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2023 ReportStock Code: 2324 Compal Electronics, Inc. 2020 Annual Report Notice to readers This English version annual report is a translation of the Mandarin version. This document is created for the sole purpose of the convenience for its non-Mandarin readers and is not an official document to represent the financial status of the Company per Taiwan law. Should any discrepancy arise between the English and Mandarin versions, the Mandarin version shall prevail. Taiwan Stock Exchange Market Observation Post System: http:/newmops.twse.com.tw The Company's Annual Report is available at: http:/www.compal.com Printed on May 12, 2021 I. Spokesperson Spokesperson: Ching-Hsiung Lu/Vice President Deputy Spokesperson: Cheng-Chiang Wang /Vice President of Accounting Dept. Tel: 886-2-8797-8588 E-mail: Investor@compal.com II. Headquarters, Branches and Plant Headquarters Address: No.581 and 581-1, Ruiguang Rd., Neihu District, Taipei, Taiwan Tel: 886-2- 8797-8588 Manufacturing Site Address: No. 8, South East Rd., Pingzhen City, Taoyuan City Tel: 886-3-439-1707 III. Share Administration Agency Chinatrust Transfer Agent Address: 5F, No. 83, Sec 1, Chung Ching Nan Road, Taipei, Taiwan Tel: 886-2-6636-5566 Website: https:/www.ctbcbank.com IV. Auditors CPA Firm: KPMG Taiwan Auditors: Chien, Szu Chuan and Au, Yiu Kwan Address: 68F, No. 7, Sec. 5, Xinyi Road, Taipei, Taiwan Tel.: 886-2-8101-6666 Website: http:/www.kpmg.com.tw V. Overseas Securities Exchange Luxembourg Stock Exchange: http:/www.bourse.lu London Stock Exchange http:/www.londonstockexchange.com VI. Corporate Website http:/www.compal.com 1 Table of Contents 4 I. Letter to Shareholders II. Company Profile 7 7 2.1 Date of Incorporation 2.2 Company History III. Corporate Governance Report 3.1 Organization 3.2 Directors, Supervisors and Management Team 3.3 Implementation of Corporate Governance 3.4 Information Regarding the Company’s Audit Fee and Independence 3.5 Replacement of CPA 3.6 If the chairman, president, and financial or accounting manager of the Company had worked for the accounting firm or related parties thereof in the most recent year 3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 3.8 Relationship among the Top Ten Shareholders 3.9 Ownership of shares in Affiliated Enterprises IV. Capital Overview 4.1 Capital and Shares 4.2 Bonds 4.3 Preferred shares 4.4 Global Depository Receipts 4.5 Employee Warrants 4.6 Subscription of New Shares by Employees and Restricted Shares 4.7 New Share Issuance in Connection with Mergers and Acquisitions 4.8 Financing Plans and Implementation 9 11 33 90 91 91 92 95 96 98 102 102 103 105 105 105 105 V. Operational Highlights 5.1 Business Activities 5.2 Market and Sales Overview 5.3 Human Resources 5.4 Environmental Protection Expenditure 5.5 Labor Relations 5.6 Important Contracts 106 130 151 152 152 155 2 VI. Financial Information 156 160 166 167 167 167 6.1 Five-Year Financial Summary 6.2 Five-Year Financial Analysis 6.3 Audit Committee’s Report in the Most Recent Year 6.4 Consolidated Financial Statements and Independent Auditors’ Report (Attachment I) 6.5 Parent-Company-Only Financial Statements and Independent Auditors’ Report (Attachment II) 6.6 Status of financial difficulties for the Company and its subsidiaries VII. Review of Financial Position, Operating Results, and Risk Management 168 169 170 170 171 172 177 7.1 Analysis of Financial Status 7.2 Analysis of Operation Results 7.3 Analysis of Cash Flow 7.4 Major Capital Expenditures 7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year 7.6 Analysis of Risk Management 7.7 Other material issues VIII. Special Disclosure 178 207 207 207 207 8.1 Summary of Affiliated Companies 8.2 Private Placement of Securities in the Most Recent Year 8.3 Subsidiaries’ Holding of the Company’s Shares in the Most Recent Year 8.4 Other supplementary notes, where applicable 8.5 Events with Significant Impacts Attachment I II Consolidated Financial Statements and Independent Auditors’ Report Parent-Company-Only Financial Statements and Independent Auditors’ Report 3 I. Letter to Shareholders Dear Shareholders, As a result of the ongoing COVID-19 pandemic and rising tension in international trade, the macro environment in 2020 was harsh. Despite the diverse challenges that industrial uncertainties brought to enterprises, we believe that “the worse moment is also the golden era, and we are the ordinary people in an extraordinary time,” and our preparedness for the challenges and turning situations into opportunities matters. With customer trust and all employees and partners' concert efforts, Compal successfully made a new milestone in 2020 against the unstable macro environment, with financial achievements reaching a new high over the past nine years, smart manufacturing efficiency continuingly rising, and business making new progress. Hence, we are presenting to you our financial and operational achievements in 2020 and business outlook for 2021 as follows: Financial Performance In 2020, our consolidated revenue increased by 7% over 2019 to TWD 1,048,929 million, and the total shipping volume of 5C-related electronic products also increased by 14% and 13 million units over 2019 to 105 million units. Despite the impact of COVID-19 in 1Q20, when both revenue and profit reduced sharply due to supply chain disruption, through the quick and flexible response, we made further progress in both management and manufacturing efficiency. After resuming operation, stability regained and procurement capability enhanced, allowing us to increase profit each quarter and eventually achieve a consolidated operating profit of TWD 11,493 million and a net operating profit margin of 1.1%, with the amount increased by 9% over 2019. Although the foreign exchange rate trend was unfavorable to exporters, thanks to the advanced response and effective hedging, the non-operating profit also increased significantly over 2019. Hence, the consolidated net income attributed to the parent increased by 35% over 2019 to TWD 9,362 million, with an EPS amounting to TWD 2.15. Business Development and Smart Manufacturing Thanks to the rising demand for work from home, distance learning, and distance entertainment as a result of the COVID-19 pandemic, and alongside the efforts in customer development and technical capacity in platform development over the years, we could quickly grasp the opportunity of the growth in NB PCs in 2020. We also made further resource investment in technology innovation to develop more hardware and software solutions, create differences with competitors, and provide customers with higher-value services. Although the global consumer market was weakened in 2020, we could still make some decent progress in the business diversification. For example, the shipping volume of servers and smartphones grew more than double in 2020. In addition, we also officially opened our 5G laboratory to make proactively deployment the solutions for four major sectors: industry, agriculture, healthcare, and e-sports/entertainment through the mass production of 5G modules, terminal devices, and small cells to the development of dedicated 5G enterprise network. In addition, after seven years of effort, our smart medical and healthcare deployment has become better and fuller. Currently, the deployment has covered seven categories: medical IoT solutions, 4 immunotherapy solutions, AI-assisted healthcare, hospital software systems, chronic disease care, personal health management, and long-term care. Overall, the non-NB PCs' sales already contributed up to 35% of the 2020 revenue, one percent more than in 2019. In smart manufacturing, our efforts in lean programs and production automation projects in recent years have gradually borne fruit. Besides reducing manufacturing costs, we can quickly respond to the rapidly changing macro environment and customer demands, further boosting the efficiency in both management and operations. In manufacturing diversification, the mass production of many products has smoothly activated as scheduled in Vietnam and Taiwan. We will continue with capacity diversification to provide customers with more options in production bases and further invest digitization to enhance overall corporate competitiveness. Innovation and Sustainability While pursing business growth, Compal will never forget its business philosophy of “innovation, harmony, surpassing”, to invest in technology innovation and pursue sustainable business development of the Company. To pour innovative thinking in Compal’s DNA, internally, every year we encourage employees to make innovation proposals, present the “Innovation Award”, and listen to and incorporate the creativity and recommendations of employees in order to create a win-win situation for both the Company and employees; and externally, we actively participate in international ratings. In 2020, our efforts were recognized again by many awards from the German “iF Design Award”, and our ranking in global business innovation competitiveness also rose to the world’s 11th. Facing the environmental impacts of climate change, we proactively engage in green product design and plant energy conservation. When the COVID-19 pandemic broke out, we immediately formed an epidemic response team to reduce the risk of operations and strengthen care for employees. Our emphasis on the environmental, social, and governance (ESG) earned us a Platinum Award in the Corporate Sustainability Report Awards from the 2020 Taiwan Corporate Sustainability Awards (TCSA). In addition, in the 2020 Corporate Governance Evaluation of the Taiwan Stock Exchange (TWSE), we were again ranked among the top 6-20% public companies in Taiwan. Furthermore, we were selected as a constituent of both the FTSE4GOOD Index and FTSE4GOOD TIP Taiwan ESG Index for years, marking the long-term recognition of Compal’s sustainable investment value by intuitional investors. Business Outlook Looking ahead to 2021, despite the continued dominance of uncertainties in the global economic and industrial changes, we will hope that the macro environment can progressively recover from the pandemic to regain stable development. Many industrial research institutions have predicted that the demand for electronic products will increase in 2021 compared to 2020. By grasping the trend with our steady foundation developed over the years, we will stay cautiously optimistic to the business development in 2021 and expect the continuous growth based on the 2020 achievements. Among them, the 5G, auto electronics, and smart medical and healthcare will be the key focus of Compal’s mid- to long-term development in the future, which 5 will be the main driver to Compal’s non-NB PCs sales contribution to achieve the goal of 40%. In addition to the topline growth, we will emphasize more on profit growth through the implementation of various management measures and continuous engagement in automation and digitization achieved by teamwork and execution of all employees. Increase the Company’s economic value is the ultimate goal, meanwhile, we will also fulfill our social responsibility as a global corporate citizen to address the expectation on Compal stakeholders, including shareholders, customers, and business partners. Once again, here we sincerely appreciate your long-term support and encouragement for Compal. Lastly, we wish you a peaceful and prosperous year ahead. Sincerely, Chairman: Sheng-Hsiung Hsu (Rock Hsu) CEO: Chung-Pin Wong (Martin Wong) Head of Accounting: Cheng-Chiang Wang (Jack Wang) 6 II. Company Profile 2.1 Date of Incorporation: June 1, 1984 2.2 Company History ■ Company history in the past two years: 2019 • • • • • • • • • • • Won 13 awards at the 2019 “iF design awards” and ranked 17th in iF Global Innovation Companies Ranking. Ranked World Design Index - TOP 3 Taiwan, Top 10 Asia, Top 10 Computer, and Top 25 Companies 2015~2019. Selected to take part in the CDP climate change program for five consecutive years (2014-2018) and received an overall CDP rating of B- at the Management Level for 2018. Ranked within top the 6%~20% TWSE-listed companies of the “5th Round of Corporate Governance Evaluations” by TWSE. Ranked 6th in CommonWealth Magazine’s “Top-2000 Manufacturers", and ranked 62nd in “Cross- strait Top 1000 Survey." Won the Platinum Medal of 2019 Taiwan Corporate Sustainability Report Award of TCSA. Selected into the FTSE4GOOD Index for four consecutive years and in the FTSE4GOOD TIP Taiwan ESG Index for the second consecutive years. Ranked 390th on the Fortune Global 500. Ranked 1463th on Forbes Global 2000. Top 20 of 2019 Happiness Enterprise online voting by 1111 Human resource agency. The Company’s share capital reached TWD 44.1 billion in 2019. The Company earned NTD 980.4 billion in consolidated revenues in 2019. 2020 • Won 18 awards at the 2020 “iF Design Awards” and a third consecutive Gold Award. Ranked 11th in the iF Global Innovation Companies Ranking. • Selected to take part in the CDP climate change program for six consecutive years (2014-2019) and received an overall CDP rating of B- at the Management Level for 2019. • Ranked within top the 6%~20% TWSE-listed companies of the “6th Round of Corporate Governance Evaluations” by TWSE. • Ranked 44th in Common Wealth Magazine’s “CSR Top 50”. • Ranked 64th in Common Wealth Magazine’s “Top1000 in China, Taiwan and Hong Kong”, and Kinpo- Compal group was ranked 4th in Common Wealth magazine’s “Taiwan Top 50 Group”. • Won the Platinum Medal of 2020 Taiwan Corporate Sustainability report Award of TCSA and the Silver 7 Medal of 2020 English Report Award of TCSA. • Selected into the FTSE4GOOD Index for five consecutive years and in the FTSE4GOOD TIP Taiwan ESG Index for the third consecutive year. • Ranked 396th on the Fortune Global 500. • Ranked 1558th on the Forbes Global 2000. • The Company’s share capital reached NTD 44.1 billion in 2019. • The Company earned TWD 1,048.9 billion in consolidated revenues in 2020. 2021 • Selected to take part in the CDP climate change program for 7 consecutive years (2014-2020) and received an overall CDP rating of B- at the Management Level for 2020. • Won 25 honors at the 2021 “iF Design Awards” and a fourth consecutive Gold Award. Ranked 6th in the iF Global Innovation Companies Ranking. • Ranked among the top 6%-20% in the TWSE-listed companies in the 7th round of "Corporate Governance Evaluation" organized by Taiwan Stock Exchange and Taipei Exchange. • Ranked 5th in CommonWealth Magazine’s “Top-2000 Manufacturers" ■ Any changes to the management rights, significant changes of the management mode or business content, and other important matters that can affect shareholders' equity and their impact on the Company in the most recent year and up to the date of printing of the annual report: None. 8 3.1 Organization 3.1.1 Organizational Chart (As of Jan 1, 2021) Shareholders Board of Directors President’s Office Remuneration Committee Audit Committee Auditing Office Personnel Evaluation Committee Top Management Committee Investment Planning and Management Office Legal Affairs Office Insider Trading Prevention Office P C B G 1 P C B G 2 P C O B G G O B G S D B G Digital Transformation Committee Green Sustainability Office Corporate Social Responsibility Office Occupational Safety and Health Office H R a n d A D M G r o u p F i n a n c i a l G r o u p A c c o u n t i n g G r o u p 9 3.1.2 Major Corporate Functions Department Functions President’s Office Responsible for the Company’s operation Investment Planning and Management Office Responsible for investment-related activities Auditing Office Conducts internal audits Legal Affairs Office Handles the Company’s legal affairs Green Sustainability Office Executes “Green Life” projects Insider Trading Prevention Office Implements preventive measures against insider trading Corporate Social Responsibility Office Promotes and executes CSR-related affairs Occupational Safety and Health Office Implementing a comprehensive occupational health and safety program PCBG 1 PCBG 2 GOBG SDBG PCOBG Responsible for the R&D, production, quality control and the sale of PC products Responsible for the R&D, production, quality control and the sales of non- Notebook products. Responsible for production, quality control, and worldwide operation affairs Responsible for the R&D, production, quality control, and the sale of smart devices Responsible for production and quality control of NB Products Accounting Group Handles accounting, share administration, and funding affairs Financial Group Responsible for the Company's financial planning, capital scheduling, and payments controlling. HR and Administration Group Responsible for human resource, training, education, employee relations, general affairs, and building management 10 Directors and Management Team 3.2 3.2.1 Directors Title Name/ Nationality/Ge nder (Note 1, 2) Elected Date Term First Elected Date Shareholding as of elected date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career (academic) achievements April 27, 2021 Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Selected Current Positions held concurrentl y in the Company and/or any other companies Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Title Name Relationship 1984.04.16 8,975,401 0.20% 8,975,401 0.20% 17,107,025 0.39% 0 0.00% (Note 5) Chairman of Kinpo and AcBel Director Chieh-Li Hsu Honorary Doctorate, National Taiwan Normal University Director Sheng-Chieh Hsu Brothers father and son Chairman Sheng-Hsiung Hsu 2018.6.22 Vice Chairman Jui-Tsung Chen 2018.6.22 Binpal Investment Co., Director Ltd. 2018.6.22 3 years 3 years 3 years Representative: Wen-Being Hsu Kinpo Electronics, Inc. Representative: Chieh-Li Hsu Director 2018.6.22 3 years 3 1992.04.30 35,352,587 0.80% 35,352,587 0.80% 1,069,405 0.02% 2018.6.22 5,000,000 0.11% 5,000,000 0.11% 1984.04.16 4,000,000 0.09% 5,000,000 0.11% 1990.06.22 151,628,692 3.43% 151,628,692 3.44% - 0 - - 0.00% - 2020.07.21 4,117,569 0.09% 4,117,569 0.09% 631 0.00% Director Charng-Chyi Ko 2018.6.22 years 1984.04.16 7,896,867 0.18% 7,896,867 0.18% 30,645 0.00% 0 0 0 0 0 0 Polytech Inc. Honorary Doctorate, National 0.00% Cheng Kung University Chairman of Arcadyan Technology Corp. 0.00% National Tao-Yuan Sr. Vocational Agricultural and Industrial School 0.00% Director of BAOTEK, Inc. 0.00% 0.00% M.S., International Business, Waseda University, Japan Director and President of AcBel Polytech Inc. National Taiwan University College of Management (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) Chairman Sheng-Hsiung Hsu father and son 0.00% PhD, Lincoln University, USA (Note 5) N/A N/A N/A Chairman of Taiwan Biotech Co., Ltd. Department of Architecture, Director Sheng-Chieh Hsu 2018.6.22 3 1997.05.29 9,119,297 0.21% 9,204,201 0.21% 8,152,928 0.18% (Note 4) (Note 4) Tam-Kang University (Note 5) Chairman Sheng-Hsiung Hsu Brothers years Director of Kinpo Electronics Inc. 11 Title Name/ Nationality/Ge nder (Note 1, 2) Elected Date Term First Elected Date Shareholding as of elected date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career (academic) achievements Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) 3 Department of Geosciences, Selected Current Positions held concurrentl y in the Company and/or any other companies Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Title Name Relationship Director Yen-Chia Chou 2018.6.22 years 1987.06.13 8,022,874 0.18% 8,022,874 0.18% 2,502,768 0.06% 0 0.00% National Taiwan University (Note5) N/A N/A N/A Director Chung-Pin Wong 2018.6.22 Director Chiung-Chi Hsu 2018.6.22 Director Ming-Chih Chang 2018.6.22 Director Anthony Peter Bonadero 2018.6.22 Director Sheng-Hua Peng 2018.6.22 Independent Director Independent Director Min-Chih Hsuan 2018.6.22 Duei Tsai 2018.6.22 3 years 3 years 3 years 3 years 3 years 3 years 3 years 2007.06.15 6,618,618 0.15% 6,618,618 0.15% 1,398 0.00% 0 0.00% Chiao Tung University (Note 5) N/A N/A N/A Director of Kinpo Electronics Inc. Graduate Institute of Management Science, National 1994.04.23 2,000,731 0.05% 2,117,731 0.05% 30,000 0.00% 2018.6.22 1,919,489 0.04% 1,919,489 0.04% 2018.6.22 0 0.00% 0 0.00% 2018.6.22 835,000 0.02% 835,000 0.02% 2012.6.22 2012.6.22 0 0 0.00% 0.00% 0 0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0 0 0 0 0 12 Chairman of Compal Broadband Networks, Inc. Master’s Degree, Golden Gate University, San Francisco, USA Director of I PAO Bearing Co., Ltd. Master’s degree in San Francisco 0.00% (Note5) N/A N/A N/A 0.00% Golden Gate University. (Note5) N/A N/A N/A 0.00% Director of Mactech Co., Ltd. Texas AandM University EVP of Auscom Engineering Inc. Graduate Institute of Electronics Engineering of National Taiwan (Note 5) N/A N/A N/A 0.00% University (Note 5) N/A N/A N/A Director of Arcadyan Technology Corp. Honorary Doctorate, National 0.00% Chiao Tung University Chairman and President of United Microelectronics Corp. 0.00% PhD, Graduate Institute of Electrical Engineering, National (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A 0 0 0 0 0 0 Title Name/ Nationality/Ge nder (Note 1, 2) Elected Date Term First Elected Date Shareholding as of elected date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career (academic) achievements Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Selected Current Positions held concurrentl y in the Company and/or any other companies Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Title Name Relationship Independent Director Duh-Kung Tsai 2018.6.22 3 years 2012.6.22 0 0.00% 0 0.00% 0 0.00% 0 0.00% Institute of Technology (Note 5) N/A N/A N/A Chairman of Powertech Technology Inc. Note: 1. All Directors are male; except for Anthony Peter Bonadero who is a U.S. citizen, the remaining are ROC nationals. 2. The Chairman, Chief Strategy Officer and President of the Company are not the same person, spouses, or related to each other. 3. Change in representative of the Company’s institutional Director of Kinpo Electronics, Inc., and the former Shyh-Yong Shen was re-appointed to Chieh-Li Hsu, on July 21, 2020. 4. Director Sheng-Chieh Hsu held 2,794,000 shares (0.06%) through proxies. Taiwan University Minister of Transportation and Communications R.O.C. Department of Industrial Engineering, National Taipei 13 5. Selected Current Positions as below: Title Name Chairman Sheng-Hsiung Hsu Vice Chairman Jui-Tsung Chen Selected Current Positions Chairman：Kinpo Electronics, Inc., AcBel Polytech Inc., Cal-Comp Electronics(Thailand) Public Company Limited, Teleport Access Services, Inc., AcSacca Solar Energy Co., Ltd., Cal-Comp Electronics And communications Co., Ltd., Gempal Technology Corp., Panpal Technology Corp., Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd., Jipo Investment Inc., Kinpo Group Management Consultant Company, NTNU Innovation Investment Holding Company, Compal Electronics Technology (Kunshan) Co., Ltd., Compal Information (Kunshan) Co., Ltd., Compal Information Technology (Kunshan) Co., Ltd., Compal Digital Technology (Kunshan) Co., Ltd., Compal Electronics (Chengdu) Co., Ltd., Compal Electronics (ChongQing) Co., Ltd., Compal Electronics, (China) Co., Ltd., Compal Optoelectronics (Kunshan) Co., Ltd., Compal Display Electronics (Kunshan) Co., Ltd., Kunshan Botai Electronics Co., Ltd., Compal Smart Device (Chongqing) Co., Ltd., Compal Investment (Sichuan) Co., Ltd., Compal Investment (Jiangsu) Co., Ltd., Compal Management (Chengdu) Co., Ltd., Kinpo Electronics (China) Co., Ltd., Cal-Comp Precision Holding Co., Ltd. Managing Director：Taiwan Biotech Co., Ltd. Director：Crownpo Technology Inc., Compal System Trading (Kunshan) Co., Ltd., Cal-Comp Optical Electronics (Suzhou) Co., Ltd., Cal-Comp Technology (Suzhou) Co., Ltd., Cal-Comp Electronics and Communications (Suzhou) Co., Ltd., Acbel Polytech Holdings Inc., Acbel Polytech (Singapore) Pte. Ltd., Ascendant Private Equity Investment Ltd., Billion Sea Holdings Ltd., Big Chance International Co., Ltd., Cal-Comp Electronics (USA) Co., Ltd., Cal-Comp Electronics de Mexico Co. S.A. de C.V., Cal-Comp Precision (Philippines), Inc., Cal-Comp USA (Indiana), Co., Inc., Cal-Comp USA (San Diego), Co., Inc., Center Mind International Co., Ltd., Compal Display Holding (HK) Limited, Compal Electronics (Holding) Ltd., Compal Electronics International Ltd., Compal International Ltd., Compal International Holding (HK) Limited, Compal International Holding Co., Ltd., Compal Rayonnant Holdings Ltd., Core Profit Holdings Ltd., Flight Global Holding Inc., Fortune Way Technology Corp., Goal Reach Enterprises Ltd., HengHao Holdings A Co., Ltd., HengHao Holdings B Co., Ltd., High Shine Industrial Corp., Intelligent Universal Enterprise Ltd., Jenpal International Ltd., Just International Ltd., Kinpo International (Singapore) Pte. Ltd., Kinpo International Ltd., Lipo Holding Co., Ltd., Prospect Fortune Group Ltd., Prisco International Co., Ltd., Ranashe International Ltd., Smart International Trading Ltd. President：Kinpo Group Management Consultant Company Other：Honorary Chairman of Chinese National Federation of Industries, Honorary Chairman of Importers and Exporters Association of Taipei, Chairman of The Third Wednesday Club, Policy Consultant of Taiwan Electrical and Electronic Manufacturers' Association., Chairman of China Productivity Center, Vice Chairman of Straits Exchange Foundation, Vice Chairman of Sinocon Industrial Standards Foundation, Managing Director of Taiwan Design Research Institute, Director of Management Institute in Taipei Chairman：Arcadyan Technology Corporation, Ripal Optotronics Co., Ltd., Palcom International Corporation, General Life Biotechnology Co., Ltd., Raycore Biotech Co., Ltd., ARCE Therapeutics, Inc., UniCore Biomedical Co., Ltd., Aco Smartcare Co.,Ltd., Ray-Kwong Medical Management Consulting Co., Ltd., Compal System Trading (Kunshan) Co., Ltd. Director：Kinpo Electronics, Inc., Compal Broadband Networks, Inc., Mactech Co., Ltd., HengHao Technology Co. Ltd., Unicom Global, Inc., Kinpo Group Management Consultant Company, Compal Electronics Technology (Kunshan) Co., Ltd., Compal Information (Kunshan) Co., Ltd., Compal Information Technology (Kunshan) Co., Ltd., Compal Digital Technology (Kunshan) Co., Ltd., Compal Electronics (Chengdu) Co., Ltd., Compal Electronics (ChongQing) Co., Ltd., Compal Electronics, (China) Co., Ltd., Compal Optoelectronics (Kunshan) Co., Ltd., Compal Display Electronics (Kunshan) Co., Ltd., Compal Networking (Kunshan) Co., Ltd., Kunshan Botai Electronics Co., Ltd., Compal Investment (Sichuan) Co., Ltd., Compal Investment (Jiangsu) Co., Ltd., Compal Management (Chengdu) Co., Ltd., Compal (Vietnam) Co., Ltd., Compal Development and Management (Vietnam) Co., Ltd., Ascendant Private Equity Investment Ltd., Arcadyan Technology N.A. Corporation, Arcadyan Holding (BVI) Corp., Arch Holding (BVI) Corp., Billion Sea Holdings Ltd., Big Chance International Co., Ltd., Bizcom Electronics, Inc., Center Mind International Co., Ltd., Compal Display Holding (HK) Limited, Compal Electronics International Ltd., Compal Electronics (Holding) Ltd., Compal International Ltd., Compal 14 Title Name Selected Current Positions International Holding Co., Ltd., Compal International Holding (HK) Limited, Compal Rayonnant Holdings Ltd., Compalead Electronics B.V., Compal Wise Electronic (Vietnam) Co., Ltd., Core Profit Holdings Ltd., Etrade Management Co., Ltd., Flight Global Holding Inc., Forever Young Technology Inc., Fortune Way Technology Corp., Giant Rank Trading Ltd., Goal Reach Enterprises Ltd., High Shine Industrial Corp., Intelligent Universal Enterprise Ltd., Jenpal International Ltd., Just International Ltd., Prospect Fortune Group Ltd., Prisco International Co., Ltd., Smart International Trading Ltd., Sinoprime Global Inc., Wah Yuen Technology Holding Ltd., Webtek Technology Co., Ltd. Independent Director：Powertech Technology Inc. Audit Committee Member：Powertech Technology Inc. Chief Strategy Officer：Compal Electronics, Inc. Other：Chairman of Chengdian Culture and Education Foundation Director Representative of Binpal Investment Co., Ltd.: Wen-Being Hsu Chairman：Binpal Investment Co., Ltd. Kinpo Electronics, Inc. Director：AcBel Polytech Inc., CastleNet Technology Inc., Teleport Access Services, Inc., Crownpo Technology Inc., iHELPER Inc., Cal-Comp Big Data, Inc., XYZprinting, Inc., Norm Pacific Automation Corp., Kinpo Group Management Consultant Company, Cal-Comp Asset Management, Inc., Jipo Investment Inc., PK Venture Capital Corp., Prudence Venture Investment Corp., NTNU Innovation Investment Holding Company Director Representative of Kinpo Electronics Inc.: Chieh-Li Hsu Supervisor：Cal-Comp Biotech Co., Ltd., Jipo Investment Inc. Chairman：AcBel Electronic (Dong Guan) Co., Ltd., AcBel Electronic (Wuhan) Co., Ltd., Acbel Polytech (Philippines) Inc. Vice Chairman：Cal-Comp Electronics(Thailand) Public Company Limited Director：Kinpo Electronics, Inc., AcBel Polytech Inc., CastleNet Technology Inc., The Eslite Spectrum Corporation, PChome Online Inc., ARCE Therapeutics, Inc., Raypal Biomedical Co., Ltd., AcBel Telecom Inc., Cal-Comp Big Data, Inc., Sunny Go Solar Co., Ltd., Daytime Solar Energy Co., Ltd., AcRay Energy Co., Ltd., AcTek Energy Co., Ltd., Ray-Kwong Medical Management Consulting Co., Ltd., LIZ Electronics (Nantong) Co., Ltd., Acbel (USA) Polytech Inc., Acbel Polytech (Ireland) Limited, AcBel Polytech (SAMOA) Investment Inc., Acbel Polytech (Singapore) Pte Ltd., Acbel Polytech (UK) Limited, Acbel Polytech Holdings Inc., AcBel Polytech International Inc., AcBel Polytech Japan Inc., CK Holdings Inc., CSA Holdings Inc., EPI Technology Venture Pte. Ltd., Evercomm Singapore Pte. Ltd., Power Station Holdings Ltd. Supervisor：Teleport Access Services, Inc., Kinpo Group Management Consultant Company, Full Power Investment Co., Ltd. Independent Director：Winbond Electronics Corporation, Nuvoton Technology Corporation Remuneration Committee Member：Winbond Electronics Corporation, Nuvoton Technology Corporation Audit Committee Member：Winbond Electronics Corporation, Nuvoton Technology Corporation President：AcBel Polytech Inc., Acbel (USA) Polytech Inc., Acbel Polytech (Philippines) Inc. Other：Vice Chairman of Taiwan Electrical and Electronic Manufacturers' Association, Director of Importers and Exporters Association of Taipei 15 Title Name Director Charng-Chyi Ko Director Sheng-Chieh Hsu Director Yen-Chia Chou Director Chung-Pin Wong Director Chiung-Chi Hsu Selected Current Positions Chairman：Taiwan Biotech Co., Ltd., All For Health Biotech Co., Ltd., Evergene Biotech Industrial Co., Ltd., Weck Tech Biotech Co., Ltd., Global BioParma Ltd., Genhealth Pharma Co., Ltd., Taiwan Veterans Pharmaceutical Co., Ltd., Aseptic Innovative Medicine Co., Ltd., Young and Health Care Resorts Inc., Taiwan Venture Capital Co., Ltd., Long Yee Investment Co. Ltd., Yinfeng International, Inc., Taiwan Chariston AMC Corp., Ltd, Twin Luck Global Company Ltd. Director：Kinpo Electronics, Inc., Baotek Industrial Materials Ltd., Formosan Union Chemical Corp., Chang Yao Technology Inc., OmniHealth Group, Inc., All Information Inc., Spiregene Biotech Co., Ltd., Taiwan Carefor Home Pharmacy Co., Ltd., Minsheng Medical Holding Inc., Gold Precision Ltd., KKXC Intergrated Management Holding (CYPRUS) Ltd., Optics Lab Inc., Syn Pharm Inc. Supervisor：Teleport Access Services, Inc., Sunny Special Dyeing and Finishing Co., Ltd. Other：Chairman of Yang Bi Li Education Foundation Of Management, Director of Health,Welfare and Environment Foundation, Managing Supervisor of Cross-Strait Health Care and Leisure Activities Association Chairman：Integrate Investment Corp. Director ：Kinpo Electronics, Inc., Cal-Comp Electronics(Thailand) Public Company Limited, Cal-Comp Electronics And communications Co., Ltd., Jipo Investment Inc., Kinpo Electronics (China) Co., Ltd., Dongguan Kaipo Electronics Co., Ltd., Kinpo International Ltd. Supervisor：Gempal Technology Corp., Panpal Technology Corp., Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd. Chairman：Sceptre Industry Co., Ltd., Mega Industry Co., Ltd. Director：Kinpo Electronics, Inc., Micro Metal Electronics Co., Ltd. Supervisor：Full Power Investment Co., Ltd. President：Sceptre Industry Co.,Ltd. Chairman：Compal Broadband Networks, Inc., Starmems Semiconductor Corp., HengHao Technology Co. Ltd., Rayonnant Technology Co., Ltd., HippoScreen Neurotech Corp., Shennona Co., Ltd., Unicom Global, Inc., Wah Yuen Technology Holding Ltd. Executive Director：Compower Global Service Co., Ltd. Director：Arcadyan Technology Corporation, Mactech Co., Ltd., Gempal Technology Corp., Panpal Technology Corp., Ripal Optotronics Co., Ltd., Infinno Technology Corp., General Life Biotechnology Co., Ltd., ARCE Therapeutics, Inc., UniCore Biomedical Co., Ltd., Aco Smartcare Co.,Ltd., Raypal Biomedical Co., Ltd., Kinpo Group Management Consultant Company, Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd., Compal System Trading (Kunshan) Co., Ltd., Compal Information Technology (Kunshan) Co., Ltd., Compal Information (Kunshan) Co., Ltd., Compal Electronics Technology (Kunshan) Co., Ltd., Compal Electronics (Chengdu) Co., Ltd., Compal Electronics (ChongQing) Co., Ltd., Compal Digital Technology (Kunshan) Co., Ltd., Compal Investment (Sichuan) Co., Ltd., Compal Management (Chengdu) Co., Ltd., Compal Smart Device (Chongqing) Co., Ltd., Allied Power Holding Corp., Amexcom Electronics, Inc. Auscom Engineering Inc., Bizcom Electronics, Inc., Compal Connector Manufacture Ltd., HengHao Holdings A Co., Ltd., HengHao Holdings B Co., Ltd., Primetek Enterprises Ltd., Shennona Corporation, Sirqul Inc. Supervisor：Hong Ya Technology Corporation President：Compal Electronics, Inc., Gempal Technology Corp., Panpal Technology Corp., Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd. Chairman：Full Power Investment Co., Ltd. Director：E-Bow Bearing Co., Ltd., Juan Hsin Bao Hardware co., Ltd. Director：Mactech Co., Ltd., Panpal Technology Corp., Kunshan Botai Electronics Co., Ltd., CGS Technology (Poland) Sp. z o. o. Director Ming-Chih Chang Compal Europe (Poland) Sp. z o. o. President：Compal System Trading (Kunshan) Co., Ltd., Compal Information Technology (Kunshan) Co., Ltd., Compal Information (Kunshan) Co., Ltd., Compal 16 Title Name Selected Current Positions Electronics Technology (Kunshan) Co., Ltd., Compal Electronics (Chengdu) Co., Ltd., Compal Electronics (ChongQing) Co., Ltd., Compal Digital Technology (Kunshan) Co., Ltd., Compal Wireless Communications (Nanjing) Co., Ltd., Compal Digital Communications (Nanjing) Co., Ltd., Compal Communications (Nanjing) Co., Ltd., Kunshan Botai Electronics Co., Ltd., Compower Global Service Co., Ltd., Compal Investment (Sichuan) Co., Ltd., Compal Management (Chengdu) Co., Ltd. Director Anthony Peter Bonadero Executive Vice President：Compal Electronics, Inc. Executive Vice President：Auscom Engineering Inc. Director Sheng-Hua Peng Independent Director Min Chih Hsuan Independent Director Duei Tsai Independent Director Duh Kung Tsai Chairman：Compal Wireless Communications (Nanjing) Co., Ltd., Compal Digital Communications (Nanjing) Co., Ltd., HANHELT Communications (Nanjing) Co., Ltd., Compal Communications (Nanjing) Co., Ltd. Director：Arcadyan Technology Corporation, Gempal Technology Corp., Palcom International Corporation, Ripal Optotronics Co., Ltd., UniCore Biomedical Co., Ltd., Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd., Compal Optoelectronics (Kunshan) Co., Ltd., Compal Display Electronics (Kunshan) Co., Ltd., Compal Electronics, (China) Co., Ltd., Compal Smart Device (Chongqing) Co., Ltd., Compal Investment (Jiangsu) Co., Ltd., Amexcom Electronics, Inc., Bizcom Electronics, Inc. Supervisor：General Life Biotechnology Co., Ltd. President ： Palcom International Corporation, Compal Investment (Jiangsu) Co., Ltd., Compal Display Electronics (Kunshan) Co., Ltd., HANHELT Communications (Nanjing) Co., Ltd., Compal Smart Device (Chongqing) Co., Ltd. Executive Vice President：Compal Electronics, Inc. Chairman：Clientron Corp., Taiwan Memory Company, Fusionvax, Inc., TC-1 Culture Fund, Vital First Investment Corporation, Maxima Ventures II, Inc. Director：General Biologicals Corporation, SIPP, Inc., Meridigen Biotech Co., Ltd., Elevant Biopharma Co., Ltd., Tonghua United Capsules Co., Ltd., Allied Focus Holding Corporation (Seychelles), Angeluca Science Ltd. (Republic of Seychelles), Bohe Biopharma Global corporation (Cayman), Moral Express Holding Corporation (Seychelles), Orilitia Biopharma Limited (Hokg Kong), Pacgen Biopharmaceuticals Corporation (Canada) Supervisor：Meribank Biotech Co., Ltd. Remuneration Committee Member：Compal Electronics, Inc. Audit Committee Member：Compal Electronics, Inc. Independent Director：Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd. Remuneration Committee Member：Compal Electronics, Inc., Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd. Audit Committee Member：Compal Electronics, Inc., Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd. Chairman：Powertech Technology Inc., Greatek Electronics Inc. Director：Powertech Technoloyg (Suzhou) Ltd., Powertech Technology Akita Inc., Powertech Holding (B.V.I.) Inc., Powertech Technology (Singapore) Pte. Ltd., PTI Technology (Singapore) Pte. Ltd., Tera Probe, Inc. Independent Director：Chicony Power Technology Co., Ltd. Remuneration Committee Member：Compal Electronics, Inc., Chicony Power Technology Co., Ltd. Audit Committee Member：Compal Electronics, Inc., Chicony Power Technology Co., Ltd. Business Executive Representative：Powertech Technology Japan Ltd. Other：Chairman of PTI Education Fundation 17 Major shareholders of the Company’s corporate shareholders Name of corporate shareholder Kinpo Electronics, Inc. Major shareholders of the corporate shareholder (Note) Compal Electronics, Inc. (8.44%), Jipo Investment Inc. (3.14%), Shen, Tsai Lai- Shun(2.85%), Panpal Technology Corp. (1.58%), Shen, Kun-Chao (1.53%), Ho Bao Investment Co., Ltd. (1.52%), Tsai, Li-Chu (1.48%), Union Bank of Switzerland Taipei Branch, Trust property account-Tsai, Li Chu (1.36%), JPMorgan hosting Sanskrit Vanguard Emerging Markets Equity Index Fund account (1.29%), JPMorgan Managed Advanced Stars advanced aggregate International Equity Index (1.25%) April 24, 2021 Note: If the major shareholder is also a corporate entity, please refer to the following table. Major shareholders of the Company’s major corporate shareholders Name of corporate shareholder Jipo Investment Inc. Panpal Technology Corporation Ho Bao Investment Co., Ltd. Kinpo Electronics, Inc. (100%) Compal Electronics, Inc. (100%) Hsu, Chieh-Li (45.76%), Tsai, Li-Chu (20.06%), Hsu, Chun-Chi (17.09%), Hsu, Yung-Hsu (17.09%) Major shareholders of corporate shareholders 18 Professional qualifications and independence analysis of Directors Criteria Name Sheng-Hsiung Hsu Jui-Tsung Chen Representative of Binpal Investment Co., Ltd.: Wen-Being Hsu Representative of Kinpo Electronics Inc.: Chieh-Li Hsu Charng-Chyi Ko Sheng-Chieh Hsu Yen-Chia Chou Chung-Pin Wong Chiung-Chi Hsu Ming-Chih Chang Anthony Peter Bonadero Sheng-Hua Peng Min Chih Hsuan Duei Tsai Duh-Kung Tsai Having Met One of the Following Professional Qualifications combined with at Least Five Years Work Experience An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company Having Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company Independence Criteria (Note) 1 2 3 4 5 6 7 8 9 10 11 12 Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 19 Note: If the Director or supervisor meets the following conditions in the two years before the election and during the term of office, please mark “✔” in the space below each condition code. (1) Not an employee of the Company or its affiliated enterprises. (2) Not a Director or a supervisor of the Company or its affiliated enterprises (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (3) A natural person shareholder who or whose spouse or minor children or in another person’s name does not hold more than 1% of the total issued shares of the Company or is not a top-ten shareholder. (4) Not a manager in (1) or the spouse, second-tier relatives, or third-tier relatives of the persons listed in (2) or (3). (5) A Director, supervisor, or employee of a corporate shareholder who does not directly hold more than 5% of the total issued shares of the Company, is a top-five shareholder, or is designated as a representative to serve as a Director or supervisor of the Company in accordance with paragraph 1 or 2 of Article 27 of the Company Act (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (6) A Director, supervisor, or employee of another company who does not have a seat on the Board of Directors or more than half of the shares with voting rights are controlled by the same person of this company (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (7) A Director, supervisor, or employee of another company or institution who is not the same person or spouse as the Chairman, President, or an equivalent position of the Company (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (8) A Director, supervisor, or manager of another company or institution which does not have financial or business dealings with the Company, or a shareholder holding more than 5% of the shares of the Company (not applicable if the Company or institution holds more than 20% but no more than 50% of the total issued shares of the Company, with concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (9) A professional, sole proprietor, partner, business owner or partner, Director, supervisor, manager, or the spouse of the above of a company or institution which does not provide audit services to the Company or its affiliated enterprises or the cumulative remuneration amount of which in the past two years does not exceed TWD 500,000 for business, legal affairs, finance or accounting related services. However, this does not apply to the members of the remuneration committee, public takeover review committee, or special merger and acquisition committee who perform their functions in accordance with the Securities and Exchange Act or the Business Mergers and Acquisitions Act. (10) Not a spouse or have a second-tier relative relationship with other Directors. (11) There are no such circumstances as in Article 30 of the Company Act. (12) Not the government, legal person, or their representatives are elected as stipulated in Article 27 of the Company Act. 20 3.2.2 Management Team Name/ Shares held minors names of others Major career (academic) achievements Shares held by spouse and Total shares held in the Title Nationality/ Date elected Gender /appointed Subsidiary shareholding Shares held Shareholding Shareholding Shareholding (Note 1, 2) Shares Percentage Shares Percentage Shares Percentage Chief Strategy Officer Jui-Tsung Chen 2018.07.04 35,352,587 0.80% 1,069,405 0.02% (%) (%) President Chung-Pin Wong 2018.07.04 6,618,618 0.15% 1,398 0.00% Executive Vice President Executive Vice President Executive Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Ming-Chih Chang 2018.07.04 1,919,489 0.04% Sheng-Hua Peng 2018.07.04 835,000 0.02% Chen-Chang Hsu 2011.08.31 0 0.00% 0 0 0 0.00% 0.00% 0.00% Chun-Te Shen 2007.01.01 2,953,700 0.07% 900,000 0.02% Kuo-Chuan Chen 2007.01.01 685,823 0.02% 10,924 0.00% Chyou-Jui Wei 2010.03.18 0 0.00% Wen-Da Hsu 2014.02.27 1,333,000 0.03% Shi-Kuan Chen 2009.05.01 Chi-Wai Wan 2017.05.10 0 0 0.00% 0.00% 0 0 0 0 0.00% 0.00% 0.00% 0.00% 21 0 0 0 0 0 0 0 0 0 0 0 April 27, 2021 Spouse or relatives of second degree or closer acting as managers Title Name Relationship Vice President Po-Tang Wang Relative by affinity N/A N/A N/A N/A N/A N/A N/A N/A N/A Selected Current Positions Refer to Page14~15 Refer to Page 16 Refer to Page 16~17 Refer to Page 17 (Note 4) N/A N/A N/A (%) 0.00% Honorary Doctorate, National Cheng Kung University Chairman of Arcadyan Technology Corp. Graduate Institute of Management Science, National Chiao 0.00% Tung University Chairman of Compal Broadband Networks, Inc. Department of Electrical Engineering, Ming Chi University of 0.00% Technology Director of Mactech Co., Ltd. Graduate Institute of Electrical Engineering, National Taiwan 0.00% University Director of Arcadyan Technology Corp. National Chiao Tung University EMBA 0.00% Executive Vice President of WINTEK Corporation Graduate Institute of Electrical Engineering, National Taiwan 0.00% University (Note 4) N/A N/A N/A Director of Kinpo Electronics Inc. 0.00% Department of Physics, Chung Yuan Christian University Senior Vice President of Compal Communication Inc. Master of Business Administration, University of Washington, N/A N/A N/A N/A 0.00% USA (Note 4) N/A N/A N/A 0.00% 0.00% Senior Vice President of Toppoly Optoelectronics Corp. Department of Media Administration, Shih Hsin University Senior Vice President of Compal Communication Inc. Master of Industrial Design, Cranbrook Academy of Art Director of Design and Customer Affairs, Philips (Hong Kong) Department of Electrical Engineering, Fu Jen Catholic (Note 4) N/A N/A (Note 4) N/A N/A N/A N/A 0.00% University N/A N/A N/A N/A Inventec Corp. Vice President Name/ Shares held minors names of others Major career (academic) achievements Shares held by spouse and Total shares held in the Title Nationality/ Date elected Gender /appointed Subsidiary shareholding Shares held Shareholding Shareholding Shareholding (Note 1, 2) Shares Percentage Shares Percentage Shares Percentage (%) (%) (%) Selected Current Positions Spouse or relatives of second degree or closer acting as managers Title Name Relationship Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Min-Tung Weng 2018.12.01 623,786 0.01% Lo-Chun Lee 2018.12.01 420,000 0.01% Sheng-Hung Li 2019.11.11 495,574 0.01% Bor-Heng Chen 2020.05.13 280,010 0.01% 0 0 0 0 0.00% 0.00% 0.00% 0.00% Chung-Hsing Tan 2020.08.12 0 0.00% 5,320 0.00% Vice President Chih-Chuan Cheng 2003.01.01 2,103,786 0.05% 51,194 0.00% Vice President Ching-Hsiung Lu 2003.01.01 7,437,007 0.17% 850,000 0.02% Vice President Po-Tang Wang 2007.07.10 559,548 0.01% 486 0.00% Vice President Tzong-Ming Wang 2009.07.16 293,184 0.01% Vice President Fu-Chuan Chang 2009.07.16 160,662 0.00% Vice President Yung-Nan Chang 2011.01.01 0 0.00% 0 0 0 0.00% 0.00% 0.00% 22 0 0 0 0 0 0 0 0 0 0 0 Master of Business Administration, University of Washington, 0.00% USA (Note 4) N/A N/A N/A Deputy Manager of Sales, Kapok Computer Company Department of Electronic Engineering, Lee-Ming Institute of 0.00% Technology N/A N/A N/A N/A Chairman's Special Assistant, Mag Technology Co., Ltd. Department of Electronics, National Taipei Institute of 0.00% Technology COLUMBIA UNIVERSITY N/A N/A N/A N/A 0.00% Master of Industrial Engineering and Operations N/A N/A N/A N/A 0.00% 0.00% 0.00% Management Department of Electrical Engineering, Tatung University Vice President of Compal Communication Inc. Department of Electronic Engineering, Lunghwa University of Science and Technology Deputy Manager of Research and Development, Top Information Technologies Co., Ltd. Department of Accounting, Feng Chia University Director Compal Communication Inc. Department of Computer Science and Information (Note 4) N/A N/A N/A N/A N/A N/A N/A (Note 4) N/A N/A N/A 0.00% Engineering, National Taiwan University (Note 4) Chief Strategy Officer Jui-Tsung Chen Relative by affinity President of Vibo Telecom Inc. National Taipei Institute of Technology Head of Research and Development, CLEVO Company National Chin-Yi University of Technology Production Manager, ADI Corp MBA, Pacific Western University Factory Manager, Delta Electronics Inc. 0.00% 0.00% 0.00% N/A N/A N/A N/A (Note 4) N/A N/A N/A N/A N/A N/A N/A Name/ Shares held minors names of others Major career (academic) achievements Shares held by spouse and Total shares held in the Title Nationality/ Date elected Gender /appointed Subsidiary shareholding Shares held Shareholding Shareholding Shareholding (Note 1, 2) Shares Percentage Shares Percentage Shares Percentage (%) (%) (%) Selected Current Positions Spouse or relatives of second degree or closer acting as managers Title Name Relationship Vice President Yong-Ho Su 2011.07.01 500,401 0.01% 73,000 0.00% Vice President Jyh-Shyan Liang 2011.10.31 80,000 0.00% Vice President Chiao-Lie Huang 2014.02.27 38,992 0.00% Vice President Yi-Yun Chang 2014.08.13 140,246 0.00% Vice President Hsin-Kung Mao 2014.11.13 420,714 0.01% Vice President Hsin-Hsiung Huang 2015.01.22 419,001 0.01% Vice President Shih-Hong Huang 2016.02.24 280,000 Vice President Yi-Chiang Chiu 2016.02.24 280,000 0.01% 0.01% Vice President Jui-Chun Shyur 2016.05.11 0 0.00% 0 0 0 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Vice President Ta-Chun Wang 2016.06.29 204,200 0.00% 4,119 0.00% Vice President Jen-Liang Lin 2018.03.06 50,500 0.00% General Counsel Peng-Hong Chan 2018.05.09. 0 0.00% Vice President Wei-Chia Wang 2018.12.01 120,000 0.00% 0 0 0 0.00% 0.00% 0.00% 23 0 0 0 0 0 0 0 0 0 0 0 0 0 Department of Electrical Engineering, National Taipei 0.00% Institute of Technology N/A N/A N/A N/A Vice President of Arima Photovoltaic and Optical Corp. University of Colorado 0.00% Postgraduate Institute of Digital Communication/Vice N/A N/A N/A N/A President of Wireless Communication, Altek Corporation Graduate Institute of Electrical Engineering, National Taiwan 0.00% University (Note 4) N/A N/A N/A Vice President of Compal Communication Inc. Graduate Institute of Electrical Engineering, National Taiwan 0.00% University N/A N/A N/A N/A Senior Manager of Compal Communication Inc. Master of Business Administration, University of Lincoln Director of Avalue Technology Inc. Department of Electronics, Chung Yuan Christian University Senior Manager of Compal Communication Inc. Master in Control Engineering, National Chiao Tung University Director of Coretronic Corporation 0.00% 0.00% 0.00% 0.00% Master in Earth Sciences, National Central University PhD, Graduate Institute of Electrical Engineering, National 0.00% Taiwan University Photonics Industries International, Inc.President Master of Industrial Engineering, University of Illinois Shanghai Real Industrial Co., Ltd. Managing Vice President Department of Industrial Engineering, Feng Chia University Director of Operations Division, Compal Fab No. 2 Master of Cornell University Law School CSO, Pou Chen Group Chung Yuan Christian University, Electrical Engineering Senior Director of LCFC 0.00% 0.00% 0.00% 0.00% (Note 4) N/A N/A (Note 4) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Name/ Shares held minors names of others Major career (academic) achievements Shares held by spouse and Total shares held in the Title Nationality/ Date elected Gender /appointed Subsidiary shareholding Shares held Shareholding Shareholding Shareholding (Note 1, 2) Shares Percentage Shares Percentage Shares Percentage (%) (%) (%) Selected Current Positions Spouse or relatives of second degree or closer acting as managers Title Name Relationship Accounting and Corporate Governance Officer Cheng-Chiang Wang 2018.07.04 2019.05.13 955,808 0.02% Vice President Cheng-Hui Su 2018.12.01 Vice President Tu-Chuan Tu 2018.12.01 Vice President Chang-Chieh Tien 2018.12.01 105,000 593,081 403 Financial Officer Guo-Dung Yu 2020.08.12 60,000 Vice Presiden Peng Kuee Lau 2020.08.12 Vice Presiden Yau-De Chiou 2021.02.25 Internal Audit Officer Po-Wen Hsieh 2010.10.27 0 0 0 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 30 0 62,105 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0 0 0 0 0 0 0 0 Fu Jen Catholic University, Department of Accounting 0.00% Financial officer of Allied Circuit Co., Ltd. (Note 4) N/A N/A N/A 0.00% Tulane University Master of MBA 0.00% Vanung University, Electrical Engineering 0.00% National Chiao Tung University,Transportation Management 0.00% 0.00% George Washington University Master of Accounting Financial officer of Arcadyan Technology Corp. IOWA STATE UNIVERSITY of Science and Technology Bachelor Columbia Southern University Master of Business 0.00% Administration Alabama President of Lien Chang Electronic Enterprise Co., Ltd. Department of Accounting, National Taiwan University 0.00% Audit Manager, KGT Telecom N/A N/A N/A (Note 4) N/A N/A N/A N/A N/A N/A N/A N/A (Note 4) N/A N/A N/A N/A N/A N/A N/A (Note 4) N/A N/A N/A N/A N/A N/A N/A Note: 1. Except for Senior Vice President Peng Kuee Lau is Malaysia national, all other managers are ROC nationals; except for Senior Vice President Chyou-Jui Wei, all other managers are male. 2. The Chairman, Chief Strategy Officer, and President of the Company are not the same person, spouses, or related to each other. 3. Senior Vice Presidents Pei-Yuan Chen, Ying Chang, Wei-Chang Chen and Vice Presidents Shyh -An Lee, Hsiao-Wei Lo resigned in 2020. 24 4. Concurrent positions in other companies Title Name Concurrent positions in other companies Executive Vice President Chen-Chang Hsu Chairman：HengHong Optoelectronics Technology (Kunshan) Co., Ltd., LUCOM Display Technology (KunShan) Ltd. Vice Chairman：HengHao Technology Co. Ltd. Director：Mactech Co., Ltd. President：HengHao Technology Co. Ltd., HengHong Optoelectronics Technology (Kunshan) Co., Ltd., LUCOM Display Technology (KunShan) Senior Vice President Chun-Te Shen Director：HippoScreen Neurotech Corp., Auscom Engineering Inc., Shennona Corporation Ltd. Senior Vice President Chyou-Jui Wei Chairman：Rapha Bio Ltd. Director：Taiwan Star Telecom Co., Ltd., Chenfeng Optronics Corp., General Life Biotechnology Co., Ltd., Raycore Biotech Co., Ltd., ARCE Therapeutics, Inc., UniCore Biomedical Co., Ltd., IIH Biomedical Venture Fund I Co.,, Hua Vi Venture Capital Corporation, Hua VII Venture Capital Corporation, Cdib and Partners Investment Holding Corp., Compal Electronic Technology (Chongqing) Co., Ltd., ZhengYing Electronics(Chongqing) Co., Ltd., Compal Precision Module(Jiangsu) Co., Ltd., ShengBao Precision Electronics (Taicang) Ltd., Rayonnant Technology (HK) Holdings Limited Supervisor：HengHao Technology Co. Ltd., Rayonnant Technology Co., Ltd., Mactech Co., Ltd., Rayonnant Technology (HK) Holdings Limited, Infinno Technology Corp., Ripal Optotronics Co., Ltd., Unicom Global, Inc., Aco Smartcare Co.,Ltd., Ray-Kwong Medical Management Consulting Co., Ltd., Rayonnant Technology (Taicang) Co., Ltd. Independent Director：SYNergy ScienTech Corp., Visco Vision Inc. Remuneration Committee Member：SYNergy ScienTech Corp., Visco Vision Inc. Audit Committee Member：SYNergy ScienTech Corp., Visco Vision Inc. Wen-Da Hsu Director：HANHELT Communications (Nanjing) Co., Ltd. Shi-Kuan Chen Director：Rayonnant Technology Co., Ltd., Rayonnant Technology (Taicang) Co., Ltd. Min-Tung Weng Director：Auscom Engineering Inc. President：Auscom Engineering Inc. Chung-Hsing Tan Director：HANHELT Communications (Nanjing) Co., Ltd. Senior Vice President Senior Vice President Senior Vice President Senior Vice President Vice President Ching-Hsiung Lu Director：Zhi-Bao Technology Corporation, Arcadyan Technology (Shanghai) Corp. Supervisor：Compal Electronics Technology (Kunshan) Co., Ltd., Compal Information (Kunshan) Co., Ltd., Compal Information Technology (Kunshan) Co., Ltd., Compal Electronics, (China) Co., Ltd., Compal Digital Technology (Kunshan) Co., Ltd., Compal Electronics 25 Title Name Concurrent positions in other companies (Chengdu) Co., Ltd., Compal Electronics (ChongQing) Co., Ltd., Compal Optoelectronics (Kunshan) Co., Ltd., Compal Display Electronics (Kunshan) Co., Ltd., Compal Networking (Kunshan) Co., Ltd., Kunshan Botai Electronics Co., Ltd., Compal Investment (Sichuan) Co., Ltd., Compal Investment (Jiangsu) Co., Ltd., Compal Management (Chengdu) Co., Ltd. Vice President Po-Tang Wang Independent Director：Galaxy Software Services Corporation Remuneration Committee Member：Galaxy Software Services Corporation Audit Committee Member：Galaxy Software Services Corporation Director：Bizcom Electronics, Inc., CGS Technology (Poland) Sp. z o. o., Compal Europe (Poland) Sp. z o.o. Vice President Fu-Chuan Chang President：Compal Optoelectronics (Kunshan) Co., Ltd., Compal Electronics, (China) Co., Ltd. Vice President Chiao-Lie Huang Supervisor：HANHELT Communications (Nanjing) Co., Ltd. Director：Avalue Technology Inc., Unicom Global, Inc., Amexcom Electronics, Inc., Compalead Electronics B.V., Mexcom Electronics, LLC, Vice President Hsin-Kung Mao Mexcom Technologies, LLC Vice President Hsin-Hsiung Huang Vice President Accounting and Corporate Governance Officer Vice Presidentt and Financial Officer Cheng-Chiang Wang Guo-Dung Yu President：Amexcom Electronics, Inc. Director：Compal Wireless Communications (Nanjing) Co., Ltd., Compal Digital Communications (Nanjing) Co., Ltd., Compal Communications (Nanjing) Co., Ltd. Director：Allied Circuit Co., Ltd., Zhi-Bao Technology Corporation, HengHao Technology Co. Ltd., Palcom International Corporation, Infinno Technology Corp., Compal Wireless Communications (Nanjing) Co., Ltd., Compal Digital Communications (Nanjing) Co., Ltd., Compal Communications (Nanjing) Co., Ltd., Rayonnant Technology (Taicang) Co., Ltd., Compal Electronics India Private Limited Supervisor：HippoScreen Neurotech Corp., Compal System Trading (Kunshan) Co., Ltd., Compower Global Service Co., Ltd., HengHong Optoelectronics Technology (Kunshan) Co., Ltd., Compal Smart Device (Chongqing) Co., Ltd. Chairman：Compal Electronics India Private Limited Supervisor：Palcom International Corporation, ARCE Therapeutics, Inc., Compal Wireless Communications (Nanjing) Co., Ltd., Compal Digital Communications (Nanjing) Co., Ltd., Compal Communications (Nanjing) Co., Ltd. President：Compal Electronics India Private Limited 26 3.2.3 Remuneration of Directors, Independent Directors, President and Vice Presidents 1. Remuneration of Directors and Independent Directors Directors' remuneration Remuneration as an employee Remuneration (A) Pension (B) Remuneration from earnings appropriation (C) Business department implementation Fees for services rendered (D) The sum of A, B, C and D as a percentage of after- tax profit Salaries, bonuses, special allowances etc (E) Retirement Pension (F) Share of profit as an employee (G) The Company All companies included in the financial statements The Company All companies included in the financial statements The Company All companies included in the financial statements The Company All companies included in the financial statements The Company All companies included in the financial statements The Company All companies included in the financial statements The Company All companies included in the financial statements The Company All companies included in the financial statements Cash Stock Amount Amount Cash Stock The sum of A, B, C, D, E, F, and G as a percentage of after-tax profit The Company All companies included in the financial statements Remunerati on from ventures other than subsidiaries or from the parent company (H) Unit: TWD Thousands; Thousand shares; % 0 0 0 0 51,541 51,541 2,284 3,034 0.5749% 0.5829% 74,143 119,307 743 743 22,900 0 22,900 0 1.6194% 2.1099% 63,308 Title Name Chairman Sheng-Hsiung Hsu Vice Chairman Jui-Tsung Chen Director Director Director Director Director Director Director Director Director Representative: of Binpal Investment Co., Ltd. Wen-Being Hsu Representative of Kinpo Electronics Inc.: Chieh-Li Hsu, Shyh-Yong Shen Charng-Chyi Ko Sheng-Chieh Hsu Yen-Chia Chou Chung-Pin Wong Chiung-Chi Hsu Ming-Chih Chang Anthony Peter Bonadero Director Sheng-Hua Peng Independent Director Independent Director Independent Director Min-Chih Hsuan Duei Tsai 7,200 7,200 0 0 0 0 475 475 0.0820% 0.0820% 0 0 0 0 0 0 0 0 0.0820% 0.0820% 0 Duh-Kung Tsai 1. Please state the remuneration payment policy, system, standard and structure of Independent Directors, and the relationship between factors such as the responsibilities, risks and time devoted, and the amount of remuneration: The remuneration of Independent Directors shall be submitted by the remuneration committee to the Board of Directors and decided by the Board of Directors, which depended on personal partake-in, contribution to the Company’s business and benchmarks in the same industry according to the “Articles of Association". 2. Remuneration collected by Directors for their services (i.e. acting as advisor for non-employees) as disclosed in the Financial Report in the most recent year not shown in the table: 0 27 Note: 1. Change in representative of the Company’s institutional Director of Kinpo Electronics, Inc., and the former Shyh-Yong Shen was re-appointed to Chieh-Li Hsu, on July 21, 2020. 2. In 2020, the Company made pension contributions totaling TWD 743,000 (including TWD 324,000 under the new system and TWD 419,000 under the old system) for Directors who also assumed managerial roles as employees; Meanwhile, all companies reported in the financial statements had made pension contributions totaling TWD 743,000 (including TWD 324,000 under the new system and TWD 419,000 under the old system). 3. Directors’ compensation refers to the estimated Directors’ compensation approved by the Board of Directors meeting on March 26, 2021. ▓ Table of Remuneration Ranges Range of Remuneration Under TWD 1,000,000 TWD 1,000,000 ~ TWD 2,000,000 (exclusive) TWD 2,000,000 ~ TWD 3,500,000 (exclusive) TWD 3,500,000 ~ TWD 5,000,000 (exclusive) TWD 5,000,000 ~ TWD 10,000,000 (exclusive) TWD 10,000,000 ~ TWD 15,000,000 (exclusive) TWD 15,000,000 ~ TWD 30,000,000 (exclusive) TWD 30,000,000~ TWD 50,000,000 (exclusive) TWD 50,000,000 ~ TWD 100,000,000 (exclusive) Over TWD 100,000,000 (inclusive) Total Total of (A+B+C+D) Total of (A+B+C+D+E+F+G+H) Number of Directors The Company Companies in the consolidated financial statements The Company Companies in the consolidated financial statements 3 (Note 1) 3 (Note 2) 8 (Note 3) 4 (Note 4) 3 (Note 5) 3 (Note 6) 8 (Note 7) 4 (Note 8) 3 (Note 9) 3 (Note 10) 5 (Note 11) 3 (Note 12) 2 (Note 13) 2 (Note 14) 1 (Note 15) 3 (Note 16) 3 (Note 17) 4 (Note 18) 3 (Note 19) 4 (Note 20) 18 18 18 18 Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung-Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng, Anthony Peter Bonadero, Kinpo Electronics, Inc. - 8 positions Sheng-Hsiung Hsu, Jui-Tsung Chen, Charng-Chyi Ko, Binpal Investment Co., Ltd. - 4 positions Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung-Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng, Anthony Peter Bonadero, Kinpo Electronics, Inc. - 8 positions Sheng-Hsiung Hsu, Jui-Tsung Chen, Charng-Chyi Ko, Binpal Investment Co., Ltd. - 4 positions Note: 1. Wen-Being Hsu, Chieh-Li Hsu, Shyh-Yong Shen - 3 positions 2. Min Chih Hsuan, Duei Tsai, Duh Kung Tsai - 3 positions 3. 4. 5. Wen-Being Hsu, Chieh-Li Hsu, Shyh-Yong Shen - 3 positions 6. Min Chih Hsuan, Duei Tsai, Duh Kung Tsai - 3 positions 7. 8. 9. Wen-Being Hsu, Chieh-Li Hsu, Shyh-Yong Shen - 3 positions 10. Min Chih Hsuan, Duei Tsai, Duh Kung Tsai - 3 positions 11. Sheng-Chieh Hsu, Yen-Chia Chou, Chiung-Chi Hsu, Anthony Peter Bonadero, Kinpo Electronics, Inc. - 5 positions 28 Jui-Tsung Chen, Chung-Pin Wong - 2 positions 12. Sheng-Hsiung Hsu, Charng-Chyi Ko, Binpal Investment Co., Ltd. - 3 positions 13. Ming-Chih Chang, Sheng-Hua Peng - 2 positions 14. 15. Wen-Being Hsu1 - 1 position 16. Min Chih Hsuan, Duei Tsai, Duh Kung Tsai - 3 positions 17. Yen-Chia Chou, Chiung-Chi Hsu, Kinpo Electronics, Inc. - 3 positions 18. Shyh-Yong Shen, Charng-Chyi Ko, Sheng-Chieh Hsu, Binpal Investment Co., Ltd. -4 positions 19. Chieh-Li Hsu, Ming-Chih Chang, Sheng-Hua Peng - 3 positions 20. Sheng-Hsiung Hsu, Jui-Tsung Chen, Chung-Pin Wong, Anthony Peter Bonadero - 4 positions 2. Remuneration of Supervisors: Not Applicable (The Company adopts an Audit Committee system) 3. Remuneration of the President and Vice Presidents Salary (A) Pension (B) Bonus and special allowances (C) Share of profit as an employee (D) Sum of A, B, C and D as a percentage of after-tax profit (%) Title Name All companies All companies included in the All companies The Company All companies included in the financial statements The Company included in the The Company The Company included in the financial statements financial statements financial statements Cash Amount Stock Amount Cash Amount Stock Amount The Company All companies included in the financial statements Remuneration from ventures other than subsidiaries or from the parent company (E) Unit: TWD Thousands; Thousand shares; % 47 employees including CSO Jui- Tsung Chen (Note1) 122,116 128,322 6,007 6,007 230,736 231,289 101,845 0 101,845 0 4.9211 % 4.9933% 1,063 Note: 1.Managers’ titles and names ‧ ‧ ‧ ‧ ‧ Chief Strategy Officer: Jui-Tsung Chen – 1 position President: Chung-Pin Wong – 1 position Executive Vice Presidents: Ming-Chih Chang, Shen-Hua Peng, Chen-Chang Hsu – 3 positions Senior Vice Presidents: Chun-Te Shen, Kuo-Chuan Chen, Chyou-Jui Wei, Wen-Da Hsu, Shi-Kuan Chen, Chi-Wai Wan, Min-Tung Weng, Lo-Chun Lee, Sheng-Hung Li, Bor-Heng Chen, Chung-Hsing Tan, Pei-Yuan Chen, Ying Chang, Wei-Chang Chenn–14 positions Vice Presidents: Chih-Chuan Cheng, Ching-Hsiung Lu, Po-Tang Wang, Tzong-Ming Wang, Fu-Chuan Chang, Yung-Nan Chang, Yong-Ho Su, Jyh-Shyan Liang, Chiao-Lie Huang, Yi-Yun Chang, Hsin-Kung Mao, Hsin- Hsiung Huang, Shih-Hong Huang, Yi-Chiang, Jui-Chun Shyur, Ta-Chun Wang, Liang-Jen Lin, Peng-Hong Chan, Wei-Chia Wang, Cheng- Chiang Wang, Cheng-Hui Su, Tu-Chuan Tu, Chang-Chieh Tien, Guo-Dung Yu, Peng Kuee Lau, Yau-De Chiou, Shyh -An Lee, Hsiao-Wei Lo–28 positions 29 2. The Company made pension contributions totaling TWD 6,007,000 (including TWD 4,284,,000 under the new system and TWD 1,723,000 under the old system). While all companies reported in the financial statements made pension contributions totaling TWD 6,007,000 (including TWD 4,284,,000 under the new system and TWD 1,723,000 under the old system). 3. Employees’ compensation appropriation was approved by the Board of Directors at the meeting on March 26, 2021. The compensations of the aforementioned managers were not yet final and will be reviewed based on the list of the date of distribution. ▓ Table of Remuneration Ranges Range of Remuneration Under TWD 1,000,000 TWD 1,000,000 ~ TWD 2,000,000 (exclusive) TWD 2,000,000 ~ TWD 3,500,000 (exclusive) TWD 3,500,000 ~ TWD 5,000,000 (exclusive) TWD 5,000,000 ~ TWD 10,000,000 (exclusive) TWD 10,000,000 ~ TWD 15,000,000 (exclusive) TWD 15,000,000 ~ TWD 30,000,000 (exclusive) TWD 30,000,000~ TWD 50,000,000 (exclusive) TWD 50,000,000 ~ TWD 100,000,000 (exclusive) Over TWD 100,000,000 (inclusive) Total Total of (A+B+C+D) The Company 2 (Note 1) 3 (Note 2) 4 (Note 3) 24 (Note 4) 8 (Note 5) 4 (Note 6) 2 (Note 7) 47 Number of President and Vice Presidents Total of (A+B+C+D+E) Companies in the consolidated financial statements 2(Note 8) 3 (Note 9) 2 (Note 10) 26 (Note 11) 8 (Note 12) 4 (Note 13) 2 (Note 14) 47 Note: 1. 2. 3. 4. Yau-De Chiou、Ying Chang - 2 positions Pei-Yuan Chen、Hsiao-Wei Lo、Shyh-An Lee - 3 positions Ching-Hsiung Lu、Fu-Chuan Chang、Yung-Nan Chang 、Peng Kuee Lau - 4 positions Kuo-Chuan Chen、Chyou-Jui Wei、Wen-Da Hsu、Chih-Chuan Cheng、Po-Tang Wang、Tzong -Ming Wang、Jyh-Shyan Liang、 Chiao-Lie Huang 、Yi-Yun Chang、Hsin- Kung Mao、Hsin-Hsiung Huang、Shih-Hong Huang、Yi-Chiang Chiu、Jui-Chun Shyur、Ta-Chun Wang、Jen-Liang Lin、Peng-Hong Chan、Wei-Chia Wang、Cheng-Chiang Wang、Cheng-Hui Su、Tu-Chuan Tu、Chang-Chieh Tien、Guo-Dung Yu、Wei-Chang Chen - 24 positions Chun-Te Shen、Shi-Kuan Chen、Min-Tung Weng、Lo-Chun Lee、Sheng-Hung Li、Bor-Heng Chen、Chung-Hsing Tan、Yong-Ho Su - 8 positions 5. 6. Ming-Chih Chang、Sheng-Hua Peng、Chen-Chang Hsu、Chi-Wai Wan - 4 positions 7. 8. Jui-Tsung Chen、Chung-Pin Wong - 2 positions Yau-De Chiou、Ying Chang - 2 positions 30 Pei-Yuan Chen、Hsiao-Wei Lo、Shyh-An Lee - 3 positions 9. 10. Ching-Hsiung Lu、Peng Kuee Lau - 2 positions 11. Kuo-Chuan Chen、Chyou-Jui Wei、Wen-Da Hsu、Chih-Chuan Cheng、Po-Tang Wang、Tzong -Ming Wang、Fu-Chuan Chang、Yung-Nan Chang 、Jyh-Shyan Liang、 Chiao-Lie Huang 、Yi-Yun Chang、Hsin-Kung Mao、Hsin-Hsiung Huang、Shih-Hong Huang、Yi-Chiang Chiu、Jui-Chun Shyur、Ta-Chun Wang、Jen-Liang Lin、Peng-Hong Chan、Wei-Chia Wang、Cheng-Chiang Wang、Cheng-Hui Su、Tu-Chuan Tu、Chang-Chieh Tien、Guo-Dung Yu、Wei-Chang Chen - 26 positions 12. Chun-Te Shen、Shi-Kuan Chen、Min-Tung Weng、Lo-Chun Lee、Sheng-Hung Li、Bor-Heng Chen、Chung-Hsing Tan、Yong-Ho Su - 8 positions 13. Ming-Chih Chang、Sheng-Hua Peng、Chen-Chang Hsu、Chi-Wai Wan - 4 positions 14. Jui-Tsung Chen、Chung-Pin Wong - 2 positions ▓ Employee profit sharing granted to the management team Unit: TWD Thousands Title Name Stock dividends Cash dividends Total Total as a percentage to after-tax profit (%) 43 employees including CSO Jui-Tsung Chen (Note 1) Note: 1.Managers’ titles and names ‧Chief Strategy Officer: Jui-Tsung Chen – 1 position ‧President: Chung-Pin Wong – 1 position 0 102,075 102,075 1.0903% ‧Executive Vice Presidents: Ming-Chih Chang, Shen-Hua Peng, Chen-Chang Hsu– 3 positions ‧Senior Vice Presidents: Chun-Te Shen, Kuo-Chuan Chen, Chyou-Jui Wei, Wen-Da Hsu, Shi-Kuan Chen, Chi-Wai Wan, Min-Tung Weng, Lo-Chun Lee, Sheng-Hung Li, Bor- Heng Chen, Chung-Hsing Tan,– 11 positions ‧Vice Presidents : Chih-Chuan Cheng, Ching-Hsiung Lu, Po-Tang Wang, Tzong-Ming Wang, Fu-Chuan Chang, Yung-Nan Chang, Yong-Ho Su, Jyh-Shyan Liang, Chiao-Lie Huang, Yi-Yun Chang, Hsin-Kung Mao, Hsin-Hsiung Huang, Shih-Hong Huang, Yi-Chiang, Jui-Chun Shyur, Ta-Chun Wang, Liang-Jen Lin, Peng-Hong Chan, Wei-Chia Wang, Cheng- Chiang Wang, Cheng-Hui Su, Tu-Chuan Tu, Chang-Chieh Tien, Guo-Dung Yu, Peng Kuee Lau, Yau-De Chiou – 26 positions ‧Other: Po-Wen Hsieh - 1 position 2. Senior Vice Presidents Pei-Yuan Chen, Ying Chang, Wei-Chang Chen and Vice Presidents Shyh -An Lee, Hsiao-Wei Lo resigned in 2020. 3. Employees’ compensation appropriation was approved by the Board of Directors at the March 26, 2021 meeting. The compensations of the aforementioned managers have not been finalized and will be reviewed based on the list upon the date of distribution. 31 3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents, and Vice Presidents ▓ The percentage of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to Directors, supervisors, presidents, and vice presidents of the Company, relative to net income. 2020 2019 (Note) Amount % Amount % Increase (Decrease) % Amount Unit: TWD Thousands 574,044 6.13% 529,830 7.62% 44,214 8.34% Analysis Directors CSO, Presidents, and Vice Presidents Net Income 9,361,893 6,955,899 2,405,994 Note: 2019 is the actual amount. ▓ The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and correlation with business performance. ‧ Remuneration paid by the Company to Directors has been made in accordance with the Articles of Association. When the Company makes profit in a year, no more than 2% of the Company’s pre-tax profit (not including remuneration for employees and Directors) shall be paid to Directors as remuneration along with reasonable compensation based on other factors such as the Company’s operational performance and the individual Director’s contribution to the Company’s performance taken into consideration. ‧ The Company’s remuneration policy for Managers has been established based on various factors, including the Company’s wage policy, the average wage offered by competitors for the same position, the duties and responsibilities for the position in question, and the Manager’s actual contribution to the Company’s operational objectives. ‧ The Company’s procedure for determining remuneration not only takes into account the Company’s overall operational performance but also includes employee’s personal performance and their contribution to the Company’s performance in order to determine a reasonable compensation. Relevant wages and compensations are reviewed by the Remuneration Committee and resolved by the Board of Directors. The Company will also be keeping a close eye on the latest developments in the global economy, international financial environment, and state of the industry in order to predict its operational development, profit status, operational risks and changes in pertinent regulations in the near future in order to review the compensation system, thereby striving for an ideal balance between the Company’s sustainable operation and relevant risk control. 32 3.3 Implementation of Corporate Governance 3.3.1 Board of Directors ‧The term of the 13th committee is from June 22, 2018 to June 21, 2021. ‧There were six Board meetings during 2020 (A). Director’s attendance records are as shown below: Title Chairman Vice Chairman Director Director Name Sheng-Hsiung Hsu Jui-Tsung Chen Binpal Investment Co., Ltd. Representative:Wen-Being Hsu Kinpo Electronics, Inc. Representative: Chieh-Li Hsu, Representative: Shyh-Yong Shen Director Charng-Chyi Ko Director Sheng-Chieh Hsu Director Yen-Chia Chou Director Chung-Pin Wong Director Chiung-Chi Hsu Director Ming-Chih Chang Director Anthony Peter Bonadero Director Independent Director Independent Director Independent Director Sheng-Hua Peng Min-Chih Hsuan Duei Tsai Duh-Kung Tsai Attendance in Person (B) 6 6 6 2 0 6 5 5 6 6 4 3 6 4 6 5 By Proxy 0 0 0 0 4 0 1 1 0 0 2 3 0 2 0 1 Attendance Rate (%)[B/A] 100% Remarks Note Note 100% 100% 100% 0% 100% 83% 83% 100% 100% 67% 50% 100% 67% 100% 83% Note: Change in representative of the Company’s institutional Director of Kinpo Electronics, Inc., and the former Shyh-Yong Shen was re-appointed to Chieh-Li Hsu, on July 21, 2020. ‧In 2020, Independent Director’s attendance records are as shown below: Title Name Independent Director Independent Director Independent Director Min-Chih Hsuan Duei Tsai Duh-Kung Tsai 1st Meeting ★ ● ● second Meeting ● ● ★ 3rd Meeting ● ● ● 4th Meeting ★ ● ● 5th Meeting ● ● ● 6th Meeting ● ● ● Note: ●: Attendance in Person; ★: By Proxy; ◎: Absent ▓ Other notes: 1. For Board of Directors meetings that meet any of the following descriptions, state the date, session, the discussed topics, Independent Directors' opinions, and how the Company has responded to such opinions: (1) Conditions described in Article 14-3 of the Securities and Exchange Act: Not applicable (the Company has assembled the Audit Committee in place of supervisors) (2) Any other documented objections or qualified opinions raised by Independent Directors against board resolutions in relation to matters other than those described above: None. 33 2. Disclosure regarding avoidance of interest-conflicting agendas, including the names of Directors concerned, the agendas, the nature of conflicting interests, and the voting outcome: Board of Directors Meeting 13th Meeting (13th Term) 2020.5.13 15th Meeting (13th Term) 2020.8.12 The agendas, the nature of conflicting interests, and the voting outcome • Approved the release of non-competition restrictions for the managers A conflict-of-interest relationship between multiple parties exists among Directors Jui- Tsung Chen, Chung-Pin Wong and Sheng-Hua Peng. In order to avoid conflict of interest, these Directors recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chairman of the meeting, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the first mid-year employees’ bonus of the year 2020 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists between any Directors and any agenda proposals, such Directors should recuse themselves during discussion of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang, and Sheng-Hua Peng, who are also acting as managerial officers of Compal, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approved employees’ salary adjustment of the year 2020 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists between any Directors and any agenda proposals, such Directors should recuse themselves during discussion of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang, and Sheng-Hua Peng, who are also acting as managerial officers of Compal, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the proposal for the appropriate percentage for the remuneration of employees and Directors of the year 2020 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists between any Directors and any agenda proposals, such Directors should recuse themselves during discussion of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang, and Sheng-Hua Peng, who are also acting as managerial officers of Compal, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the Directors’ Remuneration for the year 2019 Chairman Sheng-Hsiung Hsu asked the Independent Director Min-Chih Hsuan to act as a deputy chairman to preside over this meeting for discussion and voting on this proposal. Since an interested party relationship exists, the Directors (i.e., Sheng-Hsiung Hsu, Jui- Tsung Chen, Wen Being Hsu, Chieh-Li Hsu, Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung-Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng amd Anthony Peter Bonadero) recused and excluded themselves from discussion and voting on this proposal to avoid conflict of interest. Upon solicitation of comments by the deputy chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the second mid-year employees’ bonus for the year 2020 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists among any Directors and any agenda proposals, such Directors shall recuse and exclude themselves during discussion 34 Board of Directors Meeting 16th Meeting (13th Term) 2020.11.12 The agendas, the nature of conflicting interests, and the voting outcome of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui- Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approve the investment in Raypal Biomedical Co., Ltd. Chairman Sheng-Hsiung Hsu asked Independent Director Min-Chih Hsuan to act as a deputy chairman to preside over this meeting for discussion and voting on this proposal. To avoid conflict of interest, Director Chieh-Li Hsu who is also acting as Director of the Raypal, Director Sheng-Hsiung Hsu, the father-son relationship, who are relatives within first degree, of kinship of the Director Chieh-Li Hsu of Raypal, Director Jui-Tsung Chen, the father-son relationship, who is relatives within first degree, of kinship of the Director Douglass Chen of Raypal, recused and excludedd themselves from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the deputy chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present • Approved the compensation of Employee bonuses in cash of year 2019 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the proposal for 2020 year-end employees’ bonus In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists between any Directors and any agenda proposals, such Directors shall recused themselves from discussion and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approve the investment in ARCE Therapeutics, Inc. To avoid conflict of interest, Jui-Tsung Chen who is also acting as Director of the ARCE, recused himself from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present 3. Self-Evaluation of the Board of Directors: Evaluation cycles Evaluation periods Scope of evaluation Once a year From June 1, 2019 to May 31, 2020 Board of Directors, Functional Committees (Including Audit Committee, Remuneration Committee), individual Directors 35 Method of evaluation Internal self-evaluation of Board of Directors and Functional Committees (Including Audit Committee, Remuneration Committee), Self-evaluation of individual Directors ◆Criteria for evaluating the performance of the Board of Directors, which should cover the following five aspects: 1.Participation in the operation of the Company; 2.Improvement of the quality of the Board of Directors' decision making; 3.Composition and structure of the Board of Directors; 4.Election and continuing education of the Directors; and 5.Internal control Content of evaluation ◆Criteria for evaluating the performance of the Functional Committees, which should cover the following five aspects: 1.Participation in the operation of the Company; 2.Awareness of the duties of the Functional Committee; 3.Improvement of quality of decisions made by the Functional Committee; 4.Makeup of the Functional Committee and election of its members; and 5. Internal control. ◆Criteria for evaluating the performance of the individual Directors, which should cover the following five aspects: 1.Alig nment of the goals and missions of the Company; 2.Awareness of the duties of a Director; 3.Participation in the operation of the Company; 4.Management of internal relationship and communication; 5.The Director's professionalism and continuing education; and 6. Internal control. 4. Enhance the valuation regarding the target achievement and execution by the Board of Directors in the current and most recent year: The Company established a “Remuneration Committee” in 2011. During the election of the 11th Board of Directors and Supervisors at the 2012 annual shareholders’ meeting, three (3) Independent Directors were elected and appointed to be the committee members of the Remuneration Committee. Supervisor positions were replaced with the Audit committee after the 12th Board of Directors was elected at the 2015 annual shareholders’ meeting. In 2019, the “Rules and Procedures for Board of Directors Meetings” was amended in accordance with the “Taiwan Stock Exchange Corporation Operation Directions for Compliance with the Establishment of Board of Directors by TWSE Listed Companies and the Board's Exercise of Powers” and “Company Act,” and the Company shall appoint a chief corporate governance officer to execute corporate governance matters. In 2020, to implement corporate governance, enhance the Board of Directors function and set up the performance targets, the “Rules of Self-Evaluation of the Board of Directors and Functional Committees Performance” was adopted to strengthen their operation efficiency. The performance of evaluation results for the year 2020, submitted to the Remuneration Committee for analytical review and reported to the Board of Directors for discussion and improvement, shall be used as reference in determining individual Director’s compensation and their nomination for a next office term. The performance evaluation results have been published on the Company's website. 36 3.3.2 Audit Committee ‧The Company’s Audit Committee is composed of three Independent Directors. ‧The term of the 2nd committee is from June 22, 2018 to June 21, 2021. ‧There were four Audit Committee meetings during 2020 (A). The attendance records of the Independent Directors are as follows: Title Name Convener Committee Member Committee Member Min-Chih Hsuan Duei Tsai Duh Kung Tsai Attendance in Person (B) 4 4 3 By Proxy 0 0 1 Attendance Rate (%) [B/A] 100% 100% 75% Remarks - - - ▓ Duties of the Audit Committee The Audit Committee exists as an enhancement to the Company's supervisory and management function. It assists the Board of Directors in various decisions such as review of financial statements, internal control policies, internal audits, accounting policies and procedures, major asset transactions, appointment/dismissal/independence/suitability of certified public accountants, appointment/dismissal of the chief accountant and chief auditor, etc., thereby ensuring that the Company operates in compliance with the competent authority's instructions and relevant laws. ▓ The powers of the Committee are as follows: 1. The adoption of or amendments to the internal control system pursuant to Article 14-1 of the Securities and Exchange Act. 2. Assessment of the effectiveness of the internal control system. 3. The adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, of the procedures for handling financial or business activities of a material nature, such as acquisition or disposal of assets, derivatives trading, loaning of funds to others, and endorsements or guarantees for others. 4. Matters in which a Director is an interested party. 5. Asset transactions or derivatives trading of a material nature. 6. Loans of funds, endorsements, or provision of guarantees of a material nature. 7. The offering, issuance, or private placement of equity-type securities. 8. The hiring or dismissal of a certified public accountant, or their compensation. 9. The appointment or discharge of a financial, accounting, or internal audit officer. 10. Annual financial reports which are signed or sealed by the chairperson, managerial officer, and accounting officer. 11. Other material matters as may be required by this Company or by the competent authority. 37 ▓ The major audit items of the Audit Committee in 2020 were as follows: 1. 2019 Financial Statement 2. To evaluate the CPAs’ independence and competence for performing the financial report audit. 3. Appointment of the Financial Officer 4. Matter bearing on the personal interests of the DDirectors and Managers 5. Material monetary loan 6. Material asset transaction. 7. Assessment of the design and operation effectiveness of the internal control system. 8. Defects, irregularities, and status of corrections in the internal control system. 9. Annual audit plan for year 2021 10. Compliance with the relevant laws and regulations by this Company. ▓ Other notes: 1. The Company should record the date of the Board of Directors’ meeting, the term, content of discussion, the result of the Audit Committee’s decision and the actions the Company has taken in response should any of the following situations arise in the operation of the Audit Committee: (1) Matters listed in Item 5, Article 14 of the Security Act: Board of Directors Meeting 12th Meeting (13th Term) 2020.3.30 Content of discussion and actions taken in response Not approved by the Matters listed in Audit Committee but had Item 5, Article 14 of the consent of more than the Security Act two-thirds of all 1.To approve the Internal Control System Statement for the year 2019 2.To approve 2019 Audited Consolidated Financial Statements and Parent Company Only Financial Statements 3. To evaluate CPAs’ independence and competence of performing financial report audit. V V V Directors. N.A. N.A. N/A. ▲ Resolution adopted by the Audit Committee (2020.3.30): Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in response to opinion of the Audit Committee: Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Directors present. 1 To review and approve the motion to lift the non- competition restriction for Managers. 2.To approve a fund loan to the 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. V V ▲ Resolution adopted by the Audit Committee (2020.5.13): N.A. N.A. 13th Meeting (13th Term) 2020.5.13 Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in response to the opinion of the Audit Committee: ・Motion 1 An interested party’s relationship existed among Directors Jui-Tsung Chen, Chung-Pin Wong and Sheng-Hua Peng. In order to avoid conflict of interest, these Directors recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chairman of the meeting, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. ‧Motion 2 38 Board of Directors Meeting Content of discussion and actions taken in response Not approved by the Matters listed in Audit Committee but had Item 5, Article 14 of the consent of more than the Security Act two-thirds of all Directors. Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Directors present. 1.To approve the appointment of the Financial Officer 2.To approve investment in Raypal Biomedical Co., Ltd. 3.To approve a loan to Henghao Technology Co. Ltd. 4.To approve for a loan to Unicom Global, Inc. ▲ Resolution adopted by the Audit Committee (2020.8.12): V V V V N.A. N.A. N.A. N.A. Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in response to the opinion of the Audit Committee: ・Motion 1, 3 and 4 Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Directors present. ・Motion 2 Chairman Sheng-Hsiung Hsu asked Independent Director Min-Chih Hsuan to act as a deputy chairman to preside over this meeting for discussion and voting on this proposal. To avoid conflict of interest, Director Chieh-Li Hsu who is also acting as Director of the Raypal, Director Sheng-Hsiung Hsu, the father-son relationship, who is relatives within first degree, of kinship of the Director Chieh-Li Hsu of Raypal. Director Jui-Tsung Chen, the father-son relationship, who is relatives within first degree, of kinship of the Director Douglass Chen of Raypal, recused and excluded themselves from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the deputy chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. 1.To propose for approval of annual audit plan for year 2021 2.A proposal to approve investment in ARCE Therapeutics, Inc. V V N.A. N.A. ▲ Resolution adopted by the Audit Committee (2020.11.12): Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in response to opinion of the Audit Committee: ・Motion 1 Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Directors present. ・Motion 2 To avoid conflict of interest, Jui-Tsung Chen who is also acting as Director of the ARCE, avoided discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present 15th Meeting (13th Term) 2020.8.12 16th Meeting (13th Term) 2020.11.12 (2) With the exception of the aforementioned matter, other matters not approved by the Audit Committee but had the consent of more than two-thirds of all Directors: None. 39 2. The actions of the Independent Directors with respect to the avoidance of conflict of interest should be disclosed including the name of the Independent Director, the matter, and the reasons for the avoidance, and the voting and attendance status: None. 3. Status of communication between Independent Directors, Internal Audit Officer, and CPA: (1) Method of communication between Independent Directors, the Internal Audit Officer, and CPA: • After the Internal Audit Officer has submitted an audit report and follow-up report, he/she should provide the completed audited items to the Independent Directors for their review by the end of the following month. Should the Independent Directors require clarification of the audit and follow-up, they should contact the internal audit supervisor. The internal auditor shall report the audit results to the Audit Committee on a quarterly basis and discuss the relevant matters in person with the committee. • The Independent Directors must communicate with the CPA on a yearly basis through the Audit Committee or Board of Directors’ Meeting. The CPA shall report to the Independent Directors on the results of the financial statement audit and other pertinent legal requirements while the Audit Committee shall also evaluate the selection, independence, and fitness of the CPA engaged by the Company. (2) Summary of the communications between Independent Directors and Internal Audit Officer: Date 2020.3.30 2020.5.13 Content of discussion 1. Report on operational status of the internal audit activities 2.To approve the Internal Control System Statement for the year 2019 1. Report on operational status of the internal audit activities 2020.8.12 1. Report on operational status of the internal audit activities 2020.11.12 1. Report on operational status of the internal audit activities 2. To propose for approval of annual audit plan for year 2021 2021.3.26 1. Report on operational status of the internal audit activities 2. To approve the Internal Control System Statement for the year 2020 40 Results The report was reviewed by the Audit Committee whereupon the Independent Directors raised no objection or further instruction. The proposal was approved by the Audit Committee and will be decided on by the Board of Directors The report was reviewed by the Audit Committee whereupon the Independent Directors raised no objection or further instruction. The report was reviewed by the Audit Committee whereupon the Independent Directors raised no objection or further instruction. The report was reviewed by the Audit Committee whereupon the Independent Directors raised no objection or further instruction. The proposal was approved by the Audit Committee and will be decided on by the Board of Directors The report was reviewed by the Audit Committee whereupon the Independent Directors raised no objection or further instruction. The proposal was approved by the Audit Committee and will be decided on by the Board of Directors Date 2021.5.12 Content of discussion 1. Report on operational status of the internal audit activities Results The report was reviewed by the Audit Committee whereupon the Independent Directors raised no objection or further instruction. (3) Summary of the communications between the Independent Directors and CPA: Date 2020.3.30 Content of discussion 1. To approve 2019 Audited Consolidated Financial Statements and Parent Company Only Financial Statements ‧ Explanation of key audit items ‧ Financial statements and major accounting Results The proposal was approved by the Audit Committee and will be decided on by the Board of Directors 2021.3.26 items analysis ‧ Description of the Company's self-made financial report process 1. To approve 2020 Audited Consolidated Financial Statements and Parent Company Only Financial Statements ‧ Explanation of key audit items ‧ Financial statements and major accounting items analysis The proposal was approved by the Audit Committee and will be decided on by the Board of Directors 41 3.3.3 Corporate Governance Implementation and Deviations from the “Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies” Actual governance Deviation and causes of deviation from the Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies No Summary description The Company’s corporate governance principles were approved by the Board of Directors on May 13, 2020, and have been disclosed on its official website and MOPS. No deviations were found The Company has a spokesperson and acting spokesperson that represent the interests of the shareholders and a unit that specializes in addressing shareholders’ suggestions, queries, disputes, and litigations. No deviations were found Assessment criteria Yes Yes I. Has the Company established and disclosed its corporate governance principles based on the “Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies?” II. Shareholding structure and shareholders’ interests 1. Has the Company Yes implemented a set of internal procedures to handle shareholders’ suggestions, queries, disputes, and litigations? 2. Is the Company constantly Yes The Company keeps track of the identity of its ultimate controllers by monitoring insider informed of the identities of its major shareholders and the ultimate controller? 3. Has the Company established Yes and implemented risk management practices and firewalls for companies it is affiliated with? 4. Has the Company established internal policies that prevent insiders from trading securities against non-public information? shareholding positions (including that of Directors, supervisors, managers, and shareholders with more than 10% ownership interest), with the shareholder registry held by the share administration agency. The Company has an “Internal Control Policy - Non-trade Activities - Supervision and Management of Subsidiaries," “Internal Control Policy - Trade Activities – Investment Management," and “Guidelines on Financial and Business Dealings Between Affiliated Enterprises” to set up and execute firewalls and risk controls over related parties. Yes To prevent insider trading, the “CO10 Insider Trading Prevention Management” and “Insider Trading Prevention Procedures” have been included as part of the internal control of the Company and details are published on the intranet and linked to the TWSE website to which employees have access. Both policies have been included as part of the compulsory e-Learning courses for departmental heads, and eCSA questionnaires are issued on a yearly basis to facilitate self- 42 No deviations were found No deviations were found No deviations were found Assessment criteria Actual governance Yes No Summary description assessment. Insiders such as Directors, supervisors, and managers are given a copy of the TWSE “Insider Share Trading Manual” when they come aboard to make them aware of the Company insider rules. Deviation and causes of deviation from the Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies III. Assembly and obligations of the Board of Directors 1. Has the board devised and implemented policies to ensure the diversity of its members? Yes 2. Apart from the Remuneration Yes Committee and Audit Committee, has the Company assembled other functional committees at its own discretion? 3. Has the Company established Yes performance evaluation measures and methods for the Board of Directors, conducted performance evaluation annually and regularly, reported the results of performance evaluation to the Board of Directors and applied them to the reference of salary and remuneration of individual Directors and nomination and The Company has rules and regulations in place such as the “Corporate Governance Guidelines” and “Rules for Director Election” to ensure a diversified board member composition in addition to drafting suitable guidelines for diversification based on the Board’s operation, the Company’s operating format, and its needs and developments. As such, board members are required to possess the required knowledge, skills, and character in order to accomplish the goal of ideal corporate governance. For more information on the diversification of board members, please refer to page 49. No deviations were found Apart from the Remuneration and Audit Committees, the Company lalso has a CSR Committee headed by President and CEO Chung-Pin Wong, who in turn reports to the Board of Directors regarding the operating status and results of the committee on a yearly basis. No deviations were found The Board of Directors adopted the “Rules of Self-Evaluation of the Board of Directors and Functional Committees Performance” on March 30, 2020. The performance evaluation scope covers the evaluation of the Board as a whole, individual Directors and Functional Committees. Methods of evaluations included the Self-Evaluation of the Board of Directors and Functional Committees, self-evaluation by individual board members, or other appropriate methods. The evaluation results, being submitted to the Remuneration Committee for analytical review and reported to the Board of Directors for discussion and improvement, shall be used as reference in No deviations were found 43 Assessment criteria Actual governance renewal? ) determining individual Director’s compensation and their nomination of next office term. Yes No Summary description Deviation and causes of deviation from the Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies ▓ The performance of evaluation results in 2020 are as follows: Items Individual board members Board of Directors Audit Committee Remuneration Committee Total average 4.51 4.78 4.95 4.63 Evaluation level Good Good Excellent Good 4. Is the independence of Yes external auditors assessed on a regular basis? IV. Is the listed or OTC company Yes equipped with competent and appropriate number of corporate governance personnel and has its designated corporate governance Director to be responsible for corporate governance related matters (including but not limited to The CPA issues an “Independent Auditor’s Report” on an annual basis and is required to decline engagement should he/she be involved in any direct or indirect material interest. The Company evaluates the independence and suitability of the CPA at least once a year, in accordance with Article 47 of the CPA Law and Bulletin 10 of the Norms of Ethics for Certified Public Accountants. The CPA cannot be a Director, supervisor, or shareholder of the Company and may not be on the payroll or be a related party to the Company. The Company then submits the “CPA Independence and Fitness Evaluation Form” along with the “Independent Auditor’s Report” to the Audit Committee for review before it is submitted to the Board of Directors for examination and discussion. The same principles apply to whenever there is an internal rotation within the accounting firm. No deviations were found VP Cheng-Chiang Wang has been appointed to lead and supervise affairs pertaining to corporate governance in accordance with the Company’s “Corporate Governance Guidelines," while the BOD secretariat was assigned as the Company’s responsible unit for corporate governance to handle relevant affairs. No deviations were found VP Cheng-Chiang Wang and the designated personnel responsible for corporate governance have more than 25 years of experience in stock affairs and meeting-related management for publicly traded companies. They are primarily responsible for handling corporate governance affairs, such as handling matters relating to board meetings and shareholders meetings according to the laws, 44 Assessment criteria Actual governance Deviation and causes of deviation from the Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies providing information required by Directors and supervisors to carry out business, assisting Directors and supervisors to comply with laws and regulations, managing related matters of the Board of Directors’ meeting and shareholders' meeting in accordance with laws, taking minutes of the Board of Directors’ meeting and shareholders' meeting, etc.) V. Has the Company provided proper communication channels and created dedicated sections on its website to address corporate social responsibility issues that are of significant concern to stakeholders (including but not limited to shareholders, employees, customers, and suppliers)? VI. Does the Company engage a share administration agency to handle shareholder meeting affairs? Yes No Summary description producing minutes of board meetings and sareholders meetings, assisting in onboarding and continuous development of Directors, furnishing information required for duty execution by Directors and members of the audit committee, ensuring legal compliance and taking other matters set out in the articles or corporation or contracts, periodically examining and revising the Company’s corporate governance guidelines and relevant procedures, improving disclosure transparency, safeguarding shareholder rights and promoting better corporate governance. For more information on the status of Compal’s corporate governance operations for 2020, refer to page 42. Yes The Company has addressed its stakeholder relations on its corporate website, CSR report, and CSR Sustainability website. Separate contact persons, phone numbers, and e-mail addresses have been provided for each type of stakeholder relation to ensure that queries are directed to the relevant departments. In addition, an online “Material Aspects” questionnaire has also been created for stakeholders to identify issues that are of significant concern. The Company will address stakeholders’ responses properly and take their suggestions as part of the Company’s goals. No deviations were found Yes The Chinatrust Commercial Bank – Securities Trust has been appointed as the share administration agency responsible for handling shareholder affairs and meetings and for providing share administration services. No deviations were found 45 Assessment criteria Actual governance Deviation and causes of deviation from the Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies Yes No Summary description Yes The Company website at (www.compal.com) is regularly updated with information such as financial performance, corporate governance and shareholder meetings No deviations were found Yes ‧The Company website has both Chinese and English pages. The information is gathered and disclosed by a dedicated department. ‧The Company also has a spokesperson and an acting spokesperson. ‧Investor conferences are held regularly and whenever deemed necessary. The proceedings are posted on the Company’s website and also broadcast on the TWSE platform (at https:/www.compal.com/investor-relations/financial-release/). No deviations were found No The Company financial reports were not able to be announced and filed within two months after the fiscal year end. However, the date of the Company's announcing and filing financial reports for the year and the first, second and third quarters, as well as business operational results for each month were earlier than required by statute. The Company will carefully assess the probability of announcing and filing annual financial reports within two months after the fiscal year end. No deviations were found VIII. Does the Company offer Yes other vital information (including but not limited to employee rights, employee • • • Employee rights and care for employees (page 51) Code of conduct for Directors, managers, and employees (page 51~ 52) Investor relations (page 52) 46 VII. Information disclosure 1. Has the Company established a website that discloses financial, business and corporate governance-related information? 2. Has the Company adopted other means to disclose information (e.g. an English website, assignment of specific personnel to collect and disclose corporate information, implementation of a spokesperson system, broadcasting of investor conferences via the Company website)? 3. Does the Company announce and declare the annual financial report within two months after the end of the fiscal year and announce and declare the first, second, and third quarter financial reports and the operation of each month ahead of the required time limit? Actual governance Deviation and causes of deviation from the Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies Yes No Summary description • • • • • • • Supplier relations and execution of customer policy (page 52) Stakeholders’ interests (page 52) Risk management practice and framework (page 52-54), Risk analysis (page 172-177) Purchasing liability coverage for the Company’s Directors, supervisors, and managers (page 55) Continuing education for Directors and managers (page 55-57) Succession plan for Board members and key Management team (page 58) Certificate and qualification acquisition status for personnel (page 58) Assessment criteria care, investor relationships, supplier relationships, stakeholders’ interests, continuing education of Directors/supervisors, risk management policies, risk assessment standard implementation status, implementation status of customer policies, insuring against liabilities of company Directors and supervisors) that would enable a better understanding of the Company’s corporate governance practices? 47 Assessment criteria Actual governance Deviation and causes of deviation from the Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies Yes No Summary description IX. State the improvements that have been made with regard to the results of the latest Corporate Governance Evaluation conducted by TWSE in the most recent year. For items that have yet to be improved upon, state the Company’s priorities and measures for improvement. • With regard to the further education of Directors (including Independent Directors), Compal has advocated and encouraged Directors to take part in courses on the pertinent regulations offered by subsidiary Kinpo Group Management Consultant Company or training provided by external professional organizations. In 2020, members of the Board of Directors completed a total of 48 hours of training. • In 2020, with setting forth a performance target to improve the operation efficiency of the Board of Directors, the "Rules of Self-Evaluation of the Board of Directors and Functional Committees Performance” was adopted., In addition, the enactment to the "Employee Integrity Code" has made and the amendment to the "Rules and Procedures for Board of Directors Meetings", "Audit Committee Charter", "Remuneration Committee Charter", "Corporate Governance Best Practice Principles" and "Corporate Social Responsibility Best Practice Principles" are completed to accommodate the business needs and the requirements of applicable laws and regulations. • In 2021, the amendment to the “Regulations for Election of Directors", “Rules Governing the Scope of Powers of Independent Directors", “Remuneration Committee Charter", “Procedures for Ethical Management and Guidelines for Conduct" and “Rules Governing Financial and Business Matters Between this Company and its Affiliated Enterprises" were proposed to accommodate the business needs and the requirements of applicable laws and regulations. • In the “7th Round of Corporate Governance Evaluations” by TWSE, Compal was placed in the top 6%~20% listed companies. •Upload the English version of Annual Report and Annual Financial Statements 16 days before the shareholders’ meeting. 48 Operation management Leadership and decision- making Knowledge of the industry International market perspective Risk Management Finance and accounting Investment M&A Communications and network V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V Director Independent Director V ▓ Status of board member diversification Core items for diversification Name of Director (Note) Sheng-Hsiung Hsu Jui-Tsung Chen Representative of Binpal Investment Co., Ltd.: Wen-Being Hsu Representative of Kinpo Electronics Inc.: Chieh-Li Hsu Charng-Chyi Ko Sheng-Chieh Hsu Yen-Chia Chou Chung-Pin Wong Chiung-Chi Hsu Ming-Chih Chang Anthony Peter Bonadero Sheng-Hua Peng Min-Chih Hsuan Duei Tsai Duh-Kung Tsai Item 31 ~ 50 years old 51~65 years old 65 years and over Male Female Republic of China United States Age Gender Country of Citizenship Employee Status (Note) 1 5 6 12 0 11 1 5 0 0 3 3 0 3 0 0 49 Note: Concurrently an employee of the Company, subsidiaries companies. ▓ The status of Compal’s corporate governance operations for 2020 is as follows: ‧ The Company compiled and prepared relevant documents needed for the Audit Committee and the Board of Directors’ Meetings in accordance with pertinent regulations and operational/financial needs; and be responsible for coordination of relevant units and coordination of proposal making from different relevant units. ‧ With setting a performance target to improve the operation efficiency of the Board of Directors, the "Rules of Self-Evaluation of the Board of Directrs and Functional Committees Performance” was adopted. In addition, the enactment to the "Employee Integrity Code" has made and the amendment to the “"Rules and Procedures for Board of Directors Meetings", "Audit Committee Charter," "Remuneration Committee Charter", "Corporate Governance Best Practice Principles" and "Corporate Social Responsibility Best Practice Principles" are completed to accommodate the business needs and the requirements of applicable laws and regulations, all of which have been submitted to the Board of Directors for approval. ‧ The performance evaluation of Directors and Independent Directors, the Board of Directors, the audit committee, and the remuneration committee are submitted to the Board of Directors. ‧ The Company planned the communication meeting between Independent Directors, Internal Audit Supervisors and CPA to have the Audit Committee determine the independence and fitness of the CPA engaged by the Company as a measure to ensure sound corporate governance. ‧ Pursuant to “Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies”, Compal has advocated and encouraged Directors to take part in courses on pertinent regulations offered by subsidiary Kinpo Group Management Consultant Company or by external professional organizations. ‧ The Company disclosed and announced important information in conjunction with Board of Directors Meetings, Shareholders Meetings, financial and sales information; in addition, the Company has also held investor conferences at least two times annually, and has been invited to attend domestic/overseas investor conferences to help investors better understand the Company’s status of operation. ‧ The Company registered the date for Shareholders Meetings as required by law; prepared meeting notifications within the scheduled deadline, meeting handbook and meeting minutes and filing; coordinated relevant units, agents for stock affairs, CPA, attorneys and so forth. ‧ Contents on the chapter for corporate governance – responsible for the collection of data, compilation of stock affairs data, coordination of different units and editing. ‧ Corporate governance evaluation – responsible for the collection of data, plan setting, compilation of stock affairs data, coordination of different units and website maintenance. ‧ The Company has taken out liability insurance for its Directors, supervisors and managers. The amount for their liability insurance in 2020 came to USD 50,000,000, which was roughly equivalent to TWD 1,440,500,000. Vital information relating to their liability insurance was reported to the Board of Directors on the nearest meeting of the Board of Directors. ‧ The Corporate Governance Officer took 15 hours of continuing education. The exact education program, please see page 57. 