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MERRY AGM Information 2021

Aug 9, 2021

52085_rns_2021-08-09_5fdd7594-c0eb-41ae-8249-a4537832f770.pdf

AGM Information

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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)

2021 Annual Shareholders’ Meeting Minutes

(Translation)

Time: 9:00 a.m., July 21, 2021 (Wednesday) Venue: Merry Electronics Co., Ltd.’s headquarters (No. 22, 23rd Road, Taichung Industrial Park, Nantun Dist., Taichung City, Taiwan) Total outstanding shares of Merry Electronics Company Limited: 209,333,242 Total amount of voting shares: 209,277,642 Total shares represented by Shareholders present in person or by proxy 127,827,970

Percentage of shares held by shareholders present in person or by proxy (excluding 27,900 new restricted employee shares repurchaed) 61.08% Present directors: LIAO, LU-LEE, WEI, WEN-CHIEH, HUANG, CHAO-LI, LIN, SHIH-CHIEH (video conference) TONG-CIAN Investment

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Corporation Representative: Liao, Keng-Pin (video conference)

Present independent directors: WU, HUEI-HUANG (video conference) SHER, JIH-HSIN (video conference) Chairperson: LIAO, LU-LEE

Recorder: HUNG, WAN-TING

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

I. Chairperson’s Remark (omitted)

II. Matters for Report

  1. The Company’s 2020 Business Report, please take note.

(Proposed by the board of directors)

Explanation: For the business report, please refer to Attachment 1. (Noted)

  1. Audit Committee’s review report on the 2020 Financial Statements. Please take note.

(Proposed by the board of directors)

Explanation: For the Audit Committee’s audit report on the financial statements of 2020, please refer to Attachment 2.

(Noted)

  1. Employees’ profit sharing bonus and directors’ compensation of 2020, please take note.

(Proposed by the board of directors)

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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)

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 of the Company’s profit (if any) in the fiscal year.

  • (2) With respect to 2020 employee’s profit sharing bonus and directors’ compensation, the board of directors dated 25 February 2021 has resolved that the Company distribute 6.5% (NT$ 110,825,654 in total) as employees’ profit sharing bonus and 1.5% (NT$ 25,575,151 in total) as directors’ compensation. Both employee’s profit sharing bonus and directors’ compensations will be paid in cash. The above resolved amounts have no difference from the amounts listed in the estimated recognized costs of 2020.

(Noted)

  1. To report 2020 earnings in cash distribution, please take note.

  2. (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 2020, in addition to the legal reserve provided in accordance with the Articles of Incorporation of the Company, cash dividends NT$1,068,244,317 in total will be distributed to shareholders. Namely, each common shareholder will be entitled to receive a cash dividend of NT$5.1633 per share. The profit of 2020 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

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  • 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.

(Noted)

  1. 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 ''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.

(Noted)

  1. To report the amendment of the '' Corporate Social Responsibility Best Practice Principles '', please take note.

(Proposed by the board of directors)

Explanation:

  • (1) The Principles are amended in accordance with the “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM

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Listed Companies” announced by Taiwan Stock Exchange on 13 February 2020.

  • (2) Please refer to Attachment 3.

(Noted)

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III. Matters for Approval

  1. Proposal ： To adopt 2020 Business Report, individual financial statements and consolidated financial statements, please approve.

  2. (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 2020, 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 for the aforementioned business report, and please refer to Attachment 4 for the individual and consolidated financial statements and records.

Voting Results:

127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 120,119,224 votes were in favor of the proposal (including votes casted electronically: 45,332,255), representing 93.96% of the total represented shares present; 37,504 votes were cast against the proposal (including votes casted electronically: 37,504); 0 vote was invalid; 7,671,242 votes were either invalidly cast or abstained (including votes casted electronically: 7,671,242).

Approved , that the above proposal be and hereby was approved as proposed.

  1. Proposal ： To adopt the proposal for distribution of 2020 earnings, please approve.

(Proposed by the board of directors)

Explanation:

The profit distribution is to distribute distributable net profit of 2020, and please refer to Attachment 5 for the profit distribution table of 2020. Voting Results:

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127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 120,149,208 votes were in favor of the proposal (including votes casted electronically: 45,362,239), representing 93.99% of the total represented shares present; 69,721 votes were cast against the proposal (including votes casted electronically: 69,721); 0 vote was invalid; 7,609,041 votes were either invalidly cast or abstained (including votes casted electronically: 7,609,041). Approved , that the above proposal be and hereby was approved as proposed.

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IV. Matters for Discussion

  1. To revise the Articles of Incorporation, please Discuss.

(Proposed by the board of directors)

Explanation:

  • (1) The articles of association of the company are amended in accordance with the business item code and business needs of the Announcement No. 10902419890 of the Ministry of Economic Affairs on August 12, 2020.

  • (2) Please refer the comparison table of amendments to the Articles of Incorporation as follows:

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

Articles after amendment Current Articles Explanation
Article 2 ： The business scopes of the Article 2 ： The business scopes of the Cooperate
Company are as follows: Company are as follows: with the
A. CC01030 Electric Appliance and 1. CC01030 Electric Appliance and business item
Audiovisual Electric Products Audiovisual Electric Products code and
Manufacturing; Manufacturing; business needs
B. CC01070 Telecommunication 2. CC01070 Telecommunication of the Ministry
Equipment and Apparatus Equipment and Apparatus of Economic
Manufacturing; Manufacturing; Affairs
C. CC01080 Electronic Parts and 3. CC01080 Electronic Parts and Announcemen
Components Manufacturing; Components Manufacturing; t No.
D. CC01110 Computers and Computing 4. CC01110 Computers and Computing 10902198990
Peripheral Equipment Manufacturing; Peripheral Equipment Manufacturing; on August 12,
E. CC01100 Restrained Telecom Radio 5. CC01101 Restrained Telecom Radio 2020.
Frequency Equipment and Materials Frequency Equipment and Materials
Manufacturing; Manufacturing;
F. CF01011 Medical Materials and 6. CF01011 Medical Materials and
Equipment Manufacturing; Equipment Manufacturing;
G. F108031Wholesale of Drugs, Medical 7. F108031Wholesale of Drugs, Medical
Goods; Goods;
8. F401021 Restrained Telecom Radio
Frequency Equipment and Materials
Import;
9. I103060 Management Consulting
Services;
10. ZZ99999 All business items that are
not prohibited or restricted by law,
except those that are subject to special
approval.
Article 22 ： Article 22 ： Revised based
----- End of picture text -----

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Articles after amendment Current Articles Explanation The industrial environment of the The industrial environment of the on financial, Company is apt to change, and the Company is apt to change, and the business and enterprise life cycle stays in a stage of enterprise life cycle stays in a stage of operational stable growth, and it is necessary to stable growth, and it is necessary to considerations consider the budget for the future capital consider the budget for the future capital expenditure and funding requirement, and expenditure and funding requirement, measure the necessity to cope with funding and measure the necessity to cope with requirement by earnings, to determine the funding requirement by earnings, to amount for retaining or distributing the determine the amount for retaining or earnings and the distribution amount of distributing the earnings and the shareholder bonus in cash. The net profit distribution amount of shareholder bonus after final accounting, except for in cash. The net profit after final withholding of income tax in accordance accounting, except for withholding of with laws, shall be utilized for make-up of income tax in accordance with laws, the loss of previous years, and secondly shall be utilized for make-up of the loss setting aside 10% of the remaining earnings of previous years, and secondly setting as a legal reserve. After setting aside or aside 10% of the remaining earnings as a reversing special reserve in accordance legal reserve. After setting aside or with laws when necessary, the balance after reversing special reserve in accordance adding the undistributed earnings of the with laws when necessary, the balance previous year will be the accumulated after adding the undistributed earnings of distributable earnings. The board of the previous year will be the directors shall propose an earning accumulated distributable earnings. The distribution proposal for the shareholders’ board of directors shall propose an meeting to resolve the distribution. For the earning distribution proposal for the earning distribution proposal proposed by shareholders’ meeting to resolve the the board of directors, in accordance with distribution. For the earning distribution financial, business and operational factors, proposal proposed by the board of allocate within the limit of not less than directors, the total amount of 30% of the new distributable surplus in the shareholders’ bonus shall be 30% to 80% current period and not more than 80% of of the accumulated distributable earning, the accumulated distributable earning, and and the cash bonus shall account for 5% the distribution of the shareholder bonus or more of the shareholder bonus. 。 To shall be given priority in cash dividends authorize the distributable dividends and and shall also be distributed in the form of bonuses in whole or in part may be paid stock dividends, provided that the in cash after a resolution has been proportion of cash dividends distributed adopted by a majority vote at a meeting shall not be less than 30% of the total of the Board of Directors attended by dividend. To authorize the distributable two-thirds of the total number of dividends and bonuses in whole or in part directors; and in addition thereto a report may be paid in cash after a resolution has of such distribution shall be submitted to been adopted by a majority vote at a the shareholders’ meeting. meeting of the Board of Directors attended To inspire the employees and by two-thirds of the total number of management team, if the Company directors; and in addition thereto a report of makes profits in the said year, it shall set

