Skip to main content

AI assistant

Sign in to chat with this filing

The assistant answers questions, extracts KPIs, and summarises risk factors directly from the filing text.

Sign up Log in

TFC AGM Information 2018

Jul 16, 2018

51902_rns_2018-07-16_b28a8238-2be4-44a9-8a42-bd21e9d9f25f.pdf

AGM Information

Open in viewer

Opens in your device viewer

Stock No.: 1722

Taiwan Fertilizer Co., Ltd.

==> picture [98 x 97] intentionally omitted <==

2018 General Shareholders’ Meeting Meeting Handbook

June 29, 2018

Venue: Armed Forces Officer's Club (No.142, Yanping S. Rd., Taipei City)

Table of Contents

Agenda ........................................................................................................................ 1 Report Items ................................................................................................................. 2 (1) 2017 Business Report ............................................................................................... 2 (2) Report on the Audit of Final Accounting Statements for 2017 by Supervisors ...... 5 (3) Report on the Remuneration for Directors, Supervisors, and Employees for 2017 ....................................................................................................................... 6 (4) The report on amendments to Rules for Procedure of Directors’ Meetings in part ......................................................................................................................... 7 (5) The report on amendments to Ethical Corporate Management Best-Practice Principles in part .................................................................................................. 19 (6) The report on amendments to the Code of Ethical Conduct for Directors and Top Managers in part ........................................................................................... 31 Acceptance Items ....................................................................................................... 39 (1) Adoption of the Business Report and the Financial Results for 2017 ................... 39 (2) Approval of the proposal for distribution of 2017 earnings .................................. 66 Discussion Items ........................................................................................................ 68 (1) The motion for allocation of cash dividend based on legal reserve ...................... 68 (2) The amendments to “Procedure for Acquisition or Disposition of Assets” in part ....................................................................................................................... 69 (3) The amendments to “Procedure for Loaning of Fund and Making of Endorsements/Guarantees” in part ...................................................................... 78 (4) The amendments to “Rules of Procedure for Shareholders’ Meetings” in part .... 85 Elections ...................................................................................................................... 90 Other Matter and Discussion.. ................................................................................. 94 Motions ....................................................................................................................... 95 Appendix .................................................................................................................... 96 1. Rules of Procedure for Shareholders’ Meeting .................................................... 97 2. Articles of Incorporation .................................................................................... 103 3. Regulations on Election of Board of Directors and Independent Board of Directors…………………………………………………………….………...113 4. Rules for Procedure of Directors’ Meetings ....................................................... 116 5. Ethical Corporate Management Best-Practice Principles .................................. 124

  1. Code of Ethical Conduct for Directors and Top Managers ................................ 132 7. Procedure for Acquisition or Disposal of Assets ................................................ 135 8. Procedure for Loaning of Fund and Making of Endorsements/Guarantees ...... 159 9. Shareholdings of Directors and Supervisors ...................................................... 172 10. Effect of the gratuitous allotment of shares on operation performance, earnings per share and return rate on investment for shareholders ................... 174

Taiwan Fertilizer Co., Ltd. 2018 General Shareholders’ Meeting Agenda

Date: June 29, 2018, 9:00AM (Friday)

Venue: Armed Forces Officer's Club (No.142, Yanping S. Rd., Taipei City)

Agenda:

  • I. Meeting called to order: Report the number of shares represented by the shareholders present

  • II. Speech given by the chairperson

  • III. Reported Items

  • IV. Acceptance Items

  • V. Discussion Items

  • VI. Elections

  • VII. Other Motions and Discussion

  • VIII. Motions

  • IX. Dismissal of the Meeting

  • 1 -

Report No. 1

Cause: 2017 Business Report

Business Report

I. Foreword :

Recalling 2017, the global economic recovered stably. The Company's management team worked hard to control costs and upgrade profit. Though consolidated operating revenue decreased by 4.75% from 2016, the consolidated gross profit and consolidated net operating profit creased by 29.66% and 106.14% from 2016. Meanwhile, benefitting from the increasing raw materials and supplies price in the world, the income from investment in Al-Jubail Fertilizer Company increased and thereby drove the growth in the Company's consolidated net nonoperating profit by 210.53%. As a result, the consolidated net profit was NT$ 1,619,126 thousand, increasing by 2324.17% from 2016.

II. Overview of Business :

(I) Production and marketing :

The Company's actual output of fertilizer products totaled 674,032 tons in 2017, increasing by 12.33% from 2016. The output of chemical engineering products totaled 158,540 tons, increasing by 1.53% from 2016. The actual sales of fertilizer products totaled 759,549 tons, decreasing by 6.75% from 2016, and that of chemical engineering products totaled 203,646 tons, increasing by 12.92% from 2016.

(II) Operating revenue and profit :

1. Separate financial statement

The operating revenue was NT$ 11,346,419 thousand in 2017, increasing by 4.60% from NT$ 11,893,266 thousand in 2016. The net operating profit, NT$ 1,275,875 thousand, increasing by 88.96% from 2016. The net nonoperating profit was NT$ 543,075 thousand, increasing by 180.65% from 2016. The current net profit was NT$ 1,619,126 thousand, increasing by 2324.17% from 2016.

2. Consolidated financial statement

The operating revenue was NT$ 11,658,986 thousand in 2017, increasing by 4.75% from NT$ 12,240,920 thousand in 2016. The net operating profit, NT$ 1,227,938 thousand, increasing by 106.14% from 2016. The net nonoperating profit was NT$ 606,115 thousand, increasing by 210.53% from 2016. The current net profit was NT$ 1,619,126 thousand, increasing by 2324.17% from 2016.

  • 2 -

(III) Financial structure :

1. Separate financial statement

The Company had solid financial structure. Until December 31, 2017, the Company has had the assets totaled NT$ 75,088,882 thousand, and liabilities totaled NT$ 25,996,430 thousand. The liability ratio was 34.62%. The equity amounted to NT$ 49,092,452 thousand, and EPS NT$ 50.09.

2. Consolidated financial statement

The Company had solid financial structure. Until December 31, 2017, the Company has had the assets totaled NT$ 75,156,891 thousand, and liabilities totaled NT$ 26,064,439 thousand. The liability ratio was 34.68%. The equity amounted to NT$ 49,092,452 thousand, and EPS NT$ 50.09.

(IV) Investment plan:

With respect to the core business, fertilizer and chemical engineering, Taichung Factory will continue the Nitric Acid distillation plan and new Nitric Acid cooling tower plan, and also invest in the project for planning of Xishi Factory at Taichung Port. Meanwhile, Miaoli Factory will continue its development of e-chemical business, and will continue to invest in the plan for construction of NMP purification and electronic L-Arginine production lines.

For real estate, to be in line with the changes in circumstances, the Land Development Layout of Nangang Business-Trade Park Tourist Hotels (C2) Project adjusted the development model. Then, it intends to proceed with changes of design, construction of slurry wall and awarding of construction contract. The Hsinchu Science Park D7-A Development Project has been completed at the end of 2017. The Company will continue the investment solicitation. The Nangang R13-1 residential development project, C4 land development project, Hsinchu D7 overall planning project, Hsinchu 2nd urban land re-adjustment hosted by private sector, and Keelung Dongming Road medical zone project are still in progress.

III. Prospective :

The global economic growth strength keeps expanding this year (2018). According to the latest forecast by IHS Markit in January this year, the global economic growth rate is 3.3% this year, better than 3.2% last year (2017). It is expected that the rate will increase by additional 3.2% in 2019. The IMF released the “World Economic Outlook Update” report in January 22 this year, indicating that the global economic activity would be accelerated and the global economic growth rate is expected to be 3.9% this year, increasing by 0.2% from the previous forecast (in October last year) and better than 3.7% of last year. Given the improvement on the vision, the economic growth rate of advanced economies is expected to be 2.3%, increasing by 0.3% from the previous forecast. The economic

  • 3 -

growth rate of emerging markets and developing economies is 4.9% as same as the previous forecast.

For the time being, the international economy is still facing multiple risk variables. Those to be concerned include the spill-over benefit of tax reform and the speed of interest escalation in the U.S.A., localization of supply chain and structural adjustment in the Mainland China, bargaining debate of Brexit, risk over Geopolitics, variance in the price of international crude oil and bulk commodity, fluctuation in the global financial market and stock & exchange markets, Protectionism, and challenge against extreme climate change, which are critical to the international economic outlook.

Following the international economic recovery, IMF forecasts that the world trading volume will increase by 4.2% and 4.0% respectively this year and next year, which may help boost Taiwan's export. Besides, the Government boosts the forward-looking infrastructure plan, and the investment in semi-conductor and highrank production process of related supply chains is expected to be continued, in order to help maintain the investment growth strength. According to the DirectorateGeneral of Budget, Accounting and Statistics, Executive Yuan, the economic growth rate shall be 2.86% in 2017 and expected to growth by 2.42% in 2018.

Looking forward to this year, to deal with the rapid changes in domestic and foreign industrial and economic environmental conditions, the Company will keep upholding the management philosophy focusing on solidity, reinforcement, innovation and business sustainability, transform and upgrade the Company's constitution, and continue to adopt the profit growth, optimization of competition and sustainable development as its strategic objectives to construct the development blueprint for the two major business units, “fertilizer chemical business” and “real estate and investment business”, and also hopes to achieve the objectives of sustainability and business development pursued by the Company by exploitation of diversified business development and strategy of diversification.

==> picture [44 x 43] intentionally omitted <==

Chairman of Board: Kang Hsinhong

==> picture [36 x 37] intentionally omitted <==

General Manager: Huang Yaohsing

==> picture [45 x 45] intentionally omitted <==

Chief Accountant: Huang Meiling

  • 4 -

Report No. 2

Cause:Report on the Audit of Final Accounting Statements for 2017 by Supervisors

Supervisor’s Report of Taiwan Fertilizer Co., Ltd.

The Company's 2017 business report, financial statements and statement of earnings distribution were submitted by the Company’s Board of Directors. The financial statements were already audited by Kuo-Yang Tseng, CPA and Heng-Sheng Lin of KPMG, who also issued the auditor report accordingly.

The supervisor, after completing the audit of said business report, financial statements and statement of earnings distribution, believes that they are free of material misstatement, and thus produces this report according to Article 219 of the Company Act.

Please review accordingly.

To:

2018 General Shareholders’ Meeting of the Company

Supervisor: Chunghwa Post Co., Ltd.

Representative: Lin Chihlung

==> picture [112 x 44] intentionally omitted <==

Chen Chailai

==> picture [94 x 47] intentionally omitted <==

Tsai Linglan

==> picture [101 x 48] intentionally omitted <==

March 29, 2018

  • 5 -

Report No. 3

Cause: Report on the Remuneration for Directors, Supervisors, and Employees for 2017 Submitted by the Board of Directors

Remark:

  • I. This matter is handled in accordance with the subparagraph 1 of Article 25 of the Company's Articles of Incorporation.

  • II. The profit sought by the Company in 2017 based on the financial statements as audited by KMPG (the income before earnings before tax less remuneration to employees, directors and supervisors) totaled NT$ 1,894,739,436.

  • III. The remuneration payable to directors, supervisors and employees pursuant to the Company's Articles of Incorporation is stated as following:

  • (I) Remuneration to directors/supervisors, NT$ 30,315,831, in cash: Meet the requirement about 1.6% of the profit, NT$ 1,894,739,436, in 2017.

  • (II) Remuneration to employees, NT$ 45,473,746, in cash: Meet the requirement about 2.4% of the profit, NT$ 1,894,739,436, in 2017.

  • 6 -

Report No. 4

Cause: The report on amendments to Rules for Procedure of Directors’ Meetings in part Submitted by the Board of Directors

Remark:

  • I. According to TWSE’s Letter Tai-Zhen-Shang-Yi-Zi No. 1061803515 dated August 1, 2017 and FSC’s Letter Jin-Guan-Zhen-Fa-Zi No. 10200531121 dated December 31, 2013, the Company shall establish an audit committee in replace of the supervisor upon expiration of the term of office held by the current (33rd-term) directors and supervisor (namely 2018).

  • II. The amendments focused on express definition of independent directors’ functions, enhancement of independent directors’ participation in the operation of the board of directors and establishment of the audit committee in replace of the supervisor upon expiration of the term of office held by 33rd-term directors and supervisor. Accordingly, the provisions about supervisor are deleted. A total of 17 provisions are amended and 1 provision is deleted. Meanwhile, the amendments add the provision requiring that deletion of the provisions about supervisor shall be effective as of the date when the audit committee is established.

  • The comparative list for amendments to the “Parliamentary Rules for Directors’ Meetings of Taiwan Fertilizer Co., Ltd.” in part is enclosed herewith (see Attachment).

  • 7 -

Comparative List for Amendments to Parliamentary Rules for Directors’ Meetings of Taiwan Fertilizer Co., Ltd. In part

Amended Provision Current Provision Remark Article 4. Any general Article 4. Any general 1. The Company directors’ meeting shall be directors’ meeting shall be establishes the audit notified to each director notified to each director and committee in within 7 days prior to the supervisor within 7 days accordance with Article meeting. The time, venue prior to the meeting. The 14-4 of the Securities and reasons for calling the time, venue and reasons for and Exchange Act. meeting shall be identified calling the meeting shall be Therefore, the in the meeting notice to be identified in the meeting provisions about sent together with the notice to be sent together supervisor are deleted. information related to the with the information related 2. Paragraph 2 adjusted meeting, provided that if any to the meeting, provided that upon change of the extemporaneous or urgent if any extemporary or urgent article No. motion shall be included motion shall be included into into the agenda, the the agenda, the information information about the about the motion may be motion may be distributed distributed instantly. instantly. A special meeting may be A special meeting may be called from time to time. All called from time to time. All matters set out in Article 14 matters set out in Article 13 herein shall be specified in herein shall be specified in the notice of the reasons for the notice of the reasons for calling a board of directors calling a board of directors meeting. None of them may meeting. None of them may be raised by an extemporary be raised by an extemporary motion except in the case of motion except in the case of an emergency or with an emergency or with legitimate reason. legitimate reason. The notice set forth in the The notice set forth in the preceding two paragraphs preceding two paragraphs may be effected by means of may be effected by means of electronic transmission, after electronic transmission, after obtaining prior consent from obtaining prior consent from the recipients thereof. the recipients thereof. Article 6. When a directors’ Article 6. When a directors’ The Company establishes meeting is held, an meeting is held, an the audit committee in attendance book shall be attendance book shall be accordance with Article 14-4 made ready for signature by made ready for signature by of the Securities and directors attending the directors, supervisors Exchange Act. Therefore,

  • 8 -
Amended Provision Current Provision Remark
meeting and other
attendants. All directors
shall attend the meeting in
person. If attendance in
person is not possible, they
may appoint another director
to exercise the right on
behalf of them as their
proxy. A director appointing
another director to attend the
meeting on his behalf shall
issue a written proxy stating
the scope of authorization
with respect to the reasons
for meeting.
The proxy shall identify the
proxy’s name and signed or
sealed by the appointer. The
proxy may act on behalf of
one persononly.


attending the meeting and
other attendants. All
directors shall attend the
meeting in person. If
attendance in person is not
possible, they may appoint
another director to exercise
the right on behalf of them
as their proxy. A director
appointing another director
to attend the meeting on his
behalf shall issue a written
proxy stating the scope of
authorization with respect to
the reasons for meeting.
The proxy shall identify the
proxy’s name and signed or
sealed by the appointer. The
proxy may act on behalf of
one persononly.		 the provisions about
supervisor are deleted.
Article 8. (Deleted) Article 8. Supervisors may
attend the directors’ meeting,
state their opinion and raise
questions, provided that they
shall not participate in
voting.
1. The Company
establishes the audit
committee in
accordance with Article
14-4 of the Securities
and Exchange Act.
Therefore, the
provisions about
supervisor are deleted.
2. Deleted.
Article8. When holding a
directors’ meeting, the
Company's related
department managers shall
attend the meeting as
nonvoting participants and
report the Company's
overview of business and
respond to directors’
questions. The Company
may also invite certificated
public accounts,attorneys-		 Article 9. When holding a
directors’ meeting, the
Company's related
department managers shall
attend the meeting as
nonvoting participants and
report the Company's
overview of business and
respond to directors’or
supervisors’ questions. The
Company may also invite
certificatedpublic accounts,		 1. The Company
establishes the audit
committee in
accordance with Article
14-4 of the Securities
and Exchange Act.
Therefore, the
provisions about
supervisor are deleted.
2. Adjusted as Article 8, as
the Article No. is
changed.
  • 9 -
Amended Provision Current Provision Remark
at-law, or other
professionals to attend the
meeting as nonvoting
participants to provide
expert's opinion and other
related information for the
Board of Directors’
reference to help the
meeting procedure.		 attorneys-at-law, or other
professionals to attend the
meeting as nonvoting
participants to provide
expert's opinion and other
related information for the
Board of Directors’ reference
to help the meeting
procedure.
Article9. The Company
shall record on audio or
video tape the entire
proceedings of a directors’
meeting, and preserve the
recordings for at least five
years....(omitted).		 Article10. The Company
shall record on audio or
video tape the entire
proceedings of a directors’
meeting, and preserve the
recordings for at least five
years.... (omitted).		 Adjusted as Article 9, as the
Article No. is changed.
Article10. The Agenda for
the Company's regular
directors’ meetings shall
include at least the
following:.... (omitted).		 Article11.The Agenda for
the Company's regular
directors’ meetings shall
include at least the
following:.... (omitted).		 Adjusted as Article 10, as
the Article No. is changed.
Article11.When the time of
a meeting has arrived and a
majority of the all directors
are present, the meeting
chairperson.... (omitted).
Article12.When the time of
a meeting has arrived and a
majority of the all directors
are present, the meeting
chairperson.... (omitted).		 Adjusted as Article 11, as
the Article No. is changed.
Article12. A directors’
meeting shall be conducted
in accordance with the
scheduled agenda, provided
that with the approval of a
majority of directors present
at themeeting, ....(omitted).		 Article13. A directors’
meeting shall be conducted
in accordance with the
scheduled agenda, provided
that with the approval of a
majority of directors present
at themeeting, ....(omitted).		 Adjusted as Article 12, as
the Article No. is changed.
Article13. The following
motions shall be submitted
for discussion by the
Company's Board of
Directors:
1. The Company's
business report;
2. The Company's annual
financial report.		 Article 14. The following
motions shall be submitted
for discussion by the
Company's Board of
Directors:
1. The Company's business
report;
2. Annual andsemi-annual
financial reports; with
1. According to IFRS, the
Company cancels
preparation of the semi-
annual financial reports
and, therefore, deletes
the subparagraph 2 of
Paragraph 1.
2. Considering the
assessment on the
  • 10 -

Amended Provision

Current Provision

Remark

  • the exception of semi annual financial reports which, under relevant laws and regulations, need not be audited and attested by a certified public accountant (CPA).

  • Adoption or amendment of an internal control system pursuant to Article 14-1 of the Securities and Exchange Act (hereinafter referred to as the “Act”), and an assessment on the effectiveness of the internal control system;

  • Adoption or amendment of an internal control system pursuant to Article 14-1 of the Securities and Exchange Act (hereinafter referred to as the “Act”);

  • Adoption or system pursuant to amendment, pursuant to Article 14-1 of the Article 36-1 of the Act, Securities and Exchange of operating procedures Act (hereinafter referred for financial or to as the “Act”); operational actions of 4. Adoption or amendment, material significance, pursuant to Article 36-1 such as acquisition or of the Act, of operating disposal of assets, procedures for financial derivatives trading, or operational actions of loaning of fund to material significance, others, and making of such as acquisition or endorsements or disposal of assets, guarantees for others; derivatives trading, 5. Offering, issuance, or loaning of fund to private placement of others, and making of any equity-type endorsements or securities; guarantees for others; 6. Appointment or 5. Offering, issuance, or discharge of a financial, private placement of any accounting, or internal equity-type securities; audit officer; 6. Appointment or 7. A donation to a related discharge of a financial, party or a major accounting, or internal donation to a nonaudit officer; related party, provided 7. A donation to a related that a public-interest party or a major donation of disaster donation to a non-related relief for a major natural party, provided that a disaster may be public-interest donation submitted to next of disaster relief for a directors’ meeting for major natural disaster jor natural disaster or natural disaster

  • Adoption or amendment, pursuant to Article 36-1 of the Act, of operating procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, loaning of fund to others, and making of endorsements or guarantees for others;

  • Offering, issuance, or private placement of any equity-type securities;

  • A donation to a related party or a major donation to a non-related party, provided that a public-interest donation of disaster relief for a major natural disaster jor natural disaster or natural disaster

effectiveness of the internal control system related to the audit committee’s functions referred to in Article 145 of the Securities and Exchange Act is also a significant matter, it shall be submitted to the Board of Directors for discussion and, therefore, added into the subparagraph 3 of Paragraph 1.

  1. Paragraph 2 and Paragraph 3 adjusted literally.

  2. In order to expressly define the independent directors’ functions and enhance the independent directors’ participation in the operation of the Board of Directors, the Company amends Paragraph 5 to state that at least one independent director shall attend each meeting in person; in the case of a meeting concerning any matter required to be resolved by the board of directors under paragraph 1, each independent director shall attend in person; if an independent director is unable to attend in person, he or she shall appoint another independent director to

  3. 11 -

Amended Provision

Current Provision

Remark

attend as his or her proxy.

may be submitted to next directors’ meeting for retroactive recognition;

retroactive recognition;

  1. Any matter required by next directors’ meeting Article 14-3 of the Act for retroactive or any other law, recognition; regulation, or bylaw to 8. Any matter required by be approved by Article 14-3 of the Act resolution at a or any other law, shareholders' meeting or regulation, or bylaw to directors’ meeting, or be approved by any such significant resolution at a matter as may be shareholders' meeting or prescribed by the directors’ meeting, or competent authority. any such significant The term “related party” in matter as may be subparagraph 7 of the prescribed by the preceding paragraph means competent authority. a related party as defined in The term “related party” in the Regulations Governing subparagraph 7 of the the Preparation of Financial preceding paragraph means a Reports by Securities related party as defined in Issuers. The term “major the Regulations Governing donation to a non-related the Preparation of Financial party” means any individual Reports by Securities donation, or cumulative Issuers. The term “major donations within a 1-year donation to a non-related period to a single recipient, party” means any individual at an amount of NT$ 100 donation, or cumulative million or more, or at an donations within a 1-year amount equal to or greater period to a single recipient, than 1 percent of net at an amount of NT$ 100 operating revenue or 5 million or more, or at an percent of paid-in capital as amount equal to or greater stated in the CPA-attested than 1 percent of net financial report for the most operating revenue or 5 recent year. percent of paid-in capital as The term “within a 1-year stated in the CPA-attested period” in the preceding financial report for the most paragraph means a period of recent year. 1 year calculated The term “within a 1-year retroactively from the date period” in the preceding on which the current paragraph means a period of directors’ meeting is 1 year calculated

  2. The requirements in Paragraph 5 refer to some “prohibitive provisions”, instead of “provisions on legal effects”. The violation of Paragraph 5 shall be held involving the administrative sanction referred to in the subparagraph 7, Paragraph 1 of Article 178 of the Securities and Exchange Act. Further, if the attendees present at a directors’ meeting meet the statutory quota, the validity of the current directors’ meeting shall remain unaffected, even if the independent directors are absent at the meeting.

  3. Adjusted as Article 13, as the Article No. is changed.

  4. 12 -

Amended Provision Current Provision Remark
convened. Amounts already
submitted to and passed by a
resolution of the Board are
exempted from inclusion in
the calculation.
For foreign companies
whose stock has no par
value or a par value other
than NT$ 10, the “5 percent
of paid-in capital” in
paragraph 2 above shall be
calculated instead as 2.5
percent of shareholders’
equity.
If the Company has
appointed independent
directors,at least one
independent director shall
attend each meeting in
person. In the case of a
meeting concerning any
matter required to be
submitted for a resolution by
the board of directors under
paragraph 1, each
independent director shall
attend in person. Ifan
independent director is
unable to attend in person,
he or she shall appoint
another independent director



retroactively from the date
on which the current
directors’ meeting is
convened. Amounts already
submitted to and passed by a
resolution of the Board are
exempted from inclusion in
the calculation.
For foreign companies
whose stock has no par value
or a par value other than
NT$ 10, the “5 percent of
paid-in capital” in paragraph
2 above shall be calculated
instead as 2.5 percent of
shareholders’ equity.
If the Company has
appointed independent
directors, in the case of a
meeting concerning any
matter required to be
submitted for a resolution by
the board of directors
pursuant toArticle 14-3 of
the Act, each independent
director shall attend in
person, or appoint another
independent director to
attend as his or her proxy. If
an independent director
expresses any objection or
reservation about a matter, it
shall be recorded in the
directors’ meeting minutes.
An independent director
intending to express an
objection or reservation but
unable to attend the meeting
in person shall, unless there
is some legitimate reason to
do otherwise, issue a written
opinion in advance,which

to attend as his or her proxy.
If an independent director
expresses any objection or
reservation about a matter, it
shall be recorded in the
directors’ meeting minutes.
An independent director
intending to express an
objection or reservation but
unable to attend the meeting
inperson shall,unless there
  • 13 -
Amended Provision Current Provision Remark
is some legitimate reason to
do otherwise, issue a written
opinion in advance, which
shall be recorded in the
meetingminutes.		 shall be recorded in the
meeting minutes.
Article14. Any director’s
say shall be subject to the
chairperson’s prior approval
and free from personal
insult... (omitted).		 Article15. Any director’sor
supervisor’s say shall be
subject to the chairperson’s
prior approval and free from
personal insult... (omitted).		 1. The Company
establishes the audit
committee in
accordance with Article
14-4 of the Securities
and Exchange Act.
Therefore, the
provisions about
supervisor are deleted.
2. Adjusted as Article 14,
as the Article No. is
changed
Article15.When the
chairperson is of the opinion
that a matter has been
sufficiently discussed to a
degree of putting to a vote,
the chairperson may
announce the discussion
closed and bring the matter
to vote... (omitted).
Article16.When the
chairperson is of the opinion
that a matter has been
sufficiently discussed to a
degree of putting to a vote,
the chairperson may
announce the discussion
closed and bring the matter
to vote... (omitted).		 Adjusted as Article 15, as
the Article No. is changed.
Article16.Except as
otherwise stated in the
Company Law, the
Company’s Articles of
Incorporation or related
laws, a resolution on a
matter at a directors’
meeting........(omitted).		 Article17.Except as
otherwise stated in the
Company Law, the
Company’s Articles of
Incorporation or related
laws, a resolution on a
matter at a directors’
meeting........(omitted).		 Adjusted as Article 16, as
the Article No. is changed.
Article17. If any director is
an interested party with
respect to any motion
proposed at the directors’
meeting and thereby is
likely to prejudice the
interests of the
Company.....(omitted).		 Article18. If any director is
an interested party with
respect to any motion
proposed at the directors’
meeting and thereby is likely
to prejudice the interests of
the Company.....(omitted).
Adjusted as Article 17, as
the Article No. is changed.
  • 14 -

Amended Provision

Current Provision Remark

  • Article 18. Meeting minutes Article 19. Meeting minutes 1. The Company shall be prepared of the shall be prepared of the establishes the audit discussions at directors’ discussions at directors’ committee in meetings. The meeting meetings. The meeting accordance with Article minutes shall record the minutes shall record the 14-4 of the Securities following: following: and Exchange Act. 1. Session (or year), time, 1. Session (or year), time, Therefore, the and place of meeting. and place of meeting. provisions about

    1. Chairperson's name. 2. Chairperson's name. supervisor are deleted. 3. Attendance of directors 3. Attendance of directors 2. Adjusted as Article 18, at the meeting, at the meeting, as the Article No. is specifying the names specifying the names changed. and number of members and number of members 3. Subparagraph 7 of present, excused, and present, excused, and Paragraph 1 adjusted absent. absent. upon change of the
    1. Names and job titles of 4. Names and job titles of article No. those attending the those attending the meeting as nonvoting meeting as nonvoting participants. participants.
    1. Name of minutes taker. 5. Name of minutes taker. 6. Reported matters. 6. Reported matters. 7. Discussion: The method 7. Discussion: The method of resolution and the of resolution and the result for each motion; a result for each motion; a summary of the summary of the comments made by comments made by directors, experts, or directors, supervisors, other persons; the name experts, or other of any director that is an persons; the name of any interested party as director that is an referred to in the interested party as preceding article, an referred to in the explanation of the preceding article, an important aspects of the explanation of the relationship of interest, important aspects of the the reasons why the relationship of interest, director is required or the reasons why the not required to enter director is required or recusal, and the status of not required to enter their recusal; opinions recusal, and the status of expressing objections or their recusal; opinions reservations at the expressing objections or

  • 15 -

Amended Provision

Current Provision

reservations at the meeting that are included in records or stated in writing; and any opinion issued in writing by an independent director under Paragraph 5 of Article 14 herein.

meeting that are included in records or stated in writing; and any opinion issued in writing by an independent director under Paragraph 5 of Article 13 herein.

  1. Extemporary motion: Article 14 herein. The name of the mover; 8. Extemporary motion: the method of resolution The name of the mover; and the result for each the method of resolution motion; a summary of and the result for each the comments made by motion; a summary of directors, experts, or the comments made by other persons; the name directors, supervisors, of any director that is an experts, or other interested party as persons; the name of any referred to in paragraph director that is an article, an explanation interested party as of the important aspects referred to in paragraph of the relationship of article, an explanation of interest, the reasons the important aspects of why the director is the relationship of required or not required interest, the reasons why to enter recusal, and the the director is required status of their recusal; or not required to enter opinions expressing recusal, and the status of objections or their recusal; opinions reservations at the expressing objections or meeting that are reservations at the included in records or meeting that are stated in writing. included in records or 9. Other matters required stated in writing.

  2. Other matters required stated in writing. to be recorded. 9. Other matters required

If any independent director to be recorded. expresses an objection or If any independent director reservation that has been expresses an objection or included in records or stated reservation that has been in writing on a resolution included in records or stated passed at a directors’ in writing on a resolution meeting, the same shall be passed at a directors’

Remark

  • 16 -
Amended Provision Current Provision Remark
stated in the meeting
minutes, and be published
on an information reporting
website designated by the
competent authority within
two days of the meeting.
The meeting minutes shall
bear the signature or seal of
both the chairperson and the
minutes taker. A copy of the
minutes shall be distributed
to each director within 20
days after the meeting and
maintained as important
company records during the
existence of the Company.
The production and
distribution of the meeting
minutes referred to in
Paragraph 1 may be done in
electronic form.		 meeting, the same shall be
stated in the meeting
minutes, and be published on
an information reporting
website designated by the
competent authority within
two days of the meeting.
The meeting minutes shall
bear the signature or seal of
both the chairperson and the
minutes taker. A copy of the
minutes shall be distributed
to each director and
supervisorwithin 20 days
after the meeting and
maintained as important
company records during the
existence of the Company.
The production and
distribution of the meeting
minutes referred to in
Paragraph 1 may be done in
electronicform.
Article19.Except the
matters to be submitted to a
directors’ meeting for
discussion referred to in
Paragraph 1, Article13
herein, any motion proposed
during the recess...
(omitted).
Article20.Except the
matters to be submitted to a
directors’ meeting for
discussion referred to in
Paragraph 1, Article14
herein, any motion proposed
during the recess...
(omitted).		 1. Adjusted as Article 19,
as the Article No. is
changed.
2. Paragraph 1 adjusted
upon change of the
article No.
Article20. If any resolution
made at a directors’ meeting
is required by
laws...(omitted).		 Article21. If any resolution
made at a directors’ meeting
is required by
laws...(omitted).		 Adjusted as Article 20, as
the Article No. is changed.
Article21. Any matters not
covered herein shall be
handled in accordance with
the Company Law, the
Company's Articles of
Incorporation and other
related laws.		 Article22. Any matters not
covered herein shall be
handled in accordance with
the Company Law, the
Company's Articles of
Incorporation and other
related laws.		 Adjusted as Article 21, as
the Article No. is changed.
  • 17 -
Amended Provision Current Provision Remark
Article22. The Rules shall
be enforced upon approval
of the Board of Directors
and reported to a
shareholders’ meeting. The
same shall apply where the
Rules are amended.
The deletion of provisions
about supervisors referred to

Article23. The Rules shall
be enforced upon approval
of the Board of Directors
and reported to a
shareholders’ meeting. The
same shall apply where the
Rules are amended.		 1. The addition of
Paragraph 2 expressly
stating the deletion of
provisions about
supervisors shall
become effective as of
the date when the Audit
Committee is
established.
2. Adjusted as Article 22,
as the Article No. is
changed.

in the Rules shall become
effective as of the date when
the Audit Committee is
established.
  • 18 -

Report No. 5

Cause: The report on amendments to Ethical Corporate Management Best-Practice Principles in part.

Submitted by the Board of Directors

Remark:

  • I. According to Paragraph 1 of Article 14-4 of the Securities and Exchange Act and FSC’s Letter Jin-Guan-Zhen-Fa-Zi No. 10200531121 dated December 31, 2013, the Company shall establish an audit committee in replace of the supervisor upon expiration of the term of office held by the current (33rd-term) directors and supervisor and, therefore, delete the term “supervisor” and add the term “independent director”. A total of 15 provisions are amended.

The comparative list for amendments to the “Ethical Corporate Management Best-Practice Principles of Taiwan Fertilizer Co., Ltd.” is enclosed herewith (see Attachment).

  • 19 -

Comparative List for Amendments to Ethical Corporate Management Best-Practice Principles of Taiwan Fertilizer Co., Ltd.

