MERRY - AGM Information 2020 | FinancialReports.eu

Stock Code: 2439

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Annual Shareholders’ Meeting Meeting Agenda (Translation)

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Note

This English translation is provided for reference only and might not reflect exactly the meaning and full text of the original language

Meeting Date: June 19, 2020

I. Meeting Procedure ......................................................................................................... 1 II. Meeting Agenda ............................................................................................................ 2 1.Matters for Report ...................................................................................................... 4 2.Matters for Approval .................................................................................................. 8 3.Matters for Discussion ................................................................................................ 9 4.Extemporary motions ............................................................................................... 12 Attachment ....................................................................................................................... 13 1.2019 Business Report ................................................................................................ 13 2.The Audit Committee's Review Report .................................................................. 17 3.Comparison of Amendments to the Procedures of The Company to buy back shares transfer employee ................................................................................................. 18 4.Comparison of Amendments to the Ethical Corporate Management Best Practice Principles ........................................................................................................... 19 5.Comparison of Amendments to the Codes of Ethical Conduct ............................ 34 6.CPA's Audit Report, Individual Financial Statements and Consolidated Financial Statements ........................................................................................................ 36 7.2019 Profit Distribution Table ................................................................................. 61 8.Comparison of Amendments to the Rules of Procedure for Shareholders Meetings ............................................................................................................................ 62 9.Regulations Governing the Issuance of New Restricted Employee Shares of 2020 ............................................................................................................................................ 68 Appendix ........................................................................................................................... 76 1.Procedures of The Company to buy back shares transfer employees (Before Amendments) .................................................................................................................... 76 2.Rules of Procedure for Shareholders Meetings (Before Amendments) ............... 79 3.Articles of Incorporation .......................................................................................... 90 4.Shareholding Status of Directors ............................................................................. 98 5.Dividend Policy .......................................................................................................... 99 6.The impact of the share dividend proposed in this annual shareholders' meeting on the operational performance of the Company and the earnings per share: ....... 100 7.Explanation for the proposal excluded from this annual shareholders' meeting .......................................................................................................................................... 100

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I. Meeting Procedure

Merry Electronics Co., Ltd.

Meeting Procedure for the 2020 Annual Shareholders' Meeting

Reporting total represented shares
Call the Meeting to Order
Chairperson Remarks
Matters for Report
Matters for Approval
Matters for Discussion
Extemporary Motions
Meeting Adjourned

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II. Meeting Agenda

Merry Electronics Co., Ltd.

Meeting Agenda of the 2020 Annual Shareholders' Meeting

Time ： 9:00 a.m., June 19, 2020 (Friday)

Venue: ： Merry Electronics Co., Ltd.’s headquarters

(No. 22, 23rd Road, Taichung Industrial Park, Nantun Dist., Taichung City, Taiwan)

Attendance ： All shareholders or their proxy

Chairperson ： Lu-Lee Liao, Chairperson of the Board of Directors

Chairperson Remarks
Matters for Report
(1) The Company’s 2019 Business Report
(2) Audit Committee’s review report on the 2019 Financial Statements
(3) Employees’ profit sharing bonus and directors’ compensation of 2019
(4) To report 2019 earnings distribution
(5) The performance assessments and compensation levels of directors and managerial officers
(6) Amendment of the ''Procedures of The Company to buy back shares transfer employees”
(7) Amendent of the ''Ethical Corporate Management Best Practice Principles''
(8) Amendent of the ''Codes of Ethical Conduct''
Matters for Approval
(1) The Company’s 2019 Business Report and Financial Statements
(2) The proposal for distribution of 2019 earnings
Matters for Discussion
(1) To revise the ''Rules of Procedure for Shareholders Meetings''
(2) To approve the issuance of 2020 new restricted employee shares

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Extemporary motions
Meeting adjourned

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Matters for Report

The Company’s 2019 Business Report, please take note.

(Proposed by the board of directors)

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

Audit Committee’s review report on the 2019 Financial Statements. Please take note.

(Proposed by the board of directors)

Explanation: For the Audit Committee’s audit report on the financial statements of 2019, please refer to Attachment 2. (page 17)
Employees’ profit sharing bonus and directors’ compensation of 2019, please take note.

(Proposed by the board of directors)

Explanation:

(1) According to the Articles of Incorporation, should the Company be profitable, it shall set aside 5% to 10% as employees' profit sharing bonus and not more than up to 2% as compensation of directors and supervisors of the Company’s profit (if any) in the fiscal year.
(2) With respect to 2019 employee’s profit sharing bonus and directors’/supervisors’ compensation, the board of directors dated 27 February 2020 has resolved that the Company distribute 6% (NT$205,175,987 in total) as employees’ profit sharing bonus and 2% (NT$68,391,996 in total) as directors’/supervisors’ compensation. Both employee’s profit sharing bonus and directors’/supervisors’ compensations will be paid in cash. The above resolved amounts have no difference from the amounts listed in the estimated recognized costs of 2019.

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To report 2019 earnings in cash distribution, please take note.

(Proposed by the board of directors)

Explanation:

(1) According to the Articles of Association, it is authorized that the distributable dividends and bonuses in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

(2) Considering the future operation of the Company, for profit distribution of 2019, in addition to the legal reserve provided in accordance with the Articles of Incorporation of the Company, cash dividends NT$1,608,376,434 in total will be distributed to shareholders. Namely, each common shareholder will be entitled to receive a cash dividend of NT$7.7095 per share. The profit of 2019 profits will be distributed first for the above purpose.

(3) 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. The board of directors determines the ex-dividend date and the related matters at its discretion discretionary.

(4) If the total amount of issued shares changes subsequently due to domestic non-secured convertible bonds of the Company, purchase of treasury shares, issuance of new restricted employee shares or other reasons, which will affect the payout ratio, the board of directors determines the payout ratio at its discretion discretionary.

To report the performance assessments and compensation levels of directors, and managerial officers, please take note.

(Proposed by the board of directors)

Explanation:

(1) The performances of individual directors are appraised according to the Company’s ''Remuneration Committee Charter'' and

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''Regulations Governing the directors’ and managers’ remuneration'', and take the result as the calculation basis of directors’ compensation levels.

(2) The performances of individual managerial officers are appraised according to the Company’s ''Operating Procedure of the employee performance appraisal'' and take the result as the calculation basis of individual managerial officers' compensation levels.
(3) The remuneration committee and Board of Directors have resolved that the reliance and rationality of the individual performance appraisal and compensation levels of directors and managerial officers.
To report amendment of the ''Procedures of The Company to buy back shares transfer employees”, please take note.

(Proposed by the board of directors)

Explanation:

(1) In consideration with the Article 28-2 of the Securities and Exchange Act amended on 17 April 2019 for the purpose of talent retentaion by enterprises, the time limit for the transfer of employee stock option certificates and the company’s shares buy back to employees will be extended from three years to five years.
(2) Please refer to Attachment 3. (page 18) for the comparison table of amendments.
To report the amendment of the ''Ethical Corporate Management Best Practice Principles'', please take note.

(Proposed by the board of directors)

Explanation:

(1) The Principles are amended in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” announced by Taiwan Stock Exchange on 23 May 2019.
(2) Please refer to Attachment 4 (from page 19 to page 33) for the comparison table of amendments.

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To report the amendment of the ''Codes of Ethical Conduct'', please take note.

(Proposed by the board of directors)

Explanation:

(1) The Codes are amended in accordance with the “Guidelines for the Adoption of Codes of Ethical Conduct for TWSE/GTSM Listed Companies” and practical operation of the Company.
(2) Please refer to Attachment 5 (from page 34 to page 35) for the comparison table of amendments.

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Matters for Approval

Proposal ： To adopt 2019 Business Report, individual financial statements and consolidated financial statements, please approve.
(Proposed by the board of directors)

Explanation:

(1) The Board of Directors has prepared the statements and records of business report, profit distribution table, individual financial statements and consolidated financial statements of 2019, forwarded to the audit committee for review and issue the audit committee's review report for recordation in accordance with the Article 36 and section 3 of Article 14-4 of the Securities and Exchange Act and Articles 219 and 230 of the Company Act.
(2) Please refer to Attachment 1 (from page 13 to page 16) for the aforementioned business report, and please refer to Attachment 6 (from page 36 to page 60) for the individual and consolidated financial statements and records.

Resolution:

Proposal ： To adopt the proposal for distribution of 2019 earnings, please approve.

(Proposed by the board of directors)

Explanation:

The profit distribution is to distribute distributable net profit of 2019, and please refer to Attachment 7 (page 61) for the profit distribution table of 2019

Resolution:

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Matters for Discussion

To revise the ''Rules of Procedure for Shareholders Meetings'', please deliberate.

(Proposed by the board of directors)

Explanation:

(1) The Rules is amended in consideration of amendment of “Sample Template Rules of Procedure for Shareholders Meetings” announced by Taiwan Stock Exchange on 2 January 2020.
(2) Please refer to Attachment 8 (from page 62 to page 67) for comparison table of amendments.

Resolution:

To approve the issuance of 2020 new restricted employee shares, please deliberate.

(Proposed by the board of directors)

Explanation:

(1) In accordance with Article 267 of the Company Act and Article 60-2 of the "Regulations Governing the Offering and Issuance of Securities by Securities Issuers" (hereafter, the "Issuance Regulations"), the Company will issue new restricted employee shares.
(2) Total issuance: The total issuance is 2,000,000 shares of new common shares and par value of each share is NT$10, which constitute the total issued amount of NT$20,000,000.
(3) Conditions of issuance:
A. Issuance price: The shares are issued 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 2020" without any violation of the said regulations.
C. Failure in satisfying of vesting condition: The Company may

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retrieve, without remuneration, all new restricted employee shares distributed to such employees and cancel such.

(4) 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. Qualification requirements of employees’ include the employees of parents or subsidiaries of the company meeting certain specific requirements. 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:
- (A) Key personnel related to future development of the Company;
- (B) Personnel with performance which is fairly valuable to the Company;
- (C) 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 CEO. 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

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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.

(5) 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 officers and employees of the Company are connected with interests of the shareholders.
(6) 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 7 April 2020 NT$131.4 per share is used for the calculation, when vesting conditions are all satisfied, the sum of possible costs are estimated to be NT$262,800 (in thousands of dollars), according to the vesting conditions, the cost apportioned each year will be NT$78,840 (in thousands of dollars), NT$78,840 (in thousands of dollars) and NT$105,120 (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 208,622,247, the dilution of the earnings per share each year will be NT$0.38, NT$0.38 and NT$0.50 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.
(7) Other important agreed matters: The new restricted employee shares issued shall be delivered to a trust for custody before the

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satisfaction of vesting conditions.

(8) 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 CEO under authorization by the board of directors.
(9) 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.
(10) 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 2020", and please refer to Attachment 9. (from page 68 to page 75)

Resolution:

Extemporary motions

Meeting adjourned

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Attachment 1

Merry Electronics Co., Ltd.

2019 Business Report

I. Operating Strategy
The main operating focus of 2019 is “Cross-Border Integration, Southbound Deployment and Navigation towards the Blue Ocean”.
Continue to join the partnership to expand the map, and actively carry out the vertical division of resources and horizontal integration, with a view to achieving the synergy of cross-border integration.
Continue to build production bases in Southeast Asia, enhance the flexibility of capacity scheduling, south-facing layout to mitigate the impact of international political and economic uncertainty.
Be committed to exploring new markets and layouts in new areas, in order to explore new blue oceans continuously, enhance long-term competitive advantage and entity value, to reach new heights for the enterprise

II. General Condition of Implementation

In 2019, the global economic growth continued to slow down under the influence of multiple factors such as the trade conflict between China and the United States. In response to changes in the overall market environment, MERRY follows the operating strategy of “Integration of resources, toward Southeast Asia, Shifts to the Blue Ocean” in 2019. Actively layout for the future, devote time and effort and expand the electro-acoustic market continually, promote the integration of cross-BU, subsidiaries, functional organizations, and combine resources of M&A company to enhance the efficiency of cross-border integration resources; Simultaneously, considering the Group's expanding demand and dispersing production risks, Merry actively expands the manufacturing base in Thailand to increase the flexibility of capacity, and launches the blue ocean project to lay out next motivation of grow. Despite the turbulent international situation in 2019, with the cooperation of the management team and all colleagues, the Group's annual operating performance showed fruitful results once again. We sincerely thank shareholders for their long-term care and affirmation, customers' recognition and trust, and suppliers' full support.

Looking forward the future, the subsequent development of the US-China trade war,

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global environmental changes, and the Wuhan pneumonia are the major uncertainties affecting the overall economy. Based on the group's long-term development layout plan and the direction of the future map, the company takes "technology pilot, digital transformation, southward deep roots, sustainable development" as operating focus of 2020.

"Technology Pilot ", electroacoustic field is our core competence, based on the ten major technology trends from two aspects of "people-oriented" and "smart space" in 2020, we invest IOT, 5G, AI, and other future new technology-related electro-acoustic applications. The application of electro-acoustic combined with electro-acoustic professional technology trends continues to expand the field and create powerful new growth momentum. We promote to assimilate new technological knowledge into work and daily life, build the DNA to embrace new technology lnowledge and shape technological culture.

"Digital transformation" with the rapid change of the technology industry, in addition to strength the core competence and in response to the market changes brought by digital technology, applying the new technology, data and combine the existing operating model, to promote the transformation of operational procedure into digital operations and intelligent manufacturing as two-way goals, so as to build an MERRY smart platform to enhance competitiveness and continue to pursue growth and excellence.

"Southbound policy ", in order to enhance the flexibility of overall Group's capacity allocation and manufacturing efficiency; and to respond global manufacturing trends to face future challenges, will continue to be rooted in the construction layout of production base in Thailand and Vietnam, reduce the risk of a single production base in China.

"Sustainable development", the enterprise takes and repays the society, MERRY strives to create business performance, and promotes the concept of corporate social responsibility (CSR) and ESG principles into the MERRY culture simultaneously and implements the concept of sustainable development. It has become one of MERRY’s core values. We create a shared and prosperous new situation for shareholders, customers, employees, suppliers, society, environment and other parties to achieve the goal of sustainable development.

Facing the multifaceted challenges of the international political, economic situation and the changes of the technology industry, all the colleagues of MERRY must adhere to operation philosophy and deepen the core cause. We have learned and open mind towards the direction of sustainable development and steady growth to create higher entreprise

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value.

III. Results of Implementation of Business Plan

The consolidated revenue of Company and its subsidiaries is NT$36,397,793 (in thousands of dollars), which constitutes a NT$902,985 (in thousands of dollars) and 2.54% growth the 2018 revenue, which is NT$35,494,808 (in thousands of dollars). The total profit before tax is NT$3,246,197 (in thousands of dollars), which constitutes a NT$519,948 (in thousands of dollars) and 19.07% growth of the 2018 profit before tax, which is NT$2,726,249 (in thousands of dollars). The increase of the operating income and other profits serves as the major factor for the growth.

IV. Financial Revenue and Expenses and Profitability Analysis
Financial Revenue and Expenses

Unit: NT$ in thousands of dollars

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Account 2019 2018
Other incomes 383,263 240,595
Other gains and losses 44,344 (32,952)
Financial costs (81,319) (48,453)
Gains and losses of affiliates 664,557 263,926
for using equity method and
joint ventures accounted
Total 1,010,845 423,116
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Profitability Analysis

Unit: NT$ in thousands of dollars

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Subject Consolidated Consolidated
number of 2019 number of 2018
Financial Debt to asset ratio 49.94% 66.77%
structure (%)
Solvency (%) Current ratio 167.10% 133.77%
Liquidity ratio 143.42% 114.49%
Profitability (%) Return on assets 11.02% 7.41%
Return on shareholders’ 22.24% 17.44%
equity
Operating income to
107.53% 136.54%
paid-in capital ratio
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	Earnings per share after tax(NTD)	12.51	10.47

V. Research and Development
In 2019, the consolidated number of new products and extended products developed is 142.
In 2019, the consolidated number of patents approved is 51 and the consolidated number of patents under review is 94.
In 2019, the consolidated expenses for research and development is NT$1,305,385 (in thousands of dollars), which increases NT$202,380 (in thousands of dollars) than the 2018 amount, which is NT$1,103,005 (in thousands of dollars), and accounts for 3.59% of the consolidated sales revenue.
VI. Execution of the Budget: Not applicable as no financial forecast has been issued.

