ECLAT — AGM Information 2020

Jun 24, 2020

ECLAT TEXTILE CO., LTD.

Further Explanatory Note of 2020 Annual General Shareholders’ Meeting

Time: June 18, 2020 (Thursday) 9:00AM

Location: No. 39, Sanhao Road, Hsichou Village, Houlong Township, Miaoli County

3F Conference Room, Eclat’s Hsichou Plant

I Approval Matters

Proposal 1 Proposed by the board of directors

Proposal: To approve 2019 Business Report and Financial Statements. Explanation:

1. The 2019 financial statements (including consolidated financial statements) of the Company had been audited by KPMG’s CPA Hui-Chih Kou and CPA Hsin-I Kuo, and audit reports which were capable of appropriately presenting the financial status of the Company were issued.

2. The aforementioned financial statements and business report, profit distribution table had been reviewed by the Audit Committee with the written review report issued on record, and had been submitted to the board of directors’ meeting for resolution and approval.

3. Refer to Handbook Appendix XI and XII for the financial statements

Submitted for approval

Resolution:

Proposal 2

Proposed by the board of directors

Proposal: Recognition of the Proposal of 2019 Profit Distribution. Explanation:

1. The net profit after tax of the Company in 2019 was NTD 4, 299,249,089, deduct the effects of retrospective application of NTD 2,049,536 and other comprehensive income of NTD 4,260,000, the net profit after tax with extra items included in current year was NTD 4,292,939,553, in addition, plus the undistributed profit from the previous year of NTD 4,643,184,506 and deducted legal reserve of NTD 429,293,955 and special reserve NTD 82,179,481, the distributable profit of the current year was NTD 8,424,650,623. The Board proposed to declare cash dividend for NTD 11 per share and for a total amount of NTD 3,018,038,221 (calculated based on the current ordinary share), and the remaining amount of NTD 5,406,612,402 is to be retained for future distributions in subsequent years.

2. According to the shareholding of the shareholders recorded on the shareholders’ roster on the ex-dividend date, the amount of issuance per share is calculated to the integer dollar with the decimal values truncated; where the distribution is less than 1 dollar, it would be accounted to Other Income of the Company.

3. After this proposal is approved through the resolution of the shareholders’ meeting, the Chairman is authorized to set the ex-dividend date and other relevant issues.

4. Where the new shares are issued due to the Company repurchase of the treasury stocks or transfer of the treasury stocks to employees or employees’ exercise of the subscription right with the share subscription warrants or due to capital increased by cash, then for the dividend distribution ratio of shareholders, the Chairman is authorized to make adjustment proportionally accordingly to the number of shares outstanding on the ex-dividend date.

5. Refer to the Handbook for the Earnings Distribution Table

Regarding the profit distribution proposal, it is submitted for approval. Resolution:

II Discussion Matters

Proposal 1 Proposed by the board of directors

Proposal: Amendment to the Articles of Incorporation.

Explanation:

According to the amendment of the “Company Act”, laws of competent authorities and the need to add the company’s business scopes, the Company proposes to amend the “Articles of Incorporation” of the Company, and the Comparison Table for the Provisions Before and After Amendment is provided in the following. It is submitted for resolution.

Eclat Textile Co., Ltd. Comparison Table for the Provisions Before and After Amendment of

“Articles of Incorporation”

Article No.	Provision After Amendment	Current Provision	Reason of Amendment
Article 2	The scope of business of the Company shall be as follows: 1. C301010 Yarn Spinning Mills 2. C302010 Knit Fabric Mills 3. C305010 Printing, Dyeing, and Finishing Mills 4. C306010 Outerwear Knitting Mills 5. C399990 Other Textile Products Manufacturing 6. CF01011 Medical Materials and Equipment Manufacturing 7. F108031 Wholesale of Drugs, Medical Goods 8. F208031 Retail sale of Medical Equipments 9. ZZ99999All business items that are not prohibited or restricted by law, except those that are subject to special approval.	The scope of business of the Company shall be as follows: 1. C301010 Yarn Spinning Mills 2. C302010 Knit Fabric Mills 3. C305010 Printing, Dyeing, and Finishing Mills 4. C306010 Outerwear Knitting Mills 5. C399990 Other Textile Products Manufacturing ~~6.~~All business items that are not prohibited or restricted by law, except those that are subject to special approval.	Adding a franchise of Manufacturing, wholesale and retail on Medical Materials and Equipment to Business items.
	7.
	8.
	9.
Article 8	The shares of the Company	The shares of the Company	An editorial