Amended Provision Current Provision Remark
Article 2
When engaging in commercial
activities, the Company's
directors, independent directors,
managers, employees,
mandatories, and persons having
substantial control over the
Company (“substantial
controllers”) shall not directly or
indirectly offer, promise to offer,
request or accept any improper
benefits, nor commit unethical
acts including breach of ethics,
illegal acts, or breach of
fiduciary duty (“unethical
conduct”) for purposes of
acquiring or maintaining
benefits.
Parties referred to in the
preceding paragraph include
civil servants, political
candidates, political parties or
members of political parties,
state-run or private-owned
businesses or institutions, and
their directors, supervisors,
managers, employees or
substantial controllers or other
stakeholders.		 Article 2
When engaging in commercial
activities, the Company's
directors,~~supervisors,~~managers,
employees, mandatories, and
persons having substantial
control over the Company
(“substantial controllers”) shall
not directly or indirectly offer,
promise to offer, request or
accept any improper benefits,
nor commit unethical acts
including breach of ethics,
illegal acts, or breach of
fiduciary duty (“unethical
conduct”) for purposes of
acquiring or maintaining
benefits.
Parties referred to in the
preceding paragraph include
civil servants, political
candidates, political parties or
members of political parties,
state-run or private-owned
businesses or institutions, and
their directors, supervisors,
managers, employees or
substantial controllers or other
stakeholders.		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
Article 10
When conducting business, the
Company and its directors,
independent directors, managers,
employees, mandatories, and
substantial controllers, may not
directly or indirectly offer,
promise to offer, request, or
accept any improper benefits in
whatever form to or from		 Article 10
When conducting business, the
Company and its directors,
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers, may not
directly or indirectly offer,
promise to offer, request, or
accept any improper benefits in
whatever form to or from		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
  • 20 -
Amended Provision Current Provision Remark
clients, agents, contractors,
suppliers, public servants, or
other stakeholders, unless the
same meets the local laws
applicable in the place where the
Companyoperates.		 clients, agents, contractors,
suppliers, public servants, or
other stakeholders. Unless the
same meets the local laws
applicable in the place where the
Companyoperates.		 “independent
director”.
Article 11
When directly or indirectly
offering a donation to political
parties or organizations or
individuals participating in
political activities, the
Company’s directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall
comply with the Political
Donations Act and the
Company's relevant internal
operating procedures, and shall
not make such donations in
exchange for commercial gains
or business advantages.		 Article 11
When directly or indirectly
offering a donation to political
parties or organizations or
individuals participating in
political activities, the
Company’s directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall
comply with the Political
Donations Act and the
Company's relevant internal
operating procedures, and shall
not make such donations in
exchange for commercial gains
or business advantages.		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
Article 12
When making or offering
donations and sponsorship, the
Company and its directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall
comply with relevant laws and
regulations and internal
operating procedures, and shall
not surreptitiously engage in
bribery.		 Article 12
When making or offering
donations and sponsorship, the
Company and its directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall
comply with relevant laws and
regulations and internal
operating procedures, and shall
not surreptitiously engage in
bribery.		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
Article 13
The Company and its directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall not
directly or indirectly offer or
accept anyunreasonable		 Article 13
The Company and its directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall not
directly or indirectly offer or
accept anyunreasonable		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and,therefore,
  • 21 -
Amended Provision Current Provision Remark
presents, hospitality or other
improper benefits to establish
business relationship or
influence commercial
transactions.		 presents, hospitality or other
improper benefits to establish
business relationship or
influence commercial
transactions.		 deletes the term
“supervisor” and
adds the term
“independent
director”.
Article 14
The Company and its directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall
observe applicable laws and
regulations, the Company's
internal operating procedures,
and contractual provisions
concerning intellectual property,
and may not use, disclose,
dispose of, or damage
intellectual property or
otherwise infringe intellectual
property rights without the prior
consent of the intellectual
propertyrights holder.		 Article 14
The Company and its directors,
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall
observe applicable laws and
regulations, the Company's
internal operating procedures,
and contractual provisions
concerning intellectual property,
and may not use, disclose,
dispose of, or damage
intellectual property or
otherwise infringe intellectual
property rights without the prior
consent of the intellectual
propertyrights holder.		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
Article 16
In the course of research and
development, procurement,
manufacture, provision, or sale
of products and services, the
Company and its directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall
observe applicable laws and
regulations and international
standards to ensure the
transparency of information
about, and safety of, its products
and services. The Company shall
also adopt and publish a policy
on the protection of the rights
and interests of consumers or
other stakeholders, and carry out
thepolicyin its operations,with		 Article 16
In the course of research and
development, procurement,
manufacture, provision, or sale
of products and services, the
Company and its directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall
observe applicable laws and
regulations and international
standards to ensure the
transparency of information
about, and safety of, its products
and services. The Company shall
also adopt and publish a policy
on the protection of the rights
and interests of consumers or
other stakeholders, and carry out
thepolicyin its operations,with		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
  • 22 -
Amended Provision Current Provision Remark
a view to preventing its products
and services from directly or
indirectly damaging the rights
and interests, health, and safety
of consumers or other
stakeholders. Where there are
sufficient facts to determine that
the Company's products or
services are likely to pose any
hazard to the safety and health
of consumers or other
stakeholders, the Company
shall, in principle, recall those
products or suspend the services
immediately.		 a view to preventing its products
and services from directly or
indirectly damaging the rights
and interests, health, and safety
of consumers or other
stakeholders. Where there are
sufficient facts to determine that
the Company's products or
services are likely to pose any
hazard to the safety and health
of consumers or other
stakeholders, the Company
shall, in principle, recall those
products or suspend the services
immediately.
Article 17
The Company's directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall
exercise the due care of good
administrators to urge the
Company to prevent unethical
conduct, always review the
results of the preventive
measures and continually make
adjustments so as to ensure
thorough implementation of its
ethical corporate management
policies. To achieve sound
ethical corporate management,
the Company has various units
responsible for the following
matters under supervision by the
Audit Office, and the various
units shall report to the Board of
Directors periodically:
1. Chairman's Office:
(1) Assisting in
incorporating ethics and
moral values into the
Company's business		 Article 17
The Company's directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall
exercise the due care of good
administrators to urge the
Company to prevent unethical
conduct, always review the
results of the preventive
measures and continually make
adjustments so as to ensure
thorough implementation of its
ethical corporate management
policies. To achieve sound
ethical corporate management,
the Company has various units
responsible for the following
matters under supervision by the
Audit Office, and the various
units shall report to the Board of
Directors periodically:
1. Chairman's Office:
(1) Assisting in incorporating
ethics and moral values
into the Company's
business strategy.		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
  • 23 -
Amended Provision Current Provision Remark
strategy.
(2) Planning the internal
organization, structure,
and allocation of
responsibilities and
setting up check-and-
balance mechanisms for
mutual supervision of the
business activities within
the business scope that
are possibly at a higher
risk over unethical
conduct.
(3) Adopting programs to
prevent unethical
conduct pursuant to laws,
and setting out in each
program the standard
operating procedures and
conduct guidelines with
respect to the Company's
operations and business.
2.
Educational training unit:
To boost the promotional
training for ethical
policy.
3.
Audit Office:
(1) Developing a whistle-
blowing system and
ensuring its operating
effectiveness.
(2) Assisting the Board of
Directors and
management in auditing
and assessing whether
the prevention measures
taken for implementing
ethical management are
effectively operating, and
preparing reports on the
regular assessment of
compliance with ethical		 (2) Planning the internal
organization, structure,
and allocation of
responsibilities and setting
up check-and-balance
mechanisms for mutual
supervision of the
business activities within
the business scope that are
possibly at a higher risk
over unethical conduct.
(3) Adopting programs to
prevent unethical conduct
pursuant to laws, and
setting out in each
program the standard
operating procedures and
conduct guidelines with
respect to the Company's
operations and business.
2.
Educational training unit:
To boost the promotional
training for ethical policy.
3.
Audit Office:
(1) Developing a whistle-
blowing system and
ensuring its operating
effectiveness.
(2) Assisting the Board of
Directors and
management in auditing
and assessing whether the
prevention measures taken
for implementing ethical
management are
effectively operating, and
preparing reports on the
regular assessment of
compliance with ethical
management in operating
procedures.
  • 24 -
Amended Provision Current Provision Remark
management in operating
procedures.
Article 18
The Company's directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall
comply with laws and
regulations and the prevention
programs when conducting
business.		 Article 18
The Company's directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall
comply with laws and
regulations and the prevention
programs when conducting
business.		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
Article 19
The Company shall adopt
policies for preventing conflicts
of interest to identify, monitor,
and manage risks possibly
resulting from unethical
conduct, and shall also offer
appropriate means for directors,
independent directors, managers,
and other stakeholders attending
or present at directors’ meetings
to voluntarily explain whether
their interests would potentially
conflict with those of the
Company.
When a motion at a given
directors’ meeting concerns the
personal interest of, or the
interest of the juristic person
represented by, any of the
directors, independent directors,
managers, and other
stakeholders attending or present
at directors’ meetings of the
Company, the concerned person
shall state the important aspects
of the relationship of interest at
thegiven meeting. If his or her		 Article 19
The Company shall adopt
policies for preventing conflicts
of interest to identify, monitor,
and manage risks possibly
resulting from unethical
conduct, and shall also offer
appropriate means for director~~s,~~
~~supervisors,~~managers, and other
stakeholders attending or present
at directors’ meetings to
voluntarily explain whether their
interests would potentially
conflict with those of the
Company.
When a motion at a given
directors’ meeting concerns the
personal interest of, or the
interest of the juristic person
represented by, any of the
directors~~, supervisors~~, managers,
and other stakeholders attending
or present at directors’ meetings
of the Company, the concerned
person shall state the important
aspects of the relationship of
interest at the given meeting. If
his or herparticipation is likely		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
  • 25 -
Amended Provision Current Provision Remark
participation is likely to
prejudice the interest of the
Company, the concerned person
may not participate in discussion
of or voting on the motion and
shall recuse himself or herself
from the discussion or the
voting, and may not exercise
voting rights as proxy for
another director. The directors
shall practice self-discipline and
must not support one another in
improper dealings.
The Company's directors,
independent directors, managers,
employees, mandatories, and
substantial controllers shall not
take advantage of their positions
or influence in the Company to
obtain improper benefits for
themselves, their spouses,
parents, children or any other
person.		 to prejudice the interest of the
Company, the concerned person
may not participate in discussion
of or voting on the motion and
shall recuse himself or herself
from the discussion or the
voting, and may not exercise
voting rights as proxy for
another director. The directors
shall practice self-discipline and
must not support one another in
improper dealings.
The Company's directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers shall not
take advantage of their positions
or influence in the Company to
obtain improper benefits for
themselves, their spouses,
parents, children or any other
person.
Article 21
The Company shall establish
operating procedures and
guidelines in accordance with
Article 6 hereof to guide
directors, independent directors,
managers, employees, and
substantial controllers on how to
conduct business. The
procedures and guidelines shall
at least contain the following
matters:
1.
Standards for determining
whether improper benefits
have been offered or
accepted.
2.
Procedures for offering
legitimate political
donations.		 Article 21
The Company shall establish
operating procedures and
guidelines in accordance with
Article 6 hereof to guide
directors,~~supervisors,~~managers,
employees, and substantial
controllers on how to conduct
business. The procedures and
guidelines shall at least contain
the following matters:
1.
Standards for determining
whether improper benefits
have been offered or
accepted.
2.
Procedures for offering
legitimate political
donations.
3.
Procedures and the standard		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
  • 26 -
Amended Provision Current Provision Remark
3.
Procedures and the standard
rates for offering charitable
donations or sponsorship.
4.
Rules for avoiding work-
related conflicts of interests
and how they shall be
reported and handled.
5.
Rules for keeping
confidential trade secrets
and sensitive business
information obtained in the
ordinary course of business.
6.
Regulations and procedures
for dealing with suppliers,
clients and business
transaction counterparts
suspected of unethical
conduct.
7.
Any operating procedures
against these Principles.
8.
Disciplinary measures
against violators.		 rates for offering charitable
donations or sponsorship.
4.
Rules for avoiding work-
related conflicts of interests
and how they shall be
reported and handled.
5.
Rules for keeping
confidential trade secrets
and sensitive business
information obtained in the
ordinary course of business.
6.
Regulations and procedures
for dealing with suppliers,
clients and business
transaction counterparts
suspected of unethical
conduct.
7.
Any operating procedures
against these Principles.
8.
Disciplinary measures
against violators.
Article 22
The Company's Chairman of
Board, president or senior
management shall communicate
the importance of corporate
ethics to its directors,
independent directors,
employees, and mandatories on
a regular basis.
The Company shall periodically
organize training and awareness
programs for directors,
independent directors, managers,
employees, mandatories, and
substantial controllers and invite
the Company's commercial
trading counterparts to attend the
programs, in order to enable
them to understand the
Company's resolve to implement		 Article 22
The Company's Chairman of
Board, president or senior
management shall communicate
the importance of corporate
ethics to its directors,
employees, and mandatories on
a regular basis.
The Company shall periodically
organize training and awareness
programs for directors~~,~~
~~supervisors,~~managers,
employees, mandatories, and
substantial controllers and invite
the Company's commercial
trading counterparts to attend the
programs, in order to enable
them to understand the
Company's resolve to implement
ethical corporate management,		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
  • 27 -
Amended Provision Current Provision Remark
ethical corporate management,
the related policies, prevention
programs and the consequences
of committing unethical
conduct.
The Company shall apply the
policies of ethical corporate
management when creating its
employee performance appraisal
system and human resource
policies to establish a clear and
effective reward and discipline
system.		 the related policies, prevention
programs and the consequences
of committing unethical
conduct.
The Company shall apply the
policies of ethical corporate
management when creating its
employee performance appraisal
system and human resource
policies to establish a clear and
effective reward and discipline
system.
Article 23
The Company shall adopt a
concrete whistle-blowing system
and scrupulously operate the
system. The whistle-blowing
system shall include at least the
following:
1.
An independent mailbox
or hotline, either internally
established and publicly
announced or provided by
an independent external
institution, to allow the
Company’s insiders and
outsiders to submit
reports.
2.
Dedicated personnel or
unit appointed to handle
whistle-blowing system.
Any tip involving a
director or senior manager
shall be reported to the
independent directors.
Categories of reported
misconduct shall be
delineated and standard
operating procedures for
the investigation of each
shall be adopted.		 Article 23
The Company shall adopt a
concrete whistle-blowing system
and scrupulously operate the
system. The whistle-blowing
system shall include at least the
following:
1.
An independent mailbox
or hotline, either internally
established and publicly
announced or provided by
an independent external
institution, to allow the
Company’s insiders and
outsiders to submit
reports.
2.
Dedicated personnel or
unit appointed to handle
whistle-blowing system.
Any tip involving a
director or senior manager
shall be reported to the
independent directors~~or~~
~~supervisors.~~Categories of
reported misconduct shall
be delineated and standard
operating procedures for
the investigation of each
shall be adopted.		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor”.
  • 28 -
Amended Provision Current Provision Remark
3.
Documentation of case
acceptance, investigation
processes, investigation
results, and relevant
documents.
4.
Confidentiality of the
identity of whistle-
blowers and the contents
of reported cases.
5.
Measures for protecting
whistle-blowers from
inappropriate disciplinary
actions due to their
whistle-blowing.
6.
Whistle-blowing incentive
measures.
When material misconduct or
likelihood of material
impairment to the Company
comes to their awareness upon
investigation, the dedicated
personnel or unit handling the
whistle-blowing system shall
immediately prepare a report
and notify the independent
directors in written form.		 3.
Documentation of case
acceptance, investigation
processes, investigation
results, and relevant
documents.
4.
Confidentiality of the
identity of whistle-
blowers and the contents
of reported cases.
5.
Measures for protecting
whistle-blowers from
inappropriate disciplinary
actions due to their
whistle-blowing.
6.
Whistle-blowing incentive
measures.
When material misconduct or
likelihood of material
impairment to the Company
comes to their awareness upon
investigation, the dedicated
personnel or unit handling the
whistle-blowing system shall
immediately prepare a report
and notify the independent
directors~~or supervisors~~in
written form.
Article 26
The Company shall at all times
monitor the development of
relevant local and international
regulations concerning ethical
corporate management and
encourage its directors,
independent directors,managers,
and employees to make
suggestions, based on which the
adopted ethical corporate
management policies and
measures taken will be reviewed
and improved with a view to
achievingbetter implementation		 Article 26
The Company shall, at all times,
monitor the development of
relevant local and international
regulations concerning ethical
corporate management and
encourage its directors,
~~supervisors,~~managers, and
employees to make suggestions,
based on which the adopted
ethical corporate management
policies and measures taken will
be reviewed and improved with
a view to achieving better
implementation of ethical		 The Company
establishes the
Audit Committee
pursuant to the
amended Articles
of Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
  • 29 -
Amended Provision Current Provision Remark
of ethical management. management.
Article 27
The Principles shall be
implemented upon approval of
the Board of Directors, and shall
be sent to eachindependent
directorsand reported at a
shareholders' meeting. The same
shall apply where the Principles
are amended.
Where the Company submits the
Principles for discussion by the
Board of Directors pursuant to
the preceding paragraph, the
Board of Directors shall take
into full consideration each
independent director's opinions.
If an independent director
objects to or expresses
reservations about any matter, it
shall be recorded in the minutes
of the board of directors
meeting. An independent
director that cannot attend the
directors’ meeting in person to
express objection or reservations
shall provide a written opinion
before the meeting, unless there
is some legitimate reason to do
otherwise, and the opinion shall
be recorded in the meeting
minutes.
The deletion of provisions about
supervisors referred to herein
shall become effective as of the
date when the Audit Committee
is established.		 Article 27
The Principles shall be
implemented upon approval of
the Board of Directors, and shall
be sent to each~~supervisor~~and
reported at a shareholders'
meeting. The same shall apply
where the Principles are
amended.
Where the Company submits the
Principles for discussion by the
Board of Directors pursuant to
the preceding paragraph, the
Board of Directors shall take
into full consideration each
independent director's opinions.
If an independent director
objects to or expresses
reservations about any matter, it
shall be recorded in the minutes
of the board of directors
meeting. An independent
director that cannot attend the
directors’ meeting in person to
express objection or reservations
shall provide a written opinion
before the meeting, unless there
is some legitimate reason to do
otherwise, and the opinion shall
be recorded in the meeting
minutes.		 1. The Company
establishes the
Audit
Committee
pursuant to the
amended
Articles of
Incorporation
and, therefore,
deletes the term
“supervisor” and
adds the term
“independent
director”.
2. The addition of
Paragraph 2
expressly stating
the deletion of
provisions about
supervisors shall
become effective
as of the date
when the Audit
Committee is
established.
  • 30 -

Report No. 6

Cause: The report on amendments to the Code of Ethical Conduct for Directors and Top Managers in part

Submitted by the Board of Directors

Remark:

  • I. According to Article 14-4 of the Securities and Exchange Act and FSC’s Letter Jin-Guan-Zhen-Fa-Zi No. 10200531121 dated December 31, 2013, the Company shall establish an audit committee in replace of the supervisor upon expiration of the term of office held by 33rd-term directors and supervisor and, therefore, delete the term “supervisor”. 12 provisions are amended accordingly.

  • II. The comparative list for amendments to the “Code of Ethical Conduct for Directors and 1st-level executive officer and above of Taiwan Fertilizer Co., Ltd.” is enclosed herewith (see Attachment).

  • 31 -

Taiwan Fertilizer Co., Ltd. Comparative List for Amendments to “Code of Ethical Conduct for Directors and 1st-level executive officer and above”

Amended Provision Current Provision Remark
Taiwan Fertilizer Co., Ltd.
Code of Ethical Conduct for
Directors and 1st-level
executive officer and above		 Taiwan Fertilizer Co., Ltd.
Code of Ethical Conduct for
the directors, supervisors
and 1st-level executive
officer and above.		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
Chapter I. General
Provisions
Article 1
In order to provide the
Company's directors and
1st-level executive officer
and above (including
president, executive vice
president, vice president,
assistant vice president,and
1st-level executive officer
and deputy supervisors of
each unit) with guidelines
for their conduct and ethics
when they engage in
business activities for the
Company and to enable the
Company's stakeholders to
better understand the
Company's code of ethics,
the Code is established
accordingly.		 Chapter I. General
Provisions
Article 1
In order to provide the
Company's directors,
supervisorsand 1st-level
executive officer and above
(including president,
executive vice president,
vice president, and 1st-level
executive officer and deputy
supervisors of each unit)
with guidelines for their
conduct and ethics when
they engage in business
activities for the Company
and to enable the
Company's stakeholders to
better understand the
Company's code of ethics,
the Code is established
accordingly.		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
Add the job title, assistant
vice president, pursuant to
the Company's
organizational hierarchy.
Chapter II. Code of Ethical
Conduct
Article 2
Honesty and ethical
conduct: The directors and
1st-level executive officer
and above shall deal with
the Company's affairs by		 Chapter II. Code of Ethical
Conduct
Article 2
Honesty and ethical
conduct: The directors,
supervisors and1st-level
executive officer and above
shall deal with the		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
  • 32 -
Amended Provision Current Provision Remark
upholding the principles
focusing on maintenance of
the Company's interest,
honesty, ethics, observance
of laws and regulations,
fairness, and compliance
with ethics, and be
prohibited from engaging in
such unethical conduct as
deception, fabrication,
breach of trust and fraud,
etc.		 Company's affairs by
upholding the principles
focusing on maintenance of
the Company's interest,
honesty, ethics, observance
of laws and regulations,
fairness, and compliance
with ethics, and be
prohibited from engaging in
such unethical conduct as
deception, fabrication,
breach of trust and fraud,
etc.
Article 3
The directors and 1st-level
executive officer and above
shall avoid the conflicts of
interest arising when
personal interest intervenes
or is likely to intervene in
the overall interest of the
Company, as for example
when they are unable to
perform their duties in an
objective and efficient
manner, or when they take
advantage of their positions
in the Company to obtain
improper benefits for either
themselves or their spouses,
parents, children, or
relatives within the third
degree of kinship. In order
to prevent the conflict of
interest, the loans of funds,
provisions of guarantees,
and major asset transactions
between the Company and
said persons or the affiliates
in which they work for shall
be subject to review and
approval bythe Board of		 Article 3
The directors, supervisors
and1st-level executive
officer and above shall
avoid the conflicts of
interest arising when
personal interest intervenes
or is likely to intervene in
the overall interest of the
Company, as for example
when they are unable to
perform their duties in an
objective and efficient
manner, or when they take
advantage of their positions
in the Company to obtain
improper benefits for either
themselves or their spouses,
parents, children, or
relatives within the third
degree of kinship. In order
to prevent the conflict of
interest, the loans of funds,
provisions of guarantees,
and major asset transactions
between the Company and
said persons or the affiliates
in which they work for shall
be subject to review and		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
  • 33 -
Amended Provision Current Provision Remark
Directors. The relevant
purchase (sale) shall be
handled by taking into
consideration the
Company’s maximum
interest.		 approval by the Board of
Directors. The relevant
purchase (sale) shall be
handled by taking into
consideration the
Company’s maximum
interest.
Article 4
When the Company has an
opportunity for profit, it is
the responsibility of the
directors, 1st-level
executive officer and above
to maximize the reasonable
and proper benefits that can
be obtained by the
Company.
The directors, 1st-level
executive officer and above
shall not seek an
opportunity to pursue
personal gain, or earn
personal gain, by using the
Company’s property or
information or taking
advantage of their positions,
and shall not engage in any
activities competing with
the Company, unless it is
required by the Company
Law or the Company’s
Articles of Incorporation.		 Article 4
When the Company has an
opportunity for profit, it is
the responsibility of the
directors, supervisors,1st-
level executive officer and
above to maximize the
reasonable and proper
benefits that can be obtained
by the Company.
The directors, supervisors,
1st-level executive officers
and above shall not seek an
opportunity to pursue
personal gain, or earn
personal gain, by using the
Company’s property or
information or taking
advantage of their positions,
and shall not engage in any
activities competing with
the Company, unless it is
required by the Company
Law or the Company’s
Articles of Incorporation.		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
Article 5
Confidentiality:
The directors and 1st-level
executive officers and
above shall be bound by the
obligation to maintain the
confidentiality of any
information regarding the
Company itself or its
suppliers and customers,		 Article 5
Confidentiality:
The directors, supervisors
and1st-level executive
officers and above shall be
bound by the obligation to
maintain the confidentiality
of any information
regarding the Company
itself or its suppliers and		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
  • 34 -
Amended Provision Current Provision Remark
except when authorized or
required by laws to disclose
such information. The
confidential information
includes any undisclosed
information that, if
exploited by a competitor or
disclosed, could result in
damage to the Company or
the customers.		 customers, except when
authorized or required by
laws to disclose such
information. The
confidential information
includes any undisclosed
information that, if
exploited by a competitor or
disclosed, could result in
damage to the Company or
the customers.
Article 6
Fair trade:
The directors and 1st-level
executive officers and
above shall treat all of the
Company's suppliers and
customers, competitors, and
employees fairly, and may
not obtain improper benefits
through manipulation,
nondisclosure, misconduct,
or abuse of the information
learned by virtue of their
positions, or through
misrepresentation of
important matters, or
through other unfair trading
practices.		 Article 6
Fair trade:
The directors, supervisors
and1st-level executive
officers and above shall
treat all of the Company's
suppliers and customers,
competitors, and employees
fairly, and may not obtain
improper benefits through
manipulation,
nondisclosure, misconduct,
or abuse of the information
learned by virtue of their
positions, or through
misrepresentation of
important matters, or
through other unfair trading
practices.		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
Article 7
Protection and fair use of
the Company’s assets:
The directors and 1st-level
executive officers and
above have the
responsibility to protect the
Company’s assets and to
ensure that they can be
effectively and lawfully
used for official business
purposes toprevent the		 Article 7
Protection and fair use of
the Company’s assets:
The directors, supervisors
and1st-level executive
officers and above have the
responsibility to protect the
Company’s assets and to
ensure that they can be
effectively and lawfully
used for official business
purposes toprevent the		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
  • 35 -
Amended Provision Current Provision Remark
Company's assets from any
theft, negligence in care,
benefit to others, or waste of
the assets that will all
directly impact the
Company'sprofitability.		 Company's assets from any
theft, negligence in care,
benefit to others, or waste of
the assets that will all
directly impact the
Company'sprofitability.
Article 8
Legal compliance:
The directors and 1st-level
executive officers and
above shall comply with the
Securities and Exchange
Act, other applicable laws
and regulations, and the
Company's regulations.		 Article 8
Legal compliance:
The directors, supervisors
and1st-level executive
officers and above shall
comply with the Securities
and Exchange Act, other
applicable laws and
regulations, and the
Company's regulations.		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
Article 9
Encouraging reporting on
misconduct or any conduct
against the Code of Ethical
Conduct:
The Company's employees
shall report to theAudit
Committee, mangers,
internal auditor officers, or
other competent persons
any misconduct or conduct
against the Code of Ethical
Conduct committed by any
director or 1st-level
executive officer and above,
upon awareness of the
same. Once the reported
case is proven true, the
Company will reward them
pursuant to the relevant
requirements.
The Company shall process
the reported information as
confidential information,
and shall make every
endeavor to keepin		 Article 9
Encouraging reporting on
misconduct or any conduct
against the Code of Ethical
Conduct:
The Company's employees
shall report to the
supervisors,mangers,
internal auditor officers, or
other competent persons
any misconduct or conduct
against the Code of Ethical
Conduct committed by any
director, supervisoror 1st-
level executive officer and
above, upon awareness of
the same. Once the reported
case is proven true, the
Company will reward them
pursuant to the relevant
requirements.
The Company shall process
the reported information as
confidential information,
and shall make every
endeavor to keepin		 1. The Company
establishes the audit
committee in
accordance with Article
14-4 of the Securities
and Exchange Act.
Therefore, the
provisions about
supervisor are deleted.
2. Amended the Code of
Ethical Conduct for
Directors and 1st-level
Executive Officer and
above to provide that
the report may be made
to the Audit Committee.
  • 36 -
Amended Provision Current Provision Remark
confidence the informants’
identity and protect their
safety to prevent them from
retaliation and threat in any
form.		 confidence the informants’
identity and protect their
safety to prevent them from
retaliation and threat in any
form.
Article 10
Disciplinary measures:
When the directors or 1st-
level executive officers and
above violate the Code of
Ethical Conduct, the
Company shall verify the
truth and report the same to
the Board of Directors. The
violator shall bear the
relevant civil and criminal
liabilities, and be
disciplined according to the
relevant requirements, in the
case of 1st-level executive
officers and above. The
Company shall also without
delay disclose on the
Market Observation Post
System (MOPS) the
violator’s job title, name,
date of violation, reasons
for the violation, the
provisions of the Code
violated, and the
disciplinary actions taken.
The violator may seek
remedies under the relevant
appeal system established
by the Company.		 Article 10
Disciplinary measures:
When the directors,
supervisorsor 1st-level
executive officers and
above violate the Code of
Ethical Conduct, the
Company shall verify the
truth and report the same to
the Board of Directors. The
violator shall bear the
relevant civil and criminal
liabilities, and be
disciplined according to the
relevant requirements, in the
case of 1st-level executive
officers and above. The
Company shall also without
delay disclose on the
Market Observation Post
System (MOPS) the
violator’s job title, name,
date of violation, reasons
for the violation, the
provisions of the Code
violated, and the
disciplinary actions taken.
The violator may seek
remedies under the relevant
appeal system established
bythe Company.		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
the provisions about
supervisor are deleted.
Chapter III. Procedure for
Exemption
Article 11
Any exemption of directors
or 1st-level executive
officers and above from		 Chapter III. Procedure for
Exemption
Article 11
Any exemption of directors,
supervisorsor 1st-level
executive officers and		 The Company establishes
the audit committee in
accordance with Article 14-
4 of the Securities and
Exchange Act. Therefore,
theprovisions about
  • 37 -
Amended Provision Current Provision Remark
compliance with the Code
shall be approved upon
resolution by the Board of
Directors, and the
information on the
exempted person's job title
and name, the date on which
the Board of Directors
adopted the resolution for
exemption, period and cause
of exemption, and standards
applicable to the exemption
shall be disclosed without
delay on the MOPS, so that
the shareholders may
evaluate the appropriateness
of the resolution and
maintain the Company's
interest and right.		 above from compliance
with the Code shall be
approved upon resolution
by the Board of Directors,
and the information on the
exempted person's job title
and name, the date on which
the Board of Directors
adopted the resolution for
exemption, period and cause
of exemption, and standards
applicable to the exemption
shall be disclosed without
delay on the MOPS, so that
the shareholders may
evaluate the appropriateness
of the resolution and
maintain the Company's
interest and right.		 supervisor are deleted.
Chapter V. Bylaw
Article13
The Code shall be enforced
upon approval of the Board
of Directors and reported to
a shareholders’ meeting.
The same shall apply where
the Rules are amended.
The deletion of provisions
about supervisors referred
to herein shall become
effective as of the date
when the Audit Committee
is established.		 Chapter V. Bylaw
Article13
The Code shall be enforced
upon approval of the Board
of Directors anddistributed
to each supervisor and
reported to a shareholders’
meeting. The same shall
apply where the Rules are
amended.		 The addition of Paragraph 2
expressly stating the
deletion of provisions about
supervisors shall become
effective as of the date when
the Audit Committee is
established.
  • 38 -

Acceptance No. 1

Cause: Adoption of the Business Report and the Financial Results for 2017

Submitted by the Board of Directors

Remark:

  • I. The Company’s 2017 financial statements and its subsidiaries’ consolidated financial statements have already reviewed and approved at 31st meeting of the 33rd Board of Directors on March 29, 2018, for which the audit report was issued by the external auditors upon completion of the audit thereon. Said financial statements, together with the business report approved at the same meeting (please see Pages 2~4 of the Handbook), were also reviewed by the supervisor accordingly.

  • II. Enclosed please find the Company's 2017 Independent Auditor’s Report and Financial Statements (see Attachment).

Resolution:

  • 39 -

Independent Auditors ’ Report

To the Board of Directors of Taiwan Fertilizer Co., Ltd:

Opinion

We have audited the financial statements of Taiwan Fertilizer Co., Ltd( “ the Company”), which comprise the non-consolidated statement of financial position as of December 31, 2017 and 2016, and the non-consolidated statement of comprehensive income, non-consolidated statement of changes in equity and non-consolidated statement of cash flows for the year ended December 31, 2017 and 2016, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors (refer to the Other Matters paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2017 and 2016, and its financial performance and 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 auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained, inclusive of the reports from other auditors, is sufficient and appropriate to provide a basis of 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 financial statements for the year ended December 31, 2017 of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters that, in our professional judgment, should be communicated are as follows:

  1. Impairment Assessment of Investments Accounted for by the Equity Method (Including Goodwill and Intangible Assets with Indefinite Useful Lives)

Please refer to notes 4(h), 5 and 6(e) of the notes to the recognition of impairment

  • 40 -

assessment of investments accounted for by the equity method, assumptions used and uncertainties considered in determining investments accounted for by the equity method, investments for impairment loss and obsolescence and balances of impairment loss and obsolescence, respectively.

  • 41 -

(a) Key audit matters:

As described in Note 6(e) of the accompanying financial statements, the Company acquired control over Taiwan Yes Deep Ocean Water Co., Ltd. (“Taiwan Yes”) on January 7, 2013, which was accounted for as acquisition using the equity method (including the goodwill and trademark with indefinite “ ” useful lives). In accordance with IAS 36 Impairment of Assets , goodwill and intangible assets with indefinite useful lives should be tested for impairment annually; and based on the estimated future cash flows of Taiwan Yes (the cash-generating unit), the recoverable amount was evaluated in order to determine whether there is any impairment of the aforementioned investment accounted for by using the equity method (including the goodwill and intangible assets with indefinite useful lives). Since the estimated future cash flows requires management’s forecasting of the industry overview and the future operating performance of Taiwan Yes, should the situation change, the recoverable amount will be affected and an impairment loss will be incurred. Therefore, the impairment assessment of equity-method investments has been identified as a key audit matter.

(b) Auditing procedures performed:

Our main audit procedures performed in response to this key audit matter included evaluating the rationality of the goodwill of the recoverable amount generated from the cash flow forecasted for the next five years, which are reviewed regularly by the management. The management reviews the disclosure of the report when identifying loss of impairment, whether timely and appropriately reflected in the financial report; accessing the reasonableness of the forecasting method used by the management and the discount rate, and comparing the discount rate with external information; Verifying the assumptions of the management according to external relevant information; professionally the reasonableness of major assumptions (including the expected growth rate, discount rate and profit rate) used in the model.

Other Matter

We did not audit the financial statements as of and for the years ended December 31, 2017 of certain investees, but such financial statements had been audited by other auditors, whose reports have been furnished to us. Our opinion, insofar as it relates to the amounts included in the Corporation’s financial statements for these investees, is based solely on the reports of the other auditors. As of December 31, 2017, the investments in the aforementioned investees is 12.70% ($9,538,520 thousand), of the Corporation’s total assets. For the years ended December 31, 2017, the investment income on the above said investees is 34.24% ($622,846 thousand) of the Corporation’ s income before income tax.

