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DELTA AGM Information 2019

Jun 25, 2019

52000_rns_2019-06-25_2a18f7c6-b1b4-4a39-a231-7a3fcdef59da.pdf

AGM Information

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Delta Electronics, Inc. ("Company") Minutes of 2019 Annual General Shareholders' Meeting

(Translation)

Time: 10:00 AM, June 10, 2019

Place: Conference Room at 2[nd] floor, no. 18, XinLong Road, Taoyuan District, Taoyuan City

Quorum: 2,384,119,347 shares were represented by the shareholders and proxies present, which amounted to 91.78% of the Company’s 2,597,543,329 issued and outstanding shares.

Board Members Present: Bruce CH Cheng, Yancey Hai, Mark Ko, Ping Cheng, Simon Chang, Albert Chang, Victor Cheng, Yung-Chin Chen (Independent Director), Tsong-Pyng Perng (Independent Director), George Chao (Independent Director) and Ji-Ren Lee (Independent Director). 11 members of the Board of Directors (including 4 Independent Directors) are present.

Attendance: Ms. Lin, Yu-Kuan, and Mr. Chou, Chien-Hung, CPA, PricewaterhouseCoopers Mr. James Chen, Attorneys-at-Law, Lee and Li

Chairman: Yancey Hai, Chairman of the Board of Directors

Recorder: YiChun Chen

Commencement: (The aggregate shareholding of the shareholders and proxies present constituted a quorum. The Chairman called the meeting to order.)

Salute according to the etiquette

Chairman’s speech: (omitted)

1

I. Report Items

  • (1) 2018 Operation Results (Please see Appendix 1)

  • (2) 2018 Financial Results (Please see Appendix 2 and 3)

  • (3) Audit Committee's Review Opinions on 2018 annual final accounting books and statements (Please see Appendix 4)

  • (4) Report on communication between Audit Committee and Chief Internal Auditors The Independent Directors review the results of internal audit department on a monthly basis, and the chief internal auditor reports to the Independent Directors on major findings from time to time. Besides, Independent Directors and Directors hold discussions with the chief internal auditor about recent findings in meetings of Audit Committee and meetings of Board of Directors on a quarterly basis. Records of the discussions are kept, and the discussions are followed up and improvements implemented which lead to efficient communications between two parties.

  • (5) Report on 2018 Employees' and Directors' Compensation

  • The Company's annual profit in 2018 is NT$20,129,324,464, of which 8.6% is allocated as the employees' compensation in cash totaling NT$1,728,343,835 and 0.15% is allocated as the directors' compensation totaling NT$29,400,000.

  • (6) Report on Short-form Merger between Delta Electronics, Inc. and Delta Green Life Co., Ltd.

  • In order to streamline Delta group and protect customers’ rights, the Company will merge with its 100% owned subsidiary Delta Green Life Co., Ltd. upon the resolution passed by both Boards of Directors held on April 30, 2018. The effective date of the merger is purposed to be on August 1, 2018. Upon the merger, the Company is the surviving company, while Delta Green Life Co., Ltd. is the dissolved company. The short-form merger has been approved by the Department of Commerce, Ministry of Economic Affairs.

  • (7) Report on Short-form Merger between Delta Electronics, Inc. and Delta Networks, Inc. (Taiwan).

In order to improve Delta group’s management efficiency and resource integration,

2

the Company will merge with its 99.98% owned subsidiary Delta Networks, Inc. (Taiwan) upon the resolution passed by both Boards of Directors held on July 31, 2018. Upon the merger, the Company is the surviving company, while Delta Networks, Inc. (Taiwan) is the dissolved company. Due to actual process of this project, the chairmen of both companies issued declaration letters to change the effective date of the merger to April 1, 2019. The short-form merger has been approved by the Department of Commerce, Ministry of Economic Affairs.

(Questions raised by the shareholders for the Report Items 3, 5 & 7: The registered number of shareholder who raised questions was 171695. The questions and answers were omitted. Regarding the questions and relevant suggestions by the shareholder, the Chairman and related person had fully explained in detail in the meeting. The Company has also kept record of the questions and answers for future reference.)

II. Proposal Items

  • (1) Adoption of the 2018 Annual Final Accounting Books and Statements (Proposed by the Board of Directors)

  • Explanation: a) This Company's 2018 Annual Final Accounting Books and Statements, including the Business Report, Parent Company Only Financial Statements and Consolidated Financial Statements (please refer to Appendix 1~3), have been reviewed by the Company's Audit Committee. The Company's Audit Committee has found no discrepancies after a thorough review and has made a written review report.

    • b) It is proposed by the Board of Directors to submit the 2018 Annual Final Accounting Books and Statements to the shareholders’ meeting for adoption.

Resolution:

Approved and acknowledged as proposed by the Board of Directors by voting (a total of 2,384,119,347 shares with voting rights were present when votes were cast; the number of voting rights for approval is 2,129,028,093, among which 1,404,022,135 was exercised by electronic transmission, the number of voting rights

3

for rejection is 72,393, the number of invalid votes is 0, the number of voting rights for abstention is 255,018,861, and 89.30% of the total voting rights voted for approval when votes were cast).

  • (2) Adoption of the 2018 Earnings Distribution (Proposed by the Board of Directors)

  • Explanation: a) The 2018 Earnings Distribution Table is compiled as follows in accordance with Company Act and the Company's Articles of Incorporation and has been approved by the Audit Committee and the Board of Directors on March 11, 2019.

    • b) The Board of Director proposed to set aside NT$12,987,716,645 for cash dividends. Subject to the approval of Annual General Shareholders' Meeting, the Board of Directors would be authorized to set a record date on which the proposed cash dividend would be distributed according to the shareholding ratio of shareholders appeared in the register of shareholders on the designated record date of distribution. According to the number of shares issued and entitled to distribution totaling 2,597,543,329, the cash dividends of approximately NT$ 5,000 per thousand shares will be distributed. In the event that the proposed earnings distribution approved is affected by an amendment to relevant laws or regulations, a request by the competent authorities, or a change in common shares (such as, buyback of shares for transfer or cancellation, domestic capital increase by cash, and exercise of employee stock options), it is proposed that the Board of Directors be authorized to adjust the cash dividends to be distributed to each share based on the number of actual shares outstanding on the record date for distribution.

    • c) It is proposed by the Board of Directors to submit the 2018 Earnings Distribution to the shareholders’ meeting for adoption.

4

Delta Electronics, Inc. 2018 Earnings Distribution Table

Unit: NT$
Item Description Amount
Net profit after tax for the year 2018 18,193,092,998
Subtract: Setting aside 10% legal reserve 1,819,309,300
Setting aside special reserves 472,888,902
Earnings available for distribution by the end of 2018 15,900,894,796
Add: Retained earnings in the beginning of 2018 13,936,059,479
Adjustment amount on initial application of IFRS 9 1,118,916,346
Subtract: Actuarial losses on defined benefit plan 15,945,956
Loss on disposal of financial assets at fair
value through other comprehensive income 9,336,310
Difference between consideration and carrying
amount in non-controlling interest transactions 62,682,222
Earnings available for distribution by the end of the
fiscal year (Note 1) 30,867,906,133
Distribution Items:
Shareholders' dividends - Cash
 NT$5.0 per share 12,987,716,645
Undistributed earnings by the end of 2018 17,880,189,488
(Note 1) The principle of 2018 earnings distribution: Earnings available for distribution by
the end of the fiscal year shall be distributed first.
(Note 2) Cash dividends distributed are rounded up to NT$1. The total amount of fractional
cash dividends less than NT$1 shall be reversed to undistributed earnings.

5

Resolution:

Approved and acknowledged as proposed by the Board of Directors by voting (a total of 2,384,119,347 shares with voting rights were present when votes were cast; the number of voting rights for approval is 2,133,111,935, among which 1,408,105,977 was exercised by electronic transmission, the number of voting rights for rejection is 81,459, the number of invalid votes is 0, the number of voting rights for abstention is 250,925,953, and 89.47% of the total voting rights voted for approval when votes were cast).

(Questions raised by the shareholders for the Proposal Items 1 & 2: The registered number of shareholder who raised questions was 171695. The questions and answers were omitted. Regarding the questions and relevant suggestions by the shareholder, the Chairman and related person had fully explained in detail in the meeting. The Company has also kept record of the questions and answers for future reference.)

III. Discussion Items

  • (1) Discussion of the Amendments to Operation Procedures of Acquisition or Disposal of Assets (Proposed by the Board of Directors)

  • Explanation: a) It is proposed to amend certain provisions of the Operating Procedures of Acquisition or Disposal of Assets in order to comply with the amendments to the Regulations Governing the Acquisition and Disposal of Assets by Public Companies announced by the Financial Supervisory Commission. Please see the comparison table of revised articles of the Operating Procedures of Acquisition or Disposal of Assets for the detailed revisions.

    • b) The proposed amendments are submitted for discussion.

Comparison Table of Revised Articles of the Operating Procedures of Acquisition or Disposal of Assets

6

Article Article after revision Article before revision Explanation
Article 2 The
Operating
Procedures
of
Acquisition or Disposal of Assets of the
Company shall be approved by one-
half or more of all Audit Committee
members and then for discussion and
consent by the Board of Directors and
be
further
submitted
to
the
shareholders' meeting for approval. The
same procedure shall apply to any
amendment
to
the
Operating
Procedures.
If the Operating Procedures have not
been approved by one-half or more of
all Audit Committee members, the
Operating
Procedures
may
be
undertaken upon the consent of two-
thirds or more of all directors, and the
resolution of the audit committee shall
be recorded in the meeting minutes of
the Board of Directors.
"All Audit Committee members" and "all
directors" in the preceding paragraph
referred
to
in
these
Operating
Procedures shall mean the actual
number of persons currently holding
those positions.		 The
Operating
Procedures
of
Acquisition or Disposal of Assets of the
Company shall be approved by one-
half or more of all Audit Committee
members and then for discussion and
consent by the Board of Directors and
be
further
submitted
to
the
shareholders' meeting for approval. The
same procedure shall apply to any
amendment
to
the
Operating
Procedures.
If the Operating Procedures have not
been approved by one-half or more of
all Audit Committee members, the
Operating
Procedures
may
be
undertaken upon the consent of two-
thirds or more of all directors, and the
resolution of the audit committee shall
be recorded in the meeting minutes of
the Board of Directors.
"All Audit Committee members" and "all
directors" in the preceding paragraph
referred
to
in
these
Operating
Procedures shall mean the actual
number of persons currently holding
those positions.
When the Operating Procedures are
submitted for discussion in the meeting
of Board of Directors, the Board of
Directors
shall
take
into
full
consideration of each independent
director's opinion. If an independent
director
objects
or
expresses
reservation about any matter, it shall be		 Certain languages
are
revised
as
appropriate
because
the
Company shall not
apply to the Article
14-3 of Securities
and Exchange Act
as the Company
has
established
audit committee.

7

recorded in the meeting minutes of the
Board of Directors.
Article 3 Definition of Terms:
1.
Derivatives:
refers
to
forward
contracts, options contracts, futures
contracts, leverage contracts,or
swap contracts, whose value is
derived froma specifiedinterest 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.
2. Assets acquired or disposed through
mergers or consolidations, splits,
acquisitions, or assignment of shares
in accordance with applicable laws:
refers to assets acquired or disposed
through
mergers,
splits,
or
acquisitions
conducted
in
accordance
with
the
Business
Mergers
and
Acquisitions
Act,
Financial Holding Company Act,
Financial Institutions Merger Act or
other applicable laws, or issuance of
new shares and byuse of the share		 Definition of Terms:
1.
Derivatives:
refers
to
forward
contracts, options contracts, futures
contracts, leverage contracts, swap
contracts,and compound contracts
comprising
combinations
of
the
foregoing products,whose value is
derived from assets,interest rates,
foreign exchange rates,indexes or
other interests.The term "forward
contracts" does not include insurance
contracts,
performance
contracts,
after-sales service contracts, long-
term leasing contracts, or long-term
purchase (sales)agreements.
2. Assets acquired or disposed through
mergers or consolidations, splits,
acquisitions, or assignment of shares
in accordance with applicable laws:
refers to assets acquired or disposed
through
mergers,
splits,
or
acquisitions
conducted
in
accordance
with
the
Business
Mergers
and
Acquisitions
Act,
Financial Holding Company Act,
Financial Institutions Merger Act or
other applicable laws, or issuance of
new shares and by use of the share
equity so raised as the consideration
payable for acquisition of another
company's shares (the "assignment
of
shares")
in
accordance
with
paragraph 8,Article 156 of the		 1. Certain
languages
in
subparagraph
1 are revised
as appropriate
in
order
to
apply to IFRS
9,
“financial
instruments.”
2. Certain
languages are
revised
as
appropriate
in
order to comply
with
revised
“Company Act.”

8

equity so raised as the consideration
payable for acquisition of another
company's shares (the "assignment
of shares") in accordance with Article
156-3of the Company Law.
3. Related party and subsidiaries: as
defined in the Regulations Governing
the Preparation of Financial Reports
by Securities Issuers.
4. Professional appraiser: refers to a
real estate appraiser or other person
authorized by applicable laws to
engage in the appraisal of real estate
or equipment.
5. Date of occurrence: refers to the
date of contract signing, date of
payment, date of completion of
trading, date of transfer registration,
date of board of directors resolution,
or
other
date
confirming
the
counterpart
and
amount
of
the
transaction, whichever date is earlier.
However, in the case of investments
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.
6. Mainland China area investment:
refers to investments in Mainland
China
area
approved
by
the
Investment
Commission
of
the
Ministry of Economic Affairs or
conducted in accordance with the
Regulations Governingthe Approval
Company Law.
3. Related party and subsidiaries: as
defined in the Regulations Governing
the Preparation of Financial Reports
by Securities Issuers.
4. Professional appraiser: refers to a
real estate appraiser or other person
authorized by applicable laws to
engage in the appraisal of real estate
or equipment.
5. Date of occurrence: refers to the
date of contract signing, date of
payment, date of completion of
trading, date of transfer registration,
date of board of directors resolution,
or
other
date
confirming
the
counterpart
and
amount
of
the
transaction, whichever date is earlier.
However, in the case of investments
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.
6. Mainland China area investment:
refers to investments in Mainland
China
area
approved
by
the
Investment
Commission
of
the
Ministry of Economic Affairs or
conducted in accordance with the
Regulations Governing the Approval
of
Investment
or
Technical
Cooperation in Mainland China.
7.
As
used
in
the
Operating
Procedures, "within oneyear" refers

9

of
Investment
or
Technical
Cooperation in Mainland China.
7.
As
used
in
the
Operating
Procedures, "within one year" refers
to the year preceding the date of
occurrence of the acquisition of
disposal of assets; however, items
duly announced in accordance with
the Operating Procedures will be
disregarded.
8.
As
used
in
the
Operating
Procedures,
"latest
financial
statement" refers to the financial
statement published and audited or
reviewed by the Company's auditing
CPA in accordance with applicable
laws prior to the acquisition or
disposal of assets.
9.
As
used
in
the
Operating
Procedures, "10% of the Company's
total assets" is calculated based on
the total assets as stated in the most
recent
stand-alone
or
individual
financial statement prepared under
the
Regulations
Governing
the
Preparation of Financial Reports by
Securities Issuers.		 to the year preceding the date of
occurrence of the acquisition of
disposal of assets; however, items
duly announced in accordance with
the Operating Procedures will be
disregarded.
8.
As
used
in
the
Operating
Procedures,
"latest
financial
statement" refers to the financial
statement published and audited or
reviewed by the Company's auditing
CPA in accordance with applicable
laws prior to the acquisition or
disposal of assets.
9.
As
used
in
the
Operating
Procedures, "10% of the Company's
total assets" is calculated based on
the total assets as stated in the most
recent
stand-alone
or
individual
financial statement prepared under
the
Regulations
Governing
the
Preparation of Financial Reports by
Securities Issuers.
Article 4 Scope of assets applicable to the
Operating Porcedures:
1. Securities: including long- term and
short-term
investments
such
as
stocks, government bonds, corporate
bonds,
financial
debentures,
securities representing interest in a
fund, deposit receipts, call(put)		 Scope of assets applicable to the
Operating Porcedures:
1. Securities: including long- term and
short-term
investments
such
as
stocks, government bonds, corporate
bonds,
financial
debentures,
securities representing interest in a
fund, deposit receipts, call(put)		 1. Subparagraph 5
is
added
in
order to comply
with IFRS 16,
“leases”.
2. Move
the
original
subparagraph

10

2.
3.
4.
5.
6.
7.
8.
9.		 warrants, beneficiary certificates and
asset-backed securities.
Real estate (including land, buildings
and construction, investment real
estate) and equipment.
Membership certificates.
Intangible assets: including patents,
copyrights,
trademarks,
and
franchises, etc.
Right-of-use assets.
Claims against financial institutions
(including receivables, loans and bills
purchase discounts, and overdue
receivables).
Derivatives.
Assets acquired or disposed through
mergers or consolidations, splits,
acquisitions, or assignment of shares
in accordance with applicable laws.
Other important assets.		 warrants, beneficiary certificates and
asset-backed securities.
2. Real estate (including land, buildings
and construction, investment real
estateand rights to use land) and
equipment.
3. Membership certificates.
4. Intangible assets: including patents,
copyrights,
trademarks,
and
franchises, etc.
5. Claims against financial institutions
(including receivables, loans and bills
purchase discounts, and overdue
receivables).
6. Derivatives.
7. Assets acquired or disposed through
mergers or consolidations, splits,
acquisitions, or assignment of shares
in accordance with applicable laws.
8. Other important assets.		 5~8
to
subparagraph
6~9.
Article 5 The total value of real property, its right-
of-use assetsor securitiesacquiredby
the Company and its subsidiaries
("Subsidiaries") for non-operating use
and limit onacquisition ofeach specific
security are as follows:
1. The total value of real propertyor its
right-of-use assets acquiredby the
Company for non-operating use may
not exceed 20% of the Company's
net worth as stated in its latest
financial statement. The total value of
real propertyor its right-of-use assets
acquiredby a Subsidiary for non-
operatinguse maynot exceed 20%		 The total value of real property or
securitiespurchasedby the Company
and its subsidiaries ("Subsidiaries") for
non-operating
use
and
limit
on
investment ineach specific security are
as follows:
1. The total value of real property
purchasedby the Company for non-
operating use may not exceed 20%
of the Company's net worth as stated
in its latest financial statement. The
total value of real propertypurchased
by a Subsidiary for non-operating
use may not exceed 20% of the
Company's net worth as stated in its		 Amendments
are
made in order to
be consistent with
the Article 4 and
the Article 7 of the
Operating
Procedures.

11

of the Company's net worth as stated
in its latest financial statement.
2. The total value of securitiesacquired
by the Company may not exceed
100% of the Company's net worth as
stated in its latest financial statement.
The total value of securitiesacquired
by a Subsidiary may not exceed 60%
of the Company's net worth as stated
in its latest financial statement.
3. The specific securityacquiredby the
Company may not exceed 50% of
the Company's net worth as stated in
its latest financial statement. The
specific
security
acquired
by
a
Subsidiary may not exceed 30% of
the Company's net worth as stated in
its financial statement.		 latest financial statement.
2. The total value of securitiesinvested
by the Company may not exceed
100% of the Company's net worth as
stated in its latest financial statement.
The total value of securitiesinvested
by a Subsidiary may not exceed 60%
of the Company's net worth as stated
in its latest financial statement.
3. Theinvestment in aspecific security
by the Company may not exceed
50% of the Company's net worth as
stated in its latest financial statement.
Theinvestment in aspecific security
by a Subsidiary may not exceed 30%
of the Company's net worth as stated
in its financial statement.
Article 6 When assets are acquired or disposed
in accordance with the Operating
Procedures, the execution department
shall evaluate the terms and conditions
of the transaction according to the
Company's
internal
operating
procedures in advance and then submit
it for approval by the authorized person
according to the authorized limit table
approved by the Board of Directors. If
the amount of the assets to be acquired
or disposed exceeds the amount as set
forth in the authorized limit table, the
transaction may be implemented only
after
approved
by
the
Board
of
Directors.
The execution departments referred to		 When assets are acquired or disposed
in accordance with the Operating
Procedures, the execution department
shall evaluate the terms and conditions
of the transaction according to the
Company's
internal
operating
procedures in advance and then submit
it for approval by the authorized person
according to the authorized limit table
approved by the Board of Directors. If
the amount of the assets to be acquired
or disposed exceeds the amount as set
forth in the authorized limit table, the
transaction may be implemented only
after
approved
by
the
Board
of
Directors.
The execution departments referred to		 Amendments
are
made in order to
be consistent with
the Article 4 of the
Operating
Procedures.

12

in the foregoing paragraph are as
follows:
1.
For
securities:
the
Investment
Department
and
the
Finance
Department.
2. For real property and equipment: the
Department which uses such assets
and the Finance Department.
3. For membership certificate: the
Finance Department.
4. For intangible assets: each business
unit, Legal and Intellectual Property
Department
or
other
competent
department concerned.
5.
For
right-of-use
assets:
the
Department which uses such assets
and the Finance Department.
6.
For
claims
against
financial
institutions: the Finance Department.
7.
For
derivatives:
the
Finance
Department.
8. For assets acquired or disposed
through mergers or consolidations,
splits, acquisitions, or assignment of
shares in accordance with applicable
laws: the Investment Department.
9. For other important assets: the
Department which uses such assets.		 in the foregoing paragraph are as
follows:
1.
For
long-term
and
short-term
securities:
the
Investment
Department
and
the
Finance
Department.
2. For real property and equipment: the
Department which uses such assets
and the Finance Department.
3. For membership certificate: the
Finance Department.
4. For intangible assets: each business
unit, Legal and Intellectual Property
Department
or
other
competent
department concerned.
5.
For
claims
against
financial
institutions: the Finance Department.
6.
For
derivatives:
the
Finance
Department.
7. For assets acquired or disposed
through mergers or consolidations,
splits, acquisitions, or assignment of
shares in accordance with applicable
laws: the Investment Department.
8. For other important assets: the
Department which uses such assets.
7.
8.

9.
Article 7 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 opinionsin		 When the Company should appoint a
professional
appraiser,
accountant,
lawyer, or underwriter to assist in
appraisal work and obtain an expert
opinion
in
accordance
with
the
"Regulations Governing the Acquisition
or Disposal of Assets byPublic		 Amendments are
made to comply
with “Regulations
Governing
the
Acquisition
and
Disposal of Assets
by
Public

13

accordance
with
the
"Regulations
Governing the Acquisition or Disposal
of Assets by Public Companies"or the
Operating Procedures 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 the 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 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.		 Companies"
promulgated
by
the
Competent Authority, the professional
appraiser and its appraisal personnel,
the accountant, lawyer, or underwriter
so appointed shall not be a related
party to the parties in the proposed
transaction.		 Companies.”

1.

2.

3.
Article 9 If any acquisition or disposal of assets
should be approved by the Audit
Committee, the Board of Directors, or
the
shareholders'
meeting
in		 If any acquisition or disposal of assets
should be approved by the Audit
Committee, the Board of Directors, or
the
shareholders'
meeting
in		 Certain languages
are
revised
as
appropriate
because
the

14

accordance
with
the
"Regulations
Governing the Acquisition or Disposal
of
Assets
by
Public
Companies"
promulgated
by
the
Competent
Authority, the Operating Proceduresor
other applicable laws, paragraph 1 of
Article 6 of the Operating Procedures
shall not apply to such acquisition or
disposal of assets. In this case, the
execution department shall evaluate
the terms and conditions of the
transaction according to the Company's
internal
operating
procedures
in
advance, and then approved by one-
half or more of all Audit Committee
members and submit it for approval by
the Board of Directors, or approval by
the shareholders' meeting.
If approval of more than half of all audit
committee members is not obtained
regarding the acquisition or disposal of
assets as set forth in the preceding
paragraph, the procedures may be
implemented if approved by more than
two-thirds of all directors, and the
resolution of the audit committeeshall
be recorded in the meeting minutes of
the Board of Directors.		 accordance
with
the
"Regulations
Governing the Acquisition or Disposal
of
Assets
by
Public
Companies"
promulgated
by
the
Competent
Authority or other applicable laws,
paragraph 1 of Article 6 of the
Operating Procedures shall not apply to
such acquisition or disposal of assets.
In this case, the execution department
shall evaluate the terms and conditions
of the transaction according to the
Company's
internal
operating
procedures in advance, and then
approved by one-half or more of all
Audit Committee members and submit
it for approval by the Board of
Directors,
or
approval
by
the
shareholders' meeting.
When the Operating Procedures are
submitted for discussion in the meeting
of Board of Directors, the Board of
Directors
shall
take
into
full
consideration of each independent
director's opinion. If an independent
director
objects
or
expresses
reservation about any matter, itshall be
recorded in the meeting minutes of the
Board of Directors.		 Company shall not
apply to the Article
14-3 of Securities
and Exchange Act
as the Company
has
established
audit committee.
Article 10-1 Where the transaction amount of a
proposedacquisition or disposalin a
specific
security
by
a
Subsidiary
exceedsNT$1 billion,the proposed
acquisition
or
disposal
shall
be
approved by the Company's Audit
Committee and the Board of Directors		 Where the total amount invested by a
Subsidiary in securities after making a
proposed investment will exceed 30%
of the Company's net worth as stated in
its
latest
financial
statement,
the
proposed investment shall be approved
by the Company's Audit Committee and		 Certain languages
are revised per the
group’s needs.