50 X. Other vital information on the operating status of corporate governance: ▓ Employees' rights and care for employees Compal respects employees' rights and tends to their needs. Internal policies are updated constantly to reflect the latest labor regulations, and published to ensure understanding and compliance from employees. Compal's subsidiaries in the USA, China, Brazil, Vietnam, and India have all established employment guidelines in accordance with local labor regulations, and all terms of employment are compliant with the laws of the local countries and regions. The Company's support for equal work opportunities and respect for employees' freedom of association have led to the assembly of a union at the Kunshan Factory. Employees are offered equal compensation for equal work, whereas salary details are approved based on the nature of work involved and individual performance. The Company has nursery rooms available throughout the organization. It actively prevents and resolves workplace unlawful infringement incidents, grants workers the break and overtime pay they deserve, purchases social insurance coverage, and contributes to employees' pension funds. Compal is committed to creating communication platforms where employees may exchange opinions and information. A “Sunshine Group” and hotlines have been set up at all plant sites and are run by compassionate people who promptly respond to employees' thoughts. By providing employees with the means to express feelings and complaints, the Company is able to help employees resolve difficulties in a timely manner. In an attempt to create a joyful work environment where talents are assigned to suitable positions, Compal publishes recruitment information internally and offers employees the freedom to choose or transfer to positions they consider suitable, and thereby assures satisfaction across the work force and protects employees' interest. Compal provides employees with the following health-related facilities and services outside of work: ‧ ‧ ‧ Common dining: Employee dining facilities have been made available to serve nutritious and healthy foods. Recreation center: Places where employees may hold club activities, exercise, and make friends. Spiritual, health, and arts seminars: The Company organizes health seminars, spiritual seminars, musical performances, and art exhibitions from time to time, and uses them as a means of stress relief to cater to employees' physical and mental health. Infirmary and stationed physicians: Employees may consult physicians and access timely medical assistance for them and their family members. Employee assistance services are available. Employees can consult with consultants on work, family, relationships, physical and mental health, mental illness, finance, legal, and management issues through a dedicated line or E-mail. ‧ ‧ ▓ Codes of conduct for Directors, managers, and employees Compal has established an ethics policy as described below to enforce business integrity and to guide employees toward complying with laws and ethics for the protection of Compal's and stakeholders' assets, interests, and reputation: ‧ Comply with government regulations. ‧ Protect the interests of employees, customers, shareholders, suppliers, communities, and relevant organizations. ‧ Uphold business integrity and the principles of fair trade, fair advertising, and fair competition. Refrain from making illicit gains. Make information transparent to stakeholders while at the same time respecting intellectual property rights, privacy, and identity protection. Prohibit retaliation and make responsible purchase of minerals. ‧ Continually improve, execute, and convey the Company's ethics policy to relevant organizations. In addition to implementing an ethics policy, Compal has also established a Human Resource Management Policy, Director and Manager Code of Conduct, and Employee Code of Conduct not only in the employees' best interest, but also to communicate with stakeholders about the moral standards and behavioral guidelines that employees are bound to obey when carrying out their duties. All employees are required to 51 sign a "Confidentiality Commitment Letter" when coming on board, which is a declaration to abide by the Company's rules, the Human Resources Management Policy and to maintain confidentiality of the Company's business secrets. ▓ Investor relations The Company has an Investor Relations Department which handles shareholders' recommendations. The department bridges communication between the Company and its investors. In addition to hosting investor seminars on a regular and ad-hoc basis, the department has also created an Investor Relations section on the Company's website to facilitate complete and fair disclosure of Compal's latest progress, and thereby provide investors with full understanding of the Company's business performance and long-term goals. Despite being impacted by COVID-19 epidemic in 2020, Compal proactively participated in online investor forums and investor conference calls, hosted by brokers every quarter, 8 events in total, to regularly update its financial results and business progress to shareholders and investors, which to enhance investors understanding for the Company operation and increase the communication and engagements. ▓ Supplier relations and execution of customer policy The Company signs contracts with all suppliers and customers not only to protect the interests of both parties, but also to maintain a strong working relationship. With respect to green products and parts, the Company coordinates closely and systematically with partnered suppliers, and follows a robust review and certification process to ensure effective communication, tracking, management, and elimination of parts that contain prohibited chemical substances. Every supplier and business partner is able to inquire about the latest "Compal Environmental Management Standard for Parts and Materials" through the SDCP (Supplier Design Cooperation Portal: sdcp.compal.com)/GPMS (Green Product Management System). They are also required to provide assurance that all raw materials supplied are free of substances that may harm the environment. The Company's R&D, production and quality assurance departments and all major customers are able to learn information concerning chemical composition and content of green products through the use of this system, and take measures such as sample testing and on-site inspection as deemed necessary. The Company operates throughout Europe, America, and Asia, and has service centers at main business locations to provide customers with safe and high-quality products, as well as complete and correct product information. The Company addresses customer complaints actively and immediately. It accepts customers' audit requests, participates in customers' activities, and handles critical correspondences in a confidential manner. The Company has always been protective of customers' secrets. It has firewalls in place to block exchange of confidential information between customers, teams, office areas, and factories. A specialized team monitors the security of network information from time to time for the protection of customers' interests. Meanwhile, all employees are required to sign a confidentiality agreement that prohibits them from openly discussing customers' details. It is the organization's goal to provide customers with the most comprehensive service network and the best protection anywhere in the world. There has been no violation of law concerning the offering and use of products or services. ▓ Stakeholders' interests Stakeholders are able to communicate with and make suggestions to the Company for the protection of their interests. The Company provides safe and high-quality products along with complete and accurate product information to customers. Customers' complaints are addressed immediately. ▓ Risk management 1. Risk management practice (1) One of the purposes of the risk management policy is to discover any risk factors in advance that might adversely affect operations, so that the Company may then apply appropriate assessments and treatments to transfer risks and mitigate or prevent losses. Another purpose is to enable timely detection and warning of changes in the internal and external environment, and thereby allow employees 52 worldwide to execute risk management practices within their areas of responsibility in a timely manner. The Company has its own financial, sales, and accounting system, and a system for monitoring financial and business information of its subsidiaries in accordance with "Regulations Governing the Establishment of Internal Control Systems by Public Companies". The Company has also guidelines in place for supplier management, customer relations, R&D, human resources, financial affairs, credit/endorsement/ guarantee arrangements with affiliated businesses, and acquisition/disposal of key assets. These policies, risk assessment standards, and procedures serve as a guideline by which employees may abide for risk assessment and management. Dedicated personnel have been appointed in every department to manage, control, minimize, and prevent Company risks. (2) The Internal Control System developed by the Company is distinguished between the Overall Level and Operation Level. Five elements (Control Environment, Risk Assessment, Control Operation, Information and Communication, Supervision) have been incorporated into each transaction cycle at the operation level. In recent years, the Company has made enhancements to corporate risk management based on the latest Regulations Governing Establishment of Internal Control Systems by Public Companies, corporate governance practice, internal audit theory, technology, and various codes of conduct by adopting robust risk detection, assessment, reporting, handling, and prevention measures. The Company's risk control mechanism operates on three levels: ‧ involves heads of various divisions The first level involves the organizer or handling officer, who is responsible for risk discovery, assessment and control at first contact, as well as designing preventive measures against risks. The second (offices), headquarters, business departments/centers and regional business groups/centers, Executive Vice Presidents and the President. This level comprises members of the senior management, who are responsible for assessing the feasibility of various operations as well as identifying, handling, and preventing operational risks. The third level involves review by Legal Affairs, Auditing Office, Board of Directors, and Audit Committee. The Company involves all employees as part of the risk management system and implements layered controls over day-to-day operations. level ‧ ‧ (3) From the implementation perspective, all the divisions of the Company evaluate various business risks to make contingency plans, while preparing annual budget and work plan. At the same time, the internal audit office drafts the annual audit plans for the coming year based on the risk assessment of operating activities. The annual audit plan is implemented after approval by the Board of Directors, and the execution status is also reported to the Board of Directors. Given the Company's role as an ODM for 5C electronics, we review and assess business risks on an annual basis, and reflect our findings in the financial statements under accounts such as allowance for doubtful debts, warranty reserves, and royalties. All provisioning policies are submitted to the CPA for review whenever adjustments are made. This is to ensure that financial reports present a fair view of the Company's operations. Furthermore, the Company has dedicated personnel appointed to monitor and control exchange rate risks, and take hedging measures as necessary (please refer to page 172). (4) If an important operating activity is identified with a potential urgent risk, it can be reported to the supervisor immediately for proper prevention. For extremely important matters, such as investments or engineering project bidding, will be jointly reviewed by relevant departments. Audits will be performed on a regular or irregular basis. 53 2. Risk management framework Key risk areas ‧ Interest rate, exchange rate, inflation and financial risks ‧ High-risk or highly leveraged investment, loan to third party, endorsement, guarantee, trading of derivatives and treasury investment ‧ R&D planning ‧ Changes in policy and law ‧ Changes in technology and industry ‧ Changes in corporate image ‧ Investment, subsidiary and MandA benefits Front line unit (Business organizer) (Level 1) Risk review and control (Executive management meeting) (Level 2) ‧ Finance Department ‧ Operation Team Board of Directors, Audit Committee, Legal Affairs Office, Auditing Office (Level 3) ‧ Legal Affairs Office: Oversees legal affairs and makes suggestions on risk identification, assessment and prevention ‧ Business ‧ Corporate investment departments/centers (Note 1) review ‧ Executive management ‧ Common departments meeting (Note 3) ‧ Subsidiaries monitoring and management report ‧ Auditing Office: Risk inspection, evaluation, supervision, improvement and reporting ‧ Board of Directors, Audit Committee: Decision-making and ultimate control over risk evaluation ‧ Expansion of factory, production ‧ Business ‧ Monthly operating site and equipment ‧ Centralized purchase or sale departments/centers (Note 1) meeting ‧ Production and marketing ‧ Common departments meeting (Note 3) ‧ Equity transfer involving ‧ Share administration ‧ Share administration Directors, supervisors, and major shareholders ‧ Change of management ‧ Litigation and non-contentious cases affairs ‧ Board of Directors affairs ‧ Head of ‧ Product risk management Finance/Accounting ‧ Legal affairs ‧ Business groups/centers ‧ Handling of product safety ‧ Managers of all levels (Note 2) incidents ‧ Other operational affairs ‧ Personnel behaviors, ethics, and conduct ‧ Rules (including SOP), internal control system and compliance with regulations ‧ Managers of all levels ‧ HR and Administration ‧ Managers of all levels ‧ Legal Affairs Office ‧ Personnel Evaluation Committee ‧ Investment Planning and Management Office ‧ Auditing Office ‧ Finance ‧ Accounting ‧ HR and Administration ‧ IT ‧ Board of Directors Meetings ‧ Share administration affairs ‧ Secretary of the Board of Directors ‧ Legal Affairs Office ‧ Auditing Office ‧ Prevention of insider trading ‧ Managers of all levels ‧ Insider Trading Prevention ‧ Information security ‧ Managers of all levels ‧ Information Security Office management (ISMS) Committee ‧ Information Security Team Notes: 1. Business departments/centers: America/Europe, Asia Pacific, Operations, Enterprise Products, Auto Electronics, Creativity, Quality Assurance, Procurement, R&D, Manufacturing, and Sales, etc. 2. Business groups/centers: PC Business Group, Smart Devices Business Group, Global Operations, etc. 3. Common departments: Finance, Accounting, HR and Administration, Investment Planning and Management Office, Legal Affairs Office, etc. 54 ▓ Purchasing liability coverage for the Company’s Directors, supervisors, and managers Since 2002, the Company has purchased liability insurance for its Directors, supervisors, and managers. The summary of the insurance policies purchased in 2020 are listed as follows: Insured Individuals Directors, Supervisors and Managers Insured amount USD 50,000,000 (Equivalent to TWD 1,440,500,000) Insured Period From:2020.11.21 To: 2021.11.21 Date of submission to the Board of Directors 2021.2.25 ▓ Continuing education for Directors and managers All Directors and managers possess relevant professional knowledge and skills. In addition to offering relevant information both on a regular and intermittent basis to Directors and managers, the Company would also organize seminars and workshops when deemed necessary. Training completed by Directors and managers in 2020 include: ▓ Continuing education for diectors: Date of training 2020.06.16 Chairman Name Title Sheng-Hsiung Hsu Organized by Course title Accounting Research and Development Foundation Common corporate governance deficiencies in enterprises and analysis of related laws and regulations Hours of training 3 Jui-Tsung Chen 2020.10.16 Compal Electronics, Inc. Changes in the world economy after the 2020 Vice Chairman 2020.12.10 Director Chieh-Li Hsu 2020.04.23 Accounting Research and Development Foundation Taiwan Corporate Governance Association 2020.08.06 Taiwan Corporate Governance Association 2020.08.06 Taiwan Corporate Governance Association United States presidential election Assist the Company to improve its ability to prepare financial reports independently Augmented reality technology and smart manufacturing; Sino-US Silicon Crystal Group (Global Wafer) shares the experience of growth through mergers and acquisitions Sino-US Silicon Crystal Group (Global Wafer) shares the experience of growth through mergers and acquisitions The new digital reality in the post-epidemic era; the latest development trend of AIoT and its application in smart manufacturing Key of global political and economic trends and financial market outlook in the second half of 2020 United States presidential election Unconventional transactions that Directors and supervisors should pay attention to in practical issues Operational Practice of Audit Committee Discussion on the Management of Intellectual Property from the Perspective of the Board of Directors 1 6 3 3 3 2 1 1 1 3 3 3 Sheng-Chieh Hsu 2020.07.24 2020.10.16 Kinpo Group Management Consultant Company Compal Electronics, Inc. Changes in the world economy after the 2020 2020.10.16 Compal Electronics, Inc. Changes in the world economy after the 2020 United States presidential election 2020.10.16 Compal Electronics, Inc. Changes in the world economy after the 2020 United States presidential election Director Director Director Director Independent Director Chung-Pin Wong Ming-Chih Chang Sheng-Hua Peng Min Chih Hsuan 2020.08.12 Taiwan Corporate Governance Association 2020.08.12 Independent Director Duei Tsai 2020.08.05 Taiwan Corporate Governance Association Securities and Futures Institute 55 Title Name Date of training 2020.09.30 2020.10.16 2020.10.21 Independent Director Duh Kung Tsai 2020.11.05 2020.11.05 Organized by Course title Taiwan Corporate Governance Association Taiwan Corporate Governance Association Taiwan Corporate Governance Association Taiwan Corporate Governance Association Taiwan Corporate Governance Association Discussion on the disputes of management rights from shareholder activism Corporate Governance and Corporate Integrity program in Directors and Supervisors Promotion Conference Integrity Management and ISO 37001 The impact of the latest tax law reform on corporate operations and its response (part 1) The impact of the latest tax law reform on corporate operations and its response (part 2) Hours of training 3 3 3 3 3 56 ▓ Continuing education for managers Title Name Date of training Organized by Course title Vice President Guo-Dung Yu 2020.01.31 Compal Electronics, Inc. Executive Vice President Senior Vice President Senior Vice President Sheng-Hua Peng Chung-Hsing Tan Wen-Da Hsu 2020.12.31 Compal Electronics, Inc. 2020.12.31 Compal Electronics, Inc. 2020.12.31 Compal Electronics, Inc. Vice President Yi-Yun Chang 2020.12.31 Compal Electronics, Inc. Vice President Chiao-Lie Huang 2020.12.31 Compal Electronics, Inc. Vice President Wei-Chia 2020.12.31 Compal Electronics, Inc. Wang Vice President Hsin-Hsiung 2020.12.31 Compal Electronics, Inc. Huang Vice President Peng Kuee Lau 2020.12.31 Compal Electronics, Inc. Accounting Officer Cheng-Chiang Wang 2020.12.24~ 2020.12.25 Accounting Research and Development Foundation Corporate Governance Officer Cheng-Chiang Wang 2020.02.18 Taiwan Corporate Governance Association 2020.03.06 Taiwan Corporate Governance Association 2020.12.24 Accounting Research and Development Foundation 2020.12.25 Accounting Research and Development Foundation 2020.12.25 Accounting Research and Development Foundation 2021.01.18 Accounting Research and Development Foundation 2021.01.19 Accounting Research and Development Foundation Internal Audit Officer Powen Hsieh Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) Management for the prevention of insider trading (Senior managers) “Training program for the new Accounting Officer” The class for the new Accounting Officer, requested due to the company share exchange/transaction on public place. Functions and tasks of corporate governance personnel under the corporate governance blueprint Shareholders meeting planning and case study Strategy and Implementations of Employees Compensation Protection and legal liability in Intellectual Property Rights Practices in Compliance with the Designation of the Company Secretary How the internal auditor applies the technical of digital forensics into the business secret protection and investigation The policy analysis and internal control management practices of assisting companies to improve the capabilities of self-preparing financial report Hours of training 0.58 0.58 0.58 0.58 0.58 0.58 0.58 0.58 0.58 12 3 3 3 3 3 6 6 57 ▓ Succession plan for Board members and key Management team Compal launched the succession plan for Board members and the key management team in 2018. The former President Jui-Tsung Chen was promoted to the position of Vice Chairman and Chief Strategy Officer of the Company, responsible for the Company’s long-term strategy development and implementation. The President's position was taken by Executive VP Chung-Pin Wong, who joined Compal in 1989 and has full experience in various positions, such as marketing, procurement, sales, etc. In addition, Anthony Peter Bonadero, Sheng-Hua Peng, and Ming-Chih Chang were promoted from Senior VP to Executive VP positions and were appointed to lead the three business group: PCBG, SDBG, and GOBG, separately. They were also elected as the 13th Board of Directors in 2018. By this, Compal has successfully completed the succession of the Board members and the key management team that symbolizes transition into a new generation. In response to the future growth, the Company will continue to invest in the talents and promote the key management team’s experience sharing and inheritance, through the arrangement of the regular “Group General Managers Meetings” and “Executive Management Meetings." This plan and mechanism will enable the Company to achieve its long-term sustainability goals. ▓ Certificate and qualification acquisition status for personnel involved in financial information Name of certificate No. of persons 6 persons 2 persons 1 person 8 persons 4 persons 3 persons 3 persons 2 persons 2 persons 1 person transparency CPA qualification USCPA qualification ASEANCPA qualification Senior Securities Specialist Securities Specialist Futures Specialist Securities Investment Trust and Consulting Professional Certified Internal Auditor - Taiwan Certified Internal Auditor Chartered Financial Analyst 58 3.3.4 Composition, Responsibilities, and Operations of the Remuneration Committee 1. Professional Qualifications and Independence Analysis of Remuneration Committee Members Having work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company Having Met One of the Following Professional Qualifications, Together with at Least Five Years Work Experience A judge, public prosecutor, attorney, Certified Public Accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the Company An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university Independence Criteria (Note 2) 1 2 3 4 5 6 7 8 9 10 Number of Other Public Companies in Which the Individual is Concurrently Serving as an Remuneration Committee Member Remarks ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 0 2 1 - - - Criteria Title (Note 1) Name Independent Min-Chih Director Hsuan Independent Director Duei Tsai Independent Duh-Kung Tsai Director Note: If the Director or supervisor meets the following conditions in the two years before the election and during the term of office, please mark “✔” in the space below each condition code. (1) Not an employee of the Company or its affiliated enterprises. (2) Not a Director or supervisor of the Company or its affiliated enterprises (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (3) A natural person shareholder who or whose spouse or minor children or in another person’s name does not hold more than 1% of the total issued shares of the Company or is not a top-ten shareholder. (4) Not a manager in (1) the spouse, second-tier relatives, or third-tier relatives of the persons listed in (2) or (3). (5) A Director, supervisor, or employee of a corporate shareholder who does not directly hold more than 5% of the total issued shares of the Company or is a top-five shareholder or is designated as a representative to serve as a Director or supervisor of the Company in accordance with paragraph 1 or 2 of Article 27 of the Company Act (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (6) A Director, supervisor, or employee of another company who does not have a seat on the Board of Directors or more than half of the shares with voting rights are controlled by the same person of this company (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (7) A Director, supervisor, or employee of another company or institution who is not the same person or spouse as the Chairman, President, or an equivalent position of the Company (except for concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (8) A Director, supervisor, or manager of another company or institution which does not have financial or business dealings with the Company or a shareholder holding more than 5% of the shares of the Company (not applicable if the Company or institution holds more than 20% but no more than 50% of the total issued shares of the Company, with concurrent Independent Directors of the Company and its parent company, subsidiaries, or subsidiaries of the same parent company in accordance with this Act or local laws and regulations). (9) A professional, sole proprietor, partner, business owner or partner, Director, supervisor, manager, or the spouse of the above of a company or institution which does not provide audit services to the Company or its affiliated enterprises or the cumulative remuneration amount of which in the past two years does not exceed TWD 500,000 for business, legal affairs, finance or accounting related services. However, this does not apply to the members of the remuneration committee, public takeover review committee, or special merger and acquisition committee who perform their functions in accordance with the Securities and Exchange Act or the Business Mergers and Acquisitions Act. . (10) There are no such circumstances as in Article 30 of the Company Act. 59 2. Attendance of Members at Remuneration Committee Meetings • The Company's Remuneration Committee is composed of three Independent Directors. • The term of the 4th committee is from July 4, 2018 to June 21, 2021. • There were four Remuneration Committee meetings during 2020(A) and the committee member qualifications and attendance records are as follows: Title Name Convener Committee Member Committee Member Min-Chih Hsuan Duei Tsai Duh-Kung Tsai Attendance in Person (B) 4 4 3 By Proxy 0 0 1 Attendance Rate (%) [B/A] 100% 100% 75% Remarks - - - ■ Functions and Tasks of the Remuneration Committee • Prescribe and periodically review the performance review and remuneration policy, system, standards, and structure for Directors/Independent Directors, and managerial officers. • Periodically evaluate and prescribe the remuneration of Directors/Independent Directors, and managerial officers. "Remuneration" as used in the preceding two paragraphs includes cash compensation, stock options, profit sharing and stock ownership, retirement benefits or severance pay, allowances or stipends of any kind, and other substantive incentive measures. ■ The discussion of the salary and Remuneration Committee and the outcome of the resolution, as well as the actions the Company has taken in response should any of the situations arise in the operation of the Remuneration Committee. Board of Directors Meeting 12th Meeting (13th Term) 2020.3.30 13th Meeting (13th Term) 2020.05.13 Resolution Adopted by the Remuneration Committee 1. To approve the distribution of compensation to employees and Directors for 2019 ▲ Resolution Adopted by the Remuneration Committee (2020.3.30): Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in Response to the opinion of the Remuneration Committee: Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Directors present. 1. To approve the percentage of compensation to employees and Directors for 2020 2. The 1st mid-year bonus of 2020 3. Salary adjustment of 2020 ▲ Resolution Adopted by the Remuneration Committee (2020.5.13): Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in Response to the opinion of the Remuneration Committee: ・Motion 1 ~3: In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists between any Directors and any agenda proposals, such Directors shall recuse themselves from discussion of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of 60 Board of Directors Meeting 15th Meeting (13th Term) 2020.8.12 16th Meeting (13th Term) 2020.11.12 Resolution Adopted by the Remuneration Committee comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. 1. To approve the Directors' remuneration of 2019 2. To approve the second mid-year bonus of 2020 ▲ Resolution Adopted by the Remuneration Committee (2020.8.12): Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in Response to the opinion of the Remuneration Committee: ・Motion 1: Chairman Sheng-Hsiung Hsu asked the Independent Director Min-Chih Hsuan to act as a deputy chairman to preside over this meeting for discussion and voting on this proposal. Since an interested party relationship exists, the Directors (i.e., Sheng-Hsiung Hsu, Jui-Tsung Chen, Wen Being Hsu, Chieh-Li Hsu, Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung- Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng amd Anthony Peter Bonadero) recused and excluded themselves from discussion and voting on this proposal to avoid conflict of interest. Upon solicitation of comments by the deputy chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. ・Motion 2: In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, recused themselves from discussion and voting on this proposal . Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. 1. To approve employee compensation in cash of 2019 2. To approve the year-end bonus payment of 2020 ▲ Resolution Adopted by the Remuneration Committee (2020.11.12): Upon solicitation of comments by the Chairman, no objection was raised and the resolution was adopted unanimously by the Committee Members present. ▲ Action taken by the Company in Response to the opinion of the Remuneration Committee: ・Motion 1 and 2: In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the chairman, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. ■ Other notes: 1. If the Board of Directors declines to adopt or modify a recommendation of the remuneration committee, it should specify the date of the meeting, the session, the nature of motion, the resolution made by the Board of Directors, and the Company’s response to the remuneration committee’s opinion (e.g., if the amount of remuneration passed by the Board of Directors 61 exceeds the remuneration committee’s recommended amount, the circumstances and cause for the difference shall be specified): None. 2. If resolutions of the remuneration committee are objected to by members or become subject to a qualified opinion, which has been recorded or declared in writing, then the date of the meeting, the session, the nature of the motion, all members’ opinions and the response to members’ opinions should be specified: None. 62 Deviation and causes of deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies No deviations were found 3.3.5 Corporate Social Responsibility Assessment criteria Yes No Summary description Actual governance 1. Does the Company conduct Yes risk assessment on environmental, social, and corporate governance issues related to the Company's operation in accordance with the principle of materiality and formulate relevant risk management policies or strategies? 2. Has the Company set up a full- Yes time (or part-time) unit to promote corporate social responsibility, which is authorized by the Board of Directors to be handled by the senior management and reported to the Board of Directors? 3. Environmental issues. (1) Has the Company established an Yes appropriate environmental management system according to its industrial characteristics? The Company collects and reviews, at least once a year in accordance with CSR materiality, issues that stakeholders concern about, evaluates risks on material issues and formulates strategies and goals to respond to the risks as well as completely implements the strategies and goals. In 2020, the Company collected material issues on economic, environment and social to formulate strategies and implement management. The Company has a CSR Committee and a dedicated unit responsible for the prevention of insider trading. The Committee consists of members of senior management authorized by the Board of Directors to oversee affairs pertaining to CSR and integrity management. In addition, Compal laso has a CSR Office with designated personnel to handle the promotion of relevant tasks resolved by the CSR Committee. For the 2020 Corporate Social responsibility operation and implementation please refer to page 68~69, the targets and plans of 2021 Corporate Social Responsibility please refer to page 69~70. The results of implementation are also disclosed in our Annual Report, CSR Report, and on our corporate website/CSR sustainability website. No deviations were found The Company began its implementation of ISO 14001 Environment Management System in April 1997. Quality and environmental safety policies were created in 2005 to guide the Company’s efforts on employee workplace safety and corporate responsibilities. Operating procedures and environmental/safety/health management systems have been established based on government regulations and international standards such as ISO 45001. The Company adopted proper communication channels to convey its environmental and safety policies and goals to employees, suppliers, contractors, surrounding neighbors, and interest groups. No deviations were found 63 Assessment criteria (2) Is the Company committed to improving the efficiency of resource utilization and using recycled materials with a low impact on the environment? Yes No Yes (3) Does the Company assess the Yes risks and opportunities of climate change for the enterprise now and in the future and take measures to deal with climate- related issues? Actual governance Summary description Throughout the "product life cycle," we consider the environmental impacts of raw material procurement, manufacturing, transportation and distribution, consumer use and disposal, etc., at the beginning of product design. In addition to focusing on user needs, functionality and additional Value, the R&D team is more focused on product development and design from the perspective of “environmental load minimization” at each stage, covering at least the three core directions of “green materials," “energy efficiency," and “ease of dis-assembly/recycling." Improve production line yield and energy efficiency, develop, and use recycled materials stably, design energy-saving products to reduce energy consumption during reuse, and increase the recoverable proportion of waste entering the waste phase. Extreme weather conditions caused by global warming and climate change have caused significant impact to the world and Taiwan, and pose unprecedented challenges to mankind. Apart from mitigation, we must also begin adaptation operations since climate change is inevitable. Adaptation applies not only to individuals, but to corporations as well, for it is important for companies to minimize business risks caused by extreme weather, which will require extensive and thorough risk assessments in order to turn risks into opportunities. We attach a climate-related risk and opportunity identification table, Please see page 71. Deviation and causes of deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies No deviations were found No deviations were found 64 Deviation and causes of deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies No deviations were Yes No Yes Assessment criteria (4) Does the Company prepare statistics of greenhouse gas emissions, water consumption, and the total weight of waste in the past two years and formulate policies for energy conservation and carbon reduction, greenhouse gas reduction, water consumption reduction, or other waste management? Actual governance Summary description The Company began its greenhouse gas surveys (scopes 1 and 2) and carbon footprint inventory as early as 2010. Starting from 2014, the Company has conducted greenhouse gas (scopes 3) inventories on a yearly basis. In 2015, Compal was included in the CDP Climate Disclosure Leadership Index (“CDLI”) for the first time. The Company has actively participated in the Carbon Disclosure Project (“CDP”) as a means to improve its response to climate changes. The CDP achieves its purpose by assessing a company’s carbon emissions, reduction progress, compliance risks and exposure to physical risks in the hopes of reducing operational risks and costs through autonomous carbon reduction or even turning risks into opportunities to ensure the Company’s sustainability. In order to reduce the environmental impact of Compal's operations, we actively promote water saving and waste reduction in each plant area, and record the water consumption and the total amount of various types of waste of the latest 2 years attached as follows: Items Total greenhouse gas emissions Total water consumption Total waste 2019 301,471 2,184,654 11,759 Note: This is an estimation. Please refer to the CSR Reports for the actual figure. Unit: Tons 2020 234,305 (Note) 2,543,277 8,037.65 4. Social issues (1) Has the Company formulated Yes relevant management policies and specific management plans in accordance with relevant laws and regulations and International Human Rights Conventions? The Company places great emphasis on equal opportunities and business ethics. It has policies and systems in place to ensure compliance with international conventions. The Company and all its subsidiaries throughout the world have established employment guidelines according to international human rights conventions and local labor regulations. All employment terms have been assured to conform with the laws of the local country or region. Out of respect to labor rights, the Company changes its policies and rules in line with the latest regulations, and announces them to all its employees. For the purpose of maintaining harmonic employer-employee relations, a communication platform has been created to enable exchange of opinions and information between the Company and its employees. No deviations were found 65 Yes No Yes Assessment criteria (2) Has the Company established and implemented reasonable employee welfare measures (including compensation, vacation, and other benefits) and properly reflected the operating performance or the results of employee compensation? (3) Does the Company provide Yes employees with a safe and healthy work environment? Are employees trained regularly on safety and health issues? Actual governance Summary description The Company has work rules in place regading wages, working hours, leave, pension, social insurance and occupational disaster compensation…etc. and has set up a Committee of Employee Welfare for benefit planning and execution. Pursuant to the Articles of Association, when the Company makes profit in a year, no more than 2% of the Company’s pre-tax profit (not including remuneration for employees and Directors) shall be appropriated to employees. The aforementioned bonus, adjustment in wages, and employee compensations are reviewed by the Remuneration Committee and resolved by the Board of Directors. The Company's remuneration policy is based on personal ability, contribution to the Company, performance, and is considered to be a correlation between operating performance and the positive correlation. The Company is well-aware of how significantly “workplace safety and health” affect a company, its employees, and stakeholders. This was the reason why the Company has enhanced its environmental, safety, and quality policies and obtained ISO 14001 and ISO 45001 certification, which requires all departments to implement proper safety and health practices, as well as regular training on matters such as fire safety equipment, utility plans, waste disposal, emergency response procedures, etc. The Company organizes health and safety training for employees on a regular basis as a means to prevent occupational hazards and ensure workplace safety. In 2020, 10,400 employees had completed their training for a total of 12,633 hours. Deviation and causes of deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies No deviations were found No deviations were found (4) Has the Company established an effective career development training program for its employees? Yes Annual training programs are tailored to suit the needs of different employees, based on the Company’s business strategies, policy guidelines, and career roadmaps. The Company constantly aims to establish itself as a learning organization and coaching management. No deviation was found (5) Does the Company follow Yes relevant laws and regulations and international standards for customer health and safety, customer privacy, marketing and labeling of products and services and formulate relevant policies and grievance procedures to protect The Company is an OEM/ODM. It manufactures TV sets, notebooks, cell phones and electronics for the world’s top brands. All products are printed with customers’ trademarks, names, and labeling that conform with relevant laws and international guidelines. However, the Company does not print its own logos or names on the products it produces. Until customers have officially launched their products, employees are not allowed to disclose product appearance, design, specifications, or technical information in any way. Compal is committed to protecting customers' information in every step along the way and is operated based on the policy and plans of Compal’s “Information Security No deviations were found 66 Actual governance Yes No Summary description Assessment criteria the rights and interests of consumers? (6) Does the Company have a Yes supplier management policy that requires suppliers to follow relevant specifications and their implementation in environmental protection, occupational safety and health, or labor human rights issues? Yes 5. Does the Company prepare the Corporate Sustainability and Social Responsibility Report and other reports that disclose the Company's non-financial information in accordance with the international reporting standards or guidelines? Is the aforesaid report confirmed or guaranteed by a third-party verification unit? Committee.” Compal aims for customers’ health and safety. Maintaining customer health and safety is the most basic and important issue. All products produced by Compal have passed the IEC 60950-1 certification standard, and have never violated product safety and health regulations and voluntary regulations and the development of Halogen-free products and construction of a more robust production capacity are our promise and responsibility. Compal adopts the policy of signing procurement agreements with every new supplier it engages with. The purpose of such agreements is to prohibit unfair, unjust or discriminative behaviors in the procurement process, and to reiterate that: all products supplied to Compal must conform to international, national, and regional environmental regulations. Suppliers will be held responsible for any violations against the agreement. Apart from procurement contracts, starting from 2009, all new suppliers collaborating with Compal have been required to sign a contract of compliance to abide by RBA’s code of conduct and standards, with contents covering the five major aspects of RBA’s code of conduct: management of Labor, Health and Safety, Environment and Ethicsalong with an additional clause on the non-use of conflict minerals. The policy has been effective ever since. Each year, we select suppliers involved in transactions of substantial amounts with greater disruption risks as the target of audit. We adopt RBA’s VAP for our audit process. We audited 16 suppliers in China in 2020. The Company has issuepublished annual CSR reports for its stakeholders on its website since 2010. The CSR report was first certified by an external institution in 2012. The Company adopted Global Reporting Initiative’s most updated guidelines (GRI Standards, published in 2016) to prepare its 2019 CSR report. The report was compiled based on issues concerning stakeholders and the Company’s key objectives. To ensure the credibility of reported contents, the Company commissioned SGS to provide independent assurance based on the criteria specified in AA 1000 AS and GRI Standards. After their assurance, the report was certified to meet AA 1000 AS Standard Type 2, mid-level accountability and GRI Standards application core requirements. The Company was awarded Silver or Bronze Awards by the Taiwan Institute for Sustainable Energy for its “Taiwan Corporate Sustainability Report Award” in 2014-2020 and Silver Award for English Report in 2020. 67 Deviation and causes of deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies No deviations were found No deviations were found ▓ The implementation results of 2020 Corporate Social Responsibility Item Results 1. We were awarded the 6th Corporate Governance Evaluation top 6-20% in Public traded company group, which was held by Taiwan Stock Exchange (TWSE). 2. We were selected into the FTSE4GOOD Index for five consecutive years and in the FTSE4Good TIP Taiwan ESG Index for the third consecutive years. 3. We were ranked 44th of Common Wealth Magazine’s CSR Top 50, 396th of Fortune Top 500, 1558th of Forbes Top 2000, 64th of Common Wealth Magazine’s Top1000 in China, Taiwan and Hong Kong, and Common Wealth magazine’s Taiwan Top 50 Group #4. 4. The Compal CSR report in 2020 was certified by SGS Taiwan Ltd., by using the assurance standards of the AA1000 and GRI Standards Core Options. Meanwhile, the report won the Platinum Medal of 2020 Taiwan Corporate Sustainability Report Award and the Silver Medal of 2020 English Report Award of TCSA. 5. We were ranked 11th of Germany iF Worldwide Design Awards in 2020. 1. We implement the training and promotion of Corporate Social Responsibility (CSR) and the code of conduct of Responsible Business Alliance (RBA) for employees and suppliers. In 2020, we implemented the non-use of conflict minerals policy and completed a Survey (CMRT) of 864 suppliers' conflict minerals with a completion rate of 100%. 2. To reinforce CSR audit and management on Tier 1 suppliers, we have audited 16 suppliers and tracked the finding correcting plans in 2020. 3. We launched the project of building a supply chain management on-line platform in 2019 and 80% completed by the end of 2019. Complete CSR on-line platform of supply chain management and Digitalization of supply chain management on May, 2020. 1. We participated in the CDP climate change and water safety questionnaire. Climate change questionnaire named at management tier in 2020. 2. We promoted waste reduction and recycling. The NJC and KS1, KS3 conduct waste management in accordance with UL2799 waste zero landfill management system. All of them meet the platinum level and are certified by The NJC and KS1. 3. Reduce greenhouse gas emissions, continue to implement energy management systems and strengthen the procurement of renewable energy. The percentage of renewable energy used in the plant area has increased from 3.22% to 33.26%. 4. We participated in the "Waste 3C Recycling Activities" of customers. 213 Compal employees joined the event. 5. Responding to the sustainable development goal of the United Nations "SDGs 14 Life below Water ", we organized a “Beach cleaning activity at Liukuaicuo”, a beach cleaning activity with 85 college students volunteers and Dayuan, Guanyin class assistant students together at Linkou Zhuwai Beach. We participated in the initiative activity, “Do one thing for Tamsui River “held by CommonWealth Magazine and participated in the Linkou Jiabao Beach Enterprise Joint Beach Cleanup. 1. Compal adheres to the goal of reducing environmental load and reducing human hazards, and builds the production and manufacturing capabilities of halogen-free products. Halogen-free products in 2020 include: NB 76 model, Smartphone 33 model, and tablet 2 models. 2. We use ENERGY STAR as the standard to check the energy-saving status of products. In 2020, 110 models will be mass-produced, 95 of which have passed the ENERGY STAR standard. In addition, 5 models of LCD monitors have passed the ENERGY STAR standard. 1. We continue participating in charities with the HCI foundation. In 2020, 1,403 employees donated more than TWD 4 million. Corporate Governance Supply Chain Management Green Environment Green Product Social Welfare 68 Item Results 2. We sponsored the "Kangaroo Project" from the Rural Education Center of Fu Jen University, and 28 volunteers from Compal Enterprise participated in the after-school tutoring center at the Dayuan Guanyin and Yuli Bookstore for the community service work. 3. We continued to participate in various activities to promote Children’s high-quality education, promote digital education in rural areas, donate NB, AIO, tablets, participate in Taoyuan’s "Education-industry Collaboration Program” to assist schools in the promotion of information education to achieve SDGs4 Quality Education of UN. 4. We regularly hold volunteer service activities. In 2020, we had 4 volunteer service activities with 165 participants. We also held blood donation activities. (146 employees donated 224 units of blood) 5. Compal held the first “Healthy charity- Walk for health and love” activity, having a total of 167 colleagues participated and donated 180 tablets, continue committing to “Action Digital Learning Program” to enhance the quality of popular science education for school kids in rural areas. A total of 422 digital mobile learning devices be donated in 2020. 1. We offer employees with diverse care. We arrange health counseling service for employees every week. 478 employees used the service in 2020. We manage health promotion for employees who are in the moderate and high-risk group of cardiovascular diseases based on health examination result, and achievement rate is above 80%. (1)The achievement rate of people with medium and high cardiovascular risk: 92.5%. (2)The third level's achievement rate is three high (hypertension, hyperlipidemia and hyperglycemia) group: 80.6%. (3)The achievement rate of the second-level and second-high (hypertension, hyperglycemia) group: 82.4%. 2. We organize various employee health promotion activities, including health walking projects with charity, health lectures, and various club activities to take care of employees' physical and mental health. The instructions are as follows: (1)Walking charity activities: A total of 167 people participated, and the average number of steps for the whole group was more than 7000 steps per day. A total of 180 computers were donated to complete the goal. (2)Blood donation activity: 146 people participated and donated 224 bags of blood, totaling 56,000 cc. (3)Health seminar: 46 people participated, and the satisfaction reached 100%. 3. We continued the Employee Assistance Program (EAP) in 2020. EAP counseled 72 cases about family issue, parenting issue, law issue and Interpersonal relationship issue. Meanwhile, we held 3 health lectures about emotion care. 4. To improve fertility rates, we provide a TWD 66,000 maternity subsidy to employees for each newborn baby. 222 Compal babies were born in 2020. Employee Care The programs of personnel training We organize a GOLF academic alliance with AUO and Wistron. In 2020, we successfully admitted 98 students to participate in a one-year internship. Also, we had 157 students to register online courses and host 11 on-campus business internship sessions with a total of more than 1,000 students participating. ▓ The targets and plans of 2021 Corporate Social Responsibility NO. 1 Targets Plans Cooperate with the global epidemic prevention (1)Collect the impact of COVID-19 on business operations and energy resources, and use SBT to calculate short-, medium-, and long-term carbon reduction targets, and review Compal’s carbon reduction path and 69 NO. Targets Plans requirements and policies for major diseases, constantly review sustainable actions, and strengthen the identification and management of risks related to climate change. Promote the digitalization of CSR management. Consistently Implement Continue to promote employee health care and assistance and combine public welfare participation to create a friendly workplace environment. Continue to Flip education, respond to the United Nations Sustainable Development Goals ("SDGs"), and focus on SDGs 3 health and well-being and SDGs 4 quality education as the main axis. Respond to the United Nations 30 (ocean) x 30 (land) plan: protect at least 30% of the ocean and land by 2030, and reduce climate change. 2 3 4 5 impact on the 2℃ scenario analysis results. Financial impact, strengthen environmental protection research and development capabilities, and grasp green business opportunities. (2)Identify the risks of climate change, reduce the impact of disasters, and improve corporate resilience. (3)From the perspective of river basin water resources, promote the balance of health, epidemic prevention and water resources protection, and promote the concept of sanitation and water conservation. in (4)Promote waste reduction from the communication with suppliers on packaging materials, using reusable and recyclable packaging materials to reduce waste, introducing renewable materials and recyclable and easy-to-dismantle designs into products, becoming part of the circular economy. factory area, starting (1)Optimize CSR on-line platform of supplier chain management platform functions. (2)Organize suppliers education and training to improve user efficiency. (3)CSR report management system evaluation plan. (1)We actively manage health promotion for employees who are in the moderate and high-risk group of cardiovascular diseases based on health examination result, and achievement rate is 80%. (2)Strengthen the professional training of first-line supervisors and HR staff to provide a friendly work environment for employees. (3)Integrate and promote the Second year health projects with charity to achieve a win-win situation for employee health and public welfare participation. (1) Support the HCI Foundation's various physical and mental education and health care activities for disadvantaged school children in rural areas. (2) In the third year, cooperated with the Rural Education Center of Fu Jen Catholic University on the "Kangaroo Project" to enhance the quality of teaching and learning afterschool in rural areas. (3) Continue implementing the "Compal Reading Volunteer Program" to promote reading education in rural areas. (4) Pay attention to the education and medical care of the silver-haired people in rural Communities. (5) Improve students' ability to judge and think about the truth and participate in teaching plans for identifying fake news. (1)Attach importance to biodiversity, protect plants in the blue carbon ecosystem, and sponsor mangrove wetland conservation plans. (2)Organize beach clean-up activities, continuously carry out environmental education and promotion, and jointly advocate for ocean protection. 70 ■ Climate-related risk and opportunity identification table Type Risk and Influence Adaption and Opportunity Strategy and Law ‧ International trends and the environmental regulations in China have become stricter. Therefore, we are faced with fines or risks of plants closing down resulting from more environmental requests. There are also possibilities that suppliers close down their plants or reduce the production due to environmental problems, which will lead to unstable supply and indirectly influence the efficiency of our assembly line. The amendment draft of the “Renewable Energy Development Act” of Taiwan adds an article that electricity consumers who have the capacity contract higher than 800 kW must set up a renewable energy generation device or replace it with energy storage, purchase of renewable energy certificates, and payment of subsidies, which might lead to the increase of operation costs in the short term. ‧ Products are faced with stricter instructions, regulations, and standards. New materials might influence reliability. Technology Market ‧ Customers have gradually put emphasis on and chosen low-carbon and eco- friendly products. ‧ Reputation If we do not coordinate with the environmental standards and regulations in advance, the client might transfer the order. Acute ‧ Climate change might lead to rainfall type change and the increase of frequency in rainstorms, droughts, and typhoons. These will bring about the block of road transportation, the increase of burden on AC devices, health problems and poor attendance of employees, and damage to plants and machines due to floods. ‧ Climate transformation is likely to worsen the air, cause drought, increase the frequency of heatwaves, change water quality, and affect employees’ health. Chronic Transfer of Risk Concrete Risks 1. Areas with stricter laws and regulations help us distinguish fine green suppliers and enable us to construct a complete green supply chain. 2. We voluntarily review our internal environmental disadvantages, undergoing improvement of personnel behavior and device updates to boost our green production competitiveness. 1. Accelerating the development of green electricity and improving the energy management. Escalating energy productivity and saving energy expenses to cut down costs. 2. The price fluctuations of the oil and electricity will influence the operation costs directly. Therefore, we effectively control the operation costs through the erection of renewable energy devices and the boost of energy management ability. We have to handle regulations and standards from the globe and the market firmly to coordinate, research, develop, and trial run in advance. We also have to construct the development and the production capacity of green products to boost our competitiveness. We are equipped with the ability to mass produce low-carbon products, and we continue to develop new products to complete the ability of creating a green product market. We actively engage in external advocacy to learn the international trends and bring in external guidance and the audit system, constructing complete risk assessment of climate change and the coordination strategy. 1. We monitor the rainstorm alarm system and implement an alert plan to elevate the plants located on lower land, reducing the risk of floods. 2. We established a healthcare department designated to provide fine healthcare counseling for the employees. 3. We have a plan for water use and a drought operating team to effectively monitor and use water resources, reduce the risk of water use, and cut down the expense on water. 4. We promote knowledge on climate change and rescue exercises and enforce the medical resources preparation and epidemic prevention exercises to improve the health and safety awareness of employees. 71 6. If the Company has established the corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies," please describe any discrepancy between the Principles and their implementation: ■ The Company has adopted the “Compal Corporate Social Responsibility Best Practices” based on “Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies." A “CSR Office” has also been introduced specifically for the purpose of promoting social responsibilities, environmental sustainability, public welfare, and information disclosure. The Company has adopted the principles of RBA by including corporate social responsibilities as part of its overall business plan, thereby making sure that everything it does confirms with RBA. The CSR Office reports its progress regularly to the Board of Directors, and publishes annual CSR reports to ensure proper disclosure of CSR information. ■ In order to implement the development of a sustainable environment, maintain an environmental management system, the Company regularly organizes environmental education courses for management and employees. Green management has been introduced from the product design stage and the supply chain. We reduce the energy consumption of products and services, effectively manage harmful substances, reduce the generation of waste water and waste, and properly handle and adopt the best feasible pollution prevention and control technology measures. ■ We improve product life and reliability, and maximize the sustainable use of renewable resources with the concept of easy disassembly and recycling. The Company sets energy conservation and carbon reduction targets, carries out greenhouse gas reduction operations, and does its utmost to reduce the adverse impact of the Company's operations on human health and the natural environment. 7. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices: ■ External initiatives and participation As a significant member of the Earth, the Company actively participates in global and local environmental initiatives and actions. Since 2009, Compal has been participating in CDP's questionnaires on climate change, water, and supply chain carbon management. In addition, the Company takes part in the Greenhouse Gases (GHG) Protocol developed by the World Business Council for Sustainable Development (“WBCSD”) and World Resources Institute (“WRI”), and the “Business Transformation Carbon Footprint Program” introduced by the Industrial Technology Research Institute (“ITRI”) and the Taiwan Electrical and Electronic Manufacturers' Association (“TEEMA”). The Company has been named a “low-carbon pioneer," and is a current participant of DSJI and the Supply Chain GHG Task Force under the International Sustainability Index Promotion Alliance for Taiwanese Businesses, and took part in the Taipei Earth Day Corporate Environment Education Commitment campaign. In 2014, Compal was invited to the annual meeting of Taiwan's “Cradle to Cradle” platform. In 2015, Compal was selected as part of CDP's Climate Disclosure Leadership Index (“CDLI”) for the first time. In 2020, Compal received an overall CDP Management score of B-. ■ Energy management system Increasing productivity per unit of energy is the most fundamental solution to reducing energy 72 consumption and greenhouse gas emission, the Company has detailed planning and implementation since 2017. The Company has completed the certification of the energy management system of PCP, KS3 and CD Plants in 2019, and has extended relevant experience to other plants. ■ Supply chain carbon management As one of the world’s key IT producers, Compal uses “information platforms” and “workshops” to keep suppliers informed of the latest energy/carbon reduction technologies and green living, and inspires them to commit to active care for the local environment. The Company requires all its suppliers to be certified for ISO 9001 (quality management system) and ISO 14001 (environmental management system), and follow EICC guidelines by signing a Letter of Commitment to the behavioral standards of the RBA Code of Conduct. Under this commitment, upstream suppliers are bound to comply with international, national, and local regulations with respect to all activities. Due to the COVID-19, there was no planned physical supplier conference in 2020, relevant laws and regulations were announced in the COMPAL Supplier Design Collaboration Partal System as a means to communicate with suppliers on how they are expected to contribute and assist in Compal's global environmental protection and quality management initiatives. Compal also took the opportunity to exchange and share experiences on CSR issues with suppliers. ■ Corporate environmental education The Company continued to incorporate environmental education and green experience into employees' training throughout 2020. In response to the Marine Debris Action Plan, starting from the source reduction, we did not provide disposable tableware in the Company’s staff restaurant, and held a zero-waste symposium. From caring for rivers, signing the "Tamsui River Convention", organizing Tamsui River ecological tour, inviting company employees, supply chain partners and collaborative social welfare groups to participate in environmental education and beach cleaning activities, a total of three sessions. The Company provided full top-down support, while employees and their family members enthusiastically participated in a series of “experiential” environmental education. We rallied our employees to exercise our influence as consumers to select safe foods and sponsor quality rice fields and tea farms. The crops are later presented to clients as Chinese New Year gifts. By modifying demand, we hope to change supply and promote more sustainable agriculture, forestry, animal husbandry, and fishery. All new recruits are required to undergo 0.5 hours of online environmental training in their initial year. The course covers a variety of topics from green living, preservation of ecosystems, climate change, to green design. In the future, the Company will also make “green products” a mandatory course and introduce more advanced courses on green design issues. A core team will be assembled specifically for the purpose of improving green energy efficiency, and building up Compal's distinguished values in the Information and Communication Technologies (ICT) industry. ■ Supporting social enterprises In recent years, many social enterprises have emerged with goals to protect the environment and improve public interest. In support of their efforts, the Company encourages employees to purchase products and services offered by social enterprises, in hopes that by redirecting purchasing power, we may be able to 73 muster positive energy to solve society's problems. In 2020, Compal collaborated with Mennonite Hualien County Sheltered Workshop, I Can Sheltered Workshop, Hanner Family, Taiwan Mountain and Maritime Protection Society, and managed to raise several hundred,000 New Taiwan Dollars of donations from employees. ■ Community engagement ‧ The Company has long been sponsoring the maintenance and management of Zhouzi Park No. 2 in Neihu in order to provide community residents and industrial park workers a nice place for leisure and recreation activities. ‧ ‧ Compal Neihu employees supports the “2020 Blood donation activity”: 146 people participated and donated 224 bags of blood, totaling 56,000cc. Compal has teamed up with the "Kangaroo Project" from the Center of Care Services for Rural Area Education of Fu Jen Catholic University, and ran after-school tutoring centers at three communities namely as Dayuan, Guanyin, and Yuli Bookstore. 2020 “beach-cleaning activity” with 85 college students’ volunteers and Dayuan, Guanyin class assistant students together at Linkou Bamboo Wai Beach. Participated in the initiative activity. ■ Social services ‧ Compal's employees have run the “Compal Volunteer Club” since 2004. Members of this club visit disadvantaged children during weekends and guide them to read good books. The goal of this program is to help them develop the habit of reading and the ability to think independently, and hence prepare them for the future. The volunteers have also been working with Hsu Chauing Social Welfare and Charity Foundation to provide extracurricularm education for immigrant children. Since 2009, they have been visiting Jong Jen Elementary School, Wuhan Elementary School, Nan-Shi Primary School, Chung Ping Elementary School, Shuang Long Elementary School, Neihai Elementary School, Nan Sing Elementary School, Hsiang An Elementary School, Tien Hsin Elementary School, Hua Hsun Elementary School, Wu Cyuan Elementary School, San He Elementary School, Chung-Shing Elementary School, Sin-Jie Elementary School, Xin Lu Elementary School, Fu An Elementary School, Dacheng Elementary School, Long-Sing Primary School, San Keng Primary School, Shanghu Primary School, Yisheng Elementary School, Shi-Hai Primary School, Te-Long Elementary School, Sha Keng Elementary School, Da Po Elementary School and Haibin Elementary School in Taoyuan during public holidays to accompany children in their reading activities. As of the end of 2020, the volunteers had assisted 3,908 immigrant children and children from disadvantaged families. ‧ ‧ Compal has been encouraging college volunteer clubs to join the Company's “reading volunteers” initiative and provide study aids to children from low-income families in the neighborhood. By sharing good reading materials and environmental awareness, the Company hopes to contribute to the learning progress of disadvantaged children. 45 colleagues participated in the activity of Hsu Chao-Ying Foundation called “New Pen Pal relationship- Hand in hand move forward together.” Through exchanging letters once a month, the participants of our company and the children from high-risk families in Taichung share what they see and hear in life and cheer for each other. We believe that only the cares from hearts can encourage 74 people move forward and carry out the goal and plan written in the letter together. ■ Social welfare (1) Budget sponsorship ‧ Sponsoring of budgets for college volunteer clubs In an attempt to encourage college students to participate in volunteer service, the Company has been contributing TWD 600,000 every year since 2004 to sponsor college clubs in reading promotion directed at children, after-school classes, and environmental education in locations that lack resources and for low-income households. Thirteen college clubs applied for sponsorship and 491 volunteers participated in sponsored volunteer activities in 2021, for which the Company contributed a sum of TWD 584,000 that benefited 2,267 students. Sponsoring of budgets for Compal Sunshine Scholarship "Compal x Sunshine Scholarship" has been in existence for 21 years, which has specially designed to provide "Outstanding Computer Talent Scholarship" and "Computer Excellence Scholarship" for students with burns and facial impairments yet with excellent computer skills. In addition to charity involvement, the Company also provides strong support to academic and industrial organizations including: Taipei City Friends of the Police Association Neihu Office, Taoyuan Enterprise Chamber, Taiwan District of Kiwanis International, Taiwan Institute for Sustainable Energy, Kaohsiung Medical University Donation Fund National Taipei University, Kaohsiung Public Library, Spinal Cord Injury Foundation, National Policy Research Foundation, General Assembly of the Association of Retired Police Officers of the Republic of China, A sum of TWD 4,990,000 was donated to the above mentioned entities in 2020. ‧ ‧ (2) Donation of supplies ‧ Compal has the“ Education-industry Collaboration Program Playing Plan” with the Hsu Chao-Ying Foundation In 2020, Department of Education, Taoyuan, Hsu Chao-Ying Foundation and the Compal Electronics had a press conference for the“Education-industry Collaboration Program Playing Plan”in Wen Huah Elementary School, Taoyuan. The Compal donates 180 tablets to the following 9 elementary schools: Taipei Xi nmin Private Elementary School, Wen-huah Elementary School, Da’an Elementary School, Pushin Elementary School, Zhentou Elementary School, Jung-Pu Elementary School, Xihai Elementary School, Wu-hanElementary School and Ximen Elementary School to help the Xu Chao-Ying Foundation promote the plan called“Professional learning community with the maker teacher and Student maker club.” In order to assist and enhance the function of digital mobile learning program of schools and communities in remote areas, Compal donated 132 sets of AIO, 20 sets of Tablet and 90 sets of NB PCs, respectively. ‧ (3) 2020 Compal Charity Bazaar Both chairman Hsu Sheng-xiong of Compal Electronics and chairman Tsai Li-chu of Hsu Chauing Social Welfare and Charity Foundation attended the event together. At the event, the object of fund-raising for Hsu Chauing Social Welfare and Charity Foundation is to raise money for grandma Jiang so that she can purchase a two- person electric scooter. During the charity sale, there are red envelopes made after Xin Chou Year with the donated painting copyright from our colleague, Chen Jia-ying and tea gift boxes donated by Chairman Tsai. Besides, the booths participated in this charity fair include: Yu-Cheng Social Welfare Foundation, Kanner Village, Happy Mount Colony, DoDo hand-made master Chen Sin-yao and Good Days. With joint support from 81 colleagues, we worked together to fulfill Grandma's wish as she is now living at the mountains of Pingtung, and 75 raised a new two-person electric scooter for her. ■ Human rights The Company respects the human rights of all employees. In addition to prohibiting the use of child labor and overtime working, the Company treats all employees of different ethnicities, religious beliefs, skin color, gender, nationality, age and physical features with equal respect and fairness. The Human Resource Management Policy explicitly states that “the Company shall recruit employees based on knowledge, morality, skills, experience and suitability for the position/job in question. Under no circumstances may the Company reject recruitment for reasons such as gender, ethnicity, religion, political association, nationality, sexual preference, or age." The Company also refrains from using involuntary workers and child labor. ■ Safety and health At a time when financial performance is as important as environmental protection, the Company considers “occupational safety and health” to be an important issue that no business shall neglect. Only by creating a safe work environment are employees able to unleash their full potential, which is a driving force behind the Company's progress. For this reason, the Company not only ensures that every operation is compliant with environmental, safety, and health rules, but also commits to eliminate or reduce safety and health risks to employees, suppliers, contractors and stakeholders that are caused by production procedures, facilities, and activities. At Compal, we see financial performance, environmental protection, and occupational safety and health as three co-existing and complementing factors of business administration. The Company created its official environmental safety and quality policies to guide employees toward protection in the workplace and social responsibilities. Furthermore, these policies also provide employees and external stakeholders (such as suppliers, contractors, customers, environmental organizations, government agencies and community residents) with a better understanding of the Company's environmental safety efforts and its resolve to protect and minimize risks to the environment. Ultimately, we hope to direct the attention of our partnered vendors to environmental protection, safety and health, and work together towards accomplishing our goals. (1) Environment safety and health policy: ‧ ‧ Comply with environmental, safety and health laws, and related requirements. Conduct environment safety and health training to raise employees' awareness towards individual responsibilities as well as safety and health concerns of the surrounding environment, while at the same time encouraging their participation in relevant issues. ‧ ‧ ‧ Continually improve environmental, safety and health performance through programs such as pollution prevention, accident prevention, energy/resource conservation, waste reduction, and responsible care. Pay attention to the control of pollution sources and reducing waste from production. Enhance safety and health facilities to prevent pollution and minimize risks. Establish proper communication channels to convey the Company's environmental safety policy, requirements, and goals to employees, suppliers, contractors, nearby residents and concerned organizations. 76 (2) Environmental safety and health systems/measures: In an attempt to minimize losses on occupational hazards and rectify hidden dangers and recurring safety incidents for more harmonic labor-management relations, the Company subsequently assembled an Environment Safety Promotion Committee that specializes in the development of environment safety plans. Any environment safety-related policies and goals proposed are subject to review during the Environmental Safety Management Review Meeting. Once reviewed, the Committee becomes responsible for supervising work safety units in the implementation of safety and health-related measures, auto inspections, maintenance, and training to eliminate hazardous factors in the environment. In addition, the Committee also supervises relevant departments in completing hazard prevention and loss control systems. (3) Execution ‧ Fire safety equipment/facilities plans and execution: Appropriateness and adequacy of fire safety equipment/facilities are reviewed whenever there is a change to the layout of the business premises. Locations of fire safety equipment/facilities and evacuation routes are clearly labeled on each floor. The Company also engages professional and qualified fire safety inspectors to conduct annual fire safety inspections and reports according to law. ‧ ‧ Water/power plans and execution: The Company promotes proper awareness and implements appropriate control on all uses of water and power equipment for more effective conservation of energy and resources. The administrative department is responsible for the day-to-day inspection of power usage, power systems, and water equipment. All inspection findings are detailed in the “Safety and Health Equipment Inspection Log” and any issues discovered are rectified immediately. Cleaning, monitoring, and control of industrial waste: Handled by the Factory Affairs Division of various factories and General Affairs Department of the headquarters. Waste generated from factories can be classified into the following categories: a. Hazardous waste: Sorted according to “Standards for Defining Hazardous Industrial Waste” stipulated by the Environmental Protection Administration (EPA), Executive Yuan, and collected by certified contractors for subsequent treatment. b. Industrial waste: Industrial waste other than hazardous industrial waste is collected and treated by certified contractors. 77 ‧Emergency response procedures: These procedures have been established to guide the Company through disruption of production, information, and raw material supply in the occurrence of natural or man-made disasters. Incident resolution procedures: Hazard alert occurs Incident reporting Confirmation of Hazard YES Activate emergency response NO Update records m e a s u r e s i n r i s k m a n a g e m e n t s y s t e m I n c l u s i o n o f i n c i d e n t i n v e s t i g a t i o n r e p o r t a n d i m p r o v e m e n t / p r e v e n t i v e Confirmation of damage control NO Request external support YES Level 1 hazard: Post-disaster recovery Any death or 3 major injuries or Incident investigation and proposal of preventive measures higher Loss of work hour exceeding 1 day Loss of property above USD USD 1 million SP: Occurrence of Level 1 hazard must be escalated to the Senior Risk Management Committee (4) Quality Policy (pursuing continuous improvement to meet customer needs): We commit to . Implement customer-oriented performance management. . Create competitive advantages in products and services. 78 3.3.6 Ethical Corporate Management Yes No Yes Assessment criteria I. Establishment of integrity policies and solutions 1. Does the Company have an ethical corporate management policy approved by the Board of Directors and clearly state the ethical corporate management policy and practice in the internal regulations and external documents, as well as the commitment of the Board of Directors and senior management to actively implement the corporate management policy? Actual governance Summary description The Company has established the “Ethical Corporate Management Best Practice Principles” and “Procedures for Ethical Management and Guidelines for Conduct” and, in addition, clearly outlined the procedures for ethical management and guidelines to conduct in its HR policies, social responsibility policies, the integrity principles and code of conduct for Directors, supervisors, managers, and the general code of conduct. The Company’s “Board of Directors Meeting Guidelines” contain a conflicting interest clause that requires Directors to disassociate from all discussion and voting on any agenda that poses a conflict of interest between the Company and themselves or the entities they represent. The Board of Directors approved the policies that were based on integrity accordingly in 2019 as well. The Board of Directors and the management had issued "The statement of compliance with the Ethical Corporate Management Best Principles," committed themselves to business integrity. Deviation and causes of deviation from Integrity Best Practice Principles for TWSE/TPEX Listed Companies No deviations were found 2. Has the Company Yes established an evaluation mechanism for the risk of unethical behavior, regularly analyzed and evaluated the business activities with high unethical behavior risk within the business scope and formulated a plan to When the Company internal audit prepared the next year audit plan, unethical behavior was included in the scope of risk assessment. The relevant audits are performed accordingly, and the “Procedures for Ethical Management and Guidelines for Conduct” was adopted to govern the of follows items: ‧ Prohibition against offering and accepting of improper benefits ‧ Prohibition against lobbying ‧ Prohibition against illegal political donations ‧ Prohibition against improper donations or sponsorships ‧ Prohibition against inappropriate gifts, treatments and illegitimate benefits ‧ Prohibition against unfair competition ‧ Prohibition against leakage of commercial secrets and infringement of intellectual property rights No deviations were found 79 Actual governance Yes No Summary description ‧ Prohibition against insider trading and rules of confidentiality Furthermore, the “Information Security Policy” has introduced measures to prevent violation of commercial secrets. Deviation and causes of deviation from Integrity Best Practice Principles for TWSE/TPEX Listed Companies Assessment criteria prevent unethical behavior accordingly which at least covers the preventive measures for the behaviors in paragraph 2, Article 7 of the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies”? Yes 3. Does the Company stipulate the operating procedures, behavior guidelines, and disciplinary and grievance systems in its unethical behavior prevention plan and implement them and regularly review and revise the plan? II. 1. Yes Integrity actions Does the Company evaluate the integrity of all counterparties it has business relationships with? Are there any integrity clauses in the agreements it signs with business partners? The Company has established the “Ethical Corporate Management Best Practice Principles” and “Procedures for Ethical Management and Guidelines for Conduct” (hereinafter, “Procedures and Behaviors”) as an incentive to insiders and outsiders to report unethical or unseemly conduct. Any insider who makes a false report or a malicious accusation shall be subject to disciplinary action and be removed from office if the circumstance has substance. This Company has appointed a contact person, and has established a hotline and mailbox that can be used either through the Intranet of the Company website or the official Company website. Any person involved in unethical conduct will be referred to an authorized department and processed according to the “Procedures for Ethical Management and Guidelines for Conduct." The Company carries out regular reviews and revises for relevant measures every year. Also, we arrange related training on Ethical Corporate Management and announce the request to follow Ethical Corporate Management Best Practice Principles. No deviations were found The Company requires all suppliers to sign the Letter of Undertaking for Compliance with the Responsible Business Alliance (“RBA”) Code of Conduct by Vendors, which binds them to local regulations on workers, environment, safety, health, management, and moral conduct, and prevents them against corruption and unethical behaviors. No deviations were found 80 Deviation and causes of deviation from Integrity Best Practice Principles for TWSE/TPEX Listed Companies No deviations were found Yes No Yes Assessment criteria 2. Has the Company set up a dedicated unit under the Board of Directors to promote ethical corporate management and regularly (at least once a year) report to the Board of Directors its ethical corporate management policy and plan to prevent unethical behavior as well as its supervision of the implementation? Actual governance Summary description The Company has appointed its human resources, administrative management and legal affairs offices as the competent units in charge of the Company’s ethical matters. These units jointly set the guidelines and policies, which are monitored by the auditors and reports to the Board of Directors on a yearly basis. To prevent potential conflicts of interest, the Company has established the “Ethical Corporate Management Best Practice Principles” and “Procedures for Ethical Management and Guidelines for Conduct." In addition, the Company has also designed relevant course for its online e- Learning, including legal affairs related training on information security, personal information protection act, relevant company policies and employees’ code of conduct so as to familiarize all employees with the aforementioned guidelines and thereby facilitate the promotion of honest management. Status of Operation and Implementation in 2020: The Company requires suppliers to follow the RBA code of conduct, and sign the RBA Code of Conduct commitment or complete the RBA Code of Conduct questionnaire. Among 1,245 suppliers with transaction records, 1,116 have signed the RBA Code of Conduct commitment or completed the RBA Code of Conduct questionnaire, making for a signing rate of 89.64%. In addition, 17,493 employees completed 16,335 hours of integrity management related training, including: Courses New Employee Orientation On-job Training for New Employee Management of the prevention of insider trading CSR Training The Precautions of Intellectual Property Rights and Software Installation New Employee Orientation (PCP) Information Security Management System Hours 2,995 7,428 5 3,649 872 1,146 240 Attendances 1,198 1,645 9 6,884 6,708 191 858 3. Does the Company have any policy that prevents conflict of interest, and channels that facilitate the Yes The Company has established the “Ethical Corporate Management Best Practice Principles” and “Procedures for Ethical Management and Guidelines for Conduct” (hereinafter, “Procedures and Behaviors”). A Company Director, officer or other stakeholder attending, or present at a board meeting, or a juristic representative whose presence infers a likelihood that company interests might No deviations were found 81 Actual governance Yes No Summary description Deviation and causes of deviation from Integrity Best Practice Principles for TWSE/TPEX Listed Companies Assessment criteria report of conflicting interests? be prejudiced may not participate in a discussion or vote on that proposal, shall recuse themselves from discussion and voting, and may not exercise voting rights as a proxy on behalf of another Director. The Directors shall exercise discipline among themselves, and may not support each other in any inappropriate manner. If, in the course of conducting company business, an employee of this Company discovers that a potential conflict of interest exists involving themselves or the juristic person that they represent, or that they or their spouse, parents, children, or a person with whom they have a relationship of interest is likely to obtain improper benefit, the matter shall be reported to their immediate supervisor and the responsible unit, and the supervisor shall provide the employee with the proper instructions. No employee of this Company may use company resources for commercial activities other than those of this Company, nor may his or her job performance be affected by involvement in commercial activities other than those of this Company. The Company’s HR policy and employee code of conduct have introduced rules to identify, supervise, and manage conflicts of interest for business activities that are more highly prone to dishonest behaviors. There are channels in place for Directors, supervisors, managers, stakeholders, and board meeting participants to state their conflicting interests with the Company. To prevent leakage of material nonpublic information, the Company has established “CO10 Insider Trading Prevention Management” as part of its internal control and demanded strict compliance from Directors, supervisors, managers, employees, and any party that gains knowledge to the Company’s material non-public information whether because of their identity, job responsibility, or controlling relationships. The Company has set “Ethical Corporate Management Best Practice Principles” and focuses on creating an effective accounting system and internal control system to avoid high-risk or unethical business activities and the use of external or secret accounts. Self-evaluation is done on a regular basis to make sure the design and execution of the system is effective. Since 2019, when the Company internal audit prepared the next year audit plan, unethical behavior was included in the scope of risk assessment, and relevant audits are performed accordingly. 82 No deviations were found 4. Yes Has the Company established an effective accounting system and internal control system for the implementation of ethical corporate management and has the internal audit unit, according to the assessment results of the Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation from Integrity Best Practice Principles for TWSE/TPEX Listed Companies risk of unethical behavior, drawn up relevant audit plans to check the status of unethical behavior prevention accordingly, or entrusted an independent auditor to carry out the audit? Does the Company organize internal or external training on a regular basis to maintain business integrity? Implementation of whistleblowing system Does the Company provide incentives and means for employees to report malpractice? Does the Company assign dedicated personnel to investigate the reported malpractice? Yes Yes 5. III. 1. 2. Has the Company Yes established the standard operating procedures for the investigation of accused matters, follow-up measures after investigation, and the relevant confidentiality mechanism? The Company organizes training courses in accordance with “Regulations Governing the Establishment of Internal Control Systems by Public Companies” and the board-approved “Insider Trading Prevention Principles." Insider training prevention courses are organized for vice president- grade employees and above, while general employees take training on ethical behaviors on a yearly basis. No deviations were found The Company has mailboxes in place to receive malpractice reports from within or outside the Company. Once a report has been sent to the mailbox, it will be referred to the appropriate department and personnel depending on the nature of the underlying issue to handle or conduct related checks. No deviations were found The Company has established procedures to report matters for filing, assigning, verifying, etc., and requires the responsible person to take relevant actions depending on the results of the investigation. The case content and whistleblower information shall be processed in confidential. No deviations were found 83 Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation from Integrity Best Practice Principles for TWSE/TPEX Listed Companies 3. IV 1. V Yes The Company's relevant regulations and employee code of conduct are clearly regulated, requiring the responsible unit or person not to disclose the content of the case and the identity of the whistleblower, and to take necessary protective actions to ensure that the whistleblower is not treated inappropriately or retaliated. Does the Company assure malpractice reporters that they will not be mistreated for making such reports? Enhanced information disclosure Has the Company disclosed its integrity principles and progress onto its website and MOPS? If the Company has established business integrity policies in accordance with “Ethical Corporate Management Best Practice Principles for TWSE/TPEX-Listed Companies" please describe its current practices and any deviations from the Best Practice Principles: The Company’s “Business Integrity Principles” and “Business Integrity Procedures and Behaviors” have been passed by the Board of Directors and disclosed at the Company’s website and MOPS. A specialized unit will be empowered to enforce these policies and ensure employees’ compliance. The Company has disclosed corporate governance and business integrity matters and updated the progress of such efforts in its annual reports, CSR reports and “Investor Relations-corporate governance” and the “CSR” section of its website. No deviations were found No deviations were found Yes VI. Other information relevant to understanding the Company’s business integrity (e.g. reviews over business integrity principles): Courses have been introduced to the e-Learning system so that employees are made aware of the Company’s “Business Integrity Principles” and “Business Integrity Procedures and Behaviors." 84 3.3.7 Corporate Governance Guidelines and Regulations Please refer to the Company’s website→ Investor Relations → Corporate Governance → Major Internal Policies https:/www.compal.com/investor-relations/corporate-governance/ ‧Framework of Corporate Governance ‧Articles of Association ‧Rules of Procedure for Shareholders’ Meetings ‧Regulations for Election of Directors ‧Procedures for Acquisition or Disposal of Assets ‧Procedures for Financial Derivatives Transactions ‧Procedures for Lending Funds to Other Parties ‧Procedures for Endorsements and Guarantees ‧Board of Directors Meeting Guidelines ‧The Responsibilities and Rules for Independent Directors ‧Audit Committee Procedures ‧Remuneration Committee Procedures ‧CSR Committee Procedure ‧Corporate Governance Best Practice Procedures ‧Code of Conduct for Directors and Managers ‧Code of Conduct for Employees ‧Ethical Corporate Management Best Practice Principles ‧Business Integrity Procedures and Behaviors ‧Insider Trading Prevention Procedures ‧Corporate Social Responsibility Best Practice Principles ‧Rules Governing Financial and Business Matters Between this Company and its Affiliated Enterprises ‧Procedures of Application to Suspend and Resume Trading ‧Rules of Self-Evaluation of the Board of Directors and Functional Committees Performance 3.3.8 Other Important Information Regarding Corporate Governance Please refer to the Company’s website→ CSR https:/www.compal.com/CSR/ZH/ ‧Sustainable Management ‧Stakeholders ‧Supply Chain Management ‧Environment ‧Employee Relationship ‧Charity ‧Download Report Please refer to the Company’s website→ Stakeholder Communication https:/www.compal.com/stakeholder-communication-area/ ‧Employee Relations ‧Customer Relations ‧Supplier Relations ‧Investor Relations 85 3.3.9 Internal Control Systems 1. Statement of the Internal Control System Compal Electronics, Inc. Statement of the Internal Control System Date: March 26, 2021 The Company states the following with regard to its internal control system during fiscal year 2020, based on the findings of a self-assessment: 5. The Company is fully aware that establishing, operating, and maintaining an internal control system are the responsibility of its Board of Directors and management. The Company has established such a system aimed at providing reasonable assurance of the achievement of objectives in the effectiveness and efficiency of operations (including profits, performance, and safeguard of asset security), reliability, timeliness, transparency, and regulatory compliance of reporting, and compliance with applicable laws, regulations, and bylaws. 2. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing the three goals mentioned above. Furthermore, the effectiveness of an internal control system may change along with changes in environment or circumstances. The internal control system of the Company contains self-monitoring mechanisms, however, and the Company takes corrective actions as soon as a deficiency is identified. 3. The Company judges the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (herein below, the “Regulations”). The internal control system judgment criteria adopted by the Regulations divide internal control into five elements based on the process of management control: 1. control environment 2. risk assessment 3. control activities 4. information and communications 5. monitoring activities. Each element further contains several items. Please refer to the Regulations for details. 4. The Company has assessed the design and operating effectiveness of its internal control system according to the aforesaid criteria. 5. Based on the findings of the assessment mentioned in the preceding paragraph, the Company believes that as of Dec 31, 2020 its internal control system (including its supervision and management of subsidiaries), encompassing internal controls for knowledge of the degree of achievement of operational effectiveness and efficiency objectives, reliability, timeliness, transparency, and regulatory compliance of reporting, and compliance with applicable laws, regulations, and bylaws, is effectively designed and operating, and reasonably assures the achievement of the above-stated objectives. 6. This Statement will become a major part of the content of the Company's Annual Report and Prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Act. 7. This Statement has been passed by the Board of Directors Meeting of the Company held on March 26, 2021, where 0 of the 15 attending Directors expressed dissenting opinions, and the remainder all affirmed the content of this Statement. Compal Electronics, Inc. Chairman: Sheng-Hsiung Hsu (Rock Hsu) President: Chung-Pin Wong (Martin Wong) 86 2. If an independent auditor is entrusted with reviewing the internal control system, the independent auditor’s report: None. 3.3.10 Penalties imposed against the Company and its staff, or penalties imposed by the Company against its staff for violations of internal control or regulations; state any corrective actions taken in the most recent years up till the date of the annual report: None. 3.3.11 Major Resolutions Made in Shareholders’ Meeting and Board Meetings 1. Shareholders’ meeting ■ Time: 9:00 am, June 19, 2020 ■ Place: B1, No. 581, Ruiguang Rd., Neihu District, Taipei City 11492, Taiwan (R.O.C.) ■ Major Resolutions: (1) Ratified the Business Report and Financial Statements for 2019. (2) Ratified the Distribution of Earnings for 2019. (3) Approval of the release of non-competition restrictions for Directors. ■ Post-meeting Execution: (1) The 2020 distribution of cash dividends and capital reserves are summarized as follows: ‧ Cash Dividends: TWD 1 per share ‧ Cash Distributed from Capital Reserve: TWD 0.2 per share ‧ Ex-dividend Date: July 25, 2020 ‧ Declaration Date: August 14 2020 2. Board meetings Date 11th Meeting (13th Term) 2020.2.14 Major resolutions 1. Approved the issuance of Letter of Support by the Company to facilitate its subsidiaries in obtaining credit facilities from financial institutions 2. Approved the Company to obtain credit facilities from financial institutions 12th Meeting (13th Term) 2020.3.30 1. Approved the Internal Control System Statement for the year 2019 2. Approved the proposal of the distribution of compensation to employees and Directors for the year 2019 3. Approved 2019 Audited Consolidated Financial Statements and Parent Company Only Financial Statements 4. Approved the Business Report for the year 2019 5. Approved the Business Plan for the year 2020 6. Approved the proposal for Distribution of Earnings for the year 2019 7. Approved the proposal for cash dividends from Earnings for the year 2019 8. Approved the proposal of cash distribution from Capital Surplus 9. Approved the convention of 2020 Annual General Shareholders’ Meeting 10. Approved the targets and plans of Corporate Social Responsibility for the year 2020 11. Approved the CPAs’ independence and competence of performing financial report audit. 12. Approved the enactment to the “Rules of Self-Evaluation of the Board of Directors and Functional Committees Performance” 13. Approved the enactment to the “Employee Integrity Code” 14. Approved the Company to obtain credit facilities from financial institutions 87 13th Meeting (13th Term) 2020.5.13 1. Approved senior level management change 2. Approved the amendment to the “Rules and Procedures for Board of Directors Meetings” 3. Approved the amendment to the “Audit Committee Charter” 4. Approved the amendment to the “Remuneration Committee Charter” 5. Approved the amendment to the “Corporate Governance Best Practice Principles” 6. Approved the amendment to the “Corporate Social Responsibility Best Practice Principles” 7. Approved the release of non-competition restrictions for the managers 8. Approved the release of non-competition restrictions for Directors 9. Approved the first mid-year employees’ bonus of the year 2020 10. Approved employees’ salary adjustment of the year 2020 11. Approved the proposal for the appropriated percentage for the remuneration of employees and Directors of the year 2020 12. Approved fund loan to 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. 13. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 14. Approved the Company to obtain credit facilities from financial institutions 1. Approved the relevant matters regarding the distribution of the year 2020 cash dividends and 14th Meeting (13th Term) 2020.6.30 cash distribution from capital surplus to shareholders 2. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 3. Approved the Company to obtain credit facilities from financial institutions 15th Meeting (13th Term) 2020.8.12 16th Meeting (13th Term) 2020.11.12 17th Meeting (13th Term) 2021.2.25 18th Meeting (13th Term) 2021.3.26 1. Approved senior level management change 2. Approved the appointment of the Financial Officer 3. Approved the appointment of replacement officer in charge of monitoring and control of risks arising from financial derivative transactions 4. Approved the Directors’ Remuneration for the year 2019 5. Approved secondthe second mid-year employees’ bonus for the year 2020 6. Approved investment in Raypal Biomedical Co., Ltd. 7. Approved a loan to Henghao Technology Co. Ltd. 8. Approved a loan to Unicom Global, Inc. 9. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 10. Approved the Company to obtain credit facilities from financial institutions 1. Approved the compensation of Employee bonuses in cash of year 2019 2. Approved the proposal for 2020 year-end employees’ bonus 3. Approved approval of annual audit plan for year 2021 4. Approved investment in ARCE Therapeutics, Inc. 5. Approved the Company to obtain credit facilities from financial institutions 1. Approved senior level management change 2. Approved the issuance of Letter of Support by the Company to facilitate its subsidiaries in obtaining credit facilities from financial institutions 3. Approved the Company to obtain credit facilities from financial institutions 4. Approved the amendment to the “Audit Committee Charter” 1. Approved the Internal Control System Statement for the year 2020 2. Approved the proposal of the distribution of compensation to employees and Directors for the year 2020 3. Approved 2020 Audited Consolidated Financial Statements and Parent Company Only Financial Statements 4. Approved the Business Report for the year 2020 88 5. Approved the Business Plan for the year 2021 6. Approved the proposal for Distribution of Earnings for the year 2020 7. Approved the proposal for cash dividends from Earnings for the year 2020 8. Approved the proposal of cash distribution from Capital Surplus 9. Approved the relevant matters regarding the distribution of the year 2020 cash dividends and cash distribution from capital surplus to shareholders 10. Approved the proposal on election of the 14th term of Directors 11. Approved the convention of 2021 Annual General Shareholders’ Meeting 12. Approved candidates list of Directors for the 14th term 13. Approved the change of independent auditor 14. Approved CPAs’ independence and competence of performing financial report audit. 15. Approved the proposal of donation to Hsu Chauing Social Welfare and Charity Foundation 16. Approved the first mid-year employees’ bonus of the year 2021 17. Approved the proposal for providing Corporate Guaranty Letter to Quanta Computer Inc. 18. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 1. Approved for the amendment to the “Regulations for Election of Directors” 2. Approved for the amendment to the “Rules Governing the Scope of Powers of Independent Directors” 3. Approved for the amendment to the “Remuneration Committee Charter” 4. Approved for the amendment to the “Rules Governing Financial and Business Matters Between this Corporation and its Affiliated Enterprises” 5. Approved for the amendment to the “Procedures for Ethical Management and Guidelines for Conduct” 19th Meeting (13th Term) 2021.5.12 6. Approved for the release of non-competition restrictions for the managers 7. Approved for the release of non-competition restrictions for Directors 8. Approved for employees’ salary adjustment of the year 2021 9. Approved for the proposal for the appropriated percentage for the remuneration of employees and Directors of the year 2021 10. Approved for the targets and plans of Corporate Social Responsibility for the year 2021 11. Approved for fund loan to 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. 12. Approved for fund loan to 100% owned subsidiary Compal Eletrônica Da Amazônia Ltda. 13. Approved for the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 14. Approved for the Company to obtain credit facilities from financial institutions 3.3.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None. 3.3.13 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit, Corporate Governance and R&D: Title Name Date of appointment Date of dismissal Reasons for dismissal Financial Officer Ching-Hsiung Lu 1989.10.1 2020.8.12 Internal position adjustment 89 3.4 Information Regarding the Company’s Audit Fees and Independence Accounting Firm Name of CPA Period Covered by CPA’s Audit Remarks KPMG Chien, Szu Chuan Au, Yiu Kwan 2020.01.01~2020.12.31 - ■ CPA Public Expense Information and Matrix Fee Range 1 2 3 4 5 6 Under TWD 2,000,000 TWD 2,000,000 ~ TWD 4,000,000 TWD 4,000,000 ~ TWD 6,000,000 TWD 6,000,000 ~ TWD 8,000,000 TWD 8,000,000 ~ TWD 10,000,000 Over TWD 100,000,000 Fee Items Audit Fee Non-audit Fee - - - - - 10,420 - - 4,292 - - - Unit: TWD Thousands Total - - 4,292 - - 10,420 (1) Non-audit fees paid to CPAs, accounting firms, and affiliated companies thereof that amount to more than 1/4 of the audit fees: Unit: TWD Thousands Firm Name of CPA Audit Fee Non-audit Fee System Design Company Registration Human Resource Others Subtotal Period Covered by CPA’s Audit Remarks KPMG Chien, Szu Chuan Au, Yiu-Kwan 10,420 - - - 4,292 4,292 2020.01.01~2020.12.31 - Note: Other non-audit fees: Transfer pricing report of $600,000, tax consultation of $3,492,000, and others of $200,000. (2) Changes in the accounting firm that result in lesser audit fees paid in comparison to the previous year: None (3) Reduction of audit fees by more than 10% compared to the previous year: None 90 3.5 Replacement of CPA: 1. About the former CPA Date of replacement Approved by the Board of Directors on March 26, 2021 Reason and explanation for replacement Due to adjustments in work and duties at KPMG, the CPAs were changed from Chien, Szu Chuan and Au, Yiu-Kwan to Kuo, Kuan-Ying and Chien, Szu Chuan starting from 1Q 2021. Party involved Situation CPA Commissioner Voluntarily terminated the Not applicable Not applicable commission Will no longer accept Not applicable Not applicable (continue) the commission State whether the commissioner or the CPA terminated the service or declined the commission Other audit report opinions and causes issued within the last two years other than unqualified opinion Did he/she have opinions that Yes differed from that of the publisher? N.A. Accounting principles or practices Disclosure of financial report Scope or step of auditing Other N.A. Description V Other items of disclosure (Contents that should be disclosed as covered in Clauses 1.4~1.7, Section 6, Article 10 of this guideline) 2. About the succeeding CPA Name of accounting firm KPMG N.A. Name of CPA Date commissioned Kuo, Kuan-Ying and Chien, Szu Chuan Approved by the Board of Directors on March 26, 2021 Items of consultation and results on the accounting methods for specific transactions, accounting principles and potential opinions for financial report prior to commissioning Written opinion from succeeding CPA on items of disagreement with the former CPA N.A. N.A. 3.6 If the chairman, president, and financial or accounting manager of the Company had worked for the accounting firm or related parties thereof in the most recent year, the name, title, and the term of service with the accounting firm or the related party must be disclosed: None. 91 3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 2020 Up till April 27, 2021 Shares held Increase (Decrease) Shares pledged Increase (Decrease) Shares held Increase (Decrease) Shares pledged Increase (Decrease) Unit: shares 0 0 0 0 0 0 0 606,904 0 0 0 0 0 0 0 0 0 0 0 Title Name Chairman Sheng-Hsiung Hsu Vice Chairman And CSO Jui-Tsung Chen Binpal Investment Co., Ltd. Director Representative: Wen-Being Hsu Kinpo Electronics, Inc. Representative: Chieh-Li Hsu Representative: Shyh-Yong Shen Charng-Chyi Ko Sheng-Chieh Hsu Yen-Chia Chou Chung-Pin Wong Chiung-Chi Hsu Ming-Chih Chang Anthony Peter Bonadero Sheng-Hua Peng Min-Chih Hsuan Duei Tsai Duh-Kung Tsai Chen Chang Hsu Chun-Te Shen Director Director Director Director Director and President Director Director And EVP Director Director And EVP Independent Director Independent Director Independent Director Executive Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice Kuo-Chuan Chen (306,000) Chyou-Jui Wei Wen-Da Hsu Shi-Kuan Chen Chi-Wai Wan 0 0 0 0 92 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - 0 (117,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2020 Up till April 27, 2021 Shares held Increase (Decrease) Shares pledged Increase (Decrease) Shares held Increase (Decrease) Shares pledged Increase (Decrease) Title Name President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Min-Tung Weng Lo-Chun Lee Sheng-Hung Li Bor-Heng Chen Chung-Hsing Tan Vice President Chih-Chuan Cheng 0 0 0 0 0 0 Vice President Ching-Hsiung Lu (110,000) Vice President Po-Tang Wang Vice President Tzong -Ming Wang Vice President Fu-Chuan Chang Vice President Yung-Nan Chang Vice President Yong-Ho Su Vice President Jyh-Shyan Liang Vice President Chiao-Lie Huang Vice President Yi-Yun Chang Vice President Hsin-Kung Mao Vice President Hsin-Hsiung Huang Vice President Shih-Hong Huang Vice President Yi-Chiang Chiu Vice President Jui-Chun Shyur Vice President Ta-Chun Wang Vice President Jen-Liang Lin General Counsel Peng-Hong Chan Vice President Wei-Chia Wang Vice President, Accounting and Corporate Governance Officer Cheng-Chiang Wang Vice President Cheng-Hui Su Vice President Tu-Chuan Tu Vice President Chang-Chieh Tien Vice President and Financial Officer Guo-Dung Yu Vice President Peng Kuee Lau Vice President Yau-De Chiou 0 0 10,000 0 0 (20,000) 0 0 0 0 0 (8,000) 0 0 (50,000) 0 0 0 0 0 0 0 - - 93 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - - 0 0 (9,000) 0 0 0 (50,000) 0 0 0 0 0 (5,000) 0 (160,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Title Name Internal Audit Officer Po-Wen Hsieh Senior Vice President Senior Vice President Senior Vice President Pei-Yuan Chen Ying Chang Wei-Chang Chen Vice President Shyh-An Lee Vice President Hsiao-Wei Lo 2020 Up till April 27, 2021 Shares held Increase (Decrease) Shares pledged Increase (Decrease) Shares held Increase (Decrease) Shares pledged Increase (Decrease) 0 0 0 0 0 20,000 0 0 0 0 0 0 0 - - - - - 0 - - - - - Note: 1. Change in representative of the Company’s institutional Director of Kinpo Electronics, Inc., and the former Shyh-Yong Shen was re-appointed to Chieh-Li Hsu, on July 21, 2020. 2. Senior Vice Presidents Pei-Yuan Chen, Ying Chang, Wei-Chang Chen and Vice Presidents Shyh -An Lee, Hsiao-Wei Lo resigned in 2020. Vice President Yau-De Chiou took office in 2021. 