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MERRY AGM Information 2024

Jun 17, 2024

52085_rns_2024-06-17_1f347302-939c-4a37-ac32-3d96f7a4795b.pdf

AGM Information

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Table of Contents

I. Meeting Procedure ....................................................................................................... 1 II. Meeting Agenda .......................................................................................................... 2 1. Matters for Report ................................................................................................ 3 2. Matters for Approval ............................................................................................ 6 3. Matters for Discussion ......................................................................................... 8 4. Extemporary motions ........................................................................................... 9 Attachment .................................................................................................................... 10 1. 2023 Business Report ......................................................................................... 10 2. The Audit Committee's Review Report ............................................................... 14 3. Sustainability Development Policy and Promotion Plan ..................................... 15 4. CPA's Audit Report, Individual Financial Statements and Consolidated Financial Statements ......................................................................................................... 16 5. 2023 Profit Distribution Table .......................................................................... 39 6. Comparison of Amendments to the Procedures for Acquisition and Disposal of Assets ................................................................................................................ 40 7. Proposal of removal of the non-competition restrictions one the directors (including independent director)......................................................................... 43 Appendix ....................................................................................................................... 44 1. Operation Procedures for the Acquisition or Disposal of Assets (Before Amendments) ................................................................................................... 44 2. Rules of Procedure for Shareholders Meetings ................................................... 67 3. Articles of Incorporation .................................................................................. 83 4. Shareholding Status of Directors ...................................................................... 90 5. Dividend Policy ............................................................................................... 91 6. The impact of the share dividend proposed in this annual shareholders' meeting on the operational performance of the Company and the earnings per share .......... 92 7. Explanation for the proposal excluded from this annual shareholders' meeting….92

I.Meeting Procedure

Merry Electronics Co., Ltd.

Meeting Procedure for the 2024 Annual Shareholders' Meeting

  1. Reporting total represented shares

  2. Call the Meeting to Order

  3. Chairperson Remarks

  4. Matters for Report

  5. Matters for Approval

  6. Matters for Discussion

  7. Extemporary Motions

  8. Meeting Adjourned

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II. Meeting Agenda

Merry Electronics Co., Ltd.

Meeting Agenda of the 2024 Annual Shareholders' Meeting

Convening Means: Physical shareholders meeting

Time：May 29, 2024 (Wednesday) at 9:00 am

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

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

  1. Chairperson Remarks

  2. Matters for Report

  3. (1) The Company’s 2023 Business Report

  4. (2) Audit Committee’s review report on the 2023 Financial Statements

  5. (3) Employees’ profit sharing bonus and directors’ compensation of 2023

  6. (4) The Company’s 2023 earnings distribution

  7. (5) The performance assessments and compensation levels of directors and managerial officers

  8. (6) The Company's sustainable development policy and execution plan

  9. Matters for Approval

  10. (1) The Company’s 2023 Business Report and Financial Statements

  11. (2) The proposal for distribution of 2023 earnings

  12. Matters for Discussion

  13. (1) To revise the '' Procedures for Acquisition and Disposal of Assets ''

  14. (2) The examption of restrictions on directors' (including independent directors') non-competition agreements.

  15. Extemporary motions

  16. Meeting adjourned

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Matters for Report

  1. The Company’s 2023 Business Report, please take note.

(Proposed by the Board of Directors) Explanation: For the business report, please refer to Attachment 1. (from page 10 to page 13)

  1. Audit Committee’s review report on the 2023 Financial Statements, please take note.

(Proposed by the Board of Directors) Explanation: For the Audit Committee’s audit report on the financial statements of 2023, please refer to Attachment 2. (page 14)

  1. Employees’ profit sharing bonus and directors’ compensation of 2023, please take note.

(Proposed by the Board of Directors)

Explanation:

  • (1) According to the Articles of Incorporation, should the Company be profitable, it shall set aside 5% to 10% as employees' profit sharing bonus and no more than up to 2% as compensation of directors of the Company’s profit (if any) in the fiscal year.

  • (2) With respect to 2023 employee’s profit sharing bonus and directors’ compensation, the Board of Directors dated 22 February 2024 has resolved that the Company distribute 10% (NT$ 184,910,469 in total) as employees’ profit sharing bonus and 2% (NT$36,982,094 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 2023.

  • To report 2023 earnings in cash distribution, please take note.

(Proposed by the Board of Directors)

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Explanation:

  • (1) According to Article 22 of Association, and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

  • (2) The proposal for distribution of 2023 earnings adopted at the meeting of the Board of Directors, cash dividends NT$1,030,914,177 in total will be distributed to shareholders. Namely, each common shareholder will be entitled to receive a cash dividend of NT$4.7 per share.

  • 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.

  • To report the Company's sustainable development policy and execution plan, please take note.

    • (Proposed by the Board of Directors)

  • (1) To comply with sustainability trends, MERRY incorporated sustainability into its corporate vision in 2024 – “Creating Sensory experiences for sustainability and well-being." We value the voices of stakeholders and are committed to implementing ESG sustainable development, establishing major sustainability principles, and setting

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short, medium, and long-term goals to strengthen corporate sustainability, improve ESG information disclosure, and create a new situation of shared prosperity for shareholders, customers, employees, suppliers, society, and the environment.

  • (2) For explanations on governance, environment, and social aspects, please refer to Attachment 3 on page 15 of this manual.

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Matters for Approval

  1. Proposal：To adopt 2023 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 2023 business report, earnings distribution table, parent company only financial statements and consolidated financial statements in accordance with Article 36 and section 3 of Article 14-4 of the Securities and Exchange Act and Articles 219 and 230 of the Company Act. The reports and statements were examined, and a review report was hence issued, by the Aaudit Ccommittee.

  • (2) Please refer to Attachment 1 (from page 10 to page 13) for the aforementioned business report, and please refer to Attachment 4 (from page 16 to page 38) for the individual and consolidated financial statements and records.

Resolution:

  1. Proposal：To adopt the proposal for distribution of 2023 earnings, please approve.

  2. (Proposed by the Board of Directors)

Explanation:

  • (1) The proposal for 2023 earnings distribution was approved by the Board of Directors and examined by the Audit Committee.

  • (2) The earnings distribution proposed to distribute cash dividends NT$1,030,914,177 in total to shareholders. Namely, each common shareholder will be entitled to receive a cash dividend of NT$4.7 per share.

  • (3) Cash dividends will be distributed to the shareholders recorded in the shareholders roster as of the ex-dividend date, according to the shareholding percentage and round down to dollar. The sum of the fractional amount will be recorded as other income of the Company.

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The Board of Directors determines the ex-dividend date and the related matters at its discretion.

  • (4) If the total amount of outstanding shares changes subsequently due to purchase of treasury shares, issuance of Restricted Employee Stock Award, conversion of the third domestic non-secured convertible bonds of the Company, or other factors, that will affect the payout ratio, the Chairperson determines the payout ratio at his discretion.

  • (5) The profit distribution table of 2023, please refer to Attachment 5 (page 39)

Resolution:

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Matters for Discussion

  1. Proposal：To revise the '' Procedures for Acquisition and Disposal of Assets

  2. ". Please discuss.

(Proposed by the Board of Directors)

Explanation:

  • (1) Amend some provisions of the company's "Procedures for Acquiring or Disposal of Assets" in accordance with current operations, and add new provisions and make textual amendments where appropriate.

  • (2) Please refer to Attachment 6 (from page 40 to page 42) for comparison table of amendments.

Resolution:

  1. Proposal ： The examption of restrictions on directors' (including independent directors') non-competition agreements. Please discuss.

(Proposed by the Board of Directors)

Explanation:

  • (1) According to Article 209 of the Company Act, directors are required to explain the important details of their actions within the scope of the company's business and obtain approval from the shareholders' meeting.

  • (2) Directors (including independent directors) may engage in business activities similar to the company's operations. In order to meet the practical business needs and without compromising the company's interests, it is proposed to seek the approval of the shareholders' meeting to lift the restrictions on directors' non-competition agreements.

  • (3) Please refer to Attachment 7 (page 43) for the main content of directors' (including independent directors') non-competition agreements.

Resolution:

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Extemporary motions

Meeting adjourned

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Attachment 1

Merry Electronics Co., Ltd. 2023 Business Report

  • I. Operational policy

2023 annual operational core: “revenue-orientated, diversified development, AI empowerment, and accelerated carbon reduction”.

II. General Condition of Implementation

2023 was a year full of opportunities and challenges. Facing a volatile global economic environment, MERRY has demonstrated its resilience as a learning organization and adheres to the business policy of "focusing on profits, customer optimization, risk diversification, and net-zero and sustainability." We successfully created fruitful results and once again set a new revenue record. At the same time, the Company has won many awards, including "SGS ESG AWARD - Sustainability Report - Gold Award," "TCSA Taiwan Corporate Sustainability Award - Sustainability Report - Gold Award," "MSCI ESG Rating - BBB," "iF Design Award (Micro hollow sleeping earbuds)," "EE Awards Asia Awards - Best Sensor of the Year," "2023 Taichung City Happy Workplace Five-Star Award", "Ministry of Education Sports Administration Sports Enterprise Certification," "Taichung City's Elderly-friendly Outstanding Enterprise - Excellence Award," "Health Promotion Administration Outstanding Healthy Workplace - Healthy Silver Age Award." These recognitions once again demonstrate MERRY's determination to pursue corporate sustainability.

Looking towards 2024, developments in the international political and economic situation, geo-economic fragmentation, net-zero transition policies of countries in response to climate risks, continued decline in inflation, and tightening of monetary policy will greatly impact the recovery of the global economy. MERRY's business policy in 2024 is "revenue-orientated, diversified development, AI empowerment, and accelerated carbon reduction," which is briefly described as follows:

For "revenue-oriented", MERRY continues to build core electroacoustic capabilities, deepen relationships with existing customers, and actively optimizes the competitiveness of product quotations. At the same time, the Company further invests in and effectively allocates R&D resources, constantly launches new products, and enhances the competitiveness of its products. As the Company continues to develop the gaming industry, the Company has strengthened its business communication technology and extended it to video terminals to further expand its business. The Company hopes that when economic growth regains

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momentum, these efforts will enable it to actively face challenges, seize opportunities, expand new customers in the field of electroacoustics, expand market share, and achieve greater success.

For "diversified development," MERRY actively promotes development in four aspects: "customer diversification," "product diversification," "market diversification," and "production capacity diversification." In terms of customer diversification, the Company not only deepens cooperation with existing customers, but also actively seeks opportunities of new customers to develop a global customer base. In terms of product diversification, the Company expands its product diversity and further creates greater value from differentiation through technology integration, audio-visual solutions, and software and algorithm services. In terms of market diversification, the Company continues to develop the consumer market in depth, and will actively cross over into different fields, such as commercial, medical, educational, and military markets. In terms of production capacity diversification, the Company adopts the China+ strategy and expands Outside China by establishing production base in Southeast Asia, in order to diversity its production capacity while maximizing manufacturing benefits.

In terms of "AI empowerment," MERRY continues to develop its AI technology, and integrates its data analysis platform to better understand customer service, improve factory productivity, and strengthen employees' application ability. Furthermore, the Company hopes to create greater value by combining products with AI. For the Company's employees, the application of AI technology will bring more opportunities and challenges. MERRY will continue to incorporate AI technology into its corporate culture, so that employees can gradually master new skills and knowledge as they learn about AI technology, thereby improving their work efficiency and creativity.

For "accelerated carbon reduction," MERRY is actively taking carbon reduction actions in response to the rapid global climate change. The Company joined RE100 in 2021, set mediumand long-term targets for the use of renewable energy, and plans to complete the target review of the SBTi in 2024, in order to strengthen green supply chain management. In addition, the Company moved the target for achieving carbon neutrality from 2050 to 2040 to achieve the carbon reduction target sooner. The Company adopts the cradle-to-cradle design concept for products, and incorporates sustainable design and green products into its core competitiveness, making the Company's products more in line with environmental protection requirements and raising the Company's awareness of social responsibility. MERRY will continue to fulfill its commitment to the sustainable development of the Earth, and make every effort to accelerate carbon reduction actions for the sake of the environment for future generations.

In 2024, MERRY will still face many challenges, but the Company will follow the short-,

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medium- and long-term strategies and the above-mentioned operating guidelines, and work with all employees to create greater value for shareholders, customers, suppliers, and partners. In an environment full of changes and challenges, MERRY will continue to pursue sustainable development, innovation, and progress.

Finally, we would like to thank all shareholders, customers, suppliers, and partners for their support for MERRY. It is your trust and love that has allowed MERRY to gain the success it has today. We look forward to continuing to work with everyone and embrace a new, more sustainable future.

III. Results of Implementation of Business Plan

The consolidated operating income of the company and its subsidiaries was NT$36,690,383 thousand, representing an increase of NT$1,291,693 thousand or 3.65% from the NT$35,398,690 thousand in 2022; the consolidated net profit before tax was NT$1,885,495 thousand, a decrease of NT$163,531 thousand or 7.98% from the NT$2,049,026 thousand of 2022, mainly due to the decrease in other profits.

  • IV. Financial Revenue and Expenses and Profitability Analysis

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

Account Consolidated
number of 2023		 Consolidated
number of 2022
Other incomes 603,813 554,479
Othergains and losses (40,545) 318,148
Financial costs (100,497) (105,635)
Gains and losses of affiliates for using equity
method andjoint ventures accounted		 284,801 208,914
Total 747,572 975,906
  • 2.Profitability Analysis Unit: NT$ in thousands of dollars
Subject Consolidated
number of 2023		 Consolidated
number of 2022
Financial
structure(%)		 Debt to asset ratio 58.66% 60.94%
Solvency (%) Current ratio 130.69% 155.22%
Liquidityratio 106.54% 120.36%
Profitability
(%)		 Return on assets 4.52% 5.06%
Return on shareholders’ equity 10.69% 12.86%
Operating income to paid-in
capital ratio		 51.89% 49.27%
Earnings per share after
tax(NTD)		 6.16 6.81

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  • V. Research and development status

  • 1、In 2023, a total of 62 new products and extension models were developed.

  • 2、In the 2023 year, 53 new patents have been approved and 60 are in review.

