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EPISTAR CORPORATION
2019 Annual General Shareholders’ Meeting
MINUTES
(Translation)
Time::::9:00 a.m., Thursday, June 20, 2019
Place: Conference Room 101, Association of Industries in Hsinchu Science Park (No.2, Zhanye 1st
Rd., Hsinchu City, Taiwan)
Attendants: All shareholders and their proxy holders, representing 736,186,118 shares (amongst
them, 428,442,750 shares voted via electronic transmission), or 68.27% of the total
1,078,336,655 outstanding shares (10,364,755 non-voting shares have been deducted
according to the second paragraph of Section 179 in Company Act).
Board Members Present: Biing-Jye Lee, Nan-Yang Wu, Wei-Min Sheng and Feng-Shang Wu.
Attendees: Ya-Huei Cheng CPA of PricewaterhouseCoopers, Taiwan, Li, Lin- Sheng Attorney of
Lee Hsu & Wang Attorney-at-Law
Chairperson: Biing-Jye Lee Chairman Minute Recorder: Belle Lu
ⅠⅠⅠⅠ. Chairman announced commencement.
ⅡⅡⅡⅡ. Chairman’s Address (omitted)
Ⅲ. Report Items
(1) The 2018 Business Report. (see Attachment 1, page 15~16.)
(Acknowledged)
(2) Audit Committee's report of 2018 audited financial report. (see Attachment 2, page 17.)
(Acknowledged)
(3) Implementation Report on the Issuance of the Common Stocks through Private Placement
which approved by the 2018 Annual General Shareholders' Meeting.
Explanation:
Capital injection by issuance of 160 million shares of common stocks through private
placement had been terminated by the resolution of the Board of Directors meeting on
March 14th, 2019 due to lack of qualified strategic investor can be found before the expiry
date on June 20th, 2019.
(Acknowledged)
(4) Implementation Report on the repurchase of the Company’s common stocks.
Explanation:
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A. In order to encourage its employees, the Board of Directors meeting on November 12,
2018 resolved the share repurchase and transfer to employees. The Rules for the
Repurchase of Shares and Transfer to Employees is attached hereto as Attachment 3
(page 18~19).
B. Status of repurchases are listed below:
The period November 13, 2018 ~ January 12, 2019
Repurchased price range NT$25~NT$40. When the Company's stock price
is below the set floor price, the Company will
continue its exercise plan.
The actual number of shares
repurchased
7,800,000 shares.
Ratio of the shares to be repurchased to total
issued shares of the Company is 0.72%
The actual total monetary amount
of the share repurchased
NT$ 190,327,325
Average repurchase price NT$ 24.4
The status of transferred 0 share.
(Acknowledged)
(5) Amendments to the Rules for the Conduct of the Board of Directors' Meeting.
Explanation:
A. It is resolved by the Board of Directors to revise part of the articles of 「the Rules for the
Conduct of the Board of Directors' Meeting」of the Company to comply with the
amendment of Company Act and the amendment of Article 15 and Article 20 of Taiwan
Stock Exchange Corporation Operation Directions for Compliance with the
Establishment of Board of Directors by TWSE Listed Companies and the Board’s
Exercise of Powers.
B. The Company hereby proposes to amend the Rules for the Conduct of the Board of
Directors' Meeting. Comparison Table for Amendments is attached hereto as Attachment
4 (page 20~29).
(Acknowledged)
(6) Status of Endorsements and Guarantees as of the End of 2018.
Explanation:
A. The Company provided endorsements and guarantees for the finance of its wholly owned
subsidiary, Episky Corporation (Xiamen) Ltd. The balance of endorsements and
guarantees amounted to US$83,000,000 and RMB$72,000,000 as of December 31st,
2018.
B. The Company provided endorsements and guarantees for the finance of its 86.97% owned
subsidiary, Jiangsu Canyang Optoelectronics Ltd. The balance of endorsements and
guarantees amounted to US$13,000,000 as of December 31st, 2018.
(Acknowledged)
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Summary of the proceedings:
1. Shareholder account #3095: How the Company will transform the R&D expense into
revenue and profit and what is the schedule of it? What is your countermeasures to
overcome difficulties from the trade war between China and the USA? What is your
schedule for importing the mini LED and Micro LED to supply chain?
2. Shareholder account #151517: what is the yield rate and schedule for mass production of
Mini LED and Micro LED?
The questions above have been clarified to shareholders by the Chairman and the designated
person.
Ⅳ. Approval Items
(1) 2018 Business Report and Financial Statements.
(Proposed by the Board of Directors)
Explanation:
A. The 2018 Business Report and Financial Statements were approved by the Board of
Directors’ Meeting on March 14, 2019 and reviewed by the Audit Committee. The Audit
Committee’s report was issued accordingly.
B. The 2018 Business Report, Audit Report from the Certified Public Accountant (CPA) and
Financial Statements are attached hereto as Attachments 1 and 5 (pages 15~16 and pages
30~57).
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 586,696,247 votes
(279,032,899 votes) 79.69%
Votes against: 40,614 votes
(40,614 votes) 0.01%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 149,449,257 votes
(149,369,237 votes) 20.30%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
Summary of the proceedings:
Shareholder account #3095: How does the Company improve gross profit? What is the
auditing procedures for those re-investment companies? How is the account receivable and
the allowance to reduce inventory to market? It is proposed to improve the debit ratio and to
accelerate the schedule for new product development and application.
The questions above have been clarified to shareholders by the Chairman and the designated
person.
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(2) Proposal for 2018 Deficit Compensation.
(Proposed by the Board of Directors)
Explanation:
A. The 2018 net loss after tax was approximately NT$ 456,146 thousand.
B. The Deficit Compensation Statement is attached hereto as Attachment 6 (page 58).
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 588,817,876 votes
(281,154,528 votes) 79.98%
Votes against: 77,297 votes
(77,297 votes) 0.01%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 147,290,945 votes
(147,210,925 votes) 20.01%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
Ⅴ. Election Item
(1) To elect 9 directors of the 10th term of the Board of Directors.( including 5 independent
directors)
(Proposed by the Board of Directors)
Explanation:
A. The Company will elect the 10th term of Directors during the 2019 Annual General
Shareholders’ Meeting. Nine directors will be considered for the Board. The term for
elected Directors is three years, starting from June 20th, 2019 to June 19th, 2022.
B. The Company have established an Audit Committee pursuant to the R.O.C. Securities and
Exchange Act. The Audit Committee is composed of all independent directors.
Voting Results:
The list of the newly elected directors with votes received follows:
Title Name Votes Received
Director Biing-Jye Lee 700,080,858
Director Chih-Yuan Chen 632,868,000
Director Nan-Yang Wu 632,380,000
Director Chin-Yung Fan 631,008,000
Independent Director Wei-Min Sheng 348,451,428
Independent Director Feng-Shang Wu 346,108,000
Independent Director Chi-Yen Liang 345,348,000
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Title Name Votes Received
Independent Director Yu-Te Houng 345,278,005
Independent Director Wei-Kuo Chen 344,095,738
Ⅵ. Discussion Items
(1) Cash Distribution of the Capital Surplus to Shareholders.
(Proposed by the Board of Directors)
Explanation:
A. Pursuant to Article 241 of the Company Act, the Company plans to distribute
NT$324,270,423 as dividend in cash. It shall be allocated from the capital surplus derived
from the capital increase in which the new shares were issued with the amount exceeding
the par value. It shall be distributed in accordance with the share amounts held by the
shareholders as registered in the roster of shareholders on the record date of the dividend
distribution. The distribution calculation shall be rounded up to the nearest NT dollar.
B. As calculated on the basis of the number of shares issued by the Company as of March 6th,
2019, eligible share for distribution was 1,080,901,410 in total, the cash dividend shall be
NT$0.3 per share.
C. It is proposed that shareholders’ meeting resolve to authorize chairman to set up the date
of ex-dividends and other relevant issues. If the dividend ratio is affected by the change
of the numbers of outstanding shares of the Company, the chairman of the Board of
Directors is fully authorized to conduct necessary process.
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 588,888,770 votes
(281,225,422 votes) 80.00%
Votes against: 35,849 votes
(35,849 votes) 0.00%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 147,261,499 votes
(147,181,479 votes) 20.00%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
(2) Amendments to the Articles of Incorporation.
(Proposed by the Board of Directors)
Explanation:
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A. To comply with the amendments of the Company Act amended by the Republic of China
on August 1st, 2018 and operational requirements of the Company, the Company hereby
proposes to amend the Articles of Incorporation.
B. Comparison Table for Amendments is attached hereto as Attachment 7 (page 59~70).
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 588,864,601 votes
(281,201,253 votes) 79.99%
Votes against: 22,606 votes
(22,606 votes) 0.00%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 147,298,911 votes
(147,218,891 votes) 20.01%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
(3) To amend "Acquisition or Disposal Procedures of Asset".
(Proposed by the Board of Directors)
Explanation:
A. Pursuant to the amendments of Regulations Governing the Acquisition and Disposal of
Assets by Public Companies issued per the Order No. 10703410725 of The Financial
Supervisory Commission dated on November 26th, 2018, and to slightly revise crossing
check Investment quota, authorization level and an execution unit in the “management
procedure of the long-term and short-term investment of the company” according to
business operation situation and merge into “Acquisition or Disposal Procedures of
Asset”, then the “management procedure of the long-term and short-term investment of
the company” is abolished.
B. Comparison Table for Amendments is attached hereto as Attachment 8 (page 71~107).
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 588,880,024 votes
(281,216,676 votes) 79.99%
Votes against: 23,712 votes
(23,712 votes) 0.00%
Votes invalid: 0 votes
(0 votes) 0.00%
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Voting Results % of the total represented share present
Votes abstained: 147,282,382 votes
(147,202,362 votes) 20.01%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
(4) To amend "Procedures for Loaning Funds to Other Parties".
(Proposed by the Board of Directors)
Explanation:
A. The amendment is based on the amendments of the Regulations Governing Loaning of
Funds and Making of Endorsements/Guarantees by Public Companies promulgated by
Financial Supervisory Commission on March 7th, 2019 (Ref. 1080304826)
B. Comparison Table for Amendments is attached hereto as Attachment 9 (page 108~114).
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 588,847,257 votes
(281,183,909 votes) 79.99%
Votes against: 26,371 votes
(26,371 votes) 0.00%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 147,312,490 votes
(147,232,470 votes) 20.01%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
(5) To amend "Procedures of Endorsement and Guarantee".
(Proposed by the Board of Directors)
Explanation:
A. The amendment is based on the amendments of the Regulations Governing Loaning of
Funds and Making of Endorsements/Guarantees by Public Companies promulgated by
Financial Supervisory Commission on March 7th, 2019 (Ref. 1080304826)
B. Comparison Table for Amendments is attached hereto as Attachment 10 (page 115~121).
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 588,848,365 votes
(281,185,017 votes) 79.99%
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Voting Results % of the total represented share present
Votes against: 31,362 votes
(31,362 votes) 0.00%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 147,306,391 votes
(147,226,371 votes) 20.01%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
(6) To approve issuance of new common shares for cash to sponsor issuance of the global
depositary receipt and/or issuance of new common shares for cash in private placement.
(Proposed by the Board of Directors)
Explanation:
A. Because the issuance of new common shares for cash to sponsor DR Offering and/or
Issue Private Placement Shares which are approved by Annual General Shareholders’
Meeting convened on June 21st, 2018 are not executed within 12 months from the date of
approval on the last Annual General Shareholders’ Meeting, the plan of fundraising is
canceled. The Company proposes the plan of fundraising to be approved at Annual
General Shareholders’ Meeting in 2019.
B. In order to purchase machines and equipment, repay bank loans, enrich working capital,
have sound financial structure and/or finance the Company's long term development
plans, the Company plans to introduce strategic investors and diversify its fund-raising
channels so as to achieve financial flexibility, by taking into account the capital market
condition, timeliness and feasibility of fundraising, issuance cost, and/or the development
of the Company. It is hereby proposed at the shareholders’ meeting to authorize the Board
of Directors ("Board"), within the limit of 120,000,000 common shares in total,
depending on the market conditions and the Company’s capital needs, to choose
appropriate timing and fund raising method(s):
Ⅰ. To issue new common shares for cash to sponsor DR Offering and/or
Ⅱ. To issue Private Placement Shares
The number of 120,000,000 common shares represents 11.02% of the total issued shares
and 9.93% of the enlarged share capital.
C. If the method of issuing new common shares for cash to sponsor DR Offering is adopted:
Ⅰ. It will be proposed at the shareholders’ meeting to authorize the Board, within the limit
of 120,000,000 common shares, depending on the market conditions, to choose
appropriate timing and fund raising method(s), to issue new commons shares for cash
to sponsor DR Offering and/or issue Private Placement Shares.
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Ⅱ. Except for 10% of the new common shares which shall be allocated for the employees'
subscription in accordance with the applicable law, it is proposed at the shareholders’
meeting to approve the waiver of current shareholders’ rights on subscribing the
remaining shares and such remaining shares will be offered to the public under
Article 28-1 of the Securities and Exchange Act as the underlying shares of the global
depositary shares to be sold in the DR Offering. Any new common shares not
subscribed by employees of the Company shall be determined by the Chairman,
depending on the market needs, to be allocated as underlying shares of the global
depositary shares or to be subscribed by the designated person(s).
Ⅲ. The actual issue price of the new common shares for cash to sponsor DR Offering
will be decided in accordance with the relevant provisions of the Taiwan Securities
Association Regulations Governing Underwriters’ assistance in Offering and Issuance
of Securities by Issuing Companies. The price shall not be less than 90% of the
reference price (The average of the closing price of the Company’s common shares
for either 1, 3 or 5 consecutive trading days prior to the pricing date after adjustment
for bonus shares issued as stock dividends, shares cancelled in connection with
capital reduction and the cash dividends). If the relevant domestic laws and
regulations are changed, the pricing mechanism will be adjusted accordingly. In view
of the fluctuant share prices in the domestic stock market, the actual issue price of the
common shares in accordance with the preceding set mode, will be determined by the
chairman by taking reference to international practice, international capital markets,
the domestic market price and the purchase situation summary circle etc., and by
discussion with the underwriters.
Ⅳ. The common stock issuance through new commons shares for cash to sponsor DR
Offering and/or Private Placement Shares are planned to be no more than
120,000,000 shares. If the new common share issuance for cash to sponsor DR
Offering and/or Private Placement Shares is conducted, the maximum of issued
shares will amount for 9.93% of the enlarged share capital. The share issuance is
expected to improve the Company's competitiveness which will then increase
shareholders' value. Because the issue price of the new common shares will be
decided with reference to fair market value of the common shares in the form of
centralized domestic market as the basis, the existing shareholders will be able to
purchase common shares in the domestic stock market with the price close to the
issue price of the GDR without bearing exchange rate risk and liquidity risk. It should
not cause a significant impact on the existing shareholders' value.
Ⅴ. After the shareholders meeting approves the resolution of issuance of new common
shares to sponsor the DR Offering, it is proposed at the shareholders’ meeting to
authorize the Board to determine and amend, at the Board’s sole discretion, the terms
and condition of the new common shares to be issued for the DR Offering, the plan
for the use of proceeds, the schedule and projected benefits and all matters in
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connection therewith, in accordance with the Company’s actual needs, market
conditions and relevant regulations and if any amendment thereto is required by the
regulatory changes or required by the regulator’s instruction or based on the
Company’s operation evaluation or change of the market conditions, the Board is
authorized to make the required amendments at the Board’s sole discretion.
Ⅵ. To complete the fund raising, the Chairman or the Chairman's designee is authorized,
on behalf of the Company, to handle all matters relating to, and sign all agreements
and documents in connection with, issuance of the new common shares to sponsor the
DR Offering.
Ⅶ. The Board is authorized to handle all matters which are not addressed herein in
accordance with the applicable laws and regulations.
D. If the method of issuing Private Placement Shares is adopted:
Ⅰ. In accordance with Article 43-6 of the Securities and Exchange Act, the Company
proposes to process capital increase in cash to issue common stocks through private
placement at appropriate timing. On the basis of the following principles and the
actual fundraising status, the Board of Directors requests to be authorized to process
the common stock issuance through private placement. The issuance shall be
processed in one or two installments within twelve months after the resolution is
approved at the Annual General Shareholders’ Meeting. The Board of Directors will
be authorized to determine the issuance amounts in each installment.
Ⅱ. The upper limit of the common share issuance through Private Placement
a. Shares issued through new commons shares for cash to sponsor DR Offering
and/or Private Placement: The number of issued shares shall not exceed
120,000,000 shares.
b. Par value per share: NT$10.
c. Total private placement amounts: To be calculated according to the final share
issue price.
Ⅲ. The Pricing Basis of Private Placement and its Reasonableness
The private placement price of the Company shall be no less than 80% of the higher
of the following two calculation bases prior to the price determination date:
a. The simple average closing price of the common stock of either the one, three or
five consecutive business day period immediately before the price determination
date, after adjustment for any distribution of stock dividends, cash dividends, or
capital reduction.
b. The simple average closing price of the common stock of the thirty consecutive
business day period immediately before the price determination date, after
adjustment for any distribution of stock dividends, cash dividends, or capital
reduction.
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The determination of the actual price determination date and common stock prices
through private placement is to be authorized to the Board of Directors. The actual
price shall be no less than the price set by the resolution proposed at the Annual
General Shareholders' Meeting, and in accordance with the future market status. The
determination of the price is to be reasonable, and have no significant influence on
the value of shareholders' equities.
Ⅳ. Selection of Specific Investors
The Board of Directors proposes to be authorized the sole discretion to handle the
selection process by the Annual General Shareholders’ Meeting.
a. Selection Method
The premise of the selection of common share subscribers is to be in compliance
with Article 43-6 of the Securities and Exchange Act and related letter issued by
the Financial Supervisory Commission, R.O.C., and the share issuance will not
cause significant changes on the management control of the company. The
common share subscriber shall meet the abovementioned criteria and shall be a
strategic investor who is able to benefit the Company on business development.
b. Selection Purpose
The selection purpose is in order to upgrade technology, expand the Company's
business as its main purpose.
c. Necessity and Effects
To enhance competitiveness and develop long-term operation capacities, it is
necessary for the Company to adopt strategic investors. The Company expects to
expand its product marketing channel and benefit its business growth by
introducing strategic investors.
The Company will select the strategic investors who could bring synergies to the
company.
Ⅴ. Reasons for the Necessity of the Private Placement
The LED upstream industry chip market suffered from oversupply and it has affected
revenue and profitability, the Company will launch foundry business such as VCSEL,
GaN on Si and new product line Mini-LED this year and will consider forming
strategic cooperation with downstream industry players. As such, the Company
requests shareholders’ approval on the mandate of issuing shares by private placement
so as to introduce strategic investors who can bring synergies to our technology and
product development and overall corporate growth.
In addition, the Company expects to expand its product marketing channel and benefit
its business growth by introducing strategic investors.
The purpose of each share issuance is to finance the collaboration on patent,
technology, and business strategy, and strengthen working capital to meet the
requirement of the Company’s operation needs.
The strategic plan will support the Company to develop new business and eventually
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improve the Company’s profitability and competitive position.
We believe that it is in the best interest of the shareholders of the Company.
a. Reasons for Conducting Non-public Offerings
The company will take into account the capital market condition, timeliness and
feasibility of fundraising, issuance cost, and/or the development of the Company
when introducing strategic investors. Because the lock-up limitation of
transferring privately placed shares can ensure the long-term cooperation
between the Company and the strategic investors, and strengthen the stability of
the Company’s operation, the method of fundraising is proposed by private
placement.
b. Purposes of the Private Placement Capital and Estimated Effects
Common stock issuance through private placement is planned to be processed in
one or two installments. The purpose of each issuance is to finance the
collaboration on patent, technology, and business strategy, and strengthen
working capital to meet the requirement of the Company’s operation needs. The
proceeds of the fund will be used within three years after the completion of
fundraising. The purpose of each installment is to achieve the business growth of
the Company, lower the risk of running the Company, and increase the value of
the shareholders' equities.
Ⅵ. The Company believes that the corporate governance structure of the Board is
sufficient and comprehensive for overseeing the Company’s substantial actions and
protecting shareholders’ value. The Company has established the Audit Committee
which is exclusive for independent directors and the number of committee member
should not be less than three. The Audit Committee is currently consisted of three
independent directors. The independent directors have reviewed and agreed every
resolution to be proposed at the upcoming Annual General Shareholders’ Meeting,
including the share issue resolution. Annual General Shareholders' Meeting of 2019
will elect five(5) independent directors who constituted more than half of the seats of
the Board. The independent rate of the Board of the Company is 55.6%. We believe
the Company has sufficient independence to reduce the potential risk of abuse of
share issuance mandate by insiders to benefit themselves. The Audit Committee will
review the qualifications of potential strategic investors and assess their capacities of
creating synergies to the Company.
Ⅶ.Whether any material change in the Company’s management control occurs after
introducing strategic investors
The common stock issuance through new commons shares for cash to sponsor DR
Offering and/or Private Placement Shares are planned to be no more than
120,000,000 shares. If the new common share issuance for cash to sponsor DR
Offering and/or Private Placement Shares is conducted, the maximum of issued
shares will amount for 9.93% of the enlarged share capital. In order to enhance the
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possibility of introducing diversified strategic investors, the Company plans to issue
common stocks through private placement in two installments. The diversification of
investors through this private placement will reduce the possibility of changing the
management control and protect current shareholders’ interests.
The Company will communicate with the potential share subscribers while seeking
strategic investors in accordance with the principle of not causing significant changes
in the Company’s management control.
Ⅷ. Rights and obligations of the common stock through this private placement
Rights and obligations of common stocks through private placement are generally
the same with common stocks issued by the Company. However, pursuant to Article
43-8 of the Securities and Exchange Act, with the exception of special conditions,
common stocks issued through private placement will not be freely transferred until
three years after the settlement date. An application for the public offering of
common stocks through private placement and listing on the Taiwan Stock Exchange
shall be made at least three years after the settlement date under related laws and
regulations.
Ⅸ. Should any revision to major matters regarding common stocks through private
placement be made due to a competent authority or a change of the objective
circumstance, excluding the price determination ratio, but including the issuance
terms and conditions, the issuance price, the issuance shares, the total raising capital,
the project items and progress, the expected use of funds, the expected efficacy and
any other related matters, it shall be fully authorized to the Board of Directors to deal
with.
Ⅹ. Pursuant to the letter No. 1080001050 dated on March 26, 2019, from Securities and
Futures Investors Protection Center, the Company explains as below:
The main purpose of this private placement is that because of the fierce competition
in the global LED industry and the rapidly change of the overall operating
environment, the use of the core technologies of the Company to develop existing
LEDs and other III-V semiconductor products will enable the Company to expand in
different fields then to enhance profitability of the Company. Adopting the private
placement to introducing strategic investors is not only because the need of funds, it
will also enhance the Company's competitiveness and maintaining the Company's
stable growth to achieve a sustainable business by cooperating with the Company's
product-related application customers from the perspectives of patenting, technical or
strategic cooperation and enriching working capital of the Company, it also
accelerate the virtual vertical integration of the industry and expanding product
marketing channels through jointly develop products and markets. After the private
placement has been approved by the shareholders' meeting to authorize the Board,
the board of directors will assess the introduction of strategic investors at an
appropriate time and in a synergistic manner, thereby increasing the return on equity.
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Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 556,380,837 votes
(248,717,489 votes) 75.58%
Votes against: 32,542,183 votes
(32,542,183 votes) 4.42%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 147,263,098 votes
(147,183,078 votes) 20.00%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
(7) To release the newly elected directors from non-competition restrictions.
(Proposed by the Board of Directors)
Explanation:
A. According to Article 209, Company Act.
B. Propose to approve to release the list of Company’s directors from non-competition
restrictions as attached hereto as Attachment 11 (page 122~125).
Voting Results:
Shares represented at the time of voting: 736,186,118
Voting Results % of the total represented share present
Votes in favor: 557,724,425 votes
(250,061,077 votes) 75.76%
Votes against: 203,093 votes
(203,093 votes) 0.03%
Votes invalid: 0 votes
(0 votes) 0.00%
Votes abstained: 178,258,600 votes
(178,178,580 votes) 24.21%
* including votes casted electronically (numbers in brackets)
Resolution:
The above proposal be and hereby was approved as proposed.
