Stock Code:2324

COMPAL ELECTRONICS, INC.

Parent Company Only Financial Statements

With Independent Auditors ’ Report For the Years Ended December 31, 2018 and 2017

Address: No.581 & 581-1, Ruiguang Rd., Neihu District, Taipei, Taiwan Telephone: (02)8797-8588

Contents 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 Parent Company Only-Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses due to major disasters (11) Subsequent events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in Mainland China (14) Segment information 9. List of major accounting items	Page
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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, 2018 and 2017, the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2018 and 2017, 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, 2018 and 2017, and its financial performance and its cash flows for the years then ended December 31, 2018 and 2017, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Account receivable valuation

Please refer to Note (4)(f) for the accounting policy of accounts receivable. Information of account receivable valuation are shown in Note (6)(h) of the financial statements.

3-1

Description of key audit matters:

The Company devotes to develop new product lines and customers in emerging countries, and the credit risks of these customers are higher than other world leading enterprises. Therefore, valuation of accounts receivable has been identified as a key audit matter.

Our key audit procedures performed in respect of the above area included the following:

In order to evaluate the reasonableness of the Company's estimations for bad debts, our key audit procedures included reviewing if the measurement of impairment loss of accounts receivable is accordance with accounting policy, examining the historical recovery records, analyzing the aging of accounts receivable, and the current credit status of customers, as well as inspecting the amount collected in the subsequent period.

2. Inventory valuation

Please refer to Note (4)(g) and Note (5) for the accounting policy of inventory valuation, as well as the estimation and assumption uncertainty of the valuation of inventory, respectively. Information of estimation of the valuation of inventory are disclosed in Note (6)(j) of the financial statements.

Description of key audit matters:

The inventory is measured at the lower of cost or net realizable value. The short life cycle of electronic products may cause significant changes in customers ’ demand and sales of related products. Consequently, the book value of inventory may be lower than the net realizable value of inventory. Therefore, the valuation of inventory is one of the key audit matters.

Our key audit procedures performed in respect of the above area included the following:

In order to verify the rationality of assessment of inventory valuation estimated by the Company, our key audit procedures included reviewing the consistency of prior year and accounting policy, inspecting the Company's inventory aging reports, analyzing the change of inventory aging, as well as verifying the inventory aging reports and the calculation of lower of cost or net realizable value.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company’s financial reporting process.

3-2

Auditor ’ s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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 for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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.
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.
Obtain sufficient appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

3-3

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Szu-Chuan Chien and Yiu-Kwan Au.

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KPMG

Taipei, Taiwan (Republic of China) March 22, 2019

Notes to Readers

The accompanying parent company only financial statements are intended only to present the parent company only financial statements of financial position, financial performance and its cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such parent company only financial statements are those generally accepted and applied in the Republic of China.

COMPAL ELECTRONICS, INC.

Balance Sheets

December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note (6)(a)) 1110 Current financial assets at fair value through profit or loss (note (6)(b)) 1125 Current available-for-sale financial assets (note (6)(d)) 1136 Current financial assets at amortized cost (note (6)(f)) 1147 Current bond investments without active market (note (6)(g)) 1170 Notes and accounts receivable, net (note (6)(h)) 1180 Notes and accounts receivable due from related parties, net (notes (6)(h) and 7) 1200 Other receivables, net (notes (6)(h), (6)(i) and 7) 1310 Inventories (note (6)(j)) 1470 Other current assets Non-current assets: 1550 Investments accounted for using equity method (note (6)(k)) 1510 Non-current financial assets at fair value through profit or loss (note (6)(b)) 1517 Non-current financial assets at fair value through other comprehensive income (note (6)(c)) 1523 Non-current available-for-sale financial assets (note (6)(d)) 1543 Non-current financial assets at cost (note (6)(e)) 1546 Non-current bond investments without active market (note (6)(g)) 1600 Property, plant and equipment (note (6)(m)) 1780 Intangible assets 1840 Deferred tax assets (note 6(t)) 1990 Other non-current assets Total assets	December 31, 2018 December 31, 2017 Amount % Amount % $ 20,446,378 5.7 28,343,534 8.6 284,768 0.1 - - - - 46,479 - 350,000 0.1 - - - - 350,000 0.1 189,496,594 53.3 165,540,785 50.5 1,318,230 0.4 2,095,570 0.7 1,418,750 0.4 711,293 0.2 51,517,159 14.5 42,985,363 13.1 541,027 0.1 604,564 0.2 265,372,906 74.6 240,677,588 73.4 83,299,238 23.5 77,919,870 23.7 23,745 - - - 3,731,918 1.0 - - - - 5,735,334 1.8 - - 2,333 - - - 350,000 0.1 2,128,181 0.6 2,092,272 0.7 378,745 0.1 146,813 - 760,580 0.2 1,065,112 0.3 117,500 - 106,744 - 90,439,907 25.4 87,418,478 26.6 $ 355,812,813 100. 328,096,066 100. Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note (6)(n)) 2130 Current contract liabilities (note (6)(x)) 2170 Notes and accounts payable 2180 Notes and accounts payable to related parties (note 7) 2200 Other payables (note 7) 2230 Current tax liabilities 2250 Current provisions (note (6)(p)) 2300 Other current liabilities 2313 Unearned revenue 2365 Current refund liabilities (note (6)(q)) 2322 Long-term borrowings, current portion (note (6)(o)) Non-Current liabilities: 2540 Long-term borrowings (note (6)(o)) 2570 Deferred tax liabilities (note (6)(t)) 2640 Non-current net defined benefit liability (note (6)(s)) 2670 Non-current liabilities, others (note (6)(k)) Total liabilities Equity: 3110 Ordinary share (note (6)(u)) 3200 Capital surplus (note (6)(u)) 3300 Retained earnings (note (6)(u)) 3400 Other equity interest (notes (6)(u) and (6)(v)) 3500 Treasury shares (note (6)(u)) Total equity Total liabilities and equity	December 31, 2018	December 31, 2018
		Amount	%
		237,882,742 66.9 203,492,102 62.1
		10,900,000 3.0 21,114,450 6.4 386,555 0.1 543,621 0.2 621,581 0.2 612,131 0.2 298,289 0.1 438,178 0.1
		12,206,425 3.4 22,708,380 6.9
		250,089,167 70.3 226,200,482 69.0
		44,071,466 12.4 44,191,916 13.5 9,932,434 2.8 10,938,773 3.3 60,060,381 16.9 56,557,146 17.2 (7,459,388) (2.1) (8,911,004) (2.7) (881,247) (0.3) (881,247) (0.3)
		105,723,646 29.7 101,895,584 31.0
		$ 355,812,813 100. 328,096,066 100.

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC.

Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share)

2018	% 100.0 97.6	2017
Amount $ 911,050,122 889,171,625		Amount 841,309,602 819,765,642
21,878,497 (2,344)	2.4 -	21,543,960 (480)
21,880,841	2.4	21,544,440
3,157,897 2,389,356 9,396,882	0.3 0.3 1.0	5,979,101 2,100,602 8,294,188
14,944,135	1.6	16,373,891
6,936,706	0.8	5,170,549
	- (0.2) 0.1 0.4	(1,615,111) (975,175) 937,671 3,160,786
3,021,610	0.3	1,508,171
9,958,316 1,044,951	1.1 0.1	6,678,720 929,195
8,913,365	1.0	5,749,525
(20,189) (1,096,846) (212,493) 69,926	- (0.1) - -	(79,683) - (1,970) 13,546
(1,259,602)	(0.1)	(68,107)
1,853,763 - (229,339) -	0.1 - - -	(4,606,117) 147,849 (21,111) (12,221)
1,624,424	0.1	(4,491,600)
364,822	-	(4,559,707)
$ 9,278,187	1.0	1,189,818
$	2.05
$	2.02

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC. Statements of Changes in Equity For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

Ordinary shares		Retained earnings	Retained earnings			Total	other equity interest	other equity interest
	Legal reserve	Special reserve	Unappropriated retained earnings	Total retained earnings	Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on financial assets measured at fair value through other comprehensiv e income	Unrealized gains (losses) on available-for- sale financial assets	Unearned employee benefit and others	Total other equity interest
$ 44,241,606 11,779,274 17,439,772 3,199,674 34,649,963 - - - - 5,749,525 - - - - (68,107)				55,289,409 1,324,282 - 5,749,525 - - (68,107) (4,801,658) -
- - - - 5,681,418				5,681,418 (4,801,658) -			310,058 - (4,491,600) - 1,189,818
- - 813,089 - (813,089) - - - 1,139,875 (1,139,875) - - - - (4,422,153) - (884,431) - - - - 33,016 - - (2,179) - 142 - - (424) - 14,217 - - (194) (49,690) (63,472) - - 11,269 - 60,027 - - -				- - - - - - (4,422,153) - - - - - (2,179) - - (424) - - (194) - - 11,269 - - - - -			- - - - - - - - - - - - - - (4,422,153) - - - - (884,431) - - - - 30,837 - - - - (282) - - - - 14,023 - 205,249 205,249 - 103,356 - - - - 60,027
44,191,916 10,938,773 18,252,861 4,339,549 33,964,736 - - - - 494,051				56,557,146 (3,477,376) - (5,353,772) (79,856) (8,911,004) (881,247) 101,895,584 494,051 - (5,847,823) 5,353,772 - (494,051) - -
44,191,916 10,938,773 18,252,861 4,339,549 34,458,787				57,051,197 (3,477,376) (5,847,823) - (79,856) (9,405,055) (881,247) 101,895,584
- - - - 8,913,365 - - - - 14,094				8,913,365 - - - - - - 8,913,365 14,094 1,624,424 (1,273,696) - - 350,728 - 364,822
- - - - 8,927,459				8,927,459 1,624,424 (1,273,696) - - 350,728 - 9,278,187
- - 574,953 - (574,953) - - - 4,491,599 (4,491,599) - - - - (4,407,147) - (881,429) - - - - (32,706) - - (521,643) - (459) - - (1,156) (120,450) (151,766) - - 36,141 - 60,021 - - - - - - - (1,024,470)				- - - - - - - - - - - - - - - - (4,407,147) - - - - - - (4,407,147) - - - - - - - (881,429) (521,643) - 489,483 - - 489,483 - (64,866) (1,156) - 1,130 - - 1,130 - (485) 36,141 - - - 79,856 79,856 - (156,219) - - - - - - - 60,021 (1,024,470) - 1,024,470 - - 1,024,470 - -
$ 44,071,466 9,932,434 18,827,814 8,831,148 32,401,419				60,060,381 (1,852,952) (5,606,436) - - (7,459,388) (881,247) 105,723,646

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC.

Statements of Cash Flows

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation and amortization Increase in expected credit loss /allowance for uncollectible accounts Net 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 profit of subsidiaries, associates and joint ventures accounted for using equity method Loss on disposal of investments 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 Decrease (increase) in other current assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in notes and accounts payable Increase (decrease) in other payables Increase (decrease) in refund liabilities Increase (decrease) in provisions Increase (decrease) in unearned revenue Increase (decrease) in contract liabilities Increase (decrease) in other current liabilities Others Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow (outflow) generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Redemption from financial assets at amortized cost Acquisition of investments accounted for using equity method and financial assets at fair value through other comprehensive income Proceeds from disposal of investments accounted for using equity method and financial assets at fair value through other comprehensive income Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Proceeds from capital reduction of investments Acquisition of property, plant and equipment Increase in other receivables due from related parties Acquisition of intangible assets Others Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase (decrease) in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Cash dividends paid Others Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2018 $ 9,958,316	2017 6,678,720
	456,117 1,065 (95,526) 1,938,044 (332,905) (212,129) (156,219) (4,198,330) -	480,523 2,928,547 - 975,175 (239,394) (117,742) 103,356 (3,160,786) 1,804
	(2,599,883)	971,483
	(23,179,534) (629,912) (8,531,796) 63,537	(5,685,417) (223,698) (15,016,352) (145,850)
	(32,277,705)	(21,071,317)
	11,759,347 1,172,349 40,154 - - (212,174) (77,610) (12,315)	(2,770,322) (686,997) - (91,958) (156,532) - (261,816) (9,639)
	12,669,751	(3,977,264)
	(19,607,954)	(25,048,581)
	(22,207,837)	(24,077,098)
	(12,249,521) 314,650 592,252 (1,769,911) (684,300)	(17,398,378) 221,027 660,913 (962,095) (517,161)
	(13,796,830)	(17,995,694)
	350,000 (137,435) 291,435 (23,745) 574,529 8,054 (203,186) (321,840) (521,722) (10,572)	350,000 (503,112) 809,196 - - 1,459,043 (126,108) (293,029) (193,154) 10,495
	5,518	1,513,331
	9,919,682 34,258,000 (32,994,950) (5,288,576) -	10,942,250 12,691,630 (16,893,430) (5,306,584) (104)
	5,894,156	1,433,762
	(7,897,156) 28,343,534	(15,048,601) 43,392,135
	$ 20,446,378	28,343,534

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC.

Notes to the Parent Company Only-Financial Statements

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(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 22, 2019.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018.

New, Revised or Amended Standards and Interpretations Amendment to IFRS 2“Classification and Measurement of Share-based Payment Transactions” Amendments to IFRS 4“Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” IFRS 9“Financial Instruments” IFRS 15“Revenue from Contracts with Customers” Amendment to IAS 7“Statement of Cash Flows–Disclosure Initiative” Amendment to IAS 12“Income Taxes–Recognition of Deferred Tax Assets for Unrealized Losses” Amendments to IAS 40“Transfers of Investment Property”	Effective date per IASB
	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018

New, Revised or Amended Standards and Interpretations
Amendment to IFRS 2“Classification and Measurement of Share-based
Payment Transactions”
Amendments to IFRS 4“Applying IFRS 9 Financial Instruments with IFRS 4
Insurance Contracts”
IFRS 9“Financial Instruments”
IFRS 15“Revenue from Contracts with Customers”
Amendment to IAS 7“Statement of Cash Flows–Disclosure Initiative”
Amendment to IAS 12“Income Taxes–Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS 40“Transfers of Investment Property”

Effective date
per IASB

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

New, Revised or Amended Standards and Interpretations Annual Improvements to IFRS Standards 2014–2016 Cycle: Amendments to IFRS 12 Amendments to IFRS 1 and Amendments to IAS 28 IFRIC 22“Foreign Currency Transactions and Advance Consideration”	Effective date per IASB
	January 1, 2017 January 1, 2018 January 1, 2018

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of significant changes are as follows:

(i) IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, using a five-step model framework to determine the method, timing and amount of revenue recognized. This standard replaces existing revenue recognition guidance, including IAS 18, Revenue, IAS 11, Construction Contracts, and the related interpretations. The Company applies this standard retrospectively with the cumulative effect, it needs not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. Upon the initial application of this standard, there was no cumulative effect and no adjustment was made to retained earnings on January 1, 2018.

The following are the nature and impacts on changing of accounting policies:

1) Sales of goods

For the sale of the Company's products, revenue was used to be recognized when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer, the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods. The Company believes that the point at which the related risks and rewards of ownership transfer to the customers is similar to the point of control transfer. Therefore, the changes in accounting policy of the above-mentioned sales of goods do not result in a material adjustment of the financial statements.

2) Impacts on financial statements

’ The following tables summarize the impacts of adopting IFRS 15 on the Company s financial statements for the year ended December 31, 2018:

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

December 31, 2018	December 31, 2018	January 1, 2018
Carrying amount under IAS 18 and related standards and interpretations	Adjustments from changes in accounting policies	Adjustments from changes in accounting policies
		1,617,626 (1,440,292) (1,617,626) 1,440,292
		-

Note 1: Prior to the adoption of IFRS 15, the sales returns and discounts were recognized as sales returns and allowances provisions. Under IFRS 15, it was recognized as refund liabilities.
Note 2: Prior to the adoption of IFRS 15, unearned revenue were recognized as other current liabilities or expressed it alone. Under IFRS 15, it was recognized as contract liabilities.
(ii) IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

As a result of the adoption of IFRS 9, the Company adopted the consequential amendments to IAS 1 “Presentation of Financial Statements” which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Company’s approach was to include the impairment of trade receivables in selling expenses. Additionally, the Company adopted the consequential amendments to IFRS 7 “Financial Instruments: Disclosures” that are applied to disclosures about 2018 but generally have not been applied to comparative information.

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Company classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note (4)(f).

The adoption of IFRS 9 did not have any significant impact on its accounting policies on financial liabilities.

2) Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with the ‘expected credit loss’ (“ECL”) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than those under IAS 39. Please see note (4)(f).

3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below,

‧ Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

‧ The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.
- － The determination of the business model within which a financial asset is held.
- － The designation of certain investments in equity instruments not held for trading as at FVOCI.
‧ If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Company assumed that the credit risk on its asset will not increase significantly since its initial recognition.
4) Classification of financial assets on the date of initial application of IFRS 9

The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company’s financial assets as of January 1, 2018 (no change in measurement categories and carrying amounts for financial liabilities).

Financial Assets Cash and cash equivalents Debt securities Investment in equity instruments Notes and accounts receivable net (including related parties) Notes and accounts receivable, net (including related parties) Other receivables and guarantee deposits	IAS 39		IFRS 9	Carrying Amount 28,343,534 700,000 2,333 763,771 5,018,042 128,447,972 39,188,383 818,037
	Measurement categories Loans and receivables (note 3) Loans and receivables (Bond investment without active market-current and non-current) (note 1) At cost (note 2) Available for sale–current and non-current (note 2) Available for sale–current and non-current (note 2) Loans and receivables (note 3) Loans and receivables (note 4) Loans and receivables (note 3)	Carrying Amount

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Note1: The corporate debt securities that were previously classified as bond investment without an active market are now classified at amortized cost. The Company intends to hold the assets to maturity to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding.
Note2: These equity securities (including financial assets measured at cost) represent investments that the Company intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVOCI and FVTPL. Accordingly, a decrease of $377,309 thousands in the reserves, as well as the increase of $377,309 thousands in retained earnings were recognized on January 1, 2018. Besides, on the date of initial application, a decrease of $ 116,742 thousands in the reserve, as well as the increase of $116,742 thousands in retained earnings were recognizes due to the adjustment resulted from investments accounted for using equity method.
Note3: Cash and cash equivalents, notes and accounts receivable (including related parties), other receivables and guarantee deposits that were classified as loans and receivables under IAS 39 are now classified at amortized cost.
Note4: Accounts receivable are held within a business model whose objective is achieved by both collecting the contractual cash flows and by selling accounts receivables that were classified as loans and receivables under IAS 39 are now classified at FVOCI, and recorded as accounts receivable.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on January 1, 2018.

2017.12.31 IAS 39 Carrying Amount $ - -	Reclassifications - 763,771	Remeasurements - -	2018.1.1 IFRS 9 Carrying Amount	2018.1.1 Adjustments to retained earnings - 125,134	2018.1.1 Adjustments to other equity - (125,134)
$ -	763,771	-		125,134	(125,134)
$ 5,784,146 - -	- 39,188,383 (763,771)	- - -	44,208,758	252,175 - -	(252,175) - - (252,175) - - -
$ 5,784,146	38,424,612	-		252,175
$ 197,391,197 -	- (39,188,383)	- -	158,202,814	- -
$ 197,391,197	(39,188,383)	-		-

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(iii) Amendments to IAS 7 “Disclosure Initiative”

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes.

To satisfy the new disclosure requirements, the Company presents a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities as note 6(af).

(iv) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Loss”

The amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value.

The Company believes that the above changes in accounting policies would not have any material impact on its parent-company-only financial statements.

(b) The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

1070324857 issued by the FSC on July 17, 2018:
New, Revised or Amended Standards and Interpretations IFRS 16“Leases” IFRIC 23“Uncertainty over Income Tax Treatments” Amendments to IFRS 9“Prepayment features with negative compensation” Amendments to IAS 19“Plan Amendment, Curtailment or Settlement” Amendments to IAS 28“Long-term interests in associates and joint ventures” Annual Improvements to IFRS Standards 2015–2017 Cycle	Effective date per IASB
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

1070324857 issued by the FSC on July 17, 2018:

New, Revised or Amended Standards and Interpretations
IFRS 16“Leases”
IFRIC 23“Uncertainty over Income Tax Treatments”
Amendments to IFRS 9“Prepayment features with negative compensation”
Amendments to IAS 19“Plan Amendment, Curtailment or Settlement”
Amendments to IAS 28“Long-term interests in associates and joint ventures”
Annual Improvements to IFRS Standards 2015–2017 Cycle

Effective date
per IASB

January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

(i) IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, SIC-15 “Operating Leases – Incentives” and SIC-27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of low-value items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify leases as finance or operating leases.

1) Determining whether an arrangement contains a lease

On transition to IFRS 16, the Company can choose to apply either of the following:

‧ IFRS 16 definition of a lease to all its contracts; or
‧ a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.

The Company plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

2) Transition

As a lessee, the Company can apply the standard using either of the following:

‧ retrospective approach; or
‧ modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases.