  • 3、The 2023 consolidated research and development expense was NT$1,964,625 thousand, an increase of NT$163,895 thousand from the NT$1,800,730 thousand in 2022, accounting for

    • 5.35% 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 2023 business report, profit distribution table and individual financial statement and consolidated financial statement, which were audited and issued by certified public accountants Liu, Mei-Lan and Hsu, Chien-Yeh 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 22, 2024

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Attachment 3

Sustainability Development Policy and Promotion Plan

Explanation follows based on governance, environment, and social aspects:

Under the board of directors, there are Sustainability Development and Nomination Committee and Sustainability Promotion Team, responsible for discussing important issues related to operations including economy, environment, society, and risk management, and reporting to the board of directors.

A. Climate Initiative

The governance level understands the potential impacts of climate change on operations and long-term development. Since 2020, we have been promoting management policy related to TCFD, gradually enhancing recognition of climate issues and climate risks and opportunities in 2022 and incorporating quantitative indicators, implement climate governance, policymaking, and target-setting. We also invest resources in evaluating and planning for transformation and continue to track the achievement of goals.

  • B. Environmental Sustainability Goal—Carbon Neutrality by 2040

In response to the global climate action for net-zero carbon emissions, we has set "Carbon Neutrality by 2040" as goal for the group's environmental sustainability actions. Our primary goals are to reduce energy carbon emissions and use renewable energy, actively integrate environmental sustainability concepts into product design and development, improve the efficiency of environmental resource use, and ultimately resort to carbon offset mechanisms as a final means to offset carbon emissions.

Employees: Employees are the most important partners in our operations, we aiming to create a secure, equal, and diverse working environment. We expect our employees to receive four types of income in a friendly workplace environment: salary and professional ability, friendship, and charity feedback. We continue to promote activities based on four DNAs—“understand music, love reading, fond of exercise, and volunteer.” to help employees balance work and life.

Details of the above for 2023 are disclosed in the 2023 Meritronics Sustainability Report. Please visit the official website (https://www.merry.com.tw) for more information.

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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, 2023 and 2022, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, 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 Financial Statement Audit and Attestation Engagements of Certified Public Accountants and Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditor’s 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 Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Based on our audits and the reports of other auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters. The key audit matters in relation to the parent company only financial statements for the year ended

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December 31, 2023 are outlined as follows:

Cut-off on sales revenue from distribution warehouse

Description

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

The Company recognizes revenue upon delivery of goods or pick-up of goods (the transfer of control of ownership) by customers at warehouse. Warehouse sales revenue constitutes 41% of total operating revenue for the year ended December 31, 2023. 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 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 recognized 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 recognized 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 recognized in the appropriate period.

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

Investments accounted for using equity method - valuation of inventories

Description

The Company receives orders from customers and the subsidiaries are tasked to manufacture the products. The subsidiaries (shown as investments accounted for using equity method) have a high risk of incurring inventory valuation loss and obsolescence due to fluctuations in market demand

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and rapidly evolving technology. Further, the measurement of net realizable 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 realizable 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 realizable 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 - audits of the other auditors

We did not audit the financial statements of certain consolidated subsidiaries and investments accounted for under the equity method that are included in the consolidated financial statements and disclosures in Note 13. Those financial statements were audited by other auditors, whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on reports of the other auditors. The balance of these investments accounted for under equity method amounted to NT$480,811 thousand and NT$39,582 thousand, constituting 1.61% and 0.13% of total assets as of December 31, 2023 and 2022, respectively, and comprehensive income (loss) was (NT$5,001) thousand and (NT$3,146) thousand, constituting (0.43%) and (0.2%) of total comprehensive income for the years then ended.

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 company only financial statements that are free from material

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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 auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of 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 Standards on Auditing of 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.

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

  • D.

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

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based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

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

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

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

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

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

Liu, Mei Lan

Hsu, Chien-Yeh

For and on behalf of PricewaterhouseCoopers, Taiwan February 22, 2024

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 translation.

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MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

Assets Notes
6(1)
6(2)
6(3)
6(4)(5)
7(2)
7(2)
6(6)
6(2)
6(3)
6(7)
6(8)
6(9)
6(27)		 December31,2023
AMOUNT
%
$
2,510,496
8
524,580
2
105,206
-
-
-
6,909,818
23
5,624
-
141,864
1
2,638,436
9
1,236,568
4
88,509
-
10,791
-
14,171,892
47
45,828
-
270,021
1
13,690,685
46
1,360,514
5
3,360
-
194,340
1
106,762
-
5,626
-
15,677,136
53
$
29,849,028
100		 December31,2022 December31,2022
AMOUNT
$
2,510,496
524,580
105,206
-
6,909,818
5,624
141,864
2,638,436
1,236,568
88,509
10,791
14,171,892
45,828
270,021
13,690,685
1,360,514
3,360
194,340
106,762
5,626
15,677,136
$
29,849,028		 AMOUNT
$
4,077,520
389,181
251,448
30,710
6,135,004
6,650
53,958
1,234,195
2,642,209
78,257
6,487
14,905,619
27,284
430,786
13,416,962
1,305,747
4,990
237,153
78,449
20,086
15,521,457
$
30,427,076		 %
Current assets
1100
Cash and cash equivalents
1110
Financial assets at fair value through
profit or loss - current
1120
Financial assets at fair value through
other comprehensive income - current
1136
Current financial assets at amortised
cost
1170
Accounts receivable, net
1180
Accounts receivable - related parties
1200
Other receivables
1210
Other receivables - related parties
130X
Inventories, net
1410
Prepayments
1479
Other current assets
11XX
Total current assets
Non-current assets
1510
Financial assets at fair value through
profit or loss - non-current
1517
Financial assets at fair value through
other comprehensive income - non-
current
1550
Investments accounted for under
equity method
1600
Property, plant and equipment, net
1755
Right-of-use assets
1780
Intangible assets
1840
Deferred income tax assets
1990
Other non-current assets, others
15XX
Total non-current assets
1XXX
Total assets		 14
1
1
-
20
-
-
4
9
-
-
49
-
2
44
4
-
1
-
-
51
100

(Continued)

-21-

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity December31,2023
December31,2022
Notes
AMOUNT
%
AMOUNT
%
6(11)
$
790,000
3
$
1,378,960
4
6(2)
1,726
-
10,137
-
6(21)
282,209
1
364,860
1
1,358,309
5
1,212,916
4
7(2)
6,964,294
23
7,808,084
26
6(12)
724,126
2
475,300
2
7(2)
207,436
1
341,618
1
303,215
1
173,123
1
6(13)(14)
3,341,619
11
291,346
1
366,941
1
238,416
1
14,339,875
48
12,294,760
41
6(21)
590,487
2
650,861
2
6(13)
-
-
2,953,838
10
6(14)
755,105
3
714,463
2
6(27)
1,505,933
5
1,501,291
5
6(15)
36,054
-
37,619
-
327
-
1,807
-
2,887,906
10
5,859,879
19
17,227,781
58
18,154,639
60
6(17)
2,193,163
7
2,177,827
7
6(18)
4,872,974
16
4,720,866
15
6(19)
2,412,390
8
2,265,932
8
768,186
3
748,930
3
3,583,885
12
3,355,328
11
6(20)
(
1,209,351) (
4) (
996,446) (
4 )
12,621,247
42
12,272,437
40
9
$
29,849,028
100
$
30,427,076
100
Current liabilities
2100
Short-term borrowings
2120
Financial liabilities at fair value
through profit or loss - current
2130
Current contract liabilities
2170
Accounts payable
2180
Accounts payable - related parties
2200
Other payables
2220
Other payables - related parties
2230
Current income tax liabilities
2320
Long-term liabilities, current portion
2399
Other current liabilities, others
21XX
Total current liabilities
Non-current liabilities
2527
Non-current contract liabilities
2530
Corporate bonds payable
2540
Non-current portion of non-current
borrowings
2570
Deferred income tax liabilities
2640
Accrued pension liabilities
2670
Other non-current liabilities
25XX
Total non-current liabilities
2XXX
Total liabilities
Equity
Share capital
3110
Share capital - common stock
Capital surplus
3200
Capital surplus
Retained earnings
3310
Legal reserve
3320
Special reserve
3350
Unappropriated retained earnings
Other equity interest
3400
Other equity interest
3XXX
Total equity
Significant contingent liabilities and
unrecognised contract commitments
3X2X
Total liabilities and equity

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

-22-

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2023 AND 2022

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

Items YearendedDecember31
2023
2022
Notes
AMOUNT
%
AMOUNT
%
6(21) and 7
$
26,701,755
100
$
25,903,833
100
6(6) and 7
(
24,858,294 ) (
93) (
24,077,390) (
93 )
1,843,461
7
1,826,443
7
6(25)(26)
(
229,217 ) (
1) (
204,985) (
1 )
(
567,116 ) (
2) (
512,616) (
2 )
(
818,554 ) (
3) (
713,199) (
2 )
12(2)
(
1,123 )
-
11,780
-
(
1,616,010 ) (
6) (
1,419,020) (
5 )
227,451
1
407,423
2
6(22)
74,498
-
38,955
-
6(23) and 7
99,942
-
53,580
-
6(24)
(
103,276 )
-
434,987
2
(
60,738 )
-
(
51,772)
-
6(7)
1,389,335
5
930,299
3
1,399,761
5
1,406,049
5
1,627,212
6
1,813,472
7
6(27)
(
306,894 ) (
1) (
358,074) (
1 )
$
1,320,318
5
$
1,455,398
6
6(15)
( $
6,348 )
-
$
11,395
-
6(3)(20)
4,100
-
(
349,843) (
1 )
3,246
-
(
10,728)
-
6(27)
1,269
-
(
2,279)
-
2,267
-
(
351,455) (
1 )
6(20)
(
98,016 ) (
1)
349,431
1
6(3)(20)
2,687
-
(
5,628)
-
6(20)
(
94,837 )
-
83,321
-
6(20)(27)
38,261
-
(
85,747)
-
(
151,905 ) (
1)
341,377
1
( $
149,638 ) (
1) ($
10,078)
-
$
1,170,680
4
$
1,445,320
6
6(28)
$
6.16
$
6.81
$
5.49
$
6.07
4000
Sales revenue
5000
Operating costs
5900
Net operating margin
Operating expenses
6100
Selling expenses
6200
General and administrative expenses
6300
Research and development expenses
6450
Expected credit impairment (loss) gain
6000
Total operating expenses
6900
Operating profit
Non-operating income and expenses
7100
Interest income
7010
Other income
7020
Other gains and losses
7050
Finance costs
7070
Share of profit of associates and joint
ventures accounted for using equity
method
7000
Total non-operating income and
expenses
7900
Profit before income tax
7950
Income tax expense
8200
Profit for the year
Other comprehensive income
Components of other comprehensive
income that will not be reclassified to
profit or loss
8311
Actuarial losses on defined benefit plans
8316
Unrealized losses from investments in
equity instruments measured at fair value
through other comprehensive income
8330
Share of other comprehensive loss of
associates and joint ventures accounted
for using equity method
8349
Income tax related to components of
other comprehensive income that will not
be reclassified to profit or loss
8310
Other comprehensive income (loss)
that will not be reclassified to profit or
loss
Components of other comprehensive
income that will be reclassified to profit
or loss
8361
Exchange differences on translation
8367
Unrealized gains from investments in
debt instruments measured at fair value
through other comprehensive income
8380
Share of other comprehensive (loss)
income of associates and joint ventures
accounted for using equity method
8399
Income tax relating to the components of
other comprehensive income
8360
Other comprehensive (loss) income
that will be reclassified to profit or loss
8300
Other comprehensive loss for the year
8500
Total comprehensive income for the year
Earnings per share
9750
Basic earnings per share
9850
Diluted earnings per share

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

-23-

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

Year 2022
Balance at January 1, 2022
Profit for the year
Other comprehensive income (loss) for the year
Total comprehensive income (loss)
Appropriation and distribution of 2021 retained earnings
Legal reserve
Special reserve
Cash dividends
Share-based payment
Recognition of change in equity of associates in proportion to the
Company's ownership
Balance at December 31, 2022
Year 2023
Balance at January 1, 2023
Profit for the year
Other comprehensive loss for the year
Total comprehensive income (loss)
Appropriation and distribution of 2022 retained earnings
Legal reserve
Special reserve
Cash dividends
Convertible bonds converted into common shares
Share-based payment
Equity instruments at fair value through other comprehensive income
reclassified to investments accounted for using equity method
Recognition of change in equity of associates in proportion to the
Company's ownership
Balance at December 31, 2023		 Notes Share capital -
commonstock		 Capital surplus,
additional paid-in
capital		 RetainedEarnings RetainedEarnings RetainedEarnings Financial statements
translation
differences of
foreignoperations		 Totalequity
Legal reserve Special reserve Unappropriated
retained earnings
6(20)
6(19)
6(16)
6(20)
6(19)
6(13)
6(16)
6(3)


$
2,165,100
-
-
-
-
-
-
12,727
-
$
2,177,827
$
2,177,827
-
-
-
-
-
-
10
15,326
-
-
$
2,193,163		 $
4,646,623
-
-
-
-
-
-
57,551
16,692
$
4,720,866
$
4,720,866
-
-
-
-
-
-
90
125,063
-
26,955
$
4,872,974		 $ 2,152,834
-
-
-
113,098
-
-
-
-
$ 2,265,932
$ 2,265,932
-
-
-
146,458
-
-
-
-
-
-
$ 2,412,390		 $ 269,144
-
-
-
-
479,786
-
-
-
$ 748,930
$ 748,930
-
-
-
-
19,256
-
-
-
-
-
$ 768,186		 $
3,349,676
1,455,398
9,178
1,464,576
(
113,098 )
(
479,786 )
(
866,040 )
-
-
$
3,355,328
$
3,355,328
1,320,318
(
5,066 )
1,315,252
(
146,458 )
(
19,256 )
(
981,235 )
-
-
60,254
-
$
3,583,885		 ($
969,246 )
-
(
19,256 )
(
19,256 )
-
-
-
(
7,944 )
-
($
996,446 )
($
996,446 )
-
(
144,572 )
(
144,572 )
-
-
-
-
(
8,079 )
(
60,254 )
-
($
1,209,351 )		 $
11,614,131
1,455,398
(
10,078 )
1,445,320
-
-
(
866,040 )
62,334
16,692
$
12,272,437
$
12,272,437
1,320,318
(
149,638 )
1,170,680
-
-
(
981,235 )
100
132,310
-
26,955
$
12,621,247