3.7.1 Shares Trading with Related Parties: Name Reason for transfer Transaction date Counterparty Sheng-Chieh Hsu Inherit 2020.09.23 Xin-Huang Hsu Counterparty's relationship with the Company, Directors, Supervisors, Managers, and shareholders with more than 10% ownership interest Mother and Son Sheng-Chieh Hsu Inherit 2020.09.25 Xin-Huang Hsu Mother and Son Ching-Hsiung Lu Gift 2020.07.07 Shao-Hsuan Lu fFther and Daughter Shares Transaction price 377,617 229,287 110,000 19.85 19.85 19.25 3.7.2 Shares Pledged with Related Parties: None 94 3.8 Relationship among the Top Ten Shareholders April 27, 2021 Unit: Shares Name Self Shares held Shareholdings of spouse and minors Total shares held in the names of others Shares held Shares Shareholding Percentage Shares Shareholding Percentage Shares Shareholding Percentage Spouse, relative of second degree or closer, and relationships among top 10 shareholders Name Relationship 164,522,000 3.73% 151,628,692 3.44% - - - - 8,975,401 0.20% 17,107,025 0.39% 115,244,179 2.61% 94,300,991 2.14% 0 0% 86,878,000 1.97% 76,966,000 1.75% 0 0% 68,275,000 1.55% 57,487,900 1.30% 53,641,652 1.22% - - 0 - - 0 - - - - - 0% - - 0% - - - 0 0 0 0 0 0 0 0 0 0 0 0% N/A N/A 0% N/A N/A 0% 0% N/A N/A 0% N/A N/A 0% 0% N/A N/A 0% N/A N/A 0% 0% N/A 0% N/A N/A N/A 52,357,000 1.19% - - 0 0% N/A N/A Silchester International Investors International Value Equity Trust Kinpo Electronics Inc. Representative: Sheng-Hsiung Hsu Yuanta/P-shares Taiwan Dividend Plus ETF Fubon Life Insurance Co., Ltd Representative : Ming-Hsing Tsai Silchester International Investors International Value Equity Group Trust Taiwan Cooperative Bank Representative : Lei, Chung-Ta New Labor Pension Fund Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index Funds JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds Silchester International Investors International Value Equity Taxable Trust 95 3.9 Ownership of Shares in Affiliated Enterprises December 31, 2020 Unit: Shares; % Investees (Note) Invested by the Company Held by directors, supervisors, managers, and directly/indirectly controlled entities Aggregate investment Shares Shareholding percentage Shares Shareholding percentage Shares Shareholding percentage Panpal Technology Corp. Gempal Technology Corp. Hong Ji Capital Co., Ltd. Hong Jin Investment Co., Ltd. HippoScreen Neurotech Corp. SHENNONA CO.,Ltd. Aco Smartcare Co.,Ltd. ARCE Therapeutics, Inc. Raypal Biomedical Co., Ltd. Rayonnant Technology Co., Ltd. RiPAL Optotronics Co., Ltd. Unicom Global Inc. Palcom International Corporation Henghao Technology Co., Ltd. Compal Broadband Networks Inc., Crownpo Technology Co., Ltd. Kinpo Group Management Consultant Company Mactech Co., Ltd. General life Biotechnology Co., Ltd. Lead-honor Optoelectronic Co., Ltd. Infinno Technology Corporation Allied Circuit Co., Ltd. Arcadyan Technology Corp. Maxima Ventures I, Inc. Avalue Technology Inc. Core Profit Holdings Ltd. Flight Global Holding Inc. Just International Ltd. High Shine Industrial Corp. Compal International Holding Co., Ltd. 20,014,952 100.00 500,000,000 90,000,000 100,000,000 29,500,000 2,100,000 600,000 100,000,000 20,000,000 3,446,143 - 100.00 - 100.00 - 100.00 - 100.00 - 70.00 - 100.00 - 52.04 32.79 7,805,110 30.00 2,466,999 - 500,000,000 - 90,000,000 - 100,000,000 29,500,000 - 2,100,000 - 600,000 - - 100,000,000 12.80 30.68 27,805,110 5,913,412 29,500,000 100.00 6,000,000 10,000,000 100.00 100.00 10,000,000 100.00 20,014,952 100.00 - - - - - - - - - - 29,500,000 6,000,000 10,000,000 10,000,000 29,060,176 43.42 13,672,854 20.43 42,733,030 3,738,668 33.23 6,230,544 55.39 9,969,212 300,000 37.50 300,000 37.50 600,000 21,756,192 52.88 274,954 0.67 22,031,146 100.00 100.00 100.00 100.00 70.00 100.00 52.04 45.58 60.68 100.00 100.00 100.00 100.00 63.89 88.62 75.00 53.55 50.00 15,000,000 50.00 2,772,000 42.00 - - - 15,000,000 - 2,772,000 42.00 5,649,625 27.20 433,864 2.08 6,083,489 10,157,730 41,304,504 126,000 14,924,070 147,000,000 89,755,495 48,010,000 42,700,000 3,000 20.42 7,021,701 19.82 31,867,024 22.55 21.26 695,000 100.00 - 100.00 - 100.00 - 53.58 37,000,000 14.11 17,179,431 15.29 73,171,528 0.54 0.99 129,000 15,619,070 - 147,000,000 89,755,495 - 48,010,000 - 79,700,000 46.42 53,001,000 100.00 - - 53,001,000 29.28 34.53 35.11 23.09 22.25 100.00 100.00 100.00 100.00 100.00 96 Investees (Note) Invested by the Company Held by directors, supervisors, managers, and directly/indirectly controlled entities Aggregate investment Shares Shareholding percentage Shares Shareholding percentage Shares Shareholding percentage Big Chance International Co., Ltd. Compal Rayonnant Holdings Limited Auscom Engineering Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology(Poland) Sp. z o.o. Bizcom Electronics, Inc. Compal Electronics (Holding) Ltd. 90,820,000 100.00 12,500,000 100.00 3,000,000 100.00 136,080 100.00 100 100.00 100,000 100.00 1,000 100.00 Compalead Electronics B.V. 6,426,516 100.00 - - - - - - - - - - - - - - - - 90,820,000 100.00 12,500,000 3,000,000 136,080 100 100,000 1,000 6,424,516 100,000 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Etrade Management Co., Ltd. 46,900,000 65.23 25,000,000 34.77 71,900,000 Webtek Technology Co., Ltd. 100,000 100.00 Forever Young Technology Inc. 50,000 100.00 - - - - 50,000 100.00 Lipo Holding Co., Ltd. 98,000 49.00 102,000 51.00 200,000 100.00 Ascendant Private Equity Investment Ltd. 31,253,125 34.72 44,750,000 49.72 76,003,125 84.44 UniCore BioMedical Co., Ltd. 20,000,000 100.00 Shennona Corporation 2,600,000 100.00 Note: Investments made by the Company using the Equity Method. - - - - 20,000,000 2,600,000 100.00 100.00 97 IV. Capital Overview 4.1 Capital and Shares 4.1.1 Source of Capital Year Month Issuance Price Authorized capital Paid-up capital Shares Amount (TWD ) Shares Amount (TWD ) Source of capital Remarks Paid in properties other than cash Others May 12, 2021 2018 2018 3 5 Share Type Ordinary shares 10 6,000,000,000 60,000,000,000 4,419,191,625 44,191,916,250 Cancellation of Restricted Employee N.A. Change of capital approved by the Ministry of Shares of $10,890,000 Economic Affairs on March 21, 2018 10 6,000,000,000 60,000,000,000 4,407,146,625 44,071,466,250 Cancellation of Restricted Employee N.A. Change of capital approved by the Ministry of Shares of $120,450,000 Economic Affairs on May 29, 2018 Outstanding shares (public listed) Unissued shares Total Authorized capital Remarks 4,407,146,625 1,592,853,375 6,000,000,000 Approved to include 100,000,000 shares of employees shares and corporate bonds with warrant in capital. ■ Shelf registration system information: None 98 4.1.2 Status of Shareholders Analysis Gover nment Agencies Financial Institutions Other Institutions Foreign Institutions and Natural Persons Domestic Natural Persons Treasury stocks Total Number of Shareholders Shareholding (shares) Percentage 3 41 316 1,154 189,078 0 190,592 8 379,896,895 552,799,860 2,121,826,929 1,352,622,933 0 4,407,146,625 0.00% 8.62% 12.54% 48.15% 30.69% 0.00% 100.00% April 27, 2021 4.1.3 Share Ownership Distribution Range of Shareholding (Unit: Shares) 1 ~ 999 1,000 ~ 5,000 5,001 ~ 10,000 10,001 ~ 15,000 15,001 ~ 20,000 20,001 ~ 30,000 30,001 ~ 40,000 40,001 ~ 50,000 50,001 ~ 100,000 100,001 ~ 200,000 200,001 ~ 400,000 400,001 ~ 600,000 600,001 ~ 800,000 800,001 ~ 1,000,000 1,000,001 and over Total Number of Shareholders Shareholding (Shares) Percentage April 27, 2021 42,615 105,504 21,809 7,326 4,066 3,376 1,456 929 1,695 751 345 162 88 54 416 190,592 8,273,748 230,410,728 166,654,104 89,683,423 74,486,974 85,054,607 51,497,708 43,047,946 122,216,140 105,456,615 95,262,475 79,084,832 60,237,076 48,493,209 3,147,287,040 4,407,146,625 0.19% 5.23% 3.78% 2.03% 1.69% 1.93% 1.17% 0.98% 2.77% 2.39% 2.16% 1.79% 1.37% 1.10% 71.42% 100.00% 4.1.4 List of Major Shareholders Shareholder’s name Silchester International Investors International Value Equity Trust Kinpo Electronics, Inc. Yuanta/P-shares Taiwan Dividend Plus ETF Fubon Life Insurance Co., Ltd Silchester International Investors International Value Equity Group Trust Taiwan Cooperative Bank New Labor Pension Fund Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index Funds 99 April 27, 2021 Shares held 164,522,000 151,628,692 115,244,179 94,300,991 86,878,000 76,966,000 68,275,000 57,487,900 Percentage (%) 3.73% 3.44% 2.61% 2.14% 1.97% 1.75% 1.55% 1.30% JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund， a series of Vanguard Star Funds Silchester International Investors International Value Equity Taxable Trust 53,641,652 1.22% 52,357,000 1.19% 4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share Measurement Year Per-share market price Per-share net worth (Note) Earnings per share Per-share dividend High Low Average Before dividend After dividend Before adjustment After adjustment Weighted average outstanding shares Earnings per share Weighted average outstanding shares Earnings per share Cash dividends Stock dividends From earnings From capital reserves Cumulative unpaid dividends P/E ratio Price to dividends ratio Cash dividend yield 2019 20.65 17.05 18.79 24.32 23.11 2020 21.00 15.30 18.88 24.52 22.90 (Note) Year-to-date March 31, 2021 27.30 20.60 22.41 23.59 - 4,357,129,194 4,357,129,194 4,357,129,194 1.60 2.15 0.60 4,357,129,194 4,357,129,194 1.60 1.20 - - - 2.15 1.60 (Note) - - - - - - - - - Analysis of investment returns - - - Note: The 2020 distribution of earnings was resolved at the March 26, 2021 Board of Directors’ Meeting 8.78 11.80 (Note) 8.47% (Note) 11.74 15.66 6.39% 4.1.6 Dividend Policy and Implementation Status 1. Dividend Policy If there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent (10%) of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The Board of Directors may set aside a certain amount to cope with the business operation conditions, and shall prepare the proposal for distribution of the balance amount thereof after a resolution has been adopted and then allocated in accordance with Second Paragraph of this Article or Article 29. The Company authorizes the Board of Director to distribute all or part of the dividends and bonuses, capital surplus or legal reserve in cash to shareholders after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by at least two-thirds of the total number of 100 Directors; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting. The lifecycle of the industry of the Company is in the growing stage. To meet the future capital needs and in consideration of capital budget, long-term financial planning and onshore and offshore competition condition, as well as the need of shareholders for cash flow, if there is any profit after close of books, the dividend and bonds to be distributed to shareholders should not be less than thirty percent (30%) of the after-tax profit of such year and the cash dividend allocated by the Company each year shall not be lower than ten percent (10%) of the total dividend (including cash and share dividend) for such year. 2. The Board of Directors' resolution on dividend distribution ‧ The 2020 distribution of earnings of shareholders’ dividends in the amount of TWD 5,288,575,950 was approved by the Board of Directors Meeting on March 26, 2021. The aforementioned amount is set to be distributed as an all-cash dividend of TWD 1.2 per share and incurred capital surplus generated from the excess of the issuance price over the par value of the capital stock in the amount of TWD 1,762,858,650, or TWD 0.4 per share. The total cash distribution amounts to TWD 7,051,434,600. ‧ The Board of Directors has approved to set an ex-dividend record date for distribution and record date of cash distribution from capital surplus on May 1, 2021, and cash distribution has been paid out on May 21, 2021 3. When there is a significant change in the expected dividend policy, it should be stated: None. 4.1.7 Impact on 2020 Business Performance and EPS resulting from Stock Dividend Distribution: Not Applicable (The Company did not disclose 2021 annual financial forecast) 4.1.8 Employees’ and Directors’ Compensation 1. Employees’ and Directors’ compensation policies as stated in the Articles of Association When the Company makes a profit in a fiscal year, the Company’s pre-tax profits in such fiscal year, prior to the deduction of compensation to employees and Directors, shall be distributed to employees as compensation in the amount of no less than two percent (2%) thereof and to Directors as compensation in an amount of no more than two percent (2%) of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset the accumulated losses. The compensation to employees as mentioned above may be distributed in the form of stock or cash and employees entitled to receive said stock/cash may include the employees of the Company’s subordinate companies pursuant to the Company Act. 2. Basis for estimating employees ‘and Directors’ compensation and stock dividends, and accounting treatments 101 for any discrepancies between the amounts estimated and the amounts paid. ‧ Compensation to Directors and employees, as denoted in the Articles of Association, shall be estimated based on income before taxes prior to the subtraction of Directors and employee compensation during the current year and multiplied by the ratio as denoted in the Articles of Association (shall not be more than 2% or less than 2% of the remainder.) ‧ ‧ If the compensation approved for distribution to employees is to be in the form of common shares, the number of shares is determined by dividing the amount of the compensation by the closing price of the shares on the day preceding the Board of Directors’ meeting. If the actual amounts differ from the amounts estimated, the differences are recorded as gains/losses in the subsequent year as a change in accounting estimate. 3. 2020 employee compensation proposal passed by the Board of Directors ‧ Accrued employee compensation is TWD 974,693,802 and Directors compensation is TWD 51,540,800. ‧ If the estimated distribution amount differs from the amounts estimated in accrued expenses, the variance, reason, and resolution should be disclosed: No variance. ‧ The proposed distribution of employee stock compensation, and the size of such an amount as a percentage of the sum of the after-tax net income stated in the individual financial reports for the current period and total employee compensation: Not applicable (no employee stock compensation). 4. Actual distribution of 2019 employee and Directors compensation: ‧ The employee compensation is TWD 731,321,511 and the Directors compensation is TWD 38,671,525. ‧ The 2019 actual distribution of employee and Directors compensation remained as proposed by the Board of Directors. 4.1.9 Company Buyback of Own Shares: None 4.2 Bonds: 4.2.1 Overseas Corporate Bonds: None 4.2.2 Domestic Corporate Bonds: None 4.2.3 Exchangeable Bonds: None 4.2.4 Blanket declaration of issued corporate bonds: None 4.2.5 Corporate bonds with warrants: None 4.3 Preferred shares: None 102 4.4 Global Depository Receipts 1. Issuance Details Date of issue: November 9, 1999 May 21, 2001 Issuance and trading location Total sum issued Issuance price per unit Number of units issued Luxembourg USD 122,160,000 USD 15.27 8,000,000 units Source of represented securities Participating shareholder(s): Kinpo Electronics, Inc. Luxembourg USD 174,816,000 USD 6.07 28,800,000 units 1. Participating shareholder(s): 44,000,000 shares contributed by (1) Kinpo Electronics, Inc. (2) Panpal Technology Corporation (3) Gempal Technology Corporation 2. New cash issue of Compal shares: 1,000,000,000 shares 144,000,000 ordinary shares of Compal Electronics Quantity of represented securities 40,000,000 ordinary shares of Compal Electronics 1. GDR holders’ rights and obligations 2. Voting rights: According to the terms of the depository agreement and the laws of the Republic of China, the beneficiary certificate holder is entitled to the voting rights of shares represented under the beneficiary certificate. Rights to dividend distribution, share subscription, and other rights: Unless otherwise specified in the agreement, the GDR carries identical rights as do ordinary shares Trustee Depository bank Custodian Unredeemed balance Allocation of expenses incurred at issuance and over the duration Key terms of the depository and custodian agreements Per Unit Market Price 2020 Year-to-date May 12, 2021 High Low Average High Low Average N.A. The Bank of New York Mega International Commercial Bank 2,881,640 units (May 12, 2021) Borne by participating shareholder(s) N.A. The Bank of New York Mega International Commercial Bank Allocated proportionally between the Company and participating shareholders See descriptions below USD $ 3.74 USD $ 2.58 USD $ 3.21 USD $ 4.94 USD $ 3.70 USD $ 4.18 2. Key terms of the depository and custodian agreement (1) Key terms of the depository agreement ■ Depository receipts Each depository certificate represents 5 Compal ordinary shares. ■ Transfer/settlement Ownership and transfer of depository receipts shall be certified through the book-entry settlement system of The Depositary Trust Company ("DTC"). Depository receipts shall be settled over DTC's book-entry system. Unless otherwise specified by law, ownership and transfer of depository receipts may only be completed over DTC's records. In Europe, depository receipts are still held under DTC, but transactions are settled through the book-entry system of Euroclear or Clearstream. 103 ■ Deposit and redemption of Compal shares Three months after issuance of depository receipts, holders may request to redeem and receive shares represented by the depository receipt after paying the relevant charges according to the terms of the depository contract, or request the depository institution to sell shares represented by the depository receipt (provided that Compal has placed an adequate quantity of ordinary shares for sale with the depository institution). Once the shares represented by the depository receipt have been sold, the depository institution shall deduct the relevant charges, taxes, and government levies from the sales proceeds, and convert the remainder into USD before paying the depository receipt holder who has requested redemption. Subsequent issues of depository receipts are subject to the procedures outlined by the Securities and Futures Institute of the Republic of China, the terms of the depository contract, and the consent of both Compal and the depository institution. The depository receipts have been listed on the Luxembourg Stock Exchange and are traded through the PORTAL of National Association of Securities Dealers Inc. ■ Distribution of dividends, gains, and rights For cash dividends on Compal shares, the depository institution is required to convert the amount of cash received into USD according to the laws of the Republic of China, deduct taxes and relevant charges, and distribute the remainder to depository receipt holders based on the percentage of shares represented in each depository receipt. For stock dividends on Compal shares (including shares issued against capitalized earnings and reserves), the depository institution is required to adjust the number of shares represented in each depository receipt according to the laws of the Republic of China and terms of the depository contract. DTC will then produce additional depository receipts based on the size currently held and distribute them to the respective holders. Sale of stock dividends is subject to compliance with the terms of the depository contract and laws of the Republic of China. ■ Tax ‧ Any dividends (cash or stock) paid to the depository institution are subject to withholding tax at the prevailing tax rate when payment is made. ‧ Holders who request the redemption of depository receipts by having the depository institution sell the underlying shares through the Taiwan Stock Exchange Corporation (TWSE) will be charged securities transaction tax at the prevailing rate when the sale takes place. ‧ Capital gains tax on securities transactions is currently suspended according to the laws of the Republic of China. Practices may be adjusted to reflect changes in the laws of the Republic of China. (2) Key terms of the custodian agreement ■ Placing securities for the issuance of global depository receipts Compal is required to place securities with the custodian and hand over all documents mentioned in the custodian contract, which provide the basis for the issuance of global depository receipts. ■ Notifying the depository institution for the issuance of depository receipts Once the custodian has received Compal's ordinary shares, the custodian shall immediately notify the depository institution for the issuance of global depository receipts. As soon as the depository institution 104 receives the above notice, it shall produce and issue global depository receipts representing the number of entitled securities to the parties mentioned in the custodian's notice above. ■ Delivery of securities upon redemption of depository receipt If a holder requests the redemption of depository receipts, the depository institution shall immediately notify the custodian to transfer the number of securities represented to the party specified by the depository institution. The custodian may collect a sum sufficient to cover the taxes or expenses incurred from the party specified by the depository institution as a result. ■ Confirmation of share quantity on baseline date The custodian is required to report to the depository institution the number of securities held in custody by the end of each baseline date. 4.5 Employee Warrants: None 4.6 Subscription of New Shares by Employees and Restricted Shares: None 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions: None 4.8 Financing Plans and Implementation: 1. Execution of the previous issue or private placement of securities that have not been completed: None 2. The latest three-year issuance or private placement of securities has been completed and the project benefits have not yet been revealed: none 105 V. Operational Highlights 5.1 Business Activities 5.1.1 Business Scope 1. Main areas of business and revenue contribution ■ Main areas of business operations The development, design, manufacture, and sales of Notebooks, Ultraslim notebooks, 2-in-1 Notebooks, AIO, 5G Module and Products, Tablets, Smartphones, Smart Wearable Devices, Smart Hearable Devices, Smart Display Products, AR/VR Smart Devices, Smart Home Devices, IoT Vertical Solutions, Smart Medical and Healthcare, Auto electronics, and Servers. ■ 2020 Revenue contribution Major Divisions (%) of Total Sales 5C electronics Other products Total 99.7% 0.3% 100% 2. Current and future product development ■ Notebooks In 2020, Compal adopted the most efficient R&D methods for the launch of its latest notebook PC hardware, which included laptops with 11th generation processors and the AMD new Ryzen platform. Compal has special expertise in system integration, R&D, and manufacturing to assist clients in the development and mass- production of new products with the latest specifications in a relatively short time. The Compal price- competitive, slim, and stylish notebooks were launched at a time when the market favored more affordable and portable devices. Then, the pandemic changed peoples’ daily habits. The demand for work-from-home and e-learning devices triggered by the COVID-19 pandemic has driven strong consumption of notebook devices. Compal continues to release commercial and education laptops to meet market demand. In addition, with consistent attention, the gaming market continues to grow due to the pandemic. After years of operation as an ODM of gaming laptops for our brand partners, Compal has accumulated profound experience in their design and development. In 2021, Compal will continue to conduct high-end technology in its flagship gaming laptop and ultraslim gaming devices. Compal will continue to make significant investments in R&D to create a win-win situation with our customers to increase their market share. 106 ■ Ultraslim Notebooks Innovative technology and extensive R&D capabilities have allowed Compal to maintain a leading position in the industry. Compal produces an ultra-thin Notebook, which uses the latest generation processor from Intel and AMD. Not only is it slim and light, but it offers excellent performance and allows users to really be productive. Compal will introduce more Ultra slim notebooks in 2021. In addition to compatibility with the Intel design specifications, like “Intel Evo,” for their latest generation products, we will also be introducing slimmer products at a lower price to meet market demand. They will feature the stylish and elegant body that is typical of Compal products, yet offer computing power that can rival a high-performance PC. Compal will also continue to develop newer and more competitive technologies that consumers around the world will get to enjoy, but will also give our clients faster access to these markets. In addition, gaming notebooks, which usually cannot have a slim design will start to phase in nVIDIA Max-Q technology to achieve both high-performance and an Ultra slim design. ■ 2-in-1 Notebooks The 2-in-1 Notebook is a novel product that borrows the concept of “Transformers” – in addition to having a standard laptop keyboard for te usual functional operations, the product also features Tablet PC touch versatility. The touch-sensing display module coupled with the latest Microsoft Windows 10 OS attracts both the consumer base for standard laptops as well as that for tablet PCs. We have utilized our rich R&D experience to present several innovative concepts that incorporate exclusive technology as well as materials. The fan-less design of the 2-in-1 Notebook with its different designs and form factors, has allowed the Company to create new market demand and earn unanimous praise from clients and consumers alike. In 2021, 5G will become mature for 2-in-1 notebooks, which focus on mobility. ■ All-in-one (AIO) The AIO has been on the market for years. It is an elegant design combination of screen and computer with a truly special thin shape. The product has replaced the desktop in many households and corporations. Compal has also enhanced the design for AIO with unique rotating hinge to adjust display. Because Compal has the fundamental technical capabilities required for notebook PCs as featured in the AIOs, it can also commence production in a very short time. Our AIO product lines have been very well received by clients. ■ 5G Module and Products 5G communication and 5G applications are global development trends. The three major usage scenarios provided by 5G communication are mobile broadband service (eMBB), multi-machine type communication (mMTC), ultra-high reliability and ultra-low-latency communication (URLCC). In coming years, 5G communication will be widely deployed in various industries and various domain applications. Building on its long-term technical advantages in the communication field, Compal provides 5G communication devices and networking equipment as well as offers the highly End-to-End integrated 5G networking infrastructure solution (the so-called Non-Public Network or Private Network). The 5G universal integrated 107 module complies with 3GPP Release R15 specification, is backward compatible with 4G LTE/3G WCDMA, supports high-speed LTE Cat20, and supports both 5G NSA and SA networking modes. Modules with multi-band support include WCDMA/TDD-LTE/FDD-LTE, 5G FR1 (Sub-6 GHz) and 5G FR2 millimeter waves etc. Modules also built with GPS/GNSS global positioning system, eSim and other functions, are all needed foundational technology of coming 5G and AIoT applications and devices. Based on the long-term experience in consumer electronics design, research and development, and product manufacturing, Compal provides variant kinds of reference designs of 5G user equipment products, collaborates with existing customers and partners, to provide 5G products such as 5G Mifi, 5G routers, 5G CPE, 5G notebook, 5G AR/VR, 5G drone, 5G robots, 5G Camera, 5G Industrial PC and industrial router, and 5G USB Dongle … etc. Rooted in the technology competence of telecommunication and the collaboration competency of joint development, Compal effectively engages with strategic partners to develop and manufacture 5G networking equipment, such as 5G Small Cell, Edge Computing, and 5G Core Network, as well as the integrated and optimized 5G private network and the vertical applications on top of the 5G infrastructure network. The 5G devices, networking equipment, and 5G Private Network solutions will be widely used in various industries such as entertainment, culture, tourism, finance, health, transportation, education, industry, agriculture, government, and power utilities, etc. ■ Tablets Compal has deeply cultivated in consumer tablets and e-Readers for many years. By our advanced design technologies, outstanding mass production records, superior performance management and reliable quality control, we have won high praise from global leading customers. Facing the slow down global tablet market in recent years, Compal is also devoted to breakthroughs in technologies and product features, aiming to commercial and industrial tablet market to engage more business opportunity and raise profits. ■ Smartphones Compal targets various groups of smartphone users and general consumers, and the pioneers of technology continue to strengthen technical design and operation efficiency to develop core communication technologies. Since 2019, we have invested in the design of 5G smartphone models and promoted 5G models to maintain our leadership in the industry. In 2019, we developed and shipped mid-end 5G smartphone models, and keep development more advanced technology features, included flexible display, fingerprint recognition, AI camera technology, hundred-million-pixel camera, narrower bezel design, and high-speed fast charging technology to meet market demands and customer expectations. At the same time, compal has also continued to dig deep into the design of rugged mobile phones, improved the anti-scratch, anti-panel crack, drop resistance, and waterproof and dustproof designs for rugged outdoor usage. The stylish appearance reverses the traditional and monotonous shape of rugged phones and can meet the military standard requirements, also bringing a new and fashion ID look to rugged smartphones. ■ Smart Wearable Devices 108 Compal started shipping wearable devices in 2016. Based on our design engineering capabilities and manufacturing experience with smart devices, we have made great progress in terms of the shipping quantities for Google Wear OS-based smart watches. In addition to the development of more compact and energy efficient smart watches, we are also devoted to expanding our wearable product lines to satisfy various requirements from our customers. ■ Smart Hearable Devices The trend to remove audio jacks on smartphones is one key driver to the fast-booming Smart hearable market. Convenience of usage and affordable price also stimulate the market demand. Based on our rich experience in wireless and acoustic technology, Compal has aggressively entered the smart hearable market. In addition to the consumer Bluetooth headset and TWS earbuds, we also have deep cooperation with hearing experts to develop hearable and acoustics for noise cancellation and human voice enhancement with AI technology. ■ Smart Display Products In recent years, the development of emerging technologies has continuously created diversified convenient situations for people's lives, and the demand for smart displays has become more diverse. We continue to deepen and strengthen the development of mini and micro LED backlight solutions on large-scale displays, the introduction of artificial intelligence (AI) image processing and sound processing, smart display with intelligent voice assistants, and integration of far-field radio microphone arrays and other technologies. Through interactive convenience and visual and auditory immersive experience in the use of products, we satisfy multiple usage scenarios and enhance value-added services and new business opportunities. ■ AR/VR Smart Devices Worldwide leading technical companies have invested in the development of virtual reality (VR) and augmented reality (AR) for many years. In recent years, with the leap forward in semiconductor process technology, breakthroughs in optical display technology and the development of AI, AR, and VR are expected to be part of the next-generation personal computing platform. A Compal base in product manufacture, mobility design, and communication capabilities, applied to AR/VR devices and cooperated deeply with Qualcomm. In the future, for vertical customers, Compal will combine hardware, software solutions, and 5G communication into a standard 5G AR/VR solution to meet customer needs. ■ Smart Home Devices The Smart Home has been in development for many years, and the rise of the Internet of Things (IoT) and AI technologies has allowed speaker hubs with smart voice assistants to become the focal point of competition in several industries. We have already received client recognition for our development of the Smart Speaker and 109 Smart Camera by Compal design and development capability. In the future, Compal will also use its core capabilities to expand its product coverage in many different applications and devices in the Smart Home. ■ IoT Vertical Solutions Vertical solutions have been one of the key demands in the development of IoT with an extensive range of applications covering smart cities, Industry 4.0, smart buildings, smart retail, and smart medical care. Such solutions feature integrated software and hardware and are designed specifically to accommodate client needs. Demands from B2B customers not only account for a higher portion of the existing IoT market but also bring Compal more immediate profit. Besides, the demand for AR/VR glassess in vertical market has increased since the technology progress of wearable device in past few years. ■ Smart Medical and Healthcare The aging population, China’s new two-child policy, the flourishing health care industry, and the rise of sports fashion, especially the popular and convenient smart devices, have all contributed to smart healthcare becoming a focus of attention. It has also become a major matter of cross industry cooperation. Compal has responded to market demand and the rapid advent of the IoT era by active engagement in the healthcare market. The Company has reached out to major hospitals and point of care (POC) centers such as those engaged in long-term or postpartum care, using our strengths in integration and extensive experience in product development. The designs, which include science, technology, and humanity, help caregivers to provide higher quality services and also give hope of a better quality of life and personal dignity to those who need healthcare. ■ Auto electronics (AE) The Company’s Auto Electronics Parts (AEP) Business Unit is currently engaged in providing the products including Telematics, in-Vehicle-Infotainment and Advanced Driver Assistance Systems (ADAS), and deals with the customers which are primarily international Tier-1 car suppliers and leading car manufacturers. ■ Servers The Cloud application market is growing, and a significant portion of data storage and computing analytics have shifted to cloud servers in the back end. To meet the demand from both Enterprises and Data Centers, Compal has mastered the R&D of high-density computing power and precision performance management and has developed the capacity to design and manufacture servers with high cost-performance value. 110 5.1.2 Industry Overview 1. Current and future industry prospects ■ Notebooks Due to the pandemic, many people have made the abrupt shift to working from home and learning from home. The pandemic not only fueled the PC market demand but also created opportunities that resulted in a market expansion. According to IDC, notebook shipments amounted to 219.9 million units worldwide in 2020, up 29% from 2019. In 2021, COVID will drive another wave of PC penetration, with ownership in mature markets likely to rise from one PC per family to one PC per person. The momentum in PC market will trigger strong consumer and commercial demand. Also, from a market perspective, demand is pushing the PC market forward. As the PC industry matures, brand manufacturers are shifting focus towards higher priced and more featured products, such as Ultra slim Notebooks, 2-in-1s, gaming notebooks and creator PCs in search of more market opportunities, revenue and profit. This transformation requires more precise market segmentation, product positioning and innovative design. Compal, with its extensive industrial experience, fine craftsmanship and proprietary patents, can coordinate with suppliers and customers in creating market demand by developing innovative products that progress with time. ■ Ultraslim Notebooks Slimness and lightweight continue to be two dominant design trends in today’s PC market. As solid-state drives (SSD) become popular, Ultraslim Notebooks no longer present a luxury that only high-end consumers can afford but are gradually becoming accessible to mainstream consumers as more affordable models become available. According to IDC, the shipment of ultra slim notebooks (<18mm thick) in 2020 was close to 63 million units worldwide, representing an annual growth rate of 52%. Ultraslim notebooks may account for 31% of the total notebook shipment worldwide by 2021. However, Compal will continue exploring new lightweight materials, power-saving solutions, and cooling technologies to help our clients provide the most competitive products and earn market recognition. ■ 2-in-1 Notebooks Owing to efforts across the entire supply chain, the cost and selling prices of 2-in-1s have dropped considerably, which has made them more available and acceptable by a wider group of consumers. There are two types of 2- in-1: flip-screen and detachable. Flip-screen notebooks can be physically converted for use under different scenarios, such as video sharing, multi-user sharing and tablet mode. In recent years, manufacturers have introduced notebooks with flip screens that are both lightweight and thin, making them even more appealing. Detachable notebooks are characterized by smaller screen size. This is a feature that appeals to both tablet and notebook users. The compact form factor combined with a detachable keyboard can better satisfy users who have higher need for portability. According to IDC, the shipment of 2-in-1 devices totaled about 91.41 million units worldwide in 2020. The manufacturers will introduce diversify products with 5G and AI in 2021. This has 111 the potential to increase shipment by nearly 6% to more than 97.29 million units. ■ All-in-one (AIO) The AIO market is currently dominated by HP, Lenovo, Dell and Apple. Those top brands account for more than 83% of market share today. The AIO market is currently divided between two extremes. One end of the spectrum is characterized by the use of entry-level CPUs such as Intel Celeron and Pentium. Their main purpose being to replace desktop PCs as learning machines for children. On the other end of the spectrum lie mid-range and high-priced products. Their main advertised features include multimedia playback, a high-end desktop or notebook CPU, an advanced video processor, and a large touch screen panel. These high-end specifications combined with aesthetic design have revolutionized the PC market and these products are starting to replace desktops. According to IDC, the three-year decline of AIOs has ended and shipments should remain stable with 11.4 million units in 2021. ■ 5G Module and Products According to the GSA, by March 2021, there are 176 operators officially providing 5G network communication products and services in more than 76 countries worldwide. Cisco Annual Internet Report states that by 2023, about 70% of the world's population (5.7 billion) will have mobile network communication, at least 10% of which is provided by 5G communication. There are more than 628 5G consumer products available in the global market. Include 21 product categories such as mobile phones, tablet, network sharing devices (CPE/MiFi), router, dongle, notebook, TVs, robots, vending machine etc. Many products have adopted Compal 5G solutions already. Compal will continue to expand its partnerships in different 5G domains to develop more 5G application services and consumer products. ■ Tablets Impacted by the COVID-19 pandemic, demands for work, entertainment and education at home have sharply increased, which has driven the tablet demands to hit a high in recent years. According to IDC report, global tablet market shipped 164 million units in 2020, 13.6% YoY growth comparing to 2019. The pandemic pushes people to communicate through Internet, and tablets are more cost-effective than personal computers, which also drives this growth. In some mature markets, there are high discount promotion by tablet channels, some operators also offer 60-day free internet package to attract more sales. Compal also continues to pay attention to these market trends and respond to these changes to provide consumers with competitive and diverse types of tablet products. ■ Smartphones According to IDC, the global smartphone sales volume in 2020 was about 1,280 million units, with a YoY decline of 6.7%. The overall decline in sales is due to COVID-19 pandemic in World Wide smartphone market. We observe that 5G smartphone keep the huge growth power for the upcoming 5G network deployment and the 112 launch of 5G services into the market. Compal aggressively invests in the development of new technologies for 5G smartphones, and provides built-in AI (artificial intelligence) enhancement, virtual personal voice assistants, and a more intuitive user interface. In addition, it will also bring a more attractive new generation of smartphone products. ■ Smart Wearable Devices According to IDC, smartwatch shipment increased steadily by 15% YoY in 2020. This dynamic growth is being led by strong sales of Apple watches. Providing technology support and manufacturing services timely, Compal released an original designed LTE smartwatch in 2020. To build our core value for customers, Compal not only consults our upstream partners, but also provides diversified designs and solutions to meet various needs of the end users. ■ Smart Hearable Devices According to market research data, the growth of TWS earbuds in year 2020 remains strong and the shipment surpassed 190 million units, a 73% YoY growth comparing to the shipment in 2019. Apple Airpods series still dominated and accounted for around 50% of the market share. However, there are more users choosing to buy TWS earbuds with lower price under USD 100 dollars from brands like JLab. In addition to music streaming and smart assistants, TWS earbuds also have new features like hearing protection. According to the World Health Organization (WHO), about 460 million people worldwide have hearing loss problems, and about 1 billion people run the risk of hearing loss due to loudspeakers and long- term listening to entertainment headphones. Compal develops smart hearable products and co-works with professional research centers to bring customers greater listening experience, efficient wireless communication technology, as well as smarter hearing assist features and user interaction experience. ■ Smart Display Products According to statistics from Omdia Market, due to the impact of COVID-19 the overall annual growth rate of global LCD TV industry shipments in 2020 was only 0.4%, and the total number of global shipments was about 223 million units, of which the ratio of 50 inch and above was over 20% together with the proportion of Smart TVs in North America also exceeded 97% in the third quarter. Looking forward to 2021, for the post-COVID-19 period, we will actively develop smart TV and smart video-related products with ultra-high picture quality, immersive audio quality and built-in voice assistants, and continue to cultivate strategic partnerships to maintain a good business and keep flexibility to respond to market dynamics. ■ AR/VR Smart Devices In response to the use of new forms of media and information technology, humans can accelerate the efficiency of processing, solving problems in work, life, and entertainment. Through VR experience, learning, training, and AR (augmenting reality) to solve problems in a timely manner. Therefore, AR/VR applications have gradually 113 become the main force for the development of technology giants in various fields, especially Microsoft, Facebook, and Google. The application of AR/VR head-mounted display devices has achieved breakthrough development in vertical markets such as smart factories, smart healthcare, and remote collaboration. Personal gaming and 3D holographic streaming media have also been produced in entertainment. In the future, AR/VR will further deepen computer vision, AI (artificial intelligence), and IoT applications, and become the new personal computing platform. In addition, COVID-19 continues to impact the flexibility of the Company’s work environment and promote the entire process of transformation. IDC predicts that by 2023, 70% of service- oriented companies in the world will use AR/VR as personal assistants. The application of the acceptance and transfer of work knowledge; therefore, AR/VR enterprise application solutions will become the main market direction. ■ Smart Home Devices Mobile devices have become an inseparable part of daily life. As wireless technology matures, an “Always Connected” environment is starting to take shape to cater for our work, living, and leisure needs. Smart Home applications have become a mainstream development topic for technology giants such as Amazon and Google. Smart voice assistants and AI embedded smart devices have been a breakthrough for progress in Smart Home applications. More and more players are joining this market. In the future, there will be more applications based on voice interaction, image recognition and interaction, as well as security. The implementation of AI technology will provide users with a more convenient and intuitive experience. ■ IoT Vertical Solutions Industries have maintained high interest in IoT over the last few years. We hope to resolve the inherent problems in collaboration with ICT businesses. In this sector, we have engaged in cross-sector alliances with leaders of other industries to develop automated guided vehicles (AGVs) to enhance plant production efficiency or smart cold-chain transportation to resolve the long-time pain point of businesses. Furthermore, Augmented Reality (AR) glasses/Virtual Reality (VR) glasses demand is not limited to consumer applications, the market is also towards enterprise applications. To Compal Electronics, this is a favorable opportunity to enter the IoT market. ■ Smart Medical and Healthcare Increasing shortages of medical staff over recent years has imposed a heavy burden on medical personnel. The result is that medical institutions are desperately searching for more efficient ways to manage personnel and resources. In the United States, hospitals have responded to this crisis with the full implementation of digital charts and modern hospital management systems. Compal is actively introducing promising solutions from abroad to help Taiwanese medical institutions provide better service for patients. Furthermore, the aging population and shifting focus of medical technology towards convenience have resulted in a change in healthcare practices from always being hospital-based to some home-based and personalized solutions. In light of this, Compal has invested significant resources in the development of integrated products 114 that make it possible for many healthcare services to be carried out at home or at other fixed locations. Compal also develops smart sports solutions and smart assistive tools, and is collaborating with athlete training centers, both at home and abroad, in the development of exclusive high-end products for professional athletes. ■ Auto electronics (AE) In recent years, governments all over the world have been tightening the exhaust emissions standard and safety standards of vehicles and have set a timeframe for implementation. Electrification, connectivity, and ADAS/AD become the megatrend which trigger disruptive changes in the automotive industry. IT companies (e.g. Google), startups (e.g. AI and sensor startups), and service platforms (e.g. Uber) enter the market one by one, even legacy automakers restructure themselves and adapt purchase sourcing models to cope with the changes. In response to that, in 2017, we made ourselves ISO 26262 certified, which the first automotive electronics manufacturer in Taiwan granted and devote to ADAS related product development and market exploration. ■ Servers Server shipments have grown at about 2.8% per year mainly due to increased demand for cloud services. According to IDC, shipment of x86 servers totaled 15.99 million units in 2020. This is expected to rise to nearly 16.92 million units in 2021. X86 servers accounted for 95% of total server shipments. Rack-mounted servers represent a higher market share because they are both energy efficient and scalable. 2. Association between upstream, midstream, and downstream industry participants ■ Notebooks The notebook industry is now mature and Taiwanese manufacturers have developed comprehensive partnerships with upstream, mid-stream, and downstream suppliers. This fully-fledged supply system gives manufacturers the advantage of being able to quickly and flexibly adjust to market changes. It also enables Compal to keep up to date with the latest technology and pricing of key components such as CPUs, chipsets, LCD panels, hard disk drives (HDD), and solid-state drives (SSD). However, we still suffer Geopolitical issues and regional conflicts, as it has caused difficulty in global production and logistics since 2018. Compal and other Taiwanese ODMs/OEMs possess distinctive know-how on system integration, from design to manufacturing, as well as operational management. Taiwan now accounts for more than 80% of the world's notebook ODM/OEM production. The downstream customers including brand manufacturers such as Dell, Lenovo, HP, Acer, Asus, and Apple all have strong marketing strategies and comprehensive sales support systems to ensure success. . ■ Ultraslim Notebooks As an Ultra slim Notebook supplier, access to metal for casings and lightweight carbon fiber materials is especially important. Compal has developed a robust upstream, mid-stream, and downstream supply system, and acquired the equipment and technology to produce the needed metal products. Compal will now shift 115 focus gradually towards products in the mainstream price range, such as Ultra slim Notebooks made with plastic materials. This will ensure quick launch of new customer products and growth in this market. ■ 2-in-1 Notebooks The supply chain and manufacturers of 2-in-1s are generally identical to those of convention notebooks, with the addition of some tablet parts suppliers and manufacturers. Support of the existing supply system and its advantage of integration across suppliers, allows Compal to maintain full control of the development of key components. This speeds up research and innovation of new features because brand manufacturers and users of 2-in-1s continue to add new requirements. Despite the increasing complexity and challenges ahead, Compal remains confident and continues to make improvements as well as continuing to bring new products and concepts to the market. ■ All-in-one (AIO) The supply chain and manufacturers of AIOs are generally identical to those of conventional notebooks. The upstream supply structure is similar to that for general PCs, with the addition of suppliers of large touch screen panels. HP, Lenovo, and Dell focus not only on commercial users but also home multimedia users. Apple’s emphasis is on professional applications and usage. ■ 5G Module and Products Compal 5G module and the reference device design has combined upstream and downstream and dozens of well-known customers and operators to establish a complete 5G product ecosystem, providing flexible and diversified 5G related products to fulfill various 5G domain services and requirements. ■ Tablets In addition to existing supply chain and industry advantages, Compal also actively explores more competitive suppliers and manufacturing sites outside of China to provide production options and ensure that the price and quality could meet both customer and market expectations. ■ Smartphones Compal actively explores competitive suppliers to ensure the quality of sourced material meets both customer and market needs. Furthermore, Compal is building up a 5G related component supplier chain, as well as new technology, to assist customers in remaining competitive. ■ Smart Wearable Devices Compal works closely with suppliers for chipsets, sensors, wearable displays, and touchscreen modules to secure parts for wearable devices. In addition to coordinating with upstream suppliers and developing new 116 technologies for new customers, Compal also reaches out to suppliers with advanced technologies. Thanks to the technical collaboration between Compal and its technology partners, Compal can quickly adjust the supply chain and product development strategies to accommodate the fast-changing market. ■ Smart Hearable Devices Compal has plenty of resources for smart hearable platforms and related components based on our past development experiences in smart devices. We have built strict standards for acoustic, reliability, and regulation tests so that we can guarantee to our customers that Compal can deliver reliable and high-quality products. ■ Smart Display Products Affected by the uncertainties of both COVID-19 pandemic and the China-US tariff dispute, the supply chain began to develop outside China to diversify risks. We continue to integrate resources across regions from upstream to downstream, deploy production base resources, control and manage operating costs, and provide flexible order fulfillment to meet customer’s demands. ■ AR/VR Smart Devices For AR/VR application, Compal provides a complete set of software and hardware solutions, combined with 5G communication to provide high-performance application solutions. Compal has also built up a strong partnership with Qualcomm to provide the standard device reference design, creating a highly cost-effective solution for customers, which can further seize consumer market applications and take leadership in future personal computing platforms. ■ Smart Home Devices Compal provides diversified terminal devices such as smart speakers and smart cameras for this application segment. Compal also coordinates across upstream, mid-stream, and downstream partners, to provide all kinds of customized hardware devices, software support, and platform solutions on demand. This allows different system integration providers and our many industrial customers to fulfill all kinds of Smart Home applications. ■ IoT Vertical Solution As product positioning and requirements vary in different regions, countries, customers, and applications, fulfilling the specific specifications and stringent environmental requirements in product design is the main difference between vertical specific industry and ordinary consumer computers. In addition, we have begun to develop integrated system services and products, such as AGV, in collaboration with suppliers with respect to the customer’s application requirements. 117 ■ Smart Medical and Healthcare (1) Management system: • Digital charts and smart ward solutions Compal has been introducing digital charts through an alliance with some foreign partners. Unlike the conventional management system adopted by existing medical institutions, this product offers the potential to provide both diagnostic aid to physicians and also reduces the workload on nurses. It can also be integrated with many different data management systems currently used in hospitals. Digital transformation is already happening within the healthcare system. Compal is currently working with several hospitals to develop digital charts and smart ward solutions. Healthcare organizations will no longer have to operate in isolation but will be able to coordinate their activities with each other towards the establishment of a uniform standard to reduce the wastage of medical resources. • Point-of-care solutions Compal aims to address the recent increase in demand, as well as the shortage of manpower, at nursing and postpartum centers. This is being done by the introduction of human-operated healthcare solutions, such as proprietary bedside systems that are compatible with the instruments and specifications of other manufacturers. However, flexibility and the ability to customize products to customer needs will still be maintained. The most important feature of this product is that it works with different types of Smart Home devices and medical instruments, and also supports multiple services. It is intended to provide at home comfort in nursing and postpartum centers, while also allowing professional care facilities to be set up at home. (2) Instruments, equipment, and accessories: • Smart sports Compal has invested substantial resources into the development and integration of smart sports vital sign monitors. These can gather measurable data and are also useful for professional course design. Compal solutions can be further combined with the services of professional fitness training centers to provide users and trainers with physiological information in real-time. This information can be exchanged over the cloud to facilitate remote training and communication between athletes and trainers. This helps athletes undertake the most effective physical and technical training methods and helps to avoid sports injuries. • Smart assistance devices and healthcare-related products Compal is actively investing in the digital transformation of medical equipment. Through Internet connectivity, data from medical equipment can be exchanged and calculations can be made in real-time over the cloud. This can make various user services available, such as auto record-keeping, reminders, behavior prediction, and so on. These devices can even be connected to advance and back-end medical service providers for professional medical consultation, to accomplish the Compal vision of a mobile and real-time medical service. • Innovative medical devices Compal has been working with partners in both the industry and the medical segment for several years 118 and has invested in the development of some rather innovative medical devices. These include: CGM (Continuous Glucose Monitoring), 24-hour BPM (24-hour blood pressure monitoring), handheld smart ultrasound, i-AED, and others. We expect to provide users and physicians with many more options to help develop a smart medical industry and improve the quality of healthcare. (3) Medical AI • Cardiovascular disease prediction To reduce the problem of a lack of medical manpower, Compal has been working with the Chi-Mei Hospital and medical center on the development of AI in medicine. Using the existing abundant medical resources of the hospital, Compal is helping to build up a cardiovascular disease prediction AI system which can be used in hospitals and medical centers. The product will include long-term tracking and users may be able to predict the timing and probability of cardiovascular complication. This will allow preventative action to be taken and reduce the risk of such events as stroke, myocardial infarction, etc. Compal also expects to help with the medical technology upgrade after the integration of the products in professional medical establishments in Taiwan. ■ Auto electronics (AE) The mid-stream players in the supply of auto electronics are represented by tier 1 AE integrated system providers. This integrated system handles in-car information, communications and entertainment, and is also linked to other auto parts. These products are sold to downstream automobile makers, which places the Company between the midstream and upstream of the AE supply chain. ■ Servers Server technology is a highly mature industry and one in which Taiwanese manufacturers have developed a comprehensive supply system of upstream, mid-stream, and downstream partners. Main parts such as CPUs, memory, and storage drives are easily secured and downstream customers such as HPE, DELL, and Lenovo all have long-term notebook manufacturing relationships with Compal. Compal has now developed extensive experience and has a reputation for the design and manufacturing of server products. 3. Product trends and competition ■ Notebooks • The Notebook has matured to a point where brand manufacturers are shifting focus towards higher priced and more fully featured products, such as ultra slim notebooks, 2-in-1s, and gaming notebooks in a search for greater market opportunities, revenue, and profit. • More user scenarios for notebooks, for example, gaming notebooks for eSports and creator PCs for content creation. • The Intel 10th generation CPUs were the mainstream processors used in 2020. 119 • AMD started to gain CPU market share in 2018 2H because of Intel’s CPU shortage issue. In 2020, Apple released the first MACs with M1 Chip. In addition, remote learning led to education laptop demand. PC running on ARM-based processors may increase in the market. • The increasing popularity of mobile devices and online applications have called for more robust and diverse security functions, from fingerprints, to facial and voice recognition. These are all intended to enhance information flow and convenience without compromising security. ■ Ultraslim Notebooks • Lightweight, high screen-to-body ratio and high-quality design will become the main decision factors for consumers. • The new CPUs will provide consumers with adequate power for multi-tasking and the handling of day-to- day computing tasks. • Long-lasting batteries will free users from the need for frequent recharging when traveling. • Metallic casing material allows thinner, lighter, and higher-value products. ■ 2-in-1 Notebooks • Consumers nowadays expect more from 2-in-1s than light weight and portability. Multi-tasking processors, long-lasting batteries and the capacitive stylus have become the new mainstream features. • 5G will bring more modern usage for 2-in-1 notebooks. ■ All-in-one (AIO) • High-end home entertainment AIOs and new flat, portable AIOs present new opportunities. • There is room for improvement in touch-based applications and graphical user interfaces. • The product exterior can be designed to match interior decoration and furniture. • Portable products can be designed with screens that can move in several directions. The AIO target market is no longer confined to first-time PC users, or as replacement for conventional office desktops. More advanced components are becoming available and these devices will benefit from broadened applications to achieve higher market acceptance. ■ 5G Modules and Products 5G communication and applications have expected explosive growth in the coming years. 5G terminal and consumer products will come out with different product categories such as network devices (CPE/Mifi), notebook computers, routers, televisions, and robots… etc. 120 5G requirements come from various industries. Compal provides leading communication technology, product manufacturing and technical know-how. Our integrated 5G module solutions come with complete technical support and development tools to help our customers develop their 5G products and services. ■ Tablets • Extend R&D technology to 5G communications. • Focus on more cost-performance competitive and better quality design. • Explore collaborative opportunities with content providers or telecommunications operators. • Explore opportunities in education, for kids, industrial, and medical applications. • Develop tablets for the Smart Home and IoT and use them as control centers or as multi-functional platforms. Tablet is a mature product, and what manufacturers should focus on for the next step is the exploration of new use cases and more convenient user operation and support for more diversified applications. Education, kids, e-commerce, Smart Home hub, and IoT applications are all potential directions that Compal is actively exploring. ■ Smartphones The communication technology enters into the 5G communications generation. In addition to mobile broadband service (eMBB), multi-machine type communication (mMTC), ultra-high reliability and ultra-low- latency communication (URLCC), these features will increase consumer demand for entertainment, application, and services. • Integrates multi-core architecture and strengthens 4G and 5G carrier aggregation mobile broadband communication to provide faster transmission speed and data throughput. • Support AI image processing and applications, drive video streaming services to meet the needs of consumers in daily work and life entertainment. • Higher screen ratios, high picture quality, narrower border touch products. • Integrating under-screen fingerprint recognition technology and under-screen camera technology to create full screen experience for consumers. • Continuously improve the functions required for rugged mobile phones, scratch-resistant, crack-resistant, drop-resistant, waterproof, dustproof, etc. ■ Smart Wearable Devices • More and more smart, fashionable, and compact watches for sports and health are following Apple to the market. 121 • Customers who use smart wearable devices for sports also want high-accuracy GPS, steps count, heart rate monitoring, and other bio-measurements. However, power efficiency remains a key requirement common to all users. • Customers who use smart wearable devices for health reasons need accurate algorithms and convenient user operation. This will be one of the key success factors of the products. To satisfy customer needs, Compal not only continues to make more power-efficient and compact designs, but also enhances the flexibility of its production processes. ■ Smart Hearable Devices Evolving due to keen competition, smart hearable devices will not only be used for music streaming, but also include more advanced features such as active noise cancellation, smart assistant, bio-detection, etc. Besides the functionality enhancements, the design will also aim to improve user experiences like water resistance, ergonomics for comfortable wearing, and applications with AI technologies to make it smarter. Compal has been professional in both hardware and software development for a long time. We have also co- worked with hearing experts for more professional acoustic products development to create product differentiation and make us more competitive in the market. ■ Smart Display Products We team up with strategic partners to develop high-end models, integrating far-field microphones, ultra-high- resolution large size display solutions, Mini and Micro LED backlight solutions, and introducing technologies such as artificial intelligence image processing and artificial intelligence sound processing, continue to accumulate the latest technology and experience, make use of the essence of innovation, and integrate research and development resources across fields, combining applications in mobile phones, wearables and home networking products to improve user experience and satisfy multiple usage scenarios, stay on top of the industry's technology, and maintain long-term competitiveness. ■ AR/VR Smart Devices • AR head-mounted displays and spatial sensing modules have been adopted by vertical application customers and entered the European and American markets. • AR/VR new Platform (XR Platform) completed the development stage. ■ Smart Home Devices • The voice input and interaction provided, and AI enhanced applications of the smart speaker and smart camera are trends of the future Smart Home devices. Compal will create more intuitive and convenient Smart Home products. 122 • Software services are integrated with cloud computing, and data analysis and user behavior learning will be the key competitiveness of Smart Home products. ■ IoT Vertical Solution Given the high entry barriers, not may investors have engaged in the vertical specific industry over time. The rise of IoT has also attracted increasing competitors. As an ICT leader, therefore, we will implement some new technologies, such as AI and the design capacity of energy-efficient devices, to increase our competitive strengths. ■ Smart Medical and Healthcare (1) Management system: ‧ Digital charts and smart ward solutions The United States currently has the most popular (Level 7) digital chart and hospital management system, and other countries around the world are following closely behind. The purpose of this product is to deliver functions that will be of assistance to physicians and nurses while still being easy to operate. Alliances with world industry leaders has made it possible for Compal to introduce the solution to medicine in Taiwan, where its success will be replicated in our medical systems and it will also be moved to other countries in Asia. ‧ Point-of-care solutions An aged society, combined with a need for differentiated medical services, make nursing centers and postpartum care centers especially popular in Taiwan. This management system provides them with a comprehensive solution and makes it possible for communications to be established between several different medical devices while patient privacy remains protected. Compal has invested in the development of related hardware and software and is working with existing medical instrument suppliers on the growth in this market. (2) Instruments, equipment, and accessories: ‧ Smart sports There is already a strong and growing demand from professional athletes for assistive technologies and devices. Compal has invested significant R&D efforts in collaboration with top world sports experts for the development of products that are more suitable for professional athletes. Compal is also working with fitness centers on the creation of customized, exclusive packages that deliver the most effective sports solutions and communications to users and businesses. ‧ Medical equipment and healthcare-related products Medical equipment with Internet connectivity is a trend of the future. Devices that have functionalities that allow access to information from a health management platform will be easier to operate and is also more competitive in the market. Compal will continue investing in the development of medical 123 instruments and equipment with such connectivity and will bring better quality services to customers with the help of a management platform and cloud service. ‧ Innovative medical devices As the new biosensors and related hardware such as MCU/firmware/biomaterials and software have matured over recent years, development of the innovative medical devices industry has also moved to another stage. Continuous investment and development by Compal have led to more and more customers gaining trust in our design and development capacity, and the market trend is now moving towards an alternative device generation. ■ Auto electronics (AE) Telematics, in-vehicle-infotainment, and Advanced Driver Assistance Systems (ADAS). ■ Servers The rack-mounted server is still the mainstream product today because it can be easily maintained and scaled up as business grows. Tower servers are still favored among SMEs for their low cost, but their market share has been steadily declining. Blade servers are relatively expensive to set up and may gradually be replaced by more simplified High Density servers. • The number of servers required for Data Centers has increased continuously year after year. Although the demand for conventional enterprise-grade servers has gone down a little, demand for both types of servers will ultimately reach equilibrium. • In addition to cost-performance, design flexibility and quick response to customer needs are the two most decisive factors for a product’s success. 5.1.3 Research and Development 1. Research and Development Expenses over the past year Year R&D expenses Operating revenue Unit: TWD Thousands; % R&D expenses as a percentage of operating revenue 2020 2021 first quarter 15,162,995 3,759,510 1,048,929,251 269,991,533 1.5 1.4 2. New products developed ■ Notebooks • High-end products: These are high-performance professional models combined with an ultra-high definition display (4K), high refresh rate (144Hz) and a powerful GPU that targets users who seek 124 ultimate performance such as gamers or creators. • Mainstream products: 15.6-inch and 14-inch products thin, low voltage, slim bezel and 16:10 aspect ratio design that are powered by the latest CPU from Intel or AMD, are distinguished by integrated or discrete GPU models. • Business products: Business notebooks designed specifically for corporate users. These products feature enhanced structural design and security, and are offered to large corporations, SME, and the education sector. Security mechanisms such as fingerprint, facial or voice recognition are incorporated to satisfy the user’s need for security and data confidentiality. • Special products: Compal has directed resources into developing notebooks of extreme slimness and will lead the industry in technological innovation in this area. Dual screen and foldable notebooks will be a hot new topic. ■ Ultraslim Notebooks • Compal has successfully mass-produced and launched many Ultra slim Notebooks, and its designs have been recognized by several international awards. • Performance will not be sacrificed. • Not only thinner and lighter but also low power consumption are key requirements for good user experience. • New ultra slim notebook will feature thin frame displays for a more fashionable and cleaner appearance; the display quality will also be improved. ■ 2-in-1 Notebooks • Compal has successfully designed, mass-produced devices and launched a new 2-in-1. • An innovative hinge design is being developed to provide a more secure and precise connection while allowing easier detachment, this allows better user convenience when 2-in-1s are used in different scenarios. ■ All-in-one (AIO) • Compal has successfully designed, mass-produced, and launched AIOs for mainstream users. • Compal has successfully designed, mass-produced, and launched a new flat type of AIO. • Compal has developed, mass-produced, and launched AIOs that are targeted at e-sports. • Compal plans to acquire touch control technologies with pen support and introduce AIOs in sizes ranging from 19" to 27." • Compal has successfully designed AIOs with a wireless charging dock. ■ 5G Module and Products • MTK based 5G M.2/LGA module will be mass-produced in 2021. • Qualcomm based 5G M.2/LGA module obtained product certification, including GCF, CE, CCC, TELEC, 125 FCC, and PTCRB…etc. and mass-produced in 2020. • 5G products obtain interoperability test and certification from major worldwide 5G operators • 5G indoor/outdoor CPE, and MiFi will be in development and MP in 2020. To extend 5G module to various types of devices. ■ Tablets • Developed and manufactured WiFi tablets of high cost-performance ratio for entertainment. • New tablets with in-cell display and wireless charging function. • Developed and mass-produced a new generation of waterproof e-Readers. ■ Smartphones • Compal has successfully developed and mass-produced 5G smartphones with NR FR1 Sub 6 and FR2 mmWave bands • Mass-produced various smartphones equipped with 21:9 aspect ratio FHD + large full-screen smartphones. • Mass-produced the world's first thinnest rugged mobile phone, with a stylish appearance, and military- grade requirements, bringing a new look to rugged smartphones. ■ Smart Wearable Devices • More than 50 models launched in 2020. • Compal supports a variety of product types, such as luxurious material and design, wireless charging, offline map, high-accuracy GPS, and high-level water resistant for sports watches. Customized product design and more power efficient to support 3C and fashion brand requests. A new generation of lighter, smaller, narrow border, multi-purpose smart watches with diversified designs has been introduced. • Mass-produced eSIM enabled LTE smartwatch. ■ Smart Hearable Devices • Bluetooth headsets with smart assistant have been developed and are in mass production. • Long-term investing in high-end AI technology to develop Bluetooth headset with more intelligent noise cancellation features. ■ Smart Display Products • Integrated Far-Field Microphone array into the size over 43” and above smart TV to support hands-free voice interactive feature. • Developing a Mini-LED backlight solution. ■ AR/VR Smart Devices • In the industrial market, Compal has developed VR/AR all-in-one and spatial sensing integrated optical 126 modules, which have been adopted by customers to integrate in enterprise-specific systems. • Deeply cooperating with Qualcomm to develop the next-generation 5G+AR/VR device reference design, Compal will be the leader in 5G+AR/VR device and ecosystem. ■ Smart Home Devices • Compal has successfully launched several smart display and smart speaker products for the Worldwide Smart Home market. • Compal has successfully developed several smart camera devices that will be launched soon. ■ IoT Vertical Solution • The development of AR Glasses product was completed, and shipping to foreign customers has begun. • Mass production of the shield-type and uplift-type AVGs has begun. Apart from implementing all Compal plants, we have started cooperation with system integrators to promote products to the industry. ■ Smart Medical and Healthcare • Digital charts and a smart ward solution • Compal is promoting business opportunities in this respect. Several hospitals have begun adopting and exploring our smart ward solution this year. • Point-of-care solutions • More than 10 point-of-care centers in Taiwan have begun trials and official use of this solution. In addition to this, several prominent nursing centers in China have also shown interest and commenced collaborating in the use of this solution. • Smart sports • Smart sports solutions have been introduced at several places in Taiwan and promotion in the Taiwan and China market is ongoing. A case has also been built up in Kaohsiung. • Innovative medical devices • Many innovative medical device cases have been executed and plans for the achievement of FDA/NMPA/CE certification have been established. Launch is expected by the end of 2019 and 2020. ■ Auto Electronics (AE) • Compal has mass-produced various systems and modularized several products that it has designed and developed. ■ Servers • General Purpose Rack-mounted Servers According to the Intel product roadmap, the launch of 1U and 2U general purpose rack-mounted servers is undemanding and the factory can quickly fulfill customer requirements by a simple BOM Option change. 127 • Edge Computing Servers The system has been designed for 5G telecommunication facilities in collaboration with China telecom service providers. This system provides tremendous and responsive acceleration for all aspects of edge computing. • High Capacity Storage Servers The 4U server includes 36 3.5inch hard drives and dual Intel Xeon processors, to provide cloud service providers with massive computing performance and huge capacity to fulfill any user scenario. 5.1.4 Long-term and Short-term Development 1. Short-term Development • We will adapt to market changes, respond epidemic situation, strengthen new design concepts, maintain the focus on product difference to meet market needs. • We will enhance operational efficiency, to further increase our product competitiveness and push the sales growth rate higher than the market average. • We will improve logistics management and flexibility to shorten delivery time. • We will consolidate material supply to fulfill OEMs’ demands. • We will elaborate different market strategies for different product markets. Mainstream products will be bundled with new technology and modular features to boost the added value and diversity of products. For featured products, we will adopt a prospective standpoint in our design concept for new products to become the focal point of the product market. User functionality should be taken into consideration as well as competitive pricing for lower priced products. • Diversified production sites to mitigate geopolitical risk and strengthen cost competitiveness. • We will pay closer attention to market trends and evolution in smart devices and develop product concepts suitable for OEM customers and the market. We will help customers create differentiated products of feasible design. • Product development times will be further shortened to optimize supply chain management, maintain persistent high quality, and provide customers with more competitive products. • More effort will be made to maintain existing customer relations. Apart from maintaining a high degree of customer satisfaction, we will work towards increasing the volume of product cooperation. We will also seek other opportunities for cooperation with new customers to achieve a growth rate that is better than the market average for smart device products. • We will improve product profitability to achieve the maximum utilization of capacity and enhance overall operational efficiency and profitability. • We will tap our accumulated communications industry R&D energy resources to quickly and efficiently cut into the high growth 5G networking market. • Several cross-industry alliance strategies will be used for the rapid development of a diversified product line that will strengthen customer relationships in the shortest possible time. 128 2. Long-term Development • A spirit of innovation will strengthen value-added Company products and improve long-term core competitiveness. • Cooperation with our customers will be improved to allow better product planning, development and manufacture as well as comprehensive after-sales service. • Horizontal and vertical integration of all parts and products of the Group’s affiliates will be strengthened strategically and aligned with customer needs, to give them more convenient and complete services. • Optimization of the quality of sophisticated products will be enhanced by new development and cost structures and strategic alliances with main parts providers to give customers better and more competitive products and services. • Closer horizontal and vertical cooperation will be made with affiliates in the Group to create and strengthen the loyalty of long-term customers. • Our ability to innovate will be further cultivated, aimed at more accurate prediction of market trends, before the clients do, and provide them with products and services and high value-added solutions to improve long- term core competitiveness. • The Company has established a service-oriented business model and new revenue sources through careful long- term upstream and downstream integration and cooperation. • We are strengthening the breadth of learning of our team in preparation for future new business and product development through cross-industry alliances. • We are cultivating the ability to control key technology, strategize high-end product lines, and gain cooperation opportunities with big manufacturers around the world. • We will continue to strengthen our core R&D technology and communication capability and capacity for integrated services for smart devices. 129 5.2 Market and Sales Overview 5.2.1 Market Analysis 1. 2020 Sales (Service) by Regions Area Americas Europe Asia (Including Taiwan) Other Area Total 2. Market Share ■ Notebooks Percentage 47.4% 24.8% 25.1% 2.7% 100.0% According to IDC statistics, the total number of notebook PCs sold around the world in 2020 came to approximately 219.9 million units. In terms of total shipping quantity, Compal’s notebook PCs have approximately 25% of the global market share and the Company remains a world leading manufacturer of this product. As the market for notebook PCs is entering the era of vertical integration, Compal will continue to improve upon its technological capabilities, broaden the scope of its influence, and expand the market scale while challenging the limits and striving for continual improvement to maintain our lead over the competition. ■ Smartphones and 5G Products The 5G Smartphone market has become mainstream. Compal will continue to ship smartphone products with customers and regional carriers. Expand investment in 5G smartphone technology, provide customized solutions, product reference designs, and flexible ODM/JDM/EMS and services. Compal continues to catch market trends and develop new applications to meet market needs. ■ Smart Wearable Devices Compal is the biggest ODM supplier for more than 70 models of Google Wear OS Smartwatch. The smartwatch market is expected to maintain its high growth for the next three years. Compal will endeavor to win more world- wide brand customers while studying market demand and adjusting the direction of product development to meet market trends. ■ Smart Hearable Devices Compal already shipped several models of smart hearable products, including Bluetooth headsets and TWS 130 earbuds. Because smart hearable products requires high accuracy and miniature manufacturing, Compal is also devoting to optimize the product design and improve manufacturing process to enhance production efficiency. ■ Smart Display Products Developed mass-produced ultra-high-resolution smart TVs and successfully gained 7% of the North American smart TV market. Understanding the market needs in advance to adjust the product development direction is crucial to successfully winning the existing customer cooperation plan. In the future, we will continue to maintain the momentum of shipments, and actively expand new product lines to maintain stable growth. ■ AR/VR Smart Devices Successfully developed the AR/VR all-in-one model, which was adopted by several industrial information system integration companies in Taiwan as an exemplary solution. AR/VR modules are also adopted by some China companies, for health, manufacturers used to develop and integrate into various applications. So far, high-end AR/VR devices are dominated by vertical market applications. In the future, in accordance with the AR/VR market trend and the 5G communication deployment, Compal will invest more resources to develop both commercial and consumer products. 3. Future Supply and Demand Situation and Growth of the Market ■ Notebooks According to IDC statistics, global notebook market shows a 29% of year-on-year growth in 2020. In 2021, with the long ten impact of the pandemic, the demand for consumer and commercial device will remain strong. However, components shortage crisis may affect notebook shipment. ■ Ultraslim Notebooks The Ultrabook PC has been well-received and is not limited to the premium market. More and more mid-line and entry-level models have also shifted towards more compact design. IDC statistics show the global shipping quantity for Ultra slim laptops (no thicker than 18mm) in 2020 was approximately 63.0 million units with 52% year-on-year growth. An annual growth rate of 31% is expected for 2021 with a total shipping quantity exceeding 85.5 million units. ■ 2-in-1 Notebooks Much effort and hard work from the industrial chain, has resulted in the costs and prices for 2-in-1 Notebooks to become substantially lower as consumers have gradually become more receptive and familiar with the product. IDC statistics show the global shipping quantity for 2-in-1 Notebooks in 2020 was approximately 91.41 million units. It is expected by that 2021, different manufacturers will offer more diversified products and new features such as 5G/AI. It will contribute to an annual growth rate of close to 6%, with a global shipping quantity exceeding about 131 97.29 million units. 2-in-1 Notebooks will inject new vitality into the notebook PC market. ■ All-in-one (AIO) IDC statistics show the global shipping quantity for AIO PCs in 2020 was 11.06 million units and the number is expected to remain about the same at 11.4 million units in 2021. Compal will continue to cultivate the market. ■ 5G Module and Products Cisco internet report points out that in the next 2 years, 70% of the world's population (5.7 billion people) will have mobile networks, and at least 10.6% (600 million people) of mobile networks will be enabled by 5G networks. 5G products will have rapid growth, and it’s estimated more than 2 billion 5G devices of various types (average 2 to 3.6 connected devices per person) will be purchased. Compal will develop 5G products with customers and various 5G domain partners. ■ Tablets Impacted by the global IC shortage in the first half of 2021 and the pandemic getting controlled, it’s predicted that the shipping quantity in 2021 would decline, comparing to 2020. However, Compal still anticipates some gradual growth in demand. This will be the result of increased network coverage and telecommunication facilities, as well as active promotion of 4G connectivity by the service providers in emerging regions. Compal will direct its experience in smartphone design towards the development of tablets with carrier access and also design entry- level tablets, also with carrier access, to accommodate the growing demand. ■ Smartphones According to IDC's, the impact of the COVID-19 pandemic in 2020 will impact the short-term global outlook. It is estimated that the global smartphone market will recover in 2021 up to 1,350 million with 5.5% YoY compare to 1,280 million. Compal invests in high cost-effectiveness 5G Smartphone models with existing customers, also expands to new customers, to ensure stable sales momentum. ■ Smart Wearable Devices IDC predicts that smart watches will continue high growth in the following years. To be well-prepared for the potential momentum, Compal is developing more advanced features such as sensors for activity detection, 4G LTE for always connection, Voice control and AI integration. Compal will continue to accumulate the relevant technologies to extend its reach into more diversified wearable device product lines. ■ Smart Hearable Devices According to research from IDC, the global hearable market will remain strong for serveral years in the future, driven by different marketing strategies: independent product or accessory of smartphone and smartwatch. More vendors join into the market and it becomes more competitive. To create more value, Compal is focusing on new 132 technologies for longer battery life, better sound quality, more efficient connection, and smarter user interaction. ■ Smart Display Products According to Omdia estimates, the global LCD TV in 2021 was still affected by the COVID-19 epidemic and is expected to have a flat grow at 0.2%. However, the market's development of high-end LCD TV products will continue to focus on such as artificial intelligence image processing and artificial intelligence sound processing, ultra-high resolution, built-in voice assistant, Mini and Micro LED backlight solutions, large size, high dynamic range (HDR) and wide color gamut (WCG), makes TV pictures closer to natural scenes when rendered, and provides consumers with true-to-life audiovisual enjoyment. ■ AR/VR Smart Devices According to IDC estimation, the annual average growth rate (CGAR) of AR/VR will exceed 80%, the global AR/VR device shipments have strong growth power. Compal actively taps into both commercial and consumer markets. ■ Smart Home Devices According to Strategy Analytics, Smart Home sales will continue to grow with 11% CGAR and more than 15% worldwide households will have one or more Smart Home devices. Compal will actively establish its presence in the Smart Home market. ■ IoT Vertical Solution According to the forecast of Statista, the IoT connected devices are projected to amount to 10 billion units in 2021, and will grow to 25 billion units by 2030, which shows that the market demand is still climbing. ■ Smart Medical and Healthcare (1) Management Systems: • Electronic Medical Records (EMR) and Smart Ward Solutions: According to estimates by FMI, the global market for Electronic Medical Records (EMR) and management systems is expected to grow from USD 11.4 billion in 2015 to USD 19.7 billion by 2025, with an annual growth rate of 5.6%. (2) Instruments, Equipment, and Accessories: • Smart sports products: Estimates of Market Reports Hub show that the value of smart sports goods will increase to USD 15 billion in 2021, with professional athletes, professional teams, amateur athletes, and highly self-demanding trainers as the major consumer groups. • Medical devices and healthcare-related products: Estimates of Research and Markets show that the scale of the global medical device market will expand from USD 370 billion in 2018 to over USD 400 million in 2023, with an annual growth of 4.5%. • Innovative medical devices: The sales of innovative medical devices, such as the continuous blood sugar monitoring system, reached USD 1.8 million in 2018 and will hit USD 2.5 billion in 2026, with a CAGR of 133 33%. • Severe cardiovascular diseases monitoring AI: Estimates of Global Markets Insights show that the scale of the global medical AI market will reach USD 13 billion in 2025, with a CAGR of 40%. ■ Auto electronics (AE) IHS estimates global light vehicle production in 2021 will reach 83.4 million units, up 9% YoY from 76.5 million in 2020. ■ Server IDC statistics show that the demand for x86 servers was 15.99 million sets in 2020 and will reach 16.92 million sets in 2021. The server demand will continue to rise in the next few years as boosted by the cloud computing demand, which is the major source of x86 server demand accounting for nearly 95% of the shipping volume. As the frame- type server has a higher market share, we have actively engaged in the server market. 4. Competitive advantage: Compal has the long-time investment in Information and Communication Technology (ICT) industry and has committed to its role as an ODM. The following is a description of our competitive advantages in terms of R&D and mass production capacity: ■ Notebooks The Company has been manufacturing notebooks since 1989 and is one of the most experienced notebook manufacturers in Taiwan. Products designed by the Company have won many Editor's Choice awards from renowned magazines worldwide as well as awards from the Taiwan External Trade Development Council. Furthermore, our design team has great sensitivity and responds to market changes with new commercialized products. To enhance product competitiveness, Compal has assembled an R&D team that specializes in the research of new materials and technologies as well as to adding more value to products. The Company also has an intellectual property rights system in place to protect new technologies developed by the R&D team. The demand for notebooks by general consumers has dwindled consistently due to the rise of handheld devices. This has forced manufacturers to switch competitive strategy towards faster response and more ergonomic design. The Company has always been sensitive to changes in the market and product trends. The next generation of products is planned well in advance to capture market opportunities and generate revenue. ■ Ultraslim Notebooks Compal continues to stay ahead of its competitors in terms of technology advancement and R&D and strives to bring innovation to its designs. In 2021, Compal will maintain this advantage actively assist customers in the development of more competitive Ultra slim Notebooks. 134 ■ 2-in-1 Notebooks Compal has extensive experience in the development and manufacture of both notebooks and tablets. By adding a bit of innovation, Compal is confident of their ability to create new demand for these products. ■ All-in-one (AIO) Compal possesses the advantage and ability to commercialize products quickly in this respect. To further emphasize product differentiation, a dedicated software development team has been assembled to carry out software development and man-machine interface integration, to make the products more suitable for consumer needs. ■ 5G Module and Products Compal has long-term communication technology development and has involved itself in the evolution of global communications standards (2/3/4/5G). With complete technical capabilities and manufacturing advantages, Compal can provide customers and partners with the most competitive and flexible solutions. • One-stop capability and services from communication and whole machine design and manufacturing • Obtained carrier Interoperability test (IoT) and certification • Obtained product certifications, including GCF, CE, CCC, TELEC, FCC, and PTCRB... etc. ■ Tablets Compal remains somewhat optimistic about the future of the tablet market. We will continue to introduce differentiated and competitively priced products to consumers. The Company will also explore the possibility of introducing products that support 4G/LTE/5G Carrier Aggregation (CA), using the experience and knowledge accumulated in smartphone manufacture, to meet rising demand. ■ Smartphones Compal has accumulated many years of experience in smartphones. The ability to develop software and hardware and incorporate research outcomes and technologies into products has earned us the recognition of customers all over the world. Furthermore, the advantage of producing with economies of scale creates exceptional bargaining power with respect to the pricing and timing of material supply. This allows much more flexibility and control over raw material purchases. • Development of 5G communication technology and keeping pace with emerging technologies. • The introduction of AI, the virtual personal assistant and a more intuitive user interface. • The enhanced application of biometric technologies. • Consolidate the research and development of 5G system and RF antenna design. • Integrating upstream and downstream supply chains, providing ODM/JDM/EMS flexible product design 135 solutions. ■ Smart Wearable Devices Compal has developed many different types of wearable devices ahead of its international peers. We have long- term strategic partnerships with technology leading companies such as Google and Qualcomm for development of innovative technology. Compal currently offers an extensive range of products, and leads the industry in many advanced technologies, including video, audio, wireless, and wearable materials. ■ Smart Hearable Devices Compal has years of experience in acoustic, wireless communication, mechanical structure design for smart mobile devices. We have experienced engineering teams, systematic development processes, and complete test processes and facilities. We can also provide supply chain management services and excellent cost and quality control. All these can be beneficial to our brand customers or distributors. ■ Smart Display Products • Continue to develop artificial intelligence in the improvement of picture and sound quality and the application of voice assistants, integrate cross-domain product research, and development resources to expand the industrial ecological chain. • Continue to cultivate strategic partnerships between customers and suppliers, and actively adjust the allocation of resources between production bases and supply chains, further improving our competitive advantage in order to create a win-win business and strive for market share. ■ AR/VR Smart Devices Compal continues tight cooperation with Qualcomm, in the R&D and design capabilities of the existing product line, linked to 5G communications capabilities and develop cloud software platforms, to provide customers full software and hardware solutions, and also provide customized services to fulfill market and user requirements. ■ Smart Home Devices Compal will leverage its hardware design, software, and firmware capabilities in consumer devices and communication fields, and invest in the development of a cloud computing software/platform. To provide complete Smart Home solutions and bring customers more integrated solutions and customizable applications to meet customer and market users’ expectations. ■ IoT Vertical Solution Compal aims to expand its notebook design capabilities to that of industrial products computers with different 136 capabilities and specifications to provide customers with the most comprehensive solutions. Furthermore, Compal will be re-designing its factory production lines to conform to special specifications and test requirements for new product applications for medial and vertical industries. A hardware or software module design AI will be incorporated in vertical solutions as needed to complement the overall service package and to ensure greater reliability of the products offered. ■ Smart medical and healthcare Compal will leverage its existing ITC capabilities and cloud platform to explore cross-industry alliances and opportunities to satisfy customer needs with diverse products and services. ■ Auto electronics (AE) Under megatrends in automotive: Electrification, connectivity, ADAS/AD, we strive to prosper our existing business by concurrent engineering with customers to achieve cost competitiveness and 0 ppm quality in IVI systems and ICT solutions, and leverage core technologies and experiences to new product to explore new business opportunities. ■ Servers Compal has many years of experience in the design and manufacturing of computers, and this has helped with our entry into the server industry. Compal's existing business relationships with world leading server manufacturers also works in our favor. 5. Future opportunities, threats, and responsive strategies ■ Opportunities • The improvement of CPU performance supports the evolution of commercial laptops. It also not only allows increasing productivity at work but triggers business laptop replacement. • The pandemic has prompted people to embrace flexible work and learn styles; it leads to strong notebook demands. • Innovation from world leading brands puts the Company in a position to dictate new products and markets. • Expansion of software development, aesthetic design and man-machine interface talent has greatly improved the ergonomics of products manufactured by Compal, which adds both value and appeal to customers. • Compal's strong R&D, manufacturing and operational management experience has earned the trust of world- renowned brands. • Compal has rigorous processes in place to monitor cost from initial R&D to manufacturing and is therefore able to maintain a competitive edge with our products. 137 • A rational pricing strategy supported by an alliance with parts suppliers helps secure market growth. • Connectivity not only brings convenience, but also adds value and competitiveness to the products offered. • Compal actively forms alliances with participants across industries. This helps the Company to increase product and customer diversity. • Compal remains active in developing innovative technologies and exploring new product concepts. The Company works alongside customers in developing new product lines, and in so doing secures access to new products and technologies. • Compal has the technical capabilities to make smartphones and tablets in ways that support new IoT applications such as smart speakers, smart voice assistance, etc. as well as the ability to explore new opportunities across different industries. • Driven by growing demand for wearable devices, Compal continues to mass-produce products and develop new proposals and innovations with major customers, continuing to maintain the Company’s position as the leading producer of wearable devices. • Compal is aggressively investing in 5G development and puts much innovative energy into 5G and product development to provide the 5G applications requested by their customers. • The US trade war is expected to enhance Compal’s design opportunities and slow down the price competition among China manufacturers. • • Integrate 5G communication capabilities with partners inside and outside the Compal group to develop various 5G domain and industrial applications. Integrate holographic 3D streaming media, 5G communication technology, artificial intelligence (AI) to build the next-generation AR/VR. • Actively apply for audio and voice analysis patents to enhance global patent deployment. • Enhance artificial intelligence (AI) technology as the foundation of the next-generation of smart devices. ■ Threats • The global shortage of semiconductors will affect notebook shipment in 2021. • The industry now competes in terms of vertical integration as opposed to specialization, which involves more costly investment, higher market complexity and more challenging business management. Faced with the rise of the Chinese supply chain, Taiwanese notebook manufacturers need to coordinate operations to be able to match the integrated design, development and assembly capacity from China. • The Notebook is a highly matured product and requires more diverse, value-adding, and innovative features for differentiation from other market participants. 138 • Intense competition in the IoT market can give rise to inconsistent quality and make competition in the industry more difficult. • Ongoing price competition among smartphones has a significant impact on large-brand customers. • Overall demand for tablets has declined, which adds to the competitive pressure. • Wearable devices are still in the early stages of development and require sustained periods of expansion to reach an economy of scale. • 5G is distributed in various domains, many industries are in the POC stage, and 5G innovative new business model is still under development. ■ Strategies • The Company will adopt strategies that focus primarily on innovation, product added value, and service. • Quality and production efficiency will be improved to reduce manufacturing costs. • The use of land and human resources in emerging countries throughout the world will be optimized to reduce the cost of production and basic R&D. • We will enhance the product design review process and develop a comprehensive database of documents to improve design efficiency and quality while reducing costs. • New customers and new product lines will be explored in emerging markets. • We will launch ultra slim notebooks integrating high performance and portability in response to the machine renewal demand in the commercial market to seize the commercial market together with customers. • The gaming market has grown in diversity with new technologies constantly being introduced to entice consumers into replacing old products. Compal is in the position to offer gaming notebooks at various price levels to meet consumer demand. • We will offer complete solutions and form alliances across industries to quickly tap into market demand while retaining the flexibility to satisfy customer needs. • We will nurture innovative talent within the organization, enhance the development capacity for high-end medical equipment and engage world-renowned medical equipment suppliers in strategic, long-term, and mutually beneficial cooperation. • We will continue to strengthen working relationships with platform operators by providing hardware and software solutions. • We will continue to extend our 5G communication capabilities to various 5G domains and types of product, build up leadership in 5G, and provide complete total solutions. • We will provide complete AR/VR solutions and collaborate with various domain partners, to create market 139 penetration, and increase customer satisfaction. • We will continue to develop high-end acoustic technologies for smart hearable products, and collaborate with audio professors and Taiwan Top acoustic research centers. • We will cultivate internal R&D talents of artificial intelligence (AI) technologies, hold artificial intelligence seminars, and training courses. 5.2.2 Major Products and Their Main Uses 1. Main product applications ■ Notebooks An analog-digital application hardware platform combined with dedicated software to enable a variety of applications such as data editing/processing, word processing, layout, graphics applications, web browsing, communications, digital multimedia entertainment, gaming, content creation and others. ■ Ultraslim Notebooks A laptop that emphasizes thinness and is lightweight and takes into account computing as well as battery performance to meet the consumer need for both portability and productivity. ■ 2-in-1 Notebooks These devices use the Windows 10 operating system, have an optional stylus, and satisfy the growing consumer demand for mobile computing. In addition to multiple operating modes, the device has a touch screen that enables it to be used as a tablet. ■ All-in-one (AIO) Beautiful aesthetics suited for home, commercial, and design use, with emphasis on a touch screen input interface, a range of software applications and high computing power. ■ Smart Home Devices Smart appliances, controls and sensors that provide users with diversified services for a smart lifestyle. ■ Tablets Portable touch screen multimedia, mobile viewing, and online information applications. 140 ■ Smart Display Products Graphics displays with audio output. ■ Smartphones and Modules Personal communication and internet access. ■ IoT Vertical Solutions Flexible hardware designs allow a range of customized software applications along with cloud and big data analysis for horizontal alliance. We offer clients complete solutions and services by the creation of novel applications. Unlikely conventional IT products, such as AGV and VR/AR glasses AI products usually need customization for various needs, but they elicit greater brand loyalty. ■ Smart Medicine and Healthcare Penetration into households and point-of-care areas using technology, including that of the IoT, and gradual integration with our own peripheral software products allows the provision of comprehensive solutions. These can give convenient and instant smart health care that will enhance dependence on the products as well as engender user brand loyalty. ■ Auto electronics (AE) ‧ In-Vehicle Infotainment systems ‧ Vehicle communication (4G/5G) systems ‧ Voice controlled natural sound navigation ‧ Android Auto/Carplay connectivity, Smartphone connectivity ‧ Smartphone Auto connection ‧ Accident alarm. ‧ ADAS warning system ■ Servers Designed for high power computing, capable of storing massive amounts of data and compatible with different processing programs for data analysis. Built to accommodate different applications required by enterprises, data centers, and cloud platforms. 141 2. Production Process of the Main Products ■ Notebooks 142 Casing of logic board Preparation of LCD display Assembly Preparation of main board Preparation of keyboard Fasten LED board Inspect LCD panel Input inspection Input inspection Prepare plunger + frame Fasten power switch board Fasten interface board to lower casing Fasten motherboard to frame Parts processing Install frame onto metal board Produce LED frame Fix LCD panel to lower casing Prepare battery spring SMT (surface mount technology) Apply double-sided tape Apply hook to casing Prepare battery wire Insert add-ons Insert keys Combine upper & lower casing Prepare disk drives Visual inspection Press keys and check Assemble LCD casing & logic board upper casing Fasten disk drives+motherboard to bottom casing Soldering furnace Production process inspection Fasten power board to motherboard Remove board Install PCB to lower casing Production process inspection Trip conductor Install wires to lower casing & fasten Fasten LCD casing & bottom casing Machine wash Assemble upper casing Battery assembly Apply heat sink Prepare name plate Keyboard installation Secondary soldering Process quality inspection Function test Brush clean Accelerated aging test Visual observation Function test Repair Prepare name plate & paste onto unit Process quality inspection Wipe down unit Automated machine testing Exterior inspection Accelerated aging test Unit packaging Automated machine testing QA testing ■ LCD TVs and Monitors 143 Display panel Power panel Assembly of LCD TV & monitor ↓ ↓ ↓ Parts processing Parts processing Prepare parts ↓ ↓ ↓ SMT SMT Assemble LCD panel ↓ ↓ ↓ SMT visual inspection SMT visual inspection Fasten metal parts ↓ ↓ ↓ Manually insert add-ons Manually insert add-ons Assemble display panel ↓ ↓ ↓ Visual inspection Visual inspection Assemble power panel ↓ ↓ ↓ Auto soldering Auto soldering Install connecting wires ↓ ↓ ↓ Manual soldering Manual soldering Assemble back casing ↓ ↓ ↓ Apply heat sink Apply glue Structural inspection ↓ ↓ Apply glue Functional test ↓ ↓ Substrate test Accelerated aging test ↓ ↓ QA random inspection Screen adjustment ↓ Pressure test ↓ Electrical test ↓ Wipe down exterior ↓ Exterior inspection ↓ Paste front and back name plates ↓ QA testing ↓ Packaging ↓ Box and package ↓ Final product inspection IMEI OK Packaging OK Shipment ■ Smartphones and Tables Design/analyze OK Input material OK SQE test OK Install PCB SMD OK Welding of parts OK Base band TEST OK Assembly OK Vibration and appearance OK Function test OK FINAL TEST OK CALL TEST OK Current IDEL OK Exterior NO NO NO NO NO NO NO NO Repair Repair Repair Repair Repair Repair Repair Repair OK OK OK OK OK OK OK OK 144 5.2.3 Supply Status of Main Materials ■ CPU/Chipset ● Notebooks Under the influence of COVID-19 in 2020, the global demand for working from home and studying from home increased strongly, particularly in the demand for Chromebooks. The brand customers stocked up ahead and the subsidy of education tenders that caused the supply and demand gap of X86 Small core CPU was particularly large. In order to fulfill for the X86 Small core demand, the brand customers have begun to import second source with the ARM CPU (MTK and Qualcomm solution), and it will been mass production and shipped at the end of the fourth quarter. Also, Apple laptops began to import the ARM M1 CPU and began mass production at the end of the fourth quarter. The overall NB demand in 2021 is still strong and demand is still greater than supply. The CPUs are still in a tight supply, although the INTEL/AMD has increased production capacity, improved yield rate, and imported the ARM CPUs. Due to the ARM's CPU shipment, the proportion of INTEL and AMD has been diluted. It is estimated that the market penetration rate of INTEL will reach 76.8%, of AMD will be 17.45%, and ARM will grow to 5.75% in the future. In terms of Intel's new products, the high-end 8 core Tiger Lake H is expected to be launched in the second quarter of 2021, but it still only supports DDR4. The mid-range product Tiger Lake U Refresh will launch in the third quarter of 2021 and support LPDDR5. The 10 nm Alder Lake will be launched in the fourth quarter of 2021. The low-end CPUs are still based on the 10 nm Jasper Lake. The 7 nm process Meteor Lake is expected to be launched in the first quarter of 2023. Intel will not have any new 14 nm product announcement. ● Smartphones and Modules From Q4’20 to Feb 2021, the construction process has slowed down, but the demand for major communication system equipment vendors think demand gradually recovering. From March, the overall industrial demand is expected. In 2021, the global 5G mobile phone market is expected to double the size of 2020. Driven by demand and mobile phone manufacturers' push for 5G mobile phones, global smartphone shipments in the first quarter of 2021 will increase by 13.9% annually, and the annual growth rate will be 5.5 %, the global smartphone market’s CAGR will reach 3.6% from 2020 to 2025. As low-to-medium 5G mobile phones continue to be on the road and 5G network coverage, it is beneficial to further boost global 5G mobile phone sales In spite of the continued border blockade and economic concerns, we are still optimistic about the strong demand for smartphones, and the supply chain, OEMs and consumer channels are ready to deal with any further blockades. COVID-19 has disrupted the global supply chain, coupled with changes in semiconductor manufacturing processes, leading to chip shortages, tight semiconductor supply, and panic in the market. Industries and customers will sway each other, affected by global 8-inch and 12-inch wafers. The production capacity of the round factory is affected by the tight supply, and the supply cycle of 145 mobile phone AP and mobile phone power management chip (PMIC) is extend over 30 weeks. ■ Memory ● DRAM The price of DRAM is expected to have an upward cycle from 2021’Q1 by quarter for a whole year, mainly from the increasing demand for server and mobile phone. Due to the production capacity of the three major OEMs (Samsung, SK Hynix and Micron) cannot meet the demand, the major OEMs have caught these opportunities to increase the DRMA prices significantly which results the overall DRAM price entered an upward trend. In term of DRAM applications, the overall demand for World Wide is calculated based on 1Gb eqv. The shipment were 155 billion unit in 2020 and were estimated substantially rise to 185 billion units in 2021, with a compound annual growth rate of 18%. The ratio of Mobile increased to 38%, Server remained steady at 30%, consumer dropped to 14%, PC rose to 13% and graphics accounted for 5%. The overall of DRAM demand increase approximate 3 to 4 % higher than DRAM supply in 2021. Meanwhile, the three major OEMs have conservative perspective on output plan as their capital expenditures have been reduced to 1 to 2 % compared with 2020. In term of the DRAM manufacturing process, the three major OEMs have mass-produced 1z nm since 2020’Q4 and plan to start small volume production of DDR5 in 2021’Q3. The initial production capacity transfer to new generation of DDR5 is estimated to have a 30% loss in output due to yield loss. The whole year output bit growth of the three major OEMs is about 17.5%, which is lower than the demand side of bit growth by 20.8 %. Therefore, the DRAM price is expected continually to rise till 2022’Q1 due to the shortage. DRAM orders have soared with the booming demand for 5G, electric vehicles, game consoles, server, smart phones, and etc.,. Besides, Bitcoin has brought extreme demand for display cards and consoles, which increase the demand for DRAM as well. Moreover, the well-known electric vehicle manufacturer Tesla has significantly invested in Bitcoin, which has led to a mining trend and result the lack of VRAM, increasing the VRAM price approximate three times. It is expected that the price of VRAM is difficult to stabilize once the mining trend remains. In conclusion, the demand for DRAM and VRAM continues to rise due to strong demand for smart phone, server and mining. However, the three major OEMs have taken a conservative point of view on output plan in 2021, as they do not increase capital expenditures, meanwhile, a part of production capacity will transfer to DDR5. As a result, the DRAM market is undersupply and price is expected to increase continually. ■ NAND flash Looking forward to 2021, the NAND Flash market is still optimistic. It is estimated that the supply bit growth rate will reach 30% in the 2021 with the market demand bit growth rate may exceed 30%. The main growth drivers include demand for data center rebounded, the 5G mobile phones, the positive outlook for automotive, and the Internet of Things, but the demand for PC applications are relatively flat. 146 Due to the Controller IC shortage in the 2020, the price for channel products of SSD/eMMC has increased. Some SSD module house have more Controller IC inventory, and the transfer order effect that cause the order is maintained at the same level and NAND Flash suppliers keep high inventory. The overall NAND Flash demand has been more stable than originally expected. The mainstream production process still keeps on 92/96 layers, although the major NAND Flash manufacturers introduced 3D TLC/QLC with more than 100 layers in 2020. Looking forward to 2021, mass production of 128- layer 3D NAND will begin in the second half of the year. After the yield rate has risen steadily, the leading products of mass production will be more than 100 layers and will get into the competition of more than 170 layers by the end of the year. Both Micron and SK Hynix adopt double-layer stacking technology with the improvement of process, and the new generation of 176-layer NAND Flash sample has delivered for testing. The 144-layer NAND Flash of Intel has also officially entered to market. It is expected to drive NAND Flash manufacturer to launch 200-layer TLC or QLC in the second half of 2021 while the industry competes toward to higher stacking processes. 