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Attachment 2

Merry Electronics Co., Ltd.

The Audit Committee's Review Report

The undersigned, being the Audit Committee of the Company, hereby confirm that the 2019 business report, profit distribution table and individual financial statement and consolidated financial statement, which were audited and issued by certified public accountants Wang, Yu-Juan and Xu, Jian-Ye from PricewaterhouseCoopers Taiwan, are not incorrect and issue a report thereupon in accordance with Article 219 of the Company Act and the Article 14-4 for Securities and Exchange Act for your review.

Merry Electronics Co., Ltd.

Chairman of the Audit Committee: KO, JIUNN-HUEI

February 27, 2020

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Attachment 3

Comparison of Amendments to the

Procedures of The Company to buy back shares transfer employee

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Articles after amendment Current Articles Explanation
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Procedures of The Company to buy back shares transfer employee	Procedures of The Company to buy back shares transfer employee	Procedures of The Company to buy back shares transfer employee
Articles after amendment Current Articles Explanation

5.2. Transfer period. 5.2.1. The shares to be bought back shall be transferred to the employee once or in separate parts withinfiveyears from the date of the purchase of the shares. 5.2.2. The Company buys back shares to transfer to employees, may limit the employees may not transfer for a certain period of time, but the maximum period of not more than two years.	5.2. Transfer period. 5.2.1. The shares to be bought back shall be transferred to the employee once or in separate parts withinthreeyears from the date of the purchase of the shares. 5.2.2. The Company buys back shares to transfer to employees, may limit the employees may not transfer for a certain period of time, but the maximum period of not more than two years.	In consideration with the Article 28-2 of the Securities and Exchange Act amended on 17 April 2019 for the purpose of talent retention by enterprises, the time limit for the transfer of employee stock option certificates and the company’s shares buy back to employees will be extended from three years to five years.

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Attachment 4

Comparison of Amendments to the

Ethical Corporate Management Best Practice Principles

	Articles after amendment		Current Articles	Explanation
	Article 5 Our company shall abide by the operational philosophies of honesty, transparency and responsibility, base policies on the principle of good faithand obtain approval from the board of directors, and establish good corporate governance and risk control and management mechanism so as to create an operational environment for sustainable development.		Article 5 Our company shall abide by the operational philosophies of honesty, transparency and responsibility, base policies on the principle of good faith and establish good corporate governance and risk control and management mechanism so as to create an operational environment for sustainable development.	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.
	Article 7 Our company shall establish a risk assessment mechanism against unethical conduct, analyze and assess on a regular basis business activities within their business scope which are at a higher risk of being involved in unethical conduct, and establish prevention programs accordingly and review their adequacy and effectiveness on a regular basis. The prevention programs adopted by our company shall at least include preventive measures against the following:		Article 7 When establishing the prevention programs, our company shall analyze which business activities within their business scope which are possibly at a higher risk of being involved in an unethical conduct, and strengthen the preventive measures. The prevention programs adopted by our company shall at least contain preventive measures against the following: 1. Offering and acceptance of bribes. 2. Illegalpolitical donations.	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.

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	Articles after amendment	Current Articles	Explanation
	1. Offering and acceptance of bribes. 2. Illegal political donations. 3. Improper charitable donations or sponsorship. 4. Offering or acceptance of unreasonable presents or hospitality, or other improper benefits. 5. Misappropriation of trade secrets and infringement of trademark rights, patent rights, copyrights, and other intellectual property rights. 6. Engaging in unfair competitive practices. 7. Damage directly or indirectly caused to the rights or interests, health, or safety of consumers or other stakeholders in the course of research and development, procurement, manufacture, provision, or sale ofproducts and services.	3. Improper charitable donations or sponsorship. 4. Offering or acceptance of unreasonable presents or hospitality, or other improper benefits. 5. Misappropriation of trade secrets and infringement of trademark rights, patent rights, copyrights, and other intellectual property rights. 6. Engaging in unfair competitive practices. 7. Damage directly or indirectly caused to the rights or interests, health, or safety of consumers or other stakeholders in the course of research and development, procurement, manufacture, provision, or sale of products and services.
	Article 8 Our company shall request our directors and senior management to issue a statement of compliance with the ethical management policy and require in the terms of employment that employees comply with such policy.	Article 8 Our company and our respective business group shall clearly specify in their rules and external documents the ethical corporate management policies and the commitment by the board of directors and the management on rigorous and	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by

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	Articles after amendment	Current Articles	Explanation
	Our company and our respective business group shall clearly specify in their rules, external documentsand on the company websitethe ethical corporate management policies and the commitment by the board of directors and the management on rigorous and thorough implementation of such policies, and shall carry out the policies in internal management and in commercial activities. Our company shall compile documented information on the ethical management policy, statement, commitment and implementation mentioned in the first and second paragraphs and retain said information properly.	thorough implementation of such policies, and shall carry out the policies in internal management and in commercial activities.	Taiwan Stock Exchange on 23 May 2019.
	Article 9 Our company shall engage in commercial activities in a fair and transparent manner based on the principle of ethical management. Prior to any commercial transactions, our company shall take into consideration the legality of our agents, suppliers, clients, or other trading	Article 9 Our company shall engage in commercial activities in a fair and transparent manner based on the principle of ethical management. Prior to any commercial transactions, our company shall take into consideration the legality of our agents, suppliers, clients, or other trading	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23

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Articles after amendment		Current Articles	Explanation
counterparties and whether any of them are involved in unethical conduct, and shall avoid any dealings with persons so involved. When entering into contracts with their agents, suppliers, clients, or other trading counterparties, our company shall include in such contracts terms requiring compliance with ethical corporate management policy and that in the event the trading counterparties are involved in unethical conduct, our company may at any time terminate or rescind the contracts.		counterparties and whether any of them are involved in unethical conduct, and shall avoid any dealings with persons so involvedand with unethical record. When entering into contracts with their agents, suppliers, clients, or other trading counterparties, our company shall include in such contracts terms requiring compliance with ethical corporate management policy and that in the event the trading counterparties are involved in unethical conduct, our company may at any time terminate or rescind the contracts.	May 2019.
Article 17 The directors, managers, employees, mandataries, and substantial controllers of our company shall exercise the due care of good administrators to urge the company to prevent unethical conduct, always review the results of the preventive measures and continually make adjustments so as to ensure thorough implementation of its ethical corporate managementpolicies.		Article 17 The directors, managers, employees, mandataries, and substantial controllers of our company shall exercise the due care of good administrators to urge the company to prevent unethical conduct, always review the results of the preventive measures and continually make adjustments so as to ensure thorough implementation of its ethical corporate managementpolicies.	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.

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Articles after amendment Current Articles Explanation
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Articles after amendment Current Articles Explanation

	To achieve sound ethical corporate management, our company shall establish a dedicated unitthat is under the board of directors and avail itself of adequate resources and staff itself with competent personnel, responsible for establishing and supervising the implementation of the ethical corporate management policies and prevention programs.The dedicated unit shall be in charge of the following matters, and shall report to the board of directors on a regular basis(at least once a year): 1. Assisting in incorporating ethics and moral values into the company's business strategy and adopting appropriate prevention measures against corruption and malfeasance to ensure ethical management in compliance with the requirements of laws and regulations. 2.Analyzing and assessing on a regular basis the risk of involvement in unethical conduct within the business scope, adopting accordingly programs toprevent unethical	To achieve sound ethical corporate management, our company shall establish a dedicated unit,administration center, which isresponsible for establishing the implementation of the ethical corporate management policies and prevention programs. The internal audit unit shall be responsible for supervising the implementation of the ethical corporate management policies and prevention programsand shall report to the board of directors on a regular basis: 1. Assisting in incorporating ethics and moral values into the company's business strategy and adopting appropriate prevention measures against corruption and malfeasance to ensure ethical management in compliance with the requirements of laws and regulations. 2. Adopting programs to prevent unethical conduct and setting out in each program the standard operating procedures and conduct guidelines 3. Planning the internal organization, structure, and

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Articles after amendment Current Articles Explanation

conduct and setting out in each program the standard operating procedures and conduct guidelines with respect to the company's operations and business. 3. Planning the internal organization, structure, and allocation of responsibilities and setting up check-and-balance mechanisms for mutual supervision of the business activities within the business scope which are possibly at a higher risk for unethical conduct. 4. Promoting and coordinating awareness and educational activities with respect to ethics policy. 5. Developing a whistle-blowing system and ensuring its operating effectiveness. 6. Assisting the board of directors and management in auditing and assessing whether the prevention measures taken for the purpose of implementing ethical management are effectively operating, and preparing reports on the regular assessment of compliance with	allocation of responsibilities and setting up check-and-balance mechanisms for mutual supervision of the business activities within the business scope which are possibly at a higher risk for unethical conduct. 4. Promoting and coordinating awareness and educational activities with respect to ethics policy. 5. Developing a whistle-blowing system and ensuring its operating effectiveness. 6. Assisting the board of directors and management in auditing and assessing whether the prevention measures taken for the purpose of implementing ethical management are effectively operating, and preparing reports on the regular assessment of compliance with ethical management in operating procedures.

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ethical management in
operating procedures.
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Articles after amendment Current Articles Explanation
ethical management in operating procedures.
Article 19 Our company shall adopt policies for preventing conflicts of interest to identify, monitor, and manage risks possibly resulting from unethical conduct, and shall also offer appropriate means for directors, managers, and other stakeholders attending or present at board meetings to voluntarily explain whether their interests would potentially conflict with those of the company. When a proposal at a given board of directors meeting concerns the personal interest of, or the interest of the juristic person represented by, any of the directors, managers, and other stakeholders attending or present at board meetings of our company, the concerned person shall state the important aspects of the relationship of interest at the given board meeting. If his or her participation is likely to prejudice the interest of the company,the concernedperson	Article 19 Our company shall adopt policies for preventing conflicts of interest to identify, monitor, and manage risks possibly resulting from unethical conduct, and shall also offer appropriate means for directors, managers, and other stakeholders attending or present at board meetings to voluntarily explain whether their interests would potentially conflict with those of the company. When a proposal at a given board of directors meeting concerns the personal interest of, or the interest of the juristic person represented by, any of the directors, managers, and other stakeholders attending or present at board meetings of our company, the concerned person shall state the important aspects of the relationship of interest at the given board meeting. If his or her participation is likely to prejudice the interest of the company, he or she could make	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.

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Articles after amendment		Current Articles	Explanation
may not participate in discussion of or voting on the proposal and shall recuse himself or herself from the discussion or the voting, and may not exercise voting rights as proxy for another director. The directors shall practice self-discipline and must not support one another in improper dealings. Our company's directors, managers, employees, mandataries, and substantial controllers shall not take advantage of their positions or influence in the companies to obtain improper benefits for themselves, their spouses, parents, children or any other person.		a statement and an answer over the act.The concerned person may not participate in discussion of or voting on the proposal and shall recuse himself or herself from the discussion or the voting, and may not exercise voting rights as proxy for another director. The directors shall practice self-discipline and must not support one another in improper dealings. Our company's directors, managers, employees, mandataries, and substantial controllers shall not take advantage of their positions or influence in the companies to obtain improper benefits for themselves, their spouses, parents, children or any other person.
Article 20 Our company shall establish effective accounting systems and internal control systems for business activities possibly at a higher risk of being involved in an unethical conduct, not have under-the-table accounts or keep secret accounts, and conduct reviews regularlyso as		Article 20 Our company shall establish effective accounting systems and internal control systems for business activities possibly at a higher risk of being involved in an unethical conduct, not have under-the-table accounts or keep secret accounts, and conduct reviews regularlyso as	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock

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Articles after amendment Current Articles Explanation
to ensure that the design and to ensure that the design and Exchange on 23
enforcement of the systems are enforcement of the systems are May 2019.
showing results. showing results.
The internal audit unit of our The internal audit unit of our
company shall, based on the company shall periodically
results of assessment of the risk examine the company's
of involvement in unethical compliance with the foregoing
conduct, devise relevant audit systems and prepare audit
plans including auditees, audit reports and submit the same to
scope, audit items, audit the board of directors. The
frequency, etc., and examine internal audit unit may engage a
accordingly the compliance certified public accountant to
with the prevention programs. carry out the audit, and may
The internal audit unit may engage professionals to assist if
engage a certified public necessary.
accountant to carry out the
audit, and may engage
professionals to assist if
necessary.
The results of examination in
the preceding paragraph shall
be reported to senior
management and the ethical
management dedicated unit and
put down in writing in the form
of an audit report to be
submitted to the board of
directors.
Article 21 Article 21 To amend in
Our company shall establish Our company shall establish accordance with
operational procedures and prevention program in the Ethical
guidelines in accordance with accordance with Article 6 Corporate
Article 6 hereof to guide hereof to guide directors, Management Best
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Articles after amendment Current Articles Explanation

	directors, managers, employees, and substantial controllers on how to conduct business. The procedures and guidelines should at least contain the following matters: 1. Standards for determining whether improper benefits have been offered or accepted. 2. Procedures for offering legitimate political donations. 3. Procedures and the standard rates for offering charitable donations or sponsorship. 4. Rules for avoiding work-related conflicts of interests and how they should be reported and handled. 5. Rules for keeping confidential trade secrets and sensitive business information obtained in the ordinary course of business. 6. Regulations and procedures for dealing with suppliers, clients and business transaction counterparties suspected of unethical conduct. 7. Handling procedures for violations of these Principles. 8. Disciplinary measures on offenders.	managers, employees, and substantial controllers on how to conduct business. The procedures and guidelines should at least contain the following matters: 1. Standards for determining whether benefit is corresponding to the normal social etiquette, and is happening incidentally without risk of affecting specific rights and obligations. 2. Procedures for offering legitimate political donations. 3. Procedures and the standard rates for offering charitable donations or sponsorship. 4. Rules for avoiding work-related conflicts of interests and how they should be reported and handled. 5. Rules for keeping confidential trade secrets and sensitive business information obtained in the ordinary course of business. 6. Regulations and procedures for dealing with suppliers, clients and business transaction counterparties suspected of unethical conduct. 7. Handling procedures for	Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.

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Articles after amendment Current Articles Explanation
violations of these Principles.
8. Disciplinary measures on
offenders.
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Articles after amendment Current Articles Explanation
violations of these Principles. 8. Disciplinary measures on offenders.
	Article 22 The chairperson, general manager, or senior management of our company shall communicate the importance of corporate ethics to its directors, employees, and mandataries on a regular basis. Our company shall periodically organize training and awareness programs for directors, managers, employees, mandataries, and substantial controllers and invite the companies' commercial transaction counterpartiesso they understand the companies' resolve to implement ethical corporate management, the related policies, prevention programs and the consequences of committing unethical conduct. Our company shall apply the policies of ethical corporate management when creating its employee performance appraisal system and human resource policies to establish a clear and effective reward and	Article 22 The chairperson, general manager, or senior management of our company shall communicate the importance of corporate ethics to its directors, employees, and mandataries on a regular basis. Our company shall periodically organize training and awareness programs for directors, managers, employees, mandataries, and substantial controllers, so they understand the companies' resolve to implement ethical corporate management, the related policies, prevention programs and the consequences of committing unethical conduct. Our company shall apply the policies of ethical corporate management when creating its employee performance appraisal system and human resource policies to establish a clear and effective reward and discipline system.	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.