On January 1, 2019, the Company plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Company chooses to elect the following practical expedients:

apply a single discount rate to a portfolio of leases with similar characteristics.
apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.
exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

  - use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

3) So far, the most significant impact identified is that the Company will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Company estimated that the right-of-use assets and the lease liabilities to increase by $823,996 thousands and $823,996 thousands respectively, on January 1, 2019.
(ii) IFRIC 23 Uncertainty over Income Tax Treatments

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations.

If an entity concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates consistently with the tax treatment used or planned to be used in its income tax filings. Otherwise, an entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty.

So far, the company believes that above changes in accounting policies would not have any material impact on its financial statements.

The actual impacts of adopting the standards may change depending on the economic conditions and events which may occur in the future.

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Board (IASB), but have yet to be endorsed by the FSC:
New, Revised or Amended Standards and Interpretations Amendments to IFRS 3“Definition of a Business” Amendments to IFRS 10 and IAS 28“Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture” IFRS 17“Insurance Contracts” Amendments to IAS 1 and IAS 8“Definition of Material”	Effective date per IASB
	January 1, 2020 Effective date to be determined by IASB January 1, 2021 January 1, 2020

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Those which may be relevant to the Company are set out below:

Issuance / Release Dates October 31, 2018	Standards or Interpretations Amendments to IAS 1 and IAS 8“Definition of Material”	Content of amendment
		The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until now has featured elsewhere in IFRS Standards. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards.

The Company is evaluating the impact on its financial position and financial performance upon the initial adoption of the above-mentioned standards or interpretations. The results thereof will be disclosed when the Company completes its evaluation.

(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 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) Financial instruments measured at fair value through profit or loss are measured at fair value;
2) Financial instruments measured at fair value through other comprehensive income (Available-for-sale) are measured at fair value;
3) 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).

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(ii) Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the Company operates. The parent-company-only financial statements are presented in New Taiwan Dollar, which is the Company's functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(c) Foreign currency

(i) Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the reporting date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation.

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) fair value through other comprehensive income (available-for-sale) financial assets financial assets;
2) 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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

(d) Classification of current and non-current assets and liabilities

An entity shall classify an asset as current when:

(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.

An entity shall classify all other assets as non-current.

An entity shall classify a liability as current when:

(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) It 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.

An entity shall classify all other liabilities as non-current.

(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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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 (policy applicable from January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).

The Company shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Dividend income derived from equity investments is recognized on the date that the Company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

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.

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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

The Company measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

‧ debt securities that are determined to have low credit risk at the reporting date; and
‧ other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. An evidence that a financial asset is credit-impaired includes the following observable data:

‧ significant financial difficulty of the borrower or issuer;
‧ a breach of contract such as a default or being more than 90 days past due;
‧ the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;
‧ it is probable that the borrower will enter bankruptcy or other financial reorganization; or
‧ the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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 assets (policy applicable before January 1, 2018)

Financial assets are classified into the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables.

1) Financial assets at fair value through profit or loss

A financial asset is classified in this category if it is classified as held-for-trading or is designated as such on initial recognition. Financial assets are classified as held-for-trading if they are acquired principally for the purpose of selling in the short term. The Company designates financial assets, other than ones classified as held-for-trading, as at fair value through profit or loss at initial recognition under one of the following situations:

a) Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
b) Performance of the financial asset is evaluated on a fair value basis
c) A hybrid instrument contains one or more embedded derivatives.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss, and are included in non-operating income and expenses. Under a regular way, purchase or sale of financial assets shall be recognized and derecognized as applicable using trade date accounting.

2) Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value, and changes therein, other than impairment losses, interest income calculated using the effective interest method, dividend income, and foreign currency differences on available-for-sale debt instruments, are recognized in other comprehensive income and

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

presented in the fair value reserve in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in non-operating income and expenses. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at cost less impairment losses, and are included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established, which in the case of quoted securities is normally on the date the shareholders’ meeting approved the earning distribution. Such dividend income is included in non-operating income and expenses.

3)

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables, other receivables, and investment in debt security with no active market. Such assets are recognized initially at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less, any impairment losses other than insignificant interest on short-term receivables. Under a regular way, purchase or sale of financial assets shall be recognized and derecognized as applicable using trade date accounting.

Interest income is recognized in profit or loss, and it is included in non-operating income and expenses.

4) Impairment of financial assets

A financial asset is impaired if, and only if, there is an objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be estimated reliably.

The objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries, and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than those suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

An impairment loss in respect of a financial asset measured at cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss is not reversible in subsequent periods.

An impairment loss in respect of a financial asset is deducted from the carrying amount, except for trade receivables, for which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of receivable written off is recorded in the allowance account. Changes in the amount of the allowance account are recognized in profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

If, in a subsequent period, the amount of the impairment loss of a financial asset measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date.

Impairment losses recognized on an available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income and accumulated in other equity.

Impairment losses and recoveries are recognized in profit or loss. Recovery and loss on doubtful debts of account receivables is included in operating expense, others are included in non-operating income and expense.

5) Derecognition of financial assets

The Company derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

On derecognition of a financial asset in its entirety, the difference between the 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 from available-for-sale financial assets is recognized in profit or loss, and included in non-operating income or expenses.

The Company separates the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income shall be recognized in profit or loss, and is included in non-operating income or 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 derecognized based on the relative fair values of those parts.

(iii) 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.

Interest and loss or gain related to financial liabilities are recognized as profit or loss and are reported under non-operating income and expenses. Financial liabilities are reclassified as equity when converted, and conversions do not generate profit or loss.

2) Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if acquired principally for the purpose of selling in the short term. This type of financial liability is measured at fair value at the time of initial recognition, and attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, and are included in non-operating income or expenses.

3) Other financial liabilities

Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise loans and borrowings, and trade and other payable, are measured at fair value, plus, any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method other than significant interest on short-term loans and payables. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in non-operating income or expenses.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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.

(iv) Derivative financial instruments (policy applicable from January 1, 2018)

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.

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.

(v) Derivative financial instruments (policy applicable before January 1, 2018)

Except for the following items, the Company applies the same accounting policies as applicable from January 1, 2018.

For derivatives that are linked to investments in equity instruments that do not have a quoted market price in an active market and must be settled by delivery of such unquoted equity instruments, such derivatives that are classified as financial assets are measured at amortized cost, and are included in financial assets measured at cost; and such derivatives that are classified as financial liabilities are measured at cost, and are included in financial liabilities measured at cost.

Embedded derivatives are separated from the host contract and accounted for separately when the economic characteristics and risk of the host contract and the embedded derivatives are not closely related, and the host contract is measured as at fair value through profit or loss.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(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.

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

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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

(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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(iii) Depreciation

The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over its useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss.

The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

1) Buildings: 35~50 years
2) Building improvement: 8~15 years
3) Research equipment: 3 years
4) Other equipment: 0.5~5 years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate.

(k) Leases

(i) The Company as lessor

Lease income from operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(ii) The Company as lessee

Operating leases are not recognized in the Company’s balance sheets.

Payments made under operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(l) Intangible assets
(i) Goodwill
- 1) Initial recognition

Goodwill arising from acquisition of subsidiaries is included in intangible assets. The measurement of initial recognition of goodwill, please refer to note (4)(t).

2) Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses.

Goodwill related to an investment accounted for using equity method is included in the carrying amount of the investment, and not allocated to any asset, including goodwill, forms part of the carrying amount of the investment accounted for using the equity method.

(ii) Research & Development

During the research phase, activities are carried out to obtain and understand new scientific or technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred.

Expenditures arising from the development phase shall be recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they will be recognized in profit or loss as incurred.

1) The technical feasibility of completing the intangible asset so that it will be available for use or sale.
2) Its intention to complete the intangible asset and use or sell it.
3) Its ability to use or sell the intangible asset.
4) How the intangible asset will generate probable future economic benefits.
5) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
6) Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

(Continued)

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Capitalized expenditure arising from the development phase is measured at cost less accumulated amortization and accumulated impairment losses.

(iii) Other intangible assets

Other intangible assets that are acquired by the Company are measured at cost, less accumulated amortization and any accumulated impairment losses.

(iv) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(v) Amortization

The amortizable amount is the cost of an asset, or other amount substituted for cost, less its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with all indefinite useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

1) Patents: the shorter of contract period and estimated useful lives
2) Computer software: 1~3 years

The residual value, the amortization period, and the amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as changes in accounting estimates.

(m) Impairment of non-derivative financial assets

Non-derivative financial assets except for inventories, deferred tax assets, and assets arising from employee benefits are assessed at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Company shall estimate the recoverable amount of the asset. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit.

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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units or group of units. If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, the entity shall recognize the impairment loss and the impairment loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount. That increase is a reversal of an impairment loss.

(n) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(o) Treasury stock

Repurchased shares are recognized under treasury shares (a contra-equity account) based on its repurchase price (including all directly accountable costs), and net of tax. Gains on disposal of treasury shares should be recognized under Capital Reserve – Treasury Shares Transactions; losses on disposal of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings. The carrying amount of treasury shares should be calculated using the weighted average different types of repurchase.

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.

Notes to Parent-Company-Only Financial Statements

(p) Recognition of revenue

(i) Revenue from contracts with customers (policy applicable from January 1, 2018)

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.

1) Sale of goods

The Company manufactures and sells electronic products to electronic products brand vendor. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

The Company assesses sales discounts based on historical experience, management's judgment and other known reasons. Such allowances are recognized as a deduction of sales revenue in the same period in which sales are made. The aforementioned provisions are expected to settle over the next year. A refund liability is recognized for expected discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales of electronic products are made with a credit term which is consistent with the market practice.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

2) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(ii) Revenue (policy applicable before January 1, 2018)

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement.

(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

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

(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) levied by the same taxing authority; or
2) 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

If the business combination is achieved in stages, the Company 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 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 restricted employee stock and 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 statement.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

There are no critical judgments in applying the accounting policies that have significant effect on the amounts recognized in the 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 (provisions)

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. Refer to notes 6(p) and 6(q) for further description of the recognition of provisions and refund liabilities.

(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)(j) for further description of the valuation of inventories.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

nation of significant accounts: Cash and cash equivalents
Cash on hand Checking accounts and demand deposits Time deposits Bonds purchased under resale agreements	December 31, 2018 $ 1,596 3,972,558 15,609,214 863,010	December 31, 2017 1,358 812,541 27,387,135 142,500 28,343,534
	$ 20,446,378

Please refer to note (6)(ac) 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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(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 listed in domestic markets Unlisted fund in foreign markets Total Current Non-current	December 31, 2018 $ 284,768 23,745
	$ 308,513
	$ 284,768 23,745
	$ 308,513

The aforementioned stock listed in domestic markets were recorded under available-for-sale financial assets as of December 31, 2017. Please refer to note (6)(d).

The market risk related to the financial instruments please refer to note (6)(ad).

As of December 31, 2018, the Company did not provide any aforementioned financial assets as collaterals for its loans.

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, 2018 $ 2,383,976 400,184 896,395 51,363
	$ 3,731,918

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, whereas, were presented under financial assets carried at cost and available-for-sale financial assets as of December 31, 2017. Please refer to note (6)(d) and (6)(e).

In 2018, the Company has sold parts of its shares held in Innolux Corporation measured at fair value through other comprehensive income. The fair value of the shares was $291,435 when dispose, and the cumulative losses amounted to $1,024,470, which has been transferred to retained earnings from other comprehensive income.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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 year ended December 31, 2018, will be $186,596. These analyses are performed on the same basis for the period and assume that all other variables remain the same.

The Company’s information of market risk please refer to note (6)(ad).

As of December 31, 2018, the Company did not provide any financial assets at fair value through other comprehensive income as collaterals for its loans.

(d) Available-for-sale financial assets

Stocks listed in domestic markets Stocks listed in foreign markets Stocks unlisted in domestic markets Stocks unlisted in foreign markets Total Current Non-current	December 31, 2017 $ 3,794,069 654,192 1,207,219 126,333 $ 5,781,813 $ 46,479 5,735,334 $ 5,781,813

(i) The Company and its subsidiaries, Zhaopal Investment Co., Ltd. (“Zhaopal”), Yongpal Investment Co., Ltd. (“Yongpal”) and Kaipal Investment Co., Ltd. (“Kaipal”) (“the Company and its subsidiaries”), purchased newly issued shares of Chunghwa Picture Tubes, Ltd. (“CPT”) via private placement in 2009. The cost was 2.5 New Taiwan dollars per share, totally amounting to $7,000,000. The Company signed an agreement with Tatung Company (“Tatung”, the parent company of CPT) on such matter. In accordance with the agreement, the Company and its subsidiaries have the right to request Tatung to purchase all the CPT shares obtained via the private placement within certain agreed periods, at the price the Company and its subsidiaries originally paid for the CPT shares plus interest. Accordingly, since the fair value of CPT shares obtained via the private placement were below the original costs, the Company measured the book value of the shares at its original cost.

The Company filed an arbitration based on the agreement on March 29, 2013, requesting Tatung to perform its obligations. The Company received the verdict on May 12, 2014. According to the verdict, Tatung should pay $2,118,607 to the Company and its subsidiaries for purchasing all the CPT shares held by the Company and its subsidiaries. Additionally, Tatung should pay the interest which is calculated by the annual rate of 5% in the period from April 3, 2013 to the actual payment date. Therefore, the Company recognized both the impairment loss of $1,689,000 and the related share of loss of associates and joint ventures accounted for using equity method of $3,041,000 in the first quarter of 2014 accordingly. On June 13, 2014, the Company filed a civil complaint with the Taiwan Taipei District Court to revoke the arbitration award. At the end, the Taiwan Supreme Court dismissed the appeal on January 11, 2017. The Company and its subsidiaries sold all shares of CPT to Tatung on

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

February 9, 2017 in accordance with the arbitration. The selling prices of the Company and its subsidiaries amounted to $811,466 (including the interest) and $1,460,638 (including the interest), respectively, totaling $2,272,104 (including the interest). The loss of sale was $1,804 and $2,448, respectively, and the total loss was $4,252. The total price has been fully recovered.

(ii) If there is an increase (decrease) in the market price of the equity securities by 5% on the reporting date, the increase (decrease) in other comprehensive income (pre-tax) for the year ended December 31, 2017, will be $289,091. These analyses is performed on the same basis and assume that all other variables remain the same.
(iii) As of December 31, 2017, the Company did not provide any available-for-sale financial assets as collaterals for its loans.
(iv) As of December 31, 2018, the aforementioned investments were classified as financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. Please refer to note (6)(b) and (6)(c).
(e) Financial assets at cost

Unlisted common stock in domestic markets	December 31, 2017 $ 2,333

(i) The aforementioned unlisted common stock in domestic markets held by the Company were measured at cost, less accumulated impairment losses on the reporting date. The fair values of these investments cannot be measured reliably because the range of reasonable fair value estimates is large and the probabilities for each estimate cannot be reasonably determined.
(ii) As of December 31, 2017, the Company did not provide any financial assets at cost as collaterals for its loans.
(iii) The aforementioned investments were classified as financial assets at fair value through other comprehensive income on December 31, 2018. Please refer to note (6)(c).
(f) Current financial assets measured at amortized costs

Common bonds – Taiwan Star Telecom Corporation Limited (Taiwan Star )	December 31, 2018 $ 350,000

The Company has assessed that these financial assets are held to maturity to collect contractual cash flows, which consist solely of payments of principal and interest on the principal amount outstanding. Therefore, these investments were classified as financial assets measured at amortized cost on January 1, 2018. As of December 31, 2017, the aforementioned financial assets measured at amortized costs of the Company were classified as bond investment without as active market. Please refer to note (6)(g).

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

As of December 31, 2018, the Company did not provide the aforementioned financial assets as collaterals for its loans.

(g) Bond investment without active market

Common bonds – Taiwan Star Telecom Corporation Limited (Taiwan Star ) Current Non-current	December 31, 2017 $ 700,000
	$ 350,000 350,000
	$ 700,000

The Company subscribed the five-year common bonds issued by Taiwan Star via private placement for $1,750,000 in June 2014 with an interest rate of 2%. Taiwan Star will repay the amount of $350,000 per annum from the date of issuance till the maturity of the bond in June 2019. The aforementioned bond investments was classified as financial assets measured at amortized cost on December 31, 2018. Please refer to note (6)(f).

As of December 31, 2017, the Company did not provide the aforementioned financial assets as collaterals for its loans.

(h) Notes and accounts receivable

Notes receivable from operating activities Accounts receivable – measured as amortized cost Accounts receivable – fair value through other comprehensive income Less: allowance for uncollectible accounts Notes and accounts receivable Notes and accounts receivable – related parties	December 31, 2018	December 31, 2017 605 171,353,245 -
	$ 1,218 171,635,955 22,896,211
	194,533,384 (3,718,560)	171,353,850 (3,717,495)
	$ 190,814,824	167,636,355
	$ 189,496,594	165,540,785
	$ 1,318,230	2,095,570

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 on January 1, 2018.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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 on December 31, 2018. 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 as of December 31, 2018 was determined as follows:

Credit rating	Carrying amount of accounts receivable $ 187,485,567 3,424,080 3,623,737	Weighted- ave rage ECL rate		Lifetime ECLs - 94,823 3,623,737	Credit-impai red
Level A Level B Level C		0% 2.769% 100%			No No Yes
	$ 194,533,384			3,718,560

As of December 31, 2018 the aging analysis of accounts receivable, which were past due but not impaired, was as follows:

Overdue 1 to 180 days

		December
		31, 2018
	$	1,770,814

As of December 31, 2017, the Company applies the incurred loss model to consider the loss allowance provision of notes and accounts receivable, and the aging analysis of notes and accounts receivable, which were past due but not impaired, was as follows:

Overdue 1 to 180 days

		December
		31, 2017
	$	344,920

For the years ended December 31, 2018 and 2017, the movement in the allowance for notes and accounts receivable were as follow:

2018 $ 3,717,495 -	2017 Individually assessed impairment Collectively assessed impairment - 788,948 689,097 (689,097) 2,929,599 (1,052)	2017 Individually assessed impairment Collectively assessed impairment - 788,948 689,097 (689,097) 2,929,599 (1,052)
	Individually assessed impairment - 689,097 2,929,599
3,717,495 - 1,065
$ 3,718,560	3,618,696	98,799

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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 had recognized full loss for the uncollectible accounts receivables of Leshi, however, the Company will make the utmost effort to recover the accounts receivable, including taking proper legal actions.

The Company entered into accounts receivable factoring agreements with banks. As of December 31, 2018 and 2017, except for the amount used under the actual sales amount in thousand accordance with certain agreements, the factoring amount granted by the banks was USD 950,000 thousands and USD 985,000 thousands, respectively. Based on the agreements, the Company is not responsible for guaranteeing the ability of the accounts receivable obligor to make payment when it is affected by credit risk. Thus, this is a non-recourse accounts receivable factoring. 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, 2018 and 2017, the factored accounts receivable with no advance amounting to $0 and $44,641, respectively, are accounted for as other receivables.

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, 2018 and 2017, accounts receivable factored were recovered and derecognized since the conditions of derecognition were met.

As of December 31, 2018 and 2017, the details of the factored accounts receivable were as follows:

Purchaser			December	31, 2018
	Accounts receivable factored (gross) $ 32,098,074		Advanced amount 32,098,074	Collateral	Amount derecognized	Interest rate

Financial Institution Purchaser					32,098,074	3.02%~3.52%

	Accounts receivable factored (gross) $ 35,315,810		Advanced amount 35,271,169	Collateral	Amount derecognized	Interest rate

Financial Institution		35,315,810		-	35,315,810	1.79%~2.56%

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

As of December 31, 2018 and 2017, the Company did not provide any aforementioned notes and accounts receivable as collaterals.

(i) Other receivables

Other receivables
Other accounts receivable - loans to subsidiaries Other accounts receivable - related parties Others	December 31, 2018 $ 301,137 144,455 973,158	December 31, 2017 360,473 25,829 324,991 711,293
	$ 1,418,750

As of December 31, 2018 and 2017, none of other receivables were past due.

(j) Inventories

Finished goods Work in progress Raw materials Raw materials in transit	December 31, 2018 $ 18,779,873 44,008 32,693,278 -	December 31, 2017 11,546,680 45,980 30,826,430 566,273 42,985,363
	$ 51,517,159

(i) During the years ended December 31, 2018 and 2017, inventory cost recognized as cost of sales amounted to $889,171,625 and $819,765,642, respectively.
(ii) The write-down of inventories to net realizable value amounted to $171,790, in the year ended December 31, 2018. The Company reversed its allowance for inventory valuation loss amounting to $494,472 due to the sale and disposal of its obsolete inventories in the year ended December 31, 2017.
(iii) As of December 31, 2018 and 2017, the Company did not provide any inventories as collaterals for its loans.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(k) Investments accounted for using equity method

A summary of the Company’s financial information for equity-accounted investees at the reporting date is as follows:

Subsidiaries Associates Plus: Other receivables–related parties Credit balance of investment in equity method (other non-current liability) Less: unrealized profits or losses	December 31, 2018 $ 79,891,379 2,619,501	December 31, 2017 74,925,869 2,330,648
	82,510,880 494,744 298,023 (4,409)	77,256,517 232,194 437,912 (6,753)
	$ 83,299,238	77,919,870

(i) Subsidiaries

Please refer to the consolidated financial statement for the year ended December 31, 2018.

