Compal — Interim / Quarterly Report 2019

Nov 14, 2019

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Stock Code:2324

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors’ Review Report For the Nine Months Ended September 30, 2019 and 2018

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

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Table of contents

		Contents	Page
1.	Cover Page		1
2.	Table of Contents		2
3.	Independent Auditors’ Review Report		3
4.	Consolidated Balance Sheets		4
5.	Consolidated Statements of Comprehensive Income		5
6.	Consolidated Statements of Changes in Equity		6
7.	Consolidated Statements of Cash Flows		7
8.	Notes to the Consolidated Financial Statements
	(1)	Company history	8
	(2)	Approval date and procedures of the consolidated financial statements	8
	(3)	New standards, amendments and interpretations adopted	8～11
	(4)	Summary of significant accounting policies	11～21
	(5)	Significant accounting assumptions and judgments, and major sources	21
		of estimation uncertainty
	(6)	Explanation of significant accounts	21～63
	(7)	Related-party transactions	63～65
	(8)	Pledged assets	65
	(9)	Commitments and contingencies	66
	(10)	Losses due to major disasters	66
	(11)	Subsequent events	66
	(12)	Other	66～67
	(13)	Other disclosures
		(a) Information on significant transactions	67, 69～79
		(b) Information on investees	68, 80～85
		(c) Information on investment in Mainland China	68, 86～88
	(14)	Segment information	68

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Independent Auditors’ Review Report

To COMPAL ELECTRONICS, INC.:

Introduction

We have reviewed the accompanying consolidated balance sheets of COMPAL ELECTRONICS, INC. (the “Company”) and its subsidiaries (the “Group”) as of September 30, 2019 and 2018, and the related consolidated statements of comprehensive income for the three months and nine months then ended, as well as the changes in equity and cash flows for the nine months then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. The management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “ Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

Except as explained in the Basis for Qualified Conclusion paragraph, we conducted our reviews in accordance with Statement of Auditing Standard 65, “ Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of the consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

As stated in Note 4(b), the consolidated financial statements included the financial statements of certain nonsignificant subsidiaries, which were not reviewed by independent auditors. These financial statements reflect the total assets amounting to $22,162,821 thousand and $20,384,537 thousand, constituting 5.3% and 4.7% of the consolidated total assets; and the total liabilities amounting to $3,174,818 thousand and $4,996,067 thousand, constituting 1.0% and 1.6% of the consolidated total liabilities as of September 30, 2019 and 2018, respectively; as well as the total comprehensive income amounting to $(46,775) thousand and $(31,367) thousand and $(38,266) thousand and $190,658 thousand, constituting (2.9)%, (0.9)%, (0.6)% and 2.3% of the consolidated total comprehensive income (loss) for the three months and nine months then ended, respectively.

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Qualified Conclusion

Except for the adjustments, if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries described in the Basis for Qualified Conclusion paragraph above been reviewed by independent auditors, based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of September 30, 2019 and 2018, and of its consolidated financial performance for the three months and nine months then ended, as well as its consolidated cash flows for the nine months then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

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

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KPMG

Taipei, Taiwan (Republic of China) November 11, 2019

Notes to Readers

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

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Reviewed only, not audited in accordance with the generally accepted auditing standards as of September 30, 2019 and 2018

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2019, December 31, 2018, and September 30, 2018

(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)) 1136 Current financial assets at amortized cost (note (6)(e)) 1170 Notes and accounts receivable, net (note (6)(f)) 1180 Notes and accounts receivable due from related parties, net (notes (6)(f) and (7)) 1200 Other receivables, net (notes (6)(f) and (7)) 1310 Inventories (note (6)(g)) 1470 Other current assets (note (8)) Non-current assets: 1550 Investments accounted for using equity method (note (6)(h)) 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)) 1600 Property, plant and equipment (notes (6)(l) and (8)) 1755 Right-of-use assets (note (6)(m)) 1780 Intangible assets 1840 Deferred tax assets 1985 Long-term prepaid rents 1990 Other non-current assets (note (8)) Total assets	September 30, 2019 Amount % $ 55,444,483 13.3 3,838,516 0.9 - - 204,651,901 49.0 104,454 - 1,799,346 0.4 111,059,758 26.7 2,960,582 0.7 379,859,040 91.0 7,208,408 1.7 121,036 - 4,637,345 1.1 19,880,190 4.8 2,619,473 0.6 1,647,543 0.4 1,020,966 0.2 - - 696,385 0.2 37,831,346 9.0 $ 417,690,386 100.0	December 31, 2018 Amount % 70,296,545 17.6 4,611,134 1.1 350,000 0.1 203,715,965 51.0 58,106 - 1,665,249 0.4 79,148,922 19.8 2,899,329 0.7 362,745,250 90.7 7,364,485 1.9 69,390 - 5,172,295 1.3 20,418,228 5.1 - - 1,516,253 0.4 1,023,948 0.3 891,147 0.2 593,827 0.1 37,049,573 9.3 399,794,823 100.0	September 30, 2018 Amount % 72,064,833 16.7 3,893,302 0.9 350,000 0.1 209,474,786 48.5 24,725 - 2,021,133 0.5 102,939,506 23.8 3,402,254 0.8 394,170,539 91.3 7,120,925 1.6 45,165 - 5,585,923 1.3 20,585,966 4.8 - - 1,464,509 0.3 1,554,160 0.4 890,856 0.2 525,153 0.1 37,772,657 8.7 431,943,196 100.0 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note (6)(n)) 2120 Current financial liabilities at fair value through profit or loss (note (6)(b)) 2125 Current derivative financial liabilities for hedging (note (6)(d)) 2130 Current contract liabilities (note (6)(z)) 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)(r)) 2280 Current lease liabilities (note (6)(q)) 2300 Other current liabilities 2365 Current refund liabilities (note (6)(s)) 2322 Long-term borrowings, current portion (note (6)(o)) Non-Current liabilities: 2530 Bonds payable (note (6)(p)) 2540 Long-term borrowings (note (6)(o)) 2570 Deferred tax liabilities 2580 Non-current lease liabilities (note (6)(q)) 2640 Non-current net defined benefit liability 2670 Non-current liabilities, others (note (6)(h)) Total liabilities Equity: Equity attributable to owners of parent (notes (6)(v) and (6)(w)): 3110 Ordinary share 3200 Capital surplus 3300 Retained earnings 3400 Other equity interest 3500 Treasury shares 36XX Non-controlling interests Total equity Total liabilities and equity	September 30, 2019		December 31, 2018	December 31, 2018		September 30, 2018 Amount % 84,959,651 19.7 11,546 - 1,808 - 1,480,288 0.3 168,876,386 39.1 1,691,710 0.4 24,266,789 5.6 4,437,087 1.0 441,086 0.1 - - 2,540,214 0.6 1,039,668 0.2 18,054,375 4.2 307,800,608 71.2 - - 11,458,281 2.7 701,589 0.2 - - 696,840 0.2 200,215 - 13,056,925 3.1 320,857,533 74.3 44,071,466 10.2 9,965,268 2.3 58,424,825 13.5 (7,466,391) (1.7) (881,247) (0.2) 104,113,921 24.1 6,971,742 1.6 111,085,663 25.7 431,943,196 100.0
						Amount 72,350,197 26,913 - 1,476,304 152,300,093 1,976,620 19,558,007 3,722,191 426,981 - 3,255,135 1,579,832 17,535,625	%
						274,207,898
						- 10,998,438 478,169 - 710,146 238,324
						12,425,077
						286,632,975

See accompanying notes to consolidated financial statements.

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Reviewed only, not audited in accordance with generally accepted auditing standards

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three months and nine months ended September 30, 2019 and 2018 (Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

4000 Net sales revenue (notes (6)(z) and (7)) 5000 Cost of sales (notes (6)(g), (7) and (12)) Gross profit Operating expenses: (notes (6)(t), (6)(u) and (12)) 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Net operating income Non-operating income and expenses: 7020 Other gains and losses, net (notes (6)(d), (6)(h), (6)(j), (6)(ab) and (6)(ad)) 7050 Finance costs (notes (6)(p) and (6)(q)) 7190 Other income (note (6)(ab)) 7590 Miscellaneous disbursements 7770 Share of profit (loss) of associates and joint ventures accounted for using equity method (note (6)(h)) Total non-operating income and expenses 7900 Profit from continuing operations before tax 7950 Less: Income tax expenses (note (6)(v)) Profit 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8320 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (note (6)(v)) Components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8368 Gains (losses) on hedging instrument (note (6)(ac)) 8370 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss (note (6)(v)) Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income 8500 Total comprehensive income Profit, attributable to: 8610 Profit, attributable to owners of parent 8620 Profit, attributable to non-controlling interests Comprehensive income attributable to: 8710 Comprehensive income (loss), attributable to owners of parent 8720 Comprehensive income (loss), attributable to non-controlling interests Earnings per share (note 6(y)) 9750 Basic earnings per share 9850 Diluted earnings per share	For the three months ended September 30 2019 2018 Amount % Amount % $ 249,923,397 100.0 253,408,464 100.0 241,860,510 96.8 246,019,083 97.1 8,062,887 3.2 7,389,381 2.9 1,249,685 0.5 1,109,378 0.4 1,051,783 0.4 1,106,466 0.4 3,341,570 1.3 3,267,254 1.3 5,643,038 2.2 5,483,098 2.1 2,419,849 1.0 1,906,283 0.8 199,194 0.1 2,439,988 0.9 (649,050) (0.3) (709,778) (0.3) 545,543 0.2 490,734 0.2 (6,474) - (4,561) - (1,696) - 253,887 0.1 87,517 - 2,470,270 0.9 2,507,366 1.0 4,376,553 1.7 463,198 0.2 514,537 0.2 2,044,168 0.8 3,862,016 1.5 (51,268) - (58,370) - 52,214 - (5,737) - 3,722 - 10,337 - (2,776) - (74,444) - (198,051) (0.1) 106,108 - - - (10,530) - (215,914) (0.1) (269,454) (0.1) (2,158) - 212 - (411,807) (0.2) (174,088) (0.1) (414,583) (0.2) (248,532) (0.1) $ 1,629,585 0.6 3,613,484 1.4 $ 1,800,061 0.7 3,733,179 1.4 244,107 0.1 128,837 0.1 $ 2,044,168 0.8 3,862,016 1.5 $ 1,391,359 0.5 3,490,118 1.4 238,226 0.1 123,366 - $ 1,629,585 0.6 3,613,484 1.4 $ 0.41 0.86 $ 0.41 0.85	For the three months ended September 30 2019 2018 Amount % Amount % $ 249,923,397 100.0 253,408,464 100.0 241,860,510 96.8 246,019,083 97.1 8,062,887 3.2 7,389,381 2.9 1,249,685 0.5 1,109,378 0.4 1,051,783 0.4 1,106,466 0.4 3,341,570 1.3 3,267,254 1.3 5,643,038 2.2 5,483,098 2.1 2,419,849 1.0 1,906,283 0.8 199,194 0.1 2,439,988 0.9 (649,050) (0.3) (709,778) (0.3) 545,543 0.2 490,734 0.2 (6,474) - (4,561) - (1,696) - 253,887 0.1 87,517 - 2,470,270 0.9 2,507,366 1.0 4,376,553 1.7 463,198 0.2 514,537 0.2 2,044,168 0.8 3,862,016 1.5 (51,268) - (58,370) - 52,214 - (5,737) - 3,722 - 10,337 - (2,776) - (74,444) - (198,051) (0.1) 106,108 - - - (10,530) - (215,914) (0.1) (269,454) (0.1) (2,158) - 212 - (411,807) (0.2) (174,088) (0.1) (414,583) (0.2) (248,532) (0.1) $ 1,629,585 0.6 3,613,484 1.4 $ 1,800,061 0.7 3,733,179 1.4 244,107 0.1 128,837 0.1 $ 2,044,168 0.8 3,862,016 1.5 $ 1,391,359 0.5 3,490,118 1.4 238,226 0.1 123,366 - $ 1,629,585 0.6 3,613,484 1.4 $ 0.41 0.86 $ 0.41 0.85	For the three months ended September 30 2019 2018 Amount % Amount % $ 249,923,397 100.0 253,408,464 100.0 241,860,510 96.8 246,019,083 97.1 8,062,887 3.2 7,389,381 2.9 1,249,685 0.5 1,109,378 0.4 1,051,783 0.4 1,106,466 0.4 3,341,570 1.3 3,267,254 1.3 5,643,038 2.2 5,483,098 2.1 2,419,849 1.0 1,906,283 0.8 199,194 0.1 2,439,988 0.9 (649,050) (0.3) (709,778) (0.3) 545,543 0.2 490,734 0.2 (6,474) - (4,561) - (1,696) - 253,887 0.1 87,517 - 2,470,270 0.9 2,507,366 1.0 4,376,553 1.7 463,198 0.2 514,537 0.2 2,044,168 0.8 3,862,016 1.5 (51,268) - (58,370) - 52,214 - (5,737) - 3,722 - 10,337 - (2,776) - (74,444) - (198,051) (0.1) 106,108 - - - (10,530) - (215,914) (0.1) (269,454) (0.1) (2,158) - 212 - (411,807) (0.2) (174,088) (0.1) (414,583) (0.2) (248,532) (0.1) $ 1,629,585 0.6 3,613,484 1.4 $ 1,800,061 0.7 3,733,179 1.4 244,107 0.1 128,837 0.1 $ 2,044,168 0.8 3,862,016 1.5 $ 1,391,359 0.5 3,490,118 1.4 238,226 0.1 123,366 - $ 1,629,585 0.6 3,613,484 1.4 $ 0.41 0.86 $ 0.41 0.85	For the nine months ended September 30 2019 2018 Amount % Amount % 712,919,021 100.0 687,404,390 100.0 688,527,276 96.6 665,592,534 96.8 24,391,745 3.4 21,811,856 3.2 3,689,529 0.5 3,171,629 0.5 3,063,209 0.4 3,084,256 0.4 10,138,266 1.4 8,971,307 1.3 16,891,004 2.3 15,227,192 2.2 7,500,741 1.1 6,584,664 1.0 290,950 - 2,287,729 0.3 (2,138,992) (0.3) (1,741,563) (0.3) 1,615,555 0.2 1,562,778 0.2 (18,853) - (12,959) - (9,700) - 548,123 0.1 (261,040) (0.1) 2,644,108 0.3 7,239,701 1.0 9,228,772 1.3 1,503,446 0.2 1,494,285 0.2 5,736,255 0.8 7,734,487 1.1 (79,813) - (779,603) (0.1) 87,233 - (60,578) - 23,222 - (54,244) - (15,802) - (785,937) (0.1) 556,163 0.1 1,416,190 0.2 - - (1,808) - (156,234) - (222,328) - 541 - 4,354 - 399,388 0.1 1,187,700 0.2 383,586 0.1 401,763 0.1 6,119,841 0.9 8,136,250 1.2 4,941,697 0.7 7,218,776 1.0 794,558 0.1 515,711 0.1 5,736,255 0.8 7,734,487 1.1 5,323,485 0.8 7,604,613 1.1 796,356 0.1 531,637 0.1 6,119,841 0.9 8,136,250 1.2 1.13 1.66 1.12 1.64	For the nine months ended September 30 2019 2018 Amount % Amount % 712,919,021 100.0 687,404,390 100.0 688,527,276 96.6 665,592,534 96.8 24,391,745 3.4 21,811,856 3.2 3,689,529 0.5 3,171,629 0.5 3,063,209 0.4 3,084,256 0.4 10,138,266 1.4 8,971,307 1.3 16,891,004 2.3 15,227,192 2.2 7,500,741 1.1 6,584,664 1.0 290,950 - 2,287,729 0.3 (2,138,992) (0.3) (1,741,563) (0.3) 1,615,555 0.2 1,562,778 0.2 (18,853) - (12,959) - (9,700) - 548,123 0.1 (261,040) (0.1) 2,644,108 0.3 7,239,701 1.0 9,228,772 1.3 1,503,446 0.2 1,494,285 0.2 5,736,255 0.8 7,734,487 1.1 (79,813) - (779,603) (0.1) 87,233 - (60,578) - 23,222 - (54,244) - (15,802) - (785,937) (0.1) 556,163 0.1 1,416,190 0.2 - - (1,808) - (156,234) - (222,328) - 541 - 4,354 - 399,388 0.1 1,187,700 0.2 383,586 0.1 401,763 0.1 6,119,841 0.9 8,136,250 1.2 4,941,697 0.7 7,218,776 1.0 794,558 0.1 515,711 0.1 5,736,255 0.8 7,734,487 1.1 5,323,485 0.8 7,604,613 1.1 796,356 0.1 531,637 0.1 6,119,841 0.9 8,136,250 1.2 1.13 1.66 1.12 1.64
	2019	% 100.0 96.8 3.2 0.5 0.4 1.3 2.2 1.0 0.1 (0.3) 0.2 - - - 1.0 0.2 0.8 - - - - (0.1) - (0.1) - (0.2) (0.2) 0.6 0.7 0.1 0.8 0.5 0.1 0.6 0.41 0.41	2018 Amount 253,408,464 246,019,083 7,389,381 1,109,378 1,106,466 3,267,254 5,483,098 1,906,283 2,439,988 (709,778) 490,734 (4,561) 253,887 2,470,270 4,376,553 514,537 3,862,016 (58,370) (5,737) 10,337 (74,444) 106,108 (10,530) (269,454) 212 (174,088) (248,532) 3,613,484 3,733,179 128,837 3,862,016 3,490,118 123,366 3,613,484	2019 Amount 712,919,021 688,527,276 24,391,745 3,689,529 3,063,209 10,138,266 16,891,004 7,500,741 290,950 (2,138,992) 1,615,555 (18,853) (9,700) (261,040) 7,239,701 1,503,446 5,736,255 (79,813) 87,233 23,222 (15,802) 556,163 - (156,234) 541 399,388 383,586 6,119,841 4,941,697 794,558 5,736,255 5,323,485 796,356 6,119,841	% 100.0 96.6 3.4 0.5 0.4 1.4 2.3 1.1 - (0.3) 0.2 - - (0.1) 1.0 0.2 0.8 - - - - 0.1 - - - 0.1 0.1 0.9 0.7 0.1 0.8 0.8 0.1 0.9 1.13 1.12
	Amount $ 249,923,397 241,860,510 8,062,887 1,249,685 1,051,783 3,341,570 5,643,038 2,419,849 199,194 (649,050) 545,543 (6,474) (1,696) 87,517 2,507,366 463,198 2,044,168 (51,268) 52,214 3,722 (2,776) (198,051) - (215,914) (2,158) (411,807) (414,583) $ 1,629,585 $ 1,800,061 244,107 $ 2,044,168 $ 1,391,359 238,226 $ 1,629,585 $ $

See accompanying notes to consolidated financial statements.

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Reviewed only, not audited in accordance with generally accepted auditing standards COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2019 and 2018 (Expressed in Thousands of New Taiwan Dollars)

Equity attributable to owners of parent

Balance at January 1, 2018 Effects of retrospective application Adjusted balance at January 1, 2018 Profit for the nine months ended September 30, 2018 Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Cash dividends from capital surplus Changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted for using equity method Share-based payments transaction Adjustments of capital surplus for company's cash dividends received by subsidiaries Disposal of investments in equity instruments measured at fair value through other comprehensive income Changes in non-controlling interests Balance at September 30, 2018 Balance at January 1, 2019 Profit for the nine months ended September 30, 2019 Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Cash dividends from capital surplus Changes in ownership interests in subsidiaries Changes in equity of associates and joint ventures accounted for using equity method Adjustments of capital surplus for company's cash dividends received by subsidiaries Disposal of investments in equity instruments measured at fair value through other comprehensive income Changes in non-controlling interests Balance at September 30, 2019	Ordinary shares		Capital surplus				Retained	earnings	earnings				Total	Total	other equity interest	other equity interest	other equity interest	other equity interest				Treasury shares	Total equity attributable to owners of parent	Total equity attributable to owners of parent		Non- controlling interests Total equity
					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 comprehensive income		Unrealized gains (losses) on available- for-sale financial assets			Unearned employee benefit and others		Total other equity interest
	$ 44,191,916 - 44,191,916 - - - - - - - - - (120,450) - - - $ 44,071,466 $ 44,071,466 - - - - - - - - - - - - $ 44,071,466		10,938,773 -		18,252,861 -		4,339,549 -		33,964,736 494,051 34,458,787 7,218,776 28,828 7,247,604 (574,953) (4,491,599) (4,407,147) - (477,345) (1,155) 36,141 - (1,024,470) - 30,765,863 32,401,419 4,941,697 451 4,942,148 (891,336) 1,363,317 (4,407,147) - - (26,891) - (3,620,348) - 29,761,162	56,557,146 494,051		(3,477,376) - (3,477,376) - 1,175,865 1,175,865 - - - - - - - - - - (2,301,511) (1,852,952) - 397,393 397,393 - - - - - - - - - (1,455,559)		- (5,847,823) (5,847,823) - (818,204) (818,204) - - - - 476,199 1,130 - - 1,024,470 - (5,164,228) (5,606,436) - (16,056) (16,056) - - - - - - - 3,620,348 - (2,002,144)		(5,353,772) 5,353,772 - - - - - - - - - - - - - - - - - - - - - - - - - - - - -		(79,856) - (79,856) - (652) (652) - - - - - - 79,856 - - - (652) - - - - - - - - - - - - - -		(8,911,004) (494,051) (9,405,055) - 357,009 357,009 - - - - 476,199 1,130 79,856 - 1,024,470 - (7,466,391) (7,459,388) - 381,337 381,337 - - - - - - - 3,620,348 - (3,457,703)		(881,247) - (881,247) - - - - - - - - - - - - - (881,247) (881,247) - - - - - - - - - - - - (881,247)		101,895,584 -		6,752,388 108,647,972 - - 6,752,388 108,647,972 515,711 7,734,487 15,926 401,763 531,637 8,136,250 - - - - - (4,407,147) - (881,429) - (1,018) - (484) - (156,219) - 60,021 - - (312,283) (312,283) 6,971,742 111,085,663 7,438,202 113,161,848 794,558 5,736,255 1,798 383,586 796,356 6,119,841 - - - - - (4,407,147) - (881,429) - 18,146 - (22,613) - 60,021 - - (336,389) (336,389) 7,898,169 113,712,278
			10,938,773		18,252,861		4,339,549			57,051,197														101,895,584
			- -		- -		- -			7,218,776 28,828														7,218,776 385,837
			-		-		-			7,247,604														7,604,613
					574,953 - - - - - - - - -		- 4,491,599 - - - - - - - -
					18,827,814		8,831,148
					18,827,814 - -		8,831,148 - -
					-		-
					891,336 - - - - - - - -
					19,719,150

See accompanying notes to consolidated financial statements.