Article No.		Provision After Amendment		Current Provision	Reason of Amendment
		shall be registered, which shall be signed or sealed bytheDirectorson behalf of the Company, and the shares shall be certified with the signatures by the authorized bank for theissuance thereof.		shall be registered, which shall be signed or sealed by~~at least three~~Directors, and the shares shall be certified by the competent authority or~~a registration~~ ~~institution approved by the~~ ~~competent authority for the~~ issuance thereof.	amendment in accordance with the amendment of Company Act.
Article 22		The Company shall have eleven to thirteen directors. The election of the directors of the Company shall adopt the candidate nomination system prescribed in Article 192-1 of the Company Act, and directors shall be elected by the shareholders’ meeting from the candidate roster announced by the Company. Required compliance matters shall be handled according to relevant laws. The total number of registered shares held by all of the directors shall not be less than the percentage specified by the competent authority according to the laws. In the roster of directors described in the preceding paragraph, the number of independent directors shall not be less than three and shall not be less than one fifth of the total number of Directors. Relevant matters of the professional qualification, shareholding, concurrent job position limitation, nomination and election methods of the Independent Director as well as other necessary requirements shall comply with relevant regulations specified by the		The Company shall have eleven to thirteen directors. The election of the directors of the Company shall adopt the candidate nomination system prescribed in Article 192-1 of the Company Act, and directors shall be elected by the shareholders’ meeting from the candidate roster announced by the Company. Required compliance matters shall be handled according to relevant laws. The total number of registered shares held by all of the directors shall not be less than the percentage specified by the competent authority according to the laws. In the roster of directors described in the preceding paragraph, the number of independent directors shall not be less than three and shall not be less than one fifth of the total number of Director~~s, with the adoption~~ ~~of the candidates nomination~~ ~~system shall be adopted, and~~ ~~elected by the shareholders’~~ ~~meeting from the~~ ~~independent director~~ ~~candidate roster.~~Relevant matters of the professional qualification, shareholding, concurrent job position	An editorial amendment in accordance with the amendment of Company Act.

Article No.		Provision After Amendment		Current Provision	Reason of Amendment
		competent authority. Independent and non-independent directors shall be elected at the same time, but in separately calculated numbers.		limitation, nomination and election methods of the Independent Director as well as other necessary requirements shall comply with relevant regulations specified by the competent authority. Independent and non-independent directors shall be elected at the same time, but in separately calculated numbers.
Article 23		The term of office of a director is three years, and he/she may be eligible for re-election. Unless otherwise specified in the Company Act, in case where no election of new Directors is effected after expiration of the term of office of existing directors, the term of office of out-going Directors shall be extended until the time new Directors have been elected and assumed their office. The Company establishes the “Audit Committee” according to Article 14-4 of the Securities and Exchange Act.The audit committee shall be composed of the entire number of independent directors. The number and term of office of audit committee members, powers of the audit committee, and the rules of procedure for meetings of the audit committee shall be handled according to the “Regulations Governing the Exercise of Powers by Audit Committees of Public		The term of office of a director is three years, and he/she may be eligible for re-election. Unless otherwise specified in the Company Act, in case where no election of new Directors is effected after expiration of the term of office of existing directors, the term of office of out-going Directors shall be extended until the time new Directors have been elected and assumed their office. The Company establishes the “Audit Committee” according to Article 14-4 of the Securities and Exchange Act~~,~~ ~~such no supervisors are~~ ~~established in the Company.~~ The number and term of office of audit committee members, powers of the audit committee, and the rules of procedure for meetings of the audit committee. etc. shall be handled according to the “Regulations Governing the Exercise of Powers by Audit Committees of Public	For the purpose of strengthening governance mechanisms, grant the Board to set up functional committees.

