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2023 ReportStock Ticker 2324 2022 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 8, 2023 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 9 11 39 116 117 118 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 118 3.7 For the most recent year and as of the date of publication of the annual report, changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 121 122 3.8 Relationship among the Top Ten Shareholders 3.9 Ownership of shares in Affiliated Enterprises IV. Capital Overview 124 128 128 129 131 131 131 131 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 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 132 158 178 179 179 182 184 2 VI. Financial Information 185 189 195 196 196 196 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 197 198 199 199 200 201 204 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 205 237 237 237 237 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, We sincerely thank all shareholders for your long-term support of Compal. 2022 was still a challenging year for most of the enterprises! The global economy and industry environment were under severe changes during the year, including the war, energy crisis, inflation, and continuous conflict between the U.S. and China. We faced difficult situations from the shortage of supplies, port congestion, demand over supply at the beginning of the year to the increasing inventory and decline of demand during the end of the year. In addition, the global economic momentum was weak, causing great challenges to business operations. Nevertheless, Compal is able to maintain business stability and continues to invest in innovation and prospective planning, in order to achieve the objective of long-term competitiveness of the company. We would like to present the following summary of our financial and business results for 2022 and the business outlook for 2023: Financial and Business Results Compal’s 2022 consolidated revenue was NT$1,073,246 million, a decline of 13% from last year. Nevertheless, with continuous effort in the product mix and efficiency improvement, the annual gross margin increased to 3.8% an increase of 3.4% from last year. The consolidated operating income was NT$9,219 million, and the net income after tax attributable to the parent company was NT$7,288 million, a decline of 42% from last year, and the earnings per share was NT$1.67. As the world heads toward the post-pandemic era, the market demand for computers and consumer electronic products has started to slow down in comparison to the last two years. As a result, the 5C product shipment of Compal in 2022 also indicated a decline from last year to 94 million units. Fortunately, we have been able to actively respond to such market change since the middle of last year through the measures of reduction of inventory and adjustment of production capacity, thereby allowing the operation and capital management to maintain stable during such downtime of the industry. In terms of the development of new businesses, Compal has been able to reach double-digit growths in the revenues from the businesses of servers, automotive electronics, wearable devices, mobile phones and 5G communication devices, promoting our diversification to move forward stably and continuously. We believe that these new businesses will be trend of the industry development and will also become the great support for continuous growth of Compal. Investment in Innovation and Business Planning Under the economic downturn, we uphold the long-term perspective and continue to invest in innovation and prospective business planning. Compal has participated in the German iF Design award for a long period of time, and continues to achieve outstanding performance in the global enterprise innovation competition ranking. In 2022, both the health care system developed by the medical team of Compal and the brainwave detection system developed by the subsidiary have received the honor of national class award of “National Innovation Award”. With regard to the business planning, Compal has launched numerous deep-rooted investment plans in Taiwan, 4 including the group’s headquarter smart innovation park at Beitou Shilin Technology Park in Taipei City, the medical long-term care facility building at Ruifang of New Taipei City, and the PC and 5G AIoT R&D center officially established in Kaohsiung City at southern Taiwan. While facing the trend of global supply chain diversification, to cope with the customer demands, Compal has also accelerated investment planning in Vietnam. In 2022, we have acquired the land use right of 40 ha of land at Thai Binh province, Vietnam, and we expect to establish the third factory of Compal in Vietnam. All of the above are important projects for Compal to establish long-term competitiveness and to achieve business objectives in a greater scale. Corporate Sustainable Development To strengthen corporate governance, to implement corporate social responsibility and to head toward the goal of sustainability, Compal has established the Sustainability Committee under the board of directors in 2022. In addition, tasks forces have also been established with respect to different aspects of environment (E), society (S) and governance (G), in order to implement ESG works in daily operation of the company. With regard to the global 2050 net zero emissions, Compal has also announced and established the medium and long term carbon reduction targets for the company. Through the method of “big-leading-small”, we have started to promote the greenhouse gas inventory of subsidiaries and to implement sustainability education and responsible supply chain management on the supply chain. In 2022, Compal was selected and ranked to be one of the “Taiwan Top100 Sustainable Benchmark Enterprises” by the Taiwan Institute for Sustainable Energy, and also received the honor of “Happiness Enterprise Award” presented by Job Bank for three consecutive years. In addition, Compal has received the rating of A in the MSCI ESG Rating. Furthermore, Compal has been selected to be one of the constituent stocks of FTSE4GOOD Index. All of above demonstrates the public’s recognition on Compal’s continuous effort in sustainable operation. Future Outlook and Plan After three years of pandemic, countries around the world are gradually relaxing epidemic control measures, and people’s live and industry economy are also recovering back to normal. Nevertheless, the global inflation pressure, raising interest rates among countries and geopolitics continue to develop in 2023, bringing uncertainties to the economy. For companies relying on export businesses, it will still be a challenging year. The market research institutions’ predictions on the economy and industry in 2023 are still conservative; however, the economy during the second half of the year is expected to be better than the first half of the year. Despite the current economic downtime, we are still optimistic about the development of new technologies and markets as innovative technologies are the key to recovery and future growth. While facing challenges, Compal will respond actively and seize opportunities. For 2023, the key business focus will be to continue the long-term promotion of the four main aspects of “Diversity, Digitization, Automation, Team Organization” in order to face the fast changing environment. In addition, we will further enhance the implementation of “Innovation, Talent Cultivation, Execution”, in order to establish long-term competitive advantages. Although the beginning of this year has been challenging, we expect that the business in 2023 will grow progressively, and the new businesses of servers, automotive electronics, medical care and 5G communication devices will also develop further stably. With regard to the sustainable development, we look forward to further extend our influence in order to expand 5 the concept and action of ESG to our customers and cooperating supply chain. In addition, we plan to actively participate in the global initiatives, thereby responding to the expectation of all stakeholders on Compal and achieving the long-term sustainable value of the company. 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: 2021 • Selected to take part in the CDP climate change program for the 8th consecutive year (2014-2021) and received an overall CDP rating of B- at the Management Level for 2021. • 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. • 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 9 consecutive years (2014-2022). In 2022, received a score of B in the CDP climate change and were rated at the management level for the water questionnaire. • 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. Selected as a constituent stock of “Taiwan High Salary 100 Index” and “Taiwan Employment 99 Index”. Selected into the FTSE4GOOD Index and the FTSE4GOOD TIP Taiwan ESG Index. • Ranked 4th in CommonWealth Magazine’s “Top-2000 Manufacturers”. Ranked 1345th on the Forbes Global 2000. Ranked 317th on the Fortune Global 500. Ranked the Gold Award in the Technology R&D of 2022 Happiness Enterprise online voting by 1111. The Company acquired Poindus Systems Corp. (Poindus) through tender offer to expand Industrial PC • 7 business. • The Company signed the contract of “New Taipei City RuiFang District Medical & Long-Term Care Facility BOT+BTO” with New Taipei City Government. • The Company obtained the land use rights of 40 ha (hectare) located in the Thai Binh province, Vietnam to further expand the production in Vietnam. The Company’s share capital reached TWD 44.1 billion in 2022. The Company’s consolidated revenue reached TWD 1,073.2 billion in 2022. • • 2023 • Kinpo-Compal Group Headquarter, located in Beitou Shilin Technology Park, was officially ground breaking in February 2023. • • 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”. • Won 17 awards at the 2023 “iF Design Awards”. • Selected into the“Taiwan Tech High Dividend Index”. • Ranked among the top 21%-35% in the TWSE-listed companies in the 9th round of "Corporate Governance Evaluation” organized by Taiwan Stock Exchange and Taipei Exchange. • Ranked 6th 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 May 8, 2023) Shareholders Board of Directors President’s Office Remuneration Committee Audit Committee Risk Management 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 ESG 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 Risk Management Committee Implements risk management related affairs 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 Implements preventive measures against insider trading Promotes and executes CSR-related affairs Implementing a comprehensive occupational health and safety program ESG Office Implements sustainability-related plans PCBG 1 PCBG 2 GOBG SDBG PCOBG Responsible for the R&D, production, quality control and the sale of PC products Responsible for the R&D, production, quality control and the sales of non-notebook products. Responsible for production, quality control, and worldwide operation affairs Responsible for the R&D, production, quality control, and the sale of smart devices Responsible for production and quality control of 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 election date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career/academic achievements Shareholding Shareholding Shareholding Shareholding Shares Percentage Shares Percentage Shares Percentage Shares Percentage (%) (%) (%) (%) Chairman Sheng-Hsiung Hsu Male 66-80 2021.8.27 3 years 1984.04.16 8,975,401 0.20% 8,975,401 0.20% 8,975,401 0.20% 17,107,025 0.39% Vice-Chairman Jui-Tsung Chen Male 66-80 2021.8.27 3 years 1992.04.30 35,352,587 0.80% 35,352,587 0.80% 35,352,587 0.80% 1,069,405 0.02% Director Binpal Investment Co., Ltd. Representative: Wen-Being Hsu Director Kinpo Electronics, Inc. - Male 81-90 - Representative: Chieh-Li Hsu Male 36-50 Director Charng-Chyi Ko Male 81-90 Director Sheng-Chieh Hsu Male 66-80 2018.6.22 5,000,000 0.11% 5,000,000 0.11% 5,000,000 0.11% 1984.04.16 5,000,000 0.11% 5,001,000 0.11% 5,001,000 0.11% 1990.06.22 151,628,692 3.44% 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% 4,117,569 0.09% 631 0.00% 2021.8.27 3 years 2021.8.27 3 years 3 2021.8.27 years 1984.04.16 7,896,867 0.18% 7,896,867 0.18% 7,896,867 0.18% 30,645 0.00% 3 2021.8.27 years 1997.05.29 9,204,201 0.21% 9,204,201 0.21% 9,204,201 0.21% 8,152,928 0.18% Honorary Doctorate, National Taiwan Normal University Chair of Kinpo Electronics, Inc. Honorary Doctorate, National Cheng Kung University Chair of Arcadyan Technology Corp. National Tao-Yuan Sr. Vocational Agricultural and Industrial School Director of BAOTEK, Inc. Master of International Business, Waseda University, Japan Chair and President of AcBel Polytech Inc. Bachelor of Business Dept., National Taiwan University PhD, Lincoln University, USA Chair of Taiwan Biotech Co., Ltd. Bachelor of Architectural Dept., Tam- Kang University Director of Kinpo Electronics Inc. April 23, 2023 Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Title Name Relationship Selected Current Position at COMPAL and Other Companies (Note 5) Director Director Sheng-Chieh Hsu Chieh-Li Hsu Brother’s father and son (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) Chairman Sheng-Hsiung Hsu father and son (Note 5) N/A N/A N/A (Note 5) Chairman Sheng-Hsiung Hsu Brothers 11 Title/ Name/ Nationality (Note 1, 2) Gender/ Age Elected Date Term First Elected Date Shareholding at election date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career/academic achievements Shareholding Shareholding Shareholding Shareholding Shares Percentage Shares Percentage Shares Percentage Shares Percentage (%) (%) (%) (%) Director Yen-Chia Chou Male 66-80 2021.8.27 3 years 1987.06.13 8,022,874 0.18% 8,022,874 0.18% 8,022,874 0.18% 2,502,768 0.06% Director Chung-Pin Wong Male 51-65 2021.8.27 3 years 2007.06.15 6,618,618 0.15% 6,618,618 0.15% 6,618,618 0.15% 1,398 0.00% Director Chiung-Chi Hsu Male 51-65 2021.8.27 3 years 1994.04.23 2,117,731 0.05% 2,117,731 0.05% 2,117,731 0.05% 30,000 0.00% Director Ming-Chih Chang Male 51-65 2021.8.27 Director Anthony Peter Bonadero Male 51-65 2021.8.27 Director Sheng-Hua Peng Male 51-65 2021.8.27 3 years 3 years 3 years Independent Director Min-Chih Hsuan Male 66-80 2021.8.27 3 years Independent Director Duei Tsai Male 66-80 2021.8.27 3 years 2018.6.22 1,919,489 0.04% 1,919,489 0.04% 1,919,489 0.04% 0 0.00% 2018.6.22 0 0.00% 0 0.00% 0 0.00% 0 0.00% 2018.6.22 835,000 0.02% 835,000 0.02% 835,000 0.02% 0 0.00% 2012.6.22 0 0.00% 0 0.00% 0 0.00% 0 0.00% 2012.6.22 0 0.00% 0 0.00% 0 0.00% 0 0.00% 12 Bachelor of Geology Dept. National Taiwan University Director of Kinpo Electronics Inc. Master of Management Science, National Chiao- Tung University Chair of Compal Broadband Networks, Inc. Master of Golden Gate University, San Francisco, USA Director of I PAO Bearing Co., Ltd. Electrical Engineering Dept., Ming Chi Institute of Technology Director of Mactech Co., Ltd. Texas A&M University Executive Vice-President of Auscom Engineering Inc. Master of Electronics Engineering, National Taiwan University Director of Arcadyan Technology Corp. Bachelor of Electrical Engineering Dept., National Chiao Tung University Chair and President of United Microelectronics Corp. Ph.D., Electrical Engineering, National Taiwan University Independent Director of Selected Current Position at COMPAL and Other Companies Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Title Name Relationship (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A (Note 5) N/A N/A N/A Title/ Name/ Nationality (Note 1, 2) Gender/ Age Elected Date Term First Elected Date Shareholding at election date Current shareholding Shares held by spouse and underage children Current shareholding Shares held by proxy Major career/academic achievements Shareholding Shareholding Shareholding Shareholding Shares Percentage Shares Percentage Shares Percentage Shares Percentage (%) (%) (%) (%) Selected Current Position at COMPAL and Other Companies Spouse or relatives of second degree or closer acting as Directors, Supervisors, or department heads Title Name Relationship Independent Director Wen-Chung Shen Male 66-80 2021.8.27 3 years 1998.4.8 2,836,000 0.06% 2,836,000 0.06% 2,836,000 0.06% 2,315,000 0.05% 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. Wen-Chung Shen served as Director from April 22, 1998 to June 22, 2018. 4. Director Sheng-Chieh Hsu held 2,839,000 shares (0.06%) through proxies. Taiwan High Speed Rail Corporation Bachelor of Electrical Engineering Dept., National Taiwan University Director of Compal Electronics, Inc. (Note 5) N/A N/A N/A 5. Selected Current Positions as below: Title Name Selected Current Positions Chairman: Kinpo Electronics, Inc., Cal-Comp Electronics(Thailand) Public Company Limited, Cal-Comp Electronics and communications Co., 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 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., 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 Precision (Thailand) 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 13 Chairman Sheng-Hsiung Hsu Title Name Selected Current Positions International Ltd., Smart International Trading Ltd. Group CEO: Kinpo Electronics, Inc. President: Kinpo Group Management Consultant Company, Cal-Comp Precision Holding Co., Ltd. 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, Vice Chair of Straits Exchange Foundation, Vice-Chair of Sinocon Industrial Standards Foundation 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., River Regeneration and Rejuvenation Biotechnology Co. Ltd., Kinpo&Compal Group Assets Development Corporation, Compal Ruifang Health Assets Development Corporation, Ray- Kwong Medical Management Consulting Co., Ltd., Compal System Trading (Kunshan) Co., Ltd., Compal Smart Device (Chongqing) Co., Ltd., Director: 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 Americas (US) Inc., Compal Display Holding (HK) Limited, Compal Electronics International Ltd., Compal Electronics N.A. Inc., Compal Electronics (Holding) Ltd., Compal International Ltd., Compal 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. 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., Yuanbao Investment Co., Ltd. Director: AcBel Polytech Inc., CastleNet Technology Inc., Crownpo Technology Inc., iHELPER Inc., Norm Pacific Automation Corp., Teleport Access Services, Inc., XYZprinting, Inc., Kinpo Group Management Consultant Company, Cal-Comp Asset Management, Inc., Prudence Venture Investment Corp., 14 Vice Chairman Jui-Tsung Chen Director Director Representative of Binpal Investment Co., Ltd.: Wen-Being Hsu Kinpo Electronics, Inc. Title Name Selected Current Positions NTNU Innovation Investment Holding Company Representative of Kinpo Electronics Inc.: Chieh-Li Hsu Chairman: AcBel Polytech Inc., AcSacca Solar Energy Co., Ltd., AcTel Power Co.,Ltd., AcGile EV Power Inc., KangYang New Energy Co., Ltd., AcRay Energy Co., Ltd., AcTek Energy Co., Ltd., AcLeap Power Inc., Sumray Power Company, 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: CastleNet Technology Inc., The Eslite Spectrum Corporation, ARCE Therapeutics, Inc., Raypal Biomedical Co., Ltd., VesCir Ltd., QBit Semiconductor Ltd., Shangbao Enterprise Inc., XYZprinting, Inc., Melvita Taiwan Ltd., Ginza Sakoh Taiwan Co., Ltd., Kinpo&Compal Group Assets Development Corporation, Compal Ruifang Health 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 Industria De Semicondutores S.A., Cal-Comp Precision (Malaysia) SDN. BHD., Cal-Comp Precision (Thailand) Limited, 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 Remuneration Committee Member: Winbond Electronics Corporation Audit Committee Member: Winbond Electronics Corporation Chief Strategy Officer: Cal-Comp Electronics and Communications Co., Ltd. President: AcBel Polytech Inc., Kinpo&Compal Group Assets Development Corporation, AcBel Electronic(Dong Guan) Co., Ltd., AcBel Electronic (Wuhan) Co., Ltd., Acbel (USA) Polytech Inc., Acbel Polytech Philippines, Inc. Other: Vice-Chair of Taiwan Electrical and Electronic Manufacturers' Association, Director of Chinese National Federation of Industries, Director of Importers and Exporters Association of Taipei, Director of The Third Wednesday Club 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., Long Yee Investment Co. Ltd., Taiwan Venture Capital Co., Ltd., Yinfeng International, Inc., Taiwan Chariston AMC Corp., Ltd, Twin Luck Global Company Ltd. Director Charng-Chyi Ko Vice-Chairman: OmniHealth Group, Inc. Director: Kinpo Electronics, Inc., Formosan Union Chemical Corp., Chang Yao Technology Inc., 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 15 Title Name Selected Current Positions Director Sheng-Chieh Hsu Development Corporation, Kinpo Electronics (China) Co., Ltd., Dongguan Kaipo Electronics Co., Ltd., Kinpo International Ltd. Chairman: Integrate Investment Corp. Director: Cal-Comp Electronics (Thailand) Public Company Limited, Cal-Comp Electronics and communications Co., Ltd., Kinpo&Compal Group Assets Director Yen-Chia Chou Director Chung-Pin Wong Director Chiung-Chi Hsu Director Ming-Chih Chang Supervisor: Gempal Technology Corp., Panpal Technology Corp., Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd. Chairman of Development Executive Committee: Kinpo&Compal Group Assets Development Corporation Chairman: Sceptre Industry Co., Ltd., Mega Industry Co., Ltd. Director: 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., Compal USA (Indiana), 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, Compal Ruifang Health 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., Auscom Engineering Inc., Bizcom Electronics, Inc., Compal Connector Manufacture Ltd., HengHao Holdings A Co., Ltd., HengHao Holdings B Co., Ltd., Primetek Enterprises Ltd., Shennona Corporation, Sirqul Inc. Supervisor: Hong Ya Technology Corporation President: Compal Electronics, Inc., Gempal Technology Corp., Panpal Technology Corp., Hong Ji Capital Co., Ltd., Hong Jin Investment Co., Ltd. Sustainability Committee Member: Compal Electronics, Inc. Risk Management Committee Member: Compal Electronics, Inc. Chairman: Full Power Investment Co., Ltd. Director: E-Bow Bearing Co., Ltd., Juan Hsin Bao Hardware co., Ltd., Jin Yongxiang co., Ltd. Director: Mactech Co., Ltd., Panpal Technology Corp., Kunshan Botai Electronics Co., Ltd., CGS Technology (Poland) Sp. z o.o. 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 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. 16 Title Name Director Anthony Peter Bonadero Director Sheng-Hua Peng Independent Director Min Chih Hsuan Independent Director Duei Tsai Selected Current Positions Executive Vice-President: Compal Electronics, Inc. Executive Vice-President: Auscom Engineering Inc. Chief Sustainability Officer of Sustainable Committee: Compal Electronics, Inc. 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., 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: SIPP, Inc., Meribank Biotech Co., Ltd., Meridigen Biotech Co., Ltd., Htsensortek 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. Risk Management Committee Member: Compal Electronics, Inc. Director: Daai Satellite TV Co., Ltd. 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., Starlux Airlines Co., Ltd. Audit Committee Member: Compal Electronics, Inc., Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd., Starlux Airlines Co., Ltd. Sustainability Committee Member: Compal Electronics, Inc., TTY Biopharm Company Ltd. Risk Management Committee Member: Compal Electronics, Inc. Independent Director Wen-Chung Shen Chairman: Her Tuo Co., Ltd. Remuneration Committee Member: Compal Electronics, Inc. Audit Committee Member: Compal Electronics, Inc. Sustainability Committee Member: Compal Electronics, Inc. Risk Management 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. (8.29%), Panpal Technology Corp. (4.64%), GEBO Limited (3.43%), Lai-Shun Shen Tsai (2.79%), Ho Bao Investment Co., Ltd. (2.00%), Ruey Shinn Co., Ltd. (1.87%), Li Chu Tsai (1.45%),Kun-Chao Shen (1.44%), UBS Taipei Branch is subject to Li Chu Tsai trust property account (1.34%), JPMorgan Chase Bank Taipei Branch is entrusted with the safekeeping of Van Gard Emerging Market Stock Index Fund investment account of the manager of Van Gard Group (1.24%) April 1, 2023 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. Major shareholders of corporate shareholders 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%) 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 directorships of other public firms 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 1 Conditions Name Professional Qualification & Experience Independence Status of Independent Directors No. of concurrent Independent directorships of other public firms 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 directorships of other public firms held Director Anthony Peter Bonadero Director Sheng-Hua Peng Director Min Chih Hsuan Director Duei Tsai Director Wen-Chung Shen 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, President and Honorary Vice Chairman 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. PhD, Graduate Institute of Electrical Engineering, National Taiwan University Independent Director of Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd.and Independent Director for Public Welfare of Starlux Airlines 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. 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. N/A N/A ˙Compliance with independence criteria (note) ˙The person or their 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 or their 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 ˙Compliance with independence criteria (note) ˙Number of shares of the Company and shareholding ratio of the person or their spouse or relatives within the second degree of kinship (or in the name of others): 5,151,000 shares, 0.11% Note: Independent Directors shall indicate the fulfilment of independence criteria. 21 • These criteria include but are 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 a position as a director, supervisor or employee of any company 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 or their 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 Leadership and decision- making Knowledge of the industry International market perspective 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 V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V Industry Experience (Note) Information Technology Information Technology Consumer Discretionary Information Technology Healthcare Industrial Information Technology Information Technology Materials Information Technology Information Technology Information Technology Information Technology Industrial Information Technology Note: The GICS Level 1 sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Healthcare, Financials, Information Technology, Communication Services, Utilities, and Real Estate. 23 Age Gender Country of Citizenship Employee Status shareholder Seniority of Independent Directors Item 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 The company The companies’ subsidiaries Less than 3 year More than 9 years Director Independent Director Number of people 1 5 6 12 0 11 1 4 2 11 1 - - % 7% 33% 40% 80% 0% 73% 7% 27% 13% 73% 7% - - Number of people 0 0 3 3 0 3 0 0 0 1 2 1 2 % 0% 0% 20% 20% 0% 20% 0% 0% 0% 7% 13% 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: The number of Directors holding concurrent positions as the Company Managers not exceeding one-third of the Board seats. 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. Management goal Implementation Implemented Implemented Implemented When the company plans to re-elect the next term of directors, the number of independent directors shall not be less than 1/3 of all directors. In addition, at least one female director shall serve, helping achieve the specific goal of diversification of the Company's Directors member. 2. 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 roles 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 Honorary Doctorate, National Cheng Jui-Tsung Chen 2018.07.04 35,352,587 0.80% 1,069,405 0.02% 0 0.00% Kung University President Chung-Pin Wong 2018.07.04 6,618,618 0.15% 1,398 0.00% 0 0.00% Chair of Arcadyan Technology Corp. Master of Management Science, National Chiao-Tung University Chair of Compal Broadband Networks, Inc. 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% 0 0 0 0 Electrical Engineering Dept., Ming Chi 0.00% University of Technology Director of Mactech Co., Ltd. Master of Electronics Engineering, 0.00% National Taiwan University Director of Arcadyan Technology Corp. National Chiao Tung University EMBA April 23, 2023 Spouse or relatives of second degree or closer acting as managers 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 Selected Current Position at COMPAL and Other Companies Refer to Page14 Refer to Page 16 Refer to Page 16-17 Refer to Page 17 Kuo-Chuan Chen 2007.01.01 685,823 0.02% 10,924 0.00% 0 0.00% 0.00% Vice-Chair of HengHao Technology Co. (Note 4) N/A N/A N/A Ltd. Master of Electrical Engineering, National 0.00% Taiwan University (Note 4) N/A N/A N/A 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 Director of General Life Biotechnology Co., N/A N/A N/A N/A (Note 4) N/A N/A N/A Senior Vice- Wen-Da Hsu 2014.02.27 1,333,000 0.03% 0.00% Media Administration Dept., Shih Hsin (Note 4) N/A N/A N/A Chyou-Jui Wei 2010.03.18 0 0.00% 0.00% 0 0 0 0 0.00% 0.00% 25 Chief Strategy Officer Executive Vice- President Executive Vice- President Executive Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Title 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 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 (%) 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 2019.11.11 285,574 0.01% Bor-Heng Chen 2020.05.13 280,010 0.01% 0 0 0 0 0 0 0.00% 0 0.00% 0.00% 0 0.00% 0.00% 0.00% 0.00% 0 0 0 Selected Current Position at COMPAL and Other Companies Spouse or relatives of second degree or closer acting as managers Title Name Relationship (Note 4) N/A N/A N/A Major career/academic achievements University Senior Vice-President of Compal Communication Inc. Master of Industrial Design, Cranbrook Academy of Art Director of Design and Customer Affairs, Philips (Hong Kong) Bachelor of Electrical Engineering Dept., 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 (Note 4) N/A N/A N/A N/A N/A N/A N/A (Note 4) N/A N/A N/A 0.00% 0.00% 0.00% Operations Management, Columbia N/A N/A N/A N/A 0.00% 0 0.00% Fu Jen Catholic University N/A N/A N/A N/A Chung-Hsing Tan 2020.08.12 0 0.00% 5,320 0.00% 0 0.00% University Master of Electrical Engineering, Tatung University Vice-President of Compal Communication Inc. Tamkang University PhD of Finance (Note 4) N/A N/A N/A Ta-Chun Wang 2016.06.29 204,200 0.00% 4,119 0.00% 0 0.00% Managing Vice-President of Shanghai (Note 4) N/A N/A N/A 26 Real Industrial Co., Ltd. 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% Selected Current Position at COMPAL and Other Companies Spouse or relatives of second degree or closer acting as managers Title Name Relationship N/A N/A N/A N/A 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 Vice-President Ching-Hsiung Lu 2003.01.01 7,237,007 0.16% 650,000 0.01% 0 0.00% University (Note 4) N/A N/A N/A Chief Information Security Officer and Vice- President Po-Tang Wang 2007.07.10 559,548 0.01% 486 0.00% 0 0.00% Director Compal Communication Inc. Bachelor of Computer Science and Information Engineering Dept., National Taiwan University President of Vibo Telecom Inc. National Taipei Institute of Technology (Note 4) Chief Strategy Officer Jui-Tsung Chen Relative by affinity Vice-President Tzong-Ming Wang 2009.07.16 283,184 0.01% Vice-President Fu-Chuan Chang 2009.07.16 160,662 0.00% Vice-President Yong-Ho Su 2011.07.01 410,401 0.01% Vice-President Jyh-Shyan Liang 2011.10.31 75,000 0.00% Vice-President Yi-Yun Chang 2014.08.13 140,246 0.00% 0 0 0 0 0 0.00% 0.00% 0.00% 0 0 0 0.00% Head of Research and Development, N/A N/A N/A N/A CLEVO Company 0.00% 0.00% National Chin-Yi University of Technology Production Manager, ADI Corp Department of Electrical Engineering, National Taipei Institute of Technology Vice-President of Arima Photovoltaic and (Note 4) N/A N/A N/A N/A N/A N/A N/A 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. 0.00% 0 0.00% 0.00% 0 0.00% 27 (Note 4) N/A N/A N/A N/A 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 Position at COMPAL and Other Companies Spouse or relatives of second degree or closer acting as managers Title Name Relationship Vice-President Hsin-Kung Mao 2014.11.13 500,714 0.01% Vice-President Shih-Hong Huang 2016.02.24 0 0.00% Vice-President Yi-Chiang Chiu 2016.02.24 280,000 0.01% Vice-President Jui-Chun Shyur 2016.05.11 Peng-Hong Chan 2018.05.09. 0 0 0.00% 0.00% 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0 0 0 0 Master of Business Administration, 0.00% University of Lincoln (Note 4) N/A N/A N/A Vice-Chairman of Poindus System Corp. Master in Control Engineering, National 0.00% Chiao Tung University N/A N/A N/A N/A 0.00% 0.00% Director of Coretronic Corporation Master of Earth Sciences, National Central University Ph.D., Electrical Engineering, National Taiwan University President of Photonics Industries International, Inc. Master of Cornell University Law School, N/A N/A N/A N/A N/A N/A N/A N/A 0.00% 0 0.00% USA N/A N/A N/A N/A Chief Legal Officer and Vice-President Corporate Governance & Accounting Officer and Vice-President 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 0.00% Vice-President Tu-Chuan Tu 2018.12.01 593,081 0.01% 62,105 0.00% Vice-President Chang-Chieh Tien 2018.12.01 403 0.00% Financial Officer and Vice-President 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% 28 CSO, Pou Chen Group Bachelor of Accounting Dept., Fu Jen 0.00% Catholic University (Note 4) N/A N/A N/A 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% Bachelor of Transportation Management Dept., National Chiao Tung University Master of Accounting, George Washington University Financial officer of Arcadyan Technology Corp. 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 0.00% Bachelor of Science and Technology N/A N/A N/A N/A 0 0 0 0 0 0 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 (%) Selected Current Position at COMPAL and Other Companies Spouse or relatives of second degree or closer acting as managers Title Name Relationship Major career/academic achievements Dept., IOWA State University Mechanical Engineering, National Vice-President Hou-Chun Liu 2021.11.11 Vice-President Wu-Ching Chi 2022.02.10 0 0 0.00% 0.00% 0 0 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 0 0 0 0 0.00% Kaohsiung University of Applied Sciences N/A N/A N/A N/A COO of SuperAlloy Industrial Co., LTD 0.00% Master of Computer Engineering, NCTU N/A N/A N/A N/A Master of Electrical Engineering, 0.00% Columbia University, NY (Note 4) Chief Strategy Officer Jui-Tsung Chen father and son N/A N/A N/A N/A 0.00% Director of Raypal Biomedical Co., Ltd. Master of EMBA, National Central University Master of Business Administration, 0.00% Nanyang Technological University, N/A N/A N/A N/A 0.00% 0 0.00% Singapore Master of Technology Management, National Tsing Hua University Internal Control Director of Tingyi (Cayman Islands) Holding Corp. N/A N/A N/A N/A Note: 1. Except for Senior Vice-President Peng Kuee Lau, a Malaysian national, all managers are ROC nationals; except for Senior Vice-President Chyou-Jui Wei, all 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 Chiao-Lie Huang, Wei-Chia Wang and Yau-De Chiou resigned in 2022. Vice Presidents Jen-Liang Lin transferred in 2023. 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 29 Title Name Senior Vice- President Chyou-Jui Wei Selected Current Positions 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 Investment Holding Corp., Compal Electronic Technology (Chongqing) Co., Ltd., Compal Precision Module(Jiangsu) Co., Ltd., ShengBao Precision Electronics (Taicang) Ltd., Rayonnant Technology (HK) Holdings Limited, Ju Teng Electronic Technology (Vietnam) Limited., Compal Americas (US) Inc., Compal Electronics N.A. Inc. 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. President: Compal Ruifang Health Assets Development Corporation Independent Director: SYNergy ScienTech Corp., Visco Vision Inc. Remuneration Committee Member: SYNergy ScienTech Corp., Visco Vision Inc. Audit Committee Member: SYNergy ScienTech Corp., Visco Vision Inc. Wen-Da Hsu Director: HANHELT Communications (Nanjing) Co., Ltd. Shi-Kuan Chen Director: Rayonnant Technology Co., Ltd., Rayonnant Technology (Taicang) Co., Ltd. Min-Tung Weng Director: Auscom Engineering Inc. President: Auscom Engineering Inc. Sheng-Hung Li Deputy Sustainability Officer of Sustainable Committee: Compal Electronics, Inc. Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Chung-Hsing Tan Ta-Chun Wang Vice-President Ching-Hsiung Lu 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., Compal Americas (US) Inc., Compal Electronics N.A. Inc. President: Compal USA (Indiana), Inc., Compal Americas (US) Inc., Compal Electronics N.A. 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 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 Information Security Committee Member: 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 Cheng-Chiang Wang Financial Officer and Vice- President 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. Chairman: Chia Dah Knitting Co., Ltd. Vice-Chairman: Poindus System Corp. Director: Avalue Technology Inc., UNICOM GLOBAL, INC., Ruixing Investment Co., Ltd., Compalead Electronics B.V., Mexcom Electronics, LLC, Mexcom Technologies, LLC Chief Operating Officer: Poindus Systems Corp. Director: Allied Circuit Co., Ltd., Poindus System Corp., Zhi-Bao Technology Corporation, HengHao Technology Co. Ltd., Palcom International Corporation, Infinno Technology Corp., UniCore Biomedical Co., Ltd., 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 Ruifang Health Assets Development Corporation, Compal System Trading (Kunshan) Co., Ltd., Compower Global Service Co., Ltd., HengHong Optoelectronics Technology (Kunshan) Co., Ltd., Compal Smart Device (Chongqing) Co., Ltd. Deputy Sustainability Officer of Sustainable Committee: Compal Electronics, Inc. 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., River Regeneration and Rejuvenation Biotechnology 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 and 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 and 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 39,709 39,709 2,284 3,068 0.5762% 0.5869% 72,935 122,109 784 784 21,080 0 21,080 0 1.8769% 2.5623% 30,787 41,993 42.777 136.792 186,750 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 Min-Chih Hsuan 7,675 7,675 7,675 7,675 Duei Tsai 7,200 7,200 0 0 0 0 475 475 0.1053% 0.1053% 0 0 0 0 0 0 0 0 0.1053% 0.1053% 0 Wen-Chung Shen 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 participation in and contribution to the Company’s business and benchmarks within 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 Note: 1. In 2022, the Company made pension contributions totaling TWD 784,000 (including TWD 324,000 under the new system and TWD 460,000 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 784,000 (including TWD 324,000 under the new system and TWD 460,000 under the old system). 32 2. The distribution of directors' remuneration, was approved by the Board of Directors meeting on March 15, 2023. The remuneration amount of the Directors aforementioned is not determined fully until authorized by a meeting of the Board of Directors. ▓ 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 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 2 (Note 1) 2 (Note 5) 2 (Note 9) 11 (Note 2) 3 (Note 3) 1 (Note 4) 11 (Note 6) 3 (Note 7) 1 (Note 8) 8 (Note 10) 2 (Note 11) 1 (Note 12) 2 (Note 13) 2 (Note 14) 1 (Note 15) 7 (Note 16) 1 (Note 17) 2 (Note 18) 3 (Note 19) 3 (Note 20) Total 17 17 17 17 Note: 1. Wen-Being Hsu,Chieh-Li Hsu-2 positions 2. 3. 4. 5. Wen-Being Hsu,Chieh-Li Hsu-2 positions 6. Sheng-Chieh Hsu,Yen-Chia Chou,Chung-Pin Wong,Chiung-Chi Hsu,Ming-Chih Chang,Sheng-Hua Peng,Min Chih Hsuan, Duei Tsai, Wen-Chung Shen, Anthony Peter Bonadero,Kinpo Electronics, Inc.-11 positions Jui-Tsung Chen,Charng-Chyi Ko,Binpal Investment Co., Ltd.-3 positions Sheng-Hsiung Hsu-1 position Sheng-Chieh Hsu,Yen-Chia Chou,Chung-Pin Wong,Chiung-Chi Hsu,Ming-Chih Chang,Sheng-Hua Peng,Min Chih Hsuan, Duei Tsai, Wen-Chung Shen, Anthony Peter Bonadero,Kinpo Electronics, Inc.-11 positions Jui-Tsung Chen,Charng-Chyi Ko,Binpal Investment Co., Ltd.-3 positions Sheng-Hsiung Hsu.-1 position 7. 8. 9. Wen-Being Hsu,Chieh-Li Hsu-2 positions 10. Sheng-Chieh Hsu,Yen-Chia Chou,Chiung-Chi Hsu,Min Chih Hsuan, Duei Tsai, Wen-Chung Shen, Anthony Peter Bonadero,Kinpo Electronics, Inc.-8 positions 11. Charng-Chyi Ko,Binpal Investment Co., Ltd.-2 positions 12. Sheng-Hsiung Hsu-1 position 13. Ming-Chih Chang,Sheng-Hua Peng -2 positions 33 Jui-Tsung Chen,Chung-Pin Wong -2 positions 14. 15. Wen-Being Hsu-1 position 16. Chieh-Li Hsu,Yen-Chia Chou,Chiung-Chi Hsu,Min Chih Hsuan, Duei Tsai, Wen-Chung Shen, Kinpo Electronics, Inc. -7 positions 17. Binpal Investment Co., Ltd.-1 position 18. Charng-Chyi Ko,Sheng-Chieh Hsu-2 positions 19. Sheng-Hsiung Hsu,Ming-Chih Chang,Sheng-Hua Peng-3 positions 20. Jui-Tsung Chen,Chung-Pin Wong,Anthony Peter Bonadero-3 positions 2. Remuneration of Supervisors: Not Applicable (The Company adopts an Audit Committee system) 3. Remuneration of the President and Vice-Presidents Salary (A) Pension (B) Bonus and special allowances (C) 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 44 employees including CSO Jui- Tsung Chen (Note1) 131,458 137,641 5,925 5,925 206,935 207,509 90,620 0 90,620 0 Unit: TWD 1,000; Thousand shares; % Sum of A, B, C and D and 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) 434,938 5.96763% 441,695 6.06034% 371 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 Chiu, Jui-Chun Shyur, Peng-Hong Chan, Cheng- Chiang Wang, Cheng-Hui Su, Tu-Chuan Tu, Chang-Chieh Tien, Guo-Dung Yu, Peng Kuee Lau, Hou-Chun Liu, Wu-Ching Chi, Hsin-Chung Chen, Jue-Teng Chang, Choo-Tain Chiu,Wei-Chia Wang, Yau-De Chiou, Liang-Jen Lin- 27 positions 2. In 2022, the Company made pension contributions totaling TWD 5,925,000 (including TWD 4,169,000 under the new system and TWD 1,756,000 under the old system). While all companies reported in the financial statements made pension contributions totaling TWD 5,925,000 (including TWD 4,169,000 under the new system and TWD 1,756,000 under the old system). 34 3. Employees’ compensation appropriation was approved by the Board of Directors at the meeting on March 15, 2023. The compensations of the aforementioned managers were not yet final and will be reviewed prior to the date of distribution. ▓ Table of Remuneration Ranges Range of Remuneration Under TWD 1,000,000 TWD 1,000,000 - TWD 2,000,000 (exclusive) TWD 2,000,000 - TWD 3,500,000 (exclusive) TWD 3,500,000 - TWD 5,000,000 (exclusive) TWD 5,000,000 - TWD 10,000,000 (exclusive) TWD 10,000,000 - TWD 15,000,000 (exclusive) TWD 15,000,000 - TWD 30,000,000 (exclusive) TWD 30,000,000- TWD 50,000,000 (exclusive) TWD 50,000,000 - TWD 100,000,000 (exclusive) Over TWD 100,000,000 (inclusive) Total Total of (A+B+C+D) The Company 1 (Note 1) 1 (Note 2) 1 (Note 3) 5 (Note 4) 21 (Note 5) 9 (Note 6) 4 (Note 7) 2 (Note 8) 44 Number of President and Vice-Presidents Total of (A+B+C+D+E) Companies in the consolidated financial statements 1(Note 9) 1(Note 10) 4 (Note 11) 23 (Note 12) 9 (Note 13) 4 (Note 14) 2 (Note 15) 44 Note: 1. Wei-Chia Wang-1 position 2. 3. 4. 5. Yau-De Chiou-1 position Jen-Liang Lin-1 position Ching-Hsiung Lu、Fu-Chuan Chang、Jui-Chun Shyur、Jue-Teng Chang、Choo-Tain Chiu -5 positions Chun-Te Shen、Kuo-Chuan Chen、Wen-Da Hsu、Chih-Chuan Cheng、Po-Tang Wang、Tzong -Ming Wang、Jyh-Shyan Liang、Yi-Yun Chang、Hsin-Kung Mao、Shih-Hong Huang、Yi-Chiang Chiu、Peng-Hong Chan、Cheng-Chiang Wang、Cheng-Hui Su、Tu-Chuan Tu、Tu-Chuan Tu、Guo-Dung Yu、Peng Kuee Lau、Hou-Chun Liu、Wu-Ching Chi、Hsin-Chung Chen-21 positions Chyou-Jui Wei、Shi-Kuan Chen、Min-Tung Weng、Lo-Chun Lee、Sheng-Hung Li、Bor-Heng Chen、Chung-Hsing Tan、Ta-Chun Wang、Yong-Ho Su-9 positions Jui-Tsung Chen、Chung-Pin Wong-2 positions 6. 7. Ming-Chih Chang、Sheng-Hua Peng、Chen-Chang Hsu、Chi-Wai Wan -4 positions 8. 9. Wei-Chia Wang-1 position 10. 11. 12. Yau-De Chiou-1 position Ching-Hsiung Lu、Fu-Chuan Chang、Jui-Chun Shyur、Jen-Liang Lin-4 positions Chun-Te Shen、Kuo-Chuan Chen、Wen-Da Hsu、Chih-Chuan Cheng、Po-Tang Wang、Tzong -Ming Wang、Jyh-Shyan Liang、Yi-Yun Chang、Hsin-Kung Mao、Shih-Hong Huang、Yi-Chiang 35 Chiu、Peng-Hong Chan、Cheng-Chiang Wang、Cheng-Hui Su、Tu-Chuan Tu、Tu-Chuan Tu、Guo-Dung Yu、Peng Kuee Lau、Hou-Chun Liu、Wu-Ching Chi、Hsin-Chung Chen、Jue-Teng Chang、Choo-Tain Chiu-23 positions Chyou-Jui Wei、Shi-Kuan Chen、Min-Tung Weng、Lo-Chun Lee、Sheng-Hung Li、Bor-Heng Chen、Chung-Hsing Tan、Ta-Chun Wang、Yong-Ho Su-9 positions 13. 14. Ming-Chih Chang、Sheng-Hua Peng、Chen-Chang Hsu、Chi-Wai Wan-4 positions 15. Jui-Tsung Chen、Chung-Pin Wong-2 positions ▓ Employee profits sharing granted to the management team Unit: TWD 1,000 Title Name Stock Amount Cash Amount Total Amout Total as a percentage of after-tax profits (%) 41 employees including CSO Jui-Tsung Chen (Note 1) Note: 1. Managers’ titles and names 0 90,620 90,620 1.2434% ‧ ‧ ‧ ‧ ‧ 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 Chiu,Jui-Chun Shyur,Peng-Hong Chan,Cheng-Chiang Wang,Cheng-Hui Su,Tu-Chuan Tu,Tu-Chuan Tu,Guo-Dung Yu,Peng Kuee Lau,Hou-Chun Liu,Wu-Ching Chi,Hsin-Chung Chen,Jue-Teng Chang,Choo-Tain Chiu – 24 positions 2. Vice-Presidents Chiao-Lie Huang, Wei-Chia Wang, Yau-De Chiou resigned in 2022. Vice-President Liang-Jen Lin transferred in 2023. 3. Employees’ compensation appropriation was approved by the Board of Directors at the March 15, 2023 meeting. The compensations of the aforementioned managers have not been finalized and will be reviewed prior to the date of distribution. 36 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 2022 2021 (Note) Increase (Decrease) Amount % Amount % Amount % Unit: TWD 1,000 540,457 7.42% 659,641 5.22% (119,184) -18.07% Net Income 7,288,292 12,632,667 (5,344,375) Note: 2021 is the actual amount. The Company's remuneration paid to Directors, CSO, the President and Vice Presidents reduced by NT$119,184 thousand dollars in the year of 2022 compared with that in the year of 2021 (the ratio of reduce were 18.07%), primarily due to the fact of declined profits in the Company for the year 2022, in turn, boosted the reduce in the corresponding remuneration. Nevertheless, in the year of 2022, the profits recognized reduced by 42.31% compared to the year of 2021. Accordingly, the aggregate total remuneration in 2022 paid to the Company’s Directors, CSO, the President and Vice Presidents to the net income after tax shown in the parent-company-only financial statements in the Company and all companies covered in the consolidated financial reports compared with the year of 2021 significantly increased by 42.15%. ▓ 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 compation based on other factors such as the Company’s operational performance and the individual Director’s personal 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 to 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 37 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. 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 14th committee ran from August 27, 2021 to August 26, 2024 There were five Board meetings during 2022 (A). Director’s attendance records are as shown below: Title Name Chairman Sheng-Hsiung Hsu Vice Chairman Director Director Jui-Tsung Chen Binpal Investment Co., Ltd. Representative:Wen-Being Hsu Kinpo Electronics, Inc. Representative: Chieh-Li Hsu, Director Charng-Chyi Ko Director Sheng-Chieh Hsu Director Yen-Chia Chou Director Chung-Pin Wong Director Chiung-Chi Hsu Director Ming-Chih Chang Director Anthony Peter Bonadero Director Independent Director Independent Director Independent Director Sheng-Hua Peng Min-Chih Hsuan Duei Tsai Wen-Chung Shen Attendance in Person (B) 5 5 3 4 5 5 5 5 5 5 3 5 5 5 5 By Proxy Attendance Rate (%) [B/A] Remarks 0 0 0 1 0 0 0 0 0 0 2 0 0 0 0 100% 100% 60% 100% 100% 100% 100% 100% 100% 100% 60% 100% 100% 100% 100% ‧ Independent Director’s attendance records for 2022: Title Name Independent Director Independent Director Independent Director Min-Chih Hsuan Duei Tsai Wen-Chung Shen 1st Meeting 2nd Meeting 3rd Meeting 4th Meeting 5th 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 3nd Meeting (14th Term) 2022.2.10 4th Meeting (14th Term) 2022.3.15 5th Meeting (14th Term) 2022.5.11 The agendas, the nature of conflicting interests, and the voting outcome Approved loan to Kinpo&Compal Group Assets Development Corporation To avoid a conflict of interest, Jui-Tsung Chen, Chung-Pin Wong, Sheng-Chieh Hsu, and Chieh-Li Hsu who are also acting as Directors of the Kinpo&Compal Group Assets Development Corporation avoided discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors Approved the appointment of the 1st term of sustainability committee members An interested party relationship exists in Director Mr. Chung-Pin Wong, Independent Directors Mr. Duei Tsai; Mr. Wen-Chung Shen. In order to avoid a conflict of interest, these Director and Independent Directors excused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chairman of the meeting, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. Approved the first mid-year employees’ bonus of the year 2022 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng- Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. Approved the release of non-competition restrictions for the managers An interested party relationship existed in Directors Jui-Tsung Chen, Chung-Pin Wong. In order to avoid a conflict of interest, these Directors excused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chairman of the meeting, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. Approved employees’ salary adjustment of the year 2022 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng- Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. Approve to obtain newly issued shares of Raypal Biomedical Co., Ltd. by participating in the capital injection by cash. Chairman Sheng-Hsiung Hsu asked Independent Director Min-Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. To avoid a conflict of interest, Directors Directors Jui-Tsung Chen, Chieh-Li Hsu, Chung-Pin Wong who are also acting as Directors of Raypal, Director Sheng- 40 Board of Directors Meeting 6th Meeting (14th Term) 2022.8.12 7th Meeting (14th Term) 2022.11.11 The agendas, the nature of conflicting interests, and the voting outcome Hsiung Hsu, who has a the Father-son relationship, with Director Chieh-Li Hsu of Raypal, Director Jui-Tsung Chen, who has a Father-son relationship with Director Hsin-Chung Chen of Raypal, recuses and excludes themselves from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the deputy chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present Approved the Directors’ Remuneration for the year 2021 Chairman Sheng-Hsiung Hsu asked the Independent Director Min-Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. Since an interested party relationship exists, the Directors (i.e., Sheng-Hsiung Hsu, Jui-Tsung Chen, Chieh-Li Hsu, Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung-Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng and Anthony Peter Bonadero) recused and excluded themselves from discussion and voting on this proposal to avoid a conflict of interest. Upon solicitation of comments by the deputy chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. Approved 2nd mid-year employees’ bonus for the year 2022 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists among any Directors and any agenda proposals, such Directors shall recuse and exclude themselves during discussion of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present Approved the compensation of Employee bonuses in cash of year 2021 In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng- Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. Approved the proposal for 2022 year-end employees’ bonus In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng- Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. 41 Board of Directors Meeting The agendas, the nature of conflicting interests, and the voting outcome Approved the proposal of the subsidiary’s planned gross project budget of the leased land and commissioned to build the new group operating headquarters building Chairman Sheng-Hsiung Hsu asked the Independent Director Min Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. Directors of the Company, Jui-Tsung Chen, Chung-Pin Wong, Sheng- Chieh Hsu, and Chieh-Li Hsu are also acting as Directors of Kinpo&Compal Group Assets Development Corporation. In addition, Sheng-Hsiung Hsu and Sheng-Chieh Hsu are second cousins (brothers), Sheng-Hsiung Hsu and Chieh-Li Hsu are first cousins (father and son). To avoid a conflict of interest, they recused and excluded themselves from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. Approved the issuance of Letter of Undertaking by the Company to facilitate its subsidiary in obtaining credit facilities from financial institution Chairman Sheng-Hsiung Hsu asked the Independent Director Min Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. Directors of the Company, Jui-Tsung Chen, Chung-Pin Wong, Sheng- Chieh Hsu, and Chieh-Li Hsu are also acting as Directors of Kinpo&Compal Group Assets Development Corporation. In addition, Sheng-Hsiung Hsu and Sheng-Chieh Hsu are second cousins (brothers), Sheng-Hsiung Hsu and Chieh-Li Hsu are first cousins (father and son). To avoid a conflict of interest, they recused and excluded themselves from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. 42 3. Self-Evaluation of the Board of Directors: Evaluation cycles Evaluation periods Scope of evaluation Method of evaluation Once a year From June 1, 2021 to May 31, 2022 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. 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 function of the Board of Directors and set 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 2022, 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 43 a next office term. The performance evaluation results have been published on the Company's website. In 2022, to fulfill the company's commitment to sustainable development and improve the in ESG risk management, Compal Electronics established a company's overall capacity Sustainability Committee. In 2023, in order to strengthen corporate governance and risk management functions, it is to set up a Risk Management Committee. 44 3.3.2 Audit Committee ▓ Duties of the Audit Committee The Audit Committee exists as an enhancement to the Company's supervisory and management function. It assists the Board of Directors in various decisions such as review of financial statements, internal control policies, internal audits, accounting policies and procedures, major asset transactions, appointment/dismissal/independence/suitability of certified public accountants, appointment/dismissal of the chief accountant and chief auditor, etc., thereby ensuring that the Company operates in compliance with the competent authority's instructions and relevant laws ▓ The powers of the Committee are as follows: 1. The adoption of or amendments to the internal control system pursuant to Article 14-1 of the Securities and Exchange Act. 2. Assessment of the effectiveness of the internal control system. 3. The adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, of the procedures for handling financial or business activities of a material nature, such as acquisition or disposal of assets, derivatives trading, loaning of funds to others, and endorsements or guarantees for others. 4. Matters in which a Director is an interested party. 5. Asset transactions or derivatives trading of a material nature. 6. Loans of funds, endorsements, or provision of guarantees of a material nature. 7. The offering, issuance, or private placement of equity-type securities. 8. The hiring or dismissal of a certified public accountant, or their compensation. 9. The appointment or discharge of a financial, accounting, or internal audit officer. 10. Annual financial reports which are signed or sealed by the 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. ▓ Professional Qualifications and Experience of Audit Committee Members Title Name Professional Qualifications and Experience Convener Min-Chih Hsuan Committee Member Duei Tsai Committee Member Wen-Chung Shen Honorary Doctorate, Department of Electrical Engineering, National Chiao Tung University Chairman, Vice Chairman, CEO, President and Honorary Vice Chairman of United Microelectronics Corp. The individual has rich knowledge and adequate experience in business operations, performance evaluation, investment, corporate merger/acquisition, which is extremely helpful to the company's development. The Independent Director possesses more than 30 years of work experience required for the business of the Company. PhD, Graduate Institute of Electrical Engineering, National Taiwan University Independent Director of Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd.and Independent Director for Public Welfare of Starlux Airlines Co., Ltd. The individual has professional capability in the communications network field, and rich knowledge as well as adequate experience in the company management and information security protection, which will help the company strengthen relevant management measures. The Independent Director possesses more than 30 years of work experience required for the business of the Company. Department of Electrical Engineering, National Taiwan University Chairman of Her Tuo Co., Ltd., and Director and Executive Vice President of Compal The individual has rich knowledge and adequate experience in electronics industry, business operations, risk management, which is extremely helpful 45 Title Name Professional Qualifications and Experience to the company's development. The Independent Director possesses more than 30 years of work experience required for the business of the Company. ▓ Attendance of Members at Audit Committee Meetings ‧ ‧ ‧ The Company's Audit Committee is composed of three independent directors. The term of the 3rd committee ran from August 27, 2021 to August 26, 2024. There were five Audit Committee meetings during 2022 (A). The attendance records of the Independent Directors are as follows: Title Name Convener Committee Member Committee Member Min-Chih Hsuan Duei Tsai Wen-Chung Shen Attendance in Person (B) 5 5 5 By Proxy 0 0 0 Attendance Rate (%) [B/A] 100% 100% 100% Remarks - - - ▓ The major audit items of the Audit Committee in 2022 are as follows: 1. The amendments to the internal control system pursuant. 2. The amendment to the Procedures for Acquisition or Disposal of Assets, Procedures for Lending Funds to Other Parties 3. Annual and interim financial reports, Business report, Proposal for distribution of profits 4. To evaluate the CPAs’ independence and competence for performing the financial report audit. 5. Matters in which a Director is an interested party. 6. A material monetary loan and providing of Letter of Undertaking. 7. A material asset transaction. 8. Assessment of the design and operation effectiveness of the internal control system. 9. The defects, irregularities, and the status of corrections in the internal control system. 10. Annual audit plan for year 2023 11. 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 3nd Meeting (14th Term) 2022.2.10 Content of discussion and actions taken in response Matters listed in Item 5, Article 14 of the Security Act Not approved by the Audit Committee but had the consent of more than two-thirds of all directors. 1.To approve for loan to Kinpo&Compal Group Assets Development Corporation 2. To approve for the Company to acquire the common shares of Poindus Systems Corp. by public tender offer. ▲Resolution adopted by the Audit Committee (2022.2.10): V V None None Upon solicitation of comments by the Chairman, there was no objection addressed 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 To avoid a conflict of interest, Jui-Tsung Chen, Chung-Pin Wong, Sheng-Chieh Hsu, 46 Board of Directors Meeting Content of discussion and actions taken in response Matters listed in Item 5, Article 14 of the Security Act Not approved by the Audit Committee but had the consent of more than two-thirds of all directors. and Chieh-Li Hsu who are also acting as Directors of the Kinpo&Compal Group Assets Development Corporation avoided discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. ・Motion 2 Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Directors present. 1. To approve 2021 Audited Consolidated Financial Statements and Parent Company Only Financial Statements 2. To approve the Business Report for the year 2021 3. To approve the proposal for Distribution of Earnings for the year 2021 4. To evaluate CPAs’ independence and competence of performing financial report audit. 5. To approve the Internal Control System Statement for the year 2021 V V V V V 4th Meeting (14th Term) 2022.3.15 None None None None None ▲Resolution adopted by the Audit Committee (2022.3.15): Upon solicitation of comments by the Chairman, there was no objection addressed 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: Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Directors present. 5th Meeting (14th Term) 2022.5.11 1. To approve the 1Q 2022 Consolidated Financial Review Report 2. To approve the amendment to the “Procedures for Acquisition or Disposal of Assets” 3. To approve the amendment to the “Procedures for Lending Funds to Other Parties” 4.To approve the release of non-competition restrictions for the managers 5. To approve fund loan to 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. 6. To approve fund loan to 100% owned subsidiary Compal Eletrônica Da Amazônia Ltda. 7. To approve the execution of the investment agreement for the project of New Taipei City RuiFang District Medical and Long-Term Care Facility BOT+BTO Project 8. To approve to obtain newly issued shares of Raypal Biomedical Co., Ltd. by participating in the capital injection by cash. V V V V V V V V None None None None None None None None ▲Resolution adopted by the Audit Committee (2022.5.11): Upon solicitation of comments by the Chairman, there was no objection addressed 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: 47 Board of Directors Meeting Content of discussion and actions taken in response Matters listed in Item 5, Article 14 of the Security Act Not approved by the Audit Committee but had the consent of more than two-thirds of all directors. ・Except for motion 4 and 8 Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Committee Members present. ・Motion 4 An interested party relationship existed in Directors Jui-Tsung Chen, Chung-Pin Wong. In order to avoid a conflict of interest, these Directors excused themselves from discussion and voting on this proposal. Upon solicitation of comments by the Chairman of the meeting, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. ・Motion 8 Chairman Sheng-Hsiung Hsu asked Independent Director Min-Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. To avoid conflict of interest, Directors Directors Jui-Tsung Chen, Chieh-Li Hsu, Chung-Pin Wong who are also acting as Directors of Raypal, Director Sheng- Hsiung Hsu, who has a Father-son relationship with Director Chieh-Li Hsu of Raypal, Director Jui-Tsung Chen, who has a Father-son relationship with Director Hsin-Chung Chen of Raypal, 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 chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present 1.To approve the 1H 2022 Consolidated Financial Review Report 2.To approve for a loan to Henghao Technology Co. Ltd. 3.To approve for a loan to Unicom Global, Inc. 6th Meeting (14th Term) 2022.8.12 4.To approve the Company to adjust the lending interest rate and interest payment date of the capital loan to the subsidiaries ▲Resolution adopted by the Audit Committee (2022.8.12): V V V V None None None None Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Committee Members present. ▲Action taken by the Company in response to opinion of the Audit Committee: Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Directors present. 1.To approve the 3Q 2022 Consolidated Financial Statements 2.To approve the amendment to the “Internal Control System” 3. To approve to indirectly invest in the 7th Meeting (14th Term) 2022.11.11 establishment of a Vietnamese subsidiary and obtain the land use rights by the subsidiary. 4. To approve the proposal of the subsidiary’s planned gross project budget of the leased land and commissioned to build the new group operating headquarters building 5. To approve the issuance of Letter of Undertaking by the Company to facilitate its 48 V V V V V None None None None None Board of Directors Meeting Content of discussion and actions taken in response Matters listed in Item 5, Article 14 of the Security Act Not approved by the Audit Committee but had the consent of more than two-thirds of all directors. subsidiary in obtaining credit facilities from financial institution 6. To propose for approval of annual audit plan for year 2023 V None ▲Resolution adopted by the Audit Committee (2022.11.11): Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Committee Members present. ▲Action taken by the Company in response to opinion of the Audit Committee: ・Except for motion 4 and 5 Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Directors present. ・Motion 4 Chairman Sheng-Hsiung Hsu asked the Independent Director Min Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. Directors of the Company, Jui-Tsung Chen, Chung-Pin Wong, Sheng-Chieh Hsu, and Chieh-Li Hsu are also acting as Directors of Kinpo&Compal Group Assets Development Corporation. In addition, Sheng-Hsiung Hsu and Sheng-Chieh Hsu are second cousins (brothers), Sheng-Hsiung Hsu and Chieh-Li Hsu are first cousins (father and son). To avoid a conflict of interest, they recused and excluded themselves from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. ・Motion 5 Chairman Sheng-Hsiung Hsu asked the Independent Director Min Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. Directors of the Company, Jui-Tsung Chen, Chung-Pin Wong, Sheng-Chieh Hsu, and Chieh-Li Hsu are also acting as Directors of Kinpo&Compal Group Assets Development Corporation. In addition, Sheng-Hsiung Hsu and Sheng-Chieh Hsu are second cousins (brothers), Sheng-Hsiung Hsu and Chieh-Li Hsu are first cousins (father and son). To avoid a conflict of interest, they recused and excluded themselves from discussion and voting on this proposal in accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. (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. 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 49 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 Committee 4th Meeting (3rd Term) 2022.3.15 5th Meeting (3rd Term) 2022.5.11 6th Meeting (3rd Term) 2022.8.12 7th Meeting (3rd Term) 2022.11.11 8th Meeting (3rd Term) 2023.3.15 9th Meeting (3rd Term) 2023.5.8 Content of discussion Results 1. Report on operational status of the internal audit activities 2.To approve the Internal Control System Statement for the year 2021 1. Report on operational status of the internal audit activities 1. Report on operational status of the internal audit activities 1. Report on operational status of the internal audit activities 2. To propose for approval of annual audit plan for year 2023 1. Report on operational status of the internal audit activities 2.To approve the Internal Control System Statement for the year 2022 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. 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. The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. 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 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 The report was reviewed by the Audit Committee whereupon independent directors raised no objection or further instruction. 50 (3) Summary of the communications between the Independent Directors and CPA: Audit Committees Meeting Content of discussion Results 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 accounting The proposal was approved by the Audit Committee and will be resolved by the Board of Directors 8th Meeting (3rd Term) 2023.3.15 items 1. To approve the 2022 Audited Consolidated Financial Statements and Parent Company Only Financial Statements ‧ Declaration of Independence ‧ The responsibility of auditors in auditing financial The proposal was approved by the Audit Committee and will be resolved by the Board of Directors statements. ‧ The types of audit opinion ‧ The audit scope (including Explanation of key audit items) ‧ The audit Findings 4. Status of individually communication between independent directors, internal audit supervisor and CPA: Object Forum Communication focus Results 2022.11.11 Internal audit supervisor 1. Annual Manpower Planning and Education and Training Promotion of Internal Audit Office 2. Proposed amendments to the Risk Management Regulations in accordance with the latest regulations of the competent authorities and consultation with independent directors 2022.11.11 CPA 1. Annual audit plan 2. Independence 3. Audit Quality Indicators in 2021 Agree to strengthen the professional training of auditors and fill the vacancies. Agreed to establish a risk management committee in accordance with the recommendation of the competent authority, and all three independent directors agreed to be members. The independent directors have no issue with content of communication 51 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 8, 2023, 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 52 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 implemented policies to ensure the diversity of its members? Yes 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 22. 