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

-24-

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation

Depreciation expense - right-of-use assets

Amortization

Expected credit impairment (gain) loss

Impairment loss - non-financial assets

Finance costs
Interest expense - lease liability
Loss (gain) on financial assets or liabilities at fair
value through profit or loss
Proceeds from disposal of available-for-sale financial
assets-non-current

Share of profit of associates and joint ventures
accounted for using equity method

Dividend income

Interest income

Gain on disposal of property, plant and equipment

Share-based payments

Unrealized foreign exchange (gain) loss
Changes in operating assets and liabilities
Changes in operating assets
Financial assets (liabilities) at fair value through
profit or loss
Accounts receivable
Accounts receivable - related parties
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Changes in operating liabilities
Accounts payable
Accounts payable - related parties
Contract liabilities
Other payables
Other payables - related parties
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Interest paid
Income taxes paid
Interest received
Dividend income
Net cash flows (used in) from operating activities		 Year ended December 31
Notes
2023
2022
$
1,627,212 $
1,813,472
6(8)(25)
35,464
23,356
6(25)
4,143
5,055
6(9)(25)
58,894
49,219
12(2)
1,123 (
11,780 )
6(7)(24)
65,510
161,766
60,394
23,289
344
234
(
13,435 )
9,376
6(24)
(
16,500 )
-
6(7)
(
1,389,335 ) (
930,299 )
6(3)(23)
(
7,775 ) (
8,850 )
6(22)
(
74,498 ) (
38,955 )
6(24)
- (
15 )
6(16)
132,310
62,334
114,538 (
204,450 )
(
8,878 ) (
3,020 )
(
977,283 )
939,673
1,026
3,061
53,053 (
15,816 )
(
382,972 ) (
527,162 )
1,405,641 (
780,941 )
(
10,252 ) (
64,806 )
(
5,689 )
49,133
185,814
274,098
(
736,670 )
1,513,861
(
143,026 )
178,047
120,170
120,180
(
134,182 )
246,781
128,658 (
17,404 )
(
7,912 ) (
31,108 )
85,887
2,838,329
(
37,002 ) (
17,471 )
(
160,945 ) (
65,663 )
75,884
40,714
7,775
8,850
(
28,401 )
2,804,759

(Continued)

-25-

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Increase in financial assets mandatorily measured at fair
value through profit or loss
Proceeds from disposal of financial assets at fair value
through other comprehensive income
Decrease in financial assets at amortized cost - current
Decrease in financial assets at amortized cost - non -
current
Acquisition of investments accounted for using equity
method

Proceeds from disposal of investments accounted for
using equity method

Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets

Decrease in guarantee deposits paid
Recognition of dividends received from investments
accounted for using equity method

Net cash flows (used in) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings
Increase in long-term borrowings
Decrease in long-term borrowings
Cash dividends paid

Repayment of principal portion of lease liabilities
Net cash flows used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year		 Year ended December 31
Notes
2023
2022
($
140,480 ) ($
51,309 )
161,125
-
30,450
976,541
-
3,853
6(7)
(
483,584 ) (
57,800 )
6(7)
243,600
29,341
6(29)
(
86,572 ) (
121,842 )
-
15
6(29)
(
11,890 ) (
21,913 )
376
1,242
6(7)
213,003
-
(
73,972 )
758,128
(
587,600 ) (
459,080 )
400,000
-
(
291,346 ) (
286,111 )
6(30)
(
981,235 ) (
866,040 )
(
4,470 ) (
5,184 )
(
1,464,651 ) (
1,616,415 )
(
1,567,024 )
1,946,472
4,077,520
2,131,048
$
2,510,496 $
4,077,520

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

-26-

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, 2023 and 2022, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors (please refer to the Other matter section), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2023 and 2022, 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 that came into effect as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the Regulations Governing Financial Statement Audit and Attestation Engagements of Certified Public Accountants and Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Based on our audits and the reports of other auditors, 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 2023 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.

Key audit matters for the Group’s 2023 consolidated financial statements are stated as follows:

-27-

Cut-off on sales revenue from distribution warehouse

Description

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

The Group recognizes revenue upon delivery or pick-up of goods (the transfer of control of ownership) by customers at warehouses. Warehouse sales revenue constitutes 30% of total operating revenue for the year ended December 31, 2023. 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 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 recognized 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 recognized 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 recognized 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.

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, 2023, the balances of inventories and allowance for inventory valuation losses were NT$4,065,282 thousand and NT$243,962 thousand,

-28-

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 realizable 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 realizable value of each kind of inventory and checked whether the applied calculation logic was in agreement with all inventories, tested the supporting documents related to the estimation basis for net realizable 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 - audits of other independent auditors

We did not audit the financial statements of certain investments accounted for under the equity method that are included in the consolidated financial statements and disclosures in Note 13. Those financial statements were audited by other independent auditors, whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on reports of the other independent auditors. The balance of these investments accounted for under equity method amounted to NT$480,811 thousand and NT$39,582 thousand, constituting 1.47% and 0.12% of total assets as of December 31, 2023 and 2022, respectively, and the comprehensive loss of associates accounted for using equity method was (NT$5,001) thousand and (NT$3,146) thousand, constituting (0.40%) and (0.19%) of total comprehensive income for the years then ended.

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, 2023 and 2022.

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

-29-

Standards, IFRIC Interpretations, and SIC Interpretations that came into effect 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 the audit committee, are responsible for overseeing the Group’s financial reporting process.

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

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of 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 Standards on Auditing of the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

  • 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 auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are

-30-

based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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

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

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

Liu, Mei Lan

Hsu, Chien-Yeh

For and on behalf of PricewaterhouseCoopers, Taiwan

February 22, 2024

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.

-31-

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

Assets Notes
6(1)
6(2)
6(3)
6(4)(5)
7(2)
6(2)
7(2)
6(6)
6(2)
6(3)
6(7)
6(8)
6(9)
6(10)
6(27)		 December31,2023
AMOUNT
%
$
5,526,722
17
556,580
2
105,206
-
513,218
2
9,224,475
28
155,813
-
169,190
1
173,586
1
3,821,320
12
470,436
1
20,716,546
64
45,828
-
369,523
1
422,748
1
5,602,510
17
4,021,917
12
247,172
1
911,221
3
188,976
1
84,752
-
11,894,647
36
$
32,611,193
100		 December31,2022 December31,2022
AMOUNT
$
5,526,722
556,580
105,206
513,218
9,224,475
155,813
169,190
173,586
3,821,320
470,436
20,716,546
45,828
369,523
422,748
5,602,510
4,021,917
247,172
911,221
188,976
84,752
11,894,647
$
32,611,193		 AMOUNT
$
6,923,268
389,181
251,448
185,601
8,709,698
61,771
87,327
118,270
4,910,577
286,170
21,923,311
27,284
526,509
110,200
5,028,458
4,147,903
293,554
1,102,943
160,015
108,454
11,505,320
$
33,428,631		 %
Current assets
1100
Cash and cash equivalents
1110
Financial assets at fair value through
profit or loss - current
1120
Current financial assets at fair value
through other comprehensive income
1136
Current financial assets at amortised
cost
1170
Accounts receivable, net
1180
Accounts receivable due from related
parties, net
1200
Other receivables
1210
Other receivables - related parties
130X
Inventories
1470
Other current assets
11XX
Current Assets
Non-current assets
1510
Financial assets at fair value through
profit or loss - non-current
1517
Non-current financial assets at fair
value through other comprehensive
income
1535
Non-current financial assets at
amortised cost
1550
Investments accounted for under
equity method
1600
Property, plant and equipment
1755
Right-of-use assets
1780
Intangible assets
1840
Deferred income tax assets
1900
Other non-current assets
15XX
Non-current assets
1XXX
Total assets		 21
1
1
1
26
-
-
-
15
1
66
-
2
-
15
12
1
3
1
-
34
100

(Continued)

-32-

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity December31,2023
December31,2022
Notes
AMOUNT
%
AMOUNT
%
6(12)
$
1,133,099
4
$
2,146,851
6
6(2)
1,726
-
10,137
-
6(22)
301,635
1
370,035
1
5,516,301
17
5,015,885
15
7(2)
3,023,117
9
4,198,902
13
6(13)
1,385,934
4
1,194,443
4
7(2)
65,895
-
82,414
-
466,311
1
313,322
1
6(14)(15)
3,428,440
11
451,919
1
529,581
2
340,051
1
15,852,039
49
14,123,959
42
6(22)
590,487
2
650,862
2
6(14)
-
-
2,953,838
9
6(15)
1,003,177
3
904,528
3
6(27)
1,540,737
5
1,534,222
5
94,413
-
140,904
-
6(16)
36,054
-
37,619
-
11,963
-
26,413
-
3,276,831
10
6,248,386
19
19,128,870
59
20,372,345
61
6(18)
2,193,163
7
2,177,827
7
6(19)
4,872,974
14
4,720,866
14
6(20)
2,412,390
8
2,265,932
7
768,186
3
748,930
2
3,583,885
11
3,355,328
10
6(21)
(
1,209,351) (
4) (
996,446) (
3 )
12,621,247
39
12,272,437
37
4(3)
861,076
2
783,849
2
13,482,323
41
13,056,286
39
9
$
32,611,193
100
$
33,428,631
100
Current liabilities
2100
Short-term borrowings
2120
Financial liabilities at fair value
through profit or loss - current
2130
Current contract liabilities
2170
Accounts payable
2180
Accounts payable - related parties
2200
Other payables
2220
Other payables - related parties
2230
Current income tax liabilities
2320
Current portion of long-term
borrowings
2399
Other current liabilities, others
21XX
Current Liabilities
Non-current liabilities
2527
Non-current contract liabilities
2530
Corporate bonds payable
2540
Long-term borrowings
2570
Deferred income tax liabilities
2580
Non-current lease liabilities
2640
Accrued pension liabilities
2670
Other non-current liabilities, others
25XX
Non-current liabilities
2XXX
Total Liabilities
Equity attributable to owners of
parent
Share capital
3110
Share capital - common stock
Capital reserve
3200
Capital surplus
Retained earnings
3310
Legal reserve
3320
Special reserve
3350
Unappropriated retained earnings
Other equity interest
3400
Other equity interest
31XX
Equity attributable to owners of
the parent
36XX
Non-controlling interest
3XXX
Total equity
Significant contingent liabilities and
unrecognized contract commitments
3X2X
Total liabilities and equity

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

-33-

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2023 AND 2022

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

Items Year ended December 31
2023
2022
Notes
AMOUNT
%
AMOUNT
%
6(22) and 7(2)
$
36,690,383
100
$
35,398,690
100
6(6) and 7(2)
(
31,948,416 ) (
87) (
30,846,138) (
87 )
4,741,967
13
4,552,552
13
6(25)(26)
(
456,917 ) (
1) (
467,211) (
1 )
(
1,186,242 ) (
3) (
1,224,345) (
4 )
(
1,964,625 ) (
6) (
1,800,730) (
5 )
12(2)
3,740
-
12,854
-
(
3,604,044 ) (
10) (
3,479,432) (
10 )
1,137,923
3
1,073,120
3
136,805
-
66,266
-
6(23) and 7(2)
467,008
1
488,213
1
6(24)
(
40,545 )
-
318,148
1
(
100,497 )
-
(
105,635)
-
6(7)
284,801
1
208,914
1
747,572
2
975,906
3
1,885,495
5
2,049,026
6
6(27)
(
467,598 ) (
1) (
427,970) (
1 )
$
1,417,897
4
$
1,621,056
5
4000
Sales revenue
5000
Operating costs
5900
Net operating margin
Operating expenses
6100
Selling expenses
6200
General and administrative expenses
6300
Research and development expenses
6450
Expected credit impairment gain
6000
Total operating expenses
6900
Operating profit
Non-operating income and expenses
7100
Interest income
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of profit(loss) of associates and
joint ventures accounted for under equity
method
7000
Total non-operating income and
expenses
7900
Profit before income tax
7950
Income tax expense
8200
Profit for the year

(Continued)

-34-

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2023 AND 2022

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

Items YearendedDecember31
2023
2022
Notes
AMOUNT
%
AMOUNT
%
6(16)
( $
6,348 )
-
$
11,395
-
6(3)(21)
8,152
-
(
361,602) (
1 )
(
22 )
-
62
-
6(27)
485
-
(
1,310)
-
2,267
-
(
351,455) (
1 )
6(21)
(
118,368 ) (
1)
397,730
1
6(3)(21)
2,687
-
(
5,628)
-
6(7)(21)
(
94,837 )
-
83,321
-
6(27)
38,261
-
(
85,747)
-
(
172,257 ) (
1)
389,676
1
( $
169,990 ) (
1) $
38,221
-
$
1,247,907
3
$
1,659,277
5
$
1,320,318
4
$
1,455,398
4
97,579
-
165,658
1
$
1,417,897
4
$
1,621,056
5
$
1,170,680
3
$
1,445,320
4
77,227
-
213,957
1
$
1,247,907
3
$
1,659,277
5
6(28)
$
6.16
$
6.81
6(28)
$
5.49
$
6.07
Other comprehensive income
Components of other comprehensive
income that will not be reclassified to
profit or loss
8311
Other comprehensive income, before tax,
actuarial gains (losses) on defined benefit
plans
8316
Unrealized gains(losses) from
investments in equity instruments
measured at fair value through other
comprehensive income, net
8320
Share of other comprehensive income of
associates and joint ventures accounted
for using equity method, components of
other comprehensive income that will not
be reclassified to profit or loss
8349
Income tax related to components of
other comprehensive income that will not
be reclassified to profit or loss
8310
Components of other comprehensive
income (loss) that will not be
reclassified to profit or loss
Components of other comprehensive
income that will be reclassified to profit
or loss
8361
Financial statements translation
differences of foreign operations
8367
Unrealized gains (losses) from
investments in debt instruments
measured at fair value through other
comprehensive income, net
8370
Share of other comprehensive income of
associates and joint ventures accounted
for using equity method, components of
other comprehensive income that will be
reclassified to profit or loss
8399
Income tax relating to the components of
other comprehensive income
8360
Components of other comprehensive
income that will be reclassified to
profit or loss
8300
Total other comprehensive (loss) income
for the year
8500
Total comprehensive income for the year
Profit, attributable to:
8610
Owners of parent
8620
Non-controlling interest
Total Profit
Comprehensive income, attributable to:
8710
Owners of the parent
8720
Non-controlling interest
Total Comprehensive Income
Basic earnings per share
9750
Total basic earnings per share
Diluted earnings per share
9850
Total diluted earnings per share

