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2023 ReportStock Ticker 2324 2021 Annual Report This translated document is prepared in accordance with the Chinese version and is for reference only. In the event of any inconsistency between the English version and the Chinese version, the Chinese version shall prevail. Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw Company Website: http://www.compal.com Printed on May 11, 2022 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: Kuo,Kuan Ying and Chien, Szu Chuan 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 Certified Public Accountant (CPA) Fee Information 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 39 109 110 111 111 114 115 117 121 121 122 124 124 124 124 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 Information Security Management 5.7 Important Contracts 125 151 172 173 174 176 178 2 VI. Financial Information 179 183 189 190 190 190 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 191 192 193 193 194 195 198 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 199 230 230 230 230 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, In 2021, the COVID-19 pandemic continued to affect the global economic activities and daily lives of the general public, and our industries also faced numerous different challenges. With regard to the positive aspect of the business, as the company benefits from the trends of work from home and learn from home, our notebook computer business has demonstrated remarkable growth in the past two years, and our shipping volume continues to reach new highs. However, on the other hand, due to the impacts of the insufficient workforce, component shortage and global logistics bottleneck, we also face challenges in our business operation. As the general economic environment is of great uncertainty and rapid change, Compal demonstrates its flexibility in corporate management and outstanding teamwork. Based on the long-term trust of customers and joint efforts of business partners, we can continue to achieve remarkable business outcomes. In the following, we provide further explanation on our 2021 business outcome and business outlook for 2022 to all shareholders: Financial Performance Despite numerous external environmental challenges in 2021, Compal has successfully overcome all obstacles and achieved outstanding business growth. The consolidated revenue reaches NT$ 1,235.682 billion, a growth of 18% from last year, and the overall 5C related electronic products total output volume reached the scale of 119 million units. The annual consolidated operating profit reaches NT$13.349 billion, a growth of 16% from last year. The non-operating revenue is stable and in conjunction with the benefit contribution gained from the disposal of the real property of Kunshan facility in China; therefore, the consolidated income before tax is NT$ 17.468 billion, and the net income after tax attributable to owners of parent reaches NT$ 12.633 billion, a growth of 35%, and the earnings per share (EPS) is NT$2.90, a record high in the last decade. Business Development and Operation Planning In 2021, the notebook computer business of Compal demonstrated significant growth. While facing changes in different markets of commercial, consumer, education and gaming, we are able to satisfy customer demands promptly. For the post-pandemic era, we expect that notebook computer use will become more diverse, and it will require greater investment in product development services. For a long time, Compal has been committed to the investment of research, development, and innovation, such that we have been able to gain competitive advantages in the industry. In terms of the diverse business development, we have actively invested in several new businesses, including such as servers, auto electronics parts, 5G solutions, IOT application devices, smart medical and healthcare, etc. As the technology advances and along with the market development, Compal has made a stable contribution in the market, and we expect that these new businesses will become the source driving our business to reach new highs. In 2021, Compal also did numerous new planning for the global business operation. With Taiwan as the R&D and innovation center, we have planned the regional production capacity to reduce the risk of overly concentrated production and provide the most suitable service and manufacturing solution to customers. In 2021, in addition to establishing the 5G AIOT application innovation base in the Asia New Bay Area at Kaohsiung Taiwan, we collaborated with Kaohsiung Medical University to construct the largest cell therapy laboratory in southern Taiwan. Furthermore, 4 we also participated in the investment of the Beitou Shilin Technology Park (BSTP) based on the five main themes of smart economy, smart health, smart transportation, smart environment and smart building, for the plan of the establishment of the Group’s corporate headquarter, promoting smart and innovative settlement for the future. In terms of manufacturing, in 2021, Compal Vietnam Factory II was successfully constructed completely, and production collaboration with the Group’s fellow subsidiary Kinpo Electronics in Thailand has also been successfully started. Moreover, we have also added a new production site in the State of Indiana, U.S.A., in order to accelerate the expansion of production capacity for auto electronics parts business. Talents and Sustainability While facing a rapidly changing world, enterprises have greater demand for talents. Due to the unsecured environment caused by the pandemic outbreak, Compal focuses more on the establishment of a stable relationship between the company and employees and is committed to establishing a working environment based on the principle of the right person for the right place, allowing employees to develop their skills and talents, thereby achieving an organization with competitiveness and sustainable development. To cope with the environmental impact caused by climate change, we have incorporated the circular economy concept into our product design, such that for all stages from material selection to properly planning, recycling and disassembly processes, resources can be used more efficiently. For the production end, we actively promote production sites to implement waste reduction activity and increase the use of renewable energies to achieve the long-term environmental sustainability goal of net zero-emission sought by Compal. In 2021, Compal has, once again, received the “Happy Enterprise Award” organized by the job bank and the recognition of the “Taiwan Corporate Sustainability Award” presented by the Taiwan Institute for Sustainable Energy. In addition, we have also been selected as the component stock for the “FTSE4Good Index” and “FTSE4Good TIP Taiwan ESG Index”. Moreover, we are also ranked in the top 20% of the “Corporate Governance Evaluation” at TWSE. In the future, Compal will continue to uphold the business philosophy of people-oriented and sustainable development to actively promote and improve all sustainable activities. Business Outlook Regarding the future overall planning and the deep rooting in the existing businesses, we will continue to expand the main directions developed in the past years to accelerate the expansion of new businesses. Particularly, for the biotechnology and medical field, with the improvement of the computation capability of computers, artificial intelligence, 5G telecommunication technology development of the ICT industry, we expect that smart medical technologies will be able to assist and overcome issues currently faced in the medical sector. Accordingly, in the future, relevant hardware facilities, software platforms, or even precision medical care of artificial intelligence development related to smart hospitals in the future will be the fields for active business development and expansion of Compal. Furthermore, as the human average life expectancy increases and aging society accelerates, Taiwan is expected to enter the aged society. Accordingly, the demand for long-term care services in medical care will also increase; therefore, Compal will invest greater resources in the healthcare field in the future. With the technical strength accumulated over the past years in the ICT industry of Taiwan, the next trillion-dollar industry will focus on the development biotechnology, medical care and long-term care fields in Taiwan, which is also related to the main business development strategy for Compal for the next five years. 5 Looking into 2022, despite that there will still be great challenges in the global economy and changes in the industry, we are still confidently ready to continue to excel further and to achieve further revenue growth continuously. In addition, we also view profit growth as an important business target. Although the issues of insufficient manpower, component shortage, and electricity shortage in the industry still exist, in addition to the trade conflict between the U.S. and China, Compal has actively promoted numerous new measures with customers. Moreover, as digitization, automation and teamwork continue to develop, we expect to move forward in 2022, making the cost and efficiency of our business operation competitive in order to overcome challenges in the environment and market. During the seeking of the economic value of the company, we continue to uphold the principle of fulfilling corporate social responsibilities as a corporate citizen to respond to the expectations of all shareholders, customers, employees, and stakeholders in the society on Compal. We, again, sincerely appreciate your long-term support of Compal. We wish you: Good Health and Prosperity! 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: 2020 • Won 18 awards at the 2020 “iF Design Awards”, including 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 CommonWealth Magazine’s “CSR Top 50”. • Ranked 64th in CommonWealth Magazine’s “Top1000 in China, Taiwan and Hong Kong”, and Kinpo- Compal group was ranked 4th in CommonWealth Magazine’s “Taiwan Top 50”. • Won the Platinum Medal of 2020 Taiwan Corporate Sustainability report Award of TCSA and the Silver 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 in the Fortune Global 500. • Ranked 1558th in the Forbes Global 2000. • • The Company’s share capital reached TWD 44.1 billion in 2019. The Company earned TWD 1,048.9 billion in consolidated revenue 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 awards 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” • Ranked 64th in CommonWealth Magazine’s “Top-1000 in China, Taiwan and Hong Kong” • Selected into the FTSE4GOOD Index and the FTSE4GOOD TIP Taiwan ESG Index. Selected as a constituent stock of “Taiwan High Salary 100 Index” and “Taiwan Employment 99 Index” • • Ranked 339th on the Fortune Global 500. 7 • Ranked 1314th on the Forbes Global 2000. • • The Company’s share capital reached TWD 44.1 billion in 2021. The Company’s consolidated revenue reached TWD 1,235.7 billion in 2021. 2022 • Won 8 awards at the 2022 “iF Design Awards”, ranked 10 in the iF Global Innovation Companies Ranking. • • Selected into the “TIP Customized Environmental Sustainability Dividend +Index”. Selected to take part in the CDP climate change program for 8 consecutive years (2014-2021) and received an overall CDP rating of B- at the Management Level for 2021. • Ranked among the top 21%-35% in the TWSE-listed companies in the 8th round of "Corporate Governance Evaluation" organized by Taiwan Stock Exchange and Taipei Exchange. • Ranked 4th 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 March 15, 2022) Shareholders Board of Directors President’s Office Remuneration Committee Audit Committee Personnel Evaluation Committee Investment Planning and Management Office Legal Affairs Office Insider Trading Prevention Office Top Management Committee P C B G 1 P C B G 2 P C O B G G O B G S D B G Auditing Office Sustainability Committee Digital Transformation Office ttee 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 operations Investment Planning and Management Office Responsible for investment-related activities Auditing Office Conducts internal audits Sustainability Committee Promotes and executes sustainability-related plans Legal Affairs Office Handles the Company’s legal affairs Digital Transformation Office Promotes and executes digital transformation projects Green Sustainability Office Executes “Green Life” projects Insider Trading Prevention Office Corporate Social Responsibility Office Occupational Safety and Health Office PCBG 1 PCBG 2 GOBG SDBG PCOBG Implements preventive measures against insider trading Promotes and executes CSR-related affairs Implementing a comprehensive occupational health and safety program 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 notebook 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 (Note 1, 2) Gender/ age Elected Date Term First Elected Date Shareholding at the election date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career/academic achievements April 26, 2022 Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Selected Current Positions held concurrently in the Company and/or any other companies Shareholding Shareholding Shareholding Shareholding Shares Percentage Shares Percentage Shares Percentage Shares Percentage Title Name Relationship (%) (%) (%) (%) Chairman Sheng-Hsiung Hsu Vice-Chairman Jui-Tsung Chen Male 66-80 Male 66-80 2021.8.27 2021.8.27 3 years 3 years Binpal Investment Co., - Director Ltd. Representative: Wen-Being Hsu Kinpo Electronics, Inc. Representative: Chieh-Li Hsu Director Director Charng-Chyi Ko Director Sheng-Chieh Hsu Male 81-90 - Male 36-50 Male 81-90 Male 66-80 2021.8.27 3 years 2021.8.27 3 years 2021.8.27 3 years 3 1984.04.16 8,975,401 0.20% 8,975,401 0.20% 17,107,025 0.39% 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 5,000,000 0.11% 5,000,000 0.11% 1990.06.22 151,628,692 3.44% 151,628,692 3.44% - 0 - - 0.00% - 2020.07.21 4,117,569 0.09% 4,117,569 0.09% 631 0.00% 1984.04.16 7,896,867 0.18% 7,896,867 0.18% 30,645 0.00% 0 0 0 0 0 0 0 Honorary Doctorate, National 0.00% Taiwan Normal University (Note 6) Director Sheng-Chieh Hsu Director Chieh-Li Hsu Brother’s father and son Chair of Kinpo Electronics, Inc. Honorary Doctorate, National Cheng Kung University Chair of Arcadyan Technology Corp. 0.00% 0.00% National Tao-Yuan Sr. Vocational Agricultural and Industrial School 0.00% Director of BAOTEK, Inc. 0.00% Master of International Business, Waseda University, (Note 6) N/A N/A N/A (Note 6) N/A N/A N/A father and son Japan (Note 6) Chairman Sheng-Hsiung Hsu 0.00% Chair and President of AcBel 0.00% Polytech Inc. Bachelor of Business Dept., National Taiwan University PhD, Lincoln University, USA Chair of Taiwan Biotech Co., Ltd. Bachelor of Architectural Dept., (Note 6) N/A N/A N/A 2021.8.27 years 1997.05.29 9,204,201 0.21% 9,204,201 0.21% 8,152,928 0.18% (Note 5) (Note 5) Tam- Kang University (Note 6) Chairman Sheng-Hsiung Hsu Brothers Director of Kinpo Electronics Inc. 11 Title Name/ Nationality (Note 1, 2) Gender/ age Elected Date Term First Elected Date Shareholding at the election date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career/academic achievements Selected Current Positions held concurrently in the Company and/or any other companies Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Director Yen-Chia Chou Director Chung-Pin Wong Director Chiung-Chi Hsu Director Ming-Chih Chang Director Anthony Peter Bonadero Director Sheng-Hua Peng Male 66-80 Male 51-65 Male 51-65 Male 51-65 Male 51-65 Male 51-65 2021.8.27 2021.8.27 2021.8.27 2021.8.27 2021.8.27 2021.8.27 3 years 3 years 3 years 3 years 3 years 3 years Independent Director Min-Chih Hsuan Male 66-80 2021.8.27 3 years Shareholding Shareholding Shareholding Shareholding Shares Percentage Shares Percentage Shares Percentage Shares Percentage Title Name Relationship (%) (%) (%) (%) 1987.06.13 8,022,874 0.18% 8,022,874 0.18% 2,502,768 0.06% 0 0.00% National Taiwan University (Note 6) N/A N/A N/A Bachelor of Geology Dept. 2007.06.15 6,618,618 0.15% 6,618,618 0.15% 1,398 0.00% 0 0.00% Director of Kinpo Electronics Inc. Master of Management Science, National Chiao-Tung University Chair of Compal Broadband Networks, Inc. Master of Golden Gate (Note 6) N/A N/A N/A 1994.04.23 2,117,731 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% 0 0 0.00% 0.00% 0 0 0 0.00% University, San Francisco, USA Director of I PAO Bearing Co., Ltd. Electrical Engineering Dept., (Note 6) N/A N/A N/A 0.00% Ming Chi Institute of Technology (Note 6) N/A N/A N/A Director of Mactech Co., Ltd. Texas A&M University 0.00% Executive Vice-President of (Note 6) N/A N/A N/A Auscom Engineering Inc. Master of Electronics Engineering, National Taiwan 2018.6.22 835,000 0.02% 835,000 0.02% 0 0.00% 0 0.00% University (Note 6) N/A N/A N/A Director of Arcadyan Technology Corp. Bachelor of Electrical Engineering Dept., National 2012.6.22 0 0.00% 0 0.00% 0 0.00% 0 0.00% Chiao Tung University (Note 6) N/A N/A N/A Independent Director Duei Tsai Male 66-80 2021.8.27 3 years 2012.6.22 0 0.00% 0 0.00% 0 0.00% 0 0.00% 12 Chair and President of United Microelectronics Corp. Ph.D., Electrical Engineering, National Taiwan University Independent Director of Taiwan High Speed Rail Corporation (Note 6) N/A N/A N/A Title Name/ Nationality (Note 1, 2) Gender/ age Elected Date Term First Elected Date Shareholding at the election date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career/academic achievements Selected Current Positions held concurrently in the Company and/or any other companies Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Shareholding Shareholding Shareholding Shareholding Shares Percentage Shares Percentage Shares Percentage Shares Percentage Title Name Relationship (%) (%) (%) (%) Independent Wen-Chung Director Shen Male 66-80 2021.8.27 3 years 1998.4.8 2,836,000 0.06% 2,836,000 0.06% 2,315,000 0.05% 0 0.00% Note: 1. Except for Director Anthony Peter Bonadero, who is a US citizen, the rest of the directors 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. Independent Directors Duh-Kung Tsai Stepped down on August 27, 2021. Independent Director Wen-Chung Shen took office on August 27, 2021. 4. Wen-Chung Shen serviced as Director from April 22, 1998 to June 22, 2018. 5. Director Sheng-Chieh Hsu held 2,839,000 shares (0.06%) through proxies. Bachelor of Electrical Engineering Dept., National Taiwan University Director of Compal Electronics, Inc. (Note 6) N/A N/A N/A 13 6. Selected Current Positions as below: Title Name Chairman Sheng-Hsiung Hsu Vice Chairman Jui-Tsung Chen Selected Current Positions Chairman: Kinpo Electronics, Inc., Cal-Comp Electronics(Thailand) Public Company Limited, AcSacca Solar Energy Co., Ltd., Cal-Comp Electronics and communications Co., Ltd., QBit Semiconductor Ltd., Gempal Technology Corp., Panpal Technology Corp., Teleport Access Services, Inc., Kinpo Group Management Consultant Company, Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd., 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., QBit Semiconductor Holding, 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., 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 Precision (Singapore) Limited, 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., Confiar Land Corp., 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 Electronics (Philippines), Inc., 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 Chair of Chinese National Federation of Industries, Honorary Chair of Importers and Exporters Association of Taipei, Honorary Chair of The Third Wednesday Club, Policy Consultant of Taiwan Electrical and Electronic Manufacturers' Association., Chair of China Productivity Center, Deputy Chair of Straits Exchange Foundation, Vice-Chair of Sinocon Industrial Standards Foundation , Director of Taiwan Institute of Economic Research Chairman: Arcadyan Technology Corporation, Ripal Optotronics Co., Ltd., Palcom International Corporation, General Life Biotechnology Co., Ltd., ARCE Therapeutics, Inc., UniCore Biomedical Co., Ltd., Aco Healthcare Co., Ltd., Raypal Biomedical Co., Ltd., Kinpo&Compal Group Assets Development Corporation, 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, Phoenix Innovation Venture Capital Co., Ltd., 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 & Management (Vietnam) Co., Ltd., Ascendant Private Equity Investment Ltd., 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., Compal USA (Indiana), Inc., 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. Director Representative of Binpal Investment Co., Ltd.: Wen-Being Hsu Kinpo Electronics, Inc. Director Representative of Kinpo Electronics Inc.: Chieh-Li Hsu Independent Director: Powertech Technology Inc. Audit Committee Member: Powertech Technology Inc. Chief Strategy Officer: Compal Electronics, Inc. Other: Director of Chengdian Culture and Education Foundation Chairman: Binpal Investment Co., Ltd. Director: AcBel Polytech Inc., CastleNet Technology Inc., Crownpo Technology Inc., iHELPER Inc., New Era AI Robotic Inc., Norm Pacific Automation Corp., Teleport Access Services, Inc., Cal-Comp Big Data, Inc., XYZprinting, Inc., Kinpo Group Management Consultant Company, Cal-Comp Asset Management, Inc., Prudence Venture Investment Corp., NTNU Innovation Investment Holding Company Chairman: AcBel Polytech Inc., AcBel Electronic (Dong Guan) Co., Ltd., AcBel Electronic (Wuhan) Co., Ltd., Shanghai Sino Hardware Electronics (Wujiang) Co., Ltd., Acbel Polytech (Philippines) Inc. Vice-Chairman: Cal-Comp Electronics (Thailand) Public Company Limited Executive Director: Chongqing Tongliang District Shanghai Sino Hardware Electronics Co., Ltd., Chongqing Kanghua Metal Product Co., Ltd. Director: Kinpo Electronics, Inc., CastleNet Technology Inc., The Eslite Spectrum Corporation, ARCE Therapeutics, Inc., Raypal Biomedical Co., Ltd., VesCir Ltd., QBit Semiconductor Ltd., New Era AI Robotic Inc., AcTel Power Co., Ltd., AcRay Energy Co., Ltd., AcTek Energy Co., Ltd., Cal-Comp Big Data, Inc., XYZprinting, Inc., Melvita Taiwan Ltd., Kinpo&Compal Group Assets Development Corporation, Ray-Kwong Medical Management Consulting Co., Ltd., NKG Advanced Intelligence and Technology Development (Yue Yang) Co., Ltd., LIZ Electronics (Nantong) Co., Ltd., Cal-Comp Precision Holding 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., Cal-Comp Electronics (USA) Co., Ltd., Cal-Comp Electronics de Mexico Co., S.A. de C.V., Cal-Comp Holding (Brasil) S.A., Cal-comp Industria De Semicondutores S.A., Cal-Comp Precision (Malaysia) SDN. BHD., Cal-Comp USA (San Diego), Co., Inc., CK Holdings Inc., CSA Holdings Inc., Power Station Holdings Ltd., QBit Semiconductor Holding, Ltd., Target Gain Corporation 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 Chief Strategy Officer: Cal-Comp Electronics and Communications Co., Ltd. President: AcBel Polytech Inc., Kinpo&Compal Group Assets Development Corporation, Acbel (USA) Polytech Inc., Acbel Polytech (Philippines) Inc., Cal-comp Industria De Semicondutores S.A. Other: Vice-Chair 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 & 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., Spiregene Biotech Co., Ltd., All Information Inc., 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 & Finishing Co., Ltd. Other: Chair of Yang Bi Li Education Foundation of Management, Director of Health, Welfare & 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., Kinpo&Compal Group Assets Development Corporation, 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., Poindus System Corp., 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 Healthcare Co., Ltd., Raypal Biomedical Co., Ltd., Kinpo&Compal Group Assets Development Corporation, 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., Compal USA (Indiana), Inc., 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. Sustainability committee member: Compal Electronics, Inc. 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 Wen-Chung Shen 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., Meribank Biotech Co., Ltd., Meridigen Biotech Co., Ltd., Elevant Biopharma 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) Remuneration Committee Member: Compal Electronics, Inc. Audit Committee Member: Compal Electronics, Inc. Independent Director: Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd. Independent Director for Public Welfare: Starlux Airlines Co., 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. Sustainability committee member: Compal Electronics, Inc., TTY Biopharm Company Ltd. Chairman: Her Tuo Co., Ltd. Remuneration Committee Member: Compal Electronics, Inc. Audit Committee Member: Compal Electronics, Inc. Sustainability committee member: Compal Electronics, Inc. 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. (8.31%), Panpal Technology Corp. (4.65%), GEBO Limited (4.17%), Ho Bao Investment Co., Ltd. (2.94%), Lai-Shun Shen Tsai (2.80%), Chun-Chi Hsu (2.40%), Ruey Shinn Co., Ltd. (1.88%), Shih-Jung Shen (1.69%), Kun-Chao Shen (1.50%), Li Chu Tsai (1.45%) April 29, 2022 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 Panpal Technology Corporation GEBO Limited Ho Bao Investment Co., Ltd. Ruey Shinn Co., Ltd. Compal Electronics, Inc. (100%) Li-Chu Tsai (95.39%), Chieh-Li Hsu (1.77%), Chun-Chi Hsu (1.42%), Yung-Hsu Hsu (1.42%) Chieh-Li Hsu (45.76%), Li-Chu Tsai (20.06%), Chun-Chi Hsu (17.09%), Yung-Hsu Hsu (17.09%) Hsin Chung Chen (33.34%), Hsin Tso Chen (33.33%), Hsin Yu Chen (33.33%) Major shareholders of corporate shareholders 18 ▓ Professional qualification of Directors and independence Information of Independent Directors: Conditions Name Professional Qualification & Experience Independence Status of Independent Directors No. of concurrent Independent directorship of other public firm held Chairman Sheng-Hsiung Hsu Vice Chairman Jui-Tsung Chen Director Representative of Binpal Investment Co., Ltd.: Wen-Being Hsu Director Representative of Kinpo Electronics Inc.: Chieh-Li Hsu Director Charng-Chyi Ko Department of Chinese, Honorary Doctorate, National Taiwan Normal University Chairman of Kinpo Electronics Inc. and Cal-Comp Electronics (Thailand) Public Company Limited The Chairman possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Department of Electrical Engineering, Honorary Doctorate, National Cheng Kung University Chairman of Arcadyan Technology Corp. and Compal Communication Inc., and Chief Strategy Officer of Compal The Vice Chairman possesses more than 40 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. National Tao-Yuan Sr. Vocational Agricultural and Industrial School Director of BAOTEK, Inc. The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. IMBA, Waseda Business School Chairman and President of AcBel Polytech Inc. The Director possesses more than 20 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Department of Business, National Taiwan University and Doctorate Degree, University of Lincoln Director of Kinpo Electronics Inc. and Chairman of Taiwan Biotech Co., Ltd. The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. 19 N/A N/A N/A N/A N/A 1 2 Conditions Name Professional Qualification & Experience Independence Status of Independent Directors No. of concurrent Independent directorship of other public firm held Director Sheng-Chieh Hsu Director Yen-Chia Chou Director Chung-Pin Wong Director Chiung-Chi Hsu Director Ming-Chih Chang Department of Architecture, Tam-Kang University Director of Kinpo Electronics Inc. and Cal-Comp Electronics (Thailand) Public Company Limited The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Department of Geosciences, National Taiwan University Director of Kinpo Electronics Inc. The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Master of Management Science, National Chiao Tung University Chairman of Compal Broadband Networks, Inc. and Poindus Systems Corp., and President of Compal The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Master’s Degree, Golden Gate University, San Francisco, USA Director of Eb-Bow-Bearing Co., Ltd. The Director possesses more than 20 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Department of Electrical Engineering, Ming Chi University of Technology Director of Mactech Co., Ltd., Executive Vice President of Compal and President of LCFC (HeFei) Electronics Technology Co., Ltd. The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. 20 N/A N/A N/A N/A N/A Conditions Name Professional Qualification & Experience Independence Status of Independent Directors No. of concurrent Independent directorship of other public firm held Director Anthony Peter Bonadero Director Sheng-Hua Peng Director Min Chih Hsuan Texas A&M University Executive Vice President of Auscom Engineering Inc. The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Master of Science in Electrical Engineering, National Taiwan University Director of Arcadyan Technology Corp., Executive Vice President of Compal and Senior Vice President of Compal Communications, Inc. The Director possesses more than 20 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Honorary Doctorate, Department of Electrical Engineering, National Chiao Tung University Chairman, Vice Chairman, CEO and President of United Microelectronics Corp. The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. Director Duei Tsai PhD, Graduate Institute of Electrical Engineering, National Taiwan University Independent Director of Taiwan High Speed Rail Corporation and TTY Biopharm Company Ltd. The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. N/A N/A ˙Compliance with independence criteria (note) ˙The person him/herself or his/her spouse or relatives within the second degree of kinship (or in the name of others) hold 0 shares of the Company with a shareholding percentage of 0%. ˙Compliance with independence criteria (note) ˙The person him/herself or his/her spouse or relatives within the second degree of kinship (or in the name of others) hold 0 shares of the Company with a shareholding percentage of 0%. 3 Director Wen-Chung Shen Department of Electrical Engineering, National Taiwan University Chairman of Her Tuo Co., Ltd., and Director and Executive Vice President of Compal The Director possesses more than 30 years of work experience required for the business of the Company and has not been a person of any conditions defined in the Company Act, Article 30. ˙Compliance with independence criteria (note) ˙Number of shares of the Company and shareholding ratio of the person him/herself or his/her spouse or relatives within the second degree of kinship (or in the name of others): 5,151,000 shares, 0.11% 21 Note: Independent Directors shall indicate the fulfilment of independence criteria. • Including but not limited to, the Director or the Director’s spouse or relatives within the second degree of kinship have not worked as directors, supervisors or employees of the Company or its affiliated enterprises; • The Director has not assumed positions as a director, supervisor or employee of company (ies) in specified relationship with the Company (Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies, Article 3, Paragraph 1, Sub-paragraphs 5 to 8). • The Director has not received remuneration by providing business, legal, financial, accounting or other services to the Company or its affiliates in the last 2 years. • Number of shares of the Company and shareholding ratio of the person him/herself or his/her spouse or relatives within the second degree of kinship (or in the name of others). ▓ The Diversity & Independence of the Board of Directors:： 1. The Diversity of the Board of Directors: (1)In accordance with the Company’s Corporate Governance Best-Practice Principles，the composition of the board of directors shall be determined by taking diversity. It is advisable that directors concurrently serving as company officers not exceed one-third of the total number of the board members, and that an appropriate policy on diversity based on the company's business operations, operating dynamics, and development needs be formulated. All members of the board shall have the knowledge, skills, and experience necessary to perform their duties. To achieve the ideal goal of corporate governance, the board of directors shall possess the following abilities: 1. Ability to make operational judgments. 2. Ability to perform accounting and financial analysis. 3. Ability to conduct management administration. 4. Ability to conduct crisis management. 5. Knowledge of the industry. 6. An international market perspective. 7. Ability to lead. 8. Ability to make policy decisions. 22 (2)Status of board member diversification: Core items for diversification Name of Director 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 Wen-Chung Shen Operation management V V V V V V V V V V V V V V V Item Leadership and decision- making V V V V V V V V V V V V V V V Knowledge of the industry V V V V V V V V V V V V V International market perspective V V V V V V V V V V V V V V Risk Management Finance and accounting Investment M&A Communications and network Architecture 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 Age Gender Country of Citizenship Employee Status Seniority of Independent Directors 36 ~ 50 years old 51~65 years old 65 years or older Male Female Republic of China U.S.A. The company The companies’ subsidiaries Less than 1 year More than 9 years 23 Director Independent Director Number of people 1 5 6 12 0 11 1 4 2 - - % 7% 33% 40% 80% 0% 73% 7% 27% 13% - - Number of people 0 0 3 3 0 3 0 0 0 1 2 % 0% 0% 20% 20% 0% 20% 0% 0% 0% 33% 67% The current Board of Directors is comprised of 15 Directors. The management goals and implementation status of the diversity policy of the Board are as follows: Management goal Implementation The number of Directors holding concurrent positions as the Company Managers not exceeding one-third of the Board seats. Implemented At least four Directors possess expertise in the computer industry, sales and technology. At least two Directors possess expertise in law, finance, accounting and technology. Implemented Implemented Considering the diversity factor and gender equality of the Board members, in the future, appropriate and eligible female individuals shall be considered for the candidacy of directorship. Furthermore, the proportion of Independent Directors shall be increased. (II) Independence of the Board of Directors: The current Board of Directors comprises 15 Directors, including Independent Directors (constituting 20% of the Board members). The establishment of Independent Directors and their duty performance are compliant with the provisions of the Securities and Exchange Act, and “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.” Apart from Sheng-Hsiun Hsu (Chairman), Sheng-Chieh Hsu (Director) and Chieh-Li Hsu (representative of juristic person Director, Kinpo Electronics Inc.) who are relatives within the second degree of kinship, the rest of the Directors do not have spousal or familial relationships within the second degree of kinship. As such, the Directors are not persons of conditions listed in Securities and Exchange Act, Article 26-3 and 26-4. In conclusion, the Board of Directors of the Company are deemed independent. 24 3.2.2 Management Team Title Name/ Nationality/ Gender (Note 1, 2) Date elected /appointed Shares held Shares held by spouse and underage children Subsidiary shareholding Total shares held in the names of others Shares held Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Major career/academic achievements 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 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% 0 0 0.00% 0.00% 25 0 0 0 0 0 0 0 0 0 0.00% Honorary Doctorate, National Cheng Kung University Chair of Arcadyan Technology Corp. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Master of Management Science, National Chiao-Tung University Chair of Compal Broadband Networks, Inc. Electrical Engineering Dept., Ming Chi University of Technology Director of Mactech Co., Ltd. Master of Electronics Engineering, National Taiwan University Director of Arcadyan Technology Corp. National Chiao Tung University EMBA Vice-Chair of HengHao Technology Co. Ltd. Master of Electrical Engineering, National Taiwan University Director of Kinpo Electronics Inc. Bachelor of Physics Dept., Chung Yuan Christian University Senior Vice-President of Compal Communication Inc. Master of Business Administration, University of Washington, USA Senior Vice-President of Toppoly Optoelectronics Corp. Media Administration Dept., Shih Hsin University Senior Vice-President of Compal Communication Inc. April 26, 2022 Spouse or relatives of second degree or closer acting as managers Selected Current Positions Title Name Relationship Vice- President Vice- President Po-Tang Wang Hsin-Chung Chen Relative by affinity father and son N/A N/A N/A N/A N/A N/A N/A N/A N/A 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 (Note 4) N/A N/A N/A N/A N/A N/A N/A (Note 4) N/A N/A N/A (Note 4) N/A N/A N/A Title Name/ Nationality/ Gender (Note 1, 2) Date elected /appointed Shares held Shares held by spouse and underage children Subsidiary shareholding Total shares held in the names of others Shares held Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Major career/academic achievements 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 Senior Vice- President Senior Vice- President Senior Vice- President Shi-Kuan Chen 2009.05.01 Chi-Wai Wan 2017.05.10 0 0 0.00% 0.00% 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 0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Chung-Hsing Tan 2020.08.12 0 0.00% 5,320 0.00% Ta-Chun Wang 2016.06.29 204,200 0.00% 4,119 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% Master of Industrial Design, Cranbrook Academy of Art Director of Design and Customer Affairs, Philips (Hong Kong) Bachelor of Electrical Engineering Dept., Fu Jen Catholic University Senior Vice-President of Inventec Corp. Master of Business Administration, Washington University, USA Deputy Manager of Sales, Kapok Computer Company Electronic Engineering Dept., Lee-Ming Institute of Technology Chair's Special Assistant, Mag Technology Co., Ltd. Electronics Dept., National Taiwan University of Science and Technology Master of Industrial Engineering and Operations Management, Columbia University Master of Electrical Engineering, Tatung University Vice-President of Compal Communication Inc. Tamkang University PhD of Finance Managing Vice-President of Shanghai Real Industrial Co., Ltd. (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 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 26 Title Name/ Nationality/ Gender (Note 1, 2) Date elected /appointed Shares held Shares held by spouse and underage children Subsidiary shareholding Total shares held in the names of others Shares held Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Vice-President Chih-Chuan Cheng 2003.01.01 2,103,786 0.05% 51,194 0.00% 0 0.00% Vice-President Ching-Hsiung Lu 2003.01.01 7,337,007 0.17% 750,000 0.02% Po-Tang Wang 2007.07.10 559,548 0.01% 486 0.00% Chief Information Security Officer and Vice- President Vice-President Tzong-Ming Wang 2009.07.16 283,184 0.01% Vice-President Fu-Chuan Chang 2009.07.16 170,662 0.00% Vice-President Yong-Ho Su 2011.07.01 446,401 0.01% Vice-President Jyh-Shyan Liang 2011.10.31 80,000 0.00% Vice-President Yi-Yun Chang 2014.08.13 140,246 0.00% Vice-President Hsin-Kung Mao 2014.11.13 500,714 0.01% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 27 Major career/academic achievements Department of Electronic Engineering, Lunghwa University of Science and Technology Deputy Manager of Research and Development, Top Information Technologies Co., Ltd. Bachelor of Accounting Dept., Feng Chia University Director Compal Communication Inc. Bachelor of Computer Science and Information Engineering Dept., National Taiwan University President of Vibo Telecom Inc. 0.00% 0.00% 0.00% National Taipei Institute of Technology Head of Research and Development, CLEVO Company 0.00% National Chin-Yi University of Technology Production Manager, ADI Corp 0.00% 0.00% 0.00% 0.00% Department of Electrical Engineering, National Taipei Institute of Technology Vice-President of Arima Photovoltaic and Optical Corp. Master of Digital Communication, University of Colorado Boulder, USA Vice-President of Wireless Communication, Altek Corporation Master of Electrical Engineering, National Taiwan University Senior Manager of Compal Communication Inc. Master of Business Administration, University of Lincoln Director of Avalue Technology Inc. Selected Current Positions Spouse or relatives of second degree or closer acting as managers Title Name Relationship N/A N/A N/A N/A (Note 4) N/A N/A N/A (Note 4) Chief Strategy Officer Jui-Tsung Chen Relative by affinity N/A N/A 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 (Note 4) N/A N/A N/A Title Name/ Nationality/ Gender (Note 1, 2) Date elected /appointed Shares held Shares held by spouse and underage children Subsidiary shareholding Total shares held in the names of others Shares held Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Major career/academic achievements Vice-President Shih-Hong Huang 2016.02.24 280,000 0.01% Vice-President Yi-Chiang Chiu 2016.02.24 280,000 0.01% Vice-President Jui-Chun Shyur 2016.05.11 0 0.00% Vice-President Jen-Liang Lin 2018.03.06 50,500 0.00% 0 0 0 0 0.00% 0.00% 0.00% 0 0 0 0.00% 0.00% 0.00% Master in Control Engineering, National Chiao Tung University Director of Coretronic Corporation Master of Earth Sciences, National Central University Ph.D., Electrical Engineering, National Taiwan University President of Photonics Industries International, Inc. 0.00% 0 0.00% Bachelor of Industrial Engineering Dept., Feng Chia University Director of Operations Division, Compal Fab No. 2 Master of Cornell University Law School, USA CSO, Pou Chen Group Selected Current Positions Spouse or relatives of second degree or closer acting as managers Title Name Relationship 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 Chief Legal Officer and Vice-President Corporate Governance & Accounting Officer and Vice-President Peng-Hong Chan 2018.05.09. 0 0.00% 0 0.00% 0 0.00% Cheng-Chiang Wang 2018.07.04 2019.05.13 955,808 0.02% 30 0.00% Vice-President Cheng-Hui Su 2018.12.01 105,000 0.00% 0 Vice-President Tu-Chuan Tu 2018.12.01 593,081 0.01% 62,105 Vice-President Financial Officer and Vice-President Chang-Chieh Tien 2018.12.01 403 0.00% Guo-Dung Yu 2020.08.12 60,000 0.00% Vice-President Peng Kuee Lau 2020.08.12 0 0.00% 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00% 28 0 0 0 0 0 0 0.00% Bachelor of Accounting Dept., Fu Jen Catholic University Financial officer of Allied Circuit Co., Ltd. 0.00% Master of Business Administration, Tulane University 0.00% Vanung University, Vanung University 0.00% 0.00% 0.00% Bachelor of Transportation Management Dept., National Chiao Tung University Master of Accounting, George Washington University Financial officer of Arcadyan Technology Corp. Bachelor of Science and Technology Dept., IOWA State University (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 (Note 4) N/A N/A N/A (Note 4) N/A N/A N/A Title Name/ Nationality/ Gender (Note 1, 2) Date elected /appointed Shares held Shares held by spouse and underage children Subsidiary shareholding Total shares held in the names of others Shares held Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Shares Shareholding Percentage (%) Major career/academic achievements Selected Current Positions Spouse or relatives of second degree or closer acting as managers Title Name Relationship Vice-President Yau-De Chiou 2021.02.25 Vice-President Hou-Chun Liu 2021.11.11 Vice-President Wu-Ching Chi 2022.02.10 0 0 0 0.00% 0.00% 0.00% 0 0 0 0.00% 0.00% 0.00% Vice-President Hsin-Chung Chen 2022.02.10 10,662,383 0.24% 10,000 0.00% Vice-President Jue-Teng Chang 2022.02.10 Vice-President Choo-Tain Chiu 2022.02.10 Internal Audit Officer Chenyi Li 2021.08.27 0 0 0 0.00% 0.00% 0.00% 0 0 0 0.00% 0.00% 0.00% 0 0 0 0 0 0 0 0.00% 0.00% Master of Business Administration, Columbia Southern University, Alabama President of Lien Chang Electronic Enterprise Co., Ltd. Mechanical Engineering, National Kaohsiung University of Applied Sciences COO of SuperAlloy Industrial Co., LTD (Note 4) N/A N/A N/A N/A N/A N/A N/A 0.00% Master of Computer Engineering, NCTU N/A N/A N/A N/A 0.00% 0.00% 0.00% 0.00% Master of Electrical Engineering, Columbia University, NY Director of Raypal Biomedical Co., Ltd. Master of EMBA, National Central University Master of Business Administration, Nanyang Technological University, Singapore Master of Technology Management, National Tsing Hua University Internal Control Director of Tingyi (Cayman Islands) Holding Corp. (Note 4) N/A N/A Chief Strategy Officer Jui-Tsung Chen father and son N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Note: 1. Except for Senior Vice-President Peng Kuee Lau, anMalaysian 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. Vice-Presidents Yung-Nan Chang and Hsin-Hsiung Huang resigned in 2021, Vice-Presidents Chiao-Lie Huang and Wei-Chia Wang resigned in 2022. 29 4. Concurrent positions in other companies Title Name Selected Current Positions Executive Vice- President Senior 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) Ltd. Chun-Te Shen Director: HippoScreen Neurotech Corp., Auscom Engineering Inc., Shennona Corporation Senior Vice- President Chyou-Jui Wei Director: Taiwan Star Telecom Co., Ltd., Chenfeng Optronics Corp., General Life Biotechnology 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 & Partners (Chongqing) Co., Ltd., ZhengYing Electronics(Chongqing) Co., Ltd., Compal Precision Module(Jiangsu) Co., Ltd., ShengBao Precision Electronics (Taicang) Ltd., Rayonnant Technology (HK) Holdings Limited Investment Holding Corp., Changbo Electronic Technology Supervisor: HengHao Technology Co. Ltd., Rayonnant Technology Co., Ltd., Mactech Co., Ltd., Taiwan Intelligent Robotics Company, Ltd., Infinno Technology Corp., Ripal Optotronics Co., Ltd., UNICOM GLOBAL, INC., Aco Healthcare 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. Director: Auscom Engineering Inc. President: Auscom Engineering Inc. Director: Compal Wireless Communications (Nanjing) Co., Ltd., Compal Digital Communications (Nanjing) Co., Ltd., HANHELT Communications (Nanjing) Co., Ltd., Compal Communications (Nanjing) Co., Ltd. Director: Compal USA (Indiana), Inc. President: Compal USA (Indiana), Inc. Director: Zhi-Bao Technology Corporation, Arcadyan Technology (Shanghai) Corp. Supervisor: Kinpo&Compal Group Assets Development Corporation, 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 (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. 30 Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Min-Tung Weng Chung-Hsing Tan Ta-Chun Wang Vice-President Ching-Hsiung Lu Title Name Selected Current Positions Independent Director: Galaxy Software Services Corporation Remuneration Committee Member: Galaxy Software Services Corporation Audit Committee Member: Galaxy Software Services Corporation Member of Information Security Committee: Galaxy Software Services Corporation Po-Tang Wang Director: Bizcom Electronics, Inc., CGS Technology (Poland) Sp. z o. o., Compal Europe (Poland) Sp. z o. o. CISO and Vice- President Vice-President Vice-President Fu-Chuan Chang Jyh-Shyan Liang Vice-President Hsin-Kung Mao Corporate Governance & Accounting Officer and Vice-President Financial Officer and Vice- President Cheng-Chiang Wang Guo-Dung Yu Vice-President Hsin-Chung Chen President: Compal Optoelectronics (Kunshan) Co., Ltd., Compal Electronics, (China) Co., Ltd. Supervisor: HANHELT Communications (Nanjing) Co., Ltd. Vice-Chairman: Poindus System Corp. Director: Avalue Technology Inc., UNICOM GLOBAL, INC., Amexcom Electronics, Inc., Compalead Electronics B.V., Mexcom Electronics, LLC, Mexcom Technologies, LLC President: Amexcom Electronics, Inc. Director: Allied Circuit Co., Ltd., Poindus System Corp., Zhi-Bao Technology Corporation, HengHao Technology Co. Ltd., Palcom International Corporation, Infinno Technology Corp., Phoenix Innovation Venture Capital Co., Ltd., 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 Chairman: Ruey Shinn Industrial Co., Ltd. Director: Raypal Biomedical Co., Ltd. 31 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 profits Salaries, bonuses, special allowances, etc (E) Retirement pension (F) Share of profits 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 Amount Stock Amount Cash Stock The sum of A, B, C, D, E, F, and G as a percentage of after-tax profits The Company All companies included in the financial statements Remunerati on from ventures other than subsidiaries or from the parent company (H) Unit: TWD 1,000; Thousand shares; % 0 0 0 0 71,390 71,390 2,284 3,044 0.5832% 0.5892% 75,339 118,202 766 766 46,000 0 46,000 0 1.5498% 1.8951% 44,841 7,200 7,200 0 0 0 0 475 475 0.0608% 0.0608% 0 0 0 0 0 0 0 0 0.0608% 0.0608% 0 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, 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 Independent Director Min-Chih Hsuan Duei Tsai Wen-Chung Shen 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 32 Note: 1. Independent Directors Duh-Kung Tsai Stepped down on August 27, 2021. Independent Director Wen-Chung Shen took office on August 27, 2021. 2. In 2021, the Company made pension contributions totaling TWD 766,000 (including TWD 324,000 under the new system and TWD 442,000 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 766,000 (including TWD 324,000 under the new system and TWD 442,000 under the old system). 3. The distribution of directors' remuneration, was approved by the Board of Directors meeting on March 15, 2022. The remuneration amount of the Directors aforementioned is not determined fully until the meeting of the Board of Directors decides otherwise. ▓ 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) 1 (Note 2) 2 (Note 3) 1 (Note 4) 10 (Note 5) 1 (Note 6) 3 (Note 7) 1 (Note 8) 2 (Note 9) 1 (Note 10) 10 (Note 11) 1 (Note 12) 3 (Note 13) 1 (Note 14) 2 (Note 15) 1 (Note 16) 6 (Note 17) 1 (Note 18) 2 (Note 19) 2 (Note 20) 2 (Note 21) 1 (Note 22) 2 (Note 23) 6 (Note 24) 3 (Note 25) 4 (Note 26) 18 18 18 18 Duh-Kung Tsai-1 position Note: 1. Wen Being Hsu, Chieh-Li Hsu, Wen-Chung Shen-3 positions 2. 3. Min-Chih Hsuan, Duei Tsai-2 positions 4. Kinpo Electronics, Inc.-1 position 5. Jui-Tsung Chen, Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung-Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng, Anthony Peter Bonadero, Binpal Investment Co., Ltd.-10 positions Sheng-Hsiung Hsu-1 position 6. 7. Wen Being Hsu, Chieh-Li Hsu, Wen-Chung Shen-3 positions 8. 9. Min-Chih Hsuan, Duei Tsai-2 positions Duh-Kung Tsai-1 position 33 10. Kinpo Electronics, Inc.-1 position 11. Jui-Tsung Chen, Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung-Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng, Anthony Peter Bonadero, Binpal Investment Co., Ltd.-10 positions 12. Sheng-Hsiung Hsu-1 position 13. Wen Being Hsu, Chieh-Li Hsu, Wen-Chung Shen-3 positions 14. Duh-Kung Tsai -1 position 15. Min-Chih Hsuan, Duei Tsai-2 positions 16. Kinpo Electronics, Inc.-1 position 17. Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chiung-Chi Hsu, Anthony Peter Bonadero, Binpal Investment Co., Ltd.-6 positions 18. Sheng-Hsiung Hsu-1 position 19. Ming-Chih Chang, Sheng-Hua Peng-2 positions 20. Jui-Tsung Chen, Chung-Pin Wong-2 positions 21. Wen Being Hsu, Wen-Chung Shen-2 positions 22. Duh-Kung Tsai-1 position 23. Min-Chih Hsuan, Duei Tsai-2 positions 24. Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chiung-Chi Hsu, Binpal Investment Co., Ltd., Kinpo Electronics, Inc.-6 positions 25. Chieh-Li Hsu, Ming-Chih Chang, Sheng-Hua Peng-3 positions 26. 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) 34 3. Remuneration of the President and Vice-Presidents Salary (A) Pension (B) Bonus and special allowances (C) Title Name 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 Share of profits as an employee (D) The Company All companies included in the financial statements Cash Stock Cash Amount Amount Amount Stock Amount Unit: TWD 1,000; Thousand shares; % Sum of A, B, C and D as a percentage of after-tax profits (%) Remuneration from ventures other than All companies subsidiaries or from The Company included in the the parent company financial statements (E) 47 employees including CSO Jui- Tsung Chen (Note1) 121,367 126,968 5,643 5,643 238,093 238,594 157,586 0 157,586 0 4.1376 % 4.18591% 439 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, and 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, and Ta-Chun Wang - 12 positions ‧ Vice-Presidents: Chih-Chuan Cheng, Ching-Hsiung Lu, Po-Tang Wang, Tzong-Ming Wang, Fu-Chuan Chang, Yong-Ho Su, Jyh-Shyan Liang, Yi-Yun Chang, Hsin-Kung Mao, Shih-Hong Huang, Yi-Chiang, Jui-Chun Shyur, Liang-Jen Lin, Peng-Hong Chan, Cheng- Chiang Wang, Cheng-Hui Su, Tu-Chuan Tu, Chang-Chieh Tien, Guo- Dung Yu, Peng Kuee Lau, Yau-De Chiou, Hou-Chun Liu, Wu-Ching Chi, Hsin-Chung Chen, Jue-Teng Chang, Choo-Tain Chiu, Yung-Nan Chang, Hsin-Hsiung Huang, Chiao-Lie Huang, and Wei-Chia Wang - 30 positions 2. In 2021, the Company made pension contributions totaling TWD 5,643,000 (including TWD 3,999,000 under the new system and TWD 1,644,000 under the old system). While all companies reported in the financial statements made pension contributions totaling TWD 5,643,000 (including TWD 3,999,000 under the new system and TWD 1,644,000 under the old system). 3. Employees’ compensation appropriation was approved by the Board of Directors at the meeting on March 15, 2022. The compensations of the aforementioned managers were not yet final and will be reviewed based on the list of the date of distribution. 35 ▓ 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 4 (Note 1) 4 (Note 2) 3 (Note 3) 15 (Note 4) 11 (Note 5) 8 (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 3(Note 8) 5 (Note 9) 2 (Note 10) 16 (Note 11) 11(Note 12) 8 (Note 13) 2 (Note 14) 47 Note: 1. 2. 3. 4. Hou-Chun Liu, Choo-Tain Chiu, Yung-Nan Chang, and Chiao-Lie Huang -4 positions Hsin-Chung Chen, Wu-Ching Chi, Jue-Teng Chang, and Hsin-Hsiung Huang -4 positions Ching-Hsiung Lu, Fu-Chuan Chang, and Wei-Chia Wang -3 positions Kuo-Chuan Chen, Chih-Chuan Cheng, Po-Tang Wang, Tzong-Ming Wang, Jyh-Shyan Liang, Yi-Yun Chang, Hsin-Kung Mao, Jui-Chun Shyur, Liang-Jen Lin, Peng-Hong Chan, Cheng- Chiang Wang, Tu-Chuan Tu, Chang-Chieh Tien, Peng Kuee Lau, Yau-De Chiou-15 positions Chun-Te Shen, Chyou-Jui Wei, Wen-Da Hsu, Shi-Kuan Chen, Chung-Hsing Tan, Ta-Chun Wang, Yong-Ho Su, Shih-Hong Huang, Yi-Chiang Chiu, Cheng-Hui Su, and Guo-Dung Yu -11 positions 5. 6. Ming-Chih Chang, Shen-Hua Peng, Chen-Chang Hsu, Chi-Wai Wan, Min-Tung Weng, Lo-Chun Lee, Sheng-Hung Li, and Bor-Heng Chen -8 positions 7. 8. 9. 10. 11. Jui-Tsung Chen and Chung-Pin Wong -2 positions Hou-Chun Liu, Choo-Tain Chiu, and Chiao-Lie Huang -3 positions Hsin-Chung Chen, Wu-Ching Chi, Jue-Teng Chang, Yung-Nan Chang, and Hsin-Hsiung Huang -5 positions Ching-Hsiung Lu and Wei-Chia Wang -2 positions Kuo-Chuan Chen, Chih-Chuan Cheng, Po-Tang Wang, Tzong-Ming Wang, Fu-Chuan Chang, Jyh-Shyan Liang, Yi-Yun Chang, Hsin-Kung Mao, Jui-Chun Shyur, Liang-Jen Lin, Peng-Hong Chan, Cheng- Chiang Wang, Tu-Chuan Tu, Chang-Chieh Tien, Peng Kuee Lau, and Yau-De Chiou -16 positions Chun-Te Shen, Chyou-Jui Wei, Wen-Da Hsu, Shi-Kuan Chen, Chung-Hsing Tan, Ta-Chun Wang, Yong-Ho Su, Shih-Hong Huang, Yi-Chiang Chiu, Cheng-Hui Su, and Guo-Dung Yu -11 positions 12. 13. Ming-Chih Chang, Shen-Hua Peng, Chen-Chang Hsu, Chi-Wai Wan, Min-Tung Weng, Lo-Chun Lee, Sheng-Hung Li, and Bor-Heng Chen -8 positions 14. Jui-Tsung Chen and Chung-Pin Wong -2 positions 36 ▓ Employee profits sharing granted to the management team Unit: TWD 1,000 Title Name Stock dividends Cash dividends Total Total as a percentage of after-tax profits (%) 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 0 157,586 157,586 1.2474% ‧Executive Vice-Presidents: Ming-Chih Chang, Shen-Hua Peng, and 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, and Ta-Chun Wang – 12 positions. ‧Vice-Presidents: : Chih-Chuan Cheng, Ching-Hsiung Lu, Po-Tang Wang, Tzong-Ming Wang, Fu-Chuan Chang, Yong-Ho Su, Jyh-Shyan Liang, Yi-Yun Chang, Hsin-Kung Mao, Shih-Hong Huang, Yi-Chiang, Jui-Chun Shyur, Liang-Jen Lin, Peng-Hong Chan, Cheng- Chiang Wang, Cheng-Hui Su, Tu-Chuan Tu, Chang-Chieh Tien, Guo-Dung Yu, Peng Kuee Lau, Yau-De Chiou, Hou-Chun Liu, Wu-Ching Chi, Hsin-Chung Chen, Jue-Teng Chang, and Choo-Tain Chiu – 26 positions 2. Vice-Presidents Yung-Nan Chang, Hsin-Hsiung Huang resigned in 2021, Vice-Presidents Chiao-Lie Huang, Wei-Chia Wang resigned in 2022. 3. Employees’ compensation appropriation was approved by the Board of Directors at the March 15, 2022 meeting. The compensations of the aforementioned managers have not been finalized and will be reviewed based on the list upon the date of distribution. 37 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. Analysis Directors CSO, Presidents, and Vice-Presidents Net Income 2021 2020 (Note) Amount % Amount % Increase (Decrease) % Amount Unit: TWD 1,000 652,917 5.17% 584,112 6.24% 68,805 11.78% 12,632,667 9,361,893 3,270,774 Note: 2020 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 profits makes a profit in a year, no more than 2% of the Company’s pre-tax profits (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 directors and independent directors receive a transportation allowance. Independent directors receive fixed remuneration and do not participate in the distribution of directors' remuneration, and the remaining directors do not receive fixed remuneration, but participate in the distribution of directors' remuneration. Based on the analysis of performance evaluation results, the Remuneration Committee will report the Board of Directors and make extra recommendations, which will serve as a reference for the remuneration of individual 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, education/experience, professional ability, the duties and responsibilities for the position in question, and the Manager’s actual contribution to the Company’s operational objectives. The remuneration ratio is calculated after comprehensive consideration of the target achievement rate, P&L, operating efficiency, and contribution to come out a reasonable remuneration, moreover the remuneration system of directors and managers is reviewed timely in accordance with the actual operating conditions, relevant laws and regulations. ‧ The Company’s procedure for determining remuneration not only takes into account the Company’s overall operational performance but is also based on financial indicators (individual performance achievement rate and contribution to the Company's profits), non-financial indicators (such as leading specific projects or subordinate departments have major deficiencies in legal compliance and operational risk matters). And the third factor is one’s actions in response to climate change (such as using recycled raw materials for products and other environmental protection measures, reducing carbon emissions per unit). Relevant salaries 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, profits 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. 38 Implementation of Corporate Governance 3.3 3.3.1 Board of Directors ‧The term of the 13th committee ran from June 22, 2018 to August 27, 2021. ‧The term of the 14 th committee ran from August 27, 2021 to August 26, 2024. ‧There were seven Board meetings during 2021 (A). Director’s attendance records are as shown below: Attendance in Person (B) 7 Attendance Rate (%)[B/A] Sheng-Hsiung Hsu Remarks By Proxy Name 100% Title 0 Chairman Vice- Chairman Jui-Tsung Chen Director Director Director Binpal Investment Co., Ltd. Representative: Wen-Being Hsu Kinpo Electronics, Inc. Representative: Chieh-Li Hsu, 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 Independent Director Sheng-Hua Peng Min-Chih Hsuan Duei Tsai Wen-Chung Shen Duh-Kung Tsai 7 7 7 6 7 6 7 7 7 6 7 6 7 2 5 0 0 0 1 0 1 0 0 0 1 0 1 0 0 0 100% 100% 100% 86% 100% 86% 100% 100% 100% 86% 100% 86% 100% 100% 100% Took office on August 27, 2021 Left office on August 27, 2021 Title Name ‧In 2021, Independent Director’s attendance records are as shown below: 1st Meeting ★ ● 2nd Meeting ● ● 3rd Meeting ● ● 4th Meeting ● ● Min-Chih Hsuan Duei Tsai Independent Director Independent Director Independent Director Independent Director Wen-Chung Shen Duh-Kung Tsai ● ● ● ● ● 5th Meeting ● ● 6th Meeting ● ● ● 7th 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 an Audit Committee rather than 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. 39 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 18th Meeting (13th Term) 2021.3.26 19th Meeting (13th Term) 2021.5.12 The agendas, the nature of conflicting interests, and the voting outcome • Approved the proposal of donation to the Hsu Chauing Social Welfare & Charity Foundation “Hsu Chauing Foundation” Chair Sheng-Hsiung Hsu asked Independent Director Min Chih Hsuan to act as a Deputy Chair to preside at this meeting for discussion and voting on this proposal. To avoid conflict of interest, Directors Sheng-Hsiung Hsu and Chieh-Li Hsu, who are th e spouse and the son to Chair Li-Chu Tsai of Hsu Chauing Foundation, recuse and exclude 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 Chair, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present • Approved the first mid-year employees’ bonus of the year 2021 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 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 Chair, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • 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. In order to avoid conflict of interest, these Directors recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chair of the meeting, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. • Approved employees’ salary adjustment of the year 2021 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 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 Chair, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. 40 Board of Directors Meeting 21st Meeting (13th Term) 2021.8.12 The agendas, the nature of conflicting interests, and the voting outcome • Approved the Directors’ Remuneration for the year 2020 Chair Sheng-Hsiung Hsu asked the Independent Director Min-Chih Hsuan to act as a Deputy Chair to preside over this meeting for discussion and voting on this proposal. Since an interested party relationship existed, 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, Anthony Peter Bonadero and Sheng-Hua Peng) recused and excluded themselves from discussion and voting on this proposal to avoid conflict of interest. Upon solicitation of comments by the Deputy Chair, 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 2021 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, an interested party relationship exists among any Directors and any agenda proposals, such Directors shall recuse and exclude themselves during 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, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chair, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the appointment of Chief Strategy Officer An interested party relationship existed in Director Jui-Tsung Chen. In order to avoid conflict of interest, the Director excused himself from discussion and voting on this proposal. Upon solicitation of comments by the Chair of the meeting, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the appointment of President 1st Meeting (14th Term) 2021.8.27 An interested party relationship existed in Director Chung-Pin Wong. In order to avoid conflict of interest, the Director excused himself from discussion and voting on this proposal. Upon solicitation of comments by the Chair of the meeting, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the appointment of the term 5th remuneration committee members An interested party relationship exists in Independent Directors Min Chih Hsuan, Duei Tsai and Wen-Chung Shen. In order to avoid conflict of interest, these Independent Directors rerecused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chair of the meeting, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. • Approved the compensation of Employee bonuses in cash 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 shall recuse 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, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chair, no objection was raised and the resolution was adopted unanimously by the remaining Directors present. 2nd Meeting (14th Term) 2021.11.11 41 Board of Directors Meeting The agendas, the nature of conflicting interests, and the voting outcome • Approved the proposal for 2021 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 recuse 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, recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chair, 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 Method of evaluation Once a year From June 1, 2020 to May 31, 2021 Board of Directors, Functional Committees (Including Audit Committee, Remuneration Committee), individual Directors 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. Alignment with the goals and mission 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. 42 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 as 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” were adopted to strengthen their operation efficiency. The performance of evaluation results for the year 2021, 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. 43 3.3.2 Audit Committee ‧The Company's Audit Committee is composed of three independent directors. ‧The term of the 2nd committee ran from June 22, 2018 to August 27, 2021. ‧The term of the 3rd committee ran from August 27, 2021 to August 26, 2024. ‧There were five Audit Committee meetings during 2021 (A). The attendance records of the Independent Directors are as follows: Title Name Convener Committee Member Duei Tsai Min-Chih Hsuan Committee Member Wen-Chung Shen Committee Member Duh Kung Tsai ▓ Duties of the Audit Committee Attendance in Person (B) 5 5 2 3 By Proxy 0 0 0 0 Attendance Rate (%) [B/A] 100% 100% 100% 100% Remarks - - Took office on August 27, 2021 Left office on August 27, 2021 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 Chairman, managerial officer, and accounting officer. 11. Business Report, proposal for distribution of profits or covering of losses. 12. Other material matters as may be required by this Corporation or by the competent authority. 44 ▓ The major audit items of the Audit Committee in 2021 were as follows: 1. 2020 Financial Statement, Business Report, Proposal for distribution of profits. 2. To change of independent auditor. 3. To evaluate the CPAs’ independence and competence for performing the financial report audit. 4. Election of the Committee convener and Chair of the 3nd Audit Committee 5. Appointment of the Chief Strategy Officer, President, Accounting Officer, Financial Officer and Internal Audit Officer. 6. A matter bearing on the personal interest of the Director and Manager. 7. A material monetary loan and providing of Corporate Guarantee Letter. 8. A material asset transaction. 9. Assessment of the design and operation effectiveness of the internal control system. 10. The defects, irregularities, and the status of corrections in the internal control system. 11. Annual audit plan for the year 2022. 12. Compliance with the relevant laws and regulations by the Corporation. ▓ 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 Securities and Exchange Act: Board of Directors Meeting Content of discussion and actions taken in response Matters listed in Item 5, Article 14 of the Securities and Exchange Act Not approved by the Audit Committee but receiving the consent of more than two-thirds of all directors. 1. To approve 2020 Audited Consolidated Financial Statements and Parent Company Only Financial Statements 2. To approve the Business Report for the year 2020 3. To approve the proposal for Distribution of Earnings for the year 2020 4. To approve the change of independent auditor 5. To evaluate CPAs’ independence and competence of performing financial report audit. 6. To approve the proposal of donation to the Hsu Chauing Social Welfare & Charity Foundation 7. To approve the proposal for providing Corporate Guarantee Letter to Quanta Computer Inc. 8. To approve the Internal Control System Statement for the year 2020 V V V V V V V V 18th Meeting (13th Term) 2021.3.26 No No No No No No No No ▲Resolution adopted by the Audit Committee (2021.3.26): Upon solicitation of comments by the Chair, there was no objection 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: ・Except for motion 6 Upon solicitation of comments by the Chair, there was no objection raised and the 45 Board of Directors Meeting Content of discussion and actions taken in response Matters listed in Item 5, Article 14 of the Securities and Exchange Act Not approved by the Audit Committee but receiving the consent of more than two-thirds of all directors. resolution was adopted unanimously by the Directors present. ・Motion 6 Chair Sheng-Hsiung Hsu asked Independent Director Min Chih Hsuan to act as a Deputy Chair to preside at this meeting for discussion and voting on this proposal. To avoid conflict of interest, Directors Sheng-Hsiung Hsu, and Chieh-Li Hsu, who are the spouse and the son to Chair Li-Chu Tsai of Hsu Chauing Foundation, recuse and exclude 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 Chair, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. 1.To approve the release of non-competition restrictions for the managers 2.To approve a fund loan to 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. 