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 member Chung-Pin Wong, the Sustainability Committee is responsible for taking point in explaining company policies and positions externally, defining goals and directions internally, integrating resources, reviewing action plans, monitoring execution progress and reporting results to the board of directors on a yearly basis. In order to strengthen corporate governance and risk management functions, the Company has established a "Risk Management Committee" and reports regularly (at least once a year) to the Board of Directors to review the implementation of risk management and make necessary recommendations for improvement. No deviations were found No deviations were found 53 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 for 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 2022 are as follows: Evaluation level Good Good Excellent Good Items Individual board members Board of Directors Audit Committee Remuneration Committee Total average 4.62 4.80 5.00 4.90 4. Is the independence of Yes external auditors assessed on a regular basis? No deviations were found The Company evaluates the independence and competence of the CPA at least once a year, in accordance with Article 47 of the Certified Public Accountant Act and No. 10 of the Professional Ethics for Certified Public Accountant of the Republic of China. The CPA cannot be a Director, supervisor, or shareholder of the Company and may not receive payroll or be a related party to the Company. The Company requests the “Evaluation Form of the CPA's Independence and Competence” along with the “the CPA’s Independent Confirmation” and the “Audit Quality Indicators (AQIs)”from the CPA. The company also evaluates the independence of the CPA in accordance with the items listed (please refer to page 59) as well as 13 indicators of AQIs. After evaluation, the CPA has no other financial interests or joint investment relationship with the Company except for the service fees due from audit, financial and tax cases, the CPA's family members do not violate the independence requirements, as well as the experience in audit, professional support and training hours of the CPA and his/her firm are all better than the average of the peer industry by referring to the AQIs. The latest evaluation of the independence and competence of CPA was approved by the Audit Committee held on March 15, 2023, and was 54 Assessment criteria Actual governance Deviation and causes of deviation Yes No Summary description IV. Is the listed or OTC Company Yes 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.) Yes 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 resolved by the Board of Directors held on March 15, 2023. The same evaluation applies to the condition whenever there is an internal rotation within the CPA firm. 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. 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 2022, refer to page 59. 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 55 Assessment criteria Actual governance Deviation and causes of deviation Yes No Summary description limited to shareholders, employees, customers, and suppliers)? VI. Does the Company engage a Yes share administration agency to handle shareholder meeting affairs? VII. Information disclosure 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 1. Has the Company established a Yes The Company website at (www.compal.com) is regularly updated with information such as financial 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 performance, corporate governance and shareholder meetings 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 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. No deviations were found No deviations were found The Company will carefully assess the probability of announcing and filing annual financial reports within two months after the end of the fiscal year. 56 Deviation and causes of deviation No deviations were found Assessment criteria Actual governance Yes No Summary description ahead of the required time limit? VIII. Does the Company offer 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? Investor relations (please refer to pages 61) Employee rights and care for employees (please refer to page 60) • • Code of Conduct for Directors, managers, and employees (please refer to page 61) • • Supplier relations and operation status of customer policy (please refer to page 61-62) • Stakeholders’ interests (please refer to page 62) • Risk management practice and framework (please refer to pages 62-64), Risk analysis (please refer to pages 201-204) • Purchasing liability coverage for the Company’s Directors & Supervisors(please refer to page 65) • Continuing education for Directors and managers (please refer to pages 65-68) • Succession plan for Board members and key Management team (please refer to page 68) • Acquisition of certificate(s) by the Company's personnel related to the transparency of financial information (please refer to page 69) 57 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 2022, members of the Board of Directors completed a total of 95.01 hours of training. • In 2022, establish a Sustainability Committee, the enactment to the “Sustainability Committee Charter”, “Risk management policy of Compal Group”, “Compal Group's Business Continuity Management Policy” and the amendment “Corporate Social Responsibility Best Practice Principles” to “Sustainable Development Best Practice Principles” were proposed to accommodate the corporate governance , all of which have been submitted to the Board of Directors for resolution. • In 2022, to accommodate the business needs and the requirements of applicable laws and regulations, the amendment to the “Articles of Incorporation”, “Procedures for Acquisition or Disposal of Assets”, “Procedures for Lending Funds to Other Parties”, “Rules and Procedures of Shareholders Meeting”, “Rules and Procedures for Board of Directors Meetings”, and the amendment “Procedures for Handling Material Inside Information” were proposed to the Board meeting and the Shareholders Meeting for approval. • In 2023, establish a Risk Management Committee the enactment to the “Risk Management Best Practice Principles”, “Risk Management Committee Charter ",“Human Rights Policy” and the amendment “Corporate Governance Best-Practice Principles ", “Sustainable Development Best Practice Principles ", “Management Rules for Preventing Insider Trading” to “Regulations on Prevention of Insider Trading”, “Risk management policy of Compal Group” to “Company's Risk Management Policies and Procedures” were proposed to accommodate corporate governance , all of which have been submitted to the Board of Directors for resolution. • In the “9th Round of Corporate Governance Evaluations” by TWSE, Compal was placed in the top 21%-35% of listed companies. • We uploaded the English annual financial report 16 days before the shareholders’ meeting. 58 ▓ Items to evaluate the independence of the CPA: Item Whether or not the CPA has a direct or material indirect financial interest with the Company Whether or not the CPA has joint investment relationship with the Company or its affiliates, or has shares in financial gains therewith with the Company or its affiliates Whether or not the CPA holds any share of the Company and its affiliates, or the CPA lends or borrows funds to or from the Company and its affiliates Whether or not the CPA has any improper relationship with the Company, or is currently employed by the Company to perform routine work for which the CPA receives a fixed salary Whether or not the CPA participates in the Company’s management and operational decision-making Whether or not the CPA is a spouse, lineal relative, direct relative by marriage, or a collateral relative within the second degree of kinship of any responsible person or managerial officer of the Company Whether or not the CPA provides management consulting or other non- attestation services that may affect the CPA’s independence Whether or not the CPA permits others to practice under his/her name Whether or not the CPA accepts commission related to his/her business As for the latest attestation work, whether or not the CPA remains unchanged over seven years Whether or not the CPA has received any sanction or has any circumstances which affect his/her independence Evaluation result NO Meets independence or not YES NO NO NO NO NO NO NO NO NO NO YES YES YES YES YES YES YES YES YES YES ▓ The results of Compal’s corporate governance unit operations for 2022 is as follows: ‧ Compile and prepare 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. ‧ Establishment of a Sustainability Committee, the enactment to the “Sustainability Committee Charter ", “Risk management policy of Compal Group ",“Compal Group's Business Continuity Management Policy” and the amendment “Corporate Social Responsibility Best Practice Principles" to “Sustainable Development Best Practice Principles" were proposed to accommodate the corporate governance , all of which have been submitted to the Board of Directors for resolution. ‧ 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",“Rules and Procedures for Board of Directors Meetings”, and the amendment “Procedures for Handling Material Inside Information” were proposed 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 resolution. ‧ 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 59 well as to ensure sound corporate governance. For the records of the communication meetings, please see page 50-51. ‧ 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 in the 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 2022 came to USD 50,000 thousand, which was roughly equivalent to TWD 1,557,500 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 14 hours of continuing education. For the exact education program, please see page 65-68. 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, and Vietnam, 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. We set up the employees' opinions mailbox and the anti-violence mailbox. Moreover, 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. 60 ‧ ‧ ‧ ‧ 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 use 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. ▓ 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 2022, Compal proactively participated in online investor forums and investor conference calls, hosted by either local or foreign brokers every quarter, 15 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. Since 2015, Compal has set up a supplier communication window on the procurement platform, CPS (Compal Procurement System), to establish an effective communication channel with suppliers and announce important information on CPS. Every year we cooperate with the Ministry of Safety and Environmental Affairs to hold a supplier conference. In 2019, 3 conferences were held in Taipei, Kunshan, China, and Chongqing, Sichuan. The content included the revision of environmental substance management standards and system. Affected by Covid-19 in 2020-2021, Compal maintained a good communication relationship with suppliers and changed to online conferences. The content of 2021 online conference included the update of global green product regulations, RBA VAP v7.0, conflict minerals, introduction of Compal Supplier Management System and supply chain green environment promotion. Total 349 61 suppliers participated. Our company values customer rights, ensures compliance with signed contracts and related regulations, protects customer information privacy, and provides high-quality products and services to increase our product competitiveness and customer reliance, while also solidifying long-term cooperation relationships. In addition, we conduct regular customer satisfaction surveys and proceed appropriate improvement plans based on customer feedback and opinions to continuously meet customer needs. ▓ 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) Comply with the policies and regulations of the country in which it operates： The Company has its own financial, sales, and accounting system, and a system for monitoring financial and business information of its subsidiaries in accordance with "Regulations Governing the Establishment of Internal Control Systems by Public Companies". The Company has also guidelines in place for supplier management, customer relations, R&D, human resources, financial affairs, credit/endorsement/guarantee arrangements with affiliated businesses, and acquisition/disposal of key assets. These policies, risk assessment standards, and procedures serve as a guideline by which employees may abide for risk assessment and management. Dedicated personnel have been appointed in every department to manage, control, minimize, and prevent Company risks. 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 62 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 201). (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 "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 12 in 2022 to 13 in 2023. At the same time, the professional certificate holders of CPA/CIA/CISA is expected to increase from 36% to more than 50% in five years time. 63 2. Risk management framework Key risk areas Front line unit (Business organizer) (Level 1) Risk review and control (Executive management meeting) (Level 2) ‧ Interest rate, exchange rate, inflation ‧ Finance Group ‧ Operation Team Board of Directors, Audit Committee, Risk Management Committee, Auditing Office (Level 3) ‧ Auditing Office: Risk inspection, evaluation, supervision, improvement and reporting and financial risks ‧ High-risk or highly leveraged investment, loan to third party, endorsement, guarantee, trading of derivatives and treasury investment ‧ R&D planning ‧ Changes in policy and law ‧ Changes in technology and industry ‧ Changes in corporate image ‧ Investment, subsidiary and M&A benefits ‧ Business departments/centers (Note 1) ‧ Common departments (Note 3) ‧ Expansion of factory, production site ‧ Business and equipment ‧ Centralized purchase or sale departments/centers (Note 1) ‧ Common departments (Note 3) ‧ Equity transfer involving Directors, ‧ Share administration supervisors, and major shareholders affairs ‧ Change of management ‧ Litigation and non-contentious cases ‧ Handling of product safety incidents ‧ Other operational affairs ‧ Personnel behavior, ethics, and conduct ‧ Rules (including SOPs), internal control system and compliance with regulations ‧ Board of Directors ‧ Product risk management ‧ Managers of all levels ‧ Managers of all levels ‧ HR and Administration ‧ Managers of all levels ‧ Corporate investment review ‧ Executive management meeting ‧ Subsidiaries monitoring and ‧ Board of Directors, ‧ Audit Committee, ‧ Risk Management Committee Decision-making and ultimate control over risk evaluation management report ‧ Monthly operating meeting ‧ Production and marketing meeting ‧ Share administration affairs ‧ Head of Finance/Accounting ‧ Legal affairs ‧ Business groups/centers (Note 2) ‧ Personnel Evaluation Committee ‧ 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. 3、The actual performance of risk management in 2022 The “Risk Management Policy of Compal Group” has been approved by the Board of Directors on March 15, 2022. And the “Compal Group's Business Continuity Management Policy” has been approved by the Board of Directors on August 12, 2022. With respect to complying the risk management policy, the company formulated annual plans and gradually improved the risk management mechanism. The relevant implement has reported to the Board of Directors on November 11, 2022. 64 ▓ 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 2022 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 1,557,500,000) From:2022.11.21 To: 2023.11.21 2023.02.07 ▓ 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 2022 include: ˙Continuing education for directors Title Name Date of training Organized by Course title Hours of training Chairman Sheng-Hsiung Hsu 2022.10.03 Securities and Futures Institute Vice Chairman Jui-Tsung Chen 2022.12.01 Securities and Futures Institute 2022.02.11 Compal Electronics, Inc. 2022.04.22 Taiwan Institute for Sustainable Energy 2022.10.03 Securities and Futures Institute 2022.12.09 Compal Electronics, Inc. Director Chieh-Li Hsu 2022.04.22 Taiwan Institute for Sustainable Energy 2022.10.24 Taiwan Corporate Governance Association 2022.10.25 Taiwan Corporate Governance Association 2022.10.27 Taiwan Corporate Governance Association Director Charng-Chyi Ko 2022.10.03 Securities and Futures Institute Director Sheng-Chieh Hsu 2022.12.01 Securities and Futures Institute 2022.05.20 Kinpo Group Management Consultant Company 2022.10.19 Taiwan Corporate Governance Association The key point analysis of Corporate Governance Evaluation, items list for Directors reminding Ways to handle and manage the trends of Net-Zero carbon emissions <2022> or <2020, too>? The Taishin bank 30 summit forum: strive to reach Net-Zero Carbon emissions and be sustainable in 2030 The key point analysis of Corporate Governance Evaluation, items list for Directors reminding Seminar on "Global Economic Outlook for year 2023" The Taishin bank 30 summit forum: strive to reach Net-Zero Carbon emissions and be sustainable in 2030 The analysis of regulations and business trends of third-party payment The material economic / trading topics and outlook in 2022 The new business opportunity from AI development with integration of hardware and software: digital marketing trends (Web 3 plus ESG) The key point analysis of Corporate Governance Evaluation, items list for Directors reminding Ways to handle and manage the trends of Net-Zero carbon emissions The impact of ESG trends on the capital market and how to cope The 18th (2022) Corporate Governance Summit Forum - Improving the Functions of Directors and Implementing Sustainable Corporate Governance 3 3 1 3 3 1 3 3 3 3 3 3 2 3 65 Title Name Date of training Organized by Course title Director Director Yen-Chia Chou Chung-Pin Wong Director Director Ming-Chih Chang Sheng-Hua Peng 2022.05.20 Kinpo Group Management Consultant Company 2022.02.10 Taiwan Institute for Sustainable Energy 2022.02.10 Taiwan Institute for Sustainable Energy 2022.02.11 Compal Electronics, Inc. 2022.04.28 Taiwan Institute for Sustainable Energy 2022.04.28 Taiwan Institute for Sustainable Energy 2022.05.20 Kinpo Group Management Consultant Company 2022.07.28 Taiwan Institute for Sustainable Energy 2022.07.28 Taiwan Institute for Sustainable Energy 2022.07.28 Taiwan Institute for Sustainable Energy 2022.12.09 Compal Electronics, Inc. 2022.02.11 Compal Electronics, Inc. 2022.02.11 Compal Electronics, Inc. 2022.04.22 Taiwan Institute for Sustainable Energy 2022.10.12 Securities and Futures Institute 2022.12.09 Compal Electronics, Inc. Independent Director Min Chih Hsuan 2022.06.27 Taiwan Corporate Governance Association 2022.08.08 Taiwan Corporate Governance Association Independent Director Duei Tsai 2022.04.13 Securities and Futures Institute 2022.05.20 Kinpo Group Management Consultant Company 2022.07.21 Securities and Futures Institute 2022.08.03 Securities and Futures Institute 2022.09.07 Securities and Futures Institute 2022.10.11 Taiwan Stock Exchange Corporation 66 The impact of ESG trends on the capital market and how to cope The introduction of investment strategy under current global environment Grasping sustainability and new investment trends <2022> or <2020, too>? Sustain recycle in the woods The current conditions and outlook regarding Net-Zero Carbon emissions in agriculture department The impact of ESG trends on the capital market and how to cope The experiences of promoting ESG (Nanya Technology Corporation) The impact of Green manufacturing on the technology industry The introduction of carbon credits worldwide Seminar on "Global Economic Outlook for 2023" <2022> or <2020, too>? <2022> or <2020, too>? The Taishin bank 30 summit forum: strive to reach Net-Zero Carbon emissions and be sustainable in 2030 The 2002 forum of laws and regulations on insider trading Seminar on "Global Economic Outlook for 2023" The study of Martial Information disclosure and the responsibility of Directors and Supervisors How to protect trade secrets effectively External innovation and Corporate sustainable business operations The impact of ESG trends on the capital market and how to cope The study of Corporate governance and Law of Securities Exchange and Trading Under the threat of ransomware, the legality of information security management law The international trend of Net-Zero Carbon emissions and Taiwan's actions in promoting the transition to Zero- Carbon The roles and responsibilities guidelines for Independent directors and audit committee and the Director/Supervisors education program Hours of training 2 1 1 1 1 1 2 0.67 0.67 0.67 1 1 1 3 3 1 3 3 3 2 3 3 3 3 Title Name Date of training Organized by Course title 2022.10.19 Taiwan Corporate Governance Association 2022.10.28 Securities and Futures Institute Independent Director Wen-Chung Shen 2022.04.22 Taiwan Institute for Sustainable Energy 2022.05.20 Kinpo Group Management Consultant Company 2022.10.19 Taiwan Corporate Governance Association The 18th (2022) Corporate Governance Summit Forum - Improving the Functions of Directors and Implementing Sustainable Corporate Governance The 2022 seminar on the prevention of insider trading The Taishin bank 30 summit forum: strive to reach Net-Zero Carbon emissions and be sustainable in 2030 The impact of ESG trends on the capital market and how to cope The 18th (2022) Corporate Governance Summit Forum - Improving the Functions of Directors and Implementing Sustainable Corporate Governance ˙ Continuing education for managers Title Name Date of training Organized by Course title Chun-Te Shen 2022.02.11 Compal Electronics, Inc. <2022> or <2020, too>? Senior Vice President Vice President Cheng-Chiang 2022.02.11 Compal Electronics, Inc. <2022> or <2020, too>? Wang 2022.12.09 Compal Electronics, Inc. Vice President Guo-Dung 2022.02.11 Compal Electronics, Inc. Yu 2022.04.22 Taiwan Institute for Sustainable Energy 2022.12.09 Compal Electronics, Inc. Vice President Wu-Ching Chi 2022.01.05 Compal Electronics, Inc. Vice President Hsin-Chung 2022.01.06 Compal Electronics, Inc. Chen Vice President Jue-Teng 2022.01.21 Compal Electronics, Inc. Chang Vice President Choo-Tain 2022.05.03 Compal Electronics, Inc. Chiu Corporate Governance Officer Cheng-Chiang Wang 2022.04.11 Accounting Research and Development Foundation 2022.04.27 Accounting Research and Development Foundation 2022.05.20 Kinpo Group Management Consultant Company 2022.07.19 Taiwan Corporate Governance Association 67 Seminar on "Global Economic Outlook for 2023" <2022> or <2020, too>? The Taishin bank 30 summit forum: strive to reach Net-Zero Carbon emissions and be sustainable in 2030 Seminar on "Global Economic Outlook for 2023" The management of preventing insider trading for - and with - high level managers The management of preventing insider trading for - and with - high level managers The management of preventing insider trading for - and with - high level managers The management of preventing insider trading for - and with - high level managers The study of legal matters regarding Corporate ownership battles and related practical issues Knowing TCFD report: Grasping the key information poings The impact of ESG trends on the capital market and how to cope Ways to handle and manage the trends of Net-Zero carbon emissions Hours of training 3 3 3 2 3 Hours of training 1 1 1 1 3 1 0.58 0.58 0.58 0.58 3 3 2 3 Title Name Date of training Organized by Course title Accounting Officer Cheng-Chiang Wang 2022.10.12 Securities and Futures Institute Accounting Research and Development Foundation 2022.11.17- 2022.11.18 Internal Audit Officer Chenyi Li 2023/01/09 Accounting Research and Development Foundation 2023/01/10 Accounting Research and Development Foundation The 2002 forum of laws and regulations on insider trading “Training program for the new Accounting Officer” A class for new Accounting Officers, requested due to the Company’s share exchange/transaction program The latest "Internal Control Management Guidelines Amendment" and "Information Security" legal compliance and fraud prevention practices The latest policy development and internal control management practices related to "ESG sustainability" and "self- compilation of financial reports" Hours of training 3 12 6 6 ▓ 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. 68 ▓ Certificate and qualification acquisition status for personnel involved in financial information Name of certificate No. of persons 5 persons 2 persons 9 persons 4 persons 3 persons 3 persons 1 person 1 person 1 person 1 person 3 persons 3 persons 1 person 1 person 1 person 1 person 1 person 1 person 1 person 1 person 1 person 1 person 1 person 1 person 1 person transparency CPA qualification USCPA qualification Senior Securities Specialist Securities Specialist Futures Specialist Securities Investment Trust and Consulting Professional Chartered Financial Analyst Certificate In ESG Investing Investor Relations Charter (IRC®) Professional in Business Analysis Certified Internal Auditor - Taiwan Certified Internal Auditor Business Continuity Management Lead Auditor Information Security Management Lead Auditor Information Technology Service Lead Auditor Greenhouse gas emissions Auditor 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 SCRUM Master Certified Basic Proficiency for foreign exchange personnel Certified Basic Proficiency forcredit officer Certified Product insurance salesman 69 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 Professional Qualifications and Experience Independence Criteria 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 Chairman, Vice Chairman, CEO, President and Honorary Vice Chairman 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. and Independent Director for Public Welfare of Starlux Airlines Co., 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%. May 8, 2023 Number of Other Public Companies in Which the Individual is Concurrently Serving as a Remuneration Committee Member 3 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 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 70 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 5th committee ran from August 27, 2021 to August 26, 2024. There were four Remuneration Committee meetings during 2022(A) and the committee member qualifications and attendance records are as follows. Attendance in Person (B) 4 4 4 Attendance Rate (%) [B/A] 100% 100% 100% Wen-Chung Shen Min-Chih Hsuan Duei Tsai Convener Committee Member Committee Member By Proxy 0 0 0 Name Title Remarks ■ 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 4th Meeting (14th Term) 2022.3.15 Resolution Adopted by the Remuneration Committee 1. To approve the proposal of the distribution of compensation to employees and directors for the year 2021 2. To approve the first mid-year employees’ bonus of the year 2022 ▲Resolution Adopted by the Remuneration Committee (2022.3.15): 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 Chairman, there was no objection addressed 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 of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. 71 Board of Directors Meeting 5th Meeting (14th Term) 2022.5.11 6th Meeting (14th Term) 2022.8.12 Resolution Adopted by the Remuneration Committee 1. To approve the proposal for the appropriated percentage for the remuneration of employees and Directors of the year 2022 2. To approve employees’ salary adjustment of the year 2022 ▲Resolution Adopted by the Remuneration Committee (2022.5.11): 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 Chairman, there was no objection addressed 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 of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui- Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. 1. To approve the Directors’ Remuneration for the year 2021 2. To approve 2nd mid-year employees’ bonus for the year 2022 ▲Resolution Adopted by the Remuneration Committee (2022.8.12): The resolution was adopted unanimously by the Committee Members present. ▲Action taken by the Company in Response to the opinion of the Remuneration Committee: ・Motion 1: Chairman Sheng-Hsiung Hsu asked the Independent Director Min-Chih Hsuan to act as a deputy chairman to preside at this meeting for discussion and voting on this proposal. Since an interested party relationship exists, the Directors (i.e., Sheng-Hsiung Hsu, Jui-Tsung Chen, Wen Being Hsu, Chieh-Li Hsu, Charng-Chyi Ko, Sheng-Chieh Hsu, Yen-Chia Chou, Chung-Pin Wong, Chiung-Chi Hsu, Ming-Chih Chang, Sheng-Hua Peng and Anthony Peter Bonadero) recuse and exclude themselves from discussion and voting on this proposal to avoid conflict of interest. Upon solicitation of comments by the deputy chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. ・Motion 2: In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, if an interested party relationship exists among any Directors and any agenda proposals, such Directors shall recuse and exclude themselves during discussion of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed and the resolution was adopted unanimously by the remaining Directors present. 7th Meeting (14th Term) 1. To approve the compensation of Employee bonuses in cash of year 2021 2. To approve the proposal for 2022 year-end employees’ bonus 72 Board of Directors Meeting Resolution Adopted by the Remuneration Committee 2022.11.11 ▲Resolution Adopted by the Remuneration Committee (2022.11.11): The resolution was adopted unanimously by the Committee Members present. ▲Action taken by the Company in Response to the opinion of the Remuneration Committee: ・Motion 1 and 2: In accordance with the Company’s Regulations Governing the Proceedings of Board of Directors Meetings, an interested party relationship exists between any Directors and any agenda proposals, such Directors shall excuse themselves during discussion of and voting on those proposals. Accordingly, to avoid a conflict of interest, Directors Jui-Tsung Chen, Chung-Pin Wong, Ming-Chih Chang and Sheng-Hua Peng, who are also acting as managerial officers of Compal, avoided discussion and voting on this proposal. Upon solicitation of comments by the chairman, there was no objection addressed 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. 73 3.3.5 Corporate Sustainability Development Assessment criteria 1. Does the Company conduct 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? Actual governance Yes No Summary description Yes To fulfill the company's commitment to sustainable development and improve the company's overall capacity in ESG risk management, Compal Electronics established a Sustainability Committee (the "Committee") with the approval of the board of directors in March 2022. Composed of three members appointed by the board of directors, more than half (two) of the members in the Committee are independent directors, and the member Chung-Pin Wong is elected by all Committee members as the chairperson. Holding at least one meeting a year, the Committee is responsible for taking point in explaining company policies and positions externally, defining goals and directions internally, integrating resources, reviewing action plans, monitoring execution progress, and reporting results to the board of directors. Composition, Responsibilities, and Operations of the Sustainability Committee, Board of Directors' Supervision of the Sustainability Committee. Please refer to page 88-89. For the 2022 Sustainable Development operation and implementation please refer to page 90-93, the targets and plans of 2023 Sustainable Developmen please refer to page 94. The results of implementation are also disclosed in our Annual Report, Sustainability Report, and on our corporate website/CSR sustainability website. Deviation and causes of deviation No deviations were found 2. Has the Company set up a full- 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? Yes ▓ The Group performs risk identification, assessment and analysis, response and management at least once a year. ▓ The scope of execution includes parent company and subsidiary company. 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 into "Strategy," "Finance," "Operation," and "Legal Compliance", "Environment". 2. Risk assessment issues Through a risk analysis matrix, the likelihood and impact of risk issues are evaluated respectively, No deviations were found 74 Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation and ranked by the result of the evaluation. Among them, "supply chain material interruption risk", "risk of overseas factory expansion" and "infectious disease spread " were rated as the top three risk issues 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 profits, the Company implements real-time production and precise control of inventory management. However, the conflict between Russia and Ukraine could lead to shortages of semiconductor- related raw materials, and 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) Risk of overseas factory expansion Due to the changes in the international situation such as the China-United States trade war, the demand for international strategic planning of customers, as well as the fact that multinational factory operations can strengthen the company's flexible and efficient management model and build the advantage of continuous and uninterrupted operations, the demand for overseas expansion of operating bases is increasing However, factors such as geopolitics and infectious diseases may affect the smoothness of the supply chain, thereby 75 Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation affecting the company's ability to flexibly produce and respond flexibly. In response to this risk, the company intends to take the following measures: a. Prudent investment evaluation and analysis, drawing on other past business failure cases and taking into account national policies and research reports of professional institutions (for example, geopolitical risk index) b. Introduce local professionals and establish a management team with international vision and risk awareness c. Build an "agglomeration economy" with strategic partners, increase productivity, reduce production costs and expenses through resource sharing, increase the degree of localization of the supply chain, and coordinate with existing suppliers to set up cargo distribution centers around the new factory. (3) Infectious disease spread The global spread of emerging infectious diseases is fast, the disease is unpredictable and the fatality rate is high. Once an outbreak occurs, it will have a major impact on the economy and change consumers' lifestyles and consumption habits. Taking the novel coronavirus epidemic as an example, the demand of online shopping, remote video equipment or home office has soared, and the performance of related industries has skyrocketed. However, as the epidemic slows down, the performance of related industries benefiting from the epidemic will return to normal, and even face the problem of stagnant performance due to destocking. At the same time, some countries have taken relevant measures to prevent the spread of the epidemic, resulting in delays or interruptions in supply chains and logistics delivery. In addition, employees are exposed to high health threats. If they are quarantined due to the epidemic, the continuous operation of related businesses will be tested. In response to this risk, the company intends to take the following measures: a. The anti-epidemic team at the headquarters plans five major-oriented anti-epidemic policies, including office control, access control, going abroad/returning to Taiwan, course/event control, and restaurant control. At the same time, in response to changes in the government's epidemic prevention policy at any time, we will flexibly adjust the 76 Assessment criteria Actual governance Yes No Summary description Deviation and causes of deviation 3. Environmental issues. (1) Has the Company established an appropriate environmental management system according to its industrial characteristics? Yes company's epidemic prevention policy. b. Both Taiwan and overseas factories formulated emergency plans for epidemic prevention immediately, set up emergency epidemic prevention and control teams, and formulated procedures to prevent abnormal personnel, control and track close contacts of abnormal persons, and prepared emergency plans, and carried out nucleic acid sampling for all employees when necessary. In addition, declarations are made through multiple channels such as the dedicated line of the epidemic prevention team, employee suggestion boxes, mailboxes of the epidemic prevention communication group, and telephone to comprehensively monitor and prevent the spread of the epidemic Compal has established environmental sustainability 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 2022, no violation of the environment laws or regulations has occurred. 77 No deviations were found Assessment criteria (2) Is the Company committed to improving the efficiency of resource utilization and using recycled materials with a low impact on the environment? Yes No Yes (3) Does the Company assess the Yes risks and opportunities of climate change for the enterprise now and in the future and take measures to deal with climate- Actual governance Summary description 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. 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%, a total of 23 laptop projects meet the requirements Although the operating model has changed due to the unstable power supply at the location of the factory, the power consumption intensity is 353 kWh per million of revenue, which is 33 kWh higher than that of 2021 per million of revenue, but we are still actively promoting energy conservation in factories, setting 100% by 2050 The long-term goal of using renewable energy is to continue to promote and maintain solar power generation systems, and to purchase renewable energy. PCP, KS3, CDT, CD, CQA passed the ISO 50001 energy management system certification, and completed the construction of the "Energy and Environmental Monitoring" platform, which can instantly understand the energy consumption of plants, Calculate the daily energy usage budget according to the production capacity, and provide employees with energy-saving reminders at any time. 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 78 Deviation and causes of deviation No deviations were found No deviations were found Assessment criteria related issues? Yes No Summary description Actual governance Deviation and causes of deviation 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 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 costs. 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 2022, Purchase 8,008,485 kWh of photovoltaic power generation, 113,604,723 kWh of hydropower generation and 20,000,000 kWh of green electricity certificates. Risk 3. Improve the energy efficiency standards of various assets and increase operating cost. 79 Assessment criteria Actual governance Deviation and causes of deviation Yes No Summary description Action 3. The "Energy and Environment Monitoring" platform has been completed, which can immediately understand the energy consumption of the plants, calculate the daily energy usage budget according to the production capacity, and provide energy saving tips to employees at any time; create new means to improve energy efficiency, and choose energy- saving products when energy-consuming equipment needs to be replaced. We have actively introduced external counseling units, and a total of 5 plants have passed the ISO 50001 energy management system certification and are on par with the EP100 target. 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 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. Due to the Covid-19, In 2022, an online supplier conference was planned, and a professional consultant team was specially invited to explain the topic of "creating a sustainable value chain through SBT and supply chain management" in order to improve 80 Assessment criteria Actual governance Yes No Summary description suppliers' willingness and ability to manage carbon. Deviation and causes of deviation 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 95-96. 81 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 63% 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 2021 Unit: Tons 2022 22,445.151 220,617.737 24,633.557 2,554,897 6,046.5 1,482.9 21,251.4272 (Note) 190,569.0017 (Note) 19,512.714 (Note) 2,499,769 8,321.5 1,002.2 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 82 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 are. ‧ 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 dissatisfaction 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 protects the employees from retaliation If employees would like to complain about a situation that happened in Compal, such as the human resources system, occupation, employee benefits, and forced labor, discrimination, sexual harassment and so on or any unreasonable incident, they can report via the internal website or e-mail, and we commit to confidentiality and can 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. 83 Yes No Yes Assessment criteria (2) Has the Company established and implemented reasonable employee welfare measures (including compensation, vacation, and other benefits) and properly reflected the operating performance or the results of employee compensation? (3) Does the Company provide Yes employees with a safe and healthy work environment? Are employees trained regularly on safety and health issues? Actual governance Summary description ■ Employee Benefits 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 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 of the Company and personal job performance. In addition, the Company aims to create a diverse and equal working environment. In 2022, 38.86% of worldwide Compal employees are women, and 29.2% of supervisors are women. The Company is committed to cultivating local talent in overseas factories. In 2022, the proportion of local supervisors in China and Brazil were 90.68% and 93.1%. 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, working environment monitoring, waste disposal, emergency response procedures, etc. The Company organizes health and safety training for employees on a regular basis as a means to prevent occupational accidents and ensure workplace safety. In addition, we analyze the causes of occupational accidents and provide suggestions and measures to improve the situation. 84 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 (4) Has the Company established an effective career development training program for its employees? 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? In 2022, 3,915 employees had completed their training for a total of 9,545 hours, and the number of occupational accidents among employees was 151, involving 151 employees (accounting for 0.21% of the total number of employees). Related Verification Scenarios: All major site implement ISO 45001 OH&SMS and commit to maintain sustainable operations for employees’ working environment. 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. No deviation was found No deviations were found In 2022, a total of 763 training sessions (both internal and external) were organized; these courses delivered 718,685 hours of training and 190,216 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. 85 Yes No Yes Assessment criteria (6) Does the Company have a 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? Deviation and causes of deviation No deviations were found Actual governance Summary description Compal is a responsible purchaser, and we are dedicated to improving the efficiency of sustainable supply chain management and meet international sustainable standards. New suppliers are required to sign the "Compal Procurement Contract" to regulate information security, and the products traded must comply with international, national and regional environmental laws and regulations. According to different product categories, suppliers are required to have international quality and environmental standards such as ISO9001, ISO14001, ISO13485, ISO17025, IATF16949...etc. As the global trend pays more and more attention to issues such as greenhouse gases, water resources and waste, Compal combines the corresponding ISO into supply chain management gradually. As a member of RBA, we require suppliers to undertake social responsibilities and sign the "Commitment Letter to Comply with RBA (Responsible Business Alliance) Code of Conduct Standards", which includes five aspects of RBA: labor, health and safety, environment, ethics, and management. In recent years, in order to keep up with international ESG norms, we have adjusted and added the "Compal Supplier Code of Conduct", which is in line with the RBA guidelines and raises the requirements for suppliers. At the same time, it is necessary to sign the "Declaration of Prohibition/Not Supporting/Not Using "Conflict Minerals"" to make suppliers understand and commit to the importance of banning conflict minerals. In terms of sustainable risk management, Compal conducts a sustainable assessment of suppliers every year. The assessment is conducted using the RBA SAQ questionnaire. The assessment results show the sustainable risk of the supplier. Audits are conducted for high sustainable risk manufacturers in accordance with the RBA VAP standard. A total of 11 suppliers were audited by Compal in 2022, manufacturers with poor performance must improve within a time limit. Through the annual self-assessment and auditing of suppliers, we collaborate with suppliers to improve sustainable performance. As the international sustainable issues extend, we invite suppliers to follow Compal's footsteps and philosophy, and together take care about the social issues of environment, labor, health and safety. Continue to improve the resilience and perseverance of the sustainable supply chain through the 86 Yes No Yes Assessment criteria 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? Actual governance Summary description above actions. The Company has published annual CSR reports (The name was 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 2022, we received the Platinum Award of this award and Taiwan Top 100 Sustainable Model Enterprises Award. Deviation and causes of deviation No deviations were found 87 ▓ Composition, Responsibilities, and Operations of the Sustainability Committee To fulfill the company's commitment to sustainable development and improve the company's overall capacity in ESG risk management, Compal Electronics established a Sustainability Committee (the "Committee") with the approval of the board of directors in March 2022. Composed of three members appointed by the board of directors, more than half (two) of the members in the Committee are independent directors, and the Convenor Chairman Chung-Pin Wongis elected by all Committee members as the chairperson. Holding at least one meeting a year, the Committee is responsible for taking point in explaining company policies and positions externally, defining goals and directions internally, integrating resources, reviewing action plans, monitoring execution progress, and reporting results to the board of directors. Based on the four major aspects of Economy, environment, society, and governance ("EESG"), the Committee is composed of eight task forces, including "Innovation", "Customer Relationship", "Supply Chain", "Environment", "Responsible manufacturing", "Human Resources", "Social Participation", "corporate governance", "information security", and "risk management". Composed of the heads of departments from business sectors across different regions, task forces are responsible for stipulating the operating guidelines, development tools, and workflow of each project, making annual plans through regular meetings, checking operational directions and execution progress, and reporting results to the Committee. Committed to promoting sustainable development strategies, Compal Electronics will continue to contribute to environmental protection and the low carbon economy transition. 1. Professional Qualifications and Experience of Sustainability Committee Members Identity Name Professional Qualifications and Experience Director Chung-Pin Wong Independent Director Duei Tsai Independent Director Wen-Chung Shen Master of Management Science, National Chiao Tung University Chairman of Compal Broadband Networks, Inc. and Poindus Systems Corp., and President of Compal The individual has rich knowledge and adequate experience in computer industry, business operations, performance evaluation, risk management, which is extremely helpful to the company's development. The Director possesses more than 30 years of work experience required for the business of the Company and of corporate governance. PhD, Graduate Institute of Electrical Engineering, National Taiwan University Independent Director of Taiwan High Speed Rail Corporation, TTY Biopharm Company Ltd. and Independent Director for Public Welfare of Starlux Airlines Co., Ltd. The individual has professional capability in the communications network field, and rich knowledge as well as adequate experience in the company management and information security protection, which will help the company strengthen relevant management measures. The Independent Director possesses more than 30 years of work experience required for the business of the Company. Department of Electrical Engineering, National Taiwan University Chairman of Her Tuo Co., Ltd., and Director and Executive Vice President of Compal The individual has rich knowledge and adequate experience in electronics industry, business operations, risk management, which is extremely helpful to the company's development. The Independent Director possesses more than 30 years of work experience required for the business of the Company and professional innovation capability in R&D. 88 2. Operations The term of the 1st committee is from March 15, 2022 to August 26, 2024. In 2022, the Sustainability Committee held two meetings (A) and the qualifications and attendance of Committee members are as follows: Title Name Convenor Chairman Committee member Committee member Chung-Pin Wong Duei Tsai Wen-Chung Shen Attendance in Person(B) 2 2 2 By Proxy 0 0 0 Attendance Rate (%)[B/A] 100 100 100 Remarks Topics of discussion in the Sustainability Committee 's meeting: Meeting Date Topics of Discussion Resolution and Follow-up 1st Meeting (1st Term) 2022.3.15 2nd Meeting (1st Term) 2022.5.11 1. Election of the Chairman of the 1st Chung-Pin Wong is elected by all Sustainability Committee. members as the Chairman of the 1. Report the implementation result of Sustainability for the 2021 2. To approve the targets and plans of Sustainability for the year 2022 Sustainability Committee. Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Committee Members present, and report to the Board of Directors. Upon solicitation of comments by the Chairman, there was no objection addressed and the resolution was adopted unanimously by the Committee Members present, all of which have been submitted to the Board of Directors for resolution. ▓ Board of Directors' Supervision of the Sustainability Committee In March 2022, the Board of Directors appointed three directors as members of the Sustainability Committee to manage sustainability issues, and the Sustainability Committee is required to report to the Board of Directors on a regular basis on the implementation of sustainability initiatives. In 2022, the Sustainability Committee held one meeting to report to the Board of Directors, the topics include (1) the implementation of sustainability goals and objectives in 2021, and (2) setting annual goals of 2022. The Board of Directors must evaluate the success of the strategies proposed by the Sustainability Committee, review their progress from time to time, and urge the Sustainability Committee to make adjustments as needed. 89 ▓ The implementation results of 2022 Sustainable Development Item Results Corporate Governance Supply Chain Management Environmental Sustainability 1. We were awarded the 8th Corporate Governance Evaluation top 21-35 % in the Publicly traded company group, which was held by Taiwan Stock Exchange (TWSE). 2. We were selected into the FTSE4GOOD Index for the seventh consecutive year and in the FTSE4Good TIP Taiwan ESG Index for the fifth consecutive year. 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 2022 Happiness Enterprise online voting by 1111, Human resource agency, 317th of Fortune Top 500, 1345th of Forbes Top 2000, 4th in the "Top 2000" Manufacturing Industry by Common Wealth Magazine. 4. The Compal Sustainability report in 2022 was certified by SGS Taiwan Ltd., by using the assurance standards of the AA1000 AS, GRI Standards and SASB Standards core options. Meanwhile, the report won the Platinum Medal of Taiwan Corporate Sustainability Report Award of TCSA and Taiwan Top 100 Sustainability Award. 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, 2021 Sustainability Report disclosures in compliance with TCFD and SASB standards. 6. We were ranked Taiwan Best of Germany iF Product Design Award from 2017-2022 and 10th of iF Worldwide Design Award. 1. We comply with human rights and conflict mineral standards. In 2022, we implemented the policy of "Non-use of conflict minerals’ policy and completed a survey (CMRT) of 863 suppliers’ conflict minerals with a completion rate of 100%. 2. To maintain good relationships with suppliers continuously, the Company held an online supplier conference in 2022. The content included, "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". 205 staff members of suppliers participated online. 3. Comprehensive systematic control over raw material hazardous substance, 40 new substances were added in 2022 and all projects comply with latest regulations and customer regulations, Halogen free projects to increase by 5%, Substance full-disclosure projects to increase by 6%, Inclusion and at least 19% of digitalized hazardous substance report. 1. We participated in the Carbon Disclosure Project (CDP) climate change and water safety questionnaire. Both were ranked at management tier in 2022. 2. With starting from the source reduction, promoting waste reduction and recycling, NJCand CQA plants continue to promote UL2799 management systems, KS1, KS2 obtained UL2799 zero waste landfill platinum certification. 3. Continue to promote the ISO 50001 energy management system, improve energy efficiency, and purchase 8,008,485 kWh of photovoltaic power generation, 113,604,723 kWh of hydropower generation and 20,000,000 kWh of green electricity certificates, and actually reduce emissions by 82,277,274.011 KG CO2e 4. Using the Task Force on Climate-Related Financial Disclosures (TCFD) framework, identify potential major climate risks and opportunities, formulate response strategies and goals, continue to track management in a qualitative and quantitative manner, and complete the Kunshan plant climate governance report 5. We participated in the "Waste 3C Recycling Activities" of customers; at which, 114 Compal employees joined the event. 90 Item Results 6. Responding to the sustainable development goal of the United Nations "SDGs 13 Climate Action ", "SDGs 14 Life below Water " and "SDGs 15 Life on Land ": 87 colleagues participated in the Yuan-Tan River – the Enterprises Joint Beach cleanup action. 42 colleagues participated in Xialiao beach cleaning. 202 colleagues participated in environmental education activities at the Mangrove Ecocenter. Innovation 2. 1. According to the principle of environmental protection, sustainable and recycled design. In 2022, 7% products in voluntary compliance with Ecolabel, 5% recovered material usage in each commercial notebook project, USB PD included projects to raise by 27%, and High energy density cell included projects to raise by 16%, Reduce 5.14% of auxiliary material amount and ESG patents to be 6.7% of all applications. The 81 products that have passed the Electronic Product Environmental Assessment Tool (EPEAT 2018); in which, 44 products have obtained the Gold level certification, 26 products have obtained the Taiwan Environmental Protection Label, 26 products have obtained the TCO Label, and 36 products have obtained the CECP label. 1 mobile phone product obtained EPEAT Gold level certification. There are also 4 models of LCD monitors that have obtained the CECP label and 4 models that have obtained the TCO label. 113 notebook products and 4 LCD monitors have obtained the latest Energy Star certification. The EPEAT-compliant annual revenue percentage for laptops was 78.1% and the Energy Star-compliant annual revenue percentage was 81.9%. The EPEAT-compliant annual revenue percentage of 99.9% for mobile products. The Energy Star-compliant annual revenue percentage for monitor products was 99.4%. 5. 75 notebook products have completed the full substance disclosure announcement. 6. Halogen-free products list: 91 types of laptops, 16 types of smart phones, and 6 types of 3. 4. 5G devices. 91 Item Results Social Welfare 1. In 2022, 2,321 employees participated various public welfare activities of the COMPAL and HCI Foundation, and donations exceed NT$ 5.9 million, with a total social welfare investment of more than NTD$ 40 million. 2. Donated 79 sets of "Apache Wireless Handheld Ultrasonic Systems" from Aco Healthcare, a subsidiary of the Group, to a medical institution on an offshore island, to protect the outlying islands with Smart medical biotechnology, to help improve the medical equipment in the offshore islands of Taiwan, and innovate the technology that serves the local people. The donation amount is more than NT$20 million. 3. Hold a series of activities called “Charity can’t stop”, that cooperates with social enterprises and social welfare groups in public welfare, and donates materials to help vulnerable children. In-Kind Donations for A Heartwarming New Year: 145 employees donated 3,843 items of living materials to help 200 poor families in the Sanchong District. Summer Fundraising event – Enjoy Summer: 76 employees donated 2,075 pieces of daily necessities, including rice, noodles, canned food, biscuits, toothpaste, and soap, we mainly helped with Compal’s Long-term care and cooperation of the "Kangaroo Project" of the Center of Care Services for Rural Area Education in Taiwan of Fu Jen Catholic University and community endpoints such as The HCI Welfare Charity Foundation in children and elders in the New Taipei and Taoyuan communities. 4. Compal held the third "Healthy Charity" series activities, A total of 40 colleagues attended Compal’s 10K team for the Neihu Charity Running Activity. Purchasing products from social enterprises to encourage 57 employees to participate in activities and meet health standards. 5. Compal co-organized the Second “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 social vulnerable people and to build a beautiful, good and healthy society. 6. Sponsored the "Kangaroo Project" from the Rural Center of Fu Jen University for the 4rd year, for the after-school tutoring center and community teacher training program at Linkou Dayuan, Sanduo Elementary School and FU-Shing Martial Arts Elementary and Junior High School. Participating in the public welfare cooperation project of local libraries by "Kaohsiung 7. Promoted SDGs4 Quality Education of UN, participating in the "Compal Reading Volunteer Project" to promote reading education in rural villages for the 15th year, to serve 1,091 school children and residents. In 2022, a total of 151 mobile digital devices and 250 smart wireless lamps to children of disadvantaged families at Pingtung and Taoyuan in 2022, so that their learning were not limited by environment and able to study healthily. 8. We regularly hold volunteer service activities. In 2021, we had 3 volunteer service activities with 115 participants. We also held blood donation activities. (195 employees donated 298 units of blood, a total of 74,500cc). 92 Item Results 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 high cardiovascular risk, with a 100% achievement rate by 2022. 2. To promote gender equality in the workplace, we have provided gender-friendly toilets for employees and parking spaces for pregnant women. 3. To improve fertility rates, we provide a TWD 66,000 maternity subsidy to employees for each newborn baby. 186 Compal babies were born in 2022. Compal has provided 3,196 birth rewards for 12 consecutive years, with a total amount exceeding TWD 210 million. Employee Care 4. We continue Employee Assistance Program (EAP) in 2022. EAP counseled a total of 119 cases about family and workplace relations issues. 5. Hold employee health promotion activities to take care of employees' physical and mental health. Healthy Breakthrough: A public service activity that combines intellectual and kinesthetic abilities, allowing colleagues to understand their own physical status and construct their own healthy exercise. 53 colleagues completed the activity and 53 public service gifts were given away. The programs of personnel training Compal is a member of the GOLF academic alliance. In 2022, GOLF academic alliance hosted 3 presentations and Compal hosted 15 presentations of its own campus presentations, for a total of 18 presentations and successfully admitted 113 students to participate in one-year internship. We had 227 students to register online courses. We got 92.4 point for overall satisfaction of Compal's internal intern lecture course in 2022. 93 ▓ The targets and plans of 2023 Sustainable Development NO. Targets Plans 1 2 3 Focus on responsible manufacturing and design of green products, work to the goals of circular economy and Net Zero emissions by 2050. Recruiting talents and establishing key knowledge, enforcing human rights policies & gender equality in the workplace to enhancing the overall competitiveness of the enterprise. (1) Confirm carbon emissions based on the SBT methodology to achieve the reduction target, reduce greenhouse gas emissions by 4.2% compared to 2022. (2) Assist subsidiaries to develop the carbon inventory system and complete inventories in Scope 1 & 2 of the greenhouse gas. (3) Promote energy efficiency and increasing the purchase of renewable energy, reduce by 20% power consumption in comparison with the previous year. (4) Increase 5% of products with voluntary ecolabel in comparison with the previous year. (5) Recovered material usage in each commercial notebook project > 5%. (6) The proportion of digital reporting on hazardous substances increased by 10% compared to the previous year. (1) Training to grow key knowledge and precision recruitment and systematic talent cultivation to enhance acknowledgement to Company. Proportion of local IDL as key talents ≧ 8%. Global IDL employee turnover ≦ 17%. (2) Fulfill the workplace requirements as provided in the ISO 45001 management system and provide a safe working environment. Global incident rate (temp-workers included) <0.18%. (3) Follow the company’s human rights policies and promote gender equality. No human rights penalty incident. (4) Supported the Hsu Chauing Social Welfare Charity Foundation and active participation in ecological conservation. Increase 5% of the social investment in comparison with the previous year. Strengthening corporate governance and enhance the sustainable supply chain to improve sustainability evaluation in the long run. (1) Improve sustainability evaluation in the long run to accomplish the top 20% of the listed groups in corporate governance assessment. (2) Expand the system coverage of risk control and internal control, Completion 80% of system coverage of risk control. (3) Focusing on corporate integrity management and anti-corruption, enhance employee awareness and strengthen relevant training, and no violation with a fine penalty of more than NT$1M. (4) Suppliers 1.RBA declaration/SAQ questionnaire completion rate > 99% 2.Conflict mineral due diligence - supplier questionnaire completion rate 100% 3.Key suppliers – online SASB audit completion rate 100% 94 ▓ Climate-related risk and opportunity identification table Type Risk and Influence Adaption and Opportunity Strategy and Law ‧ International trends and the environmental regulations in China have become stricter. Therefore, we are faced with fines or risks of plants closing down resulting from more environmental 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. Operating costs increased as a result of more percentage of renewable energy in order to meet international trends and customer requirements. Technology ‧ Production and costs increased due to development and inclusion of recyclable material alternatives to meet international trends and customer expectation. Transfer of Risk Increased capital input and operating costs as a result of change and upgrade of equipment to enhance assets energy efficiency and low-carbon production. 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. 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. Global awareness of environmental protection is gradually rising. 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 promotes the operation mode of saving electricity, water and waste. Continue to increase the use of solar power in production bases, and cooperate with green power purchases to increase the proportion of renewable energy used. Taking in the lessening of waste and reuse of resources in the designing phase; encompassing green materials and low polluting alternatives; adopting designs with less use of natural resources and more recycled ones. Taking initiatives to meet international trends and customers’ expectation by inserting recycled plastics in electronic products. Improve energy use efficiency. When energy-consuming equipment needs to be replaced, choose energy-saving products, provide employees with energy-saving reminders at any time, and actively introduce external counseling units. A total of 4 factories have passed the ISO 50001 energy management system certification. It is also expected to promote the connection of equipment to the Internet. Maximize the economic benefit of each unit of energy, in line with the goal of EP100. 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. 95 Acute ‧ Climate change might lead to rainfall type changes and the increase of frequency in rainstorms, droughts, and typhoons. These will bring about blocks in road transportation, increase the burden on AC devices, health issues and poor attendance of employees, and damage to plants and machines due to floods. Concrete Risks Chronic ‧ Climate transformation is likely to worsen the air, cause drought, increase the frequency of heatwaves, change water quality, and affect employees’ health. 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. 96 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 In order to help the company manage carbon emissions in the long term, meet the global greenhouse gas reduction requirements, keep the global average temperature rise within 1.5°C by the end of this century, and set the ScienceBased carbon Target, Compal has committed set SBT (Science Based Targets) in April 2022, and it is expected to pass the review before April 2024 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 2015, Compal was selected as part of CDP's Climate Disclosure Leadership Index (“CDLI”) for the first time. In 2022, 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 Company has completed the certification of the energy management system of PCP, KS3, CDT and CD Plants in 2019, CQA Plants in 2022, and has extended relevant experience to other plants. ■ Supply chain carbon management As one of the world’s key IT producers, Compal uses “information platforms” and “workshops” to keep suppliers informed of the latest energy/carbon reduction technologies and green living, and inspires them to commit to active care for the local environment. 97 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, in 2022, an online supplier conference was planned, and a professional consultant team was specially invited to explain the topic of "creating a sustainable value chain through SBT and supply chain management" in order to improve suppliers' willingness and ability to manage carbon. ■ Corporate environmental education The company continues to introduce corporate environmental education into employee training and green experience activities, and continues to respond to the "Taiwan Marine Waste Management Action Plan", starting from source reduction, caring for rivers, signing the "Tampui River Convention", and holding Tamsui River ecological tours, invite company employees, supply chain partners and cooperative social welfare groups to participate in environmental education and beach cleaning activities. Over the past few years, more than 5,000 people have shared the life stories of every corner of the land of Taiwan. The company fully supports the "experiential" environmental education action from top to bottom, and colleagues and family members enthusiastically participate in it from bottom to top; calls on colleagues to trickle down into a river, use the power of consumers to choose safe food, and give customers gifts as New Year's gifts to let demand come change the supply and support sustainable agriculture, forestry, fishery and animal husbandry. And introduce relevant concepts into the company's product design, specially set up courses related to circular economy, invite professional lecturers to explain the actions and requirements of international and customers in the ESG field, so that colleagues can reduce the impact of products on the environment from R&D and manufacturing shock. ■ Supporting green and 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 2022, we invited 7 social enterprises and public welfare groups, including Taiwan DB Art Collective, Yuan care, Doghome Org.,A good day, TriBake, Yu-Cheng Social Welfare Foundation, Kanner Village Social Enterprise to join Compal’s Social & Green Market Event. We encouraged employees to learn more about social enterprises and give them more support through the event. In 2022, Compal collaborated with the Yu-Cheng Social Welfare Foundation/Jixian Sheltered Workshop, I Can Sheltered Workshop, Hanner Family, Taiwan DB Art Collective, Yuan care, Doghome Org., A good day, TriBake ,and employees have donated more than TWD 700,000. ■ 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 “2022 Blood donation activity”: 195 people participated in and donated 298 bags of blood, totaling 74,500 cc. ‧ Compal co-organized the second “Taipei Science and Technology Cup Love Earth Charity Road Run” in Taipei Neihu Technology Park. 98 ‧ Compal has teamed up with the "Kangaroo Project" from the Center of Care Services for Rural Area Education of Fu Jen Catholic University for the 4rd year,, and ran after-school tutoring centers at Linkou Dayuan, Sanduo Elementary School and FU-Shing Martial Arts Elementary and Junior High School. ■ 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. ‧ 2022 Fall Art and Imagination, Meeting with Little Teachers “It turns out to be you” 251 colleagues serve as the Little Teachers of Heart Hope. 2022 “Compal Fall Art Festival ~The thanksgiving fare” arranged a gallery housing brilliant art pieces by Jia-Yi Elementary School art students. A charity marketplace was constructed, and fun activities led by Compal colleagues to entertain 30 Jia-Yi students. ■ Social welfare (1) Budget sponsorship ‧ Donated 79 sets of "Apache Wireless Handheld Ultrasonic Systems" from Aco Healthcare, a subsidiary of the Group, to a medical institution on an offshore island, to protect the outlying islands with Smart medical biotechnology, to help improve the medical equipment in the offshore islands of Taiwan, and innovate the technology that serves the local people. The donation amount is more than NT$20 million. ‧ Sponsoring of budgets for college volunteer clubs In an attempt to encourage college students to participate in volunteer service, the Company has been contributing TWD 600,000 every year since 2004 to sponsor college clubs in reading promotion directed at children, after-school classes, and environmental education in locations that lack resources and for low- income households. In 2022, 10 college clubs applied for sponsorship, 317 student volunteers participated in sponsored volunteer activities in 2022, for which the Company contributed a sum of TWD 445,000 that benefited 1,091children. ‧ Sponsoring of budgets for Compal Sunshine Scholarship The "Compal x Sunshine Scholarships" has entered its 24th year, which provide "Outstanding Computer Talent Scholarships" and "Computer Excellence Scholarships" for students with burns and facial 99 ‧ 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 Pingzhen Squad, Taiwan District of Kiwanis International, Taiwan Institute for Sustainable Energy, Taiwan International Care and Exchange Association, Taiwan Mini Football Association, Taiwan Semiconductor Circuit Design Association, Spinal Cord Injury Social Welfare Foundation, Golf Gap of Learning & Field, A sum of TWD 5,792,000 was donated to the above mentioned entities in 2022. (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 creative teacher and creative student 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 prepared exclusive gifts for Children's Day. In 2022, a total of 151 mobile digital devices and 250 smart wireless lamps to children of disadvantaged families at Pingtung and Taoyuan in 2022, so that their learning were not limited by environment and able to study healthily. In-Kind Donations for A Heartwarming New Year: 145 employees donated 3,843 items of living materials to help 200 poor families in the Sanchong District. ‧ ‧ ‧ ‧ Summer Fundraising event – Enjoy Summer: 76 employees donated 2,075 pieces of six daily necessities, including rice, noodles, canned food, biscuits, toothpaste, and soap, we mainly helped with Compal’s Long- term care and cooperation of the "Kangaroo Project" of the Center of Care Services for Rural Area Education in Taiwan of Fu Jen Catholic University and community endpoints such as The HCI Welfare Charity Foundation in children and elders in the New Taipei and Taoyuan communities. ‧ ‧ Sharing Care with Mooncake Charity Activity: 839 colleagues donated Mid-autumn moon cake sets to 3,118 disadvantaged school children in New Taipei, Taoyuan, Taichung, Miaoli, Changhua, Pingtung, Hualien, Hsinchu and Kaohsiung. 