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full text of the original language)
Articles after amendment Current Articles Explanation
such distribution shall be submitted to the
shareholders’ meeting.
To inspire the employees and management
team, if the Company makes profits in the
said year, it shall set aside: A. 5% to 10%
as employees’ profit sharing bonus; B. up
to 2% as compensation of directors and
supervisors, provided that if the Company
has accumulated losses, the amount to
make up the accumulated losses shall be
reserved in advance.
Where the employees' profit sharing bonus
will be distributed in the form of stocks or
in cash, it shall be resolved by a resolution
adopted by a majority vote at a meeting of
board of directors attended by two-thirds or
more of the total number of directors; and
in addition thereto a report shall be
submitted to the shareholders' meeting.
The employees’ profit sharing bonus
distributed by stocks or cash may be made
to the employees of subsidiaries meeting
certain specific requirements.		 aside: A. 5% to 10% as employees’
profit sharing bonus; B. up to 2% as
compensation
of
directors
and
supervisors,
provided
that
if
the
Company has accumulated losses, the
amount to make up the accumulated
losses shall be reserved in advance.
Where the employees' profit sharing
bonus will be distributed in the form of
stocks or in cash, it shall be resolved by
a resolution adopted by a majority vote
at a meeting of board of directors
attended by two-thirds or more of the
total number of directors; and in addition
thereto a report shall be submitted to the
shareholders' meeting.
The employees’ profit sharing bonus
distributed by stocks or cash may be
made to the employees of subsidiaries
meeting certain specific requirements.
Article 25：
These Articles of Incorporation were
promulgated on December 13, 1975. The
1st amendment was made on October 25,
1977.........The 40th amendment was made
on June 19, 2019.The 41st amendment was
made on July 21, 2021.		 Article 25：
These Articles of Incorporation were
promulgated on December 13, 1975.
The 1st amendment was made on
October
25,
1977.........
The 40th
amendment was made on June 19, 2019.		 The amendment
is to add the
amendment date
of the Article of
Incorporation for
the
above
amended
Articles.

Voting Results:

127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 116,090,174 votes were in favor of the proposal (including votes casted electronically: 41,303,205), representing 90.81% of the total represented shares present; 47,655 votes were cast against the proposal (including votes casted electronically: 47,655); 0 vote was invalid; 11,690,141 votes were either invalidly cast or abstained (including votes casted electronically:

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11,690,141).

Approved , that the above proposal be and hereby was approved as proposed.

  1. To revise the '' Procedures for Lending Funds to Other Parties'', please discuss.

(Proposed by the board of directors)

Explanation:

  • (1) It adds the relevant judgment and operating regulations that belong to” Lending Funds to Other Parties”.

  • (2) Please refer to Attachment 6 for comparison table of amendments.

Voting Results:

127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 116,068,057 votes were in favor of the proposal (including votes casted electronically: 41,281,088), representing 90.80% of the total represented shares present; 65,672 votes were cast against the proposal (including votes casted electronically: 65,672); 0 vote was invalid; 11,694,241 votes were either invalidly cast or abstained (including votes casted electronically: 11,694,241).

Approved , that the above proposal be and hereby was approved as proposed.

  1. To revise the ''Operation Procedures for the Acquisition or Disposal of Assets'', please discuss.

(Proposed by the board of directors)

Explanation:

  • (1) With the expansion of the scope of operations, it enlarges the approval authority of the chairperson.

  • (2) Please refer to Attachment 7 for comparison table of amendments.

Voting Results:

127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 108,470,639 votes were in favor of the proposal (including votes casted electronically: 33,683,670), representing84.85% of the total represented shares present; 7,051,035 votes were cast against the proposal (including votes casted

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electronically: 7,051,035); 0 vote was invalid; 12,306,296 votes were either invalidly cast or abstained (including votes casted electronically: 12,306,296).

Approved , that the above proposal be and hereby was approved as proposed.

  1. To approve issuance of new common shares for cash to sponsor issuance of the overseas depositary shares (“DR offering”) and/or issuance of new common shares for cash in private placement (“Private Placement Shares”) and/or issuance of overseas or domestic convertible bonds in private placement (“Private Placement CB”).

(Proposed by the board of directors)

Explanation:

  • (1) In order to enrich working capital, repay the debt, seek for mergers and acquisitions opportunities or other needs in long term development, it is proposed that within the limit of 40 million common shares (inclusive), to choose either or match of the following methods, to issue new common shares for cash to sponsor DR Offering and/or issue Private Placement Shares and/or issue Private Placement CB.

  • (2) The important contents of this case, including the total amount of issuance, the conditions of issuance, the conversion method, the planned project, the scheduled progress of the use of funds, the expected potential benefits and other outstanding matters, are to be requested to the shareholders' meeting to authorize the board of directors to make the decision in accordance with the relevant provisions of the competent authorities and in accordance with market conditions and the operating needs of the company.

  • (3) If amendments are necessary, due to the change of the relevant regulations or requested by the regulator’s order or changes in the objective environment, the Board of Directors is authorized to make such required amendments at its sole discretion.

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  • (4) At the time of execution of this case, the actual issue price will comply with the pricing specifications of the resolution of the Shareholders' Meeting and shall take into account the closing price of the Company's common stock at that time to determine its reasonableness and no material impact on shareholders' equity.

  • (5) The content of Issuance of new common shares for cash to sponsor DR Offering or the tentative terms and condition of the Private Placement CB, please refer to Attachment 8.

Voting Results:

127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 98,122,283 votes were in favor of the proposal (including votes casted electronically: 23,335,314), representing76.76% of the total represented shares present; 17,387,314 votes were cast against the proposal (including votes casted electronically: 17,387,314); 0 vote was invalid; 12,318,373 votes were either invalidly cast or abstained (including votes casted electronically: 12,318,373).

Approved , that the above proposal be and hereby was approved as proposed.

  1. Regulations governing the issuance of new restricted employee shares of 2021, please discuss.

(Proposed by the board of directors)

Explanation:

  • (1) It is proposed to issue new restricted employee shares in accordance with Article 267 of the Company Act and the "Regulations Governing the Offering and Issuance of Securities by Securities Issuers" (hereafter, the "Issuance Regulations").

  • (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 gratuitously with an issuance

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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 2021" without any violation of the said regulations.

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

  • (4) Qualifications and number of shares distribution:

  • (A) The employees qualified for shares distribution shall be a full-time employee 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 hold 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; or

  • (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 confirmed by CEO and then submitted to the board of directors for approval. 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

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

  • (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 officials 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 26 March 2021, NT$134.28 per share, is used for the calculation, when vesting conditions are all satisfied, the sum of possible costs is estimated to be NT$268,560 (in thousands of dollars), according to the vesting conditions, the cost apportioned each year will be NT$80,568(in thousands of dollars), NT$80,568 (in thousands of dollars) and NT$107,424 (in thousands of dollars) respectively.

  • (B) The dilution of the Company's earnings per share and other

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impacts on the rights and interests of shareholders: If it is calculated based on the number of outstanding shares of 209,351,942, the dilution of the earnings per share each year will be NT$0.38, NT$0.38 and NT$0.51 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 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 2021", please refer to Attachment 9.

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Voting Results:

127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 116,023,001 votes were in favor of the proposal (including votes casted electronically: 41,236,032), representing90.76% of the total represented shares present; 111,740 votes were cast against the proposal (including votes casted electronically: 111,740); 0 vote was invalid; 11,693,229 votes were either invalidly cast or abstained (including votes casted electronically: 11,693,229).

Approved , that the above proposal be and hereby was approved as proposed.

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V. Elections

  1. To hold by-election of one independent director of the Company, please elect one.

(Proposed by the board of directors)

Explanation ：

  • (1) Mr. Ke Junhui, the 19th Independent Director of the Company, resigned due to personal reasons and is to be elected by-election at 。

  • the regular meeting of shareholders in this (2021) year

  • (2) The directors shall be elected by opting candidates’ nomination system as specified in Article 192-1 of the Company Act in acoordance with the Article 12 of the Articles of Incorporation of the Company.

  • (3) The term of office of the new independent director is from the date of election of the 2021 year regular meeting of shareholders to the end of the current term (i.e. from June 15, 2021 to June 18, 2022).