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

-35-

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

Year 2022
Balance at January 1, 2022
Profit for the year
Other comprehensive income (loss) for the year
Total comprehensive income (loss)
Appropriation and distribution of 2021 retained earnings
Legal reserve
Special reserve
Cash dividends
Share-based payment
Recognition of change in equity of associates in
proportion to the Company's ownership
Acquisition of non-controlling interests in a subsidiary
Balance at December 31, 2022
Year 2023
Balance at January 1, 2023
Profit for the year
Other comprehensive loss for the year
Total comprehensive income (loss)
Appropriation and distribution of 2022 retained earnings
Legal reserve
Special reserve
Cash dividends
Convertible bonds converted into common shares
Share-based payment
Equity instruments at fair value through other
comprehensive income reclassified to investments
accounted for using equity method
Recognition of change in equity of associates in
proportion to the Company's ownership
Balance at December 31, 2023		 Notes Equitya Equitya ttributableto owners of the parent Non-controlling
interest		 Totalequity
Share capital - common
stock		 Capital surplus,
additionalpaid-incapital		 RetainedEarnings Financial statements
translation differences of
foreignoperations		 Total
Legal reserve Special reserve Total unappropriated
retained earnings
6(20)
6(17)
6(7)
6(20)
6(14)
6(17)
6(7)		 $
2,165,100
-
-
-
-
-
-
12,727
-
-
$
2,177,827
$
2,177,827
-
-
-
-
-
-
10
15,326
-
-
$
2,193,163		 $
4,646,623
-
-
-
-
-
-
57,551
16,692
-
$
4,720,866
$
4,720,866
-
-
-
-
-
-
90
125,063
-
26,955
$
4,872,974		 $
2,152,834
-
-
-
113,098
-
-
-
-
-
$
2,265,932
$
2,265,932
-
-
-
146,458
-
-
-
-
-
-
$
2,412,390		 $
269,144
-
-
-
-
479,786
-
-
-
-
$
748,930
$
748,930
-
-
-
-
19,256
-
-
-
-
-
$
768,186		 $
3,349,676
1,455,398
9,178
1,464,576
(
113,098 )
(
479,786 )
(
866,040 )
-
-
-
$
3,355,328
$
3,355,328
1,320,318
(
5,066 )
1,315,252
(
146,458 )
(
19,256 )
(
981,235 )
-
-
60,254
-
$
3,583,885		 ($
969,246 )
-
(
19,256 )
(
19,256 )
-
-
-
(
7,944 )
-
-
($
996,446 )
($
996,446 )
-
(
144,572 )
(
144,572 )
-
-
-
-
(
8,079 )
(
60,254 )
-
($
1,209,351 )		 $
11,614,131
1,455,398
(
10,078 )
1,445,320
-
-
(
866,040 )
62,334
16,692
-
$
12,272,437
$
12,272,437
1,320,318
(
149,638 )
1,170,680
-
-
(
981,235 )
100
132,310
-
26,955
$
12,621,247		 $
540,492
165,658
48,299
213,957
-
-
-
-
-
29,400
$
783,849
$
783,849
97,579
(
20,352 )
77,227
-
-
-
-
-
-
-
$
861,076		 $
12,154,623
1,621,056
38,221
1,659,277
-
-
(
866,040 )
62,334
16,692
29,400
$
13,056,286
$
13,056,286
1,417,897
(
169,990 )
1,247,907
-
-
(
981,235 )
100
132,310
-
26,955
$
13,482,323

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

-36-

MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation expense-property, plant and equipment

Depreciation expense - right-of-use assets

Amortization

Expected credit impairment (gain) loss

Impairment loss - non-financial assets

Finance costs
Interest expense - lease liability

Loss (gain) on financial assets or liabilities at fair
value through profit or loss
Share of profit of associates and joint ventures
accounted for using equity method

Compensation cost of share-based payment

Loss on disposal of property, plant and equipment

Loss on disposal of investments

Interest income
Dividend income

Deferred income of government's compensation
Unrealized exchange loss
Changes in operating assets and liabilities
Changes in operating assets
Increase in financial assets/liabilities mandatorily
measured at fair value through profit or loss
Accounts receivable (including related parties)
Other receivables (including related parties)
Inventories
Other current assets
Changes in operating liabilities
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Contract liabilities
Other current liabilities
Net defined benefit liability - non-current
Cash inflow generated from operations
Interest received
Dividend income
Interest paid
Income taxes paid
Net cash flows from operating activities		 Year ended December 31
Notes
2023
2022
$
1,885,495 $
2,049,026
6(8)(25)
560,412
507,804
6(9)(25)
120,710
107,114
6(10)(25)
142,490
148,859
12(2)
(
3,740 ) (
12,854 )
6(11)(24)
65,510
161,766
93,232
100,310
6(9)
7,265
5,325
(
13,435 )
7,885
6(7)
(
284,801 ) (
208,914 )
6(17)
132,310
62,334
6(24)
(
19,291 )
12,241
6(24)
(
16,500 )
-
(
136,805 ) (
66,266 )
6(23)
(
11,763 ) (
14,341 )
(
699 ) (
856 )
173,473
2,082
(
8,878 ) (
1,594 )
(
811,983 )
762,143
1,254
751,909
1,059,389
356,438
(
183,162 )
74,249
589,619 (
772,341 )
(
1,163,003 )
594,208
270,015
140,400
(
16,512 )
15,595
(
128,317 )
146,265
181,838 (
6,254 )
(
5,407 ) (
33,528 )
2,478,716
4,889,005
131,529
68,025
11,763
14,341
(
98,892 ) (
93,604 )
(
299,776 ) (
194,595 )
2,223,340
4,683,172

(Continued)

-37-

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

YEARS ENDED DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Increase in financial assets mandatorily measured at fair
value through profit or loss
Acquisition of financial assets at fair value through other
comprehensive income
Proceeds from disposal of financial assets at fair value
through other comprehensive income
Increase in financial assets at amortised cost - current
Decrease in financial assets at amortised cost - current
Increase in financial assets at amortised cost - non -
current
Decrease in financial assets at amortised cost - non -
current
Acquisition of investments accounted for using equity
method

Earnings repatriated by investments accounted for using
equity method

Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
Decrease in other non-current financial assets
Decrease in guarantee deposits paid
Net cash flows (used in) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings

Repayment of principal portion of lease liabilities

Increase in long-term borrowings

Decrease in long-term borrowings

Decrease in other non-current liabilities

Cash dividends paid

Change in non-controlling interests

Net cash flows used in financing activities
Effect of change in foreign currency exchange
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year		 Year ended December 31
Notes
2023
2022
($
172,480 ) ($
51,244 )
- (
444 )
161,125
-
(
362,886 ) (
31,570 )
30,450
889,421
(
318,630 ) (
318,694 )
-
212,077
6(7)
(
409,928 ) (
19,650 )
6(7)
213,003
-
6(29)
(
530,445 ) (
596,303 )
41,775
7,300
(
12,630 ) (
28,855 )
2,880
2,420
4,412
2,121
(
1,353,354 )
66,579
6(30)
(
986,313 ) (
1,569,848 )
6(30)
(
134,976 ) (
106,426 )
6(30)
539,459
71,965
6(30)
(
440,516 ) (
370,868 )
6(30)
(
13,583 ) (
3,569 )
6(30)
(
981,235 ) (
866,040 )
4(3)
-
29,400
(
2,017,164 ) (
2,815,386 )
(
249,368 )
146,934
(
1,396,546 )
2,081,299
6,923,268
4,841,969
$
5,526,722 $
6,923,268

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

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Attachment 5

Merry Electronics Co., Ltd. 2023 Profit Distribution Table

Merry Electronics Co., Ltd.
2023 Profit Distribution Table
Subject Amount (NTD)
Beginning retained earnings 2,208,379,211
add: 2023 net profit after tax 1,320,317,586
add: adjustments on re-measurement on define benefit plans
recognized in retained earnings
(5,065,488)
add: Proceeds from disposal of financial assets at fair value
through other comprehensive income
60,254,124
less: 10% legal reserve (137,550,622)
less: set aside or reversed special reserve (204,825,673)
Distributable net profit 3,241,509,138
Subject for distribution
less: cash bonus for shareholders (Note) (1,030,914,177)
Unappropriated retained earnings 2,210,594,961

Note: The order of surplus distribution is:

  1. The special surplus reserve reversed in the current year;

  2. The increase in distributable surplus in the current year other than 1.;

  3. The undistributed surplus at the beginning of the period.

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Attachment 6

Comparison of Amendments to the

Procedures for Acquisition and Disposal of Assets

Amendment Article Current Article Description
5. Operating Procedures
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 thesuperiors in
a hierarchical chain. If the
amountis less than NT$ 300
million, such transaction
shallbe properly approved in
accordance with regulation of
acquisition and disposal of
fixed assets in BM2-003
Regulations of Authorization
and Approval.If the amount
is NT$ 300 millionor more,
such transaction shall not be
commenced until it is
approved by the board of
directors.Such transaction
with related party shall be
executed in accordance with
Article【5.6.4.】		 5. Operating Procedures
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 thechairperson.If
the amountdoes not exceed
NT$ 300 million, such
transaction shallbe 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 by the board of
directors.		 1. Modify the
content refer to the
current process.
2. Modify the text as
appropriate.

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Amendment Article Amendment Article Current Article Description Description
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
amountis less than NT$ 300
million (inclusive), such
transaction shall be properly
approved in accordance with
BM2-003 Regulations of
Authorization and Approval.
If the amountisNT$ 300
millionor more, 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 amountdoes not exceed
NT$ 300 million (inclusive),
such transaction shall be
properly approved in
accordance withthe
authorization rules.If the
amountexceedsNT$ 300
million, such transaction shall
be submitted to the board of
directors for approval.		 1. Modify the
content refer to the
current process.
2. Modify the text as
appropriate.
5.7.1. If the Companyengages in
derivatives trading,itshall
pay strict attention to control
of the following important
risk management and
auditing matters, and
incorporate them into their
Procedures:		 5.7.1. The Company engaging in
derivatives trading shall pay
strict attention to control of
the following important risk
management
and
auditing
matters, and incorporate them
into their Procedures:		 Modify the text as
appropriate.
5.11.7. If the company does not
establish an audit
committee, the duties shall
be carried out by the
supervisor, supervisor(s), or
company secretary. If the
supervisor, supervisor(s), or
company secretary is not
authorized to exercise such
duties, the relevant
provisions do not apply. If
there is no audit committee,		 1.
2.		 New to the
“Procedures”.
Add this clause
according to the
current process.

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Amendment Article Current Article Description
supervisor, supervisor(s), or
company secretary
appointed, the relevant
provisions do not apply.
5.11.8. Unaddressed matters in this
procedure shall be handled
in accordance with the
commercial regulations of
the jurisdiction where the
company is located, as well
as the securities exchange
law, company law, and other
commercial regulations of
the ultimate parent
company's jurisdiction
within the group.		 1.
2.		 New to the
“Procedures”.
Add this clause
according to the
current process.
7. Reference
7.1 BM2-003 Regulations of
Authorization and Approval		 7. Reference 1.
2.		 New to the
“Procedures”.
Add this clause
according to the
current process.

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Attachment 7

Proposal of removal of the non-competition restrictions on the Directors (including independent director)

Title Name Current Position in other companies
Director Shande Investemnt Co., Ltd.
Corporate Representative：
Huang, Chao-Li		 <Director of Fulicare Co., Ltd.
<Director of Xiamen Etimbre Hearing Technology
Co., Ltd.
<Director of Fulicare Medical Technology
(Suzhou) Co., Ltd.
<Director of Austar Hearing Science & Technology
(Xiamen) Co., Ltd.
<Director of MerryFulingCo.,Ltd.
Independent
Director		 Sher, Jih-Hsin <Independent Director of Tainan Enterprises Co.,
Ltd.

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Appendix 1

Operation Procedures for the Acquisition or Disposal of Assets (Before Amendments)

1. Purpose

The Procedures are created according to the Article 6 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies (hereinafter referred to as these Regulations)

2. Scope

  • 2.1. The Company shall handle the acquisition or disposal of assets in compliance with these Regulations; provided, where financial laws or regulations provide otherwise, such provisions shall govern.

  • Responsibilities & Authority

  • 3.1. Financial Division: The organizer for the formulation, modification and abolition of these Procedures.

  • 3.2. Other units: Coordination department for these Procedures.

4. Terms and Definitions

  • 4.1. Derivatives: Forward contracts, options contracts, futures contracts, leverage contracts, or swap contracts, whose value is derived from a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable; or hybrid contracts combining the above contracts; or hybrid contracts or structured products containing embedded derivatives. The term "forward contracts" does not include insurance contracts, performance contracts, after-sales service contracts, long-term leasing contracts, or long-term purchase (sales) contracts.

  • 4.2. Assets acquired or disposed through mergers, demergers, acquisitions, or transfer of shares in accordance with law: Refers to assets acquired or disposed through mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or to transfer of shares from another company through issuance of new shares of its own as the consideration therefor (hereinafter "transfer of shares") under Article 156-3 of the Company Act.

  • 4.3. Related party: As defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

  • 4.4. Subsidiary: As defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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  • 4.5. Professional appraiser: Refers to a real property appraiser or other person duly authorized by law to engage in the value appraisal of real property or equipment.

  • 4.6. Date of occurrence: Refers to the date of contract signing, date of payment, date of consignment trade, date of transfer, dates of boards of directors resolutions, or other date that can confirm the counterpart and monetary amount of the transaction, whichever date is earlier; provided, for investment for which approval of the competent authority is required, the earlier of the above date or the date of receipt of approval by the competent authority shall apply.