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 2022, 66 Compal colleagues have taken part in activities to help disadvantaged children from 3 to 13 years old and prepared exclusive gifts for Children's Day. (3) Compal Christmas Elf of visited the Dingshe Elementary School. Compal Volunteers visited the Taoyuan City Luzhu Dist. Dingshe Elementary School with the Hsu Chauing Social Welfare Charity Foundation to share the festive atmosphere with teachers and students, and distributed Christmas gifts to 60 students to express their blessings. 100 ■ Formulate human rights protection policies and specific management plans, as well as related policies and implementation 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. The above relevant regulations are disclosed on the official website: “CSR- Employee Relationship- Human Rights Protection and Health Care” and Sustainability reports. ■ Workplace diversity, gender equality and implementation ‧ Compal is committed to promoting gender equality. To ensure that employees are not treated differently based on gender and sexual orientation, the Headquarters and the plants in each area have all established the management process document of “Regulation for No Enforcement, Discrimination, and Harassment". ‧ For pregnant female employees, Compal also provides special care. We provide parking space application ‧ for pregnant female employees who are two months before delivery. In order to create a more inclusive environment and a more flexible space, Compal established gender- friendly toilets in 2022, to encourage the popularization of diversity awareness and respect for individual differences. ■ Domestic culture heritage supports Compal values the cultural heritage of the community and supports the promotion of indigenous arts, culture and music. 2022 Compal Fall Art Festival ~ the thanksgiving fare arranged a gallery housing brilliant art pieces by Jia-Yi Elementary School art students. At the same time, 30 children from Chia-Yi Elementary School were invited to come down to the mountain to sing the Paiwan group songs for Compal colleagues, and to have a warm and reunion thanksgiving event. ■ 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. 101 (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 labor-management relations, the Company subsequently assembled an incidents for more harmonic Environment Safety Promotion Committee that specializes in the development of environment safety plans. Any environment safety-related policies and goals proposed are subject to review during the Environmental Safety Management Review Meeting. Once reviewed, the Committee becomes responsible for supervising work safety units in the implementation of safety and health-related measures, auto inspections, maintenance, and training to eliminate hazardous factors in the environment. In addition, the Committee also supervises relevant departments in completing hazard prevention and loss control systems. (3) Execution ‧ Fire safety equipment/facilities plans and execution: Appropriateness and adequacy of fire safety equipment/facilities are reviewed whenever there is a change to the layout of the business premises. Locations of fire safety equipment/facilities and evacuation routes are clearly labeled on each floor. The Company also engages professional and qualified fire safety inspectors to conduct annual fire safety inspections and reports according to law. ‧ Water/power plans and execution: The Company promotes proper awareness and implements appropriate control on all uses of water and power equipment for more effective conservation of energy and resources. The administrative department is responsible for the day-to-day inspection of power usage, power systems, and water equipment. All inspection findings are detailed in the “Safety and Health Equipment Inspection Log” and any issues discovered are rectified immediately. ‧ Cleaning, monitoring, and control of industrial waste: Handled by the Factory Affairs Division of various factories and General Affairs Department of the headquarters. Waste generated 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. 102 ‧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 Confirmation of damage control NO Request external support 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 YES Level 1 hazard: Post-disaster recovery Any death or 3 major injuries or SP: Occurrence of Level 1 of preventive measures Incident investigation and proposal hazard must be escalated to the Senior Risk Management Committee higher Loss of work hour exceeding 1 day Loss of property above USD 1 million (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. 103 3.3.6 Ethical Corporate Management Assessment criteria Yes No I. Establishment of integrity policies and solutions 1. Does the Company have an Yes 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 2, Article 7 of the “Ethical Corporate 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 “Rules and Procedures for Board of Directors Meetings” 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 legal entities they represent. The Board of Directors has resolved to adopt the relevant integrity management policies, and the Directors and high-level management have issue d a statement of compliance with the integrity management policies, committing to actively implement integrity management. Deviation and causes of deviation No deviations were found Yes When the Company’s internal audit prepares the next year’s 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 104 Yes No Yes Assessment criteria Management Best Practice Principles for TWSE/GTSM Listed Companies”? 3. Does the Company stipulate the operating procedures, behavior guidelines, and disciplinary and grievance systems in its unethical behavior prevention plan and implement them and regularly review and revise the plan? II. Integrity actions 1. Does the Company evaluate Yes the integrity of all counterparties it has business relationships with? Are there any integrity clauses in the agreements it signs with business partners? 2. Has the Company set up a dedicated unit under the Board of Directors to promote ethical corporate management and regularly (at least once a year) report to the Board of Directors its ethical corporate management policy and plan to prevent unethical behavior as well as its supervision of 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” (hereinafter, “Procedures and Behaviors”) as an incentive to insiders and outsiders to report unethical conduct or misconduct. 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. Deviation and causes of deviation No deviations were found The Company requests each of its suppliers to sign the "Letter of Undertaking for Compliance with the RBA Code of Conduct by Vendors” (hereinafter referred to as “RBA Code of Conduct”), according to which suppliers are requested to abide by local laws and 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 department and the legal affairs office 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 auditor’s office 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 on-line teaching courses on the e-Learning platform, including legal affairs related training on information security, personal information protection act, relevant company policies and employees’ code of conduct so as to familiarize all employees with the aforementioned guidelines and thereby facilitate the promotion of honest management. No deviations were found 105 Assessment criteria the implementation? Yes No 3. Does the Company have any policy that prevents conflict of interest, and channels that facilitate the report of conflicting interests? Yes Actual governance Summary description Deviation and causes of deviation Status of Operation and Implementation in 2022: 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 1,072 suppliers with transaction records, 1,070 have signed the RBA Code of Conduct commitment or completed the RBA Code of Conduct questionnaire, making for a signing rate of 99.81%. In addition, 10,867 employees completed 19,524 hours of integrity management related training, including: 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 1,497 1,590 326 7,450 4 Hours 2,637 8,745 1,956 6,184 2 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 Director, managerial officer or other interested party of the Company attending, or present at a Board of Directors’ meeting shall explain the important contents of his/her/its interest at the Board of Directors' meeting if he/she or the legal entity he/she represents has an interest in the proposals listed in such meeting. In addition, if it is likely to prejudice the Company’s interest, he/she shall not participate in the discussion and voting, and shall recuse himself/herself from the discussion and voting, and shall not exercise voting rights as a proxy on behalf of other Directors. 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 the Company discovers that a potential conflict of interest exists involving themselves or the legal entity 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 the 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 106 No deviations were found Assessment criteria Yes No Actual governance Summary description Deviation and causes of deviation commercial activities other than those of this Company. The Company’s Personnel Management Rules and “Employee’s Statement of Ethics and Compliance” have introduced rules to identify, supervise, and manage conflicts of interest for business activities that are more highly prone to dishonest behavior. There are channels in place for Directors, supervisors, managerial officers, stakeholders, and board meeting participants to state their conflicting interests with the Company. To prevent leakage of material inside 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’s audit plan, unethical behavior was included in the scope of risk assessment, and relevant audits are performed accordingly. 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 4. Has the Company established Yes 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? 5. Does the Company organize internal or external training on a regular basis to maintain business integrity? Yes III. Implementation of whistleblowing system 1. Does the Company provide Yes The Company has mailboxes in place to receive malpractice reports from within or outside the No deviations were 107 Assessment criteria incentives and means for employees to report malpractice? Does the Company assign dedicated personnel to investigate the reported malpractice? Yes No Actual governance Summary description Deviation and causes of deviation Company. Once a report has been sent to the mailbox, it will be referred to the appropriate department and personnel depending on the nature of the underlying issue to handle or conduct related checks. found The Company has established procedures to report matters for filing, assigning, verifying, etc., and requires the responsible person to take relevant actions depending on the results of the investigation. The case content and whistleblower information shall be processed in confidential. No deviations were found 2. Has the Company established Yes standard operating procedures for the investigation of malpractice reports, follow-up measures after investigation, and the relevant confidentiality mechanism? 3. Does the Company assure malpractice reporters that they will not be mistreated for making such reports? Enhanced information disclosure IV Yes The Company's relevant regulations and Employee Code of Conduct are clearly regulated, requiring the responsible unit or person not to disclose the content of the case and the identity of the whistleblower, and to take necessary protective actions to ensure that the whistleblower is not treated inappropriately or retaliated. No deviations were found 1. Has the Company disclosed its integrity principles and progress onto its website and MOPS? Yes 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-Major internal policies” and the “CSR and Sustainability- Sustainable Management- Compal's code of Conduct” section of its website. No deviations were found V 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. 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." 108 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/#major-internal ‧ 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 ‧ Risk Management Committee Charter ‧ Corporate Governance Best Practice Procedures ‧ Sustainable Development Best Practice Principles ‧ Risk Management Best Practice Principles ‧ Code of Conduct for Directors and Managers ‧ Code of Conduct for Employees ‧ Ethical Corporate Management Best Practice Principles ‧ Business Integrity Procedures and Behaviors ‧ Regulations on Prevention of Insider Trading ‧ Procedures of Application to Suspend and Resume Trading ‧ Rules of Self-Evaluation of the Board of Directors and Functional Committees Performance ‧ Company's Risk Management Policies and Procedures ‧ Compal Group's Business Continuity Management Policy ‧ Procedures for Handling Material Inside Information ‧ Rules Governing Financial and Business Matters Between this Company and its Affiliated Enterprises 109 3.3.8 Other Important Information Regarding Corporate Governance Please refer to the Company’s website→ CSR https://www.compal.com/csr/zh/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 110 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, 2023 The Company states the following with regard to its internal control system during fiscal the year 2022, 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, 2022 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, 2023, where 0 of the 14 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) 111 2. If an independent auditor is entrusted with reviewing the internal control system, the independent auditor’s report: None. 3.3.10 Penalties imposed against the Company and its staff, or penalties imposed by the Company against its staff for violations of internal control or regulations; state any corrective actions taken in the most recent years up till the date of the annual report: None. 3.3.11 Major Resolutions Made in Shareholders’ Meeting and Board Meetings 1. Shareholders’ meeting ■ Time: 9: 00 am, June 24, 2022 ■ 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) Approved the amendment to the “Articles of Incorporation” (4) Approved the amendment to the “Procedures for Acquisition or Disposal of Assets” (5) Didn't Approve the amendment to the “Procedures for Lending Funds to Other Parties” (6) Approved the amendment to the “Rules and Procedures of Shareholders Meeting” (7) Approved the release of non-competition restrictions for Directors ■ Post-meeting Execution: (1) The amendments to the Company’s Articles of Incorporation were approved and registered on file by the Ministry of Economic Affairs on July 20, 2022. 2. Major Resolutions of Board Meetings Date 3rd Meeting (14th Term) 2022.02.10 4th Meeting (14th Term) 2022.03.15 Material resolutions 1. Approved senior level management change 2. Approved loan to Kinpo&Compal Group Assets Development Corporation 3. Approved the Company acquisition of the common shares of Poindus Systems Corp. by public tender offer. 4. Approved the issuance of the Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 5. Approved authorizing 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 112 5th Meeting (14th Term) 2022.05.11 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 evaluation of CPAs’ independence and competence in performing the financial report audit. 16. Approved the first mid-year employees’ bonus of the year 2022 17. Approved the issuance of the Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 18. Approved authorizing the Company to obtain credit facilities from financial institutions 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 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 authorizing the Company to obtain credit facilities from financial institutions 14. Approved the plan to execute 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. 1. Approved the enactment to the “Compal Group's Business Continuity Management Policy” 2. Approved the Directors’ Remuneration for the year 2021 3. Approved 2nd mid-year employees’ bonus for the year 2022 4. Approved the 1H 2022 Consolidated Financial Review Report 5. Approved the Kaohsiung branch moving to a new location 6. Approved for a loan to Henghao Technology Co. Ltd. 7. Approved for a loan to Unicom Global, Inc. 8. Approved the Company to adjust the lending interest rate and interest payment date of the capital loan to the subsidiaries 6th Meeting (14th Term) 2022.08.12 7th Meeting (14th Term) 2022.11.11 9. Approved the issuance of a Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 10. Approved authorizing the Company to obtain credit facilities from financial institutions 1. Approved annual audit plan for year 2023 2. Approved the compensation of Employee bonuses in cash of year 2021 3. Approved the proposal for 2022 year-end employees’ bonus 4. Approved the 3Q 2022 Consolidated Financial Statements 5. Approved the amendment to the “Rules and Procedures for Board of Directors Meetings” 6. Approved the amendment to the “Procedures for Handling Material Inside Information” 7. Approved the amendment to the “Internal Control System” 113 8. Approved to indirectly invest in the establishment of a Vietnamese subsidiary and obtain the land use rights by the subsidiary. 9. Approved the proposal of the subsidiary’s planned gross project budget of the leased land and commissioned to build the new group operating headquarters building 10. Approved the issuance of a Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 11. Approved the issuance of Letter of Undertaking by the Company to facilitate its subsidiary in obtaining credit facilities from financial institution 12. Approved authorizing the Company to obtain credit facilities from financial institutions 1. Approved for senior level management change 2. Approved the issuance of a Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 3. Approved authorizing the Company to obtain credit facilities from financial institutions 1. Approved the Internal Control System Statement for the year 2022 2. Approved the proposal of the distribution of compensation to employees and directors for the year 2022 3. Approved the Audited Consolidated Financial Report and Parent Company Only Financial Report for the year 2022 4. Approved the Business Report for the year 2022 5. Approved the Business Plan for the year 2023 6. Approved the proposal for Distribution of Earnings for the year 2022 7. Approved the proposal for cash dividends from Earnings for the year 2022 8. Approved the proposal of cash distribution from Capital Surplus 9. Approved the relevant matters regarding the distribution of the year 2022 cash dividends and cash distribution from capital surplus to shareholders 10. Approved the convention of 2023 Annual General Shareholders’ Meeting 11. Approved the Sustainability Report Material Topics for the year 2022 12. Approved the targets and plans of Sustainability for the year 2023 13. Approved fund loan to 100% owned subsidiary Compalead Eletrônica do Brasil Indústria e Comércio Ltda. 14. Approved fund loan to 100% owned subsidiary Compal Eletrônica Da Amazônia Ltda. 15. Approved fund loan to 70% owned subsidiary Kinpo&Compal Group Assets Development Corporation 16. Approved the “Non-Assurance Service Pre-Approval Policy - General Policy“ 17. Approved evaluate CPAs’ independence and competence of performing financial report audit. 18. Approved the first mid-year employees’ bonus of the year 2023 19. Approved authorizing the Company to obtain credit facilities from financial institutions 1. Approved the amendment to the “Corporate Governance Best-Practice Principles” 2. Approved the amendment to the “Management Rules for Preventing Insider Trading” 3. Approved the amendment to the “Risk management policy of Compal Group” 4. Approved the enactment to the “Risk Management Best Practice Principles” 5. Approved the enactment to the “Risk Management Committee Charter” 6. Approved the appointment of the term 1st Risk Management Committee members 7. Approved the amendment to the “Sustainable Development Best Practice Principles” 8. Approved the enactment to the “Human Rights Policy” 9. Approved the 1Q 2023 Consolidated Financial Review Report 10. Approved the release of non-competition restrictions for the managers 11. Approved the release of non-competition restrictions for Directors 12. Approved employees’ salary adjustment of the year 2023 13. Approved the proposal for the appropriated percentage for the remuneration of employees and Directors of the year 2023 114 8th Meeting (14th Term) 2023.02.07 9th Meeting (14th Term) 2023.03.15 10th Meeting (14th Term) 2023.05.08 14. Approved to obtain newly issued shares of ARCE Therapeutics, Inc. by participating in the capital injection by cash. 15. Approved the proposal for providing Corporate Guaranty Letter to Quanta Computer Inc. 16. Approved the issuance of Letter of Support by the Company to facilitate its subsidiary in obtaining credit facilities from financial institutions 17. Approved authorize the Company to obtain credit facilities from financial institutions 3.3.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None. 3.3.13 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit, Corporate Governance and R&D: None. 115 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 2022.01.01~ 2022.12.31 9,600 3,470 13,070 - Note: Other non-audit fees: Transfer pricing report of $600,000, tax consultation of $2,783,000, business registration $22,000 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 116 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 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 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. Situation Party involved Voluntarily terminated the CPA Not Commissioner Not applicable commission applicable Will no longer accept/continue Not Not applicable the commission applicable N.A. Accounting principles or practices Disclosure of financial report Did he/she have opinions that differed from that of the publisher? Yes Scope or step of auditing Other N.A. Description 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 V N.A. Name of CPA Date commissioned Kuo, Kuan-Ying and Chien, Szu Chuan Approved by the Board of Directors on March 26, 2021 Items of consultation and results on the accounting methods for specific transactions, accounting principles and potential opinions for financial report prior to commissioning Written opinion from succeeding CPA on items of disagreement with the former CPA N.A. N.A. 3. The Company shall disclose the content of the reply letter from the former CPA. The former CPA's response to matters as described in Item 1 and Item 2-3 of subparagraph 6, Article 10 of the Standards: None. 117 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 For the most recent year and as of the date of publication of the annual report, changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders Title Name Chairman Vice-Chairman And CSO 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 Ming-Chih Chang Anthony Peter Bonadero Sheng-Hua Peng Min-Chih Hsuan Duei Tsai Wen-Chung Shen Chen Chang Hsu Chun-Te Shen Kuo-Chuan Chen Chyou-Jui Wei Wen-Da Hsu Shi-Kuan Chen Director Director Director Director Director Director and President Director Director and Executive Vice-President Director Director and Executive Vice-President Independent Director Independent Director Independent Director Executive Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President Senior Vice- President 2022 As of May 8, 2023 Shares held Increase (Decrease) Shares pledged Increase (Decrease) Shares held Increase (Decrease) Shares pledged Increase (Decrease) Unit: shares 0 0 0 0 0 0 (680,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 118 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Title Name 2022 As of May 8, 2023 Shares held Increase (Decrease) Shares pledged Increase (Decrease) Shares held Increase (Decrease) Shares pledged Increase (Decrease) Chi-Wai Wan Min-Tung Weng Lo-Chun Lee 0 0 0 Sheng-Hung Li (110,000) 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 Jyh-Shyan Liang Vice-President Tzong -Ming Wang Vice-President Fu-Chuan Chang Vice-President Yong-Ho Su Vice-President Vice-President Yi-Yun Chang Vice-President Hsin-Kung Mao Vice-President Shih-Hong Huang Vice-President Yi-Chiang Chiu Jui-Chun Shyur Vice-President Peng-Hong Chan CLO & VP 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 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 Chiao-Lie Huang Vice-President Wei-Chia Wang Vice-President Yau-De Chiou Jen-Liang Lin Vice-President 0 0 0 0 (100,000) 0 0 20,000 (90,000) 0 0 80,000 (280,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (100,000) 0 0 0 0 0 0 0 0 0 (5,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Note: 1. Vice-Presidents Chiao-Lie Huang, Wei-Chia Wang, Yau-De Chiou resigned in 2022, Vice-President Jen-Liang Lin transferred in 2023. 119 3.7.1 Shares Trading with Related Parties: Name Reason for transfer Transaction date Counterparty Sheng-Hung Li Sheng-Hung Li Ching-Hsiung Lu Gift Gift Gift 2022.05.09 2023.02.21 Yi-Je Li Yi-Je Li 2022.08.26 Shao-Hsuan Lu Father and Daughter Counterparty's relationship with the Company, Directors, Supervisors, Managers, and shareholders with more than 10% ownership interest Father and Son Father and Son Shares Transaction price 110,000 100,000 100,000 22.1 23.5 22.6 3.7.2 Shares Pledged with Related Parties: None 120 3.8 Relationship among the Top Ten Shareholders April 23, 2023 Unit: Shares Name Self Shares held Shareholdings of spouse and minors Total shares held in the names of others Shares held Shares Shareholding Percentage Shares Shareholding Percentage Shares Shareholding Percentage Spouse, relative of second degree or closer, and relationships among top 10 shareholders Name Relationship Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF。 Yuanta/P-shares Taiwan Dividend Plus ETF Kinpo Electronics, Inc. Sheng-Hsiung Hsu Silchester International Investors International Value Equity Trust New Labor Pension Fund Yuanta Taiwan High Dividend Low Volatility ETF 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 Citibank (Taiwan) Ltd. in custody for Norges Bank Labor Insurance Fund 0 0 0 0 0 0 0 0% None None 0% None None 0% None None 0% 0% None None 0% None None 0% None None - - - - 0 0% None None - 0 0% None None - - 0 0 0% None None 0% None None 340,376,000 7.72% 206,638,295 4.69% 151,628,692 3.44% - - - - - - 8,975,401 0.20% 17,107,025 0.39% 104,163,000 2.36% 102,163,415 2.32% 61,473,000 1.39% 57,372,900 1.30% 54,255,652 1.23% 47,241,697 1.07% 44,143,526 1.00% - - - - - - - 121 3.9 Ownership of Shares in Affiliated Enterprises December 31, 2022 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. Big Chance International Co., Ltd. Compal Rayonnant Holdings Limited 500,000,000 90,000,000 100,000,000 29,500,000 9,100,000 600,000 100,000,000 20,000,000 4,646,143 29,500,000 6,000,000 20,000,000 100.00 100.00 100.00 100.00 91.00 100.00 52.04 32.79 30.00 100.00 100.00 100.00 10,000,000 100.00 20,014,952 100.00 - - - - - - - - 500,000,000 - 90,000,000 - 100,000,000 - 29,500,000 - 9,100,000 - - 100,000,000 600,000 7,805,110 5,064,999 12.80 32.70 27,805,110 13,157,285 - - - - - - 29,500,000 - 6,000,000 - 20,000,000 - 10,000,000 - 20,014,952 29,060,176 42.73 13,139,637 19.32 42,199,813 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 15,035,000 50.12 - - 15,035,000 2,772,000 42.00 - - 2,772,000 4,648,322 10,157,730 41,304,504 14,924,070 147,000,000 89,755,495 48,010,000 42,700,000 27.72 656,396 19.83 7,037,133 18.74 34,422,417 20.94 100.00 100.00 100.00 508,000 - - - 53.58 37,000,000 3.91 13.74 15.62 5,304,718 17,196,863 75,726,921 0.70 15,432,070 - 147,000,000 - 89,755,495 - 48,010,000 46.42 79,700,000 53,001,000 100.00 - - 53,001,000 100.00 100.00 100.00 100.00 91.00 100.00 52.04 45.58 62.70 100.00 100.00 100.00 100.00 100.00 62.05 88.61 75.00 53.55 50.12 42.00 31.63 33.57 34.36 21.64 100.00 100.00 100.00 100.00 100.00 90,820,000 100.00 - - 90,820,000 100.00 12,500,000 100.00 - - 12,500,000 100.00 122 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 Auscom Engineering Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology(Poland) Sp. z o.o. Bizcom Electronics, Inc. Compal Electronics (Holding) Ltd. 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 - - - - - - - 3,000,000 - 136,080 - 245,911 - 100,000 - 1,000 - 6,424,516 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 - - - 100,000 - 50,000 Lipo Holding Co., Ltd. 98,000 49.00 102,000 51.00 200,000 Ascendant Private Equity Investment Ltd. 31,253,125 34.72 44,750,000 49.72 76,003,125 UniCore BioMedical Co., Ltd. 20,000,000 100.00 Shennona Corporation - 100.00 - - - 20,000,000 - - Starmems Semiconductor Corp. 3,500,000 35.00 1,000,000 10.00 4,500,000 Kinpo&Compal Group Assets Development Corporation Compal Ruifang Health Assets Development Corporation 52,500,000 70.00 - - 52,500,000 10,000,000 100.00 10,000,000 POINDUS SYSTEMS CORP. 11,768,199 56.04 44,000 0.21 11,812,199 Note: Investments made by the Company using the Equity Method. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 84.44 100.00 100.00 45.00 70.00 100.00 56.25 123 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 8, 2023 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 124 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 3 35 329 1,069 216,444 0 217,880 8 451,701,098 730,396,575 1,830,513,624 1,394,535,320 0 4,407,146,625 0.00% 10.25% 16.57% 41.54% 31.64% 0.00% 100.00% April 23, 2023 4.1.3 Share Ownership Distribution Range of Shareholding (Unit: Shares) 1 ~ 999 1,000 ~ 5,000 5,001 ~ 10,000 10,001 ~ 15,000 15,001 ~ 20,000 20,001 ~ 30,000 30,001 ~ 40,000 40,001 ~ 50,000 50,001 ~ 100,000 100,001 ~ 200,000 200,001 ~ 400,000 400,001 ~ 600,000 600,001 ~ 800,000 800,001 ~ 1,000,000 1,000,001 and over Total Number of Shareholders Shareholding (Shares) Percentage April 23, 2023 45,187 124,546 25,802 8,247 4,471 3,692 1,650 1,030 1,652 689 347 106 84 50 327 217,880 9,257,951 274,166,004 197,193,546 101,947,422 81,435,234 93,044,833 58,487,876 47,823,017 118,110,996 96,582,456 98,048,269 51,511,896 58,052,493 43,889,480 3,077,595,152 4,407,146,625 0.21% 6.22% 4.47% 2.31% 1.85% 2.11% 1.33% 1.09% 2.68% 2.19% 2.22% 1.17% 1.32% 1.00% 69.83% 100.00% 4.1.4 List of Major Shareholders Shareholder’s name Shares held Percentage (%) April 23, 2023 Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF Yuanta/P-shares Taiwan Dividend Plus ETF Kinpo Electronics, Inc. Silchester International Investors International Value Equity Trust New Labor Pension Fund Yuanta Taiwan High Dividend Low Volatility ETF 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 Citibank (Taiwan) Ltd. in custody for Norges Bank Labor Insurance Fund 340,376,000 206,638,295 151,628,692 104,163,000 102,163,415 61,473,000 57,372,900 54,255,652 47,241,697 44,143,526 7.72% 4.69% 3.44% 2.36% 2.32% 1.39% 1.30% 1.23% 1.07% 1.00% 125 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 Before dividend After dividend 2021 27.95 20.60 23.26 25.56 23.54 2022 27.20 20.55 23.24 26.69 25.48 (Note 1) As of May 8, 2023 25.80 22.60 24.10 25.66 - 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 Earnings per share Per-share dividend Analysis of investment returns 4,357,129,194 4,357,129,194 4,357,129,194 2.90 1.67 0.32 4,357,129,194 4,357,129,194 2.90 2.00 - - - 8.02 11.63 8.60% 1.67 1.20 (Note 1) - - - 13.92 19.37 (Note 1) 5.16% (Note 1) - - - - - - - - - Note: 1. The 2022 distribution of earnings was resolved at the March 15, 2023 Board of Directors’ Meeting. 2. Book value per share and earnings per share based on the most recent quarterly data audited (reviewed) by CPAs before the publication date of this annual report. Other fields based on data for the year as of the publication date of this annual report. 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, domestic and international competition, 126 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 2022 distribution of earnings of shareholders’ dividends in the amount of TWD 4,407,146,625 was approved by the Board of Directors Meeting on March 15, 2023. The aforementioned amount is set to be distributed as an all-cash dividend of TWD 1.0 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 881,429,325, or TWD 0.2 per share. The total cash distribution amounts to TWD 5,288,575,950. ‧ 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 27, 2023, and cash distribution has been paid out on May 19, 2023 3. When there is a significant change in the expected dividend policy, it should be stated: None. 4.1.7 Impact on Business Performance and EPS resulting from Stock Dividend Distribution: Not Applicable (The Company did not disclose 2023 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. If the actual amounts differ from the amounts estimated, the differences are recorded as gains/losses in 127 the subsequent year as a change in accounting estimate. 3. 2022 employees compensation proposal passed by the board of directors ‧ Accrued employee compensation is TWD 750,945,090 and Directors compensation is TWD 39,709,200. ‧ 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 2021 employee and Directors compensation: ‧ Accrued employee compensation is TWD 1,350,062,159 and Directors compensation is TWD 71,389,891. ‧ The 2021 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 128 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 2022 Year-to-date May 8, 2023 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 7,426,799 units (May 8, 2023) 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 $ 4.76 USD $ 3.20 USD $ 3.90 USD $ 4.22 USD $ 3.74 USD $ 3.94 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. ■ Deposit and redemption of Compal shares 129 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 receives the above notice, it shall produce and issue global depository receipts representing the number of 130 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 131 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. ■ 2022 Revenue contribution Major Divisions 5C electronics Other products Total (%) of Total Sales 99.4% 0.6% 100% 2. Current and future product development ■ Notebooks In 2022, with the most real-time R&D efficiency, Compal launched notebooks equipped with the latest processors from Intel and AMD. 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. Demand for notebooks shifted as the Covid-19 outbreak eased, with demand for Chromebooks and consumer notebooks cooling. The demand for commercial and gaming notebooks was stable, and the product strategies of brand partners have changed accordingly. Compal seized the opportunity to introduce innovative and advanced technology into product design and assist customers to launch models with market competitiveness. It has achieved superior results amidst the fierce competition in the business and game market. Entering 2023, Compal continues to launch new products with high-end technical specifications in line with market trends and assist customers in obtaining higher market share in various segments, creating a win-win situation for Compal and brand partners. ■ Ultraslim Notebooks Innovative technology and extensive R&D capabilities have allowed Compal to maintain a leading position in the industry. Compal produces an ultraslim Notebook, which uses the latest generation processor from Intel 132 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 ultraslim notebooks in 2023. 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 notebooks to change typical usage patterns. Future notebook features should combine productivity, mobility, a more user-friendly design, long battery life, and 5G connectivity. These features can 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 notebook 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 notebooks 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. With the increasing popularity of 5G networks, 2-in-1 notebooks featuring portability and mobility, equipped with 5G to surf the Internet at any time, have become the focus. ■ 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. ■ NTN (Non-Terrestrial Network) and satellite communication NTN (Non-Terrestrial Network) is a new technology introduced in 3GPP Release 17 (Jun 2022) that leverages satellite communication technology to expand the coverage of 5G networks. This enables the creation of a global covered wireless communication network and build-up new markets for communication products and services. With NTN technology developments, diversification and high reliability will become crucial in the communication field, and will need to be integrated with Ka/Ku high-frequency band and B5G communication protocol. NTN communication achieves global wireless communication through satellite-linked ground stations (User Terminals) or directly connected user devices (Mobile Devices, such as iPhone 14 had launched the Satellite communication), and provides many new application scenarios, such as remote areas, deserts, mountains and oceans. NTN technology enables the fulfilment of various communication demands, both of broadband 133 network and IoT use cases. It is also widely applicable to communication needs in fields such as military, aviation, smart transportation and cars" ■ 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). The 5G universal integrated module complies with 3GPP Release R15/R16/R17 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 millimeterwaves etc. Modules also built with GPS / GNSS global positioning system, eSim and other functions, all need foundational technology of coming 5G user equipment and AIOT applications & devices. Based on long-term experience in consumer electronics design, research & development, and product manufacturing, Compal provides various kinds of reference designs of 5G user equipment products, collaborates with customers 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 & 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 ISC (Integrated Small Cells), ORU, ODU, OCU, 5G Network Management and 5G RIC (RAN Intelligent Controller) , 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 the consumer tablet and e-Reader market 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 trend of global tablet and e-Reader market in recent years, Compal is also investing in creating breakthroughs in technologies, product features and cost management, aiming to commercial and industrial tablet market to engage more business opportunity and raise profits. 134 ■ Smartphones Compal continuously provide technical design suggestions to customers for optimizing assembling processes at factories, quality improvement and operation efficency. In addition to stabilizing OEM of 5G smartphone business, Compal explore more business opportunities from entry premium segment to premium or unltra segments. ■ 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 As the marketing demand grows up continually, Compal keeps development hearing technologies for bluetooth hearable devices, including millisecond frequency adjustment, hearing protection, beam forming, Audio Enviroment adjustment, and Fitting tool of Audiologist. Compal hearing total solutions and services will continue to be applied to bluetooth headsets, PSAPs, OTC hearing aids and hearing aids. ■ Smart Display Products As the COVID-19 begins to slow down and countries begin to open the border, the demand for smart displays in the post-COVID-19 era will also be different. We continue to develop large-size displays, optimize image quality design, adopt artificial intelligence (AI) image processing and sound processing, combine non-contact touch solution, use antibacterial and environmentally friendly materials and other technologies to create an immersive experience in product usage, and facilitate interactive convenience that take into account both safety and environmental friendliness, satisfy multiple usage scenarios, enhance value-added services and new business opportunities in the post-COVID-19 era. ■ 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. 135 ■ Smart Home Devices The rise of the Internet of Things (IoT) and AI technologies has facilitated smart home hubs with smart voice assistants to become a potential product in the industry. Compal have already been recognized by our global customers for our engineering capability on Smart Speaker, Smart Display and Smart Camera products. In the future, Compal will also use our core engineering capabilities to expand our product coverage in different smart home devices and applications. ■ 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 the market has increased since the technology progress of wearable devices in the past few years. Add to that, the Metaverse has become a hot topic and has drawn customer attention 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 136 5.1.2 Industry Overview 1. Current and future industry prospects ■ Notebooks Global notebook shipments have skyrocketed in the past two years due to the rapid increase in demand for remote office and distance learning. After entering 2022, the market demand has slowed down, and it has encountered unfavorable factors such as the Ukrainian-Russian War, global inflation, and radical interest rate hikes. In addition, the supply chain in 1H'22 was still unstable, so the annual shipment was only 211.9 million units, nearly 19% decline in shipments compared to 2021. However, the shipments are still higher than the average shipment level before the epidemic. Looking forward to 2023, the demand side will still be hindered by economic downturn, and it is estimated that the notebook market will decline slightly. To seek more market opportunities and increase revenue and profits, brand manufacturers have shifted their product strategies to premium and high-value products, such as commercial notebooks, ultraslim notebooks, 2-in-1 notebooks, gaming notebooks, and creator notebooks. Under such changes, more precise market segmentation, product positioning and innovative design are required. Compal has rich experience, sophisticated technology, and various exclusive patented technologies, and can jointly develop innovative and high-quality products that keep pace with the times with brand partners to create market demand. ■ 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. In 2022, the global shipment of ultraslim notebooks (<18mm thickness) has reached 71.65 million units. It is estimated that the shipments of ultraslim notebooks will account for 35% of the global notebook shipments in 2023. 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 behaviors and consumers continuing to support strong demand for gaming hardware with mean high shipment sales. The demand changes brought about during the epidemic will continue to drive the sales of global gaming products. According to IDC, global gaming notebook shipments in 2022 have reached 27.3 million units, accounting for about 12.8% of global notebook shipments. The demand for gaming notebooks is stable, and its share in global notebook computer shipments is expected to rise to 14.5% in 2023. 137 ■ 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 global shipment of 2-in-1 notebooks in 2022 was approximately 99.2 million units. It is estimated that brand manufacturers will launch more diversified 2-in-1 products integrating 5G network and AI-related applications in 2023, so the penetration rate in global notebook shipments is expected to continue to rise ■ All-in-one (AIO) The AIO market is currently dominated by HP, Lenovo, Apple and Dell. Those top brands account for more than 80% of market share. Brand manufacturers have successively launched large-size screen design to enhance visual comfort. In addition, in order to meet the differences in usage requirements derived from different scenarios, brand manufacturers are also striving to innovate in product specifications and designs. IDC predicts that AIO shipments will be more resilient than traditional desktop computers. AIO shipments will be 10 million units in 2023. ■ 5G Module, 5G User Equipment, 5G Small Cell and 5G O-RAN Private Network solution According to the GSA, to end-2022, there are 245 operators officially providing 5G network communication products and services in more than 155 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 10.6% of which is provided by 5G communication. There are more than 1700 5G consumer products available in the global market, across various 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 will improve 5G coverage and vertical applications. 138 ■ Tablets Due to the impact of inflation and the end of the Covid-19 pandemic, demand for tablet computers has dropped significantly. According to IDC data, global tablet shipments in 2022 were approximately 162 million units, a 3.3% decline from the previous year, ending two years of continuous growth and indicating a changing market trend. This shows a fact: during an economic downturn, most consumers will be more hesitant to choose a higher specification tablet which costs more. Cost-effectiveness and ease of use remain key factors in the market. However, there is still demand for mid-range tablets for educational purposes, as they can serve as a cheaper alternative to PCs. In addition, due to the economic downturn, there is also a trend of using consumer tablets in industrial or vertical applications for cost saving. Compal will continue 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 2022 was about 1.2 billion units, with a YoY decrease of 9.1%. Over a half of sales volume was 5G smartphone. IDC also predicts that the ratio of 5G smartphone will increase to 80% in 2026. The main reason for the decline in sales volume was conservative by consumers due to the high global inflation and unemployment rate. Compal continue to flexibly adjust production bases in line with customers’ strategies, aiming to expand their market share with low cost advantage and advanced specifications. ■ Smart Wearable Devices According to IDC, in 2022, smart watches market continued to grow at an annual growth rate of 9.4%. Apple is still the top one vendor by market share. Apple launched new release new product line - Apple Watch Ultra - and Google also launched its first smart watch – Pixel Watch - drove the growth momentum to high-end segments. In 2023, 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 Canalys' Smart Personal Audio Analysis, the unit sales of global TWS hearable device market shipments in 2022 will decrease by 2% year-on-year to 288 million units. According to DIGITIMES Research, the acceptance of TWS wireless Bluetooth headsets in the market has increased significantly. In addition to the continuous development of various major manufacturers in the TWS consumer market, the hearing aid market will also start to receive attention in 2022. With modern technology and environmental changes, people are more likely to be exposed to high volume, 139 resulting in younger hearing loss and an increase in the overall population of hearing loss. However, due to various reasons, only a very few people have used hearing device. In order to seize related business opportunities, major global consumer electronics and medical manufacturers are vying to invest in the hearing device industry, which is trending towards consumerization. The United States, the world's largest hearing aid market, will finally promulgate the "Over-the-Counter Hearing Aid Act" this year to consumerize and popularize traditional medical hearing aids. TWS hearing aids that are more consumer-oriented are similar to OTC hearing aids that are more medical-oriented. They are all aimed at mild to moderate hearing loss groups and are light medical products. It can be seen from the actions of mainstream brands to enter the field of auxiliary listening that the development trend of high-end TWS with hearing function can be expected in the future, and the market potential is huge. After the passage of the OTC hearing aid bill, TWS hearing aids are expected to be launched, sharing the mild to moderate hearing loss market together with OTC hearing aids. As a consumer-grade affordable alternative to traditional medical-grade hearing aids, TWS hearing aids and OTC hearing aids can play a role in solving the lack of penetration in the hearing aid market and connecting more professional hearing aids. Compal will continue to develop bluetooth hearing technologies and total solutions to create hearing products such as TWS, PSAPs, OTC hearing aid and hearing aids. ■ Smart Display Products According to market research companies, the global LCD TV industry saw a decline in overall shipments in 2022, with approximately 204 million units shipped worldwide, a 4% decrease from the previous year. This was due to various factors including the COVID-19 pandemic, the Ukraine-Russia conflict, and rising inflation. The North American market was particularly impacted by record high inflation, which led to decreased demand and a surplus of inventory in distribution channels. As a result, TV shipments in the region declined by 14% year-over- year, with major brands resorting to price cuts to clear inventory and causing market price chaos. Looking ahead to 2023, challenges such as the US-China trade tensions, the Ukraine-Russia conflict, and inflation will continue to affect the market, leading to conservative demand and reduced panel production capacity. In response to these challenges, our company will optimize operations and maintain flexibility, deepen strategic partnerships, and focus on R&D to adapt to the changing market conditions. ■ 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 140 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 The application of wireless network technology in smart home appliances is getting mature, bringing convenience and real-time connectivity to consumers, pushing the growth of the smart home market. In addition to continuous development on smart voice assistants and cloud services to build a complete smart home ecosystem, Amazon and Google have also begun promoting the Matter protocol to break the smart home ecosystem barriers, which has attracted more and more manufacturers to enter this market. In the future, smart home applications will have more advanced and mature artificial intelligence (AI) used on voice interaction, image recognition, and smart home automation, providing consumers with smarter and more convenient user experiences. ■ IoT Vertical Solutions I ndustries 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 robots (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. 141 ■ 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. Sine 2021, we built a plant in North America to locally supply customers’ demand. ■ Servers Server shipments have grown about 0.3% as compare with last year, mainly due to increased demand for cloud services. According to IDC, shipment of x86 servers totaled 16.76 million units in 2022. This is expected to rise to nearly 17.18 million units in 2023. X86 servers accounted for 96.5% of total server shipments. Rack-mounted servers represent a higher market share because they are both energy efficient and scalable. 2. Association between upstream, midstream, and downstream industry participants ■ Notebooks The notebook industry is now mature and Taiwanese manufacturers have developed comprehensive partnerships with upstream, mid-stream, and downstream suppliers. This fully-fledged supply system gives manufacturers the advantage of being able to adjust to market changes quickly and flexibly. 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, 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. As geopolitics and chip wars intensify, Taiwanese ODM/ OEM will become more competitive in the global notebook industry. 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 critical 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. 142 ■ Ultraslim Notebooks As an ultraslim 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 ultraslim 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 identical to those of conventional notebooks, with the addition of some tablet parts suppliers and manufacturers. Support of the existing supply system and its advantage of integration across suppliers, allows Compal to maintain full control of the development of key components. This speeds up research and innovation of new features because brand manufacturers and users of 2-in-1s continue to add new requirements. Despite the increasing complexity and challenges ahead, Compal remains confident and continues to make improvements as well as continuing to bring new products and concepts to the market. ■ All-in-one (AIO) The supply chain and manufacturers of AIOs are generally identical to those of conventional notebooks. The upstream supply structure is similar to that for general PCs, with the addition of suppliers of large touch screen panels. HP, Lenovo, and Dell focus not only on commercial users but also home multimedia users. Apple’s emphasis is on professional applications and usage. ■ 5G Module, 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 Experiencing the IC shortage in 1st half and demand decline in 2nd half in 2022, Compal have adopted more flexible production and procurement strategies in 2022, such as using the same components in the design phase 143 as possible for each product, to flexibly utilize raw materials and reduce the uncertainty generated by supply chain fluctuations. In addition, to reduce production risks, Compal is also expanding overseas production sites outside of China and actively developing local suppliers to ensure a competitive material cost, on-time delivery and quality to meet customer 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. ■ Smart Hearable Devices For the Bluetooth hearing device market, Compal has built supply chain of hearing devices including chipset suppliers and key components suppliers. Compal also has started cooperation with major channel partners to jointly build an ecosystem of Bluetooth hearing devices. Compal will deliver high-quality Bluetooth hearing devices to consumer and medical hearing markets. ■ Smart Display Products In 2022, the global supply chain was significantly impacted by the COVID-19 pandemic, China's zero-COVID policy, and the ongoing US-China trade tariffs. To mitigate risks, we have been actively diversifying our operations outside China and expanding to other regions. We have integrated resources across different regions and levels of the supply chain to optimize production, control operational costs, and provide flexible supply to meet customer demand. Our goal is to ensure that our operations are agile and adaptable to changing market conditions while maintaining high levels of service and quality. ■ 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. 144 ■ Smart Home Devices Compal provides a wide range of smart home products, including smart speakers, smart displays, and smart cameras for the development of intelligent home applications. In collaboration with upstream, mid-stream, and downstream partners, we can offer various customized hardware devices, software support, and platform integration solutions tailored to the needs of different system integrators and industrial customers. ■ 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) Instruments, equipment, and accessories: • Smart sports Compal has invested substantial resources into the development and integration of smart sports vital sign monitors. These monitors can gather measurable data and are useful for designing training programs. This information can be exchanged over the cloud to facilitate remote training and communication between athletes and trainers, helping athletes to follow the most effective physical and technical training methods and 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 (2) Medical AI • Cardiovascular disease prediction 145 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. (3) Management system: • Digital charts and smart ward solutions Compal has introduced digital charts through an alliance with foreign partners. This product category offers the potential to aid physicians in diagnosis and reduce the workload on nurses, unlike the conventional management system used by existing medical institutions. Additionally, it can be integrated with many different data management systems currently used in hospitals. Digital transformation is already happening within the healthcare system, and Compal is currently working with several hospitals to develop digital charts and smart ward solutions. Healthcare organizations will no longer operate in isolation, but will be able to coordinate their activities towards the establishment of a uniform standard and 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. ■ 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 146 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 • Notebooks have matured to a point where brand manufacturers are shifting their focus towards higher priced and more fully featured products, such as commercial notebooks, ultraslim notebooks, 2-in-1s, and gaming notebooks in a search for greater market opportunities, revenue, and profits. • There are more usage scenarios for notebooks, such as gaming notebooks for e-sports, creator notebooks for content creation, and always-connected 2-in-1 notebooks for hybrid work. • The global notebook market has entered an inflection point in the expansion cycle in 2022 and is expected to face challenges again in 2023 due to the macroeconomic uncertainty. To boost the buying of notebooks, not only Intel and AMD in the x86 camp will launch a new generation of processors with improved performance, chip manufacturers in the ARM camp (such as Qualcomm, MediaTek, etc.) also plan to launch performance-optimized processors to seize the mid-to-high end Notebook market share. As chip manufacturers and brand manufacturers cooperate more closely in system integration, it is expected that the competition between the x86 and ARM camps will become more intense. • Benefiting from the new-generation graphics cards launched by Nvidia and AMD successively, the performance and power efficiency of the two have reached the largest improvement in history, which is expected to drive gamers and content creators to replace or purchase new notebooks. Therefore, gaming notebooks and creator notebooks have a bright future. • The increasing popularity of mobile devices and online applications have called for more robust and diverse security functions, such as fingerprint recognition, face/ voice recognition, and camera shutter. 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. 147 • An always connected feature can help to work remotely. ■ Gaming Notebooks • Powerful performance is essential for gaming notebooks. • 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 notebooks 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. ■ 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 user terminals and 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 large display and designs for automation. • Focus on more eco-friendly product design such as recycled material and reparable design. 148 • 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. ■ 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 149 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 had input from hearing experts to help develop professional acoustic products to create product differentiation and make us more competitive in the market. ■ Smart Display Products Our company has been working closely with strategic partners to drive innovation in the development of high- end models. These models will feature large-sized, ultra-high-resolution display panels, the latest video streaming platform solutions, and technologies such as artificial intelligence (AI) image and sound processing, all while using eco-friendly materials. By combining these technologies with home networking products, we aim to create a diverse range of applications and opportunities. This approach will enable us to stay ahead of the competition and maintain long-term competitiveness by accumulating leading-edge technology capabilities. ■ AR/VR Smart Devices • AR head-mounted displays and spatial sensing modules have been adopted by vertical application customers and entered the European and American markets. • AR/VR new Platform (XR Platform) completed the development stage. ■ Smart Home Devices • Smart speakers, smart displays and smart cameras with AI technologies that enable multiple modes of interaction such as voice input, touch, gesture and computer vision. • Support to the Matter protocol allows connections to a wider range of smart home products from different ecosystems. • Services integrated with cloud and edge computing and data analysis for 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) Instruments, equipment, and accessories: 150 ‧ 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 top sports experts worldwide for the development of products that are more suitable for professional athletes. Compal is also working with fitness centers on the creation of customized, exclusive packages that deliver the most effective sports solutions and communications to both users and businesses. ‧ Medical equipment and healthcare-related products Medical equipment with Internet connectivity is a trend for 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 to provide 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. (2) 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 have made it possible for Compal to introduce the solutions 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. ■ Automotive electronics (AE) Telematics, in-vehicle-infotainment, and Advanced Driver Assistance Systems (ADAS). 151 ■ Servers The rack-mounted server is still the mainstream product today because it can be easily maintained and scaled up as business grows. Tower servers are still favored among SMEs for their low cost, but their market share has been steadily declining. Blade servers are relatively expensive to set up and may gradually be replaced by more simplified High Density servers. The number of servers required for Data Centers has increased continuously year after year. Although the demand for conventional enterprise-grade servers has gone down a little, demand for both types of servers will ultimately reach equilibrium. In addition to cost-performance, design flexibility and quick response to customer needs are the two most decisive factors for a product’s success. 5.1.3 Research and Development 1. Research and Development Expenses over the past year Year R&D expenses Operating revenue Unit: TWD Thousands; % R&D expenses as a percentage of operating revenue 2022 17,929,525 1,073,245,915 2023 first quarter 4,384,698 209,458,784 1.7 2.1 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 (360Hz) 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 recognition, camera shutter, facial recognition, and 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 Ultraslim notebooks, and its designs have 152 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 ultraslim 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 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 • 5G O-RAN Solutions unveiled in 2023 MWC Barcelona and obtaining certification and mass production in 2023, those include ORU, ODU, DU inline accelerator and OCU equipment and solutions. • Qualcomm X72/75 5G R17 M.2 / LGA module will be developed in 2023. • MTK based T830 5G R16 LGA module will be developed in 2023. • Qualcomm X62/65 5G R16 M.2 / LGA module will be mass-produced in 2022. • 5G integrated small cell developed in 2021 and obtained product certification. • MTK T750 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 cost-effective WiFi tablets with good performance for entertainment and enterprise applications. • New tablets with in-cell display and wireless charging function. 153 • Developed and mass-produced a new generation of waterproof e-Reader with wireless charging function. ■ Smart Wearable Devices • 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 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. • Bluetooth hearing aids with TAIWAN FDA have been developed and are in mass production. ■ Smart Display Products • Developing a latest video streaming platform. ■ 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 with AI technologies and launched to market. ■ 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; 154 meanwhile, kept promoting products to the industry. • Forklift AMR started evaluating, and some potential customers are waiting for test, the shipping schedule is set in 2H 2023. ■ Smart Medical and Healthcare • Smart sports Compal's smart exercise mat, Stampede, won the 2023 Taiwan Excellence Award and was selected as a representative sports product for 2022. It will be extended to national sports centers and expanded to the hotel and construction industries to promote smart exercise solutions. • 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 addition to this, several prominent nursing centers in China have also shown interest and commenced collaborating in the use of this solution. • 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. 155 6.1.4 Long-term and Short-term Development 1. Short-term Development • We will adapt to market changes, respond epidemic situation, strengthen innovative 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 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. 156 • 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 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. 157 5.2 Market and Sales Overview 5.2.1 Market Analysis 1. 2022 Sales (Service) by Regions Sales Regions Americas Europe Asia (Including Taiwan) Other Area Total 2. Market Share ■ Notebooks Percentage 47.2% 22.9% 27.2% 2.7% 100.0% According to IDC statistics, the global notebook shipments reached 211.88 million units in 2022. Compal accounts for about 20% of the global notebook market and is still the world's leading product manufacturer. 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, 5G O-RAN solutions, 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, 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. 158 ■ Smart Wearable Devices Compal is the biggest ODM supplier 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 Our company has successfully mass-produced high-resolution smart voice interactive TVs, which have gained over 8% market share in the North American market. We have also received high-quality reviews from consumers, averaging over 4.5 stars, and have successfully secured cooperation plans with existing customers. We plan to continue our momentum in shipping products and actively expand our product lines to maintain stable growth in the future. ■ 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, due to slowing demand and macroeconomic instability, global notebook shipments fell by nearly 19% in 2022. Looking ahead to 2023, economic headwinds and channel inventory issues will continue to affect the shipments at the beginning of the year. However, due to the launch of new-generation processors and graphics cards, and the expected recovery of the economic situation in the second half of the year, shipments will increase quarter by quarter. ■ Ultraslim Notebooks According to IDC statistics, global shipments of ultraslim notebook (<18mm thickness) has reached 71.65 million 159 units in 2022, accounting for more than 33.8% of the global notebook market. In 2023, it is estimated that more ultraslim notebooks will be launched under the competition between x86 and ARM architecture processors. ■ 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 data, global gaming notebook shipments will reach 27.25 million units in 2022, accounting for about 12.8% of global notebook shipments. In 2023, Nvidia and AMD launch new graphics cards with improved performance, which will lead the replacement demand for gaming notebooks. ■ 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 shows the global shipments of 2-in-1 notebook has reached 99.17 million units in 2022. It is estimated that in 2023, brand manufacturers will launch more diversified products and continue to integrate new applications such as 5G and AI, which will make the application of 2-in-1 notebooks wider and bring more business opportunities. ■ All-in-one (AIO) According to IDC statistics, the global AIO shipments in 2022 will be 10.58 million units, and it is expected to remain flat in 2023. 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. 160 ■ Tablets In 2022, global shipments of tablet computers slightly declined due to the ongoing Ukraine-Russia war, global inflation, and interest rate impact. Looking ahead to the next five years, many countries are expected to adopt interest rate policies to suppress inflation, but it will ultimately weaken economic growth, resulting in tightened consumer spending and business budget cut, which is a negative impact for the already matured tablet market. Despite the continued declining trend of the market, the shipment of detachable tablets will surpass slate tables in the next 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, the 2023 Global smartphone shipment is estimated to be 11.9 billion with 1.1% YoY decline which will bounce back in 2024. In the first half of 2023, shipments in most regions will have a double-digit decline. In the third quarter, there is a chance of growth, and in the fourth quarter, there is a chance for double-digit growth. Compal is also investing in cost-effective models with 5G communication with existing 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 market research companies, the global LCD TV market is expected to remain flat or decline slightly in 2023, due to factors such as inflation, weak demand, and panel production reductions. In the post-pandemic era, the market for smart display products is expected to continue developing audio and video specifications while also growing and developing in the direction of technologies such as antibacterial and environmentally sustainable. ■ AR/VR Smart Devices According to IDC estimation, the annual average growth rate (CAGR) 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. 