7th generation 3D V-NAND of Samsung is expected to lunch the product with above 16x layer even 176 layers, 192 layer or directly challenging to 256-layer process. NAND Flash manufacturer are actively building semiconductor inventories recently. Not only the wafer lead- time has extended, but also key substrate materials and Controller ICs are facing tightness. In addition, the delay in the resumption of work at Samsung's Austin fab has made the overall SSD supply tighter. However, Samsung still has inventory, and it is expected to enter mass production from mid-April at the second plant in Austin, which is expected to slow down the impact of the delay in the resumption at the first plant. It is estimated that NAND prices will rise in the Q2, but the average price will rise at a single-digit range of 3-5%. The price will not go up too strong, even in the traditional peak season of the second half of the year. The Industry supply and demand remain stable if the bit output with a 30% increase than the last year. ■ HDD In 2020, the overall HDD shipments dropped by 19% compared to the previous year. The HDD attach rate has been decreasing year-by-year with the NB becoming thinner and thinner and more mature in the cloud storage. It is expected for HDD attach rate to be reduced to 12% that NB is mainly equipped with SSDs. The 1TB usage rate was the highest in the 2020, and 500G accounted for about 36%, 1TB for about 61%, and 2TB for about 3% in the 2021. HDD price will continue to decline in 20201. It is estimated that the price of 500G hard drives will remain unchanged while the price of 1TB hard drives will be reduced by 0.7% and the prices of 2TB hard drives will be reduced by 2.4%. The overall sales of HDDs dropped from 650 million units in 2010 to 250 million units in 2020. The capacity of HDD shipments in 2020 was about 1ZB, and it is estimated that it will increase to 2.5ZB per year by 2025. In terms of the proportion of suppliers in HDD sales, Seagate is about 43%, Western Digital is about 37%, and Toshiba is 20%. ■ ODD As NB has begun to become thinner and lighter, ODD has been replaced by portable hard drives, flash drives and clouds, so now the attach rate of the models of NB with ODD has decline are less than before. 147 There will be no new ODD models or even continue to equip with DVD-RW this year. Due to the high prices of BD drives and the maturity of streaming services, that only a few models will be specially equipped with Blu- ray disc drives. Looking to the future, Blu-ray disc players will replace DVDs as the mainstream of optical disc players. ■ Batteries Due to COVID-19, the demand for online conferences and teaching caused the notebook shipment to increase 26%, reaching to the amount of 210M in 2020. It also makes the Polymer battery cell 13% growth rate in overall shipments. Shipments of wearable devices increased 28%. It is estimated that the demand for online teaching and meeting will continue to be strong. The notebook shipments for in 2021 are expected to reach 268M. However, the market still maintains a conservative view on the demand for mobile phones. There will be a small growth of about 15%. In 2020, the amount of electric vehicle sales and the shipment volume of Cylindrical batteries both increased compared to the previous year. The growth in shipment volume mainly came from the continuous growth of the electric vehicle market. The market demand is still not saturated. At present, the demand for Cylindrical applications in vehicle batteries (EV, E-Motorcycle) is still the mainstream. Due to the potential of the battery market, Japanese and Korean battery manufacturers have shifted their production capacity to the field of vehicle batteries and no longer continue to work in the 3C consumer electronics market. In other words, in the supply of the NB market, traditional Japanese and Korean manufacturers (Samsung, LG) have successively withdrawn. This situation makes China manufacturers like BYD, NVT and SWD entered the mainstream supply chain of NB batteries in 2021. ■ LCD panels and Touch control modules In 2020, the world was hit by the COVID-19 epidemic. In the 2020/H1, panel shipment was negative growth. However, the epidemic drove strong demand for "work from home", "remote teaching" and "otaku economy", which led to the rise of IT panel production and TV brand manufacturers actively shipment. And, the industry expanded the production capacity of high-end products, resulting year-on-year percentage increase of 11.2% for the panel shipment in the 2020/2H. In 2020, the panel industry shipment grew by 0.3% against the trend, ending two consecutive years of negative growth, and the annual output value reached 727.5 billion yuan. In 2020, the panel volume of global monitors (desktop) was 163 million pieces, and the expansion has risen sharply at the same time that it has been accompanied by substantial price increases; the number of notebook computer panels has also been stimulated by strong demand, reaching a scale of 225 million pieces, with YoY growth the rate is as high as 19%, but this has led to serious shortages of components including display driver ICs, T-con ICs, and power management. In 2020, China ranked first in export value, Taiwan ranked second, and South Korea ranked third. However, Taiwan’s LCD panel export growth performance is better than others, with YoY increase of 5.3%, which is the only positive growth. For YoY, China’s decline is 4.7%, South Korea’s decline is 5.6%, and Japan’s decline is 6.2%. Display companies have actively returned to Taiwan to invest in recent years. We expanded in high-end and niche application markets, such as e-sports, automotive and medical, etc., and develop products towards 148 higher value and differentiation, and improve and enhance the international competitiveness of the panel industry. In 2021, the demand for large-size LCD panels has continued to remain strong. Coupled with a slight change in the production capacity of large-size LCD panels, the price of various application panels will continue to show a monthly upward trend, and the quarterly increase of HD/TN will reach 12.6%, and the quarterly increase of FHD/IPS will reach 9.1%. The quarterly price increases for 23.8-inch and 21.5-inch monitor LCD panels can reach 17.1% and 14.6%. The quarterly rises for the mainstream sizes of TV LCD panels are separated by 9.3% to 13.6%. Expected the large- size LCD panel manufacturers will make profits in 2021 years. As the epidemic situation continues, coupled with the high demand for 2020 end channels and brand replenishment for inventory, it is expected that the overall scale of 2021/1H will maintain an increase YoY, and the demand will gradually enter a period of saturation in the 2021/Hs. Coupled with the easing of the epidemic, the overall demand will be retreated steadily. Due to the insufficient supply of ICs, it is estimated that the layout of phenotype display panels will reach 166 million pieces in 2021, YoY increase of 1.01%. The volume of NB panels is expected to reach 249 million pieces, YoY increase of 10.5%. Although the panel production lines of major panel makers in China, South Korea, and Taiwan are basically not directly affected by the COVID epidemic, but due to the shortage of some components, the shipment of some application products was affected, it is predicted that the panel price increase will continue until 2021/Q3. It will not be possible to determine the subsequent price trend until each NB brand settles the sales status of 2021/H1. Assessing the overall NB market, the total number of NBs containing Touch panels in 2020 was about 29 million, accounted for about 13% of the overall sales. The overall forecast for 2021 is 40 million, and the proportion will rise to 16%. 149 5.2.4 Major Suppliers and Clients 1. Major Suppliers in the Last Two Calendar Year 2019 2020 2021 first quarter Unit: TWD Thousands Party Name Amount As a percentage to 2019 net purchases (%) Relationship with the issuer Name Amount As a percentage to 2020 net purchases (%) Relationship with the issuer Name Amount 1 2 Company E Company B Others Net Purchase 301,780,015 89,789,108 527,842,635 919,411,758 32.82 9.77 57.41 100.00 N.A. N.A. Company E Company B Others Net Purchase 331,119,065 99,887,382 567,562,431 998,568,878 33.16 10.00 56.84 100.00 N.A. N.A. Company E Company B 78,683,038 26,119,584 144,130,927 Net Purchase 248,933,549 Others As a percentage to 2021 first quarter net purchases (%) 31.61 10.49 57.90 100.00 Relationship with the issuer N.A. N.A. Unit: TWD Thousands 2. Major Clients in the Last Two Calendar Years 2019 2020 Party Name Amount As a percentage to 2019 net sales (%) Relationship with the issuer Name Amount 1 2 3 4 Company a 96,591,070 Company d 390,210,303 Company e 105,890,275 Company f 212,262,458 Others 175,488,240 9.85 39.80 10.80 21.65 17.90 Net sales 980,442,346 100.00 N.A. N.A. N.A. N.A. Company a Company d Company e 120,376,434 431,621,595 75,903,386 Company f 240,039,272 Others Net sales 180,988,564 As a percentage to 2020 net sales (%) 11.48 41.15 7.24 22.88 17.25 Relationship with the issuer Name Amount 2021 first quarter As a percentage to 2021 first quarter net sales (%) 12.28 Relationship with the issuer N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. Company a 33,152,495 Company d 106,486,389 39.44 Company e 24,725,124 Company f 60,057,838 Others 45,569,687 9.16 22.24 16.88 1,048,929,251 100.00 Net sales 269,991,533 100.00 150 5.2.5 Production in the Last Two Years Year Production volume/ value Main products 2019 2020 Unit: 000 Units; TWD Thousands Production capacity Production volume Production value Production capacity Production volume Production value 5C electronics 136,388 115,443 942,905,972 154,830 130,051 1,009,349,172 5.2.6 Shipments and Sales in the Last Two Years Year Sales volume Main products 5C electronics 2019 2020 Domestic sales Value Volume Export sales Volume Value Domestic sales Value Volume Export sales Volume Value 266 1,134,242 117,245 979,308,104 769 3,095,681 130,581 1,045,833,570 Unit: 000 Units; TWD Thousands 5.3 Human Resources Year December 31, 2019 December 31, 2020 March 31, 2021 Number of employees 81,743 112,761 97,843 Average age Average years of service Academic qualifications Doctoral Degree Master’s degree University High school/Below/others 28.84 2.08 0.05% 3.81% 19.33% 76.81% 28.12 1.70 0.04% 3.18% 15.80% 80.98% 29.53 1.99 0.05% 3.60% 16.77% 79.58% 151 5.4 Environmental Protection Expenditure 1. Compal is an assembler of electronic products and produces no significant pollution The Company is an information electronic product assembly plant, a non-high energy consumption, high water consumption and high pollution industry. In order to protect the environment, it fulfills its social responsibilities, saves energy and reduces carbon, and reduces the impact of global warming. The Taiwan and Mainland China plants together incurred expenses of TWD 47,756,213 (excluding regular maintenance and green R&D) in 2020. We are keeping the promises we made as an earth citizen and hope to make substantial contributions to the protection of the global environment. We will continue our commitment to efforts in this respect. In 2020 and as of the date of report published, Compal had no violation of environmental laws, and will keep abreast of relevant regulatory updates and respond immediately to reduce the risk of violations. 2. Compliance with EU RoHS directives All Compal products are 100% compliant with EU RoHS Directives. There have been no cases of returns for non- compliance. The relevant specifications for the use of plasticizers DEHP, BBP, DBP and DIBP, which came into effect in 2019, and have been effective since July 2, 2018. To manufacture environmentally friendly green products and meet the requirements of both international environmental laws and client demand, the Company has implemented “Management Standards for the Control of Environment-Related Substances in Parts and Materials” that covers all hazardous substances currently prohibited by law and banned by customers. We have implemented efficient and effective methods of inspection for hazardous substances using recognized component classification and risk control to establish a plant monitoring mechanism for oversight and verification. 3. Responsive strategies and possible expenses In the future, the Company will continue to implement its environmental responsibilities including the boosting of staff knowledge of environmental matters, and the advocation of updated green living knowledge, the Company’s response to government policy with respect to green consumption, and the regular priority assessment of green product content in procurement, as well as continuous improvement in the energy efficiency of our plants. This includes scrutiny for all kinds of possible violations of environmental regulations in the operations management system, and the mandate to have a timely response to all environmental laws. 5.5 Labor Relations 1. Availability and execution of employee welfare, education, training, and retirement policies. Elaboration of the agreements between employers and employees, and protection of employee rights. ■ Employee welfare In addition to all employees’ statutory labor rights and to help them find a balance between work and personal life, both physical and mental, and to improve their vitality in the workplace, the Company has an Employee Benefits Committee, a Life Committee, and other groups responsible for promoting worker welfare. The employee health benefits and activities include a fitness center, a medical facility, periodic health checks, 152 recreational team competitions, family activities, travel, the arts, and leisure and all kinds. Group Life Insurance is covered by the Company that includes accident, medical, and cancer. Employee dependents may also join the scheme at a discounted rate, but at their own expense. We also have benefits such as scholarships for employees and their children. The Company actively supports the government in resolving the low birth rate crisis and childcare policy in Taiwan. Since 2011, we have provided generous maternity grants for employees and their spouses and children. By the end of 2020, the Company had provided TWD 182.09 million in maternity allowances and bonuses. There were 38 counts of employees who took parenting leave, with the right to return, in 2020. ■ Education and training The Company set training credits and outlined the credit system according to the needs of each level. The Company also integrates all training records in an online learning platform to further assist the competent staff in keeping abreast of learning progress. In 2020, a total of 888 training sessions (both internal and external) were organized; these courses delivered 156,447 hours of training and 65,668 persons enrolled. The total training expenses were TWD 26,104,000. The training courses included: ‧ Orientation: New hire seminars and corporate culture experience camps were organized to help new hires better understand Company culture, the current status of the industry, and Company strategy and vision. ‧ Language training: Basic to advanced English and Japanese courses that train employees to respond to customers and gives them a global vision through workspace situational training. ‧ Managerial skills Training: To establish a comprehensive blueprint of development level, strengthen core competency at all levels in such aspects as teamwork, problem analysis, innovative thinking... and soon, to conduct planning for Company talent training at various stages. ‧ Professional training: Categorized new professional knowledge lectures, courses, and experience heritage job training to enhance employee expertise and technology and to enhance Company core competitiveness through systematic management. ‧ E-learning: Offers related courses in new hire requisites, IT, Six Sigma, language, management, CSR, and occupational safety. The Company uses Internet learning and resource sharing to offer real-time learning. The effect is maximized with a complete learning and training mechanism that utilizes a comprehensive knowledge management system. ■ Retirement system To arrange retirement for employees, the Company has issued regulations of labor retirement, which stipulate the conditions and standards for retirement, application, as well as operation of labor Pension Preparation Fund based on law. A supervisory committee for the workers’ retirement preparation fund has also been established. According to the Regulations for the Allocation and Management for the Pension Preparation Fund, 153 we contribute and deposit labor pension preparation funds into the dedicated account of the Bank of Taiwan per month to protect employees’ rights. In accordance with the Labor pension Act, we have contributed 6% pension into personal account for befitted employees. Also, for those who volunteered to contribute pension, voluntary withholding rate is deducted from the employees’ monthly wage to the individual retirement account of the Labor Insurance Bureau since 1st July in 2005. ■ Employer-employee communications and the enforcement of worker rights The Company has always valued employer-employee relations and has communication channels available to facilitate two-way communication that allows the Company to respond to the thoughts and opinions of employees in a prompt manner. The Company not only has policies in place to protect employee rights, but also makes decisions in the best interests of its employees. 2. Personnel management The Company has clear policies in place to manage human resources and to guide employee behavior. There are specific levels of approval authority and detailed rules to guide decisions concerning employee recruitment, promotion, appraisal, assignment, leave of absence, resignation, confidentiality agreements, reward and discipline. These policies and rules exist to eliminate subjective judgment and to create a fair, open, and systematic corporate culture. 3. Work environment ‧ Buildings are subjected to annual fire safety inspections and reports. ‧ Buildings, plants and equipment are inspected daily and maintained on a regular basis. ‧ The Company hires regular cleaning services to ensure the cleanliness of its work environment. 4. Employee safety ‧ Personnel entry and exit is controlled by a security system. ‧ Security personnel are stationed 24 hours a day to patrol plant premises and monitor the surveillance system. Lectures and rehearsals are organized annually to demonstrate proper responses to cases of ‧ emergency. 5. Actual or estimated losses arising as a result of employment disputes in the recent year up to the publication date of this annual report, and any responsive measures taken ‧ In 2020 and as of the date of report published, Company did not suffer any losses due to employment dispute: None ‧ Future plans and potential expenses: None 154 5.6 Important Contracts Agreement Counterparty Patent Phoenix licensing Technologies agreement Ltd. Period Since 2010.1.1 Auto-renewed upon expiry Since Major Contents 1. Tool Licenses 2. Source Code licenses 3. Maintenance Under this agreement, the buyer will procure computer products developed and manufactured by the seller, while the seller will grant the buyer proper licenses to use the products and provide after-sales technical services. Trading and manufacturing agreement Dell Products 1997.06.26 L.P. Auto-renewed upon expiry Trading and manufacturing Acer Inc. agreement Since 2001.10.01 Under this agreement, the buyer will procure computer Yearly products developed and manufactured by the seller, Auto-renewed upon along with after-sales technical services provided by expiry the seller. 155 VI. Financial Information 6.1 Five-Year Financial Summary 1. Condensed Balance Sheet and Statement of Comprehensive Income ▓ Consolidated Condensed Balance Sheet Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2021 Analysis Current assets Property, plant, and equipment Intangible assets Other assets Total assets Prior to Current distribution liabilities After distribution 2016 2017 2018 2019 2020 300,469,007 321,782,654 362,745,250 343,154,813 424,460,635 401,592,642 20,952,677 18,179,367 20,418,228 19,972,347 22,085,340 1,291,281 1,284,660 1,516,253 1,553,342 24,303,146 22,109,740 15,115,092 17,967,917 1,506,101 18,873,622 23,539,019 1,646,307 19,363,061 347,016,111 363,356,421 399,794,823 382,648,419 466,925,698 446,141,029 209,232,199 231,955,732 274,207,898 255,820,033 335,524,716 319,499,755 214,478,756 237,184,287 279,436,453 261,048,588 342,496,124 (Note 2) - Non-current assets 25,500,097 22,752,717 12,425,077 12,069,042 15,411,332 15,283,486 234,732,296 239,978,853 Prior to distribution After distribution Equity attributable to parent company shareholders Ordinary shares Capital reserves Prior to Retained distribution earnings After distribution 234,732,296 254,708,449 286,632,975 267,889,075 350,936,048 334,783,241 239,978,853 259,937,004 291,861,530 273,117,630 357,907,456 (Note 2) - 105,804,389 101,895,584 105,723,646 105,972,633 106,832,505 102,790,213 44,241,606 44,191,916 44,071,466 44,071,466 11,779,274 10,938,773 9,932,434 9,159,259 44,071,466 8,342,813 44,071,466 6,662,275 55,289,409 56,557,146 60,060,381 57,726,604 62,566,181 59,892,107 50,867,256 52,149,999 55,653,234 53,319,457 57,277,605 (Note 2) - Other equity interests (4,624,653) (8,911,004) (7,459,388) (4,103,449) (7,266,708) (6,954,388) Treasury stock (881,247) (881,247) (881,247) Non-controlling interests 6,479,426 6,752,388 7,438,202 (881,247) 8,786,711 (881,247) 9,157,145 (881,247) 8,567,575 Total equity Prior to distribution After distribution 112,283,815 108,647,972 113,161,848 114,759,344 115,989,650 111,357,788 107,037,258 103,419,417 107,933,293 109,530,789 109,018,242 (Note 2) - Note: 1. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 2021, has been reviewed by the CPA. 2. The amounts are approved by the Board of Directors meeting on March 26, 2021. 156 ▓ Consolidated Condensed Statement of Comprehensive Income Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2021 2016 2017 2018 2019 2020 766,810,035 887,656,959 967,706,411 980,442,346 1,048,929,251 269,991,533 32,836,970 31,964,569 30,567,091 33,908,828 35,458,522 Analysis Net sales revenue Gross profit Net operating income 11,063,645 9,208,429 9,261,746 10,586,368 11,492,545 Non-operating income and expense 749,700 (1,094,152) 2,527,839 (578,492) 1,630,171 9,601,582 3,274,888 393,753 Net income before taxes 11,813,345 8,114,277 11,789,585 10,007,876 13,122,716 3,668,641 Net income from continuing operations Net loss from discounting operations 8,968,006 6,158,037 9,589,301 7,895,719 10,409,512 2,908,635 - - - - - - Net income (loss) 8,968,006 6,158,037 9,589,301 7,895,719 10,409,512 2,908,635 Income (Loss) from Other comprehensive income (loss) (1,265,546) (4,604,412) 387,887 (1,534,980) (3,341,346) (318,624) (net after tax) Comprehensive income 7,702,460 1,553,625 9,977,188 6,360,739 7,068,166 3,227,259 Net income attributes to shareholders of the Parent Net income attributes to non- controlling interests Comprehensive income attributed to owners of parent Comprehensive income 8,130,890 5,749,525 8,913,365 6,955,899 9,361,893 2,620,164 837,116 408,512 675,936 939,820 1,047,619 288,471 6,916,562 1,189,818 9,278,187 5,456,508 6,083,542 2,932,087 attributed to non-controlling 785,898 363,807 699,001 904,231 984,624 295,172 interests Earnings per share (unit: dollar) 1.88 1.32 2.05 1.60 2,15 0.60 Note: 1. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 20201 has been reviewed by the CPA. 157 ▓ Parent-Company-Only Condensed Balance Sheet Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2021 Analysis Current assets Property, plant, and equipment Intangible assets Other assets Total assets Current liabilities Prior to distribution After distribution 2016 2017 2018 2019 2020 237,412,415 240,677,588 265,372,906 245,522,829 296,383,073 2,132,114 2,092,272 2,128,181 2,620,638 2,604,893 268,316 146,813 378,745 438,334 436,548 88,808,075 85,179,393 87,932,981 89,201,687 89,526,637 328,620,920 328,096,066 355,812,813 337,783,488 388,951,151 197,566,162 203,492,102 237,882,742 220,871,943 268,466,052 202,872,746 208,780,678 243,171,318 226,160,519 275,517,487 (Note 2) Non-current assets 25,250,369 22,708,380 12,206,425 10,938,912 13,652,594 289,170,081 N.A. (Note 2) 44,071,466 8,342,813 Total liabilities Prior to distribution After distribution 222,816,531 226,200,482 250,089,167 231,810,855 282,118,646 228,123,115 231,489,058 255,377,743 237,099,431 Ordinary shares Capital reserves 44,241,606 44,191,916 44,071,466 44,071,466 11,779,274 10,938,773 9,932,434 9,159,259 Retained earnings Prior to distribution After distribution 55,289,409 56,557,146 60,060,381 57,726,604 62,566,181 50,867,256 52,149,999 55,653,234 53,319,457 57,277,605 (Note 2) Other equity interests (4,624,653) (8,911,004) (7,459,388) (4,103,449) (7,266,708) Treasury stock (881,247) (881,247) (881,247) (881,247) (881,247) Total equity Prior to distribution After distribution 105,804,389 101,895,584 105,723,646 105,972,633 106,832,505 100,557,832 96,667,029 100,495,091 100,744,078 99,861,097 (Note 2) Note: 1.The financial information is audited and reviewed by the CPA every year. 2. The amounts are approved by the Board of Directors meeting on March 26, 2021. 158 ▓ Parent-Company-Only Condensed Statement of Comprehensive Income Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2021 2016 2017 2018 2019 2020 Analysis Net sales revenue 725,653,095 841,309,602 911,050,122 916,280,028 991,279,270 Gross profit 21,281,171 21,544,440 21,880,841 24,848,256 23,218,044 Net operating income 5,972,854 5,170,549 6,936,706 8,536,952 6,079,726 Non-operating income and expense 3,398,892 1,508,171 3,021,610 (713,273) 4,347,551 Net income before taxes 9,371,746 6,678,720 9,958,316 7,823,679 10,427,277 Net income from continuing operations Net loss from discounting operations 8,130,890 5,749,525 8,913,365 6,955,899 9,361,893 - - - - N.A. - Net income (loss) 8,130,890 5,749,525 8,913,365 6,955,899 9,361,893 Income (loss) from other comprehensive income (net after tax) (1,214,328) (4,559,707) 364,822 (1,499,391) (3,278,351) Comprehensive income 6,916,562 1,189,818 9,278,187 5,456,508 6,083,542 Earnings per share(unit: dollar) 1.88 1.32 2.05 1.60 2.15 Note: 1.The financial information is audited and reviewed by the CPA every year. ▓ Auditors’ Opinions Year 2016 2017 2018 2019 2020 Accounting Firm CPA Audit Opinion KPMG KPMG KPMG KPMG KPMG Kuo, Kuan Ying; Au, Yiu Kwan Kuo, Kuan Ying; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Unqualified opinion Unqualified opinion Unqualified opinion Unqualified opinion Unqualified opinion 159 6.2 Five-Year Financial Analysis ▓ Consolidated Financial Analysis Analysis Year Financial Analysis for the Last Five Years As of March 31, 2021 Debt ratio 67.64 70.09 71.70 70.01 75.16 75.04 2016 2017 2018 2019 2020 Capital Structure (%) Long term fund to property, plants, and equipment ratio Current ratio (%) Liquidity analysis Quick ratio (%) Operating Performance Analysis Interest coverage Accounts receivable turnover (times) Average collection turnover Inventory turnover (times) Accounts payable turnover (times) Average inventory turnover days Property, plant and equipment turnover (times) Total assets turnover(times) Return on total assets (%) Return on equity (%) 657.59 722.80 615.07 635.02 594.97 538.01 143.60 120.22 138.72 132.29 108.19 103.06 134.14 102.94 13.47 4.50 81.11 15.51 5.68 23.53 7.25 5.03 72.56 14.55 6.30 5.47 5.08 71.85 12.61 6.33 25.08 28.95 4.67 4.96 73.58 12.01 6.34 30.39 126.51 125.69 97.39 96.52 12.42 14.53 4.95 4.82 73.73 75.73 11.61 11.10 5.89 5.46 31.43 32.88 33.88 45.36 50.14 48.55 49.88 47.34 2.27 2.87 8.08 2.49 2.01 5.57 2.54 3.08 8.65 2.51 2.57 6.93 2.47 2.67 9.02 Profitability Analysis Operating income to paid-in capital ratio (%) 26.70 18.36 26.75 22.71 29.78 Net margin (%) Earnings per share (dollar) Cash flow ratio (%) Cash flow Cash flow adequacy ratio (%) Cash reinvestment ratio (%) Leverage Operating leverage Financial leverage Note: 1. The ratio is negative. 1.16 1.88 0.61 0.69 1.32 0.99 2.05 (Note1) (Note1) 42.42 (Note1) 48.05 (Note1) 1.57 1.09 1.63 1.16 44.84 (Not1) 1.60 1.40 0.81 1.60 8.18 37.92 9.89 1.61 1.35 0.99 2.15 4.25 35.94 5.48 1.54 1.11 2.36 0.68 2.55 8.32 1.08 0.60 - - - - - 2. The financial ratio has changed by up to 20% in the past two years: ‧Interest coverage: Mainly due to the decrease in interest expenses and increase in profit compared to the earlier period. ‧Return on equity、Operating income to paid-in capital ratio、Net margin、Earnings per share : Mainly due to the increase in net income compared to the earlier period. ‧Cash flow ratio: Mainly due to decrease in net cash inflow in operating activities. ‧Cash reinvestment ratio: Mainly due to the decrease in net cash inflow in operating activities and the increase in property, plant, and equipment. 3. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 20201 has been reviewed by the CPA. 160 ▓ Formula Financial Structure 1. (1) Debt Ratio = Total liabilities/Total assets (2) Ratio of long-term capital to property, plants, and equipment = (Net shareholders’ equity + Long-term liability)/Net property, plants, and equipment Solvency 2. (1) Current ratio = Current Assets/Current liability (2) Quick ratio = (Current assets - Inventory - Prepaid expenses)/Current liability (3) Interest coverage ratio = Net income before income tax and interest expense/Interest expense 3. Operating Efficiency (1) Accounts receivable (including accounts receivable and notes receivable from business activities) turnover = Net sales/Average accounts receivable balance (including accounts receivable and notes receivable from business activities) Inventory turnover = Cost of Goods Sold/Average inventory balance (2) A/R turnover days = 365/accounts receivable turnover (3) (4) Accounts payable (including accounts payable and notes payable from business activities) turnover = Cost of goods sold/Average accounts payable balance (including accounts payable and notes payable from business activities) Inventory turnover days = 365/Inventory turnover (5) (6) Property, plants, and equipment turnover = Net sales/Average Net Property, plants, and equipment (7) Total assets turnover = Net sales/Average Total assets 4. Profitability (1) Return on assets = [PAT + Interest expense × (1 - interest rate)]/average asset balance (2) Return on equity = PAT/average net equity (3) Pre-tax income to paid-in capital = Net income before taxes/Issued capital stock (4) Net profit ratio = PAT/Net sates (5) EPS = (PAT - preferred stock dividends)/weighted average outstanding shares 5. Cash Flow (1) Cash flow ratio = Cash flow from operating activities/Current liability (2) Cash flow adequacy ratio = Most recent 5-year Cash flow from operating activities/Most recent 5-year (Capital expenditure + increases in inventory + cash dividend) (3) Cash reinvestment ratio = (Cash flow from operating activities - cash dividend)/(Gross fixed assets + long-term investment + other assets + working capital) Leverage 6. (1) Operating leverage = (Nest revenue - variable cost of goods sold and operating expense)/operating income (2) Financial leverage = Operating income/(Operating income - interest expenses) ▓ The preceding formula for calculating the earnings per share must pay attention to the following: 1. Based on the weighted average number of ordinary shares rather than on the number of shares that have been issued at the end of the year. 161 2. Those who have cash replenishment or treasury shares must consider the circulation period and calculate the weighted average number of shares. 3. Where there is a surplus to increase capital or capital surplus to increase capital, the proportion of capital increase must be retrospectively adjusted when calculating the earnings per share for the previous annual and semi-annual periods, and there is no need to consider the capital increase issuance period. 4. If the preferred stock is a non-convertible accumulative preferred stock, its annual dividends (whether issued or not) must be subtracted from the net profit after tax, or the net loss after tax must be added. If the preferred stock is non-cumulative and in the case of net profit after tax, the preferred stock dividends must be deducted from the net profit after tax. If it is a loss, no adjustment is required. ▓ When measuring cash flow, special attention should be paid to the following items: 1. The net cash flow from operating activities refers to the net cash inflow from operating activities in the cash flow statement. 2. Capital expenditure refers to the number of cash outflows of capital investment per year. 3. The increase in inventories is only included when the ending balance is greater than the opening balance. If the inventory at the end of the year decreases, it is calculated as zero. 4. The cash dividends include cash dividends from ordinary stocks and preferred stocks. 5. The gross value of property, plant, and equipment refers to the total amount of real property, plant, and equipment before depreciation. ▓ According to their nature, the issuer shall classify the various operating costs and operating expenses into fixed and variable terms. If there is any estimation or subjective judgment, the issuer must pay attention to rationality and maintain consistency. ▓ If the Company’s shares are those without par value or at par value of NT$10 per share, the former calculation for the ratio of paid-in capital shall be calculated based on the equity ratio attributable to the owner of the parent company in the balance sheet. 162 ▓ Parent-Company-Only Financial Analysis Year Financial Analysis for the Last Five Years As of March 31, 2021 Analysis Capital Structure (%) Debt ratio Long term fund to property, plants, and equipment ratio Current ratio (%) Liquidity analysis Quick ratio (%) Operating Performance Analysis Interest coverage Accounts receivable turnover (times) Average collection turnover Inventory turnover (times) Accounts payable turnover (times) Average inventory turnover days property, plants, and equipment turnover (times) Total assets turnover(times) Return on total assets (%) Return on equity (%) Profitability Operating income to paid-in capital Analysis ratio (%) Net margin (%) Earnings per share (dollar) Cash flow ratio (%) 2016 2017 2018 2019 2020 67.80 68.94 70.29 68.63 72.53 6,146.71 5,955.44 5,541.36 4,461.19 4,625.34 120.17 118.27 111.56 111.16 110.40 105.89 96.92 89.79 88.45 89.44 14.03 4.61 7.85 5.06 6.14 5.08 4.97 15.81 4.97 4.87 79.14 72.13 71.80 73.46 75.01 26.42 23.11 18.82 17.55 18.29 5.16 5.65 5.95 5.86 5.73 13.81 15.79 19.39 20.79 19.95 336.43 398.31 431.73 385.90 379.40 N.A. 2.32 2.79 7.76 2.56 2.00 5.54 2.66 3.06 8.59 2.64 2.46 6.57 2.73 2.73 8.80 21.18 15.11 22.60 17.75 23.66 1.12 1.88 0.68 1.32 0.98 2.05 0.76 1.60 0.94 2.15 3.15 (Note1) (Note1) 6.80 (Note1) Cash flow Cash flow adequacy ratio (%) 38.20 11.48 5.45 (Note1) (Note1) Cash reinvestment ratio (%) 0.68 (Note1) (Note1) 8.29 (Note1) Leverage Operating leverage Financial leverage Note: 1.The ratio is negative. 2.74 1.14 2.86 1.23 2.59 1.39 2.43 1.30 3.17 1.13 2. The financial ratio has changed by up to 20% in the past two years: ˙Interest coverage：Mainly due to the decrease in interest expenses compared to the earlier period. ˙Return on equity：Mainly due to the increase in net income compared to the earlier period. ˙Operating income to paid-in capital ratio：Mainly due to the increase in net income before taxes compared to the earlier period. ˙Net margin：Mainly due to the increase in net income compared to the earlier period. ˙Earnings per share：Mainly due to the increase in net income compared to the earlier period. ˙Operating leverage：Mainly due to the increase in net sales revenue compared to the earlier period. ˙Cash flow ratio：Mainly due to net cash outflow in operating activities. ˙Cash reinvestment ratio：Mainly due to net cash outflow in operating activities. 3. The financial information is audited and certified by the CPA every year. 163 ▓ Formula Financial Structure 1. (1) Debt Ratio = Total liabilities/Total assets (2) Ratio of long-term capital to property, plants, and equipment = (Net shareholders’ equity + Long-term liability)/Net property, plants, and equipment Solvency 2. (1) Current ratio = Current Assets/Current liability (2) Quick ratio = (Current assets - Inventory - Prepaid expenses)/Current liability (3) Interest coverage ratio = Net income before income tax and interest expense/Interest expense 3. Operating Efficiency (1) Accounts receivable (including accounts receivable and notes receivable from business activities) turnover = Net sales/Average accounts receivable balance (including accounts receivable and notes receivable from business activities) Inventory turnover = Cost of Goods Sold/Average inventory balance (2) A/R turnover days = 365/accounts receivable turnover (3) (4) Accounts payable (including accounts payable and notes payable from business activities) turnover = Cost of goods sold/Average accounts payable balance (including accounts payable and notes payable from business activities) Inventory turnover days = 365/Inventory turnover (5) (6) Property, plants, and equipment turnover = Net sales/Average Net Property, plants, and equipment (7) Total assets turnover = Net sales/Average Total assets 4. Profitability (1) Return on assets = [PAT + Interest expense × (1 - interest rate)]/average asset balance (2) Return on equity = PAT/average net equity (3) Pre-tax income to paid-in capital = Net income before taxes/Issued capital stock (4) Net profit ratio = PAT/Net sates (5) EPS = (PAT - preferred stock dividends)/weighted average outstanding shares 5. Cash Flow (1) Cash flow ratio = Cash flow from operating activities/Current liability (2) Cash flow adequacy ratio = Most recent 5-year Cash flow from operating activities/Most recent 5-year (Capital expenditure + increases in inventory + cash dividend) (3) Cash reinvestment ratio = (Cash flow from operating activities - cash dividend)/(Gross fixed assets + long-term investment + other assets + working capital) Leverage 6. (1) Operating leverage = (Nest revenue - variable cost of goods sold and operating expense)/operating income (2) Financial leverage = Operating income/(Operating income - interest expenses) ▓ The preceding formula for calculating the earnings per share must pay attention to the following: 1. Based on the weighted average number of ordinary shares rather than on the number of shares that have been issued at the end of the year. 164 2. Those who have cash replenishment or treasury shares must consider the circulation period and calculate the weighted average number of shares. 3. Where there is a surplus to increase capital or capital surplus to increase capital, the proportion of capital increase must be retrospectively adjusted when calculating the earnings per share for the previous annual and semi-annual periods. There is no need to consider the capital increase issuance period. 4. If the preferred stock is a non-convertible accumulative preferred stock, its annual dividends (whether issued or not) must be subtracted from the net profit after tax, or the net loss after tax must be added. If the preferred stock is non-cumulative and in the case of net profit after tax, the preferred stock dividends must be deducted from the net profit after tax. If it is a loss, no adjustment is required. ▓ When measuring cash flow, special attention should be paid to the following items: 1. The net cash flow from operating activities refers to the net cash inflow from operating activities in the cash flow statement. 2. Capital expenditure refers to the number of cash outflows of capital investment per year. 3. The increase in inventories is only included when the ending balance is greater than the opening balance. If the inventory at the end of the year decreases, it is calculated as zero. 4. The cash dividends include cash dividends from ordinary stocks and preferred stocks. 5. The gross value of property, plant, and equipment refers to the total amount of real property, plant, and equipment before depreciation. ▓ The issuer shall classify the various operating costs and operating expenses into fixed and variable terms according to their nature. If there is any estimation or subjective judgment, the issuer must pay attention to rationality and maintain consistency. ▓ If the Company’s shares are those without par value or at par value of NT$10 per share, the former calculation for the ratio of paid-in capital shall be calculated based on the equity ratio attributable to the owner of the parent company in the balance sheet. 165 6.3 Audit Committee’s Report for the Most Recent Year Audit Committee’s Review Report The Company’s 2020 financial statements、business report and proposal for distribution of earnings have been approved by the Audit Committee and by the Board of Directors. Szu- Chuan Chien and Yiu-Kwan Au, certified public accountants of KPMG, have completed the audit of the 2020 financial statements and issued an audit report relating thereto. According to Article 14-4 of the Securities and Exchange Act and Article 219 of Company Law, we hereby submit this report. Compal Electronics, Inc. Chairman of the Audit Committee: March 26, 2021 166 6.4 Consolidated Financial Statements and Independent Auditors’ Report Please refer to Attachment I. 6.5 Parent-Company-Only Financial Statements and Independent Auditors’ Report Please refer to Attachment II. Status of Financial Difficulties for the Company and its Subsidiaries 6.6 Incidence of financial difficulties for the Company and subsidiaries between the periods of 2020 to the publication date of this annual report: None. 167 VII. Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status Analysis Year 2020 2019 Unit: TWD Thousands Difference Amount % Current Assets Investments accounted for using equity method Property, plant and equipment Other Assets Total Assets Current Liabilities Other Liabilities Total Liabilities Ordinary Share Capital surplus Retained Earnings Other Equity Interests Treasury stock Non-controlling Equity 424,460,635 7,949,925 22,085,340 12,429,798 466,925,698 335,524,716 15,411,332 350,936,048 44,071,466 8,342,813 62,566,181 (7,266,708) (881,247) 9,157,145 343,154,813 7,319,086 19,972,347 12,202,173 382,648,419 255,820,033 12,069,042 267,889,075 44,071,466 9,159,259 57,726,604 (4,103,449) (881,247) 8,786,711 114,759,344 81,305,822 630,839 2,112,993 227,625 84,277,279 79,704,683 3,342,290 83,046,973 - (816,446) 4,839,577 (3,163,259) - 370,434 1,230,306 23.69 8.62 10.58 1.87 22.02 31.16 27.69 31.00 - (8.91) 8.38 77.09 - 4.22 1.07 Total Equity Note: Analysis of variations exceeding 20% and amounting to more than NTD10 million: 115,989,650 Increase in current assets: Mainly due to the business grow so the inventory and notes receivables and accounts increased. Increase in total assets: Mainly due to the increase in current assets such as inventory and notes receivables and accounts. Increase in current liabilities: Mainly due to the increase in the notes and accounts payables resulted from the business growth. Increase in non-current liabilities: Mainly due to the increase in the Long term loans. Increase in total liabilities: Mainly due to the increase in current liabilities such as notes and accounts payables. Decrease in other equity interests: Mainly due to the increase of losses of exchange differences on transition of foreign financial statements. Effect of changes on the Company’s financial position and Future response actions: Judging from the aforementioned causes, the effect from changes on the Company’s financial position in the last two years are normal outcomes from standard operating activities. 168 7.2 Analysis of Financial Performance Analysis Year 2020 2019 Unit: TWD Thousands Difference Amount % Net Sales Cost of Sales Gross Profit Operating Expenses Operating Income Non-operating Income and Expenses Profit Before Tax Less: Income Tax Expense Net Profit (loss) Other Comprehensive Income (after tax) 1,048,929,251 1,013,470,729 980,442,346 68,486,905 946,533,518 66,937,211 6.99 7.07 4.57 2.76 8.56 33,908,828 23,322,460 10,586,368 1,549,694 643,517 906,177 (578,492) 2,208,663 -381.80 10,007,876 2,112,157 7,895,719 3,114,840 601,047 2,513,793 31.12 28.46 31.84 35,458,522 23,965,977 11,492,545 1,630,171 13,122,716 2,713,204 10,409,512 (3,341,346) (1,534,980) (1,806,366) 117.68 Total Comprehensive Income 7,068,166 6,360,739 707,427 11.12 Note: Analysis of variations exceeding 20%: Increase in non-operating income and expenses: Mainly due to the decrease in financial costs and foreign currency exchange losses. Increase in profit before tax: Mainly due to the increase in operating income and net non-operating income and expenses. Increase in income tax expenses: Mainly due to the increase in net profit. Increase in net profit (loss): Mainly due to the increase in profit before tax. Increase in other comprehensive income (after tax): Mainly due to the increase of losses of exchange differences on translation of foreign financial statements and increase in unrealized losses from investments in equity instruments measured at fair value through other comprehensive income. ■ Forecast for sales for next year and basis for the forecast. Potential impact on the Company’s finances and sales in the future and response plan: Forecast for sales for next year and basis for the forecast Covid-19 pandemic caused the uncertainties in the global economic and industrial changes, however, it also brought the changes in people’s lifestyle. More distance work and learning, online entertainment, and trading activities also brought many new opportunities. Many industrial research institutions have predicted that the demand for electronic products will increase in 2021 compared to 2020, expecting the macro environment can progressively recover from the pandemic to regain stable development. Compal will capture those new opportunities via related technologies and products development, and we stay cautiously optimistic to the business development in 2021 and expect the continuous growth based on the 2020 achievements. Among them, the 5G, auto electronics, and smart medical and healthcare will be the key focus in the mid- to long- term. The related market analysis please refer to page 111~115 for “Industry Overview–current and future industry prospects”. Potential impact on the Company’s finances and sales in the future and response plan: In light of the growth in operation and future investments, the Company has established relevant financial 169 strategies. 7.3 Analysis of Cash Flow 7.3.1 Cash Flow Analysis for the Current Year Cash and Cash Equivalents, Beginning of Year (1) 66,559,397 Net Cash Flow from Operating Activities (2) 14,261,441 Other Cash Inflow (Outflow) (3) 8,306,085 Cash Surplus (Deficit) (1)+(2)+(3) 89,126,923 Unit: TWD Thousands Financing of Cash Deficit Investment Plans - Financing Plans - Note: 1. Other Cash Inflow (Outflow) includes the Cashflow in investing activities, financing activities, and foreign exchange impacts. 2. Analysis of the change of 2020 cash flows: •Net cash inflow in operating activities: Mainly due to profit making and increase of net changes of assets and liabilities from operating activities. •Net cash outflow in investing activities: Mainly due to the purchase of property, plants, and equipment. •Net inflow of financing activities: Mainly due to the loan increase and distribution of cash dividend. 3. Financing of cash deficits and liquidity analysis: There is no cash deficits situation. 7.3.2 Cash Flow Analysis for the Coming Year The Company takes the prudent planning and aims to maintain the stable cash liquidity, as the cash balance in the beginning of the year plus the net cash inflows from operating activities are adequate in meeting the Company’s investing and financing needs. 7.4 Major Capital Expenditures 7.4.1 Major Capital Expenditures and Sources of Capital Project Actual or Planned Source of Capital Actual or Planned Date of Completion Total Capital Unit: TWD Thousands Actual or Expected Capital Expenditure 2020 Property, plant and equipment Cash flow generated from operations and loans 7.4.2 Expected Benefits 2020 6,878,804 6,878,804 The Company’s major capital expenditure is invested to meet the needs of business growth and capacity expansion. Meanwhile to increase the automation equipment to enhance the production efficiency and achieve the goal of smart manufacturing, in which to build the Company’s long-term competitiveness. 170 7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year 1. Investment policy (1) Competition in the industry has accelerated and Compal is in full thrust integration mode. “Enlightened Living and Computing with a Green Connection” is the Compal vision. Our long-term investment strategies are to focus on products that relate to our core business, to provide the best quality in computing, communications, consumer, cloud and connection, to provide full solutions in cost and technology, and to put emphasis on our partner’s compliance with labor regulations, and the avoidance of human trafficking and slavery. We also want to strengthen the core resources, through vertical integration, diversification, and strategic investments or acquisitions as well as integration and horizontal competition. (2) Improve post investment performance, strengthen the integration of Group resources and strategic partnerships with investment businesses, facilitate the cooperation between the Company and invested business, and require their full compliance with labor regulations and those against human trafficking and slavery. Connect related customers to an information network, and form strategic alliances with other industries. Sustain the performance of operating output in social, economic, and environmental aspects using a high standard of specification. This includes increasing efficiency and productivity, improving the rights of the workers, proper economic development, and environmentally friendly production in a clean operating base. The Company fully supports investment companies with good performance to plan for IPO to accelerate the realization of good returns on investments. 2. Main causes of profits or losses incurred on investments, and any corrective actions planned The 2020 consolidated profits from investment using the equity method came to approximately TWD 436 million, coming mainly from the performance of ALLIED CIRCUIT CO., LTD., and Compal Precision Module Co., Ltd. 3. 2021 investment plans The long-term investment plan next year will be based on the Company’s operating policy to position ourselves as the pioneer provider of mobile device solutions and provide products, through the integration of R&D resources and clients, of an all-in-one computer, TV, AE and enterprise servers. The Company follows the principle of steady operation and always focuses on our core businesses. We will expand on the foundation of our existing businesses, make some vertical integration where appropriate, and expand horizontally into related activities, while continuing to grow our core business. In the vertical integration of upstream and downstream businesses that are not involved in hardware production, we will also expand the number of our developers and the proportion of software and firmware, to increase the value of their tangible assets and bring in value from additional sales. We expect horizontal mergers and expansions to help develop full IoT solutions for our clients which include applications in cross-industry automation, industrial computers, security control, the healthcare industry, cars, smart medical, smart cities, smart buildings, restaurants and retail outlets, with the primary aim of providing new investment opportunities and challenges. In practice, apart from achieving internal growth under the existing business framework, we also accept the possibility of mergers, acquisitions, joint ventures, technical calibrations, and investment activities through bilateral or multi-lateral collaboration between business entities. The Company and affiliates will proceed with the aforementioned expansion based on the consideration of whether the expansion can strengthen the Group’s advantage and assessment of reasonable risks. In terms of reinvestments, we follow the above mentioned principles and set basic principles in the following three 171 directions: (1) The vertical integration of upstream and downstream businesses to increase the proportion of self- made parts and improve overall competitiveness. (2) Horizontal mergers and expansion of related products and services, as well as other industries that provide prominent synergy or growth. (3) Develop technology which is beneficial to the Company or its affiliates, or invest in assets that provide synergy or growth. 7.6 Analysis of Risk Management 7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates, and Inflation on Corporate Finance, and Future Response Measures Net interest revenue and expense Items Net gain on exchange (including valuation of financial instruments) Net revenues Pre-tax income (Note) Net interest revenue/expense to net revenues Net interest revenue/expense to pre-tax income Net exchange gains to net revenues Net exchange gains to pre-tax income 1. Interest rate changes: Unit: TWD Thousands; % 2020 487,042 205,787 1,048,929,251 13,122,716 0.046% 3.711% 0.020% 1.568% According to the US Fed meeting minutes, the COVID-19 pandemic continues to weigh on the U.S. economic activity, employment, and inflation, and poses considerable risks to the economic outlook. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects to maintain an accommodative stance of monetary policy until the outcomes are achieved. With regard to the interest rate for TWD, the CBC conducted an overall assessment of the economic and financial conditions including a global economic recovery still faced with uncertainty, continued monetary easing and large fiscal stimuluses in major economies, mild domestic price trends and inflation outlook of a solid economic expansion. The CBC judged that a rate hold would help sustain prices and financial stability and foster economic growth. As of the end of 2020, the Company’s cash balance came to approximately TWD 89.1 billion. The long and short-term bank loans came to about TWD 112.2 billion, with net interest expenses for the year at TWD 487.042 million. The amount accounted for 0.046% and 3.711% of the Company’s net sales and income before taxes respectively. The Company will continue to monitor the change of interest rate closely and respond in a timely manner. 2. Exchange rate changes: The Company is export-oriented. And as such, the change and movement of exchange rate have a considerable impact on annual profit and loss. To minimize the impact on the Company’s operating profit/loss, the Company 172 mainly utilizes hedging such as forward foreign exchange contracts and swaps to minimize the risks of exchange rate movements. The full year net exchange gains and losses, including the valuation of financial assets, came to TWD 205.787 million, accounting for 0.020% and 1.568% of net revenue and net profit before taxes respectively. We will take all necessary actions based on the fluctuation of the exchange rate in the future. 3. Inflation: According to the CBC’s press reIease, the inflation is expected to rebound as import prices trend up on the back of oil and other raw materials and surging international freight charges. Domestic consumption is also expected to increase moderately. The Central Bank projected the CPI and core CPI annual growth rates to be 1.07% and 0.77%, respectively, indicating a mild inflation outlook in 2021. We will continue to watch for potential impact on prices. 7.6.2 Policies, Main Causes of Profits or Losses, and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions 1. The Company does not make high-risk, high-leveraged investments. 2. The Company only offers financing to its related parties, mainly providing short-term financing for their operating needs. 3. The Company only provides endorsements and guarantees that have been negotiated between subsidiaries and the parent company. The arrangements are covered by proper Endorsement and Guarantee Procedures. 4. The Company uses hedging strategies for assets and liabilities valued in foreign currencies. Such hedging, done through forward foreign exchange contracts and swap trading, covers the amount of net assets and liabilities to achieve the objective of risk aversion. The Company will continue to closely monitor changes in exchange rates and execute timely hedging in the future. 5. In addition to prudent evaluation and control of the execution of related policies, the Company also relies on regulations such as “Guidelines for Handling Acquisition and Disposal of Assets”, “Endorsement and Guarantee Procedures”, “Third Party Lending Procedures”, and “Procedures for the Handling of Derivatives Trading”. 7.6.3 Future Research and Development Projects and Corresponding Budget Other than the Company’s efforts in innovation and improvement of computers, TVs, and other peripheral products, the Company also deems innovative research and development works as a niche for the Company’s sustainable growth. Various R&D programs are developed and proposed by the R&D team based on their forecast of new technologies, understand of market trends, and integration of add-on function. They also team with clients to meet their market planning and detail product developments. In general, the Company usually has less than a one-year product development cycle and aims to shorten the R&D cycle year after year. The IT industry is highly competitive, and the timing of product development is of vital importance. The rapid growth of sales has made the quality, experience, and capacity of R&D a decisive factor that will become the key as to whether the Company can achieve its business target and whether the existing customers continue their cooperation with the Company. The 2021 R&D expenses are expected to be TWD 15.5 billion. 173 7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales The Company’s management team is paying close attention to any policies or regulations that may impact the Company’s operations. In 2020, the Company made all the necessary responses to significant changes in international and domestic policies and regulations, without a significant impact on Company operation. 7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales The constant arrival of new technology products to replace dated ones has changed the habits of users. This has consequently led to the emergence of different demands, and the development of ARM and Android has also impacted Wintel, which used to monopolize the market. Not only that, the emergence of cloud applications has also resulted in significant changes in the traditional PC market. The rising technology trend of IoT, Artificial Intelligence (AI), and 5G communication will also bring significant developments of industry as well as market opportunities. To cope with these changes, the Company has expanded new businesses to its existing product lines to embrace the latest industrial trends. As such, the Company has established its Innovation Center that is responsible for following and studying the latest developments in market trends. Not only that, the Innovation Center is also involved in the development of innovative products, technologies, and designs to strengthen the Company’s research on consumer behavior and thereby provide more accurate market segregation and product positioning to satisfy user needs. At the same time, we will also focus on boosting our innovative technology capabilities and plans for future product and market opportunities. 7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures Compal has concentrated on the IT and Communications industry for many years and has firmly adhered to a business philosophy of transcendence, sincerity, and harmony in a culture of ethics and honesty. We aim to be the best in world-class professional design, manufacturing, and services. As we pursue business growth, we always remember our obligations as a corporate citizen. We have strengthened corporate governance, fulfilled corporate social responsibility, and have established a good corporate image. In recent years, the Company business has expanded, the number of employees has increased, and our global production branches have increased in number. We have become acutely aware of the need for periodic checks of the external environment, a self-management system, and operational strategies for the early detection of potential corporate crises and the need for concrete and positive response plans and corrective measures. For many years, Compal has placed amongst the Top 500, Top 2000 businesses, and Top 2000 manufacturers in Taiwan by Fortune, Forbes Magazine, and CommonWealth Magazine respectively. In 2020, the Company placed within the top 6%-20% in the TWSE-listed Companies in the 6th round of “Corporate Governance Evaluation” and the distinction of the Award in the “Taiwan Corporate Sustainability Awards” organized by the Taiwan Institute of Sustainable Energy. These prestigious awards once again reaffirmed the Company’s corporate image. There was no company crisis in 2020 nor was there any significant event that affected the Company image in any way. 174 7.6.7 Expected Benefits from, Risks Relating to, and Response to Merger and Acquisition Plans In addition to continued cultivation of the existing information and communication technology (ICT) operations and enhancement of the core profit base, we are actively seeking out upcoming industries for merger, acquisition, joint venture, or technical collaboration, with the aim being to move into industrial computing, medical networking, IoT networking, vehicle networking and the medical equipment market. We will maintain stable development of existing businesses and also move ahead of the curve in other areas which have high growth momentum. The Company will integrate resources to increase R&D capacity, improve operational efficiency, and increase competitiveness. We expect to benefit from synergy, have a positive impact on future shareholder equity, and maintain adequate control of organizational integration matters and financial risks. 7.6.8 Expected Benefits from, Risks Relating to, and Response to Factory Expansion Plans: None 7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration: None 7.6.10 Effects of, Risks Relating to, and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%: None 7.6.11 Effects of, Risks Relating to, and Response to the Changes in Management: None 7.6.12 Litigation or Non-litigation Matters Inventec Corporation (“Inventec”), because of its former employees joined Compal Group, submitted a complaint to the Taiwan Taipei District Prosecutors Office asserting the Company has committed trade secret/copyright infringement. In August 2019, the Taiwan Taipei District Prosecutors Office brought criminal charges against the Company. In order to protect the Company’s rights and interests, the Company has retained outside counsels to defend such litigation. Considering to the fact that whether the Company has committed the trade secret/copyright infringement depending on whether Inventec’s former employees are convicted, the Taipei District Court judge therefore issued a ruling and according to which the Court made a stay of the criminal proceedings pending the determination of related criminal proceedings against those employees. Currently, the criminal proceedings against those employees is still in progress before the court. The Company cannot make any reasonable estimation regarding the possible impact on its business operation. 7.6.13 Other Major Risks ■ Information Security In order to maintain the competitive advantage and valuable intellectual property, and ensure that the information and information system for product operation are properly protected, the Compal Business Center establishes, records, implements and maintains the Compal information security management system in 175 accordance with the requirements of ISO 27001 standard, and establish information management processes and protection specifications in accordance with the government information security related laws and regulations to ensure the interests of the Company, customers and employees, and maintain the competitiveness of the Company. With the implementation of the Plan-Do-Check-Act (PDCA) management cycle, we continued to improve our information security system and comply with customer contracts properly to ensure the information security of the customers. Compal Electronics, Inc. had no proven complaints regarding intrusions to customer privacy or the loss of customer data in 2020. In response to external changes and the evolving of attack techniques, we continuously focus and invest in new information security knowledge and technologies for the effective advanced protection and detection of new information security threats to reduce operational risks. Compal Electronics, Inc. passed the ISO 27001:2005 information security certification in 2005, received the “Information Security Management System ISO 27001:2005” certification issued by the certification agency British Standards Institution (BSI) and gradually expanded the certification range while conducting regular tracking twice a year as well as reviewing audits every three years. In 2014, the IT Center was Included in the scope of verification in addition to the original R&D unit, and the certifications were reviewed again and approved. In 2015, Compal passed the verification of the new version of ISO 27001:2013, and obtained the certificate of "Information Security Management System ISO 27001:2013". In 2017 and 2020, it passed the re-verification successively, and then it was re-verified every three years afterwards, meeting the requirements of the new specifications. The scope of certification includes the information headquarters and research and development for portable computer products, all-in-one computer products, vehicle electronics, and server products. In October of 2020, we also passed external audit reviews and gradually expanded its scope of verification to KunShan Factory, ensuring the effective operations of the information security management systems. After the integration of the smart device business group information security system, the Company has further enforced information security policies, as well as executing the risk assessment of the information assets duly, and maintaining the confidentiality, integrity and availability of important information assets. On November 8, 2020, an office automation system anomaly occurred, which was processed in real time by our IT staff, who returned things back to normal the next day, with no impact on product production lines. Compal continues to strengthen the security control requirements, strengthen the Company's password policy, the original non-reusable first three generations of old password settings adjusted to ten generations. Strengthen the Company account identification mechanism, import two-factor authentication to enhance the security of remote access to internal resources, eliminate illegal users access to company resources or customer information. In order to fulfill our commitment to “sustainable operations and customer satisfaction,” the Company has assembled an “Information Committee” to serve as the highest governing body of information security within the Company Meeting twice a year for management reviews, and report to the Board of Directors on its 176 implementation once a year. The Committee is responsible for coordinating issues concerning information security projects, policies, goals, and resources, and ensuring participation from all employees for the protection of information security. The six major information security goals are measured monthly to monitor the control measures of information security management. BCP recovery exercises are executed regularly to ensure the validity of the BCP plan and that it meets the system recovery goals. Internal and external audits are executed every six months to ensure that the management system is followed and improved continuously. Risk assessment is executed every six months. Risk evaluation is performed through asset values and business processes, and risk processing measures are performed for the high-level risks evaluated. To boost employees’ awareness of information security, our employees are required to receive social engineering exercises and a briefing on information security and training. Year Information security training completion rate 2019 95.57 % 2020 95.55% ■ Other International conglomerates face many risks such as regulatory compliance, business competition, localization, and globalization. It is the responsibility of each Company employee to turn such challenges into future opportunity. Ex ante risk identification, weekly risk assessment and prevention, and post-crisis management, have all been added to the Company target management cycle (PDCA), key performance indicators (KPI), and control system for internal use. Such processes allow the dedicated units responsible for these specific risks to establish rigorous and rapid means for response and a problem-solving culture. By working through regular and unscheduled reviews and combining education, training and a performance risk appraisal system, they can cope with significantly different kinds of risk management based on local conditions. The Company did not face any significant risk in 2020. 7.7 Other material issues: None. 177 VIII. Special Disclosure 8.1 Summary of Affiliated Companies (As of Dec 31, 2020) 8.1.1 Affiliated enterprises report 1. Chart 178 179 2. Backgrounds of affiliated enterprises (December 31, 2020) Company name Compal Electronics, Inc. Date of establishment 1984.06.01 Compal International Holding Co., Ltd. Compal International Holding (HK) Limited Compal Electronics Technology (Kunshan) Co., Ltd. Compal Information (Kunshan) Co., Ltd. Compal Information Technology (Kunshan) Co., Ltd. Compal Digital Technology (Kunshan) Co., Ltd. 2000.01.12 2008.08.11 2000.05.19 2003.01.07 2003.06.20 2010.03.05 Kunshan Botai Electronics Co., Ltd. 2001.08.20 Compower Global Service Co., Ltd. 2012.04.23 Prospect Fortune Group Ltd. 2000.01.18 Jenpal International Ltd. 2010.12.27 Fortune Way Technology Corp. 2015.12.18 Just International Ltd. 1992.08.25 Compal Display Holding (HK) Limited 2008.08.11 Address Paid-up capital Main business activities or products Unit: Thousand dollars TWD 44,071,466 Manufacturing, processing and trading of notebooks, computer monitors, LCD TVs, cellphones, and electronic parts General investments USD 53,001 USD 74,803 General investments USD 12,000 Production of notebooks, cellphones and electronics USD 12,000 Production of notebooks, tablets and electronics USD 24,000 Production of notebooks and electronics USD 20,000 Production and sale of notebooks, cellphones and digital products USD 1,000 Production and after-sale service of notebooks and cellphones RMB 2,000 Maintenance and after-sale service of notebooks and cellphones USD 1 General investments USD 7,350 General investments USD 14,900 General investments USD 48,010 General investments USD 62,298 General investments No. 581 and 581-1, Ruiguang Road, Neihu District, Taipei City Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Unit 1405-1406 Dominion Centre 43-59 Queen’s road east, Wanchai,Hong Kong No. 25, Third Avenue, A Zone, Kunshan Comprehensive Free Trade Zone, Kunshan, Jiangsu, China No. 15, Third Avenue, A Zone, Kunshan Comprehensive Free Trade Zone, Kunshan, Jiangsu, China No. 58, First Avenue, A Zone, Kunshan Comprehensive Free Trade Zone, Kunshan, Jiangsu, China No.59, First Avenue, Kunshan Economic and Technological Development Zone, Kunshan, Jiangsu, China No. 1881, Liji Road, Shipai, Bacheng Town, Kunshan City, Jiangsu, China Building 3, No.9, Second Avenue, A Zone, Kunshan Comprehensive Free Trade Zone, Kunshan, Jiangsu, China Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Unit 1405-1406 Dominion Centre 43-59 Queen’s road east, Wanchai,Hong Kong 180 Date of establishment 1995.12.25 2018.04.13 Company name Compal Electronics (China) Co., Ltd. Compal Smart Device (Chongqing) Co.,LTD. Compal Optoelectronics (Kunshan) Co., Ltd. Compal System Trading (Kunshan) Co., Ltd. Compal Investment (Jiangsu) Co., Ltd. 2003.02.28 2007.10.24 2011.02.17 Compal Display Electronics (Kunshan) Co., Ltd. Compal International Ltd. 2011.03.30 1997.04.15 Compal Electronics International Ltd. 1997.04.22 Smart International Trading Ltd. 1998.09.03 Amexcom Electronics, Inc. Mexcom Technologies, LLC Mexcom Electronics, LLC Big Chance International Co., Ltd. Center Mind International Co., Ltd. 2011.07.22 2011.07.22 2011.07.22 2011.04.01 2011.04.01 Compal Investment (Sichuan) Co., Ltd. Compal Electronics (Chengdu) Co., Ltd. 2011.04.01 2011.04.02 Address Paid-up capital Main business activities or products USD 37,000 Manufacturing and sale of displays RMB 60,000 USD 12,100 Development, production and sale of communication equipment, cellphones, computers and smart watches, and provision of relevant technical services Production and sale of LCD TVs USD 1,400 International trade and distribution of computers and electronic components USD 15,600 General investments USD 15,000 Production and sale of LCD TVs USD 500 Sale of monitors, LCD TVs and related parts USD 9,245 General investments USD 1 General investments USD 1,000 Sale and maintenance of LCD TVs USD 1 General investments USD 8,234 General investments USD 90,820 General investments USD 80,820 General investments USD 80,820 USD 80,000 External investment and consultation service Development and production of notebooks, tablets, digital products, networking switches, wireless APs, and auto electronics No. 1881, Liji Road, Shipai, Bacheng Town, Kunshan City, Jiangsu, China No.18-5,Baohong Avenue,Liangjiang New District,Chongqing,China(No.D0 5,Zone D, Airport Section of Lianglu Cuntan Free Trade Port) No. 1881, Liji Road, Shipai, Bacheng Town, Kunshan City, Jiangsu, China No. 435 Weiye Road, Kunshan City Development Area, Jiangsu, China No. 1881, Liji Road, Shipai, Bacheng Town, Kunshan City, Jiangsu, China No. 1881, Liji Road, Shipai, Bacheng Town, Kunshan City, Jiangsu, China Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands 318 N. Carson Street, #208, Carson City, NV 89701, USA 318 N. Carson Street, #208, Carson City, NV 89701, USA 318 N. Carson Street, #208, Carson City, NV 89701, USA Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands No. 6, Shenglong Street, Wuhou District, Chengdu, Sichuan No. 88, Sec.1, ZongBao Avenue Chengdu Hi-tech Comprehensive Bonded Zone,Shuangliu County, Chengdu, Sichuan, China 181 Address Paid-up capital Main business activities or products No. 6, Shenglong Street, Wuhou District, Chengdu, Sichuan USD 800 Date of establishment 2011.05.25 Company name Compal Management (Chengdu) Co., Ltd. Prisco International Co., Ltd. 2011.06.02 Compal Electronics (Chongqing) Co., Ltd. 2011.06.02 Core Profit Holdings Ltd. 2012.04.02 Billion Sea Holdings Ltd. 2012.04.02 Mithera Capital Io LP 2019.06.01 High Shine Industrial Corp. 2007.07.04 Intelligent Universal Enterprise Ltd. 2007.08.02 Compal (Vietnam) Co., Ltd. 2007.10.04 Goal Reach Enterprises Ltd. 2007.07.03 2007.07.03 Compal Development and Management (Vietnam) Co., Ltd. Panpal Technology, Inc. Gempal Technology, Inc. Hong Ji Capital, Inc. 2004.06.28 1997.08.20 1997.10.29 Hong Jin Investment, Inc. 2004.07.02 Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands No.10-3, BaoHong Avenue, YuBei District, ChongQing, China (No.A03, ZoneA, Airport Section of LiangLu CunTan Free Trade Port Area) Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands PO Box 472, 2F, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Ba Thien Industrial Zone, Binh Xuyen County, Vinh Phuc Province, Vietnam Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Ba Thien Industrial Zone, Binh Xuyen County, Vinh Phuc Province, Vietnam No. 581, Ruiguang Road, Neihu District, Taipei City No. 581, Ruiguang Road, Neihu District, Taipei City No. 581, Ruiguang Road, Neihu District, Taipei City No. 581, Ruiguang Road, Neihu District, Taipei City 182 USD 10,000 USD 10,000 Management consultation, training, business information, tax advisory, investment consultation, and investment management General investments Development, production and sale of notebooks and related components, and provision of maintenance and after-sale services USD 147,000 General investments USD 147,000 General investments USD 5,000 General investments USD 79,700 General investments USD 67,000 General investments VND 1,398,683,500 Production, development, sale and repair of notebooks, computer monitors, LCD TVs and electronic components General investments USD 12,700 VND 216,428,500 Construction and investment of infrastructures at Ba-Thien Industrial Zone, Vietnam TWD 5,000,000 General investments TWD 900,000 General investments TWD 1,000,000 General investments TWD 295,000 General investments Company name Compalead Eletrônica do Brasil Indústria e Comércio Ltda. Compal Electronics India Private Limited Compal Electronica da Amazonia Ltda Arcadyan Technology Corporation Arcadyan Technology N.A. Corp. Arcadyan Germany Technology GmbH Arcadyan Technology Corporation Korea Arcadyan do Brasil Ltda. Date of establishment 2008.07.15 1996.05.21 2020.09.14 2003.05.09 2003.07.30 2007.04.11 2014.10.16 2015.04.24 Arcadyan Technology Limited Arcadyan Technology Australia Pty Ltd Arcadyan Technology Corporation (Russia), LLC. Arcadyan Holding (BVI) Corp. 2016.08.16 2017.03.28 2020.06.02 2007.03.07 Sinoprime Global Inc. 2004.12.29 Arcadyan Technology (Shanghai) Corp. Arcadyan Technology (Vietnam) Co., Ltd. Arch Holding (BVI) Corp. 2002.04.17 2019.03.26 2007.05.24 Compal Networking (Kunshan) Co., Ltd. 2006.06.26 Zhi-Bao Technology Inc. 2009.08.10 Address Paid-up capital Main business activities or products Rua Kanebo 175, Galpões C1 a C6, e C12 Distrito Industrial, Jundiaí, São Paulo, CEP:13213- 090, Brazil B-4, Ecotech 1 Ext., Surajpur Kasna Rd., Greater Noida- 201308, UP, India Rua Javari nº 1055, LOTE 2.47, ECV, Distrito Industrial I, Manaus AM, CEP 69.075-110, Brazil 8F, No. 8, Section 2, Guangfu Road, East District, Hsinchu City 5450 Thornwood Dr, Unit J Floor 2 San Jose CA 95123- 1222, USA Koelner Strasse 10b D-65760 Eschborn, Germany 103-1109RM SK Ventium 166, Gosan-ro, Gunpo-si, Gyeonggi- do, Republic of Korea 15850 Avenida Dr. Delfim Moreira, 356-SL 202, Centro, Minas Gerais, Santa Rita, Brazil, CEP 37540-000 183 Fraser Road, Sheffield, S80JP, United Kingdom 37 Midlothian Street Malvern East VIC 3145, Australia 17/2, Skakovaya street, floor 7, room 2, Moscow, Russia, 125040 Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands 4F, Block 3, No. 80 Huashen Road, Free Economic Pilot Zone, Shanghai, China Ba Thien Industrial Park, Ba Hien commune, Binh Xuyen district, Vinh Phuc Province Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands No. 520 Nanbang Road, Economic and Technological Development Zone, Kunshan, Jiangsu, China, China 5F, No. 58, Lane 188, Ruiguang Road, Neihu District, Taipei City 183 BRL 20,109 Production and after-sale service of notebooks, cellphones and electronics INR 386,000 Production and after-sale service of cellphones BRL 20,500 Production of notebooks and electronics TWD 2,084,095 USD 669 EUR 25 KRW 100,000 Research, development, production and sale of WLAN, integrated digital home and mobile office products Sale of wireless networking products Sale and technical support of wireless networking products Sale of wireless networking products BRL 9,682 Sale of wireless networking products GBP 50 AUD 50 Technical support for wireless networking products Sale of wireless networking products RUB 6,200 Sale of wireless networking products USD 69,780 General investments USD19,050 General investments USD 13,100 Research and sale of wireless networking products USD 19,000 Manufacturing of wireless products USD 10,550 General investments USD 12,450 Production and sale of wireless products TWD 349,800 General investments Address Paid-up capital Main business activities or products Company name Tatung Technology Inc. Date of establishment 2008.01.21 2018.11.22 2012.12.11 Tatung Technology of Japan Co., Ltd. Quest International Group Co., Ltd. Exquisite Electronic Co., Ltd. Tatung Home Appliances (Wu Jiang) Co., Ltd. Acbel Telecom Inc. 2004.11.29 2012.02.03 2001.02.13 Compal Broadband Networks Inc. 2009.08.19 10F, No. 288, Section 6, Civic Boulevard, Xinyi District, Taipei City 1 Chome-2-18, Mita, Minato-ku, Tokyo-to, Japan Level 2, Lotemau Centre, Vaea Street, Apia, Samoa. Level 2, Lotemau Centre, Vaea Street, Apia, Samoa. No. 508 Youming Road, Songling Town, Wujiang District, Suzhou, Jiangsu, China 5F, No. 58, Lane 188, Ruiguang Road, Neihu District, Taipei City 13F-1, No. 1, Taiyuan 1st Street, Zhubei City, Hsinchu County TWD 410,000 Development and sale of digital home electronics JPY 35,000 Sale of digital home electronics USD 1,200 General investments USD 1,170 General investments USD 3,350 Production and sale of digital home electronics TWD 87,990 General investments TWD 669,324 2017.01.01 Bekersveld 19, 2630 Aartselaar, Belgium EUR 200 2019.11.25 Het Poortgebouw Beech Avenue 54-62 Schiphol 1119 PW the Netherlands EUR 200 TWD 200,150 2010.12.10 2010.12.10 No. 2-1, Wenhua Rd., Hsin-chu Industrial Park, Hukou Shiang, Hsin-chu County 30352, Taiwan R.O.C. Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands No.520, Nanbang Rd., Kunshan City, Jiangsu Province, China 2010.12.14 2010.05.07 Development and sale of cable modems, set-top boxes and communication products Import and export of broadband networking products and related components, and provision of technical support and consultation services Import and export of broadband networking products and related components, and provision of technical support and consultation services Manufacturing of electronic components, computers and peripherals USD 46,882 General investments USD 46,882 General investments USD 40,000 Production touch panels and related components Compal Broadband Networks Belgium BVBA Compal Broadband Networks Netherlands B.V. Henghao Technology Co., Ltd. HengHao Holdings A Co., Ltd. HengHao Holdings B Co., Ltd. HengHao Optoelectronics Technology (Kunshan) Co., Ltd. Lucom Display Technology (Kunshan) Ltd. Mactech Inc. 2010.11.01 No.520, Nanbang Rd., Kunshan City, Jiangsu Province, China USD 15,000 Production touch panels and LCD displays 2000.05.23 Ripal Optotronics Co, Ltd. 2013.8.26 Rayonnant Technology Co., Ltd Compal Rayonnant Holdings Ltd. 2010.03.23 2011.12.02 TWD 411,458 Manufacturing of machinery and lighting equipment, retail sale of machinery, and international trade Manufacturing of home appliances and audiovisual electronics TWD 60,000 TWD 295,000 Manufacturing and sale of computers USD 12,500 and peripherals General investments No. 89, Land 36, Section 2, Tanxing Road, Tanyang Village, Tanzi District, Taichung City 2F, No. 256, Section 3, Zhongzheng Road, Rende District, Tainan City No. 581, Ruiguang Road, Neihu District, Taipei City Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands 184 Company name Allied Power Holding Corp. Date of establishment 2005.04.07 Primetek Enterprises Ltd. 2005.01.28 Address Paid-up capital Main business activities or products Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Unit 06, G/F, The Lodge, 535 Canton Road, Kowloon, Hong Kong USD 21,151 General investments USD 3,151 General investments USD 18,000 General investments 2010.06.04 No.9 Tainan Road,Industry Park, Taicang, Jiangsu, China USD 18,000 1361 EL Camino Real, Santa Clara, CA 95050, USA Ul Techniczna 7, 92-518, Lodz, Poland ul. Brukowa 6/8/205, 91-341 Lodz, Poland USD 100 PLN 6,804 PLN 5 Development and production of aluminum and magnesium alloy-based products Marketing and after-sale of computer monitors and notebooks Maintenance and after-sale service of notebooks and cellphones Maintenance and after-sale service of notebooks and cellphones USD 3,000 USD 89,755 Development of notebooks and related components, hardware and software General investments USD 6,427 General investments TWD 300,000 Production and wholesaling of medical equipment TWD 12,750 In vitro test supplies and equipment USD 71,900 General investments USD 27,000 Production of cellphones and tablets USD 5,800 Production of cellphones and tablets USD 49,000 Production of cellphones and tablets USD 100 General investments One Dell Way, MSC PS2-88, Round Rock, Texas 78682, USA Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands No.581-1, Ruiguang Rd., Neihu Dist., Taipei City 5F, No.240, Shinshu Rd., Shin Juang Dist., New Taipei City Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands No.68-2, Suyuan Road, Export Processing Zone (South Area). Jiangning Nanjing China No.77 Gaohu Street, Jiangning Economic and Technological Development Zone, Nanjing, China No.68-2, Suyuan Road, Export Processing Zone (South Area). Jiangning, Nanjing, China Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands 185 Rayonnant Technology Holdings (HK) Co., Ltd. Rayonnant Technology (Taicang) Co., Ltd. Bizcom Electronics, Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology (Poland) Sp. z.o.o. Auscom Engineering Inc. Flight Global Holding Inc. Compalead Electronics B.V. General Life Biotechnology Co., Ltd. Rapha Bio Ltd. Etrade Management Co., Ltd. Compal Communications (Nanjing) Co., Ltd. Compal Digital Communications (Nanjing) Co., Ltd. 2010.03.31 1992.04.13 2008.03.05 2020.09.15 2008.10.27 2007.08.09 2014.02.19 1999.01.16 2011.09.29 2000.07.05 2003.09.23 2004.03.26 Compal Wireless Communications (Nanjing) Co., Ltd. Webtek Technology Co., Ltd. 2006.02.13 2000.07.07 Address Paid-up capital Main business activities or products Company name Forever Young Technology Inc. Date of establishment 2004.11.25 Giant Rank Trading Limited 2004.11.25 HANHELT Communications (Nanjing) Co., Ltd. Compal Wise Electronic (Vietnam) Co., Ltd. 2009.03.11 2020.07.15 Unicom Global. Inc. 2006.03.21 Palcom International Corporation Compal Electronics (Holding) Ltd. 2006.03.22 1997.04.22 UniCore Biomedical Co., Ltd. Raycore Biotech Co., Ltd. Shennona Corporation HippoScreen Neurotech Corp. 2018.01.25 2017.10.18 2018.01.10 2019.01.28 Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands Room 301 3rd floor 43#, Headquarters Park,N0.70# Phoenix Road Jiangning District, Nanjing, China Binh Xuyen Industrial Zone, Dao Duc Town, Binh Xuyen District, Vinh Phuc Province, Vietnam No. 581, Ruiguang Road, Neihu District, Taipei City 8F, No. 385, Yangguang St., Neihu District, Taipei City Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands 1F, No. 50, Section 1, Jiuzong Road, Neihu District, Taipei city No. 581-1, Ruiguang Road, Neihu District, Taipei City 1361 EL Camino Real, Santa Clara, CA 95050, USA No. 581-1, Ruiguang Road, Neihu District, Taipei City SHENNONA CO., LTD. 2019.03.21 No. 581-1, Ruiguang Road, Neihu District, Taipei City TWD 6,000 Aco Smartcare Co.,Ltd. 2019.02.20 No. 581-1, Ruiguang Road, Neihu District, Taipei City TWD 30,748 USD 50 General investments USD - Sale of cellphones USD 2,000 Development of electronic communication equipment VND 46,180,000 Production and sale of cellphones, tablets, smart watches, communication equipments and electronics, and provision of relevant technical services Manufacturing and retail of computers and electronic components Sale of cellphones TWD 100,000 TWD 100,000 USD 1 General investments TWD 200,000 TWD 25,000 USD 1,100 TWD 30,000 Management consultation, leasing, and wholesale/retail of medical equipment Wholesaling and retailing of veterinary drugs Medical care IoT business Management consultation, leasing, wholesale/retail of Precision Instruments and International Trade Management consultation, leasing, wholesale/retail of Precision Instruments and International Trade wholesale/retail of Computer Software, Software Design Services, Data Processing Services, Electrical Machinery, Supplies Manufacturing, wholesale/retail of Electronic Materials, wholesale/retail of Precision Instruments, Product Designing, Biotechnology Services and International Trade 3. Business activities and relationships of affiliated enterprises (December 31, 2020) Industry category Investment holding company Name of affiliated enterprise Business relationship with other affiliated enterprises Compal International Holding Co., Ltd. Holds investment interest in Compal International Holding (HK) Limited, Prospect Fortune Group Ltd., Jenpal International Ltd., and Fortune Way Technology Corp. 186 Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises Compal International Holding (HK) Limited Jenpal International Ltd. Fortune Way Technology Corp. Just International Ltd. Compal Display Holding (HK) Limited Compal Investment (Jiangsu) Co., Ltd. Compal Electronics International Ltd. Mexcom Technologies, LLC Mexcom Electronics, LLC Big Chance International Co., Ltd. Center Mind International Co., Ltd. Compal Investment (Sichuan) Co., Ltd. Prisco International Co., Ltd. Core Profit Holdings Ltd. Billion Sea Holdings Ltd. Mithera Capital Io LP High Shine Industrial Corp. Intelligent Universal Enterprise Ltd. Goal Reach Enterprises Ltd. Panpal Technology Corporation Gempal Technology Co., Ltd. Hong Ji Capital Co., Ltd. Hong Jin Investment Co., Ltd. Compal Rayonnant Holdings Ltd. Allied Power Holding Corp. Flight Global Holding Inc. Compalead Electronics B.V. Etrade Management Co., Ltd. Compal Electronics (Holding) Ltd. Arcadyan Holding (BVI) Corp. Arch Holding (BVI) Corp. Zhi-Bao Technology Inc. Quest International Group Co., Ltd. Exquisite Electronic Co., Ltd. Acbel Telecom Inc. Holds investment interest in Compal Electronics Technology (Kunshan) Co., Ltd., Compal Information (Kunshan) Co., Ltd., Compal Information Technology (Kunshan) Co., Ltd.,Compal Digital Technology (Kunshan) Co., Ltd., Kunshan Botai Electronics Co., Ltd., and Compal Investment (Jiangsu, China) Co., Ltd. General investments General investments Holds investment interest in Compal Display Holding (HK) Limited, Compal International Ltd., and Compal Electronics International Ltd. Holds investment interest in Compal Electronics (China) Co., Ltd., Compal Optoelectronics (Kunshan) Co., Ltd., Compal System Trading (Kunshan) Co., Ltd., Compal Investment (Jiangsu, China) Co., Ltd., and Compal Communications (Nanjing) Co., Ltd. Holds investment interest in Compal Display Electronics (Kunshan) Co., Ltd. Holds investment interest in Smart International Trading Ltd., Amexcom Electronics, Inc., Mexcom Technologies, LLC, and Mexcom Electronics, LLC General investments General investments Holds investment interest in Center Mind International Co., Ltd. and Prisco International Co., Ltd. Holds investment interest in Compal Investment (Sichuan) Co., Ltd. Holds investment interest in Compal Electronics (Chengdu) Co., Ltd. and Compal Management (Chengdu) Co., Ltd. Holds investment interest in Compal Electronics (Chongqing) Co., Ltd. Holds investment interest in Billion Sea Holdings Ltd. Holds investment interest in High Shine Industrial Corp. and Mithera Capital Io LP. General investments Holds investment interest in Intelligent Universal Enterprise Ltd. and Goal Reach Enterprises Ltd. Holds investment interest in Compal (Vietnam) Co., Ltd. Holds investment interest in Compal Development and Management (Vietnam) Co., Ltd. General investments General investments General investments General investments General investments General investments General investments General investments General investments General investments Holds investment interest in Sinoprime Global Inc., Arch Holding (BVI) Corp., and Arcadyan Technology (Shanghai) Corp. Holds investment interest in Compal Networking (Kunshan) Co., Ltd. Holds investment interest in Compal Broadband Networks Inc. and Arcadyan do Brasil Ltda. Holds investment interest in Exquisite Electronic Co., Ltd. Holds investment interest in Tatung Home Appliances (Wu Jiang) Co., Ltd. General investments 187 Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises Electronic products wholesaling Electronic products manufacturing General investments Rayonnant Technology Holdings (HK) Co., Ltd. General investments HengHao Holdings A Co., Ltd. General investments HengHao Holdings B Co., Ltd. General investments Primetek Enterprises Ltd. Holds investment interest in Arcadyan Technology (Vietnam) Co., Ltd. Sinoprime Global Inc. General investments Prospect Fortune Group Ltd. General investments Compal International Ltd. General investments Webtek Technology Co., Ltd. General investments Forever Young Technology Inc. General investments Smart International Trading Ltd. International trade and distribution of computers and electronic Compal System Trading (Kunshan) Co., components Ltd. Sale of cellphones Giant Rank Trading Limited Sale of cellphones Palcom International Corporation Sale of wireless networking products Arcadyan Technology N.A. Corp. Arcadyan Technology Corporation Korea Sale of wireless networking products Sale of wireless networking products Arcadyan do Brasil Ltda. Sale of wireless networking products Arcadyan Technology Australia Pty Ltd. Development and sale of digital home electronics Tatung Technology Inc. Sale of digital home electronics Tatung Technology of Japan Co., Ltd. Sale and technical support of wireless networking products Arcadyan Germany Technology GmbH Sale of wireless networking products Arcadyan Technology Corporation (Russia), LLC. Compal Broadband Networks Belgium BVBA Compal Broadband Networks Netherlands B.V. Aco Smartcare Co.,Ltd. Compal Electronics, Inc. Import and export of broadband networking products and related components, and provision of technical support and consultation services Import and export of broadband networking products and related components, and provision of technical support and consultation services wholesale/retail of Computer Software, Software Design Services, Data Processing Services, Electrical Machinery, Supplies Manufacturing, wholesale/retail of Electronic Materials, wholesale/retail of Precision Instruments, Product Designing, Biotechnology Services, International Trade Manufacturing, processing and trading of notebooks, computer monitors, LCD TVs, cellphones, and electronic parts Production of notebooks, cellphones and electronics Compal Electronics Technology (Kunshan) Co., Ltd. Compal Information (Kunshan) Co., Ltd. Production of notebooks, tablets and electronics Compal Information Technology (Kunshan) Co., Ltd. Compal Digital Technology (Kunshan) Co., Ltd. Kunshan Botai Electronics Co., Ltd. Compal Electronics (China) Co., Ltd. Compal Smart Device (Chongqing) Co., Ltd. Production of notebooks and electronics Production and after-sale service of notebooks and cellphones Manufacturing and sale of displays Development, production and sale of communication equipment, cellphones, computers and smart watches, and provision of relevant technical services Production and sale of LCD TVs Production and sale of notebooks, cellphones and digital products Compal Optoelectronics (Kunshan) Co., Ltd. Compal Display Electronics (Kunshan) Co., Ltd. Amexcom Electronics, Inc. Production and sale of LCD TVs Sale and maintenance of LCD TVs 188 Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises Compal Electronics (Chengdu) Co., Ltd. Development and production of notebooks, tablets, digital products, networking switches, wireless APs, and auto electronics Compal Electronics (Chongqing) Co., Ltd. Development, production and sale of notebooks and related Compal (Vietnam) Co., Ltd. Compalead Eletrônica do Brasil Indústria e Comércio Ltda. Compal Electronica da Amazonia Ltda Unicom Global. Inc Arcadyan Technology Corp. Compal Broadband Networks Inc. Henghao Technology Co., Ltd. Mactech Co., Ltd. components, and provision of maintenance and after-sale services Production, development, sale and repair of notebooks, computer monitors, LCD TVs and electronic components Production and after-sale service of notebooks, cellphones and electronics Production of notebooks and electronics Manufacturing and retail of computers and electronic components Research, development, production and sale of WLAN, integrated digital home and mobile office products Development and sale of cable modems, set-top boxes and communication products Manufacturing of electronic components, computers and peripherals Manufacturing of machinery and lighting equipment, retail sale of machinery, and international trade Manufacturing and sale of computers and peripherals Production of cellphones and tablets Production of cellphones and tablets Production of cellphones and tablets Rayonnant Technology Co., Ltd. Compal Communications (Nanjing) Co., Ltd. Compal Digital Communications (Nanjing) Co., Ltd. Compal Wireless Communications (Nanjing) Co., Ltd. RiPAL Optotronics Co., Ltd. Compal Electronics India Private Limited Production and after-sale service of cellphones Compal Networking (Kunshan) Co., Ltd. Production and sale of wireless products Arcadyan Technology (Vietnam) Co., Ltd. Production and sale of wireless products Tatung Home Appliances (Wu Jiang) Co., Ltd. HengHao Optoelectronics Technology (Kunshan) CO., LTD Rayonnant Technology (Taicang) Co., Ltd. Development and production of aluminum and magnesium alloy- Manufacturing of home appliances and audiovisual electronics Production touch panels and related components Production and sale of digital home electronics Lucom Display Technology (Kunshan) Ltd. Production touch panels and LCD displays Compower Global Service Co., Ltd. Compal Management (Chengdu) Co., Ltd. Management consultation, training, business information, tax Maintenance and after-sale service of notebooks and cellphones based products HANHELT Communications (Nanjing) Co., Ltd. Bizcom Electronics, Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology (Poland) Sp. z.o.o. Auscom Engineering Inc. Arcadyan Technology (Shanghai) Corp. Arcadyan Technology Limited Compal Wise Electronic (Vietnam) Co., Ltd. Construction and development Compal Development and Management (Vietnam) Co., Ltd. advisory, investment consultation, and investment management Development of electronic communication equipment Marketing and after-sale of computer monitors and notebooks Maintenance and after-sale service of notebooks and cellphones Maintenance and after-sale service of notebooks and cellphones Development of notebooks and related components, hardware and software Research and sale of wireless networking products Technical support for wireless networking products Production and sale of cellphones, tablets, smart watches, communication equipments and electronics, and provision of relevant technical services Construction and investment of infrastructures at Ba-Thien Industrial Zone, Vietnam 189 Industry category Leasing and management consulting Name of affiliated enterprise Business relationship with other affiliated enterprises UniCore Biomedical Co., Ltd. HippoScreen Neurotech Corp. Management consultation, leasing, and wholesale/retail of medical equipment Management consultation, leasing, wholesale/retail of Precision Instruments and International Trade SHENNONA CO., LTD. Management consultation, leasing, wholesale/retail of Precision Raycore Biotech Co., Ltd. Instruments and International Trade Wholesaling and retailing of veterinary drugs General Life Biotechnology Co., Ltd. Manufacturing and sale of medical equipment Rapha Bio Ltd. Sale of test instruments and supplies Shennona Corporation Medical care IoT business Wholesale and retail of veterinary drugs Manufacturing and sale of medical equipment Medical care 4. Directors, supervisors, and President of affiliated enterprises December 31, 2020 Unit: TWD Thousands; shares; % Company name Title Name or name of representative Compal Electronics, Inc. Chairman Director and President Director Director Sheng-Hsiung Hsu Jui-Tsung Chen Binpal Investment Co., Ltd. (Representative: Wen-Being Hsu ) Kinpo Electronics, Inc. (Representative: Chieh-Li Hsu) Charng-Chyi Ko Sheng-Chieh Hsu Yen-Chia Chou Chung-Pin Wong Director Director Director President and Director Chiung-Chi Hsu Director Ming-Chih Chang Director Anthony Peter Bonadero Director Director Sheng-Hua Peng Independent Director Min-Chih Hsuan Independent Director Duei Tsai Independent Director Duh Kung Tsai Representative Representative Director Wen-Being Hsu Chieh-Li Hsu Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal International Holding Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Compal International Holding Co., Ltd. (Representative: Jui-Tsung Chen ) 190 Compal International Holding Co., Ltd. Compal International Holding (HK) Limited Director Director Director Shares held Shares (Note) 8,975,401 35,352,587 5,000,000 151,628,692 7,896,867 9,321,201 8,022,874 6.618,618 2,117,731 1,919,489 0 835,000 0 0 0 5,000,000 4,117,569 Shareholding percentage 0.20% 0.80% 0.11% 3.44% 0.18% 0.21% 0.18% 0.15% 0.05% 0.04% 0% 0.02% 0.00% 0.00% 0.00% 0.11% 0.09% 53,001,000 100.00% 53,001,000 100.00% 74,802,500 100.00% 74,802,500 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage 0 0 0.00% 0.00% Director Director Director Director Director Director 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Chairman Supervisor Supervisor Supervisor TWD 341,760 TWD 341,760 TWD 341,760 TWD 341,760 TWD 341,760 TWD 341,760 TWD 341,760 TWD 341,760 TWD 683,520 TWD 683,520 President Chairman President Chairman Compal Information (Kunshan) Co., Ltd. Compal Electronics Technology (Kunshan) Co., Ltd. Compal Information Technology (Kunshan) Co., Ltd. Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Chung-Pin Wong) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Chung-Pin Wong) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Chung-Pin Wong) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Chung-Pin Wong) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Ming-Chih Chang) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Kunshan Botai Electronics Co., Ltd. (Representative: Chung-Pin Wong) Kunshan Botai Electronics Co., Ltd. (Representative: Cheng-Chiang Wang) Ming-Chih Chang Compal International Holding Co., Ltd. Prospect Fortune (Representative: Sheng-Hsiung Hsu ) Group Ltd. Compal International Holding Co., Ltd. (Representative: Jui-Tsung Chen ) Compal Digital Technology (Kunshan) Co., Ltd. Kunshan Botai Electronics Co., Ltd. President Managing Director Compower Global Service Co., Ltd. President Chairman President Chairman President Director TWD 683,520 TWD 569,600 TWD 569,600 TWD 569,600 TWD 569,600 TWD 683,520 TWD 28,480 TWD 28,480 TWD 28,480 TWD 28,480 TWD 8,711 TWD 8,711 Supervisor Supervisor Supervisor 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Director Director Director Director Director 0.00% 0.00% 0.00% 0.00% 1,000 1,000 0 0 0 0 191 Company name Title Name or name of representative Jenpal International Ltd. Director Fortune Way Technology Corp. Just International Ltd. Compal Display Holding (HK) Limited Director Director Director Director Director Director Director Compal Electronics (China) Co., Ltd. Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Compal Smart Device (Chongqing) Co., Ltd. Compal Optoelectronics (Kunshan) Co., Ltd. Compal System Trading (Kunshan) Co., Ltd. Compal Investment (Jiangsu) Co., Ltd. Compal International Holding Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Compal International Holding Co., Ltd. (Representative: Jui-Tsung Chen ) Compal International Holding Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Compal International Holding Co., Ltd. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Just International Ltd. (Representative: Sheng-Hsiung Hsu ) Just International Ltd. (Representative: Jui-Tsung Chen ) Compal Display Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal Display Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal Display Holding (HK) Limited (Representative: Sheng-Hua Peng) Compal Display Holding (HK) Limited (Representative: Ching-Hsiung Lu) Fu-Chuan Chang Compal Electronics (China) Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Compal Electronics (China) Co., Ltd. (Representative: Chung-Pin Wong ) Compal Electronics (China) Co., Ltd. (Representative: Sheng-Hua Peng) Compal Electronics (China) Co., Ltd. (Representative: Cheng-Chiang Wang) Sheng-Hua Peng Compal Display Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal Display Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal Display Holding (HK) Limited (Representative: Sheng-Hua Peng) Compal Display Holding (HK) Limited (Representative: Ching-Hsiung Lu) Fu-Chuan Chang Compal Display Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal Display Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal Display Holding (HK) Limited (Representative: Chung-Pin Wong) Compal Display Holding (HK) Limited (Representative: Cheng-Chiang Wang) Ming-Chih Chang Compal International Holding (HK) Limited and Compal Display Holding (HK) Limited 192 Shares held Shares (Note) Shareholding percentage 7,350,000 100.00% 7,350,000 100.00% 14,900,000 100.00% 14,900,000 100.00% 48,010,000 100.00% 48,010,000 100.00% 62,297,500 100.00% 62,297,500 100.00% TWD 1,053,760 100.00% TWD 1,053,760 100.00% TWD 1,053,760 100.00% TWD 1,053,760 100.00% 0 0.00% TWD 261,342 100.00% TWD 261,342 100.00% TWD 261,342 100.00% TWD 261,342 100.00% 0 0.00% TWD 344,608 100.00% TWD 344,608 100.00% TWD 344,608 100.00% TWD 344,608 100.00% 0 0.00% TWD 39,872 100.00% TWD 39,872 100.00% TWD 39,872 100.00% TWD 39,872 100.00% 0 0.00% TWD 444,288 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Director Director Supervisor President Chairman Director Director Supervisor President Director Director Director Director Compal Display Electronics (Kunshan) Co., Ltd. Compal International Ltd. Compal Electronics International Ltd. Smart International Trading Ltd. Director Director Director Director Director President Director Director Amexcom Electronics, Inc. Mexcom Technologies, LLC Mexcom Electronics, LLC Big Chance International Co., Ltd. Director Director Center Mind International Co., Director (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited and Compal Display Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited and Compal Display Holding (HK) Limited (Representative: Sheng-Hua Peng) Compal International Holding (HK) Limited and Compal Display Holding (HK) Limited (Representative: Ching-Hsiung Lu) Sheng-Hua Peng Compal Investment (Jiangsu, China) Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Compal Investment (Jiangsu, China) Co., Ltd. (Representative: Jui-Tsung Chen ) Compal Investment (Jiangsu, China) Co., Ltd. (Representative: Sheng-Hua Peng) Compal Investment (Jiangsu, China) Co., Ltd. (Representative: Ching-Hsiung Lu) Sheng-Hua Peng Just International Ltd. (Representative: Sheng-Hsiung Hsu ) Just International Ltd. (Representative: Jui-Tsung Chen ) Just International Ltd. (Representative: Sheng-Hsiung Hsu ) Just International Ltd. (Representative: Jui-Tsung Chen ) Compal Electronics International Ltd. (Representative: Sheng-Hsiung Hsu ) Compal Electronics International Ltd. (Representative: Jui-Tsung Chen ) Compal Electronics International Ltd. (Representative: Sheng-Hua Peng) Compal Electronics International Ltd. (Representative: Hsin-Kung Mao) Compal Electronics International Ltd. (Representative: Chung-Pin Wong) Hsin-Kung Mao Compal Electronics International Ltd. (Representative: Hsin-Kung Mao ) Compal Electronics International Ltd. (Representative: Hsin-Kung Mao ) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Big chance International Co., Ltd. (Representative: Sheng-Hsiung Hsu ) 193 TWD 444,288 100.00% TWD 444,288 100.00% TWD 444,288 100.00% 0 0.00% TWD 427,200 100.00% TWD 427,200 100.00% TWD 427,200 100.00% TWD 427,200 100.00% 0 500,000 0.00% 100.00% 500,000 100.00% 9,245,000 100.00% 9,245,000 100.00% 1,000 1,000 100.00% 100.00% 1,000,000 100.00% 1,000,000 100.00% 1,000,000 0 TWD 28 100.00% 0.00% 100.00% TWD 234,504 100.00% 90,820,000 100.00% 90,820,000 100.00% 80,820,000 100.00% Company name Title Name or name of representative Ltd. Director Compal Investment (Sichuan) Co., Ltd. Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Director Director Chairman Director Director Supervisor President Director Director Compal Electronics (Chengdu) Co., Ltd. Compal Management (Chengdu) Co., Ltd. Prisco International Co., Ltd. Compal Electronics (Chongqing) Co., Ltd. Core Profit Holdings Ltd. Billion Sea Holdings Ltd. Director Director Director Mithera Capital Lo LP High Shine Director Big chance International Co., Ltd. (Representative: Jui-Tsung Chen ) Center Mind International Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Center Mind International Co., Ltd. (Representative: Jui-Tsung Chen ) Center Mind International Co., Ltd. (Representative: Chung-Pin Wong) Center Mind International Co., Ltd. (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal Investment (Sichuan) Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Compal Investment (Sichuan) Co., Ltd. (Representative: Jui-Tsung Chen ) Compal Investment (Sichuan) Co., Ltd. (Representative: Chung-Pin Wong) Compal Investment (Sichuan) Co., Ltd. (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal Investment (Sichuan) Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Compal Investment (Sichuan) Co., Ltd. (Representative: Jui-Tsung Chen ) Compal Investment (Sichuan) Co., Ltd. (Representative: Chung-Pin Wong) Compal Investment (Sichuan) Co., Ltd. (Representative: Ching-Hsiung Lu) Ming-Chih Chang Big chance International Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Big chance International Co., Ltd. (Representative: Jui-Tsung Chen ) Prisco International Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Prisco International Co., Ltd. (Representative: Jui-Tsung Chen ) Prisco International Co., Ltd. (Representative: Chung-Pin Wong) Prisco International Co., Ltd. (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Core Profit Holdings Ltd. (Representative: Sheng-Hsiung Hsu ) Core Profit Holdings Ltd. (Representative: Jui-Tsung Chen ) Billion Sea Holdings Ltd. (Representative: David Liao ) Compal Electronics, Inc. and Billion Sea 194 Shares held Shares (Note) Shareholding percentage 80,820,000 100.00% TWD 2,301,754 100.00% TWD 2,301,754 100.00% TWD 2,301,754 100.00% TWD 2,301,754 100.00% 0 0.00% TWD 2,278,400 100.00% TWD 2,278,400 100.00% TWD 2,278,400 100.00% TWD 2,278,400 100.00% 0 0.00% TWD 22,784 100.00% TWD 22,784 100.00% TWD 22,784 100.00% TWD 22,784 100.00% 0 0.00% 10,000,000 100.00% 10,000,000 100.00% TWD 284,800 100.00% TWD 284,800 100.00% TWD 284,800 100.00% TWD 284,800 100.00% 0 0.00% 147,000,000 100.00% 147,000,000 100.00% 147,000,000 100.00% 147,000,000 100.00% TWD 142,400 99.00% 79,700,000 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Industrial Corp. Director Intelligent Universal Enterprise Ltd. Director Compal (Vietnam) Co., Ltd. Goal Reach Enterprises Ltd. Compal Development and Management (Vietnam) Co., Ltd. Panpal Technology Co., Ltd. Director Director Director Director Director Chairman Director Director and President Supervisor Gempal Technology Co., Ltd. Chairman Hong Ji Capital Co., Ltd. Director and President Director Supervisor Chairman Director and President Director Supervisor Hong Jin Investment Co., Ltd. Chairman Director and President Director Supervisor President Compalead Eletrônica do Brasil Indústria e Holdings Ltd. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. and Billion Sea Holdings Ltd. (Representative: Jui-Tsung Chen ) High Shine Industrial Corp. (Representative: Sheng-Hsiung Hsu ) High Shine Industrial Corp. (Representative: Jui-Tsung Chen ) Intelligent Universal Enterprise Ltd. (Representative: Jui-Tsung Chen ) High Shine Industrial Corp. (Representative: Sheng-Hsiung Hsu ) High Shine Industrial Corp. (Representative: Jui-Tsung Chen ) Goal Reach Enterprises Ltd. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Ming-Chih Chang ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Chung-Pin Wong ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Chung-Pin Wong ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Chung-Pin Wong ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Hsiao-Li Chao 195 79,700,000 100.00% 67,000,000 100.00% 67,000,000 100.00% TWD 1,908,160 100.00% 12,700,000 100.00% 12,700,000 100.00% TWD 361,696 100.00% 500,000,000 100.00% 500,000,000 100.00% 500,000,000 100.00% 500,000,000 100.00% 90,000,000 100.00% 90,000,000 100.00% 90,000,000 100.00% 90,000,000 100.00% 100,000,000 100.00% 100,000,000 100.00% 100,000,000 100.00% 100,000,000 100.00% 29,500,000 100.00% 29,500,000 100.00% 29,500,000 100.00% 29,500,000 100.00% 0 0.00% Company name Title Name or name of representative Comércio Ltda. Compal Electronica da Amazonia Ltda Compal Electronics India Private Limited Arcadyan Technology Corp. President Hsiao-Li Chao President Director Director Chairman Director Director Director Guo-Dung Yu UJJAWAL SINGH KATIYAR Cheng-Chiang Wang Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Chung-Pao Liu) Che-He Wei Chao-Peng Tseng Director Director and President Independent Director Ying-Jen Li Independent Director Ching-Jang Wen Independent Director Wen-An Yang Director Director President Managers Director Arcadyan Technology Corp. (Representative: Jui-Tsung Chen ) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Chao-Peng Tseng Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Managers Nien-Che, Hsiung Director Director Director Director Director Chairman Director Chairman Director Chairman Director Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Keng-Tien Lin) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Fong-Yu, Lu) ) Arcadyan Technology Corp. (Representative: Linda, Chu ) Arcadyan Technology Corp. (Representative: Jui-Tsung Chen ) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Holding (BVI) Corp. (Representative: Jui-Tsung Chen ) Arcadyan Holding (BVI) Corp. (Representative: Chao-Peng Tseng) Sinoprime Global Inc. (Representative: Chao-Peng Tseng) 196 Arcadyan Technology N.A. Corp. Arcadyan Germany Technology GmbH Arcadyan Technology Corporation Korea Arcadyan do Brasil Ltda. Arcadyan Technology Limited Arcadyan Technology Australia Pty Ltd. Arcadyan Holding (BVI) Corp. Sinoprime Global Inc. Arcadyan Technology (Vietnam)Co., Ltd Shares held Shares (Note) Shareholding percentage 0 0 0 0 0.00% 0.00% 0.00% 0.00% 41,304,504 19.82% 41,304,504 19.82% 41,304,504 19.82% 41,304,504 19.82% 0 157,669 0 0 0 1,000 1,000 0 500 0.00% 0.08% 0.00% 0.00% 0.00% 100.00% 100.00% 0.00% 100.00% 20,000 100.00% 964,510 99.00% 50,000 50,000 50,000 50,000 50,000 100.00% 100.00% 100.00% 100.00% 100.00% 69,780,148 100.00% 69,780,148 100.00% 19,050,000 100.00% 19,050,000 100.00% 0 100.00% Company name Title Name or name of representative Arch Holding (BVI) Corp. Arcadyan Technology (Shanghai) Corp. Compal Network Information Technology (Kunshan) Co., Ltd. Zhi-Bao Technology Inc Tatung Technology Inc. Chairman Director Chairman Director Director Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Director Supervisor President Chairman Director Director Director Director Director Director Arcadyan Holding (BVI) Corp. (Representative: Jui-Tsung Chen ) Arcadyan Holding (BVI) Corp. (Representative: Chao-Peng Tseng) Arcadyan Holding (BVI) Corp. (Representative: Chao-Peng Tseng) Arcadyan Holding (BVI) Corp. (Representative: Ching-Hsiung Lu) Arcadyan Holding (BVI) Corp. (Representative: Fong-Yu, Lu) ) Arcadyan Holding (BVI) Corp. (Representative: Chung-Pao, Liu) Arcadyan Holding (BVI) Corp. (Representative: Chien-Lin Chen ) Arcadyan Holding (BVI) Corp. (Representative: Shih-Wei Huang) Chung-Pao, Liu Arch Holding (BVI) Corp. (Representative: Fong-Yu, Lu) ) Arch Holding (BVI) Corp. (Representative: Jui-Tsung Chen ) Arch Holding (BVI) Corp. (Representative: Chao-Peng Tseng) Arch Holding (BVI) Corp. (Representative: Ching-Hsiung Lu) Chung-Pao, Liu Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Cheng-Chiang Wang) Arcadyan Technology Corp. (Representative: Ching-Hsiung Lu) Arcadyan Technology Corp. (Representative: Fong-Yu, Lu) ) Arcadyan Technology Corp. (Representative: Shih-Wei Huang) Chao-Peng Tseng Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Fong-Yu, Lu) ) Arcadyan Technology Corp. (Representative: Chien-Lin Chen) Arcadyan Technology Corp. (Representative: Nien-Che, Hsiung) Arcadyan Technology Corp. (Representative: Li-Wei Dang) Shang Chi Investment Co., Ltd. (Representative: Chia-Tien Lin ) Chunghwa Investment Holding Company (Representative: Chih-Chen Chien) Supervisor Supervisor Shih-Wei Huang Yi-Yu Liang 197 Shares held Shares (Note) 34,900 34,900 Shareholding percentage 100.00% 100.00% TWD 373,088 100.00% TWD 373,088 100.00% TWD 373,088 100.00% TWD 373,088 100.00% TWD 373,088 100.00% TWD 373,088 100.00% 0 0.00% TWD 354,576 100.00% TWD 354,576 100.00% TWD 354,576 100.00% TWD 354,576 100.00% 0 34,980,000 0.00% 100.00% 34,980,000 100.00% 34,980,000 100.00% 34,980,000 100.00% 34,980,000 100.00% 0 25,027,910 0.00% 61.04% 25,027,910 61.04% 25,027,910 61.04% 25,027,910 61.04% 25,027,910 61.04% 1,027,056 2.51% 4,570,830 11.15% 0 0 0.00% 0.00% Company name Title Name or name of representative Tatung Technology of Japan Co., Ltd. Supervisor President Director Director Quest International Group Co., Ltd. Director Director Exquisite Electronic Co., Ltd. Director Tatung Home Appliances (Wu Jiang) Co., Ltd. Director Chairman Director Director Supervisor President Acbel Telecom Inc. Chairman Director Director Supervisor President Chi Sheng Investment Co., Ltd. (Representative: Chang-Chuan Lin) Li-Wei Dang Tatung Technology Inc. (Representative: Li-Wei Dang) Tatung Technology Inc. (Representative: Chao-Peng Tseng) Tatung Technology Inc. (Representative: Chao-Peng Tseng) Tatung Technology Inc. (Representative: Li-Wei Dang) Quest International Group Co., Ltd. (Representative: Chao-Peng Tseng) Quest International Group Co., Ltd. (Representative: Li-Wei Dang) Exquisite Electronic Co., Ltd. (Representative: Fong-Yu, Lu) ) Exquisite Electronic Co., Ltd. (Representative: Chao-Peng Tseng) Exquisite Electronic Co., Ltd. (Representative: Li-Wei Dang) Exquisite Electronic Co., Ltd. (Representative: Shih-Wei Huang) Li-Wei Dang Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Fong-Yu, Lu) ) AcBel Polytech Inc. (Representative: Chieh-Li Hsu) Shih-Wei Huang Fong-Yu, Lu Arcadyan Technology Corporation (Russia), LLC. Compal Broadband Networks Inc. Compal Broadband Networks Belgium BVBA Compal Broadband Networks Managers Isakova Nadezhda Pavlovna Chairman Director Director Director Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Realsun Investment Co., Ltd (Representative: Tsai , Jon-Jinn ) Compal Electronics, Inc. (Representative: Yu- Ho Wang) Independent Director Wong, Jen-Zen Independent Director Mao, Yin-Wen Independent Director Chen, Miao- Ling President Director Yu- Ho Wang Compal Broadband Networks Inc. (Representative: Yu- Ho Wang) Shares held Shares (Note) Shareholding percentage 2,727,272 1,062,935 700 700 6.65% 2.59% 100.00% 100.00% 1,200,000 100.00% 1,200,000 100.00% 1,170,000 100.00% 1,170,000 100.00% TWD 95,408 100.00% TWD 95,408 100.00% TWD 95,408 100.00% TWD 95,408 100.00% 0 4,494,111 4,494,111 4,292,216 0 0 0 0.00% 51.08% 51.08% 48.78% 0.00% 0.00% 100.00% 29,060,176 43.42% 29,060,176 43.42% 3,575,000 5.34% 29,060,176 43.42% 0 0 0 1,086,810 0.00% 0.00% 0.00% 1.62% 20,300 100.00% Director Compal Broadband Networks Inc. (Representative: Shao- Yang Chiu ) 20,300 100.00% 198 Company name Title Name or name of representative Netherlands B.V. Henghao Technology Co.,Ltd. HengHao Holdings A Co., Ltd. HengHao Holdings B Co., Ltd. HengHao Optoelectronics Technology (Kunshan) CO., LTD Lucom Display Technology (Kunshan) Ltd. Mactech Inc. Rayonnant Technology Co., Ltd. Chairman Vice Chairman and President Director Director Supervisor Director Director Director Director Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Director Director Director Director Supervisor Chairman Director and President Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Chen-Chang Hsu) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Cheng-Chiang Wang) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Henghao Technology Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Henghao Technology Co., Ltd. (Representative: Chung-Pin Wong) HengHao Holdings A Co., Ltd. (Representative: Sheng-Hsiung Hsu ) HengHao Holdings A Co., Ltd. (Representative: Chung-Pin Wong) HengHao Holdings B Co., Ltd. (Representative: Chen-Chang Hsu) HengHao Holdings B Co., Ltd. (Representative: Chia-Tien Liu) HengHao Holdings B Co., Ltd. (Representative: Jui-Hsiang Yang) HengHao Holdings B Co., Ltd. (Representative: Cheng-Chiang Wang) Chen-Chang Hsu HengHao Holdings B Co., Ltd. (Representative: Chen-Chang Hsu) HengHao Holdings B Co., Ltd. (Representative: Chia-Tien Liu ) HengHao Holdings B Co., Ltd. (Representative: Jui-Hsiang Yang ) HengHao Holdings B Co., Ltd. (Representative: Hsiu-Chuan Hsu) Chen-Chang Hsu Compal Electronics, Inc. (Representative: Yung-Ching Chang) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Chen-Chang Hsu) Compal Electronics, Inc. (Representative: Ming-Chih Chang) Wen-Pin Kuo Chuan-Kuei Lin Chyou-Jui Wei Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Pao-Jui Cheng) 199 Shares held Shares (Note) Shareholding percentage 20,014,952 100.00% 20,014,952 100.00% 20,014,952 100.00% 20,014,952 100.00% 20,014,952 46,882,000 46,882,000 46,882,000 46,882,000 100.00% 100.00% 100.00% 100.00% 100.00% TWD 1,139,200 100.00% TWD 1,139,200 100.00% TWD 1,139,200 100.00% TWD 1,139,200 100.00% 0 TWD 427,200 TWD 427,200 TWD 427,200 TWD 427,200 0 21,756,192 0.00% 100.00% 100.00% 100.00% 100.00% 0.00% 52.88% 21,756,192 52.88% 21,756,192 52.88% 21,756,192 52.88% 21,756,192 52.88% 1,301,505 1,609,172 0 3.16% 3.91% 0.00% 29,500,000 100.00% 29,500,000 100.00% Company name Title Name or name of representative Director Supervisor Director Director Director Director Director Director Director Director Chairman Director Director Supervisor President Director Director Director Director Director Director Director Director Compal Rayonnant Holdings Ltd. Allied Power Holding Corp. Primetek Enterprises Ltd. Rayonnant Technology Holdings (HK) Co., Ltd. Rayonnant Technology (Taicang) Co., Ltd. Bizcom Electronics, Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology (Poland) Sp. z.o.o. Auscom Engineering Inc. Chairman Director and President Director Compal Electronics, Inc. (Representative: Hsi-Kuan Chen) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Rayonnant Holdings Ltd. (Representative: Chung-Pin Wong) Rayonnant Technology Co., Ltd. (Representative: Pao-Jui Cheng) Allied Power Holding Corp. (Representative: Chung-Pin Wong) Allied Power Holding Corp. (Representative: Pao-Jui Cheng) Allied Power Holding Corp. (Representative: Chyou-Jui Wei) Allied Power Holding Corp. (Representative: Pao-Jui Cheng) Rayonnant Technology Holdings (HK) Co., Ltd. (Representative: Pao-Jui Cheng) Rayonnant Technology Holdings (HK) Co., Ltd (Representative: Cheng-Chiang Wang). Rayonnant Technology Holdings (HK) Co., Ltd. (Representative: Hsi-Kuan Chen) Rayonnant Technology Holdings (HK) Co., Ltd. (Representative: Chyou-Jui Wei) Pao-Jui Cheng Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Po-Tang Wang ) Compal Electronics, Inc. (Representative: Po-Tang Wang ) Compal Electronics, Inc. (Representative: Ming-Chih Chang) Compal Electronics, Inc. (Representative: Ming-Chih Chang) Compal Electronics, Inc. (Representative: Po-Tang Wang ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Min-Tung Weng) Compal Electronics, Inc. 200 Shares held Shares (Note) Shareholding percentage 29,500,000 100.00% 29,500,000 100.00% 12,500,000 100.00% 12,500,000 100.00% 12,500,000 59.10% 8,651,000 40.90% 3,151,000 100.00% 3,151,000 100.00% 18,000,000 100.00% 18,000,000 100.00% TWD 512,640 100.00% TWD 512,640 100.00% TWD 512,640 100.00% TWD 512,640 100.00% 0 100,000 0.00% 100.00% 100,000 100.00% 100,000 100.00% 100,000 100.00% 136,080 100.00% 136,080 100.00% 100 100 100.00% 100.00% 3,000,000 100.00% 3,000,000 3,000,000 100.00% 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Flight Global Holding Inc. Director Director RiPAL Optotronics Co., Ltd. Chairman Compal Electronics (Holding) Ltd. Etrade Management Co., Ltd. Compal Communications (Nanjing) Co., Ltd. Compal Digital Communications (Nanjing) Co., Ltd. Compal Wireless Communications (Nanjing) Co., Ltd. Director Director Supervisor Director Director Director Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Webtek Technology Director (Representative: Chun-Te Shen) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: Sheng-Hua Peng) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: Cheng-Chiang Wang) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: Hsin-Hsiung Huang) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: Guo-Dung Yu) Sheng-Hua Peng Etrade Management Co., Ltd. (Representative: Sheng-Hua Peng) Etrade Management Co., Ltd. (Representative: Cheng-Chiang Wang) Etrade Management Co., Ltd. (Representative: Hsin-Hsiung Huang) Etrade Management Co., Ltd. (Representative: Guo-Dung Yu) Sheng-Hua Peng Etrade Management Co., Ltd. (Representative: Sheng-Hua Peng) Etrade Management Co., Ltd. (Representative: Cheng-Chiang Wang) Etrade Management Co., Ltd. (Representative: Hsin-Hsiung Huang) Etrade Management Co., Ltd. (Representative: Guo-Dung Yu) Sheng-Hua Peng Compal Electronics, Inc. 201 89,755,495 100.00% 89,755,495 100.00% 6,000,000 100.00% 6,000,000 100.00% 6,000,000 100.00% 6,000,000 100.00% 1,000 1,000 100.00% 100.00% 46,900,000 65.23% TWD 768,960 100.00% TWD 768,960 100.00% TWD 768,960 100.00% TWD 768,960 100.00% 0 0.00% TWD 165,184 100.00% TWD 165,184 100.00% TWD 165,184 100.00% TWD 165,184 100.00% 0 0.00% TWD 1,395,520 100.00% TWD 1,395,520 100.00% TWD 1,395,520 100.00% TWD 1,395,520 0 100,000 100.00% 0.00% 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Co., Ltd Forever Young Technology Inc. HANHELT Communications (Nanjing) Co., Ltd. Director Chairman and President Director Director Supervisor Director Compal Wise Electronic (Vietnam) Co., Ltd. Unicom Global. Inc. Chairman Palcom International Corporation Compalead Electronics B.V. General Life Biotechnology Co., Ltd. Rapha Bio Ltd. Director Director Supervisor Chairman Director Director Supervisor Director Director Chairman Director Director Director Director Supervisor Supervisor Chairman Director Director Supervisor (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative:Jui-Tsung Chen ) Forever Young Technology Inc. (Representative: Sheng-Hua Peng) Forever Young Technology Inc. (Representative: Chung-Shing Tan) Forever Young Technology Inc. (Representative: Wen-Da Hsu) Forever Young Technology Inc. (Representative: Chiao-Lie Huang) Forever Young Technology Inc. (Representative：Jui-Tsung Chen) Compal Electronics, Inc. (Representative: Chung-Pin Wong ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen) Compal Electronics, Inc. (Representative: Hsin-Kung Mao) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Cheng-Chiang Wang) Compal Electronics, Inc. (Representative: Guo-Dung Yu) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Hsin-Kung Mao) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Alltek Technology Corp. (Representative: Yu-Wen Wu) WK Technology Fund IV (Representative: Tien-Hao Wang) China Development Industrial Bank Sheng-Hua Peng General Life Biotechnology Co., Ltd. (Representative: Chyou-Jui Wei) General Life Biotechnology Co., Ltd. (Representative: Cheng-Ta Chen) General Life Biotechnology Co., Ltd. (Representative: Tung-Pang Lin) General Life Biotechnology Co., Ltd. 202 50,000 100.00% TWD 56,960 100.00% TWD 56,960 100.00% TWD 56,960 100.00% TWD 56,960 100.00% TWD 56,960 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 6,426,516 100.00% 6,426,516 100.00% 15,000,000 50.00% 15,000,000 50.00% 15,000,000 50.00% 6,922,940 23.08% 992,000 2,520,000 0 1,275,000 1,275,000 1,275,000 1,275,000 3.31% 8.40% 0.00% 100.00% 100.00% 100.00% 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Giant Rank Trading Limited UniCore Biomedical Co., Ltd. Director Chairman Raycore Biotech Co., Ltd. Shennona Corporation HippoScreen Neurotech Corp. SHENNONA CO., LTD. Aco Smartcare Co.,Ltd. Director Director Director Director Supervisor Chairman Director Director Supervisor Director Director Director Chairman Director Director Director Director Supervisor Chairman Chairman Director Director Director Director Supervisor (Representative: Kuo-Hsiung Chung) Forever Young Technology Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Tzu-Chen Yen) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Compal Electronics, Inc. (Representative: Shu-Fen Ning) UniCore Biomedical Co., Ltd. (Representative:Jui-Tsung Chen) Raypal Biomedical Co., Ltd. (Representative: Yen-Liang Lin) UniCore Biomedical Co., Ltd. (Representative: Chyou-Jui Wei) UniCore Biomedical Co., Ltd. (Representative:Shu-Fen Ning) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Wei Chang Chen) Compal Electronics, Inc. .(Representative: Chun-Te Shen) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Wei Chang Chen) Compal Electronics, Inc. (Representative Chun-Te Shen) Po-Jen Liu Long-Song Lin Cheng-Chiang Wang Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative:Jui-Tsung Chen) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Hsuan-Bin Chen) Jian-Hung Liu Shu-Chin Su Chyou-Jui Wei - 100.00% 20,000,000 100.00% 20,000,000 100.00% 20,000,000 100.00% 20,000,000 100.00% 20,000,000 100.00% 20,000,000 100.00% 1,275,000 1,225,000 1,275,000 1,275,000 51.00% 49.00% 51.00% 51.00% 2,600,000 100.00% 2,600,000 100.00% 2,600,000 100.00% 2,100,000 70.00% 2,100,000 2,100,000 342,000 90,000 0 600,000 70.00% 70.00% 11.40% 3.00% 0.00% 100.00% 100,000,000 52.04% 100,000,000 52.04% 100,000,000 22,227,778 22,227,778 0 52.04% 11.57% 11.57% 0.00% Note: Limited liability companies are shown in terms of amount and percentage of capital contribution. (Exchange rates for amount of capital contribution: USD 1: TWD 28.48, CNY 1: TWD 4.3557, and VND 1: TWD 0.001238.) 203 5. Overview of Operating Status for Affiliated Companies in 2020 Company Name Capital Net asset value Total liabilities Net worth Operating Operating Net loss/profit for the EPS (in TWD ) revenue income period (after tax) (After tax) Unit: TWD Thousands Compal Electronics, Inc. 44,071,466 388,951,151 282,118,646 106,832,505 991,279,270 6,079,726 9,361,893 Compal International Holding Co., Ltd. and subsidiaries Just International Ltd. and subsidiaries Big Chance International Co., Ltd. and subsidiaries 1,787,680 110,222,465 74,994,142 35,228,323 448,216,021 1,948,080 2,436,470 1,460,443 39,231,680 31,497,489 7,734,191 153,181,164 74,679 (17,929) 2,636,051 32,333,632 25,871,109 6,462,523 118,880,726 562,584 279,020 Core Profit Holdings Ltd. 4,318,860 7,358,043 1,372 7,356,671 - (3,140) 74,866 High Shine Industrial Corp. and subsidiaries Panpal Technology Corporation and subsidiaries Gempal Technology Co., Ltd. Hong Ji Capital Co., Ltd. Hong Jin Investment Co., Ltd. UniCore Biomedical Co., Ltd. and subsidiaries 2,400,574 22,717,820 21,306,422 1,411,398 28,330,329 (232,992) (190,132) 5,000,000 10,415,557 4,860,173 5,555,384 8,729,642 274,268 900,000 1,000,000 295,000 2,123,010 1,142,320 351,374 20,535 881 66 2,102,475 1,141,439 351,308 - - - (283) (216) (211) 8,775 138,282 110,567 38,077 200,000 148,490 10,252 138,238 16,596 (24,355) (20,298) Shennona Corporation 32,665 1,222 (1) 1,222 - (84) (84) Arcadyan Technology Corp. and subsidiaries Compal Broadband Networks Inc. and subsidiaries Henghao Technology Co., Ltd. and subsidiaries 2,084,095 28,807,226 16,845,230 11,961,996 33,765,295 2,283,477 1,630,605 669,324 2,746,159 1,087,003 1,659,156 2,704,414 23,065 46,723 200,150 7,599,545 7,868,798 (269,253) 11,063,444 131,243 10,001 204 2.15 45.97 (0.37) 3.07 0.51 (2.39) 0.02 1.54 1.11 1.29 (1.01) (0.03) 8.36 0.70 0.50 Company Name Capital Net asset value Total liabilities Net worth Mactech Co., Ltd. 411,458 Ripal Optotronics CO, LTD. Co., Ltd. 60,000 601,961 141,028 90,855 57,547 511,106 83,481 revenue 241,870 75,576 18,131 11,056 General life Biotechnology Co., Ltd. and subsidiaries 300,000 766,409 351,147 415,262 401,547 17,145 Rayonnant Technology Holdings Ltd., 295,000 546,233 420,914 125,319 1,436,000 16,900 377,328 1,178,656 987,637 191,019 1,643,194 136,254 Operating Operating Net loss/profit for the EPS (in TWD ) income period (after tax) (After tax) Compal Rayonnant Holdings Ltd. and subsidiaries Bizcom Electronics, Inc. Compal Europe (Poland) Sp.z o.o. CGS Technology (Poland) Sp.z o.o. 36,369 90,156 37 475,710 270,291 - Auscom Engineering Inc. 101,747 185,678 Flight Global Holding Inc. 2,754,741 4,873,240 Compalead Electronics B.V. 197,463 788,338 Etrade Management Co., Ltd and subsidiaries Webtek Technology Co., Ltd Forever Young Technology Inc. and subsidiaries Unicom Global Inc. Palcom International Corporation 3,340 1,575 100,000 100,000 Compal Electronics (Holding) Ltd. 34 3,354,563 HippoScreen Neurotech Corp. SHENNONA CO., LTD. Aco Smartcare Co.,Ltd. 30,000 6,000 30,748 13,091 15,830 95,911 43,876 251,625 - 60,851 76,712 79 431,834 18,666 - 124,827 4,796,528 788,259 125,006 235,714 - 198,793 - - 155 18,626 (37) 13,006 (177) (982) 2,295,154 9,852,381 10,211,473 (359,092) 28,249,091 284,397 697,725 - 697,725 - (123) 1,862,468 533,354 1,329,114 31,809 (57,217) 648,189 141,559 1,029,416 (381,227) 29,135 (2,000) 6,697 13,057 7,990 112,424 3,356,563 6,394 2,773 (15,127) 6,937 - 648,838 136,085 - 762 23,602 (1,372) 87,921 312 (36,056) 205 (26,140) (26,086) 17,515 12,248 24,262 66,935 68,396 8,266 842 (37) 4,635 112,909 6,256 162,385 114,628 (54,135) (22,052) 6,801 - (1,340) (23,856) 0.43 2.04 0.81 2.27 5.47 82.66 6.19 (370) 1.55 1.26 0.97 2.26 1,146.28 (1,082.70) (2.21) 0.68 - (8.70) (2.23) (0.12) 6. Common shareholders in controlling and controlled companies: None 8.1.2 Consolidated financial statements of affiliated enterprises Representation Letter The entities that are required to be included in the combined financial statements of COMPAL ELECTRONICS, INC. as of and for the year ended December 31, 2020 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 endorsed by the Financial Supervisory Commission, "Consolidated and Separate Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, COMPAL ELECTRONICS, INC. and its subsidiaries do not prepare a separate set of combined financial statements. Company name: COMPAL ELECTRONICS, INC. Chairman: Sheng-Hsiung Hsu (Rock Hsu) Date: March 26, 2021 8.1.3 Affiliation reports: None 206 8.2 Private Placement of Securities in the Most Recent Year: None 8.3 Company Shares Held or Disposed by Subsidiaries in the Most Recent Year: Name of Share Capital Funding of Shares Subsidiary Acquired Source Held by the Percentage Panpal Technology Corporation Gempal Technology Co., Ltd. TWD Proprietary 5,000,000,000 capital TWD Proprietary 900,000,000 capital Company 100% 100% Date of Shares and Shares and Acquisition or Amount Amount Disposition Acquired Disposed Investment Gain (Loss) Shareholdings and Amount as of March Collateralized 31, 2021 Amount of Endorsements Made for the Subsidiary Amount Loaned to the Subsidiary Unit: TWD thousands; Shares; % - - - - - - - - 31,648,082 shares TWD 559,812,000 18,369,349 shares TWD 321,435,000 N.A. N.A. - - - - Note: Impacts on the Company’s financial performance and position: none of the subsidiaries had acquired or disposed the Company’s shares in the current year up till the publication date of this annual report, hence there were no impacts. 8.4 Other supplementary notes, where applicable: None 8.5 Any Events in 2020 and as of the Date of this Annual Report that had Significant Impacts on Shareholders’ Interests or Security Prices as Stated in Item 2 Paragraph 2 of Article 36 of Securities and Exchange Law of Taiwan: None 207 Compal Electronics, Inc. Chairman: Sheng-Hsiung Hsu (Rock Hsu) Chief Executive Officer (CEO): Chung-Pin Wong (Martin Wong) Attachment I 1 Stock Code:2324 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Financial Statements With Independent Auditors’ Report For the Years Ended December 31, 2020 and 2019 Address: Telephone: (02)8797-8588 No.581 & 581-1, Ruiguang Rd., Neihu District, Taipei, Taiwan Table of contents 2 Contents Page 1. Cover Page 2. Table of Contents 3. Representation Letter 4. Independent Auditors’ Report 5. Consolidated Balance Sheets 6. Consolidated Statements of Comprehensive Income 7. Consolidated Statements of Changes in Equity 8. Consolidated Statements of Cash Flows 9. Notes to the Consolidated Financial Statements (1) Company history (2) Approval date and procedures of the consolidated financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses due to major disasters (11) Subsequent events (12) Other (13) Other disclosures 1 2 3 4 5 6 7 8 9 9 9～10 10～39 39～40 40～94 94～96 97 97 97 97 97 (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information 98, 102～116 98, 117～121 98, 122～124 98 98～101 Representation Letter 3 The entities that are required to be included in the combined financial statements of COMPAL ELECTRONICS, INC. as of and for the year ended December 31, 2020 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 endorsed by the Financial Supervisory Commission, "Consolidated and Separate Financial Statements." In addition, the information required to be disclosed in the combined financial statements and is included in the consolidated financial statements. Consequently, COMPAL ELECTRONICS, INC. and Subsidiaries do not prepare a separate set of combined financial statements. Company name: COMPAL ELECTRONICS, INC. Chairman: Sheng-Hsiung Hsu (Rock Hsu) Date: March 26, 2021 4 Independent Auditor’s Report To COMPAL ELECTRONICS, INC.: Opinion We have audited the consolidated financial statements of COMPAL ELECTRONICS, INC. and its subsidiaries (the“Group”), which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the consolidated statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2020 and 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended December 31, 2020 and 2019, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Basis for Opinion We conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2020 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the Consolidated financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1. Account receivable valuation Please refer to Note (4)(g) for the accounting policy of accounts receivable. Information of account receivable valuation are shown in Note (6)(e) of the consolidated financial statements. 4-1 Description of key audit matters: The Group is subject to great influence of given the challenging industry climate and also devotes to develop new product lines and new customers, and the credit risks of these customers are higher than other world leading enterprises. Therefore, valuation of accounts receivable has been identified as a key audit matter. Our key audit procedures performed in respect of the above area included the following: In order to evaluate the reasonableness of the Group's estimations for bad debts, our key audit procedures included reviewing if the measurement of impairment loss of accounts receivable is accordance with accounting policy, examining the historical recovery records, analyzing the aging of accounts receivable, and the current credit status of customers, as well as inspecting the amount collected in the subsequent period. 2. Inventory valuation Please refer to Note (4)(h) and Note (5) for the accounting policy of inventory valuation, as well as the estimation and assumption uncertainty of the valuation of inventory, respectively. Information of estimation of the valuation of inventory are disclosed in Note (6)(f) of the consolidated financial statements. Description of key audit matters: The inventory is measured at the lower of cost or net realizable value. The short life cycle of electronic products may cause significant changes in customers’ demand and sales of related products. Consequently, the book value of inventory may be lower than the net realizable value of inventory. Therefore, the valuation of inventory is one of the key audit matters. Our key audit procedures performed in respect of the above area included the following: In order to verify the rationality of assessment of inventory valuation estimated by the Group, our key audit procedures included reviewing the consistency of prior year and accounting policy, inspecting the Group's inventory aging reports, analyzing the change of inventory aging, as well as verifying the inventory aging reports and the calculation of lower of cost or net realizable value. Other Matter Compal Electronics Inc. has prepared its parent-company-only financial statements as of and for the years ended December 31, 2020 and 2019, on which we have issued an unqualified opinion. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRC, SIC, endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance (including the Audit committee) are responsible for overseeing the Group’s financial reporting process. 4-2 Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. 5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 4-3 From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partners on the audit resulting in this independent auditors’ report are Szu-Chuan Chien and Yiu-Kwan Au. KPMG Taipei, Taiwan (Republic of China) March 26, 2021 The accompanying consolidated financial statements are intended only to present the consolidated statement of financial position, financial performance and cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China. Notes to Readers COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Assets Current assets: December 31, 2020 Amount % December 31, 2019 Amount % Cash and cash equivalents (note (6)(a)) $ 89,126,923 19.1 66,559,397 17.4 Current financial assets at fair value through profit or loss (note (6)(b)) 2,245,254 0.5 1,346,379 0.4 Current financial assets for hedging (note (6)(d)) Notes and accounts receivable, net (note (6)(e)) Notes and accounts receivable due from related parties, net (notes (6)(e) and (7)) Other receivables, net (notes (6)(e) and (7)) Inventories (note (6)(f)) Other current assets (note (8)) Non-current assets: Investments accounted for using equity method (note (6)(g)) Non-current financial assets at fair value through profit or loss (note (6)(b)) Non-current financial assets at fair value through other comprehensive income (note (6)(c)) Property, plant and equipment (notes (6)(k) and (8)) Right-of-use assets (note (6)(l)) Intangible assets Deferred tax assets (note (6)(s)) Other non-current assets (note (8)) - - 61 - 231,830,964 49.7 191,692,152 50.1 378,934 1,628,657 0.1 0.3 44,512 - 2,006,113 0.5 96,151,959 20.6 78,433,538 20.5 3,097,944 0.6 3,072,661 0.8 424,460,635 90.9 343,154,813 89.7 7,949,925 201,608 4,817,011 22,085,340 3,496,952 1,506,101 1,514,208 893,918 42,465,063 1.7 0.1 1.0 4.7 0.8 0.3 0.3 0.2 9.1 7,319,086 1.9 115,359 - 4,928,053 19,972,347 3,350,172 1,553,342 1,637,626 617,621 1.3 5.2 0.9 0.4 0.4 0.2 39,493,606 10.3 1100 1110 1135 1170 1180 1200 1310 1470 1550 1510 1517 1600 1755 1780 1840 1990 2100 2120 2125 2130 2170 2180 2200 2230 2250 2280 2300 2365 2322 2530 2540 2570 2580 2640 2670 Liabilities and Equity Current liabilities: Short-term borrowings (note (6)(m)) Current financial liabilities at fair value through profit or loss (note (6)(b)) Current financial liabilities for hedging (note (6)(d)) Current contract liabilities (note (6)(w)) Notes and accounts payable Notes and accounts payable to related parties (note (7)) Other payables (note (7)) Current tax liabilities Current provisions (note (6)(q)) Current lease liabilities (note (6)(p)) Other current liabilities Current refund liabilities Long-term borrowings, current portion (note (6)(n)) Non-Current liabilities: Bonds payable (note (6)(o)) Long-term borrowings (note (6)(n)) Deferred tax liabilities (note (6)(s)) Non-current lease liabilities (note (6)(p)) Non-current net defined benefit liability (note (6)(r)) Non-current liabilities, others (note (6)(g)) Total liabilities Equity: Equity attributable to owners of parent (note (6)(t)): 3110 3200 3300 3400 3500 Ordinary share Capital surplus Retained earnings Other equity interest Treasury shares 36XX Non-controlling interests Total equity 5 December 31, 2020 Amount % December 31, 2019 Amount % $ 92,838,733 19.9 60,951,844 15.9 136,617 2,192 - - 5,854 4,932 - - 820,016 0.2 956,455 0.2 196,837,439 42.2 142,940,869 37.4 2,888,624 23,397,683 5,378,651 870,050 377,161 1,470,466 1,574,469 8,932,615 0.6 5.0 1.2 0.2 0.1 0.3 0.3 1.9 1,504,908 21,916,685 4,428,716 830,757 717,021 1,990,243 1,382,374 18,189,375 0.4 5.7 1.2 0.2 0.1 0.5 0.4 4.8 335,524,716 71.9 255,820,033 66.8 980,219 10,401,738 992,470 1,910,601 786,173 340,131 15,411,332 0.2 2.2 0.2 0.4 0.2 0.1 3.3 966,492 7,559,063 1,009,218 1,550,067 738,164 0.3 2.0 0.3 0.4 0.2 246,038 - 12,069,042 3.2 350,936,048 75.2 267,889,075 70.0 44,071,466 8,342,813 9.4 1.8 44,071,466 11.5 9,159,259 2.4 62,566,181 13.4 57,726,604 15.1 (7,266,708) (881,247) (1.6) (0.2) (4,103,449) (1.1) (881,247) (0.2) 106,832,505 22.8 105,972,633 27.7 9,157,145 2.0 8,786,711 2.3 115,989,650 24.8 114,759,344 30.0 Total assets $ 466,925,698 100.0 382,648,419 100.0 Total liabilities and equity $ 466,925,698 100.0 382,648,419 100.0 See accompanying notes to consolidated financial statements. COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share) 6 2020 2019 Amount $ 1,048,929,251 100.0 % Amount % 980,442,346 100.0 1,013,470,729 96.6 946,533,518 96.5 35,458,522 3.4 33,908,828 3.5 4,604,361 4,198,621 15,162,995 23,965,977 11,492,545 0.4 0.4 1.5 2.3 1.1 4,961,131 4,204,536 14,156,793 23,322,460 10,586,368 0.5 0.4 1.5 2.4 1.1 1,636,257 0.2 1,664,803 0.2 261,043 - (166,133) - (1,149,215) (0.1) (2,725,564) (0.3) 493,920 0.1 - - (47,491) 435,657 1,630,171 13,122,716 2,713,204 10,409,512 486,554 (35,160) 197,008 - - - 0.2 1.3 0.3 1.0 (578,492) (0.1) 10,007,876 2,112,157 7,895,719 1.0 0.2 0.8 (65,862) (78,590) (54,128) 2,632 (201,212) - - - - - (40,786) 407,276 109,246 35,847 439,889 - - - - - (3,323,038) (0.3) (1,711,990) (0.2) 2,679 161,498 (18,727) - - - (4,871) (268,686) (10,678) - - - (3,140,134) (0.3) (1,974,869) (3,341,346) (0.3) (1,534,980) $ 7,068,166 0.7 6,360,739 6,955,899 939,820 7,895,719 5,456,508 904,231 6,360,739 $ 9,361,893 1,047,619 $ 10,409,512 6,083,542 984,624 7,068,166 $ $ $ $ 0.9 0.1 1.0 0.6 0.1 0.7 2.15 2.12 (0.2) (0.2) 0.6 0.7 0.1 0.8 0.5 0.1 0.6 1.60 1.58 4000 5000 6100 6200 6300 7100 7020 7050 7190 7590 7770 7900 7950 8300 8310 8311 8316 8320 Net sales revenue (notes (6)(w) and (7)) Cost of sales (notes (6)(f),(6)(r), (7) and (12)) Gross profit Operating expenses: (notes (6)(r) and (12)) Selling expenses Administrative expenses Research and development expenses Net operating income Non-operating income and expenses: Interest income (note (6)(y)) Other gains and losses, net (notes (6)(d), (6)(g), (6)(y) and (6)(aa)) Finance costs (notes (6)(m) and (6)(n)) Other income (note (6)(y)) Miscellaneous disbursements Share of profit (loss) of associates and joint ventures accounted for using equity method (note (6)(g)) Total non-operating income and expenses Profit from continuing operations before tax Less: Income tax expenses (note (6)(s)) Profit Other comprehensive income: Components of other comprehensive income that will not be reclassified to profit or loss Gains (losses) on remeasurements of defined benefit plans Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (note (6)(s)) 8360 8361 8368 8370 Components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income (loss) that will be reclassified to profit or loss Exchange differences on translation of foreign financial statements Gains (losses) on hedging instrument (note (6)(z)) Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss (note (6)(s)) Components of other comprehensive income that will be reclassified to profit or loss 8300 8500 8610 8620 8710 8720 Other comprehensive income Total comprehensive income Profit, attributable to: Profit, attributable to owners of parent Profit, attributable to non-controlling interests Comprehensive income attributable to: Comprehensive income (loss), attributable to owners of parent Comprehensive income (loss), attributable to non-controlling interests Earnings per share (note 6(v)) 9750 9850 Basic earnings per share Diluted earnings per share See accompanying notes to consolidated financial statements. COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Equity attributable to owners of parent 7 Total equity attributable to owners of parent Treasury shares (881,247) 105,723,646 6,955,899 (1,499,391) 5,456,508 - - - Non-controlling interests 7,438,202 939,820 (35,589) 904,231 Total equity 113,161,848 7,895,719 (1,534,980) 6,360,739 Total other equity interest Unrealized gains (losses) on financial assets measured at fair value through other comprehensiv e income Others - - Exchange differences on translation of foreign financial statements (1,852,952) (5,606,436) - (1,942,028) (1,942,028) - 474,763 474,763 Total other equity interest (7,459,388) - (1,706) (1,706) (1,468,971) (1,468,971) Retained earnings Special reserve Unappropriated retained earnings Balance at January 1, 2019 Profit for the year ended December 31, 2019 Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Cash dividends from capital surplus Changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted for using equity method Adjustments of capital surplus for cash dividends received by subsidiaries Disposal of investments in equity instruments measured at fair value through other comprehensive income Changes in non-controlling interests Balance at December 31, 2019 Profit for the year ended December 31, 2020 Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Cash dividends from capital surplus Changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted for using equity method Adjustments of capital surplus for cash dividends received by subsidiaries Others Disposal of investments in equity instruments measured at fair value through other comprehensive income Ordinary shares $ 44,071,466 - - - - - - - - - - - - Capital surplus 9,932,434 Legal reserve 18,827,814 - - - - - - (881,429) 43,473 4,760 60,021 - - - - - 891,336 - - - - - - - - 8,831,148 - - - - (1,363,317) - - - - - - - 44,071,466 9,159,259 19,719,150 7,467,831 - - - - - - - - - - - - - - - - - - (881,429) 1,735 2,228 60,021 999 - - - - - 695,590 - - - - - - - - - - - - - (3,366,088) - - - - - - - - Total retained earnings 60,060,381 6,955,899 (30,420) 6,925,479 - - (4,407,147) - - 32,401,419 6,955,899 (30,420) 6,925,479 (891,336) 1,363,317 (4,407,147) - - (27,199) (27,199) - - (4,824,910) (4,824,910) - 30,539,623 9,361,893 (48,219) 9,313,674 - 57,726,604 9,361,893 (48,219) 9,313,674 (695,590) 3,366,088 (4,407,147) - (33,051) - - (4,407,147) - (33,051) (9,055) (9,055) - - - - (24,844) (24,844) - - 8,342,813 20,414,740 4,101,743 38,049,698 62,566,181 (6,888,977) - - - - - - - - - (3,794,980) - (3,093,997) (3,093,997) - - - - - - - - - - - - - - - - - 4,824,910 - (306,763) - (137,062) (137,062) - - - - - - 33,051 8,978 24,844 - (376,952) - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,824,910 - - - - - - - - - - - - (4,407,147) (881,429) 43,473 (22,439) 60,021 - - (1,706) (4,103,449) - 927 927 (3,230,132) (3,230,132) (881,247) 105,972,633 9,361,893 (3,278,351) 6,083,542 - - - - - - - - - - 33,051 8,978 24,844 - - - - - - - - - - - - (4,407,147) (881,429) 1,735 2,151 60,021 999 - - (779) (7,266,708) (881,247) 106,832,505 - - - - - - - - - - (4,407,147) (881,429) 43,473 (22,439) 60,021 - 444,278 8,786,711 1,047,619 (62,995) 984,624 444,278 114,759,344 10,409,512 (3,341,346) 7,068,166 - - - - - - - - - - - (4,407,147) (881,429) 1,735 2,151 60,021 999 - (614,190) 9,157,145 (614,190) 115,989,650 Changes in non-controlling interests Balance at December 31, 2020 - $ 44,071,466 See accompanying notes to consolidated financial statements. COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation and amortization Increase (decrease) in expected credit loss Net loss (gain) on financial assets or liabilities at fair value through profit or loss Finance cost Interest income Dividend income Compensation cost of share-based payments Share of loss (profit) of associates and joint ventures accounted for using equity method Gain on disposal of property, plant and equipment Gain on disposal of investments Others Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in financial assets at fair value through profit or loss Decrease (increase) in notes and accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventories Decrease (increase) in other current assets Decrease (increase) in other non-current assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in financial liabilities at fair value through profit or loss Increase (decrease) in notes and accounts payable Increase (decrease) in other payables Increase (decrease) in refund liabilities Increase (decrease) in provisions Increase (decrease) in contract liabilities Increase (decrease) in other current liabilities Others Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Redemption from financial assets at amortized cost Acquisition of financial assets at fair value through profit or loss and through other comprehensive income Proceeds from disposal of financial assets at fair value through profit or loss and through other comprehensive income Acquisition of investments accounted for using equity method Proceeds from disposal of investments accounted for using equity method Net cash flow from disposal of subsidiaries Proceeds from capital reduction of investments Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Acquisition of right-of-use assets Others Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase (decrease) in short-term borrowings Proceeds from issuing bonds Proceeds from long-term borrowings Repayments of long-term borrowings Payment of lease liabilities Cash dividends paid Change in non-controlling interests Others Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period See accompanying notes to consolidated financial statements. 8 2020 2019 $ 13,122,716 10,007,876 6,192,985 (17,314) (9,575) 1,149,215 (1,636,257) (108,996) 72,507 (435,657) (25,499) (29,757) - 5,151,652 (898,874) (40,455,446) 521,393 (17,718,421) (25,283) 16,537 (58,560,094) 130,763 55,280,286 666,404 192,095 39,293 (136,439) (519,777) 60,122 55,712,747 (2,847,347) 2,304,305 15,427,021 1,490,940 230,451 (1,214,506) (1,672,465) 14,261,441 - (106,044) 52,105 (215,076) 38,952 - 6,933 (6,878,804) 174,054 (480,424) (317,808) (186,317) (7,912,429) 31,886,889 - 61,553,700 (67,967,785) (846,836) (5,228,555) (688,469) 92,634 18,801,578 (2,583,064) 22,567,526 66,559,397 89,126,923 6,419,421 (10,355) (24,217) 2,725,564 (1,664,803) (127,349) 125,281 (197,008) (40,245) (66,837) 16,668 7,156,120 2,630,896 12,043,387 (571,592) 715,384 (174,770) (66,117) 14,577,188 (21,059) (9,831,480) 2,735,002 (197,458) 403,776 (519,849) (991,160) 6,789 (8,415,439) 6,161,749 13,317,869 23,325,745 1,898,096 266,110 (3,112,013) (1,456,869) 20,921,069 350,000 (264,261) 1,511,226 (43,200) 18,033 143,495 10,120 (5,850,532) 168,226 (498,402) (281,637) 110,944 (4,625,988) (11,398,353) 1,007,240 66,462,300 (69,247,925) (832,815) (5,228,555) 258,360 (34,005) (19,013,753) (1,018,476) (3,737,148) 70,296,545 66,559,397 $ COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified) 9 (1) Company history Compal Electronics, Inc. (“the Company”) was incorporated in June 1984 as a company limited by shares and registered under the Ministry of Economic Affairs, R.O.C. The address of the Company’s registered office is No.581 and No.581-1 Ruiguang Rd., Neihu Dist., Taipei City, Taiwan. In accordance with Article 19 of the Business Mergers and Acquisitions Act, the Company merged its subsidiary, Compal Communications, Inc. (“CCI”) (the “Merger”), pursuant to the resolutions of the Board of Directors in November 2013. The Company was the surviving company and CCI was the dissolved company. The effective date of the Merger was February 27, 2014. The Company and its subsidiaries (together referred to as the“Group”and individually as the (“Group entities”) primarily are involved in the manufacture and sale of notebook personal computers (“notebook PCs”), monitors, LCD TVs, mobile phones and various components and peripherals. (2) Approval date and procedures of the consolidated financial statements: These consolidated financial statements were authorized for issuance by the Board of Directors and issued on March 26, 2021. (3) New standards, amendments and interpretations adopted: (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted. The Group has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2020: ● Amendments to IFRS 3“Definition of a Business” ● Amendments to IFRS 9, IAS39 and IFRS7“Interest Rate Benchmark Reform” ● Amendments to IAS 1 and IAS 8 “Definition of Material” ● Amendments to IFRS 16“COVID-19-Related Rent Concessions” (b) The impact of IFRS issued by the FSC but not yet effective The Group assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its consolidated financial statements: ● Amendments to IFRS 4“Extension of the Temporary Exemption from Applying IFRS 9” ● Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16“Interest Rate Benchmark Reform －Phase 2” (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 10 (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC The following new and amended standards, which may be relevant to the Group, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC: Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Content of amendment The amendments aim to promote consistency in applying the requirements by helping companies determine whether, the statement of balance sheet, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. in Effective date per IASB January 1, 2023 include clarifying the The amendments classification for debt a requirements company might settle by converting it into equity. The Group is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Group completes its evaluation. The Group does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements: ● 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”and amendments to IFRS 17“Insurance Contracts” ● Amendments to IAS 16“Property, Plant and Equipment－Proceeds before Intended Use” ● Amendments to IAS 37“Onerous Contracts－Cost of Fulfilling a Contract” ● Annual Improvements to IFRS Standards 2018-2020 ● Amendments to IFRS 3“Reference to the Conceptual Framework” ● Amendments to IAS 1“Disclosure of Accounting Policies” ● Amendments to IAS 8“Definition of Accounting Estimates” (4) Summary of significant accounting policies: The significant accounting policies presented in the consolidated financial statements are summarized as follows. The following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 11 (a) Statement of compliance These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the Regulations), the International Financial Reporting Standards, the International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the FSC (hereinafter referred to as the IFRS endorsed by the FSC). (b) Basis of preparation (i) Basis of measurement Except for the following significant accounts in the statement of financial position, the consolidated financial statements have been prepared on the historical cost basis: 1) 2) Financial instruments (including derivative financial instruments) measured at fair value through profit or loss are measured at fair value; Financial instruments measured at fair value through other comprehensive income are measured at fair value; 3) Hedging financial instruments are measured at fair value; 4) The defined benefit liability (or asset) is recognized as plan assets less the present value of the defined benefit obligation and the effect of the asset ceiling mentioned in note (4)(r). (ii) Functional and presentation currency The functional currency of each Group entities is determined based on the primary economic environment in which the entities operates. The consolidated financial statements are presented in New Taiwan Dollar, which is the Company's functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand. (c) Basis of consolidation (i) Principles of preparation of the consolidated financial statements The consolidated financial statements comprise the Company and its subsidiaries. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its control over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 12 Accounting policies of subsidiaries have been adjusted to ensure consistency with the policies adopted by the Group. Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any differences between the Group’s share of net assets before and after the change, and any considerations received or paid, are adjusted to or against the Group reserves. When the Group loses control over a subsidiary, it derecognizes the assets (including any goodwill) and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any interest retained in the former subsidiary is measured at fair value when control is lost, with the resulting gain or loss being recognized in profit or loss. The Group recognizes as gain or loss in profit or loss the difference between (i) the fair value of the consideration received as well as any investment retained in the former subsidiary at its fair value at the date when control is lost; and (ii) the assets (including any goodwill), liabilities of the subsidiary as well as any related non-controlling interests at their carrying amounts at the date when control is lost, as gain or loss in profit or loss. When the Group loses control of its subsidiary, it accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if it had directly disposed of the related assets or liabilities. (ii) List of subsidiaries in the consolidated financial statements Name of investor The Company Name of Subsidiary Panpal Technology Corp. (“Panpal”) Nature of Operation Investment 〞 〃 〃 Gempal Technology Corp. (“Gempal”) Hong Ji Capital Co., Ltd. (“Hong Ji”) Hong Jin Investment Co., Ltd. (“Hong Jin”) 〃 〃 〃 The Company, Panpal, et al. Accesstek, Inc. (“ATK”) Design, manufacturing and sales of optical disk drives and components 〃 Arcadyan Technology Corp. (“Arcadyan”) R&D, manufacturing and sales of wireless network, integrated household electronics, and mobile office products Percentage of ownership December 31, 2020 December 31, 2019 Description 100% 100% Panpal held 31,648 thousand shares of the Company as of December 31, 2020, which represented 0.7% of the Company’s outstanding shares. 100% 100% Gempal held 18,369 thousand shares of the Company as of December 31, 2020, which represented 0.4% of the Company’s outstanding shares. 100% 100% 100% 100% - 35% 38% The Group had control over ATK. The liquidation procedures had been completed in February 2020. 35% The Group had the ability to control Arcadyan. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 13 Name of investor The Company Rayonnant Technology Name of Subsidiary Co., Ltd. (“Rayonnant Technology”) HengHao Technology Co., Ltd. (“HengHao”) Ripal Optoelectronics Co., Ltd. (“Ripal”) Mactech Co., Ltd (“Mactech”) General Life Biotechnology Co., Ltd. (“GLB”) Nature of Operation Manufacturing and sales of PCs, computer periphery devices, and electronic components Manufacturing and sales of PCs, computer periphery devices, and electronic components Manufacturing of electric appliance and audiovisual electric products Manufacturing of equipment and lighting, retailing of equipment and international trading Manufacturing and sales of medical equipment Unicore BioMedical Co., Ltd. (“Unicore”) Hippo Screen Neurotech Co., Ltd. (“Hippo Screen”) Shennona Taiwan Co., Ltd. (“Shennona TW”) Aco Smartcare Co., Ltd. (“Aco Smartcare”) Shennona Corporation (“Shennona”) Auscom Engineering Inc. (“Auscom”) Just International Ltd. (“Just”) Compal International Holding Co., Ltd. (“CIH”) Compal Electronics (Holding) Ltd. (“CEH”) Management consulting services, rental and leasing business, wholesale and retail sale of medical equipment Management consulting services, rental and leasing business, wholesale and retail sale of precision instruments and international trading Management consulting services, rental and leasing business, wholesale and retail sale of precision instruments and international trading Wholesale and retail sale of computer software, software design services, data processing services, wholesale and retail sale of electronic materials, wholesale and retail sale of precision instruments, and biotechnology services Medical care IOT business R&D of notebook PC related products and components Investment 〃 〃 Percentage of ownership December 31, 2020 December 31, 2019 Description 100% 100% 100% 100% 100% 100% 53% 53% 50% 50% 100% 100% 70% 70% 100% 100% 52% 52% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Bizcom Electronics, Inc. (“Bizcom”) Flight Global Holding Inc. Warranty services and marketing of monitors and notebook PCs Investment 100% 100% 100% 100% (“FGH”) 〃 100% 100% 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 High Shine Industrial Corp. (“HSI”) The Company and BSH The Company Compal Europe (Poland) Sp. z o.o. (“CEP”) Big Chance International Co., Ltd. (“BCI”) 〃 Maintenance and warranty services of notebook PCs Investment 〃 〃 〃 〃 Compal Rayonnant Holdings Limited (“CRH”) Core Profit Holdings Limited (“CORE”) Compalead Electronics B.V. (“CPE”) 〃 〃 〃 CGS Technology (Poland) Sp. z o.o. (CGSP) Maintenance and warranty services of notebook PCs 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - CGSP was established in September 2020. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 14 Name of investor Panpal and Gempal Name of Subsidiary Compalead Eletronica do Brasil Industria e Comercio Ltda. (“CEB”) Nature of Operation Manufacturing of notebook PCs Percentage of ownership December 31, 2020 December 31, 2019 Description 100% 100% 〃 Compal Electronics India Private Limited (“CEIN”) Manufacturing and warranty service of mobile phones 100% 100% Panpal and CEB Compal Electronica DA Manufacturing of notebook PCs 100% Amazonia Ltda (“CEA”) - CEA was established in September 2020. Just Compal Display Holding Investment 100% 100% 〃 〃 (HK) Limited (“CDH (HK)”) Compal Electronics International Ltd. (“CII”) Compal International Ltd. (“CPI”) CDH (HK) Compal Electronics (China) Co., Ltd. (“CPC”) Compal Optoelectronics (Kunshan) Co., Ltd. (“CPO”) Compal System Trading (Kunshan) Co., Ltd. (“CST”) Compal Smart Device (Chongqing) Co., Ltd. (“CSD”) Smart International Trading 〃 〃 100% 100% 100% 100% Manufacturing and sales of monitors 100% 100% Manufacturing and sales of LCD TVs 100% 100% International trade and distribution of computers and electronic components 100% 100% Research, manufacturing and sales of communication devices, mobile phones, electronic computer, smart watch, and providing related technical service Investment 100% 100% 100% 100% Ltd. (“Smart”) Amexcom Electronics Inc. (“AEI”) Sales and maintenance of LCD TVs 100% 100% Mexcom Electronics, LLC Investment Investment (“MEL”) Mexcom Technologies, LLC (“MTL”) Compal International Holding (HK) Limited (“CIH (HK)”) Jenpal International Ltd. (“Jenpal”) Prospect Fortune Group Ltd. (“PFG”) Fortune Way Technology Corp. (“FWT”) 〃 〃 〃 〃 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 〃 〃 CPC CII 〃 〃 〃 CIH 〃 〃 〃 CIH (HK) Compal Electronics Manufacturing of notebook PCs 100% 100% 〃 〃 〃 Technology (Kunshan) Co., Ltd. (“CET”) Compal Information (Kunshan) Co., Ltd. (“CIC”) Compal Information Technology (Kunshan) Co., Ltd. (“CIT”) Kunshan Botai Electronics Co., Ltd. (“BT”) 〃 〃 〃 100% 100% 100% 100% 100% 100% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 15 Name of investor CIH (HK) Compal Information Name of Subsidiary Research and Development (Nanjing) Co., Ltd. (“CIN”) 〃 Compal Digital Technology (Kunshan) Co., Ltd. (“CDT”) Compower Global Service Co., Ltd. (“CGS”) Compal Investment (Jiansu) Co., Ltd. (“CIJ”) Compal Display BT CDH (HK) and CIH (HK) CIJ Electronics (Kunshan) Co., Ltd. (“CDE”) Etrade Management Co., Ltd. (“Etrade”) The Company and Webtek The Company Webtek Technology Co., Ltd. (“Webtek”) Forever Young Technology Inc. (“Forever”) 〃 〃 〃 CDH (HK) and Etrade Etrade Compal Digital Communication (Nanjing) Co., Ltd. (“CDCN”) Compal Wireless Communication (Nanjing) Co., Ltd. (“CWCN”) Hanhelt Communication (Nanjing) Co., Ltd. (“Hanhelt”) 〃 Forever 〃 〃 ATK 〃 〃 Nature of Operation Software and hardware R&D of computers, mobile phones and electronic components Percentage of ownership December 31, 2020 - December 31, 2019 - The liquidation procedures Description had been completed in September 2019. Manufacturing and sales of notebook PCs, mobile phones, and digital products 100% 100% Maintenance and warranty service of notebook PCs Investment 100% 100% 100% 100% Manufacturing and sales of LCD TVs 100% 100% Investment UniCom Global, Inc. (“UCGI”) Palcom International Corporation (“Palcom”) Compal Communication (Nanjing) Co., Ltd. (“CCI Nanjing”) Manufacturing and sales of computers and electronic components Sales of mobile phones Manufacturing and processing of mobile phones and tablet PCs 〃 〃 〃 〃 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% R&D and manufacturing of electronic communication equipment 100% 100% Giant Rank Trading Ltd. Sales of mobile phones 100% 100% (“GIA”) Compal Wise Electronic (Vietnam) Co., Ltd. (“CWV”) OptoRite Inc. MSI-ATK Otpics Holding Corporation (“MSI-ATK”) Maitek (BVI) Corporation (“Maitek”) Manufacturing and sales of mobile phones, tablet PCs, smart watches, communication devices, other electronic devices and providing related technical service. Sales of optical disc drives Investment 〃 100% - CWV was established in August 2020. - - - 100% 100% 100% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 16 Name of investor Name of Subsidiary Arcadyan Arcadyan Technology N.A. Nature of Operation Sales of wireless network products Percentage of ownership December 31, 2020 December 31, 2019 Description 100% 100% Technical support and sales of wireless network products 100% 100% Sales of wireless network products 100% 100% Investment 100% 100% Technical support of wireless network products 100% 100% Sales of wireless network products 100% 100% Sales of wireless network products 100% - Arcadyan RU was established in June 2020. Sales of wireless network products 100% 100% Investment 100% 100% R&D and sales of household digital electronic products Investment R&D and sales of cable modem, digital set-up box, and other communication products Import and export business 61% 51% 64% - 61% 51% 64% - The shares were recovered in November 2019. In the first quarter of 2020, the liquidation procedures had been completed. Import and export business, technical support and consulting service of broadband networks 100% 100% 〃 100% 100% Corp. (“Arcadyan USA”) 〃 Arcadyan Germany Technology GmbH (“Arcadyan Germany”) Arcadyan Technology Corporation Korea (“Arcadyan Korea”) Arcadyan Holding (BVI) Corp. (“Arcadyan Holding”) Arcadyan Technology Limited (“Arcadyan UK”) Arcadyan Technology Australia Pty Ltd. (“Arcadyan AU”) Arcadyan Technology Corporation (Russia), LLC. (“Arcadyan RU”) Arcadyan do Brasil Ltda. (“Arcadyan Brasil”) Zhi-Bao Technology Inc. (“Zhi-Bao”) Tatung Technology Inc. (“TTI”) AcBel Telecom Inc. (“AcBel Telecom”) Compal Broadband Network Inc. (“CBN”) 〃 〃 〃 〃 〃 Arcadyan and Zhi-Bao Arcadyan 〃 〃 The Company, Arcadyan, and its subsidiaries CBN Speedlink Tradings Limited (“Speedlink”) 〃 〃 Arcadyan Holding 〃 〃 Compal Broadband Networks Belgium BVBA (“CBNB”) Compal Broadband Networks Netherlands B.V. (“CBNN”) Sinoprime Global Inc. (“Sinoprime”) Arcadyan Technology (Shanghai) Corp. (“SVA Arcadyan”) Arch Holding (BVI) Corp. (“Arch Holding”) Investment R&D and sales of wireless network products Investment Arch Holding Compal Networking (Kunshan) Co., Ltd. (“CNC”) Sinoprime Arcadyan Technology (Vietnam) Co., Ltd. (“Arcadyan Vietnam”) Manufacturing of wireless network products Manufacturing of wireless network products AcBel Telecom Leading Images Ltd. Investment (“Leading Images”) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% The liquidation procedures had been completed on December 7, 2020. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 17 Name of investor Leading Images Astoria Networks GmbH (“Astoria GmbH”) Name of Subsidiary Nature of Operation Sales of wireless network products Percentage of ownership December 31, 2020 - December 31, 2019 Description 100% The liquidation procedures had been completed on October 14, 2020. TTI 〃 Quest Exquisite HSI 〃 IUE Goal Rayonnant Technology and CRH APH 〃 Rayonnant Technology (HK) Quest International Group Co., Ltd. (“Quest”) Tatung Technology of Japan Co., Ltd. (“TTJC”) Exquisite Electronic Co., Ltd. (“Exquisite”) Tatung Home Appliances (Wujiang) Co., Ltd. (“THAC”) Intelligent Universal Enterprise Ltd. (“IUE”) Goal Reach Enterprises Ltd. (“Goal”) Compal (Vietnam) Co., Ltd. (“CVC”) Compal Development & Management (“Vietnam”) Co., Ltd. (“CDM”) Allied Power Holding Corp. (“APH”) Primetek Enterprises Limited (“PEL”) Rayonnant Technology (HK) Co., Ltd. (“Rayonnant Technology (HK)”) Rayonnant Technology (Taicang) Co., Ltd. (“Rayonnant Technology (Taicang)”) Investment Sales of household digital electronic products Investment Manufacturing of household digital electronic products 100% 100% 100% 100% 100% 100% 100% 100% Investment 100% 100% 〃 R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components Construction of and investment in infrastructure in Ba-Thien industrial district of Vietnam 100% 100% 100% 100% 100% 100% Investment 100% 100% 〃 〃 100% 100% 100% 100% Manufacturing and sales of aluminum alloy and magnesium alloy products 100% 100% HengHao HengHao Holdings A Co., Investment 100% 100% HHA Ltd. (“HHA”) HengHao Holdings B Co., Ltd. (“HHB”) 〃 100% 100% HHB HengHao Trading Co., Ltd. Marketing and international trade - 100% The liquidation procedures had been completed on December 2020 〃 〃 BCI 〃 CMI PRI HengHao Optoelectronics Technology (Kunshan) Co., Ltd. (“HengHao Kunshan”) Lucom Display Technology (Kunshan) Limited (“Lucom”) Center Mind International Co., Ltd. (“CMI”) Prisco International Co., Ltd. (“PRI”) Compal Investment (Sichuan) Co., Ltd. (“CIS”) Compal Electronics (Chongqing) Co., Ltd. (“CEQ”) Production of touch panels and related components 100% 100% Manufacturing of touch panels and LCD TVs 100% 100% Investment 100% 100% 〃 100% 100% Outward investment and consulting services R&D, manufacturing and sales of notebook PCs, related components, related maintenance and warranty services 100% 100% 100% 100% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 18 Name of investor CIS Name of Subsidiary Compal Electronics (Chengdu) Co., Ltd. (“CEC”) 〃 Compal Management (Chengdu) Co., Ltd. (“CMC”) CORE Billion Sea Holdings Nature of Operation R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products Corporate management consulting, training and education, business information consulting, financial and tax consulting, investment consulting, and investment management services Investment Limited (“BSH”) Mithera Capital Io LP (“Mithera”) 〃 BSH GLB Unicore Percentage of ownership December 31, 2020 December 31, 2019 Description 100% 100% 100% 100% 100% 100% 99% 99% Rapha Bio Ltd. (“RBL”) Detector and feature Raycore Biotech Co., Ltd. Animal medication retail and wholesale 100% 51% 100% 51% (“Raycore”) (d) Foreign currency (i) Foreign currency transaction Transactions in foreign currencies are translated to the respective functional currencies of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss, except for the following differences which are recognized in other comprehensive income arising on the retranslation: 1) 2) fair value through other comprehensive income financial assets; a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or 3) qualifying cash flow hedges to the extent the hedge is effective (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 19 (ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Group entities' functional currency at exchange rates of the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Group entities' functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation differences in equity. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity. (e) Classification of current and non-current assets and liabilities An asset is classified as current under one of the following criteria, and all other assets are classified as non-current. (i) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; (ii) It holds the asset primarily for the purpose of trading; (iii) It expects to realize the asset within twelve months after the reporting period; or (iv) The asset is cash and cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current. (i) It expects to settle the liability in its normal operating cycle; (ii) It holds the liability primarily for the purpose of trading; (iii) The liability is due to be settled within twelve months after the reporting period; or (iv) The Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not impact its classification. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 20 (f) Cash and cash equivalents Cash comprise cash on hand and demand deposits. Cash equivalents are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. The time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes are reclassified as cash equivalents. (g) Financial instruments (i) Financial assets Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”). The Group shall reclassify all affected financial assets only when it changes its business model for managing its financial assets. 1) Financial assets measured at amortized cost A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: ‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting. 2) Fair value through other comprehensive income (“FVOCI”) A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: ‧ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 21 Some accounts receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling by the Group, therefore, those receivables are measured at FVOCI and presented as accounts receivable. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis. A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting. Dividend income derived from equity investments is recognized on the date that the Group’s right to receive payment is established, which in the case of quoted securities is normally on the date the shareholders' meeting approved the earning distribution. 3) Fair value through profit or loss (“FVTPL”) All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting. 4) Impairment of financial assets The Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, financial assets measured at amortized costs, notes and accounts receivable, other receivable, guarantee deposit and other financial assets), debt investments measured at FVOCI, and accounts receivable measured at FVOCI. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 22 The Group measures loss allowances at an amount equal to lifetime expected credit loss (“ECL”), except for the following which are measured as 12-month ECL: ‧ debt securities that are determined to have low credit risk at the reporting date; and ‧ other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition. Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit assessment as well as forward-looking information. The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Group considers a financial asset to be in default when the financial asset is more than 90 days past due or the borrower is unlikely to pay its credit obligations to the Group in full. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 23 At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. An evidence that a financial assets is credit-impaired includes the following observable data: ‧ significant financial difficulty of the borrower or issuer; ‧ a breach of contract such as a default or being more than 90 days past due; ‧ the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider; ‧ it is probable that the borrower will enter bankruptcy or other financial reorganization; or ‧ the disappearance of an active market for a security because of financial difficulties. Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Group recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. 5) Derecognition of financial assets Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets. On derecognition of a debt instrument in its entirety, the Group recognizes the difference between its carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in“other equity – unrealized gains or losses on fair value through other comprehensive income ” , in profit or loss, and presented it in the line item of non-operating income. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 24 On derecognition of a financial asset other than in its entirety, the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss, and presented in the line item of non-operating income and expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts. (ii) Financial liabilities and equity instruments 1) Classification of debt or equity Debt or equity instruments issued by the Group are classified as financial liabilities or equity in accordance with the substance of the contractual agreement. Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received, less, the direct cost of issuing. Interest and loss or gain related to financial liabilities are recognized as profit or loss and are reported under non-operating income and expenses. Financial liabilities are reclassified as equity when converted, and conversions do not generate profit or loss. 2) Financial liabilities at fair value through profit or loss A financial liability is classified in this category if acquired principally for the purpose of selling in the short term. This type of financial liability is measured at fair value at the time of initial recognition, and attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, and are included in non-operating income or expenses. 3) Other financial liabilities Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise loans and borrowings, notes and accounts payable and other payable, are measured at fair value, plus, any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method other than significant interest on short-term loans and payables. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in non-operating income or expenses. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 25 4) Derecognition of financial liabilities The Group derecognizes a financial liability when its contractual obligation has been discharged, cancelled or expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in non-operating income or expenses. 5) Offsetting of financial assets and liabilities The Group presents financial assets and liabilities on a net basis when the Group has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously. (iii) Derivative financial instruments and hedge accounting The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are initially measured at fair value. Any attributable transaction costs thereof are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and are included in the line item of non-operating income. When a derivative is designated as, and effective for, a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, whereas when the fair value is negative, it is classified as a financial liability. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the non-financial asset’s host contract are not closely related to the embedded derivatives and the host contract is not measured at FVTPL. The Group designates its hedging instruments, including derivatives, embedded derivatives, and non-derivative instruments for a hedge of a foreign currency risk, as a fair value hedge, cash flow hedge, or hedge of a net investment in a foreign operation. Foreign exchange risks of firm commitments are treated as fair value hedges. At initial designated hedging relationships, the Group documents the risk management objectives and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged items and hedging instrument are expected to offset each other. The Group shall discontinue hedge accounting prospectively only when the hedging relationship (or a part of a hedging relationship) ceases to meet the qualifying criteria (after taking into account any rebalancing of the hedging relationship, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 26 Cash flow hedges When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in“other equity－gains (losses) on hedging instruments”. The effective portion of changes in the fair value of the derivative that is recognized in other comprehensive income is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss, and is presented in the line item of non-operating income and expenses in the statement of comprehensive income. The Group designates only the change in fair value of the spot element of the forward exchange contract as the hedging instrument in cash flow hedging relationships. The change in fair value of the forward element of the forward exchange contracts is separately accounted for as a cost of hedging and accumulated in a separate component within equity. When the hedged item is recognized in profit or loss, the amount accumulated in equity and retained in other comprehensive income is reclassified to profit or loss in the same period or in the periods during which the hedged item affects the profit or loss, and is presented in the same accounting item with the hedged item recognized in the consolidated statement of comprehensive income. However, for a cash flow hedge of a forecast transaction recognized as a nonfinancial asset or liability, the amount accumulated in“other equity－gains (losses) on hedging instruments in cash flow hedging securities”and retained in other comprehensive income is reclassified as the initial cost of the nonfinancial asset or liability. In addition, if that amount is a loss and the Group expects that all or a portion of that loss will not be recovered in future periods, it shall immediately reclassify the amount in profit or loss. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the cash flow hedge reserve (and costs of hedging) remains in equity until the hedged future cash flows are no longer expected to occur. Otherwise, that amount would be adjusted within the carrying amount of the non-financial item. For other cash flow hedges, the amount is reclassified to profit or loss in the same period or in the periods as the hedged expected future cash flows affect the profit or loss. However, if the hedged future cash flows are no longer expected to occur, the amount shall immediately be reclassified from cash flow reserve (and the cost of hedging reserve) to profit or loss. (h) Inventories Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average-cost principle and includes expenditure incurred in acquiring the inventories, production or transition costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less, the estimated costs of completion and selling expenses. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 27 (i) Investment in associates Associates are those entities in which the Group has significant influence, but not control or join control, over the financial and operating policies. Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less, any accumulated impairment losses. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity-accounted investees after adjustments to align the accounting policies with those of the Group from the date that significant influence commences until the date that significant influence ceases. When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognizes the changes in ownership interests of its associate in capital surplus in proportion to its ownership. Unrealized profits resulting from the transactions between the Group and an associate are eliminated to the extent of the Group’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired. When the Group’s share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The Group shall discontinue the use of the equity method from the date when its investment ceases to be an associate or a joint venture. The Group shall measure the retained interest at fair value. The difference between the fair value of retained interest and proceeds from disposal, and the carrying amount of the investment at the date the equity method was discontinued is recognized in profit or loss. The Group shall account for all the amounts previously recognized in other comprehensive income in relation to that investment on the same basis as would have been required if the associates had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in other comprehensive income would be reclassified to profit or loss on the disposal of the related assets or liabilities, the entity shall reclassify the gain or loss from equity to profit or loss when the equity method is discontinued. If an entity’s ownership interest in an associate or a joint venture is reduced while the entity continues to apply the equity method, the entity shall reclassify the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest to profit or loss. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group shall continue to apply the equity method without remeasuring the retained interest. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 28 When the Group subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the net assets of the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus, however, when the balance of the capital surplus arising from the investment was insufficient, the difference charged or credited to retained earnings. If the Group’s ownership interest is reduced due to the additional subscription to the shares of associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities. (j) Joint venture A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint ventures) have rights to the net assets of the arrangement. A joint venture shall recognize its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with IAS 28“Investments in Associates and Joint Ventures”, unless, the entity is exempted from applying the equity method as specified in that Standard. When assessing the classification of a joint arrangement, the Group shall consider the structure and legal form of the arrangement, the terms in the contractual arrangement and other facts and circumstances. The Group had previously reviewed the contractual structure of the joint arrangement, and has now decided to reclassify the investments in“Jointly Controlled Entities”to “Joint Ventures”. Although the investments have been reclassified, they are still recorded under the equity method. Thus, there is no effect in the recognized assets, liabilities and other comprehensive income. (k) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 29 (ii) Subsequent cost Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred. (iii) Depreciation The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over its useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss. Land has an unlimited useful life and therefore is not depreciated. The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows: 1) Buildings: 7~50 years 2) Building improvement: 2~20 years 3) Machinery and equipment: 1~14 years 4) Research equipment: 3~10 years 5) Mold equipment: 0.5~5 years 6) Other equipment: 1~10 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 30 (l) Leases (i) Identifying a lease At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: 1) 2) 3) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and the Group has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of an asset if either: － － the Group has the right to operate the asset and the providers do not have the right to vary; or the Group designed the asset in a way that predetermines how and for what purpose it will be used. At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. (ii) As a lessee The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 31 The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise the following: － fixed payments, including in-substance fixed payment; － － － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable under a residual value guarantee; and payments for purchase or termination options that are reasonably certain to be exercised. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when: － － － － there is a change in future lease payments arising from the change in an index or rate; or there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee; or there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or there is a change of its assessment on whether it will exercise an extension or termination option; or － there is any lease modification When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero. When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease. The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position. The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases of machinery and office equipment that have a lease term of 12 months or less and leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 32 (iii) As a lessor When the Group acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset. (m) Intangible assets (i) Goodwill 1) Initial recognition Goodwill arising from acquisition of subsidiaries is included in intangible assets. The measurement of initial recognition of goodwill, please refer to note (4)(u). 2) Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. Goodwill related to an investment accounted for using equity method is included in the carrying amount of the investment, and not allocated to any asset, including goodwill, forms part of the carrying amount of the investment accounted for using the equity method. (ii) Research & Development During the research phase, activities are carried out to obtain and understand new scientific or technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred. Expenditures arising from the development phase shall be recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they will be recognized in profit or loss as incurred. 1) 2) 3) The technical feasibility of completing the intangible asset so that it will be available for use or sale. Its intention to complete the intangible asset and use or sell it. Its ability to use or sell the intangible asset. 4) How the intangible asset will generate probable future economic benefits. 5) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 33 6) Its ability to measure reliably the expenditure attributable to the intangible asset during its development. Capitalized expenditure arising from the development phase is measured at cost less accumulated amortization and accumulated impairment losses. (iii) Other intangible assets Other intangible assets that are acquired by the Group are measured at cost, less accumulated amortization and any accumulated impairment losses. (iv) Subsequent expenditure Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred. (v) Amortization The amortizable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with all indefinite useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: 1) Patents: the shorter of contract period and estimated useful lives 2) Royalty: amortized by contract period 3) Computer software: 1~7 years 4) Copyright: 10 years The residual value, the amortization period, and the amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as changes in accounting estimates. (n) Impairment of non-derivative financial assets Non-derivative financial assets except for inventories, deferred tax assets, assets arising from employee benefits are assessed at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Group shall estimate the recoverable amount of the asset. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Group will have to determine the recoverable amount for the asset's cash-generating unit. The Group assesses goodwill and intangible assets, which have indefinite useful lives and are not available for use, on an annual basis and recognizes an impairment loss on excess of carrying value over the recoverable amount. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 34 The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units or group of units. If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, the entity shall recognize the impairment loss and the impairment loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount. That increase is a reversal of an impairment loss. (o) Provisions A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. (p) Treasury stock Repurchased shares are recognized under treasury shares (a contra-equity account) based on its repurchase price (including all directly accountable costs), and net of tax. Gains on disposal of treasury shares should be recognized under Capital Reserve – Treasury Shares Transactions; losses on disposal of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings. The carrying amount of treasury shares should be calculated using the weighted average different types of repurchase. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 35 During the cancellation of treasury shares, Capital Reserve – Share Premiums and Share Capital should be debited proportionately. Gains on cancellation of treasury shares should be recognized under existing capital reserves arising from similar types of treasury shares; losses on cancellation of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings. (q) Revenue from contracts with customers Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Group’s main types of revenue are explained below. i) Sale of goods The Group manufactures and sells electronic products to electronic products brand vendor. The Group recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied. The Group assesses sales discounts based on historical experience, management's judgment and other known reasons. Such allowances are recognized as a deduction of sales revenue in the same period in which sales are made. The aforementioned provisions are expected to settle over the next year. A refund liability is recognized for expected discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales of electronic products are made with a credit term which is consistent with the market practice. A receivable is recognized when the goods are delivered as this is the point in time that the Group has a right to an amount of consideration that is unconditional. ii) Financing components The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 36 (r) Employee benefits (i) Defined contribution plans Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. (ii) Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities. If the benefits of a plan are improved, the pension cost incurred from the portion of the increased benefit relating to past service by employees, is recognized immediately in profit or loss. Re-measurement of net defined benefit liability (asset) (including actuarial gains, losses and the return on plan asset and changes in the effect of the asset ceiling, excluding any amounts included in net interest) is recognized in other comprehensive income (loss). The effect of re-measurement of the defined benefit plan is charged to retained earnings. The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets and change in the present value of defined benefit obligation. (iii) Short term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 37 A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (s) Share-based payment The grant-date fair value of share-based payment awards granted to employee is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of award that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions, and there is no true-up for differences between expected and actual outcomes. (t) Income taxes Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss. Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years. Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the following exceptions: (i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) during the transaction. (ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse. (iii) Initial recognition of goodwill. Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities may be offset against each other if the following criteria are met: (i) The entity has the legal right to settle tax assets and liabilities on a net basis; and (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 38 (ii) the taxing of deferred tax assets and liabilities fulfill one of the below scenarios: 1) 2) levied by the same taxing authority; or levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched. A deferred tax asset should be recognized for the carry-forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and they shall be adjusted based on the probability that future taxable profit that will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. The surtax on unappropriated earnings is recoded as current tax expense in the following year after the resolution to appropriate retained earnings is approved in a stockholders’ meeting. (u) Business combination Goodwill is measured as an aggregation of the consideration transferred (which generally is measured at fair value at the acquisition date) and as an amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value). If the residual balance is negative, the Group shall re-assess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter. All the transaction costs incurred for the business combination are recognized immediately as the Group’s expenses when incurred, except for the issuance of debt or equity instruments. If the business combination is achieved in stages, the Group shall measure any non-controlling equity interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Other non-controlling interest is measured (1) at fair value at the acquisition date or (2) by using other valuation techniques acceptable under the IFRS as endorsed by the FSC. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 39 In a business combination achieved in stages, the Group shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss. In prior reporting periods, the Group may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income shall be recognized on the same basis as would be required if the Group had disposed directly of the previously held equity interest. If the disposal of the equity interest required a reclassification to profit or loss, such an amount shall be reclassified to profit or loss. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Group shall retrospectively adjust the provisional amounts recognized at the acquisition date, or recognize additional assets or liabilities to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date. (v) Earnings per share The Group discloses the basic and diluted earnings per share attributable to ordinary equity holders of the Group. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholder of the Group divided by weighted average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Group divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise employee compensation not yet approved by the Board of Directors. (w) Operating segments An operating segment is a component of the Group that engages in business activities from which it may incur revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Each operating segment consists of standalone financial information. (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty: The preparation of the consolidated financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 40 The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period. There are no critical judgments in applying the accounting policies that have significant effect on the amounts recognized in the consolidated financial statements. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic. (a) Recognition and measurement of refund liabilities Because of the sales returns and allowances, the Group records a refund liabilities (sales returns and allowance provisions) for estimated returns and other allowances in the same period the related revenue is recorded. The estimate is made based on historical experience, market and economic conditions, and any other known factors using the expected value or the most likely amount and it could be different from actual sales returns and allowances, therefore, the management periodically reviews the adequacy of the estimation used. (b) Valuation of inventories As inventories are stated at the lower of cost or net realizable value, the net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial changes, there may be significant differences in the net realizable value of inventories. Refer to note (6)(f) for further description of the valuation of inventories. (6) Explanation of significant accounts: (a) Cash and cash equivalents Cash on hand Checking accounts and demand deposits Time deposits Bonds purchased under resale agreements December 31, 2020 December 31, 2019 $ 18,637 19,217 19,537,842 10,455,819 69,560,444 56,034,361 10,000 50,000 $ 89,126,923 66,559,397 Please refer to note (6)(aa) for the disclosure of the exchange rate risk, the interest rate risk and the fair value sensitivity analysis of the financial assets and liabilities of the Group. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 41 (b) Financial assets and liabilities at fair value through profit or loss Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Structured deposits Stock unlisted in domestic markets Fund in domestic or foreign markets Derivative instruments not used for hedging Foreign exchange contracts Swap contracts Total Current Non-current Financial liabilities held-for-trading: Derivative instruments not used for hedging Foreign exchange contracts Swap contracts December 31, 2020 December 31, 2019 $ $ $ $ 2,234,184 100,190 101,419 - 11,069 2,446,862 2,245,254 201,608 2,446,862 1,330,458 24,350 91,009 466 15,455 1,461,738 1,346,379 115,359 1,461,738 December 31, 2020 December 31, 2019 $ $ 130,865 5,854 5,752 - 136,617 5,854 The Group uses derivative instruments to hedge foreign currency risk the Group is exposed to arising from its operating activities. The following derivative instruments not applied hedge accounting were classified as mandatorily measured at fair value through profit or loss and held-for-trading financial liabilities : December 31, 2020 Contract amount (in thousand) Currency Maturity date Derivative financial assets: Foreign exchange contracts: Swap contracts: Currency swap USD 37,000 USD to TWD January 13~February 26, 2021 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 42 December 31, 2020 Contract amount (in thousand) Currency Maturity date Derivative financial liabilities: Foreign exchange contracts: Forward exchange sold EUR 49,000 Forward exchange purchased USD 122,300 EUR to USD January 13~April 14, 2021 USD to BRL January 7~August 26, 2021 Swap contracts: Currency swap Derivative financial assets: Foreign exchange contracts: Forward exchange purchased Swap contracts: Currency Swap Derivative financial liabilities: Foreign exchange contracts: Forward exchange sold Forward exchange purchased USD 45,500 USD to TWD March 12~April 29, 2021 December 31, 2019 Contract amount (in thousand) Currency Maturity date USD 84,500 USD to BRL January 14~May 26, 2020 USD 55,000 USD to TWD January 13~March 30, 2020 EUR 21,000 EUR to USD January 10~March 13, 2020 USD 1,000 USD to BRL September 23, 2020 For the market risk related to the financial instruments, please refer to note (6)(aa). As of December 31, 2020 and 2019, the Group did not provide any aforementioned financial assets as collaterals for its loans. (c) Financial assets at fair value through other comprehensive income Equity investments at fair value through other comprehensive income: Stock listed in domestic markets Stock listed in foreign markets Stock unlisted in domestic markets Stock unlisted in foreign markets Total December 31, 2020 December 31, 2019 $ $ 1,972,849 491,243 2,152,542 200,377 4,817,011 2,055,890 448,110 2,246,932 177,121 4,928,053 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 43 The purpose that the Group invests in the above-mentioned equity securities is for long-term strategies, but rather for trading purpose. Therefore, these equity securities are designated as at FVOCI. For the year ended December 31, 2020, the Group had sold all of its shares, measured at fair value through other comprehensive income, in Global BioPharma, Inc. and Taiwan Sanga Co., Ltd. The fair value of the shares upon disposal amounted to $52,105, resulting in a cumulative loss of $57,895, which was reclassified from other comprehensive income to retained earnings. For the year ended December 31, 2019, the Group had sold all of its shares in PrimeSensor Technology Inc. and Macroblock Inc., and Innolux Corporation ( “ Innolux ” ), which were measured at fair value through other comprehensive income. The fair value of the shares was $845,202 when disposed and the cumulative losses amounted to $4,824,910, which had been transferred to retained earnings from other comprehensive income. If there is an increase (decrease) in the market price by 5% on the reporting date of the equity securities hold by the Group, the increase (decrease) in other comprehensive income (pre-tax) for the years ended December 31, 2020 and 2019, will be $240,851 and $246,403, respectively. These analyses are performed on the same basis for the period and assume that all other variables remain the same. For the Group’s information of market risk, please refer to note (6)(aa). As of December 31, 2020 and 2019, the Group did not provide any financial assets at fair value through other comprehensive income as collaterals for its loans. (d) Financial instruments used for hedging (i) Financial instruments used for hedging were as follows: Cash flow hedge: Financial assets used for hedging: Forward exchange contracts Financial liabilities used for hedging: Forward exchange contracts (ii) Cash flow hedge December 31, 2020 December 31, 2019 $ $ - 61 2,192 4,932 The Group’s strategy is to use forward exchange contracts to hedge its foreign currency exposure in respect of forecasted future sales. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 44 As of December 31, 2020 and 2019, the amounts related to the items designated as hedge instruments were as follows: Contract amount (in thousands) December 31, 2020 Average Currency Maturity period strike price Derivative financial liabilities used for hedging Foreign exchange contracts: Forward exchange EUR 6,000 EUR to USD April 29~ 1.2192 sold Derivative financial assets used for hedging Foreign exchange contracts: Forward exchange sold Derivative financial liabilities used for hedging Foreign exchange contracts: Forward exchange sold Forward exchange purchased June 29, 2021 December 31, 2019 Average Contract amount (in thousands) Currency Maturity period strike price EUR 6,000 EUR to USD February 14~ 1.1278 June 29, 2020 EUR 39,000 EUR to USD January 31~ 1.1327 December 29, 2020 USD 3,589 USD to MXN February 26~ 19.507 March 30, 2020 (iii) For the years ended December 31, 2020 and 2019, the ineffective portion of cash flow hedge recognized in profits (losses) amounted of $67 and $(5,934), respectively, recorded as“other gains and losses, net”. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 45 (iv) For the years ended December 31, 2020 and 2019, the profits (losses) of changes in fair value of derivative financial instruments used for hedging reclassified from other equity to profit or loss is recognized as revenue in the statement of comprehensive income. Please refer to note (6)(z). (e) Notes and accounts receivable Notes receivables from operating activities December 31, 2020 December 31, 2019 $ 40,059 42,418 Accounts receivables – measured at amortized cost 197,650,813 167,615,217 Accounts receivables – fair value through other comprehensive income Less: allowance for uncollectible accounts Notes and accounts receivable Notes and accounts receivable – related parties 38,429,954 28,007,745 236,120,826 195,665,380 (3,910,928) (3,928,716) $ 232,209,898 191,736,664 $ 231,830,964 191,692,152 $ 378,934 44,512 The Group has assessed a portion of its trade receivables that was held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; therefore, such trade receivables were measured at fair value through other comprehensive income. The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information. (i) The loss allowance provision of IT product segment of the Group was determined as follows: December 31, 2020 Carrying amount of notes and accounts receivable $ $ 213,584,823 11,779,368 3,817,340 229,181,531 Weighted- ave rage ECL rate 0% 0.57% 100% Credit rating Level A Level B Level C Lifetime ECLs - 66,757 3,817,340 3,884,097 Credit- impaired No No Yes (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 46 December 31, 2019 Credit rating Level A Level B Level C Carrying amount of notes and accounts receivable $ $ 172,692,844 13,008,324 3,817,340 189,518,508 Weighted- average ECL rate 0% 0.55% 100% Lifetime ECLs - 71,101 3,817,340 3,888,441 Credit- impaired No No Yes (ii) The loss allowance provision of strategically integrated product segment of the Group was determined as follows: December 31, 2020 Credit rating Level A Level B Level C Level D Level E Carrying amount of notes and accounts receivable $ $ 2,705,044 3,772,573 443,092 - 18,586 6,939,295 Weighted- average ECL rate 0% 0.10% 1.00% 100% Lifetime ECLs - - 3,814 4,431 18,586 26,831 December 31, 2019 Credit rating Level A Level B Level C Level D~E Level F Carrying amount of notes and accounts receivable $ $ 2,620,806 2,713,406 783,004 - 29,656 6,146,872 Weighted- average ECL rate 0% 0.10% 1.00% - 100% Lifetime ECLs - - 2,789 7,830 29,656 40,275 Credit- impaired No No No - Yes Credit- impaired No No No - Yes The aging analysis of notes and accounts receivable was determined as follows: Overdue 1 to 180 days Overdue 181 to 365 days December 31, 2020 December 31, 2019 $ 2,073,442 1,707,265 104,264 285 $ 2,177,706 1,707,550 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 47 The movement in the allowance for notes and accounts receivable was as follows: Balance at January 1 Impairment losses recognized (reversed) Amounts written off Effect of changes in exchange rates Balance at December 31 2020 3,928,716 $ 2019 4,020,603 (18,694) - 906 (7,790) (85,907) 1,810 $ 3,910,928 3,928,716 Allowance for uncollectible account is the balance of accounts receivable which are uncollectable. Except for evaluating the situation of the customers’ payment records and widely analyzing the credit rating of customers, the Group also takes all the necessary procedures for collection. The Group believes that there is no doubt for the recovery of the due but unimpaired accounts receivable, therefore, no allowance recognized. The Group entered into accounts receivable factoring agreements with banks. As of December 31, 2020 and 2019, except for the amount used under the actual sales amount in accordance with certain agreements, the factoring amount granted by the banks was USD 1,600,000 thousand and EUR 59,700 thousand, USD 1,000,000 thousand and EUR 59,700 thousand, respectively. Based on the agreements, the Group is not responsible for guaranteeing the ability of the accounts receivable obligor to make payment when it is affected by credit risk. Thus, this is a non-recourse accounts receivable factoring. The Group derecognized the above accounts receivable because it has transferred substantially all of the risks and rewards of their ownership and it does not have any continuing in involvement in them. After the transfer of the accounts receivable, the Group can request partial advanced amount, while the interest calculated at an agreed rate is paid to the bank in the period during the time of receiving advance and the accounts receivable is collected. The remaining amounts with no advance are received when the accounts receivable are settled by the customers. As of December 31, 2020, the factored accounts receivable with no advance amounting $42,550 is accounted for as other receivables. As of December 31, 2019, accounts receivable factored were recovered. The Group, customers and banks signed the three-party contracts in which the banks purchase accounts receivable from the Group. The total amount of the accounts receivable should not exceed the facility limit provided by the banks to the Group’s customers. Based on the contracts, the banks have no right to request the Company to repurchase the accounts receivable. Thus, this is a non-recourse accounts receivable transfer. As of December 31, 2020 and 2019, accounts receivable factored were recovered and derecognized since the conditions of derecognition were met. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 48 As of December 31, 2020 and 2019, the details of the factored accounts receivable but unsettled were as follows: December 31, 2020 Accounts receivable factored (gross) Amount advanced Paid Unpaid Amount recognized in other receivable Purchaser Financial Amount Collateral derecognized Interest rate Institution $ 42,597,772 - 42,555,222 42,550 - 42,597,772 0.58%~0.93% December 31, 2019 Accounts receivable factored (gross) Amount advanced Paid Unpaid Amount recognized in other receivable Purchaser Financial Amount Collateral derecognized Interest rate Institution $ 25,672,764 - 25,672,764 - - 25,672,764 2.21%~2.80% As of December 31, 2020 and 2019, the Group did not provide any aforementioned notes and accounts receivable as collaterals. (f) Inventories Finished goods Work in progress Raw materials Raw materials in transit December 31, 2020 23,237,892 $ December 31, 2019 30,269,057 9,630,864 6,455,035 62,694,104 41,213,675 589,099 495,771 $ 96,151,959 78,433,538 (i) For the years ended December 31, 2020 and 2019, inventory cost recognized as cost of sales amounted to $1,013,470,729 and $946,533,518, respectively. (ii) The loss due to the write-down of inventories to net realizable value amounted to $97,090 and $587,759 for the years ended December 31, 2020 and 2019, respectively. (iii) As of December 31, 2020 and 2019, the Group did not provide any inventories as collaterals for its loans. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 49 (g) Investments accounted for using equity method A summary of the Group’s financial information for equity-accounted investees at the reporting date is as follows: Associates Joint venture Plus: credit balance of investment in equity method (other non-current liability) Less: unrealized profits or losses (i) Associates December 31, 2020 December 31, 2019 $ 8,036,165 7,410,134 (17,106) (14,725) 8,019,059 7,395,409 43,177 41,719 (112,311) (118,042) $ 7,949,925 7,319,086 1) The fair value of the shares of listed company based on the closing price was as follow: December 31, 2020 December 31, 2019 Allied Circuit Co., Ltd. (“Allied Circuit”) $ 2,075,813 1,838,621 Avalue Technology Inc. (“Avalue”) 828,286 1,147,839 $ 2,904,099 2,986,460 2) The Group’s share of the net gain (loss) of associates was as follows: The Group’s share of the gain (loss) of associates 2020 2019 436,165 229,152 3) The Group’s financial information for investments accounted for using the equity method that are individually immaterial was as follows: December 31, 2020 December 31, 2019 Carrying amount of individually immaterial associates $ 8,036,165 7,410,134 The Group’s share of the net income (loss) of associates: Profit (loss) from continuing operations Other comprehensive income Total comprehensive income 2020 2019 436,165 229,152 107,370 (159,440) 543,535 69,712 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 50 4) 5) For the year ended December 31, 2020, the Group had sold parts of its shares held in Avalue and Allied Circuit, with a consideration (net of costs of disposal) amounting to $38,952. The transaction has been completed and the price has been fully received, wherein the Group recognized a gain of $28,772, which was accounted for as other gain and loss. In October 2019, the Group had sold part of its shares held in Avalue, with a consideration (net of costs of disposal) amounting to $18,033. The transaction has been completed and the price has been fully recovered, wherein the Group recognized a gain of $8,990, which was accounted for as other gain and loss. (ii) Joint venture In April 2010, the Group and another company established a jointly controlled entity, Compal Connector Manufacture Ltd. (“CCM”), and obtained an ownership interest of 51%. CCM’s actual paid-in capital amounted to USD10,000 thousands. Moreover, in May 2014, the Group and another company established a jointly controlled entity, Zheng Ying Electronics (Chongqing) Co., Ltd., (“Zheng Ying”), and obtained an ownership interest of 51%. Zheng Ying’s actual paid-in capital amounted to USD 2,500 thousands. The Group’s financial information for investment accounted for using the equity method that are individually insignificant was as follows: December 31, 2020 December 31, 2019 The carrying amount of the Group’s interests in all individually insignificant joint ventures $ (17,106) (14,725) The Group’s share of the net income (loss) of joint ventures: Losses from continuing operations (also the total comprehensive losses) 2020 2019 (508) (32,144) (iii) Although the Group is the single largest shareholder of some associates, after a comprehensive assessment that the remaining shares of these associates are not concentrated in specific shareholders, the Group is still not able to obtain more than half of the board seats, and it has not obtained more than half of the voting rights of shareholders attending the shareholders' meeting. The Group judges that it does not have absolute power and leading ability over the relevant activities and variable remuneration of these associates, so it assesses that the Group has no control over these associates. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 51 (iv) As of December 31, 2020 and 2019, the Group did not provide any investments accounted for using equity method as collaterals for its loans. (h) Changes in subsidiaries’ equity (i) Changes in subsidiaries’ equity did not result in the Group’s loss of control 1) Subsidiaries’ employee stock options exercised CBN issued 45 thousand and 69 thousand new shares because of its employees' exercised stock options in 2020 and 2019, respectively, which resulted in the reduce of the Group’s ownership of CBN by 0.03% and 0.07%, respectively. 2) Issuance of new shares for cash of subsidiaries The Group purchased newly issued shares of Arcadyan amounting to $323,917 at a percentage different from its existing ownership percentage in the fourth quarter of 2019, resulting in a decrease in the ownership of the Group in Arcadyan by 0.37%. 3) Issuance and cancellation of subsidiaries’ restricted shares Arcadyan canceled 126 thousand and 84 thousand restricted shares in the years ended December 31, 2020 and 2019, respectively, which resulted in an increase of 0.01% of the ownership of the Group in Arcadyan for the both years. 