Employee share option plans of the Company

In order to attract, retain and reward employees, the Company and its subsidiary, ASE, have their employee share option plans for the Group’s full-time employees. As disclosed in Note 1, the Company assumed ASE’s obligations of outstanding employee share option plans starting from April 30, 2018 and each share option represents the right to purchase 0.5 ordinary share of the Company when exercised. Under the terms of the plan, share options are granted at an exercise price equal to or not less than the closing price of the ordinary shares listed on the TWSE at the issue date. The right of those share options granted under the plan is valid for 10 years,

non-transferable

and exercisable at certain percentages subsequent to the second anniversary of the grant date. For any subsequent changes in the Company’s capital structure or when cash dividend per ordinary share exceeds 1.5% of the market price per ordinary share, the exercise price is accordingly adjusted.

Information about the share option plans that the Company granted

and assumed

were as follows:


	For the Year Ended December 31
	2019					2020					2021
				Weighted					Weighted					Weighted
				Average					Average					Average
	Number of			Exercise		Number of			Exercise		Number of			Exercise
	Options			Price		Options			Price		Options			Price
	(In			Per Share		(In			Per Share		(In			Per Share
	Thousands)			(NT$)		Thousands)			(NT$)		Thousands)			(NT$)

Balance at January 1		183,814		$	58.1		170,786		$	57.0		144,767		$	56.9
Options expired		—			—		(1,006	)		40.8		—			—
Options forfeited		(4,214	)		61.8		(3,949	)		58.0		(5,907	)		52.3
Options exercised		(8,814	)		48.4		(21,064	)		49.2		(42,058	)		61.4


Balance at December 31		170,786			57.0		144,767			56.9		96,802			53.3


Options exercisable, end of year		33,822			63.5		67,388			61.4		49,696			55.5

The weighted average share prices at exercise dates of share options for the years ended December 31, 2019, 2020 and 2021 were NT$69.3, NT$68.5 and NT$108.8 (US$3.9), respectively.

Information about the outstanding share options that the Company granted and assumed at each balance sheet date was as follows:


	Range of Exercise Price Per Share (NT$)		Weighted Average Remaining Contractual Life (Years)

December 31, 2020

ASE 4 th share options	$	45.2		0.3
ASE 5 th share options		73.0		4.7
The Company 1 st share options		52.9		7.9

December 31, 2021

ASE 5 th share options		73.0		3.7
The Company 1 st share options		51.0		6.9

Employee restricted stock awards plan of the Company

To attract and retain talents

as well as

motivate and engage employees, the Company’s annual shareholders’ meetings resolved

in August 202

to issue

the 2021 employee restricted stock awards plan and

granted

15,000

thousand ordinary shares on the record date of October 1, 2021. The par value and the exercise price was NT$10 (US$0.36) and NT$0 per share, respectively

The fair value at the grant day was NT$92.4 (US$

3.33

)

per s

hare.

The vested shares are settled and issued on an annual basis during a three-year period starting from October 1, 2021. Up to one-thirds of the total shares granted will be vested only after the Company reaching specific performance targets before the end of each year-period. Except for inheritance, those shares shall not be sold, pledged, transferred, gifted, conditioned, or otherwise dispose of before vest, while the rights of attendance, propose, speak, vote and election at shareholders meeting and other rights, including but not limited to, stock dividend, cash dividend, distribution from legal reserve and capital surplus, share options at cash capital increase are identical with the Company’s ordinary shares issued and outstanding. All the shares under this plan should be deposited in a trust account before vest.

After the grant date, the Company has the right to revoke and cancel those unvested shares. The dividends (including cash dividends, stock dividends, and the cash or the shares distributed from legal reserve or capital surplus) entitled to those unvested shares and interests derived therefrom shall be returned to the Company from the trust account at the same time.