161 ■ Smart Home Devices The main driving force to the smart home market lies in the demand for smart lighting, entertainment, automation and security. In recent years, advanced technologies such as AI, machine learning, and voice recognition have also become key drivers to the market growth. According to the latest report from Grand View Research, the smart home automation market is expected to reach $444.98 billion by 2030, representing 27.3% CAGR from 2023 to 2030. Economic impact factors in 2023 may slow down, and it is estimated that smart speaker shipments will rebound to 158 million units with an annual growth rate of 5.3%. With the continuous development of smart home technology, the market has the potential to expand further. AI, touchless, ambient sensing, and smart health technologies will all become major market drivers. With the implementation of Matter, Compal will also actively seize future demand with our AI, gesture control, ambient sensing, and smart health technologies. ■ IoT Vertical Solutions According to a survey report by Gartner, Q4 2022, smart device shipments are expected to reach 1.9 billion units in 2023, increase of 15.5% over 2022, and the market value will reach US$ 519.5 billion. Moreover, Gartner expected the demand to grow to 2.3 billion units and market value of US$661.3 billon by 2025, which shows that the market demand is still climbing. ■ Smart Medical and Healthcare (1) Instruments, Equipment, and Accessories: • Smart sports products: Estimates of Market Reports Hub show that the value of smart sports goods have increased to USD 15 billion in 2021, with professional athletes, professional teams, amateur athletes, and highly self-demanding trainers as the major consumer groups. • According to a report by Mordor Intelligence, the global medical equipment market was valued at approximately $456 billion in 2021 and is projected to reach $614 billion by 2026, with a CAGR of 6.1%. • 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%. (2) 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%. ■ Automotive electronics (AE) IHS estimates global light vehicle production in 2023 will reach 88.5 million units, up 7.8% YoY from 81.6 million in 2022. 162 ■ Server IDC statistics show that the demand for x86 servers was 16.76 million pieces in 2022 and will reach 17.18 million pieces in 2023. 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 90.65% of the shipping volume. As the frame-type server has a higher market share, we have actively engaged in the server market. 4. Competitive advantage: Compal has the long-time investment in Information and Communication Technology (ICT) industry and has committed to its role as an ODM. The following is a description of our competitive advantages in terms of R&D and mass production capacity: ■ Notebooks The Company has been manufacturing notebooks since 1989 and is one of the most experienced notebook manufacturers 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 2023, Compal will maintain this advantage actively assist customers in the development of more competitive Ultraslim notebooks with x86 and ARM platform. ■ Gaming Notebooks Compal is consistently dedicated to the gaming notebook market with the best hardware and software design. We will keep focusing on the design of new-generation gaming notebooks to meet various gamers in 2023. ■ 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. 163 ■ All-in-one (AIO) Compal possesses the advantage and ability to commercialize products quickly in this respect. To further emphasize product differentiation, a resolute software development team has been assembled to carry out software development and man-machine interface integration, to make the products more suitable for consumer needs. ■ 5G Module, 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, and also the carrier certification by request etc. ■ 5G Small Cell and 5G O-RAN Private Network solution Compal 5G small cell series has comprehensive antenna solutions, 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. 5G ISC(Integrated small cells), O- RU and DU inline accelerator have equipped with the ARM processor to address low energy consumption, and lower the total cost of ownership (TCO) by delivering high-performance and energy-efficient 5G solution. With Compal's 5G RAN solution and application technology can help our customers to create 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. ■ 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 164 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 actively adjust the allocation of resources between production bases and supply chains, continuously cultivate strategic partnerships with customers and suppliers, develop the latest streaming video platforms, and integrate cross-disciplinary materials such as antibacterial and environmental protection to meet the trend of sustainable environmental management. This will help us to raise the competitive threshold and create a win-win situation to compete 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 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 165 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 • In response to the needs of geopolitics and regional markets, coupled with the rising awareness of environmental protection and sustainability, the notebook industry has also begun to move towards a regionalized supply chain. Compal has successively established manufacturing and maintenance service bases in Taiwan, China, the United States, Vietnam, Brazil, Poland, etc., which can quickly respond to customer needs and changes in geopolitics. • Microsoft is expected to end support services for the Windows 10 operating system in 2025, which is expected to gradually drive the demand for computer replacements. 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. • 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. 166 • 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. • With the flourishing growth of global 5G communication, Compal collaborate and integrate 5G communication capabilities with internal and external corporate partners, and launch a variety of 5G 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 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 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. 167 • 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. • The conditions of the US-China trade war, globalization, rapid technological development and fast-changing industries, increased investments in Taiwan from abroad as well as the demands 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 ultraslim notebooks integrating high performance and portability in response to the machine renewal demand in the commercial market to seize the commercial market together with customers. • The gaming market has grown in diversity with new technologies constantly being introduced to entice consumers into replacing old products. Compal is in the position to offer gaming notebooks at various price levels to meet consumer demand. • We will offer complete solutions and form alliances across industries to quickly tap into market demand while retaining the flexibility to satisfy customer needs. • We will nurture innovative talent within the organization, enhance the development capacity for high-end medical equipment and engage world-renowned medical equipment suppliers in strategic, long-term, and mutually beneficial cooperation. • We will continue to strengthen working relationships with platform operators by providing hardware and software solutions. • We will continue to extend our 5G communication capabilities to various 5G domains and types of products, build up leadership in 5G, and provide complete total solutions. 168 • 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 top acoustic research centers in Taiwan. • 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 notebook 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, a range of software applications and high computing power. 169 ■ 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. ■ 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. 170 2. Production Process of the Main Products ■ Notebooks 171 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 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 172 5.2.3 Supply Status of Main Materials ■ CPU/Chipset ● Notebooks The overall demand of notebooks began to show a sign of weakening in 2022 Q1 due to the influence of geopolitical issues and the epidemic. Consumer spending remains decline due to inflation, and result of the global economy continuing to slow down. With a poor economic environment and tightening budget, it is expected the overall notebook demand remains weak in 2023 H1 and might slightly recover in 2023 H2. The majority of the NB CPU market is still controlled by Intel, which accounting for more than 68%. AMD account for 18%. However, ARM-based CPU continues to gain market share from X86 CPU. Apple CPU has shown resilience in the weak NB market with the penetration continues to grow and reach 12% in 2022. In addition, both Qualcomm and MediaTek planned to release ARM based NB solution in 2024. Overall, it is estimated that ARM will account for more than 21% of NB market in 2025. In term of new products, Intel has released 10nm Raptor Lake in 2022 Q4 and expected to launch 7nm Meteor Lake equip with TSMC 5nm process GPU in 2023 Q4. Intel 20A (2nm) process technology Arrow Lake is estimated to launch in 2025 Q1. Regarding to the low-end CPU, Intel has launched Alder Lake N in 2023 Q1. AMD 6nm low-end Mendocino has released in 2022 Q3 and expected to launch high- end 4nm Phoenix in 2023 Q1. ● Smartphones and Modules The outlook for the mobile phone market in 2023 is not clear, especially for non-flagship phones, which saw the biggest decline in sales momentum last year. It seems that the scale of demand cannot be recovered in the short term, and the degree of inventory depletion will be affected. The global sales penetration rate of 5G smartphones is expected to exceed 60% in 2023, and the global economic weakness continues to impact consumer confidence, and the market's view on the growth of global mobile phone shipments in 2023 is conservative. The sales performance of low-to-mid- range models this year will depend on the growth of mobile phone consumption in India and Southeast Asia, as well as the recovery of the China market. As related technologies gradually mature, cross-industry cooperation deepens, and emerging markets begin to introduce 5G, its impact will become more obvious in 2023. There is about 31% of the global telecom operators will provide 5G services, showing strong growth momentum from 2022. It would reach 17.11 billion US dollars by 2026, with a compound annual growth rate (CAGR) 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. 173 ■ Memory ● DRAM Due to Covid-19, global inflation and international tensions, the demand of notebooks, mobile phones and servers is weak. The DRAM major manufacturers (Samsung, SK Hynix, and Micron) declined in shipments and stockpiled inventory. DRAM price had entered a price decline cycle since 2022 Q1, and market demand had not improved in 2022 Q3, the peak shipment season. Difficulty in destocking and a vague demand outlook had led DRAM manufacturers to announce the cut in production and capital expenditures in 2022 Q4. In 2022, the overall DRAM was oversupplied, the inventory level was high, and the price dropped. Even if the price had fallen by more than 50%, it’s still not be able to stimulate demand. The price of new-generation DDR5 has plummeted after mass production began in 2022 Q4, and the premium compared to DDR4 had narrowed, and it is expected to accelerate market penetration in 2023 H2. For DRAM application, the global overall supply is calculated in units of 2Gbs. The actual shipment in 2022 is 104.7 Billion units, and it is estimated to be 111 Billion units in 2023, with a compound annual growth rate of about 6%. In terms of the overall proportion, it is estimated that Mobile will drop to 36.8%, Server will increase to 37.5%, PC will be revised down to 12.2%, Consumer will account for about 8.3%, and Graphic will account for about 5.2%. ■ NAND flash In 2022, intensified inflation, rising interest rates and global economic growth downturn resulted in a decline of consumer purchasing power and a shift towards conservative corporate capital expenditures. This, in turn, caused an oversupply in the NAND Flash market. The severe supply-demand imbalance led to a peak in suppliers’ inventory, while NAND Flash prices continued to decline. Based on the uncertainty of future demand, NAND Flash manufacturers had to reduce NAND Flash output, lower investment and slow down technology migration in response. It is estimated that the supply bit growth rate for 2023 will significantly decrease to 17.2% (compared to 31.8% YoY last year and 40% YoY the year before last). Due to the manufacturers' aggressive production reduction, the downward cycle of NAND Flash prices will end earlier than expected, and it is predicted that price won’t continue to decline in the second half of 2023. 3D NAND Flash process node will keep moving to higher stacking processes. In the second half of 2022, three suppliers announced the completion of development or mass production of NAND Flash with more than 200 layers, including Micron's 232-layer NAND Flash in Q3, Samsung's 236-layer NAND Flash in Q4 and SK Hynix's 238-layer NAND Flash is expected to mass product in 2023. Due to suppliers having scaled back their capital expenditure, the pace of migration of higher stacking processes will be slowed. The mainstream production process of NAND Flash will keep at 112/128/144 layers. Despite 176-layer products now being mainstream in Micron’s shipments, Samsung and SK Hynix will also proceed with 176-layer migration for consumer storage solutions during 2023; the share of 176-layer products will be significant increase by 2023 Q4. ■ HDD The overall HDD shipments are still dominated by large-capacity enterprise hard drives. However, due to the 174 tightening demand for enterprise cloud storage business and inventory adjustments, the sales of HDDs dropped to 35.2 million units (YoY -42.5%) in 2022. In terms of market share among HDD suppliers, Seagate is about 43%, Western Digital is about 35%, and Toshiba is 22%. In NB market, the impact of SSD on the HDD market has intensified in 2023. As SSD prices continue to decrease, price advantage of HDD has diminished. HDD is inferior to SSD in terms of performance, size, and power consumption. Meanwhile, lightweight NBs become mainstream and the cloud storage technology advances. For reasons mentioned above, it is estimated that the HDD attach rate will drop from 8% to 4% in 2023 as NBs are mainly equipped with SSDs. ■ Batteries Some notebook battery materials, such as lithium and cobalt, are also used in electric vehicle power batteries. Since 2021, the price of lithium and cobalt has risen due to the increasing demand for EVs, which has also affected the price of notebook batteries. However, due to the high cost of cobalt, EV manufacturers are gradually switching from using ternary (Ni-Co-Mn or Ni-Co-Al) batteries to lithium iron phosphate (LFP) batteries to avoid the use of high-priced cobalt materials. It is estimated that in 2024, the ratio of LFP and ternary batteries installed will shift to 6:4, causing the cobalt price to decline starting in 2022 Q2 and return to pre-pandemic levels in 2023 Q1, also affecting the price of notebook batteries to decline. The major notebook battery cell suppliers are from China, South Korea, and Japan. Chinese companies such as ATL, BYD, CosMx, and Lishen are dominant in the market, while Korean companies such as Samsung SDI and LGES account for a significant portion. Japanese manufacturers, mainly Panasonic, are also present. However, as Japanese and Korean battery cell factories gradually withdraw from the consumer electronics market, Chinese battery cell factories currently account for more than 70% of the total shipment volume for notebook battery cells. ■ LCD modules In 2022, the global economy continued to deteriorate, and terminal demand reversed rapidly, causing global notebook panel shipments to decline quarter by quarter, with a total of only about 186 million panels shipped for the year, a YoY decrease of 24.5%. Restricted by the slowing market demand and the overall high inventory levels in the supply chain, the traditional peak season momentum in Q4 failed to materialize, and even with brands offering promotional prices in North America and China, sales performance fell short of expectations. In October 2022, global notebook panel shipments were only 13.5 million units, a MoM decrease of 16.1% and a YoY decrease of 45%, reaching the lowest level for the same period in the past 12 years. It is expected that the destocking of terminal inventory will be extended to 2023 Q2. 14-inch and 15.6-inch panels remained the mainstream in 2022, with a market share of about 70%. With the trend towards larger panel sizes, 16-inch 16:10 notebook panels gradually gained market share from 15.6-inch 16:9 panels. The global market share of 16:10 notebook panels reached 26.4%, with Apple accounting for 12.4% and other brands accounting for 14%. The reasons are that 16:10 is closer to the golden ratio than 16:9, and with the higher cutting efficiency of Gen 8.5 and 8.6, brands are actively adopting 16:10 models. 175 OLED panel shipment hit about 6 million record high in 2022, a YoY increase of 19%. Samsung withdrew the LCD production and keep leading OLED market. For OLED, there are more suppliers join the market, Samsung, LGD, BOE, Sharp and CSOT. It can be foreseen that OLED will take an important position in high end notebook. 176 5.2.4 Major Suppliers and Clients 1. Major Suppliers in the Last Two Calendar Year 2021 2022 2023 first quarter Unit: TWD Thousands Party Name Amount As a percentage to 2021 net purchases (%) Relationship with the issuer Name Amount As a percentage to 2022 net purchases (%) Relationship with the issuer Name Amount As a percentage to 2023 first quarter net purchases (%) Relationship with the issuer 1 Company E Others Net Purchase 416,094,822 753,445,011 1,169,539,833 35.58 64.42 100.00 N.A. Company E Others Net Purchase 330,815,052 637,179,606 967,994,658 34.18 65.82 100.00 N.A. Company E Others 72,046,227 133,599,268 Net Purchase 205,645,495 35.03 64.97 100.00 N.A. • Causes of changes: No significant change to the major suppliers reported in the last two years. 2. Major Clients in the Last Two Calendar Years 2021 2022 Party Name Amount As a percentage to 2021 net sales (%) Relationship with the issuer Name Amount As a percentage to 2022 net sales (%) Relationship with the issuer Name 1 2 3 4 Company a 144,069,158 11.66 Company d 534,800,186 43.28 Company e 116,116,250 9.40 Company f 223,256,380 18.07 N.A. N.A. N.A. N.A. Others 217,440,041 17.59 Net sales 1,235,682,015 100.00 Company a Company d Company e Company f Others Net sales 96,621,806 9.00 460,236,878 42.88 102,969,721 9.59 170,398,727 15.88 243,018,783 22.65 N.A. N.A. N.A. N.A. Company a 17,820,434 Company d 89,062,864 Company e 19,639,205 Company f 37,566,741 Others 45,369,540 42.52 9.38 17.94 21.65 1,073,245,915 100.00 Net sales 209,458,784 100.00 • Causes of changes: The decrease in sales to Customer a and Customer f in the year of 2022 is mainly due to the decrease in shipments of the corresponding products which was caused by the impact of customer demand. 177 Amount 2023 first quarter As a percentage to 2023 first quarter net sales (%) 8.51 Unit: TWD Thousands 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 2021 2022 Unit: 000 Units; TWD Thousands Production capacity Production volume Production value Production capacity Production volume Production value 5C electronics 162,729 138,126 1,183,285,569 152,068 112,581 1,039,628,777 5.2.6 Shipments and Sales in the Last Two Years Year Sales volume Main products 2021 2022 Domestic sales Value Volume Export sales Volume Value Domestic sales Value Volume Export sales Volume Value 5C electronics 1,139 5,067,681 136,980 1,230,614,334 1,100 3,047,804 110,122 1,070,198,111 Unit: 000 Units; TWD Thousands 5.3 Human Resources Year December 31, 2021 December 31, 2022 May 8, 2023 Number of employees 109,709 73,120 Average age Average years of service Academic qualifications Doctoral Degree Master’s degree University High school/Below/others 28.08 1.69 0.04% 3.34% 16.29% 80.33% 29.12 2.85 0.07% 5.05% 23.93% 70.95% 69,483 29.79 3.19 0.06% 5.48% 24.11% 70.35% 178 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 low energy consumption, low water consumption and low pollution industry. In order to protect the environment, it fulfills its social responsibilities, saves energy and reduces carbon, to help reduce the impact of global warming. The Taiwan and Mainland China plants together incurred expenses of TWD 42,993,941 (excluding regular maintenance and green R&D) in 2022. We are keeping the promises we made as Earth citizens and hope to make substantial contributions to the protection of the global environment. We will continue our commitment to efforts in this respect. In 2022, 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, 179 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 2022, the Company had provided TWD 210.93 million in maternity allowances and bonuses. There were 74 counts of employees who took parenting leave, with the right to return to work, in 2022. ■ 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 2022, 763 training sessions (both internal and external) were organized; these courses delivered 718,685 hours of training and 190,216 persons enrolled. The total training expenses were TWD 26,281,000. 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 180 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 2022 and as of the date of report published, the Company did not suffer any losses due to employment disputes: None ‧ Future plans and potential expenses: None 181 5.6 Information Security Management 1. Information security risk management framework The Information Security Committee coordinates and executes Compal's information security related operations and various activities. It has one chairman and one deputy chairman. According to management needs, several members may form the committee, with the head of the department and above as ex-officio members. An executive secretary is 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 related matters. One person is appointed as the head of the Information Security Implementation Team and reports to the Board of Directors once a year. When necessary, the Capital Committee may invite external information security consultants to 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 the ISMS, and maintain operational information security and compliance with national laws and regulatory requirements for information security control. It defines the scope of the ISMS, implements risk assessment and risk management tasks, determines acceptable risk levels, discusses the duties and responsibilities in information security related operations, and coordinates information security control measures and processing procedures. It advocates for information security policies and other information security management matters, and promotes information security awareness. Regular information security team meetings have been held to discuss and implement 21 information security strategy topics in 2022 in response to the ever-changing information security issues. 2. Information security strategy management and resources Compal established the “Information Security Policy” to be the highest guiding principle, as declared in the information security statement, "to ensure business continuity and to improve customer satisfaction." ˙ Performing information asset risk assessment; ˙ Maintaining the confidentiality, integrity and availability of critical information assets; ˙ Continuously improving ISMS by implementing Plan-Do-Check-Act (PDCA) management cycle; ˙ Fulfilling the contractual agreements with clients and protecting clients’ information security; ˙ Complying with relevant laws and regulatory requirements; and ˙ Ensuring the participation of all personnel and suppliers. 3. Information security specific management plan ˙ The six major information security goals are measured monthly to monitor the control measures of information security management. ˙ Critical systems recovery and backup & restore drills are executed regularly to ensure the validity of the Business Continuity Plan and that it meets the system recovery goals. ˙ Conduct information security incident notification, response and handling exercises regularly. ˙ To boost employees’ awareness of information security, our employees are required to receive social engineering exercises and a briefing on information security and training. ˙ Conduct the penetration test regularly to improve the security defenses. 182 ˙ Vulnerability scanning and tracking is performed regularly to ensure that vulnerability fixes are effectively addressed. ˙ Regular internal and external audits and continuous improvement. ˙ 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. 4. Information security management resources ■ ISO27001 Information security management and audit mechanism In 2005, Compal passed the ISO 27001 information security verification, and obtained the Information Security Management System ISO 27001 certificate issued by BSI. It gradually expanded its scope of verification, which is tracked twice a year and re-audited every three years. The scope of verification covers R&D activities of Portable Computer, All-in-One PC, Automotive Electronic Product, Enterprise Product, Mobile Device Product, IT Group, Smart Device Business Group-IT Division, and IT division in four plant compounds at Kunshan. Five members of the information security team have obtained ISO27001:2013 lead auditor license, and one member has a CISSP license, in addition to facing customers and impartial third- party audits, they also conduct internal audits to ensure the implementation of information security management mechanisms. ■ Strengthened network security Compal continues to strengthen control requirements for information security, reinforces the 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 the identity authentication mechanism for the Company account, and introduced two-factor authentication to enhance the security of remote login for internal resources to prevent illegal users from accessing company resources or customer information. Deploy MDR threat detection, anomaly analysis, and incident response to prevent information security threats. Access to critical information is controlled by account permissions, and the login password is changed regularly in accordance with the company's password policy. Through announcements and quarterly advocacy to enhance employee awareness for information security, persistently review the network security planning of the Company, and implement all equipment connected to the Company network in compliance with regulations and protocols. Compal maintained a score of more than 90 points within Security Scorecard of the third-party security assessment in 2022. ■ Strengthened employees' awareness of information security Compal provides eLearning courses and quarterly social engineering drills to simulate hackers' phishing emails, detect employees' information security risk awareness, supplemented by daily boot up with pop-up information security announcements and quarterly information security guidance by email and also education training to enhance colleagues' information security awareness. In order to implement the concept of information security, new employees complete the information security-training program and all employees are also required to complete information security retraining courses every year. The information security education and training shall include Compal’s information security management regulations. Upon completion of the training, personnel should evaluate the validity of the training and log the evaluation. Information security members participate in the information security intelligence and technology seminar to learn about the latest information security trends and intelligence. 183 5. Losses, possible impacts and responses of major information security incidents The widespread use of computers and rapid development of internet have greatly changed the way users store and share information. With the efforts of all colleagues, Compal did not receive any complaints about a violation of customer privacy or the loss of customer information in 2022. In response to the government's "Cyber Security Guidelines for TWSE/TPEx-Listed Companies", Compal applied to become a member of Taiwan Computer Emergency Response Team / Coordination Center (TWCERT/CC) in 2022 to improve the notification and response of cyber security incident. Major Contents Restrictions 5.7 Important Contracts Agreement Counterpart y Patent Phoenix licensing Technologie agreement s Ltd. Period Since 2010.1.1 Auto-renewed upon expiry 1. Tool Licenses 2. Source Code licenses 3. Maintenance None None Trading and manufacturing agreement Under this agreement, the buyer will procure Since computer products developed and Dell 1997.06.26 manufactured by the seller, while the seller Products L.P. Auto-renewed will grant the buyer proper licenses to use upon expiry the products and provide after-sales Trading and manufacturing Acer Inc. agreement Since 2001.10.01 Yearly Auto-renewed upon expiry technical services. Under this agreement, the buyer will procure computer products developed and manufactured by the seller, along with after- None sales technical services provided by the seller. 184 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, 2023 Analysis 2018 2019 2020 2021 2022 Current assets 362,745,250 343,154,813 424,460,635 487,115,390 390,706,503 385,109,396 Property, plant, and equipment 20,418,228 19,972,347 22,085,340 26,990,364 28,808,211 29,002,188 Intangible assets 1,516,253 1,553,342 1,506,101 1,548,508 15,115,092 17,967,917 18,873,622 21,441,078 1,722,165 32,247,554 1,693,485 31,895,967 Other assets Total assets Prior to Current distribution liabilities After distribution 399,794,823 382,648,419 466,925,698 537,095,340 453,484,433 447,701,036 274,207,898 255,820,033 335,524,716 402,242,095 302,384,911 301,742,397 279,436,453 261,048,588 342,496,124 410,956,354 307,613,466 (Note 2) - Non-current assets 12,425,077 12,069,042 15,411,332 13,313,442 23,689,679 23,744,596 Prior to distribution Total liabilities After distribution Equity attributable to parent company shareholders Ordinary shares Capital reserves Retained earnings Prior to distribution After distribution 286,632,975 267,889,075 415,555,537 412,506,626 326,074,590 325,486,993 291,861,530 273,117,630 357,907,456 424,269,796 331,303,145 (Note 2) - 105,723,646 105,972,633 106,832,505 111,360,265 116,294,754 111,782,767 44,071,466 44,071,466 44,071,466 44,071,466 9,932,434 9,159,259 8,342,813 6,724,856 44,071,466 5,078,580 44,071,466 4,258,803 60,060,381 57,726,604 62,566,181 69,651,940 69,969,059 66,955,034 55,653,234 53,319,457 57,277,605 62,600,505 65,561,912 (Note 2) - Other equity interests (7,459,388) (4,103,449) (7,266,708) (8,206,750) (1,943,104) (2,621,289) Treasury stock (881,247) (881,247) (881,247) (881,247) Non-controlling interests 7,438,202 8,786,711 9,157,145 10,179,538 (881,247) 11,115,089 (881,247) 10,431,276 Total equity Prior to distribution After distribution 113,161,848 114,759,344 115,989,650 121,539,803 127,409,843 122,214,043 107,933,293 109,530,789 109,018,242 112,825,544 122,181,288 (Note 2) - Note: 1. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 2023, has been reviewed by the CPA. 2. The amounts are approved by the Board of Directors meeting on March 15, 2023 185 ▓ Consolidated Condensed Statement of Comprehensive Income Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2023 Analysis 2018 2019 2020 2021 2022 Net sales revenue 967,706,411 980,442,346 1,048,929,251 1,235,682,015 1,073,245,915 209,458,784 Gross profit 30,567,091 33,908,828 35,458,522 41,491,574 40,364,179 Net operating income 9,261,746 10,586,368 11,492,545 13,348,593 Non-operating income and expense 2,527,839 (578,492) 1,630,171 4,119,242 9,218,997 1,505,133 9,338,737 2,254,027 (43,003) Net income before taxes 11,789,585 10,007,876 13,122,716 17,467,835 10,724,130 2,211,024 Net income from continuing operations Net loss from discounting operations 9,589,301 7,895,719 10,409,512 13,740,488 8,541,527 1,684,722 - - - - - - Net income (loss) 9,589,301 7,895,719 10,409,512 13,740,488 8,541,527 1,684,722 Income (Loss) from Other comprehensive income (loss) 387,887 (1,534,980) (3,341,346) (1,237,908) 6,535,651 (674,275) (net after tax) Comprehensive income 9,977,188 6,360,739 7,068,166 12,502,580 15,077,178 1,010,447 Net income attributes to shareholders of the Parent Net income attributes to non- controlling interests Comprehensive income attributed to owners of parent Comprehensive income 8,913,365 6,955,899 9,361,893 12,632,667 7,288,292 1,393,250 675,936 939,820 1,047,619 1,107,821 1,253,235 291,472 9,278,187 5,456,508 6,083,542 11,445,530 13,636,212 718,835 attributed to non-controlling 699,001 904,231 984,624 1,057,050 1,440,966 291,612 interests Earnings per share (unit: dollar) 2.05 1.60 2,15 2.90 1.67 0.32 Note: 1. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 2023 has been reviewed by the CPA. 186 ▓ Parent-Company-Only Condensed Balance Sheet Year Financial Summary for The Last Five Years (Note 1) Unit: TWD Thousands As of March 31, 2023 Analysis 2018 2019 2020 2021 2022 Current assets 265,372,906 245,522,829 296,383,073 348,914,103 271,829,340 Property, plant, and equipment 2,128,181 2,620,638 2,604,893 2,484,963 Intangible assets 378,745 438,334 436,548 431,936 Other assets Total assets Current liabilities Prior to distribution After distribution 87,932,981 89,201,687 89,526,637 95,517,212 355,812,813 337,783,488 388,951,151 447,348,214 237,882,742 220,871,943 268,466,052 324,236,031 248,511,419 243,171,318 226,160,519 275,517,487 333,050,325 2,417,309 529,906 104,756,856 379,533,411 253,799,995 (Note 2) 14,727,238 Non-current assets 12,206,425 10,938,912 13,652,594 11,751,918 Total liabilities Ordinary shares Capital reserves Retained earnings Prior to distribution After distribution Prior to distribution After distribution 250,089,167 231,810,855 282,118,646 335,987,949 263,238,657 255,377,743 237,099,431 289,170,081 344,802,243 44,071,466 44,071,466 44,071,466 44,071,466 9,932,434 9,159,259 8,342,813 6,724,856 268,527,233 N.A. (Note 2) 44,071,466 5,078,580 60,060,381 57,726,604 62,566,181 69,651,940 69,969,059 55,653,234 53,319,457 57,277,605 62,600,505 65,561,912 (Note 2) Other equity interests (7,459,388) (4,103,449) (7,266,708) (8,206,750) (1,943,104) Treasury stock (881,247) (881,247) (881,247) (881,247) (881,247) Total equity Prior to distribution After distribution 105,723,646 105,972,633 106,832,505 111,360,265 116,294,754 100,495,091 100,744,078 99,861,097 102,646,006 111,066,199 (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, 2023. 187 ▓ 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, 2023 2018 2019 2020 2021 2022 Net sales revenue 911,050,122 916,280,028 991,279,270 1,171,613,858 1,003,642,791 Gross profit 21,880,841 24,849,149 23,218,044 27,904,355 28,567,835 Net operating income 6,936,706 8,536,952 6,079,726 7,578,392 7,262,023 Non-operating income and expense 3,021,610 (713,273) 4,347,551 6,864,576 771,589 Net income before taxes 9,958,316 7,823,679 10,427,277 14,442,968 8,033,612 Net income from continuing operations Net loss from discounting operations 8,913,365 6,955,899 9,361,893 12,632,667 7,288,292 - - - - - N.A. Net income (loss) 8,913,365 6,955,899 9,361,893 12,632,667 7,288,292 Income (loss) from other comprehensive income 364,822 (1,499,391) (3,278,351) (1,187,137) 6,347,920 (net after tax) Comprehensive income 9,278,187 5,456,508 6,083,542 11,445,530 13,636,212 Earnings per share (unit: dollar) 2.05 1.60 2.15 2.90 1.67 Note: 1.The financial information is audited and certified by the CPA every year. ▓ Auditors’ Opinions Year 2018 2019 2020 2021 2022 Accounting Firm CPA KPMG KPMG KPMG KPMG KPMG Chien, Szu Chuan; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Chien, Szu Chuan; Au, Yiu Kwan Kuo, Kuan Ying ; Chien, Szu Chuan Kuo, Kuan Ying ; Chien, Szu Chuan Audit Opinion Unqualified opinion Unqualified opinion Unqualified opinion Unqualified opinion Unqualified opinion 188 6.2 Five-Year Financial Analysis ▓ Consolidated Financial Analysis Year Analysis Financial Analysis for the Last Five Years As of March 31, 2023 Debt ratio 71.70 70.01 75.16 77.37 71.90 72.70 2018 2019 2020 2021 2022 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 (%) 615.07 635.02 594.97 499.63 524.50 503.27 132.29 103.06 5.47 5.08 71.85 12.61 6.33 28.95 134.14 126.51 121.10 129.21 127.63 102.94 97.39 4.67 4.96 73.58 12.01 6.34 12.42 4.95 73.73 11.61 5.89 92.13 17.65 4.73 77.16 11.31 5.64 91.61 88.19 4.30 4.46 2.93 4.59 81.83 79.52 9.12 5.35 6.97 5.01 30.39 31.43 32.27 40.02 52.37 50.14 48.55 49.88 50.36 38.47 28.99 2.54 3.08 8.65 2.51 2.57 6.93 2.47 2.67 9.02 2.46 2.90 11.57 39.64 1.11 2.90 0.99 2.15 4.25 (Note1) 35.94 27.41 5.48 1.54 1.11 (Note1) 1.52 1.09 2.17 2.25 6.86 24.33 0.80 1.67 19.39 81.74 27.65 1.82 1.54 1.86 0.57 1.35 5.02 0.80 0.32 - - - - - Profitability Analysis Operating income to paid-in capital ratio (%) 26.75 22.71 29.78 Net margin (%) Earnings per share (dollar) Cash flow ratio (%) Cash flow Cash flow adequacy ratio (%) Cash reinvestment ratio (%) Leverage Operating leverage Financial leverage Note: 1. The ratio is negative. 0.99 2.05 (Note1) 44.84 (Not1) 1.60 1.40 0.81 1.60 8.18 37.92 9.89 1.61 1.35 Interest coverage: Mainly due to the increase in interest expense and decrease in profit. 2. The financial ratio has changed by up to 20% in the past two years: ‧ ‧ Average inventory turnover days: Mainly due to the decrease in inventory turnover. ‧ ‧ Property, plant and equipment turnover (times): Mainly due to decrease in net sale. Return on total asset, Return on equity, Operating income to paid-in capital ratio, Net margin, Earnings per share : Mainly due to decrease in profit. Cash flow ratio: Mainly due to net cash inflow from operation. Cash Flow Adequacy Ratio: Mainly due to the increase in net cash inflow from operation compared to the earlier period. Cash reinvestment ratio: Mainly due to the increase in net cash inflow from operation compared to the earlier period. Financial leverage: Mainly due to the decrease in profit and increase in interest expense. ‧ ‧ ‧ ‧ 3. The financial information is audited and certified by the CPA every year. The financial information as of March 31, 2023 has been reviewed by the CPA. 189 ▓ 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. 190 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. 191 ▓ Parent-Company-Only Financial Analysis Year Analysis Financial Analysis for the Last Five Years As of March 31, 2023 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 (%) 2018 2019 2020 2021 2022 70.29 68.63 72.53 75.11 69.36 5,541.36 4,461.19 4,625.34 4,954.29 5,420,.16 111.56 111.16 110.40 107.61 109.38 89.79 88.45 89.44 6.14 5.08 4.97 15.81 4.97 4.87 71.80 73.46 75.01 18.82 17.55 18.29 5.95 5.86 5.73 88.77 21.84 4.64 78.73 19.59 5.72 87.83 4.15 4.37 83.48 17.10 5.34 19.39 20.79 19.95 18.62 21.34 431.73 385.90 379.40 460.37 409.46 N.A. 2.66 3.06 8.59 2.64 2.46 6.57 2.73 2.73 8.80 2.80 3.15 11.58 2.43 2.26 6.40 22.60 17.75 23.66 32.77 18.23 Net margin (%) Earnings per share (dollar) Cash flow ratio (%) 0.98 2.05 0.76 1.60 0.94 2.15 1.08 2.90 (Note1) 6.80 (Note1) (Note1) Cash flow Cash flow adequacy ratio (%) 5.45 (Note1) (Note1) (Note1) Cash reinvestment ratio (%) (Note1) 8.29 (Note1) (Note1) Leverage Operating leverage Financial leverage Note: 1.The ratio is negative. 2.59 1.39 2.43 1.30 3.17 1.13 2.94 1.10 0.73 1.67 22.15 55.25 35.06 3.11 1.54 2. The financial ratio has changed by up to 20% in the past two years: ˙Interest coverage: Mainly due to the increase in interest expense compared to the earlier period. ˙Return on assets: Mainly due to the decrease in net income compared to the earlier period. ˙Return on equity: Mainly due to the decrease in net income compared to the earlier period. ˙Operating income to paid-in capital ratio: Mainly due to the decrease in income before tax compared to the earlier period. ˙Net margin: Mainly due to the decrease in net income compared to the earlier period. ˙Earnings per share: Mainly due to the decrease in net income compared to the earlier period. ˙Cash flow ratio: Mainly due to the increase in net cash inflow from operating activities compared to the earlier period. ˙Cash flow adequacy ratio: Mainly due to the increase in net cash inflow from operating activities compared to the earlier period. ˙Cash reinvestment ratio: Mainly due to the increase in net cash inflow from operating activities compared to the earlier period. ˙Financial leverage: Mainly due to the increase in interest expense compared to the earlier period. 3. The financial information is audited and certified by the CPA every year. 192 ▓ 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. 193 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. 194 6.3 Audit Committee’s Report for the Most Recent Year Audit Committee’s Review Report The Company’s 2022 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 2022 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. 2023 Annual General Shareholders’ Meeting Chairman of the Audit Committee: Min Chih Hsuan March 15, 2023 195 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 2022 to the publication date of this annual report: None. 196 (19.79) (3.84) 6.74 77.30 (15.57) (24.83) 77.94 (21.53) - (24.48) 0.46 (76.32) - 9.19 4.83 VII. Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status Year Analysis Current Assets Investments accounted for using equity method 2022 2021 Unit: TWD Thousands Difference Amount % 390,706,503 487,115,390 (96,408,887) 8,047,569 8,369,312 (321,743) Property, plant and equipment 28,808,211 26,990,364 1,817,847 Other Assets Total Assets Current Liabilities Other Liabilities Total Liabilities Ordinary Share Capital surplus Retained Earnings Other Equity Interests Treasury stock Non-controlling Equity Total Equity 25,922,150 14,620,274 11,301,876 453,484,433 537,095,340 (83,610,907) 302,384,911 402,242,095 (99,857,184) 23,689,679 13,313,442 10,376,237 326,074,590 415,555,537 (89,480,947) 44,071,466 - 6,724,856 (1,646,276) 69,651,940 (8,206,750) (881,247) 317,119 6,263,646 - 935,551 5,870,040 11,115,089 10,179,538 127,409,843 121,539,803 44,071,466 5,078,580 69,969,059 (1,943,104) (881,247) Note: Analysis of variations exceeding 20% and amounting to more than NTD10 million: Increase in other assets: Mainly due to the increase in the right-of-use assets and deferred tax assets. Decrease in current liabilities: Mainly due to the decrease in the notes and accounts payables and short-borrowings. Increase in non-current liabilities: Mainly due to the increase in the non-current lease liabilities. Decrease in total liabilities: Mainly due to the decrease in the current liabilities, such as the short-borrowings and the notes and accounts payables. Decresae in capital surplus: Distribution cash from capital surplus to stockholders. Increase in other equity interests: Mainly due to the decrease in losses of exchange differences on transition of foreign financial statements. ■ Effect of changes on the Company’s financial position and Future response actions: Judging from the aforementioned causes, the effect from changes on the Company’s financial position in the last two years are normal outcomes from standard operating activities. 197 7.2 Analysis of Financial Performance Analysis Net Sales Cost of Sales Gross Profit Operating Expenses Operating Income Non-operating Income and Expenses Profit Before Tax Less: Income Tax Expense Net Profit (loss) Other Comprehensive Income (after tax) Year 2022 2021 Unit: TWD Thousands Difference Amount % 1,073,245,915 1,235,682,015 (162,436,100) 1,032,881,736 1,194,190,441 (161,308,705) (13.15) (13.51) (2.72) (10.67) (30.94) (63.46) (38.61) (41.44) (37.84) 41,491,574 (1,127,395) 28,142,981 3,002,201 13,348,593 (4,129,596) 4,119,242 (2,614,109) 17,467,835 (6,743,705) 3,727,347 (1,544,744) 13,740,488 (5,198,961) (1,237,908) 7,773,559 (627.96) 40,364,179 31,145,182 9,218,997 1,505,133 10,724,130 2,182,603 8,541,527 6,535,651 Total Comprehensive Income 15,077,178 12,502,580 2,574,598 20.59 Note: Analysis of variations exceeding 20%: Decrease in operation income: Mainly due to the decrease in net sale and increase in operation expense. Increase in no-opeation income & expesnses: Mainly due to the increase in interest expenses. Decrease in profit before tax, income tax expenses, and net profit (loss): Mainly due to the decrease in operating profit and net non-operating income. Increase in other comprehensive income (after tax) loss: Mainly due to the decrease in unrealized losses from investments in equity instruments measured at fair value through other comprehensive income. Increase in total comprehensive income: Mainly due to the increase in exchange differences on transition of foreign financial statements. ■ 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 In the post-epidemic era, countries around the world are gradually relaxing epidemic control measures, and consumer life and industrial economy are also recovering back to normal. Nevertheless, the global inflation pressure, raising interest rates among countries and geopolitical issues continue to develop in 2023, bringing uncertainties to the economy. For companies relying on export businesses, it will still be a challenging year. The market research institutions’ predictions on the economy and industry in 2023 are still conservative; however, the economy during the second half of the year is expected to be better than the first half of the year. Facing the rapidly changing environment, we will further enhance the implementation of “Innovation, Talent Cultivation, Execution”, to establish long-term competitive advantages. The new businesses of servers, automotive electronics, medical care and 5G communication devices will continuous to deploy and progress steadily to become the pillars of growth in the mid- to long-term. The related market analysis please refer to page 137~142 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. 198 7.3 Analysis of Cash Flow 7.3.1 Cash Flow Analysis for the Current Year Cash and Cash Equivalents, Beginning of Year (1) Net Cash Flow from Operating Activities (2) Other Cash Inflow (Outflow) (3) Cash Surplus (Deficit) (1)+(2)+(3) Unit: TWD Thousands Financing of Cash Deficit Investment Plans Financing Plans 75,162,103 58,638,610 (54,135,411) 79,665,302 - - Note: 1. Other Cash Inflow (Outflow) includes the Cashflow in investing activities, financing activities, and foreign exchange impacts. 2. Analysis of the change of 2022 cash flows: •Net cash inflow 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 outflow of financing activities: Mainly due to Repayment the loan 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 Actual or Planned Source of Capital Date of Completion Total Capital Actual or Expected Capital Expenditure 2021 Unit: TWD Thousands Property, plant and equipment Cash flow generated from operations and loans 7.4.2 Expected Benefits 2022 7,727,184 7,727,184 The Company’s major capital expenditure is invested to meet the needs of business growth and capacity expansion. Meanwhile, the Company aims to increase automation equipment to enhance production efficiency and achieve the goal of smart manufacturing, to build the Company’s long-term competitiveness. 199 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 businesses, 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 2022 consolidated loss from investment using the equity method came to approximately TWD 272 million, the reason for the loss was mainly because of the negative impact from the sluggish market or lagging of economies of scale. 3. 2023 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: 200 (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 foreigen currency exchange transaction (including valuation of financial instruments) Unit: TWD Thousands; % 2022 (155,575) 1,356,532 Regarding interest rates 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”. 201 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 2023 R&D expenses are expected to be TWD 17.2 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 (including information security risks) 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. Besides, in response to the changing trend of external information security and the ever-changing hacking techniques, we continue to pay attention to the latest information and technology, keep up with the times in our defense and management, effectively block information security threats, and reduce operational impact. According to internal and external information security issues, invest appropriate resources and improve control measures to reduce risks. There were no major information security events in 2022, nor the leakage of confidential information affected our customers and business, and caused significant impact to the financials. 202 7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures Compal has concentrated on the IT and Communications industry for many years and has firmly adhered to a business philosophy of transcendence, sincerity, and harmony in a culture of ethics and honesty. We aim to be the best in world-class professional design, manufacturing, and services. As we pursue business growth, we always remember our obligations as a corporate citizen. We have strengthened corporate governance, fulfilled corporate social responsibility, and have established a good corporate image. As the Company scale and business complexity 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 strengthening the risk management and early detecting 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 2022 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 203 (1) 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 counsel to defend such litigation. Considering the fact that whether the Company has committed the trade secret/copyright infringement depends 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. (2) Huawei Technologies Co., Ltd. filed an infringement litigation against the Group on October 28, 2022. The Group will carefully evaluate the litigation, discuss with related client for the following strategies and actions, and engage professional attorneys, to protect the rights and reputation of the Company from any damage. 7.6.13 Other Major Risks 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 2022. 7.7 Other Material Issues: None 204 VIII. Special Disclosure 8.1 Summary of Affiliated Companies (As of Dec 31, 2022) 8.1.1 Affiliated enterprises report 1. Chart 205 4 1 Mithera Capital Io LP 99.00% 46.42% Compal Broadband Networks Netherlands B.V. 100% 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% Kinpo&Compal Group Assets Development Corporation Shennona Corporation 70% 10% 100% 59.10% Compal Ruifang Health Assets Development Corporation Poindus Systems Corp. △ 100% 56.04% Note 1: Resolution to dissolve and liquidate on December 26, 2022. 100% 206 4 Arcadyan Technology Affiliated Business Organization Chart Henghao Technology Co., Ltd. Affiliated Organization Chart Allied Power Affiliated Business Organization Chart Poindus Systems Affiliated Business Organization Chart 100% Arcadyan India Private Limited. 99% 1% Great Arch Group Ltd. Leading Images Limited Astoria Networks Inc. Astoria Networks GmbH 31.6% Arcadyan Technology (Vietnam) Co., Ltd. 100% Arcadyan Technology Corp. (Russia),LLC 100% 100% 100% 100% 100% Note 1: Complete the liquidation process on August 19, 2022. 2. Backgrounds of affiliated enterprises (December 31, 2022) 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 06, G/F, The Lodge, 535 Canton Road, Kowloon, 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 06, G/F, The Lodge, 535 Canton Road, Kowloon, Hong Kong 207 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 Development, production and sale of communication equipment, cellphones, computers and smart watches, and provision of relevant technical services USD 12,100 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 Area) No. 189, Qian Jin East Road, Development Zone, Kunshan, Jiangsu, P.R. China Room 435,No. 8 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, China (Sichuan) Pilot Free Trade Zone 208 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. 2011.05.26 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 1997.10.29 1997.08.20 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$8,130 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 District, 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 209 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 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 2,203,543 USD 669 EUR 25 KRW 100,000 Research, development, production and sale of WLAN, integrated digital home and mobile office products Sales and technical support of wireless network products Sale and technical support of wireless networking products Sale of wireless networking products BRL 9,682 Sale of wireless networking products INR 75,000 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 47,780 General investments USD 29,050 General investments USD 8,100 Research and sale of wireless networking products USD 29,000 Manufacturing of wireless network products Rua Kanebo 175, Galpões C4 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, LOT 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 Tower Three International Towers, Sydney ' Level 38, 300 Barangaroo Avenue, Sydney NSW 2000 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 1503, 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 210 Company name Arch Holding (BVI) Corp. Date of establishment 2007.05.24 Compal Networking (Kunshan) Co., Ltd. 2006.06.26 Zhi-Bao Technology Inc. Tatung Technology Inc. 2009.08.10 2008.01.21 Address Paid-up capital Main business activities or products Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands No. 520 Nanbang Road, Economic and Technological Development Zone, Kunshan, Jiangsu, China, China 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 13F-1, No. 1, Taiyuan 1st Street, Zhubei City, Hsinchu County USD 10,550 General investments USD 12,450 Manufacturing of wireless network 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 Manufacturing of wireless network products TWD 680,021 2018.11.22 2012.12.11 2012.02.03 2001.02.13 2009.08.19 2017.01.01 Bekersveld 192630 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 2010.11.01 No.520, Nanbang Rd., Kunshan City, Jiangsu Province, China USD 15,000 Production touch panels and LCD displays 2000.05.23 No. 89, Land 36, Section 2, Tanxing Road, Tanyang Village, Tanzi District, Taichung City TWD 411,458 Manufacturing of machinery and lighting equipment, retail sale of machinery, and international trade 211 Tatung Technology of Japan Co., Ltd. Quest International Group Co., Ltd. Exquisite Electronic Co., Ltd. Tatung Home Appliances (Wu Jiang) Co., Ltd. Compal Broadband Networks Inc. 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. Company name Ripal Optotronics Co, Ltd. Date of establishment 2013.8.26 Rayonnant Technology Co., Ltd Compal Rayonnant Holdings Ltd. 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 2F, No. 256, Section 3, Zhongzheng Road, Rende District, Tainan City No. 581, Ruiguang Road, Neihu District, Taipei City Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands 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 60,000 Manufacturing of home appliances and audiovisual electronics 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. 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 2008.10.27 2007.08.09 2014.02.19 1999.01.16 2000.07.05 2003.09.23 2004.03.26 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 212 Company name Compal Wireless Communications (Nanjing) Co., Ltd. Webtek Technology Co., Ltd. Date of establishment 2006.02.13 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 No.68-2, Suyuan Road, Export Processing Zone (South Area). Jiangning, Nanjing, China Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG 1110, British Virgin Islands 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 49,000 Production of cellphones and tablets 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 No. 581, Ruiguang Road, Neihu District, Taipei City 8F, No. 385, Yangguang St., Neihu District, Taipei City TWD 200,000 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 USD 1 General investments TWD 200,000 USD 1,600 Management consultation, leasing, and wholesale/retail of medical equipment Medical care IoT business TWD 100,000 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 100,000 213 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 and sales of MEMS microphone technology products Company name Kinpo&Compal Group Assets Development Corporation Compal Ruifang Health Assets Development Corporation POINDUS SYSTEMS CORP. Poindus Investment Corp. Poindus Systems UK Limited 2022.06.24 2009.06.15 2009.07.21 2015.11.1 Adasys GmbH Elektronische Komponenten QIJIE ELECTRONICS(SHEN ZHEN)CO.,LTD 1994.03.29 2019.01.25 Poindus Systems GmbH 2009.09.23 Date of establishment 2021.12.21 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 7F., No. 669, Zhongzheng Rd., Xinzhuang Dist., New Taipei City 5F., No. 59, Ln. 77, Xing'ai Rd., Neihu Dist., Taipei City 6F., No. 1, Ln. 28, Xingzhong Rd., Neihu Dist., Taipei City 3 Devonshire Business Park Knights Park Road Basingstoke RG21 6XN United Kingdom Max-Planck-Strasse 10 70806 Kornwestheim 5th Floor, Building A2, Block 2, Huiming Sheng Industrial Park, Heping Community, Fuhai Street, Bao'an District, Shenzhen City. (Huiming Sheng Industrial Park, Factory #2) Max-Planck-Strasse 10 70806 Kornwestheim TWD 100,000 Investment and development of public construction and specific areas, etc. TWD 210,000 Sales of computers and peripherals TWD 41,000 Investment and holding GPB 300 Sales of computers and peripherals EUR 100 Sales of computers and peripherals USD 1000 Sales of computers and peripherals EUR 25 Sales of computers and peripherals 3. Business activities and relationships of affiliated enterprises (December 31, 2022) 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 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 214 Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises Mexcom Electronics, LLC Big Chance International Co., Ltd. Center Mind International Co., Ltd. Compal Investment (Sichuan) Co., Ltd. Prisco International Co., Ltd. Core Profit Holdings Ltd. Billion Sea Holdings Ltd. Mithera Capital Io LP High Shine Industrial Corp. Intelligent Universal Enterprise Ltd. Goal Reach Enterprises Ltd. Panpal Technology Corporation Gempal Technology Co., Ltd. Hong Ji Capital Co., Ltd. Hong Jin Investment Co., Ltd. Compal Rayonnant Holdings Ltd. Allied Power Holding Corp. Flight Global Holding Inc. Compalead Electronics B.V. Etrade Management Co., Ltd. Compal Electronics (Holding) Ltd. Arcadyan Holding (BVI) Corp. Arch Holding (BVI) Corp. Zhi-Bao Technology Inc. Quest International Group Co., Ltd. Exquisite Electronic Co., Ltd. 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 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 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. Holds investment interest in Poindus Systems GmbH. Poindus Investment Corp. 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 Arcadyan Technology N.A. Corp. Sale of wireless networking products 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. 215 Electronic products wholesaling Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises Electronic products manufacturing Tatung Technology Inc. Tatung Technology of Japan Co., Ltd. Arcadyan Germany Technology GmbH 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. Development and sale of digital home electronics Sale of digital home electronics Sale and technical support of wireless networking products Sale of wireless networking products 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 and sales of MEMS microphone technology products Manufacturing, processing and trading of notebooks, computer monitors, LCD TVs, cellphones, and electronic parts Production of notebooks, cellphones and electronics Compal Electronics Technology (Kunshan) Co., Ltd. Compal Information (Kunshan) Co., Ltd. Production of notebooks, tablets and electronics Compal Information Technology (Kunshan) Co., Ltd. Compal Digital Technology (Kunshan) Co., Ltd. Kunshan Botai Electronics Co., Ltd. Compal Electronics (China) Co., Ltd. Compal Smart Device (Chongqing) Co., Ltd. Production of notebooks and electronics Production and after-sale service of notebooks and cellphones Manufacturing and sale of displays Development, production and sale of communication equipment, cellphones, computers and smart watches, and provision of relevant technical services Production and sale of LCD TVs Production and sale of notebooks, cellphones and digital products Compal Optoelectronics (Kunshan) Co., Ltd. Compal Display Electronics (Kunshan) Co., Ltd. Amexcom Electronics, Inc. Compal Electronics (Chengdu) 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 Compal Electronics (Chongqing) Co., Ltd. Development, production and sale of notebooks and related Compal (Vietnam) Co., Ltd. Compalead Eletrônica do Brasil Indústria e Comércio Ltda. Compal Electronica da Amazonia Ltda Unicom Global. Inc Arcadyan Technology Corp. Compal Broadband Networks Inc. Henghao Technology Co., Ltd. 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 216 Industry category Name of affiliated enterprise Business relationship with other affiliated enterprises Mactech Co., Ltd. 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 Production and sale of wireless products Compal Networking (Kunshan) Co., Ltd. Arcadyan Technology (Vietnam) Co., Ltd. Production and sale of wireless products Tatung Home Appliances (Wu Jiang) Co., Ltd. HengHao Optoelectronics Technology (Kunshan) CO., LTD Rayonnant Technology (Taicang) Co., Ltd. Development and production of aluminum and magnesium alloy- Manufacturing of home appliances and audiovisual electronics Production touch panels and related components Production and sale of digital home electronics Lucom Display Technology (Kunshan) Ltd. Production touch panels and LCD displays Compower Global Service Co., Ltd. Compal Management (Chengdu) Co., Ltd. Management consultation, training, business information, tax Maintenance and after-sale service of notebooks and cellphones based products HANHELT Communications (Nanjing) Co., Ltd. Bizcom Electronics, Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology (Poland) Sp. z o.o. Auscom Engineering Inc. Compal Wise Electronic (Vietnam) Co., Ltd. Compal USA (Indiana), Inc. POINDUS SYSTEMS CORP. QIJIE ELECTRONICS(SHENZHEN)CO.,LTD Poindus Systems UKLimited Adasys GmbH Elektronische Komponenten Poindus Systems GmbH. Compal Development and Management (Vietnam) Co., Ltd. Kinpo&Compal Group Assets Development Corporation Compal Ruifang Health 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 Sales of computers and peripherals Sales of computers and peripherals Sales of computers and peripherals Sales of computers and peripherals Sales of computers and peripherals Construction and investment of infrastructures at Ba-Thien Industrial Zone, Vietnam Real estate development leasing and related management business Investment and development of public construction and specific areas, etc. 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 Instruments and International Trade 217 Construction and development Leasing and management consulting Industry category Manufacturing and sale of medical equipment Medical care Technical service Name of affiliated enterprise Business relationship with other affiliated enterprises General Life Biotechnology Co., Ltd. Manufacturing and sale of medical equipment 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 4. Directors, Supervisors, and President of affiliated enterprises December 31, 2022 Unit: TWD Thousands; shares; % Company name Title Name or name of representative Compal Electronics, Inc. Chairman Director and President Director Director Sheng-Hsiung Hsu Jui-Tsung Chen Binpal Investment Co., Ltd. (Representative: Wen-Being Hsu ) Kinpo Electronics, Inc. (Representative: Chieh-Li Hsu) Charng-Chyi Ko Sheng-Chieh Hsu Yen-Chia Chou Chung-Pin Wong Director Director Director President and Director Chiung-Chi Hsu Director Ming-Chih Chang Director Anthony Peter Bonadero Director Director Sheng-Hua Peng Independent Director Min-Chih Hsuan Independent Director Duei Tsai Independent Director Wen-Chung Shen Representative Representative Director Compal International Holding Co., Ltd. Compal International Holding (HK) Limited Compal Electronics Technology (Kunshan) Co., Ltd. Director Director Director Chairman Director Director Supervisor 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) 218 Shares held Shares (Note) 8,975,401 Shareholding percentage 0.20% 35,352,587 5,000,000 151,628,692 7,896,867 9,204,201 8,022,874 6.618,618 2,117,731 1,919,489 0 835,000 0 0 2,836,000 5,001,000 4,117,569 0.80% 0.11% 3.44% 0.18% 0.21% 0.18% 0.15% 0.05% 0.04% 0% 0.02% 0.00% 0.00% 0.06% 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 368,520 100.00% TWD 368,520 100.00% TWD 368,520 100.00% TWD 368,520 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Compal Information (Kunshan) Co., Ltd. Compal Information Technology (Kunshan) Co., Ltd. Compal Digital Technology (Kunshan) Co., Ltd. Kunshan Botai Electronics Co., Ltd. President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Chung-Pin Wong) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Chung-Pin Wong) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Chung-Pin Wong) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang Compal International Holding (HK) Limited (Representative: Sheng-Hsiung Hsu ) Compal International Holding (HK) Limited (Representative: Jui-Tsung Chen ) Compal International Holding (HK) Limited (Representative: Ming-Chih Chang) Compal International Holding (HK) Limited (Representative: Ching-Hsiung Lu) Ming-Chih Chang 219 0 0.00% TWD 368,520 100.00% TWD 368,520 100.00% TWD 368,520 100.00% TWD 368,520 100.00% 0 0.00% TWD 737,040 100.00% TWD 737,040 100.00% TWD 737,040 100.00% TWD 737,040 100.00% 0 0.00% TWD 614,200 100.00% TWD 614,200 100.00% TWD 614,200 100.00% TWD 614,200 100.00% 0 0.00% TWD 30,710 100.00% TWD 30,710 100.00% TWD 30,710 100.00% TWD 30,710 100.00% 0 0.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage 0 1,000 1,000 0.00% Director Director 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% 100.00% Chairman 7,350,000 7,350,000 Supervisor TWD 8,828 TWD 8,828 48,010,000 14,900,000 14,900,000 62,297,500 48,010,000 Managing Director President Director Fortune Way Technology Corp. Just International Ltd. Compower Global Service Co., Ltd. Compal Electronics (China) Co., Ltd. Jenpal International Ltd. Compal Display Holding (HK) Limited 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 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 Compal Smart Device (Chongqing) Co., Ltd. Compal Optoelectronics (Kunshan) Co., Ltd. Compal System Trading (Kunshan) Co., Ltd. President Chairman President Chairman President Chairman TWD 1,136,270 TWD 1,136,270 TWD 1,136,270 TWD 1,136,270 TWD 371,591 TWD 371,591 TWD 371,591 TWD 371,591 TWD 264,853 TWD 264,853 TWD 264,853 TWD 264,853 TWD 42,994 TWD 42,994 62,297,500 Supervisor Supervisor Supervisor 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Director Director Director Director Director Director Director 0.00% 0.00% 0.00% 0 0 0 220 Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Director Director Director Director Compal Investment (Jiangsu) Co., Ltd. Compal Display Electronics (Kunshan) Co., Ltd. Compal International Ltd. Compal Electronics International Ltd. Smart International Trading Ltd. Director Director Director Director Mexcom Technologies, LLC Mexcom Electronics, LLC (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 ) Compal Electronics International Ltd. (Representative: Hsin-Kung Mao ) Compal Electronics International Ltd. (Representative: Hsin-Kung Mao ) TWD 42,994 100.00% TWD 42,994 0 100.00% 0.00% TWD 479,076 100.00% TWD 479,076 100.00% TWD 479,076 100.00% TWD 479,076 100.00% 0 0.00% TWD 460,650 100.00% TWD 460,650 100.00% TWD 460,650 100.00% TWD 460,650 100.00% 0 500,000 500,000 0.00% 100.00% 100.00% 9,245,000 100.00% 9,245,000 100.00% 1,000 1,000 TWD 31 100.00% 100.00% 100.00% TWD 252,866 100.00% Big Chance International Co., Director Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) 90,820,000 100.00% 221 Company name Title Name or name of representative Ltd. Center Mind International Co., Ltd. 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 Director Supervisor President Director Director Compal Electronics (Chengdu) Co., Ltd. Compal Management (Chengdu) Co., Ltd. Prisco International Co., Ltd. Compal Electronics (Chongqing) Co., Ltd. Core Profit Holdings Ltd. Billion Sea Holdings Ltd. Director Director Mithera Capital Lo Director 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 ) 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. 222 Shares held Shares (Note) Shareholding percentage 90,820,000 100.00% 80,820,000 100.00% 80,820,000 100.00% TWD 2,481,982 100.00% TWD 2,481,982 100.00% TWD 2,481,982 100.00% TWD 2,481,982 100.00% 0 0.00% TWD 2,456,800 100.00% TWD 2,456,800 100.00% TWD 2,456,800 100.00% TWD 2,456,800 100.00% 0 TWD 24,568 0.00% 100.00% TWD 24,568 100.00% TWD 24,568 100.00% TWD 24,568 0 10,000,000 100.00% 0.00% 100.00% 10,000,000 100.00% TWD 307,100 100.00% TWD 307,100 100.00% TWD 307,100 100.00% TWD 307,100 0 147,000,000 100.00% 0.00% 100.00% 147,000,000 100.00% 147,000,000 100.00% 147,000,000 TWD 153,550 100.00% 99.00% Company name Title Name or name of representative LP (Representative: David Liao ) Shares held Shares (Note) Shareholding percentage Compal USA (Indiana), Inc. Chairman High Shine Industrial Corp. 