7

Reviewed only, not audited in accordance with generally accepted auditing standards

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation and amortization Increase (decrease) in expected credit loss Net loss (gain) on financial assets or liabilities at fair value through profit or loss Finance cost Interest income Dividend income Compensation cost of share-based payments Share of loss (profit) of associates and joint ventures accounted for using equity method Gain on disposal of property, plant and equipment Gain on disposal of investments Long-term prepaid rents Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in financial assets at fair value through profit or loss Decrease (increase) in notes and accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventories Decrease (increase) in other current assets Decrease (increase) in other non-current assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in financial liabilities at fair value through profit or loss Increase (decrease) in notes and accounts payable Increase (decrease) in other payables Increase (decrease) in refund liabilities Increase (decrease) in provisions Increase (decrease) in contract liabilities Increase (decrease) in other current liabilities Others Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow (outflow) generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Redemption from financial assets at amortized cost Acquisition of financial assets at fair value through profit or loss and through other comprehensive income Proceeds from disposal of financial assets at fair value through profit or loss and through other comprehensive income Acquisition of investments accounted for using equity method Proceeds from disposal of investments accounted for using equity method Net cash flow from disposal of subsidiaries Proceeds from capital reduction of investments Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Acquisition of right-of-use assets Increase in long-term prepaid rents Others Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase (decrease) in short-term borrowings Proceeds from issuing bonds Proceeds from long-term borrowings Repayments of long-term borrowings Payment of lease liabilities Cash dividends paid Acquisition of non-controlling interests Change in non-controlling interests Others Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

For the nine months ended September 30 2019 2018 $ 7,239,701 9,228,772 4,750,872 3,661,736 19,883 10,730 (41,398) (77,875) 2,138,992 1,741,563 (1,292,482) (986,443) (127,349) (279,044) 75,333 (156,241) 9,700 (548,123) (37,416) (23,645) (58,107) (2,511,085) - 10,054 5,438,028 841,627 138,759 (3,003,940) (1,006,441) (31,981,516) (379,055) (1,092,309) (31,910,836) (33,482,419) (62,691) 48,682 (8,041) (130,024) (33,228,305) (69,641,526) (25,963) (12,917) 20,668,983 28,550,272 1,600,510 5,715,032 89,187 (479,638) 393,177 53,939 (241,410) (185,033) (728,058) (483,329) (9,986) 19,800 21,746,440 33,178,126 (11,481,865) (36,463,400) (6,043,837) (35,621,773) 1,195,864 (26,393,001) 1,538,603 986,465 266,110 411,211 (2,496,337) (1,608,800) (1,289,006) (1,437,782) (784,766) (28,041,907) 350,000 350,000 (264,262) (107,877) 1,283,447 720,290 (43,200) - - 7,384,102 143,495 - 7,377 12,025 (3,145,603) (3,354,526) 97,377 28,576 (461,970) (434,604) (151,459) - - (315,371) (25,891) (66,164) (2,210,689) 4,216,451 (4,559,916) 28,444,126 1,007,240 - 44,753,624 21,567,199 (47,427,456) (19,507,431) (584,470) - (5,228,555) (5,228,555) - (1,570) (492,742) (300,163) (47,723) 20,008 (12,579,998) 24,993,614 723,391 833,962 (14,852,062) 2,002,120 70,296,545 70,062,713 $ 55,444,483 72,064,833

See accompanying notes to consolidated financial statements.

8

Reviewed only, not audited in accordance with generally accepted auditing standards COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

September 30, 2019 and 2018

(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 and its subsidiaries (together referred to as the "Group" and individually as the "Group entities") primarily are involved in the manufacture and sale of notebook personal computers ("notebook PCs"), monitors, LCD TVs, mobile phones and various components and peripherals.

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

These consolidated financial statements were authorized for issuance by the Board of Directors and issued on November 11, 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, 2019.

are effective for annual periods beginning on or after January 1, 2019.
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
IFRS 16 “Leases”	January 1, 2019
IFRIC 23 “Uncertainty over Income Tax Treatments”	January 1, 2019
Amendments to IFRS 9 “Prepayment features with negative compensation”	January 1, 2019
Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”	January 1, 2019
Amendments to IAS 28 “Long-term interests in associates and joint ventures”	January 1, 2019
Annual Improvements to IFRS Standards 2015–2017 Cycle	January 1, 2019

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

(Continued)

9

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

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.

The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings on January 1, 2019. The details of the changes in accounting policies are disclosed below,

• 1) Definition of a lease

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease, as explained in note (4)(c).

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

• 2) As a lessee

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Group decided to apply recognition exemptions to short-term leases of machinery and leases of office equipment.

• Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Group applied this approach to all leases.

In addition, the Group used the following practical expedients when applying IFRS 16 to leases.

• － Applied a single discount rate to a portfolio of leases with similar characteristics.

• － Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

(Continued)

10

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• － Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

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

• Leases previously classified as finance leases

For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease liability at January 1, 2019 are determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

• 3) As a lessor

The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor. The Group accounted for its leases in accordance with IFRS 16 from the date of initial application.

• 4) Impacts on financial statements

On transition to IFRS 16, the Group recognized additional $2,981,097 thousands of rightof-use assets and $2,089,950 thousands of lease liabilities, recognizing the difference in long-term prepaid rents. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 2.78%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the statement of financial position at the date of initial application disclosed as follows:

Operating lease commitment at December 31, 2018 as disclosed in the Group’s consolidated financial statements Recognition exemption for: short-term leases leases of low-value assets Variable lease payment based on an index or a rate Discounted using the incremental borrowing rate at January 1, 2019 Finance lease liabilities recognized as at December 31, 2018 Lease liabilities recognized at January 1, 2019

January 1, 2019 $ 2,280,672 (56,654) (176) (28,660) $ 2,195,182 $ 2,089,950 - $ 2,089,950

(Continued)

11

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated 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, 2020 in accordance with Ruling No. 1080323028 issued by the FSC on July 29, 2019:

1080323028 issued by the FSC on July 29, 2019:
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

The Group assesses that the adoption of the above-mentioned standards would not have any material impact on its consolidated financial statements.

• (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

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:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2021
Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform”	January 1, 2020

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

(4) Summary of significant accounting policies:

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the Regulations) and the guidelines of IAS 34 Interim Financial Reporting which are endorsed by the FSC. These consolidated interim financial statements do not include all of the information required by the Regulations and by the International Financial Reporting Standards, the International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the FSC (hereinafter referred to as the IFRS endorsed by the FSC) for a complete set of the annual financial statements.

Except as described in the following paragraph, the significant accounting policies adoptde in the interim financial statements are consistent with the consolidated financial statements for the year ended December 31, 2018. For related information, please refer to note (4) of the consolidated financial statements for the year ended December 31, 2018.

(Continued)

12

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Basis of consolidation

Principles of preparation of the consolidated financial statements are consistent with the consolidated financial statements for the year ended December 31, 2018. For related information, please refer to note (4)(c) of the consolidated financial statements for the year ended December 31, 2018.

To list of subsidiaries in the consolidated financial statements as follows:

				Percentage of
				ownership
Name of			September	December	September
investor	Name of Subsidiary	Nature of Operation	30, 2019	31, 2018	30, 2018	Description
The Company	Panpal Technology Corp.	Investment	100%	100%	100%	Panpal held 31,648
	(“Panpal”)					thousand shares of the
						Company as of September
						30, 2019, which represented
						0.7% of the Company’s
						outstanding shares. (notes
						1&2)
〞	Gempal Technology Corp.	〃	100%	100%	100%	Gempal held 18,369
	(“Gempal”)					thousand shares of the
						Company as of September
						30, 2019, which represented
						0.4% of the Company’s
						outstanding shares. (notes
						1&2)
〃	Hong Ji Capital Co., Ltd.	〃	100%	100%	100%
	(“Hong Ji”)
〃	Hong Jin Investment Co.,	〃	100%	100%	100%
	Ltd. (“Hong Jin”)
〃	Zhaopal Investment Co.,	〃	-	100%	100%	The liquidation procedures
	Ltd. (“Zhaopal”)					had been completed in
						February 2019.
〃	Yongpal Investment Co.,	〃	-	100%	100%	The liquidation procedures
	Ltd. (“Yongpal”)					had been completed in
						November 2018.
〃	Kaipal Investment Co., Ltd.	〃	-	100%	100%	The liquidation procedures
	(“Kaipal”)					had been completed in May
						2019.
The Company,	Accesstek, Inc. (“ATK”)	Design, manufacturing	38%	38%	38%	The Group had the ability to
Panpal, et al.		and sales of optical disk				control ATK. ATK was
		drives and components				dissolved on June 30, 2009.
〃	Arcadyan Technology	R&D, manufacturing and	35%	35%	36%	The Group had the ability to
	Corp. (“Arcadyan”)	sales of wireless network,				control Arcadyan.
		integrated household
		electronics, and mobile
		office products
The Company	Rayonnant Technology	Manufacturing and sales	100%	100%	100%
	Co., Ltd. (“Rayonnant	of PCs, computer
	Technology”)	periphery devices, and
		electronic components
〃	HengHao Technology Co.,	Manufacturing and sales	100%	100%	100%
	Ltd. (“HengHao”)	of PCs, computer
		periphery devices, and
		electronic components
〃	Ripal Optoelectronics Co.,	Manufacturing of electric	100%	100%	100%
	Ltd. (“Ripal”)	appliance and audiovisual
		electric products
〃	Mactech Co., Ltd	Manufacturing of	53%	53%	53%
	(“Mactech”)	equipment and lighting,
		retailing of equipment and
		international trading

(Continued)

13

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Name of investor Name of Subsidiary Nature of Operation The Company General Life Biotechnology Co., Ltd. (“GLB”) Manufacturing and sales of medical equipment 〃 Unicore BioMedical Co., Ltd. (“Unicore”) Management consulting services, rental and leasing business, wholesale and retail sale of medical equipment 〃 Hippo Screen Neurotech Co., Ltd. (“Hippo Screen”) Management consulting services, rental and leasing business, wholesale and retail sale of precision instruments and international trading 〃 Shennona Co., Ltd. (“Shennona TW”) Management consulting services, rental and leasing business, wholesale and retail sale of precision instruments and international trading 〃 Aco Smartcare Co., Ltd. (“Aco Smartcare”) Wholesale and retail sale of computer software, software design services, data processing services, wholesale and retail sale of electronic materials, wholdsale and retail sale of precision instruments, and biotechnology services 〃 Shennona Corporation (“Shennona”) Medical care IOT business 〃 Auscom Engineering Inc. (“Auscom”) R&D of notebook PC related products and components 〃 Just International Ltd. (“Just”) Investment 〃 Compal International Holding Co., Ltd. (“CIH”) 〃 〃 Compal Electronics (Holding) Ltd. (“CEH”) 〃 〃 Bizcom Electronics, Inc. (“Bizcom”) Warranty services and marketing of monitors and notebook PCs 〃 Flight Global Holding Inc. (“FGH”) Investment 〃 High Shine Industrial Corp. (“HSI”) 〃 〃 Compal Europe (Poland) Sp. z o.o. (“CEP”) Maintenance and warranty services of notebook PCs 〃 Big Chance International Co., Ltd. (“BCI”) Investment 〃 Compal Rayonnant Holdings Limited (“CRH”) 〃	Percentage of ownership September 30, 2019 December 31, 2018 September 30, 2018 Description 50% 50% 50% 100% 100% 100% 70% - - 70% shares of Hippo Screen were acquired in February 2019. 100% - - Shennona TW was established in March 2019. 52% - - 52% shares of Aco Smartcare were acquired in July 2019. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (notes 1 & 2) 100% 100% 100% (notes 1 & 2) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
	September 30, 2019
	50% 100% 70% 100% 52% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

(Continued)

14

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Name of investor Name of Subsidiary Nature of Operation The Company Core Profit Holdings Limited (“CORE”) Investment 〃 Compalead Electronics B.V. (“CPE”) 〃 Panpal and Gempal Compalead Eletronica do Brasil Industria e Comercio Ltda. (“CEB”) Manufacturing of notebook PCs 〃 Compal Electronics India Private Limited (“CEIN”) Manufacturing and warranty service of mobile phones Just Compal Display Holding (HK) Limited (“CDH (HK)”) Investment 〃 Compal Electronics International Ltd. (“CII”) 〃 〃 Compal International Ltd. (“CPI”) 〃 CDH (HK) Compal Electronics (China) Co., Ltd. (“CPC”) Manufacturing and sales of monitors 〃 Compal Optoelectronics (Kunshan) Co., Ltd. (“CPO”) Manufacturing and sales of LCD TVs 〃 Compal System Trading (Kunshan) Co., Ltd. (“CST”) International trade and distribution of computers and electronic components CPC Compal Smart Device (Chongqing) Co., Ltd. (“CSD”) Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technical service CII Smart International Trading Ltd. (“Smart”) Investment 〃 Amexcom Electronics Inc. (“AEI”) Sales and maintenance of LCD TVs 〃 Mexcom Electronics, LLC (“MEL”) Investment 〃 Mexcom Technologies, LLC (“MTL”) 〃 MEL and MTL CENA Electromex S.A. de C.V. (“CMX”) Manufacturing, sales, and maintenance of LCD TVs CIH Compal International Holding (HK) Limited (“CIH (HK)”) Investment 〃 Jenpal International Ltd. (“Jenpal”) 〃 〃 Prospect Fortune Group Ltd. (“PFG”) 〃 〃 Fortune Way Technology Corp. (“FWT”) 〃	Percentage of ownership September 30, 2019 December 31, 2018 September 30, 2018 Description 100% 100% 100% (note 2) 100% 100% 100% 100% 100% 100% (notes 1 & 2) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (notes 1 & 2) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% CMX was disposed in August 2019. 100% 100% 100% 100% 100% 100% 100% 100% 100% (notes 1 & 2) 100% 100% 100%
	September 30, 2019
	100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100%

(Continued)

15

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Name of investor Name of Subsidiary Nature of Operation CIH (HK) Compal Electronics Technology (Kunshan) Co., Ltd. (“CET”) Manufacturing of notebook PCs 〃 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”) Software and hardware R&D of computers, mobile phones and electronic components 〃 Compal Digital Technology (Kunshan) Co., Ltd. (“CDT”) Manufacturing and sales of notebook PCs, mobile phones, and digital products BT Compower Global Service Co., Ltd. (“CGS”) Maintenance and warranty service of notebook PCs CDH (HK) and CIH (HK) Compal Investment (Jiansu) Co., Ltd. (“CIJ”) Investment CIJ Compal Display Electronics (Kunshan) Co., Ltd. (“CDE”) Manufacturing and sales of LCD TVs The Company and Webtek Etrade Management Co., Ltd. (“Etrade”) Investment The Company Webtek Technology Co., Ltd. (“Webtek”) 〃 〃 Forever Young Technology Inc. (“Forever”) 〃 〃 UniCom Global, Inc. (“UCGI”) Manufacturing and sales of computers and electronic components 〃 Palcom International Corporation (“Palcom”) Sales of mobile phones Etrade Compal Communication (Nanjing) Co., Ltd. (“CCI Nanjing”) Manufacturing and processing of mobile phones and tablet PCs 〃 Compal Digital Communication (Nanjing) Co., Ltd. (“CDCN”) 〃 〃 Compal Wireless Communication (Nanjing) Co., Ltd. (“CWCN”) 〃 Forever Hanhelt Communication (Nanjing) Co., Ltd. (“Hanhelt”) R&D and manufacturing of electronic communication equipment 〃 Giant Rank Trading Ltd. (“GIA”) Sales of mobile phones	Percentage of ownership September 30, 2019 December 31, 2018 September 30, 2018 Description 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
	September 30, 2019
	100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

(Continued)

16

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

				Percentage of
				ownership
Name of			September	December	September
investor	Name of Subsidiary	Nature of Operation	30, 2019	31, 2018	30, 2018	Description
ATK	OptoRite Inc.	Sales of optical disc	100%	100%	100%
		drives
〃	MSI-ATK Otpics Holding	Investment	100%	100%	100%
	Corporation
	(“MSI-ATK”)
〃	Maitek (BVI) Corporation	〃	100%	100%	100%
	(“Maitek”)
Arcadyan	Arcadyan Technology N.A.	Sales of wireless network	100%	100%	100%	(notes 1 & 2)
	Corp. (“Arcadyan	products
	USA”)
〃	Arcadyan Germany	Technical support of	100%	100%	100%	(notes 1 & 2)
	Technology GmbH	wireless network products
	(“Arcadyan Germany”)
〃	Arcadyan Technology	Sales of wireless network	100%	100%	100%	(notes 1 & 2)
	Corporation Korea	products
	(“Arcadyan Korea”)
〃	Arcadyan Holding (BVI)	Investment	100%	100%	100%
	Corp. (“Arcadyan
	Holding”)
〃	Arcadyan Technology	Technical support of	100%	100%	100%	(notes 1 & 2)
	Limited (“Arcadyan	wireless network products
	UK”)
〃	Arcadyan Technology	Sales of wireless network	100%	100%	100%	(notes 1 & 2)
	Australia Pty Ltd.	products
	(“Arcadyan AU”)
Arcadyan and	Arcadyan do Brasil Ltda.	Sales of wireless network	100%	100%	100%	(notes 1 & 2)
Zhi-pal	(“Arcadyan Brasil”)	products
Arcadyan	Zhi-pal Technology Inc.	Investment	100%	100%	100%	(notes 1 & 2)
	(“Zhi-pal”)
〃	Tatung Technology Inc.	R&D and sales of	61%	61%	61%
	(“TTI”)	household digital
		electronic products
〃	AcBel Telecom Inc.	Investment	51%	51%	51%	(notes 1 & 2)
	(“AcBel Telecom”)
The Company,	Compal Broadband	R&D and sales of cable	64%	64%	72%
Arcadyan, and its	Network Inc. (“CBN”)	modem, digital set-up
subsidiaries		box, and other
		communication products
CBN	Speedlink Tradings	Import and export	100%	100%	100%
	Limited (“Speedlink”)	business
〃	Compal Broadband	Import and export	100%	100%	100%
	Networks Belgium	business, technical
	BVBA (“CBNB”)	support and consulting
		service of broadband
		networks
Arcadyan	Sinoprime Global Inc.	Investment	100%	100%	100%	(notes 1 & 2)
Holding	(“Sinoprime”)
〃	Arcadyan Technology	R&D and sales of wireless	100%	100%	100%
	(Shanghai) Corp.	network products
	(“SVA Arcadyan”)
〃	Arch Holding (BVI) Corp.	Investment	100%	100%	100%
	(“Arch Holding”)
Arch Holding	Compal Networking	Manufacturing of wireless	100%	100%	100%
	(Kunshan) Co., Ltd.	network products
	(“CNC”)
Sinoprime	Arcadyan Technology	Manufacturing of wireless	100%	-	-	Arcadyan Vietnam was
	(Vietnam) Co., Ltd.	network products				established in March 2019.
	(“Arcadyan Vietnam”)					(note 1)
AcBel Telecom	Leading Images Ltd.	Investment	100%	100%	100%	(notes 1 & 2)
	(“Leading Images”)
Leading Images	Astoria Networks GmbH	Sales of wireless network	100%	100%	100%	(notes 1 & 2)
	(“Astoria GmbH”)	products
						(Continued)

17

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

				Percentage of
				ownership
Name of			September	December	September
investor	Name of Subsidiary	Nature of Operation	30, 2019	31, 2018	30, 2018	Description
TTI	Quest International Group	Investment	100%	100%	100%
	Co., Ltd. (“Quest”)
〃	Tatung Technology of	Sales of household digital	100%	100%	100%	(notes 1 & 2)
	Japan Co., Ltd.	electronic products
	(“TTJC”)
Quest	Exquisite Electronic Co.,	Investment	100%	100%	100%
	Ltd. (“Exquisite”)
Exquisite	Tatung Home Appliances	Manufacturing of	100%	100%	100%
	(Wujiang) Co., Ltd.	household digital
	(“THAC”)	electronic products
HSI	Intelligent Universal	Investment	100%	100%	100%
	Enterprise Ltd. (“IUE”)
〃	Goal Reach Enterprises	〃	100%	100%	100%
	Ltd. (“Goal”)
IUE	Compal (Vietnam) Co.,	R&D, manufacturing,	100%	100%	100%
	Ltd. (“CVC”)	sales, and maintenance of
		notebook PCs, computer
		monitors, LCD TVs and
		electronic components
Goal	Compal Development &	Construction of and	100%	100%	100%
	Management	investment in
	(“Vietnam”) Co., Ltd.	infrastructure in Ba-Thien
	(“CDM”)	industrial district of
		Vietnam
Rayonnant	Allied Power Holding	Investment	100%	100%	100%
Technology	Corp. (“APH”)
and CRH
APH	Primetek Enterprises	〃	100%	100%	100%
	Limited (“PEL”)
〃	Rayonnant Technology	〃	100%	100%	100%
	(HK) Co., Ltd.
	(“Rayonnant
	Technology (HK)”)
Rayonnant	Rayonnant Technology	Manufacturing and sales	100%	100%	100%
Technology	(Taicang) Co., Ltd.	of aluminum alloy and
(HK)	(“Rayonnant	magnesium alloy products
	Technology (Taicang)”)
HengHao	HengHao Holdings A Co.,	Investment	100%	100%	100%
	Ltd. (“HHA”)
HHA	HengHao Holdings B Co.,	〃	100%	100%	100%
	Ltd. (“HHB”)
HHB	HengHao Trading Co., Ltd.	Marketing and	100%	100%	100%
		international trade
〃	HengHao Optoelectronics	Production of touch	100%	100%	100%
	Technology (Kunshan)	panels and related
	Co., Ltd. (“HengHao	components
	Kunshan”)
〃	Lucom Display Technology	Manufacturing of touch	100%	100%	100%
	(Kunshan) Limited	panels and LCD TVs
	(“Lucom”)
BCI	Center Mind International	Investment	100%	100%	100%
	Co., Ltd. (“CMI”)
〃	Prisco International Co.,	〃	100%	100%	100%
	Ltd. (“PRI”)
CMI	Compal Investment	Outward investment and	100%	100%	100%
	(Sichuan) Co., Ltd.	consulting services
	(“CIS”)

(Continued)

18

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Name of investor Name of Subsidiary Nature of Operation PRI Compal Electronics (Chongqing) Co., Ltd. (“CEQ”) R&D, manufacturing and sales of notebook PCs, related components, related maintenance and warranty services CIS Compal Electronics (Chengdu) Co., Ltd. (“CEC”) R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products 〃 Compal Management (Chengdu) Co., Ltd. (“CMC”) Corporate management consulting, training and education, business information consulting, financial and tax consulting, investment consulting, and investment management services CORE Billion Sea Holdings Limited (“BSH”) Investment BSH Mithera Capital Io LP (“Mithera”) Investment GLB Rapha Bio Ltd. (“RBL”) Detector and feature Unicore Raycore Biotech Co., Ltd. (“Raycore”) Animal medication retail and wholesale	Percentage of ownership September 30, 2019 December 31, 2018 September 30, 2018 Description 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (note 2) 99% - - Mithera was established in June 2019. 100% 100% 100% 51% 51% 51%
	September 30, 2019
	100% 100% 100% 100% 99% 100% 51%

Note 1: The financial statements of the subsidiary as of September 30, 2019 have not been reviewed by CPA. Note 2: The financial statements of the subsidiary as of September 30, 2018 have not been reviewed by CPA.