(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, 2018 $ 621,653 586,743	December 31, 2017 802,461 696,471 1,498,932
	$ 1,208,396

2) The Company’s share of the net gain (loss) of associates was as follows:

The Company’s share of the gain of associates	2018 $ 483,812	2017 138,286

3) The Company’s financial information for investments accounted for using the equity method that are individually immaterial was as follows:

Carrying amount of individually immaterial associates	December 31, 2018 $ 2,619,501	December 31, 2017 2,330,648

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

The Company’s share of the net income (loss) of associates: Profit from continuing operations Other comprehensive income (loss) Total comprehensive income		2018 2017 $ 483,812 138,286 (97,800) (89,325) $ 386,012 48,961

(iii) As of December 31, 2018 and 2017, the Company did not provide any investments accounted for using equity method as collaterals for its loans.

(l) Changes in subsidiaries’ equity
(i) Changes in ownership interests while retaining control (increase in ownership interest)

The Company purchased 3% ownership of HengHao Technology Co., Ltd. ("HengHao") from non-controlling interest with an amount of $25,203 in 2017; therefore, the Company has acquired 100% ownership of HengHao.

The Company's subsidiary, Arcadyan Technology Corp. ("Arcadyan"), purchased shares of other subsidiaries from non-controlling interest amounting to $634 and $10,496, respectively, in 2018 and 2017.

The following summarizes the effect of changes in equity of the parent due to changes in the ownership interest of the subsidiaries:

ownership interest of the subsidiaries:
		2018		2017
Acquisition of non-controlling interest (carrying amount)	$		631	30,117
Consideration paid for the non-controlling interest			(634)	(35,699)
Difference	$		(3)	(5,582)
Capital surplus – difference between consideration and carrying	$	-		(3,492)
amount of subsidiaries acquired or disposed
Capital surplus – changes in ownership interests in subsidiaries			(3)	89
Retained earnings		-		(2,179)
	$		(3)	(5,582)

(ii) Disposal of part of equity ownership of subsidiaries interest without losing control

The Company's subsidiaries disposed 23% interest of Compal Broadband Network Inc. － ("CBN") in 2017, and the total consideration was $413,257. The capital surplus difference between consideration and carrying amount of subsidiaries acquired or disposal related to above transaction amounted to $36,508.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(iii) Changes in subsidiaries’ equity did not result in the Company’s loss of control
1) Subsidiaries’ employee stock options exercised

CBN issued 351 thousand and 1,612 thousand new shares because of its employees’ exercised stock options in 2018 and 2017, respectively, which resulted in reducing the Company and its subsidiaries' ownership of CBN by 0.41% and 2.80%, respectively.

2) Issuance of new shares for cash of subsidiaries

The Company and its subsidiaries did not purchase newly issued shares of CBN in the fourth quarter of 2018, which resulted in reducing the Company and its subsidiaries' ownership of CBN by 7.27%.

3) Issuance of subsidiaries’ restricted shares

Arcadyan issued 4,500 thousand restricted new shares in the year ended Decebmer 31, 2018, which resulted in reducing 0.84% interest of the Company and its subsidiaries' ownership of Arcadyan.

4) The following summarizes the effect of changes in equity of the parent due to changes in the ownership interest of subsidiaries:

the ownership interest of subsidiaries:
Capital surplus – changes in ownership interest in subsidiaries Retained earnings	2018 $ (32,703) (32,160)	2017 53 (424)
	$ (64,863)	(371)

(m) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2018 and 2017, were as follows:

Cost or deemed cost: Balance on January 1, 2018 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2018	Land	Buildings and building improvement Other equipment Under construction and prepayment for purchase of equipment Total
	$ 1,047,797 2,173,951 2,002,114 27,007 5,250,869 - 18,716 124,095 60,375 203,186 - (476) (62,516) - (62,992) - 2,570 48,325 (50,895) -
	$ 1,047,797 2,194,761 2,112,018 36,487 5,391,063

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Balance on January 1, 2017 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2017 Depreciation and impairments loss: Balance on January 1, 2018 Depreciation for the period Disposals and derecognitions Balance on December 31, 2018 Balance on January 1, 2017 Depreciation for the period Disposals and derecognitions Balance on December 31, 2017 Carrying amounts: Balance on December 31, 2018 Balance on January 1, 2017 Balance on December 31, 2017	Land	Buildings and building improvement Other equipment Under construction and prepayment for purchase of equipment Total
	$ 1,047,797 2,135,715 2,042,004 2,478 5,227,994 - 28,876 57,171 40,061 126,108 - (395) (102,838) - (103,233) - 9,755 5,777 (15,532) -
	$ 1,047,797 2,173,951 2,002,114 27,007 5,250,869
	$ - 1,312,069 1,846,528 - 3,158,597 - 57,362 108,965 - 166,327 - (476) (61,566) - (62,042)
	$ - 1,368,955 1,893,927 - 3,262,882
	$ - 1,261,391 1,834,489 - 3,095,880 - 51,073 114,792 - 165,865 - (395) (102,753) - (103,148)
	$ - 1,312,069 1,846,528 - 3,158,597
	$ 1,047,797 825,806 218,091 36,487 2,128,181
	$ 1,047,797 874,324 207,515 2,478 2,132,114
	$ 1,047,797 861,882 155,586 27,007 2,092,272

As of December 31, 2018 and 2017, the Company did not provide property, plant and equipment as collateral for its borrowing.

(n) 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, 2018	December 31, 2018	December 31, 2017 41,386,000 35,919,000 0.60%~2.54%
	$ 51,305,682
	$ 40,694,000
		0.72%~3.56%

For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(ac).

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(o) 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 Unsecured bank loans Less: current portion Total Unused credit line for long-term borrowings	December 31, 2018 Currency Annual range of interest rates Maturity year	Amount
	TWD 0.79%~1.22% 2019~2021 December 31, 2017 Currency Annual range of interest rates Maturity year	$ 28,396,250 (17,496,250)
		$ 10,900,000
		$ 5,414,750
		Amount
	TWD 0.78%~1.22% 2018~2020 USD 1.95%~1.96% 2018	$ 25,050,000 2,083,200 (6,018,750)
		$ 21,114,450
		$ 4,377,000

For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(ac).

(p) Provisions

Balance on January 1, 2017 Provisions made during the period Provisions used during the period Provisions reversed during the period Balance on December 31, 2017	Sales returns and allowances $ 1,532,250 1,078,600 (219,727) (950,831) $ 1,440,292

Provisions related 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. Due to the application of IFRS 15 on January 1, 2018, the sales returns and allowances provisions were reclassified as refund liabilities.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(q) Refund liabilities

Refund liabilities

December 31, 2018 $ 1,480,446

Due to the application of IFRS 15 from January 1, 2018, the provision of sale return and allowance were reclassified from provision to refund liabilities.

(r) Operating lease

(i) The Company as lessee
1) The rental payables of the non-cancellable operating lease are as follows:

Less than one year Between one and five years	December 31, 2018 $ 264,145 257,020	December 31, 2017 300,385 387,446
	$ 521,165	687,831

The Company leased several office areas under operating leases with the leasing terms from 1 to 5 years and had an option to renew the leases when the leases expired.

For the years ended December 31, 2018 and 2017, expenses recognized in profit or loss under operating leases amounted to $297,582 and $273,839, respectively.

The lease contract includes those of the land and building, with their residual values being assumed by the landlord. The rental is regularly adjusted based on the current market price. Based on the risks and rewards of leased assets not transferred to the Company, the Company recognized the lease as operating lease.

(ii) The Company as lessor

The Company leased out a few offices buildings, plants and equipments to third parties under operating lease with lease terms of 1 to 7 years. For the years ended December 31, 2018 and 2017, rentals recognized in profit or loss amounted to $5,533 and $8,630, respectively. The future minimum lease receivables under non-cancellable leases are as follows:

Less than one year Between one and five years More than five years	December 31, 2018 $ 1,222 2,951 352	December 31, 2017 2,426 2,455 880
	$ 4,525	5,761

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(s) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligations at present value and plan assets at fair value were as follows:

as follows:
Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2018	December 31, 2017 (1,220,613) 608,482
	$ (1,246,221) 624,640
	$ (621,581)	(612,131)

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.

The balance of the Company’s labor pension reserve account in the Bank of Taiwan amounted to $618,575 (excluding the ending balance of interest receivable) as of December 31, 2018. 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:

as follows:
Defined benefit obligations on January 1 Current service costs and interest Remeasurements of net benefit liabilities Benefit paid by the plan Balance on December 31	2018 $ (1,220,613) (22,168) (37,000) 33,560	2017 (1,172,961) (25,168) (76,106) 53,622
	$ (1,246,221)	(1,220,613)

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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:

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	2018 $ 608,482 8,141 16,811 24,766 (33,560)	2017 631,268 9,724 (3,577) 24,689 (53,622)
	$ 624,640	608,482

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) Cost of sales Selling expenses Administrative expenses Research and development expenses	2018 $ 5,635 8,392 $ 14,027 $ 436 745 3,395 9,451 $ 14,027	2017 6,981 8,463 15,444 423 825 4,301 9,895 15,444

5) Remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income

The Company’s remeasurements of the net defined benefit liability (assets) recognized in other comprehensive income were as follows:

Cumulative amount on January 1 Recognized during the period Cumulative amount on December 31	2018 $ 406,910 20,189	2017 327,227 79,683
	$ 427,099	406,910

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

6) Actuarial assumptions

The following were the Company’s principal actuarial assumptions at the reporting date:

date:
Discount rate Future salary increase rate	December 31, 2018 1.30% 3.00%	December 31, 2017
		1.40% 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 $24,967.

The weighted-average lifetime of the defined benefit plan is 10.3 years.

7)

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, 2018 Discount rate Future salary increasing rate December 31, 2017 Discount rate Future salary increasing rate	Effects to the defined benefit obligation	Effects to the defined benefit obligation
	Increased 0.25%	Decreased 0.25% 32,390 (30,797) 32,670 (31,054)
	(31,218) 31,779 (31,448) 32,086

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation on the net defined benefit liabilities in the balance sheets.

The method and assumption used in the sensitivity analysis is consistent with prior period.

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates the labor pension at a specific percentage to the Bureau of the Labor Insurance without additional legal or constructive obligations.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

The Company recognized the pension costs under the defined contribution method amounting to $306,912 and $286,820 for the years ended December 31, 2018 and 2017, respectively. Payment was made to the Bureau of Labor Insurance.

(t) Income taxes

According to the amendments to the "Income Tax Act” enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return effective from 2018.

(i) Income tax expenses
1) The amount of income tax for the years ended December 31, 2018 and 2017, was as follows:

Current tax expense Recognized during the period 10% surtax on unappropriated earnings Tax credit of investment Deferred tax expense Recognition and reversal of temporary differences Adjustment in tax rate Income tax expense	2018 $ 1,010,943 - (183,384)	2017 1,290,833 168,132 (322,319)
	827,559 292,600 (75,208)	1,136,646 (207,451) -
	217,392	(207,451)
	$ 1,044,951	929,195

2) The amount of income tax recognized in other comprehensive income for the years ended December 31, 2018 and 2017, was as follows:

December 31, 2018 and 2017, 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 Items that will be reclassified subsequently to profit or loss: Unrealized gain (loss) of available-for-sale financial assets	2018 $ (32,146) (37,780)	2017 (13,546) -
	$ (69,926)	(13,546)
	$ -	12,221

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

3) The income tax expense that was reconciled between the actual income tax expense and profit before tax for the years ended December 31, 2018 and 2017, was as follows:

Profit before tax Income tax calculated based on tax rate Adjustment in tax rate Estimated tax effect of tax exemption on investment income, net Realized investment loss Investment tax credit Changes in temporary differences Adjustment of estimated difference and other 10% surtax on unappropriated earnings	2018

(ii) Deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2018 and 2017 were as follows:

Deferred tax assets: Balance on January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2018 Balance on January 1, 2017 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2017	Exchange differences on translation	Refund liabilities (Provision-sal es return and allowance)	Contract liabilities (Unearned revenue)	Unrealized exchange losses, net	Others
	$ 9,823 295,900 202,893 246,246 257,728 1,012,590 - (36,354) (26,610) 119,400 (17,460) 38,976 - - - - 13,546 13,546 $ 9,823 259,546 176,283 365,646 253,814 1,065,112

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Deferred tax liabilities: Balance on January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2018 Balance on January 1, 2017 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2017	Unrealized exchange gains, net Others Total
	$ (171,868) (371,753) (543,621) 171,868 (52,582) 119,286 - 37,780 37,780
	$ - (386,555) (386,555)
	$ (340,343) (359,532) (699,875) 168,475 - 168,475 - (12,221) (12,221)
	$ (171,868) (371,753) (543,621)

(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, 2018 $ 362,131	December 31, 2017 325,419

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, 2018 and 2017, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $2,162,721 and $3,205,580, respectively.

As of December 31, 2018 and 2017, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $54,430,545 and $47,433,268, respectively.

(i) Examination and approval

The Company’s tax returns for the year through 2016 were assessed by the Taipei National Tax Administration. The Company disagreed with the assessment and filed formal tax appeals for 2012. In accordance with the conservatism, the total amounts of the assessed additional income tax were recognized in the statements of income. Any differences will be reflected as an adjustment after the tax is resolved.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(u) Capital and other equities

As of December 31, 2018 and 2017, 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 and 4,419,192 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

(i) Ordinary shares

In 2015, the Company issued its employee restricted shares amounting to $493,600, wherein the amount of $120,450 and $49,690 had been cancelled due to failure in meeting the vested requirements in the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, the registration procedure had been completed.

(ii) Capital surplus

The balances of capital surplus were as follows:

December 31, 2018 Additional paid-in capital $ 7,183,919 Treasury share transactions 2,421,864 Difference between consideration and carrying amount arising from acquisition or disposal of subsidiaries 36,766 Recognition of changes in ownership interests in subsidiaries 15,642 Employee restricted shares - Changes in equity of associates and joint ventures accounted for using equity method 274,243 $ 9,932,434	December 31, 2018 Additional paid-in capital $ 7,183,919 Treasury share transactions 2,421,864 Difference between consideration and carrying amount arising from acquisition or disposal of subsidiaries 36,766 Recognition of changes in ownership interests in subsidiaries 15,642 Employee restricted shares - Changes in equity of associates and joint ventures accounted for using equity method 274,243 $ 9,932,434	December 31, 2017 7,898,905 2,361,843 36,766 48,348 318,209 274,702
	$ 9,932,434	10,938,773

In accordance with the ROC Company Act, realized capital reserves can only be used to increase the common stock or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10% of the actual share capital amount.

The Company’s shareholders’ meeting held on June 22, 2018 and 2017, approved to distribute the cash dividend of $881,429 and $884,431, respectively, representing 0.2 New Taiwan dollars per share by using the additional paid-in capital.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(iii) Retained earnings

Based on the Company’s articles of incorporation, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The earnings appropriation proposal to distribute dividend and bonus shall be proposed by the Board of Directors and approved by the General Shareholders Meeting. The rest of the unappropriated retained earnings shall be reserved.

The lifecycle of the industry of the Company is in the growing stage. To meet the need of the Company for the future capital and the need of shareholders for cash flow, if there is any profit after close of books, 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

In accordance with the Company Act, 10% of net income should be set aside as legal reserve until it is equal to the paid-in capital. 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

In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of current earnings and previous unappropriated earnings shall be set aside as a special reserve during earnings distribution. The amount to be set aside should equal the total amount of contra accounts that are accounted for as deductions to other equity interests. A portion of previous unappropriated earnings shall be set aside as a special reserve, which should not be distributed, to account for cumulative changes to other equity interests pertaining to prior periods. The special reserve shall be made available for appropriation when the net deductions of other equity interests are reversed in the subsequent periods.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

3) Earnings distribution

Earnings distribution for 2017 and 2016 was approved by the shareholders during their annual meeting held on June 22, 2018 and 2017, respectively. The relevant information was as follows:

was as follows:
Cash dividends distributed to common shareholders	2017		2016 Amount per share Total amount 1.0 4,422,153
	Amount per share	Total amount	Amount per share
	$ 1.0	4,407,147	1.0

Earnings distribution for 2018 was approved by the Board of Directors on March 22, 2019. The relevant information was as follows:

Cash dividends distributed to common shareholders from the unappropriated earnings Cash dividends distributed to common shareholders from the capital surplus	2018 Amount per share Total amount	2018 Amount per share Total amount
	Amount per share
	$ 1.0 4,407,147 0.2 881,429 $ 5,288,576
		$ 5,288,576

The earnings distribution for the year ended December 31, 2018 is still subject to be approved by the shareholders during their annual meeting. The related information can be accessed through the Market Observation Post System website after the shareholders’ meeting.

(iv) Treasury stock

The subsidiaries of the Company did not sell the ordinary shares of the Company in the years ended December 31, 2018 and 2017. As of December 31, 2018, 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 17.45 and 21.30 New Taiwan dollars per share as of December 31, 2018 and 2017, respectively.

Pursuant to the Securities and Exchange Act, the number of treasury shares purchased cannot exceed 10% of the number of shares issued. The total purchase cost cannot exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus. The shares purchased for the purpose of transferring to employees shall be transferred within three years from the date of share repurchase. Those not transferred within the said limit shall be deemed as not issued by the Company and it should be cancelled. Furthermore, treasury stock cannot be pledged for debts, and treasury stock does not carry any shareholder rights until it is transferred.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(v) Other equity interests (net-of-taxes)

Balance on January 1, 2018
Effect of retrospective
application
Adjusted balance on January 1,
2018
The Company
Subsidiaries
Associates
Balance on December 31, 2018
Balance on January 1, 2017
The Company
Subsidiaries
Associates
Balance on December 31, 2017

Exchange
differences on
transaction of
foreign operation
financial
statements
Unrealized gain
(loss) from
financial assets at
fair value through
other
comprehensive
income
Unrealized
gain (loss) on
available-for-sale
financial assets
Unearned
compensation
for restricted
employee shares
and others
Total

$ (3,477,376)
-
(5,353,772)
(79,856)
(8,911,004)
-
(5,847,823)
5,353,772
-
(494,051)
(3,477,376)
(5,847,823)
-
(79,856)
(9,405,055)
1,853,763
(34,596)
-
79,856
1,899,023
(67,150)
401,300
-
-
334,150
(162,189)
(125,317)
-
-
(287,506)
$
(1,852,952)
(5,606,436)
-
-
(7,459,388)
$ 1,324,282
-
(5,663,830)
(285,105)
(4,624,653)
(4,606,117)
-
135,628
205,249
(4,265,240)
(148,238)
-
157,203
-
8,965
(47,303)
-
17,227
-
(30,076)

$
(3,477,376)
-
(5,353,772)
(79,856)
(8,911,004)

(v) Share-based payment

At the meeting held on June 20, 2014, the Company’s Shareholders’ Meeting adopted a resolution to issue 100,000 thousand new shares of employee restricted stock with no consideration to those full time employees who meet certain requirements. The first issuance of 50,000 thousand shares had been approved by the FSC on October 30, 2014. Moreover, the Company’s Board of Directors resolved to issue 49,980 thousand shares on January 22, 2015, and 49,360 thousand shares had actually been issued, in which the effective date of the share issuance was on February 25, 2015.

40%, 30% and 30% of the aforementioned restricted shares are vested, respectively, when the employees continue to provide service for at least 2 years, 3 years and 4 years from the registration and effective date and in the meantime, meet the performance requirement. After the issuance, the restricted shares are kept by a trust, which is appointed by the Company, before they are vested. These restricted shares shall not be sold, pledged, transferred, gifted or by any other means of disposal 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 law and regulations. If the shares remain unvested after the vesting period, the Company will purchase all the unvested shares without consideration and cancel the shares thereafter. Restricted shares could receive cash and stock dividends. The aforementioned new shares are not considered as restricted shares.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

The information of the Company’s restricted shares (in thousands) is as follows:

Outstanding shares on January 1 Vested during the period Canceled during the period Outstanding shares on December 31	2018	2017 44,740 (16,200) (4,969) 23,571
	23,571 (11,526) (12,045)
	-

The fair value of the restricted employee shares are evaluated by using the market price of $23.50 on the grant date. As of December 31, 2018 and 2017, the unearned employee benefits were $0 and $79,856, respectively. For the year ended December 31, 2018, due to the failure in meeting the vested requirements of the employee restricted shares, the Company reversed compensation cost － amounted to $156,219 and capital surplus employee restricted shares amounted to $318,209. Besides, due to meet the vested requirements of the employee restricted shares, the Company recognized capital surplus–additional paid-in capital amounted to $155,601. The compensation cost related to the employee restricted shares amounted to $103,356 for the year ended December 31, 2017.