  • 42 -

The financial statements of the Company for the year ended December 31, 2016 were audited by other auditors, and an auditors’ report with unqualified opinion was issued on March 28, 2017. As stated in Note 4 (u), since the previous financial statements of certain associates accounted for using equity method were not prepared in accordance with the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations (together referred to as “IFRSs”), the investments accounted for using equity method had decreased by $601,263 and $502,589; the deferred income tax liabilities had decreased by $102,215 and $85,440; the retained earnings had decreased by $474,024 and $417,317; other equity interest had decreased by $25,024 and increased by $169 as of January 1 and December 31, 2017, respectively. In addition, the share of profit of associates and joint ventures accounted for using equity method had increased by $68,321; the income tax expenses had increased by $11,615; the exchange differences on translation of foreign operations had increased by $30,353; income tax in relation to the items that may be reclassified subsequently to profit or loss had decreased by $5,160 for the year ended December 31, 2016. The Company has amended its non-consolidated financial statements for the year ended December 31, 2016. The former auditor, however, has not signed the auditor's report after the amendment of the non-consolidated financial statements. We have reviewed the adjusting entries through necessary procedures. In our opinion, the adjusting entries are reasonable and are entered properly.

  • 43 -

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the 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 are responsible for overseeing the Company s financial reporting process.

Auditor ’ s Responsibilities for the Audit of the Financial Statements

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

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

  1. Identify and assess the risks of material misstatement of the 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.

  2. Obtain an understanding of internal control relevant to the audit in order to design

  3. 44 -

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.

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

  2. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’ s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the 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.

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

  4. 45 -

  5. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group 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 financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Kuo-Yang Tseng and Heng-Sheng Lin.

KPMG

Taipei, Taiwan (Republic of China)

March 29, 2018

  • 46 -

TAIWAN FERTILIZER CO., LTD Balance Sheets

December 31, 2017 and 2016

TAIWAN FERTILIZER CO., LTD
Balance Sheets
December 31, 2017 and 2016		 TAIWAN FERTILIZER CO., LTD
Balance Sheets
December 31, 2017 and 2016
Assets
Current assets:
1100 Cash and cash equivalents(note)
1125 Current available-for-sale financial assets,
net(note)
1150 Notes receivable, net(note)
1170 Accounts receivable, net(note)
1220 Current tax assets(note)
1200 Other receivables, net(note)
130X Inventories(note)
1410 Prepayments(note)
1476 Other current financial assets(note)
1470 Other current assets(note)

Non-current assets:
1523 Non-current available-for-sale financial assets,
net(note)
1543 Non-current financial assets at cost, net(note)
1550 Investments accounted for using equity
method, net(note)
1600 Property, plant and equipment(note)
1760 Investment property, net(note)
1780 Intangible assets(note)
1840 Deferred tax assets(note)
1930 Long-term notes and accounts receivable,
net(note)
1980 Other non-current financial assets(note)
1985 Long-term prepaid rents(note)
1990 Other non-current assets, others(note)

Total assets
Assets		 December 31,
2017
Amount
%
$ 1,755,104
2
2,182,015
3
30,270
-
1,524,398
2
-
-
25,210
-
1,790,020
3
362,384
-
5,918,160
8
25,251
-		 (Expressed in Thousands of New Taiwan Dollars)
December 31,
2016
January 1, 2016
Amount
%
Amount
%
947,774
1
2,349,622
3
3,246,512
4
8,729,292
11
365,123
1
432,542
-
1,294,561
2
1,657,690
2
-
-
256,103
-
10,695
-
924
-
1,726,327
3
2,099,270
2
233,687
-
488,595
1
7,205,000
9
2,600,000
3
5,393
-
31,264
-
15,035,072
20 18,645,302
22
-
-
-
-
449,582
-
495,041
1
11,043,492
15 11,870,352
15
26,619,098
35 26,918,099
34
21,156,703
28 19,773,087
25
20,567
-
28,311
-
155,695
-
260,690
-
385,490
-
540,884
1
13,800
-
13,800
-
1,215,950
2
1,286,561
2
23,117
-
23,652
-
61,083,494
80 61,210,477
78
76,118,566
100 79,855,779
100
Liabilities and Equity
Current liabilities:
2150 Notes payable(note)
2170 Accounts payable(note)
2200 Other payables(note)
2230 Current tax liabilities(note)
2310 Advance receipts(note)
2399 Other current liabilities, others(note)

Non-Current liabilities:
2550 Non-current provisions(note)
2570 Deferred tax liabilities(note)
2630 Long-term deferred revenue(note)
2640 Net defined benefit liability,
non-current(note)
2645 Guarantee deposits received(note)

Total liabilities
Capital stock(note)
Capital surplus(note)
3100 Legal reserve(note)
3200 Special reserve(note)
Total unappropriated retained earnings
(accumulated deficit)(note)
3310 Other equity interest(note)
3320 Total equity
3350
3400
Total liabilities and equity		 December 31,
2017
Amount
%
$ 436
-
1,203,719
2
540,793
1
125,813
-
240,980
-
51,276
-		 December 31,
2016
Amount
Amount
6,890
-
880,304
1
473,880
1
7,465
-
179,265
-
34,546
-		 **January ** 1, 2016
Amount
-
2
1
-
-
-
%
2,213
1,182,132
738,336
16,140
201,490
60,732
2,163,017
3		 1,582,350
2		 2,201,043 3
223,648
-
7,014,086
9
16,173,803
22
112,063
-
309,813
-		 223,648
-
7,129,097
10
16,584,651
22
94,353
-
317,189
-		 327,750
7,191,083
16,977,124
468,040
221,927		 -
9
21
1
-
13,612,812
18		 15,035,072
20

29,531
-
546,899
1
10,515,078
14
13,640,123
18
34,920,398
47
28,922
-
168,705
-
313,860
-
13,500
-
1,180,739
2		 -
-
449,582
-
11,043,492
15
26,619,098
35
21,156,703
28
20,567
-
155,695
-
385,490
-
13,800
-
1,215,950
2

23,833,413
31		 24,348,938
32		 25,185,924 31
25,996,430
34		 25,931,288
34		 27,386,967 34
9,800,000
13
2,232,791
3
3,683,109
5
31,449,960
42
1,961,271
3
(34,679)
-		 9,800,000
13
2,232,791
3
3,683,109
4
33,590,309
44
286,015
1
595,054
1		 9,800,000
2,237,678
3,440,401
33,590,944
2,672,036
727,753		 12
3
4
42
4
1
118,315
-
61,476,070
82		 23,117
-
61,083,494
80
49,092,452
66		 50,187,278
66		 52,468,812 66
$ 75,088,882
**100 **		 76,118,566
**100 **		 79,855,779 100
$ 75,088,882
100		 76,118,566
**100 **
  • 47 -

TAIWAN FERTILIZER CO., LTD Statements of Comprehensive Income For the years ended December 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

4000
Operating revenue
5000
Operating costs(note)
5900
Gross profit (loss) from operations
6100
Selling expenses(note)
6200
Administrative expenses(note)
6300
Research and development expenses(note)
Total operating expenses
6900
7010
Total other income
7020
Other gains and losses, net
7050
Finance costs, net
7060
Share of profit (loss) of associates and joint ventures accounted for using
equity method, net
7900
Profit (loss) from continuing operations before tax
7950
Less: Tax income (expense)
8200
Profit (loss)
8300
Other comprehensive income:
8310
Components of other comprehensive income that will not be reclassified
to profit or loss
8311
Gains (losses) on remeasurements of defined benefit plans
8330
Share of other comprehensive income of subsidiaries, associates and joint
ventures accounted for using equity method, components of other
comprehensive income that will not be reclassified to profit or loss
8349
Income tax related to components of other comprehensive income that will
not be reclassified to profit or loss
8360
Other components of other comprehensive income that will not be
reclassified to profit or loss
8361
Exchange differences on translation
8362
Unrealised gains (losses) on valuation of available-for-sale financial assets
8380
Share of other comprehensive income of subsidiaries, associates and joint
ventures accounted for using equity method, components of other
comprehensive income that will be reclassified to profit or loss
8399
Income tax related to components of other comprehensive income that will
be reclassified to profit or loss
Components of other comprehensive income that will be reclassified to
profit or loss
8300
Other comprehensive income, net
Total comprehensive income
Basic earnings per share
9750
Basic earnings per share
9850
Diluted earnings per share
4000
Operating revenue
5000
Operating costs(note)		 2017
2,544,133
22
1,975,732
16
(194,857)
(2)
(235,361)
(2)
(991,134)
(9)
(999,871)
(8)
(82,267)
(1)
(65,285)
(1)
(1,268,258)
(12)
(1,300,517)
(11)
1,275,875
10
675,215
5
193,867
2
162,425
1
(173,163)
(2)
(186,529)
(1)
(4) -
(6,711)
-
522,375
5
(642,518)
(6)
543,075
5
(673,333)
(6)
1,818,950
15
1,882
(1)

(199,824)
(2)
(74,679)
-
1,619,126
13
(72,797)
(1)
(39,159)
-
(15,845)
-
6,282
-
-
-
6,658
-
2,694
-
(26,219)
-
(13,151)
-
49,729
-
20,580
-
(818,037)
(7)
(182,011)
(2)
138,575
1
28,732 -
(629,733)
(6)
(132,699)
(2)
(655,952)
(6)
(145,850)
(2)
$963,174
7
(218,647)
(3)
$1.65
(0.07)
$1.65
(0.07)
  • 48 -

TAIWAN FERTILIZER CO., LTD Statements of Changes in Equity For the years ended December 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

Balance at
January 1,
2016
Effects of
retrospective
application
and
retrospective
restatement
Equity at
beginning of
period after
adjustments
Profit (loss)
Other
comprehe
nsive
income
Total
comprehen
sive
income
Appropriation
and
distribution
of retained
earnings:
Legal reserve
appropriat
ed
Cash
dividends
of
ordinary
share
Reversal of
special
reserve
Due to
donated
assets
received
Balance at
December 31,
2016
Effects of
retrospective
application		 Share
capital
Ordinar
y
shares
$ 9,800,000		 Capita
l
surplu
s		 **Retained earnings ** **Retained earnings ** Total other equity interest other equity interest Total
equity
Exchange
difference
s on
translatio
n of
foreign
financial
statement
s		 Unrealized
gains (losses)
on
available-for-sa
le financial
assets		 Total
other
equity
interes
t
Legal
reserv
e		 Special
reserve		 Unappropriate
d retained
**earnings **		 Total
retaine
d
earning
s

2,237,67
8
3,440,40
1
33,590,94
4		 3,146,060 40,177,40
5		 710,438 42,339 752,777 52,967,86
0
- - - - (474,024) (474,024) (25,024) - (25,024) (499,048)
9,800,000
2,237,67
8
3,440,40
1
33,590,94
4		 2,672,036 39,703,38
1		 685,414 42,339 727,753 52,468,81
2
-
-		 -
-		 -
-		 -
-		 (72,797)
(13,151)		 (72,797)
(13,151)		 -
(153,279)		 -
20,580		 -

(132,699
)		 (72,797)
(145,850)
- - - - (85,948) (85,948) (153,279) 20,580
(132,699
)		 (218,647)

-
-
-
-		 -
-
-
(4,887)		 242,708
-
-
-
-
-
(635)
-		 (242,708)
(2,058,000)
635
-		 -
(2,058,000
)
-
-		 -
-
-
-		 -
-
-
-		 -
-
-
-		 -
(2,058,000
)
-
(4,887)
$
$9,800,00
0		 2,232,79
1
3,683,10
9		 33,590,30
9		 286,015 37,559,43
3		 532,135 **62,919 ** 595,054 50,187,27
8
$ $9,800,00
0
2,232,79
1
3,683,10
9
33,590,30
9		 703,332 37,976,75
0		 531,966 62,919 594,885 50,604,42
6
  • 49 -
and
retrospective
restatement
Retrospective
adjustment of
equity
attributable
to former
owner due to
reorganizatio
n of entities
under
common
control
Equity at
beginning of
period after
adjustments
Profit (loss)
Other
comprehe
nsive
income
Total
comprehen
sive
income
Appropriation
and
distribution
of retained
earnings:
Cash
dividends
of
ordinary
share
Special
reserve
used to
offset
accumulat
ed deficits
Reversal of
special
reserve
Balance at
December 31,
2017
-
-
-
-
(417,317)
(417,317)
169
-
169 (417,148)
9,800,000
2,232,79
1
3,683,10
9
33,590,30
9
286,015
37,559,43
3
532,135
62,919595,054
50,187,27
8
-
-
-
-
1,619,126 1,619,126
-
-
-
1,619,126
-
-
-
-
(26,219)
(26,219)
(679,462)
49,729
(629,733
) (655,952)
-
-
-
-
1,592,907 1,592,907
(679,462)
49,729
(629,733
)
963,174
-
-
-
-
(2,058,000)
(2,058,000
)
-
-
-
(2,058,000
)

-
-
-
(2,030,304
)
2,030,304
-
-
-
-
-
-
-
-
(110,045)
110,045
-
-
-
-
-
$ 9,800,000
2,232,79
1
3,683,10
9
31,449,96
0
1,961,271
37,094,34
0
(147,327)
112,648 (34,679)
49,092,45
2

Note:The Company’s remuneration of directors of $30,316 and remuneration of employees of $45,474 for the years ended December 31, 2017, had been deducted from statements of comprehensive income for the years ended December 31, 2017 . The Company did not estimate any remuneration to employees, and directors and supervisors due to its loss in 2016.

  • 50 -

TAIWAN FERTILIZER CO., LTD Statements of Cash Flows For the years ended December 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities:
Profit (loss) before tax
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense
Amortization expense
Interest expense
Interest income
Dividend income
Share of loss (profit) of subsidiaries,associates and joint ventures
accounted for using equity method
Loss (gain) on disposal of property, plan and equipment
Loss (gain) on disposal of investment properties
Loss (gain) on disposal of intangible assets
Loss (gain) on disposal of investments
Impairment loss on financial assets
Reversal of impairment loss on financial assets
Unrealized foreign exchange loss (gain)
Donation expenses
Property, plant and equipment
Investment properties transferred to expenses
Total adjustments to reconcile profit (loss)
Changes in operating assets and liabilities:
Decrease (increase) in notes receivable
Decrease (increase) in accounts receivable
Decrease (increase) in other receivable
Decrease (increase) in inventories
Decrease (increase) in prepayments
Decrease (increase) in other financial assets
Decrease (increase) in deferred debits
Total changes in operating assets
Changes in operating liabilities:
Increase (decrease) in notes payable
Increase (decrease) in accounts payable
Increase (decrease) in other payable
Increase (decrease) in provisions
Increase (decrease) in receipts in advance
Increase (decrease) in other current liabilities
Increase (decrease) in net defined benefit liability
Increase (decrease) in deferred credits
Total changes in operating liabilities
Total changes in operating assets and liabilities
Cash inflow (outflow) generated from operations		 2017
$1,818,950
721,182
84,514
4
(80,169)
(43,562)
(522,375)
(101,610)
24,569
(24,562)
(21,788)
-
-
-
241,381
8,731
861		 2016
1,882
659,673
83,913
6,711
(59,919)
(41,782)
642,518
(3,584)
-
-
(23,381)
15,000
4,294
(3,757)
-
-
-
287,176 1,279,686
334,853
(229,837)
(13,322)
(63,693)
(128,696)
(19,858)
71,630		 67,419
358,709
(78,510)
576,325
145,370
25,871
155,394
(48,923) 1,250,578
(6,454)
323,415
71,515
-
61,715
16,729
(21,449)
(410,848)		 4,677
(493,967)
130,878
(38,370)
(22,225)
(26,186)
(389,532)
(392,473)
34,623 (1,227,198)
(14,300) 23,380
  • 51 -
Interest received
Dividends received
Interest paid
Dividends paid
Income taxes refund (paid)
Net cash flows from (used in) operating activities
Cash flows from (used in) operating activities:		 2017 2016
2,091,826
78,976
474,037
(4)
-
(67,282)		 1,304,948
41,782
58,632
(6,711)
247,184
-
2,577,553 1,645,835
  • 52 -

TAIWAN FERTILIZER CO., LTD Statements of Cash Flows(CONT ＇ D) For the years ended December 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) investing activities:
Acquisition of financial assets at amortised cost
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Proceeds from capital reduction of financial assets at cost
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Decrease in refundable deposits
Acquisition of intangible assets
Cash payments to acquire subsidiaries and other business units
Acquisition of investment properties
Proceeds from disposal of investment properties
Decrease in other financial assets
Net cash flows from (used in) investing activities
Cash flows from (used in) financing activities:
Increase in guarantee deposits received
Cash dividends paid
Net cash flows from (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 2017
(150,000)
(2,205,305)
3,311,788
52,683
(404,867)
132,263
(95,198)
-
68,471
(1,293,562)
(408,260)
1,287,140		 2016
-
(84,772)
5,606,626
32,790
(744,510)
9,959
535
(5,558)
-
(1,291,949)
-
(4,605,000)
295,153 (1,081,879)
(7,376)
(2,058,000)		 95,262
(2,058,000)
(2,065,376) (1,962,738)
- (3,066)
807,330
947,774		 (1,401,848)
2,349,622
$
1,755,104		 947,774
  • 53 -

Independent Auditors ’ Report

To the Board of Directors of Taiwan Fertilizer Co., Ltd.:

Opinion

We have audited the consolidated financial statements of Taiwan Fertilizer Co., Ltd. and its subsidiaries (“the Group”), which comprise the consolidated statement of financial position as of December 31, 2017 and 2016, and the consolidated statement of comprehensive income, changes in equity and cash flows for the year ended December 31, 2017 and 2016, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors (refer to the Other Matters paragraph), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2017 and 2016, and its consolidated financial performance and cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained, inclusive of the reports from other auditors, is sufficient and appropriate to provide a basis of 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 ended December 31, 2017. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters that, in our professional judgment, should be communicated are as follows:

  • 54 -

Key audit matters:

As described in Note 6(i) of the consolidated financial statements, the Group acquired control over Taiwan Yes Deep Ocean Water Co., Ltd. (“ Taiwan Yes” ) on January 7, 2013, which was accounted for as acquisition using the equity method (including the goodwill and trademark with indefinite useful lives). In accordance with IAS 36 “Impairment of Assets”, goodwill and intangible assets with indefinite useful lives should be tested for impairment annually; and based on the estimated future cash flows of Taiwan Yes (the cash-generating unit), the recoverable amount was evaluated in order to determine whether there is any impairment of the aforementioned investment accounted for by using the equity method (including the goodwill and intangible assets with indefinite useful lives). Since the estimated future cash flows requires management’ s forecasting of the industry overview and the future operating performance of Taiwan Yes, should the situation change, the recoverable amount will be affected and an impairment loss will be incurred. Therefore, the impairment assessment of equity-method investments has been identified as a key audit matter.

How the matter was addressed in our audit:

Our principal audit procedures included confirming whether the management have properly assessed the recoverability of goodwill based on the forecasted cash flows within the following 5 years, wherein the assessment have been reviewed by the competent authority; and verifying whether the management has disclosed the impairment of goodwill in the financial statements on a timely manner after identifying such circumstance. In addition, we also assessed the adequacy of the forecasting methods and the discount rate used by the management, and compared the discount rate with external information; verified the management’s assumptions with external relevant information, and evaluated the major assumptions (including the forecast revenue growth rate, discount rate and forecast margin).

Other Matter

We did not audit the consolidated financial statements as of and for the years ended December 31, 2017 of certain investees, but such financial statements had been audited by other auditors, whose reports have been furnished to us. Our opinion, insofar as it relates to the amounts included in the Corporation’s consolidated financial statements for these investees, is based solely on the reports of the other auditors. As of December 31, 2017, the investments in the aforementioned investees is 12.69% (NT$9,538,520 thousand), of the Corporation’s total assets. For the years ended December 31, 2017, the investment income on the above said investees is 33.96% (NT$622,846 thousand) of the Corporation’s income before income tax.

The consolidated financial statements of the Group for the year ended December 31,

  • 55 -

2016 were audited by other auditors, and an auditors’ report with unqualified opinion was issued on March 28, 2017. As stated in 4(u), since the previous financial statements of certain associates accounted for using equity method were not prepared in accordance with the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations (together referred to as “IFRSs”), the investments accounted for using equity method had decreased by $601,263 and $502,589; respectively, the deferred income tax liabilities had reduced by $102,215 and $85,440; the retained earnings had reduced by $474,024 and $417,317; other equities interest had reduced by $25,024 and increased by $169 as of January 1 and December 31, 2017, respectively. In addition, the share of profit of associates and joint ventures accounted for using equity method had increased by $68,321, the income tax expenses had increased by NT$11,615; the exchange differences on translation of foreign operations had increased by $30,353; income tax in relation to the items that may be reclassified subsequently to profit or loss had decreased by 5,160, for the year ended December 31, 2016. The Group has amended its non-consolidated financial statements for the year ended December 31, 2016. The former auditor, however, has not signed the auditor's report after the amendment of the non-consolidated financial statements. We have reviewed the adjusting entries through necessary procedures. In our opinion, the adjusting entries are reasonable and are entered properly.

  • 56 -

We also audited the financial statements of Taiwan Fertilizer Group Limited as of and for the years ended December 31, 2016 and 2015 and have issued an unqualified and a modified unqualified audit report, respectively, thereon.

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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, 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 are responsible for overseeing the Group’s financial reporting process.

Auditor ’ s Responsibilities for the Audit of the Consolidated Financial Statements

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

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

  1. 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

  2. 57 -

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.

  1. 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.

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

  3. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty ’

exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

  • 58 -

  • 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.

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

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

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

The engagement partners on the audit resulting in this independent auditors’ report are Kuo-Yang Tseng and .

KPMG

Taipei, Taiwan (Republic of China) March 29, 2018

  • 59 -

TAIWAN FERTILIZER CO., LTD. AND ITS SUBSIDIARIES Consolidated Balance Sheets

December 31, 2017 and 2016

(Expressed in Thousands of New Taiwan Dollars)

December 31,
2017
December 31,
2016
Assets
Amount
%
Amount
%
Current assets:
1100
Cash and cash equivalents(note)
$ 2,266,220
3
1,084,835
1
1125
Current available-for-sale financial assets,
net(note)
2,182,015
3
3,246,512
4
1150
Notes receivable, net(note)
31,848
-
366,324
1
1170
Accounts receivable, net(note)
1,533,348
2
1,305,881
2
1220
Current tax assets(note)
6
-
-
-
1200
Other receivables, net(note)
31,373
-
11,925
-
130X Inventories(note)
1,839,122
2
1,801,599
3
1410
Prepayments(note)
364,416
-
240,051
-
1476
Other current financial assets(note)
5,918,160
8
7,237,898
9
1479
Other current assets(note)
26,315
-
6,281
-

14,192,823
18 15,301,306
20
Non-current assets:
1523
Non-current available-for-sale financial assets,
net(note)
29,531
-
-
-
1543
Non-current financial assets at cost, net(note)
546,899
1
449,582
1
1550
Investments accounted for using equity method,
net(note)
9,612,678
13 10,393,762
14
1600
Property, plant and equipment(note)
13,744,278
19 26,753,401
35
1760
Investment property, net(note)
34,920,398
47 21,157,600
28
1780
Intangible assets(note)
234,595
-
257,986
-
1840
Deferred tax assets(note)
209,017
-
209,113
-
1930
Long-term notes and accounts receivable, net(note)
313,860
-
385,490
-
1980
Other non-current financial assets(note)
52,382
-
65,800
-
1985
Long-term prepaid rents(note)
1,180,739
2
1,215,950
2
1990
Other non-current assets, others(note)
119,691
-
25,223
-

60,964,068
82 60,913,907
80
Total assets
Cash and cash equivalents(note)
**$ 75,156,891 100 76,215,213 100 **		 December 31,
2017
December 31,
2016
Assets
Amount
%
Amount
%
Current assets:
1100
Cash and cash equivalents(note)
$ 2,266,220
3
1,084,835
1
1125
Current available-for-sale financial assets,
net(note)
2,182,015
3
3,246,512
4
1150
Notes receivable, net(note)
31,848
-
366,324
1
1170
Accounts receivable, net(note)
1,533,348
2
1,305,881
2
1220
Current tax assets(note)
6
-
-
-
1200
Other receivables, net(note)
31,373
-
11,925
-
130X Inventories(note)
1,839,122
2
1,801,599
3
1410
Prepayments(note)
364,416
-
240,051
-
1476
Other current financial assets(note)
5,918,160
8
7,237,898
9
1479
Other current assets(note)
26,315
-
6,281
-

14,192,823
18 15,301,306
20
Non-current assets:
1523
Non-current available-for-sale financial assets,
net(note)
29,531
-
-
-
1543
Non-current financial assets at cost, net(note)
546,899
1
449,582
1
1550
Investments accounted for using equity method,
net(note)
9,612,678
13 10,393,762
14
1600
Property, plant and equipment(note)
13,744,278
19 26,753,401
35
1760
Investment property, net(note)
34,920,398
47 21,157,600
28
1780
Intangible assets(note)
234,595
-
257,986
-
1840
Deferred tax assets(note)
209,017
-
209,113
-
1930
Long-term notes and accounts receivable, net(note)
313,860
-
385,490
-
1980
Other non-current financial assets(note)
52,382
-
65,800
-
1985
Long-term prepaid rents(note)
1,180,739
2
1,215,950
2
1990
Other non-current assets, others(note)
119,691
-
25,223
-

60,964,068
82 60,913,907
80
Total assets
Cash and cash equivalents(note)
**$ 75,156,891 100 76,215,213 100 **		 January 1,
2016
Amount
%
2,474,406
3
8,729,292
11
432,891
1
1,671,883
2
256,153
-
1,673
-
2,174,707
3
499,591
1
2,628,202
3
31,547
-
18,900,345
24
-
-
495,041
1
10,751,664
13
27,232,915
34
19,773,984
24
471,995
1
358,990
-
540,884
1
65,800
-
1,286,561
2
24,363
-
61,002,197
76
79,902,542 100
Liabilities and Equity
Current liabilities:
2100
Notes payable(note)
2150
Accounts payable(note)
2170
Other payables(note)
2200
Current tax liabilities(note)
2230
Advance receipts(note)
2310
Other current liabilities, others(note)
2399

Non-Current liabilities:
Non-current provisions(note)
2550
Deferred tax liabilities(note)
2570
Long-term deferred revenue(note)
2630
Net defined benefit liability, non-current(note)
2640
Guarantee deposits received(note)
2645

Total liabilities
Capital stock(note)
Capital surplus(note)
Legal reserve(note)
3100
Special reserve(note)
3200
Total unappropriated retained earnings
(accumulated deficit)(note)
Other equity interest(note)
3310
Total equity
3320
3350
3400
Total liabilities and equity
Liabilities and Equity		 December 31,
2017
Amount
%
$ 35,000
-
458
-
1,218,032
2
556,010
1
127,276
-
241,964
-
53,126
-		 December 31,
2016		 January 1,
2016
Amount
%
10,000
-
2,214
-
1,196,312
2
758,177
1
16,339
-
203,781
-
61,901
-
Amount
%
46,000
-
6,924
-
897,834
1
504,629
1
7,975
-
180,763
-
35,937
-
2,231,866
3		 1,680,062
2		 2,248,724
3
223,648
-
7,014,086
9
16,173,803
22
112,063
-
308,973
-		 223,648
-
7,129,097
9
16,584,651
22
94,353
-
316,124
1		 327,750
-
7,191,083
9
16,977,124
21
468,040
1
221,009
-
23,832,573
31		 24,347,873
32		 25,185,006
31
26,064,439
34		 26,027,935
34		 27,433,730
34
9,800,000
13
2,232,791
3
3,683,109
5
31,449,960
42
1,961,271
3
(34,679)
-		 9,800,000
13
2,232,791
3
3,683,109
5
33,590,309
44
286,015
-
595,054
1		 9,800,000
12
2,237,678
3
3,440,401
4
33,590,944
42
2,672,036
4
727,753
1
60,964,068
82 60,913,907
80		 49,092,452
66
**$ 75,156,891 100 **		 50,187,278
66
**76,215,213 100 **		 52,468,812
66
79,902,542 100
**$ 75,156,891 100 76,215,213 100 **
  • 60 -

TAIWAN FERTILIZER CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Comprehensive Income For the years ended December 31, 2017 and 2016

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

2017
Amount
%
4000Operating revenue
$ 11,658,986
100
5000Operating costs(note)
(9,057,761)
(78)
5900Gross profit (loss) from operations
2,601,225
22
Operating expenses:
6100
Selling expenses(note)
(269,381)
(2)
6200
Administrative expenses(note)
(1,021,639)
(9)
6300
Research and development expenses(note)
(82,267)
(1)
Total operating expenses
(1,373,287)
(12)
6900Net operating income (loss)
1,227,938
10
Non-operating income and expenses:
7010
Total other income
198,553
2
7020
Other gains and losses, net
(208,886)
(2)
7050
Finance costs, net
(555)
-
7060
Share of profit (loss) of associates and joint ventures accounted for using
equity method, net
617,003
6
Total non-operating income and expenses
606,115
6
7900Profit (loss) from continuing operations before tax
1,834,053
16
7950Less: Tax income (expense)
(214,927)
(2)
8200Profit (loss)
1,619,126
14
8300Other comprehensive income:
8310Components of other comprehensive income that will not be reclassified
to profit or loss
8311Gains (losses) on remeasurements of defined benefit plans
(39,159)
-
8320Share of other comprehensive income of associates and joint ventures
accounted for using equity method, components of other comprehensive
income that will not be reclassified to profit or loss
6,282
-
8349Income tax related to components of other comprehensive income that will not
be reclassified to profit or loss
6,658
-
(26,219)
-
8360Other components of other comprehensive income that will not be
reclassified to profit or loss
8361Exchange differences on translation
(5,522)
-
8362Unrealised gains (losses) on valuation of available-for-sale financial assets
49,729
-
8370Share of other comprehensive income of associates and joint ventures
accounted for using equity method, components of other comprehensive
income that will be reclassified to profit or loss
(812,515)
(7)
8399Income tax related to components of other comprehensive income that will be
reclassified to profit or loss
138,575
1
Components of other comprehensive income that will be reclassified to profit
or loss
(629,733)
(6)
8300Other comprehensive income, net
(655,952)
(6)
8500Total comprehensive income
$
963,174
8
8610Profit (loss), attributable to:
$
1,619,126
14
8710Profit (loss), attributable to owners of parent
$963,174
8
Comprehensive income attributable to:
9750
Comprehensive income, attributable to owners of parent
$1.65
9850Basic earnings per share
$1.65		 2017 2016
Amount
%
12,240,920
100
(10,234,666)
(84)
2,601,225
22		 2,006,254
16
(269,381)
(2)
(1,021,639)
(9)
(82,267)
(1)		 (338,576)
(3)
(1,006,693)
(8)
(65,291)
-
(1,373,287)
(12)		 (1,410,560)
(11)
1,227,938
10		 595,694
5
198,553
2
(208,886)
(2)
(555)
-
617,003
6		 168,317
1
(522,467)
(4)
(7,029)
-
(187,213)
(2)
606,115
6		 (548,392)
(5)
1,834,053
16
(214,927)
(2)		 47,302
-
(120,099)
(1)
1,619,126
14		 (72,797)
(1)
(15,845)
-
-
-
2,694
-
(26,219)
-		 (13,151)
-
(5,522)
-
49,729
-
(812,515)
(7)
138,575
1		 (13,652)
-
20,580
-
(168,359)
(1)
28,732
-
(629,733)
(6)		 (132,699)
(1)
(655,952)
(6)		 (145,850)
(1)
$
963,174
8		 (218,647)
(2)
$
1,619,126
14		 (72,797)
(1)
$963,174
8		 (218,647)
(2)
$1.65 (0.07)
$1.65 (0.07)
  • 61 -

TAIWAN FERTILIZER CO., LTD. AND ITS SUBSIDIARIES

Consolidated Statements of Changes in Equity For the years ended December 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2016
Effects of retrospective application and retrospective
restatement
Equity at beginning of period after adjustments
Profit (loss)
Other comprehensive income
Total comprehensive income
Appropriation and distribution of retained earnings:
Legal reserve appropriated
Cash dividends of ordinary share
Reversal of special reserve
Due to donated assets received
Balance at December 31, 2016
Effects of retrospective application and retrospective
restatement
Retrospective adjustment of equity attributable to
former owner due to reorganization of entities under
common control
Equity at beginning of period after adjustments
Profit (loss)
Other comprehensive income
Total comprehensive income
Appropriation and distribution of retained earnings:
Cash dividends of ordinary share
Special reserve used to offset accumulated deficits
Reversal of special reserve
Due to business combination		 Share
capital
Ordinary
shares
$ 9,800,000
-		 Equity attributable Equity attributable to owners ofparent to owners ofparent to owners ofparent Total
equity
52,967,860
(499,048)
**Retained earnings ** Total other equity interest
Exchange
differences on
translation of
foreign financial
statements		 Unrealized gains
(losses) on
available-for-sale
financial assets		 Total
other
equity
interest
Capital
surplus		 Legal
reserve		 Special
reserve		 Unappropriated
retained earnings		 Total retained
**earnings **
2,237,678
-		 3,440,401
-		 33,590,944
-		 3,146,060
(474,024)		 40,177,405
(474,024)		 710,438
(25,024)		 42,339
-		 752,777
(25,024)
9,800,000 2,237,678 3,440,401 33,590,944 2,672,036 39,703,381 685,414 42,339 727,753 52,468,812
-
-		 -
-		 -
-		 -
-		 (72,797)
(13,151)		 (72,797)
(13,151)		 -
(153,279)		 -
20,580		 -
(132,699)		 (72,797)
(145,850)
- - - - (85,948) (85,948) (153,279) 20,580 (132,699) (218,647)
-
-
-
-		 -
-
-
(4,887)		 242,708
-
-
-		 -
-
(635)
-		 (242,708)
(2,058,000)
635
-		 -
(2,058,000)
-
-		 -
-
-
-		 -
-
-
-		 -
-
-
-		 -
(2,058,000)
-
(4,887)
$
9,800,000		 **2,232,791 ** **3,683,109 ** 33,590,309 286,015 37,559,433 532,135 62,919 595,054 50,187,278
$ 9,800,000

-		 2,232,791
-		 3,683,109
-		 33,590,309
-		 703,332
(417,317)		 37,976,750
(417,317)		 531,966
169		 62,919
-		 594,885
169		 50,604,426

(417,148)
9,800,000 2,232,791 3,683,109 33,590,309 286,015 37,559,433 532,135 62,919 595,054 50,187,278
-
-		 -
-		 -
-		 -
-		 1,619,126
(26,219)		 1,619,126
(26,219)		 -
(679,462)		 -
49,729		 -
(629,733)		 1,619,126
(655,952)
- - - - 1,592,907 1,592,907 (679,462) 49,729 (629,733) 963,174
-
-
-		 -
-
-		 -
-
-		 -
(2,030,304)
(110,045)		 (2,058,000)
2,030,304
110,045		 (2,058,000)
-
-		 -
-
-		 -
-
-		 -
-
-		 (2,058,000)
-
-
$ 9,800,000 **2,232,791 ** **3,683,109 ** 31,449,960 1,961,271 37,094,340 (147,327) 112,648 **(34,679) ** **49,092,452 **
  • 62 -

TAIWAN FERTILIZER CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities:
Profit (loss) before tax
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense
Amortization expense
Interest expense
Interest income
Dividend income
(Reversal of) write-down of inventories
Share of loss (profit) of associates and joint ventures accounted for using
equity method
Loss (gain) on disposal of property, plan and equipment
Loss (gain) on disposal of investment properties
Loss (gain) on disposal of investments
Loss (gain) on disposal of investments accounted for using equity method
Impairment loss on financial assets
Reversal of impairment loss on financial assets
Impairment loss on non-financial assets
Unrealized foreign exchange loss (gain)
Donation expenses
Property, plant and equipment
Investment properties transferred to expenses
Total adjustments to reconcile profit (loss)
Changes in operating assets and liabilities:
Decrease (increase) in notes receivable
Decrease (increase) in accounts receivable
Decrease (increase) in other receivable
Decrease (increase) in inventories
Decrease (increase) in prepayments
Decrease (increase) in other financial assets
Decrease (increase) in deferred debits
Total changes in operating assets
Increase (decrease) in notes payable
Increase (decrease) in accounts payable
Increase (decrease) in other payable
Increase (decrease) in provisions
Increase (decrease) in receipts in advance
Increase (decrease) in other current liabilities
Increase (decrease) in net defined benefit liability
Increase (decrease) in deferred credits
Total changes in operating liabilities
Total changes in operating assets and liabilities
Total adjustments		 For the years
ended
December 31
281,648
1,198,467
334,476
66,567
(227,467)
361,582
(18,966)
(78,752)
(37,523)
582,646
(117,981)
-
(23,246)
175,338
71,630
155,394
(19,077)
1,262,775
(6,466)
4,710
320,198
(490,616)
54,004
140,889
-
(38,370)
61,201
(23,018)
17,189
(25,964)
(21,449)
(389,532)
(410,848)
(392,473)
13,829
(1,214,374)
  • 63 -
Cash inflow (outflow) generated from operations
Interest received
Dividends received
Interest paid
Dividends paid
Income taxes refund (paid)
Net cash flows from (used in) operating activities
Cash flows from (used in) operating activities:
Profit (loss) before tax		 (5,248)
48,401
276,400
1,246,868
2,110,453
1,294,170
83,124
61,193
474,035
41,782
(555)
(7,029)
-
246,935
(67,701)
-
2,599,356
1,637,051
  • 64 -

TAIWAN FERTILIZER CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2017 and 2016

Cash flows from (used in) investing activities:
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Acquisition of financial assets at cost
Proceeds from capital reduction of financial assets at cost
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Decrease in refundable deposits
Acquisition of intangible assets
Acquisition of investment properties
Proceeds from disposal of investment properties
Decrease in other financial assets
Other investing activities
Net cash flows from (used in) investing activities
Cash flows from (used in) financing activities:
Increase in short-term loans
Increase in guarantee deposits received
Cash dividends paid
Net cash flows from (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 For the years
ended December
31		 For the years
ended December
31
664,042
(1,096,080)
(11,000)
36,000
(7,151)
95,115
(2,058,000)
(2,058,000)
(2,076,151)
(1,926,885)
(5,862)
(3,657)
1,181,385
(1,389,571)
1,084,835
2,474,406
$
2,266,220
1,084,835
  • 65 -

Acceptance No.2

Cause: Approval of the proposal for distribution of 2017 earnings.