• (c) Leases (applicable from January 1, 2019)

• (i) Identifying a lease

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• 1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• 2) the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

(Continued)

19

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• 3) the Group has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of an asset if either:

• － the Group has the right to operate the asset and the providers do not have the right to vary; or

• － the Group designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and nonlease components as a single lease component.

• (ii) As a lessee

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• －

• fixed payments;

• － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• －

• －

• amounts expected to be payable under a residual value guarantee; and

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• － there is a change in future lease payments arising from the change in an index or rate; or

(Continued)

20

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• － there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee; or

• － there is a change of its assessment on whether it will exercise a purchase, extension or termination option; or

• －

• there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases of machinery and office equipment that have a lease term of 12 months or less and leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

• (iii) As a lessor

When the Group acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

• (d) Income taxes

Tax expense in the interim financial statements is measured and disclosed according to paragraph B12 of IAS 34 "Interim Financial Reporting".

Income tax expense for the year is best estimated by multiplying pretax income for the interim reporting period by the effective annual tax rate as forecasted by the management. This should be recognized fully as tax expense for the current period.

For a change in tax rate that is substantively enacted in an interim period, the effect of the change should immediately be recognized in the interim period in which the change occurs.

(Continued)

21

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the effective tax rate at the time of realization or liquidation and recognized directly in equity or other comprehensive income as tax expense.

(e) Employee benefits

Under defined benefit plans, pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events.

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

The preparation of the consolidated financial statements in conformity with Regulations as well as IFRSs (in accordance with IAS 34 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.

In the preparation of the consolidated interim financial statements, the major sources of significant accounting assumptions, judgments and estimation uncertainty are consistent with note (5) of the annual consolidated financial statements for the year ended December 31, 2018.

(6) Explanation of significant accounts:

Except for the following disclosures, there is no significant difference compared with the consolidated financial statements for the year ended December 31, 2018. Please refer to the note (6) of the consolidated financial statements for the year ended December 31, 2018 and for other related information.

• (a) Cash and cash equivalents

September 30, 2019 Cash on hand $ 18,813 Checking accounts and demand deposits 10,201,270 Time deposits 45,024,400 Bonds purchased under resale agreements 200,000 $ 55,444,483	December 31, 2018 September 30, 2018 10,834 9,239 12,389,146 18,159,236 57,033,555 53,790,354 863,010 106,004 70,296,545 72,064,833

Please refer to note (6)(ad) for the disclosure of the exchange rate risk, the interest rate risk and the fair value sensitivity analysis of the financial assets and liabilities of the Group.

(Continued)

22

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Financial assets and liabilities at fair value through profit or loss

September 30, 2019 Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Structured deposits $ 3,656,014 Stock listed in domestic markets - Unlisted fund in domestic or foreign markets 121,036 Derivative instruments not used for hedging Foreign exchange contracts 182,502 Swap contracts - Total $ 3,959,552 Current $ 3,838,516 Non-current 121,036 $ 3,959,552 September 30, 2019 Financial liabilities held-for-trading: Derivative instruments not used for hedging Foreign exchange contracts $ 950 Total $ 950	September 30, 2019 Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Structured deposits $ 3,656,014 Stock listed in domestic markets - Unlisted fund in domestic or foreign markets 121,036 Derivative instruments not used for hedging Foreign exchange contracts 182,502 Swap contracts - Total $ 3,959,552 Current $ 3,838,516 Non-current 121,036 $ 3,959,552 September 30, 2019 Financial liabilities held-for-trading: Derivative instruments not used for hedging Foreign exchange contracts $ 950 Total $ 950	December 31, 2018 September 30, 2018 3,965,062 3,000,958 633,859 872,516 69,390 45,165 10,168 17,942 2,045 1,886 4,680,524 3,938,467 4,611,134 3,893,302 69,390 45,165 4,680,524 3,938,467 December 31, 2018 September 30, 2018 26,913 11,546 26,913 11,546

The Group uses derivative instruments to hedge foreign currency risk the Group is exposed to arising from its operating activities. The following derivative instruments not applied hedge accounting were classified as mandatorily measured at fair value through profit or loss and held-fortrading financial liabilities :

Derivative financial assets: Foreign exchange contracts: Forward exchange sold Forward exchange sold Forward exchange purchased Forward exchange purchased		September 30, 2019
	Contract amount (in thousand) EUR 31,000 EUR 3,000 USD 5,080 USD 87,500	Currency Maturity date EUR to USD October 9, 2019~January 31, 2020 EUR to TWD October 30, 2019 USD to MXN November 14~27, 2019 USD to BRL October 3, 2019~ May 27, 2020 (Continued)

23

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Derivative financial liabilities: Foreign exchange contracts: Forward exchange purchased Derivative financial assets: Foreign exchange contracts: Forward exchange sold Swap contracts: Currency swap Derivative financial liabilities: Foreign exchange contracts: Forward exchange sold Forward exchange sold Forward exchange purchased Derivative financial assets: Foreign exchange contracts: Forward exchange sold Swap contracts: Currency swap		September 30, 2019
	Contract amount (in thousand) USD 3,505	Currency Maturity date USD to MXN October 30, 2019 December 31, 2018
	Contract amount (in thousand) EUR 30,200 USD 27,300 EUR 21,000 EUR 1,000 USD 136,900	Currency Maturity date EUR to USD January 14~March 28, 2019 USD to TWD February 14, 2019 EUR to USD January 10~March 28, 2019 EUR to TWD March 25, 2019 USD to BRL January 3~April 16, 2019 September 30, 2018
	Contract amount (in thousand) EUR 52,000 USD 11,300	Currency Maturity date EUR to USD October 11, 2018~January 14, 2019 USD to TWD October 5~25, 2018

(Continued)

24

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Derivative financial liabilities: Foreign exchange contracts: Forward exchange sold Forward exchange purchased Forward exchange purchased		September 30, 2018 Currency Maturity date EUR to USD November 5~ December 27, 2018 USD to MXN October 5~30, 2018 USD to BRL October 3, 2018~ March 8, 2019
	Contract amount (in thousand) EUR 13,000 USD 13,312 USD145,800

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

As of September 30, 2019 and December 31 and September 30, 2018, the Group did not provide any aforementioned financial assets as collaterals for its loans.

• (c) Financial assets at fair value through other comprehensive income

September 30, 2019 Equity investments at fair value through other comprehensive income: Stock listed in domestic markets $ 1,882,874 Stock listed in foreign markets 412,165 Stock unlisted in domestic markets 2,158,100 Stock unlisted in foreign markets 184,206 Total $ 4,637,345	December 31, 2018 September 30, 2018 2,730,648 2,940,697 400,184 452,902 1,990,100 2,161,304 51,363 31,020 5,172,295 5,585,923

The purpose that the Group invests in the above-mentioned equity securities is for long-term strategies, but rather for trading purpose. Therefore, these equity securities are designated as at FVOCI.

For the nine months ended September 30, 2019, the Group had sold all of its shareholdings in PrimeSensor Technology Inc. and Macroblock Inc., and part of shares of Innolux Corporation (“Innolux”), which were measured at fair value through other comprehensive income. The fair value of the shares was $656,246 when disposed and the cumulative losses amounted to $3,620,348, which had been transferred to retained earnings from other comprehensive income.

During the third quarters of 2018, the Group has sold parts of shares of Innolux which were measured at fair value through other comprehensive income. The fair value of the shares was $425,964 when disposed, and the cumulative losses amounted to $1,500,669, which has been transferred to retained earnings from other equity.

If there is an increase (decrease) in the market price by 5% on the reporting date of the equity securities hold by the Group, the increase (decrease) in other comprehensive income (pre-tax) for the nine months ended September 30, 2019 and 2018, will be $231,867 and $279,296, respectively. These analyses are performed on the same basis for the period and assume that all other variables remain the same.

(Continued)

25

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

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

As of September 30, 2019 and December 31 and September 30, 2018, the Group did not provide any financial assets at fair value through other comprehensive income as collaterals for its loans.

• (d) Financial instruments used for hedging

• (i) Financial instruments used for hedging were as follows:

September 30, 2019 Cash flow hedge: Financial liabilities used for hedging: Forward exchange contracts $ -	September 30, 2019	December 31, 2018 September 30, 2018 - 1,808

• (ii) Cash flow hedge

The Group’ s strategy is to use forward exchange contracts to hedge its foreign currency exposure in respect of forecasted future sales.

As of September 30, 2019 and December 31, 2018, the Group did not enter into any hedge contract. As of September 30, 2018, the amount related to the items designated as hedge instruments were as follows:

Derivative financial assets used for hedging Forward exchange purchased (forecasted sales revenue)		September 30, 2018	September 30, 2018
	Contract amount (in thousands)	Currency USD to MXN	Maturity period Average strike price October 30, 2018 19.56
	USD 1,689

• (iii) For the nine months ended September 30, 2019 and 2018, the profits (losses) of changes in fair value of derivative financial instruments used for hedging reclassified from other equity to profit or loss is recognized as revenue in the statement of comprehensive income. Please refer to note (6)(ac).

• (iv) For the nine months ended September 30, 2019 and 2018, the ineffective portion of cash flow hedge recognized in losses amounted of $5,934 and $559, recorded as “other gains and losses, net”.

(Continued)

26

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• (e) Current financial assets measured at amortized costs

		September	December 31,	September
		30, 2019	2018	30, 2018
Common bonds – Taiwan Star Telecom
Corporation Limited (“Taiwan Star”)	$	-	350,000	350,000

The Group 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.

As of December 31 and September 30, 2018, the Group did not provide the aforementioned financial assets as collaterals for its loans.

• (f) Notes and accounts receivable

September 30, 2019 Notes receivables from operating activities $ 81,861 Accounts receivables – measured at amortized cost 169,506,216 Accounts receivables – fair value through other comprehensive income 39,127,120 208,715,197 Less: allowance for uncollectible accounts (3,958,842) $ 204,756,355 Notes and accounts receivable $ 204,651,901 Notes and accounts receivable – related parties $ 104,454	December 31, 2018 September 30, 2018 102,775 52,576 184,671,402 176,312,528 23,020,497 37,183,987 207,794,674 213,549,091 (4,020,603) (4,049,580) 203,774,071 209,499,511 203,715,965 209,474,786 58,106 24,725

The Group has assessed a portion of its trade receivables that was held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; therefore, such trade receivables were measured at fair value through other comprehensive income.

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information.

(Continued)

27

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• (i) The loss allowance provision of IT product segment of the Group was determined as follows:

	September 30, 2019	September 30, 2019
Credit rating Carrying amount of accounts receivable Weighted- average ECL rate Level A $ 183,994,396 0% Level B 14,132,871 0.580% Level C 3,830,424 100% $ 201,957,691 December 31, 2018			Lifetime ECLs Credit- impaired - No 81,980 No 3,830,424 Yes 3,912,404
Credit rating Carrying amount of accounts receivable Weighted- average ECL rate Level A $ 186,203,302 0% Level B 11,907,279 1.208% Level C 3,830,424 100% $ 201,941,005 September 30, 2018			Lifetime ECLs Credit- impaired - No 143,862 No 3,830,424 Yes 3,974,286
Credit rating Carrying amount of accounts receivable Level A $ 191,979,599 Level B 11,240,585 Level C 3,865,313 $ 207,085,497		Weighted- average ECL rate 0% 1.283% 100%	Lifetime ECLs Credit- impaired - No 144,179 No 3,865,313 Yes 4,009,492

• (ii) The loss allowance provision of strategically integrated product segment of the Group was determined as follows:

	September 30, 2019	September 30, 2019
Credit rating Carrying amount of accounts receivable Level A $ 2,751,278 Level B 3,324,903 Level C 650,935 Level D~E - Level F 30,390 $ 6,757,506		Weighted- average ECL rate 0% 0.10% 1.93% - 100%	Lifetime ECLs Credit- impaired - No 3,458 No 12,590 No - - 30,390 Yes 46,438

(Continued)

28

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

	December 31, 2018	December 31, 2018
Credit rating Carrying amount of accounts receivable Weighted- average ECL rate Level A $ 1,550,848 0.01% Level B 3,024,709 0.11% Level C 1,247,546 1.00% Level D~E - - Level F 30,566 100% $ 5,853,669 September 30, 2018			Lifetime ECLs Credit- impaired 82 No 3,194 No 12,475 No - - 30,566 Yes 46,317
Credit rating Carrying amount of accounts receivable Level A $ 1,878,135 Level B 4,147,110 Level C 407,857 Level D~E - Level F 30,492 $ 6,463,594		Weighted- average ECL rate 0% 0.13% 1% - 100%	Lifetime ECLs Credit- impaired - No 5,518 No 4,078 No - - 30,492 Yes 40,088

The aging analysis of notes and accounts receivable were determined as follows:

September 30, 2019 Overdue 1 to 180 days $ 2,511,471 Overdue 181 to 365 days - Overdue 365 days and over - $ 2,511,471	September 30, 2019	December 31, 2018 September 30, 2018 2,919,586 1,578,924 15,809 12,824 25,555 - 2,960,950 1,591,748

The movement in the allowance for notes and accounts receivable was as follows:

Balance at January 1, 2019 and 2018 Impairment losses recognized Amounts written off Effect of changes in exchange rates Balance at September 30, 2019 and 2018	For the nine months ended September 30, 2019 2018 $ 4,020,603 4,021,894 21,046 28,599 (85,918) - 3,111 (913) $ 3,958,842 4,049,580 (Continued)

29

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated 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 Group also takes all the necessary procedures for collection. The Group believes that there is no doubt for the recovery of the due but unimpaired accounts receivable, therefore, no allowance recognized.

The Group entered into accounts receivable factoring agreements with banks. As of September 30, 2019 and December 31 and September 30, 2018, except for the amount used under the actual sales amount in accordance with certain agreements, the factoring amount granted by the banks was USD 950,000 thousand and EUR 59,700 thousand, USD 950,000 thousand and EUR 20,000 thousand, USD 950,000 thousand and EUR 20,000 thousand, respectively. Based on the agreements, the Group is not responsible for guaranteeing the ability of the account receivable obligor to make payment when it is affected by credit risk. Thus, this is a non-recourse accounts receivable factoring. The Group derecognized the above account receivables because it has transferred substantially all of the risks and rewards of their ownership and it does not have any continuing involvement in them. After the transfer of the accounts receivable, the Group can request partial advanced amount, while the interest calculated at an agreed rate is paid to the bank in the period during the time of receiving advance and the accounts receivable is collected. The remaining amounts with no advance are received when the accounts receivable are settled by the customers. As of December 31 and Septmeber 30, 2018, account receivable factored were recovered and derecognized since the conditions of derecognition were met. As of September 30, 2019, the factored account receivable with no advance amounting to $138,081, is 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 September 30, 2019 and December 31 and September 30, 2018, accounts receivable factored were recovered and derecognized since the conditions of derecognition were met.

As of September 30, 2019 and December 31 and September 30, 2018, the details of the factored accounts receivable but unsetttled were as follows:

September 30, 2019

Purchaser Financial Institution	Accounts derecognized $ 21,060,485	Amount advanced Unpaid Paid - 20,922,404 December	Amount recognized in other receivables 138,081 31, 2018	Collateral -	Amount derecognized Interest rate 21,060,485 0.64%~2.62%
		Unpaid -
Purchaser Financial Institution	Accounts derecognized $ 32,098,074	Amount advanced Unpaid Paid - 32,098,074	Amount recognized in other receivables -	Collateral -	Amount derecognized Interest rate 32,098,074 3.02%~3.52%
		Unpaid -

(Continued)

30

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

		September	30, 2018
Purchaser Financial Institution	Accounts derecognized $ 17,296,152	Amount advanced Unpaid Paid - 17,296,152	Amount recognized in other receivables -	Collateral -	Amount derecognized Interest rate 17,296,152 0.80%~2.84%
		Unpaid -

As of September 30, 2019 and December 31 and September 30, 2018, the Group did not provide any aforementioned notes and accounts receivable as collaterals.

(g) Inventories

September 30, 2019 Finished goods $ 38,463,728 Work in progress 12,059,085 Raw materials 58,884,062 Raw materials in transit 1,652,883 $ 111,059,758	September 30, 2019	December 31, 2018 September 30, 2018 33,463,627 41,147,088 6,830,625 8,626,680 38,526,674 51,142,233 327,996 2,023,505 79,148,922 102,939,506

• (i) During the three months and nine months ended September 30, 2019 and 2018, inventory cost recognized as cost of sales amounted to $241,860,510 and $246,019,083 and $688,527,276 and $665,592,534, respectively.

• (ii) The write-down of inventories to net realizable value amounted to $39,257 and $240,244 and $434,877 and $306,860, in the three months and nine months ended September 30, 2019 and 2018, respectively.

• (iii) As of September 30, 2019 and December 31 and September 30, 2018, the Group did not provide any inventories as collaterals for its loans.

• (h) Investments accounted for using equity method

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

is as follows:
		September	December 31,	September
		30, 2019	2018	30, 2018
Associates	$	7,303,000	7,469,153	7,221,721
Joint venture		(13,223)	16,180	19,326
		7,289,777	7,485,333	7,241,047
Plus: credit balance of investment in equity method
(other non-current liability)		40,645	-	-
Less: unrealized profits or losses		(122,014)	(120,848)	(120,122)
	$	7,208,408	7,364,485	7,120,925

(Continued)

31

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(i) Associates

• 1) The fair value of the shares of listed company based on the closing price was as follow:

September 30, 2019 Allied Circuit Co., Ltd. (“Allied Circuit”) $ 1,274,893 Avalue Technology Inc. (“Avalue”) 1,203,966 $ 2,478,859	December 31, 2018 September 30, 2018 1,061,543 1,240,202 586,743 621,795 1,648,286 1,861,997

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

The Group’s share of the gain (loss) of associates	Three months ended September 30, 2019 $ 13,391	Three months ended September 30, 2018 255,598	Nine months ended September 30, 2019 Nine months ended September 30, 2018 21,405 561,417

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

September 30, 2019 Carrying amount of individually immaterial associates $ 7,303,000 Three months ended September 30, 2019 Three months ended September 30, 2018 The Group’s share of the net income (loss) of associates: Profit (loss) from continuing operations$ 13,391 255,598 Other comprehensive income (163,700) (275,191) Total comprehensive income $ (150,309) (19,593)	December 31, 2018 September 30, 2018 7,469,153 7,221,721 Nine months ended September 30, 2019 Nine months ended September 30, 2018 21,405 561,417 (69,001) (282,906) (47,596) 278,511

(Continued)

32

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• 4) In August 2018, the Group has sold all of its shares held in LC Future Center Limited Ltd. (“LCFC”), with consideration (net of costs of disposal) amounting to USD 246,792 thousands. The transaction has been completed and the price has been fully recovered. The Group recognized a gain of $2,511,085 (USD 83,925 thousands), which was accounted for as other gain and loss.

(ii) Joint venture

In April 2010, the Group and another company established a jointly controlled entity, Compal Connector Manufacture Ltd. ("CCM"), and obtained an ownership interest of 51%. CCM’s actual paid-in capital amounted to USD10,000 thousands. Moreover, in May 2014, the Group and another company established a jointly controlled entity, Zheng Ying Electronics (Chongqing) Co., Ltd., ("Zheng Ying"), and obtained an ownership interest of 51%. Zheng Ying’s actual paid-in capital amounted to USD2,500 thousands.

The Group’s financial information for investment accounted for using the equity method that are individually insignificant was as follows:

The carrying amount of the Group’s interests in all individually insignificant joint ventures Three months ended September 30, 2019 The Group’s share of the net income (loss) of joint ventures: Losses from continuing operations (also the total comprehensive losses) $ (15,087)	September 30, 2019 $ (13,223) Three months ended September 30, 2018 (1,711)	December 31, 2018 September 30, 2018 16,180 19,326 Nine months ended September 30, 2019 Nine months ended September 30, 2018 (31,105) (13,294)

(iii) As of September 30, 2019 and December 31 and September 30, 2018, the Group did not provide any investments accounted for using equity method as collaterals for its loans.