Article No.		Provision After Amendment		Current Provision	Current Provision	Reason of Amendment
		Companies”, and shall be further specified in the audit committee charter. The Company might establish other functional committees under the Board, the numbers, terms of office, and powers of committee members etc, shall be included in organizational charter to be approved by the board of directors.		Companies”, and shall be further specified in the audit committee charter.
Article 24		When the number of vacancies of directors reaches one third or when all of the independent directors are discharged, the Board of Directors shall convene an extraordinary shareholders’ meeting within sixty days to fill the vacancies, and the term of office thereof shall be limited to fulfill the unexposed term of office of the predecessor.		When the number of vacancies of directors reaches one thir~~d of the total number~~ ~~of directors~~or when all of the independent directors are discharged, the Board of Directors shall convene an extraordinary shareholders’ meeting within sixty days to fill the vacancies, and the term of office thereof shall be limited to fulfill the unexposed term of office of the predecessor.		An editorial amendment
Article 29		(Deleted)	~~Unless otherwise specified in~~ ~~the Company Act and other~~ ~~laws, in the event of the~~ ~~following matters, the~~ ~~resolution approval of the~~ ~~Board of Directors’ meeting~~ ~~shall be obtained before the~~ ~~execution thereof:~~ ~~1. Proposal to amend the~~ ~~Article of Incorporation of~~ ~~the Company.~~ ~~2. Establishment or revision of~~ ~~internal control system,~~ ~~establishment or revisions~~ ~~for the proposal of handling~~ ~~procedures for financial or~~ ~~operational actions of~~ ~~material significance,~~ ~~including acquisition or~~ ~~disposal of assets,~~ ~~derivatives trading,~~			Duplicated ruled in the Company’s “Rules of Procedure for Board of Directors Meetings”
					~~internal control system,~~ ~~establishment or revisions~~ ~~for the proposal of handling~~ ~~procedures for financial or~~ ~~operational actions of~~ ~~material significance,~~ ~~including acquisition or~~ ~~disposal of assets,~~ ~~derivatives trading,~~

Article No.	Provision After Amendment		Current Provision	Reason of Amendment
		~~3~~	~~extension of monetar loans~~
			~~y~~ ~~to others, or endorsements~~ ~~or guarantees for others.~~ ~~Approval of annual budget~~ ~~and review of annual~~ ~~settlement, including the~~ ~~review and supervision of~~ ~~annual business plan.~~ ~~Proposal for distribution of~~ ~~profit or covering loss.~~ ~~Offerin issuance or rivate~~
		~~.~~ ~~4~~
		~~.~~ ~~5~~
		~~.~~ ~~6~~	~~g, , p~~ ~~placement of any~~ ~~equity-type securities.~~ ~~Approval of reinvestment of~~ ~~the Company on other~~ ~~enterprises or transfer/sale~~ ~~of shares; provided that for~~ ~~an investment amount less~~ ~~than NTD 30,000,000~~ ~~(inclusive), the Chairman is~~ ~~authorized to provide~~ ~~approval, followed by~~ ~~execution and reporting to~~ ~~the Board of Directors.~~ ~~The hiring or discharge of~~ ~~an attesting Certified Public~~ ~~Accountant (CPA), or the~~ ~~compensation given thereto.~~ ~~Proposal of the transfer,~~ ~~sale lease lede mortae~~
		~~.~~ ~~7~~
		~~.~~ ~~8~~
		~~.~~ ~~9~~
			~~, , pg, gg~~ ~~or other methods of~~ ~~disposition of all or~~ ~~important parts of the~~ ~~Company's assets or~~ ~~business.~~ ~~Aroval for the alication~~
		~~.~~	~~pp pp~~ ~~of financing, guarantee,~~ ~~acceptance and other~~ ~~loaning of the Company~~ ~~from a financial institution~~ ~~or a third party at an~~ ~~amount above NTD~~ ~~100,000,000; provided that~~ ~~for an amount less than NTD~~
			~~100000000 but above NTD~~
			~~,,~~ ~~50,000,000, such case shall~~ ~~be reported in the latest~~ ~~session of Board of~~