Submitted by the Board of Directors

Remark:

  1. The Company's financial statements from January 1, 2017 to December 31, 2017 have been audited by the CPA. The Company's net income after tax was stated as NT$1,619,126,067.

  2. The Company's earnings after tax and unallocated earnings upon annual final accounting in 2017 are scheduled to be allocated in the following manner:

  3. (1) 10% set aside as legal reserve:

  4. 10% of the earnings after tax, NT$1,619,126,067, upon annual final accounting in 2017 was set aside as legal reserve, i.e., NT$161,912,607.

  5. (2) Distribution of bonus:

  6. Based on the earnings after tax upon annual final accounting in 2017, plus adjusted unallocated earnings, NT$342,145,022, and less legal reserve, NT$161,912,607, and the balance of unallocated earnings, NT$623,358,482, at the end of the year, NT$1,176,000,000, the bonus allocable to shareholders should be NT$1.2 per share in cash.

  7. The motion has been reviewed and approved at 31st meeting of the Company's Board of Directors of 33rd term on March 29, 2018 and submitted to the supervisors for audit. Upon resolution by the general shareholders’ meeting, the Board of Directors will be authorized by the shareholders’ meeting to schedule the ex-dividend date. Where the Company repurchases the Company’s shares or assigns or transfers of treasury stock or cancels the total outstanding shares in accordance with Article 28-2 of the Securities and Exchange Act and thereby results in some variance in the dividend yield to shareholders before the base date of allocation of shareholders’ bonus in cash, the Board of Directors will deal with it with full power.

  8. The summarization about subjects and amount of the allocation of remuneration to employees 2016 was disclosed in the Company's annual report and on the MOPS.

  9. Effect upon business performance, earnings per share and ROE by the Company's stock dividend distributed as bonus shares: Not applicable, as the Company did not prepare the financial forecast or distribute new stock as bonus shares.

  10. The Company's earnings allocation statement 2017 is enclosed herewith (see Attachment).

Resolution:

  • 66 -

Attachment

Approval of the proposal for distribution of 2017 earnings

Unit: NTD

Item Amount Remark
I. Amount to be allocated:
Unallocated earnings, beginning
Retrospective application and
retrospective restatement for affiliates
Reversal of special reserve provided upon
the first-time adoption of TIFRS
Actuarial profit (loss) stated into retained
earnings
Unallocated earnings after adjustment
Net profit in the current period
Provision of legal reserve（10%）
Allocable earnings in the current period
II. Items:
Shareholders’ bonus-cash (NT$1.2 per
share x 980,000,000 shares)
Unallocated earnings, ending		 675,636,072
(417,317,000)
110,045,527
(26,219,577)		 Note 1
Note 2
342,145,022
1,619,126,067
(161,912,607)
1,799,358,482

(1,176,000,000)
623,358,482
Notes:
(1) The earnings 2017 are allocated as the first priority.
(2) The total of the cash dividend less than NT$1 for odd shares is stated into
the Company’s other revenue.

Note 1: Paragraph 1 of Article 237 of the Company Law

A company, when allocating its earnings after having paid all taxes and dues, shall first set aside ten percent of said earnings as legal reserve. Where such legal reserve amounts to the total authorized capital, this provision shall not apply.

Note 2: Paragraph 3, Article 27 of the Company's Articles of Incorporation If the Company retains earnings upon final accounting, after paying taxes pursuant to laws and covering losses for the previous year, the Company shall set aside 10% of the remainder, if any, as legal reserve, and then set aside or reverse special reserve pursuant to laws, and the remainder, if any, plus accumulated unallocated earnings of the previous year shall be the allocable earnings. Notwithstanding, the Company may consider retaining or providing the special reserve, subject to its business need. Then, the shareholders’ bonus shall be distributed upon resolution of a shareholders’ meeting on the motion for allocation proposed by the Board of Directors.

  • 67 -

Discussion NO.1

Cause: The motion for allocation of cash dividend based on legal reserve Submitted by the Board of Directors

Remark:

  1. The Company proposes to allocate the shareholders’ cash bonus at NT$0.9 per share, subject to the shareholdings referred to in the roster of shareholders on the ex-dividend date, from the legal reserve provided in the past years pursuant to laws, NT$882,000,000, in accordance with Article 241 of the Company Law.

  2. The cash dividend to be allocated is rounded up to the dollar. The total of the cash bonus less than NT$1 for odd shares is stated into the Company’s other revenue.

  3. The motion has been reviewed and approved at 31st meeting of the Company's Board of Directors of 33rd term on March 29, 2018 and submitted to the supervisors for audit. Upon resolution by the general shareholders’ meeting, the Board of Directors shall be authorized by the shareholders’ meeting to schedule the base date for allocation of cash bonus to shareholders. Where the Company repurchases the Company’s shares or assigns or transfers of treasury stock or cancels the total outstanding shares in accordance with Article 28-2 of the Securities and Exchange Act and thereby results in some variance in the dividend yield to shareholders before the base date of allocation of cash bonus to shareholders, the Board of Directors will deal with it with full power.

  4. Where it is necessary to amend the allocation due to changes in laws and regulations, or per the competent authority’s order, or in order to deal with some objective circumstances, the Board of Directors shall deal with it with full power pursuant to laws.

  5. The cash bonus to be allocated from the legal reserve is NT$0.9 per share. In addition to the cash dividend allocated from earnings 2017 at NT$1.2 per share, the total cash to be allocated to shareholders is NT$2.1 per share.

Resolution:

  • 68 -

Discussion NO.2

  • Cause:The amendments to “Procedure for Acquisition or Disposition of Assets” in part

  • Submitted by the Board of Directors

Remark:

  1. The motion is handled in accordance with Paragraph 1 of Article 14-4 of the Securities and Exchange Act and FSC’s Letter Jin-Guan-Zhen-Fa-Zi No. 10200531121 dated December 31, 2013.

  2. The motion has been reviewed and approved at 32nd meeting of the Company's Board of Directors of 33rd term on April 27, 2018, and was ratified by the supervisors.

  3. Comparative List for Amendments to “Operating Procedures for Acquisition or Disposition of Assets of Taiwan Fertilizer Co., Ltd.” is enclosed herewith (see Attachment).

Resolution:

  • 69 -

Taiwan Fertilizer Co., Ltd. Comparative List for Amendments to “Operating Procedure for Ac uisition or Dis osition of Assets” q p

AmendedProvision CurrentProvision Remarks
Article 21. Appraisal and
Operating Procedures
When the Company
intends to acquire or dispose
of real property from or to a
related party, or when it
intends to acquire or dispose
of assets other than real
property from or to a related
party and the transaction
amount reaches 20 percent or
more of its paid-in capital, 10
percent or more of its total
assets, or NT$300 million or
more, except in trading of
government bonds or bonds
under repurchase and resale
agreements, or subscription
or redemption of money
market funds issued by
domestic securities
investment trust enterprises,
the Company may not
proceed to enter into a
transaction contract or make
a payment until the following
matters have been reviewed
by theAudit Committee and
approved by the Board of
Directors:
1.
The purpose, necessity
and anticipated benefit
of the acquisition or
disposal of assets.
2.
The reason for choosing
the related party as a
trading counterpart.
3.
With respect to the
acquisition of real		 Article 21. Appraisal and
Operating Procedures
When the Company
intends to acquire or dispose
of real property from or to a
related party, or when it
intends to acquire or dispose
of assets other than real
property from or to a related
party and the transaction
amount reaches 20 percent or
more of its paid-in capital, 10
percent or more of its total
assets, or NT$300 million or
more, except in trading of
government bonds or bonds
under repurchase and resale
agreements, or subscription or
redemption of money market
funds issued by domestic
securities investment trust
enterprises, the Company
may not proceed to enter into
a transaction contract or make
a payment until the following
matters have been approved
by theBoard of Directors and
recognized by the
supervisors:
1.
The purpose, necessity
and anticipated benefit
of the acquisition or
disposal of assets.
2.
The reason for choosing
the related party as a
trading counterpart.
3.
With respect to the
acquisition of real
propertyfrom a related		 To be in line with the
Company's
establishment of
“Audit Committee”
in replace of the
“Supervisors” in
2018, the Company
amended the relevant
languages in the
Procedure at the
same time.
  • 70 -
AmendedProvision CurrentProvision Remarks
property from a related
party, information
regarding appraisal of
the reasonableness of
the preliminary
transaction terms in
accordance with Article
22 and Article 23 herein.
4.
The date and price at
which the related party
originally acquired the
real property, the
original trading
counterpart, and that
trading counterpart's
relationship to the
Company and the
related party.
5.
Monthly cash flow
forecasts for the year
commencing from the
anticipated month of
signing of the contract,
and evaluation of the
necessity of the
transaction, and
reasonableness of the
funds utilization.
6.
An appraisal report from
a professional appraiser
or a CPA's opinion
obtained in compliance
with the preceding
Article.
7.
Restrictive covenants
and other important
stipulations associated
with the transaction.
The calculation of the
transaction amounts referred
to in the preceding paragraph
shall be made in accordance		 party, information
regarding appraisal of
the reasonableness of the
preliminary transaction
terms in accordance with
Article 22 and Article 23
herein.
4.
The date and price at
which the related party
originally acquired the
real property, the original
trading counterpart, and
that trading counterpart's
relationship to the
Company and the related
party.
5.
Monthly cash flow
forecasts for the year
commencing from the
anticipated month of
signing of the contract,
and evaluation of the
necessity of the
transaction, and
reasonableness of the
funds utilization.
6.
An appraisal report from
a professional appraiser
or a CPA's opinion
obtained in compliance
with the preceding
Article.
7.
Restrictive covenants
and other important
stipulations associated
with the transaction.
The calculation of the
transaction amounts referred
to in the preceding paragraph
shall be made in accordance
with Paragraph 2 of Article
38. Items that have been		 To be in line with the
Company's
establishment of
“Audit Committee”
in replace of the
“Supervisors” in
2018, the Company
amended the relevant
languages in the
Procedure at the
same time.
To be in line with the
Company's
establishment of
“Audit Committee”
in replace of the
“Supervisors” in
2018, the Company
amended the relevant
languages in the
Procedure at the
same time.
  • 71 -
AmendedProvision CurrentProvision Remarks
with Paragraph 2 of Article
38. Items that have been
reviewed bythe Audit
Committee and approved by
the Board of directors
pursuant to the Procedure
need not be counted toward
the transaction amount.
With respect to the
acquisition or disposition of
equipment for operating
purpose between the
Company and its
subsidiaries, the Company's
Board of Directors may
pursuant to Article 6 herein
and the Company’s
“Delegation of Authorization
of Board of Directors and
Managers” delegate the
Chairman to decide such
matters when the transaction
is within a certain amount
and have the decisions
subsequently submitted to
and ratified by the latest
meeting of the Board of
Directors.
Where the Company
delegates the position of
independent director, when a
matter is submitted for
discussion by the Board of
Directors pursuant to the
preceding paragraph, the
Board of Directors shall take
into full consideration each
independent director's
opinions. If an independent
director agrees to, objects to
or expresses reservations
about any matter, it shall be
recorded in the minutes of		 approved bythe Board of
directors and recognized by
the supervisors pursuant to
the Procedure need not be
counted toward the
transaction amount.
With respect to the
acquisition or disposition of
equipment for operating
purpose between the
Company and its subsidiaries,
the Company's Board of
Directors may pursuant to
Article 6 herein and the
Company’s “Delegation of
Authorization of Board of
Directors and Managers”
delegate the Chairman to
decide such matters when the
transaction is within a certain
amount and have the
decisions subsequently
submitted to and ratified by
the latest meeting of the
Board of Directors.
Where the Company
delegates the position of
independent director, when a
matter is submitted for
discussion by the Board of
Directors pursuant to the
preceding paragraph, the
Board of Directors shall take
into full consideration each
independent director's
opinions. If an independent
director agrees to, objects to
or expresses reservations
about any matter, it shall be
recorded in the minutes of the
Board of Directors meeting.
Where the Company
establishes an audit
  • 72 -
AmendedProvision CurrentProvision Remarks
the Board of Directors
meeting.
The matters for which
Paragraph 1requires review
by theAudit Committeeshall
first be approved by a
majority of all Audit
Committee members and
then submitted to the Board
of Directors for a resolution.
If approval of a majority of
all Audit Committee
members as required is not
obtained, the procedures may
be implemented if approved
by more than two-thirds of
all directors, and the
resolution of the Audit
Committee shall be recorded
in the minute of the Board of
Directors meeting.
The terms "all Audit
Committee members" and
"all Directors" referred to in
the preceding paragraph shall
be counted as the actual
number of persons currently
holding those positions.		 committee,the matters for
which the preceding
paragraph requires
recognition by the supervisors
shall first be approved by a
majority of all Audit
Committee members and then
submitted to the Board of
Directors for a resolution. If
approval of a majority of all
Audit Committee members as
required is not obtained, the
procedures may be
implemented if approved by
more than two-thirds of all
directors, and the resolution
of the Audit Committee shall
be recorded in the minute of
the Board of Directors
meeting.
The terms "all Audit
Committee members" and "all
Directors" referred to in the
preceding paragraph shall be
counted as the actual number
of persons currently holding
those positions.
Article 24.
Where the Company
acquires real property from a
related party and the results
of appraisals conducted in
accordance with Article 22
and Article 23 herein are
uniformly lower than the
transaction price, the
following steps shall be
taken:
1. A special reserve shall be
set aside in accordance
with Paragraph 1 of		 Article 24.
Where the Company
acquires real property from a
related party and the results of
appraisals conducted in
accordance with Article 22
and Article 23 herein are
uniformly lower than the
transaction price, the
following steps shall be
taken:
1.
A special reserve shall be
set aside in accordance
with Paragraph 1 of
  • 73 -
AmendedProvision AmendedProvision CurrentProvision CurrentProvision Remarks
2. Article 41 of the
Securities and Exchange
Act against the
difference between the
real property transaction
price and the appraised
cost, and may not be
distributed or used for
capital increase or
issuance of bonus shares.
Where the investor who
uses the equity method to
account for its
investment in the
Company is a public
company, then the
special reserve called for
under Paragraph of
Article 41 of the same
Act shall be set aside on
a pro rata basis in a
proportion consistent
with the share of the
public company's equity
stake in the Company.
The Audit Committee
members who are
independent directors
shall comply withArticle
218 of the Company Law
which that may apply
mutatis mutandis under
Article 14-4 of the
Securities and Exchange
Act.		 2. Article 41 of the
Securities and Exchange
Act against the
difference between the
real property transaction
price and the appraised
cost, and may not be
distributed or used for
capital increase or
issuance of bonus shares.
Where the investor who
uses the equity method to
account for its
investment in the
Company is a public
company, then the
special reserve called for
under Paragraph 1 of
Article 41 of the same
Act shall be set aside on
a pro rata basis in a
proportion consistent
with the share of the
public company's equity
stake in the Company.
Supervisors shall comply
with Article 218 of the
Company Law.		 To be in line with the
Company's
establishment of
“Audit Committee”
in replace of the
“Supervisors” in
2018, the Company
amended the relevant
languages in the
Procedure and
applicable laws at the
same time.
Article 25. Trading Principles
and Strategies
3. Segregation of duties
(1) Financial officer:
1. Retrieve market
information, judge trends
and risks, get familiar
with financial		 Article 25. Trading Principles
and Strategies
3. Segregation of duties
(1) Financial officer:
1. Retrieve market
information, judge trends
and risks, get familiar
with financial
  • 74 -
AmendedProvision CurrentProvision Remarks
instruments, related laws
and operation skills, and
engage in transactions
based on the authorized
limit upon approval of
the responsible
supervisor to evade the
risk over fluctuation in
market price.
2. Verify the foreign
exchange position, set
the hedge position limit
and target foreign
exchange rate per term
(monthly or quarterly)
based on the
procurement quantity
and range of target
foreign exchange rate
and cost estimated by the
procurement personnel
upon receipt of the
purchase order, in order
to mitigate the exposure
risk over foreign
exchange rate position.
3. Submit the periodic
performance appraisal
report on the held
positions to the high-
rank management
designated by the Board
of Directors for
reference.
(2) Accounting officer:
1. Responsible for
accounting.
2. Responsible for
disclosing the
information related to the
Company's transactions
in the financial
statements.		 instruments, related laws
and operation skills, and
engage in transactions
based on the authorized
limit upon approval of the
responsible supervisor to
evade the risk over
fluctuation in market
price.
2. Verify the foreign
exchange position, set the
hedge position limit and
target foreign exchange
rate per term (monthly or
quarterly) based on the
procurement quantity and
range of target foreign
exchange rate and cost
estimated by the
procurement personnel
upon receipt of the
purchase order, in order
to mitigate the exposure
risk over foreign
exchange rate position.
3. Submit the periodic
performance appraisal
report on the held
positions to the high-rank
management designated
by the Board of Directors
for reference.
(2) Accounting officer:
1. Responsible for
accounting.
2. Responsible for
disclosing the
information related to the
Company's transactions
in the financial
statements.
3. Responsible for verifying
transactions and auditing		 To be in line with the
Company's
establishment
of
“Audit
Committee”
in replace of the
“Supervisors”
in
2018, the Company
amended the relevant
languages
in
the
Procedure
at
the
same time.
  • 75 -
AmendedProvision CurrentProvision Remarks
3. Responsible for verifying
transactions and auditing
the balance of positions.
4. Handle public
announcement and
reporting.
(3) Internal audit officer:
Responsible for
periodically making a
determination of the
suitability of internal controls
on derivatives and
conducting a monthly audit
of how faithfully derivatives
trading by the trading
department adhere to the
Procedures and also
analyzing the trading cycles;
if any material violation is
discovered,the Audit
Committeeshall be notified
inwriting.		 the balance of positions.
4. Handle public
announcement and
reporting.
(3) Internal audit officer:
Responsible for
periodically making a
determination of the
suitability of internal controls
on derivatives and conducting
a monthly audit of how
faithfully derivatives trading
by the trading department
adheres to the Procedure and
also analyzing the trading
cycles, and preparing an audit
report; if any material
violation is discovered,all
supervisorsshall be notified
in writing.
Article 29. Internal Audit
System
1. The internal audit officer
shall periodically make a
determination of the
suitability of internal
controls on derivatives
and conduct a monthly
audit of how faithfully
derivatives trading by the
trading department
adhere to the Procedure
and also analyze the
trading cycles, and
prepare an audit report. If
any material violation is
discovered,the Audit
Committeeshall be
notifiedinwriting.		 Article 29. Internal Audit
System
1. The internal audit officer
shall periodically make a
determination of the
suitability of internal
controls on derivatives
and conduct a monthly
audit of how faithfully
derivatives trading by the
trading department adhere
to the Procedure and also
analyze the trading cycles,
and prepare an audit
report. If any material
violation is discovered,all
supervisorsshall be
notified in writing.		 To be in line with the
Company's
establishment of
“Audit Committee”
in replace of the
“Supervisors” in
2018, the Company
amended the relevant
languages in the
Procedure at the
same time.
Article 44. Implementation
and Amendment to the		 Article 44. Implementation
and Amendment to the		 1. To be in line with
the Company's
  • 76 -
AmendedProvision CurrentProvision Remarks
Procedure
The establishment of
the Company's “Operating
Procedure for Acquisition or
Disposition of Assets”shall
be adopted upon approval of
a majority of all Audit
Committee members, and
implemented upon resolution
by the Board of Directors
and approval by a
shareholders’meeting. The
same shall apply where the
Procedure is amended. If a
director expresses dissent
and it is contained in the
minutes or a written
statement, the company shall
submit the director's
dissenting opinion to the
Audit Committee.
If approval of a
majority of all Audit
Committee members as
required in the preceding
paragraph is not obtained, the
procedures may be
implemented if approved by
more than two-thirds of all
directors, and the resolution
of the Audit Committee shall
be recorded in the minute of
the Board of Directors
meeting.
The terms"all Audit
Committee members"and
"all Directors"referred to in
the preceding paragraph shall
be counted as the actual
number of persons currently
holding those positions.		 Procedure
After the Company's
Operating Procedure for
Acquisition or Disposition of
Assets has beenapproved by
the Board of Directors, it
shall be submitted to each
supervisor,and then to a
shareholders' meeting for
approval. The same shall
apply where the Procedure is
amended. If a director
expresses dissent and it is
contained in the minutes or a
written statement, the
company shall submit the
director's dissenting opinion
toeach supervisor.		 establishment of
“Audit
Committee” in
replace of the
“Supervisors” in
2018, the
Company
amended the
relevant languages
in the Procedure at
the same time.
2. Upon
establishment of
the "Audit
Committee”, the
Company
amended some
written contents
herein in
accordance with
Article 6 of the
“Regulations
Governing the
Acquisition or
Disposition of
Assets by Public
Companies” at the
same time.
  • 77 -

Discussion NO.3

  • Cause:The amendments to “Procedure for Loaning of Fund and Making of Endorsements/Guarantees” in part

  • Submitted by the Board of Directors

Remark:

  1. The motion is handled in accordance with Paragraph 1 of Article 14-4 of the Securities and Exchange Act and FSC’s Letter Jin-Guan-Zhen-Fa-Zi No. 10200531121 dated December 31, 2013.

  2. The motion has been reviewed and approved at 32nd meeting of the Company's Board of Directors of 33rd term on April 27, 2018, and was ratified by the supervisors.

  3. Comparative List for Amendments to “Operating Procedure for Loaning of Fund and Making of Endorsements/Guarantees” is enclosed herewith (see Attachment).

Resolution:

  • 78 -

Taiwan Fertilizer Co., Ltd. Comparative List for Amendments to “Operating Procedure for Loanin of Fund and Makin of Endorsements/Guarantees” g g

AmendedProvision CurrentProvision Remarks
Article 10. Internal Control
of Loaning of Fund
1. Financial Dept. shall
prepare the statement
recording the loaning and
repayment of fund on a
monthly basis to help
control and follow up,
and public announcement
and reporting.
2. The Company's internal
audit officer shall audit
the Operating Procedure
for Loaning of Fund and
the implementation
thereof no less frequently
than quarterly and
prepare written records
accordingly. Any
material violation found
by the officer will be
notified to theAudit
Committeeimmediately.
3. If, as a result of a change
in circumstances, the
entity to which the
Company loaned fund
does not meet the
requirements herein or
the loan balance exceeds
the limit, the Company
shall adopt rectification
plans and submit the
rectification plans tothe
Audit Committee,and
shall complete the
rectification according to
the timeframe set out in
theplan.。		 Article 10. Internal Control
of Loaning of Fund
1.
Financial Dept. shall
prepare the statement
recording the loaning
and repayment of fund
on a monthly basis to
help control and follow
up, and public
announcement and
reporting.
2.
The Company's internal
audit officer shall audit
the Operational
Procedures for Loaning
Funds to Others and the
implementation thereof
no less frequently than
quarterly and prepare
written records
accordingly. Any
material violation found
by the officer will be
notified toeach
supervisorimmediately.
3.
If, as a result of a
change in
circumstances, the
entity to which the
Company loaned fund
does not meet the
requirements herein or
the loan balance
exceeds the limit, the
Company shall adopt
rectification plans and
submit the rectification
plans toeach
supervisor,and shall		 To be in line with the
Company's
establishment of
“Audit Committee” in
replace of the
“Supervisors” in 2018,
the Company amended
the relevant languages
in the Procedure at the
same time.
To be in line with the
Company's
establishment of
“Audit Committee” in
replace of the
“Supervisors” in 2018,
the Company amended
the relevant languages
in the Procedure at the
same time.
  • 79 -
AmendedProvision CurrentProvision Remarks
complete the
rectification according
to the timeframe set out
in theplan.。
Article 17. Internal Control of
Making of
Endorsements/Guarantees
1. Financial Dept. shall
prepare the statement
recording the making
and cancellation of
endorsements/guarantees
on a monthly basis to
help control and follow-
up, and public
announcement and
reporting.
2. The Company's internal
audit officer shall audit
the Operational
Procedures for Making
of
Endorsements/Guarantee
s and the implementation
thereof no less frequently
than quarterly and
prepare written records
accordingly. Any
material violation found
by the officer will be
notified to theAudit
Committee immediately.
3. For circumstances in
which an entity for
which the Company
makes any
endorsement/guarantee is
the Company's
subsidiary whose net
worth is lower than half
of its paid-in capital, the
Company shall review
the necessityand


 Article 17. Internal Control
of Making of
Endorsements/Guarantees
1.
Financial Dept. shall
prepare the statement
recording the making
and cancellation of
endorsements/guarantee
s on a monthly basis to
help control and follow-
up, and public
announcement and
reporting.
2.
The Company's internal
audit officer shall audit
the Operational
Procedures for Making
of
Endorsements/Guarante
es and the
implementation thereof
no less frequently than
quarterly and prepare
written records
accordingly. Any
material violation found
by the officer will be
notified toeach
supervisor immediately.
3.
For circumstances in
which an entity for
which the Company
makes any
endorsement/guarantee
is the Company's
subsidiary whose net
worth is lower than half
of its paid-in capital, the
Companyshall review		 To be in line with the
Company's
establishment of
“Audit Committee” in
replace of the
“Supervisors” in 2018,
the Company amended
the relevant languages
in the Procedure at the
same time.
To be in line with the
Company's
establishment of
“Audit Committee” in
replace of the
“Supervisors” in 2018,
the Company amended
the relevant languages
  • 80 -
AmendedProvision CurrentProvision Remarks
4.
5.		 reasonableness of
endorsements/guarantees
and conduct risk
assessment in accordance
with Article 15 herein,
and shall also control the
same strictly in
accordance with the
internal control
regulations governing
endorsements/guarantees
referred to in the
preceding paragraph.
If, as a result of a change
in circumstances, the
entity for which the
Company makes
endorsements/guarantees
does not meet the
requirements herein or
the amount of
endorsements/guarantees
exceeds the limit, the
business unit in charge
and Financial Dept. shall
adopt rectification plans
and submit the
rectification plans tothe
Audit Committee,and
shall complete the
rectification according to
the timeframe set out in
the plan.
In the case of a
subsidiary with shares
having no par value or a
par value other than
NT$10, for the paid-in
capital in the calculation
under subparagraph 3 of
this Article, the sum of
the share capital plus
paid-in capital in excess		 4.
5.		 the necessity and
reasonableness of
endorsements/guarantee
s and conduct risk
assessment in
accordance with Article
15 herein, and shall also
control the same strictly
in accordance with the
internal control
regulations governing
endorsements/guarantee
s referred to in the
preceding paragraph.
If, as a result of a
change in
circumstances, the entity
for which the Company
makes
endorsements/guarantee
s does not meet the
requirements herein or
the amount of
endorsements/guarantee
s exceeds the limit, the
business unit in charge
and Financial Dept.
shall adopt rectification
plans and submit the
rectification plans to
each supervisor, and
shall complete the
rectification according
to the timeframe set out
in the plan.
In the case of a
subsidiary with shares
having no par value or a
par value other than
NT$10, for the paid-in
capital in the calculation
under subparagraph 3 of
this Article,the sum of		 in the Procedure at the
same time.
  • 81 -
AmendedProvision CurrentProvision Remarks
of par shall be
substituted.		 the share capital plus
paid-in capital in excess
of par shall be
substituted.
Article 19. Control Procedure
for Subsidiaries
1. Where a subsidiary of
the Company intends to
loan funds to others and
make
endorsements/guarantees
for others, it shall
formulate its own
operating procedure for
loaning of funds and
making of
endorsements/guarantees
and comply with the
procedure when making
endorsements/guarantees
. Notwithstanding, the
net worth shall be
calculated based on the
subsidiary's net worth.
2. The subsidiary shall
submit the
summarization about
loaning of fund to others
and making of
endorsements/guarantees
for others in last month
to the Company by 5th
day (exclusive) of each
month.
3. The Company's internal
audit officer shall audit
the subsidiary's operating
procedure for loaning of
fund and making of
endorsements/guarantees
and the implementation
thereof no less frequently
thanquarterlyand

 Article 19. Control Procedure
for Subsidiaries
1.
Where a subsidiary of
the Company intends to
loan funds to others and
make
endorsements/guarantee
s for others, it shall
formulate its own
operating procedure for
loaning of funds and
making of
endorsements/guarantee
s and comply with the
procedure when making
endorsements/guarantee
s. Notwithstanding, the
net worth shall be
calculated based on the
subsidiary's net worth.
2.
The subsidiary shall
submit the
summarization about
loaning of fund to
others and making of
endorsements/guarantee
s for others in last
month to the Company
by 5th day (exclusive)
of each month.
3.
The Company's internal
audit officer shall audit
the subsidiary's
operating procedure for
loaning of fund and
making of
endorsements/guarantee
s and the
implementation thereof		 To be in line with the
Company's
establishment of the
“Audit Committee” in
replace of the
“Supervisor” and
strictly regulate the
subsidiary’s operating
procedure for loaning
of fund, any material
violation found by the
subsidiary shall be also
notified to the
Company's Audit
Committee, in addition
to each supervisor of
the subsidiary,
immediately.
  • 82 -
AmendedProvision CurrentProvision Remarks
prepare written records
accordingly. Any
material violation found
by the officer will be
notified to each
supervisor of the
subsidiary andthe
Company's Audit
Committee immediately.		 no less frequently than
quarterly and prepare
written records
accordingly. Any
material violation found
by the officer will be
notified to each
supervisor of the
subsidiaryimmediately.
Article 21. Effect and
Amendment
The establishment of
the Procedure shall be
submitted to a shareholders’
meeting for resolution after
passage by the Audit
Committee and Board of
Directors.Where any
director expresses dissent
and it is contained in the
minutes or a written
statement, the Company shall
submit the dissenting opinion
to theAudit Committee,and
to a shareholders’ meeting
for discussion. The same
shall apply where the
Procedure is amended.
Where the Company
delegates the position of
independent director, when
the Procedure is submitted
for discussion by the Board
of Directors pursuant to the
preceding paragraph, the
Board of Directors shall take
into full consideration each
independent director's
opinions. If an independent
director agrees to, objects to
or expresses reservations
about anymatter,it shall be		 Article 21. Effect and
Amendment
After passage of the
Procedure by the Board of
Directors, the same shall be
submitted to each supervisor
and a shareholders’meeting
for approval.Where any
director expresses dissent
and it is contained in the
minutes or a written
statement, the Company
shall submit the dissenting
opinion toeach supervisor,
and to a shareholders’
meeting for discussion. The
same shall apply where the
Procedure is amended.
Where the Company
delegates the position of
independent director, when
the Procedure is submitted
for discussion by the Board
of Directors pursuant to the
preceding paragraph, the
Board of Directors shall
take into full consideration
each independent director's
opinions. If an independent
director agrees to, objects to
or expresses reservations
about any matter, it shall be
recorded in the minute of		 To be in line with the
Company's
establishment of
“Audit Committee” in
replace of the
“Supervisors” in 2018,
the Company amended
the relevant languages
and literary contents in
the Procedure at the
same time.
  • 83 -
AmendedProvision CurrentProvision Remarks
recorded in the minute of the
Board of Directors meeting.		 the Board of Directors
meeting.
  • 84 -

Discussion NO.4

Cause: The amendments to “Rules of Procedure for Shareholders’ Meetings” in part Submitted by the Board of Directors

Remark:

  1. According to Paragraph 1 of Article 14-4 of the Securities and Exchange Act and FSC’s Letter Jin-Guan-Zhen-Fa-Zi No. 10200531121 dated December 31, 2013, the Company shall establish the Audit Committee in replace of supervisors in 2018.

