MERRY — AGM Information 2017

Jul 20, 2017

Merry Electronics Co., Ltd. Code: 2439

Merry Electronics Company Limited

Handbook for the 2017 Annual Shareholders’ Meeting

(TRANSLATION)

Meeting Date: June 14, 2017

(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.)

Table of Contents

I. Meeting Procedure ................................................................................................... 1 II. Meeting Agenda ...................................................................................................... 2 1. Report Items ...................................................................................................... 3 2. Recognition Matters .......................................................................................... 5 3. Proposed Resolutions........................................................................................ 7 4. Extemporary Motion ....................................................................................... 12 III. Attachment ........................................................................................................... 13 1. 2016 Business Report ..................................................................................... 13 2. Supervisors' Review Report............................................................................ 17 3. CPA's Audit Report, Individual Financial Statements and Consolidated Financial Statements ........................................................................................... 18 4. 2016 Profit Distribution Table ........................................................................ 45 5. Comparison Table of Amendments to the "Operation Procedures for the Acquisition or Disposal of Assets ....................................................................... 46 6. Regulations Governing the Issuance of New Restricted Employee Shares of 2017 .................................................................................................................... 68 IV. Appendixes ........................................................................................................... 75 1. Operation Procedures for the Acquisition and Disposal of Assets (before amendments) ....................................................................................................... 75 2. Rules of Procedure for Shareholders' Meeting ............................................. 105 3. Articles of Incorporation ................................................................................ 111 4. Shareholding Status of Directors and Supervisors ....................................... 119 5. Dividend Policy ............................................................................................ 121 6. The impact of the share dividend proposed in this annual shareholders' meeting on the operational performance of the Company and the earnings per share .................................................................................................................. 122 7. Explanation for the proposal excluded from this annual shareholders' meeting ........................................................................................................................... 122

(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.)

I. Meeting Procedure

Merry Electronics Co., Ltd.

Meeting Procedure of the Annual Shareholders' Meeting of 2017

A. Reporting the attending shares

B. Declaring the meeting to begin

• C. Speech of the chairperson

D. Report Items

E. Recognition Matters

F. Proposed Resolutions

• G. Extemporary Motion

H. Meeting Adjourned

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II. Meeting Agenda

Merry Electronics Co., Ltd.

Meeting Agenda of the Annual Shareholders' Meeting of 2017

Time: 9:00 a.m., June 14, 2017 (Wednesday)

Venue: The Company's basement (No.22, 23rd Rd., Industrial Park, Nantun Dist., Taichung City)

Attendance: All shareholders and the representatives

Chairperson of the meeting: Lu-Lee Liao, the Chairperson

A. Speech of the Chairperson

B. Report Items

  - (A) To report business of 2016

  - (B) Supervisors’ review report on 2016 the financial statements

  - (C) To report 2016 employees’ profit sharing bonus and directors’ /supervisors’ compensation

  - (D) To report the issuance of new shares for capital increase in cash by private placement

• C. Recognition Matters

• (A) To accept 2016 Business report, individual financial statements and consolidated financial statements

• (B) To approve the proposal for distribution of 2016 earnings

• D. Proposed Resolutions

• (A) To approve the release of prohibition restriction on the independent director, Duh, Edward Shaw-Yau, from participation in competitive business.

• (B) To revise the Company’s "Operation Procedures for Acquisition and Disposal of Assets"

• (C) To approve the issuance of new restricted employee shares

• E. Extemporary motions

• F. Meeting adjourned

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Report Items

A. To report business of 2016. Please take note.

Explanation: For the business report, please refer to Attachment 1 on page 13 to page 16.

B. Supervisors’ review report on the 2016 financial statements. Please take note.

Explanation: For the supervisors’ audit report on the financial statements of 2016, please refer to Attachment 2 on page 17.

C. To report 2016 employees’ profit sharing bonus and directors’/supervisors’ compensation. Please take note.

Explanation: (A) If the Company makes profits in the current year, it shall set aside 5% to 10% as employees’ profit sharing bonus and up to 2% as compensation of directors and supervisors in accordance with the Articles of Incorporation.

(B) With respect to 2016 employee’s profit sharing bonus and directors’/supervisors’ compensation, the board of directors dated 23 February 2017 has resolved that the Company shall set aside 5% (NT$128,625,515 in total) as employees’ profit sharing bonus and set aside 1.7% (NT$43,732,675 in total) as directors’/supervisors’ compensation. Both employee’s profit sharing bonus and directors’/supervisors’ compensations will be paid in cash. The above resolved amounts have no difference from the amounts listed in the estimated recognized costs of 2016.

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• D. To report the issuance of new shares for capital increase in cash by private placement. Please take note.

• Explanation: The Company's special shareholders' meeting dated 22 January 2016 has resolved to conduct the private placement of common shares, which will be conducted once within one year after the resolution of the shareholders’ meeting. The private placement shall be handled within one year after the resolution of the shareholders' meeting in accordance with Paragraph 7 of Article 43-6 of the Securities and Exchange Act. The said private placement has not yet been approved by the Investment Commission, Ministry of Economic Affairs and thus the private placement has not been handled.

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Recognition Matters

Recognition 1 (Proposed by the board of directors)

Subject: To accept 2016 Business report, individual financial statements and consolidated financial statements. Please recognize.

• Explanation: (A) The board of directors has prepared the statements and records of business report, profit distribution table, individual financial statements and consolidated financial statements of 2016, forwarded the same to the supervisors for review and issuing the supervisors' review report for recordation in accordance with Articles 20 and 228 of the Company Act.

• (B) For the abovementioned business report, please refer to Attachment 1 on page 13 to page 16. For the statements and records of the individual financial statements and consolidated financial statements, please refer to Attachment 3 on page 18 to page 44.

Resolution:

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Recognition 2 (Proposed by the board of directors)

Subject: To approve the proposal for distribution of 2016 earnings. Please recognize.

• Explanation: (A) Considering the future operation of the Company, for profit distribution of 2016, in addition to the legal reserve provided in accordance with the Articles of Incorporation of the Company, cash dividends of NT$1,736,538,136 will be distributed to shareholders. Namely, cash dividends of NT$9.5 per share will be distributed. The profits of 2016 will be distributed first for the above purpose.

• (B) For the profit distribution table of 2016 prepared by the board of directors in accordance with the Articles of Incorporation, please refer to Attachment 4 on page 45.

• (C) Cash dividends will be distributed according to the shareholding percentage recorded in the shareholders roster as of the ex-dividend date and rounded down to an integer. The sum of the fractional amount will be listed as other income of the Company. It is proposed to authorize the board of directors to handle determination of the ex-dividend date and the distribution related matters at its discretion.

• (D) If subsequently due to domestic non-secured convertible bonds of the Company, purchase of treasury shares, issuance of new restricted employee shares or other reasons, the total amount of issued shares changes, which affects the payout ratio, it is proposed to authorize the board of directors to handle at its discretion after the approval of the shareholders' meeting.

Resolution:

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Proposed Resolutions

Proposal 1 (Proposed by the board of directors)

Subject: To approve the release of prohibition restriction on the independent director, Duh, Edward Shaw-Yau, from participation in competitive business. Please discuss.

• Explanation: (A) According to Article 209 of the Company Act, a director who does anything for himself/herself or on behalf of another person that is within the scope of the company's business, shall explain to the shareholders' meeting about the essential contents of his/her act and receive the meeting's approval

• (B) The independent director, Duh, Edward Shaw-Yau, concurrently acts as the Chairperson of Orient Semiconductor Electronics, Ltd., which concurrently operates a business similar to the Company. To cooperate with actual business needs, it is proposed for the consent of the shareholders' meeting to release the prohibition restriction on the said director to the extent of no harm on the Company's interests.

Resolution:

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Proposal 2 (Proposed by the board of directors)

Subject: To revise the Company’s "Operation Procedures for Acquisition and Disposal of Assets". Please discuss.

• Explanation: The amendment is conducted in accordance with the ruling of the Financial Supervisory Commission dated 9 February 2017 for the amendment to the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies". For the comparison table of the amended Articles, please refer to Attachment 5 on page 46 to page 67.

Resolution:

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Proposal 3 (Proposed by the board of directors)

Subject: To approve the issuance of new restricted employee shares. please discuss.

• Explanation: In order to attract and retain required professionals, encourage employees, and boost employees' coherence, so as to create the interests of the Company and shareholders together, it is proposed to issue new restricted employee shares in accordance with Article 267 of the Company Act and the "Regulations Governing the Offering and Issuance of Securities by Securities Issuers" (hereafter, the "Issuance Regulations"). The related matters of this topic are stated as follows:

• A. Total issuance: The total issuance is 1,500,000 shares of new common shares and par value of each share is NT$10, which constitute the total issued amount of NT$15,000,000.

• B. Conditions of issuance

• (A) Issuance price: The shares are issued gratuitously with an issuance price of NT$0 for each share.

• (B) Vesting conditions:

• The employees who meet the personal performance, company performance and service conditions prescribed in the "Regulations Governing the Issuance of New Restricted Employee Shares of 2017" without any violation of the said regulations.

• (C) Failure in satisfying of vesting condition: The Company may retrieve, without remuneration, all new restricted employee shares distributed to such employees and cancel such.

• C. Qualifications and number of shares distribution:

• (A) The employees qualified for shares distribution shall be a full-time employees who has been employed on or before the distribution date of the new restricted employee shares and whose performance has satisfy certain qualifications. The employees who already holds 10% or more of the outstanding common shares of the Company is not qualified for distribution.

• (B) The employees qualified for share distribution shall be any of the following employees:

• Key personnel related to future development of the Company,

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Personnel with performance which is fairly valuable to the Company, or

New employees who are essential to the Company.

• (C) The actual number of new restricted employee shares distributed to an employee will be subject to the job tenure, level of position, performance, overall contribution, special credit or any other necessary factor for management reference and shall be submitted to the board of directors for approval after being confirmed by the chairperson. However, when distribution is made to a manager, it shall also be subject to a prior consent of remuneration committee.

• (D) The cumulative number of shares which could be subscribed by the employee stock options issued by the Company to any employee in accordance with Paragraph 1, Article 56-1 of the Issuance Regulations, together with the new restricted employee shares obtained by the same employee, shall not exceed 0.3% of the outstanding number of shares. The above amount, plus the cumulative number of shares which could be subscribed by the employee stock options issued by the Company to any employee in accordance with Paragraph 1, Article 56 of the Issuance Regulations, shall not exceed 1% of the outstanding shares. However, with special approval from the central competent authority of the relevant industry, the total number of employee stock options and new restricted employee shares obtained by a single employee may be exempted from the above-mentioned restriction.

• D. The necessity of issuing the said new restricted employee shares:

• The purposes are to attract and retain the required professionals, inspire the employees and enhance internal cohesion, as well as to discover interests for the Company and the shareholders and to ensure that the interests of the officials and employees of the Company are connected with interests of the shareholders.

• E. Possible costs, the dilution of the Company's earnings per share and other possible impacts on shareholders’ equity.

  • (A) Amount of possible costs:

• If the Company's average close price for 30 business days before 26 April 2017, NT$154.53 per share, is used for the calculation,

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• when vesting conditions are all satisfied, the sum of possible costs is estimated to be NT$231,795(in thousands of dollars), according to the vesting conditions, the cost apportioned each year will be NT$69,539(in thousands of dollars), NT$69,539(in thousands of dollars) and NT$92,718(in thousands of dollars) respectively.

• (B) The dilution of the Company's earnings per share and other impacts on the rights and interests of shareholders:

• If it is calculated based on the number of outstanding shares of 192,143,309, the dilution of the earnings per share each year will be NT$0.362, NT$0.362 and NT$0.483 respectively. The dilution of the Company's earnings per share for subsequent years is considered to be limited and has no material impact on shareholders’ equity.

F. Other important agreed matters:

• The new restricted employee shares issued shall be delivered to a trust for custody before the satisfaction of vesting conditions.

• G. The issuance shall be handled by submitting application(s) to the competent authority once or several times within one (1) year after the resolution date of the shareholders' meeting. The shares may be issued at once or in installments, depending on the actual needs of the Company, within one year starting from the date of receipt of the notice of effective registration from the competent authority. The actual date of issuance shall be stipulated by the chairperson under authorization by the board of directors.

• H. If the terms and conditions set out for the said issuance of new restricted employee shares need to be amended due to the order(s) from the competent authority, the amendment(s) to relevant laws and regulations, or to respond to the financial market status or objective environment, it is proposed to authorize the board of directors to handle at its discretion after the approval of the shareholders' meeting.

• I. Relevant restrictions and important agreed matters or others for the said issuance of new restricted employee shares shall be handled in accordance with relevant laws and regulations, and the Company's "Regulations Governing the Issuance of New Restricted Employee

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Shares of 2017". Please refer to Attachment 6 on page 68 to page 74 of this manual.

Resolution:

Extemporary Motion

Meeting Adjourned

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III. Attachment

Attachment 1

Merry Electronics Co., Ltd. 2016 Business Report

I. Operation Policies

1. The main operation philosophy for 2016 is been “enthusiasm and energy, fearlessness of change, enhancing the competiveness, and opening a new prospect.”

2. To locate resources from the old competiveness, develop the new advantage, and to integrate the strength of steadiness and innovation.

3. To utilize the external resources properly and pay attention to the modularization and configurability of internal assets, so as to establish an agile organization.

4. To cultivate innovation dynamics through organizational and structural management over innovation, and to be broadly applied in every activity of the Company.

5. To set KPI and objective in every functional aspect, and periodically check and improve.

II. General Condition of Implementation

Recovery of global economy had been proceeding at a slow pace during 2016. The quantitative easing monetary policies adopted successively by Europe, the U.S. and Japan did not result in a rise of economy, and the economy had been caught into a “new mediocre” plight where low growth, low interest rates and low inflation take place. Therefore, more and more countries had adopted restriction over trade flows and it gave rise to a global trade protectionism, which led to a downward sliding of economic growth rate for export-oriented countries such as Taiwan, Singapore and Hong Kong. Fortunately, the efforts the Company had paid in past years have begun to come into results. Due to cooperation and endeavoring of every employee of the Company, the revenue, profit and earnings per share have all risen to a historical height in 2016. The market in 2017 will be as challenging as before, yet the Company will front the challenges with the operation policy of “integration, innovation, keeping up with the times, and sustainable development” and the expectation of sustenance of the good performance.

The Company was benefited from the unexpected market needs for

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new products after launching of such, which results in growing of business performance throughout seasons. Lean management had been implemented in the factories, including establishment of KPIs to improve yield rate and efficiency. In regards of the supply chain, the purchase strategy had been extended and the cost competitiveness had been elevated. Funds from China had been introduced to form a strategic alliance for cost efficiency. Being benefited from the right strategies and efforts rendered by all employees, the business performance climbed up to a historical height in 2016. Such fruitful results had been cultivated in the nutrient soil of long-term devotion by Merry, and the operation philosophy of Merry could be accordingly proved to be correct to build a sustainable value.

With a lookout into year 2017, the operation policy of the Company is “integration, innovation, keeping up with the times, and sustainable development.” To face the harsh economy and the changing market, the Company will pay more attention and action to “integration” as well as to maintain the resources which have been invested. With regards of vertical division of work and horizontal integration, the internal functions are integrated, interaction and comprehensive performance between and of each BU are enhanced, the overall competence of the supply chain have been elevated, capabilities of manufacturing and new technology are strengthened, as well as a thorough cost management project in order to improve the overall core competence for challenges from the market. The rise of post-smartphone era leads the Company to more enthusiastic devotion into the fast-growing sectors of smart devices, entertainment and communication in such era, along with continuously innovation for enhancing added value and deepening differences. The Company still engages in smartphones, personal computer and tablet, despite the growth of such has been slowed down, with the expectation of that the integration and innovation will bring to a comprehensive outcome, establish a long-term competitive advantage, and to lead the Company to keep up with the time and sustainable development.

III. Results of Implementation of Business Plan

The consolidated revenue of the Company and its subsidiaries is NT$16,939,274(in thousands of dollars), which constitutes a NT$4,699,040(in thousands of dollars) and 38.39% growth from the 2015 revenue, which is NT$12,240,234(in thousands of dollars). The total profit

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before tax is NT$2,470,306(in thousands of dollars), which constitutes a NT$1,657,006(in thousands of dollars) and 203.74% growth from the 2015 profit before tax, which is NT$813,300(in thousands of dollars). The increase of revenue and other profits serves as the major factor for the above growth.

IV. Financial Revenue and Expenses and Profitability Analysis

1. Financial Revenue and Expenses Unit: NT$ in thousands of dollars

Account	Consolidated number of 2016	Consolidated number of 2015
Other incomes	84,846	62,551
Othergains andlosses	682,365	(42,424)
Financialcosts	(29,955)	(23,614)
Gains and losses of affiliates for using equity method and joint ventures accounted	79,661	(35,727)
Total	816,917	(39,214)

1. Profitability Analy

	Subject	Consolidated number of 2016	Consolidated number of 2015
Financial structure (%)	Debt to asset ratio	54.79%	48.97%
Solvency (%)	Currentratio	164.77%	198.41%
	Liquidityratio	146.14%	157.47%
Profitability (%)	Return on assets	17.89%	6.20%
	Return on shareholders' equity	31.53%	10.83%
	Operating income to paid-in capital ratio	133.48%	43.96%
	Earnings per share after tax(NTD)	11.00	3.48

• V. Research and Development

• In 2016, the consolidated number of new products and extended products developed is 371.

• In 2016, the consolidated number of patents approved is 28 and the consolidated number of patents under review is 33.

• In 2016, the consolidated expenses for research and development is NT$703,473(in thousands of dollars), which increases NT$62,831(in

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thousands of dollars) than the 2015 amount, which is NT$640,642(in thousands of dollars), and accounts for 4.15% of the consolidated sales revenue.

VI. Execution of the Budget: Not applicable as no financial forecast has been issued.

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Attachment 2

Merry Electronics Co., Ltd. Supervisors' Review Report

The undersigned, being the supervisors of the Company, hereby confirm that the 2016 business report, profit distribution table and individual financial statement and consolidated financial statement, which were audited and issued by certified public accountants Yang, Ming-Jing and Hong, Shu-Hua from PricewaterhouseCoopers Taiwan, are not incorrect and issue a report thereupon in accordance with Article 219 of the Company Act for your review.

To: 2017 Annual Shareholders’ Meeting of Merry Electronics Co., Ltd.

Supervisor: Liao, Ben-Lin Supervisor: Cho, Sheng-Chung Supervisor: Hung, Yun-Chuan Supervisor: TONG-CIAN Investment Corporation Representative: Liao, Keng-Pin

February 24, 2017

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Attachment 3:

CPA's Audit Report, Individual Financial Statements and Consolidated Financial Statements

INDEPENDENT AUDITORS REPORT

(106)_Tsai-Shen-Bao-Tze No. 16003312

To Merry Electronics Co., Ltd.

Opinion

We have audited the accompanying individual balance sheets as of December 31, 2016 and 2015, and individual statements of comprehensive income, changes in equity and cash flows for the years from January 1 to December 31, 2016 and January 1 to December 31, 2015 and the notes to the individual financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying individual financial statements present fairly, in all material respects, the individual financial position of Merry Electronics Co., Ltd as of December 31, 2016 and 2015, and its individual financial performance and its individual cash flows for the years from January 1 to December 31, 2016 and January 1 to December 31, 2015 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Individual Financial Statements section of our report. Our people subject to the independency requirement are independent from Merry Electronics Co., Ltd in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

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Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the individual financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the individual financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Sales Revenues Cut-Off of Distribution Warehouse

Description

Please refer to Note 4 (27) to the individual financial statement for the details of the accounting policies of sales revenues recognition.