  • (4) Academic and professional background and relevant information,please refer to the table below ：

==> picture [456 x 42] intentionally omitted <==

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

Name of Shares Education Experience and current
Candidates position
----- End of picture text -----

(3) The term of office of the new independent director is from the date
of election of the 2021 year regular meeting of shareholders to the
end of the current term (i.e. from June 15, 2021 to June 18, 2022).
(4) Academic
and
professional
background
and
relevant
information,please refer to the table below：		 (3) The term of office of the new independent director is from the date
of election of the 2021 year regular meeting of shareholders to the
end of the current term (i.e. from June 15, 2021 to June 18, 2022).
(4) Academic
and
professional
background
and
relevant
information,please refer to the table below：		 (3) The term of office of the new independent director is from the date
of election of the 2021 year regular meeting of shareholders to the
end of the current term (i.e. from June 15, 2021 to June 18, 2022).
(4) Academic
and
professional
background
and
relevant
information,please refer to the table below：		 (3) The term of office of the new independent director is from the date
of election of the 2021 year regular meeting of shareholders to the
end of the current term (i.e. from June 15, 2021 to June 18, 2022).
(4) Academic
and
professional
background
and
relevant
information,please refer to the table below：
Name
of
Candidates
Shares
Education
Experience
and
current
position
I,
CHANG-Y
UN		 0 Feng Chia University
Master of Business
Management Institute
Feng Chia University
Department
of
accounting		 Experience:
Director of KPMG audit
team
Current Position:
Partner
Accountant
and
Director of Jianzhi United
Certified Public Accountants

Election resolut:

In response to the Financial Supervisory Commission's announcement on May 20, 2021, "Relevant measures for postponing the convening of shareholders' meetings of public companies in response to epidemic situation", public companies will stop holding shareholders' meetings from May 24, 2021 to June 30, and the 2021-year regular shareholders' meeting of the Company will be postponed to July 21, 2021 through the

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resolution of the board of directors. The term of office of newly appointed independent directors shall start from the actual re-election, so the term of office will be from July 21, 2021 to June 18, 2022.

The list of the newly elected Independent directors with votes received as follows:

as follows:
Title Name votes received
Independent director I,CHANG-YUN 99,620,291

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VI. Other Matters

  1. To exempt the Company’s new independent directors from non-competition restrictions, please discuss.

(Proposed by the board of directors)

Explanation：

  • (1) A director who conducts business within the business scope of the Company for himself or others shall explain to the meeting of shareholders the essential contents of such an act and secures its approval in accordance with Article 209 of the Company Act.

  • (2) The term of office of the new independent director is from the date of election of the 2021 year regular meeting of shareholders to the end of the current term (i.e. from June 15, 2021 to June 18, 2022).

  • (3) Proposal of removal of the non-competition restrictions on the newly elected Directors, please refer to the table below:

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

Name of
Tital Current Position in other companies
Candidates
----- End of picture text -----

(2) The term of office of the new independent director is from the date
of election of the 2021 year regular meeting of shareholders to the
end of the current term (i.e. from June 15, 2021 to June 18, 2022).
(3) Proposal of removal of the non-competition restrictions on the
newlyelected Directors, please refer to the table below:		 (2) The term of office of the new independent director is from the date
of election of the 2021 year regular meeting of shareholders to the
end of the current term (i.e. from June 15, 2021 to June 18, 2022).
(3) Proposal of removal of the non-competition restrictions on the
newlyelected Directors, please refer to the table below:		 (2) The term of office of the new independent director is from the date
of election of the 2021 year regular meeting of shareholders to the
end of the current term (i.e. from June 15, 2021 to June 18, 2022).
(3) Proposal of removal of the non-competition restrictions on the
newlyelected Directors, please refer to the table below:
Tital
Name of
Candidates
Current Position in other companies
independent
director		 I,
CHANG-YUN		 Stanford Management Consulting Co.,LTD
Director
Jianzhi United Certified Public Accountants
Director
SHUZ TUNG MACHINERY INDUSTRIAL
CO., LTD. Independent director
TURVO
INTERNATIONAL
CO.,
LTD.
Independent director
UVAT Technology Co., Ltd. Independent
director

Voting Results:

In response to the Financial Supervisory Commission's announcement on May 20, 2021, "Relevant measures for postponing the convening of shareholders' meetings of public companies in response to epidemic situation", public companies will stop holding shareholders' meetings from May 24, 2021 to June 30, and the 2021-year regular shareholders' meeting of the Company will be postponed to July 21, 2021 through the

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  • resolution of the board of directors. The term of office of newly appointed independent directors shall start from the actual re-election, so the term of office will be from July 21, 2021 to June 18, 2022.

  • 127,827,970 shares were presented at the time of voting (including votes casted electronically: 53,041,001); 115,974,396 votes were in favor of the proposal (including votes casted electronically: 41,187,427), representing90.72% of the total represented shares present; 93,500 votes were cast against the proposal (including votes casted electronically: 93,500); 0 vote was invalid; 11,760,074 votes were either invalidly cast or abstained (including votes casted electronically: 11,760,074).

Approved , that the above proposal be and hereby was approved as proposed.

VII. Extemporary motions: None.

  • VIII. Meeting adjourned: There was no other business and extemporary motion, the Chairperson announced the meeting adjourned on 9:56 a.m.

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Attachment 1

Merry Electronics Co., Ltd. 2020 Business Report

I. Operating Strategy

Theme of operations in 2020: "Technology-led, digital transformation, Southbound expansion, and sustainable development."

II. General Condition of Implementation

In 2020, the COVID-19 pandemic raged across the globe and the Sino-US trade war continued to escalate, causing great turbulence for the world's political and economic climate and severely damaging the global economy. During this difficult time, the MERRY Group continued to uphold its core spirit of being a learning organization, quickly adjusted its pace in response to the impact of overall market changes, and continued to carry out the group’s long-term development plans while also remaining committed to implementing its 2020 operating policy of “Piloting with Technology, Embracing Digital Transformation, Extending Southbound Efforts and Realizing Sustainable Development.” By observing technological trends and continuing to expand its business in the field of electro-acoustic applications, the group accelerated the digitalization of operating procedures and developed a digital operation management model. Moreover, by firming establishing market presence through production bases in Thailand and Vietnam, the Group is able to flexibly adjust capacity allocation to serve the needs of global customers. In the bid to integrate ESG into MERRY’s corporate culture, a sustainable development implementation team directly under the board of directors was established in 2020 to lead all units of the group in implementing ESG in corporate operations. With such efforts demonstrating outstanding performance, the Group had the honor of winning the 2020 TCSA Taiwan Corporate Sustainability Report Bronze Award. Although we are now living in an era of tremendous changes in the global economy, MERRY has a solid foundation accumulated over many years of hard work and the concerted efforts of all colleagues that has enabled it to achieve stable revenue in 2020. We sincerely thank shareholders, customers, and suppliers for their long-term affirmation and support.

Looking forward to 2021, the continuation of the post-pandemic era will add much uncertainty to global economic recovery. In the face of a severe environment shaped by the pandemic and rapidly changing market challenges, we must build our strength and persist in innovation so as to continue moving forward, growing and prospering despite a harsh external environment. At the same time, MERRY has adopted "constitution optimization, digital

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transformation, integrated innovation, and sustainable development" as its business policy for 2021, which is briefly described as follows:

Constitution Optimization: Through continuous integration and optimization of the group's organizational structure, the development of lean and agile production, refined cost structure, the development of diversified products, and other adjustments and optimizations to corporate culture, we seek to enhance resource efficiency as well as improve overall operating performance and market competitiveness.

Digital transformation: In response to the era of high volatility, we accelerated investment in all-round digital transformation, introduced process robots and digital supply chain management mechanisms, built our smart manufacturing competitiveness in keeping with the times, and enhanced customer relationship management through digital optimization to develop a digital operation management model. As such, we improved overall operating efficiency which in turn enables us to pursue growth and outstanding results.

Integrated innovation: On the basis of the core value of electroacoustics, we will actively develop "new markets and new customers" under the concept of Acoustic of Things (AoT). By continuing to create differentiated value, we will be able to establish long-term advantages that drive the momentum for our next wave of growth.

Sustainable development: To continuously promote the integration of ESG into MERRY’s corporate culture, the Group works with internal and external partners to construct and develop sustainable resources and implements various ESG action plans to ensure continuous improvement every year. These efforts are made with the goal of ensuring environmental sustainability, social participation, and corporate governance remain our goal and vision, thus they enable the company to put the concept of sustainable development into practice, usher in a new and sustainable lifestyle within a circular economy, and create a better future together.

Even though the world has entered the post-pandemic era in 2021, the global economy still faces many tests and challenges as it rebounds and recovers. As such, the MERRY management team will adhere to the concepts of prudence and pragmatism, observe the group’s operating policy for 2021, and lead all colleagues toward the goal with positivity and resolve as we seek to unveil new horizons going forward into the future. We hereby sincerely thank all shareholders, customers, suppliers and partners for their full support and company on MERRY’s journey of growth, and look forward to working with you in forging a prosperous and sustainable future.

III. Results of Implementation of Business Plan

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The consolidated operating income of the company and its subsidiaries was NT$34,444,819 thousand, representing a decrease of NT$1,952,974 thousand or 5.37% from the NT$36,397,793 thousand in 2019; the consolidated net profit before tax was NT$1,702,705 thousand, a decrease of NT$1,543,493 thousand or 47.55% from the NT$3,246,197 thousand of 2019, mainly due to the decrease in operating revenue and other profits.