(i) Changes in subsidiaries’ equity

There were no significant transactions for the nine months ended September 30, 2019 and 2018. Please refer to note (6)(l) of the consolidated financial statement for the year ended December 2018.

(j)

Loss control of subsidiaries

The Group had sold all of its shares in CMX, at the amount of $218,133, to a third party in August 2019, resulting in its losing control over CMX. The entire amount had been fully received. The gain on disposal amounting to $58,107 was recorded as other gains and losses.

(Continued)

33

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The carrying amounts of assets and liabilities of CMS. were as follows:

Cash and cash equivalents	$	74,638
Other current assets		2,918
Property, plant and equipment		117,625
Notes and accounts payable		(644)
Other payables		(33,716)
Other current liabilities		(966)
Carrying amount of net assets	$	159,855

(k) Material non-controlling interests of subsidiaries

There were no significant transactions for the nine months ended September 30, 2019 and 2018. Please refer to note (6)(m) of the consolidated financial statement for the year ended December 2018.

(l) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group for the nine months ended September 30, 2019 and 2018, were as follows:

Cost: Balance on January 1, 2019 Additions Disposals and derecognitions Reclassifications Effect of movements in exchange rates Balance on September 30, 2019 Balance on January 1, 2018 Additions Disposals and derecognitions Reclassifications Effect of movements in exchange rates Balance on September 30, 2018 Depreciation and impairments loss: Balance on January 1, 2019 Depreciation for the period Disposals and derecognitions Effect of movements in exchange rates Balance on September 30, 2019	Land	Buildings and building improvement	Machinery	Other equipment	Under construction and prepayment for purchase of equipment Total
	$ 1,772,214 - (93,905) - 1,024 $ 1,679,333 $ 1,769,326 - - - 2,313 $ 1,771,639 $ - - - - $ -	17,020,270 317,515 (459,055) 203,959 216,967 17,299,656 15,100,906 1,701,408 (5,128) - 107,167 16,904,353 10,105,653 565,105 (411,928) 159,183 10,418,013	26,201,597 1,221,378 (487,323) 76,064 16,951 27,028,667 23,268,462 2,379,515 (69,124) 95,783 (491,007) 25,183,629 18,441,703 1,873,264 (460,931) (61,872) 19,792,164	10,642,904 1,413,190 (845,369) 66,953 38,956 11,316,634 9,759,017 1,035,240 (926,666) 87,393 (274,086) 9,680,898 7,674,891 1,377,545 (835,207) 130,816 8,348,045	1,003,490 56,640,475 578,029 3,530,112 - (1,885,652) (346,976) - (120,421) 153,477 1,114,122 58,438,412 1,136,868 51,034,579 309,583 5,425,746 - (1,000,918) (183,176) - 198,139 (457,474) 1,461,414 55,001,933 - 36,222,247 - 3,815,914 - (1,708,066) - 228,127 - 38,558,222

(Continued)

34

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Balance on January 1, 2018 Depreciation for the period Disposals and derecognitions Effect of movements in exchange rates Balance on September 30, 2018 Carrying amounts: Balance on January 1, 2019 Balance on September 30, 2019 Balance on January 1, 2018 Balance on September 30, 2018	Land	Buildings and building improvement	Machinery	Other equipment	Under construction and prepayment for purchase of equipment Total
	$ - - - - $ - $ 1,772,214 $ 1,679,333 $ 1,769,326 $ 1,771,639	9,239,452 561,307 (4,140) 153,770 9,950,389 6,914,617 6,881,643 5,861,454 6,953,964	17,548,800 1,663,236 (68,405) (1,123,424) 18,020,207 7,759,894 7,236,503 5,719,662 7,163,422	6,066,960 1,180,991 (923,442) 120,862	- 32,855,212 - 3,405,534 - (995,987) - (848,792) - 34,415,967 1,003,490 20,418,228 1,114,122 19,880,190 1,136,868 18,179,367 1,461,414 20,585,966
				6,445,371
				2,968,013
				2,968,589
				3,692,057
				3,235,527

As of September 30, 2019 and December 31 and September 30, 2018, part of the Group’s property, plant and equipment were provided as collateral for long-term borrowings. Please refer to note (8).

(m) Right-of-use assets

The Group leases many assets including land and buildings, machinery and vehicles. Information about leases for which the Group as a lessee is presented below:

Cost: Balance on January 1, 2019 Adjustment on initial application of IFRS 16 Balance on January 1, 2019 per IFRS 16 Additions Deductions Effect of movements in exchange rates Balance on September 30, 2019 Depreciation and impairment loss: Balance on January 1, 2019 Adjustment on initial application of IFRS 16 Balance on January 1, 2019 per IFRS 16 Depreciation for the period Deductions Effect of movements in exchange rates Balance on September 30, 2019 Carrying amount: Balance on January 1, 2019 Balance on September 30, 2019	Land $ - 891,147 891,147 113,862 - (2,603) $ 1,002,406 $ - - - 24,453 - (176) $ 24,277 $ 891,147 $ 978,129	Buildings - 1,934,899 1,934,899 266,393 (126,259) (29,997) 2,045,036 - - - 540,520 (7,547) (253) 532,720 1,934,899 1,512,316	Machinery - 87,482 87,482 - (9,243) (745) 77,494 - - - 9,946 - (270) 9,676 87,482 67,818	Vehicles and Other Total - - 67,569 2,981,097 67,569 2,981,097 22,537 402,792 (910) (136,412) (506) (33,851) 88,690 3,213,626 - - - - - - 27,674 602,593 - (7,547) (194) (893) 27,480 594,153 67,569 2,981,097 61,210 2,619,473

(Continued)

35

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The Group leases land, offices, warehouses and factory facilities under an operating lease for the nine months ended September 30, 2018, please refer to note (6)(t).

(n) Short-term borrowings

The details of short-term borrowings were as follows:

September 30, 2019 Unsecured bank loans $ 67,790,281 Unused credit line for short-term borrowings $ 102,334,000 Range of interest rates 0.66%~5.05%	December 31, 2018 September 30, 2018 72,350,197 84,959,651 83,720,000 65,720,000 0.45%~5.87% 0.64%~5.00%

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

(o) Long-term borrowings

The details of long-term borrowings were as follows:

September 30, 2019 Unsecured bank loans $ 25,750,000 Secured bank loans 108,281 Less: current portion (16,889,375) Total $ 8,968,906 Unused credit line for long-term borrowings $ 9,570,000 Range of interest rates 0.65%~1.67%	December 31, 2018 September 30, 2018 28,396,250 29,345,000 137,813 167,656 (17,535,625) (18,054,375) 10,998,438 11,458,281 5,443,000 5,603,000 0.79%~1.67% 0.65%~1.71%

For information on the Group's interest risk, foreign currency risk and liquidity risk, please refer to note (6)(ad).

The Group pledges property, plant and equipment as collateral for its partial long-term borrowings. Please refer to note (8).

(p) Unsecured convertible corporate bonds

• (i) The Company’ s subsidiary, Arcadyan, issued the first domestic unsecured convertible corporate bonds on June 6, 2019. The details were as follows:

corporate bonds on June 6, 2019. The details were as follows:
		September
		30, 2019
Total convertible corporate bonds issued	$	1,000,000
Unamortized discounts on corporate bonds payable		(34,570)
		965,430
Unamortized issuance cost of corporate bonds payable		(2,340)
Balance of corporate bonds payable as of September 30, 2019	$	963,090

(Continued)

36

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

				September
				30, 2019
Equity options includeed in equity component (classified as capital		surplus and non-
controlling interests)			$	48,667
	For the three		For the nine
		months		months
		ended		ended
		September	September
		30, 2019		30, 2019
Interest expenses	$	3,389		4,517

The effective interest rate of the first issued convertible corporate bonds was 1.3284%.

• (ii) The main terms of issuing the above-mentioned convertible corporate bonds were as follows:

• 1) Coupon rate: 0%

• 2) Duration: three years (June 6, 2019~June 6, 2022)

• 3) Repayment:

Put option and call option are excluded from the issuance of convertible corporate bonds. Except that the bondholders convert the bonds to Arcadyan’ s common shares, or the bonds are repurchased and cancelled by Arcadyan from the securities firm’s business office, the bonds will be repaid in cash at par value when the bonds expired.

• 4) Terms of conversion:

• a) The bondholder may opt to have its bonds converted into the Arcadyan’s common shares, with the approval of Taiwan Depository & Clearing Corporation through securities firms, at any time between three months after the issuance date (September 7, 2019) and the day before the maturity day (June 6, 2022), except for the following:

  • The closing period in accordance with the applicable law;

  • The period starting from the first day of the first fifteen working days prior to the date of record for determination wherein the shareholders are entitled to receive the distributions or rights to subscribe for new shares in a capital increase for cash, and ends on the date of record for the distribution of the rights/benefits;

  • The period starts from the date of record of the capital decrease and ends on the date prior to the trading of the reissuance shares after the capital decrease.

• b) Conversion price is determined as NT$98.3 per share upon issuance. The cash dividends which Arcadyan paid at August 10, 2019 exceeded 1.5% of current price per share; therefore, the conversion price had been adjusted to NT$94.7 per share.

(Continued)

37

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(q) Lease liabilities

The details of lease liabilities were as follows:

The details of lease liabilities were as follows:
Current Non-current	September 30, 2019
	$ 632,012 $ 990,136

For the maturity analysis, please refer to note (6)(ad).

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Variable lease payments not included in the measurement of lease liabilities Expenses relating to leases of low-value assets or short-term leases	For the three months ended September 30, 2019 For the nine months ended September 30, 2019
	$ 11,093 33,793 $ 1,413 1,478 $ 51,854 86,320

The amounts recognized in the statement of cash flows for the Group was as follows:

Total cash outflow for leases	For the nine months ended September 30, 2019
	$ 706,061

(i) Real estate leases

The Group leases land leasehold rights, leases buildings for its office and plant space. The leases of office space typically run for a period of 1 ~19 years, and of land leasehold rights for 50 years.

(ii) Other leases

The Group leases vehicles and equipment, with lease terms of 1~5 years.

The Group also leases equipment and vehicles with contract terms of 1~3 years. These leases are short-term or leases of low-value items. The Group has elected not to recognize right-ofuse assets and lease liabilities for these leases.

(Continued)

38

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(r) Provisions

There were no significant changes of provisions for the nine months ended September 30, 2019 and 2018. Please refer to note (6)(q) of the consolidated financial statements for the year ended December 31, 2018 for related information.

(s) Refund liabilities

There were no significant changes of refund liabilities for the nine months ended September 30, 2019 and 2018. Please refer to note (6)(r) of the consolidated financial statements for the year ended December 31, 2018 for related information.

(t) Operating lease

There were no significant new lease contracts during the nine months ended September 30, 2019 and 2018. Please refer to note (6)(s) of the consolidated financial statements for the year ended December 31, 2018 for related information.

(u) Employee benefits

(i) Defined benefit plans

Management believes that there was no material volatility of the market, no material reimbursement and settlement or other material one-time events since prior fiscal year. As a result, the pension cost in the accompanying interim period was measured and disclosed according to the actuarial report as of December 31, 2018 and 2017.

The expenses recognized in profit or loss for the Group were as follows:

Operating cost Selling expenses Administrative expenses Research and development expenses Total	For the three months ended September 30, 2019 2018 $ 282 318 213 252 943 974 2,574 2,796 $ 4,012 4,340	For the nine months ended September 30, 2019 2018 847 993 636 785 2,799 2,946 7,751 8,388 12,033 13,112
	2019 $ 282 213 943 2,574 $ 4,012

(ii) Defined contribution plans

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

(Continued)

39

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The Company and all subsidiaries in domestic recognized the pension costs under the defined contribution method amounting to $97,284 and $98,052 for the three months ended September 30, 2019 and 2018, respectively, and $301,133 and $284,033 for the nine months ended September 30, 2019 and 2018, respectively. Payment was made to the Bureau of Labor Insurance.

Other subsidiaries recognized the pension expenses, basic endowment insurance expenses, and social welfare expenses amounting to $359,230 and $348,274 for the three months ended September 30, 2019 and 2018, respectively, and $982,439 and $1,000,758 for the nine months ended September 30, 2019 and 2018, respectively.

(v) Income taxes

• (i) The Group entities are subject to income tax rates according to the profit before tax of interim reporting period multiply by the best estimated measurement of the expected effective tax rate by the management in all the year. The amount of income tax was as follows:

Current tax expense	Three months ended September 30, 2019 $ 463,198	Three months ended September 30, 2018 514,537	Nine months ended September 30, 2019 Nine months ended September 30, 2018 1,503,446 1,494,285

• (ii) The amount of income tax recognized in other comprehensive income were as follows:

Items that will not be reclassified subsequently to profit or loss: Remeasurement of the defined benefit liability Unrealized gains (losses) on equity instruments at fair value through other comprehensive income	Three months ended September 30, 2019 $ - 3,722 $ 3,722	Three months ended September 30, 2018 - 10,337 10,337	Nine months ended September 30, 2019 Nine months ended September 30, 2018 - (29,949) 23,222 (24,295) 23,222 (54,244)

(Continued)

40

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Items that will be reclassified subsequently to profit or loss: Foreign currency translation differences of foreign operations	Three months ended September 30, 2019 $ (2,158)	Three months ended September 30, 2018 212	Nine months ended September 30, 2019 Nine months ended September 30, 2018 541 4,354

(iii) Examination and approval

The R.O.C tax authorities have assessed the Company’s income tax returns through 2017. 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.

The ROC tax authorities have assessed the income tax returns of Panpal, Gempal, Hong Ji, Hong Jin, Zhaopal, Yongpal, Palcom, Kaipal, Acbel Telecom, Ripal, Zhipal, Rayonnant Technology, UCGI, Mactech, RBL, CBN, Unicore, Raycore, TTI and GLB through 2017, of HengHao through 2016, of Arcadyan through 2017 except for 2016, and of ATK through June 2009.

(w) Capital and other equities

Except for the following disclosure, there was no significant change for capital and other equity for the periods from January 1 to September 30, 2019 and 2018. Please refer to note (6)(v) of the consolidated financial statement for the year ended December 31, 2018.

(i) Capital surplus

The balances of capital surplus were as follows:

September 30, 2019 Additional paid-in capital $ 6,302,490 Treasury share transactions 2,481,885 Difference arising from subsidiary's share price and its carrying value 36,766 Recognition of changes in ownership interests in subsidiaries 33,788 Changes in equity of associates and joint ventures accounted for using equity method 278,521 $ 9,133,450	September 30, 2019	December 31, 2018 September 30, 2018 7,183,919 7,183,919 2,421,864 2,421,864 36,766 36,766 15,642 48,476 274,243 274,243 9,932,434 9,965,268

(Continued)

41

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The Company’s shareholders’ meeting held on June 21, 2019 and June 22, 2018, approved to distribute the cash dividend of $881,429 (representing 0.2 New Taiwan Dollars per share), by using the additional paid-in-capital.

(ii) Retained earnings

Based on the Company’s articles of incorporation amended on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The Board of Directors may set aside a certain amount to cope with the business operation conditions, and shall prepare the proposal for distribution of the balance amount thereof after a resolution has been adopted and then allocated by the Board of Directors. The Company authorizes the Board of Directors to distribute all or part of the dividends and bonuses, capital surplus or legal reserve in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the General shareholders’ meeting.

Based on the Company’s articles of incorporation before revised on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The earnings appropriation proposal to distribute dividend and bonus shall be proposed by the Board of Directors and approved by the General Shareholders Meeting. The rest of the unappropriated retained earnings shall be reserved.

The lifecycle of the industry of the Company is in the growing stage. To consider the need of the Company for the future capital, capital budget, long-term financial planning, domestic and foreign competition, the need of shareholders for cash flow and other factors, if there is any profit after close of books, the dividend and bonus to be distributed to shareholder shall not be less than thirty percent of profit after tax for such year and the cash dividend allocated by the Company each year shall not be lower than ten percent of the total dividend (including cash and share dividend) for such year.

According to the law, when there is a deduction from stockholders' equity (excluding treasury stock and unearned employee benefit) during the year, an amount equal to the deduction item is set aside as a special reserve before the earnings are appropriated. A special reserve is made available for earning distribution only after the deduction of the related shareholders’ equity has been reversed.

(Continued)

42

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Distribution for the earnings of 2018 and 2017 was approved by the shareholders during their annual meetings held on June 21, 2019 and June 22, 2018, respectively. The relevant information was as follows:

Cash dividends distributed to common shareholders	2018 Amount per share Total amount $ 1.0 4,407,147	2017 Amount per share Total amount 1.0 4,407,147
	Amount per share $ 1.0

• (iii) Treasury stock

The subsidiaries of the Company did not sell the ordinary shares of the Company in the nine months ended September 30, 2019 and 2018. As of September 30, 2019, 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 17.90, 17.45 and 18.95 New Taiwan dollars per share as of September 30, 2019 and December 31 and September 30, 2018, 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.

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

Balance on January 1, 2019 The Group Associates Balance on September 30, 2019 Balance on January 1, 2018 Effect of retrospective application Adjusted balance on January 1, 2018 The Company Associates Balance on September 30, 2018	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
	$ (1,852,952) 553,627 (156,234) $ (1,455,559) $ (3,477,376) - (3,477,376) 1,398,193 (222,328) $ (2,301,511)	(5,606,436) 3,517,510 86,782 (2,002,144) - (5,847,823) (5,847,823) 743,074 (59,479) (5,164,228)	- - - - (5,353,772) 5,353,772 - - - -	- (7,459,388) - 4,071,137 - (69,452) - (3,457,703) (79,856) (8,911,004) - (494,051) (79,856) (9,405,055) 79,204 2,220,471 - (281,807) (652) (7,466,391)

(Continued)

43

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(x) Share-based payment

Except for those described below, there were no significant changes in share-based payment during the nine months ended September 30, 2019 and 2018. Please refer to note (6)(w) of the consolidated financial statements for the year ended December 31, 2018 for related information.

For the nine months ended September 30, 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.

(y) Earnings per share

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

Basic earnings per share: Profit attributable to ordinary shareholders of the Company Weighted-average number of outstanding ordinary shares (in thousands) Diluted earnings per share: 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)	Three months ended September 30, 2019 $ 1,800,061 4,357,130 $ 1,800,061 4,357,130 28,990 - 4,386,120	Three months ended September 30, 2018 3,733,179 4,357,130 3,733,179 4,357,130 38,959 - 4,396,089	Nine months ended September 30, 2019 Nine months ended September 30, 2018 4,941,697 7,218,776 4,357,130 4,356,221 4,941,697 7,218,776 4,357,130 4,356,221 43,740 50,734 - 909 4,400,870 4,407,864

(Continued)

44

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• (z) Revenue from contracts with customers

• (i) Disaggregation of revenue

Primary geographical markets: United states China Netherlands United Kingdom India Germany Others Major products: 5C related electronic products Others Primary geographical markets: United states China Netherlands United Kingdom Germany India Others Major products: 5C related electronic products Others	For the three months ended September 30, 2019	For the three months ended September 30, 2019
	IT Product Segment Strategically Integrated Product Segment Total $ 97,232,428 389,780 97,622,208 28,504,046 86,423 28,590,469 22,334,655 356,228 22,690,883 10,670,648 1,102,025 11,772,673 11,258,883 30,583 11,289,466 8,014,511 2,334,589 10,349,100 64,200,886 3,407,712 67,608,598 $ 242,216,057 7,707,340 249,923,397 $ 241,723,723 7,638,680 249,362,403 492,334 68,660 560,994 $ 242,216,057 7,707,340 249,923,397 For the three months ended September 30, 2018
		Strategically Integrated Product Segment Total 424,053 94,247,807 121,892 32,656,871 483,474 27,393,195 392,801 11,623,354 1,718,314 9,610,789 80,020 10,064,831 3,536,168 67,811,617 6,756,722 253,408,464 6,706,008 252,959,362 50,714 449,102 6,756,722 253,408,464

(Continued)

45

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

For the nine months ended September 30, 2019

Primary geographical markets: United states China Netherlands India United Kingdom Germany Others Major products: 5C related electronic products Others	IT Product Segment $ 266,959,430 75,518,027 71,879,503 34,808,411 31,556,995 20,733,948 186,294,731 $ 687,751,045 $ 686,072,676 1,678,369 $ 687,751,045	Strategically Integrated Product Segment Total 958,806 267,918,236 297,675 75,815,702 884,289 72,763,792 512,217 35,320,628 2,695,509 34,252,504 8,398,382 29,132,330 11,421,098 197,715,829 25,167,976 712,919,021 24,864,608 710,937,284 303,368 1,981,737 25,167,976 712,919,021

Primary geographical markets: United states China Netherlands United Kingdom Germany India Others Major products: 5C related electronic products Others	For the nine months ended September 30, 2018	For the nine months ended September 30, 2018
	IT Product Segment $ 253,388,072 87,973,655 78,701,218 29,519,080 21,263,828 21,187,967 176,738,482 $ 668,772,302 $ 667,081,872 1,690,430 $ 668,772,302	Strategically Integrated Product Segment Total 1,348,173 254,736,245 318,252 88,291,907 834,632 79,535,850 1,196,964 30,716,044 5,220,070 26,483,898 141,280 21,329,247 9,572,717 186,311,199 18,632,088 687,404,390 18,278,212 685,360,084 353,876 2,044,306 18,632,088 687,404,390

(Continued)

46

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) Contract balances

September 30, 2019 Notes and accounts receivable (including related parties) $ 208,715,197 Less: allowance for impairment (3,958,842) Total $ 204,756,355 Contract liabilities $ 1,234,894	December 31, 2018 September 30, 2018 207,794,674 213,549,091 (4,020,603) (4,049,580) 203,774,071 209,499,511 1,476,304 1,480,288

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

The amount of revenue recognized for the three months and nine months ended September 30, 2019 and 2018 that were included in the balance of contract liability at the beginning of the period was $318,102 and $438,570 and $1,057,580 and $1,212,987, respectively.