  2. The comparative list for amendments to the “Parliamentary Rules for Shareholders’ Meetings of Taiwan Fertilizer Co., Ltd.” is enclosed herewith (see Attachment).

Resolution:

  • 85 -

Taiwan Fertilizer Co., Ltd. Comparative List for Amendments to “Parliamentary Rules for Shareholders’ Meetin ” g

AmendedProvision CurrentProvision Remark
Article 3.
The Company shall specify
in its shareholders meeting
notices the time during
which shareholder
attendance registrations
will be accepted, the place
to register for attendance,
and other matters for
attention.
The time during which
shareholder attendance
registrations will be
accepted, as stated in the
preceding paragraph, shall
be at least 30 minutes prior
to the time the meeting
commences. The place at
which attendance
registrations are accepted
shall be clearly marked and
a sufficient number of
competent personnel
assigned to handle the
registrations.
Shareholders or their
proxies (collectively,
"shareholders") shall
attend shareholders’
meetings based on
attendance cards, sign-in
cards, or other certificates
of attendance. Solicitors
soliciting proxy forms
shall also bring
identification documents
for verification.
The Company shall furnish
thepresent shareholders
The Company shall specify
in its shareholders meeting
notices the time during
which shareholder
attendance registrations
will be accepted, the place
to register for attendance,
and other matters for
attention.
The time during which
shareholder attendance
registrations will be
accepted, as stated in the
preceding paragraph, shall
be at least 30 minutes prior
to the time the meeting
commences. The place at
which attendance
registrations are accepted
shall be clearly marked and
a sufficient number of
competent personnel
assigned to handle the
registrations.
Shareholders or their
proxies (collectively,
"shareholders") shall
attend shareholders’
meetings based on
attendance cards, sign-in
cards, or other certificates
of attendance. Solicitors
soliciting proxy forms shall
also bring identification
documents for verification.
The Company shall furnish
the present shareholders
with an attendance book to
sign,orpresent
Establish the Audit
Committee in accordance
with Article 14-4 of the
Securities and Exchange
Act.
To replace the supervisors,
delete all requirements
related to supervisors.
  • 86 -
AmendedProvision CurrentProvision Remark
with an attendance book to
sign, or present
shareholders may hand in a
sign-in card in lieu of
signing in.
The number of shares in
attendance shall be
calculated according to the
shares indicated by the
attendance book and sign-
in cards handed in plus the
number of shares whose
voting rights are exercised
by correspondence or
electronically.
The Company shall furnish
present shareholders with
the meeting handbook,
annual report, attendance
card, speaker's slips, voting
slips, and other meeting
materials. Where there is
an election of directors or
independent directors,pre-
printed ballots shall also be
furnished.		 shareholders may hand in a
sign-in card in lieu of
signing in.
The number of shares in
attendance shall be
calculated according to the
shares indicated by the
attendance book and sign-
in cards handed in plus the
number of shares whose
voting rights are exercised
by correspondence or
electronically.
The Company shall furnish
present shareholders with
the meeting handbook,
annual report, attendance
card, speaker's slips, voting
slips, and other meeting
materials. Where there is
an election of directors or
supervisors,pre-printed
ballots shall also be
furnished.
Article 17
The chairperson shall
allow ample opportunity
during the meeting for
explanation and discussion
of motions and of
amendments or
extemporary motions put
forward by the
shareholders. When the
chairperson is of the
opinion that a motion has
been discussed sufficiently
to put it to a vote, the
chairperson may announce
the discussion closed and		 The chairperson shall
allow ample opportunity
during the meeting for
explanation and discussion
of motions and of
amendments or
extemporary motions put
forward by the
shareholders. When the
chairperson is of the
opinion that a motion has
been discussed sufficiently
to put it to a vote, the
chairperson may announce
the discussion closed and
call for a vote.		 Delete all requirements
related to supervisors.
  • 87 -
Amended Provision Current Provision Remark
call for a vote.
lection or dismissal of
directors or independent
directors, amendments to
the articles of
incorporation, the
dissolution, merger, or
demerger of the Company,
or any matter under
Paragraph 1 of Article 185
of the Company Law, or
Articles 26-1 and 43-6 of
the Securities and
Exchange Act shall be set
out in the notice of the
reasons for convening the
shareholders’ meeting.
None of the above matters
may be raised in the form
of extemporary motion.		 Election or dismissal of
directors orsupervisors,
amendments to the articles
of incorporation, the
dissolution, merger, or
demerger of the Company,
or any matter under
Paragraph 1 of Article 185
of the Company Law, or
Articles 26-1 and 43-6 of
the Securities and
Exchange Act shall be set
out in the notice of the
reasons for convening the
shareholders’ meeting.
None of the above matters
may be raised in the form
of extemporary motion.
Article 20.
The election of directors
andindependent directors
at a shareholders’ meeting
shall be held in accordance
with the Company Law,
related laws, and the
applicable election and
appointment rules adopted
by the Company, and the
voting results shall be
announced on site
immediately, including the
names of those elected as
directors andindependent
directors, and the numbers
of votes with which they
are elected.
The ballots for the election
referred to in the preceding
paragraph shall be sealed
with the signatures of the
scrutineer and kept in		 The election of directors
andsupervisorsat a
shareholders’ meeting shall
be held in accordance with
the Company Law, related
laws, and the applicable
election and appointment
rules adopted by the
Company, and the voting
results shall be announced
on site immediately,
including the names of
those elected as directors
andsupervisors,and the
numbers of votes with
which they are elected.
The ballots for the election
referred to in the preceding
paragraph shall be sealed
with the signatures of the
scrutineer and kept in
proper custody for at least
1year. If,however,a		 Delete all requirements
related to supervisors.
  • 88 -
AmendedProvision CurrentProvision Remark
proper custody for at least
1 year. If, however, a
shareholder initiates a legal
action pursuant to Article
189 of the Company Law,
the ballots shall be retained
until the conclusion of the
litigation.		 shareholder initiates a legal
action pursuant to Article
189 of the Company Law,
the ballots shall be retained
until the conclusion of the
litigation.
  • 89 -

Elections

  • Cause: Election of the Company's 34th Board of Directors (including Independent Board of Directors).

  • Submitted by the Board of Directors

Remark:

  1. The Company's current directors and supervisors shall hold the position until expiration of three years on June 30, 2018. According to the Company's Articles of Incorporation, the directors/supervisors shall be reelected at the general shareholders’ meeting 2018.

  2. According to Article 16 and Article 16-1 of the Company's Articles of Incorporation, the Company shall elect 9 directors (including 3 independent directors) and adopt the nomination system for election of directors. 31st meeting of the Board of Directors of 33rd term resolved to reelect 9 directors of 34th term, who shall hold the position for three years, commencing from July 1, 2018 to June 30, 2020. The current directors will be discharged from their position upon expiration of the term of office.

  3. The Company's election of directors of 34th term adopts the nomination system. The name list of candidates for directors was reviewed and approved by the 5th special meeting of the Board of Directors of the 33rd term. Please see the following:

Candidates
category		 Candidate
name		 Education
background		 Experience Current post No. of the
held share
(unit: share)		 Government
or legal
person name		 Other
information
Director Hsin-Hong
Kang		 Doctor
of
Economics,
University
of
California,
Santa
Barbara		 Chair
of
Department
of
Business
Administratio
n,
NCKU,
and Director
of
Graduate
Institute
of
Business
Administratio
n, NCKU
Director
of
Institute
of
International
Business,
NCKU		 Chairman
of Board of
Taiwan
Fertilizer
Co., Ltd.		 235,886,376 Council of
Agriculture
, Executive
Yuan		 N/A
Director Chi-chung
Chen		 Doctor,
Institute
of
Agricultural
Economics,
Texas A&M
University		 Chairman,
Rural
Economics
Society
of
Taiwan
Secretary-		 Vice
Minister,
Council of
Agriculture
, Executive
Yuan		 235,886,376 Council of
Agriculture
, Executive
Yuan		 N/A
  • 90 -
Candidates
category		 Candidate
name		 Education
background		 Experience Current post No. of the
held share
(unit: share)		 Government
or legal
person name		 Other
information
General,
National
Chung Hsing
University
Director Tsai-Hsing
Liu		 Master,
Agronomy
Group,
Institute
of
International
Developmen
t
Plan,
Chinese
Culture
University		 Director
of
Central
and
North
Business
Offices
of
Sales
Department,
Taiwan
Fertilizer Co.,
Ltd.		 Section
Chief,
Agricultura
l
Promotion
Section of
Sales
Departmen
t,
Taiwan
Fertilizer
Co.,Ltd.		 235,886,376 Council of
Agriculture
, Executive
Yuan		 N/A
Director Chao-Feng
Li		 Master
of
Institute
of
Architecture
, NCKU		 Director-
General,
Economic
Affairs
Department,
Yilan County
Adjunct
Assistant
Professor
of
Department
of
Civil
Engineering,
National Ilan
University,
Taiwan		 Chief
Architect,
Zhao-Feng
Architectur
e Office		 235,886,376 Council of
Agriculture
, Executive
Yuan		 N/A
Director Shih-Chi
Lin		 Bachelor of
Department
of
Public
Administrati
on, National
Chung
Hsing
University		 Director-
General,
Secretariat,
Yilan County
Director-
General,
Social Affairs
Department,
YilanCounty		 Senior
Specialist,
Minister's
Office,
Council of
Agriculture		 235,886,376 Council of
Agriculture
, Executive
Yuan		 N/A
Director Yaw-
Kuang
Chen		 Doctor
of
Philosophy,
Stevens
Institute
of
Technology		 Associate
Professor
of
Department
of
Architecture,
NCKU		 Adjunct
Associate
Professor
of
Departmen
t
of		 100,000 N/A N/A
  • 91 -
Candidates
category		 Candidate
name		 Education
background		 Experience Current post No. of the
held share
(unit: share)		 Government
or legal
person name		 Other
information
Project
Manager,
SHCA
in
New
York,
the U.S.A.		 Architectur
e, NCKU
Independen
t
Director		 Horng-
Chang Lin		 Master
of
Science
in
Finance,
George
Washington
University		 CFO,
Healthconn
Independent
Supervisor,
Giga
Solar
Materials
Corp.		 Consultant,
Taiwan
Rolling
Stock Co.,
Ltd.		 0 N/A N/A
Independen
t
Director		 Ming-
Shiuan
Lee		 Master
of
Science in
Accounta
ncy,
Universit
y
of
Illinois at
Urbana
Champaig
n		 Vice
President
of
Tax
Service
Dept., PwC
Assistant
Officer/Assist
ant Manager
of
Underwriting
Dept.,
Jian
Hua
Securities
(now known
as
Underwriting
Dept.,
SinoPac
Securities		 Finance
Vice
President,
Kingmax
Group		 0 N/A N/A
Independen
t
Director		 Chao-Chin
Hsiao		 MBA,
NCKU		 Taiwan CPA,
International
and
Cross-
Strait Affairs
Commission
Member
CPA of the
R.O.C.		 Responsibl
e
person
and CPA of
Tai
Ming
CPA Office		 0 N/A N/A

Resolution:

  • 92 -

Other Matter and Discussion

Cause: Release of Directors from Non-Competition Restrictions.

Submitted by the Board of Directors

Remark:

  1. According to Article 209 of the Company Law, a director who does anything for himself or on behalf of another person that is within the scope of the company's business, shall explain to the meeting of shareholders the essential contents of such an act and secure its approval.

  2. The Company's directors are holding posts in other companies concurrently or managing other companies engaged in business lines identical with or similar to the Company’s in the capacity of director or representative. Accordingly, the Company hereby petitions the shareholders’ meeting to approve the termination of the non-competition restriction on the directors pursuant to laws.

  3. The general shareholders’ meeting is requested to terminate the noncompetition restriction on Director Ji-Zhong Chen after his election. The related information is stated as following:

Name of Director Chi-Chung Chen
Name ofCompany TaiwanSugarCorp.
Position Director
Main Contents of Business(Conduct) Gas station,et al.
  1. The motion has been approved at 5th special meeting of the Company's Board of Directors of the 33rd term and is hereby submitted to the general shareholders’ meeting for resolution.

Resolution:

  • 93 -

Motion

Adjournment

  • 94 -

Appendix

  1. Rules of Procedure for Shareholders’ Meeting

  2. Articles of Incorporation

  3. Regulations on Election of Board of Directors and Independent Board of Directors

  4. Rules for Procedure of Directors’ Meetings

  5. Ethical Corporate Management Best-Practice Principles

  6. Code of Ethical Conduct for Directors and Top Managers

  7. Procedure for Acquisition or Disposal of Assets

  8. Procedure for Loaning of Fund and Making of

  9. Endorsements/Guarantees

  10. Shareholdings of Directors and Supervisors

  11. Effect of the gratuitous allotment of shares on operation performance, earnings per share and return rate on investment for shareholders

  12. 95 -

Appendix 1

Rules of Procedure for Shareholders’ Meeting

Amended at General Shareholders’ Meeting on June 24, 2014

Article 1 The parliamentary rules for the Company's shareholders meetings, except as otherwise provided by the Company Law, Articles of Incorporation and other related laws, shall be as provided herein. Article 2 The shareholders referred to herein shall mean the shareholders per se and their proxies. Article 3 The Company shall specify in its shareholders meeting notices the time during which shareholder attendance registrations will be accepted, the place to register for attendance, and other matters for attention. The time during which shareholder attendance registrations will be accepted, as stated in the preceding paragraph, shall be at least 30 minutes prior to the time the meeting commences. The place at which attendance registrations are accepted shall be clearly marked and a sufficient number of competent personnel assigned to handle the registrations. Shareholders or their proxies (collectively, "shareholders") shall attend shareholders’ meetings based on attendance cards, sign-in cards, or other certificates of attendance. Solicitors soliciting proxy forms shall also bring identification documents for verification. The Company shall furnish the present shareholders with an attendance book to sign, or present shareholders may hand in a sign-in card in lieu of signing in. The number of shares in attendance shall be calculated according to the shares indicated by the attendance book and sign-in cards handed in plus the number of shares whose voting rights are exercised by correspondence or electronically. The Company shall furnish present shareholders with the meeting handbook, annual report, attendance card, speaker's slips, voting slips, and other meeting materials. Where there is an election of directors or supervisors, pre-printed ballots shall also be furnished. Article 4 Attendance and votes at shareholders’ meetings shall be calculated based on numbers of shares. With respect to resolutions of shareholders’ meetings, the number of shares held by a shareholder with no voting rights shall not be calculated as part of the total number of issued shares. When a shareholder is an interested party in relation to a motion, and there is the likelihood that such a relationship would prejudice the interests of the Company, that shareholder may not vote on that motion, and may not exercise voting rights as proxy for any other shareholder. The number of shares for which voting rights may not be exercised under the preceding paragraph shall not be calculated as part of the voting rights

  • 96 -

represented by present shareholders. Article 5 The venue for a shareholders’ meeting shall be the premises of the Company, or a place easily accessible to shareholders and suitable for a shareholders’ meeting. The meeting may begin no earlier than 9 a.m. and no later than 3 p.m. Article 6 If a shareholders’ meeting is convened by the Board of Directors, the meeting shall be chaired by the Chairman of Board. When the Chairman is on leave or for any reason unable to exercise the powers of the chairperson, the Chairman shall appoint one of the directors to act as chairperson. Where the Chairman does not make such a designation, the directors shall select from among themselves one person to serve as the chairperson. When a director serves as the chairperson, as referred to in the preceding paragraph, the director shall be one who has held that position for six months or more and who understands the financial and business conditions of the Company. The same shall apply where the chairperson is a representative of a juristic person director. If a shareholders’ meeting is convened by a party with power to convene but other than the Board of Directors, the convener shall chair the meeting. When there are two or more such conveners, they shall mutually select a chairperson from among themselves. Article 7 The Company may appoint its attorneys-at-law, certified public accountants, or related persons retained by it to attend a shareholders’ meeting in a non-voting capacity. Staff handling administrative affairs of a shareholders’ meeting shall wear identification cards or arm badges. Article 8 The Company, beginning from the time it accepts shareholder attendance registrations, shall make an uninterrupted audio and video recording of the registration procedure, the proceedings of the shareholders’ meeting, and the voting and vote counting procedures. The recorded materials referred to in the preceding paragraph shall be retained for at least 1 year. If, however, a shareholder initiates a legal action pursuant to Article 189 of the Company Law, the materials shall be retained until the conclusion of the litigation. Article 9 The chairperson shall call the meeting to order at the appointed meeting time. However, when the present shareholders do not represent a majority of the total number of issued shares, the chairperson may announce a postponement, provided that no more than two such postponements, for a combined total of no more than 1 hour, may be made. If the quorum is not met after two postponements, but the present shareholders represent onethirds or more of the total number of issued shares, a tentative resolution may be adopted pursuant to Paragraph 1 of Article 175 of the Company Law, and all shareholders shall be notified of the tentative resolution and another shareholders’ meeting shall be convened within 1 month. When, prior to conclusion of the meeting, the present shareholders

  • 97 -

represent a majority of the total number of issued shares, the chairperson may resubmit the tentative resolution for a vote by the shareholders’ meeting pursuant to Article 174 of the Company Law.

  • Article 10 If a shareholders’ meeting is convened by the Board of Directors, the meeting agenda shall be set by the Board of Directors. The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders’ meeting.

  • The provisions of the preceding paragraph apply mutatis mutandis to a shareholders’ meeting convened by a party with the power to convene other than the Board of Directors.

  • The chairperson may not declare the meeting adjourned prior to completion of deliberation on the meeting agenda of the preceding two paragraphs (including extemporary motions), except by a resolution of the shareholders’ meeting.

  • Article 11 If the chairperson declares the meeting adjourned in violation of the Parliamentary Rules, the shareholders shall not elect another chairperson to continue the meeting at the same venue or any other premises after the meeting is adjourned.

  • Article 12 When a meeting is in progress, the chairperson may announce a break based on time considerations.

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

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

  • When a present shareholder is speaking, other shareholders may not speak or interrupt unless they have sought and obtained the consent of the chairperson and the shareholder who gives the speech. The chairperson shall stop any violation.

  • Article 13 Except with the consent of the chairperson, a shareholder may not speak more than twice on the same motion, and a single speech may not exceed 5 minutes. If the shareholder's speech violates the rules referred to in the preceding paragraph or exceeds the scope of the motion, the chairperson may terminate the speech.

  • Article 14 When the government or a juristic person is a shareholder, it may be represented by more than one representative at a shareholders’ meeting. When a juristic person is appointed to attend as proxy, it may designate only one person to represent it in the meeting.

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

  • Article 15 After a present shareholder has spoken, the chairperson may respond in

  • 98 -

person or direct relevant personnel to respond.

Article 16 A shareholder shall be entitled to one vote for each share held, except when the shares are restricted shares or are deemed non-voting shares under Paragraph 2 of Article 179 of the Company Law. When the Company holds a shareholders’ meeting, it may allow the shareholders to exercise voting rights by correspondence or electronic means. A shareholder exercising voting rights by correspondence or electronic means will be deemed to have attended the meeting in person, but to have waived his/her rights with respect to the extemporary motions and amendments to original motions of that meeting.

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

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

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

Article 17 The chairperson shall allow ample opportunity during the meeting for explanation and discussion of motions and of amendments or extemporary motions put forward by the shareholders. When the chairperson is of the opinion that a motion has been discussed sufficiently to put it to a vote, the chairperson may announce the discussion closed and call for a vote. Election or dismissal of directors or supervisors, amendments to the articles of incorporation, the dissolution, merger, or demerger of the Company, or any matter under Paragraph 1 of Article 185 of the Company Law, or Articles 26-1 and 43-6 of the Securities and Exchange Act shall be set out in the notice of the reasons for convening the shareholders’

  • 99 -

meeting. None of the above matters may be raised in the form of extemporary motion.

  • Article 18 Except as otherwise provided in the Company Law and in the Company's Articles of Incorporation, the passage of a motion shall require an affirmative vote of a majority of the voting rights represented by the present shareholders.

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

The scrutineers and counting personnel for the voting on a motion shall be appointed by the chairperson, provided that the scrutineers shall be shareholders of the Company.

Vote counting for shareholders’ meeting motions or elections shall be conducted in public at the venue where the shareholders’ meeting is held. Immediately after vote counting has been completed, the results of the voting, including the statistical tallies of the numbers of votes, shall be announced on-site at the meeting, and a record made of the vote. The ballots which meet any of the following circumstances shall be held invalid, and the votes represented by the ballots shall not be included into the calculation:

  1. Failure to use the ballot form prepared by the Company.

  2. Failure to cast the ballot into the ballot box.

  3. The ballot remains blank or fails to express option toward the motion.

  4. The ballot contains other irrelevant text in addition to the particulars to be identified.

  5. The ballot is illegible or tampered;.

  6. The proxy uses the ballot in violation of the “Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies”.

  7. Article 19 For each shareholders’ meeting, a shareholder may appoint a proxy to attend the meeting by providing the proxy form issued by the Company and stating the scope of the proxy's authorization.

  8. A shareholder may issue only one proxy form and appoint only one proxy for any given shareholders’ meeting, and shall deliver the proxy form to the Company before 5 days before the date of the shareholders’ meeting. When duplicate proxy forms are delivered, the one received earliest shall prevail unless a declaration is made to cancel the previous proxy. After a proxy form has been delivered to the Company, if the shareholder intends to attend the meeting in person or to exercise voting rights by correspondence or electronically, a written notice of proxy cancellation shall be submitted to the Company before 2 business days before the meeting date. If the cancellation notice is submitted beyond said-noted time limit, votes cast at the meeting by the proxy shall prevail.

  9. 100 -

  10. Article 20 The election of directors and supervisors at a shareholders’ meeting shall be held in accordance with the Company Law, related laws, and the applicable election and appointment rules adopted by the Company, and the voting results shall be announced on site immediately, including the names of those elected as directors and independent directors, and the numbers of votes with which they are elected.

  11. The ballots for the election referred to in the preceding paragraph shall be sealed with the signatures of the scrutineer and kept in proper custody for at least 1 year. If, however, a shareholder initiates a legal action pursuant to Article 189 of the Company Law, the ballots shall be retained until the conclusion of the litigation.

  12. Article 21 The chairperson may direct the proctors (security personnel) to help maintain order at the meeting place. When proctors (or security personnel) help maintain order at the meeting place, they shall wear an identification card or arm badge bearing the word "Proctor".

  13. At the place of a shareholders meeting equipped with microphone, if a shareholder attempts to speak through any device other than the equipment installed by the Company, the chairperson may prevent the shareholder from so doing.

  14. When a shareholder violates the parliamentary rules and defies the chairperson's correction, obstructing the proceedings and refusing to heed calls to stop, the chairperson may direct the proctors or security personnel to escort the shareholder from the meeting.

  15. Any persons attending the shareholders’ meeting are prohibited from bringing any objects sufficient to endanger another person's life, body, freedom and safety of property with them.

  16. Article 22 If a force majeure event occurs, the chairperson may rule the meeting temporarily suspended and announce a time when, in view of the circumstances, the meeting will be resumed.

  17. If the meeting venue is no longer available for continued use before all of the motions (including extemporary motions) on the meeting agenda have been addressed, the shareholders’ meeting may adopt a resolution to resume the meeting at another venue.

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

  19. Article 23 The Rules shall be enforced upon approval of the shareholders’ meeting. The same shall apply where the Rules are amended.

  20. 101 -

Appendix 2

Articles of Incorporation

Amendment in the regular session of the Shareholders Assembly dated June 25 2013 Amendment in the regular session of the Shareholders Assembly dated June 29 2016 Amendment in the regular session of the Shareholders Assembly dated June 14 2017

Chapter I General Provision

Article I The Company is duly incorporated in accordance with the Company Act and bears the title of TAIWAN FERTILIZER CORPORATION.

  • Article II The Company is engaged in the following business:

  • I. C801010 Basic Industrial Chemical Manufacturing

  • II. C801020 Petrochemicals Manufacturing

  • III. C801110 Fertilizer Manufacturing

  • IV. C801990 Other Chemical Materials Manufacturing

  • V. C802100 Cosmetics Manufacturing

  • VI. C802170 Poisonous Chemical Material Manufacturing

  • VII. C802990 Other Chemical Products Manufacturing

  • VIII. CC01060 Wired Communication Equipment and Apparatus Manufacturing

  • IX. CC01080 Electronic Parts and Components Manufacturing

  • X. CE01030 Photographic and Optical Equipment Manufacturing XI. F102180 Wholesale of Ethanol

  • XII. F107050 Wholesale of Manure

  • XIII. F107060 Wholesale of Virulence Chemical Substance

  • XIV. F107080 Wholesale of Environment Medicines

  • XV. F107200 Wholesale of Chemistry Raw Material

  • XVI. F107990 Wholesale of Other Chemical Products

  • XVII. F108040 Wholesale of Cosmetics

  • XVIII. F113070 Wholesale of Telecom Instruments

  • XIX. F119010 Wholesale of Electronic Materials XX. F203030 Retail Sale of Ethanol

  • 102 -

XXI. F207050 Retail Sale of Manure XXII. F207060 Retail Sale of Virulence Chemical Materials XXIII. F207080 Retail Sale of Environment Medicine XXIV. F207200 Retail sale of Chemistry Raw Material XXV. F207990 Retail Sale of Other Chemical Products XXVI. F208040 Retail Sale of Cosmetics XXVII. F212011 Gasoline Stations XXVIII. F212990 Retail Sale of Other Fuel in Specialized Stores, Petrochemical Fuel Product XXIX. F214030 Retail Sale of Motor Vehicle Parts and Supplies XXX. F301010 Department Stores XXXI. F301020 Supermarkets XXXII. F401010 International Trade XXXIII. F501060 Restaurants XXXIV. G202010 Parking Garage Business XXXV. G406061 Harbor Cargoes Forwarding Services XXXVI. G801010 Warehousing and Storage XXXVII. H701010 Residence and Buildings Lease Construction and Development XXXVIII. H701020 Industrial Factory Buildings Lease Construction and Development XXXIX. H701040 Specialized Field Construction and Development XL. H701050 Public Works Construction and Investment XLI. H703010 Factory leasing XLII. H703020 Warehouse leasing XLIII. H703030 Office building leasing XLIV. I301010 Software Design Services XLV. I301020 Data Processing Services XLVI. I301030 Digital Information Supply Services XLVII. I401010 General Advertising Services XLVIII. J101030 Waste Disposing XLIX. J101040 Waste Disposing L. J101060 Wastewater (Sewage) Treatment LI. JA01990 Other Automobile Services. LII. ZZ99999 All business items that are not prohibited or

  • 103 -

  • restricted by law, except those that are subject to special approval.

  • Article III The total direct investment made by the Company shall not exceed the net worth stated in the audited or reviewed financial statements covering the most recent period but is not regulated by Article 13 of the Company Act that the total direct investment cannot exceed 40% of the paid-in capital, where the total direct investment in other industries shall not exceed 100% of the paid-in capital.

  • Article IV The Company is headquartered in Taipei, and may establish branches at appropriate locations at home and abroad for business needs. The establishment, changes, and dismantle of these branches shall be subject to the resolution of the Board.

  • Article V The Company may make announcement by publishing on eyecatching page of a daily newspaper circulated in the place where the corporate headquarters is located. Unless otherwise required by the competent authority of securities.

  • Chapter II Shares of Stock

  • Article VI The Company has authorized capital of NT$9.8 billion evenly split into 980 million shares at NT$10/share and issued in full.

  • Article VII The Company is exempted in printing physical share certificates for the shares offered and shall register with the central depository of securities.

  • Article VIII Change in the content of the Shareholders Registry is prohibited in the period of sixty (60) days prior to a scheduled regular session of the Shareholders’ Assembly and thirty (30) days prior to a scheduled special session of the Shareholders’ Assembly, and five (5) days prior to a dividend day or any other day of payment. Chapter III Shareholders Assembly

  • Article IX The Shareholders Assembly consists of regular sessions and special sessions A regular session will be convened at the call of the Board once annually within six (6) months after the end of a fiscal year. Unless the Company Act specifies otherwise, special session may be convened at any time to the call of the Board or Independent Directors under law. Shareholders of the Company holding 3% or more of the outstanding shares for more than one (1) year may also call for special session under law by specifying the agenda and the

  • 104 -

reason for the session.

  • Article X Thirty (30) days of notice to the shareholders is required for calling a regular session and fifteen (15) days of notice to the shareholders is required for calling a special session. Information on the date, time, and place shall be inscribed in the notice of meeting. Shareholders holding less than 1,000 shares may be notified to regular session of Shareholders Assembly through announcement thirty (30) days in advance, and to special session of Shareholders’ Assembly fifteen (15) days in advance.

  • Article XI Where particular shareholder may not be able to attend the session in person, and may use the power of attorney document printed by the Company to appoint a proxy to attend the meeting and specify the scope of authorization, affix the authorized signature or seal thereunto for causing the instrument to become effective.

    • The competent authority requires that shareholders of the Company may vote through electronic means. Those who cast votes electronically shall be deemed as being present in the session. Other matters shall be governed by applicable legal rules.

  • Article XII Shareholders Assembly shall make decisions in a session with the presence of shareholders representing more than half of the outstanding shares and the consent by a simple majority of the shareholders in the session unless the Company Act or other applicable laws specified otherwise.

  • Article XIII The Board shall call for the sessions of the Shareholders Assembly and the Chairman of the Board shall preside over the sessions. In the absence of the Chairman, a Director designated by the Chairman shall preside over the meeting on behalf of the Chairman, or, a Director shall be nominated among one another to preside over the meeting.

    • To be eligible for acting on behalf of and in the name of the Chairman in presiding over the sessions of the Shareholders Assembly, Director must be in office for at least six (6) months and is familiar with the financial position and operation of the Company. The same principle is applicable to institutional directors.

If the session of the Shareholders Assembly is called for by an

  • 105 -

entitled party other than the Board, such party shall preside over the session. If there are two entitled parties to call for the session, one of them shall be nominated as the Chairman of the session between themselves.

  • Article XIV The holder of each share is entitled to 1 vote.

  • Article XV The resolutions of the Shareholders Assembly shall be kept as minutes of meeting on record with the date, venue, name of the Chairman, means of resolution, the summary of the motions and the results of the voting, with the signature of the Chairman affixed, and released to the shareholders within twenty (20) days after the session.

The release of the aforementioned minutes of meeting on record may be made by announcement.

  • Chapter IV Directors and Audit Committee

  • Article XVI The Company established nine (9) seats of Directors who shall be elected from persons with legal competence by the Shareholders Assembly. Each Director has tenure of three (3) years and may assume a second term of office if reelected. Independent Directors may not assume office for a term of longer than nine (9) years. The total quantity of registered shares held all Directors of the Company is governed by the “Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies”.

  • The Company shall take professional liability insurance for the protection of the Directors and Independent Directors within their term of office and the scope of their professed duties.

Article XVI – I

Three seats of Directors as mentioned in I of the previous article shall be reserved for the Independent Directors.

  • Directors and Independent Directors shall be elected by a nomination system whereby shareholders shall elect the candidates on the list of nomination at one time. Candidates who earned the majority votes shall be elected to office.

The professional qualification, quantity of shareholding, restriction in holding other positions, the means of nomination and election, and other rules and regulations shall be governed by applicable

  • 106 -

legal rules of the competent authority.

Article XVI - II

The Company has established the Audit Committee in accordance with the Securities and Exchange Act. This body is consisted of all Independent Directors of whom 1 shall act as the convener. At least 1 of the Independent Directors shall be specialized in accounting or finance. The functions, organization code, authority and responsibility and other matters of the Audit Committee shall be governed by the legal rules of the competent authority.

The establishment of the Audit Committee shall become effective after the election of the Directors and Independent Directors for the 34th term of the Board. The office of Supervisors of the 33rd term of the Board shall automatically be dissolved at the time the Audit Committee was established.

Article XVI- III

The Company established the Compensation Committee in accordance with Article 14-6 of the Securities and Exchange Act. The Compensation Committee or members of the Compensation Committee shall perform their duties and exercise their authority in accordance with the “Regulations Governing the Appointment and Exercise of Powers by Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter”.

  • Article XVII The Directors shall be organized into the Board of Directors (the Board) and a Chairman shall be elected among themselves. The Chairman acts on behalf of and in the name of the Company externally, and presides over the sessions of the Shareholders Assembly and the Board; administer all matters of the Company in accordance with the policy set forth by the Board.

  • Article XVIII The functions of the Board:

  • I. Approval of the business and financial policies.

  • II. Approval of the business plan and supervision of the execution of the plan.

  • III. Approval of budget and account settlement.

  • IV. Planning of capitalization and decapitalization.

  • V. Approval of the issuance of corporate bonds.

  • 107 -

  • VI. Planning for the distribution of earnings or write-off loss

  • VII. Acquisition, assignment, licensing of important contracts and essential specialized technologies and patents, and the approval, amendment and termination of technology joint ventures agreements.

  • VIII. Planning for the amendment to the Articles of Incorporation of the Company.

  • IX. Approval of the organization code of the Board and the Company, and important internal rules and regulations.

  • X. Discussion and decision of the establishment, change, and dismantle of branches.

  • XI. The appointment and dismissal of the President and Vice Presidents of the Company.

  • XII. Appointment and dismissal of the external auditor. XIII. Acting on behalf of and in the name of the Company in setting the limit of endorsement, guarantee, and acceptance.

  • XIV. Approval of singificant transactions among related parties (including affiliates).

  • XV. Calling for sessions of Shareholders Assembly. XVI. Authority and duties provided by law and the resolutions of the Shareholders Assembly.

  • Article XIX. In general, the Board shall convene once a month. However, the Chairman may call for special session in urgent situations or at the request of more than half of the Directors, and shall preside over the session. In the absence of the Chairman, a Director may be appointed to act on behalf of the Chairman to preside over a session, or, a Director shall be nominated among all Directors to preside over the session.