IV. Financial Revenue and Expenses and Profitability Analysis

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

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Account 2020 2019
Other incomes 323,158 383,263
Other gains and losses (182,510) 44,344
Financial costs (60,817) (81,319)
Gains and losses of affiliates for using equity
482,132 664,557
method and joint ventures accounted
Total 561,963 1,010,845
----- End of picture text -----

  • 2.Profitability Analysis Unit: NT$ in thousands of dollars

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

Subject Consolidated Consolidated
number of 2020 number of 2019
Financial Debt to asset ratio 64.07% 49.94%
structure (%)
Solvency (%) Current ratio 112.81% 167.10%
Liquidity ratio 93.24% 143.42%
Profitability Return on assets 5.42% 11.02%
(%) Return on shareholders’ equity 10.72% 22.24%
Operating income to paid-in
54.49% 107.53%
capital ratio
Earnings per share after 6.39 12.51
tax(NTD)
----- End of picture text -----

  • V. Research and development status

  • 1 、 In 2020, a total of 91 new products and extension models were developed.

  • 2 、 In the 2020 year, 67 new patents have been approved and 73 are in review.

  • 3 、 The 2020 consolidated research and development expense was NT$1,704,636 thousand, an increase of NT$399,251 thousand from the NT$1,305,385 thousand in 2019, accounting for 4.95% of the consolidated sales revenue.

  • I. Implementation status of operating income and expenditure budget: No financial forecast is issued and therefore not applicable.

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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 2020 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 Liu, Mei-Lan 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:Sher, Jih-Hsin

February 25, 2021

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Attachment 3

Comparison of Amendments to the Corporate Social Responsibility Best Practice Principles

Articles after amendment Current Articles Explanation
Article 3
In
fulfilling
corporate
social
responsibility
initiatives,
our
company shall, in its corporate
management guidelines and business
operations, give due consideration to
the
rights
and
interests
of
stakeholders and, while pursuing
sustainable operations and profits,
also give due consideration to the
environment, society and corporate
governance.Our company shall in
accordance with the materiality
principle, conduct risk assessments
of
environmental,
social
and
corporate
governance
issues
pertaining to company operations
and establish the relevant risk
management policy or strategy.		 Article 3
In
fulfilling
corporate
social
responsibility initiatives, our company
shall, in its corporate management
guidelines and business operations,
give due consideration to the rights
and interests of stakeholders and,
while pursuing sustainable operations
and
profits,
also
give
due
consideration to the environment,
society and corporate governance.		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.
Article 17
Our company should assess the
current and future potential risks and
opportunities that climate change
may present to enterprises and adopt
climate related measures.
Our company should adopt standards
or guidelines generally used in
Taiwan and abroad to enforce
corporate greenhouse gas inventory
and to make disclosures thereof, the
scope of which should include the
following:
1. Direct greenhouse gas emissions:
emissions from operations that		 Article 17
Our company shall adopt standards or
guidelines generally used in Taiwan
and abroad to enforce corporate
greenhouse gas inventory and to make
disclosures thereof, the scope of which
shall include the following:
1. Direct greenhouse gas emissions:
emissions from operations that are
owned or controlled by the
company.
2. Indirect greenhouse gas emissions:
emissions resulting from the
generation of externally purchased
or acquired electricity, heating, or		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.

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text of the original language) text of the original language)
Articles after amendment Current Articles Explanation
are owned or controlled by the
company.
2. Indirect
greenhouse
gas
emissions: emissions resulting
from the generation of externally
purchased or acquired electricity,
heating, or steam.
Our
company
should
compile
statistics
on
greenhouse
gas
emissions,
volume
of
water
consumption and total weight of
waste and establish policies for
energy conservation, carbon and
greenhouse gas reduction,reduction
of
water
consumption
or
management of other wastes. The
companies'
carbon
reductions
strategies should include obtaining
carbon credits and be promoted
accordingly to minimize the impact
of their business operations on
climate change.		 steam.
Our companymonitors the impact of
climate change on their operations and
should establish company strategies
for energy conservation and carbon
and greenhouse gas reduction based
upon their operationsandthe result of
a greenhouse gas inventory. Such
strategiesshould include obtaining
carbon
credits
to
promote
and
minimize the impact of their business
operations on climate change.
Article 21
Our
company
creates
an
environment
conducive
to
the
development
of
the
employees'
careers and establishes effective
training programs to foster career
skills.
Our company shallestablish and
implement
reasonable
employee
welfare
measures
(including
remuneration,
leave
and
other
welfare
etc.)
and
appropriately
reflect the business performance or
achievements
in
the
employee
remuneration,
to
ensure
the		 Article 21
Our company creates an environment
conducive to the development of the
employees' careers and establishes
effective training programs to foster
career skills.
Our company
shall
appropriately
reflect
the
corporate
business
performance or achievements in the
employee remuneration policy, to
ensure the recruitment, retention, and
motivation of human resources, and
achieve the objective of sustainable
operations.		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.

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text of the original language)
Articles after amendment Current Articles Explanation
recruitment,
retention,
and
motivation of human resources, and
achieve the objective of sustainable
operations.
Article 24
Our company shall ensure the
quality of our products and services
by
following
the
laws
and
regulations of the government and
relevant standards of our industries.
Our company shall follow relevant
laws, regulations and international
guidelinesin regard to customer
health and safety and customer
privacy involved in,and marketing
and labeling of, their products and
services and shall not deceive,
mislead, commit fraud or engage in
any other acts which would betray
consumers'
trust
or
damage
consumers' rights or interests.		 Article 24
Our company shall ensure the quality
of our products and services by
following the laws and regulations of
the government and relevant standards
of our industries.
Our company shall follow relevant
laws, regulations and international
guidelines when marketing or labeling
our products and services and shall not
deceive, mislead, commit fraud or
engage in any other acts which would
betray consumers' trust or damage
consumers' rights or interests.		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.
Article 26
Our company assesses the impact
their procurement has on society as
well as the environment of the
community that they are procuring
from, and shall cooperate with our
suppliers to jointly implement the
corporate
social
responsibility
initiative.
Prior to engaging in commercial
dealings,
our
company
should
establish
supplier
management
policies and request suppliers to
comply with rules governing issues
such as environmental protection,
occupational safety and health or		 Article 26
Our company assesses the impact their
procurement has on society as well as
the environment of the community
that they are procuring from, and shall
cooperate with our suppliers to jointly
implement
the
corporate
social
responsibility initiative.
Prior to engaging in commercial
dealings, our company should assess
whether there is any record of a
supplier's impact on the environment
and society, and avoids conducting
transactions
with
those
against
corporate social responsibility policy.
When our companyenters into a		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.

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

Articles after amendment Current Articles Explanation
----- End of picture text -----

Articles after amendment Articles after amendment Current Articles Explanation
labor rights, assess whether there is
any record of a supplier's impact on
the environment and society, and
avoids conducting transactions with
those
against
corporate
social
responsibility policy.
When our company enters into a
contract with any of our major
suppliers, the content should include
terms stipulating mutual compliance
with corporate social responsibility
policy, and the contract may be
terminated or rescinded any time if
the supplier has violated such policy
and has caused significant negative
impact on the environment and
society of the community of the
supplysource.		 contract with any of our major
suppliers, the content should include
terms stipulating mutual compliance
with corporate social responsibility
policy, and the contract may be
terminated or rescinded any time if the
supplier has violated such policy and
has caused significant negative impact
on the environment and society of the
community of the supply source.

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Attachment 4

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

INDEPENDENT AUDITORS ’ REPORT 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, 2020 and 2019, and the related parent company only statementsof 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, 2020 and 2019, 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. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the parent company only financial statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountants of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Company’s 2020 parent company only financial statements. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

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Key audit matters for the Company’s 2020 parent company only financial statements are stated as follows:

Cut-off on sales revenue from distribution warehouse

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 warehouses. Warehouse sales revenue constitutes 36% of total operating revenue for the year ended December 31, 2020. The Company ’ s revenue recognition is based on inventory movement records of warehouse 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 warehouse 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 schedule of distribution warehouse and ensuring the movements of inventories contained in the statements and cost of goods sold had been recognised in the appropriate period.

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  • 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 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

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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 the audit committee, are responsible for overseeing the Company ’ s financial reporting process.

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

As part of an audit in accordance with the generally accepted auditing standards in the Republic of China, 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 auditors ’ 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 auditors ’ 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 company 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 auditors ’ 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-Chuan

Liu, Mei-Lan

For and on behalf of PricewaterhouseCoopers, Taiwan February 25, 2021

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 independent auditors ’ report 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 t ranslation.

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Attachment 1

Merry Electronics Co., Ltd. 2020 Business Report

I. Operating Strategy

Theme of operations in 2020: "Technology-led, digital transformation, Southbound expansion, and sustainable development."