The major change in the balance of contract assets and contract liabilities is the difference of the time frame between the performance of obligation to be satisfied and the payment to be received.

(aa) Employees’ and directors’ compensations

Based on the Company’ s articles of incorporation, if there is any profit in a fiscal year, the Company’s pre-tax profits in such fiscal year, prior to deduction of compensations to employees and directors, shall be distributed to employees as compensations in an amount of not less than two percent (2%) thereof and to directors as compensations in an amount of not more than two percent (2%) of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset accumulated losses. The compensations to employees as mentioned above may be distributed in the form of stock or cash. Employees entitled to receive the said stock or cash may include the employees of the Company’s subordinate companies pursuant to the Company Act (Employees entitled to receive the said stock or cash may include the employees of the Company’ s subordinate companies who meet certain conditions after the Company’ s articles of incorporation amended on June 21, 2019).

The Company accrued and recognized its employee compensation of $184,938 and $368,033 for the three months ended September 30, 2019 and 2018, respectively, $518,917 and $738,279 for the nine months September 30, 2019 and 2018, respectively, and directors’ compensation of $9,780 and $19,461 for the three months ended September 30, 2019 and 2018, respectively, and $27,440 and $39,039 for the nine months ended September 30, 2019 and 2018, 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.

(Continued)

47

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The Company accrued and recognized its employee compensation of $930,857 and $624,296, and directors’ compensation of $49,223 and $33,012 for the years ended December 31, 2018 and 2017, respectively. There is no differences between the amount approved in the Board of Directors’ meeting and those recognized in the financial statements, the related information can be accessed through the Market Observation Post System website.

• (ab) Non-operating income and expenses

(i) Other income

The other income for the nine months ended September 30, 2019 and 2018, were as follows:

Interest income Financial assets at amortized cost Bank deposits and others Dividend revenue Other revenue	Three months ended September 30, 2019 $ - 443,476 10,469 91,598 $ 545,543	Three months ended September 30, 2018 1,764 356,142 13,383 119,445 490,734	Nine months ended September 30, 2019 Nine months ended September 30, 2018 4,229 8,227 1,288,253 978,216 127,349 279,044 195,724 297,291 1,615,555 1,562,778

(ii) Other gains and losses

The other gains and losses for the nine months ended September 30, 2019 and 2018, were as follows:

Gains on disposal of investments Gains (losses) on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange losses, net Gains (losses) on disposal of property, plant, and equipment, net	Three months ended September 30, 2019 $ 58,107 333,234 (196,038) 3,891 $ 199,194	Three months ended September 30, 2018 2,511,085 75,835 (152,773) 5,841 2,439,988	Nine months ended September 30, 2019 Nine months ended September 30, 2018 58,107 2,511,085 468,456 710,527 (273,029) (957,528) 37,416 23,645 290,950 2,287,729

(Continued)

48

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• (ac) Reclassification of the components of other comprehensive income

The details of reclassification of the components of other comprehensive income for the nine months ended September 30, 2019 and 2018, were as follows:

Cash flow hedge: Gains (losses) from current period Less: reclassification of gains and losses included in profit or loss Profit (loss) recognized in other comprehensive income	Three months ended September 30, 2019 $ - - $ -	Three months ended September 30, 2018 (21,247) (10,717) (10,530)	Nine months ended September 30, 2019 Nine months ended September 30, 2018 (21,778) 1,968 (21,778) 3,776 - (1,808)

• (ad) Financial instruments

Except for those described below, there were no significant changes on fair value, credit risk, liquidity risk and market risk of financial instruments. Please refer to note (6)(ad) of the consolidated financial statements for the year ended December 31, 2018 for related information.

(i) Credit risk

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

Other financial assets at amortized cost include other receivables, investments in corporate bonds and time deposits. These financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. (Regarding how the financial instruments are considered to have low credit risk, please refer to note (4)(g) of the consolidated financial statements for the year ended December 31, 2018.) Due to the counter parties and the performing parties of the Group’s time deposits are financial institutions with investment grade and above, these time deposits are considered to have low credit risk.

(Continued)

49

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The movements in the allowance for the nine months ended September 30, 2019 and 2018 were as follows:

Balance on January 1, 2019 Impairment losses reversed Balance on September 30, 2019 Balance on January 1, 2018 Impairment losses reversed The write-off amount which was not be recovered in the period Effect of changes in exchange rates Balance on September 30, 2018	Other receivables $ 3,577 (1,163) $ 2,414 $ 82,014 (17,869) (62,071) (2) $ 2,072

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, excluding estimated interest payments.

Carrying Amount September 30, 2019 Non-derivative financial liabilities Secured borrowings $ 108,281 Unsecured borrowings 93,540,281 Lease liabilities－current and non-current 1,622,148 Notes and accounts payable 174,946,240 Other payables 16,438,653 Bonds payable 963,090 Derivative financial liabilities Forward exchange contracts: 950 Outflow Inflow $ 287,619,643 December 31, 2018 Non-derivative financial liabilities Secured borrowings $ 137,813 Unsecured borrowings 100,746,447 Notes and accounts payable 154,276,713 Other payables 14,790,757 Derivative financial liabilities Forward exchange contracts: 26,913 Outflow Inflow $ 269,978,643	Contractual cash flows (108,281) (93,540,281) (1,729,858) (174,946,240) (16,438,653) (1,000,000) (110,516) 108,727 (287,765,102) (137,813) (100,746,447) (154,276,713) (14,790,757) (5,016,249) 4,978,708 (269,989,271)	Within 1 year (39,375) (84,640,281) (670,225) (174,946,240) (16,438,653) - (110,516) 108,727 (276,736,563) (39,375) (89,846,447) (154,276,713) (14,790,757) (5,016,249) 4,978,708 (258,990,833)	1~ 2 years Over 2 years (39,375) (29,531) (2,900,000) (6,000,000) (423,295) (636,338) - - - - - (1,000,000) - - - - (3,362,670) (7,665,869) (39,375) (59,063) (8,600,000) (2,300,000) - - - - - - - - (8,639,375) (2,359,063)

(Continued)

50

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Carrying Amount September 30, 2018 Non-derivative financial liabilities Secured borrowings $ 167,656 Unsecured borrowings 114,304,651 Notes and accounts payable 170,568,096 Other payables 19,810,990 Derivative financial liabilities Forward exchange contracts: 11,546 Outflow Inflow Forward exchange for hedging: 1,808 Outflow Inflow $ 304,864,747	Contractual cash flows (167,656) (114,304,651) (170,568,096) (19,810,990) (5,352,091) 5,316,058 (53,631) 51,562 (304,889,495)	Within 1 year (59,375) (102,954,651) (170,568,096) (19,810,990) (5,352,091) 5,316,058 (53,631) 51,562 (293,431,214)	1~ 2 years Over 2 years (39,375) (68,906) (8,150,000) (3,200,000) - - - - - - - - - - - - (8,189,375) (3,268,906)

The Group is not expecting that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

• (iii) Currency risk

• 1) Exposure to foreign currency risk

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

Financial assets Monetary items USD to TWD USD to CNY EUR to TWD CNY to USD Non-monetary items THB to TWD Financial liabilities Monetary items USD to TWD USD to CNY USD to BRL EUR to TWD CNY to USD	September 30, 20	September 30, 20	19		De	cember 31, 20	18 TWD 220,832,219 122,430 3,357,974 7,722,286 400,184 219,475,660 167,427 4,323,812 1,097,747 12,424,542	September 30, 2018 Foreign currency Exchange rate TWD 7,470,862 30.525 228,048,063 3,986 6.8827 121,673 107,522 35.48 3,814,881 1,920,161 0.1453 8,516,456 479,312 0.9449 452,902 7,711,210 30.525 235,384,685 6,496 6.8827 198,290 144,969 4.0039 4,425,179 27,705 35.48 982,973 2,556,108 0.1453 11,337,061	September 30, 2018 Foreign currency Exchange rate TWD 7,470,862 30.525 228,048,063 3,986 6.8827 121,673 107,522 35.48 3,814,881 1,920,161 0.1453 8,516,456 479,312 0.9449 452,902 7,711,210 30.525 235,384,685 6,496 6.8827 198,290 144,969 4.0039 4,425,179 27,705 35.48 982,973 2,556,108 0.1453 11,337,061
	Foreign currency $ 8,575,289 11,010 113,289 2,288,920 406,394 8,324,505 6,266 144,411 43,000 2,535,574	Exchange rate 31.02 7.1217 33.87 0.1404 1.0142 31.02 7.1217 3.8322 33.87 0.1404	TWD		Foreign Currency 7,189,719 3,986 95,397 1,726,768 423,027 7,145,553 5,451 140,772 31,186 2,778,232	Exchange rate 30.715 6.8672 35.20 0.1456 0.9460 30.715 6.8672 3.8720 35.20 0.1456			Exchange rate TWD 30.525 228,048,063 6.8827 121,673 35.48 3,814,881 0.1453 8,516,456 0.9449 452,902 30.525 235,384,685 6.8827 198,290 4.0039 4,425,179 35.48 982,973 0.1453 11,337,061
			266,005,465 341,530 3,837,098 9,968,723 412,165 258,226,145 194,371 4,479,629 1,456,410 11,042,952

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, loans and borrowings, accounts payable, and other payables that are denominated in foreign currency. Assuming all other variable factors remain constant, a strengthening (weakening) 5% of appreciation (depreciation) of the each major foreign currency against Group entities’ functional currency as of September 30, 2019 and 2018, would have increased (decreased) the net profit before tax as follows. The analysis is performed on the same basis for both periods.

(Continued)

51

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

		September 30,	September 30,
		2019	2018
USD (against the TWD)
Strengthening 5%	$	388,966	(366,831)
Weakening 5%		(388,966)	366,831
USD (against the CNY)
Strengthening 5%		7,358	(3,831)
Weakening 5%		(7,358)	3,831
USD (against the BRL)
Strengthening 5%		(223,981)	(221,259)
Weakening 5%		223,981	221,259
EUR (against the TWD)
Strengthening 5%		119,034	141,595
Weakening 5%		(119,034)	(141,595)
CNY (against the USD)
Strengthening 5%		(53,711)	(141,030)
Weakening 5%		53,711	141,030

3) Exchange gains and losses of monetary items

As the Group deals with diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the three months and nine months ended September 30, 2019 and 2018, the foreign exchange losses, including both realized and unrealized, amounted to $196,038 and $152,773 and $273,029 and $957,528, respectively.

(iv) Interest rate analysis

The interest risk exposure from financial assets and liabilities has been disclosed in the note of liquidity risk management.

The following sensitivity analysis is based on the risk exposure to interest rate on the derivative and non-derivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25%, when reporting to management internally, which also represents the assessment of the Group’s management for the reasonably possible interval of interest rate change.

(Continued)

52

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

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 nine months ended September 30, 2019 and 2018, 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%	Nine months ended September 30, 2019 Nine months ended September 30, 2018 $ (11,503) (3,776) 11,503 3,776

• (v) Fair value information

• 1) The categories and fair value of financial instruments

The Group’s financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income were measured at fair value on a recurring basis. The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It shall not include fair value information of the financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value and investments in equity instruments which do not have any quoted price in an active market in which the fair value cannot be reasonably measured.

Book value Financial assets at fair value through profit or loss–current and non-current Derivative financial assets for non-hedging $ 182,502 Non-derivative financial assets mandatorily measured at fair value through profit or loss 3,777,050 Subtotal 3,959,552 Financial assets at fair value through other comprehensive income Stocks listed on domestic markets 1,882,874 Stocks listed on foreign markets 412,165 Stocks unlisted on domestic markets 2,158,100 Stocks unlisted on foreign markets 184,206 Accounts receivable 39,127,120 Subtotal 43,764,465				September 30, 2019	September 30, 2019	September 30, 2019
	Book value				Fair Value
				Level 1 - - 1,882,874 412,165 - - -	Level 2 182,502 3,656,014 - - - - 39,127,120	Level 3 Total - 182,502 121,036 3,777,050 - 1,882,874 - 412,165 2,158,100 2,158,100 184,206 184,206 - 39,127,120
		3,959,552
		1,882,874 412,165 2,158,100 184,206 39,127,120
		43,764,465

(Continued)

53

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net Notes and accounts receivable due from related parties, net Other receivables Refundable deposits Subtotal Total Financial liabilities at fair value through profit or loss Derivative financial liabilities for non- hedging Financial liabilities measured at amortized cost Short-term borrowings Notes and accounts payable Notes and accounts payable to related parties Other payables Bonds payable Lease liabilities－current and non-current Long-term borrowings current portion Long-term borrowings Deposits received Subtotal Total				September 30, 2019	September 30, 2019	September 30, 2019
		Book value			Fair Value
				Level 1 - - - - - - - - - - - - - - -	Level 2 - - - - - 950 - - - - - - - - -	Level 3 Total - - - - - - - - - - - 950 - - - - - - - - - - - - - - - - - -
	55,444,483 165,524,781 104,454 1,799,346 468,686 223,341,750 $ 271,065,767 $ 950 67,790,281 173,419,466 1,526,774 16,438,653 963,090 1,622,148 16,889,375 8,968,906 157,692 287,776,385 $ 287,777,335	55,444,483 165,524,781 104,454 1,799,346 468,686
		223,341,750

Book value Financial assets at fair value through profit or loss–current and non-current Derivative financial assets for non-hedging $ 12,213 Non-derivative financial assets mandatorily measured at fair value through profit or loss 4,668,311 Subtotal 4,680,524				December 31, 2018	December 31, 2018	December 31, 2018
	Book value				Fair Value
				Level 1 - 633,859	Level 2 12,213 3,965,062	Level 3 Total - 12,213 69,390 4,668,311
		4,680,524

(Continued)

54

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Financial assets at fair value through other comprehensive income Stocks listed on domestic markets Stocks listed on foreign markets Stocks unlisted on domestic markets Stocks unlisted on foreign markets Accounts receivable Subtotal Financial assets measured at amortized cost Cash and cash equivalents Corporate bonds－current Notes and accounts receivable, net Notes and accounts receivable due from related parties, net Other receivables Refundable deposits Subtotal Total Financial liabilities at fair value through profit or loss Derivative financial liabilities for non- hedging Financial liabilities measured at amortized cost Short-term borrowings Notes and accounts payable Notes and accounts payable to related parties Other payables Long-term borrowings current portion Long-term borrowings Deposits received Subtotal Total				December 31, 2018	December 31, 2018	December 31, 2018
		Book value			Fair Value
				Level 1 2,730,648 400,184 - - - - - - - - - - - - - - - - -	Level 2 - - - - 23,020,497 - - - - - - 26,913 - - - - - - -	Level 3 Total - 2,730,648 - 400,184 1,990,100 1,990,100 51,363 51,363 - 23,020,497 - - - - - - - - - - - - - 26,913 - - - - - - - - - - - - - -
	2,730,648 400,184 1,990,100 51,363 23,020,497 28,192,792 70,296,545 350,000 180,695,468 58,106 1,665,249 401,753 253,467,121 $ 286,340,437 $ 26,913 72,350,197 152,300,093 1,976,620 14,790,757 17,535,625 10,998,438 209,354 270,161,084 $ 270,187,997	2,730,648 400,184 1,990,100 51,363 23,020,497
		28,192,792
		70,296,545 350,000 180,695,468 58,106 1,665,249 401,753
		253,467,121

(Continued)

55

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Book value Financial assets at fair value through profit or loss－current and non-current Derivative financial asset for non-hedging $ 19,828 Non-derivative financial assets mandatorily measured at fair value through profit or loss 3,918,639 Subtotal 3,938,467 Financial assets at fair value through other comprehensive income Stocks listed on domestic markets 2,940,697 Stocks listed on foreign markets 452,902 Stocks unlisted on domestic markets 2,161,304 Stocks unlisted on foreign markets 31,020 Accounts receivable 37,183,987 Subtotal 42,769,910 Financial assets measured at amortized cost Cash and cash equivalents 72,064,833 Corporate bonds–current 350,000 Notes and accounts receivable, net 172,290,799 Notes and accounts receivable due from related parties, net 24,725 Other receivables 2,021,133 Refundable deposits 304,511 Subtotal 247,056,001 Total $ 293,764,378 Financial liabilities at fair value through profit or loss Derivative financial liabilities for non- hedging $ 11,546 Derivative financial liabilities for hedging 1,808				September 30, 2018 Fair Value	September 30, 2018 Fair Value	September 30, 2018 Fair Value
	Book value
				Level 1 - 872,516 2,940,697 452,902 - - - - - - - - - - -	Level 2 19,828 3,000,958 - - - - 37,183,987 - - - - - - 11,546 1,808	Level 3 Total - 19,828 45,165 3,918,639 - 2,940,697 - 452,902 2,161,304 2,161,304 31,020 31,020 - 37,183,987 - - - - - - - - - - - - - 11,546 - 1,808
		1,808

(Continued)

56

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Financial liabilities measured at amortized cost Short-term borrowings Notes and accounts payable Notes and accounts payable to related parties Other payables Long-term borrowings current portion Long-term borrowings Deposits received Subtotal Total				September 30, 2018 Fair Value	September 30, 2018 Fair Value	September 30, 2018 Fair Value
		Book value
				Level 1 - - - - - - -	Level 2 - - - - - - -	Level 3 Total - - - - - - - - - - - - - -
	84,959,651 168,876,386 1,691,710 19,810,990 18,054,375 11,458,281 171,248 305,022,641 $ 305,035,995	84,959,651 168,876,386 1,691,710 19,810,990 18,054,375 11,458,281 171,248
		305,022,641

• 2) Fair value valuation technique of financial instruments not measured at fair value

The Group estimates financial instruments that not measured at fair value by methods and assumption as follows:

• a) Financial liabilities measured at amortized cost

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

• 3) Fair value valuation technique of financial instruments measured at fair value

• a) Non-derivative financial instruments

Financial instruments trade in active markets is based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-therun 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.

(Continued)

57

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The fair value of the listed company is determined by reference to the market quotation.

The measurements on fair value of the financial instruments without an active market are determined using the valuation technique or the quoted market price of its competitors. Fair value measured using the valuation technique can be extrapolated from similar financial instruments, discounted cash flow method, or other valuation techniques which include the model used in calculating the observable market data at the consolidated balance sheet date.

The measurement of fair value of a non-active market financial instruments held by the Group which do not have quoted market prices are based on the comparable market approach, with the use of key assumptions of price-book ratio multiple or earnings multiple of comparable listed companies as its basic measurement. These assumptions have been adjusted for the effect of discount without the marketability of the equity securities.

b) Derivative financial instruments

Measurement of the fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate.

4) Transfer from one level to another

There was no transfer from one level to another in the nine months ended September 30, 2019 and 2018.

5) Changes in level 3

The change in level 3 at fair value in the nine months ended September 30, 2019 and 2018, were as follow:

Balance on January 1, 2019 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment Effect of changes in exchange rates Balance on September 30, 2019	Financial assets at fair value through profit or loss $ 69,390 (3,950) - 55,596 - - - $ 121,036	Financial assets at fair value through other comprehensive income Total 2,041,463 2,110,853 - (3,950) 100,525 100,525 208,666 264,262 (791) (791) (7,377) (7,377) (180) (180) 2,342,306 2,463,342

(Continued)

58

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Balance on January 1, 2018 Effects of retrospective application Adjusted balance on January 1, 2018 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Proceeds of capital reduction of investment Balance on September 30, 2018	Financial assets at fair value through profit or loss $ - 48,709 48,709 (3,544) - - - $ 45,165	Financial assets at fair value through other comprehensive income Total 2,421,909 2,421,909 5,273 53,982 2,427,182 2,475,891 - (3,544) (330,710) (330,710) 107,877 107,877 (12,025) (12,025) 2,192,324 2,237,489

For the nine months ended September 30, 2019 and 2018, total gains and losses that were included in “other gains and losses, net” and “other comprehensive income, before tax, equity instruments at fair value through other comprehensive income” were as follows:

Total gains and losses recognized: In profit or loss before tax (as “other gains and losses, net”) In other comprehensive income (as “other comprehensive income, before tax, equity instruments at fair value through other comprehensive income”)	Nine months ended September 30, 2019 Nine months ended September 30, 2018
	$ (3,950) (3,544) $ 99,734 (330,710)

• 6) The quantified information for significant unobservable inputs (level 3) used in fair value measurement

The Group’s financial instruments that use level 3 input to measure fair values include － financial assets at fair value through other comprehensive income equity instruments, － financial assets at fair value through profit or loss equity securities investment.

Most of fair value measurements of the Group which are categorized as equity investment into level 3 have several significant unobservable inputs. Significant unobservable inputs of equity investments without quoted price are independent of each other.