(w) Earnings per share

The Company’s basic and diluted earnings per share are calculated as follows:

Basic earnings per share: Profit attributable to ordinary shareholders of the Company Weighted-average number of outstanding ordinary shares (in thousands) Diluted earnings per share: Profit attributable to ordinary shareholders of the Company (after adjustment of potential diluted ordinary shares) 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) Employee restricted shares (in thousands) Weighted-average number of ordinary shares (after adjustment of potential diluted ordinary shares) (in thousands)	2018 $ 8,913,365	2017 5,749,525
	4,356,448	4,344,646
	$ 8,913,365	5,749,525
	4,356,448 59,637 682	4,344,646 39,737 20,670
	4,416,767	4,405,053

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(x) Revenue from contracts with customers

(i) Disaggregation of revenue

Primary geographical markets: United states China Netherlands United Kingdom Others Major products： 5C electronics Others	2018 IT Product Segment $ 361,991,920 110,187,798 109,185,154 43,573,507 286,111,743 $ 911,050,122 $ 910,647,211 402,911 $ 911,050,122

For details on revenue for the year ended December 31, 2017, please refer to note (6)(y).

(ii) Contract balance

Notes and accounts receivable (including related parties) Less: allowance for impairment Total Contract liabilities	December 31, 2018 January 1, 2018 $ 194,533,384 171,353,850 (3,718,560) (3,717,495) $ 190,814,824 167,636,355 $ 1,405,452 1,617,626

For the details on accounts receivable and allowance for impairment, please refer to note (6)(h).

The amount of revenue recognized for the year ended December 31, 2018 that was included in the contract liability balance at the beginning of the period was $1,585,446.

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.

Notes to Parent-Company-Only Financial Statements

(y) Revenue

The detail of revenue for the year ended December 31, 2017 of the Company was as follows:

Sale of goods Rendering of services and other	2017 $ 840,684,789 624,813
	$ 841,309,602

For the details on revenue for the year ended December 31, 2018, please refer to note (6)(x).

(z) 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 $930,857 and $624,296, respectively, and directors’ compensation of $49,223 and $33,012 for the years ended December 31, 2018 and 2017, 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 2018 and 2017.

There is no differences between the amount estimated and recognized in the financial statements in 2017. The related information can be accessed through the Market observation Post System website.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(aa) Non-operating income and expenses
(i) Other income

The other income for the years ended December 31, 2018 and 2017, were as follows:

Interest income Financial assets at amortized cost Bank deposits Others Dividend revenue Overdue payable reversed as other income Sale of expensed assets Other revenue	2018	2017
	$ 9,992 313,098 9,815 212,129 37,657 162,265 142,398	15,803 206,990 16,601 117,742 210,862 180,230 189,443
	$ 887,354	937,671

(ii) Other gains and losses

The other gains and losses for the years ended December 31, 2018 and 2017, were as follows:

Losses on disposal of investments Gains (losses) on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange gains (losses), net Others	2018	2017
	$ - 97,682 (221,786) (1,926)	(1,804) - (1,613,222) (85)
	$ (126,030)	(1,615,111)

(ab) 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, 2018 and 2017, were as follows:

Available-for-sale financial assets: Net change in fair value (net of tax) Net change in fair value reclassified to profit or loss (net of tax) Net change in fair value recognized in other comprehensive income (net of tax)	2018 $ - -	2017 135,628 -
	$ -	135,628

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(ac) 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.

2) Receivables and debt securities

Information of exposure to credit risk of notes and accounts receivable, please refer to note (6)(h).

Other financial assets at amortized cost includes other receivables, investments in corporate bonds and time deposits (previously classified as bond investment without an active market on December 31, 2017). 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 are the contractual maturities of financial liabilities, excluding estimated interest payments.

payments.
December 31, 2018 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables December 31, 2017 Non-derivative financial liabilities Unsecured borrowings Notes and accounts payable Other payables	Carrying Amount Contractual cash flows Within 1year 1 ~ 2years Over 2years $ 79,701,932 (79,701,932) (68,801,932) (8,600,000) (2,300,000) 155,427,659 (155,427,659) (155,427,659) - - 5,044,541 (5,044,541) (5,044,541) - -
	$ 240,174,132 (240,174,132) (229,274,132) (8,600,000) (2,300,000)
	$ 68,519,200 (68,519,200) (47,404,750) (13,514,450) (7,600,000) 143,668,312 (143,668,312) (143,668,312) - - 4,346,361 (4,346,361) (4,346,361) - -
	$ 216,533,873 (216,533,873) (195,419,423) (13,514,450) (7,600,000)

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

The Company 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 Company’s significant exposure to foreign currency risk was as follows:

Financial assets Monetary items USD to TWD Non-monetary items THB to TWD Financial liabilities Monetary items USD to TWD	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2017 Foreign currency Exchange rate TWD 6,517,889 29.76 193,972,377 712,938 0.9176 654,192 6,125,248 29.76 182,287,380	December 31, 2017 Foreign currency Exchange rate TWD 6,517,889 29.76 193,972,377 712,938 0.9176 654,192 6,125,248 29.76 182,287,380
	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate
	$ 6,889,285 423,027 6,819,596	30.715 0.946 30.715	211,604,389 400,184 209,463,891	6,517,889 712,938 6,125,248	29.76 0.9176 29.76

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, 2018 and 2017, would have increased (decreased) the net profit before tax as follows. The analysis is performed on the same basis for both periods.

USD (against the TWD) Strengthening 5% Weakening 5%	December 31, 2018 $ 107,025 (107,025)	December 31, 2017 584,250 (584,250)

3) Exchange gains and losses of monetary items

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, 2018 and 2017, the foreign exchange losses, including both realized and unrealized, amounted to $221,786 and $1,613,222, 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

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, 2018 and 2017, 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%	2018 $ (30,511) 30,511	2017 (47,830) 47,830

(v) Fair value information
1) The categories and fair value of financial instruments

The Company’s financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income (available- for-sale financial assets) 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.

reasonably measured.
Book value 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 $ 308,513 Financial assets at fair value through other comprehensive income Stocks listed on domestic markets 2,383,976 Stocks listed on foreign markets 400,184 Stocks unlisted on domestic markets 896,395 Stocks unlisted on foreign markets 51,363 Accounts receivable 22,896,211 Subtotal 26,628,129		December 31, 2018
	Book value		FairValue
		Level 1 284,768 2,383,976 400,184 - - -	Level 2 - - - - - 22,896,211	Level 3 23,745 - - 896,395 51,363 -	Total 308,513 2,383,976 400,184 896,395 51,363 22,896,211
	2,383,976 400,184 896,395 51,363 22,896,211
	26,628,129

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

		December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2018	Total - - - - - - - - - - - -
Book value			FairValue
		Level 1 Level 2 Level 3 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - December 31, 2017

190,251,241
$ 217,187,883
$ 51,305,682 77,050,816 78,376,843 5,044,541 17,496,250 10,900,000
$ 240,174,132

	Book value			FairValue
		Level 1 3,794,069 654,192 - - - - - - - - -		Level 2 - - - - - - - - - - -	Level 3	Total 3,794,069 654,192 1,207,219 126,333 - - - - - - -
	5,781,813
	2,333
	28,343,534 700,000 165,540,785 2,095,570 711,293 106,744
	197,497,926
	$ 203,282,072

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

	December 31, 2017	December 31, 2017	December 31, 2017
Book value		FairValue
	Level 1 - - - - - -	Level 2 - - - - - -	Level 3 - - - - - -	Total - - - - - -
$ 216,533,873

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 (bond investment without active market) and financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

3) Fair value valuation technique of financial instruments measured at fair value
a) Non-derivative financial instruments

Financial instruments trade in active markets is based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-the-run bonds from Taipei Exchange can be used as a base to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market.

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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

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 from one level to another in 2018 and 2017.

5) Changes in level 3

The change in level 3 at fair value in the years ended December 31, 2018 and 2017, were as follow:

as follow:
Balance on January 1, 2018 Effects of retrospective application Adjusted balance on January 1, 2018 Total gains and losses recognized: In other comprehensive income Purchased Proceeds of capital reduction of investment Balance on December 31, 2018	Financial assets at fair value through profit or loss $ - -	Financial assets at fair value through other comprehensive income (available-for-sale financial assets) 1,333,552 2,333
	- - 23,745 -	1,335,885 (487,950) 107,877 (8,054)
	$ 23,745	947,758

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Balance on January 1, 2017 Total gains and losses recognized: In other comprehensive income Purchased Proceeds of capital reduction of investment Disposal Balance on December 31, 2017	Financial assets at fair value through profit or loss $ - - - - -	Financial assets at fair value through other comprehensive income (available-for-sale financial assets) 2,101,861 (4,440) 60,180 (13,049) (811,000)
	$ -	1,333,552

For the years ended December 31, 2018 and 2017, total gains and losses that were included in “ other comprehensive income, before tax, available-for-sale financial assets” and “other comprehensive income, before tax, equity instruments at fair value through other comprehensive income” were as follows:

2018 Total gains and losses recognized: In other comprehensive income (as“other comprehensive income, before tax, available-for-sale financial assets”) $ - In other comprehensive income (as“other comprehensive income, before tax, equity instruments at fair value through other comprehensive income”)$ (487,950)	2018 $ -	2017 (4,440)
		-

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 equity – instruments, financial assets at fair value through profit or loss equity securities investment and available-for-sale financial assets – equity investment.

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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

The quantified information for significant unobservable inputs was as follows:

Item Financial assets at fair value through other comprehensive income (available-for-sale financial assets)－ equity investment without an active market Financial assets at fair value through other comprehensive income (available-for-sale financial assets)- investment in private placement	Valuation technique Comparable market approach Net asset value method	Significant unobservable inputs Price-Book ratio multiples (1.33~5.86, 1.7671~2.63, respectively, on December 31, 2018 and 2017) Multiples of earnings (2.32~2.95 on December 31, 2018) Lack-of-Marketability discount rate (40%~82%, and 45%~65%, respectively, on December 31, 2018 and 2017) Net asset value	Inter-relationships between significant unobservable inputs and fairvalue
			The higher the multiple is, the higher the fair value will be. The higher the multiple is, the higher the fair value will be. The higher the Lack-of-Marketabilit y discount rate is, the lower the fair value will be. 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

Input	Move up or down	Other comprehensive income Favorable change Unfavorable change $ 24,924 24,935	Other comprehensive income Favorable change Unfavorable change $ 24,924 24,935
		Favorable change $ 24,924
Price-Book ratio multiples Multiples of earnings Lack-of-Marketability discount rate Price-Book ratio multiples Lack-of-Marketability discount rate	5% 5% 5% 5% 5%
		$ 18,629	17,648
		$ 4,913	4,925
		$ 2,531	2,602
		$ 4,633	4,562

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.

(ad) 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

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, 2018 and 2017, The guarantees provide to the subsidiaries amounted to $325,179 and $372,963, 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)(n) and (6)(o) for unused credit lines of short-term and long-term borrowings as of December 31, 2018 and 2017.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(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 currencies 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.

(ae) 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, 2018 and 2017, the debt ratio was as follows:

December 31, 2018 and 2017, the debt ratio was as follows:
Total liabilities Total assets Debt ratio	December 31, 2018 $ 250,089,167	December 31, 2017 226,200,482
	$ 355,812,813	328,096,066

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

As of December 31, 2018, there were no changes in the Company’s approach of capital management.

(af) Investing and financing activities not affecting current cash flow

There is no investing and financing activities which did not affect the current cash flow in the year ended December 31, 2018.

Reconciliation of liabilities arising from financial activities were as follows:

Long-term borrowings Short-term borrowings Total liabilities from financing activities	January 1, 2018 Cash flow December 31, 2018 $ 27,133,200 1,263,050 28,396,250 41,386,000 9,919,682 51,305,682
	$ 68,519,200 11,182,732 79,701,932

(7) Related-party transactions:

(a) Name and relationship with related parties

The following are the subsidiaries and entities that have transactions with related party during the periods covered in the financial statements.

periods covered in the financial statements.

Name of related party

**Country of incorporation **

Panpal Technology Corp. (“Panpal”)
Gempal Technology Corp. (“Gempal”)
Hong Ji Capital Co., Ltd. (“Hong Ji”)
Hong Jin Investment Co., Ltd. (“Hong Jin”)
Zhaopal
Yongpal
Kaipal
Accesstek, Inc. (“ATK”)
Arcadyan
Rayonnant Technology Co., Ltd. (“Rayonnant Technology”)
HengHao
Ripal Optortronics Co., Ltd. (“Ripal”)
Auscom Engineering Inc. (“Auscom”)
Just International Ltd. (“Just”)
Compal International Holding Co., Ltd. (“CIH”)
Compal Electronics (Holding) Ltd. (“CEH”)
Bizcom Electronics, Inc. (“Bizcom”)

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

Name of related party

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”) Compalead Eletronica do Brasil Industria e Comercio Ltda. (“CEB”) Compal Display Holding (HK) Limited (“CDH (HK)”) Compal Electronics International Ltd. (“CII”) Compal International Ltd. (“CPI”) Compal Electronics (China) Co., Ltd. (“CPC”) Compal Optoelectronics (Kunshan) Co., Ltd. (“CPO”) Compal System Trading (Kunshan) Co., Ltd. (“CST”) Smart International Trading Ltd. (“Smart”) Amexcom Electronics Inc. (“AEI”) Mexcom Electronics, LLC (“MEL”) Mexcom Technologies, LLC (“MTL”) CENA Electromex, S.A. de C.V. (“CMX”) 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 Information Research and Development (Nanjing) Co., Ltd. (“CIN”) Compal Digital Technology (Kunshan) Co., Ltd. (“CDT”) Compower Global Service Co., Ltd. (“CGS”) Compal Investment (Jiansu) Co., Ltd. (“CIJ”) Compal Display Electronics (Kunshan) Co., ltd. (“CDE”) Etrade Management Co., Ltd. (“Etrade”)

Country of incorporation 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 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

Name of related party

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”) Compal Wireless Communication (Nanjing) Co., Ltd. (“CWCN”) Hanhelt Communication (Nanjing) Co., Ltd. (“Hanhelt”) Giant Rank Trading Ltd. (“GIA”) OptoRite Inc. MSI-ATK Otpics Holding Corporation (“MSI-ATK”) Maitek (BVI) Corporation (“Maitek”) Arcadyan Technology N.A. Corp. (“Arcadyan USA”) Arcadyan Germany Technology GmbH (“Arcadyan Germany”) Arcadyan Technology Corporation Korea (“Arcadyan Korea”) Arcadyan Holding (BVI) Corp. (“Arcadyan Holding”) Arcadyan do Brasil Ltda. (“Arcadyan Brasil”) Arcadyan Technology Limited (“Arcadyan UK”) Arcadyan Technology Australia Pty Ltd. (“Arcadyan AU”) Zhi-pal Technology Inc. (“Zhi-pal”) Tatung Technology Inc. (“TTI”) AcBel Telecom Inc. (“AcBel Telecom”) CBN Speedlink Tradings Limited (“Speedlink”) Compal Broadband Networks Belgium BVBA ("CBNB”) Sinoprime Global Inc. (“Sinoprime”) Arcadyan Technology (Shanghai) corp. (“SVA Arcadyan”) Arch Holding (BVI) Corp. (“Arch Holding”) Compal Networking (Kunshan) Co., Ltd. (“CNC”) Leading Images Ltd. (“Leading Images”) Great Arch Group Ltd. (“Great Arch”) Astoria Networks GmbH (“Astoria GmbH”)

Country of incorporation 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 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

Name of related party

Quest International Group Co., Ltd. (“Quest”) Exquisite Electronic Co., Ltd. (“Exquisite”) Tatung Home Appliances (Wujiang) Co., Ltd. (“THAC”) Tatung Technology of Japan Co., Ltd. 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)”) Royonnant Technology (Taicang) Co., Ltd. (“Rayonnant Technology (Taicang)”) HengHao Holdings A Co., Ltd. (“HHA”) HengHao Holdings B Co., Ltd. (“HHB”) HengHao Trading Co., Ltd. HengHao Optoelectronics Technology (Kunshan) Co., Ltd. LUCOM Display Technology (Kunshan) Limited (“Lucom”) Center Mind International Co., Ltd. (“CMI”) Prisco International Co., Ltd. (“PRI”) Compal Electronic (Sichuan) Co., Ltd. (“CIS”) Compal Electronic (Chongqing) Co., Ltd. (“CEQ”) Compal Electronic (Chengdu) Co., Ltd. (“CEC”) Compal Management (Chengdu) Co., Ltd. (“CMC”) Compal Smart Device (Chongqing) Co., Ltd. (“CSD”) Billion Sea Holdings Limited (“BSH”) Fortune Way Technology Corp. (“FWT”) General Life Biotechnology Co., Ltd. (“GLB”) Mactech Co., Ltd. (“Mactech”) Rapha Bio Ltd. (“Rapha”) Compal Electronics India Private Limited (“CEIN”) Shennona Corporation (“Shennona”) Unicore BioMedical Co., Ltd. (“Unicore”)

Country of incorporation The Company's subsidiary

The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary The Company's subsidiary

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Name of related party	Country of incorporation
Raycore Biotech Co., Ltd. (“Raycore”) AcBel Polytech Inc. (AcBel) and its subsidiaries (“AcBel”) Avalue Technology Inc (“Avaulue”) Crownpo Technology Inc (“Crownpo”) Kinpo Group Management Consultant Company (“Kinpo Group Management”) Allied Circuit Co., Ltd. (“Allied Circuit”) Compal Connector Manufacture Ltd. (“CCM”)	The Company's subsidiary The same chairman of the board with the Company An associate An associate An associate An associate A joint venture company

(b) Transactions with key management personnel

Key management personnel remunerations comprised:

Short-term employee benefits Post-employment benefits Share-based payments	2018	2017
	$ 487,007 5,913 (91,809)	385,294 6,226 68,529
	$ 401,111	460,049

There are no termination benefits and other long-term benefits. Please refer to note (6)(v) for explanations related to share-based payments.

(c) Significant related-party transactions
(i) Sale of goods to related parties

The amounts of significant sales transactions between the Company and related parties were as follows:

follows:
Subsidiaries Associates Other related parties	2018	2017 3,767,204 216 1,630
	$ 2,649,187 246 -
	$ 2,649,433	3,769,050

Sales prices for related parties were similar to those of the third-party customers. The collection period was 45~180 days for related parties.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(ii) Purchase of goods from related parties

The amounts of significant purchase transactions between the Company and related parties were as follows:

Subsidiaries Associates Joint venture	2018	2017 223,224,665 915 122
	$ 287,509,094 9,234 370
	$ 287,518,698	223,225,702

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, 2018 and 2017, amounted to $278,993 and $331,126, respectively. As of December 31, 2018 and 2017, 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, 2018 and 2017, amounted to $154,412 and $155,085, respectively. As of December 31, 2018 and 2017, the unpaid technical service expenses were recorded as other payables.

(v) Receivable due from relate parties

The receivables arising from the transactions mentioned above, the sale of machinery and equipment to related parties, and the purchasing of machinery, equipment and others on behalf of the related parties as of December 31, 2018 and 2017, were as follows:

Account Notes and accounts receivable Notes and accounts receivable Other receivables Other receivables Other receivables Less: Credit balance of investments accounted for using equity method	Related party categories	December 31, 2018 $ 1,318,230 - 520,598 120 - 1,838,948 (376,263) $ 1,462,685	December 31, 2017 2,095,564 6 204,779 179 127 2,300,655 (179,256) 2,121,399
	Subsidiaries Other related parties Subsidiaries Joint venture Other related parties

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

As of December 31, 2018 and 2017, the Company’s investment accounted for using the equity method in subsidiaries was a credit balance, recorded as a deduction from other receivable (other receivables) – related party. Please refer to note (6)(k).

(vi) Payable to related parties

The payables to related parties as of December 31, 2018 and 2017, were as follows:

Account Notes and accounts payable Notes and accounts payable Notes and accounts payable Other payable Other payable	Related party categories	December 31, 2018 $ 78,367,526 9,157 160 199,328 1,019	December 31, 2017 71,455,385 782 110 159,814 -
	Subsidiaries Associates Joint venture Subsidiaries Associates
		$ 78,577,190	71,616,091

(vii) Loan to related parties

The interest rate of unsecured loans to subsidiaries was 1.20%~2.82%, and the Company had assessed that no bad debt expenses should be recognized. As of December 31, 2018 and 2017, the loans due to related parties were recorded as other receivables.

Account	Related party categories	December 31, 2018 $ 419,618 (118,481)	December 31, 2017 413,411 (52,938)
Other receivable Less: Credit balance of investments accounted for using the equity method	Subsidiaries
		$ 301,137	360,473

As of December 31, 2018 and 2017, the Company’s investment accounted for using the equity method in some subsidiaries was a credit balance, recorded as a deduction from other receivable (other receivables) – related parties. Please refer to note (6)(k).

(viii) Guarantees

As of December 31, 2018 and 2017, the guarantees provided to subsidiaries were $325,179 and $372,963, respectively.