    • If particular Director cannot attend the session in person, this Director may appoint another Director at act as proxy to attend the session to perform his function.

  • Article XX. The Board shall make resolutions of the Board in a session with the presence of at least half of the Directors and a simple majority of the Directors in session unless the Company Act or other applicable laws specified for a higher ratio of votes. The minutes of meeting on record shall be affixed with the authorized signature/seal of the

  • 108 -

  • Chairman and the rules specified in Article XV of this Chapter shall be applicable.

  • Article XXI. The remuneration to the Chairman shall be based on 1.25% of the remuneration to the President. The remunerations to other Directors and Independent Directors shall not exceed the highest bracket of the salary scale for the employees of the Company.

    • Chapter V The Managers

  • Article XXII. The Company shall establish the seat for a President who will follow the policy direction set forth by the Board and the instruction of the Chairman to administer all operations and supervise all employees of the Company. The Company shall establish 2 to 4 seats of Vice President who will assist the President in business operation.

  • The appointment, dismissal and remunerations to the aforementioned managers shall be governed by Article XXIX of the Company Act.

    • Chapter VI Accounting

  • Article XXIII. The fiscal period of the Company starts on January 1 and ends on December 31 of each calendar year. Account settlement shall be made at the end of each fiscal year.

  • Article XXIV. The Company shall compile the following statements at the end of each fiscal year, refer to certified public accountants for auditing, and submit to the Audit Committee thirty (30) days prior to the scheduled date of the regular session of the Shareholders Assembly for ratification.

  • I. Business Report

  • II. Financial Statement

  • III. Proposal for the Distributions of Earnings or Write-Off loss carried forward

  • Article XXV. If the Company has a surplus in particular fiscal year, appropriates 2.4% as remuneration to the employees and no more than 1.6% as remunerations to the Directors with reference to the actual profit status. If there is loss carried forward, the Company shall appropriate specific amount to write-off the loss from its earnings. The aforementioned remunerations to the employees and Directors shall be subject to the resolution of the Board in a session with the

  • 109 -

presence of at least 2/3 of the Directors and a simple majority of the Directors in session, and reported to the Shareholders Assembly.

If there is a surplus after account settlement in a fiscal year, the Company shall appropriate the payment of income tax, followed by the write-off of loss carried forward. If there is still a surplus, the Company shall appropriate 10% as legal reserve, and pool the remainder after the appropriation or reversal of special reserve to the undistributed earnings carried forward from the previous year as distributable income. Pending the necessity of the appropriation of retained earnings for business needs or special reserve, the Board shall propose for the distribution of income and present to the regular session of the Shareholders Assembly for the resolution of dividend payment.

A number of factors shall be considered when paying out dividends to shareholders, including the diversity of the business operation and the specific feature of economic change, the life span of products or services, and the cash requirement in the future with proper balance between business development and the rights and interests of the shareholders. The proportion of cash dividend payable to shareholders of the year shall not fall below 10% of the total amount of dividend payment unless there is a major investment program, significant change in financial position, significant change in operation, capacity expansion, or other significant capital spending that huge amount of capital is required. The payment of dividends shall be subject to the approval of the Shareholders Assembly.

Chapter VII Miscellaneous

  • Article XXVI. The Company may establish its “Procedures for Financing and Endorsement” in accordance with the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” for business needs and undertakes guarantee in favor of third parties.

  • Article XXVII. Anything not covered by the Article of Incorporation” shall be governed by the Company Act and other applicable legal rules.

  • Article XXVIII. The internal code of the Company and related procedures shall be separately instituted.

  • 110 -

  • Article XXIX. The Articles of Incorporation were passed by the founding meeting of the Company on June 4 1947, amended by the regular session of the Shareholders Assembly on September 1 1952, special session of the Shareholders Assembly on June 19 1953, regular session of the Shareholders Assembly on April 5 1954, March 31 1955 and on April 25 1958, special session of the Shareholders Assembly on November 15 1958, regular session of the Shareholders Assembly on May 14 1959, the 1st special session of the Shareholders Assembly on May 10 1960, the 2nd special session of the Shareholders Assembly on October 21 1960, amended by the regular sessions of the Shareholders Assembly on April 29 1961, March 18 1963, March 22 1964, March 31 1965, August 16 1967, August 20 1969, September 15 1970, October 6 1972, March 2 1974, July 24 1976, May 14 1982, May 20 1983, May 23 1986, May 22 1987, the 1st special session of the Shareholders Assembly on November 30 1987, the regular sessions of the Shareholders Assembly on September 27 1990, September 21 1991, September 17 1993, September 29 1994, the 1st special session of the Shareholders Assembly on May 20 1995, the regular sessions of the Shareholders Assembly on September 30 1995, September 30 1996, September 27 1997, November 10 1999, the 1st special session of the Shareholders Assembly on May 16 2000, the regular sessions of the Shareholders Meeting on June 26 2011, June 21 2002, June 23 2003, June 25 2004, June 24 2005, June 14 2006, June 13 2007, June 16 2009, June 17 2010, June 22 2011, June 27 2012, June 25 2013, June 24 2014, June 29 2016, June 14 2017.

The removal of the content related to Supervisors in the Articles of Incorporation will be effective as of the day the Audit Committee is officially established.

  • 111 -

Appendix 3

Regulations on Election of Board of Directors and

Independent Board of Directors

Amended at the General Shareholders’ Meeting on October 30, 1998 Amended at the General Shareholders’ Meeting on June 21, 2002 Amended at the General Shareholders’ Meeting on June 23, 2003 Amended at the General Shareholders’ Meeting on June 24, 2014 Amended at the General Shareholders’ Meeting on June 14, 2017

  • Article 1. Except as otherwise provided by the Company Act or other laws, the election of Directors and Independent Directors shall be conducted in accordance with the Rules.

  • Article 2. The election of the Company’s Directors and Independent Directors shall adopt the candidate nomination system under Article 192-1 of the Company Act. The Shareholders shall elect the Directors and Independent Directors from among the nominees listed in the roster of director candidates based on the quota defined under the Company’s Articles of Incorporation. The number of the Company’s Directors and Independent Directors shall be subject to the quota referred to in the Company’s Articles of Incorporation. Based on the statistic results of electronic communication platforms and ballots, those receiving ballots representing the highest numbers of voting rights will be elected as Directors and Independent Directors sequentially according to their respective numbers of votes. The votes for Directors and Independent Directors shall be calculated separately, and the Directors and Independent Directors shall be elected separately. When two or more persons receive the same number of votes, thus exceeding the specified number of positions, they shall draw lots to determine the winner, and the Chairperson shall draw lots on behalf of any person not in attendance.

  • Article 2-1. Election and qualifications of the Company’s Independent Directors shall comply with the “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies” and related laws.

  • 112 -

  • Article 3. The single open cumulative voting method shall be used for election of the Company’s Directors and Independent Directors. Each share will have the vote in number equal to the Directors and Independent Directors to be elected, and may be cast for a single candidate, or split among multiple candidates, provided that the total of votes shall not exceed the total voting rights.

  • Article 4. Where any Shareholder appoints a proxy to cast votes on behalf of him/her, except for trust enterprises, or shareholders service agents approved by the competent authority, when a person acts as the proxy for two or more shareholders, the number of voting right represented by him/her shall not exceed 3% of the total number of voting shares of the Company, otherwise, the portion of excessive voting rights shall not be counted.

  • Article 5. The ballots shall be prepared by the Board of Directors per the attendance card number and affixed with the number of voting rights associated with each ballot. Each of the present Shareholders at the Shareholders’ Meeting shall be given one ballot. The voters shall identify the candidate’s name and Shareholder account number in the “Candidate” section of the ballot. If a candidate is a Shareholder, the voter shall specify the candidate's name and ID No., provided that when the candidate is a governmental organization or juristic person, the name of the governmental organization or juristic person or the name of the representative of the governmental organization or juristic person shall be specified. When there are multiple representatives, the names of each respective representative shall be specified.

  • Article 6. The Chairperson shall designate two voting supervisors from the present Shareholders prior to the election.

  • Article 7. The ballots which meet any of the following circumstances shall be held invalid, and the votes represented by the ballots shall not be included in the calculation of votes for the given candidate:

  • Failure to complete the registration procedure;

  • Failure to use the ballot form prepared by the Company’s Board of Directors;

  • The ballot is so illegible that it cannot be read;

  • The number of candidates specified on the ballot exceeds the quota;

  • The total of votes for various candidates exceed the total voting rights;

  • 113 -

  • The ballot is tampered with or contains other irrelevant text in addition to the particulars to be identified;

  • Failure to cast the ballot into the ballot box, or the cast ballot remains blank;

  • Failure to specify the information about the candidate as identified in accordance with Article 5 herein, or the information is inconsistent upon verification.

  • Article 8. Cast votes shall be calculated by the voting supervisors on site immediately after the end of the poll, and the results of the calculation shall be announced by the Chairperson on the site.

  • Article 9. The Company shall issue the notifications to the Directors and Independent Directors elected separately.

  • Article 10. Any matters not covered herein shall be implemented in accordance with the Company’s Articles of Incorporation, Company Act and other related laws.

  • Article 11. The Rules shall be enforced upon approval of a Shareholders’ Meeting. The same shall apply where the Rules are amended.

  • Deletion of the provisions about Supervisors referred to herein shall be effective as of the date when the Audit Committee is established.

  • 114 -

Appendix 4

Rules for Procedure of Directors’ Meetings

Passed by the Board on July 22 2003 Amended by the Board on November 21 2006 Amended by the Board on December 29 2014 Amended by the Board on August 22 2017

  • Article I This Procedure is instituted in accordance with the Company Act, Corporate Governance Best Practice Principles for TWSE/GTSMlisted Companies, the Articles of Incorporation of the Company, and other applicable legal rules for establishing a viable governance system of the Board to the extent that the Board could strengthen its performance in corporate governance under lawful parliamentary procedure and resolution of the Board.

  • Article II The Board shall perform its functions in accordance with the Company Act, the Articles of Incorporation of the Company, and other applicable legal rules as well as the resolutions of the Shareholders Assembly.

  • Article III In general, the Board shall convene once a month. However, the Chairman may call for special session in urgent situations or at the request of more than half of the Directors, and shall preside over the session. In the absence of the Chairman, a Director may be appointed to act on behalf of the Chairman to preside over a session, or, a Director shall be nominated among all Directors to preside over the session.

  • After the election for the new term of the Board, Directors who earned the majority of the votes shall call for a session of the Board within fifteen (15) days. If the election of the new term of the Board was completed within the term of office of the previous Board, and resolved to relief the Directors from duties at the expiration of the term of office, such session shall be convened within fifteen (15) days after the relief of the previous Board from office.

  • Article IV Notice of seven (7) days to the Directors is necessary for the convention of a regular session with information on the time, place, and reason for the meeting inscribed in the notice. Materials for the session will also be delivered to the Directors simultaneously with the meeting notice. If extemporary or emergent motions were to be

  • 115 -

included in the agenda, information on these motions may be released on due time.

  • Special session may be convened at any time where necessary. The particulars inscribed in Article XIII of This Procedure shall be exhibited as the reasons for the session in the meeting notice unless in an emergency or with justifiable reasons, and shall not be presented as extemporary motions.

  • Notice as referred to in the preceding 2 paragraphs may be delivered through electronic means at the consent of the receiving parties.

  • Article V The Board shall convene at the place where the Company is located and within regular office hours. Another place and time may be arranged for the session of the Board at the convenience of and appropriate with the Directors as dictated by business needs.

  • Article VI The Board shall prepare a sign-in book for the sign-in of the Directors attending the meeting and other observers to the meetings. Directors shall attend the session in person. If it is not possible for attending the session in person, the Director concerned may appoint another Director as proxy to attend the session. The scope of authorization shall be specified in the power of attorney issued for each instance of the meeting.

  • The name of the Director acting as proxy shall be inscribed in the power of attorney, which will be affixed with the authorized signature or seal of the principal. Each Director may act as the proxy for only one other Director.

  • Article VII Where the session of the Board may be convened through videoconferencing, Directors who participate in the videoconference shall be construed as attending the session in person but shall send the sign-in card by fax in lieu of signing on the sign-in book.

  • Article VIII When the Board is in session, managers of related functional departments shall be present as observers and report the status of operations to the Board and respond to the queries of the Directors. In addition, certified public accountants, lawyers or other professionals may be invited to the session for presenting professional opinions and other important information as reference for the Board for making the session a success.

Article IX

  • The entire procedure of the Board session shall be tracked on record by voice recording or videotaping and kept for at least five

  • 116 -

(5) years. The filing of record may be done electronically. In the event of legal actions on relevant resolutions of the Board before the expiration of the retention period, related voice records or videotapes shall continue to be kept and the rule of retention of five (5) years shall be waived.

Voice record or videotape for tracking Board session convened via videoconferencing shall constitute an integral part of the minutes of meeting on record and shall be kept permanently.

Article X The agenda of the routine session of the Board shall consist of at least the following:

  • I. Briefing:

    • (I) The minutes of the last meeting and follow-up.

    • (II) Important business and financial reports.

    • (III) Internal audit reports.

    • (IV) Report on other important matters.

  • II. Points of discussion:

    • (I) Discussion carried forward from the last meeting.

  • (II) The motions in the agenda for discussion in current session.

  • III. Extemporary motions

  • Article XI The Board shall announce for the session at the exact time as scheduled with the presence of more than half of the Directors. Or the Board shall announce for a postponement of the session of up to one (1) hour if less than half of the Directors were present at the scheduled time of the session. If the number of Directors in the session still cannot qualify for a quorum, the Chairman shall announce another date for the session and shall not make any provisional decisions on the motions. Once a session is announced for postponement by the Chairman, a new date for the session shall be arranged in accordance with the Parliamentary Procedure of the Board.

  • Article XII The Board shall proceed to the session in accordance with the agenda, which may be altered at the consent of more than half of the Directors in session. The Chairman shall not announce for the adjournment of the session before all the motions or topics on the agenda were covered (including extemporary motions) without the resolution of the Board. The Chairman shall arrange break time or time for consultation in the duration of the session. The designated administrative body for the arrangement of procedural matters for the Board sessions is the Office of the Board.

  • 117 -

The Office of the Board shall prepare sufficient materials and the agenda for the sessions, which will be delivered to the Directors together with the notice of the session.

If particular Director suggests the content of materials for the session is insufficient, request the Office of the Board for additional information. If more than half of the Directors suggest insufficient information for the motions in the session, discussion of these motions may be postponed at the resolution of the Board.

Article XIII

The following shall be presented to the Board for discussion:

  • I. The business plan of the Company.

  • II. Annual financial statements.

  • III. The institution or revision of the internal control system pursuant to Article 14-1 of the Securities and Exchange Act (hereinafter referred to as “SEA”), and the effectiveness of the internal control system.

  • IV. The institution or revision of the procedures for the acquisition and disposition of assets, derivative trade, loaning of third parties, guarantee and endorsement and other actions of financial significance pursuant to Article 36-1 of the SEA.

  • V. Issuance of equity securities through public offering or private placement.

  • VI. Appointment and dismissal of the persons in charge of finance, accounting, or internal audit.

  • VII. Donations to related parties or significant donations to nonrelated parties. Charity donations in an emergency situation caused by natural disasters may be reported to the nearest session of the Board for ratification.

  • VIII. Matters required for the resolution of the Board or presented to the Board for ratification or as required by the competent authority pursuant to Article 14-3 of the SEA, other applicable legal rules, and the Articles of Incorporation.

Related parties as referred to in VII of the previous subparagraph are related parties defined and governed by the Criteria for the Compilation of Financial Statements by Securities Issuers. Significant donations to non-related parties are donation to particular recipient exceeding NT$100 million in one transaction or accumulated in one year, or, at 1% of the net worth or 5% of the paid-in capital as shown in the audited financial statement of the most recent year.

  • 118 -

The most recent year as mentioned the preceding paragraph is based on the date of the Board session moving backing for one (1) year in retrospect. The donations already passed by the Board could be excluded in the calculation.

  • Shares issued by foreign companies with no face value, or the face value is not NT$10/share, and where the 5% paid-in capital limit is applicable, it shall be based on 2.5% of the shareholders’ equity. If the Company has established seats for Independent Directors, at least one shall attend the sessions of the Board in person. Matters that require the resolution of the Board as stated in Paragraph 1 shall be made in a session with the presence of all Independent Directors. If particular Independent Director cannot attend the session in person, they shall appoint another Independent Director to serve as the proxy to attend the session. Independent Directors may have adverse opinions or qualified opinions, and shall be noted in the minutes of meeting on record. Independent Directors who cannot attend the session in person but expressed adverse or qualified opinions shall present such opinions in writing in advance and shall be inscribed in the minutes of meeting on record unless under justifiable reasons.

  • Article XIV Directors shall request the Chairman for the forum for expression of opinions and shall not engage in personal attack, express opinions unrelated to the motions, repetition in expressing opinions on the same topic or motion that hinder the other Directors in expression of opinion. The Chairman shall stop any irrational moves or interference to the session.

  • Article XV If particular motion has been discussed for certain moment of time that the Chairman deems it is appropriate to refer the motion for decision, the Chairman shall announce for the voting on the motion. Each Director has one vote. The Chairman may ask the Directors for opinion on particular motion. If the Directors bring up no objection to such motion, it shall be deemed the motion is passed as was resolved by voting.

  • If there is objection on such motion, such motion shall be resolved by voting. Voting on motions could be made by show of hands, by roll calls, or balloting. If there is still objection from the Directors in the session, majority rule shall stand.

If the resolutions of the Board were found in defiance of applicable legal rules, to the extent that damage is caused to the Company,

  • 119 -

Directors who expressed adverse opinions with proof of the minutes of meeting on record or their opinions presented in writing could be exempted from legal liabilities.

  • Article XVI All resolutions of the Board shall be passed by a session with the presence of at least half of the Directors and the consent by a simple majority of the Directors in session unless the Company Act, the Articles of Incorporation, or other applicable legal rules provide otherwise.

  • Resolution of amendment to or substitute of particular motion shall be referred to voting by the Chairman in combination with the original motion. If one of the motions in the series was passed, all other motions shall be deemed vetoed without the necessity of another round of balloting.

  • The result of balloting shall be announced on the scene and tracked on record.

  • Article XVII The motions of the Board in session may involve the personal interests of particular Directors and there is the concern of posing conflict to the interest of the Company. Under such circumstance, the Directors concerned shall recuse themselves voluntarily or at the recommendation of other Directors from the discussion and balloting of the motions. If the balloting included the votes of the Directors who are supposed to recuse, the result of balloting shall be nullified.

  • Article XVIII The minutes of the session of the Board shall be kept on record with the following information inscribed in full detail:

  • I. The session series (or year), time and place.

  • II. The name of the Chairman.

  • III. The attendance of the Directors, including the names and number of persons in session, on leave, and absent.

  • IV. The names and occupational titles of the persons attending the session as observers.

  • V. Name of the minute recorder

  • VI. Briefing

  • VII. Points of discussion: the means and outcomes of resolving the motions, the summary of the messages delivered by the Directors, experts, and other personnel, the names of the Directors for recusal in the discussion and balloting of motions, the summary to the conflict of interest, the reasons for recusal or no recusal, the execution of recusal, adverse or qualified

  • 120 -

opinions tracked on record or in written declaration, and the opinions of the Independent Directors in writing pursuant to Paragraph V, Article XIII.

  • VIII. Extemporary motions: The names of the proposers of motions, the means and outcomes of resolution, the summary of the messages delivered by the Directors, experts, and other personnel, the names of the Directors for recusal in the discussion and balloting of motions, the summary to the conflict of interest, the execution of recusal, adverse or qualified opinions tracked on record or in written declaration, and the opinions of the Independent Directors as stated in the previous paragraph.

  • IX. Others for recording.

  • If particular Independent Director holds adverse or qualified opinion on particular motion tracked on record or in written declaration, specify the detail in the minute of meeting, and make declaration at the website designated by the competent authority within two (2) days after the end of the session.

  • The minutes of meeting on record shall be affixed with the authorized signature/seal by the Chairman of the meeting and the minute recorder, and delivered to the Directors within twenty (20) days after the meeting. This document shall be treated as essential and filed on Company key archive perpetually.

The preparation and circulation of the minutes of meeting on record as mentioned in Paragraph I may be done in electronic mean.

  • Article XIX With the exceptions of the motions required discussion by the Board under Paragraph 1 of Article XIII, the Board may authorize the person empowered for acting on behalf of and in the name of the Board to further authorize downward along the corporate hierarchy, the content of authorization and the substances of the matters under authorization in specificity under applicable legal rules, the Articles of Incorporation of the Company or the “Segregation of Authority and Responsibility of the Board and the Management” when the Board is in recess. Summary authorization is not permitted.

  • Article XX If any of the resolutions of the Board is treated as material information under applicable legal rules, material requirements of Taiwan Stock Exchange Corporation, or TPEx, upload the information to MOPS by designated deadline.

  • 121 -

  • Article XXI Anything not covered in this Parliamentary Procedure of the Board shall be governed by the Company Act, Articles of Incorporation, and other applicable legal rules.

  • Article XXII This Parliamentary Procedure shall be subject to the resolution of the Board for causing into full force with report to the Shareholders Assembly. The same procedure is applicable to any amendment thereto.

The removal of the relevant rules and regulations of the Supervisors in this procedure shall be effective as of the day the Audit Committee is officially established.

  • 122 -

Appendix 5

Ethical Corporate Management Best-Practice Principles

  • Article 1 In order to foster a corporate culture of ethical management as well as good risk control and management mechanism, and to ensure the sustainable management and sound development, Taiwan Fertilizer Co., Ltd. (“the Company”) establishes these principles in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies”.

The ethical corporate management best practice principles are applicable to its business groups and organizations of this Company, which comprise its subsidiaries, any foundation to which the Company's direct or indirect contribution of funds exceeds 50 percent of the total funds received, and other institutions or juridical persons which are substantially controlled by the Company ("business group").

  • Article 2 When engaging in commercial activities, directors, supervisors, managers, employees, and mandataries of the Company or persons having substantial control over the Company ("substantial controllers") shall not directly or indirectly offer, promise to offer, request or accept any improper benefits, nor commit unethical acts including breach of ethics, illegal acts, or breach of fiduciary duty ("unethical conduct") for purposes of acquiring or maintaining benefits.

Parties referred to in the preceding paragraph include civil servants, political candidates, political parties or members of political parties, state-run or

  • private-owned businesses or institutions, and their directors, supervisors, managers,

employees or substantial controllers or other stakeholders.

  • Article 3 The term, "Benefits", in these Principles means any valuable things, including money, endowments, commissions, positions, services, preferential treatment or rebates of any type or in any name. Benefits received or given occasionally in accordance with accepted social customs and that do not adversely affect specific rights and obligations shall be excluded.

  • Article 4 The Company shall comply with the Company Act, Securities and Exchange Act, Business Entity Accounting Act, Political Donations Act, Anti-Corruption Statute, Government Procurement Act, Act on Recusal of Public Servants Due to Conflicts of Interest, TWSE/GTSM listing rules, or other laws or regulations regarding commercial activities, as the underlying basic premise to facilitate ethical corporate management.

  • 123 -

  • Article 5 The Company shall abide by the operational philosophies of honesty, transparency and responsibility, base policies on the principle of good faith and establish good corporate governance and risk control and management mechanism so as to create an operational environment for sustainable development.

  • Article 6 The Company shall in its own ethical management policy clearly and thoroughly prescribe the specific ethical management practices and the programs to forestall unethical conduct ("prevention programs"), including operational procedures, guidelines, and training.

When establishing the prevention programs, the Company shall comply with relevant laws and regulations of the territory where the Company and its business group are operating.

In the course of developing the prevention programs, the Company is advised to negotiate with staff, labor unions members, important trading counterparties, or other stakeholders.

  • Article 7 When establishing the prevention programs, the Company shall analyze which business activities within its business scope which are possibly at a higher risk of being involved in an unethical conduct, and strengthen the preventive measures.

The prevention programs adopted by the Company shall at least include preventive measures against the following:

  1. Offering and acceptance of bribes.

  2. Illegal political donations.

  3. Improper charitable donations or sponsorship.

  4. Offering or acceptance of unreasonable presents or hospitality, or other improper benefits.

  5. Misappropriation of trade secrets and infringement of trademark rights, patent rights, copyrights, and other intellectual property rights.

  6. Engaging in unfair competitive practices.

  7. Damage directly or indirectly caused to the rights or interests, health, or safety of consumers or other stakeholders in the course of research and development, procurement, manufacture, provision, or sale of products and services.

  8. Article 8 The Company and its respective business group shall clearly specify in their rules and external documents the ethical corporate management policies and the commitment by the board of directors and the management on rigorous and thorough implementation of such policies, and shall carry out the policies in internal management and in commercial activities.

  9. 124 -

  10. Article 9 The Company shall engage in commercial activities in a fair and transparent manner based on the principle of ethical management. Prior to any commercial transactions, the Company shall take into consideration the legality of their agents, suppliers, clients, or other trading counterparties and whether any of them are involved in unethical conduct, and shall avoid any dealings with persons so involved.

When entering into contracts with their agents, suppliers, clients, or other trading counterparties, the Company shall include in such contracts terms requiring compliance with ethical corporate management policy and that in the event the trading counterparties are involved in unethical conduct, the Company may at any time terminate or rescind the contracts.

  • Article 10 When conducting business, the Company and its directors, supervisors, managers, employees, mandataries, and substantial controllers, may not directly or indirectly offer, promise to offer, request, or accept any improper benefits in whatever form to or from clients, agents, contractors, suppliers, public servants, or other stakeholders.

  • Article 11 When directly or indirectly offering a donation to political parties or organizations or individuals participating in political activities, the Company and its directors, supervisors, managers, employees, mandataries, and substantial controllers, shall comply with the Political Donations Act and its own relevant internal operational procedures, and shall not make such donations in exchange for commercial gains or business advantages.

  • Article 12 When making or offering donations and sponsorship, the Company and its directors, supervisors, managers, employees, mandataries, and substantial controllers shall comply with relevant laws and regulations and internal operational procedures, and shall not surreptitiously engage in bribery.

  • Article 13 The Company and its directors, supervisors, managers, employees, mandataries, and substantial controllers shall not directly or indirectly offer or accept any unreasonable presents, hospitality or other improper benefits to establish business relationship or influence commercial transactions.

  • 125 -

  • Article 14 The Company and its directors, supervisors, managers, employees, mandataries, and substantial controllers shall observe applicable laws and regulations, the Company's internal operational procedures, and contractual provisions concerning intellectual property, and may not use, disclose, dispose, or damage intellectual property or otherwise infringe intellectual property rights without the prior consent of the intellectual property rights holder.

  • Article 15 The Company shall engage in business activities in accordance with applicable competition laws and regulations, and may not fix prices, make rigged bids, establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.

  • Article 16 In the course of research and development, procurement, manufacture, provision, or sale of products and services, the Company and its directors, supervisors, managers, employees, mandataries, and substantial controllers shall observe applicable laws and regulations and international standards to ensure the transparency of information about, and safety of, its products and services. The Company shall also adopt and publish a policy on the protection of the rights and interests of consumers or other stakeholders, and carry out the policy in its operations, with a view to preventing its products and services from directly or indirectly damaging the rights and interests, health, and safety of consumers or other stakeholders. Where there are sufficient facts to determine that the Company's products or services are likely to pose any hazard to the safety and health of consumers or other stakeholders, the Company shall, in principle, recall those products or suspend the services immediately.

  • Article 17 The directors, supervisors, managers, employees, mandataries, and substantial controllers of the Company shall exercise the due care of good administrators to urge the Company to prevent unethical conduct, always review the results of the preventive measures and continually make adjustments so as to ensure thorough implementation of its ethical corporate management policies.

To achieve sound ethical corporate management, the Company shall establish a dedicated unit that is under the board of directors and responsible for establishing and supervising the implementation of the ethical corporate management policies and prevention programs. The dedicated unit shall be in charge of the following matters, and shall report to the board of directors on a regular basis:

  1. Office of Board of Directors :

  2. (1) Assisting in incorporating ethics and moral values into the Company's business strategy.

126 

  - (2) Planning the internal organization, structure, and allocation of responsibilities and setting up check-and-balance mechanisms for mutual supervision of the business activities within the business scope which are possibly at a higher risk for unethical conduct.

  - (3) Adopting programs to prevent unethical conduct and setting out in each program the standard operating procedures and conduct guidelines with respect to the Company's operations and business.

  1. Educational training unit : Promoting and coordinating awareness and educational activities with respect to ethics policy.

  2. Audit Office :

    • (1) Developing a whistle-blowing system and ensuring its operating effectiveness. (2) Assisting the board of directors and management in auditing and assessing

      • whether the prevention measures taken for the purpose of implementing ethical

      • management are effectively operating, and preparing reports on the regular assessment of compliance with ethical management in operating procedures.

  3. Article 18 The Company and its directors, supervisors, managers, employees, mandataries, and substantial controllers shall comply with laws and regulations and the prevention programs when conducting business.

  4. Article 19 The Company shall adopt policies for preventing conflicts of interest to identify, monitor, and manage risks possibly resulting from unethical conduct, and shall also offer appropriate means for directors, supervisors, managers, and other stakeholders attending or present at board meetings to voluntarily explain whether their interests would potentially conflict with those of the Company.

When a proposal at a given board of directors meeting concerns the personal interest of, or the interest of the juristic person represented by, any of the directors, supervisors, managers, and other stakeholders attending or present at board meetings of the Company, the concerned person shall state the important aspects of the relationship of interest at the given board meeting. If his or her participation is likely to prejudice the interest of the Company, the concerned person may not participate in discussion of or voting on the proposal and shall recuse himself or herself from the discussion or the voting, and may not exercise voting rights as proxy for another director. The directors shall practice self-discipline and must not support one another in improper dealings.

The Company’s directors, supervisors, managers, employees, mandataries, and substantial controllers shall not take advantage of their positions or influence in the Company to obtain improper benefits for themselves, their

127

spouses, parents, children or any other person.

  • Article 20 The Company shall establish effective accounting systems and internal control systems for business activities possibly at a higher risk of being involved in an unethical conduct, not have under-thetable accounts or keep secret accounts, and conduct reviews regularly so as to ensure that the design and enforcement of the systems are showing results.

The internal audit unit of the Company shall periodically examine the Company's compliance with the foregoing systems and prepare audit reports and submit the same to the board of directors. The internal audit unit may engage a certified public accountant to carry out the audit, and may engage professionals to assist if necessary.

  • Article 21 The Company shall establish operational procedures and guidelines in accordance with Article 6 hereof to guide directors, supervisors, managers, employees, and substantial controllers on how to conduct business. The procedures and guidelines should at least contain the following matters:

  • Standards for determining whether improper benefits have been offered or accepted.

  • Procedures for offering legitimate political donations.

  • Procedures and the standard rates for offering charitable donations or sponsorship.

  • Rules for avoiding work-related conflicts of interests and how they should be reported and handled.

  • Rules for keeping confidential trade secrets and sensitive business information obtained in the ordinary course of business.

  • Regulations and procedures for dealing with suppliers, clients and business transaction counterparties suspected of unethical conduct.

  • Handling procedures for violations of these Principles.

  • Disciplinary measures on offenders.

  • Article 22 The chairperson, general manager, or senior management of the Company shall communicate the importance of corporate ethics to its directors, employees, and mandataries on a regular basis.

The Company shall periodically organize training and awareness programs for directors, supervisors, managers, employees, mandataries, and substantial controllers and invite the Company’s commercial transaction counterparties so they understand the Company's resolve to implement ethical corporate management, the related policies, prevention programs and the consequences of committing unethical conduct.

128

The Company shall apply the policies of ethical corporate management when creating its employee performance appraisal system and human resource policies to establish a clear and effective reward and discipline system.

  • Article 23 The Company shall adopt a concrete whistle-blowing system and scrupulously operate the system. The whistle-blowing system shall include at least the following:

  • An independent mailbox or hotline, either internally established and publicly announced or provided by an independent external institution, to allow company insiders and outsiders to submit reports.

  • Dedicated personnel or unit appointed to handle whistle-blowing system. Any tip involving a director or senior manager shall be reported to the independent directors or supervisors. Categories of reported misconduct shall be delineated and standard operating procedures for the investigation of each shall be adopted.

  • Documentation of case acceptance, investigation processes, investigation results, and relevant documents.

  • Confidentiality of the identity of whistle-blowers and the content of reported cases.

  • Measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing.

  • Whistle-blowing incentive measures.

129

When material misconduct or likelihood of material impairment to the Company comes to its awareness upon investigation, the dedicated personnel or unit handling the whistle-blowing system shall immediately prepare a report and notify the independent directors or supervisors in written form.

Article 24 The Company shall adopt and publish a well-defined disciplinary and appeal system for handling violations of the ethical corporate management rules, and shall make immediate disclosure on the Company's internal website of the title and name of the violator, the date and details of the violation, and the actions taken in response.

  • Article 25 The Company shall collect quantitative data about the promotion of ethical management and continuously analyze and assess the effectiveness of the promotion of ethical management policy. The Company shall also disclose the measures taken for implementing ethical corporate management, the status of implementation, the foregoing quantitative data, and the effectiveness of promotion on its websites, annual reports, and prospectuses, and shall disclose its ethical corporate management best practice principles on the Market Observation Post System.

  • Article 26 The Company shall at all times monitor the development of relevant local and international regulations concerning ethical corporate management and encourage its directors, supervisors, managers, and employees to make suggestions, based on

which the adopted ethical corporate management policies and measures taken will be reviewed and improved with a view to achieving better implementation of ethical management.

  • Article 27 The ethical corporate management best practice principles of the Company shall be implemented after the board of directors grants the approval, and shall be sent to the supervisors and reported at a shareholders' meeting. The same procedure shall be followed when the principles have been amended.

When the ethical corporate management best practice principles are submitted by the Company to the board of directors pursuant to the preceding paragraph, the board of directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting. An independent director that cannot attend the board meeting in person to express objection or reservations shall provide a written opinion before the board meeting, unless there is some legitimate reason to do otherwise, and the opinion shall be specified in the minutes of the board of directors meeting.

  • 130 -

Appendix 6

Code of Ethical Conduct for Directors and Top Managers

Instituted by the 29th session of the 30th Board of Directors on March 24 2009

Chapter I General Provision

  • Article I This Ethic Code of Conduct (the Code) is instituted as the guideline for the Directors, Supervisors and Officers at Level I or higher (including the President, Executive Vice Presidents, Vice Presidents, and the Level I function heads and deputies of functional units) in the conduct of business for the Company in integrity and better understanding of the ethic code of the Company to all stakeholders.