Ⅶ. Extemporary Motions: None.
Ⅷ. Adjournment: Meeting ended at 10:31 am
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Attachment 1
EPISTAR Corporation
2018 Business Report
In 2018, other companies in the LED business have completed expansion of their production
capacity, resulting in fierce competition and overcapacity of the global nitride-based LED business.
Although our entire staff and workforce has dedicated all our effort into lowering operating
costs and increasing product mix optimization, our product prices continue to decrease rapidly.
In 2018, the Company’s individual net Sales was about NTD 17.19 billion, decreased 21.7%
from 2017. Our Net Operating Loss was NTD 0.407 billion and Net Loss after tax was NTD 0.456
billion.
In order to accommodate the launch of new products, upgrade product specification and
improve competitiveness, we acquired new process equipment, clean room, RD equipment, and
equipment upgrades. We also invested in increasing environmental protection and work safety
facilities; therefore this year’s capital expenditure is around NTD 2.746 billion.
Our company continues to invest in research and development. In 2018 our research and
development cost was NTD 1.828 billion, which were primarily invested to develop new products
and increase cost-performance ratio, all with good results. Asides from winning the 2018 Taiwan
International Lighting Show (TILS) Innovative Product award, we also have considerable progress
in acquiring of patents. We acquired 265 patents last year and now have a total of 4,017 patents. Our
company has earned recognition in implementation of corporate social responsibility. In addition to
“The British Standards Association CSR certification statement” issued to us, we also obtained the
2018 Taiwan Enterprise Sustainability Report Award and BSI Award.
Prospecting the upcoming year of 2019 in the LED industry, the market is still over supplied
and competition is intense. However due to global issues on energy-saving and emphasis on
environmental protection, as well as luminous efficiency has improved over the years and
miniaturization of LED chips, many more new applications of LED are emerging and the LED
market has potential to continue to grow. For example, the applications and demand of Mini LED in
various kinds of display has increased, LED High efficiency tube and filament LED light bulb
demand has grown over the years, and LED application in lighting and automobile and other
applications has continued to permeate throughout other fields of applications. LED application in
Horticulture has gradually gained importance and IR LED in security control, smart phone sensor,
and so on.
~16~
In 2019, our expected shipment of LED chip is estimated at 626,221 million pcs.
In response to market promotion of our VCSEL foundry business, in addition to significant
increase in sales of data transfer VCESL epitaxy wafer, we set up the subsidiary Unikorn
Semiconductor Corporation in Oct., 2018 so as to start to promote the foundry business and
development of VCSEL in sensor device products and the 5G application this year.
In reaction to the demands toward intelligentization and digitalization of applications and
price–performance ratio in the upcoming future, we still need to constantly put our effort in research
and development, improve our technique and lower our costs. Our company will continue to launch
new products, improve efficiency of resource operations, increase product’s additional value and
product mix optimization and compete for more high quality orders in order to achieve the goal of
out of the red in this year.
Chairman Biing-Jye Lee
President Chin-Yung Fan
Accounting Personnel Shih-Shien Chang
~17~
Attachment 2
Audit Committee’s Review Report To: EPISTAR Corporation Annual General Shareholders’ Meeting of 2019 The board of directors has prepared and submitted the Company’s 2018 Business Report, Financial
Statements and Proposal for 2018 Deficit Compensation. Ya-Huei Cheng CPA and Chin-Cheng
Hsieh CPA of PricewaterhouseCoopers have also audited the financial statements and issued the
auditors’ report. The Business Report, Financial Statements and Proposal for 2018 Deficit
Compensation have been reviewed and determined to be correct and accurate by the Audit
Committee members of Epistar Corporation. According to article 14-4 of the Securities and
Exchange Act and Article 219 of the Company Act, we hereby submit the report.
EPISTAR Corporation
Chairman of the Audit Committee: Mr. Wei-Min Sheng
Date: March 14th, 2019
~18~
Attachment 3
Epistar Corporation Rules for the Repurchase of Shares and Transfer to Employees at the first round of
Year 2018
Article 1
In order to care for and encourage its employees, Epistar adopts these Rules for the Repurchase of Shares and Transfer to Employees in accordance with Article 28-2, paragraph 1, subparagraph 1 of the Securities and Exchange Act and the provisions of the Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies issued by the Financial Supervisory Commission, Executive Yuan. Any repurchase of shares and transfer to employees by Epistar, in addition to complying with related laws and regulations, will be carried out in accordance with these Rules.
Article 2 Type of shares to be transferred, a description of the rights attaching thereto, and any restrictions on such rights. The shares in the present transfer of shares to employees will be common shares, and the rights and obligations associated with those shares, unless otherwise provided by applicable laws and regulations or these Rules, will be the same as other outstanding common shares of Epistar.
Article 3 Transfer period. In accordance with these Rules, the shares in the present share repurchase may be transferred to employees in a single transfer or multiple transfers within three years from the date of the share repurchase.
Article 4 Eligibility requirements for transferees. All regular employees of Epistar and employees of subsidiaries owed over 50% by Epistar directly or indirectly.
Article 5 Transfer allocation 1. The number of shares to which employees may subscribe will be determined
based on their salary, seniority, and performance evaluations with further considering factors such as, at the base date of shares purchasing, the total number of shares bought back by the company and the upper limit of the single employee's subscription.
2. Other than the number of shares that can be subscribed in Article 5.1, the chairman is authorized to allocate additional share subscriptions to employees with special contributions to the company based on their respective contribution levels. As to the managers, additional share subscriptions should be first proposed by the salary & compensation committee and then be submitted for Board's discussion and approval.
3. The chairman is authorized to approve the number of shares, record date, payment deadline and related matters in accordance with related regulation. A list of employees and the number of shares to which they may subscribe will be drawn up according to the approval of the chairman of the board.
4. Employees who have not subscribed and completed payment at the conclusion of the designated subscription and payment period will be deemed to have waived their subscription rights. In the event of an insufficient number of subscriptions, the chairman may contact other employees regarding subscription to the remaining shares.
~19~
Article 6 Repurchase and Procedures for transfer of shares. Procedures for the present repurchase of shares and transfer to employees: 1. The repurchase of Epistar shares will be publicly announced, reported, and carried
out during the implementation period in accordance with a resolution of the board of directors.
2. To publicly announce operating procedures relating to the record date for employee subscriptions, the standards for numbers of shares to which employees may subscribe, the period for payment for subscriptions, and the rights associated with share subscriptions.
3. Statistics will be compiled on the numbers of shares actually subscribed and paid for, and the registration of share transfers will be carried out.
Article 7 Agreed transfer price per share The share transfer price for the present repurchase of shares and transfer to employees will be the average of the actual share repurchase prices, (The transfer price is calculated round up to one decimal place.) provided that if, prior to the transfer, there is either an increase in the number of issued shares of Epistar common stock, the transfer price may be adjusted within a range proportional to the increase. Transfer price adjustment formula: Adjusted transfer prices (Note 1)= Actual Average repurchase price (Note 2) x (The total number of ordinary shares on the date which repurchase completion(Note 3) ÷The total number of ordinary shares before the record date which transfer to employees (Note 3)) Note 1: The adjusted transfer price is calculated round up to one decimal place. Note 2: Actual average repurchase price is calculated round up to one decimal place. Note 3: The total number of ordinary shares is determined according to the registration of the Ministry of Economy of the total issued shares.
Article 8 Except otherwise provided, the rights and obligations associated with the transferred shares, following the transfer of shares in the present share repurchase to employees and registration of share transfer, will be the same as those originally associated with the shares.
Article 9 When Epistar transfers to employees treasury stock it has repurchased, the related tax should be paid. But in the future, in case of any amendment to the relevant tax laws and regulations of the ROC, all tax matters shall be construed in accordance with the then prevailing laws.
Article 10 These Rules will be adopted and take effect following a resolution of the board of directors, and may be amended by submission to the board of directors for a resolution.
Article 11 These Rules, and any amendments hereto, shall be reported to the shareholders meeting.
~20~
Attachment 4
Epistar Corporation
Rules for the Procedures of the Board of Directors’ Meeting
Comparison Table for Amendments
Article No. Original Articles Amended Articles Reasons for Amendments
Article 4 Agenda
The Treasury Department and Financial
Management Division of the Company (the “TFM
Division”) is appointed by the BOD of the
Company to act as the secretariat of the meeting
(the “Secretariat”).
The Secretariat shall draft the agenda items to be
discussed in a meeting prior to the commencement
of BOD meeting, prepare sufficient materials for
the meeting, and deliver them to the members of the
BOD together with the meeting notice.
If any director of the BOD deems materials for a
discussion item insufficient, they may request for
supplements. If more than 50% of the directors
share the same view, such discussion item may be
postponed to another meeting subject to the
respective resolution adopted by the BOD.
Agenda and related document
The financial and accounting center of the
Company is appointed by the BOD of the Company
to act as the secretariat of the meeting (the
“Secretariat”).
The Secretariat shall draft the agenda items to be
discussed in a meeting prior to the commencement
of BOD meeting, prepare sufficient materials for
the meeting, and deliver them to the members of the
BOD together with the meeting notice.
If any director of the BOD deems materials for a
discussion item insufficient, they may request for
supplements then the financial and accounting
center should provide it within three working days.
If more than 50% of the directors share the same
view, such discussion item may be postponed to
another meeting subject to the respective resolution
adopted by the BOD.
To add the new title and
amend the content by
complying with the
amendment of article 15 of
Taiwan Stock Exchange
Corporation Operation
Directions for the
Appointment of
Independent Directors by
TWSE Listed Companies.
~21~
Article No. Original Articles Amended Articles Reasons for Amendments
Article 4-1 (New item) Set up Corporate Governance Director
The company shall set up a specific (part-time) unit
and a corporate governance supervisor of the
company to be the supreme director in charge of
corporate governance related matters. The authority
scope, qualifications and training for the director
shall be set and exercised by following the
provisions of “Taiwan Stock Exchange Corporation
Operation Directions for the Appointment of
Independent Directors by TWSE Listed
Companies”.
All directors of the company should be able to
obtain the assistance of the corporate governance
supervisor to ensure that the board procedures and
all applicable laws and regulations are followed,
and to ensure good information exchange between
board members and between the directors and the
manager.
The corporate governance supervisor is responsible
for handling the requirements of the directors. The
principle of promptly and effectively assisting the
directors in performing their duties should be
handled within three working days, unless
otherwise required by the law. If the processing
time may exceed three working days, the directors
To add by complying with
the amendment article 20
of Taiwan Stock Exchange
Corporation Operation
Directions for the
Appointment of
Independent Directors by
TWSE Listed Companies.
~22~
Article No. Original Articles Amended Articles Reasons for Amendments
shall negotiate with the directors as soon as
possible.
Article 7 Chairman and proxy of the chair for BOD
The Chairman of the BOD of the Company shall
call and preside over the meeting. Nevertheless, the
director who receives votes representing the largest
portion of voting rights at the shareholders’ meeting
of the Company shall call and chair the first
meeting of each newly elected BOD of the
Company. If there are 2 or more directors who are
entitled to convene the above-mentioned initial
meeting, theses directors shall elect one person by
and from among themselves to call and preside over
the first meeting.
If the Chairman is on leave, or cannot execute his or
her authority of office for any reason, the vice
Chairman shall preside over the meeting. If the
vice Chairman is also on leave, or cannot execute
his or her authority of office for any reason, the
Chairman shall designate one of the directors to
Chairman and proxy of the chair for BOD
The Chairman of the BOD of the Company shall
call and preside over the meeting. Nevertheless, the
director who receives votes representing the largest
portion of voting rights at the shareholders’ meeting
of the Company shall call and chair the first
meeting of each newly elected BOD of the
Company. If there are 2 or more directors who are
entitled to convene the above-mentioned initial
meeting, theses directors shall elect one person by
and from among themselves to call and preside over
the first meeting.
In case the meeting is convened by half or more
directors according to Article 203 (4) or Article
203-1 (1) of Company Act, the directors shall elect
a chairman of the meeting from among the directors
to preside the meeting.
If the Chairman is on leave, or cannot execute his or
her authority of office for any reason, the vice
Chairman shall preside over the meeting. If the
vice Chairman is also on leave, or cannot execute
his or her authority of office for any reason, the
Chairman shall designate one of the directors to
To amend by comply with
the amendment of Article
203 and Article 203-1 of
the company Act
published at Nov. 1st 2018.
~23~
Article No. Original Articles Amended Articles Reasons for Amendments
preside over the meeting. If the Chairman does not
designate any proxy to preside over the meeting on
his or her behalf, the directors shall elect one from
among themselves to preside over the meeting.
preside over the meeting. If the Chairman does not
designate any proxy to preside over the meeting on
his or her behalf, the directors shall elect one from
among themselves to preside over the meeting.
Article 8 Meeting materials, participants and meeting
commencement
Before and during a meeting, the designated
division shall prepare relevant materials for the
directors present at the meeting to review at any
time.
While convening a meeting, subject to the contents
of the discussion items, the Company may request
the staff of the relevant departments or subsidiaries
to attend the meeting. The Company may also
invite its accountants, lawyers or other relevant
specialists to attend the meeting and make a
statement, if necessary. But such attendees shall
leave the meeting when the discussion items are
being conducted and resolved.
Meeting materials, participants and meeting
commencement
Before and during a meeting, the designated
division shall prepare relevant materials for the
directors present at the meeting to review at any
time.
While convening a meeting, subject to the contents
of the discussion items, the Company may request
the staff of the relevant departments or subsidiaries
to attend the meeting.
The Company may also invite its accountants,
lawyers or other relevant specialists to attend the
meeting and make a statement, if necessary. But
such attendees shall leave the meeting when the
discussion items are being conducted and resolved.
Separate the second half of
the original second
paragraph into the third
paragraph. The original
third paragraph was
moved to the fourth
paragraph, and the original
fourth paragraph was
moved to the fifth
paragraph.
~24~
Article No. Original Articles Amended Articles Reasons for Amendments
The chairman of a meeting shall call the meeting
according to the schedule, provided that 50% of the
total directors are present. If at the scheduled
starting time of the meeting, the number of directors
present at the meeting has not yet reached 50% of
the total directors, the chairman may postpone the
starting time of the meeting. The postponements
shall be limited to twice at most. The chairman shall
reconvene the meeting, according to the procedures
set forth in Paragraph 2 of Article 3 of the Rules, if
the number of directors present at the meeting has
still not yet reached 50% of the total directors after
the meeting has been postponed twice.
The total number of directors referred to in the
preceding paragraph shall mean the directors who
are currently assuming their duties as directors.
The chairman of a meeting shall call the meeting
according to the schedule, provided that 50% of the
total directors are present. If at the scheduled
starting time of the meeting, the number of directors
present at the meeting has not yet reached 50% of
the total directors, the chairman may postpone the
starting time of the meeting. The postponements
shall be limited to twice at most. The chairman shall
reconvene the meeting, according to the procedures
set forth in Paragraph 2 of Article 3 of the Rules, if
the number of directors present at the meeting has
still not yet reached 50% of the total directors after
the meeting has been postponed twice.
The total number of directors referred to in the
preceding paragraph shall mean the directors who
are currently assuming their duties as directors.
Article 11 Procedure of meeting
A meeting shall proceed in accordance with the
agenda, unless otherwise resolved by the BOD of
the Company with affirmative vote of at least 50%
of all directors present at the meeting.
Unless otherwise resolved by the BOD of the
Company with affirmative vote of at least 50% of
all directors present at the meeting, the chairman
shall not adjourn the meeting.
Procedure of meeting
A meeting shall proceed in accordance with the
agenda, unless otherwise resolved by the BOD of
the Company with affirmative vote of at least 50%
of all directors present at the meeting.
Unless otherwise resolved by the BOD of the
Company with affirmative vote of at least 50% of
all directors present at the meeting, the chairman
shall not adjourn the meeting.
To amend the paragraph 4.
~25~
Article No. Original Articles Amended Articles Reasons for Amendments
During a meeting, the chairman of the meeting shall
suspend the meeting if a motion is brought up by a
director, in the event that the number of the
directors present in the meeting is less than 50% of
the directors present at the meeting. Under such
circumstance, Paragraph 3 of Article 8 of the Rules
shall apply.
During a meeting, the chairman of the meeting shall
suspend the meeting if a motion is brought up by a
director, in the event that the number of the
directors present in the meeting is less than 50% of
the directors present at the meeting. Under such
circumstance, Paragraph 4 of Article 8 of the Rules
shall apply.
Article 15 Withdrawal from discussion as an interested party
At a meeting in which a director or the juristic
person that the director represents is an interested
party and his or her participation is likely to
prejudice the interest of the Company, such director
shall state significant respects regarding the conflict
of interest at said Board of Directors’ meeting. This
director is prohibited from participating in
discussion of or voting on a matter, and shall
physically withdraw himself or herself from
participating in the discussion or voting on such
matter, and likewise is prohibited from voting on
such matter as a proxy of another director.
Withdrawal from discussion as an interested party
At a meeting in which a director or the juristic
person that the director represents is an interested
party and his or her participation is likely to
prejudice the interest of the Company, such director
shall state significant respects regarding the conflict
of interest at said Board of Directors’ meeting. This
director is prohibited from participating in
discussion of or voting on a matter, and shall
physically withdraw himself or herself from
participating in the discussion or voting on such
matter, and likewise is prohibited from voting on
such matter as a proxy of another director.
Where the spouse, a blood relative within the
second degree of kinship of a director, or any
company which has a controlling or subordinate
relation with a director has interests in the matters
under discussion in the meeting of the preceding
To amend by comply with
the amendment of article
206 of the company Act
published at Nov. 1st 2018.
~26~
Article No. Original Articles Amended Articles Reasons for Amendments
Under the circumstance set forth in the preceding
paragraph of this Article, pursuant to Paragraph 3 of
Article 206 of the Company Act, Paragraph 2 of
Article 180 of the Company Act shall apply to the
resolution adopted by the BOD of the Company.
paragraph, such director shall be deemed to have a
personal interest in the matter.
Under the circumstance set forth in the preceding
two paragraphs of this Article, pursuant to
Paragraph 4 of Article 206 of the Company Act,
Paragraph 2 of Article 180 of the Company Act
shall apply to the resolution adopted by the BOD of
the Company.
Article 16 Meeting minutes
Resolutions adopted at the meeting shall be
recorded in the meeting minutes. The meeting
minutes shall fully and accurately record the items
as follows:
1. The identification number of the meeting (or the
year), meeting time and venue;
2. The name of the chairman of the meeting;
3. Attendance status, including the names and
number of the directors who were present, on a
leave and absent, respectively;
4. The names and positions of the persons present
as guest at the meeting;
5. The name of the secretary of the meeting;
6. Reporting items;
7. Discussion items: the voting method adopted
for each resolution and each resolution adopted
Meeting minutes
Resolutions adopted at the meeting shall be
recorded in the meeting minutes. The meeting
minutes shall fully and accurately record the items
as follows:
1. The identification number of the meeting (or
the year), meeting time and venue;
2. The name of the chairman of the meeting;
3. Attendance status, including the names and
number of the directors who were present, on a
leave and absent, respectively;
4. The names and positions of the persons present
as guest at the meeting;
5. The name of the secretary of the meeting;
6. Reporting items;
7. Discussion items: the voting method adopted
for each resolution and each resolution adopted
To amend by comply with
the amendment of Article
206 of the Company Act
published at Nov. 1st 2018,
and Article 14-3 and
Article 14-5 of Securities
and Exchange Act.
~27~
Article No. Original Articles Amended Articles Reasons for Amendments
at the meeting, summary of speeches made by
the directors and supervisors of the Company,
the name of any director that is an interested
party as referred to in Section 1 of the
preceding Article, explanations for important
respects of the conflict of interest, the reasons
why a director shall be required or not required
to enter recusal, the recusal status, specialists
and other persons, any dissenting or qualified
opinions on the discussion items with records or
written statements, and any written opinion
issued by an independent director (if any) under
Section 5 of Article 12.
8. Extraordinary motions: the name of the person
who proposed the motion, the voting method
adopted for each motion and the resolution
adopted for each motion at the meeting,
summary of speeches by the directors and
supervisors of the Company, specialists and
other persons, the name of any director that is
an interested party as referred to in Section 1 of
the preceding Article, explanations for
important respects of the conflict of interest, the
reasons why the director shall be required or
at the meeting, summary of speeches made by
the directors and supervisors of the Company,
the name of any director that is an interested
party as referred to in Section 1 and section 2 of
the preceding Article, explanations for
important respects of the conflict of interest, the
reasons why a director or the one who has a
personal interest shall be required or not
required to enter recusal, the recusal status,
specialists and other persons, any dissenting or
qualified opinions on the discussion items with
records or written statements, and any written
opinion issued by an independent director (if
any) under Section 4 of Article 12.
8. Extraordinary motions: the name of the person
who proposed the motion, the voting method
adopted for each motion and the resolution
adopted for each motion at the meeting,
summary of speeches by the directors and
supervisors of the Company, specialists and
other persons, the name of any director that is
an interested party as referred to in Section 1
and Section 2 of the preceding Article,
explanations for important respects of the
conflict of interest, the reasons why the director
~28~
Article No. Original Articles Amended Articles Reasons for Amendments
not be required to enter recusal, and the recusal
status, and any dissenting or qualified opinions
on the motions with records or written
statements.
9. Other required items.
The attendance register of the meeting shall be part
of the meeting minutes and shall be kept safely
during the existence of the Company.
The meeting minutes shall be signed or sealed by
the chairman and the secretary of the meeting and
shall be distributed to all of the directors and
Supervisors of the Company within 20 days after
or the one who has conflict of interest shall be
required or not be required to enter recusal, and
the recusal status, and any dissenting or
qualified opinions on the motions with records
or written statements.
9. Other required items.
If there is any of the followings, the board of
directors shall, in addition to state in the meeting
minutes, file an announcement to Market
Observation Post System designated by the
Financial Supervisory Commission within two days
from the date of the board meeting:
1. An independent director has a dissenting
opinion or qualified opinion.
2. It has not been approved by the audit committee
of the Company but has been undertaken upon
the consent of two-thirds or more of all
directors.
The attendance register of the meeting shall be part
of the meeting minutes and shall be kept safely
during the existence of the Company.
The meeting minutes shall be signed or sealed by
the chairman and the secretary of the meeting and
shall be distributed to all of the directors and
Supervisors of the Company within 20 days after
~29~
Article No. Original Articles Amended Articles Reasons for Amendments
the date on which the meeting is held. The meeting
minutes shall be categorized as one of the material
records or files of the Company and shall be safely
kept during the existence of the Company.
Preparation and distribution of the meeting minutes
mentioned in Paragraph 1 of this Article may be
made by electronic form.
the date on which the meeting is held. The meeting
minutes shall be categorized as one of the material
records or files of the Company and shall be safely
kept during the existence of the Company.
Preparation and distribution of the meeting minutes
mentioned in Paragraph 1 of this Article may be
made by electronic form.
~30~
Attachment 5
Report of independent accountants translated from Chinese.
REPORT OF INDEPENDENT ACCOUNTANTS
PWCR18000406
To the Board of Directors and Shareholders of Epistar Corporation
Opinion
We have audited the accompanying consolidated balance sheets of Epistar Corporation and its
subsidiaries (the “Epistar Group”) as at December 31, 2018 and 2017, and the related consolidated
statements of comprehensive income, of changes in equity and of cash flows for the years then
ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, based on our audits and the reports of other independent accountants, as described in
the Other matters section of our report, the accompanying consolidated financial statements present
fairly, in all material respects, the consolidated financial position of Epistar Group as at December
31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for
the years then ended in accordance with the “Regulations Governing the Preparations of Financial
Reports by Securities Issuers” and the International Financial Reporting Standards, International
Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial
Supervisory Commission.
Basis for opinion
We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation
of Financial Statements by Certified Public Accountants” and generally accepted auditing standards
in the Republic of China (“ROC GAAS”). Our responsibilities under those standards are further
described in the Independent Accountant’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of Epistar Group in accordance with
the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the
“Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. Based
on our audits and the report of the other independent accountants, we believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
~31~
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 of the current period. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole and, in
forming our opinion thereon, we do not provide a separate opinion on these matters.