The sales of Merry Electronics Co., Ltd. are mainly divided into 2 types, one is direct sales, and the other is warehouse distribution, which accounts for 20 percent of the sales revenues. The revenues of the warehouse distribution will not be recognized until the goods were picked up by the customers (risk and compensation are transferred). Merry Electronics Co., Ltd. recognizes the revenues based on the movement of the inventories of the warehouse, and mainly relies on the reports provided by the custodian of the warehouse or the pick-up reports recorded on the web platform of the customers. However, due to the dispersion of the warehouses and numerous custodians, the frequencies of the information provided by the custodians are not exactly the same. As such, given that the revenue recognition process highly involves manual tasks, the timing of revenue recognition may be inappropriate or the figures of the book of inventories may disagree with the physical stocks. Therefore, we highlight sales revenues cut-off of distribution warehouse as one of the key audit matters.

The Responsive Audit Procedures

We conducted audit procedures as follows:

1. We understand and evaluate the operational procedure and the internal control of the sales revenues of the distribution warehouse, and design the relevant test procedures, including:

2. (1) To interview the staff of each department of the operational procedure of the sales revenues of the distribution warehouse and acquire the revenue recognition procedures, and then confirm the conformity with the operational measures.

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• (2) To understand and evaluate the internal control of distribution operation of the distribution warehouse (to check the trading terms, the timing of transfer of the ownership and verify the figures on the evidence voucher with the figures on the invoice, so as to verify the transactions being recorded in the appropriate period) so as to assure the correctness of the timing of the revenue recognition.

• We conducted cut-off tests on transactions of the sales revenues of the distribution warehouse within certain periods before and after the cut-off date, including verifying output records of the warehouse and movement of the inventory book and cost transfer of the sales being recorded in the appropriate period.

• We perform substantive tests procedures, such as confirmation on the ending balance of the accounts receivable from distribution warehouse, physical count on inventories and collection made during subsequent periods, etc., to verify that the accounts receivables and sales revenues were recorded in the correct period to be in line with the revenue recognition policy, and to assure the adjustment entries were made properly on the material discrepancies.

The influence of major events and transactions happened during the financial report period.

Description

Please refer to Note 4 (12) to the individual financial statement for the details of basis of investment accounting policies for using equity method.

In August, 2016, Merry Electronics (SUZHOU) Co., Ltd., the subsidiary of Merry Electronics Co., Ltd., carried out a capital increase in cash which were fully subscribed by Lanto Electronic (Kunshan) Ltd., the investment amount of which is RMB$530,000(in thousands of dollars) and 51% shares in Merry Electronics (SUZHOU) Co., Ltd. was obtained. As a result, the percentage of shareholding in Merry Electronics (SUZHOU) Co., Ltd. by Merry Electronics Co., Ltd. decreased from 100% to 49% and control was lost, and a disposal gain of NT$472,655(in thousands of dollars) was recognized. Please refer to Note 6 (7) to the consolidated financial statement for the details. Therefore, we highlight the transaction as one of the key audit matters.

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The Responsive Audit Procedures

We conducted the audit procedures as follows:

We conduct relevant inspection and trial on investments using equity method of the Company, including:

1. We perform inspection and trial related to investments using equity method, including:

2. (1) To check the decrease of shareholding percentage to confirm no abnormal situation.

3. (2) To check the contracts, minutes, operational license post capital increase, and audit report of registered capital, etc., to confirm the consistency with transaction records and existence of the transaction.

4. (3) To check accounting records of transaction of disposal to confirm no abnormal situation.

5. (4) To confirm the records of gain or loss from disposal and fair value of consideration are consistent with the accounting book.

6. We assess the appropriateness of evaluation of fair value conducted by the external appraisal institution, including:

7. (1) To assess the independence and appropriateness of the external appraisal institution.

8. (2) To assess whether the appraisal methods adopted by the external appraisal institution is prevailing and appropriate.

9. (3) To check the appropriateness of parameters and formula used in the appraisal model.

10. (4) To recalculate the correctness of fair value.

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

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

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

Those charged with governance (including independent directors and supervisors) are responsible for overseeing financial reporting process of Merry Electronics Co., Ltd.

Auditors’ Responsibilities for the Audit of the Individual Financial Statements

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

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

1. Identify and assess the risks of material misstatement of the individual financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omission, misrepresentation, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control of Merry Electronics Co., Ltd.

3. Evaluate the appropriateness of accounting policies used and the reasonableness

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• of accounting estimates and related disclosure made by management.

• Based on the audit evidence obtained, conclude on the appropriateness of management’s use of the going concern basis of accounting and, whether a material uncertainty exists related to events or conditions that may cast significant doubt on ability of Merry Electronics Co., Ltd. to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the individual financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation (including relevant notes), structure and content of the individual financial statements, including the disclosures, and whether the individual financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within Merry Electronics Co., Ltd. to express an opinion on the individual financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

For the matters communicated with those charged with governance, we determine those key audit matters in the audit of the individual financial statements for the year ended December 31, 2016. We describe these matters in our auditors' report unless law or regulations precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such

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communication.

Certified Public Accountants

Ming-Jing Yang

Shu-Hua Hung

PricewaterhouseCoopers

Taipei, Taiwan The Republic of China

Former Securities Management Commission under the Ministry of Finance Approval No.: (81) Tai-Tsai-Chen (6) No. 33095 (85) Tai-Tsai-Chen (6) No. 68701

February 24, 2017

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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) MERRY ELECTRONICS CO.,LTD. INDIVIDUAL BALANCE SHEETS

					(In Thousands	(In Thousands	of New Taiwan Dollars)	of New Taiwan Dollars)
				December 31,2016			December 31,2015
	Assets	Notes		Amount	%		Amount	%
	Current assets
1100	Cash and cash equivalents	(Note 6.1)	$	3,509,406	25	$	1,627,291	17
1110	Current financial assets at fair	(Note 6.2)
	value through profit or loss			276,254	2		8,219	-
1125	Current available-for-sale	(Note 6.3)
	financial assets			156,306	1		148,665	2
1170	Accounts receivable, net	(Note 6.4)		3,201,398	23		2,168,184	22
1180	Notes receivable due from related	(Note 7)
	parties, net			5,799	-		12,381	-
1200	Other receivables			169,219	1		664	-
1210	Other receivables due from	(Note 7)
	related parties			74,052	1		71,929	1
130X	Inventories	(Note 6.5)		166,952	1		132,527	1
1410	Prepayments			8,642	-		14,228	-
1479	Other current assets, others			12,770	-		7,544	-
11XX	Total current assets			7,580,798	54		4,191,632	43
	Non-current assets
1523	Non-current available-for-sale	(Note 6.3)
	financial assets			394,222	3		213,803	2
1550	Investments accounted for using	(Note 6.6)
	equity method, net			5,532,903	40		4,917,688	51
1600	Property, plant and equipment	(Note 6.7)		71,590	1		78,832	1
1780	Intangible assets	(Note 6.8)		294,727	2		171,676	2
1840	Deferred tax assets	(Note 6.23)		38,927	-		36,471	-
1990	Total other non-current assets,
	others			15,511	-		96,287	1
15XX	Total non-current assets			6,347,880	46		5,514,757	57
1XXX	Total assets		$	13,928,678	100	$	9,706,389	100

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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) MERRY ELECTRONICS CO.,LTD. INDIVIDUAL BALANCE SHEETS

Liabilities And Equity

(In Thousands of New Taiwan Dollars) December 31,2016 December 31,2015 Notes Amount % Amount % (Note 6.10) $ 161,250 1 $ - - (Note 6.2) 3,949 - 2,096 - 10,650 - 410 - (Note 7) 4,047,570 29 1,549,030 16 (Note 6.11) 338,998 2 198,037 2 (Note 7) 33,594 - 95,924 1 (Note 6.23) 211,851 2 109,645 1 221,367 2 116,010 1 5,029,229 36 2,071,152 21 (Note 6.12) 1,477,413 10 1,457,048 15 (Note 6.23) 371,299 3 262,570 3 (Note 6.13) 105,557 1 118,867 1 1,954,269 14 1,838,485 19 6,983,498 50 3,909,637 40 (Note 6.15) 1,850,625 13 1,850,273 19 15,420 - - - (Note 6.16) 1,523,507 11 1,342,694 14 (Note 6.17) 976,007 7 911,876 9 269,144 2 269,144 3 2,613,534 19 1,257,083 13 (Note 6.18) ( 199,999 ) ( 1 ) 268,740 3 (Note 6.15) ( 103,058 ) ( 1 ) ( 103,058) ( 1) 6,945,180 50 5,796,752 60 (Note 9) (Note 11) $ 13,928,678 100 $ 9,706,389 100

Current liabilities 2100 Short-term borrowings 2120 Current financial liabilities at fair value through profit or loss 2170 Accounts payable 2180 Accounts payable to related parties 2200 Other payables 2220 Other payables to related parties 2230 Current tax liabilities 2399 Other current liabilities, others 21XX Total current liabilities Non-current liabilities 2530 Total bonds payable 2570 Total deferred tax liabilities 2640 Net defined benefit liability, non-current 25XX Total non-current liabilities 2XXX Total liabilities Equity Share capital 3110 Ordinary share 3140 Advance receipts for share capital Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings (accumulated deficit) Other equity, others 3400 Total other equity interest 3500 Treasury shares 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments Significant events after the balance sheet date 3X2X Total liabilities and equity

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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) MERRY ELECTRONICS CO.,LTD. INDIVIDUAL STATEMENTS OF COMPREHENSIVE INCOME

List 4000 Operating revenue 5000 Operating costs 5900 Gross profit (loss) from operations Operating expenses 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Net operating income (loss) Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7070 Share of loss of associates and joint ventures accounted for using equity method 7000 Non-operating income and expenses 7900 Profit (loss) from continuing operations before tax 7950 Tax expense (income) 8200 Profit (loss) Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains (losses) on re-measurements of defined benefit plans 8330 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 8310 Components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation 8362 Unrealized gains (losses) on valuation of available-for-sale financial assets 8380 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 8360 Income tax related to components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income, net 8500 Total comprehensive income Basic earnings per share 9750 Total basic earnings per share Diluted earnings per share 9850 Total diluted earnings per share

(In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2016 2015 Notes Amount % Amount % (Note 7) $ 15,617,796 100 $ 10,578,633 100 (Note 6.5,6.21,6.22,7) ( 13,435,198) ( 86) ( 9,080,067) ( 86) 2,182,598 14 1,498,566 14 (Note 6.21,6.22) ( 160,628 ) ( 1) ( 117,611) ( 1 ) ( 386,912 ) ( 2) ( 296,388) ( 3 ) ( 400,004) ( 3) ( 375,663) ( 3) ( 947,544) ( 6) ( 789,662) ( 7) 1,235,054 8 708,904 7 (Note 6.19) 37,772 - 44,574 - (Note 6.2,6.20) 152,400 1 41,986 - ( 24,227 ) - ( 22,201) - (Note 6.6) 999,153 6 ( 21,209) - 1,165,098 7 43,150 - 2,400,152 15 752,054 7 (Note 6.23) ( 389,012) ( 2) ( 110,749) ( 1) $ 2,011,140 13 $ 641,305 6 (Note 6.13) ( $ 3,520 ) - ( $ 3,347) - (Note 6.6) 4,451 - - - (Note 6.23) 599 - 569 - 1,530 - ( 2,778) - (Note 6.18) ( 305,836 ) ( 2) 81,155 1 (Note 6.3) 57,200 - ( 8,230) - (Note 6.18) ( 113,559 ) ( 1) ( 12,413) - (Note 6.23) 69,029 1 ( 8,653) - ( 293,166) ( 2) 51,859 1 ($ 291,636) ( 2) $ 49,081 1 $ 1,719,504 11 $ 690,386 7 (Note 6.24) $ 11.00 $ 3.48 (Note 6.24) $ 10.27 $ 3.34

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MERRY ELECTRONICS CO.,LTD. INDIVIDUAL STATEMENTS OF CHANGES IN EQUITY

2015 BALANCE,JANUARY 1,2015 Premium on convertible bonds Appropriations of prior year’s earing(1) Legal capital reserve Cash dividends Net income in 2015 Purchase of treasury share Difference between price and book value from actual acquisition or disposal of subsidiaries Total comprehensive income in 2015 BALANCE,DECEMBER 31,2015 2016 BALANCE,JANUARY 1,2016 Common stocks from Convertible bonds Issuance of restricted stock Retirement of restricted stock Appropriations of prior year's earing (Note 2) Legal reserve Cash dividends Net income in 2016 Total comprehensive income in 2016 BALANCE,DECEMBER 31,2016	Notes		Share capital	Share capital	Share capital				Capital Surplus	Capital Surplus	Capital Surplus					(In Retained Earnings	(In Retained Earnings	Thousands of	Thousands of	Thousands of	New Taiwan Dollars, Except Dividends Per Share) Others Unrealized gains (losses) on available-fo r-sale financial assets Other equity －o t h e r s Treasury shares Total equity $ 30,746 $ - $ - $ 6,050,545 - - - 68,746 - - - - - - - ( 888,131 ) - - - 641,305 - - ( 103,058 ) ( 103,058 ) - - - ( 21,736 ) 10,442 - - 49,081 $ 41,188 $ - ($103,058 ) $ 5,796,752 $ 41,188 $ - ($ 103,058 ) $ 5,796,752 - - - 3,835 - ( 177,330 ) - 15,420 - 1,757 - 1,757 - - - - - - - ( 592,088 ) - - - 2,011,140 50,151 - - ( 291,636 ) $ 91,339 ($175,573 ) ($103,058 ) $ 6,945,180	New Taiwan Dollars, Except Dividends Per Share) Others Unrealized gains (losses) on available-fo r-sale financial assets Other equity －o t h e r s Treasury shares Total equity $ 30,746 $ - $ - $ 6,050,545 - - - 68,746 - - - - - - - ( 888,131 ) - - - 641,305 - - ( 103,058 ) ( 103,058 ) - - - ( 21,736 ) 10,442 - - 49,081 $ 41,188 $ - ($103,058 ) $ 5,796,752 $ 41,188 $ - ($ 103,058 ) $ 5,796,752 - - - 3,835 - ( 177,330 ) - 15,420 - 1,757 - 1,757 - - - - - - - ( 592,088 ) - - - 2,011,140 50,151 - - ( 291,636 ) $ 91,339 ($175,573 ) ($103,058 ) $ 6,945,180	New Taiwan Dollars, Except Dividends Per Share) Others Unrealized gains (losses) on available-fo r-sale financial assets Other equity －o t h e r s Treasury shares Total equity $ 30,746 $ - $ - $ 6,050,545 - - - 68,746 - - - - - - - ( 888,131 ) - - - 641,305 - - ( 103,058 ) ( 103,058 ) - - - ( 21,736 ) 10,442 - - 49,081 $ 41,188 $ - ($103,058 ) $ 5,796,752 $ 41,188 $ - ($ 103,058 ) $ 5,796,752 - - - 3,835 - ( 177,330 ) - 15,420 - 1,757 - 1,757 - - - - - - - ( 592,088 ) - - - 2,011,140 50,151 - - ( 291,636 ) $ 91,339 ($175,573 ) ($103,058 ) $ 6,945,180	New Taiwan Dollars, Except Dividends Per Share) Others Unrealized gains (losses) on available-fo r-sale financial assets Other equity －o t h e r s Treasury shares Total equity $ 30,746 $ - $ - $ 6,050,545 - - - 68,746 - - - - - - - ( 888,131 ) - - - 641,305 - - ( 103,058 ) ( 103,058 ) - - - ( 21,736 ) 10,442 - - 49,081 $ 41,188 $ - ($103,058 ) $ 5,796,752 $ 41,188 $ - ($ 103,058 ) $ 5,796,752 - - - 3,835 - ( 177,330 ) - 15,420 - 1,757 - 1,757 - - - - - - - ( 592,088 ) - - - 2,011,140 50,151 - - ( 291,636 ) $ 91,339 ($175,573 ) ($103,058 ) $ 6,945,180	New Taiwan Dollars, Except Dividends Per Share) Others Unrealized gains (losses) on available-fo r-sale financial assets Other equity －o t h e r s Treasury shares Total equity $ 30,746 $ - $ - $ 6,050,545 - - - 68,746 - - - - - - - ( 888,131 ) - - - 641,305 - - ( 103,058 ) ( 103,058 ) - - - ( 21,736 ) 10,442 - - 49,081 $ 41,188 $ - ($103,058 ) $ 5,796,752 $ 41,188 $ - ($ 103,058 ) $ 5,796,752 - - - 3,835 - ( 177,330 ) - 15,420 - 1,757 - 1,757 - - - - - - - ( 592,088 ) - - - 2,011,140 50,151 - - ( 291,636 ) $ 91,339 ($175,573 ) ($103,058 ) $ 6,945,180
			Ordinaryshare		Advance receipts for share capital		Capital surplus		Capital surplus－ Stock Option		Capital surplus －restricted stock	Capital surplus－ Others		Legal reserve		Special reserve	Unappropriated retained earnings		Exchange differences on translation of foreign financial statements		Unrealized gains (losses) on available-fo r-sale financial assets		Other equity －o t h e r s
	(Note6.12) (Note 6.17) (Note 6.15) (Note 6.6) (Note 6.13,6.18) (Note 6.12) (Note 6.14) (Note6.17) (Note 6.13,6.18)		$ 1,850,273 - - - - - - - $ 1,850,273 $ 1,850,273 352 - - - - - - $ 1,850,625		$ - - - - - - - - $ - $ - - 15,420 - - - - - $15,420		$ 1,262,492 - - - - - - - $ 1,262,492 $ 1,262,492 3,662 - - - - - - $ 1,266,154	$ - 68,746 - - - - - - $68,746 $ 68,746 ( 179 ) - - - - - - $68,567			$ - - - - - - - - $ - $ - - 177,330 - - - - - $177,330	$ 11,456 - - - - - - - $11,456 $ 11,456 - - - - - - - $11,456		$ 787,482 - 124,394 - - - - - $911,876 $ 911,876 - - - 64,131 - - - $976,007		$ 269,144 - - - - - - - $269,144 $ 269,144 - - - - - - - $269,144	$ 1,652,817 - ( 124,394 ) ( 888,131 ) 641,305 - ( 21,736 ) ( 2,778 ) $ 1,257,083 $ 1,257,083 - - - ( 64,131 ) ( 592,088 ) 2,011,140 1,530 $ 2,613,534	$ 186,135 - - - - - - 41,417 $227,552 $ 227,552 - - - - - - ( 343,317 ) ($115,765 )			$ 30,746 - - - - - - 10,442 $ 41,188 $ 41,188 - - - - - - 50,151 $ 91,339	$ - - - - - - - - $ - $ - - ( 177,330 ) 1,757 - - - - ($175,573 )		$ - - - - - ( 103,058 ) - - ($103,058 ) ($ 103,058 ) - - - - - - - ($103,058 )	$ 6,050,545 68,746 - ( 888,131 ) 641,305 ( 103,058 ) ( 21,736 ) 49,081 $ 5,796,752 $ 5,796,752 3,835 15,420 1,757 - ( 592,088 ) 2,011,140 ( 291,636 ) $ 6,945,180

Note 1 ： Directors' and supervisors' remuneration of $22,391 and employee bonuses of $67,173 have been deducted from the statement of comprehensive income for 2014.

Note 2: Directors' and supervisors' remuneration of $16,349 and employee bonuses of $49,047 have been deducted from the statement of comprehensive income for 2015.