(8) Pledged assets: None.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(9) Commitments and contingencies:

The details of commitments and contingencies were as follows:

(a) On May 17, 2017, Qualcomm Inc. filed a lawsuit to the Southern District Court of California, USA against the Company for not paying the royalties of the patent license agreement. The Company has filed counterclaims against Qualcomm Inc. based on the antitrust law in the same court on July 19, 2017. The Company has engaged counsels to defend the lawsuits. The final result of this case is ’
subject to future litigation procedures; therefore, there is no significant impact on the Company s business and financial performance in the current year.
(b) The Company entered into various patent license agreements with third parties, and was required to make royalty payments of a predetermined amount periodically.

(10) Losses due to major disasters: None

(11) Subsequent events: None

(12) Other:

By function By item	2018	2018	2018	2017	2017	2017	2017
	Operating costs	Operating expenses	Total		Operating costs	Operating expenses	Total
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	322,825 27,602 12,469 - 48,089 15,342 40,050	8,227,841 517,757 308,470 59,182 385,959 150,985 249,740	8,550,666 545,359 320,939 59,182 434,048 166,327 289,790		293,925 24,351 11,124 - 45,473 17,912 7,271	7,023,336 496,735 291,140 41,531 374,941 147,953 307,387	7,317,261 521,086 302,264 41,531 420,414 165,865 314,658

The Company had 7,405 and 6,590 employees as of December 31, 2018 and 2017, of which 11 and 11, directors were not in concurrent employment, respectively.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

(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, 2018:

(i) Loans to other parties:

(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:	(i) Loans to other parties:
(In Thousands of New Taiwan Dollars)
No	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Collateral		Individual funding loan limits	Maximum limit of fund financing
													Item	Value
0 0 1 2 2 3 4 5 5 6 7 7 8	The Company The Company CIH CPI CPI CET CPC CIT CIT PFG Arcadyan Arcadyan Arcadyan Holding	UCGI HengHao CEP CEB CVC CDE CDE CCI Nanjing Rayonnant Technology (Taicang) CEB Arcadyan AU Arcadyan Brasil CNC	Other receivables 〃〃〃〃〃〃〃〃〃〃〃〃	Y Y Y Y Y Y Y Y Y Y Y Y Y	500,000 402,354 108,343 437,925 307,150 1,405,800 1,377,900 4,316,900 67,080 309,550 122,860 245,720 522,155	250,000 199,618 107,503 - 307,150 - 1,341,600 2,150,050 67,080 307,150 122,860 245,720 522,155	220,000 199,618 44,537 - 127,467 - 1,341,600 2,150,050 - 307,150 - 33,787 -	1.2% 1.8%~2.82% 3.50% 2.50% 3.2% 4.35% 2.20% 2.50%~2.7 % 4.35% 2.50% 1.00% 1.00% 1.00%	Short-term financing 〃〃〃〃〃〃 6 〃〃〃 Transaction for business between two parties 〃 Short-term financing	- - - - - - - - - - 1,535,750 307,150 -	Operating demand 〃〃〃〃〃〃〃〃〃 - - Operat financing	- - - - - - - - - - - - -	- - - - - - - - - - - - -	- - - - - - - - - - - - -	21,144,729 21,144,729 34,926,977 900,177 900,177 4,824,445 2,040,377 20,445,466 20,445,466 421,799 1,228,600 245,720 970,670	42,289,458 (Note 1) 42,289,458 (Note 1) 34,926,977 (Note 2) 90 (N 900,177 (Note 3) 4,824,445 (Note 4) 2,040,377 (Note 5) 20,445,466 (Note 6) 20,445,466 (Note 6) 421,799 (Note 7) 3,626,457 (Note 8) 3,626,457 (Note 8) 970,670 (Note 9)

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 borrowerCompany. 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 ’ s net worth, nor shall it be more than 50% of the Company ’ s lendable amount limit, and shall be combined with the company ’ s endorsements/guarantees for calculation. In addition, the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company is unrestricted by the aforesaid restriction of 80%, but the maximum amount shall not exceed 50% of the Company’s lendable limit, and shall be combined with the company’s amount of loans to others when calculating.

Note 2. 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.

Note 3. According to CPI’s Procedures for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of CPI. When a short-term financing facility with CPI 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 CPI’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 CPI, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating.
Note 4. 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.
Note 5. 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.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

Note 6. 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.
Note 7. According to PFG’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of PFG. When a short-term financing facility with PFG 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 PFG’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 PFG, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating.
Note 8. 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 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 Arcadyanborrowers having business relationship with Arcadyan, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal ’s endorsements/guarantees for the borrower when calculating. When a short-term financing facility is necessary, the borrower should be Arcadyan’s investee. The total amount for lending the borrower shall not exceed 80% of the net worth of the borrower, nor shall it exceed 20% of the net worth of Arcadyan, and shall be combined with the Arcadyan’s endorsements/guarantees for the borrower when calculating.
Note 9. 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.
(ii) Guarantees and endorsements for other parties:

		Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:	Note 9. 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. (ii) Guarantees and endorsements for other parties:
		(In Thousands of New Taiwan Dollars)
No.	Name of guarantor	Counter-party of guarantee and endorsement		Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
0 0 1	The Company 〃 Arcadyan	CEB CEP Arcadya n Brasil	(Note 3) (Note 2) (Note 5)	26,430,911 26,430,911 1,208,819	61,910 315,364 245,720	61,430 263,749 245,720	61,430 263,749 -	- - -	0.06% 0.25% 2.71%	52,861,823 (Note 1) 52,861,823 (Note 1) 3,626,457 (Note 4)	Y Y Y	- - -	- - -

Note 1: According to the Company’s Procedures for Endorsement and Guarantee, the total amount of endorsements/ guarantees the Company or the Group is permitted to make shall not exceed 50% of the Company’s net worth. Endorsements/ guarantees the Company and the Group are permitted to make for a single company shall not exceed 25% of the Company’s net worth. For entities having business relationship with the Company, the amount of endorsements/ guarantees for a single company shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount of the 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.

Note 2: Subsidiary whose over 50% common stock is directly owned.

Note 3: Subsidiary whose over 50% common stock is indirectly owned.

Note 4: According to Arcadyan's Procedures for Endorsement and Guarantee, the total amount shall not exceed 40% of the net worth for latest financial statements audited or reviewed by Certified Public Accountants, and the amount for a single company shall not exceed 1/3 of the total amount.

Note 5: Subsidiary whose 100% common stock is directly owned by Arcadyan.

(iii) Securities held as of December 31, 2018 (excluding investment in subsidiaries, associates and joint ventures):

					(In Thousands of Sh	(In Thousands of Sh	(In Thousands of Sh	ares / Units) Note
Name of holder	Category and name of security	Relationship with security issuer	Account name		Ending balance			Note
				Shares/Unit s (thousands)	Carrying value	Holding percentage (%)	Fair value
The Company	Common bond－Taiwan Star Taiwan Star Kinpo Electronics, Inc. (“Kinpo”) Cal-Comp Electronics (“Thailand”) Public Co., Ltd. Innolux Corporation (“Innolux”) Chipbond Technology Corp. (“Chipbond”)	`-` `-` The same chairman of the Company 〃 `-` `-`	Financial assets at amortized cost-current Financial assets at fair value through other comprehensive income-non-current 〃〃〃 Financial assets at fair value through profit or loss-current	- 98,046 124,044 239,631 109,227 4,593	350,000	- 3% 9% 5% 1% 1%	- 734,368 1,252,842 400,184 1,061,690 284,768
					734,368 1,252,842 400,184 1,061,690 284,768

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

Name of holder	Category and name of security	Relationship with security issuer	Account name		Ending balance	Ending balance	Ending balance	Note
				Shares/Unit s (thousands)	Carrying value	Holding percentage (%)	Fair value
The Company Panpal Gempal Hong Ji Hong Jin Arcadyan	HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Global BioPharma, Inc. Chen Feng Optoelectronics PrimeSensor Technology Inc. Macroblock, Inc. Others Total Compal Electronics, Inc. Kinpo CDIB Partners Investment Holding Corp. AcBel Chipbond Taiwan Biotech Co., Ltd. Others Total Compal Electronics, Inc. Lian Hong Art. Co., Ltd. Global BioPharma, Inc. Others Total SUYIN Optronics Co., Ltd. (“SUYIN Optronics”) SUYIN Optronics GeoThings Inc. AirHop Communication Inc. Adant Technologies Inc. IOT EYE, Inc. TIEF Fund, L.P Hitron Technologies Inc. RichWare Technology Corp. Wistron NeWeb Corp. Total	`-` `-` `-` `-` `-` `-` `-` The parent company The same chairman of the Company `-` The same chairman of the Company `-` `-` The parent company `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-`	Financial assets at fair value through other comprehensive income-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 profit or loss-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-current 〃〃	290 1,053 4,000 2,000 5,829 1,357 749 31,648 23,172 54,000 5,677 5,251 4,897 18,369 2,140 2,000 380 332 200 1,152 349 60 - 543 110 100	20,551 22,926 50,040 40,740 22,909 14,542 67,903 66,968 4,040,431	10% 11% 3% 3% 13% 3% 2% 1% 2% 5% 1% 1% 3% - 8% 3% 1% 1% 9% 7% 6% 6% 7% - - -	20,551 22,926 50,040 40,740 22,909 14,542 67,903 66,968 552,259 234,042 817,020 107,289 325,560 119,589 76,178 320,545 34,921 40,740 2,277 182 160 - - - - 45,645 10,426 5,115 7,990	(Note 1) 〃〃〃
					552,259 234,042 817,020 107,289 325,560 119,589 76,178
					2,231,937
					320,545 34,921 40,740 2,277
					398,483
					182
					160
					- - - - 45,645 10,426 5,115 7,990
					69,176

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

Name of holder	Category and name of security	Relationship with security issuer	Account name		Ending balance	Ending balance	Ending balance	Note
				Shares/Unit s (thousands)	Carrying value	Holding percentage (%)	Fair value
Mactech HHB CPO CET CIC CEC CPC CEQ	Taichung International Golf Country Club HWALLAR OPTRONICS (Fuzhou) CO., LTD. Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu. Structured Deposit. Total Structured deposits–Bank of Communications Yun Tong Cai Fu, Structured Deposit. Structured deposits–Agricultural Bank of China "HuiLiFeng" customization RMB Structured Deposit Structured deposits–The RMB "Open On Schedule "Financial Product Total Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu. Structured Deposit. Structured deposits–The RMB "Open On Schedule "Financial Product Structured deposits–SPD Bank Yield Plus Structured Deposit Total Structured deposits–Industrial Bank Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu. Structured Deposit. Total	`-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-`	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-current 〃 Financial assets at fair value through profit or loss-current 〃〃 Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current 〃 Financial assets at fair value through profit or loss-current 〃	- - - - - - - - - - - - -	7,980	- 19% - - - - - - - -	7,980 - 480,285 448,948 225,651 676,881 451,154 179,699 576,466 226,281 179,963 259,705 260,029	(Note 1) 〃
					-
					480,285 448,948
					929,233
					225,651 676,881 451,154
					1,353,686
					179,699
					576,466
					226,281 179,963
					406,244
					259,705 260,029
					519,734

Note 1: The carrying value is the remaining amount after deducting accumulated impairment.

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars/CNY)

Name of company	Category and name of security	Account name	Name of counter-party	Relationship with the company	Beginning	Balance	Purch	ases		S	ales		Oth	ers	Ending B	alance
					Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Price	Cost	Gain (loss) on disposal	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount
The Company BSH	Chipbond LC Future Center (Hong Kong) Ltd.	Financial assets at fair value through profit or loss-curre nt Investmen ts accounted for using equity method	- Hefei Zhi Ju Sheng Bao Equity Investment Co., Ltd.	- -	13,542 147,000	763,771 4,742,832	- -	- -	8,949 147,000	574,528 7,384,102 (Note 3	574,528 ) 4,873,017	- 2,511,085	- -	95,525 (Note 1) 130,185 (Note 2)	4,593 -	284,768 -

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

Name of company	Category and name of security	Account name	Name of counter-party	Relationship with the company	Beginning	Balance	Purch	ases		S	ales		Oth	ers	Ending B	alance
					Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Price	Cost	Gain (loss) on disposal	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount
CPC CPC CEC CEC CEQ CPO CPO CPO CET	Structured deposits–The RMB "Open On Schedule "Financial Product Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–Win-wi n Interest Rate Structure RMB Structural Deposits. Structured deposits-Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits-Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits–Agricult ural Bank of China "Golden Key. Ben Li Feng" RMB finance products Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu. Structured Deposit. Structured deposits–Bank of Communications Yun Tong Cai Fu. Structured Deposit.	Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt Financial assets at fair value through profit or loss-curre nt	Bank of China Shanghai Pudong Development Bank China CITTIC Bank Bank of Communications Bank of Communications Agricultural Bank of China Shanghai Pudong Development Bank Bank of Communications Bank of Communications	- - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	543,072 (RMB$ 119,000) 508,363 (RMB$ 110,000) 699,581 (RMB$ 153,000) 838,610 (RMB$ 188,000) 702,920 (RMB$ 158,000) 523,488 (RMB$ 112,000) 953,248 (RMB$ 214,000) 890,886 (RMB$ 200,000) 578,442 (RMB$ 130,000)	- - - - - - - - -	325,989 (RMB$ 69,448) 328 (R 70,264) 715,328 (RMB$ 154,881) 276,248 (RMB$ 60,595) 462,760 (RMB$ 101,111) 528,448 (RMB$ 113,061) 492,965 (RMB$ 108,132) 460,437 (RMB$ 100,997) 367,162 (RMB$ 80,537)	318,780 (RMB$ 69,000) M 328,930 (RMB$ 70,000) 706,643 (RMB$ 153,000) 273,535 (RMB$ 60,000) 443,503 (RMB$ 100,000) 523,488 (RMB$ 112,000) 474,652 (RMB$ 107,000) 443,600 (RMB$ 100,000) 354,807 (RMB$ 80,000)	7,209 (RMB$448) (Note 2) (655) (RMB264) (Note 2) 8,686 (RMB$1,881) (Note 2) 2,713 (RMB$595) (Note 2) 19,256 (RMB$1,111) (Note 2) 4,960 (RMB$1,061) (Note 2) 18,314 (RMB$ 1,132) 16,838 (RMB$ 997) 16,308 (RMB$ 537)	- - - - - - - - -	1,989 (RMB$444) (Note 1) 530 (RMB$118) (Note 1) - 3,958 (RMB$885) (Note 1) 610 (RMB$137) (Note 1) - 1,689 (RMB$378) (Note 1) 1,662 (RMB$371) (Note 1) 2,016 (RMB$460) (Note 1)	- - - - - - - - -	226,281 (RMB$ 50,444) 179,963 (RMB$ 40,118) - 576,466 (RMB$ 128,885) 260,029 (RMB$ 58,137) - 480,285 (RMB$ 107,378) 448,948 (RMB$ 100,371) 225,651 (RMB$ 50,460)

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

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Beginning Balance Purchases Sales Others Ending Balance
Category Relationship
Name of and name Account Name of with the Shares/ Units Shares/ Units Shares/ Units Gain (loss) on Shares/ Units Shares/ Units
company of security name counter-party company (thousands) Amount (thousands) Amount (thousands) Price Cost disposal (thousands) Amount (thousands) Amount
[CET ] Structured Financial Shanghai Pudong - - - - 310,456 - 323,446 310,456 16,573 - - - -
deposits–SPD assets at Development (RMB$ (RMB$ (RMB$ (RMB$
Bank Yield Plus fair value Bank 70,000) 70,948) 70,000) 948)
Structured through
Deposit profit or
loss-curre
nt
[CET ] Structured Financial Agricultural Bank - - - 670,906 - - - - - 5,975 - 676,881
deposits-Agricult assets at of China (RMB$ (RMB$| (RMB$
ural Bank of fair value 150,000) 1,365) 151,365)
China through (Note 1)
"HuiLiFeng" profit or
customization loss-curre
RMB structurednt
deposit
[CET ] Structured Financial Bank of China - - - 669,025 - 231,780 221,754 12,199 - 3,883 - 451,154
deposits-The assets at (RMB$ (RMB$ (RMB$ (RMB$ (RMB$| (RMB$
RMB "Open on fair value 150,000) 50,841) 50,000) 841) 888) 10,888)
schedule" through (Note 1)
Financial Product profit or
loss-curre
nt
[CIC ] Structured Financial Shanghai Pudong - - - 357,794 - 184,258 178,897 5,361 - 802 - 179,699
deposits-SPD assets at Development (RMB$ (RMB$ (RMB$ (RMB$ (RMB$| (RMB$
Bank Yield Plus fair value Bank 80,000) 40,417) 40,000) 417) 184) 40,184)
Structured through (Note 1)
Deposit profit or
loss-curre
nt
----- End of picture text -----

Note 1: Others were valuation gains and losses and foreign exchange gains and losses. Note 2: These were gains and losses on disposal and foreign exchange gains and losses.

Note 3: The related transactions costs were deducted from the selling price.

(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vi) Disposal 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:

								(In Thou	sands of New	Taiwan Dollars)	Taiwan Dollars)
Company Name	Counter party	Nature of relationship		Tra	nsaction details		Transacti differen	ons with terms t from others	Notes/A receivable	ccounts (payable)	Note
			Purchase/ (Sale)	Amount	Percentag e of total purchases/ (sales)	Payment terms	Unit price	Payment Terms	Ending Balance	Percentage of total notes/ accounts receivable (payable)
The Company	CBN CIH and its subsidiaries UCGI	The Company's subsidiaries Subsidiaries wholly owned by the Company 〃	Sale Purchase Sale	(2,138,005) 111,112,129 (238,388)	(0.2) % 12.4 % -	90 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, and adjustments will be made based on demand for funding if necessary There is no significant difference	739,065 (49,114,165) 89,586	0.4 % (31.6) % 0.1 %

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

	Company Name	Counter party	Nature of relationship		Tran	saction details	saction details	Transacti different	ons with terms from others	Notes/A receivable	ccounts (payable)	Note
				Purchase/ (Sale)	Amount	Percentag e of total purchases/ (sales)	Payment terms	Unit price	Payment Terms	Ending Balance	Percentage of total notes/ accounts receivable (payable)
	The Company Just and its subsidiaries CIH and its subsidiaries CBN BCI and its subsidiaries	Just and its subsidiaries BCI and its subsidiaries Bizcom Palcom Webtek Forever Webtek Forever CIH and its subsidiaries The Company The Company Forever Just and its subsidiaries BCI and its subsidiaries CEB The Company The Company CIH and its subsidiaries CEB	Subsidiaries wholly owned by the Company 〃〃〃 Subsidiaries wholly owned by the Company 〃 With the same ultimate parent company 〃〃 Parent Company Parent Company With the same ultimate parent company 〃〃〃 Parent Company 〃 With the same ultimate parent company 〃	Purchase Purchase Sale Sale Purchase Purchase Sale Sale Purchase Sale Sale Sale Sale Purchase Purchase Purchase Sale Sale Sale	132,833 770,924 (121,850) (114,565) 108,584,993 66,812,621 (68,265,549) (30,470,633) 387,992 (132,833) (113,457,780) (29,538,636) (387,992) 30,045,061 (145,211) 2,126,356 (783,081) (30,045,061) (1,892,352)	- 0.1 % - - 12.1 % 7.5 % (63.3) % (28.3) % 4.0 % (0.1) % (77.1) % (20.1) % (0.3) % 27.3 % (0.1) % 57.0 % (2.3) % (89.3) % (5.6) %	120 days 〃 45~180 days Net 60 days from delivery Net 60 days from purchase 〃 Net 60 days from delivery 〃 Net 60 days from purchase 120 days 〃 Net 60 days from delivery 〃 120 days 〃 Net 90 days from delivery 120 days 〃〃	Similar to non-related parties 〃 Similar to non-related parties 〃 Markup based on Webtek's cost Markup based on Forever's cost According to markup pricing Similar to non-related parties Similar to non-related parties Similar to non-related parties 〃 According to markup pricing 〃 Similar to non-related parties Similar to non-related parties - According to markup pricing 〃〃	There is no significant difference, and adjustments will be made based on demand for funding if necessary 〃 There is no significant difference 〃 There is no significant difference 〃 Adjustments will be made based on demand for funding 〃〃 There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding 〃〃 There is no significant difference There is no significant difference Adjustments will be made based on demand for funding if necessary 〃 There is no significant difference	(504,568) (758,108) 99,370 23,209 (7,073,274) (20,843,862) 20,177,943 6,472,633 (308,041) 504,568 49,114,165 8,931,246 308,041 (9,852,148) 45,759 (739,183) 758,108 9,852,148 562,737	(0.3) % (0.5) % 0.1 % - % (4.6) % (13.4) % 74.6 % 23.9 % (6.9) % 1.5 % 45.4 % 8.3 % 0.3 % (24.1) % - (87.0) % 6.3 % 81.5 % 4.7 %