3.To approve fund loan to 100% owned subsidiary Compal Eletrônica Da Amazônia Ltda. V V V ▲Resolution adopted by the Audit Committee (2021.5.12): No No No 19th Meeting (13th Term) 2021.5.12 Upon solicitation of comments by the Chair, there was no objection 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 relationship existed between Directors Jui-Tsung Chen, Chung- Pin Wong. In order to avoid conflict of interest, these Directors recused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chair of the meeting, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. ‧Motion 2 and 3 Upon solicitation of comments by the Chair, there was no objection raised and the resolution was adopted unanimously by the Directors present. 1.To approve loan to Henghao Technology Co. Ltd. 2.To approve loan to Unicom Global, Inc. 3.Proposal for providing a Corporate Guarantee Letter for Henghao Optoelectronics Technology (KunShan) Co., Ltd., a sub-subsidiary of the Company, to Huawei Device Co., Ltd., to be resolved. V V V No No No ▲Resolution adopted by the Audit Committee (2021.8.12): Upon solicitation of comments by the Chair, there was no objection 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 Chair, there was no objection raised and the resolution was adopted unanimously by the Directors present. 46 21th Meeting (13th Term) 2021.8.12 Board of Directors Meeting Content of discussion and actions taken in response Matters listed in Item 5, Article 14 of the Securities and Exchange Act Not approved by the Audit Committee but receiving the consent of more than two-thirds of all directors. 1. Election of the Committee convener and the Chair of the 3nd Audit Committee 2. To approve the appointment of Chief Strategy Officer 3. To approve the appointment of President 4. To approve the appointment of Accounting Officer 5. To approve the appointment of Financial Officer 6. To approve the appointment of Internal Audit Officer ▲Resolution adopted by the Audit Committee (2021.8.27): ・Motion 1: V V V V V V No No No No No No Min-Chih Hsuan is elected by all members as the convener and Chair of the Audit Committee. ・Except for motion 1 Upon solicitation of comments by the Chair, there was no objection 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: Not applicable (No request of the consent of the Board of Directors) ・Motion 2 and 3 An interested party relationship existed in Directors Jui-Tsung Chen and Chung-Pin Wong. In order to avoid conflict of interest, the Director excused himself from discussion and voting on this proposal. Upon solicitation of comments by the Chair of the meeting, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. ・Except for motion 2 and 3 Upon solicitation of comments by the Chair, there was no objection raised and the resolution was adopted unanimously by the Directors present. 1. Proposal for providing Corporate Guarantee Letter to Lenovo PC HK Limited 2. To approve the proposal of application for open tender 3. To propose for approval of annual audit plan for the year 2022 V V V No No No ▲Resolution adopted by the Audit Committee (2021.11.11): Upon solicitation of comments by the Chair, there was no objection 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 Chair, there was no objection raised and the resolution was adopted unanimously by the Directors present. 1st Meeting (14th Term) 2021.8.27 2nd Meeting (14th Term) 2021.11.11 (2) With the exception of the aforementioned matters, other matters not approved by the Audit Committee but receiving the consent of more than two-thirds of all Directors: None. 47 2. 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: Audit Committees Meeting 13rd Meeting (2nd Term) 2021.3.26 14th Meeting (2nd Term) 2021.5.12 15th Meeting (2nd Term) 2021.8.12 2nd Meeting (3rd Term) 2021.11.11 4th Meeting (3rd Term) 2022.3.15 Content of discussion Results 1. Report on operational status of the internal audit activities The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. 2.To approve the Internal Control System Statement for the year 2020 1. Report on operational status of the internal audit activities The proposal was approved by the Audit Committee and will be resolved by the Board of Directors The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. 1. Report on operational status of the internal audit activities The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. 1. Report on operational status of the internal audit activities 2. To propose for approval of annual audit plan for the year 2022 The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. The proposal was approved by the Audit Committee and will be resolved by the Board of Directors 1. Report on operational status of the internal audit activities 2.To approve the Internal Control System Statement for the year 2021 The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. The proposal was approved by the Audit Committee and will be resolved by the Board of Directors 48 Audit Committees Meeting 5th Meeting (3rd Term) 2022.5.11 Content of discussion Results 1. Report on operational status of the internal audit activities The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. (3) Summary of the communications between the Independent Directors and CPA: Audit Committees Meeting 13rd Meeting (2nd Term) 2021.3.26 Content of discussion Results 1. To approve the 2020 Audited Consolidated Financial Statements and Parent Company Only Financial Statements ‧ Explanation of key audit items ‧ Explanation of statements and major The proposal was approved by the Audit Committee and will be resolved by the Board of Directors accounting items 4th Meeting (3rd Term) 2022.3.15 1. To approve the 2021 Audited Consolidated Financial Statements and Parent Company Only Financial Statements ‧ Explanation of key audit items ‧ Explanation of statements and major The proposal was approved by the Audit Committee and will be resolved by the Board of Directors accounting items 49 3.3.3 Corporate Governance Implementation and Deviations from the “Corporate Governance Best Practice Principles for TWSE/TPEX Listed Companies” Yes Yes Assessment criteria 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 litigation? Actual governance Deviation and causes of deviation 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 litigation. No deviations were found 2. Is the Company constantly Yes The Company keeps track of the identities of its ultimate beneficiaries 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? Yes shareholding positions (including 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. 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- 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 No deviations were found No deviations were found No deviations were found 50 Assessment criteria Actual governance Deviation and causes of deviation Yes No Summary description insider rules. III. Assembly and obligations of the Board of Directors 1. Has the board devised and Yes implemented policies to ensure the diversity of its members? The Company has rules in place such as the “Corporate Governance Guidelines” and “Rules for Director Elections” 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 23. 2. Apart from the Remuneration Yes Apart from the Remuneration and Audit Committees, the Company also has a Sustainability Committee and Audit Committee, has the Company assembled other functional committees at its own discretion? 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 No deviations were found 51 Assessment criteria 3. Has the Company established 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 renewal? ) Actual governance Yes Yes No Summary description 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 determining individual Director’s compensation and their nomination for the next office term. Deviation and causes of deviation No deviations were found ▓ The performance of evaluation results in 2021 are as follows: Items Individual board members Board of Directors Audit Committee Remuneration Committee Total average 4.60 4.80 5.00 4.68 Evaluation level Good Good Excellent Good 4. Is the independence of Yes external auditors assessed on a regular basis? 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 Act 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 52 Actual governance Yes Yes No Summary description Vice-President Cheng-Chiang Wang was appointed to lead and supervise affairs pertaining to corporate governance in accordance with the Company’s “Corporate Governance Guidelines," while the Board of Directors secretariat was assigned as the Company’s responsible unit to handle corporate governance affairs. Deviation and causes of deviation No deviations were found Vice-President 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, producing minutes of board meetings and shareholders 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 2021, refer to page 57. Yes The Company addresses its stakeholder relations on its corporate website, Sustainability 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 was also 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 Assessment criteria IV. Is the listed or OTC Company equipped with competent and sufficient corporate governance personnel and is its designated corporate governance Director responsible for corporate governance related matters (including but not limited to 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 53 Assessment criteria Actual governance Deviation and causes of deviation Yes No Summary description suppliers)? VI. Does the Company engage a Yes share administration agency to handle shareholder meeting affairs? 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 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 an 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? 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/). ‧ The Company’s CSR to publicly disclose the Company's ESG actions. (URL: https: //www.facebook.com/compalCSR). No deviations were found No The Company’s financial reports were not able to be announced and filed within two months after the end of the fiscal year. 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 end of the fiscal year. 54 Actual governance Summary description • • • • • • • • • • Employee rights and care for employees (page 58) Code of Conduct for Directors, managers, and employees (page 58) Investor relations (page 59) Supplier relations and execution of customer policy (page 59) Stakeholders’ interests (page 59) Risk management practice and framework (page 59-62), Risk analysis (page 195-198) Purchasing liability coverage for the Company’s Directors, supervisors, and managers (page 63) Continuing education for Directors and managers (page 63-66) Succession plan for Board members and key Management team (page 67) Certificate and qualification acquisition status for personnel (page 67-68) Deviation and causes of deviation No deviations were found Assessment criteria VIII. Does the Company offer No Yes Yes other vital information (including but not limited to employee rights, employee 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? 55 Assessment criteria Actual governance Deviation and causes of deviation 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 encouraged its 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 2021, members of the Board of Directors completed a total of 108 hours of training. • In 2021, the amendment to the “Audit Committee Charter", “Rules Governing the Scope of Powers of Independent Directors", “Remuneration Committee Charter", “Procedures for Ethical Management and Guidelines for Conduct", “Rules Governing Financial and Business Matters Between this Company and its Affiliated Enterprises" and “Rules for Elections of Directors" were proposed to accommodate the business needs and the requirements of applicable laws and regulations. • In 2022, establish a Sustainability Committee, the enactment to the “Sustainability Committee Charter ", “Risk management policy of Compal Group ", the amendment “Corporate Social Responsibility Best Practice Principles" to “Sustainable Development Best Practice Principles" were proposed to accommodate the business needs and the requirements of applicable laws and regulations. • In 2022, the amendment to the “Articles of Incorporation", “Procedures for Acquisition or Disposal of Assets", “Procedures for Lending Funds to Other Parties", and “Rules and Procedures of Shareholders Meeting" were proposed to accommodate the business needs and the requirements of applicable laws and regulations. • In the “8th Round of Corporate Governance Evaluations” by TWSE, Compal was placed in the top 21%-35% of listed companies. • We uploaded the Annual Report 18 days before the shareholders’ meeting. 56 ▓ The results of Compal’s corporate governance unit operations for 2021 is as follows: ‧ Compiled and prepared relevant documents in need for the Audit Committee and the Board of Directors’ Meetings in accordance with pertinent regulations and operational/financial request; and be responsible for coordination with proposal making relevant units. ‧ The amendment to the “Audit Committee Charter”, “Rules Governing the Scope of Powers of Independent Directors”, “Remuneration Committee Charter”, “Rules Governing Financial and Business Matters Between this Corporation and its Affiliated Enterprises”, “Procedures for Ethical Management and Guidelines for Conduct”, “Rules for Elections of Directors” 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 and shareholders’ meeting 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. ‧ 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 well as 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 encouraged its Directors to take part in the courses on pertinent regulations offered by subsidiary Kinpo Group Management Consultant Company or by external professional organizations. ‧ The Company disclosed and announced important financial and operational information in conjunction with the events of the Board of Directors Meetings, Shareholders Meetings. In addition, the Company has also held financial result announcement conferences at least twice every year, and was invited to participate in domestic/foreign brokers’ investor forums on a quarterly basis, to help investors understand the Company’s financial and operational results. ‧ 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. ‧ Edit contents on the chapter for corporate governance of Annual Report– responsible for the collection of data, compilation of stock affairs data, and 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 offered liability coverage for directors, supervisors and managers. The amount for their liability insurance in 2021 came to USD 50,000 thousand, which was roughly equivalent to TWD 1,390,000 thousand. Vital information relating to their liability insurance was reported to the Board of Directors on the latest meeting of the Board of Directors. ‧ The Corporate Governance Officer took 21 hours of continuing education. For the exact education program, please see page 65-66. 57 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 breaks 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' interests. 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 centers: Places where employees may hold club activities, exercise, and socialize. 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. ‧ ‧ ▓ Code 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 sign a "Confidentiality Pledge" 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. 58 ▓ 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. In 2021, Compal proactively participated in online investor forums and investor conference calls, hosted by either local or foreign brokers every quarter, 13 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 supply partners, 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 The Company has established the risk management policy, which was approved by the Board of Directors on March 15, 2022. The core values of the policy are complying with the laws and regulations of the place where it operates, and setting up the risk control procedures in accordance with the international standard systems. The Company expect that the policy can identify the operation risk in advance. Therefore, the Company can adopt appropriate assessment and actions to transform, reduce or prevent the risks. (1) 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 59 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. Follow the local policies and regulations of important production bases. For example: the relevant guidelines of the "The Basic Norms of Enterprise Internal Control" issued by the Ministry of Finance of the People's Republic of China in conjunction with the China Securities Regulatory Commission, the National Audit Office, the China Banking Regulatory Commission and the China Insurance Regulatory Commission. (2) Establish the risk control procedures in accordance with the international standard systems. In accordance with the methodology of ISO 31000, the Company perform the identification, analysis, and evaluation processes to confirm the risk issues, then compile the risk issues in five major areas: strategy, finance, operations, legal compliance, and environment. Finally, the Company uses the "Risk Analysis Matrix" to prioritize risk management by considering the Company's resources. The Internal Control System has developed by the Company to consider the organization structures, authorization and the control points of operation procedure, and it has been 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. The Company achieve the goal of implementing internal control through the internal control self-assessment and performance assessment. Besides, the company has refer to the Three Lines of Defense (TLD) model for risk management issued by the IIA and the company operate practice to set up organization and procedures of risk management. (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 195). (4) If an important operating activity is identified with a potential urgent risk, it can be reported to the supervisor immediately for proper prevention. 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. (5) The future plan of risk management in the following five years. a. Continue to manage the "new type of risk" refer to the GRPS research report issued by WEF. According to the Global Risks Perception Survey carried out by the World Economic Forum every year, we evaluates key issues such as economy, geopolitics, environment, society and technology, from the 60 "likelihood" and "impact" of the event, and we also take new types of risks into management scope such as climate change or contagious disease. b. Digital transformation to enhance corporate governance As business models become more complex, manual post-check become outdated. We use the information system continuously to save labor cost, enhance the effectiveness of the Three Lines of Defense (TLD) model through the IT techniques and most importantly to achieve the goal of warning in advance. c. The future plan for the personnel of Three Lines of Defense (TLD) in the following five years. The number of international professional certificates related to risk management is expected to increase from 2 in 2021 to 12 in 2022. At the same time, the professional certificate holders of CPA/CIA/CISA aim to increase from 36% to more than 70% after five years. 61 Board of Directors, Audit Committee, Auditing Office (Level 3) ‧ Auditing Office: Risk inspection, evaluation, supervision, improvement and reporting ‧ Board of Directors, Audit Committee: Decision-making and ultimate control over risk evaluation 2. Risk management framework Front line unit (Business organizer) (Level 1) Risk review and control (Executive management meeting) (Level 2) ‧ Finance Department ‧ Operation Team 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 ‧ Business ‧ Corporate investment review ‧ Changes in policy and law ‧ Changes in technology and industry ‧ Changes in corporate image ‧ Investment, subsidiary and M&A benefits departments/centers (Note 1) ‧ Common departments (Note 3) ‧ Executive management meeting ‧ Subsidiaries monitoring and management report ‧ Expansion of factory, production site ‧ Business and equipment ‧ Centralized purchase or sale departments/centers (Note 1) ‧ Common departments (Note 3) ‧ Monthly operating meeting ‧ Production and marketing meeting ‧ Equity transfer involving Directors, ‧ Share administration supervisors, and major shareholders affairs ‧ Change of management ‧ Board of Directors ‧ Share administration affairs ‧ Head of Finance/Accounting ‧ Litigation and non-contentious cases ‧ Product risk management ‧ Legal affairs ‧ Handling of product safety incidents ‧ Managers of all levels ‧ Business groups/centers (Note 2) ‧ Other operational affairs ‧ Personnel behavior, ethics, and ‧ Managers of all levels ‧ Personnel Evaluation Committee conduct ‧ HR and Administration ‧ Rules (including SOPs), internal ‧ Managers of all levels control system and compliance with regulations ‧ Legal Affairs Office ‧ Investment Planning and Management Office ‧ Finance ‧ Accounting ‧ HR and Administration ‧ IT ‧ Board of Directors Meetings ‧ Share administration affairs ‧ Secretary of the Board of Directors ‧ Legal Affairs Office ‧ Prevention of insider trading ‧ Managers of all levels ‧ Information security management ‧ Managers of all levels ‧ ‧ ‧ Insider Trading Prevention Office Information Security (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: PCBG 1, PCBG 2, PCOBG, GOBG, SDBG, etc. 3. Common departments: Finance, Accounting, HR and Administration, Investment Planning and Management Office, Legal Affairs Office, etc. 62 ▓ 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 2021 are listed as follows: Insured Individuals Insured amount Insured Period Date of submission to the Board of Directors Directors, Supervisors and Managers USD 50,000,000 (Equivalent to TWD 1,390,000,000) From:2021.11.21 To: 2022.11.21 2022.2.10 ▓ 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 2021 include: ▓ Continuing education for directors: Date of training Name Title Organized by Course title Chairman Sheng-Hsiung Hsu 2021/05/14 Securities and Futures Institute 2021/11/12 Securities and Futures Institute Strategy and Management of Business Model Upgrade and Transformation Risks and opportunities of climate change and net zero emission policies to business operations Vice-Chairman Jui-Tsung Chen 2021/04/09 Compal Electronics, Inc. Global economy, market, and foreign 2021/05/14 Securities and Futures Institute 2021/11/12 Securities and Futures Institute 2021/11/17 Taiwan Securities Association 2021/12/17 Compal Electronics, Inc. Director Chieh-Li Hsu 2021/01/19 Kinpo Group Management Consultant Company Director Charng-Chyi Ko Director Sheng-Chieh Hsu 2021/05/14 Securities and Futures Institute 2021/11/12 Securities and Futures Institute 2021/05/14 Securities and Futures Institute 2021/11/12 Securities and Futures Institute 2021/05/14 Securities and Futures Institute 2021/11/12 Securities and Futures Institute 2021/11/19 Taiwan Corporate Governance Association 63 exchange market outlook Strategy and Management of Business Model Upgrade and Transformation Risks and opportunities of climate change and net zero emission policies to business operations Corporate Governance 3.0-Blueprint for Sustainable Development Seminar on "Global Economic and Market Outlook for the year 2022" Seminar on "Global Economic and Financial Market Outlook for the year 2021" Strategy and Management of Business Model Upgrade and Transformation Risks and opportunities of climate change and net zero emission policies to business operations Strategy and Management of Business Model Upgrade and Transformation Risks and opportunities of climate change and net zero emission policies to business operations Strategy and Management of Business Model Upgrade and Transformation Risks and opportunities of climate change and net zero emission policies to business operations New venture company (funding) regulations- on the requirements, Hours of training 3 3 1 3 3 3 1 2 3 3 3 3 3 3 3 Title Name Date of training Organized by Course title Hours of training Director Yen-Chia Chou 2021/05/14 Securities and Futures Institute 2021/11/12 Securities and Futures Institute operation and development of close companies Strategy and Management of Business Model Upgrade and Transformation Risks and opportunities of climate change and net zero emission policies to business operations Director Chung-Pin Wong Director Ming-Chih Chang Director Sheng-Hua Peng 2021/04/09 Compal Electronics, Inc. Global economy, market, and foreign 2021/07/29 Taiwan Institute for Sustainable Energy 2021/07/29 Taiwan Institute for Sustainable Energy 2021/10/28 Taiwan Institute for Sustainable Energy 2021/10/28 Taiwan Institute for Sustainable Energy 2021/11/26 Taiwan Corporate Governance Association 2021/12/17 Compal Electronics, Inc. exchange market outlook Implement ESG to build the first brand of sustainable finance Build an ESG platform and implement sustainability for finance Construction and Prospect of Circular Economy of China Steel Group Zero-carbon and Circular Economy from Technology Innovation An important subject of corporate mergers and acquisitions- The topic of the prevention and exemption of insider trading liabilities. Seminar on "Global Economic and Market Outlook for the year 2022" 2021/04/09 Compal Electronics, Inc. Global economy, market, and foreign 2021/12/17 Compal Electronics, Inc. exchange market outlook Seminar on "Global Economic and Market Outlook for the year 2022" 2021/04/09 Compal Electronics, Inc. Global economy, market, and foreign 2021/12/07 Taiwan Stock Exchange Corporation 2021/12/17 Compal Electronics, Inc. Independent Director Min Chih Hsuan 2021/03/24 Taiwan Corporate Governance Association 2021/09/27 Taiwan Corporate Governance Association Independent Director Duei Tsai 2021/04/14 Securities and Futures Institute 2021/08/04 Securities and Futures Institute 2021/08/31 Taipei Exchange 2021/09/01 Taipei Exchange 2021/09/01 Securities and Futures Institute 2021/09/17 Taiwan Corporate Governance Association 64 exchange market outlook 2021 Cathay Sustainable Finance and Climate Change Summit Forum Seminar on "Global Economic and Market Outlook for the year 2022" The directors and supervisors how to supervise the Company work well in crisis and risk management. Corporate Governance and Securities Regulations Corporate Governance for Green Energy Innovation Business Model and Green Finance New Trends Digital transformation of traditional industries Decoding the Sustainability DNA of SMEs - 2021 OTC Upgrade Sustainability Online Forum Investment for Sustainability Fully Launched - 2021 OTC Upgrade Sustainability Online Forum The 13th Taipei Corporate Governance Forum Introduction of Company management disputes case and Commercial event trial law 3 3 1 1 1 1 1 3 1 1 1 1 6 1 3 3 3 3 2 2 3 3 Title Name Date of training Organized by Course title 2021/10/14 Taiwan Corporate Governance Association 2021/11/19 Taiwan Corporate Governance Association 2021/11/26 Taiwan Corporate Governance Association Independent Director Wen-Chung Shen 2021/10/08 Taiwan Securities Association 2021/11/19 Taiwan Corporate Governance Association 2021/11/26 Taiwan Corporate Governance Association 2021/12/08 Taiwan Securities Association The business strategy and corporate governance in response to the world's unsustainable risks, on the perspective of Covid-19 New venture company (funding) regulations- on the requirements, operation and development of close companies An important subject of corporate mergers and acquisitions- The topic of the prevention and exemption of insider trading liabilities. Model of Wealth Inheritance: : A case study on Transfer in Ownership of Securities and Real Estate New venture company (funding) regulations- on the requirements, operation and development of close companies An important subject of corporate mergers and acquisitions- The topic of the prevention and exemption of insider trading liabilities. New Development in ESG: Evidence from Sustainable Management Strategy of Securities / Financial Industry ▓ Continuing education for managers Date of training Name Title Organized by Course title Vice-President Guo-Dung Yu Vice-President Hou-Chun Liu 2021/12/17 Compal Electronics, Inc. 2021/04/09 Compal Electronics, Inc. Global economy, market, and foreign exchange market outlook Seminar on "Global Economic and Market Outlook for the year 2022" 2021/12/31 Compal Electronics, Inc. Management for the prevention of Hours of training 3 3 3 3 3 3 3 Hours of training 1 1 0.58 Vice-President Cheng-Chiang 2021/04/09 Compal Electronics, Inc. Wang 2021/12/17 Compal Electronics, Inc. Corporate Governance Officer Cheng-Chiang Wang 2021/04/23 Taiwan Corporate Governance Association 2021/09/07 Taiwan Securities Association 2021/10/08 Taiwan Securities Association 2021/11/19 Taiwan Corporate Governance Association 65 insider trading (for senior managers) Global economy, market, and foreign exchange market outlook Seminar on "Global Economic and Market Outlook for the year 2022" The Operation and Merger & Acquisition Strategy: A Taiwanese Enterprises view on the Global Politics and Economics Legal Liabilities & Case Study for Financial Statement Fraud & Insider Trading Model of Wealth Inheritance: : A case study on Transfer in Ownership of Securities and Real Estate New venture company (funding) regulations- on the requirements, operation and development of close companies 1 1 3 3 3 3 Title Name Date of training Organized by Course title 2021/11/26 Taiwan Corporate Governance Association 2021/12/08 Taiwan Securities Association 2021/12/10 Accounting Research and Development Foundation Accounting Officer Cheng-Chiang Wang 2021/12/09- 2021/12/10 Accounting Research and Development Foundation Internal Audit Officer Chenyi Li 2022/11/03- 2022/11/05 Securities and Futures Institute An important subject of corporate mergers and acquisitions- The topic of the prevention and exemption of insider trading liabilities. New Development in ESG: Evidence from Sustainable Management Strategy of Securities / Financial Industry New trends and new thinking in evaluating corporate’s ESG sustainable performance “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. Pre-employment Training Course for Corporate Internal Auditors Hours of training 3 3 3 12 18 66 ▓ 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 Vice-President Chung-Pin Wong, who joined Compal in 1989 and has over 30 years’ 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 Vice-President to Executive Vice-President Positions and were appointed to lead the three business groups: PCBG, SDBG, and GOBG, respectively. They were also elected to serve on the 13 th Board of Directors in 2018. By this, Compal has successfully completed the succession of its Board members and key management team that symbolizes the transition to a new generation. The abovementioned top management of the Company were re-elected as the 14th term of Board of Directors at the 2021 Annual General Shareholders Meeting. 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 transparency CPA qualification USCPA qualification ASEANCPA qualification Senior Securities Specialist Securities Specialist Futures Specialist Securities Investment Trust and Consulting Professional Certified Basic Proficiency for foreign exchange personnel Certified Basic Proficiency for credit officer Certified Product insurance salesman Chartered Financial Analyst Certified Internal Auditor - Taiwan Certified Internal Auditor Certified Information Systems Auditor Business Continuity Management Lead Auditor Information Security Management Lead Auditor Information Technology Service Lead Auditor Greenhouse gas emissions Auditor 67 5 persons 2 persons 1 person 8 persons 4 persons 3 persons 3 persons 1 person 1 person 1 person 1 person 3 persons 3 persons 1 person 1 person 2 persons 1 person 1 person Name of certificate No. of persons Personal Information Management Lead Auditor Environmental management systems Auditor Occupational health and safety management Lead Auditor Lean Six Sigma Black Belt Project Management Professional Certified SCM Master 1 person 1 person 1 person 1 person 1 person 1 person 68 3.3.4 Composition, Responsibilities, and Operations of the Remuneration Committee 1. Professional Qualifications and Independence Analysis of Remuneration Committee Members Conditions Identity Name Convener Independent Director Wen-Chung Shen Independent Director Min Chih Hsuan Independent Director Duei Tsai May 11, 2022 Number of Other Public Companies in Which the Individual Professional Qualifications and Experience Independence Criteria is Concurrently Serving as a Remuneration Committee Member Bachelor of Electrical Engineering Dept., National Taiwan University Chair of Hetuo Investment Co., Ltd. Director & Executive Vice-President of Compal Electronics, Inc. Possesses 30 or more years of work experience required for the Company's business, and not been a person of any conditions defined in Article 30 of the Company Law. Honorary Doctorate, National Chiao Tung University Bachelor of Electrical Engineering Dept., National Chiao Tung University Chair, Vice-Chair, President and CEO of United Microelectronics Corp. Possesses 30 or more years of work experience required for the Company's business, and not been a person of any conditions defined in Article 30 of the Company Law. Ph.D., Electrical Engineering, National Taiwan University Independent Director of Taiwan High Speed Rail Corporation & TTY Biopharm Company Ltd. Possesses 30 or more years of work experience required for the Company's business, and not been a person of any conditions defined in Article 30 of the Company Law. ˙ Compliance with independence requirement (note) ˙ The person him/herself or his/her spouse or relatives within the second degree (or in the name of others) hold 5,151,000 shares of the Company at a ratio of 0.11%. ˙ Compliance with independence requirement (note) ˙ The person him/herself or his/her spouse or relatives within the second degree (or in the name of others) hold 0 shares of the Company at a ratio of 0%. ˙ Compliance with independence requirement (note) ˙The person him/herself or his/her spouse or relatives within the second degree (or in the name of others) hold 0 shares of the Company at a ratio of 0%. 0 0 2 Note: Compliance with independence requirement: State whether the members of the Remuneration Committee meet the independence requirement. ˙ Including but not limited to that the person him/herself or his/her spouse or relatives within the second degree have not worked as the directors, supervisors or employees of the Company or its affiliated enterprises; ˙ Have not worked as a director, supervisor or employee of a company that has a specific relationship (per the provisions of 69 subparagraphs 5~8, paragraph 1, Article 6 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Taiwan Stock Exchange or the Taipei Exchange) with the Company; ˙ Have not received remuneration by providing business, legal, financial, accounting and other services to the Company or its affiliates in the last 2 years; ˙ Number of shares of the Company and shareholding ratio of the person him/herself or his/her spouse or relatives within the second degree (or in the name of others). 2. Responsibility of the Remuneration Committee • Formulate and regularly review the policies, systems, standards and results for the performance evaluation and remuneration of directors (including independent directors) and managers. • Regularly evaluate and determine the remuneration of directors (including independent directors) and managers. The salary and remuneration mentioned above include cash remuneration, stock options, dividends, retirement benefits or severance payments, various allowances and other measures with substantial incentives. 3. Attendance of Members at Remuneration Committee Meetings • • • • The Company's Remuneration Committee is composed of three Independent Directors. The term of the 4th committee ran from July 4, 2018 to August 27, 2021. The term of the 5th committee ran from August 27, 2021 to August 26, 2024. There were five Remuneration Committee meetings during 2021(A) and the committee member qualifications and attendance records are as follows. Title Name Attendance in Person (B) By Proxy Attendance Rate (%) [B/A] Convener Wen-Chung Shen Committee Member Min-Chih Hsuan Committee Member Duei Tsai Committee Member Duh-Kung Tsai 2 5 5 3 0 0 0 0 100% 100% 100% 100% Remarks Took office on August 27, 2021 Left office on August 27, 2021 ■ The discussion of the Remuneration Committee and the resolution, as well as the actions the Company has taken in response to any opinions arisen from the Remuneration Committee. Board of Directors Meeting 18th Meeting (13th Term) 2021.3.26 Resolution Adopted by the Remuneration Committee 1. To approve the proposal of the distribution of compensation to employees and directors for the year 2020 2. To approve the first mid-year employees’ bonus of the year 2021 ▲Resolution Adopted by the Remuneration Committee (2021.3.26): Upon solicitation of comments by the Chair, there was no objection 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: Upon solicitation of comments by the Chair, there was no objection raised and the 70 Board of Directors Meeting 19th Meeting (13th Term) 2021.5.12 21th Meeting (13th Term) 2021.8.12 Resolution Adopted by the Remuneration Committee resolution was adopted unanimously by the Directors present. ・Motion 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 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 Chair, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. 1.To approve the proposal for the appropriated percentage for the remuneration of employees and Directors of the year 2021 2.To approve employees’ salary adjustment of the year 2021 ▲Resolution Adopted by the Remuneration Committee (2021.5.12): Upon solicitation of comments by the Chair, there was no objection 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: Upon solicitation of comments by the Chair, there was no objection raised and the resolution was adopted unanimously by the Directors present. ・Motion 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 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 Chair, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. 1.To approve the Directors’ Remuneration for the year 2020 2.To approve 2nd mid-year employees’ bonus for the year 2021 ▲Resolution Adopted by the Remuneration Committee (2021.8.12): Upon solicitation of comments by the Chair, there was no objection 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: Chair Sheng-Hsiung Hsu asked the Independent Director Min-Chih Hsuan to act as a Deputy Chair to preside at this meeting for discussion and voting on this proposal. Since an interested party relationship existed, the Directors (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, Anthony Peter Bonadero and Sheng-Hua Peng) recuse and exclude themselves from discussion and voting on this proposal to avoid conflict of interest. Upon solicitation of comments by the Deputy Chair, there was no objection 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, an interested party relationship exists among any Directors and any agenda proposals, such Directors shall recuse and exclude themselves during discussion and voting on those proposals. Accordingly, to avoid conflict of interest, Directors Jui-Tsung 71 Board of Directors Meeting 1st Meeting (14th Term) 2021.8.27 2nd Meeting (14th Term) 2021.11.11 Resolution Adopted by the Remuneration Committee 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 Chair, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. 1. Election of the Committee convener and the Chair of the 5th Remuneration Committee ▲Resolution Adopted by the Remuneration Committee (2021.8.27): Wen-Chung Shen is elected by all members as the convener and Chair of the Remuneration Committee. ▲Action taken by the Company in Response to the opinion of the Remuneration Committee: Not applicable(No request for consent from the Board of Directors) 1. To approve the compensation of Employee bonuses in cash of the year 2020 2. To approve the proposal for 2021 year-end employees’ bonus ▲Resolution Adopted by the Remuneration Committee (2021.11.11): Upon solicitation of comments by the Chair, there was no objection 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 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 Chair, there was no objection raised and the resolution was adopted unanimously by the remaining Directors present. ■ Other notes: 1. 2. 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 the 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 exceeds the remuneration committee’s recommended amount, the circumstances and cause for the difference shall be specified): None. 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. 72 3.3.5 Corporate Sustainability Development Assessment criteria Actual governance 1. Does the Company conduct Yes The Company has a dedicated unit responsible for the prevention of insider trading and a Yes No Summary description 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? Sustainability Committee. The Committee consists of members of senior management authorized by the Board of Directors to oversee affairs pertaining to integrity management and Sustainability related issues. The Sustainability Committee was established in March 2022, with three members (including two independent directors) appointed by a resolution of the Board of Directors, and the Chair of the Committee is President and CEO Chung-Pin Wong. In addition, Compal also has the ESG Office with designated personnel to handle the promotion of relevant tasks resolved by the Sustainability Committee. The Sustainability Committee will report to the Board of Directors regarding the operating status and results of the committee at least once a year. For the 2021 Corporate sustainability operation and implementation please refer to page 85-87, the targets and plans of 2022 Corporate Sustainability please refer to page 87-88. The results of implementation are also disclosed in our Annual Report, Sustainability Report, and on our CSR sustainability website. Deviation and causes of deviation No deviations were found 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? 1. Risk identification: Collect environmental, social and corporate governance issues that stakeholders are concerned about, and refer to analysis reports on international situations and industry trends, then classified risk issues into "Strategy," "Finance," "Operation," and "Legal Compliance", "Environment". 2. Risk assessment Through a risk analysis matrix, the likelihood and impact of risk issues are evaluated respectively, and ranked by the result of the evaluation. Among them, "supply chain material interruption risk", "human resource development" and "information security risk" were rated as the top three risk issues. No deviations were found 3. Risk response and management (1) Supply chain material interruption risk The Company's revenue continues to grow, and it is highly dependent on the stable supply of key components. In order to reduce the risk of sluggish materials and increase profitss, the 73 Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation Company implements real-time production and precise control of inventory management. However, the Covid-19 continues to rage and the energy shortages in various countries. The risk of material outage and production stoppage arising from the model of precise inventory management is also increasing day by day. Under this circumstance, the Company intends to take the following countermeasures a. Continue to strengthen the supply chain information system and improve the platform's management mechanisms such as demand forecasting, inventory inquiry and delivery instructions. b. Strengthen the strategic partnership of key component manufacturers. c. Big data analysis to grasp the changing trend of raw material market. d. In response to the impact of the Covid-19, plan and promote online bidding (inquiry and price negotiation) and the modularization of the procurement system. (2) Human resource development Due to the Company's international strategic planning and cross-industry diversification, the demand for international talents continues to increase. However, due to the increasing competition in the industries to which the Company belongs, the impact of child rearing, the emergence of technology and the change of regulations and standards, the supply and demand of talents in the market are imbalanced, which makes it difficult to recruit talents for strategic planning, professional skills and management, and there is a risk of a talent gap or technology succession in the medium to long term. The following measures will be taken. a. Complete layout of the succession echelon of strategic management professionals. b. Excavation and cultivation of high-potential talents. c. Continuous implementation of bilingual ability and international vision development education. d. Evaluate and plan Robotic Process Automation system development 74 Assessment criteria Actual governance Yes No Summary description (3) Information security risk. Deviation and causes of deviation large international companies are accelerating The Covid-19 has led to an increase in the demand for remote work. In order to enhance their core competitiveness, their digital transformation. While during the transition period, they may face information security threats. It is urgent to strengthen protection against vulnerable links in systems, technologies and security. Therefore, in accordance with the NIST cybersecurity framework and the international ISO 27001 framework, the Company promotes the following countermeasures a. Dedicated units assess risks and ensure security controls and technical protection in a PDCA model to reduce the likelihood of external network threats. b. Build information security technology equipment in the intranet, such as anti-virus servers, hardware firewalls and mail servers to filter external letters, etc. c. Ongoing internal and external vulnerability scanning and penetration testing. d. System backup and off-site backup mechanism to ensure uninterrupted operation. e. Regularly evaluate suppliers' information security protection capabilities to ensure that they can resist external security threats. f. Develop awareness of protection for all staff, and implement regular information security training and drills. 3. Environmental issues. 75 Assessment criteria Actual governance Yes No Summary description (1) Has the Company established an Yes appropriate environmental management system according to its industrial characteristics? (2) Is the Company committed to improving the efficiency of resource utilization and using recycled materials with a low impact on the environment? Yes Compal has established environmental safety policies, and each plant has its own responsible personnel. Each month, they collect and transfer relevant laws and regulations on environment, safety and health to relevant personnel, and designate personnel to review the operations and methods related to laws, and to amend the operations and methods that do not conform to the regulations. If there is a major change in laws and regulations, it is necessary to change the Company's relevant policies, objectives and targets, and amendments should be proposed at any time. In order to grasp the possible operational challenges faced by Compal in terms of environment, we are gradually building, managing and implementing the environmental management system, all factories have adopted ISO 14001 and ISO 45001, conduct internal audit every year, and obtain third-party verification to ensure the effective operation of the management system, effectively tracking and controlling various environmental performance, actively practicing waste reduction, promoting zero landfill of regulation update waste, providing various complaint pipelines, and continuously and stably providing products and services recognized by stakeholders. All production processes and products of Compal shall comply with the requirements of environmental protection laws and regulations. We shall continue to improve and effectively manage our operation. In 2021, no violation of the environment laws or regulations has occurred. Throughout the "product lifecycle," 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 added 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. 76 Deviation and causes of deviation No deviations were found No deviations were found Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation (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? No deviations were found In 2022, recycled materials will be fully introduced into commercial laptops, and the weight ratio of recycled materials for each model must be more than 5%. Electricity intensity is 320 kWh per million revenue, 47 kWh lower than per million revenue in 2020. In addition to the introduction of ISO 50001 energy management system and continuous maintenance in Kunshan Plant 3, Chengdu Plant and Pingzhen Plant, Kunshan Plant 2 is expected to pass the verification in 2022, and set a long-term goal of 100% renewable energy use in 2050, and continue to promote and maintain Solar power generation system, outsourcing renewable energy. 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. Continue to follow the TCFD framework to identify risks and opportunities, incorporate strategic planning and risk management mechanisms, and further identify financial shocks and plan the use of capital. According to the results of identification, evaluation and sorting of risks and opportunities, the operating decision-making committee will select three risks and three opportunities for calculating financial risks, which are: Risk 1. Importing alternative recycled raw materials, increasing the cost of R&D technology transformation. Action 1. In the design stage, Compal considers waste reduction and resource reuse, introduces environmentally friendly materials and low-polluting alternative materials, and introduces many Regulation update design patterns that can reduce the use of natural resources and increase recycling. Actively develop and introduce recycled plastics and biodegradable plastics in electronic 77 Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation products to meet international trends and meet customer expectations. Risk 2. In response to external requirements, the increase in the use of renewable energy will increase operating cost. Action 2. The global awareness of environmental protection is gradually on the rise. Green production is the most important part of maintaining environmental resources and industrial competitiveness. Compal continues to abide by its excellent green production methods, and improves the operation mode of power saving, water saving and waste reduction. In 2021, 7,634,710 kWh of photovoltaic power generation and 161,055,833 hydropower generation renewable energy was purchased. Risk 3. Improve the energy efficiency standards of various assets and increase operating cost. Action 3. To make the first step of reducing energy use and reducing the burden on the environment, we should start from energy conservation. In addition to innovative means to improve energy efficiency, when energy consumption equipment needs to be replaced or disposed, we shall select energy-saving products for replacement, provide energy- saving tips to employees at any time, and actively introduce external guidance units. of the plants in Pingzhen, Kunshan no. 3 and Chengdu have obtained the ISO 50001 energy management system certification and to promote equipment networking has been established for the hope of maximizing the economic benefits of each unit of energy, to align with the goal of EP100. Opportunity 1. Actively take sustainability as a way to continuously gain customers' favor. Action 1. In recent years, climate actions as carbon reduction have been raging like a storm around the world, and internationally renowned large companies, such as Apple, Google, and Microsoft, have issued relevant carbon reduction commitments in 2020. Being confronted by the environmental impacts brought about by those climate changes, Compal has also 78 Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation actively invested itself into green product design, plant energy-saving management, and coping measures to extreme climate by promoting lean production, controlling energy use, reducing useless waste in production process, and creating higher economic benefits as well as environmental protection Opportunity 2. Assist suppliers in low-carbon transformation and reduce procurement cost affected by climate change. Action 2. Compal uses the ISO 14001 environmental management system to evaluate the environmental policies and implementation of suppliers in the new supplier selection criteria, and adds a green management evaluation form for new supplier management and selection. In 2021, although face-to-face supplier meetings could not be held due to the impact from Covid, CSR and supplier promotion matters were released in the CPS announcement system to persistently sustain good communication with suppliers. The content is related to the RBA VAP v7.0 updated category, conflict minerals, Compal supplier CSR system introduction, and green environment supply chain promotion. We will work together with our supply chain partners to enhance climate resilience and sustainable development. Opportunity 3. Introduce smart manufacturing processes to improve production and distribution efficiency, thereby reducing operating cost Action 3. Although Compal Electronics is not a high-energy consuming industry, it is also actively working to improve the energy efficiency of its production lines. In addition to promoting the automation of production lines, it has also eliminated all difficulties in building its equipment networking system to connect different equipment usage conditions at various stages, which is convenient for remote monitoring and management. We attach a climate-related risk and opportunity identification table. Please see page 89. 79 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? Deviation and causes of deviation No deviations were 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 (scope 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 cost through autonomous carbon reduction or even turning risks into opportunities to ensure the Company’s sustainability. Set a long-term goal of using 100% renewable energy by 2050. Through power saving and renewable energy procurement, it is estimated that 50% renewable energy can be used in 2030, and promote the management method of UL 2799 zero landfill waste, and actively reduce waste generation. Achieve a 50% reduction target in 2025 (base year 2018), pay attention to water resources in the basin, and reduce water consumption by 10% (base year 2018) 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 Scope 1 greenhouse gas emissions Scope 2 greenhouse gas emissions Scope 3 greenhouse gas emissions Total water consumption Total general waste Total hazardous industrial waste 2020 23,311.811 191,286.178 19,687.174 2,543,277 36392.17 1,284.61 Unit: Tons 2021 20,558.972 (Note) 188,939.931 (Note) 24,633.557 (Note) 2,554,897 33861.86 1,664.91 Note: Please refer to the Company’s Sustainability Report for the assurance data and details. 4. Social issues (1) Has the Company formulated management policies and specific management plans regarding Yes 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 are all followed the human and labor No deviations were found 80 Assessment criteria social issues in accordance with relevant laws and regulations and International Human Rights Conventions? Yes No Summary description Actual governance Deviation and causes of deviation rights of our employees by the Universal Declaration of Human Rights and Ten Principles of The United Nations Global Compact. We also align our actions with the RBA and its Code of Conduct. Human Right Policies in Compal ‧ Ensure equal job opportunities in the Company Respect and be fair to employees, no matter what their race, belief, skin color, gender, nationality, age or physical characteristics is . ‧ Provide a safe and secure work environment without harassment When the employees encounter any threat, abuse, exploitation, or compulsive behavior at work, they can report any illegal matter anonymously through the complaint mailbox. ‧ Attendance system and forbiddance of forced Labor All employees are protected by a collective bargaining agreement at the time they sign their contracts of employment. The Company plans its attendance system according to local laws and regulations. Forced labor is strictly forbidden and we protect the rights and interests of employees ‧ Establish a relationship-management communication platform When employees face any unreasonable affairs in the Company, such as unsatisfying with the human resources system, working environment, benefits, or facing forced labor, discrimination, sexual harassment etc., they can report the issues via following internal website or e-mail. The Company commits to the confidentiality and protect the employees from retaliation If employees would like to complain about the situation that happened in Compal, such as human resources system, occupation, employee benefits, and forced labor, discrimination, sexual harassment and so on of any unreasonable incidents, they can report via following internal website or e-mail, we commit to the confidentiality and prevent retaliation Respecting to the rights of our employees, the Company revise the policies and rules in line with the latest regulations, and announces them to all its employees. 81 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? Yes No Yes ■ Employee Benefits Actual governance Summary description The Company allocates 0.05% of its turnover to welfare funds every year, and has employee welfare committees to handle various welfare matters, including marriage, funeral, and childbirth allowance, social activities allowance employee health and travel allowance, festival gift certificates, birthday gift certificates, cultural and leisure allowance and other welfare matters. ■ Employee compensation Pursuant to the Articles of Association, when the Company profits makes a profits in a year, no more than 2% of the Company’s pre-tax profits (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. Deviation and causes of deviation No deviations were found (3) Does the Company provide Yes employees with a safe and healthy work environment? Are employees trained regularly on safety and health issues? 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. No deviations were found The Company organizes health and safety training for employees on a regular basis as a means to prevent occupational accidents and ensure workplace safety. In addition, we analyze the causes of occupational accidents and provide suggestions and measures to improve the situation. In 2021, 3,033 employees had completed their training for a total of 8,379 hours, and the number of occupational accidents among employees was 157, involving 157 employees (accounting for 0.2% of the total number of employees). 82 Assessment criteria (4) Has the Company established an effective career development training program for its employees? Yes No Yes (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 rights and interests of consumers? Actual governance Summary description Annual training programs are tailored to suit the needs of different employees, based on the Company’s business strategies, policy guidelines, and career roadmaps, including newcomer training, core competencies, managerial competencies, and common competencies courses. The Company constantly aims to establish itself as a learning organization and coaching management. In 2021, a total of 673 training sessions (both internal and external) were organized; these courses delivered 170,617 hours of training and 59,307 persons enrolled. 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 to 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. We offer, a complaint channel for stakeholders on the official website of Compal. 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 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, gradually convert the version to IEC 62368-1, 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. Deviation and causes of deviation No deviation was found No deviations were found (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? 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 behavior 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 No deviations were found 83 Assessment criteria Actual governance Deviation and causes of deviation Yes No Summary description RBA’s code of conduct: management of Labor, Health and Safety, Environment and Ethics along with an additional clause on the non-use of conflict minerals. The policy has been effective ever since. 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 organization? For the existing qualified suppliers, Compal collects SAQ (self-assessment questionnaire) as the first step of audit every year. The Company also holds supplier conferences to promote the contents including the attempt to revise the environmental control substance management standard and upgrade the system, the promotion of Compal CSR objectives and international initiatives. In addition, 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 completed 35 supplier on-site audits and tracking improvement plans in China in 2021. The Company has issue published annual CSR reports (The name will be changed to Sustainability Report in 2022) for its stakeholders on its website since 2010. The Sustainability report was first certified by an external institution in 2012. The Company adopted Global Reporting Initiative’s most updated guidelines (GRI Standards, published in 2018) to prepare its Sustainability report. The report was compiled based on issues concerning stakeholders and the Company’s key objectives. In 2021, we added Sustainability Accounting Standards Board (SASB) standards to disclose relevant information. To ensure the credibility of reported contents, the Company commissioned SGS to provide independent assurance based on the criteria specified in AA 1000, GRI Standards and SASB Standards. After their assurance, the report was certified as meeting AA 1000 Standard Type 2, mid-level accountability and the GRI Standards Core Requirements. The Company was awarded Awards by the Taiwan Institute for Sustainable Energy for its “ Taiwan Corporate Sustainability Report Award” for many years. In 2021, we received the Platinum Award of this award. No deviations were found 84 ▓ The implementation results of 2021 Sustainable Development Item Results 1. We were awarded the 7th 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 six consecutive years and in the FTSE4Good TIP Taiwan ESG Index for the fourth consecutive years. We were re-selected as a constituent stock of "Taiwan High Salary 100 Index" and "Taiwan Employment 99 Index". 3. We were ranked the Gold Award in the Technology R&D of 2021 Happiness Enterprise online voting by 1111, Human resource agency, 339th of Fortune Top 500, 1314th of Forbes Top 2000, 5th in the "Top 2000" Manufacturing Industry by CommonWealth Magazine, 64th of CommonWealth Magazine’s Top1000 in China, Taiwan and Hong Kong, and CommonWealth magazine’s Taiwan. 4. The Compal CSR report in 2021 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 of TCSA. 5. In order to fulfill the corporate social responsibility and strengthen the Company's ESG information disclosure, the Company officially launched the Task Force on Climate-related Financial Disclosure (TCFD) and the Sustainability Accounting Standards Board (SASB) projects, and the disclosure information of the sustainability report in 2021 will follow the TCFD and SASB. 6. We were ranked Taiwan Best of Germany iF Product Design Award from 2017-2021 and 6th of iF Worldwide Design Award. 1. We comply with human rights and conflict mineral standards. In 2021, we implemented e policy of "Non-use of conflict minerals’ policy and completed a survey (CMRT) of 1,014 suppliers’ conflict minerals with a completion rate of 100%. 2. To enforce RBA audit and management on Tier- Suppliers, our Chinese plants have audited 35 suppliers on-site and tracked the corrective actions. 3. To maintain a good communication relationship with suppliers continuously, Company held an online supplier conference in 2021. The content is about "The update of global green product regulations and key points of implementation", "RBA VAP v7.0 update items", "Conflict minerals", "Compal supplier management system introduction" and "Supply Chain green environmental advocacy". 349 staff members of suppliers participated online. 1. We participated in the Carbon Disclosure Project (CDP) climate change and water safety questionnaire. Both were ranked at management tier in 2021. 2. With starting from the source reduction, promoting waste reduction and recycling, NJC, KS1, and CQA plants continue to promote UL2799 management systems. In addition, KS2 are added to obtain UL2799 zero waste landfill platinum certification. 3. Continuously promote ISO 50001 energy management system in the KS 3, KS 4, CD and PCP Plants to improve energy efficiency, use 168,690,543 kWh of green electricity, accounting for 42.6% of the Group's electricity consumption, and reduce greenhouse gas emissions by 144,201,147.032 Kg CO2e. 4. We participated in the "Waste 3C Recycling Activities" of customers; at which, 121 Compal employees joined the event. 5. Responding to the sustainable development goal of the United Nations "SDGs 14 Life below Water ", the 62 employees participated in Forgotten Coast Beach Enterprise Joint Beach Cleanup action. Corporate Governance Supply Chain Management Environmental Sustainability Green Product 1. The 85 products that have passed the US Evaluation Guidelines (EPEAT 2018); in which, 37 products have obtained the Gold level certification, 17 products have obtained the Taiwan 85 Item Results Environmental Protection Label, 26 products have obtained the TCO Label, and 46 products have obtained the CECP label. There are also 4 models of LCD monitors that have obtained the CECP label and 4 models that have obtained the TCO label. 2. 139 notebook products and 4 LCD monitors have obtained the latest Energy Star certification. 3. 69 notebook products have completed the full substance disclosure announcement. 4. Halogen-free products list: 102 types of laptops, 23 types of smart phones, and 2 types of 5G devices. 1. Donated TWD 100 million to the Tzu Chi Foundation to purchase vaccines to help Taiwan Covid-19 pandemic prevention; and donated TWD 1 million of medical supplies to assist Vietnam in pandemic prevention. 2. Compal donated TWD 2 million to the HCI Foundation to expand social care for the vulnerable. In 2021, 1,557 employees participated in various public welfare activities of the HCI Foundation, and donations exceed TWD 5 million. 3. To promote a pluralistic and equal society, and chartered venue to support the release of documentary "Among Us" sponsored by Compal, which help the public know more about autistics. 4. Hold a series of activities of “Charity can’t stop”, cooperate with social enterprises and social welfare groups in public welfare, and donate materials to help vulnerable children and farmers. ˙Unceasing Charity by Compal I: 666 colleagues donated mid-autumn moon cake sets to 1,255 vulnerable school children in Taoyuan, Pingtung, Changhua and Hsinchu. ˙Unceasing Charity by Compal II: 474 colleagues donated 989 moon cakes to vulnerable school children in Taitung. ˙Unceasing Charity by Compal III: Compal's " Pomelo " Project has been realized via practical actions as we supported local agricultural products and helped farmers in relief. 5. Compal held the second "Healthy Charity" event, 186 employees reached the standard and donated 186 kilograms of Taiwanese rice and 186 packs of noodles to help 186 children from poor families in 5 schools. 6. Compal co-organized the first “Taipei Science and Technology Cup Love Earth Charity Road Run” in Taipei Neihu Technology Park. To advocate national sports, improve the physical and mental health of employees in Neihu Tech Park, take care of socially vulnerable people and to build a beautiful, good and healthy society. 7. Sponsored the "Kangaroo Project" from the Rural Center of Fu Jen University for the 3rd year, for the after-school tutoring center and community teacher training program at Linkou Dayuan, Sanduo Elementary School and Yuli Bookstore. 8. Promoted SDGs4 Quality Education of UN, sponsored the "Newspaper Reading Project" in Pingtung Region and donated 210 tablet computers to 12 schools in Taoyuan for participating the "Technology and Innovation Education Project" and benefiting 1,180 students. In addition, donated Taiwan World Vision 110 pieces to assist remote digital education in remote rural Taitung during the pandemic. In 2021, a total of 340 mobile digital devices will be donated to improve Children’s high-quality education. 9. We regularly hold volunteer service activities. In 2021, we had 4 volunteer service activities with 57 participants. We also held blood donation activities. (228 employees donated 440 units of blood, a total of 110,000 cc). Social Welfare Employee Care 1. We take care of the health of employees, on-site consultations with physicians are arranged every week, and health promotion management is carried out for those with 86 Item Results high cardiovascular risk. The achievement rate is 78.7% in 2021, and is above 90.5% on January, 2022 (the achievement of the target was postponed due to the impact of Covid- 19). 