15

by resolution in advance. the Board of Directors by resolution in
advance.
Where
the
transaction
amount of a proposedinvestmentin a
specific
security
by
a
Subsidiary
exceeds 10% of the Company's net
worth as stated in its latest financial
statement, the proposedinvestment
shall be approved by the Company's
Audit Committee and the Board of
Directors byresolution in advance.
Article 11 The Company shall comply with the
following guidelines with regard to the
acquisition or disposal of real property,
equipmentor its right-of-use assets:
When acquiring or disposing real
property, equipmentor its right-of-use
assets,
if
the
transaction
amount
reaches 20% of the Company's paid-in
capital or NT$300 million or more,
except for transacting with adomestic
government agency, engaging others to
build on its own land, engaging others
to build on leased land, or acquiring
equipment for operating useor its right-
of-use assets,the Company shall, prior
to the date of occurrence of the event,
obtain an appraisal report from a
professional appraiser and shall further
comply with the following provisions:
1. Where due to special circumstances
a limited price, specific price or
specified price should be used as
reference price in determining the
transaction price, such transaction
shall be submitted for approval by		 The Company shall comply with the
following guidelines with regard to the
acquisition or disposal of real property
or equipment:
When acquiring or disposing real
property
or
equipment,
if
the
transaction amount reaches 20% of the
Company's paid-in capital or NT$300
million or more, except for transacting
with a government agency, engaging
others to build on its own land,
engaging others to build on leased
land,
or
acquiring
equipment
for
operating use, the Company shall, prior
to the date of occurrence of the event,
obtain an appraisal report from a
professional appraiser and shall further
comply with the following provisions:
1. Where due to special circumstances
a limited price, specific price or
specified price should be used as
reference price in determining the
transaction price, such transaction
shall be submitted for approval by
the Board of Directors in advance,		 1. Amendments
are made to
comply
with
“Regulations
Governing the
Acquisition
and
Disposal
of Assets by
Public
Companies.”
2. Certain
languages
in
paragraph
1
are revised as
appropriate in
order to apply
to
IFRS
16,
“leases.”
3. Certain
languages
in
subparagraph
1 of paragraph
1
are
amended
for
compliance.

16

2.
3.		 the Board of Directors in advance,
and the same procedures shallalso
be followed whenever there is any
subsequent changeto the terms and
conditions of the transaction.
If the transaction amount is NT$1
billion or more, the Company shall
obtain appraisal reports from at least
two professional appraisers.

If
the
professional
appraiser’s
appraisal results revealed any of the
following circumstances, 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, the Company
shall
appoint
an
accountant
to
conduct the appraisal in accordance
with the provisions of Statement of
General Auditing Procedures No. 20
published by the ARDF and render a
specific opinion regarding the cause
of
the
differences
and
the
reasonableness of the transaction
price:
(1)Where the difference between the
appraisal
result
and
the
transaction amount is 20% or
more of the transaction amount.
(2)Where the difference between the
appraisal results of two or more
professional appraisers is 10% or
more of the transaction amount.		 2.
3.
4.		 and the same procedures shallapply
for any future changesto the terms
and conditions ofsuchtransaction.
If the transaction amount is NT$1
billion or more, the Company shall
obtain appraisal reports from at least
two professional appraisers.

If
the
professional
appraiser’s
appraisal results revealed any of the
following circumstances, 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, the Company
shall
appoint
an
accountant
to
conduct the appraisal in accordance
with the provisions of Statement of
General Auditing Procedures No. 20
published by the ARDF and render a
specific opinion regarding the cause
of
the
differences
and
the
reasonableness of the transaction
price:
(1)Where the difference between the
appraisal
result
and
the
transaction amount is 20% or
more of the transaction amount.
(2)Where the difference between the
appraisal results of two or more
professional appraisers is 10% or
more of the transaction amount.
The period from the date of the
appraisal
report
issued
by
a

17

4. The period from the date of the
appraisal
report
issued
by
a
professional
appraiser
to
the
execution date of the relevant sale
and purchase agreement should be
no
more
than
three
months.
However,
where
the
publicly
announced current land value for the
same period is used and not more
than six months have elapsed from
the original appraisal report, an
opinion may still be issued by the
same professional appraiser.
5. Items which should be included in an
appraisal report are:：
(1)Items required in accordance with
Regulations
on
Real
Estate
Appraisal.
(2)Matters regarding the professional
appraiser
and
its
appraisal
personnel:
a. The professional appraiser's
name, amount of paid-in capital,
organizational
structure,
and
personnel composition.
b. The names, ages, academic
records and curriculum vitae
(with
relevant
evidences),
number of years performing
appraisal work and employment
period,
and
number
of
appraisals conducted of the
appraisal personnel.
c.
Relationship
between
professional appraiser, appraisal		 professional
appraiser
to
the
execution date of the relevant sale
and purchase agreement should be
no
more
than
three
months.
However,
where
the
publicly
announced current land value for the
same period is used and not more
than six months have elapsed from
the original appraisal report, an
opinion may still be issued by the
same professional appraiser.
5. Items which should be included in an
appraisal report are:
(1)Items required in accordance with
Regulations
on
Real
Estate
Appraisal.
(2)Matters regarding the professional
appraiser
and
its
appraisal
personnel:
a. The professional appraiser's
name, amount of paid-in capital,
organizational
structure,
and
personnel composition.
b. The names, ages, academic
records and curriculum vitae
(with
relevant
evidences),
number of years performing
appraisal work and employment
period,
and
number
of
appraisals conducted of the
appraisal personnel.
c.
Relationship
between
professional appraiser, appraisal
personnel, and the client.
d.
Declaration
of
no
false

18

personnel, and the client.
d.
Declaration
of
no
false
statement or omission being
contained
in
the
appraisal
report.
e. Date of appraisal report.
(3) Basic information of the subject
property, which shall at least
include the name and nature,
location, and area of the subject
property.
(4)
Examples
of
transactions
involving other properties that are
located within the area as the
subject property.
(5) When the appraisal type is for a
specific price or specified price,
the conditions of the specific or
specified price and whether said
conditions are met under current
circumstances, the reason for the
difference between the normal
prices
and
such
specific
or
specified
price
and
the
reasonableness
of
such
difference,
and
whether
the
specific price or specified price is
qualified to be used as reference
for the transaction price.
(6) In terms of a joint development
contract, the reasonable allocation
percentage between the parties
should be provided.
(7)
An
estimate
of
land
value
incremental tax.		 statement or omission being
contained
in
the
appraisal
report.
e. Date of appraisal report.
(3) Basic information of the subject
property, which shall at least
include the name and nature,
location, and area of the subject
property.
(4)
Examples
of
transactions
involving other properties that are
located within the area as the
subject property.
(5) When the appraisal type is for a
specific price or specified price,
the conditions of the specific or
specified price and whether said
conditions are met under current
circumstances, the reason for the
difference between the normal
prices
and
such
specific
or
specified
price
and
the
reasonableness
of
such
difference,
and
whether
the
specific price or specified price is
qualified to be used as reference
for the transaction price.
(6) In terms of a joint development
contract, the reasonable allocation
percentage between the parties
should be provided.
(7)
An
estimate
of
land
value
incremental tax.
(8) In case that appraised value of
the subjectpropertyat the same

19

(8) In case that appraised value of
the subject property at the same
appraisal date among appraisers
differs and the difference is twenty
percent
or
more,
whether
measures provided in Article 41 of
the Real Estate Appraiser Act has
been taken.
(9) Attachments to the appraisal
report shall include the appraisal
details of the subject property,
ownership registration information,
photocopy of cadastral map, urban
planning sketch, location map of
the subject property, certificate of
land use zoning, and photographs
showing current condition of the
subjectproperty.		 appraisal date among appraisers
differs and the difference is twenty
percent
or
more,
whether
measures provided in Article 41 of
the Real Estate Appraiser Act has
been taken.
(9) Attachments to the appraisal
report shall include the appraisal
details of the subject property,
ownership registration information,
photocopy of cadastral map, urban
planning sketch, location map of
the subject property, certificate of
land use zoning, and photographs
showing current condition of the
subject property.
Article 11-1 Where the transaction amount of a
proposedacquisition or disposal by a
Subsidiary in a specific real propertyor
its right-of-use assetsfor non-operating
use exceedsNT$300 million,the
proposedacquisition or disposalshall
be approved by the Company's Audit
Committee and the Board of Directors
by resolution in advance.		 Where the total amount invested by a
Subsidiary in real property for non-
operating use after making a proposed
investment will exceed 10% of the
Company's net worth as stated in its
latest financial statement, the proposed
investment shall be approved by the
Company's Audit Committee and the
Board of Directors by resolution in
advance.
Where
the
transaction
amount of a proposedinvestmentby a
Subsidiary in a specific real property for
non-operating use exceeds1% of the
Company's net worth as stated in its
latest financial statement, the proposed
investment shall be approved by the
Company's Audit Committee and the		 Certain languages
are revised per the
group’s needs.

20

Board of Directors by resolution in
advance.
Article 12 Procedures governing transactions with
a related party are as follows:
1. When the Company acquires or
disposes of assets from or to a
related party, in addition to complying
with the requirements set forth in
Article 10, Article 11 and Article 13
and following required resolution
procedures
and
assessing
the
reasonableness of the transaction
terms and other relevant matters in
accordance
with
the
following
provisions, if the transaction amount
reaches 10% of the Company's total
assets, the Company shall also
obtain an appraisal report from a
professional
appraiser
or
an
accountant's opinion in accordance
with Article 10,Article 11 and Article
13.
The aforementioned calculation of
the transaction amount shall be
made in accordance with Article 13-1
hereof.
Furthermore,
when
determining whether the transaction
counterparty is a related party, in
addition to legal formalities, the
Company
shall
take
into
consideration of the substance of the
relationship between the transaction
parties.
2. Appraisal and operating procedures:
Where the Companyacquires or		 Procedures governing transactions with
a related party are as follows:
1.When the Company acquires or
disposes of assets from or to a
related party, in addition to complying
with the requirements set forth in
Article 10, Article 11 and Article 13
and following required resolution
procedures
and
assessing
the
reasonableness of the transaction
terms and other relevant matters in
accordance
with
the
following
provisions, if the transaction amount
reaches 10% of the Company's total
assets, the Company shall also
obtain an appraisal report from a
professional
appraiser
or
an
accountant's opinion in accordance
with Article 10,Article 11 and Article
13.
The aforementioned calculation of
the transaction amount shall be
made in accordance with Article 13-1
hereof.
Furthermore,
when
determining whether the transaction
counterparty is a related party, in
addition to legal formalities, the
Company
shall
take
into
consideration of the substance of the
relationship between the transaction
parties.
2. Appraisal and operating procedures:
Where the Companyacquires or		 1. Amendments
are made to
comply
with
“Regulations
Governing the
Acquisition and
Disposal
of
Assets
by
Public
Companies.”
2. Adoption
of
right-of-use
assets in order
to comply with
IFRS
16,
“leases.”
3. Certain
languages are
revised
as
appropriate
because
the
Company shall
not
apply
to
the Article 14-3
of
Securities
and Exchange
Act
because
the
Company
with
an
established
audit
committee.

21

disposes of real propertyor its right-
of-use assets from or to a related
party, or acquires or disposes of
assets other than real propertyor its
right-of-use assetsfrom or to a
related party where the transaction
amount
reaches
20%
of
the
Company's paid-in capital, 10% of
the
Company's
total
assets,
or
NT$300 million, except for trading of
domestic
government
bonds
or
bonds under repurchase and resale
agreements,
or
subscription
or
repurchase
of
domestic
money
market funds issued by securities
investment trust enterprises, the
Company may proceed to enter into
a transaction contract and make only
after
submitting
the
following
information to the Audit Committee
and obtaining approval by one-half or
more
of
all
Audit
Committee
members and, after submitting the
same to the Board of Directors,
obtaining approval from the Board of
Directors, and paragraphs 2 and 3 of
Article
2
shall
apply
mutatis
mutandis:
(1)The
purpose,
necessity
and
estimated
benefits
of
the
acquisition or disposal of assets.
(2) The reason for choosing the
related party as the transaction
counterparty.
(3)With respect to the acquisition of		 disposes of real property from or to a
related party, or acquires or disposes
of assets other than real property
from or to a related party where the
transaction amount reaches 20% of
the Company's paid-in capital, 10%
of the Company's total assets, or
NT$300 million, except for trading of
government bonds or bonds under
repurchase and resale agreements,
or subscription or repurchase of
domestic money market funds issued
by
securities
investment
trust
enterprises,
the
Company
may
proceed to enter into a transaction
contract
and
make
only
after
submitting the following information
to the Audit Committee and obtaining
approval by one-half or more of all
Audit Committee members and, after
submitting the same to the Board of
Directors, obtaining approval from
the
Board
of
Directors,
and
paragraphs 2 and 3 of Article 2 shall
apply mutatis mutandis:
(1)The
purpose,
necessity
and
estimated
benefits
of
the
acquisition or disposal of assets.
(2) The reason for choosing the
related party as the transaction
counterparty.
(3)With respect to the acquisition of
real property from a related party,
information regarding appraisal of
the
reasonableness
of
the

22

real propertyor its right-of-use
assets
from
a
related
party,
information regarding appraisal of
the
reasonableness
of
the
preliminary transaction terms in
accordance with the provisions of
items (1)to(4)and (6) of
subparagraph 3 of this Article 12.
(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 cashflow forecasts for the
year
beginning
from
the
anticipated month of execution of
the contract, and evaluation of the
necessity of the transaction, and
reasonableness of the use of
funds.
(6)An
appraisal
report
from
a
professional
appraiser
or
an
accountant's opinion obtained in
accordance with this Article.
(7)Restrictive covenants and other
important terms in connection with
the transaction.
The aforementioned calculation of
the transaction amount shall be
made
in
accordance
with
subparagraph7of paragraph 1 of
Article 17 hereof, and "within the
preceding year" as used herein		 preliminary transaction terms in
accordance with the provisions of
items (1)and(4),subparagraph 3
of this Article 12.
(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 cashflow forecasts for the
year
beginning
from
the
anticipated month of execution of
the contract, and evaluation of the
necessity of the transaction, and
reasonableness of the use of
funds.
(6)An
appraisal
report
from
a
professional
appraiser
or
an
accountant's opinion obtained in
accordance with this Article.
(7)Restrictive covenants and other
important terms in connection with
the transaction.
The aforementioned calculation of the
transaction amount shall be made in
accordance with subparagraph5of
paragraph 1 of Article 17 hereof, 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
submitted to and approved by the
Board of Directors in accordance with

23

refers to the year preceding the date
of
occurrence
of
the
current
transaction. Items that have been
submitted to and approved by the
audit committee and the Board of
Directors in accordance withthe
Operating Procedures need not be
counted toward the said transaction
amountand shall be subject to
mutatis
mutandis
application
of
Article 2, paragraphs 2 and 3.
3.Assessment of reasonableness of
transaction cost:
(1)The
Company
shall
use
the
following methods to assess the
reasonableness of the transaction
cost when acquiring real property
or its right-of-use assetsfrom a
related party:
a. Based upon the related party’s
transaction price plus necessary
interest on funding and the
costs payable by the buyer in
accordance with applicable law.
"Necessary interest on funding"
refers to and is calculated by
use of the weighted average
interest rate on funds borrowed
by the Company in the year
when the Company plans to
purchase the property as the
basis.
However,
such
necessary interest on funding
may not be higher than the
maximum non-financial industry		 theseOperating Procedures need not
be
counted
toward
the
said
transaction amount.
With respect to the acquisition or
disposal of equipment for business use
between
the
Company
and
its
subsidiaries, the Board of Directors
hereby authorizes the Chairman to
decide
such
matters
when
the
transaction is within NT$300 million and
subsequently
submit
the
aforesaid
decision to the next meeting of the
Board of Directors for ratification.
When the items listed in subparagraph
2 of this Article 12 are submitted for
discussion in the meeting of Board of
Directors, the Board of Directors shall
take into full consideration of each
independent director's opinion. If an
independent
director
objects
or
expresses
reservation
about
any
matter, it shall be recorded in the
meeting minutes of the Board of
Directors.
3.Assessment of reasonableness of
transaction cost:
(1)The
Company
shall
use
the
following methods to assess the
reasonableness of the transaction
cost when acquiring real property
from a related party:
a. Based upon the related party’s
transaction price plus necessary
interest on funding and the
costspayable bythe buyer in

24

lending rate announced by the
Ministry of Finance.
b. Based upon the total appraisal
value from a financial institution
if
the
related
party
has
previously taken a mortgage on
the property as security for a
loan; provided that the actual
cumulative amount lent by the
financial institution shall be 70%
or
more
of
the
financial
institution’s appraisal value for
the property and the loan shall
have
been
disbursed
and
outstanding for one year or
more. However, this method
shall not apply if the financial
institution is a related party of
one
of
the
transaction
counterparties.
(2)Where the land and the building
situated thereupon are combined
as a single property purchasedor
leasedin one transaction, the
transaction costs for the land and
the building may be separately
appraised
in
accordance
with
either of the methods set forth in
the preceding paragraph.
(3)When the Company acquires real
propertyor its right-of-use assets
from a related party, it shall
appraise the cost of the real
propertyor its right-of-use assets
in accordance with theprovisions		 accordance with applicable law.
"Necessary interest on funding"
refers to and is calculated by
use of the weighted average
interest rate on funds borrowed
by the Company in the year
when the Company plans to
purchase the property as the
basis.
However,
such
necessary interest on funding
may not be higher than the
maximum non-financial industry
lending rate announced by the
Ministry of Finance.
b. Based upon the total appraisal
value from a financial institution
if
the
related
party
has
previously taken a mortgage on
the property as security for a
loan; provided that the actual
cumulative amount lent by the
financial institution shall be 70%
or
more
of
the
financial
institution’s appraisal value for
the property and the loan shall
have
been
disbursed
and
outstanding for one year or
more. However, this method
shall not apply if the financial
institution is a related party of
one
of
the
transaction
counterparties.
(2)Where the land and the building
situated thereupon are combined
as a singleproperty purchased in

25

of items (1) and (2)of this
subparagraph,
and
shall
also
engage an accountant to review
the appraisal result and issue a
specific
opinion
regarding
appraisal result.
(4)Where the Company acquires real
propertyor its right-of-use assets
from a related party and the
results of appraisal performed in
accordance with the provisions of
items
(1)
and
(2)
of
this
subparagraph are both lower than
the
transaction
price,
the
transaction shall be handled in
accordance with the provisions of
item
(5)
and
(7)
of
this
subparagraph. However, if any of
the following circumstances occur
and where any objective evidence
has been provided and specific
opinions on reasonableness of the
transaction
price
have
been
obtained
from
a
professional
appraiser and an accountant have
been
obtained,
the
preceding
paragraph shall not apply:
a. When the related party has
acquired undeveloped land or
leased land for development, it
may submit proof of compliance
with
one
of
the
following
conditions:
i. The undeveloped land is
appraised in accordance with		 one transaction, the transaction
costs for the land and the building
may be separately appraised in
accordance with either of the
methods set forth in the preceding
paragraph.
(3)When the Company acquires real
property from a related party, it
shall appraise the cost of the real
property in accordance with the
provisions of items (1) and (2),
subparagraph3 of this Article 12,
and
shall
also
engage
an
accountant to review the appraisal
result and issue a specific opinion
regarding appraisal result.
(4)Where the Company acquires real
property from a related party and
the results of appraisal performed
in accordance with the provisions
of items (1) and (2),subparagraph
3 of this Article 12are both lower
than the transaction price, the
transaction shall be handled in
accordance with the provisions of
item (5),subparagraph3 of this
Article 12. However, if any of the
following circumstances occur and
where any objective evidence has
been
provided
and
specific
opinions on reasonableness of the
transaction
price
have
been
obtained
from
a
professional
appraiser and an accountant have
been
obtained,
the
preceding

26

the foregoing methodsas set
forth in the provisions of item
(1) to (3) and (6) of this
subparagraph, and the building
is appraised according to the
related
party’s
construction
cost
plus
reasonable
construction profit, and the
total appraised value of the
land and the building is in
excess
of
the
actual
transaction price. "Reasonable
construction profit" shall be
deemed the average gross
operating profit margin of the
related
party’s
construction
division over the most recent
three 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.
ii. Concluded transactionsor
leasingby unrelated parties
within
the
preceding
year
involving other floors of the
same
target
property
or
properties
located
in
the
neighboring area, of which the
property size and transaction
terms
are
similar
to
the
proposed
transaction
after
taking into consideration of
reasonableprice differences in		 paragraph shall not apply:
a. When the related party has
acquired undeveloped land or
leased land for development, it
may submit proof of compliance
with
one
of
the
following
conditions:
i. The undeveloped land is
appraised in accordance with
the foregoing methods, and the
building is appraised according
to
the
related
party’s
construction
cost
plus
reasonable construction profit,
and the total appraised value
of the land and the building is
in
excess
of
the
actual
transaction price. "Reasonable
construction profit" shall be
deemed the average gross
operating profit margin of the
related
party’s
construction
division over the most recent
three 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.
ii. Concluded transactions by
unrelated parties within the
preceding year involving other
floors of the same target
property or properties located
in the neighboringarea, of

27

b. floor
or
area
prices
in
accordance with standard real
property market practices or
standard real property leasing
market practices.
Where the Company provides
evidences that the terms of the
proposed acquisition of real
property
or
obtaining
real
property
right-of-use
assets
through leasingwith the related
party are similar to the terms of
transactions concluded for the
acquisition of property located in
neighboring area of a similar
size by unrelated parties within
the preceding year. Concluded
transactions for the acquisition
of
property
located
in
neighboring
area
in
the
preceding paragraph in principle
refers to property located at the
same or an adjacent block of
the target property and within a
distance of no more than 500
meters
or
the
publicly
announced current value of the
property is close to that of the
target property; transaction of
similar
size
refers
to
transactions
concluded
by
unrelated parties with a land
area of no less than 50% of the
target property; within one year
refers to oneyearprecedingthe		 b. which the property size and
transaction terms are similar to
the proposed transaction after
taking into consideration of
reasonable price differences in
floor
or
area
prices
in
accordance with standard real
property market practices.
iii.
Concluded
leasing
transactions
by
unrelated
parties within the preceding
year for other floors of the
same target property, of which
the
transaction
terms
are
similar
to
the
proposed
transaction after taking into
consideration of reasonable
price
differences
in
floor
according to standard real
property
leasing
market
practices.
Where the Company provides
evidences that the terms of the
proposed acquisition of real
property with the related party
are similar to the terms of
transactions concluded for the
acquisition of property located in
neighboring area of a similar
size by unrelated parties within
the preceding year. Concluded
transactions for the acquisition
of
property
located
in
neighboring
area
in
the
preceding paragraph inprinciple

28

date
of
occurrence
of
the
proposed
acquisition
of
the
target propertyor its right-of-use
assets.
(5)When the Company acquires real
propertyor its right-of-use assets
from a related party and the
results of appraisal performed in
accordance with the provisions of
items (1)to (4) and (6) of this
subparagraph are both lower than
the
transaction
price,
the
Company shall comply with the
following provisions. In addition, if
the Company have allocated a
special reserve in accordance with
the
following
provisions,
the
Company may not utilize such
special
reserve
until
it
has
recognized loss due to price
declinein market value of the
assets it purchased or leased at a
premium,or such property has
been disposed of, or adequate
compensation has been made,or
the leasing contract has been
terminated,
or
the
original
condition has been restored, or
there is other evidence confirming
that it is not unreasonable to do
so, and approval in connection
therewith from the Competent
Authority
shall
have
been
obtained.
a.The Companyshall allocate the		 refers to property located at the
same or an adjacent block of
the target property and within a
distance of no more than 500
meters
or
the
publicly
announced current value of the
property is close to that of the
target property; transaction of
similar
size
refers
to
transactions
concluded
by
unrelated parties with a land
area of no less than 50% of the
target property; within one year
refers to one year preceding the
date
of
occurrence
of
the
proposed
acquisition
of
the
target property.
(5)When the Company acquires real
property from a related party and
the results of appraisal performed
in accordance with the provisions
of items (1)and (2), subparagraph
3 of this Article 12 are both lower
than the transaction price, the
Company shall comply with the
following provisions. In addition, if
the Companyand any public
company
that
invests
in
the
Company using the equity method
have allocated a special reserve in
accordance with the following
provisions, the Companyand the
public companymay not utilize
such special reserve until it has
recognized loss due toprice

29

difference between the real
property
or
its
right-of-use
assetstransaction price and the
estimate cost as a special
reserve
in
accordance
with
paragraph 1, Article 41 of the
Securities and Exchange Act,
and shall not be distribute this
reserve
or
use
it
for
capitalization and issuance of
new shares. If an investor that
has investment in the Company
by using the equity method is a
public company, it shall also
allocate special reserve in an
amount in proportion to its
shareholding in the Company
according to paragraph 1, Article
41
of
the
Securities
and
Exchange Act.
b. Theindependent directors in
Audit
Committee
of
the
Company shall comply with
Article 218 of the Company Law.
c. The Company shall report
matters
handled
under
the
foregoing items (1) and (2) to
the shareholders' meeting and
shall disclose the details of the
transaction in its annual report
and prospectus.
(6)When the Company acquires real
propertyor its right-of-use assets
from a related party and any of the
followingcircumstances occur, it		 declinefor such real property,or
such property has been disposed
of, or adequate compensation has
been
made,
or
the
original
condition has been restored, or
there is other evidence confirming
that it is not unreasonable to do
so, and approval in connection
therewith from the Competent
Authority
shall
have
been
obtained.
a. The Company shall allocate the
difference between the real
property transaction price and
the estimate cost as a special
reserve
in
accordance
with
paragraph 1, Article 41 of the
Securities and Exchange Act,
and shall not be distribute this
reserve
or
use
it
for
capitalization and issuance of
new shares. If an investor that
has investment in the Company
by using the equity method is a
public company, it shall also
allocate special reserve in an
amount in proportion to its
shareholding in the Company
according to paragraph 1, Article
41
of
the
Securities
and
Exchange Act.
b. The Audit Committee of the
Company shall comply with
Article 218 of the Company Law.
c. The Companyshall report