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 Hong Ji Capital Co., Ltd. Director and President Director Supervisor Chairman Director and President Director Supervisor Hong Jin Investment Co., Ltd. Chairman Director and 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 ) 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 2,057,570 100.00% 12,700,000 100.00% 12,700,000 100.00% TWD 390,017 100.00% Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Ming-Chih Chang ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Chung-Pin Wong ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. (Representative: Chung-Pin Wong ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Compal Electronics, Inc. (Representative: Sheng-Hsiung Hsu ) Compal Electronics, Inc. 223 500,000,000 100.00% 500,000,000 100.00% 500,000,000 100.00% 500,000,000 100.00% 90,000,000 100.00% 90,000,000 100.00% 90,000,000 100.00% 90,000,000 100.00% 100,000,000 100.00% 100,000,000 100.00% 100,000,000 100.00% 100,000,000 100.00% 29,500,000 29,500,000 100.00% 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage President Director Supervisor President (Representative: Chung-Pin Wong ) Compal Electronics, Inc. (Representative: Sheng-Hua Peng) Compal Electronics, Inc. (Representative: Sheng-Chieh Hsu) Ricardo F Battaglia 29,500,000 100.00% 29,500,000 100.00% President Ricardo F Battaglia 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 Director Director Director Director Director Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Keng-Tien Lin) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Fong-Yu, Lu) ) Arcadyan Technology Corp. (Representative: Paul Christopher Devlin) Arcadyan Technology Corp. (Representative: Management Company ABU accounting services Limited Liability Company) 224 0 0 0 0 0 41,304,504 41,304,504 41,304,504 0.00% 0.00% 0.00% 0.00% 0.00% 18.74% 18.74% 18.74% 41,304,504 18.74% 0 208,669 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 99.00% 50,000 50,000 50,000 50,000 100.00% 100.00% 100.00% 100.00% 50,000 100.00% 0 100.00% 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 Technology Limited Arcadyan Technology Australia Pty Ltd. Arcadyan Technology Corporation (Russia), LLC. Company name Title Name or name of representative 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 Tatung Technology Inc. Chairman Director Chairman Director Chairman Director Chairman Director Chairman Director Director Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Director Supervisor President Chairman Director Director 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: Chih-Fang Lee) Arcadyan Holding (BVI) Corp. (Representative: Shih-Wei Huang) Chung-Pao, Liu Arch Holding (BVI) Corp. (Representative: Fong-Yu, Lu) ) Arch Holding (BVI) Corp. (Representative: Jui-Tsung Chen ) Arch Holding (BVI) Corp. (Representative: Chao-Peng Tseng) Arch Holding (BVI) Corp. (Representative: Ching-Hsiung Lu) Chung-Pao, Liu Arcadyan Technology Corp. (Representative: Chao-Peng Tseng) Arcadyan Technology Corp. (Representative: Cheng-Chiang Wang) Arcadyan Technology Corp. (Representative: Ching-Hsiung Lu) Arcadyan Technology Corp. (Representative: Fong-Yu, Lu ) Arcadyan Technology Corp. (Representative: Shih-Wei Huang) Chao-Peng Tseng Arcadyan Technology Corp. (Representative: Fong-Yu, Lu) Arcadyan Technology Corp. (Representative: Chao-Peng Tseng ) Arcadyan Technology Corp. (Representative: Shih-Wei Huang) Arcadyan Technology Corp. 225 Shares held Shares (Note) Shareholding percentage 47,780,148 100.00% 47,780,148 100.00% 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 0 TWD 382,340 100.00% 0.00% 100.00% TWD 382,340 100.00% TWD 382,340 100.00% TWD 382,340 0 34,980,000 100.00% 0.00% 100.00% 34,980,000 100.00% 34,980,000 100.00% 34,980,000 100.00% 34,980,000 100.00% 0 25,027,910 25,027,910 25,027,910 25,027,910 0.00% 61.04% 61.04% 61.04% 61.04% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Director Director Director Supervisor Supervisor Supervisor President Director Director Tatung Technology of Japan Co., Ltd. Quest International Group Co., Ltd. Director Exquisite Electronic Co., Ltd. Tatung Home Appliances (Wu Jiang) Co., Ltd. Arcadyan India Private Limited Director Director Director Chairman Director Director Supervisor President Director Director Director Compal Broadband Networks Inc. Chairman Director Director Director (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) Shih-Wei 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: Nien-Che, Hsiung) Zhi-Bao Technology Inc. (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) 226 Compal Broadband Networks Belgium 25,027,910 1,027,056 61.04% 2.51% 4,570,830 11.15% 0 0 2,727,272 0 700 700 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 0 7,465,000 35,000 7,465,000 29,060,176 29,060,176 3,575,000 29,060,176 0 0 0 1,160,010 20,300 100.00% 0.00% 99.00% 1.00% 99.00% 42.73% 42.73% 5.25% 42.73% 0.00% 0.00% 0.00% 1.71% 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage 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. Rayonnant Technology Co., Ltd. Director Compal Broadband Networks Inc. (Representative: Yu- Ho Wang) 20,300 100.00% Chairman Vice Chairman and President Director Director Supervisor Director Director Director Director Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Director Director Director Director Supervisor Chairman Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Chen-Chang Hsu) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Cheng-Chiang Wang) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Henghao Technology Co., Ltd. (Representative: Sheng-Hsiung Hsu ) Henghao Technology Co., Ltd. (Representative: Chung-Pin Wong) HengHao Holdings A Co., Ltd. (Representative: Sheng-Hsiung Hsu ) HengHao Holdings A Co., Ltd. (Representative: Chung-Pin Wong) HengHao Holdings B Co., Ltd. (Representative: Chen-Chang Hsu) HengHao Holdings B Co., Ltd. (Representative: Chia-Tien Liu) HengHao Holdings B Co., Ltd. (Representative: Jui-Hsiang Yang) HengHao Holdings B Co., Ltd. (Representative: Cheng-Chiang Wang) Chen-Chang Hsu HengHao Holdings B Co., Ltd. (Representative: Chen-Chang Hsu) HengHao Holdings B Co., Ltd. (Representative: Chia-Tien Liu ) HengHao Holdings B Co., Ltd. (Representative: Jui-Hsiang Yang ) HengHao Holdings B Co., Ltd. (Representative: Hsiu-Chuan Hsu) Chen-Chang Hsu Compal Electronics, Inc. (Representative: Yung-Ching Chang) Compal Electronics, Inc. (Representative: Jui-Tsung Chen ) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Chen-Chang Hsu) Compal Electronics, Inc. (Representative: Ming-Chih Chang) Wen-Pin Kuo Chuan-Kuei Lin Chyou-Jui Wei Compal Electronics, Inc. (Representative: Chung-Pin Wong) 227 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 1,228,400 100.00% TWD 1,228,400 100.00% TWD 1,228,400 100.00% TWD 1,228,400 100.00% 0 TWD 460,650 0.00% 100.00% TWD 460,650 100.00% TWD 460,650 100.00% TWD 460,650 100.00% 0 21,756,192 21,756,192 21,756,192 21,756,192 21,756,192 1,301,505 1,609,172 0 0.00% 52.88% 52.88% 52.88% 52.88% 52.88% 3.16% 3.91% 0.00% 29,500,000 100.00% Company name Title Name or name of representative Director and President Director Supervisor Director Director Director Director Director Director Director Director Chairman Director Director Supervisor President Director Director Director Director Director Director Director Director Chairman Director and President Compal Rayonnant Holdings Ltd. Allied Power Holding Corp. Primetek Enterprises Ltd. Rayonnant Technology Holdings (HK) Co., Ltd. Rayonnant Technology (Taicang) Co., Ltd. Bizcom Electronics, Inc. Compal Europe (Poland) Sp. z o.o. CGS Technology (Poland) Sp. z o.o. Auscom Engineering Inc. 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. (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) 228 Shares held Shares (Note) Shareholding percentage 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 8,651,000 59.10% 40.90% 3,151,000 100.00% 3,151,000 100.00% 18,000,000 100.00% 18,000,000 100.00% TWD 552,780 100.00% TWD 552,780 100.00% TWD 552,780 100.00% TWD 552,780 100.00% 0 100,000 100,000 100,000 100,000 136,080 136,080 245,911 245,911 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 3,000,000 100.00% 3,000,000 100.00% Company name Title Name or name of representative Flight Global Holding Inc. Director Director Director RiPAL Optotronics Co., Ltd. Chairman Director Director Supervisor Director Director Director Chairman Director Director Supervisor President Chairman Director Director Supervisor President Chairman Director Director Supervisor President Director Compal Electronics (Holding) Ltd. Etrade Management Co., Ltd. Compal Communications (Nanjing) Co., Ltd. Compal Digital Communications (Nanjing) Co., Ltd. Compal Wireless Communications (Nanjing) Co., Ltd. Webtek Technology Co., Ltd 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. & Webtek Technology Co., Ltd (Representative: Jui-Tsung Chen ) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: Sheng-Hua Peng) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: Cheng-Chiang Wang) Etrade Management Co., Ltd. and Compal Display Holding (HK) Limited (Representative: 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 ) 229 Shares held Shares (Note) Shareholding percentage 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% 71,900,000 100.00% TWD 829,170 100.00% TWD 829,170 100.00% TWD 829,170 100.00% TWD 829,170 100.00% 0 TWD 178,118 0.00% 100.00% TWD 178,118 100.00% TWD 178,118 100.00% TWD 178,118 0 100.00% 0.00% TWD 1,504,790 100.00% TWD 1,504,790 100.00% TWD 1,504,790 100.00% TWD 1,504,790 100.00% 0 100,000 0.00% 100.00% Company name Title Name or name of representative Forever Young Technology Inc. HANHELT Communications (Nanjing) Co., Ltd. Director Chairman and President Director Director Supervisor Director Compal Wise Electronic (Vietnam) Co., Ltd. Unicom Global. Inc. Chairman Palcom International Corporation Compalead Electronics B.V. General Life Biotechnology Co., Ltd. Giant Rank Trading Limited UniCore Biomedical Co., Ltd. Director Director Supervisor Chairman Director Director Supervisor Director Director Chairman Director Director Director Director Supervisor Supervisor Director Chairman Director Director Director 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) 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. 230 Shares held Shares (Note) Shareholding percentage 50,000 100.00% TWD 61,420 100.00% TWD 61,420 100.00% TWD 61,420 100.00% TWD 61,420 100.00% TWD 61,420 100.00% 20,000,000 100.00% 20,000,000 100.00% 20,000,000 100.00% 20,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 6,426,516 100.00% 6,426,516 100.00% 15,030,000 15,030,000 15,030,000 6,922,940 992,000 2,520,000 0 50.12% 50.12% 50.12% 23.08% 3.31% 8.40% 0.00% - 100.00% 20,000,000 100.00% 20,000,000 100.00% 20,000,000 20,000,000 100.00% 100.00% Company name Title Name or name of representative Shares held Shares (Note) Shareholding percentage Shennona Corporation HippoScreen Neurotech Corp. SHENNONA CO., LTD. Aco Healthcare Co.,Ltd. Starmems Semiconductor Corp. Kinpo&Compal Group Assets Development Corporation Poindus Systems Corp,Ltd. Director Supervisor Director Director Director Chairman Director Director Director Director Supervisor Chairman Chairman Director Director Director Director Supervisor Chairman Vice Chairman Director Supervisor Chairman Director Director Director Supervisor Chairman Vice Chairman (Representative: Cheng-Chiang Wang) Compal Electronics, Inc. (Representative: Chyou-Jui Wei) Compal Electronics, Inc. (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) Yi-Hung Liu Long-Song Lin Cheng-Chiang Wang Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative:Jui-Tsung Chen) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Hsuan-Bin Chen) Jian-Hung Liu Shu-Chin Su Chyou-Jui Wei 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 Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Hsin-Kung Mao) 231 20,000,000 100.00% 20,000,000 100.00% TWD 48,209 100.00% TWD 48,209 100.00% TWD 48,209 100.00% 9,100,000 9,100,000 9,100,000 594,000 90,000 0 600,000 100,000,000 100,000,000 100,000,000 22,227,778 22,227,778 0 3,500,000 3,500,000 2,300,000 0 91.00% 91.00% 91.00% 5.94% 0.9% 0.00% 100.00% 52.04% 52.04% 52.04% 11.57% 11.57% 0.00% 35.00% 35.00% 23.00% 0.00% 52,500,000 70.00% 52,500,000 70.00% 52,500,000 70.00% 22,500,000 0 11,768,199 30.00% 0.00% 56.04% 11,768,199 56.04% Poindus Investment Co.,Ltd. Adasys GmbH Elektronische Komponenten QiJie Electronics (ShenZhen) Co.,Ltd. Poindus Systems UK Limited Company name Title Name or name of representative Compal Electronics, Inc. (Representative: Cheng-Chiang Wang) Mu-Cheng Hu Director Director Independent Director Bing-Xian Wang Independent Director Sen-Tien Wu Independent Director Hui-Zhu Yang Chairman Poindus Systems Corp,Ltd. (Representative：Mu-Cheng Hu) Shuo-Chien Ma President Chairman and President Wei-Ho Wang Shares held Shares (Note) Shareholding percentage 11,768,199 56.04% 358,000 0 0 0 NT$4,100 - 0 1.70% 0.00% 0.00% 0.00% 100.00% 100.00% 100.00% 0 300 Director Director 100.00% Supervisor Poindus Systems GmbH Muh-Perng Hu Poindus Systems Corp,Ltd. (Representative: Mu-Cheng Hu) Poindus Systems Corp,Ltd. (Representative: Tai-Shan Wu) Compal Electronics, Inc. (Representative:Jui-Tsung Chen) Compal Electronics, Inc. (Representative: Chung-Pin Wong) Compal Electronics, Inc. (Representative: Chieh-Li Hsu) Compal Electronics, Inc. (Representative: Cheng-Chiang Wang) Note: Limited liability companies are shown in terms of amount and percentage of capital contribution. (Exchange rates for amount Compal Ruifang Health Assets Development Corporation 10,000,000 10,000,000 10,000,000 10,000,000 Supervisor Chairman 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Director Director 300 of capital contribution: USD 1: TWD 30.71, CNY 1: TWD 4.4142, and VND 1: TWD 0.001312.) 232 5. Overview of Operating Status for Affiliated Companies in 2022 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 1,787,680 90,404,161 47,851,053 42,553,108 451,440,379 (670,141) 1,030,304 1,460,443 52,310,980 41,945,986 10,364,994 137,216,792 (237,074) (43,156) 2,636,051 25,544,304 16,978,781 8,565,523 185,562,285 233,129 Core Profit Holdings Ltd. 4,318,860 8,516,394 849,503 7,666,891 856,623 8,143 2,483,084 42,718,240 42,484,541 233,699 60,362,943 497,484 582,505 301,896 407,288 5,000,000 14,169,502 9,054,817 5,114,685 13,317,573 129,328 (314,769) (0.63) 900,000 1,000,000 295,000 2,150,114 1,169,692 374,493 12,376 292 65 200,000 102,286 17,804 2,137,738 1,169,400 374,428 84,482 16,505 - - - (266) (209) (193) 165,425 97,275 42,400 21,854 (17,207) (17,399) 3 (64) (65) 2,203,543 40,020,527 26,081,266 13,939,261 47,167,749 2,199,788 1,915,053 Shennona Corporation 48,209 16,505 - 19.44 (0.90) 6.41 2.05 5.11 1.84 0.97 1.44 0.87 - 9.20 Compal International Holding Co., Ltd. and subsidiaries Just International Ltd. and subsidiaries Big Chance International Co., Ltd. and subsidiaries 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 Arcadyan Technology Corp. and subsidiaries Compal Broadband Networks Inc. and subsidiaries Henghao Technology Co., Ltd. and subsidiaries Mactech Co., Ltd. 680,021 2,642,185 1,129,008 1,513,177 2,514,695 (99,979) (63,146) (0.94) 200,150 6,332,934 7,130,455 (797,521) 10,093,756 113,943 (231,377) 411,458 698,454 136,865 561,589 345,290 55,600 44,823 (11.56) 1.09 233 Company Name Capital Total Asset Total liabilities Net worth Ripal Optotronics CO, LTD. 60,000 186,590 64,132 122,458 revenue 228,218 income 24,838 Operating Operating Net loss/profit for the EPS (in TWD ) period (after tax) (After tax) General life Biotechnology Co., Ltd. and subsidiaries Rayonnant Technology Holdings Ltd., 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. 300,000 819,571 298,403 521,168 669,577 67,403 295,000 496,130 295,483 200,647 1,430,660 (6,140) 27,157 377,328 856,759 569,025 287,734 1,529,958 (14,055) 32,813 Flight Global Holding Inc. 2,754,741 4,592,857 Compalead Electronics B.V. 197,463 865,231 Etrade Management Co., Ltd.& subsidiaries Webtek Technology Co., Ltd. Forever Young Technology Inc. & subsidiaries Unicom Global Inc. Palcom International Corporation 3,340 1,575 200,000 100,000 36,369 90,156 89,669 101,747 479,006 270,731 93,446 214,356 26,645 298,330 1,017 64,795 82,719 1,174 452,361 (27,599) 92,429 149,561 4,510,138 864,057 131,599 192,166 - 202,778 - - 2,014 (4,161) (1,862) 13,266 (167) (796) 2,224,029 5,266,127 5,245,413 20,714 11,895,451 54,672 756,027 (7,202) 763,229 - (112) 2,263,465 731,665 1,531,800 526,095 75,238 669,200 145,914 506,587 33,227 162,613 112,687 560,671 128,350 (923) 2,727 - Compal Electronics (Holding) Ltd. 34 3,617,227 (2,000) 3,619,227 - HippoScreen Neurotech Corp. 100,000 31,412 SHENNONA CO., LTD. Aco Healthcare Co.,Ltd. 6,000 30,748 29,835 53,105 9,361 26,139 21,364 22,051 3,696 31,741 234 2,347 21,744 (26,246) 55,498 304 2,056 39,095 (25,022) (24,930) 24,384 81,417 3,410 (23,440) 3,773 10,180 (152,120) 11,842 93,946 3,035 84,921 102 3,547 - 4.06 2.71 0.92 2.63 34.10 (172.25) 15.34 3.39 (1.69) 1.84 1.31 30.35 1,698.42 - 0.35 - (2.62) 3.34 (0.13) 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 POINDUS SYSTEMS CORP. Compal Ruifang Health Assets Development Corporation 100,000 76,838 5,437 71,401 5,466 (25,987) (25,660) 750,000 12,161,758 11,439,549 722,209 - (16,584) (27,910) 210,000 662,432 140,727 521,705 765,835 8,046 100,000 99,970 30 99,940 - (333) 5,505 (60) (2.57) (0.37) 0.26 (0.01) 6. Common shareholders in controlling and controlled companies: None 235 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, 2022 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, 2023 8.1.3 Affiliation reports: None 236 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, 2023 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 2022 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 237 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, 2022 and 2021 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 9～11 11～40 40～41 41～92 93～95 95 96 96 96 96 (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information 97, 101～114 97, 115～119 97, 120～122 98 98～100 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, 2022 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, 2023 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, 2022 and 2021, and the consolidated statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2022 and 2021, 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, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended December 31, 2022 and 2021, 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 Standards on Auditing of 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 Norm of Professional Ethics for Certified Public Account of Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirement. 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 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, judgement of specific items, 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, 2022 and 2021, 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 Standards on Auditing of 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 the Standards on Auditing of the Republic of China, we exercise professional judgment and 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, 2023 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, 2022 and 2021 (Expressed in Thousands of New Taiwan Dollars) Assets Current assets: December 31, 2022 December 31, 2021 Amount % Amount % Cash and cash equivalents (Note (6)(a)) $ 79,665,302 17.6 75,162,103 14.0 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 (Notes (6)(f) and (8)) Other current assets (Note (8)) Non-current assets: 187 - 400,754 0.1 186,804,648 41.2 288,436,522 53.7 4,416,073 2,369,411 1.0 0.5 1,729,332 2,445,690 0.3 0.5 111,593,984 24.6 115,012,365 21.4 5,856,898 1.3 3,928,624 0.7 390,706,503 86.2 487,115,390 90.7 Investments accounted for using equity method (Note (6)(g)) Non-current financial assets at fair value through profit or loss (Note (6)(b)) Non-current financial assets at fair value through other comprehensive income (Note (6)(c)) Property, plant and equipment (Notes (6)(k), (6)(l) and (8)) Right-of-use assets (Note (6)(l)) Intangible assets (Note (6)(h)) Deferred tax assets (Note (6)(s)) Other non-current assets (Note (8)) 8,047,569 558,909 5,425,908 28,808,211 13,705,316 1,722,165 2,393,778 2,116,074 1.7 0.1 1.2 6.4 3.0 0.4 0.5 0.5 8,369,312 1.6 259,778 6,235,063 26,990,364 3,066,218 1,548,508 1,646,524 1,864,183 - 1.2 5.0 0.6 0.3 0.3 0.3 9.3 62,777,930 13.8 49,979,950 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: 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 2540 2570 2580 2640 2670 3110 3200 3300 3400 3500 Total assets $ 453,484,433 100.0 537,095,340 100.0 36XX Non-controlling interests Total equity Total liabilities and equity See accompanying notes to consolidated financial statements. 5 December 31, 2022 December 31, 2021 Amount % Amount % $ 74,832,426 16.5 118,422,407 22.0 62,527 47,809 - - 1,589 - - - 784,238 0.2 1,065,954 0.2 152,137,066 33.6 220,549,039 41.1 9,701,032 29,622,760 7,202,033 734,061 1,813,555 3,352,565 2,632,039 - 2.1 6.5 1.6 0.2 0.4 0.7 0.6 - 3,517,324 29,701,088 7,013,976 1,204,115 625,292 2,037,822 2,035,437 326,571 19,462,800 4.3 15,741,481 0.7 5.5 1.3 0.2 0.1 0.4 0.4 0.1 2.9 302,384,911 66.7 402,242,095 74.9 11,674,322 1,247,342 9,533,209 660,019 574,787 23,689,679 2.6 0.3 2.1 0.1 0.1 5.2 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 2.5 326,074,590 71.9 415,555,537 77.4 44,071,466 5,078,580 9.7 1.1 44,071,466 6,724,856 8.2 1.2 69,969,059 15.4 69,651,940 13.0 (1,943,104) (0.4) (8,206,750) (1.5) (881,247) (0.2) (881,247) (0.2) 116,294,754 25.6 111,360,265 20.7 11,115,089 2.5 10,179,538 1.9 127,409,843 28.1 121,539,803 22.6 $ 453,484,433 100.0 537,095,340 100.0 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income For the years ended December 31, 2022 and 2021 (Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share) 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 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)(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: 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)) Components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income (loss) that will be reclassified to profit or loss Exchange differences on translation of foreign financial statements Gains (losses) on hedging instrument (Note (6)(z)) Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 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 6 2022 2021 Amount % Amount % $1,073,245,915 100.0 1,235,682,015 100.0 1,032,881,736 96.2 1,194,190,441 96.6 40,364,179 3.8 41,491,574 3.4 8,232,253 4,983,404 17,929,525 31,145,182 9,218,997 3,089,926 1,363,841 0.8 0.4 1.7 2.9 0.9 0.3 0.1 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 (3,245,701) (0.3) (1,049,137) (0.1) 652,426 (73,104) (9,431) (272,824) 1,505,133 10,724,130 2,182,603 8,541,527 - - - - 0.1 1.0 0.2 0.8 648,106 (52,513) (404,513) 448,562 4,119,242 17,467,835 3,727,347 13,740,488 - - - - 0.3 1.4 0.3 1.1 161,558 - (56,056) - (1,074,884) (0.1) 630,396 0.1 (21,325) (49,117) - - 135,751 50,190 - - (885,534) (0.1) 659,901 0.1 7,375,388 0.7 (1,892,168) (0.2) (47,809) 81,580 (12,026) 7,421,185 6,535,651 15,077,178 7,288,292 1,253,235 8,541,527 13,636,212 1,440,966 15,077,178 - - - 0.7 0.6 1.4 0.7 0.1 0.8 1.3 0.1 1.4 1.67 1.66 $ $ $ $ $ $ $ 2,192 (25,372) (17,539) - - - (1,897,809) (1,237,908) 12,502,580 (0.2) (0.1) 1.0 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 See accompanying notes to consolidated financial statements. COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the years ended December 31, 2022 and 2021 (Expressed in Thousands of New Taiwan Dollars) Equity attributable to owners of parent Retained earnings Unappropriated retained earnings 38,049,698 12,632,667 (40,067) 12,592,600 (924,672) (3,164,965) (5,288,576) (25,946) Total retained earnings 62,566,181 12,632,667 (40,067) 12,592,600 - - (5,288,576) - (25,946) (49,878) (49,878) (142,441) - - 41,045,820 7,288,292 118,035 7,406,327 (1,237,434) (940,042) (7,051,435) (2,260) - - - - - - - (142,441) - - 69,651,940 7,288,292 118,035 7,406,327 - - (7,051,435) - (2,260) - - 2,838 - 69,969,059 (38,351) (38,351) Exchange differences on translation of foreign financial statements (6,888,977) - (1,855,728) (1,855,728) - - - - - - - - - - (8,744,705) - 7,274,994 7,274,994 - - - - - - - - - - (1,469,711) 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 (376,952) - 707,754 707,754 - - - - - 14,709 49,878 142,441 - - 537,830 - (1,032,694) (1,032,694) - - - - - - - 36,599 (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) - (12,415) (12,415) - 6,229,885 6,229,885 (881,247) 111,360,265 7,288,292 6,347,920 13,636,212 - - - - - - - - - - - - - - - - 36,599 - - - (2,838) - - - - - - - - - - - - (7,051,435) (1,762,859) 31,137 (19,818) 100,035 1,217 - - (1,943,104) (881,247) 116,294,754 2,838 8,206,750 39,185,463 (2,838) - (461,103) - - (12,290) Balance at January 1, 2021 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 Disposal of investments in equity instruments measured at fair value through other comprehensive income Others Changes in non-controlling interests Balance at December 31, 2021 Profit for the year ended December 31, 2022 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, 2022 Ordinary shares $ 44,071,466 - - - - - - - - - - - - - 44,071,466 - - - - - - - - - - - Capital surplus 8,342,813 - - - - - - (1,762,859) 61,825 2,132 80,027 - - 918 6,724,856 - - - - - - (1,762,859) 33,397 (18,066) 100,035 1,217 Legal reserve 20,414,740 - - - 924,672 - - - - - - - - - 21,339,412 - - - 1,237,434 - - - - - - - - - $ 44,071,466 - - 5,078,580 - - 22,576,846 See accompanying notes to consolidated financial statements. Special reserve 4,101,743 - - - - 3,164,965 - - - - - - - - 7,266,708 - - - - 940,042 - - - - - - - - 7 Non- controlling interests Total equity 115,989,650 13,740,488 (1,237,908) 12,502,580 9,157,145 1,107,821 (50,771) 1,057,050 - - - - - - - - - (34,657) 10,179,538 1,253,235 187,731 1,440,966 - - - - - - - - - - - (5,288,576) (1,762,859) 50,588 2,132 80,027 - 918 (34,657) 121,539,803 8,541,527 6,535,651 15,077,178 - - (7,051,435) (1,762,859) 31,137 (19,818) 100,035 1,217 - (505,415) 11,115,089 (505,415) 127,409,843 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2022 and 2021 (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 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 Impairment loss Others Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease in financial assets at fair value through profit or loss Decrease (increase) in notes and accounts receivable Decrease (increase) in other receivable Decrease (increase) in inventories 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 (Decrease) increase in notes and accounts payable Increase in other payables Increase in refund liabilities (Decrease) increase in provisions (Decrease) increase in contract liabilities Increase 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 other comprehensive income Acquisition of investments accounted for using equity method Net cash flow from acquisition of subsidiaries Proceeds from capital reduction and liquidation of investments Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in restricted assets Others Net cash flows used in investing activities Cash flows from (used in) financing activities: (Decrease) increase in short-term borrowings Repayments of bonds payable 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 (used in) from 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 2022 2021 $ 10,724,130 17,467,835 7,544,408 30,177 23,672 3,245,701 (3,089,926) (128,597) 22,025 272,824 (7,086) 9,431 (158) 7,922,471 400,567 99,026,904 357,505 3,761,054 (1,523,444) 438,312 102,460,898 60,938 (62,369,969) 976,433 596,602 (472,840) (281,716) 1,309,581 (18,337) (60,199,308) 42,261,590 50,184,061 60,908,191 2,813,791 270,042 (2,697,025) (2,656,389) 58,638,610 (587,240) 10,028 (54,000) (135,971) 2,010 (7,727,184) 185,814 (659,132) (795,029) (154,230) (9,914,934) (43,590,249) (7,400) 79,108,377 (72,931,768) (2,422,290) (8,714,259) (1,062,788) 207,983 (49,412,394) 5,191,917 4,503,199 75,162,103 79,665,302 $ 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 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (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, 2023. (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, 2022: ● 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” (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, 2023, would not have a significant impact on its consolidated financial statements: ● 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” (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” Amendments to IAS 1 “Non- current Liabilities with Covenants” Effective date per IASB January 1, 2024 January 1, 2024 Content of amendment IAS 1 Under existing requirements, companies classify a liability as current when they do not have an unconditional right to defer settlement for at least 12 months after the reporting date. The amendments has removed the requirement for a right to be unconditional and instead now requires that a right to defer settlement must exist at the reporting date and have substance. The amendments clarify how a company classifies a liability that can be settled in its own shares – e.g. convertible debt. new amendments1, After reconsidering certain aspects of the 2020 1 amendments clarify that only covenants with which a company must comply on or before the classification of a liability as current or non-current. reporting date affect IAS the Covenants with which the company must comply after the reporting date (i.e. future covenants) do not affect a liability’ s classification at that date. However, when non-current liabilities are subject to future covenants, companies will now need to disclose users understand the risk that those liabilities could become repayable within 12 months after the reporting date. information help to 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 11 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 IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “ ● IFRS16 “Requirements for Sale and Leaseback Transactions” (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). (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 12 (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. 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 Percentage of ownership December 31, 2022 100% December 31, 2021 Description 100% Panpal held 31,648 thousand shares of the Company as of December 31, 2022, which represented 0.7% of the Company’s outstanding shares. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 13 Name of investor Name of Subsidiary The Company Gempal Technology Corp. (“Gempal”) Nature of Operation 〃 Percentage of ownership December 31, 2022 100% December 31, 2021 Description 100% Gempal held 18,369 thousand shares of the Company as of December 31, 2022, which represented 0.4% of the Company’s outstanding shares. Hong Ji Capital Co., Ltd. Investment 100% 100% 〃 〃 The Company, Panpal, et al. (“Hong Ji”) Hong Jin Investment Co., Ltd. (“Hong Jin”) Arcadyan Technology Corp. (“Arcadyan”) The Company Rayonnant Technology 〃 100% 100% 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 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 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 33% 34% The Group had the ability to control Arcadyan. (Note 1) 100% 100% 100% 100% 100% 100% 53% 53% 50% 50% 100% 100% 91% 91% 100% 100% 52% 52% 70% 70% Kinpo&Compal Group was established in December 2021. Investing and developing businesses, such as public construction and specific zones 100% - Compal Ruifang was established in June 2022. Medical care IOT business 100% 100% 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”) Shennona Taiwan Co., Ltd. (“Shennona TW”) Aco Smartcare Co., Ltd. (“Aco Smartcare”) Kinpo&Compal Group Assets Development Corporation (“Kinpo& Compal Group”) Compal Ruifang Health Assets Development Corporation (“Compal Ruifang ”) Shennona Corporation (“Shennona”) Auscom Engineering Inc. (“Auscom”) R&D of notebook PC related products and components 100% 100% (Continued) 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 14 Description COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 〃 〃 〃 〃 The Company and BSH The Company 〃 〃 〃 〃 〃 Panpal and Gempal Name of investor The Company Name of Subsidiary Nature of Operation Just International Ltd. Investment (“Just”) Compal International Holding Co., Ltd. (“CIH”) Compal Electronics (Holding) Ltd. (“CEH”) 〃 〃 Bizcom Electronics, Inc. (“Bizcom”) Flight Global Holding Inc. Warranty services and marketing of monitors and notebook PCs Investment (“FGH”) Percentage of ownership December 31, 2022 December 31, 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% High Shine Industrial Corp. 〃 100% 100% (“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”) Maintenance and warranty services of notebook PCs Investment 〃 〃 〃 Maintenance and warranty services of notebook PCs Manufacturing of notebook PCs 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 〃 Compal Electronics India Private Limited (“CEIN”) Manufacturing and warranty service of mobile phones 100% 100% Panpal and CEB Compal Electronica DA Manufacturing of notebook PCs 100% 100% Amazonia Ltda. (“CEA”) Compal Display Holding Investment 〃 〃 100% 100% 100% 100% 100% 100% Just 〃 〃 CDH (HK) 〃 〃 (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”) 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% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 15 Name of Subsidiary Compal Smart Device (Chongqing) Co., Ltd. (“CSD”) Smart International Trading Ltd. (“Smart”) Amexcom Electronics Inc. (“AEI”) Nature of Operation Research, manufacturing and sales of communication devices, mobile phones, electronic computer, smart watch, and providing related technical service Investment Percentage of ownership December 31, 2022 December 31, 2021 100% 100% Description 100% 100% Sales and maintenance of LCD TVs 100% 100% The Company had decided its dissolution and liquidation on December 26, 2022. Mexcom Electronics, LLC Investment 〃 〃 〃 〃 〃 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Manufacturing of notebook PCs 100% 100% 〃 〃 〃 Manufacturing and sales of notebook PCs, mobile phones, and digital products 100% 100% 100% 100% 100% 100% 100% 100% Maintenance and warranty service of notebook PCs Investment 100% 100% 100% 100% Manufacturing and sales of LCD TVs 100% 100% Investment 100% 100% (Continued) Name of investor CPC CII 〃 〃 〃 CIH 〃 〃 〃 CIH (HK) 〃 〃 〃 〃 BT CDH (HK) and CIH (HK) CIJ The Company and Webtek (“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”) Compal 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., Ltd. (“Etrade”) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 16 Name of investor Name of Subsidiary The Company Webtek Technology Co., Ltd. (“Webtek”) Nature of Operation 〃 Percentage of ownership December 31, 2022 December 31, 2021 100% 100% Description 〃 Forever Young Technology 〃 100% 100% 〃 〃 Inc. (“Forever”) UniCom Global, Inc. (“UCGI”) Palcom International Corporation (“Palcom”) Poindus Systems Corp, Ltd. (“Poindus Systems”) Poindus Systems Poindus Investment Co., 〃 Manufacturing and sales of computers and electronic components Sales of mobile phones 100% 100% 100% 100% Sales of PCs and computer periphery devices Investment holding 56% 100% Ltd. (“Poindus Investment”) 〃 〃 〃 Poindus Investment QiJie Electronics (ShenZhen) Co., Ltd. (“QiJie”) Sales of PCs and computer periphery devices Poindus Systems UK Limited (“Poindus UK”) Adasys GmbH Elektronische Komponenten (“Adasys”) Poindus Systems GmbH GroBhandel mit EDV. Oberursel (“Poindus GmbH”) 〃 〃 〃 100% 100% 100% 100% - - - - - - The Group acquired 56% of its shares in March 2022. The Group indirectly acquired 100% of its shares after acquiring 56% of Poindus Systems’ shares in March 2022. The Company had decided its dissolution and liquidation on December 22, 2022. The Group indirectly acquired 100% of its shares after acquiring 56% of Poindus Systems’ shares in March 2022. 〃 〃 The Group indirectly acquired 100% of its shares after acquiring 56% of Poindus Systems’ shares in March 2022. The Company had decided its dissolution and liquidation on December 22, 2022. CDH (HK) and Etrade 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”) Manufacturing and processing of mobile phones and tablet PCs 100% 100% 〃 〃 100% 100% 100% 100% R&D and manufacturing of electronic communication equipment 100% 100% 〃 Giant Rank Trading Ltd. Sales of mobile phones 100% 100% (“GIA”) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 17 Name of investor Forever Name of Subsidiary Compal Wise Electronic (Vietnam) Co., Ltd. (“CWV”) Arcadyan Arcadyan Technology N.A. Nature of Operation 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 Percentage of ownership December 31, 2022 December 31, 2021 100% 100% Description 100% 100% Corp. (“Arcadyan USA”) Arcadyan Germany Technology GmbH (“Arcadyan Germany”) Arcadyan Technology Corporation Korea (“Arcadyan Korea”) Arcadyan Holding (BVI) Corp. (“Arcadyan Holding”) Arcadyan Technology Limited (“Arcadyan UK”) Arcadyan Technology Australia Pty Ltd. (“Arcadyan AU”) Arcadyan Technology Corporation (Russia), LLC. (“Arcadyan RU”) Zhi-Bao Technology Inc. (“Zhi-Bao”) Tatung Technology Inc. (“TTI”) AcBel Telecom Inc. (“AcBel Telecom”) 〃 〃 〃 〃 〃 〃 〃 〃 〃 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 R&D and sales of household digital electronic products Investment 100% 100% 61% 61% - 51% The liquidation of the company had been completed on August 19, 2022. Arcadyan and Zhi-Bao 〃 Arcadyan do Brasil Ltda. (“Arcadyan Brasil”) Arcadyan India Private Limited (“Arcadyan India”) Sales of wireless network products 100% 100% Sales of wireless network products 100% 100% The subsidiary was incorporated on March 25, 2021. The Company, Arcadyan and its subsidiaries CBN Compal Broadband Network Inc. (“CBN”) Compal Broadband Networks Belgium BVBA (“CBNB”) 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 63% 62% 100% 100% 〃 Compal Broadband 〃 100% 100% Networks Netherlands B.V. (“CBNN”) The Company and CBN Starmems Semiconductor Corp. (“Starmems”) R&D of MEMS technology of manufacturing process of semiconductor and manufacturing of electronic components 45% 45% The subsidiary was incorporated in April, 2021 and the Group has substantial control over it. (Note 1) (Continued) 18 Description COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Name of Subsidiary Nature of Operation Name of investor 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 〃 Rayonnant Technology (HK) HengHao Exquisite Electronic Co., Ltd. (“Exquisite”) Tatung Home Appliances (Wujiang) Co., Ltd. (“THAC”) Intelligent Universal Enterprise Ltd. (“IUE”) Goal Reach Enterprises Ltd. (“Goal”) Compal (Vietnam) Co., Ltd. (“CVC”) Compal Development & Management (Vietnam) Co., Ltd. (“CDM”) Allied Power Holding Corp. (“APH”) Primetek Enterprises Limited (“PEL”) Rayonnant Technology (HK) Co., Ltd. (“Rayonnant Technology (HK)”) Rayonnant Technology (Taicang) Co., Ltd. (“Rayonnant Technology (Taicang)”) HengHao Holdings A Co., Ltd. (“HHA”) Percentage of ownership December 31, 2022 December 31, 2021 100% 100% 100% 100% 100% 100% 100% 100% Investment R&D and sales of wireless network products Investment Manufacturing of wireless network products Manufacturing of wireless network products 100% 100% Investment Sales of household digital electronic products Investment Manufacturing of household digital electronic products 100% 100% 100% 100% 100% 100% 100% 100% Investment 100% 100% 〃 100% 100% R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components Construction of and investment in infrastructure in Ba-Thien industrial district of Vietnam Investment 〃 〃 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Manufacturing and sales of aluminum alloy and magnesium alloy products 100% 100% Investment 100% 100% HHA HengHao Holdings B Co., 〃 100% 100% Ltd. (“HHB”) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 19 Name of investor HHB 〃 BCI 〃 CMI PRI CIS 〃 CORE BSH 〃 Nature of Operation Production of touch panels and related components Percentage of ownership December 31, 2022 December 31, 2021 100% 100% Description Manufacturing of touch panels and LCD TVs 100% 100% Investment 100% 100% 〃 100% 100% Outward investment and consulting services R&D, manufacturing and sales of notebook PCs, related components, related maintenance and warranty services 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 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 〃 99% 99% Name of Subsidiary 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”) Billion Sea Holdings Limited (“BSH”) Mithera Capital Io LP (“Mithera”) Compal USA (Indiana), Inc. (“CIN”) Foundry of automotive electronic products 100% 100% The Group acquired 100% of its shares in September 2021. Unicore Raycore Biotech Co., Ltd. Animal medication retail and wholesale - 100% Raycore was merged with (“Raycore”) 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 indications that there is an agreement among the other shareholders to make collective decisions, so the Group treats the company as a subsidiary. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 20 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. 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 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 21 (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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 22 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. 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 distribation. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 23 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. Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 24 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; •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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 25 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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 26 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. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 27 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 28 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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 29 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 (ie joint ventures) have rights to the net assets of the arrangement. A joint venture shall recognize its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with IAS 28 “Investments in Associates and Joint Ventures”, unless, the entity is exempted from applying the equity method as specified in that Standard. When assessing the classification of a joint arrangement, the Group shall consider the structure and legal form of the arrangement, the terms in the contractual arrangement and other facts and circumstances. The Group had previously reviewed the contractual structure of the joint arrangement, and has now decided to reclassify the investments in “Jointly Controlled Entities” to “Joint Ventures”. Although the investments have been reclassified, they are still recorded under the equity method. Thus, there is no effect in the recognized assets, liabilities and other comprehensive income. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 30 (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 31 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. (i) 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 32 － 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. (ii) 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 33 (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 34 (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 35 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 36 (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 37 (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 38 (s) Share-based payment The grant-date fair value of share-based payment awards granted to employee is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of award that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share- based payment is measured to reflect such conditions, and there is no true-up for differences between expected and actual outcomes. (t) Income taxes Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss. Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years. Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the following exceptions: (i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) during the transaction. (ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse. (iii) Initial recognition of goodwill. Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities may be offset against each other if the following criteria are met: (i) The entity has the legal right to settle tax assets and liabilities on a net basis; and (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 39 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 40 (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 and 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: In preparing these consolidated financial statements, management has made 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 41 (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)(g) 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 Cash equivalents December 31, 2022 December 31, 2021 $ 17,835 18,472 39,976,385 17,073,664 35,233,038 58,069,967 4,438,044 - $ 79,665,302 75,162,103 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 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, 2022 December 31, 2021 $ $ $ $ 117,150 441,759 187 - 559,096 187 558,909 559,096 137,540 399,550 120,897 2,545 660,532 400,754 259,778 660,532 December 31, 2022 December 31, 2021 Financial liabilities held-for-trading: Derivative instruments not used for hedging Foreign exchange contracts $ 62,527 1,589 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 42 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, 2022 Contract amount (in thousands) Currency Maturity date Derivative financial assets: Foreign exchange contracts: Forward exchange sold Forward exchange purchased Derivative financial liabilities: Foreign exchange contracts: EUR USD 8,000 512 EUR to USD May 12~ June 14, 2023 USD to INR January 31, 2023 Forward exchange sold EUR 25,000 EUR to USD January 31~ April 20, 2023 Forward exchange sold EUR 2,000 EUR to TWD January 31, 2023 Forward exchange purchased USD 172,800 USD to BRL January 4~June 15, 2023 December 31, 2021 Contract amount (in thousands) Currency Maturity date Derivative financial assets: Foreign exchange contracts: Forward exchange sold Forward exchange sold Forward exchange purchased EUR 33,000 EUR 1,500 USD181,700 EUR to USD January 10~May 09, 2022 EUR to TWD January 05, 2022 USD to BRL January 05~June 20, 2022 Swap contracts: Currency swap Derivative financial liabilities: Foreign exchange contracts: USD 21,000 USD to TWD February 14~March 14, 2022 Forward exchange purchased Forward exchange sold USD 5,000 EUR 7,000 USD to CNY January 26, 2022 EUR to USD February 18~March 04, 2022 The market risk related to the financial instruments please refer to note (6)(aa). As of December 31, 2022 and 2021, the Group did not provide any aforementioned financial assets as collaterals for its loans. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 43 (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, 2022 December 31, 2021 $ $ 2,797,667 579,341 1,822,164 226,736 5,425,908 3,350,210 695,728 1,879,166 309,959 6,235,063 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 the 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. The proceed from the liquidation was $1,172, resulting in a cumulative valuation loss of $157,150, which was reclassified from other comprehensive income to retained earnings. During 2022, the Group has sold all of its shareholdings, measured at fair value through other comprehensive income, in GENKI SANGA HOLDINGS CO., LTD. The fair value of the shares upon disposal amounted to $10,028, resulting in a cumulative gain of $2,838, 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, 2022 and 2021, will be $271,295 and $311,753, 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, 2022 and 2021, 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 44 (d) Financial instruments used for hedging (i) Financial instruments used for hedging were as follows: Cash flow hedge: Financial liabilities used for hedging: Forward exchange contracts (ii) Cash flow hedge December 31, 2022 December 31, 2021 $ 47,809 - 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, 2022, the details related to the items designated as hedge instruments were as follows: December 31, 2022 Contract amount (in thousands) Currency Maturity period Average strike price Derivative financial liabilities used for hedging Foreign exchange contracts: Forward exchange sold EUR 65,000 EUR to USD January 30~December 28, 2023 1.0472 (iii) For the year ended December 31, 2022 and 2021, the ineffective portion of cash flow hedge recognized in profits (losses) amounted of $44,071 and $0, respectively, recorded as “ other gains and losses, net”. (iv) For the year ended December 31, 2022 and 2021, the profits (losses) of changes in fair value of derivative financial instruments used for hedging reclassified from other equity to profit or loss are 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 45 (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, 2022 $ 10,645 179,043,536 December 31, 2021 81,244 261,179,612 16,091,084 195,145,265 (3,924,544) $ 191,220,721 $ 186,804,648 4,416,073 $ 32,796,946 294,057,802 (3,891,948) 290,165,854 288,436,522 1,729,332 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, 2022 Carrying amount of notes and accounts receivable $ $ 168,144,302 12,364,116 3,795,534 184,303,952 Weighted- average ECL rate 0% 0.68% 100% 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% Credit rating Level A Level B Level C Credit rating Level A Level B Level C Lifetime ECLs - 84,412 3,795,534 3,879,946 Lifetime ECLs - 68,262 3,795,534 3,863,796 Credit- impaired No No Yes Credit- impaired No No Yes (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 46 (ii) The loss allowance provision of strategically integrated product segment of the Group was determined as follows: December 31, 2022 Carrying amount of notes and accounts receivable $ $ 2,524,744 6,876,702 1,419,845 - 20,022 10,841,313 Weighted- average ECL rate 0% 0.10% 1.00% 100% 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% 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 - - 6,923 17,653 20,022 44,598 Lifetime ECLs - 4,913 5,192 - 18,047 28,152 Credit- impaired No No No - Yes Credit- impaired No No No - Yes The aging analysis of notes and accounts receivable’s overdue was determined as follows: Overdue 1 to 180 days Overdue 181 to 365 days Overdue 365 days December 31, 2022 December 31, 2021 $ 3,119,372 1,338,940 - 7,679 8,552 - $ 3,127,924 1,346,619 The movement in the allowance for notes and accounts receivable was as follows: Balance at January 1 Acquisition through business combination Impairment losses recognized (reversed) Effect of changes in exchange rates 2022 3,891,948 $ 2021 3,910,928 59 30,394 2,143 - (18,227) (753) Balance at December 31 $ 3,924,544 3,891,948 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 47 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, 2022 and 2021, 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 1,000 thousand, USD 1,600,000 thousand and EUR 15,000 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, 2022 and 2021, the factored accounts receivable with no advance amounting to $447 and $958, respectively, were 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 Group to repurchase the accounts receivable. Thus, this is a non-recourse accounts receivable transfer. As of December 31, 2022 and 2021, accounts receivable factored were recovered and derecognized since the conditions of derecognition were met. As of December 31, 2022 and 2021, the details of the factored accounts receivable but unsettled were as follows: Accounts receivable factored (gross) Purchaser Financial Institution $ 30,114,458 Accounts receivable factored (gross) Purchaser Financial Institution $ 33,594,209 December 31, 2022 Amount advanced Paid Unpaid Amount recognized in other receivable Amount Collateral derecognized Interest rate - 30,114,011 447 - 30,114,458 2.75%~5.61% 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% As of December 31, 2022 and 2021, the Group did not provide any aforementioned notes and accounts receivable as collaterals. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 48 (f) Inventories Finished goods Work in progress Raw materials Raw materials in transit December 31, 2022 42,519,903 $ December 31, 2021 22,625,832 11,680,487 9,683,904 56,764,510 82,224,084 629,084 478,545 $ 111,593,984 115,012,365 (i) For the years ended December 31, 2022 and 2021, inventory cost recognized as cost of sales amounted to $1,032,881,736 and $1,194,190,441, respectively. (ii) The loss due to the write-down of inventories to net realizable value amounted to $1,992,685 and $1,938,800 for the years ended December 31, 2022 and 2021, respectively. (iii) As of December 31, 2022, the Group provided part of its inventories as collaterals for its short- term borrowings. Please refer to note (8). As of December 31, 2021, 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, 2022 December 31, 2021 $ 8,142,707 8,453,133 (18,066) (17,587) 8,124,641 8,435,546 43,757 43,020 (120,829) (109,254) $ 8,047,569 8,369,312 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, 2022 December 31, 2021 $ $ 1,741,281 1,214,819 2,956,100 2,847,809 849,180 3,696,989 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 49 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 2022 (270,373) $ 2021 448,467 3) The Group’s financial information for investments accounted for using the equity method that are individually immaterial was as follows: December 31, 2022 December 31, 2021 Carrying amount of individually immaterial associates $ 8,142,707 8,453,133 The Group’s share of the net income (loss) of associates: Profit (loss) from continuing operations Other comprehensive income Total comprehensive income 2022 2021 (270,373) 60,255 $ (210,118) 448,467 110,379 558,846 (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, 2022 December 31, 2021 The carrying amount of the Group’s interests in all individually insignificant joint ventures $ (18,066) (17,587) The Group’s share of the net income (loss) of joint ventures: Net income (losses) from continuing operations (also the total comprehensive income (losses)) 2022 2021 (2,451) 95 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 50 (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, 2022 and 2021, the Group did not provide any investments accounted for using equity method as collaterals for its loans. (h) Acquisition of the subsidiary (i) Poindus Systems In order to accelerate the deployment in the industrial PCs market, the Group made a tender offer for 56% ownership of Poindus Systems Corp, Ltd. (“Poindus Systems”) at a total price of $353,046. The aforementioned price was paid, and the settlement had been completed. Since the acquisition of 56% ownership in Poindus Systems on March 7, 2022, the revenue and net profit contributed by Poindus Systems were $618,366 and loss $2,134, respectively. If the transaction took place on January 1, 2022, the management estimates that the Group’s revenue in 2022 would increase by $147,469, while net profit will increase by $6,550. In determining these amounts, management has assumed that the transaction occurred on January 1, 2022, and that the provisional fair value adjustments resulting from the acquisition date are the same. The main categories of consideration transfer, assets acquired and liabilities assumed on the acquisition date and the amount of goodwill recognized are as follows: 1) Consideration transferred Cash $ 353,046 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 51 2) The identifiable assets acquired and the liabilities assumed The fair value 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 Right-of-use assets Intangible assets Deferred tax assets Other non-current assets Short-term borrowings Notes and accounts payable Other payables Current tax liabilities Provisions Other current liabilities Current and non-current lease liabilities Deferred tax liabilities Net defined benefit liabilities 3) Goodwill arising from the acquisition of 56% ownership is as follows: Consideration transferred Non-controlling interests Less: fair value of identifiable net assets $ $ $ $ 217,075 114,308 4,874 342,673 35,077 21,591 37,258 19,160 18,495 2,099 (268) (141,704) (31,099) (10,642) (2,786) (5,162) (37,542) (1,658) (17,881) 563,868 353,046 247,882 (563,868) 37,060 Goodwill is mainly derived from the business value of Poindus Systems in the industrial PCs market. It is expected that the business of Poindus System and the Group business will be integrated to generate synergy. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 52 (ii) CIN 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: 1) Consideration transferred cash $ 226,421 2) 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 $ $ 29,419 130,003 29,994 211,240 3,798 93,373 (158,743) (124,352) (27,525) 187,207 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 53 3) Goodwill arising from the acquisition of 100% equity is as follows: Consideration transferred Less: fair value of identifiable net assets $ $ 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 new shares because of its employees' exercised stock options in 2021, which resulted in the reduce of the Group’ s ownership of CBN by 0.02%, 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%. 4) Cancellation of subsidiaries’ restricted shares and conversion of convertible bonds Arcadyan canceled 30 thousand and 53 thousand restricted shares in the years ended December 31, 2022 and 2021. Whereas, Arcadyan issued 3,892 thousand and 8,136 thousand new shares due to the conversion of convertible bonds during 2022 and 2021. These two events, respectively, resulted in a decrease of 0.59% and 1.30% the ownership of the Company and its subsidiaries in Arcadyan in the years ended December 31, 2022 and 2021. CBN canceled 469 thousand restricted shares in the years ended December 31, 2022, resulted in a increase of 0.43% the ownership of the Group in CBN in the years ended December 31, 2022. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 54 5) Acquire additional equity in a subsidiary In June 2022, the Group acquired 0.12% of equity interest in GLB from minority shareholders with $700 in cash, increasing of the equity from 50.00% to 50.12%. In August 2021, the Group acquired 49% of equity interest in Raycore Biotech from minority shareholders with $15,129 in cash, increasing of the 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 2022 2021 $ $ 33,397 (2,260) 31,137 61,825 (11,237) 50,588 (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, 2021 31, 2022 %67 %66 The following information of the aforementioned subsidiaries have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Included in these information are the fair value adjustment made during the acquisition and relevant difference in accounting principles between the Group as at the acquisition date. Intra-group transactions were not eliminated in this information. Arcadyan’s collective financial information Current assets Non-current assets Current liabilities Non-current liabilities Net assets Non-controlling interests December 31, 2022 33,543,752 $ December 31, 2021 28,532,932 6,476,775 5,368,181 (25,841,325) (20,476,963) (239,941) (501,037) $ $ 13,939,261 12,923,113 9,503,906 8,796,235 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 55 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 $ $ $ $ $ $ 2022 2021 47,167,749 38,240,058 1,915,053 1,701,800 283,981 (77,222) 2,199,034 1,624,578 1,248,748 1,083,011 1,435,919 1,032,457 2,529,050 (1,524,264) (1,415,888) (1,789,637) (1,577,423) 2,240,204 Effect of exchange rate changes on cash and cash equivalents 73,033 (35,292) Net increase (decrease) in cash and cash equivalents $ (391,228) (1,108,989) (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, 2022 and 2021, 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, 2022 $ 2,476,919 17,383,799 32,006,068 11,743,420 4,593,482 68,203,688 Acquisition through business combination Additions Disposals and derecognitions Reclassifications - - - - 356 94,356 274 94,986 340 49,023 1,940,684 2,047,295 2,057,259 6,094,601 (89,464) (386,369) (1,186,876) - (1,662,709) Effect of movements in exchange rates 8,459 1,289,824 1,181,719 3,025,276 1,491,632 152,137 554,985 (4,669,045) - 313,732 3,348,719 Balance on December 31, 2022 Balance on January 1, 2021 $ $ Acquisition through business combination Additions 2,485,718 21,658,458 36,234,090 13,405,317 2,295,702 76,079,285 1,944,094 18,519,873 28,498,191 11,885,697 1,220,785 62,068,640 10,892 479,377 87,477 162,654 4,376 - 265,399 693,335 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) 56 Total 41,213,324 73,395 6,130,845 (1,483,981) 1,337,491 47,271,074 39,983,300 172,026 5,437,426 404,513 (2,444,697) (2,339,244) 41,213,324 COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Buildings and building improvement Machinery Other equipment Land Under construction and prepayment for purchase of equipment - - - - - - - - - - - - - 10,989,522 21,254,150 8,969,652 - 356 73,039 942,521 3,411,902 1,776,422 (89,237) (269,897) (1,124,847) 713,151 150,183 474,157 12,555,957 24,546,694 10,168,423 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 - - - - - - - - - - - - - Depreciation and impairments loss: Balance on January 1, 2022 Acquisition through business combination Depreciation for the period Disposals and derecognitions Effect of movements in exchange rates Balance on December 31, 2022 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 Carrying amounts: Balance on December 31, 2022 Balance on January 1, 2021 Balance on December 31, 2021 $ $ $ $ $ $ $ 2,485,718 9,102,501 11,687,396 3,236,894 2,295,702 28,808,211 1,944,094 7,664,764 7,926,546 3,329,151 1,220,785 22,085,340 2,476,919 6,394,277 10,751,918 2,773,768 4,593,482 26,990,364 As of December 31, 2022 and 2021, 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 subsidiary of the Group, CDE, and a non-related party, Kunshan Xincheng Construction Development Co., Ltd., entered into a real estate purchase and sales agreement at the total price of $4,147,946 (CNY 956,012 thousand), which include the land use rights and the existing land building, based on a resolution approved during the board meeting held on May 7, 2021. Upon completion of 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 September 2021, the Group carried out the impairment test toward the partial production lines in Henghao Technology 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 57 (l) Right-of-use assets The Group leases many assets including land and buildings, machinery and vehicles. Information about leases for which the Group as a lessee is presented as below: Land Buildings Machinery Vehicles and other Total Cost: Balance on January 1, 2022 Acquisition through business combination Additions Deductions Effect of movements in exchange rates Balance on December 31, 2022 Balance on January 1, 2021 Additions Deductions Effect of movements in exchange rates Balance on December 31, 2021 Depreciation: Balance on January 1, 2022 Acquisition through business combination Depreciation for the period Deductions Effect of movements in exchange rates Balance on December 31, 2022 Balance on January 1, 2021 Depreciation for the period Deductions Effect of movements in exchange rates Balance on December 31, 2021 Carrying amount: Balance on December 31, 2022 Balance on January 1, 2021 Balance on December 31, 2021 $ 859,993 3,664,030 - 11,216,024 - 104,834 $ 12,180,851 1,268,129 $ - (362,689) (45,447) 859,993 39,959 299,827 (630,668) (52,921) 3,320,227 3,378,467 996,820 (679,921) (31,336) 3,664,030 69,655 1,458,825 - 151,927 - 19,481 241,063 54,756 52,675 (37,698) (78) 69,655 3,823 799,367 (523,734) (125,053) 1,613,228 1,175,689 805,895 (512,348) (10,411) 1,458,825 $ $ $ $ $ $ 11,939,788 1,213,373 $ 790,338 $ 1,706,999 2,202,778 2,205,205 76,602 - 33,423 (57,348) (1,573) 51,104 76,930 - - (328) 76,602 36,900 - 10,019 (27,382) (1,444) 18,093 24,749 12,326 - (175) 36,900 33,011 52,181 39,702 68,622 4,669,247 1,332 14,525 (9,818) (2,108) 72,553 74,969 22,824 (28,923) (248) 68,622 41,291 11,563,799 (697,834) 48,232 15,624,735 4,798,495 1,019,644 (1,071,533) (77,359) 4,669,247 37,649 1,603,029 210 21,042 (9,635) (2,231) 47,035 46,349 20,421 (28,923) (198) 37,649 4,033 982,355 (560,751) (109,247) 1,919,419 1,301,543 891,317 (578,969) (10,862) 1,603,029 25,518 28,620 30,973 13,705,316 3,496,952 3,066,218 In January 2022, the Group signed a contract with the Taipei City Government to obtain the superficies of No.91, Ruan Qiao Section, Beitou District, Taipei City, which has a term of 50 years and may be extended for additional 20 years. The registration procedures had been completed in May 2022, and the right-of-use assets and lease liabilities were recognized on the commencement date of the lease. The related depreciation expenses of right-of-use assets and interest expenses of lease liabilities had met the conditions for capitalization and were included as the cost of assets. The above-mentioned depreciation expenses and interest expenses amounted to $130,854 and $26,049, respectively, and were capitalized under property, plant and equipment for the year ended December 31, 2022, with a capitalization rate of 1.5%. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 58 (m) Short-term borrowings The details of short-term borrowings were as follows: Unsecured bank loans Secured bank loans Unused credit line for short-term borrowings Range of interest rates December 31, 2022 74,823,426 December 31, 2021 118,422,407 9,000 - 74,832,426 118,422,407 $ $ $ 212,701,000 113,777,000 0.05%~8.37% 0.05%~2.95% For information on the Group’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(aa). For the collaterals for part of the Group’s borrowings, please refer to note (8). (n) Long-term borrowings The details of long-term borrowings were as follows: Unsecured bank loans Currency TWD Annual range of interest rate 1.48%~2.06% Secured bank loans TWD 1.25%~2.00% Maturity year 2023~2026 2025~2026 December 31, 2022 Less: current portion Total Unused credit lines for long-term borrowings 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 Amount 30,525,000 612,122 (19,462,800) 11,674,322 13,018,000 Amount 24,300,000 660,513 (15,741,481) 9,219,032 12,345,000 $ $ $ $ $ $ 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 59 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 Repayments of bonds payable Balance of corporate bonds payable as of the reporting date Conversion options included in equity components (classified as capital surplus and non-controlling interests) Interest expenses December 31, 2022 December 31, 2021 $ 1,000,000 1,000,000 - - (1,433) (496) (992,600) (671,500) (7,400) - - - 326,571 15,987 2022 763 2021 11,968 $ $ $ 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; (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 60 - 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 above-mentioned convertible corporate bonds were due on June 6, 2022, and the remaining unconverted corporate bonds were fully repaid by the Group in cash at the par value of $7,400 on maturity in accordance with the conversion terms. (iv) As of June 6, 2022 and December 31, 2021, the convertible corporate bonds were converted into ordinary shares of Arcadyan for $321,100 and $671,500 with a par value of $38,920 and $81,363, respectively, and the capital surplus were recognized for $296,640 and $616,933 (including the stock option conversion premium of $15,626 and $32,680 and the unamortized discounts on corporate bonds payable of $1,166 and $5,884, respectively). (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, 2022 $ $ 1,813,555 9,533,209 December 31, 2021 625,292 1,679,504 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 2022 2021 44,563 63,701 2,528 32,350 186,825 303,454 $ $ $ (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 61 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 2022 2,656,206 $ 2021 1,234,542 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. The Group obtained the superficies of Beitou District, Taipei City in May 2022, please refer to note (6)(l). (ii) Other leases The Group leases vehicles and equipment with lease terms of 1~5 years. The Group also leases some office space, 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. (q) Provisions Balance on January 1, 2022 Business combination Provisions made during the period Provisions used during the period Provisions reversed during the period Effect of movements in exchange rates Balance on December 31, 2022 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 Warranties 1,204,115 $ 2,786 365,410 (349,378) (488,899) 27 734,061 870,050 476,940 (136,853) (6,022) $ $ $ 1,204,115 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 62 (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, 2022 (1,433,878) December 31, 2021 (1,554,902) 773,859 732,869 (660,019) (822,033) $ $ 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. 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 $757,556 (excluding the ending balance of interest rectivable) as of December 31, 2022. 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 $ (1,554,902) 2022 Benefit paid by the plan Current service costs and interest Remeasurements of net benefit liabilities Amount increased through business combination Effect of movements in exchange rates 64,567 (16,068) 106,275 (32,306) (1,444) 2021 (1,516,219) 38,959 (12,850) (64,792) - - Defined benefit obligations on December 31 $ (1,433,878) (1,554,902) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 63 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: 2022 2021 Fair value of plan assets on January 1 $ 732,869 Expected return on plan assets Remeasurements of net benefit plan assets Contributions paid by the employer Benefits paid by the plan Amount increased through business combination Effect of movements in exchange rates Fair value of plan assets on December 31 $ 4) Expenses recognized in profit or loss The expenses recognized in profit or loss were as follows: 5,073 56,929 28,460 (64,567) 14,425 670 773,859 730,046 3,675 9,626 28,481 (38,959) - - 732,869 2022 2021 Current service cost Net interest on the net defined benefit liability (asset) Cost of sales Selling expenses Administrative expenses Research and development expenses $ $ $ $ 4,720 6,275 10,995 516 627 2,714 7,138 10,995 5,198 3,977 9,175 547 576 2,137 5,915 9,175 5) Actuarial assumptions The following were the Group’s principal actuarial assumptions at the reporting date: Discount rate December 31, 2022 1.70%~1.75% December 31, 2021 0.63%~0.8% Future salary increasing rate 3.00% 3.00% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 64 The expected allocation payment made by the Group to the defined benefit plans for the one year period after the reporting date is $28,407. The weighted-average lifetime of the defined benefit plan is 8.1~12.98 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, 2022 Discount rate Future salary increasing rate December 31, 2021 Discount rate Future salary increasing rate Effects to the defined benefit obligation Increased 0.25% Decreased 0.25% (27,794) 28,198 (34,611) 34,882 28,712 (27,427) 35,847 (33,869) 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 $486,231 and $446,148 for the years ended December 31, 2022 and 2021, 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 $1,321,190 and $1,193,098 for the years ended December 31, 2022 and 2021, respectively. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 65 (s) Income taxes (i) Income tax expenses 1) The amount of income tax for the years ended December 31, 2022 and 2021, was as follows: 2022 2021 Current tax expense Recognized during the period $ 3,388,485 5% surtax on unappropriated earnings Tax credit of investment Deferred tax expense Recognition and reversal of temporary differences Income tax expense 171,404 (728,549) 2,831,340 4,240,078 14,627 (596,726) 3,657,979 (648,737) $ 2,182,603 69,368 3,727,347 2) The amount of income tax recognized in other comprehensive income for the years ended December 31, 2022 and 2021, was as follows: 2022 2021 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 Gains (losses) on hedging instrument $ $ $ $ 32,313 (11,211) (81,430) (49,117) 61,401 50,190 (2,464) (9,562) (12,026) (17,539) - (17,539) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 66 3) The income tax expense that was reconciled between the actual income tax expense and profit before tax for the years ended December 31, 2022 and 2021, 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 2022 10,724,130 3,142,341 $ $ 2021 17,467,835 4,734,068 (442,560) (98,000) (728,549) 503,909 (365,942) 171,404 (171,208) (65,440) (596,726) (704,260) 516,286 14,627 $ 2,182,603 3,727,347 (ii) Deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2022 and 2021 were as follows: Refund liabilities Unrealized exchange losses, net Loss on inventory valuation Others Total Deferred tax assets: Balance on January 1, 2022 $ 195,296 Recognized in profit or loss 91,252 477,006 522,279 202,499 220,089 771,723 1,646,524 (84,574) 749,046 Recognized in other comprehensive income Acquisition of subsidiaries - - Balance on December 31, 2022 $ 286,548 Balance on January 1, 2021 Recognized in profit or loss Recognized in other 134,880 60,416 - - 999,285 655,455 (178,449) - - 422,588 123,270 79,229 (20,287) 18,495 685,357 600,603 142,450 (20,287) 18,495 2,393,778 1,514,208 103,646 comprehensive income - - - 28,670 28,670 Balance on December 31, 2021 $ 195,296 477,006 202,499 771,723 1,646,524 Deferred tax liabilities: Balance on January 1, 2022 Recognized in profit or loss Recognized in other comprehensive income Acquisition of subsidiaries Balance on December 31, 2022 Unrealized exchange gains, net Others Total $ (504,663) (250,368) (722,142) (1,226,805) 150,059 (100,309) - - 81,430 (1,658) 81,430 (1,658) $ (755,031) (492,311) (1,247,342) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 67 Unrealized exchange gains, net Others Total Balance on January 1, 2021 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021 $ $ (424,990) (79,673) - (567,480) (93,341) (61,321) (992,470) (173,014) (61,321) (504,663) (722,142) (1,226,805) (iii) Unrecognized deferred tax assets 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, 2022 1,674,595 $ $ 996,446 December 31, 2021 1,502,666 978,257 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 authoritie 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. As of December 31, 2022, the tax effects on loss carryforward that have not been recognized as deferred tax assets were as follows: Year of loss 2013 (Assessed) 2014 (Assessed) 2015 (Assessed) 2016 (Assessed) 2017 (Assessed) 2018 (Assessed) 2019 (Assessed) 2020 (Assessed/Filed) 2020 (Filed) 2021 (Filed) 2021 (Filed) 2022 (Estimated) 2022 (Filed) Expiry year 2023 2024 2025 2026 2027 2028 2029 2030 2025 2031 2026 2032 2027 Deductible amount 211,104 $ 41,534 569,361 1,422,761 918,086 554,750 349,024 130,501 20,484 48,639 126,335 206,435 277,800 4,876,814 $ (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 68 (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, 2022 and 2021, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $2,618,241 and $2,335,023, respectively. As of December 31, 2022 and 2021, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $68,023,499 and $58,082,760, respectively. (v) Examination and approval The Company’s tax returns for the year through 2020 were assessed by the tax authorities. The income tax returns through 2021 and the liquidation period of Acbel Telecom have been examined by the tax authorities. The ROC tax authorities have assessed the income tax returns of Hong Jin and Shennona through 2021, of Hippo Screen, Zhi-Bao, UCGI, Palcom, Panpal, Gempal, Hong Ji, Unicore, Raycore, Ripal, CBN, Mactech, GLB, Arcadyan, TTI, Poindus Systems, Poindus Investment and Aco Healthcare through 2020, of Rayonnant Technology and HengHao through 2019. (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, 2022 December 31, 2021 $ 1,898,477 3,660,119 2,721,968 2,621,933 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 36,766 156,072 36,766 122,675 for using equity method 265,297 283,363 $ 5,078,580 6,724,856 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 69 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 held on March 15, 2022 and March 26, 2021, approved to distribute the cash dividend of $1,762,859 and $1,762,859 (representing 0.4 and 0.4 New Taiwan Dollars per share), by using the additional paid-in capital. The Company’ s Board of Directors meeting held on March 15, 2023, approved to distribute the cash dividend of $881,429 (representing 0.2 New Taiwan Dollars per share), by using the additional paid-in capital. The related information can be accessed through the Market Observation Post System website. (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 70 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. 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 2021 and 2020 was approved in the meeting of the Board of Directors held on March 15, 2022 and March 26, 2021, respectively. The relevant information was as follows: 2021 2020 Amount per share Total amount Amount per share Total amount Cash dividends distributed to common shareholders $ 1.6 7,051,435 1.2 5,288,576 Earnings distribution for 2022 was approved by the Board of Directors held on March 15, 2023. The relevant information was as follows: Cash dividends distributed to common shareholders from the unappropriated earnings $ 1.0 4,407,147 2022 Amount per share Total amount (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 71 (iv) Treasury stock The subsidiaries of the Company did not sell the ordinary shares of the Company in the years ended December 31, 2022 and 2021. As of December 31, 2022, 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 23.05 and 24.20 New Taiwan dollars per share as of December 31, 2022 and 2021, 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. (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 $ $ $ $ (8,744,705) 7,183,714 9,700 81,580 (1,469,711) (6,888,977) (1,791,462) (38,894) (25,372) (8,744,705) 537,830 (590,539) (420,019) 11,625 (461,103) (376,952) 567,871 160,972 185,939 537,830 Others Total - - - - 125 (12,415) (8,206,750) 6,593,175 (422,734) 93,205 (12,290) (1,943,104) (779) 904 125 (7,266,708) (1,223,591) 122,982 160,567 (8,206,750) Balance on January 1, 2022 The Group Subsidiaries Associates Balance on December 31, 2022 Balance on January 1, 2021 The Group Subsidiaries Associates Balance on December 31, 2021 (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 thousand 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 72 3,500,000 shares of the aforementioned restricted shares are issued without consideration. 30%, 30% and 40% of the 3,500 thousand 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 thousand 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. 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: Unit: in thousands of shares Outstanding shares on January 1 Canceled during the period The number vested in this period 2022 2021 1,283 (30) (1,253) Outstanding shares on December 31 - 2,306 (53) (970) 1,283 As of December 31, 2022 and 2021, the unearned employee benefit was $0 and $13,030. The compensation cost related to the restricted shares amounted to $2,396 and $32,576 for the year ended December 31, 2022 and 2021. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 73 (ii) 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: 2022 2021 Outstanding shares on January 1 Expired during the period Exercised during the period Outstanding shares on December 31 Exercisable shares on December 31 Shares - - - - - Weighted- average exercise price (NT dollars) - $ Weighted- average exercise price (NT dollars) 10 Shares 3,000 $ - - - - - (3,000) - - 10 - - - The options under the aforesaid employee stock option plan have been executed in 2021. The issuance terms of the share options are as follows. 1) 2) 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 ％ a) b) 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 year ended December 31, 2021 was $0. (iii) CBN- Issuance of restricted shares On June 24, 2020, CBN issued 1,500 thousand 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 74 In addition, the base date for capital increase has been decided by the chairman of the board of directors to be December 20, 2021, and the change registration will be 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 granted in this period Share vested in this period Shares canceled in this period Outstanding shares on December 31 Unit: in thousands of shares 2022 2021 1,500 - (365) (469) 666 - - - 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, that Capital-restricted shares $31,050. Until December 31, 2021, the balance of unearned remuneration for employees was $11,213. The compensation cost related to the restricted shares amounted to $19,629 and $831 for the year ended December 31, 2022 and 2021, respectively. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 75 (v) Earnings per share The Group’s basic and diluted earnings per share are calculated as follows: 2022 2021 Basic earnings per share: Profit attributable to ordinary shareholders of the Company $ 7,288,292 12,632,667 Weighted-average number of outstanding ordinary shares (in thousands) Diluted earnings per share: 4,357,130 4,357,130 Profit attributable to ordinary shareholders of the Company (after adjustment of potential diluted ordinary shares) 7,288,292 12,632,667 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 43,369 65,517 Weighted-average number of ordinary shares (after adjustment of potential diluted ordinary shares) (in thousands) 4,400,499 4,422,647 (w) Revenue from contracts with customers (i) Disaggregation of revenue 2022 Strategically Integrated Product Segment IT Product Segment Total $ 427,079,787 17,611,390 444,691,177 133,117,810 67,705,775 334,869 133,452,679 1,003,330 68,709,105 398,174,794 28,218,160 426,392,954 $ 1,026,078,166 47,167,749 1,073,245,915 Primary geographical markets: United States China Netherlands Others Major products: 5C related electronics products $ 1,021,266,892 45,809,328 1,067,076,220 Others 4,811,274 1,358,421 6,169,695 $ 1,026,078,166 47,167,749 1,073,245,915 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 76 2021 Strategically Integrated Product Segment IT Product Segment Total $ 477,875,378 8,487,079 486,362,457 158,629,441 86,727,156 431,844 159,061,285 1,435,217 88,162,373 474,209,982 27,885,918 502,095,900 $ 1,197,441,957 38,240,058 1,235,682,015 Primary geographical markets: United States China Netherlands Others Major products: 5C related electronics products $ 1,195,237,339 37,264,055 1,232,501,394 Others (ii) Contract balances 2,204,618 976,003 3,180,621 $ 1,197,441,957 38,240,058 1,235,682,015 Notes and accounts receivable (including related parties) December 31, 2022 $ 195,145,265 December 31, 2021 294,057,802 January 1, 2021 236,120,826 Less: allowance for impairment (3,924,544) (3,891,948) (3,910,928) Total Contract liabilities $ 191,220,721 290,165,854 232,209,898 $ 784,238 1,065,954 820,016 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, 2022 and 2021 that were included in the balance of contract liability at the beginning of the period was $1,065,954 and $820,016, respectively. The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 77 (x) Employees’ and directors’ compensations Based on the Company’ s articles of incorporation, if there is any profit in a fiscal year, the Company’s pre-tax profits in such fiscal year, prior to deduction of compensations to employees and directors, shall be distributed to employees as compensations in an amount of not less than two percent (2%) thereof and to directors as compensations in an amount of not more than two percent (2%) of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset accumulated losses. The compensations to employees as mentioned above may be distributed in the form of stock or cash. Employees entitled to receive the said stock or cash may include the employees of the Company’s subordinate companies pursuant to the Company Act. The Company accrued and recognized its employee compensation of $750,945 and $1,350,062, and directors’ compensation of $39,790 and $71,390 for the years ended December 31, 2022 and 2021, 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 2022 and 2021. There is no differences between the amount estimated and recognized in the financial statements in 2021. 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 2022 3,077,815 12,111 2021 2,015,709 1,605 3,089,926 2,017,314 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 78 (ii) Other income The other incomes for the years ended December 31, 2022 and 2021, were as follows: Dividend revenue Other revenue (iii) Other gains and losses 2022 2021 $ $ 128,597 523,829 652,426 143,686 504,420 648,106 The other gains and losses for the years ended December 31, 2022 and 2021, were as follows: Gains (losses) on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange gains (losses), net Gains (losses) on disposal of property, plant, and equipment Gains on disposal of investments, net Others 2022 2021 $ (765,115) 2,121,647 7,086 2,568 (2,345) 418,827 123,742 1,969,560 - (706) $ 1,363,841 2,511,423 (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, 2022 and 2021, 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 82,853 130,662 (47,809) 43,006 40,814 2,192 2022 2021 (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 79 2) Receivables and debt securities 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, 2022.) 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, 2022 and 2021 were as follows: Balance on January 1, 2022 Impairment losses recognized (reversed) Balance on December 31, 2022 Balance on January 1, 2021 Impairment losses recognized (reversed) Balance on December 31, 2021 (ii) Liquidity risk Other receivables $ $ $ $ 2,973 (217) 2,756 2,392 581 2,973 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, 2022 Non-derivative financial liabilities Secured borrowings Unsecured borrowings Lease liabilities－current and non-current Notes and accounts payable Other payables Derivative financial liabilities $ 621,122 105,348,426 (621,122) (105,348,426) (171,800) (94,123,426) (207,617) (5,400,000) (241,705) (5,825,000) 11,346,764 161,838,098 29,622,760 (12,637,278) (161,838,098) (29,622,760) (1,888,347) (161,838,098) (29,622,760) (6,783,542) (3,965,389) - - - - - - - - Forward exchange contracts: 62,527 Outflow Inflow Forward exchange contracts used (6,386,190) 6,176,658 (6,386,190) 6,176,658 for hedging: Outflow Inflow 47,809 (2,126,800) 2,090,285 (310,313,731) (2,126,800) 2,090,285 (287,890,478) - - (12,391,159) - - (10,032,094) $ 308,887,506 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 80 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 Currency swap contracts: Outflow Inflow Carrying Amount Contractual cash flows Within 1 year 1 ~ 2 years Over 2 years $ 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) 1,589 (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) 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, 2022 Exchange rate TWD Foreign currency December 31, 2021 Exchange rate TWD Financial assets Monetary items USD to TWD USD to CNY EUR to TWD CNY to USD Non-monetary items THB to TWD Financial liabilities Monetary items USD to TWD USD to CNY USD to BRL EUR to TWD CNY to USD $ 11,446,943 12,508 65,974 3,598,880 652,264 10,358,052 1,087 194,543 21,492 3,522,857 30.71 6.9571 32.72 0.1437 0.8882 30.71 6.9571 5.2177 32.72 0.1437 351,535,620 18,449,976 384,121 2,158,669 15,881,955 26,386 83,417 3,451,738 27.68 6.378 31.32 0.1568 510,695,336 730,364 2,612,620 14,981,316 579,341 842,184 0.8261 695,728 318,095,777 17,976,968 33,382 5,974,416 703,218 1,170 197,060 27,835 15,546,463 3,269,701 27.68 6.378 5.5805 31.32 0.1568 497,602,474 32,386 5,454,621 871,792 14,191,235 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 81 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, 2022 and 2021, 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, 2022 December 31, 2021 $ 1,671,992 (1,671,992) 17,537 (17,537) (298,721) 298,721 72,773 (72,773) 16,775 (16,775) 654,643 (654,643) 34,899 (34,899) (272,731) 272,731 87,041 (87,041) 39,504 (39,504) 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, 2022 and 2021, the foreign exchange gains (losses), including both realized and unrealized, amounted to $2,121,647 and $123,742, respectively. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 82 (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, 2022 and 2021, 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 2022 2021 $ 58,941 (58,941) 1,656 (1,656) 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 83 December 31, 2022 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 Lease liabilities－current and non-current Long-term borrowings current portion Long-term borrowings Deposits received Subtotal Total 187 558,909 559,096 2,797,667 579,341 1,822,164 226,736 16,091,084 21,516,992 79,665,302 170,713,564 4,416,073 2,369,411 803,156 828,367 969,960 259,765,833 $ 281,841,921 $ 62,527 47,809 74,832,426 152,137,066 9,701,032 29,622,760 11,346,764 19,462,800 11,674,322 519,308 309,296,478 $ 309,406,814 - - 2,797,667 579,341 - - - - - - - - - - - - - - - - - - - - 187 - 187 - 558,909 558,909 - - - - 16,091,084 - - - - - - - 62,527 47,809 - - - - - - - - - - 1,822,164 226,736 - - - - - - - - - - - - - - - - - - 2,797,667 579,341 1,822,164 226,736 16,091,084 - - - - - - - 62,527 47,809 - - - - - - - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 84 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 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 123,442 537,090 660,532 3,350,210 695,728 1,879,166 309,959 32,796,946 39,032,009 75,162,103 255,639,576 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 - - - - - - - - - - - - - - - - - - - - 123,442 - 123,442 277,312 259,778 537,090 - - - - 32,796,946 - - - - - - - - - - - - - - - - 1,589 - - 1,879,166 309,959 - - - - - - - - - - - - - - - - - - 3,350,210 695,728 1,879,166 309,959 32,796,946 - - - - - - - - - - - - - - - - 1,589 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 85 2) Fair value valuation technique of financial instruments not measured at fair value The Group estimates financial instruments that not measured at fair value by methods and assumption as follows: a) Financial assets and liabilities measured at amortized cost If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values. 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 86 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, 2022 and 2021. 5) Changes in level 3 The change in level 3 at fair value in the years ended December 31, 2022 and 2021, were as follows: Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Total Balance on January 1, 2022 $ 259,778 2,189,125 2,448,903 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds from liquidation of investments Effect of changes in exchange rates Balance on December 31, 2022 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 (23,672) - 323,183 (380) 558,909 201,609 (405,953) 264,057 (10,028) (2,010) 13,709 2,048,900 2,352,919 3,170 - 54,999 (335,469) 187,540 (12,249) (3,616) - - - - - - (23,672) (405,953) 587,240 (10,028) (2,010) 13,329 2,607,809 2,554,528 3,170 (335,469) 242,539 (12,249) (3,616) Balance on December 31, 2021 $ 259,778 2,189,125 2,448,903 For the years ended December 31, 2022 and 2021, 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: (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 87 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”) $ $ 2022 2021 (23,672) 3,170 (409,229) (331,801) 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) 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. Significant unobservable inputs Price-Book ratio multiples (1.54~2.89 and 1.82~11.62, respectively, on December 31, 2022 and 2021) Multiples of earnings (14.33~17.25 and 16.37~27.97, respectively, on December 31, 2022 and 2021) Lack-of-Marketability discount rate (40%~65% and 40%~85%, respectively, on December 31, 2022 and 2021) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 88 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, 2022 Financial assets at fair value through other comprehensive income Move up or down Other comprehensive income Unfavorable change Favorable change 5% $ 8,394 11,549 December 31, 2021 Financial assets at fair value through other comprehensive income Multiples of earnings Lack-of-Marketability discount rate Price-Book ratio multiples Multiples of earnings Lack-of-Marketability discount rate 5% 5% 5% 5% 5% $ $ $ $ $ 5,808 9,432 5,820 6,266 17,810 16,250 4,882 11,767 4,738 13,470 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 89 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, 2022 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized financial assets (a) Gross amounts of financial liabilities offset in the balance sheet (b) Cash/ Short-term borrowings $ 351,096,620 351,096,620 (USD 11,432,648 ) (USD 11,432,648 ) Net amount of financial assets presented in the balance sheet (c)=(a)-(b) - 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) Gross amounts of financial liabilities offset in the balance sheet (b) Cash/ Short-term borrowings $ 360,789,950 360,789,950 (USD 13,034,319 ) (USD 13,034,319 ) Net amount of financial assets presented in the balance sheet (c)=(a)-(b) - (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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 90 (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 analysed individually for creditworthiness before the Group’ s standard payment and delivery terms and conditions are offered. The Group’ s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, and these limits are reviewed periodically. 2) Investments The credit risks exposure in the bank deposits, investments with fixed income and other financial instruments are measured and monitored by the Group’ s finance department. Since the contractually obligated counterparties are banks, financial institutes and corporate organizations with good credits, there are no compliance issues, and therefore, no significant credit risk. transaction counterparties and the Group’ s 3) Guarantees Pursuant to the Group’s policies, it is only permissible to provide financial guarantees to subsidiaries and companies that the Group has business with. As of December 31, 2022 and 2021, the Group did not provide any guarantees to other companies besides its subsidiaries. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 91 (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, 2022 and 2021. (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. 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 92 The Group monitors the capital structure by way of periodical review the debt ratio. As of December 31, 2022 and 2021, the debt ratio was as follows: Total liabilities Total assets Debt ratio December 31, 2022 $ 326,074,590 December 31, 2021 415,555,537 $ 453,484,433 537,095,340 72% 77% 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, 2022, 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, 2022 and 2021 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 Bonds payable Long-term borrowings Lease liabilities January 1, 2022 $ 118,422,407 Cash flow (43,590,249) Other non-cash changes 268 December 31, 2022 74,832,426 326,571 (7,400) (319,171) - 24,960,513 6,176,609 - 31,137,122 2,304,796 (2,422,290) 11,464,258 11,346,764 Deposits received and others 366,068 207,983 736 574,787 Total liabilities from financing activities $ 146,380,355 (39,635,347) 11,146,091 117,891,099 Short-term borrowings Bonds payable 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 93 (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. (“Acbel”) and its subsidiaries Cal-Comp Electronics (USA) Co., Ltd. (“CCUS”) Cal-Comp Electronics (Thailand) Public Company Limited (“Cal-Comp”) and its subsidiaries Jipo Investment Inc. (“Jipo Investment”) Kinpo (b) Transactions with key management personnel Key management personnel remunerations comprised: Short-term employee benefits Post-employment benefits Share-based payments 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 2022 699,852 2021 803,552 7,534 11,328 7,854 6,110 718,714 817,516 $ $ There are no termination benefits and other long-term benefits. Please refer to note (6)(u) for explanations related to share-based payments. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 94 (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 2022 2021 $ $ 208,846 9,744 218,590 220,127 34,059 254,186 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 2022 4,038,193 32,748,290 2021 6,346,763 4,115,321 36,786,483 10,462,084 $ $ Purchase prices and payment period from related parties were similar to those from third-party suppliers. The payment period was 60~165 days for related parties. (iii) Receivables due from relate parties The receivables arising from the transactions mentioned above and others on behalf of related parties were as follows: Account Notes and accounts receivable Notes and accounts receivable Other receivables Other receivables Related party categories December 31, 2022 December 31, 2021 $ Associates Other related parties Associates Other related parties 44,795 4,371,278 1,321 - $ 4,417,394 31,640 1,697,692 2,463 45 1,731,840 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 95 (iv) Payables to related parties The payables arising from the transactions mentioned above and rendering of services from other related parties were as follows: Account Related party categories December 31, 2022 December 31, 2021 Notes and accounts payable Associates $ 774,001 1,992,718 Notes and accounts payable Other related parties 8,927,031 1,524,606 Other payables Other payables (v) Property transactions Associates Other related parties 96 20,327 35 19,542 $ 9,721,455 3,536,901 For the years ended December 31, 2021 Relationship Other related party–Jipo Investment Item Acquisition of financial assets at fair value through other comprehensive income Acquisition of the subsidiary Acquisition of minority shares Other related party-CCUS Associates- RayPal Biomedical Number of shares 46,197 thousand shares 1 thousand shares 588 thousand shares Object Common stocks of Kinpo Common stocks of CIN Common stocks of Raycore Acquisition price 616,864 226,421 15,129 (8) Pledged assets: The carrying values of pledged assets were as follows: Pledged Assets Subject Inventories Other current assets Other current assets Bank loans Customs deposit Pledged deposit Property, plant, and equipment Bank loans Other non-current assets Customs deposit Other non-current assets Pledged deposit $ December 31, 2022 59,707 534,153 269,003 485,364 800 December 31, 2021 - 336,523 96,880 466,320 500 969,160 544,184 $ 2,318,187 1,444,407 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 96 (9) Commitments and contingencies: The details of commitments and contingencies were as follows: (a) Huawei Technologies Co., Ltd. filed an infringement litigation against the Group on October 28, 2022. The Group will carefully evaluate the litigation, discuss with related client for the following strategies and actions, and engage professional attorneys, to protect the rights and reputation of the Company from any damage. (b) 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. (c) The Group entered into various patent license agreements with third parties, and was required to make royalty payments of a predetermined amount periodically. (d) As of December 31, 2022 and 2021, the Group’ s signed commitments to purchase property, plant and equipment amounted to $967,396 and $290,063, respectively. (10) Losses due to major disasters: None (11) Subsequent events: None (12) Other: (a) The employee benefits, depreciation and amortization expenses by categorized function are summarized as follows: By function By item Employee benefits Operating costs 2022 Operating expenses Total Operating costs Salary Labor and health insurance Pension Others Depreciation Amortization 16,187,550 1,162,379 1,173,680 3,359,696 5,794,829 71,405 15,215,703 1,022,635 644,736 718,760 1,187,517 490,657 31,403,253 2,185,014 1,818,416 4,078,456 6,982,346 562,062 15,289,343 1,016,912 1,077,976 2,689,676 5,238,351 78,684 2021 Operating expenses 14,136,585 962,630 570,445 631,048 1,090,392 495,684 Total 29,425,928 1,979,542 1,648,421 3,320,724 6,328,743 574,368 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 97 (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, 2022: (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, 2022 (excluding investment in subsidiaries, associates and joint ventures): Please refer to Table 3 (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 4 (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 5 (vi) Disposals of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 6 (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 7 (ix) Trading in derivative instruments: Please refer to notes (6)(b) and (6)(d) (x) Business relationships and significant intercompany transactions: Please refer to Table 8 (b) Information on investees: Please refer to Table 9 (c) Information on investment in mainland China: Please refer to Table 10 (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 98 (d) Major shareholders: Shareholder’s Name Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF Shareholding Shares Percentage 269,519,000 %6.11 Note 1: The information on major shareholders, which is provided by the Taiwan Depository & Clearing Corporation, summarized the shareholders who held over 5% of total non-physical common stocks and preferred stocks (including treasury stocks) on the last business date of each quarter. The registered non-physical stocks may be different from the capital stocks disclosed in the financial statement due to different calculation basis. Note 2: If shares are entrusted, the above information regarding such shares will be revealed by each trustors of individual trust account. The shareholders holding more than 10% of the total shares of the company should declare insider’ s equity according to Securities and Exchange Act. The numbers of the shares declared by the insider include the shares of the trust assets which the insider has discretion over use. For details of the insider’ s equity announcement please refer to the TWSE website. (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 uesd, 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. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 99 The operating segment information was as follows: For the year ended December 31, 2022 Information technology product segment Strategy integrated product segment Adjustment and elimination Total Revenue Revenue from external $ 1,026,078,166 47,167,749 customers Interest revenue Total revenue Interest expense Deprectation and amortization Investment gain (loss) Other significant non-cash $ $ items: 2,998,570 1,029,076,736 3,131,824 6,810,232 (272,824) 91,356 47,259,105 113,877 734,176 - Impairment of assets Reportable segment profit Reportable segment assets Reportable segment liabilities 9,431 - $ 8,246,412 2,477,718 - - - - - - - - 1,073,245,915 3,089,926 1,076,335,841 3,245,701 7,544,408 (272,824) 9,431 10,724,130 453,484,433 326,074,590 $ $ 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 Deprectation and amortization Investment gain (loss) Other significant non-cash items: Impairment of assets Reportable segment profit Reportable segment assets Reportable segment liabilities $ $ $ $ 1,197,441,957 1,950,777 1,199,392,734 1,011,790 6,335,289 448,562 38,240,058 66,537 38,306,595 37,347 567,822 - 404,513 15,201,740 - 2,266,095 - - - - - - - - 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 100 (c) Products information The infromation of revenue from external customers: Products and services 5C related electronic products Others (d) Geographic information 2022 2021 $ 1,067,076,220 1,232,501,394 6,169,695 3,180,621 $ 1,073,245,915 1,235,682,015 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 $ 2022 444,691,177 133,452,679 68,709,105 2021 486,362,457 159,061,285 88,162,373 426,392,954 502,095,900 $ 1,073,245,915 1,235,682,015 $ 2022 13,812,658 20,877,772 10,671,422 989,914 2021 14,411,598 9,837,851 8,708,075 511,749 $ 46,351,766 33,469,273 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 2022 2021 $ 460,236,878 534,800,186 170,398,727 223,256,380 96,621,806 144,069,158 102,969,721 116,116,250 $ 830,227,132 1,018,241,974 (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 101 Table 1 Loans to other parties: (December 31, 2022) Name of lender No. 0 The Company Name of borrower UCGI 0 The HengHao Company 0 The CEB Company 0 The Company Kinpo & Compal Group Assets Development Corporation 0 The CEA Company 1 CIH CEP 2 CPC CIC Account name Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables 3 CIT CCI Nanjing Other receivables Rayonnant (Taicang) Other receivables HengHao Kunshan HengHao Kunshan 4 CPO CIT 5 CET BT 3 CIT 3 CIT 4 CPO 6 Panpal 6 Panpal 6 Panpal Other receivables Other receivables Other receivables Other receivables Other receivables Kinpo & Compal Group Assets Development Corporation HengHao Kunshan Other receivables Other receivables Ray-Kwong Medical Management Consulting 7 CIC HengHao Kunshan Other receivables 8 BSH CIN 9 Gempal 9 Gempal 10 Hong Ji Kinpo & Compal Group Assets Development Corporation Ray-Kwong Medical Management Consulting Kinpo & Compal Group Assets Development Corporation 11 CGSP CEP 12 Arcadyan 12 Arcadyan 12 Arcadyan 12 Arcadyan Acradyan Brasil Acradyan Brasil Acradyan Brasil Arcadyan Vietnam Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Highest balance of financing to other parties during the period 466,958 Related party Y Actual usage amount during the period 230,000 Range of interest rates during the period Purposes of fund financing for the borrower 1.67%~3.5% Short-term financing Transaction amount for business between two parties - Reasons for short-term financing Operating demand Allowance for bad debt - Ending balance 230,000 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 1.85% Short-term financing 1,399,775 767,750 767,750 1.02%~5% Short-term financing 600,000 600,000 600,000 1.85% Short-term financing 2,347,875 1,381,950 1,381,950 1.02%~5% Short-term financing 64,430 61,420 61,420 5.05% 450,600 440,800 440,800 2.20% Short-term financing Short-term financing 4,510,100 2,149,700 1,781,180 3.5%~5.05% Short-term financing 80,538 76,775 - 5.05% 966,450 921,300 921,300 5.05% 1,047,900 - - 3.50% 675,900 661,200 661,200 2.20% 270,360 264,480 176,320 2.00% Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing 1,200,000 600,000 600,000 1.67%~1.85% Short-term financing 1,200,000 600,000 600,000 1.53%~1.85% Short-term financing 10,000 - - 1.53% Short-term financing 2,406,825 1,689,050 1,689,050 3.5%~5.05% Short-term financing 579,870 552,780 337,810 5.05% Short-term financing 1,000,000 600,000 600,000 1.67%~1.85% Short-term financing 20,000 10,000 10,000 1.85% Short-term financing 200,000 - 64,430 61,420 35,867 59,880 - - - - - - 64,300 61,420 42,994 5.00% 280,250 - - 1.00% 1.67% Short-term financing 5.05% 1.00% 1.00% Short-term financing Short-term financing Short-term financing Short-term financing Transaction for business between two parties - - - - - - - - - - - - - - - - - - - - - - - - Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand 4,821,470 - - - - - - - - - - - - - - - - - - - - - - - - - - (In Thousands of New Taiwan Dollars) Individual funding loan limits 23,258,950 Maximum limit of fund financing 46,517,901 Note (Note 1) 23,258,950 46,517,901 (Note 1) 23,258,950 46,517,901 (Note 1) 600,044 46,517,901 (Note 1) 23,258,950 46,517,901 (Note 1) 42,553,108 42,553,108 (Note 2) 2,589,107 2,589,107 (Note 3) 25,750,769 25,750,769 (Note 4) 25,750,769 25,750,769 (Note 4) 25,750,769 25,750,769 (Note 4) 3,047,746 3,047,746 (Note 5) 3,047,746 3,047,746 (Note 5) 4,960,064 4,960,064 (Note 6) 2,045,874 2,045,874 (Note 7) 2,045,874 2,045,874 (Note 7) 18,190 2,045,874 (Note 7) 10,388,018 10,388,018 (Note 8) 8,034,374 8,034,374 (Note 9) 855,095 855,095 (Note 10) 18,190 855,095 (Note 10) 467,760 467,760 (Note 11) 92,429 92,429 (Note 12) 2,761,448 5,522,896 (Note 13) 2,761,448 5,522,896 (Note 13) 2,761,448 5,522,896 (Note 13) 2,761,448 5,522,896 (Note 13) Collateral Item Value - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (Continued) (cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)(cid:33)COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 102 Table 1 Loans to other parties: (December 31, 2022) Name of lender No. 12 Arcadyan Name of borrower Arcadyan Vietnam Account name Other receivables Related party Y 12 Arcadyan Arcadyan RU Other 13 Arcadyan Holding 14 Poindus Systems CNC Adasys receivables Other receivables Other receivables 14 Poindus Systems Poindus UK Other receivables 14 Poindus Systems Poindus UK Other receivables Y Y Y Y Y Highest balance of financing to other parties during the period 321,500 Actual usage amount during the period - Range of interest rates during the period 1.00% Ending balance 307,100 32,150 546,550 - - - - 1.00% 1.00% 21,268 21,268 21,268 2.00% 26,093 - - 1.00% 24,506 24,109 24,109 1.00% Purposes of fund financing for the borrower Transaction for business between two parties Transaction for business between two parties Short-term financing Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Transaction amount for business between two parties 14,679,380 Reasons for short-term financing - Allowance for bad debt - 418,792 - - 80,428 58,395 58,395 Operating demand - - - - - - - - (In Thousands of New Taiwan Dollars) Individual funding loan limits 2,761,448 Maximum limit of fund financing 5,522,896 Note (Note 13) 335,034 5,522,896 (Note 13) 2,108,499 2,108,499 (Note 14) 51,752 208,682 (Note 15) 39,102 208,682 (Note 15) 51,752 208,682 (Note 15) Collateral Item Value - - - - - - - - - - - - Note 1: Note 2: Note 3: Note 4: Note 5: Note 6: Note 7: Note 8: Note 9: Note 10: Note 11: Note 12: Note 13: Note 14: Note 15: Note 16: According to the Company’ s “Procedures of Lending Funds to Other Parties”, the total amount of loans lent 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 calculated together with the amount of guarantee endorsed by the Company for the company. In addition, the Company shall not limit the total amount of loans to subsidiaries in which the Company directly or indirectly holds 100% of the voting shares to 80% of the aforementioned amount, but the maximum amount shall not exceed 50% of the Company's total funds lending limit, and shall be calculated together with the amount of guarantees endorsed by the Company for such companies. According to CIH’ s Procedures for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of CIH. When a short-term financing facility with CIH is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIH’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIH, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CPC’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPC. When a short-term financing facility with CPC is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPC’s total amount of capital lent, and shall be combined with the company’ s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPC, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to CIT ’ s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CIT. When a short-term financing facility with CIT is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIT’s total amount of capital lent, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIT, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to CPO’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPO. When a short-term financing facility with CPO is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPO’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPO, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to CET’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CET. When a short-term financing facility with CET is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CET’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CET, and shall be combined with the company’ s endorsements/guarantees for the borrower when calculating. According to 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 50% directly or indirectly owned subsidiaries by Panpal, or the ultimate parent company’s 50% 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 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 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 Gempal’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Gempal. When a short-term financing facility with Gempal 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 Gempal’s total amount of lendable capital, and shall be combined with the Gempal’s endorsements/guarantees for calculation. In addition, when lending to indirectly owned overseas subsidiaries or the ultimate parent company’s 100% directly, the total amount of loans is not limited by 80% of two aforesaid restrictions, but the maximum amount shall not exceed the total amount of lendable capital of Gempal, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to Hong Ji’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Hong Ji. When a short-term financing facility with Hong Ji 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 Hong Ji’s total amount of lendable capital, and shall be combined with the Hong Ji’s endorsements/guarantees for calculation. In addition, when lending to indirectly owned overseas subsidiaries or the ultimate parent company’s 100% directly, the total amount of loans is not limited by 80% of two aforesaid restrictions, but the maximum amount shall not exceed the total amount of lendable capital of Hong Ji, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to CGSP’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CGSP. When a short-term financing facility with CGSP 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 CGSP’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 CGSP, 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 Poindus Systems’ Procedures for Lending Funds to Other parties, the total amount of loans for individual is the lower of the amount of transaction for business between the two parties during the previous twelve months and 10% of the net worth of the company's latest financial statements, with the total limit of 40% of the net worth of the company's latest financial statements. The transactions had been eliminated in the consolidated financial statements. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 103 Table 2 Guarantees and endorsements for other parties: (December 31, 2022) Counter-party of guarantee and endorsement Name of guarantor Name The Company CEP No. 0 Relationship with the Company (Note 4) Limitation on amount of guarantees and endorsements for a specific enterprise 29,073,688 Highest balance for guarantees and endorsements during the period Balance of guarantees and endorsements as of reporting date Actual usage amount during the period 95,386 61,146 61,146 Property pledged for guarantees and endorsements (Amount) - 0 The Company CEB (Note 5) 29,073,688 132,082 61,420 61,420 0 The Company CEA (Note 5) 29,073,688 193,973 - - 0 The Company HengHao Kunshan 1 Arcadyan Arcadyan AU (Note 5) 29,073,688 27,036 26,448 26,448 (Note 5) 1,840,965 241,125 230,325 2 Poindus Systems Qijie (Note 5) 104,341 32,325 30,710 - - - - - - - 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)2) 0.05% 58,147,377 0.05% 58,147,377 0.00% 58,147,377 0.02% 58,147,377 1.67% 5,522,896 5.98% 260,852 (In Thousands of New Taiwan Dollars) Parent company endorsements/g uarantees 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 - - - - - - - Y - Y Note 1: Note 2: Note 3: 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. According to Poindus Systems ’ Procedures for Endorsement and Guarantee, Poindus Systems only endorses and guarantees to subsidiaries wherein it holds 100% of their voting shares. Poindus Systems ’ endorsement and guarantee for a subsidiary shall not exceed 20% of its net worth; and the total amount of endorsements/guarantees shall not exceed 50% of its net worth. Note 4: Subsidiary whose over 50% common stock is directly owned. Note 5: Subsidiary whose over 50% common stock is indirectly owned. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 104 Table 3 Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2022) Name of holder Category and name of security The Company Taiwan Star Relationship with security issuer (cid:4137) 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) (cid:4137) Kinpo Cal-Comp HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Chen Feng Optoelectronics PrimeSensor Technology Inc. Ganzin Technology, Inc. Genovior Biotech Crop. Airoha Technology Corp. Clean Energy Fund 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 Lian Hong Art. Co., Ltd. Taiwan Biotech Co., Ltd. The Chairman of the Board is the first degree of kinship of the Chairman of the Company (cid:4137) (cid:4137) Others Total Gempal Compal Electronics, Inc. The parent company Lian Hong Art. Co., Ltd. Others Total Hong Ji SUYIN Optronics Co., Ltd. (“SUYIN Optronics”) Hong Jin SUYIN Optronics Arcadyan GeoThings Inc. AirHop Communication Inc. (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) Ending balance Shares/Units (thousands) 98,046 Carrying value 418,658 Holding percentage (%) 2% Fair value 418,658 (In Thousands of shares/ units) The highest holdings in the period Shares/Units (thousands) 98,046 Holding percentage (%) 2% Note 124,044 1,674,591 8% 1,674,591 124,044 8% 281,233 579,341 5% 579,341 281,233 5% 290 22,571 10% 22,571 290 10% 53 11,112 11% 11,112 53 11% 4,000 13,040 3% 13,040 4,000 3% 6,685 101,676 7% 101,676 6,685 7% 868 19,638 1% 19,638 868 1% 2,000 36,000 7% 36,000 2,000 7% 3,846 9,000 2% 9,000 3,846 2% 215 114,137 (cid:4137) 114,137 215 (cid:4137) (cid:4137) 132,417 5,000 54,150 2% 8% 132,417 (cid:4137) 2% 54,150 5,000 8% 6,000 63,000 19% 63,000 6,000 19% 134,076 134,076 ___________ 3,383,407 31,648 729,488 1% 729,488 31,648 1% (Note 1) 69,370 936,490 5% 936,490 69,370 5% 54,000 694,440 5% 694,440 54,000 5% 5,677 169,449 1% 169,449 5,677 1% 2,225 67,470 6% 67,470 2,225 6% 7,845 141,204 3% 141,204 7,845 3% 14,215 14,215 ___________ 2,752,756 18,369 423,413 (cid:4137) 423,413 18,369 (cid:4137) (Note 1) 2,225 67,450 6% 67,450 2,225 6% 1,371 1,371 ___________ 492,234 380 332 200 1,152 - - (cid:4137) (cid:4137) 1% 1% 4% 5% (cid:4137) (cid:4137) (cid:4137) (cid:4137) 380 1% (Note 2) 332 1% (Note 2) 200 7% (Note 2) 1,152 5% (Note 2) 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 other comprehensive income-non- current Financial assets at fair value through other comprehensive income-non- current Financial assets at fair value through other comprehensive income-non- current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss 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 Financial assets at fair value through other comprehensive income-non- current Financial assets at fair value through other comprehensive income-non- t Financial assets at fair value through other comprehensive income-non- t Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 105 Table 3 Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2022) Name of holder Category and name of security Arcadyan Adant Technologies Inc. Relationship with security issuer (cid:4137) IOT Eye, Inc. TIEF FUND L.P. Chimei Motor Electronics Co., LTD Golden Smarthome Technology Corp. Mactech HHB Total Taichung International Golf Country Club HWALLAR OPTRONICS (Fuzhou) CO., LTD. Mithera Beyond Limits, Inc. BT CIT BSH Suzhou Genki Fuhong Health Management Co., Ltd. Kunqiao Phase II (Suzhou) Emerging Industry Venture Capital Partnership Fund Achi Capital Partners Fund LP (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) Note 1:The transaction had been eliminated in the consolidated financial statements. Note 2:The carrying value is the remaining amount after deducting accumulated impairment. Ending balance Shares/Units (thousands) 349 Carrying value (cid:4137) Holding percentage (%) 5% Fair value (cid:4137) (In Thousands of shares/ units) The highest holdings in the period Shares/Units (thousands) 349 Holding percentage (%) 5% Note (Note 2) 60 (cid:4137) 14% (cid:4137) 60 14% (Note 2) (cid:4137) 46,379 7% 46,379 (cid:4137) 7% 1,650 46,150 5% 46,150 1,650 7% 1,229 (cid:4137) 6% (cid:4137) 1,229 6% (Note 2) ___________ 92,529 11,220 (cid:4137) 11,220 - 19% (cid:4137) 873 138,195 (cid:4137) 138,195 4,414 17% 4,414 252,667 10,296 (cid:4137) (cid:4137) 252,667 10,296 (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) 19% (Note 2) 873 (cid:4137) 17% (cid:4137) (cid:4137) Account name 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-non current Financial assets at fair value through profit or loss-non current (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 106 Table 4 Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2022) Name of company Category and name of security Account name Name of counter-party Relationship with the company Shares/ Units Amount Shares/ Units Amount Shares/ Units Price Cost Gain (loss) on disposal Shares/ Units Amount Shares/ Units Amount Beginning Balance Purchases Sales Others Ending Balance (In Thousands of New Taiwan Dollars/ shares) Stock(cid:506) Poindus Systems The Company CPC CIT CIT CIC CET Structured deposits: Structured deposits– Bank of China RMB Strcutured Deposit Structured deposits– Bank of China RMB Strcutured Deposit Bank of Communications Yuntong Wealth Time-type structured deposit products Structured deposits– Bank of China RMB Strcutured Deposit Structured deposits– Bank of China RMB Strcutured Deposit Investments accounted for using equity method Public buyouts and purchases from the open market Bank of China Bank of China Bank of Communications Co., Ltd. Bank of China 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 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 disposal gains and losses and foreign exchange gains and losses. - - - - - - - - - - - - - - - - - - - - - - - 11,768 353,046 442,622 1,106,555 442,622 663,933 442,622 - - - - - - - - - 450,371 442,622 1,125,927 1,106,555 450,043 442,622 675,556 663,933 450,371 442,622 7,749 (Note 2) 19,372 (Note 2) 7,421 (Note 2) 11,623 (Note 2) 7,749 (Note 2) - - - - - - (28,278) (Note 1) 11,768 324,768 - - - - - - - - - - - - - - - (Continued) Name of company Name of property Transaction date May 5, 2022 (Note 1) Plant, mechanical and electrical equipment Buildings and building improvements Arcadyan Vietnam Kinpo & Compal Group Assets Development Corporation Compal Electronics (Vietnam) Co., Ltd (Note 3) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 107 Table 5 Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2022) Transaction amount 1,437,610 Status of payment Counter-party 657,737 Donghui Co., Ltd. and Chengyuande Construction and Trade Co., Ltd. (In Thousands of New Taiwan Dollars) If the counter-party is a related party, disclose the previous transfer information Relationshi p with the Company None Relationship with the Company not applicable Date of transfer not applicable Amount not applicable Owner not applicable Purpose of acquisition and current condition Others operational None use References for determining price price comparison and negotiation November 11, 2022 (Note 2) In the maximum limit of 22,200 thousands (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) Land use rights December 16, 2022 921,300 184,260 GREEN i-PARK CORPORATION None not applicable not applicable not applicable not applicable operational use None Refer to the real estate appraisal report issued by a professional appraiser Note 1: Note 2: Note 3: In order to meet the operational needs, the Board of Directors of Arcadyan Vietnam resolved on May 5, 2022, to authorize the chairman of the Board to expand the plant in the maximum limit of USD48,000. The total contract amount is expected to be 1,437,610 (VND 1,118,763 million). In order to meet the operation planning of the group headquarter and corporate sustainable development needs, the Board of Directors of Kinpo & Compal Group Assets Development Corporation resolved on November 11, 2022, to authorize the chairman of the Board to build a new group operation headquarters building in the maximum limit of 22.2 billion. Compal Electronics (Vietnam) Co., Ltd (tentative name) is a newly established subsidiary of BSH 100% owned. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 108 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) Company Name The Company Counter party UCGI CBN Arcadyan Nature of relationship Subsidiaries wholly owned by the Company The Company's subsidiaries The Company's subsidiaries Sale Sale Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Purchase/ (Sale) Sale Amount (221,051) Percentage of total purchases/ (sales) (0.0)% Payment terms 120 days Unit price Similar to non-related parties Payment Terms There is no significant difference Percentage of total notes/accounts receivable (payable) Ending Balance 18,806 0.0% Note (Note 2) (439,192) (0.0)% Net 90 days from delivery Similar to non-related parties There is no significant difference 258,313 0.1% (Note 2) (4,736,735) (0.5)% Net 60 days from the end of the month of delivery Similar to non-related parties Just and its subsidiaries Subsidiaries wholly owned by the Company Sale (1,190,095) (0.1)% 120 days Similar to non-related parties CIH and its subsidiaries Subsidiaries wholly owned by the Company Purchase 129,322,840 13.5% 120 days Similar to non-related parties Just and its subsidiaries Subsidiaries wholly owned by the Company HSI and its subsidiaries Subsidiaries wholly owned by the Company Purchase 136,046,231 14.2% 120 days Purchase 57,511,789 6.0% 120 days Similar to non-related parties Similar to non-related parties BCI and its subsidiaries Subsidiaries wholly owned by the Company Purchase 44,099,411 4.6% 120 days Markup based on BCI and its subsidiaries' cost Etrade and its subsidiaries Subsidiaries wholly owned by the Company Purchase 11,706,241 1.2% Net 60 days from delivery Markup based on Etrade and its subsidiaries' cost 1,451,984 0.8% (Note 2) 1,433,533 0.8% (Note 2) (47,687,191) (30.9)% (Note 2) (1,721,087) (1.1)% (Note 2) (4,914,134) (3.2)% (Note 2) (8,835,507) (5.7)% (Note 2) (2,242,604) (1.5)% (Note 2) There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Kinpo The same chairman of the Company Purchase 31,343,280 2.8% Net 35 days from the end of the month Similar to non-related parties There is no significant difference. (8,476,775) (5.5)% Just and its subsidiaries Compal Electronic, Inc. Parent company Sale (136,046,231) (99.0)% 120 days Similar to non-related parties UCGI With the same ultimate parent company Sale (118,656) (0.1)% 60 days Similar to non-related parties Compal Electronic, Inc. Parent company Purchase 1,190,095 0.9% 120 days Similar to non-related parties CIH and its subsidiaries Etrade and its subsidiaries With the same ultimate parent company With the same ultimate parent company Purchase 389,981 0.3% 120 days Similar to non-related parties Purchase 201,643 0.2% Net 60 days from delivery According Etrade and its subsidiaries to markup pricing Similar to non-related parties CIH and its subsidiaries Compal Electronic, Inc. Parent company Sale (129,322,840) (92.9)% 120 days CEA CEB With the same ultimate parent company With the same ultimate parent company Sale (405,697) (0.3)% 120 days Similar to non-related parties Sale (219,877) (0.2)% 120 days Similar to non-related parties Just and its subsidiaries With the same ultimate parent company Sale (389,981) (0.3)% 120 days Similar to non-related parties 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 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 Adjustments will be made based on demand for funding 1,721,087 97.4% (Note 2) 38,621 2.2% (Note 2) (1,433,533) (4.1)% (Note 2) (128,602) (0.4)% (Note 2) (117,120) (0.3)% (Note 2) 47,687,191 87.4% (Note 2) 124,747 0.1% (Note 2) 72,382 0.1% (Note 2) 128,602 0.1% (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 109 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) 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 BCI and its subsidiaries Nature of relationship With the same ultimate parent company Purchase/ (Sale) Sale Amount (3,026,857) Percentage of total purchases/ (sales) (2.2)% Payment terms 120 days Unit price Similar to non-related parties HSI and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company HSI and its subsidiaries Rayonnant and its subsidiaries With the same ultimate parent company With the same ultimate parent company HengHao With the same ultimate parent company Sale (4,315,689) (3.1)% 120 days Similar to non-related parties Purchase 770,541 0.8% 120 days Purchase 420,918 0.5% 120 days Purchase 1,147,721 1.2% 120 days Similar to non-related parties Similar to non-related parties Similar to non-related parties Purchase 179,199 0.2% 120 days Similar to non-related parties Percentage of total notes/accounts receivable (payable) 1.4% Note (Note 2) Ending Balance 1,425,340 4,199,215 4.2% (Note 2) (32,896) (0.0)% (Note 2) (16,497) (0.0)% (Note 2) (194,275) (0.2)% (Note 2) (25,055) (0.0)% (Note 2) Payment Terms There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary 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 CPM An associate Purchase 2,571,306 Changbao An associate Purchase 944,245 Purchase 806,342 2.8% 1.0% 0.9% 120 days 120 days 120 days Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. (541,816) (176,997) (294,099) (0.7)% (0.2)% (0.4)% Purchase 439,192 19.0% Net 90 days from delivery - Parent company Sale (44,099,411) (89.2)% 120 days Sale (770,541) (1.6)% 120 days Sale (1,365,373) (2.8)% 120 days Sale (543,836) (1.1)% 120 days Markup based on BCI and its subsidiaries' cost According to markup pricing According to markup pricing According to markup pricing There is no significant difference. Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference. (258,313) (31.0)% (Note 2) 8,835,507 27.7% (Note 2) 32,896 0.1% (Note 2) 2,409,030 7.6% (Note 1(cid:739)2) 485,682 1.5% (Note 2) Sale (918,657) (1.9)% 120 days According to markup pricing There is no significant difference. 180,177 0.6% (Note 2) Purchase 3,026,857 7.2% 120 days Purchase 790,403 1.9% Net 60 days from delivery Purchase 282,287 0.7% 120 days Purchase 446,632 Purchase 410,565 1.1% 1.0% 120 days 120 days Purchase 543,836 14.3% 120 days Purchase 1,620,529 42.7% 45 days Purchase 219,877 5.8% 120 days Sale (1,620,529) (17.3)% 45 days Purchase 405,697 5.3% 120 days Purchase 918,657 12.0% 120 days According to markup pricing Similar to non-related parties Similar to non-related parties Similar to non-related parties Similar to non-related parties Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference. There is no significant difference. According to markup pricing There is no significant difference. Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. (1,425,340) (4.7)% (Note 2) (546,121) (1.8)% (Note 2) (27,686) (0.1)% (Note 2) (24,880) (121,992) (0.1)% (0.4)% (485,682) (31.2)% (Note 2) (415,662) (26.7)% (Note 2) (72,382) (4.6)% (Note 2) 415,662 17.3% (Note 2) (124,747) (16.2)% (Note 2) (180,177) (23.4)% (Note 2) (Continued) Acbel and its subsidiaries CBN Compal Electronic, Inc. BCI and its subsidiaries Compal Electronic, Inc. CIH and its subsidiaries HSI and its subsidiaries CEB CEA CIH and its subsidiaries BCI and its subsidiaries HSI and its subsidiaries Rayonnant and its subsidiaries CPM Acbel and its subsidiaries BCI and its subsidiaries CEA CIH and its subsidiaries CEB CEA CEB CIH and its subsidiaries BCI 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 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 ultimate parent company With the same ultimate parent company COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 110 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name Etrade and its subsidiaries Counter party Compal Electronic, Inc. Nature of relationship Parent company Purchase/ (Sale) Sale Amount (11,706,241) Percentage of total purchases/ (sales) Payment terms Unit price (98.2)% Net 60 days from delivery According to markup pricing Just and its subsidiaries With the same ultimate parent company HSI and its subsidiaries With the same ultimate parent company Sale (201,643) (1.7)% Net 60 days from delivery According to markup pricing Purchase 1,829,041 16.9% Net 60 days from delivery Similar to non-related parties Payment Terms There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Forever and its subsidiaries HSI and its subsidiaries UCGI Avalue With the same ultimate parent An associate Sale Sale (514,870) (100.0)% Net 60 days from delivery (177,383) (31.6)% 75 days Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. Compal Electronic, Inc. Just and its subsidiaries Parent company Purchase 221,051 With the same ultimate parent company Purchase 118,656 45.9% 24.6% 120 days 60 days Similar to non-related parties Similar to non-related parties HSI and its subsidiaries Compal Electronic, Inc. Parent company Sale (57,511,789) (95.7)% 120 days Similar to non-related parties Etrade 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 CIH and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company Sale (1,829,041) (3.0)% Net 60 days from delivery Similar to non-related parties Sale (420,918) (0.7)% 120 days Similar to non-related parties Sale (790,403) (1.3)% Net 60 days from delivery Similar to non-related parties Purchase 4,315,689 6.9% 120 days Purchase 1,365,373 2.2% 120 days 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, and adjustments will be made based on demand for funding if necessary Percentage of total notes/accounts receivable (payable) Ending Balance 2,242,604 101.3% Note (Note 2) 117,120 5.3% (Note 2) (522,935) (24.5)% (Note 2) 216,768 100.0% (Note 2) 38,397 21.4% (18,806) (38,621) (29.7)% (Note 2) (61.1)% (Note 2) 4,914,134 26.1% (Note 2) 522,935 2.8% (Note 2) 16,497 0.1% (Note 2) 546,121 2.9% (Note 2) (4,199,215) (11.1)% (Note 2) (2,409,030) (6.3)% (Note 1(cid:739)2) Forever and its subsidiaries Rayonnant and its subsidiaries CIH and its subsidiaries With the same ultimate parent company With the same ultimate parent company Purchase 514,870 0.8% Net 60 days from delivery Similar to non-related parties There is no significant difference. (216,768) (0.6)% (Note 1(cid:739)2) Sale (1,147,721) (80.2)% 120 days Similar to non-related parties BCI and its subsidiaries With the same ultimate parent company Sale (282,287) (19.7)% 120 days Similar to non-related parties HengHao CIH and its subsidiaries With the same ultimate parent company Sale (179,199) (1.8)% 120 days Similar to non-related parties Arcadyan Arcadyan Germany Arcadyan USA Arcadyan AU CNC Arcadyan Vietnam Compal Electronic, Inc. Arcadyan's subsidiary Sale (1,226,274) (3.0)% Net 150 days from delivery Arcadyan's subsidiary Sale (16,685,476) (36.0)% Net 120 days from delivery Arcadyan's subsidiary Sale (1,135,329) (2.0)% Net 60 days from the end of the month of delivery - - - Arcadyan's subsidiary Purchase 11,854,935 16.0% Net 120 days from delivery According to markup Arcadyan's subsidiary Purchase 3,412,391 5.0% Net 180 days from the end of the month of delivery pricing According to markup pricing Parent company Purchase 4,736,735 6.0% Net 60 days from the end of - the month of delivery - - - - - - 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 194,275 87.4% (Note 2) 27,686 12.5% (Note 2) 25,055 1.3% (Note 1(cid:739)2) 597,274 6.0% (Note 2) 4,102,435 39.0% (Note 2) 281,293 3.0% (Note 2) (3,011,224) (24.0)% (Note 1(cid:739)2) (Note 3) - % (Note 1(cid:739)2) (1,451,984) (12.0)% (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 111 Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) Transaction details Transactions with terms different from others Notes/Accounts receivable (payable) Purchase/ (Sale) Sale Amount (11,854,935) Percentage of total purchases/ (sales) Payment terms Unit price (100.0)% Net 120 days from delivery According to markup Payment Terms - Ending Balance 3,011,224 Percentage of total notes/accounts receivable (payable) Note 98.0% (Note 1(cid:739)2) (In Thousands of New Taiwan Dollars) Sale (3,412,391) (100.0)% Net 180 days from the end of the month of delivery Purchase 1,226,274 100.0% Net 150 days from delivery Purchase 16,685,476 100.0% Net 120 days from delivery Purchase 1,135,329 100.0% Net 60 days from the end of the month of delivery Sale (134,361) 58.9% Net 60 days from the end of the month Purchase 134,361 43.3% Net 60 days from the end of the month pricing According to markup pricing - - - - - - - Similar to non-related parties There is no significant difference. Similar to non-related parties There is no significant difference. (Note 3) - % (Note 1(cid:739)2) (597,274) (100.0)% (Note 2) (4,102,435) (100.0)% (Note 2) (281,293) 100.0% (Note 2) 19,726 50.0% (Note 2) (19,726) 37.7% (Note 2) Company Name Counter party CNC Arcadyan Arcadyan Vietnam Arcadyan Germany Arcadyan USA Arcadyan AU Arcadyan Arcadyan Arcadyan Arcadyan Ripal GLB GLB Ripal Nature of relationship With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company 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 transactions had been eliminated in the consolidated financial statements. Note 3: The amount of other receivables on December 31, 2022 is 1,000,854 thousand dollars. (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 112 Table 7 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Nature of relationship Ending Balance Turnover rate (December 31, 2022) Name of Company Counter-party The Company CBN The Company Arcadyan The Company Just and its subsidiaries The Company HSI and its subsidiaries The Company Cal-Comp Just and its subsidiaries Compal Electronic, Inc. CIH and its subsidiaries Compal Electronic, Inc. CIH and its subsidiaries CEA The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The same chairman of the Company Parent company Parent company With the same ultimate parent company CIH and its subsidiaries Just and its subsidiaries With the same ultimate parent company CIH and its subsidiaries HSI and its subsidiaries With the same ultimate parent company CIH and its subsidiaries BCI and its subsidiaries With the same ultimate parent company Parent company BCI and its subsidiaries Compal Electronic, Inc. BCI and its subsidiaries HSI and its subsidiaries With the same ultimate parent company BCI and its subsidiaries CEB BCI and its subsidiaries CEA CEA CEB With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Parent company Etrade and its subsidiaries Etrade and its subsidiaries Forever and its subsidiaries Compal Electronic, Inc. Just and its subsidiaries With the same ultimate parent company HSI and its subsidiaries With the same ultimate parent company HSI and its subsidiaries Compal Electronic, Inc. HSI and its subsidiaries Etrade and its subsidiaries With the same ultimate parent company Parent company HSI and its subsidiaries BCI and its subsidiaries With the same ultimate parent company Rayonnant and its subsidiaries CIH and its subsidiaries With the same ultimate parent company Arcadyan Arcadyan Arcadyan Arcadyan CNC CBN Arcadyan USA Arcadyan Vietnam Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan AU Arcadyan Germamy Arcadyan Arcadyan's subsidiary Arcadyan's subsidiary With the same ultimate parent company HSI and its subsidiaries With the same ultimate parent company Note 1(cid:506)Balance as of March 7, 2023. Note 2(cid:506)Balance as of March 3, 2023. Note 3(cid:506)Balance as of March 6, 2023. Note 4(cid:413)Receivables due to purchasing on behalf of related parties. Note 5(cid:413)Accounts receivables due to processing raw material. (In Thousands of New Taiwan Dollars) Overdue Amount - Action taken - Amounts received in subsequent period 188,346 (Note 1) Allowance for bad debts - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,390,870 (Note 1) 1,433,533 (Note 1) 1,339,742 (Note 1) 4,370,909 (Note 1) 1,478,627 45,630,291 37,150 (Note 1) (Note 1) (Note 1) - - - (Note 1) (Note 1) (Note 1) 8,835,507 - (Note 1) (Note 1) 62,919 (Note 1) 160,837 (Note 1) - (Note 1) 391,222 (Note 1) - - 4,914,134 - - - (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) 2,632,307 - (Note 2) (Note 2) 188,344 236,699 655,717 (Note 2) (Note 2) (Note 2) - - - - - - - - - - - - - - - - - - - - - - - - - 258,313 1,451,984 1,433,533 1.10 6.52 1.66 5,537,829 (Note 4) (Note 4) 4,370,909 (Note 4) 1,721,087 47,687,191 124,747 (Note 4) 46.04 2.35 2.44 128,602 6.06 4,199,215 1.33 1,425,340 2.01 8,835,507 2,409,030 3.47 0.62 485,682 0.62 180,177 2.67 415,662 4.09 2,242,604 117,120 4.80 3.44 216,768 4.75 4,914,134 522,935 14.38 4.76 546,121 2.89 194,275 11.86 4,102,435 1,000,854 (Note 4) 281,293 597,274 3,011,224 (Note 5) 5.45 (Note 4) 7.45 2.84 4.70 364,925 (Note 5) (Note 5) 309,627 Strengthen collections 364,925 (Note 3) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 113 Table 8 Business relationships and significant intercompany transactions: (For the year ended December 31, 2022) Intercompany transactions (In Thousands of New Taiwan Dollars) No. (Note 1) 0 Company name Counter party The Company UCGI Relationship (Note 2) 1 Accounts name Sales Revenue Amount 221,051 0 0 The Company CBN The Company Arcadyan 0 The Company JUST and its subsidiaries 1 JUST and its subsidiaries The Company 1 JUST and its subsidiaries UCGI 2 CIH and its subsidiaries The Company 2 CIH and its subsidiaries CEA 2 CIH and its subsidiaries CEB 2 CIH and its subsidiaries JUST and its subsidiaries 2 CIH and its subsidiaries BCI and its subsidiaries 2 CIH and its subsidiaries HSI and its subsidiaries 3 BCI and its subsidiaries The Company 3 BCI and its subsidiaries CIH and its subsidiaries 3 BCI and its subsidiaries HSI and its subsidiaries 3 3 4 BCI and its subsidiaries CEB BCI and its subsidiaries CEA CEA CEB 1 1 1 2 3 2 3 3 3 3 3 2 3 3 3 3 3 Accounts Receivable Sales Revenue 18,806 439,192 Accounts Receivable Sales Revenue 258,313 4,736,735 Accounts Receivable Sales Revenue 1,451,984 1,190,095 Accounts Receivable Sales Revenue 1,433,533 136,046,231 Accounts Receivable Sale Revenue 1,721,087 118,656 Accounts Receivable Sales Revenue 38,621 129,322,840 Accounts Receivable Sales Revenue 47,687,191 405,697 Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue 124,747 219,877 72,382 389,981 Accounts Receivable Sales Revenue 128,602 3,026,857 Accounts Receivable Sales Revenue 1,425,340 4,315,689 Accounts Receivable Sales Revenue 4,199,215 44,099,411 Accounts Receivable Sales Revenue 8,835,507 770,541 Accounts Receivable Sales Revenue 32,896 1,365,373 Terms 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:579) There is no significant difference of price to non-related parties. The credit period is net 90 days from delivery. (cid:579) 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:579) 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:579) 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:579) 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:579) 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:579) 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:579) 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:579) 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:579) 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:579) 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:579) 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. (cid:579) The price is based on the operating cost. The credit period is net 120 days, and will be adjusted if necessary. (cid:579) The price is based on the operating cost. The credit period is net 120 days, and will be adjusted if necessary. Accounts Receivable Sales Revenue 2,409,030 543,836 (cid:579) The price is based on the operating cost. The credit period is net 120 days. Accounts Receivable Sale Revenue 485,682 918,657 Accounts Receivable Sale Revenue 180,177 1,620,529 (cid:579) The price is based on the operating cost. The credit period is net 120 days. (cid:579) There is no significant difference of price to non-related parties. The credit period is net 45 days. Accounts Receivable 415,662 (cid:579) Percentage of the consolidated net revenue or total assets - - - - 0.4% 0.3% 0.1% 0.3% 12.7% 0.4% - - 12.0% 10.5% - - - - - - 0.3% 0.3% 0.4% 0.9% 4.1% 1.9% 0.1% - 0.1% 0.5% 0.1% 0.1% 0.1% - 0.2% 0.1% (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 114 Table 8 Business relationships and significant intercompany transactions: (For the year ended December 31, 2022) Intercompany transactions (In Thousands of New Taiwan Dollars) No. (Note 1) 5 Company name Counter party Etrade and its subsidiaries The Company Relationship (Note 2) 2 Accounts name Sales Revenue Amount 11,706,241 5 Etrade and its subsidiaries JUST and its subsidiaries 6 Forever and its subsidiaries HSI and its subsidiaries 7 HSI and its subsidiaries The Company 7 HSI and its subsidiaries Etrade and its subsidiaries 7 HSI and its subsidiaries CIH and its subsidiaries 7 HSI and its subsidiaries BCI and its subsidiaries 8 8 Rayonnant and its subsidiaries CIH and its subsidiaries Rayonnant and its subsidiaries BCI and its subsidiaries 9 HengHao CIH and its subsidiaries 10 Arcadyan Arcadyan Germany 10 Arcadyan Arcadyan USA 10 Arcadyan Arcadyan AU 10 Arcadyan Arcadyan Vietnam 11 CNC Arcadyan 12 Arcadyan Vietnam Arcadyan 13 Ripal GLB 3 3 2 3 3 3 3 3 3 3 3 3 3 3 3 3 Accounts Receivable Sales Revenue 2,242,604 201,643 Accounts Receivable Sales Revenue 117,120 514,870 Accounts Receivable Sales Revenue 216,768 57,511,789 Accounts Receivable Sales Revenue 4,914,134 1,829,041 Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue 522,935 420,918 16,497 790,403 Accounts Receivable Sales Revenue 546,121 1,147,721 Accounts Receivable Sales Revenue Accounts Receivable Sales Revenue 194,275 282,287 27,686 179,199 Accounts Receivable Sales Revenue 25,055 1,226,274 Accounts Receivable Sales Revenue 597,274 16,685,476 Accounts Receivable Sales Revenue 4,102,435 1,135,329 Accounts Receivable Other Receivable 281,293 1,000,854 Processing Revenue 11,854,935 Accounts Receivable Processing Revenue 3,011,224 3,412,391 Sales Revenue 134,361 Terms The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. (cid:579) The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. (cid:579) There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery. (cid:579) 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:579) There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery, and will be adjusted if necessary. (cid:579) 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:579) There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery, and will be adjusted if necessary. (cid:579) 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:579) 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:579) 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:579) There is no significant difference of price to non-related parties. The credit period is net 150 days from delivery. (cid:579) There is no significant difference of price to non-related parties. The credit period is net 120 days from delivery. (cid:579) There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery. (cid:579) 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:579) The credit period is net 180 days from the end of the month of delivery and depended on funding demand. There is no significant difference of price to non-related parties.The credit period is net 60 days from the end of the month. 