Article No.		Provision After Amendment			Current Provision	Reason of Amendment
			~~Directors’ meeting for~~ ~~recordation after the~~ ~~execution of such case.~~ ~~10. A material asset or~~ ~~derivatives transaction.~~ ~~11. A material monetary loan,~~ ~~endorsement, or provision~~ ~~of a guarantee.~~ ~~12. Approval of major~~ ~~contractors or other~~ ~~material events.~~ ~~13. Approval of material~~ ~~transactions between the~~ ~~Company and interested~~ ~~parties (including affiliates).~~ ~~14. Appointment or discharge~~ ~~of a financial, accounting, or~~ ~~internal audit officer.~~ ~~15. Approval, revision and~~ ~~termination of acquisition,~~ ~~transfer, licensing or~~ ~~leasing/renting technology~~ ~~cooperation agreements for~~ ~~patent rights, trademark~~ ~~rights or copyrights.~~ ~~16. For the matters specified~~ ~~in Subparagraph 9 of this~~ ~~Section, where it is used for~~ ~~the one identical purpose,~~ ~~contract establishment,~~ ~~application or expenditure~~ ~~shall not be made~~ ~~separately.~~ ~~17 Matters in which a director~~
			~~.~~ ~~is an interested party.~~ ~~18. Other authorities granted~~ ~~by the laws and the~~ ~~shareholders’ meeting.~~
Article 36		The Board of Directors shall prepare the business report, financial statement and proposal on distribution of surplus earnings or loss of-setting according to the Company Actat the end of each fiscal year,and shall submit to the Audit Committee for auditing thirty		~~For the settlement of the~~ ~~Company,~~the Board of Directors shall prepare the business report, financial statement and proposal on distribution of surplus earnings or loss of-setting according to the Company Act, and shall submit to the Audit Committee for auditing thirty		Deleting Article 38 due to an integration of Article 36 and Article 38.

Article No.		Provision After Amendment		Current Provision	Reason of Amendment
		days prior to the convention of ordinary shareholders’ meeting, in order to issue a report for submission to the shareholders’ meeting for approval.		days prior to the convention of ordinary shareholders’ meeting, in order to issue a report for submission to the shareholders’ meeting for approval.
Article 37		Where the Company has a profit (the term “profit” refers to the income before deducting the distribution of employeecompensationfrom the income before tax)in current year, if there is surplus after covering the accumulated loss,no less than 0.1% shall be appropriated for the employee’s compensation for the distribution according to the resolution of the Board of Directors’ meeting, and be reported to the shareholders’ meeting. The distribution of employee’s compensation may be made in the form of shares or cash.		Where the Company has a profit~~after settlement~~(the term “profit” refers to the income before deducting the distribution of employee~~remuneration~~from the income before tax), no less than 0.1% shall be appropriated for the employee’s~~remuneration f~~or the distribution according to the resolution of the Board of Directors’ meeting, and be reported to the shareholders’ meeting.~~For the surplus~~ ~~earnings after the settlement~~ ~~with the appropriation of the~~ ~~employee’s remuneration,~~ ~~after tax is paid according to~~ ~~the law, it shall be used to~~ ~~cover the accumulated loss~~ ~~(including adjustment of~~ ~~undistributed surplus~~ ~~earnings amount) first,~~ ~~following which, 10% thereof~~ ~~shall be set aside as the legal~~ ~~reserve; however, when the~~ ~~legal reserve has reached the~~ ~~paid-in capital of the~~ ~~Company, it may be exempted~~ ~~from such appropriation. For~~ ~~the remaining amount, after~~ ~~special reserve is further set~~ ~~aside or reversed accordin to~~	An editorial amendment made to distinguish the content of employee’s compensation and earnings distribution, and move the employee-unrelated content to Article 37-1. After amendment, Article 37 address on rule of employee’s compensation; Article 37-1 describes the policies of earnings distribution and dividends.
				~~g~~ ~~the laws. It is combined with~~ ~~the undistributed surplus~~ ~~earnings (including~~ ~~adjustment of undistributed~~ ~~surplus earnings amount) at~~ ~~the beginning of the same~~ ~~period, for proposing to the~~ ~~shareholders’ meeting for~~

Article No.	Provision After Amendment		Current Provision	Reason of Amendment
			~~resolution on the distribution~~ ~~of shareholders’ dividends~~ ~~and bonuses.~~ ~~Where the Company has~~ ~~accumulated loss (including~~ ~~adjustment of undistributed~~ ~~surplus earnings amount)~~ ~~from the previous years, for a~~ ~~profit gained in the current~~ ~~year (the term “profit” refers~~ ~~to the income before~~ ~~deducting the distribution of~~ ~~employee remuneration from~~ ~~the income before tax) before~~
			~~,~~ ~~the appropriation of~~ ~~employee’s remuneration, it~~ ~~shall be used tocover the~~ ~~accumulated loss first,~~ ~~followed by executing the~~ ~~appropriation of the~~ ~~remaining balance according~~ ~~to the ercentae described in~~
			~~pg~~ ~~the preceding paragraph.~~The distribution of employee’s~~remuneration m~~ay be made in the form of shares or cash. ~~The present industrial~~ ~~development of the Company~~ ~~is at the growing stage, and~~ ~~there are plans for expansion~~ ~~of production lines and fund~~ ~~demands. Consequently,~~ ~~during the distribution of~~ ~~surlus earnins the Board of~~
			~~p g,~~ ~~Directors shall consider the~~ ~~investment plan, financial~~ ~~structure future fund demand~~
			~~,~~ ~~and profit status of the~~ ~~Company, and under the~~ ~~consideration that there are~~ ~~no other special conditions, it~~ ~~shall not be lower than 50%~~ ~~of the net income of the~~ ~~current year after the~~ ~~deduction of the~~ ~~compensation loss according~~ ~~to the preceding paragraph,~~