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discipline system.
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Articles after amendment Current Articles Explanation
discipline system.
	Article 23 Our company shall adopt a concrete whistle-blowing system and scrupulously operate the system. The whistle-blowing system shall include at least the following: 1. An independent mailbox or hotline either internally established and publicly announced or provided by an independent external institution, to allow company insiders and outsiders to submit reports. 2. Dedicated personnel or unit appointed to handle whistle-blowing system. Any tip involving a director or senior managementshall be reported to the independent directors or the audit committee. Categories of reported misconduct shall be delineated and standard operating procedures for the investigation of each shall be adopted. 3. Follow-up measures to be adopted depending on the severity of the circumstances after investigations of cases reported are completed. Where necessary, a case shall be	Article 23 Our company shall adopt a concrete whistle-blowing system and scrupulously operate the system. The whistle-blowing system shall include at least the following: 1. An independent mailbox or hotline either internally established and publicly announced or provided by an independent external institution, to allow company insiders and outsiders to submit reports. 2. Dedicated personnel or unit appointed to handle whistle-blowing system. Any tip involving a director or senior manager shall be reported to the independent directors or the audit committee. Categories of reported misconduct shall be delineated and standard operating procedures for the investigation of each shall be adopted. 3. Documentation of case acceptance, investigation processes, investigation results, and relevant documents. 4.Confidentiality of the identity of whistle-blowers and the	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.

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Articles after amendment Current Articles Explanation
reported to the competent content of reported cases.
authority or referred to the 5. Measures for protecting
judicial authority. whistle-blowers from
4. Documentation of case inappropriate disciplinary
acceptance, investigation actions due to their
processes, investigation results, whistle-blowing.
and relevant documents. 6. Whistle-blowing incentive
5. Confidentiality of the identity measures.
of whistle-blowers and the When material misconduct or
content of reported cases, and likelihood of material
an undertaking regarding impairment to our company
anonymous reporting. comes to their awareness upon
6. Measures for protecting investigation, the dedicated
whistle-blowers from personnel or unit handling the
inappropriate disciplinary whistle-blowing system shall
actions due to their immediately prepare a report
whistle-blowing. and notify the independent
7. Whistle-blowing incentive directors or the audit committee
measures. in written form.
When material misconduct or
likelihood of material
impairment to our company
comes to their awareness upon
investigation, the dedicated
personnel or unit handling the
whistle-blowing system shall
immediately prepare a report
and notify the independent
directors or the audit committee
in written form.
Article 26 Article 26 To amend in
Our company shall at all times Our company shall at all times accordance with
monitor the development of monitor the development of the Ethical
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	Articles after amendment	Current Articles	Explanation
	relevant local and international regulations concerning ethical corporate management and encourage their directors, managers, and employees to make suggestions, based on which the adopted ethical corporate management policies and measures taken will be reviewed and improved with a view to achieving better implementation of ethical management.	relevant local and international regulations concerning ethical corporate management and encourage their directors, managers, and employees to make suggestions, based on which the adopted ethical corporate management policies and measures andregulations taken will be reviewed and improved with a view to achieving better implementation of ethical management.	Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.
	Article 27 The ethical corporate management best practice principles of our company shall be implemented after the board of directors grants the approval, and shall be sent to the audit committeeand reported at a shareholders' meeting. The same procedure shall be followed when the principles have been amended. For our company that has appointed any independent director, when the ethical corporate management best practice principles are submitted for discussion by the board of directors pursuant to thepreceding paragraph,the	Article 27 The ethical corporate management best practice principles of our company shall be implemented after the board of directors grants the approval and reported at a shareholders' meeting. The same procedure shall be followed when the principles have been amended. For our company that has appointed any independent director, when the principles are submitted for discussion by the board of directors pursuant to the preceding paragraph, the board of directors shall take into full consideration each independent director's opinions. If an independent director	To amend in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies announced by Taiwan Stock Exchange on 23 May 2019.

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Articles after amendment Current Articles Explanation

board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting. An independent director that cannot attend the board meeting in person to express objection or reservations shall provide a written opinion before the board meeting, unless there is some legitimate reason to do otherwise, and the opinion shall be specified in the minutes of the board of directors meeting.	objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting. An independent director that cannot attend the board meeting in person to express objection or reservations shall provide a written opinion before the board meeting, unless there is some legitimate reason to do otherwise, and the opinion shall be specified in the minutes of the board of directors meeting.

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Attachment 5

Comparison of Amendments to the

Codes of Ethical Conduct

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Articles after amendment Current Articles Explanation
Article 2 Article 2 To amend in
7. Encouraging reporting on 7. Encouraging reporting on accordance with
illegal or unethical activities: illegal or unethical activities: the Guidelines for
The company shall raise The company shall raise the Adoption of
awareness of ethics internally awareness of ethics internally Codes of Ethical
and encourage employees to and encourage employees to Conduct for
report to the audit committee, report to the audit committee, TWSE/GTSM
managerial officer, chief independent director, Listed Companies
internal auditor, or other managerial officer, chief and practical
appropriate individual upon internal auditor, administration operation.
suspicion or discovery of any center, Human resources
activity in violation of a law or department & Occupational
regulation or the code of ethical Safety and Health
conduct. To encourage Administration, or other
employees to report illegal appropriate individual upon
conduct, the company shall suspicion or discovery of any
establish a concrete activity in violation of a law or
whistle-blowing system and regulation or the code of ethical
make employees aware that the conduct. To encourage
company will use its best efforts employees to report illegal
to ensure the safety of conduct, the company shall
informants and protect them establish a concrete
from reprisals. whistle-blowing system and
make employees aware that the
company will use its best efforts
to ensure the safety of
informants and protect them
from reprisals.
Article 3 Article 3 To amend in
Procedures for exemption Procedures for exemption accordance with
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Articles after amendment Current Articles Explanation

	The code of ethical conduct adopted by a company must require that any exemption for directors or managerial officers from compliance with the code be adopted by a resolution of the board of directors,and that information on the date on which the board of directors adopted the resolution for exemption, objections or reservations of independent directors, and the period of, reasons for, and principles behind the application of the exemption be disclosed without delay on the MOPS, in order that the shareholders may evaluate the appropriateness of the board resolution to forestall any arbitrary or dubious exemption from the code, and to safeguard the interests of the company by ensuring appropriate mechanisms for controlling any circumstance under which such an exemption occurs.	IF our company requires exemption for directors or managerial officers from compliance with the code be adopted by a resolution of the board of directors, and the period of, reasons for, and principles behind the application of the exemption be disclosed without delay on the MOPS, in order that the shareholders may evaluate the appropriateness of the board resolution to forestall any arbitrary or dubious exemption from the code, and to safeguard the interests of the company by ensuring appropriate mechanisms for controlling any circumstance under which such an exemption occurs.	the Guidelines for the Adoption of Codes of Ethical Conduct for TWSE/GTSM Listed Companies and practical operation.

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Attachment 6

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

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE To the Board of Directors and Shareholders of Merry Electronics Co., Ltd.

Opinion

We have audited the accompanying parent company only balance sheets of Merry Electronics Co., Ltd. (the "Company") as at December 31, 2019 and 2018, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended 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 generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Independent Accountant's Responsibilities for the Audit of Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company

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only financial statements as a whole and, in forming our opinion thereon; we do not provide a separate opinion on these matters.

The key audit matters in relation to the parent company only financial statements for the year ended December 31, 2019 are outlined as follows: Cut-off on sales revenue from distribution warehouses

Description

Refer to Note 4(30) for accounting policy on revenue recognition.

The Company recognises revenue upon delivery or pick-up of goods (the transfer of control of ownership) by customers at the warehouses. Warehouse sales revenue constitutes 39% of total operating revenue for the year ended December 31, 2019. The Company's revenue recognition is based on inventory movement records of warehouses based on the reports provided by warehouse custodians or bill of lading reports recorded on network platform. As the hubs are located in various locations and there are numerous custodians, the frequency and contents of statements provided by custodians vary, and customers are from different places, the process of revenue recognition contains numerous manual procedures, which would potentially result in inaccurate timing of revenue recognition and the discrepancy between physical inventory quantities in the hubs and quantities per accounting records. Thus, we consider the cut-off on sales revenue from distribution warehouses a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter: A. Understood evaluated and verified the Company's procedures for warehouse sales revenue and internal control, including:

(a) Interviewing the staff from different departments of the sales revenue process from distribution warehouse, and confirming the consistency by comparing interview results with the process of warehouse sales revenue recognition obtained.

(b) Verifying the internal control of warehouse distribution (checked the terms of transaction / timing of ownership transfer and dates of supporting documents and verifying transactions recognised in the appropriate period by reconciling the quantities of supporting documents with invoices) to confirm the accuracy of the timing of revenue recognition.

B. Performed cut-off procedures on sales revenue from distribution warehouse recognised during a specific period before and after the period-end, including verifying delivery

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schedule of distribution warehouses and ensuring the movements of inventories contained in the statements and cost of goods sold had been recognised in the appropriate period.

C. Performed physical inventory count observation or confirmed the inventory quantities with hub custodian and agreed the results to accounting records.

Investments accounted for using equity method - valuation of inventories

Description

The Company receives orders from customers and the subsidiaries are tasked to manufacture the products. The subsidiaries (shown as investments accounted for using equity method) have a high risk of incurring inventory valuation loss and obsolescence due to fluctuations in market demand and rapidly evolving technology. Further, the measurement of net realisable value of inventories involves subjective judgement resulting in a high degree of estimation uncertainty. Thus, we consider the allowance for inventory valuation loss of the subsidiaries (shown as investments accounted for using equity method) a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter: A. Understood and assessed the reasonableness of the subsequent inventory valuation and the provision for loss on obsolete and slow-moving inventory.

B. Inspected the annual plan of the physical inventory count and observed the inventory count; evaluated the effectiveness of the procedures used to identify and control obsolete inventories.

C. Obtained inventory aging report and verified dates of movements with supporting documents, and ensured the accuracy of inventory aging classification and its consistency with the policies.

D. Obtained the net realisable value of each kind of inventory and checked whether the applied calculation logic was in agreement with all inventory, tested the supporting documents related to the estimation basis for net realisable value of inventories including verifying the supporting documents of sales and purchase prices, as well as recalculating and assessing the reasonableness of allowance for inventory valuation losses.

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent

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

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

Those charged with governance, including independent directors and supervisors, are responsible for overseeing the Company's financial reporting process.

Independent accountant's responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS 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 parent company only financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

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

B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

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

D. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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

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

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

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Wang, Yu-Juan

Xu, Jian-Ye

For and on behalf of PricewaterhouseCoopers, Taiwan

February 27, 2020

The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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December 31, 2019 December 31, 2018
Assets Notes AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents 6(1) $ 4,038,861 18 $ 6,610,358 26
1110 Financial assets at fair value through 6(2)
profit or loss - current 16,913 - 166,048 1
1120 Financial assets at fair value through 6(3)
other comprehensive income - current 171,906 1 228,413 1
1140 Current contract assets 6(21) 31,585 - - -
1170 Accounts receivable, net 6(4) 4,466,711 19 7,168,341 28
1180 Accounts receivable - related parties 7 134,974 1 10,595 -
1200 Other receivables 17,657 - 32,397 -
1210 Other receivables - related parties 7 43,626 - 33,315 -
130X Inventories, net 6(6) 815,756 4 625,058 2
1410 Prepayments 16,216 - 8,890 -
1479 Other current assets 32,710 - 25,474 -
11XX Total current assets 9,786,915 43 14,908,889 58
Non-current assets
1510 Financial assets at fair value through 6(2)
- -
profit or loss - non-current 21,301 18,174
1517 Financial assets at fair value through 6(3)
other comprehensive income -
non-current 2,435,247 11 1,381,450 6
1550 Investments accounted for under 6(7)
equity method 9,618,330 42 8,300,401 32
1600 Property, plant and equipment, net 6(8) 770,937 3 761,523 3
1755 Right-of-use assets 6(9) 7,849 - - -
1780 Intangible assets 6(10) 287,174 1 277,570 1
1840 Deferred income tax assets 6(26) 88,793 - 40,785 -
1990 Other non-current assets 8,755 - 39,924 -
15XX Total non-current assets 13,238,386 57 10,819,827 42
1XXX Total assets $ 23,025,301 100 $ 25,728,716 100
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MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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December 31, 2019 December 31, 2018
Liabilities and Equity Notes AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings 6(12) $ 89,940 1 $ 4,399,144 17
2120 Financial liabilities at fair value 6(2)
- -
through profit or loss - current 11,799 6,976
2170 Accounts payable 103,882 1 4,420 -
2180 Accounts payable - related parties 7 5,384,900 23 6,642,168 26
2200 Other payables 6(13) 498,778 2 423,685 2
2220 Other payables - related parties 7 7,124 - 40,296 -
2230 Current income tax liabilities 215,609 1 119,172 -
2300 Other current liabilities 287,887 1 187,325 1
21XX Total current liabilities 6,599,919 29 11,823,186 46
Non-current liabilities
2530 Corporate bonds payable 6(14) 2,229,959 9 2,882,721 11
2570 Deferred income tax liabilities 6(26) 874,025 4 604,859 2
2640 Accrued pension liabilities 6(15) 83,476 - 84,044 -
2645 Guarantee deposits received 1,017 - 1,018 -
2670 Other non-current liabilities 402,928 2 402,072 2
25XX Total non-current liabilities 3,591,405 15 3,974,714 15
2XXX Total liabilities 10,191,324 44 15,797,900 61
Equity
Share capital 6(17)
3110 Share capital - common stock 2,086,684 9 1,996,625 8
Capital surplus 6(18)
3200 Capital surplus 3,870,105 17 2,789,111 11
Retained earnings 6(19)
3310 Legal reserve 1,745,768 8 1,539,341 6
3320 Special reserve 269,144 1 269,144 1
3350 Unappropriated retained earnings 3,834,442 17 3,189,563 12
Other equity interest 6(20)
3400 Other equity interest 1,027,834 4 147,032 1
3XXX Total equity 12,833,977 56 9,930,816 39
Significant contingent liabilities and 9
unrecognised contract commitments
Significant events after the balance 11
sheet date
3X2X Total liabilities and equity $ 23,025,301 100 $ 25,728,716 100
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The accompanying notes are an integral part of these parent company only financial statements.

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except earnings per share)

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Year ended December 31
2019 2018
Items Notes AMOUNT % AMOUNT %
4000 Sales revenue 6(21) and 7 $ 30,648,815 100 $ 30,438,179 100
5000 Operating costs 6(6)(24) and 7 ( 27,637,789) ( 90) ( 27,825,720) ( 92)
5900 Net operating margin 3,011,026 10 2,612,459 8
Operating expenses 6(24)(25)
6100 Selling expenses ( 192,099) ( 1) ( 210,681) -
6200 General and administrative expenses ( 584,741) ( 2) ( 553,006) ( 2)
6300 Research and development expenses ( 606,161) ( 2) ( 569,581) ( 2)
6000 Total operating expenses ( 1,383,001) ( 5) ( 1,333,268) ( 4)
6900 Operating profit 1,628,025 5 1,279,191 4
Non-operating income and expenses
7010 Other income 6(22) 145,596 - 131,041 -
7020 Other gains and losses 6(2)(3)(23) ( 5,693) - 52,726 -
7050 Finance costs ( 63,385) - ( 31,217) -
7070 Share of profit of associates and joint 6(7)
ventures accounted for using equity
method 1,441,489 5 1,063,494 4
7000 Total non-operating income and
expenses 1,518,007 5 1,216,044 4
7900 Profit before income tax 3,146,032 10 2,495,235 8
7950 Income tax expense 6(26) ( 597,420) ( 2) ( 430,970) ( 1)
8200 Profit for the year $ 2,548,612 8 $ 2,064,265 7
Other comprehensive income
Components of other comprehensive
income that will not be reclassified to
profit or loss
8311 Actuarial losses on defined benefit plans 6(15) ($ 15,027) - ($ 7,051) -
8316 Unrealised losses from investments in 6(20)
equity instruments measured at fair value
through other comprehensive income 1,146,956 4 ( 2,530,480) ( 9)
8330 Share of other comprehensive loss of
associates and joint ventures accounted
for using equity method - - ( 5,513) -
8349 Income tax related to components of other
comprehensive income that will not be
reclassified to profit or loss 3,005 - 1,410 -
8310 Other comprehensive income (loss)
that will not be reclassified to profit
or loss 1,134,934 4 ( 2,541,634) ( 9)
Components of other comprehensive
income that will be reclassified to profit or
loss
8361 Exchange differences on translation 6(20) ( 113,955) - 19,095 -
8367 Unrealised gains from investments in debt
instruments measured at fair value
through other comprehensive income ( 2,377) - 18,639 -
8380 Share of other comprehensive loss of
associates and joint ventures accounted
for using equity method ( 153,522) ( 1) ( 87,285) -
8399 Income tax relating to the components of
other comprehensive income 52,830 - 12,720 -
8360 Other comprehensive loss that will be
reclassified to profit or loss ( 217,024) ( 1) ( 36,831) -
8300 Other comprehensive (loss) income for the
year $ 917,910 3 ($ 2,578,465) ( 9)
8500 Total comprehensive (loss) income for the
year $ 3,466,522 11 ($ 514,200) ( 2)
Earnings per share 6(27)
9750 Basic earnings per share $ 12.51 $ 10.47
9850 Diluted earnings per share $ 11.54 $ 10.35
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The accompanying notes are an integral part of these parent company only financial statements.