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. Accounts Receivable 19,726 (cid:579) Percentage of the consolidated net revenue or total assets 1.1% 0.5% - - - - 5.4% 1.1% 0.2% 0.1% - - 0.1% 0.1% 0.1% - - - - - 0.1% - 1.6% 0.9% 0.1% - 0.2% 1.1% 0.7% 0.3% - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Table 9 The information on investees for the nine months ended September 30, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 115 (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company The Company Kinpo & Compal Group Assets Development Corporation Location Taipei City Main Businesses and Products Real estate development leasing and related management business December 31, 2022 December 31, 2021 Shares 525,000 525,000 52,500 Percentage of Ownership 70% Carrying Value 505,547 Shares 52,500 Percentage of Ownership Net income (losses) of investee Share of profits/losses of investee 70% (27,910) (19,538) Note (Note 2) Original Investment Amount Ending Balance The highest holdings in the period Houston, USA Warranty services and marketing 36,369 36,369 100 100% 452,361 100 100% 3,410 3,410 (Note 2) British Virgin Islands British Virgin Islands Taipei City of LCD TVs and notebook PCs Investment Investment Investment 1,480,509 1,480,509 48,010 100% 10,364,994 48,010 100% (43,156) (43,156) (Note 2) 1,787,680 1,787,680 53,001 100% 42,565,956 53,001 100% 1,030,304 1,030,304 (Note 2) 5,171,837 5,171,837 500,000 100% 4,405,558 (Note 1) Taipei City Investment 900,036 900,036 90,000 100% 1,726,562 Taipei City Consultation, training services, etc. 3,000 3,000 300 38% 4,882 (Note 1) 500,000 0 90,000 0 300 100% (313,956) (377,252) (Note 2) 0% 100% 0% 38% 164,612 127,886 (Note 2) 284 106 Taipei City Tainan City Manufacturing of electric appliance and audiovisual electric products Management&Consultant, rental and and wholesale and retail of medical equipments Taoyuan City Manufacturing of electric appliance and audiovisual Investment business leasing 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% 122,458 6,000 100% 24,384 20,384 (Note 2) 200,000 200,000 20,000 100% 84,482 20,000 100% (17,399) (17,399) (Note 2) 42,000 42,000 2,772 42% - 2,772 34 34 1 100% 3,619,227 6,000 6,000 600 100% 3,696 1 600 42% 100% - - - #REF! (Note 2) 100% 2,056 576 (Note 2) Taoyuan City Production and sales of PCB Taipei City Design and manufacture of PCs and peripheral equipment 395,388 353,046 395,388 - 10,158 11,768 20% 56% 438,793 324,768 10,158 11,768 20% 56% 555,696 4,415 112,728 (1,196) (Note 2) 90,000 90,000 100,000 52% 44,330 100,000 52% (24,930) (12,973) (Note 2) Investment 197,463 197,463 6,427 100% 864,057 489,450 489,450 98 49% 398,723 35,000 35,000 3,500 35% 24,990 149,547 149,547 3,739 33% 41,029 98 6,427 3,500 3,739 49% (664,683) (325,694) 100% 11,842 11,842 (Note 2) 35% (25,660) (8,981) (Note 2) 33% (95,015) (31,576) Bizcom Just CIH Panpal Gempal Kinpo Group management consultant company (“Kinpo Group management”) Ripal Unicore Lead-Honor Optronics. Co., Ltd. (“Lead-Honor”) CEH Shennona Taiwan Allied Circuit Poindus Systems Aco Smartcare Lipo Holding Co., Ltd. CPE Starmems Crownpo Technology Inc. (“Crownpo”) Hong Ji Hong Jin Mactech Auscom Arcadyan FGH Shennona HSI 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 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 Investment lighting, retailing of equipment and international trading Taipei City Taipei City Taichung City Manufacturing of equipment and 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 Investment 1,000,000 295,000 219,601 1,000,000 295,000 219,601 100,000 29,500 21,756 100% 100% 53% 1,169,400 374,428 262,227 100,000 29,500 21,756 100% 100% 53% 97,275 42,400 44,823 97,275 42,400 26,334 (Note 2) (Note 2) (Note 2) 101,747 101,747 3,000 100% 149,561 3,000 100% 10,180 10,180 (Note 2) 1,325,132 1,325,132 41,305 19% 2,668,147 41,305 21% 1,915,053 378,755 (Note 2) 2,754,741 2,754,741 89,755 100% 4,510,138 89,755 100% (152,120) (152,120) (Note 2) CEP Hippo Screen Neurotech Co., Ltd. Taipei City Infinno Technology Corporation (“Infinno”) Hsinchu County HengHao Taipei City British Virgin Islands Delaware, USA British Virgin Islands Poland British Virgin Islands Hsinchu County Taipei City BCI CBN Rayonnant CRH Acendant Private Equity Investment Ltd. Etrade Webtek Medical care IOT business 48,210 32,665 - 100% 16,505 - 100% (65) (65) (Note 2) Investment 1,346,814 1,346,814 42,700 54% 233,699 42,700 54% 407,288 218,225 (Note 2) Maintenance and warranty 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 90,156 112,000 90,156 112,000 136 9,100 100% 91% (27,599) 34,975 136 9,100 100% 91% (23,440) (26,246) (23,440) (23,883) (Note 2) (Note 2) 127,026 127,026 4,648 28% 32,062 4,648 28% (20,788) (5,762) 5,729,757 5,729,757 20,015 100% (797,521) 20,015 100% (231,377) (231,377) (Note 2) 2,636,051 2,636,051 90,820 100% 8,565,523 90,820 100% 582,505 582,505 (Note 2) 284,827 284,827 29,060 43% 627,558 29,060 43% (57,588) (24,531) (Note 2) 295,000 295,000 29,500 100% 200,647 29,500 100% 27,157 32,532 (Note 2) British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Investment Investment Investment Investment 377,328 377,328 12,500 100% 287,734 12,500 100% 32,813 32,813 (Note 2) 943,922 943,922 31,253 35% 1,405,430 31,253 35% (46,382) #REF! 1,532,029 1,532,029 46,900 65% (364,333) 46,900 65% 87,088 (134,458) (Note 2) 3,340 3,340 100 100% 763,229 100 100% 33,407 33,407 (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Table 9 The information on investees for the nine months ended September 30, 2022 (excluding information on investees in Mainland China): 116 (December 31, 2022) Investor Company Investee Company The Company Forever UCGI Palcom Avalue CORE Compal Ruifang GLB CGSP ARCE Original Investment Amount Ending Balance Main Businesses and Products December 31, 2022 December 31, 2021 Shares Investment 1,575 1,575 50 Percentage of Ownership 100% Carrying Value 1,531,800 (In Thousands of New Taiwan Dollars/ shares) The highest holdings in the period Shares Percentage of Ownership Net income (losses) of investee Share of profits/losses of investee 50 100% 84,921 84,921 Note (Note 2) Manufacturing and retail sale of computers and electronic components Selling of mobile phones Manufacturing, processing, and import and export business of industrial motherboards 689,997 489,998 20,000 100% 162,613 20,000 100% 102 (83) (Note 2) 100,000 547,595 100,000 547,595 10,000 14,924 100% 21% 112,687 727,787 10,000 14,924 100% 21% 3,547 556,099 3,547 118,990 (Note 2) Investment 4,318,860 4,318,860 147,000 100% 7,666,891 147,000 100% 301,896 301,896 (Note 2) Investing and developing businesses, such as public construction and specific zones 100,000 - 10,000 100% 99,940 10,000 100% (60) (60) (Note 2) Location British Virgin Islands Taipei City Taipei City New Taipei City British Virgin Islands New Taipei City New Taipei Manufacturing and wholesale of Poland Taipei City Maintenance and warranty Biotechnology services, research & development services, intellectual property rights, wholesale of animal medication, retail sale and management advisory Cancerous immunocyte therapy and regenerative medicine 247,560 89,669 60,000 246,860 89,669 60,000 15,035 - 20,000 50% 100% 33% 371,580 92,429 23,708 15,035 - 20,000 50% 100% 33% 81,417 3,773 (61,803) 40,421 (3,816) (20,601) (Note 2) (Note 2) 209,076 155,076 4,646 30% 186,922 4,646 30% (37,927) (11,348) Raypal Taipei City Panpal Arcadyan Hsinchu City Telecommunication equipment 279,202 279,202 8,192 4% 573,951 8,192 4% 1,915,053 __________ 97,080,580 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% 126,442 2,927 6% 555,696 boards Gempal Others Arcadyan Hsinchu City Telecommunication equipment 306,655 306,655 9,279 4% (514,643) 675,117 9,279 4% 1,915,053 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% 139,086 3,220 6% 555,696 boards Hong Ji Others Arcadyan Hsinchu City Telecommunication equipment 306,655 306,655 9,279 4% (740) 675,117 9,279 4% 1,915,053 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% 31,888 851 2% 555,696 boards Hong Jin Arcadyan Hsinchu City Telecommunication equipment 131,942 131,942 4,609 2% 320,345 4,609 2% 1,915,053 and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing Just CDH (HK) Hong Kong Investment 1,913,156 1,913,156 62,298 100% 7,842,940 62,298 100% (77,396) CII CPI CII Smart AEI MEL MTL British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 283,914 283,914 9,245 100% 258,032 9,245 100% (24) 15,355 15,355 500 100% 13,668 500 100% 11,067 31 31 1 100% 381 1 100% (7) U.S.A Sales and maintenance of LCD TVs 30,710 30,710 1,000 100% (483) 1,000 100% (37) U.S.A Investment 252,866 252,866 U.S.A Investment 31 31 - - 100% 209,588 100% 31 - - 100% 20 100% - ___________ #REF! 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 Investment gain (losses) recognized by CII Investment gain (losses) recognized by CII Investment gain (losses) recognized by CII Investment gain (losses) recognized by CII (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Table 9 The information on investees for the nine months ended September 30, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 117 (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company CIH CIH (HK) Location Hong Kong Main Businesses and Products Investment December 31, 2022 2,297,185 December 31, 2021 2,297,185 Shares 74,803 Percentage of Ownership Carrying Value Shares Percentage of Ownership 100% 41,759,699 74,803 100% 1,485,718 Net income (losses) of investee Original Investment Amount Ending Balance The highest holdings in the period Jenpal PFG FWT CCM HSI IUE Goal British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 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 BCI CMI PRI CORE BSH British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 225,719 225,719 7,350 100% 111,492 7,350 100% 1,931 31 31 1 100% 5,455 1 100% 25,570 457,579 457,579 14,900 100% 457,578 14,900 100% (1) 156,621 156,621 5,100 51% 25,691 5,100 51% (4,805) 2,057,570 2,057,570 67,000 100% 664,327 67,000 100% 406,560 390,017 390,017 12,700 100% 338,159 12,700 100% 728 2,057,570 2,057,570 67,000 100% 664,327 67,000 100% 406,560 390,017 390,017 12,700 100% 339,807 12,700 100% 728 2,481,982 2,481,982 80,820 100% 5,400,819 80,820 100% 392,369 307,100 307,100 10,000 100% 3,164,705 10,000 100% 190,136 4,514,370 4,514,370 147,000 100% 7,666,891 147,000 100% 301,896 BSH Mithera Cayman Islands Investment 155,086 155,086 - 99% 140,305 - 99% (3,242) HSI CIN British Virgin Islands Investment 1,136,270 1,136,270 37,000 46% 768,787 37,000 46% 407,288 U.S.A Manufaturing 249,672 249,672 1 100% 215,327 1 100% 4,015 Forever GIA British Virgin Islands Selling of mobile phones - - 61,420 61,420 - - 100% - 100% 101,739 - - 100% - 100% 79,661 CWV Vietnam Webtek Etrade British Virgin Islands R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components Investment 767,750 767,750 25,000 35% 7,446 25,000 35% 87,088 Unicore Raycore Taipei City Animal medication retail and wholesale - 40,692 - 0% - - 0% - Arcadyan Arcadyan Holding British Virgin Islands Investment 1,701,027 2,219,782 47,780 100% 1,804,421 64,780 100% (45,949) Arcadyan USA U.S.A Sales of wireless network products 23,055 23,055 Arcadyan Germany Germany Technology support and sales of wireless network products 1,125 1,125 1 1 100% 79,312 100% 87,814 1 1 100% (63,692) 100% 7,152 Arcadyan Korea Korea Sales of wireless network products 2,879 2,879 20 100% 24,216 20 100% 11,167 Zhi-Bao Hsinchu City Investment 48,000 48,000 34,980 100% 405,516 34,980 100% (10,735) TTI Taipei City R&D and sales of household digital products 308,726 308,726 25,028 61% 205,272 25,028 61% (256,058) AcBel Telecom Taipei City Investment - 23,000 - 0% - 4,494 51% 3,365 Share of profits/losses of investee 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 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 Note (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Table 9 The information on investees for the nine months ended September 30, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 118 (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Arcadyan Arcadyan UK Location UK Main Businesses and Products December 31, 2022 December 31, 2021 Shares Technical support of wireless network products 1,988 1,988 50 Percentage of Ownership 100% Carrying Value 4,759 Original Investment Amount Ending Balance The highest holdings in the period Shares Percentage of Ownership Net income (losses) of investee 50 100% 572 Arcadyan AU Australia Arcadyan RU Russia Sales of wireless network products Sales of wireless network products 1,161 1,161 50 100% 61,405 50 100% 18,089 7,672 7,672 - 100% 4,964 - 100% (1,713) CBN Hsinchu County Sales of communication and electronic components 11,925 11,925 533 1% 11,898 533 1% (57,588) Arcadyan and Zhi-Bao Arcadyan Brasil Brazil Sales of wireless network products 81,593 81,593 968 100% (41,645) 968 100% (23,669) Arcadyan India India Sales of wireless network products 29,110 13,507 7,500 100% 23,337 7,500 100% (4,001) Arcadyan Holding Sinoprime British Virgin Islands Investment 892,126 892,126 29,050 100% 1,223,179 29,050 100% 267,559 Arch Holding British Virgin Islands Investment 338,148 338,148 35 100% 827,635 35 100% (323,027) TTI Quest Samoa Investment 36,852 36,852 1,200 100% (230,523) 1,200 100% (142,972) TTJC Japan Sales of household digital electronic products 9,626 9,626 1 100% 3,297 1 100% (499) Quest Exquisite Samoa Investment 35,931 35,931 1,170 100% (232,168) 1,170 100% (142,975) Sinoprime Arcadyan Vietnam Vietnam Manufacturing of wireless network products 890,590 890,590 - 100% 1,218,634 - 100% 267,530 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% 293,202 13,140 19% (57,588) 257,454 257,454 8,651 41% 193,110 8,651 41% 59,449 Forming Co., Ltd. Taoyuan City R&D and manufacturing of 27,300 27,300 1,820 21% - 1,820 21% - CRH APH APH PEL electronic materials British Virgin Islands Investment British Virgin Islands Investment 383,875 383,875 12,500 59% 287,734 12,500 59% 59,449 96,767 96,767 3,151 100% 43,994 3,151 100% 456 Rayonnant(HK) Hong Kong Investment 552,780 552,780 18,000 100% 428,698 18,000 100% 58,993 HHT HHA HHA HHB British Virgin Islands Investment British Virgin Islands Investment CBN CBNB Belgium CBNN The Netherlands Starmems Taiwan 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 R&D of MEMS microphone related products 1,429,235 1,429,235 46,882 100% (1,091,269) 46,882 100% (360,633) 1,439,747 1,439,747 46,882 100% (1,091,210) 46,882 100% (360,633) 6,842 6,842 20 100% 5,386 20 100% (255) 7,016 7,016 20 100% 6,168 20 100% (118) 10,000 10,000 1,000 10% 7,140 1,000 10% (25,660) FGH Wah Yuen Technology Holding Ltd. and its subsidiaries Mauritius Investment 2,756,391 2,756,391 95,862 37% 4,580,629 95,862 37% (377,622) Mactech Taiwan Intelligent Robotics Company, Ltd. Taipei City Manufacturing of equipment and lighting 43,200 43,200 2,160 17% 2,395 2,160 17% (25,969) Note (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) Share of profits/losses of investee 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 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 Mactech (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Table 9 The information on investees for the nine months ended September 30, 2022 (excluding information on investees in Mainland China): 119 (December 31, 2022) Investor Company Poindus Systems Investee Company Poindus Investment Location Taipei City Main Businesses and Products investment holding December 31, 2022 December 31, 2021 4,100 4,100 Shares (Note 3) Percentage of Ownership 100% Carrying Value 559 Shares (Note 3) Percentage of Ownership Net income (losses) of investee 100% (61) Original Investment Amount Ending Balance The highest holdings in the period (In Thousands of New Taiwan Dollars/ shares) Poindus UK UK Sales of PCs and peripherals 14,297 14,297 300 100% (7,792) 300 100% (2,676) Adasys Germany Sales of PCs and peripherals 57,712 57,712 0.002 100% 1,866 0.002 100% (26,473) Poindus Investment Poindus GmbH Germany Sales of PCs and peripherals 1,721 1,721 (Note 3) 100% 135 (Note 3) 100% (61) 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: A limited company, therefore no number of shares. Note (Note 2) (Note 2) (Note 2) (Note 2) Share of profits/losses of investee Investment gain (losses) recognized by Poindus Systems Investment gain (losses) recognized by Poindus Systems Investment gain (losses) recognized by Poindus Systems Investment gain (losses) recognized by Poindus Investment (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 120 Table 10 Information on investment in Mainland China: (December 31, 2022) (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, 2022 1,136,270 Investment flows Outflow - Inflow - Accumulated outflow of investment from Taiwan as of December 31, 2022 1,136,270 Net income (losses) of the investee (301,556) Percentage of ownership 100% Investment income (losses) (Note 4) (301,556) Book value 2,597,603 Accumulated remittance of earnings in current period - Total amount of paid-in capital 1,136,270 Method of investment (Note 1) (In Thousands of New Taiwan Dollars/ shares) 614,200 (Note 2) 614,200 - - 614,200 36,769 100% 36,769 123,413 - Name of investee CPC CDT Main businesses and products Manufacturing and sales of monitors Manufacturing and sales of notebook PCs, mobile phones, and Digital products CET Manufacturing of notebook PCs 368,520 (Note 2) 368,520 - - 368,520 (341,528) 100% (341,528) 4,968,182 CSD Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technology service Zheng Ying Electronics (Chongqing) Co., Ltd. Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self -produced products BT Manufacturing of notebook PCs 264,852 (Note 2) (Note 3) - - - (178,620) 100% (178,620) 133,487 69,639 (Note 2) (Note 3) - - - - 51% - (43,757) 30,710 (Note 2) 30,710 - - 30,710 57,996 100% 57,996 (115,716) CGS Maintenance and warranty service of notebook PCs 8,828 (Note 2) (Note 3) 982,720 (Note 1) 409,364 - - - - - 7,260 100% 7,260 (38,545) 409,364 (568,185) 43% (245,342) 300,436 - - - - - - 614,200 (Note 1) 45,144 - - 45,144 (512,722) 48% (244,056) 308,175 - LIZ Electronics (Kunshan) Co., Ltd. LIZ Electronics (Nantong) Co., Ltd. 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:28874) 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 CIC Manufacturing of notebook PCs 368,520 (Note 2) 368,520 - - 368,520 739,180 100% 739,180 10,388,019 CPO Manufacturing and sales of LCD TVs 371,591 (Note 1) 371,591 - - 371,591 112,294 100% 112,294 3,047,731 - - (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 121 Table 10 Information on investment in Mainland China: (December 31, 2022) (i) The names of investees in Mainland China, the main businesses and products, and other information: Name of investee CIT Main businesses and products Manufacturing of notebook PCs Total amount of paid-in capital 737,040 Method of investment (Note 2) (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of January 1, 2022 737,040 Investment flows Outflow - Inflow - Accumulated outflow of investment from Taiwan as of December 31, 2022 Net income (losses) of the investee 737,040 954,634 Percentage of ownership 100% Investment income (losses) (Note 4) 954,634 Book value 25,750,770 Accumulated remittance of earnings in current period - CST International trade and distribution of computers and electronic components 42,994 (Note 2) 42,994 Sheng Bao Precision Electronics (Taicang) Co., Ltd. CIJ CDE CIS CEC CMC CEQ Compal Precision Module (Jiangsu) Co., Ltd. Changbao Electronic Technology (Chongqing) Co., Ltd. Rayonnant (Taicang) CCI Nanjing CDCN CWCN Hanhelt Arcadyan SVA Arcadyan CNC THAC Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self-produced products Investment and consulting services Manufacturing and sales of LCD TVs Outward investment and consulting services R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products Corporate management consulting, financial and tax consulting, investment consulting, and investment management consulting services R&D, manufacturing and sales of notebook PCs and related components. Also provides related maintenance and warranty services Manufacturing and selling of magnesium alloy injection molding Production and marketing of magnesium alloy molding 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 Manufacturing and wireless network products 307,100 (Note 2) 156,621 479,076 (Note 2) 479,076 460,650 (Note 2) (Note 3) 2,481,982 (Note 1) 2,481,982 2,456,800 (Note 2) (Note 3) - - - - - - - - - - - - 42,994 (8,091) 100% (8,091) 45,069 156,621 (4,805) 51% (2,450) 58,466 479,076 158,621 100% 158,621 2,643,288 - 160,011 100% 160,011 2,608,270 2,481,982 392,369 100% 392,369 5,400,819 - 392,329 100% 392,329 5,369,643 24,568 (Note 2) (Note 3) - - - 148 100% 148 24,729 307,100 (Note 1) 307,100 - - 307,100 190,136 100% 190,136 3,164,705 12,898,200 (Note 2) 2,537,475 1,842,600 (Note 2) 351,814 552,780 (Note 2) 383,875 829,170 (Note 1) 675,620 178,118 (Note 1) 178,118 1,504,790 (Note 1) 583,490 61,420 (Note 1) 61,420 248,751 (Note 1) 382,340 (Note 1) 412,128 (Note 7) 338,148 (Note 8) 35,317 - - - - - - - - - - - - - - - - - - - - 2,537,475 (1,093) 37% (400) 5,538,329 351,814 (218,529) 37% (80,025) 655,762 383,875 58,993 100% 58,993 429,298 675,620 (64,917) 100% (64,917) (1,168,454) 178,118 1,490 100% 1,490 90,840 583,490 155,008 100% 155,008 1,065,299 61,420 (2,771) 100% (2,771) (369) 412,128 6,199 100% 6,199 35,040 338,148 (323,027) 100% (323,027) 827,635 35,317 (142,975) 100% (142,975) (232,690) - - - - - - - - - - - - - - - - - - Manufacturing of household electronics products 102,879 (Note 1(cid:501) 9) (Continued) COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 122 Table 10 Information on investment in Mainland China: (December 31, 2022) (i) The names of investees in Mainland China, the main businesses and products, and other information: Name of investee HengHao Main businesses and products Total amount of paid-in capital Method of investment Accumulated outflow of investment from Taiwan as of January 1, 2022 Investment flows Outflow Inflow Accumulated outflow of investment from Taiwan as of December 31, 2022 Net income (losses) of the investee Percentage of ownership Investment income (losses) (Note 4) Book value Accumulated remittance of earnings in current period (In Thousands of New Taiwan Dollars/ shares) HengHao Kunshan Production of touch panels and related components 1,228,400 (Note 1) 1,222,350 Lucom Manufacturing of notebook PCs and related modules 460,650 (Note 2) 199,585 (Note 12) Poindus Systems Qijie Sales of PCs and peripherals 30,710 (Note 1) 30,710 - - - - - - 1,222,350 (361,185) 100% (361,185) (1,232,238) 199,585 671 100% 671 140,778 30,710 (10,931) 100% (10,931) 11,493 - - - (ii) Limitation on investment in Mainland China: Names of Company Accumulated Investment in Mainland China as of December 31, 2022 Investment Amounts Authorized by Investment Commission of Ministry of Economic Affairs The Company Arcadyan HengHao Poindus Systems 16,661,311 (US$542,537) (Note 5) 785,593 (US$25,581) 1,439,439 (US$46,872) 30,710 (US$1,000) 23,598,055 (US$768,416) 785,593 (US$25,581) 1,439,439 (US$46,872) 30,710 (US$1,000) (In Thousands of USD) Limitation on investment in Mainland China by Investment Commission of Ministry of Economic Affairs (Note 6) 8,284,344 (Note 12) 308,044 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”) and Compal Electronics (China) Co., Ltd. The investment income (loss) was determined based on the financial report reviewed 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. 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. The net equity of HengHao is negative at December 31, 2022. (iii) Significant transactions: For the year ended December 31, 2022, 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, 2022 and 2021 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 1 2 3 4 5 6 7 8 8 8～10 10～29 29～30 30～64 64～71 71 71～72 72 72 72～73 (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 73、85～96 73、97～101 74、102～103 74 74 75～84 KPMG (cid:9175)(cid:8958)(cid:11753)110615(cid:8136)(cid:20368)(cid:24022)5(cid:15260)7(cid:22086)68(cid:14842)((cid:9175)(cid:8958)101(cid:10510)(cid:14842)) 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) (cid:26338)(cid:729)(cid:729)(cid:23128) Tel (cid:8346)(cid:729)(cid:729)(cid:18182) Fax (cid:19865)(cid:729)(cid:729)(cid:10023) Web + 886 2 8101 6666 + 886 2 8101 6667 kpmg.com/tw 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, 2022 and 2021, the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2022 and 2021, 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, 2022 and 2021, and its financial performance and its cash flows for the years then ended December 31, 2022 and 2021, 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 Standards on Auditing of 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 Norm of Professional Ethics for Certified Public Account of Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirement. 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. KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 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, judgement of specific items, 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 Standards on Auditing of 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 the Standards on Auditing of the Republic of China, we exercise professional judgment and 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, 2023 COMPAL ELECTRONICS, INC. Balance Sheets December 31, 2022 and 2021 (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: December 31, 2022 Amount % December 31, 2021 Amount % $ 30,965,694 8.2 8,279,979 1.9 169,758,431 44.7 273,369,033 61.1 13,277,948 3,862,484 3.5 1.0 2,695,685 3,265,442 0.6 0.7 53,064,157 14.0 60,958,417 13.6 900,626 0.2 345,547 0.1 271,829,340 71.6 348,914,103 78.0 Investments accounted for using equity method (note (6)(g)) 98,259,876 25.9 88,992,850 19.9 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)(j)) Right-of-use assets (note (6)(k)) Intangible assets Deferred tax assets (note (6)(p)) Other non-current assets 249,567 3,133,840 2,417,309 1,033,366 529,906 1,743,609 336,598 0.1 0.8 0.6 0.3 0.1 0.5 0.1 222,303 - 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 0.1 107,704,071 28.4 98,434,111 22.0 1100 1170 1180 1200 1310 1470 1550 1510 1517 1600 1755 1780 1840 1990 2100 2130 2170 2180 2200 2230 2280 2300 2365 2322 2540 2570 2580 2640 2670 3110 3200 3300 3400 3500 Liabilities and Equity Current liabilities: Short-term borrowings (note (6)(l)) Current contract liabilities (note (6)(s)) 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)(n)) Other current liabilities Current refund liabilities Long-term borrowings, current portion (note (6)(m)) Non-Current liabilities: Long-term borrowings (note (6)(m)) Deferred tax liabilities (note (6)(p)) Non-current lease liabilities (note (6)(n)) Non-current net defined benefit liability (note (6)(o)) Non-current liabilities, others (note (6)(g)) Total liabilities Equity (note (6)(q)): Ordinary share Capital surplus Retained earnings Other equity interest Treasury shares Total equity 4 December 31, 2022 Amount % December 31, 2021 Amount % $ 53,068,579 14.0 78,967,920 17.7 700,046 78,000,744 76,181,679 13,119,799 3,872,974 249,553 2,005,816 2,012,229 19,300,000 0.2 20.6 20.1 3.4 1.0 0.1 0.5 0.5 5.1 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 3.5 248,511,419 65.5 324,236,031 72.5 11,225,000 1,177,418 791,427 566,941 966,452 14,727,238 3.0 0.3 0.2 0.1 0.3 3.9 8,625,000 950,327 991,342 716,131 469,118 11,751,918 1.9 0.2 0.2 0.2 0.1 2.6 263,238,657 69.4 335,987,949 75.1 44,071,466 11.6 5,078,580 1.3 44,071,466 6,724,856 9.8 1.5 69,969,059 18.4 69,651,940 15.6 (1,943,104) (0.5) (8,206,750) (1.8) (881,247) (0.2) (881,247) (0.2) 116,294,754 30.6 111,360,265 24.9 Total assets $ 379,533,411 100.0 447,348,214 100.0 Total liabilities and equity $ 379,533,411 100.0 447,348,214 100.0 See accompanying notes to financial statements. COMPAL ELECTRONICS, INC. Statements of Comprehensive Income For the years ended December 31, 2022 and 2021 (Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share) 5 Net sales revenue (notes (6)(s) and (7)) Cost of sales (notes (6)(f), (6)(o), (7) and (12)) Gross profit Operating expenses: (notes (6)(o) and (12)) Selling expenses Administrative expenses Research and development expenses Net operating income Non-operating income and expenses: Interest income (note (6)(u)) Other gains and losses, net (note (6)(u)) Finance costs (note (6)(n)) Other income (note (6)(u)) 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)(p)) Profit Other comprehensive income: 2022 2021 Amount % Amount % $1,003,642,791 100.0 1,171,613,858 100.0 975,074,956 97.2 1,143,709,503 97.6 28,567,835 2.8 27,904,355 2.4 6,211,342 2,831,405 12,263,065 21,305,812 7,262,023 367,313 790,769 0.6 0.3 1.2 2.1 0.7 - 0.1 5,720,031 2,677,154 11,928,778 20,325,963 7,578,392 45,045 591,365 0.5 0.3 1.0 1.8 0.6 - 0.1 (2,546,827) (0.3) (692,890) (0.1) 334,311 1,826,023 771,589 8,033,612 745,320 7,288,292 - 0.2 - 0.7 0.1 0.6 347,999 - 6,573,057 6,864,576 14,442,968 1,810,301 12,632,667 0.6 0.6 1.2 0.1 1.1 Components of other comprehensive income (loss) that will not be reclassified to profit or loss Gains (losses) on remeasurements of defined benefit plans 134,331 - (46,186) Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income (610,977) (0.1) 466,327 - - - - - (434,424) 3,589 - - 279,206 31,660 667,687 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)(p)) (914,659) (0.1) Components of other comprehensive income (loss) that will be reclassified to profit or loss Exchange differences on translation of foreign financial statements 7,183,714 0.7 (1,791,462) (0.1) 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 78,865 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss Other comprehensive income Total comprehensive income Earnings per share (note (6)(r)) Basic earnings per share Diluted earnings per share - 7,262,579 6,347,920 13,636,212 $ $ $ - - 0.7 0.6 1.2 1.67 1.66 (63,362) - - - (1,854,824) (1,187,137) 11,445,530 (0.1) (0.1) 1.0 2.90 2.86 4000 5000 6100 6200 6300 7100 7020 7050 7190 7370 7900 7950 8300 8310 8311 8316 8330 8360 8361 8380 8399 8300 8500 9750 9850 See accompanying notes to financial statements. COMPAL ELECTRONICS, INC. Statements of Changes in Equity For the years ended December 31, 2022 and 2021 (Expressed in Thousands of New Taiwan Dollars) Retained earnings Balance at January 1, 2021 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 Balance at December 31, 2021 Profit for the year ended December 31, 2022 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 8,342,813 - - - - - - (1,762,859) 61,825 2,132 80,027 918 - 6,724,856 - - - - - - (1,762,859) 33,397 (18,066) 100,035 1,217 Legal reserve 20,414,740 - - - 924,672 - - - - - - - - 21,339,412 - - - 1,237,434 - - - - - - - comprehensive income Balance at December 31, 2022 - $ 44,071,466 - 5,078,580 - 22,576,846 Special reserve 4,101,743 - - - - 3,164,965 - - - - - - - 7,266,708 - - - - 940,042 - - - - - - - 8,206,750 Unappropriated retained earnings 38,049,698 12,632,667 (40,067) 12,592,600 (924,672) (3,164,965) (5,288,576) (25,946) (49,878) - - - Total retained earnings 62,566,181 12,632,667 (40,067) 12,592,600 - - (5,288,576) - (25,946) (49,878) - - (142,441) 41,045,820 7,288,292 118,035 7,406,327 (142,441) 69,651,940 7,288,292 118,035 7,406,327 (1,237,434) (940,042) (7,051,435) (2,260) (38,351) - - - - - (7,051,435) - (2,260) (38,351) - - 2,838 39,185,463 2,838 69,969,059 Exchange differences on translation of foreign financial statements (6,888,977) - (1,855,728) (1,855,728) - - - - - - - - - (8,744,705) - 7,274,994 7,274,994 - - - - - - - - - (1,469,711) See accompanying notes to financial statements. 6 Treasury shares Total equity (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 7,288,292 6,347,920 13,636,212 - - - - - - - - - - - - - - (7,051,435) (1,762,859) 31,137 (19,818) 100,035 1,217 - (881,247) 116,294,754 Total other equity interest Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income Others Total other equity interest (779) (7,266,708) - (1,147,070) (1,147,070) 904 904 (376,952) - 707,754 707,754 - - - - - - 14,709 49,878 142,441 537,830 - (1,032,694) (1,032,694) - - - - - - - 36,599 - - - - - - - - - - 125 - (12,415) (12,415) - - - - - - - - - - - - 14,709 49,878 - - 142,441 (8,206,750) - 6,229,885 6,229,885 - - - - - 36,599 - - (2,838) (461,103) - (12,290) (2,838) (1,943,104) COMPAL ELECTRONICS, INC. Statements of Cash Flows For the years ended December 31, 2022 and 2021 (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 Expected credit loss Net loss (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 Others Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in notes and accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventories (Increase) decrease in other current assets Total changes in operating assets Changes in operating liabilities: (Decrease) increase in notes and accounts payable Increase in other payables Increase in refund liabilities (Decrease) increase in contract liabilities Increase 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 other comprehensive income Acquisition of investments accounted for using equity method Proceeds from capital reduction and liquidation of investments Acquisition of property, plant and equipment (Increase) decrease in other receivables due from related parties Acquisition of intangible assets Others Net cash flows used in investing activities Cash flows from (used in) financing activities: (Decrease) increase 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 (used in) from 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 2022 2021 $ 8,033,612 14,442,968 1,292,481 10,092 17,430 2,546,827 (367,313) (60,493) (1,826,023) 7,903 1,620,904 92,993,745 861,286 7,894,260 (440,998) 101,308,293 (56,853,309) 2,252,516 456,262 (332,145) 936,481 (14,859) (53,555,054) 47,753,239 49,374,143 57,407,755 363,622 762,393 (2,149,093) (1,345,557) 55,039,120 (293,452) 10,028 (723,290) 2,010 (332,902) (1,417,334) (558,111) (116,556) (3,429,607) (25,899,341) 79,109,500 (72,884,500) (439,591) (8,814,294) 4,428 (28,923,798) 22,685,715 8,279,979 30,965,694 $ 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 COMPAL ELECTRONICS, INC. Notes to the Financial Statements For the years ended December 31, 2022 and 2021 (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, 2023. (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 financial statements, from January 1, 2022: ● 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” (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, 2023, would not have a significant impact on its financial statements: ● 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” (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” Amendments to IAS 1 “Non- current Liabilities with Covenants” Effective date per IASB January 1, 2024 January 1, 2024 Content of amendment IAS 1 requirements, Under existing companies classify a liability as current when they do not have an unconditional right to defer settlement for at least 12 the reporting date. The months after amendments has removed the requirement for a right to be unconditional and instead now requires that a right to defer settlement must exist at the reporting date and have substance. The amendments clarify how a company classifies a liability that can be settled in its own shares – e.g. convertible debt. new amendments1, After reconsidering certain aspects of the 2020 1 amendments clarify that only covenants with which a company must comply on or before the classification of a liability as current or non-current. reporting date affect IAS the Covenants with which the company must comply after the reporting date (i.e. future covenants) do not affect a liability’ s classification at that date. However, when non-current liabilities are subject to future covenants, companies will now need to disclose users understand the risk that those liabilities could become repayable within 12 months after the reporting date. information help to 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: (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 10 ● 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 IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “ ● IFRS16 “Requirements for Sale and Leaseback Transactions” (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. (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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 11 (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. 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 12 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. 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”). (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 13 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. 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 14 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. 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). (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 15 The maximum period considered when estimating ECLs is the maximum contractual period over which the Company 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 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 16 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. 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. 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) 3) 4) Buildings: 35~50 years Building improvement: 2~12 years 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 21 (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 － 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 22 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. 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 23 (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: In preparing these financial statements, management has made 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 Cash equivalents December 31, 2022 December 31, 2021 $ $ 3,504 27,183,895 652,991 3,125,304 30,965,694 1,741 8,210,472 67,766 - 8,279,979 Please refer to note (6)(v) 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, 2022 December 31, 2021 $ $ 117,150 132,417 249,567 137,540 84,763 222,303 (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)(v). As of December 31, 2022 and 2021, 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, 2022 December 31, 2021 $ 1,688,060 2,016,402 579,341 782,312 84,127 695,728 614,907 181,060 $ 3,133,840 3,508,097 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, 2021, the Company has sold all of its shareholdings, measured at fair value through other comprehensive income, in GENKI SANGA HOLDINGS CO., LTD. The fair value of the shares upon disposal amounted to $10,028, resulting in a cumulative loss of $2,838, 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, 2022 and 2021, will be $156,692 and $175,405, 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)(v). As of December 31, 2022 and 2021, 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 allowance for sales returns and discounts Notes and accounts receivable Notes and accounts receivable – related parties December 31, 2022 $ 170,615,775 December 31, 2021 247,202,299 16,091,084 32,498,305 186,706,859 279,700,604 (3,642,881) (3,632,789) (27,599) (3,097) $ 183,036,379 276,064,718 $ 169,758,431 273,369,033 $ 13,277,948 2,695,685 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, 2022 Carrying amount of notes and accounts receivable $ 176,980,832 6,102,290 3,623,737 $ 186,706,859 Weighted- average ECL rate 0% 0.314% 100% Credit rating Level A Level B Level C Lifetime ECLs - 19,144 3,623,737 3,642,881 Credit- impaired No No Yes (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 33 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 The aging analysis of notes and accounts receivable, was determined as follows: Overdue 1 to 180 days December 31, 2022 December 31, 2021 $ 1,306,052 264,733 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 2022 2021 3,632,789 3,634,794 10,092 (2,005) 3,642,881 3,632,789 $ $ 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, 2022 and 2021, 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, 2022 and 2021, 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, 2022 and 2021, 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 $ 30,110,005 Accounts receivable factored (gross) Purchaser Financial Institution $ 33,585,262 December 31, 2022 Amount advanced Paid Unpaid Amount recognized in other receivables Amount Collateral derecognized Interest rate - 30,110,005 - - 30,110,005 4.74%~5.61% 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% As of December 31, 2022 and 2021, 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, 2022 December 31, 2021 $ $ 2,979,700 221,214 661,570 3,862,484 1,608,560 137,717 1,519,165 3,265,442 As of December 31, 2022 and 2021, none of other receivables were past due. (f) Inventories Finished goods Work in progress Raw materials December 31, 2022 15,471,653 1,276,477 36,316,027 53,064,157 $ $ December 31, 2021 7,535,072 1,188,814 52,234,531 60,958,417 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 35 (i) During the years ended December 31, 2022 and 2021, inventory cost recognized as cost of sales amounted to $975,074,956 and $1,143,709,503, respectively. (ii) The loss due to the write-down of inventories to net realizable value amounted $937,684 and $1,795,897 for the years ended December 31, 2022 and 2021, respectively. (iii) As of December 31, 2022 and 2021, 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, 2022 93,821,244 $ December 31, 2021 84,948,309 3,259,336 3,345,350 97,080,580 88,293,659 Plus: Accounts receivable and other receivables-related parties 227,599 240,400 Credit balance of investment in equity method (other non- current liability) Less: unrealized profits or losses 961,854 (10,157) 468,948 (10,157) $ 98,259,876 88,992,850 (i) Subsidiaries Please refer to the consolidated financial statement for the year ended December 31, 2022. (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, 2022 December 31, 2021 $ $ 1,031,010 1,214,819 2,245,829 1,686,183 849,180 2,535,363 2) The Company’s share of the net gain (loss) of associates was as follows: The Company’s share of the gain of associates 2022 (179,262) $ 2021 471,621 (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, 2022 December 31, 2021 Carrying amount of individually immaterial associates $ 3,259,336 3,345,350 The Company’s share of the net income (loss) of associates: Profit from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) $ $ (179,262) 149,704 (29,558) 471,621 160,378 631,999 2022 2021 (iii) As of December 31, 2022 and 2021, the Company did not provide any investments accounted for using equity method as collaterals for its loans. (h) Corporate combination In order to accelerate the deployment in the industrial PCs market, the Company made a tender offer for 56% ownership of Poindus Systems Corp, Ltd. (“Poindus Systems”) at a total price of $353,046. The aforementioned price was paid, and the settlement had been completed. Goodwill arising from the acquisition of 56% ownership is as follows: Consideration transferred Non-controlling interests Less: fair value of identifiable net assets $ $ 353,046 247,882 (563,868) 37,060 Goodwill is mainly derived from the business value of Poindus Systems in the industrial PCs market. It is expected that the business of Poindus System and the Company business will be integrated to generate synergy. (i) 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 new shares because of its employees’ exercised stock options in 2021, resulting in a decrease in the ownership of the Company and its subsidiaries in CBN by 0.02%. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 37 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%. 4) Cancellation of subsidiaries’ restricted shares and conversion of convertible bonds Arcadyan canceled 30 thousand and 53 thousand restricted shares in the years ended December 31, 2022 and 2021. Whereas, Arcadyan issued 3,892 thousand and 8,136 thousand new shares due to the conversion of convertible bonds during 2022 and 2021. These two events, respectively, resulted in a decrease of 0.59% and 1.30% the ownership of the Company and its subsidiaries in Arcadyan in the years ended December 31, 2022 and 2021. CBN canceled 469 thousand restricted shares in the year ended December 31, 2022. This event resulted in an increase of 0.43% the ownership of the Company and its subsidiaries in CBN in the year ended December 31, 2022. 5) The acquisition of additional equity in the subsidiary In June 2022, the Company acquired 0.12% of equity interest in GLB from minority shareholders with $700 in cash, increasing equity from 50.00% to 50.12%. In August 2021, the Company acquired 49% of equity interest in Raycore Biotech from minority shareholders with $15,129 in cash, increasing the equity from 51% to 100%. 6) 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 2022 2021 33,397 (2,260) 31,137 61,825 (11,237) 50,588 $ (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 38 (j) Property, plant and equipment The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2022 and 2021, were as follows: Cost: Balance on January 1, 2022 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2022 Balance on January 1, 2021 Additions Disposals and derecognitions Effect of movements in exchange rates Balance on December 31, 2021 Depreciation and impairments loss: Balance on January 1, 2022 Depreciation for the period Disposals and derecognitions Reclassifications Balance on December 31, 2022 Balance on January 1, 2021 Depreciation for the period Disposals and derecognitions Balance on December 31, 2021 Carrying amounts: Balance on December 31, 2022 Balance on January 1, 2021 Balance on December 31, 2021 Buildings and building improvement Other equipment Land Under construction and prepayment for purchase of equipment Total $ 1,047,797 2,556,398 2,790,052 27,476 6,421,723 - - - 36,218 198,484 98,200 332,902 (100,195) (91,188) - (191,383) (42,487) 144,906 (102,419) - $ $ 1,047,797 2,449,934 3,042,254 23,257 6,563,242 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 $ $ $ $ $ $ $ - - - - - - - - - 1,682,354 2,254,406 110,767 275,322 (99,968) (76,948) (42,487) 42,487 1,650,666 2,495,267 1,554,775 2,141,745 127,579 265,151 - (152,490) 1,682,354 2,254,406 - - - - - - - - - 3,936,760 386,089 (176,916) - 4,145,933 3,696,520 392,730 (152,490) 3,936,760 1,047,797 1,047,797 1,047,797 799,268 963,725 874,044 546,987 583,815 535,646 23,257 2,417,309 9,556 2,604,893 27,476 2,484,963 As of December 31, 2022 and 2021, the Company did not provide property, plant and equipment as collateral for its borrowing. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 39 (k) 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, 2022 Additions Deductions Balance on December 31, 2022 Balance on January 1, 2021 Additional Deductions Balance on December 31, 2021 Depreciation: Balance on January 1, 2022 Depreciation for the period Deductions Balance on December 31, 2022 Balance on January 1, 2021 Depreciation for the period Deductions Balance on December 31, 2021 Carrying amount: Balance on December 31, 2022 Balance on January 1, 2021 Balance on December 31, 2021 $ $ $ $ $ $ $ $ $ 2,263,891 151,796 (347,237) 2,068,450 1,983,275 529,032 (248,416) 2,263,891 927,542 440,095 (327,450) 1,040,187 711,010 463,549 (247,017) 927,542 1,028,263 1,272,265 1,336,349 28,374 532 (183) 28,723 45,174 2,365 (19,165) 28,374 17,464 6,156 - 23,620 27,314 9,315 (19,165) 17,464 5,103 17,860 10,910 2,292,265 152,328 (347,420) 2,097,173 2,028,449 531,397 (267,581) 2,292,265 945,006 446,251 (327,450) 1,063,807 738,324 472,864 (266,182) 945,006 1,033,366 1,290,125 1,347,259 (l) Short-term borrowings The details of short-term borrowings were as following: Unsecured bank loans Unused credit line for short-term borrowings Range of interest rates December 31, 2022 53,068,579 December 31, 2021 78,967,920 94,657,000 48,648,000 1.45%~5.38% 0.42%~0.78% $ $ For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(v). (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 40 (m) Long-term borrowings The details of long-term borrowings were as follows: Unsecured bank loans Less: current portion Total Unused credit line for long-term borrowings Unsecured bank loans Less: current portion Total Unused credit line for long-term borrowings December 31, 2022 Currency TWD Range of annual interest rates 1.48%~2.06% Maturity year 2023~2026 December 31, 2021 Currency TWD Range of annual interest rates 0.62%~0.98% Maturity year 2022~2024 Amount 30,525,000 (19,300,000) 11,225,000 12,969,000 Amount 24,300,000 (15,675,000) 8,625,000 11,803,000 $ $ $ $ $ $ For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(v). (n) Lease liabilities The details of lease liabilities were as follows: Current Non-current For the maturity analysis, please refer to note (6)(v). The amounts recognized in profit or loss was as follows: December 31, 2022 December 31, 2021 $ $ 249,553 791,427 357,794 991,342 Interest on lease liabilities Expenses relating to leases of low-value assets or short-term leases 2022 2021 15,115 16,915 9,113 9,221 $ $ (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 41 The amounts recognized in the statement of cash flows for the Company was as follows: Total cash outflow for leases (i) Building leases 2022 2021 $ 463,819 505,744 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. (o) 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, 2022 (1,185,366) December 31, 2021 (1,318,160) 618,425 602,029 (566,941) (716,131) $ $ 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 42 The balance of the Company’ s labor pension reserve account in the Bank of Taiwan amounted to $612,388 (excluding the ending balance of interest receivable) as of December 31, 2022. 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 $ (1,318,160) 2022 Current service costs and interest Remeasurements of net benefit liabilities Benefit paid by the plan (13,894) 87,865 58,823 2021 (1,286,459) (10,148) (54,331) 32,778 Defined benefit obligations on December 31 $ (1,185,366) (1,318,160) 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: 2022 2021 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 $ 602,029 4,317 46,466 24,436 (58,823) 618,425 599,405 2,857 8,145 24,400 (32,778) 602,029 4) Expenses recognized in profit or loss The expenses recognized in profit or loss for the Company were as follows: Current service cost Net interest on the net defined benefit liability (asset) 2022 2021 $ $ 3,952 5,625 9,577 3,920 3,371 7,291 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Cost of sales Selling expenses Administrative expenses Research and development expenses 5) Actuarial assumptions 2022 2021 $ $ 351 456 2,394 6,376 9,577 43 257 352 1,831 4,851 7,291 The following were the Company’s principal actuarial assumptions at the reporting date: Discount rate Future salary increase rate December 31, 2022 1.70% December 31, 2021 0.80% 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 $24,383. The weighted-average lifetime of the defined benefit plan is 8.1 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, 2022 Discount rate Future salary increasing rate December 31, 2021 Discount rate Future salary increasing rate Effects to the defined benefit obligation Increased 0.25% Decreased 0.25% (23,229) 23,643 (28,902) 29,212 23,998 (23,005) 29,922 (28,374) 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 44 (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 $421,223 and $391,223 for the years ended December 31, 2022 and 2021, respectively. Payment was made to the Bureau of Labor Insurance. (p) Income taxes (i) Income tax expenses 1) The amount of income tax for the years ended December 31, 2022 and 2021, was as follows: Current tax expense Recognized during the period $ 1,627,923 2,262,124 2022 2021 Undistributed earnings additional tax Tax credit of investment Deferred tax expense Recognition and reversal of temporary differences Income tax expense 157,833 - (638,549) (525,167) 1,147,207 1,736,957 (401,887) (401,887) 73,344 73,344 $ 745,320 1,810,301 2) The amount of income tax recognized in other comprehensive income for the years ended December 31, 2022 and 2021, 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 2022 2021 $ $ 26,866 (9,237) (23,277) 3,589 40,897 31,660 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 45 3) The income tax expense that was reconciled between the actual income tax expense and profit before tax for the years ended December 31, 2022 and 2021, 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 Income tax expense 2022 8,033,612 1,606,722 157,833 2021 14,442,968 2,888,594 - (372,094) (98,000) (638,549) 362,434 (273,026) 745,320 (84,031) (65,440) (525,167) (915,638) 511,983 1,810,301 $ $ $ (ii) Deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2022 and 2021 were as follows: Exchange differences on translation Refund liabilities Contract liabilities Unrealized exchange losses, net Others Total Deferred tax assets: Balance on January 1, 2022 $ Recognized in profit or loss Recognized in other 164,573 47,663 comprehensive income - Balance on December 31, 2022 $ 212,236 Balance on January 1, 2021 $ Recognized in profit or loss Recognized in other 68,560 96,013 195,296 91,252 - 286,548 134,880 60,416 89,998 (68,036) 394,836 580,646 273,517 1,118,220 730 652,255 - 21,962 49,536 40,462 - 975,482 588,025 (193,189) (26,866) (26,866) 247,381 261,653 2,627 1,743,609 1,102,654 6,329 comprehensive income - - - - 9,237 9,237 Balance on December 31, 2021 $ 164,573 195,296 89,998 394,836 273,517 1,118,220 Deferred tax liabilities: Balance on January 1, 2022 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2022 Balance on January 1, 2021 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021 Unrealized exchange gains, net Others Total $ $ $ $ (504,663) (250,368) - (755,031) (424,990) (79,673) - (445,664) - 23,277 (950,327) (250,368) 23,277 (422,387) (1,177,418) (404,767) (829,757) - (40,897) (79,673) (40,897) (504,663) (445,664) (950,327) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 46 (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, 2022 December 31, 2021 $ 738,878 599,004 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, 2022 and 2021, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $2,618,241 and $2,335,023, respectively. As of December 31, 2022 and 2021, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $68,285,943 and $58,601,692, respectively. (v) Examination and approval The Company’s tax returns for the year through 2020 were assessed by the tax authorities. (q) Capital and other equities (i) Ordinary shares As of December 31, 2022 and 2021, 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 47 (ii) Capital surplus The balances of capital surplus were as follows: Additional paid-in capital Treasury share transactions December 31, 2022 December 31, 2021 $ 1,898,477 2,721,968 3,660,119 2,621,933 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 36,766 156,072 36,766 122,675 for using equity method 265,297 283,363 $ 5,078,580 6,724,856 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 15, 2022 and March 26, 2021, approved to distribute cash of $1,762,859 and $1,762,859 (representing 0.4 and 0.4 New Taiwan dollars per share), by using capital surplus. The Company’s Board of Directors’ meeting held on March 15, 2023, approved to distribute cash of $881,429 (representing 0.2 New Taiwan dollars per share), by using capital surplus. The related information can be accessed through the Market Observation Post System website. (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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 48 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. 3) Earnings distribution Distribution for the earnings of 2021 and 2020 were approved in the meeting of the Board of Directors held on March 15, 2022 and March 26, 2021, respectively. The relevant information was as follows: 2021 2020 Amount per share Total amount Amount per share Total amount Cash dividends distributed to common shareholders $ 1.6 7,051,435 1.2 5,288,576 Distribution for the earnings of 2022 was approved in the meeting of the Board of Directors held on March 15, 2023. The relevant information was as follows: (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 49 2022 Amount per share Total amount Cash dividends distributed to common shareholders from the unappropriated earnings $ 1.0 4,407,147 The related information of the earnings distribution for the year ended December 31, 2022, 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, 2022 and 2021. As of December 31, 2022, 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 23.05 and 24.20 New Taiwan dollars per share as of December 31, 2022 and 2021, 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. (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, 2022 $ (8,744,705) The Company Subsidiaries Associates 7,183,714 9,700 81,580 537,830 (590,539) (420,019) 11,625 Balance on December 31, 2022 Balance on January 1, 2021 $ $ (1,469,711) (461,103) (6,888,977) (376,952) The Company Subsidiaries Associates (1,791,462) (38,894) (25,372) Balance on December 31, 2021 $ (8,744,705) 567,871 160,972 185,939 537,830 - - - - 125 (8,206,750) 6,593,175 (12,415) (422,734) 93,205 (12,290) (1,943,104) (779) (7,266,708) 904 (1,223,591) 122,982 160,567 125 (8,206,750) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 50 (r) 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 $ 7,288,292 12,632,667 2022 2021 Weighted-average number of outstanding ordinary shares (in thousands) Diluted earnings per share: 4,357,130 4,357,130 Profit attributable to ordinary shareholders of the Company (after adjustment of potential diluted ordinary shares) $ 7,288,292 12,632,667 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 43,369 65,517 Weighted-average number of ordinary shares (after adjustment of potential diluted ordinary shares) (in thousands) 4,400,499 4,422,647 (s) 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 2022 IT Product Segment 422,138,779 $ 2021 IT Product Segment 475,525,614 128,937,847 152,490,382 67,399,114 86,279,648 40,249,464 49,815,031 344,917,587 407,503,183 $ 1,003,642,791 1,171,613,858 $ 1,002,242,692 1,170,311,198 1,400,099 1,302,660 $ 1,003,642,791 1,171,613,858 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 51 (ii) Contract balance Notes and accounts receivable (including related parties) Less: allowance for impairment Less: credit balances of investments in equity method Total Contract liabilities December 31, 2022 December 31, 2021 January 1, 2021 $ 186,706,859 (3,642,881) 279,700,604 (3,632,789) 233,054,851 (3,634,794) (27,599) $ 183,036,379 700,046 $ (3,097) 276,064,718 1,032,191 - 229,420,057 828,978 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, 2022 and 2021 that was included in the balances of contract liability at the beginning of the period were $1,032,191 and $828,978, 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. (t) 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 $750,945 and $1,350,062, respectively, and directors’ compensation of $39,709 and $71,370 for the years ended December 31, 2022 and 2021, 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 2022 and 2021. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 52 There is no differences between the amount estimated and recognized in the financial statements in 2021. The related information can be accessed through the Market observation Post System website. (u) Non-operating income and expenses (i) Interest income The interest income for the years ended December 31, 2022 and 2021, were as follows: Interest income from bank deposits Interest income from financial assets measured at amortized cost 2022 2021 $ $ 283,350 83,963 367,313 18,611 26,434 45,045 (ii) Other income The other income for the years ended December 31, 2022 and 2021, were as follows: Dividend revenue Government grants Rental revenue Other revenue (iii) Other gains and losses 2022 2021 $ $ 60,493 107,861 16,993 148,964 334,311 65,011 73,055 11,278 198,655 347,999 The other gains and losses for the years ended December 31, 2022 and 2021, were as follows: Gains (losses) on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange gains (losses), net Others 2022 2021 $ $ (17,430) 818,212 (10,013) 790,769 14,212 577,882 (729) 591,365 (v) 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, 2022 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables Lease liabilities–current and non-current December 31, 2021 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables Lease liabilities–current and non-current $ 83,593,579 154,182,423 13,119,799 (83,593,579) (154,182,423) (13,119,799) (72,368,579) (154,182,423) (13,119,799) (5,400,000) (5,825,000) - - - - 1,040,980 $ 251,936,781 (1,072,067) (251,967,868) (262,093) (239,932,894) (297,430) (5,697,430) (512,544) (6,337,544) $ 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) 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, 2022 Exchange rate Foreign currency TWD December 31, 2021 Exchange rate Foreign currency TWD $ 7,083,219 30.71 217,525,655 10,410,005 27.68 288,148,938 652,264 0.8882 579,341 842,184 0.8261 695,728 6,429,305 30.71 197,443,957 10,373,943 27.68 287,150,742 Financial assets Monetary items USD to TWD 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, 2022 and 2021, 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, 2022 December 31, 2021 $ 1,004,085 49,910 (1,004,085) (49,910) 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, 2022 and 2021, the foreign exchange gains, including both realized and unrealized, amounted to $818,212 and $577,882, 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, 2022 and 2021, 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 2022 2021 $ 28,128 (28,128) (18,994) 18,994 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, 2022 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 $ 249,567 - Stocks listed on domestic markets 1,688,060 1,688,060 Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal 579,341 782,312 84,127 16,091,084 19,224,924 579,341 - - - - - - - - 249,567 249,567 - - 782,312 84,127 1,688,060 579,341 782,312 84,127 16,091,084 - 16,091,084 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 56 December 31, 2022 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 30,965,694 153,667,347 13,277,948 3,862,484 506,040 202,279,513 $ 221,754,004 $ 53,068,579 78,000,744 76,181,679 13,119,799 1,040,980 19,300,000 11,225,000 4,598 $ 251,941,379 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 57 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 58 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 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, 2022 and 2021. (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, 2022 and 2021, were as follow: Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Total Balance on January 1, 2022 $ 222,303 795,967 1,018,270 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment Balance on December 31, 2022 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 $ $ $ - - - - - (17,430) 44,694 249,567 158,769 8,535 54,999 222,303 - - (166,248) 248,758 (10,028) (2,010) 866,439 869,099 (233,782) 169,152 (8,502) 795,967 (17,430) (166,248) 293,452 (10,028) (2,010) 1,116,006 1,027,868 8,535 (233,782) 224,151 (8,502) 1,018,270 For the years ended December 31, 2022 and 2021, 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”) $ $ 2022 2021 (17,430) 8,535 (169,524) (233,651) 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 60 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 (2.04~2.89 and 3.56~11.62, respectively, on December 31, 2022 and 2021) Multiples of earnings (17.25 on December 31, 2022) Lack-of-Marketability discount rate (40%~65% and 40%~85%, respectively, on December 31, 2022 and 2021) 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 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 Input Price-Book ratio multiples December 31, 2022 Financial assets at fair value through other comprehensive income December 31, 2021 Financial assets at fair value through other comprehensive income Multiples of earnings 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% 5% $ $ $ $ $ 6,617 6,433 2,787 3,428 2,771 3,628 14,252 12,651 750 909 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. (w) 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, 2022 and 2021, the guarantees provide to the subsidiaries amounted to $149,014 and $413,781, 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)(l) and (6)(m) for unused credit lines of short-term and long-term borrowings as of December 31, 2022 and 2021. (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. (x) 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, 2022 and 2021, the debt ratio was as follows: Total liabilities Total assets Debt ratio December 31, 2022 $ 263,238,657 December 31, 2021 335,987,949 $ 379,533,411 447,348,214 69% 75% 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, 2022, there were no changes in the Company’ s approach of capital management. (y) 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, 2022 and 2021 were acquisition of right-of-use assets by leasing, please refer to note (6)(k). 