2. Implement Covid-19 prevention program ˙Establish a Covid-19 prevention team, formulate a pandemic prevention plan, implement pandemic prevention measures, conduct risk management, activate a diversion mechanism, and maintain organizational operations. ˙About 166 colleagues attended Covid-19 prevention tracking management. ˙Provide rapid test for new recruits to screen high-risk individuals, reduce risks, and ensure the health of colleagues. 3. To improve fertility rates, we provide a TWD 66,000 maternity subsidy to employees for each newborn baby. 251 Compal babies were born in 2021. Compal has provided more than 3,500 birth rewards for 11 consecutive years, with a total amount exceeding TWD 230 million. 4. We continue Employee Assistance Program (EAP) in 2021. EAP counseled a total of 83 cases about family and workplace relations issues. 5. We organize various employee health promotion activities, including charity runs, health lectures, and various club activities to take care of employees' physical and mental health. ˙Compal’s 10K team for the Neihu Charity Running Activity: 30 colleagues attended the 10K team. ˙”Exercise 132 Commitment” activities: Encourage colleagues to develop the good habit of exercising regularly. 186 colleagues achieved the exercise, with a total of more than 744 hours of exercise. The programs of personnel training Compal is a member of the GOLF academic alliance. In 2021, we successfully admitted 128 students to participate in one-year internship. Also, we had 166 students to register online courses and host 16 on-campus business internship sessions with a total of more than 1,000 students participating. ▓ The targets and plans of 2022 Sustainable Development NO. 1 2 Targets Strengthen the functions of the Board of Directors and establish a sustainable governance structure Focus on green manufacturing and carbon reduction and waste reduction, towards the sustainable goal of 2050 net zero carbon emissions. Plans (1) The Company has a Sustainability Committee, which holds meeting and report to the Board on a regular basis. Sustainability (2) We promote Business Continuity Management, improve risk management policy and risk management organization. (3) We emphasize corporate integrity management and anti-corruption, enhance employee awareness and strengthen relevant training. (1) We introduce Task Force on Climate-Related Financial (TFCD) Disclosures to accurately assess climate-related risks and opportunities. (2) We increase the proportion of renewable energy used. (3) We introduce energy management system, reduce electricity consumption level by 1% compared to the previous year. (4) We introduce digital hazardous substance test report and prepare hazardous substance assessment reports efficiently through a cloud-based data stream; the digital hazardous substances report shall be accounted for more than 5%. (5) We follow the design guidelines of environmental protection, sustainable development and renewable energy to develop environment-friendly products. The proportion of recycled materials each project for commercial notebook computer products shall reach 5% in the year 2021. 87 NO. 3 4 5 6 Targets Plans Focus on climate change and continue to respond to the United Nations 30 (ocean) x 30 (land) plan. (1) We recognize importance to biodiversity, protect plants in the blue carbon ecosystem, and participate in mangrove wetland conservation plans. (2) We organize beach clean-up activities, continuously carry out environment protection education and jointly advocate ocean protection actions Enhance the Company's power of sustainability and strengthen disclosure of ESG information. (1) We upgraded the Sustainability Committee (formerly Corporate Social Responsibility Committee) to a functional committee. Set up a functional committee - The Sustainability committee. (2) We implement Compal's vision of sustainable management and establish a Promote gender equality, a healthy workplace environment, and care for employees' family and workplace balance. Promote high-quality education, eliminate the urban-rural gap, develop digital technology, and inherit local culture. competent ESG ecosystem. (3) We strengthen our Sustainable Supply Chain and implement Sustainable Supply Chain Management project. (1) We promote gender equality in the workplace. (2) We carry out health promotion management for colleagues whose physical check- up are in the middle and high-risk group of cardiovascular disease. The event achievement rate is 80%. (3) We pay attention to the health and safety of employees, promote health promotion Programs, and care for employees to have a balanced life at home and at work. Continue to promote EAP Employee Assistance Program. (4) We hold health projects since 2019 to achieve a win-win goal for employee health and public welfare participation. (1) We support the HCI Foundation's care activities for vulnerable school children in rural areas. Responding to the UN Sustainable Development Goals (Sustainable Development Goals, SDGs); at which, the 3rd health and well-being and the 4th quality education are the main axes of implementation. (2) For the fourth year, we cooperated with the Rural Education Center of Fu Jen University on the "Kangaroo Project" to enhance the quality of teaching and afterschool learning program in rural areas. (3) For the 15th year we carried out the "Compal Reading Volunteer Program" and promote reading education in rural areas. (4) We promote sustainable education for school children, SDG 4. (5) We enhance the medical care and nursing of the elder people in rural communities. (6) We reduce inequality, and care about education rights for the vulnerable. 88 ▓ Climate-related risk and opportunity identification table Type Risk and Influence ‧ 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 requirements. There are also possibilities that suppliers close down their plants or reduce the production due to environmental issues, which will lead to unstable supply and indirectly influence the efficiency of our assembly line. In the administrative measures issued by the state, large electricity consumers must set up renewable energy power generation equipment, or replace them with energy storage, purchase of renewable energy certificates, and payment of cash, which may result in an increase in operating cost in the short term. Transfer of Risk ‧ Technology Adaption and Opportunity 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, introduced energy storage equipment in the new base, Escalating energy productivity and saving energy expenses to cut down cost 2. The price fluctuations of the oil and electricity will influence the operation cost directly. Therefore, we effectively control the operation cost through the erection of renewable energy devices and the boost of energy management ability. Products are faced with stricter instructions, regulations, and standards. New materials might influence reliability. 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. ‧ 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, clients may transfer their orders. ‧ 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 issues and poor attendance of employees, and damage to plants and machines due to floods. ‧ Chronic Climate transformation is likely to worsen the air, cause drought, increase the frequency of heatwaves, change water quality, and affect employees’ health. Concrete Risks We can 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. 1. 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. 2. We promote knowledge on climate change and rescue exercises and enforce medical resources preparation and epidemic prevention exercises to improve the health and safety awareness of employees. 89 6. If the Company has established the corporate Sustainable Development principles based on “Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies," please describe any discrepancy between the Principles and their implementation: ■ The Company has revised the “Compal Corporate Sustainable Development Best Practice Principles” based on “Corporate Sustainable Development Best Practice Principles for TWSE/TPEX Listed Companies." An “ESG Office” has also been introduced specifically for the purpose of promoting Corporate Governance, environmental sustainability, public welfare, and information disclosure. The Company has adopted the principles of RBA by including corporate sustainability in its overall business plan, thereby making sure that everything it does confirms with RBA. The Sustainability Committee reports its progress regularly to the Board of Directors, and ESG Office publishes annual Sustainability 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 2021, 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 consumption and greenhouse gas emission, the Company has detailed planning and implementation since 2017. The 90 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. Kunshan Plant 2 is expected to obtain certification in 2022. ■ 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 RBA Code of Conduct. Under this commitment, upstream suppliers are bound to comply with international, national, and local regulations with respect to all their activities. Due to the Covid-19, the supplier conference were conducted on-line in 2021, relevant laws and regulations were announced in the COMPAL Supplier Design Collaboration Portal 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 2021. 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 tours, inviting our employees, supply chain partners and collaborative social welfare groups to participate in environmental education and two beach clean-ups. 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 muster positive energy to solve society's issues. In 2021, Compal collaborated with the Yu-Cheng Social Welfare Foundation/Jixian Sheltered Workshop, I Can Sheltered Workshop, Hanner Family, Taiwan Mountain and Maritime Protection Society, and employees have donated more than TWD 800,000. 91 ■ 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 “2021 Blood donation activity”: 288 people participated in and donated 440 bags of blood, totaling 110,000 cc. Compal co-organized the first “Taipei Science and Technology Cup Love Earth Charity Road Run” in Taipei Neihu Technology Park. 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: Dayuan, Guanyin, and Yuli Bookstore. ■ 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 extracurricular 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, Haibin Elementary School in Taoyuan and Guoling Elementary School in Yilan during public holidays to accompany children in their reading activities. As of the end of 2021, the volunteers had assisted 6,543 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. “It turns out to be you” 251 colleagues serve as the Little Teachers of Heart Hope. 47 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 people move forward and carry out the goal and plan written in the letter together. ■ Social welfare (1) Budget sponsorship ‧ ‧ ‧ Donated TWD 100 million to the Tzu Chi Foundation to purchase vaccines to help Taiwan Nti-epidemic; and donated TWD 1 million of medical supplies to assist Vietnam in epidemic prevention Donated TWD 2 million to the HCI Foundation to expand social care for the disadvantaged. Sponsoring of budgets for college volunteer clubs 92 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. In 2021, 18 college clubs applied for sponsorship. Due to the impact of the new crown epidemic, 2 college clubs completed the project and 54 student volunteers participated in sponsored volunteer activities in 2021, for which the Company contributed a sum of TWD 142,000 that benefited 143 children. Sponsoring of budgets for Compal Sunshine Scholarship The "Compal x Sunshine Scholarships" has entered its 23rd year, which provide "Outstanding Computer Talent Scholarships" and "Computer Excellence Scholarships" 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 City Volunteer Fire Brigade Fourth Brigade, Taiwan District of Kiwanis International, Taiwan Institute for Sustainable Energy, Kaohsiung Medical University Donation Fund National Taipei University,, Chou Ta-Kuan Cultural & Educational Foundation, Kaohsiung Public Library, Spinal Cord Injury Foundation, National Policy Research Foundation, Gap of Learning & Field, Taitung Sustainable Development Society, National Taiwan University, A sum of TWD 5,306,000 was donated to the above mentioned entities in 2021. ‧ ‧ (2) Donation of supplies ‧ ‧ ‧ Compal has the “Education-industry Collaboration Program Playing Plan” with the Hsu Chao-Ying Foundation In 2021, Hsu Chao-Ying Foundation and the Compal Electronics had a press conference for the “Education-industry Collaboration Program Playing Plan”. Compal donated 210 tablets to the following 12 elementary schools: Shaking Elementary School, Gaoshu Elementary School, Ronghua Elementary School, Aliao Elementary School, Lingyun Elementary School, Wugou Elementary School, Yitan Elementary School, Chishan Elementary School, Gangxi Elementary School, Zhulin Elementary School, Chaodong Elementary School, Xinpi 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 enable more school children to learn without interruption, Compal donated 110 tablet PCs to participate in the public welfare project of World Vision's "2021 Fighting the Epidemic Together - Distance Learning for Disadvantaged Children." World Vision's Taitung District Office distributed the tablets to Guanshan Center, Chenggong Center, Taitung Center, Jinlun Center, and Lanyu Center to help the children and families that have been sponsored by World Vision for a long time. Initiated by the Hsu Chauing Social Welfare & Charity Foundation, the Children’s Day Wish Gift Collection, joined by colleagues from Compal and New Kinpo Group, has already stepped into fourth year. In 2021, 42 Compal colleagues have taken part in activities to help disadvantaged children from 3 to 13 years old and prepare exclusive gifts for Children's Day. (3) COMPAL "Little Ceramist - Charity Sale. Love Without Boundaries" COMPAL headquarters held the "Little Ceramist - Charity Sale. Love without Distance" activity. It showed the works of children in the ceramic art class, an art class opened by HCI every year for children, the proceeds from this charity sale will support the promotion of maker education. 20 COMPAL colleagues responded to the charity sale and bought 30 works, raising TWD 16,500 to pass on their love without distance. 93 ■ 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. 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 causes. ‧ ‧ ‧ 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. (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 94 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 by 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. Industrial waste: Industrial waste other than hazardous industrial waste is collected and treated by certified contractors. b. 95 ‧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 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. 96 3.3.6 Ethical Corporate Management 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 its 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? 2. Has the Company 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 prevent unethical behavior accordingly which at least covers the preventive measures for the behavior in paragraph Yes No Yes 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 as well. The Board of Directors and the management have issued "The statement of compliance with the Ethical Corporate Management Best Principles," committing themselves to business integrity. Deviation and causes of deviation No deviations were found Yes 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 ‧ Prohibition against insider trading and rules of confidentiality Furthermore, the “Information Security Policy” has introduced measures to prevent violation of commercial secrets. No deviations were found 97 Yes No Assessment criteria 2, Article 7 of the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies”? 3. Does the Company stipulate Yes 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. 2. Yes 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? 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 Actual governance Summary description Deviation and causes of deviation 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 a Pledge of 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 behavior. No deviations were found 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 98 No deviations were found Yes No Assessment criteria corporate management policy and plan to prevent unethical behavior as well as its supervision of the implementation? Actual governance Summary description employees with the aforementioned guidelines and thereby facilitate the promotion of honest management. Status of Operation and Implementation in 2021: 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 1,043 suppliers with transaction records, 1,012 have signed the RBA Code of Conduct commitment or completed the RBA Code of Conduct questionnaire, making for a signing rate of 97.03%. In addition, 10,309 employees completed 17,302 hours of integrity management related training, including: Deviation and causes of deviation 3. Yes Does the Company have any policy that prevents conflict of interest, and channels that facilitate the report of conflicting interests? Courses New Employee Orientation On-job Training for New Employee New Employee Orientation Compal CSR Training Compal Management of the prevention of insider trading Attendances 1,359 1,553 117 7,279 1 Hours 2,015 8,542 702 6,042 1 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 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 99 No deviations were found Assessment criteria Yes No 4. 5. III. 1. 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 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 Yes Yes Yes Actual governance Summary description behavior. 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 performed 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. Deviation and causes of deviation No deviations were found 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 behavior 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 No deviations were found 100 2. Has the Company Yes Assessment criteria malpractice? Does the Company assign dedicated personnel to investigate the reported malpractice? Yes No related checks. Actual governance Summary description Deviation and causes of deviation Yes 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. established standard operating procedures for the investigation of malpractice reports, follow-up measures after investigation, and the relevant confidentiality mechanism? 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, Sustainability reports and “Investor Relations-corporate governance” and the “CSR- Sustainable Management- Compal's code of Conduct” section of its website. 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. No deviations were found No deviations were found Yes 3. IV 1. V 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." 101 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 ‧Rules for Elections 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 ‧Sustainability Committee Charter ‧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 ‧Sustainable Development 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 ‧Risk management policy of Compal Group 102 3.3.8 Other Important Information Regarding Corporate Governance Please refer to the Company’s website→ CSR https: //www.compal.com/csr/en/default.aspx ‧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 Overview ‧Customer Relations ‧Supplier Relations ‧Investor Relations 103 3.3.9 Internal Control Systems 1. Statement of the Internal Control System Compal Electronics, Inc. Statement of the Internal Control System Date: March 15, 2022 The Company states the following with regard to its internal control system during fiscal the year 2020, based on the findings of a self-assessment: 1. The Company is fully aware that establishing, operating, and maintaining an internal control system is 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, though, 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 (“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, 2021 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 15, 2022, 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) 104 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, August 27, 2021 ■ Place: No. 581, Ruiguang Rd., Neihu District, Taipei City 11492, Taiwan ■ Major Resolutions: (1) Ratified the Business Report and Financial Statements for 2019. (2) Ratified the Distribution of Earnings for 2019. (3) Approve the amendment to the “Rules for Elections of Directors”. (4) Election for the 14th Term of Directors ・New Directors are: 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 ・New Independent Director are: Min-Chih Hsuan, Duei Tsai, Wen-Chung Shen (5) Approval of the release of non-competition restrictions for Directors. ■ Post-meeting Execution: (1) The 14th Term of Directors approved by the Ministry of Economic Affairs on September 23, 2021 2. Board meetings Date 17th Meeting (13th Term) 2021.2.25 18th Meeting (13th Term) 2021.3.26 Major resolutions 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 authorize 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 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 105 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 the 14th term of candidates list of Directors 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 the Hsu Chauing Social Welfare & Charity Foundation 16. Approved the first mid-year employees’ bonus of the year 2021 17. Approved the proposal for providing Corporate Guarantee 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 the amendment to the “Rules for Elections of Directors” 2. Approved the amendment to the “Rules Governing the Scope of Powers of Independent Directors” 3. Approved the amendment to the “Remuneration Committee Charter” 4. Approved the amendment to the “Rules Governing Financial and Business Matters Between this Corporation and its Affiliated Enterprises” 5. Approved the amendment to the “Procedures for Ethical Management and Guidelines for Conduct” 19th Meeting (13th Term) 2021.5.12 6. Approved the release of non-competition restrictions for the managers 7. Approved the release of non-competition restrictions for Directors 8. Approved employees’ salary adjustment of the year 2021 9. Approved the proposal for the appropriated percentage for the remuneration of employees and Directors of the year 2021 10. Approved the targets and plans of Corporate Social Responsibility for the year 2021 11. Approved fund loan to 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. 12. Approved fund loan to 100% owned subsidiary Compal Eletrônica Da Amazônia 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 authorize the Company to obtain credit facilities from financial institutions 20th Meeting (13th Term) 2021.7.30 21th Meeting (13th Term) 2021.8.12 1. Approved postponing the convention of the 2021 Annual General Shareholders’ Meeting 1. Approved the Directors’ Remuneration for the year 2020 2. Approved 2nd mid-year employees’ bonus for the year 2021 3. Approved the setup of Compal Kaohsiung R&D Center. 4. Approved a loan to Henghao Technology Co. Ltd. 5. Approved a loan to Unicom Global, Inc. 6. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 7. Approved the Company to obtain credit facilities from financial institutions 8. Approved providing a Corporate Guarantee Letter for Henghao Optoelectronics Technology (KunShan) Co., Ltd., a sub-subsidiary of the Company, to Huawei Device Co., Ltd., to be resolved. 106 1st Meeting (14th Term) 2021.8.27 2nd Meeting (14th Term) 2021.11.11 3rd Meeting (14th Term) 2022.2.10 4th Meeting (14th Term) 2022.3.15 1. Election of the 14th Term of Chairman of the Board 2. Election of the 14th Term of Vice-Chairman of the Board 3. Ratified the proposal of donation to Buddhist Compassion Relief Tzu Chi Foundation “Tzu Chi Foundation” 4. Approved the appointment of Chief Strategy Officer 5. Approved the appointment of President 6. Approved the appointment of Accounting Officer 7. Approved the appointment of Financial Officer 8. Approved the appointment of Internal Audit Officer 9. Approved the appointment of the term 5th remuneration committee members 1. Approved annual audit plan for the year 2022 2. Approved for senior level management change 3. Approved the compensation of Employee bonuses in cash of the year 2020 4. Approved the proposal for 2021 year-end employees’ bonus 5. Approved the Corporate Guarantee Letter to Lenovo PC HK Limited 6. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 7. Approved the Company to obtain credit facilities from financial institutions 8. Approved the proposal of application for open tender 1. Approved senior level management change 2. Approved loan to Kinpo&Compal Group Assets Development Corporation 3. Approved the Company to acquire the common shares of Poindus Systems Corp. by public tender offer. 4. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 5. Approved authorize the Company to obtain credit facilities from financial institutions 1. Approved the Internal Control System Statement for the year 2021 2. Approved the enactment to the “Risk management policy of Compal Group” 3. Approved the proposal of the distribution of compensation to employees and directors for the year 2021 4. Approved 2021 Audited Consolidated Financial Statements and Parent Company Only Financial Statements 5. Approved the Business Report for the year 2021 6. Approved the Business Plan for the year 2022 7. Approved the proposal for Distribution of Earnings for the year 2021 8. Approved the proposal for cash dividends from Earnings for the year 2021 9. Approved the proposal of cash distribution from Capital Surplus 10. Approved the relevant matters regarding the distribution of the year 2021 cash dividends and cash distribution from capital surplus to shareholders 11. Approved the convention of 2022 Annual General Shareholders’ Meeting 12. Approved the enactment to the “Sustainability Committee Charter” 13. Approved the appointment of the 1st term of sustainability committee members 14. Approved the amendment to the “Corporate Social Responsibility Best Practice Principles” 15. Approved evaluate CPAs’ independence and competence of performing financial report audit. 16. Approved the first mid-year employees’ bonus of the year 2022 17. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 18. Approved authorize the Company to obtain credit facilities from financial institutions 107 1. Approved the 1Q 2022 Consolidated Financial Review Report 2. Approved the amendment to the “Articles of Incorporation” 3. Approved the amendment to the “Procedures for Acquisition or Disposal of Assets” 4. Approved the amendment to the “Procedures for Lending Funds to Other Parties” 5. Approved the amendment to the “Rules and Procedures of Shareholders Meeting” 6. Approved the release of non-competition restrictions for the managers 7. Approved the release of non-competition restrictions for Directors 8. Approved employees’ salary adjustment of the year 2022 9. Approved the proposal for the appropriated percentage for the remuneration of employees 5th Meeting (14th Term) 2022.5.11 and Directors of the year 2022 10. Approved the targets and plans of Sustainability for the year 2022 11. Approved fund loan to 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. 12. Approved fund loan to 100% owned subsidiary Compal Eletrônica Da Amazônia Ltda. 13. Approved authorize the Company to obtain credit facilities from financial institutions 14. Approved the plan to execution of the investment agreement for the project of New Taipei City RuiFang District Medical and Long-Term Care Facility BOT+BTO Project 15. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institution. 16. Approve to obtain newly issued shares of Raypal Biomedical Co., Ltd. by participating in the capital injection by cash. 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 Internal Audit Officer Po-Wen Hsieh 2010.10.27 2021.8.27 Internal position adjustment 108 3.4 Certified Public Accountant (CPA) Fee Information Unit: TWD Thousands Accounting Firm Name of CPA Period Covered by CPA’s Audit Audit Fee Non-audit Fee Total Remarks KPMG Kuo,Kuan Ying Chien, Szu Chuan 2021.01.01~ 2021.12.31 9,600 3,535 13,135 - Note: Other non-audit fees: Transfer pricing report of $600,000, tax consultation of $2,870,000, and others of $65,000. (1) Changes in the accounting firm that result in lesser audit fees paid in comparison to the previous year, which should disclose the amount, percentage, and the reasons: None (2) Reduction of audit fees by more than 10% compared to the previous year, which should disclose the amount, percentage, and the reasons: None 109 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 N.A. 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 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. 110 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. 3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders Title Name Chairman Vice-Chairman And CSO Sheng-Hsiung Hsu Jui-Tsung Chen Director Director Director Binpal Investment Co., Ltd. Representative: Wen-Being Hsu Kinpo Electronics, Inc. Representative: Chieh-Li Hsu Charng-Chyi Ko Director Sheng-Chieh Hsu Director Director and President Director Director and Executive Vice-President Director Director and Executive Vice-President Independent Director Independent Director Independent Director Independent Director Executive Vice- President Senior Vice- President Senior Vice- President Yen-Chia Chou Chung-Pin Wong Chiung-Chi Hsu Ming-Chih Chang Anthony Peter Bonadero Sheng-Hua Peng Min-Chih Hsuan Duei Tsai Wen-Chung Shen Duh-Kung Tsai Chen Chang Hsu Chun-Te Shen Kuo-Chuan Chen 2021 Up till April 26, 2022 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 0 0 0 0 0 0 (117,000) 0 (3,240,000) 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 0 111 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 2021 Up till April 26, 2022 Shares held Increase (Decrease) Shares pledged Increase (Decrease) Shares held Increase (Decrease) Shares pledged Increase (Decrease) Chyou-Jui Wei Wen-Da Hsu Shi-Kuan Chen Chi-Wai Wan Min-Tung Weng Lo-Chun Lee 0 0 0 0 0 0 Sheng-Hung Li (9,000) Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Bor-Heng Chen Chung-Hsing Tan Ta-Chun Wang Vice-President Chih-Chuan Cheng Vice-President Ching-Hsiung Lu CISO & VP Po-Tang Wang Vice-President Tzong -Ming Wang Vice-President Fu-Chuan Chang Vice-President Yong-Ho Su Vice-President Jyh-Shyan Liang Vice-President Yi-Yun Chang Vice-President Hsin-Kung Mao Vice-President Shih-Hong Huang Vice-President Yi-Chiang Chiu Vice-President Jui-Chun Shyur Vice-President Jen-Liang Lin CLO & VP Peng-Hong Chan CGO & AO & VP Cheng-Chiang Wang Vice-President Cheng-Hui Su Vice-President Tu-Chuan Tu Vice-President Chang-Chieh Tien FO & VP Guo-Dung Yu Vice-President Peng Kuee Lau ice-President Yau-De Chiou 0 0 0 0 (150,000) 0 (10,000) (20,000) 0 (5,000) (160,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 112 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 30,000 (54,000) 0 0 80,000 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 Title Name Vice-President Hou-Chun Liu Vice-President Wu-Ching Chi Vice-President Hsin-Chung Chen Vice-President Jue-Teng Chang Vice-President Choo-Tain Chiu IAO Chenyi Li Vice-President Yung-Nan Chang Vice-President Hsin-Hsiung Huang Vice-President Chiao-Lie Huang Vice-President Wei-Chia Wang IAO Po-Wen Hsieh 2021 Up till April 26, 2022 Shares held Increase (Decrease) Shares pledged Increase (Decrease) Shares held Increase (Decrease) Shares pledged Increase (Decrease) 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 - Note: 1. Independent Director Duh-Kung Tsai left office on August 27, 2021. Independent Director Wen-Chung Shen took office on August 27, 2021. 2. Vice-President Hou-Chun Liu took office, Vice-Presidents Yung-Nan Chang, Hsin-Hsiung Huang, Internal Audit Officer Po- Wen Hsieh resigned in 2021, Vice-Presidents Wu-Ching Chi, Hsin-Chung Chen, Jue-Teng Chang, Choo-Tain Chiu were promoted, Vice-Presidents Chiao-Lie Huang, Wei-Chia Wang resigned in 2022. 3.7.1 Shares Trading with Related Parties: Name Reason for transfer Transaction date Counterparty Ching-Hsiung Lu Gift 2021.08.20 Shao-Hsuan Lu Counterparty's relationship with the Company, Directors, Supervisors, Managers, and shareholders with more than 10% ownership interest Father and Daughter Shares Transaction price 100,000 21.55 3.7.2 Shares Pledged with Related Parties: None 113 3.8 Relationship among the Top Ten Shareholders April 26, 2022 Unit: Shares Name Self Shares held Shareholdings of spouse and minors Total shares held in the names of others Shares held Spouse, relative of second degree or closer, and relationships among top 10 shareholders Name Relationship Shares Shareholding Percentage Shares Shareholding Percentage Shares Shareholding Percentage 194,008,470 4.40% 155,706,000 3.53% 151,628,692 3.44% - - - - - - 8,975,401 109,443,000 0.20% 17,107,025 2.48% - 0.39% - 0 0 0 0 0 0 0 0 0% None None 0% None None 0% None None 0% None 0% None None None 0% None None 0% None None 0% None None - - - - 0 0% None None - - 0 0 0% None None 0% None None Yuanta/P-shares Taiwan Dividend Plus ETF Silchester International Investors International Value Equity Trust Kinpo Electronics Inc. Representative: Sheng-Hsiung Hsu Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF。 New Labor Pension Fund Silchester International Investors International Value Equity Group Trust 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 Fubon Taiwan Index high dividend 30 ETF Silchester International Investors International Value Equity Taxable Trust 81,654,000 1.85% 73,840,000 1.68% 58,321,900 1.32% 53,663,652 1.22% 52,061,000 1.18% 47,964,000 1.09% - - - - - - 114 3.9 Ownership of Shares in Affiliated Enterprises December 31, 2021 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 Healthcare 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. 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 9,100,000 600,000 100,000,000 20,000,000 3,446,143 - 100.00 - 100.00 - 100.00 - 100.00 - 91.00 - 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 - 9,100,000 - 600,000 - - 100,000,000 12.80 21.48 27,805,110 5,913,142 29,500,000 100.00 6,000,000 29,000,000 100.00 100.00 10,000,000 100.00 20,014,952 100.00 - - - - - - - - - - 29,500,000 6,000,000 29,000,000 10,000,000 29,060,176 42.44 13,672,854 19.97 42,733,030 3,738,668 33.23 6,230,544 55.38 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 91.00 100.00 52.04 45.58 51.48 100.00 100.00 100.00 100.00 62.63 88.61 75.00 53.55 50.00 15,000,000 50.00 2,772,000 42.00 - - - 15,000,000 - 2,772,000 42.00 4,648,322 27.70 656,396 3.91 5,304,718 10,157,730 41,304,504 14,924,070 147,000,000 89,755,495 48,010,000 42,700,000 20.42 7,042,701 19.08 31,930,765 695,000 21.26 - 100.00 - 100.00 - 100.00 53.58 37,000,000 14.15 17,200,431 14.75 73,235,269 15,619,070 0.99 - 147,000,000 89,755,495 - 48,010,000 - 79,700,000 46.42 53,001,000 100.00 - - 53,001,000 31.61 34.57 33.83 22.25 100.00 100.00 100.00 100.00 100.00 115 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 3,000,000 100.00 136,080 100.00 245,911 100.00 100,000 100.00 1,000 100.00 Compalead Electronics B.V. 6,426,516 100.00 - - - - - - - - - - - - - - - - 90,820,000 100.00 12,500,000 3,000,000 136,080 245,911 100,000 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 - - - - 20,000,000 2,600,000 Starmems Semiconductor Corp. 3,500,000 35.00 1,000,000 10.00 4,500,000 Kinpo&Compal Group Assets Development Corporation Note: Investments made by the Company using the Equity Method. 52,500,000 70.00 - - 52,500,000 100.00 100.00 45.00 70.00 116 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 11, 2022 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 117 4.1.2 Status of Shareholders Analysis Government Agencies Financial Institutions Other Institutions Foreign Institutions and Natural Persons Domestic Natural Persons Treasury stocks Total Number of Shareholders Shareholding (shares) Percentage 4 38 357 1,149 221,866 0 223,414 26 306,198,683 713,091,225 1,859,757,142 1,528,099,549 0 4,407,146,625 0.00% 6.95% 16.18% 42.20% 34.67% 0.00% 100.00% 4.1.3 Share Ownership Distribution April 26, 2022 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 26, 2022 44,563 128,683 26,406 8,363 4,746 3,960 1,774 1,122 1,914 831 382 156 88 49 377 223,414 9,030,917 282,049,701 203,963,511 103,580,381 87,148,933 100,055,625 63,076,242 52,258,339 137,388,119 116,793,828 106,282,193 75,419,979 61,483,381 43,877,723 2,964,737,753 4,407,146,625 0.20% 6.40% 4.63% 2.35% 1.98% 2.27% 1.43% 1.19% 3.12% 2.65% 2.41% 1.71% 1.40% 1.00% 67.26% 100.00% 4.1.4 List of Major Shareholders Shareholder’s name Yuanta/P-shares Taiwan Dividend Plus ETF Silchester International Investors International Value Equity Trust Kinpo Electronics, Inc. Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF。 New Labor Pension Fund Silchester International Investors International Value Equity Group Trust 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 Fubon Taiwan Index high dividend 30 ETF Silchester International Investors International Value Equity Taxable Trust 118 Shares held 194,008,470 155,706,000 151,628,692 109,443,000 81,654,000 73,840,000 58,321,900 53,663,652 52,061,000 194,008,470 April 26, 2022 Percentage (%) 4.40% 3.53% 3.44% 2.48% 1.85% 1.68% 1.32% 1.22% 1.18% 1.09% 4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share Year Measurement Per-share market price High Low Average Per-share net worth (Note) Before dividend After dividend 2020 21.00 15.30 18.88 24.52 22.90 2021 27.95 20.60 23.26 25.56 23.54 (Note) Year-to-date March 31, 2022 27.20 24.15 25.70 24.65 - Earnings per share Per-share 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 4,357,129,194 4,357,129,194 4,357,129,194 2.15 2.90 0.50 4,357,129,194 4,357,129,194 2.15 1.60 - - - 2.90 2.00 (Note) - - - - - - - - - Analysis of investment returns - - - Note: The 2021 distribution of earnings was resolved at the March 15, 2022 Board of Directors’ Meeting. 8.02 11.63 (Note) 8.60% (Note) 8.78 11.8 8.47% 4.1.6 Dividend Policy and Implementation Status 1. Dividend Policy When the Company makes a profit during the year, 10% of the annual net income after appropriating income tax expense, offsetting any prior deficit, is to be set aside as legal reserve and a special reserve is set aside or reserved in accordance with the pertinent laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the retained earnings from previous years. The earnings appropriation, distribution of dividends, and bonuses shall be proposed by the Board of Directors and approved at a Shareholder’s Meeting. The rest of the unappropriated earning shall be reserved. The Company is in a growth period of its life cycle. And as such, for the consideration of future capital needs and to meet cash flow needs of its shareholders, the Company’s distribution of cash dividends, after closing and distribution of earnings, shall be no less than 10% of the total cash and stock dividends. Although a dividend ratio has not been specified in the Company’s articles of incorporation, the Company shall not appropriate less than 30% of its income after tax for dividends, after taking into account factors such as the Company’s capital needs, the capital budget, long term financial plans, 119 domestic and international competition, and the interests of the shareholders. The board of directors shall propose the distribution of earnings and submit them to the shareholders’ meeting for approval. 2. Proposed Distribution of Dividends ‧ The 2021 distribution of earnings of shareholders’ dividends in the amount of TWD 7,051,434,600 was approved by the Board of Directors Meeting on March 15, 2022. The aforementioned amount is set to be distributed as an all-cash dividend of TWD 1.6 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 8,814,293,250. ‧ 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 April 30, 2022, and cash distribution has been paid out on May 20, 2022 3. When there is a significant change in the expected dividend policy, it should be stated: None. 4.1.7 Impact on 2021 Business Performance and EPS resulting from Stock Dividend Distribution: Not Applicable (The Company did not disclose 2022 annual financial forecast) 4.1.8 Employees’ and Directors’ Compensation 1. Employees’ and directors’ compensation policies as stated in the Articles of Incorporation 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 for any discrepancies between the amounts estimated and the amounts paid. ‧ Compensation to directors and employees, as denoted in the Articles of Incorporations, shall be estimated based on income before tax prior to the subtraction of directors and employees compensation during the current year and multiplied by the ratio as denoted in the Article of Incorporation (shall not be more than 2% or less than 2% of the remainder, respectively.) ‧ 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. 120 ‧ 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. 2021 employees compensation proposal passed by the board of directors ‧ Accrued employee compensation is TWD 1,350,062,159 and Directors compensation is TWD 71,389,891. ‧ 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 2020 employee and Directors compensation: ‧ The employee compensation is TWD 974,693,802 and the Directors compensation is TWD 51,540,800. ‧ The 2020 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: None 4.3 Preferred shares: None 121 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 GDR holders’ rights and obligations 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 2021 Year-to-date May 11, 2022 High Low Average High Low Average 40,000,000 ordinary shares of Compal Electronics 1. 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 N/A The Bank of New York Mega International Commercial Bank 2,461,999 units (May 11, 2022) The Bank of New York Mega International Commercial Bank N/A Borne by participating shareholder(s) Allocated proportionally between the Company and participating shareholders See descriptions below USD $ 4.94 USD $ 3.70 USD $ 4.16 USD $ 4.94 USD $ 2.58 USD $ 3.80 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. 122 ■ 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 123 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 124 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, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution, 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, Automotive Electronics, and Servers. ■ 2021 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 2021, Compal adopted the most efficient R&D methods for the launch of its latest notebook PC hardware, which included laptops with 12th generation processors and AMD’s new 6nm Ryzen 6000 processors. 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. As the pandemic situation stabilizes and transitions into a post-pandemic era, the demand for hybrid working has driven strong consumption of notebook devices. Compal continues to release commercial 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 2022, Compal will continue to conduct high-end technology in its flagship gaming laptop and ultraslim gaming devices, and new thermal solutions. Compal will continue to make significant investments in R&D to create win-wins with our customers to increase their market share. 125 ■ 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 2022. In addition to compatibility with the Intel design specifications, like “Intel Evo,” for their latest generation products, we also introduced 5G for Always-On, Always-Connected laptops to change typical usage patterns. Future laptop features should combine productivity, mobility, a more user-friendly design, long battery life, and 5G connectivity. These features are able to help users to work remotely with high-efficiency support. 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. ■ 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 the usual functional operations, the product also features Tablet PC touch versatility. The touch-sensing display module coupled with the latest Microsoft Windows 11 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. Always-Connected with 5G can gradually become an attractive feature. ■ 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, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution 5G communication and 5G applications are global development trends. The three major use 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. Compal adheres to its long-term technical advantages in the communication field, provides 5G communication devices and networking equipment as well as offers the highly End-to-End integrated 5G networking infrastructure solution (the so-call Non-Public Network or Private Network). 126 The 5G universal integrated module complies with 3GPP Release R15 & R16 specification, is backward compatible with 4G LTE / 3G WCDMA, supports high-speed LTE Cat20, and supports both 5G NSA & SA networking modes. Modules with multi-band support include WCDMA/ TDD-LTE/ FDD-LTE, 5G FR1 (Sub-6GHz) & 5G FR2 millimeter waves etc. Modules also built with GPS / GNSS global positioning system, eSim and other functions, all need foundational technology of coming 5G and AIOT applications & devices. Based on the long-term experience in consumer electronics design, research & 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 CPE routers, 5G notebook, 5G AR/VR, 5G drone, 5G robots, 5G real-time Camera, 5G Industrial PC & industrial router, and 5G USB Dongle, etc. Rooted in the technology competence of telecommunication and the collaboration competency of joint development, Compal has effectively engaged with strategic partners to develop and manufacture the 5G networking equipment, such as 5G Small Cell, Edge Computing, 5G Network Management and 5G Core Network, as well as the as 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 solution - will be widely used in various industries such as entertainment, culture, tourism, finance, health, transportation, education, industry, agriculture, government, power utilities, etc. ■ Tablets Compal has deeply cultivated in consumer tablet and e-Reader products for years. By our advanced design technologies, rich mass production records, superior performance management and reliable quality control, we won high praise from global leading customers. Facing the slow down global tablet market in recent years, Compal is also investing in creating breakthroughs in technologies and product features, aiming to commercial and industrial tablet market to engage more business opportunity and raise profits. ■ Smartphones Compal targets variant 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 develop and ship 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 & monotonous shape of rugged phones and can meet the military standard requirements, also bringing a new & fashion ID look to rugged smartphones. 127 ■ Smart Wearable Devices Compal began to ship wearable devices starting in 2016. Based on the design engineering capabilities and manufacturing experience with smart devices, we have achieved good market share 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 consumer Bluetooth headsets 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 the past two years, people’s daily life has changed a lot due to the impact of the Covid-19, and the demand for smart displays has diversified. We continue to deepen and strengthen the development of quantum dot with mini and micro LED backlight solutions and OLED 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. To create interactive convenience and visual and auditory immersive experience in the use of products, 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 leaps 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 128 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 for 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 profits. Besides, the demand for AR/VR glasses in vertical market has increased since the technology progress of wearable device in past few years. Add to that, Metaverse has become a hot topic and drew customer attention. ■ 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, using our strengths 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 such products as 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. 129 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 261.1 million units worldwide in 2021, up 17% from 2020. In 2022, as the Covid-19 pandemic seems to show a sign of easing and transitioning into a post- pandemic era, the new living style throughout the pandemic will become a new normal. Demand for technical devices will be slower after strong demand in the pandemic. Also, from a market perspective, demand will not be as strong as in the past two years. As the PC industry matures, brand manufacturers are shifting focus towards higher priced products with more features, such as commercial laptops, Ultra slim Notebooks, 2-in-1s, gaming notebooks and creator PCs in search of more market opportunities, revenue and profits. 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 2021 was close to 76.9 million units worldwide, representing an annual growth rate of 22.5%. Ultraslim notebooks may account for 32.1% of the total notebook shipment worldwide by 2022. 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. ■ Gaming Notebooks The gaming market has been on fire for two years; there are some changes in consumer groups and usage scenarios. The pandemic forced people were spending more time “living life from home”. Many consumers were stuck at home for a large portion except for work, gaming became more positive and important. Also, with more time at home, consumers switched from outdoor activities to online shopping and mid-to-high-end gaming products. These new shopping behavior and consumers continue to support strong demand for gaming hardware with high shipment sales. According to IDC, in 2021, gaming laptops shipped 28.4 million units with 18.3% YoY increase. In 2022, gaming laptop shipment will take about 11.1% of the total notebook shipment. 130 ■ 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 a higher need for portability. According to IDC, the shipment of 2-in-1 devices totaled about 126.1 million units worldwide in 2021. The manufacturers will introduce diversify products with 5G and AI in 2022. This has the potential to increase shipment by nearly 2% to more than 145.8 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 81% 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 12.4 million units in 2022. ■ 5G Module, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution According to the GSA, to 2021/E, there are 200 operators officially providing 5G network communication products and services in more than 78 countries. The 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, across 21 product categories such as mobile phones, tablet, network sharing devices (CPE/MiFi), router, dongle, notebook, TVs, robots, vending machines, etc. Many products have adopted Compal 5G solutions already. Compal will continue to expand partners in different 5G domains to develop more 5G application services and consumer products. According to the latest market research, the global 5G small cell market size will reach USD 17.9 billion in 2028. By SNS estimates, the global private network market will grow to USD 3.4 billion in 2025 with CAGR 34%. Ericsson also pointed out the huge potential of digital transformation, and the 5G vertical application market will reach USD 1.32 trillion in 2026. Compal's new products 5G small cells and 5G O-RAN private networks and vertical solutions not only enhance network speeds, but also bring breakthroughs in enterprise private networks, smart city and smart factory applications. It is expected that small cells and private network solution 131 will improve 5G coverage and vertical applications. ■ Tablets Impacted by the Covid-19 pandemic, demands for work, entertainment and education at home are sharply increased, which has driven the tablet demands to hit a high in recent years. Due to epidemic slowdown global IC shortage, tablet total shipment is slightly decreased in 2021. According to an IDC report, the global tablet market shipped 168 million units in 2021, a 3% YoY increase comparing to 2020. The pandemic push people to get more used to communicate through Internet and use online learning. Comparing to PC or Laptop, tablet has cost and mobility advantages, and the huge app market leveraged from smartphone ecosystem and more user- friendly for elder people and kids also drive the growth. Compal also continues to pay attention to the market trend 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 2021 was about 1360 million units, with a YoY increase of 6.0%. We observe that 5G smartphone keep the huge growth power for the upcoming 5G network deployment and the launch of 5G services into the market. Compal aggressively invests in the development of new technologies for 5G smartphones, and provides built-in AI 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, in 2021, smart watches market continued to grow at an annual growth rate of 28%. Apple is still the top one vendor by market share. Despite the impact of Covid-19 on supply chain management, end– users have increased their awareness of healthcare management and drove the growth momentum of all smart watch segments. In 2022, Compal continues to provide best-in-class manufacturing and ODM services with latest technical development for brand customers. By integrating the latest smart watch platform and technologies, Compal provides a variety of product design solutions hand-in-hand with brand customers to meet demand of different target market segments, and end-user attributes. ■ Smart Hearable Devices The global TWS hearables market shipments in 2021 grew 24% YoY in unit sales, reaching 300 million units, and 25% in terms of value, according to Counterpoint’s TWS Hearables Market Tracker. Apple saw a slight increase of 5% YoY in its unit sales but its market share fell to 25.6%. However, the sub-$50 segment accounted for the largest share in 2021 with strong demand from emerging markets like India. 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 132 hearing loss problems, and about 1 billion people have potential risk of hearing loss due to loudspeakers and long-term listening to entertainment headphones. Compal develops smart hearable products, TWS earbuds and Bluetooth hearing aids by co-working 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 the Omdia Markit, due to the impact of Covid-19 the overall annual global LCD TV industry shipments in 2021 was about 207 million units, about -7% year-on-year. However, the North American market was stimulated by government subsidies to increasing about 39% year-on-year. Looking forward to 2021, the impact of Covid-19 still exists, but no more subsidies from government, and the market will be changed greatly with the impact of inflation. We will continue to accumulate the development energy of smart TV and smart video-related products, and continue to cultivate strategic partnerships to maintain a good business and keep flexibility to respond to market dynamics. ■ AR/VR Smart Devices Aiming for the Metaverse opportunities and the use of new forms of media and information technology, one can accelerate the efficiency of processing, solving issues in work, life, and entertainment. Through VR experience, learning, training, and AR (augmenting reality) to solve issues in a timely manner. Therefore, AR/VR applications have gradually become the main force for the development of technology giants in various fields, especially Microsoft, Facebook/Meta and HTC. 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, 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 taking 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 I 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. 133 ■ IoT Vertical Solutions Industries have maintained high interest in IoT over the last few years. We hope to resolve the inherent issues in collaboration with ICT businesses. In this sector, we have engaged in cross-sector alliances with leaders of other industries to develop autonomous mobile robot (AMR) to enhance plant production efficiency or smart cold-chain transportation to resolve the long-time pain point of businesses. Furthermore, the emergence of Metaverse will accelerate the demand of AR/VR glasses, the market is also towards enterprise and consumer applications. To Compal Electronics, this is a favorable opportunity to enter Metaverse industry. ■ 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 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. Disruptive innovation in technologies, along with IT companies (e.g. Google), startups (e.g. AI and sensor startups), and service platform providers (e.g. Uber) entering the market one by one have changed traditional supply chain and competitive environment in automotive. Driven by new entrants into the market, new technology introduction and Covid pandemic since 2019, legacy carmakers have adapted their sourcing and operation models to the changes and challenges. To cope with those changes and challenges in auto industry, we have equipped ourselves with ITAF 16949 and ISO 26262 certified and deployed 5G networking access and ADAS technologies. In last year we built a plant in North America to locally supply customers’ demand. ■ Servers Server shipments have grown at about 2.1% per year mainly due to increased demand for cloud services. According to IDC, shipment of x86 servers totaled 17.09 million units in 2021. This is expected to rise to nearly 18.18 million units in 2022. X86 servers accounted for 96.5% of total server shipments. Rack-mounted servers 134 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 and deal with the latest technology and pricing of key components such as semiconductors, CPUs, LCD panels, and solid-state drives (SSD). However, we still suffer geopolitical issues and, regional conflicts, and climate issues 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. Global warming and climate change have become important issues in recent years. The technology industry changes people's lives so that companies will not be absent. Under the trend of energy conservation, carbon reduction, and recycling, Compal helps clients to launch notebooks with eco-friendly and sustainable. The design concept is based on energy conservation, recycling, and reuse to do our part to save the planet. . ■ 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 its 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. ■ Gaming Notebooks In the design of gaming notebooks, the biggest difference from traditional notebooks is the requirement for powerful performance. As the result, thermal design is important for the performance of gaming notebooks. Compal continues to cooperate with suppliers to develop a variety of advanced cooling modules and use them in new products. It can help customers to continue to expand their market share in the gaming notebook market. ■ 2-in-1 Notebooks The supply chain and manufacturers of 2-in-1s are generally identical to those of conventional notebooks, with the addition of some tablet parts suppliers and manufacturers. Support of the existing supply system and its 135 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, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution 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 5G domains services and requirements. ■ Tablets Due to global IC shortage in 2021, in addition to existing suppliers, Compal also apply more aggressive supply chain strategy, including strategic material purchasing and validate 2nd even 3rd source in the design phase, to minimize the risk of supply chain. To lower manufacturing uncertainty, Compal also diversified manufacturing to within and outside of China to provide production options to our customers while ensuring that price, delivery and quality could meet their 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 components supply 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 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. 136 ■ 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 medical regulation tests so that we can guarantee to our customers that Compal can deliver reliable and high-quality products. ■ Smart Display Products The supply chain has been affected by the uncertainties of both Covid-19 pandemic and the China-US tariff dispute, so they continue to move production out of China to diversify risks. We aggressively to integrate resources across regions from upstream to downstream, deploy production base resources, control and manage operating cost, and provide flexible order fulfillment to meet customer’s demands. ■ AR/VR Smart Devices For AR/VR applications, Compal provides a complete range 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 highly cost-effective solutions 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 offer all kinds of Smart Home applications. ■ IoT Vertical Solutions 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 AMR, in collaboration with suppliers with respect to customers’ application requirements. ■ 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 137 conventional management system adopted by existing medical institutions, this product category 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 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 training program design. This information can be exchanged over the cloud to facilitate remote training and communication between athletes and trainers. This helps athletes follow 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 automatic 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 and has invested in the development of some rather innovative medical devices. These include: Continuous Glucose Monitoring (CGM), 24-hour blood pressure monitoring (24-hour BPM), handheld smart ultrasound, 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. 138 (3) Medical AI • Cardiovascular disease prediction To reduce the issue 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. ■ Automotive electronics (AE) The mid-stream players in the supply of automotive 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 their focus towards higher priced and more fully featured products, such as commercial notebooks, ultra slim notebooks, 2-in-1s, and gaming notebooks in a search for greater market opportunities, revenue, and profits. • More user scenarios for notebooks, for example, gaming notebooks for eSports and creator PCs for content creation. • The Intel 11th generation CPUs were the mainstream processors used in 2021, and Intel’s 10nm processors have also steadily gained the market share when the new capacity is gradually ramped. • 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 139 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. • Always on connected feature can help to work remotely. ■ Gaming Notebooks • Powerful performance is essential for gaming laptops. • The thin and light design can show better design ability. • The dazzling sound and light effects make players more immersed in the game world. • Gaming laptops should have a recognizable appearance design. ■ 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 140 applications to achieve higher market acceptance. ■ 5G Module, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution 5G communication and applications have expected explosive growth in the coming years. 5G terminals and consumer products will come out with different product categories such as network devices (5G CPE/ 5G USB Dongle/5G Mifi), notebook computers, routers, televisions, and robots… etc. By 2026, 26% of 5G revenue will come from enterprise private networks, reaching an amount of 600 billion US dollars according to Ericsson's report. The new demand for "Enterprise private network" will be an important opportunity for 5G small cells, 5G O-RAN private network and application solutions. Compal provides the leading communication technology, product manufacturing and technical know-how. Our integrated 5G module, 5G devices, 5G Small Cell and 5G O-RAN Private network solutions provide 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 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. Tablets are mature products, and for the next step, manufacturers should focus on exploring new usage scenarios 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. To provide mobile broadband service (eMBB) 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. 141 • Continuously improve the functions required for rugged mobile phones, scratch-resistance, crack- resistance, drop-resistance, waterproof, dustproof, etc. ■ Smart Wearable Devices • More and more smart, fashionable, and compact watches for sports and health are following Apple to the market. • Customers who use smart wearable devices for sports also want high-accuracy GPS, steps counter, 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 specialized in related 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, adapting OLED panels, integrating far-field microphones, ultra-high-resolution large size display solutions, Quantum Dot with 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 experiences 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. 142 • 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. • Services are integrated through cloud and edge 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 many 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 5G, AI, multiple sensor cognition, 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 143 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 are also more competitive in the market. Compal will continue investing in the development of medical 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 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. ■ Automotive 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. 144 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 2021 2022 first quarter 16,491,857 3,974,246 1,235,682,015 267,857,679 1.3 1.5 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 ultimate performance such as gamers or creators. • Mainstream products: 16-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. • No compromise on performance. • Not only thinner and lighter but also lower power consumption are key requirements for good user experience. • New ultra slim notebooks 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 more secure and precise connections while allowing easier detachment, this allows better user convenience when 2-in-1s are used in different 145 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, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution • Qualcomm X62/65 5G M.2 / LGA module will be mass-produced in 2022. • 5G integrated small cell developed in 2021 and obtained product certification. • MTK based 5G M.2 / LGA module have been mass-produced in 2021. • Qualcomm x55 5G M.2 / LGA module obtained product certification, including GCF, CE, CCC, TELEC, FCC, PTCRB, etc., which have been mass-produced in 2020. • 5G products obtain interoperability test reports and certifications from major worldwide 5G operators. • 5G indoor/outdoor CPE, and MiFi have been in development and mass-produced 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 charge function. • Developed and mass-produced a new generation of waterproof e-Reader with wireless charge function. ■ 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 maps, 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 146 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 headsets and Bluetooth hearing aids with more intelligent noise cancellation features. ■ Smart Display Products • Integrated large-size OLED panels and develop new image sticking free technology. • Developing a Quantum Dot with 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 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 smart camera devices and launched to market, and the product won the 2021 iF design award. ■ IoT Vertical Solution • The development of AR and VR Glasses product were completed, and shipping to foreign customers has begun. • The development of Smart Meter Communication Hub product was completed, and shipping to foreign customers has begun. • Mass production of the shield-type and uplift-type AMR has begun. Apart from implementing all Compal plants, we have started cooperation with system integrators and shipped to customer; meanwhile, kept promoting 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 ten point-of-care centers in Taiwan have begun trials and official use of this solution. In 147 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. ■ 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 and AMD 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. Edge Computing Servers The system has been designed for 5G telecommunication facilities in collaboration with 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 times. • 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 148 competitive pricing for lower priced products. • Diversified production sites to mitigate geopolitical risk and strengthen cost competitiveness. • We will pay close 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. • Observing the impact of Metaverse on the market and launch products that meet market demand. 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 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 149 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. 150 5.2 Market and Sales Overview 5.2.1 Market Analysis 1. 