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

2018 Balance at January 1, 2018 Effects of modified retrospective restatement Balance at January 1, 2018 after adjustments Profit Other comprehensive loss Total comprehensive income Appropriations and distribution of 2017 earnings (Note 2): Legal reserve Cash dividends Issuance of convertible bonds Convertible bonds converted to equity shares Share-based payment Retirement of treasury shares Disposal of investments in equity instruments at fair value through other comprehensive income Acquisition agreement of additional equity in subsidiaries Recognition of change in equity of associates in proportion to the Group's ownership Balance at December 31, 2018 2019 Balance at January 1, 2019 Profit (loss) Other comprehensive income (loss) Total comprehensive income Appropriations and distribution of 2018 earnings Legal reserve Cash dividends Issuance of common stock for cash Convertible bonds converted to equity shares Share-based payment Disposal of investments in equity instruments at fair value through other comprehensive income Recognition of change in equity of associates in proportion to the Group's ownership Recognition of change in equity of non-associates in proportion to the Group's ownership Balance at December 31, 2019	Notes 6(20) 6(14) 6(14) 6(16) 6(17) 6(3) 6(20) 6(14) 6(16) 6(3)		Share capital - common stock `$` `2,004,721` `-` `2,004,721` `-` `-` `-` `-` `-` `-` `1,409` `9,165` `(` `18,670 )` `-` `-` `-` `$` `1,996,625` `$` `1,996,625` `-` `-` `-` `-` `-` `40,000` `48,851` `1,208` `-` `-` `-` `$` `2,086,684`		Capital surplus, additional paid-in capital `$` `2,985,304` `-` `2,985,304` `-` `-` `-` `-` `-` `133,326` `13,565` `120,515` `(` `66,129 )` `-` `(` `402,072 )` `4,602` `$` `2,789,111` `$` `2,789,111` `-` `-` `-` `-` `-` `408,000` `636,587` `25,256` `-` `11,151` `-` `$` `3,870,105`				Retained earnings		Unappropriated retained earnings `$` `4,292,018` `3,766` `4,295,784` `2,064,265` `(` `11,154 )` `2,053,111` `(` `362,220 )` `(` `3,143,838 )` `-` `-` `-` `-` `346,726` `-` `-` `$` `3,189,563` `$` `3,189,563` `2,548,612` `(` `12,022 )` `2,536,590` `(` `206,427 )` `(` `1,751,419 )` `-` `-` `-` `68,104` `-` `(` `1,969 )` `$` `3,834,442`		Financial statements translation differences of foreign operations `$` `3,074,587` `(` `3,766 )` `3,070,821` `-` `(` `2,567,311 )` `(` `2,567,311 )` `-` `-` `-` `-` `(` `9,752 )` `-` `(` `346,726 )` `-` `-` `$` `147,032` `$` `147,032` `-` `929,932` `929,932` `-` `-` `-` `-` `18,974` `(` `68,104 )` `-` `-` `$` `1,027,834`	Treasury stocks `($` `98,743 )` `-` `(` `98,743 )` `-` `-` `-` `-` `-` `-` `-` `13,944` `84,799` `-` `-` `-` `$` `-` `$` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$` `-`		Total equity `$` `13,704,152` `-` `13,704,152` `2,064,265` `(` `2,578,465 )` `(` `514,200 )` `-` `(` `3,143,838 )` `133,326` `14,974` `133,872` `-` `-` `(` `402,072 )` `4,602` `$` `9,930,816` `$` `9,930,816` `2,548,612` `917,910` `3,466,522` `-` `(` `1,751,419 )` `448,000` `685,438` `45,438` `-` `11,151` `(` `1,969 )` `$` `12,833,977`
							Legal reserve `$` `1,177,121` `-` `1,177,121` `-` `-` `-` `362,220` `-` `-` `-` `-` `-` `-` `-` `-` `$` `1,539,341` `$` `1,539,341` `-` `-` `-` `206,427` `-` `-` `-` `-` `-` `-` `-` `$` `1,745,768`		Special reserve `$` `269,144` `-` `269,144` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$` `269,144` `$` `269,144` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$` `269,144`

Note 1: DirectorsNote 2: Directors ’’ and supervisors and supervisors ’’ remuneration amounting to $43,733 thousand and employees remuneration amounting to $90,750 thousand and employees ’’ compensation amounting to $128,626 thousand were recognised as expenses in the statement of comprehensive income for the year ended December 31, 2016. compensation amounting to $272,251 thousand were recognised as expenses in the statement of comprehensive income for the year ended December 31, 2017.

The accompanying notes are an integral part of these parent company only financial statements.

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation
Depreciation - right-of-use assets
Gain on modification of lease
Amortization
Expected credit loss
Finance costs
Interest expense - lease liability
Net loss on financial assets or liabilities at fair value through
profit or loss
Proceeds from disposal of available-for-sale financial
assets-non-current
Share of profit of associates and joint ventures accounted for
using equity method
Dividend income
Interest income
Gain on disposal of property, plant and equipment
Share-based payments
Treasury share-based payments
Compensation cost of cash capital increase reserved for
employee preemption
Effect of exchange rate changes
Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or loss
Accounts receivable
Accounts receivable - related parties
Contract assets-current
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Acquisition of financial assets at fair value through profit or
loss - non-current
Changes in operating liabilities
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Interest paid
Income taxes paid
Interest received
Dividend income
Recognition of dividends received from investments
accounted for using equity method
Net cash flows from operating activities Notes
2019
2018
$
3,146,032
$
2,495,235
6(8)
17,318
18,288
6(9)
10,441
-
(
5 )
-
6(10)
55,625
56,241
1,207
1,024
63,385
31,217
610
-
(
2,634 )
16,904
6(3)
(
833 )
-
6(7)
(
1,441,489 )
(
1,063,494 )
6(22)
(
69,850 )
(
60,437 )
6(22)
(
48,522 )
(
40,417 )
6(23)
(
471 )
(
97 )
6(16)
52,158
90,298
6(16)
-
26,734
6(16)
-
3,993
(
34,526 )
(
58,875 )
6(2)
154,703
231,061
2,782,214
(
1,234,799 )
(
124,380 )
2,923
(
31,585 )
-
19,076
152,625
(
10,311 )
495
(
190,698 )
205,914
(
7,326 )
7,548
(
7,669 )
(
7,398 )
(
3,127 )
(
18,174 )
99,462
3,934
(
1,240,671 )
(
594,367 )
74,309
(
162,479 )
(
49,769 )
(
30,977 )
11,654
7,622
(
15,596 )
(
22,325 )
3,208,732
58,217
(
15,061 )
(
30,050 )
(
223,990 )
(
552,376 )
48,955
43,223
69,850
60,437
6(28)
-
574,124
3,088,486
153,575

(Continued)

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through other
comprehensive income
Proceeds from disposal of financial assets at fair value through
other comprehensive income
Acquisition of investments accounted for using equity method
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
Decrease in other financial assets
Decrease in guarantee deposits
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Proceeds from issuance of bonds
Cash dividends paid
Repayment of principal portion of lease liabilities
Employee purchase of treasury shares
Cancellation of restricted employee shares
Issuance of common stock for cash
Net cash flows (used in) from financing activities
Effect of exchange rate changes
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year Notes
2019
2018
$
-
( $
324,392 )
6(3)(28)
143,315
603,040
6(7)
(
134,264 )
(
1,807,223 )
6(8)(28)
(
42,763 )
(
335,241 )
12,141
3,185
6(8)(28)
(
42,812 )
(
44,197 )
-
100,000
138
284
(
64,245 )
(
1,804,544 )
(
4,309,204 )
3,049,624
6(14)
-
3,015,000
6(19)
(
1,751,419 )
(
3,143,838 )
6(9)
(
10,921 )
-
-
13,944
(
6,720 )
(
1,095 )
6(17)
448,000
-
(
5,630,264 )
2,933,635
34,526
58,875
(
2,571,497 )
1,341,541
6,610,358
5,268,817
$
4,038,861
$
6,610,358

The accompanying notes are an integral part of these parent company only financial statements.

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

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE To the Board of Directors and Shareholders of Merry Electronics Co., Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of Merry Electronics Co., Ltd. and its subsidiaries (the “Group”) as at December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis 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 current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

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

The key audit matters in relation to the consolidated financial statements for the year ended December 31, 2019 are outlined as follows: Cut-off on sales revenue from distribution warehouses

Description

Refer to Note 4(31) for accounting policy on revenue recognition.

The Group recognises revenue upon delivery or pick-up of goods (the transfer of control of ownership) by customers at the warehouses. Warehouse sales revenue constitutes 32% of total operating revenue for the year ended December 31, 2019. The Group’s revenue recognition is based on inventory movement records of warehouses based on the reports provided by warehouse custodians or bill of lading reports recorded on network platform. As the hubs are located in various locations and there are numerous custodians, the frequency and contents of statements provided by custodians vary, and customers are from different places, the process of revenue recognition contains numerous manual procedures, which would potentially result in inaccurate timing of revenue recognition and the discrepancy between physical inventory quantities in the hubs and quantities per accounting records. Thus, we consider the cut-off on sales revenue from distribution warehouses a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter:

A. Understood, evaluated and verified the Group’s procedures for warehouse sales revenue and internal control, including:
(a) Interviewing the staff from different departments of the sales revenue process from distribution warehouse, and confirming the consistency by comparing interview results with the process of warehouse sales revenue recognition obtained.
(b) Verifying the internal control of warehouse distribution (checked the terms of transaction / timing of ownership transfer and dates of supporting documents and verifying transactions recognised in the appropriate period by reconciling the quantities of supporting documents with invoices) to confirm the accuracy of the timing of revenue recognition.
B. Performed cut-off procedures on sales revenue from distribution warehouses recognised during a specific period before and after the period-end, including verifying delivery schedule of distribution warehouses and ensuring the movements of inventories contained in the statements and cost of goods sold had been recognised in the appropriate period;
C. Performed physical inventory count observation or confirmed the inventory quantities with hub custodian and agreed the results to accounting records.

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

Valuation of inventories

Description

Refer to Note 4(12) for accounting policies on inventory valuation, Note 5(1) for significant accounting estimates and assumptions related to inventory valuation, and Note 6(6) for details of allowance for inventory valuation losses. As of December 31, 2019, the balances of inventories and allowance for inventory valuation losses were NT$2,300,204 thousand and NT$182,672 thousand, respectively.

The Group has a high risk of incurring inventory valuation loss or obsolescence due to fluctuations in market demand and rapidly evolving technology. Further, the measurement of net realisable value of inventories involves subjective judgement resulting in a high degree of estimation uncertainty. Thus, we consider the allowance for inventory valuation loss a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter:

A. Understood and assessed the reasonableness of the subsequent inventory valuation and the provision for loss on obsolete and slow-moving inventory.
B. Inspected the annual plan of the physical inventory count and observed the inventory count; evaluated the effectiveness of the procedures used to identify and control obsolete inventories.
C. Obtained inventory aging report and verified dates of movements with supporting documents, and ensured the accuracy of inventory aging classification and its consistency with the policies.
D. Obtained the net realisable value of each kind of inventory and checked whether the applied calculation logic was in agreement with all inventory, tested the supporting documents related to the estimation basis for net realisable value of inventories including verifying the supporting documents of sales and purchase prices, as well as recalculating and assessing the reasonableness of allowance for inventory valuation losses.

Other matter - parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of Merry Electronics Co., Ltd. as at and for the years ended December 31, 2019 and 2018.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparation of

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

Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditor’s responsibilities for the audit of the consolidated financial statements

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

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

D. 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

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

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

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

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

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

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

Wang, Yu-Juan

Xu, Jian-Ye

For and on behalf of PricewaterhouseCoopers, Taiwan February 27, 2020

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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December 31, 2019 December 31, 2018
Assets Notes AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents 6(1) $ 6,589,863 26 $ 8,512,129 28
1110 Financial assets at fair value through 6(2)
profit or loss - current 16,913 - 166,048 1
1120 Current financial assets at fair value 6(3)
through other comprehensive income 202,077 1 259,226 1
1150 Notes receivable, net 451 - 895 -
1170 Accounts receivable, net 6(4) 5,448,381 21 8,574,012 28
1180 Accounts receivable due from related 7
- -
parties, net 12,934 23,083
1200 Other receivables 49,485 - 75,386 -
1210 Other receivables - related parties 7 385,368 2 729,785 2
130X Inventories 6(6) 2,117,532 8 3,074,672 10
1470 Other current assets 6(7) 270,473 1 225,634 1
11XX Current Assets 15,093,477 59 21,640,870 71
Non-current assets
1510 Financial assets at fair value through 6(2)
- -
profit or loss - noncurrent 21,301 18,174
1517 Non-current financial assets at fair 6(3)
value through other comprehensive
income 2,533,407 10 1,482,779 5
1550 Investments accounted for under 6(8)
equity method 3,951,152 15 3,426,878 11
1600 Property, plant and equipment 6(9) 2,285,093 9 1,988,191 7
1755 Right-of-use assets 6(10) 155,434 1 - -
1780 Intangible assets 6(11) 1,502,776 6 1,552,242 5
1840 Deferred income tax assets 6(29) 151,674 - 82,335 -
1900 Other non-current assets 6(12) 101,256 - 140,107 1
15XX Non-current assets 10,702,093 41 8,690,706 29
1XXX Total assets $ 25,795,570 100 $ 30,331,576 100
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(Continued)

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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December 31, 2019 December 31, 2018
Liabilities and Equity Notes AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings 6(13) $ 470,890 2 $ 4,753,434 16
2120 Financial liabilities at fair value 6(2)
- -
through profit or loss - current 11,799 6,976
2150 Notes payable 74 - 74 -
2170 Accounts payable 2,773,441 11 5,330,461 18
2180 Accounts payable - related parties 7 3,920,251 15 4,412,969 14
2200 Other payables 6(14) 973,026 4 1,171,824 4
2220 Other payables - related parties 7 137,703 - 37,410 -
2230 Current income tax liabilities 6(29) 258,597 1 293,442 1
2300 Other current liabilities 6(15) 417,964 2 170,952 -
21XX Current Liabilities 8,963,745 35 16,177,542 53
Non-current liabilities
2530 Corporate bonds payable 6(16) 2,229,959 9 2,882,721 10
2540 Non-current portion of borrowings 6(17) 62,000 - - -
2570 Deferred income tax liabilities 6(29) 956,478 4 702,341 2
2580 Non-current lease liabilities 88,694 - - -
2640 Accrued pension liabilities 86,295 - 85,930 -
2670 Other non-current liabilities, others 410,007 2 403,615 2
25XX Non-current liabilities 3,833,433 15 4,074,607 14
2XXX Total Liabilities 12,797,178 50 20,252,149 67
Equity attributable to owners of
parent
Share capital 6(20)
3110 Share capital - common stock 2,086,684 8 1,996,625 7
Capital surplus 6(21)
3200 Capital surplus 3,870,105 15 2,789,111 9
Retained earnings 6(22)
3310 Legal reserve 1,745,768 7 1,539,341 5
3320 Special reserve 269,144 1 269,144 1
3350 Unappropriated retained earnings 3,834,442 15 3,189,563 11
Other equity interest 6(23)
3400 Other equity interest 1,027,834 4 147,032 -
31XX Equity attributable to owners of
the parent 12,833,977 50 9,930,816 33
36XX Non-controlling interest 164,415 - 148,611 -
3XXX Total equity 12,998,392 50 10,079,427 33
Significant contingent liabilities and 9
unrecognised contract commitments
Significant events after the balance 11
sheet date
3X2X Total liabilities and equity $ 25,795,570 100 $ 30,331,576 100
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The accompanying notes are an integral part of these consolidated financial statements.