30

shall implement the transaction in
accordance with the appraisal and
operating
procedures
in
subparagraph2 of thisparagraph,
and items (1)to(3)of this
subparagraph
regarding
the
assessment of the reasonableness
of
transaction
cost
are
not
applicable:
a. The related party acquired the
real propertyor its right-of-use
assetsthrough inheritance or as
a gift.
b. More than five years will have
elapsed from the time the
related party signed the contract
to obtain the real propertyor its
right-of-use
assets
to
the
execution date of the proposed
transaction.
c.The real property is to be
acquired through signing of a
joint development contract with
the related party or through
engaging the related party to
build real property, either on the
Company's own land or on a
leased land.
d. The real property right-of-use
assets for business use are
acquired by the Company with
its subsidiaries, or between its
subsidiaries in which it directly
or indirectly holds 100% of the
issued shares or authorized		 matters
handled
under
the
foregoing items (1) and (2) to
the shareholders' meeting and
shall disclose the details of the
transaction in its annual report
and prospectus.
(6)When the Company acquires real
property from a related party and
any of the following circumstances
occur, it shall implement the
transaction in accordance with the
appraisal
and
operating
procedures insubparagraphs 1
and2 of thisArticle 12, and items
(1), (2), and(3), subparagraph3 of
this
Article
12
regarding
the
assessment of the reasonableness
of
transaction
cost
are
not
applicable:
a.The related party acquired the
real
property
through
inheritance or as a gift.
b. More than five years will have
elapsed from the time the
related party signed the contract
to obtain the real property to the
execution date of the proposed
transaction.
c.The real property is to be
acquired through signing of a
joint development contract with
the related party or through
engaging the related party to
build real property, either on the
Company's own land or on a

31

capital.
(7)When the Company acquires real
propertyor its right-of-use assets
from a related party and there is
other evidence indicating that such
acquisition does not conform to
conventional business practice,
the
Company
shall
act
in
accordance with item (5)of this
subparagraph.		 leased land.
(7)When the Company acquires real
property from a related party and
there is other evidence indicating
that such acquisition does not
conform to conventional business
practice, the Company shall act in
accordance
with
item
(5),
subparagraph3 of this Article 12.
Article 13 The Company shall comply with the
following guidelines with regard to the
acquisition or disposal of intangible
assetsor its right-of-use assets or
membership certificates:
When
the
Company
acquires
or
disposes of intangible assetsor its
right-of-use
assets
or
membership
certificatesand the transaction amount
reaches 20% of the Company's paid-in
capital or NT$300 million or more,
except for transacting with adomestic
government
agency,
the
Company
shall, prior to the date of occurrence of
the event, appoint an accountant to
render
an
opinion
on
the
reasonableness
of
the
transaction
price. The accountant so appointed
shall act in accordance with Statement
of General Auditing Procedures No. 20
published bythe ARDF accordingly.		 The Company shall comply with the
following guidelines with regard to the
acquisition or disposal ofmembership
certificates orintangible assets:
When
the
Company
acquires
or
disposes ofmembership certificates or
intangible assets and the transaction
amount reaches 20% of the Company's
paid-in capital or NT$300 million or
more, except for transacting with a
government
agency,
the
Company
shall, prior to the date of occurrence of
the event, appoint an accountant to
render
an
opinion
on
the
reasonableness
of
the
transaction
price. The accountant so appointed
shall act in accordance with Statement
of General Auditing Procedures No. 20
published by the ARDF accordingly.		 The
reason
of
amendment is the
same
as
the
reason set forth in
the
first
explanation
of
Article 11.
Article 13-1 The calculation of the transaction
amount referred to in Articles 10, 10-1,
11, 11-1 and 13 shall be made in
accordance with subparagraph7of		 The calculation of the transaction
amount referred to in Articles 10, 10-1,
11, 11-1 and 13 shall be made in
accordance with subparagraph5of		 Adjustment of the
referring
subparagraph
item.

32

paragraph 1 of Article 17 hereof, 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 an accountant's opinion is
obtained in accordance with these
Operating Procedures need not be
counted toward the transaction amount.		 paragraph 1 of Article 17 hereof, 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 an accountant's opinion is
obtained in accordance with these
Operating Procedures need not be
counted toward the transaction amount.
Article 15 Procedures
governing
derivatives
trading activities are as follows:
1.Trading principles and strategies:
(1)Types of trades:
The scope of the Company's
derivatives trading shall be limited
to
forward
foreign
exchange,
options, interest rate or exchange
rate swaps, outright bond purchase
and
sale,
and
repurchase
transactions. Prior approval of the
Board of Directors is required for
trading of other types of products.
(2)Operating and hedging strategies:
The Company shall engage in
derivatives trading for the purpose
of mitigating risks. When selecting
derivatives products, the Company
shall choose from the products with
a view to mitigate the risks arising
from
the
Company's
business
operating. In addition, to avoid
creating credit risk, the Company
shall choose derivatives trading
counterparties from the Company's		 Procedures
governing
derivatives
trading activities are as follows:
1.Trading principles and strategies:
(1)Types of trades:
The scope of the Company's
derivatives trading shall be limited
to
forward
foreign
exchange,
options, interest rate or exchange
rate
swaps,
outright
bond
purchase
and
sale,
and
repurchase transactions. Prior
approval of the Board of Directors
is required for trading of other
types of products.
(2)Operating and hedging strategies:
The Company shall engage in
derivatives trading for the purpose
of mitigating risks. When selecting
derivatives products, the Company
shall choose from the products
with a view to mitigate the risks
arising
from
the
Company's
business operating. In addition, to
avoid creating credit risk, the
Companyshall choose derivatives		 Certain languages
are amended for
compliance.

33

correspondent banks to the extent
possible.
(3)Delegation of powers and duties:
a. Funds management: Funds
management is the pivot of the
foreign exchange management
system;
it
is
necessary
to
acquire foreign exchange mark
information, assess trends and
risks,
have
knowledge
of
financial products, be familiar
with
relevant
laws
and
regulations and have relevant
skills in order to provide the
management,
sales,
purchasing,
accounting,
and
funds management departments
with sufficient and up-to-date
information.
b.
Accounting
Department:
Accounting
Department
is
responsible for the control of the
Company's
overall
foreign
exchange position and shall
accurately
calculate
realized
and future positions for the
Company
to
set
account
exchange rates and lock in profit
and cost, which may avert the
performance of the Company's
core
business
from
being
influenced by exchange rate
fluctuations.
Accounting
Department needs to rely on the
information
provided
by
trading counterparties from the
Company's correspondent banks
to the extent possible.
(3)Delegation of powers and duties:
a. Funds management: Funds
management is the pivot of the
foreign exchange management
system;
it
is
necessary
to
acquire foreign exchange mark
information, assess trends and
risks,
have
knowledge
of
financial products, be familiar
with
relevant
laws
and
regulations and have relevant
skills in order to provide the
management,
sales,
purchasing,
accounting,
and
funds management departments
with sufficient and up-to-date
information.
b.
Accounting
Department:
Accounting
Department
is
responsible for the control of the
Company's
overall
foreign
exchange position and shall
accurately
calculate
realized
and future positions for the
Company
to
set
account
exchange rates and lock in profit
and cost, which may avert the
performance of the Company's
core
business
from
being
influenced by exchange rate
fluctuations.
Accounting
Department needs to relyon the

34

purchasing
and
sales
departments for the prediction
and creation of positions, and a
high level of accuracy of such
information is essential to the
holding of positions.
(4)Trading limits:
a. Hedging trade limit: The
Company shall use the monthly
trading-type foreign exchange
hedge
net
position
as
the
hedging limit. Any excess of
such limit shall be approved by
the
Board
of
Directors
in
advance.
b. Special purpose trade limit:
Special purpose trading limit
shall be confined to capital
expenditures, corporate bonds,
and long-term investments and
the actual amount of such
transactions is used as the
maximum hedging amount.
c. Others: The trading limit, stop-
loss limit, and authorized limit
for other trades which does not
belong to the two foregoing
categories should be approved
by the Board of Directors before
execution.
(5)Performance evaluation:
a. Performance evaluation shall be
based on the exchange rate
costs on the Company's books
andprofit/loss from derivatives
information
provided
by
purchasing
and
sales
departments for the prediction
and creation of positions, and a
high level of accuracy of such
information is essential to the
holding of positions.
(4)Trading limits:
a. Hedging trade limit: The
Company shall use the monthly
trading-type foreign exchange
hedge
net
position
as
the
hedging limit. Any excess of
such limit shall be approved by
the
Board
of
Directors
in
advance.
b. Special purpose trade limit:
Special purpose trading limit
shall be confined to capital
expenditures, corporate bonds,
and long-term investments and
the actual amount of such
transactions is used as the
maximum hedging amount.
c. Others: The trading limit, stop-
loss limit, and authorized limit
for other trades which does not
belong to the two foregoing
categories should be approved
by the Board of Directors before
execution.
(5)Performance evaluation:
a. Performance evaluation shall be
based on the exchange rate
costs on the Company's books

35

trading.
b. The Company has adopted a
monthly
profit/loss
appraisal
approach in order to accurately
manage and disclose price risks
of derivatives trading.
(6)Setting of loss limits:
a. Hedging trade:
i. After a trading position has
been established, a stop-loss
spot must be set to prevent
over-limit losses. The stop-
loss spot shall not exceed 10%
of the trading contract amount.
If the loss amount exceeds
10% of the trading amount,
such
event
shall
be
immediately reported to CEO
and the Board of Directors for
discussion
of
necessary
counter measures.
ii. The loss amount for each
trading
contract
shall
not
exceed 10% of the contract
amount.
iii. After a trading position has
been established, a clear stop-
loss
exchange
rate
and
interest rate shall be set based
on 10% of the amount shown
on the trade approval sheet.
The stop-loss exchange rate
and interest rate shall be
recorded in the trade approval
sheet andprior approval for

and profit/loss from derivatives
trading.
b. The Company has adopted a
monthly
profit/loss
appraisal
approach in order to accurately
manage and disclose price risks
of derivatives trading.
(6)Setting of loss limits:
a. Hedging trade:
i. After a trading position has
been established, a stop-loss
spot must be set to prevent
over-limit losses. The stop-
loss spot shall not exceed 10%
of the trading contract amount.
If the loss amount exceeds
10% of the trading amount,
such
event
shall
be
immediately reported to CEO
and the Board of Directors for
discussion
of
necessary
counter measures.
ii. The loss amount for each
trading
contract
shall
not
exceed 10% of the contract
amount.
iii. After a trading position has
been established, a clear stop-
loss
exchange
rate
and
interest rate shall be set based
on 10% of the amount shown
on the trade approval sheet.
The stop-loss exchange rate
and interest rate shall be
recorded in the trade approval

36

the
transaction
shall
be
obtained in accordance with
the
authorized
limit
table.
Market fluctuations must be
monitored constantly so long
as a position is held; if the
exchange rate or interest rate
reached the stop-loss spot,
stop loss measures must be
immediately implemented.
b. Special purpose trade:
Special purpose trade is used to
hedge risks for definite purpose,
and there must be specific
corresponding hedge positions.
In principle, a special purpose
trade
will
not
be
early
terminated.
2. Operating procedures:
(1)Authorized limit (including hedging
trades
and
special
purpose
trades):
In accordance with the Company's
growth of sales, change of risk
positions, and designated purpose,
the
authorized
limits
of
the
Company are set as follows. Any
amendment to the authorized limit
shall be handled in accordance
with these Operating Procedures.
Upper
limit
on
single
trades
Total
daily
limit		 the
transaction
shall
be
obtained in accordance with
the
authorized
limit
table.
Market fluctuations must be
monitored constantly so long
as a position is held; if the
exchange rate or interest rate
reached the stop-loss spot,
stop loss measures must be
immediately implemented.
b. Special purpose trade:
Special purpose trade is used to
hedge risks for definite purpose,
and there must be specific
corresponding hedge positions.
In principle, a special purpose
trade
will
not
be
early
terminated.
2. Operating procedures:
(1)Authorized limit (including hedging
trades
and
special
purpose
trades):
In accordance with the Company's
growth of sales, change of risk
positions, and designated purpose,
the
authorized
limits
of
the
Company are set as follows. Any
amendment to the authorized limit
shall be handled in accordance
with these Operating Procedures.
Upper
limit
on
single
trades
Total
daily
limit		 the
transaction
shall
be
obtained in accordance with
the
authorized
limit
table.
Market fluctuations must be
monitored constantly so long
as a position is held; if the
exchange rate or interest rate
reached the stop-loss spot,
stop loss measures must be
immediately implemented.
b. Special purpose trade:
Special purpose trade is used to
hedge risks for definite purpose,
and there must be specific
corresponding hedge positions.
In principle, a special purpose
trade
will
not
be
early
terminated.
2. Operating procedures:
(1)Authorized limit (including hedging
trades
and
special
purpose
trades):
In accordance with the Company's
growth of sales, change of risk
positions, and designated purpose,
the
authorized
limits
of
the
Company are set as follows. Any
amendment to the authorized limit
shall be handled in accordance
with these Operating Procedures.
Upper
limit
on
single
trades
Total
daily
limit
sheet and prior approval for
the
transaction
shall
be
obtained in accordance with
the
authorized
limit
table.
Market fluctuations must be
monitored constantly so long
as a position is held; if the
exchange rate or interest rate
reached the stop-loss spot,
stop loss measures must be
immediately implemented.
b. Special purpose trade:
Special purpose trade is used to
hedge risks for definite purpose,
and there must be specific
corresponding hedge positions.
In principle, a special purpose
trade
will
not
be
early
terminated.
2. Operating procedures:
(1)Authorized limit (including hedging
trades
and
special
purpose
trades):
In accordance with the Company's
growth of sales, change of risk
positions, and designated purpose,
the
authorized
limits
of
the
Company are set as follows. Any
amendment to the authorized limit
shall be handled in accordance
with these Operating Procedures.
Upper
limit
on
single
Total
daily
limit		 sheet and prior approval for
the
transaction
shall
be
obtained in accordance with
the
authorized
limit
table.
Market fluctuations must be
monitored constantly so long
as a position is held; if the
exchange rate or interest rate
reached the stop-loss spot,
stop loss measures must be
immediately implemented.
b. Special purpose trade:
Special purpose trade is used to
hedge risks for definite purpose,
and there must be specific
corresponding hedge positions.
In principle, a special purpose
trade
will
not
be
early
terminated.
2. Operating procedures:
(1)Authorized limit (including hedging
trades
and
special
purpose
trades):
In accordance with the Company's
growth of sales, change of risk
positions, and designated purpose,
the
authorized
limits
of
the
Company are set as follows. Any
amendment to the authorized limit
shall be handled in accordance
with these Operating Procedures.
Upper
limit
on
single
Total
daily
limit		 sheet and prior approval for
the
transaction
shall
be
obtained in accordance with
the
authorized
limit
table.
Market fluctuations must be
monitored constantly so long
as a position is held; if the
exchange rate or interest rate
reached the stop-loss spot,
stop loss measures must be
immediately implemented.
b. Special purpose trade:
Special purpose trade is used to
hedge risks for definite purpose,
and there must be specific
corresponding hedge positions.
In principle, a special purpose
trade
will
not
be
early
terminated.
2. Operating procedures:
(1)Authorized limit (including hedging
trades
and
special
purpose
trades):
In accordance with the Company's
growth of sales, change of risk
positions, and designated purpose,
the
authorized
limits
of
the
Company are set as follows. Any
amendment to the authorized limit
shall be handled in accordance
with these Operating Procedures.
Upper
limit
on
single
Total
daily
limit
Upper
limit
on
single
trades		 Total
daily
limit
Upper
limit
on
single		 Total
daily
limit

37

CEO
US$40
US$100		 trades
million
million		 CEO
US$40
US$100
Chief Officer
US$20
US$50		 million
million
of
Finance
million
million		 Chief Officer
US$20
US$50
Department of
Finance
million
million
Officer
of
US$5
US$15		 Department
Funds
million
million		 Officer
of
US$5
US$15
Management Funds
million
million
Department Management
Department
To ensure that the Company's
authorization cooperate with the To ensure that the Company's
corresponding bank's oversight, authorization cooperate with the
the foregoing authorized limits and corresponding bank's oversight,
operating and hedging strategies the foregoing authorized limits and
shall be reported to the relevant operating and hedging strategies
corresponding bank. The bank shall be reported to the relevant
shall be notified of any amendment corresponding bank. The bank
to the authorized limit and make shall be notified of any amendment
corrections thereof. In addition to to the authorized limit and make
compliance with the existing terms corrections thereof. In addition to
between Company and the bank, compliance with the existing terms
the bank shall be requested to between Company and the bank,
continue to control the Company's the bank shall be requested to
trading
and
positions
in		 continue to control the Company's
accordance with the foregoing trading
and
positions
in
authorized limit table. accordance with the foregoing
(2)Execution department: authorized limit table.
As
derivatives
trading
is		 (2)Execution department:
characterized by rapid fluctuations, As
derivatives
trading
is
large monetary amounts, frequent characterized by rapid fluctuations,
trading, and complex calculations, large monetary amounts, frequent
it is necessary to appoint well trading, and complex calculations,
trained professionals to conduct it is necessary to appoint well
the
trading
and
management.		 trainedprofessionals to conduct

38

Thus, all derivatives trading shall
be executed by authorized funds
management
personnel
designated by the Chief Officer of
the Finance Department.
3. Accounting treatment:
Accounting
treatment
shall
be
handled in accordance with the
Regulations
Governing
the
Preparation of Financial Reports by
Securities Issuers.
4. Internal control system:
(1)Risk management measures:
a. Credit risk considerations: In
principle,
transaction
counterparties are limited to the
Company's
correspondent
banks and those who could
provide
professional
information.
b. Market risk considerations: The
major trading market is to trade
in the OTC (over-the-counter)
market via banks. The Futures
market
is
not
taken
into
consideration currently.
c. Liquidity considerations: To
ensure liquidity, the bank which
the Company transacts with
should
have
sufficient
equipment,
information,
and
trading capabilities, and should
be able to trade in any market.
d. Operation considerations: To
avoid
operation
risk,
the		 the
trading
and
management.
Thus, all derivatives trading shall
be executed by authorized funds
management
personnel
designated by the Chief Officer of
the Finance Department.
3. Accounting treatment:
Accounting
treatment
shall
be
handled in accordance with the
Regulations
Governing
the
Preparation of Financial Reports by
Securities Issuers.
4. Internal control system:
(1)Risk management measures:
a. Credit risk considerations: In
principle,
transaction
counterparties are limited to the
Company's
correspondent
banks and those who could
provide
professional
information.
b. Market risk considerations: The
major trading market is to trade
in the OTC (over-the-counter)
market via banks. The Futures
market
is
not
taken
into
consideration currently.
c. Liquidity considerations: To
ensure liquidity, the bank which
the Company transacts with
should
have
sufficient
equipment,
information,
and
trading capabilities, and should
be able to trade in any market.
d. Operation considerations: To

39

Company shall observe the
authorized limit and operating
procedures closely.
e. Legal risk: To avoid legal risk,
all documents to be entered into
between the bank and the
Company shall be reviewed by
the Legal Department and the
Finance
Department
before
execution.
f. Product risk: Internal trading
officers and counterparty banks
should possess extensive and
correct professional knowledge
in connection with the trading of
financial products. It is required
for the counterparty banks to
fully
disclose
risks
to
the
Company so as to avoid losses
from incorrect use of financial
products.
g. Cashflow risk: In addition to
strictly observe the limits as set
forth in the authorized limit
table, the trading officers shall
pay
close
attention
to
the
Company's
foreign
currency
cash-flow so as to ensure that
there is sufficient cash to pay for
F/X settlements.
(2)Internal control:
a. Trading personnel shall not
concurrently
serve
as
confirmation
and
settlement
personnel.		 avoid
operation
risk,
the
Company shall observe the
authorized limit and operating
procedures closely.
e. Legal risk: To avoid legal risk,
all documents to be entered into
between the bank and the
Company shall be reviewed by
the Legal Department and the
Finance
Department
before
execution.
f. Product risk: Internal trading
officers and counterparty banks
should possess extensive and
correct professional knowledge
in connection with the trading of
financial products. It is required
for the counterparty banks to
fully
disclose
risks
to
the
Company so as to avoid losses
from incorrect use of financial
products.
g. Cashflow risk: In addition to
strictly observe the limits as set
forth in the authorized limit
table, the trading officers shall
pay
close
attention
to
the
Company's
foreign
currency
cash-flow so as to ensure that
there is sufficient cash to pay for
F/X settlements.
(2)Internal control:
a. Trading personnel shall not
concurrently
serve
as
confirmation
and
settlement

40

b. Trading personnel shall give
trading vouchers or contracts to
recording personnel for records.
c.
Recording
personnel
shall
regularly
check
account
balances
with
correspondent
banks or request for bank
statements.
d.
Recording
personnel
shall
check whether the total amount
of trades has exceeded the net
position
of foreign currency
assets,
liabilities
and
commitment net positions from
time to time.
e.
The
Funds
Management
Department shall assess the
profit/loss status based on the
final posted daily exchange
rates and produce a report
thereof at the end of each
month.
The
Funds
Management Department shall
submit such report to the Chief
Officer
of
the
Finance
Department and the Company's
senior management officers.
f. Personnel responsible for the
risk
assessment,
monitoring,
and control shall be assigned to
different departments from the
personnel referred to in the
foregoing subparagraphs, and
shall report to the Board of
Directors or senior management		 personnel.
b. Trading personnel shall give
trading vouchers or contracts to
recording personnel for records.
c.
Recording
personnel
shall
regularly
check
account
balances
with
correspondent
banks or request for bank
statements.
d.
Recording
personnel
shall
check whether the total amount
of trades has exceeded the net
position
of foreign currency
assets,
liabilities
and
commitment net positions from
time to time.
e.
The
Funds
Management
Department shall assess the
profit/loss status based on the
final posted daily exchange
rates and produce a report
thereof at the end of each
month.
The
Funds
Management Department shall
submit such report to the Chief
Officer
of
the
Finance
Department and the Company's
senior management officers.
f. Personnel responsible for the
risk
assessment,
monitoring,
and control shall be assigned to
different departments from the
personnel referred to in the
foregoing subparagraphs, and
shall report to the Board of

41

officers
not
responsible
for
trading or position decisions.
(3)Regular evaluation methods:
a. The Board of Directors shall
authorize senior management
personnel to regularly monitor
and evaluate whether derivative
trades are executedunderthe
Company's trading procedures,
and determine whether the risk
exposure
is
within
the
acceptable limits. Whenever a
market price evaluation report
contains any irregularity (such
as the position held exceeding
the
loss
limit),
the
aforementioned personnel shall
immediately report to the Board
of Directors and take necessary
counter measures.
b. Derivative trading positions held
shall be evaluated at least once
each week. However, hedging
trades
executed
for
the
Company's
business
needs
shall be evaluated at least twice
each month. Evaluation reports
shall be submitted to the Chief
Officer
of
the
Finance
Department.
(4)Oversight principles for derivative
trading by the Board of Directors:
a. The Board of Directors shall
appoint
senior
management
officers to regularlymonitor and		 Directors or senior management
officers
not
responsible
for
trading or position decisions.
(3)Regular evaluation methods:
a. The Board of Directors shall
authorize senior management
personnel to regularly monitor
and evaluate whether derivative
trades
are
executed
in
compliance with the Company's
trading
procedures,
and
determine
whether
the
risk
exposure
is
within
the
acceptable limits. Whenever a
market price evaluation report
contains any irregularity (such
as the position held exceeding
the
loss
limit),
the
aforementioned personnel shall
immediately report to the Board
of Directors and take necessary
counter measures.
b. Derivative trading positions held
shall be evaluated at least once
each week. However, hedging
trades
executed
for
the
Company's
business
needs
shall be evaluated at least twice
each month. Evaluation reports
shall be submitted to the Chief
Officer
of
the
Finance
Department.
(4)Oversight principles for derivative
trading by the Board of Directors:
a. The Board of Directors shall

42

b.
c.		 control the derivatives trading
risk.
The
guidelines
for
monitoring and control are as
follows:
i. Periodically evaluate whether
the
risk
management
measures currently adopted
are
appropriate
and
are
conducted
under
these
Operating
Procedures
and
derivative
trading
operating
guidelines promulgated by the
Company.
ii. Monitoring trading activities
and
profit/loss
status,
whenever
irregularities
are
found, the senior management
officers shall take appropriate
counter measures and shall
immediately
report
to
the
Board of Directors.
Periodically evaluate whether
derivatives trading performance
is
consistent
with
the
Company's
established
operational
strategy
and
whether the risk exposure is
acceptable to the Company.
When engaging in derivatives
trading,
the
Company
shall
report to the next Board of
Directors
meeting
after
it
authorizes relevant personnel to
conduct
derivatives
trading
underthe derivative trading		 appoint
senior
management
officers to regularly monitor and
control the derivatives trading
risk.
The
guidelines
for
monitoring and control are as
follows:
i. Periodically evaluate whether
the
risk
management
measures currently adopted
are
appropriate
and
are
conducted in accordance with
these Operating Procedures
and
derivative
trading
operating
guidelines
promulgated by the Company.
ii. Monitoring trading activities
and
profit/loss
status,
whenever
irregularities
are
found, the senior management
officers shall take appropriate
counter measures and shall
immediately
report
to
the
Board of Directors.
b. Periodically evaluate whether
derivatives trading performance
is
consistent
with
the
Company's
established
operational
strategy
and
whether the risk exposure is
acceptable to the Company.
c. When engaging in derivatives
trading,
the
Company
shall
report to the next Board of
Directors
meeting
after
it
authorizes relevantpersonnel to

43

operating
guidelines
promulgated by the Company.
d. The Company shall establish a
memorandum 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
items(3).b, (4).a.i and b of
subparagraph
4
of
this
paragraph, shall be recorded in
detail in the memorandum book
for inspection.
5. Internal audit system:
(1)The Company's internal auditor
shall
periodically
review
the
appropriateness of the internal
control
system
of
derivatives
trading, conduct a monthly audit of
compliance of derivatives trading
operating
procedures
by
the
execution
department,
analyze
trading cycles, and prepare an
audit report accordingly. The
internal auditor shall notify the
Audit Committee of the Company
in writing if any material violation is
found.
(2)The Company's internal auditor
shall file the audit report together
with the annual internal audit
review report for the preceding
year with the Competent Authority
bythe end of Februaryeachyear.
conduct derivatives tradingin
accordance withthe derivative
trading
operating
guidelines
promulgated by the Company.
d. The Company shall establish a
memorandum 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
items
3-2,
4-1
and
4-2,
subparagraph 4 of thisArticle
15, shall be recorded in detail in
the
memorandum
book
for
inspection.
5. Internal audit system:
(1)The Company's internal auditor
shall
periodically
review
the
appropriateness of the internal
control
system
of
derivatives
trading, conduct a monthly audit of
compliance of derivatives trading
operating
procedures
by
the
execution
department,
analyze
trading cycles, and prepare an
audit report accordingly. The
internal auditor shall notify the
Audit Committee of the Company
in writing if any material violation is
found.
(2)The Company's internal auditor
shall file the audit report together
with the annual internal audit
review report for thepreceding

44

The Company's internal auditor
shall
also
report
any
improvements
of
irregularities
during the preceding year to the
Competent Authority by the end of
May each year.		 year with the Competent Authority
by the end of February each year.
The Company's internal auditor
shall
also
report
any
improvements
of
irregularities
during the preceding year to the
Competent Authority by the end of
Mayeachyear.
Article 16 Procedures
governing
mergers
or
consolidations, splits, acquisitions, or
assignment of shares are as follows:
1.Appraisal and operating procedures:
(1)When the Company wishes to
conduct a merger or consolidation,
split, acquisition, or assignment of
shares,
it
may
engage
an
accountant,
lawyer,
and
underwriter
to
jointly
review
statutory
procedures
and
proposed timetable; the Company
shall also form a project execution
team to implement the transaction
in
accordance
with
statutory
procedures.
The
Company
should, prior to convening a
meeting of the Board of Directors
to decide on the matter, further
engage an accountant, lawyer, or
underwriter to render opinions
regarding the reasonableness of
the share swap ratio, acquisition
price, or distribution of cash or
other property to shareholders,
and shall submit the same to the
Board of Directors for discussion		 Procedures
governing
mergers
or
consolidations, splits, acquisitions, or
assignment of shares are as follows:
1.Appraisal and operating procedures:
(1)When the Company wishes to
conduct a merger or consolidation,
split, acquisition, or assignment of
shares,
it
may
engage
an
accountant,
lawyer,
and
underwriter
to
jointly
review
statutory
procedures
and
proposed timetable; the Company
shall also form a project execution
team to implement the transaction
in
accordance
with
statutory
procedures.
The
Company
should, prior to convening a
meeting of the Board of Directors
to decide on the matter, further
engage an accountant, lawyer, or
underwriter to render opinions
regarding the reasonableness of
the share swap ratio, acquisition
price, or distribution of cash or
other property to shareholders,
and shall submit the same to the
Board of Directors for discussion		 Certain languages
are adjusted due
to change of the
referring method.

45

and approval. In the event the
Company merges with its wholly
owned
subsidiary(ies),
or
the
merger occurs between or among
the
Company’s
wholly
owned
subsidiaries, the above-mentioned
appraisal
report
from
a
professional appraiser may be
exempted.
(2)When conducting a merger or
consolidation, split, or acquisition,
the Company shall prepare a
public report to its shareholders,
specifying important contractual
contents and matters relevant to
the merger or consolidation, split,
or
acquisition
prior
to
the
shareholders'
meeting.
The
Company shall attach such public
report and the expert opinions
referred to in item (1)of this
subparagraph when sending the
notice of shareholders' meeting for
shareholders'
reference
in
determining whether to approve
the merger or consolidation, split,
or acquisition. However, if the
convention
of
shareholders'
meeting to approve the merger or
consolidation, split, or acquisition
is exempted by applicable laws,
the notification requirement for
sending the notification in the
preceding paragraph shall not
apply. Moreover, where anyone		 and approval. In the event the
Company merges with its wholly
owned
subsidiary(ies),
or
the
merger occurs between or among
the
Company’s
wholly
owned
subsidiaries, the above-mentioned
appraisal
report
from
a
professional appraiser may be
exempted.
(2)When conducting a merger or
consolidation, split, or acquisition,
the Company shall prepare a
public report to its shareholders,
specifying important contractual
contents and matters relevant to
the merger or consolidation, split,
or
acquisition
prior
to
the
shareholders'
meeting.
The
Company shall attach such public
report and the expert opinions
referred
to
in
item
(1),
subparagraph1 of this Article 16
when
sending
the
notice
of
shareholders'
meeting
for
shareholders'
reference
in
determining whether to approve
the merger or consolidation, split,
or acquisition. However, if the
convention
of
shareholders'
meeting to approve the merger or
consolidation, split, or acquisition
is exempted by applicable laws,
the notification requirement for
sending the notification in the
preceding paragraph shall not

46

of the companies participating in a
merger or consolidation, split, or
acquisition fails to convene or
obtain a resolution due to lack of a
quorum,
insufficient
votes,
or
restrictions by applicable laws, or
the proposal was vetoed by the
shareholders'
meeting,
such
company
shall
immediately
publicly announce an explanation
of the reason for such failure,
follow-up measures to be taken,
and the proposed date of the next
shareholders' meeting.
2.Other matters to be noted:
(1)Date of shareholders' meeting or
meeting of the Board of Directors:
Companies
participating
in
a
merger or consolidation, split, or
acquisition shall convene their
board meetings and shareholders'
meetings on the same day to
resolve matters relevant to the
merger or consolidation, split, or
acquisition,
unless
otherwise
provided by applicable laws or
there are extraordinary conditions
which should be reported to and
approved
by
the
Competent
Authority in advance. Companies
participating in an assignment of
shares shall convene their board
meetings on the same day, unless
otherwise provided by applicable
laws or there are extraordinary
apply. Moreover, where any one
of the companies participating in a
merger or consolidation, split, or
acquisition fails to convene or
obtain a resolution due to lack of a
quorum,
insufficient
votes,
or
restrictions by applicable laws, or
the proposal was vetoed by the
shareholders'
meeting,
such
company
shall
immediately
publicly announce an explanation
of the reason for such failure,
follow-up measures to be taken,
and the proposed date of the next
shareholders' meeting.
2.Other matters to be noted:
(1)Date of shareholders' meeting or
meeting of the Board of Directors:
Companies
participating
in
a
merger or consolidation, split, or
acquisition shall convene their
board meetings and shareholders'
meetings on the same day to
resolve matters relevant to the
merger or consolidation, split, or
acquisition,
unless
otherwise
provided by applicable laws or
there are extraordinary conditions
which should be reported to and
approved
by
the
Competent
Authority in advance. Companies
participating in an assignment of
shares shall convene their board
meetings on the same day, unless
otherwiseprovided byapplicable

47

conditions
which
should
be
reported to and approved by the
Competent Authority in advance.
When participating in a merger or
consolidation, split, acquisition, or
assignment of another company's
shares, the Company shall prepare
a full written record of the following
information and retain it for five
years for reference:
a. 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 prior to disclosure of
the information in the planning
or implementation of any merger
or
consolidation,
split,
acquisition, or assignment of
another company's shares.
b.
Dates
of
material
events:
including those for signing of
any
letter
of
intent
or
memorandum of understanding,
engaging of a financial or legal
advisor, execution of a contract,
and convening of a board of
directors meeting.
c.
Important
documents
and
minutes: including merger or
consolidation, split, acquisition,
or plan of assignment of share,
any
letter
of
intent
or		 laws or there are extraordinary
conditions
which
should
be
reported to and approved by the
Competent Authority in advance.
When participating in a merger or
consolidation, split, acquisition, or
assignment of another company's
shares, the Company shall prepare
a full written record of the following
information and retain it for five
years for reference:
a. 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 prior to disclosure of
the information in the planning
or implementation of any merger
or
consolidation,
split,
acquisition, or assignment of
another company's shares.
b.
Dates
of
material
events:
including those for signing of
any
letter
of
intent
or
memorandum of understanding,
engaging of a financial or legal
advisor, execution of a contract,
and convening of a board of
directors meeting.
c.
Important
documents
and
minutes: including merger or
consolidation, split, acquisition,
orplan of assignment of share,

48

memorandum of understanding,
material contracts, and minutes
of board of directors meetings.
When participating in a merger or
consolidation, split, acquisition, or
assignment of another company's
shares, the Company shall, within
two days commencing from the
date of passage of a resolution by
the Board of Directors, report (in
the prescribed format and via the
Internet-based
information
system) the aforementioned basic
identification data for personnel
and dates of material events to
the
Competent
Authority
for
recordation.
Where any of the companies
participating
in
a
merger
or
consolidation, split, acquisition, or
assignment of another company's
shares is neither listed in the
securities exchange nor trading
over-the-counter, the Company
shall sign an agreement with such
company in order to prepare a full
written record of the information of
basic
identification
data
for
personnel,
dates
of
material
events and important documents
and minutes and retain it for five
years for reference and to report
(in the prescribed format and via
the
Internet-based
information
system)the aforementioned basic		 any
letter
of
intent
or
memorandum of understanding,
material contracts, and minutes
of board of directors meetings.
When participating in a merger or
consolidation, split, acquisition, or
assignment of another company's
shares, the Company shall, within
two days commencing from the
date of passage of a resolution by
the Board of Directors, report (in
the prescribed format and via the
Internet-based
information
system) the aforementioned basic
identification data for personnel
and dates of material events to
the
Competent
Authority
for
recordation.
Where any of the companies
participating
in
a
merger
or
consolidation, split, acquisition, or
assignment of another company's
shares is neither listed in the
securities exchange nor trading
over-the-counter, the Company
shall sign an agreement with such
company in order to prepare a full
written record of the information of
basic
identification
data
for
personnel,
dates
of
material
events and important documents
and minutes and retain it for five
years for reference and to report
(in the prescribed format and via
the
Internet-based
information

49

identification data for personnel
and dates of material events to
the Competent Authority for
recordation.
(2)Commitment
to
confidentiality
obligations in advance: Each
person participating in or being
informed of the plan for merger or
consolidation, split, acquisition, or
assignment
of
shares
shall
execute a written undertaking of
confidentiality
and
shall
not
disclose the contents of the plan
prior to public announcement of
information in connection with the
plan and shall not trade, in their
own names or under the name of
another person, in any stock or
other
equity
security
of
any
company related to the plan for
merger or consolidation, split,
acquisition,
or
assignment
of
shares.
(3)Principles
for
setting
and
amending share swap ratio or
acquisition
price:
When
conducting
a
merger
or
consolidation, split, acquisition, or
assignment of shares, except for
the following circumstances, the
share swap ratio or acquisition
price
shall
not
be
amended
arbitrarily and the circumstances in
which the share swap ratio or
acquisition
price
could
be		 system) the aforementioned basic
identification data for personnel
and dates of material events to
the Competent Authority for
recordation.
(2)Commitment
to
confidentiality
obligations in advance: Each
person participating in or being
informed of the plan for merger or
consolidation, split, acquisition, or
assignment
of
shares
shall
execute a written undertaking of
confidentiality
and
shall
not
disclose the contents of the plan
prior to public announcement of
information in connection with the
plan and shall not trade, in their
own names or under the name of
another person, in any stock or
other
equity
security
of
any
company related to the plan for
merger or consolidation, split,
acquisition,
or
assignment
of
shares.
(3)Principles
for
setting
and
amending share swap ratio or
acquisition
price:
When
conducting
a
merger
or
consolidation, split, acquisition, or
assignment of shares, except for
the following circumstances, the
share swap ratio or acquisition
price
shall
not
be
amended
arbitrarily and the circumstances in
which the share swapratio or

50

amended should be provided in
the contract for the merger or
consolidation, split, acquisition, or
assignment of shares:
a.
Capital
increase
by
cash,
issuance of convertible bonds,
free
distribution
of
bonus
shares, issuance of corporate
bonds with warrants, preferred
shares with warrants, stock
warrants,
and
other
equity
securities.
b. Any disposal of material assets
of the company or other action
which may have a material
adverse effect on the company's
financial condition or business.
c. A disaster or major technological
shift or other event which may
affect shareholder's equity or
the share price.
d. An adjustment results from the
buy-back of treasury stock by
any
of
the
companies
participating in the merger or
consolidation, split, acquisition,
or assignment of shares.
e. An increase or decrease in the
number of entities or companies
participating in the merger or
consolidation, split, acquisition,
or assignment of shares.
f. Other terms and conditions
allowing
amendments
which
have beenprovided in the		 acquisition
price
could
be
amended should be provided in
the contract for the merger or
consolidation, split, acquisition, or
assignment of shares:
a.
Capital
increase
by
cash,
issuance of convertible bonds,
free
distribution
of
bonus
shares, issuance of corporate
bonds with warrants, preferred
shares with warrants, stock
warrants,
and
other
equity
securities.
b. Any disposal of material assets
of the company or other action
which may have a material
adverse effect on the company's
financial condition or business.
c. A disaster or major technological
shift or other event which may
affect shareholder's equity or
the share price.
d. An adjustment results from the
buy-back of treasury stock by
any
of
the
companies
participating in the merger or
consolidation, split, acquisition,
or assignment of shares.
e. An increase or decrease in the
number of entities or companies
participating in the merger or
consolidation, split, acquisition,
or assignment of shares.
f. Other terms and conditions
allowing
amendments
which

51

relevant contract and have been
publicly disclosed.
(4) Items to be provided in contract:
In addition to those items required
under
Article
317-1
of
the
Company Law and Article 22 of
the
Business
Mergers
and
Acquisitions Act, the contract for
participation
in
a
merger
or
consolidation, split, acquisition, or
assignment of shares shall provide
the following provisions:
a. Remedy for breach of contract.
b. Principles for the handling of
equity
securities
previously
issued
or
treasury
stock
previously bought back by any
company that is to be dissolved
in a merger or that is spun off.
c. The amount of treasury stock
that could be bought back by
participating
companies
in
accordance with applicable laws
after
the
record
date
of
calculation of the share swap
ratio, and the handling principles
thereof.
d. Methods for handling changes
in the number of participating
entities or companies.
e.
Estimated
schedule
for
execution of the plan, and
anticipated completion date.
f. Scheduled date for convention of
shareholders'
meeting
in		 have been provided in the
relevant contract and have been
publicly disclosed.
(4) Items to be provided in contract:
In addition to those items required
under
Article
317-1
of
the
Company Law and Article 22 of
the
Business
Mergers
and
Acquisitions Act, the contract for
participation
in
a
merger
or
consolidation, split, acquisition, or
assignment of shares shall provide
the following provisions:
a. Remedy for breach of contract.
b. Principles for the handling of
equity
securities
previously
issued
or
treasury
stock
previously bought back by any
company that is to be dissolved
in a merger or that is spun off.
c. The amount of treasury stock
that could be bought back by
participating
companies
in
accordance with applicable laws
after
the
record
date
of
calculation of the share swap
ratio, and the handling principles
thereof.
d. Methods for handling changes
in the number of participating
entities or companies.
e.
Estimated
schedule
for
execution of the plan, and
anticipated completion date.
f. Scheduled date for convention of

52

accordance with applicable laws
in the event that execution of
the
plan
falls
behind
the
estimated schedule and relevant
handling procedures.
(5)Changes
in
the
number
of
companies
participating
in
a
merger or consolidation, split,
acquisition,
or
assignment
of
shares: After relevant information
has been publicly announced, if
any company participating in the
merger or consolidation, split,
acquisition,
or
assignment
of
shares intends further to carry out
a merger or consolidation, split,
acquisition,
or
assignment
of
shares with another company, all
of the participating companies
shall repeat the procedures or
legal actions that had originally
been
completed
toward
the
merger or consolidation, split,
acquisition,
or
assignment
of
shares; except that where the
number of participating companies
is decreased and the participating
company's shareholders' meeting
has resolved and authorized the
Board of Directors to amend the
terms, such participating company
could
be
exempted
from
convening another shareholders'
meeting to resolve the matter
again.		 shareholders'
meeting
in
accordance with applicable laws
in the event that execution of
the
plan
falls
behind
the
estimated schedule and relevant
handling procedures.
(5)Changes
in
the
number
of
companies
participating
in
a
merger or consolidation, split,
acquisition,
or
assignment
of
shares: After relevant information
has been publicly announced, if
any company participating in the
merger or consolidation, split,
acquisition,
or
assignment
of
shares intends further to carry out
a merger or consolidation, split,
acquisition,
or
assignment
of
shares with another company, all
of the participating companies
shall repeat the procedures or
legal actions that had originally
been
completed
toward
the
merger or consolidation, split,
acquisition,
or
assignment
of
shares; except that where the
number of participating companies
is decreased and the participating
company's shareholders' meeting
has resolved and authorized the
Board of Directors to amend the
terms, such participating company
could
be
exempted
from
convening another shareholders'
meetingto resolve the matter

53

(6) Where a company participating in
a merger or consolidation, split,
acquisition,
or
assignment
of
shares is not a public company,
the
Company
shall
sign
an
agreement with that company, and
shall
conduct
the
merger
or
consolidation, split, acquisition, or
assignment
of
shares
in
accordance with the Board of
Directors meetingor the general
meetingconvention date specified
in item (1) of this subparagraph,
the confidentiality obligation in
item (2), and the requirements
regarding changes in the number
of companies participating in a
merger or consolidation, split,
acquisition,
or
assignment
of
shares in item (5), subparagraph 2
of this Article 16.		 again.
(6) Where a company participating in
a merger or consolidation, split,
acquisition,
or
assignment
of
shares is not a public company,
the
Company
shall
sign
an
agreement with that company, and
shall
conduct
the
merger
or
consolidation, split, acquisition, or
assignment
of
shares
in
accordance with the Board of
Directors meeting convention date
specified
in
item
(1),
the
confidentiality obligation in item
(2),
and
the
requirements
regarding changes in the number
of companies participating in a
merger or consolidation, split,
acquisition,
or
assignment
of
shares in item (5), subparagraph 2
of this Article 16.
Article 17 Items to be publicly announced and
reported and requirements for public
announcement and reporting are as
follows:
1.Acquisition
or
disposal
of
real
propertyor its right-of-use assets
from or to a related party, or
acquisition or disposal of assets
other than real propertyor its right-of-
use assetsfrom or to a related party
where
the
transaction
amount
reaches 20% of the Company's paid-
in capital, 10% of the Company's
total assets, or NT$300 million;		 Items to be publicly announced and
reported and requirements for public
announcement and reporting are as
follows:
1.Acquisition
or
disposal
of
real
property from or to a related party, or
acquisition or disposal of assets
other than real property from or to a
related party where the transaction
amount
reaches
20%
of
the
Company's paid-in capital, 10% of
the
Company's
total
assets,
or
NT$300 million; provided, however,
that thisparagraph shall not applyto		 The
reason
of
amendment is the
same
as
the
reason set forth in
the
first
explanation
of
Article 11.

54

provided,
however,
that
this
paragraph shall not apply to trading
ofdomesticgovernment bonds or
bonds under repurchase and resale
agreements,
or
subscription
or
repurchase
of
domestic
money
market funds issued by securities
investment trust enterprises.
2.Merger
or
consolidation,
split,
acquisition, or assignment of shares.
3.Any losses from derivatives trading
which
reaches
the
limits
on
aggregate
losses
or
losses
for
individual
contracts
under
the
operating procedures promulgated
by the Company.
4.Where equipmentor its right-of-use
assets
for
operational
use
are
acquired or disposed of,and the
transaction counterparty is not a
related party, and the transaction
amount is NT$1 billion or more.
5.Acquisition
or
disposal
of
real
property
under
arrangement
of
commissioned construction on self-
owned
or
leased
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 transaction amount to be
invested by the Company is NT$500
million or more.		 trading of government bonds or
bonds under repurchase and resale
agreements,
or
subscription
or
repurchase
of
domestic
money
market funds issued by securities
investment trust enterprises.
2.Merger
or
consolidation,
split,
acquisition, or assignment of shares.
3.Any losses from derivatives trading
which
reaches
the
limits
on
aggregate
losses
or
losses
for
individual contractsas set out in the
operating procedures promulgated
by the Company.
4.Where the type of asset acquired or
disposed
of
is
equipment
for
operational use, and the transaction
counterparty is not a related party,
and the transaction amount is NT$1
billion or more.
5.Acquisition
or
disposal
of
real
property
under
arrangement
of
commissioned construction on self-
owned
or
leased
land,
joint
construction
and
allocation
of
housing units, joint construction and
allocation of ownership percentages,
or joint construction and separate
sale and the transaction amount to
be invested by the Company is
NT$500 million or more.
6.Other asset transactions other than
those referred to in the preceding five
subparagraphs,
disposal
of
receivables bya financial institution,

55

6.Other asset transactions other than
those referred to in the preceding five
subparagraphs,
disposal
of
receivables by a financial institution,
or investment in the Mainland China
area, and the transaction amount of
which
reaches
20%
of
the
Company's paid-in capital or NT$300
million or more; provided that the
public reporting requirement shall not
apply to the following circumstances:
(1)Trading ofdomesticgovernment
bonds.
(2)Trading
of
bonds
under
repurchase/resale agreements, or
subscription
or
repurchase
of
domestic money market funds
issued by securities investment
trust enterprises.
7.The transaction amount shall be
calculated as follows; and the term
"within one year" refers to the year
preceding the date of occurrence of
the proposed transaction; and items
which has been duly announced in
accordance
with
applicable
regulations may be disregarded for
the calculation:
(1)The amount of each transaction.
(2)The
cumulative
transaction
amount
of
acquisitions
and
disposals of the same type of
assets with the same transaction
counterparty within one year.
(3)The
cumulative
transaction		 or investment in the Mainland China
area, and the transaction amount of
which
reaches
20%
of
the
Company's paid-in capital or NT$300
million or more; provided that the
public reporting requirement shall not
apply to the following circumstances:
(1)Trading of government bonds.
(2)Where
the
company
is
an
investment
company,
the
securities
trading
in
foreign
securities exchanges or over-the-
counter markets, or subscribing
the offering and issuance of
straight corporate bonds and bank
debentures
that
not
involving
shareholding rights on domestic
primary markets.
(3)Trading
of
bonds
under
repurchase/resale agreements, or
subscription
or
repurchase
of
domestic money market funds
issued by securities investment
trust enterprises.
7.The transaction amount shall be
calculated as follows; and the term
"within one year" refers to the year
preceding the date of occurrence of
the proposed transaction; and items
which has been duly announced in
accordance
with
applicable
regulations may be disregarded for
the calculation:
(1)The amount of each transaction.
(2)The
cumulative
transaction

56

amount
of
acquisitions
and
disposals of real propertyor its
right-of-use assetsin the same
development project within one
year (the amount for acquisition
and the amount for disposal shall
be calculated separately).
(4)The
cumulative
transaction
amount
of
acquisitions
and
disposals of the same security
within one year (the amount for
acquisition and the amount for
disposal
shall
be
calculated
separately).		 amount
of
acquisitions
and
disposals of the same type of
assets with the same transaction
counterparty within one year.
(3)The
cumulative
transaction
amount
of
acquisitions
and
disposals of real property in the
same development project within
one
year
(the
amount
for
acquisition and the amount for
disposal
shall
be
calculated
separately).
(4)The
cumulative
transaction
amount
of
acquisitions
and
disposals of the same security
within one year (the amount for
acquisition and the amount for
disposal
shall
be
calculated
separately).
Article 20 The Subsidiaries shall comply with the
following provisions:
1. The Subsidiaries shall promulgate its
own "Operating Procedures of the
Acquisition or Disposal of Assets" in
accordance
with
the
relevant
provisions
of
the
"Regulations
Governing
the
Acquisition
or
Disposal
of
Assets
by
Public
Companies," and shall submit the
said
operating
procedures
for
approval by the Board of Directors
first and then by the shareholders'
meeting. The same procedure shall
apply in the event of any amendment
to the said operating procedures. If a		 The Subsidiaries shall comply with the
following provisions:
1. The Subsidiaries shall promulgate its
own "Operating Procedures of the
Acquisition or Disposal of Assets" in
accordance
with
the
relevant
provisions
of
the
"Regulations
Governing
the
Acquisition
or
Disposal
of
Assets
by
Public
Companies," and shall submit the
said
operating
procedures
for
approval by the Board of Directors
first and then by the shareholders'
meeting. The same procedure shall
apply in the event of any amendment
to the said operating procedures. If a		 Certain languages
are amended for
compliance.

57

Subsidiary has established an audit committee, the aforesaid promulgation shall be subject to the consent of one-half or more of all its audit committee members and be submitted to its board of directors for approval first and then by its shareholders' meeting. The same procedure shall apply in the event of any amendment to the said operating procedures.

  1. When a Subsidiary acquires or disposes of assets, the Subsidiary shall act in accordance with these Operating Procedures. The Audit Division of the Company shall include the operating specifics of the acquisition or disposal of assets by the Subsidiaries as one of the internal audit items and shall conduct audits regularly or randomly; and shall review the self-check report prepared by the Subsidiaries.

  2. If a Subsidiary is not a public company but its transaction amount of acquisition or disposal of assets meets the requirement of public announcement and reporting in accordance with the "Regulations Governing the Acquisition or Disposal of Assets by Public Companies", the Company shall make the public announcement and reporting on behalf of the Subsidiary. 4. With regard to requirement of public

Subsidiary has established an audit committee, the aforesaid promulgation shall be subject to the consent of one-half or more of all its audit committee members and be submitted to its board of directors for approval first and then by its shareholders' meeting. The same procedure shall apply in the event of any amendment to the said operating procedures.

  1. When a Subsidiary acquires or disposes of assets, the Subsidiary shall act in accordance with these Operating Procedures. The Audit Division of the Company shall include the operating specifics of the acquisition or disposal of assets by the Subsidiaries as one of the internal audit items and shall conduct audits regularly or randomly; and shall review the self-check report prepared by the Subsidiaries. 3. If a Subsidiary is not a public company but its transaction amount of acquisition or disposal of assets meets the requirement of public announcement and reporting as set forth in the "Regulations Governing the Acquisition or Disposal of Assets by Public Companies", the Company shall make the public announcement and reporting on behalf of the Subsidiary.

  2. With regard to requirement of public

58

announcement and reporting for announcement and reporting for subsidiaries, the provisions regarding subsidiaries, the provisions regarding "exceeding 20% of the Company's "exceeding 20% of the Company's paid-in capital" or 10% of the total paid-in capital" or 10% of the total assets shall refer to the parent assets shall refer to the parent company's paid-in capital or total company's paid-in capital or total assets. assets.

Resolution:

Approved and acknowledged as proposed by the Board of Directors by voting (a total of 2,384,119,347 shares with voting rights were present when votes were cast; the number of voting rights for approval is 2,113,255,322, among which 1,388,249,364 was exercised by electronic transmission, the number of voting rights for rejection is 78,815, the number of invalid votes is 0, the number of voting rights for abstention is 270,785,210, and 88.63% of the total voting rights voted for approval when votes were cast).

  • (2) Discussion of the Amendments to Operating Procedures of Fund Lending (Proposed by the Board of Directors)

  • Explanation: a) It is proposed to amend certain provisions of the Operating Procedures of Fund Lending in order to comply with the amendments to the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies announced by the Financial Supervisory Commission. Please see the comparison table of revised articles of the Operating Procedures of Fund Lending for the detailed revisions.

    • b) The proposed amendments are submitted for discussion.

Comparison Table of Revised Articles of the Operating Procedures of Fund Lending

Article Article after revision Article before revision Explanation
Article 3 Total Amount of Funds Lending and
Limit for Each Recipient
1.
When
lending
funds
to
other		 Total Amount of Funds Lending and
Limit for Each Recipient
1.
When
lending
funds
to
other		 Amendments
are
made to comply with
“Regulations

59

Article Article after revision Article before revision Explanation
companies or enterprises with which
the Company has business relations,
the amount lent to a single recipient
shall not exceed the total transaction
amount between the recipient and the
Company in the most recent year and
shall not exceed 20 percent of the
Company's net worth as stated in the
Company's
latest
financial
statements, and the total amount lent
shall not exceed 40 percent of the
Company's net worth as stated in the
Company's
latest
financial
statements; when providing short-
term financing to other companies or
enterprises, the short-term financing
amount to a single recipient shall not
exceed 20 percent of the Company's
net worth as stated in the Company's
latest financial statements, and the
total short-term financing amount shall
not
exceed
40
percent
of
the
Company's net worth as stated in the
Company's
latest
financial
statements. The aggregate amount of
total funds lent to other companies or
enterprises with which the Company
has business relations and total short-
term financing provided to other
companies or enterprises shall not
exceed 40 percent of the Company's
net worth as stated in the Company's
latest financial statements.
2. When a subsidiaryof the Company		 companies or enterprises with which
the Company has business relations,
the amount lent to a single recipient
shall not exceed the total transaction
amount between the recipient and the
Company in the most recent year and
shall not exceed 20 percent of the
Company's net worth as stated in the
Company's
latest
financial
statements, and the total amount lent
shall not exceed 40 percent of the
Company's net worth as stated in the
Company's
latest
financial
statements; when providing short-
term financing to other companies or
enterprises, the short-term financing
amount to a single recipient shall not
exceed 20 percent of the Company's
net worth as stated in the Company's
latest financial statements, and the
total short-term financing amount shall
not
exceed
40
percent
of
the
Company's net worth as stated in the
Company's
latest
financial
statements. The aggregate amount of
total funds lent to other companies or
enterprises with which the Company
has business relations and total short-
term financing provided to other
companies or enterprises shall not
exceed 40 percent of the Company's
net worth as stated in the Company's
latest financial statements.
2. When a subsidiaryof the Company		 Governing Loaning
of
Funds
and
Making
of
Endorsements/
Guarantees
by
Public
Companies”
to
exempt
the
restriction
on
the
inter-company loans
of funds between
the Company and
foreign
companies
in
which
the
Company
holds,
directly or indirectly,
100% of the voting
shares, the amount
limits of 40% net
worth
of
lending
company and the
duration limits of 1
year.

Article before revision Explanation companies or enterprises with which Governing Loaning the Company has business relations, of Funds and the amount lent to a single recipient Making of shall not exceed the total transaction Endorsements/ amount between the recipient and the Guarantees by Company in the most recent year and Public Companies” shall not exceed 20 percent of the to exempt the Company's net worth as stated in the restriction on the Company's latest financial inter-company loans statements, and the total amount lent of funds between shall not exceed 40 percent of the the Company and Company's net worth as stated in the foreign companies Company's latest financial in which the statements; when providing shortCompany holds, term financing to other companies or directly or indirectly, enterprises, the short-term financing 100% of the voting amount to a single recipient shall not shares, the amount exceed 20 percent of the Company's limits of 40% net net worth as stated in the Company's worth of lending latest financial statements, and the company and the total short-term financing amount shall duration limits of 1 not exceed 40 percent of the year. Company's net worth as stated in the Company's latest financial statements. The aggregate amount of total funds lent to other companies or enterprises with which the Company has business relations and total shortterm financing provided to other companies or enterprises shall not exceed 40 percent of the Company's net worth as stated in the Company's latest financial statements.

60

Article Article after revision ("Subsidiary") lends funds to other companies or enterprises with which the Subsidiary has business relations, the amount lent to recipients shall not exceed the total transaction amount between the recipient and the Subsidiary in the most recent year and the total amount lent shall not exceed 40 percent of the Subsidiary's net worth as stated in the Subsidiary's latest financial statements; when providing short term financing to other companies or enterprises, the total short-term financing amount shall not exceed 40 percent of the Subsidiary's net worth as stated in the Subsidiary's latest financial statements. The aggregate amount of total funds lent to other companies or enterprises with which the Subsidiary has business relations and total shortterm financing provided to other companies or enterprises shall not exceed 40 percent of the Subsidiary's net worth as stated in the Subsidiary's latest financial statements, provided that, the restriction of 40% net worth of lending company and limits of 1 year duration shall not apply to intercompany loans of funds between foreign companies in which the Company holds, directly or indirectly, 100% of the voting shares or intercompany loans of funds between the

Article before revision Explanation ("Subsidiary") lends funds to other companies or enterprises with which the Subsidiary has business relations, the amount lent to recipients shall not exceed the total transaction amount between the recipient and the Subsidiary in the most recent year and the total amount lent shall not exceed 40 percent of the Subsidiary's net worth as stated in the Subsidiary's latest financial statements; when providing short term financing to other companies or enterprises, the total short-term financing amount shall not exceed 40 percent of the Subsidiary's net worth as stated in the Subsidiary's latest financial statements. The aggregate amount of total funds lent to other companies or enterprises with which the Subsidiary has business relations and total shortterm financing provided to other companies or enterprises shall not exceed 40 percent of the Subsidiary's net worth as stated in the Subsidiary's latest financial statements, provided that, the restriction of 40% net worth of lending company shall not apply to inter-company loans of funds between foreign companies in which the Company holds, directly or indirectly, 100% of the voting shares. "Related party", "subsidiary" and "parent company" referred to herein

61

Article Article after revision Article before revision Explanation
Company and foreign companies in
which the Company holds, directly or
indirectly, 100% of the voting shares.
"Related
party",
"subsidiary"
and
"parent company" referred to herein
shall be determined according to the
provisions set forth in the Regulations
Governing
the
Preparation
of
Financial
Reports
by
Securities
Issuers.
"Net worth" referred to herein shall
mean
the
balance
sheet
equity
attributable to the owners of the
parent
company
under
the
Regulations
Governing
the
Preparation of Financial Reports by
Securities Issuers.		 shall be determined according to the
provisions set forth in the Regulations
Governing
the
Preparation
of
Financial
Reports
by
Securities
Issuers.
"Net worth" referred to herein shall
mean
the
balance
sheet
equity
attributable to the owners of the
parent
company
under
the
Regulations
Governing
the
Preparation of Financial Reports by
Securities Issuers.
Article 5 Procedures for Fund Lending
1. Handling Procedures
(1) When lending funds or providing
short-term financing to others, the
Company’s division in charge shall
review and submit the proposal for
the Chairman of the Board's
approval, and shall be approved
by one-half or more of all Audit
Committee members and then for
discussion and consent by the
Board of Directors. If the proposal
has not been approved by one-
half or more of all Audit Committee
members, it may be undertaken
upon the consent of two-thirds or
more of all directors, and the		 Procedures for Fund Lending
1. Handling Procedures
(1) When lending funds or providing
short-term financing to others, the
Company’s division in charge
shall review and submit the
proposal for the Chairman of the
Board's approval, and shall be
approved by one-half or more of
all Audit Committee members and
then for discussion and consent
by the Board of Directors. If the
proposal has not been approved
by one-half or more of all Audit
Committee members, it may be
undertaken upon the consent of
two-thirds or more of all directors,		 1. Certain
languages
are
revised
as
appropriate
because
the
Company
shall
not apply to the
Article 14-3 of
Securities
and
Exchange Act as
the
Company
has
established
audit committee.
2. Amendments are
made to comply
with “Regulations
Governing

62

Article Article after revision Article before revision Explanation
(2) resolution of the Audit Committee
shall be recorded in the meeting
minutes of the Board of Directors.
The Board of Directors may
authorize the Chairman to lend in
installments or to revolve the
credit facility when lending funds
to the same party, within a certain
amount resolved by the Board of
Directors and within one year.
The aforesaid "certain amount"
means that the authorized amount
of
loans
extended
by
the
Company or any of its subsidiaries
to any single entity shall not
exceed 10% of the net worth on
the
most
recent
financial
statements
of
the
lending
company,
provided
that
such
restriction shall not apply to inter-
company loans of funds between
foreign companies in which the
Company
holds,
directly
or
indirectly, 100% of the voting
sharesor inter-company loans of
funds between the Company and
foreign companies in which the
Company
holds,
directly
or
indirectly, 100% of the voting
shares.
The Finance Division of the
Company shall set up a record
book for recording matters relating
to fund lendingbythe Company.

and the resolution of the Audit
Committee shall be recorded in
the meeting minutes of the Board
of Directors. The Board of
Directors
may
authorize
the
Chairman to lend in installments
or to revolve the credit facility
when lending funds to the same
party, within a certain amount
resolved by the Board of Directors
and within one year.The
Company shall take into full
consideration
of
each
independent director's opinion in
the discussion by the Board of
Directors, and shall record each
independent
director's
explicit
opinion for assent or dissent and
reason for dissent in the meeting
minutes of the Board of Directors.
The aforesaid "certain amount"
means
that
the
authorized
amount of loans extended by the
Company
or
any
of
its
subsidiaries to any single entity
shall not exceed 10% of the net
worth on the most recent financial
statements
of
the
lending
company, provided that such
restriction shall not apply to inter-
company loans of funds between
foreign companies in which the
Company
holds,
directly
or
indirectly, 100% of the voting		 Loaning of Funds
and Making of
Endorsements/G
uarantees
by
Public
Companies”
to
exempt
the
restriction on the
inter-company
loans of funds
between
the
Company
and
foreign
companies
in
which
the
Company holds,
directly
or
indirectly, 100%
of
the
voting
shares,
the
amount limits of
40% net worth of
lending company
and the duration
limits of 1 year.

63

Article Article after revision Article before revision Explanation
After a lending of funds has been
approved
by
the
Board
of
Directors, the Finance Division
shall record the details of the
entity to which the lending of funds
is made, amount, date of approval
by
the
Board
of
Directors,
drawdown date, and matters to be
carefully evaluated in accordance
with the Operating Procedures in
the
record
book
for
further
inspection.
(3) The Company's internal auditors
shall audit the procedures of
lending of funds to others and the
implementation
thereof
each
quarter and prepare a written audit
report accordingly. If there is any
material violation of the Operating
Procedures, the auditors shall
promptly
notify
the
Audit
Committee of the Company in
writing.
(4) The Finance Division of the
Company shall prepare a table
listing the lending of funds made
or revoked each month in order to
facilitate the Company's internal
control, tracking, and the making
of
public
announcement
and
reporting. The Finance Division of
the Company shall also evaluate
and reserve sufficient allowance
for bad debts eachquarter, and		 shares.
(2) The Finance Division of the
Company shall set up a record
book for recording matters relating
to fund lending by the Company.
After a lending of funds has been
approved
by
the
Board
of
Directors, the Finance Division
shall record the details of the
entity to which the lending of funds
is made, amount, date of approval
by
the
Board
of
Directors,
drawdown date, and matters to be
carefully evaluated in accordance
with the Operating Procedures in
the
record
book
for
further
inspection.
(3) The Company's internal auditors
shall audit the procedures of
lending of funds to others and the
implementation
thereof
each
quarter and prepare a written audit
report accordingly. If there is any
material violation of the Operating
Procedures, the auditors shall
promptly
notify
the
Audit
Committee of the Company in
writing.
(4) The Finance Division of the
Company shall prepare a table
listing the lending of funds made
or revoked each month in order to
facilitate the Company's internal
control, tracking, and the making

64

Article Article after revision Article before revision Explanation
shall disclose information relating
to the lending of funds made by
the Company in the Company's
financial statements and shall
provide relevant information to the
Company's external auditing CPA.
(5) Where the recipients of the fund
lending are not in compliance with
the Operating Procedures or the
amount of funds lent exceeds the
limits set forth in the Operating
Procedures as a result of change
of conditions, the Finance Division
of the Company shall prepare
corrective plans and submit such
corrective plans to the Audit
Committee of the Company and
rectify as scheduled under the
corrective plans.
2. Review Procedures
(1) The company or enterprise which
applies for funds shall provide its
relevant financial information and
specify its intended usages of
funds in writing for the Company's
review.
(2) After receiving the application for
lending of funds, the Company's
division in charge shall investigate
and evaluate the necessity and
reasonableness of the funding,
whether there are direct or indirect
business relations between the
funding
recipient
and
the		 of
public
announcement
and
reporting. The Finance Division of
the Company shall also evaluate
and reserve sufficient allowance
for bad debts each quarter, and
shall disclose information relating
to the lending of funds made by
the Company in the Company's
financial statements and shall
provide relevant information to the
Company's external auditing CPA.
(5) Where the recipients of the fund
lending are not in compliance with
the Operating Procedures or the
amount of funds lent exceeds the
limits set forth in the Operating
Procedures as a result of change
of conditions, the Finance Division
of the Company shall prepare
corrective plans and submit such
corrective plans to the Audit
Committee of the Company and
rectify as scheduled under the
corrective plans.
2. Review Procedures
(1) The company or enterprise which
applies for funds shall provide its
relevant financial information and
specify its intended usages of
funds in writing for the Company's
review.
(2) After receiving the application for
lending of funds, the Company's
division in charge shall investigate

65

Article Article after revision Article before revision Explanation
Company, the recipient’s financial
and operational condition, the
recipient’s ability for repayment of
indebtedness
and
its
credit
worthiness,
profitability,
and
intended usages of funds. The
extents
of
impact
of
the
Company's aggregate amount of
funds lent on the Company's
operations,
financial
conditions
and shareholders' equity shall also
be taken into consideration, and
the division in charge shall then
prepare a written report based on
its evaluation and submit the
report to the Board of Directors for
review.
(3) When lending funds or providing
short-term financing to others, the
Company
shall
require
the
borrower to provide guarantee
notes in the same amount of funds
lent and if necessary, shall require
the borrower to provide personal
property
or
real
property
as
collaterals and to perfect the liens
on
the
collaterals,
and
the
Company shall evaluate quarterly
whether the value of the collateral
provided is comparable to the
balance of the amount of funds
lent and shall demand additional
collaterals if necessary. With
regards to the aforementioned		 and evaluate the necessity and
reasonableness of the funding,
whether there are direct or indirect
business relations between the
funding
recipient
and
the
Company, the recipient’s financial
and operational condition, the
recipient’s ability for repayment of
indebtedness
and
its
credit
worthiness,
profitability,
and
intended usages of funds. The
extents
of
impact
of
the
Company's aggregate amount of
funds lent on the Company's
operations,
financial
conditions
and shareholders' equity shall also
be taken into consideration, and
the division in charge shall then
prepare a written report based on
its evaluation and submit the
report to the Board of Directors for
review.
(3) When lending funds or providing
short-term financing to others, the
Company
shall
require
the
borrower to provide guarantee
notes in the same amount of funds
lent and if necessary, shall require
the borrower to provide personal
property
or
real
property
as
collaterals and to perfect the liens
on
the
collaterals,
and
the
Company shall evaluate quarterly
whether the value of the collateral

66

Article Article after revision Article before revision Explanation
collateral, if the borrower provides
guarantee
from
individual
or
corporation
with
considerable
financial
capability
and
credit
worthiness as a substitute for the
collaterals, the Board of Directors
may, referring to the assessment
report of the division in charge,
consider
such
guarantee
and
make a decision ; in the case of
corporate guarantee, it is required
to review if the guarantor’s articles
of incorporation provide that the
provision of corporate guarantee is
allowed.
(4) Fire insurance shall be procured
for each collateral except for land
and securities; the insurance limits
shall be in principle no less than
the
replacement
cost
of
the
collateral; each insurance policy
shall designate the Company as
the beneficiary and the title,
quantity, location and insurance
terms of the insured subject on the
insurance
policy
shall
be
consistent with the original terms
and conditions of the lending of
funds made by the Company.		 provided is comparable to the
balance of the amount of funds
lent and shall demand additional
collaterals if necessary. With
regards to the aforementioned
collateral, if the borrower provides
guarantee
from
individual
or
corporation
with
considerable
financial
capability
and
credit
worthiness as a substitute for the
collaterals, the Board of Directors
may, referring to the assessment
report of the division in charge,
consider
such
guarantee
and
make a decision ; in the case of
corporate guarantee, it is required
to review if the guarantor’s articles
of incorporation provide that the
provision of corporate guarantee is
allowed.
(4) Fire insurance shall be procured
for each collateral except for land
and securities; the insurance limits
shall be in principle no less than
the
replacement
cost
of
the
collateral; each insurance policy
shall designate the Company as
the beneficiary and the title,
quantity, location and insurance
terms of the insured subject on the
insurance
policy
shall
be
consistent with the original terms
and conditions of the lending of
funds made bythe Company.

67

Article Article after revision Article before revision Explanation
Article 9 Public Announcement and Reporting
Procedures
1. The Finance Division shall report
every month the balance of lending of
funds made by the Company and its
Subsidiaries in the preceding month
by the fifth day of the current month to
the Stock Affairs Division of the
Company together with the amount of
sales revenue for monthly public
announcement and reporting within
the required time period according to
applicable regulations.
2. In addition to the monthly public
announcement and reporting of the
Company's balance of lending of
funds, in the event that the balance of
funds lent by the Company and its
Subsidiaries reaches any of the
following thresholds, the Finance
Division
of
the
Company
shall
immediately notify the Stock Affairs
Division of the Company and provide
relevant materials for the Stock Affairs
Division
to
make
the
public
announcement and reporting within
two days commencing from the date
of occurrence of such event:
(1) The balance of lending of funds
lent to others by the Company and
its
Subsidiaries
reaches
20
percent or more of the Company's
net
worth
as
stated
in
the
Company's
latest
financial		 Public Announcement and Reporting
Procedures
1. The Finance Division shall report
every month the balance of lending of
funds made by the Company and its
Subsidiaries in the preceding month
by the fifth day of the current month to
the Stock Affairs Division of the
Company together with the amount of
sales revenue for monthly public
announcement and reporting within
the required time period according to
applicable regulations.
2. In addition to the monthly public
announcement and reporting of the
Company's balance of lending of
funds, in the event that the balance of
funds lent by the Company and its
Subsidiaries reaches any of the
following thresholds, the Finance
Division
of
the
Company
shall
immediately notify the Stock Affairs
Division of the Company and provide
relevant materials for the Stock Affairs
Division
to
make
the
public
announcement and reporting within
two days commencing from the date
of occurrence of such event:
(1) The balance of lending of funds
lent to others by the Company and
its
Subsidiaries
reaches
20
percent or more of the Company's
net
worth
as
stated
in
the
Company's
latest
financial		 Certain languages in
paragraph
2
are
revised
as
appropriate because
loaning of funds is
not
belonging
to
kinds of transaction.

68

Article Article after revision Article before revision Explanation
statements.
(2) The balance of funds lent by the
Company and its Subsidiaries to a
single
enterprise
reaches
10
percent or more of the Company's
net
worth
as
stated
in
the
Company's
latest
financial
statements.
(3) Amount of funds newly lent by the
Company
or
its
Subsidiaries
exceeds
NT$10,000,000
and
reaches 2 percent or more of the
Company's net worth as stated in
the Company's latest financial
statements.
(4) After the public announcement
and reporting has been made
pursuant to any of the preceding
items (1)-(3), the balance of funds
lent increases by more than 2
percent of the Company's net
worth as stated in the Company's
latest financial statements.
3.If any of the matters to be publicly
announced and reported as specified
above is subject to the "Taiwan Stock
Exchange Corporation Procedures for
Verification and Disclosure of Material
Information of Listed Companies", the
Company
shall
make
necessary
public announcement in accordance
with such regulation.
"Date of occurrence" referred to herein
shall mean the date of contract signing,		 statements.
(2) The balance of funds lent by the
Company and its Subsidiaries to a
single
enterprise
reaches
10
percent or more of the Company's
net
worth
as
stated
in
the
Company's
latest
financial
statements.
(3) Amount of funds newly lent by the
Company
or
its
Subsidiaries
exceeds
NT$10,000,000
and
reaches 2 percent or more of the
Company's net worth as stated in
the Company's latest financial
statements.
(4) After the public announcement
and reporting has been made
pursuant to any of the preceding
items (1)-(3), the balance of funds
lent increases by more than 2
percent of the Company's net
worth as stated in the Company's
latest financial statements.
3. If any of the matters to be publicly
announced and reported as specified
above is subject to the "Taiwan Stock
Exchange Corporation Procedures for
Verification and Disclosure of Material
Information of Listed Companies", the
Company
shall
make
necessary
public announcement in accordance
with such regulation.
"Date of occurrence" referred to herein
shall mean the date of contract signing,

69

Article Article after revision Article before revision Explanation
date of payment, date of resolution by
board of directors, or other date that can
determine the counterparty andthe
amount
of
the
loaning
of
funds,
whichever date is earlier.		 date of payment, date of resolution by
board of directors, or other date that can
determine
the
counterparty
and
transactionamount of thetransaction,
whichever date is earlier.
Article 11 Other Matters
After approval by one-half or more of all
Audit Committee members and then for
discussion and consent by the Board of
Directors, these Operating Procedures
shall be submitted to the shareholders'
meeting
for
approval
before
implementation. If the proposal has not
been approved by one-half or more of
all Audit Committee members, it may be
undertaken upon the consent of two-
thirds or more of all directors, and the
resolution of the Audit Committee shall
be recorded in the meeting minutes of
the Board of Directors, and then
submitted
for
approval
by
the
shareholders'
meeting
before
implementation.
If
any
director
expresses
an
objection
and
such
objection is recorded in the meeting
minutes or a written statement is made
for such objection, the Company shall
submit the objection to each Supervisor
and for discussion by the shareholders'
meeting. The same procedure shall
apply to any amendments to the
Operating Procedures.		 Other Matters
After approval by one-half or more of all
Audit Committee members and then for
discussion and consent by the Board of
Directors, these Operating Procedures
shall be submitted to the shareholders'
meeting
for
approval
before
implementation. If the proposal has not
been approved by one-half or more of
all Audit Committee members, it may be
undertaken upon the consent of two-
thirds or more of all directors, and the
resolution of the Audit Committee shall
be recorded in the meeting minutes
of the Board of Directors, and then
submitted
for
approval
by
the
shareholders'
meeting
before
implementation.
If
any
director
expresses
an
objection
and
such
objection is recorded in the meeting
minutes or a written statement is made
for such objection, the Company shall
submit the objection to each Supervisor
and for discussion by the shareholders'
meeting. The same procedure shall
apply to any amendments to the
Operating Procedures.
When the Operating Procedures are
submitted for discussion in the meeting		 Certain
languages
are
revised
as
appropriate because
the Company shall
not apply to the
Article
14-3
of
Securities
and
Exchange Act as the
Company
has
established
audit
committee.

70

Article Article after revision Article before revision Explanation
of Board of Directors, the Board of
Directors
shall
take
into
full
consideration
of
each
independent
director's opinion and shall record each
independent director's explicit opinion
for assent or dissent and reasons for
dissent in the meeting minutes of the
Board of Directors.

Resolution:

Approved and acknowledged as proposed by the Board of Directors by voting (a total of 2,384,119,347 shares with voting rights were present when votes were cast; the number of voting rights for approval is 2,113,241,891, among which 1,388,235,933 was exercised by electronic transmission, the number of voting rights for rejection is 96,576, the number of invalid votes is 0, the number of voting rights for abstention is 270,780,880, and 88.63% of the total voting rights voted for approval when votes were cast).

  • (3) Discussion of the Amendments to Operating Procedures of Endorsement and Guarantee (Proposed by the Board of Directors)

  • Explanation: a) It is proposed to amend certain provisions of the Operating Procedures of Endorsement and Guarantee in order to comply with the amendments to the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies announced by the Financial Supervisory Commission. Please see the comparison table of revised articles of the Operating Procedures of Endorsement and Guarantee for the detailed revisions.

    • b) The proposed amendments are submitted for discussion.

Comparison Table of Revised Articles of the Operating Procedures of Endorsement and

71

Guarantee

Article Article after revision V Procedures for Making Endorsement and Guarantee

Article after revision Article before revision Explanation Procedures for Making Endorsement Procedures for Making Endorsement Certain languages and Guarantee and Guarantee are revised as 1. The Finance Division of the Company 1. The Finance Division of the Company appropriate because shall review the qualification and shall review the qualification and the Company shall limits of endorsement and guarantee limits of endorsement and guarantee not apply to the based on the application by the entity based on the application by the entity Article 14-3 of for which the endorsement and for which the endorsement and Securities and guarantee is to be made item by item, guarantee is to be made item by item, Exchange Act as the and determine whether the amount of and determine whether the amount of Company has the endorsement and guarantee to be the endorsement and guarantee to be established audit made is in compliance with the made is in compliance with the committee. requirements of the Operating requirements of the Operating Procedures, and check whether the Procedures, and check whether the amount of the endorsement and amount of the endorsement and guarantee to be made is subject to guarantee to be made is subject to the public announcement and the public announcement and reporting regulation. The Finance reporting regulation. The Finance Division shall submit the review and Division shall submit the review and assessment report prepared in assessment report prepared in accordance with Article VI of the accordance with Article VI of the Operating Procures for the Chairman Operating Procures for the Chairman of the Board’s approval and for of the Board’s approval and for approval by one-half or more of all approval by one-half or more of all Audit Committee members and then Audit Committee members and then for discussion and consent by the for discussion and consent by the Board of Directors. If the proposal Board of Directors. If the proposal has not been approved by one-half or has not been approved by one-half or more of all Audit Committee more of all Audit Committee members, it may be undertaken upon members, it may be undertaken upon the consent of two-thirds or more of the consent of two-thirds or more of all directors, and the resolution of the all directors, and the resolution of the Audit Committee shall be recorded in Audit Committee shall be recorded in

72

Article Article after revision Article before revision Explanation the meeting minutes of the Board of the meeting minutes of the Board of Directors. If the amount to be made Directors. If the amount to be made is within the authorized amount, the is within the authorized amount, the Chairman of the Board may approve Chairman of the Board may approve the endorsement and guarantee the endorsement and guarantee based on the recipient’s credit based on the recipient’s credit worthiness and financial condition at worthiness and financial condition at his discretion and then report to the his discretion and then report to the next meeting of the Board of next meeting of the Board of Directors for recognition. Directors for recognition. 2. The Finance Division of the Company The Company shall take into full shall set up a record book for consideration of each independent recording matters relating to making director’s opinion when making endorsements and guarantees by the endorsements and guarantees to Company. The Finance Division shall others and shall record each apply for stamping by the Company independent director’s explicit opinion seal in accordance with applicable for assent or dissent and reasons for internal rules of the Company, and dissent in the meeting minutes of the Board of Directors.。

  1. The Finance Division of the Company shall set up a record book for recording matters relating to making endorsements and guarantees by the Company. The Finance Division shall apply for stamping by the Company seal in accordance with applicable internal rules of the Company, and shall also record the entity for which the endorsement or guarantee is made, amount, date of approval by the Audit Committee, date of approval

  2. The Finance Division of the Company shall set up a record book for recording matters relating to making endorsements and guarantees by the Company. The Finance Division shall apply for stamping by the Company seal in accordance with applicable internal rules of the Company, and shall also record the entity for which the endorsement or guarantee is made, amount, date of approval by the Audit Committee, date of approval by the Board of Directors, endorsement or guarantee date, and matters to be carefully evaluated in

by the Board of Directors, endorsement or guarantee date, and matters to be carefully evaluated in accordance with Article VI of the Operating Procedures.

  1. The Company's internal auditors shall audit the procedures of making endorsements and guarantees and the implementation thereof each quarter and prepare a written audit report accordingly. If there is any material violation of the Operating

73

Article Article after revision Article before revision Explanation Procedures, the auditors shall notify accordance with Article VI of the the Audit Committee of the Company Operating Procedures. in writing. 3. The Company's internal auditors shall 4. The Finance Division of the Company audit the procedures of making shall prepare a table listing endorsements and guarantees and endorsements and guarantees made the implementation thereof each or revoked each month in order to quarter and prepare a written audit facilitate the Company's internal report accordingly. If there is any control, tracking, and making public material violation of the Operating announcement and reporting. The Procedures, the auditors shall notify Finance Division of the Company the Audit Committee of the Company shall also evaluate and record the in writing. contingent loss for endorsements and 4. The Finance Division of the Company guarantees made, and shall disclose shall prepare a table listing information relating to endorsements endorsements and guarantees made and guarantees made by the or revoked each month in order to Company in the Company's financial facilitate the Company's internal statements and shall provide relevant control, tracking, and making public information to the Company's auditing announcement and reporting. The CPA. Finance Division of the Company 5. If the qualification of the entity for shall also evaluate and record the which an endorsement or guarantee contingent loss for endorsements and is made no longer meets the guarantees made, and shall disclose requirements set forth in the information relating to endorsements Operating Procedures, or the amount and guarantees made by the of endorsements and guarantees Company in the Company's financial made exceeds the limits set forth in statements and shall provide relevant the Operating Procedures as a result information to the Company's auditing CPA.

  1. If the qualification of the entity for which an endorsement or guarantee is made no longer meets the requirements set forth in the Operating Procedures, or the amount of endorsements and guarantees made exceeds the limits set forth in the Operating Procedures as a result of changes of the basis of calculating the limits, the Finance Division of the Company shall prepare corrective plans for the endorsement and guarantee made to the entity which is no longer qualified or the amount in

  2. If the qualification of the entity for which an endorsement or guarantee is made no longer meets the requirements set forth in the Operating Procedures, or the amount

74

Article before revision Explanation
of endorsements and guarantees
made exceeds the limits set forth in
the Operating Procedures as a result
of changes of the basis of calculating
the limits, the Finance Division of the
Company shall prepare corrective
plans for
the
endorsement
and
guarantee made to the entity which is
no longer qualified or the amount in
excess
of
the
limits
for
the
Chairman's approval and to correct
all such issues within a specified
period. The Finance Division of the
Company shall also submit such
corrective
plans
to
the
Audit
Committee of the Company and
rectify
as
scheduled
under
the
corrective plans.
6. If there are necessary business
needs for the Company to exceed the
limits
of
endorsements
and
guarantees set forth in the Operating
Procedures and if the requirements
set forth in the Operating Procedures
are complied with, it shallobtain
approval from the Board of Directors
and half or more of the directors shall
act as joint guarantors for any loss of
the Company that might incur due to
the excess amount of endorsements
and guarantees. The Operating
Procedures shall also be amended
accordingly and submitted to the
shareholders' meetingfor approval.

Article Article after revision excess of the limits for the Chairman's approval and to correct all such issues within a specified period. The Finance Division of the Company shall also submit such corrective plans to the Audit Committee of the Company and rectify as scheduled under the corrective plans.

  1. If there are necessary business needs for the Company to exceed the limits of endorsements and guarantees set forth in the Operating Procedures and if the requirements set forth in the Operating Procedures are complied with, it shall be approved by one-half or more of all Audit Committee members and then for discussion and consent by the Board of Directors. If the proposal has not been approved by one-half or

more of all Audit Committee members, it may be undertaken upon the consent of two-thirds or more of all directors, and the resolution of the Audit Committee shall be recorded in the meeting minutes of the Board of Directors and half or more of the directors shall act as joint guarantors for any loss of the Company that might incur due to the excess amount of endorsements and guarantees. The Operating Procedures shall also be amended accordingly and

75

Article Article after revision Article before revision Explanation
submitted
to
the
shareholders'
meeting for approval. If the
shareholders'
meeting
does
not
consent to such amendment, the
Company shall prepare a corrective
plan to revoke the excess amount
within a specific period.		 If the shareholders' meeting does not
consent to such amendment, the
Company shall prepare a corrective
plan to revoke the excess amount
within a specific period.
The Company shall take into full
consideration of each independent
director's opinion when discussing
the amendment in the meeting of
Board of Directors and shall record
each independent director's explicit
opinion for assent or dissent and
reasons for dissent in the meeting
minutes of the Board of Directors.
VIII Decision-making and Authorization
Where an amount of endorsement and
guarantee to be made is approved by
the Company, each time when executing
the endorsement and guarantee within
such amount, the application letter by
the entity for which the guarantee is to
be
made
shall
be
reviewed
in
accordance with Article V of the
Operating Procedures.		 Decision-making and Authorization
Where an amount of endorsement and
guarantee to be made is approved by
the Company, each time when executing
the endorsement and guarantee within
such amount, the application letter by
the entity for which the guarantee is to
be
made
shall
be
reviewed
in
accordance with Article V of the
Operating Procedures.
The Company shall take into full
consideration
of
each
independent
director's
opinion
when
providing
endorsements and guarantees to others
and shall record each independent
director's explicit opinion for assent or
dissent and reasons for dissent in the
meeting minutes of the Board of
Directors.		 Certain
languages
are
revised
as
appropriate because
the Company shall
not apply to the
Article
14-3
of
Securities
and
Exchange Act as the
Company
has
established
audit
committee.
X Public Announcement and Reporting Public Announcement and Reporting Certain
languages

76

Article Article after revision Article before revision Explanation Procedures Procedures are revised as 1. The Finance Division shall report the 1. The Finance Division shall report the appropriate referring balance of endorsements and balance of endorsements and to the Article 9.4.(1) guarantees made by the Company guarantees made by the Company of the Regulations and its subsidiaries in the previous and its subsidiaries in the previous Governing the month by the fifth day of the following month by the fifth day of the following Preparation of month to the Stock Affairs Division of month to the Stock Affairs Division of Financial Reports by the Company together with the the Company together with the Securities Issuers amount of sales revenue for monthly amount of sales revenue for monthly for clear definition of public announcement and reporting public announcement and reporting long-term within the required time period within the required time period investment. according to applicable regulations. according to applicable regulations. 2. In addition to the monthly public 2. In addition to the monthly public announcement and reporting of the announcement and reporting of the Company's balance of endorsements Company's balance of endorsements and guarantees, when the amount of and guarantees, when the amount of endorsements and guarantees made endorsements and guarantees made by the Company and its subsidiaries by the Company and its subsidiaries reaches any of the following reaches any of the following thresholds, the Finance Division of thresholds, the Finance Division of the Company shall immediately notify the Company shall immediately notify the Stock Affairs Division of the the Stock Affairs Division of the Company and provide relevant Company and provide relevant materials for the Stock Affairs Division materials for the Stock Affairs Division to make the public announcement to make the public announcement and reporting within two days and reporting within two days commencing from the date of commencing from the date of occurrence of such event: occurrence of such event: (1) The balance of endorsements and (1) The balance of endorsements and guarantees made by the Company guarantees made by the Company and its Subsidiaries reaches 50 and its Subsidiaries reaches 50 percent or more of the Company's percent or more of the Company's net worth as stated in the net worth as stated in the Company's latest financial Company's latest financial

77

Article Article after revision Article before revision Explanation
statements.
(2) The balance of endorsements and
guarantees made by the Company
and its Subsidiaries to a single
enterprise reaches 20 percent or
more of the Company's net worth
as stated in the Company's latest
financial statements.
(3) The balance of endorsements and
guarantees made by the Company
and its Subsidiaries to a single
enterprise reaches NT$10 million
or more and the aggregate amount
of endorsements and guarantees
for,book value ofinvestment
accounted for using equity method
in, and balance of loans to such
enterprise reaches 30 percent or
more of the Company's net worth
as stated in the Company's latest
financial statements.
(4) The amount of endorsements and
guarantees newly made by the
Company
or
its
Subsidiaries
exceeds
NT$30
million
and
reaches 5 percent or more of the
Company's net worth as stated in
the Company's latest financial
statements.
3. If any of the matters to be public
announced and reported as specified
above is subject to the "Taiwan Stock
Exchange Corporation Procedures for
Verification and Disclosure of Material		 statements.
(2) The balance of endorsements and
guarantees made by the Company
and its Subsidiaries to a single
enterprise reaches 20 percent or
more of the Company's net worth
as stated in the Company's latest
financial statements.
(3) The balance of endorsements and
guarantees made by the Company
and its Subsidiaries to a single
enterprise reaches NT$10 million
or more and the aggregate amount
of endorsements and guarantees
for, investmentof a long-term
naturein, and balance of loans to
such
enterprise
reaches
30
percent or more of the Company's
net
worth
as
stated
in
the
Company's
latest
financial
statements.
(4) The amount of endorsements and
guarantees newly made by the
Company
or
its
Subsidiaries
exceeds
NT$30
million
and
reaches 5 percent or more of the
Company's net worth as stated in
the Company's latest financial
statements.
3. If any of the matters to be public
announced and reported as specified
above is subject to the "Taiwan Stock
Exchange Corporation Procedures for
Verification and Disclosure of Material

78

Article Article after revision Article before revision Explanation
Information of Listed Companies", the
Company
shall
make
necessary
public announcement in accordance
with such regulation.
"Date of occurrence" referred to herein
shall mean the date of contract signing,
date of payment, date of resolution by
board of directors, or other date that can
determine the counterparty andthe
amount
of
the
endorsement
and
guarantee,whichever date is earlier.		 Information of Listed Companies", the
Company
shall
make
necessary
public announcement in accordance
with such regulation.
"Date of occurrence" referred to herein
shall mean the date of contract signing,
date of payment, date of resolution by
board of directors, or other date that can
determine
the
counterparty
and
transactionamount of thetransaction,
whichever date is earlier.
XIII Other Matters
After approval by one-half or more of all
Audit Committee members, and then for
discussion and consent by the Board of
Directors, these Operating Procedures
shall be submitted to the shareholders'
meeting
for
approval
before
implementation. If the proposal has not
been approved by one-half or more of
all Audit Committee members, it may be
undertaken upon the consent of two-
thirds or more of all directors, and the
resolution of the Audit Committee shall
be recorded in the meeting minutes of
the Board of Directors, and then
submitted
for
approval
by
the
shareholders'
meeting
before
implementation.
If
any
director
expresses
an
objection
and
such
objection is recorded in the meeting
minutes or a written statement is made
for such objection, the Company shall
submit the objection to the shareholders'		 Other Matters
After approval by one-half or more of all
Audit Committee members, and then for
discussion and consent by the Board of
Directors, these Operating Procedures
shall be submitted to the shareholders'
meeting
for
approval
before
implementation. If the proposal has not
been approved by one-half or more of
all Audit Committee members, it may be
undertaken upon the consent of two-
thirds or more of all directors, and the
resolution of the Audit Committee shall
be recorded in the meeting minutes of
the Board of Directors, and then
submitted
for
approval
by
the
shareholders'
meeting
before
implementation.
If
any
director
expresses
an
objection
and
such
objection is recorded in the meeting
minutes or a written statement is made
for such objection, the Company shall
submit the objection to the shareholders'		 Certain
languages
are
revised
as
appropriate because
the Company shall
not apply to the
Article
14-3
of
Securities
and
Exchange Act as the
Company
has
established
audit
committee.

79

Article Article after revision Article before revision Explanation
meeting for discussion. The same
procedure
shall
apply
to
any
amendment
to
the
Operating
Procedures.		 meeting for discussion. The same
procedure
shall
apply
to
any
amendment
to
the
Operating
Procedures.
When the Operating Procedures are
submitted for discussion in the meeting
of Board of Directors, the Board of
Directors
shall
take
into
full
consideration
of
each
independent
director's opinion and shall record each
independent director's explicit opinion
for assent or dissent and reasons for
dissent in the meeting minutes of the
Board of Directors.

Resolution:

Approved and acknowledged as proposed by the Board of Directors by voting (a total of 2,384,119,347 shares with voting rights were present when votes were cast; the number of voting rights for approval is 2,113,223,037, among which 1,388,217,079 was exercised by electronic transmission, the number of voting rights for rejection is 118,429, the number of invalid votes is 0, the number of voting rights for abstention is 270,777,881, and 88.63% of the total voting rights voted for approval when votes were cast).

  • (4) To Remove Non-competition Restrictions on Directors (Proposed by the Board of Directors)

  • Explanation: a) According to Article 209 of the Company Act, a director who conducts business within the business scope of the Company for himself or others shall explain at the shareholders’ meeting the essential contents of such conduct and obtain the shareholders’ approval.

    • b) As certain directors concurrently work for other companies, which may constitute the act restricted under Article 209 of the Company

80

Act, it is proposed to release the non-competition restrictions on the directors, without prejudice to the interests of the Company. c) The proposal is submitted for discussion.

Description of Positions of Directors in Other Companies (New)

Name of Director Positions in Other Companies Title
Ping Cheng Delta Greentech SGP Pte. Ltd. Director

Resolution:

Approved and acknowledged as proposed by the Board of Directors by voting (a total of 2,384,119,347 shares with voting rights were present when votes were cast; the number of voting rights for approval is 1,935,506,258, among which 1,210,500,300 was exercised by electronic transmission, the number of voting rights for rejection is 3,338,728, the number of invalid votes is 0, the number of voting rights for abstention is 445,274,361, and 81.18% of the total voting rights voted for approval when votes were cast).

(Questions raised by the shareholders for the Discussion Items 1 & 4: The registered number of shareholder who raised questions was 171695. The questions and answers were omitted. Regarding the questions and relevant suggestions by the shareholder, the Chairman and related person had fully explained in detail in the meeting. The Company has also kept record of the questions and answers for future reference.)

IV.Extemporary Motions:

(Questions raised by the shareholders for the Extemporary Motions: The registered number of shareholder who raised questions was 171695. The questions and answers were omitted. Regarding the questions and relevant suggestions by the shareholder, the Chairman and related person had fully explained in detail in the meeting. The Company has also kept record of the questions and answers for future reference.)

There being no other extemporary motions, the Chairman announced the meeting adjourned.

81

Meeting Adjourned: 11:43 AM, June 10, 2019

Chairman: Yancey Hai

Recorder: YiChun Chen

82

Appendix 1

Business Report

In 2018, the world economy was seriously affected by the US-China trade war and a steep rise in the cost of raw materials, which have caused a turbulent economic environment and weakened overall confidence in market investment. Despite the difficulties and challenges in the business environment, Delta achieved growth in both annual revenue and gross profit, thanks to the joint efforts of all of our Delta colleagues. Delta’s consolidated revenue in 2018 was NT$237 billion, a 6% increase from the previous year; gross profit was NT$63.6 billion; and gross profit margin was 26.8%, 5% higher than the previous year. The net operating profit was NT$18.2 billion, with a net operating profit margin of 7.7% that decreased by 8% compared to the previous year. Net income after tax was NT$ 18.2 billion, with a net after-tax profit margin of 7.7%, which showed a slight decrease of 1% compared to the previous year. In 2018, Delta's earnings per share (EPS) was NT$7.00, and return on equity (ROE) ratio was 14.28%.

In response to increasing regional economic risks, Delta announced in 2018 that it would acquire the shares of Delta Electronics (Thailand) Public Company Limited (DET), listed in Thailand via Conditional Voluntary Tender Offer by its subsidiary DEISG. After obtaining approval by the government agencies of the relevant countries for the acquisition, Delta officially submitted a public acquisition document to DET. While Delta's production has been mainly concentrated in China and Taiwan, DET has its manufacturing base in Thailand, India and Slovakia. The acquisition allows Delta to strengthen its global production layout, improve manufacturing and shipping flexibility, reduce international trade war risks, as well as increase overseas sales and draw closer to customers in India and Southeast Asia. In addition, Delta has expanded its presence in Taiwan by adding new capacity in Taoyuan, Chungli, Taichung and Tainan. Through more flexible production arrangements and more in-depth service networks, Delta will be able to further expand its global business footprint.

83

Here is a summary of Delta’s performance in various business fields in 2018, and future prospects:

Power Electronics

With sophisticated technology and excellent operations management, Delta has become an indispensable long-term strategic partner with many world-class manufacturers, winning customer praise for products such as Switch Mode Power Supplies (SMPS), brushless DC fans, cooling systems, and miniaturized key components. After decades of development, our business operations have gradually expanded from consumer products to industrial, medical, automotive, home appliance and other fields of application.

In addition to making continuous improvements in electronic component technology, Delta's developments in the field of video technology are unrivaled on the global stage. At the European International Audio-Visual and Integration System Exhibition held in the Netherlands in 2018, Delta released the world's first 25,000 lumens ultra-high brightness DLP 8K projector that presented the audience with 8K 33 megapixels of video clarity using Delta’s proprietary optical and signal processing technology. Delta's video projection devices provide a new generation of visual quality, achieving technical excellence in power management and highly efficient heat dissipation, and fulfilling Delta’s corporate mission: “To provide innovative, clean and energy-efficient solutions for a better tomorrow.”

Delta is garnering the results of years of business development in the automobile industry. Besides supplying a variety of auto components, Delta is working closely with many of the world's leading car manufacturers to provide key solutions for power management systems and traction motor systems for electric vehicles. With the rapid growth of the electric vehicle market, this sector will become an important source of Delta's future growth.

The power electronics business has contributed to Delta's revenue and profits for many years. As Delta's business becomes more extensive, the future power supply and components sector will continue to be an important pillar supporting the development of Delta's operations.

84

Automation

Delta has developed its industrial automation business for more than 20 years and holds extensive practical experience in many markets and industries around the world. With the development of intelligent manufacturing applications, solutions that combine diverse industrial knowledge have gradually become the key to success for industrial automation manufacturers. With strong R&D capabilities and production line process experience, Delta provides intelligent solutions for machines, production lines and factories for customers in a variety of industries, helping them gradually move towards smart manufacturing.

In 2018, Delta assisted automotive industry customers in mastering energy applications for production lines, collecting and analyzing energy consumption data of equipment, and achieving energy-saving targets. Delta applied its DIAView graphic control system on CNC machine tools for data collection and analysis for device networking and intelligent monitoring. In addition, Delta has provided control and wireless communication solutions for automated guided vehicles (AGV) at food processing plants, and introduced SCARA industrial robots to the carton manufacturing industry to replace human labor. The SCARA robots provide highprecision, agile and flexible carton cover assembly while applying Delta's motion control system and smart energy detector to matrix sorting lines from the logistics industry to achieve fast and accurate parcel sorting operations.

To improve manufacturing quality and achieve the long-term goal of intelligent manufacturing, Delta began introducing its own intelligent factory transformation project in 2016. The project was executed step-by-step, from equipment, production line, and logistics, to the entire factory. By the end of 2018, 77% of Delta’s China production lines had implemented processes and systems for introducing intelligent manufacturing. Using a variety of intelligent production equipment made by Delta, the proportion of process stations that rely on manual operations dropped 40% compared with the baseline year of 2015.

In the field of building automation, Delta has acquired Loytec and Delta Controls in recent years, and acquired the Taiwan-listed company Vivotek Inc. through Public Tender Offer, gradually achieving a business master plan for Delta's building automation. In 2018, Delta built

85

a high-end food research and development center for the leading dairy in Asia. Delta provided Loytec IoT, a building management platform, and constructed an integrated management center spanning different buildings and subsystems, simultaneously decentralizing and controlling a range of electromechanical equipment, effectively assisting customers in reducing system integration time and saving at least 20% in construction costs.

With the US-China trade war having a definite affect, the Chinese market is slightly cooling in 2018. However, with rigid demand in the market due to an improving industrial structure and intelligent manufacturing, we believe Delta’s automation business will continue to be a main source of growth for the company for the long term.

Infrastructure

Benefitting from the rapid pace of data center investment and construction by global conglomerates, Delta’s data center solution business is expanding in 2018. Delta designed the largest high-speed data center corridor for the MYTHIC International Submarine Cable Project using its modular containerized data center solution. Delta’s modular containerized data center not only reduces construction cost significantly, but also fits any geographical environment while utilizing a short construction time. A traditional fixed-point data center takes two years to build, while construction of the Delta modular containerized data center takes only weeks. The modular containerized data center is also highly energy efficient with an average annual PUE of less than 1.43, which meets the Green Grid’s gold level standard.

In communication power supplies, Delta already offers high-end energy solutions in countries such as Japan and the U.S. to meet commercial 5G mobile communication needs and assist telecommunication operators installing the 5G internet. In the U.S., Delta is successfully promoting a high efficiency energy system as well as a high performance DC generator for backup power supply to ensure stable and quality communication services. In Taiwan and Japan, Delta has introduced power systems that accommodate cell sites and utilize communication power supply systems that yield 98% energy conversion efficiency. In addition, these systems are equipped with Delta made lithium batteries to effectively assist the client in saving energy, reducing carbon emissions, and contributing to environmental sustainability.

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On the infrastructure side, Delta focuses on the application of distributed energy systems. Compared to a centralized power plant where a large-scale power outage may occur during an emergency, distributed energy systems offer the opportunity to dispatch energy whenever needed and are not restricted by geographical location. To support distributed energy system applications, Delta offers two-way charging devices for electric vehicles, wind power conversion units, solar inverters and energy storage related products.

Delta recently participated COP24 conference through the Delta Electronics Foundation. The company engaged in conversations with leaders of the city governments of Milan, Italy and Paris, France as well as the Deutsche Post DHL. Delta shared its infrastructure solutions for distributed energy grids and offered to assist the cities in their low carbon energy transformations.

At Delta, we not only care about developing new business and new technologies, but also about managing our company in accordance with Environmental, Social, and Governance (ESG). Last year, Delta received the Best ESG Communications Award in Greater China from IR Magazine which recognized Delta’s ESG efforts and results. Delta was also listed in “The Dow Jones Sustainability™ World Index” for the eighth consecutive year. In 2018, Delta was recognized as an industry leader and included in an honor list for the corporate social responsibility category from Global Views Monthly magazine. Delta also received the top “CSR Corporate Citizen Award” from Commonwealth Magazine, five awards from the 2018 Taiwan Corporate Sustainability Awards, as well as recognition as a “top 5% listed company” in the management evaluation carried out by the Taiwan Stock Exchange. Delta was also listed as one of Taiwan’s top 20 international brands for the eighth consecutive year. Delta’s brand value reached USD 266 million in 2018 after six years of growth.

Serving diverse industries over the years, Delta is dedicated to maintaining our long-term strategic vision regardless of the challenges ahead. We thank all of our loyal clients, shareholders and partners for your years of support. Delta’s management team continues to

87

work alongside our colleagues, leading the company as a model enterprise, influencing the world for the better, and providing a positive impact on our environment and society.

Chairman Yancey Hai CEO Ping Cheng CFO Judy Wang

88

Appendix 2

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Delta Electronics, Inc.

Opinion

We have audited the accompanying parent company only balance sheets of Delta Electronics, Inc. (the “Company”) as at December 31, 2018 and 2017, 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, based on our audits and the audit reports of other independent accountants as described in the Other Matter - Scope of the Audit section of our report, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as at December 31, 2018 and 2017, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the 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 Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements for the year 2018. 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.

89

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

Investments accounted for under equity method

Description

In October 2017, the Company publicly acquired 49.22% of VIVOTEK INC. through a tender offer. The allocation of acquisition price was completed in the first quarter of 2018.

As the net fair value of identifiable assets and liabilities and the allocation of goodwill are based on management’s estimation and involves accounting estimations and assumptions, we consider this equity price allocation transaction a key audit matter.

How our audit addressed the matter

We obtained an understanding of the basis and process of purchase price allocation which was estimated by management. We review the original data and the reasonableness of major assumptions, including growth rate, gross margin, discount rate and fair value calculation model as indicated in the purchase price allocation reports prepared by the appraisers appointed by the Company. Our procedures also included the following:

  • A. Assessing the setting of parameters of valuation models and calculation formulas;

  • B. Comparing expected growth rates and gross margin with historical data, economic and industry forecasts; and

  • C. Comparing the discount rate with the cost of capital assumptions of cash generating units and rate of return of similar assets.

Impairment assessment of investments accounted for under equity method

Description

As of December 31, 2018, the recognised goodwill as a result of investment of Cyntec Co., Ltd., VIVOTEK INC., Eltek AS, Delta Controls Inc., Loy Tec electronics GmbH and Delta Greentech (China) Co., Ltd. are material. Refer to Notes 5 for accounting estimates of impairment assessment of investments accounted for under equity method and the uncertainty of assumptions.

As the balance of investment accounted for under equity method is material, the valuation model adopted in the impairment assessment has an impact in determining the recoverable amount which involves the significant accounting estimates and prediction of future cash flows. Thus, we consider the

90

impairment assessment of investment accounted for under equity method a key audit matter. How our audit addressed the matter

We obtained management’s impairment assessment of investments accounted for under equity method, obtained an understanding of the process in determining the expected future cash flows based on each cash generating unit, and performed the following audit procedures:

  • A. Assessing whether the valuation models adopted by the Company are reasonable for the industry, environment and the valued assets of the Company;

  • B. Confirming whether the expected future cash flows adopted in the valuation model are in agreement with the budget provided by the business units; and

  • C. Assessing the reasonableness of material assumptions, such as expected growth rates, operating margin and discount rates, by:

  • (a) Checking the setting of parameters of valuation models and calculation formulas;

  • (b) Comparing the expected growth rate and operating margin with historical data, economic and industrial forecast documents; and

  • (c) Comparing the discount rate with cost of capital assumptions of cash generating units and rates of return of similar assets.

Other matter– Scope of the Audit

We did not audit the financial statements of certain investments accounted for under the equity method and information on investees disclosed in Note 13. These investments accounted for under equity method amounted to NT$14,483,106 thousand and NT$13,517,165 thousand, constituting 8.18% and 8.29% of total assets as of December 31, 2018 and 2017, respectively, and the share of profit (loss) of associates and joint ventures accounted for using equity method and share of other comprehensive income of subsidiaries associates and joint ventures accounted for using equity method was NT$454,932 thousand and NT$1,036,192 thousand, constituting 2.42% and 7.72% of total comprehensive income for the years then ended, respectively. Those financial statements and the information disclosed in Note 13 were audited by other independent accountants whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants.

91

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 the parent company only financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including audit committee, are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the parent company only financial statements

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

As part of an audit in accordance with ROC GAAS, we exercise professional judgment 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;

92

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 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; and

F.

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law

93

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.

The parent company only financial statements of Delta Electronics, Inc. for the year ended December 31, 2018 expressed in US dollars are presented solely for the convenience of the reader and were translated from the financial statements expressed in New Taiwan dollars using the exchange rate of $30.715 to US$1.00 at December 31, 2018. This basis of translation is not in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Lin, Yu-Kuan Chou, Chien-Hung

for and on behalf of PricewaterhouseCoopers, Taiwan

March 11, 2019

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

As the financial statements are the responsibility of the management, PricewaterhouseCoopers, Taiwan 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.

94

Assets
Current assets
Cash and cash equivalents
Financial assets at fair value through
profit or loss - current
Financial assets at fair value through other
comprehensive income - current
Available-for-sale financial assets - current
Contract assets - current
Notes receivable, net
Accounts receivable, net
Accounts receivable - related parties
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Total current assets
Non-current assets
Financial assets at fair value through
profit or loss - non-current
Financial assets at fair value through other
comprehensive income - non-current
Available-for-sale financial assets -
non-current
Financial assets carried at cost - non-current
Investments accounted for under equity
method
Property, plant and equipment
Intangible assets
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets		 Notes
6(1)
6(2)
6(3)
12(4)
6(15) and 12(5)
6(4)
6(4)
7
7
6(5)
8
6(2)
6(3)
12(4)
12(4)
6(6)
6(7)
6(8)
6(21)
6(9)		 US Dollars
December 31, 2018
$ 7,811
728
1,877
-
28,669
2,267
174,477
90,808
5,474
20,742
54,229
26,136
3,103
416,321
1,701
56,274
-
-
4,747,252
478,157
30,748
15,572
17,680
5,347,384
$ 5,763,705		 New Taiwan Dollars New Taiwan Dollars
December 31, 2018
$ 239,908
22,360
57,656
-
880,554
69,639
5,359,056
2,789,163
168,173
637,076
1,665,641
802,753
95,328
12,787,307
52,231
1,728,446
-
-
145,811,850
14,686,584
944,431
478,295
543,054
164,244,891
$ 177,032,198		 December 31, 2017
$ 2,548,015
-
-
336,906
-
221,128
5,712,895
2,050,988
55,971
719,292
1,327,331
710,039
140,358
13,822,923
-
-
2,470,983
59,358
133,396,710
11,834,121
801,261
498,662
245,535
149,306,630
$ 163,129,553

(Continued)

95

Liabilities and Equity
Current liabilities
Contract liabilities - current
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Current income tax liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Share capital - common stock
Capital surplus
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings
Other equity interest
Other equity interest
Total equity
Significant contingent liabilities and
unrecorded contract commitments
Significant subsequent events
Total liabilities and equity		 US Dollars
New Taiwan Dollars
Notes
December 31, 2018
December 31, 2018
December 31, 2017
6(15) and 12(5)
$ 13,895
$ 426,796
$ -
36,430
1,118,938
889,241
7
248,824
7,642,622
6,556,938
289,434
8,889,975
8,777,715
7
10,599
325,534
383,745
30,728
943,811
269,478
12(5)
20,972
644,159
1,010,849
650,882
19,991,835
17,887,966
6(10)
566,433
17,398,000
10,576,000
6(21)
240,237
7,378,875
8,096,464
6(11)
64,865
1,992,329
2,012,154
871,535
26,769,204
20,684,618
1,522,417
46,761,039
38,572,584
6(12)
845,692
25,975,433
25,975,433
6(13)
1,575,682
48,397,067
48,446,318
6(14)
755,704
23,211,444
21,373,388
230,771
7,088,143
2,767,749
1,079,606
33,160,104
33,082,224
(
246,167 ) (
7,561,032 ) (
7,088,143 )
4,241,288
130,271,159
124,556,969
9
11
$ 5,763,705
$ 177,032,198
$ 163,129,553

96

Items
Sales revenue
Operating costs
Gross profit
Operating expenses
Selling expenses
General and administrative expenses
Research and development expenses
Total operating expenses
Operating profit
Non-operating income and expenses
Other income
Other gains and losses
Finance costs
Share of profit of subsidiaries, associates
and joint ventures accounted for under
equity method, net
Total non-operating income and
expenses
Profit before income tax
Income tax expense
Profit for the year		 US Dollars
New Taiwan Dollars
Notes
2018
2018
2017
6(15) and 7
$ 1,268,073
$ 38,948,885
$ 38,577,747
6(5)(19)(20)
and 7
(
859,941 )(
26,413,103 )(
34,059,965 )
408,132
12,535,782
4,517,782
6(19)(20)
(
22,151)(
680,375)(
692,610)
(
65,275 ) (
2,004,916 ) (
1,327,397 )
(
273,892) (
8,412,595) (
165,447)
(
361,318 )(
11,097,886 )(
2,185,454 )
46,814
1,437,896
2,332,328
6(16)
24,510
752,831
648,259
6(17)
1,766
54,240
(
578,638 )
6(18)
(
2,730)(
83,854)(
76,933)
6(6)
527,770
16,210,468
17,679,180
551,316
16,933,685
17,671,868
598,130
18,371,581
20,004,196
6(21)
(
5,811) (
178,488) (
1,623,644)
$ 592,319
$ 18,193,093
$ 18,380,552

(Continued)

97

Items
Other comprehensive income (loss)
Components of other comprehensive
income (loss) that will not be
reclassified to profit or loss
Gain (loss) on remeasurements of defined
benefit plans
Unrealised gain (loss) from investments
in equity instruments measured at fair
value through other comprehensive
income
Share of other comprehensive income of
subsidiaries, associates and joint
ventures accounted for under equity
method, components of other
comprehensive income that will not be
reclassified to profit or loss
Income tax related to components of
other comprehensive income that will
not be reclassified to profit or loss
Other comprehensive loss that will not
be reclassified to profit or loss
Components of other comprehensive
income (loss) that will be reclassified
to profit or loss
Financial statements translation
differences of foreign operations
Unrealised gain (loss) on valuation of
available-for-sale financial assets
Share of other comprehensive income of
associates and joint ventures accounted
for under equity method that will be
reclassified to profit or loss
Income tax relating to the components of
other comprehensive income that will
be reclassified to profit or loss
Other comprehensive income (loss)
that will be reclassified to profit or
loss
Other comprehensive income (loss) for
the year
Total comprehensive income for the year
Earnings per share
Basic earnings per share
Diluted earnings per share		 US Dollars
New Taiwan Dollars
Notes
2018
2018
2017
6(11)
( $ 2,643 ) ($ 81,177 ) ( $ 147,085 )
(
37,692 ) (
1,157,722 )
-
12,386
380,450
19,459
6(21)
(
1,994 )(
61,235 )
25,631
(
29,943 )(
919,684 )(
101,995 )
106,950
3,284,960
(
8,118,122 )
-
-
(
159,868 )
(
58,190 ) (
1,787,299 )
2,907,524
6(21)
1,392
42,768
522,517
50,152
1,540,429
(
4,847,949 )
$ 20,209
$ 620,745
($ 4,949,944 )
$ 612,528
$ 18,813,838
$ 13,430,608
6(22)
$ 0.23
$ 7.00
$ 7.08
$ 0.23
$ 6.96
$ 7.02

98

Items Notes Share capital -
common stock
$25,975,433
-
-
-
-
-
-
-
$25,975,433
$ 25,975,433
-
25,975,433
-
-
-
-
-
-
-

-
$ 25,975,433		 Capital
surplus
$48,442,451
-
-
-
-
-
-
3,867
$48,446,318
$ 48,446,318
-
48,446,318
-
-
-
-
-
-
(
49,251)
-
$ 48,397,067		 R etained Earnings Unappropriated
retained
earnings
$31,915,572

18,380,552
(
101,995)

18,278,557

(
1,879,780)
(
2,240,193)
(
12,987,717)
(
4,215)
$33,082,224

$ 33,082,224

1,118,916
34,201,140

18,193,093
(
15,946)
18,177,147
(
1,838,056)
(
4,320,394)
(
12,987,717)
(
62,680)
(
9,336)
$ 33,160,104
 Ot her EquityInterest Gain (loss) on
hedging
instruments
$ -
-
-

-
-
-
-

-

$ -
$ -
80,537
80,537
-
50,615
50,615
-
-
-

-

-
$ 131,152		 Total equity
$ 124,114,426
18,380,552
(
4,949,944)
13,430,608
-
-
(
12,987,717)
(
348)
$ 124,556,969
$ 124,556,969
-
124,556,969
18,193,093
620,745
18,813,838
-
-
(
12,987,717)
(
111,931)
-
$ 130,271,159
Legal
reserve
$19,493,608
-
-
-
1,879,780
-
-
-
$21,373,388
$ 21,373,388
-
21,373,388
-
-
-
1,838,056
-
-
-
-
$ 23,211,444		 Special
reserve
$ 527,556
-
-

-
-

2,240,193

-

-

$ 2,767,749
$ 2,767,749
-
2,767,749
-
-

-
-

4,320,394

-

-

-

$ 7,088,143		 Financial
statements
translation
differences of
foreign
operations
($ 1,016,396)
-
(
4,895,443)
(
4,895,443)
-
-
-
-
($ 5,911,839)
( $ 5,911,839)
-

(
5,911,839)

-
1,489,814

1,489,814

-
-
-
-
-
( $ 4,422,025)
 Unrealised
gain (loss) on
financial assets
at fair value
through other
comprehensive
income
Unrealised
gain (loss) on
available-for-
sale financial
assets
$ -
( $ 1,277,551)
-
-
-
20,710
-
20,710
-
-
-
-
-
-
-
-
$ -
( $ 1,256,841)
$ -
( $ 1,256,841 )
(
2,375,757)
1,256,841

(
2,375,757)
-
-
-
(
903,738)
-
(
903,738)
-
-
-
-
-
-
-
-
-
9,336
-
( $ 3,270,159)
$ -		 Hedging
instrument gain
(loss) on
effective hedge
of cash flow
hedges
$ 53,753
-
26,784
26,784
-
-
-
-
$ 80,537
$ 80,537
(
80,537)
-
-
-
-
-
-
-
-
-
$ -
2017 New Taiwan Dollars
Balance at January 1, 2017
Profit for the year
Other comprehensive income (loss) for
the year
Comprehensive income (loss) for the year
Distribution of 2016 earnings (Note 1)
Legal reserve
Special reserve
Cash dividends
Change in ownership interests in
subsidiaries
Balance at December 31, 2017
2018 New Taiwan Dollars
Balance at January 1, 2018
Effects of retrospective application and
retrospective restatement
Balance after retrospective restatement at
January 1, 2018
Profit for the year
Other comprehensive income (loss) for
the year
Comprehensive income (loss) for the year
Distribution of 2017 earnings (Note 2)
Legal reserve
Special reserve
Cash dividends
Change in ownership interests in
subsidiaries
Disposal of equity investment valued at
fair value through other
comprehensive income
Balance at December 31, 2018		 6(14)
6(14)
6(14)
3 and 12(4)
6(14)
6(14)
6(14)
6(3)

(Continued)

99

Items Notes Share capital -
common stock
$ 845,692
-
845,692
-
-
-
-
-
-
-

-
$ 845,692		 Capital
surplus
$ 1,577,285
-
1,577,285
-
-
-
-
-
-
(
1,603)
-
$ 1,575,682		 R etained Earnings Unappropriated
retained
earnings
$ 1,077,071

36,429
1,113,500

592,319
(
520)
591,799
(
59,842)
(
140,660)
(
422,846)
(
2,041)
(
304)
$ 1,079,606
 Ot her EquityInterest Gain (loss) on
hedging
instruments
$ -
2,622
2,622
-
1,648
1,648
-
-
-

-

-
$ 4,270		 Total equity
$ 4,055,250
-
4,055,250
592,319
20,209
612,528
-
-
(
422,846 )
(
3,644 )
-
$ 4,241,288
Legal
reserve
$ 695,862
-
695,862
-
-
-
59,842
-
-
-
-
$ 755,704		 Special
reserve
$ 90,111
-
90,111
-
-

-
-

140,660

-

-

-

$ 230,771		 Financial
statements
translation
differences of
foreign
operations
( $ 192,474 )
-

(
192,474)

-
48,504

48,504

-
-
-
-
-
( $ 143,970 )
 Unrealised
gain (loss) on
financial assets
at fair value
through other
comprehensive
income
Unrealised
gain (loss) on
available-for-
sale financial
assets
$ -
( $ 40,919)
(
77,348)
40,919

(
77,348)
-
-
-
(
29,423)
-
(
29,423)
-
-
-
-
-
-
-
-
-
304
-
( $ 106,467)
$ -		 Hedging
instrument gain
(loss) on
effective hedge
of cash flow
hedges
$ 2,622
(
2,622)
-
-
-
-
-
-
-
-
-
$ -
2018 US Dollars
Balance at January 1, 2018
Effects of retrospective application and
retrospective restatement
Balance after retrospective restatement at
January 1, 2018
Profit for the year
Other comprehensive income (loss) for
the year
Comprehensive income (loss) for the year
Distribution of 2017 earnings (Note 1)
Legal reserve
Special reserve
Cash dividends
Change in ownership interests in
subsidiaries
Disposal of equity investment valued at
fair value through other comprehensive
income
Balance at December 31, 2018		 3 and 12(4)
6(14)
6(14)
6(14)
6(3)

Note 1: Directors' remuneration amounting to $1,153 and employees' bonus amounting to $56,850 had been deducted from the Statement of Comprehensive Income in 2017.

100

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax for the year
Adjustments to reconcile net income to net cash generated
from operating activities
Income and expenses having no effect on cash flows
Depreciation
Amortisation
Reversal of provision for bad debts
Interest expense
Interest income
Dividend income
Share of profit of subsidiaries, associates accounted for
under the equity method
Net loss on financial assets or liabilities at fair value
through profit or loss
Gain on disposal of property, plant and equipment
Gain on disposal of investments
Impairment loss on financial assets
Changes in assets/liabilities relating to operating activities
Net changes in assets relating to operating activities
Financial assets mandatorily measured at fair value
through profit or loss
Contract assets - current
Notes receivable, net
Accounts receivable
Accounts receivable - related parties
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Other non-current assets
Net changes in operating liabilities
Contract liabilities - current
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Other current liabilities
Other non-current liabilities
Cash generated from operations
Interest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities		 US Dollars
New Taiwan Dollars
Notes
2018
2018
2017
$ 598,130
$ 18,371,581
$ 20,004,196
6(7)(19)
31,808
976,968
790,192
6(8)(19)
8,974
275,642
152,722
12(4)
-
-
(
25,390)
6(18)
2,730
83,854
76,933
6(16)
(
530) (
16,269) (
19,062)
6(16)
(
2,419) (
74,305) (
48,792)
6(6)
(
527,770) (
16,210,468) (
17,679,180)
6(17)
456
14,014
-
6(17)
(
544) (
16,705) (
605)
6(17)
-
- (
92,679)
6(17) and 12(4)
-
-
632,304
1,812
55,662
-
9,545
293,169
-
4,932
151,489 (
44,383)
(
25,395) (
780,022)
764,705
(
24,033) (
738,175)
115,184
(
3,658) (
112,342)
7,454
2,677
82,216 (
287,489)
(
11,014) (
338,308) (
248,236)
(
3,019) (
92,714)
295,238
1,475
45,302 (
3,968)
(
4,041) (
124,105) (
29,931)
-
(
2,979) (
91,513)
-
7,241
222,411
122,945
35,347
1,085,684 (
478,090)
2,374
72,932
181,877
(
1,895) (
58,211)
21,689
4,508
138,452
219,434
(
3,297)(
101,279) (
183,409)
101,415
3,114,960
4,243,659
534
16,408
19,033
131,761
4,047,045
15,001,684
(
2,608) (
80,093) (
76,111)
(
7,177)(
220,470) (
730,282)
223,925
6,877,850
18,457,983
(Continued)

101

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Proceeds from capital reduction of available-for-sale financial
assets
Acquisition of financial asset at fair value through other
comprehensive income
Disposal of financial assets at fair value through other
comprehensive income
Acquisition of investments accounted for under equity method
Proceeds from disposal of investments accounted for under
equity method
Proceeds from capital reduction of investments accounted for
under equity method
Decrease in cash surrender value of life insurance
Decrease (increase) in prepayments for business facilities
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
(Increase) decrease in refundable deposits
Cash inflow due to business combinations
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans
Proceeds from long-term debt
Cash dividends paid
Increase in guarantee deposits received
Net cash flows used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year		 US Dollars
New Taiwan Dollars
Notes
2018
2018
2017
$ -
$ -
( $ 56,501)
-
-
351,501
-
-
95,733
(
7,988) (
245,356)
-
24
733
-
(
14,573) (
447,595) (
4,689,117)
-
-
813
68,594
2,106,870
-
274
8,415
5,086
(
6,295) (
193,344)
82,691
6(7)
(
131,582) (
4,041,549) (
1,413,573)
7,455
228,995
43,778
6(8)
(
13,635) (
418,812) (
315,376)
661
20,298 (
3,394)
6(23)
199
6,105
-
(
96,866)(
2,975,240) (
5,898,359)
6(24)
(
1,465) (
45,000)
-
6(24)
222,106
6,822,000
2,552,435
6(14)
(
422,846) (
12,987,717) (
12,987,717)
-
-
2,635
(
202,205)(
6,210,717) (
10,432,647)
(
75,146) (
2,308,107)
2,126,977
82,957
2,548,015
421,038
$ 7,811
$ 239,908
$ 2,548,015

102

Appendix 3

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Delta Electronics, Inc.

Opinion

We have audited the accompanying consolidated balance sheets of Delta Electronics, Inc. and its subsidiaries (the “Group”) as at December 31, 2018 and 2017, 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 audit reports of the other independent accountants as described in the Other Matter - Scope of the Audit section of our report, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. Based on our audits and the audit reports of other independent accountants, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year 2018. 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.

103

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

Business combination

Description

In October 2017, the Group publicly acquired 49.22% of VIVOTEK INC. through a tender offer. The allocation of acquisition price was completed in the first quarter of 2018. The value of intangible assets, inclusive of goodwill and identifiable intangible assets – premium on customer relationship, acquired from the merger is significant. The merger was accounted for in accordance with IFRS 3, “Business Combination”. For details of purchase price allocation, refer to Note 6(28).

As the allocation of goodwill and the net fair value of identifiable assets and liabilities are based on management’s estimation and involves accounting estimations and assumptions, we consider this equity price allocation transaction a key audit matter.

How our audit addressed the matter

We obtained an understanding of the basis and process of purchase price allocation which was estimated by management. We reviewed the original data and the reasonableness of major assumptions, including growth rate, gross margin, discount rate and fair value calculation model as indicated in the purchase price allocation reports prepared by the appraisers appointed by the Group. Our procedures also included the following:

  • A. Assessing the setting of parameters of valuation models and calculation formulas;

  • B. Comparing expected growth rates and gross margin with historical data, economic and industry forecasts; and

  • C. Comparing the discount rate with the cost of capital assumptions of cash generating units and rate of returns of similar assets.

Impairment assessment of goodwill

Description

As of December 31, 2018, the recognised goodwill as a result of acquisitions of VIVOTEK INC., Cyntec Co., Ltd., Loy Tec electronics GmbH, Eltek AS, Delta Controls Inc. and Delta Greentech (China) Co., Ltd. amounted to NT$19,420,823 thousand, constituting 7.41% of consolidated total assets. Refer to Notes 5(2) and 6(11).

As the balance of goodwill acquired from merger is material, the valuation model adopted in the impairment assessment has an impact in determining the recoverable

104

amount which involves the significant accounting estimates and prediction of future cash flows. Thus, we consider the impairment assessment of goodwill a key audit matter.

How our audit addressed the matter

We obtained management’s impairment assessment of goodwill, obtained an understanding of the process in determining the expected future cash flows based on each cash generating unit, and performed the following audit procedures:

  • A. Assessing whether the valuation models adopted by the Group are reasonable for the industry, environment and the valued assets of the Group;

  • B. Confirming whether the expected future cash flows adopted in the valuation model are in agreement with the budget provided by the business units; and

  • C. Assessing the reasonableness of material assumptions, such as expected growth rates, operating margin and discount rates, by:

  • (a) Checking the setting of parameters of valuation models and calculation formulas;

  • (b) Comparing the expected growth rate and operating margin with historical data, economic and industrial forecast documents; and

  • (c) Comparing the discount rate with cost of capital assumptions of cash generating units and rate of returns of similar assets.

Other matter–Scope of the Audit

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. Total assets of the subsidiaries amounted to NT$9,917,275 thousand and NT$9,128,719 thousand, constituting 3.79% and 3.64% of consolidated total assets as of December 31, 2018 and 2017, respectively, and operating revenue was NT$10,568,370 thousand and NT$4,218,765 thousand, constituting 4.46% and 1.89% of consolidated total operating revenue for the years then ended, respectively. The balance of investment accounted for under equity method was NT$8,154,777 thousand and NT$7,418,365 thousand, constituting 3.11% and 2.96% of consolidated total assets as of December 31, 2018 and 2017, respectively, and the share of profit (loss) of associates and joint ventures accounted for using equity method and share of other comprehensive income of associates and joint ventures accounted for using equity method was NT$204,169 thousand and NT$923,720 thousand, constituting 1.06% and 6.79% of consolidated total comprehensive income for the years then ended, respectively. Those financial statements and information disclosed in Note 13 were audited by other independent accountants whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants.

Other matter–Parent company only financial reports

105

We have audited and expressed an unqualified opinion with other matter section on the parent company only financial statements of Delta Electronics, Inc. as at and for the years ended December 31, 2018 and 2017.

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

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

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

Those charged with governance, including 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 ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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

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

106

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 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; and

  • 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 year 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

107

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.

The consolidated financial statements of Delta Electronics, Inc. and subsidiaries as of and for the year ended December 31, 2018 expressed in US dollars are presented solely for the convenience of the reader and were translated from the financial statements expressed in New Taiwan dollars using the exchange rate of $30.715 to US$1.00 at December 31, 2018. This basis of translation is not in accordance with International Financial Reporting Standards, International Accounting Standards, and relevant interpretations and interpretative bulletins that are ratified by the FSC.

Lin, Yu-Kuan Chou, Chien-Hung

for and on behalf of PricewaterhouseCoopers, Taiwan

March 11, 2019

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

As the financial statements are the responsibility of the management, PricewaterhouseCoopers, Taiwan 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.

108

Assets
Current assets
Cash and cash equivalents
Financial assets at fair value through
profit or loss - current
Financial assets at fair value through other
comprehensive income - current
Available-for-sale financial assets - current
Derivative financial assets for hedging -
current
Contract assets - current
Notes receivable, net
Accounts receivable, net
Accounts receivable - related parties
Other receivables
Other receivables - related parties
Current income tax assets
Inventories
Prepayments
Other current assets
Total current assets
Non-current assets
Financial assets at fair value through
profit or loss - non-current
Financial assets at fair value through other
comprehensive income - non-current
Available-for-sale financial assets -
non-current
Contract asset - non-current
Financial assets carried at cost - non-current
Investments accounted for under equity
method
Property, plant and equipment
Investment property, net
Intangible assets
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets		 Notes
6(1)
6(2) and 12(4)
6(3)
12(4)
6(4) and 12(4)
6(20) and 12(5)
6(5)
6(5)
7
7
6(7)
8
6(2)
6(3)
12(4)
6(20) and 12(5)
12(4)
6(8)
6(9) and 8
6(10)
6(11)
6(26)
6(12) and 8		 US Dollars
December 31, 2018
$ 1,941,029
32,561
1,877
-
-
55,617
133,200
1,694,726
56,068
24,646
3,236
9,552
1,116,779
37,476
14,702
5,121,469
77,903
95,079
-
16,144
-
305,835
1,511,603
53,548
1,062,295
201,188
82,868
3,406,463
$ 8,527,932		 New Taiwan Dollars New Taiwan Dollars
December 31, 2018
$ 59,618,697
1,000,116
57,656
-
-
1,708,291
4,091,231
52,053,496
1,722,114
757,008
99,389
293,394
34,301,866
1,151,065
451,583
157,305,906
2,392,799
2,920,338
-
495,875
-
9,393,716
46,428,874
1,644,728
32,628,388
6,179,485
2,545,315
104,629,518
$ 261,935,424		 December 31, 2017
$ 57,366,617
114,748
-
1,141,700
7,061
-
4,010,445
49,383,213
1,319,469
714,556
70,181
322,046
30,825,402
1,731,406
697,034
147,703,878
-
-
4,720,058
-
1,147,672
8,434,519
44,338,628
1,776,411
33,833,648
5,836,595
2,747,150
102,834,681
$ 250,538,559

(Continued)

109

Liabilities and Equity
Current liabilities
Short-term borrowings
Financial liabilities at fair value through
profit or loss - current
Contract liabilities - current
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Current income tax liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred income tax liabilities
Other non-current liabilities
Total non-current assets
Total liabilities
Equity
Share capital
Share capital - common stock
Capital surplus
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings
Other equity interest
Other equity interest
Equity attributable to owners of the
parent
Non-controlling interest
Total equity
Significant contingent liabilities and
unrecorded contract commitments
Significant subsequent events
Total liabilities and equity		 Notes
6(13)
6(2)
6(20) and 12(5)
7
6(14) and 12(5)
6(14)
6(26)
6(16)
6(17)
6(18)

4(3) and 6(19)
9
11		 US Dollars
December 31, 2018
$ 203,779
278
86,060
259
1,270,284
48,326
806,986
88,299
120,798
2,625,069
821,513
376,670
164,198
1,362,381
3,987,450
845,692
-
1,575,682
-
755,704
230,771
1,079,606
(
246,167 )
4,241,288
299,194
4,540,482
$ 8,527,932		 New Taiwan Dollars
December 31, 2018
December 31, 2017
$ 6,259,062
$ 17,463,509
8,544
9,746
2,643,318
-
7,955
9,792
39,016,773
36,708,824
1,484,335
1,206,197
24,786,588
25,209,483
2,712,106
2,206,019
3,710,299
6,407,577
80,628,980
89,221,147
25,232,787
11,218,936
11,569,432
12,103,399
5,043,317
4,221,603
41,845,536
27,543,938
122,474,516
116,765,085
25,975,433
25,975,433
48,397,067
48,446,318
23,211,444
21,373,388
7,088,143
2,767,749
33,160,104
33,082,224
(
7,561,032 )(
7,088,143)
130,271,159
124,556,969
9,189,749
9,216,505
139,460,908
133,773,474
$ 261,935,424
$ 250,538,559
December 31, 2018
$ 6,259,062
8,544
2,643,318
7,955
39,016,773
1,484,335
24,786,588
2,712,106
3,710,299
80,628,980
25,232,787
11,569,432
5,043,317
41,845,536
122,474,516
25,975,433
48,397,067
23,211,444
7,088,143
33,160,104
(
7,561,032 )
130,271,159
9,189,749
139,460,908
$ 261,935,424

110

Items
Sales revenue
Operating costs
Gross profit
Operating expenses
Selling expenses
General and administrative expenses
Research and development expenses
Reversal of impairment loss
Total operating expenses
Operating profit
Non-operating income and expenses
Other income
Other gains and losses
Finance costs
Share of profit of associates and joint
ventures accounted for under equity
method
Total non-operating income and
expenses
Profit before income tax
Income tax expense
Profit for the year		 US Dollars
New Taiwan Dollars
Notes
2018
2018
2017
6(20) and 7
$ 7,716,679
$ 237,017,809
$ 223,577,514
6(7)(24)(25)
and 7
(
5,647,515)(
173,463,422)(
162,809,240)
2,069,164
63,554,387
60,768,274
6(24)(25)
(
538,947 ) (
16,553,772 ) (
15,097,073)
(
316,278 ) (
9,714,466 ) (
9,190,101)
(
626,987 ) (
19,257,915 ) (
16,707,312)
12(2)
4,509
138,489
-
(
1,477,703)(
45,387,664)(
40,994,486)
591,461
18,166,723
19,773,788
6(21)
142,393
4,373,591
3,884,502
6(22)
(
4,381 ) (
134,572 ) (
195,968)
6(23)
(
17,864 ) (
548,704 ) (
378,861)
6(8)
30,734
943,990
714,819
150,882
4,634,305
4,024,492
742,343
22,801,028
23,798,280
6(26)
(
135,193)(
4,152,444)(
5,041,328)
$ 607,150
$ 18,648,584
$ 18,756,952

(Continued)

111

Items
Other comprehensive income (loss)
Components of other comprehensive
income (loss) that will not be
reclassified to profit or loss
Gain (loss) on remeasurements of defined
benefit plans
Unrealised gain (loss) on valuation of
equity investment at fair value through
other comprehensive income
Share of other comprehensive income
(loss) of associates and joint ventures
accounted for under equity method that
will not be reclassified to profit or loss
Income tax related to components of
other comprehensive income that will
not be reclassified to profit or loss
Other comprehensive income (loss)
that will not be reclassified to profit
or loss
Components of other comprehensive
income (loss) that will be reclassified
to profit or loss
Financial statements translation
differences of foreign operations
Unrealised gain (loss) on valuation of
available-for-sale financial assets
Hedging instrument loss on effective hedge
of cash flow hedges
Gain (loss) on hedging instrument
Share of other comprehensive income
(loss) of associates and joint ventures
accounted for under equity method that
will be reclassified to profit or loss
Income tax relating to the components of
other comprehensive income that will
be reclassified to profit or loss
Other comprehensive income (loss)
that will be reclassified to profit or
loss
Other comprehensive income (loss) for
the year
Total comprehensive income for the year
Profit attributable to:
Owners of the parent
Non-controlling interest
Comprehensive income attributable to:
Owners of the parent
Non-controlling interest
Earnings per share
Basic earnings per share
Diluted earnings per share		 US Dollars
New Taiwan Dollars
Notes
2018
2018
2017
($ 1,123 ) ($ 34,508 ) ($ 147,085)
(
26,707 ) (
820,308 )
-
496
15,249
19,459
6(26)
(
1,994)(
61,234 )
25,631
(
29,328)(
900,801 )(
101,995)
71,124
2,184,566
(
5,716,900)
-
-
20,710
-
-
32,270
1,535
47,162
-
(
25,123 ) (
771,659 )
87,656
6(26)
1,392
42,768
522,517
48,928
1,502,837
(
5,053,747)
$ 19,600
$ 602,036
($ 5,155,742)
$ 626,750
$ 19,250,620
$ 13,601,210
$ 592,319
$ 18,193,093
$ 18,380,552
$ 14,831
$ 455,491
$ 376,400
$ 612,528
$ 18,813,838
$ 13,430,608
$ 14,222
$ 436,782
$ 170,602
6(27)
$ 0.23
$ 7.00
$ 7.08
$ 0.23
$ 6.96
$ 7.02

112

Equity attributable to owners of the parent

Items Notes
Share capital -
common stock
$25,975,433
-
-
-
-
-
-
-
-
$25,975,433
$ 25,975,433

-
25,975,433
-
-
-
-
-
-
-
-
-
$ 25,975,433		 Capital
surplus
$48,442,451
-
-
-
-
-
-
3,867
-
$48,446,318
$ 48,446,318
-
48,446,318
-
-
-
-
-
-
(
49,251)
-
-
$ 48,397,067		 Retained earnings Retained earnings
Unappropriated
retained
earnings
$31,915,572
18,380,552
(
101,995)
18,278,557
(
1,879,780)
(
2,240,193)
(
12,987,717)
(
4,215)
-
$33,082,224
$ 33,082,224
1,118,916
34,201,140
18,193,093
(
15,946)
18,177,147
(
1,838,056)
(
4,320,394)
(
12,987,717)
(
62,680)
-
(
9,336)
$ 33,160,104		 Other equityinterest Other equityinterest Other equityinterest Gain (loss) on
hedging
instruments
$ -
-
-
-
-
-
-
-
-
$ -
$ -
80,537
80,537
-
50,615
50,615
-
-
-
-
-
-
$ 131,152		 Total
$124,114,426
18,380,552
(
4,949,944)
13,430,608
-
-
(
12,987,717 )
(
348 )
-
$124,556,969
$ 124,556,969
-
124,556,969
18,193,093
620,745
18,813,838
-
-
(
12,987,717 )
(
111,931 )
-
-
$ 130,271,159		 Non-
controlling
interests
$ 4,894,440
376,400
(
205,798)
170,602
-
-
(
-)
-
4,151,463
$ 9,216,505
$ 9,216,505
-
9,216,505
455,491
(
18,709)
436,782
-
-
-
-
(
463,538)
-
$ 9,189,749		 Total equity
$129,008,866
18,756,952
(
5,155,742)
13,601,210
-
-
(
12,987,717)
(
348)
4,151,463
$133,773,474
$ 133,773,474
-
133,773,474
18,648,584
602,036
19,250,620
-
-
(
12,987,717)
(
111,931)
(
463,538)
-
$ 139,460,908
Legal
reserve
$19,493,608
-
-
-
1,879,780
-
-
-
-
$21,373,388
$ 21,373,388
-
21,373,388
-
-
-
1,838,056
-
-
-
-
-
$ 23,211,444		 Special
reserve
$ 527,556
-
-
-
-
2,240,193
-
-
-
$2,767,749
$ 2,767,749
-
2,767,749
-
-
-
-
4,320,394
-
-
-
-
$ 7,088,143		 Financial
statements
translation
differences of
foreign
operations
( $1,016,396)
-
(
4,895,443)
(
4,895,443)
-
-
-
-
-
( $5,911,839)
( $ 5,911,839)
-
(
5,911,839)
-
1,489,814
1,489,814
-
-
-
-
-
-
( $ 4,422,025)		 Unrealised
gain (loss) on
financial
assets at fair
value through
other
comprehensive
income
$ -
-
-
-
-
-
-
-
-
$ -
$ -
(
2,375,757)
(
2,375,757)
-
(
903,738)
(
903,738)
-
-
-
-
-
9,336
( $ 3,270,159)		 Unrealised
gain (loss) on
available-for-
sale financial
assets
( $1,277,551)
-
20,710
20,710
-
-
-
-
-
( $1,256,841)
( $ 1,256,841)
1,256,841
-
-
-
-
-
-
-
-
-
-
$ -		 Hedging
instrument
gain (loss) on
effective
hedge of cash
flow hedges
$ 53,753
-
26,784
26,784
-
-
-
-
-
$ 80,537
$ 80,537
(
80,537)
-
-
-
-
-
-
-
-
-
-
$ -
2017 New Taiwan Dollars
Balance at January 1, 2017
Profit for the year
Other comprehensive income (loss) for
the year
Comprehensive income (loss) for the year
Distribution of 2016 earnings
Legal reserve
Special reserve
Cash dividends
Change in ownership interests in
subsidiaries
Changes in non-controlling interests
Balance at December 31, 2017
2018 New Taiwan Dollars
Balance at January 1, 2018
Effects of retrospective application and
retrospective restatement
Balance after retrospective restatement at
January 1, 2018
Profit for the year
Other comprehensive income (loss) for
the year
Comprehensive income (loss) for the year
Distribution of 2017 earnings
Legal reserve
Special reserve
Cash dividends
Change in ownership interests in
subsidiaries
Changes in non-controlling interests
Disposal of equity investment valued at
fair value through other
comprehensive income
Balance at December 31, 2018		 6(18)
6(19)
3(1) and
12(4)
6(18)
6(19)
6(3)

(Continued)

113

Equity attributable to owners of the parent

Items Notes
Share capital -
common stock
$ 845,692

-
845,692
-
-
-
-
-
-
-
-
-
$ 845,692		 Capital
surplus
$ 1,577,285
-
1,577,285
-
-
-
-
-
-
(
1,603)
-
-
$ 1,575,682		 Retained earnings Retained earnings
Unappropriated
retained
earnings
$ 1,077,071
36,429
1,113,500
592,319
(
520 )
591,799
(
59,842 )
(
140,660 )
(
422,846 )
(
2,041)
-
(
304 )
$ 1,079,606		 Other equityinterest Other equityinterest Other equityinterest Gain (loss) on
hedging
instruments
$ -
2,622
2,622
-
1,648
1,648
-
-
-
-
-
-
$ 4,270		 Total
$ 4,055,250
-
4,055,250
592,319
20,209
612,528
-
-
(
422,846 )
(
3,644)
-
-
$ 4,241,288		 Non-
controlling
interests
$ 300,065
-
300,065
14,831
(
609)
14,222
-
-
-
-
(
15,093)
-
$ 299,194		 Total equity
$ 4,355,315
-
4,355,315
607,150
19,600
626,750
-
-
(
422,846 )
(
3,644)
(
15,093)
-
$ 4,540,482
Legal
reserve
$ 695,862
-
695,862
-
-
-
59,842
-
-
-
-
-
$ 755,704		 Special
reserve
$ 90,111
-
90,111
-
-
-
-
140,660
-
-
-
-
$ 230,771		 Financial
statements
translation
differences of
foreign
operations
( $ 192,474)
-
(
192,474)
-
48,504
48,504
-
-
-
-
-
-
( $ 143,970)		 Unrealised
gain (loss) on
financial
assets at fair
value through
other
comprehensive
income
$ -
(
77,348)
(
77,348)
-
(
29,423)
(
29,423)
-
-
-
-
-
304
( $ 106,467)		 Unrealised
gain (loss) on
available-for-
sale financial
assets
( $ 40,919 )
40,919
-
-
-
-
-
-
-
-
-
-
$ -		 Hedging
instrument
gain (loss) on
effective
hedge of cash
flow hedges
$ 2,622
(
2,622)
-
-
-
-
-
-
-
-
-
-
$ -
2018 US Dollars
Balance at January 1, 2018
Effects of retrospective application and
retrospective restatement
Balance after retrospective restatement at
January 1, 2018
Profit for the year
Other comprehensive income (loss) for
the year
Comprehensive income (loss) for the year
Distribution of 2017 earnings
Legal reserve
Special reserve
Cash dividends
Change in ownership interests in
subsidiaries
Changes in non-controlling interests
Disposal of equity investment valued at
fair value through other
comprehensive income
Balance at December 31, 2018		 3(1) and
12(4)
6(18)
6(19)
6(3)

114

CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated profit before tax for the year
Adjustments to reconcile net income to net cash generated
from operating activities
Income and expenses having no effect on cash flows
Depreciation
Amortisation
Expected credit impairment (gain) loss/ Provision for
bad debts
Net (gain) loss on financial assets or liabilities at fair
value through profit or loss
Interest expense
Interest income
Dividend income
Share-based payment
Share of profit of associates accounted for under the
equity method
Gain on disposal of property, plant and equipment
Gain on disposal of non-current assets held for sale
Gain on disposal of investments
Impairment loss on financial assets
Impairment loss on non-financial assets
Changes in assets/liabilities relating to operating activities
Net changes in assets relating to operating activities
Financial assets held for trading
Financial assets mandatorily measured at fair value
through profit or loss
Contract assets
Notes receivable
Accounts receivable
Accounts receivable - related parties
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Other non-current assets
Net changes in liabilities relating to operating activities
Contract liabilities
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Other current liabilities
Other non-current liabilities
Cash generated from operations
Interest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities		 Notes
6(9)(10)
6(11)
12(2)(4)

6(22)
6(23)
6(21)

6(21)

6(29)

6(8)

6(22)

6(22)
6(22)
6(22) and 12(4)











 US Dollars
New Taiwan Dollars
2018
2018
2017
$ 742,343
$ 22,801,028
$ 23,798,280
291,039
8,939,275
8,277,810
71,744
2,203,617
1,879,506
(
4,509) (
138,489 )
375,165
6,594
202,545
(
255,740 )
17,770
545,804
378,861
(
27,712) (
851,185 ) (
632,353 )
(
5,924) (
181,942 ) (
152,687 )
(
172) (
5,282 )
32,599
(
30,734) (
943,990 ) (
714,819 )
(
8,951) (
274,921 ) (
100,584 )
-
-
(
373,138 )
-
-
(
338,087 )
-
-
662,465
-
-
718
-
-
(
84,757 )
7,845
240,966
-
(
17,385) (
533,977 )
-
(
2,630) (
80,786 ) (
457,264 )
(
114,014) (
3,501,951 ) (
947,848 )
(
13,109) (
402,645 )
124,903
(
1,382) (
42,452 )
24,865
(
951) (
29,208 )
34,399
(
113,185) (
3,476,464 ) (
3,711,462 )
18,894
580,341
962,148
7,834
240,631
(
137,998 )
1,640
50,370
447,227
30,915
949,545
-
(
60) (
1,837 )
9,792
75,141
2,307,949
(
1,174,198 )
9,055
278,138
109,659
(
13,768) (
422,895 )
1,529,431
(
59,531) (
1,828,485 )
522,902
26,753
821,714
29,242
893,550
27,445,414
30,119,037
25,449
781,652
590,381
23,247
714,031
837,278
(
17,483) (
536,989 ) (
370,730 )
(
154,074)(
4,732,398)(
4,206,676 )
770,689
23,671,710
26,969,290

(Continued)

115

CASH FLOWS FROM INVESTING ACTIVITIES
Disposal of financial assets at fair value through profit or loss
Acquisition of financial asset at fair value through other
comprehensive income
Disposal of financial assets at fair value through other
comprehensive income
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Proceeds from capital reduction of available-for-sale financial
assets
Acquisition of investments accounted for under equity
method
Net cash flow from acquisition of subsidiaries (net of cash
acquired)
Disposal of subsidiaries (net of cash disposed)
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investment properties
Acquisition of intangible assets
Decrease in other financial assets
Decrease (increase) in other non-current assets
Acquisition of investment properties
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Cash dividends paid
Cash dividends paid to non-controlling interest
Acquisition of ownership interests in subsidiaries
Net cash flows used in financing activities
Effects due to changes in exchange rate
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year		 Notes


6(28)
6(30)
6(9)

6(11)



6(31)

6(31)
6(18)

6(19)

6(19)

 US Dollars
New Taiwan Dollars
2018
2018
2017
$ -
$ -
$ 81,132
(
14,299) (
439,188 ) (
89,874 )
24
733
-
-
-
(
534,229 )
-
-
766,254
-
-
95,733
(
6,868) (
210,950 )
-
-
-
(
3,058,262 )
-
-
633,010
(
369,229) (
11,340,871 ) (
12,878,670 )
22,039
676,924
274,022
1
38
-
(
16,391) (
503,457 ) (
358,579 )
157
4,820
12,021
4,931
151,465
(
269,712 )
(
503) (
15,448 )
-
(
380,138)(
11,675,934 )(
15,327,154)
(
364,787) (
11,204,447 )
4,543,591
460,322
14,138,799
2,578,236
-
-
(
49,919 )
(
422,846) (
12,987,717 ) (
12,987,717 )
(
12,020) (
369,183 ) (
315,485 )
(
3,072)(
94,355 )
-
(
342,403)(
10,516,903 )(
6,231,294)
25,174
773,207
(
3,616,969)
73,322
2,252,080
1,793,873
1,867,707
57,366,617
55,572,744
$ 1,941,029
$ 59,618,697
$ 57,366,617

116

Appendix 4

Audit Committee's Review Report

To: The 2019 Annual General Shareholders' Meeting of Delta Electronics, Inc.

We, the Audit Committee of the Company have reviewed the business report, parent company only financial statements, consolidated financial statements and proposal for earnings distribution of the Company for the year 2018 in accordance with applicable laws and regulations and found the same have been complied with. We hereby report to the shareholders as described above in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

The Audit Committee of Delta Electronics, Inc.

Convenor of the Audit Committee: Yung-Chin Chen

Date: March 11, 2019

117

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