4) The following summarizes the effect of changes in equity of the parent due to changes in the ownership interest of subsidiaries: Capital surplus – changes in ownership interest in subsidiaries 2020 2019 $ 1,735 43,473 (i) Loss control of subsidiaries The Group had sold all of its shares in CMX, at the amount of $218,133, to a third party in August 2019, resulting in its losing control over CMX. The entire amount had been fully received. The gain on disposal amounting to $58,107 was recorded as other gains and losses. The carrying amounts of assets and liabilities of CMX were as follows: Cash and cash equivalents Other current assets Property, plant and equipment Notes and accounts payable Other payables Other current liabilities Carrying amount net assets $ 74,638 2,918 117,625 (644) (33,716) (966) $ 159,855 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 52 (j) Material non-controlling interests of subsidiaries The material non-controlling interests of subsidiaries were as follows. Subsidiaries Arcadyan Technology Corporation Main operation place Taiwan Percentage of non-controlling interests December December 31, 2019 31, 2020 65% 65% The following information of the aforementioned subsidiaries have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Included in these information are the fair value adjustment made during the acquisition and relevant difference in accounting principles between the Group as at the acquisition date. Intra-group transactions were not eliminated in this information. Arcadyan’s collective financial information is as follows. Current assets Non-current assets Current liabilities Non-current liabilities Net assets Non-controlling interests Sales revenue Net income Other comprehensive income Comprehensive income Profit, attributable to non-controlling interests Comprehensive income, attributable to non-controlling interests Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities December 31, 2020 24,721,922 $ December 31, 2019 22,052,835 4,085,304 3,478,150 (15,368,928) (13,044,806) (1,476,302) (1,145,245) 11,961,996 11,340,934 8,024,032 7,625,040 2020 33,765,295 2019 32,897,900 1,630,605 1,356,986 (97,919) (53,703) 1,532,686 1,303,283 1,033,182 894,962 970,772 859,763 3,352,208 2,496,825 (884,623) (837,786) (974,048) 2,779 $ $ $ $ $ $ $ $ Effect of exchange rate changes on cash and cash equivalents (21,328) (30,312) Net increase (decrease) in cash and cash equivalents $ 1,472,209 1,631,506 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 53 (k) Property, plant and equipment The cost, depreciation, and impairment of the property, plant and equipment of the Group for the years ended December 31, 2020 and 2019, were as follows: Buildings and building improvement Machinery Other equipment Land Under construction and prepayment for purchase of equipment Total $ 1,705,220 16,966,779 27,044,641 11,289,433 1,310,558 58,316,631 16,540 1,555,668 2,043,593 1,670,528 2,491,792 7,778,121 - (40,637) (781,081) (484,944) - (1,306,662) 222,769 568,695 1,419,898 267,958 (2,479,320) - (435) (530,632) (1,228,860) (857,278) (102,245) (2,719,450) $ $ 1,944,094 18,519,873 28,498,191 11,885,697 1,220,785 62,068,640 1,772,214 17,020,270 26,201,597 10,642,904 1,003,490 56,640,475 25,888 382,049 1,956,846 1,900,557 1,561,601 5,826,941 (93,905) (440,934) (773,288) (1,003,600) - (2,311,727) - 221,513 406,831 104,464 (1,007,468) (274,660) 1,023 (216,119) (747,345) (354,892) (247,065) (1,564,398) $ 1,705,220 16,966,779 27,044,641 11,289,433 1,310,558 58,316,631 $ $ $ $ $ $ $ - - - - - - - - - - 10,352,434 19,850,259 8,141,591 905,054 2,369,810 1,569,827 (39,988) (656,216) (461,903) (362,391) (992,208) (692,969) 10,855,109 20,571,645 8,556,546 10,105,653 18,441,703 7,674,891 802,230 2,524,504 1,778,318 (413,292) (662,693) (990,010) (142,157) (453,255) (321,608) 10,352,434 19,850,259 8,141,591 - - - - - - - - - - 38,344,284 4,844,691 (1,158,107) (2,047,568) 39,983,300 36,222,247 5,105,052 (2,065,995) (917,020) 38,344,284 1,944,094 7,664,764 7,926,546 3,329,151 1,220,785 22,085,340 1,772,214 6,914,617 7,759,894 2,968,013 1,003,490 20,418,228 1,705,220 6,614,345 7,194,382 3,147,842 1,310,558 19,972,347 Cost: Balance on January 1, 2020 Additions Disposals and derecognitions Reclassifications Effect of movements in exchange rates Balance on December 31, 2020 Balance on January 1, 2019 Additions Disposals and derecognitions Reclassifications Effect of movements in exchange rates Balance on December 31, 2019 Depreciation and impairments loss: Balance on January 1, 2020 Depreciation for the period Disposals and derecognitions Effect of movements in exchange rates Balance on December 31, 2020 Balance on January 1, 2019 Depreciation for the period Disposals and derecognitions Effect of movements in exchange rates Balance on December 31, 2019 Carrying amounts: Balance on December 31, 2020 Balance on January 1, 2019 Balance on December 31, 2019 As of December 31, 2020 and 2019, part of the Group’s property, plant and equipment were provided as collateral for long-term borrowings. Please refer to note (8). (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 54 (l) Right-of-use assets The Group leases many assets including land and buildings, machinery and vehicles. Information about leases for which the Group as a lessee is presented as below: Land Buildings Machinery Vehicles and Other Total Cost: Balance on January 1, 2020 $ 1,110,813 2,809,991 86,661 88,712 4,096,177 Additions Deductions 317,808 954,736 - 6,797 1,279,341 (106,518) (350,896) (9,460) (19,825) (486,699) Effect of movements in exchange rates (53,974) (35,364) Balance on December 31, 2020 Balance on January 1, 2019 Additions Deductions $ $ 1,268,129 3,378,467 891,147 1,934,899 245,220 1,142,076 - (226,448) Effect of movements in exchange rates (25,554) (40,536) Balance on December 31, 2019 $ 1,110,813 2,809,991 (271) 76,930 87,482 9,460 (9,067) (1,214) 86,661 (715) (90,324) 74,969 4,798,495 67,569 2,981,097 26,127 1,422,883 (4,403) (239,918) (581) (67,885) 88,712 4,096,177 Depreciation and impairment loss: Balance on January 1, 2020 Depreciation for the period Deductions Effect of movements in exchange rates Balance on December 31, 2020 Balance on January 1, 2019 Depreciation for the period Deductions Effect of movements in exchange rates Balance on December 31, 2019 Carrying amount: Balance on December 31, 2020 Balance on January 1, 2019 Balance on December 31, 2019 $ $ $ $ $ $ $ 31,587 25,354 659,467 801,567 22,270 12,138 32,681 32,690 746,005 871,749 - (258,054) (9,368) (18,742) (286,164) (2,185) (27,291) 54,756 1,175,689 (291) 24,749 (280) (30,047) 46,349 1,301,543 - - - - - 32,106 770,753 22,615 43,834 869,308 - (104,216) - (4,403) (108,619) (519) (7,070) (345) (6,750) (14,684) 31,587 659,467 22,270 32,681 746,005 1,213,373 2,202,778 891,147 1,934,899 1,079,226 2,150,524 52,181 87,482 64,391 28,620 3,496,952 67,569 2,981,097 56,031 3,350,172 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 55 (m) Short-term borrowings The details of short-term borrowings were as follows: Unsecured bank loans Unused credit line for short-term borrowings Range of interest rates December 31, 2020 December 31, 2019 $ $ 92,838,733 60,951,844 95,910,000 107,077,000 0.25%~2.58% 0.66%~5.05% For information on the Group’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(aa). (n) Long-term borrowings The details of long-term borrowings were as follows: Unsecured bank loans Unsecured bank loans Secured bank loans Less: current portion Total Unused credit lines for long-term borrowings Unsecured bank loans Secured bank loans Less: current portion Total Unused credit lines for long-term borrowings Currency TWD USD TWD December 31, 2020 Range of annual interest rate 0.66%~0.98% Maturity year 2021~2023 $ Amount 11,900,000 0.69%~0.92% 2021~2022 1%~1.5% 2022~2025 7,205,440 228,913 (8,932,615) $ 10,401,738 $ 15,327,000 December 31, 2019 Currency TWD Range of annual interest rate 0.73%~1.18% Maturity year 2020~2023 $ Amount 25,650,000 TWD 1.67% 2022 98,438 (18,189,375) $ 7,559,063 $ 12,047,000 For information on the Group’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(aa). The Group pledged property, plant and equipment as collateral for its partial long-term borrowings. Please refer to note (8). (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 56 (o) Unsecured convertible corporate bonds (i) The Company’s subsidiary, Arcadyan, issued the first domestic unsecured convertible corporate bonds on June 6, 2019. The details were as follows: Total convertible corporate bonds issued Unamortized discounts on corporate bonds payable Unamortized issuance costs on corporate bonds payable Balance of corporate bonds payable as of the reporting date Conversion options included in equity component (classified as capital surplus and non-controlling interests) $ $ December 31, 2020 December 31, 2019 $ 1,000,000 1,000,000 (18,527) (31,383) (1,254) 980,219 (2,125) 966,492 48,667 48,667 Interest expenses 2020 2019 $ 13,727 7,919 The effective interest rate of the first issued convertible corporate bonds was 1.3284%. (ii) The main terms of issuing the above-mentioned convertible corporate bonds was as follows: 1) Coupon rate: 0% 2) Duration: three years (June 6, 2019~June 6, 2022) 3) Repayment Put option and call option are excluded from the issuance of convertible corporate bonds. Except that the bondholders convert the bonds to Arcadyan’s common shares or the bonds are repurchased and cancelled by Arcadyan from the securities firm’s business office, the bonds will be repaid in cash at par value when the bonds expired. 4) Terms of conversion a) The bondholder may opt to have its bonds converted into the Arcadyan’s common shares, with the approval of Taiwan Depository & Clearing Corporation through securities firms, at any time between three months after the issuance date (September 7, 2019) and the day before the maturity date (June 6, 2022), except for the following: - The closing period in accordance with the applicable law; - The period starting from the first day of the first fifteen working days prior to the date of record for determination wherein the shareholders are entitled to receive the distributions or rights to subscribe for new shares in a capital increase for cash, and ends on the date of record for the distribution of the rights/benefits; (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 57 - The period starts from the date of record of the capital decrease and ends on the date prior to the trading of the reissuance shares after the capital decrease. b) Conversion price is determined as NT$98.3 per share upon issuing. Arcadyan paid cash dividends and issued new shares for cash in 2019; therefore, the conversion price has been adjusted to $93 per share. Arcadyan distributed cash dividends to common stocks shareholders with retained earnings and with the additional paid-in capital in 2020, thereafter, the conversion price has been adjusted to NT$87.7 per share. (p) Lease liabilities The details of leases liabilities were as follows: Current Non-current For the maturity analysis, please refer to note (6)(aa). The amounts recognized in profit or loss were as follows: December 31, 2020 December 31, 2019 $ $ 377,161 1,910,601 717,021 1,550,067 Interest on lease liabilities Variable lease payments not included in the measurement of lease liabilities Expenses relating to leases of low-value assets or short-term leases 2020 2019 50,534 48,758 3,332 4,579 131,749 117,545 The amounts recognized in the consolidated statement of cash flows for the Group were as follows: Total cash outflow for leases (i) Real estate leases 2020 1,032,451 $ 2019 1,003,697 The Group leases land leasehold rights and buildings for its office and plant space. The leases of office space typically run for a period of 1 ~19 years, and of land leasehold rights for 45~50 years. (ii) Other leases The Group leases vehicles and equipment with lease terms of 1~5 years. The Group also leases some equipment and vehicles with contract terms of 1~3 years. These leases are short-term or leases of low-value items. The Group has elected not to recognize right-of-use assets and lease liabilities for these leases. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (q) Provisions Balance on January 1, 2020 Provisions made during the period Provisions used during the period Provisions reversed during the period Balance on December 31, 2020 Balance on January 1, 2019 Provisions made during the period Provisions used during the period Provisions reversed during the period Balance on December 31, 2019 58 Warranties $ 830,757 $ $ 181,789 (142,007) (489) 870,050 426,981 721,303 (305,236) (12,291) $ 830,757 Provisions relate to sales of products are assessed based on historical experience, management's judgment and other known reasons. Such allowances are recognized as a deduction of sales revenue in the same period in which sales are made. The aforementioned provisions are expected to settle over the next year. (r) Employee benefits (i) Defined benefit plans Reconciliation of defined benefit obligations at present value and plan assets at fair value were as follows: Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities December 31, 2020 (1,516,219) $ December 31, 2019 (1,486,824) 730,046 748,660 $ (786,173) (738,164) The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average salary for the six months prior to retirement. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 59 1) Composition of plan assets The Group allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labor Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks. The balance of the Group’s labor pension reserve account in the Bank of Taiwan amounted to $729,284 (excluding the ending balance of interest receivable) as of December 31, 2020. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor. 2) Movements in the present value of the defined benefit obligations The movements in the present value of defined benefit obligations for the Group were as follows: Defined benefit obligations on January 1 $ (1,486,824) 2020 Benefit paid by the plan Current service costs and interest Remeasurements of net benefit liabilities 76,835 (19,238) (86,992) 2019 (1,447,375) 50,196 (24,942) (64,703) Defined benefit obligations on December 31 $ (1,516,219) (1,486,824) 3) Movements of the fair value of defined benefit plan assets The movements in the fair value of the defined benefit plan assets for the Group were as follows: Fair value of plan assets on January 1 $ 748,660 737,229 2020 2019 Expected return on plan assets Remeasurements of net benefit plan assets Contributions paid by the employer Benefits paid by the plan Fair value of plan assets on December 31 $ 6,675 23,554 27,992 (76,835) 730,046 9,432 23,917 28,278 (50,196) 748,660 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 60 4) Expenses recognized in profit or loss The expenses recognized in profit or loss were as follows: 2020 2019 Current service cost Net interest on the net defined benefit liability (asset) Cost of sales Selling expenses Administrative expenses Research and development expenses $ $ $ $ 5,955 6,608 12,563 546 679 3,024 8,314 12,563 6,401 9,109 15,510 689 812 3,686 10,323 15,510 5) Actuarial assumptions The following were the Group’s principal actuarial assumptions at the reporting date: Discount rate December 31, 2020 0.50%~0.63% December 31, 2019 0.90%~1.00% Future salary increasing rate 3.00% 3.00% The expected allocation payment made by the Group to the defined benefit plans for the one year period after the reporting date is $29,531. The weighted-average lifetime of the defined benefit plan is 9.6~14.00 years. 6) Sensitivity analysis If the main actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows: December 31, 2020 Discount rate Future salary increasing rate December 31, 2019 Discount rate Future salary increasing rate Effects to the defined benefit obligation Increased 0.25% Decreased 0.25% (36,336) 36,574 (36,821) 37,254 37,683 (35,482) 38,220 (36,089) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 61 Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation on the net defined benefit liabilities in the balance sheets. The method and assumption used in the sensitivity analysis is consistent with prior period. (ii) Defined contribution plans The Group allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Group allocates the labor pension at a specific percentage to the Bureau of the Labor Insurance without additional legal or constructive obligations. The Company and all subsidiaries in domestic recognized the pension costs under the defined contribution method amounting to $448,617 and $413,479 for the years ended December 31, 2020 and 2019, respectively. Payment was made to the Bureau of Labor Insurance. Other subsidiaries recognized the pension expenses, basic endowment insurance expenses, and social welfare expenses amounting to $922,151 and $1,294,677 for the years ended December 31, 2020 and 2019, respectively. (s) Income taxes (i) Income tax expenses 1) The amounts of income tax for the years ended December 31, 2020 and 2019, were as follows: 2020 2019 Current tax expense Recognized during the period $ 2,837,554 10% surtax on unappropriated earnings Tax credit of investment Deferred tax expense Recognition and reversal of temporary differences Income tax expense 27,073 (273,959) 2,590,668 2,364,140 294,326 (438,511) 2,219,955 122,536 $ 2,713,204 (107,798) 2,112,157 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 62 2) The amounts of income tax recognized in other comprehensive income for the years ended December 31, 2020 and 2019, were as follows: 2020 2019 Items that will not be reclassified subsequently to profit or loss: Remeasurement of the defined benefit obligation Unrealized gains (losses) on equity instruments at fair value through other comprehensive income Items that will be reclassified subsequently to profit or loss: Foreign currency translation differences of $ $ (13,173) (8,157) 15,805 2,632 44,004 35,847 foreign operations $ (18,727) (10,678) 3) The income tax expenses that were reconciled between the actual income tax expenses and profits before tax for the years ended December 31, 2020 and 2019, were as follows: Profit before tax Income tax calculated based on tax rate Estimated tax effect of tax exemption on investment income, net Realized investment loss Investment tax credit Changes in temporary differences Adjustment of estimated difference and others Surtax on unappropriated earnings 2020 2019 $ $ 13,122,716 10,007,876 3,260,548 2,743,666 (209,192) (60,000) (273,959) (637,794) 606,528 27,073 (155,231) (25,237) (438,511) (150,199) (156,657) 294,326 $ 2,713,204 2,112,157 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 63 (ii) Deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2020 and 2019 were as follows: Deferred tax assets: $ Balance on January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2020 $ Balance on January 1, 2019 $ Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2019 $ Refund liabilities Contract liabilities Unrealized exchange losses, net Others Total 120,603 14,277 59,429 (9,893) 750,213 (94,758) 707,381 1,637,626 (64,966) (155,340) - - - 134,880 178,025 49,536 164,955 (57,422) (105,526) 655,455 163,265 586,948 31,922 674,337 517,703 171,280 31,922 1,514,208 1,023,948 595,280 18,398 18,398 - - - 120,603 59,429 750,213 707,381 1,637,626 Deferred tax liabilities: Balance on January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2020 Balance on January 1, 2019 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2019 (iii) Unrecognized deferred tax assets Unrealized exchange gains, net $ $ $ $ (497,092) 72,102 - (424,990) - (497,092) - (497,092) Others Total (512,126) (39,527) (15,827) (567,480) (478,169) 9,610 (43,567) (512,126) (1,009,218) 32,575 (15,827) (992,470) (478,169) (487,482) (43,567) (1,009,218) Deferred tax assets have not been recognized in respect of the following items: Tax effect of deductible temporary differences Tax effect of loss carryforward December 31, 2020 1,143,771 $ December 31, 2019 827,365 $ 1,034,072 1,121,433 The Group assesses and considers that some of the income tax reduction items may be unrealized, hence they are not recognized as deferred tax assets. In addition, according to Income Tax Act, the loss carryforward are the losses incurred in past 10 years assessed by ROC tax authorities which can be deducted from the net profit of current year before levied. The items are not recognized as deferred income tax assets due to the fact that the Group may not have sufficient taxable income in the future for the losses. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 64 As of December 31, 2020, the tax effects on loss carryforward that have not been recognized as deferred tax assets were as follows: Year of loss 2011 (Assessed) 2012 (Assessed) 2013 (Assessed) 2014 (Assessed) 2015 (Assessed) 2016 (Assessed) 2017 (Assessed) 2018 (Assessed/Filed) 2019 (Filed) 2020 (Estimated) 2020 (Estimated) Expiry year 2021 Deductible amount $ 157,247 2022 2023 2024 2025 2026 2027 2028 2029 2030 2025 642,778 228,258 41,534 636,827 1,420,567 918,085 557,009 381,896 112,602 58,844 $ 5,155,647 (iv) Unrecognized deferred tax assets and liabilities related to investments in subsidiaries The temporary differences associated with investment in subsidiaries were not recognized as deferred income tax assets and liabilities as the Company has the ability to control the reversal of these temporary differences which are not expected to reverse in the foreseeable future. As of December 31, 2020 and 2019, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $1,856,500 and $1,894,891, respectively. As of December 31, 2020 and 2019, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $54,151,962 and $53,923,241, respectively. (v) Examination and approval The Company’s tax returns for the year through 2018 were assessed by the tax authorities. The ROC tax authorities have assessed the income tax returns of Rayonnant, Palcom, Gempal, Hong Jin, Unicore, Raycore, Hippo Screen, Acbel Telecom and Shennona TW through 2019, of UCGI, Panpal, Hong Ji, Ripal, CBN, Arcadyan, Zhi-Bao, Heng Hao, Mactech, GLB, RBL through 2018, of TTI through 2017. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 65 (t) Capital and other equities (i) Ordinary shares As of December 31, 2020 and 2019, the Company’s authorized common stock consisting of 6,000,000 thousand shares with a par value of 10 New Taiwan dollar per share amounted to $60,000,000 of which 4,407,147 thousand shares, were issued. All issued shares were paid up upon issuance. (ii) Capital surplus The balances of capital surplus were as follows: Additional paid-in capital Treasury share transactions December 31, 2020 December 31, 2019 $ 5,422,060 6,302,490 2,541,906 2,481,885 Difference between consideration and carrying amount arising from acquisition or disposal of subsidiaries Recognition of changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted 36,766 60,850 36,766 59,115 for using equity method 281,231 279,003 $ 8,342,813 9,159,259 In accordance with the ROC Company Act, realized capital reserves can only be used to increase the common stock or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10% of the actual share capital amount. The Company’s shareholders’ meeting held on June 21, 2019 approved to distribute cash of $881,429 (representing 0.2 New Taiwan dollars per share), by using the additional paid-in capital. The Company’s Board of Directors’ meeting held on March 30, 2020 approved to distribute cash of $881,429 (representing 0.2 New Taiwan dollars per share), by using the additional paid-in capital. The Company’s Board of Directors’ meeting held on March 26, 2021 approved to distribute cash of $1,762,859 (representing 0.4 New Taiwan dollars per share), by using the additional paid-in capital. The related information can be accessed through the Market Observation Post system website after the Board of Directors’ meeting. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 66 (iii) Retained earnings Based on the Company’s articles of incorporation amended on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The Board of Directors may set aside a certain amount to cope with the business operation conditions, and shall prepare the proposal for distribution of the balance amount thereof after a resolution has been adopted and then allocated by the Board of Directors. The Company authorizes the Board of Directors to distribute all or part of the dividends and bonuses, capital surplus or legal reserve in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the General shareholders’ meeting. Based on the Company’s articles of incorporation before amended on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The earnings appropriation proposal to distribute dividend and bonus shall be proposed by the Board of Directors and approved by the General Shareholders Meeting. The rest of the unappropriated retained earnings shall be reserved. The lifecycle of the industry of the Company is in the growing stage. To consider the need of the Company for the future capital, capital budget, long-term financial planning, domestic and foreign competition, the need of shareholders for cash flow and other factors, if there is any profit after close of books, the dividend and bonus to be distributed to shareholders shall not be less than thirty percent of profit after tax for such year and the cash dividend allocated by the Company each year shall not be lower than ten percent of the total dividend (including cash and share dividend) for such year. According to the law, when there is a deduction from stockholders' equity (excluding treasury stock and unearned employee benefit) during the year, an amount equal to the deduction item is set aside as a special reserve before the earnings are appropriated. A special reserve is made available for earning distribution only after the deduction of the related shareholders’ equity has been reversed. 1) Legal reverse When a company incurs no loss, it may, in pursuant to a resolution to be adopted by the shareholders’ meeting as required, distribute its legal reserve by issuing new shares and distributing stock dividends or distributing cash to shareholders. Only the portion of the legal reserve which exceeds 25% of the paid-in capital may be distributed. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 67 2) Special reverse In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of current earnings and previous unappropriated earnings shall be set aside as a special reserve during earnings distribution. The amount to be set aside should equal the total amount of contra accounts that are accounted for as deductions to other equity interests. A portion of previous unappropriated earnings shall be set aside as a special reserve, which should not be distributed, to account for cumulative changes to other equity interests pertaining to prior periods. The special reserve shall be made available for appropriation when the net deductions of other equity interests are reversed in the subsequent periods. 3) Earnings distribution Distribution for the earnings of 2019 was approved in the meeting of the Board of Directors held on March 30, 2020, and of 2018 was approved by the shareholders during their annual meeting held on June 21, 2019. The relevant information was as follows: 2019 2018 Amount per share Total amount Amount per share Total amount Cash dividends distributed to common shareholders $ 1.0 4,407,147 1.0 4,407,147 Distribution for the earnings of 2020 was approved in the meeting of the Board of Directors held on March 26, 2021. The relevant information was as follows: 2020 Amount per share Total amount Cash dividends distributed to common shareholders from the unappropriated earnings $ 1.2 5,288,576 The related information of the earnings distribution for the year ended December 31, 2020, can be accessed through the Market Observation Post System website after the related meeting. (iv) Treasury stock The subsidiaries of the Company did not sell the ordinary shares of the Company in the years ended December 31, 2020 and 2019. As of December 31, 2020, Panpal and Gempal, subsidiaries of the Company, held 50,017 thousand shares of ordinary shares of the Company, recorded as the Company’s treasury stock, with a book value of 17.6 New Taiwan dollars per share. The total cost was $881,247. The fair value of the ordinary shares of the Company was 20.70 and 18.85 New Taiwan dollars per share as of December 31, 2020 and 2019, respectively. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 68 Pursuant to the Securities and Exchange Act, the number of treasury shares purchased cannot exceed 10% of the number of shares issued. The total purchase cost cannot exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus. The shares purchased for the purpose of transferring to employees shall be transferred within three years from the date of share repurchase. Those not transferred within the said limit shall be deemed as not issued by the Company and it should be cancelled. Furthermore, treasury stock cannot be pledged for debts, and treasury stock does not carry any shareholder rights until it is transferred. (v) Other equity interests (net-of-taxes) Exchange differences on transaction of foreign operation financial statements Unrealized gain (loss) from financial assets at fair value through other comprehensive income (3,073,441) (182,054) 161,498 (306,763) (100,249) 75,529 (45,469) (6,888,977) (376,952) (1,852,952) (5,606,436) (1,620,812) 4,936,223 (52,530) (268,686) 252,170 111,280 Balance on January 1, 2020 $ (3,794,980) The Company Subsidiaries Associates Balance on December 31, 2020 Balance on January 1, 2019 $ $ The Company Subsidiaries Associates Others Total (1,706) 927 (4,103,449) (3,173,690) (105,598) 116,029 (779) (7,266,708) (1,706) (7,459,388) 3,315,411 197,934 (157,406) - - - - - Balance on December 31, 2019 $ (3,794,980) (306,763) (1,706) (4,103,449) (u) Share-based payment (i) Arcadyan – employee restricted shares At the meeting held on June 21, 2018, the Arcadyan’s Board of Directors decided to issue 4,500,000 shares of employee restricted shares to Arcadyan full-time employees who meet certain requirements. The restricted shares have been registered, with and approved by, the Securities and Futures Bureau of FSC. The Board of Directors decided to issue all the restricted shares on November 6, 2018, which is also the effective date of the share issuance. 3,500,000 shares of the aforementioned restricted shares are issued without consideration. 30%, 30% and 40% of the 3,500,000 restricted shares are vested when the employees continue to provide service for at least 2 year, 3 years and 4 years, respectively, from the registration and the effective date, and at the same time, meet the performance requirement. In addition, when earnings per share in two consecutive and complete fiscal years from the registration and effective date are no less than NT$4, and at the same time, the employees with the restricted shares meet the performance requirement, the other 1,000,000 shares of the restricted shares are vested 100% at the date the shareholders approved the financial statements for the second fiscal year. If the earnings per share in two consecutive and complete fiscal years from the registration and effective date are between NT$3 to NT$4, and at the same time, the employees with the restricted shares meet the performance requirement, the restricted shares are vested (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 69 75% at the date the shareholders approved the financial statements for the second fiscal year. If the earnings per share in two consecutive and complete fiscal years from the registration and effective date are less than NT$3, the employees with restricted shares, whether or not they meet the performance requirement, no restricted shares are vested at the date the shareholders approved the financial statements for the second fiscal year. The earnings per share mentioned above are calculated based on the profit approved by the shareholders and the weighted average number of ordinary shares outstanding at the date of the restricted shares have been approved by the authority. After the issuance, the restricted shares are kept by a trust, which is appointed by Arcadyan, before they are vested. These restricted shares shall not be sold, transferred, pledged, gifted, or disposed by any other means, to third parties during the custody period. The voting rights of these shares are executed by the custodian, and the custodian shall act based on the law and regulations. If the shares remain unvested after the vesting period, Arcadyan will redeem all the unvested shares without consideration and cancel the shares thereafter. Restricted shares could be received in cash and stock dividends, or could be used to participate in cash injection. The aforementioned new shares are not considered as restricted shares. The information of Arcadyan’s restricted shares is as follows: Outstanding shares on January 1 Canceled during the period Vested during the period Outstanding shares on December 31 Unit: in thousands of shares 2020 2019 4,416 (126) (1,984) 2,306 4,500 (84) 4,416 - As of December 31, 2020 and 2019, the unearned employee benefit was $45,606 and $119,897, respectively. The compensation cost related to the restricted shares amounted to $73,545 and $99,719 for the years ended December 31, 2020 and 2019. (ii) Arcadyan－cash injection reserved for employees Arcadyan’s Board of Directors resolve to implement cash injection on April 9, 2019, of which 1,500 thousand shares were reserved for employees. As of December 31, 2019, the relevant information was as follows: Grant date Number of shares granted (in thousands) Recipients Vested condition 2019.10.16 1,500 (Note 1) Vest immediately (Note 1) Arcadyan’s full-time employees who meet certain requirements. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 70 The compensation cost, recorded as operating expense and cost of sales related to the cash injection reversed for employees, amounted to $27,000 in 2019. (iii) TTI – employee stock options The information about share-based payment of TTI in 2020 and 2019 was as follows: Grant date Granted shares (in thousand) Contract period Recipients Vested condition Employee stock options 2015.10.29 1,000 7 years Employees of TTI Please refer to the issuance terms of the stock options as follows The issuance terms of the stock options are as follows: 1) 2) Exercise price: NT$13.5 per share. Exercisable duration: The employees who received stock options that exceed two years and meet the performance requirements can exercise a specific percentage in each period as below. The exercisable duration of the options is seven years. No transfer is allowed except for inheritance. Exercisable Period and performance requirements to exercise options 40 ％ 30 ％ The share purchase right is effectively vested after the satisfaction of 2 conditions: (1) Years of service must exceed 2 years after the issuance of the right. (2) Upon vesting, the average earnings per share of TTI for the past 2 years must exceed NT$3. If the criteria for the said earnings per share are not fulfilled, then the measurement period will be extended to 3 years; under this extension, the average of the earnings per share of any 2 years within the 3 year period must exceed NT$3. The share purchase right is effectively vested after the satisfaction of 2 conditions: (1) Years of service must exceed 3 years after the issuance of the right. (2) Upon vesting, the performance requirements need to be met, otherwise, the earnings per share of TTI for the following year must exceed NT$3. If the criteria for the said earnings per share are not fulfilled, then the measurement period will be extended to another 1 year; the earnings per share must exceed NT$3 during the extension period. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 71 Exercisable Period and performance requirements to exercise options 30 ％ The share purchase right is effectively vested after the satisfaction of 2 conditions: (1) Years of service must exceed 4 years after the issuance of the right. (2) Upon vesting, the performance requirements need to be met, otherwise, the earnings per share of TTI for the following year must exceed NT$3. If the criteria for the said earnings per share are not fulfilled, then the measurement period will be extended to another 1 year; the earnings per share must exceed NT$3 during the extension period. The total measurement periods mentioned above may not exceed 6 years. The earnings per share mentioned above are based on the financial statements that had been audited and certified by a certified public accountant. Exercise method: TTI would issue new shares as the options are exercised. Exercise procedure: In accordance with TTI’s issuance and exercise rules. After receiving the payment for share options, the entitlement certification of share options exercised is registered as ordinary shares. 3) 4) The information on total options issued was as follows: 2020 2019 Weighted-ave rage exercise price (NT dollars) Weighted-ave rage exercise price (NT dollars) Shares (in thousands) Shares (in thousands) 13.5 300 13.5 600 13.5 (300) - - - - 13.5 13.5 (300) 300 - - Outstanding shares on January 1 Canceled during the period Outstanding shares on December 31 Exercisable shares on December 31 The exercise price range of TTI’s outstanding employee stock options and weighted-average remaining contractual life of the outstanding options are as follows: Exercise price range $ 13.5 Weighted average remaining contract period 13.5 2.83 December 31, 2020 December 31, 2019 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 72 The shares of the stock options were all expired due to failure to meet the vested conditions in 2020. The compensation cost reversed related to the share-based payment amounted to $970 and $1,326 for the years ended December 31, 2020 and 2019, respectively. (iv) CBN－employee stock options At the meeting held on May 30, 2012, May 26, 2014 and May 17, 2016, CBN’s Board of Directors resolved to issue 1,000,000, 800,000 and 1,500,000 units of employee stock options, respectively, with an exercisable right of one share of CBN’s ordinary shares per unit. The information on total options issued was as follows: 1) The first employee stock option plan The employee stock options above have been fully exercised in 2017. 2) The second employee stock option plan Outstanding shares on January 1 Exercised during the period Outstanding shares on December 31 Exercisable shares on December 31 2019 Weighted-ave rage exercise price (NT dollars) Shares 8,910 $ (8,910) 10 10 - - - - The employee stock options above have been fully exercised in 2019. 3) The third employee stock option plan 2020 2019 Weighted- average exercise price (NT dollars) Shares Weighted- average exercise price (NT dollars) Shares Outstanding shares on January 1 87,800 $ Expired during the period Exercised during the period Outstanding shares on December 31 Exercisable shares on December 31 (4,500) (80,300) 3,000 3,000 10 10 10 10 10 153,600 $ (7,500) (58,300) 87,800 87,800 10 10 10 10 10 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 73 As of December 31, 2020 and 2019, the weighted-average remaining contractual life of the outstanding options was 0.67 and 1.67 years, respectively. The issuance terms of the share options are as follows. 1) 2) Exercise price: NT$10 per share. Exercisable duration: a) The first employee stock options plan: The employees who received share options being granted over two years can exercise a specific percentage in each period as below. The exercisable duration of the options is seven years. No transfer is allowed except for inheritance. After the expiration of the exercisable duration, the unexercised options will be canceled by CBN and not be re-issued anymore. Period to exercise options Exercisable percentage (cumulative) 2 years after options received 3 years after options received 4 years after options received b) The second employee stock option plan: 40 ％ 70 ％ 100 ％ The employees who received share options being granted over two years and are still employed by CBN and meet requirements can exercise a specific percentage in each period as stated below. The exercisable duration of the options is seven years. No transfer is allowed except for inheritance. After the expiration of the exercisable duration, the unexercised options will be canceled by CBN and not re-issued anymore. Period to exercise options Exercisable percentage (cumulative) 2 years after options received 3 years after options received 4 years after options received c) The third employee stock option plan: 40 ％ 70 ％ 100 ％ The employees who received share options being granted over five months and are still employed by CBN and meet requirements can exercise a specific percentage in each period as stated below. The exercisable duration of the options is five years. No transfer is allowed except for inheritance. After the expiration of the exercisable duration, the unexercised options will be canceled by CBN and not re-issued anymore. Period to exercise options Exercisable percentage (cumulative) 5 months after options received 100 ％ (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 74 d) e) Exercise method: CBN would issue new shares as the options are exercised. Exercise procedure: In accordance with CBN’s issuance and exercise rules, after receiving the consideration of share options, the entitlement certification of share options exercised is registered as ordinary shares once a quarter. The compensation cost for the years ended December 31, 2020 and 2019 were $(68) and $(112), respectively. CBN adopted the Black-Scholes model to estimate the fair value on the grant date, and the assumptions are summarized as follows: A. The first employee stock option plan: Original exercise price (NT dollars) Current price (NT dollars) Expected dividend yield rate Expected volatility Risk-free interest rate Expected life of the option $10 25 0% 38.25~38.64% 0.91~1.02% 4.5~5.5 years Weighted average fair value (NT dollars per share) 16.10~16.49 B. The second employee stock option plan: Original exercise price (NT dollars) Current price (NT dollars) Expected dividend yield rate Expected volatility Risk-free interest rate Expected life of the option $10 37.02 0% 31.07~32.77% 1.17~1.33% 4.5~5.5 years Weighted average fair value (NT dollars per share) 27.62~27.92 C. The third employee stock option plan: Original exercise price (NT dollars) Current price (NT dollars) Expected dividend yield rate Expected volatility Risk-free interest rate Expected life of the option $10 24.62 0% 35.87% 0.56% 2.55 years Weighted average fair value (NT dollars per share) 14.96 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 75 (v) Earnings per share The Group’s basic and diluted earnings per share are calculated as follows: Basic earnings per share: Profit attributable to ordinary shareholders of the Company Weighted-average number of outstanding ordinary shares (in thousands) Diluted earnings per share: 2020 2019 $ 9,361,893 6,955,899 4,357,130 4,357,130 Profit attributable to ordinary shareholders of the Company (after adjustment of potential diluted ordinary shares) $ 9,361,893 6,955,899 Weighted-average number of outstanding ordinary shares of potential diluted ordinary shares Weighted-average number of outstanding ordinary shares (in thousands) Effect of potential diluted common stock Employee compensation (in thousands) Weighted-average number of ordinary shares (after adjustment of potential diluted ordinary shares) (in thousands) 4,357,130 4,357,130 57,482 49,860 4,414,612 4,406,990 (w) Revenue from contracts with customers (i) Disaggregation of revenue Primary geographical markets: United states China Netherlands United Kingdom India Others Major products: 5C related electronics products Others 2020 Strategically Integrated Product Segment Total 8,106,885 568,651 1,340,450 4,637,401 299,945 18,811,963 33,765,295 446,893,526 127,573,036 84,890,214 50,423,876 30,681,543 308,467,056 1,048,929,251 IT Product Segment $ 438,786,641 127,004,385 83,549,764 45,786,475 30,381,598 289,655,093 $ 1,015,163,956 $ 1,013,091,503 33,191,331 1,046,282,834 2,072,453 573,964 2,646,417 $ 1,015,163,956 33,765,295 1,048,929,251 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 76 2019 Strategically Integrated Product Segment 2,539,578 456,189 977,438 512,219 3,853,215 9,532,350 15,024,418 32,895,407 IT Product Segment 376,459,888 103,116,226 97,981,478 43,967,861 40,566,291 29,552,389 255,902,806 947,546,939 Total 378,999,466 103,572,415 98,958,916 44,480,080 44,419,506 39,084,739 270,927,224 980,442,346 945,416,514 2,130,425 947,546,939 32,478,954 416,453 32,895,407 977,895,468 2,546,878 980,442,346 December 31, 2020 $ 236,120,826 December 31, 2019 195,665,380 January 1, 2019 207,794,674 Primary geographical markets: United states China Netherlands United Kingdom India Germany Others Major products: 5C related electronics products Others (ii) Contract balances $ $ $ $ Notes and accounts receivable (including related parties) Less: allowance for impairment (3,910,928) (3,928,716) (4,020,603) Total Contract liabilities $ 232,209,898 191,736,664 203,774,071 $ 820,016 956,455 1,476,304 For the details on accounts receivable and allowance for impairment, please refer to note (6)(e). The amount of revenue recognized for the years ended December 31, 2020 and 2019 that were included in the balance of contract liability at the beginning of the period were $877,822 and $1,419,929, respectively. The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 77 (x) Employees’ and directors’ compensations Based on the Company’s articles of incorporation, if there is any profit in a fiscal year, the Company’s pre-tax profits in such fiscal year, prior to deduction of compensations to employees and directors, shall be distributed to employees as compensations in an amount of not less than two percent (2%) thereof and to directors as compensations in an amount of not more than two percent (2%) of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset accumulated losses. The compensations to employees as mentioned above may be distributed in the form of stock or cash. Employees entitled to receive the said stock or cash may include the employees of the Company’s subordinate companies pursuant to the Company Act (Employees entitled to receive the said stock or cash may include the employees of the Company’s subordinate companies who meet certain conditions after the Company’s articles of incorporation amended on June 21, 2019). The Company accrued and recognized its employee compensation of $974,694 and $731,322, respectively, and directors’ compensation of $51,541 and $38,672 for the years ended December 31, 2020 and 2019, respectively. The estimated amounts mentioned above are based on the net profit before tax without the compensations to employees and directors of each respective ending period, multiplied by the percentage of the compensation to employees and directors, which was approved by the management. The estimations are recorded under operating expenses and cost. The differences between the amounts estimated and recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the distribution year. If the Board of Directors approve to distribute employee compensation in the form of stock, the number of the shares of the employee compensation is based on the closing price of the day before the Board of Directors' meeting, the related information can be accessed through the Market Observation Post System website. There is no difference between the amount approved in the meeting of the Board of Directors and those recognized in the financial statements in 2020 and 2019. There is no difference between the amount estimated and recognized in the financial statements in 2019. The related information can be accessed through the Market observation Post System website. (y) Non-operating income and expenses (i) Interest income Interest income from bank deposits Interest income from financial assets measured at amortized cost Other interest income Total Interest income 2020 1,635,953 $ 2019 1,656,317 - 304 2,992 5,494 $ 1,636,257 1,664,803 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 78 (ii) Other income The other incomes for the years ended December 31, 2020 and 2019, were as follows: Dividend revenue Other revenue (iii) Other gains and losses 2020 2019 $ $ 108,996 384,924 493,920 127,349 359,205 486,554 The other gains and losses for the years ended December 31, 2020 and 2019, were as follows: Gains on disposal of investments Gains on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange losses, net Gains (losses) on disposal of property, plant, and equipment, net Others 2020 2019 $ 29,757 66,837 279,262 (73,475) 408,943 (682,207) 25,499 40,245 - 49 $ 261,043 (166,133) (z) Reclassification of the components of other comprehensive income The details of reclassification of the components of other comprehensive income for the years ended December 31, 2020 and 2019, were as follows: Cash flow hedge: Gains (losses) from current period Less: reclassification of gains and losses included in profit or loss Profit (loss) recognized in other comprehensive income 2020 2019 (12,483) (15,162) 2,679 (26,649) (21,778) (4,871) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 79 (aa) Financial instruments (i) Credit risk 1) The carrying amount of financial assets represents the maximum amount exposed to credit risk. The Group’s customers are mainly from the high-tech industry. The Group does not concentrate on a specific customer and the sales regions are widely spread, thus there should be no concern on the significant concentrations of accounts receivable credit risk. And in order to mitigate accounts receivable credit risk, the Group constantly assesses the financial status of the customers. 2) Receivables and debt securities For information of exposure to credit risk of notes and accounts receivable, please refer to note (6)(e). Other financial assets at amortized cost include other receivables, and time deposits. These financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. (Regarding how the financial instruments are considered to have low credit risk, please refer to note (4)(g)) of the consolidated financial statements for the year ended December 31, 2020. Due to the counter parties and the performing parties of the Group’s time deposits are financial institutions with investment grade and above, these time deposits are considered to have low credit risk. The movements in the allowance for the years ended December 31, 2020 and 2019 were as follows: Balance on January 1, 2020 Impairment losses recognized (reversed) Balance on December 31, 2020 Balance on January 1, 2019 Impairment losses recognized (reversed) Balance on December 31, 2019 Other receivables $ $ $ $ 1,012 1,380 2,392 3,577 (2,565) 1,012 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 80 (ii) Liquidity risk The following are the contractual maturities of financial liabilities. Except for lease liabilities and bonds payable, the amounts exclude estimated interest payments. Carrying Amount Contractual cash flows Within 1 year 1 ~ 2 years Over 2 years December 31, 2020 Non-derivative financial liabilities Secured borrowings $ Unsecured borrowings Lease liabilities－current and non-current Notes and accounts payable Other payables Bonds payable Derivative financial liabilities Forward exchange contracts: 228,913 (77,175) 111,944,173 (111,944,173) (101,694,173) (228,913) 2,287,762 (486,124) (2,401,961) 199,726,063 (199,726,063) (199,726,063) (23,397,683) 23,397,683 (23,397,683) (1,000,000) 980,219 - Outflow Inflow Swap contracts: Outflow Inflow Forward exchange contracts used for hedging: Outflow Inflow (5,279,091) 5,143,059 (5,279,091) 5,143,059 (1,295,840) 1,285,715 (1,295,840) 1,285,715 130,865 5,752 2,192 (209,640) 208,331 $ 338,703,622 (338,846,259) (325,528,684) (209,640) 208,331 (77,175) (5,125,000) (74,563) (5,125,000) (562,952) (1,352,885) - - (1,000,000) - - - - - - - - - - - - - - - (6,765,127) (6,552,448) 98,438 86,601,844 (98,438) (86,601,844) (39,375) (79,101,844) (39,375) (1,925,000) (19,688) (5,575,000) December 31, 2019 Non-derivative financial liabilities Secured borrowings $ Unsecured borrowings Lease liabilities－current and non-current Notes and accounts payable Other payables Bonds payable Derivative financial liabilities Forward exchange contracts: Outflow Inflow Forward exchange contracts used for hedging: Outflow Inflow 2,267,088 (754,412) (2,369,246) 144,445,777 (144,445,777) (144,445,777) (21,916,685) 21,916,685 (21,916,685) (1,000,000) 966,492 - 5,854 4,932 (736,484) 732,377 (736,484) 732,377 (1,423,089) 1,433,921 $ 256,307,110 (256,425,265) (246,251,368) (1,423,089) 1,433,921 (416,167) (1,198,667) - - - - - - - - - (1,000,000) - - - - (2,380,542) (7,793,355) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 81 The Group is not expecting that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts. (iii) Currency risk 1) Exposure to foreign currency risk The Group’s significant exposure to foreign currency risk was as follows: Unit: thousands of foreign currency / thousands of New Taiwan Dollars Foreign currency December 31, 2020 Exchange rate TWD December 31, 2019 Foreign currency Exchange rate TWD Financial assets Monetary items USD to TWD USD to CNY EUR to TWD CNY to USD Non-monetary items THB to TWD Financial liabilities Monetary items USD to TWD USD to CNY USD to BRL EUR to TWD CNY to USD $ 13,926,339 13,381 60,677 3,646,117 28.48 396,622,135 7,070,270 10,525 381,091 6.5386 2,124,909 35.02 88,303 15,877,352 2,577,002 0.1529 29.98 211,966,695 315,540 2,966,098 11,086,598 6.9667 33.59 0.1435 516,989 0.9502 491,243 446,859 1.0028 448,110 14,056,045 3,132 131,487 12,616 3,149,932 28.48 400,316,162 6,441,501 5,424 6.5386 142,432 5.1967 42,554 35.02 13,716,669 3,182,008 0.1529 89,199 3,744,750 441,812 29.98 193,116,200 162,612 4,270,111 1,429,389 13,689,412 6.9667 3.8322 33.59 0.1435 2) Sensitivity analysis The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, loans and borrowings, accounts payable, and other payables that are denominated in foreign currency. Assuming all other variable factors remain constant, a strengthening (weakening) 5% of appreciation (depreciation) of the each major foreign currency against Group entities’ functional currency as of December 31, 2020 and 2019, would have increased (decreased) the net profit before tax as follows. The analysis is performed on the same basis for both periods. USD (against the TWD) Strengthening 5% Weakening 5% December 31, 2020 December 31, 2019 $ (184,701) 184,701 942,525 (942,525) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 82 USD (against the CNY) Strengthening 5% Weakening 5% USD (against the BRL) Strengthening 5% Weakening 5% EUR (against the TWD) Strengthening 5% Weakening 5% CNY (against the USD) Strengthening 5% Weakening 5% December 31, 2020 December 31, 2019 14,595 (14,595) 7,646 (7,646) (187,238) (213,506) 187,238 213,506 84,155 (84,155) 76,835 (76,835) 108,034 (130,141) (108,034) 130,141 3) Exchange gains and losses of monetary items As the Group deals with diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the years ended December 31, 2020 and 2019, the foreign exchange gains (losses), including both realized and unrealized, amounted to $73,475 and $682,207, respectively. (iv) Interest rate analysis The interest risk exposure from financial assets and liabilities has been disclosed in the note of liquidity risk management. The following sensitivity analysis is based on the risk exposure to interest rate on the derivative and non-derivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25%, when reporting to management internally, which also represents the assessment of the Group’s management for the reasonably possible interval of interest rate change. Assuming all other variable factors remaining constant, if the interest rate had increased or decreased by 0.25%, the impact to the net profit before tax would be as follows for the years ended December 31, 2020 and 2019, which would be mainly resulted from the bank savings and borrowings with variable interest rates. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 83 Interest increased by 0.25% Interest decreased by 0.25% (v) Fair value information 2020 2019 $ 24,312 (13,164) (24,312) 13,164 1) The categories and fair value of financial instruments The Group’s financial assets at fair value through profit or loss, financial instruments used for hedging and financial assets at fair value through other comprehensive income were measured at fair value on a recurring basis. The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It shall not include fair value information of the financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value and investments in equity instruments which do not have any quoted price in an active market in which the fair value cannot be reasonably measured. December 31, 2020 Fair Value Book value Level 1 Level 2 Level 3 Total 1,972,849 1,972,849 491,243 491,243 Financial assets at fair value through profit or loss–current and non-current Derivative financial assets for non-hedging $ 11,069 Non-derivative financial assets mandatorily measured at fair value through profit or loss Subtotal Financial assets at fair value through other comprehensive income Stocks listed on domestic markets Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal Financial assets measured at amortized cost 2,435,793 2,446,862 2,152,542 200,377 38,429,954 43,246,965 Cash and cash equivalents Notes and accounts receivable, net 89,126,923 193,401,010 Notes and accounts receivable due from related parties, net Other receivables Guarantee deposits Subtotal Total 378,934 1,628,657 522,213 285,057,737 $ 330,751,564 - - - - - - - - - - 11,069 - 11,069 2,234,184 201,609 2,435,793 - - - - - - 1,972,849 491,243 2,152,542 2,152,542 200,377 200,377 38,429,954 - 38,429,954 - - - - - - - - - - - - - - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 84 December 31, 2020 Fair Value Book value Level 1 Level 2 Level 3 Total Financial liabilities at fair value through profit or loss Derivative financial liabilities for non-hedging $ 136,617 Derivative financial liabilities for hedging 2,192 Financial liabilities measured at amortized cost Short-term borrowings Notes and accounts payable Notes and accounts payable to related parties Other payables Bonds payable Lease liabilities－current and non-current Long-term borrowings current portion Long-term borrowings Deposits received Subtotal Total 92,838,733 196,837,439 2,888,624 23,397,683 980,219 2,287,762 8,932,615 10,401,738 285,232 338,850,045 $ 338,988,854 - - - - - - - - - - - 136,617 2,192 - - - - - - - - - - - - - - - - - - - - 136,617 2,192 - - - - - - - - - December 31, 2019 Fair Value Book value Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss–current and non-current Derivative financial assets for non-hedging $ 15,921 Non-derivative financial assets mandatorily measured at fair value through profit or loss Subtotal Financial assets used for hedging Financial assets at fair value through other comprehensive income Stocks listed on domestic markets Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal - - - 1,445,817 1,461,738 61 2,055,890 2,055,890 448,110 448,110 2,246,932 177,121 28,007,745 32,935,798 - - - 15,921 - 15,921 1,330,458 115,359 1,445,817 61 - - - 61 2,055,890 448,110 2,246,932 2,246,932 177,121 177,121 - - - - 28,007,745 - 28,007,745 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 85 December 31, 2019 Fair Value Book value Level 1 Level 2 Level 3 Total Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net 66,559,397 163,684,407 Notes and accounts receivable due from related parties, net Other receivables Refundable deposits Subtotal Total Financial liabilities at fair value through profit or loss Derivative financial liabilities for non-hedging Financial liabilities used for hedging Financial liabilities measured at amortized cost Short-term borrowings Notes and accounts payable Notes and accounts payable to related parties Other payables Bonds payable Lease liabilities－current and non-current Long-term borrowings current portion Long-term borrowings Deposits received Subtotal Total 44,512 2,006,113 335,897 232,630,326 $ 267,027,923 $ 5,854 4,932 60,951,844 142,940,869 1,504,908 21,916,685 966,492 2,267,088 18,189,375 7,559,063 188,815 256,485,139 $ 256,495,925 - - - - - - - - - - - - - - - - 5,854 4,932 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,854 4,932 - - - - - - - - - - - - - - 2) Fair value valuation technique of financial instruments not measured at fair value The Group estimates financial instruments that not measured at fair value by methods and assumption as follows: a) Financial assets and liabilities measured at amortized cost If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 86 3) Fair value valuation technique of financial instruments measured at fair value a) Non-derivative financial instruments Financial instruments trade in active markets is based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-the-run bonds from Taipei Exchange can be used as a base to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market. If a quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have a quoted price in an active market. If a financial instrument is not in accord with the definition mentioned above, then it is considered to be without a quoted price in an active market. In general, market with low trading volume or high bid-ask spreads is an indication of a non-active market. The fair value of the listed company is determined by reference to the market quotation. The measurements on fair value of the financial instruments without an active market are determined using the valuation technique or the quoted market price of its competitors. Fair value measured using the valuation technique can be extrapolated from similar financial instruments, discounted cash flow method, or other valuation techniques which include the model used in calculating the observable market data at the consolidated balance sheet date. The measurement of fair value of a non-active market financial instruments held by the Group which do not have quoted market prices are based on the comparable market approach, with the use of key assumptions of price-book ratio multiple or earnings multiple of comparable listed companies as its basic measurement. These assumptions have been adjusted for the effect of discount without the marketability of the equity securities. b) Derivative financial instruments Measurement of the fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 87 4) Transfer from one level to another There was no transfer from one level to another in the year ended December 31, 2020. investment The Group held an in equity of Crystalvue Medical Corporation (“Crystalvue”), which were classified as fair value through other comprehensive income. The fair value of the investment was categorized as level 3 as of December 31, 2018, because the shares were not listed on the exchange market and was measured by significant unobservable inputs. In December 2019, Crystalvue’s shares were listed on the exchange market, wherein they are actively traded. Currently, the equity shares have quoted market price in an active market; therefore, the category was transferred from level 3 to level 1 as of December 31, 2019. 5) Changes in level 3 The change in level 3 at fair value in the years ended December 31, 2020 and 2019, were as follow: Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Total Balance on January 1, 2020 $ 115,359 2,424,053 2,539,412 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment Effect of changes in exchange rates Balance on December 31, 2020 Balance on January 1, 2019 $ $ Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment Transferred out from Level 3 Effect of changes in exchange rates 9,575 - 76,675 201,609 69,390 (9,627) - 55,596 - - - - - - - - - Balance on December 31, 2019 $ 115,359 (34,716) 29,369 (52,105) (6,933) (6,749) 2,352,919 2,041,463 210,191 208,665 (791) (10,120) (20,498) (4,857) 2,424,053 9,575 (34,716) 106,044 (52,105) (6,933) (6,749) 2,554,528 2,110,853 (9,627) 210,191 264,261 (791) (10,120) (20,498) (4,857) 2,539,412 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 88 For the years ended December 31, 2020 and 2019, total gains and losses that were included in “other gains and losses, net” and “unrealized gains and losses from equity instruments at fair value through other comprehensive income”, respectively, were as follows: Total gains and losses recognized: In profit or loss before tax (as “other gains and losses”) In other comprehensive income (as “unrealized gains and losses from equity instruments at fair value through other comprehensive income”) $ $ 2020 2019 9,575 (9,627) 8,834 210,191 6) The quantified information for significant unobservable inputs (level 3) used in fair value measurement The Group’s financial instruments that use level 3 input to measure fair values include financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss. Most of fair value measurements of the Group which are categorized as equity investment into level 3 have several significant unobservable inputs. Significant unobservable inputs of equity investments without quoted price are independent of each other. The quantified information for significant unobservable inputs was as follows: Item Financial assets at fair value through other comprehensive income－equity investment without an active market Valuation technique Comparable market approach (Price-Book ratio method and Earnings multiplier method) Inter-relationships between significant unobservable inputs and fair value The higher the multiple is, the higher the fair value will be. The higher the multiple is, the higher the fair value will be. The higher the Lack-of-Marketabilit y discount rate is, the lower the fair value will be. Significant unobservable inputs Price-Book ratio multiples (1.72~7.9 and 1.4~5.64, respectively, on December 31, 2020 and 2019) Multiples of earnings 14.68 and 3.12~16.6, respectively, on December 31, 2020 and 2019) Lack-of-Marketability discount rate (35%~85% and 35%~85%, respectively, on December 31, 2020 and 2019) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 89 Item Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Valuation technique Net asset value method Net asset value method Significant unobservable inputs Net asset value Inter-relationships between significant unobservable inputs and fair value Inapplicable Net asset value Inapplicable 7) Sensitivity analysis for fair value of financial instruments using level 3 inputs The Group’s fair value measurement on financial instruments is reasonable. However, the measurement would be different if different valuation models or valuation parameters are used. For financial instruments using level 3 inputs, if the valuation parameters changed, the impacts on other comprehensive income or loss are as follows: Input Price-Book ratio multiples December 31, 2020 Financial assets at fair value through other comprehensive income Move up or down Other comprehensive income Unfavorable change Favorable change 5% $ 36,119 35,448 December 31, 2019 Financial assets at fair value through other comprehensive income Multiples of earnings Lack-of-Marketability discount rate Price-Book ratio multiples Multiples of earnings Lack-of-Marketability discount rate 5% 5% $ $ 5,734 3,942 5,801 3,942 5% $ 28,209 27,261 5% 5% $ $ 21,481 12,886 19,524 12,938 The favorable and unfavorable changes reflect the movement of the fair value, in which the fair value is calculated by using the different unobservable inputs in the valuation technique. The table above shows the effects of one unobservable input, without considering the inter-relationships with another unobservable input for financial instrument, if there are one or more unobservable inputs. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 90 8) Offsetting financial assets and financial liabilities The Group has financial instruments transactions applicable to the International Financial Reporting Standards NO. 32 Sections 42 endorsed by the FSC which requested for offsetting. Financial assets and liabilities relating to those transactions are recognized in the net amount of the balance sheets. The following tables present the aforesaid offsetting financial assets and financial liabilities. Unit: thousands of New Taiwan Dollars / thousands of US Dollars December 31, 2020 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized financial assets (a) Gross amounts of financial liabilities offset in the balance sheet (b) Net amount of financial assets presented in the balance sheet (c)=(a)-(b) Amounts not offset in the balance sheet (d) Cash collateral received Financial instruments Net amount (e)=(c)-(d) Other current assets $ 199,267,863 199,267,863 - - - - (USD 6,996,765) (USD 6,996,765) December 31, 2020 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized financial liabilities (a) Gross amounts of financial assets offset in the balance sheet (b) Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b) Amounts not offset in the balance sheet (d) Cash collateral received Financial instruments Net amount (e)=(c)-(d) Short-term borrowings $ 199,267,863 199,267,863 - - - - (USD 6,996,765) (USD 6,996,765) December 31, 2019 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized financial assets (a) Gross amounts of financial liabilities offset in the balance sheet (b) Net amount of financial assets presented in the balance sheet (c)=(a)-(b) Amounts not offset in the balance sheet (d) Cash collateral received Financial instruments Net amount (e)=(c)-(d) Other current assets $ 104,757,401 104,757,401 - - - - (USD 3,494,243) (USD 3,494,243) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 91 December 31, 2019 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized financial liabilities (a) Gross amounts of financial assets offset in the balance sheet (b) Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b) Amounts not offset in the balance sheet (d) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 104,757,401 104,757,401 - - - - (USD 3,494,243) (USD 3,494,243) (ab) Financial risk management (i) Overview The Group is exposed to the following risks arising from financial instruments: 1) Credit risk 2) Liquidity risk 3) Market risk In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management of the Group. For detailed information, please refer to the related notes of each risk. (ii) Structure of risk management The Group’s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations. The Group minimizes the risk exposure through derivative financial instruments. The Board of Directors regulated the use of derivative financial instruments in accordance with the Group’s policy about risks arising from financial instruments such as currency risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investments of excess liquidity. The internal auditors of the Group continue with the review of the amount of the risk exposure in accordance with the Group’s policies and the risk management policies and procedures. The Group has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation. (iii) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 92 1) Accounts receivable and other receivables The Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, and these limits are reviewed periodically. 2) Investments The credit risks exposure in the bank deposits, investments with fixed income and other financial instruments are measured and monitored by the Group’s finance department. Since the contractually obligated counterparties are banks, financial institutes and corporate organizations with good credits, there are no compliance issues, and therefore, no significant credit risk. transaction counterparties and the Group's 3) Guarantees Pursuant to the Group’s policies, it is only permissible to provide financial guarantees to subsidiaries and companies that the Group has business with. As of December 31, 2020 and 2019, the Group did not provide any guarantees to other companies besides its subsidiaries. (iv) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities which be settled by delivering cash or another financial asset. The Group manages and maintains sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Group’s management supervises the banking facilities and ensures in compliance with the terms of the loan agreements. Please refer to notes (6)(m) and (6)(n) for unused credit lines of short-term and long-term borrowings as of December 31, 2020 and 2019. (v) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. 1) Currency risk The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currencies of the Group. The currencies used in these transactions are primarily denominated in TWD, USD, EUR and CNY. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 93 As for other monetary assets and liabilities denominated in other foreign currencies, when short-term imbalance takes place, the Group buys or sells foreign currencies at spot rate to ensure that the net exposure is kept on an acceptable level. 2) Interest rate risk The Group borrows funds on fixed and variable interest rates, which has a risk exposure to changes in fair value and cash flow. Therefore, the Group manages the interest rates risk by maintaining an adequate combination of fixed and variable interest rates. 3) Other price risk The Group is exposed to equity price risk arising from investments in listed equity securities. (ac) Capital management The policy of capital management made by the Board of Directors is to maintain a strong capital base so as to stabilize the confidence of the investors, creditors and the public market and to sustain future development of the business. Capital consists of ordinary shares, capital surplus, retained earnings and non-controlling interests. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders. The Group monitors the capital structure by way of periodical review the debt ratio. As of December 31, 2020 and 2019, the debt ratio was as follows: Total liabilities Total assets Debt ratio December 31, 2020 $ 350,936,048 December 31, 2019 267,889,075 $ 466,925,698 382,648,419 75 % 70 % The Group could purchase its own shares in the public market in accordance with the corresponding rules and regulations. The timing of the purchases depends on market prices. As of December 31, 2020, there were no changes in the Group’s approach of capital management. (ad) Investing and financing activities not affecting current cash flow The Group’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2020 and 2019 were acquisition of right-of-use assets by leasing, please refer to note (6)(l). (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 94 Reconciliation of liabilities arising from financing activities was as follows: Short-term borrowings Proceeds from issuance of convertible bonds Long-term borrowings Lease liabilities January 1, 2020 $ 60,951,844 Cash flow 31,886,889 Other non-cash changes - December 31, 2020 92,838,733 966,492 - 13,727 980,219 25,748,438 (6,414,085) - 19,334,353 2,267,088 (846,836) 867,510 2,287,762 Guarantee deposits and others 246,038 92,634 1,459 340,131 Total liabilities from financing activities $ 90,179,900 24,718,602 882,696 115,781,198 Short-term borrowings $ 72,350,197 (11,398,353) January 1, 2019 Cash flow Other non-cash changes - December 31, 2019 60,951,844 Proceeds from issuance of convertible bonds Long-term borrowings Lease liabilities - 1,007,240 (40,748) 966,492 28,534,063 (2,785,625) - 25,748,438 2,089,950 (832,815) 1,009,953 2,267,088 Guarantee deposits and others 238,324 (34,005) 41,719 246,038 Total liabilities from financing activities $ 103,212,534 (14,043,558) 1,010,924 90,179,900 (7) Related-party transactions: (a) Name and relationship with related parties The followings are the entities that have had transactions with the Group during the periods covered in the consolidated financial statement. Name of related party Relationship with the Group Compal Precision Module (Jiangsu) Co., Ltd. (“CPM”) Changbao Electronic Technology (Chongqing) Co., Ltd. An associate An associate (“Changbao”) Hong Ya Technology Corporation (“Hong Ya An associate Technology”) Avalue An associate (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 95 Name of related party Crownpo Technology Inc. (“Crownpo”) Allied Circuit Kinpo Group Management Consultant Company (“Kinpo Group Management”) LIZ Electronics (Kunshan) Co., Ltd. LIZ Electronics (Nantong) Co., Ltd. Compal Connector Manufacture Ltd. (“CCM”) ARCE Therapeutics Co., Ltd. (“ARCE”) Raypal Biomedical Co., Ltd. (“Raypal”) AcBel Polytech Inc. and its subsidiaries (“AcBel”) Cal-Comp Electronics & Communications Company Limited (b) Transactions with key management personnel Key management personnel remunerations comprised: Short-term employee benefits Post-employment benefits Share-based payments Relationship with the Group An associate An associate An associate An associate An associate A joint venture company An associate An associate The same Chairman of the Board with the Company The same Chairman of the Board with the Company 2020 2019 $ 724,350 671,762 8,267 19,033 8,225 30,276 $ 751,650 710,263 There are no termination benefits and other long-term benefits. Please refer to note (6)(u) for explanations related to share-based payments. (c) Significant related-party transactions (i) Sale of goods to related parties The amounts of significant sales transactions between the Group and related parties were as follows: Associates Other related parties Joint venture 2020 2019 $ 240,161 288,629 610,517 24 222 - $ 850,900 288,653 Sales prices for related parties were similar to those of the third-party customers. The collection period was 60~120 days for related parties. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 96 (ii) Purchase of goods from related parties The amounts of significant purchase transactions between the Group and related parties were as follows: Associates Other related parties Joint venture 2020 4,596,352 $ 2019 3,678,644 2,956,322 1,663,747 - 31,150 $ 7,552,674 5,373,541 Purchase prices and payment period from related parties were similar to those from third-party suppliers. The payment period was 60~165 days for related parties. (iii) Receivables due from relate parties The receivables arising from the transactions mentioned above and others on behalf of related parties were as follows: Account Related party categories December 31, 2020 December 31, 2019 Notes and accounts receivable Associates $ 29,643 44,493 Notes and accounts receivable Other related parties 349,291 Other receivables Other receivables Other related parties Joint venture 64 908 - 19 62 $ 379,906 44,574 (iv) Payables to related parties The payables arising from the transactions mentioned above and rendering of services from other related parties were as follows: Account Notes and accounts payable Notes and accounts payable Notes and accounts payable Other payables Related party categories December 31, 2020 December 31, 2019 Associates $ 1,632,862 764,129 Other related parties 1,255,762 740,742 Joint venture Associates - 37 600 - $ 2,889,224 1,504,908 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 97 (8) Pledged assets: The carrying values of pledged assets were as follows: Pledged Assets Other current assets Property, plant and equipment Subject December 31, 2020 December 31, 2019 Bail for court mandatory execution $ 41,090 41,090 Long-term borrowings (including current portion) 486,581 249,445 Other non-current assets Guarantee of post-release duty payment to the customs and guarantee of the customs 500 500 $ 528,171 291,035 (9) Commitments and contingencies: The details of commitments and contingencies were as follows: (a) In August 2019, Inventec Corporation filed a lawsuit to the Taiwan Taipei District Prosecutors Office against the Group concerning its former employees who joined the Group. This is deemed as an act of violation according to the Trade Secret Law and Copyright Law. The Group engaged lawyers to defend its right on this matter. Currently, the case is still in progress; therefore, the Group cannot make any reasonable estimation regarding the possible impact on its business operation. (b) The Group entered into various patent license agreements with third parties, and was required to make royalty payments of a predetermined amount periodically. (c) As of December 31, 2020 and 2019, the Group’s signed commitments to purchase property, plant and equipment amounted to $473,370 and $548,202, respectively. (10) Losses due to major disasters: None (11) Subsequent events: None (12) Other: (a) The employee benefits, depreciation and amortization expenses by categorized function are summarized as follows: By function Operating costs 2020 Operating expenses Total Operating costs 2019 Operating expenses Total By item Employee benefits Salary 17,777,589 12,789,968 30,567,557 18,163,713 12,202,863 30,366,576 Labor and health insurance Pension Others Depreciation Amortization 841,733 883,287 835,965 1,677,698 909,916 816,727 1,726,643 500,044 1,383,331 1,219,607 504,059 1,723,666 2,216,080 599,320 2,815,400 2,075,648 623,657 2,699,305 4,684,438 1,032,002 5,716,440 5,029,744 944,616 5,974,360 47,195 429,350 476,545 77,908 367,153 445,061 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 98 (13) Other disclosures: (a) Information on significant transactions The following were the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group for the year ended December 31, 2020: (i) Loans to other parties: Please refer to Table 1 (ii) Guarantees and endorsements for other parties: Please refer to Table 2 (iii) Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): Please refer to Table 3 (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 4 (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 5 (vi) Disposals of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 6 (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 7 (ix) Trading in derivative instruments: Please refer to notes (6)(b) and (6)(d) (x) Business relationships and significant intercompany transactions: Please refer to Table 8 (b) Information on investees: Please refer to Table 9 (c) Information on investment in mainland China: Please refer to Table 10 (d) Major shareholders: There were no shareholders holding more than 5% shares. (14) Segment information: (a) General information The Group’s information technology product segment is primarily engaged in the development, manufacture and sale of information technology products and mobile communication products. The strategy integrate product segment is primarily engaged in the research, development, manufacture and sale of networking products. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 99 (b) Reportable segments and operating segment information Accounting policies for the operating segments correspond to those stated in note 4. The profit and loss of the operating segment of the Group is measured by earnings before taxes and as the basis for performance measurement. The amount of the Group's reportable segments consistent with the one in the report that the operating decision maker used, and the Group does not allocate assets and liabilities to the reportable segments for the purpose of operating decisions to measure assets and liabilities of segments. The operating segment information was as follows: 2020 Information technology product segment Strategy integrated product segment Adjustment and elimination Total Revenue Revenue from external $ 1,015,163,956 33,765,295 customers Interest revenue Total revenue Interest expense $ $ 1,590,643 45,614 1,016,754,599 33,810,909 1,102,805 Depreciation and amortization 5,675,006 Investment gain (loss) 435,657 Other significant non-cash items: Impairment of assets - 46,410 517,979 - - Reportable segment profit $ 10,793,917 2,328,799 Reportable segment assets Reportable segment liabilities - - - - - - - - 1,048,929,251 1,636,257 1,050,565,508 1,149,215 6,192,985 435,657 - 13,122,716 466,925,698 350,936,048 $ $ (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 100 2019 Information technology product segment Strategy integrated product segment Adjustment and elimination Total $ 947,546,939 32,895,407 - 980,442,346 Revenue Revenue from external customers Interest revenue Total revenue Interest expense $ $ Depreciation and amortization Investment gain (loss) Other significant non-cash items: 1,593,904 70,899 949,140,843 32,966,306 2,669,003 5,991,303 197,008 56,561 428,118 - - Impairment of assets - Reportable segment profit $ 8,307,224 1,700,652 Reportable segment assets Reportable segment liabilities (c) Products information The information of revenue from external customers: - - - - - - - 1,664,803 982,107,149 2,725,564 6,419,421 197,008 - 10,007,876 $ 382,648,419 $ 267,889,075 Products and services 5C related electronic products Others (d) Geographic information 2020 2019 $ 1,046,282,834 977,895,468 2,646,417 2,546,878 $ 1,048,929,251 980,442,346 Stated below are the geographic information on the Group’s sales presented by destination of sales and non-current assets presented by location. (i) Revenue from external customers: Country United States China Netherlands Others 2020 2019 $ 446,893,526 378,999,466 127,573,036 103,572,415 84,890,214 98,958,916 389,572,475 398,911,549 $ 1,048,929,251 980,442,346 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 101 (ii) Non-current assets: Country China Taiwan Others 2020 2019 $ 14,963,036 13,525,794 9,373,521 3,645,754 10,389,632 1,578,056 $ 27,982,311 25,493,482 Non-current assets include plant, property and equipment, right-of-use assets, intangible assets, and other assets, excluding deferred tax assets. (e) The details of sales revenue from external customers more than 10% of the amount of consolidated statement of comprehensive income were as follows: D Company F Company A Company E Company 2020 2019 $ 431,621,595 390,210,303 240,039,272 212,262,458 120,376,434 96,591,070 75,903,386 105,890,275 $ 867,940,687 804,954,106 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 102 Table 1 Loans to other parties: (December 31, 2020) Name of lender No. 0 The Name of borrower CVC Company Account name Other receivables Related party Y Highest balance of financing to other parties during the period 302,500 Ending balance - Actual usage amount during the period - Range of interest rates during the period 3.20% Purposes of fund financing for the borrower Short-term financing Transaction amount for business between two parties - 0 The UCGI Company Other receivables 0 The HengHao Other Company receivables 0 The CEB Company 1 CIH CEP 2 CPC CDE 2 CPC CIC Other receivables Other receivables Other receivables Other receivables 3 CIT 3 CIT CCI Nanjing Other receivables Rayonnant (Taicang) Other receivables 4 CPO HengHao Kunshan Other receivables 4 CPO CIT 5 CET BT Other receivables Other receivables 6 CIC HengHao Kunshan Other receivables 7 Panpal HengHao Other 8 Arcadyan Acradyan Brasil 8 Arcadyan Acradyan Brasil 8 Arcadyan Arcadyan UK receivables Other receivables Other receivables Other receivables Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 500,000 250,000 220,000 1.08%~1.20% Short-term financing 400,000 200,000 200,000 1.08%~1.20% Short-term financing 3,013,500 1,424,000 1,424,000 2.05%~3.50% Short-term financing 163,655 56,960 56,960 3.50% 2,610,900 1,313,100 1,313,100 2.20% 437,900 437,700 - 2.20% Short-term financing Short-term financing Short-term financing 4,154,500 1,993,600 1,606,272 2.00%~2.76% Short-term financing 65,685 65,655 65,655 4.35% Short-term financing 1,642,410 966,800 966,800 2.00%~4.35% Short-term financing 656,850 656,550 - 2.20% 262,740 262,620 65,655 2.20% 582,000 569,600 569,600 2.00% Short-term financing Short-term financing Short-term financing 1,200,000 600,000 600,000 1.08%~1.2% Short-term financing 56,960 - - 1.00% 56,960 56,960 37,024 1.00% 199,360 - - - - - - - - - - - - - - - - 8 Arcadyan Arcadyan UK Other receivables Y 284,800 284,800 8 Arcadyan Arcadyan Vietnam Other receivables Y 256,320 - 8 Arcadyan Arcadyan Vietnam Other receivables Y 256,320 256,320 - - - - 1.00% 1.00% 1.00% 1.00% 8 Arcadyan Arcadyan Russia Other receivables 9 Zhi-bao Acradyan Brasil 10 Arcadyan CNC Holding 10 Arcadyan CNC Holding 11 SVA CNC Other receivables Other receivables Other receivables Other receivables Y Y Y Y Y 56,960 56,960 6,925 1.00% 31,328 484,160 - - - - 1.00% 1.00% 484,160 484,160 484,160 1.00% 153,020 153,020 139,904 3.85% Short-term financing Short-term financing Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Short-term financing Short-term financing Short-term financing Short-term financing 4,272,000 - 4,475,717 - 569,600 - 5,530,446 - 170,787 - - - - - Operating financing Operating financing Operating financing Operating financing Reasons for short- term financing Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating financing Operating financing (In Thousands of New Taiwan Dollars) Collateral Allowance for bad debt - Item - Value - Individual funding loan limits 21,366,501 Maximum limit of fund financing 42,733,002 Note (Note 1) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 21,366,501 42,733,002 (Note 1) 21,366,501 42,733,002 (Note 1) 21,366,501 42,733,002 (Note 1) 35,228,322 35,228,322 (Note 2) 1,987,846 1,987,846 (Note 3) 1,987,846 1,987,846 (Note 3) 20,913,770 20,913,770 (Note 4) 20,913,770 20,913,770 (Note 4) 2,810,936 2,810,936 (Note 5) 2,810,936 2,810,936 (Note 5) 4,761,295 4,761,295 (Note 6) 8,030,522 8,030,522 (Note 7) 2,222,153 2,222,153 (Note 8) 2,321,872 4,643,744 (Note 9) 2,321,872 4,643,744 (Note 9) 2,321,872 4,643,744 (Note 9) - - 2,321,872 4,643,744 (Note 9) - - 455,680 4,643,744 (Note 9) - - 2,321,872 4,643,744 (Note 9) - - 136,629 4,643,744 (Note 9) - - - - - - - - 42,399 169,598 (Note 10) 2,287,344 2,287,344 (Note 11) 2,287,344 2,287,344 (Note 11) 164,728 164,728 (Note 12) Note 1: According to the Company’ s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of the Company. When a short-term financing facility with the Company is necessary, the total amount for lending to any company shall not exceed 80% of the borrower’s net worth, nor shall it be more than 50% of the Company’s lendable amount limit, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company is unrestricted by the aforesaid restriction of 80%, but the maximum amount shall not exceed 50% of the Company’s lendable limit, and shall be combined with the company’s amount of loans to others when calculating. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 103 Table 1 Loans to other parties: (December 31, 2020) Note 2: Note 3: Note 4: Note 5: Note 6: Note 7: Note 8: Note 9: According to CIH’s Procedures for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of CIH. When a short-term financing facility with CIH is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIH’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIH, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CPC’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPC. When a short-term financing facility with CPC is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower ’s net worth, nor shall it exceed 50% of CPC’ s total amount of capital lent, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPC, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CIT ’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CIT. When a short-term financing facility with CIT is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower ’s net worth, nor shall it exceed 50% of CIT ’ s total amount of capital lent, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIT, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CPO’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPO. When a short-term financing facility with CPO is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPO’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPO, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CET’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CET. When a short-term financing facility with CET is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CET’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CET, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CIC ’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CIC. When a short-term financing facility with CIC is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIC’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIC, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to Panpal’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Panpal. When a short-term financing facility with Panpal is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of Panpal’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company, or the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions of 80%, but the maximum amount shall not exceed Panpal’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to Arcadyan’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Arcadyan. To borrowers having business relationship with Arcadyan, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of Arcadyan. Also, the amount shall be combined with the Arcadyan’ s endorsements/guarantees for the borrower when calculating. When a short-term financing facility is necessary, the borrower should be Arcadyan’ s investee. The total amount for lending the borrower shall not exceed 80% of the net worth of the borrower, nor shall it exceed 20% of the net worth of Arcadyan, and shall be combined with the Arcadyan’s endorsements/guarantees for the borrower when calculating. Note 10: The total amount of loans to others shall not exceed 40% of the net worth of Zhi-bao. To borrowers having business relationship with Zhi-bao, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of Zhi-bao. When a short-term financing facility is necessary, the borrower should be the investee of parent company, and the total amount for lending the borrower shall not exceed 10% of the net worth of the borrower. Note 11: According to Arcadyan Holding’s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed the net worth of Arcadyan Holding. When a short-term financing facility is necessary, the borrower should be Arcadyan Holding’s investee. The total amount for lending the borrower shall not exceed the net worth of Arcadyan Holding, and shall be combined with the Arcadyan Holding’s endorsements/ guarantees for the borrower when calculating. Note 12: Accroding to SVA's Procedure for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of SVA. To borrowers having business relationship with SVA, the total amount for lending the borrower shall not exceed 80% of the transation amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of SVA. Also, the amount shall bbe combined with the SVA's endorsements/gurarantees for the borrower when calculating. When a short-term financing facility is necessary, the borrower should be the investee of the parent company. The total amount for lending the borrower shall not exceed 20%of the net worth of SVA, and shall be combined with SVA's endorsenents/guarantees for the borrower when calculating . In addition, when lending to the parent company or its 100% directly and indirectly owned subsidiaries, the total amount or individual amount shall not exceed the net worth of the latest financial statements of SVA. Note 13: The transactions had been eliminated in the consolidated financial statements. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 104 Table 2 Guarantees and endorsements for other parties: (December 31, 2020) Counter-party of guarantee and endorsement Name of guarantor No. 0 The Company CEB Name Relationship with the Company (Note 3) Limitation on amount of guarantees and endorsements for a specific enterprise 26,708,126 Highest balance for guarantees and endorsements during the period Balance of guarantees and endorsements as of reporting date Property pledged for guarantees and endorsements (Amount) Actual usage amount during the period Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements Maximum amount for guarantees and endorsements (Note 1) 60,500 56,960 56,960 0.05% 53,416,252 (In Thousands of New Taiwan Dollars) Parent company endorsements /guarantees to third parties on behalf of subsidiary Y Subsidiary endorsements /guarantees to third parties on behalf of parent company - Endorsements / guarantees to third parties on behalf of companies in Mainland China - 0 The Company CEP (Note 2) 26,708,126 190,295 157,837 157,837 0.15% 53,416,252 Y - - - - Note 1: According to the Company’ s Procedures for Endorsement and Guarantee, the total amount of endorsements/ guarantees the Company or the Group is permitted to make shall not exceed 50% of the Company’s net worth. Endorsements/ guarantees the Company and the Group are permitted to make for a single company shall not exceed 25% of the Company’s net worth. For entities having business relationship with the Company, the amount of endorsements/ guarantees for a single company shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount of the curren t year, and shall be combined with the amount lend to others when calculating. The amount of endorsements/ guarantees permitted to make between su bsidiaries whose over 90% of its voting shares ar e owned, directly or indirectly, by the Company shall be no more than 10% of the net worth of the Company. The amount of endorsements/ guarantees permitted to make between directly or indirectly wholly owned subsidiaries is not limited by the aforementioned restriction, only the maximum amount shall be no more than 25% of the net worth of the Company. Note 2: Subsidiary whose over 50% common stock is directly owned. Note 3: Subsidiary whose over 50% common stock is indirectly owned. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 105 Table 3 Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2020) Name of holder Category and name of security The Company Taiwan Star Relationship with security issuer ‑ Account name Financial assets at fair value through other comprehensive income-non-current (In Thousands of shares/ units) Ending balance Shares/Units (thousands) 98,046 Carrying value 686,325 Holding percentage (%) 3% Fair value 686,325 Note Kinpo Electronics, Inc. (“Kinpo”) The same chairman Financial assets at fair value through other comprehensive of the Company income-non-current Cal-Comp Electronics (Thailand) Public The same chairman Financial assets at fair value through other comprehensive Co., Ltd. income-non-current of the Company 124,044 1,507,132 9% 1,507,132 239,631 491,243 5% 491,243 HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Chen Feng Optoelectronics PrimeSensor Technology Inc. IIH Biomedical Venture Fund Phoenix Innovation Investment Corporation. Others Total ‑ ‑ ‑ ‑ ‑ ‑ ‑ Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss and other comprehensive income Panpal Compal Electronics, Inc. Kinpo The parent company Financial assets at fair value through other comprehensive income-non-current The same chairman Financial assets at fair value through other comprehensive of the Company income-non-current CDIB Partners Investment Holding Corp. ‑ AcBel The same chairman of the Company Taiwan Biotech Co., Ltd. ‑ Others Total Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current 290 26,701 10% 26,701 632 20,804 11% 20,804 4,000 60,680 3% 60,680 6,685 35,764 10% 35,764 663 6,920 3% 6,920 2,500 23,450 8% 23,450 6,000 76,740 19% 76,740 104,131 3,039,890 31,648 655,115 1% 655,115 (Note 1) 23,172 281,546 2% 281,546 54,000 827,820 5% 827,820 5,677 164,340 1% 164,340 5,769 115,378 3% 115,378 197,139 2,241,338 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 106 Table 3 Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2020) Name of holder Category and name of security Relationship with security issuer Account name Gempal Compal Electronics, Inc. The parent company Financial assets at fair value Lian Hong Art. Co., Ltd. Gempal Others Total Hong Ji SUYIN Optronics Co., Ltd. (“SUYIN Optronics”) Hong Jin SUYIN Optronics Arcadyan GeoThings Inc. AirHop Communication Inc. Adant Technologies Inc. IOT EYE, Inc. TIEF FUND L.P. Chimei Motor Electronics Co., LTD Golden Smarthome Technology Corp. Total Mactech Taichung International Golf Country Club HHB HWALLAR OPTRONICS (Fuzhou) CO., LTD. Mithera Beyond Limits, Inc. BT CIT Suzhou Genki Fuhong Health Management Co., Ltd. Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-current ‑ - ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ - - ‑ - - (In Thousands of shares/ units) Ending balance Shares/Units (thousands) 18,369 Carrying value 380,246 Holding percentage (%) - Fair value 380,246 Note (Note 1) 2,140 175,783 6% 175,783 2,313 558,342 380 332 200 1,152 349 60 - - - - - - 1% 1% 7% 5% 5% 14% - - - - - - - 42,840 7% 42,840 1,650 31,135 7% 31,135 1,229 - 8% - 73,975 7,920 - 7,920 - 19% - (Note 2) 873 128,160 - 128,160 4,356 17% 4,356 1,470,031 - 1,470,031 - - - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 107 Table 3 Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2020) Name of holder CIC CET CNC CNC Category and name of security Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit Structured deposits–SPD Bank Yield Plus Structured Deposit Relationship with security issuer ‑ Account name Financial assets at fair value through profit or loss-current (In Thousands of shares/ units) Ending balance Shares/Units (thousands) - Carrying value 261,366 Holding percentage (%) - Fair value 261,366 Note ‑ ‑ ‑ Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current - - - 241,113 130,875 130,799 - - - 241,113 130,875 130,799 Note 1:The transaction had been eliminated in the consolidated financial statements. Note 2:The carrying value is the remaining amount after deducting accumulated impairment. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 108 Table 4 Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: (For the year ended December 31, 2020) Name of company Category and name of security Account name Name of counter-party Relationship with the company CPC CIT CIT CIT CEC CPO CPO CIC CIC CET CET CET CET Structured deposits– SPD Bank Yield Plus Structured Deposit Financial assets at fair value through profit or loss-current Shanghai Pudong Development Bank Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits– SPD Bank Yield Plus Structured Deposit Agricultural Bank of China Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Shanghai Pudong Development Bank Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current China CITIC Bank Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current China CITIC Bank Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Financial assets at fair value through profit or loss-current Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Structured deposits- The RMB "Open on schedule" Financial Product Financial assets at fair value through profit or loss-current Agricultural Bank of China China CITIC Bank Bank of Communications Agricultural Bank of China Agricultural Bank of China Bank of China Structured deposits- SPD Bank Yield Plus Structured Deposit Financial assets at fair value through profit or loss-current Shanghai Pudong Development Bank Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current China CITIC Bank - - - - - - - - - - - - - Note 1:Others were valuation gains and losses and foreign exchange gains and losses. Note 2:Including gains and losses on disposal and foreign exchange gains and losses. Beginning Balance Purchases Sales Others Ending Balance Shares/ Units (thousands) - Amount 394,013 Shares/ Units (thousands) - Amount 385,196 Shares/ Units (thousands) - Price 784,688 Cost 779,209 Gain (loss) on disposal 5,479 (Note 2) Shares/ Units (thousands) - Amount - (Note 1) Shares/ Units (thousands) - Amount - (In Thousands of New Taiwan Dollars) - - - - - - - - - - - - - - - - - - - - - - 437,840 - - - - - - - - - - - - - 3,152,190 855,992 641,994 1,044,310 941,591 342,397 427,996 - - - - - - - 1,743,032 1,711,984 863,317 855,992 646,956 641,994 1,061,102 1,044,310 958,576 941,591 346,182 342,397 436,110 427,996 804,633 - 554,026 547,835 449,395 855,992 427,996 1,198,388 - - - - 217,649.00 213,998 867,292 855,992 871,923 865,836 1,211,355 1,198,388 31,048 (Note 2) 7,325 (Note 2) 4,962 (Note 2) 16,792 (Note 2) 16,985 (Note 2) 3,785 (Note 2) 8,114 (Note 2) 6,191 (Note 2) 3,651 (Note 2) 11,300 (Note 2) 6,087 (Note 2) 12,967 (Note 2) - - - - - - - - - - - - 29,825 (Note 1) - (Note 1) - (Note 1) - (Note 1) - (Note 1) - (Note 1) - (Note 1) 4,568 (Note 1) 5,716 (Note 1) - (Note 1) - (Note 1) - (Note 1) - - - - - - - - - - - - 1,470,031 - - - - - - 261,366 241,113 - - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 109 Table 5 Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2020) Name of company Name of property CVC Plant Transaction date September, 2020 Arcadyan Vietnam July 28, 2020 (Note 1) Plant and mechanical and electrical equipment Transaction amount The maximum limit of the overall project is 100 million US dollars. Estimated 794,885 (Note 2) Status of payment Depending on progress in construction Depending on progress in construction If the counter-party is a related party, disclose the previous transfer information Relationship with the Company Non-related party Relationship with the Company Not applicable Owner Not applicable Date of transfer Not applicable Amount Not applicable (In Thousands of New Taiwan Dollars) References for determining price Purpose of acquisition and current condition Price negotiation Operating purpose Others None Counter- party L&K Engineering Vietnam, LLC., and Vietnam Jiuh Jiang Long, LLC. Giza E&C etc. Non-related party Not applicable Not applicable Not applicable Not applicable Manufacturing purpose None Price comparison and price negotiation Note 1: On July 28, 2020, the Board of Directors of Arcadyan Vietnam made a resolution to build plant by lease. The total contract am ount is estimated to be 794,885 thousand (VND 691,204,153 thousand). Note 2: As of December 31, 2020, contracts of hydrant, information equipment and renovation have not been signed and completed. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 110 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2020) Transaction details Percentage of total purchases/ (sales) Amount (362,834) - Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Payment terms 120 days Unit price Similar to non- related parties Payment Terms There is no significant difference Percentage of total notes/accounts receivable (payable) Ending Balance 272,826 0.1% Note (Note 2) Purchase/ (Sale) Sale Sale Sale (613,725) (0.1)% 90 days (476,501) - - 90 days 120 days Purchase 217,864 Purchase 131,063,501 13.5% 120 days Purchase 150,400,041 15.5% 120 days Purchase 27,468,420 2.8% 120 days Purchase 28,091,599 2.9% 120 days Company Name The Company Counter party UCGI CBN Cal-Comp CEP Nature of relationship Subsidiaries wholly owned by the Company The Company's subsidiaries With the same chairman Subsidiaries wholly owned by the Company CIH and its subsidiaries Subsidiaries wholly owned by the Company Just and its subsidiaries Subsidiaries wholly owned by the Company HSI and its subsidiaries Subsidiaries wholly owned by the Company BCI and its subsidiaries Subsidiaries wholly owned by the Company Etrade and its subsidiaries Subsidiaries wholly owned by the Company Henghao Palcom Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Similar to non- related parties Similar to non- related parties There is no significant difference There is no significant difference. 293,229 0.1% (Note 2) 307,456 0.1% Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Markup based on BCI and its subsidiaries' cost - - (Note 2) (27.4)% (Note 2) (6,550,748) (3.5)% (Note 2) (13,129,981) (7.0)% (Note 2) (10,533,140) (5.6)% (Note 2) (3,767,885) (2.0)% (Note 2) There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Purchase 28,106,438 2.9% Net 60 days from purchase Markup based on Etrade and its subsidiaries' cost Purchase 120,250 - 120 days Similar to non- related parties There is no significant difference. (5,448) - (Note 2) Sale (101,649) - Net 60 days from delivery Similar to non- related parties There is no significant difference 11,627 - (Note 2) Just and its subsidiaries Compal Electronic, Inc. Parent company Sale (150,302,684) (99.0)% 120 days CIH and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Sale (1,433,990) (0.9)% 120 days Purchase 1,363,778 (0.9)% 120 days Purchase 133,166 (0.1)% 120 days CIH and its subsidiaries Compal Electronic, Inc. Parent company Sale (131,048,882) (98.1)% 120 days CEB Just and its subsidiaries BCI and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Sale (151,865) - 120 days Sale (1,377,997) (0.3)% 120 days Sale (2,473,443) (0.6)% 120 days Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary 6,550,748 97.4% (Note 2) 1,136,914 2.5% (Note 2) (1,288,223) (2.0)% (Note 2) (101,939) (0.2)% (Note 2) 51,675,245 95.3% (Note 2) 69,475 0.1% (Note 2) 1,288,223 1.0% (Note 2) 1,548,460 1.2% (Note 2) (Continued) Percentage of total notes/accounts receivable (payable) Ending Balance (5,576) - Note (Note 2) (1,136,914) (0.9)% (Note 2) 2,539,028 2.0% (Note 2) (293,229) (40.0)% (Note 2) 10,533,140 87.7% (Note 2) 5,576 - (Note 2) (1,548,460) (5.0)% (Note 2) 2,360,423 7.3% (Note 2) Payment Terms Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 111 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2020) Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name CIH and its subsidiaries Counter party Nature of relationship BCI and its subsidiaries Just and its subsidiaries HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Percentage of total purchases/ (sales) Amount 589,141 0.1% Purchase/ (Sale) Purchase Payment terms 120 days Purchase 1,436,851 0.3% 120 days Sale (3,061,483) (0.7)% 120 days Unit price Similar to non- related parties Similar to non- related parties Similar to non- related parties Parent company Purchase 610,939 32.0% Net 90 days from delivery - Parent company Sale (28,308,716) (97.8)% 120 days Sale (427,368) (0.4)% 120 days Purchase 2,472,797 2.1% 120 days Sale (764,533) (0.6)% 120 days Markup based on BCI and its subsidiaries' cost According to markup pricing According to markup pricing According to markup pricing CBN BCI and its subsidiaries Compal Electronic, Inc. Compal Electronic, Inc. CIH and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries CEB BCI and its subsidiaries CIH and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company CEB Sale (986,502) (0.8)% 120 days According to markup pricing There is no significant difference 1,380,707 4.3% (Note 2) Purchase 975,309 10.5% 120 days Similar to non- related parties There is no significant difference (1,380,707) (43.5)% (Note 2) Purchase 152,379 1.6% 120 days Similar to non- related parties There is no significant difference (69,475) (4.7)% (Note 2) Etrade and its subsidiaries Compal Electronic, Inc. Parent company Sale (28,152,136) (99.6)% Net 60 days from delivery According to markup pricing HSI and its subsidiaries With the same ultimate parent company Purchase 489,035 2.2% Net 60 days from purchase Similar to non- related parties UCGI Palcom Henghao CEP Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. Parent company Purchase 370,916 Parent company Purchase 101,823 Parent company Parent company Sale Sale (119,412) (234,154) 86.6% 120 days Similar to non- related parties 94.2% Net 60 days from purchase Similar to non- related parties Similar to non- related parties Similar to non- related parties 120 days 120 days 1.1% (99.3)% HSI and its subsidiaries Compal Electronic, Inc. Parent company Sale (27,689,174) (97.7)% 120 days CIH and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company Just and its subsidiaries With the same ultimate parent company Purchase 3,064,654 10.5% 120 days Purchase 759,770 2.6% 120 days Sale (138,402) 0.5% 120 days Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties 3,767,885 98.6% (Note 2) (287,543) (5.3)% (Note 2) (272,826) (99.9)% (Note 2) (11,627) (96.7)% (Note 2) 5,448 0.2% (Note 2) - - (Note 2) 13,129,981 97.2% (Note 2) (2,539,028) (11.8)% (Note 2) (2,360,423) (11.0)% (Note 2) 101,939 (0.8)% (Note 2) Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference There is no significant difference There is no significant difference There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 112 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2020) Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name HSI and its subsidiaries Counter party Etrade and its subsidiaries Nature of relationship With the same ultimate parent company Purchase/ (Sale) Sale Transaction details Percentage of total purchases/ (sales) Amount (505,022) (1.8)% Payment terms 120 days Unit price Similar to non- related parties Payment Terms There is no significant difference, and adjustments will be made based on demand for funding if necessary Arcadyan CNC Acradyan Vietnam Acradyan Germany Acradyan USA Acradyan AU Acradyan Germany Acradyan USA Acradyan AU CNC Acradyan Vietnam Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan's subsidiary Sale (867,017) (3.0)% Net 150 days from delivery Arcadyan's subsidiary Sale (5,413,289) (18.0)% Net 120 days from delivery Arcadyan's subsidiary Sale (1,394,596) (5.0)% Net 60 days from the end of the month - - - Arcadyan's subsidiary Purchase 11,026,936 27.0% Net 120 days from delivery According to markup Arcadyan's subsidiary Purchase 1,065,328 3.0% Net 180 days from the end of the month pricing According to markup pricing With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Sale (11,026,936) (100.0)% Net 120 days from delivery According to markup Sale (1,065,328) (100.0)% Net 180 days from the end of the month Purchase 867,017 100.0% Net 150 days from delivery Purchase 5,413,289 100.0% Net 120 days from delivery Purchase 1,394,596 100.0% Net 60 days from the end of the month of delivery pricing According to markup pricing - - - - - - - - - - - - - Note 1: The remaining balance is the net value of commissioned processing and sales of raw material. Note 2: The transactions had been eliminated in the consolidated financial statements. Note 3: The amount of other receivables on December 31, 2020 is 303,959 thousand dollars. Percentage of total notes/accounts receivable (payable) Ending Balance 287,543 2.0% Note (Note 2) 242,935 4.0% (Note 2) 1,039,758 17.0% (Note 2) 22,357 - (Note 2) (3,407,485) (40.0)% (Note 1、2) (Note 3) - (Note 1、2) 3,407,485 94.0% (Note 1、2) (Note 3) - (Note 1、2) (242,935) (100.0)% (Note 2) (1,039,758) (100.0)% (Note 2) (22,357) (100.0)% (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 113 Table 7 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (December 31, 2020) Nature of relationship Ending Balance Turnover rate Name of Company The Company Counter-party CBN The Company UCGI The Company Cal-comp Just and its subsidiaries Just and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries Compal Electronic, Inc. CIH and its subsidiaries Compal Electronic, Inc. Just and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries Etrade and its subsidiaries HSI and its subsidiaries HSI and its subsidiaries Compal Electronic, Inc. HSI and its subsidiaries CEB Compal Electronic, Inc. Compal Electronic, Inc. Etrade and its subsidiaries HSI and its subsidiaries Just and its subsidiaries The Company's subsidiary The Company's subsidiary With the same chairman Parent company With the same ultimate parent company Parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent company With the same ultimate parent company Arcadyan Arcadyan Arcadyan Arcadyan Germany Arcadyan's subsidiary Arcadyan USA Arcadyan's subsidiary Arcadyan Vietnam Arcadyan's subsidiary CNC Arcadyan With the same ultimate parent company Note 1:Balance as of March 16, 2021. Note 2:Balance as of February 26, 2021. Note 3:Other receivables due to purchasing on behalf of related parties. Note 4:Accounts receivables due to processing raw material. 