(Continued)

59

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

The quantified information for significant unobservable inputs was as follows:

Inter-relationships between significant unobservable inputs and fair value

Valuation Significant unobservable inputs Item technique unobservable inputs and fair value Financial assets at fair Comparable Price-Book ratio The higher the value through other market approach multiples (1.50~5.74, multiple is, the comprehensive (Price-Book ratio 1.33~5.86 and higher the fair value － income equity method and 1.23~9.31 will be. investment without an Earnings respectively, on active market multiplier September 30, 2019 method) and December 31, and September 30, 2018) Multiples of earnings The higher the (3.02~14.95, multiple is, the 2.32~14.97 and 20.86, higher the fair value respectively, on will be. September 30, 2019 and December 31 and September 30, 2018) Lack-of-Marketability The higher the Lackdiscount rate of-Marketability (35%~82%, discount rate is, the 40%~82% and lower the fair value 40%~85% will be. respectively, on September 30, 2019 and December 31, and September 30, 2018) Financial assets at fair Net asset value Net asset value Inapplicable value through other method comprehensive income Financial assets at fair Net asset value Net asset value Inapplicable value through profit method or loss – investment in private equity fund

• 7) Sensitivity analysis for fair value of financial instruments using level 3 inputs

The Group’s fair value measurement on financial instruments is reasonable. However, the measurement would be different if different valuation models or valuation parameters are used. For financial instruments using level 3 inputs, if the valuation parameters changed, the impact on other comprehensive income or loss are as follows:

(Continued)

60

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

September 30, 2019 Financial assets at fair value through other comprehensive income December 31, 2018 Financial assets at fair value through other comprehensive income September 30, 2018 Financial assets at fair value through other comprehensive income	Input Move up or down Price-Book ratio multiples 5% Multiples of earnings 5% Lack-of-Marketability discount rate 5% Price-Book ratio multiples 5% Multiples of earnings 5% Lack-of-Marketability discount rate 5% Price-Book ratio multiples 5% Multiples of earnings 5% Lack-of-Marketability discount rate 5%	Other comprehensive income
		Favorable change Unfavorable change $ 43,542 42,427 $ 21,454 20,442 $ 946 790 $ 28,137 28,119 $ 28,210 27,202 $ 2,093 2,053 $ 20,351 21,596 $ 17,484 17,439 $ 27,096 28,296

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.

• 8) Offsetting financial assets and financial liabilities

The Group has financial instruments transactions applicable to the International Financial Reporting Standards NO. 32 Sections 42 endorsed by the FSC which requested for offsetting. Financial assets and liabilities relating to those transactions are recognized in the net amount of the balance sheets.

The following tables present the aforesaid offsetting financial assets and financial liabilities.

(Continued)

61

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Unit: thousands of New Taiwan Dollars / thousands of US Dollars

September 30, 2019 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -	September 30, 2019 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -	September 30, 2019 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -	September 30, 2019 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -
Other current assets	Gross amounts Gross amounts of financial liabilities offset of recognized financial assets (a) in the balance sheet (b) $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 )	Net amount of financial assets presented in the balance sheet (c)=(a)-(b) -
			Financial instruments -
	$ (USD

September 30, 2019 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -	September 30, 2019 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -	September 30, 2019 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -	September 30, 2019 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -	September 30, 2019 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 ) - - - -
Short-term borrowings	Gross amounts of recognized Gross amounts of financial assets offset in financial liabilities (a) the balance sheet (b) $ 79,539,189 (USD 2,564,126 ) 79,539,189 (USD 2,564,126 )		Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b) -
				Financial instruments -
	$ (USD
		(USD

December 31, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -	December 31, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -	December 31, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -	December 31, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -
Other current assets	Gross amounts Gross amounts of financial liabilities offset of recognized financial assets (a) in the balance sheet (b) $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 )	Net amount of financial assets presented in the balance sheet (c)=(a)-(b) -
			Financial instruments -
	$ (USD

December 31, 2018 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -	December 31, 2018 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -	December 31, 2018 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -	December 31, 2018 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -	December 31, 2018 Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts of recognized Gross amounts of financial assets offset in Net amount of financial liabilities presented in Amounts not offset in the balance sheet (d) financial liabilities (a) the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Short-term borrowings $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 ) - - - -
Short-term borrowings	Gross amounts of recognized Gross amounts of financial assets offset in financial liabilities (a) the balance sheet (b) $ 306,259 (USD 9,971 ) 306,259 (USD 9,971 )		Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b) -
				Financial instruments -
	$ (USD
		(USD

September 30, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 711,049 (USD 23,294 ) 711,049 (USD 23,294 ) - - - -	September 30, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 711,049 (USD 23,294 ) 711,049 (USD 23,294 ) - - - -	September 30, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 711,049 (USD 23,294 ) 711,049 (USD 23,294 ) - - - -	September 30, 2018 Financial assets that are offset which have an exercisable master netting arrangement or similar agreement Gross amounts Gross amounts of financial liabilities offset Net amount of financial assets presented in Amounts not offset in the balance sheet (d) of recognized financial assets (a) in the balance sheet (b) the balance sheet (c)=(a)-(b) Financial instruments Cash collateral received Net amount (e)=(c)-(d) Other current assets $ 711,049 (USD 23,294 ) 711,049 (USD 23,294 ) - - - -
Other current assets	Gross amounts Gross amounts of financial liabilities offset of recognized financial assets (a) in the balance sheet (b) $ 711,049 (USD 23,294 ) 711,049 (USD 23,294 )	Net amount of financial assets presented in the balance sheet (c)=(a)-(b) -
			Financial instruments -
	$ (USD

(Continued)

62

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

September 30, 2018	September 30, 2018	September 30, 2018	September 30, 2018	September 30, 2018
Financial liabilities that are offset which have an exercisable master netting arrangement or similar agreement
Short-term borrowings	Gross amounts of recognized Gross amounts of financial assets offset in financial liabilities (a) the balance sheet (b) $ 711,049 (USD 23,294 ) 711,049 (USD 23,294 )		Net amount of financial liabilities presented in the balance sheet (c)=(a)-(b) -	Amounts not offset in the balance sheet (d) Financial instruments Cash collateral received Net amount (e)=(c)-(d) - - -
				Financial instruments -
	$ (USD
		(USD

(ae) Financial risk management

The Group's objectives and policies for managing the financial risk are consistent with those disclosed in the note (6)(ae) of the consolidated financial statements for the year ended December 31, 2018.

(af) Capital management

The Group's objectives, policies and processes of capital management are the same as those disclosed in the consolidated financial statements for the year ended December 31, 2018. There were no significant changes of quantitative data of capital management compared to the consolidated financial statements for the year ended December 31, 2018. Please refer to note (6)(af) of the consolidated financial statements for the year ended December 31, 2018.

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

The Group's investing and financing activities which did not affect the current cash flow in the nine months ended September 30, 2019 were acquisition of right-of-use assets by leasing, please refer to note (6)(m). There were no investing and financing activities which did not affect the current cash flow in the nine months ended September 30, 2018.

Reconciliation of liabilities arising from financing activities were as follows:

Short-term borrowings Proceeds from issuance of convertible bonds Long-term borrowings Lease liabilities Guarantee deposits and others Total liabilities from financing activities	January 1, 2019 $ 72,350,197 - 28,534,063 2,089,950 238,324 $ 103,212,534	Cash flow (4,559,916) 1,007,240 (2,673,832) (584,470) (47,723) (6,858,701)	Other non-cash changes September 30, 2019 - 67,790,281 (44,150) 963,090 (1,950) 25,858,281 116,668 1,622,148 40,645 231,246 111,213 96,465,046

(Continued)

63

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Short-term borrowings Long-term borrowings Guarantee deposits and others Total liabilities from financing activities	January 1, 2018 $ 56,515,525 27,452,888 180,207 $ 84,148,620	Cash flow September 30, 2018 28,444,126 84,959,651 2,059,768 29,512,656 20,008 200,215 30,523,902 114,672,522

(7) Related-party transactions:

• (a) Name and relationship with related parties

The followings are the entities that have had transactions with the Group during the periods covered in the financial statement.

in the financial statement.
Name of related party	Relationship with the Group
Compal Precision Module (Jiangsu) Co., Ltd.	An associate
Changbao Electronic Technology (Chongqing) Co.,	An associate
Ltd.
LCFC (Note 1)	An associate
Avalue Technology Inc. (“Avalue”)	An associate
Crownpo Technology Inc. (“Crownpo”)	An associate
Allied Circuit Co., Ltd. (“Allied Circuit”)	An associate
Kinpo Group Management Consultant Company	An associate
(“Kinpo Group Management”)
LIZ Electronics (Kunshan) Co., Ltd.	An associate
Compal Connector Manufacture Ltd. (“CCM”)	A joint venture company
AcBel Polytech Inc. (“AcBel”) and its subsidiaries	The same chairman of the board with the
	Company

• Note 1: In August 2018, the Group has sold all its shares of LCFC and no longer has significant influence over it. Therefore, LCFC is not a related-party of the Group from September 2018.

• (b) Transactions with key management personnel

Key management personnel remunerations comprised:

Short-term employee benefits Post-employment benefits Share-based payments	Three months ended September 30, 2019 $ 145,967 2,046 7,569 $ 155,582	Three months ended September 30, 2018 182,285 1,840 2,672 186,797	Nine months ended September 30, 2019 Nine months ended September 30, 2018 451,495 482,628 6,158 5,872 22,707 (88,839) 480,360 399,661 (Continued)

64

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

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

• (c) Significant related-party transactions

• (i) Sale of goods to related parties

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

Associates Other related parties	Three months ended September 30, 2019 $ 116,058 - $ 116,058	Three months ended September 30, 2018 66,014 - 66,014	Nine months ended September 30, 2019 Nine months ended September 30, 2018 221,257 232,922 5 2,955 221,262 235,877

Sales prices for related parties were similar to those of the third-party customers. The collection period was 60~120 days for related parties.

• (ii) Purchase of goods from related parties

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

Associates Other related parties Joint venture	Three months ended September 30, 2019 $ 855,747 402,133 (350) $ 1,257,530	Three months ended September 30, 2018 1,028,112 245,366 26,668 1,300,146	Nine months ended September 30, 2019 Nine months ended September 30, 2018 2,816,289 3,011,086 1,130,758 548,117 31,494 74,335 3,978,541 3,633,538

Purchase prices and payment period from related parties were similar to those from third-party suppliers. The payment period was 60~165 days for related parties.

(Continued)

65

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) Receivables due from relate parties

The receivables arising from the transactions mentioned above and others on behalf of related parties were as follows:

Account	Related party categories September 30, 2019 Associates $ 104,454 Other related parties - Joint venture 342 $ 104,796	December 31, 2018 September 30, 2018 56,701 24,417 1,405 308 120 301 58,226 25,026
Notes and accounts receivable Notes and accounts receivable Other receivables

(iv) Payables to related parties

The payables arising from the transactions mentioned above and rendering of services from other related parties were as follows:

Account Notes and accounts payable Notes and accounts payable Notes and accounts payable Other payables	Related party categories September 30, 2019 Associates $ 865,143 Other related parties 661,105 Joint venture 526 Associates 1,701 $ 1,528,475	December 31, 2018 September 30, 2018 1,245,574 1,296,794 705,761 372,287 25,285 22,629 1,019 - 1,977,639 1,691,710

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Pledged Assets	Subject September 30, 2019 Bail for court mandatory execution $ 41,090 Long-term borrowings (including current portion) (note) 241,697 Guarantee of post-release duty payment to the customs and guarantee of the customs 500 $ 283,287	December 31, 2018 September 30, 2018 41,090 41,090 715,913 1,021,525 500 14,558 757,503 1,077,173
Other current assets Property, plant and equipment Other non-current assets

－ Note:Part of long-term borrowings had been settled, and the assets of property land pledged as collaterals was released this year.

(Continued)

66

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated 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 Group for not paying the royalties of the patent license agreement. The Group has filed counterclaims against Qualcomm Inc. based on the antitrust law in the same court on July 19, 2017. The lawsuits was settled on April 16, 2019. The Group had compromised and both parties had agreed to drop the lawsuits.

• (b) In August 2019, Inventec Corporation filed a lawsuit to the Taiwan Taipei District Prosecutors Office against the Group concerning its former employees who joined the Group. This is deemed as an act of violation according to the Trade Secret Law and Copyright Law. The Group engaged lawyers to defend its right on this matter. Currently, the case is still in progress; therefore, the Group cannot make any reasonable estimation regarding the possible impact on its business operation.

• (c) The Group entered into various patent license agreements with third parties, and was required to make royalty payments of a predetermined amount periodically.

• (d) As of September 30, 2019 and December 31 and September 30, 2018, the Group's signed commitments to purchase property, plant and equipment amounted to $771,719, $187,872 and $229,715, respectively.

(10) Losses due to major disasters: None

(11) Subsequent events: None

(12) Other:

• (a) The employee benefits, depreciation and amortization expenses by categorized function are summarized as follows:

By function By item	Three months endedSeptember 30, 2019	Three months endedSeptember 30, 2019	Three months endedSeptember 30, 2019	Three months endedSeptember 30, 2018	Three months endedSeptember 30, 2018	Three months endedSeptember 30, 2018
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefits Salary Labor and health insurance Pension Others Depreciation Amortization	5,049,419 241,593 335,701 441,410 1,266,623 26,586	3,119,505 196,461 124,825 139,465 234,017 96,875	8,168,924 438,054 460,526 580,875 1,500,640 123,461	4,483,980 218,408 328,455 536,071 1,118,531 11,887	3,066,384 181,615 122,212 151,945 114,046 73,311	7,550,364 400,023 450,667 688,016 1,232,577 85,198

(Continued)

67

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

By function By item	Nine months endedSeptember 30, 2019	Nine months endedSeptember 30, 2019	Nine months endedSeptember 30, 2019	Nine months endedSeptember 30, 2018	Nine months endedSeptember 30, 2018	Nine months endedSeptember 30, 2018
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefits Salary Labor and health insurance Pension Others Depreciation Amortization	13,767,820 671,915 918,999 1,401,316 3,723,387 58,511	9,039,405 595,696 376,606 448,489 695,120 273,854	22,807,225 1,267,611 1,295,605 1,849,805 4,418,507 332,365	12,917,451 639,287 943,403 1,669,675 3,058,137 38,205	8,379,428 541,184 354,501 422,230 347,397 217,997	21,296,879 1,180,471 1,297,904 2,091,905 3,405,534 256,202

• (b) Seasonality of operations

The Group's operations were not affected by seasonality or cyclicality factors.

(13) Other disclosures:

• (a) Information on significant transactions

The following were the information on significant transactions required by the “ Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group for the nine month ended September 30, 2019:

• (i) Loans to other parties: Please refer to Table 1

• (ii) Guarantees and endorsements for other parties: Please refer to Table 2

• (iii) Securities held as of September 30, 2019 (excluding investment in subsidiaries, associates and joint ventures): Please refer to Table 3

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 4

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

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

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 5

• (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Table 6

• (ix) Trading in derivative instruments: Please refer to note (6)(b)

• (x) Business relationships and significant intercompany transactions: Please refer to Table 7

(Continued)

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COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

• (b) Information on investees: Please refer to Table 8

• (c) Information on investment in Mainland China: Please refer to Table 9

(14) Segment information:

Segment information:
Revenue Revenue from external customers Revenue from segments Total revenue Reportable segment profit Revenue Revenue from external customers Revenue from segments Total revenue Reportable segment profit Revenue Revenue from external customers Revenue from segments Total revenue Reportable segment profit Revenue Revenue from external customers Revenue from segments Total revenue Reportable segment profit	Three months ended September 30, 2019
	Information technology product segment
		Information technology product segment	Strategically integrated product segment Total 18,632,088 687,404,390 - - 18,632,088 687,404,390 796,836 9,228,772
	$ 668,772,302 - $ 668,772,302 $ 8,431,936

(Continued)

69

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Table 1 Loans to other parties:

(September 30, 2019)

Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)	Table 1 Loans to other parties: (September 30, 2019)
													(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	Note
													Item	Value
0 0 0 0 1 2 3 4 4 5 6 7 8 9 9 9 9 10 11	The Company The Company The Company The Company CIH CPI CPC CIT CIT PFG CPO CET Panpal Arcadyan Arcadyan Arcadyan Arcadyan Zhi-pal Arcadyan Holding	CVC UCGI HengHao CEB CEP CVC CDE CCI Nanjing Rayonnant (Taicang) CEB HengHao Kunshan BT HengHao Acradyan Brasil Arcadyan UK Arcadyan AU Arcadyan Vietnam Acradyan Brasil CNC	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y	316,000 500,000 405,369 1,580,000 110,600 316,000 1,380,900 2,212,000 69,045 308,950 644,420 274,800 600,000 246,160 219,730 126,400 284,400 34,760 523,940	310,200 250,000 401,600 1,551,000 108,570 - 1,306,800 2,171,400 65,340 - 609,840 261,360 600,000 62,040 217,140 - 279,180 34,122 -	142,692 220,000 201,600 1,551,000 44,979 - 1,306,800 2,171,400 65,340 - 609,840 47,916 600,000 - - - - 34,122 -	3.20% 1.20% 1.2%~2.82% 3.50% 3.50% 3.20% 2.20% 2.76% 4.35% 2.50% 4.35% 2.20% 1.20% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Short-term financing Short-term financing	- - - - - - - - - - - - - - 4,653,000 1,551,000 620,400 - -	Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating financing Operating demand Operating demand Operating demand Operating financing - - - Operating financing Operating financing	- - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - -	21,162,822 21,162,822 21,162,822 21,162,822 34,926,977 900,177 2,040,377 20,445,466 20,445,466 421,799 2,796,969 4,824,445 2,177,306 1,911,841 1,911,841 1,240,800 496,320 45,036 1,202,687	42,325,644 42,325,644 42,325,644 42,325,644 34,926,977 900,177 2,040,377 20,445,466 20,445,466 421,799 2,796,969 4,824,445 2,177,306 3,823,682 3,823,682 3,823,682 3,823,682 180,146 1,202,687	(Note 1) (Note 1) (Note 1) (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 5) (Note 6) (Note 7) (Note 8) (Note 9) (Note 10) (Note 10) (Note 10) (Note 10) (Note 11) (Note 12)

Note 1: According to the Company’ s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of the Company. When a short-term financing facility

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

Note 4:

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 shortterm 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.

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 shortterm 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)

70

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 1 Loans to other parties:

(September	30, 2019)
Note 5:	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 shortterm 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 6:	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 shortterm 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 7:	According to CPO’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPO. When a shortterm financing facility with CPO is
	necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPO’s total amount of lendable capital, and shall be combined with the
	company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not
	limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPO, and shall be combined with the company’s endorsements/guarantees for the borrower when
	calculating.
Note 8:	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 shortterm 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 9:	According to Panpal’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Panpal. When a shortterm financing facility with Panpal
	is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of Panpal’s total amount of lendable capital, and shall be combined with
	the company’s endorsements/guarantees for calculation. In addition, when lending to the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company, or the ultimate parent
	company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions of 80%, but the maximum amount shall not exceed the of
	Panpal, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating.
Note 10:	According to Arcadyan’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Arcadyan. To borrowers having business relationship
	with Arcadyan, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the
	net worth of Arcadyan. Also, the amount shall be combined with the Arcadyan’ s endorsements/guarantees for the borrower when calculating. When a short-term financing facility is necessary, the
	borrower should be Arcadyan’s investee. The total amount for lending the borrower shall not exceed 80% of the net worth of the borrower, nor shall it exceed 20% of the net worth of Arcadyan, and shall
	be combined with the Arcadyan’s endorsements/guarantees for the borrower when calculating.
Note 11:	The total amount of loans to others shall not exceed 40% of the net worth of Zhi-pal. To borrowers having business relationship with Zhi-pal, the total amount for lending the borrower shall not exceed 80%
	of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of Zhi-pal. When a short-term financing facility is necessary, the
	borrower should be Zhi-pal’s investee, and the total amount for lending the borrower shall not exceed 10% of the net worth of the borrower.
Note 12:	According to Arcadyan Holding’s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed the net worth of Arcadyan Holding. When a short-term financing
	facility is necessary, the borrower should be Arcadyan Holding’s investee. The total amount for lending the borrower shall not exceed the net worth of Arcadyan Holding, and shall be combined with the
	Arcadyan Holding’s endorsements/ guarantees for the borrower when calculating.
Note 13:	The transactions had been eliminated in the consolidated financial statements.

(Continued)

71

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Table 2 Guarantees and endorsements for other parties:

(September 30, 2019)

		(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(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 (Note 1)and(Note 4)	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 The Company Arcadyan	CEB CEP Arcadyan Brasil	(Note 3) (Note 2) (Note 5)	26,453,527 26,453,527 1,274,560	63,200 260,766 246,160	62,040 208,503 -	62,040 208,503 -	- - -	0.06% 0.20% -	52,907,055 52,907,055 3,823,682	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.

(Continued)

72

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 3 Securities held as of September 30, 2019 (excluding investment in subsidiaries, associates and joint ventures):

(September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
						(In Thousands of shares/ units)
Name of holder	Category and name of security	Relationship with security issuer	Account name			Ending balance			Note
				Shares/Units (thousands)		Carrying value	Holding percentage (%)	Fair value
The Company Panpal Gempal	Taiwan Star Kinpo Electronics, Inc. (“Kinpo”) Cal-Comp Electronics (Thailand) Public Co., Ltd. Innolux Corporation (“Innolux”) HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Global BioPharma, Inc. PrimeSensor Technology Inc. IIH Biomedical Venture Fund Others Total Compal Electronics, Inc. Kinpo CDIB Partners Investment Holding Corp. AcBel Taiwan Biotech Co., Ltd. Others Total Compal Electronics, Inc. Lian Hong Art. Co., Ltd. Global BioPharma, Inc.	‑ The same chairman of the Company The same chairman of the Company ‑ ‑ ‑ ‑ ‑ ‑ ‑ 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 other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss and other comprehensive income Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current	98,046 124,044 239,631 27,163 290 842 4,000 2,000 861 2,500 31,648 23,172 54,000 5,677 4,897 18,369 2,140 2,000		639,263 1,327,268 412,165 179,276 24,817 19,107 43,280 35,700 7,352 25,000 196,944 __ 2,910,172 566,501 247,946 968,220 120,913 100,147 83,870 __ 2,087,597 328,811 46,048 35,700	3% 9% 5% - 10% 11% 3% 3% 3% 7% 1% 2% 5% 1% 3% - 8% 3%	639,263 1,327,268 412,165 179,276 24,817 19,107 43,280 35,700 7,352 25,000 566,501 247,946 968,220 120,913 100,147 328,811 46,048 35,700	(Note 1) (Note 1)

(Continued)

73

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 3 Securities held as of September 30, 2019 (excluding investment in subsidiaries, associates and joint ventures):

(September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
					(In Thousands of shares/ units)
Name of holder	Category and name of security	Relationship with security issuer	Account name		Ending balance			Note
				Shares/Units (thousands)	Carrying value	Holding percentage (%)	Fair value
Gempal Arcadyan Mactech HHB Mithera CPC CIT CIC CET CEC CEQ Hong Ji Hong Jin	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. Chimei Motor Electronics Co., LTD Total Taichung International Golf Country Club HWALLAR OPTRONICS (Fuzhou) CO., LTD. Beyond Limits, Inc. Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu, Structured Deposit Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu, Structured Deposit Structured deposits–SPD Bank Yield Plus Structured Deposit Total 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 other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current	380 332 200 1,152 349 60 ‑ 1,650 ‑ 873 ‑ ‑ ‑ ‑ ‑ ‑ ‑	2,448 __ 413,007 182 160 ‑ ‑ ‑ ‑ 45,926 49,500 __ 95,426 7,650 -	1% 1% 9% 7% 6% 6% 7% 9% ‑ 19% - ‑ ‑ ‑ ‑ ‑ ‑ ‑	182 160 - - - - 45,926 49,500 7,650 - 139,590 394,888 886,415 438,764 443,208 833,652 526,966 132,121	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)
					139,590 394,888 886,415 438,764 443,208 833,652 _____ 1,276,860 526,966 132,121

Note 1:The transaction had been eliminated in the consolidated financial statements. Note 2:The carrying value is the remaining amount after deducting accumulated impairment.

