MERRY - AGM Information 2017 | FinancialReports.eu

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2017 Annual Shareholders’ Meeting Minutes (Translation)

Time:	9:00 a.m., June 14, 2017 (Wednesday)
	The Company's basement (No.22, 23rd Rd.,
Venue:	Taichung Industrial Park, Nantun Dist.,
	Taichung City)
Total outstanding shares of Merry Electronics Company Limited:	194,403,309 shares
Total amount of voting shares:	192,134,309 shares
Total shares represented by shareholders present in person or by proxy:	136,809,097shares
Percentage of shares held by shareholders
present in person or by proxy (excluding	71.20%
2,269,000 treasury shares):
Present directors:	Liao, Lu-Lee; Wei, Wen-Chieh; Huang, Chao-Li
Present independent director:	Huang, Lin-Ming
	Liao, Ben-Lin; Cho, Sheng-Chung; Hung,
Present supervisors:	Yun-Chuan; TONG-CIAN Investment
	Corporation
Chairperson:	Liao, Lu-Lee; the Chairperson of the Board of Directors
Recorder:	Hsu, Yu-Hua

The aggregate shareholding of the shareholders present in person or proxy constituted a quorum. The Chairperson called the meeting to order.

I. Speech of the Chairperson (omitted)

II. Report Items

(A) To report business of 2016, please refer to Attachment 1.
(B) Supervisors’ review report on 2016 the financial statements, please refer to Attachment 2.
(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.

III. 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. For the statements and records of the individual financial statements and consolidated financial statements, please refer to Attachment 3.

Voting Results:

136,368,563 shares were presented at the time of voting (including votes casted electronically: 91,080,500); 115,638,405 votes were in favor of the proposal (including votes casted electronically: 70,350,342), representing 84.79% of the total represented shares present; 12,451 votes were cast against the proposal (including votes casted electronically: 12,451);0 votes were invalid; 20,717,707 votes were either invalidly cast or abstained (including votes casted electronically: 20,717,707). Approved , that the above proposal be and hereby was approved as proposed.

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.
(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.

Voting Results:

136,368,563 shares were presented at the time of voting (including votes casted electronically: 91,080,500); 115,638,395 votes were in favor of the proposal (including votes casted electronically: 70,350,332), representing 84.79% of the total represented shares present; 12,461 votes were cast against the proposal (including votes casted electronically: 12,461); 0 votes were invalid; 20,717,707 votes were either invalidly cast or abstained (including votes casted electronically: 20,717,707). Approved , that the above proposal be and hereby was approved as proposed.

IV. 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.

Voting Results:

136,368,563 shares were presented at the time of voting (including votes casted electronically: 91,080,500); 111,306,218 votes were in favor of the proposal (including votes casted electronically: 66,018,155), representing 81.62% of the total represented shares present; 62,526 votes were cast against the proposal (including votes casted electronically: 62,526); 0 votes were invalid; 24,999,819 votes were either invalidly cast or abstained (including votes casted electronically: 24,999,819). Approved , that the above proposal be and hereby was approved as proposed.

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. Voting Results:

136,368,563 shares were presented at the time of voting (including votes casted electronically: 91,080,500); 115,636,401 votes were in favor of the proposal (including votes casted electronically: 70,348,338), representing 84.79% of the total represented shares present; 12,454 votes were cast against the proposal (including votes casted electronically: 12,454); 0 votes were invalid; 20,719,708 votes were either invalidly cast or abstained (including votes casted electronically: 20,719,708). Approved , that the above proposal be and hereby was approved as proposed.

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.

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, 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, 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 Shares of 2017". Please refer to Attachment 6.
Voting Results:
136,368,563 shares were presented at the time of voting (including votes casted electronically: 91,080,500); 114,204,351 votes were in favor of the proposal (including votes casted electronically: 68,916,288), representing 83.74% of the total represented shares present; 1,445,405 votes were cast against the proposal (including votes casted electronically: 1,445,405); 0 votes were invalid; 20,718,707 votes were either invalidly cast or abstained (including votes casted electronically: 20,718,707). Approved , that the above proposal be and hereby was approved as proposed.

V. Extemporary Motion: None.

VI. Meeting Adjourned: There was no other business and extemporary motion, the Chairperson announced the meeting adjourned on 9:40 a.m.

Attachment 1

Merry Electronics Co., Ltd.