2021 Sales (Service) by Regions Area Americas Europe Asia (Including Taiwan) Other Area Total 2. Market Share ■ Notebooks Percentage 44.1% 25.0% 28.1% 2.8% 100.0% According to IDC statistics, the total number of notebook PCs sold around the world in 2021 came to approximately 261.1 million units. In terms of total shipping quantity, Compal’s notebook PCs have approximately 22% 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. ■ 5G Module and 5G User Equipment Compal 5G UE Modules shipped from 2020, which is applied to various product categories such as 5G Mifi, 5G CPE routers, 5G notebooks, 5G AR/VR, 5G drones, 5G robots, 5G real-time cameras, 5G Industrial PC and industrial routers, and 5G USB Dongle, etc. The 5G standard is the major world-wide communication standard and trend, will bring rich product possibilities and high growth. 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. ■ 5G Small Cell and 5G O-RAN Private Network solution Compal has launched a variety of 5G integrated small cells for both Sub-6 and mmWave, and a variety of wireless end devices, to meet outdoor and indoor application scenarios, accelerate the speed of 5G network deployment, and reduce the cost of each field. With Compal's customized 5G O-RAN private network and application solutions, 151 it can meet the deployment needs of different industrial fields. At present, it has been deployed in several domestic fields to assist the digital transformation and strengthen the development of the industry. ■ 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 earbuds. Because smart hearable products require high accuracy and miniature manufacturing, Compal is also investing in optimizing the product design and manufacturing processes to enhance production efficiency. ■ Smart Display Products Developed mass-produced ultra-high-resolution smart TVs and successfully gained over 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, the global notebook market showed a 17% year-on-year growth in 2021. In 2022, the post-pandemic era, the demand for commercial device will remain strong. However, components shortage crisis may still 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 152 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 2021 was approximately 76.9 million units with 22.5% year-on- year growth. An annual growth rate of 32.1% is expected for 2022 with a total shipping quantity exceeding 83.4 million units. ■ Gaming Notebooks As the epidemic gradually eases, people start to return to normal life and reduce their reliance on games. However, market data shows that many players still maintain gaming habits after the epidemic. According to IDC’s data, the global gaming notebook shipment is 28.4 million units with an 18.3% YoY growth in 2021. Gaming laptop shipment will take about 11.1% of the total notebook shipment. ■ 2-in-1 Notebooks Much effort and hard work from the industrial chain, have resulted in the cost 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 2021 was approximately 126.1 million units. It is expected by that 2022, 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 2%, with a global shipping quantity exceeding about 145.8 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 2021 was 12.3 million units and the number is expected to remain about the same at 12.4 million units in 2022. Compal will continue to cultivate the market. ■ 5G Module, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution Cisco’s internet report points out that by 2023 70% of the world 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 continue to develop 5G products with customers and various 5G domain partners. According to the latest market research report, the global 5G small cell market size will reach USD 17.9 billion in 2028. SNS estimates that the global mobile private network will grow to USD 3.4 billion in 2025. Ericsson's report also pointed out that the 5G vertical application market will reach USD 1.32 trillion in 2026. In view of the huge 5G small cell and 5G O-RAN private network application market, Compal actively invests in the development of 5G small cell and 5G O-RAN private network solutions. Compal deeply integrates and cooperates with various of operators and industry partners, and officially become 5G small cell equipment and 5G O-RAN private network solution provider. 153 ■ Tablets Follow by the pandemic getting controlled, it’s predicted that the total tablet shipping quantity in 2022 would decline to the level before Covid-19. According to market forecast, detachable tablet shipment will surpass slate tablet in few years. Compal sees this trend and will develop toward the commercial segment with larger screen size and 4G/5G communication technology to accommodate the growing demand. ■ Smartphones According to IDC's, after the impact of the Covid-19 pandemic, the 2022 Smartphone Global smartphone market shipment is estimated to reach 1380 million with 1.5% YoY growth when compared to 1360 million in 2021. 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 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 several years in the future, driven by different marketing strategies: independent product or accessory of smartphone and smartwatch. More vendors join the market and it becomes more competitive. To create more value, Compal is focusing on new 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 2022 will still affected by the Covid-19, logistic and inflation uncertainties and is expected to have a slight recession. 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 assistants, OLED panels, quantum dots with 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% 154 worldwide households will have one or more Smart Home devices. Compal will actively establish its presence in the Smart Home market. ■ IoT Vertical Solutions According to a survey report by Gartner, Jan. 2022, smart device shipments are expected to reach 170 million units, increase of 17.2% over 2021. Moreover, Gartner expected the demand to grow to 224 million units by 2025, 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 are 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 continuous blood sugar monitoring systems, reached USD 1.8 million in 2018 and will hit USD 2.5 billion in 2026, with a CAGR of 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%. ■ Automotive electronics (AE) IHS estimates global light vehicle production in 2022 will reach 82.4 million units, up 3.7% YoY from 79.4 million in 2021. ■ Server IDC statistics show that the demand for x86 servers was 17.09 million pieces in 2021 and will reach 18.18 million pieces in 2022. 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 96.5% of the shipping volume. As the frame-type server has a higher market share, we have actively engaged in the server market. 155 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 of 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 and is good at 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 2022, Compal will maintain this advantage actively assist customers in the development of more competitive Ultra slim Notebooks. ■ Gaming Notebooks Compal is consistently dedicated to the gaming laptop market with the best hardware and software design. We will keep focusing on the design of new-generation gaming laptops in order to target different customers in 2022. ■ 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. 156 ■ 5G Module, 5G User Equipment 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. ■ 5G Small Cell and 5G O-RAN Private Network solution • Compal’s new 5G small cell series released has comprehensively antenna solution, greatly increased the data transmission rate and accuracy, and effectively enhanced the network signal, strengthening the indoor coverage and the ability of outdoor long-distance transmission, creating the industry's fastest 5G small cells. Small cells equipped with the new processor and Compal's 5G O-RAN private network and application technology have greater flexibility to meet the needs of deployment in different industrial fields, and can also enhance the possibility of extended development and strengthen industrial development. ■ Tablets Compal remains somewhat optimistic about the future of the tablet market. Based on our design energy, we can provide more efficient tablet solutions to help our customers to decrease time-to-market while deliver more cost- effective and competitive products. Compal will also explore the possibility of introducing tablets that support 4G/LTE/5G Carrier Aggregation (CA), using the experience and knowledge accumulated in smartphone manufacture, to meet the 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, virtual personal assistants and more intuitive user interfaces. • 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 157 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 • We continue to focus on the development of smart display in the immersive of picture and sound experience and the application of voice assistants, integrate cross-domain product research, and development resources to expand the industrial ecological chain. • We 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 win-win business and strive for market share. ■ AR/VR Smart Devices Compal continues its close 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 158 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. ■ Automotive 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 • Demand jumps after the ease of pandemic. • The pandemic has prompted people to embrace flexible work styles, which has fueled commercial notebook demand. • 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. • A rational pricing strategy supported by an alliance with parts suppliers helps secure market growth. 159 • 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. • Actively invest in 5G development, continue to develop 5G small cells, 5G O-RAN private network and application solutions, 5G modules, 5G dongles/hubs and other 5G vertical product portfolios that can be supported in all fields, and gradually promote the development of 5G leadership in applications. • The US-China 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 unstable international political and economic situation has caused a turbulent state. • The global economy was impacted by inflation, debts, unequal income, and the attack of virus variants. • The unsmooth supply of semiconductors will affect notebook shipment in 2022. • 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 mature product and requires more diverse, value-adding, and innovative features for 160 differentiation from other market participants. • 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. • In the condition of the US-China trade war, within the trend of globalization, technologization and the fast- changing Industries, Taiwanese businessmen have increased investments in Taiwan from abroad as well as the demand of human resources and make the talented recruiting more difficult. ■ 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 cost. • 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 cost. • 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. 161 • 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 develop more AR/VR solutions and collaborate with domain partners, to create market 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 in AI technologies, hold AI seminars, and training courses. • We will improve employee benefits, salaries and other conditions to retain talent, disperse R&D location bases to increase the source of outstanding talents and attract outstanding talents to join the international recruitment. 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. ■ Gaming Notebooks The high-performance hardware and gaming-inspired designs allow gamers to fully immerse themselves in the gaming world. ■ 2-in-1 Notebooks These devices use the Win 10 and Win 11 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, 162 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. ■ 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 alliances. We offer clients complete solutions and services through the creation of novel applications. Unlikely conventional IT products, such as AMR 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. ■ Automotive electronics (AE) ‧ In-Vehicle Infotainment systems ‧ Vehicle communication (4G/5G) systems ‧ ADAS warning systems ■ 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. 163 2. Production Process of the Main Products ■ Notebooks 164 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 165 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 166 5.2.3 Supply Status of Main Materials ■ CPU/Chipset ● Notebooks The demand for notebooks remained strong in 2021 due to the influence of Covid-19. However, with countries gradually lifting lockdowns and people returning to office and school, following with the port congestion issue and Chromebook subsidy program change, the overall demand of NB began to slow down in 2022 Q1. In 2022, the port congestion, inflation and geopolitical influence, with the adjustment of customer CPU inventory, these factors result the delay of new product launch and the overall NB demand continues to slow down. Due to the mass production and shipment of Apple’s CPU, the proportion of X86 has been divided. It is expected that the proportion of Intel will drop from 76.54% to 72.04%, AMD will decline from 17.49% to 17.15%, and the Apple’s CPU will increase from 4.01% to 8.18% with the other ARM CPU increase from 1.96% to 2.63%. In terms of Intel new product, it is expected that the 10nm Alder Lake and supporting DG2 graphic card will be launched in 2022 Q2 that will support the new generation DDR5. 10nm Raptor Lake will be launched in 2022 Q4. Meteor Lake on 7nm process is expected to launch in 2023 Q2. Considering that the low-end CPU is still dominated by 10nm Jasper Lake, a new generation of low-end CPU Alder Lake N will launch in 2022 Q4. The new AMD product 5nm Phoenix is expected to launch in 2022 Q4 with the 6nm low-end Mendocino. ● Smartphones and Modules The Global 5G smartphone sales over 50% in Jan 2022, the major market growth in China, North America and Western Europe. The mobile phone market was also affected by seasonal sluggish demand, resulting in relative weakness in the quarter for stock adjustment. Coupled with the global economic status, the overall production performance will weaken the first half of this year, and affect the total production volume of the whole year, which is expected to be lowered from the original 1.38 billion to 1.366 billion units, and the annual growth rate will decline to 2.5%. Including Covid19, the shortage of wafer production capacity has not been significantly alleviated, coupled with geopolitics, inflation, energy shortages and other more serious issues this year, it will also bring more variables to the smartphone market this year, and it is not excluded that the total annual production volume will continue to be adjustment. The global 5G market in 2021 was 4.85 billion US dollars, and will reach 17.11 billion US dollars by 2026, with a compound annual growth rate of 28.67%. Due to the rapid development of automation equipment, drones, home automation equipment, autonomous driving, multiplayer gaming, video conferencing, webcasting, telemedicine, and augmented reality, 5G networks meet consumer demand for higher network speeds and increasing demand for mobile data services, which will significantly drive the growth of the global 5G chip market. 167 ■ Memory ● DRAM In 2021, the three major OEMs (Samsung, SK Hynix and Micron) had conservative production plans on the supply side, with the demand for notebooks and servers have increased due to the Covid-19, which causing DRAM price start to rise since 2021 Q1. The pulling force was ease due to the high-level DRAM inventory, which caused by the shortage of IC. However, since a part of production capacity was transferred to the new generation DDR5 resulting the yield loss, the DRAM price did not drop sharply in 2021 H2. In term of DRAM application, based on 1 Gb calculated for the overall world-wide supply. The shipment was 176 billion units in 2021 and it is estimated to be 209 billion units in 2022, with YoY growth around 18.7%. It is expected that the production capability proportion of mobile phones will slightly decrease from 40% to 39%, servers will increase from 34% to 35%, PCs remain 13% with Consumer and Graphic account for 8% and 5% respectively. In term of DRAM manufacturing process, three major OEMs continually move toward to 14nm, but it is expected that the capital expenditure will reduce about 9% compared with 2021. It is estimated that the whole year output bit growth of three major OEMs is about 18.7%, which is higher than the demand side of bit growth by 17.03%. Therefore, it is expected that the supply of DRAM in 2022 will be relatively stable compared with 2021. Nevertheless, the new-generation DDR5 has requested to add PMIC on module, which also increase the risk of material shortage compare with DDR4. Looking forward to the market, although the demand of server continues to grow, the demand of mobile has ease, with OEMs has adjusted the mobile production capability to server and consumer, it is expected that the PC side supply will be relatively stable in 2022 H2 with the DRAM price increase more restrained than previous. Additionally, since the mining demand has slowed down and geopolitical influence causes gaming demand decrease, the VRAM price shows a declined trend. ■ NAND flash Major NAND Flash suppliers plan to keep their bit growth rates smooth. It is estimated that the supply bit growth rate will be 31.8% in the 2022 with the market demand bit growth rate 30.8%. However, Kioxia and WD material contamination event brought about a temporary supply gap and ended the price declining cycle. In 2022, Covid-19 epidemic will continuously impact all sectors of the economy. China is still adopting zero-Covid policy, which brings many uncertainties to the electronics industry supply chain. The mainstream production process transferred from 92/96 layers to 128/144 layers. Looking forward to 2022, the NAND production process will keep move to higher stacking processes. Both Micron’s and SK Hynix’s new generation of 176-layer NAND Flash products have been entered mass production. Samsung announced that they will accelerate the mass production plan of 8th generation 3D NAND after 7th generation 3D NAND have been entered mass production. It is expected to drive NAND Flash manufacturers to launch 228-layer TLC or QLC in the end of 2022 while the industry competes toward to higher stacking processes. At the beginning of 2022, Samsung adjusted operations at their manufacturing facilities due to the lockdown in Xi’an. A 7.4 magnitude earthquake struck off the coast of Fukushima Japan on 16th of March and made 168 Kioxia halted its Kitakami plants. Kioxia/WD JV also have material contamination event in February and March. NAND Flash industry is unintelligible in the first half of the year but overall NAND Flash demand is stable and slightly decrease. The price will not go up too strong, even in the traditional peak season of the second half of the year. ■ HDD In 2021, the overall HDD shipments were still dominated by large-capacity enterprise hard drives. With the notebooks design become thinner and the cloud storage gradually turn into more mature, the HDD attach rate has decreased year-by-year. It is expected that the HDD attach rate will reduce to 8% as notebooks is mainly equipped with SSDs. The 1TB usage rate reached the peak of 61% in the 2021, with 500GB and 2TB accounting for approximately 36% and 3% respectively. HDD prices have been steady over the years. However, the three major suppliers (Seagate, Western Digital and Toshiba) will increase the price on all HDD productions from 2202Q2 due to the impact of rising transportation logistics and raw materials cost during Covid-19 pandemic. It is estimated that the price of HDDs will increase 5-8%. Overall sales of HDDs dropped from 650 million units to 235 million during the period from 2010 to 2021. The capacity of HDD shipments was about 1.3ZB (106 TB) in 2021, and is estimated to 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 36%, and Toshiba is 21%. ■ ODD As notebooks 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 notebooks with ODD has decline are less than before. 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, 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 Countries in the post-epidemic era are gradually moving towards the direction of unblocking. In the case of back to school and office, it is expected that the market demand for notebook computers will return to normal. Coupled with the fact that governments around the world are not actively compiling budgets for Chromebooks, as a consequence, the demand for laptops with educational functions has been revised significantly. With the gradual popularization of the construction of 5G base stations, the cycle of replacing 4G mobile phones with 5G mobile phones is taking place. Polymer cells are expected to keep a similar shipment level compared to 2021. As Japanese and Korean battery manufacturers have determined that they will no longer focus on 3C consumer products, Chinese suppliers will dominate the market. As the number of electric vehicle sales continues to grow, the cylindrical battery market is still in shortage. The overall supply and demand of battery raw materials has been seriously unbalanced, and futures prices have 169 also hit new highs, which also affects the cost of consumer batteries. ■ LCD panels and Touch control modules The Covid-19 epidemic continued in 2021, the shortage of upstream raw materials and the strong downstream demand, caused prices of LCD panels continued to rise in the first half year. In the second half of the year, the demand for panels began to show a sign of weakening. The demand for commercial models was still strong, but the consumer models and Chromebooks began to decline. Due to the strong demand for commercial models, panel makers quickly switched their product mix to 14-inch and 15.6-inch panels, and shipments of these two sizes increased 20.2% and 23.2% QoQ in Q3’21 and Q4’21. Panel shipments hit a new high. Notebook panel shipments hit a record high, reaching 282 million pieces, an annual growth rate of 25.1% in 2021. In 2022H2, demand was driven by the epidemic mainly for consumer notebooks and Chromebooks, and in 2022H2 as Europe and the United States gradually returned to normal life, the demand was taken over by commercial models. In Q4’21 due to the supply of components such as driver ICs and T-con ICs has gradually improved, the notebooks panel market entered into a critical adjustment period. The panel output value ranked first in mainland China, second in Taiwan, and third in South Korea in 2021. The overall panel output value of Taiwan and mainland China was the best in terms of LCD growth. Taiwan had an annual increase of 39.6%, while mainland China has an annual increase of 57.3%. South Korea only has 2.48% growth due to Samsung's withdrawal from the LCD market. The CQ1 began to enter the off-season in 2022, the shortage of driver ICs gradually eased. The order volume in the first quarter has double digits declined, but the panel suppliers did not adjust the build plan in CQ1 and caused all sizes panel have experienced price declines. The shipment of notebooks had a normal off-season correction in H1’22, and the panel supply remained high, the client inventory increased a lot. Due to inflation and geopolitics, the future demand is unclear. At the same time, due to the price decline trend, clients are expected to adjust the inventory and passively pulling goods. We foresee that demand will be resumed in the peak season with low level panel price. There is another opportunity to actively pull goods to replenish inventory. 170 5.2.4 Major Suppliers and Clients 1. Major Suppliers in the Last Two Calendar Year 2020 2021 2022 first quarter Unit: TWD Thousands Party Name Amount As a percentage to 2020 net purchases (%) Relationship with the issuer Name Amount As a percentage to 2021 net purchases (%) Relationship with the issuer Name Amount As a percentage to 2022 first quarter net purchases (%) Relationship with the issuer 1 2 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 Others Net Purchase 416,094,822 115,391,469 638,053,542 1,169,539,833 35.58 9.87 54.55 100.00 N.A. N.A. Company E 93,032,130 Company B 25,872,982 147,881,371 Net Purchase 266,786,483 Others 34.87 9.70 55.43 100.00 N.A. N.A. 2. Major Clients in the Last Two Calendar Years 2020 2021 Party Name Amount As a percentage to 2020 net sales (%) Relationship with the issuer Name Amount As a percentage to 2021 net sales (%) Relationship with the issuer Name 1 2 3 4 Company a 120,376,434 Company d 431,621,595 11.48 41.15 Company e 75,903,386 7.24 Company f 240,039,272 Others 180,988,564 22.88 17.25 Net sales 1,048,929,251 100.00 N.A. N.A. N.A. N.A. Company a Company d Company e Company f Others Net sales 144,069,158 11.66 534,800,186 43.28 116,116,250 9.40 223,256,380 18.07 217,440,041 17.59 1,235,682,015 100.00 N.A. N.A. N.A. N.A. 171 Unit: TWD Thousands Amount 2022 first quarter As a percentage to 2022 first quarter net sales (%) 9.65 Company a 25,854,144 Company d 116,428,936 Company e 27,590,879 Company f 43,302,139 Others 54,681,581 43.47 10.30 16.17 20.41 Net sales 267,857,679 100.00 Relationship with the issuer N.A. N.A. N.A. N.A. 5.2.5 Production in the Last Two Years Year Production volume/ value Main products 2020 2021 Unit: 000 Units; TWD Thousands Production capacity Production volume Production value Production capacity Production volume Production value 5C electronics 154,830 130,051 1,009,349,172 176,163 149,327 1,183,285,569 5.2.6 Shipments and Sales in the Last Two Years Year Sales volume Main products 2020 2021 Domestic sales Value Volume Export sales Volume Value Domestic sales Value Volume Export sales Volume Value 5C electronics 769 3,095,681 130,581 1,045,833,570 1,156 5,067,681 148,156 1,230,614,334 Unit: 000 Units; TWD Thousands 5.3 Human Resources Year December 31, 2020 December 31, 2021 March 31, 2022 Number of employees 112,761 109,709 89,668 Average age Average years of service Academic qualifications Doctoral Degree Master’s degree University High school/Below/others 28.12 1.70 0.04% 3.18% 15.80% 80.98% 28.08 1.69 0.04% 3.34% 16.29% 80.33% 28.59 2.10 0.05% 4.06% 19.76% 76.13% 172 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 48,928,875 (excluding regular maintenance and green R&D) in 2021. 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 2021 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 spreading 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, 173 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 2021, the Company had provided TWD 198.66 million in maternity allowances and bonuses. There were 43 counts of employees who took parenting leave, with the right to return to work, in 2021. ■ Education and training The Company set training credits and outlined the credit system according to the needs of each level. The Company also integrated all training records in an online learning platform to further assist the competent staff in keeping abreast of learning progress. In 2021, 673 training sessions (both internal and external) were organized; these courses delivered 170,617 hours of training and 59,307 persons enrolled. The total training expenses were TWD 29,565,000. 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, issue 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 labor retirement rules, 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, we contribute and deposit labor pension preparation funds into a dedicated account at the Bank of Taiwan per 174 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, the voluntary withholding rate was 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 2021 and as of the date of report published, Company did not suffer any losses due to employment disputes: None ‧ Future plans and potential expenses: None 175 5.6 Information Security Management 1. Information Security Policies and Organizations The Information Security Committee is the organization for the coordination and execution of Compal information security related operations and various activities. It has one chairman and one deputy chairman. According to management needs, several members may be set up, with the head of the department and above as ex officio members. An executive secretary is also set up to be responsible for administrative affairs. The Information Security Committee has an Information Security Implementation Team, which is composed of staff from the Information Security Team of the Information Headquarters, which handles the establishment, promotion, maintenance, audit and training of information security, and one person is appointed as the head of the Information Security Implementation Team. Report its implementation to the board of directors once a year. When necessary, the capital committee may invite external information security consultants to attend and serve as advisors. Compal’s Information Security Committee coordinates and discusses information security policies, objectives, resource scheduling and other issues, and holds management review meetings every six months to ensure the continuous applicability, relevance and effectiveness of ISMS, and maintain operational information security and compliance National laws and regulatory requirements for information security control. It defines the scope of ISMS, implements risk assessment and risk management tasks, determines acceptable risk levels, discuss the duties and responsibilities in information security related operations, and coordinate information security control measures and processing procedures. It advocates information security policies and information security management concepts, and promote the company's information security education and training. In order to maintain the company's 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 accordance with the requirements of ISO27001 standard, internal audit to be conducted twice a year and enacts the information security policy as the highest guiding principle. The statement of information security is "to ensure continuous operation and improve customer satisfaction”. Compal did not have any complaints about the violation of customer privacy or the loss of customer information in 2021. Compal's asset security policy is as follows: ‧ Implement risk assessment of information assets. ‧ Maintain the confidentiality, integrity and availability of important information assets. ‧ Continuous improvement of information security system through Plan-Do-Check-Act (PDCA) management cycle. ‧ Make sure to abide by customer contract and ensure customer information security. ‧ Follow and comply with government information security regulations. ‧ The participation of all employees and subcontractors. 2. Information security strategy management and resources In 2005, Compal passed the information security verification of ISO 27001:2005, and obtained the certificate of "Information Security Management System ISO 27001:2005" issued by BSI, and gradually expanded its 176 scope of verification, which is tracked twice a year and re-audited 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 verifications 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& 2020, it passed the re-verification successively, and then it was re-verified every three years afterwards, meeting the requirements of the new version of the specification. The scope of verification covers the IT Center, portable computer products R&D, All-in-one computer products, automotive electronic products and server products. In October 2020, the scope of verification was expanded to four plant compounds at Kunshan to ensure the effective operation of management system for information security. The widespread use of computers and rapid development of Internet have greatly changed the way users store and share information. When companies improve production and management efficiency through technology and Internet, they have, as well, exposed their privacy and information security to risks. The six major information security goals are measured monthly to monitor the control measures of information security management. Risk assessment is executed regularly 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. BCP recovery exercises are executed regularly to ensure the validity of the BCP plan and that it meets the system recovery goals. To boost employees’ awareness of information security, our employees are required to receive social engineering exercises and a briefing on information security and training. Compal continues to strengthen control requirements for information security, reinforces company password policy, and adjusts the original password setting of previous 3 generations that cannot be reused repeatedly to 10 generations. Also, it has strengthened identity authentication mechanism for company account, and introduce two-factor authentication to enhance the security of remote login for internal resources to prevent illegal users from accessing company resources or customer information. Access to product information is controlled by account permissions, and the login password is changed regularly in accordance with the company's password policy. From time to time, it will, through announcements and quarterly advocacy to enhance employee awareness for information security, persistently review the network security planning of company, and implement all equipment connected to company network in compliance with regulations and protocols. 177 5.7 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. 178 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, 2022 Analysis Current assets Property, plant, and equipment Intangible assets Other assets Total assets Prior to Current distribution liabilities After distribution 2017 2018 2019 2020 2021 321,782,654 362,745,250 343,154,813 424,460,635 487,115,390 476,061,727 18,179,367 20,418,228 19,972,347 22,085,340 26,990,364 28,118,386 1,284,660 1,516,253 1,553,342 1,506,101 1,548,508 1,648,286 22,109,740 15,115,092 17,967,917 18,873,622 21,441,078 24,002,371 363,356,421 399,794,823 382,648,419 466,925,698 537,095,340 529,830,770 231,955,732 274,207,898 255,820,033 335,524,716 402,242,095 398,468,240 237,184,287 279,436,453 261,048,588 342,496,124 410,956,354 (Note 2) - Non-current assets 22,752,717 12,425,077 12,069,042 15,411,332 13,313,442 14,038,386 Prior to distribution Total liabilities After distribution Equity attributable to parent company shareholders Ordinary shares Capital reserves Retained earnings Prior to distribution After distribution 254,708,449 286,632,975 267,889,075 415,555,537 412,506,626 412,506,626 259,937,004 291,861,530 273,117,630 357,907,456 424,269,796 (Note 2) - 101,895,584 105,723,646 105,972,633 106,832,505 111,360,265 107,385,573 44,191,916 44,071,466 44,071,466 44,071,466 44,071,466 44,071,466 10,938,773 9,932,434 9,159,259 8,342,813 6,724,856 5,087,888 56,557,146 60,060,381 57,726,604 62,566,181 69,651,940 64,741,364 52,149,999 55,653,234 53,319,457 57,277,605 62,600,505 (Note 2) - Other equity interests (8,911,004) (7,459,388) (4,103,449) (7,266,708) (8,206,750) (5,633,898) Treasury stock (881,247) (881,247) (881,247) (881,247) (881,247) Non-controlling interests 6,752,388 7,438,202 8,786,711 9,157,145 10,179,538 (881,247) 9,938,571 Total equity Prior to distribution After distribution 108,647,972 113,161,848 114,759,344 115,989,650 121,539,803 117,324,144 103,419,417 107,933,293 109,530,789 109,018,242 112,825,544 (Note 2) - Note: 1. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 2022, has been reviewed by the CPA. 2. The amounts are approved by the Board of Directors meeting on March 15, 2022. 179 ▓ Consolidated Condensed Statement of Comprehensive Income Analysis Net sales revenue Gross profit Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2022 2017 2018 2019 2020 2021 887,656,959 967,706,411 980,442,346 1,048,929,251 1,235,682,015 267,857,679 31,964,569 30,567,091 33,908,828 35,458,522 41,491,574 9,771,784 2,809,891 Net operating income 9,208,429 9,261,746 10,586,368 11,492,545 13,348,593 Non-operating income and expense (1,094,152) 2,527,839 (578,492) 1,630,171 4,119,242 215,496 Net income before taxes 8,114,277 11,789,585 10,007,876 13,122,716 17,467,835 3,025,387 Net income from continuing operations Net loss from discounting operations 6,158,037 9,589,301 7,895,719 10,409,512 13,740,488 2,404,645 - - - - - - Net income (loss) 6,158,037 9,589,301 7,895,719 10,409,512 13,740,488 2,404,645 Income (Loss) from Other comprehensive income (loss) (4,604,412) 387,887 (1,534,980) (3,341,346) (1,237,908) 2,642,157 (net after tax) Comprehensive income 1,553,625 9,977,188 6,360,739 7,068,166 12,502,580 5,046,802 Net income attributes to shareholders of the Parent Net income attributes to non- controlling interests Comprehensive income attributed to owners of parent Comprehensive income 5,749,525 8,913,365 6,955,899 9,361,893 12,632,667 2,157,178 408,512 675,936 939,820 1,047,619 1,107,821 247,467 1,189,818 9,278,187 5,456,508 6,083,542 11,445,530 4,714,397 attributed to non-controlling 363,807 699,001 904,231 984,624 1,057,050 332,405 interests Earnings per share (unit: dollar) 1.32 2.05 1.60 2,15 2.90 0.50 Note: 1. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 2022 has been reviewed by the CPA. 180 ▓ Parent-Company-Only Condensed Balance Sheet Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2022 Analysis Current assets Property, plant, and equipment Intangible assets Other assets Total assets 2017 2018 2019 2020 2021 240,677,588 265,372,906 245,522,829 296,383,073 348,914,103 2,092,272 2,128,181 2,620,638 2,604,893 2,484,963 146,813 378,745 438,334 436,548 85,179,393 87,932,981 89,201,687 89,526,637 431,936 95,517,212 328,096,066 355,812,813 337,783,488 388,951,151 447,348,214 Current liabilities Prior to distribution After distribution 203,492,102 237,882,742 220,871,943 268,466,052 324,236,031 208,780,678 243,171,318 226,160,519 275,517,487 333,050,325 (Note 2) Non-current assets 22,708,380 12,206,425 10,938,912 13,652,594 11,751,918 344,802,243 N.A. (Note 2) 44,071,466 6,724,856 Total Prior to distribution liabilities After distribution 226,200,482 250,089,167 231,810,855 282,118,646 335,987,949 231,489,058 255,377,743 237,099,431 289,170,081 Ordinary shares Capital reserves 44,191,916 44,071,466 44,071,466 44,071,466 10,938,773 9,932,434 9,159,259 8,342,813 Retained earnings Prior to distribution After distribution 56,557,146 60,060,381 57,726,604 62,566,181 69,651,940 52,149,999 55,653,234 53,319,457 57,277,605 62,600,505 (Note 2) Other equity interests (8,911,004) (7,459,388) (4,103,449) (7,266,708) (8,206,750) Treasury stock (881,247) (881,247) (881,247) (881,247) (881,247) Total equity Prior to distribution After distribution 101,895,584 105,723,646 105,972,633 106,832,505 111,360,265 96,667,029 100,495,091 100,744,078 99,861,097 102,646,006 (Note 2) Note: 1.The financial information is audited and certified by the CPA every year. 2. The amount approved by Board of Directors on Mach 15, 2022. 181 ▓ Parent-Company-Only Condensed Statement of Comprehensive Income Year Analysis Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2022 2017 2018 2019 2020 2021 Net sales revenue 841,309,602 911,050,122 916,280,028 991,279,270 1,171,613,858 Gross profit 21,544,440 21,880,841 24,849,149 23,218,044 27,904,355 Net operating income 5,170,549 6,936,706 8,536,952 6,079,726 7,578,392 Non-operating income and expense 1,508,171 3,021,610 (713,273) 4,347,551 6,864,576 Net income before taxes 6,678,720 9,958,316 7,823,679 10,427,277 14,442,968 Net income from continuing operations Net loss from discounting operations 5,749,525 8,913,365 6,955,899 9,361,893 12,632,667 - - - - N.A. - Net income (loss) 5,749,525 8,913,365 6,955,899 9,361,893 12,632,667 Income (loss) from other comprehensive income (net after tax) (4,559,707) 364,822 (1,499,391) (3,278,351) (1,187,137) Comprehensive income 1,189,818 9,278,187 5,456,508 6,083,542 11,445,530 Earnings per share(unit: dollar) 1.32 2.05 1.60 2.15 2.90 Note: 1.The financial information is audited and certified by the CPA every year. ▓ Auditors’ Opinions Year 2017 2018 2019 2020 2021 Accounting Firm KPMG KPMG KPMG KPMG KPMG CPA Kuo, Kuan Ying; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Kuo, Kuan Ying ; Chien, Szu Chuan Audit Opinion Unqualified opinion Unqualified opinion Unqualified opinion Unqualified opinion Unqualified opinion 182 6.2 Five-Year Financial Analysis ▓ Consolidated Financial Analysis Year Analysis Financial Analysis for the Last Five Years As of March 31, 2022 Debt ratio 70.09 71.70 70.01 75.16 77.37 77.86 2017 2018 2019 2020 2021 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 (%) 722.80 615.07 635.02 594.97 499.63 467.18 138.72 108.19 7.25 5.03 72.56 14.55 6.30 25.08 132.29 134.14 126.51 121.10 119.47 103.06 102.94 5.47 5.08 71.85 12.61 6.33 4.67 4.96 73.58 12.01 6.34 97.39 12.42 4.95 73.73 11.61 5.89 92.13 84.91 17.65 10.24 4.73 4.04 77.16 90.35 11.31 5.64 8.22 4.80 28.95 30.39 31.43 32.27 44.40 45.36 50.14 48.55 49.88 50.36 38.88 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 (%) 18.36 26.75 22.71 29.78 Net margin (%) Earnings per share (dollar) Cash flow ratio (%) 0.69 1.32 0.99 2.05 (Note1) (Note1) 0.81 1.60 8.18 0.99 2.15 4.25 (Note1) Cash flow Cash flow adequacy ratio (%) Cash reinvestment ratio (%) Leverage Operating leverage Financial leverage Note: 1. The ratio is negative. 48.05 (Note1) 1.63 1.16 44.84 (Not1) 1.60 1.40 37.92 35.94 27.41 9.89 1.61 1.35 5.48 1.54 1.11 (Note1) 1.52 1.09 2.46 2.90 11.57 39.64 1.11 2.90 2.01 0.50 2.01 6.86 0.90 0.50 - - - - - 2. The financial ratio has changed by up to 20% in the past two years: ‧Interest coverage、Return on equity、Operating income to paid-in capital ratio、Earnings per share : Mainly due to the increase in profit compared to the earlier period. ‧Cash Flow Adequacy Ratio: Mainly due to increase in business growth, inventory amount and capital expenditures. 3. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 2022 has been reviewed by the CPA. 183 ▓ 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. 184 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. 185 ▓ Parent-Company-Only Financial Analysis Year Analysis Financial Analysis for the Last Five Years As of March 31, 2022 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 (%) 2017 2018 2019 2020 2021 68.94 70.29 68.63 72.53 75.11 5,955.44 5,541.36 4,461.19 4,625.34 4,954.29 118.27 111.56 111.16 110.40 107.61 96.92 89.79 88.45 7.85 5.06 6.14 5.08 4.97 4.97 72.13 71.80 73.46 23.11 18.82 17.55 5.65 5.95 5.86 89.44 15.81 4.87 75.01 18.29 5.73 88.77 21.84 4.64 78.73 19.59 5.72 15.79 19.39 20.79 19.95 18.62 398.31 431.73 385.90 379.40 460.37 N.A. 2.56 2.00 5.54 2.66 3.06 8.59 2.64 2.46 6.57 2.73 2.73 8.80 2.80 3.15 11.58 15.11 22.60 17.75 23.66 32.77 0.68 1.32 0.98 2.05 0.76 1.60 0.94 2.15 1.08 2.90 (Note1) (Note1) 6.80 (Note1) (Note1) Cash flow Cash flow adequacy ratio (%) 11.48 5.45 (Note1) (Note1) (Note1) Cash reinvestment ratio (%) (Note1) (Note1) 8.29 (Note1) (Note1) Leverage Operating leverage Financial leverage Note: 1.The ratio is negative. 2.86 1.23 2.59 1.39 2.43 1.30 3.17 1.13 2.94 1.10 2. The financial ratio has changed by up to 20% in the past two years: ˙Interest coverage: Mainly due to the increase in income before tax compared to the earlier period. ˙Property, plants, and equipment turnover: Mainly due to the increase in net revenue 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 income before tax compared to the earlier period. ˙Earnings per share: Mainly due to the increase in net income compared to the earlier period. 3. The financial information is audited and certified by the CPA every year. 186 ▓ 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. 187 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. 188 6.3 Audit Committee’s Report for the Most Recent Year Audit Committee’s Review Report The Company’s 2021 financial statements, business report and proposal for distribution of earnings have been approved by the Audit Committee and by the Board of Directors. Kuan-Ying Kuo and Szu-Chuan Chien, certified public accountants of KPMG, have completed the audit of the 2021 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. To Compal Electronics, Inc. 2022 Annual General Shareholders’ Meeting Chairman of the Audit Committee: Min Chih Hsuan March 15, 2022 189 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 2021 to the publication date of this annual report: None. 190 VII. Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status Analysis Year 2021 2020 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 487,115,390 424,460,635 6,2654,755 8,369,312 7,949,925 419,387 26,990,364 22,085,340 4,905,024 14,620,274 537,095,340 402,242,095 13,313,442 12,429,798 466,925,698 335,524,716 15,411,332 415,555,537 350,936,048 44,071,466 6,724,856 69,651,940 (8,206,750) (881,247) 10,179,538 44,071,466 8,342,813 62,566,181 (7,266,708) (881,247) 9,157,145 2,190,476 70,169,642 66,717,379 (2,097,890) 64,619,489 - (1,617,957) 7,085,759 (940,042) - 1,022,393 5,550,153 14.76 5.28 22.21 17.62 15.03 19.88 (13.61) 18.41 - (19.39) 11.33 12.94 - 11.16 4.79 Total Equity Note: Analysis of variations exceeding 20% and amounting to more than NTD10 million: 121,539,803 115,989,650 Increase in property, plant and equipment: Mainly due to the addition of machinery and other operating equipment. 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. 191 7.2 Analysis of Financial Performance Analysis Year 2021 2020 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) 1,235,682,015 1,048,929,251 186,752,764 1,194,190,441 1,013,470,729 180,719,712 41,491,574 28,142,981 13,348,593 4,119,242 17,467,835 3,727,347 13,740,488 35,458,522 23,965,977 11,492,545 1,630,171 13,122,716 2,713,204 10,409,512 6,033,052 4,177,004 1,856,048 2,489,071 4,345,119 1,014,143 3,330,976 17.80 17.83 17.01 17.43 16.15 152.68 33.11 37.38 32.00 Other Comprehensive Income (after tax) (1,237,908) (3,341,346) 2,103,438 (62.95) Total Comprehensive Income 12,502,580 7,068,166 5,434,414 (76.89) Note: Analysis of variations exceeding 20%: Increase in non-operating income and expenses: Mainly due to the profits from disposal of property, plant and equipment in current year. Increase in profit before tax: Mainly due to the increase in net profit and net non-operating income. 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. Decrease in other comprehensive income (after tax) loss: Mainly due to the decrease in the loss of exchange differences on translation of foreign financial statements. Increase in total comprehensive income: Mainly due to the increase in profit before tax. ■ 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 remains, geopolitical risks intensified by the Ukraine war and the US and China competition, as well as the consumer demand impacted from inflations, which all caused the uncertainties in the global economic and industrial changes for 2022, where the Company has to react with operational flexibility and solid execution. Despite many industrial research institutions hold the conservative views for the upcoming year, the Company’s forward progress hasn’t been stopped from taking numerous new measures with customers. Moreover, as digitization, automation and teamwork continue to develop, the Company is going to capture the new opportunities via related technologies and products development, among them, the 5G technologies, 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 130~135 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 strategies. 192 7.3 Analysis of Cash Flow 7.3.1 Cash Flow Analysis for the Current Year Cash and Cash Equivalents, Beginning of Year (1) 89,126,923 Net Cash Flow from Operating Activities (2) (23,834,383) Other Cash Inflow (Outflow) (3) 9,869,563 Cash Surplus (Deficit) (1)+(2)+(3) 75,162,103 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 2021 cash flows: •Net cash outflow in operating activities: Mainly due to profit making and increase of net changes of Accounts receivable, inventory, accounts payables 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 2021 Property, plant and equipment Cash flow generated from operations and loans 7.4.2 Expected Benefits 2022 11,737,557 11,737,557 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. 193 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 2021 consolidated profits from investment using the equity method came to approximately TWD 448 million, coming mainly from the performance of Ascendant Private Equity Investment Ltd, and Lipo Holding Co., Ltd. 3. 2022 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 directions: 194 (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 Items Net interest revenue and expense Net gain on foreigne currency exchange transaction (including valuation of financial instruments) Unit: TWD Thousands; % 2021 968,177 542,569 Regarding interest rate and inflation, the company will monitor interest rate changes closely and strive for most favorable loan rate, use idle funds in low-risk bank deposits and money market funds to reduce the impact of interest rate and inflation changes on the company. The Company is export-oriented, sales and purchase of the Company are mainly accounted in USD. 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 mainly utilizes hedging such as forward foreign exchange contracts and swaps to minimize the risks of exchange rate movements. In the future, the quotation strategy will be adjusted in a timely manner depending on the fluctuation of the exchange rate. The financial department collects and evaluates the relevant information and trend of the foreign currency market, and accommodate the needs of fund and make foreign currency exchange transaction in time to reduce risk. 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 is engaged in endorsement and guarantee activities which are only negotiated between subsidiaries and the parent company. The arrangements are covered by proper Endorsement and Guarantee Procedures. 4. The Company uses a hedging strategy 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. 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”. 195 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 2022 R&D expenses are expected to be TWD 16.5 billion. 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 2021, 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 196 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, and has placed 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 2021 nor was there any significant event that affected the Company image in any way. 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 197 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 ■ 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 2021. 7.7 Other material issues: None 198 VIII. Special Disclosure 8.1 Summary of Affiliated Companies (As of Dec 31, 2021) 8.1.1 Affiliated enterprises report 1. Chart 199 4 1 Mithera Capital Io LP 99.00% 46.42% Compal Broadband Networks Netherlands B.V. 100% Shennona Corporation 100% 18.52% Compal Electronica da Amazonia Ltda. 51.7% 48.3% CGS Technology (Poland) sp.z.o.o Compal Wise Electronic (Vietnam) Co. Ltd 100% 100% Compal USA (Indiana), Inc. 100% 100% Kinpo&Compal Group Assets Development Corporation 70% 10% 59.10% 200 4 Arcadyan Technology Affiliated Business Organization Chart Henghao Technology Co., Ltd. Affiliated Organization Chart Allied Power Affiliated Business Organization Chart General Life Biotechnology Affiliated Business Organization Chart UniCore Biomedical Affiliated Business Organization Chart Arcadyan Technology (Vietnam) Co., Ltd. 100% Great Arch Group Ltd. Leading Images Limited Astoria Networks Inc. Astoria Networks GmbH 31.6% 100% 100% 100% 100% 100% Arcadyan Technology Corp. (Russia),LLC 100% Note 1: Complete the liquidation process on July, 2021. Note 2: UniCore Biomedical Co., Ltd. and Raycore Biotech Co., Ltd. merged on February, 2022. UniCore Biomedical Co., Ltd. is the surviving company，Raycore Biotech Co., Ltd. is a disappearing company. Arcadyan India Private Limited. 99% 1% 2. Backgrounds of affiliated enterprises (December 31, 2021) 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. 189, Qianjin Dong Lu, Kunshan Development Zone, Jiangsu Province, 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 201 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 General investments 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. 189, Qian Jin East Road, Development Zone, Kunshan, Jiangsu, P.R. 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. 189, Qian Jin East Road, Development Zone, Kunshan, Jiangsu, P.R. China No. 435 Weiye Road, Kunshan City Development Area, Jiangsu, China No. 189, Qian Jin East Road, Development Zone, Kunshan, Jiangsu, P.R. China No. 189, Qian Jin East Road, Development Zone, Kunshan, Jiangsu, P.R. 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),Shuangliu County, Chengdu, Sichuan, China 202 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 Compal USA (Indiana), Inc. 2010.12.16 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 Address Paid-up capital Main business activities or products No. 6, Shenglong Street, Wuhou District, Chengdu, Sichuan USD 800 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 5,050 General investments US$5,400 OEM of automotive electronic products 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 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 1 Technology Way Logansport, Indiana 46947, 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 Ba Thien Industrial Zone, Ba Hien Town, Binh Xuyen District, 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 203 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 India Private Limited 2021.03.25 Arcadyan Technology Limited 2016.08.16 Arcadyan Technology Australia Pty Ltd Arcadyan Technology Corporation (Russia), LLC. Arcadyan Holding (BVI) Corp. 2017.03.28 2020.06.02 2007.03.07 Sinoprime Global Inc. 2004.12.29 Arcadyan Technology (Shanghai) Corp. Arcadyan Technology (Vietnam) Co., Ltd. 2002.04.17 2019.03.26 Arch Holding (BVI) Corp. 2007.05.24 Address Paid-up capital Main business activities or products BRL 20,109 Production and after-sale service of notebooks, cellphones and electronics INR 386,000 Production and after-sale service of cellphones BRL 23,500 Production of notebooks and electronics TWD 2,164,926 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 INR 35,000 Sale of wireless networking products GBP 50 Technical support for wireless networking products AUD 50 Sale of wireless networking products RUB 20,000 Sale of wireless networking products USD 64,780 General investments USD 29,050 General investments USD 8,100 Research and sale of wireless networking products USD 29,000 Production and sale of wireless products USD 10,550 General investments Rua Kanebo 175, Galpões C1 a C6, e C12 Distrito Industrial, Jundiaí, São Paulo, CEP:13213- 090, Brazil Flat No. 412A, Building No.43, Chiranjiv Tower, Nehru Place, New Delhi, 110019, 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 Travessa Francisca Rios n° 48, Centro, Pouso Alegre, Minas Gerais Fifth Floor, Unit-F516, The Sapphire, Sector 49, Gurgaon,Gurgaon, Haryana, 122018 Charlotte House 500 Charlotte Road Sheffield South Yorkshire S2 4ER, 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 Room 1308, Block 20, No. 487 Tianlin Road, Xuhui District,Shanghai, China Lot D4-5-6, Thang Long Vinh Phuc Industrial Zone, Thien Ke Commune, Binh Xuyen District, Vinh Phuc Province, Vietnam Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands 204 Address Paid-up capital Main business activities or products Company name Compal Networking (Kunshan) Co., Ltd. Date of establishment 2006.06.26 Zhi-Bao Technology Inc. Tatung Technology Inc. 2009.08.10 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 2001.02.13 2012.02.03 Compal Broadband Networks Inc. 2009.08.19 No. 520 Nanbang Road, Economic and Technological Development Zone, Kunshan, Jiangsu, China, China 8F., No. 8, Sec. 2, Guangfu Rd., East Dist., Hsinchu City 10F, No. 288, Section 6, Civic Boulevard, Xinyi District, Taipei City 1 Chome-2-18, Mita, Minato-ku, Tokyo-to, Japan Unit 25,2nd Floor,Nia Mall, Saleufi Street, Apia, Samoa Unit 25,2nd Floor,Nia Mall, Saleufi 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 USD 12,450 Production and sale of wireless products TWD 349,800 General investments 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 684,704 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 2010.05.07 2010.12.14 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 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 205 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 Company name Rayonnant Technology Co., Ltd Compal Rayonnant Holdings Ltd. Date of establishment 2010.03.23 2011.12.02 Allied Power Holding Corp. 2005.04.07 Primetek Enterprises Ltd. 2005.01.28 2010.03.31 Address Paid-up capital Main business activities or products 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 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 TWD 295,000 Manufacturing and sale of computers USD 12,500 and peripherals General investments USD 21,151 General investments USD 3,151 General investments USD 18,000 General investments 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. Etrade Management Co., Ltd. Compal Communications (Nanjing) Co., Ltd. Compal Digital Communications (Nanjing) Co., Ltd. Compal Wireless Communications (Nanjing) Co., Ltd. 2010.06.04 No.9 Tainan Road,Industry Park, Taicang, Jiangsu, China USD 18,000 1992.04.13 2008.03.05 1361 EL Camino Real, Santa Clara, CA 95050, USA Jędrzejowska 85 93-636, Łódź, Poland 2020.09.15 Jędrzejowska 85 93-636, Łódź, Poland USD 100 PLN 6,804 PLN 12,296 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 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 2008.10.27 2007.08.09 2014.02.19 1999.01.16 2000.07.05 2003.09.23 2004.03.26 2006.02.13 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 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 206 Company name Webtek Technology Co., Ltd. Date of establishment 2000.07.07 Forever Young Technology Inc. 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. Shennona Corporation HippoScreen Neurotech Corp. 2018.01.25 2018.01.10 2019.01.28 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 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 USD 100 General investments 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 USD 1 General investments No. 581, Ruiguang Road, Neihu District, Taipei City 8F, No. 385, Yangguang St., Neihu District, Taipei City TWD 290,000 TWD 100,000 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 1361 EL Camino Real, Santa Clara, CA 95050, USA No. 581-1, Ruiguang Road, Neihu District, Taipei City TWD 200,000 USD 1,100 TWD 100,000 Management consultation, leasing, and wholesale/retail of medical equipment 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 Research and development of microelectromechanical (MEMS) technology in semiconductor process and manufacture and production of electronic components SHENNONA CO., LTD. 2019.03.21 No. 581-1, Ruiguang Road, Neihu District, Taipei City TWD 6,000 Aco Healthcare Co.,Ltd. 2019.02.20 No. 581-1, Ruiguang Road, Neihu District, Taipei City TWD 30,748 Starmems Semiconductor Corp. 2021.04.21 6, No. 10, Taiyuan 1st Street, Zhubei City, Hsinchu County TWD 100,000 207 Date of establishment 2021.12.21 Company name Kinpo&Compal Group Assets Development Corporation Address Paid-up capital Main business activities or products No. 581 &581-1, Ruiguang Road, Neihu District, Taipei City TWD 750,000 Real estate development leasing and related management business 3. Business activities and relationships of affiliated enterprises (December 31, 2021) Industry category Investment holding company Name of affiliated enterprise Business relationship with other affiliated enterprises Compal International Holding Co., Ltd. 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. Holds investment interest in Compal International Holding (HK) Limited, Prospect Fortune Group Ltd., Jenpal International Ltd., and Fortune Way Technology Corp. 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., Mithera Capital Io LP., and Compal USA (Indiana), Inc. 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 208 Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises 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. 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. , Arcadyan do Brasil Ltda. and Arcadyan India Private Limited Holds investment interest in Exquisite Electronic Co., Ltd. Holds investment interest in Tatung Home Appliances (Wu Jiang) Co., Ltd. General investments General investments Acbel Telecom Inc. (Note) 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. Arcadyan India Private Limited Compal Broadband Networks Belgium BVBA Compal Broadband Networks Netherlands B.V. Aco Healthcare Co.,Ltd. Starmems Semiconductor Corp. Compal Electronics, Inc. Sale of wireless networking 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 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 Research and development of microelectromechanical (MEMS) technology in semiconductor process and manufacture and production of electronic components Manufacturing, processing and trading of notebooks, computer monitors, LCD TVs, cellphones, and electronic parts Compal Electronics Technology (Kunshan) Production of notebooks, cellphones and electronics 209 Electronic products wholesaling Electronic products manufacturing Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises Production of notebooks and electronics 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 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 Electronics (Chongqing) Co., Ltd. Development, production and sale of notebooks and related Compal Optoelectronics (Kunshan) Co., Ltd. Compal Display Electronics (Kunshan) Co., Ltd. Amexcom Electronics, Inc. Compal Electronics (Chengdu) Co., Ltd. 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. Production and sale of LCD TVs Sale and maintenance of LCD TVs Development and production of notebooks, tablets, digital products, networking switches, wireless APs, and auto electronics 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 210 Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises 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. Compal Wise Electronic (Vietnam) Co., Ltd. Construction and development Leasing and management consulting Compal USA (Indiana), Inc. Compal Development and Management (Vietnam) Co., Ltd. Kinpo&Compal Group Assets Development Corporation UniCore Biomedical Co., Ltd. HippoScreen Neurotech Corp. 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 Production and sale of cellphones, tablets, smart watches, communication equipments and electronics, and provision of relevant technical services OEM of automotive electronic products Construction and investment of infrastructures at Ba-Thien Industrial Zone, Vietnam Real estate development leasing and related management business 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 General Life Biotechnology Co., Ltd. Manufacturing and sale of medical equipment Instruments and International Trade Shennona Corporation Medical care IoT business Arcadyan Technology (Shanghai) Corp. Research and sale of wireless networking products Arcadyan Technology Limited Technical support for wireless networking products Manufacturing and sale of medical equipment Medical care Technical service Note：The company had been resolved by the Board of Directors to be dissolved and liquidated on October 28, 2021 4. Directors, Supervisors, and President of affiliated enterprises December 31, 2021 Unit: TWD Thousands; shares; % Company name Title Name or name of representative Compal Electronics, Inc. Chairman Director and President Director Director Director Director Director President and 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 Chiung-Chi Hsu 211 Shares held Shares (Note) 8,975,401 35,352,587 5,000,000 151,628,692 7,896,867 9,204,201 8,022,874 6.618,618 2,117,731 Shareholding percentage 0.20% 0.80% 0.11% 3.44% 0.18% 0.21% 0.18% 0.15% 0.05% Company name Title Name or name of representative Ming-Chih Chang Director Anthony Peter Bonadero Director Sheng-Hua Peng Director Independent Director Min-Chih Hsuan Independent Director Duei Tsai Independent Director Wen-Chung Shen Representative Representative Director Shares held Shares (Note) 1,919,489 0 835,000 0 0 2,836,000 5,000,000 4,117,569 Shareholding percentage 0.04% 0% 0.02% 0.00% 0.00% 0.06% 0.11% 0.09% 53,001,000 100.00% 53,001,000 100.00% 74,802,500 100.00% 74,802,500 100.00% TWD 332,160 100.00% TWD 332,160 100.00% TWD 332,160 100.00% TWD 332,160 100.00% 0 0.00% TWD 332,160 100.00% TWD 332,160 100.00% TWD 332,160 100.00% TWD 332,160 100.00% 0 0.00% TWD 664,320 100.00% TWD 664,320 100.00% TWD 664,320 100.00% TWD 664,320 100.00% 0 0.00% TWD 553,600 100.00% TWD 553,600 100.00% TWD 553,600 100.00% 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 ) 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 TWD 553,600 100.00% 0 0.00% 212 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. Director Director Director Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage 0 0 1,000 1,000 0.00% 0.00% Director 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 7,350,000 7,350,000 Supervisor Supervisor TWD 8,680 TWD 8,680 TWD 27,680 TWD 27,680 TWD 27,680 TWD 27,680 President Director Fortune Way Technology Corp. Just International Ltd. Compower Global Service Co., Ltd. President Executive Director Kunshan Botai Electronics Co., Ltd. Jenpal International 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: 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 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 Smart Device (Chongqing) Co., Ltd. Compal Display Holding (HK) Limited Compal Electronics (China) Co., Ltd. Compal Optoelectronics President Chairman President Chairman TWD 1,024,160 TWD 1,024,160 TWD 1,024,160 TWD 1,024,160 TWD 260,395 TWD 260,395 TWD 260,395 TWD 334,928 TWD 260,395 14,900,000 14,900,000 48,010,000 62,297,500 62,297,500 48,010,000 Supervisor Supervisor Chairman 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% 100.00% Director Director Director Director Director Director Director Director 0.00% 0.00% 0 0 213 Company name Title Name or name of representative (Kunshan) Co., Ltd. Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Director Director Director Director Compal System Trading (Kunshan) Co., Ltd. Compal Investment (Jiangsu) Co., Ltd. Compal Display Electronics (Kunshan) Co., Ltd. Compal International Ltd. Compal Electronics International Ltd. Smart International Trading Ltd. Director Director 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 (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 ) 214 Shares held Shares (Note) Shareholding percentage TWD 334,928 100.00% TWD 334,928 100.00% TWD 334,928 100.00% 0 0.00% TWD 38,752 100.00% TWD 38,752 100.00% TWD 38,752 100.00% TWD 38,752 100.00% 0 0.00% TWD 431,808 100.00% TWD 431,808 100.00% TWD 431,808 100.00% TWD 431,808 100.00% 0 0.00% TWD 415,200 100.00% TWD 415,200 100.00% TWD 415,200 100.00% TWD 415,200 100.00% 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% Company name Title Name or name of representative Amexcom Electronics, Inc. Mexcom Technologies, LLC Mexcom Electronics, LLC Big Chance International Co., Ltd. Center Mind International Co., Ltd. Director Director Director President Director Director Director Director Director 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 Compal Electronics (Chengdu) Co., Ltd. Compal Management (Chengdu) Co., Ltd. Prisco International Co., Ltd. Compal Electronics (Chongqing) Co., Ltd. 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 ) 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 ) 215 Shares held Shares (Note) Shareholding percentage 1,000,000 100.00% 1,000,000 100.00% 1,000,000 0 TWD 28 100.00% 0.00% 100.00% TWD 227,917 100.00% 90,820,000 100.00% 90,820,000 100.00% 80,820,000 100.00% 80,820,000 100.00% TWD 2,237,098 100.00% TWD 2,237,098 100.00% TWD 2,237,098 100.00% TWD 2,237,098 100.00% 0 0.00% TWD 2,214,400 100.00% TWD 2,214,400 100.00% TWD 2,214,400 100.00% TWD 2,214,400 100.00% 0 0.00% TWD 22,144 100.00% TWD 22,144 100.00% TWD 22,144 100.00% TWD 22,144 100.00% 0 0.00% 10,000,000 100.00% 10,000,000 100.00% TWD 276,800 100.00% TWD 276,800 100.00% Company name Title Name or name of representative Director Supervisor President Director Director Core Profit Holdings Ltd. Billion Sea Holdings Ltd. Director Mithera Capital Lo LP Compal USA (Indiana), Inc. High Shine Industrial Corp. Director Director Chairman Director Director Director 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 Director and President Director 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 ) Billion Sea Holdings Ltd. (Representative: Chung-Pin Wong ) Billion Sea Holdings Ltd. (Representative: Jui-Tsung Chen ) Billion Sea Holdings Ltd. (Representative: Ta-Chun Wang) Compal Electronics, Inc. and Billion Sea 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. 