Employee share option plans of subsidiaries

USIE

The terms of the plans issued by USIE were the same with those option plans previously granted by ASE. Information about share options was as follows:


	For the Year Ended December 31
	2019					2020
				Weighted					Weighted
	Number of			Average Exercise		Number of			Average Exercise
	Options			Price		Options			Price
	(In			Per Share		(In			Per Share
	Thousands)			(US$)		Thousands)			(US$)

Balance at January 1		16,711		$	2.1		8,349		$	2.3
Options forfeited		—			—		(7	)		2.9
Options exercised		(8,362	)		2.0		(8,342	)		2.3


Balance at December 31		8,349			2.3		—			—


Options exercisable, end of year		8,349			2.3		—			—

In 2019 and 2020, the Group’s shareholdings in USIE decreased because USIE’s share options were exercised. The transaction was accounted for as an equity transaction since the Group did not cease to have control over USIE and, as a result, capital surplus was decreased by NT$981,078

thousand

2019

and

capital surplus

and retained earnings was decreased by NT$

1,120,111 thousand and NT$

392,447

thousand, respectively, in

2020. In addition, all of USIE’s share options were fully exercised as of December 31, 2020.

USISH

Under the share option plan issued in 2015 (“2015 share options”), each unit represents the right to purchase one ordinary share of USISH when exercised. The options are valid for 10 years,

non-transferable

and exercisable at certain percentages subsequent to the second anniversary of the grant date incorporated with certain performance conditions. For any subsequent changes in USISH’s capital structure, the exercise price is accordingly adjusted.

In November 2019, USISH adopted the first share option plan (“2019 share options”) and granted 17,167 thousand share options to its employees. Each unit represents the right to purchase one ordinary share of USISH when exercised. The options are valid for 3.0 years, 4.0 years and 5.0 years, respectively, and are exercisable at certain percentages within 12 months subsequent to the second, the third and the fourth anniversary of the grant date under the satisfaction of certain performance conditions within each respective vesting period. In the event that USISH increases share capital by capital surplus or by cash, or distributes share dividends or cash dividends, the exercisable share option units and the exercise price are accordingly adjusted.

In September 2020, USISH adopted the second share option plan (“2020 share options”) and granted 1,140 thousand share options to its employees. The conditions of issued 2020 share options are the same as 2019 share options plan, except that the options are valid for 2.2 years, 3.2 years and 4.2 years, respectively, and with each respective vesting period of 1.2 years, 2.2 years and 3.2 years.

Information about share options was as follows:


	For the Year Ended December 31
	2019					2020					2021
	Number of			Exercise		Number of			Exercise		Number of			Exercise
	Options			Price		Options			Price		Options			Price
	(In			Per Share		(In			Per Share		(In			Per Share
	Thousands)			(RMB)		Thousands)			(RMB)		Thousands)			(RMB)

Balance at January 1		21,537		$	15.5		35,077		$	14.5		31,266		$	14.6
Options granted		17,167			13.3		1,140			21.7		—			—
Options forfeited		(463	)		15.4		(636	)		14.0		(952	)		14.5
Options exercised		(3,164	)		15.5		(4,315	)		15.5		(828	)		13.8


Balance at December 31		35,077			14.5		31,266			14.6		29,486			14.2


Options exercisable, end of year		13,694			15.5		13,416			15.5		19,249			14.8


Fair value of options granted (RMB)	$	6.27-8.35				$	7.03-8.93				$	—

Information about USISH’s outstanding share options at each balance sheet date was as follows:


	Range of Exercise Price Per Share (RMB)		Remaining Contractual Life (Years)

December 31, 2020

2015 share options	$	15.5		4.9
2019 share options		13.3		3.9
2020 share options		21.7		3.9

December 31, 2021

2015 share options		15.5		3.9
2019 share options		12.7		2.9
2020 share options		21.2		2.9

Employee restricted

stock

plans of subsidiaries

In November 2019, USISH adopted the first restricted

stock

plan (“2019 restricted

stocks

”) and granted 6,156 thousand ordinary shares to its directors (excluding independent directors), supervisors and employees. In April 2020, the board of directors further resolved to grant 6,403 thousand ordinary shares instead, while other terms remain constant. The plan was of 3 phases starting from 2019 and each phase lasts for 1 year with a valid period of 4.5 years, 3.5 years and 2.5 years, respectively. Upon satisfaction of certain performance conditions in each phase, participants are entitled to subscribe a certain percentage of the total USISH’s ordinary shares issued under the plan with a

lock-up

period of 1 year. The valid period may be early terminated or extended prior to one month of the expiration date depending on the conditions of ordinary shares granted. In the event that USISH increases share capital by capital surplus or by cash, or distributes share dividends or cash dividends, the exercise price is accordingly adjusted.