2016 Business Report

I. Operation Policies

The main operation philosophy for 2016 is been “enthusiasm and energy, fearlessness of change, enhancing the competiveness, and opening a new prospect.”
To locate resources from the old competiveness, develop the new advantage, and to integrate the strength of steadiness and innovation.
To utilize the external resources properly and pay attention to the modularization and configurability of internal assets, so as to establish an agile organization.
To cultivate innovation dynamics through organizational and structural management over innovation, and to be broadly applied in every activity of the Company.
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 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 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

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 and losses	682,365	(42,424)
Financial costs	(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)

Profitability Analysis

	Subject	Consolidated number of 2016	Consolidated number of 2015
Financial structure (%)	Debt to asset ratio	54.79%	48.97%
Solvency (%)	Current ratio	164.77%	198.41%
	Liquidityratio	146.14%	157.47%
Profitability (%)	Returnonassets	17.89%	6.20%
	Return on shareholders' equity	31.53%	10.83%
	Operating income to paid-incapital 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 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.

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

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

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:

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:
(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.
(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.

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:

We perform inspection and trial related to investments using equity method, including: (1) To check the decrease of shareholding percentage to confirm no abnormal situation.
(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.

(3) To check accounting records of transaction of disposal to confirm no abnormal situation.
(4) To confirm the records of gain or loss from disposal and fair value of consideration are consistent with the accounting book.
We assess the appropriateness of evaluation of fair value conducted by the external appraisal institution, including:
(1) To assess the independence and appropriateness of the external appraisal institution.
(2) To assess whether the appraisal methods adopted by the external appraisal institution is prevailing and appropriate.
(3) To check the appropriateness of parameters and formula used in the appraisal model.
(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.

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:

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

MERRY ELECTRONICS CO.,LTD. INDIVIDUAL BALANCE SHEETS

					(In	Thousands of New Taiwan	Thousands of New Taiwan	Dollars)	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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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

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

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

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.

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)

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

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.

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:

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:
(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.
(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.

The Responsive Audit Procedures and outcome

We conducted the audit procedures as follows:

We perform inspection and trial related to investments using equity method,

including:

(1) To check the decrease of shareholding percentage to confirm no abnormal situation.
(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.
(3) To check accounting records of transaction of disposal to confirm no abnormal situation.
(4) To confirm the records of gain or loss from disposal and fair value of consideration are consistent with the accounting book.
We assess the appropriateness of evaluation of fair value conducted by the external appraisal institution, including:
(1) To assess the independence and appropriateness of the external appraisal institution.
(2) To assess whether the appraisal methods adopted by the external appraisal institution is prevailing and appropriate.
(3) To check the appropriateness of parameters and formula used in the appraisal model.
(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 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.

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.
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 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.

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 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

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)

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

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

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

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

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)

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)

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

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

List	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

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

(In Thousands of New Taiwan Dollars)

					Equity	Attributable to Shareholders of the Pa	Attributable to Shareholders of the Pa	rent						Non-controlling Interests Total equity
Capital			Capital surplus			Retained earnings			Others			Treasury shares	Total
Ordinaryshare	Advance receipts for share capital		Capital surplus	Capital surplus- others	Legal reserve	Special reserve	Unappropriated retained earnings (accumulated deficit)	Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on available-f or-sale financial assets	Equity- others
		$									$			$ 48,834 $ 6,099,379 - 68,746 - - - ( 888,131 ) 23,921 665,226 - ( 103,058 ) ( 61,206 ) ( 82,942 ) 1,803 50,884 $13,352 $ 5,810,104 $ 13,352 $ 5,810,104 - 3,835 - ( 161,910 ) - 179,087 - - - ( 592,088 ) 6 2,011,146 ( 13,029 ) ( 13,029 ) ( 248 ) ( 291,884 ) $ 81 $ 6,945,261
		$									$

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

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

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.

Attachment 5

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

	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 for any future changes to the terms and conditions of the transaction.		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 ofmachines 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.	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.