II. General Condition of Implementation

In 2020, the COVID-19 pandemic raged across the globe and the Sino-US trade war continued to escalate, causing great turbulence for the world's political and economic climate and severely damaging the global economy. During this difficult time, the MERRY Group continued to uphold its core spirit of being a learning organization, quickly adjusted its pace in response to the impact of overall market changes, and continued to carry out the group’s long-term development plans while also remaining committed to implementing its 2020 operating policy of “Piloting with Technology, Embracing Digital Transformation, Extending Southbound Efforts and Realizing Sustainable Development.” By observing technological trends and continuing to expand its business in the field of electro-acoustic applications, the group accelerated the digitalization of operating procedures and developed a digital operation management model. Moreover, by firming establishing market presence through production bases in Thailand and Vietnam, the Group is able to flexibly adjust capacity allocation to serve the needs of global customers. In the bid to integrate ESG into MERRY’s corporate culture, a sustainable development implementation team directly under the board of directors was established in 2020 to lead all units of the group in implementing ESG in corporate operations. With such efforts demonstrating outstanding performance, the Group had the honor of winning the 2020 TCSA Taiwan Corporate Sustainability Report Bronze Award. Although we are now living in an era of tremendous changes in the global economy, MERRY has a solid foundation accumulated over many years of hard work and the concerted efforts of all colleagues that has enabled it to achieve stable revenue in 2020. We sincerely thank shareholders, customers, and suppliers for their long-term affirmation and support.

Looking forward to 2021, the continuation of the post-pandemic era will add much uncertainty to global economic recovery. In the face of a severe environment shaped by the pandemic and rapidly changing market challenges, we must build our strength and persist in innovation so as to continue moving forward, growing and prospering despite a harsh external environment. At the same time, MERRY has adopted "constitution optimization, digital transformation, integrated innovation, and sustainable development" as its business policy for

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2021, which is briefly described as follows:

Constitution Optimization: Through continuous integration and optimization of the group's organizational structure, the development of lean and agile production, refined cost structure, the development of diversified products, and other adjustments and optimizations to corporate culture, we seek to enhance resource efficiency as well as improve overall operating performance and market competitiveness.

Digital transformation: In response to the era of high volatility, we accelerated investment in all-round digital transformation, introduced process robots and digital supply chain management mechanisms, built our smart manufacturing competitiveness in keeping with the times, and enhanced customer relationship management through digital optimization to develop a digital operation management model. As such, we improved overall operating efficiency which in turn enables us to pursue growth and outstanding results.

Integrated innovation: On the basis of the core value of electroacoustics, we will actively develop "new markets and new customers" under the concept of Acoustic of Things (AoT). By continuing to create differentiated value, we will be able to establish long-term advantages that drive the momentum for our next wave of growth.

Sustainable development: To continuously promote the integration of ESG into MERRY’s corporate culture, the Group works with internal and external partners to construct and develop sustainable resources and implements various ESG action plans to ensure continuous improvement every year. These efforts are made with the goal of ensuring environmental sustainability, social participation, and corporate governance remain our goal and vision, thus they enable the company to put the concept of sustainable development into practice, usher in a new and sustainable lifestyle within a circular economy, and create a better future together.

Even though the world has entered the post-pandemic era in 2021, the global economy still faces many tests and challenges as it rebounds and recovers. As such, the MERRY management team will adhere to the concepts of prudence and pragmatism, observe the group’s operating policy for 2021, and lead all colleagues toward the goal with positivity and resolve as we seek to unveil new horizons going forward into the future. We hereby sincerely thank all shareholders, customers, suppliers and partners for their full support and company on MERRY’s journey of growth, and look forward to working with you in forging a prosperous and sustainable future.

III. Results of Implementation of Business Plan

The consolidated operating income of the company and its subsidiaries was NT$34,444,819 thousand, representing a decrease of NT$1,952,974 thousand or 5.37% from the NT$36,397,793 thousand in 2019; the consolidated net profit before tax was NT$1,702,705 thousand, a decrease

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of NT$1,543,493 thousand or 47.55% from the NT$3,246,197 thousand of 2019, mainly due to the decrease in operating revenue and other profits.

IV. Financial Revenue and Expenses and Profitability Analysis

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

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Account 2020 2019
Other incomes 323,158 383,263
Other gains and losses (182,510) 44,344
Financial costs (60,817) (81,319)
Gains and losses of affiliates for using equity
482,132 664,557
method and joint ventures accounted
Total 561,963 1,010,845
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  • 2.Profitability Analysis Unit: NT$ in thousands of dollars

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Subject Consolidated Consolidated
number of 2020 number of 2019
Financial Debt to asset ratio 64.07% 49.94%
structure (%)
Solvency (%) Current ratio 112.81% 167.10%
Liquidity ratio 93.24% 143.42%
Profitability Return on assets 5.42% 11.02%
(%) Return on shareholders’ equity 10.72% 22.24%
Operating income to paid-in
54.49% 107.53%
capital ratio
Earnings per share after 6.39 12.51
tax(NTD)
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  • V. Research and development status

  • 1 、 In 2020, a total of 91 new products and extension models were developed.

  • 2 、 In the 2020 year, 67 new patents have been approved and 73 are in review.

  • 3 、 The 2020 consolidated research and development expense was NT$1,704,636 thousand, an increase of NT$399,251 thousand from the NT$1,305,385 thousand in 2019, accounting for 4.95% of the consolidated sales revenue.

  • VI. Implementation status of operating income and expenditure budget: No financial forecast is issued and therefore not applicable.

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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 2020 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 Liu, Mei-Lan 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: Sher, Jih-Hsin

February 25, 2021

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Attachment 3

Comparison of Amendments to the

Corporate Social Responsibility Best Practice Principles

Articles after amendment Current Articles Explanation
Article 3
In
fulfilling
corporate
social
responsibility
initiatives,
our
company shall, in its corporate
management guidelines and business
operations, give due consideration to
the
rights
and
interests
of
stakeholders and, while pursuing
sustainable operations and profits,
also give due consideration to the
environment, society and corporate
governance.Our company shall in
accordance with the materiality
principle, conduct risk assessments
of
environmental,
social
and
corporate
governance
issues
pertaining to company operations
and establish the relevant risk
management policy or strategy.		 Article 3
In
fulfilling
corporate
social
responsibility initiatives, our company
shall, in its corporate management
guidelines and business operations,
give due consideration to the rights
and interests of stakeholders and,
while pursuing sustainable operations
and
profits,
also
give
due
consideration to the environment,
society and corporate governance.		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.
Article 17
Our company should assess the
current and future potential risks and
opportunities that climate change
may present to enterprises and adopt
climate related measures.
Our company should adopt standards
or guidelines generally used in
Taiwan and abroad to enforce
corporate greenhouse gas inventory
and to make disclosures thereof, the
scope of which should include the
following:
1. Direct greenhouse gas emissions:
emissions from operations that		 Article 17
Our company shall adopt standards or
guidelines generally used in Taiwan
and abroad to enforce corporate
greenhouse gas inventory and to make
disclosures thereof, the scope of which
shall include the following:
1. Direct greenhouse gas emissions:
emissions from operations that are
owned or controlled by the
company.
2. Indirect greenhouse gas emissions:
emissions resulting from the
generation of externally purchased
or acquired electricity, heating, or		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.

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Articles after amendment Articles after amendment Current Articles Explanation
are owned or controlled by the
company.
2. Indirect
greenhouse
gas
emissions: emissions resulting
from the generation of externally
purchased or acquired electricity,
heating, or steam.
Our
company
should
compile
statistics
on
greenhouse
gas
emissions,
volume
of
water
consumption and total weight of
waste and establish policies for
energy conservation, carbon and
greenhouse gas reduction,reduction
of
water
consumption
or
management of other wastes. The
companies'
carbon
reductions
strategies should include obtaining
carbon credits and be promoted
accordingly to minimize the impact
of their business operations on
climate change.		 steam.
Our companymonitors the impact of
climate change on their operations and
should establish company strategies
for energy conservation and carbon
and greenhouse gas reduction based
upon their operationsandthe result of
a greenhouse gas inventory. Such
strategiesshould include obtaining
carbon
credits
to
promote
and
minimize the impact of their business
operations on climate change.
Article 21
Our
company
creates
an
environment
conducive
to
the
development
of
the
employees'
careers and establishes effective
training programs to foster career
skills.
Our company shallestablish and
implement
reasonable
employee
welfare
measures
(including
remuneration,
leave
and
other
welfare
etc.)
and
appropriately
reflect the business performance or
achievements
in
the
employee
remuneration,
to
ensure
the		 Article 21
Our company creates an environment
conducive to the development of the
employees' careers and establishes
effective training programs to foster
career skills.
Our
company
shall
appropriately
reflect
the
corporate
business
performance or achievements in the
employee remuneration policy, to
ensure the recruitment, retention, and
motivation of human resources, and
achieve the objective of sustainable
operations.		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.