The key audit matters in relation to consolidated financial statements for the year ended December
31, 2018 are outlined as follows:
Evaluation of Impairment Losses of Property, Plant and Equipment, and Goodwill
Description
Please refer to Note 4(18) of the consolidated financial statement for the accounting policy on
impairment losses on non-financial assets, Note 5(2) for the accounting estimates and assumptions
in relation to impairment losses on non-financial assets, Note 6(10) for the explanations regarding
impairment losses on non-financial assets. As of December 31, 2018, the balances of property, plant
and equipment, and goodwill were NT$22,435,949 thousand and NT$6,324,659 thousand,
respectively.
Epistar Group evaluates the recoverable amounts of idle property, plant and equipment through
assessing the fair values after deducting the disposal costs, and of property, plant and equipment,
and intangible assets through value in use. Epistar Group evaluates whether impairment losses will
be provided for property, plant and equipment, and goodwill utilizing the aforementioned
recoverable amounts. The evaluation of value in use for operational property, plant and equipment
and intangible assets consists of the estimation of future cash flows and the determination of
discount rates. Since the assumptions adopted in the estimation of future cash flows and the results
of the estimation would have significant impact on value in use of operational property, plant, and
equipment, and intangible assets, it was identified as one of the key audit matters.
How our audit addressed the matter
We have obtained the appraisal report of idle property, plant and equipment prepared by
independent valuers from Epistar Group and assessed the reasonableness of evaluation methods and
fair values utilized. For value in use of operational property, plant and equipment, and goodwill, the
following procedures were conducted:
~32~
1. Interviewed with management and obtained an understanding of Epistar Group’s operational
procedures in estimating future cash flows and verified the consistency to operation plans
approved by the Board of Directors.
2. Discussed operation plans with management to understand the product strategies and their
respective executions status.
3. Assessed the reasonableness for assumptions utilized in estimating future cash flows, including
projected sales volumes, unit prices and unit costs. Assessed the parameters adopted in
determining discount rates, including calculating and comparing the weighted average cost of
capital at risk-free rates, the industrial risk premium and the long-term rates of returns.
Evaluation of Inventories
Description
Please refer to Note 4(12) of the consolidated financial statement for the accounting policy on
inventory valuation, Note 5(2) for the accounting estimates and assumptions in relation to inventory
valuation, Note 6(5) for the explanations regarding inventory valuation. As of December 31, 2018,
the balances of inventories and the allowance for valuation loss were NT$5,631,815 thousand and
NT$926,624 thousand, respectively.
Epistar Group is primarily engaged in manufacturing and sales of LED wafers and chips. Due to
rapid technological developments, short product lifespans and frequent fluctuations of market prices,
the risk of decline in market value and obsolescence for inventories is high. Epistar Group evaluates
net realized values for inventories which aged over a specific period of time and specific obsolete
inventories in order to provide allowance for valuation loss. Since the identification of the above
obsolete inventories and their respective net realizable values are subject to management’s judgment,
it was identified as one of the key audit matters.
How our audit addressed the matter
Our key audit procedures performed in respect of the above included the following:
1. Obtained an understanding of Epistar Group’s operations and the nature of its industry and
interviewed with management to understand the probability of future sales for those out-of-date
inventories and to evaluate the reasonableness of allowance for valuation loss.
~33~
2. Obtained and validated the accuracy of the detailed listings of inventories aged over a specific
period of time and specific obsolete inventories. Validated information of historical sales and
discounts for those obsolete inventories to assess the reasonableness of policies in providing
allowance for inventory valuation loss.
Other matter – Audited by other Independent Accountants
We did not audit the financial statements of certain consolidated subsidiaries. Those financial
statements were audited by other independent accountants, whose reports thereon have been
furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included in the
financial statements and the information on the consolidated subsidiaries disclosed in Note 13 was
based solely on the reports of other independent accountants. Total assets of those consolidated
subsidiaries amounted to NT$812,777 thousand and NT$1,045,560 thousand, constituting 1.29%
and 1.56% of the consolidated total assets as at December 31, 2018 and 2017, respectively, and total
operating revenues of NT$0 thousand and NT$0 thousand, constituting 0% and 0% of the
consolidated total operating revenues for the years then ended. Furthermore, we did not audit the
2018 and 2017 financial statements of certain equity investments accounted for under the equity
method. Those financial statements were audited by other independent accountants whose reports
thereon were furnished to us and our opinion expressed herein, insofar as it relates to the amounts
included in the consolidated financial statements and certain information disclosed in Note 13
relative to these investments, is based solely on the reports of the other independent accountants.
These equity investments amounted to NT$849,968 thousand and NT$802,377 thousand,
representing 1.35% and 1.19% of the consolidated total assets as of December 31, 2018 and 2017,
respectively, and their comprehensive income (loss) (including share of loss of associates and joint
ventures accounted for under equity method and share of other comprehensive income/(loss) of
associates and joint ventures accounted for under equity method) amounted to NT$78,078 thousand
and (NT$485,632) thousand, representing (7.08%) and (33.58%) of the consolidated comprehensive
income for the years then ended.
Other matter – Parent company only financial reports
We have also and expressed an unmodified opinion on the parent company only financial
statements of Epistar Corporation as of and for the years ended December 31, 2018 and 2017.
~34~
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with the “Regulations Governing the Preparations of Financial Reports by
Securities Issuers” and the International Financial Reporting Standards, International Accounting
Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory
Commission, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Epistar 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 Epistar Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including audit committee, are responsible for overseeing the
Epistar Group’s financial reporting process.
Independent accountant’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 a report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ROC GAAS, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
~35~
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 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 audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of Epistar Group’s internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
4. 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 Epistar 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 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 report. However, future events or
conditions may cause Epistar Group to cease to continue as a going concern.
5. 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.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within Epistar Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of Epistar group
audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
~36~
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 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.
Cheng, Ya-Huei Hsieh, Chih-Cheng
For and on behalf of PricewaterhouseCoopers, Taiwan
March 14, 2019
------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.
EPISTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars)
~37~
December 31, 2018 December 31, 2017 Assets AMOUNT % AMOUNT %
Current assets
1110 Cash and cash equivalents $ 5,532,509 9 $ 6,836,697 10 1110 Financial assets at fair value through profit or loss
- current
726,406 1 410,766 1 1150 Notes receivable, net 1,495,653 2 1,886,532 3 1170 Accounts receivable, net 7,583,934 12 6,623,059 10 1180 Accounts receivable - related parties, net 1,281,006 2 2,779,105 4 1200 Other receivables 249,964 - 823,277 1 1210 Other receivables - related parties 305 - 24,785 - 130X Inventories, net 4,705,191 7 4,815,378 7 1410 Prepayments 1,126,558 2 1,192,436 2 1460 Non-current assets held for sale - net 390,042 1 468,142 1 1470 Other current assets 431,118 1 183,474 - 11XX Current Assets 23,522,686 37 26,043,651 39 Non-current assets
1517 Non-current financial assets at fair value through
other comprehensive income
3,265,125 5 - - 1523 Available-for-sale financial assets - non-current - - 1,957,093 3 1550 Investments accounted for under equity method 1,117,708 2 2,819,665 4 1600 Property, plant and equipment, net 22,435,949 36 24,348,881 36 1780 Intangible assets 7,683,928 12 7,846,962 12 1840 Deferred income tax assets 3,911,132 6 3,021,330 5 1900 Other non-current assets 802,114 2 948,087 1 15XX Non-current assets 39,215,956 63 40,942,018 61 1XXX Total assets $ 62,738,642 100 $ 66,985,669 100
(Continued)
EPISTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars)
~38~
December 31, 2018 December 31, 2017
Liabilities and Equity AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings $ 1,874,876 3 $ 700,000 1 2110 Short-term notes and bills payable 357,717 1 376,791 1 2150 Notes payable 129,942 - 74,172 - 2170 Accounts payable 2,301,209 4 2,413,925 4 2180 Accounts payable - related parties 285,825 1 754,847 1 2200 Other payables 3,820,103 6 4,037,486 6 2230 Current income tax liabilities - - 168,527 - 2320 Long-term liabilities, current portion 165,306 - 977,277 1 2399 Other current liabilities - others 178,857 - 165,789 - 21XX Current Liabilities 9,113,835 15 9,668,814 14 Non-current liabilities
2540 Long-term borrowings 409,808 1 2,120,859 3 2570 Deferred income tax liabilities 1,402,901 2 1,097,797 2 2600 Other non-current liabilities 904,188 1 1,114,287 2 25XX Non-current liabilities 2,716,897 4 4,332,943 7 2XXX Total Liabilities 11,830,732 19 14,001,757 21 Equity attributable to owners of parent company
Share capital
3110 Share capital - common stock 10,887,014 18 10,887,014 16 Capital surplus
3200 Capital surplus 39,515,679 62 39,970,967 59 Retained earnings
3310 Legal reserve 161,423 - - - 3320 Special reserve 703,607 1 - - 3350 Unappropriated retained earnings (accumulated
deficit)
( 385,142) - 1,614,226 3 Other equity interest
3400 Other equity interest ( 1,317,990) ( 2) ( 684,243) ( 1) 3500 Treasury stocks ( 211,008) - ( 408,783) - 31XX Equity attributable to owners of the parent 49,353,583 79 51,379,181 77 36XX Non-controlling interest 1,554,327 2 1,604,731 2 3XXX Total equity 50,907,910 81 52,983,912 79 3X2X Total liabilities and equity $ 62,738,642 100 $ 66,985,669 100
EPISTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars, except for earning (loss) per share amounts)
~39~
Year ended December 31
2018 2017
Items AMOUNT % AMOUNT %
4000 Sales revenue $ 20,306,412 100 $ 25,270,616 100
5000 Operating costs ( 17,651,741) ( 87 ) ( 19,786,497) ( 79)
5900 Operating margin 2,654,671 13 5,484,119 21
5910 Unrealized loss (profit) from sales 2,795 - ( 21,083) -
5920 Realized profit (loss) from sales 21,083 - ( 2,409) -
5950 Net operating margin 2,678,549 13 5,460,627 21
Operating expenses
6100 Selling expenses ( 280,781) ( 1 ) ( 231,959) ( 1)
6200 General & administrative expenses ( 1,328,003) ( 6 ) ( 1,559,394) ( 6)
6300 Research and development expenses ( 1,959,743) ( 10 ) ( 1,576,283) ( 6)
6450 Expected credit losses ( 9,814) - - -
6000 Total operating expenses ( 3,578,341) ( 17 ) ( 3,367,636) ( 13)
6500 Other income and expenses - net 220,949 1 214,159 1
6900 Operating loss ( 678,843) ( 3 ) 2,307,150 9
Non-operating income and expenses
7010 Other income 290,378 2 252,335 1
7011 Insurances income from disaster 206,785 1 400,000 3
7020 Other gains and losses ( 538,050) ( 3 ) ( 729,284) ( 3)
7023 Disaster loss - - ( 57,172) -
7050 Finance costs ( 175,678) ( 1 ) ( 198,788) ( 1)
7055 Reveral of expected credit losses 4,121 - - -
7060 Share of loss of associates and joint ventures
accounted for under equity method 24,146 - ( 50,851) -
7000 Total non-operating income and expenses ( 188,298) ( 1 ) ( 383,760) ( 1)
7900 Loss before income tax ( 867,141) ( 4 ) 1,923,390 8
7950 Income tax benefit (expense) 361,277 2 ( 237,177) ( 1)
8200 (Loss) profit for the year ($ 505,864) ( 2 ) $ 1,686,213 7
(Continued)
EPISTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars, except for earning (loss) per share amounts)
~40~
Year ended December 31
2018 2017
Items AMOUNT % AMOUNT %
Other comprehensive income 8311 Gains(Losses) on remeasurements of defined benefit plans $ 31,823 - ($ 42,790) - 8316 Unrealised gains (losses) from investments in equity
instruments measured at fair value through other
comprehensive income
( 674,074) ( 3) - - 8320 Share 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
57,284 - ( 171) - 8349 Income tax related to components of other comprehensive
income that will not be reclassified to profit or loss
111,198 1 7,274 - 8310 Components of other comprehensive income that will
not be reclassified to profit or loss
( 473,769) ( 2) ( 35,687) - Components of other comprehensive income that will be
reclassified to profit or loss
8361 Cumulative translation differences of foreign operations ( 238,892) ( 1) ( 206,586) ( 1) 8362 Unrealized gain(loss) on valuation of available-for-sale
financial assets
- - ( 66,753) - 8370 Share 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
65,149 - 24,125 - 8399 Income tax related to components of other comprehensive
income that will be reclassified to profit or loss
50,281 - 44,743 - 8360 Components of other comprehensive income that will
be reclassified to profit or loss
( 123,462) ( 1) ( 204,471) ( 1) 8300 Other comprehensive (loss)income for the year ($ 597,231) ( 3) ($ 240,158) ( 1) 8500 Total comprehensive (loss)income for the year ($ 1,103,095) ( 5) $ 1,446,055 6 Profit (loss), attributable to: 8610 Equity holders of the parent company ($ 456,146) ( 2) $ 1,649,913 7 8620 Non-controlling interest ($ 49,718) - $ 36,300 - Comprehensive (loss) income attributable to: 8710 Equity holders of the parent company ($ 1,022,814) ( 5) $ 1,435,353 6 8720 Non-controlling interest ($ 80,281) - $ 10,702 - Basic earnings (loss) per share 9750 Total basic earnings (loss) per share ($ 0.42) $ 1.55 Diluted earnings (loss) per share 9850 Total diluted earnings (loss) per share ($ 0.42) $ 1.53
EPISTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)
Equity attributable to owners of the parent
Retained Earnings Other equity interest
Share capital - common stock
Capital surplus
Legal reserve
Special reserve
Unappropriated retained
earnings(accumulated deficit)
Cumulative translation
differences of foreign
operations
Unrealised gains (losses) from
financial assets measured at fair
value through other comprehensive
income
Unrealized gain or loss on
available-for-sale financial assets
Treasury stocks
Total
Non-controlling interest
Total
~41~
2017 Balance at January 1, 2017 $ 10,915,492 $ 43,016,259 $ 241,512 $ - ($ 3,545,028 ) ($ 228,527 ) $ - ($ 276,843 ) ($ 848,721 ) $ 49,274,144 $ 1,709,852 $ 50,983,996Profit for the year - - - - 1,649,913 - - - - 1,649,913 36,300 1,686,213Other comprehensive income (loss) for the year - - - - ( 35,687 ) ( 187,423 ) - 8,550 - ( 214,560 ) ( 25,598 ) ( 240,158 )Total comprehensive income (loss) for the year - - - - 1,614,226 ( 187,423 ) - 8,550 - 1,435,353 10,702 1,446,055Appropriations of 2016 Legal reserve used to offset accumulated
deficits - - ( 241,512 ) - 241,512 - - - - - - - Capital surplus used to offset
accumulated deficits - ( 3,303,516 ) - - 3,303,516 - - - - - - -Change in investees interest accounted for under equity method - 168,908 - - - - - - - 168,908 - 168,908Difference between consideration and carrying amount of subsidiaries acquired and disposed - 105,930 - - - - - - - 105,930 ( 178,366 ) ( 72,436 )Treasury stock transferred to employees - 110,919 - - - - - - 257,681 368,600 - 368,600Compensation cost of share-based payments - 27,906 - - - - - - - 27,906 - 27,906Retirement of treasury share ( 28,478 ) ( 153,779 ) - - - - - - 182,257 - - -Cash paid for acquisition of non-controlling interests in subsidiaries - - - - - - - - - - 60,883 60,883Changes in ownership interests in subsidiaries accounted for using equity method - ( 1,660 ) - - - - - - - ( 1,660 ) 1,660 -Balance at December 31, 2017 $ 10,887,014 $ 39,970,967 $ - $ - $ 1,614,226 ($ 415,950 ) $ - ($ 268,293 ) ($ 408,783 ) $ 51,379,181 $ 1,604,731 $ 52,983,912
(Continued)
EPISTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)
Equity attributable to owners of the parent
Retained Earnings Other equity interest
Share capital - common stock
Capital surplus
Legal reserve
Special reserve
Unappropriated retained
earnings(accumulated deficit)
Cumulative translation
differences of foreign
operations
Unrealised gains (losses) from
financial assets measured at fair
value through other comprehensive
income
Unrealized gain or loss on
available-for-sale financial assets
Treasury stocks
Total
Non-controlling interest
Total
~42~
2018 Balance at January 1, 2018 $ 10,887,014 $ 39,970,967 $ - $ - $ 1,614,226 ($ 415,950 ) $ - ($ 268,293 ) ($ 408,783 ) $ 51,379,181 $ 1,604,731 $ 52,983,912 Effects of retrospective application and
retrospective restatement - - - - 46,946 3,595 ( 320,348 ) 268,293 - ( 1,514 ) ( 1,651 ) ( 3,165 ) Balance at January 1 after adjustments 10,887,014 39,970,967 - - 1,661,172 ( 412,355 ) ( 320,348 ) - ( 408,783 ) 51,377,667 1,603,080 52,980,747 Loss for the year - - - - ( 456,146 ) - - - - ( 456,146 ) ( 49,718 ) ( 505,864 ) Other comprehensive income(loss) for
the year - - - - 25,129 ( 92,899 ) ( 498,898 ) - - ( 566,668 ) ( 30,563 ) ( 597,231 ) Total comprehensive income - - - - ( 431,017 ) ( 92,899 ) ( 498,898 ) - - ( 1,022,814 ) ( 80,281 ) ( 1,103,095 )Appropriations of 2017 Legal reserve used to offset accumulated
deficits - - 161,423 - ( 161,423 ) - - - - - - - Special reserve appropriated - - - 703,607 ( 703,607 ) - - - - - - - Cash dividends - - - - ( 749,196 ) - - - - ( 749,196 ) - ( 749,196 )Cash dividends distributed from capital surplus - ( 121,765 ) - - - - - - - ( 121,765 ) - ( 121,765 )Adjustments of capital surplus for company’s cash dividends received by subsidiaries - 2,052 - - - - - - - 2,052 - 2,052Cash paid for acquisition of non-controlling interests in subsidiaries - - - - - - - - - - ( 29,329 ) ( 29,329 )Change in investees interest accounted for under equity method - ( 458,095 ) - - - - - - - ( 458,095 ) - ( 458,095 )Difference between consideration and carrying amount of subsidiaries acquired and disposed - ( 732 ) - - - - - - - ( 732 ) - ( 732 )Treasury stock transferred to employees - 117,780 - - - - - - 273,620 391,400 - 391,400Purchase of treasury shares - - - - - - - - ( 75,845 ) ( 75,845 ) - ( 75,845 )Changes in ownership interests in subsidiaries accounted for using equity method - 5,472 - - - - - - - 5,472 60,857 66,329Proceeds from disposal of financial assets at fair value through other comprehensive income - - - - ( 1,071 ) - 1,071 - - - - -Proceeds from disposal of investments accounted for using equity method - - - - - 5,439 - - - 5,439 - 5,439Balance at December 31, 2018 $ 10,887,014 $ 39,515,679 $ 161,423 $ 703,607 ($ 385,142 ) ($ 499,815 ) ($ 818,175 ) $ - ($ 211,008 ) $ 49,353,583 $ 1,554,327 $ 50,907,910
~43~
EPISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)
Years ended December 31
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before tax ( $ 867,141 ) $ 1,923,390 Adjustments Adjustments to reconcile profit (loss) Depreciation 4,758,265 4,839,803 Amortization(long-term prepaid rents) 274,152 360,721 Expected credit gain 5,693 - Provision for doubtful accounts - ( 18,534 ) Net loss on financial assets at fair value through profit or loss ( 12,382 ) ( 99,581 ) Net loss on financial liability at fair value through profit or loss - 6,572 Interest expense 185,417 234,607 Interest income ( 50,650 ) ( 56,221 ) Dividend income ( 13,940 ) ( 1,448 ) Compensation cost of share-based payment - 27,906 Effect of exchange rate on bonds payable and long-term loans ( 471 ) ( 49,210 ) Share of loss of associates and joint ventures accounted for under the equity method ( 24,146 ) 50,851 Impairment loss on non-financial assets 659,774 377,682 Loss (gain) on disposal of property, plant and equipment 113,219 ( 9,766 ) Gain on disposal of investments ( 310,915 ) ( 32,015 ) Gain on disposal of intangible assets 141 - Other income from recognition of long-term deferred revenues ( 161,436 ) ( 166,205 ) Impairment loss of financial assets - 16,651 Property, plant and equipment transferred to expenses 5,858 7,017 Prepayment for business facilities transferred to other disbursements - 8,524 Intangible assetts transferred to expenses - 410 Payable on machinery and equipment transferred to other income - ( 121,680 ) Realized (profit) loss from sales ( 21,083 ) 2,409 Unrealised (loss) profit from sales ( 2,795 ) 21,083 Disaster loss - 57,172 Changes in operating assets and liabilities Changes in operating assets Financial assets held for trading ( 209,576 ) 381,518 Notes receivable 369,378 ( 992,632 ) Accounts receivable 451,896 202,942 Other receivables 633,939 706,642 Inventories ( 49,252 ) ( 548,599 ) Prepayments 55,776 85,413 Other non-current assets 74,329 ( 40,577 ) Changes in operating liabilities Notes payable 58,144 38,732 Accounts payable ( 575,610 ) 58,459 Other payables ( 515,383 ) 171,732 Other current liabilities 42,405 ( 30,298 ) Other non-current liabilities ( 24,080 ) ( 36,628 ) Cash inflow generated from operations 4,849,526 7,376,842 Income tax paid ( 211,363 ) ( 245,836 ) Interest received 51,284 54,674 Interest paid ( 173,884 ) ( 229,498 ) Dividend received 40,649 13,959 Net cash flows from operating activities 4,556,212 6,970,141
(Continued)
~44~
EPISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)
Years ended December 31
2018 2017 CASH FLOWS FROM INVESTING ACTIVITIES Decrease in other financial assets ( $ 254,105 ) ($ 18,301 ) Acquisition of available-for-sale financial assets - ( 2,045 ) Proceeds from disposal of available-for-sale financial assets - 125,425 Acquisition of Non-current financial assets at fair value through other
comprehensive income
( 396,196 ) - Proceeds from Non-current financial assets at fair value through other
comprehensive income
3,052 - Proceeds from liquidation of financial assets 12,923 - Acquisition of investments accounted for under the equity method ( 128,423 ) ( 70,312 ) Proceeds from disposal of investments accounted for under the eauity method 273,064 - Proceeds from liquidation of investment accounted for using equity method - 14,631 Acquisition for property, plant and equipment ( 3,168,197 ) ( 2,206,021 ) Proceeds from disposal of property, plant and equipment 76,272 153,690 Acquisition of intangible assets ( 131,521 ) ( 228,929 ) (Increase) decrease in refundable deposits paid ( 76,295 ) 1,702 Net cash flows used in investing activities ( 3,789,426 ) ( 2,230,160 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term loans 1,203,014 ( 1,456,318 ) (Decrease)increase in short-term notes and bill payable ( 11,614 ) 304,287 Repayment of long-term loans ( 3,693,038 ) ( 8,518,326 ) Proceeds from long-term loans 1,160,000 5,300,000 Increase in guarantee deposits received 22,251 45,467 Purchase of treasury share ( 75,845 ) - Cash dividends distributed to non-controlling interest ( 29,329 ) - Proceed from treasury share transferred to employees 286,897 260,930 Increase in cash paid for acquisition of non-controlling interests 66,328 60,883 Payment of cash dividends (included distribated from capital surplus) ( 870,961 ) - Net cash flows used in financing activities ( 1,942,297 ) ( 4,003,077 ) Effects of foreign currency exchange ( 128,677 ) 98,363 Net (decrease) increase in cash and cash equivalents ( 1,304,188 ) 835,267 Cash and cash equivalents at beginning of year 6,836,697 6,001,430 Cash and cash equivalents at end of year $ 5,532,509 $ 6,836,697
~45~
REPORT OF INDEPENDENT ACCOUNTANTS
PWCR18000405
To the Board of Directors and Shareholders of EPISTAR CORPORATION
Opinion
We have audited the accompanying parent company only balance sheets of Epistar Corporation (the
“Company”) as at December 31, 2018 and 2017, and the related parent company only statements of
comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the
parent company only financial statements, including a summary of significant accounting policies.
In our opinion, based on our audits and the reports of other independent accountants, as described in the
Other matters section of our report, the accompanying parent company only financial statements present
fairly, in all material respects, the parent company only financial position of the Company as at December
31, 2018 and 2017, and its parent company only financial performance and its parent company only cash
flows for the years then ended in accordance with the “Regulations Governing the Preparation of
Financial Reports by Securities Issuers”.
Basis for opinion
We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of
Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the
Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the
Independent Accountant’s Responsibilities for the Audit of Parent Company Only Financial Statements
section of our report. We are independent of the Company in accordance with the Code of Professional
Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our
other ethical responsibilities in accordance with the Code. Based on our audits and the reports of other
independent accountants, we believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
~46~
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the parent company only financial statements of the current period. These matters were addressed
in the context of our audit of the parent company only financial statements as a whole and, in forming our
opinion thereon, we do not provide a separate opinion on these matters.
The key audit matters in relation to the parent company only financial statements for the year ended
December 31, 2018 are outlined as follows:
Evaluation of Impairment Losses of Property, Plant and Equipment, and Goodwill
Description
Please refer to Note 4(17) for accounting policies on impairment losses on non-financial assets, Note 5(2)
for the accounting estimates and assumptions in relation to non-financial assets valuation and note 6(9)
for the explanations regarding impairment losses on non-financial assets. As of December 31, 2018, the
balances of property, plant and equipment, and goodwill were NT$15,385,565 thousand and
NT$6,324,659 thousand, respectively.
The Company evaluates the recoverable amounts of idle property, plant and equipment through assessing
the fair values after disposal the disposal costs, and of property, plant and equipment, and intangible
assets through value in use. The Company evaluates whether impairment losses will be provided for
property, plant and equipment, and goodwill utilizing the aforementioned recoverable amounts. The
evaluation of value in use for operational property, plant and equipment and intangible assets consists of
the estimation of future cash flows and the determination of discount rates. Since the assumptions adopted
in the estimation of future cash flows and the results of the estimation would have significant impact on
value in use of operational property, plant, and equipment, and intangible assets, it was identified as one
of the key audit matters.
How our audit addressed the matter
We have obtained the appraisal report of idle property, plant and equipment prepared by independent
valuers from the Company and assessed the reasonableness of evaluation methods and fair values utilized.
For value in use of operational property, plant and equipment, and goodwill, the following procedures
were conducted:
~47~
1. Interviewed with management and obtained an understanding of the Company’s operational
procedures in estimating future cash flows and verified the consistency to operation plans approved by
the Board of Directors.
2. Discussed operation plans with management to understand the product strategies and their respective
executions status.
3. Assessed the reasonableness for assumptions utilized in estimating future cash flows, including
projected sales volumes, unit prices and unit costs. Assessed the parameters adopted in determining
discount rates, including calculating and comparing the weighted average cost of capital at risk-free
rates, the industrial risk premium and the long-term rates of returns.
Evaluation of Inventories
Description
Please refer to Note 4(11) for accounting policies on inventory valuation, Note 5(2) for the accounting
estimates and assumptions in relation to inventory valuation and note 6(5) for the explanations regarding
inventories. As of December 31, 2018, the balances of inventories and the allowance for valuation loss
were NT$3,627,775 thousand and NT$743,240 thousand, respectively.
The Company is primarily engaged in manufacturing and sales of LED wafers and chips. Due to rapid
technological developments, short product lifespans and frequent fluctuations of market prices, the risk of
decline in market value and obsolescence for inventories is high. The Company evaluates net realized
values for inventories which aged over a specific period of time and specific obsolete inventories in order
to provide allowance for valuation loss. Since the identification of the above obsolete inventories and
their respective net realizable values are subject to management’s judgment, it was identified as one of the
key audit matters.
How our audit addressed the matter
Our key audit procedures performed in respect of the above included the following:
1. Obtained an understanding of the Company’s operations and the nature of its industry and interviewed
with management to understand the probability of future sales for those out-of-date inventories and to
evaluate the reasonableness of allowance for valuation loss.
2. Obtained and validated the accuracy of the detailed listings of inventories aged over a specific period
of time and specific obsolete inventories. Validated information of historical sales and discounts for
those obsolete inventories to assess the reasonableness of policies in providing allowance for inventory
valuation loss.
~48~
Other matter – Audited by other Independent Accountants
We did not audit the 2018 and 2017 financial statements of certain subsidiaries and equity investments accounted
for under the equity method. These equity investments amounted to NT$1,329,419 thousand and NT$1,422,275
thousand, representing 2.32% and 2.30% of the total assets as of December 31, 2018 and 2017, respectively, and
their comprehensive loss (including share of income (loss) of associates and joint ventures accounted for under
equity method and share of other comprehensive income subsidiaries of associates and joint ventures accounted for
under equity method) amounted to NT$67,099 thousand and NT$92,972 thousand, representing 6.56% and (6.48%)
of the comprehensive income (loss) for the years then ended. The financial statements of the aforementioned
subsidiaries and investees were audited by other independent accountants whose reports thereon were furnished to
us and our opinion expressed herein, insofar as it relates to the amounts included in the financial statements is
based solely on the reports of the other independent accountants.
Responsibilities of management and those charged with governance for the parent
company only financial statements
Management is responsible for the preparation and fair presentation of the parent company only financial
statements in accordance with the “Regulations Governing the Preparation of Financial Reports by
Securities Issuers”, and for such internal control as management determines is necessary to enable the
preparation of parent company only financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the parent company only financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including audit committee, are responsible for overseeing the Company’s
financial reporting process.
Independent accountant’s responsibilities for the audit of the parent company only
financial statements
Our objectives are to obtain reasonable assurance about whether the parent company only financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ROC GAAS will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these parent company only financial statements.
~49~
As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the parent company only financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the parent company only financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
5. Evaluate the overall presentation, structure and content of the parent company only financial
statements, including the disclosures, and whether the parent company only financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the parent company only financial
statements. We are responsible for the direction, supervision and performance of the Company audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
~50~
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the parent company only financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that 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.
Cheng, Ya-Huei Hsieh, Chih-Cheng
For and on behalf of PricewaterhouseCoopers, Taiwan
March 14, 2019
------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.
~51~
EPISTAR CORPORATION PARENT COMPANY ONLY BALANCE SHEETS
DECEMBER 31 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)
December 31, 2018 December 31, 2017
Assets AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents $ 3,012,708 5 $ 5,310,043 9 1110 Financial assets at fair value through profit or loss - current 40,923 - - - 1150 Notes receivable, net 521,031 1 195,064 - 1170 Accounts receivable, net 4,076,544 7 4,136,510 7 1180 Accounts receivable - related parties, net 3,100,860 5 4,502,953 7 1200 Other receivables 191,748 - 563,629 1 1210 Other receivables - related parties 326,576 1 1,093,895 2 130X Inventory 2,884,535 5 3,245,355 5 1410 Prepayments 267,343 1 340,814 - 1460 Non-current assets held for sale - net 388,500 1 468,142 1 1470 Other current assets 97,552 - 97,166 - 11XX Current Assets 14,908,320 26 19,953,571 32 Non-current assets
1517 Non-current financial assets at fair value through other
comprehensive income
1,097,917 2 - - 1523 Available-for-sale financial assets - noncurrent - - 1,183,025 2 1550 Investments accounted for under equity method 14,376,759 25 12,878,833 21 1600 Property, plant and equipment 15,385,565 27 17,010,006 27 1780 Intangible assets 7,556,713 13 7,684,157 12 1840 Deferred income tax assets 3,764,894 7 2,873,564 5 1900 Other non-current assets 194,741 - 385,518 1 15XX Non-current assets 42,376,589 74 42,015,103 68 1XXX Total assets $ 57,284,909 100 $ 61,968,674 100
(Continued)
~52~
EPISTAR CORPORATION PARENT COMPANY ONLY BALANCE SHEETS
DECEMBER 31 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)
December 31, 2018 December 31, 2017 Liabilities and Equity AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings $ 449,295 1 $ 700,000 1 2150 Notes payable 9,421 - 24,793 - 2170 Accounts payable 1,565,828 3 1,679,044 3 2180 Accounts payable - related parties 538,248 1 858,269 2 2200 Other payables 2,852,214 5 3,040,775 5 2230 Current income tax liabilities - - 125,287 - 2320 Long-term liabilities, current portion 165,306 - 863,928 1 2399 Other current liabilities - others 290,033 - 107,843 - 21XX Current Liabilities 5,870,345 10 7,399,939 12 Non-current liabilities
2540 Long-term borrowings 409,808 1 1,781,905 3 2570 Deferred income tax liabilities 1,383,631 2 1,065,314 2 2600 Other non-current liabilities 267,542 1 342,335 - 25XX Non-current liabilities 2,060,981 4 3,189,554 5 2XXX Total Liabilities 7,931,326 14 10,589,493 17 Equity
Share capital
3110 Share capital - common stock 10,887,014 19 10,887,014 18 Capital surplus
3200 Capital surplus 39,515,679 69 39,970,967 64 Retained earnings
3310 Legal reserve 161,423 - - - 3320 Special reserve 703,607 1 - - 3350 Unappropriated retained earnings (accumulated deficit) ( 385,142) ( 1) 1,614,226 3 Other equity interest
3400 Other equity interest ( 1,317,990) ( 2) ( 684,243) ( 1) 3500 Treasury stocks ( 211,008) - ( 408,783) ( 1) 3XXX Total equity 49,353,583 86 51,379,181 83 3X2X Total liabilities and equity $ 57,284,909 100 $ 61,968,674 100
~53~
EPISTAR CORPORATION PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars, except for earnings (loss) per share amounts)
Year ended December 31
2018 2017
Items AMOUNT % AMOUNT %
4000 Sales revenue $ 17,189,772 100 $ 21,954,472 100
5000 Operating costs ( 14,773,356) ( 86) ( 17,589,165) ( 80)
5900 Net operating margin 2,416,416 14 4,365,307 20
5910 Unrealized loss (profit) from sales 85,787 1 ( 29,111) -
5920 Realized profit on from sales 29,111 - 28,104 -
5950 Net operating margin 2,531,314 15 4,364,300 20
Operating expenses
6100 Selling expenses ( 234,788) ( 1) ( 221,065) ( 1)
6200 General & administrative expenses ( 999,512) ( 6) ( 1,162,016) ( 5)
6300 Research and development expenses ( 1,827,561) ( 11) ( 1,529,115) ( 7)
6450 Expected credit losses ( 2,758) - - -
6000 Total operating expenses ( 3,064,619) ( 18) ( 2,912,196) ( 13)
6500 Other income and expenses - net 126,123 1 155,687 -
6900 Operating loss ( 407,182) ( 2) 1,607,791 7
Non-operating income and expenses
7010 Other income 339,338 2 269,803 1
7011 Insurances income from disaster 206,785 1 400,000 2
7020 Other gains and losses ( 689,718) ( 4) ( 598,273) ( 3)
7023 Disaster loss - - ( 57,172) -
7050 Finance costs ( 28,022) - ( 97,359) -
7055 Reveral of expected credit losses 4,121 - - -
7070 Share of loss of subsidiaries, associates
and joint ventures accounted for using
equity method, net
( 248,225) ( 2) 204,619 1
7000 Total non-operating revenue and
expenses
( 415,721) ( 3) 121,618 1
7900 (Loss) profit before income tax ( 822,903) ( 5) 1,729,409 8
7950 Income tax benefit (expense) 366,757 2 ( 79,496) -
8200 (Loss) profit for the year ($ 456,146) ( 3) $ 1,649,913 8
(Continued)
~54~
EPISTAR CORPORATION PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars, except for earnings (loss) per share amounts)
Year ended December 31 2018 2017
Items AMOUNT % AMOUNT %
Other comprehensive income
8311 Gain (loss) on remeasurements of defined
benefit plans
$ 31,823 - ($ 42,790 ) -
8316 Unrealised gains (losses) from investments
in equity instruments measured at fair value
through other comprehensive income
( 468,008 ) ( 3) - -
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
( 148,782 ) ( 1) ( 171 ) -
8349 Income tax related to components of other
comprehensive income that will not be
reclassified to profit or loss
111,198 1 7,274 -
8310 Components of other comprehensive
income that will not be reclassified to
profit or loss
( 473,769 ) ( 3) ( 35,687 ) -
8362 Unrealized gain (loss) on valuation of
available-for-sale financial assets
- - ( 23,168 ) -
8380 Total 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
( 143,180 ) ( 1) ( 200,448 ) ( 1)
8399 Income tax related to the components of
other comprehensive income that will be
reclssified to profit or loss
50,281 1 44,743 -
8360 Components of other comprehensive
income that will be reclassified to profit
or loss
( 92,899 ) - ( 178,873 ) ( 1)
8300 Other comprehensive loss for the year ($ 566,668 ) ( 3) ($ 214,560 ) ( 1)
8500 Total comprehensive (loss) income for the
year
($ 1,022,814 ) ( 6) $ 1,435,353 7
Basic (loss) earnings per share
9750 Total basic (loss) earnings per share ($ 0.42) $ 1.55
9850 Total diluted (loss) earnings per share ($ 0.42) $ 1.53
~55~
EPISTAR CORPORATION PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)
Retained Earnings Other equity interest
Share capital - common stock
Capital surplus
Legal reserve
Special reserve
Unappropriated retained earnings
(accumulated deficit)
Financial statements translation
differences of foreign operations
Unrealised gains (losses) from
financial assets measured at fair value through
other comprehensive
income
Unrealized gain or loss on
available-for-sale financial assets
Treasury stocks
Amount
2017 Balance at January 1, 2017 $ 10,915,492 $43,016,259 $ 241,512 $ - ($ 3,545,028 ) ($ 228,527 ) $ - ($ 276,843 ) ($ 848,721 ) $49,274,144 Profit for the year - - - - 1,649,913 - - - - 1,649,913 Other comprehensive income (loss) for the year - - - - ( 35,687 ) ( 187,423 ) - 8,550 - ( 214,560 ) Total comprehensive income (loss) for the year - - - - 1,614,226 ( 187,423 ) - 8,550 - 1,435,353Appropriations of 2016 Legal reserve used to offset accumulated deficits - - ( 241,512 ) - 241,512 - - - - - Capital surplus used to offset accumulated deficits - ( 3,303,516 ) - - 3,303,516 - - - - -Change in investees interest accounted for under equity method - 168,908 - - - - - - - 168,908Difference between consideration and carrying amount of subsidiaries acquired and disposed - 105,930 - - - - - - - 105,930Treasury stock transferred to employees - 110,919 - - - - - - 257,681 368,600Compensation cost of share-based payments - 27,906 - - - - - - - 27,906Retirement of treasury share ( 28,478 ) ( 153,779 ) - - - - - - 182,257 -Changes in ownership interests in subsidiaries accounted for using equity method - ( 1,660 ) - - - - - - - ( 1,660 ) Balance at December 31, 2017 $ 10,887,014 $39,970,967 $ - $ - $ 1,614,226 ($ 415,950 ) $ - ($ 268,293 ) ($ 408,783 ) $51,379,1812018 Balance at January 1, 2018 $ 10,887,014 $39,970,967 $ - $ - $ 1,614,226 ($ 415,950 ) $ - ($ 268,293 ) ($ 408,783 ) $51,379,181 Effects of retrospective application and retrospective restatement - - - - 46,946 3,595 ( 320,348 ) 268,293 - ( 1,514 ) Balance at January 1 after adjustments 10,887,014 39,970,967 - - 1,661,172 ( 412,355 ) ( 320,348 ) - ( 408,783 ) 51,377,667 Profit for the year - - - - ( 456,146 ) - - - - ( 456,146 ) Other comprehensive income (loss) for the year - - - - 25,129 ( 92,899 ) ( 498,898 ) - - ( 566,668 ) Total comprehensive loss for the year - - - - ( 431,017 ) ( 92,899 ) ( 498,898 ) - - ( 1,022,814 )Appropriations of 2017 Legal reserve appropriated - - 161,423 - ( 161,423 ) - - - - - Special reserve appropriated - - - 703,607 ( 703,607 ) - - - - - Cash dividends - - - - ( 749,196 ) - - - - ( 749,196 )Cash dividends distributed from capital surplus - ( 121,765 ) - - - - - - - ( 121,765 )Adjustments of capital surplus for company’s cash dividends received by subsidiaries - 2,052 - - - - - - - 2,052Purchase of treasury shares - - - - - - - - ( 75,845 ) ( 75,845 )Change in investees interest accounted for under equity method - ( 458,095 ) - - - - - - - ( 458,095 )Difference between consideration and carrying amount of subsidiaries acquired and disposed - ( 732 ) - - - - - - - ( 732 )Treasury stock transferred to employees - 117,780 - - - - - - 273,620 391,400Changes in ownership interests in subsidiaries accounted for using equity method - 5,472 - - - - - - - 5,472Proceeds from disposal of financial assets at fair value through other comprehensive income - - - - ( 1,071 ) - 1,071 - - -Proceeds from disposal of investments accounted for using equity method - - - - - 5,439 - - - 5,439 Balance at December 31, 2018 $ 10,887,014 $39,515,679 $ 161,423 $ 703,607 ($ 385,142 ) ($ 499,815 ) ($ 818,175 ) $ - ($ 211,008 ) $49,353,583
~56~
EPISTAR CORPORATION
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)
Years ended December 31
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before tax ( $ 822,903 ) $ 1,729,409 Adjustments Adjustments to reconcile profit (loss) Depreciation 3,499,184 3,488,145 Amortization 253,705 334,510 Provision for doubtful accounts - ( 21,198 ) Expected credit gain ( 1,363 ) - Net gain on financial assets at fair value through profit or loss ( 4,504 ) ( 1,063 ) Interest expense 28,278 97,359 Interest income ( 31,680 ) ( 58,751 ) Dividend income ( 12,910 ) ( 161 ) Compensation cost of share-based payment - 27,906 Share of loss (profit) of subsidiaries and associates accounted for using
equity method
248,225 ( 204,619 ) Impairment loss on non-financial assets 615,949 104,963 Loss on disposal of property, plant and equipment 126,690 3,658 Gain on disposal of investments ( 100,804 ) ( 30,442 ) Other income from recognition of long-term deferred revenues ( 23,647 ) ( 24,494 ) Impairment loss of financial assets - 8,774 Property, plant and equipment transferred to expenses 5,858 2,584 Intangible assetts transferred to expenses - 410 Prepayment for business facilities transferred to the expenditure - 8,524 Disaster loss - 57,172 Realized loss (profit) loss from sales ( 29,111 ) ( 28,104 ) Unrealised loss from sales ( 85,787 ) 29,111 Changes in operating assets and liabilities Changes in operating assets Financial assets held for trading ( 301,363 ) 151,074 Notes receivable ( 325,967 ) ( 154,614 ) Accounts receivable 1,463,422 2,254,227 Other receivables 1,246,730 721,909 Other current financial assets ( 386 ) ( 28,938 ) Inventories 213,393 ( 424,269 ) Prepayments 59,421 74,782 Other non-current assets 4,135 ( 2,923 ) Changes in operating liabilities Notes payable ( 15,372 ) 1,851 Accounts payable ( 433,237 ) ( 777,464 ) Other payables ( 402,911 ) 242,296 Other current liabilities 175,704 ( 59,079 ) Other non-current liabilities 22,624 40,514 Cash inflow generated from operations 5,371,373 7,563,059 Income tax paid ( 157,529 ) ( 22,711 ) Interest received 33,297 59,934 Interest paid ( 29,388 ) ( 88,606 ) Dividend received 55,084 10,340 Net cash flows from operating activities 5,272,837 7,522,016
(Continued)
~57~
EPISTAR CORPORATION
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)
Years ended December 31
2018 2017
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in other receivables from related parties ( $ 1,007,840 )
( $ 873,770 )
Decrease in other receivables from related parties 1,013,300
873,770
Proceeds from disposal of available-for-sale financial assets -
70,017
Acquisition for property, plant and equipment ( 2,745,833 )
( 1,499,565 )
Proceeds from disposal of property, plant and equipment 98,355
146,667
Acquisition of intangible assets ( 155,153 )
( 228,103 )
(Increase) decrease in refundable deposits paid 13,654
1,331
Acquisition of subsidiaries and investment of associates ( 1,443,106 )
( 179,616 )
Proceeds from liquidation of investment accounted for using equity method -
14,631
Proceeds from disposal of intangible assets 7,844
-
Cash flows used in spinoff transition ( 360,172 )
-
Net cash flows used in investing activities ( 4,578,951 )
( 1,674,638 )
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans ( 250,705 )
( 1,300,000 )
Repayment of long-term loans ( 3,239,824 )
( 8,433,928 )
Proceeds from long-term loans 1,160,000
5,300,000
(Decrease) increase in guarantee deposits received ( 783 )
3,245
Cash dividends distribnted from capital surplus ( 121,765 )
-
Cash dividends paid ( 749,196 )
-
Purchase of treasury shares ( 75,845 )
-
Proceed from treasury share transferred to employees 286,897
260,930
Net cash flows used in financing activities ( 2,991,221 )
( 4,169,753 )
Net (decrease) increase in cash and cash equivalents ( 2,297,335 )
1,677,625
Cash and cash equivalents at beginning of year 5,310,043
3,632,418
Cash and cash equivalents at end of year $ 3,012,708
$ 5,310,043
~58~
Attachment 6
EPISTAR CORPORATION Deficit Compensation Statement
Year 2018 Unit: NTD
Item Amount
Subtotal Total
Unappropriated Retained Earnings of previous years 0
Adjustments under the adoption of new issuances of IFRS 46,945,740
Other comprehensive income adjustments 24,057,620
Adjusted unappropriated Retained Earnings 71,003,360
Less : 2018 net loss (456,145,814)
Deficit yet to be compensated – at the end of 2018 (385,142,454)
Items for compensating deficit:
Special Reserve 385,142,454
To make up for the amount Subtotal 385,142,454
Deficit yet to be compensated 0
Chairman: President: Accounting Supervisor:
Biing-Jye Lee Chin-Yung Fan Shih-Shien Chang
~59~
Attachment 7
Epistar Corporation Articles of Incorporation
Comparison Table for Amendments
Article No. Original Articles Amended Articles Reasons for Amendments
Article 5 The Company is headquartered in Hsinchu
Science-based Industrial Park, Taiwan and may
have branches set elsewhere domestically and
abroad as resolved by the Board of Directors.
The Company is headquartered in Hsinchu
Science Park, Taiwan and may have branches
set elsewhere domestically and abroad as
resolved by the Board of Directors.
To comply with the
amendment of the name of
science park.
Article 7-3 (New item) The object of treasury shares bought back by the
Company may include the employees of parents
or subsidiaries of Company who meet certain
conditions.
The object of issue of employee stock option
Certification of the Company may include the
employees of parents or subsidiaries of the
Company who meet certain conditions.
The object of issue of restricted stock for
employees may include the employees of
parents or subsidiaries of the Company who
meet certain conditions.
The object of subscription of new shares of the
Company may include the employees of parents
or subsidiaries of the Company who meet
To comply with the
amendment of Company
Act and meet the needs of
the Company’s operations.
~60~
Article No. Original Articles Amended Articles Reasons for Amendments
certain conditions.
The term of “certain conditions” in this Article
is authorized to be set by Board of Director.
Article 8 All share certificates of this Company shall be
issued with numbering in nomination manner,
indicating the items provided in Art.162 of the
Company Act, duly sealed and signed by more
than 3 directors, and affixed with the
Company’s seal in accordance with legal
certification procedures. At the request of the
depository corporation, the Company may print
share certificates based on the total number of
shares or choose not to print share certificates.
All share certificates of this Company shall be
issued with numbering in nomination manner,
indicating the items provided in Art.162 of the
Company Act, duly sealed and signed by the
director who are authorized to represent the
Company, and affixed with the Company’s seal
in accordance with legal certification
procedures. At the request of the depository
corporation, the Company may print share
certificates based on the total number of shares
or choose not to print share certificates.
To comply with the
amendment of Company
Act.
Chapter 4 Directors and Supervisors Directors To comply with the
amendment of article 15-1.
Article 15 The Company shall have 9 to 15 directors and 3
supervisors to be elected at a shareholder’s
meeting through nominating system from
persons of legal capacity to serve a term of three
years. A director or supervisor may be
re-elected. The Company shall buy liability
insurance for all directors and supervisors, to
The Company shall have 7 to 15 directors to be
elected at a shareholder’s meeting through
nominating system from persons of legal
capacity to serve a term of three years. A
director may be re-elected. The Company
shall buy liability insurance for all directors, to
the extent of the compensation responsibility
To adjust the numbers of
seats of directors and to
replace the supervisors by
audit committee.
~61~
Article No. Original Articles Amended Articles Reasons for Amendments
the extent of the compensation responsibility
assumed in business execution in their term of
office according to law. Remunerations to
directors and supervisors shall be determined by
the Board of Directors based on the level of
their participation in business operation and the
value of their contribution, and taking into
account the common remuneration level in the
same industry.
The number of qualified candidates for
independent directors within the above
mentioned numbers of directors should not be
less than 2 people nor less than one fifth of the
seats in the board of directors. The qualification,
shares of holding, pluralism limitation,
independency definition, ways of nomination
and acting and any other regulations related to
the independent director have to be in
accordance with relevant rules.
assumed in business execution in their term of
office according to law. Remunerations to
directors shall be determined by the Board of
Directors based on the level of their
participation in business operation and the value
of their contribution, and taking into account the
common remuneration level in the same
industry.
The number of qualified candidates for
independent directors within the above
mentioned numbers of directors should not be
less than 3 nor less than one fifth of the seats in
the board of directors. The qualification, shares
of holding, pluralism limitation, independency
definition, ways of nomination and acting and
any other regulations related to the independent
director have to be in accordance with relevant
rules.
Article 15-1 The establishment of Auditing committee is
determined by the board of director. If the
establishment of auditing committee is resolved,
the rules of Company Law regarding supervisor
The Company set up an Auditing committee.
To comply with the
administrative order to
replace the supervisors by
audit committee.
~62~
Article No. Original Articles Amended Articles Reasons for Amendments
will cease applying during the term of office of
the auditing committee.
The constitution, authority of office, the rules of
procedure and any other related regulations of
Epistar’s auditing committee will be proceeded
in accordance with the regulations of official
authorities.
The constitution, authority of office, the rules of
procedure and any other related regulations of
the auditing committee will be proceeded in
accordance with the regulations of official
authorities.
Article 17 The Board of Directors’ (hereinafter “BOD”)
meeting should be convened at least once every
quarter. Each BOD director and supervisor is
entitled to be informed with the agenda 7 days
prior to the meeting. However, an ad-hoc
meeting may occur in the case of emergency
and notification can be made in written, via
email or facsimile to each director and
supervisor under such circumstances. The duties
and powers of the board of directors are as
follows:
1. Propose amending the Company’s articles
of incorporation
2. Approve operation guidelines and mid-term
and long-term development plans
The Board of Directors’ (hereinafter “BOD”)
meeting should be convened at least once every
quarter. Each BOD director is entitled to be
informed with the agenda 7 days prior to the
meeting. However, an ad-hoc meeting may
occur in the case of emergency and notification
can be made in written, via email or facsimile to
each director under such circumstances. The
duties and powers of the board of directors are
as follows:
1. Propose amending the Company’s articles
of incorporation
2. Approve operation guidelines and mid-term
and long-term development plans
To comply with the
amendment of article 15-1.
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Article No. Original Articles Amended Articles Reasons for Amendments
3. Examine and supervise the performance of
the annual business plan
4. Examine budget and accounting settlement
5. Determine important contracts with
external entities and other important
matters
6. Approve important capital expenditure
plans
7. Approve the endorsement, guarantee and
acceptance in the name of the Company for
others
8. Dispose important properties of the
Company
9. Appoint and dismiss President and Vice
President
10. Approve the Company’s reinvestments in
other businesses and transfer or sale of
shares
11. Prepare the regulations governing the
important transactions between the
Company and related parties (including
affiliated enterprises)
3. Examine and supervise the performance of
the annual business plan
4. Examine budget and accounting settlement
5. Determine important contracts with
external entities and other important
matters
6. Approve important capital expenditure
plans
7. Approve the endorsement, guarantee and
acceptance in the name of the Company for
others
8. Dispose important properties of the
Company
9. Appoint and dismiss President and Vice
President
10. Approve the Company’s reinvestments in
other businesses and transfer or sale of
shares
11. Prepare the regulations governing the
important transactions between the
Company and related parties (including
affiliated enterprises)
~64~
Article No. Original Articles Amended Articles Reasons for Amendments
12. Establish and dissolve branches
13. Employ and dismiss CPAs of the Company
14. Other duties and powers provided in laws
and rules and given at shareholders’
meeting.
12. Establish and dissolve branches
13. Employ and dismiss CPAs of the Company
14. Other duties and powers provided in laws
and rules and given at shareholders’
meeting.
Article 18 The Company shall have one President and
several vice President and managers whose
appointment, discharge and remuneration shall
be handled according to Article 29 of the
Company Act.
The Company shall have one President and
several vice President whose appointment,
discharge and remuneration shall be handled
according to Article 29 of the Company Act.
To amend it pursuant to
organization adjustment.
Article 19 The Company’s fiscal year starts from January 1
and ends on December 31. At the end of every
year, the board of directors shall prepare the
following statements and records of accounts in
compliance with the Company Act and pass
them on to supervisors 30 days prior to
shareholders' general meeting for audit.
Supervisors shall issue a report and submit it to
shareholders’ general meeting for recognition.
1. Business report
2. Financial statements
3. Proposal for allocation of surplus or making
good of past loss.
The Company’s fiscal year starts from January 1
and ends on December 31. At the end of every
year, the board of directors shall prepare the
following statements and records of accounts in
compliance with the Company Act and submit it
to shareholders’ general meeting for recognition.
1. Business report
2. Financial statements
3. Proposal for allocation of surplus or making
good of past loss.
To comply with the
amendment of the Law
and Regulations.
~65~
Article No. Original Articles Amended Articles Reasons for Amendments
Article 20 (New item)
The surplus earning distribution or loss
offsetting of the Company may be made after
the end of each quarter. If there is a surplus after
each quarter's final accounting, it shall first be
used to pay the taxes, offset the accumulated
losses, retain for the employee's compensation,
and then allocate ten (10) percent of the surplus
as legal reserve unless the total legal reserve has
reached the total amount of capital of the
Company. The Company may then allocate or
reverse a certain amount as special reserve or
return earnings, if necessary. The remaining
balance after aforesaid allocation with the
accumulated undistributed surplus in the
previous quarter will be the shareholders’ bonus
and the distribution of earnings shall be
proposed by the Board of Directors. If the
proposal is to distribute by issuing new shares, it
shall be submitted to the shareholders’ meeting
for resolution; if the proposal is to distribute by
cash, it shall be resolved by the board of
directors.
To comply with the
amendment of Company
Act and meet the needs of
the Company’s operations.
~66~
Article No. Original Articles Amended Articles Reasons for Amendments
The Company shall distribute the after-tax profit
after annual accounting settlement, shall first
make up for the losses, then allocate 10% as
legal reserve. However such legal reserve
amounts to the total authorized capital, this
provision shall not apply and, if necessary,
allocate or reverse special reserve. Balance plus
the previous cumulative undistributed earnings
to be allocated surplus, in addition to discretion
of reservations, which dispatched proportion of
shares held by each shareholder shall base on
the ratio.
(New item)
The Company shall distribute the after-tax profit
after annual accounting settlement, shall first
make up for the losses, then allocate 10% as
legal reserve. However such legal reserve
amounts to the total authorized capital, this
provision shall not apply and, if necessary,
allocate or reverse special reserve. Balance plus
the previous cumulative undistributed earnings
to be allocated surplus, in addition to discretion
of reservations, the distribution shall be
proposed by the Board, if the proposal is to
distribute by issuing new shares, it shall be
submitted to shareholders’ meeting for
resolution; if the proposal is to distributed by
cash, it shall be resolved by the Board of
directors and the distribution ratio shall base on
the proportion of shares held by each
shareholder.
Pursuant to the provisions of paragraph 5,
Article 245 of the Company Act, the Company
authorizes the Board of Directors to distribute
dividends or bonuses by cash under the
resolution which has been adopted by a majority
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Article No. Original Articles Amended Articles Reasons for Amendments
The Company is in the growing phase in respect
of business development. For agreeing with
present and future development plans,
investment environment, fund demand, and
competition from domestic and foreign regions,
the distribution of earnings shall be executed in
compliance with the above regulations, for
which shareholders’ interest and capital
adequacy ratio shall be also taken into account.
Besides, for shareholders’ dividends to be
distributed for the year, the ratio of the cash
dividends to be distributed shall not be less than
10% of the total dividends to be distributed.
vote at a meeting of the board of directors
attended by more than two-thirds of all the
directors, and the distribution shall be reported
to the shareholders’ meeting after resolved.
The Company is in the growing phase in respect
of business development. For agreeing with
present and future development plans,
investment environment, fund demand, and
competition from domestic and foreign regions,
the distribution of earnings shall be executed in
compliance with each of the above regulations,
for which shareholders’ interest and capital
adequacy ratio shall be also taken into account.
Besides, for shareholders’ dividends to be
distributed for the year, the ratio of the cash
dividends to be distributed shall not be less than
10% of the total dividends to be distributed.
Article 20-1 Company should dispatch 10% ~20% of the
“annual profit” to the employee remuneration
and 2% to directors. But the company shall
compensate the accumulated deficit.
Company should dispatch 10% ~20% of the
“annual profit” to the employee remuneration
and no more than 2% to directors. But the
company shall compensate the accumulated
deficit.
To comply with the
amendment of the
Company Act and the
Instruction letter #
10402427800 dated on
20151015 from Ministry
~68~
Article No. Original Articles Amended Articles Reasons for Amendments
Employee remuneration could be stock or cash.
the object of the issue of shares or cash
including the employees of subsidiaries who
compliance with certain conditions.
The “annual profit” in first paragraph means the
current year pre-tax profit (excluding other
benefits or losses, such as the put option right,
the call option rights, the conversion rights and
the redeem of overseas convertible bonds)
before the deduction of the staff remuneration
and director remuneration.
Dispatched remuneration of employees and
directors shall be decided by the board of
directors with more than a two-thirds majority
of the directors present and resolutions agreed
by half attending directors and report to
shareholder meeting.
Employee remuneration could be by stock or by
cash. The object of the issue of shares or cash
including the employees of subsidiaries or
parents of Company who meet certain
conditions. The term of “certain condition” is
authorized to be set by the Board of Directors.
The “annual profit” in first paragraph means the
current year pre-tax profit (excluding other
benefits or losses, such as the put option right,
the call option rights, the conversion rights and
the redeem of overseas convertible bonds)
before the deduction of the staff remuneration
and director remuneration.
Dispatched remuneration of employees and
directors shall be decided by the board of
directors with more than a two-thirds of the
directors present and resolved by majority of the
attended directors and report to shareholder
meeting.
of Economic Affairs, and
meet the needs of the
Company’s operations.
Article 20-2 (New item) Pursuant to the provisions of Article 241 of the
Company Act, the Company authorizes the
Board of Directors to distribute all or part of the
legal reserve and capital reserve by cash under
To comply with the
amendment of the
Company Act.
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Article No. Original Articles Amended Articles Reasons for Amendments
the resolution which has been adopted by a
majority vote at a meeting of the board of
directors attended by more than two-thirds of all
the directors, and the distribution shall report to
the shareholders’ meeting after resolved.
Article 22 The Articles of Incorporation was set up at the
meeting of the founders on September 9, 1996.
The 1st amendment was made on June 4, 1997.
The 2nd amendment was made on July 24, 1998.
The 3rd amendment was made on April 20,
1999. The 4th amendment was made on May 9,
2000. The 5th amendment was made on May 14,
2001. The 6th amendment was made on June 19,
2002. The 7th amendment was made on June 18,
2003. The 8th amendment was made on June 17,
2004. The 9th amendment was made on June 14,
2005. The 10th amendment was made on
October 4, 2005. The 11th amendment was made
on March 2, 2006. The 12th amendment was
made on November 21, 2006. The 13th
amendment was made on June 13, 2008. The
14th amendment was made on June 10, 2009.
The 15th amendment was made on June 15,
The Articles of Incorporation was set up at the
meeting of the founders on September 9, 1996.
The 1st amendment was made on June 4, 1997.
The 2nd amendment was made on July 24, 1998.
The 3rd amendment was made on April 20,
1999. The 4th amendment was made on May 9,
2000. The 5th amendment was made on May 14,
2001. The 6th amendment was made on June 19,
2002. The 7th amendment was made on June 18,
2003. The 8th amendment was made on June 17,
2004. The 9th amendment was made on June 14,
2005. The 10th amendment was made on
October 4, 2005. The 11th amendment was made
on March 2, 2006. The 12th amendment was
made on November 21, 2006. The 13th
amendment was made on June 13, 2008. The
14th amendment was made on June 10, 2009.
The 15th amendment was made on June 15,
Added the latest
amendment date.
~70~
Article No. Original Articles Amended Articles Reasons for Amendments
2010. The 16th amendment was made on June
27, 2012. The 17th amendment was made on
June 14, 2013. The 18th amendment was made
on June 19, 2014. The 19th amendment was
made on June 29, 2015.
2010. The 16th amendment was made on June
27, 2012. The 17th amendment was made on
June 14, 2013. The 18th amendment was made
on June 19, 2014. The 19th amendment was
made on June 29, 2015. The 20 th amendment
was made on June 20, 2019.
~71~
Attachment 8
Epistar Corporation Acquisition or Disposal Procedures of Asset
Comparison Table for Amendments
Article No. Original Articles Amended Articles Reasons for
Amendments
Article 2 Definition of assets
1. Investment in securities (including stocks, government
bonds, corporate bonds, financial bonds, depository
receipt, call/put warrants, beneficiary securities and
asset-based securities etc)
2. Real estate (including land, houses and buildings,
investment property, rights to use land, and
construction enterprise inventory) and equipment.
3. Membership certificates
4. Intangible assets such as patents, copyrights,
trademarks, concession and so on.
5. Derivatives
6. Assets acquired or disposed as a result of legal
merging, division, acquisition or share selling.
7. Other important assets
Definition of assets
1. Investment in securities (including stocks, government
bonds, corporate bonds, financial bonds, depository
receipt, call/put warrants, beneficiary securities and
asset-based securities etc)
2. Real estate (including land, houses and buildings and
investment property) and equipment.
3. Membership certificates
4. Intangible assets such as patents, copyrights,
trademarks, concession and so on.
5. Right-of-use assets.
6. Derivatives
7. Assets acquired or disposed as a result of legal
merging, division, acquisition or share selling.
8. Other important assets
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission
Article 3 Decision-making approaches on pricing and references
1. Securities
Decision-making approaches on pricing and references
1. Securities
Revised in
accordance with
~72~
Article No. Original Articles Amended Articles Reasons for
Amendments
Other than complying with the following regulations
when acquiring or disposing securities, Epistar should
receive the most recent audited CPA report/financial
statement from the target company as the reference for
evaluating trading price before the day of occurrence.
Moreover, any trading exceeding 20% of the paid-in
capital or above NT$300 million requires CPAs’
comment on the rationality of trading price. before the
day of occurrence. If it is necessary for the CPAs to
adopt the professional report, SAS No. 20 issued by
the ROC Accounting Research and Development
Foundation (ARDF)has to be followed:
(1) In compliance with “Company Act”, Securities
acquired by cash as a result of initiation or
collection, which should make the recognition of
rights equivalent to the proportion of contribution.
(2) Securities issued at par with the participation of the
target company via capital injection by cash based
on related regulations.
(3) Securities issued by the 100% invested company
participating in the subscription via
recapitalization in cash.
Other than complying with the following regulations
when acquiring or disposing securities, Epistar should
receive the most recent audited CPA report/financial
statement from the target company as the reference for
evaluating trading price before the day of occurrence.
Moreover, any trading exceeding 20% of the paid-in
capital or above NT$300 million requires CPAs’
comment on the rationality of trading price. before the
day of occurrence. If it is necessary for the CPAs to
adopt the professional report, SAS No. 20 issued by
the ROC Accounting Research and Development
Foundation (ARDF)has to be followed:
(1) In compliance with “Company Act”, Securities
acquired by cash as a result of initiation or
collection, which should make the recognition of
rights equivalent to the proportion of contribution.
(2) Securities issued at par with the participation of the
target company via capital injection by cash based
on related regulations.
(3) Securities issued by the invested company of
which Epistar directly or indirectly holds 100% of
the shares to participating in the subscription via
recapitalization in cash, or the subsidiaries of
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
~73~
Article No. Original Articles Amended Articles Reasons for
Amendments
(4) Securities traded in the security exchange house or
listed/OTC securities in business areas of security
companies.
(5) Government bonds and repo/resell bonds.
(6) Domestic and offshore mutual funds.
(7) Acquired or disposed stocks of listed/OTC
companies based on the regulations of subscribing
to securities stipulated by stock exchange house,
subscription rules of OTC center, or policies
related to selling stocks.
(8) Securities acquired via participating the
recapitalization or via domestic Corporate bonds
(including Bank Debentures) and not via private
placement in cash of listed companies.
(9) According to Paragraph 1 Article 11 of the
“Securities Investment Trust and Consulting Act”,
Subscribed domestic private Mutual funds prior to
establishment of the funds , or purchased domestic
private placement funds, including those with the
which Epistar directly or indirectly holds 100% of
the shares to invest each other by issuing securities
via cash injection
(4) Securities traded in the security exchange house or
listed/OTC securities in business areas of security
companies.
(5) Local Government bonds and repo/resell bonds.
(6) Mutual funds.
(7) Acquired or disposed stocks of listed/OTC
companies based on the regulations of subscribing
to securities stipulated by Taiwan stock exchange
house or Taipei Exchange (TPEx), subscription
rules of OTC center, or policies related to selling
stocks.
(8) Domestic Securities acquired via participating the
recapitalization or via domestic Corporate bonds
(including Bank Debentures) and not via private
placement in cash of listed companies.
(9) According to Paragraph 1 Article 11 of the
“Securities Investment Trust and Consulting Act”,
Subscribed domestic private Mutual funds prior to
establishment of the funds , or purchased domestic
private placement funds, including those with the
~74~
Article No. Original Articles Amended Articles Reasons for
Amendments
same investment scope with public placement
funds except definitive description in the trust
contract stating that investment strategy has
excluded trading for security credit and related
position of uncovered securities.
2. Real estate or equipment.
Before the day of occurrence, any real estate or
equipment acquired or disposed by Epistar with
trading value more than 20% of paid-in capital or
above NT$300 million are required to obtain the
quotation from professionals except trading with
government sectors, outsourcing construction projects
for self-owned/rented properties, or
acquiring/disposing equipment/facilities for business
use. And the following regulations must be followed:
(1) Any transaction requiring a limited price, specific
or special price as reference for any special reason
should be submitted to the Board of Directors (the
“BOD”) for review and approval. Any change in
the conditions for such cases should also be
approved by the BOD.
(2) Any case above NT$1 billion is required to request
same investment scope with public placement
funds except definitive description in the trust
contract stating that investment strategy has
excluded trading for security credit and related
position of uncovered securities.
2. Real estate, equipment or right-of-use assets.
Before the day of occurrence, any real estate,
equipment or right-of-use assets acquired or disposed
by Epistar with trading value more than 20% of
paid-in capital or above NT$300 million are required
to obtain the quotation from professionals except
trading with domestic government sectors, outsourcing
construction projects for self-owned/rented properties,
or acquiring/disposing equipment/facilities or
right-of-use assets for business use. And the following
regulations must be followed:
(1) Any transaction requiring a limited price, specific
or special price as reference for any special reason
should be submitted to the Board of Directors (the
“BOD”) for review and approval. Any change in
the conditions for such cases should also be
approved by the BOD.
(2) Any case above NT$1 billion is required to request
~75~
Article No. Original Articles Amended Articles Reasons for
Amendments
more than 2 professional agencies for appraisal.
(3) An appraisal report is required to state the
following contents:
A. All the items required by the rules of
appraising real estate.
B. Related items for the appraiser and
professional.
(a) The name, total capital, organization
structure and employment structure of the
professional appraising company.
(b) The appraiser’s name, age, education (with
related evidence), the number of years
working in appraisal and period, number
of cases undertaken by the appraiser.
(c) The relationship between the professional
appraising company, the appraiser and
outsourced company.
(d) A statement of “No fraud or concealment
in any statement of the appraisal report”.
(e) The date of issuing the report.
C. The basic profile of the appraised target should
at least include the name, feature, location and
area etc.
more than 2 professional agencies for appraisal.
(3) An appraisal report is required to state the
following contents:
A. All the items required by the rules of
appraising real estate.
B. Related items for the appraiser and
professional.
(a) The name, total capital, organization
structure and employment structure of the
professional appraising company.
(b) The appraiser’s name, age, education (with
related evidence), the number of years
working in appraisal and period, number
of cases undertaken by the appraiser.
(c) The relationship between the professional
appraising company, the appraiser and
outsourced company.
(d) A statement of “No fraud or concealment
in any statement of the appraisal report”.
(e) The date of issuing the report.
C. The basic profile of the appraised target should
at least include the name, feature, location and
area etc.
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Article No. Original Articles Amended Articles Reasons for
Amendments
D. An actual case compared with other real estate
in the same area of the target.
E. For cases with limited or specific price range,
the appraiser should evaluate whether the
current conditions are still consistent with such
limitation. The appraiser is also required to
state the rationales and reasonability of the
difference between the target and normal price,
and comment on whether the limited/specific
price is rationale to be the basis for transaction
price.
F. If the target is a contract of joint construction,
the reasonable proportion of both parties
should be noted.
G. Estimate the value-added tax for lands.
H. When the same appraiser concludes a price
with more than 20% difference of the same
period, whether the appraiser complies with
Article 41 of Real Estate Appraisal Act is
required to be investigated.
I. The attachments should include the details of
the appraisal, registration information of
ownership, a copy of situated area, a brief
D. An actual case compared with other real estate
in the same area of the target.
E. For cases with limited or specific price range,
the appraiser should evaluate whether the
current conditions are still consistent with such
limitation. The appraiser is also required to
state the rationales and reasonability of the
difference between the target and normal price,
and comment on whether the limited/specific
price is rationale to be the basis for transaction
price.
F. If the target is a contract of joint construction,
the reasonable proportion of both parties
should be noted.
G. Estimate the value-added tax for lands.
H. When the same appraiser concludes a price
with more than 20% difference of the same
period, whether the appraiser complies with
Article 41 of Real Estate Appraisal Act is
required to be investigated.
I. The attachments should include the details of
the appraisal, registration information of
ownership, a copy of situated area, a brief
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Article No. Original Articles Amended Articles Reasons for
Amendments
summary of urban renewal, the map of the
target where it is located, the usage certificate
of different sections of the land, the photos of
the current status of the target.
(4) Except for all of the evaluation results of acquired
asset made by the professional appraisers are
higher than the trading value or all of the
evaluation results of disposed asset made by the
professional appraisers are lower than the trading
value.
If a professional appraiser comes up with any of
the following result, the Company should consult
with CPAs and study SFAS No. 20 prorogated by
Accounting Research and Development
Foundation. The CPAs should issue definitive
comments on the reasons of the difference and
reasonability of the transaction price:
A. The appraisal result has more than 20%
difference from the actual transaction price.
B. The appraisal price from 2 professional
appraising companies has more than 10%
difference.
(5) The issue date of the report made by professional
summary of urban renewal, the map of the
target where it is located, the usage certificate
of different sections of the land, the photos of
the current status of the target.
(4) Except for all of the evaluation results of acquired
asset made by the professional appraisers are
higher than the trading value or all of the
evaluation results of disposed asset made by the
professional appraisers are lower than the trading
value.
If a professional appraiser comes up with any of
the following result, the Company should consult
with CPAs and study SFAS No. 20 prorogated by
Accounting Research and Development
Foundation. The CPAs should issue definitive
comments on the reasons of the difference and
reasonability of the transaction price:
A. The appraisal result has more than 20%
difference from the actual transaction price.
B. The appraisal price from 2 professional
appraising companies has more than 10%
difference.
(5) The issue date of the report made by professional
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Article No. Original Articles Amended Articles Reasons for
Amendments
appraisers should not be more than three months
ahead of the contract date. However, if the publicly
announced land value of the target is applicable
within 6 months, the original professional
appraiser may still issue a letter of comments.
The “professional appraisers” refer to real estate
appraiser, or other appraisers permitted by law to
conduct appraising for real estate and equipment.
3. Membership certificates or intangible assets
When Epistar acquires or disposes membership
certificates or intangible assets above 20% of the
paid-in capital or NT$300 million or more, except in
transactions with a government agency, Epistar should
engage CPAs to issue comments on the rationality of
the transaction price before the day of occurrence.
Accordingly, the CPAs should comply with the
regulations in SFAS No. 20 prorogated by Accounting
Research and Development Foundation.
4. The calculation of the trading amount in the first three
paragraphs should be proceeded according to the
regulations stated in the paragraph 2 of Act. 6. It is
not necessary to be recognized if the appraisal report
made by the professional appraiser or the CPAs’
appraisers should not be more than three months
ahead of the contract date. However, if the publicly
announced land value of the target is applicable
within 6 months, the original professional
appraiser may still issue a letter of comments.
The “professional appraisers” refer to real estate
appraiser, or other appraisers permitted by law to
conduct appraising for real estate and equipment.
3. Intangible assets or right-of-use assets.
When Epistar acquires or disposes intangible assets or
right-of-use assets above 20% of the paid-in capital or
NT$300 million or more, except in transactions with
a government agency, Epistar should engage CPAs to
issue comments on the rationality of the transaction
price before the day of occurrence. Accordingly, the
CPAs should comply with the regulations in SFAS
No. 20 prorogated by Accounting Research and
Development Foundation.
4. The calculation of the trading amount in the first three
paragraphs should be proceeded according to the
regulations stated in the paragraph 2 of Act. 6. It is
not necessary to be recognized if the appraisal report
made by the professional appraiser or the CPAs’
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Article No. Original Articles Amended Articles Reasons for
Amendments
comments is provided within one year after the
occurrence date.
5. Derivatives
Comply with related regulations of Section 3 in
“ Acquisition or Disposal Procedures of Assets” by the
Company.
6. Assets acquired or disposed based on legal merging,
division, procurement or receiving stocks
Assets acquired or disposed as a result of legal
merging, spin-off, acquisition or transfer of shares
should comply with related regulations of Section 4 in
“ Acquisition or Disposal Procedures of Assets” by the
Company.
Any professional appraising company and their
appraisers, any accountants, legal consults, or security
underwriters and transaction counterparties issuing
comments or appraisal report should not be the related
parties of the clients pertinent to the transaction.
comments is provided within one year after the
occurrence date.
5. Derivatives
Comply with related regulations of Section 3 in
“ Acquisition or Disposal Procedures of Assets” by
the Company.
6. Assets acquired or disposed based on legal merging,
division, procurement or receiving stocks
Assets acquired or disposed as a result of legal
merging, spin-off, acquisition or transfer of shares
should comply with related regulations of Section 4 in
“ Acquisition or Disposal Procedures of Assets” by
the Company.
Any professional appraising company and their
appraisers, any accountants, legal consults, or security
underwriters and transaction counterparties issuing
comments or appraisal report should not be the related
parties of the clients pertinent to the transaction and shall
in comply with following regulations :
1. No violation of the Securities Exchange Act, the
Company Law, the Banking Law, the Insurance Law,
the Financial Holding Company Law, the Commercial
Accounting Law, or the fraud, breach of trust,
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Article No. Original Articles Amended Articles Reasons for
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encroachment, falsification of documents or business
crimes, been declared of more than one year
imprisonment. However, it is not limited to who if the
execution is completed, the probation period expired
or the pardon has been completed for three years.
2. The counterparty should not be a related person or a
person with a substantive relationship.
3. If two or more appraisal report shall be obtained,
professional valuers or appraisers may not be related
to each other or have substantive relationships.
When issuing the appraisal report or opinion , the
personnel of the preceding paragraph shall comply with
the following matters:
1. Professional ability, practical experience and
independence should carefully assess before
undertaking a case.
2. A case should be checked by appropriate operational
procedures and should be properly planned and
implemented to reach a conclusion for the basis of a
report or opinion accordingly; the procedures, data
collected and conclusions shall be carried out with
details in the working paper of the case.
3. The data source, parameters and information used
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When acquiring or disposing assets by means of the
auction procedure of the court house, Epistar may
provide documents of the court house to substitute the
appraisal report or CPA’s comments.
shall be evaluated item by item for completeness,
correctness and reasonableness as the basis for the
issuance of appraisal reports or opinions.
4. The statement shall include the professionalism and
independence of the relevant personnel, the
information used for evaluation is reasonable and
correct, and the relevant laws and regulations are
followed.
When acquiring or disposing assets by means of the
auction procedure of the court house, Epistar may
provide documents of the court house to substitute the
appraisal report or CPA’s comments.
Article 4 Transaction cap
1. If the asset acquired or disposed by Epistar and any
subsidiary belongs to lands, real estate and equipment
for business use, there will not be any limitation on the
cap of transaction.
Transaction cap
1. If the asset acquired or disposed by Epistar and any
subsidiary belongs to lands, real estate and equipment
or right-of-use assets for business use, there will not
be any limitation on the cap of transaction. If the
business scope of a subsidiary is in business
investment category, the amount of securities
To comply with
the amendment
of the provisions
of “Regulations
Governing the
Acquisition and
Disposal of
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2. For all real estate for non business use purchased by
Epistar and any subsidiary, the transaction amount
should not exceed 20% of paid-in capital.
3. Any long-term and short-term investment of Epistar
and subsidiaries shall be subject to the “Rules of
Management for long-term and short-term
investments”.
investment is not limited.
2. For all real estate and right-of-use assets t for non
business use purchased by Epistar and any subsidiary,
the transaction amount should not exceed 10% of the
net value of the most recent financial statement.
3. The transaction cap of Security investment of Epistar
and subsidiaries is limited to 100% and 60%
respectively of the net value of the most recent
financial statement.
4. The amount of investment in individual securities of
the Company and its subsidiaries is limited to 50% and
30% respectively of the company's most recent
financial statements.
The amount of securities investment mentioned above
should be calculated in accordance with initial
investment cost.
Assets by Public
Companies” by
Financial
supervisory
commission
R.O.C. (Taiwan)
and to
incorporate in
the “Long-term
and Short-term
Investment
Management
Measures” of the
Company to
these
procedures.
Article 5 Delegation, execution unit and decision-making
procedure of transaction conditions
1. Acquisition procedures of real estate and equipment:
the acquisition of the Company’s real estate and
equipment should be authorized to the responsible
managers within their delegation after the execution
unit proposes a budget and approved by the BOD. In
Delegation, execution unit and decision-making
procedure of transaction conditions
1. Acquisition procedures of real estate and equipment or
right-of-use assets : the acquisition of the Company’s
real estate and equipment and right-of-use assets
should be authorized to the responsible managers
within their delegation after the execution unit
To comply with
the amendment
of the provisions
of “Regulations
Governing the
Acquisition and
Disposal of
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the case of emergency, any case under NT$30 million
is authorized by the Chairman to review and approve.
Any case from NT$30 million to NT$100 million
should be reviewed and approved by the chairman and
submitted to the next nearest BOD meeting for report.
Any case more than NT$100 million is required to be
submitted to the BOD for deliberation and approval.
2. Procedure of disposing real estate and equipment: Any
discarding or selling of real estate and equipment by
Epistar require a statement of reasons via special
project from the original user. Any case with on-par
value or appraisal value under NT$10 million after
quoting, price comparison and negotiation by the
manager of the assets should be approved by the
Chairman. For cases from NT$10 million to NT$30
million, the Chairman should review and approve. Any
application above NT$30 million requires the BOD’
review and approval.
3. Acquisition and disposal procedure for long-term
equity investment and short-term investment on
securities:
proposes a budget and approved by the BOD. In the
case of emergency, any case under NT$30 million is
authorized by the Chairman to review and approve.
Any case from NT$30 million to NT$100 million
should be reviewed and approved by the chairman and
submitted to the next nearest BOD meeting for report.
Any case more than NT$100 million is required to be
submitted to the BOD for deliberation and approval.
2. Procedure of disposing real estate and equipment and
right-of-use assets: Any discarding or selling of real
estate and equipment and right-of-use assets by Epistar
require a statement of reasons via special project from
the original user. Any case with the higher of on-par
value and appraisal value under NT$10 million after
quoting, price comparison and negotiation by the
manager of the assets should be approved by the
Chairman. For cases from NT$10 million to NT$30
million, the Chairman should review and approve. Any
application above NT$30 million requires the BOD’
review and approval.
3. Acquisition and disposal procedure for investment on
securities:
Assets by Public
Companies” by
Financial
supervisory
commission
R.O.C. (Taiwan)
and to
incorporate in
the “Long-term
and Short-term
Investment
Management
Measures” of the
Company to
these
procedures.
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All the acquisition and disposal of Epistar’s long-term
equity investment and short-term investment on
securities comply with the internal rules and
delegation policies.
(1) Authority Matrix
Items Amount
per time
Authorized signer
President Chairman BOD
Strategic
long-term
securities
below 50
millions review approve
exceed 50
millions review approve
Short-term
securities *
below 50
millions approve
exceed 50
millions review approve
Strategic
short-term
securities
(Investmen
t other than
above
items)
below 10
millions approve
10
millions to
50
millions
review approve
exceed
50millions review approve
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4. The acquisition and disposal procedures of
membership cards, intangible assets:
The execution unit is required to prepare related
information and submit to the BOD for deliberation
and approval.
5. Assets acquired or disposed via legal merging,
division, procurement or share selling and other
important assets:
The BOD should be entitled to deliberate and approve.
When Epistar acquires or disposes any asset compliant
with the afore-stated regulation or other laws that require
approval from the BOD but some directors express
objection with record or written statement, Epistar should
send this information to each supervisor.
When Epistar has independent director in place, Epistar
should consider each independent director’s comment
*: The purpose of short-term security is for Short-term
fund transfer, it includes buy/sell short-term notes,
repo/resell bounds, bound fund, currency fund and
Structured/linked deposits with a principle
guaranteed.
(2) Executive unit : Financial and accounting center
4. The acquisition and disposal procedures of intangible
assets, right-of-use assets or membership cards:
The execution unit is required to prepare related
information and submit to the BOD for deliberation
and approval.
5. Assets acquired or disposed via legal merging,
division, procurement or share selling and other
important assets:
The BOD should be entitled to deliberate and approve.
When Epistar acquires or disposes any asset compliant
with the afore-stated regulation or other laws that require
approval from the BOD but some directors express
objection with record or written statement, Epistar should
send this information to each supervisor.
When Epistar has independent director in place, Epistar
should consider each independent director’s comment
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when submitting any application of acquiring and
disposing assets to the BOD for discussion in compliance
with paragraphs 1 to 5. In case of any objection or
comment to put hold of the application, the meeting
notes of the BOD should be noted.
When Epistar has formulated the Audit Committee, any
major transaction of assets or derivatives should receive
approval from 50% of the Audit Committee and submit
to the BOD for approval.
The afore-stated cases should obtain concurrence of 2/3
members from the BOD’ directors if they do not receive
the approval from 50% members in Audit Committee.
And this situation, along with the resolution of Audit
Committee, should be noted in meeting notes.
The entire board of Audit Committee and afore-stated
“all directors” refer to those who are actually performing
duty currently.
when submitting any application of acquiring and
disposing assets to the BOD for discussion in compliance
with paragraphs 1 to 5. In case of any objection or
comment to put hold of the application, the meeting
notes of the BOD should be noted.
When Epistar has formulated the Audit Committee, any
major transaction of assets or derivatives should receive
approval from 50% of the Audit Committee and submit
to the BOD for approval.
The afore-stated cases should obtain concurrence of 2/3
members from the BOD’ directors if they do not receive
the approval from 50% members in Audit Committee.
And this situation, along with the resolution of Audit
Committee, should be noted in meeting notes.
The entire board of Audit Committee and afore-stated
“all directors” refer to those who are actually performing
duty currently.
Article 6 Procedure of promulgation and declaration
Epistar is liable to announce and declare on websites
appointed by regulators in regulated format within 2 days
after the occurrence of any of the following incident
(hereinafter “the occurrence date”) when acquiring or
disposing assets:
Procedure of promulgation and declaration
Epistar is liable to announce and declare on websites
appointed by regulators in regulated format within 2 days
after the occurrence of any of the following incident
(hereinafter “the occurrence date”) when acquiring or
disposing assets:
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
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1. Obtain or dispose real estate from related parties;
obtain or dispose the assets not aside from real estate
with trading value of 20% of the Company’s paid-in
capital or that of 10% of total asset or more than
NT$300 million; provided, this shall not apply to
trading of government bonds or bonds under
repurchase and resale agreements, or subscription or
redemption of domestic money market funds which is
issued by domestic security investment trust entity.
2. Merge with other companies, divide the company,
procure assets or sell stocks.
3. The loss incurred from derivatives transaction exceeds
the loss cap of the entire or individual contract based
on rules in the procedures.
4. Acquire or dispose equipment which for business use
and Trading partner is not related parties, transaction
amount is to one of the following requirements:
(1) Epistar paid-in capital is below NTD Ten (10)
billion, transaction amount is above NTD five
hundred (500) million.
(2) Epistar paid-up capital is above NTD Ten (10)
1. Obtain or dispose real estate or right-of-use assets
from related parties; obtain or dispose the assets not
aside from real estate or right-of-use assets with
trading value of 20% of the Company’s paid-in capital
or that of 10% of total asset or more than NT$300
million; provided, this shall not apply to trading of
domestic government bonds or bonds under
repurchase and resale agreements, or subscription or
redemption of domestic money market funds which is
issued by domestic security investment trust entity.
2. Merge with other companies, divide the company,
procure assets or sell stocks.
3. The loss incurred from derivatives transaction exceeds
the loss cap of the entire or individual contract based
on rules in the procedures.
4. Acquire or dispose equipment or right-of-use assets
which for business use and Trading partner is not
related parties, transaction amount is to one of the
following requirements:
(1) Epistar paid-in capital is below NTD Ten (10)
billion, transaction amount is above NTD five
hundred (500) million.
(2) Epistar paid-up capital is above NTD Ten (10)
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
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Article No. Original Articles Amended Articles Reasons for
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billion, transaction amount is above NTD one (1)
billion.
5. Epistar acquires real estate via outsourcing
construction on self-owned lands or outsourcing
construction on leased lands, or joint construction and
separate the building/profit/sales with estimate
investment above NTD five-hundred (500) million.
6. Other than the above 5 types of transactions or
investment in China, or any other cases worth more
than 20% paid-in capital of the Company or NT$300
million, the following situations shall not be
applicable:
(1) Trading of government bonds.
(2) Trading of bonds under repurchase/resale
agreements, or subscription or redemption of
domestic money market funds which is issued by
domestic security investment trust entity.
Each of the above-stated transaction value is calculated
by any of the following formula:
1. Total of each individual transaction
2. The transaction total of the same person accumulated
in one year from acquiring or disposing the same type
billion, transaction amount is above NTD one (1)
billion.
5. Epistar acquires real estate, the counterparty should be
not a related party, via outsourcing construction on
self-owned lands or outsourcing construction on
leased lands, or joint construction and separate the
building/profit/sales with estimate investment above
NTD five-hundred (500) million.
6. Other than the above 5 types of transactions or
investment in China, or any other cases worth more
than 20% paid-in capital of the Company or NT$300
million, the following situations shall not be
applicable:
(1) Trading of domestic government bonds.
(2) Trading of bonds under repurchase/resale
agreements, or subscription or redemption of
domestic money market funds which is issued by
domestic security investment trust entity.
Each of the above-stated transaction value is calculated
by any of the following formula:
1. Total of each individual transaction
2. The transaction total of the same person accumulated
in one year from acquiring or disposing the same type
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Article No. Original Articles Amended Articles Reasons for
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of targets
3. The transaction total accumulated in one year from
acquiring or disposing (separately) on the same project
to develop real estate
4. The transaction total accumulated in one year from
acquiring or disposing (separately) the same security.
The above-stated “investment in China” stated in first
Paragraph of this Article refers to investments in the
mainland China area approved by the Ministry of
Economic Affairs Investment Commission or conducted
in accordance with the provisions of the Regulations
Governing Permission for Investment or Technical
Cooperation in the Mainland Area.
The above-stated “the occurrence date” stated in first
Paragraph of this Article, in principle, refers to the
contract signature date of transactions, payment date,
engaged transaction date, transmission date, resolution
date of the BOD, or the date confirming other transaction
counterparties or transaction price, whichever occurs
first. However, for the investments requiring regulators’
approval, “the occurrence date” refers to any of the above
dates or the date receiving regulator’s approval,
whichever happens first.
of targets
3. The transaction total accumulated in one year from
acquiring or disposing (separately) on the same project
to develop real estate or right-of-use assets.
4. The transaction total accumulated in one year from
acquiring or disposing (separately) the same security.
The above-stated “investment in China” stated in first
Paragraph of this Article refers to investments in the
mainland China area approved by the Ministry of
Economic Affairs Investment Commission or conducted
in accordance with the provisions of the Regulations
Governing Permission for Investment or Technical
Cooperation in the Mainland Area.
The above-stated “the occurrence date” stated in first
Paragraph of this Article, in principle, refers to the
contract signature date of transactions, payment date,
engaged transaction date, transmission date, resolution
date of the BOD, or the date confirming other transaction
counterparties or transaction price, whichever occurs
first. However, for the investments requiring regulators’
approval, “the occurrence date” refers to any of the above
dates or the date receiving regulator’s approval,
whichever happens first.
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Article No. Original Articles Amended Articles Reasons for
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The “within one year” mentioned in Paragraph B refers
to the one year before “the occurrence date”. The dates
already announced may be exempt from the calculation.
Epistar should update the status of derivatives transaction
of Epistar, and subsidiaries of non-listed companies in
Taiwan as of last month end to website appointed by
regulators in regulated format prior to 10th of every
month.
The “within one year” mentioned in Paragraph B refers
to the one year before “the occurrence date”. The dates
already announced may be exempt from the calculation.
Epistar should update the status of derivatives transaction
of Epistar, and subsidiaries of non-listed companies in
Taiwan as of last month end to website appointed by
regulators in regulated format prior to 10th of every
month.
Article 7 Procedure to control acquisition or disposal of assets by
subsidiaries
1. Epistar should supervise each subsidiary to formulate
a SOP regarding acquiring and disposing assets.
2. When each subsidiary acquire or dispose any asset,
they should provide related data to the mother
company and proceed with acquisition or disposal
process after taking reference from the comments of
related parties in the mother company.
3. For subsidiaries of Epistar that are not listed
companies and meeting the declaration requirements
stipulated in Article 6 of the SOP, unless investment is
their professional business and except for trading for
securities in domestic/overseas stock exchange house
or business areas of security companies, Epistar
Procedure to control acquisition or disposal of assets by
subsidiaries
1. Epistar should supervise each subsidiary to formulate
a SOP regarding acquiring and disposing assets.
2. When each subsidiary acquire or dispose any asset,
they should provide related data to the mother
company and proceed with acquisition or disposal
process after taking reference from the comments of
related parties in the mother company.
3. For subsidiaries of Epistar that are not listed
companies and meeting the declaration requirements
stipulated in Article 6 of the SOP, unless investment is
their professional business and except for trading for
securities in domestic/overseas stock exchange house
or business areas of security companies, Epistar
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
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Article No. Original Articles Amended Articles Reasons for
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should take care of the announcement and declaration
details.
4. In the declaration requirements of Epistar and its
subsidiaries, the sentence “more than 20% of paid-in
capital or 10% of total asset of the Company” refers to
the paid-in capital or total asset of Epistar.
should take care of the announcement and declaration
details.
4. In the declaration requirements of Epistar and its
subsidiaries subject to the sentence “paid-in capital or
total asset of the Company” refers to the paid-in
capital or total asset of Epistar.
Article 10 Data retention
When Epistar acquires or disposes any asset, Epistar
should retain all related contracts, meeting notes, records,
appraisal reports, letter of comments by the CPAs,
lawyers or security underwriters in the Company. Unless
otherwise stipulated by laws, all the documents should be
preserved for at least 5 years.
Data retention
When Epistar acquires or disposes any asset, Epistar
should retain all related contracts, meeting notes, records,
appraisal reports, letter of comments by the CPAs,
lawyers or security underwriters in the Company. Unless
otherwise stipulated by laws, all the documents should be
preserved for at least 5 years.
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
Article 12 When acquisition or disposal of real estate occurs
between Epistar and related parties or the value of
trading the assets aside from real estate is 20% of the
When acquisition or disposal of real estate and
right-of-use assets occurs between Epistar and related
parties or the value of trading the assets aside from real
Revised in
accordance with
partial
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Company’s paid-in capital, 10% of total asset or more
than NT$300 million , except in trading of government
bonds or bonds under repurchase and resale agreements,
or subscription or redemption of domestic money market
funds which is issued by domestic security investment
trust entity. Epistar should submit the following
information to the BOD for approval and recognition by
the supervisors to before signing the contract and paying
the amount:
1. The purpose, necessity and estimated effectiveness
of such acquisition or disposal of assets
2. The reason(s) of choosing this related party for such
transaction.
3. Acquiring real estate from related parties, related data
on evaluating the estimated transaction conditions
based on Article 13 and 14.
4. The original acquisition date and price of the related
party, the relationship between the counterparty and its
company and related party etc.
5. An estimate table of cash revenue/expenditure for the
following 12 months after the estimate contract date,
and evaluation on the necessity of the transaction and
estate or right-of-use assets is 20% of the Company’s
paid-in capital, 10% of total asset or more than NT$300
million , except in trading of domestic government bonds
or bonds under repurchase and resale agreements, or
subscription or redemption of domestic money market
funds which is issued by domestic security investment
trust entity. Epistar should submit the following
information to the BOD for approval and recognition by
the supervisors to before signing the contract and paying
the amount:
1. The purpose, necessity and estimated effectiveness of
such acquisition or disposal of assets
2. The reason(s) of choosing this related party for such
transaction.
3. Acquiring real estate or right-of-use assets from
related parties, related data on evaluating the estimated
transaction conditions based on Article 13 and 14.
4. The original acquisition date and price of the related
party, the relationship between the counterparty and its
company and related party etc.
5. An estimate table of cash revenue/expenditure for the
following 12 months after the estimate contract date,
and evaluation on the necessity of the transaction and
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
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Amendments
reasonability of capital utilization.
6. The appraisal report made by the professional
appraiser or CPA’s comments as stated in the previous
paragraph.
7. The limitations of this transaction and other important
agreements.
The trading amount should be calculated in accordance
with paragraph 2 of Act. 6. The “within one year”
mentioned refers to the one year before “the occurrence
date”. The dates already submitted and approved by the
board of directors may be exempt from the calculation. If
the amount of acquisition or disposal of equipment
between Epistar and its subsidiaries is under
NTD1,000,000,000, the chairman is authorized to
determine the execution and then submitted to the board
meeting to have it approved.
When Epistar has independent director in place, Epistar
should consider each independent director’s comment
reasonability of capital utilization.
6. The appraisal report made by the professional
appraiser or CPA’s comments as stated in the previous
paragraph.
7. The limitations of this transaction and other important
agreements.
The trading amount should be calculated in accordance
with paragraph 2 of Act. 6. The “within one year”
mentioned refers to the one year before “the occurrence
date”. The dates already submitted and approved by the
board of directors may be exempt from the calculation. If
Epistar and its subsidiaries or subsidiaries that directly or
indirectly hold 100% of the issued shares or total capital
engaged in the following transactions with each other is
under NTD1,000 million, the chairman is authorized to
determine the execution and then submitted to the board
meeting to have it approved.
1. Obtain or dispose of equipment for business use or its
right-of- use assets.
2. Acquiring or disposing of the real estate right-of-use
assets for business use.
When Epistar has independent director in place, Epistar
should consider each independent director’s comment
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Article No. Original Articles Amended Articles Reasons for
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when submitting any application of acquiring and
disposing assets to the BOD for discussion. In case of
any objection or comment to put hold of the application,
the meeting notes of the BOD should be noted.
When Epistar has formulated the Audit Committee, any
matters requiring supervisors’ recognition per Paragraph
1 should receive approval from 50% of the Audit
Committee and submit to the BOD for approval.
The afore-stated cases should obtain concurrence of 2/3
members from the BOD’ directors if they do not receive
the approval from 50% members in Audit Committee.
And this situation, along with the resolution of Audit
Committee, should be noted in meeting notes.
The entire board of Audit Committee and afore-stated
“all directors” refer to those who are currently
performing their duties.
when submitting any application of acquiring and
disposing assets to the BOD for discussion. In case of
any objection or comment to put hold of the application,
the meeting notes of the BOD should be noted.
When Epistar has formulated the Audit Committee, any
matters requiring supervisors’ recognition per Paragraph
1 should receive approval from 50% of the Audit
Committee and submit to the BOD for approval.
The afore-stated cases should obtain concurrence of 2/3
members from the BOD’ directors if they do not receive
the approval from 50% members in Audit Committee.
And this situation, along with the resolution of Audit
Committee, should be noted in meeting notes.
The entire board of Audit Committee and afore-stated
“all directors” refer to those who are currently
performing their duties.
Article 13 Epistar should evaluate the reasonability of transaction
cost when acquiring real estate from related parties with
the following methods:
1. Other than the original transaction price, add all
necessary interest incurred from the capital and costs
liable for the buyer pursuance to related laws. The
“necessary interest cost of funding” is based on the
Epistar should evaluate the reasonability of transaction
cost when acquiring real estate or right-of-use assets
from related parties with the following methods:
1. Other than the original transaction price, add all
necessary interest incurred from the capital and costs
liable for the buyer pursuance to related laws. The
“necessary interest cost of funding” is based on the
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
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Article No. Original Articles Amended Articles Reasons for
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weighted average interest rate of the loan for assets
procured of the same year. However, it should not
exceed the highest interest rate among financial
institutes promulgated by Ministry of Finance.
2. If any related has pledged a mortgage to any financial
institute with the target asset, the financial institutes
should have evaluated a total value of the target
against the loan. However, the loan-to-value decided
by the financial institute should be more than 70% and
the loan period must exceed more than one year.
Nonetheless, this rule does not apply to the case when
any of the financial institute or transaction
counterparty is the related party.
When purchasing the lands and houses of the same target
together with other parties, Epistar should follow any of
the above-stated methodologies to calculate the value of
the lands and houses.
Epistar should evaluate the cost of real estate subject to
Paragraph 1 and 2 when acquiring real estate from
related parties, and consult with CPA for review and
issue definitive comments.
weighted average interest rate of the loan for assets
procured of the same year. However, it should not
exceed the highest interest rate among financial
institutes promulgated by Ministry of Finance.
2. If any related has pledged a mortgage to any financial
institute with the target asset, the financial institutes
should have evaluated a total value of the target
against the loan. However, the loan-to-value decided
by the financial institute should be more than 70% and
the loan period must exceed more than one year.
Nonetheless, this rule does not apply to the case when
any of the financial institute or transaction
counterparty is the related party.
When purchasing or leasing the lands and houses of the
same target together with other parties, Epistar should
follow any of the above-stated methodologies to
calculate the value of the lands and houses.
Epistar should evaluate the cost of real estate or
right-of-use assets subject to Paragraph 1 and 2 when
acquiring real estate or right-of-use assets from related
parties, and consult with CPA for review and issue
definitive comments.
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
~96~
Article No. Original Articles Amended Articles Reasons for
Amendments
When any of the following situations applies to the
acquisition of real estate by Epistar, Article 12, instead of
the afore-stated 3 regulations, shall be the basis:
1. The real estate was inherited or given to the related
party.
2. The acquisition of the real estate (by contract) by the
related party has exceeded more than 5 years of the
contract date of the transaction.
3. The real estate was acquired from signing a joint
construction contract with the related party, or through
engaging a related party to build real property, either
on the company's own land or on rented land.
When any of the following situations applies to the
acquisition of real estate or right-of-use assets by Epistar,
Article 12, instead of the afore-stated 3 regulations, shall
be the basis:
1. The real estate or right-of-use assets was inherited or
given to the related party.
2. The acquisition of the real estate or right-of-use
assets (by contract) by the related party has exceeded
more than 5 years of the contract date of the
transaction.
3. The real estate was acquired from signing a joint
construction contract with the related party, or
through engaging a related party to build real
property, either on the company's own land or on
rented land.
4. The Company and its subsidiaries, or subsidiaries
that directly or indirectly hold 100% of the issued
shares or total capital, acquire the real estate
right-of-use assets for business use.
Article 14 Epistar should follow the regulations in Article 15 when
the evaluation result is lower than the actual transaction
price following the assessment standards in Paragraph 1
and 2 in the afore-stated article. However, such rule does
Epistar should follow the regulations in Article 15 when
the evaluation result is lower than the actual transaction
price following the assessment standards in Paragraph 1
and 2 in the afore-stated article. However, such rule does
Revised in
accordance with
partial
amendment of
~97~
Article No. Original Articles Amended Articles Reasons for
Amendments
not apply to any of the following, especially when object
evidence is provided and the professional appraiser of
real estate and CPA both issue comments on the
reasonability of such transaction:
1. The related party provides evidence subject to any of
the following criteria when acquiring pure lands and
initiate construction:
(1) For pure lands, the rules of the above-stated article
shall apply. For houses, the sum of the building
cost and a reasonable construction profit for the
related party exceeds the actual transaction price.
The “reasonable construction profit” refers to the
average operating gross rate of the construction
department of the related party in the recent three
years or the gross rate of construction industry
announced by Ministry of Finance, whichever is
lower.
(2) Any other cases of transaction with non related
parties for the other floors of the target’s housing
lands or adjacent areas with similar areas. And the
transaction conditions are similar to the case of the
related party based on the transaction practices of
real estate in terms of the reasonable number of
not apply to any of the following, especially when object
evidence is provided and the professional appraiser of
real estate and CPA both issue comments on the
reasonability of such transaction:
1. The related party provides evidence subject to any of
the following criteria when acquiring pure lands and
initiate construction:
(1) For pure lands, the rules of the above-stated article
shall apply. For houses, the sum of the building
cost and a reasonable construction profit for the
related party exceeds the actual transaction price.
The “reasonable construction profit” refers to the
average operating gross rate of the construction
department of the related party in the recent three
years or the gross rate of construction industry
announced by Ministry of Finance, whichever is
lower.
(2) Any other cases of transaction with non related
parties for the other floors of the target’s housing
lands or adjacent areas with similar areas. And the
transaction conditions are similar to the case of the
related party based on the transaction practices of
real estate or lease in terms of the reasonable
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
~98~
Article No. Original Articles Amended Articles Reasons for
Amendments
floors or after evaluating the price differentiation
of the same area.
(3) Any other cases of leasing with non related parties
for the other floors of the target’s housing lands or
adjacent areas with similar areas. And the
transaction conditions, with estimation, are similar
to the case of the related party based on the leasing
practices of real estate in terms of the reasonable
number of floors.
2. The real estate purchased by the real estate and of
which the evidence is proposed by Epistar has
transaction conditions similar to other cases of
transactions with non related parties in the same
neighborhood in a year and with similar areas.
The above stated “transactions in the same
neighborhood”, in principle, refers to the area within 500
meters in the same, or adjacent, streets/roads, or any
similar case based on publicly announced current value.
The “similar areas,” in principle, refer to more than 50%
of the areas of the transaction targets with non-related
parties. The “one year” refers to 12 months prior to the
de facto date of acquiring the real estate this time.
number of floors or after evaluating the price
differentiation of the same area.
2. The real estate by purchasing or by leasing to acquire
the right-of-use assets which the evidence is proposed
by Epistar has transaction conditions similar to other
cases of transactions with non related parties in the
same neighborhood in a year and with similar areas.
The above stated “transactions in the same
neighborhood”, in principle, refers to the area within 500
meters in the same, or adjacent, streets/roads, or any
similar case based on publicly announced current value.
The “similar areas,” in principle, refer to more than 50%
of the areas of the transaction targets with non-related
parties. The “one year” refers to 12 months prior to the
de facto date of acquiring the real estate or right-of-use
assets this time.
~99~
Article No. Original Articles Amended Articles Reasons for
Amendments
Article 15 When the evaluation result of Epistar based on Article 13
and 14 for acquiring real estate from related parties is
lower than the transaction price, Epistar should comply
with the following:
1. Pursuant to Paragraph 1 Article 41 of Securities &
Exchange Act, Epistar should reserve a special earned
surplus for the difference between the transaction price
and assessed cost. Epistar should not distribute or
reallocate the amount to recapitalization stocks. If
Epistar follows Equity Method for investments,
Epistar should also reserve special earned surplus
proportionally based on the regulation in Paragraph 1
Article 41 of Securities & Exchange Act.
2. The supervisors should comply with the regulations in
Article 218 of Company Act.
3. Epistar should submit the follow-up status of
Subparagraph 1 and 2 to Shareholders’ Meeting and
disclose the details of transactions in the Annual
Report and Prospectus.
Epistar should not utilize the special earned surplus as
stated afore until Epistar has recognized the falling price
loss or disposed it, or compensated it properly or restored
When the evaluation result of Epistar based on Article 13
and 14 for acquiring real estate or right-of-use assets
from related parties is lower than the transaction price,
Epistar should comply with the following:
1. Pursuant to Paragraph 1 Article 41 of Securities &
Exchange Act, Epistar should reserve a special earned
surplus for the difference between the transaction price
and assessed cost of real estate or right-of-use assets.
Epistar should not distribute or reallocate the amount
to recapitalization stocks. If Epistar follows Equity
Method for investments, Epistar should also reserve
special earned surplus proportionally based on the
regulation in Paragraph 1 Article 41 of Securities &
Exchange Act.
2. The supervisors should comply with the regulations in
Article 218 of Company Act.
3. Epistar should submit the follow-up status of
Subparagraph 1 and 2 to Shareholders’ Meeting and
disclose the details of transactions in the Annual
Report and Prospectus.
The Company shall provide a special surplus reserve in
accordance with the provisions of the preceding
paragraph. The assets purchased or leased at a high price
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
~100~
Article No. Original Articles Amended Articles Reasons for
Amendments
it, or any other evidence can be provided to prove its
reasonability concurred by the regulators.
The 2 rules of the above-stated paragraphs should be
applicable when other evidence proving abnormal
transactions is discovered when acquiring real estate
from related parties.
shall be recognized as a loss or disposed or termination
of the lease or may be properly compensated or
reinstated, or there is other evidence provided with no
unreasonable situations, and with the consent of the
competent authority, the special surplus reserve shall be
utilized.
The 2 rules of the above-stated paragraphs should be
applicable when other evidence proving abnormal
transactions is discovered when acquiring real estate or
right-of-use assets from related parties.
Article 16 Transaction principles and policies
1. Transaction types: The derivatives transactions of
Epistar refers to the contracts of which the value
derives from assets, interest rates, exchange rates,
indices, or other interest, including forwards
(excluding insurance contracts, guaranty of contract,
after-sale service guarantee, long-term lease contracts
and long-term purchasing/sales contracts), options,
futures, exchange and structured contracts with the
combination of the above-stated products. Any other
products require the approval from the chairman
before transaction.
Transaction principles and policies
1. Transaction types: The derivatives transactions of
Epistar refers to the contracts of which the value
derives from specific interest rates, price of financial
tools, merchandise prices, exchange rates, indices,
price or rate index, credit rating, or credit index or
other index, including forwards (excluding insurance
contracts, guaranty of contract, after-sale service
guarantee, long-term lease contracts and long-term
purchasing/sales contracts), options contracts, futures
contracts, Leverage margin contract , swap contracts,
hybrid contracts combining the above contracts; or
hybrid contracts or structured products containing
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
~101~
Article No. Original Articles Amended Articles Reasons for
Amendments
2. Management or hedging strategies: Transaction of
derivatives should focus on hedging; the targets of the
transactions should also be banks having business
relationship with Epistar to avoid credit risk.
3. Delegation:
(1) Treasury Department: Treasury Department is
responsible for FX management system, such as
collecting market information, judging the market
tread and risks, becoming familiar with financial
products and transaction skills etc. Treasury
Department, under the instruction of its head, is
authorized to control FX positions based on
Epistar’s internal policy on risk hedging.
(2) Accounting Department: Accounting Department
controls the entire FX position, settles the realized
and unrealized exchange P/L on a regular basis for
Treasury Department to decide their hedging
practices.
4. Evaluation of performance: For any transaction on
derivatives, the trader(s) should mark down the details
(such as amount, exchange rate, banks, maturity date
embedded derivatives. Any other products require the
approval from the chairman before transaction.
2. Management or hedging strategies: Transaction of
derivatives should focus on hedging; the targets of the
transactions should also be banks having business
relationship with Epistar to avoid credit risk.
3. Delegation:
(1) Treasury Department: Treasury Department is
responsible for FX management system, such as
collecting market information, judging the market
tread and risks, becoming familiar with financial
products and transaction skills etc. Treasury
Department, under the instruction of its head, is
authorized to control FX positions based on
Epistar’s internal policy on risk hedging.
(2) Accounting Department: Accounting Department
controls the entire FX position, settles the realized
and unrealized exchange P/L on a regular basis for
Treasury Department to decide their hedging
practices.
4. Evaluation of performance: For any transaction on
derivatives, the trader(s) should mark down the details
(such as amount, exchange rate, banks, maturity date
Commission.
~102~
Article No. Original Articles Amended Articles Reasons for
Amendments
etc) on the summary of unwinding position in order to
control P/L. In addition, the FX exchange P/L should
be settled on a monthly, quarterly and annually basis.
5. Total facility of master agreement and all/individual
loss limit:
(1) Total facility of master agreement shall be
pursuant to the risk position (net) of the Company.
(2) All/individual loss limit: The trading on
derivatives of the Company is for hedging
purpose. The loss cap for all/individual contract is
15% of the contract value. However, in the case of
any major negative impact related to exchange
rates or interest rates, the Company should
convene a meeting to gather all related parties and
discuss solutions.
etc) on the summary of unwinding position in order to
control P/L. In addition, the FX exchange P/L should
be settled on a monthly, quarterly and annually basis.
5. Total facility of master agreement and all/individual
loss limit:
(1) Total facility of master agreement shall be
pursuant to the risk position (net) of the Company.
(2) All/individual loss limit: The trading on
derivatives of the Company is for hedging
purpose. The loss cap for all/individual contract is
15% of the contract value. However, in the case of
any major negative impact related to exchange
rates or interest rates, the Company should
convene a meeting to gather all related parties and
discuss solutions.
Article 23 The “assets acquired or disposed by means of legal
merging, spin-off, acquisition or transfer of shares” in the
Rules refers to the assets acquired or disposed subject to
Business Mergers and Acquisitions Act, Financial
Holding Company Act, Financial Institutions Merger Act
or other laws via corporate merging, spin-off or
acquisition, or transferred company shares (hereinafter
“transfer of shares”) via new issuance subject to
The “assets acquired or disposed by means of legal
merging, spin-off, acquisition or transfer of shares” in the
Procedures refers to the assets acquired or disposed
subject to Business Mergers and Acquisitions Act,
Financial Holding Company Act, Financial Institutions
Merger Act or other laws via corporate merging, spin-off
or acquisition, or transferred company shares (hereinafter
“transfer of shares”) via new issuance subject to Article
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
~103~
Article No. Original Articles Amended Articles Reasons for
Amendments
Paragraph 6 Article 156 of Company Act. 156-3 of Company Act. Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
Article 26 Unless otherwise indicated in other laws or any special
reasons requiring pre-approval by the regulators, Epistar
should convene the BOD meeting and Shareholders’
Meeting on the same day with the company participating
the merger, spin-off or acquisition to decide related
matters of such merger, spin-off or acquisition.
Unless otherwise indicated in other laws or any special
reasons requiring pre-approval by the regulators, Epistar
should convene the BOD meeting and Shareholders’
Meeting on the same day with the company participating
the transfer of shares.
Epistar should retain the following information in a
complete written form for 5 years in case of future
inspection when participating any merger, spin-off,
acquisition or transfer of shares:
1. Basic profile of people: Including the titles, names, ID
numbers (or passport numbers for foreigners) of
Unless otherwise indicated in other laws or any special
reasons requiring pre-approval by the regulators, Epistar
should convene the BOD meeting and Shareholders’
Meeting on the same day with the company participating
the merger, spin-off or acquisition to decide related
matters of such merger, spin-off or acquisition.
Unless otherwise indicated in other laws or any special
reasons requiring pre-approval by the regulators, Epistar
should convene the BOD meeting and Shareholders’
Meeting on the same day with the company participating
the transfer of shares.
Epistar should retain the following information in a
complete written form for 5 years in case of future
inspection when participating any merger, spin-off,
acquisition or transfer of shares:
1. Basic profile of people: Including the titles, names, ID
numbers (or passport numbers for foreigners) of
Revised in
accordance with
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
~104~
Article No. Original Articles Amended Articles Reasons for
Amendments
everyone participating or executing the mergers,
spin-off, acquisition or transfer of shares prior to the
announcement of such news.
2. Important dates: Including the dates of signing letter
of intent or MOU, engagement for financial or legal
consultants, signing the contracts and BOD meeting.
3. Important documents and meeting notes: Including the
plan of mergers, spin-off, acquisition or transfer of
shares, letter of intent or MOU, important contracts
and meeting notes of BOD meetings etc.
In the case of participating merger, spinoff, acquisition or
transfer of shares, Epistar should upload the information
stated in Subparagraph 1 and 2 within 2 days after the
occurrence date of the BOD approving the resolution to
the internet system in regulated format for FSC’s future
review.
If the company participating in Epister’s merger, spin-off,
acquisition or transfer of shares is not a listed/OTC
company, Epistar should sign an agreement with the
company and process according to the stipulation in
Paragraphs 3 and 4.
everyone participating or executing the mergers,
spin-off, acquisition or transfer of shares prior to the
announcement of such news.
2. Important dates: Including the dates of signing letter
of intent or MOU, engagement for financial or legal
consultants, signing the contracts and BOD meeting.
3. Important documents and meeting notes: Including the
plan of mergers, spin-off, acquisition or transfer of
shares, letter of intent or MOU, important contracts
and meeting notes of BOD meetings etc.
In the case of participating merger, spinoff, acquisition or
transfer of shares, Epistar should upload the information
stated in Subparagraph 1 and 2 within 2 days after the
occurrence date of the BOD approving the resolution to
the internet system in regulated format for FSC’s future
review.
If the company participating in Epister’s merger, spin-off,
acquisition or transfer of shares is not a listed/OTC
company, Epistar should sign an agreement with the
company and process according to the stipulation in
foresaid two Paragraphs
Article 33 The SOP, and any amendment thereto, should be put into
force after approve by the BOD and Shareholders’
The SOP, and any amendment thereto, should be put into
force after approve by the BOD and Shareholders’
Revised in
accordance with
~105~
Article No. Original Articles Amended Articles Reasons for
Amendments
Meeting, and submitted to each supervisor. If any
director expresses objection with a record or written
statement Epistar should submit such objections to each
supervisor.
When Epistar has independent directors in place, Epistar
should consider each independent director’s comment
when submitting any application of acquiring and
disposing assets to the BOD for discussion. In case of
any objection or comment to put hold of the application,
the meeting notes of the BOD should be noted.
When Epistar has formulated the Audit Committee, any
major transaction of assets or derivatives should receive
approval from 50% of the Audit Committee and submit
to the BOD for approval.
The afore-stated cases should obtain concurrence of 2/3
members from the BOD’ directors if they do not receive
the approval from 50% members in Audit Committee.
And this situation, along with the resolution of Audit
Committee, should be noted in meeting notes.
The entire board of Audit Committee and afore-stated
“all directors” refer to those who are currently
performing their duties.
When Epistar has Audit Committee in place, Paragraph 3
Meeting, and submitted to each supervisor. If any
director expresses objection with a record or written
statement Epistar should submit such objections to each
supervisor.
When Epistar has independent directors in place, Epistar
should consider each independent director’s comment
when submitting any application of acquiring and
disposing assets to the BOD for discussion. In case of
any objection or comment to put hold of the application,
the meeting notes of the BOD should be noted.
When Epistar has formulated the Audit Committee, any
major transaction of assets or derivatives should receive
approval from 50% of the Audit Committee and submit
to the BOD for approval.
The afore-stated cases should obtain concurrence of 2/3
members from the BOD’ directors if they do not receive
the approval from 50% members in Audit Committee.
And this situation, along with the resolution of Audit
Committee, should be noted in meeting notes.
The entire board of Audit Committee and afore-stated
“all directors” refer to those who are currently
performing their duties.
When Epistar has Audit Committee in place, Paragraph 3
partial
amendment of
the “Regulations
Governing the
Acquisition and
Disposal of
Assets by Public
Companies”
issued by
Financial
Supervisory
Commission.
~106~
Article No. Original Articles Amended Articles Reasons for
Amendments
Article 14 in Securities and Exchange Act should be
applicable to the supervisors in Audit Committee and
Paragraph 3 Article 14-4 of Securities and Exchange Act
should be applicable to the independent directors of
Audit Committee.
Related party or subsidiary, as defined in the Regulations
Governing the Preparation of Financial Reports by
Securities Issuers.
For the calculation of 10 percent of total assets under
these procedures, the total assets stated in the most recent
parent company only financial report or individual
financial report prepared under the Regulations
Governing the Preparation of Financial Reports by
Securities Issuers shall be used.
Article 14 in Securities and Exchange Act should be
applicable to the supervisors in Audit Committee and
Paragraph 3 Article 14-4 of Securities and Exchange Act
should be applicable to the independent directors of
Audit Committee.
Related party or subsidiary, as defined in the Regulations
Governing the Preparation of Financial Reports by
Securities Issuers.
For the calculation of 10 percent of total assets under
these procedures, the total assets stated in the most recent
parent company only financial report or individual
financial report prepared under the Regulations
Governing the Preparation of Financial Reports by
Securities Issuers shall be used.
The definitions of the procedures for domestic and
overseas stock exchanges or OTC's business premises are
as follows:
1. Domestic stock exchanges refer to Taiwan Stock
Exchange Co., Ltd.; foreign stock exchanges refer to
any securities trading market organized and managed
by the securities authorities of the country where it is
located.
~107~
Article No. Original Articles Amended Articles Reasons for
Amendments
2. The OTC's business premises: the domestic OTC's
business premises, which refers to the place where the
securities dealer's designed a special counters used for
trading according to the Administrative Measures for
the Sale and Purchase of Securities by Securities
Dealers' Business Offices; the foreign OTC's business
premises refers to the financial institution business
premises managed by foreign securities authority and
conducting securities business.
~108~
Attachment 9
Epistar Corporation Procedures for Loaning Funds to Other Parties
Comparison Table for Amendments
Article No. Original Articles Amended Articles Reasons for Amendments
Article 2 Targets
Based on Article 15 of Company Act, except for
the following situations, the funding of Epistar
should not loan to any shareholders or others:
(1) The companies or firms having business
relationship with Epistar.
(2) Companies or firms with the demand for
short-term financing. The so-called
“short-term” refers to one year or one business
cycle (whichever is longer). The so-called
“financing” amount refers to the cumulative
balance of Epistar’s short-term funding for
financing.
Epistar may loan to the foreign companies of
which Epistar directly or indirectly holds shares
for 100% voting rights and the restriction of
Section 1 Article 4 shall not be applicable. But the
amount limits of loans shall not exceed forty
percent (40%) of Epistar's net worth, and the
Targets
Based on Article 15 of Company Act, except for
the following situations, the funding of Epistar
should not loan to any shareholders or others:
(1) The companies or firms having business
relationship with Epistar.
(2) Companies or firms with the demand for
short-term financing. The so-called
“short-term” refers to one year or one business
cycle (whichever is longer). The so-called
“financing” amount refers to the cumulative
balance of Epistar’s short-term funding for
financing.
Foreign companies of which Epistar directly or
indirectly holds shares for 100% voting rights may
loan to each other, or the foreign companies of
which Epistar directly or indirectly holds shares
for 100% voting rights may loan to Epistar and the
restriction of paragraph 1 Article 4 shall not be
Revised in accordance with
“Regulations Governing
Loaning of Funds and Making
of Endorsements/ Guarantees
by Public Companies.”
~109~
Article No. Original Articles Amended Articles Reasons for Amendments
duration of loans shall not be longer than three
years.
applicable. But the total amount of loans and
limits of loans to individual shall not exceed forty
percent (40%) of Epistar's net worth, and the
duration of loans shall not be longer than three
years.
The person in charge of the company who violates
the provisions of paragraph 1 shall be responsible
for the return of the loan jointly and severally with
the borrower; if the company suffers damage, the
person in charge shall also be liable for damages.
Article 5 Procedures of loans
(1) Crediting
Before Epistar proceeds with any loans to
others, the creditor is required to provide all
necessary data and financial information
related to the company in order to apply for
financing from Epistar. After accepting the
application, Epistar’s Treasury Department
should investigate and evaluate the company’s
core business, financial status, solvency, credit,
profitability and usage for loans in order to file
a report.
(2) Security
When conducting any loans to others, Epistar
Procedures of loans
(1) Crediting
Before Epistar proceeds with any loans to
others, the creditor is required to provide all
necessary data and financial information
related to the company in order to apply for
financing from Epistar. After accepting the
application, Epistar’s Treasury Department
should investigate and evaluate the company’s
core business, financial status, solvency,
credit, profitability and usage for loans in
order to file a report.
(2) Security
When conducting any loans to others, Epistar
Revised in accordance with
“Regulations Governing
Loaning of Funds and Making
of Endorsements/ Guarantees
by Public Companies.”
~110~
Article No. Original Articles Amended Articles Reasons for Amendments
should request guaranteed checks equivalent to
the loan amount and mortgage of movable
properties or real estate when necessary. The
BOD may take reference from the crediting
report of Treasury Department for the above
guarantee if the creditor provides financial
status qualified as a guarantee for individual or
corporate creditor. For those providing
guarantee for corporations, Epistar should pay
attention to whether there is any clause related
to guarantee in the Articles of Incorporation.
(3) Delegation Scope
Before approving any loan to others, Epistar’s
Treasury Department should submit the
application to President and BOD for approval
based on the evaluation result of Paragraph 1,
Article 5. Any loan between Epistar and any
subsidiary, or between different subsidiaries,
should be submitted to the BOD for
deliberation and approval based on the
evaluation result of Paragraph 1, Article 5. The
Chairman is authorized to approve the same
creditor within the delegated credit line
decided by the BOD for any loan (installment
should request guaranteed checks equivalent
to the loan amount and mortgage of movable
properties or real estate when necessary. The
BOD may take reference from the crediting
report of Treasury Department for the above
guarantee if the creditor provides financial
status qualified as a guarantee for individual
or corporate creditor. For those providing
guarantee for corporations, Epistar should pay
attention to whether there is any clause related
to guarantee in the Articles of Incorporation.
(3) Delegation Scope
Before approving any loan to others, Epistar’s
Treasury Department should submit the
application to President and BOD for approval
based on the evaluation result of Paragraph 1,
Article 5. Any loan between Epistar and any
subsidiary, or between different subsidiaries,
should be submitted to the BOD for
deliberation and approval based on the
evaluation result of Paragraph 1, Article 5. The
Chairman is authorized to approve the same
creditor within the delegated credit line
decided by the BOD for any loan (installment
~111~
Article No. Original Articles Amended Articles Reasons for Amendments
or revolving) under 1-year tenure. The credit
line refers to the authorized line for any single
enterprise under 10% net worth of Epistar or
the subsidiary based on the most recent
financial statement. On top of that, the credit
line should be subject to the regulations
stipulated in Paragraph 2, Article 2.
Where Epistar has established the position of
Independent Directors, when it submits ithe
matters related to loaning funds to other parties
for discussion by the Board of Directors,
Epistar should consider each independent
director’s comments for any loan to others and
record the definitive comments for agreement
or objection into meeting notes of BOD.
or revolving) under 1-year tenure. The credit
line refers to the authorized line for any single
enterprise under 10% net worth of Epistar or
the subsidiary based on the most recent
financial statement. On top of that, the credit
line should be subject to the regulations
stipulated in Paragraph 2, Article 2.
Where Epistar has established the position of
Independent Directors, when it submits ithe
matters related to loaning funds to other
parties for discussion by the Board of
Directors, Epistar should consider each
independent director’s comments for any loan
to others. If an independent director has
objections or reservations, it should be stated
in the meeting minutes of the board of
directors.
Article 9 Procedures of announcement and declaration
1. Epistar should announce and declare the
endorsement/guarantee balance as of the last
month end for Epistar and subsidiaries prior to
the 10th of each month.
2. When Epistar’s loan balance meets any of the
following standards, Epistar is required to make
Procedures of announcement and declaration
1. Epistar should announce and declare the
endorsement/guarantee balance as of the last
month end for Epistar and subsidiaries prior to
the 10th of each month.
2. When Epistar’s loan balance meets any of the
following standards, Epistar is required to make
Revised in accordance with
“Regulations Governing
Loaning of Funds and Making
of Endorsements/ Guarantees
by Public Companies.”
~112~
Article No. Original Articles Amended Articles Reasons for Amendments
promulgation within 2 days after the occurrence
date (inclusive):
(1) The loan balance of Epistar and subsidiaries
to others achieve more than 20% of Epistar’s
net worth according to the most recent
financial statements.
(2) The loan balance of Epistar and subsidiaries
to a single enterprise achieve more than 10%
of Epistar’s net worth according to the most
recent financial statements.
(3) The new loans of fund of Epistar or
subsidiaries is more than NT$10 millions
and above 2% of Epistar’s net worth
according to the most recent financial
statements.
If any subsidiary of Epistar is not a listed
company and the subsidiary meets any of the
requirements as above-stated in Sub-section 3,
Epistar should make declaration on behalf of
the subsidiary.
“The occurrence date” in Section 2 means the
contract signing date, the payment date, the
Board of Directors resolution date, or other
dates that can confirm transaction parties and
promulgation within 2 days after the occurrence
date (inclusive):
(1) The loan balance of Epistar and subsidiaries
to others achieve more than 20% of Epistar’s
net worth according to the most recent
financial statements.
(2) The loan balance of Epistar and subsidiaries
to a single enterprise achieve more than 10%
of Epistar’s net worth according to the most
recent financial statements.
(3) The new loans of fund of Epistar or
subsidiaries is more than NT$10 millions
and above 2% of Epistar’s net worth
according to the most recent financial
statements.
If any subsidiary of Epistar is not a listed
company and the subsidiary meets any of the
requirements as above-stated in section 3 in the
preceding paragraph, Epistar should make
declaration on behalf of the subsidiary.
“The occurrence date” in paragraph 2 means the
contract signing date, the payment date, the
Board of Directors resolution date, or other
dates that can confirm the counterparties of loan
~113~
Article No. Original Articles Amended Articles Reasons for Amendments
monetary amounts, whichever date is earlier.
3. Epistar should evaluate or recognize the
contingent loss of the loans and disclose related
information in financial reports, offering related
data to CPAs for necessary audit procedures.
and monetary amounts, whichever date is
earlier.
3. Epistar should evaluate or recognize the
contingent loss of the loans and disclose related
information in financial reports, offering related
data to CPAs for necessary audit procedures.
Article 14 This SOP, after approved by BOD, should be
submitted to each supervisor and obtain the
approval from shareholders in Shareholders’
Meeting. If any director expresses objection on a
record or a written statement, Epistar should
submit such objection to each supervisor and
Shareholders’ Meeting for discussion. Any related
amendments should follow the same rules.
Where Epistar has established the position of
Independent Directors, when it submits the
operational procedures related to loaning funds to
other parties for discussion by the Board of
Directors, Epistar should consider each
independent director’s comment on the
endorsement/guarantee application and record any
definitive comments of agreement or objection
(and the reasons for objection) in the meeting
notes of the BOD.
This SOP, after approved by BOD, should be
submitted to each supervisor and obtain the
approval from shareholders in Shareholders’
Meeting. If any director expresses objection on a
record or a written statement, Epistar should
submit such objection to each supervisor and
Shareholders’ Meeting for discussion. Any related
amendments should follow the same rules.
Where Epistar has established the position of
Independent Directors, when it submits the
operational procedures related to loaning funds to
other parties for discussion by the Board of
Directors, Epistar should consider each
independent director’s comment on the
endorsement/guarantee application. If an
independent director has objections or
reservations, it should be stated in the meeting
minutes of the board of directors.
Revised in accordance with
“Regulations Governing
Loaning of Funds and Making
of Endorsements/ Guarantees
by Public Companies.”
~114~
Article No. Original Articles Amended Articles Reasons for Amendments
Where Epistar has established an Audit
Committee, the Audit Committee shall exercise its
functional duties under Article 14-5 of the
Securities and Exchange Act. The provisions
regarding supervisors in this regulation shall apply
mutatis mutandis to the Audit Committee.
Where Epistar has established an Audit
Committee, the Audit Committee shall exercise its
functional duties under Article 14-5 of the
Securities and Exchange Act. The provisions
regarding supervisors in this regulation shall apply
mutatis mutandis to the Audit Committee.
If the company establish an audit committee, the
setting or amendments of this procedures shall be
approved by majority members of the audit
committee and submit to the board of directors for
resolution. The second provision shall not apply.
If the setting or amendments is not approved by
one-half of all members of the Audit Committee, it
may be resolved by more than two-thirds of all
directors, and the resolutions of the Audit
Committee shall be stated in the meeting minutes
of the Board of Directors.
All members of the Audit Committee referred to in
paragraph 5 and all directors referred to in the
preceding paragraph shall be counted as actual
incumbents.
~115~
Attachment 10
Epistar Corporation Procedures for Endorsements and Guarantees
Comparison Table for Amendments
Article No. Original Articles Amended Articles Reasons for Amendments
Article 5 Announcement requirements
1. Epistar should announce and declare the
endorsement/guarantee balance as of the last
month end for Epistar and subsidiaries prior to
the 10th of each month.
2. When Epistar’s endorsement/ guarantee
balance meets any of the following standards,
Epistar is required to make promulgation
within 2 days after the occurrence date
(inclusive):
(1) The endorsement/guarantee balance of
Epistar and subsidiaries achieve more than
50% of Epistar’s net worth according to
the most recent financial statements.
(2) The endorsement/guarantee balance of
Epistar and subsidiaries to a single
enterprise achieve more than 20% of
Epistar’s net worth according to the most
recent financial statements.
Announcement requirements
1. Epistar should announce and declare the
endorsement/guarantee balance as of the last
month end for Epistar and subsidiaries prior to
the 10th of each month.
2. When Epistar’s endorsement/ guarantee
balance meets any of the following standards,
Epistar is required to make promulgation
within 2 days after the occurrence date
(inclusive):
(1) The endorsement/guarantee balance of
Epistar and subsidiaries achieve more than
50% of Epistar’s net worth according to
the most recent financial statements.
(2) The endorsement/guarantee balance of
Epistar and subsidiaries to a single
enterprise achieve more than 20% of
Epistar’s net worth according to the most
recent financial statements.
Revised in accordance
with “Regulations
Governing Loaning of
Funds and Making of
Endorsements/
Guarantees by Public
Companies.”
~116~
Article No. Original Articles Amended Articles Reasons for Amendments
(3) The endorsement/guarantee balance of
Epistar and subsidiaries is more than
NT$10 million, and the total of such
endorsement/guarantee, a long-term nature
investment and loan balance total is more
than 30% of Epistar’s net worth according
to the most recent financial statements.
(4) The new endorsement/guarantee amount
of Epistar or subsidiaries is more than
NT$30 million and above 5% of Epistar’s
net worth according to the most recent
financial statements.
“The occurrence date” in Section 2 means the
contract signing date, the payment date, the
Board of Directors resolution date, or other
dates that the transaction parties and monetary
amounts could be confirmed, whichever date
is earlier.
If any subsidiary of Epistar is not a listed
company and the subsidiary meets any of the
requirements provided by subparagraph 4 in
Section 2, Epistar should make declaration on
(3) The endorsement/guarantee balance of
Epistar and subsidiaries is more than
NT$10 million, and the total of such
endorsement/guarantee, the investment of
book value of the loan by equity method
and loan balance total is more than 30% of
Epistar’s net worth according to the most
recent financial statements.
(4) The new endorsement/guarantee amount
of Epistar or subsidiaries is more than
NT$30 million and above 5% of Epistar’s
net worth according to the most recent
financial statements.
“The occurrence date” in Section 2 means the
contract signing date, the payment date, the
Board of Directors resolution date, or other
dates that the endorsement/guarantee parties
and monetary amounts could be confirmed,
whichever date is earlier.
If any subsidiary of Epistar is not a listed
company and the subsidiary meets any of the
requirements provided by subparagraph 4 in
Section 2, Epistar should make declaration on
~117~
Article No. Original Articles Amended Articles Reasons for Amendments
behalf of the subsidiary.
3. Epistar should evaluate or recognize the
contingent loss of the endorsement/guarantee
and disclose related information in financial
reports, offering related data to CPAs for
necessary audit procedures.
The so-called “most recent financial statements”
refer to the financial statements audited or
reviewed by CPAs.
behalf of the subsidiary.
3. Epistar should evaluate or recognize the
contingent loss of the endorsement/guarantee
and disclose related information in financial
reports, offering related data to CPAs for
necessary audit procedures.
The so-called “most recent financial statements”
refer to the financial statements audited or
reviewed by CPAs.
Article 6 Procedures of endorsement/guarantee
The responsible unit should submit a petition in
regards with any endorsement/ guarantee, stating
the targets, rationales and amount. After approved
by the Treasury Department, President and
Chairman, the petition must be submitted to the
BOD for deliberation and approval. However, the
BOD may delegate Chairman to approve
applications under a certain facility and report to
the BOD for recognition afterwards. It should also
be reported to the Shareholders’ Meeting for any
follow-up updates.
Before confirming endorsement/ guarantee for
any subsidiary, by which Epistar holds more than
Procedures of endorsement/guarantee
The responsible unit should submit a petition in
regards with any endorsement/ guarantee, stating
the targets, rationales and amount. After approved
by the Treasury Department, President and
Chairman, the petition must be submitted to the
BOD for deliberation and approval. However, the
BOD may delegate Chairman to approve
applications under a certain facility and report to
the BOD for recognition afterwards.
Before confirming endorsement/ guarantee for
any subsidiary, by which Epistar holds more than
Revised in accordance
with “Regulations
Governing Loaning of
Funds and Making of
Endorsements/
Guarantees by Public
Companies.”
~118~
Article No. Original Articles Amended Articles Reasons for Amendments
90% shares via voting rights directly or indirectly
subject to Paragraph 2 in Article 3, the application
of such endorsement/ guarantee should be
submitted to the BOD for deliberation and
approval. However, this rule does not apply to any
company by which Epistar holds 100% share via
voting rights.
90% shares via voting rights directly or indirectly
subject to Paragraph 2 in Article 3, the application
of such endorsement/ guarantee should be
submitted to the BOD for deliberation and
approval. However, this rule does not apply to any
company by which Epistar holds 100% share via
voting rights.
Article 8 Decision making and authorization level
1. Any endorsement/guarantee requires the
approval from BOD and process according to
normal procedures. However, in line with
business demands, the BOD may delegate the
chairman for approval to process based on
special procedures within 50% limit and
compliant with Article 4. And such cases must
be submitted to the BOD for recognition
afterwards. The implementation updates of
such endorsement/guarantee within each
business year, and any amendment thereto,
should be submitted to Shareholders’ Meeting
of the following year for reference.
2. In case of business demand and any necessary
request to exceed the liability facilities
Decision making and authorization level
1. Any endorsement/guarantee requires the
approval from BOD and process according to
normal procedures. However, in line with
business demands, the BOD may delegate the
chairman for approval to process based on
special procedures within 50% limit and
compliant with Article 4. And such cases must
be submitted to the BOD for recognition
afterwards.
2. In case of business demand and any necessary
request to exceed the liability facilities
Revised in accordance
with “Regulations
Governing Loaning of
Funds and Making of
Endorsements/
Guarantees by Public
Companies.”
~119~
Article No. Original Articles Amended Articles Reasons for Amendments
stipulated in Article 4, Epistar should follow
normal procedure and require the BOD’
approval to request the directors’ signatures
on joint guarantee for the possible loss
incurred from such exceeding. And Epistar
should amend the procedures and report to
Shareholders’ Meeting for recognition
afterwards. In the case of objection from the
shareholders in Shareholders’ Meeting,
Epistar should draft a plan to cancel the
facilities exceeding the limit within a certain
period of time.
3. Where Epistar has established the position of
Independent Directors, when it submits the
matters of endorsements/ guarantees for
discussion by the Board of Directors, Epistar
should consider each independent director’s
comment on the endorsement/guarantee
application and record any definitive
comments of agreement or objection (and the
reasons for objection) in the meeting notes of
the BOD.
stipulated in Article 4, Epistar should follow
normal procedure and require the BOD’
approval to request the directors’ signatures
on joint guarantee for the possible loss
incurred from such exceeding. And Epistar
should amend the procedures and report to
Shareholders’ Meeting for recognition
afterwards. In the case of objection from the
shareholders in Shareholders’ Meeting,
Epistar should draft a plan to cancel the
facilities exceeding the limit within a certain
period of time.
3. Where Epistar has established the position of
Independent Directors, when it submits the
matters of endorsements/ guarantees for
discussion by the Board of Directors, Epistar
should consider each independent director’s
comment on the endorsement/guarantee
application. If an independent director has
objections or reservations, it should be stated
in the meeting minutes of the board of
directors.
~120~
Article No. Original Articles Amended Articles Reasons for Amendments
Article 14 This SOP, after approved by BOD, should be
submitted to each supervisor and approved by
shareholders in Shareholders’ Meeting. If any
director expresses objection on a record or a
written statement, Epistar should submit such
objection to each supervisor and Shareholders’
Meeting for discussion. Any related amendments
should follow the same rules.
Where Epistar has established the position of
Independent Directors, when it submits the
operational procedures of endorsements/
guarantees for discussion by the Board of
Directors, Epistar should consider each
independent director’s comment on the
endorsement/guarantee application and record any
definitive comments of agreement or objection
(and the reasons for objection) in the meeting
notes of the BOD.
This SOP, after approved by BOD, should be
submitted to each supervisor and approved by
shareholders in Shareholders’ Meeting. If any
director expresses objection on a record or a
written statement, Epistar should submit such
objection to each supervisor and Shareholders’
Meeting for discussion. Any related amendments
should follow the same rules.
Where Epistar has established the position of
Independent Directors, when it submits the
operational procedures of endorsements/
guarantees for discussion by the Board of
Directors, Epistar should consider each
independent director’s comment on the
endorsement/guarantee application. If an
independent director has objections or
reservations, it should be stated in the meeting
minutes of the board of directors.
If the company sets up an audit committee and
sets or amends the operating procedures, it shall
be approved by majority of members of the audit
committee and submit to the board of directors for
resolution. The second provision shall not apply.
Revised in accordance
with “Regulations
Governing Loaning of
Funds and Making of
Endorsements/
Guarantees by Public
Companies.”
~121~
Article No. Original Articles Amended Articles Reasons for Amendments
If the preceding paragraph is not approved by
majority of the Audit Committee, it may be
resolved by more than two-thirds of all directors,
and the resolutions of the Audit Committee shall
be stated in the meeting minutes of the Board of
Directors.
All members of the Audit Committee referred to
in the third paragraph and all directors referred to
in the preceding paragraph shall be counted as
actual incumbents.
~122~
Attachment 11
EPISTAR CORPORATION List of releasing the newly elected directors from non-competition restrictions
Name Positions in Other Companies Engage Business Place of
establishment
Relationship between the Company
and the Competitive Entities
Biing-Jye Lee The director of Epicrystal
Corporation (ChangZhou)
Ltd.
Production and sales of
Light-emitting diode epi
wafers and chips.
China To increase the penetration rate of LED products in
various application markets, EPISTAR deploy LED
industrial cooperation strategies from upstream to
downstream and further expand the OEM products
and customer base by combining the production
capacity and technical advantages of both
companies ; the joint venture company founded with
strategic partners as listed in left column who may be
involved in the same or similar businesses to
aforesaid joint venture companies of EPISTAR;
Nevertheless, it will not have a major impact on
EPISTAR due to Strategic Partners relationship.
The director of Kaistar
Lighting (Xiamen) Co., Ltd.
Production and sales of
Light-emitting diode epi
wafers, chips, packages
and modules.
China
The director of FormoLight
Technologies, Inc.
LED display system and
solution provider.
Taiwan
The Chairman of Unikorn
Semiconductor Corporation
III-V Semiconductor
Foundry business.
Taiwan
(Continued)
~123~
Name Positions in Other Companies Engage Business Place of
establishment
Relationship between the Company
and the Competitive Entities
Chih-Yuan Chen The director of Nan Ya
Photonics Inc.
LED lighting
applications.
Taiwan To increase the penetration rate of LED products in
various application markets, EPISTAR deploy LED
industrial cooperation strategies from upstream to
downstream; the joint venture company founded
with strategic partners as listed in left column who
may be involved in the same or similar businesses to
aforesaid joint venture companies of EPISTAR;
Nevertheless, it will not have a major impact on
EPISTAR due to Strategic Partners relationship.
(Continued)
~124~
Name Positions in Other Companies Engage Business Place of
establishment
Relationship between the Company
and the Competitive Entities
Nan-Yang Wu The director of EDISON Opto
Corporation
The manufacturer and
sales of LED packaging.
Taiwan Director Nan-Yang Wu is a senior deputy GM of
Yi-Far holding system; To increase the penetration
rate of LED products in various application markets,
EPISTAR deploy LED industrial cooperation
strategies from upstream to downstream; the joint
venture company founded with strategic partners as
listed in left column who may be involved in the
same or similar businesses to aforesaid joint venture
companies of EPISTAR; Nevertheless, it will not
have a major impact on EPISTAR due to Strategic
Partners relationship.
The director of ProLight Opto
Technology Corporation
The manufacturer and
sales of LED packaging.
Taiwan
The director of Wafer Works
Corporation
Semiconductor / IC
Manufacturing (Silicon
Wafer supplier for
Semiconductor)
Taiwan
The director of GaN Ventures
Co., Limited
Investment & sales of
electronic components.
Hong Kong
The director of GV
Semiconductor Inc.
Research and design of
Semiconductors and
seller of technology
components.
America
The director of APT
Electronics Co Ltd.
R&D, production, sell of
Light emitting diode
(LED) and Lighting
system.
China
(Continued)
~125~
Name Positions in Other Companies Engage Business Place of
establishment
Relationship between the Company
and the Competitive Entities
Chin-Yung Fan The director of Luxlite
(Shenzhen) Corporation
Limited
Sales of Light-emitting
diode chips.
China To increase the penetration rate of LED products in
various application markets, EPISTAR deploy LED
industrial cooperation strategies from upstream to
downstream; the joint venture company founded
with strategic partners as listed in left column who
may be involved in the same or similar businesses to
aforesaid joint venture companies of EPISTAR;
Nevertheless, it will not have a major impact on
EPISTAR due to Strategic Partners relationship.
The director of LEDOLUX
Sp. Zo. O.
Production and sales of
Light-emitting diode for
lighting products
Poland
The director of Jiangsu
Canyang Optoelectronics Ltd.
Production and sales of
Light-emitting diode epi
wafers and chips.
China
The director of Te Opto
Corporation
Production and sales of
Light-emitting diode epi
wafers and chips.
Taiwan
(End)