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

Current Articles Explanation

(2) .Where the transaction amount (2) .Where the transaction reaches NT$1 billion or more, amount reaches NT$1 billion appraisals from two or more or more, appraisals from two professional appraisers shall or more professional be obtained. appraisers shall be obtained. (3) .Where any one of the (3).Where any one of the following circumstances following circumstances applies applies with respect to the with respect to the professional professional appraiser's appraiser's appraisal results, appraisal results, unless all the unless all the appraisal results appraisal results for the assets for the assets to be acquired are to be acquired are higher than higher than the transaction the transaction amount, or all amount, or all the appraisal the appraisal results for the results for the assets to be assets to be disposed of are disposed of are lower than the lower than the transaction transaction amount, a certified amount, a certified public public accountant shall be accountant shall be engaged to engaged to perform the appraisal perform the appraisal in in accordance with the accordance with the provisions provisions of Statement of of Statement of Auditing Auditing Standards No. 20 Standards No. 20 published by published by the ROC the ROC Accounting Research Accounting Research and and Development Foundation Development Foundation (hereinafter "ARDF") and (hereinafter "ARDF") and render render a specific opinion a specific opinion regarding the regarding the reason for the reason for the discrepancy and discrepancy and the the appropriateness of the appropriateness of the transaction price: 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

(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

Articles after amendment Current Articles transaction amount is 20 % or and the transaction amount more of the transaction is 20 % or more of the amount. transaction amount.

Explanation

Articles after amendment	Current Articles	Explanation
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 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 certified public accountant’s opinion.	and the transaction amount is 20 % or more of the transaction amount. (3) .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 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. (4) .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.
5.5. 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,	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	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

Articles after amendment 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.

5.5.2. 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

Current Articles 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 operational procedures

Explanation Article and the punctuation marks.

Articles after amendment Current Articles under repurchase and resale under repurchase and resale agreements, or subscription or agreements, or subscription repurchase money market or redemption of domestic funds issued by domestic money market funds, the securities investment trust Company may not proceed enterprises , the Company to enter into a transaction may not proceed to enter into contract or make a payment a transaction contract or make until the following a payment until the following information has been information has been submitted and approved by submitted and approved by the board of directors and the board of directors and recognized by the recognized by the supervisors: supervisors: (1). The purpose, necessity (1). The purpose, necessity and anticipated benefit of and anticipated benefit the acquisition or disposal of the acquisition or of assets. disposal of assets. (2). The reason for choosing (2). The reason for choosing the related party as a the related party as a trading counterparty. trading counterparty. (3). With respect to (3). With respect to acquisition of real acquisition of real property from a related property from a related party, relevant party, relevant information regarding information regarding appraisal of the appraisal of the reasonableness of the reasonableness of the preliminary transaction preliminary transaction terms in accordance with terms in accordance with Article [5.5.3.(1).] and Article [5.5.3.(1).] and Article [5.5.3.(4).]. Article [5.5.3.(4).].

(4). The date and price at which the related party originally acquired the real property, the original

(4). The date and price at which the related party originally acquired the real property, the original 42

Explanation

Articles after amendment Current Articles Explanation transaction counterparty, transaction counterparty, and that transaction and that transaction counterparty's counterparty's relationship with the relationship with the Company and the related Company and the related party. party.

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

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

(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

Articles after amendment 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 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

Current Articles 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 the transaction amount is within NT$ 50 million and have the decisions subsequently submitted to and ratified by the next board meeting.

Explanation

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

Articles after amendment		Current Articles
the ARDF.		disposal of memberships, it is required to consider the market fair value to determine the transaction terms and price and then prepare 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
	(2).

Articles after amendment Current Articles Explanation 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

Articles after amendment			Current Articles	Explanation
		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

		(1).

		(2).

Articles after amendment			Current Articles	Explanation
			Company’s acquisition or disposal of intangible assets reaches 10% of the 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
		(3).

		(4).

Articles after amendment		Current Articles	Explanation
		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 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 share exchange ratio,	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		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.

	Articles after amendment		Current Articles	Explanation
	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.		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.
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 from the date of occurrence of the event (inclusive):		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. The amendment is made with reference to Article 14 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies. 2. The