(Continued)

74

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 4 Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

(For the nine-month ended September 30, 2019)

(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)
					(In Thousands of New Taiwan Dollars)
Name of company	Category and name of security	Account name	Name of counter-party	Relationship with the company	Beginning Balance		Purchases		Sales				Others		Ending Balance
					Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Price	Cost	Gain (loss) on disposal	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount
CIT CEC The Company CPC The Company Panpal CEQ CEQ CPO CPO CPO CIC CET CET CET CET CET	Chipbond Chipbond Innolux Corporation 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 Structured deposits- Industrial Bank Structured Deposits Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit 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 Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Structured deposits- SPD Bank Yield Plus Structured Deposit Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits- The RMB "Open on schedule" Financial Product	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 other comprehensive income-non- current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current 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 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	- - - Shanghai Pudong Development Bank Bank of Communications Bank of Communications Industrial Bank Co.,Ltd Bank of Communications Shanghai Pudong Development Bank Bank of Communications Bank of China Shanghai Pudong Development Bank Shanghai Pudong Development Bank China CITIC Bank Agricultural Bank of China Bank of Communications Bank of China	- - - - - - - - - - - - - - - - -	4,593 109,227 5,251 - - - - - - - - - - - - - -	284,768 1,061,690 325,560 179,963 - 576,466 260,029 259,705 448,948 480,285 - 179,699 225,651 676,881 451,154 - -	- - - - - - - - - - - - - - - - -	- - - 1,217,018 904,846 1,529,188 370,987 262,405 - - 452,423 1,085,815 1,131,057 452,423 226,211 1,312,027 452,423	4,593 82,064 5,251 - - - - - - - - - - - - - -	307,207 574,225 344,843 1,000,910 - 1,582,027 502,701 532,693 456,933 487,848 461,723 822,474 914,464 1,142,422 685,263 456,891 456,765	307,207 574,225 344,843 990,806 - 1,565,382 497,665 524,810 452,422 484,092 452,423 814,361 904,845 1,131,057 678,634 452,423 452,423	- - - 10,104 (Note 2) - (Note 2) 16,645 (Note 2) 5,036 (Note 2) 7,883 (Note 2) 4,511 (Note 2) 3,756 (Note 2) 9,300 (Note 2) 8,113 (Note 2) 9,619 (Note 2) 11,365 (Note 2) 6,629 (Note 2) 4,468 (Note 2) 4,342 (Note 2)	- - - - - - - - - - - - - - - - -	22,439 (Note 1) (308,190) (Note 1) 19,283 (Note 1) (1,183) (Note 1) (18,431) (Note 1) 3,339 (Note 1) 3,806 (Note 1) 10,583 (Note 1) 7,985 (Note 1) 7,563 (Note 1) 9,300 (Note 1) (4,276) (Note 1) 964 (Note 1) 13,118 (Note 1) 7,898 (Note 1) (21,484) (Note 1) 4,342 (Note 1)	- 27,163 - - - - - - - - - - - - - - -	- 179,276 - 394,888 886,415 526,966 132,121 - - - - 438,764 443,208 - - 833,652 -

Note 1:Others were valuation gains and losses and foreign exchange gains and losses.

Note 2:Including gains and losses on disposal and foreign exchange gains and losses.

(Continued)

75

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 5 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the nine-month ended September 30, 2019)

(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)
			(In Thousands of New Taiwan Dollars)
Company Name	Counter party	Nature of relationship	Transaction details				Transactions with terms different from others		Notes/Accounts receivable (payable)		Note
			Purchase/ (Sale)	Amount	Percentage of total purchases/ (sales)	Payment terms	Unitprice	Payment Terms	Ending Balance	Percentage of total notes/accounts receivable (payable)
Just and its subsidiaries CIH and its subsidiaries CBN BCI and its subsidiaries Webtek The Company	UCGI CBN CIH and its subsidiaries Just and its subsidiaries HSI and its subsidiaries BCI and its subsidiaries Etrade and its subsidiaries Webtek Forever Webtek Compal Electronic, Inc. Forever Compal Electronic, Inc. CEB Forever Compal Electronic, Inc. Compal Electronic, Inc. CEB Compal Electronic, Inc.	Subsidiaries wholly owned by the Company The Company's subsidiaries Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company With the same ultimate parent company Parent company With the same ultimate parent company Parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent company Parent company	Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale Sale Sale Sale Sale Purchase Sale Sale Sale	(171,267) (812,466) 112,393,303 60,765,175 2,678,061 18,139,957 9,578,144 34,469,915 18,139,071 (24,375,017) (60,765,175) (6,892,761) (112,259,607) (168,869) (9,187,778) 809,031 (18,140,881) (1,720,629) (34,469,915)	- (0.1)% 16.8% 9.1% 0.4% 2.7% 1.4% 5.1% 2.7% (26.5)% (66.0)% (7.5)% (86.3)% (0.1)% (7.1)% 55.0% (81.4)% (7.7)% (100.0)%	120 days 90 days 120 days 120 days 120 days 120 days Net 60 days from purchase Net 60 days from purchase Net 60 days from purchase Net 60 days from delivery 120 days Net 60 days from delivery 120 days 120 days Net 60 days from delivery Net 90 days from purchase 120 days 120 days Net 60 days from delivery	Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Markup based on BCI and its subsidiaries's cost Markup based on Etrade and its subsidiaries's cost 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 Similar to non- related parties According to markup pricing - Markup based on BCI and its subsidiaries's cost According to markup pricing According to markup pricing	There is no significant difference There is no significant difference There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference, 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 Adjustments will be made based on demand for funding There is no significant difference Adjustments will be made based on demand for funding	151,998 638,306 (50,727,061) (8,433,593) (1,614,318) (7,950,274) (5,100,571) (576,232) (614,096) - 8,383,903 - 50,727,061 96,676 - (638,371) 7,950,274 1,142,000 576,232	0.1% 0.3% (29.6)% (4.9)% (0.9)% (4.6)% (3.0)% (0.3)% (0.4)% - 20.0% - 37.8% - - (69.0)% 78.4% 4.7% 100.0%	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

(Continued)

76

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 5 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the nine-month ended September 30, 2019)

(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)
			(In Thousands of New Taiwan Dollars)
Company Name	Counter party	Nature of relationship	Transaction details				Transactions with terms different from others		Notes/Accounts receivable (payable)		Note
			Purchase/ (Sale)	Amount	Percentage of total purchases/ (sales)	Payment terms	Unitprice	Payment Terms	Ending Balance	Percentage of total notes/accounts receivable (payable)
CEB Etrade and its subsidiaries Forever UCGI HSI and its subsidiaries Arcadyan CNC Acradyan Germany Acradyan USA Acradyan AU THAC TTI	Etrade and its subsidiaries JUST and its subsidiaries BCI and its subsidiaries CIH and its subsidiaries Webtek Compal Electronic, Inc. Compal Electronic, Inc. CIH and its subsidiaries JUST and its subsidiaries Compal Electronic, Inc. Compal Electronic, Inc. Acradyan Germany Acradyan USA Acradyan AU CNC Arcadyan THAC Arcadyan Arcadyan Arcadyan TTI CNC THAC	With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary With the same ultimate parent company With the same ultimate parent company The Company's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company	Purchase Purchase Purchase Purchase Sale Sale Sale Purchase Purchase Purchase Sale Sale Sale Sale Purchase Sale Sale Purchase Purchase Purchase Sale Purchase Purchase	10,091,875 24,375,017 1,717,001 164,462 (10,091,875) (9,578,144) (18,139,071) 9,187,778 6,892,761 171,267 (2,678,061) (1,166,288) (1,169,866) (1,538,494) 8,796,118 (8,796,118) (138,765) 1,166,288 1,169,866 1,538,494 (356,283) 138,765 356,283	29.0% 71.0% 19.3% 1.8% (51.1)% (48.5)% (79.6)% 39.9% 29.9% 67.3% (100.0)% (6.0)% (6.0)% (8.0)% 31.0% (100.0)% (2.0)% 100.0% 100.0% 100.0% (99.0)% 9.0% 8.0%	Net 60 days from purchase Net 60 days from purchase 120 days 120 days Net 60 days from delivery Net 60 days from delivery Net 60 days from delivery Net 60 days from purchase Net 60 days from purchase 120 days 120 days Net 120 days from delivery Net 60 days from delivery Net 45 days from delivery Net 45 days from delivery Net 45 days from delivery Net 90 days from the end of the month of delivery Net 120 days from delivery Net 60 days from delivery Net 45 days from delivery Net 60 days from the end of the month of delivery Net 90 days from the end of the month of delivery Net 60 days from the end of the month of delivery	According to markup pricing According to markup pricing Similar to non- related parties Similar to non- related parties According to markup pricing According to markup pricing According to markup pricing Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties - - - According to markup pricing According to markup pricing - - - According to markup pricing - -	Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference There is no significant difference Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference Adjustments will be made based on demand for funding - - - - - - - - - - -	- - (1,142,000) (96,676) - 5,100,571 614,096 - - (151,998) 1,614,318 453,884 1,040,789 517,367 (2,539,031) 2,539,031 42,508 (453,884) (1,040,789) (517,367) - (42,508) -	- - (48.7)% (4.1)% - 100.0% 100.0% - - (91.9)% 100.0% 7.0% 15.0% 7.0% (26.0)% 99.0% 2.0% (100.0)% (100.0)% (100.0)% - (40.0)% -	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 1、2) (Note 1、2) (Note 1、2) (Note 2) (Note 2) (Note 2) (Note 1、2) (Note 1、2) (Note 1、2)

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

Note 2: The transactions had been eliminated in the consolidated financial statements.

(Continued)

77

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 6 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
					(In Thousands of New Taiwan Dollars)
Name of Company	Counter-party	Nature of relationship	Ending Balance	Turnover rate	Overdue		Amounts received in subsequentperiod		Allowance for bad debts
					Amount	Action taken
The Company The Company Just and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries Forever Webtek Etrade and its subsidiaries HSI and its subsidiaries Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan CNC CBN	CBN UCGI Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. CEB Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. Arcadyan Germany Arcadyan USA Arcadyan AU Arcadyan Vietnam TTI Arcadyan Just and its subsidiaries	The Company's subsidiary The Company's subsidiary Parent company Parent company Parent company With the same ultimate parent company Parent company Parent company Parent company Parent company Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary With the same ultimate parent company With the same ultimate parent company	638,306 151,998 8,383,903 50,727,061 7,950,274 1,142,000 614,096 576,232 5,100,571 1,614,318 453,884 1,040,789 517,367 283,131 (Note 4) 144,498 (Note 4) 2,539,031 (Note 5) 256,162 (Note 6)	1.57 1.88 18.23 3.00 5.56 2.69 2.25 12.02 4.97 4.42 2.47 2.73 3.30 5.55 12.33 3.74 -	- - - - - - - - - - - - - - - 92,339	- - - - - - - - - - - - - - - Enhanced the collection	248,617 - 5,389,155 15,592,774 2,540,096 99,962 - - 2,545,980 - 142,265 34,819 311,571 433,560 85,334 1,872,428 160,030	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 3)	- - - - - - - - - - - - - -

Note 1:Balance as of November 1, 2019. Note 2:Balance as of October 29, 2019.

Note 3:Balance as of November 6, 2019.

Note 4:Other receivables due to purchasing on behalf of Arcadyan Vietnam and TTI.

Note 5:Other receivables due to processing.

Note 6:Other receivables due to processing and sales of raw material.

(Continued)

78

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Table 7 Business relationships and significant intercompany transactions: (For the nine-month ended September 30, 2019)

(In Thousands of New Taiwan Dollars)

				(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
No. (Note 1)	Company name	Counterparty	Relationship (Note 2)	Intercompany transactions
				Accounts name	Amount	Terms	Percentage of the consolidated net revenue or total assets
0 0 1 1 1 2 2 2 3 3 4 5 5	The Company The Company JUST and its subsidiaries JUST and its subsidiaries JUST and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries Webteck Etrade and its subsidiaries Etrade and its subsidiaries	CBN UCGI Webtek Forever The Company The Company Forever CEB The Company CEB The Company Webtek The Company	1 1 3 3 2 2 3 3 2 3 2 3 2	Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Sale Revenue Sale Revenue Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Sale Revenue Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Sale Revenue Sale Revenue Accounts Receivable	812,466 638,306 171,267 151,998 24,375,017 6,892,761 60,765,175 8,737,618 112,259,607 50,727,061 9,187,778 168,869 96,676 18,140,881 7,950,274 1,720,629 1,142,000 34,469,915 576,232 10,091,875 9,578,144 5,100,571	There is no significant difference of price to non-related parties. The credit period is net 90 days. 〃 The price is based on the operating cost. The credit period is net 120 days, and will be adjusted if necessary. 〃 The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery, and will be adjusted if necessary. There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery, and will be adjusted if necessary. There is no significant difference of price to non-related parties. The credit period is net 60 days from delivery, and will be adjusted if necessary. 〃 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 There is no significant difference of price to non-related parties. The credit period is net 120 days. 〃 The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. 〃 The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. 〃	0.1% 0.2% - - 3.4% 1.0% 8.5% 2.1% 15.7% 12.1% 1.3% - - 2.5% 1.9% 0.2% 0.3% 4.8% 0.1% 1.4% 1.3% 1.2%

(Continued)

79

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Table 7 Business relationships and significant intercompany transactions:

(For the nine-month ended September 30, 2019)

(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)	(For the nine-month ended September 30, 2019)
				(In Thousands of New Taiwan Dollars)
No. (Note 1)	Company name	Counterparty	Relationship (Note 2)	Intercompany transactions
				Accounts name	Amount	Terms	Percentage of the consolidated net revenue or total assets
6 7 8 8 8 8 8 9 9 10	Forever HSI Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan CNC CNC THAC	The Company The Company Arcadyan Germany TTI Arcadyan USA Arcadyan AU Arcadyan Vietnam Arcadyan THAC TTI	2 2 3 3 3 3 3 3 3 3	Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Other Receivable Sale Revenue Accounts Receivable Sale Revenue Accounts Receivable Other Receivable Processing Revenue Accounts Receivable Processing Revenue Accounts Receivable Processing Revenue Contract Liability	18,139,071 614,096 2,678,061 1,614,318 1,166,288 453,884 144,498 1,169,866 1,040,789 1,538,494 517,367 283,131 8,796,118 2,539,031 138,765 42,508 356,283 173,910	The price is based on the operating cost. The credit period is net 60 days from delivery, and will be adjusted if necessary. 〃 There is no significant difference of price to non-related parties. The credit period is net 120 days, and will be adjusted if necessary. 〃 There is no significant difference of price to non-related parties. The credit period is net 120 days from delivery. 〃 The price is based on the operating cost. The credit period is net 90 days from the end of month of delivery. There is no significant difference of price to non-related parties. The credit period is net 60 days from the end of the month of delivery. 〃 There is no significant difference of price to non-related parties. The credit period is net 45 days from delivery. 〃 The price is based on the operating cost. The credit period is net 45 days from the end of the month of delivery and depended on funding demand. The price is based on the operating cost. The credit period is net 45 days from the end of the month of delivery and depended on funding demand. 〃 The price is based on the operating cost. The credit period is net 90 days from the end of month of delivery. 〃 The price is based on the operating cost. The credit period is net 60 days from the end of the month of delivery and depended on funding demand. 〃	2.5% 0.1% 0.4% 0.4% 0.2% 0.1% - 0.2% 0.2% 0.2% 0.1% 0.1% 1.2% 0.6% - - - -

Note 1: The numbers filled in as follows:

1.0 represents the Company.

1. Subsidiaries are sorted in a numerical order starting from 1.

Note 2: Transactions labeled as follows:

1. represents transactions between the parent company and its subsidiaries.

2. represents transactions between the subsidiaries and the parent company.

3. represents transactions between subsidiaries.

(Continued)

80

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 8 The following is the information on investees for the three-months ended September 30, 2019 (excluding information on investees in Mainland China): (September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
				(In Thousands ofNewTaiwan Dollars/ shares)
Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Ending Balance			Net income (losses) of investee	Share of profits/losses of investee	Note
				June 30, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
The Company	Bizcom Just CIH Panpal Gempal Kinpo Group management consultant company (“Kinpo Group management”) Ripal Unicore Lead-Honor Optronics. Co., Ltd. (“Lead-Honor”) CEH Shennona Taiwan Allied Circuit Maxima Ventures I, Inc. (“Maxima”) Aco Smartcare Lipo Holding Co., Ltd.(“Lipo”) CPE ATK Crownpo Technology Inc. (“Crownpo”) Hong Ji Hong Jin Mactech Auscom Arcadyan FGH Shennona HSI CEP Zhaopal Yongpal	Milpitas, USA British Virgin Islands British Virgin Islands Taipei City Taipei City Taipei City Tainan City Taipei City Taoyuan City British Virgin Islands Taipei City Taoyuan City Taipei City Hsinchu City Cayman Islands Netherlands Hsinchu City Taipei City Taipei City Taipei City Taichung City Austin, TX USA Hsinchu City British Virgin Islands Delaware, USA British Virgin Islands Poland Taipei City Taipei City	Warranty services and marketing of LCD TVs and notebook PCs Investment Investment Investment Investment Consultation, training services, etc. Manufacturing of electric appliance and audiovisual electric products Management&Consultant, rental and leasing business and wholesale and retail of medical equipments Manufacturing of electric appliance and audiovisual electric products Investment Management&Consultant, rental and leasing business, wholesale and retail sale of precision instruments and International Trade Production and sales of PCB boards Investment Wholesale and retail sale of computer software, software design services, data processing services, wholesale and retail sale of electronic materials, wholesale and retail sale of precision instruments, and biotechnology services Investment Investment 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 Manufacturing of equipment and lighting, retailing of equipment and international trading 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 Medical care IOT business Investment Maintenance and warranty services of notebook PCs Investment Investment	36,369 1,480,509 1,787,680 5,171,837 900,036 3,000 60,000 200,000 42,000 34 6,000 395,388 1,260 90,000 489,450 197,463 202,908 149,547 1,000,000 295,000 219,601 101,747 1,325,132 2,754,741 32,665 1,346,814 90,156 - -	36,369 1,480,509 1,787,680 5,171,837 900,036 3,000 60,000 200,000 42,000 34 - 395,388 1,260 - 489,450 197,463 202,908 149,547 1,000,000 295,000 219,601 101,747 1,325,132 2,754,741 29,558 1,346,814 90,156 1,358,000 1,188,500	100 48,010 53,001 500,000 90,000 300 6,000 20,000 2,772 1 600 10,158 126 100,000 98 6,427 899 3,739 100,000 29,500 21,756 3,000 41,305 89,755 2,600 42,700 136 - -	100% 100% 100% 100% 100% 38% 100% 100% 42% 100% 100% 20% 23% 52% 49% 100% 28% 33% 100% 100% 53% 100% 21% 100% 100% 100% 100% - -	461,033 8,552,228 35,706,837 5,057,167 (Note 1) 1,586,825 (Note 1) 4,850 70,948 152,762 - 3,655,741 5,948 300,935 2,719 88,372 542,395 849,234 10,539 61,156 1,082,497 335,357 223,476 129,507 2,145,219 4,408,014 1,445 680,228 8,483 - -	13,704 595,983 425,915 60,454 78,158 829 19,294 (11,766) - - (52) 131,022 (84) (5,622) (204,949) 13,705 602 (34,426) 47,280 23,706 (617) 2,347 1,043,846 20,931 (7,156) (61,635) (7,269) 1 -	15,919 595,983 425,915 22,476 56,115 313 19,152 (11,886) - - (52) 26,748 64 (1,627) (100,425) 13,705 167 (11,441) 47,280 23,706 (1,332) 2,347 222,729 20,931 (7,156) (61,635) (7,269) 1 -	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

(Continued)