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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) MERRY ELECTRONICS CO.,LTD. INDIVIDUAL STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities Profit before tax Adjustments Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Provision for bad debt expense Finance costs Net loss (gain) on financial assets or liabilities at fair value through profit or loss Share of loss (profit) of associates and joint ventures accounted for using equity method Dividend income Interest income Loss (gain) on disposal of property, plan and equipment Loss (gain) on disposal of investments Share-based payments Effect of exchange rate changes Changes in operating assets and liabilities Changes in operating assets financial assets or liabilities at fair value through profit or loss Decrease (increase) in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in accounts receivable due from related parties Decrease (increase) in other receivable Decrease (increase) in inventories Decrease (increase) in prepayments Decrease (increase) in other current assets Changes in operating liabilities Increase (decrease) in notes payable Increase (decrease) in accounts payable Increase (decrease) in accounts payable to related parties Increase (decrease) in other payable Increase (decrease) in other payable to related parties Increase (decrease) in other payable to related parties Increase (decrease) in net defined benefit liability Cash inflow (outflow) generated from operations Interest paid Income taxes refund (paid) Interest received Dividends received Net cash flows from (used in) operating activities

Notes 2016 2015 $ 2,400,152 $ 752,054 (Note 6.7,6.21) 13,634 14,143 (Note 6.8,6.21) 33,337 24,088 (Note 6.4) 17,173 - 24,227 22,201 (Note 6.2) ( 21,060 ) ( 908 ) (Note 6.6) ( 999,153 ) 21,209 (Note 6.19) ( 5,808 ) - (Note 6.19) ( 14,876 ) ( 12,100 ) (Note 6.20) ( 937 ) ( 765 ) (Note 6.20) ( 37,433 ) 193 (Note 6.14) 1,757 - 52,774 ( 9,957 ) (Note 6.2,6.25) ( 406,701 ) - ( 2 ) 436 ( 1,050,387 ) 265,835 6,582 10,737 ( 6,981 ) 11,978 ( 34,425 ) ( 6,316 ) 5,586 ( 2,875 ) ( 3,977 ) ( 2,804 ) ( 98 ) ( 693 ) 10,338 ( 9,846 ) 2,498,540 339,600 134,302 ( 28,620 ) ( 62,330 ) 86,095 105,357 56,413 ( 16,830 ) 1,075 2,642,761 1,531,173 ( 21 ) - (Note 6.23) ( 110,905 ) ( 188,032 ) (Note 6.19) 13,629 9,142 5,808 1,500 2,551,272 1,353,783

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MERRY ELECTRONICS CO.,LTD. INDIVIDUAL STATEMENTS OF CASH FLOWS

			(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Cash flows from (used in) investing activities
Increase in other receivable due from related parties	(Note 7)	( $	2,123 ) ( $	38 )
Acquisition of current available-for-sale financial assets	(Note 6.3)	(	29,902 ) (	147,892 )
Proceeds from disposal of current available-for-sale financial
assets			22,584	-
Acquisition of non-current available-for-sale financial assets	(Note 6.3)	(	138,714 ) (	90,047 )
Proceeds from disposal of non-current available-for-sale	(Note 6.3)
financial assets			59,342	-
Acquisition of investments accounted for using equity method		(	32,400 ) (	664,594 )
Proceeds from disposal of investments accounted for using
equity method			-	369
Acquisition of property, plant and equipment	(Note 6.7)	(	8,347 ) (	23,299 )
Proceeds from disposal of property, plant and equipment			10,207	10,291
Acquisition of intangible assets	(Note 6.8)	(	80,966 ) (	85,217 )
Decrease (increase) in other non-current assets		(	646 )	1
Net cash flows from (used in) investing activities		(	200,965 ) (	1,000,426 )
Cash flows from (used in) financing activities
Increase (decrease) in short-term loans			161,250	-
Proceeds from issuing bonds	(Note 6.12)		-	1,507,500
Cash dividends paid	(Note 6.17)	(	592,088 ) (	888,131 )
Payments to acquire treasury shares	(Note 6.15)		- (	103,058 )
Advance receipts for share capital			15,420	-
Net cash flows from (used in) financing activities		(	415,418 )	516,311
Effect of exchange rate changes on cash and cash equivalents		(	52,774 )	9,957
Net increase (decrease) in cash and cash equivalents			1,882,115	879,625
Cash and cash equivalents at beginning of period			1,627,291	747,666
Cash and cash equivalents at end of period		$	3,509,406 $	1,627,291

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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) INDEPENDENT AUDITORS REPORT

(106)_Tsai-Shen-Bao-Tze No. 16003446

To Merry Electronics Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Merry Electronics Co. Ltd. and its subsidiaries (the “Group”), which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years from January 1 to December 31, 2016 and January 1 to December 31, 2015 and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years from January 1 to December 31, 2016 and January 1 to December 31, 2015 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. Our people subject to the independency requirement are independent from the Group in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the Group for the year ended December 31, 2016. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Cut-off of Sales Revenues of Distribution Warehouse

Description

Please refer to Note 4 (28) to the consolidated financial statement for the details of the accounting policies of sales revenues recognition.

The sales of the Merry Group are mainly divided into 2 types, one is direct sales, and the other is warehouse distribution, which accounts for 20 percent of the sales revenues. The revenues of the warehouse distribution will not be recognized until the goods were picked up by the customers (risk and compensation are transferred). The Group recognizes the revenues based on the movement of the inventories of the warehouse, and mainly relies on the reports provided by the custodian of the warehouse or the pick-up reports recorded on the web platform of the customer. However, due to the dispersion of the warehouses and numerous custodians, the frequencies of the information provided by the custodians are not exactly the same. As such, given that the revenue recognition process highly involves manual tasks, the timing of revenue recognition may be inappropriate or the figures of the book of inventories may disagree with the physical stocks. Therefore, we highlight sales revenues cut-off of distribution warehouse as one of the key audit matters.

The Responsive Audit Procedures

We conducted audit procedures as follows:

1. We understand and evaluate the operational procedure and the internal control of the sales revenues of the distribution warehouse of the Group, and design the relevant test procedures, including:

2. (1) To interview the staff of each department of the operational procedure of the sales revenues of the distribution warehouse and acquire the revenue recognition procedures, and then confirm the conformity with the operational measures.

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• (Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.)

• (2) To understand and evaluate the internal control of distribution operation of the distribution warehouse (to check the trading terms, the timing of transfer of the ownership and verify the figures on the evidence voucher with the figures on the invoice, so as to verify the transactions being recorded in the appropriate period) so as to assure the correctness of the timing of the revenue recognition.

• We have conducted cut-off tests on transactions of the sales revenues of the distribution warehouse within certain periods before and after the cut-off date, including verifying output records of the warehouse and movement of the inventory book and cost transfer of the sales being recorded in the appropriate period.

• We perform substantive tests procedures, such as confirmation on the ending balance of the accounts receivable from distribution warehouse, confirmation on inventories and collection made during subsequent periods, etc., to verify that accounts receivables and sales revenues were recorded in the correct period to be in line with the revenue recognition policy, and to assure the adjustment entries were made properly on the material discrepancies.

The influence of major events and transactions happened during the financial report period.

Description

Please refer to Note 4 (3) and 4 (13) to the consolidated financial statement for the details of basis of consolidation and investment accounting policies for using equity method.

In August, 2016, Merry Electronics (SUZHOU) Co., Ltd., the subsidiary of Merry Electronics Co., Ltd. carried out a capital increase in cash which were fully subscribed by Lanto Electronic (Kunshan) Ltd., the investment amount of which is RMB$530,000(in thousands of dollars) and 51% shares in Merry Electronics (SUZHOU) Co., Ltd. was obtained. As a result, the percentage of shareholding in Merry Electronics (SUZHOU) Co., Ltd. by Merry Electronics Co. Ltd. decreased from 100% to 49% and control was lost, and a disposal gain of NT$472,655(in thousands of dollars) was recognized. Please refer to Note 6 (7) to the consolidated financial statement for the details. Therefore, we highlight the transaction as one of the key audit matters.

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The Responsive Audit Procedures and outcome

We conducted the audit procedures as follows:

1. We perform inspection and trial related to investments using equity method, including:

2. (1) To check the decrease of shareholding percentage to confirm no abnormal situation.

3. (2) To check the contracts, minutes, operational license post capital increase, and audit report of registered capital, etc., to confirm the consistency with transaction records and existence of the transaction.

4. (3) To check accounting records of transaction of disposal to confirm no abnormal situation.

5. (4) To confirm the records of gain or loss from disposal and fair value of consideration are consistent with the accounting book.

6. We assess the appropriateness of evaluation of fair value conducted by the external appraisal institution, including:

7. (1) To assess the independence and appropriateness of the external appraisal institution.

8. (2) To assess whether the appraisal methods adopted by the external appraisal institution is prevailing and appropriate.

9. (3) To check the appropriateness of parameters and formula used in the appraisal model.

10. (4) To recalculate the correctness of fair value.

Other Matter - Individual Financial Statements

We have also audited the Individual financial statements prepared by Merry Electronics Co. Ltd. as of and for the years ended December 31, 2016 and 2015 on which we have issued an unqualified opinion.

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

Management is responsible for the presentation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission

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of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance (including independent directors and supervisors) are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omission, misrepresentation, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the

35

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• purpose of expressing an opinion on the effectiveness of Merry Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Based on the audit evidence obtained, conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Merry Group’s ability to continue as a going concern. If we concluded that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation (including relevant notes), structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within Merry Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of Merry Group audit. We remain solely responsible for our audit opinion.

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

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

For the matters communicated with those charged with governance, we determine those key audit matters in the audit of the consolidated financial statements for the year ended December 31, 2016 of Merry Group. We describe these matters in our auditors’ report unless law or regulations precludes public disclosure about the

36

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matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Certified Public Accountants

Ming-Jing Yang

Shu-Hua Hung

PricewaterhouseCoopers

Taipei, Taiwan

The Republic of China

Former Securities Management Commission under the Ministry of Finance Approval No.: (81) Tai-Tsai-Chen (6) No. 33095

(85) Tai-Tsai-Chen (6) No. 68701

February 24, 2017

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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

					(In Thousands	(In Thousands	of New Taiwan Dollars)	of New Taiwan Dollars)
				December 31,2016			December 31,2015
	Assets	Notes		Amount	%		Amount	%
	Current assets
1100	Cash and cash equivalents	(Note 6.1)	$	4,477,187	29	$	2,530,016	22
1110	Current financial assets at fair	(Note 6.2)
	value through profit or loss
	Current financial assets at fair
	value through profit or loss			322,424	2		151,096	1
1125	Current available-for-sale	(Note 6.3)
	financial assets			188,714	1		148,665	1
1170	Accounts receivable, net	(Note 6.4)		3,605,274	24		2,576,424	23
1200	Other receivables			191,350	1		38,794	-
1210	Other receivables due from	(Note 7)
	related parties			131,205	1		-	-
130X	Inventories	(Note 6.5)		1,178,603	8		1,461,774	13
1410	Prepayments			15,121	-		50,293	1
1470	Other current assets	(Noted 6.6)		447,200	3		370,790	3
11XX	Total current assets			10,557,078	69		7,327,852	64
	Non-current assets
1523	Non-current available-for-sale	(Note. 6.3)
	financial assets			484,763	3		315,118	3
1550	Investments accounted for using	(Note6.7)
	equity method, net			2,510,309	16		122,606	1
1600	Property, plant and equipment	(Note 6.8)		1,307,610	9		2,840,113	25
1780	Intangible assets	(Note 6.9)		300,956	2		234,276	2
1840	Deferred tax assets	(Note6.24)		45,446	-		68,115	1
1900	Total other non-current assets,	(Note 6.10)
	others			154,802	1		477,628	4
15XX	Total non-current assets			4,803,886	31		4,057,856	36
1XXX	Total assets		$	15,360,964	100	$	11,385,708	100

(NEXT)

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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

Liabilities And Equity

(In Thousands of New Taiwan Dollars) December 31,2016 December 31,2015 Notes Amount % Amount % (Note 6.11) $ 381,771 2 $ 135,905 1 (Note 6.2) 3,949 - 2,096 - 3,298,700 21 2,596,215 23 (Note 7) 1,615,513 11 - - (Note 6.12) 599,019 4 682,284 6 (Note 6.24) 250,706 2 134,259 1 257,672 2 142,604 1 6,407,330 42 3,693,363 32 (Note 6.13) 1,477,413 10 1,457,048 13 (Note 6.24) 382,148 2 271,432 3 (Note 6.14) 105,557 1 118,867 1 43,255 - 34,894 - 2,008,373 13 1,882,241 17 8,415,703 55 5,575,604 49 (Note 6.16) 1,850,625 12 1,850,273 16 15,420 - - - (Note 6.17) 1,523,507 10 1,342,694 12 (Note 6.18) 976,007 6 911,876 8 269,144 2 269,144 3 (Note 6.24) 2,613,534 17 1,257,083 11 (Note 6.19) ( 199,999) ( 1) 268,740 2 (Note 6.16) ( 103,058) ( 1) ( 103,058) ( 1) 6,945,180 45 5,796,752 51 81 - 13,352 - 6,945,261 45 5,810,104 51 (Note 9) (Note 11) $ 15,360,964 100 $ 11,385,708 100

Current liabilities 2100 Short-term borrowings 2120 Current financial liabilities at fair value through profit or loss 2170 Accounts payable 2180 Accounts payable to related parties 2200 Other payables 2230 Current tax liabilities 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2530 Total bonds payable 2570 Total deferred tax liabilities 2640 Net defined benefit liability, non-current 2670 Other current liabilities-others 25XX Total non-current liabilities 2XXX Total liabilities Total equity attributable to owners of parent Share capital 3110 Ordinary share 3140 Advance receipts for share capital Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings (accumulated deficit) Other equity, others 3400 Total other equity interest 3500 Treasury shares 31XX Total equity attributable to owners of parent 36XX Non-controlling interests 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments Significant events after the balance sheet date 3X2X Total liabilities and equity

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MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

List 4000 Operating revenue 5000 Operating costs 5900 Gross profit (loss) from operations Operating expenses 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Net operating income (loss) Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of profits of associates and joint venture accounted for using equity method 7000 Non-operating income and expenses 7900 Profit (loss) from continuing operations before tax 7950 Tax expense (income) 8200 Profit (loss)

(In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2016 2015 Notes Amount % Amount % $ 16,939,274 100 $ 12,240,234 100 (Note 6.5,6.22,6.23) ( 13,573,195 ) ( 80) ( 9,845,348) ( 80 ) 3,366,079 20 2,394,886 20 (Note 6.22,6.23) ( 302,079 ) ( 2) ( 269,806) ( 2 ) ( 707,138 ) ( 4) ( 631,924) ( 5 ) ( 703,473 ) ( 4) ( 640,642) ( 6 ) ( 1,712,690 ) ( 10) ( 1,542,372) ( 13 ) 1,653,389 10 852,514 7 (Note 6.20) 84,846 1 62,551 - (Note 6.2,6.21) 682,365 4 ( 42,424) - ( 29,955 ) - ( 23,614) - (Note 6.7) 79,661 - ( 35,727) - 816,917 5 ( 39,214) - 2,470,306 15 813,300 7 (Note 6.24) ( 459,160 ) ( 3) ( 148,074) ( 1 ) $ 2,011,146 12 $ 665,226 6 (Next)

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MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

List	41 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2016 2015 Notes Amount % Amount % ( $ 3,520 ) - ( $ 3,347) - 4,451 - - - 599 - 569 - 1,530 - ( 2,778) - (Note 6.19) ( 306,084 ) ( 2) 52,279 - (Note 6.3) 46,099 - 9,428 - ( 106,510 ) ( 1) ( 406) - (Note 6.24) 73,081 1 ( 7,639) - ( 293,414) ( 2) 53,662 - ($ 291,884) ( 2) $ 50,884 - $ 1,719,262 10 $ 716,110 6 $ 2,011,140 12 $ 641,305 6 6 - 23,921 - $ 2,011,146 12 $ 665,226 6 $ 1,719,504 10 $ 690,386 6 ( 242) - 25,724 - $ 1,719,262 10 $ 716,110 6 (Note 6.25) $ 11.00 $ 3.48 (Note 6.25) $ 10.27 $ 3.34	Except Earnings Per Share) 2015	Except Earnings Per Share) 2015
			%
Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains (losses) on re-measurements of defined benefit plans 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 8310 Components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation 8362 Unrealized gains (losses) on valuation of available-for-sale financial assets 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 8360 Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income 8500 Total comprehensive income Profit (loss), attributable to: 8610 Profit (loss), attributable to owners of parent 8620 Profit (loss), attributable to non-controlling interests Net Income(Loss) Net income (Loss) attributable to : 8710 Comprehensive income, attributable to owners of parent 8720 Comprehensive income, attributable to non-controlling interests Total Comprehensive income for the year Basic earnings per share 9750 Total basic earnings per share Diluted earnings per share 9850 Total diluted earnings per share			- - -
			-
			- - - -
			-
			-
			6
			6 -
			6
			6 -
			6
			3.48
		$	3.34

(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.)

MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

																														(In	Thousands	Thousands	of	New Taiwan Dollars)	New Taiwan Dollars)	New Taiwan Dollars)	New Taiwan Dollars)
										EquityAttributable to Shareholders				of the	Parent
			Capital				Capital surplus				Retained earnings									Others
																Exchange			Unrealized
																differences				gains
													Unappropriated			on			(losses) on
				Advance									retained			translation			available-f
				receipts				Capital					earnings			of foreign			or-sale
				for share				surplus-		Legal		Special	(accumulated			financial			financial			Equity-			Treasury							Non-controlling
	Notes	Ordinary	share	capital		Capital	surplus	others		reserve		reserve	deficit)			statements				assets		others				shares				Total			Interests				Total equity
2015
BALANCE,JANUARY 1,2015		$	1,850,273	$	-	$	1,262,492	$	11,456	$	787,482	$ 269,144	$	1,652,817			$	186,135		$	30,746		$	-			$		-	$	6,050,545		$	48,834		$	6,099,379
Premium on convertible bonds	(Note 6.13)		-		-		-		68,746		-	-			-			-			-			-					-		68,746				-		68,746
Appropriations of prior year's	(Note 6.18)
earning
Legal capital reserve			-		-		-		-		124,394	-	(	124,394		)		-			-			-					-		-				-		-
Cash dividends			-		-		-		-		-	-	(	888,131		)		-			-			-					-	(	888,131	)			-	(	888,131 )
Net income in 2015			-		-		-		-		-	-		641,305				-			-			-					-		641,305			23,921			665,226
Purchase of treasury share	(Note 6.16)		-		-		-		-		-	-			-			-			-			-		(		103,058 )		(	103,058	)			-	(	103,058 )
Difference between price and	(Note 6.26)
book value from actual
acquisition or disposal of
subsidiaries			-		-		-		-		-	-	(	21,736		)		-			-			-					-	(	21,736	)	(	61,206 )		(	82,942 )
Total comprehensive income in	(Note 6.19)
2015			-		-		-		-		-	-	(	2,778		)		41,417			10,442			-					-		49,081			1,803			50,884
BALANCE,DECEMBER
31,2015		$	1,850,273	$	-	$	1,262,492	$	80,202	$	911,876	$269,144	$	1,257,083			$	227,552		$	41,188		$	-		($		103,058 )		$	5,796,752		$	13,352		$	5,810,104
2016
BALANCE,JANUARY 1,2016		$	1,850,273	$	-	$	1,262,492	$	80,202	$	911,876	$ 269,144	$	1,257,083			$	227,552		$	41,188		$	-		($		103,058 )		$	5,796,752		$	13,352		$	5,810,104
Common stocks from	(Note 6.13)
Convertible bonds			352		-		3,662	(	179 )		-	-			-			-			-			-					-		3,835				-		3,835
Issuance of restricted stock	(Note 6.15)		-		15,420		-		-		-	-			-			-			-	(		177,330	)				-	(	161,910	)			-	(	161,910 )
Unearned compensation of
restricted stock			-		-		-		177,330		-	-			-			-			-			1,757					-		179,087				-		179,087
Appropriations of prior year's	(Note 6.18)
earning
Legal reserve			-		-		-		-		64,131	-	(	64,131		)		-			-			-					-		-				-		-
Cash dividends			-		-		-		-		-	-	(	592,088		)		-			-			-					-	(	592,088	)			-	(	592,088 )
Net income in 2016			-		-		-		-		-	-		2,011,140				-			-			-					-		2,011,140				6		2,011,146
Disposal of Subsidiary			-		-		-		-		-	-			-			-			-			-					-		-		(	13,029 )		(	13,029 )
Total comprehensive income in	(Note
2016	6.15,6.19)		-		-		-		-		-	-		1,530		(		343,317	)		50,151			-					-	(	291,636	)	(	248 )		(	291,884 )
		$	1,850,625	$	15,420	$	1,266,154	$	257,353	$	976,007	$269,144	$	2,613,534		($		115,765	)	$	91,339	($		175,573	)	($		103,058 )		$	6,945,180		$	81		$	6,945,261
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(Note: This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the original language.) MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from (used in) operating activities Profit (loss) before tax Adjustments Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Amortization on long-term rent prepaid Expense of Restricted Stock Provision (reversal of provision) for bad debt expense Net loss (gain) on financial assets or liabilities at fair value through profit or loss Share of loss (profit) of associates and joint ventures accounted for using equity method Interest income Dividend income Deferred income of government's compensation Loss (gain) on disposal of property, plant and equipment Loss (gain) on disposal of investments Gain on disposal of subsidiary Finance costs Effect of exchange rate changes Changes in operating assets and liabilities Changes in operating assets Changes on Financial asset at fair value through profit or loss Decrease (increase) in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in other receivable Decrease (increase) in inventories Decrease (increase) in prepayments Decrease (increase) in other current assets Changes in operating liabilities Increase (decrease) in accounts payable Increase (decrease) in accounts payable Increase (decrease) in accounts payable to related parties Increase (decrease) in other payable Increase (decrease) in other current liabilities Increase (decrease) in net defined benefit liability Cash inflow (outflow) generated from operations Income taxes refund (paid) Interest received Interest paid Dividends received Net cash flows from (used in) operating activities

(In Thousands of New Taiwan Dollars) Notes 2016 2015 $ 2,470,306 $ 813,300 (Note 6.8,6.22) 265,429 317,392 (Note 6.9,6.22) 38,225 34,004 (Note 6.10,6.22) 4,447 5,430 (Note6.15) 1,757 - (Note 6.4) 11,624 - (Note 6.2) ( 21,060 ) ( 915 ) (Note 6.7) ( 79,661 ) 35,727 ( 24,039 ) ( 23,889 ) (Note 6.20) ( 5,808 ) - (Note 6.28) ( 3,962 ) ( 1,718 ) (Note 6.21) ( 6,462 ) 15,150 (Note 6.21) ( 37,433 ) - (Note 6.21,6.27) ( 468,177 ) - 29,955 23,614 52,774 ( 9,957 ) (Note 6.2,6.27) ( 393,695 ) ( 91,937 ) ( 468 ) 7,365 ( 1,460,123 ) 275,282 ( 40,936 ) 32,482 ( 37,894 ) ( 138,049 ) ( 249,117 ) ( 3,518 ) ( 127,371 ) 12,912 ( 1,595 ) 804 1,541,749 95,024 1,615,513 - 4,929 81,412 121,142 68,490 ( 16,830 ) 1,075 3,183,219 1,549,480 (Note 6.24) ( 135,648 ) ( 253,075 ) 22,674 20,918 ( 4,977 ) ( 1,413 ) 5,808 1,500 3,071,076 1,317,410

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MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from (used in) investing activities Changes on Financial asset at fair value through profit or loss Acquisition of current available-for-sale financial assets Acquisition of non-current available-for-sale financial assets Proceeds from disposal of current available-for-sale financial assets Proceeds from disposal of non-current available-for-sale financial assets Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in other receivables due from related parties Increase in other financial assets Increase(Decrease) in guarantee deposits received Cash from disposal of subsidiary Effect of changes in consolidated entities Net cash flows from (used in) investing activities cash flows from (used in) financing activities Increase(Decrease) in short-term loans Decrease on non-current liabilities Proceeds from issuing bonds Purchase of treasury share Cash dividends paid Advance receipts for share capital Change in non-controlling interests Net cash flows from (used in) financing activities Effect of exchange rate changes Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

(In Thousands of New Taiwan Dollars) Notes 2016 2015 (Note 6.2) $ 83,700 $ - (Note 6.3) ( 62,639 ) ( 147,892 ) (Note 6.3) ( 138,714 ) ( 90,047 ) (Note 6.3) 22,584 - (Note 6.3) 59,342 - (Note 6.27) ( 185,508 ) ( 935,014 ) 63,773 151,223 (Note 6.27) ( 95,273 ) ( 132,002 ) ( 64,500 ) - ( 292,820 ) ( 19,386 ) ( 1,233 ) 151 (Note 6.27) 15,713 - (Note 6.27) ( 65,532 ) - ( 661,107 ) ( 1,172,967 ) 309,321 135,905 12,323 1,238 - 1,507,500 (Note 6.16) - ( 103,058 ) ( 592,088 ) ( 888,131 ) (Note 6.16) 15,420 - - ( 82,942 ) ( 255,024 ) 570,512 ( 207,774 ) 147,767 1,947,171 862,722 2,530,016 1,667,294 $ 4,477,187 $ 2,530,016

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Attachment 4

Merry Electronics Co., Ltd.

2016 Profit Distribution Table

Subject	Amount (NTD)
Beginning retained earnings	600,864,808
Adjusted beginning retained earnings	600,864,808
add: 2016 retained earnings for adjustment (pension	1,529,259
actuarial fees)
Adjusted and unappropriated retained earnings	602,394,067
add: 2016 net profit after tax (1)	2,011,140,223
less: 10% legal reserve <1>*10%	(201,114,022)
add/less: set aside or reversed special reserve	0
distributable net profit	2,412,420,268
Subject for distribution (2)
less: cash bonus for shareholders (2016 retained earnings)	(1,736,538,136)
Retained earnings	675,882,132

Note: The proposal of distribution of 2016 profits was approved by the board of directors but shall further require approval from the annual shareholders' meeting.

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Attachment 5

Comparison Table of Amendments to the "Operation Procedures for the Acquisition or Disposal of Assets

	or Disposal of Assets
	Articles after amendment		Current Articles	Explanation
	5.3.4. Appraiser reports of real property or other fixed assets In acquisition or disposal of real property, factory or equipment where the transaction amount reaches 20% of the Company's paid-in capital or NT$300 million or more, the Company, unless transacting with agovernment agency,engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposal of equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions: (1) .Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the board of directors, and the same procedure shall be followed		5.3.4. Appraiser reports of real property or other fixed assets In acquisition or disposal of real property, factory or equipment where the transaction amount reaches 20% of the Company's paid-in capital or NT$300 million or more, the Company, unless transacting with a governmental institution, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposal of machines and equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions: (1) .Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the board of directors, and the same procedure shall be followed for anyfuture	1. Amendment is made with reference to the amended Article 9 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies. 2. To remove the redundant words.

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Articles after amendment Current Articles Explanation for any future changes to changes to the terms and the terms and conditions of conditions of the transaction. the transaction. (2) .Where the transaction .Where the transaction amount reaches NT$1 billion amount reaches NT$1 or more, appraisals from two billion or more, appraisals or more professional from two or more appraisers shall be obtained.

(2) .Where the transaction amount reaches NT$1 billion or more, appraisals from two or more professional appraisers shall be obtained.

(3) .Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a certified public accountant shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ROC Accounting Research and Development Foundation (hereinafter "ARDF") and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price: (a). The discrepancy between the appraisal results

(3) .Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a certified public accountant shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ROC Accounting Research and Development Foundation (hereinafter "ARDF") and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price:

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Articles after amendment Current Articles Explanation of two or more professional (a). The discrepancy appraisers is 10 % or more between the appraisal of the transaction amount. results of two or more professional appraisers is (b). The discrepancy 10 % or more of the between the appraisal result transaction amount. and the transaction amount is 20 % or more of the (b). The discrepancy transaction amount. between the appraisal result and the transaction (4) .No more than 3 months may amount is 20 % or more of elapse between the date of the the transaction amount. appraisal report issued by a professional appraiser and the (4) .No more than 3 months contract execution date; may elapse between the provided, where the publicly date of the appraisal report announced current value for issued by a professional the same period is used and appraiser and the contract no more than 6 months have execution date; provided, elapsed, an opinion may still where the publicly be issued by the original announced current value for professional appraiser. the same period is used and no more than 6 months (5) .Where the Company have elapsed, an opinion acquires or disposes of assets may still be issued by the through court auction original professional procedures, the evidentiary appraiser. documentation issued by the

(5) .Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or certified public accountant’s opinion.

(5) .Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or certified public accountant’s opinion.

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Articles after amendment	Current Articles	Explanation
5.5. Related party transactions 5.5.1. When the Company acquires or disposes of assets from or to a related party, in addition to ensuring that relevant resolutions are adopted and the reasonableness of the transaction terms is appraised in accordance with this Article, if the transaction amount reaches 10% or more of the Company's total assets, the Company shall also obtain an appraisal report from a professional appraiser or a certified public accountant's opinion in compliance with the provisions of the preceding section. The calculation of the transaction amount referred to in the preceding paragraph shall be made in accordance with Article [5.6.] herein. When judging whether a trading counterparty is a related party, in addition to its legal formalities, the substance of the relationship shall also be considered.	5.5. Related party transactions 5.5.1. When the Company acquires or disposes of assets from or to a related party, in addition to ensuring that relevant resolutions are adopted and the reasonableness of the transaction terms is appraised in accordance with this Article, if the transaction amount reaches 10% or more of the Company's total assets, the Company shall also obtain an appraisal report from a professional appraiser or a certified public accountant's opinion in compliance with the provisions of the preceding section. The calculation of the transaction amount referred to in the preceding paragraph shall be made in accordance with Article[5.6.4.(4)] herein. When judging whether a trading counterparty is a related party, in addition to its legal formalities, the substance of the relationship shall also be considered. 5.5.2. The appraisal and operationalprocedures	1. To be in line with Article 5.6. 2. With reference to Article 14 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies, amendment is made to this Article and the punctuation marks.

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Articles after amendment 5.5.2. The appraisal and operational procedures

When the Company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20% or more of the paid-in capital, 10% or more of the Company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or repurchase money market funds issued by domestic securities investment trust enterprises , the Company may not proceed to enter into a transaction contract or make a payment until the following information has been submitted and approved by the board of directors and recognized by the supervisors:

Current Articles Explanation When the Company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20% or more of the paid-in capital, 10% or more of the Company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds, the Company may not proceed to enter into a transaction contract or make a payment until the following information has been submitted and approved by the board of directors and recognized by the supervisors:

• (1). The purpose, necessity and anticipated benefit of the acquisition or disposal of assets.

• (2). The reason for choosing the related party as a trading counterparty.

(1). The purpose, necessity

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Articles after amendment	Current Articles	Explanation
and anticipated benefit of the acquisition or disposal of assets. (2). The reason for choosing the related party as a trading counterparty. (3). With respect to acquisition of real property from a related party, relevant information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article [5.5.3.(1).] and Article [5.5.3.(4).]. (4). The date and price at which the related party originally acquired the real property, the original transaction counterparty, and that transaction counterparty's relationship with the Company and the related party. (5). Monthly cash flow forecasts for the year commencing from the anticipated month of	(3). With respect to acquisition of real property from a related party, relevant information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article [5.5.3.(1).] and Article [5.5.3.(4).]. (4). The date and price at which the related party originally acquired the real property, the original transaction counterparty, and that transaction counterparty's relationship with the Company and the related party. (5). Monthly cash flow forecasts for the year commencing from the anticipated month of signing of the contract, and evaluation of the necessity of the transaction, and reasonableness of the funds utilization. (6). An appraisal report from a professional appraiser or a certifiedpublic

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Articles after amendment		Current Articles	Explanation
signing of the contract, and evaluation of the necessity of the transaction, and reasonableness of the funds utilization. (6). An appraisal report from a professional appraiser or a certified public accountant's opinion obtained in compliance with the preceding paragraph. (7). Restrictive covenants and other important stipulations associated with the transaction. The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with Article [5.10.1.(7).] herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by the board of directors and recognized by the supervisors in accordance with this procedure need not be counted toward the transaction amount.		accountant's opinion obtained in compliance with the preceding paragraph. (7). Restrictive covenants and other important stipulations associated with the transaction. The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with Article [5.10.1.(5)] herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by the board of directors and recognized by the supervisors in accordance with this procedure need not be counted toward the transaction amount. With respect to the acquisition or disposal of business-use machines and equipment between the Company and its parent or subsidiaries, the Company's board of directors may delegate the chairperson to decide such matters when

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Articles after amendment Current Articles Explanation the transaction amount is With respect to the within NT$ 50 million and acquisition or disposal of have the decisions business-use equipment subsequently submitted to between the Company and and ratified by the next its parent or subsidiaries, board meeting.

With respect to the acquisition or disposal of business-use equipment between the Company and its parent or subsidiaries, the Company's board of directors may delegate the chairperson to decide such matters when the transaction amount is within NT$ 50 million and have the decisions subsequently submitted to and ratified by the next board meeting.

Where the position of independent director has been created, when a matter is submitted for discussion by the board of directors pursuant to Article [5.14.2.], the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations, it shall be recorded in the minutes of the board of directors meeting.

Where the position of independent director has been created, when a matter is submitted for discussion by the board of directors pursuant to Article [5.14.2.], the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations, it shall be recorded in the minutes of the board of directors meeting. Where an audit committee has been established, the matters for which Article [5.14.2.] requires

Where an audit committee has been established, the matters for which Article [5.14.2.] requires recognition by the supervisors shall first be approved by the majority of all audit committee members and then submitted to the board of directors for a resolution, and Article [5.14.2.] shall apply mutatis mutandis.

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	Articles after amendment	Current Articles	Explanation
	recognition by the supervisors shall first be approved by the majority of all audit committee members and then submitted to the board of directors for a resolution, and Article [5.14.2.] shall applymutatis mutandis.
	5.6.Operational Procedures for the acquisition and disposal of memberships or intangible assets Where the Company acquires or disposes of memberships or intangible assetsand the transaction amount reaches 20 percent or more of the paid-in capital or NT$300 million or more, except for transactions with a government agency, the Company shall engage a certified public accountant prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the certified public accountant shall comply with the provisions of Statement of Auditing Standards No. 20 published by the ARDF.	5.6. Operational Procedures for the acquisition and disposal of memberships or intangible assets 5.6.1. The appraisal and operational procedures The Company shallfollow the Company's cycle procedures for fixed assets under the internal control systemfor the acquisition and disposal of memberships or intangible assets. 5.6.2. The procedure to determine the transaction terms and authorized quota (1). For the acquisition or disposal of memberships, it is required to consider the market fair value to determine the transaction terms and price and then prepare	With reference to Article 11 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies, to simplify and amend this Article.

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Articles after amendment			Current Articles	Explanation
			an analysis report to be submitted to the general manager. If the amount does not exceed 1% of the paid-in capital or NT$ 3 million, such transaction shall be submitted to the general manager for approval and reported to the next board meeting. If the amount exceeds NT$ 3 million, such transaction shall not be commenced until it is approved by the board of directors. For the acquisition or disposal of intangible assets, it is required to consider experts' appraisal report and market fair value to determine the transaction terms and price and then prepare an analysis report to be submitted to the chairperson. If the amount does not exceed 10% of the paid-in capital or NT$ 20 million, such transaction shall be submitted to the
		(2).

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Articles after amendment			Current Articles	Explanation
			chairperson for approval and reported to the next board meeting. If the amount exceeds NT$ 20 million, such transaction shall not be commenced until it is approved by the board of directors. For the Company's acquisition or disposal of assets which is subject to the approval of the board of directors under the procedure or other laws or regulations, if any director expresses dissent and it is recorded or contained in a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the position of independent director has been created or an audit committee has been established, the resolution procedures shall be handled in accordance with Article [5.14.2].
		(3).

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Articles after amendment		Current Articles	Explanation
		5.6.3. Execution unit: The acquisition or disposal of memberships or intangible assets shall be submitted for approval in accordance with the approval authorization provided in the preceding paragraph and executed by the departments using such assets and the finance department or the administration department. 5.6.4. Experts appraisal opinion and report of memberships or intangible assets (1). Where the transaction amount of the Company’s acquisition or disposal of memberships reaches 1% of the paid-in capital or NT$3 million or more, appraisal reports from experts shall be obtained. (2). Where the transaction amount of the Company’s acquisition or disposal of intangible assets reaches 10% of the
		(1).
		(2).

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Articles after amendment			Current Articles	Explanation
			paid-in capital or NT$20 million or more, appraisal reports from experts shall be obtained. Where the transaction amount of the Company’s acquisition or disposal of memberships or intangible assets reaches 20% or more of paid-in capital or NT$300 million or more, except for transactions with a government agency, the Company shall engage a CPA prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the CPA shall handle in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ARDF. The calculation of the transaction amounts referred to in the preceding three paragraphs shall be handled in accordance
		(3).
		(4).

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Articles after amendment		Current Articles	Explanation
		with Article [5.10.1.5] herein, and"within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have obtained the appraisal report from a professional appraiser or a certified public accountant's opinion or in accordance with this procedure need not be counted toward the transaction amount.
5.9. Procedures for engaging in mergers, demergers, acquisitions, and shares assumption 5.9.1. Evaluation and Operation Procedure (1). The Company that conducts a merger, demerger, acquisition, or transfer of shares, prior to convening the board of directors to resolve on the matter, shallengage a certified public accountant, attorney, or securities underwriter to give an opinion on the reasonableness of the	5.9. Procedures for engaging in mergers, demergers, acquisitions, and shares assumption 5.9.1. Evaluation and Operation Procedure (1). When engaging in mergers, demergers, acquisition and shares assumptions, it is advisable for the Company to engage a lawyer,certified public accountantand securities underwriter to jointly discuss the tentative timeline of regulatory procedure		With reference to Article 22 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies, to amend this Article and remove the redundant words.

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Articles after amendment	Articles after amendment		Current Articles	Explanation
	share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and submit it to the board of directors for deliberation and passage. However, the requirement of obtaining an aforesaid opinion on reasonableness issued by an expert may be exempted in the case of a merger by the Company of a subsidiary in which it directly or indirectly holds 100 percent of the issued shares or total capital, and in the case of a merger between subsidiaries in which the Company directly or indirectly holds 100 percent of the respective subsidiaries' issued shares or total capital.		and form an ad hoc group for implementation in accordance with the regulatory procedure. Prior to convening the board of directors to make a resolution, the Company shall engage a CPA, lawyer, or securities underwriter to give an opinion on the fairness of the share exchange ratio, acquisition price, or cash or other property distributed to shareholders, and submit it to the board of directors for deliberation and resolution.
5.10. Procedure for Public Disclosure of Information 5.10.1. Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the FSC's designated website in the prescribed format within		5.10. Procedure for Public Disclosure of Information 5.10.1. Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the FSC's designated website in the prescribed format within two days immediately		1. The amendment is made with reference to Article 14 of the Regulations Governing the Acquisition and Disposal of Assets by

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	Articles after amendment	Current Articles	Explanation
two days from the date of occurrence of the event (inclusive): (1). Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches twenty percent or more of paid-in capital, ten percent or more of the company's total assets, or NT$300 million or more; provided that, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or repurchase ofdomestic money market funds issued by domestic securities investment trust enterprises. (2). Merger, demerger, acquisition, or shares assumption. (3). Losses from derivatives trading reaching the limits on aggregate losses or losses on		from the date of occurrence of the event: (1). Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches twenty percent or more of paid-in capital, ten percent or more of the company's total assets, or NT$300 million or more; provided that, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds. (2). Merger, demerger, acquisition, or shares assumption. (3). Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contracts set out in the procedures adopted by the Company.	Public Companies. 2. The amendment is made with reference to Article 30 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies. 3. It is provided when the Company at the time of public announceme nt makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items

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Articles after amendment	Current Articles	Explanation
individual contracts set out in the procedures adopted by the Company. (4). Where the type of asset acquired or disposed is equipment for business use, the trading counterparty is not a related party, and the transaction amount reaches NT$500 million or more. (5). Acquisition or disposal by the Company in the construction business of real property for construction use, where the trading counterparty is not related party, and the transaction amount reaches NT$500 million or more. (6).Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, orjoint construction and	(4).Where an asset transaction other than any of those referred to in the preceding three subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches twenty percent or more of paid-in capital or NT$300 million; provided that, this shall not apply to the following circumstances: (a). Trading of government bonds. (b). Securities trading by investment professionals on foreign or domestic securities exchanges or over-the-counter markets, or subscription of securitiesby a securities firm, either in the primary market or in accordance with relevant regulations. (c). Trading of bonds under repurchase/resale agreements, or subscription or redemption of domestic money market funds. (d).Where the type of asset	shall be again publicly announced and reported in their entirety within two days counting inclusively from the date of knowing of such error or omission so as to amend some wording. 4. To remove the redundancy and amend the order of items.

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Articles after amendment		Current Articles	Explanation
separate sale, and the amount the Company expects to invest in the transactionreaches NT$500 millionor more. (7). Where an asset transaction other than any of those referred to in the preceding six subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches twenty percent or more of paid-in capital or NT$300 million; provided that, this shall not apply to the following circumstances: (a). Trading of government bonds. (b). Securities trading by investment professionals on foreign or domestic securities exchanges or over-the-counter markets, or subscription by investment professionals of ordinary corporate bonds or general bank debentures without	acquired or disposed is equipment/machinery for business use, the trading counterparty is not a related party, and the transaction amount isless than NT$500 million. (e). Acquisition or disposal by a public company in the construction business of real property for construction use, where the trading counterparty is not a related party, and the transaction amount is less than NT$500 million. (f). Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the transaction isless than NT$500 million. (5). The amount of transactions

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Articles after amendment	Current Articles	Explanation
equity characteristics offered and issued in the domestic primary market, or subscription by a securities firm of securities as necessitated by its undertaking business or as an advisory recommending securities firm for an emerging stock company, in accordance with the rules of the Taipei Exchange. (c). Trading of bonds under repurchase/resale agreements, or repurchase of money market funds issued by domestic securities investment trust enterprises. The amount of transactions above shall be calculated as follows: (a). The amount of any individual transaction. (b). The cumulative transaction amount of acquisitions and disposals of the same	above shall be calculated as follows: (a). The amount of any individual transaction. (b). The cumulative transaction amount of acquisitions and disposals of the same type of underlying asset with the same trading counterparty within the preceding year. (c). The cumulative transaction amount of real property acquisitions and disposals (for acquisitions and disposals, calculated respectively) within the same development project within the preceding year. (d). The cumulative transaction amount of acquisitions and disposals (For acquisitions and disposals, calculated respectively) of the same security within the preceding year. "Within the preceding year" as used in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with

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Articles after amendment	Current Articles	Explanation
type of underlying asset with the same trading counterparty within the preceding year. (c). The cumulative transaction amount of real property acquisitions and disposals (for acquisitions and disposals, calculated respectively) within the same development project within the preceding year. (d). The cumulative transaction amount of acquisitions and disposals (for acquisitions and disposals, calculated respectively) of the same security within the preceding year. "Within the preceding year" as used in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with these Regulations need not be counted toward the transaction amount.	these Regulations need not be counted toward the transaction amount. 5.10.2. Time limit on announcement and report Where the Company acquires or disposes the asset which includes the item to be announced and the trading amount reaches the threshold for public announcement and report, a public announcement and report shall be made within 2 days immediately from the date of occurrence of the event. 5.10.3. Procedure of public announcement and report (1). The Company shall make a public announcement and report of relevant information on the website designated by the FSC. (2).The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by itself and any subsidiaries that are not domestic public companies and enter the information

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Articles after amendment 5.10.2. The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by itself and any subsidiaries that are not domestic public companies and enter the information in the prescribed format into the information reporting website designated by the FSC by the 10th day of each month.

5.10.3. When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety within two days counting inclusively from the date of knowing of such error or omission.

5.10.4. The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, record books, appraisal reports and certified public accountant, lawyer, and securities underwriter opinions at the company headquarters, where they

Articles after amendment		Current Articles	Explanation
5.10.2. The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by itself and any subsidiaries that are not domestic public companies and enter the information in the prescribed format into the information reporting website designated by the FSC by the 10th day of each month. 5.10.3. When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entiretywithin two days counting inclusively from the date of knowing of such error or omission. 5.10.4. The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, record books, appraisal reports and certified public accountant, lawyer, and securities underwriter opinions at the company headquarters,where they		in the prescribed format into the information reporting website designated by the FSC by the 10th day of each month. (3).When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety. (4).The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, record books, appraisal reports and certified public accountant, lawyer, and securities underwriter opinions at the company headquarters, where they shall be retained for five years except where another act provides otherwise. (5).Where any of the following circumstances occurs with respect to a transaction that the Companyhas already

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	Articles after amendment		Current Articles	Explanation
	shall be retained for five years except where another act provides otherwise. 5.10.5. Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the preceding article, a public report of relevant information shall be made on the website designated within two days immediately from the date of occurrence of the event: (a). Change, termination, or rescission of a contract signed in regard to the original transaction. (b). The merger, demerger, acquisition, or shares assumption is not completed by the scheduled date set forth in the contract. (c). Amendment to the originally publicly announced and reported information.		publicly announced and reported in accordance with the preceding article, a public report of relevant information shall be made on the website designated within two days immediately from the date of occurrence of the event: (a). Change, termination, or rescission of a contract signed in regard to the original transaction. (b). The merger, demerger, acquisition, or shares assumption is not completed by the scheduled date set forth in the contract. (c). Amendment to the originally publicly announced and reported information.

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Attachment 6

Regulations Governing the Issuance of New Restricted Employee Shares of 2017

1. Purpose

The purposes are to attract and retain the required professionals, inspire the employees and enhance internal cohesion, as well as to discover interests for the Company and the shareholders and to ensure that the interests of the officials and employees of the Company are connected with interests of the shareholders. The following Regulations Governing the Issuance of New Restricted Employee Shares are stipulated for the Company in accordance with Article 267 of the Company Act and the Regulations Governing the Offering and Issuance of Securities by Securities Issuers of the Financial Supervisory Commission under the Executive Yuan (“FSC Regulations”).

2. Scope Nil.

3. Responsibilities & Authorities

• 3.1.Human Resources Department: The in-charge department for establishment/revision, drafting, implementation, revocation and application of the Regulations and relevant documents.

• 3.2.Other departments shall serve as the cooperation departments for implementation of the Regulations.

4. Terms and Definitions

• New Restricted Employee Shares: The shares provided by the Company to the employees in accordance with Paragraph 8, Article 267 of the Company Act, with vesting requirements of service period or performance. Before the said requirements are satisfied, the rights of such shares are restricted, and the Company may retrieve the issued new shares of the restricted employee shares when the employees fail to satisfy the said requirements.

5. Operating Procedures

5.1.Issuance Period

The shares may be issued at once or in installments, depending on the actual needs of the Company, within one year starting from the date of receipt of the notice of effective registration from the competent authority. The actual date

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of issuance shall be stipulated by the chairperson under authorization by the board of directors.

5.2.Total Issuance

The total issuance is 1,500,000 shares of common shares and par value of each share is NT$10, which constitute the total issued amount of NT$15,000,000.

• 5.3.Type of Shares Upon issuance of the shares, rights of the new restricted employee shares shall be the same as the other issued common shares of the Company, except for the shares under trust in accordance with the Regulations or the rights under restriction set forth in the Regulations before satisfaction of vesting conditions.

5.4.Issuance Price

• The shares are issued gratuitously with an issuance price of NT$0 for each share.

5.5.Qualification for Shares Distribution

• 5.5.1. The employees qualified for shares distribution shall be a full-time employees who has been employed on or before the distribution date of the new restricted employee shares and whose performance has satisfy certain qualifications.

• 5.5.2. The employees qualified for shares distribution shall be any of the following:

• (1).Key personnel related to future development of the Company,

• (2).Personnel with performance which is fairly valuable to the Company, or

• (3).New employees who are essential to the company.

• 5.5.3. The actual number of new restricted employee shares distributed to an employee will be subject to the job tenure, performance, overall contribution, special credit or any other necessary factor for management reference and shall be submitted to the board of directors for approval after being confirmed by the chairperson. However, when distribution is made to a manager, it shall also be subject to a prior consent of remuneration committee.

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• 5.5.4. Any individual who already holds 10% or more of the outstanding common shares of the Company is not qualified for distribution.

• 5.5.5. Any member of the remuneration committee or any member of the board of directors, who is not an employee, is not qualified for distribution.

• 5.5.6. The cumulative number of shares which could be subscribed by the employee stock options issued by the Company to any employee in accordance with Paragraph 1, Article 56-1 of the FSC Regulations, together with the new restricted employee shares obtained by the same employee, shall not exceed 0.3% of the outstanding number of shares. The above amount, plus the cumulative number of shares which could be subscribed by the employee stock options issued by the Company to any employee in accordance with Paragraph 1, Article 56 of the FSC Regulations, shall not exceed 1% of the outstanding shares. However, with special approval from the central competent authority of the relevant industry, the total number of employee stock options and new restricted employee shares obtained by a single employee may be exempted from the above-mentioned restriction.

5.6.Vesting Conditions

• 5.6.1. The performance of an employee shall be B or above since such employee has obtained the new restricted employee shares. The vesting conditions shall be deemed as unsatisfied when performance of such employee is lower than B.

• 5.6.2. The conditions for company performance will be set forth as follows, on basis of the operation income and operating profits listed in the consolidated financial statement of the latest year:

• (1). The first year: The operation income growth is 10% or more from the previous year;

• (2). The second year: The operating profit growth, after adjustment, is 10% or more from the previous year;

• (3). The third year: The operating profit growth, after adjustment, is 10% or more from the previous year.

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  • (4). The operating profit after adjustment shall be the operating profit listed in a financial statement audited and issued by a certified public accountant plus the non-operating income related to the major business of the Company.

  • (5). The vesting conditions shall be deemed as unsatisfied when the above conditions for company performance are not satisfied.

• 5.6.3. If the conditions for personal performance in [5.6.1.] and company performance in [5.6.2.] are both satisfied, the highest amount an employee may obtain from the shares distribution in each year shall be as follows:

  • (1). 30% of the distributed number of shares to such employee, whereas the employee has served for over one year after the distribution;

  • (2). 30% of the distributed number of shares to such employee, whereas the employee has served for over two years after the distribution;

  • (3). 40% of the distributed number of shares to such employee, whereas the employee has served for over three years after the distribution.

• 5.7.Failure of Satisfaction of Vesting Conditions

• When any employee fails to satisfy the vesting conditions, the Company may retrieve, without remuneration, all new restricted employee shares distributed to such employee and cancel such.

• 5.8.Resignation, Retirement, Suffering Occupational Injury or Resulted Disability or Death, Transferring to Affiliate Company, or Leave of Absence of Employees

• 5.8.1. With regard to any employee who voluntarily resigns, is dismissed by the Company, retires, or dies from or of other factors other than occupational injuries, such employee shall be deemed as incapable of satisfying the vesting conditions starting from the date when such employee resigns, retires or dies. The shares for which the vesting conditions are not satisfied shall be retrieved by the Company without remuneration.

• 5.8.2. With regard to any employee who is not able to serve at the Company due to disability caused by occupational injuries or dies from

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occupational injuries, if the vesting conditions in [5.6.3.] have been satisfied on the date such employee resigns or dies, the vesting conditions of the year shall be deemed as satisfied before expiration. However, the employee shall be deemed as incapable of satisfying the vesting conditions of the next two years, and the shares for which the vesting conditions are not satisfied shall be retrieved by the Company without remuneration.

• 5.8.3. As the operation of the Company may require, when any employee of the Company is transferred to an affiliate company of which the Company holds 50% or more of the shares and vesting conditions in [5.6.3.] have been satisfied in the year of such transfer (note: the condition for company performance of the year shall be calculated by the percentage of the days such employee serves until the transfer date to the total number of days in the same year, multiplying conditions in [5.6.2.]), the chairperson or an authorized official may review if such employee has satisfied the vesting conditions in such percentage of time.

• 5.8.4. With regard to any employee who takes a leave of absence under approval of the Company, if the vesting conditions in [5.6.3.] for the year in which the leave date occurs have been satisfied, the new restricted employee shares which are yet vested shall be calculated by the job tenure in [5.6.3.] with deduction of the actual days of the leave.

• 5.8.5. The new restricted employee shares retrieved by the Company without remuneration shall be cancelled.

• 5.9.Restriction on the Shares before Satisfaction of Vesting Conditions

• 5.9.1. The employees, immediately upon obtaining the new restricted employee shares issued by the Company, shall place such shares in trust with a trustee designated by the Company. The employees may not, for any purposes or in any manner, request the trustee for return of such new restricted employee shares.

• 5.9.2. Before the vesting conditions are satisfied, the relevant restricted employee shares shall not be entitled to bonus shares, share dividend or participation in capital increase in cash.

• 5.9.3. The shares shall not be sold, pledged, transferred, given as gift, set as subject of any right or obligation or disposed in any other manner, before the vesting conditions are satisfied.

• 5.9.4. Before the vesting conditions are satisfied, the rights of shareholder of

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the holding employees, including attendance, making proposal, raising opinion or voting in the shareholders' meeting of the Company or other relevant matters shall be authorized to the trustee to exercise.

5.10.Other Agreed Matters

• 5.10.1. The employees shall place the new restricted employee shares, which such employee obtained in accordance with the Regulations, in trust before the vesting conditions are satisfied. Within one month from the date when the vesting conditions are satisfied, the relevant shares shall be appropriated from the trust account to the centralized depository account of such employee.

• 5.10.2. Agreement and Confidentiality

• (1). When the number to be issued, subscription price, principles for distribution and the list of the personnel for distribution are confirmed, the employees shall sign on the “HR2-077-001 Consenting Form for Receipt of the New Restricted Employee Shares”. Any employee who fails to sign on such form in accordance with the Regulations shall be deemed as abandon such qualification for distribution of the new restricted employee shares.

• (2). The employee who obtains the new restricted employee shares shall comply with the confidentiality regulations and shall not disclose the number of distributed shares or any other relevant information, unless otherwise required by the laws or regulations or a competent authority.

• (3). Whereas any employee is in violation of the above requirements which is deemed as a material violation by the Company, such employee shall be immediately disqualified for distribution of the new restricted employee shares for which the vesting conditions are not satisfied yet. The Company may retrieve shares from such employee without remuneration and cancel such shares.

• 5.10.3. Whereas any employee who obtains the new restricted employee shares is in violation of the provisions in the “HR2-077-001 Consenting Form for Receipt of the New Restricted Employee Shares” regarding good faith or integrity, the Company may retrieve the new restricted employee shares which are not yet vested, if any, and cancel such shares.

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5.10.4. Taxation

The taxation incurred from the new restricted employee shares shall be declared and paid by such employee in accordance with relevant laws and regulations in Taiwan.

• 5.11.The Regulations have been approved by a board meeting where two third or more of the directors attended and over half of the attending directors voted for approval of the Regulations. The Regulations have also been approved by a shareholders meeting where the shareholders representing two third or more of the outstanding shares attended and over half of the attending shares present voted for approval of the Regulations (or where shareholders representing over half of the outstanding shares attended and two third or more of the attending shares were voted for approval of the Regulations). The Regulations enter into effect after being submitted to and approved by the competent authority. The above applies to amendment to the Regulations. If upon review by the competent authority, any amendment is required by the competent authority, the chairperson is authorized to amend the Regulations. The issuance can only be made after recognition by the board meeting.

• 5.12.Any other matter not stipulated above in the Regulations shall be subject to the relevant laws or regulations.

6. Forms

• 6.1. HR2-077-001 Consenting Form for Receipt of the New Restricted Employee Shares

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IV. Appendixes

Appendix 1

Operation Procedures for the Acquisition and Disposal of Assets (before amendments)

1. Purpose

The Company hereby adopted this procedure in order to protect assets and carry out the information disclosure.

2. Scope

2.1. Legal basis

This procedure is adopted and handled in accordance with relevant provisions of Article 36-1 of the Securities Exchange Act and the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" enacted and announced by the Financial Supervisory Commission of the Executive Yuan ("FSC"), provided that, where other laws or regulations provide otherwise, such provisions shall govern.

2.2. Scope of the assets

• 2.2.1. Investments in stocks, government bonds, corporate bonds, financial bonds, securities representing interest in a fund, depositary receipts, call (put) warrants, beneficial interest securities, and asset-backed securities.

• 2.2.2. Real property (including investment property, rights to use land, and construction enterprise inventory), factory and equipment.

2.2.3. Memberships.

• 2.2.4. Intangible assets: Including patents, copyrights, trademarks, franchise rights, and other intangible assets.

• 2.2.5. Claims of financial institutions (including receivables, bills purchased and discounted, loans, and overdue receivables).

2.2.6. Derivatives.

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• 2.2.7. Assets acquired or disposed of as a result of mergers, demergers, acquisitions, or transfer of shares in accordance with laws.

2.2.8. Other major assets.

3. Responsibilities & Authority:

Finance Department.

4. Terms and Definitions

4.1. Derivatives

It refers to forward contracts, options contracts, futures contracts, leverage contracts, and swap contracts, and compound contracts combining the above products, whose value is derived from assets, interest rates, foreign exchange rates, indexes or other interests. The term "forward contracts" does not include insurance contracts, performance contracts, after-sales service contracts, long-term leasing contracts, or long-term purchase (sales) agreements.

• 4.2. Assets acquired or disposed as a result of mergers, demergers, acquisitions, or transfer of shares in accordance with laws

It refers to assets acquired or disposed of as a result of mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other laws, or issuance of new shares as a consideration of assuming the shares of another company (hereinafter "transfer of shares") under Paragraph 8, Article 156 of the Company Act.

4.3. Related party or subsidiary

As defined under the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

4.4. Professional appraiser

It refers to a real property appraiser or other persons duly authorized by laws to engage in the value appraisal of real property, factory or equipment.

4.5. Date of occurrence

It refers to the date of contract signing, date of payment, date of consignment

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4.6. Mainland China area investment

It refers to investments in the mainland China area in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area enacted by the "Investment Commission, the Ministry of Economic Affairs".

• 4.7."Within the preceding year" as used herein refers to the year preceding the date of the acquisition and disposal of assets (excluding the public announcement period).

• 4.8. The "latest financial statements" refers to the financial statements audited or reviewed by a CPA and has been announced prior to the Company's acquisition or disposal of assets.

5. Operating Procedures

• 5.1. The quota for investment in real property not for business use and securities:

The respective quota for acquisition of the above-mentioned assets by the Company and each of the subsidiaries is as follow:

• 5.1.1. For investment in real property not for business use, the total investment amount shall not exceed 50% of the assets.

• 5.1.2. For the investment in securities, the total investment amount shall not exceed 70% of the assets.

• 5.1.3. For the investment in individual security, the investment amount shall not exceed 50% of the assets.

• 5.2. For the appraisal reports, CPA's, attorney's or underwriter's opinions the Company obtained, such professional appraisers and their officers, CPAs, attorneys, and securities underwriters shall not be a related party of any party to the transaction.

• 5.3. Procedures governing the acquisition and disposal of real property or other fixed assets

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5.3.1. The appraisal and operational procedures

The Company shall follow the Company's cycle procedures for fixed assets under the internal control system to handle the acquisition or disposal of the real property and other fixed assets.

• 5.3.2. The procedure to determine the transaction terms and authorized quota

• (1) For the acquisition or disposal of real property, it is required to consider the publicly announced current value, appraised value and the actual transaction price of the neighboring real property to determine the transaction terms and price and then prepare an analysis report and submit to the chairperson. If the amount does not exceed NT$ 50 million, such transaction shall be submitted to the chairperson for approval and reported in the latest following board meeting. If the amount exceeds NT$ 50 million, such transaction shall not be commenced until it is approved by the board of directors.

• (2) For the acquisition or disposal of other fixed assets, it shall be done by one of the following: price inquiry, price survey, price negotiation or bidding. If the amount does not exceed NT$ 50 million (inclusive), such transaction shall be properly approved in accordance with the authorization rules. If the amount exceeds NT$ 50 million, such transaction shall be submitted to the general manager for approval and shall not be commenced until it is approved by the board of directors.

• (3) For the Company's acquisition or disposal of assets which is subject to the approval of the board of directors under the procedure or other laws or regulations, if any director expresses dissent and it is recorded or contained in a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the Company has independent director(s) or audit committee, the resolution procedures shall be handled in accordance with Article [5.14.2].

5.3.3. Execution unit

The acquisition or disposal of real property or other fixed assets shall be submitted for approval in accordance with the approval authorization provided in the preceding paragraph and executed by relevant departments.

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5.3.4. Appraisal reports of real property or other fixed assets

In acquisition or disposal of real property, factory or equipment where the transaction amount reaches 20% of the Company's paid-in capital or NT$300 million or more, the Company, unless transacting with a governmental institution, engaging others to build on its own land, engaging others to build on rented land, or acquisition or disposal of machines and equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions:

• (1) Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the board of directors, and the same procedure shall be followed for any future changes to the terms and conditions of the transaction.

• (2) Where the transaction amount reaches NT$1 billion or more, appraisals from two or more professional appraisers shall be obtained.

• (3) Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a CPA shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ROC Accounting Research and Development Foundation (hereinafter "ARDF") and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price:

• (a) The discrepancy between the appraisal results of two or more professional appraisers is 10 % or more of the transaction amount.

• (b) The discrepancy between the appraisal result and the transaction amount is 20 % or more of the transaction amount.

• (4) No more than 3 months may elapse between the date of the appraisal report issued by a professional appraiser and the contract execution date; provided, where the publicly announced current

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value for the same period is used and no more than 6 months have elapsed, an opinion may still be issued by the original professional appraiser.

  - (5) Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion.

• 5.4. Investment procedures governing the acquisition and disposal of securities

• 5.4.1. The appraisal and operational procedures

The Company shall follow the Company's investment cycle procedures under the internal control system for purchase and sale of securities.

• 5.4.2. The procedure to determine the transaction terms and authorized quota

• (1) Transactions of securities traded on the centralized securities exchange market or over the counter shall be determined by the responsible units according to the market quotation and approved in accordance with the relevant authorization requirement of the Company.

• (2) For transactions of the securities not traded on the centralized securities exchange market or over the counter, it is required to obtain financial statements of the issuing company certified or reviewed by a CPA for the most recent period for reference in appraising the transaction price, consider the net value per share, profitability and the growing potential in the future and be approved in accordance with the relevant authorization requirement of the Company.

• (3) With respect to the Company's acquisition or disposal of assets which is subject to the approval of the board of directors under the procedure or other laws or regulations, if any director expresses dissent and it is recorded or contained in a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the position of independent director has been created or an audit committee has been established, the resolution procedures shall be handled in accordance with Article [5.14.2].

• 5.4.3. Execution unit: The Company's investment in securities shall be submitted for approval in accordance with the approval authorization provided in the proceed paragraph and executed by the finance and

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accounting departments.

5.4.4. Obtaining professional's opinion

• (1) The Company acquiring or disposing of securities shall, prior to the date of occurrence of the event, obtain financial statements of the issuing company certified or reviewed by a CPA for the most recent period for reference in appraising the transaction price, and if the amount of the transaction is 20% of the Company's paid-in capital or NT$300 million or more, the Company shall additionally engage a CPA prior to the date of occurrence of the event to provide an opinion regarding the reasonableness of the transaction price. If the CPA needs to use the report of an expert, the CPA shall do so in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ARDF. This requirement does not apply, however, to securities with public quotation of an active market, or where otherwise provided by regulations of the FSC.

• (2) Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion.

5.5. Related party transactions

• 5.5.1. When the Company acquires or disposes of assets from or to a related party, in addition to ensuring that relevant resolutions are adopted and the reasonableness of the transaction terms is appraised in accordance with this Article, if the transaction amount reaches 10% or more of the Company's total assets, the Company shall also obtain an appraisal report from a professional appraiser or a CPA's opinion in compliance with the provisions of the preceding section.

The calculation of the transaction amount referred to in the preceding paragraph shall be made in accordance with Article [5.6.4.(4)] herein.

When judging whether transaction counterparty is a related party, in addition to its legal formalities, the substance of the relationship shall also be considered.

5.5.2. The appraisal and operational procedures

When the Company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction

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amount reaches 20% or more of the paid-in capital, 10% or more of the Company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds, the Company may not proceed to enter into a transaction contract or make a payment until the following information has been submitted and approved by the board of directors and recognized by the supervisors:

• (1) The purpose, necessity and anticipated benefit of the acquisition or disposal of assets.

• (2) The reason for choosing the related party as transaction counterparty.

• (3) With respect to acquisition of real property from a related party, relevant information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article [5.5.3.(1)] and Article [5.5.3.(4)].

• (4) The date and price at which the related party originally acquired the real property, the original transaction counterparty, and that transaction counterparty's relationship with the Company and the related party.

• (5) Monthly cash flow forecasts for the year commencing from the anticipated month of signing of the contract, and evaluation of the necessity of the transaction, and reasonableness of the funds utilization.

• (6) An appraisal report from a professional appraiser or a CPA's opinion obtained in compliance with the preceding paragraph.

• (7) Restrictive covenants and other important stipulations associated with the transaction.

The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with Article [5.10.1.(5)] herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by the board of directors and recognized by the supervisors in accordance with this procedure need not be counted toward the transaction amount.

With respect to the acquisition or disposal of business-use machines

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and equipment between the Company and its parent or subsidiaries, the Company's board of directors may delegate the chairperson to decide such matters when the transaction amount is within NT$ 50 million and have the decisions subsequently submitted to and ratified by the next board meeting.

Where the position of independent director has been created, when a matter is submitted for discussion by the board of directors pursuant to Article [5.14.2.], the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations, it shall be recorded in the minutes of the board of directors meeting.

Where an audit committee has been established, the matters for which Article [5.14.2.] requires recognition by the supervisors shall first be approved by the majority of all audit committee members and then submitted to the board of directors for a resolution, and Article [5.14.2.] shall apply mutatis mutandis.

• 5.5.3. Evaluation of the reasonableness of the transaction costs

• (1) For the Company to acquire real property from a related party, it shall evaluate the reasonableness of the transaction costs by the following means:

  • (a) Based upon the related party's transaction price plus necessary interest on funding and the costs to be duly borne by the buyer. "Necessary interest on funding" is calculated by the weighted average interest rate for borrowing in the year the Company purchases the property; provided that it may not be higher than the maximum non-financial industry borrowing rate announced by the Ministry of Finance.

  • (b) The total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided that the actual cumulative amount lend by the financial institution shall be 70% or more of the financial institution's appraised loan value of the property and the period of the loan shall be 1 year or more. However, this shall not apply where the financial institution is a related party of one of the transaction counterparties.

• (2) Where land and the building thereupon are consolidated as a single property to be purchased in one transaction, the transaction costs for

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the land and the building may be separately appraised in accordance with either of the means listed in the preceding paragraph.

• (3) The Company acquiring real property from a related party and appraises the cost of the real property in accordance with Article [5.5.3.(1)] and Article [5.5.3.(2)] shall engage a CPA to review the appraisal and render a concrete opinion.

• (4) When the results of the Company's appraisal conducted in accordance with Article [5.5.3.(1)] and Article [5.5.3.(2)] are both lower than the transaction price, the matter shall be handled in accordance with Article [5.5.3.(5)]. However, where the following circumstances exist, objective evidence has been provided and specific opinions on reasonableness have been obtained from a professional real property appraiser and a CPA, this restriction shall not apply:

• (a) Where the related party acquired undeveloped land or leased land for development, it may provide proof of satisfying one of the following conditions:

  • (i) Where undeveloped land is appraised in accordance with the means in the preceding Article, and buildings are valued according to the related party's construction cost plus reasonable construction profit, the aggregate amount is in excess of the actual transaction price. The "reasonable construction profit" shall be determined according to the average gross operating profit margin of the related party's construction division over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower.

  • (ii) Completed transactions by unrelated parties within the preceding year involving other floors of the same property or neighboring area, where the land area and transaction terms are similar after calculation of reasonable price discrepancies in floor or area land prices in accordance with standard property market practices.

  • (iii) Completed leasing transactions by unrelated parties for other floors of the same property within the preceding year, where the transaction terms are similar after calculation of reasonable price discrepancies among floors in accordance

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with standard property leasing market practices.

• (b) Where the Company acquiring real property from a related party provides evidence that the terms of the transaction are similar to the terms of transactions completed for the acquisition of neighboring land of a similar size by unrelated parties within the preceding year. Completed transactions for neighboring land in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transaction for similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50% of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property.

• (5) Where the Company acquires real property from a related party and the results of appraisals conducted in accordance with Article [5.5.3.(1)] and Article [5.5.3.(2)] are both lower than the transaction price, the following steps shall be taken.

In addition, if the Company and a public company using the equity method to account for its investment in the Company have set aside a special reserve under Article [5.5.3.(5).(a)], they may not utilize the special reserve until it has recognized a loss on decline in market value of the assets it purchased at a premium, or they have been disposed of, or adequate compensation has been made, or the status quo ante has been restored, or there is other evidence confirming that there was nothing unreasonable about the transaction, and the FSC has given its consent.

• (a) A special reserve shall be set aside by the Company in accordance with Paragraph 1, Article 41 of the Securities Exchange Act for the difference between the real property transaction price and the appraised cost, and may not be distributed or used for capital increase or issuance of bonus shares. Where a public company uses the equity method to account for its investment in the Company, then the special reserve called for under Paragraph 1, Article 41 of the Securities Exchange Act shall be set aside pro rata in accordance with its shareholding in the Company.

• (b) Supervisors shall handle in accordance with Article 218 of the

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Company Act. Where an audit committee has been established, such requirement shall apply to the independent directors of the audit committee.

  - (c) Actions taken pursuant to Article [5.5.3.5.(a)] and Article [5.5.3.5.(b)] shall be reported to the shareholders meeting, and the details of the transaction shall be disclosed in the annual report and any prospectus.

• (6).Where the Company acquires real property from a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with the appraisal and operational procedures provided in Article [5.5.1] and Article [5.5.2] and the evaluation of the reasonableness of the transaction costs provided in Articles [5.5.3.(1), 5.5.3.(2), 5.5.3.(3)] shall not apply:

  • (a) The related party acquired the real property through inheritance or as a gift.

  • (b) More than 5 years will have elapsed from the time the related party signed the contract to obtain the real property to the signing date for the current transaction.

  • (c) The real property is acquired through signing of a joint development contract with the related party, or through engaging a related party to build real property, either on the Company's own land or on rented land.

• (7) When the Company obtains real property from a related party, it shall also comply with Article [5.5.3.(5)] if there is other evidence indicating that the acquisition was not an arms of length transaction.

• 5.6. Operational procedures for acquisition and disposal of memberships or intangible assets

5.6.1. The appraisal and operational procedures

The Company shall follow the Company's cycle procedures for fixed assets under the internal control system for the acquisition and disposal of memberships or intangible assets.

• 5.6.2. The procedure to determine the transaction terms and authorized quota

• (1) For the acquisition or disposal of memberships, it is required to

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• (2) For the acquisition or disposal of intangible assets, it is required to consider experts' appraisal report and market fair value to determine the transaction terms and price and then prepare an analysis report to be submitted to the chairperson. If the amount does not exceed 10% of the paid-in capital or NT$ 20 million, such transaction shall be submitted to the chairperson for approval and reported to the next board meeting. If the amount exceeds NT$ 20 million, such transaction shall not be commenced until it is approved by the board of directors.

• (3) For the Company's acquisition or disposal of assets which is subject to the approval of the board of directors under the procedure or other laws or regulations, if any director expresses dissent and it is recorded or contained in a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the position of independent director has been created or an audit committee has been established, the resolution procedures shall be handled in accordance with Article [5.14.2].

5.6.3. Execution unit:

The acquisition or disposal of memberships or intangible assets shall be submitted for approval in accordance with the approval authorization provided in the preceding paragraph and executed by the departments using such assets and the finance department or the administration department.

• 5.6.4. Experts appraisal opinion and report of memberships or intangible assets

• (1) Where the transaction amount of the Company’s acquisition or disposal of memberships reaches 1% of the paid-in capital or NT$3 million or more, appraisal reports from experts shall be obtained.

• (2) Where the transaction amount of the Company’s acquisition or

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disposal of intangible assets reaches 10% of the paid-in capital or NT$20 million or more, appraisal reports from experts shall be obtained.

• (3) Where the transaction amount of the Company’s acquisition or disposal of memberships or intangible assets reaches 20% or more of paid-in capital or NT$300 million or more, except for transactions with a government agency, the Company shall engage a CPA prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the CPA shall handle in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ARDF.

• (4) The calculation of the transaction amounts referred to in the preceding three paragraphs shall be handled in accordance with Article [5.10.1.5] herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have obtained the appraisal report from a professional appraiser or a CPA's opinion or in accordance with this procedure need not be counted toward the transaction amount.

• 5.7. Procedures governing the acquisition and disposal of claims of financial institutions

The Company will not engage in the acquisition and disposal of claims of financial institutions in principle. If the Company would like to engage in transaction of the acquisition and disposal of claims of financial institutions in the future, the Company will submit to the board of directors for approval and then establish the assessment and operational procedures.

5.8. Procedures governing the acquisition and disposal of derivatives

5.8.1. Trading principles and strategies

(1) Trading types

• (a) The transaction of derivatives the Company engaged in refers to transaction contract whose value is derived from assets, interest rates, foreign exchange rates, indexes or other interests (such as forward contracts, options contracts, futures, interest rates or foreign exchange rates, swaps and compound contracts combining the above products.)

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• (b) Relevant matters in connection with the Company engaging in deposit trading of bonds shall also comply with the relevant requirements of this procedure. The requirements in this procedure may not apply to engaging in bonds transactions with repurchase agreement.

(2) Operational (hedging) strategy

The Company shall engage in derivatives transaction for the purpose of hedging and shall choose the transaction products to hedge the risks generate from the operation of the Company's business. The currencies held by the Company shall meet the demand of the Company for foreign currencies in import and export transactions. Such positions shall be covered by the total internal positions held by the Company (foreign currency assets, foreign currency income and expenses) in principle so as to reduce the total foreign exchange risks the Company assumed and also save the costs to operate foreign exchange. Transaction for other specific purpose shall be carefully assessed and shall not commence until it has been submitted to the board of directors for approval.

• (3) Delegation of authority and duty

• (a) Finance department

  • (i) Trading personnel

  • (I) Responsible to propose the strategy on financial products

  • (II) Trading personnel shall calculate the positions on a regular basis collect market information and conduct the trends judging and risk assessment to plan the operational strategy. Once such strategy is approved by the authority, it will serve as the basis for the Company to conduct transaction.

  • (III) To execute transactions based on the authorization and the existing strategy.

  • (IV)To propose assessment reports and replace the strategy from time to time when there is a material change to the financial market and the trading personnel determined that the existing strategy shall not apply anymore. Once such strategy is approved by the general manager, it will serve as the basis for the Company to conduct transaction.

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(ii) Accounting personnel

• (I) To confirm the transaction executed.

• (II) To review and check whether the transaction is conducted in accordance with the authorization and existing strategy.

• (III) To conduct evaluations on a monthly basis and submit the evaluation reports to the general manager.

• (IV)To handle accounting and books.

• (V) To conduct report and announcement according to the requirements of the FSC.

• (iii) Settlement personnel: Responsible to execute settlements.

• (iv) Authorization to approve the derivatives

• (I) The authorization to approve transaction

	Unit: US$10 thousand	Unit: US$10 thousand
Total amount of the contract	Hedging transaction	Non-hedging transaction
Chief Financial Officer	200	-
General manager	600	-
Chairperson	1000	100
Board of directors	1000 and above	100 and above

The abovementioned amount shall not include the purchase and sale of the contracts with the same tenor and same amount on the same day.

• (II) For the Company's acquisition or disposal of assets which is subject to the approval of the board of directors under the procedure or other laws or regulations, if any director expresses dissent and it is recorded or contained in a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the position of independent director has been created or an audit committee has been established, the resolution procedures

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(b) Audit department

Responsible to understand the appropriateness of the internal control system of the derivatives transaction, audit the compliance of the trading department with the operational procedures, analyze the transaction cycle, generate audit report and report to the board of directors when there is any material deficiency.

(c) Performance assessment

(i) Hedging transaction

• (I) Take the profits and losses generated between the cost of foreign exchange rate from the Company's books and the transaction of derivatives as the basis for performance assessment.

• (II) In order to fully control and express the transaction risks assessed, the Company will assess profits and losses based on the monthly balance.

• (III) The finance department shall provide the evaluation on foreign exchange positions and the market trend of the foreign exchange and market analysis to the general manager as management reference and indication.

(ii) Transaction for specific purposes

It shall take the actual profits and losses as the basis to assess performance and the accounting personnel shall compile the positions into a statement on a regular basis for the management's reference.

• (d) Setting the total amount of contracts and the maximum loss limit

• (i) Total amount of contracts

(I) Quota for hedging transaction

The finance department shall control the total positions of the Company in order to hedge transaction risks. The amount of hedging transaction shall not exceed the

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Company's total net positions, where exceeded, it shall be reported to the general manager for approval.

• (II) Transaction for specific purposes

Based on the assessment on the market change, the finance department may propose strategy when needed and submit to the general manager and chairperson for approval and execution. The total amount of the contracts of the net accumulated positions the Company holds for transaction for specific purposes shall not exceed US$10 million. Once the total amount exceeds US$10 million, it shall not be executed until it is approved by the board of directors and executed in accordance with policy instruction.

• (ii) Setting the maximum loss limit

• (I) With respect to hedging transaction, the maximum loss limit for individual contract shall be 50% of each transaction amount.

• (II) If it is a transaction contract for specific purposes, when the position is held by the Company, it is required to set the stop loss point to avoid excess of loss.

The setting of stop loss point shall not excess of 10% of the total transaction contract amount. If the loss amount exceeds 10% of the transaction amount, it shall be reported to the general manager immediately and reported to the board of directors to discuss the necessary measures to deal with it.

• (III) The loss amount of individual contract shall not exceed US$20,000 or 5% of the transaction contract amount, whichever is lower.

• (IV)The Company’s annual maximum loss limit for transactional operation for specific purposes is US$300,000.

5.8.2. Risk management measures

• (1) Management of credit risk

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Considering that the market fluctuates due to various elements, which may cause the operational risk of derivatives financial products, the management of market risk shall be conducted in accordance with the following principles:

• (a) Counterparties: The Company shall mainly deal with reputational local or foreign financial institutions.

• (b) Transaction products: The Company shall only transact the products provided by reputational local or foreign financial institutions

• (c) Transaction amount: Hedging shall be centralized to deal with a single counterparty, unless such transaction is approved by the general manager.

• (2) Management of market risks: The Company shall mainly deal on the public foreign exchange trading market provided by banks.

(3) Management of liquidity risk

To ensure the market liquidity, the Company shall choose the financial products with higher liquidity (which means the position can be covered on the market at any time) and the financial institutions accept trading orders shall maintain adequate information and the ability to engage in transaction on any market at any time.

(4) Management of cash flow risk

To ensure the stability of the turnover of the Company's operational fund, the funding for the Company to engage in derivatives transaction shall be the Company's self-owned capital and it shall also consider the demand for fund based on the estimation of cash inflow and outflow for the next three months to decide the transaction amount.

(5) Management of operational risk

• (a) It is required to strictly follow the Company's authorized quota and operational procedures, which shall be adopted into the internal audit to avoid operational risk.

• (b) The trading personnel for derivative products shall not

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concurrently act as the operational personnel such as the persons handling confirmation or settlement.

