)
($		 Packaging
Business
Other
Group
segments
204,038
$ 12,683
$ 9,063
$ 47,702)
($

~68~

(3) Reconciliation for segment income (loss)

  • A. The revenue from external customers reported to the Chief Operating Decision-Maker is measured in a manner consistent with that in the statement of comprehensive income.

  • B. A reconciliation of reportable segment income or loss to the income (loss) before tax from continuing operations is measured in a manner consistent with that in the statement of comprehensive income.

~69~

Opto Tech Corporation and subsidiaries

Provision of endorsements and guarantees to others

Table 1

Expressed in thousands of TWD

Nine months ended September 30, 2021

Number
(Note 1)
Endorser/
guarantor		 Party being
endorsed/guaranteed		 Limit on
endorsements/
guarantees
provided for a single
party
(Note 3)		 Maximum outstanding
endorsement/
guarantee
amount as of September
30,2021		 Outstanding
endorsement/
guarantee
amount at September
30,2021		 Actual amount
drawn down		 Amount of
endorsements/
guarantees
secured with
collateral		 Ratio of accumulated
endorsement/
guarantee amount to net
asset value of the
endorser/
guarantor company		 Ceiling on
total amount of
endorsements/
guarantees
provided
(Note 3)		 Provision of
endorsements/
guarantees
by parent
company to
subsidiary		 Provision of
endorsements/
guarantees
by subsidiary
to parent
company		 Provision of
endorsements/
guarantees
to the party
in Mainland
China		 Remark
Company
name
Relationship with
the endorser/
guarantor
(Note2)
0
Opto
Tech
Corp.		 Opto Plus
Technology Co.,
Ltd.
3		 1,857,941
$		 100,048
$		 97,650
$		 88,548
$		 - 1.05% 4,644,852 Y N Y -

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

  • (1)The Company is “0”.

  • (2)The subsidiaries are numbered in order starting from “1”.

Note 2: Relationship with the endorser/guarantor is classified into the following categories:

  • (1) Having business relationship.

  • (2) The Company owns more than 50% voting shares of the endorsed/guaranteed company.

(3) The Company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company.

  • (4) The endorsed/guaranteed company directly or indirectly owns more than 50% voting shares of the endorser/guarantor.

  • (5) Mutual guarantees in the same trade due to construction undertaking pursuant to the contracts.

  • (6) Due to joint venture, each shareholder provides guarantees for the company in proportion to its ownership.

  • Note 3: The calculation and amount of ceiling on providing endorsement / guarantee to others shall be disclosed. It there was contingent loss recogniSed in the financial statements, the recognised amount shall be disclosed Under the Company’s “Procedures for Provision of Endorsements and Guarantees” , the Company’s total guarantees and endorsements to others should not exceed 50% of the Company’s net asset value, and total guarantees and

endorsements provided for a single party should not exceed 20% of the Company’s net asset value. The calculation is shown below:

(1) $9,289,704 thousand dollars × 20% ＝ $1,857,941 thousand dollars

  • (2) $9,289,704 thousand dollars × 50% ＝ $4,644,852 thousand dollars

Table 2

Expressed in thousands of TWD

Opto Tech Corporation and subsidiaries

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

September 30, 2021

Securities held by Type of
marketable
securities		 Name of marketable
securities		 Relationship with the
securities issuer		 General ledger account As of September 30,2021 As of September 30,2021 Remark
Number of shares Book value Ownership (%) Fair value
Opto Tech Corp.
〞
〞
〞
〞
〞
〞
Ho Chung Investment Co., Ltd.
Dongzhen Asset Co., Ltd.
Opto Tech Corp.
〞
〞
〞
〞
〞
〞		 Stock
〞
〞
〞
〞
〞
〞
〞
〞
Fund
〞
〞
〞
〞
〞
〞		 AXT, Inc.
Nichia Corp.
Viking Tech Corporation
Lu Zhu Development
Co., Ltd.
Giga Epitaxy
Technology Corp.
Shin-Etsu Opto
Electronic Co., Ltd.
Top Increasing
Technology Co., Ltd.
Opto Tech Corp.
United Microelectronics Corp.
Jih Sun Money Market fund
Taishin 1699 Money Market
fund
TCB Taiwan Money Market
Fund
FSITC Taiwan Money Market
fund
Franklin Templeton Sinoam
Money Market Fund
Capital Money Market
Union Money Market		 None.
This company is the parent
company of Nichia Taiwan Corp.
None.
None.
None.
None.
None.
Parent company
None.
None.
None.
None.
None.
None.
None.
None.		 Financial assets at fair value
through profit or loss
Financial assests at fair value
through other comprehensive
income
〞
Financial assets at fair value
through profit or loss
Financial assests at fair value
through other comprehensive
income
〞
Financial assets at fair value
through profit or loss
〞
〞
〞
〞
〞
〞
〞
〞
〞		 124,100
10,000
2,873,994
13,808,725
4,950,491
2,000,000
10,000,000
754,543
4,208,000
5,391,133
4,477,862
4,885,150
5,965,267
9,247,290
5,837,819
7,134,275		 -
$ 585,253
108,637
106,990
16,391
96,565
-
24,485
111,512
80,756
61,216
50,075
92,239
96,615
95,095
95,098		 -
0.45
2.45
6.38
15.00
10.00
16.67
0.17
1.06
None
None
None
None
None
None
None		 -
$ 585,253
108,637
106,990
16,391
96,565
-
24,485
111,512
80,756
61,216
50,075
92,239
96,615
95,095
95,098		 Note
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None

Note : The 124,000 shares of AXT, Inc. which are owned by the Company, are preferred stocks.

Opto Tech Corporation and subsidiaries

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

Nine months ended September 30, 2021

Table 3

Expressed in thousands of TWD

Purchaser/seller Counterparty Relationship with the
counterparty		 Transaction Transaction Differences in transaction terms
compared to third party
transactions		 Differences in transaction terms
compared to third party
transactions		 Notes/accounts receivable(payable) Remark
Purchases
(sales)		 Amount Percentage of
total purchases
(sales)		 Credit term Unitprice Credit term Balance Percentage of
total notes/accounts
receivable(payable)
Opto Tech Corp. Nichia Corp. This company is the
Company's parent
company of
enterprise group
accounted for using		 Sales 270,000)
($		 (5.92%) 45 days Equivalent to
general
transaction		 - 35,725
$		 2.35% None

Opto Tech Corporation and subsidiaries

Table 4

Information on investees

Nine months ended September 30, 2021

Expressed in thousands of TWD

Investor Investee Location Main business activities Initial investment amount Initial investment amount Shares held as at September 30,2021 at September 30,2021 Net income
(loss) of the
investee		 Investment
income (loss)
recognised by
investor		 Remark
Balance
as of September 30,
2021		 Balance
as of December 31,
2020		 Number of shares Ownership
(%)		 Book value
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Opto Tech
Corp.
Ho Chung
Investment
Co., Ltd.
Dongzhen Asset
Co., Ltd.
CS Bright
Corporation
Bright
Investment
International
Ltd		 Ho Chung
Investment
Co., Ltd.
CS Bright
Corporation
Bright Investment
International Ltd.
Everyung
Investment Ltd.
Dongzhen Asset
Co., Ltd.
Opto System
Technologies Inc.
NEW SMART
TECHNOLOGY
CO., LTD.
VML
TECHNOLOGIES
B.V.
NEW SMART
TECHNOLOGY
CO., LTD.
Bright Investment
International Ltd.
Everyung
Investment Ltd.		 Taiwan
Taiwan
B.V. I.
Samoa
Taiwan
Taiwan
Taiwan
Netherlands
Taiwan
B.V. I.
Samoa		 Investment business
Manufacture and Sales of
Displays, SMD Lamps a nd other
LED related products
Investment business
Investment business
Investment business
Manufacture and sales of lighting
equipment
Automatic control equipment
engineering business
Manufacture and Design
of system products
Automatic control equipment
engineering business
Investment business
Investment business		 258,348
$ 50,170
171,332
42,343
400,000
1,000
14,000
37,436
56,000
-
168,421		 258,348
$ 50,170
-
42,343
42,343
-
-
37,436
-
171,332
168,421		 1,298,800
4,993,562
5,100,000
5,000,000
40,000,000
100,000
1,000,000
6,000
4,000,000
-
5,000,000		 100
99.87
100
50
100
100
5
25
20
100
50		 23,159
$ 149,256
55,574
54,840
403,775
1,000
13,550
5,393
54,202
-
55,138		 4,187
$ 67,227
13,008
26,025
3,808
-
33,064
1,122
33,064
13,008
26,025		 598)
($ 1,562
8,551
13,012
3,808
-
450)
(
280
1,801)
(
4,457
13,012		 Subsidiary of the
Company
Subsidiary of the
Company (Note)
Subsidiary of the
Company
Subsidiary of the
Company
Subsidiary of the
Company
Subsidiary of the
Company
Investment
accounted for
using equity
method
Investment
accounted for
using equity
method
Investment
accounted for
using equity
method
Indirect
subsidairy
Indirect
subsidairy