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

Company Name	Counter party	Nature of relationship		Tran	saction details	saction details	Transacti different	ons with terms from others	Notes/A receivable	ccounts (payable)	Note
			Purchase/ (Sale)	Amount	Percentag e of total purchases/ (sales)	Payment terms	Unit price	Payment Terms	Ending Balance	Percentage of total notes/ accounts receivable (payable)
Webtek CEB Etrade and its subsidiaries Forever UCGI Palcom Bizcom THAC TTI THAC CNC Arcadyan 〃 CNC 〃 Arcadyan Germany Arcadyan USA Arcadyan AU Arcadyan	The Company Etrade and its subsidiaries Just and its subsidiaries BCI and its subsidiaries CIH and its subsidiaries Webtek The Company CIH and its subsidiaries Just and its subsidiaries The Company The Company The Company TTI THAC CNC THAC Arcadyan Germany Arcadyan USA Arcadyan AU Arcadyan AcBel Polytech Arcadyan Arcadyan Arcadyan CNC	Parent Company With the same ultimate parent company 〃 With the same ultimate parent company 〃 With the same ultimate parent company Parent Company With the same ultimate parent company 〃 Parent company Parent company Parent company With the same ultimate parent company With the same ultimate parent company 〃〃 Arcadyan's subsidiaries 〃〃 The Company's subsidiaries Same Director of Board as ultimate parent company The Company's subsidiaries 〃〃 Arcadyan's subsidiaries	Sale Purchase Purchase Purchase Purchase Sale Sale Purchase Purchase Purchase Purchase Purchase Sale Purchase Purchase Sale Sale Sale Sale Sale Purchase Purchase Purchase Purchase Purchase	(108,584,993) 40,334,951 68,265,549 1,903,878 148,236 (40,334,951) (66,812,621) 29,538,636 30,470,633 241,529 114,565 121,850 (383,948) 383,948 164,591 (164,591) (2,457,020) (496,199) (1,329,743) (11,249,751) 108,030 2,457,020 496,199 1,329,743 11,249,751	(100.0) % 37.1 % 62.9 % 17.3 % 1.4 % (100.0) % (85.6) % 38.0 % 39.0 % 72.8 % 100.0 % (78.8) % (100.0) % 4.0 % 3.0 % (1.0) % (11.0) % (2.0) % (6.0) % (100.0) % 1.0 % 100.0 % 100.0 % 100.0 % 35.0 %	Net 60 days from delivery Net 60 days from purchase 〃 120 days 120 days Net 60 days from delivery 〃 Net 60 days from purchase 〃 120 days Net 120 days from delivery 45~180 days Net 60 days from the end of the moth of delivery 〃 Net 90 days from the ended of the month of delivery 〃 Net 120 days from delivery Net 60 days from the end of the month of delivery Net 45 days from the end of the month of delivery Net 45ays from the end of the month of delivery Net 120 days from the end of the month of delivery Net 120 days from delivery Net 60 days from the end of the month of delivery Net 45 days from the end of the month of delivery Net 45ays from the end of the month of delivery	〃〃〃 Similar to non-related parties 〃 According to markup pricing 〃 Similar to non-related parties 〃〃〃〃 According to markup pricing - - - - - According to markup pricing - - - - According to markup pricing	Adjustments will be made based on demand for funding 〃〃 There is no significant difference 〃 Adjustments will be made based on demand for funding 〃〃〃 There is no significant difference 〃〃 - - - - - - - - - - - - -	7,073,274 (4,489,304) (20,177,943) (558,273) (45,479) 4,489,304 20,843,862 (8,931,246) (6,472,633) (89,586) (23,209) (99,370) 351,268 (351,268) (64,808) 64,808 805,017 104,031 727,600 3,404,030 (79,455) (805,017) (104,031) (727,600) (3,404,030)	100.0 % (18.2) % (81.8) % (38.2) % (3.1) % 100.0 % 91.0 % (34.0) % (25.0) % (84.5) % (100.0) % (85.2) % 100.0 % (28.0) % (59.0) % 2.0 % 14.0 % 2.0 % 13.0 % 98.0 % (2.0) % (100.0) % (100.0) % (100.0) % (40.0) %	(Note 1) 〃〃〃 (Note 1) (Note 1) (Note 1)

Note 1: The remaining balance is the net value of commissioned processing and sales of raw material.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

					(In Thousands of New Taiwan Dollars) Overdue Amounts received in Allowance Amount Action taken subsequent period for bad debts Note - - 434,844 (Note 1) - - - 6,277,163 (Note 1) - - - 20,177,943 (Note 1) - - - - (Note 1) - - - 30,770,107 (Note 1) - - - 8,050,832 (Note 1) - - - - (Note 1) - - - 70,422 (Note 1) - - - 6,788,977 (Note 1) - - - 316,880 (Note 1) - - - 14,413,628 (Note 1) - - - 7,073,274 (Note 1) - - - 4,489,304 (Note 1) - - - 581,083 (Note 2) - - - 11,688 (Note 2) - - - 521,951 (Note 2) - - - 169,496 (Note 2) - - - 351,268 (Note 2) - - - 207,119 (Note 2) - - - 2,311,269 (Note 2) - 22,528 - 174,680 (Note 3) - 22,528 Enhanced the collection 174,680 (Note 3) -	(In Thousands of New Taiwan Dollars) Overdue Amounts received in Allowance Amount Action taken subsequent period for bad debts Note - - 434,844 (Note 1) - - - 6,277,163 (Note 1) - - - 20,177,943 (Note 1) - - - - (Note 1) - - - 30,770,107 (Note 1) - - - 8,050,832 (Note 1) - - - - (Note 1) - - - 70,422 (Note 1) - - - 6,788,977 (Note 1) - - - 316,880 (Note 1) - - - 14,413,628 (Note 1) - - - 7,073,274 (Note 1) - - - 4,489,304 (Note 1) - - - 581,083 (Note 2) - - - 11,688 (Note 2) - - - 521,951 (Note 2) - - - 169,496 (Note 2) - - - 351,268 (Note 2) - - - 207,119 (Note 2) - - - 2,311,269 (Note 2) - 22,528 - 174,680 (Note 3) - 22,528 Enhanced the collection 174,680 (Note 3) -	(In Thousands of New Taiwan Dollars) Overdue Amounts received in Allowance Amount Action taken subsequent period for bad debts Note - - 434,844 (Note 1) - - - 6,277,163 (Note 1) - - - 20,177,943 (Note 1) - - - - (Note 1) - - - 30,770,107 (Note 1) - - - 8,050,832 (Note 1) - - - - (Note 1) - - - 70,422 (Note 1) - - - 6,788,977 (Note 1) - - - 316,880 (Note 1) - - - 14,413,628 (Note 1) - - - 7,073,274 (Note 1) - - - 4,489,304 (Note 1) - - - 581,083 (Note 2) - - - 11,688 (Note 2) - - - 521,951 (Note 2) - - - 169,496 (Note 2) - - - 351,268 (Note 2) - - - 207,119 (Note 2) - - - 2,311,269 (Note 2) - 22,528 - 174,680 (Note 3) - 22,528 Enhanced the collection 174,680 (Note 3) -	(In Thousands of New Taiwan Dollars) Overdue Amounts received in Allowance Amount Action taken subsequent period for bad debts Note - - 434,844 (Note 1) - - - 6,277,163 (Note 1) - - - 20,177,943 (Note 1) - - - - (Note 1) - - - 30,770,107 (Note 1) - - - 8,050,832 (Note 1) - - - - (Note 1) - - - 70,422 (Note 1) - - - 6,788,977 (Note 1) - - - 316,880 (Note 1) - - - 14,413,628 (Note 1) - - - 7,073,274 (Note 1) - - - 4,489,304 (Note 1) - - - 581,083 (Note 2) - - - 11,688 (Note 2) - - - 521,951 (Note 2) - - - 169,496 (Note 2) - - - 351,268 (Note 2) - - - 207,119 (Note 2) - - - 2,311,269 (Note 2) - 22,528 - 174,680 (Note 3) - 22,528 Enhanced the collection 174,680 (Note 3) -	(In Thousands of New Taiwan Dollars) Overdue Amounts received in Allowance Amount Action taken subsequent period for bad debts Note - - 434,844 (Note 1) - - - 6,277,163 (Note 1) - - - 20,177,943 (Note 1) - - - - (Note 1) - - - 30,770,107 (Note 1) - - - 8,050,832 (Note 1) - - - - (Note 1) - - - 70,422 (Note 1) - - - 6,788,977 (Note 1) - - - 316,880 (Note 1) - - - 14,413,628 (Note 1) - - - 7,073,274 (Note 1) - - - 4,489,304 (Note 1) - - - 581,083 (Note 2) - - - 11,688 (Note 2) - - - 521,951 (Note 2) - - - 169,496 (Note 2) - - - 351,268 (Note 2) - - - 207,119 (Note 2) - - - 2,311,269 (Note 2) - 22,528 - 174,680 (Note 3) - 22,528 Enhanced the collection 174,680 (Note 3) -
Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue		Amounts received in subsequent period	Allowance for bad debts	Note
					Amount	Action taken
The Company Just and its subsidiaries 〃 CIH and its subsidiaries 〃 BCI and its subsidiaries 〃〃 Forever Webtek Etrade and its subsidiaries Arcadyan 〃〃〃 THAC TTI CNC CBN Speedlink	CBN Forever Webtek Compal Electronic, Inc. Compal Electronic, Inc. Forever Just and its subsidiaries Compal Electronic, Inc. CIH and its subsidiaries CEB Compal Electronic, Inc. Compal Electronic, Inc. Webtek Arcadyan Germany Arcadyan USA Arcadyan AU TTI TTI THAC Arcadyan Speedlink Just and its subsidiaries	The Company's subsidiary With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent With the same ultimate parent Parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent company Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary The Company's subsidiary With the same ultimate parent company With the same ultimate parent company	739,065 6,472,633 20,177,943 504,568 49,111,165 8,931,246 308,041 758,108 9,852,148 562,737 20,843,862 7,073,274 4,489,304 805,017 104,031 727,600 172,161 (Note 5) 351,268 (Note 4) 207,119 (Note 5) 3,404,030 (Note 4) 242,069 (Note 4) 242,069 (Note 4)	1.98 6.32 6.18 0.27 2.25 4.05 1.24 1.65 2.91 3.31 4.09 15.01 7.71 3.08 4.32 3.54 0.11 10.14 12.43 2.46 - -	- - - - - - - - - - - - - - - - - - - - 22,528 22,528	- - - - - - - - - - - - - - - - - - - - - Enhanced the collection	434,844 (Note 1) 6,277,163 (Note 1) 20,177,943 (Note 1) - (Note 1) 30,770,107 (Note 1) 8,050,832 (Note 1) - (Note 1) 70,422 (Note 1) 6,788,977 (Note 1) 316,880 (Note 1) 14,413,628 (Note 1) 7,073,274 (Note 1) 4,489,304 (Note 1) 581,083 (Note 2) 11,688 (Note 2) 521,951 (Note 2) 169,496 (Note 2) 351,268 (Note 2) 207,119 (Note 2) 2,311,269 (Note 2) 174,680 (Note 3) 174,680 (Note 3)	- - - - - - - - - - - - - - - - - - - - - -

Note 1: Balance as of March 15, 2019.

Note 2: Balance as of February 27, 2019.

Note 3: Balance as of March 8, 2019.

Note 4: Other receivables due to processing and sales of raw material.

Note 5: Other receivables due to purchasing on behalf of TTI.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

(ix) Trading in derivative instruments: Please refer to notes (6)(b) and (6)(d)

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2018 (excluding information on investees in Mainland China):

								(In Tho	usands of New	Taiwan Dollars / U	SD/Shares)
Investor Company	Investee Company	Location	Main Businesses and Products	Original Am	Investment ount		Ending Bal	ance	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of Ownership	Carrying Value
The Company	Bizcom Just CIH Panpal Gempal Kinpo Group management consultant company (“Kinpo Group management”) Ripal Avalue Technology, Inc. Unicore CEH Allied Circuit Maxima Ventures I, Inc. (“Maxima”) Lipo Holding Co., Ltd. (“Lipo”) CPE ATK Crownpo Technology Inc. (“Crownpo”) Hong Ji Hong Jin Auscom Arcadyan FGH HSI CEP Zhaopal Yongpal Kaipal Lead-Honor Optronics. Co., Ltd. (“Lead-Honor”) Infinno Technology Corporation (“Infinno”)	Milpitas, USA British Virgin Islands British Virgin Islands Taipei City Taipei City Taipei City Tainan City New Taipei City Taipei City British Virgin Islands Taoyuan City Taipei City Cayman Islands Netherlands Hsinchu City Taipei City Taipei City Taipei City Austin, TX USA Hsinchu City British Virgin Islands British Virgin Islands Poland Taipei City Taipei City Taipei City Taoyuan City Hsinchu County	Warranty services and marketing of LCD TV s and notebook PCs Manufacturing, sales and maintenance of monitors and LCD TVs, and investment Sales and manufacturing of notebook PCs and investments Investment Investment Consultation, training services, etc. Manufacturing of electric appliance and audiovisual electric products Manufacturing, processing, and import and export business of industrial motherboards Animal medication retail and wholesale Investment Production and sales of PCB boards Investment Investment Investment Design, research & development, and selling of DVD, Combo, CD-RW Drives Manufacturing, processing, and selling resistor chips, networking chips, diodes, multilayer ceramic capacitors, semiconductor devices, and selling electronic products Investment Investment R&D of notebook PC related products and components R&D, manufacturing and sales of wireless network, integrated household electronics, and mobile office products Investment Investment Maintenance and warranty services of notebook PCs Investment Investment Investment Manufacturing of electric appliance and audiovisual electric products Manufacturing of electronic components, wholesale and retail sale of precision instruments and electronic materials	36,369 1,480,509 1,787,680 5,171,837 900,036 3,000 60,000 559,189 200,000 34 395,388 1,260 489,450 197,463 202,908 149,547 1,000,000 295,000 101,747 1,325,132 2,754,741 1,346,814 90,156 1,358,000 1,188,500 510,500 42,000 109,837	36,369 1,480,509 1,787,680 5,171,837 900,036 3,000 60,000 559,189 200,000 34 395,388 1,260 489,450 197,463 202,908 149,547 1,000,000 295,000 101,747 1,325,132 2,754,741 1,346,814 90,156 1,358,000 1,188,500 510,500 42,000 109,837	100 48,010 53,001 500,000 90,000 300 6,000 15,240 20,000 1 10,158 126 98 6,427 899 3,739 100,000 29,500 3,000 41,305 89,755 42,700 136 135,800 118,850 51,050 2,772 5,650	100% 100% 100% 100% 100% 38% 100% 22% 100% 100% 20% 23% 49% 100% 28% 33% 100% 100% 100% 21% 100% 100% 100% 100% 100% 100% 42% 27%	440,755 7,982,139 34,939,825 4,890,099 (Note 1) 1,580,854 (Note 1) 4,538 51,798 595,790 164,648 3,619,817 331,092 3,174 652,532 827,329 10,371 75,267 1,067,825 328,852 125,912 2,055,316 4,545,364 734,227 15,589 6,190 5,509 3,110 - 21,553	8,082 85,523 1,081,596 135,442 88,488 371 20,946 244,100 (21,756) - 366,180 (203) 617,951 284,489 141 71,765 46,621 20,358 4,757 871,519 275,557 (35,898) (16,749) (183) (184) (185) - 12	8,082 85,523 1,081,596 97,464 66,445 139 20,942 53,166 (20,162) - 74,756 (9,552) 302,796 130,819 39 23,849 45,946 20,358 4,757 189,715 275,557 (35,898) (21,694) (183) (184) (185) - 3

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

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Original Investment
Investor Investee Main Amount Ending Balance Net income Share of
Company Company Location Businesses and Products December 31, December 31, Shares Percentage Carrying (losses) profits/losses of Note
2018 2017 (thousands) of Value of investee investee
Ownership
HengHao Taipei City Manufacturing of PCs, 5,329,757 5,329,757 63,815 100% (118,482) (737,747) (736,708)
computer periphery
devices, and electronic
components
Mactech Taichung City Manufacturing of 219,601 219,601 21,756 53% 246,787 76,500 39,053
equipment and lighting,
retailing of equipment
and international trading
BCI British Virgin Investment 2,636,051 2,636,051 90,820 100% 6,037,985 261,806 261,806
Islands
CBN Hsinchu County R&D and sales of 284,827 284,827 29,060 43% 782,491 184,370 87,802
cable modem, digital set-up
box, and other communication
products
Rayonnant Taipei City Manufacturing and sales 295,000 295,000 29,500 100% 41,138 (51,684) (48,528)
of PCs, computer
periphery devices, and
electronic components
CRH British Virgin Investment 377,328 377,328 12,500 100% 107,301 (72,347) (72,347)
Islands
Ascendant Private Equity British Virgin Investment 943,922 943,922 31,253 35% 935,555 111,326 38,655
Investment Ltd. (“APE”) Islands
CORE British Virgin Investment 4,318,860 4,318,860 147,000 100% 7,625,407 2,604,284 2,604,284
Islands
Etrade British Virgin Investment 1,532,029 1,532,029 46,900 65% (298,023) (225,609) (124,210)
Islands
Webtek British Virgin Selling of mobile phones 3,340 3,340 100 100% 583,463 (101,398) (101,398)
Islands
Forever British Virgin Selling of mobile phones 1,575 1,575 50 100% 1,488,011 33 33
Islands
UCGI Taipei City Manufacturing and retail sale 100,000 100,000 10,000 100% (376,263) (139,243) (144,069)
of computers and electronic
components
Palcom Taipei City Selling of mobile phones 100,000 100,000 10,000 100% 109,663 1,465 1,465
GLB New Taipei City Manufacturing and wholesale 246,860 246,860 15,000 50% 260,934 46,429 23,218
of medical equipment
Shennona Delaware. USA Medical care IOT business 14,598 - 2,500 100% 5,438 (24,820) (24,820)
82,510,880 4,198,330
[Webtek ] Etrade British Virgin Investment 763,125 457,875 25,000 35% (165,051) (225,609) Investment
Islands (US$25,000) (US$15,000) (US$(5,374)) (US$(7,482)) gain(losses)
recognized by
Webtek
[Forever ] GIA British Virgin Selling of mobile phones - - - 100% - - Investment
Islands gain(losses)
recognized by
Forever
[Panpal ] Arcadyan Hsinchu City Telecommunication 180,968 180,968 6,827 4% 387,911 871,519 Investment
equipment and apparatus gain(losses)
manufacturing, electronic recognized by
parts and components Panpal
manufacturing, restrained
telecom radio frequency
equipments and materials
import and manufacturing
Allied Circuit Taoyuan City Production and selling of PCB 148,263 148,263 2,927 6% 95,407 366,180 〃
boards
Others 588,641
[Gempal ] Arcadyan Hsinchu City Telecommunication 203,500 203,500 7,846 4% 469,719 871,519 Investment
equipment and apparatus gain(losses)
manufacturing, electronic recognized by
parts and components Gempal
manufacturing, restrained
telecom radio frequency
equipments and materials
import and manufacturing
Allied Circuit Taoyuan City Production and selling of PCB 53,645 53,645 3,220 6% 104,948 366,180 〃
boards
Others 3,604
[Just ] CDH (HK) Hong Kong Investment 1,913,468 1,913,468 62,298 100% 5,615,616 75,505 Investment
(US$62,298) (US$62,298) (US$182,830) (US$2,504) gain(losses)
recognized by Just
CII British Virgin Investment 283,960 283,960 9,245 100% 220,282 (22,263) 〃
Islands (US$9,245) (US$9,245) (US$7,172) (US$(738))
CPI British Virgin Sales of monitors, LCD 15,358 15,358 500 100% 897,261 - 〃
Islands TVs and related (US$500) (US$500) (US$29,212) (US$-)
components.
[CII ] AEI U.S.A Sales and maintenance of 30,715 30,715 1,000 100% 49,452 (577) Investment
LCD TVs (US$1,000) (US$1,000) (US$1,610) (US$(19)) gain(losses)
recognized by CII
MEL U.S.A Investment 252,907 252,907 - 100% 258,826 (16,489) 〃
(US$8,234) (US$8,234) (US$8,427) (US$(547))
MTL U.S.A Investment 31 31 - 100% 31 - 〃
(US$1) (US$1) (US$1) (US$-)
Smart British Virgin Sales of electronic 31 31 1 100% 400 (11) 〃
Islands products and related (US$1) (US$1) (US$13) (US$-)
components
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(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