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Articles after amendment Current Articles Explanation
recruitment,
retention,
and
motivation of human resources, and
achieve the objective of sustainable
operations.
Article 24
Our company shall ensure the
quality of our products and services
by
following
the
laws
and
regulations of the government and
relevant standards of our industries.
Our company shall follow relevant
laws, regulations and international
guidelinesin regard to customer
health and safety and customer
privacy involved in,and marketing
and labeling of, their products and
services and shall not deceive,
mislead, commit fraud or engage in
any other acts which would betray
consumers'
trust
or
damage
consumers' rights or interests.		 Article 24
Our company shall ensure the quality
of our products and services by
following the laws and regulations of
the government and relevant standards
of our industries.
Our company shall follow relevant
laws, regulations and international
guidelines when marketing or labeling
our products and services and shall not
deceive, mislead, commit fraud or
engage in any other acts which would
betray consumers' trust or damage
consumers' rights or interests.		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.
Article 26
Our company assesses the impact
their procurement has on society as
well as the environment of the
community that they are procuring
from, and shall cooperate with our
suppliers to jointly implement the
corporate
social
responsibility
initiative.
Prior to engaging in commercial
dealings,
our
company
should
establish
supplier
management
policies and request suppliers to
comply with rules governing issues
such as environmental protection,
occupational safety and health or		 Article 26
Our company assesses the impact their
procurement has on society as well as
the environment of the community
that they are procuring from, and shall
cooperate with our suppliers to jointly
implement
the
corporate
social
responsibility initiative.
Prior to engaging in commercial
dealings, our company should assess
whether there is any record of a
supplier's impact on the environment
and society, and avoids conducting
transactions
with
those
against
corporate social responsibility policy.
When our companyenters into a		 Referring to the "
Corporate Social
Responsibility
Best
Practice
Principles
for
TWSE/GTSM
Listed Companies
" published on
February
13,
2020, the changed
provisions of the
Code of Practice.

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Articles after amendment Current Articles Explanation
----- End of picture text -----

Articles after amendment Articles after amendment Current Articles Explanation
labor rights, assess whether there is
any record of a supplier's impact on
the environment and society, and
avoids conducting transactions with
those
against
corporate
social
responsibility policy.
When our company enters into a
contract with any of our major
suppliers, the content should include
terms stipulating mutual compliance
with corporate social responsibility
policy, and the contract may be
terminated or rescinded any time if
the supplier has violated such policy
and has caused significant negative
impact on the environment and
society of the community of the
supplysource.		 contract with any of our major
suppliers, the content should include
terms stipulating mutual compliance
with corporate social responsibility
policy, and the contract may be
terminated or rescinded any time if the
supplier has violated such policy and
has caused significant negative impact
on the environment and society of the
community of the supply source.

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Attachment 4

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

INDEPENDENT AUDITORS ’ REPORT 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, 2020 and 2019, and the related parent company only statementsof 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, 2020 and 2019, 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. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the parent company only financial statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountants of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Company’s 2020 parent company only financial statements. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

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Key audit matters for the Company’s 2020 parent company only financial statements are stated as follows:

Cut-off on sales revenue from distribution warehouse

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 warehouses. Warehouse sales revenue constitutes 36% ’ of total operating revenue for the year ended December 31, 2020. The Company s revenue recognition is based on inventory movement records of warehouse 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 warehouse 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 schedule of distribution warehouse and ensuring the movements of inventories contained in the statements and cost of goods sold had been recognised in the appropriate period.

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  • 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 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

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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 the audit committee, are responsible for overseeing the Company ’ s financial reporting process.

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

As part of an audit in accordance with the generally accepted auditing standards in the Republic of China, 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 auditors ’ 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 auditors ’ 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 company 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 auditors ’ 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-Chuan

Liu, Mei-Lan

For and on behalf of PricewaterhouseCoopers, Taiwan February 25, 2021

----------------------------------------------------------------------------------------------------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 independent auditors ’ report 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 t ranslation.

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INDEPENDENT AUDITORS ’ REPORT 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, 2020 and 2019, 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, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2020 and 2019, 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. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public Accountants of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Group’s 2020 consolidated financial statements. 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.

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Key audit matters for the Group’s 2020 consolidated financial statements are stated 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 28% of total operating revenue for the year ended December 31, 2020. 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.

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Valuation of inventories

Description

Refer to Note 4(13) 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, 2020, the balances of inventories and allowance for inventory valuation losses were NT$3,904,966 thousand and NT$(113,307) 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, 2020 and 2019.

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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 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.

Auditors ’ responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to

fraud or error, and to issue an auditors ’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the generally accepted auditing standards in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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

We also:

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  • 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.

  • 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 Group’s 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 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 auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

  • 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.

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.

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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 consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ 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.

Wang, Yu-Chuan

Liu, Mei-Lan

For and on behalf of PricewaterhouseCoopers, Taiwan February 25, 2021

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 independent auditors ’ report 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.

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Attachment 5

Merry Electronics Co., Ltd.

2020 Profit Distribution Table

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Subject Amount (NTD)
Beginning retained earnings 1,965,793,419
Adjusted beginning retained earnings 1,965,793,419
add: adjustments on re-measurement on define benefit plans
593,925
recognized in retained earnings
add: Disposal in equity instruments measured at fair value
145,400,631
through other comprehensive gains and losses.
Adjusted and unappropriated retained earnings 2,111,787,975
add: 2020 net profit after tax (1) 1,321,942,904
less: 10% legal reserve (146,793,746)
add/less: set aside or reversed special reserve 0
Distributable net profit (2) 3,286,937,133
Subject for distribution
less: cash bonus for shareholders (2020 retained earnings) (1,068,244,317)
Unappropriated retained earnings 2,218,692,816
----- End of picture text -----

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Attachment 6

Comparison of Amendments to the

Procedures for Lending Funds to Other Parties

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Articles after amendment Current Articles Explanation
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Comparison of Amendments to the
Procedures for Lending Funds to Other Parties		 Comparison of Amendments to the
Procedures for Lending Funds to Other Parties		 Comparison of Amendments to the
Procedures for Lending Funds to Other Parties
Articles after amendment
Current Articles
Explanation
5.2.3.The relevant judgment and operating
regulations that belong to the Lending
Funds to Other Parties:
(1) Where the following circumstances occurs,
the Company should clarify whether it
belongs to“lending funds to other
parties”:
(a) If the Company's accounts receivable
(including related parties and non-related
parties) have not been recovered for more
than 3 months beyond the normal credit
period and the amount exceeds 1.5% of
the company's consolidated net worth,
the Board Meeting shall at least quarterly
be raised to resolve whether that
belongs to“lending funds to other
parties”, except that it can be justified
that the Company has no intention to lend
(e.g., taking legal action, proposing
feasible
control
measures,
etc.),
otherwise, the announcement and
reporting procedures shall be made in
accordance with the articles of 5.7.1.
and 5.7.2.
(b) Any amount other than the company's
accounts receivable, if the amount
exceeds
1.5%
of
the
company's
consolidated net worth or is of a special
reasons, and the amount paid is not
contractual, the amount of payment is not
in conformity with the performance
obligations under the contract or the
reason for the disappearance of the		 1. To add this
Article.
2.
Add
the
relevant
judgment
and
operating
regulations that
belong
to”
Lending Funds
to
Other
Parties”.

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Articles after amendment Current Articles Explanation
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Articles after amendment Current Articles Explanation
payment, etc., shall be handled in
accordance with the above regulations.
(2) If any other receivables of the Company are
deemed to be the nature of the“lending
funds to other parties”, it shall be
approved by the latest board meeting in
accordance with the provisions of this
procedure.
(3) If the upper limit of the lending fund is
exceeded
by
the
identifying
other
receivables as the nature of“lending funds
to other parties”, the Company shall make
an improvement plan in accordance with
the article 5.5.8.of this procedure and
submit it to the Audit Committee.

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Attachment 7

Comparison of Amendments to the

Operation Procedures for the Acquisition or Disposal of Assets

Articles after amendment Current Articles Explanation
5.2.4.The calculation of the transaction
amounts referred to in the Article
【5.2.1.】to【5.2.3.】shall be done
in
accordance
with
Article
【5.4.2. 】, and "within the
preceding year" as used herein
refers to the year preceding the
date of occurrence of the current
transaction. Items for which an
appraisal
report
from
a
professional appraiser or a CPA's
opinion has been obtained need
not
be
counted
toward
the
transaction amount.		 5.2.4.The calculation of the transaction
amounts referred to in the Article
【5.2.1.】to【5.2.3.】shall be done
in
accordance
with
Article
【5.2.4. 】, and "within the
preceding year" as used herein
refers to the year preceding the
date of occurrence of the current
transaction. Items for which an
appraisal
report
from
a
professional appraiser or a CPA's
opinion has been obtained need not
be counted toward the transaction
amount.		 Correct the article
number.
5.3.1. For the acquisition or disposal of
real property, it is required to
consider the publicly announced
current value, appraised value and
the actual transaction price of the
neighboring
real
property
to
determine the transaction terms
and price and then prepare an
analysis report and submit to the
chairperson. If the amount does
not exceed NT$300million, such
transaction shall be submitted to
the chairperson for approval and
reported in the latest following
board meeting. If the amount
exceeds NT$300 million, such
transaction
shall
not
be
commenced until it is approved		 5.3.1. For the acquisition or disposal of
real property, it is required to
consider the publicly announced
current value, appraised value and
the actual transaction price of the
neighboring
real
property
to
determine the transaction terms
and price and then prepare an
analysis report and submit to the
chairperson. If the amount does
not exceed NT$ 50million, such
transaction shall be submitted to
the chairperson for approval and
reported in the latest following
board meeting. If the amount
exceeds NT$50million, such
transaction
shall
not
be
commenced until it is approved by		 With the expansion
of
the
scale
of
operations, improve
the
approval
authority
of
the
chairperson.