Chapter II Ethic Code of Conduct

  • Article II Integrity and moral behaviors

  • Directors, Supervisors and officers at Level I and higher shall seek to safeguard the rights and interest of the Company, behave with honesty and integrity, duly observe applicable laws, be fair and just, and observe moral principles in handling Company business. There shall be no concealment, cheating, breach of trust, and fraud and other unethical behaviors.

  • Article III Avoidance of the conflict of interest:

  • Directors, Supervisors and officers at Level I and higher shall avoid the conflict of personal interest with the overall interest of the Company, including in situations where they cannot handle their duties objectively or efficiently, or allow for unjustified enrichment to themselves, spouses, parents, children or kindred within the 3rd tier under the Civil Code due to the functions or duties they perform. When the Company finances or provides guarantee, or engaged in major asset trade with the aforementioned personnel or their affiliates, the prior approval of the Board is necessaryto avoid the conflict of interest. The interest of the Company is the foremost concern in related transactions in purchases or sales.

  • Article IV Avoidance of the opportunities for private interest

  • Where the Company may have an opportunity for making profits, the Directors, Supervisors and officers at Level I and higher shall be responsible for maximize the legitimate profits of the Company.

Directors, Supervisors and officers at Level I and higher shall not seek

  • 131 -

private interests with the opportunities granted by using Company property, information or through the functions and duties they performed unless the Company Act or the Articles of Incorporation provides otherwise. Competition with the business of the Company is prohibited.

  • Article V Confidentiality of business secrets:

  • Directors, Supervisors, and officers at Level I and higher shall be obliged to keep all information on the transactions between the Company and the customers in purchases and sales in strict confidence unless under authorization or required by law. Information for confidentiality shall include undisclosed information the use of which by competitors or the disclosure of which will cause damage to the Company or the customers.

  • Article VI Fair Trade:

  • Directors, Supervisors, and officers at Level I and higher shall treat the customers in purchases and sales, competitors, and employees fairly, and shall not manipulate, conceal, improperly use, or foully use the information accessible to them due to the functions and duties they performed, or present misstatement on vital issues, or exhibit unfair trade for unjustified enrichment.

  • Article VII The safeguard and proper use of Company assets:

  • It is the onus of the Directors, Supervisors and officers at Level I and higher to safeguard the assets of the Company and ascertain the efficient and legitimate use of these assets in business operation. Avoid any negative influence on the profitability of the Company due to the theft of assets, negligence, funneling of interest to a third party or wasteful use of assets.

  • Article VIII Compliance with applicable legal rules:

  • Directors, Supervisors, and officers at Level I and higher shall duly observe the Securities and Exchange Act, other applicable laws, and the internal code of the Company.

  • Article IX Encouragement of reporting any unlawful acts or defiance of the ethic code of conduct ：

  • If any of the personnel of the Company suspects or discovers any violation of applicable laws or the Code by Directors, Supervisors or officers at Level I and higher, report to the Supervisors, Managers, Head of Internal Audit, or any other appropriate personnel. If the accusation is substantiated, rewards will be granted to the informant.

The Company shall keep the report and the information contained in the report in strict confidence, and shall protect the identity and the personal safety of the informant to avoid any form of revenge and/or intimidation.

  • 132 -

Article X Penalty:

  • In case of the violation of the Code by Directors, Supervisors or officers at Level I and higher and has been proved, report to the Board. The offender shall be liable to all civil and criminal consequences. In addition, officers at Level I and higher shall be subject to disciplinary action of the Company in accordance with applicable rules and regulations. The occupational title, name, date of violation, and the act of violation, applicable rules and regulations, and the action taken in response to the violation shall be posted at MOPS. The party concerned may file a complaint on the accusation in accordance with the complaint system of the Company as remedy.

Chapter III Procedure for waiver

  • Article XI On circumstance where the obligation of the Directors, Supervisors, and officers at Level I and higher to the observation of the Code shall be waived, the resolution of the Board is necessary. In addition, the occupational title, name of the party concerned, the date of resolution of the Board on the waiver, the duration of the waiver, the reason for the waiver and applicable rules and regulations shall be disclosed at MOPS with the knowledge of the shareholders for determination if the waiver is appropriate for the protection of the interest of the Company.

Chapter IV Means of Disclosures

  • Article XII This Ethic Code of Conduct shall be disclosed in the annual report and prospectus of the Company, and the MOPS. The same procedures shall be applicable to any amendment thereto.

Chapter V Miscellaneous

  • Article XIII This Ethic Code of Conduct shall come into full force at the approval of the Board with report to the Supervisors and the Shareholders Assembly. The same procedure is applicable to any amendment thereto.

  • 133 -

Appendix 7

Procedure for Acquisition or Disposal of Assets

Amended by the regular session of the Shareholders Assembly on June 29 2016 Amended by the regular session of the Shareholders Assembly on June 14 2017

Chapter I General Provision

  • Article I This Procedure is instituted in accordance with Article 36-1 of the Securities and Exchange Act and Letter Tai-Cai-Zheng- (I)-Zi. No. 0910006105 issued by Securities and Futures Commission, Ministry of Finance, dated December 10 2002. The Company shall follow This Procedure in the acquisition or disposition of assets unless the law specifies otherwise.

  • Article II This Procedure shall be applicable to assets specified as follows:

  • I. Long and short-term investments like stocks, government bonds, corporate bonds, bank debentures, domestic fund certificates, overseas mutual funds, depository receipts, call (put) warrants, beneficiary certificates, and asset-back securities.

  • II. Property (including lands, buildings and structures, investment property, right of land use, and inventory of the construction industry) and equipment.

  • III. Membership cards/certificates

  • IV. Intangible assets like patents, copyrights, trademarks, and franchise rights.

  • V. Right of debts from financial institutions (including account receivables, exchange discount and loans, overdue accounts).

  • VI. Derivatives

  • VII. Assets acquired or disposed from merger, spinoff, acquisition or assignment of shares under law.

  • VIII. Other major assets

  • Article III Terms and definitions used in This Procedure are shown below:

  • I. Derivatives: The contracts deriving from the trading of interest rate and exchange rate, including the composite contracts of forwards contracts, option contracts, swap contracts and the combination of the aforementioned derivatives. Forwards contracts do not include insurance contracts, performance contracts, post-delivery service contracts, long-term lease contracts, and long-term purchase (sale) contracts.

  • 134 -

  • II. Assets acquired or disposed by merger, spinoff, acquisitions, or assignment of shares under law: Assets acquired or disposed from corporate merger, spinoff, or acquisition under the Business Mergers And Acquisitions Act, Financial Holding Company Act, Financial Institutions Merger Act, or other applicable laws, or the issuance of new shares for the acceptance of shares from other companies (hereinafter referred to as “assignee of shares”) pursuant to Paragraph 8, Article 156 of the Company Act.

  • III. Related parties, subsidiaries: as defined in the Criteria for the Compilation of Financial Statements by Securities Issuers.

  • IV. Professional appraisers: real property appraisers or firms permitted by law to undertake appraisal of property and equipment.

  • V. The day of deed: the trading contract signing day, payment day, day on which a trade order is place, the day of account transfer, the day of Board resolutions, or the day on which the counterparty of trade and amount of trade can be confirmed, whichever comes first. The day of deed for investors subject to final approval of the competent authority shall be any of the aforementioned days or the day on which the notice of approval from the competent authority was delivered, whichever comes first.

  • VI. Investment in Mainland China: the investment in Mainland China under the regulations governing the permission of investment or technology joint ventures in Mainland China administered by the Investment Commission, Ministry of Economic Affairs.

  • Article IV The Company may acquire appraisal report or statement of opinions from certified public accountants, lawyers, or securities underwriters, and these professional appraisal firms and their appraisers, the certified public accountants, lawyers, or securities underwriters shall not be related parties to the Company.

  • Article V For assets acquired or disposed through court auction, the certification documents issued by court shall be used in lieu of the appraisal report or the statement of opinion from certified public accountants.

Chapter II The procedure for the acquisition or disposition of property or equipment

Article VI Assessment and Operation Procedures

  • I. Proceed to Article VII and Article IX on the assessment procedure for the acquisition or disposition of property or equipment.

  • II. The administering department shall provide information on the reason for acquisition or disposition, the subject matter, the counterparty of trade, the price for the transfer, the conditions for

  • 135 -

payment or receipt of proceeds, the normative reference on pricing to the competent authority of the Company for finalization.

  • III. Related operations shall be performed in conformity to the internal control system and This Procedure.

  • Article VII Procedure for determination of the condition of trade and authorized limit

  • I. The prior approval or ratification in the aftermath of the Board will be necessary for the acquisition or disposition of property or equipment. If Article 185 of the Company Act is applicable, the prior approval of the Shareholders Assembly will be necessary.

  • II. The procedure for determination of the condition of trade for the acquisition or disposition of property or equipment and the normative reference for the procedure are specified below:

    • (I) In the acquisition or disposition of property, consult the announced present value, assessed value, the actual price of transaction of nearby property, and commissioning of a professional appraisal firm for the issuance of an appraisal report pursuant to Article IX of This Procedure before making decision on the condition of trade and the price for the transaction, and compile the information into an analysis report for referring to the approval procedure along the corporate hierarchy in accordance with the “Segregation of Authority and Responsibility between the Board and the Managers”, “Table of Gate Approval” and “Empowerment of All Factories by the General Management”. The acquisition or disposition of property could be conducted through bidding, bargaining, or invitation to tender.

    • (II) The acquisition or disposition of equipment could be conducted by bidding, bargaining, or invitation to tender, and consult the appraisal report issued by a professional appraisal firm as required.

Article VIII The executor

  • I. Property: the administering department shall be responsible for the execution of the transaction.

  • II. Equipment: the administering department shall be responsible for the execution of the transaction.

  • Article IX The scope of application for the appraisal reports issued by experts In the acquisition or disposition of property or assets, transaction accounted for 20% of the paid-in capital of the Company or amounted to NT$300 million or more, except for transactions with government

  • 136 -

entities, commissioning for construction on property land, commissioning for construction on leased land, and the disposition of business equipment, the Company shall obtain an appraisal report issued by a professional appraisal firm before the day of deed (the particulars to be inscribed in the appraisal report is exhibited in Appendix I) and shall be in conformity to the following requirements:

  • I. If limited price or designated price will be used as reference for the determination of transaction price under special circumstances, such transaction price shall be subject to the resolution of the Board. The same procedure shall be applicable to any subsequent change in the condition of trade.

  • II. Transaction amount exceeding NT$1 billion shall require the support of appraisal reports from at least 2 professional appraisal firms.

  • III. If any of the following occurs to the appraisal result of the professional appraisers, proceed to the Statement of Auditing Standard No. 20 released by the Accounting Research and Development Foundation (hereinafter referred to as “ARDF”) except in circumstances where the appraisal result of the assets for acquisition is higher than the amount of transaction, or the appraisal result of the assets for disposition falls below the amount of transaction, and present an opinion on the reason for the difference and if the transaction price is proper.

  • (I) If the difference between the appraisal result and the amount of transactions exceeds 20% from the amount of transaction.

  • (II) The appraisal results from two (2) or more professional appraisers varied with the amount of transaction by more than 10%.

  • IV. The appraisal may be conducted before the day on which the agreement is being entered and the appraisal repost may be issued prior to this day, but the day of the issuance of appraisal report shall not be longer than three (3) months from the day of entering into agreement. If the announced present value in the same validity period is applicable and is less than six (6) months, the original appraisers shall present a statement of opinion.

The calculation of the aforementioned amount of transactions shall be based on Paragraph II, Article XXXVIII of This Procedure, and the period covered by the appraisal reports issued by professional appraisers or statement of opinions by certified public accountants as required in This Procedure could be excluded from the calculation.

  • 137 -

The construction sector may elect to adopt the limited price, designated price or special price as reference for setting the transaction price, and may also obtain an appraisal report and the statement of opinion from certified public accountants as stated in Subparagraph III of the previous paragraph within two (2) weeks after the day of deed if the appraisal report cannot be obtained timely with justifiable reasons.

  • Article X The limit of acquiring property not for business purpose

  • The total amount for the Company in acquiring property not for business purpose shall be limited to 20% of the paid-in capital in current period. Individual subsidiaries may acquire property not for business purpose up to 20% of their relevant paid-in capital in current period.

  • Chapter III Procedure for the acquisition or disposition of securities

  • Article XI Assessment and Operation Procedures

  • The procedures of the Company for the acquisition or disposition of long and short-term securities shall be conforming to the internal control system in the aspect of investment cycle and This Procedure.

  • Article XII Procedure for determination of the condition of trade and authorized limit

  • In the engagement of securities trade, the Company shall consult the audited or reviewed financial statements of the target companies covering the most recent period as reference and consider the earnings per share, profitability, and the potential of development in the future except open-end domestic beneficiary certificates, overseas mutual funds, government bonds and R/P bond trade, and conduct an analysis on the information on hand and compile an analysis report for presenting to the Chairman. The approval of the Board is necessary before proceeding to the transaction. If the “Segregation of Authority and Responsibilities of the Board and the Managers” of the Company specified otherwise, comply accordingly.

Article XIII Executor

  • I. Long-term securities: the administering department shall be responsible for the execution.

  • II. Short-term securities: the administering department shall be responsible for the execution.

  • Article XIV Professional opinion on assessment

  • If any of the following is applicable to the Company, and the amount of transaction accounted for 20% of the paid-in capital or more or amounted to NT$300 million or more, request a certified public accountant to present an opinion on the rationality of the transaction price before the day of deed. If the certified public account needs to

  • 138 -

adopt reports from experts, proceed to Statement of Auditing Standard No. 20 released by ARDF except that the securities in point have open quotation in an active market or unless FSC specified otherwise.

  • I. The acquisition or disposition of securities not traded in TWSE or TPEx. Except for the trading of open-end domestic beneficiary certificates, overseas mutual funds, government bonds, and R/P bonds.

  • II. The acquisition or disposition of securities through private placement.

  • The calculation of the aforementioned amount of transactions shall be based on Paragraph II, Article XXXVIII of This Procedure, and the period covered by the appraisal reports issued by professional appraisers or statement of opinions by certified public accountants as required in This Procedure could be excluded from the calculation.

  • Article XV: The limit of the acquisition of securities not for business purposes Further to the acquisition of assets for business purposes, the Company and subsidiaries may invest in securities not for business purposes and the limit of investment is specified below:

  • I. The total investment in long and short-term stocks shall not exceed the limit set forth in the Articles of Incorporation of the Company. The total investment in particular long or short-term security shall not exceed the limit set forth in the Articles of Incorporation of the Company.

  • II. The total investment in particular long or short-term security by the Company and subsidiaries shall not exceed NT$1 billion of which the total investment in particular long or short-term stock shall not exceed NT$1 billion. Where the Company may have established holding companies in countries or regions with preferential tax treatment, or have established subsidiaries in countries or regions with preferential tax treatment in supporting the needs of corporate reorganization, or, the subsidiaries of the Company established in countries or regions with preferential tax treatment responding to applicable laws in respective countries or regions by investing in long or short-term securities after passing by the Board under special treatment irrespective of the aforementioned limit applicable to the total investment of individual subsidiaries. However, the decision for such investment shall be reported to the Shareholders Assembly.

  • III. The total investment of the Company in securities beyond long or short-term stocks shall not exceed the paid-in capital of the

  • 139 -

Company where the total investment in particular security shall not exceed 20% of the paid-in capital. The total investment of respective subsidiaries in securities beyond long or short-term stocks shall not exceed NT$80 million where the total investment in particular security shall not exceed NT$20 million.

Chapter IV Procedure for the acquisition or disposition of Article XVI Assessment and Operation Procedures

  • The assessment and operation procedure for the acquisition or disposition of membership card or intangible assets is specified in Article XVII and other requirements of the Company.

  • Article XVII Procedure for determination of trade and authorized limit

  • I. In the acquisition or disposition of membership card, consult the fair market value for setting the condition and price for the transaction, and compile the details into a report refer to the approval procedure along the corporate hierarchy in accordance with the “Segregation of Authority and Responsibility between the Board and the Managers”, “Table of Gate Approval” and “Empowerment of All Factories by the General Management”.

  • II. In the acquisition or disposition of intangible assets (trademarks, exclusive technologies, patents, copyrights, and good will), consider if the transaction could bring in economic benefit to the Company in the future and consult the assessment reports of the experts or fair market value for setting the condition and price for the transaction, and compile the details into a report refer to the approval procedure along the corporate hierarchy in accordance with the “Segregation of Authority and Responsibility between the Board and the Managers”, “Table of Gate Approval” and “Empowerment of All Factories by the General Management”.

Article XVII Executor

The users or the management of the Company shall be responsible for the execution of the acquisition or disposition of membership card or intangible assets.

  • Article XIX Professional assessment opinion report

  • In the acquisition or disposition of membership cards or intangible assets accounted for 20% of the paid-in capital or the Company or exceeding NT$300 million, request a certified public accountant to present an opinion on the rationality of the transaction price before the day of deed. If the certified public account needs to adopt reports from experts, proceed to Statement of Auditing Standard No. 20 released by ARDF except the counterparties of transactions are government

  • 140 -

entities.

The calculation of the aforementioned amount of transactions shall be based on Paragraph II, Article XXXVIII of This Procedure, and the period covered by the appraisal reports issued by professional appraisers or statement of opinions by certified public accountants as required in This Procedure could be excluded from the calculation.

Chapter V Related Party Transactions

  • Article XX In the acquisition or disposition of assets with related parties the proceeds for the transactions of which exceeds 10% of the total assets of the Company shall be supported by an appraisal report issued by professional appraisers or the statement of opinion issued by certified public accountants as stated in the preceding 3 chapters further to the procedures in conformity to the requirements in the aforementioned 3 chapters and the procedure for decision and assessment of the rationality of the condition for transaction in this chapter.

  • The calculation of the aforementioned amount of transaction shall be the same as the procedure specified in Paragraph II of the previous article. Further to the legal formality, the substantive relation shall also be considered in defining if a party in the transactions is a related party.

  • Article XXI Assessment and Operation Procedure

  • In the acquisition or disposition of property with related parties, or in the acquisition or disposition of other assets beyond property, and the transaction exceeds 20% of the paid-in capital of the Company, 10% of the total assets, or NT$300 million, refer the following information to the Board for resolutions and the ratification of the Supervisors before proceeding to entering into the transaction agreements and effecting payment except for the trading of government bonds, R/P and reverse R/P bond trade, subscription or redemption of money market fund issued by domestic securities investment trust:

  • I. The purpose, necessity and expected benefits from the acquisition or disposition of assets and property.

  • II. The reasons for choosing related parties as the counterparties of trade.

  • III. In the acquisition of property from related parties, proceed to Articles XXII and XXIII in the assessment of related information on the rationality of the condition of trade.

  • IV. The original date and price of acquisition by the related parties, the counterparties of trade, and the relation between the counterparties and the Company/related parties.

  • 141 -

  • V. The projected monthly cash flows in the year ahead from the month of entering into agreement with assessment of the necessity of the transactions and the justifiable use of funds.

  • VI. The appraisal reports issued by professional appraisers or the statements of opinion issued by certified public accountants as specified in the previous article.

  • VII. Limitation and other important agreements in this transaction.

  • The calculation of the aforementioned amount of transaction shall conform to the requirements of Paragraph II, Article XXXVIII of This Procedure. The portion referred to the Board for resolutions and ratification of the Supervisors under This Procedure could be excluded from the calculation.

The acquisition or disposition of business equipment between the Company and subsidiaries shall be passed by the Board through authorization to the Chairman pursuant to Article VI of This Procedure and the “Segregation of Authorities and Responsibilities between the Board and the Managers” of the Company if the amount of transaction falls within specific limit, and present it to the nearest session of the Board for ratification.

The Company may have established seats for Independent Directors and the opinions of the Independent Directors regarding the topics reported to the Board for discussion as mentioned in the previous paragraph shall be fully considered. Opinions for and against the motions, or qualified opinions of the Independent Directors shall be kept as minutes of the meeting on record.

If the Company established an Audit Committee, and matters required the ratification of Supervisors as mentioned in the previous paragraph shall be subject to the approval of the Audit Committee with the consent of at least half of the committee members and presented to the Board for final approval. Motions not passed by at least 1/2 of the members of the Audit Committee may stand under the consent of 2/3 or more of the Directors. Under such circumstance, the resolution of the Audit Committee shall be inscribed as minutes of meeting of the Board on record.

All members of the Audit Committee and all Directors as referred to in the previous paragraph shall be the members still in office.

  • Article XXII Assessment of reasonable cost of transaction

Assess the reasonable cost of transaction in the following means for the acquisition of property by the Company from related parties:

  • I. Addition of necessary cost of capital and the cost to be borne by the

  • 142 -

buyer under law to the transaction price of the related party. Necessary cost of capital shall be calculated on the basis of the weighted average interest rate for the Company in the year of asset purchase for financing but shall not exceed the highest interest offered by non-financial intuitions announced by the Ministry of Finance.

  • II. Where the related party may have pledged the subject property under lien to a financial institution for financing and the actual drawdown was more than 70% of the total appraised value of the subject property declared by the financial institution for lending and the loan has been outstanding for more than one (1) year. This provision is waived if the financial institution and the counterparty are related parties.

For the combined purchase of land and building of the same subject property, assess the reasonable cost of transaction on the land and building separately in any of the methods specified in the previous paragraph.

In acquiring property from related parties, the Company shall assess the cost of the property as specified in I and II of this article, and commission a certified public accounts for a second review opinion.

If any of the following is applicable to the Company in the acquisition of property from related parties, the assessment of the reasonable cost of transactions as specified in the previous 3 paragraphs could be waived and just proceed to the assessment and operation procedure as specified in Article XXI will do.

  • I. The related party acquired the property through succession or donation as gifts.

  • II. The time at which the related party entered into the agreement for the acquisition of the property was more than five (5) years ago from the day of deed in retrospect.

  • III. Entered into agreement with the related party on joint venture in construction, or commissioning of construction on property land, commissioning of construction on leased land, and the acquisition of property by commissioning the related party to build the property.

  • Article XXIII If the assessment result pursuant to Paragraph I and Paragraph II of the previous article on the acquisition of property of the Company from a related party indicated a lower price than the transaction price, proceed to Article XXIV. This provision could be waived in the event of the following situations, with the presentation of

  • 143 -

objective evidence and the appraisal reports issued by professional appraisers and the statements of opinions issued by certified public accountants on the rationality of the cost:

  • I. The related party acquired empty land or leased land for reconstruction shall meet any of the following conditions:

    • (I) Assessment on empty land shall be conducted in any of the aforementioned methods. For buildings, add reasonable construction profit to the construction cost of the related party and the sum exceeds the actual price of transaction. Reasonable construction profit shall be based on the average gross margin of the construction segment of the related party over the last 3 years, or the gross margin of the construction sector covering the most recent period as announced by the Ministry of Finance, whichever is lower.

    • (II) Successful transactions of other stories of the same subject property or in the immediate area between non-related parties in one (1) year, with similar floor area, and the condition of trade shall be comparable to relevant floor levels or reasonable price difference by region under general customs of property trade in the assessment.

    • (III) Successful transactions of other stories of the subject property with non-related parties within one (1) year, and the condition of trade shall be comparable to relevant floor levels under general customs of property trade in the assessment.

  • II. The Company shall prove that the property purchased from related parties was conducted in similar condition of other successful transactions by non-related parties with similar floor area and in the immediate area within one (1) year.

    • The aforementioned successful transaction in the immediate area refers to the subject matter in transaction featured the same or similar street contour and falls within a perimeter of 500 meters, or approximates the present value as posted. Similar floor area refers to the floor area of the subject matter of other successful transactions with non-related parties no more than 50% smaller than the subject property. Within one (1) year shall be the period of one (1) year from the day of deed in retrospect.

  • Article XXIV If the assessment result of the acquisition of property from related parties by the Company pursuant to Article XXII and XXIII falls below the transaction price, proceed to the following:

  • I. Recognize the difference between the transaction price of property

  • 144 -

and the assessed cost as special reserve pursuant to Article Paragraph 1, Article 41 of the Securities and Exchange Act, and shall not distribute as cash dividend or capitalized into new shares. If the investees of the Company accounted for under the equity methods are public companies, recognize for special reserve in proportion to the holding of the shares of these companies pursuant to Paragraph 1, Article 41 of the Securities and Exchange Act.

  • II. The Supervisors shall proceed to Article 218 of the Company Act.

  • III. Report the state of action taken under I and II to the Shareholders Assembly, and disclose the detail of the transactions in the annual report and the prospectus.

Special reserve recognized by the Company in accordance with the previous paragraph may be appropriated for other purposes if the assets purchased at high price has been recognized for impairment, or disposed, compensated appropriately or recovery to original condition, or there is evidence implicating no unjustifiable reason and at the approval of the Securities and Futures Bureau of the FSC (hereinafter, “SFR”).

In acquiring property from related parties, and there is evidence implicating the transaction has not been conducted in arm’s length, proceed to the rules of the previous 2 paragraphs.

Chapter VI Derivative Trade

Article XXV Principles and policies of trade

  • I. Types of trade Derivate trade engaged by the Company refers to contracts deriving from interest rate and/or exchange rate as underlying value, including forwards contracts, options contracts, swap contracts, and the composite contracts of the aforementioned combinations. The aforementioned forwards contracts exclude insurance contracts, performance contracts, post-delivery warranty contracts, long-term lease contracts and long-term contracts on purchase or sale.

  • II. Operation and hedge strategy

  • The primary purpose of the Company in engaging in derivative trade is hedging, and the selection of derivatives will target those hedge the risks deriving from the operation of the Company. The currencies in holding shall serve the purpose of supporting the import and export of the Company and the overall position shall be held for offsetting to reduce the overall exchange risk of the Company and save the cost of foreign exchange operation.

  • III. Segregation of authorities and responsibilities

  • (I) Financial staff:

  • 145 -

  • Gathering of market information, make judgment of the trend and risk, knowledge of financial products and applicable laws, skills of financial operation, and engagement in trading within the authorized limit subject to the approval of the competent authority of the Company to hedge off the risk deriving from price fluctuations in market.

  • Determine the foreign exchange position of the Company on the basis of estimated purchase quantity relevant with the customer orders provided by the purchasing staff and the range of the cost of target exchange rate, and the sale and the export and import volume of the Company thereby setting the upper limit of the position for hedging monthly or quarterly to reduce the risk of exposure to foreign exchange.

  • Conduct evaluation on the performance of the position in holding and report to the senior officer designated by the Board as reference for assessment.

  • (II) Accounting staff:

  • Bookkeeping

  • Disclosure of the transactions of the Company in the financial auditing report.

  • Confirmation of transactions and cross-checking on the balance of the position.

  • Handling announcement and declaration

  • (III)Auditors:

Auditors shall review the internal control system for derivative trade at regular intervals to ensure the proper function of the system, and conduct monthly audit on the dealing unit in compliance with this procedure and analysis of the transaction system. The findings will be compiled into audit reports. If material breach was discovered, notify the Supervisors in writing.

  • IV. The principles and procedures of performance evaluation

  • (I) Hedge trade

    1. The range of the cost of target exchange rate estimated on the basis of the customer orders provided by the purchasing staff and the capital gains/loss from derivative trade will be the basis for performance evaluation.

    2. The financial staff shall review the position of derivative trade at least twice a month, and present the evaluation

  • 146 -

report to the senior officer designated by the Board.

  • (II) Financial transactions

    1. The exact amount of capital gains/loss shall be the basis of performance evaluation.

    2. The financial staff shall review the position of derivative trades at least once a week, and present the evaluation report to the senior officer designated by the Board.

  • (III) The Company evaluates capital gains/loss on a monthly basis for the proper control and presentation of evaluation risk of the transactions.

  • V. Setting the total amount of contracts and the limit of loss

  • (I) Total amount of contract and the limit of loss

Hedge trade Financial transactions
All contracts
Investment limit		 Accounted for 70% of the
revenues in the most recent
quarter		 Accounted for 70% of the
revenues in the most recent
quarter
Total loss of all
contracts
Limit of loss		 20% of the total amount of
contracts		 10% of the total amount of
contracts
Limit of loss for
particular contract		 20% of particular contract
amount		 10% of particular contract
amount
  • (II) Set the cut loss point on the basis of the average price of derivative contracts already entered. Proceed to cut loss at this point and report to the officer designated by the Board at once, take necessary measures, and report to the Board.

Article XXVI Operation Procedure

  • I. Conduct analysis of the trend of the foreign exchange market and the risk on the basis of the range of the cost of target exchange range on the basis of the customer orders estimated by the purchasing staff and the net foreign exchange position to determine action for hedge, set the upper limit of hedge position and the target exchange rate, map out the hedge plan and report to the management.

  • II. Authorized limit

Set the following table of authorized limit on the basis of revenue growth and the change in the risk position of the Company.

  • (I) Hedge trade

  • 147 -

Level Amount for single transaction Net accumulative total amount
ofposition
President USD16 million
or the equivalence in other
currencies
USD32 million
or the equivalence in other
currencies
Officer
Vice President		 USD8 million
or the equivalence in other
currencies
USD16 million
or the equivalence in other
currencies
Chief Financial
Officer		 USD4 million
or the equivalence in other
currencies
USD8 million
or the equivalence in other
currencies
(II)Financial transactions
Level Amount for single transaction Net accumulative total amount
ofposition
President USD2 million
or the equivalence in other
currencies		 USD4 million
or the equivalence in other
currencies
Officer
Vice President		 USD 1 million
or the equivalence in other
currencies		 USD2 million
or the equivalence in other
currencies
Chief Financial
Officer		 USD500,000
or the equivalence in other
currencies		 USD 1 million
or the equivalence in other
currencies

III. Execution of trade

(I) Executor: The financial unit of the Company is responsible for the execution of derivative trades, as this kind of trade changed rapidly and the amount involved is high, and the transactions are frequent and require sophisticated calculations.

  • (II) Entering into contracts: The Chairman at the authorization of the Board shall enter into derivative trade contracts with respective financial institutions.

  • (III) Execution process: the procedure of derivative trade at the Company: (1) authorization or approval of trade, (2) execution of transactions, (3) confirmation of transactions, (4) settlement and delivery, (5) accounting, (6) risk management (7) audits.

  • IV. In undertaking derivative trade, the Company shall prepare a registry for tracking the types, amount of derivative trade, the date of resolutions by the Board, and matters for cautious review as

  • 148 -

stated in the previous article in detail.

Article XXVII Risk Management Policy

  • I. Credit risk management

  • (I) The counterparties of trade shall be renowned domestic and foreign financial institutions with credit limits offered for the Company, in good credit standing and can provide professional information.

  • (II) The total amount of trade with particular counterparty before leveling shall not exceed 20% of the overall authorized limit of the Company unless otherwise specially approved by the President.

  • II. Market risk management

  • Mainly with the OTC (Over-the-Counter) of the counterparties.

  • III. Liquidity risk management

  • Derivatives should be chosen with caution for ensuring high liquidity. In addition, the counterparties must have sufficient equipment, information, and cash flow for engagement in trading in market at any time.

  • IV. Cash flow risk management

  • The source of fund for derivative trade in the Company is limited to equity capital for maintaining stable work capital. In addition, the dealers shall duly observe the authorized limits and related requirements and pay close attention to the cash flow of the Company at all times to ensure sufficient cash flow for delivery and settlement. In addition, the dealers shall pay close attention to the credit standing of the counterparties.

  • V. Operation Risk Management

  • The authorized limit, operation procedures shall be duly observed and included as an integral part of internal control to avoid operation risk.

  • (I) The dealers engaged in derivative trade shall not perform the functions of the confirmation staff in confirmation and delivery, and vice versa.

  • (II) The dealers shall forward the transaction vouchers or contracts to the confirmation staff for registration, and shall pay attention to the authorized limit, the transactions, and the cut loss amount.

  • (III) The confirmation staff shall check with the counterparties on the details of the transactions and the total amount of transactions regularly.

  • 149 -

    • (IV) The senior officer designated by the Board shall be responsible for reporting to the Board on the measurement of related risks, the monitoring and control of risks.

  • VI. Product Risk Management

    • The dealers of the Company and the counterparties of trade shall have good and proper professional knowledge of the derivatives. In addition, the counterparties shall be required to fully disclose the risks and avoid the misuse of derivatives that caused loss.

  • VII. Legal Risk Management

    • All documents binding the Company and banks shall be subject to the review of the legal affairs officers or legal counsels of the Company before signing to avoid legal risk.

  • Article XXVIII Routine Evaluation and Responding to Abnormality

  • I. The financial department shall assess the position held for derivative trade at least once a week, and assess the position of hedge trade for business needs at least twice a month. The assessment report shall be presented to the senior officer designated by the Board.

  • II. The Board shall evaluate the performance of derivative trade at regular intervals to ensure congruence with the business strategy, and if the risk assumed is relevant with the tolerance of the Company.

  • III. The senior officer designated by the Board shall conduct routine assessment of the risk management policy in pursuit to make sure it is effective, and duly observe the “Criteria for the Acquisition or Disposition of Assets” established by SFB and This Procedure.

  • IV. The senior officer designated by the Board shall monitor the transactions and the profit status, and take necessary measures in case of abnormality, and report to the Board at once. If the Company has established the seats of Independent Directors, Independent Directors shall attend the session of the Board and express their opinions.

Article XXIX Internal Audit System

  • I. The internal auditors shall be well aware of the internal control of derivative trade at any time to ensure it is properly performed, and shall conduct monthly audit on the dealing function in compliance with this procedure and conduct analysis of the transaction cycle. The audit findings shall be compiled into audit reports. If material breach is discovered, notify the Supervisors in writing.

  • II. The aforementioned audit reports shall be declared with SFB

  • 150 -

together with the status of pursuit of the annual audit plan by the end of next February, and declare with SFB on corrective action addressing to defects from audits by the end of next May.

  • Article XXX: The principle of supervision of the Board in derivative trade

  • I. The senior officer designated by the Board shall pay close attention to the monitoring and control of the risk deriving from derivative trade under the following principles of management:

    • (I) Conduct routine assessment on the risk management policy in pursuit to ensure its effectiveness, and duly observe the “Criteria for the Acquisition or Disposition of Assets” established by SFB and This Procedure.

    • (II) In case of abnormality discovered in the course of supervision of the trade and the profit position, take necessary measures in response to the situation and report to the Board at once. If the Company has established the seats of Independent Directors, Independent Directors shall attend the session of the Board and express their opinions.

  • II. Conduct routine evaluation on the performance of derivative trade to ensure congruence with the business strategy, and if the risk assumed is relevant with the tolerance of the Company.

  • III. In the engagement of derivative trade, the Company shall authorize related personnel in accordance with This Procedure to conduct the trade, and report to the nearest session of the Board.

Chapter VII Procedures for corporate merger, spinoff, acquisition, and assignment of shares

Article XXXI Assessment and Operation Procedure

  • I. In proceeding to corporate merger, spinoff, acquisition or acceptance of shares from assignment, the Company shall retain certified public accountants, lawyers or securities underwriters to present opinions on the rationality of the ratio of share swap, the acquisition price or payment of cash and other assets to shareholders before the Board convene for making decision, and present these opinions to the Board for discussion and resolution. The aforementioned opinions on rationality presented by the experts could be waived for mergers with direct or indirect wholly-owned subsidiaries of the Company, or the wholly-owned subsidiaries of the aforementioned subsidiaries.

  • II. The Company shall disclose the summary of the merger, spinoff, or acquisition and related matters as open documents to the shareholders before the convention of the Shareholders Assembly,

  • 151 -

and deliver such information, the opinions of the experts, and notice of session to the shareholders as reference for their discretion in the merger, spinoff, or acquisition. This provision could be waived if the resolution of the Shareholders Assembly for the merger, spinoff, or acquisition is not required under law.

  • III. If the shareholders’ meeting of any of the participating companies in the merger, spinoff or acquisition lacked a quorum for meeting, lacked the majority required for resolution, or under other legal restrictions, to the extent that meetings for resolution cannot be successfully convened and decision cannot be made, or the proposal for merger, spinoff or acquisition was vetoed by their shareholders’ meetings, these participating companies shall make immediate announcements explaining the cause of the failure, subsequent actions to be taken and the expected date for the next session of their shareholders’ meetings.

  • Article XXXII Unless the law specified otherwise, or under special circumstances that the prior consent of FSB is required, participating companies in the merger, spinoff or acquisition shall call for sessions of their boards and shareholders’ meeting on the same day for resolution of the merger, spinoff, or acquisition and related matters.

    • Unless the law specified otherwise, or under special circumstances that the prior consent of FSB is required, the Board shall convene on the same day.

  • Article XXXIII All parties participating or with access to the plans of the merger, spinoff, acquisition or acceptance of shares from assignment, shall declare confidentiality in writing thereby shall not disclose any part of the content of the plan before public announcement, and shall not purchase the stocks or other equity securities issued by the companies related to the merger, spinoff, acquisition, or acceptance of shares from assignment in their own names or in the name of a third party.

  • Article XXXIV The Company shall not make any change in the ratio of share swap or acquisition price in the merger, spinoff, acquisition or acceptance of shares from assignment at free will except under the following circumstances. In addition, any change thereof shall be explicitly stated in the agreement on the merger, spinoff, acquisition or acceptance of shares from assignment:

  • I. Proceeding to offering new shares for raising capital, issuance of convertible bonds, release of stock dividend, issuance of warrant bonds, issuance of preferred shares with subscription warrant,

  • 152 -

subscription warrants, and other equity securities.

  • II. Disposition of major assets that significantly affects the financial position and business of the Company.

  • III. Occurrence of severe disasters, significant change in technology that affects the shareholders’ equity or stock price of the Company.

  • IV. Any side of the companies participating in the merger, spinoff, acquisition, or acceptance elects to repurchase treasury shares that resulted in relevant adjustment.

  • V. There is a change in the number of entities or participants in the merger, spinoff, acquisition or acceptances of shares through assignment.

  • VI. The conditions for change have been inscribed in the agreements and were disclosed to public.

  • Article XXXV The following and the rights and obligations of the companies participating in the merger, spinoff, acquisition, or acceptance of shares from assignment shall be explicitly stated in the agreement on the merger, spinoff, acquisition, or acceptance of shares from assignment undertaken by the Company:

  • I. Response to breach of contract.

  • II. The principle for handling equity securities or repurchased treasury shares issued by companies acquired in the merger or severed from the spinoff.

  • III. The principle of the repurchase of treasury shares in quantity under law after the base day of the calculation of the ratio of shares in the swap for the participating companies.

  • IV. The response to the change in the number of entities or participants.

  • V. The expected progress and estimated date of completion of the plan. VI. If the progress of the plan falls behind schedule, the estimated date for the convention of the shareholders’ meetings and related procedures under law.

  • Article XXXVI If any of the participating companies in the merger, spinoff, acquisition, or acceptance of shares from assignment intends to engage in merger, spinoff, acquisition, or acceptance of shares from assignment with other companies after the disclosure of related information, the participating companies are not required to call for sessions of the shareholders’ meetings for a new round or resolutions except in circumstances where there is a decrease in the number of participants and the shareholders’ meetings have resolved to authorize the boards to change the level of authority. However, all participants shall repeat the procedures or related legal

  • 153 -

  • actions on previous merger, spinoff, acquisition, or acceptance of shares from assignment already completed.

  • Article XXXVII Where some of the participants in the merger, spinoff, acquisition or acceptance of shares from assignment may not be public companies, the Company shall enter into agreement with these participants and proceed to Article XXXII, Article XXXIII, and Article XXXVI of This Procedure in handling the change in the number of participants in the merger, spinoff, acquisition, or acceptance of shares from assignment.

Chapter VIII Disclosure of information

  • Article XXXVIII If any of the following is applicable to the acquisition or disposition of assets, the Company shall declare and disclose relevant information at designated website of SFB within two (2) days after the day of deed in the required format of the competent authority:

  • I. In the acquisition or disposition of property with related parties, or in the acquisition or disposition of assets other than property with transaction amount at 20% of the paid-in capital of the Company, 10% of the total assets, or exceeding NT$300 million. Except for the trading of government bonds, R/P and reverse R/P bonds, subscription or redemption of money market fund offered by domestic securities investment trust firms.

  • II. Proceeding to merger, spinoff, acquisition, or acceptance of shares from assignment.

  • III. Capital loss from derivative trade at the upper limit of cut loss for all contracts or particular contract as stated in related procedures.

  • IV. The types of assets in the acquisition or disposition are business equipment and the counterparties of trade are not related parties and the transaction amount exceeds NT$500 million.

  • V. The acquisition or disposition of property by a public construction firm for construction purpose and the counterparties are not related parties with transaction amount exceeds NT$500 million.

  • VI. Acquisition of property through commissioning of construction on property land, commissioning of construction on leased land, joint venture in construction with split up of finished premises, joint venture in construction with split up of the proceeds from selling of the finished premises with anticipated investment of more than NT$500 million by the Company.

  • VII. Asset trade, factoring from financial institutions, or investment in Mainland China beyond the scope of the previous 6 sections, and

  • 154 -

the transaction amount accounted for 20% of the paid-in capital of the Company or exceeds NT$300 million. Except the following:

  • (I) Trading of government bonds

  • (II) Engagement in the investment profession with trading of securities in domestic and overseas stock exchanges or OTC, or, regular corporate bonds and bank debentures not related to equity offered in the domestic primary market, or, securities dealers act as the supervisor for companies listed in the emerging market for the underwriting of securities and subscribe the securities as required by TPEx.

  • (III) The trading of R/P and reverse R/P bonds, subscription or redemption of money market fund offered by domestic securities investment trust firms.

The aforementioned transaction amount shall be calculated in accordance with the following method:

  • I. The amount of each transaction.

  • II. The transaction amount accumulated in one (1) year with particular counterparty in the acquisition or disposition of subject matter of trade in the same nature.

  • III. The transaction amount from the acquisition or disposition of particular development project of property accumulated in one (1) year (accumulated separately for acquisition, disposition).

  • IV. The transaction amount from the acquisition or disposition of particular security accumulated in one (1) year (accumulated separately for acquisition, disposition).

One year as referred to shall be the period of one (1) year from the day of deed for current transaction in retrospect. The portion already disclosed under This Procedure could be excluded in the calculation.

The Company shall enter all information on derivative trade of the Company and subsidiaries which are not domestic public companies to the end of last month in the required format at the website designated by SFB by the 10th day of the month.

In the event of error of missing information found in the content required for disclosure, take appropriate correction within two (2) days after acknowledgement of the problem and repeat the declaration process with update information.

In the acquisition or disposition of assets, the Company shall keep related contracts, minutes of meeting on record, registry books, appraisal reports, and statements of the certified public accountants, lawyers or

  • 155 -

securities underwriters at the Company for at least five (5) years unless the law specified otherwise.

  • Article XXXIX If any of the following occurs after the declaration of the transactions for disclosure, disclose related information at the designated website of SFB within two (2) days after the day of the event:

  • I. Alteration, termination or rescission of the agreements previously entered into.

  • II. The merger, spinoff, acquisition, or acceptance of shares from assignment has not completed by the expected deadline stated in the contract.

  • III. Change in the content previously disclosed.

  • Article XL Disclosure of the acquisition or disposition of assets by subsidiaries The Company shall declare any transaction of acquisition or disposition of assets by subsidiaries that are not domestic public companies in accordance with this chapter of This Procedure.

  • The criteria of 20% of the paid-in capital or 10% of the total assets for disclosure under I to V in Article XXXVIII shall be based on the paid-in capital or total assets of the Company.

Chapter IX Miscellaneous

Article XLI Procedure for the control of subsidiaries

  • Subsidiaries shall institute the “Procedure for the Acquisition or Disposition of Assets” in accordance with the “Criteria for the Acquisition or Disposition of Assets by Public Companies” subject to the resolution of the boards of the subsidiaries and report to the Shareholders Assembly of the Company for ratification before implementation. The same procedure is applicable to any amendment thereto.

  • Subsidiaries shall observe the rules and regulations of the Company in the acquisition or disposition of assets.

  • The requirement of 10% of the total assets as stated in This Procedure is calculated on the basis of the total assets presented in the separate or individual financial statements compiled in accordance with the Criteria for the Compilation of Financial Statements by Securities Issuers covering the most recent period.

If the shares offered by subsidiaries bear no face value or the face value is not NT$10/share, the requirement of 20% of the paid-in capital shall refer to 10% of the shareholders’ equity attributable to the Company.

  • Article XLII Internal Audit

The audit of the procedure for the acquisition or disposition of assets

  • 156 -

shall be conforming to the requirement of the internal control system of the Company and other applicable legal rules unless This Procedure provides otherwise.

Article XLIII Penalty

  • In case any of the employees of the Company violates This Procedure in the acquisition or disposition of assets, proceed to the Regulations Governing the Evaluation of Personnel of the Company with proper punishment relevant with the severity of the offense.

  • Article XLIV Implementation and amendment to This Procedure

    • The Procedure for the Acquisition or Disposition of Assets of the Company shall be subject to the approval of the Board with release to the Supervisors and report to the Shareholders Assembly for ratification before coming into force. The same procedure is applicable to any amendment thereto. In case of adverse opinions from the Directors tracked on record, or in written declaration, the Company shall refer to information on adverse opinions to related Supervisors.

    • If the Company has established seats for Independent Directors, the opinions presented by respective Independent Directors on the procedure for the acquisition or disposition of assets presented to the Board for discussion shall be considered in full. The opinions for and against the proposal or the reason for objection shall also be tracked as minutes of meeting on record.

  • Article XVV Anything not covered by This Procedure shall be governed by other applicable legal rules.

  • 157 -

Appendix 8

Procedure for Loaning of Fund and Making of

Endorsements/Guarantees

Amended by the regular session of the Shareholders Assembly on June 25, 2013 Amended by the regular session of the Shareholders Assembly on June 29, 2016

Chapter I General Provision

  • Article I This Procedure is instituted in accordance with the “Regulations Governing Loaning of Funds and Taking Endorsements/Guarantees by Public Companies”. Anything not covered by This Procedure shall be governed by applicable legal rules.

  • Article II Prospective beneficiaries of financing by the Company shall be the following companies trading with the Company or with a need for shortterm financing:

  • I. Companies that have direct trading relation with the Company.

  • II. Subsidiaries of the Company with the direct holding of more than 50% of their common stock of equity shares.

  • III. Investees to the Company and subsidiaries which jointly hold more than 50% of their common stock of equity shares in combination.

  • Short-term as referred to in previous paragraph shall be a period of one (1) year. If the business cycle of the Company is longer than one (1) year, the duration of business cycle shall stand.

  • Article III Endorsements/Guarantees as referred to in This Procedure cover:

  • I. Endorsements/Guarantees for financing: (I) Financing through discount of customer cheques.

    • (II) Endorsements/Guarantees undertaken for purpose of financing a third party company.

    • (III) Issuance of financial instruments in favor of a non-financial enterprise as security for purpose of financing of the Company.

  • II. Endorsements/Guarantees for tariffs: Endorsements/Guarantees undertaken for the security of tariff payment in favor of the Company or a third party company.

  • III. Endorsements/Guarantees for other purposes: Endorsements/Guarantees that cannot be classified into the aforementioned 2 categories.

  • 158 -

This Procedure is also applicable to the pledge of movables or property as lien or mortgage in favor of a third party company for financing.

  • Article IV The beneficiaries of Endorsements/Guarantees undertaken by the Company are limited to the following parties:

  • I. Companies that have direct trading relation with the Company.

  • II. Subsidiaries of the Company with the direct holding of more than 50% of their common stock of equity shares.

  • III. Investees to the Company and subsidiaries which jointly hold more than 50% of their common stock of equity shares in combination.

  • Notwithstanding of the restriction stated in the previous paragraph, Endorsements/Guarantees may be undertaken in circumstances of contracting for work as a member in joint venture that mutual guarantee is required, or in joint investment that respective investors shall undertake endorsements/guarantees on the investee in proportion to the respective shares of investment, or as a part of joint and several liabilities with other industry peers for guarantee of performance of a preliminary agreement on property sale as required by the Consumer Protection Act. However, the Company shall not assume the part of the joint or several liabilities to be assumed by other shareholders.

  • Investments as referred to in the previous paragraph shall be the direct capital investment of the Company or capital investment by a whollyowned enterprise of the Company through the holding of voting shares.

  • Article V Subsidiaries as referred to in This Procedure shall be determined by the definition set forth in the Criteria for the Compilation of Financial Statements by Securities Issuers. Net worth as referred to in This Procedure shall be the shareholders’ equity attributable to the Company as stated in the balance sheet compiled in accordance with the Criteria for the Compilation of Financial Statements by Securities Issuers. The shareholders’ equity of the Company shall be based on the audited or reviewed financial statements covering the most recent period. Chapter II Procedure for loaning of funds

  • Article VI Standard of assessment of financing

  • I. For trade financing, the target of financing shall have no overdue payment record in the retirement of loan, and the total amount of financing shall not exceed 20% of the total amount of transaction with the Company in the previous year on an accumulative basis.

  • II. For short-term financing, the target of financing must have the need and meet the requirements of I- (II)~(III) in Article II, and the

  • 159 -

financing is for retirement of other loans, purchase of equipment, working capital, and other needs in the operation.

Article VII Limit of all financing and to particular target of financing

  • I. Total limit

  • (I) The overall financing offered by the Company and subsidiaries shall not exceed 20% of the net worth of the Company in current period.

    1. The total amount of loans to trading partners of the Company shall not exceed 20% of the net worth of the Company in current period on an accumulative basis.

    2. The total amount of loans to those who have the need for short-term financing shall not exceed 15% of the net worth of the Company in current period on an accumulative basis.

  • (II) The total amount of loans offered by the Company shall not exceed 20% of the net worth of the Company in current period.

    1. The total amount of loans to trading partners of the Company shall not exceed 20% of the net worth of the Company in current period on an accumulative basis.

  • The total amount of loans to those who have the need for short-term financing shall not exceed 15% of the net worth of the Company in current period on an accumulative basis.

II. Limit to particular target of financing

  • (I) The total amount of financing offered by the Company and subsidiaries to particular target of financing shall not exceed 5% of the net worth of the Company in current period.

    1. The total amount of loans to particular trading partner of the Company shall not exceed 5% of the net worth of the Company on an accumulative basis.

    2. The total amount of loan to particular target that has the need for short-term financing shall not exceed 2% of the net worth of the Company in current period on an accumulative basis.

  • (II) The total amount of financing offered by the Company to particular target of financing shall not exceed 5% of the net worth of the Company in current period.

    1. The total amount of loans to particular trading partner of the Company shall not exceed 5% of the net worth of the

  • 160 -

Company on an accumulative basis.

  • 2.The total amount of loan to particular target that has the need for short-term financing shall not exceed 2% of the net worth of the Company in current period on an accumulative basis.

Article VIII Term of financing and calculation of interest

  • I. Each count of loans shall be retired within one (1) year or a business cycle (whichever is longer) from the day of drawdown. If the financing is for trading purpose, the term may be extended as needed.

  • II. Interest shall be determined with reference to the interest rate offered in the financial market but shall not fall below the basic interest rate offered by the Bank of Taiwan, and shall be calculated monthly.

  • Article IX Procedures for processing and review of financing

  • I. The borrower shall present a request for financing or an official letter for financing with information on its financial position and other necessary information to the loan processing function of the Company.

  • II. The loan processing function of the Company shall collect, analyze and evaluate the credit standing and the state of operation of the borrower, compile a report on financing with elaboration of the target of financing, the reason, amount, term, and interest rate for financing, the methods of retirement, the use of the funds from financing, the collaterals or other means of guarantee, and opinions on the request for loans.

  • III. The “loan processing function” and “Financial Department” shall proceed to review and evaluation on the following, and keep record on the processing for reporting to the Board for review and discussion:

    • (I) Factors like the purpose of borrowing and the use of funds, business relation with the Company, or the importance of the operation of the borrower to the Company shall be considered. The loan shall be granted as needed and justifiable with reference to the standard set forth in Article VI and the limit of financing and the balance of outstanding loans.

    • (II) The financial positions and other necessary information on the target of financing, the operation, financial position, and credit

  • 161 -

standing, and the sources of funds for the retirement of loans by the target of financing shall be subject to analysis for measurement of possible risk.

  • (III) Evaluate the effect of the new loans on the balance of loan in proportion to the net worth of the Company, operation risk, financial position and shareholders’ equity of the Company on the basis of the evaluation results from (I) and (II).

  • (IV) At the time of requesting for financing, the borrower shall consider the pledge of property at 50% of the amount of loans, or the equivalent amount in government bonds, certificates of deposits, savings bond, or other securities under lien, or a bank guarantee of the equivalent value, in favor of the Company. In addition, appraisal on the value of the collaterals shall be conducted at least once quarterly to ensure the amount is relevant with the outstanding loans. Where necessary, request for the pledge of additional collaterals from the borrower.

  • IV. All financing to third parties shall be subject to the resolutions of the Board. Under no circumstance shall decision be made by a third party under authorization. The Company may have established seats for Independent Directors, and shall fully consider the opinions of the Independent Directors on financing. The opinions in favor or against the motion of financing clearly presented, and the underlying reasons, shall be kept as minutes of meeting on record of the Board.

  • V. Financing between the Company and subsidiaries, and among the subsidiaries, shall be resolved by the Board. The Chairman may be authorized to make decision of the limit of financing particular target of financing within the designated limit granted by the Board in several drawdowns or as revolving credit within one (1) year.

  • Designated limit as specified in the previous section shall be the authorized limit of financing particular enterprise by the Company or the subsidiaries shall not exceed 2% of the net worth of the Company or the subsidiaries stated in the financial statement covering the most recent period.

  • VI. In processing the request for financing, the Company shall establish a registry for tracking the transactions with particulars like the borrowers, amount, the date of resolution by the Board, the dates for drawdown, and the items required cautious assessment inscribed.

  • 162 -

  • VII. The Company shall review the status of financing with appropriation of sufficient amount of provision for bad debts, appropriately disclose the detail in the financial statement, and provide related information to the external auditors for necessary audits.

  • Article X Internal control of financing

  • I. Financial Department shall keep track on new loans and retirement of old loans on a monthly basis with ledgers and statements for proper control and declaration.

  • II. The internal auditors of the Company shall conduct audit on the procedures for the loaning of funds and the implementation of the procedure at least once quarterly, and keep record on the findings. If there are material defects, notify the Supervisors in writing.

  • III. In the event of change in the circumstance to the extent that the targets of financing are no longer conforming to requirements or the balance goes beyond the limit, the Company shall map out a corrective action plan and report to the Board and circulate to the Supervisors, and accomplish the corrective action plan as scheduled.

  • Article XI Procedure for post-approval control and management of overdue loans

  • I. The loan processing function shall review the credit status and the operation, and the value of the collaterals of the borrowers at regular intervals. In addition, they shall provide the information on the financial positions of the borrowers to Financial Department for review.

  • II. If particular borrower failed to retire the loan at maturity, the loan processing function shall proceed to collection of the overdue loans and appeal to legal proceedings for the recovery of the debts.

  • Article XII Announcement and declaration procedure

  • I. The Company shall make announcement on the balance of loans of the Company and subsidiaries in the last month by the 10th day of each month.

  • II. If the balance of loans of the Company and subsidiaries meet the requirements specified in Paragraph I, Article 22 of the “Regulations Governing Loaning of Funds and Taking Endorsements/Guarantees by Public Companies”, the Company shall make declaration and announcement within two (2) days after the day of deed.

  • III. The requirements specified in Paragraph I, Article 22 of the

  • 163 -

“Regulations Governing Loaning of Funds and Taking Endorsements/Guarantees by Public Companies”:

  • (I) The balance of loans of public companies and subsidiaries in favor of third parties exceed 20% of the net worth as stated in the financial statements of the public companies covering the most recent period.

  • (II) The balance of loans of public companies and subsidiaries in favor of particular enterprise exceed 10% of the net worth as stated in the financial statements of the public companies covering the most recent period.

  • (III) The new loans of public companies or subsidiaries amounted to NT$10 million or more and exceed 2% of the net worth of the public companies as stated in the financial statements of the public companies covering the most recent period.

  • IV. If the subsidiaries of the Company are not domestic public companies, the Company shall make declaration and disclosure for the subsidiaries.

  • V. Day of deed as referred to in paragraph II shall be the day on which an agreement was signed, for payment, resolution of the Board or any other day on which the counterparties and amount of transaction are determined, whichever comes first.

Chapter III Endorsements/Guarantees operation procedure

Article XIII Limit of Endorsements/Guarantees

  • I. The overall limit of Endorsements/Guarantees undertaken by the Company and subsidiaries in favor of third parties shall not exceed 50% of the net worth of the Company in current period.

  • II. The overall limit of Endorsements/Guarantees undertaken by the Company in favor of third parties shall not exceed 50% of the net worth of the Company in current period.

  • III. The overall limit of Endorsements/Guarantees undertaken by the Company and subsidiaries in favor of a particular third party shall not exceed 20% of the net worth of the Company in current period and also 50% of the net worth of the third party.

  • IV. The overall limit of Endorsements/Guarantees undertaken by the Company in favor of a particular third party shall not exceed 20% of the net worth of the Company in current period and also 50% of the net worth of the third party.

Article XIV Gate Approval and Decision

  • 164 -

  • I. Endorsements/ Guarantees shall be taken in accordance with This Procedure for approval and the resolution of the Board. If urgent decision is necessary, the Board may authorized the Chairman to make decision within the 5% limit as set forth in the overall limit of Endorsements/Guarantees specified in Article XIII and report to the nearest session of the Board for ratification. The detail and related matters shall be reported to the Shareholders Assembly for record.

  • II. If for business reason that the Company shall undertake Endorsements/Guarantees in excess of the overall limit as specified in Article XIII of This Procedure and the conditions have satisfied the requirements of the operation procedures for Endorsements/Guarantees of the Company, the consent of more than half of the Directors with their countersignatures will be necessary. Likewise, This Procedure shall also be amended accordingly and reported to the Shareholders Assembly for ratification. If the Shareholders Assembly disagrees with the action taken, map out a plan for revoking part of the limit so granted within designated period.

  • III. If the Company has established seats for Independent Directors, the opinions of the Independent Directors in the discussion of the motions regarding the limit as stated in the previous sections shall be fully considered. Their opinions in favor of or against the motions and the reasons shall be tracked as minutes of meeting on record of the Board.

  • Article XV Procedures for processing and review of Endorsements/Guarantees

  • I. The beneficiary shall present a request for Endorsements/Guarantees or an official letter for Endorsements/Guarantees with information on its financial position and other necessary information to the Endorsements/Guarantees processing function of the Company.

  • II. The “Endorsements/Guarantees processing function” and “Financial Department” shall proceed to review and evaluation on the following, and keep record, and make decision pursuant to Article XIV of This Procedure:

    • (I) Factors like the purpose of borrowing and the use of funds, business relation with the Company, or the importance of the operation of the borrower to the Company shall be considered. If Endorsements/Guarantees shall be undertaken for business

  • 165 -

transactions, the accumulated amount thereof shall be limited to 20% of the total amount of business transactions with the Company in the previous year. Endorsements/Guarantees shall be undertaken as needed and justifiable with reference to the limit and current balance of Endorsements/ Guarantees.

  • (II) The financial positions and other necessary information on the target of financing, the operation, financial position, and credit standing, and the sources of funds for the retirement of loans by the target of Endorsements/Guarantees shall be subject to analysis for measurement of possible risk.

  • (III) Evaluate the effect of additional undertaking of Endorsements/Guarantees on the balance of loan in proportion to the net worth of the Company, operation risk, financial position and shareholders’ equity of the Company on the basis of the evaluation results from (I) and (II).

  • (IV) With reference to the purpose of Endorsements/Guarantees, and the findings from the assessment from (I) ~ (III), evaluate if it is necessary to require the target of Endorsements/Guarantees to pledge movables or property under lien or mortgage as collaterals in favor of the Company. In addition, appraisal on the value of the collaterals shall be conducted at least once quarterly to ensure the amount is relevant with the outstanding loans. Where necessary, request for the pledge of additional collaterals from the target of Endorsements/Guarantees.

  • III. The Company shall prepare a registry for tracking all Endorsements/Guarantees undertaken with the detail of promise of guarantees, the name of the enterprises under guarantees, the result of risk assessment, the amount of Endorsements/Guarantees, the content of collaterals, the date of resolution of the Board of decision of the Chairman, the conditions for discharge of the responsibility of Endorsements/Guarantees and the date shall be inscribed for record. Make photocopies of related financial instruments and agreements and keep these documents properly.

  • IV. In case the enterprise elects to retire the loans before maturity, or prior to the expiration day of Endorsements/Guarantees, the processing function and Financial Department shall urge the enterprise in point to recover the promissory notes retained by the

  • 166 -

bank or financial institution and cancel the promissory notes related to Endorsements/Guarantees to discharge the responsibility of the Company over the Endorsements/Guarantees.

  • V. The Company shall evaluate or recognize the contingent loss deriving from the undertaking of Endorsements/Guarantees with disclosure in the financial statements, and provide the external auditors related information for necessary audits.

  • Article XVI Procedures for application and keeping of specimen seals

  • I. In undertaking Endorsements/Guarantees, the Company shall issue promissory notes with the affixing of the official seal and apply with the Ministry of Economic Affairs to register the specimen seal as the official seal evidencing the approval of Endorsements/Guarantees. The Company shall appoint designated personnel to keep the official seal and financial instruments, and shall affix the official seal or issue financial instruments in due procedure of the Company. The appointment of the aforementioned keeper of the official seal and financial instruments shall be subject to approval of the Board. The same procedure is applicable to any replacement thereof.

  • II. At the resolution of the Board or the approval of the Chairman, the record on approval, the agreement on Endorsements/Guarantees or the promissory notes, which require the application of official seal, shall be forwarded to the Financial Department for review before referring to the keeper of official seal for application.

  • III. The keeper of the official seal shall check to ensure the approval record before affixing the official seal to relevant documents as requested.

  • IV. In undertaking guarantee in favor of foreign companies by the Company, the letter of guaranteed issued by the Company shall be affixed with the signature of the person authorized by the Board.

  • Article XVII Internal control of Endorsements/ Guarantees

  • I. Financial Department shall keep track on additional undertaking of Endorsements/Guarantees and the cancellation of Endorsements/Guarantees on a monthly basis with ledgers and statements for control and declaration.

  • II. The internal auditors of the Company shall conduct audit on the procedures for Endorsements/Guarantees and the implementation of the procedure at least once quarterly, and keep record on the

  • 167 -

findings. If there are material defects, notify the Supervisors in writing.

  • III. If the Company undertakes Endorsements/Guarantees in favor of a subsidiary which net worth falls below 1/2 of the paid-in capital, review the necessity, rationality of the undertaking and assess the risk with caution pursuant to Article XV. In addition, exercise strict internal control over Endorsements/Guarantees as mentioned in the preceding section.

  • IV. In the event of change in the circumstance to the extent that the targets of Endorsements/Guarantees are no longer conforming to requirements or the balance goes beyond the limit, the Company shall map out a corrective action plan and report to the Board and circulate to the Supervisors, and accomplish the corrective action plan as scheduled.

  • V. For subsidiaries issuing shares without face value or the face value of the shares are not NT$10/share, calculate the paid-in capital pursuant to III of this article, and shall combine the capital stock and capital reserve – additional paid-in capital in the calculation.

  • Article XVIII Procedure for announcement and declaration

  • I. The Company shall make announcement on the balance of Endorsements/Guarantees undertaken by the Company and subsidiaries in the last month by the 10th day of each month.

  • II. If the balance Endorsements/Guarantees undertaken by the Company and subsidiaries meet the requirements specified in Paragraph I, Article 25 of the “Regulations Governing Loaning of Funds and Taking Endorsements/Guarantees by Public Companies”, the Company shall make declaration and announcement within two (2) days after the day of deed.

  • III. The requirements specified in Paragraph I, Article 25 of the “Regulations Governing Loaning of Funds and Taking Endorsements/Guarantees by Public Companies”:

    • (I) The balance of Endorsements/Guarantees undertaken by public companies and subsidiaries in favor of third parties exceed 50% of the net worth as stated in the financial statements of the public companies covering the most recent period.

    • (II) The balance of Endorsements/Guarantees undertaken by public companies and subsidiaries in favor of particular enterprise exceed 20% of the net worth as stated in the financial

  • 168 -

statements of the public companies covering the most recent period.

  • (III) The balance of Endorsements/Guarantees undertaken by public companies and subsidiaries in favor of particular enterprise exceed NT$10 million and the total of Endorsements/Guarantees, long-term investment, and financing exceeds the 30% of the net worth of the public company in point as stated in the financial statement covering the most recent period.

  • (IV) The additional Endorsements/Guarantees undertaken public companies or subsidiaries amounted to NT$30 million or more and exceed 5% of the net worth of the public companies as stated in the financial statements of the public companies covering the most recent period.

  • IV. If the subsidiaries of the Company are not domestic public companies, the Company shall make declaration and disclosure for the subsidiaries.

  • V. Day of deed as referred to in II shall be the day on which an agreement was signed, for payment, resolution of the Board or any other day on which the counterparties and amount of transaction are determined, whichever comes first.

Chapter IV Miscellaneous

Article XIX Procedure for the control of subsidiaries

  • I. If the subsidiaries of the Company elect to finance or undertake Endorsements/Guarantees in favor of a third party, they shall institute related procedures for loaning of funds and taking endorsements/guarantees and observe This Procedure in operation. Net worth shall be the net worth of respective subsidiaries in the calculation.

  • II. Subsidiaries shall put together the details of loaning of funds and Endorsements/Guarantees of the previous month in writing and submit to the Company prior to the 5th day of the month.

  • III. The internal auditors of the Company shall conduct audits on the procedures for loaning of funds and Endorsements/Guarantees and the implementation of the procedures at least once quarterly, and keep record on the findings. In case of material defects, notify the Supervisors of respective subsidiaries at once in writing.

Article XX Penalty

  • 169 -

In case any of the Managers or project organizers of the Company violates This Procedure, proceed to the “Regulations Governing the Evaluation of Personnel” of the Company with proper punishment relevant with the severity of the offense.

  • Article XXI Effective date and amendment

  • This Procedure of the Company shall be subject to the approval of the Board with release to the Supervisors and report to the Shareholders Assembly for ratification before coming into force. In case of adverse opinions from the Directors tracked on record, or in written declaration, the Company shall refer the information on adverse opinions to related Supervisors. The same procedure is applicable to any amendment thereto. If the Company has established seats for Independent Directors, the opinions presented by respective Independent Directors on the procedure for the acquisition or disposition of assets presented to the Board for discussion shall be considered in full. The opinions for and against the proposal or the reason for objection shall also be tracked as minutes of the meeting on record.

  • 170 -

Appendix 9

Shareholdings of Directors and Supervisors

  1. According to Article 26 of the Securities and Exchange Act, Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies and the Company's Articles of Incorporation, the total equity held by all of the Company's directors shall be no less than 31,360,000 shares, and the total equity held by all of the Company's supervisors shall be no less than 3,136,000 shares.

  2. Before the date of suspension of stock transfer resolved by the general shareholders’ meeting, May 1, 2018, the shareholdings by individual directors, all directors (independent directors) and supervisors referred to in the roster of shareholders are stated as following:

Job Title Name Quantity
(shares)		 Shareholding %
Chairman of
Board		 Council of Agriculture,
Executive Yuan
Representative: Hsin-Hong
Kang		 235,886,376 24.07%
Director Council of Agriculture,
Executive Yuan
Representative: Chi-Chung
Chen
Director Council of Agriculture,
Executive Yuan
Representative: Xu-Hong
Huang
Director Council of Agriculture,
Executive Yuan
Representative: Chao-FengLi
Director Council of Agriculture,
Executive Yuan
Representative: Sheng-Ming
Xu
Director Chang-HaiCai 356,000 0.03%
Director Qing-Lian Xu 100,000 0.01%
Independent
Director		 Ming-Cai Xu 0 -
Independent
Director		 Ya-Hui Sheng 0 -
Totalequityheld by alldirectors 236,342,376 24.11%
Supervisor Chunghwa Post Co.,Ltd. 34,378,000 3.51%
  • 171 -
Job Title Name Quantity
(shares)		 Shareholding %
Representative: Chih-Lung
Lin
Supervisor Tsai-LaiChen 100,000 0.01%
Supervisor Ling-LangTsai 135,000 0.01%
Total equityheld byall supervisors 34,613,000 3.53%
  • 172 -

Appendix 10

Effect of the gratuitous allotment of shares on operation performance, earnings per share and return rate on investment for shareholders : N/A .

  • 173 -

More from TFC

Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 8
Regulatory Filings 2026
May 7
Regulatory Filings 2026
May 7
View all filings →