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

Original Investment
Investor Investee Main Amount Ending Balance Net income Share of
Company Company Location Businesses and Products December 31, December 31, Shares Percentage Carrying (losses) profits/losses of Note
2018 2017 (thousands) of Value of investee investee
Ownership
[ME Land ] CMX Mexico Manufacturing, sales and 247,256 247,256 32,903 100% 258,826 (16,489) Investment
MTL maintenance of LCD TVs (US$8,050) (US$8,050) (US$8,427) (US$(547)) gain(losses)
recognized by
MEL and MTL
[CIH ] CIH (HK) Hong Kong Investment 2,297,559 2,297,559 74,803 100% 32,986,019 1,062,037 Investment
(US$74,803) (US$74,803) (US$1,073,938) (US$35,223) gain(losses)
recognized by
CIH
Jenpal British Virgin Investment 225,755 225,755 7,350 100% 105,048 2,521 〃
Islands (US$7,350) (US$7,350) (US$3,420) (US$84)
CCM British Virgin Investment 156,647 156,647 5,100 51% 56,804 (2,521) 〃
Islands (US$5,100) (US$5,100) (US$1,849) (US$(84))
PFG British Virgin Sales of notebook PCs 31 31 1 100% 421,800 - 〃
Islands and related components (US$1) (US$1) (US$13,733) (US$-)
FWT British Virgin Investment 457,654 457,654 14,900 100% 457,964 79 〃
Islands (US$14,900) (US$14,900) (US$14,910) (US$3)
[Hong Ji ] Arcadyan Hsinchu City Telecommunication 203,500 203,500 7,846 4% 469,713 871,519 Investment
equipment and apparatus gain(losses)
manufacturing, electronic recognized by
parts and components Hong Ji
manufacturing, restrained
telecom radio frequency
equipments and materials
import and manufacturing
Allied Circuit Taoyuan City Production and selling of PCB 12,274 12,274 1,041 2% 27,977 366,180 〃
boards
[Hong Jin ] Arcadyan Hsinchu City Telecommunication 112,569 112,569 4,340 2% 239,239 871,519 Investment
equipment and apparatus gain(losses)
manufacturing, electronic recognized by
parts and components Hong Jin
manufacturing, restrained
telecom radio frequency
equipments and materials
import and manufacturing
[Arcadyan ] Arcadyan Holding British Virgin Investment 1,240,526 962,291 32,780 100% 1,221,252 59,092 Investment
Islands gain(losses)
recognized by
Arcadyan
Arcadyan USA U.S.A Sales of wireless network 23,055 23,055 1 100% 51,226 4,547 〃
products
Arcadyan Germany Germany Technology support and sales 1,125 1,125 0.5 100% 64,388 11,439 〃
of wireless network
products
Arcadyan Korea Korea Sales of wireless network 2,879 2,879 20 100% 7,789 3,116 〃
products
Arcadyan do Brasil Ltda Brazil Sales of wireless network - - - -% - - 〃
products
Zhi-Pal Taipei City Investment 48,000 48,000 34,980 100% 450,366 40,042 〃
TTI Taipei City R&D and sales of 308,726 306,925 25,028 61% 583,890 45,883 〃
household digital
products
AcBel Telecom Taipei City Investment 23,000 23,000 4,494 51% 33,952 (18,989) 〃
Arcadyan UK UK Technical support of 1,988 1,988 50 100% 2,683 317 〃
wireless network
products
Arcadyan AU Australia Sales of wireless network 1,161 1,161 50 100% 6,200 5,296 〃
products
CBN Hsinchu County Sales of communication and 11,925 11,925 533 1% 14,460 184,370 〃
electronic components
Golden Smart Home Taipei City Selling of hardware and 15,692 15,692 1,229 16% - (30,339) 〃
Technology Corp. software integration of
high-tech systems
[Arcadyan and ] Arcadyan Brasil Brazil Sales of wireless network 81,593 81,593 968 100% 14,381 (25,526) 〃
Zhi-pal products
[Arcadyan ] Sinoprime British Virgin Investment 277,971 1,536 9,050 100% 278,800 874 Investment
Holding Islands (US$50) (US$50) (US$9,077) (US$29) gain(losses)
recognized by
Arcadyan
Holding
Arch Holding British Virgin Investment 338,203 338,203 35 100% 834,649 52,580 〃
Islands (US$11,011) (US$11,011) (US$27,174) (US$1,744)
[TTI ] Quest Samoa Investment 36,858 36,858 1,200 100% 65,774 25,977 Investment
(US$1,200) (US$1,200) gain(losses)
recognized by
TTI
TTJC Japan Sales of household digital 1,341 1,341 - 100% 765 (610) 〃
electronic products
[Quest ] Exquisite Samoa Investment 35,937 35,937 1,170 100% 72,272 25,958 Investment
(US$1,170) (US$1,170) (US$2,353) (US$861) gain(losses)
recognized by
Quest
[AcBel Telecom ] Leading Images British Virgin Investment 1,536 1,536 50 100% 9,931 (18,420) Investment
Islands (US$50) (US$50) gain(losses)
recognized by
AcBel Telecom
Great Arch British Virgin Sales of wireless network - 1,536 - - - (6) 〃 Note 2
Islands products (US$-) (US$50)
----- End of picture text -----

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

Investor Company	Investee Company	Location	Main Businesses and Products	Original I Amo	nvestment unt		Ending Bala	nce	Net income (losses) of investee	Share of profits/losses of investee
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of Ownership	Carrying Value
Leading Images Zhi-pal HSI IUE Goal Rayonnant CRH HHT HHA HHB CBN FGH CORE BSH APH BCI GLB Unicore	Astoria GmbH CBN IUE Goal CVC CDM APH Forming Co., Ltd. APH HHA HHB HengHao Trading Co., Ltd. Speedlink CBNB Wah Yuen Technology Holding Ltd. and its subsidiaries BSH LCFC (HK) PEL Rayonnant (HK) CMI PRI Rapha Raycore	Germany Hsinchu county British Virgin Islands British Virgin Islands Vietnam Vietnam British Virgin Islands Taoyuan City British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Belgium Mauritius British Virgin Islands Hong Kong British Virgin Islands Hong Kong British Virgin Islands British Virgin Islands New Taipei City Taipei	Sales of wireless network products Produces and sales of communication and electronic components Investment Investment R&D, manufacturing, sales, and maintenance of notebook PCs, computer monitors, LCD TVs and electronic components Construction of and investment in infrastructure in Ba-Thien industrial district of Vietnam Investment R&D and manufacturing of electronic materials Investment Investment Investment Marketing and international trade Import and export business The import and export business of broad band network products and related components, as well as technical support and advisory services Investment Investment Investment and trading Investment Investment Investment Investment Detectors and test strip Animal medication retail and wholesale	880 (EUR25) 36,272 921,450 (US$30,000) 390,081 (US$12,700) 921,450 (US$30,000) 390,081 (US$12,700) 257,454 27,300 383,938 (US$12,500) 1,429,235 1,439,982 (US$46,882) 307 (US$10) 1,514 6,842 2,756,840 (US$89,755) 4,515,105 (US$147,000) - 96,783 (US$3,151) 552,870 (US$18,000) 2,482,386 (US$80,820) 307,150 (US$10,000) 6,500 25,500	880 (EUR25) 38,032 921,450 (US$30,000) 390,081 (US$12,700) 921,450 (US$30,000) 390,081 (US$12,700) 257,454 27,300 383,938 (US$12,500) 1,429,235 1,439,982 (US$46,882) 307 (US$10) 1,514 6,842 2,756,840 (US$89,755) 4,515,105 (US$147,000) 4,515,105 (US$147,000) 96,783 (US$3,151) 552,870 (US$18,000) 2,482,386 (US$80,820) 307,150 (US$10,000) 6,500 25,500	25 13,140 30,000 12,700 30,000 12,700 8,651 1,820 12,500 46,882 46,882 10 50 20 95,862 147,000 - 3,151 18,000 80,820 10,000 1,275 1,275	100% 20% 100% 100% 100% 100% 41% 21% 59% 100% 100% 100% 100% 100% 37% 100% - 100% 100% 100% 100% 100% 51%	9,522 (US$310) 356,317 455,400 (US$14,827) 306,789 (US$9,988) 480,087 (US$15,630) 365,367 (US$11,895) 68,240 - 107,300 (US$3,493) 251,850 269,419 (US$8,772) 401 (US$13) 2,015 6,919 4,615,937 (US$150,283) 7,625,407 (US$248,263) - 53,590 (US$1,745) 113,797 (US$3,705) 3,787,256 (US$123,303) 2,250,729 (US$73,278) 460 22,307	(60) (US$(2)) 184,370 (38,498) (US$(1,277)) 2,600 (US$86) (38,498) (US$(1,277)) 2,600 (US$86) (132,974) - (132,974) (US$(4,410)) (229,806) (229,820) (US$(7,622)) 49 (US$2) 267 (95) 275,379 (US$9,133) 2,604,284 (US$86,372) 201,793 (US$6,693) (11,161) (US$(370)) (121,813) (US$(4,040)) 112,153 (US3,720) 149,653 (US$4,963) (98) (6,024)	Investment gain(losses) recognized by Leading Images Investment gain(losses) recognized by Zhi-pal Investment gain(losses) recognized by H SI 〃 Investment gain(losses) recognized by IUE Investment gain(losses) recognized by Goal Investment gain(losses) recognized by Rayonnant 〃 Investment gain(losses) recognized by CRH Investment gain(losses) recognized by HHT Investment gain(losses) recognized by HHA Investment gain(losses) recognized by HHB Investment gain(losses) recognized by CBN 〃 Investment gain(losses) recognized by FGH Investment gain(losses) recognized by CORE Investment gain(losses) recognized by BSH Investment gain(losses) recognized by APH 〃 Investment gain(losses) recognized by BCI 〃 Investment gain(losses) recognized by GLB Investment gain(losses) recognized by Unicore.
Note 1: The carrying value had been d Note 2: It was liquidated in April, 201		educted $559, 81 8.	2 and $321, 435 of the Company’s sto		ck held by Panpal and Gempal, respectively.

(Continued)

100

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

(c) Information on investment in Mainland China:
(i) The names of investees in Mainland China, the main businesses and products, and other information:

										(In Thousands	of New Taiwan Do	llars / CNY/USD)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2017	Investme	nt flows	Accumulated outflow of investment from Taiwan as of December 31, 2018	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumu- lated remittance of earnings in current period
					Outflow	Inflow
CPC CDT CET CSD BT CGS LIZ Electronics (Kunshan) Co., Ltd. LIZ Electronics (Nantong) Co., Ltd. Zheng Ying Electronics (Chongqing) Co., Ltd. CIC CPO CIT LCFC (Hefei) Electronics Technology Co., Ltd. CST CIN	Manufacturing and sales of monitors Manufacturing and sales of notebook PCs, mobile phones, and Digital products Manufacturing of notebook PCs Manufacturing of notebook PCs Maintenance and warranty service of notebook PCs Production and processing chip-resistors, ceramic capacitors, diodes, and other latest electronic components and related precision electronic equipment; selling self-produced products Research & development, and manufacturing chip components (chip resistors, ceramic chip diode；selling self-produced products and providing after-sales service. Performing wholesale and trading business of electronic components, semiconductors, special materials for electronic components, and spare parts Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technology service Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self- produced products Manufacturing of notebook PCs Manufacturing and sales of LCD TVs Manufacturing of notebook PCs Manufacturing and selling of personal computers and related components, and providing related maintenance and after-sales service International trade and distribution of computers and electronic components Software and hardware R&D of computers, mobile phones and electronic components	1,136,455 (US$37,000) 614,300 (US$20,000) 368,580 (US$12,000) 268,363 (RMB$60,000) 30,715 (US$1,000) 8,945 (RMB2,000) 982,880 (US$32,000) 614,300 (US$20,000) 70,562 (RMB15,776) 368,580 (US$12,000) 371,652 (US$12,100) 737,160 (US$24,000) 8,139,475 (US$265,000) 43,001 (US$1,400) 61,430 (US$2,000)	(Note 1) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 1) (Note 1) (Note 2) (Note 2) (Note 1) (Note 2) (Note 1) (Note 2) (Note 2)	1,136,455 (US$37,000) 614,300 (US$20,000) 368,580 (US$12,000) (Note 3) 30,715 (US$1,000) (Note 3) 409,431 (US$13,330) 45,151 (US$1,470) (Note 3) 368,580 (US$12,000) 371,652 (US$12,100) 737,160 (US$24,000) 3,988,343 (US$129,850) 43,001 (US$1,400) (US	- - - - - - - - - - - - - - -	- - - - - - - - - - - - - - -	1,136,455 (US$37,000) 614,300 (US$20,000) 368,580 (US$12,000) - 30,715 (US$1,000) - 409,431 (US$13,330) 45,151 (US$1,470) - 368,580 (US$12,000) 371,652 (US$12,100) 737,160 (US$24,000) 3,988,343 (US$129,850) 43,001 (US$1,400) 61,430 (US$2,000)	(272,595) (US$(9,041)) (69,038) (US$(2,290)) 116,086 (US$3,850) (201,551) (RMB(44,210)) (105,760) (US$(3,508)) (14,673) (RMB(3,218)) 667,227 (US$22,129) 225,064 (US$7,464) (27,269) (RMB(5,982)) 268,390 (US$8,901) 94,641 (US$3,139) 769,672 (US$25,527) 201,793 (US$6,693) (3,174) (US$(105)) (29) (US$(1))	100 % 100 % 100 % 100 % 100 % 100 % 43 % 48 % 51 % 100 % 100 % 100 % - 100 % 100 %	(272,595) (US$(9,041)) (69,038) (US$(2,290)) 116,086 (US$3,850) (201,551) (RMB(44,210)) (105,760) (US$(3,508)) (14,673) (RMB(3,218)) 288,109 (US$9,555) 107,243 (US$3,557) (13,907) (RMB(3,051)) 268,390 (US$8,901) 94,641 (US$3,139) 769,672 (US$25,527) - (3,174) (US$(105)) (29) (US$(1))	2, (US$66, 196,193 (US$6,388) 4,832,564 (US$157,336) (252,598) (RMB(56,475) (192,357) (US$(6,263)) (37,432) (RMB(8,369)) 597,867 (US$19,465) 441,006 (US14,358) (73,016) (RMB(16,325)) 7,471,213 (US$243,243) 2,796,954 (US$91,061) 20,445,466 (US$665,651) - 49,419 (US$1,609) 755 (US$25)	0 - - - - - - - - - - - - - - -

(Continued)

101

COMPAL ELECTRONICS, INC.

Notes to Consolidated Financial Statements

Name of investee 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 HengHao HengHao Optoelectronic Technology (Kunshan) Co., Ltd. (“Heng Hao Kunshan”) Lucom Display Technology (Kunshan) Limited (“Lucom”)	Main businesses and products Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self-produced products" Investment and consulting services Manufacturing and sales of LCD TVs Outward investment and consulting services R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products Corporate management consulting, financial and tax consulting, investment consulting, and investment management consulting services R&D, manufacturing and sales of notebook PCs and related components. Also provides related maintenance and warranty services 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 Manufacturing of household electronics products Production of touch panels and related components Manufacturing of notebook PCs and related modules	Total amount of paid-in capital 307,150 (US$10,000) 479,154 (US$15,600) 460,725 (US$15,000) 2,482,386 (US$80,820) 2,457,200 (US$80,000) 24,572 (US$800) 307,150 (US$10,000) 12,593,150 (US$410,000) 1,842,900 (US$60,000) 552,870 (US$18,000) 675,730 (US$22,000) 178,147 (US$5,800) 1,197,885 (US$39,000) 61,430 (US$2,000) 402,367 (US$13,100) 382,402 (US$12,450) 102,895 (US$3,350) 1,228,600 (US$40,000) 460,725 (US$15,000)	Method of investment (Note 2) (Note 2) (Note 2) (Note 1) (Note 2) (Note 2) (Note 1) (Note 2) (Note 2) (Note 2) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Notes 1、10) (Note 1) (Note 2)	Accumulated outflow of investment from Taiwan as of January 1, 2017 156,647 (US$5,100) (US$1 (Note 3) (US$8 (Note 3) (Note 3) 307,150 (US$10,000) 2,537,888 (US$82,627) (US$1 (US$1 (US$2 (US (US$1 (US (US$1 (Note 7) (US$1 (Note 8) (US (US$3 199,617 (US$6,499) (Note 12)	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31, 2018 156,647 (US$5,100) 479,154 (US$15,600) - 2,482,386 (US$80,820) - - 307,150 (US$10,000) 2,537,888 (US$82,627) 351,871 (US$11,456) 383,938 (US$12,500) 675,730 (US$22,000) 178,147 (US$5,800) 583,585 (US$19,000) 61,430 (US$2,000) 565,770 (US$18,420) 338,203 (US$11,011) 35,322 (US$1,150) 1,222,549 (US$39,803) 199,617 (US$6,499)	Net income (losses) of the investee 1,440 (US$48) 339,351 (US$11,255) 335,680 (US$11,133) 112,153 (US$3,720) 112,135 (US$3,719) 99 (US$3) 149,653 (US$4,963) 791,080 (US$26,237) 110,851 (US$3,676) (121,811) (US$(4,040)) (102,215) (US$(3,390)) 754 (US$25) (210,490) (US$(6,981)) 30 (US$1) 7,175 (US$238) 52,580 (US$1,744) 25,958 (US$861) (230,717) (US$(7,652)) 849 (US$28)	Percentage of ownership 51 % 100 % 100 % 100 % 100 % 100 % 100 % 37 % 37 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %	Investment income (losses) 734 (US$24) 339,351 (US$11,255) 335,680 (US$11,133) 112,153 (US$3,720) 112,135 (US$3,719) 99 (US$3) 149,653 (US$4,963) 289,693 (US$9,608) 40,594 (US$1,346) (121,811) (US$(4,040)) (102,215) (US$(3,390)) 754 (US$25) (210,490) (US$(6,981)) 30 (US$1) 7,175 (US$238) 52,580 (US$1,744) 25,958 (US$861) (230,717) (US$(7,652)) 849 (US$28)	Book value 59,231 (US$1,928) 952,554 (US$31,013) 923,056 (US$30,052) 3,787,256 (US$123,303) 3,756,356 (US$122,297) 24,398 (US$794) 2,250,729 (US$73,278) 5,684,301 (US$185,066) 1,019,634 (US$33,197) 114,396 (US3,724) (1,026,526) (US$(33,421)) 85,388 (US$2,780) 434,617 (US$14,150) 3,133 (US$102) 126,607 (US$4,122) 834,649 (US$27,174) 71,750 (US$2,336) 116,874 (US$3,805) 134,882 (US$4,391)	Accumu- lated remittance of earnings in current period - - - - - - - - - - - - - - - - - - -
					Outflow - - - 2 - - - - - - - - - - - - - - 1 - -	Inflow - - - - - - - - - - - - - - - - - - -

(Continued)

(ii) Limitation on investment in Mainland China:

Names of Company	Accumulated Investment in Mainland China as of December 31, 2018	Investment Amounts Authorized by Investment Commission of Ministry of Economic Affairs	Limitation on investment in Mainland China by Investment Commission of Ministry of Economic Affairs
The Company Arcadyan HengHao	16,725,454 (USD 544,537) (Note 5) 939,303 (USD 30,581) 1,439,674 (USD 46,872)	23,069,606 (USD 751,086) 939,303 (USD 30,581) 1,439,674 (USD 46,872)	(Note 6) 5,439,686 365,077

Note 1: Indirectly investment in Mainland China through companies registered in the third region.
Note 2: Indirectly investment in Mainland China through an existing company registered in the third region.
Note 3: Investees held by Kunshan Botai Electronics Co., Ltd. (“BT”), Compal Investment (Jiansu) Co., Ltd. (“CIJ”), Compal Electronic (Sichuan) Co., Ltd. (“CIS”), and Compal Electronics (China) Co., Ltd. (“CPC”) through their own funds.
Note 4: The investment income (loss) was determined based on the financial report audited by CPA.
Note 5: Including the investment amount of sold or dissolved companies, including Beijing Compower Xuntong Electronic Technology Co., Ltd, VAP Optoelectronics (NanJing) Corp., Flextronics Technology (Shanghai) Ltd., Lucom and the increased investment amount form merging with Compal Communication Co., Ltd.
Note 6: As the Company has obtained the certificate of being qualified for operating headquarters, issued by Industrial Development Bureau, MOEA, the upper limit on investment in mainland China is not applicable.
Note 7: Arcadyan paid US$18,420 thousands and acquired 100% shares of SVA Arcadyan from Accton Asia through Arcadyan Holding in 2010. Note 8: Arcadyan paid US$8,561 thousands and acquired 100% shares of CNC from Just through Arcadyan Holding in 2007.
Note 9: SVA Arcadyan decreased its capital amounting to US$15,000 thousands to offset accumulated losses in March 2009.
Note 10: Arcadyan’s subsidiary, TTI, obtained the control over THAC with US$1,150 thousands on February 28, 2013 (the date of stock transferring).
Note 11: The amounts in New Taiwan Dollars were translated at the exchange rates at the balance sheet date or the average exchange rate.
Note 12: The Company had an accumulated investment amounting to US$7,350 thousands in the previous years. In the first half of 2014, HengHao paid the Company and LG US$3,184 thousands and US$3,315 thousands, respectively, for organization restructure, to obtain 100% ownership of Lucom.

(iii) Significant transactions:

For the year ended December 31, 2018, 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 .

(14) Segment information:

Please refer to the consolidated financial report of 2018.

103

COMPAL ELECTRONICS, INC.