  • 4.7. Mainland China area investment: Refers to investments in the mainland China area approved by the Ministry of Economic Affairs Investment Commission or conducted in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area.

  • 4.8. Investment professional: Refers to financial holding companies, banks, insurance companies, bill finance companies, trust enterprises, securities firms operating proprietary trading or underwriting business, futures commission merchants operating proprietary trading business, securities investment trust enterprises, securities investment consulting enterprises, and fund management companies, that are lawfully incorporated and are regulated by the competent financial authorities of the jurisdiction where they are located.

  • 4.9. Securities exchange: "Domestic securities exchange" refers to the Taiwan Stock Exchange Corporation; "foreign securities exchange" refers to any organized securities exchange market that is regulated by the competent securities authorities of the jurisdiction where it is located.

  • 4.10. Over-the-counter venue ("OTC venue", "OTC"): "Domestic OTC venue" refers to a venue for OTC trading provided by a securities firm in accordance with the Regulations Governing Securities Trading on the Taipei Exchange; "foreign OTC venue" refers to a venue at a financial institution that is regulated by the foreign competent authority and that is permitted to conduct securities business.

  • Operating Procedures

  • 5.1. The term "assets" includes the following:

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

    • 5.1.2. Real property (including land, houses and buildings, investment property, and construction enterprise inventory) and equipment.

    • 5.1.3. Memberships.

    • 5.1.4. Patents, copyrights, trademarks, franchise rights, and other intangible assets.

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  • 5.1.5. Right-of-use assets.

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

  • 5.1.7. Derivatives.

  • 5.1.8. Assets acquired or disposed of in connection with mergers, demergers, acquisitions, or transfer of shares in accordance with law.

  • 5.1.9. Other major assets.

  • 5.2. Evaluation procedures:

  • 5.2.1. In acquiring or disposing of real property, equipment, or right-of-use assets thereof where the transaction amount reaches 20 percent of the company's paid-in capital or NT$300 million or more, the company, unless transacting with a domestic government agency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment or right-of-use assets thereof held for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions:

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

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

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

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

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

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  • (4). No more than 3 months may elapse between the date of the appraisal report issued by a professional appraiser and the contract execution date; provided, where the publicly announced current value for the same period is used and not more than 6 months have elapsed, an opinion may still be issued by the original professional appraiser.

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

  • 5.2.3. Where the Company acquires or disposes of intangible assets or right-of-use assets thereof or memberships and the transaction amount reaches 20 percent or more of paid-in capital or NT$300 million or more, except in transactions with a domestic government agency, the Company shall engage a certified public accountant prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the CPA shall comply with the provisions of Statement of Auditing Standards No. 20 published by the ARDF.

  • 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.

  • 5.2.5. Professional appraisers and their officers, certified public accounts, attorneys, and securities underwriters that provide the Company with appraisal reports, certified public accountant's opinions, attorney's opinions, or underwriter's opinions shall meet the following requirements:

  • (1). May not have previously received a final and unappealable sentence to imprisonment for 1 year or longer for a violation of Securities and Exchange Act, the Company Act, the Banking Act of The Republic of China, the Insurance Act, the Financial Holding Company Act, or the Business Entity Accounting Act, or for fraud, breach of trust, embezzlement, forgery of documents, or occupational

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crime. However, this provision does not apply if 3 years have already passed since completion of service of the sentence, since expiration of the period of a suspended sentence, or since a pardon was received. 

  - (2). May not be a related party or de facto related party of any party to the transaction.

  - (3). If the company is required to obtain appraisal reports from two or more professional appraisers, the different professional appraisers or appraisal officers may not be related parties or de facto related parties of each other.

  • 5.2.6. When issuing an appraisal report or opinion, the personnel referred to in the provision of【5.2.5.】shall comply with the following:

    • (1). Prior to accepting a case, they shall prudently assess their own professional capabilities, practical experience, and independence.

    • (2). When examining a case, they shall appropriately plan and execute adequate working procedures, in order to produce a conclusion and use the conclusion as the basis for issuing the report or opinion. The related working procedures, data collected, and conclusion shall be fully and accurately specified in the case working papers.

    • (3). They shall undertake an item-by-item evaluation of the comprehensiveness, accuracy, and reasonableness of the sources of data used, the parameters, and the information, as the basis for issuance of the appraisal report or the opinion.

    • (4). They shall issue a statement attesting to the professional competence and independence of the personnel who prepared the report or opinion, and that they have evaluated and found that the information used is reasonable and accurate, and that they have complied with applicable laws and regulations.

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

  • 5.3. Operating procedures:

  • 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$ 300 million, 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 by the board of directors.

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  • 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.

  • 5.3.3. With respect to the Company's acquisition or disposal of assets that is subject to the approval of the board of directors under the procedures or other laws or regulations, if a director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the director's dissenting opinion to audit committee.

  • 5.3.4. Where the Audit Committee has been established in accordance with the provisions of the Securities and Exchange Act, any transaction involving major assets or derivatives shall be approved by more than half of all audit committee members and submitted to the board of directors for a resolution, and shall be subject to mutatis mutandis application of Article 【5.11.5.】and【5.11.6.】

  • 5.4. Procedure for public announcement

  • 5.4.1. Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the FSC's designated website in the appropriate format as prescribed by regulations within 2 days counting inclusively from the date of occurrence of the event:

    • (1). Acquisition or disposal of real property or right-of-use assets thereof from or to a related party, or acquisition or disposal of assets other than real property or rightof-use assets thereof from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more; provided, this shall not apply to trading of domestic government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises.

    • (2). Merger, demerger, acquisition, or transfer of shares.

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

    • (4). Where equipment or right-of-use assets thereof for business use are acquired or disposed of, and furthermore the transaction counterparty is not a related party, and the transaction amount meets any of the following criteria:

      • (a). For a public company whose paid-in capital is less than NT$10 billion, the transaction amount reaches NT$500 million or more.

      • (b). For a public company whose paid-in capital is NT$10 billion or more, the transaction amount reaches NT$1 billion or more.

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  • (5). Acquisition or disposal by a public company in the construction business of real property or right-of-use assets thereof for construction use, and furthermore the transaction counterparty is not a related party, and the transaction amount reaches NT$500 million; among such cases, if the public company has paid-in capital of NT$10 billion or more, and it is disposing of real property from a completed construction project that it constructed itself, and furthermore the transaction counterparty is not a related party, then the threshold shall be a transaction amount reaching NT$1 billion or more.

  • (6). Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and furthermore the transaction counterparty is not a related party, and the amount the company expects to invest in the transaction reaches NT$500 million.

  • (7). Where an asset transaction other than any of those referred to in the Article 【5.4.1.(1).】to Article【5.4.1.(6).】, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances:

    • (a). Trading of domestic government bonds.

    • (b). Where done by professional investors-securities trading on securities exchanges or OTC markets, or subscription of ordinary corporate bonds or general bank debentures without equity characteristics (excluding subordinated debt) that are offered and issued in the primary market, or subscription or redemption of securities investment trust funds or futures trust funds, or subscription by a securities firm of securities as necessitated by its undertaking business or as an advisory recommending securities firm for an emerging stock company, in accordance with the rules of the Taipei Exchange.

    • (c). Trading of bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises.

  • 5.4.2. The amount of transactions as the provisions of 【5.4.1.】 shall be calculated as follows:

  • (1). The amount of any individual transaction.

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

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  • (3). The cumulative transaction amount of acquisitions and disposals (cumulative acquisitions and disposals, respectively) of real property or right-of-use assets thereof within the same development project within the preceding year.

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

  • 5.4.3. "Within the preceding year" as used in the Article 【5.4.2.】 refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with these Regulations need not be counted toward the transaction amount.

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

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

  • 5.4.6. A public company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, log books, appraisal reports and CPA, attorney, and securities underwriter opinions at the Company, where they shall be retained for 5 years except where another act provides otherwise.

  • 5.4.7. Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the Article 【5.4.1.】to【5.4.6.】, a public report of relevant information shall be made on the information reporting website designated by the FSC within 2 days counting inclusively from the date of occurrence of the event:

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

  • (2). Merger, demerger, acquisition, or transfer of shares is not completed by the scheduled date set forth in the contract.

  • (3). Change to the originally publicly announced and reported information.

  • 5.4.8. Information required to be publicly announced and reported in accordance with the provisions of 【5.4.1.】to【5.4.7.】 on acquisitions and disposals of assets by the Company's subsidiary that is not itself a public company in Taiwan shall be reported by the Company.

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  • 5.4.9. The paid-in capital or total assets of the Company shall be the standard applicable to a subsidiary referred to in the Article【5.4.8.】 in determining whether, relative to paid-in capital or total assets, it reaches a threshold requiring public announcement and regulatory filing under Article 【5.4.1.】

  • 5.5. Total amounts of real property and right-of-use assets thereof or securities acquired by the company and each subsidiary for business use, and limits on individual securities:

  • 5.5.1. For investment in real property and right-of-use assets thereof not for business use, the total investment amount shall not exceed 50 percent of the assets.

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

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

  • 5.6. Relative Party Transactions:

  • 5.6.1. When the Company engages in any acquisition or disposal of assets from or to a related party, in addition to ensuring that the necessary resolutions are adopted and the reasonableness of the transaction terms is appraised, if the transaction amount reaches 10 percent or more of the Company 's total assets, the Company shall also obtain an appraisal report from a professional appraiser or a CPA's opinion in compliance with the provisions of the Article【5.2.】

  • 5.6.2. The calculation of the transaction amount referred to in the Article【5.6.1.】 shall be made in accordance with Article 【5.2.4.】

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

  • 5.6.4. When the Company intends to acquire or dispose of real property or right-of-use assets thereof from or to a related party, or when it intends to acquire or dispose of assets other than real property or right-of-use assets thereof from or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more, except in trading of domestic government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises, the company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by more than half of all audit committee members and the board of directors:

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

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

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  • (3).With respect to the acquisition of real property or right-of-use assets thereof from a related party, information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article 【5.6.3.】and【5.6.4.】.

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

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

  • (6). An appraisal report from a professional appraiser or a CPA's opinion obtained in compliance with Article【5.6.3.】.

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

  • 5.6.5. The calculation of the transaction amounts referred to in Article【5.6.4.】and 【5.6.17.】 shall be made in accordance with Article 【5.4.2.】 herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by more than half of all audit committee members and the board of directors need not be counted toward the transaction amount.

  • 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:

  • (1).Acquisition or disposal of equipment or right-of-use assets thereof held for business use.

  • (2).Acquisition or disposal of real property right-of-use assets held for business use.

  • 5.6.7. Where an audit committee has been established in accordance with the provisions of the Securities and Exchange Act shall be subject to mutatis mutandis application of Article【5.11.5.】and 【5.11.6.】

  • 5.6.8. The Company that acquires real property or right-of-use assets thereof from a related party shall evaluate the reasonableness of the transaction costs by the following means:

  • (1). Based upon the related party's transaction price plus necessary interest on funding and the costs to be duly borne by the buyer. "Necessary interest on funding" is imputed as the weighted average interest rate on borrowing in the year the company purchases the property; provided, it may not be higher than the

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maximum non-financial industry lending rate announced by the Ministry of Finance.

  • (2). Total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided, the actual cumulative amount loaned by the financial institution shall have been 70 percent or more of the financial institution's appraised loan value of the property and the period of the loan shall have been 1 year or more. However, this shall not apply where the financial institution is a related party of one of the transaction counterparties.

  • 5.6.9. Where land and structures thereupon are combined as a single property purchased or leased in one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in the Article 【5.6.8.】.

  • 5.6.10. The Company that acquires real property or right-of-use assets thereof from a related party and appraises the cost of the real property or right-of-use assets thereof in accordance with Article 【5.6.8.】 and 【5.6.9.】 shall also engage a CPA to check the appraisal and render a specific opinion.

  • 5.6.11. Where the Company acquires real property or right-of-use assets thereof from a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with Article 【5.6.4.】 to Article 【5.6.7.】, and Article 【5.6.8.】 to Article 【5.6.10.】 do not apply:

  • (1). The related party acquired the real property or right-of-use assets thereof through inheritance or as a gift.

  • (2). More than 5 years will have elapsed from the time the related party signed the contract to obtain the real property or right-of-use assets thereof to the signing date for the current transaction.

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

  • (4). The real property right-of-use assets for business use are acquired by the Company with its parent or subsidiaries, or by its subsidiaries in which it directly or indirectly holds 100 percent of the issued shares or authorized capital.

  • 5.6.12. When the results of the Company 's appraisal conducted in accordance with Article 【5.6.8.】 and 【5.6.9.】 are uniformly lower than the transaction price, the matter shall be handled in compliance with Article 【5.6.14. 】. However, where the following circumstances exist, objective evidence has been submitted and specific

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opinions on reasonableness have been obtained from a professional real property appraiser and a CPA has been obtained, this restriction shall not apply:

  • (1). Where the related party acquired undeveloped land or leased land for development, it may submit proof of compliance with one of the following conditions:

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

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

  • (2). Where the Company acquiring real property, or obtaining real property right-ofuse assets through leasing, from a related party provides evidence that the terms of the transaction are similar to the terms of completed transactions involving neighboring or closely valued parcels of land of a similar size by unrelated parties within the preceding year.

  • 5.6.13. Completed transactions involving neighboring or closely valued parcels of land in the Article【5.6.12.】in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transactions involving similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property or obtainment of the right-of-use assets thereof.

  • 5.6.14. Where the Company acquires real property or right-of-use assets thereof from a related party and the results of appraisals conducted in accordance with Article 【5.6.8.】to【5.6.13.】are uniformly lower than the transaction price, the following steps shall be taken:

  • (1). A special reserve shall be set aside in accordance with Article 41, paragraph 1 of the Act against the difference between the real property transaction price and the

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appraised cost, and may not be distributed or used for capital increase or issuance of bonus shares. Where the Company uses the equity method to account for its investment in another company, then the special reserve called for under Article 41, paragraph of the Securities Exchange Act shall be set aside pro rata in a proportion consistent with the share of the Company's equity stake in the other company. 

  - (2). The independent director as members of the audit committee shall comply with Article 218 of the Company Act.