81

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 8 The following is the information on investees for the three-months ended September 30, 2019 (excluding information on investees in Mainland China): (September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
								(In Thousands ofNewTaiwan Dollars/ shares)
Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Ending Balan		ce	Net income (losses) of investee	Share of profits/losses of investee	Note
				June 30, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
The Company Panpal Gempal	Kaipal Hippo Screen Neurotech Co., Ltd. Infinno Technology Corporation (“Infinno”) HengHao BCI CBN Rayonnant CRH Acendant Private Equity Investment Ltd. (“APE”) Etrade Webtek Forever UCGI Palcom Avalue Technology, Inc. CORE GLB Arcadyan Allied Circuit Others Arcadyan Allied Circuit Others	Taipei City Taipei City Hsinchu County Taipei City British Virgin Islands Hsinchu County Taipei City British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Taipei City Taipei City New Taipei City British Virgin Islands New Taipei City Hsinchu City Taoyuan City Hsinchu City Taoyuan City	Investment Management&Consultant, Rental and Leasing Business, wholesale and retail sale of precision instruments and International Trade Manufacturing of electronic components, wholesale and retail sale of precision instruments and electronic materials Manufacturing of PCs, computer periphery devices, and electronic components Investment R&D and sales of cable modem, digital setup box, and other communication products Manufacturing and sales of PCs, computer periphery devices, and electronic components Investment Investment Investment Investment Investment Manufacturing and retail sale of computers and electronic components Selling of mobile phones Manufacturing, processing, and import and export business of industrial motherboards Investment Manufacturing and wholesale of medical equipment Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing Production and selling of PCB boards Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing Production and selling of PCB boards	- 42,000 109,837 5,529,757 2,636,051 284,827 295,000 377,328 943,922 1,532,029 3,340 1,575 100,000 100,000 559,189 4,318,860 246,860 180,968 148,263 203,500 53,645	510,500 - 109,837 5,329,757 2,636,051 284,827 295,000 377,328 943,922 1,532,029 3,340 1,575 100,000 100,000 559,189 4,318,860 246,860 180,968 148,263 203,500 53,645	- 4,200 5,650 20,015 90,820 29,060 29,500 12,500 31,253 46,900 100 50 10,000 10,000 15,240 147,000 15,000 6,827 2,927 7,846 3,220	- 70% 27% 100% 100% 43% 100% 100% 35% 65% 100% 100% 100% 100% 22% 100% 50% 4% 6% 4% 6%	- 37,782 17,506 (399,998) 6,288,114 738,266 59,686 129,599 1,009,732 (512,198) 580,394 1,502,781 (451,593) 100,972 631,940 7,860,865 319,353 84,037,116 402,771 86,717 440,512 486,796 95,389 3,241	- (6,026) (14,880) (484,258) 190,376 19,004 18,527 21,256 7,154 (273,242) (26,976) 107 (75,330) (7,103) 308,427 159,909 117,015 1,043,846 131,022 1,043,846 131,022	- (4,218) (4,048) (484,258) 190,376 8,309 17,420 21,256 2,484 (246,266) (26,976) 107 (75,330) (7,103) 69,670 159,909 58,420 970,480 Investment gain(losses) recognized by Panpal Investment gain(losses) recognized by Panpal Investment gain(losses) recognized by Gempal Investment gain(losses) recognized by Gempal	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

(Continued)

82

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 8 The following is the information on investees for the three-months ended September 30, 2019 (excluding information on investees in Mainland China): (September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
				(In Thousands ofNewTaiwan Dollars/ shares)
Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Ending Balance			Net income (losses) of investee	Share of profits/losses of investee	Note
				June 30, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
Hong Ji Hong Jin Just CII MEL and MTL CIH HSI	Arcadyan Allied Circuit Arcadyan CDH (HK) CII CPI Smart AEI MEL MTL CMX CIH (HK) Jenpal PFG FWT CCM IUE Goal	Hsinchu City Taoyuan City Hsinchu City Hong Kong British Virgin Islands British Virgin Islands British Virgin Islands U.S.A U.S.A U.S.A Mexico Hong Kong British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands	Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing Production and selling of PCB boards Telecommunication equipment and apparatus manufacturing, electronic parts and components manufacturing, restrained telecom radio frequency equipments and materials import and manufacturing Investment Investment Investment Investment Sales and maintenance of LCD TVs Investment Investment Manufacturing, sales and maintenance of LCD TVs Investment Investment Investment Investment Investment Investment Investment	203,500 12,274 112,569 1,932,468 286,780 15,510 31 31,020 255,419 31 - 2,320,374 227,997 31 462,198 158,202 930,600 393,954	203,500 12,274 112,569 1,932,468 286,780 15,510 31 31,020 255,419 31 249,711 2,320,374 227,997 31 462,198 158,202 930,600 393,954	7,846 1,041 4,340 62,298 9,245 500 1 1,000 - - - 74,803 7,350 1 14,900 5,100 30,000 12,700	4% 2% 2% 100% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 51% 100% 100%	486,796 24,880 248,685 6,080,119 268,109 913,990 399 49,822 217,898 31 - 33,733,452 108,263 438,589 462,629 27,422 382,158 326,031	1,043,846 131,022 1,043,846 513,807 45,689 7,827 (5) (121) (43,545) - (12,291) 425,609 2,175 12,614 117 (29,979) (77,848) 16,213	Investment gain(losses) recognized by Hong Ji Investment gain(losses) recognized by Hong Ji Investment gain(losses) recognized by Hong Jin Investment gain(losses) recognized by Just Investment gain(losses) recognized by Just Investment gain(losses) recognized by Just Investment gain(losses) recognized by CII Investment gain(losses) recognized by CII Investment gain(losses) recognized by CII Investment gain(losses) recognized by CII Investment gain(losses) recognized by MEL and MTL Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by CIH Investment gain(losses) recognized by HSI Investment gain(losses) recognized by HSI	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

(Continued)

83

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 8 The following is the information on investees for the three-months ended September 30, 2019 (excluding information on investees in Mainland China): (September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
				(In Thousands ofNewTaiwan Dollars/ shares)
Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Ending Balance			Net income (losses) of investee	Share of profits/losses of investee	Note
				June 30, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
IUE Goal BCI CORE BSH Forever Webtek Unicore Arcadyan	CVC CDM CMI PRI BSH Mithera GIA Etrade Raycore Arcadyan Holding Arcadyan USA Arcadyan Germany Arcadyan Korea Zhi-Pal TTI AcBel Telecom Arcadyan UK Arcadyan AU CBN	Vietnam Vietnam British Virgin Islands British Virgin Islands British Virgin Islands Cayman Islands British Virgin Islands British Virgin Islands Taipei City British Virgin Islands U.S.A Germany Korea Taipei City Taipei City Taipei City UK Australia Hsinchu County	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 Investment Investment Investment Selling of mobile phones Investment Animal medication retail and wholesale Investment Sales of wireless network products Technology support and sales of wireless network products Sales of wireless network products Investment R&D and sales of household digital products Investment Technical support of wireless network products Sales of wireless network products Sales of communication and electronic components	930,600 393,954 2,507,036 310,200 4,559,940 155,100 - 775,500 25,500 1,240,526 23,055 1,125 2,879 48,000 308,726 23,000 1,988 1,161 11,925	930,600 393,954 2,507,036 310,200 4,559,940 - - 775,500 25,500 1,240,526 23,055 1,125 2,879 48,000 308,726 23,000 1,988 1,161 11,925	30,000 12,700 80,820 10,000 147,000 - - 25,000 1,275 32,780 1 0.5 20 34,980 25,028 4,494 50 50 533	100% 100% 100% 100% 100% 99% 100% 35% 51% 100% 100% 100% 100% 100% 61% 51% 100% 100% 1%	407,091 385,191 3,933,475 2,354,639 7,860,865 153,307 - (176,721) 18,876 1,155,493 (159,516) 61,150 7,959 418,776 651,954 38,484 2,969 14,963 13,656	(77,848) 16,213 108,728 81,648 159,909 (1,795) - (273,242) (6,728) (52,114) 24 (829) 653 4,346 143,230 9,376 352 17,788 19,004	Investment gain(losses) recognized by IUE Investment gain(losses) recognized by Goal Investment gain(losses) recognized by BCI Investment gain(losses) recognized by BCI Investment gain(losses) recognized by CORE Investment gain(losses) recognized by BSH Investment gain(losses) recognized by Forever Investment gain(losses) recognized by Webtek Investment gain(losses) recognized by Unicore Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

(Continued)

84

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 8 The following is the information on investees for the three-months ended September 30, 2019 (excluding information on investees in Mainland China): (September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
				(In Thousands ofNewTaiwan Dollars/ shares)
Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Ending Balance			Net income (losses) of investee	Share of profits/losses of investee	Note
				June 30, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
Arcadyan Arcadyan and Zhi-pal Arcadyan Holding TTI Quest AcBel Telecom Sinoprime Leading Images Zhi-Pal Rayonnant CRH APH HHT HHA HHB	Golden Smart Home Technology Corp. Arcadyan Brasil Sinoprime Arch Holding Quest TTJC Exquisite Leading Images Arcadyan Vietnam Astoria GmbH CBN APH Forming Co., Ltd. APH PEL Rayonnant(HK) HHA HHB HengHao Trading Co., Ltd.	Taipei City Brazil British Virgin Islands British Virgin Islands Samoa Japan Samoa British Virgin Islands Vietnam Germany Hsinchu County British Virgin Islands Taoyuan City British Virgin Islands British Virgin Islands Hong Kong British Virgin Islands British Virgin Islands British Virgin Islands	Selling of hardware and software integration of high- tech systems Sales of wireless network products Investment Investment Investment Sales of household digital electronic products Investment Investment Manufacturing of wireless network products Sales of wireless network products Produces and sales of communication and electronic components Investment R&D and manufacturing of electronic materials Investment Investment Investment Investment Investment Marketing and international trade	15,692 81,593 280,731 341,561 37,224 4,130 36,293 1,551 279,180 847 36,272 257,454 27,300 387,750 97,744 558,360 1,429,235 1,454,281 310	15,692 81,593 280,731 341,561 37,224 1,341 36,293 1,551 - 847 36,272 257,454 27,300 387,750 97,744 558,360 1,429,235 1,454,281 310	1,229 968 9,050 35 1,200 0.3 1,170 50 - 25 13,140 8,651 1,820 12,500 3,151 18,000 46,882 46,882 10	11% 100% 100% 100% 100% 100% 100% 100% 100% 100% 20% 41% 21% 59% 100% 100% 100% 100% 100%	- (8,859) 202,654 865,489 73,203 2,431 76,123 18,624 198,094 18,240 336,517 83,598 - 129,599 36,706 168,237 47,291 65,034 493	(28,134) (23,651) (79,032) 22,576 3,128 (1,228) 3,136 9,324 (81,175) 9,316 19,004 35,967 - 35,967 (17,429) 53,396 (207,301) (207,315) 88	Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Investment gain(losses) recognized by Arcadyan Holding Investment gain(losses) recognized by Arcadyan Holding Investment gain(losses) recognized by TTI Investment gain(losses) recognized by TTI Investment gain(losses) recognized by Quest Investment gain(losses) recognized by AcBel Telecom Investment gain(losses) recognized by Sinoprime Investment gain(losses) recognized by Leading Images Investment gain(losses) recognized by Zhi-Pal Investment gain(losses) recognized by Rayonnant Investment gain(losses) recognized by Rayonnant Investment gain(losses) recognized by CRH Investment gain(losses) recognized by APH Investment gain(losses) recognized by APH Investment gain(losses) recognized by HHT Investment gain(losses) recognized by HHA Investment gain(losses) recognized by HHB	(Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

(Continued)

85

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 8 The following is the information on investees for the three-months ended September 30, 2019 (excluding information on investees in Mainland China): (September 30, 2019)

(September 30, 2019)	(September 30, 2019)	(September 30, 2019)	(September 30, 2019)
				(In Thousands ofNewTaiwan Dollars/ shares)
Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Ending Balance			Net income (losses) of investee	Share of profits/losses of investee	Note
				June 30, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
CBN FGH GLB Mactech	Speedlink CBNB Wah Yuen Technology Holding Ltd. and its subsidiaries Rapha Taiwan Intelligent Robotics Company, LTD.	British Virgin Islands Belgium Mauritius New Taipei City Taipei City City	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 Detectors and test strip Manufacturing of equipment	1,514 6,842 2,784,215 6,500 43,200	1,514 6,842 2,784,215 6,500 -	50 20 95,862 1,275 2,160	100% 100% 37% 100% 20%	2,120 6,457 4,479,096 322 41,313	85 (207) 20,739 (138) (15,673)	Investment gain(losses) recognized by CBN Investment gain(losses) recognized by CBN Investment gain(losses) recognized by FGH Investment gain(losses) recognized by GLB Investment gain(losses) recognized by Mactech	(Note 2) (Note 2) (Note 2)

Note 1: The carrying value had been deducted $559, 812 and $321, 435 of the Company’s stock held by Panpal and Gempal, respectively. Note 2: The transactions had been eliminated in the consolidated financial statements.

(Continued)

86

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 9 Information on investment in Mainland China:

(September 30, 2019)

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

Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	information:	information:	information:	information:	information:	information:	information:	information:
					(In Thousands of New Taiwan Dollars/ shares)
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, 2019	Investment flows		Accumulated outflow of investment from Taiwan as of March 31, 2019	Net income (losses) of the investee	Percentage of ownership	Investment income (losses) (Note 4)	Book value	Accumulated remittance of earnings in current period
					Outflow	Inflow
CPC CDT CET CSD Zheng Ying Electronics (Chongqing) Co., Ltd. BT CGS LIZ Electronics (Kunshan) Co., Ltd. LIZ Electronics (Nantong) Co., Ltd. CIC CPO CIT	Manufacturing and sales of monitors Manufacturing of notebook PCs Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self -produced products Maintenance and warranty service of notebook PCs Production and processing chipresistors, ceramic capacitors, diodes, and other latest electronic components and related precision electronic equipment; selling self-produced products Research & development, and manufacturing chip components( chip resistors, ceramic chip diode；selling self- produced products and providing after-sales service. Performing wholesale and trading business of electronic components, semiconductors, special materials for electronic components, and spare parts Research, manufacture and sales of communication devices, mobile phones, electronic computer, smart watch, and provide related technology service Manufacturing of notebook PCs Manufacturing and sales of LCD TVs Manufacturing of notebook PCs Manufacturing and sales of notebook PCs, mobile phones, and Digital products Manufacturing of notebook PCs	1,147,740 620,400 372,240 261,342 68,716 31,020 8,711 992,640 620,400 372,240 375,342 744,480	(Note 1) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 1) (Note 1) (Note 2) (Note 1) (Note 2)	1,147,740 620,400 372,240 (Note 3) (Note 3) 31,020 (Note 3) 413,497 45,599 372,240 375,342 744,480	- - - - - - - - - - - -	- - - - - - - - - - - -	1,147,740 620,400 372,240 - - 31,020 - 413,497 45,599 372,240 375,342 744,480	348,676 (50,869) (106,024) (324,650) (2,209) (32,927) 3,720 (213,184) (127,782) 177,269 98,690 416,239	100% 100% 100% 100% 51% 100% 100% 43% 48% 100% 100% 100%	348,676 (50,869) (106,024) (324,650) (1,126) (32,927) 3,720 (92,053) (60,888) 177,269 98,690 416,239	2,417,520 147,326 4,774,641 (558,547) (40,645) (232,428) (32,871) 493,621 370,844 7,722,481 2,818,796 21,064,281	- - - - - - - - - - - -

(Continued)

87

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 9 Information on investment in Mainland China:

(September 30, 2019)

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

Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	Table 9 Information on investment in Mainland China: (September 30, 2019) (i) The names of investees in Mainland China, the main businesses and products, and other	information:	information:	information:	information:	information:	information:	information:	information:
					(In Thousands of New Taiwan Dollars/ shares)
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, 2019	Investment flows		Accumulated outflow of investment from Taiwan as of March 31, 2019	Net income (losses) of the investee	Percentage of ownership	Investment income (losses) (Note 4)	Book value	Accumulated remittance of earnings in current period
					Outflow	Inflow
Sheng Bao Precision Electronics (Taicang) Co., Ltd. CST CIN CWCN CIJ CDE CIS CEC CMC CEQ Compal Precision Module (Jiangsu) Co., Ltd. Changbao Electronic Technology (Chongqing) Co., Ltd. Rayonnant (Taicang) CCI Nanjing CDCN	International trade and distribution of computers and electronic components Software and hardware R&D of computers, mobile phones and electronic components Research & development, and manufacturing latest electronic components, precision cavity mold, design and manufacturing for standard parts for molds, and selling self- produced products" Investment and consulting services Manufacturing and sales of LCD TVs Outward investment and consulting services R&D and manufacturing of notebook PCs, tablet PCs, digital products, network switches, wireless AP, and automobile electronic products Corporate management consulting, financial and tax consulting, investment consulting, and investment management consulting services R&D, manufacturing and sales of notebook PCs and related components. Also provides related maintenance and warranty services Manufacturing and selling of magnesium alloy injection molding Production and marketing of magnesium alloy molding Manufacturing and sales of aluminum alloy and magnesium alloy products 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	43,428 62,040 310,200 483,912 465,300 2,507,036 2,481,600 24,816 310,200 12,718,200 1,861,200 558,360 682,440 179,916 1,519,980	(Note 2) (Note 2) (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)	43,428 62,040 158,202 483,912 (Note 3) 2,507,036 (Note 3) (Note 3) 310,200 2,563,090 355,365 387,750 682,440 179,916 589,380	- - - - - - - - - - - - - - -	- - - - - - - - - - - - - - -	43,428 62,040 158,202 483,912 - 2,507,036 - - 310,200 2,563,090 355,365 387,750 682,440 179,916 589,380	(1,577) (2) (53,220) 89,941 90,150 108,728 109,451 (682) 81,648 448,211 (299,675) 53,396 63,908 1,149 (144,895)	100% 100% 51% 100% 100% 100% 100% 100% 100% 37% 37% 100% 100% 100% 100%	(1,577) (2) (27,142) 89,941 90,150 108,728 109,451 (682) 81,648 164,135 (109,741) 53,396 63,908 1,149 (144,895)	48,335 760 31,550 1,051,857 1,022,276 3,933,393 3,902,990 23,959 2,354,639 5,691,922 887,307 168,870 (919,340) 84,250 294,163	- - - - - - - - - - - - - - -

(Continued)

88

COMPAL ELECTRONICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Table 9 Information on investment in Mainland China:

(September 30, 2019)

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

						(In Thousands of New Taiwan Dollars/ shares)	(In Thousands of New Taiwan Dollars/ shares)	(In Thousands of New Taiwan Dollars/ shares)	(In Thousands of New Taiwan Dollars/ shares)	(In Thousands of New Taiwan Dollars/ shares)	(In Thousands of New Taiwan Dollars/ shares)	(In Thousands of New Taiwan Dollars/ shares)	(In Thousands of New Taiwan Dollars/ shares)
	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, 2019	Investment flows		Accumulated outflow of investment from Taiwan as of March 31, 2019	Net income (losses) of the investee	Percentage of ownership	Investment income (losses) (Note 4)	Book value	Accumulated remittance of earnings in current period
						Outflow	Inflow
Hanhelt Arcadyan SVA Arcadyan CNC THAC HengHao HengHao Optoelectronic Technology (Kunshan) Co., Ltd. (“HengHao Kunshan”) Lucom Display Technology (Kunshan) Limited(“Lucom”)		R&D and manufacturing of electronic communication equipment Manufacturing of household electronics products Production of touch panels and related components R&D and sales of wireless network products Manufacturing and wireless network products Manufacturing of notebook PCs and related modules	62,040 406,362 386,199 103,917 1,240,800 465,300	(Note 1) (Note 1) (Note 1) (Note 1、 10) (Note 1) (Note 2)	62,040 571,388 (Note 7) 341,561 (Note 8) 35,673 1,234,689 201,600 (Note 12)	- - - - - -	- - - - - -	62,040 - 571,388 341,561 35,673 1,234,689 201,600	31 5,248 22,576 3,136 (207,837) 465	100% 100% 100% 100% 100% 100%	31 5,248 22,576 3,136 (207,837) 465	3,071 128,361 865,458 75,596 (89,579) 136,686	- - - - - -

• (ii) Limitation on investment in Mainland China:

(In Thousands of USD)

			(In Thousands of USD)
Names of Company	Accumulated Investment in Mainland China as of September 30, 2019 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	16,891,538 948,623 1,453,969 (US$544,537) (Note 5) (US$30,581) (US$46,872)	23,304,675 (US$751,279) 948,623 (US$30,581) 1,453,969 (US$46,872)	(Note 6) 5,735,524 (Note 13)

Note 1: Indirectly investment in Mainland China through companies registered in the third region.

• Note 2: Indirectly investment in Mainland China through an existing company registered in the third region.

• Note 3: Investees held by Kunshan Botai Electronics Co., Ltd. (“BT”), Compal Investment (Jiansu) Co., Ltd. (“CIJ”), Compal Electronic (Sichuan) Co., Ltd. (“CIS”), and Compal Electronics (China) Co., Ltd. (“CPC”) through their own funds.

• Note 4: The investment income (loss), except for Compal Precision Module (Jiangsu) Co., Ltd., was determined based on the financial report reviewed by the CPAs.

• Note 5: Including the investment amount of sold or dissolved companies, including Beijing Compower Xuntong Electronic Technology Co., Ltd., VAP Optoelectronics (NanJing) Corp., Flextronics Technology (Shanghai) Ltd. Lucom, LCFC (HeFei) Electronics Technology Co., Ltd. and the increased investment amount form merging with Compal Communication Co., Ltd.

Note 6: As the Company has obtained the certificate of being qualified for operating headquarters, issued by Industrial Development Bureau, MOEA, the upper limit on investment in mainland China is not applicable.

Note 7: Arcadyan paid US$18,420 thousands and acquired 100% shares of SVA Arcadyan from Accton Asia through Arcadyan Holding in 2010.

Note 8: Arcadyan paid US$8,561 thousands and acquired 100% shares of CNC from Just through Arcadyan Holding in 2007.

Note 9: SVA Arcadyan decreased its capital amounting to US$15,000 thousands to offset accumulated losses in March 2009.

Note 10:Arcadyan’s subsidiary TTI obtained the control over THAC with US$1,150 thousands on February 28, 2013 (the date of stock transferring).

• Note 11:The amounts in New Taiwan Dollars were translated at the exchange rates at the balance sheet date or the average exchange rate.

• Note 12:The Company had an accumulated investment amounting to US$7,350 thousands in the previous years. In the first half of 2014, HengHao paid the Company and LG US$3,184 thousands and US$3,315 thousands, respectively, for organization restructure, to obtain 100% ownership of Lucom.

Note 13:The net equity of HengHao is negative at December 31, 2018.

(iii) Significant transactions:

For the nine months ended September 30, 2019, the significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions” and “Business relationships and significant intercompany transactions”.