STATEMENT OF CASH AND CASH EQUIVALENTS

December 31, 2018

(Expressed in thousands of New Taiwan Dollars;

in dollars of Foreign Currency)

Item Cash on hand Checking account and demand deposits Time deposits Cash equivalents: Bonds purchased under resale agreements Total	Description TWD Foreign currency (US$126,497,482 and others) TWD(Maturity date: 2019.1.24~2019.2.1) Foreign currency (US$458,000,000, Maturity date: 2019.1.2~ 2019.2.11) (CNY$27,000,000, Maturity date: 2019.1.7~ 2019.5.28) TWD(Maturity date: 2019.1.2~2019.1.11)	Amount $ 1,596 77,468 3,895,090 3,972,558 1,421,000 14,067,470 120,744 15,609,214 863,010 $ 20,446,378

Note: The exchange rate is 30.715 New Taiwan dollars for 1 US dollar; ; 4.472 New Taiwan dollars for 1 CNY dollar.

104

COMPAL ELECTRONICS, INC.

STAEMENTS OF NOTES AND ACCOUNTS RECEIVABLE

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item D Company A Company E Company G Company Others (Note) Less: allowance for uncollectible accounts Notes and accounts receivable, net	Description Sales of non-related-parties 〃〃〃〃	Amount $ 113,012,264 20,037,143 19,237,162 13,033,195 27,895,390 193,215,154 (3,718,560) $ 189,496,594

Note: The amount of individual client included in others does not exceed 5% of the account balance.

STATEMENTS OF INVENTORIES

Item Finished goods Work in progress Raw materials Total

Cost $ 18,779,873 44,008 32,693,278	Net Realizable Value 18,792,754 44,008 32,722,458 51,559,220
$ 51,517,159

105

COMPAL ELECTRONICS, INC.

STATEMENT OF INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars; thousands of shares)

Beginning	Balance	Increase (Note 1)		Decrease (Note 2)	Amount ~~-~~ 514,720 - - - 71,193 36,368 15,589 - - 55,893 - - 24 126,655 - - - - - - 52,189 - - - - - - - 126,447 - - - - 40,173 - 247,240 - - 8,281 21,756 -	Ending Balance (including impairment loss) Share of profit recognized Number of shares Amount (not including exchange differences on transaction of foreign financial statements ~~4,757~~ ~~3,000~~ ~~135,590~~ 97,464 500,000 5,941,971 85,523 48,010 8,252,466 1,081,596 53,001 35,479,344 - 1 3,906,656 66,445 90,000 1,920,264 45,946 100,000 1,070,753 20,358 29,500 330,469 (9,552) 126 4,961 39 899 10,374 74,756 10,158 331,178 8,082 100 454,679 302,796 98 677,539 23,849 3,739 76,971 189,715 41,305 2,065,133 275,557 89,755 4,927,347 (35,898) 42,700 737,228 (183) 135,800 6,190 (184) 118,850 5,509 (185) 51,050 3,110 - 2,772 (3) 87,802 29,060 782,396 139 300 4,538 (48,528) 29,500 43,764 (72,347) 12,500 104,879 (736,708) 63,815 (100,557) 3 5,650 21,553 (21,694) 136 19,975 261,806 90,820 5,857,011 38,655 31,253 926,089 2,604,284 147,000 7,395,104 (20,162) 20,000 164,648 20,942 6,000 51,798 130,819 6,427 839,756 53,166 15,240 599,634 (124,210) 46,900 (169,077) (101,398) 100 685,089 33 50 1,567,245 (144,069) 10,000 (376,263) 1,465 10,000 109,663 39,053 21,756 246,787 23,218 15,000 260,934 ~~(24,820)~~ 2,500 ~~4,738~~ 4,198,330 85,377,433 - (1,985,306) - (881,247) - (4,409) ~~4,198,330~~ ~~82,506,471~~	Ending Balance (including impairment loss) Share of profit recognized Number of shares Amount (not including exchange differences on transaction of foreign financial statements ~~4,757~~ ~~3,000~~ ~~135,590~~ 97,464 500,000 5,941,971 85,523 48,010 8,252,466 1,081,596 53,001 35,479,344 - 1 3,906,656 66,445 90,000 1,920,264 45,946 100,000 1,070,753 20,358 29,500 330,469 (9,552) 126 4,961 39 899 10,374 74,756 10,158 331,178 8,082 100 454,679 302,796 98 677,539 23,849 3,739 76,971 189,715 41,305 2,065,133 275,557 89,755 4,927,347 (35,898) 42,700 737,228 (183) 135,800 6,190 (184) 118,850 5,509 (185) 51,050 3,110 - 2,772 (3) 87,802 29,060 782,396 139 300 4,538 (48,528) 29,500 43,764 (72,347) 12,500 104,879 (736,708) 63,815 (100,557) 3 5,650 21,553 (21,694) 136 19,975 261,806 90,820 5,857,011 38,655 31,253 926,089 2,604,284 147,000 7,395,104 (20,162) 20,000 164,648 20,942 6,000 51,798 130,819 6,427 839,756 53,166 15,240 599,634 (124,210) 46,900 (169,077) (101,398) 100 685,089 33 50 1,567,245 (144,069) 10,000 (376,263) 1,465 10,000 109,663 39,053 21,756 246,787 23,218 15,000 260,934 ~~(24,820)~~ 2,500 ~~4,738~~ 4,198,330 85,377,433 - (1,985,306) - (881,247) - (4,409) ~~4,198,330~~ ~~82,506,471~~	Ending Balance (including impairment loss) Share of profit recognized Number of shares Amount (not including exchange differences on transaction of foreign financial statements ~~4,757~~ ~~3,000~~ ~~135,590~~ 97,464 500,000 5,941,971 85,523 48,010 8,252,466 1,081,596 53,001 35,479,344 - 1 3,906,656 66,445 90,000 1,920,264 45,946 100,000 1,070,753 20,358 29,500 330,469 (9,552) 126 4,961 39 899 10,374 74,756 10,158 331,178 8,082 100 454,679 302,796 98 677,539 23,849 3,739 76,971 189,715 41,305 2,065,133 275,557 89,755 4,927,347 (35,898) 42,700 737,228 (183) 135,800 6,190 (184) 118,850 5,509 (185) 51,050 3,110 - 2,772 (3) 87,802 29,060 782,396 139 300 4,538 (48,528) 29,500 43,764 (72,347) 12,500 104,879 (736,708) 63,815 (100,557) 3 5,650 21,553 (21,694) 136 19,975 261,806 90,820 5,857,011 38,655 31,253 926,089 2,604,284 147,000 7,395,104 (20,162) 20,000 164,648 20,942 6,000 51,798 130,819 6,427 839,756 53,166 15,240 599,634 (124,210) 46,900 (169,077) (101,398) 100 685,089 33 50 1,567,245 (144,069) 10,000 (376,263) 1,465 10,000 109,663 39,053 21,756 246,787 23,218 15,000 260,934 ~~(24,820)~~ 2,500 ~~4,738~~ 4,198,330 85,377,433 - (1,985,306) - (881,247) - (4,409) ~~4,198,330~~ ~~82,506,471~~	Exchange differences on transaction of foreign financial statements ~~(9,678)~~ (492,060) (270,327) (539,519) (286,839) (17,975) (2,928) (1,617) (1,787) (3) (86) (13,924) (25,007) (1,704) (9,817) (381,983) (3,001) - - - 3 95 - (2,626) 2,422 (17,925) - (4,386) 180,974 9,466 230,303 - - (12,427) (3,844) (128,946) (101,626) (79,234) - - - -	Ending Balance (including exchange differences on transaction of foreign statements ~~125,912~~ 5,449,911 7,982,139 34,939,825 3,619,817 1,902,289 1,067,825 328,852 3,174 10,371 331,092 440,755 652,532 75,267 2,055,316 4,545,364 734,227 6,190 5,509 3,110 - 782,491 4,538 41,138 107,301 (118,482) 21,553 15,589 6,037,985 935,555 7,625,407 164,648 51,798 827,329 595,790 (298,023) 583,463 1,488,011 (376,263) 109,663 246,787 260,934	Market Price / Net Value
Number of shares		Number of shares		Number of shares			Number of shares	Amount (not including exchange differences on transaction of foreign financial statements
~~3,000 $~~ ~~130,833~~ 500,000 5,922,985 48,010 8,166,943 53,001 34,397,748 1 3,906,656 90,000 1,902,233 100,000 1,060,974 29,500 325,587 126 14,513 899 10,335 10,158 312,315 100 446,597 98 374,707 3,739 53,146 41,305 2,001,001 89,755 4,651,687 42,700 773,126 135,800 6,373 118,850 5,693 51,050 3,295 2,772 (3) 29,060 738,962 300 4,399 29,500 92,292 12,500 177,226 131,499 636,151 5,650 21,550 136 41,669 90,820 5,595,205 31,253 1,013,881 147,000 4,790,820 20,000 184,810 6,000 30,856 6,427 708,937 15,240 586,333 46,900 (292,106) 100 1,033,727 50 1,567,212 10,000 (232,194) 10,000 116,479 21,756 226,825 15,000 237,716 - ~~-~~ 81,747,494 (3,609,730) (881,247) (6,753) ~~77,249,764~~ 232,194 437,912 ~~$~~ ~~77,919,870~~		~~-~~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,500		~~-~~ - - - - - - - - - - - - - - - - - - - - - - - - 67,684 - - - - - - - - - - - - - - - - -		~~4,757~~ 97,464 85,523 1,081,596 - 66,445 45,946 20,358 (9,552) 39 74,756 8,082 302,796 23,849 189,715 275,557 (35,898) (183) (184) (185) - 87,802 139 (48,528) (72,347) (736,708) 3 (21,694) 261,806 38,655 2,604,284 (20,162) 20,942 130,819 53,166 (124,210) (101,398) 33 (144,069) 1,465 39,053 23,218	~~3,000~~ ~~135,590~~ 500,000 5,941,971 48,010 8,252,466 53,001 35,479,344 1 3,906,656 90,000 1,920,264 100,000 1,070,753 29,500 330,469 126 4,961 899 10,374 10,158 331,178 100 454,679 98 677,539 3,739 76,971 41,305 2,065,133 89,755 4,927,347 42,700 737,228 135,800 6,190 118,850 5,509 51,050 3,110 2,772 (3) 29,060 782,396 300 4,538 29,500 43,764 12,500 104,879 63,815 (100,557) 5,650 21,553 136 19,975 90,820 5,857,011 31,253 926,089 147,000 7,395,104 20,000 164,648 6,000 51,798 6,427 839,756 15,240 599,634 46,900 (169,077) 100 685,089 50 1,567,245 10,000 (376,263) 10,000 109,663 21,756 246,787 15,000 260,934 2,500 ~~4,738~~ 85,377,433 (1,985,306) (881,247) (4,409) ~~82,506,471~~				~~125,912~~ 5,443,264 7,982,139 34,926,976 3,617,817 1,901,506 1,067,825 328,852 3,174 10,371 621,653 (Note 4) 440,755 653,180 75,267 3,089,577 (Note 3) 4,545,364 762,189 6,190 5,509 3,110 - 1,333,862 (Note 3) 5,696 41,138 107,301 (118,482) 21,553 15,589 6,037,985 935,605 7,625,407 164,648 51,798 827,329 586,743 (Note 4) (309,643) 583,463 1,488,011 (376,263) 109,663 281,505 150,545 5,438
	~~-~~		~~29,558~~		~~-~~	~~(24,820)~~		~~4,738~~	~~700~~	~~5,438~~
	81,747,494 (3,609,730) (881,247) (6,753)		748,137 1,624,424 - 2,344		1,316,528 - - -	4,198,330 - - -		85,377,433 (1,985,306) (881,247) (4,409)	(1,985,306)	83,392,127 - (881,247) (4,409)

	~~77,249,764~~ 232,194 437,912		~~2,374,905~~		~~1,316,528~~	~~4,198,330~~		~~82,506,471~~		~~82,506,471~~ 494,744 298,023

	~~$~~ ~~77,919,870~~									~~83,299,238~~

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, remeasurement of defined benefit plans, 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 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 28, 2018.

Note 4：The unit price is calculated by the closing price of Gre Tai Securities Market as of December 28, 2018.

106

COMPAL ELECTRONICS, INC.

STATEMENT OF CHANGES IN FINANCIAL ASSETS MEASURED AT FAI

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Beginning Balance	Beginning Balance	Adjusted Balance	Adjusted Balance	Increase(Note 1)	Increase(Note 1)	Decrease(Note 2)	Ending Balance Amount Number of Shares Amount 55,820 124,044 1,252,842 254,008 239,631 400,184 610,789 109,227 1,061,690 246,097 98,046 734,368 275,086 - 282,834 1,441,800 3,731,918	Ending Balance Amount Number of Shares Amount 55,820 124,044 1,252,842 254,008 239,631 400,184 610,789 109,227 1,061,690 246,097 98,046 734,368 275,086 - 282,834 1,441,800 3,731,918	Amount	Collaterals or Pledged Assets
Number of Shares	Amount	Number of Shares		Number of Shares		Number of Shares
- - - - -	$ - - - - -	124,044 239,631 134,877 98,046 -		- - - - -		- - 25,650 - -		124,044 1,252,842 239,631 400,184 109,227 1,061,690 98,046 734,368 - 282,834 3,731,918		None None None None None
	$ -		5,020,375		153,343		1,441,800		3,731,918

Note1: Increase included purchasing financial assets at fair value through other comprehensive income and unrealized gains on financial instruments at fair value through other comprehensive income

Note 2: Decrease included sale of financial assets at fair value through other comprehensive income, unrealized loss on financial instruments at fair value through other comprehensive income, deferred tax for unrealized loss and proceeds of capital reduction of investments.

107

COMPAL ELECTRONICS, INC.

STATEMENT OF PROPERTY, PLANT AND

EQUIPMENT

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Please refer to Note (6)(i).

STATEMENT OF SHORT-TERM BORROWINGS

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Creditor Description Sumitomo Mitsui Banking Corporation Credit Loans The Shanghai Commercial & Savings Bank 〃 Land Bank of Taiwan 〃 CTBC Bank Co., Ltd. 〃 Bank SinoPac 〃 Mega International Commercial Bank Co., Ltd. 〃 Credit Agricole Corporate & Investment Bank 〃 Citibank Taiwan, Ltd. 〃 DBS Bank Limited 〃 Cathay United Bank 〃 KGI Bank 〃 Hua Nan Commercial Bank 〃 HSBC Bank (Taiwan) Limited 〃 Agricultural Bank of Taiwan 〃 Bank of China Limited 〃 The Bank of Tokyo-Mitsubishi UFJ 〃	Contract Period 2018.12~2019.01 2018.12~2019.02 2018.12~2019.01 2018.12~2019.01 2018.12~2019.01 2018.12~2019.02 2018.12~2019.01 2018.12~2019.03 2018.12~2019.01 2018.12~2019.02 2018.12~2019.01 2018.12~2019.01 2018.12~2019.01 2017.12~2018.01 2018.12~2019.01 2018.12~2019.02	Interest Rate Note 〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃	Loan Commitments $ 7,525,175 2,150,050 4,500,000 2,500,000 700,000 1,000,000 7,678,750 9,060,925 2,150,050 4,607,250 2,800,000 4,000,000 6,143,000 1,400,000 6,143,000 4,607,250	Collaterals or Pledged Assets	Collaterals or Pledged Assets	Ending balance 2,272,910 1,658,610 4,300,100 2,457,200 645,015 921,450 7,678,750 7,371,600 2,150,050 4,545,820 1,228,600 3,808,660 4,300,100 1,366,817 2,450,000 4,150,000
				None None None None None None None None None None None None None None None None
			$ 66,965,450			51,305,682

Note: The range of interest rates of aforementioned loans were 0.72%~3.56%.

108

COMPAL ELECTRONICS, INC.

STATEMENT OF NOTES AND ACCOU PAYABLE December 31, 2018 (Expressed in thousands of New Taiwan Dollars)

Suppliers E Company J Company B Company A Company H Company I Company Others (Note) Total	Amount $ 27,527,918 11,336,333 7,701,129 7,594,339 7,572,981 7,495,748 7,822,368 $ 77,050,816

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

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COMPAL ELECTRONICS, INC.

STATEMENT OF LONG-TERM BORROWINGS

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Amount Loan within 1 year Loan more than 1 year 4,700,000 - 250,000 - - 2,000,000 1,800,000 - 1,871,250 - 2,425,000 875,000 - 2,300,000 1,100,000 825,000 - 600,000 - 300,000 - 1,000,000 5,350,000 - - 3,000,000 17,496,250 10,900,000	Amount Loan within 1 year Loan more than 1 year 4,700,000 - 250,000 - - 2,000,000 1,800,000 - 1,871,250 - 2,425,000 875,000 - 2,300,000 1,100,000 825,000 - 600,000 - 300,000 - 1,000,000 5,350,000 - - 3,000,000 17,496,250 10,900,000	Interest Rate	Amount 4,700,000 250,000 2,000,000 1,800,000 1,871,250 3,300,000 2,300,000 1,925,000 600,000 300,000 1,000,000 5,350,000 3,000,000	Collaterals or Pledged Assets
Loan within 1 year 4,700,000 250,000 - 1,800,000 1,871,250 2,425,000 - 1,100,000 - - - 5,350,000 - 17,496,250
		Note 〃〃〃〃〃〃〃〃〃〃〃〃		None None None None None None None None None None None None None
	10,900,000		28,396,250

Note: The range of interest rates of aforementioned loans were 0.79%~1.22%.

110

COMPAL ELECTRONICS, INC.

STATEMENT OF OTHER PAYABLES

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item Payroll payables and year-end bonuses payable Technical service fee payables Others (Note) Total	Description Payroll for December 2018, estimated year-end bonuses for 2018, and employees and directors' compensations Export expense payables and others	Amount $ 3,347,970 628,443 4,416,098 $ 8,392,511

Note: The amount of each item in others does not exceed 5% of the account balance.

STATEMENT OF NET SALES REVENUE

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item Quantity Sales revenue: 5C electronic products Note Others Less: Sales return Sales allowance Net sales Other operating revenue: Service and processing revenue Net sales revenue Note: Due to multi-categories, it’s hard to be classified in categories.	Amount $ 912,010,341 445,649 (964,375) (844,404)
	910,647,211 402,911
	$ 911,050,122

111

COMPAL ELECTRONICS, INC.

STATEMENT OF COSTS OF SALES

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item
Raw materials
Raw materials, beginning of the year
Plus: Purchases
Less: Raw materials, end of the year
Transferred to operating expense
Cost of material sold
Scraps
Raw materials used
Direct labor
Manufacturing expenses
Total Manufacturing costs
Plus: Work-in-process, beginning of the year
Less: Work-in-process, end of the year
Scraps
Cost of finished goods
Plus: Finished goods, beginning of the year
Purchases
Others
Less: Finished goods, end of the year
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 raw materials and finished goods
Cost of sales

Amount

$ 32,475,740
631,780,550
(33,941,015)
(11,672)
(6,686,188)
(355,714)
623,261,701
180,145
480,549
623,922,395
45,980
(44,008)
(1,221)
623,923,146
11,576,936
262,790,021
198,982
(18,817,650)
(860,330)
878,811,105
3,145,607
6,686,188
171,790
356,935
$
889,171,625

112

COMPAL ELECTRONICS, INC.

STATEMENT OF OPERATING EXPENSES

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item Payroll expenses Export expenses Royalty expenses Research expenses Shipping expenses Sample expenses Others (Note) Total	Selling expenses $ 329,052 180,338 260,045 - 2,063,750 322,996 1,716	Administrative expenses 1,491,605 - - - 3,449 425 893,877	Research and development expenses 6,456,407 - - 833,518 1,221 749 2,104,987
	$ 3,157,897	2,389,356	9,396,882

Note: The amount of each item in others does not exceed 5% of the account balance.

AI assistant

Compal — Annual Report 2018

52007_rns_2018-11-14_9e4ef01d-8eea-4ab2-9e99-cf84abc75444.pdf

COMPAL ELECTRONICS, INC.

Table of contents

Independent Auditor ’ s Report

Opinion

Basis for Opinion

Key Audit Matters

Description of key audit matters:

2. Inventory valuation

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Auditor ’ s Responsibilities for the Audit of the Financial Statements

Notes to Readers

COMPAL ELECTRONICS, INC.

Balance Sheets

December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

COMPAL ELECTRONICS, INC.

Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share)

COMPAL ELECTRONICS, INC. Statements of Changes in Equity For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

COMPAL ELECTRONICS, INC.

Statements of Cash Flows

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

COMPAL ELECTRONICS, INC.

Notes to the Parent Company Only-Financial Statements

For the years ended December 31, 2018 and 2017

(1) Company history

(2) Approval date and procedures of the financial statements:

(3) New standards, amendments and interpretations adopted:

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(i) IFRS 15 “Revenue from Contracts with Customers”

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(4) Summary of significant accounting policies:

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

(ii) Functional and presentation currency

(c) Foreign currency

(i) Foreign currency transaction

(ii) Foreign operations

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Notes to Parent-Company-Only Financial Statements

Notes to Parent-Company-Only Financial Statements

Impairment of financial assets

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Notes to Parent-Company-Only Financial Statements

3)

Loans and receivables

4) Impairment of financial assets

Notes to Parent-Company-Only Financial Statements

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

3) Other financial liabilities

Notes to Parent-Company-Only Financial Statements

Notes to Parent-Company-Only Financial Statements

Compal Annual Report 2018