  - (3). Actions taken pursuant to Article 【5.6.14.(1).】 and 【5.6.14.(2).】 shall be reported to a shareholders meeting, and the details of the transaction shall be disclosed in the annual report and any investment prospectus.

  • 5.6.15. The Company that has set aside a special reserve under the preceding paragraph may not utilize the special reserve until it has recognized a loss on decline in market value of the assets it purchased or leased at a premium, or they have been disposed of, or the leasing contract has been terminated, or adequate compensation has been made, or the status quo ante has been restored, or there is other evidence confirming that there was nothing unreasonable about the transaction, and the FSC has given its consent.

  • 5.6.16. When the Company obtains real property or right-of-use assets thereof from a related party, it shall also comply with Article 【5.6.14.】and【5.6.15.】 if there is other evidence indicating that the acquisition was not an arm’s length transaction.

  • 5.6.17. If the company or its subsidiaries that are not domestic public companies have transactions in [5.6.4.] and the transaction amount reaches more than 10% of the company’s total assets, the company shall transfer [5.6.4.] Only after all the information is listed and submitted to the shareholders' meeting for approval can the transaction contract be signed and payment made. However, this does not apply to transactions between the company and its parent company, subsidiaries, or its subsidiaries.

  • 5.7. Operation Procedures of engaging in Derivatives Trading:

  • 5.7.1. The Company engaging in derivatives trading shall pay strict attention to control of the following important risk management and auditing matters, and incorporate them into their Procedures:

    • (1). Trading principles and strategies:

      • (a). Trading types:

Derivatives, the Company shall engage in , as the provisions of【4.1.】.

(b). Operating or hedging strategies:

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The Company shall engage in derivatives transaction for the purpose of hedging and shall choose the transaction products to hedge the risks generate from the operation of the Company's business. The currencies held by the Company shall meet the demand of the Company for foreign currencies in import and export transactions. Transaction for other specific purpose shall be carefully assessed and shall not commence until it has been submitted to the board of directors for approval.

(c). Segregation of duties:

personnel Content
Trading
personnel		 Responsible to propose the strategy and execute transaction on
financialproducts
Accountant Responsible to handle accounting and books and to conduct
report and announcement according to the requirements of the
FSC.
Settlement
personnel		 To execute settlements.
Internal
Auditor		 Responsible to evaluate the suitability of the internal control
system in connection with financial derivative transactions, to
conduct auditing on how well the related departments follow the
Procedures, and to produce report with trading cycle analysis.
Should there be any violation found, a written report is needed
to notifythe board of directors.

The authorization to approve transaction:

Total
amount
of
the
contract		 Hedging transaction Non-hedging
transaction
Chief Financial Officer US$2MM and above -
Managerial personnel in
accordance with the article		 US$10 MM and above US$1MM and above
Board of directors US$10 MM and above US$1MM and above
Note: The above mentioned amount shall not include the purchase and sale of
the contracts with the same tenor and same amount on the same day.

(d). Essentials of performance evaluation:

Hedging
transaction		 Take the profits and losses generated between the cost of
foreign exchange rate from the Company's books and the
transaction of derivatives as the basis for performance
assessment. In order to fullycontrol and express the

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transaction risks assessed, the Company will assess
profits and losses based on the monthlybalance.
Transaction
for
specific purposes		 It shall take the actual profits and losses as the basis to
assess performance and the financial division shall
compile the positions into a statement on a regular basis
for the management's reference.

(e). Total amount of derivatives contracts that may be traded:

Hedging
transaction		 The financial division shall control the total positions of
the Company in order to hedge transaction risks. The
amount of hedging transaction shall not exceed the
Company's total exposure, where exceeded, it shall be
reported to the managerial personnel in accordance with
the article for approval.
Transaction
for
specific purposes		 Based on the assessment on the market change, the
financial division may propose strategy when needed and
submit to the managerial personnel in accordance with the
article for approval and execution. The total amount of the
contracts of the net accumulated positions the Company
holds for transaction for specific purposes shall not
exceed US$10 million. Once the total amount exceeds
US$10 million, it shall not be executed until it is approved
by the board of directors and executed in accordance with
policyinstruction.

(f). Limits on aggregate losses or losses on individual contracts

Hedging
transaction		 Limits on aggregate losses or losses on individual
contracts shall not exceed 50% of the contract.
Transaction
contract for
specific purposes		 When the position is held by the Company, it is required
to set the stop loss point to avoid excess of loss.
The setting of stop loss point shall not excess of 10% of
the total transaction contract amount. If the loss amount
exceeds 10% of the transaction amount, it shall be
reported to the managerial personnel in accordance with
the article immediately and reported to the board of
directors to discuss the necessarymeasures to deal with it.
The loss amount of individual contract shall not exceed
US$20,000 or 5% of the transaction contract amount,
whichever is lower.

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

  • (2). Risk management measures:

  • (a). Management of credit risk:

Counterparties The Company shall mainly deal with reputational local or
foreign financial institutions.
Transaction
products		 The Company shall only transact the products provided by
reputational local or foreign financial institutions
Transaction
amount		 Hedging shall be centralized to deal with a single
counterparty, unless such transaction is approved by the
general manager.

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

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

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

(e). Management of operational risk:

Items Content
1 It is required to strictly follow the Company's authorized quota and
operational procedures, which shall be adopted into the internal audit
to avoid operational risk.
2 The trading personnel for derivative products shall not concurrently
act as the operational personnel such as the persons handling
confirmation or settlement.
3 The personnel of risk assessment, supervision and control shall belong
to departments other than the department of personnel mentioned in
the preceding paragraph and shall report to the board of directors or to

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the high-level managers not responsible for decision making of transactions or positions. 

  - (f). Management of product risk: The internal trading personnel shall equip with complete and correct professional knowledge of the financial products and shall request banks to fully disclose risks to avoid the risk of misuse of financial products.

  - (g). Management of legal risk: The documents to be executed with financial institutions shall not be executed unless they have been reviewed by legal department or legal counsels to avoid legal risk.

  • (3).Internal audit system:

    • (a). The internal audit personnel shall periodically make a determination of the suitability of internal controls on derivatives and conduct a monthly audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, and prepare an audit report. If any material violation is discovered, the audit committee shall be notified in writing.

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

  • (4). Regular evaluation methods and the handling of irregular circumstances：

    • (a). The board of directors shall authorize senior management personnel to periodically monitor and evaluate whether the derivatives trades are faithfully conducted in accordance with the trading procedure stipulated by the Company and whether the risk undertaken is within the Company's permitted scope of tolerance. Where the irregular circumstance is found in the evaluation report of market price (such as the holding position has exceeded the upper limit of the loss), a report shall be immediately made to the board of directors and the corresponding measures shall be adopted.

    • (b). The holding position of derivatives trades shall be evaluated at least once per week. If the hedging transaction was made in consideration of business necessity, the evaluation shall be made at least twice per month.

  • 5.7.2. The company engaged in derivative transactions, the following risk management should be implemented:

  • (1).The scope of risk management should include 【5.7.1.(2).(a).】 to【5.7.1.(2).(g).】.

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  - (2). The trading personnel for derivative products shall not concurrently act as the operational personnel such as the persons handling confirmation or settlement.

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

  - (4). The holding position of derivatives trades shall be evaluated at least once per week. If the hedging transaction was made in consideration of business necessity, the evaluation shall be made at least twice per month.

  - (5). Other important risk management measures.

  • 5.7.3. The Company engaging in derivatives trading, its board of directors shall faithfully supervise and manage such trading in accordance with the following principles:

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

    • (2). Periodically evaluate whether derivatives trading performance is consistent with established operational strategy and whether the risk undertaken is within the Company's permitted scope of tolerance.

  • 5.7.4. Senior management personnel authorized by the board of directors shall manage derivatives trading in accordance with the following principles:

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

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

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

  • 5.7.6. The Company engaging in derivatives trading shall establish a log book in which details of the types and amounts of derivatives trading engaged in, board of directors approval dates, and the matters required to be carefully evaluated under Article 【5.7.2.(4).】, 【5.7.3.(2).】 and 【5.7.4.(1).】 shall be recorded in detail in the log book.

  • 5.8. Mergers and Consolidations, Demergers, Acquisitions, and Assignment of Shares：

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  • 5.8.1. The Company that conducts a merger, demerger, acquisition, or transfer of shares, prior to convening the board of directors to resolve on the matter, shall engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and submit it to the board of directors for deliberation and passage. However, the requirement of obtaining an aforesaid opinion on reasonableness issued by an expert may be exempted in the case of a merger by The Company of a subsidiary in which it directly or indirectly holds 100 percent of the issued shares or authorized capital, and in the case of a merger between subsidiaries in which the public company directly or indirectly holds 100 percent of the respective subsidiaries' issued shares or authorized capital.

  • 5.8.2. The Company participating in a merger, demerger, acquisition, or transfer of shares shall prepare a public report to shareholders detailing important contractual content and matters relevant to the merger, demerger, or acquisition prior to the shareholders meeting and include it along with the expert opinion referred to provisions of【5.8.1.】 when sending shareholders notification of the shareholders meeting for reference in deciding whether to approve the merger, demerger, or acquisition. Provided, where a provision of another act exempts a company from convening a shareholders meeting to approve the merger, demerger, or acquisition, this restriction shall not apply.

  • 5.8.3. Where the shareholders meeting of any one of the companies participating in a merger, demerger, or acquisition fails to convene or pass a resolution due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is rejected by the shareholders meeting, the companies participating in the merger, demerger or acquisition shall immediately publicly explain the reason, the follow-up measures, and the preliminary date of the next shareholders meeting.

  • 5.8.4. A company participating in a merger, demerger, or acquisition shall convene a board of directors meeting and shareholders meeting on the day of the transaction to resolve matters relevant to the merger, demerger, or acquisition, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent.

  • 5.8.5. A company participating in a transfer of shares shall call a board of directors meeting on the day of the transaction, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent.

  • 5.8.6. When participating in a merger, demerger, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall prepare a full written record of the following information and retain it for 5 years for reference:

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

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

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

  • 5.8.7. When participating in a merger, demerger, acquisition, or transfer of another company's shares that is listed on an exchange or has its shares traded on an OTC market shall, within 2 days counting inclusively from the date of passage of a resolution by the board of directors, report in the prescribed format and via the Internet-based information set out in 【5.8.6.(1).】and【5.8.6.(2).】.

  • 5.8.8. Where any of the companies participating in a merger, demerger, acquisition, or transfer of another company's shares is neither listed on an exchange nor has its shares traded on an OTC market, the company(s) so listed or traded shall sign an agreement with such company whereby the latter is required to abide by the provisions of Article 【5.8.6.】and【5.8.7.】

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

  • 5.8.10. The Company participating in a merger, demerger, acquisition, or transfer of shares may not arbitrarily alter the share exchange ratio or acquisition price unless under the below-listed circumstances, and shall stipulate the circumstances permitting alteration in the contract for the merger, demerger, acquisition, or transfer of shares: (1). Cash capital increase, issuance of convertible corporate bonds, or the issuance of bonus shares, issuance of corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity based securities.

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

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  • (3). An event, such as a major disaster or major change in technology, that affects shareholder equity or share price.

  • (4). An adjustment where any of the companies participating in the merger, demerger, acquisition, or transfer of shares from another company, buys back treasury stock.

  • (5). An increase or decrease in the number of entities or companies participating in the merger, demerger, acquisition, or transfer of shares.

  • (6). Other terms/conditions that the contract stipulates may be altered and that have been publicly disclosed.

  • 5.8.11. The contract for participation by a public company in a merger, demerger, acquisition, or of shares shall record the rights and obligations of the companies participating in the merger, demerger, acquisition, or transfer of shares, and shall also record the following:

  • (1). Handling of breach of contract.

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

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

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

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

  • (6). Scheduled date for convening the legally mandated shareholders meeting if the plan exceeds the deadline without completion, and relevant procedures.

  • 5.8.12. After public disclosure of the information, if any company participating in the merger, demerger, acquisition, or share transfer intends further to carry out a merger, demerger, acquisition, or share transfer with another company, all of the participating companies shall carry out anew the procedures or legal actions that had originally been completed toward the merger, demerger, acquisition, or share transfer; except that where the number of participating companies is decreased and a participating company's shareholders meeting has adopted a resolution authorizing the board of directors to alter the limits of authority, such participating company may be exempted from calling another shareholders meeting to resolve on the matter anew.

  • 5.8.13. Where any of the companies participating in a merger, demerger, acquisition, or transfer of shares is not a public company, the Company shall sign an agreement with

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the non-public company whereby the latter is required to abide by the provisions of 【5.8.4.】 to 【5.8.9.】 and 【5.8.12.】.

  • 5.9. Control procedures for the acquisition and disposal of assets by subsidiaries.

  • 5.9.1. The Company shall urge its subsidiaries to prescribe and enforce procedures for the disposal of assets in accordance with the provisions of these Regulations.

  • 5.10. Penalties for personnel violating these Regulations or the procedures for the acquisition or disposal of assets.：

  • 5.10.1. Managers and persons-in-charge whose violate this operating procedure shall compensate the company for the damage suffered as a result.

  • 5.11. Other important matters:

  • 5.11.1. For the calculation of 10 percent of total assets under these Regulations, the total assets stated in the most recent parent company only financial report or individual financial report prepared under the Regulations Governing the Preparation of Financial Reports by Securities Issuers shall be used.

  • 5.11.2. In the case of a company whose shares have no par value or a par value other than NT$10-for the calculation of transaction amounts of 20 percent of paid-in capital under these Regulations, 10 percent of equity attributable to owners of the parent shall be substituted; for calculations under the provisions of these Regulations regarding transaction amounts relative to paid-in capital of NT$10 billion, NT$20 billion of equity attributable to owners of the parent shall be substituted.

  • 5.11.3. The Company shall establish its procedures for the acquisition or disposal of assets in accordance with the provisions of these Regulations. After the procedures have been approved by the board of directors, it shall be submitted to audit committee, and then to a shareholders' meeting for approval; the same applies when the procedures are amended. If any director expresses dissent and it is contained in the minutes or a written statement, the Company shall submit the director's dissenting opinion to audit committee.

  • 5.11.4. Where an audit committee has been established in accordance with the provisions of the Securities and Exchange Act, when the Procedures are adopted or amended they shall be approved by more than half of all audit committee members and submitted to the board of directors for a resolution.

  • 5.11.5. If approval of more than half of all audit committee members as required in Article 【5.11.4.】 is not obtained, the procedures may be implemented if approved by more than two-thirds of all directors, and the resolution of the audit committee shall be recorded in the minutes of the board of directors meeting.

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  • 5.11.6. The terms "all audit committee members" in Article 【5.11.4.】 and "all directors" in Article 【5.11.5.】 shall be counted as the actual number of persons currently holding those positions.

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Appendix 2

Rules of Procedure for Shareholders Meetings

  1. Purpose

To establish a strong governance system and sound supervisory capabilities for this Company's shareholders meetings, and to strengthen management capabilities, these Rules are adopted pursuant to Article 5 of the “BM0-006 Corporate Governance Best-Practice Principles”.

  1. Scope

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

  1. Responsibilities & Authorities

  2. 3.1. Financial Division: The sponsoring unit that formulates modifies or abolishes this specification.

  3. 3.2. Other units: Coordination unit for this specification.

  4. Terms and Definitions: Nil.

  5. Operational Procedures:

  6. 5.1. Convening shareholders meetings and shareholders meeting notices

    • 5.1.1. Unless otherwise provided by law or regulation, this Company's shareholders meetings shall be convened by the board of directors. The company shall hold a video conference of the shareholders' meeting, unless otherwise stipulated in the stock affairs handling guidelines of companies offering shares to the public, which shall be specified in the articles of association and shall be resolved by the board of directors. A resolution approved by more than half of the directors shall be implemented. The change to convene a shareholders' meeting shall be resolved by the Board of Directors and no later than the notice of the meeting of shareholders' is sent.

    • 5.1.2. This Company shall prepare electronic versions of the shareholders meeting notice and proxy forms, and the origins of and explanatory materials relating to all proposals, including proposals for ratification, matters for deliberation, or the election or dismissal of directors or supervisors, and upload them to the Market Observation Post System (MOPS) before 30 days before the date of a regular shareholders meeting or before 15 days before the date of a special shareholders meeting. This Company shall prepare electronic versions of the shareholders meeting agenda and supplemental meeting materials and upload them to the MOPS before 21 days before the date of the

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regular shareholders meeting or before 15 days before the date of the special shareholders meeting. However, if the Company's paid-up capital at the end of the most recent fiscal year reaches NT$10 billion or more, or the total Investors of foreign and Mainland Chinese shareholding ratios recorded in its shareholders' book at the ordinary meeting of shareholders in the most recent fiscal year reaches more than 30%, the transmission of electronic files shall be completed before the General meeting of shareholders is completed 30 days ago. In addition, before 15 days before the date of the shareholders meeting, this Company shall also have prepared the shareholders meeting agenda and supplemental meeting materials and made them available for review by shareholders at any time. The meeting agenda and supplemental materials shall also be displayed at this Company and the professional shareholder services agent designated.

The Handbook and Supplementary Information for the Meeting shall be provided to shareholders for reference by the Company on the day of the meeting of shareholders in the followings:

  • (1). When the physical shareholders' meeting is convened, it shall be issued at the shareholders' meeting.

  • (2). When a video-assisted shareholders' meeting is held, it shall be distributed Onsite of the shareholders' meeting and transmitted to the video conference platform by electronic files.

  • (3). When a video shareholders' meeting is held, the electronic file shall be uploaded to the video conference platform.

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

  • 5.1.4. Matters pertaining to election or discharge of directors, alteration of the Articles of Incorporation, reduction of capital, application for the approval of ceasing its status as a public company, approval of competing with the company by directors, surplus profit distributed in the form of new shares, reserve distributed in the form of new shares, dissolution, merger, spin-off, or any matters as set forth in Paragraph I, Article 185, 26-1 and 43-6 of the Securities Exchange Law, Articles 56-1 and 60-2 of the Guidelines for the Handling of Securities Offering and Issuance by Issuers, hereof shall be itemized in the causes or subjects to be described and the essential contents shall be explained in the notice to convene a meeting of shareholders, and shall not be brought up as extemporary motions.

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  • 5.1.5. The convening of the shareholders' meeting has stated the full re-election of directors and the date of appointment. After the election of the shareholders' meeting is completed, the same meeting shall not change its appointment date by temporary motion or other means.

  • 5.1.6 A shareholder holding 1 percent or more of the total number of issued shares may propose a proposal to Company for discussion at a regular shareholders meeting. Such proposals, however, are limited to one item only, and no proposal containing more than one item will be included in the meeting agenda. In addition, if the proposal of the shareholder has one of the circumstances of the paragraphs of Item 4 of Article 172-1 of the Company Act, the board of directors may not be listed as a proposal. Shareholders may put forward a proposal to urge the company to promote the public interest or fulfill its social responsibilities, and the procedure shall be limited to one item in accordance with the relevant provisions of Article 172-1 of the Company Law, and if there is more than one proposal, it shall not be included in the proposal.

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

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

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

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

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

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

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the previous proxy appointment.

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

  • 5.2.4. After proxy is delivered to the Company, the shareholder who wishes to attend the shareholders' meeting by video shall notify the company in writing to revoke the proxy two days before the meeting of the shareholders' meeting; In the event of revocation after the time limit, the voting rights of the proxy representative shall be present and exercised.

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

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

  • 5.3.2. When the Company convenes a video shareholders' meeting, it shall not be subject to the restrictions on the place of convening in the preceding paragraph.

  • 5.4. Preparation of documents such as the attendance book and matters to be included in the notice of convocation of the video meeting of the shareholders' meeting

  • 5.4.1. The Company shall specify in its shareholders meeting notices the time during which shareholder, solicitors, and trustees (hereinafter referred to as the shareholders) attendance registrations will be accepted, the place to register for attendance and other matters for attention.

  • 5.4.2. In 【5.4.1.】 the time during which shareholder attendance registrations will be accepted, as stated in the preceding paragraph, shall be at least 30 minutes prior to the time the meeting commences. The place at which attendance registrations are accepted shall be clearly marked and a sufficient number of suitable personnel assigned to handle the registrations; The video meeting of the shareholders' meeting shall be accepted and registered on the video meeting platform of the shareholders' meeting 30 minutes before the start of the meeting, and the shareholders who complete the registration shall be deemed to be present at the shareholders' meeting in person.

  • 5.4.3. Shareholders hall attend shareholders meetings based on attendance cards, sign-in cards, or other certificates of attendance. This Company may not arbitrarily add

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requirements for other documents beyond those showing eligibility to attend presented by shareholders. Solicitors soliciting proxy forms shall also bring identification documents for verification.

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

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

  • 5.4.6. If the Shareholders meeting is convened by video conference, shareholders who wish to attend by video should register with the Company two days before the meeting of shareholders.

  • 5.4.7. For the convening of the video meeting of the shareholders' meeting, the Company shall upload the meeting manual, annual report and other relevant materials to the video meeting platform of the shareholders' meeting at least 30 minutes before the start of the meeting and continue to disclose them until the end of the meeting.

  • 5.4.8. When a company convenes a video conference of a shareholders' meeting, it shall specify the following matters in the notice of the shareholders' meeting:

  • (1). Methods for shareholders to participate in video conferences and exercise their rights.

  • (2). The handling of obstacles caused by natural disasters, incidents or other force majeure circumstances caused by video conferencing platforms or video participation includes at least the following matters:

    • (a) The above-mentioned ongoing and non-removable obstacles result in the postponement or renewal of the meeting time and the date of the meeting if it is to be postponed or renewed.

    • (b) Shareholders who are not registered to participate in the original shareholders' meeting by video shall not participate in the postponement or renewal of the meeting.

    • (c) The holding of a video-assisted shareholders' meeting, if it is not possible to renew the video meeting, after deducting the number of shares present at the shareholders' meeting by video, the total number of shares present at the

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shareholders' meeting reaches the statutory quota of the shareholders' meeting, the shareholders' meeting shall continue, and the number of shares participating in the shareholders by video shall be included in the total number of shareholders' shares present, and all the proposals of the shareholders' meeting shall be regarded as abstention. 

     - (d) Follow-up to provisional motions that have not yet been made, when the results of all motions have been announced.

  - (3) The convening of a video shareholders' meeting shall indicate the appropriate alternative measures to be provided to shareholders who may have difficulties participating in the shareholders by video. Except for the circumstances stipulated in Item 6, Article 44-9, of the Standards for the Handling of Share Affairs of Companies Offering Shares to the Public, at least shareholders shall be provided with connection equipment and necessary assistance, and the period during which shareholders may apply to the company and other relevant notices shall be specified matter.

  • 5.5. The chair and non-voting participants of a shareholders meeting

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

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

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

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  • 5.5.4. If a shareholders meeting is convened by a party with power to convene but other than the board of directors, the convening party shall chair the meeting. When there are two or more such convening parties, they shall mutually select a chair from among themselves.

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

  • 5.6. Documentation of a shareholders meeting by audio or video

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

  • 5.6.2. In 【5.6.1.】 the recorded materials of the preceding paragraph shall be retained for at least 1 year. If, however, a shareholder files a lawsuit pursuant to Article 189 of the Company Act, the recording shall be retained until the conclusion of the litigation.

  • 5.6.3. If the shareholders' meeting is convened by video meeting, the Company shall keep records of the shareholders' registration, enrollment, check-in, put questions, voting and the results of the company's vote count, and record the whole process of the video conference continuously and uninterruptedly.

  • 5.6.4. Of 【5.6.3. 】 the Company shall properly store the data and audio and video recordings during its duration, and provide the audio and video recordings to those entrusted with the handling of video conferencing services for safekeeping.

  • 5.6.5. If the shareholders' meeting is convened by video conference, the Company shall make audio and video recordings of the background operation interface of the video conference platform.

  • 5.7. Total numbers of attendance shares and Call the meeting

  • 5.7.1. Attendance at shareholders meetings shall be calculated based on numbers of shares. The number of shares in attendance shall be calculated according to the shares indicated by the attendance book and sign-in cards handed in and the number of shares registered on the video conferencing platform plus the number of shares whose voting rights are exercised by correspondence or electronically.

  • 5.7.2. The chair shall call the meeting to order at the appointed meeting time, and announce the number of non-voting rights and the number of shares present simultaneously. However, when the attending shareholders do not represent a majority of the total number of issued shares, the chair may announce a postponement, provided that no more than two such postponements, for a combined total of no more than 1 hour, may

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be made. If the quorum is not met after two postponements and the attending shareholders still represent less than one third of the total number of issued shares, the chair shall declare the meeting adjourned; if the shareholders' meeting is convened by video meeting, the Company shall also announce the meeting adjourned on the video meeting platform of the shareholders' meeting.

  • 5.7.3. In 【5.7.2.】 if the quorum is not met after two postponements as referred to in the preceding paragraph, but the attending shareholders represent one third or more of the total number of issued shares, a tentative resolution may be adopted pursuant to Article 175, paragraph 1 of the Company Act; all shareholders shall be notified of the tentative resolution and another shareholders meeting shall be convened within 1 month; if the shareholders' meeting is convened by video meeting, and the shareholders wish to participate in the meeting by video, they shall re-register with the Company in accordance with 【5.4.6.】.

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

  • 5.8. Discussion of proposals

  • 5.8.1. If a shareholders meeting is convened by the board of directors, the meeting agenda shall be set by the board of directors. Relevant motions (including extraordinary motions and amendments to the original proposals) should be voting by poll. The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders meeting.

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

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

  • 5.8.4. The chair shall allow ample opportunity during the meeting for explanation and

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discussion of proposals and of amendments or extraordinary motions put forward by the shareholders; when the chair is of the opinion that a proposal has been discussed sufficiently to put it to a vote, the chair may announce the discussion closed and call for a vote and arrange adequate voting time.

  • 5.9. Shareholder speech

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

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

  • 5.9.3. Except with the consent of the chair, a shareholder may not speak more than twice on the same proposal, and a single speech may not exceed 5 minutes. If the shareholder's speech violates the rules or exceeds the scope of the agenda item, the chair may terminate the speech.

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

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

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

  • 5.9.7. The shareholders who convene the video meeting of the shareholders' meeting and the shareholders who participate by video may put questions in text on the video meeting platform of the shareholders' meeting after the chairman announces the meeting and before the announcement of the adjournment of the meeting, and the number of questions asked on each proposal shall not exceed two times, each time limited to 200 words, and the provisions of 【5.9.1.】 to 【5.9.5.】 shall not apply.

  • 5.9.8. In 【5.9.7.】 if the question does not violate the regulations or does not exceed the scope of the proposal, it is advisable to disclose the question on the video meeting platform of the shareholders' meeting for information.

  • 5.10. Calculation of voting shares and recusal system

  • 5.10.1. Voting at a shareholders meeting shall be calculated based the number of shares.

  • 5.10.2. With respect to resolutions of shareholders meetings, the number of shares held by

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a shareholder with no voting rights shall not be calculated as part of the total number of issued shares.

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

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

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

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

  • 5.10.7. When this Company holds a shareholders meeting, it may allow the shareholders to exercise voting rights by correspondence or electronic means. When voting rights are exercised by correspondence or electronic means, the method of exercise shall be specified in the shareholders meeting notice. A shareholder exercising voting rights by correspondence or electronic means will be deemed to have attended the meeting in person, but to have waived his/her rights with respect to the extraordinary motions and amendments to original proposals of that meeting; it is therefore advisable that this Company avoid the submission of extraordinary motions and amendments to original proposals.

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

  • 5.10.9. After a shareholder has exercised voting rights by correspondence or electronic means, in the event the shareholder intends to attend the shareholders meeting in

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

  • 5.10.10. Except as otherwise provided in the Company Act and in this Company's Articles of Incorporation, the passage of a proposal shall require an affirmative vote of a majority of the voting rights represented by the attending shareholders. At the time of a vote, for each proposal, the chair or a person designated by the chair shall first announce the total number of voting rights represented by the attending shareholders, followed by a poll of the shareholders. After the conclusion of the meeting, on the same day it is held, the results for each proposal, based on the numbers of votes for and against and the number of abstentions, shall be entered into the MOPS.