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Articles after amendment Current Articles Explanation
by the board of directors. the board of directors.
5.3.2. For the acquisition or disposal of
other fixed assets, it shall be done
by one of the following: price
inquiry,
price
survey,
price
negotiation or bidding. If the
amount does not exceed NT$300
million
(inclusive),
such
transaction shall
be properly
approved in accordance with the
authorization rules. If the amount
exceeds NT$300 million, such
transaction shall be submitted to
the
board
of
directors
for
approval.		 5.3.2. For the acquisition or disposal of
other fixed assets, it shall be done
by one of the following: price
inquiry,
price
survey,
price
negotiation or bidding. If the
amount does not exceed NT$50
million
(inclusive),
such
transaction
shall
be
properly
approved in accordance with the
authorization rules. If the amount
exceeds NT$50million, such
transaction shall be submitted to
the board of directors for approval.		 In
line
with
the
expansion
of
the
scale of operations,
increase the amount
that
needs
to
be
approved
by
the
Board of Directors.
5.6.6. With respect to the types of
transactions listed below, when to
be conducted between a public
company
and
its
parent
or
subsidiaries,
or
between
its
subsidiaries in which it directly or
indirectly holds 100 percent of
the issued shares or authorized
capital, the Company's board of
directors may delegate the board
chairman to decide such matters
when the transaction is within
NT$300 million and have the
decisions subsequently submitted
to and ratified by the next board
of directors meeting:		 5.6.6. With respect to the types of
transactions listed below, when to
be conducted between a public
company
and
its
parent
or
subsidiaries,
or
between
its
subsidiaries in which it directly or
indirectly holds 100 percent of the
issued shares or authorized capital,
the Company's board of directors
may delegate the board chairman
to decide such matters when the
transaction
is
within
NT$50
million and have the decisions
subsequently submitted to and
ratified by the next board of
directors meeting:		 With the expansion
of
the
scale
of
operations, improve
the
approval
authority
of
the
chairperson.

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Attachment 8

The methods and content of this public offering or private placement

  • (1) When filling the case of " To issue new common shares for cash to sponsor issuance of the overseas depositary shares (“DRs”)”, it is proposed to request the approval of the shareholders' meeting and authorize the board of directors to proceed as following:

  • " To issue new common shares for cash to sponsor issuance of the overseas depositary shares (“DRs”), in accordance with Article 267 of the Company Act, the retention of 15% of the company's employees to purchase. The remaining shares shall, in accordance with Article 28-1 of the Securities and Exchange Act, request the shareholders' meeting to agree for public offering, as the shares for issuance of overseas depositary shares (“DRs”), and the original shareholders shall waive their priority subscription rights in full. If the employee subscribes insufficiently or waives the subscription part, it is proposed to authorize the chairman to negotiate with a specific person to subscribe at the issue price, or to issue new shares for cash to sponsor issuance of the overseas depositary shares (“DRs”) as required by the market condition.

  • The basis and reasonableness of the pricing

  • The issuance price shall not be less than 90% of the simple arithmetic mean of the closing prices of the Company's common stock on the date falling on either one, three or five business day(s) prior to such filing, net of the ex-rights by share distribution (or the ex-rights by share distribution (or the ex-rights by capital reduction) and rights by capital reduction) and ex-dividends in accordance with the Self-Regulatory Rules for Assistance by Member Underwriters of the TWSE for Listed Companies in the Offering and Issuance of Securities (the “Self-Regulatory Rules”). It is proposed that the Board of Directors authorize the Chairman to refer to the international capital market, domestic market prices and summary of the purchase situation, etc., to negotiate securities underwriters to improve the acceptance of overseas investors.

  • " To issue new common shares for cash to sponsor issuance of the overseas depositary shares (“DRs”) will dilute the original shareholders' equity, but through the increase capital ratio, it can strengthen the financial structure and reduce the cost of capital to respond to changes in the industry; all in all, upon the capital increase benefits are shown, it will help the competitiveness and profitable growth of the Company, which should help increase shareholder equity. The original shareholders were still able to approach the issue price of “DRs” and buy common stock on the domestic stock market without having to bear foreign exchange and liquidity risks.

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  1. The rights and obligations of the new shares issued shall be the same as those of the original shares.

  2. The final issued shares, the proportion of employees to purchase, the price and conditions of the offering, the actual amount raised, the plan for the use of funds (including planned projects, scheduled progress, expected benefits, etc.) and other issue-related matters, if approved by the competent authorities, based on operational assessment, due to the needs of capital market conditions, or in response to changes in the objective environment, it is proposed to submit to the Shareholders' Meeting for the chairman's full authority.

  3. After approval by the competent authorities, the offering and issuance plan intends to authorize the Chairman to set base date of subscription, payment periods, capital increase base date and other related matters for raising shares.

  4. In order to cooperate with this “DRs”, it is proposed to request the Shareholders' Meeting to authorize the Chairman or his designated agent to sign all relevant contracts and documents relating to “DRs” and to handle all relevant matters.

(2) When filling the case of " To issue new common shares for cash in private placement (“Private Placement Shares”)”, it is proposed to request the approval of the shareholders' meeting and authorize the board of directors to carry out in installments once or more times (up to three times) within one year from the date of the resolution of the Shareholders' Meeting and proceed as following:

  1. The basis and reasonableness of the pricing

  2. (A) The price of Private Placement Shares shall not be less than 80% of the reference price, which shall be either of the following prices (whichever is higher):

  3. (a)The simple arithmetic mean of the closing prices of the Company's common stock on the date falling on either one, three or five business day(s) prior to such filing, after adjustment for net of the ex-rights by share distribution, cash dividends or capital reduction.

  4. (b)The simple arithmetic mean of the closing prices of the Company's common stock on the date falling on thirty business day(s) prior to such filing, after adjustment for net of the ex-rights by share distribution, cash dividends or capital reduction.

  5. (B) It is proposed that the shareholders' meeting authorize the Board of Directors to determine the actual issuance price by taking into account market conditions and contact with specific persons, within a range not less than the ratio determined by the resolutions of the shareholders' meeting.

  6. (C) Said the price of Private Placement Shares is determined according to the Company’s stock price and theoretical price respectively. The pricing also complies with the Directions for Public Companies Conducting Private Placements of Securities and is therefore reasonable.

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  1. The method and objectives of selecting the specific persons, the necessity for that selection, and the anticipated benefits

  2. The investors to subscribe the private placement shall meet the qualifications listed in Article 43-6 of the Securities and Exchange Act, are strategic investors of the company, and can create synergy with the company’s long-term development and competitiveness and existing shareholder equity.

The specific persons have not been arranged, it is proposed that the shareholders authorize the Board of Directors to determine specific persons with full power.

The purpose, necessity and expected benefits for choosing strategic investors are to accommodate the Company’s operation and development needs. The investors of private placement will assist the Company, directly or indirectly, in its finance, business, and strategy development, etc. The funds raised will be used to replenish working capital or paying off liabilities, search for product line acquisition opportunities, or other needs in response to the company's long-term development in the future. It is expected to enhance the Company's competitiveness, strengthen the shareholders' structure, strengthen the Company's financial structure and increase its scale of operations, which should help increase shareholder equity.

  1. The reasons for the necessity of conducting the private placement

  2. The Company intends to conduct the private placement in consideration the situation of the capital market, time sensitiveness, feasibility, issue costs and actual demand in introduction of strategic investors. And the private placement of securities is subject to a three-year limitation on transfers, which may ensure a long-term relationship between the Company and its strategic investors.

  3. The rights and obligations of the Private Placement Shares shall be the same as those of the original shares. Under the Securities and Exchange Act, the company may not resell the securities except to persons specified in Article 43-8 within 3 full years following the delivery date of the private placement securities.

  4. The Private Placement Shares plan includes primarily actual issued price, total number of shares, conditions of issuance, amount of issuance, record date of cash capital increase ,planned project, the scheduled progress of the use of funds, the expected potential benefits and other outstanding matters. If amendments are necessary, due to the change of the relevant regulations or requested by the regulator’s order or changes in the objective environment, it is proposed to request the Shareholders' Meeting to authorize the Board of Directorsto do all required acts.

(3) When filling the case of " Private Placement CB”, it is proposed to request the approval of the shareholders' meeting and authorize the board of directors to carry out in installments once or

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more times (up to three times) within one year from the date of the resolution of the Shareholders' Meeting and proceed as following:

  1. The basis and reasonableness of the pricing

  2. (A) Term ： The term of the Private Placement CB shall not exceed seven years from the issuance date.

  3. (B) Coupon Rate ： To be determined by the Board.