Note: The Board of Directors of the Company resolved to process liquidation through the company on September 10, 2020 . The liquidation was still in process.

Opto Tech Corporation and subsidiaries

Information on investments in Mainland China Nine months ended September 30, 2021

Table 5

Expressed in thousands of TWD

Investee in Mainland
China		 Main business
activities		 Paid-in capital Investment
method
(Note 1)		 Accumulated
amount of
remittance to
Mainland
China
as of January 1,
2021		 Amount
remitted
to Mainland
China
during the
period		 Amount
remitted
back to
Taiwan
during the
period		 Accumulated
amount
of remittance to
Mainland China
as of September
30,2021		 Net income
of investee
for the nine
months
ended
September
30,2021		 Ownership
held by
the
Company
(direct or
indirect)		 Investment income
(loss) recognised
by the Company
for the nine
months September
30, 2021
(Note 2)		 Book value of
investments in
Mainland China
as of September
30,2021		 Accumulated
amount
of investment
income
remitted back to
Taiwan as of
September 30,
2021		 Remark
Opto Plus
Technology
Co., Ltd.		 Manufacture and
Sales of LED and
Electronic products		 317,341 (2) 317,341
$		 -
$		 -
$		 317,341
$		 26,025
$		 100% 26,025
$		 110,276
$		 -
$

Note 1: The investment methods are classified into three categories as follows:

(1) Directly investing in the investee company in Mainland China.

(2) Through investing in an existing company in the third area, which then invested in the investee company in Mainland China. (Opto Tech (Cayman) Co., Ltd. invests in Opto Tech (Suzhou) Co., Ltd. and Everyung Investment Ltd. invests in Opto Plus Technology Co., Ltd.)

  • (3) Others.

Note 2: The investment income or loss was recognised by indirect weighted ownership based on the financial statements of these investees which were not reviewed by the independent auditors of the parent company for the corresponding periods.

Investments in Mainland China for the nine months ended September 30, 2021:

Name of company Accumulated amount
of remittance from
Taiwan to Mainland
China
as of September 30,
2021		 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
Opto Tech Corp. $ 317,341 $ 317,849 $ 5,573,822

Opto Tech Corporation and its subsidiaries Major shareholders information September 30, 2021

Table 6

Shares Name of major shareholders Number of share held Ownership (%) Nichia Taiwan Corp 88,811,822 20.24%

Description: If a company applies to Taiwan Depository & Clearning Corporation for the information of the table, the following can be explained in the notes of the table. (a) The major shareholders information was from the data that the Company issued common shares(including treasury shares) and preference shares in dematerialised form which were registered and held by the shareholders above 5% on the last operating date of each quarter and was calculated by Taiwan Depository & Clearing Corporation.The share capital which was recorded in the financial statements is different form the actual number of shares issued in dematerialised form because of the different calculation basis or the differences.

(b) If the aforementioned data contains shares which were kept at the trust by the shareholders, the data was disclosed as separate account of client which was set by the trustee. As for the shareholder who reports share equity as an insider whose shareholding ratio is greater than 10% in accordance with Securities and Exchange Act, the shareholding ratio includes the self-owned shares and trusted shares, at the same time, and persons who have power to decide how to allocate the trust assets. For the information of reported share equity of insider, please refer to Market Observation Post System.

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