In September 2020, USISH adopted the second restricted

stock

plan (“2020 restricted

stocks

”) and granted 425 thousand ordinary shares to its employees. The conditions of issued 2020 restricted

stocks

are the same as 2019 restricted

sto

cks

plan, except that the restricted

stocks

are valid for 2 years and the ordinary shares that USISH would issue to participants for free are with a

lock-up

period of 1.3 year.

In September 2021, USISH adopted the third restricted

stock

plan (“2021 restricted

stocks

”) and granted 281 thousand ordinary shares to its expatriate staff. The conditions of issued 2021 restricted

are the same as 2020 restricted

sto

cks

plan.

Information about restricted

stocks

was as follows:


	For the Year Ended December 31
	2019				2020					2021
	Number of		Exercise		Number of			Exercise		Number of			Exercise
	Options		Price		Options			Price		Options			Price
	(In		Per Share		(In			Per Share		(In			Per Share
	Thousands)		(RMB)		Thousands)			(RMB)		Thousands)			(RMB)

Balance at January 1		—	$	—		6,156		$	13.3		5,547		$	12.2
Options granted		6,156		13.3		672			4.9		281			—
Options exercised		—		—		(1,281	)		13.2		(1,780	)		12.7
Options forfeited		—		—		—			—		(483	)		12.1


Balance at December 31		6,156		13.3		5,547			12.2		3,565			10.2


Options exercisable, end of year		—		—		—			—		—			—


Fair value of options granted (RMB)	$	13.47			$	18.55				$	11.78

Information about USISH’s outstanding restricted

at each balance sheet date was as follows:


	Range of Exercise Price Per Share (RMB)		Remaining Contractual Life (Years)

December 31, 2020

2019 restricted st ocks	$	13.2		3.3
2020 restricted stocks		—		1.7

December 31, 2021

2019 restricted st ocks		12.7		2.3
2020 restricted stocks		—		0.7
2021 restricted st oc ks		—		1.7

The Group’s shareholdings in USISH decreased because the abovementioned share option plans and restricted

stock

plan were exercised in 2019, 2020 and 2021. The transaction was accounted for as an equity transaction since the Group did not cease to have control over USISH and, as a result, capital surplus increased by NT$105,785 thousand, NT$1,010,219 thousand and NT$58,448 thousand (US$2,107 thousand) in 2019, 2020 and 2021, respectively.

Fair value information

For the fair values at the grant date of USISH’s 2019, 2020 and 2021 plans, the share options plans were measured by using the trinomial tree model, while the restricted

stocks

plans were measured by using the Black-Scholes Option Pricing Model incorporating the effect of the

lock-up

period. The inputs to the models were as follows:


Share option plan

	2019 Share Options Plan	2020 Share Options Plan

Share price at the grant date	RMB15.84 per share	RMB21.55 per share
Exercise price	RMB13.34 per share	RMB21.65 per share
Expected volatility (%)	45.07-51.80	48.14-53.57
Expected lives (years)	3-5	2.2-4.2
Expected dividend yield	—	—
Risk free interest rate (%)	2.80-2.97	2.80-2.99


Restricted stock plan

	2019 Restricted S tocks Plan	2019 Restricted Stocks Plan Amended in 2020	2020 Restricted Stocks Plan	2021 Restricted Stocks Plan

Share price at the grant date	RMB16.30 per share	RMB16.60 per share	RMB24.30 per share	RMB14.65 per share
Exercise price	RMB13.34 per share	RMB13.34 per share	(Note)	(Note)
Expected volatility (%)	47.77	57.21	56.97	47.15
Lock-up periods (years)	1	1	1.3	1.3
Expected dividend yield	—	—	—	—
Risk free interest rate (%)	2.70	1.55	2.63	2.34

Note:

The restricted

ock

plan is to transfer ordinary shares for free upon satisfaction of certain performance conditions prior to the expiration.

Expected volatilities were based on the annualized volatilities of USISH’s historical share prices.

For the years ended December 31, 2019, 2020 and 2021, employee benefits expense recognized on the share-based payment plans were NT$871,699 thousand, NT$955,575 thousand and NT$699,211 thousand (US$25,206 thousand), respectively.