Article No.		Provision After Amendment		Current Provision	Reason of Amendment
				~~for the Board of Directors to~~ ~~submit proposal to the~~ ~~shareholders’ meeting for~~ ~~resolution before the~~ ~~execution thereof. However,~~ ~~the total amount of dividends~~ ~~shall not be less than 20% of~~ ~~amount of cash dividends~~ ~~distributed.~~
Article 37-1		Where the Company has a profit in current year , when allocating its surplus profits after having paid all taxes and			Additon. Refer to Article 37 for the explanations, and make some editorial amendments.
		dues, shall first set aside ten percent of said profits as legal
		reserve. Where such legal reserve amounts to the total paid-in capital, this provision may be exempted. Aside from the aforesaid legal reserve, the
		company may, under its Articles of Incorporation or by
		resolution of the meeting of shareholders, set aside another sum as special reserve, along with the undistributed earnings at the beginning, the Board proposed the earning distribution to the shareholder’s meetings to resolve. The present industrial development of the Company is at the growing stage, and there are plans for expansion of production lines and fund demands. Consequently, during the distribution of surplus earnings, the Board of
		Directors shall consider the investment plan, financial structure, future fund demand
		and profit status of the Company, and under the consideration that there are no other special conditions, it shall not be lower than 50%

Article No.		Provision After Amendment		Current Provision	Reason of Amendment
		of the net income of the current year after the deduction of the compensation loss according to the preceding paragraph, for the Board of Directors to submit proposal to the shareholders’meeting for resolution before the execution thereof. However, the total amount of dividends shall not be less than 20% of amount of cash dividends distributed.
Article 38		(Delete)		~~At the end of each fiscal year,~~ ~~the Company shall submit the~~ ~~business report, financial~~ ~~statement and proposal on~~ ~~distribution of surplus~~ ~~earnings or loss off-setting to~~ ~~the shareholders’ meeting for~~ ~~approval.~~	Article 38 was deleted, and the content was combined with Article 36.
Article 41		These Articles of Incorporation were established on November 10, 1977. The first amendment was made on August 21, 1981. (omitted) The twenty-sixth amendment was made on June 18, 2019. The twenty-seventh amendment is made on June 18, 2020.		These Articles of Incorporation were established on November 10, 1977. The first amendment was made on August 21, 1981. (omitted) The twenty-sixth amendment was made on June 18, 2019.	Add the latest amendment date.

Resolution:

Proposal 2 Proposed by the board of directors

Proposal: Amendment to the “Rules Governing the Procedures for Shareholders’ Meetings”. Explanation:

1. According to the amendment of the “Sample Template for XXX Co., Ltd. Rules of Procedure for Shareholders Meetings” by the competent authority, the Company

proposes to amend parts of the provisions of the “Rules Governing the Procedures for Shareholders’ Meetings”. The Comparison Table for the provisions before and after amendment is provided in the following. It is submitted for resolution.

1. Refer to the Handbook for financial statements Comparison Table for the Provisions Before and After Amendment.

Resolution:

Proposal 3

Proposed by the board of directors

Proposal: Amendments to the “Procedures for Election of Directors”..

Explanation:

1. According to the amendment of the “Sample Template for XXX Co., Ltd. Procedures for Election of Directors and Supervisors” of the competent authorities, the Company proposes to amend the “Procedures for Election of Directors”, and the Comparison Table for the Provisions Before and After Amendment is provided in the following. It is submitted for resolution.

2. Refer to the Handbook for financial statements Comparison Table for the Provisions Before and After Amendment.

Resolution: