YAGEO — AGM Information 2018

Jun 22, 2018

Stock Code: 2327

YAGEO Corporation

Handbook for the 2018 Annual Meeting of Shareholders

(Translation)

Date: June 5, 2018

Place: No. 265, Sec. 3, Beishen Rd., Shenkeng Dist., New Taipei City, Taiwan

VIP 1 Conference Room, Holiday Inn East Taipei

Table of Contents

Page Meeting Procedure ……………………………………………………..1 Meeting Agenda ………………………………………………………...2 1. Management Presentations...…………………..………………....3 2. Proposed Resolutions…………………………..………………....7 3. Discussions and Elections…………………..…………………..9 4. Motions………………….…………………………….….……..13

YAGEO Corporation

Year 2018

Procedure for Annual Meeting of Shareholders

I. Call the Meeting to Order

II. Chairperson Remarks

III. Management Presentations

IV. Proposed Resolutions

• V. Discussions and Elections

VI. Motions

VII. Adjournment

1

YAGEO Corporation

Year 2018

Agenda for Annual Meeting of Shareholders

1. Time: Tuesday 9:00 a.m. on June 5, 2018

2. Place: VIP 1 Conference Room, Holiday Inn East Taipei

No. 265, Sec. 3, Beishen Rd., Shenkeng Dist., New Taipei City, Taiwan

1. Chairperson Remarks

2. Management Presentations:

3. a. Year 2017 Business Report

4. b. Year 2017 Supervisors’ Review Report

5. c. Share Buyback Program and the Implementation Status

6. d. 2017 Employees’ Compensation and Remuneration to Directors and Supervisors Distribution Status

7. Proposed Resolutions:

8. a. Adoption of the 2017 Financial Statements

9. b. Adoption of the Proposal for Distribution of 2017 Earnings

10. Discussions and Elections:

11. a. Proposal for a cash distribution from capital surplus

12. b. Proposal for the new shares issuance through capitalization of earnings

13. c. Amendment to the Rules of Procedure for Shareholder Meetings

14. d. Amendment to the Company's Articles of Incorporation

15. e. Amendment to the Operational Procedures for Acquisition and Disposal of Assets

16. f. Amendment to the Operational Procedures for Lending of Capital, Endorsements and Guarantees

17. g. Amendment to the Rules for the Election of Directors

18. h. Election of Directors

19. i. Proposal of Release the Prohibition on Directors from Participation in Competitive Business

20. Motions

21. Adjournment

2

Management Presentations

Item a

Proposed for Reviewed: Year 2017 Business Report

YAGEO Corporation Year 2017 Business Report

Dear Shareholders:

FY17 is an innovated, transformed and breakout year for Yageo Corporation. The consolidated sales, gross profit, operating income, net profit and earnings per share after tax are record highs. This outstanding achievement resulted from forward-looking layout of the Corporation, developing its core business, continuous expansion of the profitable product portfolio, optimizing customer mix, providing premium value-added services and solutions, and maintaining the high operational efficiency of the organization. With concerted efforts, the Corporation is toward a growth development steadily with sound operating and financial results.

1. Operating Results:

FY17 consolidated sales reported NT$ 32,259 million, up 16.1% y-o-y, with 32.5% of gross margin. Operating income posted NT$ 7,593 million with 23.5% of operating profit margin. FY17 net profit attribute to parent company reported NT$ 6,656 million or NT$ 15.64 earnings per share.

2. Implementation of the 2017 Budget

The Company did not disclose financial forecast for 2017 and thus, does no need to disclose the budget implementation.

1. Financial operations and profitability analysis:

Financial operations	andprofitabilityanalysis:
	Items	Year 2017
Capital Structure	Debt Ratio(%)	55.04
	Permanent Capital to Fixed Assets(%)	228.88
Liquidity	Current Ratio(%)	108.12
Profitability	Return on Assets(%)	11.43
	Return on Equity (%)	24.60
	Net Profit Margin(%)	20.71
	Earnings Per Share (NTD)	15.64

4. Year 2018 Business Plan:

Yageo will continue to execute following strategies to create values for its all stakeholders, including shareholders, clients, and employees.

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• (1) Continuous expansion of the profitable product portfolio. Close to the trend of technology. Continue to penetrate Automotive/Industrial segments, power application, IoT, AI, VR/AR technology and optimize products and customer portfolio and build solid relationships with mega customers to increase revenue contributions from higher margin products and customers.

• (2) Implement operational excellence. Optimize "one-stop shopping" by providing integrated solutions and services and diversified product mix to customers. Continue to integrate efficient logistics and warehouse management to provide best global logistics services. Continue to integrate business units and global sales network and update systems and operation processes in a timely manner. Through advanced plan and optimized technique to implement automation intelligence production and Industry 4.0 innovated applications.

• (3) Enlarge high-quality innovated product portfolio. Invest in adjacent technology to develop advanced and profitable products based on existing products and technologies. Introduce new high-valued components by looking external strategic cooperation. Solidly execute new product launch plans. Improve the products quality management to provide full range, high-quality product line to meet the various demands of customers.

• (4) Maintain high performance organization. Clear roles and responsibility and authorized and coached successor management, recruit and retain talented employees. Continue to build up a highly efficient corporation through the innovation of organization and processes.

Looking ahead, there are many uncertainties in the global economy and industry, such as some disputes among international trades, the tightening of international environmental protection regulations, the impact of exchange rate fluctuations and interest rate increases, and the price competition of passive components in the industry. However, in order to maintain the Corporation's international competitiveness and drive further growth in its performance and profitability, Yageo Corporation continue to upgrade production and environmental protection equipment and follow environmental regulations, prudently implement necessary financial hedging strategies, expand the proportion of capacity for high-end automotive and industrial products, and optimize product and end-user portfolios. We appreciate your full support of the Company. Wish you good health and prosperity!

Chairman: Pierre Chen General Manager: Dora Chang Chief Accounting Officer: Alfred Huang

4

Item b Proposed for Reviewed: Year 2017 Supervisors’ Review Report

YAGEO Corporation Supervisors' Review Report

The Board of Directors has approved the Corporation’s 2017 Financial Statements, Business Report, and proposal for distribution of earnings. The CPA firm of Deloitte and Touche, which was appointed by the Board of Directors, has audited the Corporation’s 2017 Financial Statements and issued an unqualified opinion.

The certified public accountants, Yung-Hsiang Chao and Jr-Shian Ke, have audited the Corporation’s 2017 financial statements and communicated the following issues with supervisors:

1. The audit scope, time and significant matters

2. The independence of the CPA

3. Key audit matters

We have examined the Corporation’s 2017 Financial Statements, Business Report, and the proposal for distribution of earnings that have been approved by the Board of Directors. We hereby respectfully prepare and present this Report in accordance with Article 219 of The Company Act for your review.

Supervisor: Hung Tai Investments Ltd. Legal Representative: Lai-Fu Lin

Supervisor: Hung Tai Investments Ltd. Legal Representative: Yuan-Ho Lai

February 22, 2018

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Item c

Proposed for Reviewed: Share Buyback Program and the Implementation Status

As of December 31, 2017

		As of December 31, 2017
The number of times	11thBuyback	12thBuyback
Purpose	Preserve the company's credit and shareholders' value	Preserve the company's credit and shareholders' value
Types and number of shares	30,000,000 common shares	30,000,000 common shares
Schedule period	2016/12/26~2017/02/24	2017/03/06~2017/05/05
Price range	NT$ 40.00~87.80	NT$ 52.20~109.30
Repurchase types and number of shares	18,349,000 common shares	3,392,000 common shares
Repurchase period	2017/01/03~2017/02/14	2017/04/10~2017/05/05
Repurchase Amount	NT$ 1,294,349,920	NT$ 323,187,384
Canceled and transferred	18,349,000 common shares	3,392,000 common shares
Cumulative shares held	-	-
Ratio of cumulative shares held of total company’s shares issued	-	-

Item d

Proposed for Reviewed: 2017 Employees’ Compensation and Remuneration to Directors and Supervisors Distribution Status

• Explanation: 1. In accordance to the authority’s regulations and Company’s Articles of Incorporation to set aside not less than 2% of pre-tax income before deduct employees’ compensation and remuneration to directors and supervisors to employees as compensation, and not more than 3% to directors and supervisors as remuneration.

• Employees’ compensation of 2017 is NT$240,164,282 (3%), and remuneration to directors and supervisors is NT$240,164,282 (3%), based on pre-tax income before deduct employees’ compensation and remuneration to directors and supervisors. Both are paid in cash.

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Proposed Resolutions:

Item a

Proposal: Adoption of the 2017 Financial Statements (Proposed by the Board of

Directors)

Explanation: 1. The Company's business report, financial statements and consolidated financial statements of 2017 have been approved by the Board and examined by the supervisors of the company.

1. Please refer to page 3~5

2. Please acknowledge.

Resolution:

Item b

Proposal: Adoption of Proposal for Distribution of 2017 Earnings (Proposed by the Board of Directors)

• Explanation: 1. 2017 net profit is NT$6,847,299,863. After setting aside the legal reserve of NT$684,729,986, reversing special reserve of NT$1,286,096,979, and then adding adjusted retained earnings of NT$ 13,248,816,415, the retained earnings available for distribution are NT$20,697,483,271, of which, NT$ 5,036,143,650 will be distributed as cash dividends to shareholders, or NT$14.36 per share, and NT$ 701,412,760 will be distributed as stock dividends to shareholders, or NT$2.00 per share.

• The cash dividend is issued to the rounded full NT dollar, and any distributed amounts less than NT$1 will be transferred to the company’s other revenues.

• In the event that, before the distribution record date, the proposed earnings distribution of cash dividends per share is affected by an amendment by the competent authorities, or the number of actual shares outstanding, it is proposed that the Chairman be authorized to handle matters related to the changes.

• Upon the approval of the Annual Meeting of Shareholders, it is proposed that the Chairman be authorized to resolve the ex-dividend date and other relevant issues.

• According to the Article 241 of Company Act, where a company incurs no loss, it may capitalize its legal reserve and capital surplus – the income derived from the issuance of new shares at a premium, in whole or in part, by issuing new shares or cash which shall be distributable as dividend shares to its original shareholders in proportion to the number of shares

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being held by each of them at a premium. The total cash available distributed from capital surplus is NT$ 224,452,084, or NT$ 0.64 per share. Upon the approval of the Annual Meeting of Shareholders for the cash distribution from capital surplus, the total cash distribution to shareholders is NT$ 17 per share.

1. Please acknowledge.

Yageo Corporation Earnings Distribution Proposal Year 2017

Year 2017
Item		Amount(In NTD)
Undistributed retained earnings, beginning Less：Cancellation of Treasury Shares Less：Remeasurement of defined benefit plan Less：Adjustment arising from investments accounted for using equity method Adjusted undistributed retained earnings Add：2017 Net profit Less：10% Legal reserve Add：Reverse special reserve Total retained earnings available for distribution Appropriations: Common share dividend – Cash Common share dividend – Stock Undistributed retained earnings, end		14,696,628,209 (1,390,190,255) (46,690,966) (10,930,573)
		13,248,816,415 6,847,299,863 (684,729,986) 1,286,096,979
		20,697,483,271 (5,036,143,650) (701,412,760)
		14,959,926,861

Chairman: Pierre Chen General Manager: Dora Chang Chief Accounting Officer: Alfred Huang

Resolution:

8

Discussions and Elections:

Item a

Proposal for Cash Distribution from Capital Surplus (Proposed by the Board of Directors)

Explanation: 1. According to the Article 241 of Company Act, where a company incurs no loss, it may capitalize its legal reserve and capital surplus – the income derived from the issuance of new shares at a premium, in whole or in part, by issuing new shares or cash which shall be distributable as dividend shares to its original shareholders in proportion to the number of shares being held by each of them at a premium. The total cash available distributed from capital surplus is NT$ 224,452,084, or NT$ 0.64 per share.

1. The cash dividend is issued to the rounded full NT dollar, and any distributed amounts less than NT$1 will be transferred to the company’s other revenues.

2. Upon the approval of the Annual Meeting of Shareholders, it is proposed that the Chairman be authorized to resolve the ex-dividend date and other relevant issues.

3. In the event of revision or changes regulated by the authority for the cash distribution, it is proposed that the Chairmen be authorized to resolve relevant issues.

4. In the event that, before the distribution record date, the proposed distribution from capital surplus is affected by an amendment by the competent authorities, or the number of actual shares outstanding, it is proposed that the Chairman be authorized to adjust the total cash to be distributed based on the same dividend per share.

Resolution:

9

Item b

Proposal for the new shares issuance through capitalization of earnings (Proposed by the Board of Directors)

• Explanation: 1. For the further development of company business, it is proposed to capitalize NT$ 701,412,760 from distributable earnings and issue 70,141,276 new shares in par value of NT$ 10. Depend on registered shareholders and shareholding ratio on the ex-rights date, 200 new bonus common shares will be distributed for every 1,000 common shares. Allotment of fractional shares (less than one share) shall be put together by shareholders to the agent for stock affairs of the Company within 5 days from the book closure date. To the fractional shares which are insufficient to put together past the due date, specified persons may subscribe by the designation of the Chairman.

• In the event for the new shares issuance which is affected by an amendment by the competent authorities, or the number of actual shares outstanding, it is proposed that the Chairman be authorized to resolve relevant issues.

• The shareholder rights and obligations of the new shares are the same as those of existing shares.

• After the approval of the Annual Meeting of Shareholders and the competent authority, it is proposed that the Board be authorized to resolve the ex-right date.

Resolution:

Item c

Amendment to the Rules of Procedure for Shareholder Meetings (Proposed by the Board of Directors)

Explanation: In order to conform to the needs of commercial practice, the company hereby proposes to amend the Rules of Procedure for Shareholder Meetings.

Resolution:

10

Item d

Amendment to the Company's Articles of Incorporation (Proposed by the Board of Directors)

Explanation: In order to conform to the needs of commercial practice, the company hereby proposes to amend the Company's Articles of Incorporation.

Resolution:

Item e

Amendment to the Operational Procedures for Acquisition and Disposal of Assets (Proposed by the Board of Directors)

Explanation: In order to conform to the needs of commercial practice, the company hereby proposes to amend the Operational Procedures for Acquisition and Disposal of Assets.

Resolution:

Item f

Amendment to the Operational Procedures for Lending of Capital, Endorsements and Guarantees (Proposed by the Board of Directors)

Explanation: In order to conform to the needs of commercial practice, the company hereby proposes to amend the Operational Procedures for Lending of Capital, Endorsements and Guarantees.

Resolution:

Item g

Amendment to the Rules for the Election of Directors (Proposed by the Board of Directors)

Explanation: In order to conform to the needs of commercial practice, the company hereby proposes to amend the Rules for the Election of Directors.

Resolution:

11

Item h

Election of Directors (Proposed by the Board of Directors)

Explanation: 1. The term of current Yageo Directors and Supervisors will expire on June 11, 2018. According to the regulations by the authority, the Company should set up an Audit Committee and no Supervisors. The Audit Committee will consist of all independent Directors. In accordance with the revised Articles of Incorporation, nine Directors (including three independent Directors) will be elected at this Annual Shareholders’ Meeting.

1. The three-year tenure, from June 5, 2018 to June 4, 2021, of newly elected Directors shall commence immediately after this Annual Shareholders’ Meeting.

2. The qualification of the nominated Directors has been reviewed by the Board of Director on April 24, 2018.

3. Please elect.

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Director Candidate List

	Name	Education	Experience	Present position	Holding Shares	Representive of Company
Director	Tie-Min Chen	B.S. of Engineering, National ChengKungUniversity	General Manager of Yageo Corp.	Chairman of Yageo Corp.	26,862,741	N.A.
Director	Lai-Fu Lin	ROC Certified Public Accountant	Partner of Deloitte & Touche	Partner and CEO of UHY L&C Company	3,354,562	Hsu Chang Investment Ltd.
Director	Shih-Chien Yang	Ph. D. of Electrical Engineering, Northwestern University, USA	General director of Minister of Industrial Development Bureau, Ministry of Economic Affairs	Chairman and CEO of Global Strategic Investment Fund	3,354,562	Hsu Chang Investment Ltd.
Director	Chi-Wen Chang	MBA in Finance, UCLA, Anderson School	CFO of Advantech Co., Ltd.	CEO and General Manager of Yageo Corp.	3,354,562	Hsu Chang Investment Ltd.
Director	Pao-Yuan Wang	B.S. of Electrical Engineering and Microelectronics, National ChengKungUniversity	Vice president of Philips Taiwan	Chairman of Ko-E Corp	3,354,562	Hsu Chang Investment Ltd.
Director	Victor C. Wang	EMBA of National Taiwan University	Vice Chairman of Deloitte & Touche	Independent director of Taiwan Cement Corp.	3,354,562	Hsu Chang Investment Ltd.
Independent Director	Jerry Lee	B.S. of Accounting, Tam-KangUniversity	Vice Chairman of Yageo Corp.	Independent director of Yageo Corp.	0	N.A.
Independent Director	Tun-Son Lin	Ph. D. of Management, King's College London	Chairman and managing partner of Whitesun EquityPartners	Chairman and executive partner of Whitesun EquityPartners	0	N.A.
Independent Director	Hilo Chen	EMBA, National Taiwan University	CEO and General Manager of Systex Corp	Founder & Chairman of GuoShi Partners	0	N.A.

Voting Results:

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Item i

Proposal of Release the Prohibition on Directors from Participation in Competitive Business (Proposed by the Board of Directors)

Explanation: According to Article 209 of the Company Law, the directors for themselves or others that is within the scope of the company’s business, in line with the actual needs, under the precondition of not interfering with the Company’s interests, it is proposed that to release the prohibition on the Company’s newly elected directors from participation in competitive business.

Resolution:

Motions

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