Articles after amendment Current Articles Explanation amendment is
(1). Acquisition or disposal of (1). Acquisition or disposal made with real property from or to a of real property from or reference to related party, or acquisition to a related party, or Article 30 of or disposal of assets other acquisition or disposal of the Regulations than real property from or assets other than real Governing the to a related party where the property from or to a Acquisition and transaction amount reaches related party where the Disposal of twenty percent or more of transaction amount Assets by paid-in capital, ten percent reaches twenty percent Public or more of the company's or more of paid-in Companies. total assets, or NT$300 capital, ten percent or million or more; provided more of the company's 3. It is provided that, this shall not apply to total assets, or NT$300 when the trading of government million or more; Company at the bonds or bonds under provided that, this shall time of public repurchase and resale not apply to trading of announcement agreements, or subscription government bonds or makes an error or repurchase of domestic bonds under repurchase or omission in money market funds and resale agreements, an item issued by domestic or subscription or required by securities investment trust redemption of domestic regulations to enterprises. money market funds. be publicly announced and
(2). Merger, demerger, (2). Merger, demerger, so is required to acquisition, or shares acquisition, or shares correct it, all assumption. assumption. the items shall be again
(3). Losses from derivatives (3). Losses from derivatives publicly trading reaching the limits trading reaching the limits announced and on aggregate losses or on aggregate losses or reported in losses on individual losses on individual their entirety contracts set out in the contracts set out in the within two days procedures adopted by the procedures adopted by the counting Company. Company. inclusively from the date of
(4). Where the type of asset (4). Where an asset transaction knowing of acquired or disposed is other than any of those such error or equipment for business use, referred to in the preceding omission so as

Articles after amendment Current Articles Explanation the trading counterparty is three subparagraphs, a to amend some not a related party, and the disposal of receivables by wording. transaction amount reaches a financial institution, or NT$500 million or more. an investment in the 4. To remove the mainland China area redundancy and reaches twenty percent or amend the more of paid-in capital or order of items. 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 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

Articles after amendment		Current Articles		Explanation
(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, or joint construction and 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	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 isless than NT$500 million.

Articles after amendment	Current Articles	Explanation
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 subscriptionby investment professionals of ordinary corporate bonds or general bank debentures without 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, orrepurchase of money market funds

Articles after amendment	Current Articles	Explanation
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 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 theyearprecedingthe	(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 theyearprecedingthe

Articles after amendment 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. 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

Current Articles

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

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

Explanation

Articles after amendment accountant, lawyer, and securities underwriter opinions at the company headquarters, where they shall be retained for five years except where another act provides otherwise.

5.10.5. 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.

Current Articles Explanation 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 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

Articles after amendment		Current Articles	Explanation
		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.

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”).

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 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.
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.
(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 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 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.

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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MERRY — AGM Information 2017

52085_rns_2017-07-20_ce39d5ca-798e-4244-8296-0d50b1a3ffb3.pdf

2017 Annual Shareholders’ Meeting Minutes (Translation)

I. Speech of the Chairperson (omitted)

II. Report Items

III. Recognition Matters

Recognition 1 (Proposed by the board of directors)

Recognition 2 (Proposed by the board of directors)

IV. Proposed Resolutions

Voting Results:

Proposal 2 (Proposed by the board of directors)

Proposal 3 (Proposed by the board of directors)

(B) Vesting conditions:

V. Extemporary Motion: None.

Merry Electronics Co., Ltd.

2016 Business Report

I. Operation Policies

II. General Condition of Implementation

IV. Financial Revenue and Expenses and Profitability Analysis

V. Research and Development

Merry Electronics Co., Ltd.

Supervisors' Review Report

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

INDEPENDENT AUDITORS REPORT

Opinion

Basis for Opinion

Key Audit Matters

Sales Revenues Cut-Off of Distribution Warehouse

Description

The Responsive Audit Procedures

Description

The Responsive Audit Procedures

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

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

Auditors’ Responsibilities for the Audit of the Individual Financial Statements

MERRY ELECTRONICS CO.,LTD. INDIVIDUAL BALANCE SHEETS

MERRY ELECTRONICS CO.,LTD. INDIVIDUAL BALANCE SHEETS

MERRY ELECTRONICS CO.,LTD. INDIVIDUAL STATEMENTS OF COMPREHENSIVE INCOME

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

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

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

Opinion

Basis for Opinion

Key Audit Matters

Description

The Responsive Audit Procedures

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

Description

The Responsive Audit Procedures and outcome

Other Matter - Individual Financial Statements

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

MERRY ELECTRONICS CO.,LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

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

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

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

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

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

Attachment 4

Merry Electronics Co., Ltd.

2016 Profit Distribution Table

Attachment 5

Explanation

Explanation

Attachment 6

Regulations Governing the Issuance of New Restricted Employee Shares of 2017

1. Purpose

3. Responsibilities & Authorities

4. Terms and Definitions

5. Operating Procedures

5.1.Issuance Period

5.2.Total Issuance

5.3.Type of Shares

5.4.Issuance Price

6. Forms

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MERRY AGM Information 2017