• (c) The personnel of risk assessment, supervision and control shall belong to departments other than the department of personnel mentioned in the preceding paragraph and shall report to the board of directors or to the high-level managers not responsible for decision making of transactions or positions.

(6) Management of product risk

The internal trading personnel shall equip with complete and correct professional knowledge of the financial products and shall request banks to fully disclose risks to avoid the risk of misuse of financial products.

(7) Management of legal risk

The documents to be executed with financial institutions shall not be executed unless they have been reviewed by the expert of foreign exchange and legal or legal counsels to avoid legal risk.

5.8.3. Internal audit system

• (1) The internal auditor shall periodically make a determination of the suitability of internal controls on derivatives, conduct monthly audit on the compliance of procedure for derivatives trading engaged by the trading department and analyze the trading cycle, and prepare an audit report. If any material violation is found, he/she shall notify the supervisor in writing.

• (2) The internal auditor shall file the audit report, together with the annual internal auditing condition, to the FSC by the end of February of the following year, and shall file the improvement to the irregular circumstance by the end of May of the following year at the latest.

5.8.4. Regular evaluation methods

• (1) The board of directors shall authorize senior management personnel to periodically monitor and evaluate whether the derivatives trades are faithfully conducted in accordance with the trading procedure stipulated by the Company and whether the risk undertaken is within the Company's permitted scope of tolerance. Where the

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irregular circumstance is found in the evaluation report of market price (such as the holding position has exceeded the upper limit of the loss), a report shall be immediately made to the board of directors and the corresponding measures shall be adopted.

• (2) The holding position of derivatives trades shall be evaluated at least once per week. If the hedging transaction was made in consideration of business necessity, the evaluation shall be made at least twice per month. The evaluation report shall be submitted to the senior management personnel authorized by the board of directors.

• 5.8.5. The supervising and managing principles of the board of directions when engaging in derivatives trades:

• (1) Designate senior management personnel to pay continuous attention to monitoring and controlling derivatives trading risk.

• (2) Periodically evaluate whether derivatives trading performance is consistent with established operational strategy and whether the risk undertaken is within the Company's permitted scope of tolerance. Senior management personnel authorized by the board of directors shall manage derivatives trading in accordance with the following principles:

  • (a) Periodically evaluate whether the risk management measures currently employed is appropriate and whether the regulations and the procedures for engaging in derivatives trading stipulated by the Company are faithfully complied with.

  • (b) When irregular circumstances are found in the course of supervising trading and profit-loss circumstances, appropriate measures shall be adopted and a report shall be immediately made to the board of directors. Where the Company has independent directors, an independent director shall be present at the meeting and express an opinion.

• (3) The Company shall report to the latest board meeting if it authorizes the relevant personnel to handle derivatives trading in accordance with its procedures for engaging in derivatives trading.

• (4) When engaging in derivatives trades, the Company shall establish a record book in which details of the types and amounts of derivatives trading engaged in, board of directors approval dates,

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and the matters required to be carefully evaluated under [5.8.4.(2), 5.8.5.(1) and 5.8.5.(2)] shall be recorded in detail in the record book.

• 5.9. Procedures for engaging in mergers, demergers, acquisitions, and shares assumption

• 5.9.1. Evaluation and Operation Procedure

  • (1) When engaging in mergers, demergers, acquisition and shares assumptions, it is advisable for the Company to engage a lawyer, CPA and securities underwriter to jointly discuss the tentative timeline of regulatory procedure and form an ad hoc group for implementation in accordance with the regulatory procedure. Prior to convening the board of directors to make a resolution, the Company shall engage a CPA, lawyer, or securities underwriter to give an opinion on the fairness of the share exchange ratio, acquisition price, or cash or other property distributed to shareholders, and submit it to the board of directors for deliberation and resolution.

  • (2) The Company shall prepare a public report to shareholders detailing important contractual terms and matters relevant to the merger, demerger or acquisition prior to the shareholders' meeting and include it along with the expert opinion referred to in [5.9.1.(1)] when sending notification of the shareholders' meeting to shareholders for reference to determine whether to approve the merger, demerger or acquisition, provided that the restriction shall not apply where other laws or regulations exempt a company from convening a shareholders' meeting to approve the merger, demerger or acquisition. In addition, where the shareholders' meeting of any party participating in a merger, demerger or acquisition fails to convene or pass a resolution due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is rejected by the shareholders' meeting, the companies participating in the merger, demerger or acquisition shall immediately and publicly explain the reason, the follow-up measures, and the preliminary date of the next shareholders' meeting.

5.9.2. Other matters to be noted

• (1) Date of the board meeting: The companies participating in a merger, demerger or acquisition shall convene the meeting of the board of directors and shareholders' meeting on the same day to resolve

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matters relevant to the merger, demerger or acquisition, unless other laws provide otherwise or the FSC is notified in advance of extraordinary circumstances and grants the consent. The companies participating in assumption of shares shall convene the meeting of the board of directors on the same day, unless other laws provide otherwise or the FSC is notified in advance of extraordinary circumstances and grants the consent.

• (2) Prior undertaking of confidentiality: Every person participating in or privy to the plan for merger, demerger, acquisition, or assumption of shares shall issue a written undertaking of confidentiality and may not disclose the content of the plan prior to public disclosure of the information and may not trade, in their own name or under the name of another person, in any stock or other equity securities of any company related to the plan for merger, demerger, acquisition or assumption of shares.

• (3) Determination and alteration principles of the exchange ratio or acquisition price

Companies participating in merger, demerger, acquisition, or assumption of shares shall, prior to convening the board of directors, engage a CPA, lawyer, or securities underwriter to give an opinion on the fairness of the share exchange ratio, acquisition price, or cash or other property distributed to shareholders, and submit it to the shareholders' meeting. Share exchange ratio or acquisition price may not be arbitrarily altered in principle, provided that this restriction shall not apply if the conditions for alteration have already been stipulated in the contract and disclosed to the public. Share exchange ratio or acquisition price is permitted to be altered in the following conditions:

• (a) Capital increase in cash, or issuance of convertible corporate bonds, bonus shares, corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity securities.

• (b) An action which affects the company's financial and operations, such as a disposal of major assets.

• (c) An event which affects shareholder equity or securities price, such as a major disaster or major change in technology.

• (d) An adjustment where any of the companies participating in the merger, demerger, acquisition, or assumption of shares from

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another company, buys back treasury stock.

• (e) An increase or decrease in the number of entities or companies participating in the merger, demerger, acquisition, or assumption of shares, or change of such entities or companies.

• (f) Other terms/conditions permitted to alter which are stipulated in the contract and have been publicly disclosed.

• (4) Content shall be included in the contract

In addition to Article 317-1 of Company Act and Article 22 of Business Mergers and Acquisitions Act, the contract for a merger, demerger, acquisition, or assumption of shares shall record the following:

• (a) Handling of breach of contract.

• (b) Principles for handling equity-type securities previously issued or treasury stock previously bought back by any company that is dissolved in a merger or that is demerged.

• (c) The amount of treasury stock participating companies are permitted under the laws to buy back after the record date of calculation of the share exchange ratio, and the principles for handling thereof.

• (d) The handling manner of changes in the number of participating entities or companies or changes of such entities or companies.

• (e) Preliminary schedule for plan execution, and anticipated completion date.

• (f) Scheduled date for convening the legally required shareholders meeting if the plan is not completed as scheduled, as well as the relevant procedures.

• (5) Changes in the number of companies participating in the merger, demerger, acquisition, or share assumption

After public disclosure of the information, if any company participating in the merger, demerger, acquisition, or share assumption intends to further carry out a merger, demerger, acquisition, or share assumption with another company, all of the

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participating companies shall carry out again the procedures or legal actions that had originally been completed for the merger, demerger, acquisition, or share assumption; except that where the number of participating companies is decreased and a participating company's shareholders meeting has adopted a resolution authorizing the board of directors to change, such participating company may be exempted from calling another shareholders meeting to resolve on the matter again.

• (6) Where any of the companies participating in a merger, demerger, acquisition, or transfer of shares is not a public company, the Company shall sign an agreement with the non-public company and act in accordance with [5.9.2.(1), 5.9.2.(2), 5.9.2.(5), 5.9.2.(7)].

• (7) A company participating in a merger, demerger, acquisition, or share assumption and listed on an exchange or having its shares traded on an OTC market shall prepare a complete written record of the following information and retain it for 5 years for reference:

• (a)Basic identification data of personnel: Including the titles, names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, demerger, acquisition, or assumption of another company's shares prior to disclosure of the information.

• (b) Dates of material events: Including signing of any letter of intent or memorandum of understanding, engaging a financial or legal advisor, execution of a contract, and convening of a board of directors meeting.

• (c) Important documents and minutes: Including merger, demerger, acquisition, and share assumption plans, any letter of intent or memorandum of understanding, material contracts, and minutes of board of directors meetings.

A company participating in a merger, demerger, acquisition, or share assumption and listed on an exchange or having its shares traded on an OTC market shall report (in the prescribed format and via the Internet-based information system) the information set out in (a) and (b) of the preceding paragraph to the FSC for recordation within 2 days immediately from the date of a resolution by the board of directors.

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Where any of the companies participating in a merger, demerger, acquisition, or share assumption of another company's shares is neither listed on an exchange nor has its shares traded on an OTC market, the company(s) so listed or traded shall sign an agreement with such company whereby the provisions of paragraphs 1 and 2 shall be complied with.

• 5.10. Procedure for Public Disclosure of Information

• 5.10.1. Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the FSC's designated website in the prescribed format within two days immediately from the date of occurrence of the event:

  • (1) Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches twenty percent or more of paid-in capital, ten percent or more of the company's total assets, or NT$300 million or more; provided that, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds.

  • (2) Merger, demerger, acquisition, or shares assumption.

  • (3) Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contracts set out in the procedures adopted by the Company.

  • (4) Where an asset transaction other than any of those referred to in the preceding three subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches twenty percent or more of paid-in capital or NT$300 million; provided that, this shall not apply to the following circumstances:

(a) Trading of government bonds.

• (b) Securities trading by investment professionals on foreign or domestic securities exchanges or over-the-counter markets, or subscription of securities by a securities firm, either in the primary market or in accordance with relevant regulations.

• (c) Trading of bonds under repurchase/resale agreements, or

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subscription or redemption of domestic money market funds.

• (d) Where the type of asset acquired or disposed is equipment/machinery for business use, the trading counterparty is not a related party, and the transaction amount is less than NT$500 million.

• (e) Acquisition or disposal by a public company in the construction business of real property for construction use, where the trading counterparty is not a related party, and the transaction amount is less than NT$500 million.

• (f) Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the transaction is less than NT$500 million.

• (5) The amount of transactions above shall be calculated as follows:

• (a) The amount of any individual transaction.

• (b) The cumulative transaction amount of acquisitions and disposals of the same type of underlying asset with the same trading counterparty within the preceding year.

• (c) The cumulative transaction amount of real property acquisitions and disposals (for acquisitions and disposals, calculated respectively) within the same development project within the preceding year.

• (d) The cumulative transaction amount of acquisitions and disposals (For acquisitions and disposals, calculated respectively) of the same security within the preceding year.

"Within the preceding year" as used in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with these Regulations need not be counted toward the transaction amount.

• 5.10.2. Time limit on announcement and report

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Where the Company acquires or disposes the asset which includes the item to be announced and the trading amount reaches the threshold for public announcement and report, a public announcement and report shall be made within 2 days immediately from the date of occurrence of the event.

5.10.3. Procedure of public announcement and report

• (1) The Company shall make a public announcement and report of relevant information on the website designated by the FSC.

• (2) The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by itself and any subsidiaries that are not domestic public companies and enter the information in the prescribed format into the information reporting website designated by the FSC by the 10th day of each month.

• (3) When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety.

• (4) The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, record books, appraisal reports and CPA, lawyer, and securities underwriter opinions at the company headquarters, where they shall be retained for five years except where another act provides otherwise.

• (5) Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the preceding article, a public report of relevant information shall be made on the website designated within two days immediately from the date of occurrence of the event:

• (a) Change, termination, or rescission of a contract signed in regard to the original transaction.

• (b) The merger, demerger, acquisition, or shares assumption is not completed by the scheduled date set forth in the contract.

• (c) Amendment to the originally publicly announced and reported information.

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• 5.11. The subsidiaries of the Company shall act in accordance with the following:

  • 5.11.1. The subsidiary shall also set up "Operational Procedures for Acquisition and Disposal of Assets" in accordance with relevant regulations of "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" and the same applies to any amendments thereto.

  • 5.11.2. Where the matter is not stipulated in the "Operational Procedures for Acquisition and Disposal of Assets" set up or amended by the subsidiary or is in violation of "Operational Procedures for Acquisition and Disposal of Assets" set up by the Company, it shall be handled in accordance with the regulations of the Company.

  • 5.11.3. Where the subsidiary of the Company is not a public company and its acquisition or disposal of assets meets the standards under the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" to be publicly announced and reported, the public announcement and report shall be made by the Company.

The standards for public announcement and report under [5.10.1.] shall apply to subsidiaries mentioned above.

For the calculation of ten percent of total assets under this procedure, the total assets stated in the most recent standalone financial report or individual financial report prepared under the Regulations Governing the Preparation of Financial Reports by Securities Issuers shall apply.

In the case of a company whose shares have no par value or a par value other than NT$10, for calculation of transaction amounts of twenty percent of paid-in capital under this procedure, ten percent of shareholder equity attributable to the parent company shall apply instead.

• 5.12. Penalty: The manager and in-charge personnel shall compensate the loss and damage suffered by the Company if he/she violates this procedure.

• 5.13. Implementation and amendment

After the "Procedures Governing the Acquisition and Disposal of Assets" established by the Company has been approved by the board of directors, it shall be submitted to each supervisor, and then to a shareholders' meeting for approval; the same applies when the procedure is amended. If any

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director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the director's dissenting opinion to each supervisor.

Where the position of independent director or audit committee has been created, the resolution procedure shall be conducted in accordance with [5.14.2.].

5.14. Supplementary

• 5.14.1. Where any matter is not stipulated in this procedure, it shall be handled in accordance with relevant laws and regulations.

• 5.14.2. Where the position of independent director has been created in accordance with the laws, when a matter is submitted for discussion by the board of directors, the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes. Where an audit committee has been established in accordance with the laws, the matters shall first be approved by a half of all audit committee members and then submitted to the board of directors for a resolution. If approval of a half of all audit committee members is not obtained, it shall be subject to approval by two-thirds or more of all directors, and the resolution of the audit committee shall be recorded in the minutes of the board of directors meeting. The terms "all audit committee members" and "all directors" shall be counted as the actual number of persons currently holding those positions. The provisions for supervisors in this procedure shall apply to the audit committee mutatis mutandis.

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Appendix 2

Rules of Procedure for Shareholders' Meeting

1. Purpose: To establish rules for shareholders meetings of the Company to comply with.

2. Scope: Annual shareholders' meeting and extraordinary shareholders' meeting.

3. Responsibilities & Authorities: General Finance Department.

4. Terms and Definitions: Nil.

5. Operational Procedures:

6. 5.1 The rules of procedures for the Company's shareholders' meetings, except as otherwise provided by laws, regulations, or the articles of incorporation, shall be as provided in this Rules.

7. 5.2 This Company shall specify in its shareholders' meeting notices the time during which shareholder attendance registrations will be accepted, the place to register for attendance, and other matters for attention.

The time during which shareholder attendance registrations will be accepted, as stated in the preceding paragraph, shall be at least 30 minutes prior to the time the meeting commences. The place at which attendance registrations are accepted shall be clearly marked and a sufficient number of suitable personnel assigned to handle the registrations.

Shareholders and their proxies (collectively, "shareholders") shall attend shareholders' meetings based on attendance cards, sign-in cards, or other certificates of attendance. Solicitors soliciting proxy forms shall also bring identification documents for verification.

The Company shall furnish the attending shareholders with an attendance book to sign, or attending shareholders may hand in a sign-in card in lieu of signing in.

Attending shares shall be calculated based on the attendance book or sign-in card.

The Company shall furnish attending shareholders with the meeting agenda book, annual report, attendance card, speaker's slips, voting slips, and other

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meeting materials. Where there is an election of directors or supervisors, pre-printed ballots shall also be furnished.

• 5.3 Attendance at shareholders' meetings shall be calculated based on numbers of shares.

• 5.4 The venue for a shareholders' meeting shall be the premises of the Company, or a place easily accessible to shareholders and suitable for a shareholders' meeting. The meeting may begin no earlier than 9 a.m. and no later than 3 p.m.

• 5.5 If a shareholders' meeting is convened by the board of directors, the meeting shall be chaired by the chairperson of the board. When the chairperson of the board is on leave or for any reason unable to exercise the powers of the chairperson, the vice chairperson shall act in place of the chairperson; if there is no vice chairperson or the vice chairperson also is on leave or for any reason unable to exercise the powers of the vice chairperson, the chairperson shall appoint one of the managing directors to act as chair, or, if there are no managing directors, one of the directors shall be appointed to act as chair. Where the chairperson does not make such a designation, the managing directors or the directors shall select from among themselves one person to serve as chair.

When a managing director or a director serves as chair, as referred to in the preceding paragraph, the managing director or director shall be one who has held that position for six months or more and who understands the financial and business conditions of the company. The same shall be true for a representative of a juristic person director that serves as chair.

It is advisable that shareholders' meetings convened by the board of directors be attended by a majority of the directors.

If a shareholders' meeting is convened by a party with power to convene but other than the board of directors, the convening party shall chair the meeting.

• 5.6 This Company may appoint its lawyers, CPAs, or related persons retained by it to attend a shareholders' meeting in a non-voting capacity.

• 5.7 The Company, beginning from the time it accepts shareholder attendance registrations, shall make an uninterrupted audio and video recording of the registration procedure, the proceedings of the shareholders' meeting, and the voting and vote counting procedures.

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• 5.8 The chair shall call the meeting to order at the appointed meeting time. However, when the attending shareholders do not represent a majority of the total number of issued shares, the chair may announce a postponement, provided that no more than two such postponements, for a combined total of no more than 1 hour, may be made. If the quorum is not met after two postponements and the attending shareholders represent one third of the total number of issued shares or more, a tentative resolution may be made in accordance with Paragraph 1, Article 175 of the Company Act.

When, prior to conclusion of the meeting, the attending shareholders represent a majority of the total number of issued shares, the chair may resubmit the tentative resolution for a vote by the shareholders' meeting pursuant to Article 174 of the Company Act.

• 5.9 If a shareholders' meeting is convened by the board of directors, the meeting agenda shall be set by the board of directors. The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders' meeting.

The provisions of the preceding paragraph apply mutatis mutandis to a shareholders' meeting convened by a party with the power to convene that is not the board of directors.

The chair may not declare the meeting adjourned prior to completion of deliberation on the meeting agenda of the preceding two paragraphs (including extempore motions, except by a resolution of the shareholders' meeting.

After close of the said meeting, shareholders shall not elect another chairperson to hold another meeting at the same place or at any other place. However, if the chair declares the meeting adjourned in violation of the rules of procedure, the meeting can be continued by electing a new chair under the agreement of a majority of the votes represented by the attending shareholders.

• 5.10 Before speaking, an attending shareholder must specify on a speaker's slip the subject of the speech, his/her shareholder account number (or attendance card number), and account name. The order in which shareholders speak will be set by the chair.

A shareholder in attendance who has submitted a speaker's slip but does not actually speak shall be deemed to have not spoken. When the content of the speech does not correspond to the subject given on the speaker's slip, the spoken content shall prevail.

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When an attending shareholder is speaking, other shareholders may not speak or interrupt unless they have sought and obtained the consent of the chair and the shareholder that has the floor; the chair shall stop any violation.

• 5.11 Except with the consent of the chair, a shareholder may not speak more than twice on the same proposal, and a single speech may not exceed five minutes.

If the shareholder's speech violates the rules or exceeds the scope of the agenda item, the chair may terminate the speech.