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except earnings per share)

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Year ended December 31
2019 2018
Items Notes AMOUNT % AMOUNT %
4000 Sales revenue 6(24) $ 36,397,793 100 $ 35,494,808 100
5000 Operating costs 6(6) ( 31,357,874) ( 86) ( 30,769,740) ( 86)
5900 Net operating margin 5,039,919 14 4,725,068 14
Operating expenses 6(27)(28)
6100 Selling expenses ( 397,602) ( 1) ( 350,439) ( 1)
6200 General and administrative expenses ( 1,101,580) ( 3) ( 968,491) ( 3)
6300 Research and development expenses ( 1,305,385) ( 4) ( 1,103,005) ( 3)
6000 Total operating expenses ( 2,804,567) ( 8) ( 2,421,935) ( 7)
6900 Operating profit 2,235,352 6 2,303,133 7
Non-operating income and expenses
7010 Other income 6(25) 383,263 1 240,595 -
7020 Other gains and losses 6(2)(3)(26) 44,344 - ( 32,952) -
7050 Finance costs ( 81,319) - ( 48,453) -
7060 Share of profit of associates and joint 6(8)
ventures accounted for under equity
method 664,557 2 263,926 1
7000 Total non-operating income and
expenses 1,010,845 3 423,116 1
7900 Profit before income tax 3,246,197 9 2,726,249 8
7950 Income tax expense 6(29) ( 715,051) ( 2) ( 665,400) ( 2)
8200 Profit for the year $ 2,531,146 7 $ 2,060,849 6
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(Continued)

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except earnings per share)

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Year ended December 31
2019 2018
Items Notes AMOUNT % AMOUNT %
Other comprehensive income
Components of other comprehensive
income that will not be reclassified to
profit or loss
8311 Other comprehensive income, before tax, 6(18)
actuarial gains (losses) on defined benefit
plans ($ 15,027) - ($ 7,051) -
8316 Total expenses, by nature 6(23) 1,150,081 3 ( 2,530,480) ( 7)
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 - - ( 5,513) -
8349 Income tax related to components of other
comprehensive income that will not be
reclassified to profit or loss ( 120) - 1,410 -
8310 Components of other comprehensive
income (loss) that will not be
reclassified to profit or loss 1,134,934 3 ( 2,541,634) ( 7)
Components of other comprehensive
income that will be reclassified to profit or
loss
8361 Financial statements translation 6(23)
differences of foreign operations ( 119,248) - 14,447 -
8367 Unrealised gains (losses) from 6(23)
investments in debt instruments measured
at fair value through other comprehensive
income, net ( 2,377) - 18,639 -
8370 Share of other comprehensive income of 6(23)
associates and joint ventures accounted
for using equity method, components of
other comprehensive income that will be
reclassified to profit or loss ( 140,011) - ( 87,285) -
8399 Income tax relating to the components of
other comprehensive income 52,830 - 12,720 -
8360 Components of other comprehensive
loss that will be reclassified to profit
or loss ( 208,806) - ( 41,479) -
8300 Total other comprehensive income (loss)
for the year $ 926,128 3 ($ 2,583,113) ( 7)
8500 Total comprehensive income (loss) for the
year $ 3,457,274 10 ($ 522,264) ( 1)
Profit (loss), attributable to:
8610 Owners of parent $ 2,548,612 7 $ 2,064,265 6
8620 Non-controlling interest ( 17,466) - ( 3,416) -
Total Net Income $ 2,531,146 7 $ 2,060,849 6
Comprehensive income (loss) attributable
to:
8710 Owners of the parent $ 3,466,522 10 ($ 514,200) ( 1)
8720 Non-controlling interest ( 9,248) - ( 8,064) -
Total Comprehensive Income (Loss) $ 3,457,274 10 ($ 522,264) ( 1)
Basic earnings per share 6(30)
9750 Total basic earnings per share $ 12.51 $ 10.47
Diluted earnings per share 6(30)
9850 Total diluted earnings per share $ 11.54 $ 10.35
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The accompanying notes are an integral part of these consolidated financial statements.

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (Expressed in thousands of New Taiwan dollars)

Year 2018 Balance at January 1, 2018 Effect of restospective application and retrospective restatement Balance at January 1 after adjustments Profit (loss) Other comprehensive loss Total comprehensive income (loss) Appropriations and distribution of 2017 earnings: Legal reserve Cash dividends Issuance of convertible bonds Convertible bonds converted to equity shares Share-based payment Retirement of treasury shares Disposal of investments in equity instruments at fair value through other comprehensive income Acquisition of additional equity in subsidiaries Recognition of change in equity of associates in proportion to the Group's ownership Acquisition of non-controlling interests in subsidiaries Balance at December 31, 2018 Year 2019 Balance at January 1, 2019 Profit (loss) Other comprehensive income (loss) Total comprehensive income (loss) Appropriations and distribution of 2018 earnings: Legal reserve Cash dividends Issuance of common stock for cash Convertible bonds converted to equity shares Share-based payment Disposal of investments in equity instruments at fair value through other comprehensive income Recognition of change in equity of associates in proportion to the Group's ownership Acquisition of non-controlling interests in subsidiaries Balance at December 31, 2019	Notes 6(16) 6(19) 6(22) 6(16) 6(19) 6(3)						Equityattributableto	Equityattributableto	Equityattributableto	Equityattributableto	owners of the parent							Non-controllin g interest `$` `82` `-` `82` `(` `3,416 )` `(` `4,648 )` `(` `8,064 )` `-` `-` `-` `-` `-` `-` `-` `-` `-` `156,593` `$ 148,611` `$ 148,611` `(` `17,466 )` `8,218` `(` `9,248 )` `-` `-` `-` `-` `-` `-` `-` `25,052` `$ 164,415`		Total equity `$ 13,704,234` `-` `13,704,234` `2,060,849` `(` `2,583,113 )` `(` `522,264 )` `-` `(` `3,143,838 )` `133,326` `14,974` `133,872` `-` `-` `(` `402,072 )` `4,602` `156,593` `$ 10,079,427` `$ 10,079,427` `2,531,146` `926,128` `3,457,274` `-` `(` `1,751,419 )` `448,000` `685,438` `45,438` `-` `11,151` `23,083` `$ 12,998,392`
			Share capital - common stock `$` `2,004,721` `-` `2,004,721` `-` `-` `-` `-` `-` `-` `1,409` `9,165` `(` `18,670 )` `-` `-` `-` `-` `$` `1,996,625` `$` `1,996,625` `-` `-` `-` `-` `-` `40,000` `48,851` `1,208` `-` `-` `-` `$` `2,086,684`		Capital surplus, additional paid-in capital `$ 2,985,304` `-` `2,985,304` `-` `-` `-` `-` `-` `133,326` `13,565` `120,515` `(` `66,129 )` `-` `(` `402,072 )` `4,602` `-` `$ 2,789,111` `$ 2,789,111` `-` `-` `-` `-` `-` `408,000` `636,587` `25,256` `-` `11,151` `-` `$ 3,870,105`			R	etainedEarnings		Unappropriated retained earnings `$ 4,292,018` `3,766` `4,295,784` `2,064,265` `(` `11,154 )` `2,053,111` `(` `362,220 )` `(` `3,143,838 )` `-` `-` `-` `-` `346,726` `-` `-` `-` `$ 3,189,563` `$ 3,189,563` `2,548,612` `(` `12,022 )` `2,536,590` `(` `206,427 )` `(` `1,751,419 )` `-` `-` `-` `68,104` `-` `(` `1,969 )` `$ 3,834,442`	d	Financial statements translation ifferences of foreign operations `$` `3,074,587` `(` `3,766 )` `3,070,821` `-` `(` `2,567,311 )` `(` `2,567,311 )` `-` `-` `-` `-` `(` `9,752 )` `-` `(` `346,726 )` `-` `-` `-` `$` `147,032` `$` `147,032` `-` `929,932` `929,932` `-` `-` `-` `-` `18,974` `(` `68,104 )` `-` `-` `$` `1,027,834`	Treasury stocks `($` `98,743 )` `-` `(` `98,743 )` `-` `-` `-` `-` `-` `-` `-` `13,944` `84,799` `-` `-` `-` `-` `$` `-` `$` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$` `-`		Total `$` `13,704,152` `-` `13,704,152` `2,064,265` `(` `2,578,465 )` `(` `514,200 )` `-` `(` `3,143,838 )` `133,326` `14,974` `133,872` `-` `-` `(` `402,072 )` `4,602` `-` `$` `9,930,816` `$` `9,930,816` `2,548,612` `917,910` `3,466,522` `-` `(` `1,751,419 )` `448,000` `685,438` `45,438` `-` `11,151` `(` `1,969 )` `$` `12,833,977`
							Legal reserve `$ 1,177,121` `-` `1,177,121` `-` `-` `-` `362,220` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$ 1,539,341` `$ 1,539,341` `-` `-` `-` `206,427` `-` `-` `-` `-` `-` `-` `-` `$ 1,745,768`		Special reserve `$ 269,144` `-` `269,144` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$ 269,144` `$ 269,144` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `$ 269,144`

The accompanying notes are an integral part of these consolidated financial statements.

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

FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation-Property, plant and equipment
Depreciation-Right-of-use assets
Amortisation
Expected credit loss
Amortisation on long-term rent prepaid
Share-based payments
Treasury share-based payments
Compensation cost of cash capital increase reserved for employee
preemption
Loss on financial assets or liabilities at fair value through profit or
loss
Share of profit of associates and joint ventures accounted for using
equity method
Interest income
Dividend income
Deferred income of government's compensation
Loss on disposal of property, plant and equipment
Finance costs
Interest expense-lease liability
Changes in operating assets and liabilities
Changes in operating assets
Financial assets mandatorily measured at fair value through profit
or loss
Notes receivable, net
Accounts receivable
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Acquisition of financial assets at fair value through profit or loss -
non-current
Changes in operating liabilities
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Other current liabilities
Decrease (increase) in net defined benefit
Cash inflow generated from operations
Interest received
Dividend income
Interest paid
Income taxes paid
Gain on valuation of disposal of financial assets at fair value
through other comprehensive income
Net cash flows from operating activities Year ended December 31
Notes
2019
2018
$
3,246,197
$
2,726,249
6(9)
206,457
197,670
6(9)(25)
73,295
-
6(11)(27)
132,426
94,691
12(2)
21,164
6,045
-
3,180
6(19)
52,158
90,298
-
26,734
-
3,993
6(2)
(
6,834 )
16,904
6(8)
(
664,557 )
(
263,926 )
6(25)
(
70,090 )
(
58,430 )
6(25)
(
73,953 )
(
72,379 )
(
724 )
(
586 )
6(26)
3,552
798
79,093
48,453
6(10)
2,226
-
6(32)
158,903
276,558
444
(
910 )
3,123,579
(
1,809,613 )
29,341
(
22,457 )
344,251
(
455,747 )
917,132
(
572,527 )
55,086
16,904
45,051
649,227
(
3,127 )
(
18,174 )
-
(
1,304 )
(
2,457,391 )
878,273
(
482,284 )
500,112
(
276,184 )
(
41,476 )
105,514
23,672
75,688
(
56,974 )
(
14,662 )
(
32,921 )
4,621,751
2,152,337
70,428
61,714
73,953
72,379
(
47,656 )
(
45,686 )
(
492,478 )
(
618,556 )
(
833 )
-
4,225,165
1,622,188

(Continued)

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

FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through other
comprehensive income
Proceeds from disposal of financial assets at fair value through
other comprehensive income
Acquisition of investments accounted for using equity method
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
Proceeds from disposal of intangible assets
Decrease (increase) in other financial assets
Decrease in guarantee deposits
Proceeds from disposal of subsidiary
Proceeds from disposal of subsidiary
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings
Increase (decrease) in other non-current liabilities
Proceeds from issuance of bonds
Repayment of principal portion of lease liabilites
Proceeds from long-term borrowings
Cash dividends paid
Employee purchase of treasury shares
Cancellation of restricted employee shares
Proceeds from issuance of shares
Net cash flows (used in) from financing activities
Effect of change in foreign currency exchange
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year Year ended December 31
Notes
2019
2018
6(3)
$
-
( $
332,429 )
6(32)
143,315
603,040
-
(
452,564 )
6(32)
(
607,310 )
(
624,079 )
94,132
5,289
6(32)
(
69,681 )
(
57,336 )
-
1,154
(
3,215 )
4,186
9,630
(
4,876 )
(
4,425 )
-
-
(
1,106,733 )
(
437,554 )
(
1,964,348 )
6(33)
(
4,269,747 )
2,582,573
7,430
(
60,208 )
-
3,015,000
6(9)
(
96,425 )
-
62,000
-
(
1,751,419 )
(
3,143,838 )
-
13,944
(
6,720 )
(
1,095 )
448,000
-
(
5,606,881 )
2,406,376
(
102,996 )
(
38,226 )
(
1,922,266 )
2,025,990
8,512,129
6,486,139
$
6,589,863
$
8,512,129

The accompanying notes are an integral part of these consolidated financial statements.

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

Attachment 7

Merry Electronics Co., Ltd.

==> picture [471 x 441] intentionally omitted <==

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

2019 Profit Distribution Table
Subject Amount (NTD)
1,231,718,186
Beginning retained earnings
1,231,718,186
Adjusted beginning retained earnings
(12,021,406)
less: 2019 retained earnings for adjustment (pension actuarial
fees)
66,133,597
add: 2019 retained earnings for adjustment-
adjustment of investments accounted for using equity method and
dispose through other comprehensive income
1,285,830,377
Adjusted and unappropriated retained earnings
2,548,611,884
add: 2019 net profit after tax (1)
(260,272,408)
less: 10% legal reserve (1)10%
0
add/less: set aside or reversed special reserve
3,574,169,854
Distributable net profit (2)
Subject for distribution
(1,608,376,434)
less: cash bonus for shareholders (2019 retained earnings)
1,965,793,419
Unappropriated retained earnings
----- End of picture text -----*

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

Attachment 8

Comparison of Amendments to the

Rules of Procedure for Shareholders Meetings

	Articles after amendment		Current Articles	Explanation
	3. Responsibilities & Authorities 3. Responsibilities & Authorities 3.1. Financial Division: The sponsoringunitthat formulates modifies or abolishes this specification. 3.2 Other units: Coordination unit for this specification.		3. Responsibilities & Authorities 3.1. Financial Division: The sponsoring department that formulates modifies or abolishes this specification. 3.2 Other units: Coordination department for this specification.	Namely unit.
	5.1.4. Matters pertaining to election or discharge of directors, alteration of the Articles of Incorporation, reduction of capital, application for the approval of ceasing its status as a public company, approval of competing with the company by directors, surplus profit distributed in the form of new shares, reserve distributed in the form of new shares, dissolution, merger, spin-off, or any matters as set forth in Paragraph I, Article 185 hereof shall be itemized in the causes or subjects to be described and the essential contents shall be explainedin the notice to convene a meeting of shareholders, and shall not be		5.1.4. Matters pertaining to election or discharge of directors, alteration of the Articles of Incorporation, the dissolution, merger, or demerger of the corporation, or any matters as set forth in Paragraph I, Article 185of the Company Act, Articles 26-1 and 43-6 of the Securities and Exchange Act, or Articles 56-1 and 60-2 of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers shall be itemized in the causes or subjects to be described in the notice to convene a meeting of shareholders, and shall not be brought up as extemporary motions.	To amend in accordance with Paragraph 5 of Article 172 of the Company Act., to clarify motions shall not be brought up as extemporary motions, the essential contents may be posted on the website designated by the competent authority in charge of securities affairs or the company, and such website shall be indicated in the above notice.