216 Shares held Shares (Note) Shareholding percentage TWD 276,800 100.00% TWD 276,800 100.00% 0 0.00% 147,000,000 100.00% 147,000,000 100.00% 147,000,000 100.00% 147,000,000 100.00% TWD 138,400 99.00% 1,000 1,000 1,000 100.00% 100.00% 100.00% 79,700,000 100.00% 79,700,000 100.00% 67,000,000 100.00% 67,000,000 100.00% TWD 1,854,560 100.00% 12,700,000 100.00% 12,700,000 100.00% TWD 351,536 100.00% 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 90,000,000 100.00% 100.00% Company name Title Name or name of representative Hong Ji Capital Co., Ltd. Supervisor Chairman Director and President Director Supervisor Hong Jin Investment Co., Ltd. Chairman Director and President Director Supervisor President (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 Compalead Eletrônica do Brasil Indústria e Comércio Ltda. Compal Electronica da Amazonia Ltda Compal Electronics India Private Limited Arcadyan Technology Corp. Arcadyan Technology N.A. Corp. Arcadyan Germany Technology GmbH Arcadyan Technology Corporation Korea Arcadyan do Brasil Ltda. Arcadyan 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 President Managers Director Arcadyan Technology Corp. (Representative: Yen-Ju Lin) Yen-Ju Lin Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Managers Nien-Che, Hsiung Director Arcadyan Technology Corp. 217 Shares held Shares (Note) Shareholding percentage 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 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00% 41,304,504 19.08% 41,304,504 19.08% 41,304,504 19.08% 41,304,504 19.08% 0 202,669 0 0 0 1,000 0 500 0.00% 0.09% 0.00% 0.00% 0.00% 100.00% 0.00% 100.00% 20,000 100.00% 964,510 50,000 99.00% 100.00% Company name Title Name or name of representative Technology Limited Arcadyan Technology Australia Pty Ltd. Director Director Director Director (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 ) Shares held Shares (Note) Shareholding percentage 50,000 50,000 50,000 50,000 100.00% 100.00% 100.00% 100.00% Arcadyan Technology Corporation (Russia), LLC. Arcadyan Holding (BVI) Corp. Sinoprime Global Inc. Arcadyan Technology (Vietnam)Co., Ltd Arch Holding (BVI) Corp. Arcadyan Technology (Shanghai) Corp. Compal Network Information Technology (Kunshan) Co., Ltd. Zhi-Bao Technology Inc Managers Isakova Nadezhda Pavlovna 0 100.00% Chairman Director Chairman Director Chairman Director Chairman Director Chairman Director Director Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director 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) 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. 218 64,780,148 100.00% 64,780,148 100.00% 29,050,000 100.00% 29,050,000 100.00% 0 100.00% 34,900 34,900 100.00% 100.00% TWD 224,208 100.00% TWD 224,208 100.00% TWD 224,208 100.00% TWD 224,208 100.00% TWD 224,208 100.00% TWD 224,208 100.00% 0 0.00% TWD 344,616 100.00% TWD 344,616 100.00% TWD 344,616 100.00% TWD 344,616 100.00% 0 34,980,000 34,980,000 0.00% 100.00% 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Director Director Supervisor President Chairman Director Director Director Director Director Director Supervisor Supervisor Supervisor President Director Director Tatung Technology Inc. Tatung Technology of Japan Co., Ltd. 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 (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: Fong-Yu, Lu) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng ) Arcadyan Technology Corp. (Representative: Chien-Lin Chen) Arcadyan Technology Corp. (Representative: Nien-Che, Hsiung) Arcadyan Technology Corp. (Representative: Chih-Fang Lee) Shang Chi Investment Co., Ltd. (Representative: Chia-Tien Lin ) Chunghwa Investment Holding Company (Representative: Chih-Chen Chien) Ya-Ling Chiang Chih-Cheng Huang Chi Sheng Investment Co., Ltd. (Representative: Chang-Chuan Lin) Kuei-Che Huang Tatung Technology Inc. (Representative: Fong-Yu, Lu) Tatung Technology Inc. (Representative: Chao-Peng Tseng) Tatung Technology Inc. (Representative: Chao-Peng Tseng) Tatung Technology Inc. (Representative: Fong-Yu, Lu) Quest International Group Co., Ltd. (Representative: Chao-Peng Tseng) Quest International Group Co., Ltd. (Representative: Fong-Yu, Lu) Exquisite Electronic Co., Ltd. (Representative: Fong-Yu, Lu) ) Exquisite Electronic Co., Ltd. (Representative: Chao-Peng Tseng) Exquisite Electronic Co., Ltd. (Representative: Chung-Pao Liu) Exquisite Electronic Co., Ltd. (Representative: Shih-Wei Huang) Chung-Pao Liu Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Fong-Yu, Lu) ) AcBel Polytech Inc. 219 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 2,727,272 1,062,935 700 700 0.00% 0.00% 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 92,728 100.00% TWD 92,728 100.00% TWD 92,728 100.00% TWD 92,728 100.00% 0 4,494,111 4,494,111 4,292,216 0.00% 51.08% 51.08% 48.78% Company name Title Name or name of representative Arcadyan India Private Limited Supervisor President Director Director Director Compal Broadband Networks Inc. Chairman Director Director Director (Representative: Chieh-Li Hsu) Shih-Wei Huang Fong-Yu, Lu Arcadyan Technology Corp. (Representative: Nien-Che, Hsiung) Arcadyan Technology Corp. (Representative: Yi-Shu Lee ) Arcadyan Technology Corp. (Representative: RAJ KUMAR BHOLA) 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 0 0 0.00% 0.00% 3,500,000 100.00% 3,500,000 100.00% 3,500,000 100.00% 29,060,176 42.44% 29,060,176 42.44% 3,575,000 5.22% 29,060,176 42.44% 0 0 0 1,286,810 0.00% 0.00% 0.00% 1.88% 20,300 100.00% 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 Director Compal Broadband Networks Inc. (Representative: Shao- Yang Chiu ) 20,300 100.00% Chairman Vice Chairman and President Director Director Supervisor Director Director Director Director Chairman Director Director Supervisor 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 220 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 1,107,200 100.00% TWD 1,107,200 100.00% TWD 1,107,200 100.00% TWD 1,107,200 100.00% 0 0.00% Company name Title Name or name of representative Lucom Display Technology (Kunshan) Ltd. Mactech Inc. Rayonnant Technology Co., Ltd. Compal Rayonnant Holdings Ltd. Allied Power Holding Corp. Primetek Enterprises Ltd. Rayonnant Technology Holdings (HK) Co., Ltd. Rayonnant Technology (Taicang) Co., Ltd. Chairman Director Director Supervisor President Chairman Director Director Director Director Director Director Supervisor Chairman Director and President Director Supervisor Director Director Director Director Director Director Director Director Chairman Director Director 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) 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. 221 Shares held Shares (Note) Shareholding percentage TWD 415,200 100.00% TWD 415,200 100.00% TWD 415,200 100.00% TWD 415,200 100.00% 0 21,756,192 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% 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 498,240 100.00% TWD 498,240 100.00% TWD 498,240 100.00% Company name Title Name or name of representative Supervisor President Director Director Director Director Director Director Director Director Chairman Director and President Director Director Director Bizcom Electronics, Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology (Poland) Sp. z.o.o. Auscom Engineering Inc. Flight Global Holding Inc. RiPAL Optotronics Co., Ltd. Chairman Compal Electronics (Holding) Ltd. Etrade Management Co., Ltd. Compal Communications (Nanjing) Co., Ltd. Director Director Supervisor Director Director Director Chairman Director Director (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. (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 222 Shares held Shares (Note) Shareholding percentage TWD 498,240 100.00% 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% 245,911 100.00% 245,911 100.00% 3,000,000 100.00% 3,000,000 100.00% 3,000,000 100.00% 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 747,360 100.00% TWD 747,360 100.00% TWD 747,360 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Director Director Chairman and President Director Director Supervisor Director Compal Digital Communications (Nanjing) Co., Ltd. Compal Wireless Communications (Nanjing) Co., Ltd. Webtek Technology Co., Ltd Forever Young Technology Inc. HANHELT Communications (Nanjing) Co., Ltd. Compal Wise Electronic (Vietnam) Co., Ltd. Unicom Global. Inc. Chairman Director Director Supervisor Chairman Director Director Palcom International Corporation Display Holding (HK) Limited (Representative: Chung-Shing Tan) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: Guo-Dung Yu) Ming-Chih Chang Etrade Management Co., Ltd. (Representative: Sheng-Hua Peng) Etrade Management Co., Ltd. (Representative: Cheng-Chiang Wang) Etrade Management Co., Ltd. (Representative: Chung-Shing Tan) Etrade Management Co., Ltd. (Representative: Guo-Dung Yu) Ming-Chih Chang Etrade Management Co., Ltd. (Representative: Sheng-Hua Peng) Etrade Management Co., Ltd. (Representative: Cheng-Chiang Wang) Etrade Management Co., Ltd. (Representative: Chung-Shing Tan) Etrade Management Co., Ltd. (Representative: Guo-Dung Yu) Ming-Chih Chang Compal Electronics, Inc. (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: Jyh-Shyan Liang) 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) 223 TWD 747,360 100.00% 0 0.00% TWD 160,544 100.00% TWD 160,544 100.00% TWD 160,544 100.00% TWD 160,544 100.00% 0 0.00% TWD 1,356,320 100.00% TWD 1,356,320 100.00% TWD 1,356,320 100.00% TWD 1,356,320 100.00% 0 100,000 0.00% 100.00% 50,000 100.00% TWD 55,360 100.00% TWD 55,360 100.00% TWD 55,360 100.00% TWD 55,360 100.00% TWD 55,360 100.00% 29,000,000 100.00% 29,000,000 100.00% 29,000,000 100.00% 29,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% Company name Title Name or name of representative Compalead Electronics B.V. General Life Biotechnology Co., Ltd. Giant Rank Trading Limited UniCore Biomedical Co., Ltd. Raycore Biotech Co., Ltd. Shennona Corporation Supervisor Director Director Chairman Director Director Director Director Supervisor Supervisor Director Chairman Director Director Director Director Supervisor Chairman Director Director Supervisor Director Director Director HippoScreen Neurotech Corp. Chairman Director Director Director 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 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 224 Shares held Shares (Note) Shareholding percentage 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 3.31% 8.40% 0.00% - 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% 9,100,000 9,100,000 9,100,000 54,000 91.00% 91.00% 91.00% 0.54% Company name Title Name or name of representative SHENNONA CO., LTD. Aco Healthcare Co.,Ltd. Starmems Semiconductor Corp. Kinpo&Compal Group Assets Development Corporation Director Supervisor Chairman Chairman Director Director Director Director Supervisor Chairman Vice Chairman Director Supervisor Chairman Director Director Director Supervisor 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 Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Yu- Ho Wang) Realsun Investments Co., Ltd. (Representative: Hou-Wei Lin) Shiu-Hung Lu Compal Electronics, Inc. (Representative:Jui-Tsung Chen) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) AcBel Polytech Inc. (Representative: Chieh-Li Hsu) Ching-Hsiung Lu Shares held Shares (Note) 90,000 0 600,000 Shareholding percentage 0.9% 0.00% 100.00% 100,000,000 52.04% 100,000,000 52.04% 100,000,000 22,227,778 22,227,778 0 3,500,000 52.04% 11.57% 11.57% 0.00% 35.00% 3,500,000 35.00% 2,300,000 23.00% 0 0.00% 52,500,000 70.00% 52,500,000 70.00% 52,500,000 70.00% 22,500,000 0 30.00% 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 27.68, CNY 1: TWD 4.3399, and VND 1: TWD 0.001222.) 225 5. Overview of Operating Status for Affiliated Companies in 2021 Company Name Capital Total Asset 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. 44,071,466 447,348,214 335,987,949 111,360,265 1,171,613,858 7,578,392 12,632,667 Compal International Holding Co., Ltd. and subsidiaries Just International Ltd. and subsidiaries Big Chance International Co., Ltd. and subsidiaries 1,787,680 120,864,262 83,466,918 37,397,344 548,369,589 2,013,423 3,060,284 1,460,443 81,749,017 72,171,105 9,577,912 179,309,786 509,704 2,038,308 2,636,051 36,684,653 29,505,456 7,179,197 202,550,016 861,051 788,352 Core Profit Holdings Ltd. 4,318,860 7,499,427 919,144 6,580,283 139,805 (37,464) (569,898) 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 2,370,974 20,690,805 20,165,644 525,161 35,581,039 (878,055) (856,715) 5,000,000 13,720,531 7,858,635 5,861,896 10,698,284 31,851 900,000 1,000,000 295,000 2,166,154 1,136,939 359,348 19,776 151 130 2,146,378 1,136,788 359,218 - - - (261) (196) (191) 18,876 145,664 89,224 39,395 200,000 107,799 5,918 101,881 16,507 (21,239) (21,226) Shennona Corporation 32,665 1,098 - 1,098 - (92) (92) 2,164,926 33,901,113 20,978,000 12,923,113 38,240,058 2,199,087 1,701,800 684,704 3,239,504 1,614,787 1,624,717 2,906,921 83,833 32,744 Arcadyan Technology Corp. and subsidiaries Compal Broadband Networks Inc. and subsidiaries Henghao Technology Co., Ltd. and subsidiaries 2.90 57.74 42.46 8.68 (3.88) (10.75) 0.04 1.62 0.89 1.34 (1.06) (0.04) 8.60 0.49 200,150 8,286,082 8,770,235 (484,153) 11,927,618 19,230 (425,641) (21.27) 226 Operating Operating Net loss/profit for the EPS (in TWD ) income period (after tax) (After tax) Company Name Capital Total Asset Total liabilities Net worth Mactech Co., Ltd. Ripal Optotronics CO, LTD. 411,458 60,000 663,687 157,858 119,886 55,784 543,801 102,074 revenue 263,977 143,525 15,205 21,580 General life Biotechnology Co., Ltd. and subsidiaries 300,000 753,490 422,886 330,604 408,407 24,914 Rayonnant Technology Holdings Ltd., 295,000 782,278 631,493 150,785 2,023,818 11,041 377,328 1,169,796 940,938 228,858 2,290,790 59,114 Compal Rayonnant Holdings Ltd. and subsidiaries Bizcom Electronics, Inc. Compal Europe (Poland) Sp.z o.o. CGS Technology (Poland) Sp.z o.o. Auscom Engineering Inc. 36,369 90,156 89,669 101,747 441,032 286,153 86,856 182,943 Flight Global Holding Inc. 2,754,741 4,826,929 Compalead Electronics B.V. 197,463 767,803 Etrade Management Co., Ltd.& subsidiaries Webtek Technology Co., Ltd. Forever Young Technology Inc. & subsidiaries Unicom Global Inc. Palcom International Corporation 3,340 1,575 290,000 100,000 36,473 289,250 1 57,596 74,599 - 404,559 (3,097) 86,855 125,347 4,752,330 767,803 87,229 221,317 - 200,043 - - (20,460) (7,101) (1,228) 13,073 (144) (729) 679,564 - 679,564 - (92) 1,903,478 598,926 1,304,552 263,097 12,036 617,034 135,333 654,337 22,210 (37,303) 113,123 1,007,988 89,638 59,202 5,500 - 41,445 21,471 24,917 35,093 43,721 (19,042) (20,160) (1,700) 4,074 (62,830) 1,706 494 12,658 53,840 4,426 - Compal Electronics (Holding) Ltd. 34 3,260,334 - 3,260,334 - HippoScreen Neurotech Corp. 100,000 55,252 SHENNONA CO., LTD. Aco Healthcare Co.,Ltd. 6,000 30,748 19,038 62,536 4,279 15,918 5,865 50,973 3,120 56,671 227 1,206 (25,226) (25,053) 31,232 404 382 8,713 (34,045) (31,249) 2,224,029 8,245,694 8,242,959 2,735 17,170,814 337,322 336,037 1.01 3.58 0.83 1.19 3.50 (190.42) (148.15) (6.91) 1.36 (0.70) 0.27 4.67 4.94 253.16 1.86 0.44 - (2.51) 0.64 (0.16) Company Name Capital Total Asset Total liabilities Net worth Operating Operating Net loss/profit for the EPS (in TWD ) revenue income period (after tax) (After tax) Starmems Semiconductor Corp. Kinpo&Compal Group Assets Development Corporation 100,000 101,654 4,593 97,061 2,840 (3,712) (2,940) 750,000 750,120 - 750,120 - - 120 (0.29) - 6. Common shareholders in controlling and controlled companies: None 228 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, 2021 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 15, 2022 8.1.3 Affiliation reports: None 229 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: Unit: TWD thousands; Shares; % Percentage Date of Name of Share Capital Funding of Shares Acquisition Subsidiary Acquired Source Held by the or Company Disposition Shares and Shares and Amount Amount Acquired Disposed Investment Gain (Loss) Shareholdings and Amount as of Collateralized March 31, 2022 Amount of Endorsements Made for the Subsidiary Amount Loaned to the Subsidiary Panpal Technology Corporation Gempal Technology Co., Ltd. TWD Proprietary 5,000,000,000 capital TWD Proprietary 900,000,000 capital 100% 100% - - - - - - - - 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 2021 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 230 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, 2021 and 2020 Address: Telephone: No.581 & 581-1, Ruiguang Rd., Neihu District, Taipei, Taiwan (02)8797-8588 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 10～38 38～39 39～91 91～93 94 94 94 94 95 (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information 95, 99～113 96, 114～118 96, 119～121 96 96～98 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, 2021 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 15, 2022 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, 2021 and 2020, and the consolidated statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2021 and 2020, 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, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended December 31, 2021 and 2020, 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 audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants 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. 4-1 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, 2021 and 2020, 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. 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 Kuan-Ying Kuo and Szu- Chuan Chien. 4-3 KPMG Taipei, Taiwan (Republic of China) March 15, 2022 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, 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars) Assets Current assets: December 31, 2021 December 31, 2020 Amount % Amount % Cash and cash equivalents (note (6)(a)) $ 75,162,103 14.0 89,126,923 19.1 Current financial assets at fair value through profit or loss (note (6)(b)) 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: 400,754 0.1 2,245,254 0.5 288,436,522 53.7 231,830,964 49.7 1,729,332 2,445,690 0.3 0.5 378,934 1,628,657 0.1 0.3 115,012,365 21.4 96,151,959 20.6 3,928,624 0.7 3,097,944 0.6 487,115,390 90.7 424,460,635 90.9 Investments accounted for using equity method (note (6)(g)) 8,369,312 1.6 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 (note (8)(h)) Deferred tax assets (note(6)(s)) Other non-current assets (note (8)) 259,778 6,235,063 26,990,364 3,066,218 1,548,508 1,646,524 1,864,183 49,979,950 - 1.2 5.0 0.6 0.3 0.3 0.3 9.3 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 1100 1110 1170 1180 1200 1310 1470 1550 1510 1517 1600 1755 1780 1840 1990 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 Bonds payable, current portion (note (6)(o)) 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)): Ordinary share Capital surplus Retained earnings Other equity interest Treasury shares 2100 2120 2125 2130 2170 2180 2200 2230 2250 2280 2300 2365 2321 2322 2530 2540 2570 2580 2640 2670 3110 3200 3300 3400 3500 Total assets $ 537,095,340 100.0 466,925,698 100.0 36XX Non-controlling interests Total equity Total liabilities and equity See accompanying notes to consolidated financial statements. 5 December 31, 2021 December 31, 2020 Amount % Amount % $ 118,422,407 22.0 92,838,733 19.9 1,589 - - - 136,617 2,192 - - 1,065,954 0.2 820,016 0.2 220,549,039 41.1 196,837,439 42.2 3,517,324 29,701,088 7,013,976 1,204,115 625,292 2,037,822 2,035,437 326,571 15,741,481 0.7 5.5 1.3 0.2 0.1 0.4 0.4 0.1 2.9 2,888,624 23,397,683 5,378,651 870,050 377,161 1,470,466 1,574,469 - 0.6 5.0 1.2 0.2 0.1 0.3 0.3 - 8,932,615 1.9 402,242,095 74.9 335,524,716 71.9 - 9,219,032 1,226,805 1,679,504 822,033 366,068 13,313,442 - 1.7 0.2 0.3 0.2 0.1 2.5 980,219 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 3.3 415,555,537 77.4 350,936,048 75.2 44,071,466 6,724,856 8.2 1.2 44,071,466 8,342,813 9.4 1.8 69,651,940 13.0 62,566,181 13.4 (8,206,750) (1.5) (7,266,708) (1.6) (881,247) (0.2) (881,247) (0.2) 111,360,265 20.7 106,832,505 22.8 10,179,538 1.9 9,157,145 2.0 121,539,803 22.6 115,989,650 24.8 $ 537,095,340 100.0 466,925,698 100.0 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income For the years ended December 31, 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share) 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)(k), (6)(y) and (6)(aa)) Finance costs (notes (6)(o) and (6)(p)) Other income (note (6)(y)) Miscellaneous disbursements Impairment loss (note (6)(k)) 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: 6 2021 2020 Amount % Amount % $1,235,682,015 100.0 1,048,929,251 100.0 1,194,190,441 96.6 1,013,470,729 96.6 41,491,574 3.4 35,458,522 3.4 7,088,418 4,562,706 16,491,857 28,142,981 13,348,593 2,017,314 2,511,423 0.6 0.4 1.3 2.3 1.1 0.2 0.2 4,604,361 4,198,621 15,162,995 23,965,977 11,492,545 1,636,257 261,043 0.4 0.4 1.5 2.3 1.1 0.2 - (1,049,137) (0.1) (1,149,215) (0.1) 493,920 0.1 648,106 (52,513) (404,513) 448,562 4,119,242 17,467,835 3,727,347 13,740,488 - - - - 0.3 1.4 0.3 1.1 (47,491) - 435,657 1,630,171 13,122,716 2,713,204 10,409,512 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 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (note (6)(s)) (56,056) - 630,396 0.1 135,751 50,190 - - (65,862) (78,590) (54,128) 2,632 Components of other comprehensive income that will not be reclassified to profit or loss 659,901 0.1 (201,212) 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 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 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)) Basic earnings per share Diluted earnings per share (1,892,168) (0.2) (3,323,038) (0.3) 2,192 (25,372) (17,539) - - - 2,679 161,498 (18,727) - - - (1,897,809) (1,237,908) 12,502,580 (0.2) (0.1) 1.0 (3,140,134) (3,341,346) 7,068,166 (0.3) (0.3) 0.7 12,632,667 1,107,821 13,740,488 11,445,530 1,057,050 12,502,580 1.0 0.1 1.1 0.9 0.1 1.0 2.90 2.86 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 1.3 0.3 1.0 - - - - - 4000 5000 6100 6200 6300 7100 7210 7050 7190 7590 7670 7770 7900 7950 8300 8310 8311 8316 8320 8349 8360 8361 8368 8370 8399 8300 8500 8610 8620 8710 8720 9750 9850 See accompanying notes to consolidated financial statements. COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the years ended December 31, 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars) Equity attributable to owners of parent 7 Balance at January 1, 2020 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 Changes in non-controlling interests Balance at December 31, 2020 Profit for the year ended December 31, 2021 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 Changes in non-controlling interests Balance at December 31, 2021 Ordinary shares $ 44,071,466 - - - Capital surplus 9,159,259 - - - Legal reserve 19,719,150 - - - Special reserve 7,467,831 - - - 695,590 - - - - - - - - - - - 44,071,466 - - - - - - - - - - - - - $ 44,071,466 - - - (881,429) 1,735 2,228 60,021 999 - - 8,342,813 - - - - - - (1,762,859) 61,825 2,132 80,027 918 - - 6,724,856 - - - - - - - - - 20,414,740 - - - 924,672 - - - - - - - - - 21,339,412 (3,366,088) - - - - - - - - 4,101,743 - - - - 3,164,965 - - - - - - - - Retained earnings Unappropriated retained earnings 30,539,623 9,361,893 (48,219) 9,313,674 (695,590) 3,366,088 (4,407,147) (33,051) Total retained earnings 57,726,604 9,361,893 (48,219) 9,313,674 - - (4,407,147) - (33,051) (9,055) (9,055) - - - - - - - (24,844) 38,049,698 12,632,667 (40,067) 12,592,600 (924,672) (3,164,965) (5,288,576) (25,946) - - (24,844) - 62,566,181 12,632,667 (40,067) 12,592,600 - - (5,288,576) - (25,946) - - (142,441) - 69,651,940 (49,878) (49,878) (142,441) - 7,266,708 41,045,820 See accompanying notes to consolidated financial statements. Total other equity interest Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income Others Total other equity interest Treasury shares Total equity attributable to owners of parent (306,763) - (137,062) (137,062) - - - - - - 33,051 8,978 24,844 - (376,952) - 707,754 707,754 - - - - - - 14,709 49,878 142,441 - 537,830 - - - - - - - - - - - - - - - - - - - - - - (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) 904 904 - (1,147,070) (1,147,070) (881,247) 106,832,505 12,632,667 (1,187,137) 11,445,530 - - - - - - - 14,709 49,878 - - 142,441 - - - - - - - - - - - - - (5,288,576) (1,762,859) 50,588 2,132 80,027 918 - - 125 (8,206,750) (881,247) 111,360,265 Exchange differences on translation of foreign financial statements (3,794,980) - (3,093,997) (3,093,997) - - - - - - - - - - (6,888,977) - (1,855,728) (1,855,728) - - - - - - - - - - (8,744,705) Non- controlling interests Total equity 114,759,344 10,409,512 (3,341,346) 7,068,166 8,786,711 1,047,619 (62,995) 984,624 - - - - - - - - - - - (4,407,147) (881,429) 1,735 2,151 60,021 999 - (614,190) 9,157,145 1,107,821 (50,771) 1,057,050 (614,190) 115,989,650 13,740,488 (1,237,908) 12,502,580 - - - - - - - - - - (5,288,576) (1,762,859) 50,588 2,132 80,027 918 - (34,657) 10,179,538 - (34,657) 121,539,803 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2021 and 2020 (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, and right-of-use assets Gain on disposal of investments Impairment loss 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: 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 acquisition of subsidiaries Proceeds from liquidation of investments Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment and right-of-use assets Acquisition of intangible assets Acquisition of right-of-use assets Decrease in restricted 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 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 2021 2020 $ 17,467,835 13,122,716 6,903,111 (17,646) (3,170) 1,049,137 (2,017,314) (143,686) 33,407 (448,562) (1,969,560) - 404,513 706 3,790,936 1,844,499 (57,806,973) (746,025) (18,649,166) (434,580) (251,890) (76,044,135) (135,028) 24,215,948 5,961,832 460,968 334,065 245,938 567,356 45,798 31,696,877 (44,347,258) (40,556,322) (23,088,487) 1,975,718 302,344 (1,033,955) (1,990,003) (23,834,383) (859,403) (17,189) - - (197,002) 17,472 (11,737,557) 3,801,301 (960,300) - (936,497) (173,940) (11,063,115) 25,424,931 50,106,091 (44,479,931) (835,037) (6,971,407) (692,982) 26,093 22,577,758 (1,645,080) (13,964,820) 89,126,923 75,162,103 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 $ COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (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 15, 2022. (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. 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, 2021: ● 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” ● Amendments to IFRS 16 “Covid-19-Related Rent Concessions beyond June 30, 2021” (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, 2022, would not have a significant impact on its consolidated financial statements: ● 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” (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” Effective date per IASB January 1, 2023 Content of amendment to aim amendments liabilities with The promote consistency in applying the requirements by helping companies determine whether, in the statement of balance sheet, debt and other uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments the include for debt a requirements classification company might settle by converting it into equity. clarifying an 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 1 “Disclosure of Accounting Policies” ● Amendments to IAS 8 “Definition of Accounting Estimates” ● Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” (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 financial statements. (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). (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 11 (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) 3) 4) 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; Hedging financial instruments 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)(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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 12 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 〃 〃 〃 The Company, Panpal, et al. Gempal Technology Corp. (“Gempal”) Hong Ji Capital Co., Ltd. (“Hong Ji”) Hong Jin Investment Co., Ltd. (“Hong Jin”) Arcadyan Technology Corp. (“Arcadyan”) The Company Rayonnant Technology 〃 〃 〃 〃 〃 〃 Co., Ltd. (“Rayonnant Technology”) HengHao Technology Co., Ltd. (“HengHao”) Ripal Optoelectronics Co., Ltd. (“Ripal”) Mactech Co., Ltd (“Mactech”) General Life Biotechnology Co., Ltd. (“GLB”) Unicore BioMedical Co., Ltd. (“Unicore”) Hippo Screen Neurotech Co., Ltd. (“Hippo Screen”) 〃 〃 〃 R&D, manufacturing and sales of wireless network, integrated household electronics, and mobile office products 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 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 Percentage of ownership December 31, 2021 100% December 31, 2020 Description 100% Panpal held 31,648 thousand shares of the Company as of December 31, 2021, which represented 0.7% of the Company’s outstanding shares. 100% Gempal held 18,369 thousand shares of the Company as of December 31, 2021, which represented 0.4% of the Company’s outstanding shares. 100% 100% 35% The Group had the ability to control Arcadyan. (Note 1) 100% 100% 100% 34% 100% 100% 100% 100% 100% 100% 53% 53% 50% 50% 100% 100% 91% 70% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 13 Name of investor The Company Name of Subsidiary Shennona Taiwan Co., Ltd. (“Shennona TW”) 〃 〃 〃 〃 〃 〃 〃 〃 〃 Aco Smartcare Co., Ltd. (“Aco Smartcare”) Kinpo&Compal Group Assets Development Corporation(“Kinpo&C ompal Group”) Shennona Corporation (“Shennona”) 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”) Nature of Operation 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 Real estate development leasing and related management business Medical care IOT business R&D of notebook PC related products and components Investment 〃 〃 Warranty services and marketing of monitors and notebook PCs Investment High Shine Industrial Corp. 〃 The Company and BSH The Company 〃 〃 〃 〃 〃 Panpal and Gempal 〃 (“HSI”) Compal Europe (Poland) Sp. z o.o. (“CEP”) Big Chance International Co., Ltd. (“BCI”) Compal Rayonnant Holdings Limited (“CRH”) Core Profit Holdings Limited (“CORE”) Compalead Electronics B.V. (“CPE”) CGS Technology (Poland) Sp. z o.o. (“CGSP”) Compalead Eletronica do Brasil Industria e Comercio Ltda. (“CEB”) Compal Electronics India Private Limited (“CEIN”) Maintenance and warranty services of notebook PCs Investment 〃 〃 〃 Maintenance and warranty services of notebook PCs Manufacturing of notebook PCs Percentage of ownership December 31, 2021 December 31, 2020 100% 100% 52% 52% Description 70% - Kinpo&Compal Group was established in December 2021. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Manufacturing and warranty service of mobile phones 100% 100% Panpal and CEB Compal Electronica DA Manufacturing of notebook PCs Just 〃 〃 Amazonia Ltda. (“CEA”) Compal Display Holding Investment (HK) Limited (“CDH (HK)”) Compal Electronics International Ltd. (“CII”) Compal International Ltd. (“CPI”) 〃 〃 100% 100% 100% 100% 100% 100% 100% 100% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 14 Name of investor CDH (HK) 〃 〃 Name of Subsidiary Nature of Operation Percentage of ownership December 31, 2021 December 31, 2020 Description Compal Electronics (China) Co., Ltd. (“CPC”) Compal Optoelectronics (Kunshan) Co., Ltd. (“CPO”) Compal System Trading (Kunshan) Co., Ltd. (“CST”) 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% CPC Compal Smart Device (Chongqing) Co., Ltd. (“CSD”) CII Smart International Research, manufacturing and sales of communication devices, mobile phones, electronic computer, smart watch, and providing related technical service Investment Trading Ltd. (“Smart”) Amexcom Electronics Inc. (“AEI”) Sales and maintenance of LCD TVs Mexcom Electronics, LLC Investment 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 〃 〃 〃 〃 〃 Manufacturing of notebook PCs 〃 〃 〃 Manufacturing and sales of notebook PCs, mobile phones, and digital products Maintenance and warranty service of notebook PCs Investment 〃 〃 〃 CIH 〃 〃 〃 CIH (HK) 〃 〃 〃 〃 BT CDH (HK) and CIH (HK) CIJ (“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”) Compal Electronics Technology (Kunshan) Co., Ltd. (“CET”) Compal Information (Kunshan) Co., Ltd. (“CIC”) Coompal Information Technology (Kunshan) Co., Ltd. (“CIT”) Kunshan Botai Electronics Co., Ltd. (“BT”) Compal Digital Technology (Kunshan) Co., Ltd. (“CDT”) Compower Global Service Co., Ltd. (“CGS”) Compal Investment (Jiangsu) Co., Ltd. (“CIJ”) Compal Display Electronics (Kunshan) Co., Ltd. (“CDE”) Etrade Management Co., The Company and Webtek The Company Webtek Technology Co., Ltd. (“Etrade”) 〃 〃 Ltd. (“Webtek”) Forever Young Technology Inc. (“Forever”) UniCom Global, Inc. (“UCGI”) Manufacturing and sales of LCD TVs 100% 100% Investment 〃 〃 Manufacturing and sales of computers and electronic components 100% 100% 100% 100% 100% 100% 100% 100% (Continued) 15 Description COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Name of investor The Company CDH (HK) and Etrade Name of Subsidiary Palcom International Corporation (“Palcom”) Compal Communication (Nanjing) Co., Ltd. (“CCI Nanjing”) Etrade Compal Digital 〃 Forever 〃 〃 Communication (Nanjing) Co., Ltd. (“CDCN”) Compal Wireless Communication (Nanjing) Co., Ltd. (“CWCN”) Hanhelt Communication (Nanjing) Co., Ltd. (“Hanhelt”) Giant Rank Trading Ltd. (“GIA”) Compal Wise Electronic (Vietnam) Co., Ltd. (“CWV”) Arcadyan Arcadyan Technology N.A. 〃 〃 〃 〃 〃 〃 〃 〃 〃 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”) Zhi-Bao Technology Inc. (“Zhi-Bao”) Tatung Technology Inc. (“TTI”) AcBel Telecom Inc. (“AcBel Telecom”) Nature of Operation Sales of mobile phones Manufacturing and processing of mobile phones and tablet PCs 〃 〃 Percentage of ownership December 31, 2021 December 31, 2020 100% 100% 100% 100% 100% 100% 100% 100% R&D and manufacturing of electronic communication equipment 100% 100% Sales of mobile phones Manufacturing and sales of mobile phones, tablet PCs, smart watches, communication devices, other electronic devices and providing related technical service. Sales of wireless network products 100% 100% 100% 100% 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% 100% Investment 100% 100% R&D and sales of household digital electronic products Investment Arcadyan and Zhi-Bao 〃 Arcadyan do Brasil Ltda. (“Arcadyan Brasil”) Arcadyan India Private Limited (“Arcadyan India”) Sales of wireless network products Sales of wireless network products 61% 51% 100% 100% 61% 51% The company had decided its dissolution and liquidation on October 28, 2021. 100% - The subsidiary was incorporated on March 25, 2021. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 16 Name of investor The Company, Arcadyan and its subsidiaries CBN Name of Subsidiary Compal Broadband Network Inc. (“CBN”) Compal Broadband Networks Belgium BVBA (“CBNB”) Nature of Operation R&D and sales of cable modem, digital set-up box, and other communication products Import and export business, technical support and consulting service of broadband networks Percentage of ownership December 31, 2021 December 31, 2020 62% 64% 100% 100% Description 〃 Compal Broadband 〃 100% 100% Networks Netherlands B.V. (“CBNN”) The Company and CBN Starmems Semiconductor Corp. (“Starmems”) 〃 〃 Arcadyan Holding Sinoprime Global Inc. (“Sinoprime”) Arcadyan Technology (Shanghai) Corp. (“SVA Arcadyan”) Arch Holding (BVI) Corp. (“Arch Holding”) Arch Holding Compal Networking (Kunshan) Co., Ltd. (“CNC”) Arcadyan Technology (Vietnam) Co., Ltd. (“Arcadyan Vietnam”) Quest International Group Co., Ltd. (“Quest”) Tatung Technology of Japan Co., Ltd. (“TTJC”) Sinoprime TTI 〃 Quest Exquisite HSI 〃 IUE Goal Rayonnant Technology and CRH APH 〃 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)”) R&D of MEMS technology of manufacturing process of semiconductor and manufacturing of electronic components Investment R&D and sales of wireless network products Investment Manufacturing of wireless network products Manufacturing of wireless network products Investment Sales of household digital electronic products Investment Manufacturing of household digital electronic products Investment 〃 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 Investment 〃 〃 45% - The subsidiary was incorporated in April, 2021 and the Group has substantial control over it. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 17 Name of investor Rayonnant Technology (HK) HengHao Name of Subsidiary Rayonnant Technology (Taicang) Co., Ltd. (“Rayonnant Technology (Taicang)”) HengHao Holdings A Co., Ltd. (“HHA”) Nature of Operation Manufacturing and sales of aluminum alloy and magnesium alloy products Investment HHA HengHao Holdings B Co., 〃 Production of touch panels and related components Percentage of ownership December 31, 2021 December 31, 2020 100% 100% Description 100% 100% 100% 100% 100% 100% Manufacturing of touch panels and LCD TVs 100% 100% HHB 〃 BCI 〃 CMI PRI CIS 〃 Ltd. (“HHB”) 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”) Compal Electronics (Chengdu) Co., Ltd. (“CEC”) Compal Management (Chengdu) Co., Ltd. (“CMC”) CORE BSH 〃 Billion Sea Holdings Limited (“BSH”) Mithera Capital Io LP (“Mithera”) Compal USA (Indiana), Inc. (“CIN”) Investment 〃 Outward investment and consulting services R&D, manufacturing and sales of notebook PCs, related components, related maintenance and warranty services 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 〃 OEM of automotive electronic products GLB Rapha Bio Ltd. (“RBL”) Detector and feature Unicore Raycore Biotech Co., Ltd. Animal medication retail and wholesale (“Raycore”) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 100% - 100% 99% - The Group acquired 100% of its shares in September 2021. 100% The liquidation had been completed in July 2021. 51% Raycore was merged with Unicore in February, 2022. Unicore was the surviving company and Raycore was the dissolved company. Note 1: The Group holds less than half of the voting rights of the company, but the Group considers that the rest of the company's shareholding is extremely dispersed. The previous procedures for the participation of other shareholders in the shareholders' meeting show that the Group has the actual ability to unilaterally dominate the relevant activities, and there is no indication that there is an agreement among the other shareholders to make collective decisions, so the Group treats the company as a subsidiary. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 18 (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 (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 19 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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 20 (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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 21 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 22 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 months 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. 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; (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 23 •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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 24 (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, and trade 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 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 25 (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 nonderivative 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 26 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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 27 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 28 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. (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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 29 The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows: 1) 2) Buildings: 9~50 years Building improvement: 2~30 years 3) Machinery and equipment: 2~14 years 4) Research equipment: 3~10 years 5) Modeling equipment: 0.5~5 years 6) Other equipment: 0.25~10 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. (l) Leases 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. (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. 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; － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 30 － 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 of its assessment on whether it will exercise a purchase, 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 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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 31 (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) 4) 5) 6) 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. How the intangible asset will generate probable future economic benefits. 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 Group are measured at cost, less accumulated amortization and any accumulated impairment losses. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 32 (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) 2) 3) 4) Patents: the shorter of contract period and estimated useful lives Royalty: amortized by contract period Computer software: 1~7 years 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 and non-current assets classified as held for sale 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 33 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 34 (q) Recognition of Revenue (i) 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. 1) 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. 2) 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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 35 (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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 36 (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 awards 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 (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 37 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 acquire, 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 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 38 (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. 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. In addition, information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows: (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 39 (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, 2021 December 31, 2020 $ 18,472 18,637 17,073,664 19,537,842 58,069,967 69,560,444 - 10,000 $ 75,162,103 89,126,923 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. (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 December 31, 2021 December 31, 2020 $ - 137,540 399,550 120,897 2,545 660,532 400,754 259,778 660,532 $ $ $ 2,234,184 100,190 101,419 - 11,069 2,446,862 2,245,254 201,608 2,446,862 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 40 Financial liabilities held-for-trading: Derivative instruments not used for hedging Foreign exchange contracts Swap contracts December 31, 2021 December 31, 2020 $ $ - 1,589 1,589 130,865 5,752 136,617 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, 2021 Contract amount (in thousand) Currency Maturity date Derivative financial assets: Foreign exchange contracts: Forward exchange sold Forward exchange sold Forward exchange purchased Swap contracts: Currency Swap Derivative financial liabilities: Foreign exchange contracts: Forward exchange purchased Forward exchange sold Derivative financial assets: Swap contracts: EUR 33,000 EUR 1,500 USD 181,700 EUR to USD January 10, 2022 ~ May 09, 2022 EUR to TWD January 5, 2022 USD to BRL January 5, 2022 ~ June 20, 2022 USD 21,000 USD to TWD February 14~March 14, 2022 USD EUR 5,000 7,000 USD to CNY January 26, 2022 EUR to USD February 18, 2022 ~ March 4, 2022 Contract amount (in thousand) Currency Maturity date December 31, 2020 Currency swap USD 37,000 USD to TWD January 13~February 26, 2021 Derivative financial liabilities: Foreign exchange contracts: Forward exchange sold EUR 49,000 EUR to USD January 13~April 14, 2021 Forward exchange purchased USD 122,300 USD to BRL January 7~August 26, 2021 Swap contracts: Currency swap USD 45,500 USD to TWD March 12~April 29, 2021 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 41 The market risk related to the financial instruments please refer to note (6)(aa). As of December 31, 2021 and 2020, 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, 2021 December 31, 2020 $ $ 3,350,210 695,728 1,879,166 309,959 6,235,063 1,972,849 491,243 2,152,542 200,377 4,817,011 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. In order to strengthen business cooperation with its related party, Kinpo Electronics, Inc. (“Kinpo”), the Group acquired 46,197 thousand common stocks of Kinpo from its related party, Jipo Investment Inc. in May 2021, with a transaction price amounting to $616,864. The transaction has been completed and the price has been fully paid. The liquidation procedures of Horizon Ventures Fund I, LP, Kunji Venture Capital Co., Ltd, and HeDing Venture Capital Co., Ltd, measured at fair value through other comprehensive income by the Group, had been completed in 2021. Proceed from the liquidation amounted to $1,172, resulting in a cumulative loss of $157,150, which was reclassified from other comprehensive income to retained earnings. During 2020, the Group has sold all of its shareholdings, 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. 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, 2021 and 2020, will be $311,753 and $240,851, respectively. These analyses are performed on the same basis for the period and assume that all other variables remain the same. The Group’s information of market risk please refer to note (6)(aa). As of December 31, 2021 and 2020, the Group did not provide any financial assets at fair value through other comprehensive income as collaterals for its loans. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 42 (d) Financial instruments used for hedging (i) Financial instruments used for hedging were as follows: December 31, 2021 December 31, 2020 Cash flow hedge: Financial liabilities used for hedging: Forward exchange contracts $ - 2,192 (ii) Cash flow hedge The Group’s strategy is to use forward exchange contracts to hedge its foreign currency exposure in respect of forecasted future sales. As of December 31, 2021, the Group did not enter into any hedge contract. As of December 31, 2020, the amounts related to the items designated as hedge instruments were as follows: December 31, 2020 Contract amount (in thousands) Currency Maturity period Average strike price Derivative financial liabilities used for hedging Foreign exchange contracts: Forward exchange sold EUR 6,000 EUR to USD April 29~June 29, 2021 1.2192 (iii) For the years ended December 31, 2021 and 2020, the ineffective portion of cash flow hedge recognized in profits (losses) amounted of $0 and $67, respectively, recorded as “other gains and losses, net”. (iv) For the years ended December 31, 2021 and 2020, 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). (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 43 (e) Notes and accounts receivable Notes receivables from operating activities Accounts receivables – measured at amortized cost Accounts receivables – fair value through other comprehensive income Less: allowance for uncollectible accounts Notes and accounts receivable Notes and accounts receivable – related parties December 31, 2021 December 31, 2020 $ 81,244 40,059 261,179,612 197,650,813 32,796,946 294,057,802 38,429,954 236,120,826 (3,891,948) (3,910,928) $ 290,165,854 232,209,898 $ 288,436,522 231,830,964 $ 1,729,332 378,934 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, 2021 Carrying amount of notes and accounts receivable $ $ 268,016,952 14,524,868 3,795,534 286,337,354 Weighted- average ECL rate 0% 0.47% 100% December 31, 2020 Carrying amount of notes and accounts receivable $ $ 213,584,823 11,779,368 3,817,340 229,181,531 Weighted- average ECL rate 0% 0.57% 100% Credit rating Level A Level B Level C Credit rating Level A Level B Level C Lifetime ECLs - 68,262 3,795,534 3,863,796 Lifetime ECLs - 66,757 3,817,340 3,884,097 Credit- impaired No No Yes Credit- impaired No No Yes (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 44 (ii) The loss allowance provision of strategically integrated product segment of the Group was determined as follows: December 31, 2021 Carrying amount of notes and accounts receivable $ $ 2,142,077 5,042,739 517,585 - 18,047 7,720,448 Weighted- average ECL rate 0% 0.10% 1.00% - 100% December 31, 2020 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% Credit rating Level A Level B Level C Level D Level E Credit rating Level A Level B Level C Level D Level E Lifetime ECLs - 4,913 5,192 - 18,047 28,152 Lifetime ECLs - 3,814 4,431 - 18,586 26,831 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, 2021 December 31, 2020 $ $ 1,338,940 7,679 1,346,619 2,073,442 104,264 2,177,706 The movement in the allowance for notes and accounts receivable was as follows: Balance at January 1 Impairment losses recognized (reversed) Effect of changes in exchange rates Balance at December 31 2021 3,910,928 (18,227) (753) 3,891,948 $ $ 2020 3,928,716 (18,694) 906 3,910,928 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 45 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, 2021 and 2020, 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 15,000 thousand, USD 1,600,000 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, 2021 and 2020, the factored account receivable with no advance amounting $958 and $42,550, respectively, is accounted for as other receivables. 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, 2021 and 2020, accounts receivable factored were recovered and derecognized since the conditions of derecognition were met. As of December 31, 2021 and 2020, the details of the factored accounts receivable but unsettled were as follows: Accounts receivable factored (gross) Purchaser Financial Institution $ 33,594,209 Accounts receivable factored (gross) Purchaser Financial Institution $ 42,597,772 December 31, 2021 Amount advanced Paid Unpaid Amount recognized in other receivable Amount Collateral derecognized Interest rate - 33,593,251 958 - 33,594,209 0.47%~0.86% December 31, 2020 Amount advanced Paid Unpaid Amount recognized in other receivable Amount Collateral derecognized Interest rate - 42,555,222 42,550 - 42,597,772 0.58%~0.93% As of December 31, 2021 and 2020, the Group did not provide any aforementioned notes and accounts receivable as collaterals. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 46 (f) Inventories Finished goods Work in progress Raw materials Raw materials in transit December 31, 2021 22,625,832 $ December 31, 2020 23,237,892 9,683,904 9,630,864 82,224,084 62,694,104 478,545 589,099 $ 115,012,365 96,151,959 (i) For the years ended December 31, 2021 and 2020, inventory cost recognized as cost of sales amounted to $1,194,190,441 and $1,013,470,729, respectively. (ii) The loss due to the write-down of inventories to net realizable value amounted $1,938,800 and $97,090 for the years ended December 31, 2021 and 2020, respectively. (iii) As of December 31, 2021 and 2020, the Group did not provide any inventories as collaterals for its loans. (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, 2021 December 31, 2020 $ 8,453,133 8,036,165 (17,587) (17,106) 8,435,546 8,019,059 43,020 43,177 (109,254) (112,311) $ 8,369,312 7,949,925 1) The fair value of the shares of listed company based on the closing price was as follows: Allied Circuit Co., Ltd. (“Allied Circuit”) Avalue Technology Inc. (“Avalue”) December 31, 2021 December 31, 2020 2,847,809 2,075,813 849,180 828,286 3,696,989 2,904,099 $ $ (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 47 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 $ 448,467 2021 2020 436,165 3) The Group’s financial information for investments accounted for using the equity method that are individually immaterial was as follows: December 31, 2021 December 31, 2020 Carrying amount of individually immaterial associates $ 8,453,133 8,036,165 The Group’s share of the net income (loss) of associates: Profit (loss) from continuing operations Other comprehensive income Total comprehensive income 2021 2020 $ $ 448,467 110,379 558,846 436,165 107,370 543,535 4) For the year ended December 31, 2020, the Group had sold parts of its shares held in Allied Circuit and Avalue, 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. (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, 2021 December 31, 2020 The carrying amount of the Group’s interests in all individually insignificant joint ventures $ (17,587) (17,106) The Group’s share of the net income (loss) of joint ventures: Losses from continuing operations (also the total comprehensive losses) $ 95 (508) 2021 2020 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 48 (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. (iv) As of December 31, 2021 and 2020, the Group did not provide any investments accounted for using equity method as collaterals for its loans. (h) Acquisition of the subsidiary In order to expand the automotive electronics business and build an automotive electronics production base in the US, the Group’s indirect investee, Billion Sea Holdings Ltd., acquired a 100% ownership of Cal-Comp USA (Indiana), Inc. from the Group's related party － Cal-Comp Electronics (USA) Co., Ltd. (“ CCUS” ). Cal-Comp USA (Indiana), Inc. was renamed to be Compal USA (Indiana), Inc. (“CIN”) after acquisition. The company signed a contract with CCUS on September 30, 2021, to acquire 100% of the equity at a total price of $226,421. The aforementioned price was paid, and the delivery of shares had been completed. Since the acquisition of 100% equity of CIN on September 30, 2021, the revenue and net profit contributed by CIN were $139,834 and loss of $35,101, respectively. If the transaction takes place on January 1, 2021, the management estimates that the Group's revenue in 2021 would increase by $490,751, while net profit would decrease by $8,992. In determining these amounts, management has assumed that the transaction occurred on January 1, 2021 and that the provisional fair value adjustment resulting from the acquisition date is the same. The main categories of consideration transfer, assets acquired and liabilities on the acquisition date and the amount of recognized goodwill are as follows: (i) Consideration transferred Cash $ 226,421 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 49 (ii) The identifiable assets acquired and the liabilities assumed The fair value details of the identifiable assets acquired and the liabilities assumed on the acquisition date are as follows: Cash and cash equivalents Notes and accounts receivable, net Other receivables Inventories, net Prepayments and other current assets Property, plant and equipment Short-term borrowings Accounts payable Other payables (iii) Goodwill arising from the acquisition of 100% equity is as follows: Consideration transferred Less: fair value of identifiable net assets $ $ $ $ 29,419 130,003 29,994 211,240 3,798 93,373 (158,743) (124,352) (27,525) 187,207 226,421 (187,207) 39,214 Goodwill is mainly derived from the business value of CIN in the automotive electronics market. It is expected that CIN and the Group’s business will be integrated to generate synergy. (i) 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 38 thousand and 45 thousand new shares because of its employees' exercised stock options in 2021 and 2020, respectively, which resulted in the reduce of the Group’s ownership of CBN by 0.02% and 0.03%, respectively. 2) Issuance of new shares for cash of subsidiaries The Group purchased newly issued shares of HippoScreen about $70,000, resulting in an increase in the ownership of the Group in HippoScreen by 21%. 3) Issuance of subsidiaries’ restricted shares CBN issued 1,500 thousand restricted shares in the year ended December 31, 2021, resulting in a decrease in the ownership of the Group in CBN by 0.95%. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 50 4) Cancellation of subsidiaries’ restricted shares and conversion of convertible bonds Arcadyan canceled 53 thousand and 126 thousand restricted shares in the years ended December 31, 2021 and 2020. Whereas, Arcadyan issued $8,136 new shares due to the conversion of convertible bonds during 2021. These two events, respectively, resulted in a decrease of 1.30% and an increase of 0.01% the ownership of the Company and its subsidiaries in Arcadyan in the years ended December 31, 2021 and 2020. 5) The acquisition of additional equity in the subsidiary In August 2021, the Group acquired 49% of equity interest in Raycore Biotech from minority shareholders with $15,129 in cash, increasing equity from 51% to 100%. 6) 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 Retained earnings 2021 2020 $ $ 61,825 (11,237) 50,588 1,735 - 1,735 (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, 2020 31, 2021 %66 %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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 51 Arcadyan’s collective financial information 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 Effect of exchange rate changes on cash and cash equivalents December 31, 2021 28,532,932 $ December 31, 2020 24,721,922 $ $ $ $ $ $ $ $ 5,368,181 4,085,304 (20,476,963) (15,368,928) (501,037) (1,476,302) 12,923,113 11,961,996 8,796,235 8,024,032 2021 2020 38,240,058 33,765,295 1,701,800 1,630,605 (77,222) (97,919) 1,624,578 1,083,011 1,032,457 1,532,686 1,033,182 970,772 (1,524,264) 3,352,208 (1,789,637) 2,240,204 (35,292) (884,623) (974,048) (21,328) Net increase (decrease) in cash and cash equivalents $ (1,108,989) 1,472,209 (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, 2021 and 2020, were as follows: Buildings and building improvement Machinery Other equipment Land Under construction and prepayment for purchase of equipment Total Cost: Balance on January 1, 2021 $ 1,944,094 18,519,873 28,498,191 11,885,697 1,220,785 62,068,640 Acquisition through business combination 10,892 87,477 162,654 4,376 - 265,399 Additions 479,377 693,335 3,164,422 1,598,322 6,125,821 12,061,277 Disposals and derecognitions - (1,893,781) (915,011) (1,142,655) - (3,951,447) Reclassifications 43,694 378,343 2,011,033 229,103 (2,662,173) - Effect of movements in exchange rates (1,138) (401,448) (915,221) (831,423) (90,951) (2,240,181) Balance on December 31, 2021 $ 2,476,919 17,383,799 32,006,068 11,743,420 4,593,482 68,203,688 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 52 Buildings and building improvement Machinery 27,044,641 16,966,779 Other equipment 11,289,433 Land 1,705,220 $ Under construction and prepayment for purchase of equipment 1,310,558 Total 58,316,631 16,540 1,555,668 2,043,593 1,670,528 2,491,792 7,778,121 Balance on January 1, 2020 Additions Disposals and derecognitions - (40,637) (781,081) (484,944) - (1,306,662) Reclassifications 222,769 568,695 1,419,898 267,958 (2,479,320) - Effect of movements in exchange rates (435) (530,632) (1,228,860) (857,278) (102,245) (2,719,450) Balance on December 31, 2020 $ 1,944,094 18,519,873 28,498,191 11,885,697 1,220,785 62,068,640 Depreciation and impairments loss: Balance on January 1, 2021 Acquisition through business combination Depreciation for the period Impairment loss Disposals and derecognitions Effect of movements in exchange rates Balance on December 31, 2021 Balance on January 1, 2020 Depreciation for the period Disposals and derecognitions Effect of movements in exchange rates Balance on December 31, 2020 Carrying amounts: Balance on December 31, 2021 Balance on January 1, 2020 Balance on December 31, 2020 $ $ $ $ $ $ $ - - - - - - - - - - - - 10,855,109 20,571,645 8,556,546 18,824 148,912 4,290 923,523 2,566,033 1,947,870 - 378,072 26,441 (622,536) (812,833) (1,009,328) (185,398) (1,597,679) (556,167) 10,989,522 21,254,150 8,969,652 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 - - - - - - - - - - - - 39,983,300 172,026 5,437,426 404,513 (2,444,697) (2,339,244) 41,213,324 38,344,284 4,844,691 (1,158,107) (2,047,568) 39,983,300 2,476,919 6,394,277 10,751,918 2,773,768 4,593,482 26,990,364 1,705,220 6,614,345 7,194,382 3,147,842 1,310,558 19,972,347 1,944,094 7,664,764 7,926,546 3,329,151 1,220,785 22,085,340 As of December 31, 2021 and 2020, part of the Group’ s property, plant and equipment were provided as collateral for long-term borrowings. Please refer to note (8). In order to activate the assets of the Group, the Board of Directors approved a resolution on May 7, 2021, that the subsidiary CDE and Kunshan Xincheng Construction Development Co., Ltd., a non- related party, signed a real estate purchase and sale contract. The transaction targets include land use rights and existing land building, with the transaction price of $4,147,946 (CNY $956,012 thousand) in total. The Group has completed the above transaction. The Group recognized a disposal gain of $1,961,419, which was accounted for as other gains and losses, after deducting the book value of assets and related transaction costs from the transaction price. In 2021, the Group carried out the impairment test toward the partial production lines in Henghao and its subsidiaries, and assessed that the recoverable amount of the machinery and equipment was lower than its book value. The impairment loss of $404,513 was recognized, and accounted for non- operating income and expenses. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 53 (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: Cost: Balance on January 1, 2021 Additions Deductions Effect of movements in exchange rates Balance on December 31, 2021 Balance on January 1, 2020 Additions Deductions Effect of movements in exchange rates Balance on December 31, 2020 Depreciation and impairment loss: Balance on January 1, 2021 Depreciation for the period Deductions Effect of movements in exchange rates Balance on December 31, 2021 Balance on January 1, 2020 Depreciation for the period Deductions Effect of movements in exchange rates Balance on December 31, 2020 Carrying amount: Balance on December 31, 2021 Balance on January 1, 2020 Balance on December 31, 2020 Land Buildings Machinery Vehicles and Other Total $ $ $ $ $ $ $ $ $ $ $ 1,268,129 - (362,689) (45,447) 859,993 1,110,813 317,808 (106,518) (53,974) 1,268,129 54,756 52,675 (37,698) (78) 69,655 31,587 25,354 - (2,185) 54,756 3,378,467 996,820 (679,921) (31,336) 3,664,030 2,809,991 954,736 (350,896) (35,364) 3,378,467 1,175,689 805,895 (512,348) (10,411) 1,458,825 659,467 801,567 (258,054) (27,291) 1,175,689 790,338 1,079,226 1,213,373 2,205,205 2,150,524 2,202,778 76,930 - - (328) 76,602 86,661 - (9,460) (271) 76,930 24,749 12,326 - (175) 36,900 22,270 12,138 (9,368) (291) 24,749 39,702 64,391 52,181 74,969 22,824 (28,923) (248) 68,622 88,712 6,797 (19,825) (715) 74,969 46,349 20,421 (28,923) (198) 37,649 32,681 32,690 (18,742) (280) 46,349 4,798,495 1,019,644 (1,071,533) (77,359) 4,669,247 4,096,177 1,279,341 (486,699) (90,324) 4,798,495 1,301,543 891,317 (578,969) (10,862) 1,603,029 746,005 871,749 (286,164) (30,047) 1,301,543 30,973 56,031 28,620 3,066,218 3,350,172 3,496,952 (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, 2021 $ 118,422,407 December 31, 2020 92,838,733 $ 113,777,000 95,910,000 0.05%~2.95% 0.25%~2.58% For information on the Group’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(aa). (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 54 (n) Long-term borrowings The details of long-term borrowings were as follows: Unsecured bank loans December 31, 2021 Currency TWD Annual range of interest rate 0.62%~0.98% Maturity year 2022~2024 Secured bank loans TWD 1.00%~1.50% 2022~2026 Less: current portion Total Unused credit lines for long-term borrowings Unsecured bank loans Unsecured bank loans Secured bank loans Less: current portion Total Unused credit lines for long-term borrowings December 31, 2020 Currency TWD USD TWD Annual range of interest rate 0.66%~0.98% 0.69%~0.92% 1%~1.5% Maturity year 2021~2023 2021~2022 2022~2025 Amount 24,300,000 660,513 (15,741,481) 9,219,032 12,345,000 Amount 11,900,000 7,205,440 228,913 (8,932,615) 10,401,738 15,327,000 $ $ $ $ $ $ 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). (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 Accumulated converted amount Balance of bonds payable of the reporting date Conversion options included in equity components (classified as capital surplus and non-controlling interests) $ $ $ December 31, 2021 December 31, 2020 1,000,000 (1,433) (496) (671,500) 326,571 1,000,000 (18,527) (1,254) - 980,219 15,987 48,667 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 55 Interest expenses 2021 $ 11,968 2020 13,727 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) 2) 3) Coupon rate: 0% Duration: three years (June 6, 2019~June 6, 2022) 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 day (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; - 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 in 2021 and 2020, thereafter, the conversion price has been adjusted to NT82.5 and $87.7 per share, respectively. (iii) The maturity date of the above convertible corporate bonds is June 6, 2022, so it has been transferred to current liabilities from June 30, 2021. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 56 (iv) As of December 31, 2021, the convertible corporate bonds were converted into Arcadyan's ordinary shares with a face value of $671,500 which was converted into Arcadyan's ordinary shares with a total share capital of $81,363. The resulting capital reserve – issuance stock premium was $616,933 (including the premium of $32,680 and the unamortized amount of the discounted corporate bond payables of $5,884). (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, 2021 $ $ 625,292 1,679,504 December 31, 2020 377,161 1,910,601 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 2021 2020 63,701 50,534 32,350 3,332 303,454 131,749 $ $ $ 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 2021 1,234,542 $ 2020 1,032,451 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, 2021 Provisions made during the period Provisions used during the period Provisions reversed during the period Balance on December 31, 2021 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 57 Warranties 870,050 $ $ $ 476,940 (136,853) (6,022) 1,204,115 830,757 181,789 (142,007) (489) $ 870,050 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, 2021 (1,554,902) December 31, 2020 (1,516,219) 732,869 730,046 (822,033) (786,173) $ $ 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 58 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 $739,802 (excluding the ending balance of interest receivable) as of December 31, 2021. 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 $ (1,516,219) 2021 Benefit paid by the plan Current service costs and interest Remeasurements of net benefit liabilities 38,959 (12,850) (64,792) 2020 (1,486,824) 76,835 (19,238) (86,992) Defined benefit obligations on December 31 $ (1,554,902) (1,516,219) 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: 2021 2020 Fair value of plan assets on January 1 $ 730,046 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 $ 3,675 9,626 28,481 (38,959) 732,869 748,660 6,675 23,554 27,992 (76,835) 730,046 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 4) Expenses recognized in profit or loss The expenses recognized in profit or loss were as follows: 2021 2020 Current service cost Net interest on the net defined benefit liability (asset) Cost of sales Selling expenses Administrative expenses Research and development expenses $ $ $ $ 5,198 3,977 9,175 547 576 2,137 5,915 9,175 59 5,955 6,608 12,563 546 679 3,024 8,314 12,563 5) Actuarial assumptions The following were the Group’s principal actuarial assumptions at the reporting date: Discount rate December 31, 2021 0.63%~0.8% December 31, 2020 0.50%~0.63% 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 $29,915. The weighted-average lifetime of the defined benefit plan is 9~13.42 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, 2021 Discount rate Future salary increasing rate December 31, 2020 Discount rate Future salary increasing rate Effects to the defined benefit obligation Increased 0.25% Decreased 0.25% (34,611) 34,882 (36,336) 36,574 35,847 (33,869) 37,683 (35,482) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 60 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 $446,148 and $448,617 for the years ended December 31, 2021 and 2020, 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 $1,193,098 and $922,151 for the years ended December 31, 2021 and 2020, respectively. (s) Income taxes (i) Income tax expenses 1) The amount of income tax for the years ended December 31, 2021 and 2020, was as follows: 2021 2020 Current tax expense Recognized during the period $ 4,240,078 5% surtax on unappropriated earnings Tax credit of investment Deferred tax expense Recognition and reversal of temporary differences 14,627 (596,726) 3,657,979 2,837,554 27,073 (273,959) 2,590,668 69,368 69,368 122,536 122,536 Income tax expense $ 3,727,347 2,713,204 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 61 2) The amount of income tax recognized in other comprehensive income for the years ended December 31, 2021 and 2020, was as follows: 2021 2020 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 foreign operations $ $ $ (11,211) (13,173) 61,401 50,190 15,805 2,632 (17,539) (18,727) 3) The income tax expense that was reconciled between the actual income tax expense and profit before tax for the years ended December 31, 2021 and 2020, was 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 Surtax on unappropriated earnings 2021 17,467,835 4,734,068 $ $ 2020 13,122,716 3,260,548 (171,208) (65,440) (596,726) (704,260) 516,286 14,627 (209,192) (60,000) (273,959) (637,794) 606,528 27,073 $ 3,727,347 2,713,204 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 62 (ii) Deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2021 and 2020 were as follows: Refund liabilities Contract liabilities Unrealized exchange losses, net Others Total Deferred tax assets: Balance on January 1, 2021 $ Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021 Balance on January 1, 2020 Recognized in profit or loss Recognized in other $ $ 134,880 60,416 - 195,296 120,603 14,277 49,536 40,462 655,455 (178,449) 674,337 181,217 1,514,208 103,646 - 89,998 59,429 (9,893) - 477,006 750,213 28,670 884,224 707,381 28,670 1,646,524 1,637,626 (94,758) (64,966) (155,340) comprehensive income - - - Balance on December 31, 2020 $ 134,880 49,536 655,455 31,922 674,337 31,922 1,514,208 Deferred tax liabilities: Balance on January 1, 2021 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021 Balance on January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2020 (iii) Unrecognized deferred tax assets Unrealized exchange gains, net $ $ $ $ (424,990) (79,673) - (504,663) (497,092) 72,102 - (424,990) Others Total (567,480) (93,341) (61,321) (722,142) (512,126) (39,527) (15,827) (567,480) (992,470) (173,014) (61,321) (1,226,805) (1,009,218) 32,575 (15,827) (992,470) 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, 2021 1,028,920 $ December 31, 2020 1,143,771 $ 978,257 1,034,072 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 63 As of December 31, 2021, the tax effects on loss carryforward that have not been recognized as deferred tax assets were as follows: Year of loss 2012 (Assessed) 2013 (Assessed) 2014 (Assessed) 2015 (Assessed) 2016 (Assessed) 2017 (Assessed) 2018 (Assessed/Filed) 2019 (Assessed/Filed) 2020 (Filed) 2020 (Filed) 2021 (Estimated) 2021 (Filed) Expiry year 2022 Deductible amount 345,099 $ 2023 2024 2025 2026 2027 2028 2029 2030 2025 2031 2026 $ 228,258 41,534 636,827 1,423,381 918,085 554,750 377,577 138,962 18,527 48,943 124,353 4,856,296 (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, 2021 and 2020, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $2,335,023 and $1,856,500, respectively. As of December 31, 2021 and 2020, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $58,082,760 and $54,151,962, respectively. (v) Examination and approval The Company’ s tax returns for the year through 2019 were assessed by the Taipei National Tax Administration. The ROC tax authorities have assessed the income tax returns of Hippo Screen, Zhi-Bao, Acbel Telecom, and Shennona through 2020, of Rayonnant Technology ,UCGI, Palcom, Panpal, Gempal, Hong Ji, Hong Jin, Unicore, Raycore, Ripal, Arcadyan, Heng Hao, Mactech, GLB, RBL, Aco Healthcare and CBN through 2019, and of TTI through 2019. However, TTI’s tax returns through 2018 has not yet been approved. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 64 (t) Capital and other equities (i) Ordinary shares As of December 31, 2021 and 2020, 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, 2021 December 31, 2020 $ 3,660,119 5,422,060 2,621,933 2,541,906 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 36,766 122,675 36,766 60,850 for using equity method 283,363 281,231 $ 6,724,856 8,342,813 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 Board of Directors meeting respectively held on March 26, 2021 and March 30, 2020, approved to distribute cash of $1,762,859 and $881,429 (representing 0.4 and 0.2 New Taiwan Dollars per share), by using capital surplus. The Company’ s Board of Directors meeting held on March 15, 2022, approved to distribute cash of $1,762,859 (representing 0.4 New Taiwan Dollars per share), by using the capital surplus. The related information can be accessed through the Market Observation Post System website. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 65 (iii) Retained earnings 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. 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. 2) Special reverse A portion of current period earnings and undistributed prior period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should equal to the current period total net reduction of other shareholders’ equity. For the year 2019 earnings distribution in 2020, the amount to be reclassified to special reserve shall be a portion of current-period earnings and undistributed prior- period earnings. As for the year 2020 earnings distribution in 2021, the amount to be reclassified to special reserve shall be a portion of current-period earnings plus other line items in the retained earnings movements and undistributed prior-period earnings. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 66 3) Earnings distribution Distribution for the earnings of 2020 and 2019 were approved in the meeting of the Board of Directors held on March 26, 2021 and March 30, 2020, respectively. The relevant information was as follows: 2020 2019 Amount per share Total amount Amount per share Total amount Cash dividends distributed to common shareholders $ 1.2 5,288,576 1.0 4,407,147 Earnings distribution for 2021 was approved by the Board of Directors held on March 15, 2022. The relevant information was as follows: 2021 Amount per share Total amount Cash dividends distributed to common shareholders from the unappropriated earnings $ 1.6 7,051,435 The related information of the earnings distribution for the year ended December 31, 2021, can be accessed through the Market Observation Post System website after the shareholders’ meeting. (iv) Treasury stock The subsidiaries of the Company did not sell the ordinary shares of the Company in the years ended December 31, 2021 and 2020. As of December 31, 2021, 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 24.20 and 20.70 New Taiwan dollars per share as of December 31, 2021 and 2020, respectively. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 67 (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 $ $ $ $ (6,888,977) (1,791,462) (38,894) (25,372) (8,744,705) (3,794,980) (3,073,441) (182,054) 161,498 (6,888,977) (376,952) 567,871 160,972 185,939 537,830 (306,763) (100,249) 75,529 (45,469) (376,952) Others Total (779) 904 125 (1,706) 927 - - - - (7,266,708) (1,223,591) 122,982 160,567 (8,206,750) (4,103,449) (3,173,690) (105,598) 116,029 (779) (7,266,708) Balance on January 1, 2021 The Group Subsidiaries Associates Balance on December 31, 2021 Balance on January 1, 2020 The Group Subsidiaries Associates Balance on December 31, 2020 (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 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 68 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, 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 The number vested in this period Outstanding shares on December 31 Unit: in thousands of shares 2021 2020 2,306 (53) (970) 1,283 4,416 (126) (1,984) 2,306 As of December 31, 2021 and 2020, the unearned employee benefit was $13,030 and $45,606. The compensation cost related to the restricted shares amounted to $32,576 and $73,545 for the year ended December 31, 2021 and 2020. (ii) TTI – employee stock options The information about share-based payment of TTI in 2021 and 2020 was as follows: Grant date Granted shares (in thousand) Contract period Recipients Employee stock options 2015.10.29 1,000 7 years Employees of TTI Vested condition Please refer to the issuance terms of the stock options as follows (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 69 The issuance terms of the stock options are as follows: 1) 2) 3) 4) 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 40 ％ 30 ％ 30 ％ Period and performance requirements to exercise options 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 70 The information on total options issued was as follows: Outstanding shares on January 1 Canceled during the period Exercisable shares on December 31 2020 Weighted- average exercise price (NT dollars) 13.5 $ Shares (in thousands) 300 13.5 (300) - - 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 Weighted average remaining contract period December 31, 2020 13.5 - The reverse related to the share-based payment amounted to $970 for the years ended December 31, 2020. (iii) CBN－employee stock options At the meeting held on May 17, 2016, CBN’ s Board of Directors resolved to issue 1,500,000 units of employee stock options with an exercisable right of one share of CBN’ s ordinary shares per unit. The issuance of employee stock options and related information are as follows: 2021 2020 Outstanding shares on January 1 Expired during the period Exercised during the period Outstanding shares on December 31 Exercisable shares on December 31 Weighted- average exercise price (NT dollars) 10 Shares 3,000 $ Weighted- average exercise price (NT dollars) 10 Shares 87,800 $ - (3,000) - - 10 - - - (4,500) (80,300) 3,000 3,000 10 10 10 10 In the year ended December 31, 2020, the weighted-average remaining contractual life of the outstanding options was 0.67 years. The options under the aforesaid employee stock option plan have been exercised in 2021. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 71 The issuance terms of the share options are as follows. 1) 2) 3) 4) Exercise price: NT$10 per share. Exercisable duration: 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 5 months after options received Exercisable percentage (cumulative) 100 ％ 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, 2021 and 2020 were $0 and $(68), respectively. CBN adopted the Black-Scholes model to estimate the fair value on the grant date, and the assumptions are summarized as follows: 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 Weighted average fair value (NT dollars per share) (iv) CBN- Issuance of restricted shares $10 24.62 0％ 35.87％ 0.56％ 2.55 years 14.96 On June 24, 2020, CBN issued 1,500,000 new restricted shares through shareholders' meeting. This is a gratuitous issuance, and the recipients are full-time employees of CBN who have been employed on grant day and meet specific terms. It have been approved by the Financial Supervisory Commission. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 72 In addition, the issuance date has been decided by the chairman of the board of directors to be December 20, 2021, and the statutory registration procedures had been completed on January 7, 2022. If the employees who have been on the job for one year, two years and three years ,since the new restricted shares have been given, achieved the performance required by CBN, the proportion of shares with acquired conditions can be 40%, 30% and 30%, respectively. After the issuance of new shares, employees must hand over all of them to the trust agency designated by the company for safekeeping before they meet the terms. Except for inheritance, they shall not be sold, mortgaged, transferred, gifted, pledged or disposed of in other ways. Before the employees meet the terms, all matters concerning shareholders' rights and interests are entrusted to the trust agency designated by CBN to exercise on their behalf. If any of the assigned employees does not meet the acquired terms, CBN will take back their shares from the employees for free and cancel them. The information of CBN’s restricted shares is as follows: Outstanding shares on January 1 Shares vested in this period Outstanding shares on December 31 Unit: in thousands of shares 2021 - 1,500 1,500 The above-mentioned new restricted shares of CBN takes the closing price of $30.70 on the grant day, December 20, 2021, as the fair value, and capital surplus-employee restricted shares amounted to $31,050. Until December 31, 2021, the balance of unearned employees benefit was $45,219. The compensation cost related to the restricted shares amounted to $831 for the year ended December 31, 2021. (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 $ 12,632,667 9,361,893 Weighted-average number of outstanding ordinary shares (in thousands) 4,357,130 4,357,130 2021 2020 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 73 Diluted earnings per share: Profit attributable to ordinary shareholders of the Company (after adjustment of potential diluted ordinary shares) $ 12,632,667 9,361,893 2021 2020 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) 4,357,130 4,357,130 65,517 57,482 Weighted-average number of ordinary shares (after adjustment of potential diluted ordinary shares) (in thousands) 4,422,647 4,414,612 (w) Revenue from contracts with customers (i) Disaggregation of revenue Primary geographical markets: United states China Netherlands Others Major products: 5C related electronics products Others 2021 Strategically Integrated Product Segment Total 8,487,079 431,844 1,435,217 27,885,918 38,240,058 486,362,457 159,061,285 88,162,373 502,095,900 1,235,682,015 IT Product Segment $ 477,875,378 158,629,441 86,727,156 474,209,982 $ 1,197,441,957 $ 1,195,237,339 2,204,618 $ 1,197,441,957 37,264,055 976,003 38,240,058 1,232,501,394 3,180,621 1,235,682,015 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 74 2020 Strategically Integrated Product Segment Total 8,106,885 568,651 1,340,450 23,749,309 33,765,295 446,893,526 127,573,036 84,890,214 389,572,475 1,048,929,251 IT Product Segment $ 438,786,641 127,004,385 83,549,764 365,823,166 $ 1,015,163,956 $ 1,013,091,503 2,072,453 $ 1,015,163,956 33,191,331 573,964 33,765,295 1,046,282,834 2,646,417 1,048,929,251 Primary geographical markets: United states China Netherlands Others Major products: 5C related electronics products Others (ii) Contract balances Notes and accounts receivable (including related parties) Less: allowance for impairment Total Contract liabilities December 31, 2021 $ 294,057,802 December 31, 2020 236,120,826 January 1, 2020 195,665,380 (3,891,948) $ 290,165,854 1,065,954 $ (3,910,928) 232,209,898 820,016 (3,928,716) 191,736,664 956,455 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, 2021 and 2020 that were included in the balance of contract liability at the beginning of the period was $820,016 and $877,822, 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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 75 The Company accrued and recognized its employee compensation of $1,350,062 and $974,694, and directors’ compensation of $71,390 and $51,541 for the years ended December 31, 2021 and 2020, 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 differences between the amount approved in the Board of Directors' meeting and those recognized in the financial statements in 2021 and 2020. There is no differences between the amount estimated and recognized in the financial statements in 2020. The related information can be accessed through the Market observation Post System website. (y) Non-operating income and expenses (i) Interest income The details of interest income were as follows: Interest income from bank deposits Other interest income Total Interest income (ii) Other income 2021 2,015,709 1,605 2020 1,635,953 304 2,017,314 1,636,257 $ $ The other incomes for the years ended December 31, 2021 and 2020, were as follows: Dividend revenue Other revenue 2021 2020 $ $ 143,686 504,420 648,106 108,996 384,924 493,920 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 76 (iii) Other gains and losses The other gains and losses for the years ended December 31, 2021 and 2020, were as follows: Gains on disposal of investments 2021 - $ 2020 29,757 Gains on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange gains (losses), net 418,827 123,742 Gains (losses) on disposal of property, plant, and equipment 1,969,560 279,262 (73,475) 25,499 Others (706) - $ 2,511,423 261,043 (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, 2021 and 2020, were as follows: Cash flow hedge: Gains (losses) from current period Less: reclassification of gains (losses) included in profit or loss Profit (loss) recognized in other comprehensive income $ $ 43,006 40,814 2,192 (12,483) (15,162) 2,679 2021 2020 (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 77 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, 2021. 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, 2021 and 2020 were as follows: Balance on January 1, 2021 Impairment losses recognized (reversed) Balance on December 31, 2021 Balance on January 1, 2020 Impairment losses recognized (reversed) Balance on December 31, 2020 (ii) Liquidity risk Other receivables 2,392 581 2,973 1,012 1,380 2,392 $ $ $ $ The following are the contractual maturities of financial liabilities. In addition to lease liabilities and bonds payable, excluding estimated interest payments. Carrying Amount Contractual cash flows Within 1 year 1 ~ 2 years Over 2 years December 31, 2021 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 $ 660,513 142,722,407 (660,513) (142,722,407) (66,481) (134,097,407) (127,612) (6,125,000) (466,420) (2,500,000) 2,304,796 224,066,363 29,701,088 326,571 (2,411,332) (224,066,363) (29,701,088) (328,500) (665,378) (224,066,363) (29,701,088) (328,500) Forward exchange contracts: 1,589 Outflow Inflow (358,893) 357,183 (399,891,913) (358,893) 357,183 (388,926,927) $ 399,783,327 (1,331,721) (414,233) - - - - - - - - - - (7,584,333) (3,380,653) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 78 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 Forward exchange contracts: Outflow Inflow Outflow Inflow Forward exchange contracts used for hedging: Outflow Inflow Carrying Amount Contractual cash flows Within 1 year 1 ~ 2 years Over 2 years $ 228,913 111,944,173 (228,913) (111,944,173) (77,175) (101,694,173) (77,175) (5,125,000) (74,563) (5,125,000) 2,287,762 199,726,063 23,397,683 980,219 130,865 (2,401,961) (199,726,063) (23,397,683) (1,000,000) (486,124) (199,726,063) (23,397,683) - (5,279,091) 5,143,059 (5,279,091) 5,143,059 (1,295,840) 1,285,715 (1,295,840) 1,285,715 2,192 (209,640) 208,331 (338,846,259) (209,640) 208,331 (325,528,684) $ 338,703,622 (562,952) (1,352,885) - - (1,000,000) - - - - - - - - - - - - - - - (6,765,127) (6,552,448) Currency swap contracts: 5,752 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, 2021 Exchange rate TWD Foreign currency December 31, 2020 Exchange rate TWD $ 18,449,976 26,386 83,417 3,451,738 842,184 17,976,968 1,170 197,060 27,835 3,269,701 27.68 6.378 31.32 0.1568 0.8261 27.68 6.378 5.5805 31.32 0.1568 510,695,336 730,364 2,612,620 14,981,316 13,926,339 13,381 60,677 3,646,117 695,728 516,989 497,602,474 32,386 5,454,621 871,792 14,191,235 14,056,045 3,132 131,487 12,616 3,149,932 28.48 6.5386 35.02 0.1529 0.9502 28.48 6.5386 5.1967 35.02 0.1529 396,622,135 381,091 2,124,909 15,877,352 491,243 400,316,162 89,199 3,744,750 441,812 13,716,669 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 NTD CNY to USD (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 79 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, 2021 and 2020, 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% 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, 2021 December 31, 2020 $ 654,643 (654,643) 34,899 (34,899) (272,731) 272,731 87,041 (87,041) 39,504 (39,504) (184,701) 184,701 14,595 (14,595) (187,238) 187,238 84,155 (84,155) 108,034 (108,034) 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, 2021 and 2020, the foreign exchange gains (losses), including both realized and unrealized, amounted to $123,742 and $(73,475), respectively. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 80 (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, 2021 and 2020, 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 $ 2021 2020 1,656 (1,656) 24,312 (24,312) 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, 2021 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 $ Non-derivative financial assets mandatorily measured at fair value through profit or loss Subtotal 123,442 537,090 660,532 - - 123,442 - 123,442 277,312 259,778 537,090 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 81 December 31, 2021 Fair Value Book value Level 1 Level 2 Level 3 Total 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 3,350,210 3,350,210 695,728 695,728 1,879,166 309,959 32,796,946 39,032,009 Cash and cash equivalents Notes and accounts receivable, net 75,162,103 255,639,576 Notes and accounts receivable due from related parties, net Other receivables Other current assets (restricted assets) Refundable deposits Other non-current assets (restricted assets) Subtotal Total 1,729,332 2,445,690 433,403 696,393 544,684 336,651,181 $ 376,343,722 Financial liabilities at fair value through profit or loss Derivative financial liabilities for non- hedging $ 1,589 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 118,422,407 220,549,039 3,517,324 29,701,088 326,571 2,304,796 15,741,481 9,219,032 311,325 400,093,063 $ 400,094,652 - - - - - - - - - - - - - - - - - - - - - - - - - - 3,350,210 695,728 1,879,166 1,879,166 309,959 309,959 32,796,946 - - - - - - - - - - - - - - - - 1,589 - - - - - - - - - - - - - - - - - - 32,796,946 - - - - - - - - - - - - - - - - 1,589 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 82 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 Derivative financial assets for non-hedging $ 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 Cash and cash equivalents Notes and accounts receivable, net Notes and accounts receivable due from related parties, net Other receivables Other current assets (restricted assets) Refundable deposits Other non-current assets (restricted assets) Subtotal Total Financial liabilities at fair value through profit or loss Derivative financial liabilities for non- hedging Derivative financial liabilities 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 11,069 2,435,793 2,446,862 1,972,849 491,243 2,152,542 200,377 38,429,954 43,246,965 89,126,923 193,401,010 378,934 1,628,657 41,090 522,213 500 285,099,327 $ 330,793,154 $ 136,617 2,192 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 - - 1,972,849 491,243 - - - - - - - - - - - - - - - - - - - - - 11,069 - 11,069 2,234,184 201,609 2,435,793 - - - - 38,429,954 - - - - - - - 136,617 2,192 - - - - - - - - - - - 2,152,542 200,377 - - - - - - - - - - - - - - - - - - - 1,972,849 491,243 2,152,542 200,377 38,429,954 - - - - - - - 136,617 2,192 - - - - - - - - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 83 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 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 84 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 from one level to another in the years ended December 31, 2021 and 2020. 5) Changes in level 3 The change in level 3 at fair value in the years ended December 31, 2021 and 2020, were as follows: Balance on January 1, 2021 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Proceeds from liquidation and capital reduction of investments Effect of changes in exchange rates Balance on December 31, 2021 Balance on January 1, 2020 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds from capital reduction of investments Effect of changes in exchange rates Balance on December 31, 2020 Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Total $ 201,609 2,352,919 2,554,528 $ $ - - - - - - - 3,170 - 54,999 259,778 115,359 (335,469) 187,540 (12,249) (3,616) 2,189,125 2,424,053 9,575 - 76,675 (34,716) 29,369 (52,105) (6,933) (6,749) 2,352,919 $ 201,609 3,170 (335,469) 242,539 (12,249) (3,616) 2,448,903 2,539,412 9,575 (34,716) 106,044 (52,105) (6,933) (6,749) 2,554,528 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 85 For the years ended December 31, 2021 and 2020, 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” 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”) $ $ 2021 2020 3,170 9,575 (331,801) 8,834 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, 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) Significant unobservable inputs Price-Book ratio multiples (1.82~11.62 and 1.72~7.9 ,respectively, on December 31, 2021 and 2020) Multiples of earnings (16.37~27.97 and 14.68, respectively, on December 31, 2021 and 2020) Lack-of-Marketability discount rate (40%~85% and 35%~85%,respectively, on December 31, 2021 and 2020) 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-Marketability discount rate is, the lower the fair value will be. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 86 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, 2021 Financial assets at fair value through other comprehensive income December 31, 2020 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 Move up or down Other comprehensive income Unfavorable change Favorable change 5% 5% 5% 5% 5% 5% $ $ $ $ $ $ 17,810 16,250 4,882 11,767 4,738 13,470 36,119 35,448 5,734 3,942 5,801 3,942 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 87 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, 2021 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized financial assets (a) 360,789,950 $ Gross amounts of financial liabilities offset in the balance sheet (b) 360,789,950 Net amount of financial assets 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) - Cash (USD 13,034,319 ) (USD 13,034,319 ) December 31, 2021 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized financial liabilities (a) 360,789,950 Gross amounts of financial assets offset in the balance sheet (b) 360,789,950 (USD 13,034,319 ) (USD 13,034,319 ) Short-term borrowings $ 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) - 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) 199,267,863 $ Gross amounts of financial liabilities offset in the balance sheet (b) 199,267,863 Net amount of financial assets 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) - Cash (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 financial assets offset in the balance sheet (b) 199,267,863 Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b) - Gross amounts of recognized financial liabilities (a) 199,267,863 (USD 6,996,765 ) (USD 6,996,765 ) Short-term borrowings $ Amounts not offset in the balance sheet (d) Financial instruments - Cash collateral received - Net amount (e)=(c)-(d) - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 88 (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. 1) Accounts receivable and other receivables The Group has established a credit policy under which each new customer is analyzed 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 89 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. the contractually obligated Since 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, 2021 and 2020, 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, 2021 and 2020. (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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 90 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, 2021 and 2020, the debt ratio was as follows: Total liabilities Total assets Debt ratio December 31, 2021 $ 415,555,537 December 31, 2020 350,936,048 $ 537,095,340 466,925,698 77% 75% 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, 2021, 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, 2021 and 2020 were acquisition of right-of-use assets by leasing, please refer to note (6)(l). 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, 2021 $ 92,838,733 Cash flow 25,424,931 Other non-cash changes 158,743 December 31, 2021 118,422,407 980,219 - (653,648) 326,571 19,334,353 5,626,160 - 24,960,513 2,287,762 (835,037) 852,071 2,304,796 Deposits received and others 340,131 26,093 (156) 366,068 Total liabilities from financing activities $ 115,781,198 30,242,147 357,010 146,380,355 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 91 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 Deposits received 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 (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 financial statement. Name of related party Relationship with the Group Compal Precision Module (Jiangsu) Co., Ltd. (“CPM”) An associate An associate Changbao Electronic Technology (Chongqing) Co., Ltd. (“Changbao”) Avalue Crownpo Technology Inc. (“Crownpo”) Allied Circuit LIZ Electronics (Kunshan) Co., Ltd. LIZ Electronics (Nantong) Co., Ltd. ARCE Therapeutics Co., Ltd. (“ARCE”) Raypal Biomedical Co., Ltd. (“Raypal”) Hong Ya Technology Co., Ltd. (“Hong Ya”) Kinpo Group Management Service Company (“Kinpo Group Management Service”) Acbel Polytech Inc. and its subsidiaries (“Acbel”) Cal-Comp Electronics (USA) Co., Ltd. (“CCUS”) Cal-Comp Electronics (Thailand) Public Company Limited (“Cal-Comp”) Kinpo Electronics, Inc.(“Kinpo”) Jipo Investment Inc. (“Jipo Investment”) An associate An associate An associate An associate An associate An associate An associate An associate An associate The Chairman of the Board is the first degree of kinship of the Chairman of the Company The same Chairman of the Ultimate parent company with the Company The same Chairman of the Board with the Company The same Chairman of the Board with the Company The same Chairman of the Board with the Company (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 92 (b) Transactions with key management personnel Key management personnel remunerations comprised: Short-term employee benefits Post-employment benefits Share-based payments 2021 803,552 2020 724,350 7,854 6,110 8,267 19,033 817,516 751,650 $ $ 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 ventures 2021 2020 220,127 34,059 - 240,161 610,517 222 254,186 850,900 $ $ Sales prices for related parties were similar to those of the third-party customers. The collection period was 60~120 days for related parties. (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 2021 6,346,763 4,115,321 10,462,084 $ $ 2020 4,596,352 2,956,322 7,552,674 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 93 (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 Notes and accounts receivable Notes and accounts receivable Other receivables Other receivables (iv) Payables to related parties Related party categories December 31, 2021 December 31, 2020 Associates Other related parties Associates Other related parties $ $ 31,640 1,697,692 2,463 45 1,731,840 29,643 349,291 908 64 379,906 The payables arising from the transactions mentioned above and rendering of services from other related parties were as follows: Account Related party categories December 31, 2021 December 31, 2020 Notes and accounts payable Associates $ 1,992,718 1,632,862 Notes and accounts payable Other related parties 1,524,606 1,255,762 Other payables Other payables (v) Property transactions Associates 35 600 Other related parties 19,542 - $ 3,536,901 2,889,224 Relationship Other related party-Jipo Investment Other related party-CCUS Associates-RayPal Biomedical Item Acquisition of financial assets at fair value through other comprehensive income Acquisition of the subsidiary Acquisition of minority shares For the years ended December 31, 2021 Number of shares Acquisition price 46,197 thousand shares Object Common stocks of Kinpo 1 thousand shares Common stocks of CIN 588 thousand shares Common stocks of Raycore Biotech 616,864 226,421 15,129 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 94 (8) Pledged assets: The carrying values of pledged assets were as follows: Pledged Assets Other current assets Bail for court mandatory execution Subject Other current assets Customs deposit Other current assets Pledge deposit PPE Long-term borrowings (including current portion) Other non-current assets Customs deposit Other non-current assets Pledge deposit (9) Commitments and contingencies: The details of commitments and contingencies were as follows: December 31, 2021 - $ December 31, 2020 41,090 336,523 96,880 - - 466,320 486,581 500 500 544,184 - $ 1,444,407 528,171 (a) In August 2019, Inventec Corporation filed a lawsuit to the Taiwan Taipei District Prosecutor Office against the Group concerning its former employees who join 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 immediately. Currently, the case is still in progress in Taipei District Court; 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, 2021 and 2020, the Group’ s signed commitments to purchase property, plant and equipment amounted to $290,063 and $473,370, respectively. (10) Losses due to major disasters: None (11) Subsequent events: In response to the industry development trend and the future strategic development of the Group and for the purpose to integrate resources, provide more comprehensive products and services, increase R&D capabilities, improve efficiency, and increase competitiveness, the Company plans to acquire 51%~65% of shares of Poindus Systems Corp, Ltd. (“Poindus Systems”) under the public acquisition as a tender offer after the resolution of the Board of Directors (hereinafter referred to as the Public Acquisition). The price of the Public Acquisition is 30 New Taiwan Dollars per share. The aforementioned Public Acquisition as a tender offer had been completed on March 7, 2022, with a total acquisition of 56.04% of Poindus Systems' ordinary shares and the total acquisition consideration is $353,046. The settlement was completed on March 11, 2022. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 95 (12) Other: (a) The employee benefits, depreciation and amortization expenses by categorized function are summarized as follows: By function By item Employee benefits Operating costs 2021 Operating expenses Total Operating costs Salary Labor and health insurance Pension Others Depreciation Amortization 15,289,343 1,016,912 1,077,976 2,689,676 5,238,351 78,684 14,136,585 962,630 570,445 631,048 1,090,392 495,684 29,425,928 1,979,542 1,648,421 3,320,724 6,328,743 574,368 17,777,589 841,733 883,287 2,216,080 4,684,438 47,195 2020 Operating expenses 12,789,968 835,965 500,044 599,320 1,032,002 429,350 Total 30,567,557 1,677,698 1,383,331 2,815,400 5,716,440 476,545 (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, 2021: (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, 2021 (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: Please refer to Table 6 (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 7 (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 8 (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 9 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 96 (b) Information on investees: Please refer to Table 10 (c) Information on investment in mainland China: Please refer to Table 11 (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. (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 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: For the year ended December 31, 2021 Information technology product segment Strategy integrated product segment Adjustment and elimination Total Revenue Revenue from external customers Interest revenue Total revenue Interest expense Depreciation and amortization Investment gain (loss) Other significant non-cash items: $ $ $ 1,197,441,957 38,240,058 1,950,777 66,537 1,199,392,734 38,306,595 1,011,790 6,335,289 448,562 37,347 567,822 - - Impairment of assets 404,513 Reportable segment profit $ 15,201,740 2,266,095 Reportable segment assets Reportable segment liabilities - - - - - - - - 1,235,682,015 2,017,314 1,237,699,329 1,049,137 6,903,111 448,562 404,513 17,467,835 537,095,340 415,555,537 $ $ (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 97 For the year ended December 31, 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 $ $ Depreciation and amortization Investment gain (loss) Other significant non-cash items: 1,590,643 45,614 1,016,754,599 33,810,909 1,102,805 5,675,006 435,657 46,410 517,979 - - Impairment of assets - 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 $ $ (c) Products information The information of revenue from external customers: Products and services 5C related electronic products Others 2021 2020 $ 1,232,501,394 1,046,282,834 3,180,621 2,646,417 $ 1,235,682,015 1,048,929,251 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 98 (d) Geographic information 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 (ii) Non-current assets: Country China Taiwan Vietnam Others 2021 486,362,457 $ 2020 446,893,526 159,061,285 127,573,036 88,162,373 84,890,214 502,095,900 389,572,475 $ 1,235,682,015 1,048,929,251 2021 14,411,598 $ 9,837,851 8,708,075 511,749 2020 14,963,036 9,373,521 3,377,464 268,290 $ 33,469,273 27,982,311 Non-current assets include plant, property, and equipment, 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 are as follows: D Company F Company A Company E Company 2021 2020 $ 534,800,186 431,621,595 223,256,380 240,039,272 144,069,158 120,376,434 116,116,250 75,903,386 $ 1,018,241,974 867,940,687 (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:314) Table 1 Loans to other parties: (December 31, 2021) Name of lender No. 0 The Name of borrower UCGI Company Account name Other receivables Related party Y Highest balance of financing to other parties during the period Ending balance 475,325 224,560 Actual usage amount during the period 224,560 Range of interest rates during the period Purposes of fund financing for the borrower 1.02%~1.08% Short-term financing Transaction amount for business between two parties - 0 The HengHao Other Company 0 The CEB Company 0 The CEA Company 1 CIH CEP 2 CPC CDE 2 CPC CIC receivables Other receivables Other receivables Other receivables Other receivables Other receivables 3 CIT 3 CIT 3 CIT CCI Nanjing Other receivables Rayonnant (Taicang) Other receivables HengHao Kunshan 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 receivables 7 Panpal Ray-Kwong Medical Other receivables 8 BSH CIN 9 Arcadyan Acradyan Brasil 9 Arcadyan Acradyan Brasil 9 Arcadyan Arcadyan UK Other receivables Other receivables Other receivables Other receivables 9 Arcadyan Arcadyan Vietnam Other receivables 9 Arcadyan Arcadyan Vietnam Other receivables 9 Arcadyan Arcadyan Russia Other receivables 9 Arcadyan Arcadyan Russia Other receivables 10 Arcadyan CNC Holding 10 Arcadyan CNC Holding 11 SVA CNC Other receivables Other receivables Other receivables Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 400,000 200,000 200,000 1.08% Short-term financing 1,985,950 553,600 553,600 1.02%~2.05% Short-term financing 838,800 830,400 830,400 1.02% 57,070 55,360 55,360 3.50% 1,315,200 - - 2.20% 438,400 434,400 434,400 2.20% 1,997,450 1,937,600 1,561,152 2.00% Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing 137,098 69,200 - 1.30%~4.35% Short-term financing 856,050 830,400 830,400 1.30% 998,725 968,800 968,800 1.30% 657,600 651,600 651,600 2.20% Short-term financing Short-term financing Short-term financing 524,640 260,640 173,760 2.00%~2.20% Short-term financing 570,700 553,600 553,600 1.30% 1,200,000 600,000 600,000 1.08% 10,000 10,000 10,000 1.10% 278,100 276,800 207,600 1.02% 57,020 35,984 35,984 1.00% 55,620 55,360 - 1.00% 285,100 - 285,100 276,800 255,510 - - - - 1.00% 1.00% 1.00% 57,020 - - 1.00% 27,800 27,800 6,705 1.00% 484,670 - - 1.00% 470,560 470,560 470,560 1.00% 153,440 - - 3.85% Short-term financing Short-term financing Short-term financing Short-term financing 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 - - - - - - - - - - - - - - - - - - Reasons for short- term financing Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating financing Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating financing Operating financing Allowance for bad debt - - - - - - - - - - - - - - - - - - - - - - - - - - - Collateral Item Value - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,349,995 4,345,760 5,375,096 165,990 - - - - 377,472 - - - - Operating financing Operating financing Operating financing (In Thousands of New Taiwan Dollars) Individual funding loan limits 22,272,053 Maximum limit of fund financing 44,544,106 Note (Note 1) 22,272,053 44,544,106 (Note 1) 22,272,053 44,544,106 (Note 1) 22,272,053 44,544,106 (Note 1) 37,397,344 37,397,344 (Note 2) 2,613,831 2,613,831 (Note 3) 2,613,831 2,613,831 (Note 3) 22,323,113 22,323,113 (Note 4) 22,323,113 22,323,113 (Note 4) 22,323,113 22,323,113 (Note 4) 2,838,191 2,838,191 (Note 5) 2,838,191 2,838,191 (Note 5) 4,787,996 4,787,996 (Note 6) 8,676,307 8,676,307 (Note 7) 2,344,758 2,344,758 (Note 8) 1,172,379 2,344,758 (Note 8) 6,580,283 6,580,283 (Note 9) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 132,792 5,062,440 (Note 10) - 301,977 5,062,440 (Note 10) 2,416,212 2,416,212 (Note 11) - 2,416,212 2,416,212 (Note 11) 28,344 28,344 (Note 12) (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:305) Table 1 Loans to other parties: (December 31, 2021) Note 1: Note 2: 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. 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 Note 3: 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 Note 4: 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 Note 5: 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 Note 6: 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 Note 7: 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 Note 8: Note 9: 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 BSH’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of BSH. When a short-term financing facility with BSH 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 BSH’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 Note 10: Note 11: Note 12: by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of BSH, 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. 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. According 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 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 SVA. Also, the amount shall be combined with the SVA's endorsements/guarantees 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 endorsements/guarantees for the borrower when calculating. In addition, Note 13: 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. The transactions had been eliminated in the consolidated financial statements. (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:306) Table 2 Guarantees and endorsements for other parties: (December 31, 2021) Counter-party of guarantee and endorsement Name of guarantor No. 0 The Company CEB Name Relationship with the Company (Note 4) Limitation on amount of guarantees and endorsements for a specific enterprise 27,840,066 Highest balance for guarantees and endorsements during the period 115,450 Balance of guarantees and endorsements as of reporting date 113,488 Property pledged for guarantees and endorsements (Amount) - Actual usage amount during the period 113,488 0 The Company CEA (Note 4) 27,840,066 177,786 174,384 174,384 0 The Company CEP (Note 3) 27,840,066 151,129 99,845 99,845 0 The Company HengHao Kunshan 1 Arcadyan Arcadyan AU (note 4) 27,840,066 26,160 26,064 26,064 (Note 4) 1,687,480 209,700 207,600 - - - - - Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements Maximum amount for guarantees and endorsements (Note 1(cid:501)(cid:501)2) 0.10% 55,680,132 0.16% 55,680,132 0.09% 55,680,132 0.02% 55,680,132 1.64% 5,062,440 (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 - Y Y Y Y - - - - - - Y - Note 1: Note 2: 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 current 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 are 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. According to Arcadyan's Procedures for Endorsement and Guarantee, the total amount of endorsements/guarantees Arcadyan and its subsidiaries are permitted to make shall not exceed 40% of the Arcadyan's net worth. Endorsements/guarantees Arcadyan and its subsidiaries are permitted to make for a single company shall not exceed 1/3 of the aforementioned total amount. Note 3: Subsidiary whose over 50% common stock is directly owned. Note 4: Subsidiary whose over 50% common stock is indirectly owned. (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:307) Table 3 Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2021) Name of holder Category and name of security The Company Taiwan Star Relationship with security issuer (cid:4137) Kinpo Cal-Comp The same chairman of the Company The same chairman of the Company (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Chen Feng Optoelectronics TOP Taiwan VI Venture Capital Co., Ltd. IIH Biomedical Venture Fund Phoenix Innovation Investment Corporation. Others Total Panpal Compal Electronics, Inc. The parent company Kinpo The same chairman of the Company CDIB Partners Investment Holding Corp. (cid:4137) AcBel The Chairman of the Board is the first degree of kinship of the Chairman of the Company Taiwan Biotech Co., Ltd. (cid:4137) Others Total Gempal Compal Electronics, Inc. The parent company Lian Hong Art. Co., Ltd. (cid:4137) Others Total Account name 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 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 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 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 Ending balance Shares/Units (thousands) 98,046 Carrying value 441,993 Holding percentage (%) 2% The highest holdings in the period Fair value 441,993 Shares/Units (thousands) 98,046 Holding percentage (%) 3% Note (In Thousands of shares/ units) 124,044 2,003,307 9% 2,003,307 124,044 9% 259,600 695,728 5% 695,728 259,600 5% 290 18,722 10% 18,722 290 10% 632 13,342 11% 13,342 632 11% 4,000 26,600 3% 26,600 4,000 3% 6,685 101,676 10% 101,676 6,685 13% 402 4,233 2% 4,233 663 3% 5,000 48,800 8% 48,800 5,000 8% 6,000 88,740 19% 88,740 6,000 19% 287,259 ___________ 3,730,400 31,648 765,884 1% 765,884 31,648 1% (Note 1) 69,370 1,120,320 5% 1,120,320 69,370 5% 54,000 880,740 5% 880,740 54,000 5% 5,677 207,766 1% 207,766 5,677 1% 6,995 116,883 3% 116,883 6,995 3% 126,498 ___________ 3,218,091 18,369 444,538 - 444,538 18,369 - (Note 1) 2,140 108,551 6% 108,551 2,140 8% 2,139 ___________ 555,228 (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:308) Table 3 Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2021) Name of holder Hong Ji Category and name of security SUYIN Optronics Co., Ltd. (“SUYIN Optronics”) Relationship with security issuer (cid:4137) 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 BSH Suzhou Genki Fuhong Health Management Co., Ltd. CitiBank RED ARC TERMLIQUIDITY FUND (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) Ending balance The highest holdings in the period Shares/Units (thousands) 380 Carrying value - Holding percentage (%) 1% Fair value - Shares/Units (thousands) 380 Holding percentage (%) 1% Note (Note 2) (In Thousands of shares/ units) 332 200 1,152 349 60 - - - - - 1% 7% 5% 5% 14% - - - - - 332 1% (Note 2) 200 7% (Note 2) 1,152 5% (Note 2) 349 5% (Note 2) 60 14% (Note 2) 37,475 7% 37,475 - 7% 1,650 26,169 7% 26,169 1,650 7% 1,229 - 6% - 1,229 6% (Note 2) ___________ 63,644 9,000 - 9,000 - - - 19% - 19% (Note 2) 873 124,560 - 124,560 873 - 4,340 17% 4,340 - 17% 277,312 - 277,312 - - - - Account name 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 Note 1:The carrying value is the remaining amount after deducting accumulated impairment. (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:309) 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, 2021) Name of company Category and name of security Account name Name of counter-party Relationship with the company Beginning Balance Purchases Sales Others Ending Balance Shares/ Units Amount Shares/ Units Amount Shares/ Units Price Cost Gain (loss) on disposal Shares/ Units Amount Shares/ Units Amount (In Thousands of New Taiwan D Panpal Stock : Kinpo Jipo Investment Related party 23,172 281,546 46,197 616,864 - - - - - 221,910 (Note 1) 69,369 1,120,320 Financial assets at fair value through other comprehensive income-non- current 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 Financial assets at fair value through profit or loss-current Agricultural Bank of China Bank of China Bank of Communications Industrial and Commercial Bank of China Structured deposits : Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits– Bank of China RMB Strcutured Deposit Yuntong Wealth Time-type structured deposit products Structured deposits– Industrial and Commercial Bank of China RMB Strcutured Deposit 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– Industrial and Commercial Bank of China RMB Strcutured 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- Win-win Interest Rate Structure RMB Structural Deposits Financial assets at fair value through profit or loss-current Industrial and Commercial Bank of China Agricultural Bank of China Agricultural Bank of China Bank of China Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits– Industrial and Commercial Bank of China RMB Strcutured Deposit Structured deposits- Kunshan Rural Commercial Bank Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Fund RED ARC TERM LIQUIDITY FUND Agricultural Bank of China Industrial and Commercial Bank of China Kunshan Rural Commercial Bank Agricultural Bank of China 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 Financial assets at fair value through profit or loss-current Citibank Financial assets at fair value through profit or loss-current CIT CIT CIT CIT CEC CPO CPO CIC CIC CET CET CNC CNC BSH - - - - - - - - - - - - - - - - - - - - - - - - - - 1,470,031 - - - - - 261,366 - 241,113 - - 130,799 - - - - - - - - - - - - - - 1,660,937 781,618 434,232 868,464 542,790 521,078 521,078 495,024 521,078 238,828 390,809 390,513 260,342 1,400,550 - - - - - - - - - - - - 3,156,037 3,130,968 791,505 781,618 439,453 434,232 877,521 868,464 546,782 542,790 526,513 521,078 525,696 521,078 761,903 756,390 528,433 521,078 484,885 479,941 395,872 390,809 393,959 390,513 393,905 390,513 1,121,474 1,120,440 25,069 (Note 2) 9,887 (Note 2) 5,221 (Note 2) 9,057 (Note 2) 3,992 (Note 2) 5,435 (Note 2) 4,618 (Note 2) 5,513 (Note 2) 7,355 (Note 2) 4,944 (Note 2) 5,063 (Note 2) 3,446 (Note 2) 3,392 (Note 2) 1,034 (Note 2) - - - - - - - - - - - - - - - - - - - - - - - - - - (628) (Note 1) (2,798) (Note 1) - - - - - - - - - - - - - - - - - - - - - - - - - - - 277,312 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. (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:310) Table 5 Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2021) If the counter-party is a related party, disclose the previous transfer information Transaction amount Status of payment Counter- party 415,480 Paid Natural person Relationship with the Company Non-related party Owner Not applicable Relationship with the Company Not applicable Date of transfer Not applicable Amount Not applicable (In Thousands of New Taiwan Dollars) References for determining price Appraisal and price negotiation Purpose of acquisition and current condition Operational use Others None Name of company Arcadyan Name of property Land located at Guangfu Road, Hsinchu City Transaction date March 17, 2021 (Note 1) Note 1(cid:506) In response to business operation, the Group authorized the chairman to purchase land within $500,000 by a resolution of the Board of Directors on March 17, 2021. In addition, the Group has signed an agreement with non-related parties on April 7, 2021 to purchase land. Table 6 Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2021) (In Thousands of New Taiwan Dollars) Name of company CDE Type of property Right-of-use assets(cid:28860)land and building Transaction date May 7, 2021 (Note 1) Acquisition date 2011~2016 Book value 1,446,029 Transaction amount 4,147,946 (CNY 956,012 thousand) Status of payment The payment has been received. Gain (losses) on disposal 1,961,419 Relationship with the company Non-related party Purpose of disposal Activating the assets Counter- party Kunshan XinCheng Construction and Development Co., Ltd. References for determine price Appraisal and price negotiation Note 1: The board of directors resolved to activate assets on May 7, 2021, the Group signed an agreement with a non-related party regarding the disposal of property Others None (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:311) Table 7 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, 2021) Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Percentage of total purchases/ (sales) Amount (749,825) (0.1)% Purchase/ (Sale) Sale Payment terms 120 days Unit price Similar to non- related parties Payment Terms There is no significant difference Company Name The Company Counter party UCGI CBN CEP Nature of relationship Subsidiaries wholly owned by the Company The Company's subsidiaries 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 Sale (803,662) (0.1)% Net 90 days from sale Purchase 218,938 - 120 days Purchase 149,835,609 13.1% 120 days Purchase 178,478,231 15.6% 120 days Purchase 28,688,394 2.5% 120 days Purchase 42,665,925 3.7% 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 Markup based on BCI and its subsidiaries' cost Purchase 17,101,460 1.5% Net 60 days from purchase Markup based on Etrade and its subsidiaries' cost Kinpo Electronic, Inc. Compal Electronic, Inc. With the same chairman Parent company Just and its subsidiaries Purchase 527,883 - Sale (179,037,498) (99.9)% 35 days from the 1st of the following month 120 days Similar to non- related parties Similar to non- related parties CIH and its subsidiaries HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company Sale (102,464) (0.1)% 120 days Purchase 206,180 0.1% 120 days CIH and its subsidiaries Compal Electronic, Inc. Parent company Sale (150,179,442) (93.5)% 120 days CEA CEB With the same ultimate parent company With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company Sale (428,856) (0.3)% 120 days Sale (390,795) (0.2)% 120 days Sale (3,491,406) (2.2)% 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 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 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 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 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 Percentage of total notes/accounts receivable (payable) Note Ending Balance 220,379 0.1% (Note 2) 540,542 0.2% (Note 2) - - (Note 2) (62,366,178) (29.6)% (Note 2) (4,188,862) (2.0)% (Note 2) (3,086,146) (1.5)% (Note 2) (16,612,130) (7.9)% (Note 2) (2,631,399) (1.2)% (Note 2) (527,418) (0.2)% 4,188,862 99.9% (Note 2) - - (Note 2) (57,375) (0.1)% (Note 2) 62,366,178 96.5% (Note 2) 207,124 0.2% (Note 2) 261,497 0.2% (Note 2) 1,580,332 1.1% (Note 2) (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:312) Table 7 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, 2021) 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 HSI and its subsidiaries With the same ultimate parent company Purchase/ (Sale) Sale Amount (5,042,538) Percentage of total purchases/ (sales) (3.1)% Payment terms 120 days Unit price Similar to non- related parties Henghao HSI and its subsidiaries Just and its subsidiaries CPM With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company An associate Purchase 245,113 0.2% 120 days Purchase 712,378 0.5% 120 days Purchase 102,536 0.1% 120 days Purchase 4,602,669 Changbao An associate Purchase 1,109,808 Acbel and its subsidiaries The Chairman of the Board is the first degree of kinship of the Chairman of the Company Purchase 1,200,858 3.1% 0.7% 0.8% 120 days 120 days 120 days Parent company Purchase 803,108 30.0% Net 90 days from delivery - Parent company Sale (42,863,233) (88.6)% 120 days Sale (135,499) (5.6)% 120 days Percentage of total notes/accounts receivable (payable) Note Ending Balance 2,304,731 1.6% (Note 2) (61,174) (0.1)% (Note 2) (170,879) (0.1)% (Note 2) - - (Note 2) (1,382,777) (1.1)% (383,101) (0.3)% (552,945) (0.4)% (540,542) (43.0)% (Note 2) 16,612,130 94.0% (Note 2) 1,993,166 2.7% (Note 1(cid:739)2) Payment Terms 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 There is no significant difference There is no significant difference There is no significant difference Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding 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 Markup based on BCI and its subsidiaries' cost According to markup pricing CBN BCI and its subsidiaries Compal Electronic, Inc. Compal Electronic, Inc. HSI and its subsidiaries CEB CEA CIH and its subsidiaries CPM Acbel and its subsidiaries CEB CEA CIH and its subsidiaries BCI and its subsidiaries CEA Cal-Comp CEA CEB CIH and its subsidiaries BCI and its subsidiaries CEB Etrade and its subsidiaries Compal Electronic, Inc. With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company An associate The Chairman of the Board is the first degree of kinship of the Chairman of the 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 The same chairman of the 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 Parent company Sale (590,887) (1.2)% 120 days According to markup pricing There is no significant difference 1,269,252 1.4% (Note 2) Sale (783,053) (1.6)% 120 days According to markup pricing There is no significant difference 507,450 0.6% (Note 2) Purchase 3,488,526 (7.3)% 120 days Purchase 475,357 (1.0)% 120 days Purchase 608,220 1.3% 120 days According to markup pricing Similar to non- related parties Similar to non- related parties Adjustments will be made based on demand for funding There is no significant difference There is no significant difference (1,580,332) 1.7% (Note 2) (178,927) 0.2% (284,359) (0.3)% Sale (108,252) (1.9)% 45 days Similar to non- related parties There is no significant difference 1,537 (0.2)% (Note 2) Purchase 392,098 6.6% 120 days Similar to non- related parties There is no significant difference (261,497) (15.4)% (Note 2) Purchase 590,436 9.9% 120 days Similar to non- related parties There is no significant difference (1,269,252) (31.9)% (Note 2) Purchase 473,416 8.0% 45 days Similar to non- related parties There is no significant difference (376,304) (22.1)% (Note 2) Purchase 1,468,381 24.7% 120 days Similar to non- related parties There is no significant difference (31,855) (1.9)% (Note 2) Sale (473,416) (9.7)% 45 days Similar to non- related parties There is no significant difference 376,304 (17.4)% (Note 2) Purchase 429,390 32.4% 120 days Similar to non- related parties There is no significant difference (207,124) (16.0)% (Note 2) Purchase 783,338 59.2% 120 days Similar to non- related parties There is no significant difference (507,450) (39.3)% (Note 2) Purchase 108,252 1.8% 45 days Similar to non- related parties There is no significant difference (1,537) (0.1)% (Note 2) Sale (17,096,471) (99.5)% Net 60 days from delivery According to markup pricing HSI and its subsidiaries With the same ultimate parent company Purchase 1,639,840 14.2% Net 60 days from purchase Similar to non- related parties Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding 2,631,399 98.2% (Note 2) (246,217) (10.0)% (Note 2) (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:313) Table 7 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, 2021) Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name Forever and its subsidiaries Counter party HSI and its subsidiaries UCGI Avalue and its subsidiaries Nature of relationship With the same ultimate parent company An affiliate of the ultimate parent company Purchase/ (Sale) Sale Amount (242,089) Percentage of total purchases/ (sales) Payment terms Unit price 100.0% Net 60 days from purchase Similar to non- related parties Percentage of total notes/accounts receivable (payable) Note Ending Balance 46,437 (100.0)% (Note 2) Payment Terms There is no significant difference Sale (166,677) 16.5% 45 days after the month ended Similar to non- related parties There is no significant difference 23,533 (11.7)% 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 (220,379) (94.1)% (Note 2) 61,174 1.7% (Note 2) - - (Note 2) 3,086,146 86.8% (Note 2) 57,375 0.8% (Note 2) 246,217 3.2% (Note 2) 170,879 2.3% (Note 2) (2,304,731) (13.0)% (Note 2) (1,993,166) (15.1)% (Note 1(cid:739) 2) 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 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 HengHao CEP Compal Electronic, Inc. CIH and its subsidiaries Compal Electronic, Inc. Parent company Purchase 757,372 92.3% 120 days With the same ultimate parent company Sale (245,484) (2.1)% 120 days Parent company Sale (220,757) (99.8)% 120 days HSI and its subsidiaries Compal Electronic, Inc. Parent company Sale (28,700,918) (84.9)% 120 days Just and its subsidiaries With the same ultimate parent company Etrade and its subsidiaries With the same ultimate parent company CIH and its subsidiaries With the same ultimate parent company CIH and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company Sale (207,079) (0.6)% 120 days Sale (1,639,069) (4.9)% Net 60 days from delivery Similar to non- related parties Sale (712,526) (2.1)% 120 days Purchase 4,867,677 16.2% 120 days Purchase 98,879 8.8% 120 days Similar to non- related parties Similar to non- related parties Similar to non- related parties With the same ultimate parent company The Chairman of the Board is the first degree of kinship of the Chairman of the Company ultimate parent company Arcadyan's subsidiary Forever and its subsidiaries Acbel and its subsidiaries Acradyan Germany Acradyan USA Acradyan AU CNC Acradyan Vietnam Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan CNC Acradyan Vietnam Acradyan Germany Acradyan USA - - - Sale (1,226,052) (3.0)% Net 150 days from delivery Arcadyan's subsidiary Sale (7,323,420) (20.0)% Net 120 days from delivery Arcadyan's subsidiary Sale (505,287) (1.0)% Net 60 days from the end of the month of delivery Arcadyan's subsidiary Purchase 12,985,802 26.0% Net 120 days from delivery According to markup Arcadyan's subsidiary Purchase 1,091,354 2.0% Net 180 days from the end of the month of delivery 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 Sale (12,985,802) (100.0)% Net 120 days from delivery According to markup Sale (1,091,354) (100.0)% Net 180 days from the end of the month of delivery Purchase 1,226,052 100.0% Net 150 days from delivery Purchase 7,323,420 100.0% Net 120 days from delivery pricing According to markup pricing - - Purchase 242,089 0.8% 60 days after the delivery Similar to non- related parties There is no significant difference (46,437) (0.3)% (Note 2) Purchase 168,952 0.6% 120 days Similar to non- related parties There is no significant difference (79,867) (0.5)% - - - - - - - - - 266,118 4.0% (Note 2) 2,020,989 29.0% (Note 2) 23,439 - % (Note 2) (2,028,930) (27.0)% (Note 1(cid:739)2) (Note 3) - % (Note 1(cid:739)2) 2,028,930 - % (Note 1(cid:739)2) (Note 3) - % (Note 1(cid:739)2) (266,118) (100.0)% (Note 2) (2,020,989) (100.0)% (Note 2) (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:314) Table 7 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, 2021) Company Name Acradyan AU Counter party Arcadyan Nature of relationship With the same ultimate parent company Purchase/ (Sale) Purchase Transaction details Percentage of total purchases/ (sales) Amount Payment terms 505,287 100.0% Net 60 days from the end of the month of delivery Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Unit price - Payment Terms - Percentage of total notes/accounts receivable (payable) Note Ending Balance (23,439) 100% (Note 2) 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, 2021 is 1,276,111 thousand dollars. (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:305) Table 8 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Overdue Amount - Action taken - (In Thousands of New Taiwan Dollars) Amounts received in subsequent period 297,600 (Note 1) Allowance for bad debts - Nature of relationship The Company's subsidiary The Company's subsidiary The same chairman of the Company Parent company Ending Balance 540,542 220,379 Turnover rate 1.93 3.04 1,697,598 - 4,188,862 33.34 Parent company 62,366,178 (December 31, 2021) Name of Company The Company Counter-party CBN The Company UCGI The Company Cal-Comp Just and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries CEA Etrade and its subsidiaries HSI and its subsidiaries HSI and its subsidiaries HSI and its subsidiaries Arcadyan Arcadyan Arcadyan CNC CBN Compal Electronic, Inc. Compal Electronic, Inc. CEA CEB BCI and its subsidiaries HSI and its subsidiaries Compal Electronic, Inc. HSI and its subsidiaries CEB CEA CEB Compal Electronic, Inc. Compal Electronic, Inc. Etrade 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 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 Parent company Parent company With the same ultimate parent company With the same ultimate parent CIH and its subsidiaries Arcadyan Germany Arcadyan's subsidiary Arcadyan USA Arcadyan's subsidiary Arcadyan Vietnam Arcadyan's subsidiary Arcadyan With the same Just and its subsidiaries With the same ultimate parent company Note 1:Balance as of Mrach 4, 2022. Note 2:Balance as of Mrach 1, 2022. Note 3:Balance as of Mrach 9, 2022. Note 4:Other receivables due to purchasing on behalf of related parties. Note 5:Accounts receivables due to processing raw material. Note 6:Other receivables due to processing and sales of raw material. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2.63 4.14 207,124 261,497 2.36 1,580,332 2.23 2,304,731 2.08 16,612,130 1,993,166 3.16 0.06 1,269,252 0.45 507,450 3.09 376,304 2.52 2,631,399 3,086,146 246,217 5.34 3.54 6.14 170,879 8.32 4.82 4.79 (Note 4) 4.78 266,118 2,020,989 1,276,111 (Note 4) 2,028,930 (Note 5) 182,739 (Note 6) - 12,530 Enhanced the collection 88,156 (Note 1) 1,697,598 (Note 1) - (Note 1) 62,366,178 (Note 1) 161,410 (Note 1) 134,253 (Note 1) - - (Note 1) (Note 1) 16,612,130 (Note 1) - (Note 1) 135,132 (Note 1) 448,708 (Note 1) 366,319 (Note 1) 1,843,015 (Note 1) 2,302,953 (Note 1) - - (Note 1) (Note 1) 94,823 (Note 2) 1,360,434 (Note 2) (Note 2) - 1,854,400 (Note 2) 175,468 (Note 3) - - - - - - - - - - - - - - - - - - (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:306) Table 9 Business relationships and significant intercompany transactions: (For the year ended December 31, 2021) Intercompany transactions (In Thousands of New Taiwan Dollars) No. (Note 1) Company name Counter party 0 The Company CBN Relationship (Note 2) 1 Accounts name Sales Revenue Amount 803,662 0 The Company UCGI 1 1 2 2 2 2 2 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 CEA CIH and its subsidiaries CEB CIH and its subsidiaries BCI and its subsidiaries CIH and its subsidiaries HSI and its subsidiaries BCI and its subsidiaries The Company Accounts Receivable Sales Revenue 540,542 749,825 Accounts Receivable Sales Revenue 220,379 179,037,498 Accounts Receivable Sale Revenue 4,188,862 102,464 Accounts Receivable Sales Revenue - 150,179,442 Accounts Receivable Sales Revenue 62,366,178 428,856 Accounts Receivable Sales Revenue 207,124 390,795 Accounts Receivable Sales Revenue 261,497 3,491,406 Accounts Receivable Sales Revenue 1,580,332 5,042,538 Accounts Receivable Sales Revenue 2,304,731 42,863,233 1 2 3 2 3 3 3 3 2 Terms There is no significant difference of price to non-related parties. The credit period is net 90 days. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) The price is based on BCI and its subsidiaries's operating cost. The credit period is net 120 days, and will be adjusted if necessary. Accounts Receivable 16,612,130 (cid:741) Percentage of the consolidated net revenue or total assets 0.1% 0.1% 0.1% - 14.5% 0.8% - - 12.2% 11.6% - - - - 0.3% 0.3% 0.4% 0.4% 3.5% 3.1% (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:307) Table 9 Business relationships and significant intercompany transactions: (For the year ended December 31, 2021) Intercompany transactions (In Thousands of New Taiwan Dollars) No. (Note 1) Company name Counter party 3 3 3 BCI and its subsidiaries HSI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries CEB CEA 4 CEB CEA 5 CEA CEB 6 7 Etrade and its subsidiaries The Company Forever and its subsidiaries HSI and its subsidiaries 8 HHT CIH and its subsidiaries 9 CEP The Company 10 HSI and its subsidiaries The Company 10 HSI and its subsidiaries Just and its subsidiaries 10 HSI and its subsidiaries Etrade and its subsidiaries Relationship (Note 2) 3 Accounts name Sales Revenue Amount 135,499 Accounts Receivable Sales Revenue 1,993,166 590,887 Accounts Receivable Sale Revenue 1,269,252 783,053 Accounts Receivable Sale Revenue 507,450 108,252 Accounts Receivable Sale Revenue 1,537 473,416 Accounts Receivable Sales Revenue 376,304 17,096,471 Accounts Receivable Sales Revenue 2,631,399 242,089 Accounts Receivable Sales Revenue 46,437 245,484 Accounts Receivable Sales Revenue 61,174 220,757 Accounts Receivable Sales Revenue - 28,700,918 Accounts Receivable Sales Revenue 3,086,146 207,079 Accounts Receivable Sales Revenue 57,375 1,639,069 3 3 3 3 2 3 2 2 2 3 3 Terms The price is based on the operating cost. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) The price is based on the operating cost. The credit period is net 120 days. (cid:741) The price is based on the operating cost. The credit period is net 120 days. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 45 days. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 45 days. (cid:741) The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 60 days after the delivery. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 60 days, and will be adjusted if necessary. Percentage of the consolidated net revenue or total assets - 0.4% - 0.2% - - - - - 0.1% 1.4% 0.5% - - - - - - 2.3% 0.6% - - 0.1% (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:308) Table 9 Business relationships and significant intercompany transactions: (For the year ended December 31, 2021) Intercompany transactions (In Thousands of New Taiwan Dollars) No. (Note 1) Company name Counter party Relationship (Note 2) 10 HSI and its subsidiaries CIH and its subsidiaries 11 Arcadyan Arcadyan Germany 11 Arcadyan Arcadyan USA 11 Arcadyan Arcadyan AU 11 Arcadyan Arcadyan Vietnam 12 CNC Arcadyan 13 Arcadyan Vietnam Arcadyan 3 3 3 3 3 3 3 Accounts name Accounts Receivable Sales Revenue Amount 246,217 712,526 Accounts Receivable Sales Revenue 170,879 1,226,052 Accounts Receivable Sales Revenue 266,118 7,323,420 Accounts Receivable Sales Revenue 2,020,989 505,287 Accounts Receivable Other Receivable 23,439 1,276,111 Processing Revenue 12,985,802 Accounts Receivable Processing Revenue 2,028,930 1,091,354 Terms (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 150 days from delivery. (cid:741) There is no significant difference of price to non-related parties. The credit period is net 120 days from delivery. (cid:741) 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. (cid:741) The credit period is net 180 days from the end of the month of delivery and depended on funding demand. The price is based on the operating cost. The credit period is net 120 days from delivery and depended on funding demand. (cid:741) The credit period is net 180 days from the end of the month of delivery and depended on funding demand. Percentage of the consolidated net revenue or total assets - 0.1% - 0.1% - 0.6% 0.4% - - 0.2% 1.1% 0.4% 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) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:309) Table 10 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) Investor Company Investee Company The Company Kinpo&Compal Group Assets Development Corporation Bizcom Just CIH Panpal Gempal Original Investment Amount December 31, 2021 525,000 December 31, 2020 - Ending Balance Percentage of Shares 52,500 Ownership Carrying Value 525,085 70% Shares 52,500 The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Percentage of Ownership Net income (losses) of investee Share of profits/losses of investee 1 120 85 Note (Note 2) 36,369 36,369 100 100% 404,559 100 100% (19,042) (15,326) (Note 2) 1,480,509 1,480,509 48,010 100% 9,577,912 48,010 100% 2,038,308 2,038,308 (Note 2) 1,787,680 1,787,680 53,001 100% 37,410,192 53,001 100% 3,196,352 3,196,352 (Note 2) Main Businesses and Products Location Taipei City Real estate development leasing and related management business Houston, USA Warranty services and marketing of LCD TVs and notebook PCs Investment British Virgin Islands British Virgin Islands Investment Taipei City Investment 5,171,837 5,171,837 500,000 100% 5,120,741 500,000 Taipei City Investment 900,036 900,036 90,000 100% 1,716,614 90,000 (Note 1) Kinpo Group management Taipei City Consultation, training services, etc. 3,000 3,000 300 38% 4,776 300 (Note 1) 100% 100% 38% 19,461 (31,176) (Note 2) 145,081 115,690 (Note 2) 288 117 Tainan City Manufacturing of electric appliance and audiovisual electric products Management&Consultant, rental and leasing business and wholesale and retail of medical equipments Taipei City 60,000 60,000 6,000 100% 102,074 6,000 100% 21,471 18,593 (Note 2) 200,000 200,000 20,000 100% 101,881 20,000 100% (21,226) (23,402) (Note 2) 42,000 42,000 2,772 42% - 2,772 42% 34 34 1 100% 3,262,334 6,000 6,000 600 100% 3,120 1 600 Allied Circuit Taoyuan City Production and sales of PCB 395,388 395,388 10,158 20% 398,995 10,158 - 1,260 - - - 126 90,000 90,000 100,000 52% 57,303 100,000 - - - - (Note 2) 382 347 (Note 2) 390,431 79,707 - - (31,249) (16,261) (Note 2) 100% 100% 20% 23% 52% 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 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 County Taipei City 489,450 489,450 98 49% 711,499 Investment 197,463 197,463 6,427 100% 767,803 35,000 - 3,500 149,547 149,547 3,739 35% 33% 33,971 71,758 R&D of MEMS microphone related products Manufacturing, processing, and selling resistor chips, networking chips, diodes, multilayer ceramic capacitors, semiconductor devices, and selling electronic products 98 6,427 3,500 3,739 49% 284,726 139,516 100% 1,706 1,706 (Note 2) 35% 33% (2,940) (1,029) (Note 2) 41,617 13,830 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% 1,136,788 359,218 252,821 100,000 29,500 21,756 100% 100% 53% 89,224 39,395 41,445 89,224 39,395 22,068 (Note 2) (Note 2) (Note 2) 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% 125,347 3,000 100% 4,074 4,074 (Note 2) 1,325,132 1,325,132 41,305 19% 2,493,682 41,305 20% 1,787,544 351,746 (Note 2) Ripal Unicore Lead-Honor Optronics. Co., Ltd. (“Lead-Honor”) CEH Shennona Taiwan Maxima Ventures I, Inc. (“Maxima”) Aco Smartcare Lipo Holding Co., Ltd.(“Lipo”) CPE Starmems Crownpo Technology Inc. (“Crownpo”) Hong Ji Hong Jin Mactech Auscom Arcadyan FGH Shennona HSI CEP British Virgin Islands Delaware, USA British Virgin Islands Poland Hippo Screen Neurotech Co., Ltd. Taipei City Infinno Technology Corporation (“Infinno”) Hsinchu County HengHao Taipei City BCI CBN British Virgin Islands Hsinchu County Investment 2,754,741 2,754,741 89,755 100% 4,752,330 89,755 Medical care IOT business 32,665 32,665 2,600 100% 1,098 2,600 100% 100% (62,830) (62,830) (Note 2) (92) (92) (Note 2) Investment 1,346,814 1,346,814 42,700 54% 57,547 42,700 54% (856,715) (300,169) (Note 2) Maintenance and warranty services of notebook PCs Management & Consultant, 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 Manufacturing of PCs, computer periphery devices, and electronic components Investment R&D and sales of cable modem, digital setup box, and other communication products 90,156 90,156 136 100% (3,097) 112,000 42,000 9,100 91% 58,858 136 9,100 100% (20,160) (18,034) (Note 2) 91% (25,053) (22,724) (Note 2) 127,026 109,837 4,648 28% 37,824 5,650 28% 28,574 7,873 5,729,757 5,529,757 20,015 100% (484,153) 20,015 100% (425,641) (425,641) (Note 2) 2,636,051 2,636,051 90,820 100% 7,179,197 90,820 100% 908,947 908,947 (Note 2) 284,827 284,827 29,060 43% 682,558 29,060 43% 32,744 14,204 (Note 2) (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:310) Table 10 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) Investor Company Investee Company The Company Rayonnant CRH Acendant Private Equity Investment Ltd. (“APE”) Etrade Webtek Forever UCGI Palcom Avalue CORE GLB CGSP ARCE Location Taipei City British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Taipei City Taipei City New Taipei City British Virgin Islands New Taipei City Poland Taipei City Raypal Taipei City Original Investment Amount December 31, 2021 295,000 December 31, 2020 295,000 Ending Balance Percentage of Shares 29,500 Ownership Carrying Value 150,785 100% Shares 29,500 The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Percentage of Ownership Net income (losses) of investee Share of profits/losses of investee 100% 35,093 29,295 Note (Note 2) 377,328 377,328 12,500 100% 228,858 12,500 100% 43,721 43,721 (Note 2) 943,922 943,922 31,253 1,532,029 1,532,029 46,900 35% 65% 1,305,068 31,253 (184,795) 46,900 3,340 1,575 3,340 1,575 100 50 100% 679,564 100% 1,304,552 100 50 489,998 199,999 10,000 100% (37,303) 10,000 100,000 547,595 100,000 547,595 10,000 14,924 100% 21% 113,123 626,851 10,000 14,924 35% 65% 100% 100% 100% 100% 21% 603,543 209,561 632,364 516,481 (Note 2) 116,378 116,378 (Note 2) 12,658 12,658 (Note 2) 53,840 53,926 (Note 2) 4,426 196,505 3,976 43,341 (Note 2) Main Businesses and Products Manufacturing and sales of PCs, computer periphery devices, and electronic components Investment Investment Investment Investment Investment Manufacturing and retail sale of computers and electronic components Selling of mobile phones Manufacturing, processing, and import and export business of industrial motherboards Investment 4,318,860 4,318,860 147,000 100% 6,580,283 147,000 100% (569,898) (569,898) (Note 2) 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 246,860 246,860 15,000 50% 330,604 15,000 89,669 37 - 100% 86,855 - 50% 100% 24,917 12,585 (Note 2) (1,700) (1,741) (Note 2) 60,000 60,000 20,000 33% 44,309 20,000 33% (46,608) (15,543) 155,076 155,076 3,446 30% 144,270 3,446 30% (22,602) (6,781) Panpal Arcadyan Hsinchu City Telecommunication equipment 279,202 279,202 8,192 4% 539,351 8,192 4% 1,787,544 __________ 88,293,659 and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing Allied Circuit Taoyuan City Production and selling of PCB 148,263 148,263 2,927 6% 114,974 2,927 6% 390,431 boards Gempal Others Arcadyan Hsinchu City Telecommunication equipment 306,655 306,655 9,279 4% 75,937 635,925 9,279 4% 1,787,544 and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing Allied Circuit Taoyuan City Production and selling of PCB 53,645 53,645 3,220 6% 126,471 3,220 6% 390,431 boards Hong Ji Others Arcadyan Hsinchu City Telecommunication equipment 306,655 306,655 9,279 4% 175 635,925 9,279 4% 1,787,544 and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing Allied Circuit Taoyuan City Production and selling of PCB 10,389 10,389 851 2% 28,554 851 2% 390,431 boards Hong Jin Arcadyan Hsinchu City Telecommunication equipment 131,942 131,942 4,609 2% 300,876 4,609 2% 1,787,544 and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing Just CDH (HK) Hong Kong Investment 1,724,395 1,724,395 62,298 100% 7,336,510 62,298 100% 2,033,586 CII CPI British Virgin Islands Investment British Virgin Islands Investment 255,902 255,902 9,245 100% 232,596 9,245 100% (469) 13,840 13,840 500 100% 831,308 500 100% 2,720 __________ 6,573,057 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 Investment gain(losses) recognized by Just Investment gain(losses) recognized by Just Investment gain(losses) recognized by Just (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:311) Table 10 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) Investor Company CII Smart Investee Company Main Businesses and Products Investment December 31, 2021 December 31, 2020 28 28 Location British Virgin Islands Original Investment Amount The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Ending Balance Percentage of Shares 1 Ownership Carrying Value 350 100% Shares Percentage of Ownership Net income (losses) of investee Share of profits/losses of investee 1 100% (3) AEI MEL MTL U.S.A Sales and maintenance of LCD TVs 27,680 27,680 1,000 100% 43,364 1,000 100% (491) U.S.A Investment 227,917 227,917 U.S.A Investment 28 28 - - 100% 188,891 100% 28 - - 100% 100% 25 - CIH CIH (HK) Hong Kong Investment 2,070,533 2,070,533 74,803 100% 36,259,088 74,803 100% 3,482,248 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 203,448 203,448 7,350 100% 98,697 7,350 100% 373 28 28 1 100% 430,130 1 100% 7,570 412,432 412,432 14,900 100% 412,895 14,900 100% - 141,168 141,168 5,100 51% 25,433 5,100 51% 187 1,854,560 1,854,560 67,000 100% 221,043 67,000 100% (869,094) Goal British Virgin Islands Investment 351,536 351,536 12,700 100% 304,117 12,700 100% 12,379 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 1,854,560 1,854,560 67,000 100% 221,043 67,000 100% (869,094) 351,536 351,536 12,700 100% 305,603 12,700 100% 12,379 BCI CMI British Virgin Islands Investment 2,237,098 2,237,098 80,820 100% 4,503,395 80,820 100% 578,634 PRI British Virgin Islands Investment 276,800 276,800 10,000 100% 2,675,803 10,000 100% 330,312 CORE BSH British Virgin Islands Investment 4,068,960 4,068,960 147,000 100% 6,580,283 147,000 100% (569,898) BSH Mithera Cayman Islands Investment 138,400 138,400 - 99% 129,444 - 99% (3,059) HSI CIN U.S.A Manufaturing 226,421 British Virgin Islands Investment 1,024,160 1,024,160 37,000 46% 467,614 37,000 46% (856,715) 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 55,360 55,360 - - 1 100% 190,352 1 100% (35,101) - - 100% - 100% 16,398 - - 100% - 100% 13,289 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) Investment gain(losses) recognized by CII 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 Investment gain(losses) recognized by HSI Investment gain(losses) recognized by HSI Investment gain(losses) recognized by IUE Investment gain(losses) recognized by Goal Investment gain(losses) recognized by BCI Investment gain(losses) recognized by BCI Investment gain(losses) recognized by CORE Investment gain(losses) recognized by BSH Investment gain(losses) recognized by BSH Investment gain(losses) recognized by BSH Investment gain(losses) recognized by Forever Investment gain(losses) recognized by Forever (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:312) Table 10 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) Investor Company Investee Company Webtek Etrade Main Businesses and Products Investment December 31, 2021 692,000 December 31, 2020 692,000 Location British Virgin Islands Original Investment Amount The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Ending Balance Percentage of Shares 25,000 Ownership Carrying Value (54,057) 35% Shares 25,000 Percentage of Ownership Net income (losses) of investee Share of profits/losses of investee 35% 632,364 Unicore Raycore Taipei City Animal medication retail and wholesale 40,692 25,500 588 100% 29,252 1,275 100% (1,629) Arcadyan Arcadyan Holding British Virgin Islands Investment 2,219,782 2,359,732 64,780 100% 2,323,746 64,780 100% 335,159 Arcadyan USA U.S.A Sales of wireless network products 23,055 23,055 1 100% 162,359 1 100% 83,123 Arcadyan Germany Germany Technology support and sales of wireless network products 1,125 1,125 0.5 100% 76,914 0.5 100% 8,474 Arcadyan Korea Korea Sales of wireless network products 2,879 2,879 20 100% 11,899 20 100% (436) Zhi-Bao Taipei City Investment 48,000 48,000 34,980 100% 415,117 34,980 100% 6,825 TTI Taipei City R&D and sales of household digital products 308,726 308,726 25,028 61% 371,174 25,028 61% (219,951) AcBel Telecom Taipei City Investment 23,000 23,000 4,494 51% 32,638 4,494 51% (121) Arcadyan UK UK Technical support of wireless network products 1,988 1,988 50 100% 4,206 Arcadyan AU Australia Sales of wireless network products 1,161 1,161 50 100% 41,705 50 50 100% 793 100% 3,213 Arcadyan RU Russia Sales of wireless network products 7,672 2,492 - 100% 5,856 - 100% (1,361) CBN Hsinchu County Sales of communication and electronic components 11,925 11,925 533 1% 12,642 533 1% 32,744 Arcadyan and Zhi-Bao Arcadyan Brasil Brazil Sales of wireless network products 81,593 81,593 968 100% (14,827) 968 100% (148) Arcadyan India India Sales of wireless network products 13,507 - 3,500 100% 11,389 3,500 100% (1,448) Arcadyan Holding Sinoprime British Virgin Islands Investment 804,104 527,304 29,050 100% 854,011 29,050 100% 138,028 Arch Holding British Virgin Islands Investment 304,784 304,784 35 100% 1,045,972 35 100% 186,372 TTI Quest Samoa Investment 33,216 33,216 1,200 100% (64,119) 1,200 100% (96,963) TTJC Japan Sales of household digital electronic products 9,626 9,626 0.7 100% 3,945 1 100% (1,325) Quest Exquisite Samoa Investment 32,386 32,386 1,170 100% (76,480) 1,170 100% (96,967) Sinoprime Arcadyan Vietnam Vietnam Manufacturing of wireless network products 802,720 525,920 - 100% 849,942 - 100% 138,028 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 19% 311,536 13,140 20% 32,744 257,454 257,454 8,651 41% 152,994 8,651 41% 76,203 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(cid:739)3) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) Investment gain(losses) recognized by Webtek Investment gain(losses) recognized by Unicore 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 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 Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Holding Investment gain(losses) recognized by Arcadyan Holding Investment gain(losses) recognized by TTI Investment gain(losses) recognized by TTI Investment gain(losses) recognized by Quest Investment gain(losses) recognized by Sinoprime Investment gain(losses) recognized by Zhi-Bao Investment gain(losses) recognized by Rayonnant (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:313) Table 10 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) Investor Company Investee Company Location Main Businesses and Products December 31, 2021 December 31, 2020 Rayonnant Forming Co., Ltd. Taoyuan City R&D and manufacturing of 27,300 27,300 electronic materials Original Investment Amount The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Ending Balance Percentage of Shares 1,820 Ownership Carrying Value - 21% Shares 1,820 Percentage of Ownership Net income (losses) of investee Share of profits/losses of investee 21% - CRH APH APH PEL British Virgin Islands Investment British Virgin Islands Investment 346,000 346,000 12,500 59% 228,858 12,500 59% 76,203 87,220 87,220 3,151 100% 39,230 3,151 100% 2,243 Rayonnant(HK) Hong Kong Investment 498,240 498,240 18,000 100% 335,238 18,000 100% 73,960 HHT HHA HHA HHB British Virgin Islands Investment British Virgin Islands Investment 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 1,429,235 1,429,235 46,882 100% (648,644) 46,882 100% (476,081) 1,297,695 1,297,695 46,882 100% (648,584) 46,882 100% (476,081) 6,842 6,842 20 100% 5,410 20 100% (271) 7,016 7,016 20 100% 6,022 20 100% (124) Starmems Hsinchu County R&D of MEMS microphone related products 10,000 - 1,000 10% 9,706 1,000 10% (2,940) FGH Wah Yuen Technology Holding Ltd. and its subsidiaries Mauritius Investment 2,484,432 2,484,432 95,862 37% 4,815,888 95,862 37% (62,723) GLB RBL New Taipei City Detectors and test strip - 6,500 - 0% - 1,275 100% (334) Mactech Taiwan Intelligent Robotics Company, LTD. Taipei City Manufacturing of equipment 43,200 43,200 2,160 17% 16,763 2,160 20% (17,477) 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 subsidiary was incorporated on March 25, 2021. Note 4: Liquidation was completed in July, 2021. Note (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) Investment gain(losses) recognized by Rayonnant Investment gain(losses) recognized by CRH Investment gain(losses) recognized by APH Investment gain(losses) recognized by APH Investment gain(losses) recognized by HHT Investment gain(losses) recognized by HHA Investment gain(losses) recognized by CBN Investment gain(losses) recognized by CBN Investment gain(losses) recognized by CBN Investment gain(losses) recognized by FGH Investment gain(losses) recognized by GLB Investment gain(losses) recognized by Mactech (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:306)(cid:314) Table 11 Information on investment in Mainland China: (December 31, 2021) (i) The names of investees in Mainland China, the main businesses and products, and other information: Accumulated outflow of investment from Taiwan as of January 1, 2021 1,024,160 Investment flows Outflow - Inflow - Accumulated outflow of investment from Taiwan as of December 31, 2021 1,024,160 Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 689,977 100% 689,977 Book value 2,621,488 Accumulated remittance of earnings in current period - (In Thousands of New Taiwan Dollars/ shares) Total amount of paid-in capital 1,024,160 Method of investment (Note 1) 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 CST Main businesses and products Manufacturing and sales of monitors Manufacturing and sales of notebook PCs, mobile phones, and Digital products Manufacturing of notebook PCs Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technology service Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self -produced products Manufacturing of notebook PCs Maintenance and warranty service of notebook PCs Production and processing chip resistors, 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(cid:414) 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 Manufacturing of notebook PCs Manufacturing and sales of LCD TVs Manufacturing of notebook PCs International trade and distribution of computers and electronic components - - 553,600 (Note 2) 553,600 332,160 (Note 2) 332,160 260,395 (Note 2) (Note 3) - - - 68,467 (Note 2) (Note 3) - 27,680 (Note 2) 27,680 8,680 (Note 2) (Note 3) 885,760 (Note 1) 368,974 - - - - - - - - - - 553,600 (22,978) 100% (22,978) 77,074 332,160 162,364 100% 162,364 4,795,313 555,435 100% 555,435 568,446 - - - - 51% - (43,020) - 27,680 27,737 100% 27,737 (158,184) - (19,533) 100% (19,533) (45,016) 368,974 256,101 43% 110,585 535,940 - - - 553,600 (Note 1) 40,690 - - 40,690 175,713 48% 83,640 542,279 - 332,160 (Note 2) 332,160 334,928 (Note 1) 334,928 664,320 (Note 2) 664,320 38,752 (Note 2) 38,752 - - - - - - - - 332,160 881,782 100% 881,782 8,676,307 334,928 61,872 100% 61,872 2,838,177 664,320 2,020,686 100% 2,020,686 22,323,113 38,752 1,442 100% 1,442 48,140 - - - - (Continued) (cid:33)(cid:33) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:307)(cid:305) Table 11 Information on investment in Mainland China: (December 31, 2021) (i) The names of investees in Mainland China, the main businesses and products, and other information: Accumulated outflow of investment from Taiwan as of January 1, 2021 141,168 Investment flows Outflow - Inflow - Accumulated outflow of investment from Taiwan as of December 31, 2021 Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 141,168 187 51% 96 Accumulated remittance of earnings in current period - Book value 57,161 (In Thousands of New Taiwan Dollars/ shares) Total amount of paid-in capital 276,800 Method of investment (Note 2) Name of investee Sheng Bao Precision Electronics (Taicang) Co., Ltd. CIJ CDE CIS CEC CMC CEQ Main businesses and products 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 Changbao Electronic Technology (Chongqing) Co., Ltd. Rayonnant (Taicang) CCI Nanjing CDCN CWCN Hanhelt Arcadyan SVA Arcadyan Production and marketing of magnesium alloy molding Manufacturing and sales of aluminum alloy and magnesium alloy products 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 R&D and manufacturing of electronic communication equipment R&D and sales of wireless network products 431,808 (Note 2) 431,808 415,200 (Note 2) (Note 3) 2,237,098 (Note 1) 2,237,098 2,214,400 (Note 2) (Note 3) - - - - 22,144 (Note 2) (Note 3) - 276,800 (Note 1) 276,800 - 1,660,800 (Note 2) 317,102 498,240 (Note 2) 346,000 747,360 (Note 1) 608,960 160,544 (Note 1) 160,544 1,356,320 (Note 1) 525,920 55,360 (Note 1) 55,360 - - - - - - - - - - - - - - - - - - - - 431,808 1,692,951 100% 1,692,951 2,235,113 - 1,692,304 100% 1,692,304 2,202,258 2,237,098 578,634 100% 578,634 4,503,395 - - 578,669 100% 578,669 4,475,331 (51) 100% (51) 22,152 276,800 330,312 100% 330,312 2,675,803 2,287,115 218,835 37% 80,137 5,443,063 317,102 (222,019) 37% (81,303) 726,504 346,000 73,960 100% 73,960 335,779 608,960 (40,952) 100% (40,952) (930,657) 160,544 1,737 100% 1,737 87,829 525,920 373,471 100% 373,471 816,200 55,360 (476) 100% (476) 2,380 - - - - - - - - - - - - - - 224,208 (Note 1) 509,866 - (Note 7) 138,400 (Note 9) 371,466 6,442 100% 6,442 28,344 (Continued) Compal Precision Module (Jiangsu) Co., Ltd. Manufacturing and selling of magnesium alloy injection molding 11,625,600 (Note 2) 2,287,115 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:307)(cid:306) Table 11 Information on investment in Mainland China: (December 31, 2021) (i) The names of investees in Mainland China, the main businesses and products, and other information: Accumulated outflow of investment from Taiwan as of January 1, 2021 304,784 (Note 8) 31,832 Total amount of paid-in capital 344,616 Method of investment (Note 1) 92,728 (Note 1(cid:739) 10) 1,107,200 (Note 1) 1,101,747 Name of investee CNC THAC HengHao HengHao Optoelectronic Technology (Kunshan) Co., Ltd. (“HengHao Kunshan”) Main businesses and 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 415,200 (Note 2) 179,893 - (Note 12) (ii) Limitation on investment in Mainland China: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of December 31, 2021 Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 304,784 186,372 100% 186,372 Accumulated remittance of earnings in current period - Book value 1,045,972 Investment flows Outflow - Inflow - - - 31,832 (96,967) 100% (96,967) (76,950) 1,101,747 (477,802) 100% (477,802) (775,079) 179,893 1,687 100% 1,687 126,264 - - - Names of Company The Company Arcadyan HengHao Accumulated Investment in Mainland China as of December 31, 2021 Investment Amounts Authorized by Investment Commission of Ministry of Economic Affairs 15,017,424 (US$542,537) 21,254,309 (US$767,858) (In Thousands of USD) Limitation on investment in Mainland China by Investment Commission of Ministry of Economic Affairs (Note 6) (Note 5) 708,082 1,297,417 (US$25,581) (US$46,872) 708,082 (US$25,581) 1,297,417 (US$46,872) 7,593,661 (Note 13) Note 1: Note 2: Note 3: Note 4: Note 5: Note 6: Note 7: Note 8: Note 9: Note 10: Note 11: Note 12: Indirectly investment in Mainland China through companies registered in the third region. Indirectly investment in Mainland China through an existing company registered in the third region. 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. The investment income (loss) was determined based on the financial report audited by the CPAs. 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. 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. Arcadyan paid US$18,420 thousand and acquired 100% shares of SVA Arcadyan from Accton Asia through Arcadyan Holding in 2010. Arcadyan paid US$8,561 thousand and acquired 100% shares of CNC from Just through Arcadyan Holding in 2007. SVA Arcadyan decreased its capital amounting to US$15,000 thousand to offset accumulated losses in March 2009, and returned its capital amounting to US$5,000 thousand on April 7, 2021. Arcadyan’s subsidiary, TTI, obtained the control over THAC with US$1,150 thousand on February 28, 2013 (the date of stock transferring). The amounts in New Taiwan Dollars were translated at the exchange rates at the balance sheet date or the average exchange rate. The Company had an accumulated investment amounting to US$7,350 thousand in the previous years. In the first half of 2014, HengHao paid the Company and LG US$3,184 thousand and US$3,315 thousand, respectively, for organization restructure, to obtain 100% ownership of Lucom. Note 13: The net equity of HengHao is negative at December 31, 2021. (iii) Significant transactions: For the year ended December 31, 2021, 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, 2021 and 2020 Address: Telephone: No.581 & 581-1, Ruiguang Rd., Neihu District, Taipei, Taiwan (02)8797-8588 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 9～29 29～30 30～64 64～71 71 71 71 72 72～73 73～74、 85～96 74、 97～102 74、 103～105 74 74 75～84 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, 2021 and 2020, the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2021 and 2020, 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, 2021 and 2020, and its financial performance and its cash flows for the years then ended December 31, 2021 and 2020, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Basis for Opinion We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and 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. 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. 3-1 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. 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. 3-2 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. 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 Kuan-Ying Kuo and Szu- Chuan Chien. KPMG Taipei, Taiwan (Republic of China) March 15, 2022 COMPAL ELECTRONICS, INC. Balance Sheets December 31, 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars) Assets Current assets: Cash and cash equivalents (note (6)(a)) 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 1100 1170 1180 1200 1310 1470 1550 1510 1517 1600 1755 1780 1840 1990 December 31, 2021 Amount % December 31, 2020 Amount % $ 8,279,979 1.9 7,666,366 2.0 273,369,033 61.1 218,292,177 56.1 2,695,685 3,265,442 0.6 0.7 11,127,880 2,846,497 2.9 0.7 60,958,417 13.6 55,792,348 14.3 345,547 0.1 657,805 0.2 348,914,103 78.0 296,383,073 76.2 88,992,850 19.9 83,957,849 21.6 222,303 - 158,769 - 3,508,097 2,484,963 1,347,259 431,936 1,118,220 328,483 0.8 0.6 0.3 0.1 0.2 0.1 2,881,121 2,604,893 1,290,125 436,548 1,102,654 0.8 0.7 0.3 0.1 0.3 136,119 - 98,434,111 22.0 92,568,078 23.8 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, 2021 Amount % December 31, 2020 Amount % $ 78,967,920 17.7 55,991,680 14.4 1,032,191 119,540,795 91,494,937 10,470,766 4,071,326 357,794 1,069,335 1,555,967 15,675,000 0.2 26.7 20.5 2.4 0.9 0.1 0.2 0.3 3.5 828,978 100,825,221 87,802,452 9,229,539 2,786,226 0.2 25.9 22.6 2.4 0.7 202,113 - 690,513 1,253,890 8,855,440 0.2 0.3 2.3 324,236,031 72.5 268,466,052 69.0 8,625,000 950,327 991,342 716,131 469,118 11,751,918 1.9 0.2 0.2 0.2 0.1 2.6 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 3.5 335,987,949 75.1 282,118,646 72.5 44,071,466 6,724,856 9.8 1.5 44,071,466 11.3 8,342,813 2.1 69,651,940 15.6 62,566,181 16.1 (8,206,750) (1.8) (7,266,708) (1.8) (881,247) (0.2) (881,247) (0.2) 111,360,265 24.9 106,832,505 27.5 Total assets $ 447,348,214 100.0 388,951,151 100.0 Total liabilities and equity $ 447,348,214 100.0 388,951,151 100.0 See accompanying notes to financial statements. COMPAL ELECTRONICS, INC. Statements of Comprehensive Income For the years ended December 31, 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share) 5 2021 2020 Amount % Amount % 4000 5000 5910 6100 6200 6300 7100 7020 7050 7190 7370 7900 7950 8300 8310 8311 8316 8330 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 8349 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)) $,171,613,858 100.0 991,279,270 100.0 97.7 ,143,709,503 2.3 27,904,355 - - 2.3 27,904,355 97.6 968,054,585 23,224,685 6,641 23,218,044 2.4 - 2.4 5,720,031 2,677,154 11,928,778 20,325,963 7,578,392 45,045 591,365 (692,890) 347,999 6,573,057 6,864,576 14,442,968 1,810,301 12,632,667 0.5 0.3 1.0 1.8 0.6 - 0.1 (0.1) - 0.6 0.6 1.2 0.1 1.1 3,705,829 2,262,855 11,169,634 17,138,318 6,079,726 126,882 599,312 (704,218) 358,670 3,966,905 4,347,551 10,427,277 1,065,384 9,361,893 0.4 0.2 1.1 1.7 0.6 - 0.1 (0.1) - 0.4 0.4 1.0 0.1 0.9 (46,186) 466,327 279,206 31,660 667,687 - - - - - (57,224) (116,466) (14,409) (2,818) (185,281) - - - - - Components of other comprehensive income (loss) that will be reclassified to profit or loss Exchange differences on translation of foreign financial statements (1,791,462) (0.1) (3,073,441) (0.3) 8360 8361 8380 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 8399 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 8300 8500 9750 9850 Other comprehensive income Total comprehensive income Earnings per share (note 6(q)) Basic earnings per share Diluted earnings per share See accompanying notes to financial statements. (63,362) - (19,629) - - (1,854,824) (1,187,137) $ 11,445,530 - (0.1) (0.1) 1.0 - (3,093,070) (3,278,351) 6,083,542 - (0.3) (0.3) 0.6 $ $ 2.90 2.86 2.15 2.12 6 COMPAL ELECTRONICS, INC. Statements of Changes in Equity For the years ended December 31, 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars) Retained earnings Balance at January 1, 2020 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 Balance at December 31, 2020 Profit for the year ended December 31, 2021 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 Ordinary shares $ 44,071,466 - - - - - - - - - - - - 44,071,466 - - - - - - - - - - - Capital surplus 9,159,259 - - - - - - (881,429) 1,735 2,228 60,021 999 - 8,342,813 - - - - - - (1,762,859) 61,825 2,132 80,027 918 Legal reserve 19,719,150 - - - 695,590 - - - - - - - - 20,414,740 - - - 924,672 - - - - - - - comprehensive income Balance at December 31, 2021 - $ 44,071,466 - 6,724,856 - 21,339,412 Special reserve 7,467,831 - - - - (3,366,088) - - - - - - - 4,101,743 - - - - 3,164,965 - - - - - - - 7,266,708 Unappropriated retained earnings 30,539,623 9,361,893 (48,219) 9,313,674 (695,590) 3,366,088 (4,407,147) (33,051) (9,055) - - - Total retained earnings 57,726,604 9,361,893 (48,219) 9,313,674 - - (4,407,147) - (33,051) (9,055) - - (24,844) 38,049,698 12,632,667 (40,067) 12,592,600 (24,844) 62,566,181 12,632,667 (40,067) 12,592,600 (924,672) (3,164,965) (5,288,576) (25,946) (49,878) - - - - - (5,288,576) - (25,946) (49,878) - - (142,441) 41,045,820 (142,441) 69,651,940 Exchange differences on translation of foreign financial statements (3,794,980) - (3,093,997) (3,093,997) - - - - - - - - - (6,888,977) - (1,855,728) (1,855,728) - - - - - - - - - (8,744,705) See accompanying notes to financial statements. Total other equity interest Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income Others Total other equity interest (306,763) - (137,062) (137,062) - - - - - - 33,051 8,978 24,844 (376,952) - 707,754 707,754 - - - - - - 14,709 49,878 142,441 537,830 - - - - - - - - - - - - - - - - - - - - (1,706) (4,103,449) - (3,230,132) (3,230,132) 927 927 - - - - 33,051 8,978 - - (779) 904 904 24,844 (7,266,708) - (1,147,070) (1,147,070) - - - - 14,709 49,878 - - 142,441 (8,206,750) 125 Treasury shares Total equity (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 12,632,667 (1,187,137) 11,445,530 - - - - - - - - - - - - - - (5,288,576) (1,762,859) 50,588 2,132 80,027 918 - (881,247) 111,360,265 COMPAL ELECTRONICS, INC. Statements of Cash Flows For the years ended December 31, 2021 and 2020 (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 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: 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 and liquidation 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 2021 2020 $ 14,442,968 10,427,277 1,351,021 (2,005) (8,535) 692,890 (45,045) (65,011) (6,573,057) - 762 (4,648,980) - (46,645,753) (456,496) (5,166,069) 367,618 (51,900,700) 22,408,059 1,208,152 302,077 203,213 378,822 (17,109) 24,483,214 (27,417,486) (32,066,466) (17,623,498) 43,724 720,292 (658,932) (451,858) (17,970,272) (224,151) - (1,226,820) - 13,725 (296,453) 382,796 (480,815) (224,104) (2,055,822) 22,976,240 49,654,536 (44,459,976) (479,608) (7,051,435) (50) 20,639,707 613,613 7,666,366 8,279,979 $ 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 COMPAL ELECTRONICS, INC. Notes to the Financial Statements For the years ended December 31, 2021 and 2020 (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 15, 2022. (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. which have already been adopted. The Company has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2021: ● 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” ● Amendments to IFRS 16 “Covid-19-Related Rent Concessions beyond June 30, 2021” (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, 2022, would not have a significant impact on its financial statements: ● 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” (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 to aim amendments liabilities with promote The consistency in applying the requirements by helping companies determine whether, in the statement of balance sheet, debt and uncertain other settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The include the amendments classification for debt a requirements company might settle by converting it into equity. clarifying an The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated 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 1 “Disclosure of Accounting Policies” ● Amendments to IAS 8 “Definition of Accounting Estimates” ● Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” (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) 2) Buildings: 35~50 years Building improvement: 2~12 years (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 21 3) 4) Research equipment: 3~5 years 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 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. (i) 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. 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 22 － 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. 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. (ii) 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 23 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) 4) 5) 6) 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. How the intangible asset will generate probable future economic benefits. 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 24 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) 2) Patents: the shorter of contract period and estimated useful lives Computer software: 1~6 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. 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 25 (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. 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 26 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. (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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 27 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. 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 28 (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: 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 29 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. 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 30 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. (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, 2021 December 31, 2020 $ 1,741 8,210,472 67,766 - $ 8,279,979 1,700 7,578,068 76,598 10,000 7,666,366 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 Stock unlisted in domestic markets Fund in foreign market Total December 31, 2021 December 31, 2020 $ $ 137,540 84,763 222,303 100,190 58,579 158,769 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 31 For the market risk related to the financial instruments, please refer to note (6)(u). As of December 31, 2021 and 2020, 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, 2021 December 31, 2020 $ 2,016,402 1,520,779 695,728 614,907 181,060 491,243 801,238 67,861 $ 3,508,097 2,881,121 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. The liquidation procedures of Horizon Ventures Fund I, LP, measured at fair value through other comprehensive income by the Company, had been completed in January 2021. Proceed from the liquidation amounted to $104, resulting in a cumulative loss of $142,441, which was reclassified from other comprehensive income to retained earnings. For the year ended December 31, 2020, the Company has sold all of its shareholdings, 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 $25,156, resulting in a cumulative loss of $24,844, which was reclassified from other comprehensive income to retained earnings. 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, 2021 and 2020, will be $175,405 and $144,056, 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, 2021 and 2020, 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 32 (d) Notes and accounts receivable Accounts receivable – measured at amortized cost Accounts receivable – fair value through other comprehensive income Less: allowance for uncollectible accounts December 31, 2021 $ 247,202,299 December 31, 2020 194,723,552 32,498,305 38,331,299 279,700,604 233,054,851 (3,632,789) (3,634,794) allowance for sales returns and discounts (3,097) - Notes and accounts receivable Notes and accounts receivable – related parties $ 276,064,718 229,420,057 $ 273,369,033 218,292,177 $ 2,695,685 11,127,880 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, 2021 Carrying amount of notes and accounts receivable $ 269,018,050 7,058,817 3,623,737 $ 279,700,604 Weighted- average ECL rate 0% 0.128% 100% Credit rating Level A Level B Level C Lifetime ECLs - 9,052 3,623,737 3,632,789 Credit- impaired No No Yes (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 33 December 31, 2020 Carrying amount of notes and accounts receivable $ 224,404,852 Weighted- average ECL rate 0% 5,026,262 3,623,737 0.22% 100% $ 233,054,851 Credit rating Level A Level B Level C Lifetime ECLs - 11,057 3,623,737 3,634,794 Credit- impaired No No Yes The aging analysis of notes and accounts receivable, was determined as follows: Overdue 1 to 180 days December 31, 2021 December 31, 2020 $ 264,733 1,364,958 The movement in the allowance for notes and accounts receivable was as follow: Balance at January 1 Impairment losses recognized (reversed) Balance at December 31 2021 2020 3,634,794 3,634,190 (2,005) 604 3,632,789 3,634,794 $ $ 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, 2021 and 2020, except for the amount used under the actual sales amount in accordance with certain agreements, the factoring amount granted by the banks were USD 1,600,000 thousands. 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, 2021 and 2020, accounts receivable factored were recovered. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 34 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, 2021 and 2020, accounts receivable factored were recovered. The details of the factored accounts receivable at the reporting date were as follows: Accounts receivable factored (gross) Purchaser Financial Institution $ 33,585,262 Accounts receivable factored (gross) Purchaser Financial Institution $ 42,187,597 December 31, 2021 Amount advanced Paid Unpaid Amount recognized in other receivables Amount Collateral derecognized Interest rate - 33,585,262 - - 33,585,262 0.47%~0.86% December 31, 2020 Amount advanced Paid Unpaid Amount recognized in other receivables Amount Collateral derecognized Interest rate - 42,187,597 - - 42,187,597 0.58%~0.93% As of December 31, 2021 and 2020, 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, 2021 December 31, 2020 $ $ 1,608,560 137,717 1,519,165 3,265,442 1,644,000 141,149 1,061,348 2,846,497 As of December 31, 2021 and 2020, none of other receivables were past due. (f) Inventories Finished goods Work in progress Raw materials December 31, 2021 $ $ 7,535,072 1,188,814 52,234,531 60,958,417 December 31, 2020 11,718,417 682,167 43,391,764 55,792,348 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 35 (i) During the years ended December 31, 2021 and 2020, inventory cost recognized as cost of sales amounted to $1,143,709,503 and $968,054,585, respectively. (ii) The loss due to the write-down of inventories to net realizable value amounted $1,795,897 and $35,077 for the years ended December 31, 2021 and 2020, respectively. (iii) As of December 31, 2021 and 2020, 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 December 31, 2021 84,948,309 $ December 31, 2020 79,719,654 3,345,350 2,877,977 88,293,659 82,597,631 Plus: Accounts receivable and other receivables-related parties 240,400 581,227 Credit balance of investment in equity method (other non- current liability) Less: unrealized profits or losses 468,948 (10,157) 789,148 (10,157) $ 88,992,850 83,957,849 (i) Subsidiaries Please refer to the consolidated financial statement for the year ended December 31, 2021. (ii) Associates 1) The fair value of the shares of listed company based on the closing price was as follow: Allied Circuit Co., Ltd. (“Allied Circuit”) Avalue Technology Inc. (“Avalue”) December 31, 2021 December 31, 2020 1,686,183 1,229,085 849,180 828,286 2,535,363 2,057,371 $ $ 2) The Company’s share of the net gain (loss) of associates was as follows: The Company’s share of the gain of associates 2021 $ 471,621 2020 258,376 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 36 3) The Company’ s financial information for investments accounted for using the equity method that are individually immaterial was as follows: December 31, 2021 December 31, 2020 Carrying amount of individually immaterial associates $ 3,345,350 2,877,977 2021 2020 The Company’s share of the net income (loss) of associates: Profit from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) $ $ 471,621 160,378 631,999 258,376 107,656 366,032 4) For the year ended December 31, 2020, the Company had sold part of its shares held in Avalue, with a consideration (net of costs of disposal) amounting to $8,306. The transactions have been completed and the price has been fully recovered, wherein the Company recognized gain of $3,914, which were accounted for as other gain and loss. (iii) As of December 31, 2021 and 2020, 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 38 thousand and 45 thousand new shares because of its employees’ exercised stock options in 2021 and 2020, respectively, resulting in a decrease in the ownership of the Company and its subsidiaries in CBN by 0.02% and 0.03%, respectively. 2) Issuance of new shares for cash of subsidiaries The Company purchased newly issued shares of HippoScreen amounting to $70,000 at a percentage different from its existing ownership percentage in January, 2021, resulting in an increase in the ownership of the Company in HippoScreen by 21%. 3) Issuance of subsidiaries’ restricted shares CBN issued 1,500 thousand restricted shares in 2021, resulting in a decrease of the ownership of the Company and its subsidiaries in CBN by 0.95%. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 37 4) Cancellation of subsidiaries’ restricted shares and conversion of convertible bonds Arcadyan canceled 53 and 126 restricted shares in the years ended December 31, 2021 and 2020. Whereas, Arcadyan issued 8,136 new shares due to the conversion of convertible bonds during 2021. These two events, respectively, resulted in a decrease of 1.30% and an increase of 0.01% the ownership of the Company and its subsidiaries in Arcadyan in the years ended December 31, 2021 and 2020. 5) 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 Retained earnings 2021 2020 61,825 (11,237) 50,588 $ 1,735 - 1,735 (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, 2021 and 2020, were as follows: Cost: Balance on January 1, 2021 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2021 Balance on January 1, 2020 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2020 Depreciation and impairments loss: Balance on January 1, 2021 Depreciation for the period Disposals and derecognitions Balance on December 31, 2021 Buildings and building improvement Other equipment Land Under construction and prepayment for purchase of equipment Total $ 1,047,797 2,518,500 2,725,560 9,556 6,301,413 - - - 37,898 205,451 53,104 296,453 - - (176,143) - (176,143) 35,184 (35,184) - $ $ 1,047,797 2,556,398 2,790,052 27,476 6,421,723 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 $ $ - - - - 1,554,775 2,141,745 127,579 265,151 - (152,490) 1,682,354 2,254,406 - - - - 3,696,520 392,730 (152,490) 3,936,760 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 38 Balance on January 1, 2020 Depreciation for the period Disposals and derecognitions Balance on December 31, 2020 Carrying amounts: Balance on December 31, 2021 Balance on January 1, 2020 Balance on December 31, 2020 Buildings and building improvement 1,443,734 Other equipment 1,944,023 Under construction and prepayment for purchase of equipment - 122,763 241,067 (11,722) (43,345) 1,554,775 2,141,745 - - - Land - - - - Total 3,387,757 363,830 (55,067) 3,696,520 1,047,797 1,047,797 1,047,797 874,044 946,541 963,725 535,646 438,055 583,815 27,476 2,484,963 188,245 2,620,638 9,556 2,604,893 $ $ $ $ $ As of December 31, 2021 and 2020, the Company did not provide property, plant and equipment as collateral for its borrowing. (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, 2021 Additions Deductions Balance on December 31, 2021 Balance on January 1, 2020 Additional Deductions Balance on December 31, 2020 Depreciation: Balance on January 1, 2021 Depreciation for the period Deductions Balance on December 31, 2021 Balance on January 1, 2020 Depreciation for the period Deductions Balance on December 31, 2020 $ $ $ $ $ $ $ $ 1,983,275 529,032 (248,416) 2,263,891 1,687,346 369,422 (73,493) 1,983,275 711,010 463,549 (247,017) 927,542 333,271 450,829 (73,090) 711,010 45,174 2,365 (19,165) 28,374 50,120 2,175 (7,121) 45,174 27,314 9,315 (19,165) 17,464 16,580 17,850 (7,116) 27,314 2,028,449 531,397 (267,581) 2,292,265 1,737,466 371,597 (80,614) 2,028,449 738,324 472,864 (266,182) 945,006 349,851 468,679 (80,206) 738,324 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 39 Carrying amount: Balance on December 31, 2021 Balance on January 1, 2020 Balance on December 31, 2020 (k) Short-term borrowings Buildings Vehicles Total $ 1,336,349 1,354,075 1,272,265 10,910 33,540 17,860 1,347,259 1,387,615 1,290,125 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, 2021 78,967,920 December 31, 2020 55,991,680 48,648,000 46,248,000 0.42%~0.78% 0.48%~1.00% $ $ For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(u). (l) Long-term borrowings The details of long-term borrowings were as follows: December 31, 2021 Currency TWD Range of annual interest rates 0.62%~0.98% Maturity year 2022~2024 Unsecured bank loans Less: current portion Total Unused credit line for long-term borrowings Unsecured bank loans December 31, 2020 Currency TWD Range of annual interest rates 0.66%~0.98% Maturity year 2021~2023 Unsecured bank loans USD 0.69%~0.92% 2021~2022 Less: current portion Total Unused credit line for long-term borrowings Amount 24,300,000 (15,675,000) 8,625,000 11,803,000 Amount 11,900,000 7,205,440 (8,855,440) 10,250,000 15,290,000 $ $ $ $ $ $ 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 (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, 2021 $ $ 357,794 991,342 December 31, 2020 202,113 1,096,415 Interest on lease liabilities Expenses relating to leases of low-value assets or short-term leases 2021 2020 16,915 17,077 9,221 5,843 $ $ The amounts recognized in the statement of cash flows for the Company was as follows: Total cash outflow for leases (i) Building leases 2021 2020 $ 505,744 494,013 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 3~5 years. The Company also leases some machinery and office equipment with contract terms of 1~5 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, 2021 (1,318,160) December 31, 2020 (1,286,459) 602,029 599,405 (716,131) (687,054) $ $ (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 41 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. 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 $604,481 (excluding the ending balance of interest receivable) as of December 31, 2021. 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 $ (1,286,459) 2021 Current service costs and interest Remeasurements of net benefit liabilities Benefit paid by the plan (10,148) (54,331) 32,778 2020 (1,270,206) (15,945) (77,143) 76,835 Defined benefit obligations on December 31 $ (1,318,160) (1,286,459) 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: 2021 2020 Fair value of plan assets on January 1 $ 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 $ 599,405 2,857 8,145 24,400 (32,778) 602,029 626,953 5,455 19,919 23,913 (76,835) 599,405 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 4) Expenses recognized in profit or loss The expenses recognized in profit or loss for the Company were as follows: 2021 2020 Current service cost Net interest on the net defined benefit liability (asset) Cost of sales Selling expenses Administrative expenses Research and development expenses $ $ $ $ 3,920 3,371 7,291 257 352 1,831 4,851 7,291 42 4,811 5,679 10,490 383 504 2,611 6,992 10,490 5) Actuarial assumptions The following were the Company’s principal actuarial assumptions at the reporting date: Discount rate Future salary increase rate December 31, 2021 0.80% December 31, 2020 0.50% 3.00% 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 $25,860. The weighted-average lifetime of the defined benefit plan is 9.0 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, 2021 Discount rate Future salary increasing rate December 31, 2020 Discount rate Future salary increasing rate Effects to the defined benefit obligation Increased 0.25% Decreased 0.25% (28,902) 29,212 (30,316) 30,583 29,922 (28,374) 31,422 (29,675) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 43 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 $391,223 and $364,251 for the years ended December 31, 2021 and 2020, 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, 2021 and 2020, was as follows: Current tax expense Recognized during the period $ 2,262,124 1,319,010 2021 2020 Undistributed earnings additional tax Tax credit of investment Deferred tax expense Recognition and reversal of temporary differences Income tax expense - 16,836 (525,167) (273,959) 1,736,957 1,061,887 73,344 73,344 3,497 3,497 $ 1,810,301 1,065,384 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 44 2) The amount of income tax recognized in other comprehensive income for the years ended December 31, 2021 and 2020, was as follows: Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit obligation Unrealized gains (losses) on equity instruments at fair value through other comprehensive income 2021 2020 $ $ (9,237) (11,445) 40,897 31,660 8,627 (2,818) 3) The income tax expense that was reconciled between the actual income tax expense and profit before tax for the years ended December 31, 2021 and 2020, 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 2021 14,442,968 2020 10,427,277 2,888,594 2,085,455 $ $ - 16,836 (84,031) (65,440) (525,167) (915,638) 511,983 (169,069) (60,000) (273,959) (873,487) 339,608 Income tax expense $ 1,810,301 1,065,384 (ii) Deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2021 and 2020 were as follows: Exchange differences on translation Refund liabilities Contract liabilities Unrealized exchange losses, net Others Total Deferred tax assets: Balance on January 1, 2021 $ 9,823 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021 $ Balance on January 1, 2020 $ Recognized in profit or loss Recognized in other comprehensive income - - - - 9,823 9,823 134,880 60,416 - 195,296 120,603 14,277 49,536 40,462 588,025 (193,189) 320,390 98,640 1,102,654 6,329 - 89,998 59,429 (9,893) - 394,836 670,265 (82,240) 9,237 428,267 306,688 2,257 9,237 1,118,220 1,166,808 (75,599) Balance on December 31, 2020 $ 9,823 134,880 49,536 588,025 - - - 11,445 320,390 11,445 1,102,654 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 45 Deferred tax liabilities: Balance on January 1, 2021 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021 Balance on January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2020 Unrealized exchange gains, net Others Total $ $ $ $ (424,990) (404,767) (829,757) (79,673) - - (504,663) (497,092) 72,102 - (40,897) (445,664) (396,140) - (8,627) (79,673) (40,897) (950,327) (893,232) 72,102 (8,627) (424,990) (404,767) (829,757) (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, 2021 December 31, 2020 $ 125,258 388,424 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, 2021 and 2020, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $2,335,023 and $1,856,500, respectively. As of December 31, 2021 and 2020, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $58,601,692 and $54,205,119, respectively. (v) Examination and approval The Company’s tax returns for the year through 2019 were assessed by the tax authorities. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 46 (p) Capital and other equities (i) Ordinary shares As of December 31, 2021 and 2020, 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, 2021 December 31, 2020 $ 3,660,119 2,621,933 5,422,060 2,541,906 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 36,766 122,675 36,766 60,850 for using equity method 283,363 281,231 $ 6,724,856 8,342,813 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 Board of Directors’ meeting respectively held on March 26, 2021 and March 30, 2020, approved to distribute cash of $1,762,859 and $881,429 (representing 0.4 and 0.2 New Taiwan dollars per share), by using capital surplus. The Company’s Board of Directors’ meeting held on March 15, 2022, approved to distribute cash of $1,762,859 (representing 0.4 New Taiwan dollars per share), by using capital surplus. The related information can be accessed through the Market Observation Post System website. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 47 (iii) Retained earnings 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. 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 48 2) Special reverse A portion of current period earnings and undistributed prior period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should equal to the current-period total net reduction of other shareholders’ equity. For the year 2019 earnings distribution in 2020, the amount to be reclassified to special reserve shall be a portion of current-period earnings and undistributed prior- period earnings. As for the year 2020 earnings distribution in 2021, the amount to be reclassified to special reserve shall be a portion of current-period earnings plus other line items in the retained earnings movements and undistributed prior-period earnings. 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 2020 and 2019 were approved in the meeting of the Board of Directors held on March 26, 2021 and March 30, 2020, respectively. The relevant information was as follows: 2020 2019 Amount per share Total amount Amount per share Total amount Cash dividends distributed to common shareholders $ 1.2 5,288,576 1.0 4,407,147 Distribution for the earnings of 2021 was approved in the meeting of the Board of Directors held on March 15, 2022. The relevant information was as follows: 2021 Amount per share Total amount Cash dividends distributed to common shareholders from the unappropriated earnings $ 1.6 7,051,435 The related information of the earnings distribution for the year ended December 31, 2021, 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, 2021 and 2020. As of December 31, 2021, 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 24.20 and 20.70 New Taiwan dollars per share as of December 31, 2021 and 2020, respectively. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 49 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, 2021 $ (6,888,977) (376,952) (779) (7,266,708) The Company Subsidiaries Associates Balance on December 31, 2021 Balance on January 1, 2020 $ $ The Company Subsidiaries Associates (1,791,462) (38,894) (25,372) (8,744,705) 567,871 160,972 185,939 537,830 (3,794,980) (306,763) (3,073,441) (100,249) (182,054) 161,498 75,529 (45,469) - - - - 904 (1,223,591) 122,982 160,567 125 (8,206,750) (1,706) (4,103,449) (3,173,690) 927 (105,598) 116,029 Balance on December 31, 2020 $ (6,888,977) (376,952) (779) (7,266,708) (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 $ 12,632,667 9,361,893 Weighted-average number of outstanding ordinary shares (in thousands) 4,357,130 4,357,130 2021 2020 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 50 Diluted earnings per share: Profit attributable to ordinary shareholders of the Company (after adjustment of potential diluted ordinary shares) $ 12,632,667 9,361,893 2021 2020 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) 4,357,130 4,357,130 65,517 57,482 Weighted-average number of ordinary shares (after adjustment of potential diluted ordinary shares) (in thousands) 4,422,647 4,414,612 (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 2021 IT Product Segment 475,525,614 $ 2020 IT Product Segment 438,228,844 152,490,382 120,250,527 86,279,648 83,664,387 49,815,031 45,763,811 407,503,183 303,371,701 $ 1,171,613,858 991,279,270 $ 1,170,311,198 990,202,030 1,302,660 1,077,240 $ 1,171,613,858 991,279,270 Notes and accounts receivable (including related parties) Less: allowance for impairment Less: credit balances of investments in equity method Total Contract liabilities December 31, 2021 December 31, 2020 January 1, 2020 $ 279,700,604 (3,632,789) 233,054,851 (3,634,794) 181,654,052 (3,634,190) (3,097) $ 276,064,718 1,032,191 $ - 229,420,057 828,978 - 178,019,862 877,822 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 51 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, 2021 and 2020 that was included in the balances of contract liability at the beginning of the period were $828,978 and $877,822, 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. The Company accrued and recognized its employee compensation of $1,350,062 and $974,694, respectively, and directors’ compensation of $71,370 and $51,541 for the years ended December 31, 2021 and 2020, 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 2021 and 2020. There is no differences between the amount estimated and recognized in the financial statements in 2020. The related information can be accessed through the Market observation Post System website. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 52 (t) Non-operating income and expenses (i) Interest income The interest income for the years ended December 31, 2021 and 2020, were as follows: Interest income from bank deposits Interest income from financial assets measured at amortized cost 2021 18,611 26,434 45,045 $ $ 2020 80,823 46,059 126,882 (ii) Other income The other income for the years ended December 31, 2021 and 2020, were as follows: Dividend revenue Sale of expensed assets Other revenue (iii) Other gains and losses 2021 2020 $ $ 65,011 15,225 267,763 347,999 56,780 85,268 216,622 358,670 The other gains and losses for the years ended December 31, 2021 and 2020, 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 2021 - 2020 3,914 14,212 577,882 (729) 591,365 (9,013) 604,339 72 599,312 $ $ (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 53 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, 2021 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables Lease liabilities–current and non-current December 31, 2020 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables Lease liabilities–current and non-current $ 103,267,920 211,035,732 10,470,766 (103,267,920) (211,035,732) (10,470,766) (94,642,920) (211,035,732) (10,470,766) (6,125,000) (2,500,000) - - - - 1,349,136 $ 326,123,554 (1,389,967) (326,164,385) (372,578) (316,521,996) (337,572) (6,462,572) (679,817) (3,179,817) $ 75,097,120 188,627,673 9,229,539 (75,097,120) (188,627,673) (9,229,539) (64,847,120) (188,627,673) (9,229,539) (5,125,000) (5,125,000) - - - - 1,298,528 $ 274,252,860 (1,347,574) (274,301,906) (217,649) (262,921,981) (348,353) (5,473,353) (781,572) (5,906,572) 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 54 (iii) Currency risk 1) Exposure to foreign currency risk The Company’s significant exposure to foreign currency risk was as follows: December 31, 2021 Exchange rate Foreign currency TWD December 31, 2020 Exchange rate Foreign currency TWD $10,410,005 27.68 288,148,938 8,521,135 28.48 242,681,925 842,184 0.8261 695,728 516,989 0.9502 491,243 10,373,943 27.68 287,150,742 9,056,682 28.48 257,934,303 Financial assets Monetary items USD to TWD Non-monetary items THB to TWD Financial liabilities Monetary items USD to TWD 2) Sensitivity analysis 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, 2021 and 2020, 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, 2021 December 31, 2020 $ 49,910 (762,619) (49,910) 762,619 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, 2021 and 2020, the foreign exchange gains, including both realized and unrealized, amounted to $577,882 and $604,339, 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 55 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, 2021 and 2020, 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 2021 2020 $ (18,994) 18,994 (5,566) 5,566 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, 2021 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 $ 222,303 - Stocks listed on domestic markets 2,016,402 2,016,402 Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal 695,728 614,907 181,060 32,498,305 36,006,402 695,728 - - - - - - - - 222,303 222,303 - - 614,907 181,060 2,016,402 695,728 614,907 181,060 32,498,305 - 32,498,305 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 56 December 31, 2021 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 Refundable deposits -current and non- current 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 8,279,979 240,870,728 2,695,685 3,265,442 383,843 255,495,677 $ 291,724,382 $ 78,967,920 119,540,795 91,494,937 10,470,766 1,349,136 15,675,000 8,625,000 170 $ 326,123,724 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 $ 158,769 - Stocks listed on domestic markets 1,520,779 1,520,779 Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal 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 Refundable 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 58 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, 2021 and 2020. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 59 5) Changes in level 3 The change in level 3 at fair value in the years ended December 31, 2021 and 2020, were as follow: Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Total 158,769 869,099 1,027,868 $ $ $ Balance on January 1, 2021 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Proceeds of capital reduction of investment Balance on December 31, 2021 Balance on January 1, 2020 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment 8,535 54,999 222,303 71,097 10,997 76,675 - - - - - Balance on December 31, 2020 $ 158,769 - - (233,782) 169,152 (8,502) 795,967 956,718 (65,813) 7,578 (25,156) (4,228) 869,099 8,535 (233,782) 224,151 (8,502) 1,018,270 1,027,815 10,997 (65,813) 84,253 (25,156) (4,228) 1,027,868 For the years ended December 31, 2021 and 2020, 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”) In other comprehensive income (as “unrealized gains and losses from equity instruments at fair value through other comprehensive income”) $ $ 2021 2020 8,535 10,997 (233,651) (46,709) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 60 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) Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Net asset value method Net asset value method Significant unobservable inputs Price-Book ratio multiples (3.56~11.62 and 1.72~7.9, respectively, on December 31, 2021 and 2020) Lack-of-Marketability discount rate (40%~85% and 35%~85%, respectively, on December 31, 2021 and 2020) Net asset value Inter-relationships between significant unobservable inputs and fair value The higher the multiple is, the higher the fair value will be. The higher the Lack- of-Marketability discount rate is, the lower the fair value will be. 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: (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 61 December 31, 2021 Financial assets at fair value through other comprehensive income December 31, 2020 Financial assets at fair value through other comprehensive income Input Price-Book ratio multiples Lack-of-Marketability discount rate Price-Book ratio multiples Lack-of-Marketability discount rate Move up or down Other comprehensive income Unfavorable change Favorable change 5% 5% 5% 5% $ $ $ $ 14,252 12,651 750 909 35,945 35,279 4,523 4,567 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. (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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 62 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. 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, 2021 and 2020, the guarantees provide to the subsidiaries amounted to $413,781 and $214,797, 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, 2021 and 2020. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 63 (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. 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, 2021 and 2020, the debt ratio was as follows: Total liabilities Total assets Debt ratio December 31, 2021 $ 335,987,949 December 31, 2020 282,118,646 $ 447,348,214 388,951,151 75% 73% 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 64 As of December 31, 2021, 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, 2021 and 2020 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 Deposits received Total liabilities from financing activities Short-term borrowings Long-term borrowings Lease liabilities Deposits received Total liabilities from financing activities $ January 1, 2021 55,991,680 19,105,440 1,298,528 220 Cash flow 22,976,240 5,194,560 (479,608) (50) Other non- cash changes - - 530,216 - December 31, 2021 78,967,920 24,300,000 1,349,136 170 $ 76,395,868 27,691,142 530,216 104,617,226 $ January 1, 2020 39,363,800 25,650,000 1,398,432 220 Cash flow 16,627,880 (6,544,560) (471,093) - Other non- cash changes - - 371,189 - December 31, 2020 55,991,680 19,105,440 1,298,528 220 $ 66,412,452 9,612,227 371,189 76,395,868 (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”) Arcadyan Relationship with the Company 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 65 Name of related party 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”) Core Profit Holdings Limited (“CORE”) Compalead Electronics B.V. (“CPE”) 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 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”) 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”) Compal Digital Technology (Kunshan) Co., Ltd. (“CDT”) 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 66 Name of related party 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”) Compal Digital Communication (Nanjing) Co., Ltd. (“CDCN”) 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 Compal Wireless Communication (Nanjing) Co., Ltd. (“CWCN”) The Company’s subsidiary Hanhelt Communication (Nanjing) Co., Ltd. (“Hanhelt”) Giant Rank Trading Ltd. (“GIA”) Arcadyan Technology N.A. Corp. (“Arcadyan USA”) Arcadyan Germany Technology GmbH (“Arcadyan Germany”) Arcadyan Technology Corporation Korea (“Arcadyan Korea”) Arcadyan India Private Limited (“Arcadyan India”) Arcadyan Holding (BVI) Corp. (“Arcadyan Holding”) Arcadyan do Brasil Ltda. (“Arcadyan Brasil”) Arcadyan Technology Limited (“Arcadyan UK”) Arcadyan Technology Australia Pty Ltd. (“Arcadyan AU”) 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 Corporation (Russia), LLC.(“Arcadyan RU”) The Company’s subsidiary Zhi-Bao Technology Inc. (“Zhi-Bao”) Tatung Technology Inc. (“TTI”) AcBel Telecom Inc. (“AcBel Telecom”) CBN 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 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”) Quest International Group Co., Ltd. (“Quest”) 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 Exquisite Electronic Co., Ltd. (“Exquisite”) Tatung Home Appliances (Wujiang) Co., Ltd. (“THAC”) Tatung Technology of Japan Co., Ltd. (“TTJC”) Intelligent Universal Enterprise Ltd. (“IUE”) 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 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 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”) Hippo Screen Neurotech Co., Ltd. (“Hippo Screen”) Shennona Co., Ltd. (“Shennona TW”) 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 The Company’s subsidiary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 68 Name of related party Aco Smartcare Co., Ltd. (“Aco Smartcare”) Starmems Semiconductor Corp. (“Starmems Semiconductor”) Relationship with the Company The Company’s subsidiary The Company’s subsidiary Kinpo&Compal Group Assets Development Corporation (“Kinpo&Compal The Company’s subsidiary Assets Development”) Compal Electronica DA Amazonia LTDA (“CEA”) Compal Wise Electronic (Vietnam) Co., Ltd. (“CWV”) CGS Technology (Poland) Sp. z o.o. (“CGSP”) Compal USA (Indiana), Inc. (“CIN”) AcBel Polytech Inc. (AcBel) and its subsidiaries (“AcBel”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Chairman of the Board is the first degree of kinship of the Chairman of the Company Cal-Comp Electronics (Thailand) Public Company Limited (“Cal-Comp”) The same Chairman of the Board Kinpo Electronics, Inc. (“Kinpo”) Avalue Crownpo Technology Inc. (“Crownpo”) Kinpo Group Management Consultant Company (“Kinpo Group Management”) Allied Circuit LIZ Electronics (Kunshan) Co., Ltd. (“LIZK”) LIZ Electronics (Nantong) Co., Ltd. (“LIZN”) 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”) Cal-Comp Electronics (USA) Co., Ltd. (CCUS) (b) Transactions with key management personnel Key management personnel remunerations comprised: Short-term employee benefits Post-employment benefits 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 An associate A joint venture company The chairman of the board of directors of its ultimate parent company is the same as that of the Company 2021 598,395 5,643 604,038 $ $ 2020 516,197 6,007 522,204 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 69 There are no termination benefits and other long-term benefits. (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 2021 1,777,777 $ 190 30,429 2020 1,170,456 190 476,501 $ 1,808,396 1,647,147 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 2021 2020 $ 175,003,681 145,525,596 241,832,462 219,732,381 416,836,143 365,257,977 1,309 568,440 2,859 41,802 $ 417,405,892 365,302,638 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, 2021 and 2020, amounted to $265,455 and $255,349, respectively. As of December 31, 2021 and 2020, the unpaid warranty service expenses were record as other payables. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 70 (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, 2021 and 2020, amounted to $199,811 and $198,315, respectively. As of December 31, 2021 and 2020, the unpaid technical service expenses were recorded as other payables. (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, 2021 and 2020, were as follows: Account Related party categories Notes and accounts receivable Subsidiaries Notes and accounts receivable Other related parties Other receivables Other receivables Other receivables Other receivables Subsidiaries - UCGI Subsidiaries - Others Associates Other related parties Less: Credit balance of investments accounted for using the equity method December 31, 2021 $ 1,001,098 December 31, 2020 10,820,424 1,697,684 161,863 10,649 2,463 45 307,456 506,229 15,176 907 64 2,873,802 11,650,256 (40,400) (381,227) $ 2,833,402 11,269,029 As of December 31, 2021 and 2020, the Company’s investment accounted for using the equity method in subsidiaries was a credit balance, recorded as a deduction from account receivables and other receivables (other receivables) – related party. Please refer to note (6)(g). (vi) Payables to related parties The payables to related parties as of December 31, 2021 and 2020, were as follows: Account Notes and accounts payable Related party categories Subsidiaries - CIT December 31, 2021 38,910,233 $ December 31, 2020 30,623,968 Notes and accounts payable Subsidiaries - Others 52,043,163 57,161,436 Notes and accounts payable Associates Notes and accounts payable Other related parties Other payables Subsidiaries 315 541,226 167,250 166 16,882 174,010 $ 91,662,187 87,976,462 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 71 (vii) Loans to related parties The interest rate of unsecured loans to subsidiaries was 1.02%~2.05%, and the Company had assessed that no bad debt expenses should be recognized. As of December 31, 2021 and 2020, the loans due to related parties were recorded as other receivables. Account Other receivables Other receivables Other receivables Other receivables Less: Credit balance of investments accounted for using the equity method Related party categories December 31, 2021 Subsidiaries - CEB $ Subsidiaries - CEA Subsidiaries - HengHao Subsidiaries - UCGI 553,600 830,400 200,000 224,560 December 31, 2020 1,424,000 - 200,000 220,000 (200,000) (200,000) $ 1,608,560 1,644,000 As of December 31, 2021 and 2020, 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, 2021 and 2020, the guarantees provided to subsidiaries were $413,781 and $214,797, 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 in Taipei District Court; 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 72 (11) Subsequent events: In response to the industry development trend and the future strategic development of the Company and for the purpose to integrate resources, provide more comprehensive products and services, increase R&D capabilities, improve efficiency, and increase competitiveness, the Company plans to acquire 51%~65% of shares of Poindus Systems Corp, Ltd. (“Poindus Systems”) under the public acquisition as a tender offer after the resolution of the Board of Directors (hereinafter referred to as the Public Acquisition). The price of the Public Acquisition is 30 New Taiwan Dollars per share. The aforementioned Public Acquisition as a tender offer had been completed on March 7, 2022, with a total acquisition of 56.04% of Poindus Systems' ordinary shares and the total acquisition consideration is $353,046. The settlement was completed on March 11, 2022. (12) Other: The employee benefits, depreciation and amortization expenses by categorized function are summarized as follows: By function By item Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization Operating costs 2021 Operating expenses Total Operating costs 2020 Operating expenses 980,082 93,355 33,341 - 158,665 181,888 6,235 9,893,755 674,677 365,173 81,349 437,831 683,706 479,192 10,873,837 768,032 398,514 81,349 596,496 865,594 485,427 1,108,657 81,056 27,718 - 209,112 156,554 6,301 9,021,361 607,195 347,023 61,500 403,706 675,955 384,626 Total 10,130,018 688,251 374,741 61,500 612,818 832,509 390,927 For the years ended December 31, 2021 and 2020, 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 2021 2020 8,965 11 1,411 1,214 8,633 11 1,369 1,175 %3.32 (1.26) % - - $ $ $ (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 73 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. 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, 2021: (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, 2021 (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 (Continued) COMPAL ELECTRONICS, INC. Notes to Consolidated Financial Statements 74 (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: Please refer to Table 6 (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 7 (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 8 (ix) Trading in derivative instruments: None. (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: Please refer to the consolidated financial report of 2021. 75 COMPAL ELECTRONICS, INC. Statement of cash and cash equivalents December 31, 2021 (Expressed in thousands of New Taiwan Dollars; in dollars of Foreign Currency) Item Cash on hand Checking account and demand deposits TWD Description Foreign currency (US$292,652,637 and others) Time deposits Foreign currency (CNY$15,600,000, Maturity date: 2022.1.5~ 2022.3.15) Cash equivalents: Total $ Amount 1,741 88,720 8,121,752 8,210,472 67,766 $ 8,279,979 Note: The exchange rate is 27.68 New Taiwan dollars for 1 US Dollar; 4.344 New Taiwan Dollars for 1 CNY. (Continued) COMPAL ELECTRONICS, INC. Statement of notes and accounts receivable December 31, 2021 (Expressed in thousands of New Taiwan Dollars) 76 Item Description Sales of non-related parties Amount 166,954,221 $ D Company E Company A Company B Company Others (Note) Less: allowance for uncollectible accounts Notes and accounts receivable, net 〃 〃 〃 〃 36,713,257 23,605,470 21,149,343 28,579,531 277,001,822 (3,632,789) $ 273,369,033 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 $ Cost 7,535,072 1,188,814 52,234,531 $ 60,958,417 Net Realizable Value 7,676,872 1,188,814 52,234,531 61,100,217 (Continued) Statement of changes in accumulated impairment of investments accounted for using the equity method COMPAL ELECTRONICS, INC. For the year ended December 31, 2021 (Expressed in thousands of New Taiwan Dollars; thousands of shares) Beginning Balance Increase (Note 1) Decrease (Note 2) Ending Balance (including impairment loss) Investee Company Auscom Panpal Just CIH CEH Gempal Hong Ji Hong Jin Maxima Ventures l, Inc. 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 Starmems Semiconductor Kinpo & Compal Assets Development Raypal Subtotal 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 Amount (not including exchange differences on transaction of foreign financial statements Number of shares 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 - - - $ 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) 82,587,474 581,227 789,148 83,957,849 Number of shares - - - - - - - - - - - - - - - - - - - - - 20,000 1,719 29,000 7,000 3,500 52,500 - - - - - - - - - - - - - - - - - - - - Number of shares - - - - - - - - 126 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20,000 2,721 29,000 Amount - 279,791 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 38,316 8,925 4,434 39,732 200,000 17,189 185,939 2,387 289,998 3,210 70,000 89,632 35,000 525,000 - 1,789,553 - - - 1,789,553 Amount - 14,999 163,662 99,815 34,436 5,699 71,160 270,799 82 44,739 255 49,878 38,703 3,277 7,991 5,367 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 810,862 1,855,720 - - 2,666,582 Share of profit recognized Number of shares Amount (not including exchange differences on transaction of foreign financial statements Exchange differences on transaction of foreign financial statements Ending Balance (including exchange differences on transaction of foreign statements 3,000 500,000 48,010 53,001 1 90,000 100,000 29,500 10,158 100 98 3,739 41,305 89,755 42,700 2,772 29,060 300 29,500 12,500 20,015 4,648 136 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 9,100 600 100,000 20,000 3,500 52,500 3,446 - - 4,074 (31,176) 2,038,308 3,196,352 - 115,690 89,224 39,395 - 79,707 (15,326) 139,516 13,830 351,746 (62,830) (300,169) - 14,204 117 29,295 43,721 (425,641) 7,873 (18,034) 908,947 209,561 (569,898) (23,402) 18,593 1,706 43,341 516,481 116,378 12,658 53,926 3,976 22,068 12,585 (92) (22,724) 347 (16,261) (15,543) (1,741) (1,029) 85 (6,781) 6,573,057 - - - 6,573,057 148,218 6,395,013 10,504,421 41,651,641 3,906,656 2,064,952 1,148,085 365,036 - 399,105 464,104 751,341 74,488 2,541,390 5,109,123 94,838 (3) 682,970 4,776 165,153 244,802 (486,703) 37,824 6,409 7,675,491 1,422,211 7,132,354 101,881 102,074 864,112 647,647 (127,360) 817,392 1,527,945 (37,303) 113,123 252,821 330,604 519 58,858 3,120 57,303 44,309 87,891 33,971 525,085 144,270 98,051,957 (8,877,051) (881,247) (10,157) 88,283,502 (22,871) (714,460) (926,509) (4,241,449) (644,322) (26,903) (11,297) (5,818) (110) (59,545) (39,842) (2,730) (47,708) (356,793) (37,291) 3 (412) (14,368) (15,944) 2,550 (9,506) (496,294) (117,143) (552,071) (96,309) (20,796) (57,435) (137,828) (223,393) 579 - - - - - - - - - - - - - (1,036) - - - (8,877,051) 125,347 5,680,553 9,577,912 37,410,192 3,262,334 2,038,049 1,136,788 359,218 398,995 404,559 711,499 71,758 2,493,682 4,752,330 57,547 682,558 4,776 150,785 228,858 (484,153) 37,824 (3,097) 7,179,197 1,305,068 6,580,283 101,881 102,074 767,803 626,851 (184,795) 679,564 1,304,552 (37,303) 113,123 252,821 330,604 1,098 58,858 3,120 57,303 44,309 86,855 33,971 525,085 144,270 89,174,906 (881,247) (10,157) 88,283,502 240,400 468,948 88,992,850 - - - 77 Market Price / Net Value 125,347 5,861,896 9,577,912 37,397,344 3,262,334 2,146,378 1,136,788 359,218 - 1,686,183 (Note 4) 404,559 711,499 71,758 5,266,324 (Note 3) 4,752,330 525,161 - 909,584 (Note 3) 5,936 150,785 228,858 (484,153) 37,824 (3,097) 7,179,197 1,305,047 6,580,283 101,881 102,074 767,803 849,180 (Note 4) (184,795) 679,564 1,304,552 (37,303) 113,123 252,821 220,216 1,098 46,384 3,120 29,490 35,437 86,855 33,971 525,085 28,691 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 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, 2021. Note 4：The unit price is calculated by the closing price of Taipei Exchange as of December 31, 2021. (Continued) COMPAL ELECTRONICS, INC. Statement of financial assets measured at fair value through other comprehensive income - non-current For the year ended December 31, 2021 (Expressed in thousands of New Taiwan Dollars) 78 Beginning Balance Increase (Note 1) Decrease (Note 2) Ending Balance Kinpo Investee Company Number of Shares Amount 124,044 $ 1,507,132 Number of Shares - Amount 496,175 Number of Shares - Amount - Number of Shares 124,044 Amount 2,003,307 Cal-Comp Electronics (Thailand) Public Co., Ltd. 239,631 491,243 19,969 204,485 Taiwan Star Others Total 98,046 686,325 - 196,421 - - $ 2,881,121 - 249,397 950,057 - - - - 259,600 695,728 244,332 98,046 441,993 78,749 - 323,081 367,069 3,508,097 Collaterals or Pledged Assets None None None None Note 1: Increase included transfer of the invested company's surplus to capital, purchasing financial assets at fair value through other comprehensive income, deferred tax for unrealized gains and unrealized gains on financial instruments at fair value. Note 2: Decrease included the adjustment of the unrealized loss of financial assets according to fair value, the reduction of capital and the return from liquidation. (Continued) COMPAL ELECTRONICS, INC. Statement of property, plant and equipment For the year ended December 31, 2021 (Expressed in thousands of New Taiwan Dollars) 79 Please refer to Note (6)(i). Statement of short-term borrowings December 31, 2021 Creditor Bank of Communications Description Credit Loans Co., Ltd. Land Bank of Taiwan Cathay United Bank E.SUN Commercial Bank Agricultural Bank of Taiwan Citibank The bank of Tokyo- Mitsubishi UFJ Bank of China Hua Nan Bank HSBC Bank (Taiwan) Limited United Overseas Bank First Bank DBS Bank Limited Sumitomo Mitsui Banking Corporation China Construction Bank Corporation Taipei Fubon Commercial Bank Co., Ltd. Taishin International Bank Shin Kong Bank BNP Paribas Bank Banco Bilbao Vizcaya Argentaria Bank ″ 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Contract Period 2021.12~2022.01 2021.11~2022.01 2021.12~2022.01 2021.10~2022.01 2021.10~2022.01 2021.11~2022.01 2021.12~2022.01 2021.12~2022.01 2021.12~2022.01 2021.11~2022.02 2021.12~2022.01 2021.12~2022.01 2021.10~2022.02 2021.10~2022.01 2021.12~2022.01 2021.12~2022.02 2021.12~2022.02 2021.11~2022.02 2021.10~2022.01 2021.07~2022.04 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Note: The range of interest rates of aforementioned loans were 0.42%~0.78%. Interest Rate Note Loan Commitments 5,536,000 $ Collaterals or Pledged Assets None Ending balance 5,536,000 6,000,000 4,152,000 4,000,000 1,550,000 8,165,600 5,536,000 6,089,600 6,000,000 4,982,400 4,152,000 3,000,000 5,536,000 6,920,000 4,152,000 3,736,800 5,000,000 1,500,000 2,768,000 3,044,800 None None None None None None None None None None None None None None None None None None None 5,812,800 4,152,000 3,272,400 1,384,000 3,598,400 5,536,000 6,089,600 3,875,200 3,691,200 3,321,600 2,906,400 5,508,320 6,920,000 4,152,000 1,799,200 4,428,800 1,384,000 2,600,000 3,000,000 $ 91,821,200 78,967,920 (Continued) COMPAL ELECTRONICS, INC. Statement of notes and accounts payable December 31, 2021 (Expressed in thousands of New Taiwan Dollars) 80 Amount $ 36,295,215 22,517,970 15,913,636 11,931,436 10,634,860 8,942,796 13,304,882 $ 119,540,795 Suppliers E Company J Company A Company B Company D Company I Company Others (Note) Total Note: The amount of individual vendor included in others does not exceed 5% of the account balance. (Continued) COMPAL ELECTRONICS, INC. Statement of long-term borrowings December 31, 2021 (Expressed in thousands of New Taiwan Dollars) 81 Contract Period 2021.09~2024.09 Interest Rate Note Amount 2,900,000 Collaterals or Pledged Assets None Amount Creditor Yuan Ta Commercial Bank Loan Commitments 3,000,000 $ Loan within 1 year 2,900,000 Mizuho Bank, Ltd. 5,536,000 5,500,000 KGI Bank 2,800,000 2,800,000 Loan more than 1 year - - - 2021.05~2023.05 2021.09~2023.09 Shanghai Commercial and 2,300,000 Savings Bank Far Eastern International 1,000,000 Bank Co., Ltd. CTBC Bank Co., Ltd. 2,000,000 - - - 2,300,000 2020.06~2023.06 1,000,000 2020.09~2023.09 2,000,000 2020.11~2023.11 Bank SinoPac Co., Ltd. 3,300,000 2,475,000 825,000 2019.03~2023.03 Bank of America 4,567,200 2,000,000 - 2021.08~2022.09 E.SUN Commercial Bank 2,000,000 Bank of Taiwan 3,500,000 - - 300,000 2021.11~2024.11 2,200,000 2021.12~2024.12 $ 30,003,200 15,675,000 8,625,000 Note: The range of interest rates of aforementioned loans were 0.62%~0.98%. Statement of lease liabilities Item Buildings Vehicles Description For office and factory space For operating activities Lease term 1~10 years 3~5 years Less：Current portion Lease liabilities–Non- Current 〃 〃 〃 〃 〃 〃 〃 〃 〃 5,500,000 2,800,000 2,300,000 None None None 1,000,000 None 2,000,000 3,300,000 2,000,000 300,000 2,200,000 24,300,000 None None None None None Discount rate %1.2 %1.2 Ending balance 1,338,058 $ 11,078 1,349,136 (357,794) $ 991,342 (Continued) COMPAL ELECTRONICS, INC. Statement of other payables December 31, 2021 (Expressed in thousands of New Taiwan Dollars) 82 Item Payroll payables and year-end Description Payroll for December 2021, estimated year-end bonuses Amount $ 4,180,784 bonuses payable for 2021, and employees and directors’ compensations Import and export fee payables Technical service fee payables Others (Note) Total 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, 2021 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. 1,326,545 560,108 4,403,329 $ 10,470,766 Amount $ 1,171,128,396 371,662 (261,537) (927,323) 1,170,311,198 1,302,660 $ 1,171,613,858 (Continued) COMPAL ELECTRONICS, INC. Statement of operating costs For the year ended December 31, 2021 (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 83 Amount $ 44,603,184 735,139,560 (55,216,445) (37,725) (3,364,426) (483,388) (2,951) 720,637,809 745,554 1,171,173 722,554,536 685,002 (1,189,112) (68,380) 721,982,046 11,758,417 407,144,561 903,172 (7,603,013) (3,238) (346,034) 1,133,835,911 4,158,263 3,364,426 1,795,897 555,006 $1,143,709,503 (Continued) COMPAL ELECTRONICS, INC. Statement of operating expenses For the year ended December 31, 2021 (Expressed in thousands of New Taiwan Dollars) 84 Item Payroll expenses Export expenses Royalty expenses Research expenses Shipping expenses Sample expenses Others (Note) Total Selling expenses Administrative expenses Research and development expenses $ 362,202 288,665 176,661 - 4,459,970 356,122 76,411 $ 5,720,031 1,526,644 8,004,909 - - - 21,767 139 1,128,604 2,677,154 - - 1,555,325 1,878 1,713 2,364,953 11,928,778 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 (cid:313)(cid:310) Table 1 Loans to other parties: (December 31, 2021) Name of lender No. 0 The Name of borrower UCGI Company Account name Other receivables Related party Y Highest balance of financing to other parties during the period Ending balance 475,325 224,560 Actual usage amount during the period 224,560 Range of interest rates during the period Purposes of fund financing for the borrower 1.02%~1.08% Short-term financing Transaction amount for business between two parties - 0 The HengHao Other Company 0 The CEB Company 0 The CEA Company 1 CIH CEP 2 CPC CDE 2 CPC CIC receivables Other receivables Other receivables Other receivables Other receivables Other receivables 3 CIT 3 CIT 3 CIT CCI Nanjing Other receivables Rayonnant (Taicang) Other receivables HengHao Kunshan 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 receivables 7 Panpal Ray-Kwong Medical Other receivables 8 BSH CIN 9 Arcadyan Acradyan Brasil 9 Arcadyan Acradyan Brasil 9 Arcadyan Arcadyan UK Other receivables Other receivables Other receivables Other receivables 9 Arcadyan Arcadyan Vietnam Other receivables 9 Arcadyan Arcadyan Vietnam Other receivables 9 Arcadyan Arcadyan Russia Other receivables 9 Arcadyan Arcadyan Russia Other receivables 9 Arcadyan Arcadyan Russia Other receivables 10 Arcadyan CNC Holding 10 Arcadyan CNC Holding 11 SVA CNC Other receivables Other receivables Other receivables Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 400,000 200,000 200,000 1.08% Short-term financing 1,985,950 553,600 553,600 1.02%~2.05% Short-term financing 838,800 830,400 830,400 1.02% 57,070 55,360 55,360 3.50% 1,315,200 - - 2.20% 438,400 434,400 434,400 2.20% 1,997,450 1,937,600 1,561,152 2.00% Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing 137,098 69,200 - 1.30%~4.35% Short-term financing 856,050 830,400 830,400 1.30% 998,725 968,800 968,800 1.30% 657,600 651,600 651,600 2.20% Short-term financing Short-term financing Short-term financing 524,640 260,640 173,760 2.00%~2.20% Short-term financing 570,700 553,600 553,600 1.30% 1,200,000 600,000 600,000 1.08% 10,000 10,000 10,000 1.10% 278,100 276,800 207,600 1.02% 57,020 35,984 35,984 1.00% 55,620 55,360 - 1.00% 285,100 - 285,100 276,800 255,510 - - - - 1.00% 1.00% 1.00% 57,020 57,020 - - - 1.00% - 1.00% 27,800 27,800 6,705 1.00% 484,670 - - 1.00% 470,560 470,560 470,560 1.00% 153,440 - - 3.85% Short-term financing Short-term financing Short-term financing Short-term financing 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 Transaction for business between two parties Short-term financing Short-term financing Short-term 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 financing Operating demand Operating demand Operating demand Operating demand Operating demand - - - - - - - - - - - - - - - - - Operating demand - Operating demand Operating financing Operating financing 4,349,995 4,345,760 5,375,096 165,990 165,990 377,472 - - - - - - - - Operating financing - Operating financing Operating financing Allowance for bad debt - - - - - - - - - - - - - - - - - - - - - - - - - - - - Collateral Item Value - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (In Thousands of New Taiwan Dollars) Individual funding loan limits 22,272,053 Maximum limit of fund financing 44,544,106 Note (Note 1) 22,272,053 44,544,106 (Note 1) 22,272,053 44,544,106 (Note 1) 22,272,053 44,544,106 (Note 1) 37,397,344 37,397,344 (Note 2) 2,613,831 2,613,831 (Note 3) 2,613,831 2,613,831 (Note 3) 22,323,113 22,323,113 (Note 4) 22,323,113 22,323,113 (Note 4) 22,323,113 22,323,113 (Note 4) 2,838,191 2,838,191 (Note 5) 2,838,191 2,838,191 (Note 5) 4,787,996 4,787,996 (Note 6) 8,676,307 8,676,307 (Note 7) 2,344,758 2,344,758 (Note 8) 1,172,379 2,344,758 (Note 8) 6,580,283 6,580,283 (Note 9) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 2,531,220 5,062,440 (Note 10) 132,792 5,062,440 (Note 10) 132,792 5,062,440 (Note 10) 301,977 5,062,440 (Note 10) 2,416,212 2,416,212 (Note 11) - 2,416,212 2,416,212 (Note 11) 28,344 28,344 (Note 12) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements (cid:313)(cid:311) Table 1 Loans to other parties: (December 31, 2021) Note 1: Note 2: Note 3: 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. 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 Note 4: 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 Note 5: Note 6: Note 7: Note 8: Note 9: Note 10: Note 11: Note 12: 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 BSH’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of BSH. When a short-term financing facility with BSH 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 BSH’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 BSH, 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. 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. According 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 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 SVA. Also, the amount shall be combined with the SVA's endorsements/guarantees 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 endorsements/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 (cid:313)(cid:312) Table 2 Guarantees and endorsements for other parties: (December 31, 2021) Counter-party of guarantee and endorsement Name of guarantor No. 0 The Company CEB Name Relationship with the Company (Note 4) Limitation on amount of guarantees and endorsements for a specific enterprise 27,840,066 Highest balance for guarantees and endorsements during the period 115,450 Balance of guarantees and endorsements as of reporting date 113,488 Property pledged for guarantees and endorsements (Amount) - Actual usage amount during the period 113,488 0 The Company CEA (Note 4) 27,840,066 177,786 174,384 174,384 0 The Company CEP (Note 3) 27,840,066 151,129 99,845 99,845 0 The Company HengHao Kunshan 1 Arcadyan Arcadyan AU (note 4) 27,840,066 26,160 26,064 26,064 (Note 4) 1,687,480 209,700 207,600 - - - - - Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements Maximum amount for guarantees and endorsements (Note 1(cid:501)(cid:501)2) 0.10% 55,680,132 0.16% 55,680,132 0.09% 55,680,132 0.02% 55,680,132 1.64% 5,062,440 (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 - Y Y Y Y - - - - - - Y - Note 1: Note 2: 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 current 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 are 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. According to Arcadyan's Procedures for Endorsement and Guarantee, the total amount of endorsements/guarantees Arcadyan and its subsidiaries are permitted to make shall not exceed 40% of the Arcadyan's net worth. Endorsements/guarantees Arcadyan and its subsidiaries are permitted to make for a single company shall not exceed 1/3 of the aforementioned total amount. Note 3: Subsidiary whose over 50% common stock is directly owned. Note 4: Subsidiary whose over 50% common stock is indirectly owned. (Continued) (cid:68)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:77)(cid:33)(cid:70)(cid:77)(cid:70)(cid:68)(cid:85)(cid:83)(cid:80)(cid:79)(cid:74)(cid:68)(cid:84)(cid:45)(cid:33)(cid:74)(cid:79)(cid:68)(cid:47) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:79)(cid:112)(cid:117)(cid:102)(cid:116)(cid:33)(cid:117)(cid:112)(cid:33)(cid:81)(cid:98)(cid:115)(cid:102)(cid:111)(cid:117)(cid:46)(cid:68)(cid:112)(cid:110)(cid:113)(cid:98)(cid:111)(cid:122)(cid:46)(cid:80)(cid:111)(cid:109)(cid:122)(cid:33)(cid:71)(cid:106)(cid:111)(cid:98)(cid:111)(cid:100)(cid:106)(cid:98)(cid:109)(cid:33)(cid:84)(cid:117)(cid:98)(cid:117)(cid:102)(cid:110)(cid:102)(cid:111)(cid:117)(cid:116) (cid:313)(cid:313) Table 3 Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2021) Name of holder Category and name of security The Company Taiwan Star Relationship with security issuer (cid:4137) Kinpo Cal-Comp The same chairman of the Company The same chairman of the Company (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Chen Feng Optoelectronics TOP Taiwan VI Venture Capital Co., Ltd. IIH Biomedical Venture Fund Phoenix Innovation Investment Corporation. Others Total Panpal Compal Electronics, Inc. The parent company Kinpo The same chairman of the Company CDIB Partners Investment Holding Corp. (cid:4137) AcBel The Chairman of the Board is the first degree of kinship of the Chairman of the Company Taiwan Biotech Co., Ltd. (cid:4137) Others Total Gempal Compal Electronics, Inc. The parent company Lian Hong Art. Co., Ltd. (cid:4137) Others Total Account name 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 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 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 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 (In Thousands of shares/ units) Ending balance Shares/Units (thousands) 98,046 Carrying value 441,993 Holding percentage (%) 2% Fair value Note 441,993 124,044 2,003,307 9% 2,003,307 259,600 695,728 5% 695,728 290 18,722 10% 18,722 632 13,342 11% 13,342 4,000 26,600 3% 26,600 6,685 101,676 10% 101,676 402 4,233 2% 4,233 5,000 48,800 8% 48,800 6,000 88,740 19% 88,740 287,259 ___________ 3,730,400 31,648 765,884 1% 765,884 69,370 1,120,320 5% 1,120,320 54,000 880,740 5% 880,740 5,677 207,766 1% 207,766 6,995 116,883 3% 116,883 126,498 ___________ 3,218,091 18,369 444,538 - 444,538 2,140 108,551 6% 108,551 2,139 ___________ 555,228 (Continued) (cid:68)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:77)(cid:33)(cid:70)(cid:77)(cid:70)(cid:68)(cid:85)(cid:83)(cid:80)(cid:79)(cid:74)(cid:68)(cid:84)(cid:45)(cid:33)(cid:74)(cid:79)(cid:68)(cid:47) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:79)(cid:112)(cid:117)(cid:102)(cid:116)(cid:33)(cid:117)(cid:112)(cid:33)(cid:81)(cid:98)(cid:115)(cid:102)(cid:111)(cid:117)(cid:46)(cid:68)(cid:112)(cid:110)(cid:113)(cid:98)(cid:111)(cid:122)(cid:46)(cid:80)(cid:111)(cid:109)(cid:122)(cid:33)(cid:71)(cid:106)(cid:111)(cid:98)(cid:111)(cid:100)(cid:106)(cid:98)(cid:109)(cid:33)(cid:84)(cid:117)(cid:98)(cid:117)(cid:102)(cid:110)(cid:102)(cid:111)(cid:117)(cid:116) (cid:313)(cid:314) Table 3 Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2021) Name of holder Hong Ji Category and name of security SUYIN Optronics Co., Ltd. (“SUYIN Optronics”) Relationship with security issuer (cid:4137) 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 BSH Suzhou Genki Fuhong Health Management Co., Ltd. CitiBank RED ARC TERMLIQUIDITY FUND (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (In Thousands of shares/ units) Ending balance Shares/Units (thousands) 380 Carrying value - Holding percentage (%) 1% Fair value - Note (Note 1) 332 200 1,152 349 60 - - - - - 1% 7% 5% 5% 14% - - - - - (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) 37,475 7% 37,475 1,650 26,169 7% 26,169 1,229 - 6% - (Note 1) ___________ 63,644 9,000 - 9,000 - 19% - (Note 1) 873 124,560 - 124,560 4,340 17% 4,340 277,312 - 277,312 - - - - Account name 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 Note 1:The carrying value is the remaining amount after deducting accumulated impairment. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements (cid:314)(cid:305) 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, 2021) Name of company Category and name of security Account name Name of counter-party Relationship with the company Beginning Balance Purchases Sales Others Ending Balance Shares/ Units Amount Shares/ Units Amount Shares/ Units Price Cost Gain (loss) on disposal Shares/ Units Amount Shares/ Units Amount (In Thousands of New Taiwan Dollars/ shares) Jipo Investment Related party 23,172 281,546 46,197 616,864 - - - - Panpal Stock : Kinpo CIT CIT CIT CIT CEC CPO CPO CIC CIC CET CET CNC CNC BSH Structured deposits : Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits– Bank of China RMB Strcutured Deposit Yuntong Wealth Time-type structured deposit products Structured deposits– Industrial and Commercial Bank of China RMB Strcutured Deposit Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Structured deposits– Industrial and Commercial Bank of China RMB Strcutured 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– Bank of China RMB Strcutured Deposit Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits– Industrial and Commercial Bank of China RMB Strcutured Deposit Structured deposits- Kunshan Rural Commercial Bank Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Fund RED ARC TERM LIQUIDITY FUND Financial assets at fair value through other comprehensive income-non- current 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 Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss- current Agricultural Bank of China Bank of China Bank of Communications Industrial and Commercial Bank of China China CITIC Bank Financial assets at fair value through profit or loss- current Industrial and Commercial Bank of China 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 Financial assets at fair value through profit or loss- current Agricultural Bank of China Agricultural Bank of China Bank of China Agricultural Bank of China Financial assets at fair value through profit or loss- current Industrial and Commercial Bank of China Kunshan Rural Commercial Bank Agricultural Bank of China Citibank 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 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. - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,470,031 - - - - - - 261,366 - 241,113 - - 130,799 - - - - - - - - - - - - - - - 1,660,937 781,618 434,232 868,464 542,790 521,078 521,078 495,024 521,078 238,828 - 390,809 390,513 260,342 1,400,550 - - - - - - - - - - - - - 3,156,037 3,130,968 791,505 781,618 439,453 434,232 877,521 868,464 546,782 542,790 526,513 521,078 525,696 521,078 761,903 756,390 528,433 521,078 25,069 (Note 2) 9,887 (Note 2) 5,221 (Note 2) 9,057 (Note 2) 3,992 (Note 2) 5,435 (Note 2) 4,618 (Note 2) 5,513 (Note 2) 7,355 (Note 2) 484,885 479,941 4,944 395,872 390,809 393,959 390,513 393,905 390,513 5,063 (Note 2) 3,446 (Note 2) 3,392 (Note 2) 1,121,474 1,120,440 1,034 (Note 2) - - - - - - - - - - - - - - - 221,910 (Note 1) 69,369 1,120,320 - - - - - - - - - - - - (628) (Note 1) (2,798) (Note 1) - - - - - - - - - - - - - - - - - - - - - - - - - - - 277,312 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements (cid:314)(cid:306) Table 5 Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2021) If the counter-party is a related party, disclose the previous transfer information Transaction amount 415,480 Status of payment Paid Counter- party Natural person 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 Appraisal and price negotiation Purpose of acquisition and current condition Operational use Others None Name of company Arcadyan Name of property Land located at Guangfu Road, Hsinchu City Transaction date March 17, 2021 (Note 1) Note 1(cid:506) In response to business operation, the Group authorized the chairman to purchase land within $500,000 by a resolution of the Board of Directors on March 17, 2021. In addition, the Group has signed an agreement with non-related parties on April 7, 2021 to purchase land. Table 6 Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2021) (In Thousands of New Taiwan Dollars) Name of company CDE Type of property Right-of-use assets(cid:28860)land and building Transaction date May 7, 2021 (Note 1) Acquisition date 2011~2016 Book value 1,446,029 Gain (losses) on disposal 1,961,419 Amount actually received The payment has been received. Transaction amount 4,147,946 (CNY 956,012 thousand) Counter- party Kunshan XinCheng Construction and Development Co., Ltd. Relationship with the company Non-related party Purpose of disposal Activating the assets References for determine price Appraisal and price negotiation Note 1: The board of directors resolved to activate assets on May 7, 2021, the Group signed an agreement with a non-related party regarding the disposal of property Others None (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:307) Table 7 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, 2021) Company Name The Company Counter party UCGI CBN CEP Nature of relationship Subsidiaries wholly owned by the Company The Company's subsidiaries 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 Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Percentage of total purchases/ (sales) Amount (749,825) (0.1)% Purchase/ (Sale) Sale Payment terms 120 days Unit price Similar to non- related parties Payment Terms There is no significant difference Sale (803,662) (0.1)% Net 90 days from sale Purchase 218,938 - 120 days Purchase 149,835,609 13.1% 120 days Purchase 178,478,231 15.6% 120 days Purchase 28,688,394 2.5% 120 days Purchase 42,665,925 3.7% 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 Markup based on BCI and its subsidiaries' cost Purchase 17,101,460 1.5% Net 60 days from purchase Markup based on Etrade and its subsidiaries' cost 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 There is no significant difference, and adjustments will be made based on demand for funding if necessary Percentage of total notes/accounts receivable (payable) Note Ending Balance 220,379 0.1% 540,542 0.2% - - (62,366,178) (29.6)% (4,188,862) (2.0)% (3,086,146) (1.5)% (16,612,130) (7.9)% (2,631,399) (1.2)% Kinpo Electronic, Inc. With the same chairman Purchase 527,883 - 35 days from the 1st of the following month Similar to non- related parties There is no significant difference (527,418) (0.2)% Just and its subsidiaries Compal Electronic, Inc. Parent company Sale (179,037,498) (99.9)% 120 days CIH and its subsidiaries HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company Sale (102,464) (0.1)% 120 days Purchase 206,180 0.1% 120 days CIH and its subsidiaries Compal Electronic, Inc. Parent company Sale (150,179,442) (93.5)% 120 days CEA CEB With the same ultimate parent company With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company Sale (428,856) (0.3)% 120 days Sale (390,795) (0.2)% 120days Sale (3,491,406) (2.2)% 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 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, 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 4,188,862 99.9% - - (57,375) (0.1)% 62,366,178 96.5% 207,124 0.2% 261,497 0.2% 1,580,332 1.1% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:308) Table 7 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, 2021) 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 HSI and its subsidiaries With the same ultimate parent company Purchase/ (Sale) Sale Amount (5,042,538) Percentage of total purchases/ (sales) (3.1)% Payment terms 120 days Unit price Similar to non- related parties Henghao HSI and its subsidiaries Just and its subsidiaries CPM With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company An associate Purchase 245,113 0.2% 120 days Purchase 712,378 0.5% 120 days Purchase 102,536 0.1% 120 days Purchase 4,602,669 Purchase 1,200,858 3.1% 0.7% 0.8% 120 days 120 days 120 days Changbao An associate Purchase 1,109,808 Purchase 803,108 30.0% Net 90 days from delivery - Parent company Sale (42,863,233) (88.6)% 120 days Sale (135,499) (5.6)% 120 days Sale (590,887) (1.2)% 120 days Percentage of total notes/accounts receivable (payable) Note Ending Balance 2,304,731 1.6% (61,174) (0.1)% (170,879) (0.1)% - - (1,382,777) (1.1)% (383,101) (0.3)% (552,945) (0.4)% (540,542) (43.0)% 16,612,130 94.0% 1,993,166 2.7% (Note 1) 1,269,252 1.4% Payment Terms 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 There is no significant difference There is no significant difference There is no significant difference 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 Similar to non- related parties Similar to non- related parties Markup based on BCI and its subsidiaries' cost According to markup pricing According to markup pricing Acbel and its subsidiaries CBN BCI and its subsidiaries Compal Electronic, Inc. Compal Electronic, Inc. HSI and its subsidiaries CEB CEA CIH and its subsidiaries CPM Acbel and its subsidiaries CEB CEA CIH and its subsidiaries BCI and its subsidiaries CEA Cal-Comp CEA CEB CIH and its subsidiaries BCI and its subsidiaries CEB Etrade and its subsidiaries Compal Electronic, Inc. HSI and its subsidiaries The Chairman of the Board is the first degree of kinship of the Chairman of the Company 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 An associate The Chairman of the Board is the first degree of kinship of the Chairman of the 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 chairman With the same ultimate 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 Sale (783,053) (1.6)% 120 days According to markup pricing There is no significant difference 507,450 0.6% Purchase 3,488,526 7.3% 120 days Purchase 475,357 Purchase 608,220 1.0% 1.3% 120 days 120 days According to markup pricing Similar to non- related parties Similar to non- related parties Adjustments will be made based on demand for funding There is no significant difference There is no significant difference (1,580,332) (1.7)% (178,927) (0.2)% (284,359) (0.3)% Purchase (108,252) 1.9% 120 days Similar to non- related parties There is no significant difference 1,537 (0.2)% Purchase 392,098 6.6% 120 days Similar to non- related parties There is no significant difference (261,497) (15.4)% Purchase 590,436 9.9% 120 days Similar to non- related parties There is no significant difference (1,269,252) (31.9)% Purchase 473,416 8.0% 45 days Similar to non- related parties There is no significant difference (376,304) (22.1)% Purchase 1,468,381 24.7% 120 days Sale (473,416) 9.7% 45 days Similar to non- related parties Similar to non- related parties There is no significant difference There is no significant difference (31,855) (1.9)% 376,304 (17.4)% Purchase 429,390 32.4% 120 days Similar to non- related parties There is no significant difference (207,124) (16.0)% Purchase 783,338 59.2% 120 days Similar to non- related parties There is no significant difference (507,450) (39.3)% Purchase 108,252 1.8% 45 days Similar to non- related parties There is no significant difference (1,537) (0.1)% Sale (17,096,471) (99.5)% Net 60 days from delivery According to markup pricing Purchase 1,639,840 14.2% Net 60 days from purchase Similar to non- related parties Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding 2,631,399 98.2% (246,217) (10.0)% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:309) Table 7 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, 2021) Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name Forever and its subsidiaries HSI and its subsidiaries Counter party Nature of relationship With the same ultimate parent company With the same ultimate parent company UCGI Avalue and its subsidiaries HengHao Compal Electronic, Inc. CIH and its subsidiaries CEP Compal Electronic, Inc. Purchase/ (Sale) Sale Amount (242,089) Percentage of total purchases/ (sales) Unit price (100.0)% Net 60 days from purchase Similar to non- related parties Payment terms Sale (166,677) (16.5)% Net 45 days after the month ended Parent company Purchase 757,372 92.3% 120 days With the same ultimate parent company Sale (245,484) (2.1)% 120 days Parent company Sale (220,757) (99.8)% 120 days HSI and its subsidiaries Compal Electronic, Inc. Parent company Sale (28,700,918) (84.9)% 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 Sale (207,079) (0.6)% 120 days Sale (1,639,069) (4.9)% Net 60 days from delivery Similar to non- related parties Sale (712,526) 2.1% 120 days Purchase 4,867,677 16.2% 120 days Purchase 98,879 8.8% 120 days Similar to non- related parties Similar to non- related parties 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 CIH and its subsidiaries With the same ultimate parent company CIH and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company Forever and its subsidiaries With the same ultimate parent company Acbel and its subsidiaries The Chairman of the Board is the first degree of kinship of the Chairman of the Company ultimate parent company Percentage of total notes/accounts receivable (payable) Note Ending Balance 46,437 (100.0)% 23,533 11.7% (220,379) (94.1)% 61,174 1.7% - - 3,086,146 86.8% 57,375 0.8% 246,217 (3.2)% 170,879 (2.3)% (2,304,731) (13.0)% (1,993,166) (15.1)% (Note 1) 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 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 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 242,089 0.8% 60 days after the delivery Similar to non- related parties There is no significant difference (46,437) (0.3)% Purchase 168,952 0.6% 120 days Similar to non- related parties There is no significant difference (79,867) (0.5)% Arcadyan CNC Acradyan Vietnam Acradyan Germany Acradyan Germany Acradyan USA Acradyan AU CNC Acradyan Vietnam Arcadyan Arcadyan Arcadyan Arcadyan's subsidiary Sale (1,226,052) (3.0)% Net 150 days from delivery Arcadyan's subsidiary Sale (7,323,420) (20.0)% Net 120 days from delivery Arcadyan's subsidiary Sale (505,287) (1.0)% Net 60 days from the end of the month of delivery - - - Arcadyan's subsidiary Purchase 12,985,802 26.0% Net 120 days from delivery According to markup Arcadyan's subsidiary Purchase 1,091,354 2.0% Net 180 days from the end of the month of delivery pricing According to markup pricing With the same ultimate parent With the same ultimate parent company With the same ultimate parent company Sale Sale (12,985,802) (100.0)% Net 120 days from delivery According to markup (1,091,354) (100.0)% Net 180 days from the end of the month of delivery pricing According to markup pricing Purchase 1,226,052 100.0% Net 150 days from delivery - - - - - - - - - 266,118 4.0% 2,020,989 29.0% 23,439 - % (2,028,930) (27.0)% (Note1) (Note 2) - % (Note1) 2,028,930 - % (Note1) (Note 2) - % (Note1) (266,118) (100.0)% (Note1) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:310) Table 7 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, 2021) Transaction details Percentage of total purchases/ (sales) Amount Payment terms 7,323,420 100.0% Net 120 days from delivery Purchase/ (Sale) Purchase Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Unit price - Payment Terms - Percentage of total notes/accounts receivable (payable) Note (100.0)% (Note1) Ending Balance (2,020,989) Purchase 505,287 100.0% Net 60 days from the end of - - (23,439) 100% (Note1) the month of delivery Company Name Acradyan USA Counter party Arcadyan Acradyan AU Arcadyan Nature of relationship With the same ultimate parent company With the same ultimate parent company 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, 2021 is 1,276,111 thousand dollars. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:311) Table 8 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Nature of relationship The Company's subsidiary The Company's subsidiary With the same chairman Parent company Ending Balance Turnover rate 540,542 220,379 1,697,598 1.93 3.04 - 4,188,862 33.34 Parent company 62,366,178 (December 31, 2021) Name of Company The Company Counter-party CBN The Company UCGI The Company Cal-Comp Just and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries CEA Etrade and its subsidiaries HSI and its subsidiaries HSI and its subsidiaries HSI and its subsidiaries Arcadyan Arcadyan Arcadyan CNC CBN Compal Electronic, Inc. Compal Electronic, Inc. CEA CEB BCI and its subsidiaries HSI and its subsidiaries Compal Electronic, Inc. HSI and its subsidiaries CEB CEA CEB Compal Electronic, Inc. Compal Electronic, Inc. Etrade 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 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 Parent company Parent company With the same ultimate parent company With the same ultimate parent CIH and its subsidiaries Arcadyan Germany Arcadyan's subsidiary Arcadyan USA Arcadyan's subsidiary Arcadyan Vietnam Arcadyan's subsidiary Arcadyan Just and its subsidiaries With the same ultimate parent company With the same ultimate parent company Overdue Amount - Action taken - (In Thousands of New Taiwan Dollars) Amounts received in subsequent period 297,600 (Note 1) Allowance for bad debts - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 88,156 (Note 1) - - (Note 1) (Note 1) 62,366,178 (Note 1) 161,410 (Note 1) 134,253 (Note 1) - - (Note 1) (Note 1) 16,612,130 (Note 1) - (Note 1) 135,132 (Note 1) 448,708 (Note 1) 366,319 (Note 1) 1,843,015 (Note 1) 2,302,953 (Note 1) - (Note 1) (Note 1) 94,823 (Note 2) 1,360,434 (Note 2) (Note 2) - 1,854,400 (Note 2) - - - - - - - - - - - - - - - - - - 2.63 4.14 207,124 261,497 2.36 1,580,332 2.23 2,304,731 2.08 16,612,130 1,993,166 3.16 0.06 1,269,252 0.45 507,450 3.09 376,304 2.52 2,631,399 3,086,146 246,217 5.34 3.54 6.14 170,879 8.32 266,118 2,020,989 1,276,111 (Note 4) 2,028,930 (Note 5) 4.82 4.79 (Note 4) 4.78 182,739 (Note 6) - 12,530 Enhanced the collection 175,468 (Note 3) Note 1:Balance as of Mrach 4, 2022. Note 2:Balance as of Mrach 1, 2022. Note 3:Balance as of Mrach 9, 2022. Note 4:Other receivables due to purchasing on behalf of related parties. Note 5:Accounts receivables due to processing raw material. Note 6:Other receivables due to processing and sales of raw material. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:312) Table 9 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) Investor Company Investee Company The Company Kinpo&Compal Group Assets Development Corporation Bizcom Just CIH Panpal Gempal (In Thousands of New Taiwan Dollars/ shares) Original Investment Amount December 31, 2021 525,000 December 31, 2020 - Shares 52,500 Ending Balance Percentage of Ownership 70% Carrying Value 525,085 Net income (losses) of investee Share of profits/losses of investee 120 85 Note 36,369 36,369 100 100% 404,559 (19,042) (15,326) 1,480,509 1,480,509 48,010 100% 9,577,912 2,038,308 2,038,308 1,787,680 1,787,680 53,001 100% 37,410,192 3,196,352 3,196,352 Location Main Businesses and Products Taipei City City Real estate development leasing and related management business Houston, USA Warranty services and marketing of LCD TVs and notebook PCs Investment British Virgin Islands British Virgin Islands Investment Taipei City Investment 5,171,837 5,171,837 500,000 100% 5,120,741 19,461 (31,176) (Note 1) Taipei City Investment 900,036 900,036 90,000 100% 1,716,614 145,081 115,690 Kinpo Group management Taipei City Consultation, training services, etc. 3,000 3,000 300 38% 4,776 288 117 (Note 1) Ripal Unicore Lead-Honor Optronics. Co., Ltd. (“Lead-Honor”) CEH Shennona Taiwan Tainan City Taipei City Manufacturing of electric appliance and audiovisual electric products Management&Consultant, 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 60,000 60,000 6,000 100% 102,074 21,471 18,593 200,000 200,000 20,000 100% 101,881 (21,226) (23,402) 42,000 42,000 2,772 42% - 34 34 1 100% 3,262,334 - - - - 6,000 6,000 600 100% 3,120 382 347 Allied Circuit Taoyuan City Production and sales of PCB 395,388 395,388 10,158 20% 398,995 390,431 79,707 Maxima Ventures I, Inc. (“Maxima”) Aco Smartcare Lipo Holding Co., Ltd.(“Lipo”) CPE Starmems Crownpo Technology Inc. (“Crownpo”) Hong Ji Hong Jin Mactech Auscom Arcadyan FGH Shennona HSI CEP 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 County Taipei City - 1,260 - - - - - 90,000 90,000 100,000 52% 57,303 (31,249) (16,261) 489,450 489,450 98 49% 711,499 284,726 139,516 Investment 197,463 197,463 6,427 100% 767,803 1,706 1,706 35,000 - 3,500 35% 33,971 (2,940) (1,029) 149,547 149,547 3,739 33% 71,758 41,617 13,830 R&D of MEMS microphone related products Manufacturing, processing, and selling resistor chips, networking chips, diodes, multilayer ceramic capacitors, semiconductor devices, and selling electronic products 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% 1,136,788 359,218 252,821 89,224 39,395 41,445 89,224 39,395 22,068 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% 125,347 4,074 4,074 1,325,132 1,325,132 41,305 19% 2,493,682 1,787,544 351,746 British Virgin Islands Delaware, USA British Virgin Islands Poland Investment 2,754,741 2,754,741 89,755 100% 4,752,330 (62,830) (62,830) Medical care IOT business 32,665 32,665 2,600 100% 1,098 (92) (92) Investment 1,346,814 1,346,814 42,700 54% 57,547 (856,715) (300,169) Maintenance and warranty services of notebook PCs 90,156 90,156 136 100% (3,097) (20,160) (18,034) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:313) Table 9 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) (In Thousands of New Taiwan Dollars/ shares) Original Investment Amount December 31, 2021 112,000 December 31, 2020 42,000 Shares 9,100 Ending Balance Percentage of Ownership 91% Carrying Value Net income (losses) of investee Share of profits/losses of investee Note 58,858 (25,053) (22,724) 127,026 109,837 4,648 28% 37,824 28,574 7,873 5,729,757 5,529,757 20,015 100% (484,153) (425,641) (425,641) 2,636,051 2,636,051 90,820 100% 7,179,197 908,947 908,947 284,827 284,827 29,060 43% 682,558 32,744 14,204 295,000 295,000 29,500 100% 150,785 35,093 29,295 377,328 377,328 12,500 100% 228,858 43,721 43,721 943,922 943,922 31,253 35% 1,305,068 603,543 209,561 1,532,029 1,532,029 46,900 65% (184,795) 632,364 516,481 3,340 1,575 3,340 100 100% 679,564 116,378 116,378 1,575 50 100% 1,304,552 12,658 12,658 489,998 199,999 10,000 100% (37,303) 53,840 53,926 100,000 547,595 100,000 547,595 10,000 14,924 100% 21% 113,123 626,851 4,426 196,505 3,976 43,341 Investment 4,318,860 4,318,860 147,000 100% 6,580,283 (569,898) (569,898) 246,860 246,860 15,000 50% 330,604 24,917 12,585 89,669 37 - 100% 86,855 (1,700) (1,741) 60,000 60,000 20,000 33% 44,309 (46,608) (15,543) 155,076 155,076 3,446 30% 144,270 (22,602) (6,781) 279,202 279,202 8,192 4% 539,351 1,787,544 __________ 88,293,659 Investor Company Investee Company Location Main Businesses and Products The Company Hippo Screen Neurotech Co., Ltd. Taipei City Infinno Technology Corporation (“Infinno”) Hsinchu County HengHao Taipei City BCI CBN Rayonnant CRH Acendant Private Equity Investment Ltd. (“APE”) Etrade Webtek Forever UCGI Palcom Avalue CORE GLB CGSP ARCE British Virgin Islands Hsinchu County Taipei City British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Taipei City Taipei City New Taipei City British Virgin Islands New Taipei City Poland Taipei City Raypal Taipei City Panpal Arcadyan Hsinchu City Management & Consultant, 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 Manufacturing of PCs, computer periphery devices, and electronic components Investment R&D and sales of cable modem, digital setup box, and other communication products Manufacturing and sales of PCs, computer periphery devices, and electronic components Investment Investment Investment Investment Investment Manufacturing and retail sale of computers and electronic components Selling of mobile phones Manufacturing, processing, and import and export business of industrial motherboards 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 equipment and materials import and manufacturing Allied Circuit Taoyuan City Production and selling of PCB 148,263 148,263 2,927 6% 114,974 390,431 Gempal Others Arcadyan Hsinchu City boards Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing 306,655 306,655 9,279 4% 75,937 635,925 1,787,544 __________ 6,573,057 Investment gain(losses) recognized by Panpal Investment gain(losses) recognized by Panpal Investment gain(losses) recognized by Gempal (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:314)(cid:314) Table 9 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Location Main Businesses and Products December 31, 2021 December 31, 2020 Gempal Allied Circuit Taoyuan City Production and selling of PCB 53,645 53,645 Original Investment Amount Ending Balance Percentage of Ownership 6% Carrying Value 126,471 Net income (losses) of investee 390,431 Shares 3,220 Hong Ji Others Arcadyan Hsinchu City boards Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing 306,655 306,655 9,279 4% 175 635,925 1,787,544 Allied Circuit Taoyuan City Production and selling of PCB 10,389 10,389 851 2% 28,554 390,431 Hong Jin Arcadyan Hsinchu City boards Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing 131,942 131,942 4,609 2% 300,876 1,787,544 Just CDH (HK) Hong Kong Investment 1,724,395 1,724,395 62,298 100% 7,336,510 2,033,586 CII CPI CII Smart AEI MEL MTL British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 255,902 255,902 9,245 100% 232,596 (469) 13,840 13,840 500 100% 831,308 2,720 28 28 1 100% 350 (3) U.S.A Sales and maintenance of LCD TVs 27,680 27,680 1,000 100% 43,364 (491) U.S.A Investment 227,917 227,917 U.S.A Investment 28 28 - - 100% 188,891 25 100% 28 - CIH CIH (HK) Hong Kong Investment 2,070,533 2,070,533 74,803 100% 36,259,088 3,482,248 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 203,448 203,448 7,350 100% 98,697 373 28 28 1 100% 430,130 7,570 412,432 412,432 14,900 100% 412,895 - 141,168 141,168 5,100 51% 25,433 187 1,854,560 1,854,560 67,000 100% 221,043 (869,094) 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 Investment gain(losses) recognized by Just Investment gain(losses) recognized by Just Investment gain(losses) recognized by Just Investment gain(losses) recognized by CII 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 Investment gain(losses) recognized by HSI (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:305) Table 9 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) (In Thousands of New Taiwan Dollars/ shares) Investor Company HSI Goal Investee Company Main Businesses and Products Investment December 31, 2021 351,536 December 31, 2020 351,536 Shares 12,700 Location British Virgin Islands Original Investment Amount Ending Balance Percentage of Ownership 100% Carrying Value 304,117 Net income (losses) of investee Share of profits/losses of investee Note 12,379 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 1,854,560 1,854,560 67,000 100% 221,043 (869,094) 351,536 351,536 12,700 100% 305,603 12,379 BCI CMI British Virgin Islands Investment 2,237,098 2,237,098 80,820 100% 4,503,395 578,634 PRI British Virgin Islands Investment 276,800 276,800 10,000 100% 2,675,803 330,312 CORE BSH British Virgin Islands Investment 4,068,960 4,068,960 147,000 100% 6,580,283 (569,898) BSH Mithera Cayman Islands Investment 138,400 138,400 - 99% 129,444 (3,059) HSI CIN British Virgin Islands Investment 1,024,160 1,024,160 37,000 46% 467,614 (856,715) U.S.A Manufaturing 226,421 - - 1 100% 190,352 (35,101) - - 100% - - 100% 16,398 13,289 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 55,360 55,360 Webtek Etrade British Virgin Islands Investment 692,000 692,000 25,000 35% (54,057) 632,364 Unicore Raycore Taipei City Animal medication retail and wholesale 40,692 25,500 588 100% 29,252 (1,629) Arcadyan Arcadyan Holding British Virgin Islands Investment 2,219,782 2,359,732 64,780 100% 2,323,746 335,159 Arcadyan USA U.S.A Sales of wireless network products 23,055 23,055 1 100% 162,359 83,123 Arcadyan Germany Germany Technology support and sales of wireless network products 1,125 1,125 0.5 100% 76,914 8,474 Arcadyan Korea Korea Sales of wireless network products 2,879 2,879 20 100% 11,899 (436) Zhi-Bao Taipei City Investment 48,000 48,000 34,980 100% 415,117 6,825 TTI Taipei City R&D and sales of household digital products 308,726 308,726 25,028 61% 371,174 (219,951) Investment gain(losses) recognized by HSI Investment gain(losses) recognized by IUE Investment gain(losses) recognized by Goal Investment gain(losses) recognized by BCI Investment gain(losses) recognized by BCI Investment gain(losses) recognized by CORE Investment gain(losses) recognized by BSH Investment gain(losses) recognized by BSH Investment gain(losses) recognized by BSH Investment gain(losses) recognized by Forever Investment gain(losses) recognized by Forever Investment gain(losses) recognized by Webtek Investment gain(losses) recognized by Unicore 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 Investment gain(losses) recognized by Arcadyan (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:306) Table 9 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) Investor Company Investee Company Arcadyan AcBel Telecom Location Taipei City Main Businesses and Products Investment December 31, 2021 December 31, 2020 23,000 23,000 Shares 4,494 Original Investment Amount Ending Balance Percentage of Ownership 51% (In Thousands of New Taiwan Dollars/ shares) Carrying Value Net income (losses) of investee Share of profits/losses of investee Note 32,638 (121) Arcadyan UK UK Technical support of wireless network products 1,988 1,988 50 100% 4,206 793 Arcadyan AU Australia Sales of wireless network products 1,161 1,161 50 100% 41,705 3,213 Arcadyan RU Russia Sales of wireless network products 7,672 2,492 - 100% 5,856 (1,361) CBN Hsinchu County Sales of communication and electronic components 11,925 11,925 533 1% 12,642 32,744 Arcadyan and Zhi-Bao Arcadyan Brasil Brazil Sales of wireless network products 81,593 81,593 968 100% (14,827) (148) Arcadyan India India Sales of wireless network products 13,507 - 3,500 100% 11,389 (1,448) Arcadyan Holding Sinoprime British Virgin Islands Investment 804,104 527,304 29,050 100% 854,011 138,028 Arch Holding British Virgin Islands Investment 304,784 304,784 35 100% 1,045,972 186,372 TTI Quest Samoa Investment 33,216 33,216 1,200 100% (64,119) (96,963) TTJC Japan Sales of household digital electronic products 9,626 9,626 0.7 100% 3,945 (1,325) Quest Exquisite Samoa Investment 32,386 32,386 1,170 100% (76,480) (96,967) Sinoprime Arcadyan Vietnam Vietnam Manufacturing of wireless network products 802,720 525,920 - 100% 849,942 138,028 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 19% 311,536 32,744 257,454 257,454 8,651 41% 152,994 76,203 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 346,000 346,000 12,500 59% 228,858 76,203 87,220 87,220 3,151 100% 39,230 2,243 Rayonnant(HK) Hong Kong Investment 498,240 498,240 18,000 100% 335,238 73,960 (Note 2) 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 Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Holding Investment gain(losses) recognized by Arcadyan Holding Investment gain(losses) recognized by TTI Investment gain(losses) recognized by TTI Investment gain(losses) recognized by Quest Investment gain(losses) recognized by Sinoprime 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. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:307) Table 9 The information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China): (December 31, 2021) (In Thousands of New Taiwan Dollars/ shares) Investor Company HHT HHA Investee Company Main Businesses and Products Investment December 31, 2021 1,429,235 December 31, 2020 1,429,235 Shares 46,882 Location British Virgin Islands Original Investment Amount Ending Balance Percentage of Ownership 100% Carrying Value (648,644) Net income (losses) of investee (476,081) HHA HHB British Virgin Islands Investment 1,297,695 1,297,695 46,882 100% (648,584) (476,081) 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% 5,410 (271) 7,016 7,016 20 100% 6,022 (124) Starmems Hsinchu County R&D of MEMS microphone related products 10,000 - 1,000 10% 9,706 (2,940) FGH Wah Yuen Technology Holding Ltd. and its subsidiaries Mauritius Investment 2,484,432 2,484,432 95,862 37% 4,815,888 (62,723) GLB RBL New Taipei City Detectors and test strip - 6,500 - 0% - (334) Mactech Taiwan Intelligent Robotics Company, LTD. Taipei City Manufacturing of equipment 43,200 43,200 2,160 17% 16,763 (17,477) Share of profits/losses of investee Note Investment gain(losses) recognized by HHT Investment gain(losses) recognized by HHA Investment gain(losses) recognized by CBN Investment gain(losses) recognized by CBN Investment gain(losses) recognized by CBN Investment gain(losses) recognized by FGH Investment gain(losses) recognized by GLB Investment gain(losses) recognized by Mactech (Note 3) 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 subsidiary was incorporated on March 25, 2021. Note 3: Liquidation was completed in July, 2021. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:308) Table 10 Information on investment in Mainland China: (December 31, 2021) (i) The names of investees in Mainland China, the main businesses and products, and other information: Accumulated outflow of investment from Taiwan as of January 1, 2021 1,024,160 Investment flows Outflow - Inflow - Accumulated outflow of investment from Taiwan as of December 31, 2021 1,024,160 Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 689,977 100% 689,977 Book value 2,621,488 Accumulated remittance of earnings in current period - (In Thousands of New Taiwan Dollars/ shares) Total amount of paid-in capital 1,024,160 Method of investment (Note 1) 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 CST Main businesses and products Manufacturing and sales of monitors Manufacturing and sales of notebook PCs, mobile phones, and Digital products Manufacturing of notebook PCs Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technology service Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self -produced products Manufacturing of notebook PCs Maintenance and warranty service of notebook PCs Production and processing chip resistors, 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(cid:414) 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 Manufacturing of notebook PCs Manufacturing and sales of LCD TVs Manufacturing of notebook PCs International trade and distribution of computers and electronic components - - 553,600 (Note 2) 553,600 332,160 (Note 2) 332,160 260,395 (Note 2) (Note 3) - - - 68,467 (Note 2) (Note 3) - 27,680 (Note 2) 27,680 8,680 (Note 2) (Note 3) 885,760 (Note 1) 368,974 - - - - - - - - - - 553,600 (22,978) 100% (22,978) 77,074 332,160 162,364 100% 162,364 4,795,313 555,435 100% 555,435 568,446 - - - - 51% - (43,020) - 27,680 27,737 100% 27,737 (158,184) - (19,533) 100% (19,533) (45,016) 368,974 256,101 43% 110,585 535,940 - - - 553,600 (Note 1) 40,690 - - 40,690 175,713 48% 83,640 542,279 - 332,160 (Note 2) 332,160 334,928 (Note 1) 334,928 664,320 (Note 2) 664,320 38,752 (Note 2) 38,752 - - - - - - - - 332,160 881,782 100% 881,782 8,676,307 334,928 61,872 100% 61,872 2,838,177 664,320 2,020,686 100% 2,020,686 22,323,113 38,752 1,442 100% 1,442 48,140 - - - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:309) Table 10 Information on investment in Mainland China: (December 31, 2021) (i) The names of investees in Mainland China, the main businesses and products, and other information: Accumulated outflow of investment from Taiwan as of January 1, 2021 141,168 Investment flows Outflow - Inflow - Accumulated outflow of investment from Taiwan as of December 31, 2021 Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 141,168 187 51% 96 Accumulated remittance of earnings in current period - Book value 57,161 (In Thousands of New Taiwan Dollars/ shares) Total amount of paid-in capital 276,800 Method of investment (Note 2) Name of investee Sheng Bao Precision Electronics (Taicang) Co., Ltd. CIJ CDE CIS CEC CMC CEQ Main businesses and products 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 Changbao Electronic Technology (Chongqing) Co., Ltd. Rayonnant (Taicang) CCI Nanjing CDCN CWCN Hanhelt Arcadyan SVA Arcadyan Production and marketing of magnesium alloy molding Manufacturing and sales of aluminum alloy and magnesium alloy products 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 R&D and manufacturing of electronic communication equipment R&D and sales of wireless network products 431,808 (Note 2) 431,808 415,200 (Note 2) (Note 3) 2,237,098 (Note 1) 2,237,098 2,214,400 (Note 2) (Note 3) - - - - 22,144 (Note 2) (Note 3) - 276,800 (Note 1) 276,800 - 1,660,800 (Note 2) 317,102 498,240 (Note 2) 346,000 747,360 (Note 1) 608,960 160,544 (Note 1) 160,544 1,356,320 (Note 1) 525,920 55,360 (Note 1) 55,360 - - - - - - - - - - - - - - - - - - - - 431,808 1,692,951 100% 1,692,951 2,235,113 - 1,692,304 100% 1,692,304 2,202,258 2,237,098 578,634 100% 578,634 4,503,395 - - 578,669 100% 578,669 4,475,331 (51) 100% (51) 22,152 276,800 330,312 100% 330,312 2,675,803 2,287,115 218,835 37% 80,137 5,443,063 317,102 (222,019) 37% (81,303) 726,504 346,000 73,960 100% 73,960 335,779 608,960 (40,952) 100% (40,952) (930,657) 160,544 1,737 100% 1,737 87,829 525,920 373,471 100% 373,471 816,200 55,360 (476) 100% (476) 2,380 - - - - - - - - - - - - - - 224,208 (Note 1) 509,866 - (Note 7) 138,400 (Note 9) 371,466 6,442 100% 6,442 28,344 (Continued) Compal Precision Module (Jiangsu) Co., Ltd. Manufacturing and selling of magnesium alloy injection molding 11,625,600 (Note 2) 2,287,115 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (cid:306)(cid:305)(cid:310) Table 10 Information on investment in Mainland China: (December 31, 2021) (i) The names of investees in Mainland China, the main businesses and products, and other information: Accumulated outflow of investment from Taiwan as of January 1, 2021 304,784 (Note 8) 31,832 Total amount of paid-in capital 344,616 Method of investment (Note 1) 92,728 (Note 1(cid:739) 10) 1,107,200 (Note 1) 1,101,747 Name of investee CNC THAC HengHao HengHao Optoelectronic Technology (Kunshan) Co., Ltd. (“HengHao Kunshan”) Main businesses and 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 415,200 (Note 2) 179,893 - (Note 12) (ii) Limitation on investment in Mainland China: (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of December 31, 2021 Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) 304,784 186,372 100% 186,372 Accumulated remittance of earnings in current period - Book value 1,045,972 Investment flows Outflow - Inflow - - - - 31,832 (96,967) 100% (96,967) (76,950) 1,101,747 (477,802) 100% (477,802) (775,079) 179,893 1,687 100% 1,687 126,264 - - - Names of Company The Company Arcadyan HengHao Accumulated Investment in Mainland China as of December 31, 2021 Investment Amounts Authorized by Investment Commission of Ministry of Economic Affairs 15,017,424 (US$542,537) 21,254,309 (US$767,858) (In Thousands of USD) Limitation on investment in Mainland China by Investment Commission of Ministry of Economic Affairs (Note 6) (Note 5) 708,082 1,297,417 (US$25,581) (US$46,872) 708,082 (US$25,581) 1,297,417 (US$46,872) 7,593,661 (Note 13) Note 1: Note 2: Note 3: Note 4: Note 5: Note 6: Note 7: Note 8: Note 9: Note 10: Note 11: Note 12: Indirectly investment in Mainland China through companies registered in the third region. Indirectly investment in Mainland China through an existing company registered in the third region. 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. The investment income (loss) was determined based on the financial report audited by the CPAs. 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. 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. Arcadyan paid US$18,420 thousand and acquired 100% shares of SVA Arcadyan from Accton Asia through Arcadyan Holding in 2010. Arcadyan paid US$8,561 thousand and acquired 100% shares of CNC from Just through Arcadyan Holding in 2007. SVA Arcadyan decreased its capital amounting to US$15,000 thousand to offset accumulated losses in March 2009, and returned its capital amounting to US$5,000 thousand on April 7, 2021. Arcadyan’s subsidiary, TTI, obtained the control over THAC with US$1,150 thousand on February 28, 2013 (the date of stock transferring). The amounts in New Taiwan Dollars were translated at the exchange rates at the balance sheet date or the average exchange rate. The Company had an accumulated investment amounting to US$7,350 thousand in the previous years. In the first half of 2014, HengHao paid the Company and LG US$3,184 thousand and US$3,315 thousand, respectively, for organization restructure, to obtain 100% ownership of Lucom. Note 13: The net equity of HengHao is negative at December 31, 2021. (iii) Significant transactions: For the year ended December 31, 2021, 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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