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

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

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

  • 5.10.14. The Company convenes A video meeting of the Shareholders meeting, and the shareholders who participate by video shall, after the Meeting announced by the Chairman, vote on the proposals and the voting on the election proposals through the video conferencing platform, and shall complete them before the Chairman

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announces the closing of the voting, and shall be deemed to have abstained if they are overdue.

  • 5.10.15. If the meeting of shareholders is convened by video conference, the voting shall be counted in one lump sum after the Chairman announces the completion of the voting, and the voting and election results shall be announced.

  • 5.10.16.When the Company convenes a video-assisted shareholders' meeting, a shareholder who has registered to attend the shareholders' meeting by video in accordance with the provisions of 【5.4.6.】 shall deregister in the same way as the registration two days before the meeting of the shareholders' meeting; those who withdraw after the deadline can only attend the shareholders' meeting by video.

  • 5.10.17. A shareholder who exercises the right to vote in writing or electronically, without revoking his expression of intent, and participates in a meeting of shareholders by video, shall not exercise the right to vote on the original proposal or propose amendments to the original proposal or to exercise the right to exercise the right to vote on the original proposal, except for provisional motions.

  • 5.11. Elections

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

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

  • 5.12. The meeting minutes

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

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

  • 5.12.3. The meeting minutes shall accurately record the year, month, day, and place of the

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meeting, the chair's full name, the methods by which resolutions were adopted, and a summary of the deliberations and their voting results (including statistical weight), the number of votes for each candidate should be disclosed when there has a election of directors, and shall be retained for the duration of the existence of this Company.

  • 5.12.4. In addition to the matters to be recorded in accordance with the provisions of

【5.12.3.】, the minutes of the shareholders' meeting shall record the time from the meeting of the shareholders' meeting, the manner of convening the meeting, the name of the chairman and the record, and the handling method and handling situation of the video conference platform or the video participation in the event of obstacles due to natural disasters, incidents or other force majeure circumstances.

  • 5.12.5.The Company shall convene a video shareholders' meeting, in addition to the provisions of 【5.12.4.】, and shall indicate in the Proceedings to provide alternative measures for shareholders who may have difficulties participating by video.

  • 5.13. Public disclosure

  • 5.13.1. On the day of a shareholders meeting, this Company shall compile in the prescribed format a statistical statement of the number of shares obtained by solicitors through solicitation and the number of shares represented by proxies and the number of shares attended by shareholders in writing or electronically, and shall make an express disclosure of the same at the place of the shareholders meeting; if the shareholders' meeting is convened by video conference, the Company shall upload the above information to the video meeting platform of the shareholders' meeting at least 30 minutes before the start of the meeting and continue to disclose it until the end of the meeting.

  • 5.13.2. When the Company convenes a video meeting of the Shareholders' Meeting and announces the meeting, the total number of shareholders' shares present shall be disclosed on the Video Meeting Platform. The same shall apply if the total number of shares and voting rights of the shareholders present at the meeting is also counted.

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

  • 5.14. Maintaining order at the meeting place

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

  • 5.14.2. The chair may direct the proctors or security personnel to help maintain order at the

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

  • 5.14.3. At the place of a shareholders meeting, if a shareholder attempts to speak through any device other than the public address equipment set up by this Company, the chair may prevent the shareholder from so doing.

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

  • 5.15. Recess and resumption of a shareholders meeting

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

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

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

  • 5.16. Disclosure of information on video conferencing

  • If the shareholders' meeting is convened by video meeting, the Company shall immediately disclose the voting results of each proposal and the election results on the video meeting platform of the shareholders' meeting in accordance with the regulations after the voting is completed, and shall continue to disclose them for at least 15 minutes after the chairman announces the adjournment of the meeting.

  • 5.17. The location of the chairman and record-keeper of the video shareholders' meeting When the Company convenes a video shareholders' meeting, the Chairman and the recordkeeper shall be at the same place, and the Chairman shall announce the address of that place at the time of the meeting.

  • 5.18. Handling for Disconnection

  • 5.18.1. For the convener of a video conference at a shareholders' meeting, the Company may provide a simplified connection test for shareholders before the meeting and provide relevant services immediately before and during the meeting to assist in the handling of technical issues of communication.

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  • 5.18.2. If the shareholders' meeting is convened by video meeting, the Chairman shall, at the time of announcing the meeting, separately announce that, except for the matter stipulated in Article 44-20(4) of the Standard for the Handling of Shares of Publicly Issued Companies, shall postpone or renew the meeting within five days except for the date of postponing or renewing the meeting before the Chairman announces the adjournment of the meeting, due to acts of God, events or other force majeure circumstances, and if an obstacle to the video conference platform or participation in the video conference by means of video has occurred, and the date of the meeting shall be postponed or resumed within five days, and the provisions of Article 182 of the Company Act shall not apply.

  • 5.18.3. Occuring 【5.18.2.】 a shareholder who is due to postpone or renew a meeting shall not participate in an extended or renewed meeting if he or she has not registered to participate in the original shareholders' meeting by video.

  • 5.18.4. In accordance with the provisions of 【5.18.2.】, the number of shares, voting rights and voting rights exercised by shareholders present at the original shareholders' meeting shall be included in the total number of shares, voting rights and voting rights of the shareholders present at the postponed or renewed meeting of shareholders who have registered to participate in the original shareholders' meeting by video and who have completed the registration.

  • 5.18.5. In accordance with 【5.18.2.】, when the shareholders' meeting is postponed or renewed, there is no need to re-discuss and resolve the proposal that has completed the voting and counting, and announces the voting result or the election list of directors and supervisors.

  • 5.18.6. In the event that the Company convenes a video-assisted shareholders' meeting and 【 5.18.2. 】 cannot be renewed, if the total number of shares present at the shareholders' meeting by video is deducted, the total number of shares present at the shareholders' meeting by video still reaches the statutory quota for the shareholders' meeting, the shareholders' meeting shall continue without the need to postpone or continue the meeting in accordance with【5.18.2.】.

  • 5.18.7. In the event of 【5.18.6.】,the number of shares present at the shareholders' meeting shall be included in the total number of shares of the shareholders present in the event of 【5.18.6.】 the shareholders who should continue to participate in the shareholders' meeting by video, but shall be regarded as an abstention in respect of all the proposals of the shareholders' meeting.

  • 5.18.8. The Company shall postpone or renew the assembly in accordance with the

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provisions of 【5.18.2.】, and shall handle the relevant pre-operations in accordance with the provisions of Item 7 of Article 44-20 of the Standard for the Handling of Shares of Publicly Issued Stock Companies, in accordance with the date of the original shareholders' meeting and the provisions of each article.

  • 5.18.9. The Company shall postpone or renew the date of the shareholders' meeting in accordance with the date of the shareholders' meeting specified in article 12 of the Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies and article 13, item 3 of Article 13, item 2 of Article 44-5, article 44-15 and article 44-17 of the Guidelines for the Handling of Shares of Publicly Offering Companies.

5.19. Handling for Digital Divide

When the Company convenes a video shareholders' meeting, it shall provide appropriate alternative measures to shareholders who will have difficulties in attending the shareholders by video. Except for the circumstances stipulated in Item 6, Article 44-9, of the Standards for the Handling of Share Affairs of Companies Offering Shares to the Public, at least shareholders shall be provided with connection equipment and necessary assistance, and the period during which shareholders may apply to the company and other relevant notices shall be specified matter.

5.20. Other Matters

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

  • 5.20.2. Where any matter is not stipulated in these Rules, it shall be handled in accordance with Company Act and other relevant laws and regulations and the Article of Incorporation of the Company.

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

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Appendix 3

Articles of Incorporation

CHAPTER I GENERAL PROVISIONS

Article 1:

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

Co., Ltd.

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

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

  • A. CC01030 Electric Appliance and Audiovisual Electric Products Manufacturing;

  • B. CC01070 Telecommunication Equipment and Apparatus Manufacturing;

  • C. CC01080 Electronic Parts and Components Manufacturing;

  • D. CC01110 Computers and Computing Peripheral Equipment Manufacturing;

  • E. CC01100 Restrained Telecom Radio Frequency Equipment and Materials Manufacturing; F. F108031Wholesale of Drugs, Medical Goods;

Article 3:

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

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

Article 4:

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

CHAPTER II SHARES

Article 5:

The total amount of capital of the Company is NTD 4,000,000,000, divided into 400,000,000 shares (in which the number of shares for employee stock options is 5,000,000 shares), with a par value of

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NTD 10 per share, to be issued in installments, and the relevant matters of issuance shall be stipulated by the Board of Directors.

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

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

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

Article 6:

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

Article 7:

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

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

CHAPTER III SHAREHOLDERS' MEETING

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

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

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

Article 8-1:

The company's shareholders meetingmay be held by video conference or other methods announced by the competent authority.

Article 9:

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

Article 10:

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

Article 11:

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

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

CHAPTER IV DIRECTORS

Article 12:

This Company shall have seven 7 to ten 10 directors, and the Board of Directors is authorized to determine the number of Directors. The term of their office is three (3) years and they are eligible for re-election. The company adopts the candidate’s nomination system stipulated by Article 192-1 of the Company Act as election of the directors of the company and the shareholders shall elect the directors among the nominees listed in the roster for director candidates. The amount of total shares

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owned by the directors will be handled in accordance with the "Rules and Review Procedures for Director and Supervisor Share Ownership Ratios of Public Companies" issued by the competent authority.

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

Article 13:

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

Article 14:

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

Article 15:

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

Article 16:

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

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

Unless otherwise provided for in the Company Act, meetings of the Board of Directors shall be

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

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

Article 17:

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

Article 18:

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

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

Article 19:

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

CHAPTER V MANAGER

Article 20:

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

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

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Article 21:

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

  • A. The business report;

  • B. The financial statements;

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

Article 22:

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

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

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

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

CHAPTER VII ANCILLARY PROVISIONS

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

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

Article 25: These Articles of Incorporation were promulgated on December 13, 1975. The 1st amendment was made on October 25, 1977. The 2nd amendment was on October 12, 1981. The 3rd amendment was on December 30, 1981. The 4th amendment was on December 15, 1984. The 5th amendment was on December 9, 1985. The 6th amendment was on December 20, 1985. The 7th amendment was on September 15, 1987. The 8th amendment was on December 10, 1988. The 9th amendment was on November 15, 1989. The 10th amendment was on May 10, 1990. The 11th amendment was on June 25, 1990. The 12th amendment was on December 15, 1990. The 13th amendment was on January 23, 1991. The 14th amendment was on March 1, 1991. The 15th amendment was on April 2, 1991. The 16th amendment was on July 12, 1991. The 17th amendment was on June 10, 1995. The 18th amendment was on July 26, 1996. The 19th amendment was on May 31, 1997. The 20th amendment was on March 25, 1998. The 21st amendment was on May 18, 1999. The 22nd amendment was on May 16, 2000. The 23rd amendment was on May 3, 2001. The 24th amendment was on August 28, 2001. The 25th amendment was on May 27, 2002. The 26th amendment was on May 20, 2004. The 27th amendment was on May 19, 2005. The 28th amendment was on October 18, 2005. The 29th amendment was on June 16, 2006. The 30th amendment was on June 13, 2007. The 31st amendment was on June 13, 2008. The 32nd amendment was on June 16, 2009. The 33rd amendment was on 14 June 2010. The 34th amendment was on June 22, 2012. The 35th amendment was on June 11, 2014. The 36th amendment was on June 12, 2015. The 37th amendment was made on January 22, 2016. The 38th amendment was made on June 29, 2016. The 39th amendment was made on June 13, 2018. The 40th amendment was made on June 19, 2019. The 41st amendment was made on July 21, 2021. The 42nd amendment was made on June 15, 2022.

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Appendix 4

Merry Electronics Co., Ltd.

Shareholding Status of Directors

  1. The paid-in capital of the Company is NT$ 2,204,049,470 on 31 March 2024. The issued and outstanding shares are 220,404,947 shares.

  2. According to Article 26 of Securities and Exchange Act, the minimum shareholding of all of the directors is 12,000,000 shares.

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

Title Name Shareholdings in the shareholders
book as of 31 March 2024(share)
Chairperson ZONG CYUAN Investment Co., Ltd.
Representative:
LIAO,LU-LEE		 1,653,025
Director WEI,WEN-CHIEH 9,617,475
Director SHANDE Investment Co., Ltd.
Representative:
HUANG,CHAO-LI		 802,135
Director LIN,SHIH-CHIEH 372,876
Director TONG-CIAN Investment Co., Ltd.
Representative:
LIAO,KENG-PIN		 5,972,061
Director SOH,YONG-SENG 226,617
Independent Director WU,HUEI-HUANG 0
Independent Director SHER,JIH-HSIN 0
Independent Director I, CHANG-YUN 0
Total shares of all directors 18,644,189
  1. The name, shareholding and discharged reason of the discharged director as of 31 March 2024: None。

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Appendix 5

Dividend Policy

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

  2. The net profit after final accounting, except for withholding of income tax in accordance with laws, shall be utilized for make-up of the loss of previous years, and secondly setting aside 10% of the remaining earnings as a legal reserve; however, when the legal reserve has reached paid in capital of the Company, it will not be listed. After setting aside or reversing special reserve in accordance with laws when necessary, the balance after adding the undistributed earnings of the previous year will be the accumulated distributable earnings. The board of directors shall propose an earning distribution proposal for the shareholders’ meeting to resolve the distribution. For the earning distribution proposal proposed by the board of directors, in accordance with financial, business and operational factors, allocate within the limit of not less than 30% of the new distributable surplus in the current period and not more than 80% of the accumulated distributable earning, and the distribution of the shareholder bonus shall be given priority in cash dividends and shall also be distributed in the form of stock dividends, provided that the proportion of cash dividends distributed shall not be less than 30% of the total dividend. To authorize the distributable dividends and bonuses in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

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

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

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

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Appendix 6

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

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

Appendix 7

Explanation for the proposal excluded from this annual shareholders' meeting

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

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

  2. The period for collecting proposals from shareholders for this annual shareholders' meeting is from March 22 to April 1 in 2024 and announcement was made at the Market Observation Post System in accordance with the relevant laws and regulations.

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

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