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, 2022 78,967,920 24,300,000 1,349,136 170 Cash flow (25,899,341) 6,225,000 (439,591) 4,428 Other non- cash changes - - 131,435 - December 31, 2022 53,068,579 30,525,000 1,040,980 4,598 $ 104,617,226 (20,109,504) 131,435 84,639,157 $ 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 (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 Rayonnant Technology Co., Ltd. (“Rayonnant Technology”) 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 65 HengHao Technology Co., Ltd. (“HengHao”) Name of related party 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 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”) Compower Global Service Co., Ltd. (“CGS”) Compal Investment (Jiansu) Co., Ltd. (“CIJ”) 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 66 Compal Display Electronics (Kunshan) Co., Ltd. (“CDE”) Name of related party 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 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”) 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 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”) Exquisite Electronic Co., Ltd. (“Exquisite”) Tatung Home Appliances (Wujiang) Co., Ltd. (“THAC”) Tatung Technology of Japan Co., Ltd. (“TTJC”) Intelligent Universal Enterprise Ltd. (“IUE”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 67 Name of related party Goal Reach Enterprises Ltd. (“Goal”) Compal (Vietnam) Co., Ltd. (“CVC”) Relationship with the Company 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”) 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”) Aco Smartcare Co., Ltd. (“Aco Smartcare”) Starmems Semiconductor Corp. (“Starmems Semiconductor”) 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 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”) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 68 Compal USA (Indiana), Inc. (“CIN”) Name of related party Relationship with the Company The Company’s subsidiary Compal Ruifang Health Assets Development Corporation (“Compal The Company’s subsidiary Ruifang”) Poindus Systems Corp, Ltd. (“Poindus Systems”) Poindus Investment Co., Ltd. (“Poindus Investment”) QiJie Electronics (ShenZhen) Co., Ltd. (“QiJie”) Poindus Systems UK Limited (Poindus UK) Adasys GmbH Elektronische Komponenten (Adasys) The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary The Company’s subsidiary Poindus Systems GmbH GroBhandel mit EDV. Oberursel (Poindus GmbH) The Company’s subsidiary Compal Connector Manufacture Ltd. (“CCM”) A joint venture company Compal Precision Module (Jiangsu) Co., Ltd. (“CPM”) Changbao Electronic Technology (Chongqing) Co., Ltd. (“Changbao”) Avalue Crownpo Technology Inc. (“Crownpo”) Allied Circuit LIZ Electronics (Kunshan) Co., Ltd. (“LIZK”) LIZ Electronics (Nantong) Co., Ltd. (“LIZN”) ARCE Therapeutics Co., Ltd. (“ARCE”) Raypal Biomedical Co., Ltd. (“Raypal”) Hong Ya Technology Corporation (“Hong Ya Technology”) Kinpo Group Management Consultant Company (“Kinpo Group Management”) AcBel Polytech Inc. (AcBel) and its subsidiaries (“AcBel”) An associate An associate 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 Cal-Comp Electronics (Thailand) Public Company Limited (“Cal-Comp”) The same Chairman of the Board Kinpo Electronics, Inc. (“Kinpo”) (b) Transactions with key management personnel Key management personnel remunerations comprised: Short-term employee benefits Post-employment benefits There are no termination benefits and other long-term benefits. with the Company The same Chairman of the Board with the Company 2022 478,681 5,925 484,606 $ $ 2021 598,395 5,643 604,038 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 69 (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 2022 6,778,358 $ 2021 1,777,777 171 - 190 30,429 $ 6,778,529 1,808,396 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 2022 2021 $ 129,409,933 175,003,681 249,433,436 241,832,462 378,843,369 416,836,143 633 31,370,385 1,309 568,440 $ 410,214,387 417,405,892 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, 2022 and 2021, amounted to $316,155 and $265,455, respectively. As of December 31, 2022 and 2021, the unpaid warranty service expenses were record as other payables. (iv) Technical service expense The Company engaged its subsidiaries to research and develop of notebooks, and the related technical service expenses for the years ended December 31, 2022 and 2021, amounted to $203,283 and $199,811, respectively. As of December 31, 2022 and 2021, the unpaid technical service expenses were recorded as other payables. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 70 (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 equipment, mold and others on behalf of the related parties as of December 31, 2022 and 2021, were as follows: Account Related party categories December 31, 2022 December 31, 2021 Notes and accounts receivable Subsidiaries $ 8,934,638 Notes and accounts receivable Other related parties Other receivables Other receivables Other receivables Other receivables Subsidiaries - UCGI Subsidiaries - Others Associates Other related parties 4,370,909 195,183 24,710 1,321 - 1,001,098 1,697,684 161,863 10,649 2,463 45 Less: Credit balance of investments accounted for using the equity method 13,526,761 2,873,802 (27,599) (40,400) $ 13,499,162 2,833,402 As of December 31, 2022 and 2021, 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, 2022 and 2021, were as follows: Account Notes and accounts payable Related party categories Subsidiaries - CIT December 31, 2022 32,506,355 $ December 31, 2021 38,910,233 Notes and accounts payable Subsidiaries - Others 35,192,564 52,043,163 Notes and accounts payable Associates 493 Notes and accounts payable Other related parties 8,482,267 Other payables Other payables Subsidiaries Other related parties 206,212 20,327 315 541,226 167,250 - $ 76,408,218 91,662,187 (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 1.85%~5.00%, and the Company had assessed that no bad debt expenses should be recognized. As of December 31, 2022 and 2021, the loans due to related parties were recorded as other receivables. Account Related party categories December 31, 2022 December 31, 2021 Subsidiaries - CEB $ 767,750 Other receivables Other receivables Other receivables Other receivables Other receivables Less: Credit balance of investments accounted for using the equity method Subsidiaries - CEA Subsidiaries - HengHao Subsidiaries - UCGI Subsidiaries - Kimpo & Compal Assets Development 1,381,950 200,000 230,000 553,600 830,400 200,000 224,560 600,000 - (200,000) (200,000) $ 2,979,700 1,608,560 As of December 31, 2022 and 2021, 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, 2022 and 2021, the guarantees provided to subsidiaries were $149,014 and $413,781, respectively. (8) Pledged assets: None. (9) Commitments and contingencies: The details of commitments and contingencies were as follows: (a) Huawei Technologies Co., Ltd. filed an infringement litigation against the Group on October 28, 2022. The Group will carefully evaluate the litigation, discuss with related client for the following strategies and actions, and engage professional attorneys, to protect the rights and reputation of the Company from any damage. (b) 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 72 (c) The Company entered into various patent license agreements with third parties, and was required to make royalty payments of a predetermined amount periodically. (10) Losses due to major disasters: None (11) Subsequent events: None (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 1,171,256 87,235 32,961 - 145,492 158,378 10,331 2022 Operating expenses 10,508,656 705,361 397,839 49,668 456,164 673,962 449,810 Total Operating costs 11,679,912 792,596 430,800 49,668 601,656 832,340 460,141 980,082 93,355 33,341 - 158,665 181,888 6,235 2021 Operating expenses 9,893,755 674,677 365,173 81,349 437,831 683,706 479,192 Total 10,873,837 768,032 398,514 81,349 596,496 865,594 485,427 For the years ended December 31, 2022 and 2021, 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 $ $ $ 9,066 11 1,491 1,290 %6.26 - 8,965 11 1,411 1,214 %3.32 - 2022 2021 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. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements 73 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, 2022: (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, 2022 (excluding investment in subsidiaries, associates and joint ventures): Please refer to Table 3 (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 4 (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 5 (vi) Disposals of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None. (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 6 (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 7 (ix) Trading in derivative instruments: None. (b) Information on investees: Please refer to Table 8 (c) Information on investment in mainland China: Please refer to Table 9 (Continued) COMPAL ELECTRONICS, INC. Notes to Consolidated Financial Statements 74 (d) Major shareholders: Shareholder’s Name Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF Shareholding Shares Percentage 269,519,000 %6.11 Note 1: The information on major shareholders, which is provided by the Taiwan Depository & Clearing Corporation, summarized the shareholders who held over 5% of total non-physical common stocks and preferred stocks (including treasury stocks) on the last business date of each quarter. The registered non-physical stocks may be different from the capital stocks disclosed in the financial statement due to different calculation basis. Note 2: If shares are entrusted, the above information regarding such shares will be revealed by each trustors of individual trust account. The shareholders holding more than 10% of the total shares of the company should declare insider’ s equity according to Securities and Exchange Act. The numbers of the shares declared by the insider include the shares of the trust assets which the insider has discretion over use. For details of the insider’ s equity announcement please refer to the TWSE website. (14) Segment information: Please refer to the consolidated financial report of 2022. COMPAL ELECTRONICS, INC. Statement of cash and cash equivalents December 31, 2022 (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$861,866,942 and others) Time deposits Foreign currency (USD$20,000,000, Maturity date: 2023.1.9, Rate: 4.35%) Foreign currency (CNY$8,800,000, Maturity date: 2023.1.6~ 2022.3.15, Rate: 1.40%~2.28%) 75 $ Amount 3,504 690,284 26,493,611 27,183,895 614,200 38,791 652,991 Cash equivalents: Bonds purchased under resale agreements Total TWD (Maturity date: 2023.1.3~2023.1.9, Rate: 0.80%~0.88%) 1,896,442 Foreign currency (US$40,015,055.68, Maturity date: 2023.1.3~ 2023.1.4, Rate: 4.60%~4.70%) 1,228,862 3,125,304 $ 30,965,694 Note: The exchange rate is 30.71 New Taiwan dollars for 1 US Dollar; 4.408 New Taiwan Dollars for 1 CNY. (Continued) COMPAL ELECTRONICS, INC. Statement of notes and accounts receivable December 31, 2022 (Expressed in thousands of New Taiwan Dollars) 76 Item Description Sales of non-related parties Amount 114,331,296 $ D Company E Company B Company Others (Note) Less: allowance for uncollectible accounts Notes and accounts receivable, net 〃 〃 〃 19,777,943 9,591,155 29,700,918 173,401,312 (3,642,881) $ 169,758,431 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 15,471,653 1,276,477 36,316,027 $ 53,064,157 Net Realizable Value 15,813,564 1,276,477 36,316,027 53,406,068 (Continued) Statement of changes in accumulated impairment of investments accounted for using the equity method COMPAL ELECTRONICS, INC. For the year ended December 31, 2022 (Expressed in thousands of New Taiwan Dollars; thousands of shares) Beginning Balance Increase (Note 1) Decrease (Note 2) Ending Balance (including impairment loss) 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 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 9,100 600 100,000 20,000 3,500 52,500 3,446 - - - - Number of shares - - - - - - - - - 11,768 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20,000 35 1,200 Number of shares - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 29,000 - - - - - - - - - - - - Amount - 66,218 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 38,173 5,096 3,031 100,000 353,046 805 27,158 1,346 11,625 2,748 199,999 1,174 700 15,545 54,000 880,664 880,664 Amount - 395,750 167,924 81,671 36,138 27,067 73,748 284,476 30,636 36,599 38,513 - - - - - - - - - - - - - - - - - - - - - - - - - 3,983 18,102 145 - - - - - - - - - 1,194,752 (7,274,986) - - (6,080,234) 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 11,768 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 1,000 10,000 21,756 15,035 9,100 600 100,000 20,000 3,500 52,500 4,646 - - - 10,180 (377,252) (43,156) 1,030,304 - 127,886 97,275 42,400 (60) (1,196) 112,728 3,410 (325,694) (31,576) 378,755 (152,120) 218,225 - (24,531) 106 32,532 32,813 (231,377) (5,762) (23,440) 582,505 (16,105) 301,896 (17,399) 20,384 11,842 118,990 (134,458) 33,407 84,921 (83) 3,547 26,334 40,421 (65) (23,883) 576 (12,973) (20,601) (3,816) (8,981) (19,538) (11,348) 1,826,023 - - - 1,826,023 (8,837) (722,859) (96,271) (115,989) (287,429) (15,090) 615 99 (15) (97) (15,153) (26,924) (1,883) 5,320 (448,211) (79,364) 3 (245) 2,962 10,119 (79,441) (10,568) 307,527 24,298 232,641 (11,897) (3,085) (102,515) (87,570) (81,066) 506 - - - - - - - - - - - - - 8,354 - - - (1,602,065) 158,398 5,688,229 10,461,265 42,681,945 3,906,656 2,063,087 1,168,785 374,329 99,940 324,783 438,890 467,514 425,647 42,912 2,662,827 4,958,349 313,063 (3) 627,803 4,882 197,685 277,615 (718,080) 32,062 (17,031) 8,257,996 1,381,132 7,434,250 84,482 122,458 875,954 730,872 (261,818) 850,799 1,612,866 162,613 112,687 262,227 371,580 15,999 34,975 3,696 44,330 23,708 84,075 24,990 505,547 186,922 99,563,892 (1,602,065) (881,247) (10,157) 97,070,423 149,561 4,965,370 10,364,994 42,565,956 3,619,227 2,047,997 1,169,400 374,428 99,940 324,768 438,793 452,361 398,723 41,029 2,668,147 4,510,138 233,699 627,558 4,882 200,647 287,734 (797,521) 32,062 (27,599) 8,565,523 1,405,430 7,666,891 84,482 122,458 864,057 727,787 (364,333) 763,229 1,531,800 162,613 112,687 262,227 371,580 16,505 34,975 3,696 44,330 23,708 92,429 24,990 505,547 186,922 97,961,827 (881,247) (10,157) 97,070,423 227,599 961,854 98,259,876 - - 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) 88,283,502 240,400 468,948 88,992,850 77 Market Price / Net Value 149,561 5,114,685 10,364,994 42,553,108 3,619,227 2,137,738 1,169,400 374,428 99,940 287,708 1,031,010 (Note 4) 452,361 398,723 41,029 3,952,841 (Note 3) 4,510,138 233,699 - 746,847 (Note 3) 6,042 200,647 287,734 (797,521) 32,062 (27,599) 8,565,523 1,405,430 7,666,891 84,482 122,458 864,057 1,214,819 (Note 4) (364,333) 763,229 1,531,800 162,613 112,687 262,227 261,192 16,505 22,501 3,696 16,517 14,836 92,429 24,990 505,547 71,343 Investee Company Auscom Panpal Just CIH CEH Gempal Hong Ji Hong Jin Compal Ruifang Poindus Systems 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 $ 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, 2022. Note 4：The unit price is calculated by the closing price of Taipei Exchange as of December 31, 2022. (Continued) COMPAL ELECTRONICS, INC. Statement of financial assets measured at fair value through other comprehensive income - non-current For the year ended December 31, 2022 (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 $ 2,003,307 Number of Shares - Amount - Number of Shares - Amount 328,716 Number of Shares 124,044 Amount 1,674,591 Cal-Comp Electronics (Thailand) Public Co., Ltd. 259,600 695,728 21,633 Taiwan Star Others Total 98,046 441,993 - 367,069 - - $ 3,508,097 - - 258,174 258,174 - - - 116,387 281,233 579,341 23,335 98,046 418,658 163,993 632,431 - 461,250 3,133,840 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, and unrealized gains on financial instruments at fair value. Note 2: Decrease included disposal of financial assets at fair value through other comprehensive income, the adjustment of the unrealized loss of financial assets according to fair value, deferred tax for unrealized losses, and 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, 2022 (Expressed in thousands of New Taiwan Dollars) 79 Please refer to Note (6)(j). Statement of short-term borrowings December 31, 2022 Creditor China Construction Bank Description Credit Loans Corporation Citibank Bank of Communications Co., Ltd. The bank of Tokyo- Mitsubishi UFJ United Overseas Bank Sumitomo Mitsui Banking Corporation Cathay United Bank Land Bank of Taiwan Taishin Internation Bank BNP Paribas Bank HSBC Bank (Taiwan) Limited The Hongkong and Shanghai Banking Corporation Limited Bank of China Shin Kong Bank Banco Bilbao Vizcaya Argentaria Bank 〃 〃 〃 〃 〃 〃 ″ 〃 〃 〃 〃 〃 〃 〃 Contract Period 2022.10~2023.01 2022.10~2023.01 2022.10~2023.01 2022.10~2023.04 2022.11~2023.01 2022.11~2023.02 2022.12~2023.02 2022.12~2023.01 2022.10~2023.01 2022.09~2023.03 2022.11~2023.02 2022.12~2023.02 2022.11~2023.02 2022.11~2023.02 2022.09~2023.03 Interest Rate Note Loan Commitments 6,142,000 $ Collaterals or Pledged Assets None Ending balance 6,142,000 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 9,059,450 6,142,000 None None 3,685,200 4,742,300 6,142,000 None 6,074,250 4,606,500 7,677,500 5,527,800 6,000,000 5,000,000 3,071,000 1,842,600 None None None None None None None 4,606,500 2,453,729 3,721,000 3,071,000 1,842,600 1,800,000 1,830,000 4,760,050 None 1,300,000 6,756,200 1,500,000 6,449,100 None None None 4,000,000 1,500,000 6,300,000 $ 80,676,200 53,068,579 Note: The range of interest rates of aforementioned loans were 1.45%~5.38%. (Continued) COMPAL ELECTRONICS, INC. Statement of notes and accounts payable December 31, 2022 (Expressed in thousands of New Taiwan Dollars) 80 Amount $ 25,027,877 10,462,714 7,208,570 6,129,776 5,003,108 4,375,011 19,793,688 $ 78,000,744 Suppliers E Company J Company A Company I Company D Company B 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, 2022 (Expressed in thousands of New Taiwan Dollars) 81 Creditor Bank of Taiwan Loan Commitments 5,000,000 $ Loan within 1 year 1,000,000 Loan more than 1 year 3,500,000 Contract Period 2022.11~2024.12 Interest Rate 註 Amount 4,500,000 Collaterals or Pledged Assets None Amount Yuan Ta Commercial Bank 3,000,000 3,000,000 Mizuho Bank, Ltd. 9,827,200 9,000,000 - - 2022.12~2023.03 2022.11~2023.02 Note 3,000,000 E.SUN Commercial Bank 2,000,000 - 1,900,000 2021.11~2024.11 Shanghai Commercial and 2,300,000 2,300,000 - 2020.06~2023.06 Savings Bank Far Eastern International 1,000,000 - 1,000,000 2022.11~2025.09 Bank Co., Ltd. CTBC Bank Co., Ltd. 2,000,000 2,000,000 - 2020.11~2023.11 Taiwan Corporative Bank Chang Hwa Bank 1,000,000 3,000,000 - - 1,000,000 2022.05~2025.05 3,000,000 2022.05~2026.05 Bank of America 5,067,150 2,000,000 - 2022.09~2023.09 Bank SinoPac Co., Ltd. 3,300,000 - 825,000 2022.12~2026.12 $ 37,494,350 19,300,000 11,225,000 Note: The range of interest rates of aforementioned loans were 1.48%~2.06%. 9,000,000 1,900,000 2,300,000 None None None None 1,000,000 None 2,000,000 1,000,000 3,000,000 2,000,000 825,000 30,525,000 None None None None None 〃 〃 〃 〃 〃 〃 〃 〃 〃 Discount rate Item Buildings Vehicles Less：Current portion Lease liabilities–Non- Current Statement of lease liabilities Description For office and factory space Lease term 1~10 years 1.20%~1.60% $ Ending balance 1,035,781 For operating activities 3~5 years 1.20%~1.60% 5,199 1,040,980 (249,553) $ 791,427 (Continued) COMPAL ELECTRONICS, INC. Statement of other payables December 31, 2022 (Expressed in thousands of New Taiwan Dollars) 82 Item Payroll payables and year-end Description Payroll for December 2022, estimated year-end bonuses Amount $ 4,416,138 bonuses payable for 2022, 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, 2022 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. 1,213,982 1,289,536 6,200,143 $ 13,119,799 Amount $ 1,004,056,566 607,561 (1,066,520) (1,354,915) 1,002,242,692 1,400,099 $ 1,003,642,791 (Continued) COMPAL ELECTRONICS, INC. Statement of operating costs For the year ended December 31, 2022 (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 Others 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 $ 55,216,445 565,105,897 (40,296,164) (38,882) (4,776,463) (786,169) (1,766) 574,422,898 605,349 1,249,803 576,278,050 1,189,112 33 (1,276,477) (50,981) 576,139,737 7,603,013 394,536,527 1,619,273 (15,479,353) (2,723) (528,474) 963,888,000 4,632,936 4,776,463 937,684 839,873 $ 975,074,956 (Continued) COMPAL ELECTRONICS, INC. Statement of operating expenses For the year ended December 31, 2022 (Expressed in thousands of New Taiwan Dollars) 84 Item Payroll expenses Export expenses Research expenses Shipping expenses Sample expenses Others (Note) Total Selling expenses Administrative expenses Research and development expenses $ 364,618 314,281 - 4,745,014 434,551 352,878 $ 6,211,342 1,664,466 8,479,572 - - - 37,378 1,129,561 2,831,405 - 1,558,147 2,133 649 2,222,564 12,263,065 Note: The amount of each item in others does not exceed 5% of the account balance. (Continued) Table 1 Loans to other parties: (December 31, 2022) Name of lender No. 0 The Company Name of borrower UCGI 0 The HengHao Company 0 The CEB Company 0 The Company Kinpo & Compal Group Assets Development Corporation 0 The CEA Company 1 CIH CEP 2 CPC CIC Account name Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables 3 CIT CCI Nanjing Other receivables Rayonnant (Taicang) Other receivables 3 CIT 3 CIT 4 CPO HengHao Kunshan HengHao Kunshan 4 CPO CIT 5 CET BT 6 Panpal 6 Panpal Kinpo & Compal Group Assets Development Corporation HengHao Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables 6 Panpal Ray-Kwong Medical Other receivables 7 CIC HengHao Kunshan Other receivables 8 BSH CIN 9 Gempal 9 Gempal 10 Hong Ji Kinpo & Compal Group Assets Development Corporation Ray-Kwong Medical Management Consulting Kinpo & Compal Group Assets Development Corporation 11 CGSP CEP 12 Arcadyan Acradyan Brasil 12 Arcadyan Acradyan Brasil 12 Arcadyan Acradyan Brasil Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables 12 Arcadyan Arcadyan Vietnam Other receivables 12 Arcadyan Arcadyan Vietnam Other receivables COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Highest balance of financing to other parties during the period 466,958 Related party Y Actual usage amount during the period 230,000 Ending balance 230,000 Range of interest rates during the period Purposes of fund financing for the borrower 1.67%~3.5% Short-term financing Transaction amount for business between two parties - Reasons for short-term financing Operating demand Allowan ce for bad debt - 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 1.85% 1,399,775 767,750 767,750 1.02%~5% 600,000 600,000 600,000 1.85% 2,347,875 1,381,950 1,381,950 1.02%~5% 64,430 61,420 61,420 5.05% 450,600 440,800 440,800 2.20% Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing 4,510,100 2,149,700 1,781,180 3.5%~5.05% Short-term financing 80,538 76,775 - 5.05% 966,450 921,300 921,300 5.05% 1,047,900 - - 3.50% 675,900 661,200 661,200 2.20% 270,360 264,480 176,320 2.00% Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing 1,200,000 600,000 600,000 1.67%~1.85% Short-term financing 1,200,000 600,000 600,000 1.53%~1.85% Short-term financing 10,000 - - 1.53% Short-term financing 2,406,825 1,689,050 1,689,050 3.5%~5.05% Short-term financing 579,870 552,780 337,810 5.05% Short-term financing 1,000,000 600,000 600,000 1.67%~1.85% Short-term financing 20,000 10,000 10,000 1.85% Short-term financing 200,000 - 64,430 61,420 35,867 59,880 - - - - - - 64,300 61,420 42,994 5.00% 280,250 - 321,500 307,100 - - 1.00% 1.00% 1.67% Short-term financing 5.05% Short-term financing 1.00% 1.00% Short-term financing Short-term financing Short-term financing Transaction for business between two parties Transaction for business between two parties - - - - - - - - - - - - - - - - - - - - - - - - Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating financing Operating financing Operating financing 4,821,470 14,679,380 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 85 (In Thousands of New Taiwan Dollars) Individual funding loan limits 23,258,950 Maximum limit of fund financing 46,517,901 Note (Note 1) 23,258,950 46,517,901 (Note 1) 23,258,950 46,517,901 (Note 1) 600,044 46,517,901 (Note 1) 23,258,950 46,517,901 (Note 1) 42,553,108 42,553,108 (Note 2) 2,589,107 2,589,107 (Note 3) 25,750,769 25,750,769 (Note 4) 25,750,769 25,750,769 (Note 4) 25,750,769 25,750,769 (Note 4) 3,047,746 3,047,746 (Note 5) 3,047,746 3,047,746 (Note 5) 4,960,064 4,960,064 (Note 6) 2,045,874 2,045,874 (Note 7) 2,045,874 2,045,874 (Note 7) 18,190 2,045,874 (Note 7) 10,388,018 10,388,018 (Note 8) 8,034,374 8,034,374 (Note 9) 855,095 855,095 (Note 10) 18,190 855,095 (Note 10) 467,760 467,760 (Note 11) 92,429 92,429 (Note 12) 2,761,448 5,522,896 (Note 13) 2,761,448 5,522,896 (Note 13) 2,761,448 5,522,896 (Note 13) 2,761,448 5,522,896 (Note 13) 2,761,448 5,522,896 (Note 13) (Continued) Collateral Item Value - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 1 Loans to other parties: (December 31, 2022) 86 Name of lender Name of borrower No. 12 Arcadyan Arcadyan RU Other Account name Highest balance of financing to other parties during the period 32,150 Related party Y Actual usage amount during the period - Range of interest rates during the period 1.00% Ending balance - 13 Arcadyan CNC Holding 14 Poindus Systems Adasys receivables Other receivables Other receivables 14 Poindus Systems Poindus UK Other receivables 14 Poindus Systems Poindus UK Other receivables Y Y Y Y 546,550 - - 1.00% 21,268 21,268 21,268 2.00% 26,093 - - 1.00% 24,506 24,109 24,109 1.00% Transaction amount for business between two parties 418,792 Reasons for short-term financing - Allowan ce for bad debt - - Operating financing 80,428 58,395 58,395 - - - - - - - (In Thousands of New Taiwan Dollars) Individual funding loan limits 335,034 Maximum limit of fund financing 5,522,896 Note (Note 13) 2,108,499 2,108,499 (Note 14) 51,752 208,682 (Note 15) 39,102 208,682 (Note 15) 51,752 208,682 (Note 15) Collateral Item Value - - - - - - - - - - Purposes of fund financing for the borrower Transaction for business between two parties Short-term financing Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Note 1: According to the Company’ s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of the Company. When a short-term financing facility with the Company is necessary, the total amount for lending to any company shall not exceed 80% of the borrower’s net worth, nor shall it be more than 50% of the Company’s lendable amount limit, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company is unrestricted by the Note 2: Note 3: 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 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 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 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 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 Gempal’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Gempal. When a short-term financing facility with Gempal 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 Gempal’s total amount of lendable capital, and shall be combined with the Gempal’s endorsements/guarantees for calculation. In addition, when lending to indirectly owned overseas subsidiaries or the ultimate parent company’s 100% directly, the total amount of loans is not limited by 80% of two aforesaid restrictions, but the maximum amount shall not exceed the total amount of lendable capital of Gempal, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to Hong Ji’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Hong Ji. When a short-term financing facility with Hong Ji 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 Hong Ji’s total amount of lendable capital, and shall be combined with the Hong Ji’s endorsements/guarantees for calculation. In addition, when lending to indirectly owned overseas subsidiaries or the ultimate parent company’s 100% directly, the total amount of loans is not limited by 80% of two aforesaid restrictions, but the maximum amount shall not exceed the total amount of lendable capital of Hong Ji, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating. According to CGSP’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CGSP. When a short-term financing facility with CGSP 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 CGSP’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 CGSP, 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 Poindus Systems’ Procedures for Lending Funds to Other parties, the total amount of loans for individual is the lower of the amount of transaction for business between the two parties during the previous twelve months and 10% of the net worth of the company's latest financial statements, with the total limit of 40% of the net worth of the company's latest financial statements. The transactions had been eliminated in the consolidated financial statements. Note 5: Note 6: Note 7: Note 8: Note 9: Note 10: Note 11: Note 12: Note 13: Note 14: Note 15: Note 16: (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 2 Guarantees and endorsements for other parties: (December 31, 2022) Counter-party of guarantee and endorsement Name of guarantor No. 0 The Company CEP Name Limitation on amount of guarantees and endorsements for a specific enterprise 29,073,688 Relationship with the Company (Note 4) Highest balance for guarantees and endorsements during the period Balance of guarantees and endorsements as of reporting date Actual usage amount during the period 95,386 61,146 61,146 Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements 0.05% Property pledged for guarantees and endorsements (Amount) - Maximum amount for guarantees and endorsements (Note 1(cid:501)2) 58,147,377 Parent company endorsements/g uarantees to third parties on behalf of subsidiary Y Subsidiary endorsements/g uarantees to third parties on behalf of parent company - Endorsements/ guarantees to third parties on behalf of companies in Mainland China - (In Thousands of New Taiwan Dollars) 87 0 The Company CEB (Note 5) 29,073,688 132,082 61,420 61,420 0 The Company CEA (Note 5) 29,073,688 193,973 - - 0 The Company HengHao Kunshan (Note 5) 29,073,688 27,036 26,448 26,448 1 Arcadyan Arcadyan AU (Note 5) 1,840,965 241,125 230,325 2 Poindus Systems Qijie (Note 5) 104,341 32,325 30,710 - - - - - - - 0.05% 58,147,377 0.00% 58,147,377 0.02% 58,147,377 1.67% 5,522,896 5.98% 260,852 Y Y Y Y Y - - - - - - - Y - Y Note 1: Note 2: Note 3: 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. According to Poindus Systems’ Procedures for Endorsement and Guarantee, Poindus Systems only endorses and guarantees to subsidiaries wherein it holds 100% of their voting shares. Poindus Systems’ endorsement and guarantee for a subsidiary shall not exceed 20% of its net worth; and the total amount of endorsements/guarantees shall not exceed 50% of its net worth. Note 4: Subsidiary whose over 50% common stock is directly owned. Note 5: Subsidiary whose over 50% common stock is indirectly owned. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 3 Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2022) 88 Name of holder Category and name of security The Company Taiwan Star Relationship with security issuer (cid:4137) 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) (cid:4137) Kinpo Cal-Comp HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Chen Feng Optoelectronics PrimeSensor Technology Inc. Ganzin Technology, Inc. Genovior Biotech Crop. Airoha Technology Corp. Clean Energy Fund 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 Lian Hong Art. Co., Ltd. Taiwan Biotech Co., Ltd. The Chairman of the Board is the first degree of kinship of the Chairman of the Company (cid:4137) (cid:4137) Others Total Gempal Compal Electronics, Inc. The parent company Lian Hong Art. Co., Ltd. Others Total (cid:4137) (cid:4137) 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 other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss 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 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 418,658 Holding percentage (%) 2% Fair value Note 418,658 124,044 1,674,591 8% 1,674,591 281,233 579,341 5% 579,341 290 22,571 10% 22,571 53 11,112 11% 11,112 4,000 13,040 3% 13,040 6,685 101,676 7% 101,676 868 19,638 1% 19,638 2,000 36,000 7% 36,000 3,846 9,000 2% 9,000 215 114,137 (cid:4137) 114,137 (cid:4137) 132,417 2% 132,417 5,000 54,150 8% 54,150 6,000 63,000 19% 63,000 134,076 134,076 ___________ 3,383,407 31,648 729,488 1% 729,488 69,370 936,490 5% 936,490 54,000 694,440 5% 694,440 5,677 169,449 1% 169,449 2,225 67,470 6% 67,470 7,845 141,204 3% 141,204 14,215 14,215 ___________ 2,752,756 18,369 423,413 (cid:4137) 423,413 2,225 67,450 6% 67,450 1,371 1,371 ___________ 492,234 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 3 Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2022) 89 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. Mactech HHB Total Taichung International Golf Country Club HWALLAR OPTRONICS (Fuzhou) CO., LTD. Mithera Beyond Limits, Inc. BT CIT BSH Suzhou Genki Fuhong Health Management Co., Ltd. Kunqiao Phase II (Suzhou) Emerging Industry Venture Capital Partnership Fund Achi Capital Partners Fund LP (cid:4137) (cid:4137) (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 (cid:4137) Note (Note 1) 332 200 1,152 349 60 - (cid:4137) (cid:4137) (cid:4137) (cid:4137) 1% 4% 5% 5% 14% (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (cid:4137) 46,379 7% 46,379 1,650 46,150 5% 46,150 1,229 (cid:4137) 6% (cid:4137) (Note 1) ___________ 92,529 11,220 (cid:4137) 11,220 - 19% (cid:4137) (Note 1) 873 138,195 (cid:4137) 138,195 4,414 17% 4,414 252,667 10,296 (cid:4137) (cid:4137) 252,667 10,296 (cid:4137) (cid:4137) (cid:4137) (cid:4137) (cid:4137) 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 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 Note 1: The carrying value is the remaining amount after deducting accumulated impairment. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 4 Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2022) Name of company Category and name of security Account name Name of counter-party Relationship with the company Shares/ Units Amount Shares/ Units Amount Shares/ Units Price Cost Gain (loss) on disposal Shares/ Units Amount Shares/ Units Amount Beginning Balance Purchases Sales Others Ending Balance (In Thousands of New Taiwan Dollars/ shares) 90 Stock : Poindus Systems The Company Structured deposits : Structured deposits– Bank of China RMB Strcutured Deposit Structured deposits– Bank of China RMB Strcutured Deposit Investments accounted for using equity method Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Public buyouts and purchases from the open market Bank of China Bank of China Bank of Communications Yuntong Wealth Time-type structured deposit products Financial assets at fair value through profit or loss-current Bank of Communications Co., Ltd. Structured deposits– Bank of China RMB Strcutured Deposit Structured deposits– Bank of China RMB Strcutured Deposit Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Bank of China Bank of China CPC CIT CIT CIC CET 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. - - - - - - - - - - - - - 11,768 353,046 - - - - - - - - - - 442,622 1,106,555 442,622 663,933 442,622 - - - - - - - - - 450,371 442,622 1,125,927 1,106,555 450,043 442,622 675,556 663,933 450,371 442,622 7,749 (Note 2) 19,372 (Note 2) 7,421 (Note 2) 11,623 (Note 2) 7,749 (Note 2) - - - - - - (28,278) (Note 1) 11,768 324,768 - - - - - - - - - - - - - - - (Continued) 91 COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 5 Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: (December 31, 2022) Name of company Arcadyan Vietnam Name of property Plant, mechanical and electrical equipment Transaction date May 5, 2022 (Note 1) Transaction amount 1,437,610 Status of payment Counter-party 657,737 Donghui Co., Ltd. and Chengyuande Construction and Trade Co., Ltd. Relationshi p with the Company None If the counter-party is a related party, disclose the previous transfer information Owner Not applicable Relationship with the Company Not applicable Date of transfer Amount Not applicable Not applicable References for determining price price comparison and negotiation Purpose of acquisition and current condition operational use Others None (In Thousands of New Taiwan Dollars) Kinpo & Compal Group Assets Development Corporation Compal Electronics (Vietnam) Co., Ltd (Note 3) Buildings and building improvements November 11, 2022 (Note 2) In the maximum limit of 22,200 thousands (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) (cid:46) Land use rights December 16, 2022 921,300 184,260 GREEN i-PARK CORPORATION None Not applicable Not applicable Not applicable Not applicable operational use None Refer to the real estate appraisal report issued by a professional appraiser Note 1: Note 2: Note 3: In order to meet the operational needs, the Board of Directors of Arcadyan Vietnam resolved on May 5, 2022, to authorize the chairman of the Board to expand the plant in the maximum limit of USD48,000. The total contract amount is expected to be 1,437,610 (VND 1,118,763 million). In order to meet the operation planning of the group headquarter and corporate sustainable development needs, the Board of Directors of Kinpo & Compal Group Assets Development Corporation resolved on November 11, 2022, to authorize the chairman of the Board to build a new group operation headquarters building in the maximum limit of 22.2 billion. Compal Electronics (Vietnam) Co., Ltd (tentative name) is a newly established subsidiary of BSH 100% owned. (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) 92 Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name The Company Counter party UCGI CBN Arcadyan Nature of relationship Subsidiaries wholly owned by the Company The Company's subsidiaries The Company's subsidiaries Purchase/ (Sale) Sale Sale Sale Transaction details Percentage of total purchases/ (sales) Amount (221,051) (0.0)% (439,192) (0.0)% Net 90 days from delivery (4,736,735) (0.5)% Net 60 days from the end of the month of delivery Payment terms 120 days Unit price Similar to non- related parties Payment Terms There is no significant difference Sale (1,190,095) (0.1)% 120 days Purchase 129,322,840 13.5% 120 days Purchase 136,046,231 14.2% 120 days Purchase 57,511,789 6.0% 120 days Purchase 44,099,411 4.6% 120 days Just and its 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 Purchase 11,706,241 1.2% Net 60 days from delivery Markup based on Etrade and its subsidiaries' cost 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 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 Percentage of total notes/accounts receivable (payable) Note 0.0% 0.1% 0.8% Ending Balance 18,806 258,313 1,451,984 1,433,533 0.8% (47,687,191) (30.9)% (1,721,087) (1.1)% (4,914,134) (3.2)% (8,835,507) (5.7)% (2,242,604) (1.5)% Kinpo The same chairman of the Company Purchase 31,343,280 2.8% Net 35 days from the end of the month Similar to non- related parties There is no significant difference. (8,476,775) (5.5)% Just and its subsidiaries Compal Electronic, Inc. Parent company Sale (136,046,231) (99.0)% 120 days UCGI With the same ultimate parent company Sale (118,656) (0.1)% 60 days Compal Electronic, Inc. Parent company Purchase 1,190,095 0.9% 120 days CIH and its subsidiaries Etrade and its subsidiaries With the same ultimate parent company With the same ultimate parent company Purchase 389,981 0.3% 120 days Purchase 201,643 0.2% Net 60 days from delivery According Etrade CIH and its subsidiaries Compal Electronic, Inc. Parent company Sale (129,322,840) (92.9)% 120 days CEA With the same ultimate parent company Sale (405,697) (0.3)% 120 days Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties and its subsidiaries to markup pricing Similar to non- related parties Similar to non- related parties 1,721,087 97.4% 38,621 2.2% (1,433,533) (4.1)% (128,602) (0.4)% (117,120) (0.3)% 47,687,191 87.4% 124,747 0.1% There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) 93 Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name CIH and its subsidiaries Counter party CEB Nature of relationship With the same ultimate parent company Purchase/ (Sale) Sale Transaction details Percentage of total purchases/ (sales) Amount (219,877) (0.2)% Payment terms 120 days Unit price Similar to non- related parties Just and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company HSI and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company HSI and its subsidiaries Rayonnant and its subsidiaries With the same ultimate parent company With the same ultimate parent company HengHao With the same ultimate parent company Sale (389,981) (0.3)% 120 days Sale (3,026,857) (2.2)% 120 days Sale (4,315,689) (3.1)% 120 days Purchase 770,541 0.8% 120 days Purchase 420,918 0.5% 120 days Purchase 1,147,721 1.2% 120 days Purchase 179,199 0.2% 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 Percentage of total notes/accounts receivable (payable) Note Ending Balance 72,382 0.1% 128,602 0.1% 1,425,340 1.4% 4,199,215 4.2% (32,896) (0.0)% (16,497) (0.0)% (194,275) (0.2)% (25,055) (0.0)% (Note 1) 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 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 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 CPM An associate Purchase 2,571,306 Changbao An associate Purchase 944,245 Purchase 806,342 2.8% 1.0% 0.9% 120 days 120 days 120 days 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. There is no significant difference. (541,816) (176,997) (294,099) (0.7)% (0.2)% (0.4)% Acbel and its subsidiaries CBN Compal Electronic, Inc. BCI and its subsidiaries Compal Electronic, Inc. The Chairman of the Board is the first degree of kinship of the Chairman of the Company Parent company Purchase 439,192 19.0% Net 90 days from delivery - Parent company Sale (44,099,411) (89.2)% 120 days There is no significant difference. Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference. Markup based on BCI and its subsidiaries' cost According to markup pricing According to markup pricing According to markup pricing Sale (770,541) (1.6)% 120 days Sale (1,365,373) (2.8)% 120 days (543,836) (1.1)% 120 days Sale Sale (918,657) (1.9)% 120 days According to markup pricing There is no significant difference. Purchase 3,026,857 7.2% 120 days Purchase 790,403 1.9% Net 60 days from delivery Purchase 282,287 0.7% 120 days Purchase 446,632 Purchase 410,565 1.1% 1.0% 120 days 120 days According to markup pricing Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference. There is no significant difference. CIH and its subsidiaries HSI and its subsidiaries CEB CEA CIH and its subsidiaries HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Rayonnant and its subsidiaries CPM Acbel and its subsidiaries 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 (258,313) (31.0)% 8,835,507 27.7% 32,896 0.1% 2,409,030 7.6% (Note 1) 485,682 180,177 1.5% 0.6% (1,425,340) (4.7)% (546,121) (1.8)% (27,686) (0.1)% (24,880) (121,992) (0.1)% (0.4)% (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) 94 Counter party Nature of relationship Company Name CEB CEA BCI and its subsidiaries CEA CIH and its subsidiaries CEB CIH and its subsidiaries BCI and its subsidiaries Compal Electronic, Inc. Etrade and its subsidiaries With the same ultimate parent With the same ultimate parent With the same ultimate parent With the same ultimate parent With the same ultimate parent With the same ultimate parent Parent company Just and its subsidiaries With the same ultimate parent company HSI and its subsidiaries With the same ultimate parent 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 543,836 14.3% Purchase/ (Sale) Purchase Payment terms 120 days Purchase 1,620,529 42.7% 45 days Purchase 219,877 5.8% 120 days Sale (1,620,529) (17.3)% 45 days Purchase 405,697 5.3% 120 days Purchase 918,657 12.0% 120 days Unit price According to markup pricing Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties According to markup pricing Sale (11,706,241) (98.2)% Net 60 days from delivery According to markup pricing Sale (201,643) (1.7)% Net 60 days from delivery According to Purchase 1,829,041 16.9% Net 60 days from delivery markup pricing Similar to non- related parties Percentage of total notes/accounts receivable (payable) Note Ending Balance (485,682) (31.2)% (415,662) (26.7)% (72,382) 415,662 (4.6)% 17.3% (124,747) (16.2)% (180,177) (23.4)% 2,242,604 101.3% 117,120 5.3% (522,935) (24.5)% Payment Terms There is no significant difference. There is no significant difference. There is no significant difference. There is no significant difference. There is no significant difference. There is no significant difference. There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Forever and its subsidiaries HSI and its subsidiaries UCGI Avalue With the same ultimate parent company An associate Sale Sale (177,383) (31.6)% 75 days (514,870) (100.0)% Net 60 days from delivery Similar to non- related parties There is no significant difference. 216,768 100.0% (Note 1) Compal Electronic, Inc. Just and its subsidiaries Parent company Purchase 221,051 With the same ultimate parent company Purchase 118,656 45.9% 24.6% 120 days 60 days HSI and its subsidiaries Compal Electronic, Inc. Parent company Sale (57,511,789) (95.7)% 120 days Etrade 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 CIH and its subsidiaries With the same ultimate parent company BCI and its subsidiaries With the same ultimate parent company Sale (1,829,041) (3.0)% Net 60 days from delivery Sale (420,918) (0.7)% 120 days Sale (790,403) (1.3)% Net 60 days from delivery Purchase 4,315,689 6.9% 120 days Purchase 1,365,373 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 Similar to non- related parties Similar to non- related parties 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 38,397 (18,806) (38,621) 21.4% (29.7)% (61.1)% 4,914,134 26.1% 522,935 2.8% 16,497 0.1% 546,121 2.9% (4,199,215) (11.1)% (2,409,030) (6.3)% (Note 1) Forever and its subsidiaries Rayonnant and its subsidiaries CIH and its subsidiaries With the same ultimate parent company With the same ultimate parent company Purchase 514,870 0.8% Net 60 days from delivery Similar to non- related parties There is no significant difference. (216,768) (0.6)% (Note 1) Sale (1,147,721) (80.2)% 120 days Similar to non- related parties There is no significant difference, and adjustments will be made based on demand for funding if necessary 194,275 87.4% (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 6 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2022) 95 Transactions with terms different from others Notes/Accounts receivable (payable) (In Thousands of New Taiwan Dollars) Company Name Rayonnant and its subsidiaries Counter party BCI and its subsidiaries Nature of relationship With the same ultimate parent company Purchase/ (Sale) Sale Transaction details Percentage of total purchases/ (sales) Amount (282,287) (19.7)% Payment terms 120 days Unit price Similar to non- related parties HengHao CIH and its subsidiaries With the same ultimate parent company Sale (179,199) (1.8)% 120 days Similar to non- related parties Arcadyan Arcadyan Germany Arcadyan USA Arcadyan AU Arcadyan's subsidiary Sale (1,226,274) (3.0)% Net 150 days from delivery Arcadyan's subsidiary Sale (16,685,476) (36.0)% Net 120 days from delivery Arcadyan's subsidiary Sale (1,135,329) (2.0)% Net 60 days from the end of the month of delivery - - - Arcadyan CNC Arcadyan's subsidiary Purchase 11,854,935 16.0% Net 120 days from delivery According to Arcadyan's subsidiary Purchase 3,412,391 5.0% Net 180 days from the end of the month of delivery markup pricing According to markup pricing Parent company Purchase 4,736,735 6.0% Net 60 days from the end of - Arcadyan Vietnam Compal Electronic, Inc. Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan CNC Arcadyan Vietnam Arcadyan Germany Arcadyan USA Arcadyan AU Ripal GLB GLB Ripal With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Sale (11,854,935) (100.0)% Net 120 days from delivery According to the month of delivery Sale (3,412,391) (100.0)% Net 180 days from the end of the month of delivery Purchase 1,226,274 100.0% Net 150 days from delivery Purchase 16,685,476 100.0% Net 120 days from delivery Purchase 1,135,329 100.0% Net 60 days from the end of the month of delivery markup pricing According to markup pricing - - - Sale (134,361) 58.9% Net 60 days from the end of the month Purchase 134,361 43.3% Net 60 days from the end of the month Similar to non- related parties There is no significant difference. Similar to non- related parties There is no significant difference. Payment Terms There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary - - - - - - - - - - - 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, 2022 is 1,000,854 thousand dollars. Percentage of total notes/accounts receivable (payable) Note Ending Balance 27,686 12.5% 25,055 1.3% (Note 1) 597,274 6.0% 4,102,435 39.0% 281,293 3.0% (3,011,224) (24.0)% (Note 1) (Note 2) - % (Note 1) (1,451,984) (12.0)% 3,011,224 98.0% (Note 1) (Note 2) - % (Note 1) (597,274) (100.0)% (4,102,435) (100.0)% (281,293) 100.0% 19,726 50.0% (19,726) 37.7% (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 7 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (December 31, 2022) 96 Name of Company Counter-party The Company CBN The Company Arcadyan The Company Just and its subsidiaries The Company HSI and its subsidiaries The Company Cal-Comp Just and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries Compal Electronic, Inc. Compal Electronic, Inc. CEA Nature of relationship The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The same chairman of the Company Parent company Parent company With the same ultimate parent company Ending Balance 258,313 1,451,984 1,433,533 Turnover rate 1.10 6.52 1.66 5,537,829 (Note 4) (Note 4) 4,370,909 (Note 4) 1,721,087 47,687,191 124,747 (Note 4) 46.04 2.35 2.44 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 Just and its subsidiaries With the same ultimate parent company HSI and its subsidiaries With the same ultimate parent company CEB BCI and its subsidiaries With the same ultimate parent company Parent company Compal Electronic, Inc. HSI and its subsidiaries With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Parent company CEA CEB Just and its subsidiaries With the same ultimate parent company Etrade and its subsidiaries Compal Electronic, Inc. Etrade and its subsidiaries Forever and its subsidiaries HSI and its subsidiaries With the same ultimate parent company Parent company HSI and its subsidiaries HSI and its subsidiaries Compal Electronic, Inc. Etrade and its subsidiaries With the same ultimate parent company HSI and its subsidiaries Rayonnant and its subsidiaries Arcadyan Arcadyan Arcadyan Arcadyan CNC CBN BCI and its subsidiaries With the same ultimate parent company CIH and its subsidiaries With the same ultimate parent company Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan USA Arcadyan Vietnam Arcadyan AU Arcadyan Germamy Arcadyan Arcadyan's subsidiary Arcadyan's subsidiary With the same ultimate parent company HSI and its subsidiaries With the same ultimate parent company Note 1: Balance as of March 7, 2023. Note 2: Balance as of March 3, 2023. Note 3: Balance as of March 6, 2023. Note 4: Receivables due to purchasing on behalf of related parties. Note 5: Accounts receivables due to processing raw material. 128,602 6.06 4,199,215 1.33 1,425,340 2.01 8,835,507 2,409,030 3.47 0.62 485,682 0.62 180,177 2.67 415,662 4.09 2,242,604 117,120 4.80 3.44 216,768 4.75 4,914,134 522,935 14.38 4.76 546,121 2.89 194,275 11.86 5.45 (Note 4) 7.45 2.84 4.70 4,102,435 1,000,854 (Note 4) 281,293 597,274 3,011,224 (Note 5) 364,925 (Note 5) Overdue Amount - Action taken - (In Thousands of New Taiwan Dollars) Amounts received in subsequent period 188,346 (Note 1) Allowance for bad debts - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,390,870 (Note 1) 1,433,533 (Note 1) 1,339,742 (Note 1) 4,370,909 (Note 1) 1,478,627 45,630,291 37,150 (Note 1) (Note 1) (Note 1) - - - (Note 1) (Note 1) (Note 1) 8,835,507 - (Note 1) (Note 1) 62,919 (Note 1) 160,837 (Note 1) - (Note 1) 391,222 - (Note 1) (Note 1) - (Note 1) 4,914,134 - - - (Note 1) (Note 1) (Note 1) (Note 1) 2,632,307 - (Note 2) (Note 2) 188,344 236,699 655,717 (Note 2) (Note 2) (Note 2) - - - - - - - - - - - - - - - - - - - - - - - - - (Note 5) 309,627 Strengthen collections 364,925 (Note 3) (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 8 The information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 97 Investor Company Investee Company The Company Kinpo&Compal Group Assets Development Location Taipei City Bizcom Just CIH Panpal Gempal Kinpo Group management consultant company (“Kinpo Group management”) Ripal Unicore Lead-Honor Optronics. Co., Ltd. (“Lead-Honor”) CEH Shennona Taiwan Allied Circuit Poindus Systems Taipei City Aco Smartcare Hsinchu County Lipo Holding Co., Ltd. CPE Starmems Crownpo Technology Inc. (“Crownpo”) Cayman The Netherlands Hsinchu County Taipei City Main Businesses and Products Real estate development leasing and related management business Houston, USA Warranty services and marketing of LCD TVs and notebook PCs British Virgin Islands British Virgin Islands Taipei City Investment Investment Investment Original Investment Amount Ending Balance December 31, 2022 525,000 December 31, 2021 525,000 Shares 52,500 Percentage of Ownership 70% Carrying Value 505,547 Net income (losses) of investee (27,910) Share of profits/losses of investee (19,538) Note (In Thousands of New Taiwan Dollars/ shares) 36,369 36,369 100 100% 452,361 3,410 3,410 1,480,509 1,480,509 48,010 100% 10,364,994 (43,156) (43,156) 1,787,680 1,787,680 53,001 100% 42,565,956 1,030,304 1,030,304 5,171,837 5,171,837 500,000 100% 4,405,558 (313,956) (377,252) (Note 1) Taipei City Investment 900,036 900,036 90,000 100% 1,726,562 164,612 127,886 Taipei City City Consultation, training services, etc. 3,000 3,000 300 38% 4,882 284 106 (Note 1) 60,000 60,000 6,000 100% 122,458 24,384 20,384 200,000 200,000 20,000 100% 84,482 (17,399) (17,399) 42,000 42,000 2,772 42% - 34 34 1 100% 3,619,227 - - - - 6,000 6,000 600 100% 3,696 2,056 576 395,388 395,388 10,158 20% 438,793 555,696 112,728 353,046 - 11,768 56% 324,768 4,415 (1,196) 90,000 90,000 100,000 52% 44,330 (24,930) (12,973) 489,450 197,463 489,450 197,463 98 6,427 49% 100% 398,723 864,057 (664,683) 11,842 (325,694) 11,842 35,000 35,000 3,500 35% 24,990 (25,660) (8,981) 149,547 149,547 3,739 33% 41,029 (95,015) (31,576) 1,000,000 295,000 219,601 1,000,000 295,000 219,601 100,000 29,500 21,756 100% 100% 53% 1,169,400 374,428 262,227 97,275 42,400 44,823 97,275 42,400 26,334 101,747 101,747 3,000 100% 149,561 10,180 10,180 1,325,132 1,325,132 41,305 19% 2,668,147 1,915,053 378,755 2,754,741 2,754,741 89,755 100% 4,510,138 (152,120) (152,120) Taipei City Tainan 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 Taoyuan City Production and sales of PCB boards Design and manufacture of PCs and peripheral equipment 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 Investment 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 Investment Taipei City Taipei City Taichung City Manufacturing of equipment 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 Investment British Virgin Islands Delaware, USA British Virgin Islands Poland CEP Hippo Screen Neurotech Co., Ltd. Taipei City Infinno Technology Corporation (“Infinno”) Hsinchu County HengHao Taipei City BCI British Virgin Islands Medical care IOT business 48,210 32,665 - 100% 16,505 (65) (65) Investment 1,346,814 1,346,814 42,700 54% 233,699 407,288 218,225 Maintenance and warranty 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 90,156 112,000 90,156 112,000 136 9,100 100% 91% (27,599) 34,975 (23,440) (26,246) (23,440) (23,883) 127,026 127,026 4,648 28% 32,062 (20,788) (5,762) 5,729,757 5,729,757 20,015 100% (797,521) (231,377) (231,377) 2,636,051 2,636,051 90,820 100% 8,565,523 582,505 582,505 (Continued) Hong Ji Hong Jin Mactech Auscom Arcadyan FGH Shennona HSI COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 8 The information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 98 Investor Company The Company CBN Investee Company Rayonnant CRH Acendant Private Equity Investment Ltd. Etrade Webtek Forever UCGI Palcom Avalue CORE Compal Ruifang GLB CGSP ARCE Raypal Original Investment Amount Ending Balance December 31, 2022 284,827 December 31, 2021 284,827 Shares 29,060 Percentage of Ownership 43% Carrying Value 627,558 Net income (losses) of investee (57,588) Share of profits/losses of investee (24,531) Note (In Thousands of New Taiwan Dollars/ shares) 295,000 295,000 29,500 100% 200,647 27,157 32,532 377,328 377,328 12,500 100% 287,734 32,813 32,813 943,922 943,922 31,253 35% 1,405,430 (46,382) (16,105) 1,532,029 1,532,029 46,900 65% (364,333) 87,088 (134,458) 3,340 1,575 3,340 1,575 100 50 100% 763,229 33,407 33,407 100% 1,531,800 84,921 84,921 689,997 489,998 20,000 100% 162,613 102 (83) 100,000 547,595 100,000 547,595 10,000 14,924 100% 21% 112,687 727,787 3,547 556,099 3,547 118,990 4,318,860 4,318,860 147,000 100% 7,666,891 301,896 301,896 100,000 - 10,000 100% 99,940 (60) (60) 247,560 246,860 15,035 50% 371,580 81,417 40,421 89,669 89,669 - 100% 92,429 3,773 (3,816) 60,000 60,000 20,000 33% 23,708 (61,803) (20,601) Location 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 New Taipei City Poland Taipei City Main Businesses and Products 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 Investment Investing and developing businesses, such as public construction and specific zones 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 Taipei City Cancerous immunocyte therapy and regenerative medicine 209,076 155,076 4,646 30% 186,922 (37,927) (11,348) Panpal Arcadyan Hsinchu City Telecommunication equipment 279,202 279,202 8,192 4% 573,951 1,915,053 __________ 97,080,580 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% 126,442 555,696 boards Gempal Others Arcadyan Hsinchu City Telecommunication equipment 306,655 306,655 9,279 4% (514,643) 675,117 1,915,053 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% 139,086 555,696 boards Hong Ji Others Arcadyan Hsinchu City Telecommunication equipment 306,655 306,655 9,279 4% (740) 675,117 1,915,053 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% 31,888 555,696 boards Hong Jin Arcadyan Hsinchu City Telecommunication equipment 131,942 131,942 4,609 2% 320,345 1,915,053 and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipment and materials import and manufacturing ___________ 1,826,023 Investment gain(losses) recognized by Panpal 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 8 The information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 99 (In Thousands of New Taiwan Dollars/ shares) Investor Company Investee Company Just CDH (HK) Location Hong Kong Main Businesses and Products Investment December 31, 2022 1,913,156 December 31, 2021 1,913,156 Shares 62,298 Percentage of Ownership 100% Carrying Value 7,842,940 Net income (losses) of investee (77,396) Original Investment Amount Ending Balance CII CPI CII Smart AEI MEL MTL British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 283,914 283,914 9,245 100% 258,032 (24) 15,355 15,355 500 100% 13,668 11,067 31 31 1 100% 381 (7) U.S.A Sales and maintenance of LCD TVs 30,710 30,710 1,000 100% (483) (37) U.S.A Investment 252,866 252,866 U.S.A Investment 31 31 - - 100% 209,588 20 100% 31 - CIH CIH (HK) Hong Kong Investment 2,297,185 2,297,185 74,803 100% 41,759,699 1,485,718 Jenpal PFG FWT CCM HSI IUE Goal British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 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 British Virgin Islands Investment British Virgin Islands Investment British Virgin Islands Investment 225,719 225,719 7,350 100% 111,492 1,931 31 31 1 100% 5,455 25,570 457,579 457,579 14,900 100% 457,578 (1) 156,621 156,621 5,100 51% 25,691 (4,805) 2,057,570 2,057,570 67,000 100% 664,327 406,560 390,017 390,017 12,700 100% 338,159 728 2,057,570 2,057,570 67,000 100% 664,327 406,560 390,017 390,017 12,700 100% 339,807 728 2,481,982 2,481,982 80,820 100% 5,400,819 392,369 307,100 307,100 10,000 100% 3,164,705 190,136 4,514,370 4,514,370 147,000 100% 7,666,891 301,896 Cayman Islands Investment 155,086 155,086 - 99% 140,305 (3,242) British Virgin Islands Investment 1,136,270 1,136,270 37,000 46% 768,787 407,288 U.S.A Manufaturing 249,672 249,672 1 - 100% 215,327 4,015 100% - - Forever GIA British Virgin Islands Selling of mobile phones - - BCI CMI PRI CORE BSH BSH Mithera HSI CIN Share of profits/losses of investee Note 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 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 8 The information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 100 (In Thousands of New Taiwan Dollars/ shares) Investor Company Forever CWV Investee Company Webtek Etrade Unicore Raycore Main Businesses and Products R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components Investment Location Vietnam British Virgin Islands Taipei City Animal medication retail and wholesale Original Investment Amount Ending Balance December 31, 2022 December 31, 2021 Shares Percentage of Ownership 61,420 61,420 - 100% Carrying Value 101,739 Net income (losses) of investee Share of profits/losses of investee Note 79,661 767,750 767,750 25,000 35% 7,446 87,088 - 40,692 - 0% - - Arcadyan Arcadyan Holding British Virgin Islands Investment 1,701,027 2,219,782 47,780 100% 1,804,421 (45,949) Arcadyan USA U.S.A Sales of wireless network products 23,055 23,055 Arcadyan Germany Germany Technology support and sales of wireless network products 1,125 1,125 1 1 100% 79,312 (63,692) 100% 87,814 7,152 Arcadyan Korea Korea Sales of wireless network products 2,879 2,879 20 100% 24,216 11,167 Zhi-Bao Hsinchu City Investment 48,000 48,000 34,980 100% 405,516 (10,735) TTI Taipei City R&D and sales of household digital products 308,726 308,726 25,028 61% 205,272 (256,058) AcBel Telecom Taipei City Investment - 23,000 - 0% - 3,365 Arcadyan UK UK Technical support of wireless network products 1,988 1,988 50 100% 4,759 572 Arcadyan AU Australia Arcadyan RU (cid:83)(cid:118)(cid:116)(cid:116)(cid:106)(cid:98) Sales of wireless network products Sales of wireless network products 1,161 1,161 50 100% 61,405 18,089 7,672 7,672 - 100% 4,964 (1,713) CBN Hsinchu County Sales of communication and electronic components 11,925 11,925 533 1% 11,898 (57,588) Arcadyan and Zhi-Bao Arcadyan Brasil Brazil Sales of wireless network products 81,593 81,593 968 100% (41,645) (23,669) Arcadyan India India Sales of wireless network products 29,110 13,507 7,500 100% 23,337 (4,001) Arcadyan Holding Sinoprime British Virgin Islands Investment 892,126 892,126 29,050 100% 1,223,179 267,559 Arch Holding British Virgin Islands Investment 338,148 338,148 35 100% 827,635 (323,027) TTI Quest Samoa Investment 36,852 36,852 1,200 100% (230,523) (142,972) TTJC Japan Sales of household digital electronic products 9,626 9,626 1 100% 3,297 (499) Quest Exquisite Samoa Investment 35,931 35,931 1,170 100% (232,168) (142,975) Sinoprime Arcadyan Vietnam Vietnam Manufacturing of wireless network products 890,590 890,590 - 100% 1,218,634 267,530 Zhi-Bao CBN Hsinchu County Produces and sales of communication and electronic components 36,272 36,272 13,140 19% 293,202 (57,588) 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 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 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 (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 8 The information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China): (December 31, 2022) 101 (In Thousands of New Taiwan Dollars/ shares) Investor Company Rayonnant APH Investee Company Location British Virgin Islands Original Investment Amount Ending Balance Main Businesses and Products Investment December 31, 2022 257,454 December 31, 2021 257,454 Shares 8,651 Percentage of Ownership 41% Carrying Value 193,110 Net income (losses) of investee Share of profits/losses of investee Note 59,449 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 383,875 383,875 12,500 59% 287,734 59,449 96,767 96,767 3,151 100% 43,994 456 Rayonnant(HK) Hong Kong Investment 552,780 552,780 18,000 100% 428,698 58,993 HHT HHA HHA HHB British Virgin Islands Investment British Virgin Islands Investment 1,429,235 1,429,235 46,882 100% (1,091,269) (360,633) 1,439,747 1,439,747 46,882 100% (1,091,210) (360,633) CBN CBNB Belgium CBNN Netherlands Starmems Taiwan 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 R&D of MEMS microphone related products 6,842 6,842 20 100% 5,386 (255) 7,016 7,016 20 100% 6,168 (118) 10,000 10,000 1,000 10% 7,140 (25,660) FGH Wah Yuen Technology Holding Ltd. and its subsidiaries Mactech Taiwan Intelligent Robotics Company, LTD. Mauritius Investment 2,756,391 2,756,391 95,862 37% 4,580,629 (377,622) Taipei City Manufacturing of equipment 43,200 43,200 2,160 17% 2,395 (25,969) Poindus Systems Poindus Investment Poindus Investment Taipei City investment holding 4,100 4,100 (Note 2) 100% 559 (61) Poindus UK UK Sales of PCs and peripherals 14,297 14,297 300 100% (7,792) (2,676) Adasys Germany Sales of PCs and peripherals 57,712 57,712 0.002 100% 1,866 (26,473) Poindus GmbH Germany Sales of PCs and peripherals 1,721 1,721 (Note 2) 100% 135 (61) 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: A limited company, therefore no number of shares. 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 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 Mactech Investment gain (losses) recognized by Poindus Systems Investment gain (losses) recognized by Poindus Systems Investment gain (losses) recognized by Poindus Systems Investment gain (losses) recognized by Poindus Investment (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 9 Information on investment in Mainland China: (December 31, 2022) (i) The names of investees in Mainland China, the main businesses and products, and other information: 102 Main businesses and products Manufacturing and sales of monitors Total amount of paid-in capital 1,136,270 Method of investment (Note 1) Accumulated outflow of investment from Taiwan as of January 1, 2022 1,136,270 (In Thousands of New Taiwan Dollars/ shares) Accumulated outflow of investment from Taiwan as of December 31, 2022 1,136,270 Net income (losses) of the investee (301,556) Percentage of ownership 100% Investment income (losses) (Note 4) (301,556) Book value 2,597,603 Accumulated remittance of earnings in current period - Investment flows Outflow - Inflow - - - - - - - 614,200 (Note 2) 614,200 368,520 (Note 2) 368,520 264,852 (Note 2) (Note 3) 614,200 36,769 100% 36,769 123,413 368,520 (341,528) 100% (341,528) 4,968,182 - (178,620) 100% (178,620) 133,487 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 Sheng Bao Precision Electronics (Taicang) Co., Ltd. CIJ CDE CIS CEC CMC CEQ Compal Precision Module (Jiangsu) Co., Ltd. Changbao Electronic Technology (Chongqing) Co., Ltd. Rayonnant (Taicang) and sales Manufacturing 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 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:28874) 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 International trade and distribution of computers and electronic components Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self-produced products Investment and consulting services Manufacturing and sales of LCD TVs Outward investment and consulting services R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products Corporate management consulting, financial and tax consulting, investment consulting, and investment management consulting services R&D, manufacturing and sales of notebook PCs and related components. Also provides related maintenance and warranty services Manufacturing and selling of magnesium alloy injection molding Production and marketing of magnesium alloy molding Manufacturing and sales of aluminum alloy and magnesium alloy products 69,639 (Note 2) (Note 3) - - - - 51% - (43,757) Manufacturing of notebook PCs 30,710 (Note 2) 30,710 8,828 (Note 2) (Note 3) 982,720 (Note 1) 409,364 - - - - - - 30,710 57,996 - 7,260 100% 100% 57,996 (115,716) 7,260 (38,545) 409,364 (568,185) 43% (245,342) 300,436 614,200 (Note 1) 45,144 - - 45,144 (512,722) 48% (244,056) 308,175 Manufacturing of notebook PCs 368,520 (Note 2) Manufacturing and sales of LCD TVs 371,591 (Note 1) Manufacturing of notebook PCs 737,040 (Note 2) 42,994 (Note 2) 368,520 371,591 737,040 42,994 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 368,520 371,591 739,180 112,294 737,040 954,634 42,994 (8,091) 100% 100% 100% 100% 739,180 10,388,019 112,294 3,047,731 954,634 25,750,770 (8,091) 45,069 156,621 (4,805) 51% (2,450) 58,466 479,076 158,621 100% 158,621 2,643,288 - 160,011 100% 160,011 2,608,270 2,481,982 392,369 100% 392,369 5,400,819 - - 392,329 100% 392,329 5,369,643 148 100% 148 24,729 307,100 190,136 100% 190,136 3,164,705 2,537,475 (1,093) 37% (400) 5,538,329 351,814 (218,529) 37% (80,025) 655,762 383,875 58,993 100% 58,993 429,298 307,100 (Note 2) 156,621 479,076 (Note 2) 479,076 460,650 (Note 2) (Note 3) 2,481,982 (Note 1) 2,481,982 2,456,800 (Note 2) (Note 3) 24,568 (Note 2) (Note 3) 307,100 (Note 1) 307,100 12,898,200 (Note 2) 2,537,475 1,842,600 (Note 2) 351,814 552,780 (Note 2) 383,875 - - - - - - - - - - - - - - - - - - - - - - (Continued) COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements Table 9 Information on investment in Mainland China: (December 31, 2022) (i) The names of investees in Mainland China, the main businesses and products, and other information: 103 Accumulated outflow of investment from Taiwan as of January 1, 2022 675,620 Accumulated outflow of investment from Taiwan as of December 31, 2022 Net income (losses) of the investee 675,620 (64,917) Percentage of ownership 100% Investment income (losses) (Note 4) (64,917) Book value (1,168,454) Accumulated remittance of earnings in current period - Investment flows Outflow - Inflow - Total amount of paid-in capital 829,170 Method of investment (Note 1) (In Thousands of New Taiwan Dollars/ shares) Name of investee CCI Nanjing CDCN CWCN Hanhelt Arcadyan SVA Arcadyan CNC THAC HengHao HengHao Kunshan Main businesses and 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 Manufacturing and wireless network products Manufacturing of household electronics products 178,118 (Note 1) 178,118 1,504,790 (Note 1) 583,490 61,420 (Note 1) 61,420 248,751 (Note 1) 382,340 (Note 1) 102,879 (Note 1(cid:739) 9) 412,128 (Note 7) 338,148 (Note 8) 35,317 Production of touch panels and related components 1,228,400 (Note 1) 1,222,350 Lucom Manufacturing of notebook PCs and related modules 460,650 (Note 2) 199,585 (Note 12) Poindus Systems Qijie Sales of PCs and peripherals 30,710 (Note 1) 30,710 - - - - - - - - - - - - - - - - - - 178,118 1,490 100% 1,490 90,840 583,490 155,008 100% 155,008 1,065,299 61,420 (2,771) 100% (2,771) (369) 412,128 6,199 100% 6,199 35,040 338,148 (323,027) 100% (323,027) 827,635 35,317 (142,975) 100% (142,975) (232,690) 1,222,350 (361,185) 100% (361,185) (1,232,238) 199,585 671 100% 671 140,778 30,710 (10,931) 100% (10,931) 11,493 - - - - - - - - - (ii) Limitation on investment in Mainland China: Names of Company The Company Arcadyan HengHao Poindus Systems Note 1(cid:28873) Note 2(cid:28873) Note 3(cid:28873) Note 4(cid:28873) Note 5(cid:28873) Note 6(cid:28873) Note 7(cid:28873) Note 8(cid:28873) Note 9(cid:28873) Note 10(cid:28873) Note 11(cid:28873) Accumulated Investment in Mainland China as of December 31, 2022 16,661,311 (US$542,537) (Note 5) 785,593 (US$25,581) 1,439,439 (US$46,872) 30,710 (US$1,000) Investment Amounts Authorized by Investment Commission of Ministry of Economic Affairs 23,598,055 (US$768,416) Limitation on investment in Mainland China by Investment Commission of Ministry of Economic Affairs (Note 6) (In Thousands of USD) 785,593 (US$25,581) 1,439,439 (US$46,872) 30,710 (US$1,000) 8,284,344 (Note 12) 308,044 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 basis for recognition of investment profit and loss is based on the financial statements that verified by CPA 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. 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 12(cid:28873) The net equity of HengHao is negative at December 31, 2022. (iii) Significant transactions: For the year ended December 31, 2022, 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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