  4. (C) The basis and reasonableness of the private placement pricing

The price of Private Placement CB shall not be less than 80% of the theoretical price, and the conversion price shall not be less than 80% of the following prices (whichever is higher):

  • (a)The simple arithmetic mean of the closing prices of the Company's common stock on the date falling on either one, three or five business day(s) prior to such filing, after adjustment for net of the ex-rights by share distribution, cash dividends or capital reduction.

  • (b)The simple arithmetic mean of the closing prices of the Company's common stock on the date falling on thirty business day(s) prior to such filing, after adjustment for net of the ex-rights by share distribution, cash dividends or capital reduction.

For the actual issue price, it is proposed to request the Shareholders' Meeting to authorize the Board of Directors to set the price according to the Act and not below the range approved by the shareholders meeting and depending on current market and company circumstances. The price set above is not only according to the regulations and closing price of the common shares but in consideration of the strict restrictions for transfer timing (three-year holding period after the delivery date). The price and terms for this Private Placement CB is deemed to be reasonable.

  1. The method and objectives of selecting the specific persons, the necessity for that selection, and the anticipated benefits

The investors to subscribe the private placement shall meet the qualifications listed in Article 43-6 of the Securities and Exchange Act, are strategic investors of the Company, and can create synergy with the Company’s long-term development and competitiveness and existing shareholder equity.

The specific persons have not been arranged, it is proposed that the shareholders hereby authorize the Board of Directors to determine specific persons with full power.

The purpose, necessity and expected benefits for choosing strategic investors are to accommodate the Company’s operation and development needs. The investors of private placement will assist the Company, directly or indirectly, in its finance, business, and strategy development, etc. The funds raised will be used to replenish working capital or paying off liabilities, search for product line

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acquisition opportunities, or other needs in response to the company's long-term development in the future. It is expected to enhance the Company's competitiveness, strengthen the shareholders' structure, strengthen the Company's financial structure and increase its scale of operations, which should help increase shareholder equity.

  1. The reasons for the necessity of conducting the private placement The Company intends to conduct the private placement in consideration the situation of the capital market, time sensitiveness, feasibility, issue costs and actual demand in introduction of strategic investors. And the private placement of securities is subject to a three-year limitation on transfers, which may ensure a long-term relationship between the Company and its strategic investors.

  2. The restrictions on transfers of the Private Placement CB are handled under Article 43-8 of the Securities and Exchange Act.

  3. The Private Placement CB plan includes primarily actual issued price, conditions of issuance, conversion method, amount of issuance, planned project, the scheduled progress of the use of funds, the expected potential benefits and other outstanding matters. If amendments are necessary, due to the change of the relevant regulations or requested by the regulator’s order or changes in the objective environment, the Board of Directors is authorized to do all required acts.

  4. It is proposed to request the Shareholders' Meeting to authorize the Chairman or his designated agent to sign all relevant contracts and documents relating to “The Private Placement CB” and to handle all relevant matters.

Terms and Conditions for Issuance of Overseas or Domestic Convertible Bonds in Private Placement (Tentative):

1. Issuer

Merry Electronics Co., Ltd. (“Issuer” )

  1. Issuance Size

The Board of Directors (“Board”) is authorized, within the limit of 40 million common shares, to issue new common shares for cash to sponsor issuance of the overseas depositary shares (“DRs”) and/or issue new common shares for cash in public offering and/or issue new common shares in private placement (“Private Placement Shares”) and/or issue overseas or domestic convertible bonds in private placement (“Private Placement CB”). For issuance of Private Placement CB, the number of common shares to be converted within the limit of 40 million common shares shall be calculated in accordance with the conversion price determined at the time of issuance of such Private Placement CB.

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3. Issuance Date

The Private Placement CB shall be issued in one time within one year from the 2021 annual general shareholders’ meeting.

  1. Issuance Method

The Private Placement CB will be issued in accordance with Article 43-6 of the Securities and Exchange Act and the regulations of the jurisdiction where the Private Placement CB is issued. The investors to subscribe the Private Placement Shares and/or Private Placement CB shall meet the qualifications listed in Article 43-6 of the Securities and Exchange Act. The Board is fully authorized to determine the specific investor(s). If the investor(s) are strategic investor(s), such strategic investor(s) shall still meet the aforementioned limitations for specific investor(s). The purpose, necessity and expected benefits for choosing strategic investor(s) are to accommodate the Company’s operation and development needs. The investor(s) of private placement will assist the Company, directly or indirectly, in its finance, business, manufacturing, technology, procurement, management, and strategy development, etc. so as to strengthen the Company’s competitiveness and enhance its operational efficiency and long term development.

  1. Type, Denomination and Issuance Price of Private Placement CB

The Private Placement CB will be issued in registered form in denomination of US$10,000 or a multiple thereof or NT$100,000 or a multiple thereof. The issue price shall be no less than 80% of the theoretical price.

  1. Coupon Rate

To be determined by the Board.

  1. Term

The term of the Private Placement CB shall not exceed seven years from the issuance date.

  1. Redemption

Unless previously converted, redeemed or purchased and cancelled, the Private Placement CB will be redeemed by the Issuer at the maturity date in cash at a price equal to the par value or the par value plus interest.

  1. Conversion Securities

The Private Placement CB will be convertible into the Issuer’s common shares or the DRs representing the Issuer’s common shares.

10. Conversion

(1) Conversion Period:

Unless previously redeemed, purchased, cancelled or converted, or except during the closed period that the holders are not permitted to convert under the Indenture, a holder of the Private Placement CB may request the Issuer to convert the Private Placement CB into Issuer’s

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common shares or the DRs at any time after a designated period of time following the issuance date of the Private Placement CB and until certain days prior to the maturity date in accordance with applicable rules and regulations and terms of the Indenture.

  • (2) Conversion Procedure:

To exercise the relevant conversion rights attached to the Private Placement CB, the holder thereof must deposit with the Issuer a notice of conversion together with the Private Placement CB and any other documents or certificates required by R.O.C. laws.

  • (3) Determination and the Adjustment of the Conversion Price:

The conversion price of the Private Placement CB shall be no less than 80% of (x) the simple average closing price of the Issuer’s common shares for either 1, 3 or 5 trading days prior to the pricing date, after deducting shares issued as stock dividends, shares cancelled in connection with capital reduction and the cash dividends, or (y) the simple average closing price of the Issuer’s common shares for 30 trading days prior to the pricing date, after deducting shares issued as stock dividends, shares cancelled in connection with capital reduction and the cash dividends. The actual conversion price shall be proposed to the shareholders' meeting to authorize the Board to determine in accordance with applicable rules and regulations.

  • (4) Dividend Entitlement at Conversion

Prior to conversion of the Private Placement CB, holders are not entitled to receive any dividend distribution. Following the conversion of the Private Placement CB, the rights to receive dividend payments will be the same as the other common shareholders of the Issuer.

  • (5) Rights and Obligations after Conversion

Except that the Private Placement CB is subject to a three-year holding period after the delivery date of the Private Placement CB under Article 43-8 of the Securities and Exchange Act, the new common shares to be issued upon conversion of Private Placement CB will have the same rights and obligations as the common shares.

  1. Early Redemption at the Option of the Issuer To be determined by the Board.

  2. Holders’ Put Option

The Issuer may elect not to grant holders’ put option, or after expiry of a designated period following issuance of the Private Placement CB, holders may require the Issuer to redeem all or part of the Private Placement CB at a price that would result in certain annual yield on the Private Placement CB.

13. Others

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The Board is authorized to determine and amend, at its sole discretion, the terms and conditions of the Private Placement CB and other matters which are not addressed herein.

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Attachment 9

Regulations Governing the Issuance of New Restricted Employee Shares of 2021

1. Purpose

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

  1. Scope

Nil.

  1. Responsibilities & Authorities

  2. 3.1 Human Resources Unit: The in-charge unit for establishment/revision, drafting, implementation, revocation and application of the Regulations and relevant documents.

  3. 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.

  1. Operating Procedures

  2. 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.

  • 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.

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  • 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 have 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 Letter 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; or (3). New employees who are essential to the company.

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

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

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

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

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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 level 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 level B.

  • 5.6.2. The conditions for company performance:

    • (1). The grade of employee equal to or lower than level 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 level 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). 】

  • (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

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  - 1 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 level 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;

  • (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 level 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:

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  • 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 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 Code 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

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  • 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.

  • 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 “HR2-115-001 Consent Form for Receipt of the New Restricted Employee Shares of 2021”. 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 provisions 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.

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  • 5.10.3. Whereas any employee who obtains the new restricted employee shares is in violation of the provisions in the “HR2-115-001 Consent Form for Receipt of the New Restricted Employee Shares of 2021” regarding good faith or integrity, the Company may retrieve the new restricted employee shares which are not yet vested, if any, and cancel such shares.

  • 5.10.4. Taxation

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

  • 5.11. The Regulations 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. HR2-115-001 Consent Form for Receipt of the New Restricted Employee Shares of 2021.

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