293,229 272,826 307,456 6,550,748 1,136,914 51,675,245 1,288,223 1.97 2.28 3.10 7.39 2.52 2.44 2.14 1,548,460 3.14 2,539,028 2.35 10,533,140 2,360,423 3.03 0.38 1,380,707 0.92 3,767,885 13,129,981 287,543 5.73 1.76 3.51 101,939 2.72 242,935 1,039,758 303,959 (Note 3) 3,407,485 (Note 4) 2.73 2.91 (Note 3) 3.38 Overdue Amount - Action taken - (In Thousands of New Taiwan Dollars) Amounts received in subsequent period 176,313 (Note 1) Allowance for bad debts - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (Note 1) - (Note 1) (Note 1) (Note 1) - - 51,675,245 (Note 1) - (Note 1) - - (Note 1) (Note 1) 10,533,140 (Note 1) - (Note 1) 200,985 (Note 1) - (Note 1) 3,391,483 (Note 1) 100,280 (Note 1) 95,173 (Note 1) 216,165 1,019,515 7,278 (Note 2) (Note 2) (Note 2) 3,223,397 (Note 2) - - - - - - - - - - - - - - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 114 Table 8 Business relationships and significant intercompany transactions: (For the year ended December 31, 2020) No. (Note 1) 0 Company name Counter party The Company CBN Relationship (Note 2) 1 Accounts name Sales Revenue Intercompany transactions (In Thousands of New Taiwan Dollars) 0 The Company UCGI 0 The Company Palcom 1 1 2 2 2 2 2 3 3 JUST and its subsidiaries The Company JUST and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries The Company CIH and its subsidiaries CEB CIH and its subsidiaries JUST and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries BCI and its subsidiaries The Company BCI and its subsidiaries CIH and its subsidiaries 1 1 2 3 2 3 3 3 3 2 3 Accounts Receivable Sales Revenue Accounts Receivable Sale Revenue Accounts Receivable Sales Revenue Accounts Receivable Sale Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Amount Terms 613,725 There is no significant difference of price to non-related parties. The credit period is net 90 days. 〃 293,229 362,834 There is no significant difference of price to non-related parties. The credit period is net 120 days. 〃 272,826 101,649 There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery, and will be adjusted if necessary. 11,627 〃 150,302,684 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 6,550,748 1,433,990 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 1,136,914 〃 131,048,882 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 51,675,245 〃 151,865 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 69,475 〃 1,377,997 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 1,288,223 2,473,443 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 1,548,460 3,061,483 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 2,539,028 28,308,716 The price is based on BCI and its subsidiaries' operating cost. The credit period is net 120 days, and will be adjusted if necessary. Accounts Receivable Sales Revenue 10,533,140 〃 427,368 The price is based on the Accounts Receivable 5,576 〃 operating cost. The credit period is net 120 days, and will be adjusted if necessary. Percentage of the consolidated net revenue or total assets 0.1% 0.1% - 0.1% - - 14.3% 1.4% 0.1% 0.2% 12.5% 11.1% - - 0.1% 0.3% 0.2% 0.3% 0.3% 0.5% 2.7% 2.3% - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 115 Table 8 Business relationships and significant intercompany transactions: (For the year ended December 31, 2020) Intercompany transactions (In Thousands of New Taiwan Dollars) No. (Note 1) 3 Company name Counter party BCI and its subsidiaries HSI and its subsidiaries Relationship (Note 2) 3 3 4 BCI and its subsidiaries CEB Etrade and its subsidiaries The Company 5 Henghao The Company 6 CEP The Company 7 7 7 HSI and its subsidiaries The Company HSI and its subsidiaries JUST and its subsidiaries HSI and its subsidiaries Etrade and its subsidiaries 8 Arcadyan Arcadyan Germany 8 Arcadyan Arcadyan USA 8 Arcadyan Arcadyan AU 3 2 2 2 2 3 3 3 3 3 Accounts name Sales Revenue Amount Terms 764,533 The price is based on the operating cost. The credit period is net 120 days, and will be adjusted if necessary. Accounts Receivable Sales Revenue 2,360,423 〃 986,502 The price is based on the operating cost. The credit period is net 120 days. Accounts Receivable Sales Revenue 1,380,707 28,152,136 The price is based on the 〃 Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. 3,767,885 〃 119,412 There is no significant difference of price to non-related parties. The credit period is net 120 days. 5,448 〃 234,154 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 27,689,174 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 13,129,981 〃 138,402 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 101,939 505,022 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 287,543 867,017 There is no significant difference of price to non-related parties. The credit period is net 150 days from delivery. 242,935 〃 5,413,289 There is no significant difference of price to non-related parties. The credit period is net 120 days from delivery. 〃 1,039,758 1,394,596 There is no significant difference of price to non-related parties. The credit period is net 60 days from the end of the month of delivery. 8 Arcadyan Arcadyan Vietnam 3 Accounts Receivable Other Receivable 22,357 〃 303,959 The credit period is net 180 days from the end of the month of invoice date and depended on funding demand. Percentage of the consolidated net revenue or total assets 0.1% 0.5% 0.1% 0.3% 2.7% 0.8% - - - 2.6% 2.8% - - - 0.1% 0.1% 0.1% 0.5% 0.2% 0.1% - 0.1% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 116 Table 8 Business relationships and significant intercompany transactions: (For the year ended December 31, 2020) Intercompany transactions (In Thousands of New Taiwan Dollars) No. (Note 1) 9 Company name Counter party CNC Arcadyan Relationship (Note 2) 3 Accounts name Processing Revenue Amount 11,026,936 The price is based on the Terms operating cost. The credit period is net 120 days from delivery and depended on funding demand. 10 Arcadyan Vietnam Arcadyan 3 Accounts Receivable Processing Revenue 3,407,485 1,065,328 The credit period is net 180 days 〃 from the end of the month of invoice date and depended on funding demand. Percentage of the consolidated net revenue or total assets 1.1% 0.7% 0.1% Note 1: The numbers filled in as follows: 1.0 represents the Company. 2. Subsidiaries are sorted in a numerical order starting from 1. Note 2: Transactions labeled as follows: 1. represents transactions between the parent company and its subsidiaries. 2. represents transactions between the subsidiaries and the parent company. 3. represents transactions between subsidiaries. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 117 Table 9 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) Investor Company Investee Company The Company Bizcom Main Businesses and Products Milpitas, USA Warranty services and Location December 31, 2020 December 31, 2019 Shares 36,369 36,369 100 Percentage of Ownership 100% Carrying Value 431,834 Shares 100 Percentage of Ownership 100% Net income (losses) of investee Share of profits/losses of investee Note 8,266 8,266 (Note 2) Original Investment Amount Ending Balance The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Just CIH Panpal Gempal marketing of LCD TVs and notebook PCs Investment British Virgin Islands British Virgin Islands Investment 1,480,509 1,480,509 48,010 100% 7,734,191 48,010 100% 3,843 3,843 (Note 2) 1,787,680 1,787,680 53,001 100% 35,241,171 53,001 100% 2,502,193 2,502,193 (Note 2) Taipei City Investment 5,171,837 5,171,837 500,000 100% 4,911,705 500,000 100% 9,328 (28,650) (Note 2) Taipei City Investment 900,036 900,036 90,000 100% 1,729,287 90,000 100% 137,732 115,689 (Note 2) (Note 1) Kinpo Group management Taipei City Consultation, training services, etc. Ripal Tainan City Manufacturing of electric appliance and audiovisual electric products 3,000 3,000 300 38% 4,659 300 83 31 (Note 1) 60,000 60,000 6,000 100% 83,481 6,000 100% 12,248 6,849 (Note 2) Unicore Taipei City Management&Consultant, 200,000 200,000 20,000 100% 125,283 20,000 100% (20,298) (20,381) (Note 2) rental and leasing business and wholesale and retail of medical equipments Lead-Honor Optronics. Co., Ltd. (“Lead-Honor”) CEH Taoyuan City Manufacturing of electric appliance and audiovisual electric products Investment British Virgin Islands Shennona Taiwan Taipei City Management&Consultant, rental and leasing business, wholesale and retail sale of precision instruments and International Trade 42,000 42,000 2,772 42% - 2,772 42% 34 34 1 100% 3,356,563 1 100% - - - - (Note 2) 6,000 6,000 600 100% 2,773 600 100% (1,340) (1,519) (Note 2) Allied Circuit Taoyuan City Production and sales of PCB 395,388 395,388 10,158 20% 390,455 10,158 20% 531,744 108,556 Maxima Ventures I, Inc. (“Maxima”) Aco Smartcare Lipo Holding Co., Ltd.(“Lipo”) CPE ATK Taipei City boards Investment Hsinchu City Wholesale and retail sale of computer software, software design services, data processing services, wholesale and retail sale of electronic materials, wholesale and retail sale of precision instruments, and biotechnology services Investment Cayman Islands The Netherlands Hsinchu City Design, research & Investment Crownpo Taipei City development, and selling of DVD, Combo, CD-RW Drives Manufacturing, processing, and selling resistor chips, networking chips, diodes, multilayer ceramic capacitors, semiconductor devices, and selling electronic products 1,260 1,260 126 23% 5,699 126 23% 8,206 701 90,000 90,000 100,000 52% 73,564 100,000 52% (23,856) (12,414) (Note 2) 489,450 489,450 98 49% 575,047 98 49% 119,774 58,689 197,463 197,463 6,427 100% 788,259 6,427 100% 6,256 6,256 (Note 2) - - - - - - - 56 15 (Note 2) 149,547 149,547 3,739 33% 58,126 3,739 33% 5,947 1,976 Hong Ji Hong Jin Mactech Auscom Arcadyan FGH Shennona HSI CEP Investment Taipei City Taipei City Investment Taichung City Manufacturing of equipment 1,000,000 295,000 219,601 1,000,000 295,000 219,601 100,000 29,500 21,756 100% 100% 53% 1,141,439 351,308 235,534 100,000 29,500 21,756 100% 100% 53% 110,567 38,077 17,515 110,567 38,084 9,735 (Note 2) (Note 2) (Note 2) and lighting, retailing of equipment and international trading Austin, TX USA R&D of notebook PC related products and components Hsinchu City R&D, manufacturing and sales of wireless network, integrated household electronics, and mobile office products 101,747 101,747 3,000 100% 124,827 3,000 100% 4,635 4,635 (Note 2) 1,325,132 1,325,132 41,305 20% 2,386,293 41,305 20% 1,713,942 339,600 (Note 2) British Virgin Islands Delaware, USA British Virgin Islands Poland Investment 2,754,741 2,754,741 89,755 100% 4,796,528 89,755 100% 112,909 112,909 (Note 2) Medical care IOT business 32,665 32,665 2,600 100% 1,222 2,600 100% (84) (84) (Note 2) Investment 1,346,814 1,346,814 42,700 54% 357,637 42,700 54% (190,132) (162,171) (Note 2) Maintenance and warranty services of notebook PCs 90,156 90,156 136 100% 18,666 136 100% 842 2,244 (Note 2) Hippo Screen Taipei City Management&Consultant, 42,000 42,000 2,100 70% 16,949 4,200 70% (26,086) (17,920) (Note 2) Infinno Technology Corporation (“Infinno”) Hsinchu County Rental and Leasing Business, wholesale and retail sale of precision instruments and International Trade Manufacturing of electronic components, wholesale and retail sale of precision instruments and electronic materials 109,837 109,837 5,650 27% 13,017 5,650 27% (15,372) (4,182) HengHao Taipei City Manufacturing of PCs, 5,529,757 5,529,757 20,015 100% (269,253) 20,015 100% 10,001 8,553 (Note 2) computer periphery devices, and electronic components (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 118 Table 9 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) Investor Company The Company BCI Investee Company CBN Location British Virgin Islands Hsinchu County Original Investment Amount Ending Balance The highest holdings in the period Main Businesses and Products Investment December 31, 2020 2,636,051 December 31, 2019 2,636,051 Shares 90,820 Percentage of Ownership 100% Carrying Value 6,462,523 Shares 90,820 Percentage of Ownership 100% Net income (losses) of investee Share of profits/losses of investee Note 613,030 613,030 (Note 2) (In Thousands of New Taiwan Dollars/ shares) R&D and sales of cable modem, digital setup box, and other communication products 284,827 284,827 29,060 43% 713,557 29,060 43% 46,723 20,297 (Note 2) Rayonnant Taipei City Manufacturing and sales of 295,000 295,000 29,500 100% 125,319 29,500 100% 66,935 69,187 (Note 2) PCs, computer periphery devices, and electronic components CRH Acendant Private Equity Investment Ltd. (“APE”) Etrade Webtek Forever UCGI Palcom Avalue Technology, Inc. CORE GLB CGSP ARCE Investment Investment Investment British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Taipei City Manufacturing and retail sale Investment Investment of computers and electronic components Selling of mobile phones Manufacturing, processing, and import and export business of industrial motherboards Taipei City New Taipei City British Virgin Islands New Taipei City Poland Taipei City Manufacturing and wholesale of medical equipment Maintenance and warranty services of notebook PCs Biotechnology services, research & development services, intellectual property rights, wholesale of animal medication, retail sale and management advisory. Cancerous immunocyte therapy and regenerative medicine Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing Raypal Biomedical Co.,Ltd. Taipei City Panpal Arcadyan Hsinchu City Investment 4,318,860 4,318,860 147,000 100% 7,356,671 147,000 100% 74,866 74,866 (Note 2) 377,328 377,328 12,500 100% 191,019 12,500 100% 68,396 68,396 (Note 2) 943,922 943,922 31,253 35% 994,883 31,253 35% 142,340 49,423 1,532,029 1,532,029 46,900 65% (719,895) 46,900 65% 155,770 (162,840) (Note 2) 3,340 1,575 3,340 1,575 100 50 100% 572,869 100% 1,329,114 100 50 100% 55,882 55,882 (Note 2) 100% (53,455) (53,455) (Note 2) 199,999 100,000 10,000 100% (381,227) 10,000 100% (22,052) (21,929) (Note 2) 100,000 547,595 100,000 559,189 10,000 14,924 100% 21% 112,424 625,188 10,000 15,024 100% 22% 6,801 215,886 6,801 47,355 (Note 2) 246,860 246,860 15,000 50% 318,019 15,000 50% 24,262 12,032 (Note 2) 37 60,000 - - - 100% - - 100% (37) (37) (Note 2) 20,000 33% 59,852 20,000 33% (27,062) (148) 155,076 - 3,446 30% 151,051 3,446 30% (38,071) (4,025) 279,202 279,202 8,192 4% 518,053 8,192 4% 1,713,942 82,597,631 Allied Circuit Taoyuan City Production and selling of PCB 148,263 148,263 2,927 6% 112,513 2,927 6% 531,744 Gempal Others Arcadyan Allied Circuit Hong Ji Others Arcadyan boards Hsinchu City Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing Taoyuan City Production and selling of PCB boards Hsinchu City Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing 306,655 306,655 9,279 4% 306,536 611,802 9,279 4% 1,713,942 53,645 53,645 3,220 6% 123,764 3,220 6% 531,744 306,655 306,655 9,279 4% 2,311 611,802 9,279 4% 1,713,942 Allied Circuit Taoyuan City Production and selling of PCB 10,389 12,274 851 2% 27,838 1,041 2% 531,744 Hong Jin Arcadyan boards Hsinchu City Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing 131,942 131,942 4,609 2% 288,893 4,609 2% 1,713,942 3,966,905 Investment gain(losses) recognized by Panpal (Note 2) Investment gain(losses) recognized by Panpal Investment gain(losses) recognized by Gempal Investment gain(losses) recognized by Gempal Investment gain(losses) recognized by Hong Ji Investment gain(losses) recognized by Hong Ji Investment gain(losses) recognized by Hong Jin (Note 2) (Note 2) (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 119 Table 9 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) Original Investment Amount Ending Balance The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Location Main Businesses and Products Just CDH (HK) Hong Kong Investment December 31, 2020 1,774,233 December 31, 2019 1,774,233 Shares 62,298 Percentage of Ownership 100% Carrying Value 5,434,537 Shares 62,298 Percentage of Ownership 100% Net income (losses) of investee Share of profits/losses of investee (19,931) Investment gain(losses) recognized by Just (314) Investment gain(losses) recognized by Just (3) Investment gain(losses) recognized by CII (519) Investment gain(losses) recognized by CII Investment gain(losses) recognized by CII Investment gain(losses) recognized by CII Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH (213,296) Investment gain(losses) recognized by HSI (55,369) Investment gain(losses) recognized by HSI (213,296) Investment gain(losses) recognized by IUE (55,369) Investment gain(losses) recognized by Goal CII CPI CII Smart AEI MEL MTL British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 263,298 263,298 9,245 100% 239,796 9,245 100% 14,240 14,240 500 100% 852,569 500 100% 9,450 Investment gain(losses) recognized by Just 28 28 1 100% 363 1 100% U.S.A Sales and maintenance of LCD TVs 28,480 28,480 1,000 100% 45,117 1,000 100% U.S.A Investment 234,504 234,504 U.S.A Investment 28 28 - - 100% 194,325 100% 29 - - 100% 207 100% - CIH CIH (HK) Hong Kong Investment 2,130,375 2,130,375 74,803 100% 33,766,486 74,803 100% 2,734,885 Jenpal PFG FWT CCM HSI IUE British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 209,328 209,328 7,350 100% 101,170 7,350 100% 1,288 28 28 1 100% 434,865 1 100% 22,376 424,352 424,352 14,900 100% 424,829 14,900 100% 51 145,248 145,248 5,100 51% 26,071 5,100 51% 870 1,908,160 1,908,160 67,000 100% 1,111,077 67,000 100% Goal British Virgin Islands Investment 361,696 361,696 12,700 100% 300,321 12,700 100% IUE CVC Vietnam Goal CDM Vietnam R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components Construction of and investment in infrastructure in Ba-Thien industrial district of Vietnam 1,908,160 1,908,160 67,000 100% 1,111,077 67,000 100% 361,696 361,696 12,700 100% 301,850 12,700 100% BCI CMI British Virgin Islands Investment 2,301,754 2,301,754 80,820 100% 4,045,228 80,820 100% 396,577 PRI British Virgin Islands Investment 284,800 284,800 10,000 100% 2,417,295 10,000 100% 216,453 CORE BSH British Virgin Islands Investment 4,186,560 4,186,560 147,000 100% 7,356,672 147,000 100% 74,866 Investment gain(losses) recognized by BCI Investment gain(losses) recognized by BCI Investment gain(losses) recognized by CORE BSH Mithera Cayman Islands Investment 142,400 142,400 - 99% 136,264 - 99% HSI British Virgin Islands Investment 1,053,760 1,053,760 37,000 46% 1,053,760 37,000 46% (3,109) Investment gain(losses) recognized by BSH (190,132) Investment gain(losses) recognized by BSH Forever GIA British Virgin Islands Selling of mobile phones - - - 100% - - 100% - Investment gain(losses) recognized by Forever Note (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 120 Table 9 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Forever CWV Location Vietnam Original Investment Amount Ending Balance The highest holdings in the period Main Businesses and Products December 31, 2020 December 31, 2019 Shares R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components 56,960 - - Percentage of Ownership 100% Carrying Value Shares 3,203 - Percentage of Ownership 100% Net income (losses) of investee Share of profits/losses of investee (55,790) Investment gain(losses) recognized by Forever Webtek Etrade British Virgin Islands Investment 712,000 712,000 25,000 35% (124,856) 25,000 35% 155,770 Investment gain(losses) recognized by Webtek Unicore Raycore Taipei City Animal medication retail and wholesale 25,500 25,500 1,275 51% 14,720 1,275 51% (8,218) Investment gain(losses) recognized by Unicore Arcadyan Arcadyan Holding British Virgin Islands Investment 2,359,732 2,064,032 69,780 100% 2,240,149 69,780 100% 95,019 Arcadyan USA U.S.A Sales of wireless network products 23,055 23,055 1 100% 91,507 1 100% 62,073 Arcadyan Germany Germany Technology support and sales of wireless network products 1,125 1,125 0.5 100% 76,874 0.5 100% 5,667 Arcadyan Korea Korea Sales of wireless network products 2,879 2,879 20 100% 13,858 20 100% 6,446 Zhi-bao Taipei City Investment 48,000 48,000 34,980 100% 423,997 34,980 100% 9,632 Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan TTI Taipei City R&D and sales of household digital products 308,726 308,726 25,028 61% 503,434 25,028 61% AcBel Telecom Taipei City Investment 23,000 23,000 4,494 51% 32,700 4,494 51% (193,291) Investment gain(losses) recognized by Arcadyan (16,432) Investment gain(losses) recognized by Arcadyan Arcadyan UK UK Technical support of wireless network products 1,988 1,988 50 100% 3,555 50 100% 446 Arcadyan AU Australia Sales of wireless network products 1,161 1,161 50 100% 46,106 50 100% 9,619 CBN Hsinchu County Sales of communication and electronic components 11,925 11,925 533 1% 13,204 533 1% 46,723 Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Arcadyan RU Russia Sales of wireless network products 2,492 - - 100% 2,142 - 100% Arcadyan and Zhi-bao Arcadyan Brasil Brazil Sales of wireless network products 81,593 81,593 968 100% (16,192) 968 100% Arcadyan Holding Sinoprime British Virgin Islands Investment 542,544 257,744 19,050 100% 453,544 19,050 100% (243) Investment gain(losses) recognized by Arcadyan (10,717) Investment gain(losses) recognized by Arcadyan (10,815) Investment gain(losses) recognized by Arcadyan Holding Arch Holding British Virgin Islands Investment 313,593 313,593 35 100% 886,668 35 100% 62,526 Investment gain(losses) recognized by Arcadyan Holding TTI Quest Samoa Investment 34,176 34,176 1,200 100% 32,776 1,200 100% TTJC Japan Sales of household digital electronic products 9,626 4,130 0.7 100% 5,947 0.7 100% Quest Exquisite Samoa Investment 33,322 33,322 1,170 100% 19,908 1,170 100% AcBel Telecom Leading Images British Virgin Islands Investment - 1,424 Sinoprime Arcadyan Vietnam Vietnam Manufacturing of wireless network products 541,120 256,320 - - - - 50 100% 100% 449,357 - 100% (59,064) Investment gain(losses) recognized by TTI (1,588) Investment gain(losses) recognized by TTI (59,068) Investment gain(losses) recognized by Quest (14,432) Investment gain(losses) recognized by AcBel Telecom (10,815) Investment gain(losses) recognized by Sinoprime Note (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2、3) (Note 2) (Continued) Net income (losses) of investee Share of profits/losses of investee (768) Investment gain(losses) recognized by Leading Images Investment gain(losses) recognized by Zhi-bao 46,723 Investment gain(losses) recognized by Rayonnant Investment gain(losses) recognized by Rayonnant Investment gain(losses) recognized by CRH Investment gain(losses) recognized by APH Investment gain(losses) recognized by APH Note (Note 2、4) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 121 Table 9 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) Original Investment Amount Ending Balance The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Investor Company Leading Images Investee Company Astoria GmbH Location Germany Main Businesses and Products December 31, 2020 December 31, 2019 Shares Sales of wireless network products - 874 - Percentage of Ownership - Carrying Value Shares - 25 Percentage of Ownership 100% Zhi-bao CBN Rayonnant APH Hsinchu County Produces and sales of communication and electronic components British Virgin Islands Investment 36,272 36,272 13,140 20% 325,386 13,140 20% 257,454 257,454 8,651 41% 126,616 8,651 41% 105,538 Forming Co., Ltd. Taoyuan City R&D and manufacturing of 27,300 27,300 1,820 21% - 1,820 21% - CRH APH APH PEL electronic materials British Virgin Islands Investment British Virgin Islands Investment 356,000 356,000 12,500 59% 191,019 12,500 59% 105,538 89,740 89,740 3,151 100% 38,083 3,151 100% 3,973 Rayonnant(HK) Hong Kong Investment 512,640 512,640 18,000 100% 271,991 18,000 100% 101,565 HHT HHA HHA HHB British Virgin Islands Investment British Virgin Islands Investment 1,429,235 1,429,235 46,882 100% (183,304) 46,882 100% 1,335,200 1,335,200 46,882 100% (183,245) 46,882 100% (163,529) Investment gain(losses) recognized by HHT (163,529) Investment gain(losses) recognized by HHA HHB HengHao Trading Co., Ltd. British Virgin Islands Investment - 285 - - - 10 100% 5 Investment gain(losses) recognized by HHB CBN CBNB Belgium CBNN The Netherlands The import and export business of broad band network products and related components, as well as technical support and advisory services The import and export business of broad band network products and related components, as well as technical support and advisory services 6,842 6,842 20 100% 6,321 20 100% (256) Investment gain(losses) recognized by CBN 7,016 7,016 20 100% 6,848 20 100% (Note 2) (135) Investment gain(losses) recognized by CBN FGH Wah Yuen Technology Holding Ltd. and its subsidiaries Mauritius Investment 2,556,236 2,556,236 95,862 37% 4,861,814 95,862 37% 112,954 Investment gain(losses) recognized by FGH GLB Rapha New Taipei City Detectors and test strip 6,500 6,500 1,275 100% (36) 1,275 100% Mactech Taiwan Intelligent Robotics Company, LTD. Taipei City City Manufacturing of equipment 43,200 43,200 2,160 20% 28,103 2,160 20% (Note 2) (334) Investment gain(losses) recognized by GLB (38,817) Investment gain(losses) recognized by Mactech Note 1: The carrying value had been deducted $559,812 and $321,435 of the Company’s stock held by Panpal and Gempal, respectively. Note 2: The transactions had been eliminated in the consolidated financial statements. Note 3: The liquidation procedures had been completed on December 7,2020. Note 4: The liquidation procedures had been completed on October 14,2020. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 122 Table 10 Information on investment in Mainland China: (December 31, 2020) (i) The names of investees in Mainland China, the main businesses and products, and other information: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of December 31, 2020 Investment flows Outflow Inflow Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 1,053,760 143,952 100% 143,952 Accumulated remittance of earnings in current period - Book value 1,995,724 Accumulated outflow of investment from Taiwan as of January 1, 2020 1,053,760 Total amount of paid-in capital 1,053,760 Method of investment (Note 1) 569,600 (Note 2) 569,600 341,760 (Note 2) 341,760 261,340 (Note 2) (Note 3) 68,715 (Note 2) (Note 3) 28,480 (Note 2) 28,480 8,711 (Note 2) (Note 3) - - - - - - - - - - - - - - 569,600 (3,408) 100% (3,408) 102,664 341,760 381,455 100% 4,768,823 - - 207,001 100% 207,001 13,366 (1,831) 51% (934) (43,177) 28,480 39,641 100% 39,641 (190,957) - 1,960 100% 1,960 (25,586) - - - - - - 911,360 (Note 1) 379,638 - - 379,638 92,284 43% 39,848 426,972 - 569,600 (Note 1) 41,866 - - 41,866 129,313 48% 61,553 460,351 - 341,760 (Note 2) 341,760 344,608 (Note 1) 344,608 683,520 (Note 2) 683,520 - - - - - - 341,760 916,689 100% 916,689 8,030,522 344,608 (25) 100% (25) 2,810,923 683,520 1,454,332 100% 1,454,328 20,913,770 - - - (Continued) Name of investee CPC CDT CET CSD Zheng Ying Electronics (Chongqing) Co., Ltd. BT CGS LIZ Electronics (Kunshan) Co., Ltd. LIZ Electronics (Nantong) Co., Ltd. CIC CPO CIT Main businesses and products Manufacturing and sales of monitors Manufacturing and sales of notebook PCs, mobile phones, and Digital products Manufacturing of notebook PCs Manufacturing of notebook PCs Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self -produced products Maintenance and warranty service of notebook PCs Production and processing chipresistors, ceramic capacitors, diodes, and other latest electronic components and related precision electronic equipment; selling self-produced products Research & development, and manufacturing chip components( chip resistors, ceramic chip diode； selling self- produced products and providing after-sales service. Performing wholesale and trading business of electronic components, semiconductors, special materials for electronic components, and spare parts Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technology service Manufacturing of notebook PCs Manufacturing and sales of LCD TVs Manufacturing of notebook PCs COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 123 Table 10 Information on investment in Mainland China: (December 31, 2020) (i) The names of investees in Mainland China, the main businesses and products, and other information: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of January 1, 2020 Accumulated outflow of investment from Taiwan as of December 31, 2020 Investment flows Outflow Inflow Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 39,872 - 39,872 3,123 100% 3,123 Accumulated remittance of earnings in current period - Book value 48,065 Total amount of paid-in capital 39,872 Method of investment (Note 2) 284,800 (Note 2) 145,248 - 444,288 (Note 2) 444,288 427,200 (Note 2) (Note 3) 2,301,754 (Note 1) 2,301,754 2,278,400 (Note 2) (Note 3) - - - - 145,248 (2,107) 51% (1,517) 29,890 - 444,288 (220,802) 100% (220,802) 578,414 - (222,067) 100% (222,067) 545,268 2,301,754 396,577 100% 396,577 4,045,228 - 396,303 100% 396,303 4,016,319 - - - - - - - - - - 22,784 (Note 2) (Note 3) - - - 211 100% 211 22,844 - 284,800 (Note 1) 284,800 - - 284,800 216,453 100% 216,453 2,417,295 - 11,961,600 (Note 2) 2,353,217 - 1,708,800 (Note 2) 326,267 - 512,640 (Note 2) 356,000 - 768,960 (Note 1) 626,560 165,184 (Note 1) 165,184 1,395,520 (Note 1) 541,120 - - - - - - - - - 2,353,217 356,025 37% 138,213 5,905,294 326,267 (227,797) 37% (83,419) 810,695 356,000 101,565 100% 101,565 272,548 626,560 (59,301) 100% (59,301) (935,877) 165,184 1,774 100% 1,774 86,422 541,120 219,725 100% 219,725 460,044 - - - - - - (Continued) Name of investee CST Sheng Bao Precision Electronics (Taicang) Co., Ltd. CIJ CDE CIS CEC CMC CEQ CPM Changbao Main businesses and products International trade and distribution of computers and electronic components Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self- produced products Investment and consulting services Manufacturing and sales of LCD TVs Outward investment and consulting services R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products Corporate management consulting, financial and tax consulting, investment consulting, and investment management consulting services R&D, manufacturing and sales of notebook PCs and related components. Also provides related maintenance and warranty services Manufacturing and selling of magnesium alloy injection molding Production and marketing of magnesium alloy molding Rayonnant (Taicang) Manufacturing and sales of aluminum alloy and magnesium alloy products CCI Nanjing CDCN CWCN Manufacturing and processing of mobile phones and tablet PCs Manufacturing and processing of mobile phones and tablet PCs Manufacturing and processing of mobile phones and tablet PCs COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 124 Table 10 Information on investment in Mainland China: (December 31, 2020) (i) The names of investees in Mainland China, the main businesses and products, and other information: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of January 1, 2020 Accumulated outflow of investment from Taiwan as of December 31, 2020 Investment flows Outflow Inflow Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) Book value 56,960 - - 56,960 (172) 100% (172) 2,856 Accumulated remittance of earnings in current period - Total amount of paid-in capital 56,960 Method of investment (Note 1) 373,088 (Note 1) 354,576 (Note 1) 95,408 (Note 1、 10) 524,602 (Note 7) 313,593 (Note 8) 32,752 - - - 1,139,200 (Note 1) 1,133,589 - - - - - - 524,602 35,282 100% 35,282 164,728 313,593 62,526 100% 62,526 886,668 32,752 (59,068) 100% (59,068) 19,423 - - - 1,133,589 (165,830) 100% (165,830) (311,685) - 427,200 (Note 2) 185,092 - - 185,092 2,276 100% 2,276 128,188 - (Note 12) Name of investee Hanhelt Arcadyan SVA Arcadyan CNC THAC HengHao HengHao Optoelectronic Technology (Kunshan) Co., Ltd. (“HengHao Kunshan”) Main businesses and products R&D and manufacturing of electronic communication equipment R&D and sales of wireless network products Manufacturing and wireless network products Manufacturing of household electronics products Production of touch panels and related components Lucom Display Technology (Kunshan) Limited(“Lucom”) Manufacturing of notebook PCs and related modules (ii) Limitation on investment in Mainland China: Names of Company The Company Arcadyan HengHao Accumulated Investment in Mainland China as of December 31, 2020 Investment Amounts Authorized by Investment Commission of Ministry of Economic Affairs Limitation on investment in Mainland China by Investment Commission of Ministry of Economic Affairs (In Thousands of USD) 15,451,454 (US$542,537) (Note 5) 870,947 (US$30,581) 1,334,915 (US$46,872) 21,549,449 (US$756,652) 870,947 (US$30,581) 1,334,915 (US$46,872) (Note 6) 6,965,617 (Note 13) Note 1: Indirectly investment in Mainland China through companies registered in the third region. Note 2: Indirectly investment in Mainland China through an existing company registered in the third region. Note 3: Investees held by Kunshan Botai Electronics Co., Ltd. (“BT”), Compal Investment (Jiansu) Co., Ltd. (“CIJ”), Compal Electronic (Sichuan) Co., Ltd. (“CIS”), and Compal Electronics (China) Co., Ltd. (“CPC”) through their own funds. Note 4: The investment income (loss) was determined based on the financial report audited by the CPAs. Note 5: Including the investment amount of sold or dissolved companies, including Beijing Compower Xuntong Electronic Technology Co., Ltd., VAP Optoelectronics (NanJing) Corp., Flextronics Technology (Shanghai) Ltd., Lucom, LCFC (HeFei) Electronics Technology Co., Ltd. and the increased investment amount form merging with Compal Communication Co., Ltd. Note 6: As the Company has obtained the certificate of being qualified for operating headquarters, issued by Industrial Development Bureau, MOEA, the upper limit on investment in mainland China is not applicable. Note 7: Arcadyan paid US$18,420 thousands and acquired 100% shares of SVA Arcadyan from Accton Asia through Arcadyan Holding in 2010. Note 8: Arcadyan paid US$8,561 thousands and acquired 100% shares of CNC from Just through Arcadyan Holding in 2007. Note 9: SVA Arcadyan decreased its capital amounting to US$15,000 thousands to offset accumulated losses in March 2009. Note 10: Arcadyan’s subsidiary, TTI, obtained the control over THAC with US$1,150 thousands on February 28, 2013 (the date of stock transferring). Note 11: The amounts in New Taiwan Dollars were translated at the exchange rates at the balance sheet date or the average exchange rate. Note 12: The Company had an accumulated investment amounting to US$7,350 thousands in the previous years. In the first half of 2014, HengHao paid the Company and LG US$3,184 thousands and US$3,315 thousands, respectively, for organization restructure, to obtain 100% ownership of Lucom. Note 13: The net equity of HengHao is negative at December 31, 2020. (iii) Significant transactions: For the year ended December 31, 2020, the significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions” and “Business relationships and significant intercompany transactions”. Attachment II 1 Stock Code:2324 COMPAL ELECTRONICS, INC. Parent Company Only Financial Statements With Independent Auditors’ Report For the Years Ended December 31, 2020 and 2019 Address: Telephone: (02)8797-8588 No.581 & 581-1, Ruiguang Rd., Neihu District, Taipei, Taiwan Table of contents 2 Contents Page 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to the Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses due to major disasters (11) Subsequent Events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information 9. List of major accounting items 1 2 3 4 5 6 7 8 8 8～9 9～30 30～31 31～66 66～73 73 73 73 73 74～75 75, 86~97 75, 98~103 75, 104~106 75 75 76～85 3 Independent Auditor’s Report To COMPAL ELECTRONICS, INC.: Opinion We have audited the financial statements of COMPAL ELECTRONICS, INC. (the “Company”), which comprise the balance sheets as of December 31, 2020 and 2019, the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2020 and 2019, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended December 31, 2020 and 2019, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Basis for Opinion We conducted our audit of the financial statements as of and for the year ended December 31, 2020 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1. Account receivable valuation Please refer to Note (4)(f) for the accounting policy of accounts receivable. Information of account receivable valuation are shown in Note (6)(d) of the financial statements. 3-1 Description of key audit matters: The Company is subject to great influence of given the challenging industry climate and also devotes to develop new product lines and new customers, and the credit risks of these customers are higher than other world leading enterprises. Therefore, valuation of accounts receivable has been identified as a key audit matter. Our key audit procedures performed in respect of the above area included the following: In order to evaluate the reasonableness of the Company's estimations for bad debts, our key audit procedures included reviewing if the measurement of impairment loss of accounts receivable is accordance with accounting policy, examining the historical recovery records, analyzing the aging of accounts receivable, and the current credit status of customers, as well as inspecting the amount collected in the subsequent period. 2. Inventory valuation Please refer to Note (4)(g) and Note (5) for the accounting policy of inventory valuation, as well as the estimation and assumption uncertainty of the valuation of inventory, respectively. Information of estimation of the valuation of inventory are disclosed in Note (6)(f) of the financial statements. Description of key audit matters: The inventory is measured at the lower of cost or net realizable value. The short life cycle of electronic products may cause significant changes in customers’ demand and sales of related products. Consequently, the book value of inventory may be lower than the net realizable value of inventory. Therefore, the valuation of inventory is one of the key audit matters. Our key audit procedures performed in respect of the above area included the following: In order to verify the rationality of assessment of inventory valuation estimated by the Company, our key audit procedures included reviewing the consistency of prior year and accounting policy, inspecting the Company's inventory aging reports, analyzing the change of inventory aging, as well as verifying the inventory aging reports and the calculation of lower of cost or net realizable value. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company’s financial reporting process. 3-2 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. 5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6. Obtain sufficient appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 3-3 From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partners on the audit resulting in this independent auditors’ report are Szu-Chuan Chien and Yiu-Kwan Au. KPMG Taipei, Taiwan (Republic of China) March 26, 2021 The accompanying parent company only financial statements are intended only to present the financial position, financial performance and cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such parent company only financial statements are those generally accepted and applied in the Republic of China. Notes to Readers COMPAL ELECTRONICS, INC. Balance Sheets December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Assets Current assets: December 31, 2020 Amount % December 31, 2019 Amount % Cash and cash equivalents (note (6)(a)) $ 7,666,366 2.0 13,459,969 4.0 Current financial assets at fair value through profit or loss (note (6)(b)) Notes and accounts receivable, net (note (6)(d)) Notes and accounts receivable due from related parties, net (notes (6)(d) and 7) Other receivables, net (notes (6)(e) and 7) Inventories (note (6)(f)) Other current assets Non-current assets: Investments accounted for using equity method (note (6)(g)) Non-current financial assets at fair value through profit or loss (note (6)(b)) Non-current financial assets at fair value through other comprehensive income (note (6)(c)) Property, plant and equipment (note (6)(i)) Right-of-use assets (note (6)(j)) Intangible assets Deferred tax assets (note (6)(o)) Other non-current assets - - 149,888 - 218,292,177 56.1 176,967,731 52.4 11,127,880 2,846,497 2.9 0.7 1,052,131 3,110,607 0.3 0.9 55,792,348 14.3 50,048,069 14.9 657,805 0.2 734,434 0.2 296,383,073 76.2 245,522,829 72.7 83,957,849 21.6 83,430,169 24.7 158,769 - 71,097 - 2,881,121 2,604,893 1,290,125 436,548 1,102,654 0.8 0.7 0.3 0.1 0.3 3,019,393 2,620,638 1,387,615 438,334 1,166,808 0.9 0.8 0.4 0.1 0.4 136,119 - 126,605 - 92,568,078 23.8 92,260,659 27.3 1100 1110 1170 1180 1200 1310 1470 1550 1510 1517 1600 1755 1780 1840 1990 2100 2130 2170 2180 2200 2230 2280 2300 2365 2322 2540 2570 2580 2640 2670 3110 3200 3300 3400 3500 Liabilities and Equity Current liabilities: Short-term borrowings (note (6)(k)) Current contract liabilities (note (6)(r)) Notes and accounts payable Notes and accounts payable to related parties (note 7) Other payables (note 7) Current tax liabilities Current lease liabilities (note (6)(m)) Other current liabilities Current refund liabilities Long-term borrowings, current portion (note (6)(l)) Non-Current liabilities: Long-term borrowings (note (6)(l)) Deferred tax liabilities (note (6)(o)) Non-current lease liabilities (note (6)(m)) Non-current net defined benefit liability (note (6)(n)) Non-current liabilities, others (note (6)(g)) Total liabilities Equity (note (6)(p)): Ordinary share Capital surplus Retained earnings Other equity interest Treasury shares Total equity 4 December 31, 2020 Amount % December 31, 2019 Amount % $ 55,991,680 828,978 100,825,221 87,802,452 9,229,539 2,786,226 202,113 690,513 1,253,890 8,855,440 14.4 0.2 25.9 22.6 2.4 0.7 - 0.2 0.3 2.3 39,363,800 877,822 74,138,921 74,925,238 9,390,399 2,107,283 387,499 348,480 1,182,501 18,150,000 11.7 0.3 21.9 22.2 2.8 0.6 0.1 0.1 0.4 5.3 268,466,052 69.0 220,871,943 65.4 10,250,000 829,757 1,096,415 687,054 789,368 13,652,594 2.6 0.2 0.3 0.2 0.2 3.5 7,500,000 893,232 1,010,933 643,253 891,494 10,938,912 2.2 0.3 0.3 0.2 0.2 3.2 282,118,646 72.5 231,810,855 68.6 44,071,466 8,342,813 62,566,181 (7,266,708) (881,247) 106,832,505 11.3 2.1 16.1 (1.8) (0.2) 27.5 44,071,466 9,159,259 57,726,604 (4,103,449) (881,247) 105,972,633 13.1 2.7 17.1 (1.2) (0.3) 31.4 Total assets $ 388,951,151 100.0 337,783,488 100.0 Total liabilities and equity $ 388,951,151 100.0 337,783,488 100.0 See accompanying notes to financial statements. COMPAL ELECTRONICS, INC. Statements of Comprehensive Income For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share) 5 2020 2019 Net sales revenue (notes (6)(r) and 7) Cost of sales (notes (6)(f), (6)(n), 7 and 12) Gross profit Less: Unrealized profit (loss) from sales Gross profit Operating expenses: (notes (6)(n) and 12) Selling expenses Administrative expenses Research and development expenses Net operating income Non-operating income and expenses: Interest income (note (6)(t)) Other gains and losses, net (note (6)(t)) Finance costs (note (6)(m)) Other income (note (6)(t)) Share of profit of associates and joint ventures accounted for using equity method (note (6)(g)) Total non-operating income and expenses Profit from continuing operations before tax Less: Income tax expenses (note (6)(o)) Profit Other comprehensive income: Components of other comprehensive income (loss) that will not be reclassified to profit or loss Gains (losses) on remeasurements of defined benefit plans Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will not be reclassified to profit or loss (note (6)(o)) Components of other comprehensive income (loss) that will be reclassified to profit or loss Exchange differences on translation of foreign financial statements Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss Other comprehensive income Total comprehensive income Earnings per share (note 6(q)) Basic earnings per share Diluted earnings per share % % Amount Amount $ 991,279,270 100.0 916,280,028 100.0 968,054,585 97.7 891,431,772 97.3 2.7 - 2.7 23,224,685 6,641 23,218,044 24,848,256 (893) 24,849,149 2.3 - 2.3 3,705,829 2,262,855 11,169,634 17,138,318 6,079,726 0.4 0.2 1.1 1.7 0.6 3,532,483 2,318,452 10,461,262 16,312,197 8,536,952 0.4 0.3 1.1 1.8 0.9 126,882 599,312 (704,218) 358,670 3,966,905 4,347,551 10,427,277 - 0.1 (0.1) - 0.4 0.4 1.0 184,607 (420,923) (1,969,101) 469,232 1,022,912 (713,273) 7,823,679 - - (0.2) 0.1 0.1 - 0.9 1,065,384 0.1 867,780 0.1 9,361,893 0.9 6,955,899 0.8 (57,224) (116,466) (14,409) (2,818) (185,281) - - - - - (32,645) 120,897 359,147 3,056 444,343 - - - - - (3,073,441) (0.3) (1,620,812) (0.2) (19,629) - - - (322,922) - - - (3,093,070) (0.3) (1,943,734) (0.2) (3,278,351) 6,083,542 (0.3) 0.6 $ (1,499,391) (0.2) 0.6 5,456,508 $ $ 2.15 2.12 1.60 1.58 4000 5000 5910 6100 6200 6300 7100 7020 7050 7190 7370 7900 7950 8300 8310 8311 8316 8330 8349 8360 8361 8380 8399 8300 8500 9750 9850 See accompanying notes to financial statements. COMPAL ELECTRONICS, INC. Statements of Changes in Equity For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Retained earnings Total other equity interest Unrealized 6 Special reserve Unappropriated retained earnings gains (losses) on financial assets measured at fair value through other comprehensive income (5,606,436) Exchange differences on translation of foreign financial statements (1,852,952) - (1,942,028) (1,942,028) - 474,763 474,763 - - - - - - - - (3,794,980) - (3,093,997) (3,093,997) - - - - - - - - - (6,888,977) - - - - - - - 4,824,910 (306,763) - (137,062) (137,062) - - - - - - 33,051 8,978 24,844 (376,952) Total retained earnings 60,060,381 6,955,899 (30,420) 6,925,479 - - (4,407,147) - - 32,401,419 6,955,899 (30,420) 6,925,479 (891,336) 1,363,317 (4,407,147) - - (27,199) - (27,199) - (4,824,910) 30,539,623 9,361,893 (48,219) 9,313,674 (4,824,910) 57,726,604 9,361,893 (48,219) 9,313,674 (695,590) 3,366,088 (4,407,147) - (33,051) (9,055) - - - - (4,407,147) - (33,051) (9,055) - - (24,844) 38,049,698 (24,844) 62,566,181 Total other equity interest (7,459,388) - Others - - (1,706) (1,706) (1,468,971) (1,468,971) Treasury shares Total equity (881,247) 105,723,646 6,955,899 (1,499,391) 5,456,508 - - - - - - - - - - - - - - - - - - - - - - - - - - - - (1,706) 4,824,910 (4,103,449) - 927 927 (3,230,132) (3,230,132) - - - - - - 33,051 8,978 (779) 24,844 (7,266,708) - - - - - - - - - - (4,407,147) (881,429) 43,473 (22,439) 60,021 - (881,247) 105,972,633 9,361,893 (3,278,351) 6,083,542 - - - - - - - - - - - - - - (4,407,147) (881,429) 1,735 2,151 60,021 999 - (881,247) 106,832,505 Balance at January 1, 2019 Profit for the year ended December 31, 2019 Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Cash dividends from capital surplus Changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted for using equity method Adjustments of capital surplus for cash dividends received by subsidiaries Disposal of investments in equity instruments measured at fair value through other comprehensive income Balance at December 31, 2019 Profit for the year ended December 31, 2020 Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Cash dividends from capital surplus Changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted for using equity method Adjustments of capital surplus for cash dividends received by subsidiaries Others Disposal of investments in equity instruments measured at fair value through Ordinary shares $ 44,071,466 - - - - - - - - - - - Capital surplus 9,932,434 Legal reserve 18,827,814 - - - - - - (881,429) 43,473 4,760 60,021 - - - - 891,336 - - - - - - - 8,831,148 - - - - (1,363,317) - - - - - - 44,071,466 9,159,259 19,719,150 7,467,831 - - - - - - - - - - - - - - - - - (881,429) 1,735 2,228 60,021 999 - - - - 695,590 - - - - - - - - - - - - (3,366,088) - - - - - - - 8,342,813 20,414,740 4,101,743 other comprehensive income Balance at December 31, 2020 - $ 44,071,466 See accompanying notes to financial statements. COMPAL ELECTRONICS, INC. Statements of Cash Flows For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation and amortization Increase in expected credit loss Net gain on financial assets or liabilities at fair value through profit or loss Finance cost Interest income Dividend income Share of profit of subsidiaries, associates and joint ventures accounted for using equity method Gain on disposal of investments Others Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in financial assets at fair value through profit or loss Decrease (increase) in notes and accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventories Decrease (increase) in other current assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in notes and accounts payable Increase (decrease) in other payables Increase (decrease) in refund liabilities Increase (decrease) in contract liabilities Increase (decrease) in other current liabilities Others Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow (outflow) generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Redemption from financial assets at amortized cost Acquisition of financial assets at fair value through profit or loss and through other comprehensive income Proceeds from disposal of financial assets at fair value through profit or loss and through other comprehensive income Acquisition of investments accounted for using equity method Proceeds from disposal of investments accounted for using equity method Proceeds from capital reduction of investments Acquisition of property, plant and equipment Increase in other receivables due from related parties Acquisition of intangible assets Others Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase (decrease) in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Payment of lease liabilities Cash dividends paid Others Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period See accompanying notes to financial statements. 7 2020 2019 $ 10,427,277 7,823,679 1,223,436 604 (10,997) 704,218 (126,882) (56,780) (3,966,905) (3,914) (73) (2,237,293) 149,888 (51,400,799) 324,137 (5,744,279) 77,370 (56,593,683) 39,563,514 (130,987) 71,389 (48,844) 342,033 (6,783) 39,790,322 (16,803,361) (19,040,654) (8,613,377) 128,708 767,756 (733,092) (382,944) (8,832,949) - (84,253) 25,156 (515,113) 8,306 4,228 (551,684) 161,040 (368,736) 36,751 (1,284,305) 16,627,880 61,349,200 (67,893,760) (471,093) (5,288,576) - 4,323,651 (5,793,603) 13,459,969 7,666,366 1,017,058 1,537 (14,195) 1,969,101 (184,607) (71,778) (1,022,912) (8,990) (48) 1,685,166 (149,888) 12,793,425 (316,517) 1,469,090 (193,407) 13,602,703 (6,363,500) 1,176,316 (297,945) (527,630) (238,828) (11,365) (6,262,952) 7,339,751 9,024,917 16,848,596 231,795 536,175 (2,147,529) (450,537) 15,018,500 350,000 (74,992) 1,152,409 (341,107) 18,034 22,426 (761,929) (1,587,080) (384,816) (6,244) (1,613,299) (11,941,882) 66,503,625 (69,249,875) (414,856) (5,288,576) (46) (20,391,610) (6,986,409) 20,446,378 13,459,969 $ COMPAL ELECTRONICS, INC. Notes to the Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified) 8 (1) Company history Compal Electronics, Inc. (the “Company”) was incorporated in June 1984 as a company limited by shares and registered under the Ministry of Economic Affairs, R.O.C. The address of the Company's registered office is No.581 and No.581-1 Ruiguang Rd., Neihu Dist., Taipei City, Taiwan. In accordance with Article 19 of the Business Mergers and Acquisitions Act, the Company merged its subsidiary, Compal Communications, Inc. (“CCI”) (the “Merger”), pursuant to the resolutions of the Board of Directors in November, 2013. The Company was the surviving company and CCI was the dissolved company. The effective date of the Merger was February 27, 2014. The Company is primarily involved in the manufacture and sale of notebook personal computers (“notebook PCs”), monitors, LCD TVs, mobile phones and various components and peripherals. (2) Approval date and procedures of the financial statements: The accompanying parent-company-only financial statements were authorized for issuance by the Board of Directors and issued on March 26, 2021. (3) New standards, amendments and interpretations adopted: (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted. The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2020: ● Amendments to IFRS 3 “Definition of a Business” ● Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform” ● Amendments to IAS 1 and IAS 8 “Definition of Material” ● Amendments to IFRS 16 “COVID-19-Related Rent Concessions” (b) The impact of IFRS issued by the FSC but not yet effective The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its financial statements: ● Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” ● Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform －Phase 2” (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 9 (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC: Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Effective date per IASB January 1, 2023 Content of amendment The amendments aim to promote consistency in applying the requirements by helping companies determine whether, the statement of balance sheet, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. in The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation. The Company does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements: ● 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” and amendments to IFRS 17 “ Insurance Contracts” ● Amendments to IAS 16 “Property, Plant and Equipment－Proceeds before Intended Use” ● Amendments to IAS 37 “Onerous Contracts－Cost of Fulfilling a Contract” ● Annual Improvements to IFRS Standards 2018-2020 ● Amendments to IFRS 3 “Reference to the Conceptual Framework” ● Amendments to IAS 1 “Disclosure of Accounting Policies” ● Amendments to IAS 8 “Definition of Accounting Estimates” (4) Summary of significant accounting policies: The significant accounting policies presented in the parent-company-only financial statements are summarized as follows. The following accounting policies were applied consistently throughout the periods presented in the parent-company-only financial statements. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 10 (a) Statement of compliance These parent-company-only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. (b) Basis of preparation (i) Basis of measurement Except for the following significant accounts in the statement of financial position, the parent-company-only financial statements have been prepared on the historical cost basis: 1) 2) 3) Financial instruments measured at fair value through profit or loss are measured at fair value; Financial instruments measured at fair value through other comprehensive income are measured at fair value; The defined benefit liability (or asset) is recognized as plan assets less the present value of the defined benefit obligation and the effect of the asset ceiling mentioned in note (4)(q). (ii) Functional and presentation currency The functional currency of the Company is determined based on the primary economic environment in which the Company operates. The parent-company-only financial statements are presented in New Taiwan Dollar, which is the Company’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand. (c) Foreign currency (i) Foreign currency transaction Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 11 Foreign currency differences arising on retranslation are recognized in profit or loss, except for the following differences which are recognized in other comprehensive income arising on the retranslation: 1) 2) fair value through other comprehensive income financial assets; a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or 3) qualifying cash flow hedges to the extent the hedge is effective (ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company’s functional currency at exchange rates of the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation differences in equity. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity. (d) Classification of current and non-current assets and liabilities An asset is classified as current under one of the following criteria, and all other assets are classified as non-current. (i) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; (ii) It holds the asset primarily for the purpose of trading; (iii) It expects to realize the asset within twelve months after the reporting period; or (iv) The asset is cash and cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 12 A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current. (i) It expects to settle the liability in its normal operating cycle; (ii) It holds the liability primarily for the purpose of trading; (iii) The liability is due to be settled within twelve months after the reporting period; or (iv) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not impact its classification. (e) Cash and cash equivalents Cash comprise cash on hand and demand deposits. Cash equivalents are subject to an insignificant risk of changes in their fair value, and are used by the Company in the management of its short-term commitments. The time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes are reclassified as cash equivalents. (f) Financial instruments (i) Financial assets Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”). The Company shall reclassify all affected financial assets only when it changes its business model for managing its financial assets. 1) Financial assets measured at amortized cost A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: ‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 13 A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting. 2) Fair value through other comprehensive income (“FVOCI”) A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: ‧ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Some accounts receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling by the Company, therefore, those receivables are measured at FVOCI and presented as accounts receivable. On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis. A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting. Dividend income derived from equity investments is recognized on the date that the Company’s right to receive payment is established, which in the case of quoted securities is normally the date the shareholders' meeting approved the earning distribution. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 14 3) Fair value through profit or loss (“FVTPL”) All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting. 4) Impairment of financial assets The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, financial assets measured at amortized costs, notes and accounts receivable, other receivable, guarantee deposit and other financial assets), debt investments measured at FVOCI, and accounts receivable measured at FVOCI. The Company measures loss allowances at an amount equal to lifetime expected credit loss (“ECL”), except for the following which are measured as 12-month ECL: ‧ debt securities that are determined to have low credit risk at the reporting date; and ‧ other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition. Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 15 When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’s historical experience and informed credit assessment as well as forward-looking information. The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of “investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings”. The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the borrower is unlikely to pay its credit obligations to the Company in full. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset. At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. An evidence that a financial asset is credit-impaired includes the following observable data: ‧ significant financial difficulty of the borrower or issuer; ‧ a breach of contract such as a default or being more than 90 days past due; ‧ the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider; ‧ it is probable that the borrower will enter bankruptcy or other financial reorganization; or ‧ the disappearance of an active market for a security because of financial difficulties. Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 16 The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due. 5) Derecognition of financial assets Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets. On derecognition of a debt instrument in its entirety, the Company recognizes the difference between its carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in “other equity – unrealized gains or losses on fair value through other comprehensive income”, in profit or loss, and presented it in the line item of non-operating income. On derecognition of a financial asset other than in its entirety, the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss, and presented in the line item of non-operating income and expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts. (ii) Financial liabilities and equity instruments 1) Classification of debt or equity Debt or equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual agreement. Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received, less, the direct cost of issuing. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 17 Interest and loss or gain related to financial liabilities are recognized as profit or loss and are reported under non-operating income and expenses. Financial liabilities are reclassified as equity when converted, and conversions do not generate profit or loss. 2) Financial liabilities at fair value through profit or loss A financial liability is classified in this category if acquired principally for the purpose of selling in the short term. This type of financial liability is measured at fair value at the time of initial recognition, and attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, and are included in non-operating income or expenses. 3) Other financial liabilities Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise loans and borrowings, notes and accounts payable and other payable, are measured at fair value, plus, any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method other than significant interest on short-term loans and payables. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in non-operating income or expenses. 4) Derecognition of financial liabilities The Company derecognizes a financial liability when its contractual obligation has been discharged, cancelled or expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in non-operating income or expenses. 5) Offsetting of financial assets and liabilities The Company presents financial assets and liabilities on a net basis when the Company has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously. (iii) Derivative financial instruments The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are initially measured at fair value. Any attributable transaction costs thereof are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and are included in the line item of non-operating income. When a derivative is designated as, and effective for, a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, whereas when the fair value is negative, it is classified as a financial liability. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 18 Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the non-financial asset’s host contract are not closely related to the embedded derivatives and the host contract is not measured at FVTPL. (g) Inventories Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average-cost principle and includes expenditure incurred in acquiring the inventories, production or transition costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less, the estimated costs of completion and selling expenses. (h) Investment in associates Associates are those entities in which the Company has significant influence, but not control or join control, over their financial and operating policies. Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less, any accumulated impairment losses. The parent-company-only financial statements include the Company’s share of the profit or loss and other comprehensive income of equity-accounted investees after adjustments to align the accounting policies with those of the Company from the date that significant influence commences until the date that significant influence ceases. When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognizes the changes in ownership interests of its associate in capital surplus in proportion to its ownership. Unrealized profits resulting from the transactions between the Company and an associate are eliminated to the extent of the Company’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired. When the Company’s share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 19 The Company shall discontinue the use of the equity method from the date when its investment ceases to be an associate or a joint venture. The Company shall measure the retained interest at fair value. The difference between the fair value of retained interest and proceeds from disposal, and the carrying amount of the investment at the date the equity method was discontinued is recognized in profit or loss. The Company shall account for all the amounts previously recognized in other comprehensive income in relation to that investment on the same basis as would have been required if the associates had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in other comprehensive income would be reclassified to profit or loss on the disposal of the related assets or liabilities, the entity shall reclassify the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. If an entity’s ownership interest in an associate or a joint venture is reduced while the entity continues to apply the equity method, the entity shall reclassify the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest to profit or loss. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Company shall continue to apply the equity method without remeasuring the retained interest. When the Company subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus, however, when the balance of the capital surplus arising from the investment was insufficient, the difference charged or credited to retained earnings. If the Company’s ownership interest is reduced due to the additional subscription to the shares of associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities. (i) Investment in subsidiaries When preparing the parent-company-only financial statements, investment in subsidiaries which are controlled by the Company is accounted for using the equity method. Under the equity method, the amounts of net income, other comprehensive income and equity attributable to shareholders of the Company in the parent-company-only financial statement are equal to those in the consolidated financial statements. Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 20 (j) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses. (ii) Subsequent cost Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred. (iii) Depreciation The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over its useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss. The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life. Land has an unlimited useful life and therefore is not depreciated. The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows: 1) Buildings: 35~50 years 2) Building improvement: 8~15 years (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 21 3) Research equipment: 3 years 4) Other equipment: 0.5~5 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate. (k) Leases (i) Identifying a lease At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: 1) 2) 3) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and the Company has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of an asset if either: － － the Company has the right to operate the asset and the providers do not have the right to vary; or the Company designed the asset in a way that predetermines how and for what purpose it will be used. At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. (ii) As a lessee The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 22 The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise the following: － fixed payments, including in-substance fixed payments; － － － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable under a residual value guarantee; and payments for purchase or termination options that are reasonably certain to be exercised. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when: － － － － there is a change in future lease payments arising from the change in an index or rate; or there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying assets, or there is a change of its assessment on whether it will exercise an extension or termination option; or － there is any lease modifications When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero. When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease. The Company presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 23 The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases of machinery and office equipment that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (iii) As a lessor When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset. (l) Intangible assets (i) Goodwill 1) Initial recognition Goodwill arising from acquisition of subsidiaries is included in intangible assets. The measurement of initial recognition of goodwill, please refer to note (4)(t). 2) Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. Goodwill related to an investment accounted for using equity method is included in the carrying amount of the investment, and not allocated to any asset, including goodwill, forms part of the carrying amount of the investment accounted for using the equity method. (ii) Research & Development During the research phase, activities are carried out to obtain and understand new scientific or technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred. Expenditures arising from the development phase shall be recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they will be recognized in profit or loss as incurred. 1) The technical feasibility of completing the intangible asset so that it will be available for use or sale. 2) Its intention to complete the intangible asset and use or sell it. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 24 3) Its ability to use or sell the intangible asset. 4) How the intangible asset will generate probable future economic benefits. 5) 6) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. Its ability to measure reliably the expenditure attributable to the intangible asset during its development. Capitalized expenditure arising from the development phase is measured at cost less accumulated amortization and accumulated impairment losses. (iii) Other intangible assets Other intangible assets that are acquired by the Company are measured at cost, less accumulated amortization and any accumulated impairment losses. (iv) Subsequent expenditure Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred. (v) Amortization The amortizable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with all indefinite useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: 1) Patents: the shorter of contract period and estimated useful lives 2) Computer software: 1~3 years The residual value, the amortization period, and the amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as changes in accounting estimates. (m) Impairment of non-derivative financial assets Non-derivative financial assets except for inventories, deferred tax assets, and assets arising from employee benefits are assessed at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Company shall estimate the recoverable amount of the asset. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 25 The Company assesses goodwill and intangible assets, which have indefinite useful lives and are not available for use, on an annual basis and recognizes an impairment loss on excess of carrying value over the recoverable amount. The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units or group of units. If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, the entity shall recognize the impairment loss and the impairment loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited. The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount. That increase is a reversal of an impairment loss. (n) Provisions A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. (o) Treasury stock Repurchased shares are recognized under treasury shares (a contra-equity account) based on its repurchase price (including all directly accountable costs), and net of tax. Gains on disposal of treasury shares should be recognized under Capital Reserve – Treasury Shares Transactions; losses on disposal of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings. The carrying amount of treasury shares should be calculated using the weighted average different types of repurchase. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 26 During the cancellation of treasury shares, Capital Reserve – Share Premiums and Share Capital should be debited proportionately. Gains on cancellation of treasury shares should be recognized under existing capital reserves arising from similar types of treasury shares; losses on cancellation of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings. (p) Revenue from contracts with customers Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’s main types of revenue are explained below. i) Sale of goods The Company manufactures and sells electronic products to electronic products brand vendor. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied. The Company assesses sales discounts based on historical experience, management's judgment and other known reasons. Such allowances are recognized as a deduction of sales revenue in the same period in which sales are made. The aforementioned provisions are expected to settle over the next year. A refund liability is recognized for expected discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales of electronic products are made with a credit term which is consistent with the market practice. A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional. ii) Financing components The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 27 (q) Employee benefits (i) Defined contribution plans Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. (ii) Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities. If the benefits of a plan are improved, the pension cost incurred from the portion of the increased benefit relating to past service by employees, is recognized immediately in profit or loss. Re-measurement of net defined benefit liability (asset) (including actuarial gains, losses and the return on plan asset and changes in the effect of the asset ceiling, excluding any amounts included in net interest) is recognized in other comprehensive income (loss). The effect of re-measurement of the defined benefit plan is charged to retained earnings. The Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets and change in the present value of defined benefit obligation. (iii) Short term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 28 A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (r) Share-based payment The grant-date fair value of share-based payment awards granted to employee is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of award that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions, and there is no true-up for differences between expected and actual outcomes. (s) Income taxes Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss. Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years. Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the following exceptions: (i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) during the transaction. (ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse. (iii) Initial recognition of goodwill. Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities may be offset against each other if the following criteria are met: (i) The entity has the legal right to settle tax assets and liabilities on a net basis; and (ii) the taxing of deferred tax assets and liabilities fulfill one of the below scenarios: (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 29 1) 2) levied by the same taxing authority; or levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched. A deferred tax asset should be recognized for the carry-forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and they shall be adjusted based on the probability that future taxable profit that will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. The surtax on unappropriated earnings is recoded as current tax expense in the following year after the resolution to appropriate retained earnings is approved in a stockholders’ meeting. (t) Business combination Goodwill is measured as an aggregation of the consideration transferred (which generally is measured at fair value at the acquisition date) and as an amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value). If the residual balance is negative, the Company shall re-assess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter. All the transaction costs incurred for the business combination are recognized immediately as the Company’s expenses when incurred, except for the issuance of debt or equity instruments. If the business combination is achieved in stages, the Company shall measure any non-controlling equity interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Other non-controlling interest is measured (1) at fair value at the acquisition date or (2) by using other valuation techniques acceptable under the IFRS as endorsed by the FSC. In a business combination achieved in stages, the Company shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss. In prior reporting periods, the Company may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income shall be recognized on the same basis as would be required if the Company had disposed directly of the previously held equity interest. If the disposal of the equity interest required a reclassification to profit or loss, such an amount shall be reclassified to profit or loss. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 30 If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Company shall retrospectively adjust the provisional amounts recognized at the acquisition date, or recognize additional assets or liabilities to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date. (u) Earnings per share The Company discloses the basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholder of the Company divided by weighted average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise employee compensation not yet approved by the Board of Directors. (v) Operating segments The operating segment information is disclosed within the consolidated financial statements but not disclosed in the parent-company-only financial statements. (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty: The preparation of the financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates. The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period. There are no critical judgments in applying the accounting policies that have significant effect on the amounts recognized in the financial statements. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 31 (a) Recognition and measurement of refund liabilities Because of the sales returns and allowances, the Company records refund liabilities (sales returns and allowances provisions) for estimated returns and other allowances in the same period the related revenue is recorded. The estimate is made based on historical experience, market and economic conditions, and any other known factors using the expected value or the most likely amount, and it could be different from actual sales returns and allowances, therefore, the management periodically reviews the adequacy of the estimation used. (b) Valuation of inventories As inventories are stated at the lower of cost or net realizable value, the net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial changes, there may be significant differences in the net realizable value of inventories. Refer to note (6)(f) for further description of the valuation of inventories. (6) Explanation of significant accounts: (a) Cash and cash equivalents Cash on hand Checking accounts and demand deposits Time deposits Bonds purchased under resale agreements December 31, 2020 December 31, 2019 $ 1,700 1,527 7,578,068 3,523,187 76,598 9,885,255 10,000 50,000 $ 7,666,366 13,459,969 Please refer to note (6)(u) for the disclosure of the exchange rate risk, the interest rate risk and the fair value sensitivity analysis of the financial assets and liabilities of the Company. (b) Financial assets and liabilities at fair value through profit or loss Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Structured deposits Stock unlisted in domestic markets Fund in foreign market Total Current Non-current December 31, 2020 December 31, 2019 $ - 100,190 58,579 158,769 - 158,769 158,769 $ $ $ 149,888 24,350 46,747 220,985 149,888 71,097 220,985 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 32 For the market risk related to the financial instruments, please refer to note (6)(u). As of December 31, 2020 and 2019, the Company did not provide any aforementioned financial assets as collaterals for its loans. (c) Financial assets at fair value through other comprehensive income Equity investments at fair value through other comprehensive income: Stock listed in domestic markets Stock listed in foreign markets Stock unlisted in domestic markets Stock unlisted in foreign markets Total December 31, 2020 December 31, 2019 $ 1,520,779 1,614,565 491,243 801,238 67,861 448,110 914,507 42,211 $ 2,881,121 3,019,393 The purpose that the Company invests in the abovementioned equity securities is for long-term strategies, but rather for trading purpose. Therefore, these equity securities are designated as at FVOCI. For the year ended December 31, 2020, the Company had sold all of its shares, measured at fair value through other comprehensive income, in Global Bio Pharma, Inc. and Taiwan Sanga Co., Ltd. The fair value of the shares upon disposal amounted to $25,156, resulting in a cumulative loss of $24,844, which was reclassified from other comprehensive income to retained earnings. For the year ended December 31, 2019, the Company had sold all of its shares in Prime Sensor Technology Inc., Macroblock Inc., and Innolux Corporation (“Innolux”), which were measured at fair value through other comprehensive income. The fair value of the shares was $845,202 when disposed and the cumulative losses amounted to $4,824,910, which had been transferred to retained earnings from other comprehensive income. If there is an increase (decrease) in the market price by 5% on the reporting date of the equity securities hold by the Company, the increase (decrease) in other comprehensive income (pre-tax) for the years ended December 31, 2020 and 2019, will be $144,056 and $150,970, respectively. These analyses are performed on the same basis for the period and assume that all other variables remain the same. For the Company’s information of market risk, please refer to note (6)(u). As of December 31, 2020 and 2019, the Company did not provide any financial assets at fair value through other comprehensive income as collaterals for its loans. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 33 (d) Notes and accounts receivable Notes receivable from operating activities December 31, 2020 - $ December 31, 2019 1,104 Accounts receivable – measured at amortized cost 194,723,552 154,482,480 Accounts receivable – fair value through other comprehensive income Less: allowance for uncollectible accounts Notes and accounts receivable Notes and accounts receivable – related parties 38,331,299 27,170,468 233,054,851 181,654,052 (3,634,794) (3,634,190) $ 229,420,057 178,019,862 $ 218,292,177 176,967,731 $ 11,127,880 1,052,131 The Company has assessed a portion of its trade receivables that was held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; therefore, such trade receivables were measured at fair value through other comprehensive income. The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information. The loss allowance provision of the Company were determined as follows: December 31, 2020 Carrying amount of notes and accounts receivable $ 224,404,852 Weighted- ave rage ECL rate 0% Lifetime ECLs - Credit-impai red No 5,026,262 3,623,737 0.22% 100% $ 233,054,851 11,057 3,623,737 3,634,794 No Yes Credit rating Level A Level B Level C (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 34 December 31, 2019 Carrying amount of notes and accounts receivable $ 173,733,360 Weighted- ave rage ECL rate 0% Lifetime ECLs - Credit-impai red No 4,296,955 3,623,737 0.24% 100% $ 181,654,052 10,453 3,623,737 3,634,190 No Yes Credit rating Level A Level B Level C The aging analysis of notes and accounts receivable, was determined as follows: Overdue 1 to 180 days December 31, 2020 December 31, 2019 $ 1,364,958 497,543 The movement in the allowance for notes and accounts receivable was as follow: Balance at January 1 Impairment losses recognized Amounts written off Balance at December 31 2020 2019 $ 3,634,190 3,718,560 604 - 1,537 (85,907) $ 3,634,794 3,634,190 Allowance for uncollectible account is the balance of accounts receivables which are uncollectable. Except for evaluating the situation of the customers’ payment records and widely analyzing the credit rating of customers, the Company also takes all the necessary procedures for collection. The Company believes that there is no doubt for the recovery of the due but unimpaired account receivable, therefore, no allowance recognized. The Company entered into accounts receivable factoring agreements with banks. As of December 31, 2020 and 2019, except for the amount used under the actual sales amount in accordance with certain agreements, the factoring amount granted by the banks was USD 1,600,000 thousands and USD 1,000,000 thousands, respectively. Based on the agreements, the Company is not responsible for guaranteeing the ability of the accounts receivable obligor to make payment when it is affected by credit risk. Thus, this is a non-recourse accounts receivable factoring. The Company derecognized the above account receivables because it has transferred substantially all of the risks and rewards of their ownership and it does not have any continuing involvement in them. After the transfer of the accounts receivable, the Company can request partial advanced amount, while the interest calculated at an agreed rate is paid to the bank in the period during the time of receiving advance and the accounts receivable is collected. The remaining amounts with no advance are received when the accounts receivable are settled by the customers. As of December 31, 2020 and 2019, accounts receivable factored were recovered. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 35 The Company, customers, and banks signed the three-party contracts in which the banks purchase accounts receivable from the Company. The total amount of the accounts receivable should not exceed the facility limit provided by the banks to the Company’s customers. Based on the contracts, the banks have no right to request the Company to repurchase the accounts receivable. Thus, this is a non-recourse accounts receivable transfer. As of December 31, 2020 and 2019, accounts receivable factored were recovered. The details of the factored accounts receivable at the reporting date were as follows: December 31, 2020 Accounts receivable factored (gross) Amount advanced Paid Unpaid Amount recognized in other receivables Collateral derecognized Interest rate Amount Institution $ 42,187,597 - 42,187,597 - - 42,187,597 0.58%~0.93% December 31, 2019 Accounts receivable factored (gross) Amount advanced Paid Unpaid Amount recognized in other Amount receivables Collateral derecognized Interest rate Institution $ 25,672,764 - 25,672,764 - - 25,672,764 2.21%~2.80% Purchaser Financial Purchaser Financial As of December 31, 2020 and 2019, the Company did not provide any aforementioned notes and accounts receivable as collaterals. (e) Other receivables Other receivables - loans to subsidiaries Other receivables - related parties Others December 31, 2020 December 31, 2019 $ 1,644,000 1,719,000 141,149 149,120 1,061,348 1,242,487 $ 2,846,497 3,110,607 As of December 31, 2020 and 2019, none of other receivables were past due. (f) Inventories Finished goods Work in progress Raw materials December 31, 2020 11,718,417 682,167 43,391,764 55,792,348 $ $ December 31, 2019 13,454,860 152,421 36,440,788 50,048,069 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 36 (i) During the years ended December 31, 2020 and 2019, inventory cost recognized as cost of sales amounted to $968,054,585 and $891,431,772, respectively. (ii) The write-down of inventories to net realizable value amounted to $35,077 in the year ended December 31, 2020. The Company reversed its allowance for inventory valuation loss amounting to $66,336 due to sale and disposal of its obsolete inventories in the year ended December 31, 2019. (iii) As of December 31, 2020 and 2019, the Company did not provide any inventories as collaterals for its loans. (g) Investments accounted for using equity method A summary of the Company’s financial information for equity-accounted investees at the reporting date is as follows: Subsidiaries Associates Plus: Other receivables–related parties Credit balance of investment in equity method (other non-current liability) Less: unrealized profits or losses December 31, 2020 79,719,654 $ December 31, 2019 79,267,709 2,877,977 2,615,406 82,597,631 81,883,115 581,227 659,296 789,148 (10,157) 891,274 (3,516) $ 83,957,849 83,430,169 (i) Subsidiaries Please refer to the consolidated financial statement for the year ended December 31, 2020. (ii) Associates 1) The fair value of the shares of listed company based on the closing price was as follow: December 31, 2020 December 31, 2019 Allied Circuit Co., Ltd. (“Allied Circuit”) $ 1,229,085 1,076,719 Avalue Technology Inc. (“Avalue”) 828,286 1,147,839 $ 2,057,371 2,224,558 2) The Company’s share of the net gain (loss) of associates was as follows: The Company’s share of the gain of associates $ 258,376 70,378 2020 2019 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 37 3) The Company's financial information for investments accounted for using the equity method that are individually immaterial was as follows: Carrying amount of individually immaterial associates $ 2,877,977 2,615,406 December 31, 2020 December 31, 2019 The Company’s share of the net income (loss) of associates: 2020 2019 Profit from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) $ $ 258,376 107,656 366,032 70,378 (158,336) (87,958) 4) For the years ended December 31, 2020 and 2019, the Company had sold part of its shares held in Avalue, with a consideration (net of costs of disposal) amounting to $8,306 and $18,034, respectively. The transactions have been completed and the price has been fully recovered, wherein the Company recognized gains of $3,914 and $8,990, respectively, which were accounted for as other gain and loss. (iii) As of December 31, 2020 and 2019, the Company did not provide any investments accounted for using equity method as collaterals for its loans. (h) Changes in subsidiaries’ equity (i) Changes in subsidiaries’ equity did not result in the Company’s loss of control 1) Subsidiaries’ employee stock options exercised Compal Broadband Network Inc. (“CBN”) issued 45 thousand and 69 thousand new shares because of its employees ’ exercised stock options in 2020 and 2019, respectively, resulting in a decrease in the ownership of the Company and its subsidiaries in CBN by 0.03% and 0.07%, respectively. 2) Issuance of new shares for cash of subsidiaries The Company and its subsidiaries purchased newly issued shares of Arcadyan amounting to $323,917 at a percentage different from its existing ownership percentage in the fourth quarter of 2019, resulting in a decrease in the ownership of the Company and its subsidiaries in Arcadyan by 0.37%. 3) Issuance and cancellation of subsidiaries’ restricted shares Arcadyan canceled 126 thousand and 84 thousand restricted shares in the years ended December 31, 2020 and 2019, respectively, resulting in an increase of 0.01% of the ownership of the Company and its subsidiaries in Arcadyan for the both years. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 38 4) The following summarizes the effect of changes in equity of the Company due to changes in the ownership interest of subsidiaries: Capital surplus – changes in ownership interest in subsidiaries 2020 2019 $ 1,735 43,473 (i) Property, plant and equipment The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2020 and 2019, were as follows: Cost: Balance on January 1, 2020 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2020 Balance on January 1, 2019 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2019 Depreciation and impairments loss: Balance on January 1, 2020 Depreciation for the period Disposals and derecognitions Balance on December 31, 2020 Balance on January 1, 2019 Depreciation for the period Disposals and derecognitions Balance on December 31, 2019 Carrying amounts: Balance on December 31, 2020 Balance on January 1, 2019 Balance on December 31, 2019 Buildings and building improvement Other equipment Land Under construction and prepayment for purchase of equipment Total $ 1,047,797 2,390,275 2,382,078 188,245 6,008,395 - - - 138,772 342,763 70,149 551,684 (11,722) (89,536) (157,408) (258,666) 1,175 90,255 (91,430) - $ $ 1,047,797 2,518,500 2,725,560 9,556 6,301,413 1,047,797 2,194,761 2,112,018 36,487 5,391,063 - - - 138,731 343,873 279,325 761,929 (6,637) (137,960) - (144,597) 63,420 64,147 (127,567) - $ 1,047,797 2,390,275 2,382,078 188,245 6,008,395 $ $ $ $ $ $ $ - - - - - - - - 1,443,734 1,944,023 122,763 241,067 (11,722) (43,345) 1,554,775 2,141,745 1,368,955 1,893,927 80,891 185,219 (6,112) (135,123) 1,443,734 1,944,023 - - - - - - - - 3,387,757 363,830 (55,067) 3,696,520 3,262,882 266,110 (141,235) 3,387,757 1,047,797 963,725 583,815 9,556 2,604,893 1,047,797 825,806 218,091 36,487 2,128,181 1,047,797 946,541 438,055 188,245 2,620,638 As of December 31, 2020 and 2019, the Company did not provide property, plant and equipment as collateral for its borrowing. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 39 (j) Right-of-use assets The Company leases many assets including buildings and vehicles. Information about leases for which the Company as a lessee is presented below: Buildings Vehicles Total Cost: Balance on January 1, 2020 Additions Deductions Balance on December 31, 2020 Balance on January 1, 2019 Additional Deductions Balance on December 31, 2019 Depreciation: Balance on January 1, 2020 Depreciation for the period Deductions Balance on December 31, 2020 Balance on January 1, 2019 Depreciation for the period Deductions Balance on December 31, 2019 Carrying amount: Balance on December 31, 2020 Balance on January 1, 2019 Balance on December 31, 2019 $ $ $ $ $ $ $ $ $ 1,687,346 369,422 (73,493) 1,983,275 781,756 979,422 (73,832) 1,687,346 333,271 450,829 (73,090) 711,010 - 407,103 (73,832) 333,271 1,272,265 781,756 1,354,075 50,120 2,175 (7,121) 45,174 40,060 12,098 (2,038) 50,120 16,580 17,850 (7,116) 27,314 - 18,618 (2,038) 16,580 1,737,466 371,597 (80,614) 2,028,449 821,816 991,520 (75,870) 1,737,466 349,851 468,679 (80,206) 738,324 - 425,721 (75,870) 349,851 17,860 1,290,125 40,060 33,540 821,816 1,387,615 (k) Short-term borrowings The details of short-term borrowings were as following: Unsecured bank loans Unused credit line for short-term borrowings Range of interest rates December 31, 2020 December 31, 2019 $ $ 55,991,680 39,363,800 46,248,000 57,478,000 0.48%~1.00% 0.66%~2.49% For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(u). (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 40 (l) Long-term borrowings The details of long-term borrowings were as follows: Unsecured bank loans December 31, 2020 Currency TWD Range of annual interest rates 0.66%~0.98% Maturity year 2021~2023 Amount $ 11,900,000 Unsecured bank loans USD 0.69%~0.92% 2021~2022 Less: current portion Total Unused credit line for long-term borrowings Unsecured bank loans Less: current portion Total Unused credit line for long-term borrowings 7,205,440 (8,855,440) 10,250,000 15,290,000 $ $ December 31, 2019 Currency TWD Range of annual interest rates 0.73%~1.18% Maturity year 2020~2023 Amount $ 25,650,000 (18,150,000) 7,500,000 11,807,000 $ $ For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(u). (m) Lease liabilities The details of lease liabilities were as follows: Current Non-current For the maturity analysis, please refer to note (6)(u). The amounts recognized in profit or loss was as follows: December 31, 2020 December 31, 2019 $ 202,113 $ 1,096,415 387,499 1,010,933 Interest on lease liabilities Expenses relating to leases of low-value assets or short-term leases 2020 2019 17,077 13,549 5,843 3,325 $ $ (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 41 The amounts recognized in the statement of cash flows for the Company was as follows: Total cash outflow for leases (i) Building leases 2020 2019 $ 494,013 431,730 The Company leases buildings for its office and factory space, typically run for a period of 1~10 years. (ii) Other leases The Company leases vehicles with lease terms of 1~5 years. The Company also leases some machinery and office equipment with contract terms of 1~3 years. These leases are short-term or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases. (n) Employee benefits (i) Defined benefit plans Reconciliation of defined benefit obligations at present value and plan assets at fair value were as follows: Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities December 31, 2020 (1,286,459) $ December 31, 2019 (1,270,206) 599,405 626,953 $ (687,054) (643,253) The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average salary for the six months prior to retirement. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 42 1) Composition of plan assets The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labor Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks. The balance of the Company’s labor pension reserve account in the Bank of Taiwan amounted to $594,242 (excluding the ending balance of interest receivable) as of December 31, 2020. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor. 2) Movements in the present value of the defined benefit obligations The movements in the present value of defined benefit obligations for the Company were as follows: Defined benefit obligations on January 1 $ (1,270,206) 2020 Current service costs and interest Remeasurements of net benefit liabilities Benefit paid by the plan (15,945) (77,143) 76,835 2019 (1,246,221) (21,108) (53,073) 50,196 Defined benefit obligations on December 31 $ (1,286,459) (1,270,206) 3) Movements of the fair value of defined benefit plan assets The movements in the fair value of the defined benefit plan assets for the Company were as follows: 2020 2019 Fair value of plan assets on January 1 $ 626,953 Expected return on plan assets Remeasurements of net benefit plan assets Contributions paid by the employer Benefits paid by the plan Fair value of plan assets on December 31 $ 5,455 19,919 23,913 (76,835) 599,405 624,640 7,875 20,428 24,206 (50,196) 626,953 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 43 4) Expenses recognized in profit or loss The expenses recognized in profit or loss for the Company were as follows: 2020 2019 Current service cost Net interest on the net defined benefit liability (asset) Cost of sales Selling expenses Administrative expenses Research and development expenses $ $ $ $ 4,811 5,679 10,490 383 504 2,611 6,992 10,490 5,314 7,919 13,233 517 631 3,239 8,846 13,233 5) Actuarial assumptions The following were the Company’s principal actuarial assumptions at the reporting date: Discount rate Future salary increase rate December 31, 2020 0.50% 3.00% December 31, 2019 0.90% 3.00% The expected allocation payment made by the Company to the defined benefit plans for the one year period after the reporting date is $25,409. The weighted-average lifetime of the defined benefit plan is 9.6 years. 6) Sensitivity analysis If the main actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows: December 31, 2020 Discount rate Future salary increasing rate December 31, 2019 Discount rate Future salary increasing rate Effects to the defined benefit obligation Increased 0.25% Decreased 0.25% (30,316) 30,583 (30,821) 31,239 31,422 (29,675) 31,967 (30,287) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 44 Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation on the net defined benefit liabilities in the balance sheets. The method and assumption used in the sensitivity analysis is consistent with prior period. (ii) Defined contribution plans The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates the labor pension at a specific percentage to the Bureau of the Labor Insurance without additional legal or constructive obligations. The Company recognized the pension costs under the defined contribution method amounting to $364,251 and $335,403 for the years ended December 31, 2020 and 2019, respectively. Payment was made to the Bureau of Labor Insurance. (o) Income taxes (i) Income tax expenses 1) The amount of income tax for the years ended December 31, 2020 and 2019, was as follows: Current tax expense Recognized during the period Undistributed earnings additional tax Tax credit of investment Deferred tax expense Recognition and reversal of temporary differences 2020 2019 $ 1,319,010 16,836 934,581 274,317 (273,959) (438,511) 1,061,887 770,387 3,497 3,497 97,393 97,393 Income tax expense $ 1,065,384 867,780 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 45 2) The amount of income tax recognized in other comprehensive income for the years ended December 31, 2020 and 2019, was as follows: Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit obligation $ (11,445) (6,529) 2020 2019 Unrealized gains (losses) on equity instruments at fair value through other comprehensive income 8,627 (2,818) $ 9,585 3,056 3) The income tax expense that was reconciled between the actual income tax expense and profit before tax for the years ended December 31, 2020 and 2019, was as follows: Profit before tax Income tax calculated based on tax rate Undistributed earnings additional tax Estimated tax effect of tax exemption on investment income, net Realized investment loss Investment tax credit Changes in temporary differences Adjustment of estimated difference and other 2020 10,427,277 2019 7,823,679 2,085,455 1,564,736 $ $ 16,836 274,317 (169,069) (60,000) (55,294) (25,237) (273,959) (438,511) (873,487) (211,637) 339,608 (240,594) Income tax expense $ 1,065,384 867,780 (ii) Deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2020 and 2019 were as follows: Exchange differences on translation Refund liabilities Contract liabilities Unrealized exchange losses, net Others Total Deferred tax assets: $ Balance on January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2020 $ Balance on January 1, 2019 $ Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2019 $ - - - - 9,823 120,603 14,277 59,429 (9,893) 670,265 (82,240) 306,688 1,166,808 2,257 (75,599) - - - 9,823 9,823 134,880 178,025 49,536 164,955 (57,422) (105,526) 588,025 106,526 563,739 11,445 320,390 301,251 (1,092) 11,445 1,102,654 760,580 399,699 - - - 6,529 6,529 9,823 120,603 59,429 670,265 306,688 1,166,808 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 46 Deferred tax liabilities: Balance on January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2020 Balance on January 1, 2019 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2019 Unrealized exchange gains, net Others Total $ (497,092) (396,140) (893,232) 72,102 - - (8,627) 72,102 (8,627) $ $ (424,990) (404,767) (829,757) - (386,555) (386,555) (497,092) - (497,092) - (9,585) (9,585) $ (497,092) (396,140) (893,232) (iii) Unrecognized deferred tax assets Deferred tax assets have not been recognized in respect of the following items: Tax effect of deductible temporary differences December 31, 2020 December 31, 2019 $ 388,424 398,919 The Company assesses and considers that some of the income tax reduction items may be unrealized, hence they are not recognized as deferred tax assets. (iv) Unrecognized deferred tax assets and liabilities related to investments in subsidiaries The temporary differences associated with investment in subsidiaries were not recognized as deferred income tax assets and liabilities as the Company has the ability to control the reversal of these temporary differences which are not expected to reverse in the foreseeable future. As of December 31, 2020 and 2019, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $1,856,500 and $1,894,891, respectively. As of December 31, 2020 and 2019, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $54,205,119 and $53,620,982, respectively. (v) Examination and approval The Company’s tax returns for the year through 2018 were assessed by the tax authorities. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 47 (p) Capital and other equities (i) Ordinary shares As of December 31, 2020 and 2019, the Company’s authorized common stock consisting of 6,000,000 thousand shares with a par value of 10 New Taiwan dollar per share amounted to $60,000,000 of which 4,407,147 thousand shares were issued. All issued shares were paid up upon issuance. (ii) Capital surplus The balances of capital surplus were as follows: Additional paid-in capital Treasury share transactions December 31, 2020 December 31, 2019 $ 5,422,060 6,302,490 2,541,906 2,481,885 Difference between consideration and carrying amount arising from acquisition or disposal of subsidiaries Recognition of changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted 36,766 60,850 36,766 59,115 for using equity method 281,231 279,003 $ 8,342,813 9,159,259 In accordance with the ROC Company Act, realized capital reserves can only be used to increase the common stock or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10% of the actual share capital amount. The Company’s shareholders’ meeting held on June 21, 2019, approved to distribute cash of $881,429 (representing 0.2 New Taiwan dollars per share), by using the additional paid-in capital. The Company’s Board of Directors’ meeting held on March 30, 2020, approved to distribute cash of $881,429 (representing 0.2 New Taiwan dollars per share), by using the additional paid-in capital. The Company’s Board of Directors’ meeting held on March 36, 2021, approved to distribute cash of $1,762,859 (representing 0.4 New Taiwan dollars per share), by using the additional paid-in capital. The related information can be accessed through the Market Observation Post system website after the Board of Directors’ meeting. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 48 (iii) Retained earnings Based on the Company’s articles of incorporation amended on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The Board of Directors may set aside a certain amount to cope with the business operation conditions, and shall prepare the proposal for distribution of the balance amount thereof after a resolution has been adopted and then allocated by the Board of Directors. The Company authorizes the Board of Directors to distribute all or part of the dividends and bonuses, capital surplus or legal reserve in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the General shareholders’ meeting. Based on the Company’s articles of incorporation before amended on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The earnings appropriation proposal to distribute dividend and bonus shall be proposed by the Board of Directors and approved by the General Shareholders Meeting. The rest of the unappropriated retained earnings shall be reserved. The lifecycle of the industry of the Company is in the growing stage. To consider the need of the Company for the future capital, capital budget, long-term financial planning, domestic and foreign competition, the need of shareholders for cash flow and other factors, if there is any profit after close of books, the dividend and bonus to be distributed to shareholders shall not be less than thirty percent of profit after tax for such year and the cash dividend allocated by the Company each year shall not be lower than ten percent of the total dividend (including cash and share dividend) for such year. According to the law, when there is a deduction from stockholders' equity (excluding treasury stock and unearned employee benefit) during the year, an amount equal to the deduction item is set aside as a special reserve before the earnings are appropriated. A special reserve is made available for earning distribution only after the deduction of the related shareholders’ equity has been reversed. 1) Legal reverse When a company incurs no loss, it may, in pursuant to a resolution to be adopted by the shareholders’ meeting as required, distribute its legal reserve by issuing new shares and distributing stock dividends or distributing cash to shareholders. Only the portion of the legal reserve which exceeds 25% of the paid-in capital may be distributed. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 49 2) Special reverse In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of current earnings and previous unappropriated earnings shall be set aside as a special reserve during earnings distribution. The amount to be set aside should equal the total amount of contra accounts that are accounted for as deductions to other equity interests. A portion of previous unappropriated earnings shall be set aside as a special reserve, which should not be distributed, to account for cumulative changes to other equity interests pertaining to prior periods. The special reserve shall be made available for appropriation when the net deductions of other equity interests are reversed in the subsequent periods. 3) Earnings distribution Distribution for the earnings of 2019 was approved in the meeting of the Board of Directors held on March 30, 2020, and of 2018 was approved by the shareholders during their annual meeting held on June 21, 2019. The relevant information was as follows: 2019 2018 Amount per share Total amount Amount per share Total amount Cash dividends distributed to common shareholders $ 1.0 4,407,147 1.0 4,407,147 Distribution for the earnings of 2020 was approved in the meeting of the Board of Directors held on March 26, 2021. The relevant information was as follows: 2020 Amount per share Total amount Cash dividends distributed to common shareholders from the unappropriated earnings $ 1.2 5,288,576 The related information of the earnings distribution for the year ended December 31, 2020, can be accessed through the Market Observation Post System website after the related meeting. (iv) Treasury stock The subsidiaries of the Company did not sell the ordinary shares of the Company in the years ended December 31, 2020 and 2019. As of December 31, 2020, Panpal and Gempal, subsidiaries of the Company, held 50,017 thousand shares of ordinary shares of the Company, recorded as the Company’s treasury stock, with a book value of 17.6 New Taiwan dollars per share. The total cost was $881,247. The fair value of the ordinary shares of the Company was 20.70 and 18.85 New Taiwan dollars per share as of December 31, 2020 and 2019, respectively. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 50 Pursuant to the Securities and Exchange Act, the number of treasury shares purchased cannot exceed 10% of the number of shares issued. The total purchase cost cannot exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus. The shares purchased for the purpose of transferring to employees shall be transferred within three years from the date of share repurchase. Those not transferred within the said limit shall be deemed as not issued by the Company and it should be cancelled. Furthermore, treasury stock cannot be pledged for debts, and treasury stock does not carry any shareholder rights until it is transferred. (v) Other equity interests (net-of-taxes) Exchange differences on transaction of foreign operation financial statements Unrealized gain (loss) from financial assets at fair value through other comprehensive income Unearned compensation for restricted employee shares and others Total Balance on January 1, 2020 $ (3,794,980) (306,763) (1,706) (4,103,449) The Company Subsidiaries Associates Balance on December 31, 2020 Balance on January 1, 2019 $ $ The Company Subsidiaries Associates (3,073,441) (100,249) (182,054) 75,529 161,498 (45,469) (6,888,977) (376,952) (1,852,952) (5,606,436) (1,620,812) 4,936,223 (52,530) 252,170 (268,686) 111,280 - - - - - (3,173,690) 927 (105,598) 116,029 (779) (7,266,708) (7,459,388) 3,315,411 (1,706) 197,934 (157,406) Balance on December 31, 2019 $ (3,794,980) (306,763) (1,706) (4,103,449) (q) Earnings per share The Company’s basic and diluted earnings per share are calculated as follows: Basic earnings per share: Profit attributable to ordinary shareholders of the Company Weighted-average number of outstanding ordinary shares (in thousands) 2020 2019 $ 9,361,893 6,955,899 4,357,130 4,357,130 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 51 Diluted earnings per share: Profit attributable to ordinary shareholders of the Company (after adjustment of potential diluted ordinary shares) $ 9,361,893 6,955,899 Weighted-average number of outstanding ordinary shares of potential diluted ordinary shares Weighted-average number of outstanding ordinary shares (in thousands) Effect of potential diluted common stock Employee compensation (in thousands) Weighted-average number of ordinary shares (after adjustment of 4,357,130 4,357,130 57,482 49,860 potential diluted ordinary shares) (in thousands) 4,414,612 4,406,990 (r) Revenue from contracts with customers (i) Disaggregation of revenue Primary geographical markets: United states China Netherlands United Kingdom Others Major products： 5C related electronic products Others (ii) Contract balance 2020 IT Product Segment $ 438,228,844 2019 IT Product Segment 376,228,186 120,250,527 90,543,393 83,664,387 98,084,239 45,763,811 43,940,021 303,371,701 307,484,189 $ 991,279,270 916,280,028 $ 990,202,030 915,421,296 1,077,240 858,732 $ 991,279,270 916,280,028 Notes and accounts receivable (including related parties) Less: allowance for impairment Total Contract liabilities December 31, 2020 $ 233,054,851 December 31, 2019 181,654,052 January 1, 2019 194,553,384 (3,634,794) $ 229,420,057 828,978 $ (3,634,190) 178,019,862 877,822 (3,718,560) 190,834,824 1,405,452 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 52 For the details on accounts receivable and allowance for impairment, please refer to note (6)(d). The amounts of revenue recognized for the years ended December 31, 2020 and 2019 that was included in the balances of contract liability at the beginning of the period were $877,822 and $1,405,452, respectively. The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received. (s) Employees’ and directors’ compensations Based on the Company’s articles of incorporation, if there is any profit in a fiscal year, the Company’s pre-tax profits in such fiscal year, prior to deduction of compensations to employees and directors, shall be distributed to employees as compensations in an amount of not less than two percent (2%) thereof and to directors as compensations in an amount of not more than two percent (2%) of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset accumulated losses. The compensations to employees as mentioned above may be distributed in the form of stock or cash. Employees entitled to receive the said stock or cash may include the employees of the Company’s subordinate companies pursuant to the Company Act (Employees entitled to receive the said stock or cash may include the employees of the Company’s subordinate companies who meet certain conditions after the Company’s articles of incorporation amended on June 21, 2019). The Company accrued and recognized its employee compensation of $974,694 and $731,322, respectively, and directors’ compensation of $51,541 and $38,672 for the years ended December 31, 2020 and 2019, respectively. The estimated amounts mentioned above are based on the net profit before tax without the compensations to employees and directors of each respective ending period, multiplied by the percentage of the compensation to employees and directors, which was approved by the management. The estimations are recorded under operating expenses and cost. The differences between the amounts estimated and recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the distribution year. If the Board of Directors approve to distribute employee compensation in the form of stock, the number of the shares of the employee compensation is based on the closing price of the day before the Board of Directors’ meeting, the related information can be accessed through the Market Observation Post System website. There is no difference between the amount approved in the Board of Directors’ meeting and those recognized in the financial statements in 2020 and 2019. There is no differences between the amount estimated and recognized in the financial statements in 2019. The related information can be accessed through the Market observation Post System website. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 53 (t) Non-operating income and expenses (i) Interest income The interest income for the years ended December 31, 2020 and 2019, were as follows: Interest income from bank deposits Interest income from financial assets measured at amortized cost Other interest income 2020 2019 80,823 141,195 - 46,059 126,882 2,992 40,420 184,607 $ $ (ii) Other income The other income for the years ended December 31, 2020 and 2019, were as follows: Dividend revenue Sale of expensed assets Other revenue (iii) Other gains and losses 2020 2019 56,780 85,268 216,622 358,670 71,778 275,412 122,042 469,232 $ The other gains and losses for the years ended December 31, 2020 and 2019, were as follows: Gains on disposal of investments Gains (losses) on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange gains (losses), net Others 2020 2019 3,914 8,990 (9,013) 604,339 72 599,312 55,140 (484,552) (501) (420,923) $ $ (u) Financial instruments (i) Credit risk 1) The carrying amount of financial assets represents the maximum amount exposed to credit risk. The Company’s customers are mainly from the high-tech industry. The Company does not concentrate on a specific customer and the sales regions are widely spread, thus there should be no concern on the significant concentrations of accounts receivable credit risk. And in order to mitigate accounts receivable credit risk, the Company constantly assesses the financial status of the customers. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 54 2) Receivables and debt securities For information of exposure to credit risk of notes and accounts receivable, please refer to note (6)(d). Other financial assets at amortized cost includes other receivables and time deposits. These financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses (Regarding how the financial instruments are considered to have low credit risk, please refer to note (4)(f)). Due to the counter parties and the performing parties of the Company’s time deposits are financial institutions with investment grade and above, these time deposits are considered to have low credit risk. (ii) Liquidity risk The following table shows the contractual maturities of financial liabilities. Except for lease liabilities, the amounts exclude estimated interest payments. Carrying Amount Contractual cash flows Within 1 year 1 ~ 2 years Over 2 years December 31, 2020 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables Lease liabilities—current $ 75,097,120 (64,847,120) (75,097,120) 188,627,673 (188,627,673) (188,627,673) (9,229,539) (9,229,539) 9,229,539 and non-current 1,298,528 (217,649) $ 274,252,860 (274,301,906) (262,921,981) (1,347,574) December 31, 2019 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables Lease liabilities—current $ 65,013,800 (57,513,800) (65,013,800) 149,064,159 (149,064,159) (149,064,159) (9,390,399) (9,390,399) 9,390,399 and non-current 1,398,432 (402,010) $ 224,866,790 (224,912,575) (216,370,368) (1,444,217) (5,125,000) (5,125,000) - - - - (348,353) (5,473,353) (781,572) (5,906,572) (1,925,000) (5,575,000) - - - - (306,979) (2,231,979) (735,228) (6,310,228) The Company is not expecting that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 55 (iii) Currency risk 1) Exposure to foreign currency risk The Company’s significant exposure to foreign currency risk was as follows: Foreign currency December 31, 2020 Exchange rate TWD Foreign currency December 31, 2019 Exchange rate TWD Financial assets Monetary items USD to TWD Non-monetary items THB to TWD Financial liabilities Monetary items USD to TWD 2) Sensitivity analysis $ 8,521,135 28.48 242,681,925 6,580,212 29.98 197,274,756 516,989 0.9502 491,243 446,859 1.0028 448,110 9,056,682 28.48 257,934,303 6,021,076 29.98 180,511,858 The Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, loans and borrowings, accounts payable, and other payables that are denominated in foreign currency. Assuming all other variable factors remain constant, a strengthening (weakening) 5% of appreciation (depreciation) of the each major foreign currency against the Company’s functional currency as of December 31, 2020 and 2019, would have increased (decreased) the net profit before tax as follows. The analysis is performed on the same basis for both periods. USD (against the TWD) Strengthening 5% Weakening 5% 3) Exchange gains and losses of monetary items December 31, 2020 December 31, 2019 $ (762,619) 838,145 762,619 (838,145) As the Company deals with diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the years ended December 31, 2020 and 2019, the foreign exchange losses, including both realized and unrealized, amounted to $604,339 and $(484,552), respectively. (iv) Interest rate analysis The interest risk exposure from financial assets and liabilities has been disclosed in the note of liquidity risk management. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 56 The following sensitivity analysis is based on the risk exposure to interest rate on the derivative and non-derivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25%, when reporting to management internally, which also represents the assessment of the Company’s management for the reasonably possible interval of interest rate change. Assuming all other variable factors remaining constant, if the interest rate had increased or decreased by 0.25%, the impact to the net profit before tax would be as follows for the years ended December 31, 2020 and 2019, which would be mainly resulted from the bank savings and borrowings with variable interest rates. Interest increased by 0.25% Interest decreased by 0.25% (v) Fair value information 2020 2019 $ (5,566) (30,454) 5,566 30,454 1) The categories and fair value of financial instruments The Company’s financial assets and liabilities at fair value through profit or loss and financial assets at fair value through other comprehensive income were measured at fair value on a recurring basis. The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It shall not include fair value information of the financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value and investments in equity instruments which do not have any quoted price in an active market in which the fair value cannot be reasonably measured. December 31, 2020 Fair Value Book value Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss–current and non-current Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Stocks listed on domestic markets Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal $ 158,769 - 1,520,779 1,520,779 491,243 801,238 67,861 38,331,299 41,212,420 491,243 - - - - - - - - 158,769 158,769 - - 801,238 67,861 1,520,779 491,243 801,238 67,861 38,331,299 - 38,331,299 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 57 December 31, 2020 Fair Value Book value Level 1 Level 2 Level 3 Total Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net Notes and accounts receivable due from related parties, net Other receivables Guarantee deposits Subtotal Total Financial liabilities measured at amortized cost Short-term borrowings Notes and accounts payable Notes and accounts payable to related parties Other payables Lease liabilities–current and non-current Long-term borrowings current portion Long-term borrowings Deposits received Total 7,666,366 179,960,878 11,127,880 2,846,497 136,119 201,737,740 $ 243,108,929 $ 55,991,680 100,825,221 87,802,452 9,229,539 1,298,528 8,855,440 10,250,000 220 $ 274,253,080 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - December 31, 2019 Fair Value Book value Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss–current and non-current Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Stocks listed on domestic markets Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal $ 220,985 - 149,888 71,097 220,985 1,614,565 1,614,565 448,110 914,507 42,211 27,170,468 30,189,861 448,110 - - - - - - - - - 914,507 42,211 1,614,565 448,110 914,507 42,211 27,170,468 - 27,170,468 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 58 December 31, 2019 Fair Value Book value Level 1 Level 2 Level 3 Total Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net 13,459,969 149,797,263 Notes and accounts receivable due from related parties, net Other receivables Guarantee deposits Subtotal Total Financial liabilities measured at amortized cost Short-term borrowings Notes and accounts payable Notes and accounts payable to related parties Other payables Lease liabilities–current and non-current Long-term borrowings current portion Long-term borrowings Deposits received Total 1,052,131 3,110,607 126,605 167,546,575 $ 197,957,421 $ 39,363,800 74,138,921 74,925,238 9,390,399 1,398,432 18,150,000 7,500,000 220 $ 224,867,010 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2) Fair value valuation technique of financial instruments not measured at fair value The Company estimates financial instruments that not measured at fair value by methods and assumption as follows: a) Financial assets measured at amortized cost and financial liabilities measured at amortized cost If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values. 3) Fair value valuation technique of financial instruments measured at fair value a) Non-derivative financial instruments Financial instruments trade in active markets is based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-the-run bonds from Taipei Exchange can be used as a base to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 59 If a quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have a quoted price in an active market. If a financial instrument is not in accord with the definition mentioned above, then it is considered to be without a quoted price in an active market. In general, market with low trading volume or high bid-ask spreads is an indication of a non-active market. The fair value of the listed company is determined by reference to the market quotation. The measurements on fair value of the financial instruments without an active market are determined using the valuation technique or the quoted market price of its competitors. Fair value measured using the valuation technique can be extrapolated from similar financial instruments, discounted cash flow method, or other valuation techniques which include the model used in calculating the observable market data at the balance sheet date. The measurement of fair value of a non-active market financial instruments held by the Company which do not have quoted market prices are based on the comparable market approach, with the use of key assumptions of price-book ratio multiple or earnings multiple of comparable listed companies as its basic measurement. These assumptions have been adjusted for the effect of discount without the marketability of the equity securities. b) Derivative financial instruments Measurement of the fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate. 4) Transfer from one level to another There was no transfer form one level to another in the year ended December 31, 2020. The Company held an investment in equity of Crystalvue Medical Corporation (“Crystalvue”). The investment was categorized as level 3 as of December 31, 2018, because the shares were not listed on the exchange market and was measured by significant unobservable inputs. In December 2019, Crystalvue’s shares were listed on the exchange market, wherein they are actively traded. Currently, the equity shares have quoted market price in an active market; therefore, the category was transferred from level 3 to level 1 as of December 31, 2019. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 60 5) Changes in level 3 The change in level 3 at fair value in the years ended December 31, 2020 and 2019, were as follow: Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Total Balance on January 1, 2020 $ 71,097 956,718 1,027,815 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment Balance on December 31, 2020 Balance on January 1, 2019 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment Transferred out from level 3 $ $ 10,997 - 76,675 158,769 23,745 (8,244) - 55,596 - - - - - - - Balance on December 31, 2019 $ 71,097 (65,813) 7,578 (25,156) (4,228) 869,099 947,758 18,468 19,396 (791) (7,615) (20,498) 956,718 10,997 (65,813) 84,253 (25,156) (4,228) 1,027,868 971,503 (8,244) 18,468 74,992 (791) (7,615) (20,498) 1,027,815 For the years ended December 31, 2020 and 2019, total gains and losses that were included in“other gains and losses, net”and“unrealized gains and losses from equity instruments at fair value through other comprehensive income”,respectively, were as follows: Total gains and losses recognized: In profit or loss (as“other gains and losses, net”) $ 10,997 (8,244) In other comprehensive income (as“unrealized gains and losses from equity instruments at fair value through other comprehensive income”) $ (46,709) 17,677 2020 2019 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 61 6) The quantified information for significant unobservable inputs (level 3) used in fair value measurement The Company’s financial instruments that use level 3 input to measure fair values include financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss. Most of fair value measurements of the Company which are categorized as equity investment into level 3 have several significant unobservable inputs. Significant unobservable inputs of equity investments without quoted price are independent of each other. The quantified information for significant unobservable inputs was as follows: Item Financial assets at fair value through other comprehensive income － equity investment without an active market Valuation technique Comparable market approach (Price-Book ratio method and Earnings multiplier method) Inter-relationships between significant unobservable inputs and fair value The higher the multiple is, the higher the fair value will be. The higher the multiple is, the higher the fair value will be. The higher the Lack-of-Marketabilit y discount rate is, the lower the fair value will be. Significant unobservable inputs Price-Book ratio multiples (1.72~7.9 and 1.4~5.64, respectively, on December 31, 2020 and 2019) Multiples of earnings (3.12~11.24, on December 31, 2019) Lack-of-Marketability discount rate (35%~85%, and 35%~85%, respectively, on December 31, 2020 and 2019) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 62 Item Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Valuation technique Net asset value method Net asset value method Significant unobservable inputs Net asset value Inter-relationships between significant unobservable inputs and fair value Inapplicable Net asset value Inapplicable 7) Sensitivity analysis for fair value of financial instruments using level 3 inputs The Company’s fair value measurement on financial instruments is reasonable. However, the measurement would be different if different valuation models or valuation parameters are used. For financial instruments using level 3 inputs, if the valuation parameters changed, the impact on other comprehensive income or loss are as follows: December 31, 2020 Financial assets at fair value through other comprehensive income December 31, 2019 Financial assets at fair value through other comprehensive income Input Price-Book ratio multiples Lack-of-Marketability discount rate Price-Book ratio multiples Multiples of earnings Lack-of-Marketability discount rate Move up or down Other comprehensive income Unfavorable change Favorable change 5% $ 35,945 35,279 5% $ 4,523 4,567 5% $ 25,552 24,531 5% 5% $ $ 14,707 6,589 12,746 6,548 The favorable and unfavorable changes reflect the movement of the fair value, in which the fair value is calculated by using the different unobservable inputs in the valuation technique. The table above shows the effects of one unobservable input, without considering the inter-relationships with another unobservable input for financial instrument, if there are one or more unobservable inputs. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 63 (v) Financial risk management (i) Overview The Company is exposed to the following risks arising from financial instruments: 1) Credit risk 2) Liquidity risk 3) Market risk In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management of the Company. For detailed information, please refer to the related notes of each risk. (ii) Structure of risk management The Company’s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations. The Company minimizes the risk exposure through derivative financial instruments. The Board of Directors regulated the use of derivative financial instruments in accordance with the Company’s policy about risks arising from financial instruments such as currency risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investments of excess liquidity. The internal auditors of the Company continue with the review of the amount of the risk exposure in accordance with the Company’s policies and the risk management policies and procedures. The Company has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation. (iii) Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. 1) Accounts receivable and other receivables The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, and these limits are reviewed periodically. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 64 2) Investments The credit risks exposure in the bank deposits, investments with fixed income and other financial instruments are measured and monitored by the Company’s finance department. Since the Company’s transaction counterparties and the contractually obligated counterparties are banks, financial institutes and corporate organizations with good credits, there are no compliance issues, and therefore, no significant credit risk. 3) Guarantees Pursuant to the Company’s policies, it is only permissible to provide financial guarantees to subsidiaries and companies that the Company has business with. As of December 31, 2020 and 2019, the guarantees provide to the subsidiaries amounted to $214,797 and $255,662, respectively. (iv) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities which be settled by delivering cash or another financial asset. The Company manages and maintains sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’s management supervises the banking facilities and ensures in compliance with the terms of the loan agreements. Please refer to notes (6)(k) and (6)(l) for unused credit lines of short-term and long-term borrowings as of December 31, 2020 and 2019. (v) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices which will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. 1) Currency risk The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, primarily USD. As for other monetary assets and liabilities denominated in other foreign currencies, when short-term imbalance takes place, the Company buys or sells foreign currencies at spot rate to ensure that the net exposure is kept on an acceptable level. 2) Interest rate risk The Company borrows funds on fixed and variable interest rates, which has a risk exposure to changes in fair value and cash flow. Therefore, the Company manages the interest rates risk by maintaining an adequate combination of fixed and variable interest rates. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 65 3) Other price risk The Company is exposed to equity price risk arising from investments in listed equity securities. (w) Capital management The policy of capital management made by the Board of Directors is to maintain a strong capital base so as to stabilize the confidence of the investors, creditors and the public market and to sustain future development of the business. Capital consists of ordinary shares, capital surplus and retained earnings. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders. The Company monitors the capital structure by way of periodical review the debt ratio. As of December 31, 2020 and 2019, the debt ratio was as follows: Total liabilities Total assets Debt ratio December 31, 2020 $ 282,118,646 December 31, 2019 231,810,855 $ 388,951,151 337,783,488 73 % 69 % The Company could purchase its own shares in the public market in accordance with the corresponding rules and regulations. The timing of the purchases depends on market prices. As of December 31, 2020, there were no changes in the Company’s approach of capital management. (x) Investing and financing activities not affecting current cash flow The Company’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2020 and 2019 were acquisition of right-of-use assets by leasing, please refer to note (6)(j). Reconciliation of liabilities arising from financial activities was as follows: Short-term borrowings Long-term borrowings Lease liabilities Guarantee deposits Total liabilities from financing activities January 1, 2020 39,363,800 25,650,000 1,398,432 220 66,412,452 $ $ Other non-cash changes - - 371,189 - 371,189 December 31, 2020 55,991,680 19,105,440 1,298,528 220 76,395,868 Cash flow 16,627,880 (6,544,560) (471,093) - 9,612,227 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 66 Long-term borrowings Short-term borrowings Lease liabilities Guarantee deposits Total liabilities from financing activities January 1, 2019 51,305,682 28,396,250 821,816 266 80,524,014 $ $ Other non-cash changes - - 991,472 - 991,472 December 31, 2019 39,363,800 25,650,000 1,398,432 220 66,412,452 Cash flow (11,941,882) (2,746,250) (414,856) (46) (15,103,034) (7) Related-party transactions: (a) Name and relationship with related parties The following are entities that had transactions with related party during the periods covered in the parent-company-only financial statements. Name of related party Panpal Technology Corp. (“Panpal”) Gempal Technology Corp. (“Gempal”) Hong Ji Capital Co., Ltd. (“Hong Ji”) Hong Jin Investment Co., Ltd. (“Hong Jin”) Accesstek, Inc. (“ATK”) Arcadyan Rayonnant Technology Co., Ltd. (“Rayonnant Technology”) HengHao Technology Co., Ltd. (“HengHao”) Ripal Optortronics Co., Ltd. (“Ripal”) Auscom Engineering Inc. (“Auscom”) Just International Ltd. (“Just”) Compal International Holding Co., Ltd. (“CIH”) Compal Electronics (Holding) Ltd. (“CEH”) Bizcom Electronics, Inc. (“Bizcom”) Flight Global Holding Inc. (“FGH”) High Shine Industrial Corp. (“HSI”) Compal Europe (Poland) Sp. z o.o. (“CEP”) Big Chance International Co., Ltd. (“BCI”) Compal Rayonnant Holdings Limited (“CRH”) Relationship with the Company The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 67 Name of related party Core Profit Holdings Limited (“CORE”) Compalead Electronics B.V. (“CPE”) Relationship with the Company The Company’s subsidiary The Company’s subsidiary Compalead Eletronica do Brasil Industria e Comercio Ltda. (“CEB”) The Company’s subsidiary Compal Display Holding (HK) Limited (“CDH (HK)”) Compal Electronics International Ltd. (“CII”) Compal International Ltd. (“CPI”) Compal Electronics (China) Co., Ltd. (“CPC”) Compal Optoelectronics (Kunshan) Co., Ltd. (“CPO”) Compal System Trading (Kunshan) Co., Ltd. (“CST”) Smart International Trading Ltd. (“Smart”) Amexcom Electronics Inc. (“AEI”) Mexcom Electronics, LLC (“MEL”) Mexcom Technologies, LLC (“MTL”) CENA Electromex, S.A. de C.V. (“CMX”) (Note) Compal International Holding (HK) Limited (“CIH (HK)”) Jenpal International Ltd. (“Jenpal”) Prospect Fortune Group Ltd. (“PFG”) Compal Electronics Technology (Kunshan) Co., Ltd. (“CET”) Compal Information (Kunshan) Co., Ltd. (“CIC”) Compal Information Technology (Kunshan) Co., Ltd. (“CIT”) Kunshan Botai Electronics Co., Ltd. (“BT”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary Compal Information Research and Development (Nanjing) Co., Ltd. (“CIN”) The Company’s subsidiary Compal Digital Technology (Kunshan) Co., Ltd. (“CDT”) Compower Global Service Co., Ltd. (“CGS”) Compal Investment (Jiansu) Co., Ltd. (“CIJ”) Compal Display Electronics (Kunshan) Co., Ltd. (“CDE”) Etrade Management Co., Ltd. (“Etrade”) Webtek Technology Co., Ltd. (“Webtek”) Forever Young Technology Inc. (“Forever”) Unicom Global, Inc. (“UCGI”) Palcom International Corporation (“Palcom”) Compal Communication (Nanjing) Co., ltd. (“CCI Nanjing”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 68 Compal Digital Communication (Nanjing) Co., Ltd. (“CDCN”) Name of related party Relationship with the Company The Company’s subsidiary Compal Wireless Communication (Nanjing) Co., Ltd. (“CWCN”) The Company’s subsidiary Hanhelt Communication (Nanjing) Co., Ltd. (“Hanhelt”) Giant Rank Trading Ltd. (“GIA”) OptoRite Inc. MSI-ATK Otpics Holding Corporation (“MSI-ATK”) Maitek (BVI) Corporation (“Maitek”) Arcadyan Technology N.A. Corp. (“Arcadyan USA”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary Arcadyan Germany Technology GmbH (“Arcadyan Germany”) The Company’s subsidiary Arcadyan Technology Corporation Korea (“Arcadyan Korea”) Arcadyan Holding (BVI) Corp. (“Arcadyan Holding”) Arcadyan do Brasil Ltda. (“Arcadyan Brasil”) Arcadyan Technology Limited (“Arcadyan UK”) Arcadyan Technology Australia Pty Ltd. (“Arcadyan AU”) Zhi-Bao Technology Inc. (“Zhi-Bao”) Tatung Technology Inc. (“TTI”) AcBel Telecom Inc. (“AcBel Telecom”) CBN Speedlink Tradings Limited (“Speedlink”) Compal Broadband Networks Belgium BVBA (“CBNB”) Compal Broadband Networks Netherlands B.V. (“CBNN”) Sinoprime Global Inc. (“Sinoprime”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary Arcadyan Technology (Vietnam) Co., Ltd. (“Arcadyan Vietnam”) The Company’s subsidiary Arcadyan Technology (Shanghai) corp. (“SVA Arcadyan”) Arch Holding (BVI) Corp. (“Arch Holding”) Compal Networking (Kunshan) Co., Ltd. (“CNC”) Leading Images Ltd. (“Leading Images”) Astoria Networks GmbH (“Astoria GmbH”) Quest International Group Co., Ltd. (“Quest”) Exquisite Electronic Co., Ltd. (“Exquisite”) Tatung Home Appliances (Wujiang) Co., Ltd. (“THAC”) Tatung Technology of Japan Co., Ltd. (“TTJC”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 69 Intelligent Universal Enterprise Ltd. (“IUE”) Name of related party Goal Reach Enterprises Ltd. (“Goal”) Compal (Vietnam) Co., Ltd. (“CVC”) Relationship with the Company The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary Compal Development &Management (Vietnam) Co., Ltd. (“CDM”) The Company’s subsidiary Allied Power Holding Corp. (“APH”) Primetek Enterprises Limited (“PEL”) The Company’s subsidiary The Company’s subsidiary Rayonnant Technology (HK) Co., Ltd. (“Rayonnant Technology (HK)”) The Company’s subsidiary Royonnant Technology (Taicang) Co., Ltd. (“Rayonnant Technology The Company’s subsidiary (Taicang)”) HengHao Holdings A Co., Ltd. (“HHA”) HengHao Holdings B Co., Ltd. (“HHB”) HengHao Trading Co., Ltd. HengHao Optoelectronics Technology (Kunshan) Co., Ltd. LUCOM Display Technology (Kunshan) Limited (“Lucom”) Center Mind International Co., Ltd. (“CMI”) Prisco International Co., Ltd. (“PRI”) Compal Electronic (Sichuan) Co., Ltd. (“CIS”) Compal Electronic (Chongqing) Co., Ltd. (“CEQ”) Compal Electronic (Chengdu) Co., Ltd. (“CEC”) Compal Management (Chengdu) Co., Ltd. (“CMC”) Compal Smart Device (Chongqing) Co., Ltd. (“CSD”) Billion Sea Holdings Limited (“BSH”) Mithera Capital Io LP (“Mithera”) Fortune Way Technology Corp. (“FWT”) General Life Biotechnology Co., Ltd. (“GLB”) Mactech Co., Ltd. (“Mactech”) Rapha Bio Ltd. (“Rapha”) Compal Electronics India Private Limited (“CEIN”) Shennona Corporation (“Shennona”) Unicore BioMedical Co., Ltd. (“Unicore”) Raycore Biotech Co., Ltd. (“Raycore”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 70 Hippo Screen Neurotech Co., Ltd. (“Hippo Screen”) Name of related party Shennona Co., Ltd. (“Shennona TW”) Aco Smartcare Co., Ltd. (“Aco Smartcare”) Compal Electronica DA Amazonia LTDA (“CEA”) Compal Wise Electronic (Vietnam) Co., Ltd. (“CWV”) Arcadyan Technology Corporation (Russia), LLC. (“Arcadyan RU”) CGS Technology (Poland) Sp. z o.o. (“CGSP”) AcBel Polytech Inc. (AcBel) and its subsidiaries (“AcBel”) Cal-Comp Electronics & Communications Company Limited (“Cal-Comp”) Avalue Crownpo Technology Inc. (“Crownpo”) Kinpo Group Management Consultant Company (“Kinpo Group Management”) Allied Circuit LIZ Electronics (Kunshan) Co., Ltd. (“LIZ”) Compal Precision Module (Jiangsu) Co., Ltd. (“CPM”) Changbao Electronic Technology (Chongqing) Co., Ltd. (“Changbao”) Hong Ya Technology Corporation (“Hong Ya Technology”) Raypal Biomedical Co., Ltd. (“Raypal”) ARCE Therapeutics Co., Ltd. (“ARCE”) Compal Connector Manufacture Ltd. (“CCM”) Relationship with the Company The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The same Chairman of the Board with the Company The same Chairman of the Board with the Company An associate An associate An associate An associate An associate An associate An associate An associate An associate An associate A joint venture company Note: Since the disposal of CMX in August 2019, CMX is no longer a subsidiary of the Company. (b) Transactions with key management personnel Key management personnel remunerations comprised: Short-term employee benefits Post-employment benefits There are no termination benefits and other long-term benefits. 2020 2019 $ $ 516,197 482,308 6,007 6,130 522,204 488,438 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 71 (c) Significant related-party transactions (i) Sale of goods to related parties The amounts of significant sales transactions between the Company and related parties were as follows: Subsidiaries Associates Other related parties 2020 1,170,456 $ 2019 1,432,433 190 179 476,501 - $ 1,647,147 1,432,612 Sales prices for related parties were similar to those of the third-party customers. The collection period was 45~180 days for related parties. (ii) Purchase of goods from related parties The amounts of significant purchase transactions between the Company and related parties were as follows: Subsidiaries CSD Others Associates Other related parties Joint venture 2020 2019 $ 145,525,596 219,732,381 365,257,977 2,859 41,802 - $ 365,302,638 96,242,404 296,062,338 392,304,742 410 65,573 467 392,371,192 Purchase prices and payment period from related parties were similar to those from third-party suppliers. The payment period was 60~120 days for related parties. (iii) Product warranty service expenses The product warranty service expenses paid to subsidiaries for the years ended December 31, 2020 and 2019, amounted to $255,349 and $292,959, respectively. As of December 31, 2020 and 2019, the unpaid warranty service expenses were record as other payables. (iv) Technical service expense The Company engaged its subsidiaries to research and develop of notebooks, and the related technical service expenses for the years ended December 31, 2020 and 2019, amounted to $198,315 and $170,657, respectively. As of December 31, 2020 and 2019, the unpaid technical service expenses were recorded as other payables. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 72 (v) Receivables due from relate parties The receivables arising from the transactions mentioned above, the sale of machinery and equipment to related parties, and the purchasing of machinery, equipment and others on behalf of the related parties as of December 31, 2020 and 2019, were as follows: Account Notes and accounts receivable Notes and accounts receivable Other receivables Other receivables Other receivables Other receivables Less: Credit balance of investments accounted for using the equity method Related party categories Subsidiaries Other related parties Subsidiaries - UCGI Subsidiaries - Others Associates Joint venture $ December 31, 2020 10,820,424 307,456 506,229 15,176 907 64 11,650,256 December 31, 2019 1,052,131 - 581,199 27,155 - 62 1,660,547 (381,227) $ 11,269,029 (459,296) 1,201,251 As of December 31, 2020 and 2019, the Company’s investment accounted for using the equity method in subsidiaries was a credit balance, recorded as a deduction from other receivable (other receivables) – related party. Please refer to note (6)(g). (vi) Payables to related parties The payables to related parties as of December 31, 2020 and 2019, were as follows: Account Notes and accounts payable Notes and accounts payable Related party categories Subsidiaries - CIT December 31, 2020 30,623,968 $ December 31, 2019 31,847,665 Subsidiaries - Others 57,161,436 43,055,746 Notes and accounts payable Associates 166 259 Notes and accounts payable Other payables Other related parties 16,882 21,568 Subsidiaries 174,010 339,318 $ 87,976,462 75,264,556 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 73 (vii) Loans to related parties The interest rate of unsecured loans to subsidiaries was 1.08%~2.05%, and the Company had assessed that no bad debt expenses should be recognized. As of December 31, 2020 and 2019, the loans due to related parties were recorded as other receivables. Account Other receivables Other receivables Other receivables Less: Credit balance of investments accounted for using the equity method Related party categories December 31, 2020 December 31, 2019 Subsidiaries - CEB $ Subsidiaries - HengHao Subsidiaries - UCGI 1,424,000 1,499,000 200,000 200,000 220,000 220,000 (200,000) (200,000) $ 1,644,000 1,719,000 As of December 31, 2020 and 2019, the Company’s investment accounted for using the equity method in some subsidiaries was a credit balance, recorded as a deduction from other receivables – related parties (classified as other receivables). Please refer to note (6)(g). (viii) Guarantees As of December 31, 2020 and 2019, the guarantees provided to subsidiaries were $214,797 and $255,662, respectively. (8) Pledged assets: None. (9) Commitments and contingencies: The details of commitments and contingencies were as follows: (a) In August 2019, Inventec Corporation filed a lawsuit to the Taiwan Taipei District Prosecutors Office against the Company concerning its former employees who joined the Company. This is deemed as an act of violation according to the Trade Secret Law and Copyright Law. The Company engaged lawyers to defend its right on this matter. Currently, the case is still in progress; therefore, the Company cannot make any reasonable estimation regarding the possible impact on its business operation. (b) The Company entered into various patent license agreements with third parties, and was required to make royalty payments of a predetermined amount periodically. (10) Losses due to major disasters: None (11) Subsequent events: None (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 74 (12) Other: The employee benefits, depreciation and amortization expenses by categorized function are summarized as follows: By function By item Employee benefits Salary Operating costs 2020 Operating expenses Total Operating costs 2019 Operating expenses Total 1,108,657 9,021,361 10,130,018 677,649 8,450,610 9,128,259 Labor and health insurance Pension 81,056 27,718 Remuneration of directors - Others Depreciation Amortization 209,112 156,554 6,301 607,195 347,023 61,500 403,706 675,955 384,626 688,251 374,741 51,188 17,972 61,500 - 612,818 832,509 390,927 136,787 93,277 5,980 571,822 330,664 48,630 402,952 598,554 319,247 623,010 348,636 48,630 539,739 691,831 325,227 For the years ended December 31, 2020 and 2019, the information on the number of employees and employee benefit expense of the Company is as follows: Number of employees (Average salaries) Number of directors (non-employees) Average benefit expense of employees Average salary expense of employees Percentage of change in average salary expense of employees Remuneration received by supervisors 2020 2019 8,633 11 1,369 1,175 7,682 11 1,387 1,190 (1.26)% (4.11)% - - $ $ $ Information about salary and compensation policies (including directors, managers and employees) of the Company is as follows: Directors’ remuneration is allocated according to the terms of the Articles of the Incorporation, and no more than 2% of the Company’s pre-tax profit in the fiscal year, excluding employees’ and directors’ compensations, shall be paid to directors as remuneration along with reasonable compensation based on other factors to be taken into consideration, such as the Company’s operational performance and the individual directors’ contribution to the Company’s performance. Remuneration of the independent directors’ of the Company is allocated according to the terms of the Articles of the Incorporation, as well as the involvement level in the corporate operation, contribution value, responsibility that is taken, risk that is borne by the independent directors and reference of competitors from the same industry. The remuneration is proposed by the Remuneration Committee and resolved by the Board of Directors. The Company’s remuneration policy for managers has been established based on various factors including the Company’s wage policy, the average wage offered by competitors for the same position, the duties and responsibilities for the position in question, and the manager’s actual contribution to the Company’s operational objectives. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 75 The Company’s procedure for determining remuneration takes into account the Company’s overall operational performance as well as includes employee’s personal performance and their contribution to the Company’s performance in order to determine a reasonable compensation. Relevant salaries and compensations are reviewed by the Remuneration Committee and resolved by the Board of Directors. The Company will frequently examine the latest developments in the global economy, international financial environment, and change of the industry condition in order to predict its operational development, profit status, operational risks and changes in pertinent regulations in the near future in order to review the compensation system, thereby reach a balance between the Company’s sustainable operation and relevant risk control. (13) Other disclosures: (a) Information on significant transactions The following were the information on significant transactions required by the“Regulations Governing the Preparation of Financial Reports by Securities Issuers”for the Company for the year ended December 31, 2020: (i) Loans to other parties: Please refer to Table 1 (ii) Guarantees and endorsements for other parties: Please refer to Table 2 (iii) Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): Please refer to Table 3 (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 4 (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 5 (vi) Disposals of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 6 (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 7 (ix) Trading in derivative instruments: None. (b) Information on investees: Please refer to Table 8 (c) Information on investment in mainland China: Please refer to Table 9 (d) Major shareholders: There were no shareholders holding more than 5% shares. (14) Segment information: Please refer to the consolidated financial report of 2020. (Continued) 76 Amount $ 1,700 265,111 7,312,957 7,578,068 76,598 COMPAL ELECTRONICS, INC. Statement of cash and cash equivalents December 31, 2020 (Expressed in thousands of New Taiwan Dollars; in dollars of Foreign Currency) Item Cash on hand Checking account and TWD demand deposits Description Foreign currency (US$256,192,860 and others) Time deposits Foreign currency (CNY$17,500,000, Maturity date: 2021.1.8~ 2021.3.15) Cash equivalents: Bonds purchased under resale agreements TWD (Maturity date: 2021.1.7) Total 10,000 $ 7,666,366 Note: The exchange rate is 28.48 New Taiwan dollars for 1 US dollar; 4.377 New Taiwan dollars for 1 CNY dollar. (Continued) 77 COMPAL ELECTRONICS, INC. Statement of notes and accounts receivable December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Item Description Sales of non-related parties Amount 126,299,231 $ D Company E Company A Company C Company B Company Others (Note) 〃 〃 〃 〃 〃 26,254,007 18,158,410 13,675,832 13,074,071 24,465,420 221,926,971 (3,634,794) $ 218,292,177 Less: allowance for uncollectible accounts Notes and accounts receivable, net Note: The amount of individual client included in others does not exceed 5% of the account balance. Statement of inventories Item Finished goods Work in progress Raw materials Total Net Realizable Cost 11,718,417 $ Value 11,922,637 682,167 682,167 43,391,764 43,427,910 $ 55,792,348 56,032,714 (Continued) Statement of changes in accumulated impairment of investments accounted for using the equity method COMPAL ELECTRONICS, INC. For the year ended December 31, 2020 (Expressed in thousands of New Taiwan Dollars; thousands of shares) Beginning Balance Increase (Note 1) Decrease (Note 2) Ending Balance (including impairment loss) 78 Amount (not including exchange differences on transaction of foreign Investee Company Number of shares financial statements Auscom Panpal Just CIH CEH Gempal Hong Ji Hong Jin Maxima Ventures l, Inc. ATK Allied Circuit Bizcom LIPO Crownpo Arcadyan FGH HSI Lead-Honor Optronics Co., Ltd. CBN Kinpo Group Management Rayonnant Technology CRH HengHao Infinno Technology Corp. CEP BCI APE CORE Unicore Ripal CPE Avalue Etrade Webtek Forever UCGI Palcom Mactech GLB Shennona Hippo Screen Shennona TW Aco Smartcare ARCE CGSP Raypal Subtotal 3,000 $ 500,000 48,010 53,001 1 90,000 100,000 29,500 126 899 10,158 100 98 3,739 41,305 89,755 42,700 2,772 29,060 300 29,500 12,500 20,015 5,650 136 90,820 31,253 147,000 20,000 6,000 6,427 15,024 46,900 100 50 10,000 10,000 21,756 15,000 2,600 4,200 600 100,000 - - - - - - Exchange differences on transaction of foreign financial statements Less: Treasury shares held by subsidiaries Unrealized profits or losses Subtotal Plus: Deduction of accounts receivable and other receivable－related parties Plus: Credit balance of investment in equity method Total $ 139,509 6,396,435 8,462,270 35,953,096 3,906,656 1,944,816 1,083,154 344,708 4,998 8,548 319,049 471,164 552,441 58,754 2,278,389 5,058,576 557,178 (3) 734,180 4,628 66,671 132,685 (469,615) 17,199 22,199 6,153,514 1,081,612 7,627,386 145,664 76,632 856,150 654,537 (481,001) 645,132 1,568,742 (459,297) 105,623 237,496 305,987 695 34,869 4,292 85,978 86,691,696 (3,927,334) (881,247) (3,516) 81,879,599 659,296 891,274 83,430,169 Number of Share of profit Number of foreign financial foreign financial differences on transaction Market Price / Amount (not including exchange differences Exchange differences Ending Balance on transaction of on transaction of (including exchange Number of shares - - - - - - - - - - - - - - - - - - - - - - 20,000 - - - - - - - - - - - - - - - - - - - - 10,000 20,000 3,446 Amount - 38,272 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 123,166 119 165 695 1,482 550 200,000 2,819 99,999 206 60,000 37 155,076 682,586 682,586 shares - - - - - - - - - 899 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20,000 100 10,000 2,100 Amount - 244,660 109,063 44,089 27,314 8,563 37,047 72 198,760 40,972 54,446 64,089 11,903 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 840,978 3,093,997 - 6,641 3,941,616 recognized shares statements statements of foreign statements 3,000 500,000 48,010 53,001 1 90,000 100,000 29,500 126 10,158 100 98 3,739 41,305 89,755 42,700 2,772 29,060 300 29,500 12,500 20,015 5,650 136 90,820 31,253 147,000 20,000 6,000 6,427 14,924 46,900 100 50 10,000 10,000 21,756 15,000 2,600 2,100 600 100,000 20,000 3,446 - - 4,635 (28,650) 3,843 2,502,193 - 115,689 110,567 38,084 701 15 108,556 8,266 58,689 1,976 339,600 112,909 (162,171) - 20,297 31 69,187 68,396 8,553 (4,182) 2,244 613,030 49,423 74,866 (20,381) 6,849 6,256 47,355 (162,840) 55,882 (53,455) (21,929) 6,801 9,735 12,032 (84) (17,920) (1,519) (12,414) (148) (37) (4,025) 3,966,905 - - - 3,966,905 144,144 6,161,397 8,466,113 38,455,289 3,906,656 2,074,608 1,149,751 355,643 5,699 - 390,558 479,430 611,825 60,658 2,420,711 5,172,035 395,007 (3) 713,505 4,659 135,858 201,081 (261,062) 13,017 24,443 6,766,544 1,076,589 7,702,252 125,283 83,481 862,406 640,622 (643,841) 701,014 1,515,287 (381,227) 112,424 235,534 318,019 611 16,949 2,773 73,564 59,852 - 151,051 90,500,209 (7,021,331) (881,247) (10,157) 82,587,474 (19,317) (689,880) (731,922) (3,214,118) (550,093) (23,886) (8,312) (4,335) (103) (47,596) (36,778) (2,532) (34,418) (375,507) (37,370) 3 52 (10,539) (10,062) (8,191) (5,777) (304,021) (81,706) (345,581) (74,147) (15,434) (76,054) (128,145) (186,173) 611 (7,021,331) - - - - - - - - - - - - - - - - 124,827 5,471,517 7,734,191 35,241,171 3,356,563 2,050,722 1,141,439 351,308 5,699 390,455 431,834 575,047 58,126 2,386,293 4,796,528 357,637 713,557 4,659 125,319 191,019 (269,253) 13,017 18,666 6,462,523 994,883 7,356,671 125,283 83,481 788,259 625,188 (719,895) 572,869 1,329,114 (381,227) 112,424 235,534 318,019 1,222 16,949 2,773 73,564 59,852 151,051 83,478,878 (881,247) (10,157) 82,587,474 581,227 789,148 83,957,849 - - - - Net Value 124,827 5,555,384 7,734,191 35,228,323 3,356,563 2,102,475 1,141,439 351,308 5,121 - 1,229,085 (Note 4) 431,834 575,047 58,126 3,874,362 (Note 3) 4,796,528 1,411,398 - 932,832 (Note 3) 5,819 125,319 191,019 (269,253) 13,017 18,666 6,462,523 994,883 7,356,671 125,283 83,481 788,259 828,286 (Note 4) (719,895) 572,869 1,329,114 (381,227) 112,424 235,534 207,631 1,222 4,475 2,773 45,751 59,852 - 151,051 Note 1：Increase in current period included purchasing long-term investments, adjusting by using equity method of capital surplus, unrealized gains from financial assets measured at fair value through other comprehensive income, and subsidiaries received cash dividends from the parent company. Note 2：Decrease in current period included disposal of long-term investments, return of capital from liquidation, cash dividends distributed from long-term investments for using the equity method, adjustment by equity method of capital surplus and retained earnings, remeasurement of defined benefit plans, and unrealized loss from financial assets measured at fair value through other comprehensive income. Note 3：The unit price is calculated by the closing price of the Taiwan Stock Exchange as of December 31, 2020. Note 4：The unit price is calculated by the closing price of Taipei Exchange as of December 31, 2020. (Continued) 79 COMPAL ELECTRONICS, INC. Statement of financial assets measured at fair value through other comprehensive income - non-current For the year ended December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Beginning Balance Increase (Note 1) Decrease (Note 2) Ending Balance Number of Number of Number of Number of Collaterals or Pledged Investee Company Shares Amount 124,044 $ 1,593,962 Shares - Amount - Shares - Amount Shares Amount 86,830 124,044 1,507,132 Assets None Kinpo Cal-Comp Electronics (Thailand) Public Co., Ltd. Taiwan Star Others 239,631 448,110 98,046 680,442 - 296,879 - - - 43,133 5,883 30,278 - - - - - 239,631 491,243 None 98,046 686,325 None 130,736 - 196,421 None Total Note 1: Increase included purchasing financial assets at fair value through other comprehensive income, deferred tax for unrealized gains and unrealized gains on financial instruments $ 3,019,393 79,294 217,566 2,881,121 at fair value. Note 2: Decrease included sale of financial assets at fair value through other comprehensive income, unrealized loss on financial instruments at fair value and proceeds of capital reduction of investments. (Continued) 80 Please refer to Note (6)(i). COMPAL ELECTRONICS, INC. Statement of property, plant and equipment For the year ended December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Statement of short-term borrowings December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Creditor Description Period Interest Rate Commitments Pledged Assets balance Contract Loan Collaterals or Ending Taishin International Bank Credit Loans 2020.12~2021.01 Note $ 3,000,000 United Overseas Bank Bank of China Limited Cathay United Bank The bank of Tokyo-Mitsubishi UFJ 〃 〃 〃 2020.12~2021.01 2020.12~2021.01 2020.12~2021.01 2020.12~2021.01 Bank of Communications 〃 2020.12~2021.01 CO., Ltd. DBS Bank Limited Taipei Fubon Commercial Bank CO. Ltd. 〃 〃 2020.12~2021.01 2020.12~2021.01 China Construction Bank 〃 2020.12~2021.01 Corporation Land Bank of Taiwan E.SUN Commercial Bank Sumitomo Mitsui Banking Corporation 〃 〃 〃 2020.12~2021.01 2020.12~2021.01 2020.12~2021.01 Shanghai Commercial and 〃 2020.12~2021.01 Savings Bank Citibank Taiwan, Ltd. Agricultural Bank of Taiwan 〃 〃 2020.12~2021.01 2020.12~2021.02 HSBC Bank (Taiwan) 〃 2020.12~2021.02 Limited 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Note: The range of interest rates of aforementioned loans were 0.48%~1.00%. 4,272,000 6,265,600 4,272,000 4,272,000 None None None None None 2,848,000 4,272,000 2,848,000 4,272,000 4,272,000 2,848,000 None 2,848,000 2,848,000 1,851,200 None None 2,819,520 1,851,200 4,272,000 None 4,272,000 5,000,000 4,000,000 7,120,000 None None None 4,556,800 1,424,000 6,550,400 2,420,800 None 1,424,000 8,401,600 1,550,000 None None 5,097,920 1,509,440 5,696,000 None 5,126,400 $ 68,089,200 55,991,680 (Continued) COMPAL ELECTRONICS, INC. Statement of notes and accounts payable December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Suppliers E Company I Company A Company D Company J Company B Company C Company Others (Note) Total 81 Amount $ 30,279,281 12,250,502 9,709,329 9,625,248 9,601,755 9,293,659 7,004,933 13,060,514 $ 100,825,221 Note: The amount of individual vendor included in others does not exceed 5% of the account balance. (Continued) 82 COMPAL ELECTRONICS, INC. Statement of long-term borrowings December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Amount Loan Loan within Loan more Contract Interest Collaterals or Creditor Commitments 1 year than 1 year Period Shanghai Commercial and $ 2,300,000 - 2,300,000 2020.06~2023.06 Rate Note Amount Pledged Assets 2,300,000 None Savings Bank Bank of Taiwan 4,000,000 2,258,800 1,650,000 2019.09~2022.09 Taipei Fubon Commercial 2,000,000 939,840 Bank CO. Ltd. Mizuho Bank, Ltd. CTBC Bank Co., Ltd. 5,696,000 5,656,800 2,000,000 Far Eastern International Bank 1,000,000 Co., Ltd. Bank SinoPac Co., Ltd. 3,300,000 - - - - - 2020.07~2022.07 2020.05~2022.05 2,000,000 2020.11~2023.11 1,000,000 2019.08~2022.08 〃 〃 〃 〃 〃 3,908,800 None 939,840 None 5,656,800 None 2,000,000 None 1,000,000 None 3,300,000 2019.03~2023.03 〃 3,300,000 None $ 20,296,000 8,855,440 10,250,000 19,105,440 Note: The range of interest rates of aforementioned loans were 0.66%~0.98%. Statement of lease liabilities December 31, 2020 Item Description Lease term rate Discount Buildings Vehicles For office and factory space 1~10 years For operating activities 1~5 years Less: Current portion Lease liabilities — Non Current Ending balance 1,280,468 1.2% $ 1.2% 18,060 1,298,528 (202,113) $ 1,096,415 (Continued) 83 COMPAL ELECTRONICS, INC. Statement of other payables December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Item Description Payroll payables and year-end Payroll for December 2020, estimated year-end bonuses bonuses payable for 2020, and employees and directors’ compensations Technical service fee payables Others (Note) Total Export expense payables and others Amount $ 3,873,936 988,765 4,366,838 $ 9,229,539 Note: The amount of each item in others does not exceed 5% of the account balance. Statement of operating revenue For the year ended December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Quantity Note Item Sales revenue: 5C electronic products Others Less: Sales return Sales allowance Net sales Other operating revenue: Service and processing revenue Net sales revenue Note: Due to multi-categories, it’s hard to be classified in categories. Amount $ 991,194,015 114,212 (443,819) (662,378) 990,202,030 1,077,240 $ 991,279,270 (Continued) COMPAL ELECTRONICS, INC. Statement of operating costs For the year ended December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Item Raw materials Raw materials, beginning of the year Add: Purchases Less: Raw materials, end of the year Transferred to operating expense Cost of material sold Scraps Others Raw materials used Direct labor Manufacturing expenses Total Manufacturing costs Add: Work-in-process, beginning of the year Less: Work-in-process, end of the year Scraps Cost of finished goods Add: Finished goods, beginning of the year Purchases Others Less: Finished goods, end of the year Scraps Transferred to operating expense Costs of sales of finished goods and processing costs Maintenance costs Cost of material sold Allowance for obsolescence loss and inventory valuation Scrap loss of inventory Cost of sales 84 Amount $ 37,621,576 627,925,144 (44,603,184) (16,821) (2,785,177) (334,566) (3,443) 617,803,529 624,957 1,434,510 619,862,996 153,034 (685,002) (4,662) 619,326,366 13,492,637 340,101,288 863,305 (11,758,417) (3,350) (373,513) 961,648,316 3,243,437 2,785,177 35,077 342,578 $ 968,054,585 (Continued) 85 COMPAL ELECTRONICS, INC. Statement of operating expenses For the year ended December 31, 2020 (Expressed in thousands of New Taiwan Dollars) Item Payroll expenses Export expenses Royalty expenses Research expenses Shipping expenses Sample expenses Others (Note) Total $ Research and Selling Administrative development expenses expenses expenses 336,384 218,903 203,682 - 2,530,981 378,594 37,285 1,338,561 7,346,416 - - - 1,519 273 - - 1,185,001 272 593 922,502 2,637,352 $ 3,705,829 2,262,855 11,169,634 Note: The amount of each item in others does not exceed 5% of the account balance. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 86 Table 1 Loans to other parties: (December 31, 2020) Name of lender No. 0 The Name of borrower CVC Company Account name Other receivables Related party Y Highest balance of financing to other parties during the period 302,500 Ending balance - Actual usage amount during the period - Range of interest rates during the period 3.20% Purposes of fund financing for the borrower Short-term financing Transaction amount for business between two parties - 0 The UCGI Company Other receivables 0 The HengHao Other Company receivables 0 The CEB Company 1 CIH CEP 2 CPC CDE 2 CPC CIC Other receivables Other receivables Other receivables Other receivables 3 CIT 3 CIT CCI Nanjing Other receivables Rayonnant (Taicang) Other receivables 4 CPO HengHao Kunshan Other receivables 4 CPO CIT 5 CET BT Other receivables Other receivables 6 CIC HengHao Kunshan Other receivables 7 Panpal HengHao Other 8 Arcadyan Acradyan Brasil 8 Arcadyan Acradyan Brasil 8 Arcadyan Arcadyan UK receivables Other receivables Other receivables Other receivables Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 500,000 250,000 220,000 1.08%~1.20% Short-term financing 400,000 200,000 200,000 1.08%~1.20% Short-term financing 3,013,500 1,424,000 1,424,000 2.05%~3.50% Short-term financing 163,655 56,960 56,960 3.50% 2,610,900 1,313,100 1,313,100 2.20% 437,900 437,700 - 2.20% Short-term financing Short-term financing Short-term financing 4,154,500 1,993,600 1,606,272 2.00%~2.76% Short-term financing 65,685 65,655 65,655 4.35% Short-term financing 1,642,410 966,800 966,800 2.00%~4.35% Short-term financing 656,850 656,550 - 2.20% 262,740 262,620 65,655 2.20% 582,000 569,600 569,600 2.00% Short-term financing Short-term financing Short-term financing 1,200,000 600,000 600,000 1.08%~1.2% Short-term financing 56,960 - - 1.00% 56,960 56,960 37,024 1.00% 199,360 - - - - - - - - - - - - - - - - 8 Arcadyan Arcadyan UK Other receivables Y 284,800 284,800 8 Arcadyan Arcadyan Vietnam Other receivables Y 256,320 - 8 Arcadyan Arcadyan Vietnam Other receivables Y 256,320 256,320 - - - - 1.00% 1.00% 1.00% 1.00% 8 Arcadyan Arcadyan Russia Other receivables 9 Zhi-bao Acradyan Brasil 10 Arcadyan CNC Holding 10 Arcadyan CNC Holding 11 SVA CNC Other receivables Other receivables Other receivables Other receivables Y Y Y Y Y 56,960 56,960 6,925 1.00% 31,328 484,160 - - - - 1.00% 1.00% 484,160 484,160 484,160 1.00% 153,020 153,020 139,904 3.85% Short-term financing Short-term financing Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Short-term financing Short-term financing Short-term financing Short-term financing 4,272,000 - 4,475,717 - 569,600 - 5,530,446 - 170,787 - - - - - Operating financing Operating financing Operating financing Operating financing Reasons for short- term financing Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating financing Operating financing (In Thousands of New Taiwan Dollars) Collateral Allowance for bad debt - Item - Value - Individual funding loan limits 21,366,501 Maximum limit of fund financing 42,733,002 Note (Note 1) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 21,366,501 42,733,002 (Note 1) 21,366,501 42,733,002 (Note 1) 21,366,501 42,733,002 (Note 1) 35,228,322 35,228,322 (Note 2) 1,987,846 1,987,846 (Note 3) 1,987,846 1,987,846 (Note 3) 20,913,770 20,913,770 (Note 4) 20,913,770 20,913,770 (Note 4) 2,810,936 2,810,936 (Note 5) 2,810,936 2,810,936 (Note 5) 4,761,295 4,761,295 (Note 6) 8,030,522 8,030,522 (Note 7) 2,222,153 2,222,153 (Note 8) 2,321,872 4,643,744 (Note 9) 2,321,872 4,643,744 (Note 9) 2,321,872 4,643,744 (Note 9) - - 2,321,872 4,643,744 (Note 9) - - 455,680 4,643,744 (Note 9) - - 2,321,872 4,643,744 (Note 9) - - 136,629 4,643,744 (Note 9) - - - - - - - - 42,399 169,598 (Note 10) 2,287,344 2,287,344 (Note 11) 2,287,344 2,287,344 (Note 11) 164,728 164,728 (Note 12) Note 1: According to the Company’ s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of the Company. When a short-term financing facility with the Company is necessary, the total amount for lending to any company shall not exceed 80% of the borrower’s net worth, nor shall it be more than 50% of the Company’s lendable amount limit, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company is unrestricted by the aforesaid restriction of 80%, but the maximum amount shall not exceed 50% of the Company’s lendable limit, and shall be combined with the company’s amount of loans to others when calculating. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 87 Table 1 Loans to other parties: (December 31, 2020) Note 2: Note 3: Note 4: Note 5: Note 6: Note 7: Note 8: Note 9: According to CIH’s Procedures for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of CIH. When a short-term financing facility with CIH is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIH’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIH, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CPC’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPC. When a short-term financing facility with CPC is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower ’s net worth, nor shall it exceed 50% of CPC’ s total amount of capital lent, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPC, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CIT ’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CIT. When a short-term financing facility with CIT is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower ’s net worth, nor shall it exceed 50% of CIT ’ s total amount of capital lent, and shall be co mbined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIT, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CPO’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPO. When a short-term financing facility with CPO is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPO’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPO, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CET’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CET. When a short-term financing facility with CET is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CET’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CET, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CIC ’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CIC. When a short-term financing facility with CIC is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIC’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIC, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to Panpal’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Panpal. When a short-term financing facility with Panpal is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of Panpal’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company, or the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions of 80%, but the maximum amount shall not exceed Panpal’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to Arcadyan’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Arcadyan. To borrowers having business relationship with Arcadyan, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of Arcadyan. Also, the amount shall be combined with the Arcadyan’ s endorsements/guarantees for the borrower when calculating. When a short-term financing facility is necessary, the borrower should be Arcadyan’ s investee. The total amount for lending the borrower shall not exceed 80% of the net worth of the borrower, nor shall it exceed 20% of the net worth of Arcadyan, and shall be combined with the Arcadyan’s endorsements/guarantees for the borrower when calculating. Note 10: The total amount of loans to others shall not exceed 40% of the net worth of Zhi-bao. To borrowers having business relationship with Zhi-bao, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of Zhi-bao. When a short-term financing facility is necessary, the borrower should be the investee of parent company, and the total amount for lending the borrower shall not exceed 10% of the net worth of the borrower. Note 11: According to Arcadyan Holding’s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed the net worth of Arcadyan Holding. When a short-term financing facility is necessary, the borrower should be Arcadyan Holding’s investee. The total amount for lending the borrower shall not exceed the net worth of Arcadyan Holding, and shall be combined with the Arcadyan Holding’s endorsements/ guarantees for the borrower when calculating. Note 12: Accroding to SVA's Procedure for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of SVA. To borrowers having business relationship with SVA, the total amount for lending the borrower shall not exceed 80% of the transation amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of SVA. Also, the amount shall bbe combined with the SVA's endorsements/gurarantees for the borrower when calculating. When a short-term financing facility is necessary, the borrower should be the investee of the parent company. The total amount for lending the borrower shall not exceed 20%of the net worth of SVA, and shall be combined with SVA's endorsenents/guarantees for the borrower when calculating . In addition, when lending to the parent company or its 100% directly and indirectly owned subsidiaries, the total amount or individual amount shall not exceed the net worth of the latest financial statements of SVA. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 88 Table 2 Guarantees and endorsements for other parties: (December 31, 2020) Counter-party of guarantee and endorsement Name of guarantor No. 0 The Company CEB Name Relationship with the Company (Note 3) Limitation on amount of guarantees and endorsements for a specific enterprise 26,708,126 Highest balance for guarantees and endorsements during the period Balance of guarantees and endorsements as of reporting date Property pledged for guarantees and endorsements (Amount) Actual usage amount during the period Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements Maximum amount for guarantees and endorsements (Note 1) 60,500 56,960 56,960 0.05% 53,416,252 (In Thousands of New Taiwan Dollars) Parent company endorsements /guarantees to third parties on behalf of subsidiary Y Subsidiary endorsements /guarantees to third parties on behalf of parent company - Endorsements / guarantees to third parties on behalf of companies in Mainland China - 0 The Company CEP (Note 2) 26,708,126 190,295 157,837 157,837 0.15% 53,416,252 Y - - - - Note 1: According to the Company’ s Procedures for Endorsement and Guarantee, the total amount of endorsements/ guarantees th e Company or the Group is permitted to make shall not exceed 50% of the Company’s net worth. Endorsements/ guarantees the Company and the Group are permitted to make for a single company shall not exceed 25% of the Company’s net worth. For entities having business relationship with the Company, the amount of endorsements/ guarantees for a single company shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount of the curren t year, and shall be combined with the amount lend to others when calculating. The amount of endorsements/ guarantees permitted to make between subsidiaries whose over 90% of its voting shares ar e owned, directly or indirectly, by the Company shall be no more than 10% of the net worth of the Company. The amount of endors ements/ guarantees permitted to make between directly or indirectly wholly owned subsidiaries is not limited by the aforementioned restriction, only the maximum amount shall be no more than 25% of the net worth of the Company. Note 2: Subsidiary whose over 50% common stock is directly owned. Note 3: Subsidiary whose over 50% common stock is indirectly owned. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 89 Table 3 Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2020) Name of holder Category and name of security The Company Taiwan Star Relationship with security issuer ‑ Account name Financial assets at fair value through other comprehensive income-non-current (In Thousands of shares/ units) Ending balance Shares/Units (thousands) 98,046 Carrying value 686,325 Holding percentage (%) 3% Fair value 686,325 Note Kinpo Electronics, Inc. (“Kinpo”) The same chairman Financial assets at fair value through other comprehensive of the Company income-non-current Cal-Comp Electronics (Thailand) Public The same chairman Financial assets at fair value through other comprehensive Co., Ltd. income-non-current of the Company 124,044 1,507,132 9% 1,507,132 239,631 491,243 5% 491,243 HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Chen Feng Optoelectronics PrimeSensor Technology Inc. IIH Biomedical Venture Fund Phoenix Innovation Investment Corporation. Others Total ‑ ‑ ‑ ‑ ‑ ‑ ‑ Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss and other comprehensive income Panpal Compal Electronics, Inc. Kinpo The parent company Financial assets at fair value through other comprehensive income-non-current The same chairman Financial assets at fair value through other comprehensive of the Company income-non-current CDIB Partners Investment Holding Corp. ‑ AcBel The same chairman of the Company Taiwan Biotech Co., Ltd. ‑ Others Total Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current 290 26,701 10% 26,701 632 20,804 11% 20,804 4,000 60,680 3% 60,680 6,685 35,764 10% 35,764 663 6,920 3% 6,920 2,500 23,450 8% 23,450 6,000 76,740 19% 76,740 104,131 3,039,890 31,648 655,115 1% 655,115 23,172 281,546 2% 281,546 54,000 827,820 5% 827,820 5,677 164,340 1% 164,340 5,769 115,378 3% 115,378 197,139 2,241,338 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 90 Table 3 Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2020) Name of holder Category and name of security Relationship with security issuer Account name Gempal Compal Electronics, Inc. The parent company Financial assets at fair value Lian Hong Art. Co., Ltd. Others Total Hong Ji SUYIN Optronics Co., Ltd. (“SUYIN Optronics”) Hong Jin SUYIN Optronics Arcadyan GeoThings Inc. AirHop Communication Inc. Adant Technologies Inc. IOT EYE, Inc. TIEF FUND L.P. Chimei Motor Electronics Co., LTD Golden Smarthome Technology Corp. Total Mactech Taichung International Golf Country Club HHB HWALLAR OPTRONICS (Fuzhou) CO., LTD. Mithera Beyond Limits, Inc. BT CIT Suzhou Genki Fuhong Health Management Co., Ltd. Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-current ‑ - ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ - - ‑ - - (In Thousands of shares/ units) Ending balance Shares/Units (thousands) 18,369 Carrying value 380,246 Holding percentage (%) - Fair value 380,246 Note 2,140 175,783 6% 175,783 2,313 558,342 380 - 1% 332 - 1% 200 1,152 349 60 - - - - 7% 5% 5% 14% - - - - - - - 42,840 7% 42,840 1,650 31,135 7% 31,135 1,229 - 8% - 73,975 7,920 - 7,920 - 19% - (Note 1) 873 128,160 - 128,160 4,356 17% 4,356 1,470,031 - 1,470,031 - - - - (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 91 Table 3 Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2020) Name of holder CIC CET CNC CNC Category and name of security Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit Structured deposits–SPD Bank Yield Plus Structured Deposit Relationship with security issuer ‑ Account name Financial assets at fair value through profit or loss-current (In Thousands of shares/ units) Ending balance Shares/Units (thousands) - Carrying value 261,366 Holding percentage (%) - Fair value 261,366 Note ‑ ‑ ‑ Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current - - - 241,113 130,875 130,799 - - - 241,113 130,875 130,799 Note 1:The carrying value is the remaining amount after deducting accumulated impairment. (Continued) COMPAL ELECTRONICS, INC. Notes to Patent-Company-Only Financial Statements 92 Table 4 Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: (For the year ended December 31, 2020) Name of company Category and name of security Account name Name of counter-party Relationship with the company CPC CIT CIT CIT CEC CPO CPO CIC CIC CET CET CET CET Structured deposits– SPD Bank Yield Plus Structured Deposit Financial assets at fair value through profit or loss-current Shanghai Pudong Development Bank Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits– SPD Bank Yield Plus Structured Deposit Agricultural Bank of China Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Shanghai Pudong Development Bank Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current China CITIC Bank Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current China CITIC Bank Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Financial assets at fair value through profit or loss-current Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Structured deposits- The RMB "Open on schedule" Financial Product Financial assets at fair value through profit or loss-current Agricultural Bank of China China CITIC Bank Bank of Communications Agricultural Bank of China Agricultural Bank of China Bank of China Structured deposits- SPD Bank Yield Plus Structured Deposit Financial assets at fair value through profit or loss-current Shanghai Pudong Development Bank Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current China CITIC Bank - - - - - - - - - - - - - Note 1:Others were valuation gains and losses and foreign exchange gains and losses. Note 2:Including gains and losses on disposal and foreign exchange gains and losses. Beginning Balance Purchases Sales Others Ending Balance Shares/ Units (thousands) - Amount 394,013 Shares/ Units (thousands) - Amount 385,196 Shares/ Units (thousands) - Price 784,688 Cost 779,209 Gain (loss) on disposal 5,479 (Note 2) Shares/ Units (thousands) - Amount - (Note 1) Shares/ Units (thousands) - Amount - (In Thousands of New Taiwan Dollars) - - - - - - - - - - - - - - - - - - - - - - 437,840 - - - - - - - - - - - - - 3,152,190 855,992 641,994 1,044,310 941,591 342,397 427,996 - - - - - - - 1,743,032 1,711,984 863,317 855,992 646,956 641,994 1,061,102 1,044,310 958,576 941,591 346,182 342,397 436,110 427,996 804,633 - 554,026 547,835 449,395 855,992 427,996 1,198,388 - - - - 217,649.00 213,998 867,292 855,992 871,923 865,836 1,211,355 1,198,388 31,048 (Note 2) 7,325 (Note 2) 4,962 (Note 2) 16,792 (Note 2) 16,985 (Note 2) 3,785 (Note 2) 8,114 (Note 2) 6,191 (Note 2) 3,651 (Note 2) 11,300 (Note 2) 6,087 (Note 2) 12,967 (Note 2) - - - - - - - - - - - - 29,825 (Note 1) - (Note 1) - (Note 1) - (Note 1) - (Note 1) - (Note 1) - (Note 1) 4,568 (Note 1) 5,716 (Note 1) - (Note 1) - (Note 1) - (Note 1) - - - - - - - - - - - - 1,470,031 - - - - - - 261,366 241,113 - - - (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 93 Table 5 Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2020) Name of company Name of property CVC Plant Transaction date September, 2020 Arcadyan Vietnam July 28, 2020 (Note 1) Plant and mechanical and electrical equipment Transaction amount The maximum limit of the overall project is 100 million US dollars. Estimated 794,885 (Note 2) Status of payment Depending on progress in construction Depending on progress in construction If the counter-party is a related party, disclose the previous transfer information Relationship with the Company Non-related party Relationship with the Company Not applicable Owner Not applicable Date of transfer Not applicable Amount Not applicable (In Thousands of New Taiwan Dollars) References for determining price Purpose of acquisition and current condition Price negotiation Operating purpose Others None Counter- party L&K Engineering Vietnam, LLC., and Vietnam Jiuh Jiang Long, LLC. Giza E&C etc. Non-related party Not applicable Not applicable Not applicable Not applicable Manufacturing purpose None Price comparison and price negotiation Note 1: On July 28, 2020, the Board of Directors of Arcadyan Vietnam made a resolution to build plant by lease. The total contract am ount is estimated to be 794,885 thousand (VND 691,204,153 thousand). Note 2: As of December 31, 2020, contracts of hydrant, information equipment and renovation have not been signed and completed. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 94 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2020) Transaction details Percentage of total purchases/ (sales) Amount (362,834) - Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Payment terms 120 days Unit price Similar to non- related parties Payment Terms There is no significant difference Percentage of total notes/accounts receivable (payable) Note Ending Balance 272,826 0.1% (613,725) (0.1)% 90 days (476,501) - - 120 days 120 days Purchase 217,864 Similar to non- related parties Similar to non- related parties There is no significant difference There is no significant difference. 293,229 307,456 0.1% 0.1% Purchase/ (Sale) Sale Sale Sale Company Name The Company Counter party UCGI CBN Cal-Comp CEP Nature of relationship Subsidiaries wholly owned by the Company The Company's subsidiaries With the same chairman Subsidiaries wholly owned by the Company CIH and its subsidiaries Subsidiaries wholly owned by the Company Just and its subsidiaries Subsidiaries wholly owned by the Company HSI and its subsidiaries Subsidiaries wholly owned by the Company BCI and its subsidiaries Subsidiaries wholly owned by the Company Etrade and its subsidiaries Subsidiaries wholly owned by the Company Purchase 131,063,501 13.5% 120 days Purchase 150,400,041 15.5% 120 days Purchase 27,468,420 2.8% 120 days Purchase 28,091,599 2.9% 120 days Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Markup based on BCI and its subsidiaries' cost Purchase 28,106,438 2.9% Net 60 days from purchase Markup based on Etrade and its subsidiaries' cost Henghao Palcom Subsidiaries wholly owned by the Subsidiaries wholly owned by the Company Purchase 120,250 Sale (101,649) - 120 days Similar to non- related parties - Net 60 days from delivery Similar to non- related parties Just and its subsidiaries Compal Electronic, Inc. Parent company Sale (150,302,684) (99.0)% 120 days CIH and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Sale (1,433,990) (0.9)% 120 days Purchase 1,363,778 (0.9)% 120 days Purchase 133,166 (0.1)% 120 days CIH and its subsidiaries Compal Electronic, Inc. Parent company Sale (131,048,882) (98.1)% 120 days CEB With the same ultimate parent company Sale (151,865) - 120 days Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties - - (51,675,245) (27.4)% (6,550,748) (3.5)% (13,129,981) (7.0)% (10,533,140) (5.6)% (3,767,885) (2.0)% (5,448) 11,627 - - 6,550,748 97.4% 1,136,914 2.5% (1,288,223) (2.0)% (101,939) (0.2)% 51,675,245 95.3% 69,475 0.1% There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference. There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 95 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2020) Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name CIH and its subsidiaries Counter party Nature of relationship Just and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries Just and its subsidiaries HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Percentage of total purchases/ (sales) Amount (1,377,997) (0.3)% Purchase/ (Sale) Sale Payment terms 120 days Sale (2,473,443) (0.6)% 120 days Purchase 589,141 0.1% 120 days Purchase 1,436,851 0.3% 120 days Sale (3,061,483) (0.7)% 120 days Unit price Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Parent company Purchase 610,939 32.0% Net 90 days from delivery - Parent company Sale (28,308,716) (97.8)% 120 days Sale (427,368) (0.4)% 120 days Purchase 2,472,797 2.1% 120 days Sale (764,533) (0.6)% 120 days Sale (986,502) 0.8% 120 days Markup based on BCI and its subsidiaries' cost According to markup pricing According to markup pricing According to markup pricing According to markup pricing CBN BCI and its subsidiaries Compal Electronic, Inc. Compal Electronic, Inc. CIH and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries CEB BCI and its subsidiaries CIH and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company CEB Etrade and its subsidiaries Compal Electronic, Inc. Parent company Sale (28,152,136) (99.6)% Net 60 days from delivery According to markup pricing HSI and its subsidiaries With the same ultimate parent company Purchase 489,035 2.2% Net 60 days from purchase Similar to non- related parties UCGI Palcom Compal Electronic, Inc. Compal Electronic, Inc. Henghao Compal Electronic, Inc. Parent company Purchase 370,916 86.6% 120 days Similar to non- related parties Parent company Purchase 101,823 94.2% Net 60 days from purchase Similar to non- related parties Parent company Sale (119,412) 1.1% 120 days CEP Compal Electronic, Inc. Parent company Sale (234,154) (99.3)% 120 days HSI and its subsidiaries Compal Electronic, Inc. Parent company Sale (27,689,174) (97.7)% 120 days CIH and its subsidiaries With the same ultimate parent company Purchase 3,064,654 10.5% 120 days Percentage of total notes/accounts receivable (payable) Note Ending Balance 1,288,223 1.0% 1,548,460 1.2% (5,576) - (1,136,914) (0.9)% 2,539,028 2.0% (293,229) (40.0)% 10,533,140 87.7% 5,576 - (1,548,460) (5.0)% 2,360,423 7.3% 1,380,707 (4.3)% Payment Terms Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties 3,767,885 98.6% (287,543) (5.3)% (272,826) (99.9)% (11,627) (96.7)% 5,448 0.2% - - 13,129,981 97.2% (2,539,028) (11.8)% Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference There is no significant difference There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary (Continued) Purchase 975,309 10.5% 120 days Similar to non- related parties There is no significant difference (1,380,707) (43.5)% Purchase 152,379 1.6% 120 days Similar to non- related parties There is no significant difference (69,475) (4.7)% COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 96 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2020) Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name HSI and its subsidiaries Counter party Nature of relationship BCI and its subsidiaries With the same ultimate parent company Purchase/ (Sale) Purchase Transaction details Percentage of total purchases/ (sales) Amount 759,770 2.6% Payment terms 120 days Unit price Similar to non- related parties Just and its subsidiaries With the same ultimate parent company Etrade and its subsidiaries With the same ultimate parent company Sale (138,402) 0.5% 120 days Sale (505,022) (1.8)% 120 days Similar to non- related parties Similar to non- related parties Payment Terms There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Arcadyan CNC Acradyan Vietnam Acradyan Germany Acradyan USA Acradyan AU Acradyan Germany Acradyan USA Acradyan AU CNC Acradyan Vietnam Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan's subsidiary Sale (867,017) (3.0)% Net 150 days from delivery Arcadyan's subsidiary Sale (5,413,289) (18.0)% Net 120 days from delivery Arcadyan's subsidiary Sale (1,394,596) (5.0)% Net 60 days from the end of the month - - - Arcadyan's subsidiary Purchase 11,026,936 27.0% Net 120 days from delivery According to markup Arcadyan's subsidiary Purchase 1,065,328 3.0% Net 180 days from the end of the month pricing According to markup pricing With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Sale (11,026,936) (100.0)% Net 120 days from delivery According to markup Sale (1,065,328) (100.0)% Net 180 days from the end of the month Purchase 867,017 100.0% Net 150 days from delivery Purchase 5,413,289 100.0% Net 120 days from delivery Purchase 1,394,596 100.0% Net 60 days from the end of the month of delivery pricing According to markup pricing - - - - - - - - - - - - - Note 1: The remaining balance is the net value of commissioned processing and sales of raw material. Note 2: The amount of other receivables on December 31, 2020 is 303,959 thousand dollars. Percentage of total notes/accounts receivable (payable) Note Ending Balance (2,360,423) (11.0)% 101,939 (0.8)% 287,543 2.0% 242,935 1,039,758 22,357 4.0% 17.0% - (3,407,485) (40.0)% (Note 1) (Note 2) - (Note 1) 3,407,485 94.0% (Note 1) (Note 2) - (Note 1) (242,935) (100.0)% (1,039,758) (100.0)% (22,357) (100.0)% (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 97 Table 7 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (December 31, 2020) Nature of relationship Ending Balance Turnover rate Name of Company The Company Counter-party CBN The Company UCGI The Company Cal-comp Just and its subsidiaries Just and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries Compal Electronic, Inc. CIH and its subsidiaries Compal Electronic, Inc. Just and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries Etrade and its subsidiaries HSI and its subsidiaries HSI and its subsidiaries Compal Electronic, Inc. HSI and its subsidiaries CEB Compal Electronic, Inc. Compal Electronic, Inc. Etrade and its subsidiaries HSI and its subsidiaries Just and its subsidiaries The Company's subsidiary The Company's subsidiary With the same chairman Parent company With the same ultimate parent company Parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent company With the same ultimate parent company Arcadyan Arcadyan Arcadyan Arcadyan Germany Arcadyan's subsidiary Arcadyan USA Arcadyan's subsidiary Arcadyan Vietnam Arcadyan's subsidiary CNC Arcadyan With the same ultimate parent company Note 1:Balance as of March 16, 2021. Note 2:Balance as of February 26, 2021. Note 3:Other receivables due to purchasing on behalf of related parties. Note 4:Accounts receivables due to processing raw material. 293,229 272,826 307,456 6,550,748 1,136,914 51,675,245 1,288,223 1.97 2.28 3.10 7.39 2.52 2.44 2.14 1,548,460 3.14 2,539,028 2.35 10,533,140 2,360,423 3.03 0.38 1,380,707 0.92 3,767,885 13,129,981 287,543 5.73 1.76 3.51 101,939 2.72 242,935 1,039,758 303,959 (Note 3) 3,407,485 (Note 4) 2.73 2.91 (Note 3) 3.38 Overdue Amount - Action taken - (In Thousands of New Taiwan Dollars) Amounts received in subsequent period 176,313 (Note 1) Allowance for bad debts - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (Note 1) - (Note 1) (Note 1) (Note 1) - - 51,675,245 (Note 1) - (Note 1) - - (Note 1) (Note 1) 10,533,140 (Note 1) - (Note 1) 200,985 (Note 1) - (Note 1) 3,391,483 (Note 1) 100,280 (Note 1) 95,173 (Note 1) 216,165 1,019,515 7,278 (Note 2) (Note 2) (Note 2) 3,223,397 (Note 2) - - - - - - - - - - - - - - - (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 98 Table 8 The information on investees for the year ended December 31, 2020 (excluding information on 口investees in Mainland China): (December 31, 2020) (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company The Company Bizcom Main Businesses and Products Milpitas, USA Warranty services and Location December 31, 2020 December 31, 2019 36,369 36,369 Shares 100 Percentage of Ownership 100% Carrying Value 431,834 Net income (losses) of investee 8,266 Share of profits/losses of investee 8,266 Note Original Investment Amount Ending Balance Just CIH Panpal Gempal marketing of LCD TVs and notebook PCs British Virgin Islands Investment British Virgin Islands Investment 1,480,509 1,480,509 48,010 100% 7,734,191 3,843 3,843 1,787,680 1,787,680 53,001 100% 35,241,171 2,502,193 2,502,193 Taipei City Investment 5,171,837 5,171,837 500,000 100% 4,911,705 9,328 (28,650) Taipei City Investment 900,036 900,036 90,000 100% 1,729,287 137,732 115,689 (Note 1) Kinpo Group management Taipei City Consultation, training services, etc. Ripal Tainan City Manufacturing of electric appliance and audiovisual electric products 3,000 3,000 300 38% 4,659 83 31 (Note 1) 60,000 60,000 6,000 100% 83,481 12,248 6,849 Unicore Taipei City Management&Consultant, 200,000 200,000 20,000 100% 125,283 (20,298) (20,381) Lead-Honor CEH Shennona Taiwan rental and leasing business and wholesale and retail of medical equipments Taoyuan City Manufacturing of electric appliance and audiovisual electric products Investment British Virgin Islands Taipei City Management&Consultant, rental and leasing business, wholesale and retail sale of precision instruments and International Trade 42,000 42,000 2,772 42% - 34 34 1 100% 3,356,563 - - - - 6,000 6,000 600 100% 2,773 (1,340) (1,519) Allied Circuit Taoyuan City Production and sales of PCB 395,388 395,388 10,158 20% 390,455 531,744 108,556 Maxima Aco Smartcare Lipo CPE ATK Taipei City boards Investment Hsinchu City Wholesale and retail sale of computer software, software design services, data processing services, wholesale and retail sale of electronic materials, wholesale and retail sale of precision instruments, and biotechnology services Investment Cayman Islands The Netherlands 1,260 1,260 126 23% 5,699 8,206 701 90,000 90,000 100,000 52% 73,564 (23,856) (12,414) 489,450 489,450 98 49% 575,047 119,774 58,689 Investment 197,463 197,463 6,427 100% 788,259 6,256 6,256 Hsinchu City Design, research & - - - - - 56 15 development, and selling of DVD, Combo, CD-RW Drives Crownpo Taipei City Manufacturing, processing, 149,547 149,547 3,739 33% 58,126 5,947 1,976 and selling resistor chips, networking chips, diodes, multilayer ceramic capacitors, semiconductor devices, and selling electronic products Investment Taipei City Investment Taipei City Taichung City Manufacturing of equipment 1,000,000 295,000 219,601 1,000,000 295,000 219,601 100,000 29,500 21,756 100% 100% 53% 1,141,439 351,308 235,534 110,567 38,077 17,515 110,567 38,084 9,735 and lighting, retailing of equipment and international trading R&D of notebook PC related products and components Austin, TX USA Hsinchu City R&D, manufacturing and sales of wireless network, integrated household electronics, and mobile office products 101,747 101,747 3,000 100% 124,827 4,635 4,635 1,325,132 1,325,132 41,305 20% 2,386,293 1,713,942 339,600 British Virgin Islands Delaware, USA British Virgin Islands Poland Investment 2,754,741 2,754,741 89,755 100% 4,796,528 112,909 112,909 Medical care IOT business 32,665 32,665 2,600 100% 1,222 (84) (84) Investment 1,346,814 1,346,814 42,700 54% 357,637 (190,132) (162,171) Maintenance and warranty services of notebook PCs 90,156 90,156 136 100% 18,666 842 2,244 Hong Ji Hong Jin Mactech Auscom Arcadyan FGH Shennona HSI CEP (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 99 Table 8 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Location Main Businesses and Products December 31, 2020 December 31, 2019 The Company Hippo Screen Taipei City Management&Consultant, 42,000 42,000 Percentage of Ownership 70% Shares 2,100 Carrying Value Net income (losses) of investee Share of profits/losses of investee Note 16,949 (26,086) (17,920) Original Investment Amount Ending Balance Infinno Hsinchu County Rental and Leasing Business, wholesale and retail sale of precision instruments and International Trade Manufacturing of electronic components, wholesale and retail sale of precision instruments and electronic materials 109,837 109,837 5,650 27% 13,017 (15,372) (4,182) HengHao Taipei City Manufacturing of PCs, 5,529,757 5,529,757 20,015 100% (269,253) 10,001 8,553 computer periphery devices, and electronic components BCI CBN British Virgin Islands Hsinchu County Investment 2,636,051 2,636,051 90,820 100% 6,462,523 613,030 613,030 R&D and sales of cable modem, digital setup box, and other communication products 284,827 284,827 29,060 43% 713,557 46,723 20,297 Rayonnant Taipei City Manufacturing and sales of 295,000 295,000 29,500 100% 125,319 66,935 69,187 PCs, computer periphery devices, and electronic components CRH Acendant Private Equity Investment Ltd. (“APE”) Etrade Webtek Forever UCGI Palcom Avalue CORE GLB CGSP ARCE Investment Investment Investment British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Taipei City Manufacturing and retail sale Investment Investment of computers and electronic components Selling of mobile phones Manufacturing, processing, and import and export business of industrial motherboards Taipei City New Taipei City British Virgin Islands New Taipei City Poland Taipei City Manufacturing and wholesale of medical equipment Maintenance and warranty services of notebook PCs Biotechnology services, research & development services, intellectual property rights, wholesale of animal medication, retail sale and management advisory. Cancerous immunocyte therapy and regenerative medicine Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing Raypal Taipei City Panpal Arcadyan Hsinchu City 377,328 377,328 12,500 100% 191,019 68,396 68,396 943,922 943,922 31,253 35% 994,883 142,340 49,423 1,532,029 1,532,029 46,900 65% (719,895) 155,770 (162,840) 3,340 1,575 3,340 1,575 100 50 100% 572,869 55,882 55,882 100% 1,329,114 (53,455) (53,455) 199,999 100,000 10,000 100% (381,227) (22,052) (21,929) 100,000 547,595 100,000 559,189 10,000 14,924 100% 21% 112,424 625,188 6,801 215,886 6,801 47,355 246,860 246,860 15,000 50% 318,019 24,262 12,032 37 60,000 - - - 100% - (37) 20,000 33% 59,852 (27,062) (37) (148) 155,076 - 3,446 30% 151,051 (38,071) (4,025) 82,597,631 3,966,905 279,202 279,202 8,192 4% 518,053 1,713,942 Investment 4,318,860 4,318,860 147,000 100% 7,356,671 74,866 74,866 Allied Circuit Taoyuan City Production and selling of PCB 148,263 148,263 2,927 6% 112,513 531,744 boards Gempal Others Arcadyan Hsinchu City Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing 306,655 306,655 9,279 4% 306,536 611,802 1,713,942 Investment gain(losses) recognized by Gempal (Continued) Investment gain(losses) recognized by Panpal Investment gain(losses) recognized by Panpal COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 100 Table 8 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Location Main Businesses and Products December 31, 2020 December 31, 2019 Gempal Allied Circuit Taoyuan City Production and selling of PCB 53,645 53,645 boards Percentage of Ownership 6% Carrying Value 123,764 Net income (losses) of investee 531,744 Shares 3,220 Original Investment Amount Ending Balance Hong Ji Others Arcadyan Hsinchu City Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing 306,655 306,655 9,279 4% 2,311 611,802 1,713,942 Allied Circuit Taoyuan City Production and selling of PCB 10,389 12,274 851 2% 27,838 531,744 Hong Jin Arcadyan boards Hsinchu City Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing 131,942 131,942 4,609 2% 288,893 1,713,942 Note Share of profits/losses of investee Investment gain(losses) recognized by Gempal Investment gain(losses) recognized by Hong Ji Investment gain(losses) recognized by Hong Ji Investment gain(losses) recognized by Hong Jin Just CDH (HK) Hong Kong Investment 1,774,233 1,774,233 62,298 100% 5,434,537 CII CPI CII Smart AEI MEL MTL British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 263,298 263,298 9,245 100% 239,796 14,240 14,240 500 100% 852,569 9,450 Investment gain(losses) recognized by Just 28 28 1 100% 363 U.S.A Sales and maintenance of LCD TVs 28,480 28,480 1,000 100% 45,117 U.S.A Investment 234,504 234,504 U.S.A Investment 28 28 - - 100% 194,325 207 100% 29 - CIH CIH ( HK) Hong Kong Investment 2,130,375 2,130,375 74,803 100% 33,766,486 2,734,885 Jenpal PFG FWT CCM HSI IUE British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 209,328 209,328 7,350 100% 101,170 1,288 28 28 1 100% 434,865 22,376 424,352 424,352 14,900 100% 424,829 51 145,248 145,248 5,100 51% 26,071 870 1,908,160 1,908,160 67,000 100% 1,111,077 (213,296) Investment gain(losses) recognized by HSI (Continued) (19,931) Investment gain(losses) recognized by Just (314) Investment gain(losses) recognized by Just (3) Investment gain(losses) recognized by CII (519) Investment gain(losses) recognized by CII Investment gain(losses) recognized by CII Investment gain(losses) recognized by CII Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 101 Table 8 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) (In Thousands of New Taiwan Dollars/ shares) Investor Company HSI Goal Investee Company Location British Virgin Islands IUE CVC Vietnam Goal CDM Vietnam Original Investment Amount Ending Balance Main Businesses and Products Investment December 31, 2020 361,696 December 31, 2019 361,696 Shares 12,700 Percentage of Ownership 100% Carrying Value 300,321 R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components Construction of and investment in infrastructure in Ba-Thien industrial district of Vietnam 1,908,160 1,908,160 67,000 100% 1,111,077 361,696 361,696 12,700 100% 301,850 Net income (losses) of investee Share of profits/losses of investee Note (55,369) Investment gain(losses) recognized by HSI (213,296) Investment gain(losses) recognized by IUE (55,369) Investment gain(losses) recognized by Goal BCI CMI British Virgin Islands Investment 2,301,754 2,301,754 80,820 100% 4,045,228 396,577 PRI British Virgin Islands Investment 284,800 284,800 10,000 100% 2,417,295 216,453 CORE BSH British Virgin Islands Investment 4,186,560 4,186,560 147,000 100% 7,356,672 74,866 Investment gain(losses) recognized by BCI Investment gain(losses) recognized by BCI Investment gain(losses) recognized by CORE BSH Mithera Cayman Islands Investment 142,400 142,400 - 99% 136,264 HSI British Virgin Islands Investment 1,053,760 1,053,760 37,000 46% 1,053,760 (3,109) Investment gain(losses) recognized by BSH (190,132) Investment gain(losses) recognized by BSH Forever GIA British Virgin Islands Selling of mobile phones - CWV Vietnam R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components 56,960 - - - - 100% - - Investment gain(losses) recognized by Forever 100% 3,203 (55,790) Investment gain(losses) recognized by Forever Webtek Etrade British Virgin Islands Investment 712,000 712,000 25,000 35% (124,856) 155,770 Investment gain(losses) recognized by Webtek Unicore Raycore Taipei City Animal medication retail and wholesale 25,500 25,500 1,275 51% 14,720 (8,218) Investment gain(losses) recognized by Unicore Arcadyan Arcadyan Holding British Virgin Islands Investment 2,359,732 2,064,032 69,780 100% 2,240,149 95,019 Arcadyan USA U.S.A Sales of wireless network products 23,055 23,055 1 100% 91,507 62,073 Arcadyan Germany Germany Technology support and sales of wireless network products 1,125 1,125 0.5 100% 76,874 5,667 Arcadyan Korea Korea Sales of wireless network products 2,879 2,879 20 100% 13,858 6,446 Zhi-bao Taipei City Investment 48,000 48,000 34,980 100% 423,997 9,632 Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan TTI Taipei City R&D and sales of household digital products 308,726 308,726 25,028 61% 503,434 AcBel Telecom Taipei City Investment 23,000 23,000 4,494 51% 32,700 (193,291) Investment gain(losses) recognized by Arcadyan (16,432) Investment gain(losses) recognized by Arcadyan (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 102 Table 8 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Arcadyan Arcadyan UK Location UK Main Businesses and Products Technical support of wireless network products Original Investment Amount Ending Balance December 31, 2020 December 31, 2019 1,988 1,988 Shares 50 Percentage of Ownership 100% Carrying Value 3,555 Net income (losses) of investee 446 Arcadyan AU Australia Sales of wireless network products 1,161 1,161 50 100% 46,106 9,619 CBN Hsinchu County Sales of communication and electronic components 11,925 11,925 533 1% 13,204 46,723 Share of profits/losses of investee Note Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Arcadyan RU Russia Sales of wireless network products 2,492 - - 100% 2,142 Arcadyan and Zhi-bao Arcadyan Brasil Brazil Sales of wireless network products 81,593 81,593 968 100% (16,192) Arcadyan Holding Sinoprime British Virgin Islands Investment 542,544 257,744 19,050 100% 453,544 (243) Investment gain(losses) recognized by Arcadyan (10,717) Investment gain(losses) recognized by Arcadyan (10,815) Investment gain(losses) recognized by Arcadyan Holding Arch Holding British Virgin Islands Investment 313,593 313,593 35 100% 886,668 62,526 Investment gain(losses) recognized by Arcadyan Holding TTI Quest Samoa Investment 34,176 34,176 1,200 100% 32,776 TTJC Japan Sales of household digital electronic products 9,626 4,130 0.7 100% 5,947 Quest Exquisite Samoa Investment 33,322 33,322 1,170 100% 19,908 AcBel Telecom Leading Images British Virgin Islands Investment - 1,424 Sinoprime Arcadyan Vietnam Vietnam Manufacturing of wireless network products 541,120 256,320 Leading Images Astoria GmbH Germany Sales of wireless network products - 874 - - - - - 100% 449,357 - - (59,064) Investment gain(losses) recognized by TTI (1,588) Investment gain(losses) recognized by TTI (59,068) Investment gain(losses) recognized by Quest (14,432) Investment gain(losses) recognized by AcBel Telecom (10,815) Investment gain(losses) recognized by Sinoprime (768) Investment gain(losses) recognized by Leading Images (Note 2) (Note 3) Zhi-bao CBN Rayonnant APH Hsinchu County Produces and sales of communication and electronic components British Virgin Islands Investment 36,272 36,272 13,140 20% 325,386 46,723 257,454 257,454 8,651 41% 126,616 105,538 Forming Co., Ltd. Taoyuan City R&D and manufacturing of 27,300 27,300 1,820 21% - - CRH APH APH PEL electronic materials British Virgin Islands Investment British Virgin Islands Investment 356,000 356,000 12,500 59% 191,019 105,538 89,740 89,740 3,151 100% 38,083 3,973 Rayonnant( HK) Hong Kong Investment 512,640 512,640 18,000 100% 271,991 101,565 Investment gain(losses) recognized by Zhi-bao Investment gain(losses) recognized by Rayonnant Investment gain(losses) recognized by Rayonnant Investment gain(losses) recognized by CRH Investment gain(losses) recognized by APH Investment gain(losses) recognized by APH (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 103 Table 8 The information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China): (December 31, 2020) (In Thousands of New Taiwan Dollars/ shares) Investor Company HHT HHA Investee Company Location British Virgin Islands Original Investment Amount Ending Balance Main Businesses and Products Investment December 31, 2020 1,429,235 December 31, 2019 1,429,235 Shares 46,882 Percentage of Ownership 100% Carrying Value (183,304) HHA HHB British Virgin Islands Investment 1,335,200 1,335,200 46,882 100% (183,245) Note Share of profits/losses of investee Net income (losses) of investee (163,529) Investment gain(losses) recognized by HHT (163,529) Investment gain(losses) recognized by HHA HHB HengHao Trading Co., Ltd. British Virgin Islands Investment - 285 - - - 5 Investment gain(losses) recognized by HHB CBN CBNB Belgium CBNN The Netherlands The import and export business of broad band network products and related components, as well as technical support and advisory services The import and export business of broad band network products and related components, as well as technical support and advisory services 6,842 6,842 20 100% 6,321 7,016 7,016 20 100% 6,848 (256) Investment gain(losses) recognized by CBN (135) Investment gain(losses) recognized by CBN FGH Wah Yuen Technology Holding Ltd. and its subsidiaries Mauritius Investment 2,556,236 2,556,236 95,862 37% 4,861,814 112,954 Investment gain(losses) recognized by FGH GLB Rapha New Taipei City Detectors and test strip 6,500 6,500 1,275 100% (36) Mactech Taiwan Intelligent Robotics Company, LTD. Taipei City City Manufacturing of equipment 43,200 43,200 2,160 20% 28,103 (334) Investment gain(losses) recognized by GLB (38,817) Investment gain(losses) recognized by Mactech Note 1: The carrying value had been deducted $559,812 and $321,435 of the Company’s stock held by Panpal and Gempal, respectively. Note 2: The liquidation procedures had been completed on December 7, 2020. Note 3: The liquidation procedures had been completed on October 14, 2020. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 104 Table 9 Information on investment in Mainland China: (December 31, 2020) (i) The names of investees in Mainland China, the main businesses and products, and other information: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of December 31, 2020 Investment flows Outflow Inflow Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 1,053,760 143,952 100% 143,952 Accumulated remittance of earnings in current period - Book value 1,995,724 Accumulated outflow of investment from Taiwan as of January 1, 2020 1,053,760 Total amount of paid-in capital 1,053,760 Method of investment (Note 1) 569,600 (Note 2) 569,600 341,760 (Note 2) 341,760 261,340 (Note 2) (Note 3) 68,715 (Note 2) (Note 3) 28,480 (Note 2) 28,480 8,711 (Note 2) (Note 3) - - - - - - - - - - - - - - 569,600 (3,408) 100% (3,408) 102,664 341,760 381,455 100% 381,455 4,768,823 - - 207,001 100% 207,001 13,366 (1,831) 51% (934) (43,177) 28,480 39,641 100% 39,641 (190,957) - 1,960 100% 1,960 (25,586) - - - - - - 911,360 (Note 1) 379,638 - - 379,638 92,284 43% 39,848 426,972 - 569,600 (Note 1) 41,866 - - 41,866 129,313 48% 61,553 460,351 - 341,760 (Note 2) 341,760 344,608 (Note 1) 344,608 683,520 (Note 2) 683,520 - - - - - - 341,760 916,689 100% 916,689 8,030,522 344,608 (25) 100% (25) 2,810,923 683,520 1,454,332 100% 1,454,328 20,913,770 - - - (Continued) Name of investee CPC CDT CET CSD Zheng Ying Electronics (Chongqing) Co., Ltd. BT CGS LIZ Electronics (Kunshan) Co., Ltd. LIZ Electronics (Nantong) Co., Ltd. CIC CPO CIT Main businesses and products Manufacturing and sales of monitors Manufacturing and sales of notebook PCs, mobile phones, and Digital products Manufacturing of notebook PCs Manufacturing of notebook PCs Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self -produced products Maintenance and warranty service of notebook PCs Production and processing chipresistors, ceramic capacitors, diodes, and other latest electronic components and related precision electronic equipment; selling self-produced products Research & development, and manufacturing chip components( chip resistors, ceramic chip diode； selling self- produced products and providing after-sales service. Performing wholesale and trading business of electronic components, semiconductors, special materials for electronic components, and spare parts Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technology service Manufacturing of notebook PCs Manufacturing and sales of LCD TVs Manufacturing of notebook PCs COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 105 Table 9 Information on investment in Mainland China: (December 31, 2020) (i) The names of investees in Mainland China, the main businesses and products, and other information: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of January 1, 2020 Accumulated outflow of investment from Taiwan as of December 31, 2020 Investment flows Outflow Inflow Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 39,872 - 39,872 3,123 100% 3,123 Accumulated remittance of earnings in current period - Book value 48,065 Total amount of paid-in capital 39,872 Method of investment (Note 2) 284,800 (Note 2) 145,248 - 444,288 (Note 2) 444,288 427,200 (Note 2) (Note 3) 2,301,754 (Note 1) 2,301,754 2,278,400 (Note 2) (Note 3) - - - - 145,248 (2,107) 51% (1,517) 29,890 - 444,288 (220,802) 100% (220,802) 578,414 - (222,067) 100% (222,067) 545,268 2,301,754 396,577 100% 396,577 4,045,228 - 396,303 100% 396,303 4,016,319 - - - - - - - - - - 22,784 (Note 2) (Note 3) - - - 211 100% 211 22,844 - 284,800 (Note 1) 284,800 - - 284,800 216,453 100% 216,453 2,417,295 - 11,961,600 (Note 2) 2,353,217 - 1,708,800 (Note 2) 326,267 - 512,640 (Note 2) 356,000 - 768,960 (Note 1) 626,560 165,184 (Note 1) 165,184 1,395,520 (Note 1) 541,120 - - - - - - - - - 2,353,217 356,025 37% 138,213 5,905,294 326,267 (227,797) 37% (83,419) 810,695 356,000 101,565 100% 101,565 272,548 626,560 (59,301) 100% (59,301) (935,877) 165,184 1,774 100% 1,774 86,422 541,120 219,725 100% 219,725 460,044 - - - - - - (Continued) Name of investee CST Sheng Bao Precision Electronics (Taicang) Co., Ltd. CIJ CDE CIS CEC CMC CEQ CPM Changbao Main businesses and products International trade and distribution of computers and electronic components Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self- produced products Investment and consulting services Manufacturing and sales of LCD TVs Outward investment and consulting services R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products Corporate management consulting, financial and tax consulting, investment consulting, and investment management consulting services R&D, manufacturing and sales of notebook PCs and related components. Also provides related maintenance and warranty services Manufacturing and selling of magnesium alloy injection molding Production and marketing of magnesium alloy molding Rayonnant (Taicang) Manufacturing and sales of aluminum alloy and magnesium alloy products CCI Nanjing CDCN CWCN Manufacturing and processing of mobile phones and tablet PCs Manufacturing and processing of mobile phones and tablet PCs Manufacturing and processing of mobile phones and tablet PCs COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 106 Table 9 Information on investment in Mainland China: (December 31, 2020) (i) The names of investees in Mainland China, the main businesses and products, and other information: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of January 1, 2020 Accumulated outflow of investment from Taiwan as of December 31, 2020 Investment flows Outflow Inflow Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) Book value 56,960 - - 56,960 (172) 100% (172) 2,856 Accumulated remittance of earnings in current period - Total amount of paid-in capital 56,960 Method of investment (Note 1) 373,088 (Note 1) 354,576 (Note 1) 95,408 (Note 1、 10) 524,602 (Note 7) 313,593 (Note 8) 32,752 - - - 1,139,200 (Note 1) 1,133,589 - - - - - - 524,602 35,282 100% 35,282 164,728 313,593 62,526 100% 62,526 886,668 32,752 (59,068) 100% (59,068) 19,423 - - - 1,133,589 (165,830) 100% (165,830) (311,685) - 427,200 (Note 2) 185,092 - - 185,092 2,276 100% 2,276 128,188 - (Note 12) Name of investee Hanhelt Arcadyan SVA Arcadyan CNC THAC HengHao HengHao Optoelectronic Technology (Kunshan) Co., Ltd. (“HengHao Kunshan”) Main businesses and products R&D and manufacturing of electronic communication equipment R&D and sales of wireless network products Manufacturing and wireless network products Manufacturing of household electronics products Production of touch panels and related components Lucom Display Technology (Kunshan) Limited(“Lucom”) Manufacturing of notebook PCs and related modules (ii) Limitation on investment in Mainland China: Names of Company The Company Arcadyan HengHao Accumulated Investment in Mainland China as of December 31, 2020 Investment Amounts Authorized by Investment Commission of Ministry of Economic Affairs Limitation on investment in Mainland China by Investment Commission of Ministry of Economic Affairs (In Thousands of USD) 15,451,454 (US$542,537) (Note 5) 870,947 (US$30,581) 1,334,915 (US$46,872) 21,549,449 (US$756,652) 870,947 (US$30,581) 1,334,915 (US$46,872) (Note 6) 6,965,617 (Note 13) Note 1: Indirectly investment in Mainland China through companies registered in the third region. Note 2: Indirectly investment in Mainland China through an existing company registered in the third region. Note 3: Investees held by Kunshan Botai Electronics Co., Ltd. (“BT”), Compal Investment (Jiansu) Co., Ltd. (“CIJ”), Compal Electronic (Sichuan) Co., Ltd. (“CIS”), and Compal Electronics (China) Co., Ltd. (“CPC”) through their own funds. Note 4: The investment income (loss) was determined based on the financial report audited by the CPAs. Note 5: Including the investment amount of sold or dissolved companies, including Beijing Compower Xuntong Electronic Technology Co., Ltd., VAP Optoelectronics (NanJing) Corp., Flextronics Technology (Shanghai) Ltd., Lucom, LCFC (HeFei) Electronics Technology Co., Ltd. and the increased investment amount form merging with Compal Communication Co., Ltd. Note 6: As the Company has obtained the certificate of being qualified for operating headquarters, issued by Industrial Development Bureau, MOEA, the upper limit on investment in mainland China is not applicable. Note 7: Arcadyan paid US$18,420 thousands and acquired 100% shares of SVA Arcadyan from Accton Asia through Arcadyan Holding in 2010. Note 8: Arcadyan paid US$8,561 thousands and acquired 100% shares of CNC from Just through Arcadyan Holding in 2007. Note 9: SVA Arcadyan decreased its capital amounting to US$15,000 thousands to offset accumulated losses in March 2009. Note 10: Arcadyan’s subsidiary, TTI, obtained the control over THAC with US$1,150 thousands on February 28, 2013 (the date of stock transferring). Note 11: The amounts in New Taiwan Dollars were translated at the exchange rates at the balance sheet date or the average exchange rate. Note 12: The Company had an accumulated investment amounting to US$7,350 thousands in the previous years. In the first half of 2014, HengHao paid the Company and LG US$3,184 thousands and US$3,315 thousands, respectively, for organization restructure, to obtain 100% ownership of Lucom. Note 13: The net equity of HengHao is negative at December 31, 2020. (iii) Significant transactions: For the year ended December 31, 2020, the significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.
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