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

==> picture [441 x 684] intentionally omitted <==

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

Articles after amendment Current Articles Explanation
brought up as extemporary
motions; the essential contents
may be posted on the website
designated by the competent
authority in charge of securities
affairs or the company, and
such website shall be indicated
in the above notice.
5.1.5. 1. To add this
The convening of the article.
shareholders 'meeting has stated 2. In accordance
the full re-election of directors with Article 172 of
and the date of appointment. the Company Act.,
After the election of the to clarify the
shareholders' meeting is convening of the
completed, the same meeting shareholders
shall not change its appointment 'meeting has stated
date by temporary motion or the full re-election
other means. of directors and the
date of
appointment. After
the election of the
shareholders'
meeting is
completed, the
same meeting shall
not change its
appointment date
by temporary
motion or other
means.
5.1.6. A shareholder holding 1 5.1.5. A shareholder holding 1 1. Article
percent or more of the total percent or more of the total modification, the
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	Articles after amendment		Current Articles	Explanation	d
	number of issued shares may propose a proposal to Corporation for discussion at a regular shareholders meeting. Such proposals, however, are limited to one item only, and no proposal containing more than one item will be included in the meeting agenda.Sharehoders propose a motion is to urge the company to promote public interest or fulfill its social responsibilities. The board of directors must include the proposal.In addition, when the circumstances of any subparagraph of Article 172-1, paragraph 4 of the Company Act apply to a proposal put forward by a shareholder, the board of directors may exclude it from the agenda.		number of issued shares may submit to this Corporationa written proposalfor discussion at a regular shareholders meeting. Such proposals, however, are limited to one item only, and no proposal containing more than one item will be included in the meeting agenda. In addition, when the circumstances of any subparagraph of Article 172-1, paragraph 4 of the Company Act apply to a proposal put forward by a shareholder, the board of directors may exclude it from the agenda.	original`【`5.1.5.`】` move to`【`5.1.6.`】`. 2. To amend in accordance with Paragraph 1, Article 172-1 and revised Paragraph 5 of the Company Act., to clarify Sharehoders propose a motion is to urge the company to promote public interest or fulfill its social responsibilities. The board of directors must include the proposal.
	5.1.6. Prior to the book closure date before a regular shareholders meeting is held, this Corporation shall publicly announce that it will receive shareholder proposals, written proposal or electronic, the location and time period for their submission; the period for submission of shareholder proposals may not be less than		5.1.6. Prior to the book closure date before a regular shareholders meeting is held, this Corporation shall publicly announce that it will receive shareholder proposals, and the location and time period for their submission; the period for submission of shareholder proposals may not be less than 10 days.	1. Article modification, the original`【`5.1.6.`】` move to`【`5.1.7.`】`. 2. To amend in accordance with Paragraph 2, Article 172-1 of the Company Act., to ad the Corporation shall publicly announce

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Articles after amendment Current Articles Explanation
10 days. prior to the book
closure date before a
regular shareholders
meeting is held.
5.1.8. Shareholder-submitted 5.1.7. Shareholder-submitted 1. Article
proposals are limited to 300 proposals are limited to 300 modification, the
words, and no proposal words, and nothing containing original 【 5.1.7. 】
containing more than 300 words more than 300 words will be move to 【 5.1.8. 】 .
will be included in the meeting included in the meeting agenda. 2. To make a
agenda. The shareholder The shareholder making the textual amendment.
making the proposal shall be proposal shall be present in
present in person or by proxy at person or by proxy at the
the regular shareholders regular shareholders meeting
meeting and take part in and take part in discussion of
discussion of the proposal. the proposal.
5.1.9. Prior to the date for 5.1.8. Prior to the date for Article
issuance of notice of a issuance of notice of a modification, the
shareholders meeting, this shareholders meeting, this original 【 5.1.8. 】
Corporation shall inform the Corporation shall inform the move to 【 5.1.9. 】 .
shareholders who submitted shareholders who submitted
proposals of the proposal proposals of the proposal
screening results, and shall list screening results, and shall list
in the meeting notice the in the meeting notice the
proposals that conform to the proposals that conform to the
provisions of this article. At the provisions of this article. At the
shareholders meeting the board shareholders meeting the board
of directors shall explain the of directors shall explain the
reasons for exclusion of any reasons for exclusion of any
shareholder proposals not shareholder proposals not
included in the agenda. included in the agenda.
5.8.1. If a shareholders meeting 5.8.1. If a shareholders meeting Cooperationg with
is convened by the board of is convened by the board of the listed company
directors, the meeting agenda directors, the meeting at stock exchange
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Articles after amendment Current Articles Explanation
shall be set by the board of agenda shall be set by the and
directors. Relevant motions board of directors. The over-the-counter
(including extraordinary meeting shall proceed in the market fully
motions and amendments to the order set by the agenda, adopting electronic
original proposals) should be which may not be changed votiong from 2018,
voting by poll. The meeting without a resolution of the and implement the
shall proceed in the order set by shareholders meeting. spirit of voting
the agenda, which may not be case-by-case, to
changed without a resolution of clarify relevant
the shareholders meeting. motions (including
extraordinary
motions and
amendments to the
original proposals)
should be voting by
poll.
5.8.4. The chair shall allow 5.8.4. The chair shall allow To clarify it should
ample opportunity during the ample opportunity during the arrange adequate
meeting for explanation and meeting for explanation and voting time, in
discussion of proposals and of discussion of proposals and of order to avoid the
amendments or extraordinary amendments or extraordinary the shareholders
motions put forward by the motions put forward by the have no time to
shareholders; when the chair is shareholders; when the chair is vote and affect the
of the opinion that a proposal of the opinion that a proposal shareholders'
has been discussed sufficiently has been discussed sufficiently voting rights due to
to put it to a vote, the chair may to put it to a vote, the chair may convenors of the
announce the discussion closed announce the discussion closed shareholders
and call for a vote and arrange and call for a vote. meeting
adequate voting time. excessively
restricting the
shareholders’
voting time.
5.12.3. The meeting minutes 5.12.3. The meeting minutes To implement the
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Articles after amendment Current Articles Explanation
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Articles after amendment	Articles after amendment	Current Articles	Explanation

	shall accurately record the year, month, day, and place of the meeting, the chair's full name, the methods by which resolutions were adopted, and a summary of the deliberations and their voting results (including statistical weight), the number of votes for each candidate should be disclosed when there has a election of directors,and shall be retained for the duration of the existence of this Corporation	shall accurately record the year, month, day, and place of the meeting, the chair's full name, the methods by which resolutions were adopted, and a summary of the deliberations and their results, and shall be retained for the duration of the existence of this Corporation.	spirit of voting by poll and refer to the Asian Corporate Governance Association, clarify the content the meeting minutes shall accurately record.

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Attachment 9

Regulations Governing the Issuance of New Restricted Employee Shares of 2020

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.

Responsibilities & Authorities
3.1.Human Resources Unit: The in-charge unit for establishment/revision, drafting, implementation, revocation and application of the Regulations and relevant documents. 3.2.Other units 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 9, 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.

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 CEO under authorization by the board of directors.

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5.2.Total Issuance

The total issuance is 2,000,000 shares of common shares and par value of each share is NT$10, which constitute the total issued amount of NT$20,000,000.

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 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.

Qualification requirements of employees include the employees of parents or subsidiaries of the company meeting certain specific requirements.

The so-called controlled or subordinate company is the one that meets the interpretation No. 1070121068 of Financial Supervision Commission.

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,

(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 CEO. 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.

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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:
(1). The grade of employee equal to or lower than 8:

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:

(a). The first year: The one of operation income or operating profit growth is 5% or more from the previous year;
(b). The second year: The one of operation income or operating profit growth is 5% or more from the previous year;
(c). The third year: The one of operation income or operating profit growth is 5% or more from the previous year.
(d). The vesting conditions shall be deemed as unsatisfied when the above conditions for company performance are not satisfied.
(2). The grade of employee equal to or above than 9:

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 【 5.6.2.(1). 】 :

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(a). The first year: The one of operation income or operating profit growth is 5% or more from the previous year;
(b). The second year: The one of operation income or operating profit growth is 5% or more from the previous year;
(c). The third year: The one of operation income or operating profit growth is 5% or more from the previous year.
(d). The vesting conditions shall be deemed as unsatisfied when the above conditions for company performance are not satisfied; however, when either of the accumulated operation income or operating profit in the third year is reached. (That is in 【5.6.2. (2).(a).】 one of the operation income or operating profit in the consolidated financial statements of the previous year in 【 5.6.2.(2).(a).], assuming TWD 1 billion for example, the figures will be settled after the expiration of the three-year vesting period, more than TWD billion[1(1+5%)(1+5%)(1+5%)]=1.1576 billion or above.) Then, it is deemed to have met the vested conditions in the first to third years.
(3). 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.

5.6.3. 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). The grade of employee equal to or lower than 8:

Depending on the conditions, each year will obtain from the shares distribution in each year shall be as follows:

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

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(c). 40% of the distributed number of shares to such employee, whereas the employee has served for over three years after the distribution.
(2). The grade of employee equal to or above than 9:
Depending on the conditions, the employee has served for over three years after the distribution will obtain from the shares distribution one-time accumulated in the third year shall be as follows:
(a). Satisfied 【5.6.2.(2).(a).】, 30% of the distributed number of shares to such employee;
(b). Satisfied 【5.6.2.(2).(b).】, 30% of the distributed number of shares to such employee;
(c). Satisfied 【5.6.2.(2).(c).】, 40% of the distributed number of shares to such employee.
(d). If 【5.6.2.(2).(a).】 - 【5.6.2.(2).(c).】 are not satisfied; however, when 【5.6.2. (2).(d).】 is satisfied, it still accumulates 100% of the distributed number of shares to such employee.

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 laid off or dismissed by the Company, such employee shall be deemed as incapable of satisfying the vesting conditions starting from the date when such employee resigns. 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 are unable to continue their employment due to retirement or physical disability due to occupational injuries have not yet met the vesting conditions to restricted employee shares, his/ her shares shall be deemed to have fulfilled all the vesting conditions from the effective date of employee resignation.

5.8.3. With regard to any employee dies during his tenure with the company on the

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condition that he/she has not yet met the vesting conditions to restricted employee shares, his/her shares will be deemed to have fulfilled all the vesting conditions from the date of death of the employee.

After the facts occurrs, the legal heir will inherit the relevant rights of the relevant provisions of the Civil Law and the relevant provisions of the public offering company and must complete the statutory necessary procedures and provide relevant supporting documents, and obtain the transfer shares in accordance with the trust indenture.

5.8.4. Employee of the Company is transferred to an affiliate company
- (1). In 【5.6.1.】 the performance of employee: Based on the performance of the employee's is transferred to an affiliate company assessment.
- (2). In 【 5.6.2. 】 the performance of company: Still based on the performance conditions of the company.
- (3). In 【5.6.3.】 the seniority of employee: When any employee of the Company is transferred to an affiliate company, the seniority of employee shall be calculated into 【5.6.3.】.
5.8.5. 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 not yet vested shall be calculated by the job tenure in 【5.6.3.】 with deduction of the actual days of the leave.
5.8.6. 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 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.

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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 “HR2-102-001 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 “HR2-102-001 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

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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 shall be 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, and shall also be 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 CEO 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. HR2-102-001 Consenting Form for Receipt of the New Restricted Employee Shares.

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Appendix 1 Procedures of The Company to buy back shares transfer employees (Before Amendments)

Purpose

In order to motivate employees and enhance their motivation, the Company, in accordance with article 28-2, the first paragraph and first subparagraphs of the Securities Exchange Act, "Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies" issued by the Financial Supervisory Commission (FSC), and other relevant provisions, the Company to buy back shares transfer employees, in order to comply with.

Scope

The Company buys back shares transferred to employees, in addition to the relevant provisions of the Law, in accordance with the provisions of these Measures.

Responsibilities & Authority
3.1. General Finance Division: The sponsoring department for the formulation, modification or abolition of this code.
3.2. Human resource unit: List of transferred employees and share number planning after buying back shares.
Terms and Definitions: Nil.
Operating Procedures
5.1.Types of shares transferred, content of rights and limited rights
- 5.1.1. The shares transferred to employees shall be common stock, and their rights and obligations shall be the same as common stock outstanding, except for relevant laws and regulations and these Measures provide otherwise.
5.2.Transfer period.
- 5.2.1. The shares to be bought back shall be transferred to the employee once or in separate parts within three years from the date of the purchase of the shares.
- 5.2.2. The Company buys back shares to transfer to employees, may limit the employees may not transfer for a certain period of time, but the maximum period of not more than two years.
5.3.Eligibility requirements for transferees.
- 5.3.1. Employees who have completed one year's service before the date of the stock offering or who have made special contributions to the company and who have made special contributions to the company and who directly or indirectly

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hold more than 50 percent of the voting shares of the company or employees of subsidiaries who directly or indirectly hold voting shares, or who are eligible to subscribe in accordance with the No. 10960073134 of the Financial Supervisory Commission dated 26 December 2007. However, the person who has left or remains without pay between the base date of the employee's share offer and the subscription payment deadline shall be disqualified from the subscription.

5.4.Approval authority for transfers
5.4.1. The Company takes into account the standards of employee grade, service years and special contribution to the Company, and shall take into account the total amount of shares held by the Company on the subscription base date and the upper limit of the number of shares subscribed by a single employee, etc., and determine the number of rights for employees to be transferred to shares, and report them to the Board of Directors for approval.
5.5.Procedures for transfer of shares
5.5.1. Operating procedures for the transfer of shares back to employees:
- (1). In accordance with the resolution of the Board of Directors, announce, declare and buy back the shares of the Company within the time limit of implementation.
- (2). The Board of Directors shall, in accordance with these Measures, set and publish the operating matters such as the subscription base date, the criteria for the number of shares to be subscribed, the period of subscription payment, the content of the rights and the restrictions, etc.
- (3). The number of actual subscription payment shares and register the transfer of shares will b calculated.
5.6.Agreed transfer price per share.
5.6.1. The transfer of shares to employees shall be the transfer price at the average price of the actual buyback, but before the transfer, if the shares of common shares issued by the company are increased or decreased, they may be adjusted within the range of the increase or decrease ratio of the shares issued. Or in accordance with the provisions of the Articles of Association of the Company, the transfer to employees at an average price lower than the actual purchase, shall, prior to the transfer, be attended by the last shareholder signed by more than half of the shareholders' total number of shares outstanding, attend the consent of more than two-thirds of the shareholders' voting rights, and shall list in the convening of the

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shareholders' meeting to list the matters specified in Article 10 of the "Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies". Adjusted Transfer Price=Pre-Adjusted Transfer Price * (Number of common shares outstanding before reduction / Number of common shares outstanding after reduction)
5.7.Rights and obligations subsequent to execution of the transfer. 5.7.1. After the transfer of shares to employees and the registration of transfers, the residual rights and obligations shall be the same as those of the original shares, unless otherwise specified.
5.8.Confidentiality agreement
5.8.1. The transferee shall abide by the confidentiality provisions, shall not inquire into others or disclose relevant information, and in the event of a violation, the Company may revoke its subscription eligibility for the amount of its outstanding contributions.
5.9.Matters not provided for in these Measures shall be handled in accordance with the provisions of the Company Act, other relevant laws and regulations and the Articles of Association of the Company.
5.10.These Procedures and Amendments shall enter into force after adoption by the resolution of the Board of Directors.
5.11.These Procedures and Amendments shall be submitted to the shareholders' meeting.