• 5.12 When a juristic person is appointed to attend as proxy, it may designate only one person to represent it in the meeting.

When a juristic person shareholder appoints two or more representatives to attend a shareholders' meeting, only one of the representatives so appointed may speak on the same proposal.

• 5.13 After an attending shareholder has spoken, the chair may respond in person or direct relevant personnel to respond.

• 5.14 When the chair is of the opinion that a proposal has been discussed sufficiently to put it to a vote, the chair may announce the discussion closed and call for a vote.

• 5.15 Vote monitoring and counting personnel for the voting on a proposal shall be appointed by the chair, provided that all monitoring personnel shall be shareholders of the Company.

Vote counting for shareholders' meeting proposals or elections shall be conducted in public at the place of the shareholders' meeting. Immediately after vote counting has been completed, the results of the voting, including the statistical tallies of the numbers of votes, shall be announced on-site at the meeting, and a record made of the vote.

The election of directors or supervisors at a shareholders' meeting shall be held in accordance with the applicable election and appointment rules adopted by the company, and the voting results shall be announced on-site immediately, including the names of those elected as directors and supervisors and the numbers of votes with which they were elected.

• 5.16 When a meeting is in progress, the chair may announce a break based on time considerations.

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• 5.17 Except otherwise provided in the Company Act and in the Company's articles of incorporation, the passage of a proposal shall require an affirmative vote of a majority of the voting rights represented by the attending shareholders. When a matter comes to a vote, if upon inquiry by the meeting chair no member voices an objection, the matter will be deemed approved, with the same effect as approval by vote.

• 5.18 When there is an amendment or an alternative to a proposal, the chair shall present the amended or alternative proposal together with the original proposal and decide the order in which they will be put to a vote. When any one among them is passed, the other proposals will then be deemed rejected, and no further voting shall be required.

• 5.19 Staff handling administrative affairs of a shareholders' meeting shall wear identification cards or arm bands.

The chair may direct the proctors or security personnel to help maintain order at the meeting place. When proctors or security personnel help maintain order at the meeting place, they shall wear an identification card or armband bearing the word "Proctor."

When a shareholder violates the rules of procedure and defies the chair's correction, obstructing the proceedings and refusing to heed calls to stop, the chair may direct the proctors or security personnel to escort the shareholder from the meeting.

• 5.20 Matters relating to the resolutions of a shareholders' meeting shall be recorded in the meeting minutes. The meeting minutes shall be signed or sealed by the chair of the meeting and a copy distributed to each shareholder within twenty days after the conclusion of the meeting. The meeting minutes shall be retained for the duration of the existence of this Corporation.

The meeting minutes may be produced and distributed in electronic form. The meeting minutes may also be distributed in the means of announcement.

The attendance list bearing the signatures of shareholders present at the meeting and the powers of attorney of the proxies shall be kept by the Company for a minimum period of at least one year. However, if a lawsuit has been instituted by any shareholder in accordance with the provisions of Article 189 of Company Act, the minutes of the shareholders' meeting involved shall be kept by the company until the legal proceedings of the foregoing lawsuit have been concluded.

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• 5.21 Where there is air alarm happened during the meeting, the meeting shall be terminated or suspended immediately and the participant shall be evacuated. The meeting shall be continued one hour after the clear of alarm.

• 5.22 Where any matter is not stipulated in this Rules, it shall be handled in accordance with Company Act and other relevant laws and regulations and the article of incorporation of the Company.

• 5.23 This Rules, and any amendments hereto, shall be implemented after adwarr by shareholders' meetings.

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Appendix 3

Merry Electronics Co., Ltd. Articles of Incorporation

CHAPTER I GENERAL PROVISIONS

• Article 1: This Company is duly organized as a company limited by shares under the Company Act, bearing the name of Merry Electronics Co., Ltd.

• Article 2: The business scopes of the Company are as follows:

• A. CC01030 Electric Appliance and Audiovisual Electric Products Manufacturing

• B. CC01070 Telecommunication Equipment and Apparatus Manufacturing

• C. CC01080 Electronic Parts and Components Manufacturing

• D. CC01110 Computers and Computing Peripheral Equipment Manufacturing

• E. CC01101 Restrained Telecom Radio Frequency Equipment and Materials Manufacturing

• F. CF01011 Medical Materials and Equipment Manufacturing

• H. F108031Wholesale of Medical Materials and Equipment

• J. F401021 Restrained Telecom Radio Frequency Equipment and Materials Import

• Article 3: In response to its business requirements, the Company may conduct mutual guarantee business with affiliates or entities of the same industry.

• Article 4: The Headquarter of the Company is located in the Taichung City. If necessary, with the resolution of the board of directors, the Company may establish branch offices or factories onshore or offshore in accordance with laws.

CHAPTER II SHARES

• Article 5: The total amount of capital of the Company is NTD 3,000,000,000, divided into 300,000,000 shares (in which the number of shares for employee stock options is 5,000,000 shares), with a par value of NTD 10 per share, to be issued in installments, and the relevant matters of issuance shall be stipulated by the board of directors.

• Article 6: The Company shall not be a shareholder of unlimited liability in another company or the partner of a partnership. When the Company becomes a

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shareholder of limited liability in other companies, the total amount of its investments may exceed forty percent of the amount of paid-up capital of the Company.

• Article 7: For share transfer, the transferor and transferee shall apply for title transfer with the Company with an application form signed or bearing the seal of the transferor and the transferee; before completing the transfer procedures, the share transfer shall not be set up as a defense against the Company.

The shares issued by the Company may be exempted from printing any share certificate, provided that the shares being issued shall be recorded with the centralized securities custody enterprise.

CHAPTER III SHAREHOLDERS' MEETING

Article 8: A shareholders’ meeting can be divided into two types:

• A. Annual shareholders’ meeting, to be convened within six months after close of each fiscal year.

• B. Special shareholders’ meeting, to be convened when necessary according to relevant law and regulations.

• Article 9: The shareholder of the Company shall have one voting power in respect of each share in his/her possession. The Company has no voting power in respect of the shares in its own possession in accordance with the Company Act. When the shareholder cannot attend the shareholders’ meeting for any cause, he/she/it may execute a power of attorney and appoint a proxy to attend the shareholders' meeting on his/her/its behalf in accordance with Article 177 of the Company Act and the Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies announced by the competent authority. The Chairperson shall preside at the shareholders' meetings. In the event that the Chairperson is absent, the Vice Chairperson shall act on his/her behalf. If the Vice Chairperson is also absent, the Chairperson shall designate one of the directors to act on his/her behalf. If there is no such designation, the directors shall elect a chairperson to act on his/her behalf from among themselves. For the shareholders' meeting convened by any other person having the convening right, he/she shall act as the chairperson of that meeting, provided, however, that if there are two or more conveners, the chairperson of the meeting shall be elected from among themselves.

• Article 10: Resolutions at a shareholders' meeting shall, unless otherwise provided for in the Company Act, be adopted by a majority vote of the shares

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represented by the attending shareholders, who represent more than one-half of the total number of voting shares. When it comes to a vote, if the chairperson puts the matter before all shareholders present at the meeting and none voices an objection, the matter is deemed approved, with the same effect with voting by ballot.

• Article 11: Resolutions adopted at a shareholders' meeting shall be recorded in the minutes of the meeting, which shall be signed or bear the seal of the chairperson of the meeting and shall be distributed to all shareholders within 20 days after the close of the meeting.

The preparation and distribution of the minutes of shareholders' meeting as required in the preceding Paragraph may be effected by means of electronic transmission; the distribution of the minutes of shareholders' meeting may also be effected by means of a public notice.

CHAPTER IV DIRECTORS AND SUPERVISORS

• Article 12: This Company shall have seven (7) directors and four (4) supervisors to be elected from among persons with capacity to make judicial acts by shareholders' meeting. The term of their office shall be three (3) years and they are eligible for re-election. The amount of total shares owned by the directors and supervisors will be handled in accordance with the "Rules and Review Procedures for Director and Supervisor Share Ownership Ratios of Public Companies" issued by the competent authority.

When the number of vacancies in the board of directors reaches one third of the total number of directors or all supervisors are discharged, the board of directors shall call, within 60 days, a special meeting of shareholders to elect succeeding directors or supervisors to fill the vacancies, and the term shall be limited to fulfilling the remaining term of office of the predecessors. If the term of the director and supervisor expires and the new election cannot be held in time, their term will be extended until the new directors and supervisor are elected and have assumed the office.

• Article 12-1: Amongst the directors of the Company, two shall be independent directors to be elected by the shareholders’ meeting from the independent directors’ candidates list, and the candidate nomination system shall be adopted. The professional qualification, shareholding, restriction on the concurrent posts, the means of nomination and election of independent directors and other matters to be complied with, shall all be in accordance with the relevant rules of the competent authority of securities.

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• Article 13: A Chairperson and a Vice Chairperson shall be elected from amongst the directors. The Chairperson represents the Company in external affairs, be the Chairperson of the shareholders’ meeting and the board meeting in internal affairs, and executes all the affairs of the Company in accordance with laws, regulations, Articles of Incorporation and the resolutions of shareholders’ meeting and the board of directors. In the event that the Chairperson cannot attend the meetings for any cause, the Vice Chairperson shall act on his/her behalf; and if the Vice Chairperson also cannot attend the meetings, the Chairperson shall designate one of directors to act on his/her behalf, and if there is no such designation, the directors shall elect a chairperson to act on his/her behalf from among themselves.

• Article 14: The board of directors is organized by the directors, and the powers and duties of the board of directors are as follows:

• A. Drawing up and amending various important by-laws.

• B. Proposals of amendments to the Articles of Incorporation.

• C. Determination and amendment to the business guideline(s).

• D. Review of annual budget and final accounts.

• E. Proposals of earnings distribution or loss make-up.

• F. Approval of reinvestment, loans to other companies and collateralizing assets.

• G. Drawing up and approval of real estate acquisition and disposal.

• H. Determination of important officers.

• I. If the amount of endorsements and guarantees to affiliates exceeds the total amount enacted by the board of directors, it shall be submitted to the board of directors for approval.

• J. The establishment, modification, revocation and determination of other essential matters of important organization of the Company.

• K. Other powers and duties empowered/required by laws, regulations or the shareholders' meeting.

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• Article 15: In calling a meeting of the board of directors, a notice setting forth therein the subject(s) to be discussed at the meeting shall be given to each director and supervisor no later than 7 days prior to the scheduled meeting date. However, in the case of emergency, the meeting may be convened at any time.

The notice of convening meetings of the board of directors of the Company may be given by the means of written notice, e-mail or fax.

Unless otherwise provided for in the Company Act, meetings of the board of directors shall be adopted by a majority vote of the directors present at a meeting where a majority of the directors attend. In case a director cannot attend the meeting for any cause, a proxy setting forth therein the scope of authority with reference to the subject(s) to be discussed at the meeting may be submitted to delegate the attendance to other directors, provided that one director may accept the delegation of one other director only.

The meeting of the board of directors may be proceeded via video conference. The directors participating by video conference shall be deemed to have attended the meeting in person.

Article 16: The powers and duties of the supervisors are as follows:

• A. Investigating the Company’s business condition.

• B. Investigating the Company’s financial condition.

• C. Auditing the books and documents of the Company.

• D. Attending the meetings of the board of directors to state the opinions and request the board of directors to report, while having no voting right.

• E. Other powers and duties empowered/required by the Company Act.

• Article 17: The directors and supervisors may receive transportation allowance, the amount of which is decided by the resolution at the meetings of the board of directors. The board of directors is authorized to determine the remuneration of directors and supervisors based on the level of participation and the value of devotion to the operation of the Company, with reference to the standard of other entities in the same industry. The Company may purchase liability insurance for the directors and supervisors within the scope of the business he/she conducts during his/her term.

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CHAPTER V MANAGER AND EMPLOYEE

• Article 18: The Company may have managers, and his/her appointment, discharge and remuneration shall be handled in accordance with the Company Act.

• Article 19: The Company may engage advisors and important personnel by the resolution at the meetings of the board of directors in accordance with Article 15 of the Articles of Incorporation.

• Article 20: Other personnel of the Company shall be appointed and discharged by the president and shall be reported to the board of directors.

CHAPTER VI FINAL ACCOUNTS

• Article 21: The fiscal year of the Company is annually from 1 January until 31 December. The Company shall act in accordance with Article 228 of the Company Act. Upon close of each fiscal year, the following reports and statements shall be prepared by the board of directors and be given to the supervisors for auditing no later than 30 days prior to the date of the annual meeting of shareholders, and the supervisors shall submit the report to the annual meeting of shareholders for ratification.

• A. The business report

• B. The financial statements

The proposal of the earnings distribution or loss make-up .

• Article 22: The industrial environment of the Company is apt to change, and the enterprise life cycle stays in a stage of stable growth, and it is necessary to consider the budget for the future capital expenditure and funding requirement, and measure the necessity to cope with funding requirement by earnings, to determine the amount for retaining or distributing the earnings and the distribution amount of shareholder bonus in cash. The net profit after final accounting, except for withholding of income tax in accordance with laws, shall be utilized for make-up of the loss of previous years, and secondly setting aside 10% of the remaining earnings as a legal reserve. After setting aside or reversing special reserve in accordance with laws when necessary, the balance after adding the undistributed earnings of the previous year will be the accumulated distributable earnings. The board of directors shall propose an earning distribution proposal for the shareholders’ meeting to resolve the distribution. For the earning distribution proposal proposed by the board of directors, the total amount of shareholders’ bonus shall be 30% to 80% of the accumulated distributable

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earning, and the cash bonus shall account for 5% or more of the shareholder bonus.

To inspire the employees and management team, if the Company makes profits in the said year, it shall set aside: A. 5% to 10% as employees’ profit sharing bonus; B. up to 2% as compensation of directors and supervisors, provided that if the Company has accumulated losses, the amount to make up the accumulated losses shall be reserved in advance.

Where the employees' profit sharing bonus will be distributed in the form of stocks or in cash, it shall be resolved by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds or more of the total number of directors; and in addition thereto a report shall be submitted to the shareholders' meeting.

The employees’ profit sharing bonus distributed by stocks or cash may be made to the employees of subsidiaries meeting certain specific requirements.

CHAPTER VII ANCILLARY PROVISIONS

• Article 23: The organic regulations and the operational regulations of the Company are stipulated by the board of directors.

• Article 24: Any items that are not specified herein shall be dealt with in accordance with the Company Act and any other laws or rules.

• Article 25: These Articles of Incorporation were promulgated on December 13, 1975. The 1st amendment was made on October 25, 1977. The 2nd amendment was on October 12, 1981. The 3rd amendment was on December 30, 1981. The 4th amendment was on December 15, 1984. The 5th amendment was on December 9, 1985. The 6th amendment was on December 20, 1985. The 7th amendment was on September 15, 1987. The 8th amendment was on December 10, 1988. The 9th amendment was on November 15, 1989. The 10th amendment was on May 10, 1990. The 11th amendment was on June 25, 1990. The 12th amendment was on December 15, 1990. The 13th amendment was on January 23, 1991. The 14th amendment was on March 1, 1991. The 15th amendment was on April 2, 1991. The 16th amendment was on July 12, 1991. The 17th amendment was on June 10, 1995. The 18th amendment was on July 26, 1996. The 19th amendment was on May 31, 1997. The 20th amendment was on March 25, 1998. The 21st amendment was on May 18, 1999. The 22nd amendment was on May 16, 2000. The 23rd amendment was on May 3, 2001. The 24th amendment was on August 28, 2001. The 25th amendment was on May 27, 2002. The 26th amendment was on May 20, 2004. The 27th amendment was on May 19, 2005. The 28th amendment was on October 18, 2005. The 29th amendment was on June 16, 2006. The 30th amendment was on June 13, 2007. The 31st amendment was on June 13,

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1. The 32nd amendment was on June 16, 2009. The 33rd amendment was on 14 June 2010. The 34th amendment was on June 22, 2012. The 35th amendment was on June 11, 2014. The 36th amendment was on June 12, 2015. The 37th amendment was made on January 22, 2016. The 38th amendment was made on June 29, 2016.

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Appendix 4

Merry Electronics Co., Ltd.

Shareholding Status of Directors and Supervisors

1. The paid-in capital of the Company is NT$1,944,033,090. The issued and outstanding shares are 194,403,309 shares.

2. According to Article 26 of Securities and Exchange Act, the minimum shareholding of all of the directors is 11,664,198 shares and the minimum shareholding of all of the supervisors is 1,166,419 shares.

3. As of the book closure date of this annual shareholders' meeting, the shareholding of all of directors and supervisors in the shareholders book, which complies with the requirement under Article 26 of Securities and Exchange Act, are as follows:

Title	Title	Name	Shareholdings in the shareholders book as of April 16,2017(share)	Note
Chairperson		Liao,Lu-Lee	6,045,975	（Note）
Vice Chairperson		Wei,Wen-Chieh	9,420,067
Director		Lin,Shu-Chun	341,204
Director		Lin,Shih-Chieh	331,576
Director		Huang,Chao-Li	23,915
Independent Director		Huang, Lin-Ming	0
Independent Director		Duh, Edward Shaw-Yau	0
Total shares of all directors			16,162,737
Supervisor	Hung,Yun-Chuan		652,997
Supervisor	Cho,Sheng-Chung		350,280
Supervisor	Liao,Ben-Lin		105,729
Supervisor	TONG-CIAN Investment Corporation		1,308,931
Total shares of all supervisors			2,417,937

Note: The shareholding includes the entrusted shares with reservation of decision discretionary.

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1. The name, shareholding and discharged reason of the discharged director or supervisor as of April 16, 2017: Nil

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Appendix 5

Dividend Policy

1. The industrial environment of the Company is apt to change, and the enterprise life cycle stays in a stage of stable growth, and it is necessary to consider the budget for the future capital expenditure and funding requirement, and measure the necessity to cope with funding requirement by earnings, to determine the amount for retaining or distributing the earnings and the distribution amount of shareholder bonus in cash.

2. The net profit after final accounting, except for withholding of income tax in accordance with laws, shall be utilized for make-up of the loss of previous years, and secondly setting aside 10% of the remaining earnings as a legal reserve. After setting aside or reversing special reserve in accordance with laws when necessary, the balance after adding the undistributed earnings of the previous year will be the accumulated distributable earnings. The board of directors shall propose an earning distribution proposal for the shareholders’ meeting to resolve the distribution. For the earning distribution proposal proposed by the board of directors, the total amount of shareholders’ bonus shall be 30% to 80% of the accumulated distributable earning, and the cash bonus shall account for 5% or more of the shareholder bonus.

3. To inspire the employees and management team, if the Company makes profits in the said year, it shall set aside: A. 5% to 10% as employee reward; B. up to 2% as reward of directors and supervisor, provided that if the Company has accumulated losses, the amount to make up the accumulated losses shall be reserved in advance.

Where the employees' reward will be distributed in the form of stocks or in cash, it shall be resolved by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds or more of the total number of directors; and in addition thereto a report shall be submitted to the shareholders' meeting.

The employees reward distributed by stocks or cash may be made to the employees of subsidiaries meeting certain specific requirements.

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Appendix 6

The impact of the share dividend proposed in this annual shareholders' meeting on the operational performance of the Company and the earnings per share: There is no share dividend this year and thus it is not applicable.

Appendix 7 Explanation for the proposal excluded from this annual shareholders' meeting

The explanation for handling of proposals in this annual shareholders' meeting:

Explanation: 1. According to Article 172-1 of the Company Act, any shareholder holding one percent or more of the total number of outstanding shares may propose to the Company a written proposal for discussion at an annual shareholders' meeting, provided that only one agenda shall be allowed, and such proposal shall be elaborated by 300 words or less.

1. The period for collecting proposals from shareholders for this annual shareholders' meeting is from April 7 to April 18 in 2017 and announcement was made at the Market Observation Post System in accordance with the relevant laws and regulations.

2. The Company had not received any proposal from shareholders.

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