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Appendix 2 Rules of Procedure for Shareholders Meetings (Before Amendments)

Purpose

To establish a strong governance system and sound supervisory capabilities for this Corporation's shareholders meetings, and to strengthen management capabilities, these Rules are adopted pursuant to Article 5 of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies.

Scope

The rules of procedures for this Corporation's shareholders meetings, except as otherwise provided by law, regulation, or the articles of incorporation, shall be as provided in these Rules.

Responsibilities & Authorities
3.1. General Finance Division: The sponsoring department that formulates modifies or abolishes this specification.
3.2. Other units: Coordination department for this specification.
Terms and Definitions: Nil.
Operational Procedures:
5.1. Convening shareholders meetings and shareholders meeting notices
- 5.1.1. Unless otherwise provided by law or regulation, this Corporation's shareholders meetings shall be convened by the board of directors.

5.1.2. This Corporation shall prepare electronic versions of the shareholders meeting notice and proxy forms, and the origins of and explanatory materials relating to all proposals, including proposals for ratification, matters for deliberation, or the election or dismissal of directors or supervisors, and upload them to the Market Observation Post System (MOPS) before 30 days before the date of a regular shareholders meeting or before 15 days before the date of a special shareholders meeting. This Corporation shall prepare electronic versions of the shareholders meeting agenda and supplemental meeting materials and upload them to the MOPS before 21 days before the date of the regular shareholders meeting or before 15 days before the date of the special shareholders meeting. In addition, before 15 days before the date of the shareholders meeting, this Corporation shall also have prepared the shareholders meeting agenda and supplemental meeting materials and made them available for review by shareholders at any time. The meeting agenda and supplemental materials shall

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also be displayed at this Corporation and the professional shareholder services agent designated thereby as well as being distributed on-site at the meeting place.

5.1.3. The reasons for convening a shareholders meeting shall be specified in the meeting notice and public announcement. With the consent of the addressee, the meeting notice may be given in electronic form.

5.1.4. Election or dismissal of directors or supervisors, amendments to the articles of incorporation, the dissolution, merger, or demerger of the corporation, or any matter under Article 185, paragraph 1 of the Company Act, Articles 26-1 and 43-6 of the Securities and Exchange Act, or Articles 56-1 and 60-2 of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers shall be set out in the notice of the reasons for convening the shareholders meeting. None of the above matters may be raised by an extraordinary motion.

5.1.5. A shareholder holding 1 percent or more of the total number of issued shares may submit to this Corporation a written proposal for discussion at a regular shareholders meeting. Such proposals, however, are limited to one item only, and nothing containing more than one item will be included in the meeting agenda. In addition, when the circumstances of any subparagraph of Article 172-1, paragraph 4 of the Company Act apply to a proposal put forward by a shareholder, the board of directors may exclude it from the agenda.

5.1.6. Prior to the book closure date before a regular shareholders meeting is held, this Corporation shall publicly announce that it will receive shareholder proposals, and the location and time period for their submission; the period for submission of shareholder proposals may not be less than 10 days.

5.1.7. Shareholder-submitted proposals are limited to 300 words, and no proposal containing more than 300 words will be included in the meeting agenda. The shareholder making the proposal shall be present in person or by proxy at the regular shareholders meeting and take part in discussion of the proposal.

5.1.8. Prior to the date for issuance of notice of a shareholders meeting, this Corporation shall inform the shareholders who submitted proposals of the proposal screening results, and shall list in the meeting notice the proposals that conform to the provisions of this article. At the shareholders meeting the board of directors shall explain the reasons for exclusion of any shareholder proposals not included in the agenda.

5.2. Principles determining the proxy's authorization to attend the meeting.

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5.2.1. For each shareholders meeting, a shareholder may appoint a proxy to attend the meeting by providing the proxy form issued by this Corporation and stating the scope of the proxy's authorization.

5.2.2. A shareholder may issue only one proxy form and appoint only one proxy for any given shareholders meeting, and shall deliver the proxy form to this Corporation before 5 days before the date of the shareholders meeting. When duplicate proxy forms are delivered, the one received earliest shall prevail unless a declaration is made to cancel the previous proxy appointment.

5.2.3. After a proxy form has been delivered to this Corporation, if the shareholder intends to attend the meeting in person or to exercise voting rights by correspondence or electronically, a written notice of proxy cancellation shall be submitted to this Corporation before 2 business days before the meeting date. If the cancellation notice is submitted after that time, votes cast at the meeting by the proxy shall prevail.

5.3. Principles determining the time and place of a shareholders meeting

The venue for a shareholders meeting shall be the premises of this Corporation, or a place easily accessible to shareholders and suitable for a shareholders meeting. The meeting may begin no earlier than 9 a.m. and no later than 3 p.m. Full consideration shall be given to the opinions of the independent directors with respect to the place and time of the meeting.

5.4. Preparation of documents such as the attendance book

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

5.4.2. In 【5.4.1.】 the time during which shareholder attendance registrations will be accepted, as stated in the preceding paragraph, shall be at least 30 minutes prior to the time the meeting commences. The place at which attendance registrations are accepted shall be clearly marked and a sufficient number of suitable personnel assigned to handle the registrations.

5.4.3. Shareholders and their proxies (collectively, "shareholders") shall attend shareholders meetings based on attendance cards, sign-in cards, or other certificates of attendance. This Corporation may not arbitrarily add requirements for other documents beyond those showing eligibility to attend presented by shareholders. Solicitors soliciting proxy forms shall also bring identification

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

documents for verification.

5.4.4. This Corporation shall furnish the attending shareholders with an attendance book to sign, or attending shareholders may hand in a sign-in card in lieu of signing in. This Corporation shall furnish attending shareholders with the meeting agenda book, annual report, attendance card, speaker's slips, voting slips, and other meeting materials. Where there is an election of directors, pre-printed ballots shall also be furnished.

5.4.5. When the government or a juristic person is a shareholder, it may be represented by more than one representative at a shareholders meeting. When a juristic person is appointed to attend as proxy, it may designate only one person to represent it in the meeting.

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

5.5.2. In 【5.5.1.】 when a managing director or a director serves as chair, as referred to in the preceding paragraph, the managing director or director shall be one who has held that position for six months or more and who understands the financial and business conditions of the company. The same shall be true for a representative of a juristic person director that serves as chair.

5.5.3. It is advisable that shareholders meetings convened by the board of directors be chaired by the chairperson of the board in person and attended by a majority of the directors, at least one independent directorr in person, and at least one member of each functional committee on behalf of the committee. The attendance shall be recorded in the meeting minutess.

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

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

When there are two or more such convening parties, they shall mutually select a chair from among themselves.

5.5.5. This Corporation may appoint its attorneys, certified public accountants, or related persons retained by it to attend a shareholders meeting in a non-voting capacity.

5.6. Documentation of a shareholders meeting by audio or video
5.6.1. This Corporation, beginning from the time it accepts shareholder attendance registrations, shall make an uninterrupted audio and video recording of the registration procedure, the proceedings of the shareholders meeting, and the voting and vote counting procedures.
5.6.2. In 【5.6.1.】 the recorded materials of the preceding paragraph shall be retained for at least 1 year. If, however, a shareholder files a lawsuit pursuant to Article 189 of the Company Act, the recording shall be retained until the conclusion of the litigation.
5.7. Total numbers of attendance shares and Call the meeting
5.7.1. Attendance at shareholders meetings shall be calculated based on numbers of shares. The number of shares in attendance shall be calculated according to the shares indicated by the attendance book and sign-in cards handed in plus the number of shares whose voting rights are exercised by correspondence or electronically.

5.7.2. The chair shall call the meeting to order at the appointed meeting time. However, when the attending shareholders do not represent a majority of the total number of issued shares, the chair may announce a postponement, provided that no more than two such postponements, for a combined total of no more than 1 hour, may be made. If the quorum is not met after two postponements and the attending shareholders still represent less than one third of the total number of issued shares, the chair shall declare the meeting adjourned.

5.7.3. In 【5.7.2.】 if the quorum is not met after two postponements as referred to in the preceding paragraph, but the attending shareholders represent one third or more of the total number of issued shares, a tentative resolution may be adopted pursuant to Article 175, paragraph 1 of the Company Act; all shareholders shall be notified of the tentative resolution and another shareholders meeting shall be convened within 1 month.

5.7.4. When, prior to conclusion of the meeting, the attending shareholders

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

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

5.8. Discussion of proposals
5.8.1. If a shareholders meeting is convened by the board of directors, the meeting agenda shall be set by the board of directors. The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders meeting.
5.8.2. The provisions of the preceding paragraph apply mutatis mutandis to a shareholders meeting convened by a party with the power to convene that is not the board of directors.

5.8.3. In 【5.8.1.】 and 【5.8.2.】 the chair may not declare the meeting adjourned prior to completion of deliberation on the meeting agenda of the preceding two paragraphs (including extraordinary motions), except by a resolution of the shareholders meeting. If the chair declares the meeting adjourned in violation of the rules of procedure, the other members of the board of directors shall promptly assist the attending shareholders in electing a new chair in accordance with statutory procedures, by agreement of a majority of the votes represented by the attending shareholders, and then continue the meeting.

5.8.4. The chair shall allow ample opportunity during the meeting for explanation and discussion of proposals and of amendments or extraordinary motions put forward by the shareholders; when the chair is of the opinion that a proposal has been discussed sufficiently to put it to a vote, the chair may announce the discussion closed and call for a vote.

5.9. Shareholder speech

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

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

5.9.3. Except with the consent of the chair, a shareholder may not speak more than

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

twice on the same proposal, and a single speech may not exceed 5 minutes. If the shareholder's speech violates the rules or exceeds the scope of the agenda item, the chair may terminate the speech.

5.9.4. When an attending shareholder is speaking, other shareholders may not speak or interrupt unless they have sought and obtained the consent of the chair and the shareholder that has the floor; the chair shall stop any violation.
5.9.5. When a juristic person shareholder appoints two or more representatives to attend a shareholders meeting, only one of the representaties so appointed may speak on the same proposal.

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

5.10. Calculation of voting shares and recusal system
5.10.1. Voting at a shareholders meeting shall be calculated based the number of shares.

5.10.2. With respect to resolutions of shareholders meetings, the number of shares held by a shareholder with no voting rights shall not be calculated as part of the total number of issued shares.

5.10.3. When a shareholder is an interested party in relation to an agenda item, and there is the likelihood that such a relationship would prejudice the interests of this Corporation, that shareholder may not vote on that item, and may not exercise voting rights as proxy for any other shareholder.

5.10.4. In 【5.10.3.】 the number of shares for which voting rights may not be exercised under the preceding paragraph shall not be calculated as part of the voting rights represented by attending shareholders.

5.10.5. With the exception of a trust enterprise or a shareholder services agent approved by the competent securities authority, when one person is concurrently appointed as proxy by two or more shareholders, the voting rights represented by that proxy may not exceed 3 percent of the voting rights represented by the total number of issued shares. If that percentage is exceeded, the voting rights in excess of that percentage shall not be included in the calculation.

5.10.6. A shareholder shall be entitled to one vote for each share held, except when the shares are restricted shares or are deemed non-voting shares under Article 179, paragraph 2 of the Company Act.

5.10.7. When this Corporation holds a shareholders meeting, it may allow the

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

shareholders to exercise voting rights by correspondence or electronic means (in accordance with the provision of Article 177-1 of the Company Act regarding companies that shall adopt electronic voting: When this Corporation holds a shareholder meeting, it shall adopt exercise of voting rights by electronic means and may adopt exercise of voting rights by correspondence). When voting rights are exercised by correspondence or electronic means, the method of exercise shall be specified in the shareholders meeting notice. A shareholder exercising voting rights by correspondence or electronic means will be deemed to have attended the meeting in person, but to have waived his/her rights with respect to the extraordinary motions and amendments to original proposals of that meeting; it is therefore advisable that this Corporation avoid the submission of extraordinary motions and amendments to original proposals.

5.10.8.In 【 5.10.7. 】 a shareholder intending to exercise voting rights by correspondence or electronic means under the preceding paragraph shall deliver a written declaration of intent to this Corporation before 2 days before the date of the shareholders meeting. When duplicate declarations of intent are delivered, the one received earliest shall prevail, except when a declaration is made to cancel the earlier declaration of intent.

5.10.9. After a shareholder has exercised voting rights by correspondence or electronic means, in the event the shareholder intends to attend the shareholders meeting in person, a written declaration of intent to retract the voting rights already exercised under the preceding paragraph shall be made known to this Corporation, by the same means by which the voting rights were exercised, before 2 business days before the date of the shareholders meeting. If the notice of retraction is submitted after that time, the voting rights already exercised by correspondence or electronic means shall prevail. When a shareholder has exercised voting rights both by correspondence or electronic means and by appointing a proxy to attend a shareholders meeting, the voting rights exercised by the proxy in the meeting shall prevail.

5.10.10. Except as otherwise provided in the Company Act and in this Corporation's articles of incorporation, the passage of a proposal shall require an affirmative vote of a majority of the voting rights represented by the attending shareholders. At the time of a vote, for each proposal, the chair or a person designated by the chair shall first announce the total number of voting rights

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

represented by the attending shareholders, followed by a poll of the shareholders. After the conclusion of the meeting, on the same day it is held, the results for each proposal, based on the numbers of votes for and against and the number of abstentions, shall be entered into the MOPS.

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

5.10.12. Vote monitoring and counting personnel for the voting on a proposal shall be appointed by the chair, provided that all monitoring personnel shall be shareholders of this Corporation.

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

5.11. Elections

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

5.11.2. The ballots for the election referred to in the preceding paragraph shall be sealed with the signatures of the monitoring personnel and kept in proper custody for at least 1 year. If, however, a shareholder files a lawsuit pursuant to Article 189 of the Company Act, the ballots shall be retained until the conclusion of the litigation.

5.12. The meeting minutes

5.12.1. Matters relating to the resolutions of a shareholders meeting shall be recorded in the meeting minutes. The meeting minutes shall be signed or sealed by the chair of the meeting and a copy distributed to each shareholder within 20 days after the conclusion of the meeting. The meeting minutes may be produced and distributed in electronic form.

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

5.12.2. In 【5.12.1.】 this Corporation may distribute the meeting minutes of the preceding paragraph by means of a public announcement made through the MOPS.

5.12.3. The meeting minutes shall accurately record the year, month, day, place of the meeting, the chair's full name, the methods by which resolutions were adopted and a summary of the deliberations and their results, and shall be retained for the duration of the existence of this Corporation.

5.13. Public disclosure

5.13.1. On the day of a shareholders meeting, this Corporation shall compile in the prescribed format a statistical statement of the number of shares obtained by solicitors through solicitation and the number of shares represented by proxies, and shall make an express disclosure of the same at the place of the shareholders meeting.

5.13.2. If matters put to a resolution at a shareholders meeting constitute material information under applicable laws or regulations or under Taiwan Stock Exchange Corporation regulations, this Corporation shall upload the content of such resolution to the MOPS within the prescribed time period.

5.14. Maintaining order at the meeting place
5.14.1. Staff handling administrative affairs of a shareholders meeting shall wear identification cards or arm bands.
5.14.2. The chair may direct the proctors or security personnel to help maintain order at the meeting place. When proctors or security personnel help maintain order at the meeting place, they shall wear an identification card or armband bearing the word "Proctor."
5.14.3. At the place of a shareholders meeting, if a shareholder attempts to speak through any device other than the public address equipment set up by this Corporation, the chair may prevent the shareholder from so doing.
5.14.4. When a shareholder violates the rules of procedure and defies the chair's correction, obstructing the proceedings and refusing to heed calls to stop, the chair may direct the proctors or security personnel to escort the shareholder from the meeting.
5.15. Recess and resumption of a shareholders meeting
5.15.1. When a meeting is in progress, the chair may announce a break based on time considerations. If a force majeure event occurs, the chair may rule the

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

meeting temporarily suspended and announce a time when, in view of the circumstances, the meeting will be resumed.

5.15.2. When a meeting is in progress, the chair may announce a break based on time considerations. If a force majeure event occurs, the chair may rule the meeting temporarily suspended and announce a time when, in view of the circumstances, the meeting will be resumed.

5.15.3. A resolution may be adopted at a shareholders meeting to defer or resume the meeting within 5 days in accordance with Article 182 of the Company Act.

5.16. Other Matters

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

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

5.16.3. These Rules, any amendments hereto, shall be implemented after adoption by shareholders' meetings.

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

Appendix 3 Articles of Incorporation

CHAPTER I GENERAL PROVISIONS

Article 1:

This Company is duly organized under the Company Act, bearing the name of Merry Electronics Co., Ltd.

The company's English name is Merry Electronics Co., Ltd.

Article 2: The business scopes of the Company are as follows:
A. CC01030 Electric Appliance and Audiovisual Electric Products Manufacturing;
B. CC01070 Telecommunication Equipment and Apparatus Manufacturing;
C. CC01080 Electronic Parts and Components Manufacturing;
D. CC01110 Computers and Computing Peripheral Equipment Manufacturing;
E. CC01101 Restrained Telecom Radio Frequency Equipment and Materials Manufacturing;
F. CF01011 Medical Materials and Equipment Manufacturing;
G. F108031Wholesale of Drugs, Medical Goods;
H. F401021 Restrained Telecom Radio Frequency Equipment and Materials Import;
I. I103060 Management Consulting Services;
J. ZZ99999 All business items that are not prohibited or restricted by law, except those that are subject to special approval.

Article 3:

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

The Company shall not be a shareholder of unlimited liability in another company or the partner of a partnership. When the Company becomes a shareholder of limited liability in other companies, the total amount of its investments may exceed forty percent of the amount of paid-up capital of the Company.

Article 4:

The Headquarter of the Company is located in the Taichung City. If necessary, with the resolution of the Board of Directors, the Company may establish branch offices or representative offices onshore or offshore in accordance with laws.

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

CHAPTER II SHARES

Article 5:

The total amount of capital of the Company is NTD 4,000,000,000, divided into 400,000,000 shares (in which the number of shares for employee stock options is 5,000,000 shares), with a par value of NTD 10 per share, to be issued in installments, and the relevant matters of issuance shall be stipulated by the Board of Directors.

The treasury shares purchase by the Company in accordance with the Company Act may be transferred to the employees of parents or subsidiaries of the Company who meet certain specific requirements set by the Board of Directors.

The share subscription warrant may be transferred to the employees of parents or subsidiaries of the company who meet certain specific requirements set by the Board of Directors.

The new shares issued by the company may be transferred to the employees of parents or subsidiaries of the company who meet certain specific requirements set by the Board of Directors.

The new restricted employee shares may be transferred to the employees of parents or subsidiaries of the company who meet certain specific requirements set by the Board of Directors.

Article 6:

The Company's share services shall be handled in accordance with the “Regulations Governing the Administration of Shareholder Services of Public Companies” and the relevant laws and regulations.

Article 7:

The registration of share transfer shall not be altered within 60 days prior to the convening date of a regular shareholders' meeting, or within 30 days prior to the convening date of a special shareholders' meeting, or within 5 days prior to the target date fixed by the Company for distribution of dividends, bonus or other benefits.

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

CHAPTER III SHAREHOLDERS' MEETING Article 8: A shareholders' meeting can be divided into two types:

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

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

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

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

Article 10: Resolutions at a shareholders' meeting shall, unless otherwise provided for in the Company Act, be adopted by a majority vote of the shares represented by the attending shareholders, who represent more than one-half of the total number of voting shares.

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

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

CHAPTER IV DIRECTORS

Article 12:

This Company shall have seven 7 to ten 10 directors, and the Board of Directors is

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

authorized to determine the number of Directors. The term of their office is three (3) years and they are eligible for re-election. The company adopts the candidate’s nomination system stipulated by Article 192-1 of the Company Act as election of the directors of the company and the shareholders shall elect the directors among the nominees listed in the roster for director candidates. The amount of total shares owned by the directors will be handled in accordance with the "Rules and Review Procedures for Director and Supervisor Share Ownership Ratios of Public Companies" issued by the competent authority.

When the numbers of vacancies in the Board of Directors shall be elected in accordance with laws, the Board of Directors shall call a shareholders' meeting to elect succeeding directors to fill the vacancies, and the term shall be limited to fulfilling the remaining term of office of the predecessors. If the term of office of the directors expires and the new election cannot be held in time, their term will be extended until the new directors are elected and have assumed the office.

Article 13: Amongst the directors of the Company, at least 3 independent directors shall be elected by the shareholders’ meeting from the independent directors’ andidates list, and the candidate nomination system shall be adopted. The professional qualification, shareholding, restriction on theconcurrent post, the means if nomination and electionof independent directorsand other matters to be compiled with, shall all ve in accordance with the relevant rules of the competent authority of securities. Article 14:

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

Article 15:

Directors shall exercise their powers and duties in accordance with the resolutions adopted by the Board of Directors and the shareholders' meeting.

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

Article 16:

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

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

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

The meeting of the Board of Directors may be proceeding by video conference. The directors participating by video conference shall be deemed to have attended the meeting in person.

Article 17:

The Company establish audit committee, which is composed of all the independent directors in accordance with Article 14-4 of the Securities and Exchange Act. The exercise of power and related matters by audit committee and independent directors shall complywith the Company Act, the Securities and Exchange Act, and relevant laws and regulations prescribed by the competent authority.

Article 18:

The directors may receive transportation allowance and related business implementation costs, the amount of which is decided by the resolution at the meetings of the Board of Directors.

The Board of Directors is authorized to determine the remuneration of directors based on the level of participation and the value of devotion to the operation of the Company, with reference to the standard of other entities in the same industry.

Article 19:

The Company may purchase liability insurance for the directors within the scope of the business he/she conducts during his/her term and in addition thereto a report of insurance contents and relative details shall be submitted to the Board of the Directors.

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

CHAPTER V MANAGER

Article 20:

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

The managers shall be empowered to manage the operation of the company and to sign relevant business documents for the company, subject to the scope of his/her duties and power, and the relevant authorization measures shall be set by the Board of Directors.

CHAPTER VI ACCOUNTING

Article 21:

The fiscal year of the Company is annually from 1 January until 31 December. The Company shall act in accordance with Article 228 of the Company Act, upon close of each fiscal year, the following reports and statements by the Board of Directors and the following reports and statements shall be given to the audit committee for auditing no later than 30 days prior to the date of the annual meeting of shareholders, and the audit committee shall submit the report to the annual meeting of shareholders for ratification: A. The business report;

B. The financial statements;

C. The proposed of the earnings distribution or loss make-up.

Article 22:

The industrial environment of the Company is apt to change, and the enterprise life cycle stays in a stage of stable growth, and it is necessary to consider the budget for the future capital expenditure and funding requirement, and measure the necessity to cope with funding requirement by earnings, to determine the amount for retaining or distributing the earnings and the distribution amount of shareholder bonus in cash. The net profit after final accounting, except for withholding of income tax in accordance with laws, shall be utilized for make-up of the loss of previous years, and secondly setting aside 10% of the remaining earnings as a legal reserve; however, when the legal reserve has reached paid in capital of the Company, it will not be listed. After setting aside or reversing special reserve in accordance with laws when necessary, the balance after adding the undistributed earnings of the previous year will be the accumulated distributable earnings. The Board of Directors shall propose an earning distribution proposal for the shareholders’ meeting to resolve the distribution. For the earning distribution proposal proposed by the Board of Directors, the total amount of shareholders’ bonus shall be 30% to 80% of the

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

accumulated distributable earning, and the cash bonus shall account for 5% or more of the shareholder bonus. It is authorized that the distributable dividends and bonuses in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

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

Decision on the ratio of employees’ profit sharing bonus and directors’ compensation and which the employees' profit sharing bonus will be distributed in the form of stocks or in cash, shall be resolved by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds or more of the total number of directors; and in addition thereto a report shall be submitted to the shareholders' meeting.

Employees’ profit sharing bonus may be distributed to the employees of parents or subsidiaries of the company who meet certain specific requirements set by the Board of Directors.

CHAPTER VII ANCILLARY PROVISIONS

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

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

Article 25: These Articles of Incorporation were promulgated on December 13, 1975. The 1st amendment was made on October 25, 1977. The 2nd amendment was on October 12, 1981. The 3rd amendment was on December 30, 1981. The 4th amendment was on December 15, 1984. The 5th amendment was on December 9, 1985. The 6th amendment was on December 20, 1985. The 7th amendment was on September 15, 1987. The 8th amendment was on December 10, 1988. The 9th amendment was on November 15, 1989. The 10th amendment was on May 10, 1990. The 11th amendment was on June 25, 1990. The 12th amendment was on December 15, 1990. The 13th amendment was on January 23, 1991. The 14th amendment was on March 1, 1991. The 15th amendment was on April 2, 1991. The 16th amendment was on July 12, 1991. The 17th amendment was on June 10,

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

The 18th amendment was on July 26, 1996. The 19th amendment was on May 31, 1997. The 20th amendment was on March 25, 1998. The 21st amendment was on May 18, 1999. The 22nd amendment was on May 16, 2000. The 23rd amendment was on May 3, 2001. The 24th amendment was on August 28, 2001. The 25th amendment was on May 27, 2002. The 26th amendment was on May 20, 2004. The 27th amendment was on May 19, 2005. The 28th amendment was on October 18, 2005. The 29th amendment was on June 16, 2006. The 30th amendment was on June 13, 2007. The 31st amendment was on June 13, 2008. The 32nd amendment was on June 16, 2009. The 33rd amendment was on 14 June 2010. The 34th amendment was on June 22, 2012. The 35th amendment was on June 11, 2014. The 36th amendment was on June 12, 2015. The 37th amendment was made on January 22, 2016. The 38th amendment was made on June 29, 2016. The 39th amendment was made on June 13, 2018. The 40th amendment was made on June 19, 2019.

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

Appendix 4 Merry Electronics Co., Ltd.

Shareholding Status of Directors

The paid-in capital of the Company is NT$ 2,086,222,470 on 21 April 2020. The issued and outstanding shares are 208,622,247 shares.
According to Article 26 of Securities and Exchange Act, the minimum shareholding of all of the directors is 12,000,000 shares and the minimum shareholding of all of the supervisors is 1, 200,000 shares.
As of the book closure date of this annual shareholders' meeting, the shareholding of all of directors in the shareholders book, which complies with the requirement under Article 26 of Securities and Exchange Act, are as follows:

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Title Name Shareholdings in the
shareholders book as of 21 Note
April, 2020 (share)
Chairperson LIAO, LU-LEE 3,411,243 (Note)
Director WEI, WEN-CHIEH 9,318,523
Director LIN, SHU-CHUN 247,272
Director LIN, SHIH-CHIEH 338,476
Director HUANG, CHAO-LI 45,690
Director TONG-CIAN Investment
Corporation
5,112,179
Representative:
Liao, Keng-Pin
Independent Director KO, JIUNN-HUEI 0
Independent Director WU,
0
HUEI-HUANG
Independent Director SHER,
0
JIH-HSIN
Total shares of all directors 18,473,383
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Note: The shareholding includes the entrusted shares with reservation of decision discretionary.

The name, shareholding and discharged reason of the discharged director as of 21 April 2020: Nil.

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

Appendix 5 Dividend Policy

The industrial environment of the Company is apt to change, and the enterprise life cycle stays in a stage of stable growth, and it is necessary to consider the budget for the future capital expenditure and funding requirement, and measure the necessity to cope with funding requirement by earnings, to determine the amount for retaining or distributing the earnings and the distribution amount of shareholder bonus in cash..
The net profit after final accounting, except for withholding of income tax in accordance with laws, shall be utilized for make-up of the loss of previous years, and secondly setting aside 10% of the remaining earnings as a legal reserve; however, when the legal reserve has reached paid in capital of the Company, it will not be listed. After setting aside or reversing special reserve in accordance with laws when necessary, the balance after adding the undistributed earnings of the previous year will be the accumulated distributable earnings. The Board of Directors shall propose an earning distribution proposal for the shareholders’ meeting to resolve the distribution. For the earning distribution proposal proposed by the Board of Directors, the total amount of shareholders’ bonus shall be 30% to 80% of the accumulated distributable earning, and the cash bonus shall account for 5% or more of the shareholder bonus. To authorize the distributable dividends and bonuses in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.
If the Company makes profits in the said year, it shall set aside: A. 5% to 10% as employees’ profit sharing bonus; B. up to 2% as compensation of directors, provided that if the Company has accumulated losses, the amount to make up the accumulated losses shall be reserved in advance.

Employees’ profit sharing bonus may be distributed to the employees of parents or subsidiaries of the company who meet certain specific requirements set by the Board of Directors.

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

Appendix 6

The impact of the share dividend proposed in this annual shareholders' meeting on the operational performance of the Company and the earnings per share :

There is no share dividend this year and thus it is not applicable.

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

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

According to Article 172-1 of the Company Act, any shareholder holding one percent or more of the total number of outstanding shares may propose to the Company a written proposal for discussion at an annual shareholders' meeting, provided that only one agenda shall be allowed, and such proposal shall be elaborated by 300 words or less.
The period for collecting proposals from shareholders for this annual shareholders' meeting is from April 13 to April 22 in 2020 and announcement was made at the Market Observation Post System in accordance with the relevant laws and regulations.
The Company had not received any proposal from shareholders.

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MERRY — AGM Information 2020

52085_rns_2020-07-07_159fea34-0290-4c17-9247-dba50416bdd0.pdf

Annual Shareholders’ Meeting Meeting Agenda (Translation)

Note

Table of Contents

I. Meeting Procedure

Merry Electronics Co., Ltd.

Meeting Procedure for the 2020 Annual Shareholders' Meeting

II. Meeting Agenda

Merry Electronics Co., Ltd.

Meeting Agenda of the 2020 Annual Shareholders' Meeting

Matters for Report

Matters for Approval

Matters for Discussion

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

Extemporary motions

Meeting adjourned

Attachment 1

Merry Electronics Co., Ltd.

2019 Business Report

II. General Condition of Implementation

Attachment 2

Merry Electronics Co., Ltd.

The Audit Committee's Review Report

Attachment 3

Comparison of Amendments to the

Procedures of The Company to buy back shares transfer employee

Attachment 4

Comparison of Amendments to the

Ethical Corporate Management Best Practice Principles

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

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

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

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

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

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

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

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

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

Attachment 5

Comparison of Amendments to the

Codes of Ethical Conduct

Attachment 6

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

Opinion

Basis for opinion

Key audit matters

Description

Investments accounted for using equity method - valuation of inventories

Description

Responsibilities of management and those charged with governance for the parent company only financial statements

Independent accountant's responsibilities for the audit of the parent company only financial statements

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Opinion

Basis for opinion

Key audit matters

The key audit matters in relation to the consolidated financial statements for the year ended December 31, 2019 are outlined as follows: Cut-off on sales revenue from distribution warehouses

Description

How our audit addressed the matter

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

Valuation of inventories

Description

How our audit addressed the matter

Other matter - parent company only financial reports

Responsibilities of management and those charged with governance for the consolidated financial statements

Auditor’s responsibilities for the audit of the consolidated financial statements

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

MERRY AGM Information 2020